President Trump's tariffs in China are in place, striking all products imported from the country, including many of the medicines Americans rely on.
China's imports account for a significant proportion of US prescriptions and counter drugs. Many Chinese-made drugs are generics, accounting for 91% of prescriptions dispensed in the US
“The Chinese market is the major supplier of major departure materials; [Active Pharmaceutical Ingredient (API)] To the generic supply chain,” said John Murphy, president and CEO of the Accessible Pharmaceutical Association (AAM).
“I think they're no longer of importance for actual finished filling and final manufacturing,” Murphy pointed out. “But really, it's a rare mineral and a major starting material that is clearly important for the supply chain.”
Stakeholders were hoping the drug would be spared from tariffs. Some people noted that the United States was the signatories of the World Trade Organization (WTO) 1994 agreement on the trade in medicines, which calls for the elimination of tariffs on many pharmaceutical products. China has vowed to sue 10% tariffs, which it says is in violation of WTO rules.
However, a White House official who spoke to the Oka said no exceptions were planned and the administration was not aware of the WTO contract.
The US is dependent on China
Reliance on China to maintain its pharmaceutical supply chain has long been an issue that lawmakers on both sides of the aisle have been trying to address.
In 2018, the US-China Economic Security Review Board said the country “relied heavily on” the drugs and APIs that gave birth to China. a 2023 Analysis We have discovered that the value of the API ordered to be China has continued to grow in recent years.
Monica de Bolle, a senior fellow at the Peterson Institute for International Economics, noted that the US is not unique in its dependence on China on drugs, and that the European Union is similarly dependent.
De Bolle said China's dominance in the market grew as US pharmaceutical companies tried to increase drug production capacity while looking to pursue other manufacturing.
“What happened was that we developed this huge biotech sector. “The manufacturing market has become the production of these more sophisticated drugs. What is used in treatments, clinical trials. Something that has experienced.
“So we produced a lot of these things, not a lot of these things, but a lot of these things, to buy from other places, and other places It eventually became China,” she added.
Customs duties can cause shortages, Industry exit
The margins for manufacturing generic drugs are thinner razors, and supply chain disruptions tend to cause shortages or delays.
“That 10% tariff will have a rather significant impact on the supply chain, similar to the cost of generic products,” Murphy said. “We don't have a large stockpile of common drugs in the US. It's a pretty just-in-time inventory.”
According to Murphy, some manufacturers may find it economically infeasible to produce generic drugs.
In all industries, analysts warn that the increased costs brought by tariffs will be passed on to consumers. However, some manufacturers may drop out of the market entirely, rather than passing costs due to important provisions in the Inflation Reduction Act (IRA).
As part of the cost-cutting measures, the IRA includes a provision that requires the drug to be paid for rebates to Medicaid if the price of a drug rises faster than inflation.
Tom Krauss, vice president of government relations for the American Health System's Pharmacists Association, said that tariffs could mean more than a shortage.
“You need to have some factor when paying that penalty.
He said that group purchasing organizations, companies that help hospitals and pharmacies save money by purchasing drugs, may decide that products from China are too expensive and can leave them completely. I stated.
My eyes turn to India
India is also a global powerhouse when it comes to API manufacturing. an analysis By the US, Pharmacopeia (USP) discovered that India has 50% of the API Drug Master File (DMF), a document submitted to the Food and Drug Administration detailing the manufacturing process of APIs in 2023. did.
India has a slightly larger share of DMFS, but China has gained more foothold after increasing its DMF share by 63% between 2021 and 2023. .
However, switching from China to India for procurement doesn't happen overnight.
“India has a lot of this ability. Even in the European Union and Canada, there are a lot of this ability. I think the problem is that there is an excess of capacity,” Murphy said. “You are still in a situation where it takes time to expand your additional surge capabilities in one of these locations to meet global demand.”
Not only is it a matter of time, but the Indian manufacturers do not have the exact same capabilities as the Chinese manufacturers.
“India doesn't have the scope of what China makes,” De Bore said. “We can rely on India for some of the over-the-counter drugs. We can rely on India for the active ingredients that will be in the vaccine. We can rely on some antibiotics.
“When you come in… the rest becomes more complicated,” she added. “And China is almost the only market.”
