The Fraser Institute

The Fraser Institute

December 05, 2007 06:00 ET

The Fraser Institute: Government Policies Cause Canadian Seniors to Pay More for Generic Drugs Than American Seniors

TORONTO, ONTARIO--(Marketwire - Dec. 5, 2007) - Canadian seniors are paying more than double what American seniors pay for identical generic drugs, according to a new study released today by the independent research organization The Fraser Institute.

The peer-reviewed study, Seniors and Drug Prices in Canada and the United States, found that on average, Canadian prices for the generic drugs most commonly prescribed to seniors in 2006 were 118 per cent higher than U.S. prices for the same drugs. This is up from 2003 when Canadian prices for the most commonly prescribed generic drugs for seniors were on average 64 per cent higher than U.S. prices.

"Canadian seniors are paying unfair prices for generic drugs because of faulty pricing and reimbursement policies used by government-run public drug plans," said Brett Skinner, Fraser Institute's 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 over were 52 per cent lower on average than U.S. 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 per cent lower than U.S. prices.

"Over the past four years, Canadian seniors have seen significant price increases for the generic drugs they need relative to the prices paid by American seniors for exactly the same drugs," Skinner said.

"On the positive side, prices paid by Canadian seniors for brand name drugs have become less expensive relative to prices paid by American seniors."

Skinner said inflated generic drug prices in Canada produce unnecessary costs for public drug plans, private insurance payers and seniors who pay cash for their prescription medicines.

"Canadians should put the blame squarely where it belongs - bad government policies. The 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 prices," Skinner said.

"Generic drug prices in the U.S. are much cheaper because governments south of the border tend to rely more on competitive free market forces to discount the prices of generic drugs."

A Fraser Institute study released in July, Canada's Drug Price Paradox, estimated that the total potential savings lost from high generic prices in Canada due to government drug policies was between $2.5 billion and $6.6 billion for 2006 alone. Over the four years covering 2003 to 2006, the potential savings lost from high generic prices totalled between $20 billion and $26 billion.

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. The data sample represented 69 per cent of the total number of brand name prescriptions dispensed, and 57 per cent of the total number of generic prescriptions dispensed in Canada.

"If Canadian governments truly want to show they care about seniors, both federal and provincial governments will repeal the policies that distort the market for prescription drugs. That would lead to lower prices and a greater voluntary use of generics, providing choice and savings for seniors across the country," Skinner said.

The Fraser Institute is an independent research and educational organization with offices in Calgary, Montreal, Tampa, Toronto, and Vancouver. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit

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