University of Calgary

Generic drugs

Feb. 6, 2009

Alberta could save millions on generic drugs

Aiden Hollis says provincial government pricing and insurance policies are distorting the market. / Photo: Ken Bendiktsen

Aiden Hollis says provincial government pricing and insurance policies are distorting the market.
/ Photo: Ken Bendiktsen

When it comes to generic drug-pricing and procurement policy in Canada, provinces are experimenting with a variety of policies to ensure good prices, appropriate dispensing, and security and stability of supply.  So why, then, do drugs cost consumers in Canada as much as they do—more than in many other parts of the world?  It all comes down to competition between the drug manufacturers, and the fact that any savings in cost are not being shared with consumers.

According to a new paper released today, there are currently two chief stumbling blocks to generic drug competition.  In his paper, “Generic Drug Pricing and Procurement: A Policy for Alberta”, the U of C’s Aidan Hollis argues that first, pharmacies are in a position to capture the benefits of competition among manufacturers, and those benefits are not regularly passed on to consumers.  Consumers, in turn, are reluctant to invest the time to look for lower prices for a variety of reasons, including insurance. Second, Hollis says, the peculiarities of Canada’s laws make litigation almost a prerequisite if generic competition is to occur.

“The reason is not inefficient or uncompetitive generic drug companies, but rather provincial government pricing and insurance policies that are distorting the market.”

To read more of the findings in Aidan Hollis’ paper, go to www.ucalgary.ca/policystudies

Aidan Hollis is an Associate Professor in the Department of Economics at the University of Calgary. He has advised governments, pharmaceutical companies, and testified in court in pharmaceutical patent and competition cases. He has published over twenty articles and a book on pharmaceutical markets.


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