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When President Donald Trump announced 10% global tariffs in April, the pharma industry remained largely unscathed.

However, the president has since threatened to slap additional tariffs on pharmaceutical products to encourage drug manufacturing at home and alleviate what he considers to be a national security threat of relying on drugs made overseas.

With the threat of such tariffs looming, pharma companies are navigating an unprecedented landscape complicated by other pressing factors like drug pricing measures and widespread regulatory upheaval at the Food and Drug Administration (FDA).

Pharma tariffs — while intended to encourage greater domestic drug production — could potentially lead to the opposite, experts say. This could mean tighter budgets, higher drug costs and possibly even generic drug shortages. 

Still, much of it will depend on each company’s footprint overseas.

“Some [pharma companies] will be affected heavily and some will not be affected as much,” noted Arda Ural, a pharma consultant and life sciences sector leader at EY. “That would create winners and losers, and it would create drug shortages inevitably.”

There is also concern among pharma leaders that tariffs could make the U.S. lose its spot as a leader in global R&D and innovation.

Amid all the uncertainty, drugmakers are creating scenario plans to navigate what many consider to be an unprecedented time.

“The pharma and biotech industry is going through a unique historical set of challenges right now, [with many] externalities converging,” Ural said. “We don’t have a playbook on how to navigate this kind of complexity.”

What would pharma tariffs look like?

In April, Trump promised to place major tariffs on pharmaceuticals “very shortly,” arguing that “once we do that, [companies] are going to come rushing back to our country because we’re the big market.”

He highlighted China’s significant role in producing U.S. drugs and argued his tariff policy would encourage a shift from manufacturing there to domestic plants.

Since it’s cheaper to produce active pharmaceutical ingredients (API) abroad in places like China and India, many U.S. pharma companies outsource their manufacturing to those countries. 

Last year, the U.S. imported some $213 billion worth of pharma products, according to the UN Comtrade.

This is especially true for generics, which face steep competition and have a smaller profit margin in the U.S. than branded drugs.

Generic drugs would be hardest hit by tariffs since they are more vulnerable due to their reliance on APIs made abroad. Generics account for nine in every 10 prescriptions in the U.S., but about 80% of them are manufactured abroad.

Tariffs could ultimately deter pharma companies from investing in generics and even lead some to discontinue generics.

While tariffs on branded drugs could achieve one of Trump’s goals by getting companies to move production back to the U.S., this could take years.

Additionally, experts note that these costly investments may not guarantee long-term success. As such, many pharma companies are grappling with whether to invest in U.S. manufacturing since it’s unclear if these tariffs will remain in place after four years under a new president.

“The time frame of these moves will take years and hundreds of millions of dollars per plant,” Ural said. “So you are talking about multi-billion dollar price tags for making these moves.”

Marta Wosinska, a senior fellow in economic studies at the Center on Health Policy at the Brookings Institution, noted in a Harvard Business Review article that the expectations that tariffs on their own would lead to onshoring of drugs is “unrealistic.”

“What we might get, however, are two results that would be bad not just for U.S. employers but for the entire U.S. population: drug shortages that negatively affect the health and productivity of Americans and additional upward pressure on insurance premiums,” she wrote.

Pharma companies push back

Shortly after Trump announced broad tariffs on “Liberation Day” on April 2, the Department of Commerce (DOC) initiated a trade investigation to examine how imports of drugs and pharmaceutical ingredients could impact national security. The investigation aims to help the administration define tariffs specific to pharma.

Industry stakeholders were invited to submit comments and the DOC received more than 900, with 311 of those made public.

Among the public submissions were those of Big Pharma companies — including Eli Lilly, Pfizer, Novo Nordisk, Sanofi and AbbVie. 

The majority of these major drugmakers spelled out concerns that tariffs would hamper innovation, drive up drug costs for U.S. consumers and be counterproductive since they would deter companies from investing in reshoring manufacturing, rather than encouraging it.

In one comment, Lucas Montarce, Lilly’s EVP and CFO, urged the government to avoid “blanket tariffs” on pharmaceuticals.

