ORIGINAL RESEARCH ARTICLE
Appl Health Econ Health Policy 2008; 6 (1): 19-26 1175-5652/08/0001-0019/$48.00/0 © 2008 Adis Data Information BV. All rights reserved.
Differences in Generic Drug Prices between the US and Canada Malcolm Gooi1 and Chaim M. Bell1,2,3,4,5 1 2 3 4 5
Faculty of Medicine, University of Toronto, Toronto, Canada Department of Medicine, University of Toronto, Toronto, Canada Department of Health Policy Management and Evaluation, University of Toronto, Toronto, Canada The Institute for Clinical Evaluative Sciences, Toronto, Canada Department of Medicine and Keenan Research Centre, Li Ka Shing Knowledge Institute, St Michael’s Hospital, Toronto, Canada
Abstract
Background: It has long been recognized that brand name prescription medications are more expensive in the US than in Canada. However, non-peer-reviewed reports contend that this is not the case for generic medications. Objective: To compare prices for generic prescription medications in the US and Canada. Methods: A telephone and internet survey of pharmacies was conducted for the top 19 dispensed generic medications available in both countries. Twelve pharmacies in total were selected: six from the US (three online and three ‘walk-in’) and six from Canada (three online and three walk-in). Data were collected from March to April 2007. The main outcome measure was the total purchase price in $US at the day’s exchange rate in 2007, obtained from each of the 12 pharmacies, for 100 doses of each of the 19 selected drugs. Results: Using the lowest quote for each selected drug, 12 of the 19 (63%) generic medications were least expensive in the US, with an average saving of 47% per drug for these 12 drugs. Seven of the 19 (37%) drugs were least expensive in Canada, with an average saving of 29% per drug for these seven drugs. Overall, there was a sizable variation in prices for the same generic medications within and between the US and Canada. Conclusions: The lowest priced generic medications were not consistently found in either the US or Canada. The price controls and ensuing savings applied in Canada to prescription patented medications do not fully extend to generic medications.
Background and Objective Canada is often considered a bargain hunter’s paradise by Americans seeking cheaper prescription medications. Indeed, many have found that brand
name drugs are usually more expensive in the US.[1-7] However, not all prescription medications are cheaper in Canada. Generic medications in Canada are not subject to the same price regulations as their patented counterparts.[8,9] Moreover, non-peer-
20
Gooi & Bell
reviewed reports have documented that prices for generic drugs in Canada were on average 11–115% more expensive than the same medications in the US.[10-12] The different price policies of the US and Canada for brand name and generic medication may potentially lead to significant expenditure, as generic medications account for almost two-thirds of US prescriptions and just under half of Canadian prescriptions.[1] Medication prices can be compared at many levels, including the individual and aggregate. The perspective of an individual without insurance tends to provide price differences and amounts that may be more understandable, reproducible and tangible for consumers, in contrast to aggregate expenditures or insured costs.[13] Thus, we sought to compare prices for generic medications from the perspective of an uninsured consumer shopping at retail online and ‘walk-in’ pharmacies in the US and Canada. Methods Medication Selection
We selected all generic medications and medications interchangeable with generics available in 2007 from the IMS Health Canada listing of the 50 most dispensed medications in Canada in 2005.[14,15] There were 23 generic medications listed; however, three were not available in generic form in the US and one was available over-the-counter without a prescription. This left 19 comparable generic medications (see Appendix for list). Pharmacy Selection
We chose a combination of online and walk-in pharmacies. In total, twelve pharmacies were selected: six from Canada (three online and three walk-in) and six from the US (three online and three walk-in). For the six Canadian pharmacies, the three walk-in corporations included the two chains with the highest prescription drug sales (Shoppers Drug Mart and The Jean Coutu Group) and a low-dispensing-fee pharmacy (Wal-Mart).[16] As with previous methodology for online pharmacy research, we used PharmacyChecker.com to select the online © 2008 Adis Data Information BV. All rights reserved.
