Johnson and Johnson’s chief executive has issued a warning regarding potential US tariffs on the pharmaceutical industry, suggesting they could result in medicine shortages. Although the industry was not included in the broad tariffs announced earlier in the month, the Trump administration has indicated it is considering such measures to enhance domestic manufacturing.
The United States currently imposes no tariffs on pharmaceuticals due to an exemption in the 1994 World Trade Organization trade agreement. Joaquin Duato, head of one of the largest pharmaceutical and medical device companies globally, expressed concerns during a call with analysts. He noted the rationale for keeping pharmaceutical tariffs at zero, citing that tariffs might disrupt supply chains and lead to shortages.
The new US tariffs have affected medical devices and technologies, such as the surgical robots produced by Johnson and Johnson. Duato suggested tax policy as a more effective strategy, rather than tariffs, to bolster manufacturing capacity in the US for both med tech and pharmaceuticals.
In March, Johnson and Johnson announced a $55 billion investment in new US plants over the next four years, marking a 25% increase in investment compared to the previous four years. Additionally, the US administration stated on Monday that it had initiated an investigation into the national security implications of medicine import reliance. The investigation, which commenced on April 1, will include a 21-day consultation period.
Addressing questions about the investigation and possible tariffs, Duato emphasized the importance of healthcare companies collaborating with the administration to address vulnerabilities in the healthcare supply chain. The company’s chief financial officer, Joe Wolk, mentioned their intent to respect the administration and its processes.
While the pharmaceutical industry has typically avoided publicly opposing the tariffs, hoping for resolution through private negotiations, Duato’s comments follow a warning from AstraZeneca’s chair, Michel Demaré, about the potential adverse effects of tariffs on patients, health systems, and health equity.
In its first-quarter financial results, Johnson and Johnson reported maintaining its adjusted diluted earnings per share forecast for the year at $10.50-$10.70, despite incorporating $400 million in costs primarily related to tariffs on medical devices. The company saw a 2.4% increase in sales, reaching $21.9 billion, surpassing analysts’ expectations of $21.6 billion for the same period last year.
