For the bio/pharma industry, it has been again another active week on the US policy front, with additional moves relating to tariffs, the federal government shutdown, and drug pricing. What is the latest?

By Patricia Van Arnum, Editorial Director, DCAT, pvanarnum@dcat.org

Unpacking the latest: tariffs and drug pricing
The prospect of pharmaceutical-industry specific tariffs took another turn this week (September 30, 2025) following an announcement by the White House and Pfizer that they had reached an agreement under which Pfizer would have a three-year grace period for any tariffs resulting from an ongoing effort by the Trump Administration to impose pharmaceutical-industry specific tariffs under Section 232 of the Trade Expansion Act of 1962, conditioned on Pfizer increasing US-based capital investment, a key policy objective in the Administration’s trade/tariff policy.

In announcing the agreement, Pfizer said it is committing an additional $70 billion dedicated to US research, development, and capital projects in the next few years (as reported on September 30, 2025), which the company says builds on more than $83 billion in US investment from 2018-2024. Pfizer currently has a US workforce of 31,000 employees supported by 13 manufacturing and distribution sites and seven major R&D facilities in the US, according to the company.

The Pfizer agreement also addresses another policy goal of the Administration: most-favored-nation drug pricing. The agreement with Pfizer represents the first agreement with the Administration and a major pharmaceutical company to implement measures for most-favored-nation drug pricing.

The premise behind most-favored-nation drug pricing is that the US pays higher prescription drug costs comparative to other developed countries and therefore assumes a larger share of the costs of drugs and that measures should be taken to reduce the differential in the prices of prescription drugs in the US compared to other developed countries, where prescription drug prices are lower. Under its agreement with the US government, Pfizer has voluntarily agreed to a price framework under which prices of its drugs in the US are comparable to drug prices to those available in other developed countries and that pricing newly launched medicines are at parity with other key developed markets. Pfizer will also participate in a direct purchasing platform, TrumpRx.gov, which will allow US patients to purchase medicines from Pfizer at a discount. Pfizer says that a large majority of the company’s primary care treatments and some select specialty brands will be offered at savings that will range as high as 85% and on average 50%.

“We now have the certainty and stability we need on two critical fronts, tariffs and pricing, that have suppressed the industry’s valuations to historic lows,” said Albert Bourla, Chairman and CEO, Pfizer, in a September 30, 2025, statement. “We’ve agreed to a three-year grace period during which time Pfizer products under a Section 232 investigation won’t face tariffs, provided we further invest in manufacturing in the United States. Additionally, we’ve established a balanced global pricing approach that continues to recognize the value of innovation while ensuring prices in the US and other developed countries are both reasonable and sustainable, maintaining the strength of the US market alongside other developed nations.”

Delving deeper: tariffs
The US government’s agreement with Pfizer does not preclude the formal imposition of overall pharmaceutical-industry specific tariffs under the Section 232 investigation. The groundwork for potential industry-specific tariffs was laid earlier this year (April 1, 2025), when the US Department of Commerce initiated an investigation to determine the effects on US national security of imports of pharmaceuticals and pharmaceutical ingredients. The statutory authority for such an investigation comes Section 232 of the Trade Expansion Act of 1962, as amended, which allows the President to impose import restrictions based on an investigation and affirmative determination by the US Department of Commerce that certain imports threaten to impair US national security. The Commerce Secretary’s report to the President is prepared within 270 days of the initiation of the investigation. For the Section 232 investigation into pharmaceuticals, such a report would be required no later than December 27, 2025. After the Commerce Department issues its report, the President can concur or not with the Commerce Secretary’s recommendations, and take action to “adjust the imports of an article and its derivatives” or other non-trade related actions as deemed necessary. If the Commerce Secretary determines that there is no threat to U.S. national security, no further action is taken. If the Commerce Secretary determines that there is such a threat, the President has up to 90 days to decide (1) whether to concur with Commerce’s determination; and (2) if concurring, whether to act. If the President opts to act, the President has 15 days to implement actions. Within 30 days after deciding whether or not to take action, the President must submit a written statement to Congress providing the reasons for that decision.

