The drug industry got a temporary reprieve on Wednesday when foreign-made medicines were exempted from President Trump’s far-reaching new tariffs.
But Mr. Trump has been saying for weeks that he plans to impose tariffs specifically on pharmaceuticals, with the goal of shifting overseas production of medications back to the United States. He has said those levies could be 25 percent or higher. Drugmakers still expect tariffs targeting them to be announced soon.
“The pharmaceutical companies are going to come roaring back, they’re coming roaring back, they’re all coming back to our country because if they don’t, they got a big tax to pay,” Mr. Trump said in remarks at a Rose Garden event on Wednesday.
While there is still some drug manufacturing in the United States, most of the drugs Americans consume are produced at least partly overseas.
The most important places in the industry’s supply chain are China, India and Europe. For example, plants in China and India make nearly all of the world’s supply of the active ingredients in the painkiller ibuprofen and the antibiotic ciprofloxacin, according to Clarivate, an industry data provider.
Drugmakers have powerful financial incentives to produce their products overseas. For most companies and most medications, tariffs are unlikely to reverse that, experts said.
Instead, tariffs threaten to increase prices and create shortages of certain generic medications, which account for a vast majority of U.S. prescriptions. Americans are less likely to feel a direct impact for brand-name drugs.
The Trump administration is aware of the risks of raising drug prices and is weighing that as it designs tariffs specific to pharmaceuticals. Levies could be imposed under a national-security-related legal authority known as Section 232 which Trump officials had also proposed using for tariffs on other goods like lumber and cars. The timing is uncertain.
The drug industry has been lobbying the Trump administration to gradually phase in any levies, instead of imposing a 25 percent tariff all at once. The industry also hopes to secure exemptions for certain types of drugs, like those at risk of shortages or medicines deemed critical like antibiotics.
Here’s what to know about where America’s medications are manufactured and what tariffs on drug imports could mean.
Where is America’s drug supply made?
There’s usually no single country where a drug is manufactured. Plants in different parts of the world handle different parts of the process. Factories make chemicals and other raw materials. Drug companies buy those materials and use them to make the active ingredient of a medication. Then the active ingredient needs to be formulated into a pill or a liquid. In the final stage, the drug is packaged into boxes, vials or pens.
For cheaper, off-patent generics, active ingredients are usually made in India or China, where costs are significantly lower than in the United States. Indian manufacturers often import their raw materials from China.
Biden and Trump officials, as well as federal lawmakers, have said this reliance on China is a national security vulnerability.
Newer and more expensive medications are more likely to be made in the United States or Europe. Ireland, in particular, has become a hub because it is a tax haven.
Many of the industry’s biggest blockbusters are manufactured at least partly in Ireland. Among them are: Keytruda, Merck’s cancer drug; Zepbound, Eli Lilly’s weight-loss drug; and Stelara, Johnson & Johnson’s anti-inflammatory drug used for conditions like arthritis.
Mr. Trump has taken notice. “This beautiful island of five million people has got the entire U.S. pharmaceutical industry in its grasp,” he said in March at a meeting with Prime Minister Micheal Martin of Ireland.
Why did U.S. drug manufacturing move overseas?
U.S. production of pharmaceuticals peaked, by one measure, in 2006.
That was around the time a wave of top-selling American-made drugs lost patent protection, creating opportunities for generic manufacturers in India and China to ramp up production of generics. Around the same time, U.S. government incentives to manufacture in Puerto Rico were phased out, while new carrots, like tax advantages in Ireland, encouraged manufacturers to move production overseas.
In 2021, most of America’s top-consumed generic drugs, as well as key antibiotics and antivirals, had no American facility producing their active ingredients, according to Clarivate.
Mr. Trump said on Wednesday that “the United States can no longer produce enough antibiotics to treat our sick.”
For example, nearly all the world’s sites producing the active ingredient of amoxicillin, a common antibiotic, are in China, India or Europe, according to Clarivate.
A Tennessee plant, now owned by a company called USAntibiotics, used to supply nearly all of the amoxicillin consumed in the United States. It now imports the active ingredient from Europe and uses it to formulate pills. The plant now supplies about 5 percent of America’s amoxicillin.
Have drugs been subject to tariffs before?
Medications are usually protected from tariffs under a World Trade Organization agreement aimed at protecting patients’ access to vital drugs. The tariffs that Mr. Trump imposed on certain imports in his first term did not hit pharmaceuticals.
Starting in February, drugmakers importing active ingredients made in China into the United States have had to pay a tariff that Mr. Trump imposed on Chinese goods. That tariff rose to 20 percent in March. (Wednesday’s levies add a new 34 percent tariff on most Chinese imports, though that does not apply to medicines.)
