New research shows pharmaceutical stocks outperform their peers
The Canadian pharmaceutical industry is the envy of the world.
Its shares are up over 60 per cent this year.
But that's not necessarily because of the high returns of its drugs.
Rather, it's because of its relatively high costs.
And as the Canadian economy begins to heal, the pharmaceutical industry's costs are expected to rise.
The Globe Andamp; Mail's Michael Geist reports on a new study that shows the pharmaceuticals that people buy and use the most have outperformed their peers in a broad range of industries.
Read moreThe new research, published Thursday by the Canadian Institutes of Health Research, finds that pharmaceuticals are cheaper than those that cost more because they're cheaper to produce and to dispense, and they're also more effective.
"I think that is a big part of why the pharmaceutical companies are really seeing the value," said the report's lead author, Dr. Robert D'Amico, a professor of pharmaceuticals at the University of Toronto.
"If you look at the drugs that are available to Canadians and the drugs in the market, they're the cheapest drugs in Canada."
While some of these drugs are cheaper to manufacture and distribute, most of them are not.
"Most of the drugs we are getting from companies that are selling generics are generics that are not as good as the ones that we have in the pipeline," said D'amico, who presented the results at the annual meeting of the American Society for Clinical Pharmacology in Chicago.
"A lot of the generics in the generico market, most people are not going to be able to do what they are going to do with a pharmaceutical in the next few years.
So they are really low-cost generic."
The authors of the new study say the generically produced drugs are often more effective than the genericas they replace.
"There is a clear trend that shows that the generic drugs are more effective," said Dr. John B. Cramer, a senior author of the study and professor at the Cleveland Clinic.
"I think it is a matter of supply and demand."
Cramer said that the high cost of the generic drugs may be a reason why they are cheaper.
"They are more expensive than the drugs you would buy from a generic company," he said.
"The question is, are we going to pay that price?"
The pharmaceutical companies have long said that they can cut costs through lower prices.
But the new research shows that their prices are often higher than their competitors, making them less effective.
A new study finds that the price of generic drugs has been a big driver of drug cost growth, not profitsThe cost of generic medicines has increased over time.
In the early 2000s, generics were relatively cheap because they were easy to produce.
But as drug prices rose, so did their prices, and that trend continued until the mid-2000s.
Today, genericas are relatively expensive because the costs of the manufacturing and dispensing process are so high.
And in addition, the cost of shipping generic drugs is much higher than it was in the past.
"We're in a world where you can only sell them for a certain amount of money, and now you can sell them on the internet for anywhere from $20,000 to $40,000 a pill," said Cramer.
"That's not really cost-effective."
The new study looked at drug prices over a six-year period, starting in 2000.
The researchers looked at how much generics cost in each province and compared it to what they were costing generics.
"The data clearly shows that generics have a huge effect on the cost to the Canadian consumer," said Boonce Chen, a drug economist at the Canadian Institute for Health Information.
"We found that genericas have a direct impact on cost by about 40 per cent."
Chen says that when generics started to become more expensive, they were responsible for an extra 4.7 per cent of drug costs in Ontario, while generic drugs had an impact of 5.4 per cent.
The study found that, for example, the generic drug price was about 25 per cent more expensive in Ontario than it is in British Columbia.
"What we found is that the effect of generics on prices is a very large one," Chen said.
And in some cases, generic prices are also higher than the generic ones.
"In Ontario, generico prices were about 40 to 50 per cent higher than generics," said Chen.
"This suggests that, in some circumstances, generica prices may be more expensive.
But generico costs tend to be lower than generica costs for the average consumer."
Cohn said that while the study was based on generic prices, he thinks that the effects are still there, and the effects could become more pronounced if generic drugs were more effective and more affordable.
"If generics became more expensive and if generics could be more effective, it would lead
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