Pharmaceuticals play a vital role in the health system. Policymakers need to balance access for new medicines while providing the right incentives to industry and acknowledging that health care budgets are limited. After inpatient and outpatient care, pharmaceuticals represent the third largest expenditure item of health care spending; accounting for more than a sixth (16%) of health expenditure on average across OECD countries in 2015 (not taking into account spending on pharmaceuticals in hospitals).

Pharmacists are educated and trained health care professionals who manage the distribution of medicines to consumers/patients and help ensure their safe and efficacious use. The role of the pharmacist has changed over recent years. Although their main role is to dispense medications in retail pharmacies, pharmacists are increasingly providing direct care to patients (e.g. flu vaccinations in Ireland and New Zealand, medicine adherence support in Australia, Japan, England and New Zealand), both in community pharmacies and as part of integrated health care provider teams.

In general, pharmaceutical consumption continues to increase, partly driven by a growing need for drugs to treat ageing-related and chronic diseases, and by changes in clinical practice. This section examines consumption of four categories of pharmaceuticals: antihypertensive, cholesterol-lowering, antidiabetic and antidepressant drugs.

All OECD countries view the development of generic markets as a good opportunity to increase efficiency in pharmaceutical spending, but many do not fully exploit the potential of generics (). In 2015, generics accounted for more than three-quarters of the volume of pharmaceuticals sold in the United States, Chile, Germany, New Zealand and the United Kingdom, while they represented less than one-quarter of the market in Luxembourg, Italy, Switzerland and Greece.

Funding for pharmaceutical research and development (R&D) is the result of a complex mix of private and public sources. Governments mainly support basic and early-stage research. Such funding is made through direct budget allocations, research grants, publicly-owned research institutions and funding of higher education institutions. The pharmaceutical industry translates and applies knowledge generated by basic research to develop products, and invests in large clinical trials required to gain market approval. The industry also receives direct R&D subsidies or tax credits in many countries.