President Donald Trump says America needs to raise drug prices to lower them. At least that’s the logic of a government that wants to use tariffs to reshape the economy.
The president decreed last week that pharmaceutical companies must cut deals to reduce retail prices. If they don’t, he will impose 100 percent tariffs on all imported pharmaceuticals, as well as on ingredients that are made or used by American companies.
Trump doesn’t have the unilateral power to impose price controls on drug companies. Instead, he is using the threat of import taxes to jawbone manufacturers into agreements that advance the government’s agenda. That includes moving production plants to the United States or selling products on TrumpRx, the administration’s drug discount platform.
Drug prices in the U.S. are indeed higher than in other developed countries, especially in Europe, and Trump isn’t alone in identifying this as politically potent terrain. Socialists like Sen. Bernie Sanders (I-Vermont) have wanted bureaucrats to run the health-care industry for decades.
Why shouldn’t the government use all the tools at its disposal to make deals with drug companies, especially if they are “voluntary”?
Start with the fact that the European prices that the administration is trying to replicate are artificially low. That’s the result of government restrictions or negotiated rates via socialized health systems. These policies make it harder for companies to invest in new drugs. They also exacerbate shortages across Europe and keep newer treatments out of the market entirely.
The administration seems to understand these problems and has criticized Europeans for “free riding” on U.S. innovation. Trump is right that Europeans get access to our biomedical breakthroughs without paying full fare, and that’s not sustainable. But this only reveals the underlying incoherence in his strategy: Trump wants European-style prices here while simultaneously pressuring those countries to pay more.
Meanwhile, the administration’s tariff strategy invites cronyism. Many larger pharmaceutical companies have already entered deals with the administration, though the details often remain hidden from the public. Some might be able to afford discounts on their drugs — and would be happy to offer them if they can get special treatment for other products facing reviews by the Food and Drug Administration.
Unsurprisingly, spending for lobbying by Big Pharma exploded in 2025. Also unsurprising are the enormous carveouts in the tariff announcement. The administration has exempted generic and biosimilar drugs from the levies and said it would spare drugs for rare diseases from certain countries or that “meet an urgent public health need.”
Judging by the stock market’s lack of reaction to Trump’s announcement, those loopholes probably are enough for most companies to get by unscathed. It might be a different story for biotech startups struggling to get by. And, if this continues, many lifesaving drugs might never leave the research laboratory to go into development.
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