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By Manas Mishra, Michael Erman and Patrick Wingrove
(Reuters) -Major drugmakers were a standout on a tumultuous day of corporate earnings on Thursday, beating expectations even as they grapple with the threat of sector-specific tariffs, efforts to lower drug prices and federal layoffs that could undermine efforts to invest heavily in the U.S. in coming years.
Unlike companies like airlines that drastically cut or pulled forecasts due to tariff-related uncertainty, large drugmakers have mostly been immune to the trade turmoil. Bristol Myers Squibb, Merck & Co, Sanofi and Roche all exceeded quarterly earnings expectations on Thursday, and Bristol raised its profit forecast.
The sector overall has mostly weathered the market's ups and downs, with the S&P 500 Healthcare index down just 0.5% this year, compared with a 7.5% drop in the broader S&P 500 index.
Still, drugmakers are grappling with several factors that could cause upheaval, such as Trump administration efforts to shrink the federal workforce, including at the U.S. Food and Drug Administration, and probes into pharmaceutical imports that set the stage for levies on the sector.
Drugs have so far been exempt from U.S. President Donald Trump's reciprocal tariffs, but he has argued the U.S. needs more drug manufacturing so it does not have to rely on other countries for its supply of medicines.
So far, there is little clarity on the rates and timings of any such tariffs. But the industry could be in for a big hit if Trump goes ahead with his plans, since the U.S. imports more than $200 billion in prescription drugs.
Some companies, like Merck, have begun to see the effects, as it forecast a $200 million hit from tariffs levied by the U.S. on some countries, particularly China, and from subsequent tariffs from other countries.
Its biggest exposure is through blockbuster cancer drug Keytruda, the world's biggest-selling prescription medicine. Merck said it has enough U.S. inventory for this year, while it is working to expand domestic manufacturing for future years.
Johnson & Johnson earlier this month accounted for a $400 million hit from tariff-related costs in its full-year forecast, mostly related to its devices business.
Manufacturers have said that sector-wide tariffs could create supply chain disruptions and eventually hurt patients. They say they have continued talking to the White House to highlight this impact.
"The concern for us is anything that would impact innovation," said Bristol Myers Chief Financial Officer David Elkins, "or would restrict access to medicines for patients."