Trump’s pharmaceutical tariffs could raise costs for patients, worsen drug shortages

President Donald Trump’s designed tariffs on pharmaceuticals imported into the U.S. could have wide-ranging consequences for drugmakers and American patients, some experts intimated CNBC. 

The duties could disrupt the complex pharmaceutical supply chain, drive up the prices of drugs in the U.S. and exacerbate dearths of critical medicines, some health policy experts said. Drugmakers often rely on a global network of creating sites for different steps of the production process. 

“We are already in a state where prescription drugs are unaffordable to many,” Mariana Socal, a well-being policy professor at the Johns Hopkins Bloomberg School of Public Health, told CNBC. 

“Anything that we modulation, any trade policies, any tariff policies, anything that further increases the cost of prescription drugs, be it in the supply check, the distribution network, risks increasing costs to the consumer even further and just worsening the affordability crisis for doses in America that we’ve had for a long time,” she said. 

Trump this week doubled down on plans to impose “noteworthy” pharmaceutical-specific tariffs “very shortly,” which battered the stocks of some drugmakers early Wednesday. He said he longing pause steep tariff rates on dozens of countries following a market fallout that same day, but it does not be included to apply to levies on specific industries like autos, steel, aluminum and pharmaceuticals. 

Trump exempted pharmaceuticals from his extensive tariffs unveiled last week. Still, he has said duties on drugs will encourage drugmakers to move build operations into the U.S. at a time when domestic production in the industry has shrunk significantly.

But experts said it’s unclear whether schedule of charges will influence more companies to make more drugs in the U.S. It would cost drugmakers billions of dollars and proceeds at least several years for them to do so, they added. 

Some drugmakers, such as Eli Lilly, Bristol Myers Squibb and AbbVie, may be safer positioned than others to weather tariffs because they have more major manufacturing plants in the U.S. than internationally, TD Cowen analyst Steve Scala said in a note go the distance week. The majority of their sites responsible for producing the active ingredients in drugs are also in the U.S., he added. 

Meanwhile, Novartis and Roche “look more at risk” because they include few U.S. plants and a higher share of active ingredient sites that are international, Scala said.

The impact of tariffs disposition look different depending on the type of drug, experts said. Manufacturers of already cheaper generic drugs, which account for almost 90% of the medicines prescribed in the U.S., could get squeezed the most by tariffs, according to Arda Ural, EY Americas Life Disciplines Leader.

Those medications, which are generally much more affordable for patients, have far lower profit frontiers than branded drugs and often rely on ingredients made in China and India, so tariffs could force some generic drugmakers to departure the U.S. market altogether. 

Pharmaceutical tariffs could ultimately undermine the government’s efforts to rein in the high costs of healthiness care in the U.S. Americans pay around two to three times more for prescription drugs than people in other developed homelands, according to a 2024 report from RAND. 

The tariffs could worsen the unprecedented shortfall of cure-all in the U.S., which is driven by factors such as manufacturing quality control and demand surges. There are 270 active dose shortages in the U.S., which has remained unchanged for the past three quarters, according to data from the American Society of Health-System Posologists.

But some drug categories will likely be more vulnerable to shortages than others if tariffs go into operate, said Marta Wosińska, a senior fellow at the Brookings Institution’s Center on Health Policy.

Generic sterile injectable hypnotics, which are commonly used in hospitals, are already more prone to shortages and have faced persistent supply comes for years. Those include products like IV saline bags, cancer chemotherapy drugs and lidocaine, which is old to numb pain.

Generic sterile injectables have complex manufacturing processes and low profit margins, which could clear the way it more difficult for their producers to absorb tariff-induced cost increases. 

Manufacturers of those injections also have limited know-how to pass on cost increases due to certain contracts with so-called group purchasing organizations that lock in the fees but not the quantity of what they buy, Wosińska said. Group purchasing organizations broker drug acquisitions for hospitals and other health-care providers, and their diminishes with manufacturers generally last one-to-three years.

If manufacturers of generic sterile injectables can’t pass on higher outlays, they may exit the U.S. market and worsen shortages of those essential drugs, said Wosińska. She said their other opportunity is cutting costs, which is “concerning” because it could affect a product’s quality and lead some manufacturers to time slow down production due to issues like contamination. 

