USTR’s hearing on German drug pricing opened Tuesday with nine witnesses and a split industry, one week before a separate 100 percent pharmaceutical tariff reaches every remaining importer
WASHINGTON, Sept. 22, 2026. The Office of the U.S. Trade Representative convened its public hearing on Germany’s pharmaceutical pricing practices at 10 a.m. Tuesday in the main hearing room of the International Trade Commission, opening the evidentiary phase of a Section 301 investigation that could produce tariffs against one of the largest economies in Europe over how it pays for patented medicines.
Nine witnesses were scheduled for the first panel, and the list makes clear that this is not a proceeding with a settled outcome. Ranged on the side supporting action are Perry Siatis of AbbVie, Kevin Haninger of the Pharmaceutical Research and Manufacturers of America, and Chris Israel of the Alliance of U.S. Startups and Inventors for Jobs. Ranged against it, or at least sceptical of the remedy, are Megan Whiteman of Public Citizen, Satya Marar of the Mercatus Center at George Mason University, and Frederik Roeder of the Consumer Choice Center. Also scheduled were Jeffrey Gerrish of Schagrin Associates, a former Deputy U.S. Trade Representative, Thomas Hwang of Harvard Medical School and Brigham and Women’s Hospital, and James Poole of Obelisk Tech Systems.
USTR announced the hearing on Sept. 21. It is closed to cameras and is not being livestreamed. “The hearing will not be livestreamed,” the agency’s notice states. “A full transcript of the hearing will be posted on ustr.gov after the hearing.” The proceeding continues Wednesday if the witness list is not exhausted.
The timing is not incidental. Exactly one week from Tuesday, on Sept. 29, the Section 232 tariff on patented pharmaceuticals reaches every company not already covered, a separate action under separate authority that will apply rates of up to 100 percent to branded drugs, biologics and the active pharmaceutical ingredients behind them. The two measures are legally independent. Commercially, they land on the same balance sheets within days of each other.
The complaint
USTR initiated the investigation on June 18, 2026, publishing the initiation notice in the Federal Register on June 24. The subject is what the agency describes as Germany’s persistent underpayment for innovative medicines.
The specific allegations are narrower than the framing suggests. The first concerns a discount of approximately 9 percent that German law applies to manufacturers who decline to make their negotiated prices public, effectively imposing a financial penalty on pricing confidentiality. Because German prices function as a reference point for a large number of other national pricing systems, a manufacturer that accepts a low disclosed price in Germany sees that price propagate across markets well beyond Germany. The confidentiality discount, in the American argument, forces manufacturers to choose between a direct price cut and a wider one.
The second allegation concerns draft German legislation that would add a mandatory rebate on patented medicines beginning in 2027, deepening the existing reduction.
The theory of harm is that these practices cause American patients and the American health system to bear a disproportionate share of global pharmaceutical research and development costs, because revenue that European systems decline to pay must be recovered somewhere, and the United States is where it is recovered.
PhRMA endorsed the investigation at initiation. “PhRMA appreciates the Administration’s commitment to challenging unfair practices abroad and supports using Section 301 to achieve this goal,” said Stephen J. Ubl, the association’s president and chief executive. Ubl announced in April that he will step down at the end of 2026.
Written comments and requests to appear were due Aug. 10. Tuesday’s hearing is the point at which the record becomes public and contested.
Why the witness list is the story
Section 301 hearings are often one-sided affairs in which the petitioning industry and its allies dominate the panel and opposition is limited to written comment. This one is not, and the composition suggests USTR expects the remedy question to be genuinely difficult.
The presence of Public Citizen matters because the organization has spent years arguing the opposite of the industry’s position on drug pricing, contending that the problem is American prices being too high rather than European prices being too low. Its participation ensures the record contains the argument that a tariff remedy against Germany would raise costs for American patients without reducing them for anyone.
