The Misguided War Against Medicines 2008

Executive summary / 1 Introduction / 7 The particular impact of new or " patented " drugs on government health care costs / 8 The impact of all types of drugs on government health care costs / 18 The real cause of unsustainable growth in government health spending / 25 Research suggests that government health spending in Canada is growing at an unsus-tainable pace [Skinner and Rovere, 2006; 2007a]. At the same time, government spending on prescription drugs (both patented and non-patented) has grown faster than other components of health spending [CIHI, 2007a]. In addition, new patented prescription medicines are often more expensive than existing drugs. These observations have led some to assume that prescription drugs—and patented medicines, in particular— are the primary cause of the unsustainable growth in government health spending In order to evaluate the validity of this claim, this study examines all of the ways in which spending on drugs may contribute to the overall growth in total government health spending. The evidence suggests that neither patented medicines in particular, nor prescription drugs in general can be blamed for the unsustainable growth rates of government health spending. Prescription drugs are a small percentage of total government health spending; patented drugs are an even smaller percentage Prescription drugs in general and patented drugs in particular account for a small percentage of government health spending, and, therefore, cannot be the primary cause of Medicare's lack of financial sustainability. Overall, total spending on all types of drugs, whether patented, non-patented, prescription, or non-prescription, accounted for 16.7% of total government and private health spending in Canada in 2006. However, prescription drugs accounted for only 9.3% of total government spending on health care in 2006 [CIHI, 2007a]. More specifically, patented prescription drugs accounted for only 6.3% of total annual government spending on health care in Canada in 2006, and for much less in previous years [CIHI, 2007a; PMPRB, 2007; calculation by authors]. Therefore, even fast rates of growth in spending on prescription drugs in general, or patented drugs in particular, could not have large statistical effects on the overall growth rate of government health expenditure over time. If it were true that prescription drugs are the primary cause of unsustainable growth in government expenditure on health, then it stands to reason that, if we spent nothing at all on drugs, then all other components of government health spending would be growing at …