Canada’s pharmaceutical sector

The pharmaceutical sector is one of the most innovative industries in Canada. It is composed of companies developing and manufacturing innovative medicines and generic pharmaceuticals, as well as over the counter drug products. The sector is made up of a number of sub-sectors that service different market segments, these include brand-name pharmaceuticals companies, generic drug firms, biopharmaceutical small and medium sized enterprises (biopharmaceutical SMEs), and contract service providers (CSPs).

Size and structure of the industry

  • Pharmaceutical sales in Canada have a 2.5 percent share of the global market, making Canada the 9th largest world market. Since 2009, compound annual growth has slowed to 0.4 percent (IMS Health Pharmafocus 2018).
  • Companies undertake research and development (R&D) to develop new or improved patented therapies, while others develop bio-equivalent copies of innovative drugs once patents expire. An emerging field of biologics and subsequent entry biologics (SEBs) is also taking shape.
  • Brand-name products account for 77 percent of Canadian sales and 34 percent of prescriptions. Generics account for the rest.
  • In 2014, the manufacturing portion of the sector employed 26,300 people and over the last 5 years employment has fallen by 6.3 percent.
  • The industry is clustered mainly in the metropolitan areas of Vancouver, Montreal and Toronto.
Table 1: Yearly Employment in Manufacturing Portion of Pharmaceutical Sector
Year Employment
Source: Statistics Canada, Monthly Labour Force Survey, CANSIM table 281-0023, Yearly employment is 12 month trailing average from July 2014.
2005 27,923
2006 29,935
2007 29,379
2008 28,635
2009 28,563
2010 28,059
2011 26,288
2012 26,974
2013 27,022
2014 26,301

Canadian drug sales

  • From 2001 to 2013, total pharmaceutical sales (including non-patented over the counter medicines) in Canada have almost doubled to $22 billion, with 89 percent sold to retail drug stores and 11 percent sold to hospitals. Governments account for 42 percent of drug expenditures and private payers the remaining 58 percent (private coverage and individuals).
  • Annual domestic pharmaceutical manufacturing production is valued at $7.7 billion as of August 2014 with a declining compound annual growth rate of 2.5 percent since 2008 (Statistics Canada CANSIM table 304-0014).
  • Cross-border internet pharmacy sales between Canada and the U.S. grew rapidly from 2000 to 2003, but have since steadily declined to $105 million or 2 percent of total exports in 2013.
Table 2: Canadian Manufacturer’s Sales of Patented and Non-Patented Drugs from 2004 to 2013 (Sales in $ billions)
Year Patented Non-Patented Total
Source: 2013 PMPRB Annual ReportFootnote1
2004 11.0 4.2 15.2
2005 11.5 4.8 16.3
2006 11.9 5.7 17.6
2007 12.3 7.2 19.5
2008 12.6 7.8 20.4
2009 12.9 8.9 21.8
2010 12.4 9.7 22.1
2011 12.9 8.7 21.6
2012 12.8 8.8 21.6
2013 13.6 8.4 22.0

R&D activities

  • Total business expenditures on R&DFootnote2 by Canadian pharmaceutical companies has fallen below $1 billion since 2011. From 2001 to 2013, industry R&D spending has fallen by 29 percent.
  • However, the industry’s changing business model means more R&DFootnote2 is being conducted externally and through partnerships. This includes investments in SMEs, venture funds and work with Canada’s growing CSP sector. A recent survey by Rx&DFootnote3 and KPMG highlights many of these new investments, indicating additional R&DFootnote4expenditures of $247M in 2013.
  • The pharmaceutical industry is second after the Information Technology (IT) sector in R&D intensity. Twenty pharmaceutical and biotechnology companies are listed in Research Infosource’s Top 100 Corporate R&D Spenders 2014 in Canada.
  • R&D costs per drug averaged US$605 million 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 significantly. 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.
Table 3: Total Canadian Pharmaceutique Business R&DFootnote1Expenditures (2004 to 2013)
Year Expenditure (in $ billions)
Source: 2013 PMPRB Annual Report
2004 1.17
2005 1.23
2006 1.21
2007 1.33
2008 1.31
2009 1.27
2010 1.18
2011 0.99
2012 0.89
2013 0.75
Table 4: 2013 Distribution of Canadian  Business R&D Expenditures By Region
Region R&D Distribution (%)
Source: 2013 PMPRB Annual Report
Ontario 44.1
Quebec 40.0
West 13.1
Maritimes 2.8

International trade

  • From 2001 to 2013, pharmaceutical exports and imports between Canada and the rest of the world increased by 155 percent and 96 percent respectively.
  • More than half of Canadian production is exported (primarily to the United States) and a significant portion (62.3%) of the Canadian market is supplied by foreign imports (33 percent of imports from the U.S. and 43 percent from EU).
Table 5: Total Canadian Pharmaceutical Trade (2004 to 2013) (in $ billions)
Year Domestic Exports Imports Trade Deficit
Source: Statistics Canada, Industry Canada Trade data online
2004 3.7 9.6 5.5
2005 3.9 10.0 5.7
2006 5.1 11.4 5.9
2007 6.5 12.3 5.5
2008 6.5 12.7 5.9
2009 7.2 14.5 7.0
2010 5.7 13.3 7.2
2011 4.9 13.5 7.7
2012 5.2 13.5 8.0
2013 5.6 13.7 8.1

Leading companies

  • In 2013 the top ten pharmaceutical companies accounted for half of total Canadian pharmaceutical sales including both prescription and non-prescription medicines. (IMS Health Pharmafocus 2018)
Table 6: Leading Pharmaceutical Companies in Canada in 2013
Rank Leading Companies Total Sales
($ billions)
Market Share (%)
Source: IMS Health Pharmafocus 2018
1 Johnson & Johnson 2.13 9.6
2 Pfizer 1.45 6.5
3 Apotex 1.19 5.4
4 Merck 1.17 5.3
5 Novartis 1.13 5.1
6 Teva 0.97 4.4
7 GlaxoSmithKline 0.91 4.1
8 Roche 0.80 3.6
9 Pharmascience 0.77 3.5
10 AstraZeneca 0.77 3.4

Source: www.ic.gc.ca/eic/site/lsg-pdsv.nsf/eng/h_hn01703.html

 

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