By Josh Nathan-Kazis

As D-Day for drug tariffs ticks closer, the pharmaceutical industry doesn't know what to think.

The Trump administration said in mid-April to expect tariffs on drug imports in a month or so, which puts the deadline sometime in the next few weeks. Drugmakers rely on supply chains that span the globe, and a big new tax on their imports could be destabilizing.

The problem now is that the companies appear to have no idea what to expect. Ask two CEOs what they think all of sPresident Donald Trump's tariff talk will come to, and you'll get two starkly different answers.

One optimist is Pfizer chief Albert Bourla, who also serves as chair of the board of the drug industry lobbying group PhRMA. Bourla said on an investor call Wednesday that he is "cautiously optimistic" after having conversations with "all the Secretaries that are involved and the White House staff."

Citing officials in the "highest level of government," Bourla said he had been told the drug tariffs will be focused on "national security threats," and implied that they would be narrowly targeted on certain medicines imported from "adversary countries."

Bourla's confidence was good for Pfizer's share price, and the stock jumped as he spoke, eventually closing up 3.2% on the day.

Thursday morning, though, Eli Lilly CEO David Ricks pulled expectations expectations back down to earth. Speaking to Barron's before the market opened, Ricks called Bourla's optimism "a little early."

"Maybe he knows something I don't," Ricks said.

The bureaucratic process the administration is using to design the tariffs, Ricks acknowledged, is meant to deal with national security questions. But that doesn't necessarily mean the tariffs will stick within those boundaries. "They could go other places with this, too," he said. "I don't think those have been ruled out yet."

In other words, it's impossible to guess what Trump will do.

That's the big problem for the companies seeking to plan for these tariffs, and for investors trying to understand the economic picture. What the drug tariffs look like appears to be ultimately up to one man -- and his threats and promises have been all over the map.

Early last month, it sounded from listening to Trump that the drug tariffs would be massive. On April 8, Trump threatened a "major tariff on pharmaceuticals," and one day later suggested those tariffs could be as high as 200%.

More recently, though, the president's tone has moderated. In a speech on April 30, he seemed to suggest the drug tariffs might be delayed, though the meaning of his comments was far from clear.

"We're going to give them a lot of time to do it, but after that there's going to be a tariff wall put up, and they won't be happy about it, but they'll be happy if they start building right now," Trump said, referring to drugmakers moving production into the U.S. "Right now it's going to be build, and after a certain period of time it's going to get tougher, tougher, tougher, and then it's going to be real hard to do business in this country."

Drugmakers have sought to appease Trump in recent weeks with announcements of plans to invest in U.S. manufacturing. Johnson & Johnson, AbbVie, Novartis, Lilly, Roche, and Merck have all said they will spend billions increasing their U.S. manufacturing footpring.

Trump acknowledged many of the pharma companies in his April 30 speech, ribbing Lilly's Ricks for nagging him to pressure the pharmacy benefit managers. "Every time I talk to him about drug prices he sweet-talks me, he tells me about the middleman," Trump said.

All those billions of dollars in investments, however, have not stopped talk of the tariffs. Now, the industry has adopted a new argument. Pharmaceutical executives including Ricks, Bourla, and Johnson & Johnson CEO Joaquin Duato have all made nearly identical cases in recent weeks that lowering U.S. corporate taxes would bring manufacturing into the U.S. more effectively than introducing new tariffs.

"If what you want is to build manufacturing capacity in the US, both in medtech and in pharmaceuticals, the most effective answer is not tariffs but tax policy," Duato said on an investor call in April, in comments that were typical across the group.

Bourla, on his own investor call, cited a global minimum tax rate of 15% on large multinational corporations that went into effect last year, negotiated through the Organisation for Economic Co-operation and Development. The U.S. corporate tax rate is higher, at 21%. "It's not as good in the U.S.," Bourla said.

Trump floated a proposal in his April 30 speech to cut the corporate tax rate to 15% "if you make your product in the U.S.A." Axios has reported that Treasury Secretary Scott Bessent has pushed a 15% corporate tax rate in a meeting with Republican senators. Ricks told Barron's he supports the policy.

Big Pharma companies have dramatically cut their tax liabilities in recent years by shifting their intellectual property, and some manufacturing, to low-tax jurisdictions. A Council on Foreign Relations report from in March, based on 2024 annual securities filings, wrote that most U.S. Big Pharma companies pay no U.S. corporate taxes. Lilly was a notable exception.

"If we look long-term at what happened on the innovative side, in terms of where production was relocated, it was really mostly relocated to low tax jurisdictions," Ricks told Barron's on Thursday. "Puerto Rico, Ireland, Singapore, Switzerland. I mean, it's not because there was some amazing natural resource base, or some other reason, right?"

Ricks said that lower corporate taxes would bring production back into the U.S. "I think you do that, the problem is going to go away pretty quickly," Ricks told Barron's. "We don't need tariffs."

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 02, 2025 13:19 ET (17:19 GMT)

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