President Donald Trump is threatening to impose a 100% tariff on imported generic medications, which could raise costs for Americans unless drugmakers can move production to the U.S. by August 2028.
In his latest swipe at the pharmaceutical industry, Trump posted on Truth Social Tuesday that imported generic medicines would be subject to a 100% tariff beginning in August 2028 that would rise to 200% in August 2029. The president’s goal is to reshore production “to protect the people of the United States” even though American consumers would likely end up paying much higher costs, as generic drugs make up more than 90% of prescriptions.
But experts caution that, as with some of Trump’s past tariff threats, there are more questions than answers right now about whether that timeline is feasible for reshoring production for drugmakers, how the tariff would be applied, and whether the president is willing to negotiate. What’s more, the Trump administration has yet to make a formal executive order or issue an official policy implementing tariffs on generic medines.
That’s why more details are needed, according to the Association for Accessible Medicines, which represents generic drugmakers. And there may be alternative legislative and regulatory solutions that could help address market deficiencies, president and CEO John Murphy III said in a statement to Politico.
“We need to understand more the specifics of the policy, but the generics industry is committed to pursuing policies that support and stabilize both the industry and the access necessary to ensure patients have reliable options for affordable medicines,” Murphy said.
Still, the threat of tariffs has been enough to unnerve traders. Shares of various European and Asian companies that manufacture generic drugs fell as much as 4.3% on Wednesday, as The Wall Street Journal reported.
WILL THIS MEAN HIGHER COSTS FOR CONSUMERS?
Whether idle or real, Trump’s latest tariff threat could upend the generic drug industry—and materially shock a current regime that’s ensured these medicines are more affordable in the U.S. than in many other countries, as Jeremy Leonard, managing director of global industry services at Oxford Economics, told Bloomberg. “The main effect is likely to be higher costs and supply disruption rather than a quick move of production to the U.S.”
While drugmakers enjoy years of exclusivity for brand-name drugs to account for the years of costly research and development that allow them to charge higher prices for the medicines, that’s not a luxury shared by generic drugmakers. Rather, after patents have expired and a proven market has been identified, makers of generic medicines enter the market and compete largely on price.
Thinner margins for generic drugs mean that tariffs of 100% or 200% would be very difficult for these drugmakers to absorb—and they’d likely have to pass some of those costs along to consumers or stop selling some products altogether, as CNBC reported. “A 100-200% tariff on a product with single-digit margins is a market-exit notice,” Salil Kallianpur, an independent pharmaceutical consultant told the outlet.
If the supply of available generic drugs dry up for American consumers, that would likewise increase costs if they’re instead forced to rely on brand-name drugs. As a result, tariffs on generic drugs could end up having the opposite effect than Trump has said he wants to achieve, Nathan Gray, a senior research fellow at the Institute for International Trade at Adelaide University, told Bloomberg.
“If they want to reduce costs for consumers, this is not the way to do it,” Gray told the outlet.
WILL THE DRUGMAKERS MOVE PRODUCTION?
There’s also the question of whether Trump’s timeline for reshoring drug manufacturing is even realistic as building new facilities may take longer than a couple years.
Trump said in his post that such facilities are being built across the U.S. “at a level never seen before,” though he didn’t provide any specifics regarding that activity. In April, Trump announced a 100% tariff on certain brand-name and patented drugs to effect on July 31 if drugmakers didn’t build factories in the U.S., though several drugmakers were able to avoid those tariffs by negotiating lower prices. Trump said on Tuesday that that policy “has been so successful” that it will remain in place.
But because of the economics of generic drugs, many companies may have very little incentive to move manufacturing to the U.S. The Indian Pharmaceutical Alliance, a trade group that represents 23 generic drugmakers, told The Wall Street Journal that tariffs alone wouldn’t lead to sustainable onshoring to the U.S. of generic-medicine production.
When the Trump administration started floating the idea of pharmaceutical tariffs last year, the CEO of Sandoz, which makes more than 400 generic drugs, told The Wall Street Journal that such threats wouldn’t induce change—unless the government was willing to offer some help.
“Where’s the incentive?” Richard Saynor told the outlet. “You sell a packet of antibiotics more cheaply than a packet of M&M’s. That’s offensive, and we lose money doing that.”
