Last week, the current administration signaled its intent to announce tariffs on pharmaceutical imports. On April 15th, a federal notice was filed to investigate imports of pharmaceutical products and ingredients, citing the goal of identifying actions that could ultimately reduce drug prices for consumers1.
While it remains uncertain when, or if, these tariffs will take effect, the U.S. Commerce Secretary indicated they may be announced “in the next month or two.” Regardless of whether these tariffs are implemented, it’s important to understand the rationale behind them and explore how pharmaceutical supply chains, U.S. consumption patterns, and industry responses may shape their potential impact.
Tariffs, which essentially function as taxes on imported goods, have become a routine topic of conversation recently across many industries. Historically, tariffs on pharmaceuticals have been low to non-existent.
“There’s a reason why pharmaceutical tariffs are zero. It’s because tariffs can create disruptions in the supply chain, leading to shortages.”
Joaquin Duato, CEO, Johnson & Johnson
The administration’s rationale for imposing pharmaceutical tariffs includes:
The U.S. imports a significant share of its pharmaceutical products. As of February 2025, “Pharmaceutical Preparations” topped the list of most valuable imported consumer goods, according to the Bureau of Economic Analysis2. Roughly 131 million Americans (66% of adults) use prescription drugs3, with use and costs rising significantly with age. Older adults and people with chronic conditions are the highest users of medications and also bear higher out-of-pocket expenses.
In 2024, the U.S. imported $212 billion in pharmaceutical goods, making them the fifth most imported product overall. Top sources included:
The U.S. primarily imports generic medications, many of which originate from India and China. By contrast, brand-name drugs, those still under patent, are often manufactured in the U.S. or European Union.
According to the Center on Health Policy at Brookings, generic drugs account for 92% of prescriptions filled at U.S. retail and mail-order pharmacies. Despite their widespread use, the majority of drug spending remains concentrated on brand-name products. Brookings’ recent report, Will Pharmaceutical Tariffs Achieve Their Goals?, explores the complexities of the pharmaceutical supply chain—highlighting the distinctions between finished dosage form (FDF) drugs and their active pharmaceutical ingredients (APIs), which are often subject to different tariff treatments. The report also outlines the multiple stages of global drug manufacturing and how each is impacted by potential trade policy changes. For a deeper dive into these issues, the full Brookings report is a useful and accessible resource.
While tariffs on pharmaceuticals could have various direct and indirect effects, the two most frequently discussed are:
Because tariffs are imposed on the importer, it is generally assumed that the added costs of bringing drugs into the U.S. will be passed on to domestic consumers.
In terms of shortages, stakeholders have expressed less concern about brand-name drugs. These products typically have high profit margins, allowing companies to absorb some of the tariff burden. The greater concern lies with the generics market. As noted earlier, the U.S. relies heavily on generic medications, which are primarily imported from countries like India and China. Generic drugs operate on thin profit margins, and if manufacturers are forced to absorb tariff-related costs, they may discontinue certain products.
This concern was outlined in a letter from several members of Congress:
The industry response to proposed pharmaceutical tariffs has been mixed. While many pharmaceutical companies acknowledge the benefits of onshoring more manufacturing, they argue that tariffs may not be the most effective way to achieve that goal.
Several industry leaders have pointed to the long timelines and high costs associated with shifting production back to the U.S., particularly away from countries like India and China where much of the world’s generic drug manufacturing currently occurs.
Companies such as Eli Lilly, Johnson & Johnson, and others are investing heavily in domestic manufacturing infrastructure—including multi-year projects in states like North Carolina—but these efforts take time. In the meantime, these companies continue to rely significantly on foreign manufacturing partners.
“If what you want is to build manufacturing capacity in the U.S., both in med-tech and in pharmaceuticals, the most effective answer is not tariffs, but tax policy.”
Joaquin Duato, CEO, Johnson & Johnson
“Tariffs will only amplify the problems that already exist in the U.S. market for affordable medicines.”
John Murphy III, Association for Accessible Medications
“We have to eat the cost of the tariffs and make trade-offs within our own companies. Typically, that will be in reduction of staff or research and development, and I predict R&D will come first. That’s a disappointing outcome.”
David Ricks, CEO, Eli Lilly
As the administration weighs imposing pharmaceutical tariffs, the potential trade-offs are clear. While the goal of strengthening domestic manufacturing is widely shared, tariffs alone may not deliver the intended results, and could instead lead to higher costs and reduced access to essential medications, particularly generics. Whether or not these tariffs move forward, the conversation highlights the complexity of the pharmaceutical supply chain and the need for more targeted, long-term strategies to support U.S. drug production without compromising affordability.
Associate Director, Research, Center for the Business of Health; UNC Kenan-Flagler Business School
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