US imposes new pharmaceutical tariffs of up to 100% as industry warns of pressure on smaller drugmakers

A new United States tariff regime targeting imported patented medicines and pharmaceutical ingredients took effect on September 29, imposing a headline duty of 100% on covered products from companies that do not qualify for exemptions, special trade treatment or agreements to expand American manufacturing. The Trump administration says the policy is intended to reduce US dependence on foreign pharmaceutical production and strengthen domestic supply chains, but industry analysts warn that smaller biotechnology companies may have far greater difficulty adapting than the largest global drugmakers.

The 100% figure does not apply across the entire pharmaceutical market. Generic medicines are currently excluded, several categories of specialty therapies can receive zero-tariff treatment, and companies with approved plans to expand production in the United States face substantially lower rates. Major manufacturers that have reached pricing and manufacturing agreements with the administration can also qualify for zero tariffs under specified conditions.

That structure means the immediate effects could be concentrated among smaller and midsize drugmakers that import patented medicines or ingredients but lack their own large-scale American manufacturing networks. Experts cited in industry analysis warn that those companies may have to absorb higher costs, seek exemptions, negotiate agreements with Washington or reconsider whether some products remain commercially viable in the US market.

Why the United States is imposing 100% tariffs on some imported patented medicines

The administration introduced the pharmaceutical tariffs under Section 232 of the Trade Expansion Act, which allows the president to restrict imports determined to threaten national security. A Commerce Department investigation concluded that heavy American dependence on foreign pharmaceutical production could create risks during geopolitical crises, wars or major supply-chain disruptions.

According to the administration, approximately 53% of patented pharmaceutical products distributed in the United States were produced outside the country as of 2025. The dependence is even greater for active pharmaceutical ingredients, with only about 15% of patented APIs by volume manufactured domestically for the American market.

The White House argues that medicines used to treat cancer, infectious diseases, autoimmune conditions and other serious illnesses should be supported by a stronger domestic industrial base. The policy is therefore designed not simply to collect tariffs but to encourage manufacturers to build or expand US production facilities.

Companies with Commerce Department-approved onshoring plans can receive a 20% tariff rate instead of the standard 100% rate. That preferential treatment is intended to give manufacturers time to relocate or expand production while creating a financial incentive to establish more capacity inside the United States.

The administration has also negotiated company-specific agreements involving domestic manufacturing and pharmaceutical pricing. Companies that qualify through those arrangements can receive additional tariff relief, including zero-tariff treatment for certain products during specified periods.

The structure reflects a broader industrial-policy strategy in which tariffs are being used alongside negotiated agreements to influence where companies manufacture strategically important goods.

The headline 100% tariff includes major exemptions for generics and specialty therapies

Generic pharmaceuticals and their associated ingredients are excluded from the Section 232 tariffs for now. That exemption is important because generic drugs account for most prescriptions filled in the United States by volume and are particularly sensitive to price increases because manufacturers frequently operate on narrow profit margins.

Several categories of specialized medicine can also receive zero-tariff treatment when they meet government requirements. These include certain orphan drugs used for rare diseases, nuclear medicines, plasma-derived treatments, fertility drugs, cell and gene therapies, antibody-drug conjugates, some emergency medical countermeasures and selected animal-health products.

The Commerce Department published additional guidance shortly before the broader tariff rollout establishing procedures through which companies can seek zero-tariff treatment when imports meet an urgent US health need.

Products imported from countries covered by certain trade arrangements may also receive preferential treatment. Patented pharmaceuticals originating in the European Union, Japan, South Korea, Switzerland and Liechtenstein are generally subject to a 15% rate under the administration’s framework rather than the full 100% tariff, while the United Kingdom is covered by separate negotiated treatment. These exceptions substantially narrow the number of medicines likely to face the full tariff.

Industry analysts therefore caution against interpreting the policy as an immediate doubling of the price of every imported patented drug. The actual duty depends on the product, manufacturer, country of origin and whether a company has reached an approved manufacturing or pricing agreement.

Smaller biotechnology companies could face the greatest financial pressure

The largest pharmaceutical manufacturers have significant financial resources and often operate production facilities in multiple countries, including the United States. Many have also negotiated agreements with the administration that reduce or eliminate their exposure to the new duties.

Smaller biotechnology companies often have a very different business model. A preliminary Brookings Institution analysis cited in reporting identified more than 100 drugmakers with at least one product potentially exposed to the tariff regime. Many do not operate their own factories and instead rely on specialized contract manufacturers to produce medicines on their behalf.

Moving that production to the United States can be difficult because pharmaceutical manufacturing facilities require regulatory approval, specialized equipment and significant capital. Production cannot simply be transferred to a different factory in the same way that manufacturing of some consumer products might be relocated.

Marta Wosińska, a senior fellow at the Brookings Institution, said competition for American contract-manufacturing capacity is already extremely intense. Smaller companies consequently may have difficulty finding domestic facilities capable of producing their drugs at an economically sustainable cost.

That financial pressure could encourage some companies to pursue partnerships or mergers with larger pharmaceutical groups that already possess US manufacturing capacity. Others could attempt to negotiate specific tariff agreements or delay product launches while determining whether American production is financially viable. Industry representatives argue that the result could unintentionally accelerate consolidation inside the pharmaceutical sector if smaller firms cannot absorb the additional costs.

