Canadian pharmaceutical companies struggle to compete on the global market.Jacques Boissinot/The Canadian Press
Andrew Kemle is the government and external relations manager of the Graduate Students’ Association at the University of Calgary.
U.S. President Donald Trump’s Executive Order 14297 takes aim at “any act, policy, or practice that … has the effect of forcing American patients to pay for a disproportionate amount of global pharmaceutical research and development,” which includes “suppressing the price of pharmaceutical products below fair market value in foreign countries.”
This will likely have a big impact on Canada.
By bargaining for discounted drug prices through the Pan-Canadian Pharmaceutical Alliance, Canada allegedly isn’t paying its fair share of the research and development costs that go into manufacturing drugs. We are, apparently, “freeloading” off the U.S. pharmaceutical industry.
R&D costs have long been used by the pharmaceutical industry to argue that high drug prices in the United States are necessary, even though academic research suggests otherwise.
Pivoting Canada away from U.S. pharmaceutical companies is one way to mitigate the leverage Mr. Trump has over us, should drug prices become part of the trade war. Expanding our own pharmaceutical and biomedical fields would help, in addition to increasing the number of high-tech industries in Canada. But here, we run into a persistent problem: Canadian companies struggle to compete globally.
Trump demands drug companies lower prices in U.S. and raise them in other countries
Part of the problem is that our universities generate a lot of research, but the patents tend to be sold to foreign-owned companies. This forms the core of what has been termed “Canada’s patent productivity paradox”: the observation that our productivity growth is substantially lower than it should be given the number of patents produced by our universities.
Our universities co-operate extensively with U.S. pharmaceutical companies, which is a bit ironic given Mr. Trump’s insistence that we’re “freeloading.” But the downside to this is that Canadian companies have less freedom to innovate, according to a paper from the Centre for International Governance Innovation (CIGI), as foreign patent holders use university intellectual property (IP) to restrict the research activities of domestic businesses, such as those in the pharmaceutical industry.
To be clear, universities are simply partnering with companies that offer them the most money. Given how Higher Education Strategy Associates (HESA) has an entire tracker dedicated to quantifying how much money has been cut from postsecondary budgets, nobody should blame universities for doing this.
But if we need to build up a strong domestic pharmaceutical industry to help mitigate threats to our drug-pricing system, then our universities need to be incentivized to work with domestic companies. And it needs to be done in a way that doesn’t worsen the impact of protectionism, meaning governments can’t simply force universities to work with Canadian companies, and in a way that doesn’t further erode the operating budgets of universities.
One idea is to make it easier for universities to transfer intellectual property to university spinoffs (USOs), as argued in a paper from the University of Calgary’s School of Public Policy. USOs are local and maintain close ties with their parent universities. If they become an anchor tenant in a Canadian city and have easy access to university IP, then USOs should induce other local businesses to invest more in partnering with universities. A caveat here is that universities need to be well funded enough to part with their IP; the more constrained their budgets, the more likely they’ll sell to the highest bidder (including U.S. companies).
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Another option is to utilize graduate students. Graduate students are one of, if not the key driver in university-industry interactions. Using scholarships to incentivize graduate students to work with local businesses as part of their research duties should help increase the number of domestic pharmaceutical companies (indeed, and Canadian businesses of other types) that partner with universities. This is not only because graduate student research tends to be easier to commercialize, but because graduate students help connect faculty members with private industry too.
While a Canada-wide pharmacare system hasn’t yet materialized, Canadians still enjoy discounted drug prices relative to the United States. One study from 2022 found that pharmaceuticals cost Canadians about 44 per cent of what our neighbours to the south pay. Now, the threat to these prices has become very real.
Unlike many of Mr. Trump’s trade policies, his plan to up drug costs for countries like Canada seems to have the backing of U.S. businesses. The Pharmaceutical Research and Manufacturers of America (PhRMA), the U.S. Chamber of Commerce, and the National Association of Manufacturers are just some of the groups urging the President to use tariffs to punish “freeloaders,” Canada included.
Lower drug prices help save lives. Our universities might hold the key to protecting our pricing system from Mr. Trump’s overtures.