Key Takeaways
- Tariffs could spike drug costs: Proposed 25% tariffs on pharmaceuticals may raise US drug prices by up to 12.9% and cost the industry an estimated $51 billion annually.
- Supply chain disruption is growing: Pharma and medtech sectors face significant supply chain strain, including delays and pricing spikes, due to tariff volatility and reliance on global manufacturing.
- Reshoring and R&D impact: Companies are investing in US facilities to offset tariffs, but increased costs—especially for imported APIs—are forcing firms to reallocate R&D resources, potentially slowing innovation.
Tariffs galore officially commenced April 2, when President Trump announced that he would be enacting reciprocal tariffs on countries that are running trade surpluses with the United States—those in which the country has the largest trade deficits.1
He had been able to levy these tariffs by declaring a national economic emergency, making the decision without Congress per the 1977 International Emergency Powers Act.
Since that time, Trump has imposed fentaynl tariffs on Canada, Mexico, and China; United States had also enacted steel and aluminum taxes on Canada; and taxes on automobile parts to name a few.
Impacting the general supply chain
Now, with possible 25% US tariffs on pharmaceuticals looming, much of industry would agree that they would impact not only the pharma manufacturing sector, but the overall supply chain as well.
For one, a report2 commissioned by the trade association, Pharmaceutical Research and Manufacturers of America (PhRMA)—whose members include Novartis, Novo Nordisk, and Pfizer, Sanofi, and Takeda among the list—predicts that the tariffs would raise drug costs in the United States by nearly $51 billion yearly, while also raising US prices by as high as 12.9%.
This is in the midst of various companies—such as Regeneron, Roche, Merck, and Thermo Fisher3—reshoring production to the United States in order to avoid paying these hefty tariffs—a process that can take years if the proper infrastructure is not already put in place.
Infrastructure can not only include facilities, but the equipment that powers them. Existing tariffs have indirectly hit medtech (devices and equipment), and iData Research, a market researcher, anticipates major supply disruption across the sector.4
"With the US medical device and pharmaceutical sectors highly dependent on global supply chains, tariff volatility is triggering real consequences, from procurement delays to pricing spikes," said Dr. Kamran Zamanian, iData Research’s CEO. "In today's trade environment, protecting margins in the $200B medtech industry requires contingency planning, supplier diversification, and close monitoring of policy changes."
In the case of Piramal Pharma Limited5—who’s investing $90 million toward growing two of the company’s plants located in Lexington, KY and Riverview, MI—the plants handle sterile compounded and active pharmaceutical ingredient (API) development and manufacturing respectively. Although it could be argued that these moves may have come in preparation (Piramal hadn't confirmed that it was per se), it’s important to note that finished products are not the only items being impacted. Rather, production of active APIs themselves are also affected, given that many are produced overseas, including in China. The challenge in accessing these ingredients could have financial repercussions far earlier along the chain than many might have anticipated, including in research & development and clinical trial phases.
“I think tariffs on APIs will definitely increase costs to everybody who has touch points in the supply chain,” Ron Lanton, a partner at Lanton Law recently explained to Applied Clinical Trials. “Pharma obtains a significant amount of APIs from the global market, and I think that's going to lead to increased expenses and a lot of difficulties in sourcing essential ingredients that we need for the APIs. I think the companies might respond to these challenges by reallocating resources meant to maintain or maybe accelerate their R&D pipelines in order to address the issues, but I definitely think it's going to result in an increase of cost.”
We’ll have to stay tuned to how this continues to develop.
References
1. Saraceno N. Trump Issues New Reciprocal Tariffs. Pharmaceutical Commerce. April 3, 2025. Accessed June 3, 2025. https://www.pharmaceuticalcommerce.com/view/trump-issues-new-reciprocal-tariffs
2. Fick M. Exclusive: US pharma tariffs would raise US drug costs by $51 billion annually, report finds. Reuters. April 25, 2025. Accessed June 3, 2025. https://www.reuters.com/business/healthcare-pharmaceuticals/us-pharma-tariffs-would-raise-us-drug-costs-by-51-bln-annually-report-finds-2025-04-25/
3. Tracy D. Merck Begins Construction on $1 Billion Biologics Manufacturing Hub. Pharmaceutical Executive. May 5, 2025. Accessed June 3, 2025. https://www.pharmexec.com/view/merck-begins-construction-1-billion-biologics-manufacturing-hub
4. Tariff Shock Threatens $200B U.S. MedTech Market: iData Research Warns of Major Supply Chain and Pricing Fallout. PR Newswire. June 2, 2025. Accessed June 3, 2025. https://www.prnewswire.com/news-releases/tariff-shock-threatens-200b-us-medtech-market-idata-research-warns-of-major-supply-chain-and-pricing-fallout-302470423.html
5. Saraceno N. Piramal Pharma to Invest $90 Million in US Site Expansions. Pharmaceutical Commerce. May 12, 2025. Accessed June 3, 2025. https://www.pharmaceuticalcommerce.com/view/piramal-pharma-to-invest-90-million-us-site-expansions
6. Tracy D, Studna A. Rising API Tariffs Are Forcing Pharma to Shift R&D Resources. Applied Clinical Trials. June 3, 2025. Accessed June 3, 2025. https://www.appliedclinicaltrialsonline.com/view/rising-api-tariffs-forcing-pharma-shift-resources
