Pharmaceutical Costs and Prices

In recent years, drug costs have accounted for an increasingly large proportion of expenditures in the Canadian health care system, with expenditures growing faster than any other component of health care. In 1997, expenditures on drugs surpassed spending on physician remuneration to become the second largest cost in the health care system, after hospitals. The main drivers behind these increased expenditures are:

1. an increase in the overall use of pharmaceuticals; and
2. the use of newer and more costly drug products.

According to the Canadian Institute for Health Information (CIHI), total expenditures on prescribed and non-prescribed drugs in Canada (via public and private insurance and out-of-pocket expenditures) reached $21.8 billion in 2004. Spending on prescribed drugs in 2004 was an estimated $18 billion, representing more than 80% of total drug expenditure (compared with 67.5% in 1985) and a growth rate of 10.2% from the year before. Spending on all drugs in 2004 amounted to an estimated 16.7 per cent of total health expenditures in Canada.

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