Research Project

The Causes and Consequences of Rising Drug Costs

Overview

Canadians spent $25 billion on pharmaceuticals in 2006. This represents nearly two-thirds of what we spend on hospitals ($44 billion) and 50 per cent more than we spend on physicians ($19 billion). Perhaps more strikingly, it is a significant increase over what we spent on pharmaceuticals ten years ago ($10 billion). If the trends of the past decade continue, drug costs will surpass hospital expenditures by 2017. At that point, one out of every four dollars spent on health care would go to drugs ($85 billion). Drug expenditure is an investment. It is made by patients and governments, and by individuals and employers through private insurance plans. Because we live in a world in which both private and public resources are limited, spending money on one drug is an investment that could have been spent on others. Moreover, spending on pharmaceuticals is an investment that might otherwise be spent on other forms of health care or, in the case of private financing, on other goods and services. The investment in pharmaceutical care, like the investment in other health services, is made to improve health and to reduce strains on the health care system. The return on investment from pharmaceutical care is the amount of these desired outcomes achieved per dollar spent.

Research

Is expenditure on pharmaceuticals increasing because Canadians are treating more conditions due to population aging or increasing morbidity? Is increased use of medicines improving population health? Is the investment helping us save money in other parts of the health care system? Policy makers and taxpayers need population- and evidence-based answers to these questions. Building on our CIHR-funded work, we will investigate:

  • To what extent are health needs—or other factors—driving investment in pharmaceutical care over time and across regions?
  • Is increased investment in pharmaceutical care improving population health or reducing the use of other health care services?
  • Are measures of prescribing appropriateness associated with better outcomes?

Approach

Through a series of related projects, our team is measuring the causes and consequences of drug expenditures in British Columbia and across Canada. Using linked, transaction-level data for BC, they are describing the extent and determinants of regional variation in pharmaceutical utilization, prescribing appropriateness, and spending. Using national market-level data, they are providing similar insights into the nature and extent of variation in drug expenditure across provinces. This ambitious research agenda is supported by CHSPR’s ongoing work to advance statistical methods to determine the impact of increased investment in pharmaceutical care on health status and health care utilization and expenditure.

Project Team

  • Contact: Steve Morgan
  • Charlyn Black
  • Morris Barer
  • Robert Evans
  • Kenneth Bassett
  • James Wright, Pharmacology and Therapeutics, UBC

Funding

  • Canadian Institutes of Health Research