Here is a nice article on the Canadian Drug Shell Game - Click Here!
"Through limiting the availability of prescription drugs and controlling the prices of those that are available, Canada has succeeded only in preventing Canadians from obtaining drugs that might have reduced hospital stays and expensive medical procedures. Despite prices on some individual drugs that are lower than in the United States, Canada has been unable to hold down the overall cost of either prescription drugs or other health care. The result is a lower standard of health care at a higher cost than Canadian patients and taxpayers have a right to expect. "
Canada is not necessarily subsidizing the price, they simply tell the drug companies what the price will. They control the price. They limt what the company can charge
Since even at dictated prices the drug companies are making money, they simply sell to canadian distribrution chain at cheaper prices than they sell to US distributers.