The presence of Mercatus and the Consumer Choice Center matters for a different reason. Both are broadly market oriented organizations, and their scepticism, if that is what they offer, comes from the direction of trade liberalization rather than from drug pricing advocacy. A Section 301 action premised on another country’s domestic health insurance reimbursement policy is a substantial extension of the statute’s traditional reach, which has historically concerned intellectual property protection, market access barriers and discriminatory regulation. Whether a national health system’s negotiated prices constitute an actionable act, policy or practice is a live legal question, and it is the kind of question free market economists tend to answer conservatively.
Thomas Hwang’s appearance is notable for a separate reason. Hwang is the lead author of a study published in The Lancet analyzing the projected savings from the administration’s most favored nation drug pricing agreements. In a secondary analysis reported on Sept. 21, Hwang estimated that the 26 manufacturer agreements now in place could reduce projected Medicare savings by nearly 80 percent, because signatory companies believe their agreements exempt them from the GLOBE and GUARD Medicare pricing models.
“Our secondary analysis, looking at the impact on savings from exempting companies, was based on companies’ financial filings and other disclosures that they believe their agreements exempt them from GLOBE and GUARD,” Hwang said by email.
That finding cuts across the hearing’s premise in an awkward way. If the policy objective is to move global pricing toward parity, and the domestic instrument built to achieve it is being eroded by the same agreements that were used to defuse the tariff, then the international instrument is being asked to carry more weight than it was designed for.
The tariff arriving next Tuesday
The Section 232 pharmaceutical action is the larger immediate event for importers, and it remains substantially unresolved with seven days to run.
Proclamation 11020, signed April 2, 2026 and published in the Federal Register on April 9, imposes a headline rate of 100 percent on patented pharmaceuticals and the active pharmaceutical ingredients listed in its Annex I. That rate took effect July 31 for the 17 companies named in Annex III. It reaches all remaining companies on Sept. 29.
The rate structure is tiered. A company with a Commerce-approved onshoring plan pays 20 percent, rising to 100 percent on April 2, 2030. A company with both an onshoring plan and a most favored nation pricing agreement with the Department of Health and Human Services pays zero through Jan. 20, 2029. Products originating in the European Union, Japan, South Korea, Switzerland and Liechtenstein are capped at 15 percent under their respective framework agreements. United Kingdom product is at zero through Jan. 19, 2029 under the December 2025 pharmaceutical pricing arrangement, confirmed by a Commerce notice published Aug. 4, 2026. Generics and biosimilars are exempt until April 2, 2027, subject to a mandatory reassessment, with a separately announced escalator taking them to 100 percent in August 2028 and 200 percent a year later.
The Commerce finding underpinning the action was that roughly 53 percent of patented pharmaceuticals distributed domestically are produced abroad. Food and Drug Administration data indicate that only about 11 percent of active pharmaceutical ingredient manufacturers are based in the United States.
The problem, a week out, is that substantial parts of the regime have no published procedure.
The Biotechnology Innovation Organization set out the gaps in an analysis published Sept. 14 and updated Sept. 18. The product exemptions contemplated by Clause 3(d) of the proclamation, potentially covering orphan drugs, nuclear medicines, plasma derived therapies, fertility treatments, cell and gene therapies, antibody drug conjugates and medical countermeasures, have no published application process. The “urgent U.S. health need” exemption is described by Commerce as case by case, with no request mechanism issued. The list of countries holding qualifying trade and security framework agreements, which determines who gets the 15 percent cap, has not been published. The parameters for onshoring plans and most favored nation agreements are likewise handled case by case without published criteria.
BIO judged full implementation on Sept. 29 “highly unlikely” and set out three scenarios: charge every importer by country of origin and refund later; defer collection on potentially exempt goods and collect retroactively; or a presidential decision to delay or forgo implementation.
“At a time when the U.S. is competing to maintain global leadership in biotechnology, policies that raise costs, discourage innovation, and weaken our competitive position ultimately make it harder to deliver for patients and strengthen the economy,” said Kelly Seagraves, BIO’s vice president of national security and international affairs. “We urge the Administration to consider alternative policies for bolstering U.S. manufacturing and resilient supply chains.”
