A report commissioned by a trade organization in the USA Pharmaceutical Industry indicates that if the USA imposes a 25% tariff on imported Pharmaceuticals, it could increase the annual Pharmaceutical costs in the USA by nearly 51 billion dollars and raise drug prices by up to 12.9%.
According to a report commissioned by a trade organization from the USA's pharmaceutical Industry, imposing a 25% tariff on imported Pharmaceutical products could increase annual drug costs in the USA by nearly 51 billion dollars and potentially raise prices by up to 12.9%.
This report was commissioned by the USA's main pharmaceutical lobbying group, the American Pharmaceutical Research and Manufacturers Association, whose members include Amgen (AMGN.US), Bristol-Myers Squibb (BMY.US), Eli Lilly and Co (LLY.US), and Pfizer (PFE.US). The report indicates that the USA imported Pharmaceutical products worth 203 billion dollars in 2023, 73% of which came from Europe, primarily including Ireland, Germany, and Swiss Franc. In the same year, the total sales of finished Pharmaceuticals in the USA was 393 billion dollars.
For a long time, Pharmaceuticals have been excluded from trade wars due to their potential risks, but Trump has repeatedly threatened to impose a 25% tariff on imported Pharmaceuticals. Last week, the Trump administration announced an investigation into imported Pharmaceuticals, citing concerns over National Security regarding dependence on foreign Pharmaceutical production. This initiative has initiated an investigation led by the USA Department of Commerce and has triggered a 21-day public comment period.
Ted Murphy, a trade attorney at Sidley Austin law firm, stated that Pharmaceutical companies view this investigation as an opportunity to signal to the government that high tariffs will hinder their efforts to rapidly increase domestic production capacity in the USA, while also presenting a timing for alternative proposals. The law firm is assisting businesses in submitting comments to the Department of Commerce.
Pharmaceutical companies are also lobbying the Trump administration for a phased implementation of tariffs on imported Pharmaceutical products to minimize the impact. The report indicates that production costs are just one of many factors influencing the prices of new drugs, and it remains unclear to what extent tariffs on imported intermediate products or finished products will be passed on to Consumers.
For tariffs on imported finished Pharmaceuticals, the costs may be passed on to Consumers through higher prices set by the wholesalers or retailers paying the tariffs. However, if these tariffs are completely passed through to domestic prices, Ernst & Young estimates that Pharmaceutical prices in the USA could rise by up to 12.9%.
Data shows that in 2023, about 30% of the pharmaceuticals imported into the USA were Active Pharmaceutical Ingredients used for domestic manufacturing, which were then either exported or sold within the country. The report states that tariffs on these Active Pharmaceutical Ingredients will increase the domestic production costs in the USA by 4.1%, and weaken the global competitiveness of pharmaceuticals manufactured in the USA.
Approximately 25% of the pharmaceutical production in the USA is used for export, with a total export value reaching 101 billion dollars in 2023. Ernst & Young pointed out that if higher input costs weaken foreign market demand for American pharmaceuticals, a part of the 0.49 million jobs related to exports within the Industry could be at risk.
In addition, the report did not include the potential impact of retaliatory tariffs. It stated that if such tariffs were introduced, the economic impact on American pharmaceutical companies would be even more severe.
