President Trump’s recent move towards imposing tariffs on imported medicines presents significant political risks, as it could lead to higher prices and shortages of essential drugs for Americans.
On Monday, the Trump administration announced the initiation of a federal investigation to determine whether imports of medicines and pharmaceutical ingredients pose a threat to national security, which may set the stage for potential tariffs on foreign-made drugs.
Mr. Trump has expressed his intention to impose such tariffs to encourage the relocation of pharmaceutical production back to the United States. However, experts have indicated that achieving this goal through tariffs is unlikely, as the process of moving manufacturing is costly and time-consuming.
The duration of the investigation and the timeline for any potential tariffs remain unclear. The inquiry is being conducted under Section 232, a legal authority previously used for other industries, such as steel and lumber.
In comments to reporters, Mr. Trump stated that pharmaceutical tariffs would be implemented in the “not too distant future,” highlighting the U.S.'s reliance on foreign production, particularly from countries like China and Ireland.
Concerns about the U.S.'s dependence on China for medicines have been raised by both political parties, identifying it as a national security issue. Many drugs require at least one manufacturing stage to occur in China, and even India's generic drug sector relies heavily on Chinese raw materials.
Implementing tariffs on lifesaving medications poses unique risks for Mr. Trump, as opposed to previous tariff targets like steel and aluminum, where price increases do not directly affect consumers. A backlash could arise if these tariffs lead to significant drug price hikes or shortages, especially given that drug shortages reached record levels last year.
Democrats have already criticized the proposed tariffs, warning that they could harm U.S. patients and lead to difficult rationing decisions by healthcare providers. A letter from a group of lawmakers emphasized the potential negative impact on access to critical medical products.
A White House spokesman reiterated the administration's commitment to reshoring critical manufacturing for national and economic security.
Targeting pharmaceuticals could also strain relationships with allies such as the European Union and India, whose economies benefit from drug exports to the U.S. Concerns have been raised that tariffs could lead companies to withdraw investments, resulting in job losses and decreased tax revenue.
Pharmaceuticals represent one of the largest categories of goods imported by the U.S., and tariffs could impose tens of billions of dollars in additional costs on an industry reliant on a complex global supply chain. Most medications consumed in the U.S. involve production processes that span multiple countries.
While expensive patented medications are often produced in the U.S. or Europe, cheaper generic drugs, which make up the majority of U.S. prescriptions, are predominantly manufactured in China and India. This includes key ingredients for widely used medications like ibuprofen and ciprofloxacin.
Tariffs on pharmaceuticals would likely be passed on to consumers, potentially increasing out-of-pocket costs for patients, especially those with high deductibles or co-payments. Additionally, manufacturers may be forced to reduce production of cheaper generic drugs due to thin profit margins.
Industry experts have expressed concerns that while brand-name drugs may not face shortages, patients could still experience higher costs or be required to switch to more expensive alternatives due to tariff-induced shortages.
Despite Mr. Trump’s assertion that tariffs will encourage drugmakers to return production to the U.S., experts argue that the tariffs alone are insufficient to achieve this goal, particularly for generic drugs. The high costs of U.S. labor and production make relocating manufacturing challenging.
Recent statements from industry leaders suggest that while some companies may absorb tariff costs, they could also reduce research spending or cut jobs as a result. The administration has targeted Ireland, where many American drugmakers have significant operations, citing tax advantages that attract the industry.
Irish officials are concerned that tariffs could deter drugmakers from investing in their country, but experts note that the complexities and costs of relocating operations may prevent significant shifts in production.
Historically, pharmaceuticals have been exempt from tariffs under a World Trade Organization agreement designed to ensure access to essential medications. Recent global tariffs announced by Mr. Trump have largely excluded medications, although some imports from China have been subject to tariffs imposed earlier this year.