OBJECTIVES: In Malaysia public sector, medicines spending in Ministry of Health health facilities has increased by 428% from 1998 to 2008.  The ultimate aim of this research is to examine the trend of medicine expenditure and to identify the factors associated with the changes in medicine expenditure. METHODS: This was a cross-sectional study.  It studied prescriptions from 2007 to 2009 at the Pharmacy Department of SFMS Hospital in Johor State.  Simple linear regression and multiple linear regression analysis were conducted. RESULTS: Total medicines expenditures for outpatient and inpatient rose every year.  In outpatient, volume of medicine utilization increased over the years.  Medicine expenditure declined in 2009 despite the continuous rise of medicines utilization.  Median cost per medicine declined throughout these three years.  Inpatient had a continuous rise in medicine expenditure.  Median cost per medicine was fluctuating between 2007 and 2009 and was about 35% lower than outpatient.  In outpatient, median cost per medicine was significantly different between years 2007, 2008 and 2009 for all variables except for hospital discipline Paediatric and X-ray.  Meanwhile in inpatient, the exception was for Dermatology, X-ray, Ophthalmology and Dental.  The study found that volume of medicine utilization, which includes the number of medicines, number of medicines per prescription and duration of supply, contributed significantly to the increase of medicine expenditure.  Demographics, price and new medicine approved in the formulary were found to have no impact.  CONCLUSIONS: The increase of medicine utilization rate could be due to the increase of population; the increase of the elderly population and new treatment guidelines and treatment which was previously not available.  Other factors include off-label prescribing, irrational prescribing and poly-pharmacy.  These three factors can lead to medication wastage and higher cost of treatment.  Duration of medicine supply must be carefully monitored as longer duration might result in medication wastage.