WHITE PAPER
Understanding Net Pharmaceutical Expenditure Dynamics in Europe
Apr 05, 2022
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Summary

The level of pharmaceutical expenditure is closely watched and often commented upon, but the composition of that expenditure and its dynamics are not as well understood. Healthcare systems require information on the future of their budgets, as well as an understanding of what a sustainable approach to healthcare budgeting could be, as drivers of budgets change over time due to demographic change, epidemiology, and innovative technologies.

Typically, official statistics such as OECD data on pharmaceutical spending only includes medicines dispensed in pharmacies and do not include those used in the hospital setting, an issue which raises questions about their representativeness of total spending.

In this report, for the first time across Europe, we have generated estimates of total pharmaceutical spending for the past 20-years including hospital spending, as well as discounts and rebates, for 15 countries. These estimates have been based on official statistics from government agencies in the countries (where available).



Key findings: 

  • The total pharmaceutical expenditure in Europe is not easy to calculate. Public sources completed by countries in Europe are updated on an annual basis but often lag 2-3 years behind. Major components of expenditure are not always included
  • While the level of drug expenditure is closely watched and often commented upon, the composition of that expenditure and its dynamics are not as well understood
  • The changes in drug spending over the past quarter century have been dramatic in terms of the types of medicine and the diseases they are used to treat. But drug spending as a share of healthcare spending has changed to a lesser degree and has represented greater stability than one might have expected.
  • Net price is not always able to be calculated, and net cost is a more appropriate measure for the long-term understanding of pharmaceutical expenditure given the difference pricing mechanisms used by payers
  • In every country studied, drug spending is a small proportion of healthcare spending, averaging ~15% (and ranging from 8–24%) and has remained relatively flat over the last 20 years, even though the reliance on pharmaceuticals has increased.
  • Pharmaceutical expenditure includes more than just the cost of the medicines, it often includes tax which can range from 1% - 20%, and supply chain costs, based on country policies.
  • Pharmaceutical expenditure is often very small when compared to the societal costs of diseases, for both established treatments, and novel therapies
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