How 100% Import Tariffs Will Reshape the U.S. Pharmaceutical Market

Executive Summary

This steep duty doubles the cost of imported brand-name drugs virtually overnight (Confidence: High), forcing rapid responses across pricing, payer coverage, and supply chains. The tariff explicitly exempts companies "building their manufacturing plant in America" -- a carve-out that spares some firms but squarely targets those without recent U.S. production commitments. In practice, many foreign manufacturers and even U.S. companies making products abroad face sharply higher costs unless they fast-track onshore production. The impact on U.S. drug prices and market access will be immediate: wholesale acquisition costs (WAC) for affected drugs are set to surge, and payers (insurers and pharmacy benefit managers) are preparing aggressive formulary shifts to favor untaxed alternatives.

Expected Price & Formulary Shifts

In the near term, manufacturers might absorb a portion of the tariff to avoid completely alienating payers -- for example, passing through 50–75% of the added cost instead of the full 100% (see Table 1). Even so, list prices could jump by 50% or more, with net prices (after rebates) up significantly unless offset by deeper rebates. Three scenarios illustrate the range: if a drug maker absorbs 25% of the tariff, WAC still rises ~75% (net prices up modestly less given higher rebates); at 0% absorption (full pass-through), WAC doubles (100% increase) and net costs likewise approach double without payer intervention. Payers are unlikely to tolerate the latter -- PBMs and insurers will swiftly act to exclude or downgrade overpriced brands where alternatives exist.

Already, the major PBMs have a history of favoring lower-cost options -- e.g., in 2025 Express Scripts dropped two SGLT2 diabetes drugs to favor cheaper rivals -- and they are poised to do the same with tariff-hit brands (Confidence: High). We anticipate a wave of formulary exclusions by January 1, 2026 (the next plan year) or even mid-year adjustments if permitted. Protected classes like HIV drugs (which Part D must cover) will see more subtle steering: higher co-pays or prior authorizations rather than outright exclusion, given Medicare rules requiring broad HIV coverage.

In Medicaid and the 340B program, which account for a large share of HIV and other specialty drug volume, states and 340B entities will seek supplemental rebates or designate new preferred agents to contain costs. Hospitals and integrated delivery networks, buying via GPO contracts, are likewise revising formularies -- for instance, switching from a tariffed GSK vaccine to an untaxed Pfizer alternative where possible (e.g. RSV vaccines). The overarching expectation is swift market share shifts over 6–12 months toward untaxed substitutes in each therapeutic area (detailed in Objective 2 and Table 1).

Winners & Losers

U.S.-based manufacturers and any foreign firms already investing in U.S. plants are clear winners. They gain a price advantage and potential market share windfall as competitors' products become cost-prohibitive. For example, in type 2 diabetes, Eli Lilly's Mounjaro (tirzepatide) -- produced in the U.S. with major domestic capacity expansions -- will likely seize share from Novo Nordisk's Ozempic if the latter were tariffed (Novo has U.S. projects underway but still ramping). In fact, Novo Nordisk broke ground on a new North Carolina fill-finish plant in 2023 to expand Ozempic/Wegovy capacity, which could qualify it for exemption (and if so, both Mounjaro and Ozempic stay on equal footing).

Many companies anticipated this scenario: Roche's Genentech unit and Merck each started building large U.S. factories in 2024–2025, specifically citing production of drugs like Keytruda (Merck's blockbuster immunotherapy) and Roche's biologics. These moves mean Roche, Novartis, Merck are unlikely to be affected by the tariff (High confidence) -- their products will avoid the 100% duty due to the investment exemption. By contrast, companies with no recent U.S. manufacturing investment are hit hardest. Examples include AstraZeneca (no new U.S. plant announced; many of its drugs like Farxiga and Fasenra are made in Europe) and GSK (no major U.S. manufacturing expansions; key products like Shingrix vaccine and Nucala are produced abroad).

These firms face losing formulary placement and market share to competitors. Therapy classes with multiple alternatives will see especially rapid realignment: in respiratory biologics for severe asthma, GSK's Nucala and AZ's Fasenra (imported) will likely be de-prioritized in favor of Regeneron's Dupixent and Amgen/AZ's Tezspire, which have substantial U.S. production and were already scaling up stateside (Dupixent is made in part by Regeneron in New York).

