The developed world has long forced American patients to disproportionately shoulder the cost of pharmaceutical innovation. And President Trump has had enough. He recently put our allies on notice — by launching a formal trade investigation into Germany's unfair drug pricing practices and signaling his readiness to formally investigate other nations if they refuse to change course.
Those investigations are desperately needed. Germany's government is poised to enact an even more aggressive price-setting scheme in the coming weeks, and Japan's leaders are considering similar steps.
The official probe into Germany's drug pricing practices will give Trump administration officials the leverage needed to bring Germany to the negotiating table and compel an end to its freeloading. The administration should now follow suit in Japan.
Nearly every wealthy U.S. trading partner — including the United Kingdom, France, and South Korea — uses government price controls to suppress payments for innovative U.S. medicines. But Germany and Japan are among the worst offenders.
These policies shift the cost of pharmaceutical research and development onto Americans. Indeed, biopharmaceutical companies earn roughly three-quarters of their global profits in the United States, even though the U.S. represents only one-quarter of the world economy.
Fortunately, President Trump recognizes the imbalance — and has already shown how trade policy can help correct it.
His administration recently struck a landmark deal with the United Kingdom. In exchange for avoiding threatened tariffs, the UK agreed to double its drug spending over the next decade and reduce the amount of revenue it claws back from companies through rebate mechanisms.
That agreement was a real victory for Americans. It committed a wealthy ally to paying a fairer share of global pharmaceutical R&D costs, reducing the burden that has long fallen on the United States. It also strengthened incentives for domestic research and manufacturing.
But there is still considerable ground left to cover with America's trading partners. Germany and Japan, especially, appear determined to double down on their current policies.
Both governments appear to be betting that the United States is unwilling to impose meaningful trade consequences for discriminatory pricing practices. The Trump administration already proved Germany wrong — and should do so in Japan. A Section 301 investigation is the right tool.
Launching these probes allows U.S. officials to formally examine how our allies use price controls to systematically devalue American medicines and build a record supporting corrective action.
If the investigation concludes that these governments have engaged in unfair or discriminatory practices against U.S. companies, the administration could impose retaliatory measures, including tariffs and other penalties. That outcome is avoidable — if Germany and Japan agree to meaningful reforms instead.
Americans have footed the bill for the pharmaceutical innovation the world depends on for far too long. Washington should use every available trade tool to bring allies like Germany and Japan to the table — and finally end their free-riding.
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.
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