Shelf of pharmaceutical ducts. D3sign | Moment | Getty ImagesPresident Donald Trump announced Thursday that the U.S.
will impose a 100% tariff on "any branded or patented Pharmaceutical duct" entering the country from Oct.
1.The measure will not apply to companies building drug manufacturing plants in the U.S., Trump said.
He added that the exemption covers jects where construction has started, including sites that have broken ground or are under construction."There will, therefore, be no Tariff on these Pharmaceutical ducts if construction has started," Trump said in a post on Truth Social.Branded or patented pharmaceutical ducts are drugs sold under trade names and tected by patents or other intellectual perty, which block generic competition until those tections expire.Trump has said tariffs will incentivize drug companies to move manufacturing operations to the U.S.
That is an effort that Eli Lilly, Johnson & Johnson, AbbVie and others are already pursuing at a time when domestic drug manufacturing has shrunk dramatically over the last few decades.
CNBC reached out to major drugmakers for on the tariffs but did not receive an immediate response.Risks to the drug supply chainIn 2024, U.S.
imports of pharmaceuticals nearly tripled to around $213 billion from a decade earlier, according to data from the United Nations Comtrade Database.The Trump administration in April initiated a so-called Section 232 investigation into pharmaceutical ducts, which allows the Secretary of Commerce to examine the impact of imports on national security.
The president similarly used that power to impose tariffs on other goods, such as cars and aluminum.
The tariffs deal a long-awaited blow to pharmaceutical companies, many of which have pushed back and warned that the levies could drive up costs, deter investments in the U.S.
and disrupt the drug supply chain, ultimately putting patients at risk.In public s to the government in May, Eli Lilly said tariffs will "deprive manufacturers of necessary capital to both innovate and invest in reshoring" since they will redirect capital to cushion the impact of the levies.
That was among the hundreds of s released by the Department of Commerce in late May in relation to its 232 investigation into the pharmaceutical industry.Some health policy experts also say the move could disrupt the drug supply chain at the expense of U.S.
patients, driving up costs for certain treatments or even exacerbating the medication shortages plaguing the nation.
Drugmakers often rely on a global network of manufacturing sites for different steps of the duction cess.
There "is the potential for higher prescription drug prices in an environment where we're already pushing very hard to try to get those prices down," Leigh Purvis, prescription drug policy principal in AARP's Public Policy Institute, told CNBC before the tariff announcement.She added that there are "a lot of generic drugs specifically that could potentially have to make decisions between being unfitable and pulling from the market entirely."Tariff stormThe levies are lower than the up to 250% tariff rate on pharmaceuticals that Trump floated in August in an interview with CNBC's "Squawk Box." Trump said he would initially impose a "small tariff" on pharmaceuticals, but then in a year to a year and a half "maximum," he will raise that rate to 150% and then 250%.The industry is already navigating the fallout from Trump's posed drug pricing policies, which drugmakers argue threaten both their bottom lines and their capacity to invest in re and development, and a massive overhaul at the Department of Health and Human Services under minent vaccine skeptic Robert F.
Kennedy Jr.It's the development in Trump's evolving tariff policy, which aims to bring back manufacturing in the U.S.The new duties the launch of fresh national security investigations announced on Wednesday into imports of robotics, industrial machinery, and medical devices.The bes by the Department of Commerce expand the list of goods that could face higher tariffs to include personal tective equipment such as surgical masks, N95 respirators, gloves and other medical consumables, including syringes and needles.Any new duties resulting from the sector-specific bes would be stacked on top of Trump's country-specific tariffs, though the European Union and Japan have reached agreements that could shield them from extra levies.Shifting manufacturingAnalysts have raised concerns that it will be difficult to reshore duction in the country, which would be costly and could take several years."Global supply chains are complex, with Pharma among the most–it's not as simple as moving where someone screws in little screws to make an iPhone," BMO Capital analyst Evan Seigerman said in a note in April.He said the tariffs will "ly do little to shift manufacturing" back to the U.S.
since companies already have robust operations in the country.
Seigerman said he expects most large pharmaceutical companies will ly set a goal of "waiting until the end of Trump's presidency to consider more permanent manufacturing decisions."J&J in March also announced a new $55 billion investment in U.S.
manufacturing, re and development and nology over the next four years.
In April, J&J said it expects to record a $400 million tariff expense in 2025, which reflects already-announced levies and doesn't predict the effects of pharmaceutical-specific tariffs.
It is primarily related to the company's medical device ducts, executives said on an earnings call at the time.Other companies, including Pfizer, have also recorded charges related to the tariffs Trump announced in April.J&J CEO Joaquin Duato echoed the warnings of health policy experts."There's a reason...why pharmaceutical tariffs are zero.
It's because tariffs can create disruptions in the supply chain, leading to shortages," Duato said during the call. He added that favorable tax policies would be a more effective tool to boost the U.S.
manufacturing capacity of both drugs and medical devices.Some drugmakers, such as Eli Lilly, Bristol Myers Squibb and AbbVie, may be better positioned than others to weather tariffs because they have more major manufacturing plants in the U.S.
than internationally, TD Cowen analyst Steve Scala said in a note in April. The majority of their sites responsible for ducing the active ingredients in drugs are also in the U.S., he added.
Meanwhile, Novartis and Roche "look more at risk" because they have few U.S. plants and a higher of active ingredient sites that are international, Scala said.