In a surprising twist, U.S. President Donald Trump's push for higher drug prices in Canada might not be entirely detrimental, according to a recent opinion piece. The argument centers on the potential benefits of increased access to life-saving medications, even if they come at a higher cost.
The Most-Favoured-Nation Drug Pricing Plan
Last year, Trump introduced the most-favoured-nation (MFN) drug pricing policy for the United States. This policy aims to lower drug prices for Americans while raising them in countries like Canada. Under the MFN plan, U.S. prices for brand-name medicines will be based on prices in eight reference countries, including Canada, Denmark, France, Germany, Italy, Japan, Switzerland, and the United Kingdom. Drug manufacturers must report confidential discounted prices in these countries, and the U.S. price will be set equal to the second lowest, adjusted for GDP per capita.
Tariffs as a Leverage Tool
Trump is also employing tariffs to pressure drug companies to reinvest in research and development within the United States. Starting in August, a 100% tariff will be imposed on pharmaceuticals and their ingredients imported into the U.S. However, companies that commit to reshoring will pay only 20% during construction of new U.S. facilities, with the rate reverting to 100% in April 2030. Those that also agree to MFN pricing will pay no tariff during construction. So far, 17 major companies have committed to both reshoring and MFN pricing.
Impact on Drug Access in Canada
In light of these policies, drug developers are reassessing how they market medicines in countries with lower prices, including Canada. Some companies are deciding to delay or not launch new drugs in certain markets, preferring to lose entire markets rather than agree to low prices that would damage their U.S. revenue. Others warn they will cut R&D in Europe unless governments increase their willingness to pay.
Canada's Drug Pricing System
All eight MFN reference countries evaluate the value-for-money of new medicines. In Canada, the Canada's Drug Agency (CDA) evaluates new medicines for all provincial drug plans except Quebec's. Recent CDA reimbursement recommendations have almost all been conditional on clinical criteria and/or a price cut, often expressed as a specific percentage reduction to reach an arbitrary value-for-money benchmark. In the past five years, more than half of CDA's recommended price reductions were 73% or higher. Another quasi-governmental agency uses CDA's recommendations in its drug price negotiations with manufacturers to keep prices low.
Potential Consequences for Canadians
Because negotiated prices remain confidential, it is unclear how Canadian prices compare with those in other MFN reference countries. Given the steep reductions CDA usually recommends, it is reasonable to assume Canadian prices are at the lower end. If so, this could force a reduction in companies' U.S. prices, leading them to delay bringing drugs to Canada or not launching them at all. This could ultimately result in both less and slower access to life-saving new medicines for Canadians.
