President Trump has consistently spoken about confronting the pharmaceutical industry’s giants. However, the much-anticipated 100% tariffs on imported medicines, revealed Thursday night, seem to have provided a surprising reprieve for the wealthiest drugmakers.
Numerous major pharmaceutical corporations are set to completely sidestep these new tariffs. This is largely because, in anticipation of such measures, they’ve already invested billions into establishing or expanding manufacturing facilities right here in the United States, qualifying them for exemptions.
Giants like Johnson & Johnson, Eli Lilly, Merck, Gilead Sciences, Roche, GSK, AstraZeneca, and Novo Nordisk have recently broken ground on new factories across states including North Carolina, Indiana, Delaware, California, Pennsylvania, and Maryland.
“Overall, we view this as a positive development for Pharma, anticipating no significant material impact,” commented analysts from Wall Street firm Jefferies in a client note on Friday. Reflecting this sentiment, major drugmaker stocks saw little change or a slight increase by Friday morning.
For several months, Mr. Trump’s warnings of drug tariffs sparked concerns that American consumers could face escalated prices and scarcity of essential medications. Yet, with the narrower scope of tariffs announced on Thursday, the public is unlikely to feel much, if any, effect on numerous widely recognized and top-selling drugs.
Leading companies, such as Novartis, were quick to declare their expected immunity from the tariffs by Friday morning. Michael Meo, a company spokesman, stated, “The recently announced 100 percent tariff is not anticipated to affect Novartis.”
Conversely, these tariffs could severely impact a different segment of the industry: smaller manufacturers of branded drugs. These companies, largely unfamiliar to the American public, often produce medications in countries like Canada or Mexico and lack the financial resources to invest billions in new U.S. manufacturing plants.
John Crowley, president of the Biotechnology Innovation Organization, a trade association representing both biotech firms and most large pharmaceutical companies, issued a statement noting that these new drug tariffs would disproportionately affect “small and mid-sized” businesses.
On Thursday evening, Mr. Trump announced via social media his intention to levy a 100% tariff on all patent-protected brand-name drugs imported into the U.S., effective October 1st. A significant caveat, however, allows companies to bypass these tariffs if they are actively building new factories domestically.
The President’s declaration also seemingly granted exemptions for manufacturers of older, more affordable generic drugs, which constitute the majority of prescriptions filled by Americans. The White House declined to comment on inquiries seeking clarification on this point.
Nevertheless, disruptions and price increases remain a possibility for certain lesser-known products produced by smaller, foreign-based companies that cannot afford to establish new American manufacturing facilities.
“The tariffs are most likely to impact smaller companies focusing on niche products,” explained Dr. Aaron Kesselheim, a professor of medicine at Harvard Medical School and Brigham and Women’s Hospital. “This could create challenges for patients relying on those specific medications.”
Large pharmaceutical companies typically enjoy substantial profit margins from their blockbuster drugs, such as Merck’s globally best-selling cancer treatment, Keytruda. However, this isn’t always true for smaller firms. Confronted with a 100% tariff, a company producing its branded medication in Canada or Mexico might be forced to cease sales or sell the drug to another entity.
“A smaller, specialized brand-name drug, without the massive profit margins of blockbusters like Keytruda or GLP-1 weight-loss medications, will likely face intense pressure,” Dr. Kesselheim noted. “This situation could potentially lead to drug shortages and supply chain interruptions.”
For a smaller brand-name company unexpectedly hit with a 100% tariff, unable to absorb such a financial blow, the path forward becomes starkly evident.
“Companies will inevitably factor these tariffs into their pricing and raise costs,” stated John Maraganore, former CEO of Alnylam Pharmaceuticals and a past chair of the Biotechnology Innovation Organization. “Especially for a company reliant solely on one product, this is a natural, albeit consumer-unfriendly, course of action.”
Biotechnology investor Peter Kolchinsky, based in Boston, suggested that Mr. Trump’s tariffs could place smaller American biotech firms at a significant disadvantage compared to large multinational corporations. He expressed hope that “the final regulations allow them sufficient time to establish manufacturing in the U.S., otherwise we risk losing numerous American innovation jobs.”
Most branded medications consumed by Americans are already produced either in the U.S. or Europe. For instance, the widely used weight-loss drugs Ozempic and Wegovy are manufactured in Denmark.
However, earlier this summer, the European Union successfully negotiated a trade agreement that caps tariffs at a maximum of 15%. EU officials confirmed Friday that this deal would remain unaffected by Mr. Trump’s newly announced tariffs. The White House declined to comment on whether any adjustments had been made.
The timeline for when, or if, a 15% or lower tariff would apply to European-imported brand-name drugs from companies not building U.S. plants remains uncertain. Should this come to pass, these particular medications might experience comparatively minor price hikes.
The pharmaceutical industry maintains a formidable and influential lobbying presence in Washington. Prior to the tariff announcement, the industry actively pushed for exemptions, successfully securing several that were included in Mr. Trump’s Thursday declaration.
Despite these tariff exemptions, major drugmakers continue to face other significant challenges from the Trump administration. Earlier on Thursday, the administration hinted at intentions to compel pharmaceutical companies to align certain U.S. drug prices with the lower rates found in Europe. Additionally, officials have indicated plans to pursue a regulatory shift that could remove drug advertisements from television.
Even with their substantial investments in new U.S. facilities, the largest pharmaceutical companies have no intention of ceasing overseas production for many of their medications. As a result, they now stand to save billions of dollars that they had initially anticipated spending on significantly higher pharmaceutical tariffs.