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The article examines how parallel trade affects drug policies and prices in Canada and the U.S. U.S. consumers and Canadian pharmacies have taken advantage of the opportunity presented by price differences in patented pharmaceuticals. This brought the Canadian and U.S. systems for determining pharmaceutical pricing under increased scrutiny. It asserts that the price discrimination strategies of pharmaceutical manufacturers and exchange rate fluctuate have played an underappreciated role.

Drug plans take different approaches to determining reimbursement prices for generic drugs. One common approach is to set the maximum reimbursement price as a percentage of the price of the interchangeable branded drug. In many countries this percentage depends on the number of generic entrants, a model we call "tiered pricing." This paper seeks to enhance understanding of how to set the tiers. We construct a simple model of tiered pricing and set parameters to match evidence on generic drug costs and the distribution of revenues. Using simulation methods, we then assess different tier structures in terms of total surplus and average drug cost. We find when tiers are bunched tightly together welfare outcomes are poor. Moreover, there are large welfare gains from increasing the number of tiers from one to two, and only small welfare gains from increasing the number of tiers beyond four. The choice of tiers has substantial welfare and cost implications. While it is possible to refine the simulation analysis based on specific market characteristics, an optimal tier structure, such as the one we propose in the paper, should have at least two tiers. [ABSTRACT FROM AUTHOR]

The article explores the problem in the pricing and procurement of orphan drugs using an old orphan drug, trientine, for the treatment of Wilson disease, as an example. Topics covered include the aim of the traditional laws for orphan drugs in Canada, the regulatory status of D-penicillamine and trientine as oral treatments for Wilson disease, in Canada, and the reason pharmaceutical firm Valeant Canada announced that the price of Syprine would match the U.S. price.

The article discusses the impact of price negotiation through rebates to the drug expenditure of the patients. It highlights the development of publicly funded prescription insurance plans with a co-insurance payment structure for the patients. It also cites the confidentiality of pricing agreements between the government and pharmaceutical manufacturers.