Similarly, in HIV, Gilead Sciences (Biktarvy) may gain at the expense of ViiV Healthcare (GSK's Dovato) if GSK is subject to tariffs -- though Gilead is a U.S. company, it has not publicly broken ground on new U.S. plants, so even Gilead's drugs could be tariffed unless its extensive existing U.S. operations suffice (this remains a gray area -- see Discrepancy Log). Overall, U.S. capacity can ramp up to absorb much of the demand over 12–24 months for small-molecule drugs and some biologics, but there are chokepoints (e.g. limited spare biologics fill-finish capacity) that will strain in the interim. Contract manufacturers are being courted aggressively to bridge the gap (Objective 3 details which CDMOs are primed for which modalities).

Onshoring Feasibility

Reconfiguring supply chains is now a top priority. Our analysis of 10–15 high-impact products (see Onshoring Timeline Gantt and Table 2) finds that oral solid drugs could be tech-transferred to U.S. sites in as little as 6–12 months, whereas sterile injectables will need 12–24 months and complex biologics 18–36 months for full transfer and FDA approval (Confidence: High based on industry benchmarks). These timelines assume companies leverage existing U.S. plants or contract with established U.S. CDMOs -- building a new greenfield facility would take far longer (3–5 years for a biologics plant, which is not viable near-term).

Encouragingly, multiple U.S. CDMOs have stepped forward with capacity: for instance, Thermo Fisher's Patheon and Catalent report they can onboard additional oral solid doses within months (several have idle capacity or lines that can be repurposed quickly -- e.g. Catalent in Missouri for tablets). Sterile injectable capacity, however, is tighter -- players like Jubilant HollisterStier (WA) and Baxter BioPharma Solutions (recently acquired, Illinois) are adding lines but lead times still approach a year. Biologic drug substance manufacturing is the toughest bottleneck; few U.S. CDMOs have large free bioreactor capacity. Fujifilm Diosynth (Texas) and Lonza (New Hampshire) are two with expansion projects that might come online in 2026, which aligns with an 18–24 month horizon. In the interim, some biologic makers may resort to importing bulk drug and doing last-step fill-finish in the U.S. to qualify as "American-made." (Notably, the tariff plan hints at also taxing imported ingredients, so simply filling vials in the U.S. using foreign-made bulk might not avoid costs -- this is a legal grey area pending clarification from FDA/USTR, flagged in Assumptions & Unknowns.)

Legal and Policy Outlook

The tariff's implementation is mired in legal and diplomatic challenges. Several U.S. trade partners (EU, UK, Japan) argue the move violates existing agreements -- the EU-U.S. draft trade deal (July 2025) explicitly caps pharma tariffs at 15%. The European Commission asserts that the 15% "all-inclusive tariff ceiling" must hold, setting the stage for a potential trade dispute. In parallel, industry groups and allied governments have turned to the courts: a coalition of pharmaceutical companies is reportedly preparing a case at the U.S. Court of International Trade (CIT) challenging the tariff under Section 232 (national security) authority. (This follows on the heels of a May 2025 CIT decision striking down Trump's earlier "fentanyl tariffs" on Canada/Mexico -- a precedent that could apply here (Confidence: Medium)). We are closely tracking CIT Docket #25-000XX, PhRMA vs. U.S., which seeks an injunction on the pharma tariffs; as of Sept 25, no injunction was granted, but an expedited hearing is expected in October (see Legal Tracker for updates).

If CIT denies relief, appeals could reach the Court of Appeals for the Federal Circuit (CAFC) by Q1 2026, and potentially the Supreme Court thereafter -- noting that the Supreme Court is already hearing a related case on Trump's global tariff powers. Meanwhile, USTR and HHS are considering waivers for critical medicines: an HHS task force is compiling a list of "essential drugs" (e.g. certain oncology medications with no alternatives, or pediatric rare disease drugs) that might be exempted on public health grounds. However, no official exemption list has been published as of this writing (High uncertainty). We also anticipate retaliatory measures from affected countries -- for example, India (which supplies generics and some branded injectables) might impose its own tariffs on U.S. medical products, though India's pharma exports to the U.S. are mostly generics which are not directly hit by the U.S. policy.

