Supply Chain Signal: Three Tariff Deadlines Reshaping Pharma Manufacturing

The second episode of Supply Chain Signal, featuring pharmaceutical supply chain expert Thanigavelan Jambulingam, PhD, examines three tariff tracks now shaping how pharma companies plan their US manufacturing footprint, and the different pressure each one applies.

Section 232 duties took effect July 31 for the 17 manufacturers named in the White House’s April 2nd proclamation, including Eli Lilly, Pfizer and Novo Nordisk. The structure defaults to a 100% duty, drops to 20% with a Department of Commerce-approved onshoring plan, and reaches zero if that plan is paired with a Most Favored Nation pricing agreement with HHS, through January 2029. Jambulingam says the policy's primary aim is supply chain resilience and predictability, but noted that manufacturing facilities represent a four-to-seven-year capital commitment that some companies are unlikely to make on the strength of a single policy. He says some companies will pursue price concessions first and wait to see whether the political and economic conditions hold before committing to longer-term investment, pointing to Fact Set data showing more than half of many top pharma companies' revenue already comes from the US market.

A second wave of Section 232 duties hits mid-size and smaller manufacturers on September 29th, and is the result of a longer compliance runway compared to the 120 days given to Annex III companies. Jambulingam says these companies face a harder set of trade-offs than their larger counterparts because they are more resource-constrained, often weighing a dollar spent on new drug development against a dollar spent on manufacturing investment. He notes smaller, publicly held companies also answer directly to shareholder value expectations, making it more difficult for them to justify onshoring commitments and more likely they lean toward pursuing price concessions instead.

The episode's final segment addresses a generics-specific tariff plan floated by President Trump in a July 21st Truth Social post, which has not been written into formal policy yet. The proposal would set a 0% rate through August 2028, rising to 100% for a year and then 200% after that for companies without US manufacturing commitments. Generics fill the majority of US prescriptions but represent a small share of total drug spend, and India and China dominate the supply base. Jambulingam said the math comes down to economics: generic manufacturing already runs on thin margins, and unless Medicare or another payer commits to higher reimbursement for domestically made products, or the government provides infrastructure subsidies, the US cannot compete with India and China's manufacturing infrastructure and cost base regardless of the tariff timeline.

Stay tuned for next month's installment of Supply Chain Signal.