Following a year-long Trade Expansion Act’s Section 232 investigation to determine the impact of pharmaceutical and active pharmaceutical ingredients imports on national security, the Trump administration announced last week that patented medicines will face a 100% tariff entering the U.S. with a phased rollout.
The administration noted that this tariff would apply to products that are subject to valid, unexpired U.S. patents and are listed either in the U.S. Food and Drug Administration’s Orange Book or Purple Book, as well as the ingredients used to manufacture these products.
Will my company be affected?
Several countries already negotiated lower rates with the administration, most notably the European Union, Japan, South Korea and Switzerland, which had agreed to a 15% tariff. As of April 2, the UK had also finalized a 0% tariff for UK-made medicines imported to the U.S. In addition, many larger pharmaceutical companies had previously negotiated lower rates based on accommodating various goals of the administration, including U.S. manufacturing and most favored nation pricing.
There are several exceptions to the tariffs, including products for rare diseases, cell and gene therapies, and animal health products if they meet specific trade and security arrangements or address urgent U.S. health needs. In addition, generic pharmaceuticals, biosimilars and the ingredients used to manufacture both are exempted from the tariffs at this time.
For companies listed in Annex III of the executive order, the tariffs will be effective for goods entering the U.S. on July 31, 2026. For all other companies, aside from those which have negotiated (or are in the process of negotiating) lower rates or are listed in Annex III, the tariffs will be effective as of Sept. 29, 2026.
How can my company prepare?
If your company has not yet evaluated the potential for meeting the administration’s two key goals—most favored nation pricing and onshoring of production—it may be beneficial to look at the feasibility, benefits and tradeoffs of compliance with these two goals. For companies looking toward domestic manufacturing opportunities, there may be many opportunities to access grants, tax credits, or various state, local, or federal incentives. In addition, new deductions such as the 100% bonus depreciation deduction on qualified production property may be valuable if your company is looking to build a manufacturing facility in the U.S.
To evaluate the impact of applying most favored nation pricing, companies should look at global sales strategies, gross-to-net pricing and existing transfer pricing arrangements. Companies should also consider partnering with contract development and manufacturing organizations in countries where the U.S. has bilateral tariff deals to lower the tariff impact, consider front-loading imports to build a strategic safety stock to delay tariff exposure, or using foreign trade zones or bonded warehouses to defer tariffs. Overall, mapping your global supply chain can help identify risks and potential opportunities.
As a reminder, companies importing products for use solely in research and development, including clinical trials, may import these products duty-free.
Contributor: Jodi Ader, RSM US LLP
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