Pharma sector: A changing US landscape will prove disruptive for the entire sector

New measures announced by Trump to hit the pharma sector

In September, President Trump used social media to informally announce the imposition of 100% tariffs on imported branded or patented pharmaceutical products to the USA, effective from 1 October.

Furthermore, Trump has initiated pricing policy overhauls (in particular the “Most-Favoured Nation” (MFN) pricing framework and direct sales to patients via TrumpRx.gov) in response to his concerns that branded medications are much more expensive in the USA than in Europe. Those initiatives are starting to have an impact.

How are pharma sector sales performing now?

First of all, it is important to note that the global pharmaceutical sector continues to experience favourable sales performance, with a positive outlook for the coming years.  

Growing demand for medicines across the globe will continue to provide drugmakers with good sales growth, with developed markets (DMs) expected to outpace emerging markets (EMs) this year in terms of growth when measured in USD. This follows historical trends in which EMs have posted slightly slower growth in USD, even though they often post stronger growth when assessed in local currency, since less mature markets may experience catch-up growth trajectories.

The prospects for sales remain favourable in global terms. However, major transformations and possible disruptions related to what is going on in the USA should weigh on margins and profits of manufacturers and distributors.

If US import tariffs are imposed, what happens next?

On 25 September, President Trump announced via social media that, starting 1 October, branded or patented pharmaceuticals made abroad would face a 100% tariff in order to encourage domestic manufacturing. This announcement includes exemptions for companies with active construction underway in the USA, namely those classified as “breaking ground” or “under construction”). Generic drugs are also not subject to these tariffs, which helps mitigate the scope on most prescriptions, as generics account for about 90% of all US prescriptions. Up until now, the levies have not received a legal basis and have yet to be implemented.  

The impact of these tariffs varies by region. Due to trade agreements in place, European (EU27) and Japanese pharmaceutical exports face a lower tariff rate of 15%, while large Swiss manufacturers such as Novartis, Roche and Lonza are highly likely to be exempt from those tariffs due to their US investment plans. However, small Swiss companies with a sizeable US exposure will be hit harder, though not many companies fit this category. Asian exporters, especially in India and China, will most likely also face greater impacts due to limited exemptions in the region.

Major pharmaceutical companies such as Pfizer, Merck, Eli Lilly and Johnson & Johnson have already announced or instigated investments in US manufacturing in order to avoid the tariffs. As a result, the 100% pharma tariffs are likely to have a marginal impact on those large companies in particular, at least in the foreseeable future. Meanwhile, smaller companies from countries without tariff cap agreements with the USA face the greatest risks.

In other news, the ongoing Section 232 investigation into pharmaceutical imports could potentially extend tariffs to active pharmaceutical ingredients (APIs) and even generics, depending on the final outcome. Indian pharmaceutical firms, which rely heavily on exports to the USA for generics, are particularly vulnerable in this regard and would be severely hit if these measures are implemented.

At the same time, a pricing policy overhaul is taking place in the USA

Drugmakers also face heightened cost pressures from the “Most-Favoured Nation” (MFN) pricing framework, reinstated by the White House in May 2025, which promises to align US drug prices to the lowest prices in peer OECD countries. This would lower US drug prices significantly: at present, drug prices are regularly two to three times higher in the USA than in other advanced economies.

While the USA has no legislation in place to regulate drug pricing, the MFN framework appears to be more of a political tool signalling intent to reshape pricing usages. In its current version, the MFN policy pushes drugmakers to offer US patients the lowest price that they charge in any country in the G7, Switzerland and the Netherlands. Within this framework, and under the threat of large import tariffs, an initial deal was settled with Pfizer in September, which agreed to cut certain prices by between 50 and 85% of current listed rates and to sell medicines to patients directly (without going through intermediaries), in exchange for a three-year tariff exemption. Pfizer also obtained agreement that the MFN-related price cuts will only apply to drugs supplied via Medicaid, the government-backed insurance for people on low incomes, which represents only 5% of company revenues. Another deal has also been fixed with AstraZeneca.

Since Trump has requested 17 pharmaceutical companies to make binding commitments to comply with the MFN framework and lower drug prices, it is likely that other companies will follow in making deals with the US authorities in order to avoid tariffs.  

