05/28/2015 05:15 EDT | Updated 05/28/2016 05:59 EDT

Prescription drug spending growth fuelled by costly new drugs

Prescription drug spending in Canada reached an estimated $28.8 billion last year, driven by new biologics that can cost hundreds of thousands of dollars per patient.

Thursday's report from the Canadian Institute of Health Information (CIHI) focuses on public sector spending on prescribed drugs in 2014.

Total prescription drug spending is expected to have reached $28.8 billion in 2014, up 0.9 per cent from the year before. The institute called it the lowest annual growth rate since spending was first tracked in 1975.

CIHI attributed the savings to patents expiring, lower-cost generics and generic pricing policies by provinces and territories. But it also pointed to increases in spending on drugs such as biologics.

"Savings from generics between 2008 and 2013 were largely offset by increased spending on other drug classes," according to the report.

Public drug program spending on one class of biologics known as anti-TNF drugs, used to treat rheumatoid arthritis and Crohn's disease, increased by $233.8 million over the five years.

In the 1990s, spending $1,000 per patient per year was considered expensive, said Steve Morgan, a professor of health policy at the University of British Columbia School of Population and Public Health.

That figure has climbed, starting with the introduction of treatments for HIV and AIDS, which cost $10,000 per patient a year.

"Now it's not 1,000 or 10,000 that's considered expensive. It's tens of thousands of dollars per patient treated is starting to be considered expensive … Many new products coming to market are priced in tens, if not in fact hundreds of thousands of dollars per patient treated. The challenge in this new era is going to be setting fair and reasonable limits on what should be charged," Morgan said.

Biologics are large molecules manufactured inside animal cells or bacteria. Since the manufacturing process uses cell lines, very small changes can results in substantial changes to the end product, which demands extra vigilance from regulators over manufacturing, Morgan said.

Traditional generics can be discounted up to 90 per cent compared with the branded version. Given the complexity of biologics, when their patents expire, the discounts are often about 15 per cent, he said.