Canadian Institute for Health Information
1
Health Care Cost Drivers:
Drug Expenditure
Trends Perspective
November 3, 2011
2
Overview
• How does growth in drug spending compare
with growth in overall health spending?
• How do Canada’s drug spending trends compare
with those of other countries in the OECD?
• What types of drugs account for the majority
of spending? What types of drugs are growing
the fastest?
• How have drug pipeline and drug policy changes
affected drug spending?
3
Overview (cont’d)
• What are the effects of possible cost drivers?
– Inflation
– Population growth
– Aging
– Changes in utilization; therapeutic mix
• What are the key issues to watch in the future?
4
Macro-Level
Drug Spending Context
5
Drugs Have Accounted for the Second-Largest Share
of Health Care Spending Since 1997, With a Slight
Increase Since 2000
45%
40%
39.1%
Share of Total Health Spending, by Selected
Category, Canada, 1990 to 2010
35%
29.6%
30%
28.9%
25%
20%
15%
15.2%
15.4%
11.4%
16.3%
13.7%
13.4%
10%
5%
0%
1990
Note
f: forecast.
2000
Hospitals
Drugs
2010f
Physicians
6
Growth in Drug Spending Lowest Among All Major
Expenditure Categories During Last Half of Decade
Average Annual Growth, by Selected Category
of Health Spending, Canada, 2000 to 2010
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
8.9%
8.0%
6.2%
Hospitals
Note
f: forecast.
7.4%
7.1%
6.1%
Drugs
Average (2000–2005)
6.4%
6.2%
Physicians
Total Health Spending
Average (2005–2010f)
7
Although Public Share of Drug Spending
Is Rising, It Is Lower Than Other Major
Categories of Health Spending
Public Share of Health Expenditure, by Selected Category,
2000 and 2010
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
98.7% 98.8%
90.8% 91.1%
35.0%
Hospitals
Note
f: forecast.
Physicians
2000
39.0%
Drugs
2010f
8
Total Public Drug Spending Includes More
Than Public Drug Program Spending
Publicly Funded Drug Expenditure, by Category, 2009
Category
$ Millions
Public Drug Programs (Including Social Insurance)f
$11,537.2
Hospital Drug Wholesales (Cancer)
$803.3
Hospital Drug Wholesales (Non-Cancer)
$1,615.1
Drug Programs and Hospital Wholesales
$13,955.5
Note
f: forecast.
.
9
Per Capita Drug Spending Has More Than
Tripled Since 1990
$1,000
Total Drug Expenditure per Capita, Current and Constant Dollars,
Canada, 1990 to 2010
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
Current Dollars
Constant Dollars (GDP Deflator)
Forecast
10
Growth in per Capita Drug Spending in Canada
Second to the U.S. Among Selected Countries
Average Annual Growth in per Capita Drug Spending,
Selected Countries, 1997 to 2007
7%
6.1%
6%
5.2%
5%
4%
4.9%
3.5%
3.2%
3%
2.3%
2%
2.3%
1.4%
0.8%
1%
0%
Canada Australia France Germany
Italy
Japan
New
United
Zealand Kingdom
United
States
Note
National currency units at 2000 GDP price level.
11
Per Capita Spending Highest Among Seniors
Per Capita Retail Expenditure, by Age Group, Canada, 2007
$2,000
$1,778
$1,800
$1,600
$1,400
$1,200
$1,000
$774
$800
$600
$400
$200
$271
$132
$0
0–19
20–44
45–64
65+
12
Immunosuppressants, Cholesterol-Lowering Drugs
and Cancer Drugs Biggest Contributors to Growth
in Wholesales
Average Annual Growth in Wholesale Drug Expenditure and Contribution to
Overall Wholesale Growth, by Therapeutic Category, 2004–2005 to 2009–2010
Therapeutic Category
Contribution to Growth
AAG (%)
Immunosuppressants
12.2
25.1
Cholesterol-Lowering Drugs
10.5
7.8
Cancer Drugs
9.3
13.4
Respiratory Drugs
5.4
8.4
Diabetes Drugs
4.5
9.9
Analgesics
4.3
6.3
HIV Drugs
4.1
11.4
Anti-Epileptics
3.5
13.0
Antidepressants
3.0
4.2
Antihypertensives
2.7
1.6
13
Brand Name Drugs Still Account for the Majority of
Spending, Though the Proportion Is Decreasing
Share of Wholesale Drug Expenditure, Brand Name
and Generic, 2004–2005 and 2009–2010
2004–2005
17.9%
2009–2010
25.9%
74.1%
82.1%
Brand
Generic
Brand
Generic
14
Generic Prices, on Average, Are Approximately
60% of Brand Name Prices
