AbstractThis paper analyses the evolution of pharmaceutical expenditure with respect to GDP for a group of the most important OECD economies. We find that this relationship is not stable across the sample considered (1960–2003), and heterogeneity is found in the temporal evolution of the variables and across countries. Furthermore, we can see differences in the income elasticity estimation when we disaggregate pharmaceutical expenditure into its private and government components or when the total health‐care expenditure (Total HCE) is disaggregated into its pharmaceutical and non‐pharmaceutical components. We conclude that the changes in the elasticity of pharmaceutical expenditure and in the Total HCE elasticity are due to the private component and the pharmaceutical expenditure behaviour, respectively. Copyright © 2007 John Wiley & Sons, Ltd.