Trade Winds Shift for Pharma: Understanding the Section 232 Tariff Proclamation on Pharmaceuticals

On April 2, 2026, President Trump signed a proclamation implementing tariffs on certain pharmaceutical products pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. § 1862). The action imposes tariffs of 100% on “patented pharmaceuticals,” which includes active pharmaceutical ingredients and key starting materials (ingredients). However, there are also numerous exceptions and preferential treatment provisions, which mean that many pharmaceutical products will not be subject to tariffs or will be subject to lower tariff rates. The new duties will go into effect on July 31, 2026 for 17 large pharmaceutical companies named in the proclamation; however, most of those companies have tariff exemptions based on agreements with the administration, per the proclamation.¹ The tariffs are set to go into effect for all other companies on September 29, 2026.

Whether an imported drug or input will be subjected to tariffs — and at what rate — appears to be based on: (1) the patent status of drug product involved; (2) the specific company importing the drug; (3) the country of origin; and (4) whether an exception applies. The proclamation begins with the blanket imposition of 100% tariffs on all “patented pharmaceuticals and associated ingredients” but then provides that:

• Lower tariff rates will be imposed on imports from certain countries that have reached agreements with the United States on tariffs.
• Lower tariffs will be imposed on imports “for companies” that have plans “approved by the Secretary, to onshore production” of patented pharmaceuticals.
• Tariffs will not be imposed on imports “for companies” that have signed agreements with the administration to on-shore investments and to provide so-called “most favored nation” pricing.
• Conditional exemptions may be granted for a long list of certain specialty drug products, including orphan drugs (with only orphan indications), “fertility treatments,” cell and gene therapies, antibody drug conjugates, and other specialty pharmaceutical products as identified by the Secretary of Commerce, if certain conditions are met.

To determine correct tariff rates and avoid compliance concerns, importers will need to focus on country of origin, as well as patent status and Orange/Purple Book listing (described further below), intended use in the United States (for ingredients as well as to determine qualification for the specialty drug exceptions for certain uses), and whether the product otherwise qualifies for the specialty drug exceptions.

Scope of “Patented Pharmaceuticals” Captured by the Proclamation

A pharmaceutical product (as well as an ingredient for such product) will be considered a “patented pharmaceutical article” and so in scope for tariffs only if it is subject to a valid, unexpired U.S. patent, and listed in the U.S. Food and Drug Administration’s (FDA’s) Orange Book or Purple Book.² Thus, it appears that many drugs will fall outside the scope of the proclamation. Specifically, many older, off-patent drugs will generally not meet the patent criteria. Similarly, drugs marketed under the OTC Monograph, which are not listed in the Orange or Purple Books, should not be subject to tariffs.

It appears that the tariff status of ingredients, i.e., imported active pharmaceutical ingredients (API) and other “key starting materials,” will also depend on the patent status and Orange/Purple Book listing status of the finished drug product for which the imports will be used. In certain cases, this could mean that imports of identical API or key inputs may be subject to different tariffs based on intended use in the United States. This may prove challenging to implement, for example, if the precise use of an ingredient is not known at the time of import, or if the finished drug product ultimately may be subject to a use-based specialty drug exemption.

Generics and Biosimilars Not Subject to Tariffs for Now

As anticipated based on various prior communications from President Trump and other administration officials, the new tariffs will not apply to “generic pharmaceuticals and their associated ingredients, including biosimilar products, at this time.” “Generic pharmaceutical articles” are defined as “FDA-approved pharmaceutical articles, and associated ingredients, that are not subject to a valid, unexpired U.S. patent and are off exclusivity.”³ The definition of “generic “ drug may also encompass branded products that have lost patent and regulatory exclusivities. Such products would generally not be expected to be subject to tariffs in the first instance, as they would fall outside the definition of captured “patented pharmaceutical products.” As further defined, however, generic pharmaceutical articles also refers to pharmaceutical products and their ingredients as approved in a “qualifying application” under: (1) section 505(j) of the Federal Food, Drug, and Cosmetic Act (FDCA) for generic drugs; (2) section 505(b)(2) of the FDCA for follow on drugs; (3) section 351(k) of the Public Health Service Act for biosimilars; or (4) section 505(t) for the FDCA and 42 U.S.C. § 1320f-1(e)(2)(B)(ii), for authorized generic drug or biological products. It appears the tariff relief with respect to this last category (authorized generics) applies only to goods that are “imported by a generic or biosimilar manufacturer.”

In addition, the relief offered to generics and biosimilars may be time-limited. The proclamation directs the Secretary of Commerce to provide a report within one year with an opinion as to whether the president should take action to adjust imports of generic products. Thus, the risk of tariffs on generics and biosimilars in the future remains a possibility. The Trump administration may rely on the threat of tariffs on generic products to leverage future negotiations with generic drug makers, as well as countries that export significant volumes of generic drugs, such as India.

