Canadians pay more for medicines

Generic drugs are on average 78 percent more expensive in Canada than in the United States, according to a new study by Brett Skinner (Fraser Institute).

Moreover, Canadians could save between $2 billion and $5 billion annually if governments allowed the pharmaceutical market in Canada to be as competitive as the U.S. market, says Skinner.

Governments claim that price regulations reduce drug costs for Canadians, yet the data show that Canadians actually pay more than they should for non-patented drugs – generics – because government policies that were supposed to make drugs cheaper instead reduce competition and drive up prices.

According to Skinner:

U.S. prices for generic drugs are lower because the American market has more generic manufacturers competing for sales, which leads to lower prices and higher voluntary rates of generic drug use in the United States.

By contrast, only a few firms with little serious competition dominate the Canadian generic market; this leads to inflated prices and lower rates of generic use.

Skinner also finds:

Only two generic companies accounted for 68 percent of all prescriptions dispensed among the 100 top selling generics in 2003, and only five companies accounted for 95 percent.

The data also shows that Canada's generic market is divided up into individual product monopolies on pharmacy shelves, often with only one or two companies taking all the sales for individual products, while not competing for sales of other products.

Skinner suggests that price controls and other policies distort the pharmaceutical market, reduce competition and harm Canadian consumers by causing inflated prices for non-patented drugs, and suggests that Canadians would be better off if governments repealed such policies.

Source: Brett J. Skinner, Government Interference in Pharmaceutical Markets Costs Canadians $2 billion to $5 billion Annually, Fraser Institute, February 23, 2005.

For text: http://www.fraserinstitute.ca/shared/readmore.asp?sNav=nr&id=644

For more on Drug Price Controls: http://www.ncpa.org/iss/hea/

FMF Policy Bulletin/ 08 March 2005