By Josh Nathan-Kazis
While President Donald Trump and his advisers have waffled on the fate of their so-called reciprocal tariff plan, they have remained rock solid on another trade promise: big tariffs for drugmakers.
Trump vowed late Tuesday he would soon impose "a major tariff on pharmaceuticals," and on Wednesday, after Trump suspended the "reciprocal" tariffs on most trading partners, Treasury Secretary Scott Bessent said during a news conference the pharmaceutical tariffs were still coming.
Later that day, talking to reporters in the Oval Office, Trump suggested the tariffs on pharmaceuticals could be as high as 200%.
"If they have to pay that, they're going to say, 'We're not going to pay that, we're going to build here,'" Trump said.
Drug stocks have fallen on the tariff threats, but they may not have fallen far enough.
Analysts projecting the potential impact of tariffs seem to be assuming levels of less than 50%. But Trump has indicated the actual tariff levels could be far higher, and recent history suggests that relying on the president to take a moderate course on trade policy would be a bad bet.
It is unclear how the tariffs would even be calculated, so arguing over the details of their impact may not be worth the effort. What's clear is the threats have significantly dimmed the outlook for biopharma, which was already facing a litany of problems -- patent cliffs, drug price reform proposals, and looming worries over the stability of the Food and Drug Administration.
Citi Research analysts wrote Friday that tariff risks to drugmakers would be "manageable at a 20% level," which they calculated would imply a 10% drag on 2026 operating incomes. In a note late Thursday, analysts at Jefferies found that a 50% tariff on imported pharmaceuticals would amount to a 4% to 5% drag on future earnings per share for most of the large biopharma names.
The problem for investors is that Trump in his Oval Office comments referred to pharmaceutical tariffs of "50% or 100% or 200%."
What does seem clear is that there are some biopharma names that would fare relatively better under pharmaceutical tariffs. Drugmakers generally don't disclose details about which products are made where, but Jefferies analysts wrote that Vertex Pharmaceuticals may see the lowest impact, since it says it has no manufacturing outside of the U.S.
Citi's Geoff Meacham wrote Friday that in addition to Vertex, Eli Lilly, and Regeneron Pharmaceuticals appear to face relatively lower tariff risk than their peers. He wrote that Merck, Pfizer, AbbVie, and Biogen have the most potential exposure.
Since the market opened the day after Trump's initial "reciprocal" tariff announcement on April 2, AbbVie shares have fallen the most of the big biopharma names. AbbVie was down 15.3% as of midmorning Friday, while the NYSE Arca Pharmaceutical Index was down 9.6%.
Other pharma stocks that have seen steep selloffs are Biogen, down 13.7%, and Bristol Myers Squibb, down 14.2%.
Vertex, meanwhile, has been relatively unscathed. It was down 1.5%.
Drugmakers seem to be trying to head off the tariffs by announcing big investments in U.S. manufacturing. Novartis late Thursday said it would spend $23 billion on building and expanding U.S. manufacturing plants, according to Reuters. That echoes similar announcements in recent weeks by Eli Lilly and Johnson & Johnson.
What happens next appears to be up to Trump.
Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 11, 2025 13:13 ET (17:13 GMT)
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