Tariff therapy: Trump nudges pharma cos to make drugs in US or face 100% tariff
The goal of the move is to push drugmakers to onshore production and lower U.S. prescription drug prices. Trade agreements offer exemptions and reduced rates through production commitments and most-favored nation pricing agreements.
Also Read: Sun Pharma is Indian company most exposed to Trump’s new tariff threat, Jefferies warns
Here are some details:
* The United States will impose a 100% tariff on patented drugs that are not produced in the country and are not covered by drug pricing agreements.
* Major pharmaceutical companies have 120 days to announce plans to avoid 100% tariffs; Smaller companies have 180 days.
* Companies can move production to the U.S. in exchange for a 20% reduced tariff.* Onshore drug manufacturers that have signed most-preferred nation pricing agreements with the U.S. Department of Health and Human Services are exempt from tariffs.
* The US has already agreed to such agreements with 17 drugmakers; of these, 13 have been finalized and four are under negotiation.
* Tariffs have been reduced to 15% for drugs produced in the European Union, Japan, South Korea and Switzerland due to existing trade agreements. The UK has a separate tariff agreement.
* US patients are by far the ones paying the most for prescription drugs; almost three times more than in other developed countries.
* Trump is pressuring drug manufacturers to lower their prices to what people in high-income countries pay under his most favored nation drug pricing policy.
* Pfizer and Eli Lilly are among the major pharmaceutical manufacturers that have signed agreements exempting them from tariffs for three years.
* Many companies have not yet signed deals, including about half of those represented by industry lobby group PhRMA.
* Industry sources say small and medium-sized drugmakers are seeking individual regulations to avoid tariffs and new pricing rules.
* The Trump administration had previously said that generic drugs would be exempt from tariffs.
* According to the US Food and Drug Administration, more than 90% of drugs sold in the US are generic drugs.
