Drug price comparison: Canada vs. US

My wife had to get a scrip in the US. It cost $44, close to C$60 at the current rate. She just got a renewal from our doctor here. Cost $12 and there was no provincial subsidy (don’t know why). Both were generics incidentally; it is an old remedy.

:: sigh :: don’t start me. Albuterol inhalers cost over $50 in the U.S. if you’re paying cash, and require a prescription (there’s no longer a U.S. generic because the propellant was changed a few years ago). And you can walk into any pharmacy in Panama and buy the brand-name for about $8, the generic a bit cheaper.

The Panamanian pharmacist looked at me in disbelief when I told her what they cost in the U.S. The drug has been around for decades and is the most basic asthma rescue inhaler.

I think there is some kind of law here in Canada that prevents big Pharma companies from ripping us off too much. If it weren’t so late, I would be inclined to look up the details. Maybe someone else can.

No, not exactly.

Basically what happens is that the Canadian government negotiates the price.

That’s a massive oversimplification but to understand the difference, it’s a pretty good shorthand. Canada has a board called the Patented Medicine Prices Review Board that determines that a drug should cost, based on a review of what it costs in other rich industrialized countries and arriving at a rough average of that. While they officially “set” the price, there is, by necessity, negotiation, since of course if they set the price below the manufacturer’s costs, the manufacturer won’t sell it in Canada at all.

The USA has no function like this, and so, consequently, the drug companies can charge whatever the equilibrium price would be. Since the drugs are being sold directly to the distributors, and they can’t legally collude to negotiate as a unit, none of them have price-manipulating power. Walgreen’s is a big outfit but if they won’t pay the market price, Pfizer will tell them to go to hell. In Canada, Pfizer never gets a chance to negotiate with Shoppers Drug Mart; the price is already set before Shoppers ever places a purchase order.

That said, the Canadian system isn’t perfect in in a lot of cases, drug prices have caught up to U.S. prices, for a variety of fairly predictable reasons.

Generic prescription drugs fall to provincial boards. Generic stuff like Tylenol isn’t regulated, which is why a bottle of Extra Strength Tylenol is basically the same price in Calgary or Carson City.

Why is our government trying to do something about the prices here in the US?

Something about making profits or lining pockets?

The US population is around nine times that of Canada. You can regulate prices on a small market without screwing up the overall economics of manufacture. But if you try to regulate the whole enchilada, you get the same kind of nonsense that ultimately destroys every central-planning based economy.

I’m pretty sure that it is about Making Money.

It’s not true regulating, in some ways it leans more toward negotiating. As a very large block purchaser. It’s a strong position and makes large discounts possible.

Wouldn’t you expect a benefit if you were buying 50 cars, instead of 1 ?

In the US it’s thousands and thousands of different programs, each with different rules, forms, etc. That’s gotta be a lot of work for the manufacturer and must carry costs, I should think. Each minuscule compared with a truly large block purchaser.

Yes and New Zealand has Pharmac (Pharmaceutical Management Agency), an arm of government which bulk buys all medicines used in the public sector. That is 43 million different medicines. We have free healthcare.

The system works well with a maximum dispensing fee of $20 but often only $5.

Where problems arise is at the edges. New drugs and rare drugs are often not funded by Pharmac. We can buy them but at US prices.

Australia has the PBS (Pharmaceuticals Benefits Scheme) which approves certain medicines which are subsidised by the government. Similar to Pharmac but quicker to accept new drugs. Australia has public healthcare.

Ok while we are on this topic. It is worth knowing that the US Veterans Administration (VA) also buys drugs in bulk and at substantially cheaper prices than you can. Quite why this system isn’t adopted by each State is difficult to understand. Private hospitals could join in if they wished.

The other matter of interest is that Hawaii has some form of public healthcare although I don’t know how it works. Presumably medicines are subsidised or bulk purchased.

The overall point is that it is a mystery why pharmaceuticals are sold at extraordinary prices in the US when they are priced at 1/10th elsewhere or even free.

Most hospitals belong to Group Purchasing Organizations, which negotiate lower prices for them. Their public health/indigent care drugs (340-B) are automatically sold at the lowest price. There’s a whole industry working to get the right prices to the right organizations. Drug pricing is insanely confusing.


This puzzles me too. My Dr had to phone in for an authority but I get 4 salbutamol inhalers a month for the grand total of $5.20 thanks to the Australian Pharmaceutical Benefits Scheme (the usual prescription gives 2 per month) but anyone can buy them over the counter for about $6 each which is what I find puzzling given the US prices for the same thing. I don’t believe our government subsidises them in any way when not prescribed so how come they are so cheap for us and $50 in the US?

In a ‘not for profit’ healthcare system, the whole set up tips to minimizing costs wherever efficiencies can be realized. So the entire state negotiates as one large block, realizing a large discount.

In a ‘for profit’ system, no one overseeing organization is interested in efficiencies. And there is no, one large block. Instead, there are thousands of different groups of varying sizes, and many more steps between drug manufacturer and end user. And at each of those steps profit is added, and costs swell accordingly.

It’s really not rocket science, the reasons for these differences in pricing are actually pretty transparent.

Plus, isn’t the US government barred by federal statute from trying to negotiate lower prices for drugs it provides on Medicare? Wal-Mart can use the negotiating power of large block purchases, but not the government.

Part of that is how the patents systems work. In the US, changing the propeller or the design of a trigger can get a new patent; in many other countries, it’s not considered a big enough change to warrant one.

That’s correct.

As big as Wal-Mart is, it’s not big enough to have much of an effect on patented prescription drugs. It is not the largest pharmacy chain in the USA, and no one chain is large enough to be a price-setter.

Except that Veterans Affairs is a department of the United States government and it negotiates and obtains much lower pharmaceutical costs.