President Trump's decision to take one step closer to imposing tariffs on imported drugs poses considerable political risk, as Americans could face higher prices and a shortage of more important drugs.
The Trump administration filed a federal notice on Monday, saying it had launched an investigation into whether drug and drug imports pose a threat to US national security.
Trump has repeatedly said he plans to impose such taxes and bring overseas production back to the US. Experts said it is unlikely that tariffs will achieve that goal. Manufacturing travel is very expensive and will take years.
It was not clear how long the investigation would last or when the planned tariffs would take effect. Trump has launched an investigation under legal authority known as Section 232, which he used in other industries such as automobiles and timber.
In a statement to reporters on Monday, Trump said tariffs on drugs would come in the “not too distant future.”
“We're not making our own medicine anymore,” Trump said. “The pharmaceutical companies are in Ireland and in many other places in China.”
Although some drugs are made in the United States, US reliance on medicines on China has been creating alarms for years, with both Republicans and Democrats identifying them as a national security vulnerability.
Many drugs are not produced without at least one stage of the manufacturing process that is being carried out in China. Even India's huge generic drug sector relies heavily on China, as Indian manufacturers usually obtain raw materials from Chinese plants.
Imposing destructive collections on life-saving drugs creates risk for Trump, who has not been of great concern to some of the other tariff targets, such as steel and aluminum, which Americans generally do not directly expose directly to price increases.
He could face a severe backlash if drug tariffs lead to a significant rise or shortage in drug prices for patients. Drug shortages reached record highs last year. In addition to purchasing commercial products such as cough syrup and Tylenol, Americans fill hundreds of millions of prescriptions a year.
Trump hasn't spoken much about lowering drug prices in the second term, and hasn't made it the best issue in his 2024 campaign.
If drug tariffs cause a rise in drug prices, Democrats could jump on the issue of next year's midterm elections and try to undermine Trump's popularity among working-class voters.
Democrats have already seized the issue. In a letter sent to Trump officials last week, a group of lawmakers led by California Representative Doris Matuy and Illinois Brad Schneider wrote that they were “reckless tariffs” on drugs that threatened to harm Americans.
“Disruptions in the supply of critical medical products can inevitably injure US patients, force providers to make impossible ration decisions, and could even be replaced due to delayed treatment or for less effective alternatives,” they write.
“President Trump has long been clear about the importance of reusing manufacturing, which is critical to our country's national and economic security,” White House spokesman Kush Desai said in a statement Monday.
Drug targets also risk further inflamming relationships with allies like the European Union and India, where the economy is supported by drug exports to the US. Officials from these countries fear drug tariffs can encourage businesses to refuse to invest, resulting in loss of employment, factories and tax revenue.
In addition to automobiles and electronics, medicines are one of the most imported categories of goods measured by the US by value.
Drug tariffs add hundreds of billions of dollars of import costs to powerful industries that rely on complex global supply chains. The production of most drugs consumed in the US occurs in multiple regions of the world, with plants from different countries handling different stages of the process.
Expensive patented drugs like the popular weight loss drug Wegovy are more likely to be made in Europe or the US.
China and India produce most of the cheap generic drugs, which make up a large part of US prescriptions. For example, plants in these countries produce almost all of the active ingredients of the painkiller ibuprofen and the antibiotic ciprofloxacin, according to industry data provider Clarivate.
Drugs are the latest sectors Trump has targeted. The 25% tariff is already valid for imported steel, aluminum and cars. The Trump administration has also launched an investigation into Section 232 of copper, wood and computer chips, or an investigation into national security concerns.
An investigation under the provisions of 232 must be completed within nine months.
The pharmaceutical industry has lobbyed the Trump administration to gradually step up tariff phases or exempt certain types of products, such as drugs at risk of shortages or drugs deemed essential, such as antibiotics.
John Murphy III, head of a trade group representing generic drug manufacturers, said in a statement Monday that tariffs “just amplify the problems already present in the US market for affordable drugs.”
Customs duties are paid by pharmaceutical companies that import products or materials into the United States. Many of these manufacturers will likely try to pass at least some of the additional costs to employers and government programs such as Medicare and Medicaid, which cover most of the prescription drug tabs for Americans. It ultimately affects the patient.
Because prices are very close to production costs, taxation can cause a shortage of some inexpensive generic drugs. Manufacturers with such thin margins may be forced to reduce or terminate production.
Industry experts said they were not worried about the shortage of branded drugs, which generally have high profit margins that can absorb tariffs.
Patients who require insurance to pay a deductible or a percentage of the drug price may ultimately have higher out-of-pocket costs for some drugs. They may also have to pay a higher co-sales if the shortage arising from the tariff forces them to switch to another, more expensive drug. In the future, people may face higher health insurance premiums.
In some cases, contractual contracts and sudden financial penalties may discourage manufacturers from rapidly increasing prices. With patented products, manufacturers usually have a larger margin for sales to be highly profitable, even if they absorb the costs of tariffs.
David Ricks, CEO of Eli Lilly, told the BBC earlier this month that his company is hoping to eat the costs of the tariffs. But Lily could either reduce research spending or, he said, could cut staff.
Trump says his tariffs will encourage drugmakers to return overseas production to the US. In recent weeks, some of the wealthiest companies in the industry, Eli Lilly, Johnson & Johnson and Novartis, have announced plans to spend billions of dollars on building new plants in the United States.
However, experts say tariffs are not enough to bring most drug production back to the US. Disorders are particularly sudden with important generic drugs. Construction of new plants takes years. Even converting production into existing American plants may be too expensive. Labor and other production costs are much higher in the United States.
“If what you want is to build manufacturing capacity in the US, both medical and drugs, the most effective answer is not tariffs, but tax policy,” Johnson & Johnson CEO Joaquin Duato said in a call with analysts Tuesday.
The Trump administration is aiming for Ireland. In Ireland, almost all of America's largest drug manufacturers have manufacturing presences, sometimes going back decades. One of Ireland's biggest attractions to the industry is the tax benefits it offers. Some drugmakers will shift their profits there and shift to lower the overall tax bill.
Last month, Trump said Ireland “takes away the pharmaceutical company.” Commerce Secretary Howard Lutnick said Ireland runs a “tax fraud” exploited by American pharmaceutical companies. “It has to be over,” Rutnick said.
Some of the industry's biggest blockbusters, including the cancer drug keytruda and anti-winkle-injected Botox, are partially produced in Ireland. The US imports more medicines from Ireland than any other country, measured by its value.
Irish officials fear tariffs will encourage drugmakers to pull back from investment in the country. But experts said drugmakers may be reluctant to undergo the costly, disruptive process of uprooting their businesses there, especially while uncertainty continues about how long Trump's tariffs will be.
Drugs have historically been exempt from tariffs under the World Trade Organization contract to give patients access to critical drug therapies.
The drug was primarily exempt from the global tariff round that Trump announced earlier this month, and was partially delayed for the next 90 days. Drug manufacturers importing from China to the US are subject to tariffs Trump imposed on Chinese imports earlier this year.
Anna Swanson Reports of contributions.
