Starting October 1, 2025, the United States will impose a 100 per cent tariff on imported branded and patented pharmaceuticals unless companies have manufacturing facilities in the US. This includes drugs that are already in production overseas. President Donald Trump announced that the policy aims to increase domestic drug production, especially for critical medicines and injectable drugs, after shortages and disruptions during the pandemic.
The tariffs apply to drugs that do not have a US plant either operating, under construction, or at least “breaking ground”. Some products from Europe may see lower rates because of a July trade deal between the US and EU. While the measure sounds strict, industry experts say the impact on major global pharmaceutical companies may be limited, as many already have US facilities or are in the process of building them.
The new tariffs could potentially double the price of certain treatments overnight. Medicines are made in a complex global supply chain, with active ingredients, intermediates, and final formulations often produced in different countries. For example, a tablet might use an active ingredient from Europe, raw materials from China, and the final product could be assembled in India or the US. This makes tracking origin and compliance critical to avoid tariffs.
Some numbers show the stakes: over 50 per cent of US prescription active ingredients come from India and the EU, while 90 per cent of US prescriptions are generics, mostly sourced from India. About 43 per cent of branded drug ingredients are from the EU, and only 12 per cent of active ingredient volume is made in the US. China accounts for 8 per cent of active ingredients and key starting materials. The US produces 45 per cent of injectables and India leads in solid oral dose production, with a 60 per cent share.
The tariffs mainly affect newer, expensive, patent-protected drugs, such as oncology or obesity treatments, which often rely on European or US-sourced active ingredients. Generics, which make up the bulk of prescriptions, mostly come from India and are less affected. This means the policy impacts a smaller volume of medicines but a larger share of spending, especially on high-cost treatments.
Global drugmakers have already responded by pledging over $350 billion for US plants and R&D this year. Companies that have already started construction of US facilities are exempt from tariffs, which reduces the immediate financial impact. But firms that haven’t begun building by October 1 will face full tariffs, increasing costs and creating uncertainty.
The US government calls this approach a form of industrial policy through tariffs. Years of drug shortages and supply disruptions, especially during the pandemic, highlighted the country’s dependence on foreign suppliers. By incentivising local production, the US aims to strengthen its drug security and reduce reliance on global supply chains for critical medicines.
The policy encourages companies to localise the most valuable steps of drug production, particularly active pharmaceutical ingredients and sterile fill-finish processes. Tariffs, along with exemptions and trade agreements with Europe, aim to balance the push for domestic capacity while avoiding immediate price shocks for patients.
However, experts warn that while tariffs may increase US production, they could also add cost and complexity to an already globalised pharmaceutical system. Many drugs still depend on raw materials from China and India, so supply risk is not completely eliminated. Instead, the policy may shift production costs to consumers and companies, while creating more bureaucratic and logistical challenges for global supply chains.
Investors have generally shrugged off the announcement, betting that most large drugmakers will avoid significant financial losses due to existing or planned US facilities. Yet the policy still pressures companies that delayed investment in US manufacturing. For these firms, tariffs could become a major cost driver, especially for high-value drugs.
In the long term, the US approach could encourage greater self-reliance in critical drugs and injectables. But it raises questions about the impact on global trade and whether higher domestic production alone can address supply risks without affecting prices for patients.
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The US 100 per cent tariff on imported branded drugs is designed to boost domestic pharmaceutical capacity after years of supply disruptions. While the policy targets high-priced patented drugs, generics and most Indian exports are less affected. Carve-outs for companies with existing or under-construction facilities limit immediate financial impacts but also create incentives to build locally.
The broader goal is to reduce dependence on foreign supply chains for critical medicines and injectables. Yet the move also brings cost, complexity, and uncertainty to global drug manufacturing. Companies that delay US investment will face the greatest financial exposure, while the overall system remains connected to Chinese raw materials and Indian generics.
As the policy rolls out, it will be closely watched by drugmakers, investors, and governments worldwide, balancing between national drug security and global trade efficiency.
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