US President Donald Trump has paused tariffs on goods from Mexico and Canada, but the pharmaceutical industry remains at risk. Trump’s intention to impose tariffs on imported medications could raise drug prices for consumers and disrupt supply chains. Major companies like Roche and Novartis are concerned, while Sandoz faces challenges expanding in the US. Industry experts warn that tariffs could lead to supply shortages, prompting hopes for lobbying efforts against such measures.
Suspension of Tariffs on Goods from Canada and Mexico
US President Donald Trump has temporarily halted tariffs on goods shipped from Mexico and Canada. Despite this, many industries, including pharmaceuticals, remain vulnerable to potential tariffs when their products are imported into the United States. Notably, Swiss exports dominate the pharmaceutical sector, with a significant share directed toward the American market.
The Impacts of Potential Tariffs on the Pharmaceutical Sector
Since his inauguration, Trump has made it clear that he plans to implement tariffs on imported medications, believing it will incentivize domestic pharmaceutical production. However, this decision may lead to a noticeable increase in drug prices for American consumers.
This move towards protectionism has raised concerns among major drug manufacturers such as Roche and Novartis. Traditionally, medications have been exempt from tariffs due to their critical role in public health, a stance maintained during Trump’s previous term from 2017 to 2021.
Stefan Schneider, an analyst at Vontobel Bank, suggests that Trump is likely to follow through with his tariff threats promptly to avoid losing momentum. Financial experts are already assessing which pharmaceutical giants could bear the brunt of these tariffs, with UBS identifying Novo Nordisk and GlaxoSmithKline as the European companies most reliant on the US market for revenue by 2025.
Roche’s business activities, especially in diagnostics, are heavily influenced by the US market, with 30 percent of its diagnostics sales occurring in North America last year. The UBS analysis indicates that Roche’s top-selling drugs, such as Hemlibra and Tecentriq, are produced in Switzerland and Japan, while significant cancer therapies like Tagrisso are also manufactured for the US market.
In recent years, Swiss pharmaceutical exports to the United States have seen remarkable growth, reaching nearly 34 billion francs in 2024, an 11 percent increase from the previous year. Conversely, imports from the US to Switzerland have stagnated at 6 billion francs, resulting in a 14 percent rise in Switzerland’s export surplus in the pharmaceutical sector with the US, now nearly 28 billion francs.
Roche and Novartis, along with contract manufacturer Lonza, play a crucial role in this trade balance. Lonza produces active ingredients for various pharmaceuticals at its rapidly expanding plant in Visp and is believed to manufacture the revenue-generating cancer drug Tagrisso for AstraZeneca.
When asked about their production capacities to meet US demand, both Roche and Lonza declined to provide specific details, citing market confidentiality. Roche operates three pharmaceutical manufacturing facilities in the US and seven diagnostics plants, but it recently sold a major drug manufacturing plant in California to Lonza, a move they claim aligns with future production needs.
With 15 production sites in the US, Lonza appears well-prepared to handle potential tariffs. Industry experts, including Schneider from Vontobel, express optimism that Roche and Novartis can navigate the challenges posed by increasing US protectionism, given their substantial presence in the market.
However, the scenario is different for Sandoz, a generic manufacturer that currently generates less than 20 percent of its revenue in the US. Sandoz aims to expand its footprint in the US market, particularly in the biosimilars sector, which is still developing in the country compared to Europe.
Despite the growing demand for biosimilars in the US, Sandoz lacks a manufacturing facility for these products domestically. Instead, it plans to import biosimilars from a new plant in Slovenia, while its only US factory, focused on topical generics, is set to close.
Industry associations warn of potential supply shortages should tariffs be enacted. Many in the pharmaceutical sector are hopeful that lobbying efforts will convince the new US administration to reconsider imposing tariffs on medications. Concerns have been raised that if tariffs are introduced, it may lead manufacturers to exit the US market, causing dangerous supply shortages for American patients. Whether these fears resonate with Trump remains uncertain.