Canada - World Health Organization Regional Office for Europe

Health systems in transition Canada 67
To understand the underlying health cost drivers, it is essential to separate
health spending by service programmes or functions, and then examine the
impact of health-specific inflation, increased utilization and ageing. From the
1980s until the mid-2000s, prescription drugs were the fastest growing category
of health expenditure, and most of this growth was due to a combination of
increased utilization, the introduction of new drug therapies and higher prices.
In this respect, Canada has had among the highest generic drug prices in
the world (perhaps in part due to the lack of generic price regulation at the
national level). In contrast, factory gate prices of branded prescription drug are
regulated by the PMPRB while CADTH provides provincial governments with
a centralized drug assessment and review process for new prescription drugs
(Romanow, 2002; McMahon, Morgan & Mitton, 2006).
Since 2005, there has been an acceleration in spending on physicians driven
more by increases in remuneration than volume. Hospital expenditures have
also grown rapidly due mainly to increases in staffing levels, compensation and
the increased use of advanced technologies, including advanced diagnostics.
In sharp contrast, the growth in prescription drug spending in recent years
has been largely due to increases in utilization as opposed to price, due to the
maturing of patents as well as a slowing in the rate of new drugs coming on the
market relative to previous periods (CIHI, 2011b).
3.2 Sources of revenue and financial flows
The principal source of health system finance is taxation by the F/T/P
governments (see Fig. 3.6). Since medicare services are exempt from patient
payment at the point of service, they are entirely financed by government
revenues mainly at the provincial level. The sources of funding for other health
goods and services are derived from a combination of taxation, OOP payments
and PHI. The vast majority of PHI comes in the form of employment-based
insurance that employees are required to take on as part of a given package
of remuneration and benefits. Social insurance forms the smallest portion of
health funding and is largely used for health benefits for workplace injuries or
ailments available under workers’ compensation schemes in the provinces and
territories (see section 3.3.2).