Lower Tariff Rates for Countries with Agreements

Consistent with previously announced deals with the European Union (EU), Japan, Korea, Switzerland, and Liechtenstein, the tariff rate on products from those countries will be 15%. Pursuant to a deal with the United Kingdom (UK), products from the UK will only be subject to 10% tariffs. The proclamation states that the tariff rate on UK-origin products will be reduced to zero when the UK completes a drug pricing agreement with the United States, the framework for which was originally announced in December 2025. On April 2, 2026, the United States Trade Representative (USTR) issued a statement announcing that the UK deal had been finalized, meaning the tariff on UK-origin products will likely be set at zero when the tariffs are imposed.

Other countries are in the process of negotiating deals with the Trump administration. Many of those deals include commitments to zero tariffs on generic drugs but do not include provisions related to patented drugs. For example, the recently announced framework for a deal with India provides that India will “receive negotiated outcomes with respect to generic pharmaceuticals and ingredients.” Thus, it appears that patented products from India and other countries may be subject to the higher 100% tariff rate.

Preferential Treatment for Companies with Most Favored Nation (MFN) and/or Onshoring Agreements

The proclamation provides significant tariff benefits to companies that sign agreements with the administration to onshore investments and to provide so-called “most favored nation” pricing for certain products. The products of companies that agree to “onshoring plans approved by the Secretary of Commerce” will be subject to a 20% tariff rate until April 2, 2030. The proclamation provides for the Secretary of Commerce to establish criteria for onshoring plans, and the U.S. Department of Commerce will provide a pathway through which companies can seek approval for such plans to secure future tariff benefits. The plans are subject to monitoring and reporting and may be subject to retroactive tariff increases if terms are not met.

Companies that enter into onshoring plans and also sign MFN agreements with the Trump administration receive a zero tariff rate for “pharmaceuticals and associated ingredients until January 20, 2029.” The White House Fact Sheet accompanying the proclamation indicated that the Department of Health and Human Services (HHS) would provide a pathway for additional companies to enter into MFN pricing deals.

Exemptions for Specialty Drugs

The proclamation provides conditional exemptions for certain specialty drug products. Specifically, the proclamation provides that tariff rate will be zero for:

• Drugs “where all approved indications are designated as orphan pursuant to the Orphan Drug Act, 21 U.S.C. 360aa et seq. and its implementing regulations” 
• Nuclear medicines 
• Plasma-derived therapies
• Fertility treatments 
• Cell and gene therapies
• Antibody drug conjugates 
• Medical countermeasures related to chemical, biological, radiological, and nuclear threats or
• Other specialty pharmaceutical products to be identified by the Secretary of Commerce in consultation with the USTR and HHS

Many of these categories may prove hard to define, making operationalization key. In addition, these exemptions are not automatic. The exemptions will be available to imports from “jurisdictions that [have] a current or forthcoming trade and security framework agreement” with the United States or for products where the Secretary has determined, in consultation with the Secretary of HHS, an urgent U.S. health need.

While the status of framework agreements with various countries is in flux, the countries with deals would appear to include all EU member states, Japan, Korea, UK, and Switzerland, as well as multiple other countries. India has signed a joint statement with the United States, indicating that it plans to conclude an agreement, which would imply that the enumerated specialty drugs from India would also be eligible for the zero-tariff rates.

U.S.-Made API Further Manufactured or Packaged Abroad Not Subject to Tariffs

The proclamation provides that “U.S.-origin products” will be exempt from tariffs. The specific tariff language included in the Annex provides for no additional tariffs on “pharmaceutical products with an active pharmaceutical ingredient packaged in dosage form that is a product of the United States.” This language indicates that finished drug products manufactured abroad from U.S.-origin API will not be subject to any additional duties if the finished products are imported into the United States. This may be an important provision for companies that rely on packaging or manufacturing operations outside the United States.

Drug Products and Ingredients Not Subject to Section 232 Remain Exempt from Certain Other Special Tariff Measures

Pharmaceutical products and ingredients have been exempted from many of the other tariff measures imposed by President Trump in his second term. The ingredients and drug product that had been excluded from those tariffs, including the temporary 10% tariffs recently imposed pursuant to Section 122 of the Trade Act of 1974, continue to be exempt from those other tariffs. Thus, generic and biosimilar products that are exempted from the April 2, 2026, Section 232 action also remain exempt from the 10% Section 122 tariffs as well. However, the exemption from other tariffs could be modified in the future as the Trump administration takes actions to replace tariffs overturned by the Supreme Court.

Arnold & Porter’s Trade and Life Sciences practices are available to provide companies with in-depth guidance on navigating these complex tariffs and associated compliance requirements (including country-of-origin determinations), as well as advising companies on strategies to mitigate tariff impacts or seek tariff reductions or exemptions through onshoring and MFN agreements.

© Arnold & Porter Kaye Scholer LLP 2026 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.