Tariffs on patented drugs now apply to all branded drugmakers

Tariffs on imported patented drugs and their ingredients now apply to all drug companies, not just the largest ones. The second and final phase took effect today under a presidential proclamation issued in April, according to guidance from U.S. Customs and Border Protection (CBP). The first phase, which began at the end of July, covered 17 large drugmakers.

However, this doesn’t mean every imported brand-name drug now faces a 100% tariff. Pricing deals, lower rates for some trading partners and a long list of exempt products will decide who pays and how much.

What the Section 232 drug tariffs cover

President Donald Trump set the tariffs in Proclamation 11020. It followed a Commerce Department review under Section 232 of the Trade Expansion Act of 1962. That law lets the president limit imports that threaten national security. The review found that U.S. reliance on imported drugs and drug ingredients was that kind of threat, according to the proclamation.

Logistics firm C.H. Robinson shared that the tariffs apply to patented drugs, their active pharmaceutical ingredients (APIs) and the raw materials used to make those APIs. They are added on top of regular import duties. Rates, as shown below, depend on the company and where the product comes from:

• 100% is the standard rate.
• 20% applies to companies with an approved plan to move manufacturing to the U.S. That rate rises to 100% on April 2, 2030.
• 0% applies to companies that have both an approved U.S. manufacturing plan and a most-favored-nation (MFN) drug pricing agreement. This rate lasts through Jan. 20, 2029.

• 15% is the top rate for products from the European Union, Japan, South Korea, Switzerland and Liechtenstein.
• 10% applies to U.K. products. That rate drops to 0% under a separate U.S.-U.K. drug pricing agreement, according to law firm Covington & Burling.

Which drugs are exempt from the tariffs?

Generic drugs and biosimilars are not subject to the tariffs. Neither are drugs made in the U.S. The proclamation also sets a 0% rate for orphan drugs, cell and gene therapies, antibody-drug conjugates, plasma-derived therapies, nuclear medicines and fertility treatments. Some of these exemptions apply only when certain conditions are met, Covington shared.

Why the largest drugmakers aren’t paying

The first phase targeted 17 large companies named in the proclamation. All 17 had signed MFN pricing and U.S. manufacturing agreements by Aug. 31. That gives them a 0% rate through Jan. 20, 2029, Becker’s Hospital Review reported. The group includes AbbVie, Amgen, AstraZeneca, Bristol Myers Squibb, Eli Lilly, Johnson & Johnson, Merck, Novartis, Novo Nordisk, Pfizer and Sanofi.

The White House has said the policy “already drove about $400 billion in new investment commitments,” according to the Becker’s report.

Today’s phase reaches the rest of the brand-name market, including mid-size and smaller drugmakers. Those without an approved plan or pricing deal face the full rate, unless their products are exempt or come from a country with a lower cap.

What drug tariffs could mean for costs

It’s still unclear how much of the cost will reach health plans and patients. Group purchasing organization Vizient expects drug prices to rise 3.54% in 2027. However, that forecast doesn’t include tariffs, because it isn’t yet clear how they will play out, the Becker’s report said.

These tariffs rest on different legal ground than the broad import tariffs the Supreme Court struck down in February. In that 6-3 ruling, the court said the president went beyond his authority under the International Emergency Economic Powers Act (IEEPA). Drugs and APIs were never part of the IEEPA tariffs, according to a previous MHE report. The ruling didn’t affect Section 232.

Generic drug tariffs set to start in 2028

Generics are tariff-free for now, but that is set to change. In July, President Trump said imported generics will face no tariff through July 2028. After that, they will face a 100% tariff for one year, then a 200% tariff starting in August 2029, Becker's reported.

That could matter for payers. Generics make up about 90% of prescriptions filled in the U.S., according to benefits consulting firm Gallagher. In guidance for plan sponsors, Gallagher noted that the plan was shared in a social media post "rather than through an official government notice." Key questions are still open. They include whether the tariffs would apply to APIs as well as finished drugs, and how biosimilars would be treated.

Gallagher does not expect a cost impact for the 2026-2027 plan year. Still, it advises plan sponsors to raise the issue during pharmacy benefit manager (PBM) contract renewals, especially for guaranteed generic discount rates that extend past August 2028. The firm also suggests modeling different generic cost scenarios when setting budgets.

Patient advocates have warned about the effect on costs and access. "Tariffs of this magnitude could have enormous consequences — raising costs, worsening shortages, and putting access to lifesaving medicines at risk," Merith Basey, CEO of Patients for Affordable Drugs (P4AD), said in a statement.