Only a small amount of pharmaceuticals consumed in the U.S. are fully produced there with a recent analysis showing 12 per cent of active ingredients made there.Nam Y. Huh/The Associated Press
The Canadian pharmaceutical industry is bracing for headwinds from the U.S., as President Donald Trump floats 200-per-cent tariffs on the sector and readies a controversial pricing scheme.
Pharmaceuticals have been a frequent target of Mr. Trump’s ire, and he has signed multiple executive orders targeting the industry. Unlike metals such as steel and aluminum, however, he has not actually instituted any tariffs yet.
On Tuesday, Mr. Trump said pharmaceutical tariffs were going to be “at a very, very high rate, like 200 per cent,” but he was “going to give people about a year, a year-and-a-half” to move production into the U.S. to avoid the levies.
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That would be challenging for the industry, as only a small amount of pharmaceuticals consumed in the U.S. are fully produced there. A recent analysis published by U.S. Pharmacopeia showed 12 per cent of the active ingredients in pharmaceuticals consumed in the U.S. were made there.
Meanwhile, 32 per cent came from India, 20 per cent from the European Union and eight per cent from China, the analysis found. Canadian drugmakers are a smaller portion, but exported about $7-billion of pharmaceutical products to the U.S. last year.
As well, the pharmaceutical industry is dealing with an executive order Mr. Trump signed in May. The order contained direction to Health Secretary Robert F. Kennedy Jr. to, within 30 days, “communicate most-favored-nation price targets to pharmaceutical manufacturers to bring prices for American patients in line with comparably developed nations.”
The U.S. has the highest drug prices in the world, with the average list price more than three times higher than Canada’s. The goal of the most-favoured-nation policy, the Trump administration says, is for manufacturers to lower U.S. prices to match the discounts they are giving to other countries.
Most industry experts attribute the cost differences to the fact that the U.S. does not have price controls on medications, like other countries do. For example, Canada has a federal regulator, the Patented Medicine Price Review Board, which can intervene against “excessive” prices, and a non-profit, the pan-Canadian Pharmaceutical Alliance, that negotiates discounts on behalf of federal and provincial public health plans.
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A spokesperson for the Pharmaceutical Research and Manufacturers of America, the main lobby group for drugmakers, could not say if any of the targets mentioned in the executive order have been communicated yet.
But PhRMA has come out strongly against the pricing policy, arguing that the problem isn’t high U.S. prices, but low prices elsewhere.
“We must reject foreign price control models that ration care and suppress innovation,” president Stephen Ubl said in a statement.
Innovative Medicines Canada, which represents drugmakers in this country, said the order should “invite reflection” on domestic policies.
“While key details around implementation remain unclear, the United States has signalled a growing expectation that other countries contribute more meaningfully to the costs of pharmaceutical innovation,” said Erin Polka, IMC’s senior director of communications, in a statement.
The uncertainty around tariffs and what pharmaceutical companies can charge for their products is causing a chill in the industry.
Cheryl Reicin, partner and international chair of life sciences at Mintz LLP, said that, because “the devil will be in the details,” her clients are not making any decisions yet.
“There are more questions than answers now,” she said, such as what parts need to be manufactured in the U.S. and how much to escape tariffs. As well, whether the 200-per-cent figure Mr. Trump floated this week could be lowered to something more manageable.
“I have whiplash from all the daily tariff changes,” she said.