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On April 8, 2025, U.S. President Donald Trump announced his intention to implement “major” tariffs on pharmaceuticals imported into the United States. This statement came during a gathering for the National Republican Congressional Committee and follows a brief reprieve that drug manufacturers experienced last week when they were exempted from Trump’s recent tariffs.
“We are going to be announcing very shortly a major tariff on pharmaceuticals,” Trump stated, emphasizing that this move would compel companies to relocate their manufacturing away from China and other nations, given that a significant portion of their products is sold in the U.S. “They will be opening up their plants all over the place,” he added.
The pharmaceutical industry has seen a significant decline in domestic manufacturing over the past few decades, with the production of vital active ingredients shifting predominantly to countries like China. This trend is largely attributed to the lower costs associated with labor and production, as reported by the Food and Drug Administration.
While the specifics of the forthcoming tariffs remain somewhat unclear, Trump mentioned that they would be implemented at unprecedented levels. This has raised concerns within the pharmaceutical sector, where companies had recently begun rolling out substantial U.S. manufacturing investments in a bid to foster positive relations with the administration.
David Ricks, CEO of Eli Lilly, expressed apprehension regarding the potential consequences of these tariffs on pharmaceutical research and development. In a recent interview with the BBC, Ricks noted, “We can’t breach those agreements, so we have to absorb the cost of the tariffs and make trade-offs within our own companies. Typically, that will be in reduction of staff or research and development, and I predict R&D will come first. That’s a disappointing outcome.”
Eli Lilly has been proactive in enhancing its U.S. manufacturing capabilities, committing $50 billion over recent years to upgrade and construct new facilities, which are crucial for producing its leading medications for weight loss and diabetes. Nevertheless, the company still significantly relies on international production, particularly in Ireland, where it is investing in a new $800 million facility.
Analysts warn that the imposition of pharmaceutical-specific tariffs could result in higher prices for U.S. consumers. Even if manufacturers decide to relocate operations domestically, the transition would likely require considerable time and investment, making it more expensive than producing medicines overseas, as noted by Leerink Partners analyst David Risinger.
Determining the full impact of tariffs on pharmaceutical companies is complex due to their intricate manufacturing processes, which often span multiple countries. Analyst Steve Scala from TD Cowen highlighted that companies like Eli Lilly, Bristol Myers Squibb, and AbbVie are better positioned to handle the tariffs, as they maintain more major production facilities in the U.S. in comparison to their international counterparts. On the other hand, companies such as Novartis and Roche may face greater risks because they have fewer U.S.-based plants and a higher proportion of active ingredient sites located abroad.
Latest in health-care tech: Early stage startups dominated digital health funding deals in first quarter, report says
Despite the challenges posed by potential tariffs, the digital health sector has shown resilience. In the first quarter of 2025, $3 billion was invested across 122 deals, according to a new report from Rock Health. This marked a slight increase in funding but a decrease in deal count compared to the same quarter the previous year.
In the early stage funding landscape, startups secured the majority of investments, with Seed, Series A, and Series B rounds constituting 83% of the labeled deals. Rock Health characterized unlabeled funding rounds as a strategy for startups seeking to avoid valuation reductions in a challenging market, even if it leads to difficult discussions later on.
Only a handful of companies attained labeled Series D rounds or beyond, with notable investments including Innovaccer’s $275 million in January, Qventus’s $105 million round in the same month, and Abridge’s $250 million raise in February. These significant rounds have elevated median later-stage round sizes to $105 million, nearly double that of 2024.
As venture funding in digital health remains stable for now, the looming uncertainty regarding trade policies may introduce new complexities for investors. Following Trump’s declaration of broad tariffs, public markets experienced turbulence, sending the Nasdaq Composite into a bear market and raising questions about future investment strategies within the sector.
With the global trade landscape evolving rapidly, venture investors may exercise caution in making substantial commitments until a clearer picture emerges.
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