U.S. Imposes High Tariffs on Imported Drugs with Key Exemptions

The U.S. government will impose tariffs of up to 100 percent on certain imported drugs, though with several key exemptions, in an attempt to pressure pharmaceutical companies to produce more in the country. The new tariff, authorized by President Donald Trump, applies to patented drugs manufactured in countries that do not have tariff agreements with the U.S. by companies that do not have most-favored-nation pricing agreements with the government. Tariffs on products made by some large companies will take effect in 120 days, while items from smaller manufacturers will not be affected for another 180 days, according to a White House statement. Which countries will pay tariffs on patented drugs? Tariffs on imports from major economies that have reached agreements with the White House will be limited to 15 percent. Trump sent letters to 17 companies last summer with a list of demands, including price cuts for the Medicaid program, direct sales to consumers in the U.S., and the launch of new drugs at the same price as in other developed countries, in exchange for tariff relief. This implies that the new tariffs will mainly affect smaller pharmaceutical companies and ingredient manufacturers. A group from the biotechnology sector criticized the measure. “Any tariff on drugs in the U.S. will increase costs, hinder domestic production, and delay the development of new treatments, without improving national security,” said John Crowley, CEO of the BIO group, in a statement. Crowley noted that the tariffs will create financial risks for small biotech firms, which often lack the capital to build their own production facilities. This includes the European Union, South Korea, Japan, Switzerland, and Liechtenstein. Imports from the United Kingdom will face a lower rate after agreeing to double public spending on new drugs as a proportion of GDP in the next decade. Drugs produced by companies that commit to manufacturing partially in the U.S. will see their imports taxed at 20 percent, and if they achieve most-favored-nation agreements, the rate will be reduced to zero, according to the White House. The tariff-free exemption will remain in place until January 20, 2029. The charges fulfill threats the president made last fall to impose 100 percent tariffs on brand-name or patented drugs if companies did not move production to the U.S. However, they also include significant exceptions that could reduce the impact of the measures. Most of the world's largest pharmaceutical companies, including Merck and Eli Lilly, avoided the harshest measures by reaching agreements with the government.