Let's Look at the Facts: new drug costs aren't breaking the bank in Canada

I have been watching the debate on drug costs within the Canadian health system over the past several years. This discussion appears to be hitting a crescendo at the moment given the state of CETA negotiations between Canada and the EU.

As frequent readers of this blog will know, some have questioned the cost of implementing the three pharmaceutical intellectual property measures being sought by the EU even as CIHI data has indicated drug spending is slowing. As I've blogged before, these measures are really about ensuring that Canada has a level playing field competitively with the EU, and they are a necessary part of a healthy and competitive research environment that benefits all Canadians.

So while studies have been released that have refuted the validity of the basis for these purported inflated costs, a recent study by Brett Skinner has effectively debunked these overstated assertions by looking at actual Canadian data - not hypothetical models.

This new study entitled, Drugs and the public cost of health care in Canada, 1974-1975 to 2011-2012 was published at Canadian Health Policy, the online journal of CHPI. It examined the actual impact of provincial/territorial government spending on drugs over the last 38 years.

So what did the study find? Skinner discovered that:

(1) drugs currently account for only 8.0% of provincial/territorial government health spending,

(2) patented medicines account for 4.7% and this has been declining since 2004,

(3) drug spending in Canada has increased steadily as a percentage of government health budgets (from 1.2% to 8.0%) over a 38-year period, yet there is no correlation with the rate of growth in government health spending,

(4) provinces that spend more of their health budgets on drugs have not experienced higher rates of growth in health spending,

(5) on average Canadian prices for patented medicines have grown 1.9 percentage points slower than the general rate of inflation since 1988, and,

(6) prices of patented medicines in Canada have averaged .08 percentage points less than median international prices since 2001.

The Study went on to conclude that:

(1) the small percentage of health spending accounted for by drugs means even big efforts to cut drug costs will not return significant overall savings,

(2) drug prices do not suggest there are significant savings to be gained by leveraging the bulk buying power of governments

(3) arbitrarily restricting drug spending could be counter-productive

There is a lot at stake for Canadian jobs and economic growth if trade negotiations fail because of exaggerated claims about drug costs." According to Skinner, "Canada-Europe trade is already worth $92.1 billion. Europe is the world's wealthiest market. The trade agreement will reduce barriers for Canadians to do business with nearly 500 million people - almost 15 times the size of our domestic market.

I'm really interested in this discussion, and it is great to see that work is being done that is evidence based to help Canadians determine for themselves the benefits of a strong IP system for jobs, competitiveness and research.

To download the full study, click on this link.

You can also check out this article in the National Post.