Pharmaceutical tariffs: Updates and featured news - Prime Therapeutics
Pharmaceutical tariffs: Updates & news
Featured client communications
On Monday, the U.S. Department of Commerce (Commerce Department) posted a notice initiating public comments for a Section 232 investigation — launched April 1 — into drug imports, paving the way for potential tariffs on pharmaceuticals and pharmaceutical products.
In recent weeks, the Trump Administration has signaled imposing tariffs on drugs, citing the action could stem from a Section 232 investigation. Pharmaceuticals were exempt from both baseline and reciprocal tariffs, which are currently on a 90-day pause, but have since become a target alongside other sector-specific proposals.
Prime Therapeutics (Prime) has activated a cross-functional team to monitor the investigation, assess impacts and prepare for possible disruptions or drug shortages.
Overview
Today, the Commerce Department formally published notice of the investigation into pharmaceutical tariffs in the Federal Register — the initial step in launching the process. Section 232 of the Trade Expansion Act of 1962 empowers the president to adjust imports, including through tariffs, if it's determined that those imports threaten national security, with the broader aim of assessing the feasibility of increasing domestic production.
The investigation will focus on pharmaceuticals, Active Pharmaceutical Ingredient (API) medicines and pharmaceutical derivatives. As outlined in our April 4 communication, China and India are both key suppliers of biopharma manufacturing and raw API materials.
Potential impacts of levied tariffs include:
- Increased cost of some API medicines and finished pharmaceuticals. In turn, this could shrink inventories of some API, leading to shortages.
- Generic drug manufacturers may face increased cost pressures in addition to price hikes for over-the-counter medicines like ibuprofen and acetaminophen.
- Longer-term impacts from tariffs are uncertain, though it's possible that drug prices, premiums and copays could rise over time.
It's possible exceptions will be made for certain essential medicines or research-related imports. Any tariff implementations after the investigation could be delayed due to complexities of the pharmaceutical supply chain and the need for a phased approach in implementing tariffs.
What Prime is doing
Now that a Section 232 investigation into pharmaceuticals is moving forward, we are closely monitoring developments and will continue to share updates as more information becomes available.
To support this effort, we've established a cross-functional task force to proactively assess risks, evaluate impacts and prepare for a range of potential outcomes — including readiness scenarios focused on monitoring supply chain and anticipating possible drug shortages.
Prime will continue to drive affordability by fostering competition among manufacturers to secure better pricing and expand access to medicines for patients and payers.
Additional resources
Explore the resources below to learn more about the investigation and upcoming tariffs. Bookmark the pharmaceutical tariff Client News page for up-to-date information and to stay informed on key developments and timelines.
What you need to know
On Wednesday, President Donald Trump announced a 10% baseline tariff on all imported goods, with higher reciprocal rates for select countries, including a 34% tariff on Chinese goods and a 20% duty on European imports.
Pharmaceuticals are not subject to reciprocal tariffs at this time. An annex of the signed executive order details which drugs and compounds are protected from reciprocal tariffs.
Pharmaceuticals may be subject to tariffs within the next 90 days, however. We are monitoring the Trump administration for further announcements and expect that a pharma-sector announcement could come soon.
Overview
Baseline tariffs will take effect on April 5, and reciprocal tariffs will go into effect April 9. While pharmaceuticals are not directly impacted by these tariffs, the Trump administration has signaled potentially imposing pharmaceutical-specific tariffs by launching a Section 232 investigation into pharmaceuticals. If levied, potential impacts are outlined below. As the implications of tariffs evolve, we'll continue to share updates as we learn more.
Potential impacts on pharmaceuticals
- Tariffs could raise the price of some imported Active Pharmaceutical Ingredient (API) medicines and finished pharmaceuticals, and could shrink inventories of some API, leading to shortages. China and India are key sources of biopharma manufacturing, particularly raw API materials. China is also a key supplier of APIs that are used in targeted therapies.
- Tariffs are less likely to negatively affect brand manufacturers who have higher profit margins and a diversified API supply chain.
- Generic drug manufacturers could face increased cost pressures, though significant, immediate impacts on consumer pricing are unlikely at this time.
- Over-the-counter medicines like ibuprofen and acetaminophen could become more expensive, as China is a key supplier.
- The Inflation Reduction Act (IRA) restricts drug price increases for Medicare Part B and D, which may help mitigate some cost increases. In addition, the IRA may reduce the relative price advantage that generics currently hold. Any drug pricing increases could strain the federal Medicaid budget.
- If levied, tariffs are not expected to generate immediate, straightforward price increases. However, it’s unclear at this time whether supply chain participants may absorb costs or adjust pricing strategies, or whether tariffs will end up exacerbating drug shortages.
- Longer-term impacts from tariffs remain uncertain, including potential shifts in sourcing and broader market disruptions. It's possible that drug prices, premiums and copays could rise over time. Imposing tariffs on pharmaceuticals could establish a concerning precedent and have broader implications, including potential retaliatory tariffs from other countries.
Additional resources
Explore the resources below to learn more about the upcoming tariffs and their potential impacts.
- Pharma industry dodges tariff blow but still braces for disruption
- As Trump's 'Liberation Day' tariffs seem to spare pharmaceuticals, threat of industry-specific duties and loopholes persists
- Drug and device makers confront Trump tariffs
- Analysis: Tariffs on Canadian drugs will strain US supply
- Will pharmaceutical tariffs achieve their goals