The United States has long been dependent on China for critical pharmaceutical ingredients, particularly in the generic drug market, which accounts for 91% of all prescriptions filled in the country. Now, with the latest round of tariffs in place, including a 10% levy on Chinese imports, the U.S. is facing a potential crisis in drug affordability and availability.
A Fragile Supply Chain and the Cost of Outsourcing
For decades, American pharmaceutical companies have shifted much of their manufacturing offshore to cut costs. While the U.S. has developed a strong biotech sector focusing on high-end drug development, it has largely abandoned the production of Active Pharmaceutical Ingredients (APIs) and other key starting materials used in everyday medicines. China seized this opportunity and now dominates the global supply chain for these ingredients.
John Murphy, president of the Association for Accessible Medicines, points out that while China is no longer the primary producer of finished pharmaceuticals, it remains crucial in the early stages of drug manufacturing. “It’s the rare minerals, the key starting materials, which are obviously critical to the supply chain,” Murphy said.
Why Tariffs on Drugs Matter
The Trump administration’s renewed tariffs cover all Chinese imports, including pharmaceuticals. Some industry stakeholders had hoped for an exemption, citing the World Trade Organization’s (WTO) 1994 Agreement on Trade in Pharmaceutical Products, which calls for the elimination of tariffs on many medicines. However, a White House official told The Hill that no exceptions will be made, meaning drug imports will face the same penalties as other goods.
This decision is likely to have immediate consequences. The generic drug market already operates on razor-thin margins. With tariffs raising costs, manufacturers may either pass the expense on to consumers or simply stop producing certain drugs, leading to shortages.
Adding to the pressure is the Inflation Reduction Act (IRA), which penalizes drugmakers if their prices rise faster than inflation. This creates a dilemma: absorb the increased costs or risk financial penalties. Some pharmaceutical companies may determine that staying in the market is no longer economically viable.
What This Means for Patients
The impact of these tariffs will likely be felt most acutely by everyday Americans. Generic drugs are essential to keeping healthcare costs down, providing affordable treatment options for conditions ranging from high blood pressure to diabetes. A price increase on these medications could put life-saving treatments out of reach for some of the country’s most vulnerable populations.
Hospitals and pharmacies, which rely on group purchasing organizations to negotiate bulk prices, may start to see supply chain disruptions as some manufacturers become too expensive or exit the market altogether. This could result in longer wait times, prescription shortages, and overall higher healthcare costs.
Can the U.S. Reduce Its Dependence on China?
If the U.S. wants to regain control over its pharmaceutical supply chain, it must invest in domestic drug manufacturing. India, another major API producer, could also play a role in reducing reliance on China. However, experts caution that a full transition won’t happen overnight. “There’s plenty of capacity in India and even in the European Union, but it takes time to scale up additional surge capacity to meet global demand,” Murphy explained.
Additionally, India does not yet produce the full range of APIs that China does, meaning that a sudden shift could leave gaps in drug availability.
The Bigger Picture
The pharmaceutical industry’s reliance on Chinese production is part of a broader issue: the U.S. has offshored much of its manufacturing over the past few decades, making supply chains vulnerable to economic and geopolitical shifts. While tariffs are intended to pressure China, they may ultimately hurt American consumers and businesses in the short term.
Without a long-term strategy to invest in domestic pharmaceutical production and diversify sourcing, the U.S. risks drug shortages and rising healthcare costs. The tariffs may be a wake-up call, but whether they spur real action—or simply more economic strain—remains to be seen.
Conclusion
While the intention behind tariffs is to strengthen U.S. industries, their effect on the pharmaceutical sector could be more harmful than beneficial. The country’s dependence on China for key drug ingredients has been decades in the making, and undoing it will require significant investment and policy shifts. Until then, Americans may have to brace for higher medication costs and potential shortages in the coming months.