Some movement came Monday. The Bureau of Industry and Security filed a 17-page notice at 4:15 p.m. on Sept. 21, document number 2026-19498, titled “Guidance and Procedures: Tariff Adjustments for Specialty Pharmaceuticals and Associated Pharmaceutical Ingredients and Technical Corrections to the Harmonized Tariff Schedule of the United States,” scheduled for publication Sept. 23. Whether it resolves the Clause 3(d) process or merely corrects classification language will determine how much of BIO’s list survives the week.
The legal ground the case stands on
The Germany investigation is being conducted under a statute that has been carrying substantially more weight since February, when the Supreme Court ruled 6 to 3 that the International Emergency Economic Powers Act does not authorize the President to impose tariffs of indefinite scope. That decision removed the administration’s most flexible instrument and pushed the tariff program onto Section 232 for sectoral measures and Section 301 for country-specific ones.
Section 301 authorizes action against an act, policy or practice of a foreign country that is unreasonable or discriminatory and burdens or restricts U.S. commerce. The statute’s traditional application has been to intellectual property theft, forced technology transfer, discriminatory licensing regimes and market access barriers. It has not historically been used to challenge the reimbursement decisions of a national health insurance system.
That is the doctrinal question at the heart of Tuesday’s hearing, and it is why the panel includes a former Deputy U.S. Trade Representative. Jeffrey Gerrish held that role and now practices at Schagrin Associates; his participation signals that the procedural and legal architecture of any eventual determination, not just the economics, will be argued on the record.
The administration has already demonstrated an appetite for expansive readings of Section 301. The forced labor action completed in July rested on 60 separate investigations into whether economies had imposed and effectively enforced prohibitions on importing goods made with forced labor, a theory that reaches another country’s enforcement posture rather than its trade barriers. That action took effect July 24 and applies duties of 10 or 12.5 percent to imports from economies accounting for roughly 99.4 percent of U.S. imports. Brazil has challenged it at the World Trade Organization in dispute DS646, filed July 27, arguing violations of GATT Articles I and II and of Article 23 of the Dispute Settlement Understanding.
If the forced labor theory survives, the German pricing theory is a shorter step than it first appears. If it does not, both are exposed.
Money on the table
The investment figures attached to the onshoring pathway are the largest in the history of American pharmaceutical manufacturing.
Johnson & Johnson has committed $55 billion over four years. Roche has committed $50 billion over five years across manufacturing and research. AstraZeneca has committed $50 billion through 2030. Novartis has committed $23 billion over five years across ten facilities. Eli Lilly added $4.5 billion to its LEAP campus in Lebanon, Indiana in May, bringing that site above $13 billion. Novo Nordisk is spending $4.1 billion on fill and finish capacity in Clayton, North Carolina.
The combined Roche and Novartis commitment of roughly $73 billion, or 58 billion Swiss francs, was the basis on which Switzerland’s rate was cut from 39 percent to 15 percent, part of a wider Swiss package of $200 billion in U.S. investment over five years with a minimum of $67 billion in 2026.
Twenty-six manufacturers now hold most favored nation agreements, covering what the White House describes as 89 percent of the branded drug market. Nine were added Aug. 31: Alcon, Astellas, BeOne Medicines, BridgeBio, CSL, Kyowa Kirin, Sun Pharma, Teva and UCB, together committing $19.6 billion in U.S. manufacturing and contributing active ingredients to a new Strategic Active Pharmaceutical Ingredients Reserve.
The cost side is less frequently cited. Modeling published in Health Affairs Scholar found that a 100 percent tariff on active pharmaceutical ingredients would add an average of $21.15 per prescription for drugs produced domestically using imported ingredients. U.S. prescription drug spending rose 12.7 percent in 2025 to $915 billion and is projected to pass $1 trillion in 2026, with branded products accounting for roughly 90 percent of spend on about 15 percent of prescriptions.
