Why is Prescription Medication Cheaper in Canada?

A Guide to Comparing the U.S. versus Canadian Healthcare Systems 

When you think of medicine, chances are you envision a life-saving or health-amplifying treatment that can make a world of difference for you or your loved ones.

When you think of healthcare workers, you might picture the heroes who have worked during the COVID-19 pandemic.

But when you picture healthcare bills in America, your perception is likely not so positive.

Most Americans are aware that the healthcare system in the United States has been under strain for several decades. Between hefty insurance fees and expensive medical services, there leaves limited room for trust among many U.S. healthcare consumers.

And for many Americans, the most concerning part of today’s health system is high prescription medication costs.

The U.S. Medication Problem

Medication and pharmaceutical access is a vital backbone to a nation’s health. While the United States is notable for its ingenuity and innovation in medicine, it is also known for its expense.

There are a multitude of factors that contribute to the high cost of medication in the U.S.

Insurance Companies

Firstly, the U.S. healthcare system utilizes for-profit health insurance companies as “middlemen” between U.S. consumers and hospitals/private practices.

A private health insurance company’s primary job is to negotiate price costs with hospitals and pharmaceutical manufacturers.

The insurance company attempts to negotiate a low cost for whatever prescription their client is using. However, oftentimes insurance companies will not negotiate pharmaceutical prices too low because they must compete with other private health insurers to make a profit.

So, insurance companies will charge “premiums” to their clients or only cover certain medications in more expensive-tier insurance plans. This helps them make a substantial profit on the negotiated prices. This also leaves average American consumers at risk for surcharged costs and with nobody truly negotiating on their behalf.

Sadly, the dependence on (mostly private) health insurance is an unavoidable part of accessing healthcare in the U.S.

For example, a person without health insurance who wants to get an x-ray might find that the x-ray costs $1200 out-of-pocket, whereas a person who has health insurance will only pay a fraction of that price (sometimes still hundreds of dollars).

The same goes for medicine: if you have health insurance, then your medication might cost $25 for a 30-day supply. However, the same medication can cost hundreds of dollars without health insurance.

Yet, the problem is two-fold for Americans, since the cost of health insurance itself can be thousands to tens of thousands of dollars every year.

Drugs as a Commodity

Another concerning factor in U.S. healthcare is the positioning of pharmaceutical medication as a commodity. In the United States, pharmaceutical companies spend millions to billions of dollars on investments, research, and development.

Some Americans may be aware of the recent 18 billion dollar spending on “Operation Warp Speed” which helped fund the development of COVID-19 vaccines.

Developing effective medications can cost millions to billions of dollars, similar to the cost of vaccine development. So pharmaceutical companies, such as Johnson & Johnson (among others) spend enormous amounts of money on drug development.

Once a drug successfully makes it past trials and to market, these pharmaceutical companies want to get their money’s-worth. They begin to advertise commercials on TV about why their medication is the best.

This direct-to-consumer advertising process is only legal in the United States and New Zealand.

All other countries have banned consumer drug advertising, likely due to questionable ethics. After all, if a pharmaceutical company is spending thousands of dollars to advertise their pharmaceuticals, then will they be veracious about the drug quality or will they simply try to make it as appealing as possible?

The United States has required that drug commercials list possible side effects or adverse effects in commercials, however, this intervention has not stopped the natural conflict of interest of providing medication versus making money in drug advertising in the U.S.

Whether or not a consumer is fully informed about medication quality, the posing of drugs as a commodity creates a profit-driven system that continues to inflate U.S. medication prices.

Inflation and Scarcity

Recently, the U.S. has also been experiencing inflation in the form of gas prices and common goods.

“Inflation” is a process of a generalized increase in the price of goods and services, often while other factors, like the value of the dollar, stay stagnant.

Multiple economic factors can cause inflation. A lack of supply and an increase in demand will lead any price to skyrocket. A country-wide increase in purchasing power can lead to inflation. Or a “bubble” bursting, such as the housing crisis in 2008, can cause inflation as a reactionary response.

The COVID-19 pandemic stalled and damaged a few international supply chains, and reduced demand for goods and services while people stayed home. Now that people have decided to start spending money again, there is minimal supply for increased demand, leading to inflation.

Furthermore, U.S. wages remain more stagnant than ever, reducing the ability of average Americans to afford hefty purchases.

Health insurance, as a few-thousand dollar annual cost burden, can sometimes be on the chopping block for Americans trying to scrape by. The 2020 census shows that 28 million Americans lacked health insurance during the first year of the COVID-19 pandemic (U.S. Census).

