Generics360 – Generic Drugs in Canada, 2018

Executive Summary

Generics360 reports on the latest trends in the Canadian generic drug market within an international context. Canada has established one of the strongest generic markets in the industrialized world, though domestic prices have historically been much higher than international levels.

Over the past decade, generic price-setting policies initiated by individual provincial governments and through the pan-Canadian Pharmaceutical Alliance (pCPA) have resulted in a notable decline in generic prices. The latest initiative, a five-year joint agreement between the pCPA and the Canadian Generic Pharmaceutical Association (CGPA), has gained the greatest ground, bringing Canadian prices closely in line with international norms.

To support policy decision making, the PMPRB has been monitoring changes in the generic landscape in Canada since 2007. This edition of Generics360 reviews the decade-long impact of generic pricing policies in Canada, focusing on the effect of the most recent initiatives. The findings highlight trends in the reported sales (revenues), utilization (the number of units sold), and prices of generic medicines.

The international markets examined include the Organisation for Economic Co-operation and Development (OECD) members, with a focus on the seven countries the PMPRB considers in reviewing the prices of patented medicines (PMPRB7): France, Germany, Italy, Sweden, Switzerland, the United Kingdom (UK), and the United States (US).

The information in this report will inform discussions and support evidence-based decision making for policy makers, the pharmaceutical industry, clinicians, and patients.

Key Findings

Canada has one of the strongest generic drug markets in the OECD in terms of sales and utilization

• Sales of generic medicines in Canada rose from $3.0 billion in 2006 to $5.4 billion in 2018; this rate of increase is well within the range of the PMPRB7 countries and in line with the OECD average.
• Generic use accounted for 76% of the volume of drugs in the Canadian pharmaceutical market in 2018, the third highest retail market share among the OECD countries after the US and Germany.
• Canadians spent $164 per capita on generics in 2018, ranking second among the OECD countries, in part due to high domestic use of generic medicines.

While generic use in Canada is increasing, the share of sales has been decreasing, due to provincial pricing policies and growth in the patented medicine market

• Although generic use has increased, spending levels in 2018 were virtually the same as in 2010 due to the implementation of pricing policies.
• The sales growth of patented medicines has outpaced that of generics since 2011, diminishing the generic share of Canadian pharmaceutical spending.
• The share of generic units sold increased from 62% of the Canadian pharmaceutical market in 2010 to 76% in 2018, while the share of generic spending decreased from 32% to 25% over the same period.
• National retail spending on generic medicines in Canada dropped by 7% in 2018, principally due to price decreases that took effect partway through the year.

Provincial and pCPA generic pricing policies have significantly reduced generic prices in Canada over the last decade, gradually narrowing the gap with international levels

• Generic prices in Canada have fallen more than prices in comparable countries, decreasing by almost 60% from the last quarter of 2007 (Q4-2007) to Q4-2018, with a more significant 80% drop for some of the most commonly used medicines.
• Price reductions, as well as a slightly weakening Canadian dollar, have contributed toward aligning Canadian and foreign generic price levels over the past several years.

The most recent pCPA–CGPA initiative has brought Canadian prices closely in line with international levels

• Mean generic drug prices in the PMPRB7 countries were 5% higher than in Canada in Q4-2018, while median prices, which reduce the influence of extremely high or low values, were 13% lower. This represents a significant improvement from Q4-2017 when mean PMPRB7 prices were 11% below Canadian prices and median prices were 27% lower.
• In 2018, generic prices in Canada were 11th highest in the OECD, in line with Italy, the US, and France, and slightly above Germany, although prices in the UK and Sweden were still 25% and 33% lower, respectively.
• Canada’s international standing in 2018 is a marked improvement over 2016, when Canada ranked seventh highest in the OECD for generic prices, with Germany, France, and Italy approximately 25% lower.

Lower-priced, higher-sales generic markets made the greatest gain toward price alignment with international levels

• Generic medicines set to 10% of their brand reference price under the recent pCPA initiative made great strides toward price alignment with international levels, from a 40% difference in median prices in 2016 to being on par in 2018.
• Canadian generic sales have shifted toward lower-priced medicines. In 2016, those priced at 18% or less of their brand reference made up around 40% of all generic unit sales; by 2018, the same share was made up of generics priced at 10% or less of their reference.
• Although generics with annual sales over $10 million still had the largest differential between Canadian and median international prices, this gap narrowed from 36% in 2016 to 15% in 2018.

Full report