NCPA - National Center for Policy Analysis

Most Drugs are Cheaper in the United States -- Not Canada

January 28, 2003

The notion that pharmaceuticals are cheaper in Canada is a myth, according to experts. While some high-profile, brand-name drugs are cheaper in Canada, other lesser-known drugs and generics sell for less in the United States.

  • According to the firm Palmer D'Angelo Consulting, 21 out of 27 top-selling generics cost more in Canada -- and for all 27 combined, the average Canadian premium is 37 percent.
  • In the United States, generic drugs cost an average of 74 percent less than equivalent brand-name drugs -- while in Canada, generics average just 38 percent less.
  • The myth of cheap Canadian drugs can be traced to two studies -- a 1992 study from the U.S. General Accounting Office and a 1998 report from the Democratic staff of the House Committee on Government Reform, both of which are flawed.
  • They compared only top-selling brand-name drugs -- ignoring lower-priced generics.

Furthermore, prices in the studies weren't properly weighted to reflect market share or market discounts, argues Wharton School health economist Patricia Danzon. Correcting for the flaws, Wharton economists found that if Americans had paid Canadian prices for the drugs they bought in 1992, they would have saved, at most, 13 percent.

Source: Ira Carnahan, "The Cheap Drugs Myth," Forbes, February 3, 2003.

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