SOURCE: Canadian Health Policy Institute


November 25, 2014 06:00 ET

Study Finds Patented Drugs Are a Fraction of Annual "Drugs" Spending Reported by CIHI; Is Pharma Policy in Canada Based on False Assumptions About the Drivers of Health Spending and the Societal Affordability of Pharmaceutical Innovation?

TORONTO, ON--(Marketwired - November 25, 2014) - New research published by the Canadian Health Policy Institute (CHPI) shows that the costs attributable directly to patented drugs are only a fraction of the "drugs" related spending reported annually by the Canadian Institute for Health Information (CIHI). The way that CIHI reports drugs spending unintentionally confuses the public discussion about healthcare sustainability, and exaggerates the necessity to regulate patented drug costs and restrict access to new innovative medicines -- decisions that limit health options for millions of Canadians.

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.

Using the most recent data from CIHI and the Patented Medicine Prices Review Board (PMPRB), the CHPI study separately identified health spending that is directly attributable to patented drugs. The CHPI study also assessed the societal affordability of spending on patented drugs in Canada relative to population, inflation, GDP and other healthcare costs.

CHPI's analysis found that patented drugs impose a relatively small burden on overall healthcare costs. According to data from the PMPRB, all spending on patented drugs in Canada 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. At $13.6 billion, patented drugs accounted for only 6.5% of the $210.4 billion reported by CIHI for total (public and private) health spending in Canada 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. Adjusting for population, per capita spending on patented drugs was $386.8 and accounted for less than 1 percent (0.72%) of per capita GDP of $53,507 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 "drugs" spending numbers reported by CIHI are often cited as justification for policies that specifically target patented drugs like regulating prices, requiring health technology assessments, restricting insured access to new medicines, centralizing drug procurement, nationalizing private drug insurance, and rejecting international trade standards for the protection of intellectual property rights.

The CHPI study contributes facts to clarify the drug spending data reported by CIHI and 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 and other components of health spending, accounting for a much larger share of spending, are growing much faster. This finding raises serious questions about whether it is economical to allocate costly administrative resources to controlling the prices of and access to patented drugs.

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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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