A Pharmaceutical Executive on Trump’s Tariff Strategy

Summary

Summary of "A Pharmaceutical Executive on Trump’s Tariff Strategy" Episode of The Journal

Release Date: July 28, 2025

In this insightful episode of The Journal, hosted by Ryan Knutson and Jessica Mendoza, the discussion centers around President Donald Trump’s recent tariff strategy targeting the pharmaceutical industry. The episode features an in-depth conversation with Richard Saynor, CEO of Sandoz, a leading global manufacturer of generic drugs. The dialogue explores the implications of these tariffs on the generic drug market in the United States, the challenges faced by companies like Sandoz, and the broader need for structural reforms within the industry.

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Trump’s Tariff Announcement and Industry Response

The episode begins with Jessica Mendoza outlining President Trump’s announcement made at a Cabinet meeting earlier in the month. Trump declared a significant tariff increase for pharmaceuticals, stating:

“Give people about a year, a year and a half to come in. And after that, they're going to be tariffed. If they have to bring the pharmaceuticals into the country, the drugs and other things into the country, they're going to be tariffed at a very, very high rate, like 200%.”
— Donald Trump [00:11]

This policy aims to incentivize pharmaceutical manufacturers to relocate their operations to the United States. Mendoza highlights the immediate response from major companies such as AstraZeneca, which is expanding its U.S. manufacturing capabilities with a $50 billion investment, and Roche, committing $50 billion over five years. Additionally, Eli Lilly announced a $27 billion investment.

Sandoz’s Perspective on Tariffs

Despite these substantial investments from large firms, Mendoza points out that not all sectors within the pharmaceutical industry can adapt similarly. She introduces Richard Saynor, CEO of Sandoz, to provide a contrasting viewpoint.

Sandoz is a Switzerland-based company renowned for producing generic drugs—medicines whose patents have expired and are typically sold at lower prices compared to their brand-name counterparts. Saynor discusses the unique challenges generics face under the new tariff regime.

Impact of Tariffs on Generic Drug Manufacturing

Saynor elaborates on how the proposed 200% tariffs disproportionately affect generic drug manufacturers. He explains:

“This industry treats most of the patients most of the time in the US for a fraction of the cost. These are low-cost products frequently sold at pennies on the dollar. And so tariffs have a huge disproportionate impact.”
— Richard Saynor [01:58]

Given the slim profit margins inherent in the generics market, such steep tariffs could render manufacturing in the U.S. financially unviable. With most of Sandoz's facilities located in Europe, India, and Brazil, relocating production to the U.S. would require significant investment—costs that Saynor’s company is not prepared to bear without assurances of sustainable returns.

Challenges of US Manufacturing and Market Dynamics

When questioned about the feasibility of U.S. manufacturing, Saynor candidly admits:

“It would be loss-making because if I'm selling a pack of antibiotics... we lose money doing that and then we get a 200% tariff on that.”
— Richard Saynor [05:23]

He further explains that Sandoz’s ability to absorb these costs without passing them on to consumers is limited. During an earnings call, he noted:

“Anything beyond that then we will disclose when we get to our next earnings call.”
— Richard Saynor [06:12]

Saynor outlines potential strategies if tariffs impede profitability, including raising prices or withdrawing products from the market. However, he emphasizes a moral responsibility to maintain patient access to affordable medications.

Need for Structural Reforms in the US Market

Saynor advocates for comprehensive structural reforms in the U.S. pharmaceutical market rather than relying solely on tariffs. He states:

“Tariffs are a relatively simplistic tool that tries to address many problems through one action.”
— Richard Saynor [07:15]

He calls for discussions on creating a sustainable market environment that encourages investment, clarifies patent landscapes, and ensures fair competition. This perspective highlights the complexity of the pharmaceutical market and the inadequacy of tariffs as a standalone solution.

Comparative Analysis of the US Market

Saynor describes the U.S. market as "unpredictable" compared to more regulated environments in Europe and other regions. The necessity to engage in litigation for every product launch adds layers of uncertainty:

“In the US every time I launch a product, I have to go to court. And you know, if you go to court, sometimes you win, sometimes you lose. So there's an uncertainty there.”
— Richard Saynor [09:54]

Using Enbrel as an example, he illustrates how extended patents in the U.S. stifle generic competition. Amgen’s strategic use of U.S. patent law has effectively monopolized the market for certain drugs, delaying generic introductions and keeping prices high.

Role of Middlemen and Market Consolidation

Another critical issue raised is the consolidation of middlemen in the U.S. healthcare industry. With only three major buyers for generic drugs, intense price competition ensues, squeezing profit margins further. Saynor explains:

“If you've got 10 suppliers selling into three customers, what happens? Pricing goes down.”
— Richard Saynor [11:46]

Research cited in the episode reveals that generic manufacturers have a net profit margin of 18% in the U.S., compared to 28% for brand-name drug makers, underscoring the financial strain tariffs would impose on generics.

