President Donald Trump is planning to launch a new investigation into drug prices aimed at ensuring foreign countries pay as much as Americans do for their medicines, according to people familiar with the matter.
The probe would fall under Section 301 of the Trade Act of 1974, the people said, declining to be identified because discussions are private. Section 301 is a powerful tool that gives the president powers to impose tariffs in response to other nations’ trade measures it deems as discriminatory to American businesses or in violation of US rights under international trade agreements.
The White House declined to comment. News of the planned investigation was first reported by the Financial Times.
The fresh probe could result in tariffs or other trade actions in the coming months related to pharmaceutical products, which would exacerbate tensions with major economies. Drugmakers typically charge much less for medicines in countries where governments can directly negotiate lower prices. The Trump administration has railed against this system, calling it “global freeloading on American pharmaceutical innovation.”
The Section 301 investigation would give the administration a path to force countries to align their drug prices with what Americans pay. The tariffs could be a “marginal positive” for the pharmaceutical sector, said Leerink Partners analyst David Risinger. “But it remains to be seen how much the Trump administration can drive up ex-US drug prices.”
It marks another turn in Trump’s unpredictable trade policy, which has resulted in sweeping global tariffs and renewed brinkmanship with China. Still, Trump has yet to follow through on prior threats to slap new import taxes on drugs, and the investigation could prove to be yet another leverage play by the president. Trump has cajoled pharmaceutical companies to lower drug prices for US consumers, demanding they offer the best price for drugs or face consequences.
The president last month threatened to slap a 100% tariff on branded or patented medicines starting at the beginning of October unless manufacturers started to reshore production to the US. But Trump backed away from that proposal, as he and his advisers said they wanted to give companies more time to lower prices and open American factories.
US drug prices have been a focal point of Trump’s health-care agenda. In May, he signed an executive order calling on the pharmaceutical industry to cut costs to the lowest level paid by similar countries. Over the summer, he sent letters to 17 drugmakers insisting they immediately lower what they charge Medicare for existing medicines, giving them 60 days to comply.
Section 301 investigations focus on foreign governments, but the US Trade Representative can conduct parallel reviews of a common concern that relates to multiple countries. It did so during Trump’s first term, looking at the digital services taxes of multiple nations, including France and the UK.
Drug companies, for their part, appear to support Section 301 tariffs. AbbVie Inc. Chief Executive Officer Robert Michael said that the tariffs are something that can be used to address “unfair practices” related to international drug pricing.
“Clearly, I think the pharma companies alone cannot get it done,” he told investors at a Morgan Stanley conference in early September. “We do need partnership with the administration through trade negotiations to address these unfair practices. There are tools that are available to the president. Section 301, certainly something that can be employed to address these unfair practices.”
The probe would fall under Section 301 of the Trade Act of 1974, the people said, declining to be identified because discussions are private. Section 301 is a powerful tool that gives the president powers to impose tariffs in response to other nations’ trade measures it deems as discriminatory to American businesses or in violation of US rights under international trade agreements.
The White House declined to comment. News of the planned investigation was first reported by the Financial Times.
The fresh probe could result in tariffs or other trade actions in the coming months related to pharmaceutical products, which would exacerbate tensions with major economies. Drugmakers typically charge much less for medicines in countries where governments can directly negotiate lower prices. The Trump administration has railed against this system, calling it “global freeloading on American pharmaceutical innovation.”
The Section 301 investigation would give the administration a path to force countries to align their drug prices with what Americans pay. The tariffs could be a “marginal positive” for the pharmaceutical sector, said Leerink Partners analyst David Risinger. “But it remains to be seen how much the Trump administration can drive up ex-US drug prices.”
It marks another turn in Trump’s unpredictable trade policy, which has resulted in sweeping global tariffs and renewed brinkmanship with China. Still, Trump has yet to follow through on prior threats to slap new import taxes on drugs, and the investigation could prove to be yet another leverage play by the president. Trump has cajoled pharmaceutical companies to lower drug prices for US consumers, demanding they offer the best price for drugs or face consequences.
The president last month threatened to slap a 100% tariff on branded or patented medicines starting at the beginning of October unless manufacturers started to reshore production to the US. But Trump backed away from that proposal, as he and his advisers said they wanted to give companies more time to lower prices and open American factories.
US drug prices have been a focal point of Trump’s health-care agenda. In May, he signed an executive order calling on the pharmaceutical industry to cut costs to the lowest level paid by similar countries. Over the summer, he sent letters to 17 drugmakers insisting they immediately lower what they charge Medicare for existing medicines, giving them 60 days to comply.
Section 301 investigations focus on foreign governments, but the US Trade Representative can conduct parallel reviews of a common concern that relates to multiple countries. It did so during Trump’s first term, looking at the digital services taxes of multiple nations, including France and the UK.
Drug companies, for their part, appear to support Section 301 tariffs. AbbVie Inc. Chief Executive Officer Robert Michael said that the tariffs are something that can be used to address “unfair practices” related to international drug pricing.
“Clearly, I think the pharma companies alone cannot get it done,” he told investors at a Morgan Stanley conference in early September. “We do need partnership with the administration through trade negotiations to address these unfair practices. There are tools that are available to the president. Section 301, certainly something that can be employed to address these unfair practices.”
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