Drugmakers have pledged to invest $350 billion in US after tariff threat

GSK and Eli Lilly on Tuesday were the latest multinational drugmakers to unveil plans to build new U.S. manufacturing plants and other operations, moves aimed partly at mitigating the threat of tariffs on imported medicines by the Trump administration.

So far this year, more than a dozen drugmakers have pledged to spend more than $350 billion collectively by the end of this decade on manufacturing, research and development and other functions in the U.S., a Wall Street Journal tally of company announcements showed.

“The vast majority of our products going into the U.S. are manufactured in the U.S.," GSK Chief Executive Emma Walmsley said in an interview Tuesday when the company announced its $30 billion U.S. investment in research and development and supply-chain infrastructure over the next five years. “This of course adds to it, and it’s about the new pipeline that’s going through."

Lilly said Tuesday it will build a $5 billion manufacturing plant west of Richmond, Va., to make complex types of medicines known as monoclonal antibodies and bioconjugates.

GSK Chief Executive Emma Walmsley

These come on top of pledges from several other big drugmakers this year. Johnson & Johnson has committed to spending $55 billion over the next four years on manufacturing, research and technology in the U.S. AstraZeneca of the U.K. pledged to spend $50 billion by 2030 on new manufacturing and research capacity in the U.S.

Some of the projects were in the works before this year, aimed at bolstering domestic supply chains to mitigate the kind of cross-border disruptions drugmakers experienced during the Covid-19 pandemic.

And some of the large investment amounts drugmakers have pledged include spending on nonmanufacturing endeavors such as drug research and routine capital spending.

But the Trump administration’s tariff push is also driving the increased U.S. spending, as companies hope to minimize tariff costs. Drugmakers oppose the new tariffs, noting that medicines have historically been exempt from tariffs. They have lobbied the administration to spare pharmaceuticals from tariffs, arguing that a better way to spur U.S. drug manufacturing is through tax policy.

Brand-name pharmaceuticals are subject to a 15% maximum tariff on imports from the European Union under the recent trade deal, once the U.S. concludes its investigation into potential pharmaceutical sector tariffs.

Drugmakers hope the new U.S. spending pledges will either persuade Trump to drop potential additional tariffs on medicines, or at least limit their impact by rolling out more production in the U.S.

The U.K.’s GSK, formerly known as GlaxoSmithKline, said its plans include $1.2 billion for the construction of a new factory outside Philadelphia to make drugs for respiratory diseases and cancer, as well as technology upgrades at five existing U.S. plants.

GSK’s plans reflect the “reality" of U.S. trade policy, Walmsley said, but they are also part of a longer-term shift in investments toward the U.S., its biggest market.

Johnson & Johnson said it would spend $55 billion over the next four years on manufacturing, research and technology in the U.S.

Lilly’s Virginia plant is one of four new manufacturing sites that Lilly is planning in the U.S. and part of $27 billion in new capital spending that Lilly unveiled in February.

Lilly said it would hire about 650 people to run the plant, and it would take about 1,800 construction workers to build it.

“Our investment in Virginia underscores our commitment to U.S. innovation and manufacturing—creating high-quality jobs, strengthening communities and advancing the health and well-being of Americans nationwide," said Lilly CEO David A. Ricks.

Historically, medicines have been excluded from tariffs because they are essential.

The Trump administration is conducting an investigation that could clear the way for pharmaceutical-specific tariffs. Trump has said the rates could rise over about 18 months to as much as 250%, to give companies time to reshore manufacturing.

But drugmakers have told the Trump administration they would need more time than that because it can take about five years to build a new manufacturing plant and get regulatory signoff.

Some companies have made contingency plans to mitigate the potential near-term tariff impact by stockpiling in the U.S. the main ingredients of drugs that are made elsewhere, including for popular weight-loss drugs.

By relocating manufacturing to the U.S., large drugmakers will likely mitigate the hit to their profits, analysts say.

Morningstar analysts estimated large drugmakers would see a 4% reduction in profits if they relocated some manufacturing to the U.S., versus a 7% cut if they didn’t. European-based drugmakers are more exposed because they generally have smaller U.S. manufacturing footprints, but several European companies have announced large expansions.