Trump's pharmaceutical strategy meets global supply reality

Donald Trump's pressure on EU pharmaceutical companies to relocate to the US may have achieved some success with his electorate, but it faces major structural and logistical hurdles.

On July 9, EU pharmaceutical companies will find out whether tariffs will be imposed on their products or whether a special “creative” arrangement will be made.

Regardless of the outcome, however, Trump's message is clear: EU investment in the pharmaceutical industry is to be boosted. As Euractiv recently learned from a source familiar with the matter, the Trump administration has already contacted European pharmaceutical companies individually.

Last week, Trump signed sweeping tax and spending cuts. Dr. Cinzia Alcidi, Senior Research Fellow at the Centre for European Policy Studies (CEPS), sees this as a clear sign that the US president is trying to generate revenue through tariffs.

“We have a tax cut that will attract many companies and will be financed by tariffs imposed on the rest of the world,” she told Euractiv.

In the case of the "sensitive" pharmaceutical trade, Alcidi argues, Trump could take targeted measures to achieve a political victory and lower prices for US consumers. However, the tariffs could actually drive up those prices.

Not easy to relocate

Experts agree that Trump is seeking to shift drug manufacturing to the United States.

However, according to Kostas Athanasakis, assistant professor of health economics at the University of Western Attica in Athens, this approach is somewhat “short-sighted” because pharmaceutical companies do not operate in a vacuum.

"They are part of complex supply chains that include raw materials, active pharmaceutical ingredients (APIs), and excipients and finished products. These supply chains have evolved over decades. Relocating a manufacturing facility to another part of the world would require significant time and resources," he explained.

This complexity may partly explain why US tariffs on pharmaceuticals have been postponed. According to Alcidi, investment decisions are based on economic considerations rather than on the common good of Europe.

Concerns about a potential exodus from Europe have already prompted European pharmaceutical CEOs to write a letter to Ursula von der Leyen, urging her to take measures to keep production in Europe.

Alcidi noted that Trump's immediate goal may be to bring back American pharmaceutical companies currently operating in Europe. This would be a move more practical for voters and easier to implement in the short term. However, even that would be no easy task, as it would be a business decision with a time horizon of five, ten, or even 15 years.

A major challenge for companies is the uncertainty about how long these new measures will last given the unpredictability of Trump's domestic political support.

Another problem, according to Alcidi, is the difficulty of finding qualified personnel in the US. Washington is already struggling with a labor shortage in highly skilled fields. This challenge could be exacerbated by Trump's planned immigration restrictions and ongoing tensions with the academic sector.

Which medications would be most affected?

If the tariffs are actually introduced, not all products would be affected equally, Athanasakis explained. "If a European medicine is unique and essential, it will be more likely to achieve the requested price."

Products with direct competitors, however, would be more vulnerable to price pressure. "This could particularly affect generics, which already operate on tight profit margins and are exposed to intense international competition," she added.

However, these scenarios are purely theoretical, as the US government has not yet clarified what the tariffs would look like and whether they would apply to finished products or raw materials.

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