GUEST COLUMN, Jeffrey Gerrish, former Deputy U.S. trade representative

 

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'd 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 that 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 R&D and bring life-saving 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 over 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 the Deputy U.S. Trade Representative for Asia, Europe, the Middle East, and Industrial Competitiveness from 2018 to 2020. This piece originally ran in Newsweek.