The United States has launched a Section 301 trade investigation into Germany's pharmaceutical pricing policies, alleging that 'persistent underpayment' for innovative drugs forces American patients to bear a disproportionate share of global research and development costs — a move that threatens to unravel a hard-won transatlantic trade truce.
U.S. Trade Representative Jamieson Greer announced the probe on Thursday evening, saying it would determine whether Germany's pricing practices for innovative pharmaceutical products are 'unreasonable or discriminatory' and whether they 'burden or restrict U.S. commerce.' 'President Trump has made clear that American patients should not be shouldering a disproportionate share of global pharmaceutical research and development,' Greer said in a statement. 'I am particularly concerned with news that Germany is fast-tracking legislation that would further reduce its spending on innovative pharmaceuticals,' he added, calling it 'a serious step backwards.'
Germany's Healthcare Reform and the U.S. Response
In April, the German Cabinet greenlit a comprehensive healthcare reform package aimed at lowering insurance premiums by saving more than €16 billion. Chancellor Friedrich Merz called the reforms 'historic,' but the measures have already drawn sharp criticism from the pharmaceutical industry. Earlier this month, U.S. pharmaceutical giant Eli Lilly announced it would halve its original planned investment of €2.3 billion ($2.7 billion) in Alzey, Rhineland-Palatinate, citing the German government's healthcare reforms in its decision.
The USTR's investigation comes after 'months of meaningful discussions with our German partners in an effort to resolve this issue,' Greer said. The probe will examine whether Germany's pricing mechanisms reduce pharmaceutical company revenues and discourage continued investment in innovation. The USTR has also pointed to evidence that Germany applies 'unfair pricing' policies and practices to advanced pharmaceutical products.
Threat to Transatlantic Trade Truce
Germany has warned that the U.S. investigation could jeopardize the hard-won transatlantic trade deal struck last year at Trump's golf resort in Turnberry, Scotland. The Turnberry accord, which EU lawmakers finally voted to enact this week after months of wrangling, set a 15 percent tariff ceiling on most European exports to the U.S. — including branded medicines. The rate is due to take effect at the end of July.
If the U.S. finds Germany to be at fault, President Donald Trump could hit Germany with higher tariffs, calling into question the entire agreement. 'I assume that the United States of America will honor the agreement,' Chancellor Friedrich Merz told journalists Friday after meeting with EU leaders in Brussels. A German government spokesperson warned the U.S. should not 'jeopardize their proper implementation on either side.'
German and Industry Reactions
Germany's Health Minister Nina Warken said in Luxembourg this week that the country's statutory health insurance system faces a 'strained financial situation,' which would make it difficult to pay higher prices, but that she was dedicated to having 'constructive' talks with the U.S. The German innovative pharma trade group, vfa, said it is currently waiting for further clarification from U.S. authorities.
Pharma lobbies are already pressing German officials to scrap some of their planned cost-cutting measures, such as 'dynamic' manufacturer discounts. Currently, companies must repay 7 percent of the price of every package of patented medicine sold. The reform would retain that 7 percent rebate while introducing an additional charge that would rise or fall depending on the finances of Germany's statutory health insurers. Pfizer's CEO Albert Bourla recently penned a letter to Chancellor Merz stating that the pricing reforms are threatening 'predictability' for long-term investments in the country.
The investigation — a measure Washington has previously applied to dozens of other countries — comes after the German Health Ministry announced in April a comprehensive reform plan for the mandatory healthcare system, aimed at narrowing an estimated budget shortfall of up to 20 billion euros ($23 billion). The USTR will open a docket for submission of written comments on June 25, and its Section 301 Committee will hold a public hearing on the probe in September.
