Canadians pay far less for prescription drugs than Americans do, but new drugs also take much longer to come to Canada.Chris Wattie/Reuters
David Clement is the North American affairs manager for the Consumer Choice Center.
As Canadians, we’ve long prided ourselves on the fact that prescription drugs cost us a fraction of what our American neighbours pay. But U.S. President Donald Trump’s revived “Most Favoured Nation” drug-pricing policy, announced in May, could upend this delicate balance.
The executive order aims to cap U.S. Medicare payments for drugs at the lowest prices paid by other developed countries, including Canada. While it promises relief for Americans burdened by sky-high costs, it also risks slowing global pharmaceutical innovation, delaying Canadians’ access to life-saving treatments and even driving up our own prices.
The United States accounts for 55 per cent of global research and development, or R&D, investment in the sector, according to a study published in the journal Nature Reviews Drug Discovery, dwarfing Europe’s 29 per cent and Asia-Pacific’s 15 per cent. In 2023, worldwide pharmaceutical R&D spending hit US$301-billion, with U.S. firms leading the charge by reinvesting an average of 19 per cent of net sales into research – far above the global average.
This investment fuels innovation: Approximately 40 per cent of the world’s drugs in clinical development originate from the U.S., and from 2010 to 2019, the U.S. Food and Drug Administration approved an average of 38 new drugs annually, peaking at 59 in 2018. In 2024 alone, the FDA greenlit 50 novel drugs, many for cancer, rare diseases and infectious threats. These aren’t just statistics – they’re the therapies that eventually make their way into the Canadian system, treating everything from Alzheimer’s to COVID variants.
Is it right that Americans are subsidizing medical innovation for the world, paying high prices for those drugs, while we get them cheaply? Probably not. But it does not change the facts: With the U.S. market funding the lion’s share of new drug development, reducing prices for Americans isn’t just a matter of U.S. domestic politics – it’s a potential crisis for Canadian patients.
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Mr. Trump’s MFN policy, by aligning U.S. prices with lower international rates, effectively imposes price controls on the world’s innovation engine. Studies have consistently shown the downfalls of such measures. A landmark analysis by economists Thomas A. Abbott and John Vernon found that slashing U.S. drug prices by 40 per cent to 50 per cent could reduce R&D projects by 30 per cent to 60 per cent. The Canadian Health Policy Institute (CHPI) reviewed 49 studies, with 44 showing a “significant negative relationship” between price controls and R&D investment or access to new medicines. Another report from the Information Technology and Innovation Foundation warns that revenue cuts from price caps could limit future drug discoveries, leading to fewer treatments worldwide.
Pharmaceutical R&D is a high-stakes gamble: According to Deloitte, developing a single drug costs an average of US$2.23-billion and takes more than a decade, with most candidates failing. U.S. profits – bolstered by prices an average of 2.78 times higher than in OECD countries such as Canada – fund this risk. Diminish those returns, and the global pipeline shrinks.
For Canadians, the fallout could be profound. We already pay far less; a 2023 survey reported Americans importing prescription drugs from Canada saved an average of US$4,920 annually. But this bargain comes with delays. New drugs reach Canadian patients more than 450 days later than Americans, on average, because of slower submissions and approvals. From 2018 to 2023, the total wait from global application to public formulary listing averaged 1,476 days in Canada – more than double the 530 days in the U.S., according to CHPI. If MFN curbs U.S. innovation, these gaps widen: Fewer drugs enter development, meaning even longer waits or outright unavailability for Canadians battling chronic illnesses.
Worse, the policy might boomerang on our prices. Legal experts warn that if Canada is referenced for MFN benchmarks, pharma companies could hike Canadian list prices to protect U.S. revenues, eroding our affordability edge. Some estimates show the plan could cost drugmakers up to US$1-trillion over a decade, prompting market exits or reduced launches in low-price countries such as ours. In Austria and other price-capped markets, studies show fewer innovative drugs are launched, with patients suffering.
In order to avoid a global race to the bottom that would strangle R&D, Canada must either prepare for higher prices, or make R&D economically possible here. One way to do that is to implement reciprocal approvals, where drugs approved in peer countries are fast-tracked for approval by Health Canada, similar to what New Zealand has recently done. It is shortening the approval process to 30 days if a drug is already approved in two peer countries, and we should follow suit.
Mr. Trump’s MFN might soothe U.S. voters, but for Canadians, it’s a prescription for stagnation if we fail to act.