E-drug: Compulsory licensing in Canada (cont)
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There was actually never any analysis done on this question. A report
produced for the Canadian Drug Manufacturers Association, the
organization representing Canadian owned generic companies, estimated
that the cumulative costs of the elimination of compulsory licensing
from 1993 to 2000 would be $1.7 billion and by the 2010 the
cumulative costs from 1993 would be $4.0 billion.
I once tried to calculate a ballpark estimate of how much the
elimination of compulsory licensing cost and for what it is worth here it is.
The 1985 Commission of Inquiry on the Pharmaceutical Industry (the
Eastman Commission) estimated 1982 savings of $211 million as a
result of compulsory licensing, or in-other-words, instead of drug
expenditures of $1.53 billion in that year they would have been $1.74
billion, or 12% higher. Eastman's figure included savings in both
the patented and nonpatented segments of the market. But since
compulsory licensing only directed affected patented drugs, the
following analysis is limited to that sector.
Using the PMPRB's estimates of manufacturers' yearly sales of
patented drugs in the absence of price regulation and calculating an
annual 12% savings on these sales yields total savings from
compulsory licensing of $2.30-$2.43 billion between 1988 and 1995.
This analysis assumes that the 12% point estimate of annual savings
from compulsory licensing is a valid historical figure; and that in
the absence of Bills C-22 and C-91 generic competitors would have
continued to appear on the market at the same rate and at same price
discount after 1987 as they did in 1987 and previous years. These
savings are not as great as those that result from PMPRB price
regulation, but they do occur without the administrative costs
associated with the PMPRB (about $2.4 million per
annum) and the cost to the companies of collecting the information
that the PMPRB requires. (The PMPRB estimated that during the period
1988-1995 it had saved a total of between $2.9-4.2 billion. The range
of figures is because it used three different methods to estimate
savings.
In my opinion there were problems with the PMPRB figures.)
Joel Lexchin MD
121 Walmer Rd.
Toronto, Ontario
Canada M5R 2X8
T: +416-964-7186
F: +416-923-9515
e mail: joel.lexchin@utoronto.ca
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