Critical Condition: Cheaper in Canada

Oct. 22, 2003 -- Canada's national health plan pays for doctor visits and hospital stays. But outside the hospital — unless a patient is 65 or older, or on welfare — the government plan does not cover prescription drugs.

Canadians, like Americans, must get insurance from an employer or independently, or else pay the full cost of medications themselves.

Karen Ireland, 54, who lives in Oakville, Ontario, has Parkinson's disease. She's on five different medications. "I do find it very expensive," she told ABCNEWS.

Expensive, yes, but a steal compared to what she would pay in the United States. When her prescription drug costs are converted into U.S. dollars, the price difference is significant:

Mirapex, for Parkinson's disease: $157 in Canada vs. $263 in the United States. Celexa, for depression: $149 in Canada vs. $253 in the United States.

Diovan, for high blood pressure: $149 in Canada vs. $253 in the United States.

Oxazepam, for insomnia: $13 in Canada vs. $70 in the United States.

Seroquel, for insomnia: $33 in Canada vs. $124 in the United States.

"Oh my gosh," said Ireland after learning of the price differences. "I don't know how they [Americans] do it. That is, that is a shock!"

Canada Caps Drug Costs

Canadians are spared higher drug prices, in large part because of price controls. The Canadian government has established a "Patented Medicine Prices Review Board" to ensure drug prices are not excessive.

"They look at the price of the drug," said Dr. Allan Detsky, a pharmacoeconomist at the University of Toronto, "and they say, 'You know what, we have no idea what the long-run costs of development are, but they can't possibly be that high. Forget it.' "

The review board has established a very specific formula for drug companies wishing to sell in Canada:

Existing drugs cannot increase in price by more than the rate of inflation.

New drugs cannot cost more than similar drugs for the same illness.

And a breakthrough drug, the first of a new class of drugs, cannot cost more than the median price for the drug in other countries.

For example, the new cancer drug Campath is priced as follows: United States: $2,400 France: $760 Sweden $660 Britain $570 Italy $500

The median, or "midprice," is $660, so Canadian regulations say that's the most the drug can sell for in Canada.

"It tells you that the true long-run cost of production must be way lower than the American price," said Detsky.

U.S. Alone in No Price Controls

Every industrialized country has some form of price controls on patented medications, except the United States. American drug companies say price controls stifle innovation and discourage them from selling certain drugs in foreign markets.

"The principal problem with price controls is you have limitations on access to medicines, and you don't have the newest most innovative treatments," said Alan Holmer, president and CEO of Pharmaceutical Research and Manufacturers of America.

But when pressed, representatives of the pharmaceutical industry could only identify eight drugs not available on Canadian shelves, and three of those are contraceptives. That's not enough to bother many Canadians.

"I don't mind," said Ireland. "I think we have a pretty good selection."

And much of that selection consists of American-made drugs, at well below American prices.