President Trump’s proposed tariffs on China could ignite a US-China trade war and destabilise an already shaky pharma industry.

With prescription drug costs and healthcare spending at all-time highs, calls for cost control measures have come from the public, patient advocacy groups, and the US President himself. Yet the president’s plan to tax a long list of pharmaceutical products originating from China will only serve to exacerbate the problem of high healthcare costs and create uncertainty over the future direction of US-based generics.  Some of the main impacts of the proposed tariffs, if enforced, would be to:

Go deeper with GlobalData

Data Insights

The gold standard of business intelligence.

Find out more

Related Company Profiles

View all
  • Discourage US-based generics manufacturing. Rising costs for raw material acquisition from China will cut into the already-slim margins of generics manufacturers who import active pharmaceutical ingredients (APIs) from China. The FDA estimates that 80% of APIs used in the US originate from China or India. Trump proposes a 25% tariff on Chinese-produced APIs, which will encourage generics manufacturers to look outside of China to acquire APIs, but also spur an overall increase in the prices of APIs in general.
  • Increase healthcare costs. The increase in the manufacturing costs of generic medicines could be passed on to the end user. Prescription drug price increases could affect patients and healthy individuals enrolled in healthcare plans alike in the form of increases in healthcare premiums, deductibles, and/or copays. An estimated 30%–40% of US patients are covered under Medicare/Medicaid; both are government subsidised healthcare programmes that have sought to cut costs via substitution of branded drugs with generic forms. An increase in costs of generic medicines would increase Medicare/Medicaid costs, creating additional pressure at a time when the government is trying to cut healthcare spending.
  • Encourage generic medicine imports, raising quality concerns for generic drugs. US-based generics manufacturing is becoming less viable from a profit standpoint, even without the proposed tariffs. Generic giants like Teva and Mylan have been looking to other ventures outside of the generics space to maintain profitability in the face of increasing competition from foreign generic products. India is one of the emerging players in the US generics market, which is the largest in the world India will take an estimated 25% of market share in 2018, aided by low manufacturing costs that enable aggressive pricing tactics. Despite an advantage over US-based manufacturers in terms of cost, Indian generics manufacturers have had a checkered history of run-ins with the FDA relating to quality control issues including data integrity and poor manufacturing practices, among others. The proposed tariffs will likely fuel generic imports, adding to quality concerns for generic medicines consumed in the US.

If the proposed tariffs come into effect, there could be a turning point in the US generics market, with major players exiting and an increase in reliance on generic imports from countries like India. US generics manufacturers are already struggling to maintain profitability in a competitive environment, and an additional tariff that adds to manufacturing costs could significantly speed up their decline.

Related Reports

GlobalData (2018). Expert Insight: Is the Biopharma Industry Safe from the US-China Trade War?, April 2018, GDHC1698EI

For more insight and data, visit the GlobalData Report Store – Pharmaceutical Technology is part of GlobalData Plc.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.