Sector Profile

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 are 2 percent of the world market. Canada ranks as the 8th largest world market in sales. An 8% annual growth makes Canada the 4th fastest growing market, after China, Mexico and Spain. (IMS Health)
  
  
• Brand-name companies undertake R&D; to market new patented or improved therapies while the generic firms develop bio-equivalent copies of innovative drugs once patents expire.
  
  
• In 2005, brand-name companies, mostly foreign-owned multinationals, had 84 percent of total pharmaceutical sales in Canada, and generic companies, had 16 percent. Generics accounted for 40% by volume. (IMS Health)
  
  
• In 2005, the pharmaceutical manufacturing industry employed about 40,000 people (2/3rd in brand-name companies). A further 35,000 indirect jobs come from this industry.
  
  
• The industry is clustered in the metropolitan areas of Montreal and Toronto. The location of R&D; facilities is strongly influenced by the location of major biosciences clusters and by supportive government policies.
  
  
• R&D; costs per drug in 2005 averaged US$605 million for chemical pharma and US$559 million for bio-pharma over 12-13 years (Tufts Center for the Study of Drug Development). Full costing (amortization of research failures and opportunity cost of capital) raises average costs to US$900 million for pharma and US$1.24 billion for bio-pharma (higher for bio-pharma due to longer development times). There is variability between firms depending on the drug, number of failures and government R&D; funding. In Canada, drug R&D; costs are lower due to lower R&D; and clinical trial costs (KPMG 2006). A generic drug may take 2 to 3 years and requires R&D; costs to develop and prove equivalency with original drug.
  
  

Leading Companies

• In 2005, the top ten companies accounted for almost 60 percent of total pharmaceutical sales (wholesale level) and the top 5 companies accounted for nearly 40 percent of total sales in Canada. (IMS Health)
  
  
• Pfizer Canada had the largest share of the market with 13.4 percent of Canadian drug sales which is more than double the individual market share of the other leading companies. (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 6% and 2% of the Canadian drugs market respectively. (IMS Health)