These generalised reductions in US drug prices are expected to have broader implications and to impact global pharmaceutical profits significantly, as global manufacturers can no longer rely on the USA as the primary source of premium margins. As a result, cuts in R&D spending, both generally and for high-risk programmes such as rare disease indications, are expected in the future.

TrumpRx.gov is a related initiative launched by the Trump administration that aims to lower prices by allowing people to buy prescriptions drugs at discounted rates, negotiated by the government, directly through a dedicated web platform. The TrumpRx.gov website is expected to be launched in early 2026.

This initiative, which will potentially reduce the role of intermediaries in the drug distribution chain by allowing patients to bypass traditional intermediaries and distributors, could significantly hurt these roles.

However, many uncertainties remain at this stage, notably with regard to the scope of drugs available on TrumpRx.gov, which is expected to focus initially on selected high-cost medications. In addition, insurance integration could be limited, which may restrain the uptake among insured people, and regulatory and legal challenges could delay or reshape the programme.

US measures will impact the pharma sector on a global scale

For pharma manufacturers importing to the USA, the impact of potential tariffs should mainly be relevant for smaller companies from countries that have not yet achieved import tariff caps. Larger companies – in particular the 17 to which Trump requested binding prices cuts either because they are committed to building manufacturing capacities in the USA or are likely to engage in deals – will most likely manage to avoid tariffs. However, they will have to commit to price cuts in the USA, and the related financial impact will depend on how these negotiations go. While the effect of the deal on Pfizer appears to be limited, other companies may come out worse off. Gilead, for example, generates a significant bulk of its revenues from HIV treatments, for which Medicaid is the largest provider of health cover. In the meantime, the threat of tariffs is a reflection of the US administration’s strategy of directly pressuring drugmakers in order to cut prices, which will result in reduced R&D budgets.

Other significant trends are taking place outside the USA, impacting the sector

Cost-containment measures in many advanced economies, the looming “patent cliff” and the regionalisation of supply chains are additional trends that will reshape the sector and pose risks to profits in the coming years.

Pharma companies will try to compensate for prices cuts in the USA by increasing fees in other advanced markets. Some companies have already raised medicine prices in Europe. Bristol Myers Squibb, for example, has said it would sell its new schizophrenia drug Cobenfy for the same price in the UK as it does in the USA. Meanwhile, the UK government has proposed an up to 25% increase in how much it is prepared to pay for drugs for the NHS.

However, the acceleration of cost-containment policies in many advanced economies, particularly in Europe, due to fiscal tightening (such as Belgium’s 17.3% proposed healthcare budget cap for medicines), will continue to present headwinds to drugmaker’ profits and prevent them from being fully compensated for the loss of revenues in the USA. With the redirection of public funds to new priorities such as defence, pressures on pharma budgets are expected to become more and more acute.

Another threat is the upcoming “patent cliff”. This term refers to the sudden drop in revenue that drug companies face when their blockbuster pharmaceuticals lose patent protection, allowing competitors to produce generic versions at much lower prices. The current looming case, expected to play out in 2027 and 2028, threatens to wipe out billions of dollars in revenue for major pharmaceuticals companies. Drugs worth about USD 180 billion in annual revenue are set to lose patent protection during this period, representing nearly 12% of the global market.

Finally, since the Covid-19 pandemic crisis, geopolitical events are accelerating the shift in the regionalisation of supply chains. Europe is responding preventively through the Critical Medicines Act, a major legislative initiative proposed by the European Commission in March 2025 to strengthen the EU’s pharmaceutical resilience and strategic autonomy by enhancing the security of supply and availability of essential medicines throughout the European Union. Institutional support such as EIB funding for companies also fits into this framework. However, this may contradict with interests to avoid US tariffs, which push for investment in the USA, and pose companies with difficult strategic choices.

The regionalisation of pharmaceutical supply chains may also increase costs in the short term, as moving production from low-cost countries with lower local standards, such as India or China, to regions with higher wages and stricter regulations, such as the EU, increases manufacturing expenses.

Analyst: Florence Thiéry – f.thiery@credendo.com