Why Are Drug Prices Lower In Canada?

Why Are Drug Prices Lower In Canada?

The soaring prices of prescription drugs in the United States are no longer news today. While the government struggles to ensure quality healthcare and affordable medication for patients, the prices continue to go up. Moves such as the OTC bill is one of the steps in the right direction. However, it is not sufficient to checkmate prescription medication prices. Prices remain high today, with many people looking towards Canada for prescription drugs. The question now is, why are drug prices lower in Canada when you compare to drug prices in the US? 

Government intervention is the main reason for cheaper drug prices in Canada. 

  • The Canadian Government Declares Prices Of Prescription Drugs

The Canadian government plays an essential role in deciding prescription drug prices. The Canadian government regulates the prices of pills through a quasi-judicial agency called the Medicine Price Review Board. They are responsible for deliberating drug prices to decide if they are excessive or reasonable. 

The process of price deliberation also involves a scientific review of the potency and claims of the drug. The duty of the Human Drug Advisory Panel is to make recommendations on drug analysis. They also provide the guideline for categorization of new medicines. The board also fix ceiling prices using the level of therapeutic improvement on the existing original drug. 

  • The US Government Plays Little or No Role in Setting The Prices of Drugs in The United States   

When it comes to drug pricing in the United States, the US government plays little or no role. The United States laws prohibit the government from negotiating drug prices for Medicare and other government programs. US laws ensure that drug manufacturers recover all costs incurred during production. The costs include:

  • The cost of research
  • Production cost 
  • Marketing cost and
  • the cost of drug approval by the FDA 

In the United States, New drugs receive a patent that allows the manufacturer to enjoy sales of the drug for 20 years. The patent gives the drug manufacturer the liberty to set prices for new drugs. The insurance company now steps in to negotiate the set prices with the manufacturers. 

The Way Forward

When it comes to setting drug prices, the US and the Canadian system both present different models. While the US citizens pay for virtually everything, from research to the marketing of drugs, it is different from the Canadian system. Canadian citizens do not share the cost of production with the drug manufacturer. The American system allows for unfavorable prices of drugs. However, it provides enough incentives for new drug research and manufacturing. On the other hand, the Canadian system ensures that prices are not so high. On the contrary, it does not provide enough incentive for the development of new drugs. 

Therefore, the way forward is to make room for positive reforms that will ensure a competitive price. The reform should aim to protect patients and manufacturers alike. While prices are favorable, manufacturers should be able to recover their money over time. 

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