NCPA - National Center for Policy Analysis

CANADA'S DRUG PRICE PARADOX

August 8, 2007

Canadians pay much more than Americans for generic drugs because government policies in Canada distort the market for prescription medicines, according to a new study by the Fraser Institute.

Consider:

  • In currency-equivalent terms, Canadian retail prices for generic prescription drugs in 2006 were on average 115 percent higher than retail prices observed in the United States for identical drugs.
  • A previous analysis using 2003 data found that prices for generic drugs were 78 percent higher in Canada.

By contrast:

  • Canadian retail prices for brand-name drugs were on average 51 percent below U.S. prices for identical drugs in 2006.
  • In 2003, the prices for brand-name drugs was 43 percent lower in Canada on average.
  • For Canadians, this means that since 2003 the cost of generic drugs has risen relative to U.S. prices, while the cost of brand-name drugs has decreased.

Overall:

  • In 2006 alone, federal-provincial-territorial prescription drug policies cost Canadians between C$2.5 billion (about U.S. $2.4 billion) and C$6.6 billion (about U.S. $6.3 billion) in unnecessary spending due to inflated prices for generic drugs and inefficient use of medicines.
  • Over the four years from 2003 to 2006, the total amount of money wasted because of misguided prescription-drug policies in Canada could range from as high as C$20 billion (about U.S. $19 billion) to over C$26 billion (about U.S. $24.8 billion).

This data suggests that Canadians would be much better off if federal and provincial governments repealed policies that distort the market for prescription drugs, says the Institute.

Source: Mark Rovere and Brett J. Skinner, "Canada's Drug Price Paradox 2007," Fraser Institute, August 2007.

For text:

http://www.fraserinstitute.org/researchandpublications/publications/4542.aspx

 

Browse more articles on Health Issues