It’s time for USTR to get serious about Europe’s unfair pharmaceutical trade practices. Indications are that the innovative biopharmaceutical industry is finally ready to stand up for itself and signals from the White House are clear. The days of foreign nations freeloading on US drug research and development are coming to an end.
Since his first term, President Trump has said that American companies have been getting “systematically ripped off” by foreign governments and firms. He was right then – and now it’s time to do something about it. The bottom line is that foreign countries freeload off American medical innovation, enjoying the fruits of U.S. ingenuity while forcing American consumers to shoulder a disproportionate share of the burden of funding research.
For decades, federal officials have largely ignored these threats and left American research companies to fend for themselves. U.S. companies gave in to the bullying—quite understandably. Since they already spent the money to develop the drug, they figured it’s better to make some extra sales abroad, even if those sales are at a discount. Foreign price controls succeed because they are carried on the back of the American consumer.
Just as the President insisted that our NATO allies increase defense spending, many of these same nations must now step up and pay their fair share of global pharmaceutical innovation.
According to the President, “Our trade policy will prioritize that foreign countries pay their fair share for U.S.-manufactured drugs, so our drug companies have greater financial resources to accelerate development of new cures.”
Let’s not sugar-cost it. Many European pharmaceutical policies are mafia tactics. Not only are innovator companies given a take-it-or-leave-it price for access to government-run healthcare systems, but they’re also forced to pay “protection money” in the form of what are called “claw-backs” – one of many coercive and non-transparent pricing schemes used to shake down American drug develops. Claw-backs are the Don Corleone of national healthcare extortion rackets.
Claw-backs are brazen confiscation. They extort financial contributions from drug developers to offset deliberate underfunding of national healthcare systems. They are imposed under different forms, including mandatory drug rebates, price cuts, or the repayment (or “clawing back”) of company revenues. They are designed to artificially reduce drug prices and result in foreign governments paying less than their fair share of the pharmaceutical innovation provided by manufacturers while also limiting the ability of those companies to continue investing in novel therapies. It’s been a pay-to-play proposition. An offer pharmaceutical companies haven’t been able or willing to refuse.
In Italy, government drug spending is capped separately for retail and hospital channels. In 2024, Italy underfunded its hospital channel by €4 billion, forcing manufacturers to repay €2 billion to the government. In the U.K., claw-back rates have soared from 4–10% (2014–2021) to as high as 22–35% in recent years. As a result, total industry payments to the U.K. government have jumped by nearly 450%—from roughly £0.6 billion ($0.8 billion) on average in 2014–18 to more than £3.4 billion ($4.6 billion) projected for 2025.
About two thirds of the 27 European Union member states operate some type of claw-back model forcing pharmaceutical companies to pay back a proportion of their net sales revenue every year. Talk about rewarding bad behavior. Claw-back schemes hit U.S. innovators hardest. Of the 10 best-selling branded biologic medicines in Europe in 2022, six—including the top four—were made by American companies, while just two came from EU firms. And under a Most Favored Nation (MFN) policy or any other similar U.S. price control policy, the challenges of claw-backs will reverberate back to the U.S. in the form of higher costs for Americans.
Bottom line to date: No claw-backs. No access. And the deck is stacked. Strict European antitrust rules prohibit pharmaceutical manufacturers from developing a common strategy to minimize the impact of claw-backs -- under the threat of substantial financial penalties and the threat of being de-listed and excluded from national reimbursement programs.
One Congressional proposal worth considering is the creation of a Chief Pharmaceutical Negotiator within USTR. This role would be specifically tasked with ensuring trade negotiations prioritize reimbursement for innovative medicines and our trading partners are held accountable when they adopt price control measures or other discriminatory practices that shift a disproportionate share of R&D costs back onto American patients.
President Trump should empower USTR to insist that foreign nations immediately end the use of claw-backs and other unfair coercive mechanisms deliberately aimed at suppressing drug prices below their fair market value and artificially reducing company revenues that jeopardize their ability to invest in important research and development programs. It’s time for European claw-backs to sleep with the fishes.
America says, “Enough!”
Peter J. Pitts, a former FDA Associate Commissioner, is President of the Center for Medicine in the Public Interest and a Visiting Professor at the University of Paris School of Medicine.
