Balancing Tariffs and Patient Access in Pharma Policy

In a video interview with Pharma Commerce, Dave Malenfant, a healthcare supply chain expert, discusses the potential impact of a proposed 250% tariff on pharmaceutical imports, emphasizing that the effect depends heavily on where in the supply chain the tariff is applied. If imposed on active pharmaceutical ingredients (APIs), the impact would be minimal, as APIs contribute relatively little to the total cost of a finished drug and adjustments could be made through negotiation. However, if applied to finished pharmaceuticals or key components—such as bottle plugs, closures, molded parts, and glass—the cost implications could be significant, since these materials represent a substantial portion of overall manufacturing costs.

Malenfant notes that the US conducts much of its pharmaceutical research and development domestically but often outsources manufacturing to lower-cost countries, only to re-import the products for sale. He questions this practice, arguing that products sold in the US should be manufactured domestically to strengthen the supply chain and reduce dependency on foreign production. He cites examples of non-US companies, such as the world’s largest generic drugmaker, establishing manufacturing facilities in the United States as a step in the right direction.

The interview also addresses duty drawback. a current process allowing companies to recover duties paid on imported pharmaceuticals, which the proposed tariff regulation would reportedly eliminate. Without duty drawback, the financial burden on manufacturers and distributors would increase.

While higher component costs could drive up product expenses, Malenfant believes that companies are unlikely to pass these increases directly to patients. Instead, they may absorb the costs by reducing margins, particularly since US pharma companies already operate with some of the highest profit margins globally. However, the ripple effect would reach insurance companies, prompting complex negotiations between insurers, distributors, and manufacturers to prevent direct cost increases to patients and maintain access to medications.

He also comments on how the tariff could cascade through the pharma supply chain; the downstream operational challenges that might arise for pharma companies;mitigation strategies industry leaders should already be exploring; and much more.

A transcript of his conversation with PC can be found below.

PC: When should providing patient access supersede the payment of tariffs?

Malenfant: The number one thing to keep in mind all the time is the patient, and make sure that the patient has access to the medications. Whatever we've got to do to make sure we have patient access is so important. If there are products that we have no choice—there are some orphan products that are not made in United States—they're made offshore.

We’re assuming the government's not going to be reasonable on these, but if you have an orphan drug that's absolutely essential, for example, oncology, where we've got certain products that are in clinical studies here in the United States that pharmacologically, are comparative to drugs that are already in the market, if we can show that we're doing that—meanwhile, we’ve got to bring the very expensive oncology products, in order to have patient compliance—and we negotiate with the government saying, give us relief on those tariffs, I believe that you would get that because it's a matter of patient compliance.

We cannot do it in the United States, because if you go through Phase I, Phase II, Phase III clinical studies, it takes a long time to get final approval, so sometimes we're going to have to import certain products that have already been approved in order for us to make sure patients have the medication while we're doing the clinical studies. That's a good case where we can argue that, no, we shouldn't have to pay the tariffs, and I believe the government would come and agree with us.