Despite being the richest country in the world and a biopharmaceutical powerhouse, the US has long struggled with drug shortages. Up to 100 or more drugs may not be readily available, primarily because drug production is very little slack and leaves you vulnerable to disruption. Sometimes these are specialized drugs for cancer patients who have specific genetics and are potentially catastrophic for those individuals. And, like the recent drug shortage of ADHD, it could involve widely prescribed drugs that have health impacts that could affect millions of people.
There are moments when we can't help these shortages. As I wrote in 2022, pandemic supply chain disruptions were a kind of natural emergency that created an inevitable acute drug shortage. Americans have found it difficult to find drugs such as Tamiflu and albuterol inhalers. This is because manufacturers were struggling to get raw ingredients from medicines that could come from all over the world.
However, these COVID-induced bottlenecks have largely subsided. During 2024, the US saw a decrease in drug shortages that are close to production levels near 271 from 321 drugs. The number of new drug shortages, each of which could last for years, has dropped to the second-lowest total since 2007.
That's a bit of good news, isn't it? The bad news is: President Donald Trump's tariffs on China could erase that progress.
Why tariffs are a problem with generic drugs
Drug shortages are usually accidental. Pandemic. Factory machines need repairs. The material is contaminated. But this time it will be designed.
The possibility of confusion is enormous. China, which was hit by 10% tariffs this week, is the largest supplier of drugs or drug ingredients for the United States. As longtime healthcare journalist Meril Goosner wrote on Monday, pharmaceutical drugs and their components are the only largest American import from around the world.
Generic drug manufacturers that produce 90% of prescription drugs in the US and often rely on imports of Chinese chemicals, do not have a simple request. It is difficult to raise prices to compensate for additional tariff costs. There is a good reason for this, but the trade war could fuel shortages.
The US has introduced rules to stop pharmaceutical companies from hiking prices. For example, under the Medicaid program, pharmaceutical companies will have to pay a rebate to the program if they raise prices faster than inflation.
If there is no World Trade War, it is sound cost control. But that rule or it is not considered in a scenario where the US places massive tariffs on its biggest trading partners.
“If you face an inflation rebate, you cannot pass tariffs to the buyer. If the margins are also low, you may not be able to absorb these tariffs,” says Malta Vosiska, a senior economics fellow at the Brookings facility. I spoke to Stat News this week. “The market could close as the drug market doesn't easily recover to the shock.”
Other companies are unlikely to step in to fill the gap. Why are they? The original manufacturer has already determined that the business is not economically viable.
In 2021, economists at the European Center for International Political and Economics estimated the potential impact of hypothetical 25% tariffs from the US and Europe on drugs and their ingredients. China's exports of finished drugs will virtually disappear, drop by 81%, and exports of raw materials used to manufacture drugs to other countries will decrease by 8%.
China “will see a significant drop in production of medicines and chemicals,” analysts wrote. “Given China's importance, these declines will lead to increased access to drugs and prices in many jurisdictions to supply the global generic market.”
This theoretical scenario does not fit perfectly with Trump's new Chinese tariffs. But that approximates the scale of the risk the president is taking. The United States is increasingly dependent on China for raw drugs as well as for fully produced drugs. Some cardiovascular medications, painkillers, and cold medications have particularly increased significantly.
If these products suddenly disappear from US pharmacy shelves, it is not clear how they will be replaced. Trump's theory of tariffs is that American manufacturers will intervene. But it is not guaranteed. Generic drugs are tough business.
Why is the US so vulnerable to drug shortages?
The shortage is a central vulnerability in the US drug market. We rely on generic drugs to keep our drugs affordable. However, due to the low cost, typical drug makers will not make excess products to store for rainy days (or future drug shortages). They are also vulnerable to slight fluctuations in price, such as supply chain disruptions and tariffs. They rely on size rather than margins to make money.
General drug competition is often limited to certain classes of drugs, so if one company shuts down or discontinues its products, there is no other company to make up for the shortage.
This is what I wrote in my 2022 story about the drug shortages of the Covid pandemic.
“On average, the number of ongoing drug shortages has been rising and has been going on for longer,” according to a 2022 report from the National Academy of Sciences, Engineering and Medicine. , the underlying cause of that problem is the economics of the pharmaceutical market itself.
The reasons for the shortage are generally consistent regardless of drugs. It's a problem with shortages of raw materials or with plants where drugs are being manufactured. The shortage of medications patients can pick up at pharmacies often draw the most headlines, but in the end, most of the medications that are lacking are common, injectable drugs used in hospitals. Typically, these medications only have one or two suppliers. 。 Therefore, if there is a problem in one company's factory, there is no easy way to expand production to compensate for the shortage. And they are usually cheap. That is, the companies that manufacture them do not have strong economic incentives to generate excess supply.
“We are not investing in expanding the capacity we need for our country. It's costly. Erin Fox, a pharmacist at the University of Utah who studied drug shortages, said: “You can't help but be able to get started. It makes a lot of sense when you think about it from their perspective. But when you think about it from a hospital perspective, it makes a lot of frustration.”
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When supply is destroyed, it is impossible to quickly compensate for the shortage. These companies rely on thin margins and large scales of razors to make their businesses work. They have a production schedule “just in time.” This means that as soon as the product is deployed from the factory, it is delivered to the healthcare provider. There is no warehouse with emergency stockpiles, as it really doesn't make any economic sense for manufacturers to produce and store excess supplies.
And sometimes life-saving medicines that become unavailable. As a result, people die. Looking at the current shortage, the most common types of drugs lacking are antibiotics, chemotherapeutics, and drugs that affect the central nervous system.
Studies have shown that shortages of these essential drugs can be directly converted into patient harm.
Some of these shortages have led directly to patient death. The 2011 Associated Press report linked at least 15 deaths to drug shortages over the past 15 months. A more recent study found a higher mortality rate in patients relying on alternatives following a year-long shortage of drugs used to treat septic shock. Even with the exception of death, drug shortages can turn care patients into meaning – for example, pregnant people are at a higher risk of caesarean section, higher risk of complications, and longer recovery times. In stock.
For now, it doesn't appear that the Trump administration is offering allowances to prevent life-saving drugs from being taken away from the market due to trade policies. The Industry Association for Generic Drug Makers is lobbying for such exemptions. The first Trump administration had imposed limited tariffs on China, but offered such exemptions. However, this time there were no changes before the Tuesday deadline.
“From basic ingredients to finished products, US drugs rely on a global supply chain that is already stressful and needs to be strengthened.” John Murphy, president and CEO of the Accessible Drug Association, Accessible Drug Association III said in a statement. “Taxes on products in Canada, Mexico and China could increase the already problematic drug shortage.”
Last-minute deals between Canada and Mexico have softened some of the blow (at least temporarily). However, China is more of a prescription drug importer than any of our neighbors.
It may take some time to feel the results. But it's not surprising if bad outcomes ultimately befall American patients due to tariffs. It's a basic economy. And that is completely avoidable.
