The Trump administration’s tariffs are the talk of the town in Washington. At the end of October, the Senate rejected the administration’s national emergency declaration issued to rationalize the tariffs in a bipartisan vote. On November 5th, the Supreme Court took up the issue of the constitutionality of the tariffs. If oral arguments are any indication, it did not go well for the administration. Despite the clear opposition, there are voices calling to go even further, potentially threatening America’s supply chain o low-cost, effective medications.
President Trump’s approach to re-shoring pharmaceuticals rests in authority derived from Section 232 of the Trade Expansion Act of 1962. That provision of U.S. law allows the president to impose tariffs on trade if they are deemed to be a threat to national security. It is the dubious invocation of Section 232 to apply tariffs to an uncertain subset of pharmaceuticals (as well as a wide swath of the economy) that has drawn the ire of the Senate, the Supreme Court, and millions of Americans who see the prices of goods and services rising as a result.
Jon Toomey (President of the Coalition for a Prosperous America) recently claimed that the Section 232 pharmaceutical action plan did not go far enough. Toomey claimed that even a 100 percent tariff would not be enough to re-shore the generic supply chain. In a bizarre twist, he even suggested that lawmakers take notes from the U.S. treatment of foreign sugar and implement strict import quotas.
The U.S. sugar program is by no means an admirable public policy initiative. As intended, the program keeps the cost of sugar high, safeguarding domestic manufacturers from revenue losses. However, a Wall Street Journal analysis shows U.S. confectionary manufacturing jobs decreased by a staggering 22 percent from 1998 to 2011. This includes Kraft Foods closing an entire LifeSavers plant in Michigan to relocate to Canada. Additionally, a 2006 Department of Commerce study showed that, for every sugar growing job the program saved, three manufacturing jobs were lost. The “sugar model” is a disastrous one.
The costs of such protectionism are plain enough when it comes to sugar. However, driving up prices by limiting supply will have much more dangerous impacts when applied to medications. Generics, in particular, account for roughly nine out of every ten prescriptions in the U.S. Despite this, they only account for approximately 20 percent of the total cost to American patients. They allow patients to access lifesaving medicines at a fraction of the cost following the expiration of patent terms. Sugar tariffs and quotas disrupt production of LifeSavers candies, while the same policies applied to prescription drugs would threaten actual lifesavers for millions of patients and families across the country.
Despite these facts, lawmakers seem to be drawing the wrong conclusions as well. In October, Sen. Rick Scott (R-Fla.) focused his ire on generic manufacturers, saying, “The US currently relies on overseas manufacturers for approximately 75 percent of its essential drug supply, with Communist China and India as two of the largest contributors. Of the top 100 generic medicines consumed in the US, 83 percent of them contain no American-sourced active pharmaceutical ingredients (APIs).”
Sen. Scott went on to cast doubt about the safety and effectiveness of these drugs with foreign supply chains. While these companies import their APIs from overseas, they formulate, press, and package the finished products domestically in FDA-approved facilities. Fear-mongering about quality or trying to scare consumers with references to “Communist China” are baseless tactics that threaten to undermine access to affordable cures.
Concerns about generic drugmakers – or any other manufacturers – sourcing ingredients from abroad ignore the fact that this global supply chain is precisely what enables medications to remain affordable and available. U.S. firms depend on India and China because they produce high-quality APIs at scale and at lower cost—freeing up resources for innovation and competition. The real risk is not foreign sourcing, but the overregulation and trade barriers that drive supply down and prices up. Rather than retreating from markets, policymakers should promote transparency and open trade to strengthen—rather than shrink—America’s supply of generics.
Contrary to the Trump administration’s proclamations, there is no national security emergency when it comes to the supply line of medications that save money and lives. The system is broadly working, providing Americans access to effective and affordable cures. There is always room for policies that will deregulate the process and make it faster and easier for generics to come to market. The problem is with too much red tape, not too much free trade. As such, the solution cannot be found in demagoguing the issue. The only outcome to tariffs would be fewer cures—and more expensive ones. That would be a disservice to millions of Americans.
