Drugmakers face 100% tariff unless they cut prices or produce drugs in US

By Ahmed Aboulenein

WASHINGTON, April 2 (Reuters) - President Donald Trump signed an executive order on Thursday imposing 100% tariffs on branded pharmaceuticals imported into the U.S. unless manufacturers agree to government drug pricing deals or commit to making their products domestically.

The world's biggest drugmakers signed deals with the U.S. government last year that exempted billions of dollars of drugs from tariffs. Generic drugs have also been exempted, but small and mid-sized companies are exposed to the penalties unless they craft their own deals or move their production.

Here are some details:

• The U.S. will impose a 100% tariff on patented drugs not made in the country and not covered by drug pricing agreements.

• Large pharmaceutical companies have 120 days to announce plans to avoid the 100% tariff; smaller companies have 180 days.

• Companies can move manufacturing to the U.S. in exchange for a reduced 20% tariff.

• Drugmakers that onshore and sign most-favored-nation pricing agreements with the U.S. Department of Health and Human Services are exempt from tariffs.

• The U.S. has already agreed to such deals with 17 drugmakers, of which 13 have been finalized and four are being negotiated.

• Tariffs are reduced to 15% for drugs produced in the European Union, Japan, South Korea and Switzerland due to existing trade agreements. The U.K. has a separate tariff deal.

• Generic drugs will be exempt from tariffs for at least one year.

• More than 90% of medicines sold in the U.S. are generics, according to the U.S. Food and Drug Administration.

• Orphan, veterinary and other specialty drugs are exempt if they are from trade deal countries or meet urgent public health needs.

• U.S. patients by far pay the most for prescription medicines, often nearly triple what patients pay in other developed nations.

• Trump has been pressuring drugmakers through his most-favored-nation drug pricing policy to lower prices to what people pay in other high-income countries.

• Major drugmakers that have signed deals, which exempt them from tariffs for three years, include Pfizer PFE.N and Eli Lilly LLY.N, among others.

• Many companies, including about half of those represented by industry lobby group PhRMA, have not yet signed deals.

• Industry sources say small and mid-sized drugmakers are seeking individual arrangements to avoid tariffs and new pricing rules.

• The executive order risks creating an "unfair two-tiered system of exemptions" benefiting only big companies that have already made most-favored-nation deals with Trump, said the Midsized Biotech Alliance of America, an industry group.

• Mid-sized drugmakers "lack diversified portfolios to absorb these sudden cost increases," MBAA President Alanna Temme said in a statement.