NCPA - National Center for Policy Analysis


November 30, 2007

Government policies around the pricing and reimbursement of prescription drugs in Canada do not produce lower costs for Canadians compared to Americans, according to a new study by Brett Skinner, Director of Health, Pharmaceutical and Insurance Policy Research, and Mare Rovere, a policy analyst, at the Fraser Institute.

According to the study's authors:

  • Prescription drug expenditures made up roughly the same percentage of income before taxes in both countries.
  • In Canada, per capita spending on prescription drugs was 1.5 per cent of per capita gross domestic product (GDP) compared to 1.6 per cent for Americans.
  • Per capita prescription drug expenditures were a slightly higher percentage of after-tax income in Canada than they were in the United States with Canadians spending 2.5 per cent of their personal disposable income (PDI) on prescription drugs compared to only 2.2 per cent for Americans.

Further, the results cannot be explained by differences in the number of prescriptions taken by Canadians and Americans. The study found that the number of prescriptions dispensed per capita in each country is approximately the same. In 2006, 13 prescriptions were dispensed per person in Canada versus 12.3 prescriptions per person in the United States.

One reason for high drug prices in Canada is that generic drugs are more than double U.S. prices for identical drugs, say the authors, due to government policies that shield retail pharmacies and generic drug manufacturers from competitive market forces that would naturally put downward pressure on generic drug prices.

Brett Skinner and Mark Rovere, "Government drug policies in Canada offer no cost advantage over U.S. drug policies," Fraser Institute, November 26, 2007.


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