Potential impact of tariffs on active pharmaceutical ingredients on the price of US-made generic drugs

The impact of tariffs on prescription drug prices has been poorly understood.

Using US importation data 2019-2024, this study modeled the potential impact of tariffs on the prices of generic drugs manufactured in the United States with imported active pharmaceutical ingredients (APIs).

Under baseline assumptions a 100% worldwide tariff would result in average price increase of 30% (additional $21.15 per prescription) and a blended tariff based on rates proposed by the Federal Administration would result in an average price increase of 10% (additional $6.22 per prescription) for domestically produced generics using imported APIs. Estimates varied across drugs reflecting different API importation patterns. Assumptions on the tariff rate, the contribution of the API cost to the final drug price, and on the supply chain's ability to absorb the added tariff contributed markedly to determining the final price. The study findings do not generalize to US-made generics using US-made APIs but could be relevant to US-made branded drugs using imported APIs.

Tariffs could raise costs for US drug manufacturers using imported APIs, potentially limiting affordability and manufacturers' competitiveness in United States and global markets. Policies to incentivize "made-in-America" prescription drugs should incentivize domestic API production or reconsider API tariffs.