Drugmakers are lobbying U.S. President Donald Trump to phase in tariffs on imported pharmaceutical products in hopes of reducing the sting from the charges and to allow time to shift manufacturing, according to four sources familiar with the discussions.
Trump is expected to unveil a massive tariff plan on Wednesday. He said on Sunday that the reciprocal tariffs he is due to announce will include all nations, not just a smaller group of 10 to 15 countries with the biggest trade imbalances.
He has also said he will soon declare tariffs on the pharma industry, which have been exempt from past trade wars, following his measures against other sectors.
The four sources, who asked not to be named because discussions between the administration and industry have been confidential, said it is their understanding that Trump will not announce specifics on any pharma tariffs on Wednesday.
Still, the largest multinational drug companies now expect U.S. tariffs targeting medical products are inevitable and hope to secure an incremental ramp-up to the 25% tariff the president has threatened, rather than 25% from day one, the four sources said.
"The idea of incremental ramp up of tariffs, a sort of gradation if you will, is definitely out there from the pharma industry side," according to one of the sources.
Trump may announce on Wednesday a study looking at how the industry-specific tariffs could be applied, three of the four sources and an additional source familiar with the matter said.
Large drugmakers have global manufacturing footprints, mainly in the U.S., Europe and Asia, and moving more production to the U.S. is a major commitment of resources. Industry trade group PhRMA has said it can take 5 to 10 years and $2 billion to bring on a new production facility in the U.S. in part because of regulatory requirements.
PhRMA used this point in meetings in February and March with the U.S. administration to urge it to consider a staggered tariff rate increase over several years to reflect the time companies need, one of the four sources said.
While the situation remains fluid, the industry is hopeful that any initial tariff announcement on the sector would be below the 25% Trump has repeatedly threatened, the same source said.
The White House did not immediately respond to requests for comment.
NOT A QUICK PROPOSITION
There may be a growing acceptance within the Trump administration that moving drug manufacturing to the U.S. from abroad is not a quick proposition, leading to optimism among some in the industry that the president might consider a gradual ramp-up to 25% tariffs, another of the sources said.
Drugmakers have argued that tariffs could increase the chance of drug shortages and reduce access for patients. Still, Trump has pushed for the fees, arguing that the U.S. needs more drug manufacturing so it does not have to rely on other countries for its supply of medicines.
Another of the four sources, an industry lobbyist, said the pharma sector is also hopeful that compliance with U.S. regulations on policymaking that require public comment periods on federal law could slow implementation of the new fees.
Some multinational drugmakers have in the past several months announced billions of dollars in new investments in U.S. manufacturing to ramp up production of their best-selling drugs for the U.S. market. They include Johnson & Johnson (JNJ.N), Eli Lilly (LLY.N), AstraZeneca (AZN.L) and GSK(GSK.L).
But many firms still make the active ingredients for these products largely in Europe.
Ahead of Wednesday's tariffs announcement that could include products made in Europe, some companies have taken the unusual step of sending more medicines by air to the U.S., Reuters reported last week.
Several large European drugmakers told Reuters this month that some of their medicines would be affected by any U.S. tariffs on the EU, because substantial manufacturing of these products is currently done outside the U.S.
An executive at one of the European drugmakers said it would not be a very lengthy process for it to increase manufacturing of medicines that it currently makes, albeit in limited quantities, in the U.S.
Building new manufacturing lines at existing U.S. plants for medicines it currently makes overseas for the U.S. market, however, will take at least two years, they said.
