A bitter pill: Why Americans are set to cough up more on medicines
BIZTECH
4 min read
A bitter pill: Why Americans are set to cough up more on medicinesUnder a new trade deal, US will levy a 15 percent levy on European drugs, leading to a hike in the prices of pharmaceutical products.
Ozempic, one of the EU-made blockbuster drugs now facing a 15% US import tariff / AP
21 hours ago

The pharmacy bill of average Americans is set to go up as drugs from the European Union become pricier under the new tariff regime.

The United States and European Union recently reached a trade agreement, bringing an end to a standoff between the two economic blocs.

Following talks in Scotland between President Donald Trump and European Commission President Ursula von der Leyen, the two sides agreed to impose a 15 percent tariff on all EU goods entering the US, half the 30 percent rate Trump had threatened to introduce.

As per the new agreement, the EU’s pharmaceutical industry has been hit hard. Previously duty-free, under the new deal, a 15 percent tariff will be imposed on medicine exports to America. The sector now faces between $13 billion and $19 billion in added costs. 

Pharmaceuticals are the EU’s largest export to America by value, accounting for around 60 percent of all US pharmaceutical imports. 

In 2024, EU exports of medicinal and pharmaceutical products reached $138 billion, about 38.2 percent of all extra‑EU pharmaceutical exports. 

The US relies heavily on imports of critical medicines from the European Union, while EU-based drugmakers, especially in hubs such as Ireland and Denmark, depend on access to the US market.

For decades, most pharmaceutical products traded across the Atlantic enjoyed a zero percent under the World Trade Organization’s most-favoured nation rules. That grace period is over.

The inclusion of pharmaceuticals in the across-the-board tariff deal comes amid a US national security investigation into medicine imports. 

In April, the Trump administration opened an investigation, known as Section 232, into whether imports of medicines and pharmaceutical ingredients threatened America’s national security. That probe has now delivered its political payload.

Although some generic drugs will be exempt, the European Commission has not provided details on which ones. Blockbuster treatments like Keytruda and Ozempic to wrinkle-smoothers like Botox, will be subject to a 15 percent levy at the US border. 

How the deal will affect US


American consumers are unlikely to escape unscathed. 

Americans spent approximately $806 billion on prescription drugs in 2024. That translates to about $1,564 per person annually, the highest per-capita drug spending in OECD, an economic bloc of 38 countries.  

Compared to similar Western countries, the US has the lowest life expectancy at birth, the highest reported maternal and infant mortality, the highest hospitalisation rate from preventable causes, the highest death rate for avoidable and treatable conditions, the highest suicide rate, and the highest chronic disease burden rate in the world.

Shares in pharmaceutical companies Sanofi, Roche and Sandoz Group all closed up between 0.5 percent and one percent on Monday.

The deal leaves the EU in a weaker position than Britain, which negotiated more favourable terms with Washington.

"In principle, the UK is in a more advantageous position than other countries – so there is the potential to benefit from this," Michael Gasiorek, director of the Centre for Inclusive Trade Policy (CITP) told BBC Verify.

UK-based pharmaceutical exporters face a lower 10 percent tariff and have secured a pledge to negotiate further exemptions.

Other affected industries

US officials have said that under the EU-US deal, EU steel will remain subject to the US's global 50 percent tariff on metal imports.

As part of the agreement, the EU has committed to purchasing $750 billion (£560 billion) worth of American energy over the next three years.

Steel will continue to face a 50 percent duty, while car imports will see their rate reduced to 15 percent starting Friday.

Overall, the new tariffs will apply to 70 percent of EU exports to the US.

One estimate indicates an average US household could effectively lose around $2,400 per year in income due to higher prices tied to tariffs across multiple sectors. 

RelatedTRT Global - Europe responds to US tariffs slated for August

In return, US exports to the EU, including automobiles, currently subject to a 10 percent tariff, will be granted duty-free access.

One sticking point remains: alcohol. France and the Netherlands are pushing for exemptions to protect their wine and beer industries, but no agreement has yet been reached.

"I want to thank President Trump personally for his personal commitment and his leadership to achieve this breakthrough," Von der Leyen said.

"He is a tough negotiator, but he is also a dealmaker."

SOURCE:TRT World
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