Will tariffs lead to drug shortages?
For the manufacturers of inexpensive generic drugs with razor-thin profit margins, the added costs of tariffs could be “a tipping point” that prompts them to exit the market, said Erin Fox, an expert at the University of Utah who tracks drug shortages.
Dr. Fox said she was most worried about drugs for which shortages are already common, such as generic medications given as an injection. These injections are harder to make than pills and are much less profitable than newer medications, discouraging manufacturers from jumping in. An example is lidocaine, used to numb pain during medical procedures. Most production of lidocaine’s active ingredient is in India, according to Clarivate.
Industry groups are warning that tariffs could also lead to shortages of medical devices like syringes and blood pressure cuffs, many of which are sourced from China. That could make it harder for hospitals to perform lifesaving surgeries and keep patients safe, the American Hospital Association, a lobbying group, said.
America’s Top-Prescribed Drugs
Will tariffs increase drug prices?
Americans paying at the pharmacy counter are unlikely to see price increases from tariffs as clearly, or as quickly, as they may when buying imported cars or avocados.
Tariffs probably won’t inflate the prices of most expensive brand-name medications, which are based on what the market will bear. More likely to be affected are cheaper generic drugs, whose prices hew more closely to production costs. Generic manufacturers may try to pass on the added expense to the employers and government programs that cover most of the costs of Americans’ prescription drugs.
For a generic heart drug that sells for 82 cents a pill, a 25 percent tariff could add $42 to the annual price. For a more complex generic cancer medication, the price of a six-month supply could be inflated by as much as $10,000, according to estimates from Diederik Stadig, an economist at ING, a European bank.
For patients, that could eventually mean higher insurance premiums or increased out-of-pocket costs. And if tariffs result in drug shortages, patients accustomed to paying a small monthly co-pay for their generic medicine may have to switch to a product that costs them more.
“Is this going to be a seismic shift for patients? Probably not. But it’s still enough of a threat to be concerned about,” said Ameet Sarpatwari, a pharmaceutical policy expert at Harvard Medical School. He pointed to research showing that even modest cost increases discourage patients from filling prescriptions.
How are drugmakers responding to the threat of tariffs?
Mr. Trump has said he wants to give drug companies a chance to return their manufacturing to the United States. Eli Lilly and Johnson & Johnson recently gave him symbolic wins when they announced plans to spend billions of dollars to build new U.S. manufacturing plants.
Some drugmakers could respond to tariffs by shifting some production to their existing American plants, as Pfizer said it might do. “We don’t have to build the network,” the company’s chief executive, Albert Bourla, said at an industry conference in March.
But those companies, among the industry’s wealthiest, can afford to do what many generic drugmakers cannot.
“Certainly, in the short-to-medium term, I think tariffs will only drive more and more instability in terms of security of supply and ultimately will drive up pricing,” Richard Saynor, chief executive of Sandoz, a large generic drugmaker, told Wall Street analysts in March.
What would it take to bring drug manufacturing back?
Some experts believe that at least a portion of overseas drug manufacturing could be moved to the United States. More than 300 American plants are registered to manufacture active ingredients, up 26 percent compared with 2020, according to an industry-funded analysis.
Some sites still make generic drugs, with idle capacity that might be able to be repurposed. A survey in 2022 of manufacturers found room to make an additional 30 billion doses at generic manufacturing plants in the United States.
Still, there are steep obstacles to bringing back drug manufacturing: Building new plants can take years and billions of dollars. The costs of moving production may be greater than simply eating the costs of tariffs.
Strict environmental regulations in the United States may also make it difficult to bring back production of certain drugs whose manufacturing can produce dirty waste, said Rena Conti, a health economist at Boston University. Those drugs are typically produced in countries with laxer restrictions on this type of pollution.
How can I find out where my medication was manufactured?
Sometimes your drug’s packaging will say where a key stage of its manufacturing took place. But other times, the place listed can be misleading. Your drug’s label might say New Jersey, where the company has offices, when in fact your drug’s active ingredient was made in Ireland with raw materials from China.
Drugmakers must report where they make their products to the Food and Drug Administration. But the government makes little of that information public, and what is available is hard to navigate. Researchers often rely on a patchwork of press reports and imports data.
That makes it harder to prepare for supply disruptions — like those that could stem from tariffs.
“We don’t know which products truly are the most vulnerable, and we can’t target resources appropriately,” said Dr. Fox of the University of Utah, “because we don’t have that information about where they’re being made.”
