NCPA - National Center for Policy Analysis

Why Are Prescription Drugs Cheaper in Canada?

September 19, 2002

Differences in prices for prescription drugs between the U.S. and Canada are growing, but not for the reasons most people suppose, according to John R. Graham of the Fraser Institute.

Price controls imposed by Canada's Patented Medicine Prices Review Board are "not a significant cause of the 'cheapness' of Canadian patented drugs," says Graham.

  • Although there are no price controls on Canadian health-related goods and services in general, they are "almost as cheap relative to those in the United States as patented drugs are...."
  • A major cause of the growing gap in drug prices is that Canadians are getting poorer compared to Americans, says Graham: in 1997 the U.S. per capita Gross Domestic Product was 46 percent greater than Canada's, but grew to 55 percent greater in 2001.
  • Prices of many goods tend to be cheaper in Canada; for example, automobile prices were 16 percent lower in Canada in 1999.

Drugs sold in Canada, like cars sold in Canada, are cheaper because Canadians can't afford to pay more for them.

Furthermore, if U.S. lawmakers required drug makers to sell pharmaceutical drugs in America at Canadian or international prices, the likelihood is that prices would rise worldwide toward the U.S. level, since the United States is about half the world market for prescription drugs.

SOURCE: John R. Graham, "Why the Difference between Canadian & American Drug Prices for Prescription Drugs is Widening," Fraser Forum, September 2002. See also Scandlen's Health Policy Comments, September 16, 2002.


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