The narrative of Chinese innovative drugs' foray into global markets will usher in a major variable in two weeks.

Half a month to go.

Starting from zero o'clock on September 29, the 100% tariff imposed by the United States on imported patented drugs will be expanded from the current 17 large pharmaceutical companies to all companies in the market.

A multiple-choice question is placed in front of every pharmaceutical company:

Do nothing: 100%;

Sign the U.S. factory construction agreement with the Ministry of Commerce: 20%, valid until April 2, 2030, when it will automatically jump back to 100%;

Sign both the factory construction agreement and the Most-Favored-Nation (MFN) pricing agreement: 0%, valid until January 20, 2029;

Factories located in the European Union, Japan, South Korea, and Switzerland: 15% cap (the upper limit locked by last year's trade agreement, 10% for the United Kingdom).

Generic drugs and biosimilars are temporarily exempted.

The cruel part of this problem is that 100% has never been the figure the U.S. government wants to collect, but is used to force you to choose 0%.

01 "Rules of the Game"

Let's first explain the rules of the game.

The announcement on April 2, officially named "Presidential Proclamation No. 11020", is legally based on Section 232 of the Trade Expansion Act of 1962, an old law in the name of "national security" that steel, aluminum, semiconductors, and copper have all gone through, and now it is the turn of pharmaceuticals.

The objects of taxation are also precisely defined: drugs under patent protection, listed in the FDA Orange Book or Purple Book, as well as their active pharmaceutical ingredients (APIs) and key starting materials. The logic is simple: about 90% of prescriptions in the U.S. (by volume) are generic drugs, and the production of generic drugs and APIs is highly dependent on overseas sources, which is deemed a national security threat. Thus the president has the right to impose additional tariffs on imported drugs at a self-determined rate.

So you see a strange structure: The default tariff rate is 100%, but the actual design is a "compliance discount". Signing the onshore agreement cuts the rate by 80%, and adding the MFN pricing agreement makes it zero. This forces the production capacity, capital and pricing system of the entire industry to migrate to the U.S. mainland.

The exemption circle is also precisely delineated.

No tariffs are imposed on generic drugs and biosimilars, which account for about 90% of U.S. prescriptions by volume; a price increase of a box of metformin will explode on every pharmacy counter within a few weeks, and no one dares to take this political risk. Orphan drugs, cell and gene therapies, plasma-derived therapies and other special drugs are also conditionally exempted. Incidentally, India, the global generic drug base, is fully protected.

China is not in the exemption zone, but China's exports to the U.S. are mainly APIs and generic drugs, and the export volume of genuine patented drugs is still small. Generic drugs and APIs are temporarily outside the Section 232 scope, and some categories on the old 301 list have additional tariffs of 7.5% to 25%.

What is really being roasted on the fire is the annual import of U.S. branded patented drugs worth about hundreds of billions of dollars.

There is another detail worth pondering: according to public analysis by trade consulting agencies, although Pfizer, Johnson & Johnson, and GSK have all signed the MFN pricing agreement, the signing status of their "onshore agreements" has not been officially confirmed so far (Johnson & Johnson announced a $55 billion U.S. factory construction plan, but corporate announcements and Ministry of Commerce agreements are two different documents). In this system, the presence or absence of a single agreement makes the difference between 0% and 100%. Trade lawyers have been checking these lists all summer, as if checking the book of life and death.

02 The Three-Piece Set of "Pledge of Allegiance": Price Cuts, Factory Construction, and Inventory Donation

The four words "Most-Favored-Nation Pricing" in plain language mean: The drug prices paid by U.S. government medical insurance are aligned with the lowest prices among other developed countries.

It targets an industry structure that has lasted for decades: the "U.S. premium". For the same drug, Americans have long paid more than Europeans and Japanese; the industry defends that the extra money subsidizes global R&D. The MFN agreement breaks this logic: either cut the price to the international minimum level, or the tariff on your drug will double.

To avoid death, building factories alone is not enough, you have to complete the three-piece set. Just look at the nine companies that just signed on August 31 to understand.

That day, the White House announced new agreements with Astellas, Kyowa Kirin, UCB, Teva, Sun Pharmaceutical, Alcon, CSL, BridgeBio and Beigene. These nine mid-sized pharmaceutical companies cover medications for hemophilia, Parkinson's disease, macular degeneration, glaucoma, liver disease, skin diseases and various cancers.

Three-piece set list:

First item, price cut. All drugs of the nine companies are included in the MFN price system of Medicaid in each state, and they promise that all new drugs in the future will also follow MFN rules.

Second item, factory construction. The nine companies jointly promise to add at least 196 billion U.S. dollars of new investment in the U.S. mainland in the near future.

Third item, donate inventory. UCB donates 163 tons of levetiracetam API for anti-epileptic drugs, Sun Pharmaceutical donates 71.4 tons of clindamycin plus 6.75 tons of doxycycline, Teva donates 45 tons of metronidazole plus 4.8 tons of amlodipine, Astellas donates 25 kilograms of tacrolimus — all of which are injected into the U.S. "Strategic API Reserve" (SAPIR), a national stockpile set up to reduce external dependence.

