The Dollars and Cents of Generic Drugs

Today's economic crisis has led Canadians to look for as many ways to save money as possible. On average, Canadians are paying $64.19 for a brand-name drug while the average price of a generic is $24.07. That is roughly about a third of the cost.

They still need to take their meds at a rate of almost $60-million a day, newly released figures indicate. These numbers show prescription drug sales topped at $21.4-billion in 2008 which was an increase from the previous year of $1.2-billion or 6 per cent, according to IMS Health, a private company that tracks prescription drug sales.

With so much money at stake, consumers are starting to take a closer look at cheaper generic drugs over more expensive brand-name drugs. "Whenever you substitute a generic for a brand, you're looking at a significant savings," says Jim Keon, president of the Canadian Generic Pharmaceutical Association.

Although the cheaper drugs are looking more attractive and many Canadians are choosing this alternative, the overall cost of prescriptions is rising because the number of prescriptions has increased to a total of 453 million in 2008 - an average of 14 per person.

Mr. Keon insists that although the Canadian health system saved a whopping $3-billion last year by using generic prescription drugs, this number could easily go up by another $1-billion if practitioners and drug plans were more aggressive in their use of generics.

However, Rx & D, a group representing brand-name drug manufacturers concede that although there is a place for generics, governments and their drug plans should prioritize the most effective and cost-efficient treatment first rather than the cheapest.

Russell William, president of Rx & D also noted that generics (otherwise known as copycat drugs) can only be sold after patents expire on brand-name products. These drugs would not even exist without the research and innovation of brand-name pharmaceutical companies; therefore, it is difficult to make direct cost comparisons.

"Our companies discover new medicines and vaccines that save lives. Its costly, it's time consuming, there is a lot of regulatory hurdles and there is a great deal of risk involved," he said.

Last year, for the first time the majority of drugs dispensed in Canada - 51.6 per cent - were generics, according to the data from IMS Health.

"This number will rise significantly in coming years, in large part because a number of blockbuster drugs are coming off patent," said Steve Morgan, associate director of the Centre for Health Services and Policy Research at the University of British Columbia.

Specifically, the ones that many Canadians will be keeping their eyes on are: Lipitor, a cholesterol-lowering drug (and the most prescribed drug in Canada with 14.8 million) will come off patent in 2010, as well as the high blood pressure medication Norvasc (7.6 million prescriptions). These two alone make up for about 5 per cent of all prescriptions written for the year.

"The pharmaceutical industry is undergoing a profound shift with the blockbuster drugs falling off patent", says Dr. Morgan.

He contends that although "generic drugs are cheaper than brand names, they're not as cheap as they should be." There are a few reasons for this: lack of competition among generic drug firms and an absence of price controls on generic drugs while brand-name drugs are strictly regulated, cites a Competition Bureau report.

Last year, Canadians spent $643 per capita on prescription drugs in pharmacies according to IMS data. Many people will be paying closer attention to generic drugs as they continue to watch their pennies.

Source: Picard, Andre "Prescription sales rise by $1.2-billion, even as generics gain popularity" The Globe and Mail. 27 March 2009