Trump's pharma import tariffs threaten drug pricing, generics

Drug pricing

According to an Ernst & Young report, a 25% tariff alone could increase U.S. drug spending by an estimated $51 billion annually, which would boost U.S. prices by as much as 12.9%. With the proposed 250% tariff, the financial impact would be significantly larger.

Despite growing interest in reshoring, only 12% of active pharmaceutical ingredients (APIs) are produced in the U.S., with three domestic manufacturers accounting for 10% of that output. Bridging that gap would require a large amount of capital and years of effort to build out domestic manufacturing capabilities at scale.

"The money to support a manufacturing build-out in the U.S. has to come from somewhere, so drug prices will increase," Faget asserted.

With limited domestic capacity and no quick fixes available, manufacturers are likely to pass on the added costs caused by import tariffs to insurers and patients.

Generics

Generic drugs are especially vulnerable under Trump's proposed tariff structure. Roughly 83% of the top 100 prescribed generics in the U.S. depend on imports, with antibiotics and antivirals among the most at risk.

Most generics consumed in the U.S. are made in India, Israel and parts of Europe -- often using raw materials sourced from China. These drugs are then shipped to the U.S. as finished products or processed locally into final dosage forms.

Protected by patents, branded pharmaceutical companies typically operate with profit margins of 30–50%, providing a bigger financial cushion to withstand tariff hikes. Generic manufacturers, on the other hand, operate on margins as low as 5%, leaving far less of a buffer.

"These low-margin products truly depend on the cost benefits associated with manufacturing in other countries," Faget confirmed. "I foresee generic drugs being impacted the most if the tariffs are put in place."

If imposed, the increased cost of manufacturing could make some generics economically unviable and, in turn, limit access to life-saving medications for millions of people.

R&D

As companies reallocate budgets to absorb the infrastructure and compliance costs associated with tariff-driven manufacturing changes, Faget forewarned that R&D investments could take a hit. Building domestic capacity is capital-intensive, and companies could be forced to divert funding away from researching and developing new drugs to maintain standard operations. 

"It may be that other programs will suffer during the transition," Faget disclosed. "I would not be surprised to see less investment in research and development while this process unfolds." 

In the long term, reducing R&D investments could slow the pace of innovation and delay the market entry of new therapies.

With a supply chain still anchored overseas, the pharmaceutical industry faces the risk of higher drug prices, reduced access to affordable generics and stalled innovation. As manufacturers brace for import tariffs, it is likely that patients and payers will bear the cost of Trump's trade policy without the infrastructure to support it.

Alivia Kaylor is a scientist and the senior site editor of Pharma Life Sciences.