Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
President-elect Trump’s plan to enact high tariffs on certain imports could affect the prices and availability of pharmaceutical drugs in the US
Trump has imposed tariffs of 25 percent on imports from Mexico and Canada, as well as expanded tariffs on Chinese imports. Economists have warned that these tariffs will drive up prices, and Trump recognized earlier this month he “can’t guarantee” they won’t increase costs for consumers.
When it comes to drugs, health industry experts say Trump’s tariff plan could not only raise prices, but also lead to shortages in the US
Canada, China and Mexico are among the top five countries of origin The US imports pharmaceuticalswith China accounting for nearly a quarter of all such imports starting in 2021. With the US still dependent on imports of drugs and medical devices, supply chain experts expect the tariffs to be enacted with a nuanced approach.
One such area of concern for stakeholders is generic drugs, which account for the majority of prescriptions in the US but are prone to shortages and supply chain disruptions. Earlier this year, the American Society of Health-System Pharmacists registered the greater number of domestic shortages since he started tracking it in 2001.
Arthur Wong, managing director of health at S&P Global Ratings, noted that tariffs on Chinese imports could affect the cost of generic drugs, which contain the same active ingredients as their brand-name counterparts but are often sold at significantly higher prices low particularly because the US imports many of these ingredients from China.
“Generics account for about 90 percent of all prescriptions in the U.S., and tariffs could increase costs for a significant portion of the prescription market,” he added, noting the recent shortage of generic drugs that have affected the US.
Profit margins for generic drug manufacturers are extremely thin, which puts pressure on manufacturers to produce as many drugs as their capacity allows and, in turn, makes them vulnerable to shortages when disruptions occur.
Given the potential impact on prices, however, he expressed skepticism that Trump would subject drug ingredients to significant tariffs.
“While China accounts for a growing share of US pharmaceutical imports, particularly (active pharmaceutical ingredients (APIs)) used in generic drugs, we believe it is unlikely that the Trump administration will impose high tariffs on these imports to prevent rising drug costs in the US,” Wong said. he said
Beyond drugs, medical devices and their components are also heavily imported into the US, which is by far the largest importer of medical devices in the world, according to theWorld Trade Organization.
“80 percent of the API is produced overseas. So are many of the device components, including packaging, closures, delivery systems, etc. There will be an impact, especially for these products,” he said Mark Hendrickson, director of supply chain policy at health improvement company Premier Inc. .
According to Dan Izhaky, president of the American Medical Manufacturers Association, the cost of medical equipment will “absolutely” increase in the short term if the tariffs are implemented.
“Masks, gloves, gowns — things that are relatively disposable that are, you know, more of a commodity than something highly specialized, right? So of course those prices are going to go up,” said Izhaky, who starting a personal protective equipment company during the COVID-19 pandemic.
Wong also expressed concern that the tariffs could throw a wrench into the already fragile US medical supply chain.
“Tariffs could disrupt supply chains and lead to shortages of medical and pharmaceutical supplies, further increasing costs and affecting the availability of essential medical products,” Wong said.
Trump has argued that his proposed tariffs will bring manufacturing jobs back to the US and boost American manufacturing. It’s unclear whether the companies are eager to start manufacturing facilities in the U.S., however, and health industry experts suggest it could take some time if they do.
Izhaky estimates that it would take a year and a half to two years to start manufacturing medical equipment in an ideal situation. When it comes to getting the drug manufacturing facility up and running, Hendrickson conservatively puts the timeline at three to five years.
Trump will come into office with some tariffs on Chinese medical supplies already in place. Earlier this year, President Biden increased tariffs on Chinese-made medical supplies such as needles, masks and gloves.
But Izhaky points out that China, as well as other countries targeted by Trump’s tariffs, have ways to circumvent them.
“Many Chinese companies are investing in other countries, such as Vietnam and Indonesia, other Southeast Asian countries, to manufacture there,” Izhaky said.
Experts are skeptical that tariffs will help medical supply chains, even if they don’t disrupt them.
“We want to create a resilient supply chain that can help overcome, or avoid when we can, drug shortages, we can work with relief and disaster preparedness, etc.,” Hendrickson said. “But if we put tariffs on health care products, as they are, none of that money is going to help with any of those things that we think are very valuable.”
The United States has suffered the impact of medical supply chain disruptions several times in recent years, including in the wake of Hurricane Helene just a few months ago. The storm temporarily shut down a Baxter manufacturing plant in North Carolina that supplied most of the nation’s intravenous (IV) fluid solutions, including those needed for home dialysis treatment.
As of Baxter’s final 2024 upgrade, the North Carolina facility has returned to 85 percent of its pre-hurricane capacity.
Manufacturing IV fluids, like generic drugs, is not a highly profitable business, leading to few domestic producers. As part of the effort to mitigate any impact on patients, the Food and Drug Administration approved temporary imports from abroad.
When reached for comment, Trump-Vance transition spokesman Brian Hughes said in a statement: “President Trump has promised tariff policies that protect American manufacturers and workers from unfair practices by foreign companies and foreign markets. As he did in his first term, he will implement economic and trade policies to make life affordable and more prosperous for our nation.”
