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Canada grapples with drugs costs Posted 10/08/2012

Government report calls for the widening of the current scheme for brand-name medicines to include generics.

Background to the current pricing situation
A recent report placed Canada’s per capita drug spending the second highest among eight comparator Organisation for Economic Co-operation and Development (OECD) countries. Based on 2009 OECD data, the most recent year for which data was available, the US had the highest per capita total drug spending at US$1,145 followed by Canada at US$890 and France at US$767.

Of these eight countries, Canada had the second lowest share of total drug expenditure financed by the public sector. In 2009, the public sector funded 38.8% of total drug expenditure in Canada, compared with a high of 84.7% in the UK.

This data agrees with that of free market think tank the Fraser Institute. Canadian prices for 64 generics available in both Canada and the US were, on average, 90% higher than in the US in 2008, says the study. The Fraser Institute study also reports that, in 2008, Canadian retail prices for generics were 73% of the price of their brand-name equivalents, compared with just 17% of the price of their brand-name equivalents in the US [1].

Fuel for the policy debate
More numbers add further detail. A total of 45% of prescribed drugs are financed by the public sector, with the remaining 55% financed by the private sector. In 2011, public sector spending on prescribed drugs rose by 2.2% from 2010, while private sector expenditure, reaching an estimated CAN$15.1 (Euros 12.2) billion, went up 6.8% from 2010 (Canadian Institute for Health Information figures).

There are significant variations in prescribed drug spending across the provinces. And the estimated annual growth in per capita spending on prescribed drugs varied from 1.4% in British Columbia to 9.4% in Newfoundland and Labrador. This may reflect recent introduction of generics pricing policies in some provinces.

New government report
The Council of the Federation brings together senior politicians from Canada’s different Territories and Provinces. On 26 July 2012, health ministers published an analysis of the current healthcare situation titled ‘From Innovation to Action’. Among a range of recommendations is that the current Pan-Canadian Purchasing Alliance–agreed in August 2010 for the purchase of widely-used brand-name single-source drugs, medical supplies and equipment–should now be extended to cover three to five generic drugs. It also calls for the prompt initiation of a national competitive bidding process for generics. The hope is that strengthening collaborative intervention on a national scale will result in lower prices taking effect by April 2013.

Where do the figures lead?
In 2010 the Frazer Institute report concluded that ‘Canadian government policies are distorting the market’ and the government should simply withdraw and let competition regulate prices. They seem to lose the argument as the Province’s generics initiatives are apparently successful.

The Council’s report advocates strengthening the public sector. Lower prices resulting from the lead taken by the public sector would also benefit the private sector and employer-sponsored insurance, commented the group’s chairmen. They also see a collaborative approach with the industry as a way of tackling drug shortages.

Canada’s Research-Based Pharmaceutical Companies (Rx&D), speaking on behalf of the industry said it supported the study’s ‘general direction and focus on tangible action.’

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1.  GaBI Online - Generics and Biosimilars Initiative. Canadians pay almost twice as much as Americans for generics [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2012 Aug 10]. Available from: www.gabionline.net/Generics/Research/Canadians-pay-almost-twice-as-much-as-Americans-for-generics

Source: Canadian Institute for Health Information, Council of the Federation, Fraser Institute, Rx&D

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