Big Pharma Gets a Pass: How Trump’s Tariffs May Harm Smaller Drugmakers

President Trump often champions tackling major pharmaceutical companies. However, his eagerly anticipated 100 percent tariffs on imported medicines, announced Thursday night, seem to have surprisingly spared the wealthiest drug manufacturers. Many industry leaders are strategically positioned to completely bypass these pharmaceutical tariffs. This is largely because, predicting the tariffs, they’ve already invested billions into building or expanding manufacturing facilities across the United States, qualifying them for an exemption. Pharmaceutical powerhouses such as Johnson & Johnson, Eli Lilly, Merck, Gilead Sciences, Roche, GSK, AstraZeneca, and Novo Nordisk have recently broken ground on new factories in states including North Carolina, Indiana, Delaware, California, Pennsylvania, and Maryland. “Overall, we believe this represents a win for the pharmaceutical industry and should not have a significant impact,” noted analysts at Jefferies, a prominent Wall Street bank, in a Friday report to investors. Consequently, stocks for major drugmakers remained largely stable or saw slight increases on Friday morning. For several months, President Trump’s tariff threats on drugs sparked concerns among Americans about potential price hikes and shortages of essential medications. Yet, with the more restrained tariffs unveiled on Thursday, it appears there will be minimal, if any, impact on the prices of many widely recognized and top-selling drugs. Even before the full details were public, some leading companies, such as Novartis, were already expressing confidence on Friday morning that they would be exempt from the new tariffs. Michael Meo, a company spokesman, stated, “The announced 100 percent tariff should not affect Novartis.” However, these tariffs could severely impact a different segment of the industry: smaller manufacturers of brand-name drugs. These companies, often unfamiliar to the average American consumer, produce medications in countries like Canada or Mexico and lack the financial capacity to invest billions in new U.S. manufacturing plants. John Crowley, president of the Biotechnology Innovation Organization—a trade group representing numerous biotech firms and most pharmaceutical giants—issued a statement indicating that these tariffs would specifically harm “small and mid-sized” companies. On Thursday night, President Trump announced on social media his intention to levy a 100 percent tariff on all patent-protected brand-name drugs imported into the United States, effective October 1st. A significant exemption was included: companies could avoid these tariffs if they were actively building new manufacturing facilities within the U.S. The President’s announcement also seemed to include waivers for manufacturers of older, more affordable generic drugs, which constitute the majority of prescriptions filled by Americans. The White House did not comment when asked for clarification on this point. Nevertheless, consumers might experience disruptions and increased costs for some less-common medications produced by smaller, foreign-based companies that lack the resources to establish new factories in the U.S. Dr. Aaron Kesselheim, a professor of medicine at Harvard Medical School and Brigham and Women’s Hospital, commented, “It’s probable that the affected companies will be smaller entities focusing on niche products. This could pose significant challenges for patients relying on those specific medications.” While large pharmaceutical corporations often enjoy substantial profit margins from blockbuster drugs—such as Merck’s globally best-selling cancer treatment, Keytruda—this isn’t always true for smaller firms. Confronted with a 100 percent tariff, a company producing its brand-name drug in Canada or Mexico might be forced to halt sales or divest the product to another manufacturer. Dr. Kesselheim further explained that “a smaller, niche brand-name drug, without the immense profit margins of blockbusters like Keytruda or the popular GLP-1 weight-loss medications, could face intense pressure.” He warned, “There’s a real risk this could result in drug shortages and supply chain interruptions.” For a smaller brand-name company unexpectedly hit with a 100 percent tariff, and unable to absorb such a financial blow, the path forward is straightforward. John Maraganore, former CEO of Alnylam Pharmaceuticals and a past chair of the Biotechnology Innovation Organization, stated, “You are compelled to factor in these tariffs and increase prices.” He elaborated, “This is especially true for companies relying solely on one product; it’s a natural reaction, though it ultimately harms the American consumer.” Boston-based biotechnology investor Peter Kolchinsky suggested that President Trump’s tariffs “could place smaller American biotech companies at a significant disadvantage compared to large multinational corporations.” He emphasized, “Hopefully, the final policy will provide them sufficient time to arrange for U.S. manufacturing, preventing job losses in American innovation.” Most brand-name drugs consumed by Americans are already manufactured either in the United States or in Europe. For instance, popular weight-loss medications like Ozempic and Wegovy are currently produced in Denmark. Earlier this summer, the European Union successfully negotiated a trade agreement that caps tariff rates at a maximum of 15 percent. European officials confirmed on Friday that this agreement would remain unaffected by President Trump’s newly announced tariffs. The White House declined to comment on any potential changes to this arrangement. Uncertainty remains regarding when, or if, a tariff of 15 percent or less will apply to European brand-name drugs imported by companies without U.S. manufacturing facilities. Should this occur, it could lead to relatively minor price increases for those specific medications. The pharmaceutical industry maintains a formidable and influential lobbying presence in Washington. Prior to these tariffs, the industry actively campaigned for exemptions, ultimately securing several in President Trump’s Thursday announcement. Despite these tariff exemptions, major drugmakers continue to face other significant challenges from the Trump administration. Earlier on Thursday, the administration indicated intentions to compel pharmaceutical companies to reduce some U.S. drug prices to match lower European levels. Furthermore, officials have hinted at a regulatory overhaul that could potentially remove drug advertisements from television. Even with their significant investments in new U.S. factories, the largest pharmaceutical firms have no intentions of halting overseas production for many of their medications. This new policy means they will now save billions of dollars that they initially feared would be spent on much steeper pharmaceutical tariffs.