The U.S. is trying to raise pharmaceutical prices in Canada

The U.S. has by far the highest prices for patented drugs in the industrialized world. A report by the Rand Corporation concluded that U.S. prices are 2.78 above the average of the 33 industrialized countries in the Organization for Economic Cooperation and Development (OECD). The U.S. accounts for $800 million USD, or nearly 50 per cent of the $1.7 billion in global drug sales.

The drug industry claims that high U.S. prices (or possibly lower U.S. prices but higher international prices) are necessary to fund the research and development (R&D) that it undertakes because prices in other rich countries are too low. A senior executive at Johnson & Johnson justified a $10,000 per month cost of a prostate cancer drug by claiming that “The easy diseases have largely been solved. It gets harder and harder as we go after new treatments for ever more challenging diseases.” 

Donald Trump supports the argument that prices in other parts of the world are too low and need to rise in order to lower U.S. prices. Right-wing academics at the Becker Friedman Institute at the University of Chicago claim that a unilateral one per cent reduction in revenue from lower U.S. drug prices would lead to a 29-60 per cent reduction in R&D activity between 2021 to 2039 and 167-342 fewer new drugs during that period. 

However, a mountain of contrary evidence undercuts claims about the need for high U.S. prices. Between 2012 and 2021, the 14 U.S. pharmaceutical companies listed in the S&P 500 Index spent $660 billion on research and development, in addition to $377 billion on stock buybacks and $370 billion in dividends—totalling more than they spent on R&D. “U.S. pharmaceutical companies burden U.S. patients and taxpayers with high drug prices,” according to a study published by the Institute for New Economic Thinking, “so that, through massive distributions to shareholders, the senior executives who make these allocation decisions can boost the yields on the companies’ publicly traded shares.” 

A recent paper looked at 60 drugs the U.S. Food and Drug Administration (FDA) approved between January 1, 2009 and December 31, 2018 and found that R&D costs did not explain the variation in list prices for the 60 drugs in the sample. Finally, authors at the Brookings Institute investigated claims that the Inflation Reduction Act that mandated price negotiations on a limited number of drugs would dampen the outlook for future revenues from the sale of brand name prescription drugs. Lower revenues, in turn, would result in the lowering of R&D expenditures. They could not find any evidence to support this argument from the drug industry.

Measures to raise drug prices in other countries

Internationally, the U.S. has used threats to force countries to raise prices in order to allow U.S. companies to lower prices domestically. Such pressure tactics have become a key part of the Trump administration’s international agenda to reshape global trade relations. 

Take the United Kingdom as an example. The pharmaceutical industry is particularly important to the UK economy. The sector directly employs about 125,000 people, contributes roughly £20.4 billion in gross value added, spends £9.3 billion on R&D and exports over £5 billion annually in drug products to the United States. Drug companies have taken advantage of their position to pressure the UK government into getting favourable deals for drug prices from the UK’s National Health Service (NHS). 

According to a report in the Guardian “Merck has scrapped a £1bn research facility, while AstraZeneca ditched a £450m vaccine lab and is rethinking an expansion of another research unit. Bristol Myers Squibb (BMS) has cancelled 34 partnerships with the NHS in the last year, and Eli Lilly, Sanofi and Novartis are all believed to have put investments ‘on hold’. BMS is also threatening to play hardball with its new schizophrenia drug, saying it is ‘prepared to make the difficult decision’ to ‘walk away’ if the NHS won’t pay the price the corporation wants to charge.” 

That company pressure is backed by the foreign policy apparatus of the U.S. government. In order to avoid the imposition of tariffs on drug exports to the U.S., the British government agreed to a series of measures that will double spending on medicines as a proportion of the economy—from 0.3 per cent of GDP to at least 0.6 per cent by 2036 with a cumulative additional cost of £2.6 billion by the end of 2028 and £44.7 billion by the end of 2036. The estimate is that diverting health care spending away from other care areas will result in roughly 229,000 excess deaths.

