Pharmaceutical Tariffs: Potential Impacts And The Need For Vulnerability Assessments

The Trump Administration has implemented or proposed a broad range of tariffs, including on pharmaceuticals. These tariffs are intended to serve as a bargaining chip with other countries, promote domestic industry, reshape trade relationships, and address geopolitical risks, among other goals. Some of these goals are relevant to pharmaceuticals; for example, geographic concentration of production in critical portions of the pharmaceutical supply chain poses a geopolitical risk that should be addressed. However, applying tariffs broadly to pharmaceuticals or their ingredients is not the best policy option to achieve these goals. Tariffs are likely to create pressure for higher prices and cause unintended consequences, such as increased drug shortages of generic medicines with fragile supply chains that will affect costs and health outcomes for health care systems, insurers, and patients.

Careful vulnerability assessments on various pharmaceutical product categories should be conducted to enable policymakers to identify the targeted supply chain policy interventions best suited to achieve desired goals. Alternative policy options to tariffs—such as direct investment in domestic industrial base expansion, tax policy changes, reimbursement reform that favors domestic suppliers, or domestic purchasing preference—may be better options while also causing fewer unintended consequences to patient care.

Ultimately, policymakers should keep in mind that few, if any, of the thousands of drug shortages that have occurred in recent decades can be attributed to geopolitical or trade issues. And some of the most impactful past shortages have been caused by disruptions affecting manufacturing sites in the US. While not the focus of this article, promoting a more value-based approach to drug procurement and contracting that incentivizes reliable supply chain steps and consistent generic drug availability is an approach that can address the root causes of chronic drug shortages.

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