The Bitter Pill: How Tariffs Could Make Generics Less Affordable
As President Donald Trump’s administration introduces a series of tariffs aimed at rebalancing trade and boosting US manufacturing, one sector in particular is watching closely: pharmaceuticals. While drugs themselves may not be directly impacted by these new tariffs, there are significant risks lurking in the fine print—risks that could affect the availability and cost of generic medications, which make up the vast majority of prescriptions in the US.
The Tariff Landscape: What's at Stake for Pharma?
In early April 2025, President Trump declared a national emergency, invoking the International Emergency Economic Powers Act to impose a 10% tariff on imports from various countries.1 While certain sectors like pharmaceuticals, copper, semiconductors, and lumber are exempt for now, there is a strong possibility that these industries could be targeted later, potentially with significant consequences for the pharmaceutical supply chain.2
For the pharmaceutical industry, especially the generic drug market, the consequences of these tariffs could go beyond just cost increases. While larger brand-name drug manufacturers may have the financial cushion to absorb tariff impacts, generic drugmakers, operating on much thinner margins, are more vulnerable.2
Most generic drugs are manufactured overseas, where labor and production costs are lower. If tariffs increase the cost of importing these drugs or their raw materials—particularly active pharmaceutical ingredients (APIs) sourced from countries like China—prices for generics could climb. This would directly impact the millions of Americans who rely on affordable generics for their everyday prescriptions.2
Shifting Supply Chains: A Move Toward Domestic Manufacturing?
One of the primary goals of these tariffs is to encourage reshoring US manufacturing.1 However, the pharmaceutical industry faces a significant challenge when it comes to domestic production—specifically, the lack of infrastructure to support large-scale manufacturing of drugs. While some policymakers argue that bringing pharmaceutical manufacturing back to the US would improve resilience and reduce dependence on foreign suppliers, it’s not as simple as it may sound.
First, US pharmaceutical manufacturing capacity, particularly for generics, is underdeveloped. The incentives to manufacture overseas have been strong due to lower labor costs and more favorable regulatory environments. The challenge is not just about moving production back to the US; it’s about building an entire ecosystem capable of producing the volume of generics the US market needs.3
Even if the infrastructure were in place, the US would still face challenges related to the cost of manufacturing. The tax and regulatory framework in the US often makes it more expensive to produce drugs here than it would be overseas. Until these issues are addressed—through regulatory reform or new incentives—relying solely on domestic production could be more expensive, potentially increasing the cost of generics for consumers.3
Price Increases and Access: Who’s Affected?
The bottom line is this: if tariffs on pharmaceuticals or their raw materials are implemented, price increases are likely, particularly for generics. While brand-name drugs might not be as directly affected, the accessibility of generics—which are critical to controlling health care costs—could suffer. For millions of Americans, especially those who rely on generics for chronic conditions or routine medications, these price hikes could be a significant barrier to accessing needed care.
In an already strained health care system, this could exacerbate the problem of drug affordability. Many Americans are already grappling with the high cost of prescriptions, and price hikes from tariff impacts could push even more people into difficult choices between paying for medications or other essentials.
What Can Be Done?
As the tariffs take effect and the industry braces for what could be a protracted period of uncertainty, it’s clear that the US must address the underlying issues in its pharmaceutical manufacturing landscape. Simply imposing tariffs to bring back jobs and reduce trade imbalances won’t solve the complexities of pharmaceutical production. Instead, a more nuanced approach is needed, one that includes investing in the US manufacturing infrastructure, reforming tax and regulatory policies, and ensuring that the global supply chain remains resilient.
In the meantime, the pharmaceutical industry and policymakers will need to closely monitor the effects of these tariffs, particularly on the generic drug market. While the long-term goal of strengthening domestic manufacturing is critical, the short-term reality of increasing drug costs and potential shortages must be addressed to avoid a crisis in drug access and affordability for millions of Americans.
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References
1. The White House. Fact Sheet: President Donald J. Trump declares national emergency to increase our competitive edge, protect our sovereignty, and strengthen our national and economic security. April 2, 2025. Accessed April 9, 2025. https://www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-president-donald-j-trump-declares-national-emergency-to-increase-our-competitive-edge-protect-our-sovereignty-and-strengthen-our-national-and-economic-security/
2. Robbins R. The hidden costs of tariffs on generic drugs. The New York Times. April 4, 2024. Accessed April 8, 2025. https://www.nytimes.com/2025/04/04/health/drug-tariffs-trump-manufacturing.html
3. Philpott J. Pharma industry dodges tariff blow but still braces for disruption. Pharmaceutical Technology. April 3, 2025. Accessed April 8, 2025. https://www.pharmaceutical-technology.com/news/pharma-industry-dodges-tariff-blow-but-still-braces-for-disruption/?cf-view
