Tucked away in the cozy cellar of a pharmacy in Salt Lake City, rows of multi-hued amber pill bottles hold strong, symbols of one man’s strategic foresight amid a sea of new trade rules. For Benjamin Jolley, an autonomous pharmacist, these rows of bottles are a testament to proactive measures taken to combat potential financial hits due to tariffs instigated to promote domestic pharmaceutical production.
Those outside the industry may view these tariffs as tools to bolster the American pharmaceutical sector. Jolley, however, along with other independent pharmacists, harbors concerns about the unexpected side effects: businesses going bankrupt, prices escalating, and drug shortages intensifying. In response, Jolley prudently stocked up on a six-month supply of the pricier large bottles, an attempt to insulate his modest operation from the weight of the impending 10% tariffs on imported goods.
His concerns now intensify as the specter of additional tariffs specific to pharmaceuticals looms, leading to fears about ballooning costs for the very drugs intended to fill his carefully stocked bottles. Under the perceived threat, Jolley can’t help but worry about the implications of the tariffs to his everyday operations.
Tariffs, according to Jolley, are a double-edged sword. While they theoretically incentivize businesses to shift production from India and China to the U.S., a concept that aligns with America’s self-reliant ethos, they could also create palpable challenges in the event of global conflict.
Indeed, the independent pharmacists like Jolley who are held hostage by middlemen and insurers alike find themselves unwittingly at the epicenter of the tariff whirlwind. This new tariff storm has stirred up significant opposition along the pharmaceutical supply chain, revealing a disjunction between the intentions and the practical implications of these policies.
There are grave concerns, voiced by those in the industry, that a drastic reduction in the import of drugs could cause a ripple effect of shortages. This is due largely to the U.S.’s reliance on Chinese and Indian-manufactured chemical ingredients — the fundamental components of many medically vital drugs.
There are worries in the pharmaceutical industry that steep tariffs on raw materials and completed pharmaceuticals could inflate the cost of drugs. Last year, the U.S imported a staggering $213 billion of medicines not just from China, but from all across the globe, including India, Europe, and other regions.
In a turn of events, an executive order was signed on May 12 that compelled drugmakers to lower the prices Americans pay for prescription drugs and to bring them on par with international prices. Nevertheless, pharmacists are apprehensive that even the proposed 10% tariffs will have an adverse effect.
This apprehension is not without reason. Jolley’s estimation suggests that a potential increase of up to 30 cents per vial, albeit seeming small, could accumulate significantly over time. Particularly for a small-scale pharmacy that fills an astonishing 50,000 prescriptions annually.
The unwelcome dilemma pharmacists face is that these elevated expenses cannot simply be transferred onto their customers. Their competitive market dynamics and current payment structures would make such a decision tantamount to economic self-sabotage.
It’s no surprise it’s been a challenging decade for U.S generic firms with bankruptcy or factory closures not uncommon. While it is a daunting task to reverse this trend, placing all bets on tariffs seems to be a risk that many aren’t willing to take.
The intricate web of pharmaceutical supply chains means many American drugs rely on imported active ingredients. Case in point, Fresenius Kabi, a German firm with factories in eight U.S. states that produce or distribute critical hospital drugs for conditions like cancer, warns that tariffs on these imported raw materials could ironically encourage companies to shift finished product manufacturing overseas.
Biosimilars, cost-efficient alternatives to original drugs, are usually introduced 3-4 years later in the U.S. than in Europe or Canada. Additionally, generic drugs in these regions command higher prices which creates an intriguing paradox that needs unravelling for better pharmaceutical economics.
As one can imagine, if no remedial actions or exceptions are put in place, there are concerns about tariffs leading to drug shortages. With no perceivable benefits, tariffs pose a challenge on how to cater to community healthcare needs, avoiding both financial losses and the emotional toll of seeing every refilled prescription as a potential loss or modest gain.