President Trump’s choice to advance towards implementing tariffs on imported medicines carries significant political risks, as it could result in increased prices and more shortages of essential medications for Americans.
On Monday, the Trump administration submitted a federal notice indicating the start of an investigation to determine if the importation of medicines and pharmaceutical components endangers national security, setting the stage for potential tariffs on foreign-produced drugs.
Mr. Trump has often expressed his intention to impose these tariffs to bring pharmaceutical production back to the United States. Experts caution, however, that tariffs are unlikely to accomplish this objective; relocating manufacturing is a costly and lengthy process.
There is uncertainty regarding the duration of the investigation and the timeline for implementing the proposed tariffs. Mr. Trump initiated this inquiry under a legal framework known as Section 232, previously utilized for industries like automotive and lumber.
Mr. Trump remarked to the press on Monday that pharmaceutical tariffs are anticipated in the “not too distant future.”
“We don’t manufacture our own drugs anymore,” he stated. “The pharmaceutical companies are based in Ireland, among other locations, including China.”
Although some medications are partially produced in the United States, America’s dependency on China for pharmaceuticals has raised concerns for years, with both political parties marking it as a national security risk.
Numerous drugs require at least one manufacturing stage to occur in China. India’s massive generic drug sector is also heavily reliant on Chinese resources, as Indian manufacturers typically source their raw materials from Chinese facilities.
The imposition of disruptive tariffs on lifesaving medications presents risks for Mr. Trump that did not apply to other tariff targets, such as steel and aluminum, where Americans are generally insulated from direct price increases.
He could face severe backlash if pharmaceutical tariffs result in significant price hikes or shortages for patients. Last year witnessed a record number of drug shortages. Americans fill billions of prescriptions annually and also purchase over-the-counter medications like cough syrup and acetaminophen.
Mr. Trump has not emphasized reducing drug prices during his second term, nor has it been a central issue in his 2024 campaign.
If pharmaceutical tariffs lead to increased drug prices, Democrats might leverage the situation for the upcoming midterm elections next year, aiming to weaken Mr. Trump’s appeal among working-class voters.
Democrats have already taken action on this topic. In a letter to Trump’s officials last week, a group of lawmakers, including Representatives Doris Matsui from California and Brad Schneider from Illinois, warned that “reckless tariffs” on medications threaten to harm the American public.
“The disruption in the supply of critical medical products will inevitably harm U.S. patients, compel providers to make impossible rationing decisions, and may even lead to fatalities as treatments are postponed or more effective medications are replaced with less effective options,” they stated.
Kush Desai, a spokesperson for the White House, remarked on Monday that “President Trump has consistently underscored the need to bring back manufacturing that is vital for our country’s national and economic security.”
Focusing on pharmaceuticals also risks exacerbating relations with allies like the European Union and India, whose economies benefit from drug exports to the U.S. Officials from these nations are concerned that drug tariffs could lead companies to retract investments, resulting in job, factory, and tax loses.
Pharmaceuticals rank among the categories of goods that the United States imports the most by value, alongside cars and electronics.
Tariffs on medications would impose tens of billions in additional import costs on an influential industry that relies on a complex global supply chain. The production of most medicines consumed in the U.S. occurs in multiple regions globally, with different countries handling various stages of the process.
Expensive branded medications, such as the widely used weight-loss drug Wegovy, are more likely to be produced in Europe or the United States.
China and India are the primary producers of cheaper generic drugs, which make up the majority of U.S. prescriptions. For instance, facilities in these countries produce nearly all the global supply of the active ingredients in pain relievers like ibuprofen and antibiotics like ciprofloxacin, according to Clarivate, an industry data provider.
The pharmaceutical industry is the latest sector targeted by Mr. Trump. Currently, tariffs of 25 percent are already in effect for imported steel, aluminum, and automobiles. The Trump administration has also initiated Section 232 inquiries regarding national security concerns for copper, lumber, and computer chips.
Investigations conducted under the 232 statute must conclude within nine months.
The pharmaceutical sector has been lobbying the Trump administration to implement tariffs gradually or to exempt specific products, such as essential medications at risk of shortages.
John Murphy III, leader of a trade association for generic drug manufacturers, stated on Monday that tariffs “will only exacerbate the existing issues in the U.S. market for affordable medicines.”
The tariffs would be borne by drug companies importing products or ingredients into the United States. Many of those manufacturers would likely attempt to pass on at least a portion of the increased costs to employers and government programs like Medicare and Medicaid, which cover most of the expenses for Americans’ prescription drugs. This would ultimately impact patients.
Tariffs could lead to shortages for certain lower-priced generic drugs, as their prices are often close to production costs. Manufacturers operating with minimal profit margins may be compelled to reduce or cease production.
Industry professionals indicate they are not worried about shortages of branded drugs, which typically have high profit margins capable of absorbing tariffs.
Patients whose insurance mandates them to pay a deductible or a percentage of a drug’s price might eventually incur higher out-of-pocket expenses for certain medications. They may also face increased co-payments if shortages resulting from tariffs necessitate switching to alternative, pricier medications. In subsequent years, individuals could see elevated health insurance premiums.
In some instances, strict contractual agreements and substantial financial penalties may deter manufacturers from sharply raising prices. With patented products, firms often possess enough margin to remain profitable even if they absorb tariffs.
David Ricks, the CEO of Eli Lilly, told the BBC earlier this month that his company anticipated absorbing the costs of tariffs; however, this might lead to reductions in research funding or workforce.
Mr. Trump has asserted that his tariffs will encourage pharmaceutical companies to relocate their overseas production back to the U.S. Recently, several of the industry’s wealthiest companies, including Eli Lilly, Johnson & Johnson, and Novartis, revealed plans to invest billions in establishing new manufacturing facilities in the U.S.
Nonetheless, experts argue that the tariffs are insufficient to incentivize most drug production to return Stateside. The barriers, particularly for essential generic medications, are substantial. Establishing a new facility takes years, and even shifting production to an existing American plant may be prohibitively expensive due to higher labor and production costs in the U.S.
Joaquin Duato, CEO of Johnson & Johnson, stated during a recent analyst call that “if you aim to build manufacturing capacity in the U.S., both in the medical technology and pharmaceutical sectors, the most efficient solution is tax policy, not tariffs.”
The Trump administration has particularly targeted Ireland, home to nearly all major American pharmaceutical manufacturers, some of which have significant operations there for decades. The favorable tax conditions in Ireland appeal to the industry, as some companies shift profits there to lower their overall tax liabilities.
Last month, Mr. Trump declared that Ireland “took our pharmaceutical companies away.” Commerce Secretary Howard Lutnick described Ireland as running a “tax scam” exploited by American pharmaceutical firms, asserting, “That’s got to change.”
Some prominent drugs, including the cancer treatment Keytruda and the anti-aging injection Botox, are partially produced in Ireland. The U.S. imports more pharmaceutical products from Ireland, in terms of value, than from any other country.
Irish officials express concern that tariffs might deter drug manufacturers from investing in their country. However, experts suggest that companies may hesitate to disruptively relocate their operations, especially while there is uncertainty about the duration of Mr. Trump’s tariffs.
Pharmaceuticals have traditionally been exempt from tariffs under a World Trade Organization agreement designed to guarantee patient access to essential medications.
Medications were largely exempted from the global tariffs Mr. Trump announced earlier this month, some of which were partially postponed for 90 days. Drug imports from China to the United States have been subject to tariffs initially set at 10 percent and later increased to 20 percent as part of earlier measures by Mr. Trump against Chinese imports.
Ana Swanson contributed reporting.
