Drug spending in Canada's health system rose 4.8% to C$31.1 billion in 2010, compared to annual rises averaging 8.9% between 2000 and 2005, says a new report.

While spending on drugs used to be the fastest-growing category of health spending in Canada, its rate of rise has slowed considerably over the past five years, although medicines remain an important cost driver in health care, says the study, from the Canadian Institute for Health Information (CIHI).

Contributing to the slowdown ingrowth are recent patent expiries on a number of blockbuster brand-name drugs, including some used to treat high cholesterol and hypertension, which have allowed for lower-priced generic alternatives to enter the marketplace, it says.

"The implementation of generic pricing policies by some provincial drug programmes may also be contributing to the slowdown in growth," adds Michael Hunt, director of pharmaceuticals and health workforce information services at the CIHI.

Total national spending on medicines, both prescribed and non-prescribed, is estimated to have reached C$912 per Canadian last year. Prescribed drugs continued to account for the vast majority of total medicines spending, at C$26.1 billion, or almost 84% of the total.

Total per capita drug spending - both public and private - varies widely across Canada's provinces, from lows of C$574 in British Columbia and C$619 in Alberta to highs of C$838 in Nova Scotia and C$883 in Quebec, the report shows. Variations in spending are influenced by a number of factors, including differences in provincial, territorial and federal drug subsidy programmes, variations in the health of the population and differing health care delivery systems across jurisdictions, it says.

Annual spending growth has also been increasing more quickly in some parts of the country than in others. The estimated annual growth in per capita spending on prescribed drugs last year was lowest in British Columba (1.8%) and Ontario (2.3%), while higher annual growth rates were observed in Quebec (5.4%) and Newfoundland and Labrador (6.2%).

"While the governments of Ontario and British Columbia have taken measures to control spending on medicines, most notably by lowering the prices paid for generic drugs, more research is needed to understand why growth in overall spending has been so much slower there than in other provinces," comments Steve Morgan, associate director of the Centre for Health Services and Policy Research at the University of British Columbia. 

"Linkage of health and pharmaceutical datasets across Canada would go a long way toward answering such important questions," he says.

Canada’s public sector share of total spending on prescribed drugs also varies, ranging from highs of 56% in Saskatchewan and 52% in Quebec to lows of 37% in Newfoundland and Labrador and 33% in New Brunswick. Nationwide, 47% of spending on prescribed drugs is publicly financed.

The most recent data also shows that, in 2008, Canada's total level of drug spending per person was second only to the US, compared with 25 other Organisation for Economic Cooperation and Development (OECD) member nations with similar accounting systems. Among the three top-spending countries, per capita drug expenditure totaled C$1.104 in the US, followed by Canada at C$863 and France at C$747, says the report.

And in 2007, the last year for which international data is available, Canada had on average the highest prices of generic drugs among OECD countries for which data is available. Only the US had higher average prices for patented drugs, while in Germany they were similar to Canada's, says the CIHI.