Dive Brief:

• President Trump’s push to make other nations pay more for medicines is likely to backfire, pushing U.S. costs higher, according to the results of a new study from Harvard Medical School that focused on Germany.
• The research centered on Trump’s most-favored-nation policy, designed to cap drug prices for federal agencies like Medicaid based on amounts paid by foreign countries. Trump says the plan will ease costs for Americans, who generally pay more. But if other nations raise their prices, the benchmark goes up — and U.S. agencies will have higher costs as well, researchers said.
• A 25% increase in German drug prices would add about $6.2 billion to health insurance spending in the country, the study found. At the same time, U.S. Medicaid spending would rise by about $300 million. “Both countries lose from higher German prices,” the study found.

Dive Insight:

The research comes as both the pharmaceutical industry and the Trump administration are ramping up pressure on Germany to pay higher prices even as the country is struggling to bring healthcare costs down. A reform package passed in July increases required rebates for drugmakers.

As Germany considered the new measure, Eli Lilly and Boehringer Ingelheim said they would cut planned investments in the country, and Pfizer CEO Albert Bourla threatened to do so as well. More recently, Swiss drugmaker Roche said it would put expansion in Germany on hold.

Meanwhile, the U.S. Trade Representative in June kicked off an investigation into “persistent underpayment for innovative pharmaceutical products by Germany.” Health and Human Services Secretary Robert F. Kennedy Jr. called on the country to pay its “fair share.”

After an initial agreement struck in December, the U.K. bowed to U.S. pressure on pricing and announced a deal in April that critics said would cost the country’s health system billions of dollars. But Germany’s National Association of Statutory Health Insurance Funds is holding strong. The group initiated and supported the new analysis, conducted by a team at Harvard led by health policy researcher Thomas Hwang. The Harvard researchers had full control over the study and its results, the group wrote Wednesday.

The study found that some of the focus on German pricing is misplaced. It’s actually among the higher-price countries used for reference, and its early influence on the most-favored-nation calculations is only because medicines become available in Germany faster than in other places, the researchers added.

Germany’s insurance group said it’s important for the country to retain its independence in setting drug prices and not take on billions of dollars in new spending that wouldn’t bring down prices in the U.S. anyway.

“The pharmaceutical industry would be the sole beneficiary of these two-way spending increases,” the group said.