OBJECTIVES: Several studies forecasting health care expenditures (HCE) predict continuously increasing expenses due to at least three factors: ageing, technical progress, and prices. The aim of this study is to identify the effects of selected influencing factors on the expenditures of prescribed drugs (EPD), e.g. the share of 65 aged and older (POP65), doctors' consultations (DOC), and R&D expenditures of pharmaceutical industry (PHARM_R&D). As EPD have grown faster than any other major components of HCE since the late 1990s, cross-national differences in pharmaceutical expenditures are of great interest. METHODS: With panel data of seven countries (Australia, Canada, Finland, France, Germany, Japan, and US) from 1991 to 2001 a dynamic panel estimator, namely the first-differenced General Method of Moments (GMM) has been applied to test the following hypotheses. If POP65 as well as DOC, and PHARM_R&D increase, then EPD will increase. If the rest life expectancy at age 65 (LIFEXP65) as well as PHARM_R&D increase, then innovations instrumented as patent applications (PAT_AP) will increase. RESULTS: The one-period lagged EPD (0.646; 99%CI) was highly significant, POP65 (0.018; 90%CI) and DOC (-0.024; 95%CI) were significant, and PHARM_R&D was marginally significant (0.018; 90%CI). The one- and two-period lagged PAT_AP (0.451 & 0.297; 99%CI) and LIFEXP65 (0.018; 99%CI) were highly significant and PHARM_R&D (0.166; 90%CI) was marginally significant. CONCLUSIONS: In contrast to effects in HCE in previous studies there is an ageing effect (pull factor) causing rising EPD as well as for pharmaceutical innovations. Additionally, we found a push factor, namely R&D expenditures of pharmaceutical industry causing increasing EPD and innovations. Increasing doctors' consultations lead to decreasing EPD maybe caused by successful application of lower medical therapies or by additional following non-medical therapies which are not affecting EPD.