Over the previous few weeks, the Trump administration has imposed quite a few tariffs on imports to the U.S. with restricted exceptions. Till April 7, 2025, pharmaceutical merchandise had been a type of exceptions. In a speech on April 8, 2025, President Trump stated he was planning a “main tariff on prescription drugs” that may get pharmaceutical producers to “come dashing again.”
Whereas the scope, diploma, and timing are at the moment unknown, potential tariffs on pharmaceutical merchandise can have intensive implications on provide chains, insurance coverage prices, and entry to medicines within the U.S. well being care system and overseas.
Substances, Supplies, and Completed Merchandise for Medicine and Medical Units
In 2024, the U.S. imported $168 billion price of completed and unfinished pharmaceutical merchandise. Completed merchandise embrace already manufactured medicines and medical units; unfinished merchandise embrace uncooked supplies used to make medication and medical units. These merchandise come from many areas together with India, China, and the EU.
Whereas unfinished merchandise, like lively pharmaceutical elements, have been topic to numerous tariffs previously, completed medicines have been topic to few or no tariffs in most nations, together with the U.S. This world effort to cut back tariffs on completed pharmaceutical merchandise is partly in response to a 1995 World Commerce Group (WTO) settlement to maintain medicines reasonably priced. Given the indication that U.S. coverage might change below the Trump Administration, the potential scope of tariffs on pharmaceutical merchandise is more likely to have a big impression on world well being care techniques.
Not all Tariffs Are Created Equal; Not All Prescription drugs Are the Similar
There are at the very least six totally different strategies that the WTO has thought-about for figuring out the worth of imported items. The popular methodology of the WTO is the transaction worth methodology, which equates the worth of the nice to the “whole cost made or to be made by the customer to or for the advantage of the vendor for the imported items,” together with future funds like royalties. For instance, manufacturing prices are decrease than the value to shoppers for medication below patent, creating giant revenue margins. Utilizing the transaction worth methodology, the tariff might be levied on the price of the drug when it was imported quite than the last word value charged to shoppers. Thus, producers pay the tariff on the low-cost import, after which the importer can nonetheless cost a principally unchanged excessive market value.
In distinction, the WTO’s deductive methodology seems to be on the value the nice is bought to an unrelated third occasion within the importer nation. Utilizing the deductive methodology for a drug below patent, the tariff could be primarily based on the value the drug is bought quite than on the import value. Since importers pay a a lot larger internet tariff, the revenue margin for that firm might be a lot thinner. Decreased earnings usually tend to incentivize the importer to alter the value charged to shoppers, rising the general price of the drug to sufferers.
For generic medication, the sale value is purposively stored near the import value. Thus, generic producers are working with a lot thinner revenue margins. Below each the transaction worth and deductive method, the tariff levied might be related for the reason that import and sale value are comparatively shut. Nonetheless, the generics market is designed to be low cost and reasonably priced for shoppers. Given the skinny margins of firms promoting generics, the impression of the tariff might be higher.
Implications for Pharmaceutical Firms
The U.S. and EU have interconnected provide chains for producing medication. Final yr, the EU’s pharmaceutical exports to the U.S. have been price $127 billion. World pharmaceutical firms with main operations within the U.S. and EU embrace Bayer, Novartis, Novo Nordisk, GSK, and Pfizer. These firms produce quite a few important, life-saving medicines. Tariffs on pharmaceutical merchandise may disrupt varied elements of the availability chain. For instance, like many pharmaceutical merchandise, Eli Lilly’s GLP-1 drug is manufactured in Eire earlier than importation to the U.S. Trump has proposed tariffs on Irish items as much as 25 %. If all the pharmaceutical merchandise coming from Eire are topic to a 25 % tariff, U.S. tariff income may enhance by $19.5 billion. Whereas this may increasingly accomplish a few of President Trump’s targets of accelerating income for the U.S., these tariffs will drastically enhance the price of the medication to U.S. importers. For model title medication coming from giant pharmaceutical firms, the burden of the tariffs is more likely to be handed on to sufferers in want of the drugs.
Pharmaceutical firms with extra U.S. primarily based manufacturing vegetation and sourced uncooked elements are higher positioned for tariffs. For companies that rely closely on importation, increase manufacturing capability within the U.S. takes time, probably years. Within the brief time period, this might create large shortages of medication and medical units as producers battle to pay giant importation charges and shift manufacturing to the U.S. Additional, the upfront price of uncooked supplies wanted to construct new manufacturing vegetation is anticipated to extend on account of tariffs, including further prices to firms upfront.
Pharmaceutical innovation might probably undergo as properly. A lot of the spending of pharmaceutical firms is on analysis and improvement, which is not topic to a tariff. Nonetheless, the burden of tariffs could possibly be anticipated to cut back analysis and improvement.
Implications of the Commerce Warfare on U.S. and World Well being Care Programs
Round 40 % of medical units are manufactured outdoors the U.S. Mexico, a significant hub of medical machine manufacturing, is dealing with a 25 % tariff, which might make merchandise together with pacemakers, insulin pumps, and listening to aids, are anticipated to develop into dearer. Trade professionals count on these costs to enhance prices for hospitals and well being techniques 15 % over the subsequent six months.
One of many largest losers in case of upper tariffs is anticipated to be producers of generic medication. About 47 % of generic medication prescribed within the U.S. — which makes up 90 % of all prescriptions within the nation — are made in India, which is dealing with a 26 % tariff. These prices could be handed on to the sufferers, since, as Marc Cuban acknowledged about his personal generic manufacturing firm, they “can’t take up any further prices” given their skinny revenue margins.
Elevated prices for generic and model title importers are probably then to be mirrored in larger costs of medication and medical units for sufferers. Given elevated costs, it’s unclear how insurance coverage firms are going to reply. Insurance coverage companies are more likely to cost larger premiums and costs for lined merchandise, which may value many sufferers out of the well being care market, exacerbating already current protection points. Additional, with out gross sales, generic drug producers and different firms working on low revenue margins may additionally need to withdraw from the market, exacerbating current drug shortages and rising affected person prescription drug price. Tariffs might exacerbate already current protection and entry to medicines points.
Nonetheless, this isn’t the identical for the worldwide well being care group. Europe has proven that they may probably levy reciprocal tariffs on U.S. pharmaceutical medication. Not like the U.S., many European nations have strict value controls on medication, so the associated fee of tariffs can’t be handed on to the shoppers in these nations. As a substitute, pharmaceutical firms could be compelled to take the complete burden of the tariffs, probably resulting in decreased funding on analysis and improvement.
Quick Time period Ache for Lengthy Time period Acquire?
Tariffs on pharmaceutical merchandise are more likely to harm nationwide and world pharmaceutical firms and the well being care techniques. Uncooked supplies and elements will develop into dearer, rising the price of manufacturing. Moreover, world provide chains might be affected, rising the value of producing at varied phases. On the finish of the day, pharmaceutical firms that import lots of their merchandise will go the burden of the tariffs off to U.S. sufferers. Whereas within the long-term, tariffs might shift manufacturing again to the U.S., within the short-term, analysis and improvement might sluggish, insurance coverage prices will rise, and entry to merchandise will lower, finally harming the sufferers who want medicines most.
In regards to the writer
Jessica Samuels is a third-year twin diploma regulation and public well being pupil (J.D./MPH 2025). Her analysis pursuits embrace genetics, environmental well being sciences, novel biotechnologies, and the FDA regulatory course of. She has beforehand printed work on the accuracy of ultrasound in predicting malignant ovarian lots. At HLS, Jessica is co-president of the Harvard Well being Regulation Society.
