Big pharma negotiates with politics to avoid tariffs

"Outlook absorbs additional costs estimated at $200 million due to duties introduced to date," reads Merck's quarterly earnings release. Just the latest example of how pharmaceutical groups are approaching the rest of 2025 cautiously as they still have no visibility on the duties the industry will face. Johnson & Johnson, for example, estimated a 400 million impact on its 2025 budget from higher tariff-related costs. The first quarter, on the other hand, has been a positive trend for the industry: this week Bristol Myers Squibb, Merck itself, Sanofi and Roche announced better-than-expected quarterly results. The unknown factor of duties, however, should not be underestimated as the US remains the world's largest market for the industry and imports more than USD 200 billion in prescription drugs per year.

Large US groups are keeping an open channel of negotiations with the White House to prevent new tariffs from taking effect, because they could create supply chain disruptions and ultimately harm patients. "The concern for us is about anything that could impact innovation," said David Elkins, chief financial officer of Bristol Myers, "that could limit access to medicines for patients. Several have already announced huge investments in the US, to move production to the country: Johnson & Johnson, Roche, Novartis and Eli Lilly have pledged to invest a total of 155 billion over the next four years. But the CEO of Roche warns that the production in the US of all goods that are consumed in the country will lead to higher inflation on production costs.

Meanwhile in Europe, pharmaceutical groups are lobbying the EU to give the green light to an upward revision of drug prices, warning that without higher investment incentives, European research would fall further behind the US, where tariff threats have triggered a wave of pharmaceutical investment announcements. Astrazeneca CEO Pascal Soriot said that just as Europe has stepped up defence spending, it must now do the same and invest more to protect its health sovereignty in such a changing global environment. Soriot's comments came after the CEOs of Novartis and Sanofi wrote in a public letter that European price controls on drugs harm innovation and make the region less attractive, while the US and China incentivise it. In addition, European list prices for new drugs were proposed, pegged to net prices in the US and adjusted through discounts. The initiative follows an earlier letter to the EU signed by 30 industry CEOs.

Meanwhile, stocks on the stock exchange have all been in negative territory over the past month, with Bristol-Myers Squibb, Merck, and Novo Nordisk leading the declines with negative balances of more than 20%.

In Europe in the last month of trading the performances indicate for Astrazeneca -10%, Novartis -6%, Roche -13%, Novo Nordisk -21%, Gsk -6%, Recordati -7%. Overseas Pfizer -6%, Eli Lilly -1.5%, Johnson & Johnson -10%, Merck -21%, Abbvie -19%, Bristol-Myers Squibb -25%, Gilead Sciences -5%.