Big pharma stocks rise as tariff plan tests investor nerves

Big pharma stocks rose Friday as investors weighed President Trump’s plan to impose 100% import tariffs on pharmaceuticals beginning Oct. 1. The tariffs would not apply to companies that are building U.S. manufacturing plants, defined as those that are breaking ground or under construction. The development sent shares of several large drugmakers higher in early trading, even as broader markets hovered near flat-to-positive territory.

The president has discussed pharmaceutical tariffs for months, but he has signaled delays of a year to a year and a half to give companies time to stockpile medicines in the United States and shift more production here. Analysts note that drugmakers began stockpiling medicines earlier this year in anticipation of potential tariffs, a move that could cushion any near-term price pressures. The policy, if enacted, aims to boost domestic manufacturing and national security, though it faces legal and logistical questions that could complicate implementation.

Merck & Co., Eli Lilly and Co., and Johnson & Johnson have announced U.S. expansion plans, which could help them weather tariff costs if the policy is implemented as described. Jefferies analyst Akash Tewari said the latest tariff announcement shouldn’t have a material impact on these large drugmakers given their ongoing construction projects and robust margins. He noted that brand-name drugmakers often retain enough financial flexibility to absorb tariff costs, while generic-drug manufacturers, which account for a large share of U.S. prescriptions, may have less room to maneuver. Other analysts warned that the economic impact would depend on how strictly enforcement is applied and how the terms “breaking ground” and “under construction” are interpreted.

The new taxes also raise questions about potential legal challenges and the administration’s broader strategy, including whether tariffs could serve as leverage in a national security investigation tied to drug supply chains. Market participants cautioned that the outcome remains uncertain and that the policy’s ultimate effect on drug prices, supply, and investment remains to be seen.

Shares of Merck and Lilly rose more than 1% in morning trading, while J&J advanced modestly. The broader S&P 500 edged higher as investors digested the policy details and assessed how drugmakers might adapt in the months ahead as the Oct. 1 effective date approaches.