Drug prices and patient access are central questions surrounding the tariff rollout

The effect on patients will depend heavily on whether manufacturers pass tariff costs through to wholesalers, insurers and ultimately consumers. Pharmaceutical pricing is particularly complicated because the amount a patient pays is influenced by insurance coverage, negotiated discounts, pharmacy benefit managers, government programs and manufacturer rebates rather than simply the original wholesale price. That makes it difficult to predict how much an individual medicine could increase in price solely because of tariffs.

Trade attorney Mollie Sitkowski told reporters that medicines produced by smaller companies could face greater pricing pressure because those manufacturers have fewer financial resources available to absorb additional import costs. Patients with conditions served by relatively small pharmaceutical markets could be particularly exposed if the available treatment is manufactured by a company facing the full tariff.

The administration’s position is that increased domestic production should eventually produce a more resilient supply chain while reducing US dependence on overseas manufacturers. Critics argue that manufacturing expansion requires years rather than months and that imposing tariffs before new production capacity becomes available risks raising costs during the transition.

Both outcomes could occur simultaneously. The policy may encourage some companies to make additional American investments while creating short-term financial pressure for businesses unable to relocate production quickly.

Biotech industry warns tariffs could divert money away from drug research

The Biotechnology Innovation Organization, which represents many smaller and midsize biotechnology companies, has supported expanding pharmaceutical manufacturing in the United States but opposed using broad tariffs to achieve that goal.

The organization argues that smaller biotech companies frequently depend on external manufacturers because constructing dedicated factories would require capital they would otherwise spend developing experimental treatments.

BIO President and Chief Executive John Crowley has warned that rapidly imposed tariffs could direct limited investment away from research, clinical development and new medicines. The organization says smaller biotechnology companies are particularly important because they frequently develop early-stage technologies later licensed to or acquired by larger pharmaceutical manufacturers.

That raises a second-order concern beyond the immediate price of existing medicines. If smaller companies redirect money toward tariffs and manufacturing costs, critics argue that fewer resources may remain available for clinical trials or development programs. The extent of that effect remains uncertain because many companies will qualify for exemptions or lower tariff rates.

The administration’s framework also gives manufacturers a path toward reduced tariffs if they commit to domestic production, meaning the financial incentive could produce additional US manufacturing investment that offsets some industry concerns over time.

Pharmaceutical manufacturing cannot be relocated as quickly as many other industries

One reason the policy is attracting scrutiny is the unusually complex nature of pharmaceutical manufacturing. A new plant must comply with extensive Food and Drug Administration requirements governing production processes, quality control, contamination prevention and consistency. Companies may need regulatory approval when changing manufacturing locations or modifying production systems associated with approved medicines.

Biologic drugs can be even more difficult to transfer because their manufacturing processes often involve living cells and highly specialized facilities. These requirements mean a manufacturer cannot respond to a tariff simply by opening a US production line within several weeks.

Large drug companies have announced billions of dollars in new American manufacturing investments over recent years, but major pharmaceutical facilities can take several years to construct, validate and bring into commercial production.

The administration has attempted to account for that reality by giving companies with approved onshoring plans a reduced 20% tariff rather than imposing the full 100% rate immediately. That lower rate remains available while companies work toward their manufacturing commitments, although the framework provides for it eventually to rise if requirements are not met. Commerce officials can also monitor companies’ progress and require reports demonstrating that promised investments are actually moving forward.

The tariff policy could reshape where future medicines are manufactured

The longer-term significance of the new tariff regime may ultimately depend less on immediate drug prices and more on whether it changes investment decisions. The United States remains the world’s largest pharmaceutical market and a major center for drug research, but manufacturing has become increasingly globalized. Companies frequently conduct research in one country, manufacture active ingredients in another and produce finished medicines somewhere else. The administration wants a greater share of that production located inside the United States.

If the tariff incentives succeed, companies developing new medicines may increasingly build American production capacity from the beginning rather than designing global supply chains that later have to be relocated. Companies could also choose to diversify production across multiple countries rather than rely heavily on a single manufacturing hub, reducing exposure to both tariffs and geopolitical disruptions.

However, building redundant production systems increases costs, and companies may seek to recover at least some of those expenses through higher prices or reduced investment elsewhere. The outcome will therefore depend on how many companies ultimately face the full 100% tariff, how aggressively the administration grants exemptions and how quickly new domestic manufacturing capacity becomes available.

Key takeaways from the new US pharmaceutical tariffs taking effect

• A headline 100% US tariff on certain imported patented medicines and pharmaceutical ingredients took effect on September 29 for companies not covered by earlier arrangements.
• The administration says the policy is intended to reduce dependence on overseas pharmaceutical production and strengthen US supply security during future emergencies.
• Generic medicines are currently excluded, preventing the tariff from immediately affecting the majority of prescriptions filled in the United States by volume.
• Rare-disease therapies, cell and gene therapies, fertility medicines and several other specialty products can qualify for zero-tariff treatment under specified conditions.
• Companies with approved plans to expand pharmaceutical manufacturing in the United States generally face a reduced 20% rate rather than the full 100% tariff.
• Experts say smaller biotechnology companies could face the greatest pressure because many rely on overseas contract manufacturers and lack capital to quickly establish US factories.
• Industry groups warn that higher manufacturing costs could affect medicine prices, company consolidation and investment in research, although the extent of those effects remains uncertain.
• The longer-term test will be whether tariff incentives produce substantial new US pharmaceutical manufacturing without materially reducing competition, innovation or patient access.