Trump’s generic drug tariffs: What they could mean for medicine prices, manufacturers and supply
President Donald Trump‘s proposed tariffs on imported generic medicines have raised fresh questions about whether low-cost drugmakers can shift production to the U.S. before duties of as much as 200% take effect.
Trump said Tuesday that imported generic medicines would face no tariffs for two years before duties rise to 100% for one year and then 200%, giving manufacturers time to invest in U.S. production.
The proposal targets a growing global industry, currently worth nearly $500 billion.
While the administration says tariffs will help bring pharmaceutical manufacturing back to the U.S., the generic drug industry argues that longstanding structural challenges, not just trade policy, limit domestic production.
“We need to understand more the specifics of the policy, but the generics industry is committed to pursuing policies that support and stabilize both the industry and the access necessary to ensure patients have reliable options for affordable medicines,” John Murphy III, president and CEO of the Association for Accessible Medicines, said in a statement to CNBC.
Murphy said the industry has expanded its U.S. footprint across the supply chain over the past two years, but argued that problems with purchasing and reimbursement for many generic medicines continue to discourage further domestic manufacturing.
Here’s what to know.
Why are generic drugs different from branded drugs?
Makers of patented medicines and generic drug manufacturers have very different business models, which means they are likely to see varying impacts from potential tariffs.
Brand-name drugmakers typically spend years developing costly, new medicines and, once approved, benefit from exclusivity that allows them to sell those drugs without direct competition for a limited period of time. Those companies generally have higher margins and greater flexibility to absorb higher manufacturing costs.
A 100-200% tariff on a product with single-digit margins is a market-exit notice.
Salil Kallianpur
Independent pharmaceutical consultant
By contrast, generic manufacturers enter the market after patents expire and often compete against other companies selling identical versions of the same medicine, competing on price, manufacturing efficiency, and scale.
That means even relatively small increases in manufacturing costs can have an outsized impact on profitability.
Generic medicines account for about 90% of prescriptions in the U.S., but a relatively small share of overall drug spending due to their lower prices.
Can generic drugmakers absorb the tariffs?
Industry representatives say many manufacturers have limited room to absorb tariffs as high as 100% or 200%.
Manufacturers facing higher costs would have limited options: absorb the tariffs, pass them on to customers, invest in shifting production to the U.S. over time or stop selling products that become uneconomic.
Building a domestic generic drug manufacturing ecosystem takes a minimum of four to five years, according to Namit Joshi, chairman of India’s Pharmaceuticals Export Promotion Council (Pharmexcil), suggesting Trump’s two-year implementation period may not be enough to meaningfully onshore production.
Indian manufacturers also operate on thin margins, he said. “We can only transfer that tariff. Or we can withdraw from the market,” Joshi told Indian news agency ANI.
Independent pharmaceutical consultant Salil Kallianpur said the economics are particularly challenging for commodity generic manufacturers that export to the U.S.
Soumyabrata Roy | Nurphoto | Getty Images
If manufacturing costs rise sharply, companies may have to absorb part of the increase, pass it on to customers, invest in moving production over time or stop selling products that are no longer commercially viable.
“A 100-200% tariff on a product with single-digit margins is a market-exit notice,” Kallianpur told CNBC over email.
If this holds as written, the effect is a likely split where companies with existing U.S. manufacturing footprint or complex, specialty portfolios can adapt, while pure-volume commodity exporters with no U.S. presence don’t have an obvious answer, he said.
Will medicine prices rise?
It remains unclear whether the proposed tariffs would ultimately increase medicine prices because much depends on how the policy is implemented and how manufacturers respond.
The administration argues the tariffs will encourage companies to manufacture more medicines in the U.S., strengthening domestic supply chains over the longer term.
Industry representatives, meanwhile, say tariffs could place additional pressure on an industry where prices are already driven down by intense competition.
Many generic medicines sold in the U.S. are manufactured in India, while China supplies many of the active pharmaceutical ingredients used to make finished drugs. Those supply chains have developed over decades around lower production costs.
Murphy said the generic industry supports expanding U.S. manufacturing but believes broader policy changes are also needed.
“Our industry has several legislative and regulatory solutions to address the market deficiencies and we look forward to dialogue with the Administration and with Congress to pursue solutions that restore the generics industry to growth and to prioritize its place as a critical national security asset here in the U.S.,” he said.
Which drugmakers could be most affected?
The impact is also likely to vary significantly by company.
Analysts at Jefferies and Citi say manufacturers with substantial U.S. production, such as Amphastar Pharmaceuticals, ANI Pharmaceuticals, Hikma, and Fresenius Kabi, appear better positioned if the tariffs are implemented largely as proposed.
Companies including Teva, Viatris and Apotex have a greater exposure as they manufacture a larger share of products sold in the U.S. overseas, although analysts caution that much depends on the final policy.
One key unanswered question is whether the tariffs would apply only to imported finished medicines or also to drugs manufactured in the U.S. using imported active pharmaceutical ingredients.
Sandoz, one of the world’s largest generic drugmakers, told CNBC it was too early to assess the proposal because “further details on the implementation and scope of the measure are still required.”
The Swiss company declined to comment on whether the announcement could affect its manufacturing footprint or future investment plans.
What happens next?
For now, Kallianpur said investors appear to be treating the two-year implementation period as breathing room rather than an immediate disruption.
Generic drugmakers had broadly expected the Trump administration to extend its pharmaceutical tariff strategy to generics after months of similar proposals targeting branded medicines, he added.
“What’s new here isn’t the direction, it’s the specificity,” he said, pointing to the timeline of two tariff-free years followed by duties of 100% and then 200%.
Much now depends on how the administration defines domestic manufacturing and implements the policy.
If the generic tariff follows the framework previously outlined for branded medicines, Kallianpur said, companies may only need to demonstrate that U.S. manufacturing projects are underway rather than fully operational before the deadline.
That distinction could shape how manufacturers respond over the next two years, and whether Trump’s proposal leads to a significant expansion of U.S. drug production or simply a wave of announcements for new factories before the tariffs take effect.
