SOURCE: Canadian Health Policy Institute


November 26, 2014 06:00 ET

Public Drug Plans Are Rationing Access to New Drugs for Cost Reasons, but Study Shows That Spending on Innovative Medicines in Canada Is Affordable When Adjusted for Population, Inflation, GDP and Other Healthcare Costs: Canadian Health Policy Institute

TORONTO, ON--(Marketwired - November 26, 2014) - Public drug plans across Canada are rationing access to new drugs for cost reasons. However, a new study published by the Canadian Health Policy Institute (CHPI) concludes that spending on innovative medicines is affordable when adjusted for population, inflation and GDP -- and especially when compared to the growth and size of other healthcare costs.

The research raises serious questions about whether publicly-insured patients are being denied access to new drugs unnecessarily. It also suggests that both the costs and the benefits of drug spending should be considered together by policy-makers, as well as relative to alternative uses of overall health spending.

Using the most recent data from the Canadian Institute for Health Information (CIHI) and the Patented Medicine Prices Review Board (PMPRB), the CHPI study separately identified spending that is directly attributable to patented drugs.

CHPI's analysis found that patented drugs impose a relatively small burden on overall healthcare costs in Canada. According to data from the PMPRB, all spending on patented drugs totalled $13.6 billion in 2013. Patented drugs therefore accounted for (at most) about 40% of the $33.7 billion in total (public and private) spending reported by CIHI for "drugs" in 2013.

More importantly, patented drugs accounted for only 6.5% of the $210.4 billion reported by CIHI for total (public and private) health spending in 2013.

Spending on patented drugs has also grown much slower than spending on the rest of healthcare. Over the most recent five years from 2008 to 2013, per capita spending on patented drugs grew by only 2.1% over the entire period. By comparison, per capita spending on all other health care (excluding patented drugs) grew by 16.7%.

The CHPI study also found that patented drugs are affordable relative to GDP -- a measure of national income. Per capita spending on patented drugs was $386.82 and accounted for less than 1 percent (0.72%) of per capita GDP of $53,506.50 in 2013. Per capita spending on patented drugs has declined relative to GDP since 2004 when it was 0.83% of per capita GDP.

Adjusting for inflation over time, per capita spending on patented drugs in 2013 was 5.2% lower than in 2008 (i.e. $246.96 compared to $260.41 when stated in constant 1990 dollar values).

The study shows that the costs attributable directly to patented drugs are only a fraction of the "drugs" related spending reported annually by CIHI. As the quasi-governmental source of health statistics in Canada, CIHI publishes a yearly estimate of "drugs" spending that is commonly misunderstood to be largely accounted for by patented drugs (i.e. new or innovative medicines). In fact, the data reported by CIHI include the cost of patented and non-patented drugs, prescribed and non-prescribed drugs, wholesale and retail price mark-ups, pharmacy dispensing fees, taxes and the administrative costs of drug plans.

The CHPI study concludes there is no spending crisis regarding patented drugs in Canada. A small percentage of total health spending in Canada (public and private) is accounted for by patented drugs. Meanwhile, other components of health spending, accounting for a much larger share of spending, are growing much faster.

The study's findings are important because restricting access to new medicines limits health options for millions of Canadians. Given the health benefits derived from pharmaceutical innovation, rationing access to new drugs is likely to be socially and economically counter-productive.

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The study, Spending on Patented Drugs in Canada 1990 to 2013, was published at CHPI's free access online journal, Canadian Health Policy and can be downloaded at: or

About CHPI
Canadian Health Policy Institute (CHPI) is dedicated to conducting, publishing and communicating evidence-based socio-economic research on health system performance and health policy issues that are important to Canadians.

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