The most recent annual report by the Patented Medicines Price Review Board – Canada’s drug price regulator – said U.S. list prices were about 3.6 times higher than in Canada, and four times higher than the average of developed nations.Nam Y. Huh/The Associated Press
U.S. President Donald Trump has repeatedly mentioned pharmaceuticals as another industry that could be targeted by tariffs, but such measures would do little to lower drug prices south of the border, according to experts and reports from Congress and antitrust enforcers.
Mr. Trump told reporters in the Oval Office on Friday that he was eyeing tariffs on “all forms of medicine and pharmaceuticals” in the coming weeks, singling out the industry along with steel and semiconductors.
On Sunday, the day after announcing tariffs on Canada and Mexico would start Tuesday – levies that have since been paused for 30 days – Mr. Trump posted on social media that the U.S. was subsidizing other countries by “trillions of dollars” and asked: “Why should these other countries pay a small fraction of the cost of what USA citizens pay for Drugs and Pharmaceuticals, as an example?”
The United States does have the highest drug prices in the world by far. The most recent annual report by the Patented Medicines Price Review Board – Canada’s drug price regulator – said U.S. list prices were about 3.6 times higher than in Canada, and four times higher than the average of developed nations. (The report put Canada at number four in the world in 2023, behind the U.S., Mexico and Switzerland.)
Part of the reason for high prices is that pharmaceuticals under patent have enormous leverage to charge whatever the market will bear. For example, a life-changing cystic fibrosis treatment called Trikafta that was approved by the FDA in 2019 can cost up to $300,000 per patient per year, while the manufacturing cost for a year’s supply is only about US$6,000, according to a scholarly analysis. It is produced by an American company, Vertex Pharmaceuticals.
High drug prices have become an increasingly big political issue in the U.S., leading to bipartisan Congressional studies and investigations by the Federal Trade Commission. Florida even received special permission from the U.S. Food and Drug Administration last year to import drugs from Canada because of the price. (The Florida governor’s office did not respond to recent questions from The Globe and Mail about whether it has imported any drugs.)
But where a drug is manufactured has not come up as a reason for high prices. Instead, investigations have consistently zeroed in on market dynamics internal to the U.S. The FTC filed a lawsuit last year against a group of industry middlemen called “pharmacy benefit managers,” which it argued had used their control of insurance formularies to extract lucrative kickbacks. For example, it blamed those companies for helping drive the price of an insulin drug up by more than 1,200 per cent over an 18-year period.
Matthew Herder, director of Dalhousie University’s Health Justice Institute, said Mr. Trump’s comments suggested the U.S. was somehow subsidizing drugs in other countries, when instead lower drug prices elsewhere reflected that other countries had more mechanisms in place to counter high prices.
For example, in Canada the drug price regulator can order a price reduction for medicines found to have “excess” prices. As well, all provincial and federal public insurance plans – which control about 40 per cent of drug purchasing – negotiate prices as a group, which allows them to contain costs.
The U.S. “is the most lucrative market in the world because of the absence of those kinds of constraints,” Mr. Herder said.
For that reason, he was skeptical that tariffs would bring down drug prices in the U.S. – although it could possibly fulfill one of Mr. Trump’s other political goals, which is to bring more manufacturing to that country.
Cate Murray, president and chief executive officer of the Stem Cell Network, a not-for-profit that works with pharmaceutical researchers, said her sector is worried that U.S. drugmakers could pull out of Canada if the tariffs are imposed next month.
“For some of those American companies that are manufacturing here, that are doing R&D here, there’s big concern about whether they’re going to be able to continue to do that,” she said.
The proposed tariffs are not expected to raise prices of pharmaceuticals in Canada, as they were not on the list of products outlined in the federal government’s list of potential retaliatory tariffs on Saturday.
Makers of medical devices are also watching trade talks carefully. Almost three-quarters of medical-device exports go to the U.S., according to industry group MedTech Canada.
Ohad Arazi, president and chief executive officer of Clarius Mobile Health, which makes handheld ultrasound scanners, said he hopes the tariff threat is a wakeup call for Canada’s health sector to support more domestic procurement.
“It’s sad, but most medtech entrepreneurs will tell you that they build their business by going to the U.S. first because it’s so difficult to sell into Canada,” he said.
He said it is too bad because, as his company has worked to sell into markets in Asia, Latin America and Europe, he has found a receptive audience for his products.
“I’d say in these regions there is a real hunger to adopt Canadian health care technologies, actually. Canada has a very strong brand for quality of care.”