How Trump’s new drug tariffs could affect prescription prices

President Donald Trump signed an executive order Thursday setting the stage for tariffs as high as 100% on certain patented prescription drugs and their ingredients, while offering lower rates or exemptions to companies that strike “most favored nation” pricing agreements and build manufacturing capacity in the United States.

Under the policy, a 0% tariff would apply to drugmakers that both enter most-favored-nation pricing deals with the Department of Health and Human Services and are actively building U.S. facilities to onshore production of patented pharmaceuticals and key ingredients. Companies that are building domestic projects but do not have a pricing deal would face a 20% tariff, which the administration said would rise to 100% over four years.

A senior administration official told reporters the steepest tariffs will not begin immediately. Large companies will have 120 days before the 100% rate can apply, while smaller companies will have 180 days. The official, speaking to the Associated Press on condition of anonymity to preview the order, said companies still have time to negotiate and noted the administration has reached 17 pricing deals, with 13 signed.

Administration officials said they expect the highest rate to hit only companies that neither sign pricing deals nor commit to U.S. production. The White House fact sheet said Commerce and HHS will outline pathways to enter onshoring and most‑favored‑nation agreements, and that tariff-free treatment applies only through Jan. 20, 2029. It also said enforcement will include monitoring, external audits and the possibility of higher duties on past and future imports if firms fail to comply. For now, the policy excludes generics entirely.

What it Could Mean for Prescription Drug Prices

The administration says the tariffs are meant to push drugmakers to lower U.S. prices, using the threat of higher import taxes as leverage in negotiations. Officials have pointed to recent deals with companies such as Pfizer, Eli Lilly and Bristol Myers Squibb as evidence that pressure can produce lower launch prices for new drugs.

Critics warn the tariffs could raise costs instead. Stephen J. Ubl, CEO of the pharmaceutical trade group PhRMA, said taxes “on cutting-edge medicines will increase costs and could jeopardize billions in U.S. investments,” adding that many imports come from long-standing U.S. allies.

Economists and consumer advocates have also cautioned that if companies do not absorb the added costs or qualify for exemptions, higher import expenses could be passed through the supply chain to insurers, hospitals and patients, affecting premiums and out-of-pocket spending.

National Security Rationale and Exemptions

In the order, Trump said the actions are needed “to address the threatened impairment of the national security posed by imports of pharmaceuticals and pharmaceutical ingredients,” citing a Commerce Department investigation conducted under Section 232 of the Trade Expansion Act of 1962. A White House fact sheet said the tariffs target patented drugs and active ingredients, while generic drugs, biosimilars and associated ingredients are not covered at this time.

The announcement came on the first anniversary of Trump’s “Liberation Day,” when he imposed sweeping import taxes that roiled markets. Those broad tariffs were later struck down by the Supreme Court under a different authority, pushing the administration to rely more heavily on sector-specific tariffs and investigations.

Trade Deals Limit Scope of Drug Tariffs

The policy also creates country-based carve-outs. The White House said patented pharmaceuticals from the European Union, Japan, South Korea and Switzerland will face a 15% tariff under existing trade frameworks, while the United Kingdom will face a 10% rate that the order says could drop to zero under future agreements.

Metal Tariff Changes Announced Alongside Drug Order

Trump also signed an order updating how tariffs are calculated on imported steel, aluminum and copper, which are generally subject to 50% duties. Administration officials said the new approach will calculate tariffs using the full customs value paid by U.S. customers when purchasing foreign metal.

The administration also changed how tariffs apply to derivative goods that contain these metals. Officials said items in which steel, aluminum or copper make up less than 15% of total weight will now face only country-specific tariffs, while products with higher metal content will face a 25% tariff on the entire value.

A Broader Shift Toward Sectoral Tariffs

Thursday’s actions reflect the administration’s turn toward sector-specific tariffs after the Supreme Court struck down broad duties Trump had imposed under the International Emergency Economic Powers Act. Officials have increasingly leaned on Section 232 authorities, which Trump has also used for tariffs on autos and other products.

Beyond sectoral levies, the administration has used other legal tools to keep tariffs in place, including a temporary across-the-board tariff that can last only 150 days.

Trump argues tariffs are necessary to narrow the U.S. trade deficit and bring manufacturing back. Critics say rapid changes to global supply chains can be costly for companies and households, and they note that drug manufacturing decisions often take years even with incentives.

This article includes reporting by the Associated Press.