Abstract
Background
Drug expenditures per capita have drastically increased over the last quarter century in Canada, with a share of overall healthcare costs rising from 8.8% in 1980 to 16.8% in 2002. Pressure to curb expenditure on drugs has increased accordingly, but containing drug expenditure might increase costs elsewhere in the healthcare sector.
Objective
To measure substitution patterns between drugs and other healthcare resources over the last 25 years and thus assess whether containing drug costs might result in higher expenditure elsewhere in the healthcare system.
Methods and data
A production function approach was used, in which life expectancy was modelled as a function of per capita drugs and non-drug health-care resources, among other factors. Estimates are used to calculate a marginal rate of substitution, or trade-off, between drugs and non-drug healthcare resources, for a given level of life expectancy in the population. The model is estimated from a societal perspective, with panel data techniques using Canadian provincial-level data on health expenditure and spending on physicians per capita for the period 1980–2002, as well as individual survey data on lifestyle habits such as cigarette consumption and body mass index.
Result
Using life expectancy at birth for males as the production function, increasing drug spending by $Can1.00 (constant 2003 values) was accompanied by a decrease of $Can1.48 in non-drug, non-physician healthcare resources over the study period, without affecting life expectancy at birth. Results using life expectancy at birth for females as the production function showed a decrease of $Can1.05 in non-drug, non-physician healthcare resources over the same period.
Conclusion
Using life expectancy as a general health indicator, results suggest that increases in drug spending could be more than offset by decreases in other healthcare spending without affecting the health of the population. This suggests that better access to drugs may be an effective strategy to decrease overall healthcare costs. Freeing up healthcare dollars by reallocating spending towards drugs could provide opportunities for overall healthcare cost savings without negatively impacting the health of the population.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Canadian Institute for Health Information. Dépenses de santé— Macro-dépenses [online]. Available from URL: http://secure.cihi.ca/cihiweb/dispPage.jsp?.cw_page=statistics_results_topic_macrospend_f&cw_topic=Dépenses%20de%20san té&cw_subtopic=Macro-dépenses [Accessed 2004 Feb 26]
Patented Medicine Price Review Board. Analyse de générateurs de coûts des régimes d’assurancemédicaments provinciaux — Ontario [online]. Available from URL: http://www.pmprb-cepmb.gc.ca/CMFiles/on-f14HCK492003-7143.pdf [Accessed 2004 Feb 26]
Morgan S. Drug spending in Canada: recent trends and causes. Med Care 2004 Jul; 42 (7): 635–642
Morgan S. Drug expenditure trends in the Canadian provinces: magnitude and causes from 1998 to 2004. HealthCare Policy 2005; 1 (1): 85–99
Lichtenberg FR. The impact of new drug launches on longevity: evidence from longitudinal, disease-level data from 52 countries, 1982–2001. Working paper 9754. National Bureau of Economic Research, 2003 [online]. Available from URL: http://www.nber.org/papers/w9754 [Accessed 2004 Jun 25]
Organisation for Economic Cooperation and Development. OECD health data 2006: frequently requested data [online]. Available from URL: http://www.oecd.org/document/60/0,2340,fr_2825_495642_32368700_1_1_1_1,00.html [Accessed 2004 Oct 6]
Lichtenberg FR. The benefits and costs of newer drugs: evidence from the 1996 Medical Expenditure Panel Survey. Working paper 8147. Cambridge (MA): National Bureau of Economic Research, 2001 [online]. Available from URL: http://www.nber.org/papers/w8147 [Accessed 2004 Jun 25)
Crémieux PY, Meilleur MC, Petit P, et al. Public and private pharmaceutical spending as determinants of health outcomes in Canada. J Health Econ 2005; 14 (2): 107–116
