2025-09-26
Prices are likely to rise where imported branded medicines have few substitutes and no exemption, although the extent of pass‑through will depend on contracts, competition, and payer controls in each therapy class. [1]
From 1 October 2025, the United States will apply a 100% tariff on branded or patented pharmaceutical imports, unless the manufacturer is already building a U.S. plant, defined as a facility that has broken ground or is under construction. The same package includes about 25% on heavy trucks, 30% on upholstered furniture, and 50% on kitchen cabinets and bathroom vanities, expanding the near‑term cost backdrop beyond healthcare.
A 100% tariff doubles the landed cost of an affected branded medicine at the border, which adds immediate net cost pressure even if list prices change only at contract renewal points. In competitive classes, manufacturers may absorb part of the shock to defend share, while in single‑brand or low‑substitute categories, payers and patients face higher pass‑through risk, especially where benefit designs rely on coinsurance. Exemptions for firms that are building U.S. plants can shield specific products, but exemptions are product‑ and project‑specific and will not cover all imported lines in the near term. Biologics and sterile injectables are harder to re‑source, which can slow any shift to domestic supply and keep tariff exposure elevated while capacity is developed.
| Item | Figure | Effective Date | Notes |
|---|---|---|---|
| Branded/Patented Drugs Duty | 100% tariff | 1 Oct 2025 | Exempt if a firm is “building” a U.S. plant, defined as breaking ground or under construction |
| Heavy Trucks Duty | 25% tariff | 1 Oct 2025 | Aimed at shielding domestic producers, per policy statements |
| Upholstered Furniture Duty | 30% tariff | 1 Oct 2025 | Announced alongside trucks and drugs in the same package |
| Cabinets/Vanities Duty | 50% tariff | 1 Oct 2025 | Adds to home-renovation cost inputs and logistics complexity |
Manufacturers, payers, and patients will not experience the same effect in every category, so it helps to map tariff incidence to market structure before drawing conclusions.
Single‑brand specialty medicines with few substitutes tend to show quicker net price increases as costs flow through to payers and coinsurance‑based plans, although list moves still track contract calendars.
Multi‑brand chronic classes often see partial absorption and slower pass‑through as companies protect share and renegotiate rebates at renewal, which can delay patient‑visible changes.
Generics that fall outside the branded scope have limited direct exposure, though second‑order effects can arise if suppliers rebalance capacity or if inputs and logistics become more costly. [2]
Complex biologics face slower re‑sourcing due to validation and quality requirements, which can keep tariff exposure high until domestic capacity is online.
Exemption mechanics matter: if a product is tied to a qualifying U.S. plant build, the 100% duty may not apply, which reduces near‑term exposure for those SKUs.
Contract timing and rebate structures can mute list‑price changes at first, creating a lag where net costs rise before retail prices move.
Payer controls such as prior authorisation and step therapy can slow claims growth and shift demand, moderating pass‑through at the expense of more administration.
Broader duties on trucks, furniture, and cabinets complicate distribution and freight costs, although healthcare effects are primarily driven by the drug‑specific tariff.
Future signalling matters: public remarks have floated possible escalations to 150% or 250% in later phases, which would materially increase pass‑through risk if enacted. [3]
Agency clarifications on how exemptions apply at the product level and what documentation is accepted to prove “building” status will determine which portfolios avoid the 100% rate.
Company disclosures on U.S. plant ground‑breakings and product‑level sourcing will help identify branded lines still exposed to the duty through the next contract cycle.
Payer formulary updates in classes with limited substitutes will signal where utilisation management tightens and where tariff costs are more likely to reach patient out‑of‑pocket bills.
Market breadth of the non‑healthcare duties can influence logistics and distribution costs around the margin, which complicates cost control even if drug list prices are steady.
For the sector, margin resilience will correlate with import share by brand, bargaining power, and the ability to qualify for exemptions, with more differentiated products better placed to re‑price without large share loss.
If pass‑through becomes widespread, medical‑care components of inflation could lift, although the exemption path and class‑by‑class dynamics suggest uneven effects that will show up gradually over several renewal cycles.
Trade partners may object, and legal challenges are possible, but the onshoring carve‑out narrows the immediate scope of retaliation in branded drugs relative to broad sector tariffs.
Trump Tariff News points to higher price risk in imported branded medicines where exemptions do not apply and substitutes are scarce, but realised outcomes will differ across classes as contracts roll, payers adjust controls, and manufacturers decide how much to absorb versus re‑price.
Over the next two quarters, watch exemption guidance, plant build disclosures, and formulary changes to judge how much of the 100% duty becomes visible in claims and at the pharmacy counter.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment, or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person.
[1] https://www.reuters.com/sustainability/boards-policy-regulation/trump-announces-100-tariff-imports-branded-or-patented-pharmaceuticals-october-1-2025-09-25/
[2] https://edition.cnn.com/2025/09/25/business/imported-pharmaceuticals-tariff-trump
[3] https://www.cnbc.com/2025/09/26/us-to-impose-100percent-tariff-on-branded-patented-drugs-unless-firms-build-plants-locally-trump-says.html
