President Trump frequently speaks about challenging the pharmaceutical giants. Yet, his recently unveiled 100 percent tariffs on imported medicines appear to give the wealthiest drug companies a significant advantage.
Many leading industry players are expected to completely bypass these tariffs. This is because, anticipating such measures, they’ve already invested billions into constructing or expanding manufacturing facilities across the United States. Companies like 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 is a victory for Pharma and should not have a substantial impact,” analysts from the Wall Street firm Jefferies noted on Friday. Major drugmaker stocks generally remained stable or saw slight gains that morning.
For months, fears circulated that Trump’s tariff threats would lead to higher drug prices and shortages of essential medicines for American patients. However, with the more narrowly defined tariffs announced, the impact on many popular and widely-used medications is likely to be minimal or nonexistent.
Some major corporations, such as Novartis, were quick to predict on Friday morning that they would be exempt. “The announced 100 percent tariff should not affect Novartis,” stated Michael Meo, a company spokesman.
Instead, these tariffs are poised to severely penalize a different group: certain smaller manufacturers of brand-name drugs. These companies, often unfamiliar to most Americans, produce their medications in countries like Canada or Mexico and typically lack the financial resources to invest billions in new U.S. factories.
John Crowley, president of the Biotechnology Innovation Organization, a trade group representing numerous biotech and pharma giants, confirmed that the tariffs would primarily affect “small and mid-sized” companies.
On Thursday night, President Trump declared via social media his intention to impose a 100 percent tariff on all patent-protected brand-name drugs imported into the U.S., effective October 1. A crucial exemption was included: companies actively building new factories in the United States could avoid these tariffs.
Additionally, Trump’s announcement seemed to include exemptions for manufacturers of older, less expensive generic drugs, which constitute the vast majority of prescriptions filled by Americans. The White House has not yet confirmed this detail.
Nonetheless, some lesser-known products from smaller, overseas manufacturers might face supply disruptions and increased prices, as these companies cannot afford to construct new American facilities.
“It’s probable that the affected companies will be smaller entities producing more specialized products,” explained Dr. Aaron Kesselheim, a professor of medicine at Harvard Medical School and Brigham and Women’s Hospital. “This could create issues for those specific patients.”
Large pharmaceutical companies often enjoy substantial profit margins from their blockbuster drugs, such as Merck’s best-selling cancer medication, Keytruda. This isn’t always true for smaller firms. Faced with a 100 percent tariff, a company manufacturing its brand-name product in Canada or Mexico might choose to cease sales or sell the drug to another entity.
“A smaller, niche brand-name drug, which doesn’t yield the same high profits as a Keytruda or a GLP-1 (weight-loss drug), might experience more pressure,” Dr. Kesselheim elaborated. “There’s a real chance this could lead to shortages and supply chain disruptions.”
For small brand-name companies suddenly facing an insurmountable 100 percent tariff, the path forward is clear. “You have to account for these tariffs and raise the price,” said John Maraganore, former CEO of mid-sized drug company Alnylam Pharmaceuticals and a former chair of the Biotechnology Innovation Organization. “Especially if it’s a single-product company entirely reliant on that one product, that’s what you naturally do, which, of course, doesn’t benefit the American consumer.”
Peter Kolchinsky, a biotechnology investor in Boston, commented that Trump’s tariffs “might put smaller American biotech companies at a significant disadvantage compared to large multinationals.” He added, “Hopefully, the final regulations will give them enough time to arrange for U.S. manufacturing, or we risk losing many American innovation jobs.”
Most brand-name drugs consumed by Americans are already produced either in the United States or Europe. For example, popular weight-loss medications like Ozempic and Wegovy are manufactured in Denmark.
However, over the summer, the European Union secured a trade agreement guaranteeing a much lower tariff rate—no more than 15 percent—which EU officials confirmed on Friday would not be affected by Trump’s new additional tariffs. The White House has not yet responded to inquiries regarding any changes to this agreement.
It remains unclear when, or if, a 15 percent or lower tariff will apply to brand-name drugs imported from Europe by companies not building a U.S. plant. Should this occur, consumers might see relatively modest price increases for those particular brand-name drugs.
The pharmaceutical industry maintains a formidable and influential lobbying presence in Washington. Prior to the tariff announcement, the industry aggressively campaigned for exemptions, which were largely granted in Trump’s Thursday announcement.
Despite their investments in new U.S. facilities, major drugmakers have no plans to halt overseas production of many of their medicines. As a result, they now stand to save billions of dollars they had anticipated spending on much higher pharmaceutical tariffs.