Key Takeaways
- President Donald Trump recently proposed a tariff as high as 200% on medicine from overseas.
- Experts say steep tariffs on drugs could push up prices, insurance premiums, and even lead to shortages.
- A tariff of 25% could raise the cost of certain cancer medicines by $10,000 for a 24-week course, one analysis found.
President Donald Trump’s proposed tariffs on pharmaceuticals could lead to higher prices, higher insurance premiums, and even drug shortages, experts say.
Trump set off the latest round of speculation this week when he said his long-awaited tariffs on pharmaceutical products could be announced soon. He has previously floated the idea of a 25% tariff on pharmaceutical products, adding to the sprawling list of import taxes he has already put in place.
“The pharmaceuticals will be tariffed probably at the end of the month,” Trump told reporters on July 15 in a gaggle at Joint Base Andrews. “And we’re going to start off with a low tariff and give the pharmaceutical company a year or so to build. And then we’re going to make it a very high tariff.”
The tariffs are intended to encourage drug companies to manufacture their products in the U.S. instead of overseas, which would make the U.S. less vulnerable to supply disruptions.
The timeline for a pharma tariff remains murky, and very high could be very high indeed—Trump recently floated the idea of a 200% tariff on drugs. That would be his steepest import tax to date, but he said it might not take effect for a year to 18 months.
Who Will Pay
Consumers will ultimately pay the price for the tariffs, either directly or indirectly, according to an analysis by a team of researchers led by Sean D. Sullivan, a professor of Pharmacy at the University of Seattle, published in the Journal of Managed Care & Specialty Pharmacy this May.
Consumers would initially be shielded from the cost increases for many drugs, because prices are regulated by government programs like Medicare. In those cases, hospitals would be hit with the bill. But then companies could raise prices for private insurers, leading to higher insurance premiums, Sullivan wrote.
Companies that sell generic drugs to consumers typically have low profit margins and would have to pass most of the tariffs on to their customers, Sullivan wrote.
The hit could be bigger for certain medications that are only made overseas. A 25% tariff on pharmaceuticals would push up prices for some cancer treatments by $8,000 to $10,000 for a 24-week course, an analysis by ING found.
Drug manufacturers that are unable to pass the cost of the tariffs on to consumers may choose an even worse option: halt production or exit the U.S. market altogether. That could lead to shortages, according to Marta E. Wosińska, a senior fellow of economic studies at the Brookings Institution, a nonpartisan think tank.
The tariffs could even hurt domestic manufacturers, since many pharmaceuticals made in the U.S. use ingredients brought in from overseas, and would incur an import tax.
Tariff pressure for both domestic and foreign manufacturers of generics will test their already low margins, potentially leading to product discontinuations or cost cutting that erodes quality, Wosińska wrote in a March analysis.
The tariffs may not have their intended effect of encouraging domestic production, Sullivan wrote.
Pharmaceutical manufacturing is highly specialized, requiring significant capital investments, technological expertise, and regulatory compliance, he said. Scaling domestic production, including importing ingredients from countries like China and India, to offset disrupted foreign supply chains is often impractical and costly.
Trump’s Timeline
Financial markets are left to speculate how high a tariff will be, and when it will be put in place. Economists at Goldman Sachs led by Jan Hatzius estimated the tariffs would likely start off low and then raised after the 2026 midterm elections, since they could be unpopular with the public.
“We assume that the bulk of pharma tariffs will be delayed until Jan. 2027, despite the risk that a lower tariff might be implemented on some pharma imports in the near term,” Hatzius wrote in a commentary.