Average Generic Price as Percentage of Brand Name Price,
Top 100 Drugs With Available Generics, 2004–2005 to 2009–2010
70%
60%
50%
40%
30%
20%
10%
0%
2004–2005
2005–2006
2006–2007
2007–2008
2008–2009
2009–2010
Generic Price as Percentage of Brand Name
15
Drugs With $8.7 Billion in Wholesale Value
Have Patents That Will Expire by 2014
Total 2009 Canadian Wholesales of Patented (or Previously
Patented) Drugs, by Year of Patent Expiry, 2005 Onward
$8,676
$9,000
$8,000
$7,000
Millions
$6,000
$5,000
$4,000
$3,000
$2,000
$1,542
$1,435
$1,000
$317
$0
2005–2009
2010–2014
2015–2019
2020+
16
Drug Pipeline Context
17
Development of New Chemicals Slowed
Significantly Since 2000
Five-Year Averages of New Chemicals and New Drug Classes
Approved for Sale in Canada, 1949 to 2010
70
60
50
40
30
20
10
0
1949
1959
1969
Number of New Chemicals
1979
1989
1999
2009
Number of New Drug Classes
18
Cancer Drugs Make Up a Large Portion of Both
Recent and Future Drug Development
Newly Marketed Drugs in Canada, 2001 to 2009, and Drugs in Phase III
Clinical Trials, 2009, by Broad Therapeutic Category
Broad Therapeutic Category
Antineoplastic and Immunomodulating Agents
Anti-Infectives for Systemic Use
Nervous System
Alimentary Tract and Metabolism
Blood and Blood-Forming Organs
Cardiovascular System
Genitourinary System and Sex Hormones
Systemic Hormonal Preparations
Sensory Organs
Dermatologicals
Respiratory System
Other
Total
Percentage of New
Drugs, 2001–2009
20.4
20.4
13.1
9.9
6.3
6.3
5.2
3.7
3.7
2.6
2.6
5.8
100.0
Percentage of Drugs
in Phase III Trials
28.4
9.6
12.5
10.4
3.7
8.4
3.9
2.5
4.5
2.2
4.1
9.8
100.0
19
Drug Policy Context
20
2004 National Pharmaceuticals Strategy
(NPS) Provides Guidance for
Pharmaceuticals Management
• NPS purpose
– To address the challenges and opportunities across
the drug life cycle using an integrated, collaborative,
multi-pronged approach to pharmaceuticals within the
health care system
• NPS priority areas
–
–
–
–
–
Catastrophic drug coverage
Expensive drugs for rare diseases
Common national formulary
Drug pricing and purchasing strategies
Real-world drug safety and effectiveness
21
Commonly Listed Drugs Account for the Majority
of Public Drug Program Spending
Percentage of Drug Classes Listed on Public Drug Program Formularies and
Percentage of Program Spending, by Number of Listing Jurisdictions, 2008
100.0 100.0
88.3
90%
80.0
80%
70.0
70%
61.6
60%
50%
99.9
99.7
98.3
97.0
100%
51.9
43.7
40%
30%
20%
10%
0%
6
5 or More
Percentage of Listed Classes
4 or More
3 or More
2 or More
1 or More
Percentage of Public Drug Program Spending
22
Drug Program Changes Exhibit Some
Alignment With NPS Priorities
• 2003  B.C. implements income-based drug benefit
program for seniors and non-seniors
• 2007  Newfoundland and Labrador implements
income-based drug benefit program for non-seniors
• 2008  Nova Scotia implements income-based drug
benefit program for non-seniors
• 2008  Saskatchewan implements income-based
drug benefit program for seniors, with maximum
copayment for eligible recipients
23
Relatively Few Major Changes to Cost-Control
Strategies Until the End of the Past Decade
• Clinical and economic assessment for formulary
listings continue to be a major cost-control strategy
in Canada
• Reference pricing policies not widely used
• Generic pricing policies are in flux, with major changes
occurring toward the end of the past decade (for
example, changes in Ontario in 2006, changes in
several provinces in 2010)
24
Prices of Generic Drugs in Canada Among the
Highest in the World
Average Foreign-to-Canadian Price Ratios,
Generic and Patented Products, 2007
Country
Generic
Patented
Canada
1.00
1.00
Australia
0.90
0.78*
France
0.57
0.81
Germany
0.55
1.00
Italy
0.69
0.78
New Zealand
0.19
0.79*
Sweden
0.38
0.88
Switzerland
0.60
0.82
United Kingdom
0.55
0.88
United States
0.53
1.85
Notes
* 2005 figures.
Prices compared at purchasing power parities (PPPs).
