Trump administration launches probe of pharmaceutical imports as tariffs loom

The Trump administration has launched an investigation into whether the importation of certain pharmaceuticals and pharmaceutical ingredients may threaten U.S. national security, according to a notice for public comment published Monday in the Federal Register.

The launch of the Department of Commerce probe comes on the heels of President Donald Trump’s threat last week to impose “major” tariffs on pharmaceuticals, promising that an announcement would be coming “very shortly” from his administration.

The investigation is looking into the extent to which domestic production of pharmaceuticals and pharmaceutical ingredients can meet demand, the feasibility of increasing domestic capacity for pharmaceuticals and pharmaceutical ingredients to reduce import reliance, and whether tariffs are necessary to protect U.S. national security.

Initiated under section 232 of the Trade Expansion Act of 1962, the probe will include finished generic and non-generic drug products as well as “critical inputs such as active pharmaceutical ingredients and key starting materials, and derivative products of those items,” the notice states.

The investigation includes a public comment period of 21 days, 270 days for an investigation report to be submitted to the President, and 90 days for the President to determine whether trade measures such as tariffs should be imposed.

William Blair analyst Matt Phipps in a Monday note to investors wrote that while the investigation “had been hinted at for the past few weeks” there is “now even more debate on the timing of potential pharmaceutical tariffs given President Trump has been suggesting they could come sooner than later.”

Though the impact of potential tariffs on pharmaceuticals is “surmountable for most innovative companies given reasonable gross margins and global manufacturing footprints, it clearly creates an overhang on the pharmaceutical space given the current uncertainty and complexity of the pharmaceutical supply chains,” according to Phipps.

With recent announcements about investments in U.S. manufacturing from Big Pharma including Eli Lilly, J&J, and Novartis, Phipps said an open question remains whether these commitments to build domestic production capabilities would be enough to “appease” Trump “even though facilities can take roughly five years to build from scratch.”

Overall, Phipps sees the greatest risk from tariffs on generic drug supplies, which he said make up 90% of prescriptions in the U.S.

The Indian Pharmaceutical Alliance (IPA), which includes 23 generic pharmaceutical companies, issued a statement in response to the investigation warning that “adding tariffs on America’s affordable medicine partners in India would make it even worse” for U.S. patients, the healthcare system, and national security.

Indian pharmaceutical manufacturers “operate under razor-thin margins” and “if large tariffs are imposed, they will trigger substantially more drug shortages, cause greater U.S. dependence on China for life-saving medications, and delay Indian companies’ investments in America,” according to the IPA.