OBJECTIVES: This paper compares pricing and reimbursement of pharmaceuticals between Canada and selected European countries. METHODS: We examined the pricing and reimbursement schemes and cost-containment initiatives adopted in Europe and Canada and their impact on prices of existing and new medications. Published data from the Patented Medicine Prices Review Board (PMPRB) provides international price comparisons for patented medicines available in Canada. Prices for 13 new active substances first marketed in Canada in 2000 were assembled for Canada and six European countries. For comparative purposes, prices in the United States were also included in the analysis. RESULTS: Drug prices in Canada are typically lower than prices in Germany, Sweden, Switzerland, and the UK but higher than prices in France and Italy. Patented Drugs were 8% lower than the international median as measured by the PMPRB. However, for new drugs introduced in 2000, prices were, on average, 8.3% higher than those in Europe, although most were within the range of European prices. Prices in Canada and Europe were almost always lower than those in the United States. CONCLUSIONS: The health-care systems in Canada and Europe are fairly similar, as are the drug pricing and reimbursement schemes. However, local policies (e.g., reference pricing, generic substitution, pharmacoeconomics) can result in significant international price variations and the potential for parallel importation. Cost-effectiveness and international price comparisons play an important role in most major markets. The prices of pharmaceuticals in Canada are comparable to those in Europe although there is a trend for Canadian prices to be higher. Although pharmaceutical prices in Canada and Europe appear to be lower than in the United States, there are important differences in the health-care systems as well as in the reimbursement mechanisms that make price comparisons with the US problematic.