Protect American Innovation Without Importing Foreign Price Controls
This morning, the America First Policy Institute (AFPI) published a new issue brief titled, Put Americans First by Ending Global Freeloading. In the brief, AFPI recommends the United States implement Most Favored Nation (MFN) drug policies in order to prevent the rest of the world from leeching off of American pharmaceutical innovation. While foreign countries freeloading off American innovation is a legitimate problem, simply importing foreign price controls into America’s healthcare system is not the answer.
It is foolish to assume that U.S. drug firms can simply demand higher prices overseas by either banding together or threatening to leave the market.
Patent Retaliation: If a company independently withdraws from a market for commercial reasons, European governments could retaliate by revoking its patents under Article 5 of the Paris Convention for the Protection of Industrial Property, which allows compulsory licensing when a patent holder declines to sell its product.
Cartel-Like Perception: If multiple drug companies simultaneously withdraw from a market absent higher payments, it would likely be seen as a cartel-like strategy to manipulate drug pricing, violating EU competition law.
Only a government-to-government trade negotiation can address the imbalance caused by European government price controls; individual company actions can’t resolve the core problem.
To end foreign freeloading, the United States Trade Representative must engage foreign governments to ensure they pay their fair share.
Applying foreign countries’ price controls here would not end freeloading, in fact, it worsens it by lowering our prices.
The AFPI approach would lead to a massive reduction in our competitive position with China by forcing a reduction in private investment and new therapies while China and other adversaries are ramping up their capabilities in these sectors.
One third of all products are licensed in China, the AFPI approach could drive that to more than half, making the United States a follower, not a leader.
While addressing global freeloading on American innovation is a real concern, importing foreign price controls is not the solution. What is needed is a strategic, government-to-government approach to ensure fair pricing and protect America’s competitive edge. By focusing on direct negotiations with foreign governments, we can safeguard innovation and maintain our leadership in the pharmaceutical sector.