Dan Doebler | October 24, 2025
*Note: This article is not meant to be an exhaustive look at US drug policy. Rather it is meant to offer some insights while stimulating further questions and discussion to strengthen understanding of trends in US drug pricing. No political affiliations, critiques or judgments should be implied from this writing.
Rising Costs and New Tariffs
Employers and patients are increasingly strained by new drug costs. So, when an announcement of a 100% tariff came late last month – people in healthcare, including those funding payment for drug coverage, paid attention.
On September 25th, the Administration announced that branded (patented) pharmaceutical products will be subject to a 100% tariff unless the manufacturer is actively building their manufacturing facility in the United States.
The following day, a White House official clarified that these tariffs will not apply to those drugs from the European Union (EU) or Japan, as their duties from those areas are capped at fifteen percent (15%).
While both announcements were short on detail for determining exactly what drugs would be impacted, there’s a lot we can understand from the outset.
What’s Covered – and What’s Not
No Generics
The tariffs only apply to branded drugs. Approximately ninety percent (90%) of all drugs dispensed are generic, meaning that these tariffs would not apply. More than eighty percent (80%) of manufacturing of US generic drugs occurs in India and China.1 These generic drugs represent a critical and necessary cost savings for patients and payers.
Exempt Brand Manufacturers
In the weeks following the announcement, several major pharmaceutical companies including; Pfizer, AstraZeneca, and EMD Serono (Merck KGaA), announced new or expanded U.S. manufacturing initiatives that appear to exempt them from the tariffs. Other manufacturers, such as Johnson & Johnson, Eli Lilly, Roche, and AbbVie, already had established U.S. manufacturing plans in place before this announcement and would presumably be exempt.
Impacts on Patients and the Supply Chain
On-Site Rx operates with a pass-through pricing model, meaning the price we pay wholesalers for a drug is the same price our clients pay. Other pharmacies have margin pricing inflating the cost of the drug to earn revenue through markups. Depending on how reimbursement formulas are structured in the retail sector, this could create uncertainty and risk for traditional pharmacy models.
While On-Site Rx pharmacies could see lower overall pricing due to reduced markups, a 100% tariff applied to specific products would still result in significant price increases for employers and patients. To date, neither On-Site Rx nor our wholesalers have observed notable price increases in catalog pricing.
At least from our perspective, there hasn’t been a price to pay yet.
Potential Impacts
Positively Impacted
· Pharmacy Benefit Managers (PBMs) / Insurance Companies – PBM contracts often earn revenue as a percentage of the drug price. Higher prices could therefore increase margin dollars, though the small number of impacted products suggests this effect would be limited.
· Wholesalers – Depending on whether the drug is warehoused with the manufacturer or wholesaler, timing of any price impact could vary. So far, wholesalers report no disruptions.
· Manufacturers with Competitors in the Same Class – Drugs unaffected by tariffs could gain coverage advantages, creating incentives for other manufacturers to comply with domestic manufacturing requirements.
Negatively Impacted:
· Patients – Formulary changes could limit access to certain drugs, especially for patients on high-deductible or coinsurance plans.
· Employers/Payers – Plan sponsors, including employers, governments, and unions, typically bear 80–90% of total drug costs and would feel the largest financial impact.
· Manufacturers – List prices may not rise, but end costs could. If market share shifts to exempt competitors, revenues may decline.
Unknown Impact:
· Pharmacies –Assuming reimbursement models keep up with any changes, the impact would be neutral on the pharmacy. However, if reimbursement formulas from the PBMs lag behind and only reflect current AWP minus formulas, pharmacies would stand to lose on affected drugs.
Final Thoughts
The number of drugs impacted by these proposed tariffs appears small. However, because the affected products are already among the most expensive on the market, a 100% tariff could make their long-term U.S. viability challenging.
