Description
Brett J Skinner, PhD | Founder and CEO, CHPI; Editor-in-Chief, CHPJ |
ABSTRACT –
The global cost of pharmaceutical innovation is paid from global sales. When governments arbitrarily depress prices below normal market levels, they are essentially shifting their “fair share” of the burden for pharmaceutical innovation, to countries where prices are determined by market forces. The United States is the only major economy that does not regulate the prices of patented medicines. As a result, American consumers pay a disproportionate share of the global cost of biopharmaceutical innovation in the form of higher prices. In May 2025 the President of the United States issued Executive Order 14297: Delivering Most-Favored-Nation (MFN) Prescription Drug Pricing to American Patients. The MFN policy requires pharmaceutical manufacturers to list products at the lowest international price. Non-compliant companies are subject to tariffs on prescription drug products imported to the United States. The rationale for the MFN policy is that, “… inflated prices in the United States fuel global innovation while foreign health systems get a free ride…”. Canada has a multi layered system of price controls singularly focused on reducing the cost of patented drugs. To assess whether Canada is paying a fair share of the cost of pharmaceutical innovation, this policy brief examines the prices of 87 top selling new active substances (NAS) approved for marketing and under active patent protection in Canada and each of the 11 current, plus two former reference countries used by the PMPRB, and having reported sales in both Canada and the U.S. during 2020. The difference in prices between the 14-country average and markets that fall below the average, multiplied by local volume, represents an upper bound estimate of the costs shifted onto other countries by forcing prices below normal market levels. Lower bound is estimated accounting for manufacturer rebates. In 2020, Canada’s “fair share” of innovation costs was almost 230 percent of its total expenditure on the 87 patented medicines studied. Extrapolating the result to all Canadian sales of patented medicines showed that in 2023, Canadians paid between $13 billion CAD and $26 billion CAD less than their fair share of the global cost of innovation.
Cite: Skinner, Brett J. (2026). Does Canada pay its fair share of the global cost of pharmaceutical innovation? Canadian Health Policy, February 2026. canadianhealthpolicy.com.