Price cuts, capital contribution, and handing over core assets form a trinity, which is exactly the rhythm of submitting a pledge of allegiance.

Up to now, 26 pharmaceutical companies have signed the MFN, covering about 89% of the U.S. branded drug market. The timeline is also worth noting: the executive order was launched in May 2025, letters were sent to 17 large pharmaceutical companies at the end of July, Pfizer signed the first order on September 30 (70 billion U.S. dollars of investment + 3-year tariff exemption + Medicaid price cut), 9 more companies signed in December, TrumpRx went online in February 2026 to offer direct discounts to patients, and the last 9 companies were added on August 31.

For Chinese investors, the most familiar name on the list is Beigene, which is also the first Chinese pharmaceutical company to sign an MFN agreement with the United States, and its tislelizumab entered the Medicaid system at an agreed price — trading price cuts for market access.

Adding up all these pledges of allegiance, it is the largest collective payment in the history of the industry: the accumulated promised U.S. manufacturing investment of various pharmaceutical companies has exceeded 480 billion U.S. dollars, at least 22 new factories, and about 44,000 jobs. The individual commitments are as follows: AbbVie 100 billion (the largest single commitment), Pfizer 70 billion, Merck 70 billion, Johnson & Johnson 55 billion, Roche 50 billion, AstraZeneca 50 billion, Eli Lilly has accumulated more than 50 billion since 2020, Novartis 230 billion...

The White House's own calculation is more generous: the MFN agreement will save the United States about 600 billion U.S. dollars in drug costs in ten years.

03 Who Pays, and How?

The first cost is profit margin.

Industry estimates show that the annual import of U.S. branded patented drugs is about hundreds of billions of dollars, and 70% to 90% of the tariff cost will be transmitted to the drug price system within 12 to 24 months. However, the 20% or 0% tariff is only on paper, the real bleeding point is the MFN itself: the net price is directly aligned with the international minimum price. For the first time, the "U.S. premium" has changed from an item on the income statement to an item of compliance cost.

The second cost is production capacity.

The economics of relocation is very harsh: factories are easy to build, but pharmaceutical plants are difficult to relocate. Changing the origin of an API is a "major change" for the FDA, which requires re-verification; industry surveys show that 80% of biotechnology companies need at least 12 months to find alternative suppliers, and 44% need more than two years. Most of these new factories will not start construction until 2026 to 2027, and will not be put into production until 2028 to 2029, while the validity period of 0% tariff ends on January 20, 2029. That is to say, pharmaceutical companies have to complete the factory construction within the same time window when the tariff exemption expires. The schedule is so tightly aligned that it is not like a coincidence.

The third cost is the global pricing order.

The MFN anchors U.S. prices at the lowest level of developed countries, on the other hand, the UK-US agreement last December raised the net price of new drugs in the UK by 25% — one cut and one rise, global drug prices are converging to the middle. The old order that "high U.S. prices support global R&D" is being dismantled and recast.

On the transmission chain, non-U.S. pharmaceutical companies are the most directly affected. Switzerland suffers the most: Roche and Novartis together export about 23 billion U.S. dollars of branded drugs to the United States every year. Although Switzerland is in the 15% upper limit bracket together with the EU, Japan and South Korea, this export volume determines that it is the world's largest single impacted entity; Ireland is safe instead, with about 50 billion U.S. dollars of pharmaceutical exports to the United States covered by the EU's 15% upper limit.

China's industrial chain has its own unique situation. Patented drugs originating in China entering the United States are not protected by the 15% regional upper limit. They either build production capacity onshore, or follow the path of Beigene, using MFN to exchange for 0% tariff.

For a large number of Chinese Biotech companies that do license-out, the U.S. net price being compressed by MFN means that the future royalty base will shrink; partners will pay more and more attention to where your production capacity is located. The narrative of going global has added a major variable from now on.

04 Conclusion

The essence of this system, in a nutshell: The United States has changed the "qualification to sell at a higher price" from a market behavior to a license that requires application, payment, and has a validity period.

In the past, pharmaceutical companies paid for patents; now, they also have to pay for market access, and pay three times: price cuts, factory construction, and relocation of production capacity. And the drug price, in the end, will be the only choice among all the multiple-choice questions that patients have to pay for.

Looking further ahead, there is another shoe to drop after September 29. In late July, Trump previewed a tiered tariff plan for generic drugs on social platforms: maintain 0% before August 2028, then 100% for the next year, and 200% from 2029. This plan has not yet gone through the official announcement procedure, but the direction has been made clear:

The door for the pledge of allegiance will open to India and the global generic drug industry next.

This article is from WeChat official account "Yi Yao", author: Wang Zhe, published with authorization from 36Kr.