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What's the remedy for Canada’s high drug prices?

Prescription drugs
[Why do prescription drugs cost so much in Canada?/Getty Images]

Canada has a drug problem. Between paying 500 per cent more than, for instance, our New Zealand peers for medicine produced by homegrown companies and a fragmented public/private healthcare system – one in five Canadians pay for their own drugs – policymakers are calling on a re-jig.

“There is no question that the current status is not fair, that it’s not right, that we’re paying much higher prices than other countries are and that’s exactly what I’m working on,” Health Minister Jane Philpott told CBC’s the Fifth Estate, in step with her message she brought to Organization for Economic Co-operation and Development’s Health Policy Forum in Paris this week.

The Fifth Estate’s analysis compared drug prices in Canada to several other countries among them New Zealand which, like Canada, has a universally-funded healthcare system. An annual supply of Amlodipine, the popular blood pressure treatment made by Canadian company Apotex, sells for $130 in Canada compare to around $10 in New Zealand. Generic antibiotic Amoxicillin sold by Apotex goes for $200 for an annual supply in Canada versus $32 in New Zealand.

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So what’s the difference? One of the major standouts is New Zealand has a single purchasing and negotiating agency called PHARMAC whereas Canada’s drug purchasing is on a case-by-case basis between the public and private healthcare systems.

But we could use a national formulary, a list of medicines covered across the country, says Marc-André Gagnon, a health and pharmaceutical policy expert and professor at Carleton University.

“This is why they do a much better job than Canada and our fragmenting system where basically you have most of the private clinics reimbursing anything at any price,” he says.

And we don’t need to look far for an example for how a national formulary could work. Canadian Blood Services, argues Gagnon, is an independent agency that connects the different regions across Canada ensuring the flow of not just blood transfusions but blood-related medicines as well.

“That could be a very good example of how things need to work in Canada for all drugs not just drugs that relate to blood,” he says.

Canada’s drug price problems also lie in the way prices are calculated.

“In Canada we set the price of generic medicines based on the percentage of prices of brand name drugs – usually it’s 25 per cent but sometimes we negotiate rebates down to 18 per cent of the price of the brand name drug,” says Gagnon. “In many countries the price of the generic will be one percent or two per cent of the brand name drug.”

Officially, we pay a little higher in order to entice pharmaceutical companies to open operations in Canada and spur the economy. However, both Gagnon and Philpott (in her conversation with Fifth Estate) admit it’s not the case anymore.

“In terms of pharmaceutical R and D in Canada, investment is not there anymore (so) there’s just no reason why we should keep remaining generous to drug companies,” says Gagnon.

He also points out that the list price for medicines are set based on a bucket of seven other countries including the U.S. and Germany. Canada, Gagnon explains, tries to set its prices in the median of the pack, which should work in theory but not when the most expensive country in our basket is the U.S.

“For 15 to 20 percent of Canadian patented drugs the U.S. is the only comparative country, so we end up paying, on average, twice as much that other countries for these specific drugs, which is pure nonsense,” says Gagnon. “Let’s kick out the U.S. from the basket of comparative countries and maybe Germany as well and introduce Australia and New Zealand.”

He says the change would end up being a smaller modification to regulation as opposed to legislative overhaul and could save between $2- to $3-billion a year.

In a lot of ways, New Zealand ends up being a prime example of a patient-focused, national drug plan, one that Gagnon says we could learn from.

“They decided not to try and attract research and development… not to try to please the pharmaceutical industry and create a business environment,” he says. “They’re just there to get the best prices, best cost effective drugs and they deploy all the strategies they can with that.”