Trump drug tariffs would drive up prices, worsen shortages before any boost to US manufacturing, experts warn

By Meg Tirrell and Tami Luhby, CNN

(CNN) — “Major” tariffs on pharmaceutical imports are coming soon, President Donald Trump says, pledging that they’d help bring drug manufacturing back to the US while lamenting that other countries pay much lower prices for the same medicines.

Instead, patient advocates and drug supply chain experts warn, tariffs are likely to drive the price of medicines higher and exacerbate already dangerous drug shortages. Whether they influence manufacturers to make more drugs in the US is a source of debate, and any increase in production is at least several years away.

“We’re going to be announcing very shortly a major tariff on pharmaceuticals,” Trump said Tuesday at the National Republican Congressional Committee dinner, although he didn’t specify the size of the tariff or when it would be implemented.

Medicines had been exempted from the president’s “Liberation Day” tariff announcement April 2, causing the industry to breathe a brief sigh of relief. The president had also exempted the industry from the tariffs he imposed in his first term.

In his tariffs speech last week, Trump said it was a “tremendous problem” that “the United States can no longer produce enough antibiotics to treat our sick.”

That problem may get worse if tariffs come into play, experts warned while agreeing that it’s a problem that needs fixing. The impacts of tariffs could be largest for generic drugs, which make up about 90% of the medicines prescribed in the US and many of which rely on ingredients made in China and India.

Generic drugs, whether they’re antibiotics, diabetes drugs or statins to lower cholesterol, sell for “pennies per dose,” said Tom Kraus, vice president of government relations for the American Society of Health-System Pharmacists. Increasing the cost of ingredients that go into them “can make it so that it’s no longer profitable to sell that drug in the United States.”

Drug shortages could get worse

Already, shortages of antibiotics are a major problem in the US. Antimicrobials are among the most common drugs to be in short supply, with 40 active shortages in the US as of the end of 2024, according to data from the American Society of Health-System Pharmacists. Antibiotics currently in shortage include amoxicillin, commonly used for strep throat and ear infections, and Bicillin, crucial for treating syphilis infections.

Other especially precarious medicines include sterile injectable drugs used in hospitals. Those can be products as simple as IV saline bags or injectable dextrose, used in emergency settings, as well as cancer chemotherapy drugs. They’re required to be manufactured under pristine conditions and have been in shortage for years because of low prices and market disruptions.

“Added costs to already low-margin products may be a tipping point for companies to discontinue production,” said Erin Fox, a drug shortages expert at University of Utah Health. “I’m worried we’ll see discontinuation and a less resilient supply chain if companies quit making essential products.”

An estimated 40% of generic drugs have only one or two suppliers making their ingredients, said Rena Conti, an associate professor at the Boston University Questrom School of Business.

“That’s a pretty fragile supply,” Conti said. “If one of those manufacturers exits, well, then we’re a little bit in a pickle” – causing challenges for pharmacies and hospitals in stocking the drugs in the coming months. Consumers, meanwhile, could have trouble finding the medications they need when they go to the drugstore.

And when one manufacturer is the sole supplier of a medicine, prices often rise. That can sometimes be astronomical, even for generic medicines – such as when Martin Shkreli, known as the Pharma Bro, raised the price of a medicine used by people with HIV from $13.50 to $750 overnight. Public and political pressure has made moves like that less common, but they still occur.

But for many generic medicines, especially sterile injectables, it may be difficult for manufacturers to pass along price increases, said Dr. Marta Wosińska, a senior fellow at the Brookings Center on Health Policy.

“One reason is immediate – group purchasing organization (GPO) contracts,” Wosińska wrote in an article analyzing the potential effects of tariffs. “All hospitals use GPOs to contract for sterile injectable generics used in inpatient settings, with those contracts locking in prices but not quantity.”

Those contracts generally last one to three years, she noted, “and may limit price increases.”

Moreover, “there are laws that make increasing prices faster than inflation a problem for a drug company,” said David Maris, a managing partner at Phalanx Investment Partners who spent years as a financial analyst following the drug industry. “So I am not sure how they would even be able to pass along the increase.”