“Lilly shares this administration’s goals of protecting the American pharmaceutical supply chain, increasing American manufacturing, and ensuring that Americans have ample, secure access to safe and effective medicine,” Montarce wrote. 

However, he argued that the federal government should “avoid overly broad characterizations” of the articles and circumstances that might affect the nation’s security in ways that might harm domestic pharmaceutical innovation, patient access and quality medicine.

In the same letter, Montarce wrote that pharma tariffs would harm national security rather than support it, as it would increase the cost of medicines and decrease the capital available to manufacturers.

AbbVie also pointed out that moving manufacturing back to the U.S. is a multi-year process — one that will not pay dividends as soon as Trump may think.

“Under these circumstances, putting more pressure on pharmaceutical companies will not be sufficient to immediately increase U.S. drug production — and in the meantime, restrictions on imports could lead to significant shortages of vital drugs on which American patients rely,” AbbVie CFO Scott Reents wrote.

Some pharma companies — including Pfizer, Lilly, Novartis, Roche and Bristol Myers Squibb — recently announced they will be investing billions in their respective stateside operations as many seek to underscore their commitment to domestic production. 

Many companies are walking a tightrope of underscoring their commitment to U.S. production while emphasizing to the Trump administration that tariffs could threaten the long-term health of the industry. 

The hope is that the administration will be willing to negotiate with pharma companies on tariffs, given the added complexity of drug pricing reform policies like the Most Favored Nation (MFN) proposal.

Darshan Kulkarni, a life sciences regulatory and compliance attorney at Kulkarni Law Firm, acknowledged that there will be some version of tariffs on pharma.

“But if companies show a good faith effort to start moving manufacturing towards the U.S., I think the Trump administration will be willing to work with pharma companies to not let [drug] prices skyrocket, especially if that would be the immediate consequence,” Kulkarni wrote.

How could this impact pharma marketing?

While tariffs may appear to be a supply chain or manufacturing concern on the surface, the downstream implications can reshape how marketers approach everything from pricing strategy to brand positioning and market access planning, according to Navjot Rai, a biopharma communications consultant.

It’s possible that tariffs could impact pharma marketing in two different ways: If costs are passed onto the companies, they might decrease their marketing budgets or streamline marketing efforts to boost efficiency.

On the other hand, companies might seek to do the opposite to counterbalance the loss. That could spur them to invest more into marketing and raising awareness about medications to increase revenue and maintain market share.

“Tariffs can introduce cost pressures that force broader budget reallocations including marketing spend, with greater demand to prioritize high-impact tactics and explore more efficient, digital-first engagement strategies,” Rai said.

She added that tariffs could represent a broader shift in the global business environment, requiring marketers to think beyond traditional communications. 

That includes scenario planning around regional disruptions, pricing sensitivities and potential public perception issues — especially if tariffs lead to higher drug prices or access challenges.

Ural noted that other external pressures — like the loss of exclusivity many pharma brands are facing in 2028, paired with drug pricing changes like the Medicare price negotiations and the MFN proposal — could lead to tighter marketing budgets if tariffs are imposed.

“Overall budgets could be tighter due to all these dynamics — tariffs being one of many other considerations,” he said.

Pharma companies scenario plan

Aside from a few initial moves to reshore U.S. manufacturing, most companies are maintaining a wait-and-see approach because there are still too many unknowns and uncertainty, according to Ural.

Most companies are engaging in scenario and horizon planning to spell out potential avenues forward, depending on their unique manufacturing footprints abroad.

These firms are also paying close attention to more pressing matters like the ongoing Medicare price negotiation process and how the MFN could be implemented.

Ural is guiding his Big Pharma clients to focus on three steps in tariff scenario planning.

First, reviewing and optimizing their portfolios, depending on whether they’re a generic or branded manufacturer. Then, reviewing the health of their capital efficiency to best plan for deploying capital. Finally, optimizing their supply chain network.

“The adage here is, ‘What got us here won’t get us there,’ because the playbook doesn’t exist for the operating environment we have,” Ural said. “As these changes take effect, with [scenario planning] you’ll be in a better position than your competition to make those moves quickly.”

Related: Trump floats 200% pharma tariff threat, then teases plan for grace period