US President Donald Trump’s new tariffs announced Thursday showed that branded or patented drugs produced abroad will be subject to a 100% customs tariff starting Oct. 1.
Trump said the drugs that are manufactured outside the US will face this exorbitant rate. Any branded or patented pharmaceutical product will face the 100% tariff if the manufacturing company has not already broken ground to begin establishing a US production plant.
Trump’s decision came after the US Commerce Department launched a national security probe into imported drugs in April.
US imports over $200B pharmaceutical products
The US imported $212 billion worth of pharmaceutical products last year, according to the Observatory of Economic Complexity (OEC), a data visualization website.
Pharmaceutical products were the fifth-largest imported item last year, while the US’ pharmaceutical exports totaled $94.4 billion, the data showed.
Department data indicates the US imported medical and pharmaceutical products worth $233 billion last year, while exporting $82.8 billion.
The US imported most pharmaceuticals from Ireland last year, worth $50.3 billion, followed by Switzerland with $19 billion, Germany with $17.1 billion, Singapore with $15.3 billion, and India with $12.5 billion.
The largest recipients of US pharmaceutical imports were China, the Netherlands, Japan, Germany, and Canada.
Most of the pharmaceutical imports were generic drugs, like ibuprofen, aspirin, and antibiotics, some of which come from India and China, while most patented and branded drugs are generally produced in the US or the EU.
Bid to bring pharmaceutical manufacturing back to US
The Trump administration has signaled since April that it will impose tariffs on drugs, in a bid to bring the production back to the US to support its national security, strengthen supply chains, and promote economic growth through employment.
The current administration aims to reduce its foreign dependence on drugs, especially during global crises, by making domestic alternatives more attractive via raising the cost of imported drugs.
Trump said in August that the administration would initially impose low tariffs on drug imports but then raise it to 150% within a year, or at most 18 months, and then to 250% to force manufacturers into relocating factories to the US or face jaw-dropping rates.
Following Trump’s tariff threats, major drugmakers like Merck, AstraZeneca, and Johnson & Johnson announced investments in the US.
In April, Merck announced that it would build a $1 billion facility in Delaware, while UK-based AstraZeneca reported plans in July to invest $50 billion for drug production and research and development.
Johnson & Johnson announced in March that it would invest over $55 billion in the US over four years, while Swiss firm Roche said it would invest $50 billion over the next five years.
Eli Lily announced plans to build a $6.5 billion manufacturing plant in Texas, according to a statement released earlier this week.
Drug industry’s reaction remains mixed
Some 61% of American adults and 20% of children fill at least one prescription at a pharmacy or by mail every year, according to a report by Brookings Institution.
Most of the same patients take medication when hospitalized and millions more receive prescribed medicine for conditions like cancer or autoimmune diseases during outpatient treatment.
Drug pricing can have various direct and indirect effects, according to the UNC Center for Business of Health in April.
The two most frequently observed effects are rising costs and potential supply shortages.
The drug industry’s reaction to the 100% tariff remains mixed, as many pharmaceutical companies are aware of the benefits of bringing production back to the US but tariffs may not be the most effective way toward that goal.
Some drug industry leaders say shifting production to the US would be costly and time consuming.(AA)
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