Drug Pricing: A Comparison between Canada and Other Countries
Comparing Drug Prices in Canada and Other Countries
Measures of price change do not tell the entire story. It is also important to know how the level of prices compares from one country to another. In the case of the PMPRB's mandate to determine if the price of a patented medicine is excessive, the Patent Act requires that we take into account the prices of the same drug in other countries.
Ratio of Canadian Prices of Patented Drugs to Median International Prices, 1987-2001
As shown in this graph, Canadian prices for patented drugs on average declined from a level 23% above the median of foreign prices in 1987 to fall below the median as of 1994. Canadian prices have remained below the median prices since then. Last year, prices here were 5% below the median for the same group of drugs.
When we do a country by country comparison, we see a similar trend.
Average Foreign to Canadian Price Ratios, Patented Drug Products, 2001
In 1987, prices for patented drugs in Canada were second-highest in the basket of seven countries that we compare ourselves to, but our prices have declined relative to the other countries since then.
Last year, Canadian prices for patented drugs were well below prices in the US and put us in the mid-range of the European countries. As shown in this graph, Canadian prices on average were below those in Switzerland, the UK and Germany but higher than in Sweden, France and Italy. The differences between the highest and lowest priced countries in this group are not as significant as the difference between this group and the United States which continues to have the highest prices overall.
I would like to come back to the issue of American drug prices in a few minutes, but let me note a methodological point. Comparing drug prices is always a difficult task but it becomes even more difficult when we include the United States. Unlike the other countries that have universal health care and publicly-funded drug plans, there are no public formularies that effectively set national prices in the US and there is considerable price differentiation between different customers. The variation in prices and the lack of transparency makes it more difficult to calculate a US price for comparison purposes. For our price review purposes at the PMPRB, and following an extensive public consultation with stakeholders, we apply a methodology to calculate a US price for comparison purposes that represents a simple average of the publicly-available prices for the drug reported by the manufacturer and the price listed on the Federal Supply Schedule. The FSS lists the prices available to the US federal government and agencies.
The foreign price trends I have reported today are generally in line with other studies. For example, last year the Australian Productivity Commission published a study comparing prices for drugs in Australia and a number of OECD countries including Canada and the US.
In general, that study reported similar trends in terms of comparisons for brand-name drugs; Canadian prices tend to be in the mid-range of the European countries in our basket and well below those in the US.
The Australian study also concluded that Canadian prices for drugs are considerably higher than prices in Australia but that the biggest differences are for generic drugs and to a lesser extent, for brand-name “me-too” drugs. According to the study, the prices of “innovative” drugs in Australia appear to be more in line with the prices in Canada and our European basket.