NCPA - National Center for Policy Analysis

HOW SUCCESSFUL ARE CANADA'S DRUG POLICIES?

March 17, 2009

Canadian prescription drug policies do not result in lower drug costs for Canadians, according to a new study by the Fraser Institute.

In "Cost Burden of Prescription Drug Spending in Canada and the United States: 2008 Edition," researchers compared average per-capita drug spending in Canada and the United States in order to determine whether Canada's prescription drug policies result in lower drug costs for Canadians.  They found:

  • In both 2006 and 2007, Canadians spent approximately 2.5 percent of their Personal Disposable Income (PDI) per capita on prescription drugs.
  • Americans spent less than Canadians did in both years and averaged 2.2 percent of their after-tax income on prescription drugs in 2006 and 2.3 percent in 2007.

This information is especially pertinent because Canada and America average a very similar amount of prescriptions per person (13.7 for Canadians and 12.6 for Americans).  However, in GDP calculations, Canadians spent slightly less than Americans, say the researchers:

  • Canadians averaged 1.5 percent of their per capita gross domestic product (GDP) on prescriptions in both 2006 and 2007.
  • Americans averaged 1.6 percent in 2006 and 1.7 percent in 2007.

The researchers concluded that the Canadian government's intervention in the prescription drug market does not produce a lower drug cost burden for Canadians relative to the cost burden for Americans, who enjoy much freer markets.

Source: Brett J. Skinner and Mark Rovere, "The problem with central planning: How successful are Canada's drug policies?" Fraser Institute, February 2009.

 

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