For over a year, German officials have resisted one of the Trump administration’s significant reform efforts. The president’s patience has ended. The White House has repeatedly urged allied nations to revise their prescription drug price controls. If these countries paid market prices for medicines developed in the United States, it would reduce the burden on American patients, employers, and taxpayers who currently subsidize a notable share of research benefiting the entire globe. It would also enhance America’s biotech sector and stimulate more research investment, generating jobs.
German leaders have not complied. The German government recently intensified their price controls by passing a law that increases mandatory rebates that biotech firms must offer German insurers. This action prompted the Trump administration to formally commence a Section 301 investigation into Germany’s pricing practices. This initial step might lead to legally sound tariffs and trade penalties on Germany unless Berlin adopts the reforms President Trump seeks.
The investigation is warranted. However, the administration should not stop with Germany. Many major trading partners engage in similar unfair pricing that damages American patients and workers. For example, Japan sets low prices for new medicines and frequently reduces them. France employs biased health technology assessments to justify setting under-market prices for new medicines.
Switzerland links reimbursements for new drugs to prices in poorer European countries and older treatments. Swiss officials often reassess and cut these reimbursements. Canada lacks crucial regulatory data protections, enabling Canadian firms to replicate U.S. pharmaceuticals. Canada’s drug prices fall below market levels, limiting companies’ R & D funding and ability to supply medications to patients.
Both Republican and Democratic administrations have long criticized this foreign freeloading that denies American companies vast sales opportunities. If developed countries paid U.S. prices for brand-name drugs in 2018, drugmakers would have gained $254 billion more in revenue, according to the Information Technology and Innovation Foundation.
This increased revenue would largely benefit American firms, leading to significant R & D investments and creating numerous U.S. jobs alongside new drug developments each year. Germany ranks as Europe’s largest economy and one of the world’s influential pharmaceutical markets with over 83 million residents. Therefore, targeting Germany for the first Section 301 investigation is logical.
Allowing Germany’s freeloading would encourage foreign leaders to delay and outlast the Trump administration. More Section 301 investigations are needed swiftly. Initiating them now, amid trade discussions, grants U.S. negotiators leverage to press foreign governments for concessions. The Trump administration has shown that using such leverage is effective. The United Kingdom agreed to double its investment in innovative drugs after the administration threatened a Section 301 investigation.
The Trump administration deserves recognition for acting, not merely expressing frustration like previous administrations. For the benefit of American workers and patients, this Section 301 investigation must be the start, not the conclusion. America cannot sustain its lead in pharmaceutical innovation if it accepts persistent free-riding by affluent nations.
Ambassador Jeffrey Gerrish served as the deputy U.S. trade representative for Asia, Europe, the Middle East, and industrial competitiveness from 2018 to 2020. The views expressed in this article are the writer’s own.