Pricey medicines may get pricier

For branded medicines – those that still have patent protection and don’t face cheaper generic copycat competition – it could be a different story, Maris said. There, it would be tariffs from Europe that could hit hardest, with a huge amount of drug manufacturing in countries including Ireland, which has a favorable tax environment.

Ingredients for a branded drug may make up only 10% of the total cost to produce a product, Maris estimated, “so if that 10% rises by 35%, the overall impact on production costs is relatively small.”

Unlike with generic medicines, makers of branded drugs have more cushion to absorb price increases, Maris pointed out. But he doesn’t think they will.

“These costs will be passed on, leading to higher drug prices,” he said. “For consumers with insurance, that likely means higher premiums and potentially higher out-of-pocket copays.”

Already, the US pays the highest prices for drugs in the world, an imbalance Trump has targeted in the past and one of the few issues that puts him in agreement with lawmakers like Sen. Bernie Sanders.

“Tariffs will exacerbate that problem,” said Merith Basey, executive director of the advocacy group Patients for Affordable Drugs. “Prescription drugs aren’t luxury goods; they’re essential to people’s health and survival.”

Political and public scrutiny could stop drugmakers from raising prices precipitously, with one Wall Street analyst even begging the industry in a research note to avoid passing tariffs along in the form of higher drug prices for that reason.

Umer Raffat, an analyst with financial firm Evercore ISI, wrote in a March 28 note to clients that he’d heard from multiple CEOs that “they may have to pass on some of the impact as a price increase.”

“There is already a price discrepancy on many drugs between US vs Europe,” Raffat wrote. “Raising prices in US will add more fire to this burning issue,” potentially backfiring “in a big way” by accelerating conversations in Washington about bringing back a plan from Trump’s first administration to tie US prices to those paid in other similar countries, known as the “most favored nation” policy.

Drugmakers may ‘run out the clock’

And even as drug shortages may worsen and prices increase in the nearer term, experts are skeptical that tariffs would achieve their main stated goal of bringing drug manufacturing back to the US.

“Global supply chains are complex, with pharma among the most,” Evan Seigerman, a pharmaceuticals analyst with financial firm BMO Capital Markets, wrote in a research note. “It’s not as simple as moving where someone screws in little screws to make an iPhone.”

Seigerman predicted that most large pharmaceutical companies “are likely to look at imposed tariffs with the intention of ‘running out the clock,’ waiting until the end of Trump’s presidency to consider more permanent manufacturing decisions.”

Still, some major US pharmaceutical companies have made large investments in domestic manufacturing recently. Eli Lilly said in February that it would invest an additional $27 billion to build four manufacturing plants in the US, with the potential for tariffs in mind. The company said it anticipates that the plants could start making medicines within five years.

“We’re trying to do this quickly, because I think there will be constraints in everything from supply chain of building materials to energy,” Lilly’s CEO, David Ricks, told CNN at the time. Ricks also said the plan to build so many new domestic plants relies on renewal of certain favorable tax provisions for the industry.

Still, the process of building new plants or establishing new manufacturing sites can take years. And while multiple experts told CNN they agree it’s crucial to reduce the nation’s reliance on other countries for critical medicines, they questioned whether tariffs are the way to accomplish that.

“We think that’s a critical thing for us to explore with the administration over the next several years,” said John Murphy, CEO of the Association for Accessible Medicines, which represents generic drug manufacturers. “That’s a long-term proposal, right? We can’t build that infrastructure overnight, but we can lose access to a number of drugs overnight, if we’re not careful.”

The industry is waiting to see whether the US Department of Commerce initiates a so-called Section 232 investigation into pharmaceutical imports, which would enable Trump to impose tariffs in the name of national security. That would give drugmakers the opportunity to discuss with the administration what’s needed to boost domestic manufacturing, such as higher reimbursements from Medicare and Medicaid, Murphy said.

“Tariffs aren’t going to be that catalyst, because there’s already not the investment in the system that’s available to put new facilities in the United States,” he said.

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