OBJECTIVES: To determine the effects of different drivers for changes of the overall expenses for pharmaceuticals in Germany's social health insurance (SHI) from 2006 (26.4 bn Euro) to 2007 (28.0 bn Euro). To determine the role of shifts towards the prescription of more costly follow-on drugs. METHODS: Analysis was based on sales data on 90,027 different drug preparations having been prescribed in 2006 and 2007. An overall of 636 m (2006) resp. 650 m (2007) prescriptions represented 97% of all drug expenses of the SHI. By calculating index numbers we estimated the influences of quantities, prices, and eight structural components, amid others shifts between classes of drugs as well as shifts between compounds within classes of drugs. The latter indicates shifts towards more costly follow-on drugs. Analyses have been carried out for 95 different indication groups. RESULTS: Sales increased for 1.6 bn Euro and the prescribed quantities of drugs for 1.9 bn from 33.2 bn to 35.1 bn DDD. The higher quantity of prescribed DDD enhanced sales by 2.2 bn Euro. Reduced prices resulted in savings of 0.2 bn Euro. A higher cost efficiency of prescribing was also achieved by an increased prescription of generic drugs, larger packages and drugs of higher dosage strength summing up to savings of about 0.5 bn Euro. In the two drug groups with the highest quantity of prescribed DDD (ACE inhibitors: 3.2 bn DDD; statins: 2.1 bn DDD) the proportion of Ramipril and Simvastatin increased from 49 to 57 % and from 79 to 85 %, respectively. CONCLUSIONS: The most important cost driver was the increase of the number of prescribed DDD reflecting unserved needs in frequent indications in former years. Shifts to more costly follow-on drugs had no impact on the overall costs.