August 10, 2026
Catherine Gibson, Deputy Assistant for Monitoring and Enforcement
Jennifer Thornton, General Counsel
Office of the United States Trade Representative
600 7th Street, Northwest
Washington, DC 20508
Comments Re: Docket Nos. USTR–2026–0463 and USTR–2026–0464
Dear Deputy Assistant Gibson and General Counsel Thornton:
On behalf of National Taxpayers Union (NTU), America’s oldest national-level taxpayer advocacy organization, I write to provide comments regarding the United States Trade Representative’s (USTR) proposed Section 301 investigation regarding “Germany’s Persistent Underpayment for Innovative Pharmaceutical Products,” under Docket Nos. USTR–2026–0463 and USTR–2026–0464.
NTU asserts that taxpayers have an abiding interest in 2026-0463 and 2026-0464. For one, the tariffs contemplated upon the outcome of the Section 301 investigation here would have a direct impact upon American taxpayers. For another, Germany’s “free-riding” policies regarding pricing of U.S. innovator drugs likewise have a direct impact upon American taxpayers. It is therefore vital that policy in this area be properly modulated to ensure that U.S. patients and taxpayers derive the maximum benefit. With both principles in mind, we offer the following recommendations.
1) Foreign price controls and compulsory licensing are unfair and contrary to the express intent of Trade Promotion Authority. Clearly, Germany and other nations are taking gross advantage of United States leadership in the area of pharmaceutical development. No Patient Left Behind, a nonprofit coalition of patient advocates, researchers, and business partners dedicated to health care access, has employed data from independent sources such as RAND to calculate a “free-riding” margin that other countries enjoy in their socialized medicine systems to the detriment of American taxpayers. Germany comes out as one of the worst violators compared to the value it receives for its patients, by underpaying for U.S.-developed medicines at a 64% margin relative to purchasing power GDP per capita.[1]
As NTU has noted in numerous comments to USTR, the Department of Health and Human Services, and the Centers for Medicare and Medicaid Services, the uniquely American policy environment that permits access to nearly 90% of blockbuster drug discoveries and more than 90% of prescriptions filled through generics serves taxpayers well. This is a national security asset in and of itself, which, ironically, can be endangered by tariff policies under Section 232, 301, and other provisions of law often wielded in the name of national security. The USTR should consider working with the Department of Justice and other federal entities to provide U.S. businesses with the tools necessary to resist free-riding, such as antitrust exemptions against compulsory licensing, and Section 891 of the Tax Code which permits doubling the tax rate on the citizens and businesses of counties that impose discriminatory tax rates on U.S. citizens or businesses. As NTU wrote in comments to CMS from 2025, the “free-riding margin . . . could be described as similar in function to a ‘tax’ paid by Americans for the benefit of other countries’ health care systems.”[2] Debbie Jennings, the Senior Policy Manager for NTU’s research affiliate, has observed that:
[t]his retaliatory option [Section 891] has been identified by former U.S. Treasury officials, members of Congress, and thought leaders. Using Section 891 would hurt foreign citizens who pay American taxes but would have much less impact on the American economy as a whole than retaliatory tariffs.[3]
Thus, USTR as well as the U.S. government as a whole, has several policy options to address freeriding from Germany and other countries in connection to U.S. drug development.
2) Trade negotiations should prioritize ending foreign price controls. USTR, as well as the Executive Branch overall, have available to them a wide range of policy tools besides Section 301 investigations and tariffs which, unfortunately, have extended far beyond their normal and customary policymaking boundaries. As NTU Free Trade Initiative Director Bryan Riley has warned:
Section 301 tariffs are intended to secure the removal of foreign barriers, not to impose long-term tariff increases on Americans . . . Future USTRs, regardless of political party, may inherit essentially unlimited tariff power.[4]
To avoid this harmful outcome, NTU believes that, outside of Section 301 investigations, the vital objectives of protecting taxpayers and patients can be achieved through persistent, and firm negotiations with other countries. For example, the Trade Promotion Authority (TPA) that was affirmed by an act of Congress in 2015 expressly calls upon negotiations going forward to:
- Ensure “that the provisions of any trade agreement governing intellectual property rights that is entered into by the United States reflect a standard of protection similar to that found in United States law”;
- “[A]chieve the elimination of government measures such as price controls and reference pricing which deny full market access for United States products”; and
- “[E]nsure that government regulatory reimbursement regimes are transparent, provide procedural fairness, are nondiscriminatory, and provide full market access for United States products.”
While that explicit negotiating authority expired in 2021, TPA remains a lodestar for pharmaceutical trade policy going forward, and we urge USTR to remain dedicated to its vision.
These precepts have also served as useful guidance to obtain favorable outcomes for the United States in preventing the proliferation of Digital Services Taxes (DSTs), such as a longstanding agreement with Japan. More recently, the Canadian government ended its retroactive DST as a show of good faith in ongoing discussions with the United States. Negotiations over a long-term framework for trade with DSTs and pharmaceuticals in connection to the United Kingdom continue, and could lead to agreements that would have applicability to EU and other countries.[5] Pharmaceutical trade could benefit from such an approach.
