President Trump’s new pharmaceutical tariff policy throws another wrench into an already increasingly complex drug supply chain, with experts calling for more clarity and details into the White House’s new policy set to go into effect in less than a week.
In announcing that branded or patented drugs would be hit with 100 percent tariffs on Oct. 1, Trump also said drugmakers could escape the penalties if they have a pharmaceutical manufacturing plant for which ground has been broken, or is currently under construction.
It’s unclear how many companies can escape the tariffs under that rule, though many drug manufacturers have pledged billions in investments into the U.S. under pressure by the Trump administration.
This announcement exempts generic drugs, which account for the vast majority of prescriptions in the U.S.
Drugs produced in the European Union are also not covered by the new tariffs, though they are subject to a 15 percent tariff.
Health care lawyers said the new policy raises a number of question for those hoping to avoid the tariffs.
“What if you already have an existing US manufacturing facility? Are you exempted because you already have a domestic footprint in play, or must you be expanding that capacity in some way,” said Soumi Saha, a pharmacist, lawyer and senior vice president of government affairs at the health care improvement company Premier Inc.
“And if you assume that anybody with a U.S. footprint is exempted, it then begs the question, how many branded manufacturers have no U.S. footprint whatsoever and is that the true impact?”
Saha said clarity was needed on this policy, questioning whether companies only need to be manufacturing one of its products on U.S. soil for all its drugs to be exempted or whether this was being applied case by case.
Given that Europe’s drug exports may be exempted by virtue of the tariff agreement reached this year and a significant portion of drug exports from Asia are generics, the true impact of this policy remains murky.
But many branded drugs do originate from Asia as well, particularly from Japan, South Korea and China. And while countries like Japan have tariff trade deals in place, the current agreement only exempts generic medicines.
With no protective trade agreement in place like in Europe, it seems likely that Asian drugmakers will take the brunt of the new rule, which was reflected in the market Friday. U.S. and European pharmaceutical stocks held steady while those in Asia slipped.
Some voices said they aren’t sure there will be much of an impact at all, though they said that’s hard to predict since so little is known about the policy.
“We do not think the recent announcement of 100% tariffs on pharmaceuticals significantly changes the already currently uncertain situation the industry is facing on tariffs,” Arthur Wong, health care managing director at S&P Global Ratings, told The Hill. “However, more details are needed, such as is there a minimum amount of investment, required timelines, and does that include use of outsourced manufacturing.”
The uncertain terrain facing the industry covers a few other issues.
The Oct. 1 deadline announced for the 100 percent tariffs coincides closely with several other important dates pertaining to federal drug pricing controls. Drugmakers in the U.S. have until Sept. 29 to commit to Trump’s Most Favored Nation Executive Order, which would require companies to sell their drugs to the U.S. at the lowest they sell around the world.
Talks for the second round of Medicare negotiations under the Inflation Reduction Act (IRA) are also scheduled to end next week, and while the impact of that action is more delayed, there are areas of overlap.
According to a former federal trade official, enforcing this sort of directive will not be simple, especially the provision requiring facility development in the U.S.
“How on earth do you enforce that? How do you make sure that that is clear at the time of import? Even more so, [Harmonized Tariff Schedule] codes don’t distinguish between brand and generic,” Monica Gorman, managing director at Crowell Global Advisors and former special assistant to former President Biden for manufacturing & industrial policy, told The Hill.
“Enforcing this is going to be incredibly challenging, but at least from an immediate impact standpoint, the fact that it appears to exclude generics is incredibly important and is likely to lessen the impact on the American patients,” she added.
It remains unclear whether this order was informed by the Section 232 investigation ordered by the Trump administration.
Earlier this year, the Commerce Department initiated an investigation into the national security impact of importing pharmaceuticals and pharmaceutical ingredients. This was done under the Section 232 of the Trade Expansion Act of 1962, which gives the president authority to restrict imports that may threaten national security.
If this action was spurred by the 232 investigation, then the tariffs may be stronger as a result.
“If this is being done under the Section 232 tariffs, that likely has the most sticking power and longevity, because a formal investigation was conducted,” said Saha. “There was a formal public notice and comment period, and so those are more difficult to challenge, given the process that went into coming to this conclusion.”
Saha speculated that the first 10 drugs chosen for Medicare negotiations, the discounted prices for which are scheduled to go into effect on Jan. 1, 2026, may be more at risk of being affected by Trump’s new tariff policy. The IRA excludes drugs that have generics or biosimilars on the market from Medicare negotiation, meaning all those that are selected are branded and patented.
Washington, D.C. is also contending with a possible government shutdown on Oct. 1 next week as Congress remains unable to reach an agreement on a continuing resolution.
If the federal government does shut down, the tariffs may still go into effect though the deployment could be sabotaged.
“They’re certainly still viable,” said Gorman. “The big question becomes, who is still working? There are national security exceptions in terms of who is for which federal workers are furloughed and which ones continue to work.”
“I guess the question becomes: if we are in a shutdown situation, are the people who would clarify how this is going to be implemented, are they working?”
