The move, long anticipated by the industry, is aimed at addressing national security concerns linked to dependence on overseas production of critical medicines. However, officials indicated that the policy is also designed as a negotiation tool, allowing companies to avoid the steep tariffs under certain conditions.

Under the new framework, pharmaceutical companies can significantly reduce or completely eliminate the tariffs by entering into agreements with the US government.

Firms that commit to setting up manufacturing facilities in the US before January 2029 will face a reduced tariff of 20 per cent. The tariff can drop to zero if companies also agree to pricing arrangements aligned with government healthcare programmes such as Medicaid.

Experts say this flexible approach is intended to push companies towards negotiations. 'It's all about leverage,' noted Sean Sullivan, a professor associated with the University of Washington and the London School of Economics.

Despite the headline announcement, the immediate impact may be limited, as the tariffs do not apply to generic medicines, which account for the majority of prescriptions in the US.

Additionally, several major pharmaceutical companies have already secured agreements with the administration, enabling them to bypass the new levies. More firms are expected to follow in the coming months.

The US government clarified that it will honour existing trade arrangements with key partners, including United Kingdom, Europe, Switzerland, South Korea and Japan.

Notably, a deal signed last year between the US and the UK ensures that pharmaceutical exports from the UK to the US will continue to attract zero tariffs for three years. In return, the UK has agreed to higher payments for certain medicines through its National Health Service.

The UK government has described the agreement as beneficial for patients and businesses, stating that it could accelerate access to new treatments, including advanced cancer therapies.

Policy analysts have raised concerns about the potential economic impact of the tariffs, particularly on smaller pharmaceutical companies that may lack the resources to negotiate favourable deals.

Richard Frank of the Brookings Institution noted that the real-world implications remain uncertain. He pointed out that while the policy appears strong in principle, its effectiveness will depend on how exemptions and agreements are implemented.

There are also concerns that shifting manufacturing to the US could increase production costs, potentially affecting drug prices in the long term.

The White House claimed that the threat of tariffs has already encouraged pharmaceutical companies to commit investments worth $400 billion (approximately ₹33 lakh crore) in US manufacturing.

Officials have given large companies 120 days and smaller firms 180 days to negotiate agreements and adjust their operations.

Alongside the pharmaceutical policy, the administration has also introduced changes to tariffs on metals such as steel, aluminium and copper. Items with minimal metal content will no longer attract these tariffs, signalling a more targeted approach to trade restrictions.

While the 100 per cent tariff on patented medicines marks a significant policy shift, its real impact will depend on how companies respond to the incentives and negotiations offered by the US government. The move reflects a broader strategy of using trade measures to reshape domestic industries, but questions remain over its long-term effects on costs, competition, and global trade dynamics.