Public and private pharmaceutical spending as determinants of health outcomes in Canada

An Erratum has been published for this article in Health Economics; 14(2): 117 (2005). Canadian per capita drug expenditures increased markedly in recent years and have become center stage in the debate on health care cost containment. To inform public policy, these costs must be compared with the benefits provided by these drugs. This paper measures the statistical relationship between drug spending in Canadian provinces and overall health outcomes. The analysis relies on more homogenous data and includes a more complete set of controls for confounding factors than previous studies. Results show a strong statistical relationship between drug spending and health outcomes, especially for infant mortality and life expectancy at 65. This relationship is almost always stronger for private drug spending than for public drug spending. The analysis further indicates that substantially better health outcomes are observed in provinces where higher drug spending occurs. Simulations show that if all provinces increased per capita drug spending to the levels observed in the two provinces with the highest spending level, an average of 584 fewer infant deaths per year and over 6 months of increased life expectancy at birth would result. Copyright © 2004 John Wiley & Sons, Ltd.