Trump tariffs may play havoc with health prices, supply chains
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Maura Losch/Axios
A trade war with China could shock fragile global health care supply chains, driving up the cost of medical supplies, intensifying shortages of common drugs and limiting U.S. medical device makers' ability to import critical parts.
Why it matters: While President Trump's tariffs are billed as a boon to America's public health for the way they'll cut off sources of fentanyl, experts say they risk upending a health network that buckled during the pandemic and relies on components sourced from around the world, with multiple intermediaries.
The big picture: President Trump this week forged ahead with a 10% tariff on all imports from China while agreeing to a 30-day pause on 25% tariffs for Canadian and Mexican imports. China responded by threatening retaliatory 15% tariffs on a large number of U.S. imports.
- China has become a linchpin in biopharma manufacturing and is a key source of advanced pharmaceutical ingredients used in targeted therapies and starting materials for generic sterile injectable drugs for critical acute care.
- Many commonly used medical supplies like syringes, surgical gloves and personal protective equipment also come from China. The Biden administration last year raised tariffs on Chinese medical supplies to combat low-priced imports.
A Black Book Market Research survey of 200 industry professionals found more than 80% predicted costs for hospitals and health systems will surge by at least 15% in the next six months due to increased import expenses.
- About 7 in 10 predict drug costs will rise by at least 10% assuming the higher tariffs.
What they're saying: "Make no mistake, if there are widespread tariffs anywhere from the 10% to 25% range, I anticipate there will be corresponding price increases," Jason Hollar, CEO of health care services and products company Cardinal Health, told analysts during the company's earnings call last week.
- "My number one concern is 'Will the provider population be able to withstand the increase?'" said Niobis Queiro, a revenue cycle management expert and CEO of Atlanta-based Queiro Group.
Between the lines: Health care already saw a version of across-the-board jumps in prices when COVID hit, Queiro said. Providers retired or shut their doors in many cases.
- Tariffs could make it harder for the industry to respond quickly in the event part of the supply chain goes down. When Hurricane Helene ravaged a major IV fluid plant in North Carolina last year, supplies were stabilized with IV bags from China, Canada and Mexico, she said.
Companies are coping with the uncertainty around Trump's tariffs and trying to determine whether they're temporary threats or a new kind of normal.
- "This administration, in the first iteration, made policy at 2am on Twitter. Things are constantly changing," said Kyle MacKinnon of group purchasing organization Premier. "We're collectively trying to analyze and evaluate with the information we have right now, knowing it's going to probably change, and we're just going to have to keep flexible and pivot."
The other side: There's been concern in the past that China could weaponize its drug exports, aware that the U.S. hasn't ramped up domestic manufacturing to offset the harm. And COVID highlighted the risks of being too reliant on imports from a limited number of countries.
- Tariffs against China would be a major step toward leveling the playing field for the manufacturers of supplies like medical gloves, gowns, respirators and needles, Eric Axel, executive director of the American Medical Manufacturers Association, told Axios.
- Tariffs could help manufacturers in the U.S. be more competitive, a key to protecting the U.S. health care supply chain, Axel said.
- "We basically go from one emergency to another. If we don't have resilience, we leave ourselves exposed," he said.
Groups like the medical device industry's trade association AdvaMed are nonetheless calling for carve-outs for certain corners of the health care market, saying tariffs will result in layoffs, higher prices and less R&D.
- There are also calls for more tax incentives to bring manufacturing back to the U.S., higher Medicare reimbursements for U.S. products and getting the Food and Drug Administration to inspect domestically manufactured supplies more quickly, Premier said.
Reality check: Many of these prices won't go up overnight, since many players have long-term contracts or may have have some level of surplus product stored up.
- The Inflation Reduction Act also penalizes drug companies if the cost of their products rises too fast.
Still, experts predict patients will ultimately feel pain in the form of higher premiums or co-pays.
- "The impact doesn't just stop at the doctor or the hospital. It goes to you," Queiro said.
