As President Trump continues to signal import tariffs on pharmaceuticals to bolster US manufacturing, experts warn this could hike costs and crush biotech, but also spur reconsideration of biopharma production.
Following blanket ‘Liberation Day’ tariffs announced on April 2, Trump stated at an April 6 fundraiser, “We’re going to be announcing very shortly a major tariff on pharmaceuticals; and when they hear that, they will leave China.” While there have been no details released since, the administration has announced other policies like an executive order on the Most Favoured Nation (MFN) model, which, if enforced, will also have a major impact on US pharmaceuticals.
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The US imported a total of $213 billion in pharmaceuticals during 2024, according to the UN Comtrade database. India and China are major suppliers of active pharmaceutical ingredients to the US and the various geopolitical actions, including tariffs, are expected to have implications including potentially higher costs for drugs with more on-shore manufacturing, as per a GlobalData Strategic Intelligence report.
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For these countries and others, no tariffs are currently imposed on pharma products. As the sector waits for more clarity, experts question if pharma tariffs will coax manufacturers to the US from abroad and instead warn they are likely to simply disrupt the industry, hitting biotech hardest.
Pharma tariffs will bring little if any nearshoring
Tariffs on pharma imports, as a measure to encourage nearshored manufacturing, are more than offset by the costs of relocation for drug companies, as per Mina Tadrous, assistant professor of drug policy at the University of Toronto in Canada.
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By GlobalDataTadrous describes Trump’s proposed tariffs as “an attempt to have a very simple, shortcut, aggressive policy that doesn’t actually address the real issue,” which he says is the vast time and money needed to establish US-based pharma manufacturing. The time taken to recoup these costs ranges from 8–10 years, well over Trump’s remaining time in office, according to Nilanjan Banik, PhD, professor of economics at Mahindra University, Hyderabad, India.
Banik does envision long-term relocation, not to the US, but from high-tariff to low-tariff countries, highlighting Apple’s plans to move phone production from China to India. But Tadrous says that with this strategy of supply chain optimisation would come a risk of supply disruption and subsequent drug shortages.
However, there are signals that pharma companies are preparing to nearshore operations in the US, according to John Singer, founder of life sciences consultancy Blue Spoon Consulting. He notes Eli Lilly’s commitment to invest an extra $27 billion in US plants, in February. Since then, Novartis, Sanofi, and others have made similar pledges.
“Part of me also believes that a lot of this is just political signaling,” says Tadrous. He posits that companies may be making unbinding commitments to curry favor with the current administration, able to backpedal should tariffs be dropped. In Singer’s view, the MFN executive order is evidence of Trump’s unpredictable stance towards pharma and a cue for companies to avoid committing too heavily to nearshoring production.
The US market remains too big to ignore
Nearshoring of manufacturing has been on the rise before Trump’s tariffs were proposed. “In the Biden administration, there was a push to have more nearshoring,” Tadrous states. “The Europeans are also doing the same things. Canadians have been thinking about it as well.” He says drug shortages in recent years, most starkly seen during the Covid-19 pandemic, made clear the vulnerabilities in drug supply for many regions and spurred governments to seek greater independence of production.
Despite growing regional focus, Banik maintains that the US is still the pivotal market for pharmaceuticals as the world’s greatest drug consumer. He estimates tariffs may amount to as low as 20% of manufacturers’ marginal costs as an added expense of producing pharmaceuticals for the US. Even with import tariffs, the country is too profitable for pharma and biotech to ignore.
However, it is unclear if the US can successfully compete as a broad drug manufacturer. For Banik, many Asian countries hold too strong an advantage in generics manufacturing due to low labour costs and growing specialist talent pools for the US to challenge them. But for biologics and other advanced therapies, Tadrous says the US is well positioned to build on its already strong production capabilities.
Should Trump commit to competing for generics production with these countries, he runs the risk of incurring medicine shortages in the US, states Thomas Roades, biopharma policy researcher at the Duke-Margolis Institute for Health Policy in Durham, North Carolina. According to Roades, competition and supply contracts require generics manufacturers to keep prices so low that tariffs may lead them to discontinue certain drugs that have low or no profits, even if they are essential to many patients.
Biotechs bear the brunt of tariffs
Big pharma may be able to reoptimise supply and make gestures towards nearshoring, but for smaller biotechs, tariffs pose an existential threat, according to Jon Ellis, CEO of the Sacramento, California-based cell and gene therapy (CGT) manufacturing specialist Trenchant Biosystems. In his view, the loss of these cutting-edge drug developers would spell a sharp downturn in future innovation, a mantle larger pharma is ill-suited to take up.
“It’s not necessarily the impact of tariffs, it’s the instability that’s caused by not knowing what’s going on,” Ellis says. This period of uncertainty, archetypal of Trump’s policy, dissuades unsure investors from betting on emerging advanced therapies. Should funding opportunities diminish even further under tariffs, Ellis sees larger companies cheaply buying up broad swathes of biotech, strengthening big pharma’s clinical pipelines and R&D at the expense of the sectors’ most innovative small players.
Singer believes there is reason to suspect the US may risk losing its status as the go-to market for biotech. Innovators, who would otherwise chase FDA approvals, might consider looking to other markets should tariffs prove too constrictive to US business. But for now, Ellis maintains, “The value of the US is still too great for people to turn off, and I think people in the US will find a way of continuing to innovate.”
Biotech’s regionalised model offers the industry a solution
There is a potential tariff workaround employed by biotechs: regionalised manufacturing. Manufacturing advanced cell and gene therapies for US patients, in particular, already occurs largely in the US, Ellis points out, as these require time-sensitive, cold-chain transport which precludes lengthy international supply. According to Singer, a more regionalised approach to manufacturing could see broader adoption throughout biopharma under US tariffs.
However, what works for small biotechs may not on a larger scale. “If you have any problems setting up manufacturing in one location…50 locations is going to be complicated,” notes Jason Jones, global business development lead at Cellular Origins, a developer of robotically automated CGT manufacturing. Beyond logistics, Jones adds that large producers would have to contend with differences in regional regulation which would place limits on how regional their manufacturing could become while remaining practical.
Singer says pharma is exploring innovative ways to manufacture and distribute their products, pointing to Eli Lilly’s digital healthcare platform LillyDirect. This service offers users access to healthcare support and, crucially, home delivery of Eli Lilly medicines. In Singer’s view, big pharma’s forays in direct-to-consumer platforms are emblematic of an industry seeking independent control over its manufacture and distribution.
