BACKGROUND: While the prices of pharmaceuticals are relatively low in Greece, expenditure on them is growing more rapidly than almost anywhere else in the European Union.
OBJECTIVE: To describe and explain the rise in drug expenditures through decomposition of the increase into the contribution of changes in prices, in volumes and a product-mix effect.
METHODS: The decomposition of the growth in pharmaceutical expenditures in Greece over the period 1991-2006 was conducted using data from the largest social insurance fund (IKA) that covers more than 50% of the population.
RESULTS: Real drug spending increased by 285%, despite a 58% decrease in the relative price of pharmaceuticals. The increase in expenditure is mainly attributable to a switch to more innovative, but more expensive, pharmaceuticals, indicated by a product-mix residual of 493% in the decomposition. A rising volume of drugs also plays a role, and this is due to an increase in the number of prescriptions issued per doctor visit, rather than an increase in the number of visits or the population size.
CONCLUSIONS: Rising pharmaceutical expenditures are strongly determined by physicians' prescribing behaviour, which is not subject to any monitoring and for which there are no incentives to be cost conscious.