① The Trump administration has launched a national security investigation into imported pharmaceuticals, potentially imposing tariffs as high as 200% on the industry.  
② Analysts assess that companies like AbbVie (AbbVie, Inc.(ABBV.US)), Bristol Myers Squibb (Bristol-Myers Squibb Company(BMY.US)), and Eli Lilly (Eli Lilly and Company(LLY.US)) may be less impacted due to their large U.S. manufacturing footprint, while Novartis (Novartis AG Sponsored ADR(NVS.US)) and Roche (ROCHE HOLDINGS AG(RHHBY.US)) face higher risks.  

In April, the Trump administration initiated a national security probe targeting imported pharmaceuticals, signaling the industry could face sector-specific tariffs. Earlier this month, Trump suggested tariffs might reach 200%.  

However, it remains unclear whether he will implement such plans or levy tariffs at this level, making it difficult to fully assess the policy’s impact on pharmaceutical companies and patients. Some analysts have evaluated potential tariff risks based on factors like current manufacturing networks, noting that the effects would be "uneven."  

TD Cowen analyst Steve Scala stated in a Monday report that AbbVie (AbbVie, Inc.(ABBV.US)), Bristol Myers Squibb (Bristol-Myers Squibb Company(BMY.US)), and Eli Lilly (Eli Lilly and Company(LLY.US)) appear "relatively well-positioned" due to their larger U.S. production scale versus overseas operations. In contrast, Novartis (Novartis AG Sponsored ADR(NVS.US)) and Roche (ROCHE HOLDINGS AG(RHHBY.US)) face greater exposure.  

Scala previously noted that pharma companies maintain extensive global manufacturing networks, source active pharmaceutical ingredients (API) from multiple locations, and hold complex intellectual property patents. This leads to equally intricate tax and pricing strategies. He emphasized that limited public data "makes tariff analysis challenging, to say the least."  

Nevertheless, he estimated companies’ resilience using key metrics: the number/location of manufacturing sites, facility utilization rates, API sourcing, and patent coverage regions.  

According to Scala, AbbVie, AstraZeneca (Astrazeneca PLC Sponsored ADR(AZN.US)), Eli Lilly, Merck (Merck & Co., Inc.(MRK.US)), and Pfizer (Pfizer Inc.(PFE.US)) have the largest disclosed U.S. manufacturing networks—each with about 10 major facilities.  

He highlighted that AbbVie, Bristol Myers Squibb, and Eli Lilly operate more prominent large-scale U.S. facilities than overseas. AbbVie and Lilly each have 9 such sites, while BMS has 2.  

Jefferies analyst Michael Yee previously pointed out that Amgen (Amgen Inc.(AMGN.US)) and Biogen (Biogen Inc.(BIIB.US)) would be most affected by tariffs, while Gilead Sciences (Gilead Sciences, Inc.(GILD.US)) and Vertex Pharmaceuticals (Vertex Pharmaceuticals Incorporated(VRTX.US)) might see limited impact.  

Biogen clarified during its Q1 earnings call in May that even if drug-specific tariffs were imposed, it expects "minimal exposure" due to its high proportion of U.S. revenue from products manufactured domestically, coupled with its current global inventory strategy.  

Roche stated in a release that it maintains a "strong U.S. presence," including 15 R&D sites and 14 manufacturing facilities. It also referenced a recently announced $50 billion U.S. investment plan.  

The company added that it believes pharmaceuticals and diagnostics should be tariff-exempt to "protect patient access, supply chains, and ultimately future innovation." However, Roche confirmed preparedness to manage potential impacts, ensuring uninterrupted supply through measures like inventory adjustments.  

Significant Tariff Implications

Scala noted that tariffs could materially impact companies’ free cash flow for at least the first two years post-implementation. This assessment was based on discussions with an unnamed expert—a former CFO of a major pharmaceutical firm.  

The expert argued that while pharmaceutical makers could raise prices for some products, fully offsetting tariffs via price hikes would be "politically untenable" given existing affordability challenges. Companies might also cut R&D spending.  

The expert added that tariffs exceeding 50% would be "problematic and punitive" for the industry.  

"In such a scenario, companies would need to aggressively reshore manufacturing to the U.S., and significant R&D reductions wouldn’t be off the table," Scala wrote.  

In recent months, several pharma CEOs criticized proposed import tariffs, warning they could harm R&D and reduce patient access. Health policy experts also cautioned that tariffs might disrupt complex pharmaceutical supply chains, potentially raising U.S. pharmaceutical prices and worsening critical shortages.