Originally published by our sister publication Pharmacy Practice News

By Gina Shaw
The American Society of Health-System Pharmacists (ASHP) is urging the administration to exempt medications and specific medication-related materials from U.S.-imposed tariffs to prevent drug shortages and medication price increases. 

In a letter sent Feb. 6, 2025 to acting FDA Commissioner Sarah Brenner, MD, acting Centers for Medicare & Medicaid Services (CMS) Administrator Kevin Hassett, and National Economic Council Director Jeff Wu, ASHP warned: “Application of tariffs to API [active pharmaceutical ingredients], key starting materials, and finished medical products could result in significant unintended consequences, including drug shortages."

The letter invited the agencies to meet with ASHP and other healthcare stakeholders, such as the American Hospital Association, to identify the products that should be exempted from tariffs to avoid disruptions in patient care.

On Feb. 1, 2025, the administration announced a 10% across-the-board tariff on goods coming into the United States from China. In response, China imposed retaliatory tariffs on approximately 80 manufactured and energy products that the United States exports to that country. A statement from the administration said the tariffs were imposed to “hold Mexico, Canada, and China accountable for their promises to halt illegal immigration and stop the flow of harmful fentanyl and other drugs into our country.”

A Black Book Market Research industry survey released Feb. 2, 2025, found that 164 of the 200 survey respondents predict costs to hospitals and health systems will surge by at least 15% in the next six months due to increased import expenses, and 69% estimate pharmaceutical costs will rise by at least 10% as a result of the China tariff on APIs. (The survey was sent to hospital finance and supply chain executives, payors, patients, health market customers, pharmaceutical and medical equipment manufacturers, and physicians and ancillary practice administrators.)

Tom Kraus, JD, ASHP’s vice president of government affairs, acknowledged that it is problematic that the United States is highly dependent on other countries, particularly a geopolitical adversary such as China, for pharmaceutical products and API. 

“But as we have said in the past, we need to make sure that the solution doesn't cause supply chain disruptions that disrupt patient care,” he told Pharmacy Practice News. “Our recommendations have been to pursue carrots that incentivize domestic production as a starting point, so that you can have capacity. If you impose tariffs right now and there's a disruption in the supply chain, manufacturers can't just quickly move to the United States, because there's not capacity here. To build a pharmaceutical manufacturing plant and a supply chain to support that facility is a multi-year process.”

Although tariffs themselves do not necessarily cause drug shortages, they are associated with multiple risks that may ultimately contribute to shortages, Mr. Kraus noted. “One risk is that tariffs do increase price. If you are a manufacturer who is sourcing an API overseas and you don't have capacity to shift to a domestic supplier of that API, now your product is higher-priced than others,” he explained. 

This dynamic is evident in the generic drugs market, where “you can have big swings in market share based on price, and you could have manufacturers who are no longer cost-competitive because they’re bringing in APIs or starting materials from a country subject to tariffs,” Mr. Kraus said. “If they’re no longer competitive, they may have to increase their prices—which incurs an inflation penalty, also potentially putting them underwater—or they may drop out of the market completely.”

Concern From Generics, Biosimilars and Wholesalers Sectors

The Association for Accessible Medicines (AAM), which represents the generic and biosimilars industry, warned that generic manufacturers cannot absorb these new costs.

“Our manufacturers sell at an extremely low price, sometimes at a loss, and are increasingly forced to exit markets where they are underwater,” said AAM President and CEO John Murphy III, in a Feb. 2 statement. “The overall value of all generic sales in the U.S. has gone down by $6.4 billion in five years despite growth in volume and new generic launches. Tariffs would make this much worse.”

The Healthcare Distribution Alliance (HDA) expressed similar concerns, urging “caution on instituting tariffs on sectors that will impact medical products,” and asking that exemptions be considered for pharmaceutical products along with long implementation time lines.

“We are concerned that placing tariffs on generic drug products produced outside the U.S. will put additional pressure on an industry that is already experiencing financial distress,” the organization noted in a Feb. 2 statement. “Distributors and generic manufacturers cannot absorb the rising costs of broad tariffs.”

To further underscore that vulnerability, the HDA statement noted that distributors operate on an extremely low profit margin of 0.3%. If the tariffs are upheld and imposed, “the U.S. will likely see new and worsened shortages of important medications and the costs will be passed down to payors and patients, including those in the Medicare and Medicaid programs,” the organization said. 

Potential Solutions

The HDA suggested some potential solutions that the current administration should consider. “HDA supports strategic federal investments to boost domestic manufacturing of medical products, such as active pharmaceutical ingredients, key starting materials and finished-dose medicines for greater supply chain resilience,” the group said. “To this end, we encourage President Trump and his administration to explore long-term strategic investments and incentives for domestic manufacturing that will augment the availability and safe and affordable medicines.”

It’s not just drug ingredients and supplies that are vulnerable in a tarifff situation; other components such as packaging are at risk. On Feb. 11, Donald Trump signed an order to impose 25% tariffs on all steel and aluminum imports to the United States. “It's time for our great industries to come back to America,” he said while signing the order, adding that it was “the first of many.”

But here's the problem: “There is aluminum in all the single-dose oral drug blister packs, and when you are talking about super low-cost generic drugs, that is a non-trivial part of the price point,” Mr. Kraus said.

Tariffs also can contribute to shortages if the subject country imposes a retaliatory export control. “If they say, ‘Fine, we just won’t export this product to the U.S.,’ the fact is that we don’t have a ton of different suppliers for some of these pharmaceutical products and APIs,” Mr. Kraus said. “So, there are very real risks.”

He also noted that foreign manufacturers may be less willing to ship to the United States if their products will be subjected to tariffs. “When we do have a shortage in this country, one of our key backstops is that the FDA will try to quickly identify alternate sources of supply, which often involves imports, so that kind of reluctance could further exacerbate a shortage.”

As purchasers, pharmacies often do not have detailed visibility farther up the supply chain, so it will be difficult for them to know exactly how the tariffs will affect drug costs and shortages until after they are in place. “We don’t really know which manufacturers have that sort of risk exposure in their chain, so it’s going to be hard to adapt,” Mr. Kraus said.