The European Union is dispatching Ditte Juul Jørgensen, its most senior trade official, to Berlin on an urgent mission. The director-general for trade and economic security is to hold talks with the German Health Ministry and the Chancellor’s Office over the pharmaceutical dispute with Washington.
US Trade Representative Jamieson Greer launched an investigation in June into whether Germany sets reimbursement rates for innovative medicines too low, thereby disadvantaging American companies. US President Donald Trump could use the findings to impose additional tariffs.
The central issue is Germany’s drug-pricing system. When launching a new medicine, manufacturers may initially set the price themselves. The Federal Joint Committee then assesses how much additional benefit it offers over existing treatments. On that basis, manufacturers and statutory health insurers negotiate the long-term reimbursement price.
Washington sees this as an unfair division of the burden between countries. Germany and other wealthy European nations limit their spending while pharmaceutical companies earn a large share of their revenue in the United States.
The EU–US trade framework already caps certain US tariffs on European pharmaceutical products at 15%. The current inquiry, however, rests on a different legal basis. Brussels therefore fears that Washington could impose new duties not clearly covered by the agreement.
According to the German business daily Handelsblatt, the European Commission is looking for an offer that Trump can present as a victory. German pharmaceutical companies could lower their US prices or announce additional investment in American manufacturing and research facilities. Germany’s reimbursement system would remain intact.
Americans Pay the Higher Price
But does Washington have a point? The price gap is indeed substantial. A US government-funded study by the RAND Corporation compared medicine prices across 34 industrialized countries. In 2022, US gross prices across all medicines were almost three times German levels.
For patent-protected branded medicines, American prices were nearly four times as high as those in Germany. The gap was wider still with France. Prices in Italy and Britain were also considerably lower than in the United States for new branded drugs.
The pattern is sometimes reversed for generics, which are often cheaper in the United States than in Europe. The American market combines low prices for older medicines with exceptionally high costs for new, patent-protected drugs.
Germany is therefore not an exceptionally low-price market by European standards. Its total pharmaceutical spending per capita is among the highest in the OECD. The dispute centers on treatments whose prices reflect both the risks involved in research and the potential for future profits.
Who Pays for Innovation?
An analysis by the US Department of Health and Human Services shows how heavily pharmaceutical revenue is concentrated in the United States. Among 34 OECD countries, the US market accounted for almost 80% of sales of medicines launched between 2020 and 2025. For innovative medicines as a whole, the figure was around two-thirds.
Germany’s share was far smaller than its population and economic output would suggest. The same was true of France, Italy and Britain. American patients therefore provide much of the financial return on successful new medicines.
Europe also contributes substantially to medical research. Universities, public research institutes and government programs fund basic science, clinical networks and infrastructure. Washington’s criticism focuses on what happens once a medicine has been approved: which countries pay enough for successful products to keep further drug development commercially viable?
Pharmaceutical companies conduct research internationally, draw on publicly funded work and earn profits across numerous markets. Even so, the disparities are stark: for many new treatments, Americans pay several times as much as Europeans.
If US prices fall significantly, manufacturers will lose revenue from their most profitable market. Unless other wealthy countries pay more, companies could cut investment or focus it more narrowly on a small number of particularly lucrative drugs. Higher prices in Europe, meanwhile, would place a greater burden on health insurers, taxpayers and patients.
The EU must therefore do more than defend Germany’s healthcare system against American pressure. It must also address the imbalance in who pays for new medicines. Jørgensen’s talks in Berlin are intended to explore whether pharmaceutical companies can respond with lower US prices or additional investment in America. A public hearing is scheduled for September in Washington.