Future Outlook and Optimism for Sandoz

Despite these challenges, Saynor remains optimistic about Sandoz’s future in the U.S. market. He expresses confidence in ongoing conversations with the Trump administration and regulators to find viable solutions:

“I absolutely have no doubt our US Business will continue to grow... I want to work with an administration and with the regulators to find ways to bring more products more sustainably to warrant that investment.”
— Richard Saynor [13:22]

Saynor acknowledges the administration’s recognition of the need for change and sees the tariffs as a catalyst for necessary discussions on market sustainability and investment incentives.

Trade Deal Implications

The episode concludes by touching upon the recent U.S. trade deal with the European Union, which includes a baseline tariff rate of 15% on most goods. However, the applicability of this rate to European-made pharmaceuticals remains uncertain, leaving the future landscape for generics in flux.

“This isn't really a tariff conversation, this is a market conversation.”
— Richard Saynor [14:34]

Saynor reiterates that true progress lies in transforming the market structure to benefit U.S. patients, beyond the immediate effects of tariffs.

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Conclusion

This episode of The Journal provides a comprehensive examination of President Trump’s tariff strategy on the pharmaceutical industry through the lens of a key industry insider. Richard Saynor of Sandoz offers a nuanced critique of the policy, highlighting the complexities of the U.S. generic drug market and advocating for broader structural reforms. The conversation underscores the delicate balance between encouraging domestic manufacturing and ensuring affordable access to essential medications for American consumers.

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Notable Quotes:

• Donald Trump [00:11]: “…tariffed at a very, very high rate, like 200%.”
• Richard Saynor [01:58]: “These are low-cost products frequently sold at pennies on the dollar. And so tariffs have a huge disproportionate impact.”
• Richard Saynor [07:15]: “Tariffs are a relatively simplistic tool that tries to address many problems through one action.”
• Richard Saynor [09:54]: “So there's an uncertainty there.”
• Richard Saynor [11:46]: “If you've got 10 suppliers selling into three customers, what happens? Pricing goes down.”
• Richard Saynor [13:22]: “I absolutely have no doubt our US Business will continue to grow… find ways to bring more products more sustainably to warrant that investment.”
• Richard Saynor [14:34]: “This isn't really a tariff conversation, this is a market conversation.”

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Produced by The Wall Street Journal and Spotify Studios. Additional reporting by Jared Hopkins, Kim McCrail, and David Wehner. Special thanks to Peter Loftus.

Transcript

[Jessica Mendoza]

At a Cabinet meeting earlier this month, President Trump made an announcement. For the pharmaceutical industry, we're going to.

[Donald Trump]

Give people about a year, a year and a half to come in. And after that, they're going to be tariffed. If they have to bring the pharmaceuticals into the country, the drugs and other things into the country, they're going to be tariffed at a very, very high rate, like 200%.

[Jessica Mendoza]

We'll give, like Trump's tariffs on other industries. A primary goal is to encourage manufacturers to move their operations into the US and already some of the largest pharma companies in the world are responding. AstraZeneca is expanding its manufacturing capability here in the U.S. the UK based company just announcing a $50 billion expansion.

[Richard Saynor]

Drugs giant Roche said Tuesday it would invest $50 billion in the U.S. over the next five years. Here in this country, it's a $27 billion investment for Eli L Co.

[Jessica Mendoza]

But drug makers from one sector of the industry say that manufacturing in the US Isn't really an option for them. I spoke to the CEO of one of those companies.

[Richard Saynor]

I'm Richard Saino. I'm the CEO of a company called.

[Jessica Mendoza]

Sandoz, and it is Sandoz or Sandoz. I feel like I've heard people say both.

[Richard Saynor]

Yeah.

[Jessica Mendoza]

Sandoz is a Switzerland based company and it's one of the world's largest makers of generic drugs. Generics are medicines whose patents have expired and can be made by many drug companies. And they generally cost less than brand name drugs. Richard has been in talks with the US Government and he says tariffs aren't the way to encourage companies like his to invest in US Manufacturing. You're working with the Trump administration and having conversations with them. But you've also spoken publicly about your concerns over these tariffs when it comes to your business to generics. Why is that? What are you hoping to achieve by speaking out about this?

[Richard Saynor]

This industry treats most of the patients most of the time in the US For a fraction of the cost. These are low cost products frequently sold at pennies on the dollar. And so tariffs have a huge disproportionate impact.

[Jessica Mendoza]

Welcome to the Journal. Our show about money, business and power. I'm Jessica Mendoza. It's Monday, July 28th. Coming up, a pharma executive on Trump's tariff strategy and what it means for generic drugs.

