President Donald Trump’s executive order imposing a 10% tariff on Chinese imports is expected to raise the cost of generic drugs in the United States and worsen drug shortages, as around half of generic drugs consumed in the U.S. are manufactured entirely overseas, with 80% of active pharmaceutical ingredients sourced from abroad. Despite India being the largest producer of APIs, China has been increasingly involved in API production. Generic drugs, which make up 90% of all prescriptions filled, are typically sold at low prices, leaving little room for absorbing additional costs such as tariffs.
Experts warn that these tariffs could lead to immediate shortages and higher prices in the coming months, as manufacturers may need time to renegotiate contracts and adjust to increased costs. The Trump administration is being urged to provide an exemption from these tariffs to prevent further strain on the global drug supply chain. While protections such as state anti-price gouging laws and a tax on price increases above inflation may help prevent direct impacts on consumers, concerns remain about stockpiling by hospitals and pharmacies.
Arthur Caplan, an expert in medical ethics, suggests that the tariffs are unlikely to encourage increased domestic production of generic drugs, as the industry may not be profitable enough to justify investing in new manufacturing facilities. Additionally, the imposition of tariffs on Mexico and Canada further limits the ability of the U.S. to mitigate drug supply issues. Overall, experts predict that drug prices in the U.S. will increase in the months to come as a result of these tariffs.
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