NCPA - National Center for Policy Analysis

Lowering Drug Costs in Canada

September 3, 2003

There is little evidence that a proposed National Drug Agency will contain prescription drug costs in Canada, or that such a goal is even desirable, says John R. Graham (Fraser Institute).

Comparing the results of increased public spending on prescription drugs to overall costs across the provinces from 1985 through 1999, the share of total prescription costs paid by provincial public drug benefit plans varied greatly:

  • In British Columbia, the share paid by the provincial government dropped only slightly during the period, from 51 percent to 50 percent of total provincial prescription spending.
  • Alberta's provincial drug benefit plan, however, had a smaller share of the prescription bill but grew from 33 percent to 39 percent of total prescription spending.
  • Nevertheless, the two provinces experienced almost the same growth in total prescription drug spending over the period: 129 percent in British Columbia versus 127 percent in Alberta, as measured in real dollars on an age-adjusted basis.

Significantly, increased spending on prescription drugs in Canada is associated with shorter waiting lists for surgery, meaning that it is a valuable component of health care spending.

A National Drug Agency, then, will probably not contain the growth in prescription drug spending with more centralized negotiating power. But having one central drug agency versus many provincial drug benefit plans would eliminate Canadians' ability to judge drug costs for themselves, says Graham.

Source: John R. Graham, "A National Drug Agency Will Not Contain Drug Costs," Fraser Forum, May 2003.


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