It is medicines that have an unbalanced impact on American health, as the US and China are engaged in a trade war that is rebutted by President Donald Trump and one sector that could have a deep impact.
The US imports 75% of essential medicines. The Trump administration has launched a survey on drug imports and the active ingredients needed to make them, stating that the US lacks it. It also threatens tariffs in sectors that could range from 7.5% to 100%, in addition to the 145% currently in place in China.
Drugs have previously been exempt from Trump’s mutual tariffs, but it is not clear how long it will last, especially with tax collections in the potential sectors of the pipeline.
For the time being, there will be insulation between the looming escalating prices and what consumers pay when they go to pick up their medicines at a local pharmacy.
Unlike other products, consumer drug prices are not subject to the same instantaneous market fluctuations. The complex supply chains across the pharmaceutical industry mean that there is a delay between tariffs and patient impact.
At the same time, almost every step in the supply chain has stockpiles. Wholesalers have their own, just like the drug giants and the federal government.
“Many of these drugs, especially those in tablet forms, have been pretty stable for a long time,” Bruce Y. Lee, professor of health policy for Cuny Public Health Health Policy, told Al Jazeera.
In the short term, pharmaceutical companies and healthcare providers can surge in costs, as during the Covid-19 pandemic. This gives pharmaceutical companies and trade groups time to appeal to the administration to ensure that exceptions from tariffs continue.
India supplies about half of all generic drugs used in the US. However, it depends on China and 80% of its active pharmaceutical ingredients (API), and the compound drugs are made.
One of the world’s biggest drug giants said he was worried that rates could raise prices and hurt patient care.
At the shareholders meeting, Astrazeneca Chairman Michel Demare said, “I strongly believe that drugs should be exempt from all kinds of customs duties.
Astrazeneca did not respond to Al Jazeera’s request for further comment.
Eli Lily, Johnson and Johnson reflected similar concerns. Over the past six months, all three have pledged billions of dollars to intensify manufacturing as well as US research and development.
But the Pharma giant can only chew on the cost for a long time. The decline in stock prices for the Pharma giant means that we need to find other ways to raise the stock price to meet the fiduciary’s liability to shareholders. Experts say that depending on the drug therapy, they can do that by renegotiating drug prices higher. It causes a downstream effect of increasing premiums for Americans who rely on these drugs daily, increasing prices.
“The demand for many drugs is inflexible. This is not a good consumer,” Lee pointed out. “If we impose something that increases costs like tariffs, we won’t really change the demand and will ultimately hurt patients.”
Socioeconomic disparities
According to a report by supply chain analytics firm Exiger released last week, the US relies on China for 80% of its active pharmaceutical ingredients. In particular, with generic antibiotics, the addiction is much higher at 90%.
China’s tariffs hurt the low-income community the most difficult, as China produces more common drugs disproportionately 80-85% cheaper than branded alternatives.
“If there’s a place to save money, it’s common and that’s exactly where it increases. Generic companies work at the slimmest margins and they’re just not in a position to absorb (it).”
A recent analysis from the Financial Services Company found that even a 25% pharmaceutical fee could force cancer patients to pay an additional $2,000 for a 24-week supply.
Tom Krauss, vice president of government relations for the American Association of Health System Pharmacists (ASHP), said tariffs could force generic manufacturers to withdraw from the US market entirely.
“Imposing tariffs on drugs and their ingredients could lead to generic drug makers with already small profit margins dropping out of the US market for certain drugs, leading to a drug shortage in American patients,” Klaus said.
Approximately 90% of drugs prescribed at US pharmacies are common or biosimilars (meaning ingredients with similar effects), according to a report by the Accessible Drug Association, published in February.
“It causes a lot of reaction because someone has to pick up the tab. This will cause insurance companies to have a lower percentage of medication costs and therefore this burden is pushed against patients and consumers,” added Lee.
Americans are already struggling to meet the current healthcare costs. One in three Americans say they can’t take the medication they’re prescribed for the cost. 11% of Americans say they are unable to meet healthcare costs, with the overall burden on Hispanic adults being 18%.
