For many years, American consumers have faced significantly higher drug prices compared to their Canadian counterparts, a disparity that has fueled debates over healthcare costs and accessibility. However, a new policy initiative from U.S. President Donald Trump threatens to reshape this dynamic, with potential repercussions that extend far beyond U.S. borders. In 2025, Trump announced plans to implement a "Most Favoured Nation" (MFN) drug pricing system, aiming to cap Medicare payments at the lowest prices paid by other developed nations, possibly including Canada.
The Impact on Pharmaceutical Innovation
While this move might appear beneficial for American patients seeking relief from high costs, it carries substantial risks for global pharmaceutical innovation. The United States has long been a primary driver of research and development in the drug industry, with U.S. consumers effectively subsidizing these efforts through prices that are approximately 2.78 times higher than those in OECD countries like Canada. If MFN pricing drastically reduces U.S. revenues, the funding well for developing life-saving medications could begin to dry up, creating a crisis for patients worldwide.
Consequences for Canadian Patients
Canadian healthcare systems are already grappling with delays in drug access, with patients waiting an average of 450 days longer than Americans for new treatments due to slower approval processes. Trump's policy could exacerbate this issue by reducing the pipeline of innovative drugs, leading to even longer wait times or complete unavailability of certain medications in Canada. Moreover, if Canada serves as a benchmark for U.S. pricing, pharmaceutical companies might increase prices domestically to offset losses in the American market, further straining Canadian consumers.
Potential Solutions for Canada
To mitigate these challenges, Canada must consider proactive measures to support drug innovation and expedite approvals. One approach is to adopt strategies from other nations, such as New Zealand's 30-day approval process for drugs already approved in two peer countries. Alternatively, following the United Kingdom's recent agreement with the U.S. to increase spending on branded medicines by 25% could help share the innovation cost burden.
Historically, Canada has moved in the opposite direction by removing the U.S. from its list of comparator countries used by the Patented Medicine Prices Review Board (PMPRB) to set maximum drug prices. This decision, made under former Prime Minister Justin Trudeau, aimed to lower costs but may now hinder efforts to collaborate on innovation funding.
Call to Action for Canadian Policy
Experts argue that Canada should reinstate the U.S. as a comparator country to help shoulder research costs and ease tensions, especially with the Canada-United States-Mexico Free Trade Agreement (CUSMA) under renegotiation. By increasing government spending on pharmaceuticals and cutting bureaucratic red tape, Canada can better prepare for the shifts in the global drug market triggered by Trump's policies.
If federal leaders fail to act, Canadians risk further delays in accessing critical treatments and higher prices, underscoring the urgent need for strategic policy adjustments in response to international changes.
