U.S. opens tariff probe targeting Germany’s drug pricing policies

The U.S. has launched an investigation into Germany’s pharma policies over what it referred to as “persistent underpayment” for medicines as the European country looks to limit spiraling healthcare costs, including spending on drugs. 

“President Trump has made clear that American patients should not be shouldering a disproportionate share of global pharmaceutical research and development,” said U.S. Trade Representative Jamieson Greer in a statement late Thursday. 

“I am particularly concerned with news that Germany is fast-tracking legislation that would further reduce its spending on innovative pharmaceuticals,” he said, calling it “a serious step backwards.” 

In April, Germany proposed overhauling its health insurance system to reduce pressure on public finances, as health spending has increased substantially in recent years. 

It introduced a range of cost-saving measures, including higher discounts for insurance funds from the pharma industry, prompting numerous drugmakers to warn that they might withdraw or delay new medicines in the country. 

The draft legislation is currently going through parliamentary processes. 

The U.S. investigation was initiated under Section 301 of the Trade Act, which allows unilateral action against countries with unfair practises that burden U.S. commerce and can lead to tariffs being imposed.

Greer said that U.S. trading partners must pay their fair share to fund research into new medicines, and that the investigation comes after months of discussion with German partners. 

He also suggested that the issue could be solved without legal measures, pointing to the recent U.S.-U.K. deal, which saw the U.K. pay higher prices for new drugs through its National Health Service, in return for a tariff exemption for medicines.

“Germany should follow suit with constructive negotiations to address this imbalance,” Greer said.  

The German Health Ministry didn’t immediately respond to a request for comment.

Trump has made lower drug prices a priority and called to “end global freeloading,” referring to the higher prices in the U.S. compared to other comparable countries, including in Europe.

The Trump administration last year introduced the so-called Most Favored Nation drug policy, or MFN, that ties the prices of medicines in the U.S. to lower ones abroad. It has reached agreements with 17 of the largest pharma companies in the world to voluntarily lower drug prices in the U.S. in exchange for tariff exemptions.

Critics of the policy, however, say that it stifles innovation and disincentivises investment in research and development.

Pharma executives, including the CEO’s of AstraZeneca, Novartis, Roche, and privately-held Boehringer Ingelheim, have also warned that European countries risk missing out on novel medicines if prices in the lucrative U.S. market are tied to lower prices elsewhere.

AstraZeneca CEO Pascal Soriot said in April that if the gap between U.S. prices and prices in a reference country becomes too large, it will not be able to launch the drug there despite its “best intent” to bring new medicines to patients.