June 6, 2025

Tariff Policies Impact Pharmaceutical and Biotechnology Sectors, Affecting Costs, Supply Chains, and Global Trade

effects-on-phrama-industry
A key characteristic of the Trump administration’s trade policy was the imposition of tariffs across a broad spectrum of industries, including automotive and consumer goods. Although pharmaceuticals have largely been excluded from these measures so far, the threat of future tariffs remains a strategic risk. Given the pharmaceutical sector’s integral role in global healthcare and its complex, interdependent supply chains, any tariff imposition could significantly disrupt operations, increase costs, and strain profitability. With the United States being one of the largest importers of pharmaceutical products, any shift in tariff policy could have far-reaching implications for both domestic stakeholders and international manufacturers.
In 2024, the United States imported pharmaceutical products valued at USD 212 billion, making it the world’s largest importer in this category. Pharmaceuticals ranked as the fifth most imported product in the U.S. market. Notably, analysis reveals that the supply of nearly 100 essential drugs prescribed in the U.S. depends on a single manufacturing facility in China, highlighting significant vulnerabilities in the pharmaceutical supply chain.
Pharmaceuticals ranked as the seventh most exported product category from the U.S. While imposing tariffs could incentivize domestic production, scaling up capacity would require significant time and capital, likely driving up medication costs in the short to medium term. Tariffs on key exporting nations such as India and China could restrict their access to the U.S. market by making their products less price-competitive. Even pharmaceutical exporters from developed economies like Ireland—home to several major manufacturing facilities—are preparing for potential investment slowdowns and market disruptions resulting from such trade barriers.

We examine the potential global market impact of tariff imposition through a four-stage analytical framework:

1. Potential Impact on the Global Pharma & Biotech Industry

  • Shortages of Critical Medicines:


    The U.S. pharmaceutical market already faces significant shortages of essential, life-saving drugs. According to the American Society of Health-System Pharmacists, there are currently 270 active drug shortages in the U.S. The supply of generics, in particular, relies heavily on manufacturers from India and China—companies that operate under very thin margins. A tariff-driven increase in production costs could force these suppliers out of the U.S. market, further worsening an already fragile supply situation.

  • Delays in U.S. Pharmaceutical Investment:
    Although the intended goal of tariffs is to reshore pharmaceutical manufacturing, the move may also discourage much-needed foreign investment. Kathleen Jaeger, U.S. spokesperson for the Indian Pharmaceutical Alliance, has indicated that tariffs could delay planned investments by Indian pharmaceutical companies in U.S.-based operations—potentially slowing the development of domestic capacity.
  • Rising Drug Prices:
    Reshoring manufacturing, particularly for generics, will require substantial investment and time to build new capacity. In the interim, U.S. consumers may face rising prices for critical medications that are already in short supply. The added costs of tariffs will only exacerbate affordability challenges in the market.
  • Supply Chain Disruptions:
    The pharma and biotech supply chain—spanning raw materials (APIs) to final packaging—is highly globalized, with Indian and Chinese firms supplying much of the API volume. Tariffs will impact the entire chain, placing unsustainable financial strain on low-margin manufacturers. Many of these suppliers may opt to exit the U.S. market altogether, which could prove catastrophic in cases where only 2-3 manufacturers globally produce a given drug.
  • Adverse Effects on R&D and M&A Activity:
    Pharmaceutical firms may initially absorb some of the added costs from tariffs, but doing so could divert funds from critical R&D activities such as drug development and clinical trials. The M&A outlook may also soften as companies prioritize navigating new tariff-related challenges over pursuing strategic deals.

2. Ripple Effects Across Key Stakeholders

  • Drug Manufacturers:
    The effects of tariffs will vary by manufacturer type. Small to mid-sized players in India and China may find the U.S. market financially inaccessible post-tariff. Among global pharma giants, U.S.-based firms like Bristol-Myers Squibb, Eli Lilly, and AbbVie—who already maintain significant domestic manufacturing capacity—will be more insulated. In contrast, firms such as Roche and Novartis, which rely more heavily on offshore API production, will face greater operational risks.

For India, pharmaceutical exports—especially generics—are a vital economic driver, with the U.S. serving as its largest market. Tariffs could result in lost revenue and dampened export growth.

  • Patients and Consumers:
    While countries such as India and China are less reliant on the U.S. for access to critical medicines, U.S. patients are particularly vulnerable. Americans already pay 3 to 7 times more than their UK counterparts for branded prescription drugs. Tariffs could further inflate prices—especially for those with limited insurance coverage or during periods of shortage.
  • Healthcare Systems and Insurers:
    The U.S. healthcare system depends heavily on generics—many of which would be subject to new tariffs. According to a 2025 study by Harvard’s Petrie-Flom Center, 47% of generics prescribed in the U.S. are imported, with 90% manufactured in India. While Indian producers may maintain U.S. access, they are likely to pass on higher costs. U.S. insurers may respond with higher premiums or increased patient cost-sharing—further straining affordability.

3. Damage Control: Strategies for Managing the Impact

  • Reshoring and Strategic Investments:
    Manufacturers prioritizing access to the U.S. market should consider redirecting investments toward U.S.-based production—especially in API manufacturing—to mitigate tariff exposure.
  • Driving Operational Efficiency:
    Companies should focus on improving operational efficiency through automation and supply chain optimization to help offset higher costs.
  • Leveraging Trade Agreements:
    Active engagement in both international and regional trade agreements may help mitigate tariff impacts and preserve key supplier relationships.

Conclusion: Short-Term Pain for Potential Long-Term Gains?

Tariffs tend to deliver limited benefits to a narrow group of stakeholders. For the global pharma and biotech industry, open dialogue and a balanced policy approach will yield better long-term outcomes than blanket protectionism. While tariffs may ultimately accelerate domestic pharmaceutical manufacturing and reduce U.S. reliance on foreign suppliers, the short-term disruptions will be felt across the ecosystem—from patients to insurers to global manufacturers. A calibrated approach that balances national interests with global market realities will be essential for maintaining stability in the sector.

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