Background: Like most developed countries, in the last decade Israel's healthcare system has been subject to cost-containing measures in the drug sector.
Objective: To provide comparative information in an international context on the level of outpatient drug expenditures in Israel, both total and those publicly financed, and to analyze how these have changed with time during the last decade.
Methods: Using definitions of the OECD (Organization of Economic Cooperation and Development), internationally comparable data on total expenditure and public expenditure on medicines in Israel are provided. The Israeli estimates are based on data from the Ministry of Health audited reports of financial activities of the health management organizations and from the family expenditure surveys carried out by the Central Bureau of Statistics. Per capita total and public expenditures in Israel are analyzed over time, as are their share of national expenditure on health and of gross domestic product. Israel expenditures are then compared with those for individual member countries of the OECD, as well as a 21 country average, from 1992 to 2002.
Results: Analysis of the Israeli expenditure data shows a considerable reduction in growth of per capita total and public expenditures on medicines since 1997. Growth in the share of total drug expenditure of NEH[1] and of GDP[2] has also been constrained since 1997. In an international context, per capita expenditure on medicines in Israel, particularly what is publicly financed, is one of the lowest. Furthermore, its share of NEH and GDP is also very low compared to other countries. This substantive gap in spending on medicines between Israel and other countries has increased since 1997.
Conclusions: Israel, a medium-income country with a lower than average level of expenditure on health compared to OECD countries, has a particularly low level of expenditure on medicines. Whereas the share of health expenditure of GDP in Israel is similar to the international average, the share of drug expenditure of GDP is well below the average. In addition to structural and longer-term factors contributing to Israel's low per capita spending on medicines, such as the young population and the apparently low level of actual prices paid by most institutional purchasers, recent years are witness to the growing impact of National Health Insurance budgetary pressures on HMOs[3] as well as continual increases in prescription cost sharing by patients. The impact is felt both on the demand side (higher co-payments, administrative and prescribing restrictions) and perhaps more crucially on the supply side (price competition, mainly from generics). Substantial extra public funding for the addition of new drugs to the NHI[4] basket in recent years has had no overall impact on these longer-term spending patterns.