President Donald Trump’s executive order imposing a 10% tariff on Chinese imports is expected to increase the cost of generic drugs in the United States and potentially lead to drug shortages. Half of the generic drugs consumed in the U.S. are manufactured overseas, with China playing an increasing role in producing active pharmaceutical ingredients (APIs). These ingredients are essential components of medications, with China having 219 API facilities in 2023, up from 134 in 2021.
Generic drugs make up 90% of all prescriptions filled, and any disruptions in the supply chain, such as tariffs, can lead to shortages and price hikes. The immediate impact of the tariffs may result in shortages, but prices are likely to rise in the coming months as contracts with higher prices are negotiated. While some protections, such as anti-price gouging laws and taxes on drugmakers, may help prevent direct price increases for consumers, there are concerns about hospitals and pharmacies stockpiling drugs to avoid higher costs.
Experts are skeptical that the tariffs will stimulate domestic production of generic drugs in the U.S., as the industry is not seen as lucrative enough to warrant new manufacturing facilities. The tariffs imposed on Mexico and Canada could also hinder efforts to mitigate the issue by relying on neighboring countries for drug supply. Overall, the tariffs are expected to have a significant impact on the availability and affordability of generic drugs in the U.S. unless exemptions or alternative solutions are implemented.
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