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A worker is seen on the drug production line at a pharmaceutical facility in Meishan, China, on January 30, 2024.
Pharmaceutical companies are experiencing heightened concerns as they prepare for the potential implications of President Donald Trump’s proposed tariffs on imported medications. While the specifics of these tariffs remain uncertain, the Trump administration has initiated a Section 232 investigation into the impact of pharmaceutical imports on national security, signaling a possible move toward imposing tariffs. Recently, Commerce Secretary Howard Lutnick indicated that these duties could be implemented within the next couple of months.
As the earnings season unfolds, investors and industry analysts are keenly observing how pharmaceutical executives discuss these tariffs and their anticipated effects on business operations. Major players like Eli Lilly and Johnson & Johnson have publicly expressed their reservations regarding the tariff proposals. Both companies recently announced significant investments in U.S. manufacturing to foster positive relations with the administration.
During its earnings call, J&J provided insights into its stance on the tariffs, though divergent views emerged among its executives. Chief Financial Officer Joe Wolk highlighted that Trump does not intend to impose damage through these tariffs, noting that most pharmaceuticals routed to the U.S. consist of affordable generics rather than the more sophisticated branded drugs offered by companies like J&J. Furthermore, Wolk emphasized the company’s scientific expertise as a competitive advantage for the U.S. in life sciences.
Analysts responded favorably to Wolk’s remarks, interpreting J&J’s muted stance on tariff risks as a positive signal regarding the implications for the company and the broader branded biopharma sector. However, J&J CEO Joaquin Duato echoed warnings from public health experts, asserting that these tariffs could drive up drug prices for consumers and worsen medication shortages in the U.S. He pointed to the historical absence of tariffs on pharmaceuticals, attributing it to concerns over supply chain disruptions and recommending favorable tax policies as a more effective strategy for boosting domestic manufacturing capabilities.
Additionally, J&J anticipates incurring a $400 million expense related to tariffs in 2025, primarily linked to its medical device offerings rather than specific drug tariffs. Duato’s perspective aligns closely with that of Eli Lilly CEO Dave Ricks, who cautioned that tariffs could hinder research and development, thereby negatively impacting patients. Ricks highlighted that drug prices are often controlled in the U.S. and Europe, making it challenging to absorb the costs associated with tariffs.
The ongoing dialogue around tariffs continues to develop, and the pharmaceutical industry is bracing itself for potential shifts as these discussions evolve.
More on tariffs: The divide in medical equipment
Medical technology companies and device manufacturers are urgently seeking ways to mitigate the effects of the Trump administration’s new tariffs imposed on imports from China. Johnson & Johnson has already signaled concerns that these tariffs will create a significant financial burden for its orthopedic and cardiac segments. In a related effort, MedTech trade organizations are advocating for exemptions for healthcare goods, arguing that the new duties could inflate overall healthcare costs in the U.S. through rising expenses in Medicare and Medicaid.
Conversely, U.S. manufacturers of protective medical equipment are welcoming the tariffs as a means to level the competitive field, particularly after facing pressure from state-supported Chinese manufacturers. For items such as needles and syringes imported from China, tariffs can reach as high as 245%.
As U.S. producers seek to capitalize on this opportunity, some executives are hopeful that increased production volumes will lead to reduced prices for domestic consumers.
Latest in health-care tech: Dexcom scores FDA approval for its G7 15-Day Continuous Glucose Monitoring System
The U.S. Food and Drug Administration has granted clearance for Dexcom’s updated G7 continuous glucose monitoring system, intended for adults living with all forms of diabetes. A continuous glucose monitor (CGM) is a small device that measures glucose levels in real time, providing critical data for diabetes management.
Managing glucose is essential for preventing severe health complications, as emphasized by the Centers for Disease Control and Prevention (CDC). Dexcom aims to expand its market presence while offering innovative products, including a user-friendly sensor launched in August.
The G7 system’s key improvement lies in its extended wear period, lasting 15.5 days, compared to the previous model’s 10.5 days. This advancement includes a 12-hour grace period for ease of transitioning to new sensors. The G7 has also reported enhanced accuracy, although it is currently approved for adult use only, whereas its predecessor catered to patients aged two and up.
As Dexcom navigates shifts in the market, this latest approval is viewed as a significant step forward. Analysts anticipate that forthcoming developments, particularly in light of potential tariffs impacting production in Malaysia, may provide a boost in both gross margins and revenue for the company. Competitors such as Abbott and Medtronic also produce CGMs with varying wear times, heightening the competitive landscape.
Analysts offered mixed reactions to this announcement, with some seeing it as a notable advancement, while others regard it as a minor improvement in the larger context. The updated G7 sensor is expected to become available in the latter half of the year.
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