The Trump administration has moved to impose a 100% tariff on imports of brand-name, patented pharmaceutical products and ingredients, while extending lower rates for jurisdictions that have entered into bilateral agreements with the United States, and authorizing additional company-specific agreements to "onshore" manufacturing and tailor pricing practices in exchange for tariff relief.
On April 2, 2026, following a Department of Commerce investigation under Section 232 of the Trade Expansion Act, President Trump issued a Proclamation imposing a 100% tariff on brand-name, patented pharmaceutical products and ingredients. The tariff takes effect in 120 days for certain large companies and in 180 days for smaller companies.
The administration first threatened this tariff last year but seemed to shift its attention to the Most Favored Nation ("MFN") Drug Pricing policy, announced in May 2025. This policy requires manufacturers to align drug prices with the lowest prices paid for such drugs in comparable developed countries. In August 2025, a separate executive order targeted increasing domestic pharmaceutical production. To date, 16 manufacturers have entered into MFN agreements, many including commitments to onshore production. CMS has proposed various payment models for MFN pricing implementation, including the voluntary Medicaid GENEROUS model and the mandatory Medicare GLOBE (Part B) and GUARD (Part D) models. CMS is currently reviewing applications and comments on these models.
The recently announced tariff follows a Department of Commerce investigation that concluded, notwithstanding these efforts, that U.S. reliance on foreign pharmaceutical manufacturing—with roughly 53% of domestically distributed drugs produced overseas—poses a threat to national security and public health. The Proclamation ratifies these manufacturer-specific MFN agreements and encourages Commerce to pursue more.
Key Reductions in the Tariff
The Proclamation provides lower rates for pharmaceutical imports from parties that have negotiated agreements with the United States:
- 15% tariff for the European Union, Japan, Korea, Switzerland, and Liechtenstein;
- 10% reducing to 0% tariff for the United Kingdom;
- 0% tariff for manufacturers with both MFN and onshore production agreements; and
- 20% tariff for manufacturers with only an onshore production agreement.
Key Exemptions from the Tariff
The Proclamation clarifies that the new tariff exempts:
- Generic pharmaceutical products, biosimilars, and associated ingredients (though the administration notes this will be reassessed in one year); and
- Orphan drugs, animal health drugs, and certain specialty products from trade deal countries or that meet an urgent public health need.
This tariff continues the administration's trend of increasing attention on the pharmaceutical industry's trade and manufacturing frameworks.
