Like many Americans, the Trump Administration’s new economic policy has been at the forefront of the healthcare industry’s mind. Presently, pharmaceutical and medical products have been exempted from tariffs. However, President Trump has indicated that tariffs on those products are coming soon. The effect of these tariffs will likely result in increased costs for both patients and providers, potentially leading to adverse patient outcomes.
It is expected that generic medications will be the most impacted by tariffs. Generic medications account for 90% of all prescriptions in the United States, and most of these medications and their active pharmaceutical ingredients are manufactured abroad. Drug manufacturers don’t have the flexibility to increase prices on generic medications due to their lack of patent protection, leading to strong competition within the market and thin profit margins. While one stated intent of tariffs on pharmaceuticals is to bring production onshore, this could take several years to accomplish.
This lack of flexibility could render certain generic medications unprofitable, leading to manufacturers taking them off the market entirely. Not only would this create new drug shortages, but it would also exacerbate current ones. This will likely lead to increased out-of-pocket costs for all patients due to the demand for these medications outweighing the supply. Low-income and chronically ill patients who rely on the low costs of generic medication may be forced to skip doses or refill their medication less frequently.
Tariffs could also have an adverse effect on hospitals’ supply chains and medical device availability, as most of these items are imported and have equally long lead times for domestic production. For example, hospitals rely on the imports of masks, IV supplies, ventilators, and MRI scanners, amongst other supplies and medical devices. This anticipated cost increase will only add to the already stressed financial health and staffing challenges that hospitals and providers are facing today. The likely consequence is that increased costs will once again be passed onto the consumer, and budget cuts on vital expenditures can affect a provider’s ability to accurately diagnose major health conditions in a timely manner. Further, patient overall medical costs can increase substantially, leading to patients deferring medically necessary treatment.
The impact of tariffs is yet to be fully known as the process is just beginning. How these proposed tariffs will ultimately impact overall costs, patient outcomes and provider practices is yet to be seen.
With every purposeful action, comes an unintended consequence.