Sector Profile

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CANADIAN PHARMACEUTICAL INDUSTRY PROFILE

The pharmaceutical industry is one of the most innovative and profitable industries in Canada. This industry is composed of brand-name drug companies (which include biopharmaceutical companies) and generic drug companies. Both segments produce prescription and non-prescription drugs.

Size and Structure of the Industry

• Pharmaceutical sales in Canada account for 2 percent of the world market. Canada ranks as the 8th largest pharmaceutical market in the world in terms of sales and is the fourth fastest growing market globally, after China, United States and Spain. Its rate of growth is 10.7% per year. (IMS Health)
  
  
• For the year ending March 2004, brand-name companies, mostly foreign-owned multinationals, accounted for 85 percent of total pharmaceutical sales in Canada, and generic companies, for 15 percent. However, generics accounted for 40% in terms of prescription volume. (IMS Health)
  
  
• According to Statistics Canada, in 2003, over 26,000 people were employed in the pharmaceutical manufacturing industry, of which brand-name companies employed twothirds.
  
  
• The Canadian pharmaceutical industry is clustered in the metropolitan areas of Montreal and Toronto. The choice of location for R&D; facilities is strongly influenced by the location of major biosciences clusters in these areas as well as supportive government policies.
  
  
• Bringing an innovative drug to the market in Canada can take 10 to 12 years of R&D; and costs, $200-$300 million1. A generic drug can take 2 to 3 years to develop and costs between $1 million and $3 million.
  
  

Distribution of Pharmaceutical Purchases
by Sector -MAT March 2004

Source: IMS Health: Canadian Drug Stores and Hospital Purchases Audit

Total Canadian Pharmaceutical Industry
Employment

Distribution of Pharmaceutical R&D;
Expenditures by Geographic Areas - 2002

Leading Companies

• In the year ending March 2004, the top ten companies accounted for almost 60 percent of total pharmaceutical purchases in Canada.(IMS Health)
  
  
• The top 5 companies in Canada accounted for nearly 40 percent of total purchases. Pfizer, with its recent acquisition of Pharmacia, has increased its lead as the number one player from 10 percent to nearly 14 percent of Canadian drug purchases. (IMS Health)
  
  
• Two firms dominate the Canadian generic market; Apotex, which is Canadian-owned and Novopharm, which is owned by Teva Pharmaceuticals of Israel. They account for approximately 5% and 2% of the Canadian drugs market respectively. (IMS Health)
  
  

R&D; Activities

• According to Statistics Canada, in 2002, total intramural R&D; expenditures from Canadian pharmaceutical companies rose to $1.43 billion. Brand-name companies accounted for 77 percent of these expenditures and generic companies accounted for the balance.
  
  
• The pharmaceutical industry is one of the most R&D; intensive sectors in Canada. Thirty-one pharmaceutical and biotechnology companies are listed in Research Infosource's Top 100 Corporate R&D; Spenders 2003 in Canada.². Corporate R&D; Spenders 2003 in Canada2. Apotex Inc. is the first pharmaceutical company appearing on the list, ranking 13^th, with over $153 million spent on R&D.; Pfizer Canada Inc. follows, ranking 14^th, with $152 million spent on R&D.;
  
  
• Relative to other countries, the Canadian pharmaceutical industry lags in its R&D; performance. The R&D; to sales ratio has remained steady since 1999, in the range of 10 to 11 percent, and is the second lowest among seven industrialized countries.³.
  
  

Total R&D; Expenditures in the Canadian
Pharmaceutical Industry, 1999-2003

Source: Statistics Canada * Estimated figures

Ratio of Pharmaceutical R&D; Spending to
Domestic Sales in Different Countries - 1999

The R&D; Activities Have Translated into Several Important Discoveries

• In the last 10 years, a number of drugs were discovered in Canada. Among these, Vioxx, a ground-breaking anti-inflammatory analgesic agent, was discovered and developed by Merck Frosst in Montreal. This is now one of the top 15 best selling drugs in Canada.(IMS Health)
  
  

Examples of Drugs Discovered in Canada in the Last 10 Years

Brand-Name	Parent Company	Organization	Approval Date
Visudyne	QLT	University of British Columbia	April 12, 2000
Vioxx	Merck & Co.	Merck & Co.	May 20, 1999
Singulair	Merck & Co.	Merck & Co.	Feb. 20, 1998
3TC (Epivir)	Shire Bio Chem Inc.	McGill University	Nov. 15, 1995
Levulan	Dusa	Queens University & Royal Military College in Kingston	June 22, 2001

Canadian Drug Sales

• Canadian manufacturers' total drug sales reached $14.6 billion in 2003, an increase of 11.5 percent from the previous year. The main purchasers were drugstores ($13.1 billion), and hospitals ($1.5 billion).(IMS Health)
  
  
• Patented drugs account for 67 percent of total sales. The Patented Medicine Prices Review Board (PMPRB) estimates that sales of patented drugs were $8.8 billion in 2002. Sales of non-patented drugs, from generic and brand-name companies, reached $4.3 billion in 2002.
  