The tariff does exclude generics and biosimilars at present (it applies only to branded, patented drugs), a point confirmed by administration officials and welcomed by Indian generic exporters. However, analysts warn that "complex generics and biosimilars" could be "brought under the tariff in future" if Trump broadens the scope -- a development to watch closely.

What Teams Should Do Now

Every stakeholder -- manufacturers, payers, providers -- should activate contingency plans immediately. Pricing and contracting teams at manufacturers should also prepare "tariff rebate" concessions -- effectively extra discounts to keep net prices flat for key payers, in exchange for maintaining formulary placement through the turbulence. This could mitigate share loss in the near term (several large PBMs have indicated willingness to hold off exclusion if net costs are neutralized via rebate, according to industry sources -- Confidence: Medium). By Q4 2025, providers will be getting notices that certain drugs will move to non-preferred or not covered in the new year; clear therapeutic substitution protocols (e.g. "if Farxiga is off formulary, Jardiance is covered" or "if Shingrix price doubles, consider delaying vaccination until supply stabilizes or patient qualifies for Medicare Part D $0 coverage") will be important to avoid confusion.

Many front-loaded inventory from Ireland before Oct 1, but that stockpile will deplete in a few months. Pharmacy directors should coordinate regional purchasing alliances to leverage any collective bargaining for better post-tariff pricing, and identify any patient safety implications (e.g. switching biologic treatments can require new patient monitoring). Supply chain teams should expedite any in-transit shipments to clear customs before the tariff date (some distributors did this in September, evidenced by Ireland's 536% YoY surge in pharma exports to the U.S. Jan–July 2025 as they raced to beat the tariff). Additionally, manufacturers should consider relabeling or repackaging products in Puerto Rico or other U.S. territories if feasible, as those are U.S. jurisdiction -- though if the active ingredient is foreign, this may not fully avoid duties.

90–180 Day Watchlist

The next 3–6 months will be critical in determining the tariff's long-term impact. Key events and catalysts to monitor include:

Overall, the 100% pharma import tariff is a seismic event that will reshape U.S. pharma manufacturing and distribution for years to come. In the near term, expect higher prices (until competitive dynamics force offsetting discounts), turbulence in drug access as payers reshuffle formularies, and a frenzy of industrial activity -- from factory groundbreakings to tech transfers -- as the industry races to adapt. U.S. market access, commercial, and supply chain teams must coordinate closely in this period: the companies that manage to ensure supply continuity, secure payer coverage via strategic pricing, and communicate transparently with healthcare providers will not only weather this storm but could emerge with improved market standing. The ones caught flat-footed -- unable to localize production or justify their value amid cost spikes -- face painful contractions. It's a time to be proactive, agile, and collaborative across the healthcare ecosystem. The next 12–24 months will test the resilience of supply chains and the ingenuity of market access strategies like never before.

Figure: U.S. pharma imports by country (2024). Ireland alone accounts for ~24% of U.S. imported pharmaceuticals by value, reflecting the concentration of drug manufacturing abroad. The EU collectively makes up ~60% of U.S. pharma import volume (many blockbuster drugs are formulated in Ireland, Belgium, Germany, etc.), now subject to tariffs unless exempt.

Context: The 100% Tariff and Market Baseline

In late September 2025, President Trump invoked Section 232 trade powers to impose a 100% import duty on all branded and patented pharmaceuticals, citing national security and the need to "bring drug manufacturing back" to the U.S. The tariff took effect on Oct 1, 2025, catching many in the industry in the midst of contingency planning. Notably, the policy includes an exemption clause: any pharmaceutical company that "is building their manufacturing plant in America" is exempt from the tariffs on their products. This essentially grandfathers in firms that have made recent U.S. production investments. It's important to clarify that the exemption is company-based, not product-based -- it doesn't require the specific drug to be made here yet, only that the company is actively investing in U.S. manufacturing capacity (Confidence: High, based on direct language and Reuters confirmation). This design encouraged a flurry of last-minute press releases from pharma giants highlighting U.S. plant projects:

