U.S. President Donald Trump’s proposed tariffs on pharmaceuticals are likely to cause shortages of dozens of Canadian-made drugs in the United States, according to a new study.
Pharmaceuticals are one of a handful of sector-specific tariffs the President has talked publicly about imposing, along with ones already levied on steel, aluminum and autos. Mr. Trump has suggested tariffs could address high drug costs in the U.S. and increase domestic manufacturing.
New research published Monday in the Journal of the American Medical Association looked at how many and what kind of Canadian-made drugs would be hit by the tariffs. It found US$3-billion in annual sales came from drugs with final production in Canada, which would lead to an increased cost of US$750-million for American buyers if tariffs were set at 25 per cent. Of the Canadian-made drugs, 79 per cent were generics.
Of the 3,099 unique drugs sold in the U.S., 52 had most of their supply come from Canada, of which 28 had Canada as the only supplier.
The products include antibiotics, antidepressants and HIV treatments. Specific pharmaceuticals that are both sole-sourced from Canada and clinically important include bupropion, used to treat clinical depression, and meloxicam, a commonly used anti-inflammatory.
The researchers said supply chains will likely be disrupted as some manufacturers try to shift production to the U.S. to avoid tariffs and as some inputs get more expensive, especially as the White House prepares to introduce tariffs on a whole host of other countries and products this week.
“We’ve known from past experience that any sort of manoeuvring can really increase susceptibility to supply chain disruptions,” said Mina Tadrous, a Canada Research Chair in real world evidence and pharmaceutical policy at the University of Toronto.
“Drugs with only one manufacturer producing it have upwards of 20 to 25 per cent risk within the next year or two of having a shortage.”
He said that if costs for U.S. buyers of some products get too high, foreign manufacturers may just stop making them altogether.
“It may not be profitable any more for them to enter the market,” he said.
Some large pharmaceutical companies have announced major investments in the U.S. in an attempt to get in the Trump administration’s good graces. In February, pharma giant Eli Lilly and Co. LLY-N announced it would spend US$27-billion in the future to create four new manufacturing facilities in the U.S. At the time of the announcement – made in the White House alongside Commerce Secretary Howard Lutnick – the locations of the sites and the details about exactly what they would make were not unveiled.
But the use of tariffs to onshore drug manufacturing is running up against other White House policies that are undercutting the drug makers’ business models. On Monday, stocks of major pharma companies, such as Novavax Inc. NVAX-Q and Moderna Inc. MRNA-Q, tumbled after a top leader of the U.S. Food and Drug Administration resigned and released a sharply worded letter criticizing the government’s new vaccine policies.
The tariff study specifically looked at the U.S. market, but Prof. Tadrous said supply chain disruptions could spread to Canada, too.
Prof. Tadrous was lead author on the paper and worked with Shanzeh Chaudhry of U of T, Jan Panhuysen of the Hertie School in Berlin, and Ioannis Konstantinidis and Katie Suda of the University of Pittsburgh.
The timing of tariffs on pharmaceuticals is not clear. Mr. Trump has mentioned placing tariffs on the sector many times since coming into office, but has not specified when those levies might go into place. The White House is set to announce a swath of tariffs against multiple countries on Wednesday.