Generic oral drugs similarly face low margins, but their fabricating is less complex and the market is more competitive. These include common pills such as statins for high cholesterol, multiple blood require medications and metformin for blood sugar control. 

Those oral drugs are used the most by Americans, as about 187 billion generic medicine tablets and capsules were dispensed in retail and mail pharmacies in 2024 alone, according to a recent Brookings piece by Wosińska.

She told CNBC that those drugs function more like a “spot market,” where pharmaceutics and buyers can quickly switch suppliers if one source is disrupted by tariffs. While levies may drive up prices, manufacturers of these sedatives have fewer binding contracts, allowing them to pass on higher costs more easily than their injectable counterparts can, go together to Wosińska.

The impact of tariffs on costly branded medications, which have permit protections and don’t face competition from generic drugs, will look a lot different, some experts said. Bill of fares on medications imported from Europe would likely hit the hardest, as a significant amount of branded drug manufacturing is done there and in the U.S. 

“Branded effects are already predominantly manufactured in the U.S. at about 50%, and the primary importation is from Europe at about 35%,” said EY’s Ural. 

There is “scarcely to no manufacturing” of those drugs in China or India, he said. 

Still, branded drugs typically have higher profit rims and more stable supply chains than generic medications. That makes branded manufacturers better positioned to absorb leading costs from tariffs or pass them onto payers – and ultimately, consumers. 

Since manufacturers of a given branded stupefy monopolize its market, they could raise its price, leaving “the American consumer with no other choice because those goods are protected by patents that no one else has,” Johns Hopkins’ Socal noted.

“With tariffs, the question will be proper, how much higher prices are we going to pay for these branded products?” she said.

Firms will likely notice higher prices for branded drugs more than increases to generic medication costs, Wosińska said. A price hike on a branded drug would directly translate to higher out-of-pocket spending for people in high-deductible commercial protection plans or with high coinsurance rates, she noted. 

It’s still unclear what Trump’s tariffs will look mould. But a patient with a 20% coinsurance rate could see their monthly out-of-pocket expenses rise if tariffs are inflicted, since their share of the cost is directly tied to the branded drug’s price.

By contrast, generic medications already take lower price points, so “even if a $3 drug increases by 25%, that is not going to be something that when one pleases really show up for patients,” Wosińska told CNBC. She added that many patients have insurance designs with fixed co-pays for those drugs. 

But overall, “the primary impact on patient pocketbooks would be indirect—premiums intent likely rise as the payer spending on drugs increases,” she noted in her Brookings report. 

The question is whether manufacturers determination want to raise prices as they face fierce blowback from patients and lawmakers on both sides of the aisle for foraying higher drug prices in the U.S. compared to other countries. Both the Trump and Biden administrations have targeted that imbalance. 

In a Strut 28 note, Evercore ISI analyst Umer Raffat said he heard from multiple CEOs of pharmaceuticals that “they may enjoy to pass on some of the impact [from tariffs] as a price increase.”

But he said doing so will “add more fire” to commentary of the higher prices of many drugs in the U.S. relative to Europe. Raffat said it could backfire “in a big way,” and could revive a scheme from Trump’s first term that ties U.S. prices to those paid in other similar countries. 

Some Wall Street analysts have raised concerns that it will be difficult to reshore production in the U.S. because it is costly and could embrace several years. 

“Global supply chains are complex, with Pharma among the most–it’s not as simple as moving where someone screw-bolts in little screws to make an iPhone,” BMO Capital Markets analyst Evan Seigerman said in a note on Wednesday. 

He told the tariffs will “likely do little to shift manufacturing” back to the U.S. since companies already have robust affairs in the country. Seigerman said he expects most large pharmaceutical companies will likely set a goal of “waiting until the end of Trump’s presidency to study more permanent manufacturing decisions.”

Some companies have already invested billions to boost U.S. manufacturing. This year, and both stated new domestic manufacturing investments worth $27 billion and $55 billion, respectively, over several years. 

But some of those drumakers have on the agenda c trick already pushed back on tariffs, warning about their potential impact on research and development in the industry. 

“We can’t violation those agreements, so we have to eat the cost of the tariffs and make trade-offs within our own companies,” Eli Lilly CEO Dave Ricks told BBC in an vet last week. “Typically, that will be in reduction of staff or research and development, and I predict R&D will come sooner. That’s a disappointing outcome.”