Op-Ed: Why Germany’s Drug Price Controls Should Be Only the First Section 301 Case
In this op-ed, Ambassador Jeffrey Gerrish, who served as deputy U.S. trade representative from 2018 to 2020, argues that German price controls on prescription drugs justify the Trump administration’s Section 301 investigation, and that other wealthy countries should face similar scrutiny. He says Germany recently increased mandatory rebates that drugmakers must offer insurers, that Japan repeatedly cuts prices for new medicines, and that Canada lacks data protections and sets prices far below market value. Gerrish argues that higher foreign prices would ease the burden on American patients, employers and taxpayers and spur research investment and jobs. He points to the United Kingdom’s agreement to raise spending on innovative drugs as evidence the approach works.
For more than a year, German officials have obstructed one of the Trump administration’s most important reform initiatives. And the president’s patience just ran out.
The White House has repeatedly asked allied countries to roll back their price controls on prescription drugs. If those nations started paying market prices for medicines invented and manufactured in the United States, it would relieve the pressure on American patients, employers and taxpayers, who are currently forced to fund a disproportionate share of the research and development that benefits the entire world. And it would boost America’s biotech companies and spur more job-creating research investments.
But German leaders have refused to cooperate. In fact, the German government just doubled down on its long-standing price controls by passing a law that increases the mandatory rebates biotech companies must offer German insurers.
That escalation left the Trump administration with no choice but to formally launch a Section 301 investigation into Germany’s pricing practices. It’s the first step in a process that could allow the White House to impose legally airtight tariffs and other trade penalties on Germany, unless Berlin comes to its senses and enacts President Trump’s desired reforms.
But the administration shouldn’t stop with Germany. Nearly every major trading partner engages in similarly unfair pricing practices that harm American patients and workers.
Japan, for instance, sets artificially low prices for new medicines and then repeatedly cuts those prices every year or two.
Canada lacks critical regulatory data protections, emboldening Canadian firms to copy U.S. pharmaceuticals. Canada also sets drug prices far below their market value, restricting companies’ ability to fund research and development and bring lifesaving medications to patients.
For decades, Republican and Democratic administrations alike have complained about this foreign freeloading, which deprives American companies of hundreds of billions of dollars in annual sales.
That added revenue would disproportionately accrue to American companies, causing an R&D investment bonanza that creates thousands of new U.S. jobs and leads to the creation of multiple new drugs each year.
Germany is Europe’s largest economy. And with more than 83 million people, it’s one of the world’s largest, and thus most influential, pharmaceutical markets. So targeting it for the first Section 301 investigation makes sense.
The Trump administration has already proven that having and using this leverage works. The United Kingdom recently agreed to double its spending on innovative drugs as a share of GDP after the administration threatened to initiate a Section 301 investigation.
But for the sake of American workers and patients, this must be merely the first, not the last, Section 301 investigation. America cannot remain the world leader in pharmaceutical innovation if it tolerates chronic free-riding by other wealthy countries.
Ambassador Jeffrey Gerrish served as deputy U.S. trade representative for Asia, Europe, the Middle East and Industrial Competitiveness from 2018 to 2020.
This piece originally ran in Newsweek. For the original, visit www.newsweek.com/to-force-other-countries-to-the-negotiating-table-bring-out-the-big-trade-guns-opinion-12353073