Canadian generic prices have been significantly higher than American generic prices for a long time. The most recent data also show that Canadian generic prices have increased relative to American prices over the past five years. In 2003, Canadian prices for the most commonly prescribed generic drugs for seniors were 64 percent higher than American prices on average.
"The comparison of Canadian and American drug prices again shows that Canada's central-planning approach to drug policy is failing to provide better outcomes on generic drug prices than the less interventionist, more consumer-friendly policies commonly used in the United States," said Brett Skinner, Fraser Institute Director of Health, Pharmaceutical and Insurance Policy Research and lead author of the study.
By contrast, Canadian prices for the brand-name drugs most commonly prescribed for people aged 60 years and older were 57 percent lower on average than American prices for identical products. This is down from 2003 when Canadian prices for the most commonly prescribed brand-name drugs for seniors were on average 36 percent lower than American prices.
The study's findings are important because most publicly funded drug programs base eligibility for benefits on age. Most public drug plans also try to restrict public reimbursement to generic drug products only. Therefore, the high average prices for generic drugs most commonly prescribed to seniors in Canada are having a significant impact on the cost of public drug programs, unnecessarily raising the burden on taxpayers.
A Fraser Institute study released in June, Canada's Drug Price Paradox, estimated that across the entire market for prescription drugs in Canada, the total potential savings lost as a result of inflated prices for generic drugs and inefficient substitution of medicines was the equivalent of 13 to 33 per cent of the total spending on Canadian prescription drugs in 2007, estimated at $2.9 billion to $7.5 billion (Cdn).
The study also found that Americans substitute generic versions of drugs for their brand-name originals at higher rates than Canadians. Lower prices for generic drugs driven by market pressures in the United States create positive incentives for American consumers to make rational cost-benefit choices regarding their use of medicines.
By contrast, Canadian public policies often try to force generic substitution by government edict and yet fail to achieve rates of substitution as high as a relatively freer market in the United States.
Both studies used data from IMS Health Canada Inc., Canada's most authoritative independent source of information about retail drug sales.
The data included the 100 most commonly prescribed brand-name drugs and the 100 most commonly prescribed generic drugs in Canada along with primary data on nationally representative U.S. prices for identical drugs.
"Canadians should put the blame squarely where it belongs - bad government policies. High Canadian generic prices are caused by government policies that shield retail pharmacies and generic manufacturers from competitive market forces that would put downward pressure on generic drug prices," Skinner said.
"Generic drug prices in the U.S. are much cheaper because federal and state governments rely on competitive free market forces to discount the prices of generic drugs."
