OECD report evaluates economic impact of global recession on health spending

The latest health report by the Organisation for Economic Co-operation and Development (OECD) released yesterday (21 November) highlights the significant impact of the global financial crisis on health spending in many countries. Although the United States, Canada, and Japan have started demonstrating signs of recovery, many European countries continue to see "subdued" growth. The full report can be found here.

Growth in health spending in most of the 34 OECD countries has slowed considerably since 2008, dipping from an average per-capita spend of 4.1% year on year (y/y) between 2000 and 2009 to 0.2% between 2009 and 2011, dropping in 11 out of the 34 countries. Greece and Ireland experienced significant declines in per-capita health expenditure – 11.1% and 6.6%, respectively, between 2009 and 2011 – as health spending slowed in the US and Canada. On the other hand, Israel and Japan were the only two OECD countries to report accelerated growth in health spending since 2009.

Health expenditure accounted for 9.3% of GDP on average among OECD countries in 2011, notably led by the US at 17.7% far above other OECD countries such as Canada (11.2%), France (11.6%), Germany (11.3%), the Netherlands (11.9%), and Switzerland (11.0%). On average, most of the spending (62%) was focused on inpatient and outpatient care, while medical goods, including pharmaceuticals, represented 20% of healthcare expenditure. In 2011, hospital costs increased by 1% y/y, while pharmaceutical spend saw a 1.7% y/y decline. Life expectancy has continued to increase, exceeding 80 years on average; however, chronic diseases including diabetes and dementia are on the rise.

Public expenditure on medical services and goods

On average across 30 OECD countries, public spend on medical services in 2011 accounted for 78% of overall health expenditure, with 54% of public goods expenditure including pharmaceuticals covered with public funds. The US was notably the lowest after Mexico, with only 50% of overall medical services and 32% of medical goods covered by public funds in 2011. However, that figure may change with the roll-out of the Affordable Care Act and the expansion of the Medicaid programme in 2014, but it remains to be seen if public programme enrolment will outpace the private sector.

Pharmaceutical consumption and expenditure

In line with overall health spend, pharmaceutical expenditure in OECD countries has slowed in recent years, although consumption within certain therapeutic areas continues to increase. The report looked at four major drug classes that have notably been on the rise – anti-hypertensives, cholesterol-lowering drugs, antidiabetics and anti-depressants – in 23 OECD countries excluding the US. Between 2000 and 2011, antihypertensives consumption has nearly doubled, with the highest consumption being reported in Germany, Hungary and the Czech Republic. Cholesterol-lowering drug use has more than tripled on average over the past decade driven by increased prevalence of obesity and increased screening, with Australia and the United Kingdom demonstrating the highest consumption per capita of the countries analysed. Anti-diabetic medications have nearly doubled over the decade, while anti-depressants also demonstrated significant increases.

Expenditure growth has been dampened by the increased consumption of generics over the past decade to 41% (in 19 OECD countries excluding the US), with large variations across countries mainly as a result of policies and physician practices. In the UK, 80% of prescriptions are issued with the international non-proprietary name (INN) facilitating generic uptake, while only 12% of French physicians do so. Germany had 76% generic market share in 2011, followed by the UK (75%), New Zealand (73%), while Luxembourg (9%) and Italy (16%) demonstrated the lowest share.

Pharmaceutical spend represented 17% of overall health expenditure on average across OECD countries in 2011, totalling USD800 billion. The US spent the highest per capita at USD985, followed by Canada (USD701) and Greece (USD673), far above the OECD average at USD483. From 2000-09, pharmaceutical expenditure per capita grew by 3.5% annually, however after 2009, growth has been negative (-0.9%) on average. Notably, Greece and Ireland, both significantly affected by the economic crisis, experienced major shifts in pharmaceutical growth from 9.9% and 7.8% growth in 2000-09 to a decline of 10.1% and 7.2% respectively in 2009-11. The US went from 4.3% annual growth to a 0.5% decline for the same two periods pre- and post-2009. Alternatively, Chile and Australia were the only two OECD countries to demonstrate increased growth post-2009 in pharmaceutical expenditure, rising to 12.1% and 4.9% respectively.

Outlook and implications

Since the onset of the economic recession, countries have sought to reduce healthcare spend, lower public expenditure with budget cuts, and slash prices for medical products, including pharmaceutical drugs. In many countries, increased cost-sharing initiatives meant that patients had to pay more out of pocket, potentially reducing access to healthcare for low-income groups and exacerbating the health situation in certain countries over the long term. The report raised concerns over austerity measures that have reduced "preventive" health spending, notably in Greece, which has led to unfavourable outcomes, including a significant rise in HIV cases in the capital Athens since 2010.

Overall, the burden of chronic disease is on the rise, and is a driving force behind increased consumption of cardiovascular and diabetes drugs. However, pharmaceutical expenditure has declined since 2009, and is a reflection of price cuts achieved through reference pricing, rebates, reduction of pharmacy margins, centralised procurement of drugs, uptake of generics, reduction in coverage, and increased co-payments.

With economic recovery, health expenditure will be expected to rise; however, with several policies and frameworks already in place, the pharmaceutical industry may not see the same level of growth demonstrated pre-recession, although variations will surely exist among countries. The US will be likely to report a marked boost in 2014 as universal healthcare is mandated for all its citizens under the Affordable Care Act.