America is filling the world's medicine cabinet. Our allies need to help pay for what's inside.
Many global challenges involve public goods — benefits that everyone enjoys, regardless of who pays for them. This makes free riding a persistent and difficult problem.
President Trump’s effort to demand that NATO allies pay their fair share was designed to reduce such free riding. In 2024, the U.S. spent 3.4 percent of GDP on defense — nearly twice the NATO average. And because the U.S. economy is so large, that spending covered two-thirds of NATO’s entire bill. American taxpayers continue to underwrite the global public good of security.
This challenge isn’t limited to defense for which U.S. pressure to raise foreign NATO investments has been successful. Other global issues with concentrated costs — like climate change — have also seen repeated attempts to curb free riding through international agreements.
The same pattern holds in medicine, where global access to lifesaving treatments depends on American investment. Just as the United States underwrites Europe’s defense, it also underwrites Europe’s access to innovation — whereby the U.S. is disproportionately rewarding the R&D investment that makes new treatments and cures possible.
It’s time to rebalance our alliances by demanding fair contributions not just to security and climate goals, but to the medical breakthroughs the United States helps make possible.
America doesn’t just invent more medicines than any other country; we fund the global innovation pipeline. A Swedish drugmaker can’t break even selling only to Swedes. It needs global markets. But those markets depend on U.S. pricing to fund research. Most of the money that supports new drug development comes from American patients and taxpayers. A 2018 report by the Council of Economic Advisers found that Americans cover over 70 percent of global profits from patented medicines, even though the United States makes up just 26 percent of global GDP. This occurs even though most patented medicines are consumed globally among rich countries.
We’re not just the engine of discovery; we’re the bank behind it.
Why does this imbalance persist? Because the United States is the only major country that permits even limited market-based pricing. Elsewhere, governments cap prices, demand steep discounts, and delay patient access. In countries like the U.K. and France, bureaucrats use outdated cost-effectiveness formulas — sometimes valuing a year of life at less than $40,000. That figure hasn’t budged in decades and ignores inflation entirely. In contrast, U.S. regulators often use a value ten times higher when assessing new treatments.
The result? Other countries get the very medicines that the U.S. market enables — typically years later — but at a steep discount. Many set prices using low-income countries as benchmarks. Some forcibly claw back revenues from drugmakers to stay under budget. That leaves Americans footing the bill for global innovation.
This is more than a pricing disparity — it’s a non-tariff trade barrier. European firms can sell their drugs in the U.S. at market-based prices. American firms, by contrast, are forced to sell in Europe at artificially low prices — and often only after long delays. This is a massive U.S. subsidy to foreign countries, sustaining innovation they benefit from but do little to finance. No other major industry faces such global price fixing by government-run systems.
President Trump recently moved forward on attempt to solve the free-riding problem through an executive order. In it, he directed the adoption of a “Most Favored Nation” rule whereby U.S. government programs cannot pay higher prices than abroad. The president is the first to address the issue and is right doing so, but that kind of “favoritism” may turn out to work against his goals of reducing foreign free riding. Companies won’t sacrifice their U.S. market by lowering U.S. prices to government price controls abroad. And if a foreign country won’t allow prices to be close to those of the U.S., companies may find it in their interest to abandon that market altogether to keep their U.S. earnings intact. In that case, countries will likely compulsorily license the drug, the end result being more free riding, not less.
There’s a more productive way forward: Treat foreign free riding on American innovation for what it is — a non-tariff barrier that is a trade violation in demand of a trade-agreement solution.
We should push wealthy allies to stop gaming the system. Just as NATO set spending benchmarks for defense, trade policy should establish minimum standards for investment in medical innovation. High-income countries should spend a baseline share of GDP per capita on new medicines — one that reflects the value they derive from consuming them. That baseline should match the U.S. standard. This could be accompanied by a lack of access to new medicines if a country continued to free ride by not paying their fair share.
Countries could gradually meet the target, but once adopted, it should be binding — even after rebates or claw backs. Prices would still be negotiated, but within a transparent, market-driven framework — not dictated by government caps that ignore the value of innovation to current and future patients.
Pricing isn’t the only barrier. In Europe, regulatory approvals may be efficient, but coverage decisions — the green light for public reimbursement — are often delayed for years. This violates the EU’s own benchmark, which calls for new treatments to reach patients within 180 days of marketing authorization. In reality, countries routinely miss that mark. These delays shrink the effective patent life of new medicines, reducing the period in which developers can recoup their investment. A simple fix? If a government drags its feet for more than six months, the drugmaker should receive a corresponding patent extension.
These aren’t radical ideas. They’re grounded in fairness — just like NATO cost-sharing — and they can be implemented through trade policy.
President Trump already has allies at the trade table — and they’re listening. Foreign price controls are among the worst non-tariff barriers U.S. innovators face. And with global negotiations intensifying over trade, the U.S. has real leverage. That leverage shouldn’t be used just for semiconductors or steel, but for medicines, too. If allies want to access American drugs or have their country’s drug companies access American markets, they must stop undercutting the system that makes medical progress possible — and start paying their share.
America is filling the world’s medicine cabinet. Our allies need to help pay for what’s inside.