100% Drug Tariffs Set to Take Effect Sept. 29, but Company Guidance Still Missing

Tariffs on patented drugs and active pharmaceutical ingredients are set to take full effect on Sept. 29, but guidance for companies on how to comply has yet to be issued.

According to Gooddaybio on the 14th (local time), the Biotechnology Innovation Organization (BIO) said uncertainty over drug tariff rules and exemption criteria is increasing uncertainty for companies’ decision-making and investors.

Under a presidential proclamation signed by President Donald Trump on April 2, patented drugs and related active pharmaceutical ingredients will be subject to a 100% ad valorem tariff. The effective date is Sept. 29.

However, tariffs may be reduced or waived depending on the country, company and product. Products from Japan, the European Union (EU), South Korea, Switzerland and Liechtenstein will face a reduced rate of 15%, while products from the United Kingdom will be subject to a 0% rate under a Federal Register notice from the Department of Commerce.

Companies can negotiate onshoring plans with the Department of Commerce to reduce tariffs to 20% or 0%. Additional reductions may be available if they also reach most-favored-nation (MFN) pricing agreements with the Department of Health and Human Services, but these are temporary measures that run through April 2, 2030, and Jan. 20, 2029, respectively.

Generic drugs and biosimilars are exempt through April 2, 2027. Some products, including orphan drugs, nuclear medicine, plasma-derived therapies and cell and gene therapies, may also qualify for exemptions, but specific criteria have not yet been made public.

BIO experts said that, with two weeks remaining before implementation, many essential federal government guidelines are still missing. In particular, the Department of Commerce has said exemptions to meet “urgent U.S. health needs” will be decided case by case, but has not issued guidance on the application process.

Specific terms for onshoring and MFN negotiations have also not been established. The list of countries with trade and security framework agreements has not been made public, leaving companies unable to determine which products qualify for exemptions.

This uncertainty increases companies’ regulatory compliance costs. According to BIO, small and midsize biotech companies, which account for 71% of industry production and 54% of new drug applications, may be hit harder because they lack staff and capital.

Kelly Seagraves, BIO’s vice president for national security and international affairs, said, “At a time when the United States is competing to maintain its global leadership in biotechnology, policies that raise costs and hinder innovation do not benefit patients or the economy.”

BIO proposed strategic incentives such as tax credits for building domestic manufacturing facilities and investments in biotech workforce development as ways to protect supply chains while increasing innovation investment by small and midsize biotech companies.