Pharma imports surge amid potential tariffs

In April, President Donald Trump announced that pharmaceutical imports would soon be subject to "major" tariffs as part of an effort to drive manufacturing back to the United States. Although no details have been provided about the scope of the tariffs, he has previously suggested a 25% or higher levy on pharmaceutical imports.

On Monday, Trump issued an executive order that directed FDA, the Environmental Protection Agency, and other agencies to facilitate domestic pharmaceutical production, as well as increase fees for inspecting foreign drug plants. A new announcement on tariffs is also expected within the next two weeks.

In recent months, major U.S. drugmakers have reported increasing their efforts to import inventory as part of their preparations for tariffs.

"As you can imagine, we have done everything that we have to do to make sure that we mitigate, so that includes inventory, of course, and many other things," said Pfizer CEO Albert Bourla, adding that the company was increasing inventory each month to ensure "we are well positioned."

Separately, Merck said that it had moved enough inventory of Keytruda, a cancer drug and the world's biggest selling prescription medicine, to the United States to protect it through the end of the year.

In March, total imports of pharmaceutical products exceeded $50 billion, which is equivalent to 20% of all pharmaceutical imports in 2024. Most of the imports were from Ireland, which is major exporter of cancer drugs, insulin, Viagra, and Botox.

Pharmaceutical imports from Ireland increased to almost $31 billion in March, more than double the $15.3 billion in imports in February. Imports from Denmark, where GLP-1 manufacturer Novo Nordisk is located, also increased from $825 million to $1.2 billion from February to March.

According to Matthew Martin, senior U.S. economist at Oxford Economics, outside of Ireland and other European Union countries, the countries with the greatest risk from pharmaceutical tariffs are Singapore and Switzerland.

"The race is on. Everyone wants to get in before they can't get in anymore," said Marc Busch, an expert in international trade policy from Georgetown University.

"I'm expecting a lot of disruption and a lot of questions about 'to what end?'," Busch added, speaking about industry-specific tariffs. "This is not your typical industry and, in particular, there's going to be a major jolt to the U.S. health care system."

How will the healthcare industry be impacted?

Currently, hospitals and other trade groups are lobbying for critical medical supplies, including drugs, to be exempt from tariffs. However, ongoing uncertainty has led to concerns about supply chain disruptions and potential price increases, which could also increase patients' cost of care. 

"The surge in pharmacy imports shows the urgency that hospitals are taking in mitigating tariff impacts.  It reminds me of COVID when everyone was buying loads of toilet paper — it is only a temporary solution, not a long-term strategy, and doesn't solve all your problems.  If hospitals haven't started having conversations about how to navigate these murky waters, they need to soon," said Derek Kazahaya, a senior director at Optum Advisory*.

"Tariffs have the potential to add a layer of complication to [hospitals'] ability to get all of those medical goods, the drugs and the devices that they need to deliver care," said Akin Demehin, VP of quality and patient safety policy at the American Hospital Association.

"We especially worry about the potential impacts to vulnerable and to rural health care providers who already are operating on thin margins, and for whom changes in the cost of those kinds of goods could have a disproportionate impact," Demehin added.

Although the health insurance industry is unlikely to see major impacts from tariffs in the short term due to federal price controls on pharmaceutical costs and ongoing price contracts, insurers, as well as patients, will likely see increases in costs if tariffs are in place for a prolonged time.

"Depending on the duration of tariffs, consumers in the commercial market will likely begin to see the incremental effects in their insurance premiums later this year and into next year as policies are renewed," a report from Fitch Ratings said.

Patients taking brand-name medications will also likely see higher out-of-pocket costs if drugmakers increase their list prices to offset the impact of tariffs. Some insurers may also remove certain drugs from their formularies, favoring medications from domestic manufacturers over those overseas.

"There's a huge concern about whether or not this will disincentivize [manufacturers] from selling to the U.S. market and leave consumers with fewer options ... or potentially make drug shortages worse," Reshma Ramachandran, a health services researcher at the Yale School of Medicine.

*Advisory Board is a subsidiary of Optum. All Advisory Board research, expert perspectives, and recommendations remain independent.