America Funds Cures—The World Must Share the Burden
Stephen Miran, chairman of President Trump’s Council of Economic Advisers, is right: The rest of the world has been freeloading off America’s investments in global public goods, and pharmaceutical innovation is a prime example.
For decades, the United States has shouldered the lion’s share of global research and development (R&D) in the life sciences. American taxpayers fund research through the National Institutes of Health (NIH), the world’s largest public source of biomedical funding. U.S. pharmaceutical companies also assume the high risks associated with drug development. Unlike most other countries, the United States pays market prices for prescription drugs—effectively subsidizing lifesaving innovation for the rest of the world.
Meanwhile, virtually all other OECD countries impose high price controls on pharmaceuticals, often paying far less than is needed to sustain the very innovation pipeline they benefit from. Drug innovation is not free. When countries systematically underpay for foundational life sciences research, pharmaceutical R&D, and drugs, it distorts incentives, weakens innovation, and ultimately harms patients worldwide.
As ITIF has shown, these countries’ price controls contribute to a higher U.S. trade deficit than would otherwise be the case because they refuse to pay what they should for U.S. drug exports.
As the Trump administration weighs tariff negotiations and broader trade leverage, pharmaceutical cost-sharing should be on the agenda. If other high-income countries want access to cutting-edge American medicines, they should contribute a more equitable share of the costs behind them. That means raising their drug prices to more reasonable levels, instead of continuing to free-ride on U.S. innovation through rigid price controls.
From a game theory perspective, this situation resembles the prisoner’s dilemma, as each country faces a strategic choice: either contribute fairly to global pharmaceutical innovation, such as by paying closer to the true value of new medicines, or continue to free-ride on the investments of others, particularly the United States. As in the classic dilemma, collective cooperation yields the greatest overall benefit, but each individual actor has an incentive to defect, expecting others will continue to bear the burden.
For smaller countries, it may seem rational to impose strict price controls and by definition contribute minimally to R&D, assuming the United States will continue to fund innovation and provide access to novel drugs. But when every country other than the United States follows this strategy, the global system becomes unsustainable: innovation slows, development pipelines are reduced, and patients worldwide lose access to future therapies. As the dominant investor in pharmaceutical R&D, the United States is effectively left bearing the costs of cooperation on behalf of all. ITIF previously estimated that if 32 OECD countries had lifted pharmaceutical price regulations in 2018, the world would have benefitted from 25 additional new drugs per year.
The only way to shift this dynamic and promote more equitable burden-sharing is for the leading player—in this case, the United States—to credibly signal a willingness to “defect” by withholding cooperation unless others contribute their fair share. That is the underlying logic behind Miran’s call for negotiations with other countries to help “finance global public goods” like military expenditures to defend freedom. It’s about realigning incentives to sustain a global system that has become overly dependent on American investment in drug development.
It’s time to make drug pricing a central issue in trade negotiations—and to make clear that continued and robust development of breakthrough medicines depends on shared investment.
