Request for clarification about Canada and drug prices

Factual Questions
1

For a long time I had heard that Canada has price caps on what pharmaceutical companies can charge for drugs.

Lately I’ve been hearing that the government negotiates drug prices, which to me is not the same as a price cap, because to me a price cap is a government setting the highest allowable price by law, not negotiation.

So, are drug prices set by Canadian law, or by negotiation? Thank you.

2

They negotiate what the price cap will be - the two are not mutually exclusive.

3

Both.

The agency involved is the Patented Medicine Prices Review Board. The board determines what prices can be charge for certain medications that don’t have generic substitutes; they don’t make determinations with regards to anything that is no longer under patent, or in some cases even some that are.

The board makes its determination based on a variety of things - comparable prices of similar drugs, prices paid in other countries, and of course the willingness of the company to sell at that price; naturally, the Board isn’t going to demand so low a price that the drug company can’t make money off it.

So as alice points out, it’s a mix. On paper, the Board sets prices by law, but in practice negotiation with the drug company is a necessary part of the process.

4

Thanks.