USTR Launches Investigation into Foreign Drug Price Controls... South Korea May Also Be Included

Investigation into Excessive R&D Cost Burden on American Patients
U.S. Voices Longstanding Discontent:
"Innovative New Drugs Undervalued in Korea"

The United States Trade Representative (USTR) has launched an investigation, under the direction of President Donald Trump, into whether pharmaceutical prices are being unfairly and artificially suppressed by foreign governments. There is a possibility that South Korea may be included in the scope of this investigation, raising concerns within the relevant industry.

Jaimeon Greer, United States Trade Representative (USTR) Photo by Yonhap News

On May 23 (local time), the USTR announced that it would be collecting stakeholder opinions regarding actions, policies, or practices that are unreasonable or discriminatory and that have the effect of forcing American patients to bear a disproportionate share of the costs of global pharmaceutical research and development. The scope of these opinions includes cases in which pharmaceutical product prices are suppressed below fair market value in foreign countries. The USTR plans to accept submissions until June 27.

Previously, on May 12, President Trump announced a set of policies aimed at reducing the cost burden of prescription drugs for Americans and signed an executive order to that effect. President Trump argued that pharmaceutical companies sell the same drugs at higher prices only in the United States, effectively causing American consumers to bear most of the research and development costs, while foreign consumers benefit from innovative pharmaceuticals at lower prices?what he described as a "subsidy."

President Trump instructed the USTR to take all appropriate actions necessary to end such "free-riding" by other countries. At the time, President Trump cited Europe as a primary example of free-riding, but there is also a possibility that, during the USTR’s public comment period, American pharmaceutical companies may raise complaints about South Korea. The United States has long argued that "innovative" new drugs developed through significant research and development by American pharmaceutical companies are not properly valued in South Korea.

For drugs covered by national health insurance, the South Korean government negotiates prices with pharmaceutical companies on behalf of subscribers. The American pharmaceutical industry has repeatedly expressed dissatisfaction with what it sees as a lack of transparency and insufficient opportunities to provide input during this process. The USTR has also consistently highlighted these concerns in its annual National Trade Estimate (NTE) report.