In June 2026, the U.S. Trade Representative (USTR) initiated an investigation into whether pharmaceutical pricing policies in Germany were resulting in persistent underpayment for new medicines and thereby unfairly burdening U.S. commerce. Once again, the U.S. has threatened to impose tariffs if an agreement is not reached with the German government to raise prices. Towards the end of September 2026, the president of the European Parliament was urging Germany to reach a deal with the U.S. in order to resolve the dispute over drug pricing.

According to an article in the medical journal Lancet, “in March 2026, one company reported successfully leveraging the threat of most-favoured-nation pricing in the US to negotiate more favourable pricing in Japan and the market withdrawal of a product in Denmark was reported to be potentially associated with most-favoured-nation pricing concerns.”

To protect their high U.S. profit margins, major pharmaceutical companies (such as Sanofi, Roche, Novartis, and Bristol Myers Squibb) have actively pressured European governments to accept higher launch prices or have threatened to delay/withhold product rollouts in Europe.

What will happen in Canada?

Any analysis of the possibility of higher drug prices in Canada needs to take a number of factors into account. Canada already has the 5^th highest prices for patented drugs among 31 countries in the OECD and the 4^th highest per capita retail spending at $990 USD per year compared to an OECD average of $766 USD. About 1 in 20 people in Canada are not adhering to their prescribed medication because of the cost of drugs, potentially contributing to an exacerbation of ongoing health issues.

The Globe and Mail reported that Innovative Medicines Canada (IMC), the lobbying arm of the subsidiaries of the large multinational drug companies based in Canada, sponsored a survey of 31 drug companies. According to the survey, a total of 16 medicine launches had been cancelled in Canada because of U.S. policy related to international drug sales, but government statistics haven’t found any slowdown in the number of drugs that have applied to launch in Canada.

IMC itself does not directly argue for higher prices, but it advocates for “market access reforms” to keep Canada “competitive” compared to global peers. According to IMC, these reforms should include restoring the U.S. and Switzerland—the countries with the highest and third highest brand-name prices in the world—as international price references for use by the Patented Medicine Prices Review Board in determining if Canadian prices on new patented medicines are excessive. It also advocates for reviewing the health technology assessments from Canada’s Drug Agency that frequently recommend significant price reductions in exchange for a recommendation that drugs be publicly funded; as well as aligning Canada’s intellectual property protections to more closely align with those in the U.S. and Europe—which would prolong the period when brand-name drugs would be protected from cheaper generic alternatives.

All of IMC’s recommendations closely reflect the criticisms levelled at Canada in 2026 in the report from the USTR. The USTR report also criticized Canada for removing the U.S. and Switzerland from countries used to reference Canadian drug prices and wanted more aggressive action on intellectual property rights that would extend the time that drugs under patent are protected from generic competition. The agreement between IMC and the USTR strongly suggests that IMC would support any higher drug prices forced on Canada by the U.S. either as a result of unilateral action or as part of negotiations for a renewal of CUSMA should those negotiations restart.

In September 2025, Trump announced new tariffs on generic drug exports from all countries, including Canada, to the U.S. that will start at 100 per cent on August 1, 2028 and rise to 200 per cent a year later. These tariffs will affect up to $3 billion CAD in drug exports to the U.S. that rely on Canadian manufacturing, however they were not accompanied by any public demand to raise prices in Canada (or other countries). 

It is also possible that the U.S. could try and convince drug companies to limit exports to Canada, which totalled just under $5 billion CAD in 2023, if Canada does not raise drug prices. Whether drug companies would agree to this is unclear since it might also cost them sales in Canada which are about $43.5 billion CAD.

The U.S. has already forced other countries to accept higher drug prices under the illusion that this move will lower domestic U.S. prices and it seems determined to continue on this path. So far, these policies do not appear to have had a direct effect on Canadian prices but that may not continue to remain the case. Making drugs less affordable, especially for those lacking drug insurance, will have serious consequences for their health.

About the author

Joel Lexchin

Joel Lexchin has been researching an writting about a wide range of pharmaceutical policy issues both in Canada and internationally for over 40 years. He taught health policy at York University from 2001 to 2016 and worked as a doctor in the emergency department at the University Health Network in Toronto. He is a member of the board of the Canadian Health Coalition and formerly the board of Canadian Doctors for Medicare.