Facts about the cost of patented drugs in Canada: 2018 Edition.

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The actual costs attributable directly to patented drugs are only a fraction of the total “drugs” costs published by CIHI. In 2017 CIHI reported $38.2 Billion was spent on all “drugs” and $32.3 Billion on “prescribed drugs”. According to PMPRB, the total direct cost from gross sales of patented drugs was $16.8 Billion in 2017, which accounts for 44% of the “drugs” total reported by CIHI for the same year.

Ontario's Auditor General reported that the province’s public drug plan received rebates of close to 30% on brand name drugs in the fiscal year 2016/17.  After accounting for a national average rebate of 30% applied to the public drug plan share of sales, net national sales of patented drugs were estimated to be $14.7 Billion in 2017 – only 38% of the “drugs” total reported by CIHI. 

Measured in current dollars, the per capita cost of patented drugs was $458 in 2017. Historical data from 1990 to 2017 were available for population and the CPI that allowed for a conversion of gross national sales of patented medicines into per capita costs measured in constant 1990 dollars to remove the effect of general price inflation.  Adjusting for national population growth and inflation over time reveals that patented drugs have experienced near zero real average annual cost growth for the last 12 years. Measured in constant 1990 dollars, the gross per capita cost of patented drugs was $275 in 2017, growing at an average annual rate of only 0.55% from $258 in 2006. Accounting for a national average rebate of 30% applied to the public drug plan share of sales, the net national per capita cost of patented drugs was only $241 (constant 1990 $) in 2017.    

Gross sales of patented drugs have accounted for less than 1% of GDP for the last 28 years. Patented drugs were the same percentage of GDP in 2017 (0.78%) as in 2003 (0.78%), a 15-year period of zero average annual growth relative to GDP. Accounting for public drug plan rebates, the net national cost of patented drugs was only 0.68% of GDP in 2017.  

Gross sales of patented drugs accounted for only 6.9% of the $243.4 Billion reported by CIHI for total health spending in Canada in 2017. Patented drugs accounted for a smaller percentage of total health spending in 2017 (6.9%) than in the year 2001 (7.1%), a 17-year period of near zero average annual relative cost growth. Accounting for public drug plan rebates, the net national cost of patented drugs was only 6.0% of total health spending in 2017.

Public drug plan spending on the direct costs of patented drugs at factory list prices was roughly $7.0 Billion in 2017, representing only 4.2% of the $165.7 Billion in total health spending by Federal, Provincial and Territorial governments in the same year. Gross sales of patented drugs were the same percentage of government health costs in 2017 (4.2%) as in 2000 (4.2%), an 18-year period of zero average annual growth relative to total government health expenditure. Accounting for rebates, net national spending on patented drugs by public drug plans was only $4.9 Billion or 3.0% of all government health spending reported by CIHI in 2017.

PMPRB defines high-cost patented drugs as medicines with annual treatment costs of more than $10,000. According to PMPRB there were 144 patented medicines defined as high-cost drugs in 2017 accounting for $6.3 Billion in gross sales. Gross sales of all high-cost patented drugs represented only 0.29% of GDP and 2.6% of total health expenditures in 2017. Gross national sales of high-cost patented drugs have accounted for less than 0.35% of GDP and less than 3% of total health expenditures for the last 12 years. Accounting for a national average rebate of 30% applied to the public drug plan share of sales, net national spending on high-cost patented drugs was only $5.5 Billion representing 0.26% of GDP and 2.3% of total health expenditures in 2017.   

Measured in current dollars, gross national per capita spending on high-cost patented drugs was $172 in 2017. Historical data from 2006 to 2017 were available for population and the CPI that allowed for a conversion of gross national sales of high-cost patented medicines into per capita costs measured in constant 2006 dollars to remove the effect of general price inflation.  Measured in constant 2006 dollars, gross national per capita spending on high-cost patented drugs was $144 in 2017. Accounting for a national average rebate of 30% applied to the public drug plan share of sales, net national per capita spending on high-cost patented drugs was only $126 (constant 2006 $) in 2017.  

Gross national expenditures on high-cost patented medicines by public drug plans were $2.6 Billion in 2017 representing 0.12% of GDP and 1.6% of government health expenditures. Gross national public drug plan spending on high-cost patented medicines accounted for less than 2% of government health expenditures over the entire 12-year period 2006 to 2017. Accounting for a national average rebate of 30%, the net national public drug plan spending on high-cost patented medicines was only $1 .9 Billion or 0.09% of GDP and 1.1% of government health spending in 2017. 

PMPRB data show that the net prices of patented drugs in Canada have grown slower than the Consumer Price Index (CPI) in 28 of the 30 years from 1988 to 2017.

PMPRB data show that, adjusted for the market exchange rates of currencies, gross median international prices have been higher than Canadian prices for the last 11 years, as much as 26% higher in 2017. When the PMPRB used the gross mean (or average) prices, and adjusted currencies at purchasing power parities, international prices for patented drugs were 53% higher than Canadian prices in 2017, and the gap has widened from 4% higher in 2007. 

The cost of patented drugs must be weighed against the health and economic benefits. Pharmaceutical innovation improves patient health outcomes, reduces potential health system costs and reduces indirect societal costs like economic productivity losses from untreated or under-treated illness.

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