Trump wants lower drug prices and pharmaceutical tariffs — what does that mean for Australia?

Australia Broadcast Center

13-05-2025

Pharmaceutical companies around the world are steeling themselves for another major tariff announcement from the Trump administration that could make exporting medicine into the US more expensive.
Australia exports about $US1.6 billion ($2.5 billion) worth of medicines and healthcare products to the US each year, which makes up around 40 per cent of our total pharmaceutical exports across the globe.
But local manufacturers say they are only expecting to feel a moderate ripple from any fresh US trade restrictions.
Mr Trump's "Liberation Day" announcement last month slapped a 10 per cent baseline tariff on exports from many countries, including Australia, and while medical devices were included, pharmaceuticals were spared.
But last week the US president warned specific pharmaceutical tariffs were coming "over the next two weeks" and would force manufacturers to "leave China" and start making more products in the US.
"… [There's] going to be a tariff wall put up, and they won't be happy about it," he said.
While the world awaits that wall, Mr Trump has signed executive orders aimed at speeding up drug approvals and another that promises to bring down the cost of medicines.
US drug companies were told to voluntarily lower their prices in the next 30 days to match prices in comparable countries, otherwise, the government may step in and impose the price.
It is a policy called the "most favoured nation" and some experts say it would push prices up in other countries as drug companies try to recoup lost profits in the US.
Jared Mondschein, director of research at the United States Studies Centre at the University of Sydney, predicted countries like Australia would have to pay more or lose access to some new, innovative products.
But Matt Grudnoff, senior economist at the Australia Institute, said Australian consumers shouldn't panic.
"Our government has enormous bargaining power when it comes to setting the price of drugs here and just because [companies are] no longer able to earn super profits in the US, that doesn't take away from the market tussle here," he said.
"If the US pharmaceutical companies could get a better price out of Australia, they would do it regardless of how much they're gouging the US."
It is really US consumers who will feel the pain of any tariffs in this space.
Analysts are expecting big price hikes in the US for generic drugs, which make up a big portion of prescriptions and operate on small margins.
Australian manufacturers who can not shift their operations to America may see demand drop if they have to compete with US-made medicines.
But if there is no alternative drug in the US market — for example, Australian-patented drugs — American consumers will be forced to pay the higher cost.
However, do not expect prices to change here in Australia.
"I don't think it will have a huge effect on us," said Professor Anthony Scott from Monash's Centre for Health Economics.
Pharmaceutical imports into Australia exceed what we send to the US by around $US1 billion ($1.6 billion) so if we were to go down the path of reciprocal tariffs — where we put a tariff on US pharmaceuticals coming in — there would be major repercussions.
"If we retaliated, that would mean the US products that come here would go up in price," Director of Health at the Grattan Institute, Peter Breadon, said.
That would be dangerous because Australia imports around 21 per cent of total pharmaceuticals from the US, making it the largest single supplier.
With that in mind, Prime Minister Anthony Albanese has already ruled out any retaliatory action.
"We will not join a race to the bottom that leads to higher prices and slower growth," he said in April.
Entangled in this whole tariff business is the fact US drug companies have never been fans of Australia's Pharmaceutical Benefits Scheme (PBS)
That is because the PBS is about keeping prices down for Australians.
Instead of some medicines costing thousands of dollars per script, we only have to fork out a $31.60 co-payment if a medicine is listed on the PBS. The government picks up the rest of the cost.
The scheme forces drug companies into tough negotiations with the federal government on price so the company does not just dictate what the medicine is worth.
The powerful pharma lobby in the US (PhRMA) said this was unfair and undervalued American innovations, so has long pushed the US government to take action against Australia.
But there is almost no chance the PhRMA could influence Australia to change the PBS — it has been described by political leaders as "sacrosanct" and Labor even went to the election with a promise to reduce the co-payment to $25 by next year.
"The PBS is an Australian institution … it will never be up for negotiation," Mr Albanese said last month.
We do not know when the pharmaceutical-specific tariffs will be announced, but medical devices imported to the US have been subjected to tariffs for the last month and American hospitals have been bracing for increased costs and disrupted patient care.
It is expected there will be shortages there of essential supplies such as syringes, surgical gloves, anaesthesia instruments and pulse oximeters because a lot of these come into the US from China.
China was hit by a sky-high 145 per cent tariff by Mr Trump but that was just dropped to 30 per cent for 90 days while trade negotiations resumed.
However, two of Australia's biggest exporters of medical devices to the US have found a way to avoid these tariffs.
Cochlear is a manufacturer of cochlear implants and ResMed is a sleep technology giant. Both companies have manufacturing facilities in Sydney.
They found an exemption to the tariffs, relying on a US law that provides for duty-free importation of products for people with disabilities.
Mr Trump signalled they could be in the "neighbourhood" of 25 per cent and reporting suggested that could increase the cost of drugs in the US by around $US51 billion annually.
The US relies a lot on China, Europe and India for pharmaceuticals but Australia is a much smaller contributor, mostly exporting blood products and vaccines made by CSL.
CSL is one of Australia's biggest companies and has two manufacturing facilities in Melbourne that make influenza vaccines, antivenoms and biotherapies to treat autoimmune disorders.
But CSL also has a massive presence in the US, where it employs more than 19,000 people across 44 states, which is about 60 per cent of its global workforce.
This significant US footprint puts CSL in a good position to respond to any forthcoming pharmaceutical tariffs as they can ramp up US production.
Their US plasma products will still have to undergo some processing in Australia, but CSL is banking on Mr Trump carving out an exemption to safeguard supplies of this critical product.
Telix Pharmaceuticals is another Australian company in a similar boat.
It makes targeted radiation therapies for cancers and has facilities in Melbourne but also has manufacturing and distribution infrastructure in the US.
"Telix Pharmaceuticals does not expect any material impact on its business or supply chain as the result of the international trade tariffs levied by the US government … the majority of Telix's workforce is based in the US," a spokesperson said.
The ABC reached out to seven other pharmaceutical manufacturers in Australia but many did not wish to comment given economic sensitivities.