Why is the US targeting Germany's drug industry?
A new trade probe is reigniting a long-running clash over who should pay for medical innovation. Washington argues Germans benefit from lower prices while US
A new trade probe is reigniting a long-running clash over who should pay for medical innovation. Washington argues Germans benefit from lower prices while US patients shoulder a disproportionate share of the costs. In the world according to Donald Trump, every nation on the face of the earth is "ripping off" the United States — that goes for pharmaceuticals, too, especially those from Germany. Now, the Trump administration is targeting Germany with an investigation. Washington says it wants to find out if US patients and businesses are being forced to pay disproportionately higher prices for the research and development of top-tier pharmaceuticals so that German patients can pay less. The inquiry, scheduled to wrap up in September, is based on Section 301 of the Trade Act of 1974 and could ultimately lead to new US tariffs. An old fight over different pricing rules The conflict touches on a core aspect of health policy. Germany regulates drug prices through its public health insurance system in order to keep access affordable. The US sees this as market distortion. Berlin defends its price regulating practice as a legitimate instrument for keeping costs down. The issue of drug pricing has now evolved into a trade policy dispute that goes far beyond the pharmaceutical sector. At its core, the question now is whether US pharmaceutical companies are put at a disadvantage as a result of Germany's price regulation system, which Washington says creates a trade imbalance. According to the OECD, an organization of wealthy industrialized nations, the US and Germany are the two countries that spend the most on drugs. In 2023, US patients spent an average of $1,713 (€1,502) per person on medicine compared to $1,158 per patient in Germany. US attack on German healthcare reform "This investigation will seek to determine whether persistent underpayment for innovative pharmaceutical products by Germany is unreasonable or discriminatory and burdens or restricts US commerce," according to US Trade Representative Jamieson Greer, who added that the "investigation follows months of meaningful discussions with our German partners in an effort to resolve this issue." The US has also used Section 301 of the 1974 Trade Act to go after Switzerland for supposed market manipulation brought on by state-subsidized overcapacity in the drug industry Image: Manuel Geisser/imago images "President Trump has made clear that American patients should not be shouldering a disproportionate share of global pharmaceutical research and development," continued Greer.
"I am particularly concerned with news that Germany is fast-tracking legislation that would further reduce its spending on innovative pharmaceuticals." With that, the US is directly targeting German Health Minister Nina Warken's multi-billion-euro healthcare savings package slated to be passed by the Bundestag within the next few weeks and aimed at forcing further rebates from pharmaceutical companies. Is there any substance to the US claims? A look at one specific innovative German drug is instructive in that it highlights massive price differences depending on where a patient is buying it: Jardiance, with the active ingredient empagliflozin, was developed by Germany's Boehringer Ingelheim and is the world's most popular medication for treating type-2 diabetes and heart failure. The cost for a one-month supply of 30 tablets is roughly €80 for out-of-pocket and privately insured patients in Germany, those on public health insurance are liable for a co-pay of a maximum of €10. According to Boehringer Ingelheim's US subsidiary, uninsured patients or privately insured patients in the US who have not yet reached their annual deductible, must pay a full list price of roughly €300. Boehringer USA says that some pharmacies may charge even more. On the other hand, Boehringer USA says that older, handicapped, seriously ill and low-income US patients covered under Medicare or Medicaid pay between zero and $50 dollars for the drug. The leverage wielded by Germany's public health insurance funds translates into lower drug prices for German consumers Image: C. Ohde/Bildagentur-online/picture alliance So does that mean the massive price differences the Trump administration is pointing to only apply to the uninsured and those with high deductibles? One would be hard-pressed to find a health economist who would dispute the fact that US patients tend to pay more for top-shelf drugs than those insured in Germany. That fact was documented in a March report based on research conducted by German media outlets NDR, WDR, and the Süddeutscher Zeitung and the New York Times newspapers. Accordingly, patent-protected medications remain more expensive in the US than in Germany. Lack of transparency in different national markets makes it easy for pharmaceutical companies to demand higher prices, says Helmut Schröder of the Wissenschafltliches Institut der AOK (WIdO) — a scientific research institute linked to the AOK network of German public healthcare insurers — who led the study.
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