The Center for Innovation and Free Enterprise (CIFE) supports the Office of the United States Trade Representative’s investigation into Germany’s persistent underpayment for innovative pharmaceutical products. CIFE commends Ambassador Greer and the Administration for using Section 301 of the Trade Act of 1974 to examine whether Germany’s pharmaceutical pricing practices are unreasonable or discriminatory and burden or restrict U.S. commerce.
American researchers, workers, companies, patients, and taxpayers sustain an innovation ecosystem that produces lifesaving treatments used throughout the world. Wealthy trading partners should contribute fairly to that shared undertaking. When foreign governments impose market-distorting price controls, mandatory rebates, and other policies that suppress pharmaceutical prices below fair market value, they shift a disproportionate share of global research and development costs onto the United States.
The evidence outlined in USTR’s notice demonstrates the seriousness of this imbalance. American consumers pay approximately 3.9 times the prices paid by German consumers for brand-name medicines. Germany also conditions the confidentiality of negotiated pharmaceutical prices on acceptance of a 9 percent discount and additional administrative expenses. Proposed German legislation would impose another mandatory rebate on patented medicines beginning in 2027, potentially increasing further in subsequent years. These policies undervalue American innovation, restrict market opportunities for U.S. companies, and weaken incentives to invest in the next generation of treatments and cures.
CIFE therefore encourages USTR to determine that German policies suppressing reimbursement for innovative medicines below fair market value are unreasonable and burden or restrict U.S. commerce. USTR should use the investigation to secure binding commitments from Germany that provide fair and predictable market access, appropriately value innovative medicines, and prevent additional mandatory rebates or price reductions that disproportionately affect patented products.
Negotiated reforms should be the preferred outcome. However, should consultations fail to produce meaningful and enforceable changes, USTR should be prepared to employ appropriate and targeted tariff or non-tariff remedies authorized under Section 301. Any response should focus on correcting Germany’s market-distorting conduct while protecting American patients, pharmaceutical supply chains, intellectual property, manufacturing, and continued investment in research and development.
CIFE also thanks Senator Todd Young and Representatives Vern Buchanan, Jodey Arrington, and Nicole Malliotakis for their leadership in encouraging the Administration to investigate foreign pharmaceutical pricing practices. Their efforts and the support of their House and Senate colleagues have helped emphasize that foreign underpayment is not merely a health policy concern, but a consequential trade and innovation issue affecting American workers and patients.
CIFE appreciates the opportunity to comment and urges USTR to pursue a strong and sustained strategy that requires Germany and other wealthy trading partners to contribute fairly to the cost of medical innovation.