BIO notes that small and mid-sized biotechnology companies account for 71 percent of industry output and 54 percent of new drug applications. Those are the firms least able to negotiate a bilateral agreement with Commerce, and they are the cohort the Sept. 29 date primarily affects.
What importers should do
For pharmaceutical importers, the compliance posture for next week should assume the tariff applies unless a specific exemption is documented.
Customs and Border Protection’s operative guidance remains CSMS message 69395344, issued July 30. It requires importers of covered goods under the designated Chapter 29 and Chapter 30 provisions to report the appropriate Chapter 99 classification on every entry regardless of whether duty is payable. The zero rate pathway runs under heading 9903.04.65. Filing without the Chapter 99 line is an error even where the rate is zero.
Country of origin determination is the pivot. Because the 15 percent cap is country based and the zero and 20 percent rates are company based, a single product can carry four different rates depending on where it was manufactured and what agreements its owner holds. Importers should confirm origin at the manufacturing step rather than the shipping point, and should obtain written confirmation from suppliers of the supplier’s agreement status rather than inferring it from press coverage.
Entries that may qualify for an unpublished exemption present the hardest question. With no process to apply, an importer cannot perfect a claim before Sept. 29. The conservative approach is to enter and pay, preserving protest rights, rather than to claim an exemption that has no legal vehicle. Protest remains available within the statutory window, and the refund mechanics that developed after the February Supreme Court decision on emergency-powers tariffs have demonstrated that the government can process large-scale reimbursement when ordered to.
Finally, watch for a delay. BIO’s third scenario, a presidential decision to postpone, remains plausible precisely because the guidance gap is real and the affected companies are not the large manufacturers who have already negotiated their way to zero. A delay announced late in the week would arrive with little warning and would change the entry strategy for the following Monday entirely.
What a German determination would mean
If USTR ultimately makes an affirmative determination, the remedies available are broad. Section 301 permits duties on any goods of the subject country, not merely goods related to the offending practice. That means a finding about German drug pricing could be answered with tariffs on German machinery, chemicals or vehicles, and historically USTR has used exactly that latitude to maximize political pressure while minimizing domestic disruption.
For American importers of German goods, that creates a diffuse but real exposure that has nothing to do with the pharmaceutical sector. Companies importing German capital equipment, specialty chemicals or automotive components should note that they are potential targets of a proceeding in which they have no natural standing and about which they have probably received no notice.
There is also a European dimension. Germany is a member of the European Union and does not conduct its own trade policy; tariff retaliation is a Commission competence. A U.S. action against a single member state over a domestic health policy would test the EU’s internal handling in a way that previous bilateral disputes have not, and the Commission has instruments available under its anti-coercion regulation that it has so far declined to use against the United States.
Set against that, the EU currently holds a 15 percent cap on pharmaceutical products under its framework agreement with Washington, and that cap is itself a negotiated concession. A Section 301 action against a member state would sit uneasily alongside it. One reasonable reading of Tuesday’s hearing is that its principal function is leverage in the ongoing pharmaceutical pricing conversation with Europe rather than a predicate for tariffs that anyone expects to impose.
Nothing in the record so far confirms that reading. Determinations under Section 301 have no fixed statutory deadline in an investigation of this type, and USTR has taken anywhere from months to more than a year to move from hearing to action. What is certain is that the transcript will be public, that the arguments on both sides are now on the record, and that the sector’s attention over the next seven days will be on Sept. 29 rather than on Germany.
For U.S. businesses, the pattern worth internalizing is the stacking. A pharmaceutical importer next week may face a Section 232 sectoral duty determined by company and country, a Section 301 forced labor duty determined by origin economy, an ordinary column one rate, and the prospect of a further country-specific 301 duty from a proceeding that opened Tuesday. Each was designed in isolation. The cumulative rate on a given entry is not published anywhere as a single number, and calculating it correctly has become a specialist exercise rather than a clerical one.