Determinants of Pharmaceutical Expenditure in OECD Countries: Evidence from Panel Data

Abstract

Purpose – The objective of this study is to identify the main factors affecting pharmaceutical expenditures in the Organization for Economic Cooperation and Development (OECD) countries. Design/methodology/approach – In this study, it was investigated whether the university graduate rate (UNI), the unemployment rate (UNEMP), gross domestic product per capita (GDP) in Purchasing Power Parity (PPP $), and the number of physicians per 1,000 people (PHY) affected per capita pharmaceutical expenditures (PHAR) (PPP $) by using panel data analysis. The population of the study was 33 OECD countries whose data were available. The data consisted of the time period of 2013-2016. Results – GDP and UNI statistically significantly increased PHAR (p<0.05). The UNEMP and PHY also increased PHAR, but the effects of these variables were not found to be statistically significant (p>0.05). The variables included in the model explained 22% of the variance in PHAR. Conclusion – PHAR are affected by economic factors and sociodemographic factors as well as health systems' structure. Therefore, governments wishing to control pharmaceutical expenditures should also focus on these variables.