Drug costs up in 2013/14 for Canadian public drug plans due to increased spending on high-cost drugs; reduced savings from generics

May 25, 2016

Patented Medicine Prices Review Board releases second edition of flagship report on Canadian public drug plan expenditures

Ottawa, ON — Patented Medicine Prices Review Board

The Patented Medicine Prices ReviewBoard (PMPRB), through the National Prescription Drug Utilization Information System (NPDUIS) research initiative, today published the second edition of CompassRx, its flagship annual report that monitors major developments in drug pricing and reimbursement in Canada, analyzes trends, and measures their impact on expenditure levels. Building on the findings of the first edition, CompassRx, 2nd edition focuses on the 2013/14 fiscal year and provides a retrospective review of trends since 2009/10.

The report shows that spending by Canadian public drug plans increased by an average of 2.0% in 2013/14, reversing a multi-year trend of low or negative growth. This was due to a surge in the use of higher-cost drugs, such as biologics, and a substantial reduction in savings from the use of lower-priced generic versions of brand-name drugs. As anticipated in last year’s report, these findings suggest that the “patent cliff” era of recent years, which saw public drug plans benefit from many top-selling “blockbuster” brand-name drugs of the past decade reaching the end of their patent terms and facing generic competition for the first time, has run its course. Of the few remaining blockbuster drugs on the Canadian market, none lost patent protection in 2013/14.

In addition to increased spending on high-cost drugs, in recent years most public drug plans have been spending more on dispensing costs, which grew by 5.9% or $122.2 million in 2013/14 and accounted over time for a greater share (22.3%) of overall public drug plan spending on prescription drugs.

CompassRx, 2nd edition – 2013/14 is available on the PMPRB website in PDF and accessible HTML formats.

Quick Facts

  • The Canadian public drug plans included in the report reimbursed their active beneficiaries for 78.7% of overall drug expenditures in 2013/14, totaling $9.8 billion. This included $7.3 billion in drug costs, $2.2 billion in pharmacy dispensing costs, and $0.3 billion in markups.
  • Recent low rates of growth in prescription drug expenditures are the net result of opposing “push” and “pull” effects. Increases in beneficiary populations, the use of drugs, or the use of higher-cost drugs “push” costs upward, while generic drug substitutions and price reductions “pull” costs downward.
  • Although the proportion of active beneficiaries with annual prescription drug costs over $10,000 is relatively small — ranging from 0.6% to 2.3% depending on the public drug plan — it has been gradually increasing since 2009 and accounted for a disproportionate share of expenditures in 2013/14, ranging from 16.4% to 29.2%.
  • Without the impact of savings generated by generic drug policies, “push” effects such as increases in the size and age of the active beneficiary populations in Canadian public drug plans, the volume of drugs, and the use of higher-cost drugs would have increased drug costs in 2013/14 by 9.7%, or $688.4 million.
  • In the absence of other cost pressures, lower generic drug prices and the shift from brand-name to generic drugs would have ”pulled” drug cost levels down in 2013/14 by 7.5%, or $537 million.
  • CompassRx, 2nd edition results are presented for public drug plans in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, and Health Canada’s Non-insured Health Benefits drug plan.

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Patented Medicine Prices Review Board

The Patented Medicine Prices Review Board is a respected public agency that makes a unique and valued contribution to sustainable spending on pharmaceuticals in Canada by:

  • providing stakeholders with price, cost, and utilization information to help them make timely and knowledgeable drug pricing, purchasing, and reimbursement decisions; and
  • acting as an effective check on the patent rights of pharmaceutical manufacturers through the responsible and efficient use of its consumer protection powers.

About the NPDUIS initiative

The National Prescription Drug Utilization Information System (NPDUIS) is a research initiative established by federal, provincial, and territorial Ministers of Health in September 2001. It is a partnership between the Patented Medicine Prices Review Board and the Canadian Institute for Health Information (CIHI).

The NPDUIS initiative provides policy makers and public drug plan managers with critical analyses of price, utilization and cost trends so that Canada’s health care system has more comprehensive and accurate information on how prescription drugs are being used and on sources of cost pressures.

The main data source for this report is the NPDUIS Database, developed by the CIHI.

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Sofie McCoy-Astell
Manager, Communications
Patented Medicine Prices Review Board

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