Trump’s Tariffs Set to Hit Ireland, Where Drugmakers Play Tax Games

President Trump’s planned 15 percent tariff on medicines from Europe has shined a spotlight on Ireland, which sends the United States tens of billions of dollars’ worth of cancer medications, weight-loss drug ingredients and other pharmaceutical products each year. No other country sends more.

Manufacturing blockbuster medications there offers tax benefits for American drug companies. But the appeal of Ireland for the industry goes deeper: Drugmakers have long shifted their patents and profits there, as well, to avoid billions of dollars in taxes. Such strategies can be legal but have been repeatedly challenged by tax authorities.

For decades, the free flow of medicines across borders “had the side effect of more or less providing manufacturers free rein to play tax games,” said Brad Setser, an economist at the Council on Foreign Relations.

The tariffs on medicines from Europe, which could go into effect within weeks, create a new calculus for drugmakers. If they keep production in Ireland, they face billions of dollars in levies. If they move manufacturing to the United States, they will most likely face a range of increased costs.

Drug companies could devise creative ways to limit the damage. They will be better positioned to weather the tariffs if they have “sophisticated tax skills,” Wall Street analysts at the investment bank Leerink wrote to investors in July.

Most executives and other employees of multinational drug companies are in the United States. So are a majority of their laboratories, clinical trial sites and, crucially, sales. But many of these companies register only a tiny share of the profits in the United States, helping them lower their overall tax bill.