New medicines that treat or prevent disease have contributed significantly to declining hospitalization rates and better health outcomes in Canada. Innovative drugs have played a key role in shifting care from hospitals to ambulatory and home based care. However, over the past decade, rather than laud the role that health technology innovation has played in improving both the cost-effectiveness and quality of health care, policy makers and health industry critics in Canada have claimed that access to new drug therapies should be constrained because drugs have been the fastest growing component of health care spending in Canada. Canadian national health expenditure data refutes that claim.

In 2006, government spending on prescription drugs increased by 3.8 per cent over the previous year – a relatively small increase compared to the spending growth for institutional and physician services. In fact, from 2001 to 2006, spending on hospitals accounted for 36 per cent of per capita spending growth and physician services accounted for 18 per cent of spending growth. During the same period, prescription drugs accounted for only 12.6 per cent of government health spending growth.

Improved access to effective new medicines can help lower the costs of health care.