Trump's Drug Tariffs: A Bold Move With Limited Impact

Big promises, real costs, and a familiar affordability gap.

Apr 17, 2026

“This represents the greatest victory for patient affordability in the history of American health care, by far.”
- President Trump, announcing pricing deals with 14 major drug companies, December 2025

Last week, President Trump signed an executive order imposing 100% tariffs on imported brand-name drugs. The announcement was sweeping: pharmaceutical companies would finally be held accountable, American patients would win, and drug manufacturing would come home to the United States.

The policy will produce some benefits. It may also raise costs for many Americans. And it leaves the core reasons why drugs are so expensive in this country largely untouched.

Why Drug Prices Are High

Americans pay more for prescription drugs than people in any other developed country — often two to four times more for the same medication. The core reason is simple: unlike most wealthy nations, the United States does not set or negotiate drug prices at a national level. Drug companies largely set their own prices.

About 40% of U.S. drug spending flows through government programs, primarily Medicare and Medicaid, where some pricing controls are in place. The other 60% moves through the private market, where prices are negotiated through a complex chain involving insurers, pharmacy benefit managers, and pharmacies. Most patients at the end of that chain have little visibility into any of it, and even less leverage.

Trump’s Drug Tariffs

The new executive order imposes 100% tariffs on imported brand-name drugs, using the national security authority that survived the Supreme Court’s February ruling against Trump’s broader tariffs. But the tariff is less a trade policy than a pressure campaign.

The structure makes this clear. Companies that agree to “Most Favored Nation” pricing — matching the lowest prices they charge in other wealthy countries — and commit to building U.S. manufacturing facilities pay zero tariffs. Companies that only commit to domestic manufacturing pay 20%. Companies that do neither face the full 100%. The order applies broadly, including to small and mid-size biotech companies that develop more than half of all FDA-approved medicines and lack the resources to absorb a 100% tariff or build a domestic facility.

Throughout 2025, the threat of these tariffs prompted 14 of the 17 largest drug companies to sign pricing deals with the administration. Last week’s formal order targets the remaining holdouts. As with any tariff, the cost of non-compliance does not fall on the drug company. It is paid by American importers and passed through the supply chain to insurers and patients.

What the Deals Deliver

For Medicaid patients, the practical benefit is limited. Federal law already requires manufacturers to give Medicaid the lowest price offered to any commercial buyer. The Most-Favored-Nation deal adds little to that.

For Medicare patients, the Inflation Reduction Act’s negotiated prices remain far more meaningful than anything in the MFN agreements. Those prices are statutory, binding, and verified. The MFN deals are voluntary, confidential, and time-limited to three years. A Senate HELP Committee report released this week documents the consequences of that distinction: companies that signed pricing deals with the administration have raised the cost of hundreds of medications, and launched new drugs at an average price of $353,000 a year.

For commercially insured Americans, the deals do almost nothing. When manufacturers lower list prices, the pharmacy benefit managers that extract rebates calibrated to those prices simply adjust accordingly. The savings rarely reach the patient’s copay.

The Manufacturing Question

Rebuilding domestic pharmaceutical manufacturing addresses a real vulnerability. Roughly 53% of patented drugs distributed in the United States are currently produced abroad. The $400 billion in manufacturing commitments announced so far, if they materialize, represent real jobs and a more resilient supply chain.

But companies can commit to U.S. manufacturing without agreeing to lower prices. Higher domestic production costs, if anything, push prices up. Manufacturing jobs and drug affordability are two separate goals. This policy treats them as one.

A Familiar Approach to Affordability

The federal government already knows how to control drug costs. The VA has used its purchasing power to pay dramatically less for the same drugs for decades. And since January 2026, Medicare’s new negotiating authority, established by the Inflation Reduction Act, has begun delivering the same result at a far greater scale, reducing prices by 38% to 79% on the first ten negotiated drugs.

Trump is continuing the Inflation Reduction Act’s negotiation program and claiming credit for its results. He is also quietly weakening it. Recent legislation shields more drugs from negotiation, with the Congressional Budget Office estimating the change will cost Medicare $8.8 billion in foregone savings.

A more serious affordability agenda would expand Medicare negotiation to more drugs and extend those prices to the commercial market. It would require pharmacy benefit managers to pass savings through to patients. It would build on what is already working rather than substitute leverage for policy.

Affordability is shaping up to be one of the defining issues of the 2026 midterms. Voters are already feeling the pressure of rising drug costs, expiring ACA subsidies, and Medicaid cuts. The gap between what this administration claims and what it delivers is exactly the conversation those elections will turn on.

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