How Drug Prices Are Set in Canada: PMPRB Explained

Who Decides What Drugs Cost in Canada?

If you have ever wondered why a prescription drug costs what it does, the answer involves a complex chain of regulators, negotiators, and market forces. At the top of that chain sits the Patented Medicine Prices Review Board (PMPRB) — Canada's federal watchdog for drug pricing.

Understanding the PMPRB helps explain why Canadian drug prices are lower than the United States but higher than many European countries.

What Is the PMPRB?

The PMPRB is an independent federal body established in 1987 under the Patent Act. Its mandate is to ensure that prices of patented medicines sold in Canada are not excessive.

Key Facts

Important distinction: The PMPRB sets a ceiling price — the maximum a manufacturer can charge. It does not set the actual retail price you pay at the pharmacy. Pharmacy markups, dispensing fees, and provincial negotiations determine your final cost.

How the PMPRB Sets Price Ceilings

The Comparison Countries

The PMPRB compares Canadian drug prices to a basket of reference countries. Following reforms, the current reference countries include:

• Australia
• Belgium
• France
• Germany
• Italy
• Japan
• Netherlands
• Norway
• South Korea
• Spain
• Sweden
• United Kingdom

These countries were chosen because they have comparable income levels and drug regulatory systems. Notably, the United States is no longer in the reference basket — a deliberate move to bring Canadian prices down.

The Pricing Tests

When a new patented drug enters the Canadian market, the PMPRB applies a series of tests:

International Price Comparison — the Canadian price must not exceed the median of prices in the reference countries

Pharmacoeconomic Value Assessment — for high-cost drugs, the PMPRB considers whether the price reflects the drug's clinical value

Annual Price Increases — existing drugs cannot increase in price faster than the rate of inflation (measured by CPI)

What Happens After the PMPRB Sets the Ceiling?

The PMPRB ceiling is just the starting point. Here is the full chain:

Manufacturer → PMPRB Ceiling → pCPA Negotiation → Provincial Listing → Pharmacy Price

Manufacturer proposes a price

PMPRB ensures it is not excessive (sets the ceiling)

Pan-Canadian Pharmaceutical Alliance (pCPA) negotiates a lower price on behalf of public drug plans

Provincial formularies list the drug at the negotiated price

Pharmacies add their markup and dispensing fee

The price you see at the pharmacy is the result of all these layers. That is why comparing pharmacy prices matters — the same drug at the same manufacturer price can cost you very different amounts at different pharmacies due to varying markups and dispensing fees.

Recent PMPRB Reforms

The PMPRB has undergone significant reform in recent years, including:

• Removing the US and Switzerland from the reference country basket (they had the highest prices globally)
• Adding more affordable countries to push Canadian prices lower
• Introducing pharmacoeconomic factors — drugs must demonstrate value, not just international price parity
• Requiring rebate and discount transparency from manufacturers

These reforms are expected to save Canada's health system billions of dollars over the next decade, though some critics worry they could delay new drug launches in Canada.

What the PMPRB Does Not Control

It is important to understand the limits of the PMPRB:

• Generic drug prices — regulated by provincial governments, not the PMPRB
• Dispensing fees — set by individual pharmacies (and sometimes capped by provinces)
• Private insurance markups — your insurer negotiates its own pricing
• Over-the-counter drugs — not under PMPRB jurisdiction

What This Means for You

Even though you cannot control the PMPRB ceiling price, you can control what you pay at the pharmacy level:

• Choose generic drugs when available — they are priced well below patented equivalents
• Compare pharmacy prices — use TransparentMedz to see real price differences in your area
• Understand your provincial formulary — drugs negotiated by the pCPA are often significantly cheaper than list price

The PMPRB ensures Canadians are not paying outrageously inflated prices, but the final cost at the counter is shaped by many factors. Being an informed consumer is your best defence against overpaying.