The prospect of pharmaceutical-industry tariffs has loomed over the industry since the initiation of the Commerce Department investigation and has been reinforced by comments made by the Administration. Last week (September 25, 2025) President Donald Trump announced via a social medial post that beginning on October 1, 2025, that the US will impose a 100% tariff on any branded or patented pharmaceutical product, unless a company is building pharmaceutical manufacturing plants in the US. He defined “is building” as “breaking ground” and/or “under construction.” There has been no formal move yet to impose such tariffs, and the US government’s agreement with Pfizer may portend other potential deals with other companies or signal a move toward deferring such tariffs for now.

Aside from pharmaceutical-industry specific tariffs under the Section 232 investigation, the pharmaceutical industry, like other industries, is facing reciprocal tariffs, which are imposed on a country-by-country basis. While the reciprocal tariffs imposed thus far by the Administration remain in effect, a battle over the legal authority of the Administration to impose such tariffs is underway. Last month (September 2025), the US Supreme Court reported that it would hear oral arguments on November 5, 2025, in a case examining the legal authority of the current Administration to impose tariffs under the International Emergency Economic Powers Act (IEEPA), which was used to impose reciprocal tariffs on a country-by-country basis.

The Trump Administration first laid out a plan for imposing reciprocal tariffs in February (February 2025) to counter non-reciprocal trading arrangements with US trading partners and to improve US competitiveness, including in manufacturing. Those reciprocal tariffs were scheduled to go into effect on April 9, 2025, but the Administration placed a 90-day pause (until July 9, 2025) on their implementation to enable countries to negotiate these tariffs with the US government. The US government then extended the deadline again, to August 1, 2025, except for certain countries, which were sent letters from the White House that specified their tariffs, as the US government continued to negotiate individual deals with its trading partners. Since that time, the US has struck deals/framework agreements with key trading partners of particular relevance to the pharmaceutical industry, including the European Union, the UK, Switzerland, and Japan, and has ongoing negotiations with China and India as it continues to refine those agreements. IEEPA provides the President broad authority to regulate a variety of economic transactions following a declaration of a national emergency. In 2025, President Donald Trump issued a series of Executive Orders imposing tariffs on most US imports under IEEPA and other statutory authority. This initially included certain tariffs on China, Canada, and Mexico in February 2025. Later a baseline tariff of 10% on almost all US trading partners was imposed as well as higher country-specific reciprocal tariffs, according to an analysis by the Congressional Research Service, with modifications to these tariffs several times. IEEPA was also later used to impose separate tariffs on Brazil, India, and other countries.

Delving deeper: drug pricing
Pfizer’s voluntary agreement to implement measures relating to most-favored-nation drug pricing follows actions taken by the Administration to oblige pharmaceutical companies to take action on drug pricing. In July (July 31, 2025), President Trump sent letters to 19 pharmaceutical manufacturers, including Pfizer, outlining the steps they must take to be in alignment with most-favored-nation drug pricing. The letters followed the issuance of an Executive Order in May (May 2025) to put into motion a plan to implement most-favored-nation drug pricing. The Executive Order had sought voluntary actions by bio/pharmaceuticals to adopt most-favored-nation drug pricing; the follow-up letters sent in July 2025 indicated that sufficient progress was not made in voluntary initiatives and outlined specific actions for bio/pharmaceutical companies to take. That letter addressed four main points:

• Calling on manufacturers to provide most-favored-nation prices to every single Medicaid patient. (Medicaid is the federal health insurance plan for low-income individuals).

• Requiring manufacturers to stipulate that they will not offer other developed nations better prices for new drugs than prices offered in the United States.

