The Trump administration has launched an investigation into Germany’s pharmaceutical pricing, claiming that “persistent underpayment” for drugs is forcing Americans to subsidize research and development (R & D) globally. And it’s threatening to impose tariffs if those pricing practices are deemed unfair.

In most developed countries, drug prices are set or negotiated by the government. In the U.S., pharmaceutical companies set the prices, based more on what the private market can bear.

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That’s created a situation where unbranded generic drugs (about 90% of prescriptions in the U.S.) cost on average 2.78 times higher in this country than in 33 other OECD nations, according to a 2024 RAND report. For brand-name drugs, that gap is even higher, at 4.22 times what other nations (1)pay (1).

Now, the U.S. wants Germany to follow in the footsteps of the U.K., which recently struck a deal that — in exchange for tariff exemptions — will see the country pay more for new drugs.

But America’s “most favored nation” policy framework “incorrectly deflects blame for high American prices to other countries,” according to the Center for Global (2)Development (2) (CGD).

Government purchasers in the US could use the power of monopsony (being a single buyer) to lower prices for current drugs, and could set up incentives to keep future drugs affordable too, CGD writes, adding the country could “look at ways to rein in pharmaceutical company marketing and patent evergreening strategies.”

Here’s why the issue is so complicated, and what you can do to lower your bill — despite the larger political issues at play.

What’s happening in Europe

In April, the U.K. government agreed to a deal with the U.S. that would see that country increase spending on drugs to avoid U.S. tariffs.

It hasn’t exactly gone over well with the public. This “geopolitical game” risks “sabotaging our carefully worked-out mechanism for keeping a lid on big pharma’s overinflated prices, and they have done so without so much as a debate in parliament,” Nick Dearden, director of Global Justice Now, told The (3)Guardian (3).

Global pharmaceutical companies, for their part, are threatening to pull investment to pressure policymakers in Europe. And Germany is next on the list (4).

Pfizer, AstraZeneca and Eli Lilly have all warned Germany that they may not launch new medicines in Germany — or might scrap investment — if Germany’s proposed healthcare changes go ahead (4).

Thanks to a 20-billion-euro public healthcare budget shortfall, Berlin is proposing reforms such as higher discounts and rebates on pricey new drugs. This is what Washington is taking issue with. But German Chancellor Friedrich Merz says the U.S. must respect Germany’s pharma pricing as a domestic (5)matter (5).

Read More: Here are 5 fixed costs Americans constantly overpay for. How many are sabotaging your budget?

What’s happening in the US

In other OECD countries, governments are the biggest purchasers of any given drug. They negotiate directly with drug companies on behalf of their citizens. According to the Trump administration, “Inflated prices in the United States fuel global innovation while foreign health systems get a free ride (6).”

But the U.S. has a fundamentally different system than the rest of the world. It has chosen not to have a single public healthcare system that can negotiate drug prices for everyone.

“Other countries are not receiving ‘discounts’ against the US ‘real’ price. Instead, everyone is paying prices somewhere below their willingness to pay (the value of the drug to the purchaser) and somewhere above the marginal cost of producing the drug (the minimum price it is worth selling at for the producer),” the CGD (2) writes.

If the price is too high, “they frequently just wouldn’t buy the drugs.”

So, while the U.S. does, in fact, pay much more for prescription drugs — and those high prices do help fund R & D — the pharmaceutical sector “has systematically fought efforts to negotiate or lower prices for Americans,” according to CGD.

And, despite Washington’s recent deals with pharmaceutical companies to bring down costs, those companies have announced price increases on at least 350 branded drugs for 2026 by a median of 4%, according to healthcare research firm 3 Axis Advisors (7).

“The United States has deliberately chosen a system permitting manufacturer pricing autonomy, protected by patent laws and regulatory exclusivity provisions, subject to relatively weak constraints from government negotiation and market competition,” notes the nonpartisan educational site GovFacts (8).

About a quarter of revenues from drug companies are reinvested into R & D, according to estimates by the Congressional Budget Office. The rest goes toward other expenditures, including marketing, lobbying and shareholder (9)profit (9).

How to keep medication costs under control

With high drug prices, some Americans end up rationing their meds, skipping doses or simply not taking them. And that can lead to worse health outcomes and higher healthcare costs over the long-term.

So how can you reduce your out-of-pocket costs without compromising your health?

Generic medications typically cost less than branded ones, so you can ask your healthcare provider if you can switch to unbranded medications that will treat the same condition.

You can also use price comparison tools (such as GoodRx and Pharmacy Rx) to search prices at different pharmacies. Prices can vary widely for the same medicine (and can change, just like the price of gas), since pharmacies set their own prices.

For Medicare beneficiaries, once you reach your Part D out-of-pocket cap ($2,100 in 2026), you don’t have to pay for the rest of the year — at least for covered meds. You could also be eligible for lower co-payments through the Extra Help program, based on your income (10).

Some drug companies have patient assistance programs, which could include co-pay assistance and co-pay cards, which provide rebates when you purchase their drugs. Some charities and nonprofits also offer patient assistance or grant programs.

You could also check if your employer offers a Health Care Savings Account (HSA) or Flexible Spending Account (FSA). This can help you save money (and earn interest) specifically for healthcare expenses — and these accounts can be transferred to a new employer.

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Article Sources

We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.

RAND Corporation (1); Center for Global Development (2); The Guardian (3); Reuters (4); YouTube (5); The White House (6); CNN (7); GovFacts (8); Congressional Budget Office (9); Medicare.gov (10)

This article originally appeared on Moneywise.com under the title: US decries the ‘free ride’ countries with public health systems are getting by negotiating deals for prescription drugs

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.