New research from the Canadian Health Policy Institute (CHPI) suggests that Canada-Europe trade negotiations are being influenced by false assumptions about the impact of drugs on the cost of healthcare.

The CHPI says Canadian negotiators are reluctant to adopt European standards on intellectual property rights for new drugs because of allegations by special interest groups that those standards will lead to significantly higher healthcare costs in Canada.

“There is a lot at stake for Canadian jobs and economic growth if trade negotiations fail because of exaggerated claims about drug costs,” says Brett Skinner, author of the study Drugs and the public cost of health care in Canada, 1974–1975 to 2011–2012.

“Canada-Europe trade is already worth $92.1 billion. Europe is the world’s wealthiest market. The trade agreement will reduce barriers for Canadians to do business with nearly 500 million people—almost 15 times the size of our domestic market.”

The study examined the actual impact of provincial/territorial government spending on drugs over the last 38 years. The results indicate that in the fiscal year 2011/12, drugs accounted for only 8.0% of total government health spending. The share for patented medicines was only 4.7%, and it has been declining since 2004.

The study also found that drug spending in Canada has increased steadily as a percentage of government health budgets, growing from 1.2% to 8.0% over a 38-year period. Yet there was no correlation with the rate of growth in government health expenditures. Also, provinces that spent more of their health budgets on drugs did not experience higher rates of growth in health spending relative to provinces that spent less on drugs.

The research also showed that, on average, Canadian prices for patented medicines have grown 1.9 percentage points slower than the general rate of inflation since 1988, and prices for patented medicines in Canada have averaged below median international prices since 2001.

“Federal-provincial-territorial governments spend huge sums of public money on an expensive bureaucratic infrastructure to control patented drug costs amounting to less than 5% of public health spending,” explained Skinner. “If instead they looked for savings from the other 95% of healthcare, they might get a bigger return on their efforts.

“The evidence shows there probably isn’t a lot of fat to cut on drug prices without harming incentives for the invention and development of new medicines. Arbitrary government restriction of drug spending could also interfere with the natural evolution toward a more efficient allocation of healthcare inputs.”

Copyright © 2018 Transcontinental Media G.P. Originally published on

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