| |  | The Lead Brief | President Donald Trump has ordered a 100 percent tariff on certain medications and the key ingredients that go into them, arguing that heavy reliance on foreign-made drugs poses a national security risk. There are plenty of carveouts and caveats that could divide the pharmaceutical industry, including an exemption for generic drugs. However, the key takeaway is that the new policy is intended to be a negotiating hammer for the Trump administration. → The administration wants to convince more drugmakers to cut deals — similar to ones made by more than a dozen pharma giants — requiring them to lower medicine prices in line with what peer countries pay, known as most-favored-nation (MFN) pricing, and make more medications domestically. Why it matters: Trump has been trying to secure these kinds of drug-pricing policies since his first term. Prior attempts were overturned by courts on procedural grounds, so the strategy now is to compel companies into voluntary drug-pricing agreements. Brand-name drugmakers can reduce their tariff burden to 20 percent if they make agreements with the Commerce Department to move production of their medications to the United States. Inking an MFN pricing agreement would eliminate the 100 percent tariff entirely until Trump’s term ends in January 2029. The new building projects must also be completed by the end of Trump’s term. “We expect the lion’s share of the world’s patented pharmaceuticals to be built in America,” said a senior administration official, who briefed reporters on the condition of anonymity, explaining the tariff move. “This was not a secret,” added the official. “We’ve been talking about this endlessly for the past six months. Everybody knows it’s coming, so they’ve had plenty of warning.” INITIAL REACTION Some companies worry that operationalizing these tariffs could be more challenging than the administration intends. Others are concerned it could damage smaller and midsize companies with fewer financial resources. The Biotechnology Innovation Organization (BIO), which mostly represents small and midsize biopharma companies, warned that the new tariffs could harm research and development efforts. While these companies “have been eager to expand investments here at home,” said BIO’s president and CEO, John Crowley, “tariffs, along with an uncertain policy environment and efforts to force ‘most‑favored-nation’ schemes, work directly against that goal.” More than half of new prescription drugs are developed by small and midsize biotech companies, he said. “Tariffs on cutting-edge medicines will increase costs and could jeopardize billions in U.S. investments announced in the last year. Every dollar spent on tariffs is a dollar that can’t be invested in communities across the country,” said Steve Ubl, the president CEO of the Pharmaceutical Research and Manufacturers of America, a major drugmaker industry group. Ubl said that branded drugmakers already have a “robust” manufacturing footprint in America. OTHER RATES - There are separate, lower rates for pharmaceutical imports that come from countries that have negotiated bilateral trade agreements with the administration: Drugs and pharmaceutical ingredients from the European Union, Japan, South Korea and Switzerland come with the 15 percent tariff rate, per existing agreements.
→ The British government announced Thursday that it had reached a deal that secures three years of tariff relief on pharmaceuticals imported from the U.K. as part of a broader trade agreement with the U.S. What to watch: Companies are now likely weighing whether to increase investments in the U.S. or pay a lower tariff rate established in these bilateral deals. A large number of branded pharmaceuticals imported into the U.S. come from countries that have lower tariff rates, including Japan, Switzerland, Ireland and Germany. Overall, more than 40 percent of the active pharmaceutical ingredients, or API, in brand-name medications come from the E.U., according to nonprofit U.S. Pharmacopeia. OTHER EXEMPTIONS - In addition to generic drugs, there are carveouts from the tariffs for certain medications, including so-called orphan drugs that treat rare diseases.
→ The policy also opens the potential for top administration officials to determine that drugs meant for animals and “other specialty pharmaceutical products” that “meet an urgent U.S. need” should be exempt from tariffs. A White House official tells me that the Commerce Department will consult with the Department of Health and Human Services to determine which specialty drugs receive tariff exemptions. - I got my hands on a draft of the White House’s proclamation that started circulating Thursday evening. It also listed exemptions for other broad categories of medications, including fertility treatments, nuclear medicines (which are used to treat many diseases, including cancer), cell and gene therapies, and treatments to counteract bioweapons. The White House did not confirm whether these exemptions are in the final version.
Crowley, who leads the biotech industry group, said these exemptions wouldn’t be enough to offset the potential financial impacts. “While we appreciate the administration’s recognition of the need for tariff exemptions for certain critical biotech products,” he said, “the reality is that any tariffs on America’s medicines will raise costs, impede domestic manufacturing and delay the development of new treatments — all while doing nothing to enhance our national security.” OTHER KEY DETAILS - Large companies will be given 120 days to submit plans to onshore manufacturing facilities to the administration before the 100 percent tariffs kick in. Smaller companies will have 180 days. I asked the White House where the cutoff between large and small companies would be, but I haven’t received a response.
“Our expectation is, and our conversations have been with big, branded pharmaceutical companies, [that] they’re all planning to build in America,” the senior administration official told reporters. → The official acknowledged that smaller pharmaceutical companies often outsource their manufacturing to businesses called contract development and manufacturing organizations, or CDMOs. The official suggested that increasing the use of domestic CDMOs could mitigate the tariff threats for companies with less capital. “The big contract manufacturers are building huge factories here, so they expect to take care of the smaller companies by saying, ‘Look, we’ll build [your drugs] for you ... and we’ll build in America for you,’” the senior official said. → WaPo’s David J. Lynch and Dan Diamond have more on Trump’s tariff announcement, including new fees on steel and aluminum. MORE FROM WAPO ON TRUMP’S DRUG TARIFFS — What Trump’s tariffs mean for pharmaceuticals and patented drugs — Drug companies line up to make deals with Trump after initial hesitation — How Trump’s tariff threat could ‘devastate’ smaller drugmakers | 
_tstmp_1756933376-1920-1080.png)