The Congressional Budget Office estimates that 7.7% of Americans are uninsured. This means that medical expenses are not in your pocket. Even those with insurance, public health experts believe that if Trump advances drug tariffs, premiums will increase.
“They’re going to spread it among those who pay it as an insurance as a whole. That’s the whole concept of insurance,” Lee said.
More expensive drugs are produced within the state or in Europe. They can also be more expensive. Currently there are 10% tariffs affecting these drugs, but it can be high if the country-specific tariffs currently suspended kick in.
Drugs coming out of Europe are more often the hit brand name drugs. Eli Lily’s weight loss pills are made in Ireland, for example. If tariffs arise there, Zepbound’s out-of-pocket out-of-pocket costs for US patients could run up to $1,086.37 for a month’s supply, as opposed to the low $25 insurance coverage.
Supply Chain Strain
In February, the American Hospital Association (AHA) said in a letter calling for a tariff exception on drugs it was worried that taxation could exacerbate stocks in the existing supply chain.
“Despite continuing efforts to build a domestic supply chain, the US health system relies heavily on international sources of the many drugs and devices needed to both care for patients and protect healthcare workers. Countries where tariffs are imposed can reduce the availability of lifesaving drugs and supplies in the United States.” “U.S. providers import many cancer and cardiovascular drugs, immunosuppressants, antibiotics, and antibiotics from China. For many patients, even temporary disruption in access to these necessary drugs can result in a severe risk of harm, including death.”
The AHA has rejected Al Jazeera’s request for additional comments.
“Healthcare has a very elaborate logistics chain, and while obviously it varies from product to product, some of them are very complicated,” added Abrams of Numerof and Associates.
For example, some APIs undergo two or three different processes, not all of which are in the same place before coming to the US to be incorporated into the final product, he explained.
“To take all these relationships and throw them into the air and see how they come down, it inevitably leads to disruption in supply,” he continued.
There is more than 104 active drug shortages in the United States, including common antibiotics such as amoxicillin. China is one of the world’s largest exporters of drugs, and the US is the largest importer.
Another concern about the US’s extreme dependence on China is that the country’s API market is expected to increase by 7.8% over the next five years, according to market research firm Model Intelligence.
Washington’s call for action
During the Covid-19 pandemic, when trade essentially halted, there were concerns that the US did not have enough drugs for strategic preparation to handle the temporary suspension. Republicans such as Arkansas Sen. Tom Cotton, and Democrats such as former President Joe Biden have long sought a decrease in dependence on China on drugs.
“If there is a supply chain that is not sufficiently diversified or dependent on a particular channel alone, that supply chain is vulnerable and risky,” Lee said.
Proposals from prominent Chinese voices, including economist Li Daokui, have long sought Beijing’s leadership to reduce the export of antibiotics to the United States as a tool for the trade war.
But experts agree that Trump’s quick approach doesn’t give businesses time to prepare, putting patients at risk.
In a letter in February, ASHP told the White House that tariffs “should be applied selectively and need to increase domestic production along with other incentives and promote a stable supply chain.”
“We can’t do that in 18 months.
Some companies say they will bring more pharmaceutical manufacturing jobs to the state. Swiss Pharmaceutical Giant Roche has announced a $50 billion investment in the US over the next five years. This includes funding to build research and development facilities and expand existing manufacturing operations.
Roche has followed Novartis, which announced that it will invest $23 billion over the next five years to expand its infrastructure in the US. This includes thousands of new jobs at seven facilities that manufacture drugs and APIs.
However, according to ASHP, building and ingesting such plants during production will not solve the immediate problems.
“It is important to note that building new drug manufacturing capacity takes several years. During that time, tariffs are high in drug prices that can pass on increasing costs to consumers, and risk risk risk risk risk risk risk for shortages of generic drugs,” continued Kraus of ASHP.
The White House did not respond to Al Jazeera’s request for comment.