Amid efforts in Germany to retool the country’s drug spending, the U.S. is launching an investigation into what the Office of the United States Trade Representative has branded “persistent underpayment” by the European nation for new meds.
Announced late last week, the USTR’s Section 301 investigation will leverage powers under the Trade Act of 1974 to probe whether Germany’s payment patterns for innovative pharmaceuticals are “unreasonable or discriminatory,” as well whether the country’s drug spending “burdens or restricts U.S. commerce.”
The U.S. is launching the investigation after “months of meaningful discussions with our German partners in an effort to resolve this issue,” the USTR said in a release.
Germany often sets a precedent for new drug launches in the European Union, thanks to a hasty reimbursement process that supports faster market entry. Many drugs launch first in the country when making initial forays into the EU market.
But as international drug pricing conversations play out under the banner of the U.S.’s “most favored nation” policies, Germany earlier this year proposed cuts to its drug spending—as part of a broader proposed healthcare reform plan—aiming for savings of 1.9 billion euros in 2027.
Germany was rethinking that plan as of last week, according to a Reuters report, which cited an unnamed government source. Now, rather than attempting a variable pricing structure that would have required drugmakers to pay increased markdowns to German insurers on their products’ list prices, among other measures, Germany is now reportedly planning to utilize a fixed plan, the details of which aren’t yet available, according to Reuters.
The original plan, which is theoretically still in the offing pending a formal announcement from the German government, sparked rebukes and investment pullbacks by the industry earlier this month—and has now drawn the ire of the U.S. and its belligerent trade tactics under the second Trump administration.
“President Trump has made clear that American patients should not be shouldering a disproportionate share of global pharmaceutical research and development,” U.S. trade representation Jamieson Greer said in a June 18 release.
“I am particularly concerned with news that Germany is fast-tracking legislation that would further reduce its spending on innovative pharmaceuticals,” Greer continued. “This is a serious step backwards at a time when our trading partners need to step up and start paying their fair share to fund innovative pharmaceutical research and development.”
The investigation drills down on a common refrain from the administration that other wealthy nations aren’t paying enough for innovative biopharma R&D.
In USTR’s release, Greer framed Germany’s proposed plan in contrast to the trade deal the U.S. inked with the United Kingdom in early April, which will see the country’s National Health Service boost its spending on novel treatments by 25% as the government lowers the rebate cap on branded drugs, in turn winning U.K. immunity from President Donald Trump’s import tariffs on branded pharmaceuticals.
Pending the outcome of the investigation, the U.S. could take a number of approaches—if warranted—including “tariff and non-tariff action,” according to a more detailed overview (PDF) of the USTR plan published on the Federal Register.
The United States’ top industry trade group, the Pharmaceutical Research and Manufacturers of America (PhRMA), welcomed news of the Section 301 investigation.
“For too long, foreign governments have undervalued innovative medicines, forcing U.S. patients and taxpayers to shoulder a disproportionate share of the costs of global innovation,” PhRMA’s CEO, Stephen Ubl, said in a statement late last week. “Initial progress has been made with the U.S.-UK pharmaceutical pricing agreement, but Germany, Japan, France, Canada and other high-income countries must take action to pay their fair share.”
Stateside, the White House has secured drug pricing deals under Trump’s most favored nation framework from a slate of 17 pharma heavyweights. Regeneron most recently signed on board, joining a group that also includes Novo Nordisk, Eli Lilly, Gilead and Roche, among others.
The deals have broadly seen drugmakers pledge to lower the Medicaid cost of their drugs to better align with other high-income comparator nations, match future launch prices to comparator country costs and make investment and direct-to-consumer sales commitments in the U.S. In return, the companies have won reprieves from the thorniest aspects of the Trump administration’s pharma-facing trade policies.
After Germany announced its healthcare initiative earlier this year, the pushback from pharmas has started to mount.
In early June, Eli Lilly and Boehringer Ingelheim confirmed that they were separately cutting planned spends in the country, with a Boehringer representative telling Fierce at the time that its decision reflected “growing economic uncertainty and lack of investment predictability in the pharmaceutical sector in Germany.”
Pfizer CEO Albert Bourla also indicated that his company might be willing to rethink German investments over qualms about the country’s drug pricing proposals.