sites.[17,18] This service rates pharmacy quality on a variety of criteria. The three pharmacies with a 5/5 PharmacyChecker.com score, at least seven customer comments and an average customer rating of ‘very satisfied’ were included (ADV-Care, Jandrugs and Canada Drugs Online). A similar methodology was employed for US pharmacies. The two selected chains with the highest prescription drug sales were Walgreens and CVS, and the low-dispensing-fee pharmacy was also Wal-Mart.[19] Of the three US online stores with a PharmacyChecker.com score of 5/5, only Costco provided a full range of medications. Therefore, we included two top-selling drug chains that also provided online services: Walgreens and Rite Aid (through drugstore.com). The National Association of Boards of Pharmacy accredited the online pharmacies of Walgreens and drugstore.com.[20] Data Collection
Data were collected from walk-in and online pharmacies from March to April 2007 and included pharmacy characteristics, drug costs, dispensing fee and total transaction cost. For the Canadian walk-in pharmacies, a single Ontario store in the chain was telephoned to obtain prices for an uninsured customer; for the US walk-in pharmacies, a single New York State store in the chain was telephoned to obtain prices. We selected these areas because they have close geographic proximity, have been used for previous healthcare studies and may most closely reflect true comparison shopping.[21-23] Data was collected from online pharmacies via their individual websites. For most medications, the quantity sought was 100 doses because this matched most product sizes for online medications. For azithromycin, and ethinyl estradiol and norethindrone, the price for the usual 5-day course and 84-day (3-month) supply was sought, respectively. Data entries were excluded if the exact dose or form (i.e. extended release vs immediate release) was unavailable, if the drug was not supplied in generic form or if the dose quantity could not be provided. In addition, Canadian online pharmacies Appl Health Econ Health Policy 2008; 6 (1)
Generic Drug Prices in the US and Canada
21
80.00
do not sell controlled substances (paracetamol [acetaminophen] with codeine, lorazepam or oxazepam).
Canadian prices were converted to $US using the exchange rate available on the data collection date.[24] The rates varied from $US1 being equal to $Can1.11–1.16 during the time period. All comparisons were in $US, and differences were calculated as a percentage of the US price. We also calculated the coefficient of variation (a measure of dispersion of a probability distribution defined as the ratio of the standard deviation to the mean) for each of the 19 medications. Ethics approval was obtained from the Research Ethics Board of St Michael’s Hospital, Toronto, Canada. Results
Lowest price in US ($US)
Statistics
19 70.00 18
17
60.00 50.00
16
40.00 30.00 20.00 10.00
15 14 12 10 11 8 6 9 5 2 34 1
0.00 0.00
7
13
20.00 40.00 60.00 80.00 100.00 Lowest price in Canada ($US)
Fig. 1. Comparison of lowest prices for all 19 generic medications. The drugs are numbered from the least expensive using the lowest US purchase price: 1 = prednisone; 2 = hydrochlorothiazide; 3 = metformin HCl; 4 = metoprolol tartrate; 5 = amitriptyline; 6 = furosemide; 7 = citalopram hydrobromide; 8 = digoxin; 9 = naproxen; 10 = amoxicillin; 11 = levothyroxine; 12 = lorazepam; 13 = lovastatin; 14 = paracetamol (acetaminophen) compound with codeine; 15 = warfarin; 16 = azithromycin; 17 = ethinyl estradiol and norethindrone; 18 = omeprazole; and 19 = oxazepam.
Overview Specific Scenarios
All 12 pharmacies were contacted (100% response rate) and provided complete information. For the lowest priced quote for each selected drug, 12 of the 19 (63%) generic medications were less expensive in the US, with an average saving of 47% per drug for these 12 drugs. Seven of the 19 (37%) drugs were less expensive in Canada, with an average saving of 29% per drug for these seven drugs, based on lowest priced products. We found many medications had large differences in price between the lowest US values and the lowest Canadian values (figure 1). For example, the lowest price for 100 oxazepam tablets was $US72.59 in the US but $US15.50 in Canada. Conversely, the lowest price for 100 lovastatin tablets was $US13.33 in the US and $US106.00 in Canada. Similarly, there was marked variation found in the prices for each of the medication groups (table I). The coefficient of variation ranged from a low of 0.08 for Canadian digoxin and lovastatin to a high of 0.70 for American metformin HCl. Overall, the amount of US variation (0.40) was more than double the Canadian variation (0.16) for these selected medications. © 2008 Adis Data Information BV. All rights reserved.
