Could U.S. tariffs drive up drug prices? Manitoba bioscience group says it's complicated, but possible

Medicine manufacturers across Canada are on edge with the looming threat of catastrophic tariffs on pharmaceutical exports to the U.S., experts say.

Earlier this month, U.S. President Donald Trump threatened to impose tariffs as high as 200 per cent on pharmaceuticals exported to the United States. Howard Lutnick, Trump's secretary of commerce, said details about the pharmaceutical tariffs would come at the end of July. 

The uncertainty this created is starting to reveal itself as stock prices of major pharmaceutical manufacturing companies with operations in Canada — companies like Emergent Biosolutions and Bausch Health — have declined in recent days.

"If a 200 per cent tariff were to be put into place then I think [pharmaceutical manufacturers] would have to potentially reconsider whether it makes sense to manufacture in Canada," says Shawn Bugden, dean of the school of pharmacy at Memorial University. 

So what could the impact be in Canada? 

Given the tariff uncertainty, "it's intensely complicated," says Bugden. 

According to government data, the pharmaceutical industry in Canada represents two per cent of global market share, and the manufacturing portion of it alone consists of an average of 35,000 jobs since 2019. 

In Manitoba, medicine is one of the leading industries, accounting for between 30-35 per cent of the medicine manufactured in Canada, seven per cent of the province's GDP, and roughly 14,000 jobs, according to Andrea Ladouceur, president of the Bioscience Association of Manitoba. 

"The pharmaceutical industry is the cornerstone of the Manitoba economy," said Ladouceur. "If being in Canada becomes unaffordable for them, these companies are connected to the global market and moving out of Canada is not off the table." 

The danger of these companies leaving is multifaceted. Not only would there be the major economic impact of a shrinking key industry, but "we'd also lose the security of having some of the drug supply manufactured here in Canada," according to Bugden. 

The reliance on international trade for essential goods like medicines has proved risky in the past. During the COVID-19 pandemic, drug shortages in Canada were not uncommon. 

If pharmaceutical manufacturers move operations out of the country, it will likely make Canada even more reliant on global markets than they already are: with 70 per cent of drugs imported from foreign countries, 16 per cent of which is imported from the U.S., accounting for nearly $9 billion, according to Bugden.

However, Bugden's main concern is that a sizable tariff, like the 200 per cent figure touted by Trump, would undermine Canada's price control mechanisms like the Patented Medicine Prices Review Board and the pan-Canadian Pharmaceutical Alliance — which he views as major assets to Canadians.

The Patented Medicine Prices Review Board — established in 1987 but amended in 2019 — is meant to "ensure that the prices of patented medicines sold in Canada are not excessive."

The board reviews the price of drugs and medicine and conducts hearings "which may result in orders to reduce prices to a non-excessive level," according to guidelines listed on their website.

Bugden says that as an unintended consequence, implementing such a substantial tariff would likely raise the cost of manufacturing drugs and medicine globally, in turn applying pressure on the review board to "break their own rules and allow for higher-priced drugs."

"The Americans have been transparent, they say they have the highest drug prices in the world, we want to lower them, but we're not going to lower them, which is what they should do and they have the ability to do, we're instead going to try and make everybody else pay higher prices so that it allows our prices to go down," said Bugden. 

As things stand, many pharmaceutical companies are waiting to see what will happen. CBC News has reached out to several pharmaceutical companies in Manitoba, but none have wanted to comment given the uncertainty of the situation they're facing. 

Ladouceur says they're fearful that tariffs may force them to increase their prices. 

"At the end of the day, any increase in cost will be passed on to the consumer," says Ladouceur. 

"And so for these companies it is a very hard spot because they know it may put them out of reach for the consumer, and having medicines are key to having a healthy life and sometimes save a life, so they are really concerned their products will become unaffordable for those that need them most."

Trump has said that there would be a period — "a year, or a year and a half" after a tariff would be imposed for companies to "get their act together."

In light of that, Bugden doesn't think the end consumer will be paying the price for at least a year. 

"I don't think consumers need to worry about the prices changing tomorrow," said Bugden. "Keep calm and carry on, don't think you need to run to the drug store and fill up your prescriptions."

"I'm confident in the institutions we have in Canada to do the best job possible to maintain pricing and accessibility for Canadians," said Bugden.

Pharmaceutical industry still in the dark over 200% tariffs

21 hours ago

Duration 1:59

The Canadian pharmaceutical industry is still waiting to learn about tariffs as high as 200 per cent on exports to the U.S. threatened by the U.S. administration in early July. Experts fear the impact on industry and end consumers if they are implemented.