Pfizer agrees to lower US drug prices, locks in three-year tariff grace period

The Trump administration’s tariff threat on pharmaceuticals appears to have worked as leverage in getting at least one major drugmaker to reduce its pricing. Pfizer on Tuesday announced an agreement with the U.S. government to lower prescription drug prices for Americans, while securing for itself a three-year reprieve from pharma-specific tariffs.

“We now have the certainty and stability we need on two critical fronts, tariffs and pricing, that have suppressed the industry’s valuations to historic lows,” CEO Albert Bourla said in a statement. “We’ve agreed to a three-year grace period during which time Pfizer products under a Section 232 investigation won’t face tariffs, provided we further invest in manufacturing in the United States.”

Earlier this year, the Trump administration launched a Section 232 investigation into whether the importation of certain pharmaceuticals and pharmaceutical ingredients may threaten U.S. national security. The probe had been looking into whether pharma-specific tariffs are necessary. However, last week, President Trump said that starting Oct. 1 his administration will impose a 100% tariff on any branded or patented pharmaceutical product, unless the company “is building” their manufacturing plant in the U.S.

Trump has been using the threat of pharma tariffs as leverage for his controversial most- favored-nation (MFN) drug pricing policy. In May, Trump signed a sweeping executive order designed to cut the price of drugs in the U.S. by up to 90%.

In late July, Trump sent letters to 17 large pharmaceutical companies demanding they get onboard with the drug pricing — calling on manufacturers to provide MFN prices to every single Medicaid patient, among other provisions — and warning that if they refuse his administration “will deploy every tool in our arsenal” to ensure compliance.

In Tuesday’s announcement, Pfizer said its agreement with the White House to reduce its drug prices was in response to Trump’s July 31 letter to the company.

“Pfizer has voluntarily agreed to implement measures designed to ensure Americans receive comparable drug prices to those available in other developed countries and pricing newly launched medicines at parity with other key developed markets,” the drugmaker said.

At the same time, Pfizer pledged an additional $70 billion earmarked for U.S. research, development and capital projects over the next few years. It’s a significant change in direction for Pfizer’s investment strategy.

In April, Bourla said that Trump’s threat of pharmaceutical tariffs was deterring Pfizer from further investing in U.S. R&D and manufacturing. “If I know that there will not be tariffs and a heavy certainty, then there are tremendous investments that can happen in this country, both in R&D and manufacturing,” the CEO said.

In March, Bourla told the TD Cowen Annual Health Care Conference that Pfizer was well-positioned with its 13 U.S. production sites. “If something happens, we will try to mitigate by transferring from manufacturing sites outside to manufacturing sites here — the things that can be transferred quickly,” he said. “We don’t have to build the network.”