25
Pharmaceutical Cost Drivers
26
Changes in Volume and Mix of Drugs Used
Were Major Drivers of Drug Costs in Canada
Over the Past Decade
Determinants of the Average Annual Growth in Retail Spending on
All Types of Prescription Drugs, Canada, 1998 to 2007
14%
12%
2.0%
10%
8%
6.2%
6%
1.0%
1.0%
4%
2%
2.6%
0%
-2.7%
-2%
-4%
General Inflation
Price Changes
Population Growth
Volume of Units
Population Aging
Mix of Drug Types
27
Volume of Use Was the Major Driver of Retail
Spending on Antihypertensive Drugs in Canada
Over the Past Decade
Determinants of the Average Annual Growth in Retail Spending on
Antihypertensive Drugs, Canada, 1998 to 2007
14%
12%
0.6%
10%
6.5%
8%
6%
1.3%
1.0%
4%
2%
2.6%
0%
-2.8%
-2%
-4%
General Inflation
Price Changes
Population Growth
Volume of Units
Population Aging
Mix of Drug Types
28
Rapid Growth in Utilization Drove Spending on
Cholesterol-Lowering Drugs, the Fastest-Growing
Therapeutic Category in Canada Over the Past Decade
Determinants of the Average Annual Growth in Retail Spending on
Cholesterol-Lowering Drugs, Canada, 1998 to 2007
25%
20%
1.3%
15%
12.9%
10%
5%
1.5%
1.0%
2.6%
0%
-4.5%
-5%
-10%
General Inflation
Population Growth
Population Aging
Price Changes
Volume of Units
Mix of Drug Types
29
Growth in the Volume and Changes in the Mix of
Drugs Used Drove Spending on Gastrointestinal
Drugs in Canada Over the Past Decade
Determinants of the Average Annual Growth in Retail Spending on
Gastrointestinal Drugs, Canada, 1998 to 2007
20%
15%
2.1%
10%
8.4%
5%
1.1%
1.0%
2.6%
0%
-4.4%
-5%
-10%
General Inflation
Price Changes
Population Growth
Volume of Units
Population Aging
Mix of Drug Types
30
Changes in the Volume and Mix of Drugs Used
Increased Cancer Drug Wholesales in Canada
Over the Past Six Years
Determinants of the Average Annual Growth in Wholesale Purchases
of Cancer Drugs, Canada, 2004–2005 to 2009–2010
Hospitals, Cancer Drugs
20%
15%
Drug Stores, Cancer Drugs
20%
15%
12.5%
10%
10%
7.1%
5%
4.0%
5%
1.1%
0%
2.2%
1.3%
0%
-4.4%
-1.2%
-5%
General Inflation
Volume of Units
1.1%
2.2%
-5%
Population Growth
Mix of Drug Types
Price Changes
General Inflation
Volume of Units
Population Growth
Mix of Drug Types
Price Changes
31
Changes in the Volume and Mix of Drugs Used Caused
Rapid Increase in Immunosuppressant Drug Wholesales
in Community Setting in Canada Over Past Six Years
Determinants of the Average Annual Growth in Wholesale Purchases
of Immunosuppressant Drugs, Canada, 2004–2005 to 2009–2010
35%
30%
25%
17.9%
20%
15%
10%
8.9%
5%
2.2%
0%
1.1%
-0.8%
-5%
General Inflation
Volume of Units
Population Growth
Mix of Drug Types
Price Changes
32
Key Findings
• Pharmaceuticals are the second-largest component
of health spending
• Growth in drug spending has slowed over the
past decade
• Cholesterol-lowering drugs, cancer drugs and
immunosuppressants contributed the most to spending
growth in the past five years
• Brand name drugs accounted for
– 74.1% of wholesale spending
– 45.7% of prescriptions
33
Key Findings (cont’d)
• Volume and mix of drugs used were major drivers
of drug spending
• Population growth and aging are also cost drivers,
but had a much lower effect
• Generic versions of blockbuster drugs present savings
opportunities, although mainly in the short term
34
Future Issues to Keep an Eye On
• Growth in spending on cancer drugs, including
newer biologics
• Impact of generic pricing and patent expirations
• Number and nature of drugs under development
• Trends in utilization and possible utilization concerns
35
Data Sources
36
Data Source Notes
Source
Cost Inclusions
Spending Detail Available
Custodian
Data
Source
Admin.
Costs
Fees and
Markups
Source of
Finance
Drug
Class
Age/
Sex
Community/
Hospital
CIHI
NHEX
Yes
Yes
Yes
No
No
Community
Only
NPDUIS
No
Yes
Public
Only
Yes
Yes
Community
Only
DS&H
No
No
No
Yes
No
Yes
CS/ALPD
No
Yes
No
Yes
Yes
Community
Only
IMS
Brogan
37
.
IMS Brogan Disclaimer
IMS Brogan, a unit of IMS Health, has offices in Montréal, Toronto and Ottawa.
IMS Health provides market intelligence and health information to pharmaceutical and health care
industries worldwide. For this report, CIHI used the IMS Brogan Canadian Drug Store and Hospital
Purchases Audit (CDH), which measures the dollar value and unit volume of pharmaceutical
products purchased by Canadian retail pharmacy outlets and hospitals. Data for CDH is collected
from a representative sample of 2,700 drug stores and 686 hospitals and long-term care facilities.
The sample data is then projected to the universe of drug stores and hospitals, to reflect all
purchases across Canada.
IMS Brogan relies on external suppliers for all of its data; therefore, while employing its best
efforts to ensure the accuracy and completeness of its data and any analysis thereof, IMS Brogan
makes no representation as to the reliability of such data or any application derivative thereof. In
no event shall IMS Brogan be liable for any damages, including any consequential, incidental or
special damages, resulting from any use or application of its data, whether foreseeable or not, even
if IMS Brogan has been advised of the possibility of such damages.
38