As President Donald Trump threatens to impose sweeping geographic tariffs this week and rekindles discussions around industry-specific duties on drugmakers, pharmaceutical makers are reportedly lobbying the administration to buy themselves some extra time.
Trump is expected to unveil a new tariff plan Wednesday covering import fees on “all countries,” rather than an initially proposed pool of 10 to 15 nations with large trade imbalances, according to comments the president made to reporters over the weekend.
The potential tranche of new tariffs follows the signing of executive orders earlier this year to impose 20% tariffs on imports from China and 25% tariffs on those from Canada and Mexico, plus a renewed promise from Trump at a Cabinet meeting last week that his administration aims to roll out “25% or higher” tariffs on foreign-made pharmaceutical products “in the very near future.”
While Trump is not expected to announce his specific pharmaceutical tariffs on Wednesday, the threat that the trade penalty could eventually be imposed—coupled with the fact that most large drugmakers boast globalized operations and manufacturing footprints—has encouraged “the largest multinational drug companies” to lobby in favor of an incremental ramp-up to the 25% trade reprisal, Reuters reported Tuesday, citing several people close to the matter.
The talks between the administration and the industry, which have been taking place behind closed doors, have given some drugmakers confidence that Trump is amenable to a slower buildup of the final tariff amount rather than imposing the entire 25% amount upfront, Reuters’ sources said.
Additionally, the pharmaceutical industry is optimistic that U.S. regulations requiring public comment periods before new federal policy is enacted could slow the deployment of fees on drugs specifically, Reuters added.
Though the trade situation under Trump 2.0 remains murky for the time being, sector-specific tariffs on pharmaceutical products would likely harm both branded drugmakers and generics outfits as well as customers and patients, analysts at the investment research firm Morningstar wrote in a note to clients Tuesday.
For large drugmakers operating around the world, shifting trade dynamics and tariffs could scupper supply chains, hurt business margins and limit raw material availability, which could in turn convince those companies to rethink R&D investments and trade policies, the Morningstar team explained.
Moreover, tariffs are likely to inflate the costs of both finished products and raw materials, with the analysts figuring drug manufacturers will likely pass the financial burden onto patients, insurers and healthcare providers.
That risk holds especially true for companies that churn out generic drugs, which are already at a much greater disadvantage than their branded counterparts when it comes to the ability to potentially shift more manufacturing to the U.S. Further, copycat medicines made in places like Asia could remain competitive given the higher cost of production in the U.S., which only weakens the potential incentive for companies active in the U.S. market to reshore production there, the analysts warned.
For the biopharma industry, the U.S. is easily the biggest importer, the Morningstar team pointed out. In 2024, the country brought in more than $210 billion in pharmaceutical products and ingredients for both branded and generic drugs, compared to pharmaceutical exports of around $95 billion, the analysts said.
Moreover, roughly half of the drug ingredients used in U.S. pharmaceutical production are sourced from other countries, with China and India collectively accounting for more than 70% of that supply, according to Morningstar.
The reshoring dilemma
Restoring the U.S.’ manufacturing base—including for pharmaceutical products—is one of the chief aims of Trump’s tariff campaign and has been a popular talking point ever since the COVID-19 pandemic laid bare the fractured state of medical supply chains.
As it stands, the U.S. boasts 1,591 biopharmaceutical manufacturing facilities across 48 states and Puerto Rico—a number that has gradually increased each year from an initial pool of 1,018 plants in 2018—according to a report (PDF) published in February by the trade group Pharmaceutical Research and Manufacturers of America (PhRMA).
Still, the process of laying down new manufacturing roots is a long and expensive one, PhRMA noted in a separate release on U.S. biopharmaceutical production. Building a brand-new manufacturing facility, for example, can cost up to $2 billion and take between five and 10 years to get fully up and running when accounting for regulatory hurdles, PhRMA pointed out.
Meanwhile, pursuing plant expansions and transferring even a single product to a new manufacturing site “isn’t any simpler,” the trade group said.
During meetings with the Trump administration earlier this year, PhRMA leveraged those points about manufacturing costs and timelines to barter in favor of a staggered tariff rate increase for pharmaceuticals, Reuters noted in its Tuesday report, again citing comments from people close to the situation.
While the pharmaceutical tariff situation remains fluid for now, many large drugmakers have already sought to emphasize their commitment to U.S. manufacturing in recent weeks.
In late February, Eli Lilly announced plans to invest $27 billion in the build-out of four new production facilities in the U.S. in a move set to more than double the sum the company has earmarked for American production since 2020.
More recently, Johnson & Johnson in late March telegraphed plans to spend $55 billion in the U.S. over the next four years, a 25% increase from the prior four years.
Elsewhere, Merck & Co. and Pfizer have also signaled their commitments to domestic drug production since Trump’s return to office.
As with Morningstar’s note, researchers at GlobalData warned in a new report Tuesday that those onshoring manufacturing moves—while aligned with Trump’s broader trade agenda—are likely to boost production costs and drug prices, raising “significant concerns” that the efforts will only make medications more inaccessible for many U.S. patients.