Trump tariffs could raise drug costs, worsen shortages

President Donald Trump’s steep tariffs on Canada, Mexico and China could worsen ex­ist­ing drug shortages within the U.S., raise healthcare costs for patients and threaten cash-strapped generic drugmakers, some drug trade groups warn.

Trump on Saturday announced he would impose a 25% tariff on nearly all goods shipped from Canada and Mexico and a ten% charge on imports from China, all of which were set to take effect on Tuesday. On Monday, Mexico’s President Claudia Sheinbaum Pardo said the U.S. would delay its proposed tariffs on the country for one month after Mexico agreed to beef up security at its border. 

Trump has said the tariffs will remain in place until the three countries stop the flow of fentanyl and undocumented immigrants into the U.S. 

However the import taxes comes because the U.S. grapples with an unprecedented shortfall of crucial medicine starting from injectable cancer therapies to generics, or cheaper versions of brand-name medicines, which has forced hospitals and patients to ration drugs. It also comes as many Americans struggle to afford the high costs of prescription medications. 

The U.S. relies heavily on other countries for pharmaceutical products, especially for generic drugs. Those medications make up 90% of Americans’ prescriptions, so tariffs could potentially threaten many patients’ access to reasonably priced treatments. 

China specifically is a big supplier of energetic pharmaceutical ingredients, or APIs, for each brand-name and generic drugs attributable to lower manufacturing costs within the country. APIs are the fundamental component of a drug that causes the specified effect of the treatment. Some generic drugs are manufactured overseas entirely.  

The tariffs could “increase already problematic drug shortages” by forcing generic manufacturers out of the market attributable to low profit margins, based on a statement from John Murphy, CEO of the Association for Accessible Medicines, which represents generic pharmaceutical corporations. 

“Generic manufacturers simply cannot absorb latest costs,” Murphy said on Sunday. “Our manufacturers sell at a particularly low price, sometimes at a loss, and are increasingly forced to exit markets where they’re underwater.” 

He urged the Trump administration to exempt generic products from tariffs, adding that the general value of all generic sales within the U.S. has decreased by $6.4 billion in five years despite “growth in volume” and latest generic drug launches. 

The Healthcare Distribution Alliance, which represents 40 drug distributors, has also called for the Trump administration to reconsider including pharmaceutical products in tariffs. In a press release on Sunday, the group said tariffs would strain the pharmaceutical supply chain and “could adversely affect American patients,” whether that is thru increased medical product costs or manufacturers leaving the market. 

The group said the tariffs will put additional pressure on an industry already in financial distress, noting that distributors operate on low profit margins of just 0.3%.

The U.S. will likely see “latest and worsened shortages of essential medications,” and people costs can be “passed all the way down to payers and patients, including those within the Medicare and Medicaid programs,” the Healthcare Distribution Alliance said. 

An estimate from The Budget Lab at Yale University said long-term prices of pharmaceutical products within the U.S. can be 1.1% higher after shifts in the provision chain. 

Pharmaceutical Research and Manufacturers of America, which represents pharmaceutical corporations, said in a press release that it shares Trump’s goal of ensuring the U.S. maintains its “global leadership in biopharmaceutical innovation and manufacturing.”

Trade measures should give attention to “addressing unfair practices abroad and safeguarding our mental property,” the group added.

The U.S. also relies on overseas manufacturing for medical devices, with many key components and finished products being sourced from countries resembling China, Mexico and India.

For instance, Intuitive Surgical, which manufactures robotic surgical systems, disclosed in its annual report last week that a “significant majority” of the corporate’s instruments and accessories are manufactured in Mexicali, Mexico. 

Tariffs on the country would “increase the prices of our products manufactured in Mexico and adversely impact our gross profit,” the corporate said. 

AdvaMed, the most important medical device association globally, urged the Trump administration to exempt medical products from the tariffs. In a press release, the group said import taxes may lead to shortages of critical medical technologies, higher prices for patients and payers, and fewer investment in research and development. 

The tariffs and associated costs essentially function as “an excise tax in practice,” AdvaMed said, noting that Trump provided a carve-out for much of the medical technology sector when he imposed tariffs on China during his first term. 

Tariffs could also impact hospitals, which depend on imports for on a regular basis supplies, resembling gowns, gloves, and syringes, together with larger items resembling X-ray equipment. 

However the American Medical Manufacturers Association, which advocates for U.S. businesses that produce medical personal protect equipment, or PPE, supports the tariffs on China and increasing domestic production of those products. 

In a press release on Monday, the group said the tariffs recognize that China has “not modified its ways and continues to have interaction in anti-competitive and dangerous behavior that harms U.S. PPE and medical supply manufacturers and threatens our supply chains and national security.”

Throughout the pandemic, the American Medical Manufacturers Association accused China of slashing the value of face masks to undercut U.S. producers.