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[Jessica Mendoza]

Generic drug makers like Sandoz have a different business model than brand name drug makers. Here's the company's CEO, Richard Saner.

[Richard Saynor]

Again, mostly when they think of pharmaceuticals, they think this is one industry. But really in simple terms, there's two industries. There's the patented industry that I guess innovates, brings new drugs to the market. Generally those are sold at very high prices.

[Jessica Mendoza]

So think about a patented brand name drug like Prozac.

[Richard Saynor]

Prozac Weekly is here. Ask your doctor if it's right for you. You can learn more.

[Jessica Mendoza]

Pharma giant Eli Lilly, which developed the drug, held the patent on it for more than a decade. During that time, Lilly was the only company that could sell the drug, making it billions of dollars. When Prozac's patent expired in the early 2000s, that opened the door for other manufacturers to make the generic version, which is called Fluoxetine. Richard's company, Sandoz has made one. In fact, 90% of prescription drugs in America are generics made by companies like Sando.

[Richard Saynor]

My job in a sense, or my company's job, is to bring copies of those drugs to the market as quickly as possible and really drive down costs. So to give you an example, in the US about 90% of all of the drugs dispensed are generics and biosimilars. But they only cost to U.S. patients, about 13% of the total drugs bill. So by far the biggest part of the user, but by far the smaller part in terms of the cost.

[Jessica Mendoza]

Because generics are often much less expensive, the profit margins for the industry are smaller. And so tariffs, especially a possible 200% tariff like the one Trump proposed, they hit harder. Those smaller profit margins also make it harder to manufacture in America, where costs are higher. Most of Sandoz's manufacturing facilities are in Europe, with some factories in India and Brazil. What would your margins look like if you did try to bring manufacturing into the U.S. what would the experience be like for your company to try and do that today?

[Richard Saynor]

It would be loss making because if I'm selling a pack of antibiotics. So for me to build a new beta lactam facility, a penicillin facility, that's about two to three billion dollars now, the board would never give me two or three billion dollars. But I mean, assuming I convinced the board. So where's the market? We currently sell a packet of antibiotics to the US At a price less than a packet of M and Ms. And we lose money doing that and then we get a 200% tariff on that. Now, if I genuinely believed there was an opportunity to sell antibiotics and build a factory and get rewarded for that investment, of course, I'm a businessman, we'd make that investment.

[Jessica Mendoza]

Richard told investors in an earnings call that the company would be able to absorb the costs of the tariffs without passing the price on to consumers.

[Richard Saynor]

Anything beyond that then we will disclose when we get to our next earnings call.

[Jessica Mendoza]

What would your options be?

[Richard Saynor]

Well, I guess you have two or three. In the short term, if we consistently don't make money, we look at then raising prices. And if we can't raise prices, then we would probably withdraw the product from the market.

[Jessica Mendoza]

What effect do you think that would have on US Consumers if you had to do that?

[Richard Saynor]

So we have a record of making sure we put patients first and making sure that we're sustainable in the market. Honestly, we'd have to look at it case by case. I mean, we have a moral responsibility to make sure patients have access to medicine, which takes precedence over everything else. But we also have a business to run. And clearly over time, if we can't pass on price increases through whatever mechanisms and there are other competitors who have either, for whatever reason, lower priced products or want to go into that market, then we'd look at them case by case.

[Jessica Mendoza]

And there's no world in which you would move manufacturing to the U.S. well.

[Richard Saynor]

There is clearly a world where I would. But it's not the tariffs alone. It's also a combination of structural reform to show that there's a way that I can make a sustainable return in the US And I know that's what the administrator they want US products made in the US that are affordable and sustainable. I want exactly the same things. But the trouble is a tariff is a relatively simplistic tool that tries to address many problems through one action.

[Jessica Mendoza]

Richard says that what the tariffs are doing for the generics industry is open up a broader conversation about structural reforms.

[Richard Saynor]

All credit to this administration. I mean, we've had better access to this administration at various levels as an industry and as a company. I mean, I was in Washington a few weeks ago, so I think we have good access and I think really we want the same things. I want to make sure that American patients can get affordable, high quality medicines available in their marketplace. I think tariffs are a mechanism to force that conversation. So I think the positives out of it look, it's forcing us to think about what would it take for us to invest in the US and how do we make the US a sustainable market. Tariffs is part of the equation. The big question is how do we make this a market that makes warrants sustainable investment? How do we understand the patent landscape? How do we understand the payer framework? How do we make sure there's fair competition?

[Jessica Mendoza]

What Richard says needs to change for generic drugs in the U.S. that's next.

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[Jessica Mendoza]

Sandoz has built a steady business in the US selling all kinds of generics and biosimilars. Biosimilars are copies of medicines derived from living organisms or their components. And even though the US Is one of Sandoz's biggest markets, Richard says it's not a very easy one. How would you describe the US Market compared to others that you operate in around the world?

