Impact of U.S. Tariffs on Imported Medicines
The U.S. President's decision to impose 100% tariffs on imports of branded and patented medicines has significant implications for healthcare access in America. Prescription drugs account for approximately 10% of household medical care spending.
Key Aspects and Implications
- The tariffs, effective October 1, will particularly affect drugs from the European Union and Japan, which together account for nearly three-quarters of pharma imports.
- Drugs affected include patented medicines such as Wegovy and Ozempic, with severe implications for patients requiring specialized treatments like cancer or rare disease drugs.
- The health insurance sector could see increased costs as firms pass on higher prices to policyholders.
- An Ernst & Young study indicates a potential $51 billion increase in annual drug costs with a 25% tariff on patented drugs.
Global Impact
- Countries not exempt, such as the U.K., Switzerland, and Singapore, face a 100% tariff burden on pharma products, potentially increasing their costs.
- India's generics industry, accounting for 90% of U.S. prescriptions, is currently unaffected by the tariffs, with exports exceeding $10.5 billion to the U.S. in FY25.
- There is uncertainty regarding whether Active Pharmaceutical Ingredients (APIs), predominantly supplied by India and China, will be subject to tariffs.
Economic and Political Considerations
- The U.S. remains a major exporter of innovative medicines, and how these tariffs will affect the competitiveness of U.S. exports is unclear.
- The influential PhRMA body has opposed the tariffs, warning of increased costs for patients without addressing structural issues in the supply chain.
- The move signals a shift in global supply chains influenced by emerging political realities, urging countries to diversify trade alliances and markets.
