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OBJECTIVES: Scarcity of public resources in middle-income countries, especially in challenging economic times, draws attention to potential reduction of pharmaceutical expenditure. Per capita pharmaceutical spending in purchasing power parity (PPP) exchange rates, proportion of pharmaceutical spending compared to GDP and total health care spending are frequently used indicators to justify potential savings. Our objective was to explore the influencing factors of pharmaceutical spending in European middle-income countries. METHODS: We conducted a literature review to set up hypotheses for differences in pharmaceutical spending between middle-income (below 30'000 USD GDP/capita) and high income countries (above 30,000 USD GDP/capita). Cross sectional survey based on OECD Health Data 2010 and cluster analysis was conducted to test those hypotheses by applying Mann-Whitney-Wilcoxon test. RESULTS: Payers calculate international price references in currency exchange rates, no adjustment is made to local purchasing power. Due to manufacturers' response to international price referencing and parallel trade middle-income countries have to pay almost the same global price for innovative drugs as high income countries. Therefore adjustment of pharmaceutical expenditure to GDP PPP may not be justifiable, application of currency exchange rates is more appropriate for comparison of pharmaceutical spending. Our cluster analysis indicates that expenditure is proportionally higher in middle-income countries compared to high income countries (1.89 vs. 1.41% of GDP%, pϭ0.039; 23.58% vs. 14.14% of total health expenditure, pϽ0.001), as prices of pharmaceuticals are not adjusted to local price levels, whilst costs of other health care services are lower mainly due to lower salaries of health care professionals. CONCLUSIONS: It can be misleading to compare the pharmaceutical expenditure of middle-income countries to the average of OECD countries. Cluster analyses of countries with similar economic status and comparison of absolute spending based on currency exchange rate provide appropriate benchmarks to substantiate policy initiatives.