Americans have grown tired of subsidizing Canadian access to innovative medications. In May 2026, former President Donald Trump signed an executive order targeting the disparity between U.S. drug prices and those in other nations, where prices are significantly lower.
Canada's Underpayment for Medicines
Canadians consumed $46 billion worth of innovative medicines in 2023 but covered only 43 percent of the cost, leaving Americans to foot the remaining bill. This imbalance has persisted because the United States was the only major country that did not regulate patented drug prices, effectively funding global pharmaceutical innovation through higher market prices.
The Executive Order's Impact
The order instructs the U.S. Trade Representative to ensure foreign countries are not forcing American patients to pay a disproportionate share of global research and development costs. It now requires manufacturers to sell new prescription drugs at the lowest price available in a select group of reference countries. Since the U.S. market accounts for half of all patented drug purchases, this will dramatically reduce global industry revenues.
Drug companies may respond by keeping prices higher in reference countries to avoid lowering U.S. prices further, but American consumers will still pay less than before. Alternatively, firms may choose not to launch new drugs in low-price markets like Canada, reducing access to new medicines.
Potential Cost to Canada
Following the order, the United Kingdom agreed to double spending on new medicines, increase the National Health Service's drug budget share, and raise net prices for new drugs by 25 percent. A similar agreement with Canada could require significant additional spending. In a recent analysis of 87 top-selling new drugs across 14 high-income countries, the average price difference between the multi-country average and Canadian prices was used to estimate Canada's fair share.
If Canada were to pay its fair share, the cost would depend on how much more it would need to spend. The exact figure remains unclear, but the era of free-riding is ending.
