For decades, America’s biotechnology leadership has relied on an innovation ecosystem where startups, university researchers, entrepreneurs, and investors work together to turn scientific discoveries into lifesaving medicines. This ecosystem has made the US the world’s leader in biomedical innovation. Today, the US conducts roughly two-thirds of global pharmaceutical R&D and is home to 85% of the world’s biotechnology startups.
Biotechnology has delivered enormous benefits for the American economy. The industry supports hundreds of thousands of high-skilled jobs, attracts billions of dollars in investment, strengthens cutting-edge research universities, and anchors one of America’s most strategically important industries.
But that innovation ecosystem depends on policies that reward extraordinary risk-taking. Every new medicine represents years of failed experiments, billions of dollars in investment, and enormous uncertainty. Only 1 in 10 drugs that begin FDA clinical trials ever make it to market. But the few that do generate the returns needed to finance the next generation of startups, laboratory research, manufacturing facilities, and clinical trials.
America’s innovation economy is now facing a new challenge — and it’s coming from one of our closest allies.
Germany recently approved drug price controls that will artificially deflate the value of innovative drugs sold in Europe. While German patients might see some savings, those costs will ultimately be transferred onto American companies, investors, and researchers.
Thankfully, Washington has recognized the problem. This month, the US Trade Representative launched a long-overdue Section 301 investigation into Germany’s proposed price controls to determine whether they unfairly burden US commerce.
But it’s only a first step. The question is whether Washington will continue fighting for the US to remain the world’s leading hub for scientific research, entrepreneurship, and technological innovation.
Foreign price controls weaken the entire innovation ecosystem. The first casualties are the small biotechnology firms with one promising therapy, the university researchers commercializing a laboratory breakthrough, or the small venture capital funds deciding whether to finance another high-risk startup. Every dollar that disappears from the innovation ecosystem is a dollar that cannot be invested in the next generation of American inventions.
Germany’s existing price controls already reduce revenues for innovative medicines by roughly $35 billion a year — enough to deprive the world of more than three new medicines annually. That translates to fewer American jobs, reduced American innovation, and ultimately fewer cures for the world’s deadliest ailments.
And the timing couldn’t be worse. China is investing aggressively to become the world’s biotechnology leader, now initiating more clinical trials than the US and rapidly expanding its domestic innovation ecosystem. America cannot afford policies — whether foreign or domestic — that make it less attractive to build companies and finance research here at home.
The Section 301 investigation is a welcome first step in recognizing the problem. But the US should use every available tool to press Germany towards meaningful reforms and make it clear that wealthy allies cannot continue to undermine American innovation.
America’s leadership in biotechnology — and the millions of jobs it’s created — was never inevitable. It has been the product of decades of sustained investment, entrepreneurial risk-taking, strong intellectual property protections, and capital willing to finance ideas long before they’re profitable. If Washington wants that ecosystem to keep flourishing, it must defend it.