Findings Undermine Pharma Lobby’s Arguments Against Tariffs; Reinforce Urgent Need to Reshore U.S. Generic Drug Manufacturing
WASHINGTON, D.C. — The Coalition for a Prosperous America (CPA) released a new report by its economics team titled, “The Price Impact of Generic Drug Tariffs: Why Patients Do Not Bear the Cost.” The findings refute claims by the pharmaceutical lobby that tariffs would harm consumers, and instead underscore the urgent need for strong trade measures to reshore U.S. production of essential medicines.
The report shows how this vulnerability is more than an economic weakness — it is also a national security threat. America is dangerously reliant on high-risk foreign suppliers for essential generics, especially active pharmaceutical ingredients (APIs) concentrated in China and India, and that over-reliance impacts FDA decisions over whether to restrict exports from labs that have failed inspections, or allow for imports so as not to run out of drugs.
The root of the problem is a lack of domestic production caused by a distorted market structure that rewards imports.
KEY POINTS
- Dangerous dependence: America relies on China and India for critical medicines — a single plant shutdown overseas has already caused nationwide shortages, making this a national security threat.
- Patients are protected: Tariffs won’t raise prices at the pharmacy counter. CMS reimbursement adjusts automatically, copays stay flat, and oversized middleman margins absorb cost shifts.
- Middleman problem: Only 36% of a generic’s retail price reflects production. The other 64% is captured by PBMs, wholesalers, insurers, and pharmacies — and that’s where tariff costs land.
- Math is clear: A 42% foreign cost gap dilutes to ~15% at retail, and once TRQs rebalance the market, the impact shrinks to just 3–5% — easily absorbed upstream, never by patients.
- Fixing the system: A phased Tariff-Rate Quota, paired with domestic incentives (like the PILLS Act) and smarter CMS purchasing, secures supply chains and rebuilds U.S. production without raising costs.
The report explores how Section 232 tariffs are the right tool to correct this distortion, and generics are uniquely insulated from tariff-driven costs. A well-designed Tariff-Rate Quota (TRQ) can exclude risky imports, gives domestic and allied producers the space to expand, and narrow the cost gap without raising prices at the pharmacy counter.
Production is only a fraction of the final price, and middlemen capture the majority of margins.
“America’s dependence on high-risk pharmaceutical imports remains both a national security and a public health threat,” said Andrew Rechenberg, CPA Economist and the report’s author. “Particularly worrying is that China controls 80% to 90% of the global supply of active pharmaceutical ingredients, the chemical building blocks of modern medicine. Even drugs labeled “Made in USA” often originate in China,” Rechenberg continued. “India, which produces roughly half of America’s finished generic drugs, relies on China for up to 80% of its pharmaceutical ingredients. Our pharmaceutical supply chain is dangerously exposed to single points of failure in factories thousands of miles beyond the reach of U.S. safety regulators.”
Section 232 of the Trade Expansion Act gives the president the authority to act when imports undermine security, and pharmaceuticals clearly qualify.
The Trump administration implemented a Section 232 investigation into pharma on April 1, 2025.
CPA submitted extensive comments to the Commerce Department’s ongoing Section 232 investigation into pharma, documenting how America’s dependence on foreign-made generic drugs poses severe national security risks.
“In 2002, the United States manufactured 83% of its consumed pharmaceuticals, and by 2024, that number had dropped to just 37%. That’s right, nearly two-thirds of all U.S. pharmaceutical supplies are now imported,” said Jon Toomey, President of CPA. “Just consider the rate at which America has surrendered control of its medicine cabinet — essentially, in the past 20 years, the United States has become incredibly dependent on imports to meet its daily pharmaceutical needs. This heavy reliance on imports is now creating serious drug shortages and has led to a flurry of safety concerns,” continued Toomey. “In 2024 alone, the U.S. pharmaceutical trade deficit hit a record $118.3 billion.”
CPA has long called for a comprehensive strategy to rebuild America’s domestic pharmaceutical manufacturing base, including targeted tariffs, procurement reforms, and investment incentives.
The report demonstrates that tariffs are not only an effective trade tool to encourage reshoring but also a measure that protects U.S. patients from unsafe, low-quality imports without increasing out-of-pocket drug costs.
“Patients are not bearing the cost of generic drug tariffs—the evidence shows these tariffs are absorbed by foreign suppliers and middlemen,” said Toomey. “This report is another important piece of evidence supporting President Trump’s agenda to rebuild domestic pharmaceutical production and ensure Americans are no longer dependent on adversarial nations like China and India for lifesaving medicines.”
# # #
