President Donald Trump's proposed 100% tariffs on foreign pharmaceuticals will ultimately be paid by American patients and insurers, not foreign drug companies, according to economist Justin Wolfers.
He argues the administration’s theory that tariffs will force price cuts is flawed, especially for patented, brand-name drugs where there is no competition and demand is inelastic.
Economist Warns Of Higher Drug Costs For Consumers
Wolfers explained that for these unique medications, the economic leverage lies entirely with the manufacturer. “The administration’s theory of the case has always been American consumers have options, and they can go elsewhere,” he stated.
“You know, there’s exactly one class of goods where we don’t have options. It’s a drug that’s patented.” Because there are no alternatives, foreign companies can simply pass the full cost of the tariff onto the U.S. market.
“That’s the textbook case where buyers—American patients and insurers—eat the cost,” Wolfers noted in a social media post.
Industry Warns Against Tariffs Despite Investment Possibility In Domestic Companies
The proposed tariffs are part of a broader strategy to shield American manufacturers from what the administration calls “unfair outside competition” and have triggered a massive $270 billion investment surge into U.S.-based manufacturing.
Companies with a strong domestic presence, such as Eli Lilly and Co. (NYSE: LLY) and Pfizer Inc. (NYSE: PFE), are seen as potential winners in this policy shift.
However, the move has drawn sharp criticism from the pharmaceutical industry itself. The Pharmaceutical Research and Manufacturers of America (PhRMA) warned that “every dollar paid in tariffs is a dollar that can’t go toward American manufacturing or developing future treatments and cures.”
Patients Relying On Patented Drugs Will Bear The Cost
While the policy exempts generic drugs, which Wolfers acknowledged most Americans use, the financial burden will be felt by those who rely on specialized, foreign-made brand-name medications.
The tariffs are expected to have “a meaningful commercial hit for US consumers,” according to an Oxford Economics analyst, Louise Loo.
Despite the potential for a domestic manufacturing boom, economists warn that for the most vulnerable patients requiring patented drugs, the immediate outcome will likely be a significant increase in price.
Price Action
Here’s a list of pharma-linked exchange-traded funds that investors could consider.
| Pharma ETFs | YTD Performance | One Year Performance |
| VanEck Pharmaceutical ETF (NASDAQ: PPH) | 0.71% | -8.50% |
| iShares US Pharmaceuticals ETF (NYSE: IHE) | 7.03% | -0.54% |
| Invesco Pharmaceuticals ETF (NYSE: PJP) | 9.73% | 4.73% |
| SPDR S&P Pharmaceuticals ETF (NYSE: XPH) | 10.27% | 6.00% |
| KraneShares MSCI All China Health Care Index ETF (NYSE: KURE) | 46.79% | 21.84% |
| First Trust Nasdaq Pharmaceuticals ETF (NASDAQ: FTXH) | 1.74% | -4.65% |
| Direxion Daily Pharmaceutical & Medical (NYSE: PILL) | 10.09% | -6.83% |
The SPDR S&P 500 ETF Trust (NYSE: SPY) and Invesco QQQ Trust ETF (NASDAQ: QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, rose on Friday. The SPY was up 0.57% at $661.82, while the QQQ rose 0.41% to $595.97, according to Benzinga Pro data.
Meanwhile, SPDR Dow Jones Industrial Average ETF Trust (NYSE: DIA), tracking the Dow Jones, ended 0.62% higher at $462.28.
The futures of Dow Jones, S&P 500 and Nasdaq 100 indices were trading higher on Monday.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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