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Donald Trump is threatening 100% tariffs on pharmaceutical companies that have not struck deals to lower US drug prices.

The new tariff will only apply to branded drugs and their active ingredients. Generic drugs, which make up more than 90% of medicines sold in the US, will be exempted from tariffs for at least one year. Orphan, veterinary and other specialty drugs are exempt if they are from trade deal countries or meet urgent public health needs.

Drugmakers who enter pricing agreements with the White House and onshore drug production will be exempted from the tariffs. Companies that plan to increase their domestic manufacturing will see a 20% tariff that will increase to 100% in four years.

The US has already agreed to exemptions for 17 drugmakers, four of which are still being negotiated. Big drugmakers that have signed deals, which exempt them from tariffs for three years, include Pfizer and Eli Lilly, among others.

Large companies have 120 days before the rate goes into effect and can negotiate deals with the White House to skirt the tariff or reduce the levy. Smaller companies will have 180 days to negotiate deals.

The executive order risks creating an “unfair two-tiered system of exemptions” benefiting only big companies that have already made most-favored-nation deals with Trump, said the Midsized Biotech Alliance of America (MBAA), an industry group.

Mid-sized drugmakers “lack diversified portfolios to absorb these sudden cost increases”, Alanna Temme, MBAA’s president, said in a statement.

Trump has been pressuring drugmakers through his most-favored-nation drug pricing policy to lower prices to what people pay in other high-income countries. US patients by far pay the most for prescription medicines, often nearly triple what patients pay in other developed nations.

The announcement also comes as the White House faces pressure from consumers to lower prices amid other tariff-related price increases, as well as high gas prices triggered by the US-Israel war with Iran.

In January, Trump laid out a smorgasbord of economic policies meant to address the rising cost of living, which he has pinned on the Biden administration. Trump has proposed banning large institutional investors from buying single-family homes and capped credit card interest rates at 10%. When teasing policies affecting drug prices, Trump said at the time that “on that alone, we should win the midterms”.