Tariffs on Medicines Will Do More Harm Than Good – Inside Sources

The Trump administration just announced 100 percent tariffs on certain pharmaceutical products.

While there are some key exemptions, U.S. manufacturers and patients will ultimately be affected. The administration plans to impose 100 percent tariffs — billions of dollars — on medicines and active pharmaceutical ingredients imported from trusted allies. Allies already face tariff rates between 10 percent and 15 percent starting later this year.

With the pharmaceutical industry announcing more than $150 billion in U.S. manufacturing investments, these new tariffs could threaten those investments by significantly increasing the costs of starting materials and other drug inputs.

Research has found that the effects of tariffs implemented are passed on to consumers. In the case of proposed pharmaceutical tariffs, not only does that mean costs are likely to be passed on in the form of higher healthcare spending for Americans, but the effects could also be felt in the form of fewer jobs due to reductions in planned U.S. investments, which will weaken, rather than strengthen, our domestic biotech industry.

By raising the cost of key inputs, tariffs will significantly increase the manufacturing costs of certain finished drugs in the United States. Nearly 95 percent of biotechs anticipate that tariffs would raise their manufacturing costs.

Last year, experts estimated that 15 percent tariffs on EU pharmaceutical products alone could raise industry costs by up to $19 billion. The tariff carveout for some European manufacturers that have entered into agreements with the administration will help mitigate potential effects, but it will not entirely eliminate them on manufacturers’ input costs.

As most of America’s pharmaceutical imports come from allied countries, these tariffs will not increase U.S. economic or national security. Half of the active pharmaceutical ingredients in brand-name drugs consumed by American patients are made domestically. The rest come from abroad; notably, 29 percent of those ingredients are sourced from European Union countries.

Taxing medicines and inputs from allied countries not only fails to strengthen U.S. national security; instead, it risks undermining trusted partnerships and disrupting globally resilient supply chains that have been in place for decades.

More broadly, tariffs could undermine a thriving life sciences industry. The U.S. biopharmaceutical industry supports 5 million jobs and generates $1.65 trillion in annual economic output. Tariffs put those benefits — and future gains — at risk. Eli Lilly’s CEO has previously warned that drug companies could respond to tariffs by reducing research and development investment.

If the Trump administration wants to boost domestic manufacturing, policies should be pursued to expand federal investments in university research, including investments in the STEM workforce, reverse price controls and other policies that deter innovation, strengthen intellectual property protections and enforce U.S. inventors’ IP ex-U.S., and spur the adoption of new technologies, including AI.

Tariffs won’t lower costs for patients or further increase U.S. investments. Rather, they could hinder planned U.S. investments; increase costs for manufacturers and ultimately patients; undermine relationships with trusted allies; and increase the potential for harmful retaliatory trade policies to be implemented, creating further uncertainty for manufacturers and increased costs that will be passed on to patients.

Pharmaceutical tariffs will undermine Americans’ health and economic competitiveness at a time when China and others are poised to seize global leadership in biotech and related emerging technologies.