US and EU confirm tariff deal on pharmaceuticals, generics largely exempt

Less than a month after announcing the trade deal, the White House detailed its plans to tax medicines and other products from the EU. From 1 September, the US will impose a “Most Favoured Nation” (MFN) tariff on generics sourced from the EU, including their ingredients and chemical precursors, capped at 2.5%, according to ABC News. The US has put a 39% tariff on drugs imported from Switzerland.

Meanwhile, the US has confirmed a base tariff rate of 15% on prescription medicines and other goods. Although the previously threatened higher tariffs remain possible, the situation is somewhat more predictable for now.

EFPIA and its members have reiterated strong criticism of the US import tariffs, warning they threaten patient care and damage the pharmaceutical sector on both sides of the Atlantic. The tariffs could also exacerbate supply shortages and hinder international knowledge exchange within R&D.

Nathalie Moll, EFPIA’s Director General, stated: “Additional barriers to highly complex and well-functioning supply chains are not a path to national resilience, increased production, or improved patient care. They undermine our ability to collaborate on the development of new therapies to address global health challenges, resulting in billions of euros being diverted away from medical research.” She called on the EU Commission and Council to negotiate exemptions for innovative medicines.

High import tariffs would have been devastating for generic and biosimilar manufacturers, given their substantially lower margins compared to innovative original product manufacturers. The US sources approximately 35% of its generic active pharmaceutical ingredients (APIs) from India. Europe accounts for 18% of the generic API market, making it the second largest supplier. The US itself produces only around 12% of the ingredients for its generic drug supply, demonstrating its reliance on imports. Generics constitute the majority of prescribed medicines in the US, with the FDA estimating their share at 91% in 2023.

In 2024, the US imported medicines and vaccines valued at US$210bn. The majority originated from the EU (61%), with significant shares also from Switzerland (9%), Singapore (8%), and India (6%). To date, all these products have been exempt from reciprocal tariffs.