NCPA - National Center for Policy Analysis

THE MISGUIDED WAR AGAINST MEDICINES

May 15, 2008

Unsustainable growth in the Canadian government's spending on health is a result of the flawed design of government health and drug insurance programs, not the price of medical treatment or the introduction of new medical technologies like patented drugs, concludes a new study by the Fraser Institute.

Prescription drugs in general and patented drugs in particular account for a small percentage of government health spending.  The fact that government spending on all other areas of health care is growing at unsustainable rates, while accounting for more than 90 per cent of total government health spending, strongly suggests that targeting prescription drugs is misguided, says study author Brett Skinner.

For example:

  • Prescription drugs accounted for only 9.3 percent of total government spending on health in 2006, down from 9.6 per cent in 2005.
  • Patented prescription drugs accounted for only 6.3 per cent of total government health spending in 2006, down from 6.8 per cent in 2005.
  • After spending on drugs is subtracted, all other areas of health care accounted for 91.4 per cent to 90.7 per cent of total government health spending between 2002 and 2006.

Also:

  • These average annual growth rates are between 1.2 and 1.4 times higher than the average annual growth in consolidated provincial revenues over the same time period.
  • It is also between 1.2 and 1.3 times higher than the average annual growth in national gross domestic product (GDP) and 2.9 to 3.2 times higher than the average annual growth in general inflation.

This means that even if governments spent nothing on drugs, government spending on all other medical goods and services would still be rising at an unsustainable rate, says Skinner.

Source: Brett J. Skinner and Mark Rovere, "Costs of Prescription Drugs Not To Blame for Unsustainable Growth in Health Care Spending," Fraser Institute, April 2008.

 

Browse more articles on Health Issues