Balancing Cost Control with Innovation Amidst Tariffs

Pharmaceutical Executive: How can companies balance cost control with innovation and investment in R&D?
Lynlee Brown: This is where the macro-policy meets the micro-impacts from a company perspective and how they seek to mitigate this very large potential increase in cost. It’s fascinating because in this particular sector, from a tax perspective, the predominance of companies have a very specific tax structure. It lends itself very well, from a tax-planning perspective, to not having tariffs.

When tariffs are introduced, it has an opposite effect. What we have right now is a situation where a lot of costs are built into a product’s cost. That is optimal. From a tariff perspective, it is suboptimal. We have R&A and IP that’s not in the US. We pay for that in the form of a tariff, when we have them.

When we think about innovation, what we’re seeing is two schools of thought. We’re seeing discrete modeling for short-, medium-, and long-term and there’s an umbrella of uncertainty the encapsulates all of it. We know that in this industry, you’re dead if you’re not innovating. Where do you innovate, where do you put that money, and how long will this current state of play be in focus?

Whereas R&D decisions never contemplated trade before, now they absolutely must. The key is balancing that. You can certainly be an alarmist and prepare for millions in tariffs. What about the long-term impact on the industry and businesses? Decisions are being made on potential impact to costs, the more agile companies are saying ok, putting that in the plan, but still thinking big picture.