US tariff exemptions lessen impact on pharmaceutical industry.
Swiss pharmaceutical products will be subject to US tariffs of 100 per cent from 1 October. However, companies that set up production facilities in the US are exempt. Swiss pharmaceutical companies have therefore pledged 73 billion US dollars in investments in America, according to credit insurer Allianz Trade.
The US is imposing tariffs of 100 per cent on Swiss branded pharmaceutical products from 1 October. This is an additional surcharge on top of the 36 per cent “tariff hammer” on Swiss imports into the US, according to an analysis by the credit insurer Allianz Trade, based in Wallisellen in the Swiss canton of Zurich.
Generic drugs and companies that set up production facilities in the US are exempt from tariff regulation, writes the analysis. These exemptions are significant, says Allianz Trade, because although 71 per cent of the 100 best-selling branded drugs are manufactured outside the US, many big pharma companies have production facilities in the US or plan to set them up. Swiss pharmaceutical companies have therefore reportedly pledged 73 billion US dollars in investments in America, while new big pharma investments in the US amount to 366 billion US dollars worldwide.
Another source of hope, according to the credit insurer, is the significant accumulation of inventories in the US, as importers tried to preempt potential tariffs early on. As a result, Allianz Trade predicts that the impact on the effective tariff rate will be minimal for the time being. "The good news is that the impact is likely to be limited thanks to exemptions and existing production capacities in the US. In addition, many companies are likely to have brought forward deliveries and importers to have filled their warehouses in order to preempt the tariffs. However, with the targeted most-favored-nation prices, further dark clouds are gathering on the pharmaceutical horizon," Jan Möllmann, CEO of Allianz Trade Switzerland, is quoted as saying.
Most-favored-nation pricing, a key objective of the US government, caps prices for brand-name drugs, thereby preventing customs duties or cost increases from being absorbed by the end consumer. This means that Swiss pharmaceutical companies cannot benefit from their pricing power for patented drugs and are coming under considerable margin pressure.
Swiss pharmaceutical imports were valued at 35.4 billion US dollars in 2024, accounting for 3.8 per cent of Switzerland's total gross domestic product. Uncertainties around exemptions, changes in US policy, America’s most-favored-nation clause, and depressed pharmaceutical margins are creating downside economic risks in the medium term, Allianz Trade concludes.
Source: swisstrade
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