Canadian consumers are paying notably high prices for generic prescription drugs, the Competition Bureau says.

Generic drug manufacturersvying for shelf space in pharmacies often offer deep rebates to pharmacies as incentives but these savings are failing to reach consumers, a new study released Monday by the Competition Bureau suggests.

The watchdog undertook the study of the generic pharmaceutical industry, estimated to be worth about $3.2 billion in 2006, to assess why the non-brand-name drugs remain costly in comparison with other countries.

Consumers are continuing to pay high prices despite deals offered by manufacturers aiming to stay competitive, the federal agency said.

"Rebates provide an incentive for pharmacies to select a particular manufacturer's product," the Competition Bureau said in a release, noting that the rebates on average comprise 40 per cent of the invoice price for the drug.

"Rebates and allowances are not typically reflected in amounts paid for drugs by public or private drug plans, or out of pocket by consumers," the bureau said.

"Until recently, prices paid for generic drugs across the country tended to reflect the maximum generic drug prices allowed under Ontario's drug plan."

Ontario and Quebec are the only two provinces that don't allow drugmanufacturers to offer pharmacists rebates.

The Competition Bureau said it will continue to study the generic drug sector and will probe possible alternatives that would help lower generic drug prices.