The Impact of Pharma Tariffs on Drug Shortages

In a video interview with Pharma Commerce, Jody Hatcher, CEO of Morris & Dickson and chair of HDA’s board of directors, outlines his vision for the future of the organization and the key priorities he hopes to drive during his tenure. He expresses a strong sense of privilege and responsibility in succeeding Kirk Kaminsky and looks forward to collaborating closely with Debbie Weitzman of Cardinal Health to strengthen connections across the pharmaceutical supply chain.

Hatcher emphasizes the often-overlooked value that distributors bring to the healthcare ecosystem. Representing more than 1,200 manufacturers and serving around 330,000 pharmacies and care providers, he describes distributors as being part of an "irreplaceable network" that plays a vital, behind-the-scenes role in ensuring the availability of medications and healthcare products across the country.

He outlines three main priorities for his leadership. First, he aims to enhance engagement within the distribution community—bringing together pharmacies, manufacturers, and distributors around their shared mission. Second, he highlights the critical importance of implementing the Drug Supply Chain Security Act (DSCSA) across the supply chain. With an extension recently granted, Hatcher underscores the need to meet the updated deadlines to maintain the reliability and integrity of the distribution network.

Lastly, he stresses the importance of storytelling—articulating the value and sophistication of the distribution sector to external audiences. He notes that while distributors are often discussed in various contexts, it's essential to clearly communicate their indispensable role in maintaining a secure and efficient healthcare supply chain.

Overall, Hatcher's vision centers on strengthening collaboration, ensuring compliance, and raising awareness of the distribution sector’s critical contributions.

Hatcher also comments on his day-to-day workflow at Morris & Dickson, including how it supports the efficiency and reliability of the company’s operations; steps that should be taken to ensure DSCSA compliance; types of implications that the potential 25% tariffs on pharmaceuticals can cause; and much more.

A transcript of his conversation with PC can be found below.

PC: With potential 25% tariffs on pharmaceuticals looming, what type of implications can they cause, as far as manufacturers reshoring their production services are concerned?

Hatcher: We’re paying a lot of attention to what the current administration is looking at, in terms of policies that affect healthcare. In particular, the tariffs is one that we are keeping a close eye on. We want to support what the president is trying to do, for obvious reasons, but we also want to make sure that there are no unintended consequences associated with any kind of tariffs. What we've done, Nico, is we've respectfully urged a little bit of caution around this for really obvious reasons. Onshoring product from a manufacturer standpoint is not something that's done very quickly and easily, and so what we fear and what we worry about is any immediate impact. What we’ve also asked for is waivers for pharmaceuticals, and we’ve supported that position.

I think PhRMA has done the same, but our fear is that it contributes further to the already troubling drug shortages that we're all confronted with, dealing with, and are trying to mitigate for our customers. We're very supportive of trying to ensure as much manufacturing as possible, but it's going to take years to get those facilities underway, those facilities ready to go. The other issue is API (active pharmaceutical ingredient). The vast majority of API is not domestically sourced, and so that also has an impact. If that API isn't sourced in the US, it'll likely be subject to tariffs as well.

We really need to make sure that we're enlightening everyone about the complexity associated with the pharmaceutical supply chain. We want to avoid disruption. We want to avoid further shortages, and we want to make sure that we're supportive of our trade partners along the way. I think everyone's looking at this with an eye of caution. From our vantage point, economically, distributors—as I mentioned at the onset—play a vital role in the movement of products. We're not replaceable. We're not easily replaceable, but at the same time, we also have a very low margin profile for this business—less than 1%—and so the other concern that we have collectively is that the economic impact on tariffs, potentially on distributors and on our customers, could be very burdening and difficult.

This is something we're going to continue to watch very closely. We've engaged with the administration. We're going to be spending time in April on Capitol Hill, and our hope is that we can really have a constructive dialog about some of the caution points associated with the tariffs.