International comparisons in medicines spending and the link to competitiveness

What is the right strategic level of spending on medicines to deliver the best outcomes for patients while supporting cash-strapped health systems and delivering wider economic growth?

This is a hard question, and it depends on many factors, such as the health system funding model, public health priorities, and the country's wider economic and health policy objectives. It may be that the level any country reaches is not a conscious choice but an emergent property of its health systems and political priorities. If so, it is important to recognise this fact and make corrections to improve outcomes.

A new report from the IQVIA Institute for Human Data Science, ‘Drug Expenditure Dynamics 2000–2022’, provides valuable insight into how the UK’s spending on medicines compares internationally, and what that means for innovation, investment and patient receiving medicines. [1]

The IQVIA Institute report shows that while drug spending across 12 major markets averages around 15 per cent of total healthcare expenditure, the UK remains a consistent outlier at just 9 per cent, the lowest among the countries studied. This comparatively low but stable ratio reflects the UK’s long-standing and overriding focus on managing costs through various medicines rebate schemes, the rigorous but low-set cost-effectiveness evaluation by NICE, and one of the highest rates of generic and biosimilar use in Europe.

These policies have helped the NHS to suppress its medicines spending. Yet, this same focus on cost control can also undermine the UK’s global competitiveness as a location for developing, manufacturing and launching new medicines.

In the UK, the share of medicines as part of total healthcare spending has hovered below 10 per cent for over two decades, while other countries maintain higher shares. For example, France, which has comparable health expenditure to the UK, and Germany spend 13 and 14 per cent respectively on medicines, while Japan spends as much as 20 per cent of its health budget on medicines.

This persistent gap points to a deeper structural issue. While total NHS spending per capita has grown substantially, rising faster than medicines expenditure, much of that additional resource has gone to the workforce, hospital capacity and non-pharmaceutical services. We see the impact of this in other metrics: UK patients have more restricted access to the latest treatments than peers in Europe, such as Germany or Italy, or in North America [2]. This is generally coupled with slower and more variable adoption and use of newly launched medicines by the NHS [3,4].

The pattern is clear in the IQVIA Institute’s international comparisons: the UK’s per capita healthcare spend in 2022 was around $7,067 (PPP-adjusted), but only $656 of that went on medicines, the lowest of any country in the study. By contrast, the United States spent $13,192 per person on healthcare and $2,006 on medicines; Germany’s figures were $9,250 and $1,337, respectively. Spain and Italy, which spend less on healthcare per head than the UK, invest over 35 per cent more per capita on medicines.

The IQVIA Institute finds that across markets, per-capita medicine spending tends to rise in line with overall healthcare investment. Countries with higher overall spending, such as the US and Germany, devote a similar proportion (around 15 per cent) to medicines, while those with lower total spending, such as Japan and South Korea, show a higher proportional share because other healthcare costs are lower.

The UK’s divergence is therefore distinctive: both absolute and proportional medicines spending are low, reflecting strong price controls and barriers to adoption, rather than low healthcare costs overall.

This has real-world consequences. Internationally, higher investment in medicines correlates with greater inward investment and a stronger R&D footprint [5]. Considering that companies have finite resources when launching innovative medicines, consistent support for early adoption can lead countries to be prioritised for launch, trial activity, and manufacturing, as often seen in Germany and Japan. In contrast, the UK’s comparatively low spend and slow adoption risks discouraging companies from viewing it as a first-wave launch market.

The UK retains exceptional strengths in science, regulation and health data. The MHRA’s adaptive licensing model and the NHS’s capacity for real-world evidence make Britain well-placed to lead in innovation. But to translate those advantages into patient and economic benefit, the UK must also be a leading market for the adoption of innovation. Medicines should be seen not as a pressure on budgets, but as an investment in health, productivity and long-term fiscal sustainability.

The recent drug expenditure findings are a reminder that successful health policy and wider UK competitiveness are linked, and that both are supported by improved and more equitable access and adoption of new medicines. As other nations increase investment in innovation, the UK risks falling behind due to its overriding focus on cost containment rather than on innovation investment and adoption.

A renewed partnership between government, industry, and the NHS, grounded in sustainable investment and faster adoption, will be essential to ensure that the next generation of scientific breakthroughs is discovered, made, and launched in Britain, for the benefit of NHS patients.

By Kim Assender, Director of Commercial Policy and Analysis, ABPI

End Notes: 
[1] IQVIA Institute, ‘Drug Expenditure Dynamics 2000-2022’, October 2025
[2] EFPIA WAIT Indicator (2024), available here: efpia-patients-wait-indicator-2024-final-110425.pdf
[3] IQVIA Launch Excellence IX White Paper (2025), available here: launch-excellence-ix.pdf
[4] Office for Life Sciences (2024), LSCI Uptake Indicator, available here: Life sciences competitiveness indicators 2024: summary - GOV.UK
[5] ABPI linear regression analyses of medicine spend per capita vs. R&D spend and foreign direct investment across nations with available data.