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The United States leads the world in the research and development, manufacturing and access of innovative medicines. Today, more than half of global biopharmaceutical research and development happens in the United States alone. That’s not by accident: America’s innovation ecosystem is the best in the world, thanks to a policy environment that incentivizes innovation and rewards progress, and it supports workers, the economy and our patients.

But for too long, other developed countries haven’t been paying their fair share for innovative medicines. This has real implications for what American taxpayers and patients pay. According to a new analysis by No Patient Left Behind, 26% of U.S. drug prices go toward covering the cost of foreign countries freeriding off U.S. innovation.  

Foreign governments refuse to pay their fair share for medicines. According to the new analysis, other wealthy countries pay 60% less on average for brand medicines than they should, based on their GDP per capita at purchasing power parity. To achieve these artificially low prices, governments use distortionary policies including:

• France and Germany, which reject robust clinical trial evidence to assert that new medicines offer no added benefit over existing therapies.
• Australia, Canada, Korea and the United Kingdom, which allow bureaucrats to devalue human life to justify ultra-low drug prices.
• Japan, which indiscriminately cuts prices for half of patented medicines every single year.

By arbitrarily setting the price of medicines, foreign government bureaucrats decide which medicines to cover and which to exclude. As a result, patients in other high-income countries only have access to an average of 43% of new medicines, compared to 87% for patients in the United States. These policies don’t just harm foreign patients, they’re bad for Americans too, who are forced to pick up the difference, translating to a hidden 26% tax on medicines purchased in the United States, as referenced above.  

Adopting harmful, foreign price setting policies at home only stands to threaten U.S. competitiveness, jobs and exports. Instead of copying policies that systematically devalue innovation, U.S. policymakers should address why Americans really pay more and use trade negotiations to require other high-income countries to pay a minimum percentage of their GDP per capita on new innovative medicines and ensure everyone is paying their fair share.