Canada isn't exactly a cash cow of drug companies; between the price controls and government negotiations, prices of brand-name drugs tend to be much lower north of the border. But what Canada lacks in profit margins it might make up in sales exclusivity if trade agreements between Canada and the EU are enacted.

Among the proposals, drug companies could get an additional five years of exclusivity if the regulatory process held up the drug's approval. The EU would also like to see the data exclusivity increased from eight to 10 years, which would delay generics' entry into the Canadian market. Additionally, the proposal calls for an appeals process when generic drug companies try to invalidate patents on drugs.

The moves are clearly to protect the interests of European drugmakers: GlaxoSmithKline (NYSE: GSK), AstraZeneca (NYSE: AZN), sanofi-aventis (NYSE: SNY), and the like. The EU exported $5.3 billion worth of pharmaceutical products to Canada in 2009.

While this is a deal between the EU and Canada, shareholders in American drugmakers like Pfizer (NYSE: PFE) and Merck (NYSE: MRK) should be cheering it along as well. As far as I can tell, the entire pharmaceutical industry should benefit from increased competition-free sales.

Generic-drug makers like Teva Pharmaceuticals (Nasdaq: TEVA) and Mylan (Nasdaq: MYL) are the obvious losers if the trade provisions go through. Generic-drug companies actually make more per pill selling generics in Canada than they do in the U.S. because there's less competition, which helps keep prices higher. The industry estimates that the proposals could delay generic entry by an average of 3.5 years.

The proposal is still in the preliminary phase, and I have a hard time seeing it going through unless the EU makes big concessions that help Canada's other industries. Canadians may not love their health-care system, but they do love the prices they pay, and this looks like political dynamite given that it's sure to raise drug prices.

Buffett thinks this "picks and shovels" company should profit, regardless of U.S. health-care reforms.

Pfizer is a Motley Fool Inside Value pick. GlaxoSmithKline is a Motley Fool Global Gains recommendation. The Fool owns shares of GlaxoSmithKline and Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.