For more than a year, the biopharma industry has had to swiftly react to various tariff threats from the Trump administration. Now, a Thursday announcement from the White House puts the U.S. tariff situation into much clearer focus.
The president has rolled out a 100% tariff rate on patented pharmaceutical products and ingredients under Section 232 of the Trade Expansion Act of 1962, according to a White House fact sheet. The duties will start in 120 days for large companies and 180 days for smaller drugmakers.
There are several ways for companies to lower the tariff rate, according to the fact sheet. For instance, under existing trade deals, products coming from the European Union, Japan, Korea, Switzerland and Liechtenstein face a 15% tariff. Under a new U.K. agreement finalized today, British drug exports to the U.S. are exempt from tariffs.
For the 16 large drugmakers that have already entered into Most Favored Nation (MFN) pricing agreements with the administration, a tariff exemption applies until January 20, 2029. The fact sheet also lays out an “onshoring” arrangement that enables companies to secure a 20% tariff rate.
In a big win for generic and biosimilar players, those products and their “associated ingredients” are not being subjected to the duties, according to the fact sheet.
Likewise, orphan drugs and “certain other specialty pharmaceutical products” are exempt if they originate from countries with trade deals or address an “urgent public health need,” the White House document says.
The tariffs follow the administration’s move to launch a Department of Commerce probe into the pharmaceutical industry a year ago. According to the Thursday fact sheet, the “Section 232” probe found that pharmaceuticals “are being imported into the United States in such quantities and under such circumstances as to threaten to impair our national security.”
While the tariff rollout will come as an unwelcome development for many in the industry, large drugmakers have spent the last year preparing major U.S. investments to get out ahead of the threat. Those investment pledges have reached the hundreds of billions of dollars.
Still, midsize drugmakers and biotechs have their own set of concerns about the policies, with a newly formed trade group arguing the president’s plan “creates an unfair two-tiered system.”
“By granting full exemptions only to companies that have already accepted ‘most-favored-nation’ price controls—and leaving midsized innovators who rely on a handful of patented medicines to shoulder the burden—the policy risks undermining the very American biotech companies that drive the majority of new breakthroughs in cancer, rare diseases, and other life-threatening conditions,” a spokesperson for the Midsized Biotech Alliance of America (MBAA) said on Thursday.
It’s not only the MBAA weighing in with concerns. In a Thursday statement, John Crowley, President and CEO of the Biotechnology Innovation Organization, said that “tariffs on America’s medicines will raise costs, impede domestic manufacturing, and delay the development of new treatments—all while doing nothing to enhance our national security.”
“U.S. biotech companies have been eager to expand investments here at home, but tariffs, along with an uncertain policy environment and efforts to force ‘most‑favored nation’ schemes, work directly against that goal,” Crowley added. “The risks are especially acute for small and mid‑size biotech companies, which develop more than half of all FDA‑approved medicines yet often lack the capital to build dedicated manufacturing facilities as they weather an industry defined by high costs, long development timelines, and significant risk.”
After the first round of MFN deals with large drugmakers, the White House is now negotiating deals with smaller drugmakers, Stat News reported Thursday.