Trump’s huge tariffs on some drugmakers could end up backfiring

Drug Tariffs May Put Smaller Pharmaceutical Companies Under New Pressure

Earthguardiansonline.com – President Donald Trump’s new 100% tariff on selected patented pharmaceutical products and ingredients begins Tuesday, setting up a major test of whether trade policy can bring more drug manufacturing back to the United States without disrupting access to medicines.

The policy is intended to encourage domestic production, but its sharpest effects may be felt by smaller drugmakers rather than the industry’s biggest names. Analysts and health policy experts warn that many smaller and midsize companies lack the money, factory capacity, and negotiating leverage needed to rapidly move production into the US.

That could create an outcome at odds with the administration’s stated goal of lowering medicine costs. Companies facing substantially higher import expenses may raise prices, reduce their product lines, seek mergers, or shut down. Patients who depend on medicines made by specialized manufacturers could be particularly exposed.

Large drugmakers receive important exemptions

The headline tariff rate does not apply across the pharmaceutical sector. Many of the largest manufacturers have entered “Most Favored Nation” agreements with the administration. Under those arrangements, companies pledged to increase US manufacturing and offer lower-priced medicines through Medicaid and TrumpRx, the administration’s direct-to-consumer clearinghouse.

Those companies account for most brand-name medicines, meaning a large part of the market is outside the 100% tariff framework.

Several other exemptions and lower rates also narrow the policy’s reach. Generic medicines, orphan drugs for rare conditions, and certain specialized treatments are mostly excluded. Patented drugs imported from the European Union, Switzerland, Japan, and South Korea will generally face a 15% tariff because of existing bilateral trade arrangements. Products from the United Kingdom are not subject to the new levies, while companies that agree to expand US production will face a 20% rate.

As a result, only a limited portion of pharmaceutical companies and products will be exposed to the full 100% rate. Still, the affected group includes more than 100 drugmakers with at least one nonexempt product, based on an initial Brookings Institution review.

Contract manufacturing creates a difficult hurdle

For smaller companies, shifting production may be far more difficult than simply opening a new plant. Many do not own manufacturing facilities and instead rely on contract manufacturers to produce their medicines. Marta Wosinska, a senior fellow at Brookings, said most affected companies fall into that category.

US contract manufacturing capacity is already heavily contested, making a rapid domestic transition costly and complicated. Smaller businesses may be unable to absorb those expenses or secure enough production space, especially when larger competitors have deeper financial resources.

“Their pockets are not as deep,” Wosinska said of smaller drugmakers.

She said companies that cannot secure an agreement with the White House could ultimately have to sell themselves to larger pharmaceutical businesses. Consolidation may help some firms survive, but it could also leave fewer independent manufacturers developing and supplying medicines.

Potential consequences for patients and innovation

The greatest concern may be for patients whose conditions are not a central focus for major pharmaceutical companies. Smaller firms often serve more specialized markets, and increased costs for those businesses may translate into higher prices for patients and health systems.

Mollie Sitkowski, an international trade lawyer at Faegre Drinker, said prices for affected medicines are likely to increase. She also expects fewer new products could reach the market over the next several years if companies redirect capital from research, development, and clinical work toward tariff costs and manufacturing changes.

That concern extends beyond immediate pricing. Biotechnology companies frequently operate with limited resources while investing in treatments that may take years to develop. A steep tariff on imported ingredients or finished products can force executives to prioritize short-term survival over research programs with uncertain outcomes.

The Biotechnology Innovation Organization, which represents small and midsize drugmakers, recently urged the Commerce Department to reconsider the approach. The organization argued that penalties affecting US innovators could undermine the investment and scientific progress needed for the country’s biotechnology sector.

“The reality is that tariffs on America’s medicines will raise costs, impede domestic manufacturing, and divert scarce resources away from research and development critical to maintaining American biotech leadership,” wrote John Crowley, BIO’s CEO.

A break from decades of pharmaceutical trade policy

The April announcement marked a significant shift for an industry that had largely avoided broad tariffs for decades. International trade arrangements had generally sought to keep essential medicines moving across borders with fewer obstacles, reflecting the importance of steady supply for patients and hospitals.

The administration has long indicated that pharmaceuticals could become a target of its wider tariff strategy. Supporters of domestic manufacturing argue that stronger US production capacity can reduce dependence on overseas suppliers. However, the practical question is whether tariff pressure alone can create sufficient factories, trained workers, regulatory capacity, and contract-manufacturing space quickly enough to avoid supply and cost problems.

For now, the policy’s layered exemptions mean its immediate reach will be narrower than the 100% headline figure suggests. Yet the companies left inside the highest-rate category may have the least ability to adapt. Their response—whether through price increases, production changes, consolidation, or reduced investment—will help determine whether the tariffs strengthen domestic drug manufacturing or make medicines harder and more expensive to obtain.