We examined a variety of scenarios to compare total group expenditures between the US and Canada (table II). Bundle prices model the cost to buy all 19 generic medications with a specific consumer behaviour. The ‘ordinary shopper’ scenario assumes an individual pays the median solicited price for each of the 19 medications. Using the median price from the subset of pharmacies in either country, the ordinary shopper would pay $US782.50. Using only median US pharmacy prices, the US ordinary shopper would pay $US297.02 (44%) more than the Canadian ordinary shopper. In the ‘bargain hunter shopper’ scenario, the lowest available price is selected for each of the 19 drugs. Using the lowest price from either country, the bargain hunter shopper would pay $US298.36. Using the lowest US pharmacy prices provides a saving of $US146.35 (27%) compared with the lowest Canadian pharmacy prices. In contrast, the ‘worst luck shopper’ pays the highest possible prices. Using the highest price from either country, the worst luck shopper would pay $US1305.21. Appl Health Econ Health Policy 2008; 6 (1)
© 2008 Adis Data Information BV. All rights reserved.
10.00
59.64
Digoxin
Ethinyl estradiol and norethindrone
72.59
5.69
Oxazepam
Prednisone 45.30
10.43
93.99
246.54
15.78
20.15
43.29
83.26
51.05
36.99
13.51
12.88
62.81
18.72
98.49
49.68
26.54
15.72
30.78
56.59
21.89
112.36
279.00
29.59
28.59
56.65
110.29
62.99
44.99
21.19
16.39
87.59
21.08
141.00
54.99
44.29
25.69
44.69
0.27
0.53
0.23
0.41
0.45
0.54
0.70
0.55
0.43
0.37
0.40
0.24
0.16
0.27
0.69
0.09
0.48
0.46
0.41
24.96
7.24
15.50
85.00
16.87
18.42
18.33
106.00
12.50
11.80
8.47
6.86
38.29
20.27
79.00
24.76
16.51
23.32
14.56
30.11
11.23
17.43
130.93
21.42
22.86
21.39
116.06
14.22
13.86
13.27
13.01
45.00
23.00
94.70
27.89
19.64
26.23
16.63
Rates varied from $US1 being equal to $Can1.11–1.16 during the study time period of March to April 2007.
CV = coefficient of variation.
a
23.43
60.62
Omeprazole
Warfarin
10.00
Naproxen
6.67
Metoprolol tartrate
13.33
Lovastatin
6.67
13.27
Lorazepam
Metformin HCl
12.78
Levothyroxine
6.02
10.00
Citalopram hydrobromide
Hydrochlorothiazide
44.84
Azithromycin
8.99
12.78
Amoxicillin
Furosemide
8.88
16.09
median
lowest
CV
Canadian-only price ($US)a highest
lowest
median
US-only price ($US)
Amitriptyline
Paracetamol (acetaminophen) compound with codeine
Generic medication
Table I. Prices for 19 selected generic medications for the US and Canada
34.00
17.23
19.66
149.62
26.72
39.00
25.42
131.70
15.07
19.65
20.00
21.00
59.91
24.88
107.43
31.25
21.13
30.83
17.18
highest
0.11
0.28
0.12
0.18
0.16
0.30
0.12
0.08
0.09
0.19
0.31
0.39
0.16
0.08
0.11
0.09
0.12
0.10
0.09
CV
US-Canadian
–1.53 (–6)
–1.55 (–21)
57.09 (368)
–24.38 (–29)
–6.87 (–41)
–11.75 (–64)
–11.66 (–64)
–92.67 (–87)
0.77 (6)
0.98 (8)
–2.45 (–29)
2.13 (31)
21.35 (56)
–10.27 (–51)
–69.00 (–87)
20.08 (81)
–3.73 (–23)
–14.44 (–62)
1.53 (10)
lowest price differences [$US (%)]
22 Gooi & Bell
Appl Health Econ Health Policy 2008; 6 (1)
Generic Drug Prices in the US and Canada
23
Table II. Various price comparison scenarios for all 19 generic medications (year 2007 values) Scenarios
Definition
Ordinary shopper
Median price for each medication
Prices ($US) from: all pharmacies 782.50
US pharmacies
Canadian pharmacies
975.90
678.88
Bargain hunter shopper
Lowest price for each medication
298.36
402.29
548.64
Worst luck shopper
Highest price for each medication
1305.21
1259.85
811.67
Using only the most expensive US providers, the amount is $US1259.85, while it is $US811.67 (36% discount) if only the most expensive Canadian providers are used. Discussion We obtained prices for the 19 most prescribed generic medications at US and Canadian online and walk-in pharmacies. We found that for the lowest priced medication of each selected drug, the least expensive generic medications were generally found in the US. However, for the median prices for each drug across the subset of US or Canadian pharmacies, the six selected US pharmacies were often higher than the median prices of the six selected pharmacies in Canada. In addition, the highest prices for medication in the US were often greater than the highest prices in Canada. Further, there was notable variation in prices for generic medications within and between countries, with the greater variation being in the US. Most of the price ranges of drugs overlapped between the US and Canada; only azithromycin and oxazepam were consistently less expensive in one country (Canada) than the other. Overall, generic medications were not consistently more expensive in either country. Our study took the perspective of an individual consumer, focused on generic medications, and included a variety of pharmacy types in contrast to previous work in this area.[18,25] Others have used weighted average prices to account for the broad variety of sales volume per dosage, but this type of aggregate analysis often blurs the message to individual consumers seeking the lowest price and are concerned about actual cost.[26] Further, we ensured comparability of our findings by including the most prescribed generic medications and pricing for common doses and quantities. Moreover, we surveyed © 2008 Adis Data Information BV. All rights reserved.
