Facts about the cost of patented drugs in Canada

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CHPI's 2017 Access to Innovative Medicines (AIM) series.

In Canada, the cost of patented drugs is often cited as the reason to justify government policies such as price regulation, monopsony drug purchasing, restricting coverage for new medicines in public drug plans, nationalizing drug insurance, and rejecting international trade standards for the protection of pharmaceutical related intellectual property rights. 

These policies create negative incentives for pharmaceutical innovation and have the potential to reduce current and future access to new medicines for patients. Such policies also require government expenditures on administration -  which is public money that might otherwise be used for improving access to healthcare.

This annual study equips Canadian patients and taxpayers with the evidence they need to assess whether such policies are warranted. Our objective is to establish the facts about the actual cost of patented drugs in Canada relative to population, general price inflation, GDP and other healthcare costs – and to discuss the costs of patented drugs in the context of the health benefits of pharmaceutical innovation. 

The analysis uses the most recently comparable publicly available data from the Patented Medicine Prices Review Board (PMPRB), the Canadian Institute for Health Information (CIHI), and Statistics Canada.

The actual cost attributable directly to patented drugs is only a fraction of the total “drugs” related costs published by CIHI. Other components of the healthcare system account for much larger shares of spending than patented drugs. Cost-containment efforts are disproportionately focused on patented drugs. The very small percentage of total health spending or government health spending accounted for by patented drugs means even the most extreme cost-containment efforts will not return significant overall health system savings.

The facts show that there is no spending crisis regarding patented drugs in Canada. Adjusting for real economic factors like population, CPI and GDP, the total direct cost burden from patented drugs is stable and moderate. Prices are also stable and moderate relative to CPI or comparable countries.

These findings raise serious questions about whether it is economical for governments to increasingly allocate costly administrative resources to controlling the cost of patented drugs. Cost containment efforts that reduce access to new medicines are counter-productive. Improving access to new medicines will return health and economic gains that far outweigh the upfront costs.

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