The new tariffs, authorized by President Donald Trump on Thursday, will affect patented drugs produced in countries without tariff agreements with the US by companies that lack most-favored-nation pricing arrangements with the administration.
Taxes for products made by certain large companies will begin in 120 days, while those from smaller manufacturers will take an additional 180 days to be imposed, as stated by the White House.
For imports from major economies that negotiate deals with the White House, tariffs will be capped at 15%. This includes countries like the European Union, South Korea, Japan, Switzerland, and Liechtenstein, as noted in the statement. Imports from the UK will incur a lower rate.
Medicines produced by companies that agree to some level of manufacturing in the US will see their imported products taxed at 20%. Should they establish MFN agreements, the rate could potentially drop to zero, as reported by the White House. This tariff-free exemption is valid until January 20, 2029.
The announced charges fulfill a warning made by the president last fall about imposing 100% tariffs on branded or patented medicines unless companies relocate production to the US. However, the measures contain significant exemptions that may mitigate their impact.
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Most of the world’s largest pharmaceutical companies, including Merck & Co. and Eli Lilly & Co., have circumvented these punitive measures by reaching agreements with the administration. Last summer, Trump sent letters to 17 companies outlining demands, such as reducing prices charged to the Medicaid program for low-income individuals, direct sales to US consumers, and introducing new drugs at prices consistent with those in other developed nations, in exchange for relief on tariffs.
Consequently, the new levies are likely to predominantly affect smaller pharmaceutical companies and ingredient manufacturers.
Generic drugs will also be exempt from these tariffs, although the measure Trump signed instructs the Commerce Department to reassess those products within a year. This opens the possibility for future tariffs depending on the degree of production reshoring, as mentioned by a White House official before the announcement.
The new tariffs arise from an investigation initiated in April 2025 under Section 232 of the Trade Expansion Act, which gives the president the authority to unilaterally impose tariffs on imports considered a national security threat. Industry groups have expressed concerns that these measures could disrupt supply chains, worsen shortages, and increase costs for Americans.
This is the latest step in Trump’s protectionist approach, which faced a setback in February when the Supreme Court ruled that his global tariffs were unconstitutional. However, duties on other sectors enacted under Section 232 remained unaffected by that ruling. On the same day, Trump also moved to streamline and reinforce his metal tariffs.
Criticizing foreign drug production as a national security risk, Trump has hinted at tariffs as high as 200% to stimulate domestic manufacturing. Although companies announced significant investments in the US, it was not sufficient to prevent the tariffs resulting from the Commerce Department’s inquiries.
Drug manufacturers will have to choose between absorbing the tariff costs or raising prices for their medications in an already costly marketplace.
The timing and extent of the impact on patients remain uncertain. Americans currently pay more for medications than anyone else globally. Prices are often determined through complex negotiations involving insurance companies, pharmacy benefits managers, and manufacturers, making it difficult to immediately reflect increased costs. Ultimately, consumers may see rising prices through higher co-pays or more expensive insurance plans.
