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President-elect Trump’s plan to enact heavy tariffs on certain imports could affect the prices and availability of pharmaceutical drugs in the U.S.
Trump has floated 25 percent tariffs on imports from Mexico and Canada, as well as expanded tariffs on Chinese imports. Economists have warned that such tariffs will drive prices up, and Trump acknowledged earlier this month he “can’t guarantee” they won’t increase costs for consumers.
When it comes to drugs, health care industry insiders say Trump’s tariff plan could not only raise prices, but also lead to shortages in the U.S.
Canada, China and Mexico are among the top five countries from which the U.S. imports pharmaceutical goods, with China accounting for nearly a quarter of all such imports as of 2021. With the U.S. still reliant on imports for drugs and medical devices, supply chain experts are hoping tariffs will be enacted with a nuanced approach.
One such area that stakeholders are concerned for is generic drugs, which account for the bulk of prescriptions in the U.S. but are prone to shortages and supply chain disruptions. Earlier this year, the American Society of Health-System Pharmacists recorded the highest number of domestic shortages since it first began tracking them in 2001.
Arthur Wong, health care managing director at S&P Global Ratings, noted tariffs on Chinese imports have the potential to impact the cost of generic drugs — which contain the same active ingredients as their brand-name counterparts but are often sold for notably lower prices — in particular because the U.S. imports many such ingredients from China.
“Generics account for roughly 90 percent of all U.S. prescriptions, and tariffs would potentially raise costs for a significant portion of the market from a prescription basis,” he added, noting recent shortages in generic drugs that have impacted the U.S.
Profit margins for generic drugs manufacturers are extremely thin, which puts pressure on the manufacturers to produce as many of the drugs as their capacity allows and in turn makes them vulnerable to shortages when disruptions occur.
Considering the potential impact on prices, however, he expressed skepticism that Trump would subject drug ingredients to significant tariffs.
“While China accounts for a growing portion of U.S. pharmaceutical imports, particularly [active pharmaceutical ingredients (API)] used in generic drugs, we believe the Trump administration is unlikely to impose hefty tariffs on these imports to avoid increasing U.S. drug costs,” Wong said.
Beyond drugs, medical devices and their components are also heavily imported into the U.S., which is by far the top importer of medical devices in the world, according to the World Trade Organization.
“80 percent of the API is produced overseas. A lot of the components for devices are as well, including packaging, enclosures, delivery systems, etc. There will be an impact, especially for those products,” said Mark Hendrickson, director of supply chain policy at the health care improvement company Premier Inc.
According to Dan Izhaky, president of the American Medical Manufacturers Association, the cost of medical equipment will “absolutely” go up in the short term if tariffs are implemented.
“Masks, gloves, gowns — stuff that’s relatively disposable type stuff that’s, you know, more of a commodity versus something that’s highly specialized, right? So, of course, those prices are going to go up,” said Izhaky, who started a personal protective equipment company during the COVID-19 pandemic.
Wong also expressed concern that tariffs could throw a wrench into the U.S.’s already delicate medical supply chain.
“Tariffs could disrupt supply chains and lead to medical supply and pharmaceutical shortages, further driving up costs and impacting the availability of essential medical products,” said Wong.
Trump has argued that his proposed tariffs will bring manufacturing jobs back to the U.S. and encourage American production. It’s unclear whether companies have the appetite for starting manufacturing facilities in the U.S., however — and health care industry insiders suggest it could take some time if they do.
Izhaky estimates it would take a year and a half to two years to start manufacturing medical equipment in an ideal situation. When it comes to launching drug manufacturing facilities, Hendrickson conservatively puts the timeline between three and five years.
Trump will come into office with some tariffs on Chinese medical supplies already in place. Earlier this year, President Biden raised tariffs on Chinese-made medical supplies like needles, face masks and gloves.
But Izhaky notes China — as well as other countries being targeted by Trump’s tariffs — has ways of circumventing them.
“A lot of 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 would help medical supply chains, however, even if they don’t disrupt them.
“We want to create a resilient supply chain that can help work through, or avoid when we can, drug shortages, we can work through disaster relief and preparedness and so forth,” Hendrickson said. “But if tariffs are put in place on health care products, as it stands, none of that money is going to help with any of those things that we think are very valuable.”
The U.S. has suffered the impact of medical supply chain disruptions several times in recent years, including in the wake of Hurricane Helene just months ago. The storm temporarily shut down a Baxter manufacturing plant in North Carolina that supplied the majority of the country’s intravenous (IV) fluid solutions, including those necessary for at-home dialysis treatment.
As of Baxter’s final update of 2024, the North Carolina facility has returned to 85 percent of its prehurricane capacity.
Manufacturing IV fluids, like generic drugs, is not a highly profitable venture, which leads to few domestic producers. As part of the effort to mitigate any impacts on patients, the Food and Drug Administration approved temporary imports from overseas.
When reached for comment, Trump-Vance transition spokesperson Brian Hughes said in a statement, “President Trump has promised tariff policies that protect the American manufacturers and working men and women from the unfair practices of 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.”
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