How Tariffs Could Affect Generic Drug Prices and the Global Pharmaceutical Market

In a video interview with Pharma Commerce, James Shehan, chair of the FDA Regulatory practice at Lowenstein Sandler, discusses the potential impact of upcoming tariffs on pharmaceutical supply chains, focusing on Canada, Mexico, and China. He believes that tariffs on Mexico and Canada would have minimal effects on supply chains, as the pharmaceutical industry sources relatively little from these countries. The real concern lies with China, which is a major supplier of active pharmaceutical ingredients (APIs) and finished drug products. A significant portion of recent pharmaceutical deals has involved licensing Chinese drugs, which could be affected by tariffs if they disrupt supply chains.

If the relationship between the United States and China worsens, tariffs could have a more substantial impact. Specifically, they might increase the cost of generic drugs, since China is a crucial supplier for these products. Despite this, Shehan notes that many generic drugs are already extremely cheap, with some prescriptions costing just a few cents. Even if prices doubled, it may not drastically affect consumers. Specialty generic drugs, however, could see more noticeable price increases.

He also points out that if trade tensions extend to regions like the EU, India, or Japan, the situation could change. A broader trade conflict could influence drug prices, especially for certain medications. Overall, while tariffs on China may increase drug prices in the short term, the full impact will depend on the nature of global trade relations and the extent of supply disruptions.

Shehan also comments on how he believes the new administration will influence FDA approval processes for commercial products, other specific regulatory updates that drug developers should be closely monitoring in the current landscape, and much more.

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

PC: Moving forward, what should the approach of pharma companies be amid the latest/pending tariffs imposed on Canada, Mexico, and China? What is their potential impact on the pharma supply chain?

Shehan: If they were to come to pass the tariffs on Mexico and Canada, I don't think it would have a huge impact on supply, etc., basically because we don't source a lot of drug and drug products from those two countries. A little bit more from Canada, is my understanding. That I would kind of put aside, but China's more interesting. We do know that a very large percentage of the recent deal making has been in licensing of Chinese drugs by the global pharmaceutical industry. If there's a supply aspect to that deal, I guess tariffs have an effect. If there isn't, I don't think it substantially reduces that.

Now, if relationships with China deteriorate and one country or the other decides that that's an area they want to meddle in, I think that would have a big impact, but we haven't seen that yet. Tariffs on China will make generic drug prices go up I assume because China is such an important supplier of active pharmaceutical ingredients, as well as finished products. On the other hand, a lot of generic drugs are so dirt-cheap right now. I’ve literally had prescriptions filled for two cents, which they list the prices at $1.08 or something, and I'm responsible for two cents. I don't know how anyone makes money on that, but if you double the price of that, you're probably not going to have a huge impact. Some of the specialty, generic products are more expensive, but in terms of your pills and tablets, I don't think there's much of a difference there. If a trade war continues and spreads to say the EU, India, and other places—but mainly the EU and Japan—I think you're talking a different story there that may have an impact on prices.