What does the US investigation into Germany mean for pharma?
The US has launched a Section 301 trade investigation into Germany’s pharmaceutical pricing policies, arguing that Americans pay around four times more for branded medicines than patients in Germany. A public hearing is scheduled for September, and the investigation could lead to additional tariffs.
While German generics currently face no US tariffs and patented EU medicines are subject to a 15% rate, a separate 100% tariff on patented drugs and key ingredients is due to be phased in from July 31, unless manufacturers secure relief through US onshoring commitments and/or a Most Favoured Nation (MFN) pricing agreement. MFN status provides a country with the lowest tariffs, fewest trade barriers, and highest trade privileges compared to other trading partners.
The current US investigation appears to have been triggered by Germany’s latest proposals to curb public healthcare spending, aimed at saving €20 billion across the health system — a plan that has had significant pushback from the industry.
Many European countries, including Germany, negotiate drug pricing through mandatory discounts and rebates, primarily as a way for public or statutory insurance-funded payers to control costs. Pharma companies have to accept them to gain access to the markets.
After industry opposition, the German government dropped plans for a dynamic rebate system but has instead proposed a fixed 15.5% mandatory rebate on patented medicines, up from 7%, and extended a drug price freeze until 2030, measures the industry says will deter investment and research.
Pricing is a key factor in determining competitiveness and where pharmaceutical companies choose to invest, defining the global pharma order.
The European pharma industry is already facing intense pressure from the US and China, with pricing at the centre. Europe remains fragmented across national pricing systems, reimbursement rules and market access pathways.
As Diederik Stadig, Senior Economist at investment bank ING, said during HBI 2026:
“Europeans pay significantly less for their medication than their US counterparts. So if you’re a late-stage biotech looking to launch, why not do it first in a uniform market that rewards innovation?”
Germany has found itself at the centre of this shift. It often serves as a benchmark for European drug pricing due to its status as the European Union’s largest pharmaceutical market by value.
But other countries may follow suit. Switzerland is currently reviewing measures to reduce medicine prices, raising concerns within the industry that it could become the next target of a US investigation. With the strong lobbying against EU pricing in Washington, France, Spain and Italy are likely to be next.
The US administration has pointed to its recent agreement with the UK as a potential model. The arrangement linked pharmaceutical pricing discussions with broader trade cooperation, with the UK agreeing to increase payments for certain medicines while the US offered more favourable trade treatment.
Germany, for its part, has pushed back on this investigation, warning that the probe could jeopardise a major US-EU trade pact that limits transatlantic export tariffs.
The likely outcome is a negotiated compromise rather than a full trade confrontation. The investigation may therefore become less about tariffs and more about reshaping the conversation around who pays for innovation.
The bigger takeaway is that governments can no longer view pharmaceutical pricing in isolation. Decisions about what health systems pay for medicines are increasingly influencing trade relationships, investment decisions, and where companies choose to launch new products.
Finding the right balance between affordable healthcare and maintaining an attractive environment for innovation is likely to become an increasingly important policy challenge—not just for Germany, but for Europe as a whole.
We would welcome your thoughts on this story. Email your views to Hemani Vipul Sheth or call 0207 183 3779.
