The Trump administration is considering imposing tariffs on imported drugs, warning the American pharmaceutical industry that it may increase drug costs.

A report commissioned by a trade organization in the American pharmaceutical industry shows that if the United States imposes a 25% tariff on imported drugs, it could increase the annual drug costs in the United States by nearly $51 billion and raise drug prices by up to 12.9%. The report was commissioned by the "Pharmaceutical Research and Manufacturers of America" (PhRMA), which includes members such as Amgen (AMGN), Bristol-Myers Squibb Company (BMY), Eli Lilly (LLY), Pfizer Inc. (PFE), and other companies. The report states that in 2023, the United States imported drug products worth $203 billion, with 73% of them coming from Europe, mainly from Ireland, Germany, and Switzerland. In the same year, the total sales of finished pharmaceutical products in the United States were $393 billion. For a long time, drugs have been excluded from trade wars due to their potential risks. However, President Trump has threatened multiple times to impose a 25% tariff on imported drugs. Last week, the Trump administration announced an investigation into imported drugs, citing national security concerns over reliance on foreign drug production. This move initiated a public comment period lasting 21 days, led by the US Department of Commerce. Trade lawyer Ted Murphy from the law firm Sidley Austin stated that pharmaceutical companies view this investigation as an opportunity to show the government that high tariffs will hinder their efforts to rapidly increase domestic production capacity, as well as an opportunity to propose alternative solutions. The law firm is assisting companies in submitting their opinions to the Department of Commerce. Pharmaceutical companies are also lobbying the Trump administration to implement tariffs on imported drug products in stages to lessen the impact. The report indicates that production costs are just one of the many factors affecting drug prices, and it is currently unclear to what extent tariffs on imported intermediate products or finished products will be passed on to consumers. Regarding tariffs on imported finished drugs, wholesalers or retailers who pay the tariffs may pass on the increased costs by raising prices for consumers. However, if these tariffs are completely absorbed through domestic prices, Ernst & Young estimates that drug prices in the United States could increase by up to 12.9%. Data shows that around 30% of the drugs imported into the United States in 2023 were used for the production of active pharmaceutical ingredients (APIs) domestically, which were then exported or sold domestically. The report states that the tariffs on these APIs will increase domestic production costs by 4.1% and weaken the global competitiveness of drug manufacturing in the United States. Approximately 25% of the US drug production is exported, reaching a total of $101 billion in 2023. Ernst & Young points out that if higher input costs weaken demand for US drugs in foreign markets, some of the 490,000 jobs related to exports in the industry may be at risk. Furthermore, the report does not include the potential impact of retaliatory tariffs. The report suggests that if such tariffs were to be imposed, the economic impact on American pharmaceutical companies would be more severe.