The U.S. generic drug industry is sounding alarms over potential tariffs on pharmaceuticals, warning of possible shortages and market exits. These tariffs, they argue, could render the production of certain essential medicines unprofitable, jeopardizing the stability of the nation’s drug supply.

Reliance on Foreign Manufacturing

generic drugs, the affordable alternatives to brand-name medications after patent expiration, are predominantly manufactured outside the U.S., especially in countries with lower production costs like India. Furthermore, the active pharmaceutical ingredients (APIs) crucial for these drugs often originate from China, creating a complex global supply chain.

The Looming Threat of Tariffs

While pharmaceuticals have so far been spared from widespread U.S. tariffs, this may soon change. Former President Donald Trump has repeatedly expressed intentions to apply tariffs to the pharmaceutical sector. The U.S.Commerce Department is currently investigating the national security implications of pharmaceutical imports, a process that could pave the way for tariff implementation.

Even though the Commerce Department has up to nine months to finalize its findings,former Commerce Secretary Howard Lutnick suggested that tariffs could be imposed much sooner,potentially within the next month or two.

Industry Opposition and Potential Consequences

The Association for Accessible Medicines (AAM), a U.S.lobby group representing generic drug manufacturers, is actively campaigning against the tariffs.John Murphy, chief executive of the AAM, argues that tariffs would neither benefit patients nor enhance the security of the healthcare system. He specifically highlighted the vulnerability of older injectable medications, such as chemotherapy drugs used in cancer treatment.

For those generics already sold at a very narrow margin, you could see a situation where it becomes financially infeasible for certain products to be brought to market if they are going to lose money.

John Murphy, chief executive of the Association for Accessible Medicines

Mr. Murphy stated he is lobbying the White House for the industry to be treated differently, arguing that there were other ways to encourage more onshoring of production, and that imposing costs on an industry that was already struggling with capital investment would not work.

Where does the capital come from to shift production if we’re already at barely the cost of goods? . . . And potentially underwater in the short term because of tariffs.

John Murphy,chief executive of the Association for Accessible Medicines

Existing Supply Chain Vulnerabilities

The U.S. healthcare system already faces challenges in maintaining adequate supplies of certain low-margin drugs. According to the American Society of Health-System Pharmacists, the number of active drug shortages reached an all-time high of 323 in the first quarter of last year, underscoring the fragility of the current supply chain.

global Impact and Price increases

Mark samuels, chief executive of the British Generic Manufacturers Association, echoed these concerns, stating that intense competition has already constrained prices, making it difficult to absorb additional costs from tariffs. He warned of the potential for more shortages as a result.

India, a major player in the global generic drug market, stands to be particularly affected. The Indian Pharmaceutical Alliance reports that India accounts for 20% of global generic drug exports and 60% of low-cost vaccine supplies. Some industry experts fear that U.S. tariffs could force some Indian manufacturers out of business.

Indian pharma products will become more expensive in the US market which may result in considerable loss in market share for our Indian pharma companies.

B Partha Saradhi Reddy, chair of generic company Hetero and an MP in India’s upper house

Mr. Reddy added that this could reduce profit margins for low-cost generic medicines, making them uncompetitive and not viable for the companies making them.

Premier, a group purchasing institution representing over 4,000 U.S.hospitals, anticipates a potential increase in shortages. However, they noted that their three-year contracts with generic manufacturers often include provisions requiring drugmakers to cover the cost of alternative supplies if they fail to meet their obligations.

Furthermore, tariffs are expected to drive up prices for consumers. ING estimates that a 24-week prescription for a generic cancer drug could cost an additional $8,000 to $10,000 if 25% tariffs are imposed.

The people who would be hardest hit were those without insurance, who paid for their own drugs, though people with health insurance could face higher premiums down the line.

Stephen farrelly, global head of pharma and healthcare at ING

Prashant Reddy, co-author of “the Truth Pill,” emphasized the U.S.’s reliance on Indian drug manufacturers,stating,A lot of these drugs are not made anywhere else. They are shooting themselves in the foot because it’s just going to raise prices in the US.