The United States spends far more on healthcare, on a per capita basis, than any other country in the world. There are many reasons why, including health insurance companies. But one reason has been largely overlooked: foreign governments maintain pricing systems that limit what they pay for drugs. The difference has been absorbed in the United States, with the result that Americans cover a disproportionate share of the world’s drug costs.
These pharmaceutical pricing systems need to be called out for what they are: trade distortions. And the Trump administration should treat these distortions just as it would treat any other trade distortion: with the remedies that are available under U.S. trade law, starting with an investigation of discriminatory measures.
Countries such as Germany, France and Japan impose government pricing mandates, mandatory rebates and strict market controls that cap what they pay for medicines well below U.S. market prices. That puts manufacturers in a bind. They can either accept the punitive terms these countries have established or find their products shut out of these countries.