U.S. President Donald Trump has threatened to impose tariffs on drugs. This move would further exacerbate shortages of other Canadian-manufactured drugs in the U.S. An enlightening analysis of the U.S. pharmaceutical landscape was just published in the Journal of the American Medical Association. It exposed that 52 Canadian-made medicines have come to rely on Canada for 100% of their sourcing. Out of these, 28 have Canada as their only supplier.
At least one major pharmaceutical company is taking preemptive steps in response to the proposed tariffs. Some have even gone so far as to announce billions in new investments within the U.S., hoping to curry favor with the protectionist-leaning Trump administration. Eli Lilly and Co. has just announced one of the most ambitious plans. To that end, they are investing US$27 billion to construct four new manufacturing facilities within the United States. Actual details about where these sites will be located and what they produce are not yet public.
Pharmaceuticals is just one of the industry-specific tariffs that President Trump has floated in the past. To do so, the tariff study envisioned largely a U.S. market. It sounded the alarm that diversions and delays with supply chains would take a toll on Canada too. Specifically, the drugs whose last commercial production is in Canada represent US$3-billion in annual sales. If a 25 percent tariff is added, American consumers would pay an additional cost of US$750-million.
Co-principal investigator Mina Tadrous, Canada Research Chair in real-world evidence at pharmaceutical policy. She is an adjunct faculty member at the University of Toronto. Tadrous noted that supply chains are likely to be affected as manufacturers attempt to shift production to the United States to circumvent tariffs.
“We’ve known from past experience that any sort of manoeuvring can really increase susceptibility to supply chain disruptions,” – Mina Tadrous
Returning Wednesday from a two-week spring recess, the White House is expected to announce a first round of tariffs on specific countries. This action would break international supply chains even more. As tariffs increase the cost of production, some of these inputs will get more expensive, increasing the squeeze on manufacturers all over the world.
“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.” – Prof. Tadrous
The study adds further evidence to the fragility of drugs with few manufacturing points. Manufacturers may face future shortages if they determine they can no longer make money staying in this market with different tariff structure.
“It may not be profitable any more for them to enter the market,” – Prof. Tadrous
