Over the last 20 years, much of drug manufacturing has shifted overseas, according to Johns Hopkins experts. But the work is not going to countries where the cost of labor is less than what it is in the United States.
It's being shifted to high income countries such as Switzerland, Ireland and Germany that have high labor costs but a tax structure that incentivizes manufacturing, according to Jeromie Ballreich, associate research professor in the Department of Health Policy and Management at Johns Hopkins.
Over the last decade, imports of pharmaceuticals have doubled, Ballreich said.
"We are seeing a surge in imports on branded pharmaceuticals," he said.
While President Donald Trump is trying to create U.S. manufacturing through tariffs, he's using a blunt instrument, Ballreich said. It would be better if the administration focused on the tax structure to bring back domestic drug production.
It would take years for certain drugs to be manufactured in the United States, Ballreich said. Small molecule drugs – those in pill form – are relatively simple to manufacture, while biologics are more complicated.
Realistically, he said, it would take several years to build a manufacturing plant.
"I don't think we're going to see a surge in [U.S.] manufacturing in the near term," he said.
WHY THIS MATTERS
The bottom line is that tariffs could result in price increases for consumers, either through higher drug costs or by increased insurance premiums, said Ballreich and Mariana Socal, a physician and an associate professor in the Department of Health Policy and Management at the Johns Hopkins Bloomberg School of Public Health.
Either way, costs passed on to drugmakers would trickle down to patients, Ballreich said.
Currently, prescription drug prices are not higher, he said. Also, Ballreich said he doesn't expect a supply chain disruption unless companies move their manufacturing hubs out of Ireland or elsewhere to a country with a more friendly tariff policy.
Consumers in the United States already pay three to four times the amount for the same drug as patients in other countries, Socol said. One in four Americans can't afford their drugs, resulting in unfilled prescriptions or in taking smaller amounts of the prescribed drug.
But the problem is more about shortages than cost, Socol said.
The Inflation Rebate Penalty that was part of the Biden administration's Inflation Reduction Act penalizes manufacturers for raising prices faster than inflation. Manufacturers could decide to discontinue a drug subject to the penalties, she said.
In 2024, the United States had a shortage on over 300 drugs. This affects patients and the day-to-day clinical practice. Generic drugs make up the majority of the shortage. Tariffs could exacerbate these shortages, Socal said.
THE LARGER TREND
Tariff policy has shifted since first being announced by Trump.
China, subject to 55% and then 145% tariffs, and the United States on Tuesday agreed to a framework and implementation plan to ease tariff and trade tensions, according to yahoo!finance. Trump said the deal was "done" pending sign-off from him and Chinese President Xi Jinping.
Most of the tariffs currently in place are pared-down versions of what they were when Trump first proposed them, according to The Guardian.
"Reciprocal" tariffs have been paused until July 8.
Still in place is a 10% universal tariff that went into effect on April 5. Currently, the baseline 10% tariff is in effect for Switzerland, Ireland and Germany.
Trump has said he would impose tariffs on pharmaceuticals, but to date the tariffs that affect drug manufacturers are on the supplies used to make prescription drugs.
Email the writer: SMorse@himss.org