NCPA - National Center for Policy Analysis


October 25, 2004

Americans who are hoping for cheaper prescription drugs across the border may be surprised to learn that Canadian pharmaceuticals, particularly generics, are not always a bargain, according to a report by the Fraser Institute.

Brett J. Skinner examined the differences among Canadian drug prices and other countries by comparing them to the United States, and to a median international price composed of six European countries and the United States:

  • Canadian prices for patented prescription drugs are about 57 percent lower than American prices for the same drugs, and about 1 percent above the median international price in 2002.
  • However, Canadian prices for 63 top-selling non-patented single-source drugs (brand name drugs with no patent and a single supplier) were 28 percent higher than the median international price; when the United States was excluded, the drugs were about 75 percent above the median European price.
  • Moreover, American prices for 64 non-patented multiple-source drugs (including both brand name and generic) were as much as 69 percent lower than Canadian prices for the same drugs.

Analysts believe that one of the reasons for Canada's pricier generics is that while the government imposes price controls on patented medicines, it has no direct price controls on non-patented generics. However, legislation and court decisions relating to drug policy have created a monopoly effect in the generic market, giving a few companies advantages over their rivals and making it difficult for firms to enter the market.

Canadian consumers and taxpayers lose as well. If the country's generic drug prices closely reflected the median international price, Canadian consumers could expect to save $810 million this year.

Source: Brett J. Skinner, "Generic Drugopoly: Why Non-patented Prescription Drugs Cost More in Canada than in the United States and Europe," Public Policy Sources no. 82, August 2004, the Fraser Institute.


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