Canada Pharmaceuticals & Healthcare Report Q1 2008

The Canadian drug market remains robust and is considered by BMI to be one of the best environments in the world for a drugmaker to operate in. In 2006, the pharmaceutical market reached a value of US$18.6bn, and, going forward, BMI expects sales to be powered by generics. Over the next five years BMI forecasts a compound annual growth rate (CAGR) of 7.68% bringing the total value of the generics sector to US$5.5bn. This compares to an overall market CAGR of 5.07%.

However, as discussed in detail in BMI's Q108 Canada Pharmaceuticals & Healthcare Report, generic sales are being buoyed by high prices, despite the presence of a salubrious and competitive manufacturing industry. The primary problem appears to be the failure of pharmacies to pass on discounts offered by drugmakers to the end-payer. A study by the Patented Medicines Price Review Board (PMRB) in June 2006 concluded that retail prices for generic drugs were higher in Canada than in 10 out of 11 comparable markets. However the failure of pharmacies to address the situation, means that the authorities will probably be forced to. Both Ontario and Quebec have recently lowered the maximum price ceiling for generics drugs, in order to combat perceived price gouging.

Meanwhile, it has been a busy quarter in terms of company activity. Probably the biggest event was the US$900mn acquisition of Canadian biotech Aspreva by Swiss pharmaceutical producer and wholesaler Galenica. The purchase is one of the largest ever in the Canadian pharmaceutical sector and should provide a ringing endorsement for Canada's biotech industry, often criticised as a difficult environment to work in. Rather than developing novel drugs, Aspreva concentrates on finding new indications for existing drugs, often in neglected or rare disease areas.

In BMI's new methodology for Business Environment Rankings - which gives stronger emphasis to the regulatory environment, and also factors in country-specific economic and political indicators - Canada ranks in second position, in the Americas region and third globally. This is primarily because of excellent Country Risk Indicators, including low corruption and a stable political environment, solid growth in the pharmaceutical market, and a generous government reimbursement system.