Why are drug prices so high in America? Trump doesn’t have the right answer | Susi Geiger and Théo Bourgeron

When Donald Trump mentioned the price of drugs on December 19, he had a familiar resonance. Americans, he says, pay way too much for their drugs – and it’s everyone’s fault.

There would be no question of curbing private insurers or pharmaceutical profits. Instead, Trump blamed foreign governments for getting a better deal. Countries like France, Germany and Japan, he argued, rely on the United States by keeping their drug prices low.

Later that day, at a rally in North Carolina, he staged an imaginary confrontation with Emmanuel Macron. Trump claimed to have told the French president that France would have to double or triple the price of its drugs – and that France would eventually give in. With this tough approach, Trump has promised to cut U.S. drug prices “by 700 percent,” a figure so absurd it barely bears scrutiny.

Trump is right on one point: the American system is a failure in public health. Drug prices are incredibly high. Millions of Americans struggle to afford essential medications like insulin. Private insurers add costs without improving access. The result is a country that spends more on health care than any other country, but whose life expectancy is lower than many poorer countries.

But Trump’s explanation is wrong. Americans do not pay high prices so that citizens of Europe, Canada, South Korea and Japan can benefit from cheap drugs. They pay high prices because drug companies charge what they can make.

Patients in other countries and their governments pay less than Americans, but they hardly get drugs for free. Prices of new drugs are high and increasing everywhere. The real winners are the shareholders of multinational pharmaceutical companies that have recorded extraordinary profits, dividends and share buybacks over the past two decades – more than $1.5 trillion between 2000 and 2018. The majority of them are owned by the United States. In 2024, U.S. companies earned 49% of the revenue of the 20 largest pharmaceutical companies.

This matters because Trump’s outburst points to something bigger than campaign rhetoric. The United States is now turning against a global pharmaceutical system it helped create.

This system took shape in the 1990s, when rich countries imposed stricter rules on intellectual property through global trade agreements, particularly the infamous Trips agreement of 1994. Patent rules were strengthened and harmonized around the world, with devastating effects on many patients in countries dependent on generic manufacturing. The new patent rules have largely benefited large pharmaceutical companies based in the United States, Europe and Japan.

In return, through parallel trade agreements, poorer countries were offered access to rich markets for their manufactured goods and were drawn into global supply chains. The system generated huge profits for pharmaceutical investors, but also restricted access to drugs and drove prices even higher.

Today, this model is being put to the test. Pharmaceutical companies devote a smaller share of their revenues to research, to innovations often considered less innovative by experts, while remunerating investors more. In 2024, US pharmaceutical giant Pfizer spent only 18% of its revenue on internal research and development, while 27% went to shareholders in the form of dividends and debt repayments. Innovation has slowed. Advances that transform public health are rarer, while ultra-expensive treatments for small groups of patients become the norm.

At the same time, countries outside the old system are catching up. China, for example, has built a vast state-backed pharmaceutical industry and now produces vaccines and medicines without relying on Western patents. Between 2021 and 2022, Chinese companies alone were able to produce 3.4 billion doses of Covid-19 vaccine, or 28% of all doses produced at the time. Even countries like Cuba quickly developed their own vaccines through a state-controlled biotechnology ecosystem.

From Washington’s perspective, the problem is that profits may have peaked. When American industries face this kind of pressure, they tend to look for someone else to pay. Trump’s response is to target allies rather than corporations.

Instead of challenging domestic pharmaceutical power, he wants to force European and Asian allies to pay more for American drugs, while lowering prices for American citizens. It’s a familiar strategy: exerting economic pressure on partners who depend on U.S. military protection and have limited room for resistance.

This could put governments in Europe and Japan in a difficult position. Their domestic pharmaceutical companies have long called for higher domestic prices, closer to U.S. levels. Private insurers would probably not object. But voters would, because public health systems would quickly be unable to handle even higher price levels.

Trump presents his plan as a defense of American patients. In reality, it protects the same commercial interests that made drugs unaffordable – while exporting the harm to others.