In the US or Europe, there is a greater likelihood that newer and more expensive medicines will be made. Ireland in particular has become a hub as it is a tax shelter.
Many of the industry's biggest blockbusters are manufactured at least in part in Ireland. Among them is Merck's cancer drug, keytruda. Zepbound, Eli Lilly's weight loss pills. Stellara is an anti-inflammatory drug used for conditions such as Johnson & Johnson's arthritis.
Trump noticed. “This beautiful island of 5 million people has an understanding of the entire US pharmaceutical industry,” he told me in a meeting with Ireland's Prime Minister Micheal Martin in March.
Why did American drug manufacturing move overseas?
US production of drugs peaked on one scale in 2006.
That was around the time when a wave of top-selling American-made drugs lost patent protection and created an opportunity for Indian and Chinese generic manufacturers to bolster generic production. At about the same time, US government incentives to manufacture in Puerto Rico were phased out, but new carrots like the Irish tax benefits encouraged manufacturers to move production overseas.
In 2021, most of the top-covered generic drugs in America, and important antibiotics and antivirals, according to clarivate, no facilities produced active ingredients in the US.
“The United States will no longer be able to produce enough antibiotics to treat our illness,” Trump said Wednesday.
For example, almost every site in the world that produces the active ingredient of amoxicillin, a common antibiotic, is located in China, India, or Europe.
The Tennessee factory, now owned by a company called Usantibiotics, was used to supply almost all of the amoxicillin consumed in the United States. Currently, we import active ingredients from Europe and use them to formulate pills. Currently, the plant supplies about 5% of the amoxicillin in America.
Has drugs been previously affected by tariffs?
Drugs are usually protected from tariffs under the World Trade Organization contract, which aims to protect patients' access to critical drugs. The tariffs Trump imposed on certain imports during his first term were not attacked by drugs.
Starting in February, drugmakers importing active ingredients made in China into the United States have had to pay the tariffs Trump has imposed on Chinese products. That tariff rose to 20% in March. (Wednesday's tax adds a new 34% tariff on most Chinese imports, but that doesn't apply to the drugs.)
Will tariffs lead to drug shortages?
For manufacturers of cheap generic drugs with thin profit margins on razors, the additional costs of tariffs could be a “tip point” that encourage them to leave the market, said Erin Fox, an expert at the University of Utah who tracks drug shortages.
Dr. Fox said he is most concerned about drugs where shortages are already common, such as generic drugs given as injections. These injections are more difficult to make than pills, and are much less profitable than new drugs, discouraging manufacturers from jumping in. An example is lidocaine, which is used to paralyze during medical procedures. According to clarivate, most of the active ingredients of lidocaine are produced in India.
