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Canada's Hidden Pharma Potential

Canada Posted on: 06 Apr 06
Canada's Hidden Pharma Potential

Summary

Given its proximity to the huge US market, Canada is often overlooked with respect to its contribution to the pharmaceutical sector. Yet it is a well-established market in which all the major players are active and it has a vibrant R&D environment, both for traditional pharmaceutical companies and emerging biotech companies.

Given its proximity to the huge US market, Canada is often overlooked with respect to its contribution to the pharmaceutical sector. Yet it is a well-established market in which all the major players are active and it has a vibrant R&D environment, both for traditional pharmaceutical companies and emerging biotech companies.


 


Regional benefits


Canada’s position next to the US automatically confers certain advantages on it as an investment location and this has attracted a host of technology-based industries, including the pharmaceutical industry. The two countries have one of the world’s largest trading partnerships, with two-way trade accounting for more than US$500 billion in 2002.


 


These potential trading advantages have led to a number of North American-based companies integrating aspects of their Canadian and US operations into an almost seamless structure (1). In particular, pharmaceutical companies have benefited by being able to treat North America as a more unified market, even though the healthcare systems and pharmaceutical pricing environments are different. The trade conditions have enabled pharmaceutical companies to source materials necessary for drug manufacturing in an easier fashion and in some cases combine business units that would have previously existed to serve each market in their own right (2). As a result of NAFTA, between 1992 and 2002, US pharmaceutical companies increased their exports to Canada by 153% (2). Over a similar period Canadian pharmaceutical exports to the US market are estimated to have risen by 487% (2). In 2004, Canada imported around half of its pharmaceuticals from the US, and 81% of Canadian pharmaceutical exports went to the US (2).


 


The pharmaceutical market


The Canadian pharmaceutical market is one of the top ten global markets, and is experiencing double-digit annual growth (3). However, it only represents around 2% of the global pharmaceutical market and so is overshadowed by the huge US market when discussed in the media (3, 4). Nevertheless, the Canadian pharmaceutical market’s continuing growth has benefited companies operating here. For example, for the year ending November 2005, retail pharmacy drug sales in Canada were 15-fold less than those in the US market, but the annual growth rate in Canada (15%) was higher than that in the US (4%) (5). Furthermore, in absolute value terms, Canada’s retail pharmacy drug sales were higher than those in Spain, which is a major European pharmaceutical market (5). Therefore when examining the pharmaceutical prospects for Canada, it is important to evaluate the market in its own right and not be over-influenced by comparisons with the US market.


 


Pharmaceuticals already play a great role in improving the quality of life for the elderly and so there is the potential for companies working in the appropriate therapeutic areas to expand their sales. The top three therapeutic classes in the Canadian pharmaceutical market are cardiovascular, central nervous system and alimentary/metabolism and it is likely that demand from elderly patients for medicines in these areas is contributing substantially to sales. As the popularity of these three therapeutic classes is generally in line with those of other major global markets (US, Europe and Japan) there is potential for companies active in foreign markets to sell their products in Canada. However, in the current cost-conscious consumer environment they will be under pressure to justify their prices if they are to benefit. Furthermore the government will be keen to examine cost containment options in order to maintain control of its healthcare spending.


 


Outlook


Canada remains a promising environment for companies in the pharmaceutical and biotech sectors, possessing all the necessary ingredients in terms of business conditions and staff availability to foster research innovation. Yet, as in other countries, companies are finding that the public and media are closely watching their commercial activities and critically evaluating their role in healthcare provision. However, medical advances will depend on pharmaceutical and biotech companies and so the government must strike the right balance in controlling healthcare expenditure to the satisfaction of the public and yet promoting R&D innovation by companies.


 


References


 



  1. Anon (2004). CEO’s Guide to World Business Costs. Invest in Canada. http://www.investincanada.gc.ca

  2. Anon (2004). NAFTA: Ten years later. US Department of Commerce, International Trade Administration, Office of Industry Trade Policy. http://www.ita.doc.gov/td/industry/otea/nafta/Pharmaceuticals.pdf

  3. Anon (2005). The Pharmaceutical Industry. Invest in Canada. http://www.investincanada.gc.ca

  4. Anon (2005). IMS Reports 2004 Global Pharmaceutical Sales Grew 7 Percent to $550 Billion. IMS Health Press Release. 9 March 2005. http://www.imshealth.com/ims/portal/front/articleC/0,2777,6599_3665_71496463,00.html

  5. Anon (2005). IMS Reports 5% Growth in Retail Pharmacy Drug Sales for the 12 Months to November 2005. IMS Health. http://www.imshealth.com/ims/portal/front/articleC/0,2777,6025_73052811_76875215,00.html

Dr Faiz Kermani

Last updated on: 27/08/2010 11:40:18

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