The city’s pharmaceutical industry remained stable on Tuesday as federal officials signaled that tariffs could be around the corner.
The federal government filed a federal notice on Monday announcing that it launched a probe into drug imports, which is expected to lay the groundwork for tariffs on foreign-made drugs later this year. The wide-ranging investigation, which covers both generic and branded medicines as well as active pharmaceutical ingredients, began on April 1 and is being conducted by the Department of Commerce.
The probe, announced with a similar investigation of semiconductors, signals that the federal government is preparing to impose levies on drug imports. Pharmaceutical products have largely been spared from the universal 10% tariff that cratered the stock market earlier this month. But a 10% to 25% tariff on pharmaceuticals could be coming; U.S. Commerce Secretary Howard Lutnick told ABC News over the weekend that he expects to roll out tariffs on the industry “in the next month or two.”
Stocks for major city pharmaceutical companies remained stable by 4 p.m. on Tuesday amid news that tariffs were moving forward. Pfizer stock was trading at $22.39, a 1% increase from the previous day. Other companies experienced modest declines in their share price. Merck’s stocks fell by 1% to $78.39, Regeneron’s by 2.5% to $557.91, Bristol Myers-Squibb’s by nearly 3% to $50 and Johnson & Johnson by under 1% to $153.62.
Pharmaceutical stocks were aligned with the S&P 500, which was down by less than 1% as of 4 p.m. Tuesday.
President Donald Trump’s move to proceed with tariffs on the pharmaceutical industry is largely expected amid the increased attention on drug companies in Washington, said Glenn Hunzinger, a pharmaceutical and life sciences analyst at PwC. There are remaining questions about how much a tariff will amount to and when it will go into effect, which could have serious implications for drug companies’ finances.
Experts project that a 25% tariff on pharmaceutical products could produce costs of $63 billion for the entire U.S. industry. Some local drug companies are already starting to estimate incoming expenses; Johnson & Johnson said during an earnings call on Tuesday that it expects to incur $400 million in expenses related to tariffs, largely in its medical technology business.
Some pharmaceutical companies have considered shifting production to the U.S., with Merck and Johnson & Johnson expanding manufacturing capacity on domestic soil while Pfizer considers opening more plants on U.S. shores. But plants take roughly three to five years and upwards of $1 billion dollars to build, Hunzinger said, taking away from investment in research and development of new drugs.
“They’re either investing in R&D to try to bring products to a patient or investing in a plant to make the same product,” Hunzinger said. “It becomes a really important capital allocation question.”
