President Trump likes to talk about taking on the biggest pharmaceutical companies. But with his long-awaited 100 percent tariffs on imported medicines announced on Thursday night, Mr. Trump appears to have let the richest companies off the hook.
Many industry giants are poised to avoid the pharma tariffs entirely. They should qualify for an exemption because, in anticipation of tariffs, they have begun pouring billions of dollars into constructing or expanding factories in the United States.
Big companies like Johnson & Johnson, Eli Lilly, Merck, Gilead Sciences, Roche, GSK, AstraZeneca and Novo Nordisk have recently started construction on new factories in North Carolina, Indiana, Delaware, California, Pennsylvania and Maryland.
“Overall, we think this is a win for Pharma and shouldn’t have a material impact,” analysts at the Wall Street bank Jefferies wrote in a note to investors on Friday. Big drugmaker stocks were generally flat or up slightly on Friday morning.
For months, Mr. Trump’s threats of drug tariffs have fueled fears that American patients would be harmed by higher prices and shortages of vital drugs. But with the much more limited tariffs Mr. Trump announced on Thursday, Americans are likely to see little to no impact for many of the most well-known and best-selling medicines.
Some major companies, like Novartis, were already predicting on Friday morning that they would be spared from the tariffs. “The announced 100 percent tariff should not have an impact on Novartis,” Michael Meo, a company spokesman, said.
Instead, the tariffs could harshly punish a different kind of company: certain smaller manufacturers of brand-name drugs. These companies are unknown to most Americans and make drugs in countries like Canada or Mexico. They can’t afford to spend billions of dollars building new factories in the United States.
In a statement, John Crowley, president of the Biotechnology Innovation Organization, a trade group that represents biotech companies and most pharma giants, said the pharma tariffs would hit “small and mid-sized” companies.
Mr. Trump said on social media on Thursday night that he would impose a 100 percent tariff on all patent-protected brand-name drugs imported into the United States starting Oct. 1. But there was a huge caveat: Companies could dodge the tariffs if they were actively constructing new factories in the United States.
Mr. Trump’s announcement also appeared to allow exemptions for the makers of cheaper, old generic drugs, which account for a vast majority of Americans’ prescriptions. The White House did not respond to requests seeking to confirm that.
Still, there could be disruptions and higher prices for some lesser-known products made by smaller companies that manufacture overseas and cannot afford to build new American factories.
“It’s likely that the companies that will be affected are certain smaller companies that are making more niche products,” said Dr. Aaron Kesselheim, a professor of medicine at Harvard Medical School and Brigham and Women’s Hospital. “That could be problematic for those particular patients.”
Giant pharmaceutical companies often have fat profit margins from making the biggest blockbusters, like the world’s best-selling drug, the cancer medication Keytruda, produced and sold by Merck. That is not always the case for smaller companies. Facing a 100 percent tariff, a company manufacturing its brand-name product in Canada or Mexico could potentially opt to discontinue those sales or sell the drug to another company.
“A smaller niche brand-name drug that does not have as high of profits as the Keytrudas and GLP-1 drugs of the world might feel more pressure,” Dr. Kesselheim said, referring to the hugely popular class of weight-loss drugs. “There is the possibility that that would lead to shortages and disruptions in the supply.”
For a smaller brand-name company suddenly facing a 100 percent tariff that cannot afford to absorb the hit, the next step is clear.
“You have to account for these tariffs and raise the price,” said John Maraganore, a former chief executive of Alnylam Pharmaceuticals and a former chair of the Biotechnology Innovation Organization. “Especially if it’s a single product company that depends 100 percent on that one product, that’s what you naturally do, which of course doesn’t help the American consumer.”
Peter Kolchinsky, a biotechnology investor in Boston, said Mr. Trump’s tariffs “might leave smaller American biotech companies at a huge disadvantage to big multinationals.” He added, “Hopefully the final language gives them time to contract to build in the U.S. or we’ll lose a lot of American jobs in innovation.”
A majority of the brand-name drugs that Americans take are already made in the United States, or in Europe. For example, the popular weight-loss drug sold as Ozempic and Wegovy is produced in Denmark.
But over the summer, the European Union secured a trade deal guaranteeing a much lower tariff rate of no more than 15 percent — which bloc officials said on Friday would not be affected by Mr. Trump’s additional new tariffs. The White House did not respond to requests for comment on whether anything had changed.
It was not immediately clear when or if a tariff of 15 percent or less would go into effect for brand-name drugs imported from Europe by companies that are not building a plant in the United States. If that happens, there could be relatively modest price increases for those brand-name drugs.
The pharmaceutical industry has a powerful, well-connected lobby in Washington. Ahead of the tariffs, the industry aggressively lobbied to seek exemptions like the ones it secured in Mr. Trump’s announcement on Thursday.
Big drugmakers, though, are still facing other major threats from the Trump administration. Earlier on Thursday, the administration signaled plans to try to force drugmakers to cut some U.S. prices to the lower levels in Europe. Administration officials have also said they plan to push a regulatory change that could take drug ads off TV.
Despite their investments in new U.S. factories, the biggest companies have no plans to stop making many of their drugs overseas. And now, they can save billions of dollars that they had feared they would have to spend paying much higher pharmaceutical tariffs.
Rebecca Robbins is a Times reporter covering the pharmaceutical industry. She has been reporting on health and medicine since 2015.
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