Trump’s Pharma Threats Take Tariffs Into Uncharted Territory

For more than three decades, the pharmaceutical sector has been protected from tariffs by a World Trade Organization agreement designed to improve access to life-saving drugs.

But as US President Donald Trump prepares to launch a new wave of levies aimed at reducing America’s trade deficits and bringing manufacturing back to home soil, pharmaceuticals are high on the list of targets.

On Friday, the president said specific pharma tariffs were coming “soon.” He gave no details on what those tariffs would look like or exactly how existing blanket levies on goods from China, Canada and Mexico — and upcoming “reciprocal” tariffs on most of the world — apply to the sector. But he has previously singled out Ireland, home to manufacturing plants for most of the world’s top 10 pharmaceutical companies.

“Ireland was very smart. We love Ireland. But we’re going to have that,” he said Wednesday.

The battle to dominate pharma manufacturing won’t be easy on US companies. Multinationals like Eli Lilly & Co. and Pfizer Inc. have invested billions in developing complex global supply chains, with Europe a key piece of the puzzle. Nearly 90% of US biotech companies rely on imported components for at least half of their FDA-approved products, according to the Biotechnology Innovation Organization. The pharmaceutical industry contributed €311 billion of gross value added in the EU in 2022, according to PwC.

Protectionist policies will raise the prices of active ingredients for these producers, many of whom may have little recourse to return manufacturing to the US in the short term. Consumers are likely to feel the hit too, in the form of higher prices, potential shortages and financial strain on health care providers.

“Patients will end up paying for these products,” Richard Saynor, chief executive officer of Sandoz AG, Europe’s largest generic drug maker, said last month. “Either supply will get worse and/or the pricing will get back to insurers and ultimately to patients. I don’t think this is a strategy to drive more investment to the US.”

One possibility is that tariffs will be determined by where a medicine’s active pharmaceutical ingredient is made, rather than where the final product is assembled.

Levies on the sector will be particularly difficult to manage, according to Sam Lowe, partner and international trade expert at Flint Global. That’s in part because pharmaceuticals have been spared from tariffs and other exemptions for so long. In addition, “firms will have to pay much greater attention to the origin of the products they are exporting to the US,” he said.

The impact will be especially powerful in the generics industry, which makes the blood pressure drugs, heart medicines and other treatments most commonly prescribed to Americans, according to Marta Wosinska, a senior fellow at the Brookings Institution’s Center on Health Policy. It takes three to five years to build a drug factory, she said.

Generics have been a significant contributor to lowering drug costs in the US, but the sector’s margins are small. Unless other policies are put in place to shield makers of generics, some may begin to leave the market, Wosinska said.

For these companies, building a new factory inside the US may not pencil out. “The math just doesn’t work, period,” she said. “The timelines are too long, and the potential upside is too uncertain, and tariffs can come on and off.” She highlighted makers of injectable medicines such as chemotherapy, intravenous antibiotics and other hospital treatments in particular.

For brands, “the calculus is just dramatically different,” according to Wosinska.

Just two companies, Novo Nordisk A/S and Eli Lilly, produce the bulk of the world’s insulin, an essential medicine. Their supply chains are complicated and moving enough production to America to supply the entire domestic market would be difficult, if not impossible.

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