Dan Danielson, MS, R.Ph. | Senior Director, Access Experience Team
Greg Gregory, PhD | Executive VP, Partner
On April 2, 2025, President Trump announced a tranche of new tariffs. Notably absent—for now—were the threatened 25% tariffs on imported pharmaceuticals. On April 8, 2025, the administration promised an announcement about “major tariffs” on pharmaceuticals “soon.”
Currently, approximately 65% of global pharmaceutical trade is protected under the 1994 World Trade Organization (WTO) Agreement on Trade in Pharmaceutical Products (the “Pharma Agreement”). However, the administration’s stated skepticism toward WTO frameworks leaves future participation uncertain. There is precedent: during earlier trade tensions, certain pharmaceuticals imported from China were subject to tariffs. If new tariffs are imposed, broad retaliatory measures from trade partners are likely.
The most immediate risk is increased production costs. U.S. manufacturers depend heavily on imported active pharmaceutical ingredients (APIs), excipients, and packaging materials. To reduce exposure, manufacturers—both U.S. and international—may attempt to onshore production or secure U.S.–based capacity. This would likely increase competition for contract manufacturing organizations and contract development and manufacturing organizations (CMOs and CDMOs) and drive up prices for domestic capacity.
For others, the alternative is building new infrastructure. But with timelines ranging from one to four years and U.S. Food and Drug Administration (FDA) inspections required for approval, the path is neither fast nor simple. Current resource constraints at the FDA may further delay site approvals, compounding the challenge.
Tariffs don’t exist in isolation. They interact with a tightly regulated drug pricing environment—and not all parts of the market can absorb cost increases equally.
Generic manufacturers operate on razor-thin margins. With more than 80% of APIs imported, even modest tariffs could make some products unsustainable. With pricing locked in by Medicaid and payer contracts, options are limited:
Example: A generic anti-seizure drug sees a 12% cost increase due to Chinese API tariffs. With no pricing flexibility, the manufacturer withdraws the product—leaving hospitals scrambling for alternatives.
Branded drugs may have more room to absorb costs, but that flexibility is heavily constrained by pricing policies and contracting guardrails, including:
In rebate-heavy categories like autoimmune, respiratory, and diabetes, even small price changes can:
Even high-margin brands must weigh pricing changes carefully to avoid backlash from payers, policymakers, and patients.
While these examples highlight clear vulnerabilities, they represent only part of the picture. Broader systemic impacts—spanning procurement practices, contract structures, and supply chain interdependencies—must also be considered to fully assess the downstream risks of tariff policy on drug commercialization.
As of April 9, 2025, select tariffs have been delayed 90 days and pharmaceuticals remain exempt from tariffs; however, the administration has publicly indicated this exemption will change. Even so, the cost and pricing ripple effects are real—and will intensify if that exemption is removed.
Now is the time for biopharma manufacturers to:
Our team supports clients with scenario-based access strategy, contracting simulations, and payer-focused access planning—so you’re not caught off guard by sudden shifts in trade policy or cost structure.
This is the opening chapter of what could become a major disruption to global drug pricing and access strategy. If you’d like to talk through the implications for your portfolio or access strategy, we’re here to help.