Trump Drug Tariffs Miss The Mark. There Are Better Ways To Boost Production

On Thursday evening, President Trump made waves with his announcement via Truth Social regarding a 100% tariff on imported drugs.

This announcement included significant qualifiers. The tariffs will apply specifically to manufacturers of “branded or patented” drugs, unless those companies “are building a manufacturing plant in America.” Trump clarified that “building” constitutes “breaking ground and/or under construction.”

While the ambition to restore domestic drug manufacturing capacity is commendable, the approach of introducing heavy tariffs is misguided. More critically, this plan overlooks a far greater issue: America’s overwhelming dependence on imported generic drugs.

The Industry’s Perspective

Alex Schriver, Senior Vice President at the pharmaceutical industry group PhRMA, argues that such tariffs conflict with Trump’s objectives of driving investments to the U.S. and lowering drug prices, as they will inevitably increase financial strains on drug manufacturers, according to STAT News.

In findings shared through public comments, Eli Lilly warned that these tariffs could deprive manufacturers of vital capital needed for innovation and investments in reshoring initiatives, citing the need to redirect funds to buffer the tariffs’ impact, as noted by CNBC.

However, the extent of disruption posed by these tariffs remains uncertain. Last July, the Trump administration agreed to reduce tariff rates on products imported from Europe, where many multinational drug companies maintain substantial manufacturing operations. A strategist interviewed by STAT noted that “major players have some production presence domestically, and most have pledged increased investments directly tied to local manufacturing.” The effectiveness of these measures will hinge on details yet to be outlined.

Analysts’ Concerns

Health policy experts express concern that the proposed drug tariffs could disturb supply chains, elevate already soaring costs, and intensify drug shortages. After years of relocating drug production overseas, very few medications are now produced entirely in the United States.

While large pharmaceutical companies with the needed resources can initiate plant construction, smaller companies that have not yet embarked on such projects and those dependent on international manufacturers may face significant challenges, according to the Wall Street Journal.

It is important to note that revamping America’s drug manufacturing capability is a lengthy process; few plants under construction will be operational before the end of Trump’s second term.

Oversight on Generic Drugs

Trump’s tariff specifically targets brand-name and patented drugs. Although they constitute 90% of U.S. drug spending, they represent merely 10% of prescriptions. The remaining 90% consists of generic drugs, which are significantly cheaper and can be lawfully marketed in the U.S. following the expiration of patent protections. Many of these medications are vital for American health, playing crucial roles in intensive care units, surgical settings, transplant programs, cancer treatments, and outpatient clinics, yet nearly all are manufactured abroad.

This situation poses serious implications for patients, healthcare systems, and national security:

• The majority of drug shortages in the U.S. are tied to generic medications, primarily arising from quality and safety concerns.
• Despite clear documentation of issues, many doctors and patients operate under the assumption that any company’s generic drug is equally safe, leading to a lack of independent verification of drug quality before reaching patients; cost remains the primary concern.
• Acknowledging the challenges posed by competing with nations offering low labor costs and lax regulations, most U.S.-based drug manufacturers have shifted focus away from generic production to the more profitable brand-name drugs.
• Currently, India and China lead in global generic drug production and the necessary ingredients for their formulation, leaving the U.S. vulnerable to supply interruptions and embargoes.

Trump’s tariff strategy does not tackle these pressing challenges.

A More Effective Approach

Instead of imposing tariffs and price controls on the drug industry, the administration should leverage competition in the market as a more effective means to revitalize U.S. drug manufacturing. Here are some actionable steps:

1. The Department of Health and Human Services (HHS), along with the Veterans Health Administration and military health systems, currently acquire generic drugs based on the lowest price deemed “technically acceptable.” This policy presumes product quality without independent verification. Transitioning the standard to “best value,” determined through product testing by ISO-accredited laboratories, would enhance patient safety, improve clinical outcomes, and create a more equitable environment for U.S. manufacturers, an expense that should not burden taxpayers.
2. When issues arise, they must be reported immediately to the FDA, which can leverage the data to prioritize inspections of overseas plants and elevate regulatory oversight. The European Union adopts this method, yielding positive results.
3. To mitigate the effects of potential drug shortages or embargoes, the U.S. should swiftly replenish its national strategic stockpile. Cost savings could be achieved by reallocating expiring products to federal agencies for use before they expire, with agencies replenishing the stockpile with newly procured goods. This strategy could significantly reduce taxpayer expenses.
4. Additionally, the White House and Congress should ensure full stockpiling of the Strategic Active Pharmaceutical Ingredients Reserve (SAPIR), an initiative that President Trump initiated during his first term. Stockpiling APIs is logical, as drug components generally come at lower costs and have longer shelf lives compared to the final pharmaceutical products.
5. At this time, a mere 10 percent of APIs, by volume, are produced in the United States. To foster domestic manufacturing of APIs and essential generics, the federal government should enter into long-term, performance-based contracts with innovative U.S. firms and technology hubs to sustain and replenish both stockpiles.

These collective measures could spur, rather than impose, a renaissance in U.S. pharmaceutical manufacturing, guided by 21st-century technologies. This would enhance the quality and safety of generic medications, bolster drug supply resilience, improve patient health outcomes, and provide an economic boost.