Germany has found a convenient way to cut healthcare costs: send the bill for medical innovation to the United States.
Under a new policy, Germany will tighten its already aggressive controls on what drugmakers can charge for innovative medicines. The result is predictable: Germany will contribute even less toward the cost of developing new treatments while American patients shoulder more of the burden.
Germany is hardly alone. Across Europe, wealthy countries suppress drug prices by government decree while relying on the U.S. to finance the vast majority of pharmaceutical innovation.
Today, the public generates roughly three-quarters of global pharmaceutical profits even as foreign patients gain access to the same medicines at heavily discounted prices. President Donald Trump has spent years arguing that wealthy allies should stop free-riding on American taxpayers for their security. The same principle applies to medical innovation.
As someone born in Germany, I find my home country’s approach frustratingly familiar.
For years, Germany has used aggressive price controls and reimbursement restrictions to suppress what it pays for innovative medicines. That allows Berlin to contain healthcare costs while shifting more of the burden of pharmaceutical innovation onto the U.S.
Germany’s system also distorts access to innovative medicines. Regulators frequently conclude that new therapies offer little added benefit, leading to delayed launches, steep price reductions, and coverage restrictions.
The consequences extend beyond Germany’s borders. Price controls are only one part of a broader system that drives up costs and distorts incentives. Middlemen throughout the pharmaceutical supply chain also extract enormous value without contributing to the discovery of new medicines. Yet the need for the U.S. to rein in domestic middlemen should not excuse wealthy countries from paying their fair share for pharmaceutical innovation. The Trump administration should use its leverage to secure a fairer pricing relationship between the U.S. and the European Union and put an end to the free-riding by America’s wealthy allies.
Developing a new medicine typically takes more than a decade and costs nearly $2.7 billion. When wealthy countries refuse to contribute meaningfully to those costs, they weaken the incentives that make future breakthroughs possible. One analysis found that if Germany paid a fairer share toward pharmaceutical innovation, patients worldwide could benefit from more than three additional new medicines every year.
Those costs do not simply disappear. Because the U.S. remains the world’s largest market for innovative medicines, pharmaceutical companies increasingly rely on American sales to offset losses imposed by foreign price controls. The result is exactly what Trump has warned about for years: American patients end up subsidizing healthcare systems in wealthy foreign countries.
Germany’s latest policy shows that it is not taking those concerns seriously. And if the U.S. fails to respond, other countries will have every incentive to follow Germany’s lead.
Trump has already shown that tough negotiations can produce results. In April, he reached an agreement with the United Kingdom that will reportedly raise British prices for innovative medicines by roughly 25% — a sign that wealthy allies can be pressured to stop free-riding on American patients.
Germany should face similar pressure.
The Trump administration has already taken an important first step by launching a Section 301 investigation into Germany’s persistent underpayment for innovative medicines. That investigation should give U.S. policymakers additional leverage to press Germany — and other wealthy nations that utilize similar pricing practices — to pay a fairer share for the medicines from which they benefit.
Ultimately, Trump should pursue a broader international framework for more fairly sharing the costs of medical innovation. Just as he pushed NATO allies to contribute more to collective defense, he should insist that wealthy countries contribute more to the research and development that produces lifesaving medicines.
MEDICAL STUDENTS ARE BEING TRAINED IN LEFT-WING ACTIVISM. THAT PUTS US ALL IN DANGER
For too long, rich countries have enjoyed the benefits of U.S. pharmaceutical innovation while refusing to pay a proportional share of its cost. American patients should not be expected to bankroll the world’s medicines indefinitely. And German patients deserve better than a system that restricts access to cutting-edge treatments simply to keep government spending down.
The U.S. is the world’s leading engine of medical innovation. Trump should use America’s economic leverage to ensure wealthy countries such as Germany finally begin paying their share.
Dr. Wolfgang Klietmann is a former clinical pathologist and medical microbiologist at Harvard Medical School.