Europe watches US midterms hoping for pharma threat reprieve
Donald Trump faces a public reckoning on Tuesday that could leave him with a hostile Congress. But Europe shouldn’t assume that means he lessens his drug pricing demands.
The U.S. is pressuring European governments to raise prices of new medicines. The Trump administration argues U.S. citizens subsidize medicine developments through higher drug prices. It wants to “rebalance" that through lower rates at home and higher prices abroad.
As voters head to the polls for U.S. midterm elections on Nov. 3, Trump’s approval rating is at a record low, and European officials are betting on a lame-duck presidency.
According to one analyst, if the Democrats can wrest control of Congress from the Republicans, a weakened Trump administration may play into Europe's favor.
“That gives Europe’s governments the option to slow walk … drug pricing negotiations,” Diederik Stadig, senior health care economist at Dutch bank ING, said.
But some who have been close to negotiations doubt Trump will decelerate. If anything, losing control of Congress risks accelerating his trade agenda, including on pharmaceuticals.
“Frankly, anybody who is thinking that he’s going to be a lame-duck president on trade policy after the midterms may be disappointed,” said Dan Mullaney, a former U.S. assistant trade representative for Europe under Trump and other presidents, and now a senior fellow at the Atlantic Council think tank.
Given the stakes for Europe — where governments are grappling with soaring publicly-funded health bills on top of demands to ease energy costs, boost defense coffers and better prepare for climate disasters — the capitals are particularly watchful of these midterms.
“We’re of course following an election of an important partner country,” one EU diplomat, granted anonymity to discuss sensitive ongoing matters, said. “As things stand, it’s not easy to foresee to what extent any election result could impact the policy of the Trump administration.”
“I’d expect European embassies in Washington are watching the post-midterm pharmaceutical pricing and trade landscape closely … as governments assess what these developments could mean for them,” a U.S. senior business figure with ties to the administration said.
Trump has launched a drug pricing crusade across Europe, demanding that allies pay more for medicines to drive down the high costs of drugs in America.
His most-favored-nation (MFN) policy — which lowers U.S. drug prices to match those in other wealthy countries — has prompted pharmaceutical companies to warn they will no longer launch new medicines in Europe.
So far, the administration has only successfully negotiated drug pricing reforms with the U.K. — though it’s also in conversations with Germany and France.
The EU has sought to push back on pressure from Washington, with governments calling for a “task force” with the European Commission that would coordinate discussions between member countries, industry and the U.S. administration.
Should the Democrats win both the lower and upper houses of Congress, they would likely slow momentum on drug pricing negotiations by demanding more transparency on the deals the White House has struck with big pharma companies, Stadig at ING said.
To date, the administration has struck so-called MFN deals with 26 drugmakers, with only piecemeal details made public. These include swerving pharma tariffs, pegging some drug prices to those in Europe, and committing to major investments in America.
Democratic U.S. Senators Ron Wyden and Elizabeth Warren have pressed Health Secretary Robert F. Kennedy Jr. and Chris Klomp, Trump’s nominee for deputy health secretary, to fully disclose the deals, arguing drugmakers may have secured more benefits than American consumers.
Although Kennedy promised senators in the spring to make them partially available, he has not done so.
“Several congressional Democrats have already voiced skepticism about the MFN deals that the White House struck, so I certainly could see that as an area that gives congressional scrutiny, particularly if the Democrats have both the House and the Senate,” said Payne Griffin, former deputy chief of staff to U.S. Trade Representative Robert Lighthizer during Trump’s first term and current senior director at FTI Consulting.
Europe is already using dialogue to try to defuse Trump’s trade threats without locking itself into commitments it may struggle to deliver.
“It’s a strategy of buying time through dialogue,” Bernd Lange, a German member of the European Parliament and chair of its trade committee told POLITICO earlier this year. “The Commission’s approach is to move away from anything that could be seen as legally binding.”
It’s also a national tactic — visible in drug pricing talks with the U.S.
“We already see this happening,” said Stadig. “If you look at the response of France, Germany, and Italy … European governments are trying to continue their policies and dressing it up as something different. There are slightly different rules and schemes, but it’s mainly par for the course.”
To date, Germany has yet to deliver a drug pricing proposal for the U.S., having been under investigation by its trade office since June. France has announced a new pricing model, but it’s unclear if industry benefits in the long-term. And Italy is considering smaller industry rebates, as opposed to ending this practice deemed unfair by the Trump administration.
There’s another scenario. A weakened Trump risks accelerating his trade agenda on pharmaceuticals, escalating demands of Europe.
“I heard a number of [European officials] worried that if the House and Senate flip, they may even see a more aggressive Trump after the midterms,” said Mullaney, from the Atlantic Council.
A change in congressional control would not legally limit the president and the USTR’s ability to launch Section 301 trade investigations. The law says the USTR acts “subject to the specific direction, if any, of the president.”
The administration isn’t easing up ahead of the midterms. Washington continues to put pressure on Europe to address what it sees as outstanding issues under their Turnberry agreement — not just on pharmaceutical drug pricing, but also on the EU’s carbon border tax, its deforestation rules, and its digital markets regulation.
“The U.S. administration is taking steps to increase the pressure on Europe,” said Griffin at FTI Consulting. “It is a risky strategy to view the Trump Administration as a lame duck after the midterms. It won’t change the White House's policy push in Europe.”
What’s more, the push to lower U.S. drug prices is not exclusively a Republican cause. Bringing American prices closer to those paid in other wealthy countries has support across party lines, even if lawmakers may disagree on how to get there.
Independent Senator Bernie Sanders, who works with Democrats in the Senate, is poised to lead the committee overseeing health policy, if Democrats regain control of the chamber.
In the spring, Sanders introduced an amendment to a Senate budget resolution seeking to establish “that the United States should not be paying higher prices than other countries around the world” — though the amendment failed amid opposition from the pharmaceutical industry.
“They might not call it [most-favored-nation], they might call it something else, but I don't expect a lot of Democrats to be really strongly against the policy in principle,” said Cybil Roehrenbeck, a partner at law and lobbying firm Hogan Lovells Cadwalader, and a former senior Republican congressional staffer.
For Brussels, the strategy may be to keep the wider trade relationship on track, while resisting pressure to move faster on drug pricing.
“I think it’s a shared analysis across delegations in Brussels that the Turnberry deal is the basis for the trading relationship and that Europe should continue ensuring a smooth and effective implementation of the principles in that agreement,” said the EU diplomat cited at the beginning of the piece.
“We’re always keen to ensure a common European approach to trade matters,” the diplomat added.
