Patients will face costlier medicine and European and Indian drug companies face billion-dollar losses if US President Donald Trump’s threat issued late Tuesday of “a major tariff on pharmaceuticals” produced outside his country is realised.

However, amid chaos on the financial markets, Trump back-pedalled on Wednesday and announced a 90-day pause on all tariffs except for China – where he announced a 125% tariff on Chinese goods.

Trump’s threat was made a few hours after major European pharmaceutical companies met with European Commission (EC) President Ursula von den Leyen, urging her to negotiate with the US or they would face supply chain issues, according to Euro News.

The European Federation of Pharmaceutical Industries and Associations (EFPIA) issued a “stark warning to President von der Leyen that unless Europe delivers rapid, radical policy change then pharmaceutical research, development and manufacturing is increasingly likely to be directed towards the US,” in a statement on Tuesday.

Eighteen EFPIA member companies identified “as much as 85% of capital expenditure investments (approximately €50.6 billion) and as much as 50% of R&D expenditure (approximately €52.6 billion) potentially at risk” in an industry survey. 

“This is out of a current combined total of €164.8 billion in investments planned for the period 2025-2029 in the EU-27 territory. Over the next three months, companies that responded estimate that a total of €16.5 billion ie. 10% of the total investment plans is at risk,” the federation noted.

‘Little incentive to invest in Europe’

“In addition to the uncertainty created by the threat of tariffs, there is little incentive to invest in the EU and significant drivers to relocate to the US,” the federation warned, noting that the US “now leads Europe on every investor metric from availability of capital, intellectual property, speed of approval to rewards for innovation.

They called on von der Leyen to develop a competitive EU market that “rewards innovation”, stronger intellectual property provisions, and “policy coherence across environmental and chemical legislation to secure a resilient manufacturing and supply chain of medicines in Europe”.

“Europe needs to make a serious commitment to invest in a world-class pharmaceutical ecosystem, or at best, risk being reduced to a consumer of other region’s innovation.”

Pharma giants Bayer, Novartis, Novo Nordisk, Roche and Sanofi are based in Europe. Their shares all tumbled by around 5%, while US pharma companies’ shares fell by 3-6 %, according to Reuters. Shares in the UK-based AstraZeneca and GSK also lost value.

Costly to relocate

The share price of US pharmaceutical giants including Pfizer, Johnson & Johnson, Eli Lilly, Bristol-Myers Squibb, Gilead and AbbVie also lost value. These have significant European manufacturing capacity, based primarily in Ireland and it would be costly to relocate.

Han Steutel, head of the German Association of Research-Based Pharmaceutical Companies (VFA), said that moving production to the US could cost billions of dollars and take five to 10 years to set up.

“It will be devastating for patients if medication is no longer available as they cannot easily switch from one drug to another, like with other commodities,” Steutel told CNBC.

‘We are a global industry in terms of research and development and production,” said Steutel. “Unlike with generic companies, the active [pharmaceutical] ingredients for patented drugs are solely produced in Europe or the US,” he said.

“If a company has a plant producing this in Europe it’s not going to set up another plant in the US or vice versa because it would just make the production process inefficient,” he noted.

Huge losses for Indian companies

​​However, 90% of API for US medicines are manufactured outside that country – by 2021, mostly in India (48%), followed by Europe (22%) and China (13%). 

Indian companies face potentially huge cost increases from tariffs on pharmaceutical products as the US is their biggest market – worth $8.7 billion in 2024, according to the Pharmaceuticals Export Promotion Council of India.

Some 45% of US generics are made in India and tariffs would cause price hikes that would affect both patients and companies outside the US.

However, given Trump’s last-minute flip-flop on tariffs, uncertainty is only certain element of the US’s global trade war.

Image Credits: AMR Industry Alliance.