You asked why prescription drugs cost less in Canada than in the United States.

Many brand name drugs, both prescription and over-the-counter, cost less in Canada than the U.S. because their price is regulated by a quasi-judicial body called the Patented Medicine Prices Review Board (PMPRB). The board regulates the manufacturer’s price of patented medicines sold in Canada (not all drugs sold in the U.S. are available in Canada). The manufacturer’s price is the price the drug’s manufacturer charges wholesalers, hospitals, and pharmacies. The PMPRB does not regulate the price wholesalers or retailers charge their customers. The board’s price controls cover medicines for the 20 years they are protected by a Canadian patent.

The board sets the price of a new patent drug at a level that makes the cost of treatment involving the new drug similar to the treatment costs for existing drugs sold in Canada used to treat the same disease. The price of a “breakthrough” drug (a new product that will make a significant and major improvement in reducing illness, mortality, or disability, and for which no other product is available that achieves similar results for the same condition) is limited to the median price for that drug charged in seven other industrialized nations, including the U.S. The prices of existing drugs cannot increase by more than the consumer price index. Finally, Canadian law states that the Canadian prices of patent drugs cannot be the highest in the world.

The PMRBD does not regulate the price of generic drugs. A recent report by the Fraser Institute, an independent, market-oriented Canadian social research and educational organization, found that some generic drugs cost more at the retail level in Canada than the U.S.

Drug manufacturers claim that regulated Canadian prices (and those in other countries that control drug prices) do not adequately account for the research and development costs involved in creating a new drug. Consequently, these costs must be paid by consumers in unregulated markets like the U.S. Manufacturers assert that their inability to recoup these costs could lead to slower development of new drugs.

SS:ts