The Trump administration is preparing to impose new tariffs of up to 100% on branded drugs and their active ingredients imported from pharmaceutical companies that have not reached landmark deals with President Trump to lower U.S. drug prices, according to a draft document obtained by CNBC [1]. The proposal, which is not yet final, could be announced as soon as Thursday, though the exact timing remains unclear [1]. Drugmakers that have fully executed deals or are currently negotiating with the Health and Human Services department would be exempt from these tariffs [1].
The draft plan outlines a 20% tariff for companies planning to onshore production, which would escalate to 100% after four years [1]. There are separate tariff rates for the EU, Japan, South Korea, Switzerland, and the U.K., based on bilateral deals, while generic drugs would face zero additional tariffs [1]. The tariffs are a response to a Commerce Department investigation that found certain pharmaceutical imports pose a national security risk to the United States [1].
Since November, more than a dozen major drugmakers, including Eli Lilly (LLY), Pfizer (PFE), and Novo Nordisk (NVO), have signed agreements with the Trump administration to lower prices of new and existing medicines. These deals are part of the president's 'most favored nation' policy, which ties U.S. drug prices to lower prices abroad and exempts participating companies from tariffs for three years [1].
Prior to these agreements, Trump had repeatedly threatened tariffs on pharmaceutical imports, prompting a wave of U.S. manufacturing investments from the industry as companies sought to avoid duties and align with the administration's policies. These commitments come at a time when domestic drug manufacturing had significantly declined [1].
CONCLUSION
The Trump administration's proposed tariffs on imported branded drugs represent a significant escalation in its trade and drug pricing strategy, with potential high impact on pharmaceutical companies and the broader market. Companies that have secured deals to lower U.S. drug prices are exempt, incentivizing further negotiations and domestic manufacturing investments. The market is likely to react strongly to the uncertainty and potential cost increases for non-compliant drugmakers.