Government intervention in Canada's prescription drug market is failing to make medicines more affordable for consumers, says a new report.

Canadian health policies are based on the assumption that many people won't be able to afford prescription drugs unless government regulates the market and controls prices. But personal drug costs in the US are just as affordable, on average, as in Canada, and the US has a freer and more competitive market than Canada, according to the report's co-author Mark Rovere, associate director of health policy studies at the Canadian free-market think tank the Fraser Institute, which has published the report.

The Canadian government intervenes in the market through regulation, price controls and public drug insurance programmes, but, says Mr Rovere: "the evidence shows that affordability is not a valid justification for broad-based government intervention in prescription drug markets, and that means the public cost of supporting this government intervention is basically wasted money."

To measure affordability, the report examines per capita spending on prescription drugs by both Canadians and Americans as a percentage of per capita Gross Domestic Product (GDP), and as a percentage of per capita after-tax income for 2010.

The results indicate that both Canadians and Americans are spending nearly the same percentage of their per capita GDP on prescription drugs, at 1.6% in Canada  compared to 1.8% in the US. As a percentage of after-tax income, per capita spending on prescription drugs also nearly the same, totaling 2.5% of per capita personal disposable income in Canada against 2.3% in the US.

The report also found that the number of prescriptions dispensed per person was nearly the same in both nations last year, averaging 14.9 prescriptions in Canada and 12.9 in the US.

Personal affordability of prescription drug spending is virtually identical between the two nations for two main reasons, the report concludes. First, per capita US incomes are higher than in Canada, especially after taxes, which helps to make personal drug spending a smaller percentage of income for Americans. Second, Canadian consumers pay more than twice the amount that those in the US pay for identical generic drugs.

"High prices for generic prescription drugs offset any potential cost-savings consumers enjoy from lower brand-name drug prices in Canada," said Mr Rovere. "Americans also tend to substitute lower-priced drugs for higher-priced versions more often than Canadians," he added.

A study which Mr Rovere co-authored last year found that average retail prices for generic drugs in Canada were 73% of of theorise of their brand-name equivalents, compared with just 17% of the price of their brand-name equivalents in the US, the Institute notes.