Generic Drugopoly: Why Non-patented Prescription Drugs Cost More in Canada than in the United States and Europe

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Studies comparing international prices of prescription pharmaceuticals have found that Canadian prices are close to the international median price for patented drugs but higher for non-patented single-source (usually brand-name) drugs, and also higher for non-patented multiple-source (mostly generic) drugs. Furthermore, in studies comparing Canadian to American drug prices, it has been found that Canadian prices are significantly lower overall for patented drugs, but are usually higher than American prices for generic drugs.

Given that Canadian incomes are lower than incomes in most of the countries used for drug price comparisons by the PMPRB (and much lower than incomes in the United States), economic theory would predict that in a free market the prices for drugs would also be lower in Canada, a price-to-income relationship that has also been observed for many non-pharmaceutical products. Therefore, the observation that Canadian prices for non-patented drugs are higher that the international median and that Canadian prices for generic drugs are higher than American prices, is counter-intuitive and merits investigation into the reasons for this irregular pricing pattern.

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