retail pharmacies – both online as well as ‘bricks and mortar’ – which anchors the findings in the real world and provides useful comparisons for consumers. Why are brand name prescription medications generally far cheaper in Canada compared with the US, whereas generic medications are not? In general, patented and generic medications in Canada are subject to different types of regulation and market forces than in the US. Patented drugs in Canada are subject to the Patented Medicine Prices Review Board (PMPRB) regulations, which set introductory drug prices relative to other medications and consumer goods.[27] This helps explain why Canadian patented medications are on average 24–40% cheaper than in the US, where, by and large, this type of policy is not practised.[11,18] However, generic medications do not have the same forces lowering prices in Canada. Many of the provincial and national Canadian public drug programmes set formulary prices for generic medications that are fixed to a maximum proportion (e.g. up to 50% or 70%) of the comparable brand name covered medication. This removes some of the price competition incentive between generic manufacturers for this large source of drug sales. Moreover, competition is further limited because the generic medication marketplace is smaller in Canada (approximately 15 firms), with the two largest companies representing more than half of the total market. Further, barriers to market entry are reinforced by the larger firms’ economies of scale and individual pharmacy preferences for one-stop shopping in stocking their shelves. In the US, competitive market forces exist whereby five or six generic manufacturers may be in direct competition over a single drug and lower the price of many generic medications to 30–40% of the brand price.[28] These policy and economic conditions serve to narrow the prescription medication price Appl Health Econ Health Policy 2008; 6 (1)
24
differences that exist between the US and Canada as compared with just considering brand name drugs. Our study has limitations that merit mention. First, we did not price all generic medications, but captured the top 19 medications that are either generic or can be interchanged with a generic. Still, these selected drugs include five of the top 10 US prescribed medications in 2005, and 18 of the top 40 Canadian products.[14,29] Second, not all pharmacies were included in our survey. However, we did include representation from the US and Canadian pharmacy chains that are responsible for 44% and 59% of US and Canadian pharmacy sales, respectively.[16,19] Of note, we only selected one site within a chain to obtain prices. Even though pharmacy chains usually have a uniform district pricing policy, prices and dispensing fees may vary within and between larger regions.[30,31] Third, the prices reflect the cost to uninsured individuals, accounting for only 15% of Americans.[32] Nonetheless, these costs present a true burden to many more Americans and Canadians. In many Canadian provinces, universal health coverage tends to be limited to only seniors, social assistance recipients and hospital inpatients.[33] In Ontario, Canada’s most populous province, nearly 20% of people have neither public nor private drug coverage.[34] In addition, individuals with insurance are increasingly likely to delay or forfeit care because rising deductibles, co-insurance and copayment equates to larger out-of-pocket costs.[35,36] Cheaper drugs benefit both uninsured and insured individuals. Furthermore, this pricing discrepancy may present opportunities for third-party organizations and could influence public policy. Fourth, the variation we observed may be an underestimate because some controlled substances were not available through some pharmacies and one of our chosen online pharmacies was the same company as the walk-in one. Fifth, higher values of the $Can relative to the $US may make Canadian generic medications more expensive. Sixth, we implicitly assumed equivalent quality, which has been previously demonstrated.[37] Finally, as in other © 2008 Adis Data Information BV. All rights reserved.
