Canadian Seniors Pay More for Generic Drugs

Published September 1, 2008

Senior citizens in Canada pay on average twice the amount American seniors do for generic medications, according to a report from the Fraser Institute.

Between 2003 and 2006, prices in Canada for generic drugs increased significantly relative to prices in the United States, while relative prices for brand-name drugs most commonly prescribed to seniors decreased, according to the report.

The study evaluated the difference between brand-name and generic drug prices in Canada and the United States for the drugs most commonly prescribed to seniors.

118 Percent More in Canada

The Fraser study found Canadian seniors paid 118 percent more than their American counterparts for the same generic drugs in 2006. In 2003, those drugs were 64 percent more expensive for Canadian seniors than they were for Americans.

Brand-name drugs, on the other hand, were 36 percent less expensive for seniors in Canada than in the United States in 2003, and 52 percent less in 2006.

“High prices for generic drugs are caused by misguided public policies that shield retail pharmacies and generic drug manufacturers from the competitive market forces that would put downward pressure on the price of generic drugs,” the report found.

“Additionally,” the report noted, “most public drug programs reimburse the cost of generic drugs at a fixed percentage of the brand-name original drug. Under fixed percentage reimbursement, there is no incentive for retailers to compete by offering the lowest prices.”

‘Virtual Monopoly’

“Canada’s fixed price public reimbursement system results in a virtual monopoly within particular retail pharmacy chains for a particular generic label,” said Brett Skinner, director of Health and Pharmaceutical Policy Research at the Fraser Institute and coauthor of the study.

“If public drug benefit programs only partially reimbursed consumers directly at a flat percentage of the price of the prescribed drug, all drug sales would be subject to market forces, which would put further downward pressure on prices,” the report noted.

The solution to the price disparity, said Skinner, is to allow prices to be “determined by the level of retail competition and price sensitivities of consumers. The resulting competition between retailers would drive prices down over time.”

Matthew Smith ([email protected]) writes from Alabama.

For more information …

“Seniors and Drug Prices in Canada and the United States 2007,” Fraser Institute, July 2008: