Prescription drug spending flat, but not for long
A version of this commentary appeared in the Globe and Mail, Huffington Post and the Penticton Herald
Canadians spent almost $23-billion on prescription drugs at retailpharmacies in 2012/13
or over $650 per capita, according tothe findings from the Canadian Rx Atlas published this week bythe UBC Centre for Health Services and Policy Research. That isa lot of money. However, after adjusting for general inflation,spending per capita actually fell over the past five years
despite the fact that the population is getting older.The size of the fall in spending per capita was not large (about1%) but the finding is significant. Inflation-adjusted spending per capita on prescription drugs in Canada has not declined over anyfive-year period since World War II. As impressive as it is, the slowdown in total spending on prescriptions in Canada masks dramatic changes in thepharmaceutical sector. Beneath the calm surface lies a rapid decline in spending on widely used medicines to treatrelatively common conditions, and even more dramatic increases in spending on medicines used by relatively fewpeople who suffer from serious conditions.Five years ago, almost $9-billion
40% of all retail spending on prescription drugs
was spent on drugs to treathigh blood pressure, high cholesterol, heartburn and depression. Although these treatments only cost about a dollar per day, they are so commonly used they have been the dominant drivers of pharmaceutical costs since the 1980sand 1990s.These drugs continue to be used frequently; however, patents on many brands of these drugs expired over the pastfive years and few newly-patented brands have entered the market. Thus, largely because of increased availabilityand use of lower-cost generics, annual spending on these previously-dominant drug classes fell by $2-billion over five years.That is good news if you are an uninsured patient, a company providing employees drug coverage, or a governmentrunning a public drug plan. But the budgetary relief that comes from the “genericization” of drug classes to treatcommon conditions won’t last long for two reasons.First, most blockbuster drugs in these classes have lost their patents. There will simply be fewer opportunities tocontrol drug spending by switching to new generic entries on the horizon.Second, the pharmaceutical industry has already found a new revenue model. Whereas the industry’s businessmodel was historically focused on developing drugs to be prescribed in large numbers for common conditions, futurerevenue growth in developed countries like Canada lies primarily in treatments for less common but more seriousconditions.Indeed, data in our Rx Atlas show that spending on specialty drugs to treat conditions such as cancer, HIV, andmultiple sclerosis has increased dramatically. The fastest growth occurred for immunosuppressants to treatinflammatory conditions such as rheumatoid arthritis and psoriasis, where spending grew by nearly $1-billion over thepast five years.