There is no such thing as one Canadian or one
American price for a prescription drug and policy-makers who seek
to equalize Canadian and American pharmaceutical prices face an
impossible task. These are the findings of a new study Prescription Drug Prices in Canada and the United States: Part 3 - Retail Price Distribution
released today by The Fraser Institute.
The study found that although Canadian prescription drug prices
are lower than American prices, there are significant differences
in prices within the United States and Canada, as well as between
areas in the same country.
"We hear about Americans who claim that they save money, some say
up to 60 percent, by filling their prescriptions in Canada. That
is very misleading because in some cases a consumer can save as
much by bargain hunting at home as he can by crossing the
border," says John R. Graham, acting director of the
pharmaceutical policy research centre at the Institute and the
The study examined retail prices of three patented drugs in three
areas in the United States near the Canadian border, as well as
three neigbouring areas in Canada. The areas selected were within
Washington and British Columbia, North Dakota, Minnesota and
Manitoba, and New York and Ontario. The three drugs selected are
widely dispensed and used by many patients for an extended
period. Fifty pharmacies in each area (300 total) were canvassed
for prices of one dose of each drug.
Because there are a variety of prices charged by Canadian and
American pharmacies, American patients can save money by bargain
hunting at home as well as by crossing the border (Table 1).
There is a large difference in the savings earned by the American
customer, depending on the pharmacies from which, and to which,
he or she travels.
"Differences among services offered by individual pharmacies
explain some of the price variations. The income differentials
among regions within one country may also explain price
differences. For example, prices in the North Dakota and
Minnesota areas are cheaper than in the Washington and New York
areas," notes Graham.
Government Intervention and Prices
An understanding of government intervention helps to clarify the
conditions under which drugs are priced. Each state and province
intervenes differently in the market. All of the jurisdictions
selected for the study have programs that subsidize prescriptions
for some of their residents
High government subsidies do not ensure favourable access to
Although all three Canadian provinces subsidize prescription
drugs heavily, patients in the American states have better access
through the non-taxable benefit of health insurance. The effect
of subsidies on prices is unclear. Cash prices in Canada vary
around the government reimbursement rates, indicating that
subsidies do not prevent pharmacies from charging different
prices to non-subsidized patients.
"The difference between prices paid for prescription drugs in
Canada and the United States continues to be an issue of public
attention. Without understanding the causes of price differences
between pharmacies, crude efforts to equalize prices threaten to
jeopardize the entire distribution chain for prescription drugs,"
Prescription Drug Prices in Canada and the United
States-Part 3: Retail Price Distribution
is the third paper in a Fraser Institute series, which includes
Prescription Drug Prices in Canada and the United States,
Part 1: A Comparative Survey
Part 2: Why the Difference?