Trump looking at tariffs on semiconductors, drugs, steel
US President Donald Trump said he is considering potential tariffs on semiconductors, pharmaceuticals and steel at the House Republican Conference at Trump National Doral in Miami, Florida.
Bloomberg
As President Donald Trump on Thursday contemplated extending a global trade war to imports from Europe, the health-care industry is gauging potential fallout from tariffs levied on goods imported from China.
Health analysts and generic drug manufacturers said the 20% levy from two rounds of tariffs on goods imported from China − a major supplier of medical equipment and prescription drugs for the United States − could shrink inventories and raise prices. Hospitals, doctors and consumers filling prescriptions at their local pharmacy might feel the effects, though not immediately, pharmaceutical supply and pricing experts told USA TODAY.
China is among the largest suppliers of ingredients used in generic drugs, and about 90% of prescriptions filled in the U.S. are generics, research shows.
White House officials said the tariffs are a necessary emergency action because China hasn’t halted the flow of fentanyl precursor chemicals to cartels who smuggle the illicit drugs to the U.S. China has promised to “resolutely counter” pressure from the U.S, according to Reuters.
Organizations representing makers of generic drugs and hospital pharmacists warn that added financial pressure from tariffs could strain the nation’s generic drug supplies.
Tariffs would “exacerbate already-problematic drug shortages,” said John Murphy, president and CEO of the Association for Accessible Medicines, in a letter Tuesday to U.S. Trade Representative Jamieson Greer.
“Generic manufacturers simply can’t absorb new costs,” Murphy said in a statement last month. “Our manufacturers sell at an extremely low price, sometimes at a loss, and are increasingly forced to exit markets where they are underwater.”
The American Society of Health-System Pharmacists warned the extra costs from tariffs, combined with Biden-era penalties levied on drug companies that raise prices more than the rate of inflation, could exacerbate drug shortages. Before the tariffs took effect, pharmacists grappled with shortages of IV solution, chemotherapy drugs, attention deficit/hyperactivity disorder medications and injectable drugs.
The groups urged the federal government to exempt tariffs on imported drug ingredients and prescription medications, but the Trump administration so far hasn’t granted a reprieve for drugs or other medical supplies.
The impact of the tariffs might not be immediate, said Erin Fox, senior pharmacy director at University of Utah Health and an expert on drug supply chains.
Domestic drug manufacturers and distributors might’ve stockpiled drug ingredients in anticipation of supply hiccups. That means it could take several months for companies within the global pharmaceutical supply chain to decide how to absorb the costs of tariffs.
One possibility − drug manufacturers could decide it’s not worth it to continue making cheap generics.
“A lot of these companies are making a razor-thin margin,” Fox said. “And so if a tariff bumps that equation into them being underwater, they may just choose to discontinue making these products. And there’s no law, there’s no requirement for any drug company to make any drug, no matter how lifesaving.”
Drug shortages peaked in 2024
Hospitals pharmacists say drug shortages have been a challenge long before the most recent round of tariffs.
Global drug supply strains worsened during the COVID-19 pandemic, and the number of drugs in shortage peaked at 323 during the first three months of 2024, according the American Society of Health-System Pharmacists.
The reasons for the shortages ranged from disruptions caused by hurricanes to factory contamination that shut down production lines. In some cases, drug manufacturers stopped making a drug.
Because so many U.S. generic drug companies purchase drug ingredients from large factories in China and India, they can be particularly susceptible to shortages due to manufacturing disruptions or factory shutdowns.
Geopolitical tensions between the U.S. and China have prompted some drug companies to adopt a “China plus one” strategy to ensure they can purchase drug ingredients from factories in other nations if needed, said Markus Felgenhauer, CEO of QYOBO, a German company that tracks pharmaceutical supply chains, drug shortages and prices.
These companies want to ensure they have a backup source of drug ingredients to avoid or limit shortages.
In 2023, more than a dozen cancer drugs were in shortage, including cisplatin and carboplatin, used to treat lung, breast, prostate and gynecologic cancers. The National Cancer Institute said cisplatin and similar drugs are prescribed for 10% to 20% of all cancer patients.
Beginning in 2018, more than 12 million bottles of blood pressure-lowering drugs such as valsartan and losartan were removed from the market because they contained cancer-risk chemicals.
Generic drug companies have sought out lower-cost suppliers, and in some cases, the quality of medications suffers, said David Light, president of Valisure, an independent lab that has flagged potential harmful contaminants in consumer products such as Zantac, hand sanitizers and sunscreens. Under a project with the Department of Defense, Valisure is testing 40 medications to assess drug quality as part of a pilot study.
Light said the tariffs could financially squeeze generic manufacturers, which might result in more cost cutting.
“It will continue to motivate the race to the bottom and cutting corners that probably leads to substantial quality problems that we continue to find,” Light said.
What will happen to drug prices?
Prices for brand-name drugs are less likely to increase due to the trade war, drug pricing experts said.
Big pharmaceutical companies command higher prices for brand-names drugs, which are sold exclusively under patent protection for several years. When the patents expire, generic drug companies can offer competing versions at lower prices.
Ohio-based drug research firm 46brooklyn Research tracks drug price changes enacted in January, which is when pharmaceutical companies often hike or cut drug prices. In January, the firm reported more generic drug prices decreased than increased.
“We may suffer from the highest list prices in the world on brand drugs,” said Antonio Ciaccia, president of 46brooklyn. “On the generic side, we are getting dirt cheap drugs for the most part.”
While some generic drug manufacturers will likely seek to pass along costs, there will be some roadblocks. Medicare and Medicaid, the federal health programs for older adults, low-income families and people with disabilities, have enacted policies that seek to limit how much drug companies can increase prices.
Former President Joe Biden’s Inflation Reduction Act, passed in 2022, included a provision that penalized pharmaceutical companies which raised Medicare drug prices faster than inflation. Another rule under the American Rescue Plan Act required pharma companies to pay rebates when they significantly raise Medicaid drug prices over time.
These inflation rebate penalties − combined with fierce competition among generics − have limited how much companies have been able to raise prices. These economic constraints are one challenge to reopening domestic factories to make generic drugs in the United States, said Fox.
And while there have been efforts in recent years to bolster domestic manufacturing, such projects take time and money. If drug companies want to return manufacturing to the United States from overseas, that process can take two to three years to execute, Fox said.
And the economics of returning more generic drug manufacturing to the U.S will be difficult, Fox said.
“My main concern is the increasing fragility of the overall supply chain,” Fox said. Some generic manufactures may decide it “literally may not be worth it to them to kind of suck up the added cost of the tariffs.”
