For more than a year, the biopharma industry has been rattled by threats of tariffs from the Trump administration. The White House statement issued on April 2 finally clarified the situation in the United States. Generic drugmakers came out ahead, as the restrictions did not affect them. At risk are mid‑sized companies and startups, which have neither the ability to invest in the U.S. nor the resources to pay the tariffs. GxP News examines how these changes will impact the pharmaceutical market.
According to a White House fact sheet, the president imposed a 100% tariff on patented pharmaceutical products and ingredients under Section 232 of the Trade Expansion Act of 1962. The tariffs will take effect after 120 days for large companies and after 180 days for small drug manufacturers.
Companies have several ways to lower the rate. For 16 large pharmaceutical companies that have already signed agreements with the administration to move production to the United States, tariffs will be zero until January 20, 2029. For companies that are only now entering into agreements to bring production back to the country, a 20% rate will apply.
Under existing trade agreements, products from the EU, Japan, Korea, Switzerland, and Liechtenstein are subject to a 15% tariff. Under the new agreement with the United Kingdom, drug exports from there are exempt from tariffs.
Generic and biosimilar manufacturers came out ahead: neither the products themselves nor their “accompanying ingredients” will be subject to tariffs for the next year.
Orphan drugs and “certain other specialized pharmaceutical products” are exempt from restrictions if they originate from countries with which trade agreements are in place or if they meet a “pressing public health need,” according to the White House document. The fact sheet states that it has been determined that pharmaceutical drugs “are being imported into the United States in such quantities and under such circumstances as to threaten national security.”
Throughout the year, large pharmaceutical companies have been preparing massive investments in the United States to get ahead of the threat. These investment commitments have reached hundreds of billions of dollars.
However, mid‑sized pharma and biotech companies have reasons for concern. The main tax burden will fall precisely on small innovative companies that have few patented drugs, a representative of the American Alliance of Mid‑Sized Biotech Companies (MBAA) said on Thursday. Yet these are the companies that deliver most of the new breakthroughs in the treatment of cancer, rare diseases, and other life‑threatening conditions, the MBAA representative added.
John Crowley, President and CEO of the Biotechnology Innovation Organization (BIO), noted that “tariffs on American medicines will raise prices, make domestic manufacturing more difficult, and delay the development of new treatments – all without any improvement to our national security.”
“The risks are particularly acute for small and mid‑sized biotech companies, which develop more than half of all FDA‑approved drugs but often lack the capital to build specialized manufacturing facilities – as they must contend with an industry characterized by high costs, long development timelines, and significant risk,” Crowley added.
According to Stat News, the White House is now in negotiations with smaller drug manufacturers.