At a dinner in the Churchill War Rooms at Westminster this month, hosted by the government, the chief executives of the world’s biggest pharmaceutical companies gathered.
About 30 global bosses were in London for the Biopharmaceutical Chief Executive Officers Roundtable (BCR), a policy forum held twice a year and organised by the International Federation of Pharmaceutical Manufacturers and Associations.
The dinner, including a brief speech from Rachel Reeves and following a meeting with Sir Keir Starmer, was held on the same evening that President Trump announced sweeping global tariffs from the White House Rose Garden.
To the relief of bosses, pharmaceuticals were exempted, but the president put the industry firmly on notice of likely sector-specific duties: “Pharma companies are going to come roaring back, they’re coming roaring back, they’re all coming back to our country, because if they don’t, they got a big tax to pay.”
At a Republican dinner on Capitol Hill last Tuesday, Trump’s warning grew louder: “We’re going to be announcing very shortly a major tariff on pharmaceuticals.”
One industry source said: “I think some CEOs [chief executive officers] assumed pharma tariffs would not be included. The announcement has genuinely shaken people.”
Despite Trump announcing a 90-day pause on most tariffs the next day, the industry continues to lobby the administration and to war-game strategies, concerned that the White House will use a legal power related to national security, known as Section 232, to impose pharmaceutical tariffs.
The threat has triggered falls in the shares of global pharma stocks — which are normally a safe haven in times of economic crisis — as investors seek to price in a possible hit to profit margins and disruption to global supply chains. They include AstraZeneca and GSK, Britain’s two largest patented drugs companies on the London Stock Exchange, which have had share price falls of 15 per cent and 13 per cent respectively over the past month.
Industry bosses had hoped that they would avoid being embroiled in a global tariff war, sheltered by a 1994 World Trade Organisation agreement. Historically pharmaceuticals have benefited from low or zero tariffs under the WTO agreement, particularly for finished products and key active pharmaceutical ingredients.
The protection has created complex global and intertwined supply chains, including between America and Europe and in Asia, and led to US multinationals building manufacturing plants overseas, particularly in Ireland, a tax haven.
Experts have warned that the burden of tariffs could slow shipments, causing delays and disruption to production cycles, and lead to potential drug shortages and inflationary pressure on prices in the US, which is the world’s biggest pharmaceutical market, accounting for about 50 per cent of sales. Any retaliatory tariffs on pharma from other important trading partners, particularly in Asia and the European Union, could deepen and complicate matters, experts said.
Dame Kate Bingham, managing partner of SV Health Investors, the venture firm, and former chairwoman of the government’s UK Vaccine Taskforce during the Covid-19 pandemic, said: “If you have tariffs put on the components and on the end product, that’s going to obviously put the prices up, which means some patients won’t get them and pharma will stop investing in R&D.”
Until the White House details the size and scope of any pharma tariffs, it remains unclear how quickly they might be imposed and whether there will be any exemptions — such as for specific medicines and lower-margin, off-patent, generic drugs that make up the vast majority of US supply.
The uncertainty compounds other concerns about the new administration following job cuts at America’s Food and Drug Administration and the National Institutes of Health.
US biopharma imports have surged over the past decade, topping $202 billion in 2023, with a $101 billion trade deficit, Emily Field, an analyst at Barclays, noted to clients recently. “Notably, Europe accounts for about 80 per cent of the trade deficit,” she said.
Ireland, Germany and Switzerland were the top three US importer jurisdictions for the sector, according to a PwC report last month, with Ireland making up more than a quarter.
The Irish Pharmaceutical Healthcare Association has lobbied against tariffs, warning of the “potential to disrupt supply chains in and out of the US”. But the country is in Trump’s sights.
In a meeting with Micheál Martin, the taoiseach, last month, the president said: “This beautiful island of five million people has got the entire US pharmaceutical industry in its grasp.”
Despite Trump’s 90-day pause, Martin fears that the industry remains in the administration’s crosshairs, warning “we’re not out of the woods yet”.
For the UK, the US was the largest export market for medicinal and pharmaceutical products, accounting for 26.7 per cent of the total products exported globally. The UK’s £6.6 billion exports to the US were more than the £4 billion imported to the UK, giving the UK a trade surplus.
Experts say the most exposed companies are those with high US sales and a large manufacturing footprint outside the country, as well as those — particularly generic manufacturers, rather than the patented companies — with lower pricing power because of high-volume, low-margin products.
The US is the largest market for both AstraZeneca, based in Cambridge, and GSK, based in London. America accounted for more than 40 per cent of AstraZeneca’s $54 billion group revenue last year and just over 50 per cent of GSK’s £31.4 billion revenue.
However, the impact of tariffs could be alleviated by their large existing manufacturing presence in the US. More than 20 per cent of AstraZeneca’s facilities are there and 25 per cent of GSK’s.
Dame Emma Walmsley, GSK’s chief executive, said last week: “The situation is very fluid. We’ve been anticipating it for some time and we are confident that we will navigate through it.”
Michel Demaré, AstraZeneca’s chairman, said at its annual meeting on Friday: “We still strongly believe that medicines should be exempted from any kind of tariffs because at the end it is just harming patients’ health systems and restricting health equity.”
AstraZeneca and GSK are among multinationals to have announced plans to increase US manufacturing investment. In October, shortly before the presidential election, GSK announced its largest manufacturing investment there to date, with up to $800 million for an existing site in Pennsylvania. The company “broke ground” on the development this month.
And just a week after Trump’s election in November, AstraZeneca announced that it was increasing investment in the US to $3.5 billion, in part to expand capability to supply the American market from within the country.
Sir Pascal Soriot, AstraZeneca’s chief executive, said at the AGM that since the Covid-19 pandemic, the group has built a more regionalised supply chain, meaning that it “can actually cover the needs of the various geographies and move manufacturing around if needed”.
The bosses of Johnson & Johnson and Eli Lilly, two of America’s biggest pharma companies, as well as Novartis — most recently, on Friday — have announced multibillion-dollar US manufacturing investments. Pfizer has said that it might move overseas manufacturing to existing plants there.
Richard Saynor, the chief executive of Sandoz, one of the world’s biggest generic drug and biosimilars companies, said the patented part of the industry in the US has a “very different profit mix” than the generic market, which makes up the vast majority of medicines that Americans take.
“The US is still the largest pharmaceutical market in the world,” he said. “So for an originator company it makes a lot of sense [to expand US manufacturing] because the volume is relatively small and the value is very high. And the US market will pay for innovation.
“For the generics market, it’s the other way around. It’s very low price, it’s highly commoditised and there’s no real return.”
Saynor, a British businessman, added: “So in the short to mid-term, if tariffs were applied it will either increase insecurity of supply, which is already challenged, and over time clearly would have a cost implication where pricing would be passed on through insurers and ultimately to patients.
“But I don’t think that will drive a significant change in capital investment until we see a change in how the supply chains are rewarded for investing in the market.”
