The Trump administration has successfully negotiated nine new pricing agreements with drug manufacturers, potentially reducing prescription medicine costs for Americans. This initiative underscores President Trump’s commitment to lowering drug prices through individual negotiations rather than broad mandates.
While commendable, a focus on reducing foreign free-riding on American drug innovation would yield more substantial results. For effective and lasting price reductions, and to preserve U.S. biomedical innovation leadership, the administration needs to concentrate on getting other countries to contribute fairly to the cost of medicine development.
Addressing Global Pricing Imbalances
For years, affluent countries have suppressed their costs for innovative medicines through various policies like price controls and mandatory rebates. This enables them to benefit from new treatments while Americans disproportionately shoulder development costs. Currently, U.S. patients contribute about three-quarters of pharmaceutical profits and over half of global research and development spending.
For a balanced approach, pressuring drugmakers within the U.S. isn’t the solution. Instead, the focus should shift to stopping foreign free-riding practices.
Lowering U.S. medicine costs without increasing foreign contributions risks damaging American patients and the biotech industry. Some in Congress have suggested tying U.S. drug prices to lower international prices. Such measures could harm research funding, shrink pharmaceutical development, threaten jobs, and weaken U.S. competitiveness against China.
International Negotiations as a Solution
The Trump administration’s negotiating capacity offers a path forward. Using strategies effective in recent negotiations with manufacturers, similar approaches can be applied internationally to urge foreign governments to adjust their pricing policies.
The United Kingdom provides a notable example. A deal negotiated by Trump mandates Britain to increase payments for new medicines by 25%. As Britain pays more, the financial load on the U.S. will lighten.
Additionally, the administration is working toward an agreement with Germany, where it has initiated an investigation into the negative impact of Germany’s price controls on American commerce. This move equips American trade officials with leverage needed for negotiating fairer terms with Germany.
Similar strategies should extend to other wealthy nations such as Japan, France, and Switzerland, which employ similar tactics to underpay for new drugs. In Japan, approximately half of newly launched medicines undergo annual price reductions.
Analysis suggests that if all developed nations paid U.S. prices for new prescription drugs, global pharmaceutical revenue could rise by $254 billion. This surge would benefit U.S. drug innovators, fostering a research and development boom, job creation across the nation, and more affordable treatments.
President Trump’s dedication to lowering drug prices and his administration’s negotiation skills and leverage could drive substantial changes internationally, ensuring foreign partners contribute their fair share to pharmaceutical innovation.
By shifting focus to trading partners and insisting on equitable contributions for drug innovation, the Trump administration has the potential to lower American patient costs while maintaining U.S. leadership in biopharma.
Ambassador Jeffrey Gerrish served as the Deputy U.S. Trade Representative for Asia, Europe, the Middle East, and Industrial Competitiveness from 2018 to 2020.