Statistics Canada [online]. Available from URL: http://www40.statcan.ca/index.htm [Accessed 2007 Feb 14]
Taylor RS, Drummond MF, Salkeld G, et al. Inclusion of cost effectiveness in licensing requirements of new drugs: the fourth hurdle. BMJ 2004; 329 (7472): 972–975
Pirttili T, van Baelen B, Kavanagh S. Effect of galantamine on time to residential or nursing home admission: an international study. Poster presented at the 17th European Congress of Neuropsychopharmacology; 2004 Oct 9–13; Stockholm
Pedersen TR, Kjekshus J, Berg K, et al. Cholesterol lowering and the use of healthcare resources. Circulation 1996; 93: 1796–1802
Taylor DM, Wright T, Libretto SE. Risperidone compared with olanzapine in a naturalistic clinical study: a cost analysis. Risperidone Olanzapine Drug Outcomes Studies in Schizophrenia (RODOS): UK Investigator Group. J Clin Psychiatry 2003; 64 (5): 589–597
Heaton D, Pearce M. Low molecular weight versus unfractionated heparin: a clinical and economic appraisal. Pharmacoeconomics 1995; 8 (2): 91–99
Eisenberg JM, Koffer H, Finkler SA. Economic analysis of a new drug: potential savings in hospital operating costs from the use of a once-daily regimen of a parenteral cephalosporin. Rev Infect Dis 1984; 6 Suppl. 4: S909–S923
Horn SD, Sharkey PD, Tracy DM, et al. Intended and unintended consequences of HMO cost-containment strategies: results from the managed-care outcomes project. Am J Manag Care 1996; 2 (3): 253–264
Soumerai SB, Ross-Degnan D, Avorn J, et al. Effects of Medicaid drug payment limits on admission to hospitals and nursing homes. N Engl J Med 1991; 325 (15): 1072–1077
Cutler M, McClellan M. Is technological change in medicine worth it? Health Aff 2001; 20 (5): 11–29
Lichtenberg FR. Benefits and costs of newer drugs: an update. Working paper 8996. Cambridge (MA): National Bureau of Economic Research, 2002 [online]. Available from URL: http://www.nber.org/papers/w8996 [Accessed 2004 Jun 25]
Gardner C, Arya N, McAllister ML. Can a health unit take action on the determinants of health? Can J Public Health 2005 Sep–Oct; 96 (5): 374–379
Cicutto L, Murphy S, Coutts D, et al. Breaking the access barrier: evaluating an asthma center’s efforts to provide education to children with asthma in schools. Chest 2005 Oct; 128 (4): 1928–1935
Felder S, Meier M, Schmitt M. Health care expenditure in the last months of life. J Health Econ 2000; 19: 679–695
Johnson D, Yong J. Costly ageing or costly deaths? Understanding health care expenditures using Australian Medicare payments data. Aust Econ Pap 2006; 45 (1): 57–74
Canadian Institute for Health Information. National health expenditure trends 1975–2004 [online]. Available from URL: http://dsp-psd.tpsgc.gc.ca/Collection/H118-22004E.pdf (Accessed 2007 Apr 13)
Doran T, Whitehead M. Do social policies and political context matter for health in the United Kingdom? Int J Health Serv 2003; 33 (3): 495–522
Flegal KM, Graubard BI, Williamson DF, et al. Excess deaths associated with underweight, overweight, and obesity. Obstet Gynecol Surv 2005 Sep; 60 (9): 593–595
Acknowledgements
We would like to thank Dr Clint Cummins from TSP International for his help in adapting the TSP software to the needs of the estimation techniques used in this study.
This research was made possible by an unconditional grant from Rx&D, Canada’s research-based pharmaceutical companies.
The authors are solely responsible for the content of this article; no other person substantially contributed to this work. All the authors have served as occasional consultants to Rx&D.
Author information
Authors and Affiliations
Corresponding author
Electronic supplementary material
Rights and permissions
About this article
Cite this article
Crémieux, PY., Ouellette, P. & Petit, P. Do Drugs Reduce Utilisation of Other Healthcare Resources?. Pharmacoeconomics 25, 209–221 (2007). https://doi.org/10.2165/00019053-200725030-00004
Published:
Issue Date:
DOI: https://doi.org/10.2165/00019053-200725030-00004