Canadians pay among the highest drug prices in the developed world—less than Americans, but more than residents of most European countries with comparable health systems. This pricing reality shapes who can afford medications, what provincial formularies cover, and how much Canadian healthcare costs overall. Pharmaceutical pricing policy sits at the intersection of industrial policy, trade agreements, health equity, and fiscal constraint. Getting it right matters for millions of Canadians who depend on medications for their health.
How Drug Prices Are Set
Unlike most countries with universal healthcare, Canada lacks a national system for drug purchasing or price negotiation. Patented drug prices are subject to oversight by the Patented Medicine Prices Review Board (PMPRB), which can prevent "excessive" pricing but doesn't negotiate prices. Generic drugs operate in a more competitive market, but provincial variations in pricing and purchasing reduce Canada's collective bargaining power.
Provincial drug programs each negotiate with pharmaceutical companies separately, reducing the purchasing power that a unified national approach would provide. The pan-Canadian Pharmaceutical Alliance (pCPA) coordinates some joint negotiation, improving provincial bargaining position. But fragmentation remains the norm, with different provinces paying different prices for the same medications.
Private insurers and out-of-pocket purchasers typically pay list prices or prices negotiated individually with pharmacies. Without the purchasing power that public programs or unified negotiation would provide, private payers often pay more. The same medication may have different prices depending on who's paying and where.
International Comparisons
Countries with national pharmacare systems—the UK, Germany, France, Australia, New Zealand—typically pay less for pharmaceuticals than Canada does. Their unified purchasing power enables negotiation that fragmented Canadian purchasing cannot match. They set price ceilings, use health technology assessment to determine value, and threaten to exclude products that don't offer acceptable prices.
Canada's higher prices reflect structural factors: fragmented purchasing, no universal pharmacare, limited domestic manufacturing. The lack of a single buyer with authority to walk away from negotiations weakens Canadian bargaining position. Pharmaceutical companies can sell in Canada at higher prices than they accept elsewhere because Canadian structures allow it.
American prices—even higher than Canadian—create both pressure and opportunity. Cross-border sales to Americans seek lower Canadian prices, creating supply issues. American political pressure has influenced Canadian policy on intellectual property and pricing policy. Canada exists in North American pharmaceutical economics while aspiring to European pricing.
PMPRB Reform
The Patented Medicine Prices Review Board has authority to prevent "excessive" prices for patented drugs. But what's "excessive" depends on comparisons, and PMPRB's comparison countries and methods have been contested. Reform proposals aim to lower the ceiling on prices PMPRB allows, potentially reducing what Canadians pay for patented medications.
Pharmaceutical industry opposition to PMPRB reform has been intense, arguing that lower price ceilings would reduce drug launches in Canada, harm research investment, and limit patient access to new therapies. The industry has launched legal challenges and lobbied against reforms. Whether these predictions would materialize is debated; other countries with lower prices still receive new drug launches.
Reform implementation has been delayed and modified repeatedly, with industry challenges and government reconsiderations pushing timelines further out. The politically contested nature of pharmaceutical pricing policy—affecting powerful interests—makes reform difficult even when policy rationale is clear.
Generic Drug Pricing
Once patents expire, generic drugs can enter the market, typically at lower prices. Canada's generic drug market has seen price reductions, but Canadian generic prices have historically exceeded those in other countries. Provincial purchasing initiatives have pushed prices down; policy changes allowing reference to international prices have helped. But the generic market remains fragmented.
Pharmacy margins and dispensing fees add costs beyond drug prices. What patients pay at the pharmacy reflects not just the drug's wholesale price but the economics of pharmacy retail. Policy focused only on manufacturer prices misses part of what Canadians pay.
Biosimilars—generic versions of biologic drugs—represent a growing market segment. Biologic drugs for conditions like arthritis, cancer, and inflammatory diseases are among the most expensive medications. Biosimilar entry could provide substantial savings if adoption is encouraged. Some provinces have implemented policies to shift patients to biosimilars; others have been slower to act.
National Pharmacare and Pricing
National pharmacare would transform drug pricing dynamics. A single national purchaser would have vastly more bargaining power than current fragmented arrangements. Countries with national pharmacare pay less for drugs; Canada with pharmacare could expect similar negotiating outcomes.
The flip side of lower prices is pharmaceutical industry impact. If Canada pays less for drugs, pharmaceutical companies might reduce Canadian operations, shift research elsewhere, or delay Canadian product launches. These industry arguments against pharmacare may be overstated—other countries with lower prices maintain pharmaceutical sectors—but they carry political weight.
Even without full pharmacare, strengthened national purchasing coordination could improve pricing outcomes. The Canadian Drug Agency, established to support national drug initiatives, might enable more coordinated price negotiation. Progress toward pharmacare goals without full implementation represents an incremental approach with its own pricing implications.
Equity Implications
High drug prices fall differently on different Canadians. Those with comprehensive private insurance are largely insulated from prices; their plans cover costs regardless of list prices (though these costs flow through to premiums and employers). Those without insurance, with high deductibles, or needing drugs not on formularies face full price impact.
Cost-related non-adherence—skipping, stretching, or not filling prescriptions due to cost—is a health equity issue. When medications are too expensive, people go without treatment they need. The health consequences of non-adherence create costs elsewhere in the system while harming individuals who can't afford care. High prices translate to health inequity.
Rare disease medications pose particular pricing challenges. Small patient populations can't generate economies of scale; companies charge extremely high prices to recoup development costs. These "orphan drugs" may cost hundreds of thousands of dollars per patient per year. Ensuring access while maintaining any price discipline is exceptionally difficult for these treatments.
Questions for Consideration
Should Canada pay pharmaceutical prices comparable to other universal healthcare countries, and what changes would achieve this? How should we balance access to new medications against drug pricing discipline? What role should national pharmacare play in improving drug purchasing? How should extremely high-cost medications for rare diseases be priced and funded? What has influenced your own experience with medication costs?