[Richard Saynor]

I mean, one word, unpredictable. Now I know in Europe and the most regulated markets when the patent will expire, and I know how the market will evolve. And in many markets actually there's legislation to encourage the use of generics and biosimilars over the originate. The trouble is, in the US every time I launch a product, I have to go to court. And you know, if you go to court, sometimes you win, sometimes you lose. So there's an uncertainty there.

[Jessica Mendoza]

In Richard's view, US Law is deferential to patent holders, and he says his company often faces pushback when trying to introduce a generic drug in the U.S.

[Richard Saynor]

The originators continue to find mechanisms to extend patents. So let me give you a good example. A drug like Enbrel. Enbrel has been freely available in Europe for the last five years.

[Jessica Mendoza]

Enbrel is a brand name drug manufactured by the company Amgen. It reduces inflammation and is used to treat arthritis and other autoimmune conditions. Richard's company sells a biosimilar version of this in Europe, but can't sell it.

[Richard Saynor]

In the US because of how Amgen chose to use US patent law. It's effectively created a 30 year monopoly. Now I can't launch this product in the US we're currently in litigation with Amgen to challenge that decision because we believe patients should have access to a biologic probably 12 to 15 years after the drug is first launched. Certainly not 30 years. So then you put all of those things together in the US Means that this is probably one of the most uncertain markets in the world.

[Jessica Mendoza]

A spokesperson for Amgen said that the company doesn't comment on pending litigation. Another problem, according to Richard, are the middlemen in the healthcare industry. These middlemen act as drug price negotiators and they've driven down the prices of what they pay for generics in the.

[Richard Saynor]

US the middlemen have generally consolidated. So you now have a situation that really, the US really has only three big customers who are buying generic drugs. Now, if you've got 10 suppliers selling into three customers, what happens? Pricing goes down. It's just simple economics.

[Jessica Mendoza]

Today, generic makers have a net profit margin of 18% in the US compared with 28% for brand name drug makers. That's according to research by the University of Southern California's Shaffer Institute.

[Richard Saynor]

You're basically competing purely on price, and that makes it very difficult. So tariffs alone need to be then brought in combination of how we understand and change the dynamics of the marketplace.

[Jessica Mendoza]

It's this tricky US Market that Trump's pharma tariffs would trickle into. Richards says he's keeping the lines of communication open with the administration and he's hopeful that Sandoz can continue to grow in the U.S.

[Richard Saynor]

I think the positives for me is at least we're having the right conversations. I think behind the scenes, they understand all of these issues. You know, this is still the most attractive market in the world, and I'd love to bring more products to more American patients and I'd love to build factories in the US But I need to be confident that I'm going to get a return on that investment.

[Jessica Mendoza]

So it sounds like you're optimistic about how these conversations are going.

[Richard Saynor]

Look, I think, put it this way, it can't get much worse from where we started. And I think this administration recognizes that something needs to change.

[Jessica Mendoza]

From where things stand right now, what does Sandoz's future in the US Market look like? Do you feel like it's going to grow here, or are you going to be focusing your efforts elsewhere?

[Richard Saynor]

Look, I absolutely have no doubt our US Business will continue to grow. We've always had a business in the U.S. we will continue to have a business in the U.S. and clearly I'd love to invest in the U.S. but we will see. And America and the U.S. is an exciting market. But equally I want to work with an administration and with the regulators to find ways to bring more products more sustainably to warrant that investment. Where's the incentives to invest, to go to court, to build factories, to take risks? And those are really the conversations we're trying to have.

[Jessica Mendoza]

Yesterday the US said it reached a trade deal with the European Union. The agreement includes a baseline tariff rate of 15% on most goods coming from the EU. But as of now, there's uncertainty as to whether or not that rate will apply to European made pharmaceuticals. So tariffs or no tariffs, whatever happens with this policy, it's really this is the US going to be able to make these structural changes?

[Richard Saynor]

It's a structural nature of the market that needs to evolve. So this isn't really a tariff conversation, this is a market conversation. So in a sense, tariffs is a bit of a smokescreen. This is about how do we change the nature of the US market to the benefit of US Patients. But look, I'm very proud about what we do. I'm really excited about our future. And look, the US is an important place and I'd love to find ways to invest and expand our business here and continue to serve American patients well.

[Jessica Mendoza]

Richard Saynor, CEO of Sandoz, thank you so much for your time.

[Richard Saynor]

Pleasure. Thank you so much.

[Jessica Mendoza]

That's all for today. Monday, July 28 the Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode by Jared Hopkins, Kim McCrail and David Wehner. Special thanks to Peter Loftus. Thanks for listening. See you tomorrow.