MW America's generic-drug crisis can be fixed in two words: pharma tariffs

By Jon Toomey

Strong U.S. production isn't just good economic policy - it's about national security and public health

More than 90% of U.S. prescriptions are for generic drugs, yet more than 80% of the raw materials crucial for drug production are sourced overseas, led by India and China.

The United States is facing a dangerous and escalating national security-level health crisis: Americans' overwhelming dependence on foreign-made pharmaceuticals has directly exacerbated the U.S. drug-shortage crisis.

From antibiotics and blood-pressure medications to essential cancer treatments, almost all generic drugs consumed in the U.S. are manufactured overseas - primarily in China and India. This dependency jeopardizes patient safety, undermines American health security and weakens the U.S. economy.

Recognizing this, the U.S. Commerce Department is now investigating the pharmaceutical supply chain. U.S. Trade Representative Jamieson Greer recently told the House Ways and Means Committee: "We have to reshore pharmaceutical production. We have to do it now."

But President Donald Trump said last week at a dinner of the National Republican Congressional Committee that his administration would be announcing "a major tariff on pharmaceuticals."

Assuming tariffs are a result of this investigation, expectations are that they will be global, like the steel and aluminum tariffs. Far from an arbitrary trade measure, this investigation - and the tariffs it could produce - are essential tools as part of a larger strategy to rebuild a secure, reliable and resilient domestic drug-manufacturing industry.

Decades of poorly conceived trade policy, offshoring and regulatory neglect have left America critically exposed. More than 90% of U.S. prescriptions are for generic drugs, yet more than 80% of active pharmaceutical ingredients (APIs) - the raw materials crucial for drug production - are sourced overseas, led by India and China. Both of these countries aggressively subsidize their domestic pharmaceutical sectors.

India's Production Linked Incentive (PLI) program funnels billions of dollars to its pharmaceutical exporters, artificially lowering prices and making it impossible for American manufacturers to compete. Regulatory oversight in these countries is inadequate, leading to persistent quality issues and dangerous drug shortages, as any FDA inspector will tell you. In 2022, there were shortages of 295 essential medications in the U.S.

This economic and regulatory imbalance has hollowed out America's drug manufacturing capacity, leaving U.S. hospitals, pharmacies, and patients dependent on unstable foreign supply chains. India limited drug exports during the pandemic to help its own people at the time. The U.S. could not have picked up the slack.

Where drugs are produced matters a lot for patient safety.

The impacts of this dependency threaten American lives.

A new study in the journal Production and Operations Management found that patients taking generic drugs made in India were 54.3% more likely to suffer severe adverse health outcomes compared with those taking generics made in the U.S. or Europe. Researchers from Ohio State University, Indiana University and BYU worked on the study. Their takeaway was that not all generic drugs are created equal, even if the formula to make them is the same for everyone. Where drugs are produced matters a lot for patient safety.

But these shortages and quality issues have become routine, exacerbated by our reliance on distant, opaque supply chains. Even minor disruptions overseas can rapidly cascade into major shortages here at home. The regulatory environment in countries such as China and India often prioritizes quantity over quality, routinely bypassing or ignoring FDA safety standards such as lab cleanliness or a higher-than-allowable amount of carcinogens in the medication.

A broken economic model has left America's drug supply dangerously exposed.

What can be done about it?

First, the Commerce Department investigation is the right move. It could easily lead to tariffs. Tariffs would begin leveling the playing field, making it financially viable for U.S.-based generic-drug manufacturers to reinvest, expand existing labs and attract long-term investment here in these crucial low-cost drugs we often struggle to get our hands on.

Critics will say that tariffs raise prices. A better framing is that it will restructure a broken economic model that has left America's drug supply dangerously exposed.

Tariffs alone won't fully rebuild U.S. pharmaceutical independence. This is where Congress comes in. Lawmakers are always talking about drug prices. Importing drugs at high levels leaves America vulnerable; it's best for the U.S. to make more generic drugs itself. To make this affordable, Congress should pass legislation like the PILLS Act introduced by Rep. Claudia Tenney, a Republican from New York. The PILLS Act would incentivize U.S. production of generic drugs with tax credits, a domestic content bonus credit and an investment tax credit not unlike the CHIPS Act.

The U.S. has an investment in branded drugs. But rebuilding America's generic drug manufacturing base will require short-, medium- and long-term objectives.

In the short term, the U.S. government must move urgently to shore up supply-chain vulnerabilities in critical drug categories - starting with antibiotics. Amoxicillin, a drug that is hard to find in the U.S., has been deemed critical by the FDA and is almost always facing supply issues.

Outside of Asia, Swiss-based Sandoz (CH:SDZ) (SDZNY) operates the only fully vertically integrated antibiotic-manufacturing facility in Austria, while U.S. Antibiotics in Tennessee is the sole U.S. manufacturer of amoxicillin. Strategic purchasing agreements should be prioritized to ensure stable supply while new capacity is developed at home. We should strengthen purchasing agreements with trusted partners, especially in the European Union, whose pharmaceutical firms adhere to high standards for quality and safety.

Beyond antibiotics, heparin - a lifesaving blood thinner and one of the five most-used therapeutics worldwide - demands immediate attention. Today, the U.S. relies almost entirely on heparin derived from Chinese pigs. That is an unacceptable national-security risk. The FDA once considered cattle-based heparin but shifted away in the 1990s due to worries over "mad cow" disease. In 2016, the FDA acknowledged that cattle-based heparin is a workable alternative and is encouraging its reintroduction.

The stakes are high and some have tariff fatigue. Trump has said the generic-drug crisis was "not just a public health crisis, it's a national security crisis."

Strategic protection and tax incentives for generic drugmakers offer a clear path forward. It is not just good economic policy - it's about national security, public health, and the lives of millions of Americans who take these drugs daily. They must be readily available and effective.

America's current dependence on unstable foreign supply chains is unacceptable. The U.S. has the tools and expertise to reclaim its pharmaceutical manufacturing capabilities. But does it have the political courage to use them?

Jon Toomey is president of the Coalition for a Prosperous America $(CPA)$, an Washington, D.C.-based advocacy group representing U.S. manufacturers and producers.

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Plus: Why drug stocks are no longer a safe haven from the stock market's turmoil

-Jon Toomey

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April 14, 2025 07:13 ET (11:13 GMT)

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