Empirical Analysis of Prescription Drug Expenditures in Canada

Title: Empirical Analysis of Prescription Drug Expenditures in Canada
Authors: Wang, Yiwen
Date: 2015-12-31
Abstract: This paper examines the relationship between public expenditures on prescription drugs and private spending on prescription drugs in Canada over the period 1985 to 2012 using province-specific and year-specific data from the Canadian Institute for Health Information and Statistics Canada. Over this period, prescription drug usage and expenditures were rising; moreover many new public drug coverage plans were implemented. This paper aims to find out whether public spending on prescription drugs is affected by private spending on these drugs, and whether the introduction of catastrophic drug plans could intensify public government burden. There also includes other socioeconomic and demographic explanatory variables, such as gross domestic product, employment rate and senior proportion, and provincial and year fixed effects. The estimation is on the basis of two-way fixed effects models, one is in level form, the other one is in share form. Because the data are in macro panel format, tests for nonspherical disturbances (heteroskedasticity, autocorrelation, contemporaneous correlation) and panel-corrected standard errors (PCSE) are applied. I find that private spending on prescription drugs is a substitute for public prescription drug expenditures. The introduction of the Public Prescription Drug Insurance Plan in Quebec increases public spending of prescription drugs. None of the socioeconomic and demographic variables included in my model significantly affect public prescription drug spending.
URL: http://hdl.handle.net/10393/34158
CollectionScience économique - Mémoires // Economics - Research Papers