Trump's generic drug tariffs will test his pharma strategy
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President Trump's planned tariffs for generic drugs are the clearest test yet of whether the administration can keep its promises to both increase U.S. drug manufacturing and lower prescription costs.
Why it matters: Tariffs could give the country more control over the supply chain, but they could also make some of the country's cheapest medicines more expensive at a time when consumers are clamoring for relief.
The big picture: Generic drugs account for roughly 90% of U.S. prescriptions and are largely manufactured overseas.
State of play: Trump announced in a Truth Social post last week that he plans to impose tariffs on generic drugs imported into the U.S. starting in August 2028.
- The tariff is meant to encourage companies to bring generic manufacturing to America in the next two years before the full tariffs take effect, better securing the drug supply chain for U.S. residents, per Trump's post.
What they're saying: Reducing overreliance on a few sources of generic drugmakers is important, but the policy could drive up costs, said advocacy group Public Citizen.
- "[D]espite Trump's rhetoric that tariffs will address security concerns, the reality is that the harms will likely outweigh any supposed benefits," Public Citizen's statement on the plan said.
- Some manufacturers have already said they'd increase prices for generics as a result of the tariffs.
- Companies are prepared to invest more in the U.S., Kathleen Jaeger, U.S. spokesperson for the Indian Pharmaceutical Alliance, said in an email. But they need things like market reforms and long-term active ingredient purchasing arrangements — not tariffs.
Zoom in: The policy could also lead to generic drug shortages, said Marta Wosinska, senior fellow at the Brookings Institution. Just getting U.S. facilities up and running could be a billion-dollar investment that companies can't make or don't feel is worth it.
- "I'm worried that a lot of manufacturers, if they get hit with this, they'll [say] 'Well, I'm underwater, so I'm just gonna stop selling,'" she said.
- Tariffs can boost drug manufacturing in the U.S., but only if they're used alongside other policy levers, like payment changes for the market.
- "If we want to have more resilient supply chains, more reliable supply chains — we need to pay more for that," she said.
The other side: The White House is confident that it can bring generic drugmakers to the U.S. and continue to lower drug prices.
- Aggressive deregulation and other policies will make the transition to U.S.-made generics "as seamless as possible," White House spokesman Kush Desai said in an email to Axios.
- Trump's success in getting companies to boost U.S. manufacturing through his drug pricing deals and tariffs on branded drugs "is proof that this [administration] has a track record of success to get critical manufacturing back into the United States," he added.
What we're watching: The administration previously announced a 100% tariff on branded drugs that will go into effect later this week following an investigation that determined the tariffs would improve national security.
- But products from drugmakers that struck deals with the administration to lower U.S. prices are exempt.
- The generics tariffs could follow a similar pattern — even if they're never actually implemented.
- "The announcement fits the let's-make-a-deal approach we've seen Trump use with brands," Capital Alpha managing partner Rob Smith wrote in an analyst note last week.
