Trade Tariffs on Canadian Pharmaceuticals—Implications for US Drug Supply and Costs

Abstract

This cross-sectional study analyzes data from the National Institutes of Health, IQVIA, and the US Food and Drug Administration on pharmaceutical drugs manufactured in Canada and exported to the US.

Trade tariffs have twice been imposed on Canadian imports by the US administration with specific products currently exempted, including pharmaceutical products imported under the terms of the US-Mexico-Canada Agreement.¹ However, additional tariffs have been proposed to begin on April 2, 2025, and may no longer exempt pharmaceutical imports, raising concerns about drug availability, affordability, and supply stability. Given the overlap in US and Canadian drug manufacturing, especially for generic drugs, we assessed the potential magnitude of the trade tariffs on the US drug market.

Methods

We conducted a cross-sectional analysis of pharmaceutical drugs manufactured in Canada and exported to the US using data from the National Institutes of Health’s DailyMed package inserts database² and IQVIA’s MIDAS quarterly sales and volume data between the fourth quarter of 2022 and the third quarter of 2023. MIDAS integrates IQVIA’s national audits into a globally consistent view of the pharmaceutical market and provides estimated product volumes of registered medicines, trends, and market share through retail and nonretail channels. Standard units represent the smallest unit of consumption (eg, 1 tablet or 5 mL of liquid).

We performed analyses at the drug product and drug levels. We assessed sales, volume, generic status, and patent protection (per the US Food and Drug Administration’s [FDA’s] Orange Book³) at the drug product level, defined by a unique combination of manufacturer, drug name, active ingredient, strength, and formulation (eg, tablets vs capsules), linked to 1 or more National Drug Codes. To account for switching between equivalent drug products, we grouped products at the drug level (defined by active ingredient and formulation) to avoid overestimating reliance on Canadian manufacturing. We identified drugs for which Canada is the sole or majority supplier based on the Canadian market share (percentage of all US product units). Using a validated tool, we assessed each drug’s clinical importance (eMethods 1 and eTable 1 in Supplement 1),⁴ and determined shortage histories as reported by the American Society of Health-System Pharmacists and the FDA.⁵

All prerebate drug expenditures are reported in US dollars. Data processing, cleaning, and descriptive analyses were conducted using R version 4.3.0 (R Foundation for Statistical Computing). Additional details appear in eMethods 2 and in the eFigure in Supplement 1. The study adhered to key principles of the Strengthening the Reporting of Observational Studies in Epidemiology (STROBE) reporting guideline and was exempt from ethics review under the Common Rule because it used public, nonidentifiable data and did not include human participants.

Results

Overall, 22 082 drug products were sold in the US market from the fourth quarter of 2022 to the third quarter of 2023; 411 (1.9%) of which were manufactured in Canada, representing $3 billion in sales (Table). Of the 411 drug products manufactured in Canada, 79% (n = 323) were generic products and 21% (n = 88) were brand-name products, including 20 (4.9%) under patent protection.

Table. US Drug Sales by Canadian Manufacturing Origin^a.

	Total No.	Made in Canada
		Yesb	No
All drugs on US market
Drugs, No. (%)c	3099	173 (5.6)	3071 (99.1)
Drug products, No. (%)d	22 082	411 (1.9)	21 671 (98.1)
Salese
Total, $ in billions (%)	594	3.0 (0.5)	591 (99.5)
Volume, standard units in billions (% of total)f	270	3.9 (1.4)	266 (98.6)
Drugs with ≥50% Canadian supply (n = 52) g
Sole-source Canadian drugsh	28	28	0
Salese
Total, $ (%)	1.9 Billion	1.8 Billion (95.3)	89 Million (4.7)
Volume, standard units (% of total)f	1.9 Billion	1.3 Billion (68.2)	589 Million (31.8)

^a Analysis based on data from the IQVIA MIDAS quarterly value and volume sales data for the period between the fourth quarter of 2022 and the third quarter of 2023, reflecting estimates of real-world activity. The IQVIA national audits and IQVIA MIDAS reflect local industry standard source of pack prices, which might be the list price or average invoice price, depending on the country and the available information. The data do not consider rebates or clawbacks (details of which are normally confidential); therefore, these estimated prices do not reflect net prices realized by the manufacturers. This analysis excluded drugs under World Health Organization Anatomical Therapeutic Chemical level 2 codes J07, V03, V04, V08, V09, V10, and Z99, drugs with fewer than 1000 units sold during the observation period, and nonpharmaceutical products.

^b Canadian manufacturing origin was identified from DailyMed package inserts available via the Structured Product Labeling Resources of the US Food and Drug Administration (additional details appear in eMethods 2 in Supplement 1).

^c Defined by active ingredient and formulation (eg, acyclovir, tablets). The row percentages exceed 100% because some drugs are supplied by Canada and other countries (data appear in both columns).

^d Distinct by drug name (eg, acyclovir), manufacturer, strength (eg, 400 mg), and formulation (eg, tablets).

^e Share of total US therapeutic markets, sales, or volume.

^f Volume units represent the smallest unit of consumption (eg, 1 tablet or 5 mL of liquid).

^g A full list of drugs appears in eTable 2 in Supplement 1.

^h A drug in which 100% of observed sales during the study period originate from Canadian-manufactured drug products.

Among the 3099 unique drugs, 173 (5.6%) contained at least 1 product manufactured in Canada and 52 (1.7%) depended on Canada for at least 50% of the supply, including 28 with no alternative suppliers. Of these 52 drugs, 23 (44.2%) are rated as clinically important and 27 (51.9%) have a history of shortages (eTable 2 in Supplement 1).

Discussion

Although Canada is not the largest supplier of medications to the US, tariffs could raise costs and strain supply chains. We estimate that $3 billion in US pharmaceuticals depend on Canadian manufacturing, with 25% tariffs adding $750 million in cost. Although the Inflation Reduction Act provisions limit cost pass-through to some payers (ie, Medicare), manufacturers may still adjust production or alter distribution, increasing supply chain fragility.

Our analysis focuses on drugs with final production in Canada, a subset of the $6.75 billion in pharmaceuticals exported from Canada to the US, which would be subject to tariffs. The effects may differ for brand-name and generic drugs, with high-cost brand-name drugs likely absorbing short-term cost increases, but the long-term effects remain uncertain. Historically, minor shifts in supply chains create shortages, particularly when manufacturers lack rapid production scalability to meet demand.⁶ Extending tariffs to larger suppliers (eg, China, India, Europe) could worsen the predicted effects, providing rationale for pharmaceuticals being exempt from tariffs to avoid increasing health care costs and worsening disruptions in US supply.

Supplement 1.

eMethods 1

eMethods 2

eTable 1. Clinical Decision Criteria

eTable 2. Drugs with ≥50% Canadian Supply

eFigure. Identification of Drugs Manufactured in Canada, Data Linkage and Exclusion

Supplement 2.

Data sharing statement