Download the full report (100 Kb): C-91: Background Study on Drug Costs and Benefits (PDF)
This study examines the costs and benefits of pharmaceuticals in relation to the C-91 amendments to the Patent Act. The report is divided into two volumes. Volume 1 presents an analysis of the costs and benefits of C-91. Volume 2 provides more extensive examples of the benefits of certain classes of new medicines.
- Since 1993, Canadian health care costs have been increasing at an average annual rate of approximately 2% – between 1976 and 1992 annual increases in health care costs ranged from 8% to 19%.
- In 1994, total drug expenditures accounted for approximately 12% of total health expenditures. This figure includes prescription and non-prescription drugs as well as wholesale and retail mark-ups and dispensing fees. Patented prescription drugs accounted for approximately 27% of total drug expenditures (or 3.3% of total health expenditures).
- Between 1993 and 1996, total drug expenditures increased at an average annual rate of 3.6% – between 1976 and 1992, annual increases in drug costs averaged 12.8% and ranged from 8% to 25%.
- Since 1993, drug prices (as measured by Statistics Canada) have increased at an annual rate of less than 1%. The PMPRB reports that the prices of patented medicines actually declined in 1994 and 1995.
- On average, the prices of patented medicines in Canada are lower than in other industrialized countries.
- Annual increases in drug expenditures and prices were highest between 1976 and 1987 when there was full compulsory licensing and were lowest after compulsory licensing had been eliminated in 1993. This suggests that compulsory licensing was not an effective measure for containing increases in drug expenditures.
- Increases in drug and health expenditures have been contained by provincial government drug plans, private drug plans, and the price review of the PMPRB.
- Price, population/demographics and utilization are the three main factors that contribute to increased drug expenditures. Since 1993, drug prices have been increasing at a rate of less that 1% per year. Population growth and ageing have contributed approximately 1.9% to total drug expenditures each year. Utilization includes several sub-components such as the effect of the introduction of new medicines and cost containment measures implemented by public and private drug plans. As a whole, utilization has contributed approximately 1.5% per year to the increase in expenditures.
- New medicines can increase costs when they are the first to treat a particular disease, or when they offer a substantial improvement in treatment over existing therapies. According to the PMPRB, these innovative products are, on average, 11% cheaper in Canada than in other industrialized countries.
- Generally, new medicines that offer only incremental benefits over existing drug therapies (so-called “me-too” drugs) should not increase total drug expenditures as their introductory prices are restricted by the PMPRB to the prices of other drugs in the same therapeutic class. These products may contribute to a reduction in drug expenditures to the extent that they have to compete on the basis of price to gain market share.
- Inappropriate dispensing and use of pharmaceuticals can increase drug expenditures. There is now a greater emphasis on pharmaco-economics and practice guidelines to ensure that new medicines are cost effective and sensibly prescribed.
- Medicines provide cost effective therapy that in many cases offer savings to the health care system. Many new medicines are priced higher than the products they replace but are more cost effective in the long term.
To request a copy of the C-91 Background study, contact:
PDCI Market Access
340 Albert Street, Suite 1950
Ottawa, Ontario K1R 7Y6
Tel: (613) 742-8225, Fax: (613) 742-7675