What Trump’s ‘most favoured nation’ drug pricing policy might mean for Canadians

U.S. President Donald Trump’s announcement that all 50 states will join his proposed drug-price lowering policy is leading Canadian pharmaceutical experts and international researchers to warn how prices could rise around the world. 

On Sept. 18, Trump announced in the Oval Office that all state Medicaid programs for Americans with low incomes will benefit from lower prescription drug prices under agreements with pharmaceutical manufacturers to match the lowest prices paid by other developed nations.

“We went from paying the highest drug prices in the world to paying the lowest drug prices in the world,” Trump said about the intention of the new policy. 

The Trump administration has also cut deals with 26 large pharmaceutical companies. The goal is to keep U.S. drug prices more comparable with the 19 countries that the Trump administration proposes as reference countries, which span Europe, Canada, Australia, Japan and South Korea. 

It’s a big shift; the U.S. has had the world’s highest drug prices. With brand-name drugs, on average, significantly cheaper in Canada, will that make this country’s drug prices a target under the new policy? 

Such questions became sharper this week when Public Citizen, a U.S. consumer advocacy group, posted copies of Pfizer and Eli Lilly’s agreements it sued to obtain. Though key sections are redacted, the group said the agreements “reveal concerning terms that will help facilitate pharma companies charging more for drugs abroad or discontinuing supplying drugs in other countries so that they can continue to charge U.S. customers high prices.”

Multinational pharmaceutical companies also have incentives to raise prices or restrict supply. 

What do we know about what drug companies agreed to?

Trump’s agreements with drug makers to match low prices in other countries are known as most favoured nation, or MFN, prices.

While new to the U.S., MFN is already common across Canada and is widely used in Europe and elsewhere to control prescription drug spending, said Dr. Thomas Hwang, an assistant professor at Brigham and Women’s Hospital in Boston.

While the name most favoured nation may sound like favouring one nation over another, it is not about special treatment, pharmaceutical policy experts say.

WATCH | Lowering drug prices in the U.S.:

Trump takes aim at major pharmaceutical companies, demands lower drug prices

U.S. President Donald Trump sent letters to 17 major American pharmaceutical companies demanding decreased drug prices, matching those manufactured overseas. This follows an executive order signed by Trump in May, promising lower drug prices across the U.S.

“It basically says that the United States wishes to get the price that’s being offered to similarly sized countries and similarly wealthy countries,” Hwang said.

Similar countries, including Canada, are bundled, based on net pharmaceutical pricing deals, said Mina Tadrous, an associate professor at the University of Toronto’s pharmacy faculty who evaluates drug policy. 

Why should Canadians care?

Tadrous said the Trump administration’s MFN does not mean Canadian drug prices will automatically go up.

But to make up for — or avoid — lost revenue in the U.S. due to the new policy, pharmaceutical companies might seek higher Canadian prices, reduce the discounts they offer, or delay launching certain medicines in this country, Tadrous said.

Innovative Medicines Canada, which represents the pharmaceutical industry, says most-favoured nation (MFN) pricing in the U.S. threatens to disrupt access to existing medicines, delay introduction of new medicines and undermine confidence in Canada’s pharmaceutical market.

“For Canadians waiting for a new cancer therapy, a rare disease treatment, or first-in-class medicine, these aren’t abstract policy debates. The changes could have serious consequences for them and their families,” Innovative Medicines Canada said in an emailed statement.

Nav Persaud, a family physician with St. Michael’s Hospital in Toronto, said he already sees patients struggle. 

“People are paying a lot for food and for rent, and they don’t have money left over at the end of the month to pay for medicines and medicines end up getting sacrificed,” Persaud said. 

“I see patients who do not take recommended medicines because of the cost. That happens every day.”

What’s the basis for concern?

Last week, Hwang and his co-authors published a modelling study of the Trump administration’s proposed MFN pricing in the medical journal The Lancet. 

Hwang said in an interview that the study was motivated by wanting an independent and rigorous assessment of what the savings could look like in the U.S. and “secondly and equally as importantly,” the potential impacts of the policy outside the country.

Hwang and his team wrote that MFN pricing for brand-name medicines could decrease net Medicare spending, but the policy change “could have unintended effects on prices and access to medicines in referenced countries.”

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A Canadian pharmaceutical company, headed by two former executives with the company behind Ozempic, hopes to make a generic version of the weight-loss drug in Edmonton. Data protections on the GLP-1 receptor, semaglutide, expired in January.

What’s more, the redacted agreements posted by Public Citizen show carve outs for Eli Lilly’s popular weight-loss drugs, like the GLP-1 medication Zepbound.

“That carveout is new from what the administration has told us in the months leading up to this as well what even the companies have disclosed,” Hwang said. 

“But as of this past weekend, we now understand that the GLP-1 drugs are not going to be subject to most-favoured nation pricing.” 

Another deal suggests Pfizer agreed to share revenue with the U.S. government if it raises drug prices outside the U.S.

Hwang said raising foreign prices aligns with Washington’s broader goals.

“In the executive order that President Trump released last year, it’s not sufficient for the administration for prices to be lower in the U.S. There’s also a deep desire at the highest levels of the executive to raise prices outside the U.S, too.” 

Under the United Kingdom’s pharmaceutical trade agreement with the U.S., for instance, the U.K. committed to increasing spending on medicines as a percentage of GDP, Hwang noted.

What’s unknown?

Key financial terms and the negotiated prices for drugs are heavily redacted in the records released by Public Citizen.

That makes it difficult for anyone to independently assess value to taxpayers or companies.

“The huge asterisks around all of this is like are we [Canada] actually the lowest prices? How good are the deals we’re getting? And until we know that, we don’t know what the impacts are going to be on Canadians.”

Confidential discounts and rebates, both in the U.S. and in other countries, weren’t consistently or reliably available, Hwang added.