Pharmaceutical companies are urging US President Donald Trump to implement tariffs on imported drugs gradually, aiming to soften the impact of the charges and provide time to relocate manufacturing.
This follows Trump’s 30 March 2025 announcement that upcoming tariffs will apply globally, rather than targeting 10 to 15 nations with the largest trade imbalances, impacting the pharmaceutical sector.
Set to reveal a comprehensive tariff plan on Wednesday, 2 April 2025, Trump has advocated for the tariffs, emphasising the need to expand domestic drug manufacturing to reduce US dependence on foreign suppliers for medicines.
The largest multinational drug companies are calling for a graduated ramp-up to the 25% tariff on medical products rather than 25% from day one.
The industry trade group PhRMA has stated that establishing a new production facility in the US can take five to 10 years and cost up to $2bn, partly due to regulatory requirements.
Tariffs risk shortages
Pharmaceutical companies have warned too that tariffs may heighten the risk of drug shortages and limit patient access. They caution that Trump administration's trade policies involve a delicate balancing act between strategic shifts towards domestic manufacturing and the economic realities of increased production costs.
In recent months, several multinational pharmaceutical companies have announced billions of dollars in new investments to expand US manufacturing and boost production of their top-selling drugs for the domestic market. These companies include Johnson & Johnson, Eli Lilly, AstraZeneca, and GSK.
Eli Lilly, for instance, has announced plans to construct four manufacturing sites in the US, with an investment of at least $27bn. Similarly, Merck has opened a $1bn facility in North Carolina. These moves aim to mitigate the impact of tariffs by localising production.
Reshoring raises costs
Critics argue, however, that while reshoring manufacturing may offer long-term strategic benefits, it carries immediate economic implications. Establishing new manufacturing facilities involves substantial capital expenditure and time, potentially leading to increased production costs in the short term.
These costs may be passed on to consumers, resulting in higher drug prices. An analysis by ING Bank suggests that proposed tariffs could increase the cost of certain cancer treatments by up to $10,000 for a 24-week course.
Added to this, is that many international pharma companies primarily manufacture the active ingredients for these products in Europe and Asia. Several major European pharmaceutical companies note too that US tariffs on the EU would hugely impact the costing of some of their medicines, as a significant portion of their manufacturing takes place outside the United States.
There appears to be a growing recognition within the Trump administration that relocating drug manufacturing to the US is both a long-term and costly process. This has sparked optimism among some industry insiders that President Trump may consider gradually implementing the proposed 25% tariffs.