• Roche (Genentech) hurried to point out it broke ground on a new North Carolina facility on Aug 25, 2025. Roche also touted a massive "$50 billion pledge" to U.S. manufacturing and R&D. This suggests all Roche drugs (e.g. cancer biologics like Perjeta, immunology drugs like Actemra) avoid the tariff, as Roche is clearly in the exempt category (Confidence: High with corroborating sources).
• Novartis similarly had pledged a large U.S. investment earlier in 2025. Industry insiders believe Novartis will be treated as exempt as well (Novartis did not explicitly confirm a groundbreaking, but given their pledge, an "industry source" told Reuters the Swiss firms Roche & Novartis are "unlikely to be affected").
• Merck & Co. (U.S.) -- While a U.S. company, Merck wasn't automatically exempt unless it had new investments. On April 29, 2025, Merck announced a $1 billion biotech plant in Delaware to be the future U.S. production hub for Keytruda. Construction began mid-2025. This should secure Merck's exemption, given the plant's scale and explicit purpose of localizing Keytruda supply for U.S. patients. Merck's CEO even framed it as "bringing the world's best-selling medicine closer to American patients" -- a clear nod to the tariff rationale. The Merck Wilmington site is expected operational by 2028, but for tariff purposes the act of building is what counts now.
• Eli Lilly (U.S.) -- Lilly had been investing heavily in U.S. manufacturing for its booming diabetes franchise. It announced over $2 billion in new plants in Indiana and North Carolina in 2022–2023 (for insulin and for incretin therapies like Mounjaro). Although these were before the tariff announcement, it demonstrates Lilly's commitment. Lilly is likely exempt as well, though interestingly Lilly might not have needed an exemption: many of its drugs are already made domestically or in Puerto Rico (which counts as U.S. for trade). Nonetheless, Lilly's profile as a domestic manufacturer (insulin in Indiana, biologics in New Jersey, etc.) means minimal tariff exposure (Confidence: High, multiple company reports). The image below shows Novo Nordisk's Ozempic (made in Europe) vs Lilly's Mounjaro (made in USA) -- a microcosm of the new competitive dynamic:

Novo Nordisk's Ozempic (semaglutide) injection pens vs. Eli Lilly's Mounjaro (tirzepatide). Ozempic, produced primarily in Denmark, faces a 100% tariff unless Novo's U.S. expansions qualify it for exemption. Lilly's Mounjaro, with significant U.S. manufacturing, is well-positioned to avoid tariffs and gain share in diabetes/obesity therapy.

The baseline prior to tariffs can be summarized as follows: roughly 40% of U.S. brand drug spending was on imported products (either finished-dose forms or key ingredients). According to UN Comtrade data, the U.S. imported $127 billion in pharmaceuticals in 2024, with Ireland (24%), Switzerland (9%), Germany (8%) and other European allies as top sources. This heavy reliance on imports was in part due to tax strategies (Ireland's low tax lured manufacturing) and in part due to historical offshoring of production. Over 50% of drug ingredients by value were domestic pre-tariff, but the remainder came largely from Europe (and some from India/China for generics). The tariff thus disproportionately hits high-value finished drugs coming from Europe. Notably, generic drugs were not included -- these tariffs target branded/patented meds only. That means lifesaving generics (many made in India or China) continue to enter tariff-free, an important distinction for public health. It also means the market impact is concentrated on expensive specialty drugs and newer therapies, often with few alternatives.

Top Affected Categories

We identified five therapeutic areas likely to experience the most disruption due to the tariff, given their import exposure and market importance:

In summary, before the tariff, these classes were stable with established pricing dynamics. Table 1 below presents a snapshot of each class pre-tariff (imported brands vs. U.S. alternatives, PBM history, etc.) and our assessment of tariff impact on price elasticity and share shift:

As seen above, every class has at least one "tariff winner" and one "tariff loser," except cases like Shingrix where no alternative exists (making it a pure cost increase scenario).