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The generic drug industry has warned that US tariffs on US prices risk a shortage of drugs, including cancer treatments, and manufacturers could end up halting production of unprofitable products.
Generic drugs, the inexpensive versions of drugs that have no longer been patent protected, account for around 90% of the US drug supply. Most are manufactured outside the US in low-cost countries such as India. The active ingredients used in products often come from China.
So far, drugs have eschewed a wide range of US tariffs. But President Donald Trump has repeatedly stated plans to apply them to the sector, saying this week the US Department of Commerce is investigating the national security impact of drug imports.
The department will have up to nine months to publish its conclusions, but Commerce Secretary Howard Lutnick said tariffs could occur sooner in “next month or two.”
John Murphy, chief executive of the Accessible Drug Association, a US lobby group, said tariffs would not benefit patients or improve the security of the healthcare system. He said older injections, such as cancer chemotherapy, are “particularly vulnerable.”
“We’ve seen a situation where generics already sold at very narrow margins would become financially invisible to get into the market if a particular product loses money,” he said.
Murphy argued that he lobbyed the White House to treat the industry differently, and that there are other ways to encourage more oversight of production, and that imposing costs on an industry that is already struggling with capital investment would not work.
“If we are not already paying for the goods, where will capital change production?
The US healthcare system is already struggling to supply some particularly low margin products. The highest number of drug shortages ever reached an all-time high of 323 in the first quarter last year, according to the American Health System Pharmacists Association, the largest association of pharmacy professionals in the United States.
Mark Samuels, chief executive of the British Association of Generic Manufacturers, said the cost of tariffs is difficult to absorb, as prices are already “severely constrained” due to intense competition and “potentially more shortfalls.”
India is particularly hit hard by drug tariffs. According to the Indian Drug Alliance, there is a 20% share of the global exports of generic drugs and a 60% share of low-cost vaccine supply.
Some people in the industry say that US tariffs can shut down some Indian manufacturers.
“Indian pharmaceutical products will be more expensive in the US market, which could result in a significant loss of market share for Indian pharmaceutical companies,” said Palsa Salad Reddy, chairman of generic companies heterosexuals and chairman of the Indian senator, in March.
This could reduce profit margins for low-cost generic drugs, making them “unfeasible” for non-competitive companies, he said.
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Premier said it is a group purchasing organization that purchases drugs for more than 4,000 US hospitals, and could see a rise in shortages. However, that three-year contract says it means that the average manufacturer is locked up in the price, often including a provision that drug manufacturers who fail to supply must cover the cost of purchasing a replacement.
Tariffs could also raise consumer prices. Dutch bank ING estimates that a 24-week prescription for generic cancer drugs could cost between $8,000 and $10,000 if a 25% tariff is imposed.
Stephen Farrelly, global head of pharma and healthcare at ING, said those who will be “the biggest blow” are those who have health insurance who have paid for their drugs, although they could face higher premiums.
Prashant Reddy, co-author of The Truth Pill, a book about the Indian pharmaceutical industry, said that the US often has no choice but to buy from India. “Many of these drugs are not made elsewhere. They’re just raising prices in the US, so they’re shooting themselves with their feet,” he said.
