The news: President Trump threatened pharma companies with a 100% tariff on drug imports unless they start building US manufacturing plants by October 1. Trump said in a Truth Social post that the tariff rate will apply to any drugmaker that has not begun “breaking ground” on manufacturing plants in the US. It would also only be imposed on branded or patented drugs—not generics.

How we got here: Trump has threatened various tariff rates on the pharma sector—upwards of 250%—in hopes that drugmakers will commit to producing more of their medicines in the US. Separately, the Trump administration placed a 15% tariff on most medicines coming from the EU. It’s unclear whether the 15% tariff would be locked in for EU drugmakers that don’t have operations in the US.

Trump’s pressure on drugmakers to build or expand their US manufacturing footprints has so far worked.

• Over a dozen pharma companies have committed to investing a total of $350 billion for new or expanded US manufacturing and R&D, per a Wall Street Journal tally from earlier this month.
• The FDA recently launched a program to speed up the review process for drug manufacturing plans to start operating. It typically takes 5 to 10 years to build a new plant, per industry estimates.

Yes, but: Most Big Pharma firms can pour billions into US manufacturing thanks to profits from their blockbuster drugs.

• For instance, Merck primarily manufactures its cancer drug Keytruda (the highest-selling drug measured by 2024 sales) in Ireland, but recently said it will produce the treatment in the US for patients here. Keytruda drives over 40% of Merck's sales.
• Eli Lilly just said it will build its experimental weight-loss pill in a new $6.5 billion Texas facility. Lilly’s market cap has reached nearly $700 billion on the back of its GLP-1 products.

Many smaller pharmas and biotech companies likely don’t have the resources to build US sites—and certainly would have trouble beginning construction in just a few days before Trump’s October 1 deadline. Smaller drugmakers headquartered in other countries but that rely on US sales would have to either quickly infuse capital into US manufacturing or absorb the 100% tariff.

Our take: The winners of Trump’s latest threat/demand are generic drugmakers that appear to be spared, and highly profitable Big Pharmas that were likely planning investments in US manufacturing and R&D anyway to stabilize supply chains. But smaller pharma players may be forced to pull back from US commerce in favor of international markets, explore a sale, or cut a strategic partnership with bigger drugmakers in which their treatments could be produced at the larger company’s US facilities.

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