Alberto Mingardi // 08 January 2026

Donald Trump's threat of a 100% tariff on medicines, with the exception of generics, is for now a blank shot. The announcement led American companies to import more in September, for example, from Switzerland, to increase their stocks. But when the fateful date arrived (it was supposed to be 1 October), the administration preferred to engage Big Pharma in one-to-one negotiations, giving up the offensive in exchange for investment guarantees.

The reasons why Trump started his trade war are well known. Globalisation had damaged the United States, even though it had promoted it. It had weakened American manufacturing due to offshoring. International trade has facilitated technology transfer to other countries, which have benefited from US innovation by copying it. In general, even traditionally friendly countries, such as those in Europe, tend to sell their goods at high prices in the US, to the detriment of American consumers, while keeping their own markets closed to US products.

This narrative is largely misleading. However, it is not entirely without truth, and often it is the elements that are least recognised as such. The German government cannot be blamed if Americans like BMWs more than Germans like Fords. It is true, however, that the EU has always been impervious to imports of American meat.

The case of pharmaceuticals is unique. The high concentration of cutting-edge companies in the United States is not solely due to historical reasons. It is also the result of the fact that the US is the only market economy in which drug prices have remained essentially unregulated. There are intermediaries who negotiate with pharmaceutical companies on behalf of large buyers, such as hospital groups (including public ones) and insurance companies.

However, in general, the price at which a drug enters the market is decided by its manufacturer. Unlike its European counterparts, such as Italy's AIFA, the Food and Drug Administration deals exclusively with issues related to the safety of medicines, which determine whether they can be placed on the market. It does not set prices by law.

This has meant that, over the years, American patients have borne the costs of research, which has then benefited the rest of the world. It is estimated that around 90% of attempts to develop a new drug fail and that only 10% of compounds that enter the clinical phase actually reach the market. Critics of the industry point out that once the first pill is produced, production costs plummet. This is true, but the costs of the research behind that first pill must be added to the costs of all the research that fails to leave the starting line. It is difficult to imagine anyone taking on this burden without also being motivated by the desire to make a profit.

Europe, on the other hand, is a mosaic of countries where medicines are mostly sold at a price not far from production costs. The state is a monopsonist, i.e. it monopolises demand for all reimbursed medicines. Prices are only free for non-reimbursed medicines and over-the-counter medicines. In other words, it is mainly the more complex products that are purchased by the public health service at a price set by the state itself.

Furthermore, in Italy, as in many other EU countries, there is a payback system in place: there are spending thresholds, above which pharmaceutical companies must return what they have collected (in full or in part, in the case of hospital drugs) to the state. In other words, not only does the buyer set the price, but they also demand that the seller give up a portion of what they are owed, returning it to the buyer, by the latter's unilateral decision. Nor can the seller refuse to deliver medicines that they already know will not be paid for, or will only be partially paid for, because patients' lives would be at stake.

When defining budget laws, politicians tend to observe that pharmaceutical companies are not exactly crying poverty and therefore confirm the same system year after year. Public finances benefit from this, albeit through a perverse mechanism. Healthcare professionals like to talk about the “appropriateness” of treatments and blame doctors' tendency to prescribe excessive tests and treatments, at least in part to alleviate patients' anxieties. But there is not much appropriateness in the combination of spending caps and reimbursement measures. The simple fact that the latter must be regularly resorted to suggests that the former are set at an incongruous level.

The problem that Europe and Italy will have to face is the change in scenario brought about by Trumpism. It will not be through a 100% tariff, but Trump wants to reduce the price of medicines for Americans. However, research costs may not necessarily fall. In the current situation, this presumably means less research and fewer innovative drugs, unless other countries also bear part of the costs of developing new medicines.

Italy, with its rapidly ageing population, would be affected more than others. The whole of Europe's approach to drug price regulation is bound to change in the future. Who knows, perhaps a country with a strong pharmaceutical tradition like ours could, for once, be ahead of the curve in this regard.

Alberto Mingardi is the General Manager at the Bruno Leoni Institute.

This blog is a translation. Click here to read the original in Italian.