Health systems around the world are increasingly negotiating secret price rebates from pharmaceutical companies, and Canada risks losing out on these deals, new research warns.

For the study, which is published in the April issue of the journal Health Affairs, researchers interviewed policymakers from nine developed countries and analysed practices for securing confidential rebates from pharmaceutical manufacturers. 

They report that almost all of the countries are now routinely negotiating rebates from drug companies as a condition of coverage under their health care systems, and that manufacturers are promoting these rebates because the associated confidentiality clause ensures that deals struck in one country do not set a precedent in others.

"The pricing of medicines is now a game of negotiation, similar to buying a car at a dealership," comments study co-author Steve Morgan, of the Centre for Health Service and Policy Research at the University of British Columbia (UCB).

"There's a list price equivalent to a manufacturer's suggested retail price, and then there's secret deals that everyone negotiates from there," he says.

Of the nine countries surveyed - Australia, Austria, Canada, Germany, Italy, the Netherlands, New Zealand, UK and the US - Canada has the second-highest level of spending on medicines and the second-highest prices for top-selling drugs, behind the US.

Countries with multi-payer health care systems, such as the US and Canada, have less bargaining power in these negotiations, while New Zealand, despite its relatively small population, is able to leverage its universal public drug plan to negotiate rebates for all covered medicines, the report finds.

Most countries that have tried performance-based rebate schemes have found them difficult to enforce; governments should strive to keep pharmaceutical rebates relatively simple, the authors recommend. They also emphasise that decision-making systems must be well-designed to ensure that drug plans do not lose control in negotiations with manufacturer, and that process transparency is essential because the negotiated price will always remain secret.

They go on to warn that, after "Obamacare" expands health insurance to all Americans in 2014, Canada may be the nation which is least capable of effectively managing this new pricing regime. Canada is the only country in the world with universal coverage for medical and hospital care but not for prescription drugs. Individual provinces and insurers negotiate drug prices independently, although some provinces are working cooperatively to lower prices, they point out.

"The Canadian system is fundamentally flawed. Ironically, the smaller provinces and uninsured Canadians will end up paying the highest out-of-pocket costs for their medicines," adds Dr Morgan, who is also an expert adviser with

Also, writing recently in the Huffington Post, Dr Morgan points out that New Zealand's single payer for pharmaceuticals negotiates brand-name drug prices that are around 40% lower than those in Canada and that even the UK, which has a high concentration of pharmaceutical sector investment, pays 18% less than Canada for patented drugs.

"If we had UK prices for those drugs here, we would save C$3 billion per year on the nearly C$17 billion we pay for patented medicines," he writes.

In addition, he says, while the recent announcement by Canadian provinces that they will work together to limit the prices of six top-selling generics drugs to just 18% of brand-name drug prices in Canada would save governments around C$100 million, the prices agreed by the provinces are still about 10 times higher than those achieved by single-payer systems in countries such as New Zealand.

"Savings on that order applied to the roughly C$6 billion we spend on generic drugs would reduce drug costs in Canada by C$4 billion per year," says Dr Morgan.