US opens Section 301 customs investigation against Germany over drug prices | What does this mean for Berlin?

The United States Trade Representative (USTR), Jamieson Greer, announced on Thursday (local time) that Washington had opened a trade investigation. The investigation focuses on what it calls “persistent underpayments for innovative pharmaceutical products” and could pave the way for retaliatory trade measures.

In a press release, ÚSTR said the investigation was initiated under Section 301 of the Trade Act of 1974. It will investigate whether the ongoing underpayment of innovative pharmaceutical products in Berlin is unreasonable or discriminatory and whether it burdens or restricts US trade. The announcement follows months of crucial discussions between Washington and its partners in Berlin.

Why is the US opening an investigation against Germany?

The probe against Germany, which Washington has already launched in dozens of other countries, comes after Berlin’s health ministry announced plans in April to overhaul the country’s statutory health care system to close a looming 20 billion euro ($23 billion) funding gap, Reuters reported.

The proposal sought to introduce a system of variable rebates for pharmaceutical products, but was withdrawn after facing strong opposition from the pharmaceutical industry. Since returning to the White House for a second term last year, US President Donald Trump has pursued a tough trade strategy, imposing a 10% basic tariff on imports and warning of 100% tariffs on goods from countries including China and France.

Earlier this month, the Trump administration also unveiled plans for tariffs of up to 12.5% on imports from about 60 countries after a Section 301 investigation concluded those countries had not done enough to prevent trade in goods allegedly made with forced labor.

If the ongoing investigation reaches a similar conclusion, it could open the way for the United States to impose tariffs on imports from Germany.

What did Jamieson Greer say?

The USTR said Trump has made it clear that American patients should not bear a disproportionate share of global pharmaceutical research and development.

He added: “I am particularly concerned by news that Germany is speeding up legislation that would further reduce its spending on innovative medicines. This is a serious step backwards at a time when our trading partners need to step up and start paying their fair share of funding for innovative pharmaceutical research and development.”

Expressing confidence that the matter could be resolved, Greer said, “We believe the United States and Germany can find a way forward that expands access to the most innovative medicines for the German people while ensuring fair compensation for medicines made by American workers.”

Reuters reported that Greer’s office will also open a docket for written comments on June 25, and its Section 301 committee will hold a public hearing on the investigation in September.

What is Section 301 of the Trades Act?

Section 301 of the Trade Act of 1974 aims to address unfair foreign practices that affect US trade. It can also be used to respond to unjustified, unreasonable, or discriminatory foreign government practices that restrict or burden U.S. trade.

Under Section 302(b) of the Trade Act, the USTR may itself initiate a Section 301 investigation. A Section 301(b) investigation determines whether acts, policies, or practices are unreasonable or discriminatory and burden or restrict U.S. commerce. After consideration of the advice of the Section 301 Interagency Committee, the ÚSTR will initiate an investigation.