What limits the price increase of existing patented drugs in Canada?

The price increase of existing patented drugs in Canada is primarily limited by the consumer price index (CPI). This is because the CPI is used as a measure to account for inflation in the economy and reflects the average change over time in the prices paid by consumers for goods and services, including pharmaceuticals.

Regulatory bodies, such as the Patented Medicine Prices Review Board (PMPRB), utilize the CPI as a benchmark to ensure that the price increases of patented medications do not exceed the rate of inflation. This helps to control and regulate the costs associated with prescription drugs to prevent excessive price gouging and ensure that medications remain accessible to patients. The mechanism is designed to promote fairness in pricing for both consumers and manufacturers while allowing companies a reasonable return on their investments.

The other options, while relevant to the discussion of drug pricing, do not play as direct a role in limiting price increases as the CPI does. The general inflation rate provides a broader measure, but the CPI is more specifically aligned with consumer experiences and spending patterns. The average cost of production focuses on the manufacturing side but does not regulate pricing directly, and the price of generic alternatives influences market dynamics but is not a formal limit on the pricing of existing patented drugs.