Trump imposing 100 per cent tariffs on branded pharmaceuticals is about more than just bottom lines

In the latest policy upset from the U.S. leader, as of October 1, a 100 per cent tariff will be slapped on imports of branded pharmaceuticals. A clear indicator of where the Trump administration wants foreign companies to pivot, he went so far as to overtly clarify that businesses that commence processes to relocate manufacturing to the US will be exempt from the tariffs. While the policy move does throw an unwanted hurdle at Australian pharmaceutical companies, the problem and move has deeper ramifications for the aged care industry, and many of Australia’s most vulnerable.

Manufacturing bases in the U.S.

Trump has been very clear that he intends to bring jobs back to the United States. However, the move to encourage foreign companies, particularly Australian pharmaceutical companies to have an even greater footprint in the U.S. will have further implications than just the bottom line on Australian soil. For companies that have already broken ground on new hubs of manufacturing the president stated, “”There will, therefore, be no Tariff on these pharmaceutical products if construction has started.”

Pharmaceutical products are a significant export market for Australia to the U.S. totally around $1.6 billion in 2023-2024. A core bulk of that is down to one company, CSL, which exports sizable quantities of plasma and other blood products to U.S. shores. Speaking to the ABC, CSL said of the tariff announcement that they were actively monitoring, however, there was some confidence as, “we have a very significant United States manufacturing footprint.”

“We are already expanding our US capabilities to meet the growing demand for our therapies and we have announced further expansion of significant, new capital investments during the next five years.”

Domestic research benefits local progress

The announcement of the tariff and response from many Australian pharmaceutical companies highlights a worrying trend. With domestic strength in pharmaceutical research and manufacturing, historically local populations have benefitted from advancements at a swifter and more comprehensive rate.

While Trump’s policy allows a waiver of tariffs due to ‘breaking ground’ and having a footprint in the U.S. that pragmatically, for Australian companies, will likely mean Australian personnel to move, work, research and yield results in the U.S. Inter-department sharing of advances has precedent, but so does the benefit of domestic based industries, and compounding benefits from proximity, both in terms of bottom line, and for the Australian aged care sector.

Opposition Leader Sussan Ley voiced concerns from the Coalition, “”It is deeply concerning that Australian pharmaceutical exporters will be subject to harmful tariff arrangements from 1 October.”

Domestic led research and efficiency gains

It is seeing the full harm that experts, that both public and private must assess trade manoeuvres, medical grants and policy change going forward. While Ley notes the potential financial implications for Australia, “The 100 per cent tariff announced today puts this critical trade at risk, as well as the jobs thousands of people it employs and the savings Australians have invested in this sector”, it is also the distancing of future research and manufacturing that may prove harmful.

Also speaking to the ABC, Dr Felicity Deane, a professor at the Queensland University of Technology, encourages, “In terms of access to medicines in Australia, this is not going to affect us whatsoever.”

However she does note improvements that are still needed within the Australian pharmaceutical space, “There’s some suggestions that PBS could use some efficiency gains, but this is not going to bring them out. That’s going to come about from our own processes.”

Those needed efficiency gains are likely to be helped with deepening of research, collaboration and progress in Australia, for Australians that need those gains profoundly. Reform to incentivise the progress of research, from both public policy and private sector pivoting, to ensure that Australia continues to work across sectors to elevate the quality of medication and care for young and old alike.