Pharmaceutical Industry Profile

The pharmaceutical sector is one of the most innovative and profitable industries in Canada. It is composed of companies developing and manufacturing innovative medicines and generic pharmaceuticals as well as over the counter drug products.

• Size and Structure of the Industry
• Leading Companies
• R&D Activities
• Canadian Drug Sales
• International Trade
• Leading Products
• Health Expenditures on Drugs

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Size and Structure of the Industry

• Pharmaceutical sales in Canada have a 2.6 percent share of the global market making Canada the 8th largest world market. A 6.4 percent average annual growth over the period 2006–2010 makes Canada the 4th fastest growing market globally, after Brazil, China and Spain. (IMS Health Pharmafocus 2016)
• Brand-name companies undertake R&D to develop new or improved patented therapies while the generic firms develop bio-equivalent copies of innovative drugs once patents expire.
• Brand-name products, account for 76 percent of Canadian sales and 40 percent of prescriptions. Generics account for the rest
• In 2012, the manufacturing portion of the sector employed 27 000 people and over the last 10 years employment has increased by 14 percent.
• The industry is clustered mainly 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.
• The industry is clustered mainly in the metropolitan areas of Montreal and Toronto.
• R&D costs per drug 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 (including 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). A generic drug may take 2 to 3 years and requires $3 to $10 million of R&D to develop and prove equivalency with original drug.

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Leading Companies

• In 2011, the top ten companies accounted for 54.4 percent of total Canadian pharmaceutical sales including both prescription and non-prescription medicines. (IMS Health Pharmafocus 2016)

Table 3: Leading Pharmaceutical Companies in Canada in 2011

Rank	Leading Companies	R&D Location in Canada	Total Purchases ($ billions)	Market Share (percent)
Source: Source: IMS Health Pharmafocus 2016
1	Johnson & Johnson	Toronto	1.75	7.9
2	AstraZeneca	Montreal	1.68	7.6
3	Pfizer	Montreal	1.57	7.1
4	Teva	Toronto	1.21	5.5
5	Apotex	Toronto	1.21	5.5
6	Merck	Montreal	1.11	5.0
7	Novartis	Toronto	0.98	4.4
8	GlaxoSmithKline	Toronto	0.93	4.2
9	Abbott	Montreal	0.88	4.0
10	Roche	Toronto	0.73	3.3

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R&D Activities

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Canadian Drug Sales

• From 2001 to 2011 total Canadian pharmaceutical sales doubled to $22.3 billion, with 89 percent sold to retail drug stores and 11 percent sold to hospitals. Government pays for 42 percent of drug expenditures and the private sector pays 58 percent (private coverage and individuals).
• Pharmaceuticals are a high growth sector in Canada, with domestic production valued at $10 billion in 2011, and a compound annual growth rate of 4.7 percent since 2001.
• Cross-border internet pharmacy sales between Canada and the U.S. grew rapidly from 2000 to 2003, but have since steadily declined to $99 million or 2 percent of total exports in 2011.

Table 5: Manufacturer's Sales of Patented and Non-Patented Drugs (2001 to 2010) (in $ billions)

Year	Patented	Non-Patented
Source: 2011PMPRB Annual report
2001	7.6	4.1
2002	8.9	4.3
2003	10.2	3.8
2004	11.0	4.2
2005	11.5	4.8
2006	12.0	5.7
2007	12.7	7.2
2008	13.0	7.1
2009	13.3	7.0
2010	12.9	9.3
2011	13.1	4.7

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International Trade

• From 2001 to 2011, pharmaceutical exports and imports between Canada and the rest of the world have increased by 250 percent and 130 percent respectively.
• Just over half of Canadian production is exported (primarily to the United States) and a significant portion of the Canadian market is supplied by foreign imports (29 percent from the U.S. and 57 percent from EU).

Table 6: Total Canadian Pharmaceutical Trade (2001 to 2011) (in $ billions)

Year	Domestic Exports	Imports	Trade Deficit
Source: Global Trade Atlas
2001	2.0	6.4	4.4
2002	2.1	7.3	5.2
2003	2.8	8.2	5.4
2004	3.6	8.6	5.2
2005	3.9	9.1	5.2
2006	5.0	10.4	5.7
2007	6.3	11.3	5.2
2008	6.0	11.6	5.6
2009	6.7	13.4	6.7
2010	5.1	12.2	7.1
2011	4.3	12.5	8.2

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Leading Products

• The top ten pharmaceutical products sold in Canada account for 15 percent of 2011 industry sales. Leading therapeutic categories are cardiovascular, neuro-therapies (anti-arthritics) and gastrointestinal.

Table 7: 2011 Leading Pharmaceutical Products in Canada

Rank	Leading Products	Therapeutic Subclass	Total Sales ($ millions)	2010 Growth (%)	Company
Source: IMS Brogan Canada
1	Crestor	Cholesterol Reducer	742.20	14.2	AstraZeneca
2	Remicade	Anti-arthritic	504.80	16.3	Schering
3	Plavix	Blood circulation	306.70	4.4	BMS
4	Humira	Anti-arthritic	301.90	22.4	Nycomed
5	Enbrel	Anti-arthritic	292.70	7.1	Amgen
6	Nexium	Stomach acid control	306.70	4.4	Astrazeneca
7	Lucentis	Ophthalmic Preps	238.00	33.8	Novartis
8	Oxycontin	Pain killer	234.00	2.1	Purdue
9	Lyrica	Seizure Disorders	206.00	14.0	Pfizer
10	Advair	Asthma Therapy	202.90	2.9	Abbott

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Health Expenditures on Drugs

• Pharmaceuticals are an important component of health care, representing a forecasted 16 percent of total Canadian health expenditures in 2012 They are an increasingly important tool in healthcare (relative to surgery for example) and have become the second largest component of health care expenditures.
• Since 1992, the prices of pharmaceuticals have been increasing at a slower rate than inflation (Patented Medicine Price Index, Consumer Price Index).
• Analysis of price changes demonstrates considerable price variability between therapeutic classes, customer types (hospitals, pharmacy or wholesaler), and by provinces and territories.
• Since 1992, Canadian pharmaceutical prices have been on average lower than foreign countries.^{Footnote 1}

Footnotes

Footnote 1

The Patented Medicine Prices Review Board (PMPRB) conducts an international price comparison using seven foreign countries: France, Germany, Italy, Sweden, Switzerland, the United Kingdom and the United States.

Return to footnote 1 referrer