Pharmaceutical Pricing and Reimbursement Policies in Canada

Abstract

This paper describes and assesses pharmaceutical pricing and reimbursement policies in Canada, considering them in the context of the broader policy and market environment in which they operate, and investigating their role in contributing to Canada's achievements in meeting a range of objectives. The federal government regulates prices of patented pharmaceutical products with the objective of protecting consumers against excessive prices. Regulation has very likely been responsible for bringing Canada¿s prices for patented medicines roughly in line with European comparators. Prices of generic products, which are not regulated, are relatively high although significant penetration of the Canadian market has been achieved. All Canadians have coverage for drugs provided in hospitals through a publicly financed scheme that furnishes hospital and physician services free of charge to patients. Drugs dispensed outside the hospital setting are not included among the insured benefits guaranteed by the Canadian Health Act. Consequently, two-thirds of the Canadian population, including most employees and their families, obtains such coverage through private health insurance, while most senior citizens, together with designated groups of vulnerable populations, are covered by provincial, territorial or federal plans. In most cases, patients share in the costs of reimbursed medicines through copayments or co-insurance, sometimes after meeting a deductible. The lack of protection against the risk of catastrophic out-of-pocket spending for drugs remains an issue for a small part of the Canadian population, concentrated in the Atlantic Provinces. Reflecting these coverage and reimbursement arrangements, 54% of drug expenditures are financed by private insurances and households. Drug expenditures have been increasing very rapidly in recent years. Formulary management, now facilitated by a government initiative to undertake common drug reviews, and the promotion of generic substitution have been the main levers used by public plans to improve the efficiency of drug expenditures. Private plans have historically covered all medicines authorised for sale in Canada, although this is changing in light of cost pressure. Overall, new drugs are available in the Canadian market on a timely basis, but maintaining comprehensive availability and accessibility may be an emerging challenge.

Keywords: Canada, pharmaceutical prices, pharmaceutical market, pharmaceutical policy

JEL Classification: I18, I11