Pharmacists most often stock medications against the chance of targeted Trump tariffs

Pharmacists most often stock medications against the chance of targeted Trump tariffs

In the flimsy basement of a Salt Lake City pharmacy, hundreds of amber plastic bottles sit in rows, one man's defensive wall, in a tariff war.

Independent pharmacist Benjamin Jolley and his colleagues fear that tariffs aimed at bringing drug production into the U.S. will instead put companies out of business while raising prices and creating more of the drug shortages that have plagued American patients for several years.

Jolley bought six months' worth of the most expensive large bottles, hoping to protect his business from the 10% of total tariffs on imported goods that President Donald Trump announced on April 2. Now with threats of additional tariffs targeting pharmaceuticals and Jolley worries the cost of the drugs that fill those bottles is rising.

In principle, Jolley said, the tariffs to drive manufacturing from China and India to the U.S. make sense. In war, China could quickly stop all exports to the United States.

"I understand the rationale for tariffs. I'm not sure we're going to get it right," Jolley said. “And I’m definitely sure it will increase the price I pay my suppliers.”

Independent pharmacists like Jolley find themselves on the front lines of a tariff storm. Almost everyone across the board — drug manufacturers, pharmacies, wholesalers and middlemen — opposes most tariffs.

The drug's damage, experts say, could trigger widespread shortages, increasing America's reliance on Chinese and Indian-made chemical ingredients that form the critical building blocks of many drugs. Industry officials warn that steep tariffs on raw materials and finished pharmaceuticals could make drugs more expensive.

“Big ships don’t change course overnight,” said Robin Feldman, a UC Law San Francisco professor who writes about prescription drug problems. "Even if companies commit to bringing the manufacturing facility home, it will take time to get it up and running. The key will be to keep consumers out of the industry and the pain."

Trump said on April 8 that he would soon announce “a major pharmaceutical tariff,” which has been largely tariff-free in the U.S. for 30 years.

“If they hear this, they will leave China,” he said. The USA imported medicines worth 213 billion US dollars in 2024 - from China, but also from India, Europe and other areas.

Trump's statement sent drugmakers scrambling to figure out whether he was serious and whether some tariffs would be tightened, given that many parts of the U.S. drug supply chain are fragile, drug shortages are common and en route to the FDA questions whether staffing is adequate to inspect factories and quality problems can lead to supply chain crises.

On May 12, Trump signed an executive order calling on drug makers to reduce the prices Americans pay for the prescriptions to bring them in line with those in other countries.

Meanwhile, even the 10% tariffs Trump has demanded, pharmacists predict a potential increase of up to 30 cents per vial isn't a ransom, but it does add up when you're a small pharmacy filling 50,000 prescriptions a year.

“The only word I would say right now to describe tariffs is ‘uncertainty,” said Scott Pace, pharmacist and owner of Kavanaugh Pharmacy in Little Rock, Arkansas.

The fluctuations in the price of the weather included the medicines that his pharmacy sells the most.

“I identified the top 200 generics in my store and basically used the ones on the shelf for 90 days as a starting point,” he said. "These are the diabetes medications, the blood pressure medications, the antibiotics - the things that I know make people sicker."

Pace said the tariffs could be the death knell for the many independent pharmacies that exist on "razor-thin margins" - unless reimbursements increase to keep up with higher costs.

Unlike other retailers, pharmacies cannot pass on such costs to patients. Their payments are set by health insurers and pharmacy benefit managers, most of which are owned by insurance conglomerates that act as middlemen between drugmakers and buyers.

Neal Smoller, who employs 15 people at his Village Pharmacist in Woodstock, New York, isn't optimistic.

"It's not like they're going to go back and say here's your 10% bump because of the 10% tariff," he said. “The costs will go up and then the slow responses from the PBMs – they will cause us to lose money faster than we already are.”

Smoller, who said he has built a niche selling vitamins and supplements, fears FDA shots will mean fewer federal inspections and safety checks.

“I worry that our pharmaceutical industry is becoming like our supplement industry, where it's the Wild West,” he said.

In some cases, narrowly focused tariffs could work, said Marta Wosińska, a senior fellow at the Center on Health Policy at the Brookings Institution. For example, while drug manufacturing facilities can cost $1 billion and take three to five years, it would be relatively cheap to build a syringe factory - a business American manufacturer abandoned during the Covid-19 pandemic because China dumped its products here, Wosińska said.

It's not surprising that giants like Novartis and Eli Lilly have promised Trump they will invest billions in U.S. plants, she said, since much of their final drug will be made here or in Europe, where governments bargain against drug prices. The industry is using Trump's tariff rattles as leverage. In a letter dated April 11, 32 pharmaceutical companies called on European governments to pay them more or face an exodus to the United States.

Brandon Daniels, CEO of supply chain company Exiger, is bullish on tariffs. He believes they could help bring chemical manufacturing back to the U.S., which, if increased as the use of automation increases, would reduce the labor advantages of China and India.

“You have real estate in North Texas that is cheaper in Shenzhen than real estate in Shenzhen,” he said at an April 25 economic conference in Washington, referring to a major Chinese manufacturing hub.

But Wosińska said no tariffs would force generic drug makers, who are responsible for 90% of U.S. regulations, to build new factories in U.S. payment structures, and competition would make it economic suicide, she said.

Several U.S. generic drug companies have filed for bankruptcy or U.S. factories in the past decade, said John Murphy, CEO of the accessible medicines association Generics Trade Group. Reversing these trends won't be easy and tariffs won't do it, he said.

“There is no magic level of tariffs that will magically encourage them to come to the U.S.,” he said. “There is no room to make a billion-dollar investment in a domestic facility if you are losing money on every dose you sell in the U.S. market.”

His group has tried to explain these complexities to Trump officials and hopes the message gets through. “We are not phrma,” Murphy said, referring to the powerful trade group that primarily represents brand-name drug makers. “I don’t have the resources to go to Mar-a-Lago to talk to the president himself.”

Many of the active ingredients in American medicines are imported. Fresenius Kabi, a German company with facilities in eight U.S. states to produce or distribute sterile injectables — essential hospital medicines for cancer and other diseases — complained in a letter to U.S. Trade Representative Jamieson Greer that tariffs on these raw materials could paradoxically lead some companies to shift finished product manufacturing overseas.

Fresenius Kabi also makes biosimilars, the generic forms of expensive biologic drugs like Humira and Stelara. The United States is typically the last developed country for biosimilars to appear on the market due to patent laws.

Tariffs on biosimilars from overseas - where Fresenius makes such drugs - would further encourage the use of more expensive brand-name biologics, the March 11 letter said. Biosimilars, which can cost a tenth of the original drug price, launch on average 3-4 years later in the US than in Canada or Europe.

In addition to paying faster with cheaper knockoff drugs, European countries also pay far less than the United States for brand-name products. Paradoxically, the same countries pay more for generic drugs.

European governments tend to have more stable contracts with generic drug makers, while in the United States "rabid competition" drives prices down to the point where a manufacturer "may be counting on product quality," said John Barkett, a White House domestic policy member in the Biden administration.

As a result, Wosińska said: “Without exceptions or other measures, I am really worried about tariffs that cause drug shortages.”

Smoller, the New York pharmacist, sees no benefit from the tariffs.

“How did I solve the problem of caring for my community,” he said, “but not succumb to the emotional roller coaster of handing out hundreds of prescriptions a day and watching each one of them make a loss or 12 cents?”

Sources: