The United States is increasing pressure on Germany and paving the way for a possible new wave of tariffs. Washington has indeed launched a formal investigation into Germany’s drug pricing policies, accusing Berlin of underpaying innovative medicines and passing on an excessive share of global pharmaceutical research costs to American consumers.
Added to this is the healthcare reform promoted by the German government to contain public spending, a choice that the Trump administration considers incompatible with the goal of supporting investments in sector innovation.
WASHINGTON’S INVESTIGATION
The United States Trade Representative (USTR) has announced the initiation of an investigation under Section 301 of the Trade Act of 1974, the tool that allows Washington to adopt unilateral measures against trade practices deemed unfair. The aim is to verify whether Germany’s “persistent underpayment of innovative pharmaceutical products is unreasonable or discriminatory and constitutes an obstacle or restriction to United States trade.”
According to the notice published in the Federal Register, the evidence collected would indicate that Germany applies “unfair” pricing policies and practices towards innovative drugs. The American administration also argues that the revenue reduction resulting from such policies contributes to limiting investments in research and development, transferring a disproportionate share of pharmaceutical innovation costs onto the United States.
THE TRUMP ADMINISTRATION’S ACCUSATIONS
“President Trump – explained U.S. Trade Representative Jamieson Greer – has made it clear that American patients should not bear a disproportionate share of the global costs of pharmaceutical research and development.”
Greer expressed particular concern about the acceleration of the German legislative process aimed at further reducing spending on innovative medicines, calling it “a serious step backward at a time when our trading partners need to do more and start paying their fair share.” According to the USTR official, U.S. patients pay almost four times more than German citizens for brand-name drugs.
The American trade office, reports Bloomberg, will open a public comment procedure on June 25, with a deadline set for August 10, and will hold a public hearing on September 22 before drawing its conclusions.
THE GERMAN HEALTHCARE REFORM
The investigation comes at a delicate time for Berlin. In April, the government led by Chancellor Friedrich Merz presented a broad reform of the public healthcare system aimed at containing a funding deficit estimated at around 20 billion euros. The measures aim to generate savings exceeding 16 billion euros and include changes to drug pricing and reimbursement mechanisms.
Some of the initial proposals envisaged the introduction of variable discounts on medicines, but after criticism from the pharmaceutical industry, the German government began considering adjustments, replacing some of the contested mechanisms with more stable formulas. The Federal Ministry of Health has nonetheless clarified that no final decision has yet been made.
PRESSURE FROM PHARMACEUTICAL COMPANIES
The American initiative comes after months of increasing pressure from multinational companies in the sector. As the Financial Times writes, Albert Bourla, CEO of Pfizer, wrote to Chancellor Merz warning that the new legislation could jeopardize the group’s investments in Germany. Pascal Soriot, CEO of AstraZeneca, also indicated the possibility of postponing or limiting the launch of new drugs on the German market if the measures were approved in their current form.
In early June, Eli Lilly announced halving the planned investment of 2.3 billion euros in the Alzey plant in Rhineland-Palatinate. Boehringer Ingelheim also announced the cancellation of expansion plans worth about 900 million euros. Both companies linked their decisions to the prospects created by the German healthcare reform.
THE DISPUTE OVER DRUG PRICES
The controversy is part of a broader confrontation between Washington and several European governments over funding pharmaceutical innovation. The Trump administration argues that the lower prices practiced in Europe force American consumers to bear a disproportionate share of research and development costs.
A report by the RAND Corporation published in 2024 found that prescription drug prices in the United States are on average 2.78 times those recorded in 33 other countries, with even more significant differences in the case of brand-name medicines.
Washington considers the United Kingdom a model to follow. In April, London reached an agreement with the United States that provides for an increase in British spending on innovative medicines over the next decade and guarantees the pharmaceutical sector an exemption from American tariffs for three years. “Germany should follow the same example through constructive negotiations to address this imbalance,” Greer stated.
THE POSSIBLE OUTCOME
Investigations conducted under Section 301, according to France24, can conclude with the imposition of tariffs or other trade measures against the country concerned. The Trump administration has already used this tool against numerous trading partners and, in recent weeks, has proposed new tariffs of up to 12.5% against dozens of economies involved in other trade investigations.
While leaving the door open to negotiation, Washington indeed considers the issue of pharmaceutical prices a strategic priority. “We believe that the United States and Germany can find a solution that expands German citizens’ access to the most innovative drugs while ensuring fair reimbursement for medicines produced by American workers,” Greer declared.