  
• Canadian drug export revenues have more than doubled since 1998, with 85 percent of exports going to the United States. However, Canada has a growing trade deficit in pharmaceuticals.
  
  
• Internet pharmacies are a relatively new phenomenon exploiting the drug price differential between Canada and the United States. This segment has grown very rapidly in the past three years with sales estimated at round $600 million in 2003.(IMS Health). The growth of sales by Internet pharmacies has become a key concern to the brand-name industry, which operates in both markets.
  
  

Canadian Manufacturers' Sales of Patented
and Non-Patented Drugs, 1990-2002

Source: Statistics Canada * Estimated figures

Total Canadian Pharmaceutical Import and Export
between 1998 and 2003

Leading Products

• The leading therapeutic classes in terms of purchases by drug stores and hospitals in 2003 in Canada are cardiovasculars with 14 percent of the market. The psychotherapeutics class is second with 10 percent of the market, followed by cholesterol agents (9 percent), antispasmodics (8 percent) and cancer/ immunomodulators (6 percent). (IMS Health)
  
  
• Lipitor, a cholesterol reducer produced by Pfizer, is the leading product in terms of purchases in Canada. Sales of Lipitor represent approximately 5 percent of total drug purchases in Canada for the year ending March 2004. Losec, an anti-ulcer medication from AstraZeneca ranks second in terms of sales (3 percent).(IMS Health)
  
  

Leading Pharmaceutical Products in Canada in 2004
(MAT Combined Data March 2004)

Rank	Leading Products	Therapeutic Subclass Location	Total Purchases ($ Millions)	2004 Growth (%)
1	Lipitor	Cholesterol Reducer	731	16.9
2	Losec	Proton Pump Inhibitor	395	-5.4
3	Altace	ACE Inhibitor	290	17.8
4	Norvasc	Calcium Channel Blocker	279	11.3
5	Zyprexa	Tranquilizer	230	14.1
6	Effexor XR	Antidepressant	217	32.3
7	Pantoloc	Proton Pump Inhibitor	199	17.7
8	Praxil	Antidepressant	196	-12.4
9	Eprex	Hematopoietic Agent	187	3.7
10	Celebrex	COX-2 Inhibitor	169	-4.2

Source: IMS Health: Canadian Drug Stores and Hospital Purchases Audit

Health Expenditures on Drugs

• Expenditures on pharmaceutical products in Canada are estimated to represent 16% of total health expenditures in 2003. Drug expenditures are increasing more rapidly than other health related expenditures⁴ and are the second largest cost, after hospitals and ahead of physicians.
  
  
• The retail prices of drugs in Canada rose by less than the Consumer Price Index (CPI) in 2002. The CPI rose by 2.2 percent whereas the retail purchase price of prescription drugs (CPI-Rx) rose by 0.6 percent.
  
  
• According to a PMPRB study, changes in the price of existing drugs did not necessarily contribute to increased expenditures. The ageing population and prescribing practices seem to be the principal reasons for the increases in drug expenditures in Canada.
  
  
• Canadian prices of patented drugs are generally lower than U.S. prices but are comparable to other industrialized countries. In 2002, the Canadian prices of patented drugs were about 1 percent higher than the median of foreign prices in seven countries. Canadian prices were lower than prices in the U.K., Switzerland and the U.S. and higher than those in Italy, France, Sweden and Germany.
  
  

Total Canadian Health Expenditures and Canadian
Expenditures on Drugs, 1993-2003

Source: Canadian Institute of Health Information * Estimated figures

Annual Growth Rate of Canadian CPI-Rx and CPI

Contacts:

Industry Canada - Life Sciences Branch

Joanna Rosborough rosborough.joanna@ic.gc.ca
Marie-Hélène St-Louis stlouis.mariehelene@ic.gc.ca

¹The cost does not include amortization of unsuccessful drugs.
²http://www.researchinfosource.com/2003-top100.pdf
³The PMPRB conducts an international price comparison using seven foreign countries: France, Germany, Italy, Sweden, Switzerland, the United Kingdom and the United States.
⁴Annual health expenditures are expected to reach $121.4 billion in 2003.