Drugmakers face 100% tariff unless they cut prices or produce drugs in US

By Ahmed Aboulenein

WASHINGTON, April 2 (Reuters) – President Donald Trump signed an executive order on Thursday imposing 100% tariffs on branded pharmaceuticals imported into the U.S. unless manufacturers agree to government drug pricing deals or commit to making their products domestically.

The world’s biggest drugmakers signed deals with the U.S. government last year that exempted billions of dollars of drugs from tariffs. Generic drugs have also been exempted, but small and mid-sized companies are exposed to the penalties unless they craft their own deals or move their production. 

Here are some details:

* The U.S. will impose a 100% tariff on patented drugs notmade in the country and not covered by drug pricing agreements. * Large pharmaceutical companies have 120 days to announceplans to avoid the 100% tariff; smaller companies have 180 days. * Companies can move manufacturing to the U.S. in exchangefor a reduced 20% tariff. * Drugmakers that onshore and sign most-favored-nationpricing agreements with the U.S. Department of Health and HumanServices are exempt from tariffs. * The U.S. has already agreed to such deals with 17drugmakers, of which 13 have been finalized and four are beingnegotiated. * Tariffs are reduced to 15% for drugs produced in theEuropean Union, Japan, South Korea and Switzerland due toexisting trade agreements. The U.K. has a separate tariff deal. * Generic drugs will be exempt from tariffs for at least oneyear. * More than 90% of medicines sold in the U.S. are generics,according to the U.S. Food and Drug Administration. * Orphan, veterinary and other specialty drugs are exempt ifthey are from trade deal countries or meet urgent public healthneeds. * U.S. patients by far pay the most for prescriptionmedicines, often nearly triple what patients pay in otherdeveloped nations. * Trump has been pressuring drugmakers through hismost-favored-nation drug pricing policy to lower prices to whatpeople pay in other high-income countries. * Major drugmakers that have signed deals, which exempt themfrom tariffs for three years, include Pfizer and Eli Lilly,among others. * Many companies, including about half of those representedby industry lobby group PhRMA, have not yet signed deals. * Industry sources say small and mid-sized drugmakers areseeking individual arrangements to avoid tariffs and new pricingrules. * The executive order risks creating an “unfair two-tieredsystem of exemptions” benefiting only big companies that havealready made most-favored-nation deals with Trump, said theMidsized Biotech Alliance of America, an industry group. * Mid-sized drugmakers “lack diversified portfolios toabsorb these sudden cost increases,” MBAA President Alanna Temmesaid in a statement.

(Reporting by Ahmed Aboulenein; Additional reporting by Ryan Jones; Editing by Caroline Humer, Daniel Wallis, Will Dunham and David Gregorio)