3) Congress can and should exercise leadership in this area. The USTR’s negotiating position could be made stronger by affirmative expressions of trade policy from Congress. For instance, NTU has long expressed support for legislation such as the No Taxation without Representation Act. While some view such a proposal as a challenge to executive branch trade policymaking prerogatives, NTU believes that this legislation could actually send a message to trading partners that policy promulgated under USTR has broad and deep support from the legislative branch as well. As an NTU coalition letter signed by a dozen organizations stated in 2024, bills such as the No Taxation without Representation Act would recognize that “the Biden administration’s commitment to big government and central planning interfered with American businesses’ ability to make the most of their creativity, talents, and opportunities.”[6]
Additionally, NTU supports more recent legislation introduced by Representative Jodey Arrington (R-TX) known as the “USTRx Act” (H.R. 4780). This legislation would create a Chief Pharmaceutical Trade Negotiator at USTR, elevating the importance of issues such as Germany’s free-riding to the highest priority in the executive branch (while again affirming congressional support for a firmer stance on the matter).[7] NTU would contend that this approach is a flexible, utilitarian option that is likelier to yield more durable results for U.S. taxpayers and patients over the long term.
4) USTR can maximize U.S. leverage and credibility in any proceedings by avoiding arbitrary and counterproductive tariffs on pharmaceuticals as well as Most Favored Nation (MFN)-style schemes. Perhaps the most important stance that the U.S. government can take toward Germany’s obvious free-riding on our pharmaceutical sector’s innovation is to avoid homegrown price controls. Doing so would demonstrate leadership by example that also happens to be in the best interests of America’s free-market economy, not to mention the President’s executive order on pharmaceutical pricing that opposes “forcing American patients to pay for a disproportionate amount of global pharmaceutical research and development.” However, this should include avoiding reliance on “Most Favored Nation” (MFN) pricing policies for pharmaceuticals, which could import the very price controls the Trump Administration rightfully opposes.
In 2025 comments to USTR, NTU cautioned that “a serious shift in focus, away from the Most Favored Nation drug pricing model, will be necessary to gain an appreciation of factors actually driving the price differentials between what Americans pay for medicines versus what residents in other countries pay.” Moreover, NTU has urged repudiation of Section 11003 of the Inflation Reduction Act, which wields the threat of a confiscatory 95% excise tax to extract price concessions (falsely described as “negotiations”).[8]
Instead USTR can, and should, reflect the best reforms embodied in the Trump Administration’s tax, regulatory, and health care policies, including:
- Pro-Innovation Tax Policies toward Foreign Derived Intangible Income and R&D contained in the One Big Beautiful Bill Act, along with the clarity provided in the “side-by-side” agreement on Pillars One and Two;
- Changes to payment procedures in the 340B program and toward Pharmacy Benefit Managers to reduce systemic costs;
- More aggressive efforts to control waste, fraud, and abuse in Medicare and Medicaid; and
- Smarter approaches to coverage determinations that allow cutting-edge medications to reduce long-term costs such as hospitalizations in taxpayer-funded health care programs.
In short, NTU believes that a holistic policy approach to freeriding and other issues in the pharmaceutical sector, beyond Section 301 investigations, will best serve taxpayers and patients. As NTU’s Executive Vice President Brandon Arnold put it in a forthcoming article:
Comprehensive, multilateral trade negotiations are the most appropriate venue to move us in the direction of lower tariffs and fewer trade barriers and away from economic distortion, like that created by price controls.
International negotiations over complicated topics like prescription drug pricing aren’t easy, but the Trump Administration is perfectly suited to employ the art of the deal to counter harmful policies like price controls. And there’s no question it has the ability to do so without mixing in other harmful policies, like tariffs.
In this regard, NTU stands ready to assist USTR and other agencies. Thank you for your consideration of these comments.
Sincerely and respectfully,
Pete Sepp, President
[1] See NTU’s July 25, 2025 comments to USTR at: https://www.ntu.org/publications/detail/most-favored-nation-drug-pricing-model-wont-cut-costs-for-americans.
[2] Ibid.
[3] See the analysis at: https://www.ntu.org/foundation/detail/putting-american-interests-first-at-the-oecd.
[4] See the analysis at: https://thedailyeconomy.org/article/section-301-forced-labor-tariffs-would-dangerously-expand-executive-power/.
[5] For additional information, see: https://www.ntu.org/foundation/detail/discouraging-digital-services-taxes-through-us-trade-negotiations.
[6] See the letter at: https://www.ntu.org/publications/detail/ntu-joins-coalition-opposing-the-imposition-of-tariffs-without-congressional-approval.
[7] See a coalition letter NTU signed in support of the bill at: https://marketinstitute.org/market-institute-joins-coalition-backing-ustrx-act-to-end-foreign-drug-freeloading/.