Canadian government monitors drugs Agency keeps eye on prices, hearing told

February 23, 1993|By Newsday

WASHINGTON -- Prescription drugs are more expensive in the United States than in Canada primarily because the Canadian government regulates and negotiates prices with big pharmaceutical companies, government officials and economists have told a congressional hearing.

"Canadians rely largely on a regulatory body -- a review board that insures prices are not excessive," said Janet L. Shikles, head of health financing policy for the General Accounting Office.

Testifying yesterday before the House subcommittee on health, Ms. Shikles said that since 1987 Canada's Patented Medicine Prices Review Board has tied maximum allowable prices on drugs to the median prices of the same products in seven other industrialized nations.

The subcommittee also heard testimony on drug prices in other countries. "European prescription drug prices in relation to U.S. prices may average anywhere from 10 percent to as much as 60 or 70 percent less," said Stephen Schondelmeyer, a University of Minnesota pharmaceutical economist.

He also cited a study by Families USA Foundation, a non-profit health advocacy group, that found that drugs in the United States cost an average of three times as much as drugs in Mexico.

Drug industry officials, Republican subcommittee members, and MIT pharmaceutical economist Ernst R. Berndt faulted the GAO's Canadian findings for not including the lower prices in the United States of generic drugs and drugs purchased by state welfare programs.

But Ms. Shikles and other GAO officials defended their work, maintaining they were comparing apples with apples by sticking to the big brand-name companies and their wholesale prices to retail pharmacists.

Creation of a Canadian-style board was urged yesterday by two Democrats, Sen. David Pryor of Arkansas and Rep. Pete Stark of California, who have been vocal in the health-care financing debate.

"The success the Canadians have achieved to date in containing pharmaceutical costs is largely due to the fact that all manufacturers are required to participate in these cost containment efforts," said Mr. Pryor.

The drug industry strongly opposes such a board. Gerald Mossinghoff, president of the Pharmaceutical Manufacturers Association, testified that creation of a price control board would ruin the industry's ability to come up with new but costly breakthrough drugs.

Canada's review board takes that country's inflation rate into account when determining allowable price increases to try to see that drugs are "priced fairly to consumers and give an adequate rate of return to the manufacturers," Ms. Shikles said.

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