The United States, despite being the richest country in the world and a biopharmaceutical powerhouse, has long struggled with drug shortages. At any given time, up to 100 or more — sometimes many more — drugs are not readily available to American patients, largely because drug manufacturing operates with very little slack that leaves it vulnerable to disruptions. Sometimes, these are specialty drugs for, say, cancer patients who have certain genetics — potentially devastating for those individuals. Other times, as with the recent ADHD medication shortages, it can involve widely prescribed drugs with health impacts that can affect millions of people.
There are moments when these shortages can’t be helped. As I wrote in 2022, the pandemic’s supply chain disruption was the kind of natural emergency that creates unavoidable, acute drug shortages. Americans found it harder to find drugs like Tamiflu or inhalers with albuterol because the manufacturers were having a harder time getting their hands on the raw ingredients for those medicines, which can come from all over the world.
But those Covid-induced bottlenecks have largely subsided. The US saw a decline in drug shortages over the course of 2024, from 321 drugs to 271, closer to their pre-pandemic levels. The number of new drug shortages, each of which can last for years, fell to the second-lowest total since 2007.
A little good news, right? Here’s the bad news: President Donald Trump’s tariffs on China could erase that progress.
Why tariffs are a problem for generic drugs
Drug shortages are usually accidental. A pandemic. A factory machine needs repair. Ingredients become tainted. But this time, it would be engineered.
The potential for disruption is enormous: China, which this week has been hit with a 10 percent across-the-board tariff, is the largest supplier of drug or drug ingredients to the US. Pharmaceutical drugs and their components are still the single largest American import from around the world, as longtime health care journalist Merrill Goozner wrote on Monday.
Generic drugmakers, which produce 90 percent of the prescription drugs in the US and often depend on Chinese chemical imports, don’t have easy recourse. It will be difficult for them to raise prices to make up for the additional tariff costs — there’s a good reason for that, but it has the potential to fuel shortages with a trade war afoot.
The US has put rules in place to stop drugmakers from hiking their prices, because egregious costs have made medications unaffordable for too many Americans. Under the Medicaid program, for example, drug companies must pay rebates to the program if they raise prices faster than inflation.
In the absence of a global trade war, that is a sound cost control. But that rule and others like it were not contemplated in a scenario in which the US is placing massive tariffs on its biggest trade partners.
“If you face inflation rebates, you are not able to pass on the tariffs onto buyers. If you also have low margins, you may not be able to absorb those tariffs,” Marta Wosińska, a senior fellow in economic studies at the Brookings Institution, told STAT News this week. “You may exit the market and this in turn could result in shortages because drug markets don’t easily rebound to shocks.”
Other companies are not likely to step in to fill the gap. Why would they? The original manufacturer already decided the business wasn’t economically viable.
In 2021, economists from the European Center for International Political Economy estimated the potential impact of hypothetical 25 percent tariffs from the US and Europe on drugs and their ingredients. China’s exports of finished medications would effectively disappear, dropping by 81 percent, and their exports of raw materials used to manufacture drugs to other countries would drop by 8 percent.
China “would also experience a significant decline in the production of pharmaceuticals and chemical products,” the analysts wrote. “Given the importance of China … for supplying the global generic market, these declines would translate into reduced access to medicines and higher prices in many jurisdictions.”
This theoretical scenario doesn’t map perfectly onto Trump’s new China tariffs. But it approximates the scale of the risk the president is taking. The US increasingly depends on China not only for raw pharmaceutical ingredients but for fully produced medications: American imports of finished Chinese-made medicines have increased by 600 percent since 2016; some cardiovascular drugs, pain relievers, and cold medicine have had especially large increases.
If those products suddenly disappear from US pharmacy shelves, it’s not clear how we would replace them. The theory of the Trump tariffs is that an American manufacturer will step in. That is far from guaranteed, though. Generic drugs are a tough business.
Why the US is so vulnerable to drug shortages
Shortages are a core vulnerability for the US drug market. We depend on generic drugs to keep medications affordable. But because of their lower costs, generic drugmakers do not make excess products to store away for a rainy day (or a future drug shortage). They are vulnerable to even small fluctuations in price, from supply chain disruptions or tariffs, because their profit margins are generally small. They depend on scale, not margins, to make money.
Generic drug competition is also often limited for any given class of drug, so if one firm shuts down or discontinues a product, there is not another company to make up for the shortfall.
Here’s what I wrote in a 2022 story on the Covid pandemic’s drug shortages:
According to a 2022 report from the National Academies of Sciences, Engineering, and Medicine, “on average, the number of ongoing drug shortages has been increasing and are lasting longer.” The root cause of that problem, per a report from the Food and Drug Administration, is the economics of the pharmaceutical market itself.
The reasons for shortages are generally consistent no matter the drug: either a shortage of raw materials or a problem at the plant where the drug is manufactured. Shortages for medicines that a patient can pick up at the pharmacy often draw the most headlines, but most of the medications that end up in short supply are generic, injectable drugs that are used in hospitals: usually, these drugs have only one or two suppliers. So if there is a problem at the factory of one company, there is not an easy way to scale up production to make up for a shortfall. And they are usually cheap, which means the companies that manufacture them do not have a strong economic incentive to produce any excess supply.
“We haven’t invested in expanding the capacity our country needs. It’s costly. If you’re going to sell something for a dollar a vial, there’s no incentive to invest there,” said Erin Fox, a pharmacist at the University of Utah who has studied drug shortages. “It makes a lot of sense when you think about it from their perspective. But when you think about it from the hospital perspective, it’s very frustrating.”…
Once the supply is disrupted, it’s impossible to quickly make up for the shortfall. These companies rely on razor-thin margins and massive scale to make their business work. They have a “just in time” production schedule, which means almost as soon as the product rolls out of the factory, it is delivered to health care providers. There aren’t warehouses with emergency stockpiles, because it wouldn’t really make financial sense for manufacturers to produce and store the excess supply.
And it is sometimes lifesaving medications that become unavailable. People die as a result. If you look at the current shortages, the most common types of drugs in short supply are antibiotics, chemotherapy drugs, and medications that affect the central nervous system.
Research has shown that these shortages of essential medicines can translate directly to harm for patients:
Some of these shortages have led directly to patient deaths. An Associated Press report in 2011 linked at least 15 deaths over the prior 15 months to drug shortages. A more recent study, following the year-long shortage of a drug used to treat septic shock, found higher mortality rates for patients who relied on a substitute. Even short of death, drug shortages can meaningfully change the care patients get — if, for example, a pregnant person undergoes a cesarean delivery, with its higher risk of complications and longer recovery time, because the drug that could have induced labor earlier is out of stock.
For now, it does not appear the Trump administration is making any allowances to ensure life-saving medications aren’t taken off the market because of its trade policy. The trade association for generic drugmakers has lobbied for such an exemption; the first Trump administration had imposed more limited tariffs on China, but did provide such an exemption. But this time, there was no change before Tuesday’s deadline.
“From the base ingredients to the finished products, US medicines rely on a global supply chain that is already stressed and in need of strengthening.” John Murphy III, president and CEO of the Association for Accessible Medicines, said in a statement. “Tariffs on products from Canada, Mexico, and China could increase already problematic drug shortages.”
The last-minute deals with Canada and Mexico have (at least temporarily) softened some of the blow. But China is a bigger importer of prescription drugs than either of our neighbors.It may take time for the consequences to be felt. But if bad outcomes do eventually befall American patients because of the tariffs, it should come as no surprise. It’s basic economics. And it’s entirely avoidable.
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