Although the United States and Canada reached an agreement to scrap Ottawa’s controversial Digital Services Tax – estimated to cost U.S. companies $1 billion annually – a much larger and ongoing dispute over drug prices is getting less attention.
Canada’s government is keeping the price of American-made pharmaceuticals artificially low while U.S. consumers and taxpayers foot the bill, critics say. Now, some are calling on the U.S. Trade Representative (USTR) to take action.
“Canada funds its welfare state by freeloading on U.S. medical goods and NATO,” Mark Merritt, founder of FAIR Rx, a group opposed to unfair health care trade practices, said in a statement. “Clearly, the savings aren’t passed on to Canadian patients, who have far less access to prescription drugs than Americans.”
Drugs and medical devices are the largest non-commodity U.S. export to Canada, totaling over $14 billion annually, according to Pangea Network.
However, through its Patented Medicine Prices Review Board (PMPRB), Canada caps patented drug prices at 30% to 80% below U.S. levels, a practice flagged as a serious market access concern in the USTR’s 2025 Special 301 Report.
Even so, the USTR has yet to take formal action to challenge Canada’s pricing system as a non-tariff trade barrier. That’s the case even after President Donald Trump issued a May 2025 executive order directing the agency to counter foreign price suppression that unfairly shifts drug research and development costs onto Americans.
Canadian regulators further depressed costs via the CADTH (Canadian Agency for Drugs and Technologies in Health), which between 2020 and 2022 cut the price of 57% of reviewed drugs by over 70%.
Yet Canadian patients aren’t necessarily benefiting, critics say.
Fewer than 20% of new global drugs are available on Canadian plans. The average wait time from application to public listing is more than four years, according to Canadian Health Policy. Additionally, about one in five Canadians report skipping prescriptions due to cost or access issues, the University of British Columbia reports.
Critics argue that the situation is similar to Canada’s defense policy, where the country spends just 1.3% of its GDP, well below NATO’s 2% guideline. The lack of defense spending has prompted complaints from American politicians who accuse Canada of freeloading off the United States.
