Pharmaceutical companies are pleading with the Trump administration and EU officials to keep medical goods out of the growing tariff wars in an effort to prevent price increases on popular European-made medications, such as Novo Nordisk’s (NOVOb.CO), Merck’s (MRK.N), and Novo Nordisk’s (NOVOda).
According to more than six pharma industry sources with direct knowledge of the discussions, the pharmaceutical industry argued in talks with U.S. officials that tariffs on the EU would raise drug costs and create barriers to access for patients, jeopardizing priorities outlined in President Donald Trump’s health-related executive orders on drug pricing and raising Americans’ life expectancy.
According to three of the sources, some are expressing a desire to increase manufacturing in the US while advocating for tax incentives and legislative changes that would facilitate this.
A senior executive at a European pharmaceutical company stated, “We are firmly delivering the message to the Trump administration and to the European Union that patients will pay the price” for tariffs.
Even if Trump adds medications to a trade fight, industry leaders are arguing with Brussels officials that the EU should refrain from imposing retaliatory duties, according to multiple sources. Some brought out the fact that sanctions imposed on Russia after its invasion of Ukraine did not include life-saving medications.
“In this industry, our supply networks are intertwined as Western nations. A top executive at another major European pharmaceutical company stated that disrupting these flows would negatively impact patients’ access to life-saving medications. The statement “It is a lose-lose”
Because of the possible risks, pharmaceutical products have traditionally been exempt from trade conflicts. However, Trump’s decision to boost tariffs on Chinese goods, including raw materials and completed pharmaceuticals, along with the first round of U.S.-EU tariffs on steel and whiskey, has sparked speculation that medications may be added to the list.
Most of the medical items that are purchased from China are not very valuable. However, the United States relies on medications that generate hundreds of billions of dollars in revenue and are partially made in Europe.
For instance, Merck’s mega-blockbuster Keytruda and AbbVie’s (ABBV.N), a novel pill wrinkle therapy, are created in Ireland, while Novo Nordisk partially manufactures the active pharmaceutical ingredient for the obesity injectable Wegovy in Denmark.
Lars Fruergaard Jorgensen, the CEO of Novo, stated this month that his company will be affected in the near term by tariffs, but that it is making greater efforts to produce more of its medications that are sold in the United States locally. In order to increase production in North Carolina, the business said last year that it will invest $4.1 billion.
For this report, Merck declined to comment. AbbVie stated that it has a strong worldwide manufacturing network but declined to comment on the specific locations of the manufacturing of individual medications.
According to Simon Baker, head of global biopharma research at Redburn Atlantic, the U.S. government, a significant purchaser of medications for its expansive Medicare and Medicaid health programs, may have to pay more to cover the cost of tariffs.
Emily Field, head of Barclays’ European pharma equity research, told Reuters that she did not consider prescription medicine tariffs to be a significant issue until lately. According to her, she is now “getting asked about this nonstop by clients,”
‘NOT BROKEN’
How the Trump administration has reacted to its signals was not disclosed by industry sources. In the past, the president of the United States has declared tariffs on trading partners, only to later postpone, suspend, or permit exceptions. According to one source, it was difficult to predict which of the various trade policy theories would win the White House.
Trump criticized Ireland last week for providing tax benefits to pharmaceutical corporations, which he said contributed to a “massive deficit.” A request for comment was not immediately answered by White House officials. The European Commission refrained from providing a statement.
As governments fought over materials used in vaccinations and protective gear, the COVID-19 epidemic brought to light the U.S. and EU’s reliance on China and India for raw ingredients to create essential medications and hospital supplies.
Since then, a lot of big pharmaceutical companies have tried to separate their supply chains for the Chinese and Western markets. However, according to a number of the individuals, the idea of cutting off production linkages between the U.S. and Europe was not given any thought.
Located in Indianapolis According to multiple sources, Eli Lilly (LLY.N) recently revealed plans to invest at least $27 billion in four new manufacturing facilities in the United States, but many pharmaceutical companies would find it challenging to follow suit.
According to industry trade association PhRMA, the cost of constructing a new production facility in the United States can reach $2 billion, and it may take five to ten years until it is operational, including time and expenses associated with meeting regulatory standards.
According to a senior executive from one of the European pharmaceutical companies, establishing a manufacturing process that is entirely headquartered in the United States would need funding to be diverted from future medication research, which is equivalent to “fixing something that is not broken.”
