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Conclusion

1. The comparison of international prices of pharmaceuticals is a challenging task. In our sample, 25 percent of the data had to be excluded from analysis because comparable products could not be found in both countries. This confirms that, as indicated earlier, such studies are prone to pitfalls and potential abuse (Danzon 1996).
2. Significant and risky assumptions have to be made about wholesale prices, especially in the United States. The finding that generic drugs in Canada are more expensive at the retail level but not so at the wholesale level indicates that the wholesale prices estimated may be inaccurate. Although the the mark-ups for generic drugs by American pharmacies are believed to be higher than for branded drugs (US Department of Health and Human Services 2000: 114), the authors are not aware of any differences in regulation or market structure at this point in the distribution chain that would give Canadian pharmacies more leverage than their American counterparts in marking up generic prices.
3. Generally, prescription drugs are cheaper in Canada at both the wholesale and the retail level. These averages disguise the fact that subsets of the sample demonstrate very different results and wide variance.
4. Brand-name drugs are significantly cheaper in Canada than the United States at both the wholesale and retail level. Non-patented brand name drugs, however, have larger Canadian discounts than patented drugs.
5. the average American would spend more on generic drugs if he were paying Canadian prices rather than current American prices. However, this finding is tempered by the observation that cross-border price differences for generics are widely dispersed, with some being vastly cheaper in Canada and some very much more expensive.

Future research

These findings invite further research in both method and policy.

1. Superior measurements of wholesale prices are sorely needed to develop accurate and robust findings to support policy proposals.
2. Why are prescription drug prices lower in Canada than in the United States? Is this the effect of regulation, or other causes?
3. Even more interesting is the difference between the prices of patented, branded-only, and generic drugs. Why are generic price differences so much more widely dispersed than prices for branded drugs? Are there different public policies in the two countries that lead to differences in the Canadian discount or premium for each of these three subsets?

The authors anticipate that significant insight into policy will result from an understanding of the dynamics of the pricing of prescription drugs in the two countries and another paper in the Fraser Institute's series, Public Policy Sources, discusses these issues (Graham 2000). The authors hope that other researchers in both Canada and the United States will find this survey useful as they study drug prices and pharmaceutical policy in the two countries.

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Last Modified: August 23, 2000.