A federal inquiry into the financial and national security implications of pharmaceutical imports is leading President Trump to impose steep new fees, but they won’t touch the medicines that most Americans take — at least not yet. While the coming pharmaceutical tariffs cover brand name drugs, they exempt the generic medications that represent the vast majority of U.S. prescriptions.
The exemptions also include some less-prescribed products. Rare disease drugs and certain types of cancer therapies are spared, as are fertility drugs, cell and gene therapies, and medicines for chemical, biological, and nuclear threats. But for biopharmaceutical companies covered by the president’s new policy, the cost is steep: a 100% tariff for branded products and pharmaceutical ingredients that enter the country from abroad.
The policy announced Thursday continues Trump’s refrain to various industries since hist first term: Make your products here or pay tariffs. For biopharma companies facing these new tariffs, the financial levy starts at the end of July for large firms and at the end of September for smaller ones. That still gives them time to strike a tariff-sparing deal.
How Artera is Using Agentic AI to Humanize Patient Care
Artera President Tom McIntyre talks about the practical application of AI in healthcare.
Trump has been pursuing tariffs on multiple fronts. In February, the U.S. Supreme Court ruled the president does not have the authority to impose tariffs under the International Emergency Economic Powers Act. Trump is basing the new pharma tariffs on the findings of an investigation by the U.S. Department of Commerce. Under Section 232 of the Trade Expansion Act of 1962, the department secretary may investigate the effect of imports on national security. Trump successfully used such investigations to justify tariffs on aluminum and steel during his first presidential term. A year ago, he announced a Section 232 investigation into pharmaceuticals and their ingredients, both branded and generic products.
In a presidential proclamation, Trump cited FDA figures stating that 53% of patented drugs distributed in the U.S. come from outside the country and just 15% of active pharmaceutical ingredient (API) by volume are produced in the U.S. for the domestic market. The Commerce Department’s report concluded that reliance on drug imports threatens to limit U.S. access to life-saving medicines if there is a global supply chain disruption. Reliance on drugs and APIs from overseas is a security matter, Trump said.
“The Secretary found that patented pharmaceuticals and associated pharmaceutical ingredients are essential to the United States’ military and civilian healthcare,” the proclamation states. “A self-sufficient domestic manufacturing and industrial base for pharmaceutical products is vital for the ability to support national defense requirements and maintain public health security during a national emergency or wartime.”
Trump had already been trying to address drug and API production with policy, though not in partnership with Congress. Last summer, he issued an executive order directing the government to stockpile APIs for certain medicines “critical to the health and security of the nation.” He has also been goading pharmaceutical companies to reshore their drug manufacturing operations. The threat of tariffs was the stick that brought companies to the negotiating table.
Beyond Analytics: How Sellers Dorsey is Hard-Coding Value into Medicaid Policy [Video]
How to turn analytics into actual policy outcomes.
Pfizer was first to strike a deal, agreeing last September to match the price of certain medicines to a product’s lowest price in a comparable developed nation, which is called most-favored nation (MFN) pricing. The pharma company also agreed to invest in domestic manufacturing. Several other companies have followed with their own MFN deals. Those that have cut such deals are exempt from Section 232 tariffs for the remainder of Trump’s term. A reduced tariff rate applies to companies that have an administration-approved onshoring plan. Rather than facing a 100% rate on imported products, the rate for these companies will be 20%. But if they don’t eventually strike a formal MFN deal, their rates will increase to 100% within four years of the proclamation. Lower rates apply to companies in countries or regions where the U.S. has a trade deal, such as the European Union, Japan, and South Korea.
The zero tariff rate for generic drugs also applies to biosimilars and their ingredients. But for both generics and biosimilars, exemption from Section 232 tariffs could be temporary. The proclamation states that within one year, the commerce secretary may inform the president of any necessary policy changes for these drugs and their ingredients.
Industry trade groups do not like the new tariff policy. PhRMA contends tariffs will jeopardize the U.S. capital investments that biopharmaceutical companies have announced in the past year. In a prepared statement, PhRMA President and CEO Stephen Ubl said every dollar spent on tariffs is a dollar that can’t go toward those investments. John Crowley, president and CEO of the Biotechnology Innovation Organization, said in a prepared statement that tariffs, MFN pricing, and an uncertain policy environment work against goals of business expansion in the U.S. He added that the tariff risks are acute for small and mid-size biotech companies that often lack the capital to build dedicated manufacturing.
“While we appreciate the administration’s recognition of the need for tariff exemptions for certain critical biotech products, the reality is that any tariffs on America’s medicines will raise costs, impede domestic manufacturing, and delay the development of new treatments — all while doing nothing to enhance our national security,” Crowley said.
More tariffs are looming. In a fact sheet explaining the new policy, the Trump administration said Section 232 investigations are ongoing in sectors adjacent to pharmaceuticals: personal protective equipment, medical consumables, and medical equipment and devices, and robotics.
“These investigations will help ensure that harmful imports in any strategic sector do not compromise national security,” the White House said.
Photo: Mandel Ngan/AFP, via Getty Images