Q&A: Pharmaceutical Tariffs Could Result in Generic Drug Shortages

Amid the Trump Administration’s work to lower drug prices¹ and impose tariffs on foreign countries, a significant change in several US markets is looming. However, a federal court recently blocked the administration’s power to impose tariffs,² leading to significant uncertainty in the future of pharmaceutical drug pricing and access.

“My big worry on the generic side is that we actually won't see prices increase enough, prices will not be able to increase, and as a result, manufacturers are just going to walk away,” said Marta Wosinska, PhD, senior fellow with The Brookings Institution. “The markets are not resilient. We can't build facilities overnight. The manufacturer might leave in a couple of weeks, after they sell their inventory, and we might wait 5 years for a new facility to be built.”

Diving deep into the complex interplay between drug manufacturers, pharmacies, and the drugs they need to serve their patients, Wosinska recently joined Drug Topics to discuss the potential impact pharmaceutical tariffs may have on the drug supply chain if they were to be enacted in the near future. Learn more from Wosinska’s expert insights as she breaks down how pharmaceutical tariffs may impact generics and brands on drastically different levels.

Wosinska provides expert insights as she breaks down how pharmaceutical tariffs may impact generics and brands on drastically different levels. | image credit: Denis Anikin / stock.adobe.com

Drug Topics: Your report mentions that generic drugs make up 92% of US retail and mail-order pharmacy prescriptions.³ You also mention that “We use generics and spend on brands.” How would you expect these trends to change if tariffs are imposed on pharmaceutical goods?

Marta Wosinska: I mean, we still will spend on brands and use generics, but I definitely do think that tariffs would play out very differently for brands than generics. I should say one thing: It really matters what kinds of tariffs are imposed. If you impose a tariff on India, it's not going to affect brands, basically, at all. If you impose tariffs on China, which we, by the way, have currently a 20% tariff on Chinese pharmaceuticals because of tariffs that were put on across the board on Chinese products early in the administration. So again, the impact is going to be different, but one thing to keep in mind is that brands have a very different ability to absorb tariffs into their margins. The big question is, to what extent can they pass on the cost, and if they can't, can they absorb it? For brands, there's a big question of whether they would be passing on the cost. If they were to pass on the cost, clearly we're going to pay a lot more because a 25% tariff on a $10,000 drug is a lot of money. If branded manufacturers are passing on the tariffs, that's going to be very, very visible.

But even if they are not going to pass on the tariffs… they have the ability to absorb it. I've been really concerned that we might end up with shortages of certain types of generics. Here, it's because [manufacturers] might be limited in their ability to pass on the price. Let's say that you have a $4 generic, very typical, and the tariff is going to be 25%, that's $1. It seems like it's not a big deal, but what if that generic only had a 50-cent profit margin? So now, if they don't pass on the tariff, if they have to basically absorb it, that product is going to be unprofitable. There's a big question of where they might be able to pass on the cost, and this is where you run into the various, to some extent, contracts. In the retail setting, it's easier to pass on the cost because a lot of the retail drugs are sold based on really a spot market. On the hospital side, you actually see contracts. The group purchasing organizations might have 1- to 3-year contracts that will tie the manufacturer to [a] particular price. So that's one piece.

Another piece is the Medicaid program and the spillover to the 340B program. Under Medicaid, any prescription that is sold to a Medicaid patient, there needs to be an inflation rebate, not only the mandatory rebate, but also an inflation rebate added. The inflation rebate is over the consumer price index. Right now, the consumer price index is 2.4%; at 25% tariff, it’s 10 times as much. Imagine amoxicillin. Amoxicillin is probably heavily used by Medicaid patients. It's sold to kids. A lot of kids are in Medicaid. What you're going to see is, if you're a foreign manufacturer of amoxicillin, you can increase the price on part of your market, maybe half the market, maybe less, but for the rest of it, you have to basically absorb it beyond the 2.4%. Similarly, for the 340B program, on the sterile injectable, hospital side, that also reflects the Medicaid inflation rebate. It's basically the same mechanism on that side. The kinds of drugs where I would be concerned about manufacturing really being challenged on their profits and profitability would be in particular cancer drugs, because they have a really large exposure to the 340B program.

My big worry on the generic side is that we actually won't see prices increase enough, prices will not be able to increase, and as a result, manufacturers are just going to walk away. The markets are not resilient. We can't build facilities overnight. The manufacturer might leave in a couple of weeks, after they sell their inventory, and we might wait 5 years for a new facility to be built. So that's my big concern.

READ MORE: Q&A: How Syringe Access Underscores the Potential Impact of Pharmaceutical Tariffs

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References

1. Fact sheet: President Donald J. Trump announces actions to put American patients first by lowering drug prices and stopping foreign free-riding on American pharmaceutical innovation. News Release. The White House. May 12, 2025. Accessed May 12, 2025. https://www.whitehouse.gov/fact-sheets/2025/05/fact-sheet-president-donald-j-trump-announces-actions-to-put-american-patients-first-by-lowering-drug-prices-and-stopping-foreign-free-riding-on-american-pharmaceutical-innovation/

2. Schonfeld Z. Court of International Trade blocks Trump’s tariffs in sweeping ruling. The Hill. May 28, 2025. Accessed May 29, 2025. https://thehill.com/homenews/administration/5322889-court-rules-trump-tariffs/

3. Wosińska M. Will pharmaceutical tariffs achieve their goals? The Brookings Institution. March 27, 2025. Accessed May 29, 2025. https://www.brookings.edu/articles/pharmaceutical-tariffs-how-they-play-out/