Trump's new medical policy boots on the ground: imposes 100% tariffs on some imported drugs, supply chain risks may worsen.

Notice that the Trump administration will impose tariffs of up to 100% on certain imported drugs, despite several major exemptions. This move is intended to put pressure on pharmaceutical companies to increase production in the United States. This new tax, authorized by President Trump on Thursday, applies to patented drugs produced in countries with which the United States lacks a tariff agreement and whose production companies have not signed a "most favored nation pricing agreement" with the government. According to a White House statement, tariffs on certain large company products will take effect within 120 days, while products from small manufacturers will only be affected after 180 days. The statement says that the maximum tariff on imported products from major economies that have reached agreements with the White House will be set at 15%. This includes the European Union, South Korea, Japan, Switzerland, and Liechtenstein. In a separate agreement reached on Thursday, the UK agreed to double government spending on new drugs as a percentage of GDP over the next decade, so imported drugs from the UK will face lower tax rates. The White House stated that if companies commit to partial production in the United States, the tariff on their imported products will be 20%; if they reach a most favored nation treatment agreement, the tariff will drop to zero. This tariff exemption will last until January 20, 2029. These charges fulfill a threat issued by the President last fall that unless companies move production to the United States, they will face 100% tariffs on brand-name drugs or patented drugs. However, these measures also include significant exclusion clauses that may weaken their impact. Most of the top global pharmaceutical companies, including Gilead, have avoided punitive measures by reaching agreements with the government. Last summer, Trump sent letters to 17 companies and made a series of demands, including lowering costs for Medicaid, selling directly to US consumers, and ensuring that new drug prices are on par with those in other developed countries in exchange for tariff relief. This means that the new tariffs will mainly affect small pharmaceutical companies and active pharmaceutical ingredient manufacturers. Spencer Perlman, an analyst at Veda Partners, estimates that out of a total of $274 billion in pharmaceutical imports in 2025, only about $12 billion worth of products will be affected by 100% tariffs. Industry organizations representing biotechnology companies criticized this move. John Crowley, CEO of BIO, an industry lobbying group, said in a statement: "Imposing any tariff on American drugs will raise costs, hinder domestic manufacturing, and delay the development of new therapies - none of which will help strengthen our national security." Crowley said tariffs will bring financial risks to small biotech companies as they often lack the capital to build specialized manufacturing facilities. A White House official said the current tariff rate for the UK will be 10%, but if GlaxoSmithKline plc Sponsored ADR (GSK.US) reaches a domestic manufacturing agreement with the US government, the rate will drop to zero. Overseas production Generic drugs will not be affected by the new tariffs, but White House officials announced before the announcement that Trump's measures signed an order for the Commerce Department to reevaluate these products within a year, allowing for the possibility of tariffs based on the extent of domestic production returning. Additionally, specialty medical products (such as orphan drugs or animal health products) from countries that have reached trade agreements or in response to emergency public health needs will also be exempt. These new taxes are based on the results of an investigation initiated under Section 232 of the Trade Expansion Act in April 2025. This provision allows the president to unilaterally impose tariffs on imported products deemed a threat to national security. Industry groups are concerned that this could severely disrupt supply chains, exacerbate shortages, and increase costs for Americans. This is Trump's latest protectionist measure. His trade agenda suffered a setback in February when the Supreme Court ruled that his global tariffs violated the US Constitution. However, tariffs imposed on other industries under Section 232 were not affected by the ruling. Trump also took action on Thursday to streamline and tighten metal tariffs. Trump has long criticized overseas drug production as a threat to national security and has proposed tariffs of up to 200% to encourage domestic production. Subsequently, companies announced a series of announcements regarding investments worth billions in the US, but this was not enough to prevent the tariffs imposed based on the Commerce Department investigation. Pharmaceutical companies will face a choice: either absorb the cost of the tariffs themselves or raise drug prices in this global market. Stephen Ubl, chairman and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), said that tariffs "will increase costs and may endanger the billions of dollars in US investments announced last year." The Swiss pharmaceutical lobbying group Interpharma called on its government to negotiate a similar agreement to the UK's. It is currently unclear when patients will feel the effects and how significant the impact will be. Drug prices paid by Americans are already the highest in the world. These prices are typically determined through a series of complex negotiations between insurance companies, pharmacy benefit managers (PBMs), and manufacturers, making it difficult to immediately pass on any cost increases. However, ultimately, consumers may face higher prices through increased out-of-pocket expenses or insurance policy premium hikes.