The ongoing trade war between the US and China has sparked concerns about its impact on the healthcare industry, particularly regarding generic drugs and medical equipment. The 20% tariff imposed on goods imported from China, a major supplier of medical equipment and prescription drugs, could lead to inventory shortages and price increases.
China is a significant supplier of ingredients used in generic drugs, which account for about 90% of prescriptions filled in the US. The tariffs could exacerbate existing drug shortages, especially for critical medications like IV solutions, chemotherapy drugs, and attention deficit/hyperactivity disorder medications.
Impact on Generic Drug Manufacturers
Generic manufacturers are already operating on thin margins, selling drugs at extremely low prices, sometimes at a loss. The added cost of tariffs could push them to discontinue producing certain drugs, leading to shortages and price increases.
Consequences for Hospitals and Patients
Hospitals, doctors, and patients may feel the effects of the tariffs, although not immediately. Domestic drug manufacturers and distributors might have stockpiled ingredients in anticipation of supply disruptions, delaying the impact.
Long-term Effects
The tariffs could lead to a decline in the quality of medications as generic manufacturers seek lower-cost suppliers. This could result in more harmful contaminants being found in medications.
Efforts to Mitigate the Impact
Some drug companies are adopting a “China plus one” strategy, ensuring they have backup sources of drug ingredients to avoid shortages. However, reopening domestic factories to produce generic drugs would take time and money, making it a challenging solution.
Government Policies And Regulations
Medicare and Medicaid have implemented policies to limit price increases, and the Inflation Reduction Act penalizes pharmaceutical companies for raising Medicare drug prices faster than inflation. These measures may help mitigate the impact of the tariffs on generic drug prices.
