Insulin, heart treatments and antibiotics have been freely over many borders and tariffs for decades to make medicine affordable. But that could change soon.
For months, President Trump has been promising as part of his plan to reorganize the global trading system and bring the most important manufacturing industries back to the USA to impose higher tariffs for pharmaceuticals. This month he said that pharmaceutical tariffs could come in the “not too distant future”.
If this is the case, the move would have serious – and much uncertain – consequences for drugs that were produced in the European Union.
Pharmaceutical products and chemicals are the No. 1 of Block No. 1 to America. Among these are the weight loss blockbuster-Ozempic, cancer treatments, cardiovascular medicinal products and flu vaccines. Most are name branded medication that, with its high prices and a large number of consumers, make a big profit on the American market.
“These are critical things that people get alive,” said Léa Freet, who leads international affairs for Beuc, the European Consumer Organization. “To put them in the middle of a trade war is very worrying.”
European companies could react to a number of Mr. Trump's tariffs. Some pharmaceutical companies that are trying to avoid the tariffs have already announced plans to increase production in the USA that Mr. Trump wants. Others could later decide to move the production later.
Other companies seem to stop, but could increase their prices to cover the tariffs and increase the costs for patients. And higher prices could not only affect American consumers, but also patients in Europe. Some companies have started to argue that Europe should create more favorable conditions for their companies by reducing some of the rules that reduce drug prices.
Or a middle ground could surrender: Companies could relocate their financial profit for accounting purposes to the USA to avoid import fees, even if they leave their physical factories overseas to avoid the costs of moving and the challenges to set up new supply chains.
The group of Ms. Effret has already warned the European civil servants that they are not allowed to resign in an attack on the important industry by zelanding American drugs in return: Tit for act would be too serious for European consumers.
However, the pharmaceutical sector is complicated. Agreements with insurance companies and government agencies can make it difficult to quickly adapt prices for brand medication, while state regulations can make both a challenge and a long -term obligation. The result is that nobody can confidently predict the result.
“We have not been pharmaceuticals for a long time,” said Brad W. Setser, economist at the Council on Foreign Relations, which have closely examined the tax rules that stimulate production in overseas.
Even as Mr. Trump, his so -called “mutual” tariffs in favor of a general rate of 10 percent during the break in favor of an industry -specific tariff and made it clear that computer chips and pharmaceutical products would be next. The United States recently started examinations in both sectors, a first step to take them with tariffs.
Many industry experts expect the new tariffs to correspond to 25 percent, which has steel, aluminum and cars.
The possible tariffs are particularly worrying for the countries in the center of the European drug industry. This applies in particular to Ireland, where pharmaceuticals make up 80 percent of all exports to the United States.
Many drug companies are originally moved to Ireland because it offers very low corporate tax rates. However, it also worked on the development of its pharmaceutical industry and offers access to a highly qualified workforce.
The sector has grown quickly in recent years. According to Ireland's foreign direct investment agency, more than 90 pharmaceutical companies are now located, and many of the largest American drug manufacturers are operated in the country. Last year, the Ireland's pharmaceutical industry exported 58 billion euros or about 66 billion US dollars to pharmaceutical and chemical products to the USA.
“The Irish are smart, yes, clever people,” said Trump in March, while Prime Minister Micheál Martin from Ireland visited the White House. “You have taken over our pharmaceutical companies and other companies,” he said. “This beautiful island with five million people has received the entire US pharmaceutical industry in its grips.”
Now tariffs could cancel the advantages of manufacturing there – which Mr. Trump's goal is.
“We no longer produce our own drugs in the United States,” said Trump from the Oval Office last week and added that “the pharmaceutical companies are in Ireland”.
Companies are already prepared. The companies have hurried to export their pharmaceuticals from Ireland and the US market before the glove falls, according to statistics.
Ireland is also not the only affected country. Germany, Belgium, Denmark and Slovenia are also important exporters.
“It is an enormous topic for Europe,” said Penny Naas, who heads a competitiveness program for the thinking fund of the German Marshall Fund and has long worked in public order and company affairs of European companies.
The European leaders have contacted both American officials and the industry. In addition to the recent visit of the Irish Prime Minister in the Oval Office, the Irish Foreign Minister traveled to Washington to meet the Commercial Secretary.
Ursula von der Leyen, the President of the European Commission, the executive arm of the European Union, met in Brussels with the European Federation of the Pharmaceutical Industry and Associations, the lobby group, which represents the largest drug manufacturers in Europe.
The industry uses the moment to push according to desirable articles such as less bureaucracy.
The European Drug Lobby Group announced Ms. von der Leyen that companies could shift production or investments to the USA in order to limit their commitment to Mr. Trump's tariffs, especially if faster permits and easier access to capital make America more attractive.
At least 18 members of the group, which include Bayer, Pfizer and Merck, have planned almost 165 billion euros in the European Union in the European Union in the next five years. Half of it could shift up to the United States, said the Federation. It is not only in this prediction either.
“Pharma needs more attractive conditions for production in Europe,” said Dorothee Brakmann, director of Pharma Germany, Germany's largest association of pharmaceutical companies.
Such warnings seem to have teeth. Some companies have started to issue plans for more in the United States. The Roche company announced an American investment plan of 50 billion US dollars last week, the youngest in a series of such announcements.
In the past week, the managing directors of Novartis and Sanofi proposed that less regulation was not sufficient to contain the bleeding. They argued that “European price controls and austerity measures reduce the attractiveness of its markets” and that the block should pave the way for higher prices.
Managers in the industry have also warned that tariffs in this sector disrupt the supply lines, impair the patient's access and dampen research and development.
“There is a reason” that tariffs in medication are set to zero, said Joaquin Duato, the managing director of the drug maker Johnson & Johnson, about a recent call. “It is because tariffs can cause disorders in the supply chain, which leads to bottlenecks.”
Ms. von der Leyen has emphasized similar concerns and warns that tariffs on the pharmaceutical risk “impact on supply chains connected worldwide and the availability of medicines for European and US patients alike”.
Pharmaceutical tariffs also have another danger to the European Union.
The block has tried to build its ability to produce generic, which are medically significantly, but much less profitable than the branded products and often produced in Asia.
However, if US tariffs mean that generic drug manufacturers in China and India suddenly look for customers outside of America, this could send a flood of cheaper pills towards Europe.
This could make it even more difficult for the European Union to build a domestic production base for generics, even if the tariffs attract the drug production of the name fire for the USA.
“We think it is likely that this will lead to an increased investment in the USA,” said Diederik Stadig, a Sectoral economist at Ing. “The European Commission must be on the ball.”