Former President Donald Trump has signed an executive order that could lead to tariffs of up to 100% on some patented drugs from companies that do not reach specific agreements with his administration. This policy is primarily aimed at companies that have not entered into “Most Favored Nation” (MFN) pricing deals or committed to manufacturing their products in the U.S. Companies that have signed MFN deals and are actively establishing production facilities in the U.S. will face a 0% tariff. Those without a pricing deal but with U.S. production projects will initially see a 20% tariff, which will escalate to 100% within four years if an MFN deal isn't struck.
The tariffs are set to take effect on July 31, 2026, for larger companies and September 29, 2026, for others. Companies have a grace period of 120 days for larger firms and 180 days for all others to negotiate deals before the 100% tariffs are fully implemented. The executive order is issued under Section 232 of the Trade Expansion Act of 1962, citing national security concerns. These moves are part of the broader TrumpRx initiative, which includes the TrumpRx.gov platform designed to provide Americans with access to certain medications.
Not all pharmaceuticals are affected. Generic drugs, biosimilars, U.S.-origin drugs, rare disease treatments, certain cancer therapies, fertility drugs, and cell and gene therapies are initially exempt from these tariffs. However, the proclamation indicates that these exemptions for generics and biosimilars could be temporary, with the Commerce Secretary potentially advising the President on necessary policy changes within one year. Lower tariff rates apply to imports from certain allied countries; for instance, the European Union, Japan, and South Korea face 15% tariffs, while the United Kingdom benefits from a 10% rate, with potential for it to drop to 0% under future agreements.
Industry trade groups, such as PhRMA and the Biotechnology Innovation Organization, have expressed strong opposition to the new tariff policy. They argue that tariffs will raise costs, hinder domestic manufacturing investments, and delay the development of new treatments, potentially jeopardizing the biopharmaceutical companies' announced U.S. capital investments. They also highlight that such policies could disproportionately impact small and mid-sized biotech companies that lack the capital for extensive manufacturing infrastructure.
The administration's goal is to incentivize drug manufacturers to shift production to the United States and agree to lower drug prices, aligning with former President Trump's "America First" agenda. Pfizer was one of the first companies to strike an MFN deal, agreeing to match the lowest prices in comparable developed nations for certain medicines and to invest in domestic manufacturing. Several other companies have since followed suit, securing exemptions from the Section 232 tariffs for the remainder of Trump’s term.
