US tariffs and trade deals: impact on pharma

On 31 July 2025, President Trump signed executive orders imposing new ‘reciprocal tariffs’ on a wide list of countries. The changes are to take effect seven days after the date the order is signed (7 August 2025). The order also notes that countries negotiating trade and security agreements with the US will remain subject to these new tariffs until deals are finalised.

Tariff rates will range from 10% to 41%; notably, for Swiss-originating goods, this rate is established at 39%. It is also important to mention that pharmaceuticals are currently exempt due to an ongoing US investigation into whether imported pharmaceuticals pose a national security risk.

Earlier in July, the United States and the European Union announced a new trade agreement. Under this deal, most EU goods will face a 15% tariff. Although the official legal act confirming these arrangements is still pending, it is important to consider the potential implications for the pharmaceutical industry.

A key aspect of the agreement, as highlighted by the EU, is the assurance that any future US tariffs on EU pharmaceutical exports will be capped at 15% (if and when tariffs on pharmaceuticals are introduced in the US). This understanding was reached during discussions between European Commission President Ursula von der Leyen and US President Donald Trump. The agreement marks a major step in addressing concerns within the EU pharmaceutical industry, which previously faced the risk of tariffs as high as 200%.

Moreover, President Trump has also demanded that major pharmaceutical companies commit to providing US drug prices at ‘most favoured nation’ (MFN) levels, matching the lowest prices offered in other developed countries, and warned of government action if they do not comply.

Potential impact on pharmaceutical prices

When new tariffs are imposed on imported pharmaceuticals, a common concern is whether pharmaceutical companies will respond by raising their prices. At first glance, it seems logical that companies would pass on the increased costs from tariffs to consumers by charging more for their products.

The US pharmaceutical market operates differently from other markets. Prices are often negotiated, not simply set on a federal level. Now, the government's stepping in with new measures to lower drug costs. A recent executive order introduces a most-favoured-nations (MFN) pricing model. This requires manufacturers to match the lowest prices they offer in other developed countries for government-funded programmes. It's most likely to impact Medicaid, but also parts of Medicare, the Veterans Health Administration, and the Indian Health Service. However, the government's not stopping there. They've sent letters to big pharma companies, asking them to apply MFN prices to all Medicaid patients, reconsider pricing for other developed nations and open avenues for direct sales in the US.

Government programme patients may see lower drug prices due to the MFN order. That's good news for many, especially the low-income population. However, currently, about 25 million Americans are uninsured. They're already facing full list prices for medications. Now, with the One Big Beautiful Bill Act (OBBBA) on the horizon, we could see even more people losing coverage due to a change in the eligibility criteria. Uninsured patients aren't likely to benefit from the MFN order. In fact, they might end up bearing the brunt of any industry pushback. Drug manufacturers, facing price cuts in government programmes and increased tariffs, might try to recoup losses by raising list prices. As a consequence, we might be looking at a price increase for uninsured patients.

For example, a small tariff might be absorbed by the company or spread across many products, resulting in little to no change in prices. In contrast, a large tariff could make it difficult for companies to avoid raising prices without affecting their profits or market share. In a competitive pharmaceutical market, companies may be cautious about implementing price increases for fear of losing market share to equally effective but less expensive alternatives. Therefore, companies might choose to absorb some of the tariff costs rather than risk losing market share and revenue. Ultimately, whether and how much pharmaceutical prices rise in response to tariffs might depend on a complex mix of these economic and market considerations.

Short-term solutions

Pharmaceutical companies facing potential US tariffs can take several practical steps to minimise the impact in the short term. These actions include adjusting product pricing, reviewing and potentially changing the origin of products, rerouting supply chains, and renegotiating supplier contracts or delivery terms. Such measures are relatively straightforward to implement and can help companies respond quickly to changing trade conditions.

Pharmaceutical companies can also consider implementing the “first sale for export” rule as part of their short-term strategies. This approach allows companies to base the customs value of imported goods on the price paid in the first sale of a multi-tiered transaction, rather than the final sale price to the US importer. By leveraging this rule, companies may be able to reduce the dutiable value of their products, thereby lowering the overall tariff burden. The first sale for export rule requires careful documentation and coordination with suppliers to ensure compliance, but it is a practical and effective tool that can be quickly adopted. Like other no-regret actions, utilising the first sale for export rule can provide immediate benefits and enhance a company’s ability to manage costs in a volatile trade environment.

Additionally, companies can explore more specialised customs strategies, such as using free trade zones or bonded warehouses. These approaches not only help manage immediate risks but also build greater operational flexibility.

Importantly, these are “no-regret” actions, meaning they are beneficial regardless of how the trade environment evolves. Adopting these strategies allows pharmaceutical companies to strengthen their resilience and maintain competitiveness, even amid ongoing uncertainty. Given the highly regulated nature of the pharmaceutical industry, it's necessary to pressure-test any changes to the supply chain from a regulatory perspective. Companies must ensure that potential solutions comply with healthcare laws and health authority guidelines.

Relocating production to the US: Feasibility and challenges

Another important consideration is the US government’s suggestion that pharmaceutical companies should move their production to the United States within a 12- to 18-month timeframe. Researchers indicate that imposing tariffs to encourage domestic manufacturing is unlikely to be effective in the pharmaceutical sector. The high costs, lengthy timelines, as well as regulatory burdens to establish new manufacturing facilities in the US, often taking 8 to 10 years to become financially viable, far exceed any potential short-term benefits from tariffs. This timeline is also much longer than the typical political cycle, making such a move less attractive. In the long term, some experts predict that companies may shift production from countries with high tariffs to those with lower tariffs, as has occurred in other industries. However, this strategy could increase the risk of supply chain disruptions and potential drug shortages.

While the new EU–US trade deal introduces a degree of clarity and stability for the EU pharmaceutical industry, it does not eliminate all areas of concern. One of the unresolved issues is the status of tariffs on pharmaceuticals, which could have a substantial impact on pricing, supply chains, and market access. As the regulatory and economic environment continues to evolve, pharmaceutical companies will need to conduct thorough risk assessments and strategic planning to ensure they can adapt effectively and maintain their competitive edge.

How can PwC support you?

At PwC Switzerland, our team of customs and regulatory affairs specialists brings together extensive legal, technical, and operational knowledge to guide your business through the ever-changing landscape of global trade. We understand that customs and regulatory affairs management can be complex and challenging, especially as regulations evolve. That’s why we offer end-to-end support across all aspects of customs and regulatory affairs compliance and strategy:

Supply chain and operations: Our supply chain and operations consulting experts can help you map your physical and financial flows to quickly understand current tariff exposure and potential mitigation options in the face of the anticipated changes due to US trade tariffs. We typically work in close alignment with our customs experts to assess preferred customs options and link tax concepts with regulatory, risk and general portfolio considerations. We can support you on fit-for-purpose manufacturing network planning that can encompass all aspects of safeguarding the crucial US market, from API and raw materials sourcing to a localisation strategy that can satisfy the requirements of US health authorities and policymakers.
Expert guidance on regulatory changes: Our customs and pharma legal regulatory affairs experts closely monitor developments. We help your company understand the implications of new legislation, ensuring you are fully informed about how these changes may affect your operations.
Tailored compliance solutions: We work with you to assess your current customs and regulatory affairs processes and identify any gaps or risks. Our team assists in implementing the necessary measures to ensure your business remains compliant with all relevant regulations.
Unlocking opportunities: Beyond compliance, we help you identify and capitalise on opportunities that new customs regulations may offer. This could include optimising your supply chain, reducing costs, or streamlining your customs procedures.