Friday, August 27, 2004
Why do Canadian drugs cost so much?
[Brett J. Skinner, "Generic Drugopoly: Why Non-patented Prescription Drugs Cost More in Canada than in the United States and Europe," The Fraser Institute, August 2004.]
Yes, you read the title correctly. As it turns out, despite all of the attention certain brand-name drug price discounts in Canada receive, many drugs are actually more expensive across the border. This report from the Canadian Fraser Institute explains why:
Studies comparing international prices of prescription pharmaceuticals have found that Canadian prices are close to the international median price for patented drugs but higher for non-patented single-source (usually brand-name) drugs, and also higher for non-patented multiple-source (mostly generic) drugs. Furthermore, in studies comparing Canadian to American drug prices, it has been found that Canadian prices are significantly lower overall for patented drugs, but are usually higher than American prices for generic drugs.
Given that Canadian incomes are lower than incomes in most of the countries used for drug price comparisons by the PMPRB (and much lower than incomes in the United States), economic theory would predict that in a free market the prices for drugs would also be lower in Canada, a price-to-income relationship that has also been observed for many non-pharmaceutical products. Therefore, the observation that Canadian prices for non-patented drugs are higher that the international median and that Canadian prices for generic drugs are higher than American prices, is counter-intuitive and merits investigation into the reasons for this irregular pricing pattern.
This study concludes that interventionist and biased Canadian pharmaceutical policies are leading to prices for non-patented and generic drugs that are higher than would be expected under normal free-market conditions. This means a large and growing number of consumers are suffering unnecessary economic losses of significant
magnitudes. Furthermore, the lack of a free market for pharmaceuticals and inconsistent protections for intellectual property rights is reducing incentives for innovation. This raises the probability that future consumer access to life-improving and life-saving medicines in Canada could be limited.
[Brett J. Skinner, "Generic Drugopoly: Why Non-patented Prescription Drugs Cost More in Canada than in the United States and Europe," The Fraser Institute, August 2004.]
Yes, you read the title correctly. As it turns out, despite all of the attention certain brand-name drug price discounts in Canada receive, many drugs are actually more expensive across the border. This report from the Canadian Fraser Institute explains why:
Studies comparing international prices of prescription pharmaceuticals have found that Canadian prices are close to the international median price for patented drugs but higher for non-patented single-source (usually brand-name) drugs, and also higher for non-patented multiple-source (mostly generic) drugs. Furthermore, in studies comparing Canadian to American drug prices, it has been found that Canadian prices are significantly lower overall for patented drugs, but are usually higher than American prices for generic drugs.
Given that Canadian incomes are lower than incomes in most of the countries used for drug price comparisons by the PMPRB (and much lower than incomes in the United States), economic theory would predict that in a free market the prices for drugs would also be lower in Canada, a price-to-income relationship that has also been observed for many non-pharmaceutical products. Therefore, the observation that Canadian prices for non-patented drugs are higher that the international median and that Canadian prices for generic drugs are higher than American prices, is counter-intuitive and merits investigation into the reasons for this irregular pricing pattern.
This study concludes that interventionist and biased Canadian pharmaceutical policies are leading to prices for non-patented and generic drugs that are higher than would be expected under normal free-market conditions. This means a large and growing number of consumers are suffering unnecessary economic losses of significant
magnitudes. Furthermore, the lack of a free market for pharmaceuticals and inconsistent protections for intellectual property rights is reducing incentives for innovation. This raises the probability that future consumer access to life-improving and life-saving medicines in Canada could be limited.
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