With tariffs on the way “very shortly” for imported drugs, pharma giants like Eli Lilly and Johnson & Johnson are investing billions into expanding US manufacturing.
On the surface, it seems like tariffs are accomplishing the promised goal of bringing manufacturing back to the US. In an April 2 briefing, the White House vowed this increase would strengthen supply chains, lower costs, and reduce dependence on “foreign adversaries.”
But Baltimore, Maryland-based Johns Hopkins researchers said in a June 11 media briefing they don’t think tariffs will bring much benefit. For generic drugs, tariffs could increase supply shortages. For branded drugs—which make up 20% of prescriptions but 80% of prescription drug spending—tariffs could increase prices.
The deets. Only about 12% of active pharmaceutical ingredient (API) volume is made in the US, excluding IV fluids, according to an April report by the United States Pharmacopeia (USP), an independent nonprofit that sets global drug quality and safety standards.
“It would take years” to build up enough US manufacturing capacity to end reliance on other countries for certain branded drugs, Jeromie Ballreich, an associate research professor in the Department of Health Policy and Management at the Johns Hopkins Bloomberg School of Public Health, said during the briefing.
Plus, because domestic manufacturers import active pharmaceutical ingredients and key starting materials to make their drugs, manufacturing drugs here doesn’t necessarily dodge potential tariffs, Mariana Socal, an associate professor in the same department, said.
“We would expect pharma to pass the cost on to the insurers, and we would expect insurers to pass the cost on to the individual patients,” Ballreich said.
Already, the US pays more for branded drugs—sometimes 2x–4x more—than other countries, according to 2021 data from the Government Accountability Office.
Generic problems. Generic drugs are a different story.
The US pays about the same or less than other countries for these drugs, Socal said.
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“For these products, the biggest problem is not cost, but it’s actually supply shortages,” she said.
If it becomes more expensive to import generics, she added, manufacturers might be tempted to “cut corners” on safety, since these drugs already have such low profit margins.
The FDA, which regularly inspects manufacturing facilities, could end up pausing imports from certain plants in response, exacerbating shortages. About 62% of drug shortages from 2013–2017 were related to quality issues, the agency said in a 2019 report.
How to fix things. On the other hand, the researchers said there are legitimate concerns about relying on other countries for drugs and a need for supply chain reform.
“Having access to prescription drugs is a national security matter,” Socal said. “I think that’s part of the rationale for bringing manufacturing back to US soil.”
But to do so requires more than tariffs: It demands a well-trained workforce alongside policies that make it attractive to set up shop in the country, Ballreich said.
Branded drug manufacturers have moved from the US to places like Switzerland, Ireland, and Germany over the last couple decades because those countries offer better tax policies, he said. (The European Union manufactures 43% of API for US brand-name prescriptions, USP found.)
To bring the manufacturers back, the US needs to offer tax policies that can compete.
He pointed to the 2022 CHIPS and Science Act, which used tax credits and grants to tempt more companies to move semiconductor manufacturing back to the country.
The act subsidized the construction of factories in Arizona, New York, and Ohio, though President Trump has called for the end of the program, arguing tariffs will get the job done, the New York Times reported in March.