Pharma tariffs could be a generics problem
Add Axios as your preferred source to
see more of our stories on Google.
Photo: David Williams/Bloomberg via Getty Images
The looming prospect of American tariffs on pharmaceuticals would likely hit generic drugmakers the hardest, Johnson & Johnson's CFO told Bloomberg on Tuesday.
Why it matters: 90% of prescriptions are generic drugs or biosimilars, according to the Association for Accessible Medicines, which represents generic drugmakers.
Catch up quick: The Trump administration on Monday announced an investigation into drug imports in a likely precursor to tariffs, which the president has promised as a way to boost American production.
- But J&J CFO Joe Wolk said the probe — which is centered on impacts to U.S. national security — would likely show that most U.S. drug imports are generics, not the type of complex brand-name treatments made by J&J.
By the numbers: About 80% of generics are finished in foreign countries, with even more getting their active pharmaceutical ingredient from outside the U.S., according to Stephen W. Schondelmeyer, co-principal investigator of the Resilient Drug Supply Project at the University of Minnesota's Center for Infectious Disease Research and Policy.
- 32 of the top 100 brand-name drugs are finished in the U.S.
Zoom in: J&J management downplaying the impact of tariffs is "an important positive development for perception about the threat to JNJ and the branded biopharma industry at large," Leerink Partners analyst David Risinger wrote Tuesday in a research note.
Yes, but: J&J CEO Joaquin Duato warned on an earnings call Tuesday that "tariffs can create disruptions in the supply chain leading to shortages." He called for tax policy changes to bolster American drug manufacturing instead of tariffs.
Carrots vs sticks
Alex Schriver, senior VP of public affairs at PhRMA, the pharmaceutical industry's trade group, said this week in a statement that "we share President Trump's goal of revitalizing American manufacturing, and our members continue to expand their U.S. footprint, driven in part by tax policies President Trump put in place during his first term."
- He added that "medicines have historically been excluded from tariffs because they can lead to higher costs and shortages of life-saving medicines."
- J&J itself has cited the U.S. tax policy changes in 2017 as a driver for $55 billion in planned investments in the U.S. over the next four years, in part to bolster manufacturing.
The Association for Accessible Medicines did not respond to a request for comment.
What to watch: Several other drug companies have recently announced U.S. manufacturing investments, including factories to produce newly popular weight-loss drugs.
