Pharmaceuticals Ramp Up U.S. Investment as Tariff Plans Loom
Tariff proposals highlight the reliance on offshore drug production, the challenges of reshoring generics, and the need for investment to stabilize supply chains.
The Associated Press has reported that President Donald Trump is vowing to slap tariffs on imported pharmaceuticals, a category largely shielded from trade duties until now. A new U.S. and Europe trade deal already includes a 15% levy on some European drugs, and Trump is threatening tariffs as high as 200% on those from elsewhere.
Few expect the full 200% rate to materialize, though. Analysts believe any final policy will land far lower and could carve out exemptions for low-margin generics, which make up a hefty majority of U.S. prescriptions but leave little cushion for manufacturers to absorb new costs.
Trump says any tariffs would be delayed by 18 months to allow stockpiling and reshoring and many companies are already preparing. Roche and Johnson & Johnson have both pledged $50 billion or more in U.S. operations. Reuters recently reported that J&J will invest $2 billion alone in North Carolina as it aims to expand its U.S. manufacturing presence. Eli Lilly and AstraZeneca have also committed to invest billions of dollars to scale up their U.S. footprints.
But while U.S.-made drugs would be spared from tariffs, building pharmaceutical plants domestically is expensive and time-intensive. For generics, that’s hard to do. Most of their supply chains were offshored years ago to keep costs low. Reversing that trend would require not just tariffs, but a fundamental system redesign and billions in investment that many generic manufacturers can’t afford on their own.