Gooi & Bell
studies, shipping costs were not included in the analysis; however, they usually represent a small fraction of costs per whole order, and US pharmacies will generally not ship to Canada.[18] Conclusion Our findings question the conventional wisdom that all prescription medications are less expensive in Canada than in the US. The overall implication is that brand name medication price regulation in Canada may not necessarily translate into lower overall drug prices since generic medications are not similarly regulated or exposed to fully competitive market forces. For the individual consumer paying out of pocket, there are significant savings gained from focusing attention toward price differences within the cheaper generic market, both within and between countries. Since our findings note that generic drugs are not consistently cheaper in the US or Canada and marked variation exists between these medications, to maximize savings an individual must assess both US and Canadian prices. Indeed, our results echo what smart comparison shoppers already know: regardless of where you live, the best deals are often found away from home. Acknowledgements Dr Bell is the recipient of a Canadian Institutes of Health Research (CIHR), Institute of Aging New Investigator Award. Both authors contributed to the conception and analysis of the data, the draft and revision of the manuscript and the statistical analysis. Mr Gooi acquired the data, and Dr Bell provided supervision. The funding agency, CIHR, had no role in the design and conduct of the study; collection, management, analysis and interpretation of the data; or preparation, review and approval of the manuscript. The corresponding author had full access to all of the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis. We thank Drs Allan Detsky, Don Redelmeier and Ron Wald for their helpful comments on the manuscript. The authors have no conflicts of interest that are directly relevant to the content of this study.
Appendix See table AI for the 19 selected generic medications. Appl Health Econ Health Policy 2008; 6 (1)
Generic Drug Prices in the US and Canada
Table AI. The 19 selected generic medicationsa Generic medication
Dose
Paracetamol (acetaminophen) compound with codeine
30 mg tablet
Amitriptyline
50 mg tablet
Amoxicillin
250 mg caplet
Azithromycinb
250 mg tablet
Citalopram hydrobromide
20 mg tablet
Digoxin
0.25 mg tablet
Ethinyl estradiol and norethindronec
28-day package
Furosemide
20 mg tablet
Hydrochlorothiazide
25 mg tablet
Levothyroxine
0.15 mg tablet
Lorazepam
1 mg tablet
Lovastatin
20 mg tablet
Metformin HCl
500 mg tablet
Metoprolol tartrate
50 mg tablet
Naproxen
250 mg tablet
Omeprazole
20 mg caplet
Oxazepam
30 mg caplet
Prednisone
5 mg tablet
Warfarin
2 mg tablet
a
Quantity for 100 tablets, except azithromycin, and ethinyl estradiol and norethindrone.
b
5-day quantity.
c
84-day quantity.