But despite the high costs of health insurance and lack of complete coverage for every U.S. citizen, pharmaceutical companies still increase medication prices.

One study from the OECD found that the average American citizen spends $1200 on prescription medications every year (Organization for Economic Cooperation and Development).  This is an estimate of Americans with health insurance. Out-of-pocket costs are even higher.

The burden of inflation, on top of the “drug as a commodity” mindset and profit-driven insurance company model, puts American consumers at the bottom of the totem pole. For people who solely want to protect their health and wellness, affording medications becomes an unfair, deceitful process. This can be a huge emotional and financial strain for U.S. consumers.

Cheaper Medications in Canada

The broken U.S. healthcare system has led many Americans to search for alternatives. One such alternative lies along the northern border of the United States… Canada.

For U.S. citizens who do not know, medication is much cheaper in Canada than in the United States. Most medications sold in Canada are about 50-85% cheaper than United States medications.

In the United States, an EpiPen costs around $607, and in Canada, it only costs $276 (Personal Importation). Entocort, a medication for Crohn’s disease and Ulcerative Colitis, costs $2,047 in the United States but only $220 in Canada.

This price disparity is not due to poor quality of medication but is mostly due to differences in the U.S. versus Canadian healthcare system. Are you interested in knowing why medications are cheaper in Canada? There are a few reasons why Canada can keep costs low.

The Canadian Patented Medicine Prices Review Board (PMPRB)

The main reason that Canadian pharmacies can offer low medication costs is the establishment of the Canadian Patented Medicine Prices Review Board (PMPRB).

The PMPRB has one job: to place caps on pharmaceutical prices in Canada.

Maybe you have heard of “drug caps” before, or you are aware of advocacy and legislation in the U.S. pushing for such limits.

Essentially, drug caps prevent any pharmaceutical company in the entire nation of Canada from charging more than the maximum price set by law. So if the PMPRB sets a cap limit at $25 for a 30-day dose of Macrobid, the consumer will not pay a penny more, anywhere in Canada.

Canadian pharmaceutical companies can compete for revenue and business in other ways, but not via inflation of drug prices. And not via direct-to-consumer TV advertisements.

This approach is very different from the American market.

Canada Healthcare System

Another factor that makes the cost of Canadian pharmaceuticals lower than the cost of U.S. pharmaceuticals is the Canadian healthcare system itself.

Canada has a universal publicly-funded healthcare system, called Canadian Medicare, which means that the country’s 13 provinces/territories and the federal government work together to regulate and manage healthcare companies. The PMPRB is a result of such collaboration.

There is still private health insurance available to citizens (this is called a “blend” model), however, it is not a backbone to the system like U.S. private health insurance companies.

With less dependence on private insurers, costs can typically be enforced by government entities rather than negotiated by profit-seeking private insurers.

Furthermore, any international manufacturer looking to sell their medications in Canada must abide by the national Canadian healthcare system rules.

A.K.A: international manufacturers (think: Pfizer, Moderna, Johnson & Johnson) may be able to sell their products at a steep incline in the U.S., but if they want to enter the Canadian drug market, they must abide by the PMPRB drug caps.

While they may lose out on enormous profits, it is still worthwhile for manufacturers to abide by Canadian laws to gain access to 38 million potential Canadian consumers.

What Can We Do?

Despite its benefits, Canada’s system is not flawless. Canadian pharmaceutical companies are still vulnerable to nationwide or international economic disruptors, like inflation. That is a natural part of supply & demand.

But, medications in Canada seem to be cheaper due to the protections in place for consumers.

By creating and utilizing the PMPRB, and other methods of ingenuity, like outsourcing from other OECD countries, Canada acts as a great model for cheap medication.

If other countries like the U.S., and their citizens, hope to obtain cheap medication, they must consider placing limits and constraints on pharmaceutical pricing.

With advocacy and public opinion swaying the U.S. towards fixing a predatory healthcare system, it is possible that cheap medication can be accessed here too.

Order Medication through a Canadian Online Pharmacy

Many Americans travel great distances to buy their medication in person from Canadian pharmacies. Unfortunately, these long trips can include hours of travel, and border line-ups and have become difficult with COVID travel restrictions.

Much like shopping on Amazon, many patients are turning to online Canadian pharmacies to have their medication express shipped straight to their address.

Websites such as Pharma Giant, allow easy & secure ordering online; and help many Americans save up to 90% on their prescription medication.