Could Canada's Compulsory Rx Licensing Work in the U.S.?

Article excerpt

For several years, some U.S. policymakers and patients have looked enviously at Canada's lower prescription drug prices. Last fall, a study by the U.S. General Accounting Office found U.S. prices were about one-third higher. The healthcare reform task force under Hillary Clinton specifically examined the Canadian regulatory system, and there is speculation that when the Administration's plan is unveiled, it will have either standby or short-term price controls.

Legislation has been introduced in Congress that would create a U.S. version of Canada's Patented Medicines Price Review Board (PMPRB), a regulatory panel created in 1987 and often cited in the United States as the reason for Canada's low prices.

But newer studies of the effects of changes in Canada's patent laws--some the result of U.S. pressure to make them more like those in America--suggest that the era of low drug prices north of the border may be drawing to a close.

Out of balance: "What we now have in Canada is a pharmaceutical system that is out of balance," Jack Kay, chairman of the Canadian Drug Manufacturers Association, a group of 18 generic drug firms, told a Senate staff seminar in Washington, D.C., last month. Kay cited estimates that Canadians will pay an additional $7.2 billion (Canadian) over the next 17 years as a result of the changes. Kay maintained that the PMPRB has been ineffective, and the board itself conceded that Canada, which has a national health-care system, now has among the highest new drug prices of eight Western industrialized nations studied. Canada's prices were the highest for 42 of 177 new drugs compared and second highest for 35 more, a PMPRB report released last winter said.

Canada enjoyed low drug prices in the 1970s and 1980s largely as a result of a healthy generic drug industry operating under rules significantly different from those in the United States.

Most important was a system known as "compulsory licensing." It permitted generic companies to manufacture medicines still under patent in exchange for 4% government-set royalty payments to the patent holder. At the same time, the Canadian provinces began instituting drug benefit programs that, at a minimum, covered the poor and elderly. …