Tariff Hits on Generic Drugs: A Looming Crisis for the U.S. Healthcare System

As discussions around the Trump administration’s potential pharmaceutical import tariffs gain traction, a new perspective has emerged highlighting the unique vulnerabilities of the generic drug industry. Ronald Piervincenzi, Ph.D., CEO of the United States Pharmacopeia (USP), argues that generic medicines and their manufacturers may face considerable risks if a trade war unfolds, significantly affecting the U.S. healthcare landscape.

Fragile Resilience of the Generic Drug Industry

While branded drugmakers may have the financial resources to absorb the impact of tariffs, the generic pharmaceutical sector operates with much thinner margins, making it particularly susceptible to disruptions. Piervincenzi pointed out that the generic drugs ecosystem is already fragile, grappling with challenges such as supply shortages and manufacturing discontinuations. In a recent interview with Fierce Pharma, he emphasized that the influx of tariffs could exacerbate these existing issues for off-brand drugmakers and the millions of U.S. patients who rely on their products.

U.S. Dependency on Global Pharmaceutical Supply Chains

According to a recent USP report, the U.S. produces a mere 12% of the active pharmaceutical ingredients (API) for medicines distributed to American patients. When it comes to branded medications, this figure rises slightly to 15%, but it mirrors the generic drugs’ production rate of 12%. The report revealed that 43% of branded pharmaceutical APIs are sourced from the European Union, with additional contributions from countries like Norway and Switzerland. Alarmingly, a staggering 35% of U.S. generic prescriptions rely on APIs manufactured in India.

Potential Impact of Tariffs on Generic Drug Availability

The looming threat of industry-specific import tariffs, expected to be around 25% or higher, poses significant risks for manufacturers of generic drugs. Although pharmaceuticals were initially exempted from the tariffs introduced in early April, the Department of Commerce is actively investigating potential national security threats linked to these imports. This investigation could empower President Trump to impose trade restrictions if deemed necessary.

While major branded drugmakers are making substantial investments to bolster U.S. manufacturing and research capabilities, Piervincenzi expressed concern over how tariffs could hinder generics producers. He noted that the pressure to maintain competitive pricing may incentivize some companies to abandon certain products in favor of more lucrative markets, which could worsen shortages in critical medications.

Understanding the Interconnectedness of Branded and Generic Medicines

“A problem for the U.S. generics landscape is a problem for U.S. healthcare overall,” Piervincenzi stated, underscoring the interchangeability between generics and branded medications in patient care. Disruptions in the generics market could have cascading effects on healthcare delivery, affecting patients, physicians, and healthcare systems alike.

Contingency Planning for Tariff-Related Disruptions

In response to the potential threats posed by tariffs, USP is proactively monitoring the supply chain dynamics and developing contingency plans. This includes identifying key components and mapping out where essential ingredients and materials are sourced. Furthermore, USP is exploring alternative routes of synthesis for drugs, which could help circumvent supply disruptions arising from tariffs.

“The question is, if you wait until you have a shortage, you don’t have time to figure out that alternative route and begin ramping up a process,” Piervincenzi cautioned. While branded drug manufacturers could feasibly adjust their processes to account for new sourcing methods, the interconnected nature of the generics marketplace presents greater complexities.

The Vulnerability of Key Medications

USP’s 2024-2025 Vulnerable Medicines List identifies drugs with less resilient supply chains, spotlighting 49 medications for chronic conditions and 51 for acute care. The most vulnerable classes highlighted include medicines for pain, cancer treatments, and hospital solutions—all of which frequently feature in shortages. As of January, 61% of the drugs on the list were not considered to be in shortage, which adds another layer of concern given future tariff policies.

Conclusion: Navigating Uncertain Waters

The implications of tariffs on the pharmaceutical industry are vast, particularly for generic drugmakers. As the U.S. government continues to explore trade restrictions in the context of national security and economic stability, the balance between protecting domestic manufacturing and ensuring the availability of affordable medications will be critical. The stakes are high—not only for the pharmaceutical companies themselves but also for the millions of patients who rely on these essential medicines for their health and well-being.