Increase in drug spending hits 40 year low but expected to rebound soon

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The amount of money Canadians spent on prescription drugs last year rose a mere 0.9 per cent, the lowest increase since statistics on drug spending were first measured in 1975, a new report said Thursday.

But Michael Law, a health economist at the University of British Columbia, warned that the trend of slowing growth in drug costs has probably run its course and steeper increases will likely pick up again soon.

The report by the Canadian Institute for Health Information found that prescription drug spending for 2014 was expected to have reached just under $29 billion.

That represents 85 per cent of all drug spending in Canada for last year and makes up 13.4 per cent of all health expenditures.

Increases in the costs of prescription drugs slowed markedly in recent years after a period of significant price hikes. That’s because patent protection expired on many commonly used drugs, which meant they could be produced by generic drug manufacturers.

Big savings resulted for drugs such as cholesterol lowering statins, anti-depressants called selective serotonin reuptake inhibitors, and heart drugs known as ACE-inhibitors.

“We’ve been in a bit of a drug spending holiday, if you will, in that so many things have gone generic (and) drug plan managers and private drug plans could literally just sit around and wait for the savings to come in,” said Law, who was not involved in the production of the CIHI report. This may sound like good news for plan members and employers but Michael also comments “I think that what … this report starts to show, though, is that holiday is probably going to be over soon.”

A new wave of very expensive drugs has been coming on the market, such as new and more effective hepatitis C medications.

“The things that have been introduced recently have been very, very expensive and there’s a lot that are carrying figure prices of $10,000, $20,000, $40,000, $100,000, $500,000,” Law said.

“So I think we’re actually at a bit of an inflection point here.”

Many of the new, costly drugs are what are known as biologics. Rather than chemical compounds, they are treatments based on things like hormones, proteins, antibodies or blood compounds. Vaccines, for instance, are biologics. So is ZMapp, the Ebola treatment made from antibodies to the virus.

Biologics are more expensive and harder to produce than drugs that are made from chemical compounds. Even when their patent protection expires there may not be the same degree of savings as when generic versions of drugs like statins became available, Law said.

Law noted that last year drug spending in the United States — where these drugs reached the market sooner than they did in Canada — went up by 13 per cent.

“And I would be very surprised if we didn’t start to see some of that start to creep in this year in Canada.”

Written by Helen Branswell, The Canadian Press May 28, 2015

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