The news: The ongoing threat of tariffs on pharmaceutical imports and efforts by the Trump administration to lower prescription medication costs in the US have created uncertainty for the drug industry. But some of the most worrisome policies to drugmakers may never materialize, while the impact of other actions would only disrupt certain companies, according to a recent S&P Global report. Overall, pharma companies should be able to maintain their creditworthiness and withstand rising risks to their sector brought on by President Trump, per S&P.

Digging into the details: The report assessed the potential impact that pharma-specific tariffs and stricter drug pricing regulations could have on the industry.

Trump’s executive order to equalize prescription drug costs could deliver a blow to the industry—but the most-favored nation plan is unlikely to materialize.

• Trump’s most-favored nation plan, as proposed, will likely be challenged in court, and enforcement may need Congressional approval.
• If it were to get that far, a Republican-controlled Congress could have concerns that most-favored nation pricing would reduce drug development and innovation, per S&P.

Trump’s tariff threats would put financial pressure on pharma companies, and some drugmakers are better positioned to absorb the hit.

• Pharma companies that make branded drugs with minimal market competition could pass on potential price increases due to tariffs in commercial markets, per S&P. This would be more challenging for drugs in Medicare since the government has more price control mechanisms at its disposal via the Inflation Reduction Act.
• Drugmakers would be wise to increase US manufacturing in the event of a high tariff rate, though this comes with other cost considerations, including substantial upfront investments.
• Generic drug manufacturers have slimmer margins than their branded counterparts and won’t have the same flexibility to move more production to the US.

Our take: We agree with S&P that more details are needed on forthcoming tariff rates and efforts to lower drug prices before assessing their true impact. But we’ll also note that the administration is serious about both issues, and its executive orders, proposals, and threats can’t be taken lightly. Drug companies must stay nimble with plans in place for different outcomes.

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