On September 25, 2025, the Trump administration proposed a 100% tariff on internationally sourced branded drugs. This announcement caused a splash in the pharmacy industry, as many were left wondering what the impact of these tariffs could mean for drug prices.
The start date for these tariffs was initially set for October 1, 2025, but rollout was paused while details are still being finalized, so the tariffs have yet to go into effect.
President Donald Trump shared on social media that pharma manufacturers actively establishing U.S. facilities will be exempt from the tariffs; however, the threshold of that investment is unclear. Subsequently, it was announced that generics will also be exempt from tariffs.
The rise of pharmaceutical tariff policies
The Trump administration’s tariff policy is intended to encourage more U.S.-based manufacturing, reduce reliance on foreign supply chains, and, over time, lower drug costs.
As of the time of the announced tariff policies, these are the immediate effects:
- Levels & scope: 100% tariffs on internationally sourced branded drugs; EU and Japan at 15%.
- Exemptions: Generics were stated as exempt, but the definitions between brand and generic weren’t clearly clarified, which is important because differing definitions across regulatory, patent, and trade contexts can change how exemptions may apply.
- Manufacturing carve-out: Manufacturers “actively establishing” U.S. facilities were signaled for exemption. It remains unclear exactly how the administration is defining ‘establishment.’
- Timing: Implementation of the tariff policy was initially slated for October 1, 2025; however, the details are still being finalized.
Today, many top-spend drugs for employers are manufactured in the U.S., which tempers immediate tariff exposure. Still, the U.S. imports a meaningful share of pharmaceuticals and inputs, and even a 5–10% move on already high-cost categories (including GLP-1s) could create meaningful budget impact if ingredients or final dose are sourced abroad.
From an employer perspective, tariffs present a variable that can ripple through drug acquisition costs, formulary decisions, and supply stability. Even if exposure to the tariffs proves modest at first, sensitivity will remain high especially if a small set of categories (like GLP-1s) drives a large share of your plan spend.
Manufacturer investments and what they signal
President Trump has outlined manufacturing investment expectations for U.S. pharmaceutical companies with tariff exemptions for those who comply. Several large drug makers have publicly announced multibillion-dollar U.S. commitments (for example, Pfizer and Eli Lilly).
While the precise US investment “threshold” for tariff exemption has not been specified, these moves suggest that pharma manufacturers are aligning to mitigate tariff risk. For plan sponsors, the signal is encouraging: the more manufacturing steps (and inputs) that shift stateside, the less exposed your pharmacy spend may be to import duties over time.
Potential plan impacts to monitor
Cost pressure. Imported finished products and active pharmaceutical ingredients (APIs) may face higher costs over time, raising plan-paid amounts downstream, particularly if inputs are affected even where the finished drug is domestic. Think of this as a slow-moving supply-and-pricing signal rather than a single inflection point.
Formulary moves. PBMs may adjust formulary tiers, prefer alternatives, or remove certain products if economics change for certain drugs. These shifts can be subtle at first (e.g., NDC-level preferences) and grow as pricing signals firm up. A check-in cadence with your PBM can surface changes early, before members feel them at the counter.
Supply dynamics. Narrow formularies and managed networks could feel an impact from intermittent shortages or stockpiling behavior. A balanced oversight approach (watching trend data without overreacting to a single month) helps avoid surprises.
Claims and trend monitoring: Understanding category-level exposure (GLP-1s, select autoimmune therapies) and quarterly performance and utilization metrics can help plans better understand tariff and pricing change impacts.
How tariff policy intersects with Most Favored Nation pricing and TrumpRx
Pharmaceutical tariffs, Most Favored Nation (MFN) pricing, and TrumpRx may all be making headlines in the same news cycle, but the three policies may have distinct impacts on the pharmacy landscape.
Pharmaceutical tariffs influence import cost structures and sourcing behavior, while MFN and TrumpRx are pricing frameworks and platforms that may affect member prices, discount dynamics, and medication access.
What employers can do now about pharmaceutical tariff implications today
- Open the conversation. Ask your PBM how they are assessing tariff exposure and whether any formulary or network adjustments are under consideration.
- Monitor your claims often. Set a cadence to review trend lines in sensitive categories (cost per claim, utilization spikes, new-to-therapy starts) so you can respond rather than react.
- Check your PBM contract terms. Some contract terms may allow for changes by the PBM in the case of “market events.” Be sure you understand your contract structure and ask your PBM for clarity about potential term changes.
As the tariff policies continue to develop, it’s important to stay proactive, monitor your claims as often as you can, and initiate PBM conversations early. Expect continued policy clarification and further manufacturer responses.
Watch Our Webinar: Navigating Pharmacy Policy
For a deeper dive and timely updates, watch our latest webinar, Navigating Pharmacy Policy: Tariffs, Most Favored Nation Pricing & TrumpRx.
Frequently Asked Questions
What are pharmaceutical tariffs?
Pharmaceutical tariffs are import duties applied to drugs and drug inputs that are sourced outside the United States. They’re intended to encourage domestic manufacturing and reduce reliance on foreign supply chains, which can influence plan-paid costs and sourcing over time.
When were tariffs announced and at what levels?
When announced on September 25, 2025, the proposal set a 100% tariff on internationally sourced branded drugs, with the EU and Japan at 15%. Implementation details were still being finalized after the initially targeted October 1, 2025 start date.
Are generics exempt?
Yes, generics were stated as exempt from the proposed tariffs. That said, how “generic” and “brand” are defined for enforcement purposes will matter, and classification details may affect how the exemption is applied.
Who would be most affected if tariffs go into effect?
Imported finished drugs could be affected, as well as products manufactured in the U.S. that depend on imported active pharmaceutical ingredients (APIs) or components. Plans with a high concentration of spend in a few categories may feel even modest cost shifts more acutely.
Could this change member access to medications?
Possibly, though not necessarily. PBMs may respond to pricing changes with formulary tier shifts, preferred product strategies, or utilization management updates. Most changes, if they occur, tend to roll out gradually and should be monitored well before members feel disruption.
How might tariffs affect my plan’s pharmacy budget?
Tariffs can raise acquisition costs for affected products or inputs, which may flow into plan-paid amounts. Even a small percentage change in high-spend categories (for example, GLP-1s or certain autoimmune therapies) can meaningfully influence budgets.
How do manufacturer investments in U.S. facilities impact tariffs?
The administration has signaled that there will be tariff exemptions for manufacturers actively establishing U.S. manufacturing. Many large pharma manufacturing companies have announced significant domestic investments as a result. These moves could mitigate tariff exposure for parts of their portfolios.
How do tariffs relate to Most Favored Nation pricing and TrumpRx?
They’re often discussed together but operate through different mechanisms. Tariffs influence import costs and sourcing decisions; Most Favored Nation (MFN) pricing and TrumpRx are frameworks and platforms that affect member prices, discount dynamics, medication access, and include insurance ramifications.
What should employers do right now?
Stay proactive: initiate a check-in with your PBM about exposure and potential formulary or contract changes and monitor claims regularly for trend shifts in sensitive categories.
This FAQ provides general information and does not constitute legal advice.
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