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<\/p>\nThe developed world has long forced American patients to shoulder the cost of pharmaceutical innovation. President Donald Trump has had enough. He recently put our allies on notice, signaling his readiness to launch a formal trade investigation if they refuse to change course.<\/p>\n
That warning has gone unheeded, nowhere more so than in Berlin and Tokyo. Germany’s government is poised to enact an even more aggressive price-setting scheme in the coming weeks, and Japan’s leaders appear intent on following its lead.<\/p>\n
The time for warnings has passed. The administration should follow through. An official probe into both countries’ drug pricing practices would give federal officials the authority and leverage needed to bring Germany and Japan to the negotiating table\u2014and finally put an end to their freeloading.<\/p>\n
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Nearly every wealthy U.S. trading partner\u2014including the United Kingdom, France and South Korea\u2014uses government price controls to suppress payments for innovative U.S. medicines. But Germany and Japan are among the worst offenders.<\/p>\n
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Under Germany’s pricing framework, government authorities assess whether a new medicine provides an “added benefit” over existing therapies and use that determination to set reimbursement levels. In practice, the system routinely benchmarks new drugs against older, lower-cost treatments. The result is predictable: reimbursement levels drift downward, and genuine innovation is undervalued.<\/p>\n
Japan’s framework is equally punitive. Unlike market-based systems, Japan does not allow innovative medicines to maintain pricing stability over a product’s life cycle. Instead, officials ratchet prices downward year after year\u2014even during the patent-protection period.<\/p>\n
Under Japan’s “market expansion repricing” framework, drugs that achieve broad clinical adoption can face price cuts of up to 50 percent. Cost-effectiveness reviews function as a one-way ratchet: they can trigger additional cuts, but almost never higher prices.<\/p>\n
These policies shift the cost of pharmaceutical research and development onto Americans. Indeed, biopharmaceutical companies earn roughly three-quarters of their global profits in the United States, even though the U.S. represents only one-quarter of the world economy.<\/p>\n
Fortunately, President Trump recognizes the imbalance\u2014and has already shown how trade policy can help correct it.<\/p>\n
His administration recently struck a landmark deal with the United Kingdom. In exchange for avoiding threatened tariffs, the U.K. agreed to double its drug spending over the next decade and reduce the amount of revenue it claws back from companies through rebate mechanisms.<\/p>\n
That agreement was a real victory for Americans. It committed a wealthy ally to paying a fairer share of global pharmaceutical R&D costs, reducing the burden that has long fallen on the United States. It also strengthened incentives for domestic research and manufacturing.<\/p>\n
But there is still considerable ground left to cover with America’s trading partners. Germany and Japan, especially, appear determined to double down on their current policies.<\/p>\n
Berlin recently advanced legislation that would expand mandatory manufacturer rebates, impose additional price concessions on innovative medicines and broaden aggressive cost-containment policies. The measure has already cleared the cabinet and now heads to parliament, where a vote could come soon.<\/p>\n
Tokyo, meanwhile, continues to push broader reimbursement revisions and tighter post-launch price controls on innovative therapies.<\/p>\n
Both governments appear to be betting that the United States is unwilling to impose meaningful trade consequences for discriminatory pricing practices. The Trump administration should prove them wrong. A Section 301 investigation is the right tool.<\/p>\n
Section 301 of the Trade Act of 1974 gives the administration broad authority to investigate foreign economic practices that unfairly burden American industries. Launching such a probe would allow U.S. officials to formally examine how Germany and Japan use price controls to systematically devalue American medicines and build a record supporting corrective action.<\/p>\n
If the investigation concludes that these governments have engaged in unfair or discriminatory practices against U.S. companies, the administration could impose retaliatory measures, including tariffs and other penalties. That outcome is avoidable\u2014if Germany and Japan agree to meaningful reforms instead.<\/p>\n
U.S. Trade Representative Jamieson Greer has signaled that more agreements modeled on the U.K. deal are within reach. But securing them requires leverage. A formal Section 301 probe would provide it.<\/p>\n
Americans have footed the bill for the pharmaceutical innovation the world depends on for far too long. Washington should use every available trade tool to bring Germany and Japan to the table\u2014and finally end their free-riding.<\/p>\n
Ambassador Jeffrey Gerrish served as the deputy U.S. trade representative for Asia, Europe, the Middle East, and Industrial Competitiveness from 2018 to 2020.<\/p>\n
The views expressed in this article are the writer’s own.<\/p>\n","protected":false},"excerpt":{"rendered":"The developed world has long forced American patients to shoulder the cost of pharmaceutical innovation. President Donald Trump…\n","protected":false},"author":2,"featured_media":43062,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[5,237,17986,37110],"class_list":["post-43061","post","type-post","status-publish","format-standard","has-post-thumbnail","category-germany","tag-germany","tag-japan","tag-pharmaceuticals","tag-trade-deals"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/posts\/43061","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/comments?post=43061"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/posts\/43061\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/media\/43062"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/media?parent=43061"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/categories?post=43061"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/tags?post=43061"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}