The headline sounds scary. The reality is more nuanced.
When “100% pharmaceutical tariff” started circulating in headlines, it was easy to imagine a world where common medications double in price overnight. That’s not what’s happening, at least not yet, and possibly not at all for most drugs.
What happened: in April 2026, the federal government finalized a tariff framework for imported brand-name, patented pharmaceuticals. It’s not a flat rate across the board — it’s a tiered system with meaningful incentives built in, and most of the largest manufacturers have already negotiated their way to a 0% rate.
What does the tariff cover?
The tariff applies to brand-name, patented drugs (including both small molecule drugs and biologics), along with the active pharmaceutical ingredients and key starting materials used to manufacture them.
Generics, which make up the vast majority of prescriptions filled in the U.S., are exempt, with a formal review required within one year. For most plan members, the drugs they fill most often are not directly in scope.
It’s not all or nothing, manufacturers can earn a lower rate
Rather than a uniform tariff, the framework established a tiered rate structure. Manufacturers can reduce their rate significantly by committing to two things: relocating production to the U.S. (onshoring), and agreeing to pricing terms that ensure the U.S. isn’t paying more than other developed countries for the same drugs, an arrangement known as Most Favored Nation (MFN) pricing.
The largest pharmaceutical manufacturers currently qualify for the 0% rate, limiting near-term exposure for many high-spend therapies.
What about the rest of the market?
Outside the largest manufacturers, roughly 450 additional companies are in the process of applying for onshoring agreements. The application window opened in May 2026, and the tariff takes effect for these companies in late September. No approvals for this group have been issued yet, and there’s no firm deadline for when they will be.
This is the segment of the market worth watching most closely. Companies that haven’t secured agreements by September face tariffs that could reach 100% depending on where their products are manufactured, and that cost pressure could eventually show up in formulary decisions and specialty drug pricing.
What this means for plan sponsors
The near-term impact on plan costs is likely limited, but this isn’t a story to set aside. Here’s the practical picture for employers and plan sponsors:
📌 Generic and biosimilar spend is shielded. The categories that make up most of your prescription volume are currently exempt from the tariff.
📌 High-cost specialty therapies are where to focus. Brand-name and specialty drugs, particularly those with limited generic alternatives or complex supply chains, carry the most exposure if manufacturer agreements shift or sourcing changes.
📌 Formulary disruption is a real risk, not just a pricing one. As manufacturers respond to tariff pressures, PBMs may update preferred drug lists more frequently. That can mean mid-year changes that affect member access and cost-sharing.
📌 The 2029 cliff matters for long-range planning. The 0% rate secured by most large manufacturers expires in early 2029. Benefit strategies and contract cycles that extend beyond that window should account for potential pricing changes.
📌 Transparency gaps make this hard to monitor independently. The specific terms of manufacturer pricing and onshoring agreements haven’t been made public, which means plan sponsors can’t easily assess their own exposure without help.
Questions to ask your PBM
Your pharmacy benefit manager should be tracking this closely. If they’re not proactively communicating about tariff exposure, it’s worth asking directly:
- Which drugs in our formulary are sourced from manufacturers without onshoring agreements, and what’s our exposure if tariffs apply to them?
- Are you anticipating any formulary changes driven by tariff-related cost shifts in the next 12–18 months? Which therapeutic categories are most at risk?
- How are you evaluating biosimilar and generic alternatives for therapies that may be affected?
- If a manufacturer loses their 0% rate after 2029, how quickly could that affect our plan’s pricing, and what’s the notification process?
- Do you have a process for modeling our specific formulary’s financial exposure to different tariff scenarios?
What Expion Health is watching
The framework is still evolving. These are the developments we’re tracking most closely on behalf of our clients:
Follow Expion Health for more updates from our regulatory expert Scott Dunham .
