PMPRB Reports on Prices of Non-Patented Drugs

The Patented Medicine Review Board (PMPRB) received directions from the Canadian government in November 2005 to monitor and report on non-prescription drug prices, despite only being mandated to regulate the prices of patented drugs. As part of this process the board has began releasing quarterly reports covering different themes relevant to the price and sale of non-patented drugs. The board has now issued the first of these reports, entitled ”Canadian and Foreign Price Trends”, in which it provides an overview of sales and price trends. The report contains comparisons to drug prices in 11 countries, including all the comparator countries used by the PMPRB for its annual reporting on the patented sector (apart from Sweden). The report also features an analysis of notable price changes.

These extended reporting activities are deemed integral to Canada’s efforts to achieve international parity on the prices of non-patented drugs. This is one of the key objectives of its National Pharmaceutical Strategy (NPS), as set out in the 2004 ten-year plan to strengthen healthcare in the country. The report set out to provide an overview of pricing in the non-patented drug sector, and focused heavily on the following two themes:

International Price Comparisons

According to the PMPRB’s pricing analysis, the prices of generic drugs in Canada – or those drugs sold under the name of the drug’s principle ingredient – were lower in all the comparator countries than in Canada. Meanwhile, in the non-patented branded and patented sectors, drug prices were higher in Canada than all comparator countries, apart from the United States and Switzerland.

Price Changes

The PMPRB’s report finds that although the average prices of generic drugs declined in each of the countries in 2005, the rate of decline in Canada was lower than in the 11 comparator countries. In contrast, prices for non-patented drugs actually rose in 2005 in the United States, Canada, Germany and France, with only the United States demonstrating a higher rise in prices than Canada.

(For full details see: Non-Patented Prescription Drug Prices, Canadian and Foreign Price Trends)

Outlook and Implications

Accurate international comparisons of generic prices are notoriously difficult, as they are affected significantly by slight differences in package size, dosing and formulation. However, the main thrust of this report is that generic and non-patented branded drugs are priced higher in Canada than in a number of comparator countries. This conclusion is likely to lead to the generics industry in Canada coming under distinct pressure to reduce prices for its products. The alternative is that the Canadian generic sector is increasingly opened up to foreign competitors to provide greater competition. The sector is currently dominated by two large companies, Apotex and Novopharm.

The practise of international referencing is likely to prove a stern challenge to the generics industry in Canada, particularly when it is referenced to prices in European countries. Prices in the generic sectors of these countries have been hit hard by parallel importation of generic medicines between the 25 member states of the European Union – particularly from the accession countries. This has led drug prices in a number of these countries to plummet, as governments aim to take advantage of the discounts that such parallel importation can bring. If Canadian suppliers were forced to try and match the prices for generics in some of these countries, their profit margins may well become unsustainably squeezed. Under this scenario, it is extremely debatable whether the cost of manufacturing many of these products would be less than the sale price, rapidly making the operation of Canadian generic firms unprofitable.

Related Articles:

• Canada: 10 February 2006: Health Council in Canada Reveals Slow Progress in National Pharma Strategy