While much of the conversation around the Trump administration’s potential pharmaceutical import tariffs has leaned heavily toward branded drugmakers, generic medicines and the companies that manufacture them will be uniquely vulnerable in the event of a trade war given just how “little resilience” the industry enjoys compared to its patented counterpart.
That’s the take according to Ronald Piervincenzi, Ph.D., CEO of the United States Pharmacopeia (USP)—a nonprofit that publishes drug quality, purity, strength and identity standards that are enforced by the FDA and followed by manufacturers.
Ultimately, any disruption to the already fragile generics ecosystem could trigger manufacturing discontinuations, shortages and a multitude of other issues for off-brand drugmakers and the U.S. patients who rely on their products, Piervincenzi said in a recent interview with Fierce Pharma.
In fact, the copycat drug industry already grapples with those problems regularly without the added threat of import penalties, he pointed out. And tariffs are “a relatively unpredictable disruption, given how they apply, where they apply.”
Piervincenzi shared his perspective shortly after the publication of a USP report that found the U.S. produces just 12% of the active pharmaceutical ingredients (API) for medicines going to U.S. patients. The rate is slightly higher for branded drugs, where 15% of API manufacturing takes place in the U.S., while the rate for generic ingredients is on par with the overall 12% figure, according to the report.
Using its medicine supply map, USP determined that 43% of branded pharmaceutical API comes from the European Union, with non-member neighbors like Norway and Switzerland also key contributors. Meanwhile, 90% of the United States’ total prescription volume consists of generic drugs, with 35% made with APIs manufactured in India.
USP’s supply chain breakdown is a stark reminder of the pressures and disruptions that could arise from industry-specific import tariffs for pharmaceuticals.
Although pharmaceuticals were exempted from the reciprocal and base import tariffs President Donald Trump unveiled in early April, Commerce Secretary Howard Lutnick has suggested that industry-specific duties—which are expected to land at a rate of around 25% or higher—are still on the way.
The administration is also in the middle of a Section 232 investigation into potential national security threats linked to pharmaceutical imports. The probe gives President Trump the power to impose trade restrictions, like tariffs, if such a threat is identified.
Many branded drugmakers will likely have the resources on tap to weather a tariff storm. But generics makers, who already operate on razor-thin margins, will be much more exposed, Piervincenzi explained.
Most large drugmakers have remained mum on the tariff issue, while others like Roche, Novartis, Eli Lilly and Johnson & Johnson have telegraphed major onshoring investments. Still, some criticism of the potential trade policy is starting to trickle out from the industry.
“Tariffs can create disruptions in the supply chain, leading to shortages,” J&J's CEO Joaquin Duato cautioned on an earnings call earlier this month.
“If what you want is to build manufacturing capacity in the U.S., both in medtech and in pharmaceuticals, the most effective answer is not tariffs, but tax policy," he said.
Piervincenzi, for his part, figures tariffs could provide a strong incentive for the manufacturers of lucrative, patent-protected medicines to set up more production operations in the U.S.—which is one of the major agendas of Trump’s trade policy.
Still, when it comes to generic drugmakers, “I don’t know if a tariff is actually the incentive to move, but rather just the incentive to produce something else or purchase for a different market,” Piervincenzi said, noting that the vulnerability of the generics market is nothing new.
He alluded to the years of work USP has done mapping and analyzing pharmaceutical supply chains, which has found that some of the main risk factors correlated with drug supply disruptions include low price of the finished product, work with complex formulations, concentrated locations of production and the track records of facilities involved in the production process, all of which are characteristic of the generics industry.
Among those, the low price of the finished product correlates closest with potential shortages, Piervincenzi stressed.
If a company has to sell its product at a low price—as most generics makers do—then it’s “no surprise” that the company might abandon its product in favor of higher return opportunities, especially in the face of mounting external pressures like tariffs, he explained.
Meanwhile, a problem for the U.S. generics landscape is a problem for U.S. healthcare overall, Piervincenzi said.
While the markets are “clearly different,” they’re also “very interchangeable” when it comes to practical healthcare decisions, he pointed out, noting that generics and branded drugs are “interwoven in how patients, physicians and others are treating disease.”
“It doesn’t help anyone to have a part of the system that’s lacking resilience,” Piervincenzi said. “It blows back on everybody.”
Keeping tabs on the tariff threat
For the time being, USP is continuing to track potential tariff disruptions—and drafting contingency protocols—on two fronts.
First, the organization is looking at components of the supply chain like API and mapping out how and where those ingredients and other key starting materials are made or sourced, Piervincenzi said. Separately, USP is also analyzing “alternate routes of synthesis,” or alternative methods to create approved drugs.
The way most drugs are made today is often the simplest or cheapest approach for that specific molecule or biologic, Piervincenzi noted.
“But there are often, almost always, other routes of synthesis which can use different starting materials,” he explained.
“It could be that if you want to avoid one starting material because it’s only available in one place that might be in shortage or under tariff, you can then use a different route,” Piervincenzi said. “The question is, if you wait until you have a shortage, you don’t have time to figure out that alternative route and begin ramping up a process to create it.”
Coming up with contingency plans around alternate routes of synthesis is likely doable and already on the agenda for many branded drugmakers who comprise the sole market for their patent-protected medicines. Still, as with the other issues posed by tariffs, generics makers are likely to take the biggest hit, Piervincenzi said.
Given that generics makers often supply the same medication, it can be less clear who among them ought to start devising contingency plans, he said. Further, many of those manufacturers may rely on the same source for starting materials, which means the entire supply chain for a drug could get scrambled if a single linchpin supplier falls victim to a shortage or tariffs.
It's possible to glean a sense of which drugs are most vulnerable using USP’s 2024-2025 Vulnerable Medicines List for the United States. Although not focused on tariff risks factors specifically, the report, which was released (PDF) in early March, identified 49 drugs for chronic conditions and another 51 for acute care that suffer from less-than-resilient supply chains.
Medicines for pain and cancer, as well as hospital solutions and antibacterial medications were the most vulnerable classes identified in USP’s report. As of January, 61% of drugs on the list—most of which are injectables—were not in shortage, USP noted.
As for the Trump administration’s 232 investigation, the probe will target both finished generic and non-generic products, plus medical countermeasures for health emergencies and critical inputs like API and starting materials, the Commerce Department said earlier this month.
The investigation is a steppingstone to industry-specific tariffs, which many U.S. biotechs have warned could lead to increased manufacturing costs and disrupt key steps in the production process like raw material sourcing, according to a recent survey by the trade organization the Biotechnology Innovation Organization.