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10. Patented Medicine Prices Review Board [PMPRB]. Non-patented prescription prices reporting: Canadian and foreign price trends. Ottawa (ON): Government of Canada, 2006 11. Generic drug prices: a Canada U.S. comparison. Ottawa (ON): Palmer D’Angelo Consulting Inc., 2002 Aug 12. Bren L. Study: U.S. generic drugs cost less then Canadian drugs. FDA Consum 2004 Jul-Aug; 38 (4): 9 [online]. Available from URL: http://www.fda.gov/fdac/features/2004/404_ generic.html [Accessed 2008 Aug 22] 13. Frank RG. Prescription drug prices: why do some pay more than others do? Health Aff (Millwood) 2001 Mar-Apr; 20 (2): 115-28 14. Pharmaceutical trends: top 50 dispensed medications in Canada. Montreal (QC): IMS Health Canada, 2005 15. Ministry of Health and Long-Term Care. Drugs funded by Ontario Drug Benefit (ODB) Program: e-formulary [online]. Available from URL: http://www.health.gov.on.ca/english/ providers/program/drugs/odbf_eformulary.html [Accessed 2007 Feb 8] 16. Kyriakos T. Canada’s top drug chains. Drug store news 2001 Apr 23 [online]. Available from URL: http://findarticles.com/ p/articles/mi_m3374/is_6_23/ai_73847877 [Accessed 2006 Nov 20] 17. Pharmacy ratings and profiles [online]. Available from URL: http://pharmacychecker.com/rating.asp [Accessed 2006 Nov 20] 18. Quon BS, Firszt R, Eisenberg M. A comparison of brand-name drug prices between Canadian-based internet pharmacies and major U.S. drug chain pharmacies. Ann Intern Med 2005; 143: 397-403 19. Top 30 drug chains in dollar volume. Drug store news 2004 Apr 19 [online]. Available from URL: http://findarticles.com/p/ articles/mi_m3374/is_6_26/ai_n6007390 [Accessed 2006 Nov 20] 20. Verified internet pharmacy practice sites: for consumers; list of pharmacies [online]. Available from URL: http:// www.nabp.net/ [Accessed 2007 Nov 23] 21. Hwang SW. Mortality among men using homeless shelters in Toronto, Ontario. JAMA 2000 Apr 26; 283 (16): 2152-7 22. Hansen KK, Zwanziger J. Marginal costs in general acute care hospitals: a comparison among California, New York and Canada. Health Econ 1996 May-Jun; 5 (3): 195-216 23. McGlynn EA, Naylor CD, Anderson GM, et al. Comparison of the appropriateness of coronary angiography and coronary artery bypass graft surgery between Canada and New York State. JAMA 1994 Sep 28; 272 (12): 934-40 24. XE: the worlds favorite currency site [online]. Available from URL: http://www.xe.com/ [Accessed 2007 Aug 15] 25. Generic drug prices in the U.S. are lower than drug prices in Canada. FDA White Paper. Rockville (MD): Office of Planning, 2003 Nov 26. Frank RG. Prescription drug prices: why do some pay more than others do? Health Aff (Millwood) 2001 Mar-Apr; 20 (2): 115-28 27. Zuger A. Rx: Canadian Drugs. N Engl J Med 2003 Dec 4; 349 (23): 2188-90 28. Section A7: the U.S. drugs system. In: Fundamental review of the generic drugs market. Report prepared by OXERA for the UK Department of Health. Oxford: OXERA, 2001 Jul 29. Top 10 products by U.S. dispensed prescription. Norwalk (CT): IMS Health, IMS National Prescription Audit PLUS, 2007 Mar
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30. Hoch SJ, Kim B-D, Montgomery AL, et al. Determinants of store-level price elasticity. J Mark Res 1995; 32: 17-29 31. Sorensen AT. An empirical model of heterogeneous consumer search for retail prescription drugs [working paper 8548]. National Bureau of Economic Research, 2001 [online]. Available from URL: http://www.nber.org/papers/w8548 [Accessed 2008 Jan 9] 32. Mills RJ, Bhandari S. Health insurance coverage in the United States: 2002. Washington (DC): US Department of Commerce and Statistics Administration. US Census Bureau, 2003 Sep 33. Ministry of Health and Long-Term Care. Ontario drug benefit (ODB) [online]. Available from URL: http:// www.health.gov.on.ca/english/public/program/drugs/ drugs_mn.html [Accessed 2006 Nov 17] 34. Ontario drug benefit program. 2005/06 report card for the Ontario drug benefit program. Toronto (ON): Ministry of Health and Long-Term Care, 2007: 12
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35. Cunningham PJ, Felland LE. Falling behind: Americans’ access to medical care deteriorates, 2003-2007. Track Rep 2008 Jun; (19): 1-5 36. Banthin JS, Cunningham P, Bernard DM. Financial burden of health care, 2001-2004. Health Aff (Millwood) 2008 Jan-Feb; 27 (1): 188-95 37. Veronin MA, Lee E, Lewis EN. “Insight” into drug quality: comparison of simvastatin tablets from the US and Canada obtained via the internet. Ann Pharmacother 2007 Jul; 41 (7): 1111-5
Correspondence: Dr Chaim M. Bell, St Michael’s Hospital, 30 Bond Street, Toronto, ON M5B 1W8, Canada. E-mail:
[email protected]
Appl Health Econ Health Policy 2008; 6 (1)
