The US government has signalled a major shift in its trade policies in recent weeks, with several announcements detailing plans for import tariffs.
While President Trump has made several announcements on tariffs since he took office, things accelerated on 2 April, which was christened as ‘Liberation day’ when the administration announced reciprocal tariffs for a number of countries.
On 2 April, President Trump announced a sweeping 10% tariff on all imported goods, along with steeper, country-specific duties – like a 20% tariff on European imports and 34% on Chinese goods. Finished pharmaceuticals were left out of those tariffs in that announcement. However, that is expected to change soon.
The White House has launched a national security investigation – known as a Section 232 probe – into pharmaceutical imports. That includes not just finished drugs but also active pharmaceutical ingredients (APIs), key starting materials, and other critical inputs. These types of investigations are typically a precursor to trade restrictions, and there's a 270-day window to deliver the final report, though the short 21-day public comment period suggests there's a sense of urgency.
Commerce Secretary Howard Lutnick recently confirmed that pharmaceuticals will fall under what he called ‘sector tariffs’ - meaning they’ll be treated differently from general reciprocal tariffs and won’t be up for negotiation. The clear message from the administration is that the goal is to reshore drug manufacturing to the US.
In response to these changes, companies are strategising ways to manage the expected rise in trial costs and looking for more affordable manufacturing, contract research organisations (CROs) and supplies is at the top of the list but these changes can take some time to be implemented. Another space where companies are looking to save costs is with more use of technology, such as artificial intelligence (AI) and machine learning (ML) to reduce staffing costs for data management so these funds can be redirected to mitigate increases elsewhere as a result of tariffs.
Longer drug development times are also expected, especially given that companies will be trying to do more with less. Sponsors may consider reducing patient numbers, but this would have a knock-on effect on the quantity of data for a sponsor to use when seeking approval. There are also concerns whether the administration could make changes within the FDA that would look even more favourably on US data, meaning companies would have to run trials in the US, no matter the cost increases, if they want to seek approval there.
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