The US-China trade war poses a threat to the pharmaceutical industry as President Donald Trump’s 10% tariff on Chinese imports is expected to impact the cost of generic drugs in the United States and worsen drug shortages. According to experts, approximately half of the generic drugs consumed in the US, including vital medications like cancer drugs, antibiotics, and blood thinners, are manufactured entirely overseas to take advantage of lower production costs. Dr. Aaron Kesselheim, a Harvard Medical School professor specializing in prescription drugs, highlighted that around 80% of the active pharmaceutical ingredients (APIs) used in medications also originate from abroad, with China playing an increasing role in API production.
The United States Pharmacopeia disclosed that China had 219 API facilities in 2023, up from 134 in 2021, indicating the country’s growing involvement in pharmaceutical ingredient manufacturing. Despite India remaining the largest global producer of APIs, with roughly half of all facilities, the reliance on overseas sources for generic drugs is significant. Generic drugs represent about 90% of all prescriptions filled, according to the Association for Accessible Medicines, a trade organization representing generic drug manufacturers. Unlike brand-name drugs, generics are priced competitively, making them susceptible to disruptions like tariffs that could result in shortages and price hikes for consumers.
Although immediate shortages are anticipated, Dr. Kesselheim suggested that price increases might follow in the coming months as companies renegotiate contracts with distributors. Vimala Raghavendran from the US Pharmacopeia noted that pharmaceutical companies typically stockpile several months’ worth of API inventory, meaning the effects of policy changes may take time to manifest throughout the supply chain. The Association for Accessible Medicines urged the Trump administration to consider an exemption, emphasizing the strain on the already stressed global pharmaceutical supply chain.
While measures such as state anti-price gouging laws and drug price regulations aim to shield consumers from direct price hikes, concerns persist about potential stockpiling by hospitals and pharmacies to mitigate increased costs. Rena Conti, an associate professor at Boston University, cautioned that disparities in access to medications could be exacerbated by such actions, particularly affecting smaller pharmacies with limited resources. Conti also highlighted the potential impact of the Biden-era tax on drugmakers raising prices above inflation rates as a deterrent to unwarranted price hikes in the industry.
In the realm of healthcare, particularly for small hospitals and rural facilities that do not typically have high drug procurement volumes, the looming specter of panic-buying poses a significant challenge. Arthur Caplan, the esteemed head of the division of medical ethics at NYU Langone Medical Center in the bustling metropolis of New York City, voiced concerns over the potential difficulties these institutions may face in securing necessary supplies. Caplan noted that the implementation of tariffs is unlikely to spur domestic drug production in the United States, as the generic drug market is not perceived as lucrative enough to entice companies to invest in the establishment of new manufacturing facilities. Furthermore, he highlighted the detrimental impact of these tariffs in severing the reliance on neighboring countries such as Mexico and Canada to help alleviate the burgeoning issue.
In a recent development, President Trump imposed a 25% tariff on goods imported from bordering countries. However, the implementation of tariffs on Mexico has been temporarily delayed for a month following negotiations that resulted in an agreement between the two nations. Caplan grimly predicted that while the effects may not be immediate, the eventual consequence of these actions will likely manifest in an increase in drug prices over the coming months.