• Providing manufacturers with an avenue to sell medicines directly to patients, provided they do so at a price no higher than the best price available in developed nations.
• Using trade policy to support manufacturers in raising prices internationally provided that increased revenues abroad are reinvested directly into lowering prices for US patients and taxpayers.

Industry trade groups, such as the Pharmaceutical Research and Manufacturers of America (PhRMA), which represent innovator drug companies in the US, and the Biotechnology Innovation Organization (BIO), which represents biotechnology and bio/pharmaceuticals companies in the US, both support measures to lower the cost of prescription drugs in the US but have been critical of most-favored-nation drug pricing. They cite the negative impact such measures would have on research and development, patient access to medicines, and for not addressing higher costs associated with prices provided by pharmacy benefit managers (PBMs), which act as intermediaries between consumers and drug manufacturers, which they assert are a key contributor to higher prescription drug costs in the US. PhRMA also points to the need for reforms to address price markups under the 340B pricing program, which allows eligible safety-net healthcare organizations to purchase outpatient drugs at a discount from pharmaceutical manufacturers as well as other practices by foreign countries that it says undervalue innovation and pricing.

“Our industry is committed to working with the Trump administration to strengthen American leadership in biopharmaceutical innovation and lower costs for patients,” said PhRMA President and CEO Stephen J. Ubl, in a September 30, 2025, statement. “That is why this week we announced three major actions our industry is taking, including $500 billion in new infrastructure investments, financial support for 10 million patients struggling to afford medicines, and launching a new website to make it easier for patients and businesses to connect to direct purchase programs offered by manufacturers.” PhRMA plans to launch that website, AmericasMedicines.com, in January 2026 to connect patients with manufacturers’ direct purchase programs by allowing manufacturers to list a wide range of medicines and connect patients directly to available options prescribed by their doctor. Pharmaceutical manufacturers must make their own decisions to offer direct purchase programs, determine how they will work, and if they want to participate in AmericasMedicines.com.

US federal government shutdown: impact on pharma
The other large issue in the US is the shutdown of the US federal government, taking effect on October 1, 2025, following an impasse by Congress to reach a consensus on extending funding for fiscal year 2026, which began on October 1. Lawmakers continue to negotiate a deal (not reached as of press time on October 2, 2025). Prior to the shutdown, the US Food and Drug Administration issued a summary of activities that would continue and those would be impacted by a lapse in funding and a related contingency plan.  

Overall, barring other developments, with the lapse of appropriation, 13,872 (86%) of FDA staff will be retained, including 10,740 (66%) who are exempt (their activities or position are already funded or otherwise exempted) and 3,132 (19%) who are excepted (their activities are deemed necessary by implication, or for the safety of human life or protection of property).

FDA activities funded through carryover user-fee funding and other unlapsed funding would continue. This includes certain activities related to the regulation of human and animal drugs, biosimilar biological products, and medical devices, and all FDA activities related to the regulation of tobacco products. In addition, all FDA activities related to imminent threats to the safety of human life or protection of property would continue. This includes detecting and responding to public health emergencies and continuing to address existing critical public health challenges by managing recalls, mitigating drug shortages, and responding to outbreaks related to foodborne illness and infectious diseases. It also includes surveillance of adverse event reports for issues that could cause human harm, the review of import entries to determine potential risks to human health, conducting for cause certain surveillance inspections of regulated facilities and related regulatory testing activities, and criminal enforcement work and certain civil investigations.

However, other activities are paused or delayed with the lapse in appropriations. For the duration of the lapse, FDA would not be able to accept new drug applications, generic drug applications, biological product applications, biosimilar biological product applications, animal drug applications, or medical device submissions that require payment of a user fee. During the lapse period, the FDA will not have legal authority to accept user fees assessed for FY 2026 until an FY 2026 appropriation or Continuing Resolution for FDA is enacted. This will mean that FDA will not be able to accept any regulatory submissions for FY 2026 that require a fee payment and that are submitted during the lapse period.