Canadians Pay 2X As Much For Generics As We Do
From Canada's Fraser Institute's study "Seniors and Drug Prices in Canada and the United States, 2008 edition":
Results (see chart above) show that on average in 2007, prices for the generic drugs that were most commonly prescribed to Canadian seniors were 101% higher in Canada than for identical drugs in the United States.
High prices for generics in Canada are caused by various misguided public policies that shield retail pharmacies and generic drug manufacturers from the competitive market forces that would put downward pressure on the price of generic drugs. Specifically, the reimbursement structure of public drug programs is the primary cause of unnecessarily high prices for generic drugs.
Public drug programs indirectly reimburse retail pharmacies for the cost of prescriptions dispensed to their insured beneficiaries, instead of directly reimbursing consumers or patients (i.e., the beneficiaries). This insulates consumers from the cost of the drugs, thereby removing incentives for comparative shopping, which would put downward pressure on prices.
Additionally, most public drug programs reimburse the cost of generic drugs at a fixed percentage of the brand name original drug. Under fixed percentage reimbursement, there is no incentive for retailers to compete by offering the lowest prices. This is because the buyer (the government) offers every seller the same price, and the price is known in advance. Large, established generic companies take advantage of the fixed price public reimbursement system by offering rebates to retailers that are “bundled” across many products, in exchange for exclusive distribution rights. This frequently results in a virtual monopoly within particular retail pharmacy chains for a particular generic label, and because pharmacies are reimbursed directly, discounts are not passed on to consumers. Thus, exclusive distribution allows pharmacies to charge the same inflated generic prices to public and private payers alike.