Eli Lilly (LLY) is among the list of large-cap pharmaceutical companies that are awaiting the Trump administration’s word on tariffs on the industry.
Trump’s Department of Commerce is looking into what it calls national security threats from overseas drug manufacturing, and Eli Lilly CEO David Ricks has personally met with President Trump in recent weeks to discuss the matter.
He and CFO Lucas Montarce spoke with Yahoo Finance Thursday about how the company is planning for potential tariffs.
Montarce said the company can absorb the impact of tariffs within the 2025 guidance and that there is limited impact at this time.
“It’s a very dynamic situation as you know, but based on what is announced, we felt that it’s a limited impact at this time, and we will continue to monitor this very closely and try to plan ahead as much as possible of what we can do to mitigate the impact,” Montarce said.
Read more: What Trump’s tariffs mean for the economy and your wallet
Backbone of clinical care
Ricks, meanwhile, pointed out that the investigation is focused on the national security threat rather than the overall global network of drug manufacturing and said there is reason to consider that threat.
“I think there’s substance there, if you look at our country’s reliance on sole-source foreign-manufactured essential medicines that are older medicines we invented, and other big companies invented, long ago, but they end up becoming the backbone of clinical care,” Ricks said.
He noted that many of the basic drugs used in hospitals, like antibiotics and the generics that Americans rely on, are made overseas. A majority of prescriptions filled in the US are generics, and these essential medicines are often made in countries like India and China.
Ricks suggested that though generics are not profitable for companies, which is why they ended up being produced overseas, there could be room to negotiate production in the US instead of slapping tariffs on the drugs.
“We don’t make those medicines today, we invented them long ago, but the industry could play a role in helping national security, and that would be fine,” Ricks said.
“[Generics are] not really valuable,” he said. “And no one’s really in the mood to raise pricing on hospital drugs, so that’s sort of the quandary.”
Repatriation win
On broader tariffs, Ricks said the industry has already proven that just the threat of tariffs has resulted in decisions to manufacture in the US to the tune of nearly $200 billion in capital expenditure commitments.
“I think if the goal is to repatriate the supply chain, I would say probably the threat of tariffs has already done that,” Ricks said.
The recent flurry of announcements, started by Lilly’s in Washington, D.C, earlier this year, has resulted in its peers highlighting on earnings calls billions in manufacturing expansion and buildout through the end of the decade. Some of those include older announcements, while some are new.
Lilly, for example, announced a new round of $27 billion in factory investments, in addition to a previously announced $23 billion since 2020 for a total $50 billion. Johnson & Johnson (JNJ) announced $55 billion in investments, and Roche (RHHBY) — Europe-based and a key manufacturer of base drug compounds — announced $50 billion in US investments.
It’s why Pfizer (PFE) CEO Albert Bourla said this week that the industry should not have tariffs applied to it.
Though investments have been announced in the past few years, it will take time for the factories to get up and running.
Meanwhile, the moves are threatening to weaken Europe’s R&D and manufacturing strength, prompting executives like AstraZeneca’s (AZN) CEO to push the European Union to counter-incentivize companies to stay.
Ricks said the commitments from large-cap pharma should be enough to weaken the threat of tariffs on the sector.
“Declare victory and move on [would] be my advice,” he said.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. That includes GLP-1s, of course. Follow Anjalee as AnjKhem on social media platforms X, LinkedIn, and Bluesky @AnjKhem.
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