How Pharma Executives Can Prepare for Tariff Uncertainty

In a video interview with Pharma Commerce, Brad Stewart, BDO’s national life sciences co-leader, describes how a proposed 200% tariff on pharmaceutical imports could have significant short- and long-term impacts on US drug manufacturing and distribution, with immediate concerns focused on the stability of the generic drug market. According to Stewart, generic drugs make up the majority of medications used in the United States, but they are highly vulnerable to shortages because many become sole-source products after their initial launch. Within a few years of going generic, multiple manufacturers often consolidate into a single supplier due to limited demand and low margins. This leaves the supply chain fragile, as any disruption—such as shortages of active pharmaceutical ingredients (APIs), manufacturing conflicts, or facility issues—can quickly lead to supply gaps. The pandemic underscored these vulnerabilities.

In the short term, Stewart warns that a 200% tariff would exacerbate these challenges by increasing the costs of imported generics, which are critical for maintaining affordable drug access. This could limit availability and raise costs for patients, providers, and insurers, leading to potential shortages and higher out-of-pocket expenses.

Longer term, tariffs of this magnitude would likely drive a rise in overall drug prices in the United States. Companies would have little choice but to pass on increased costs to consumers, insurers, and healthcare systems. While patients might not feel the impact immediately due to insurers absorbing costs, premiums, and healthcare charges would eventually rise.

Stewart emphasizes that reshoring pharmaceutical manufacturing is not a quick fix. Building new manufacturing facilities or scaling domestic production requires a long lead time—typically three to five years—and involves complex regulatory and logistical challenges. As a result, while tariffs may encourage companies to explore onshoring, significant capacity expansion is unlikely to occur in the near term.

Stewart also comments on the internal constraints that nearly a quarter of life sciences CFOs are reporting as their biggest manufacturing obstacle; how artificial intelligence can help support pharma leaders in managing their supply chains; and much more.

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

PC: What operational or strategic steps should pharma executives be taking now to mitigate risks while awaiting clarity on tariff implementation?

Stewart: I think to just simplify the things I would do if I were a US or even a non-US life sciences company looking to figure out how I managed my drug supply, and being able to get it to do business in the United States, is right now, I'd want to try and stockpile as much inventory as I could in the US, just to take that tariff uncertainty out of it. The product’s already on shore, and I can then sort of deal with what happens, or at least have a little bit more time to do that.

Two, looking at alternative vendors. Since I don't yet know what all the tariffs are going to be on what products from what countries, and where I'm making product, really looking if there are opportunities to change those suppliers that will have a positive impact on the price of the drugs, or my cost to manufacture them.

Certainly, as we discussed, I think modeling and really looking at it. Do I really understand my supply chain from a global perspective, and if I change one part of it, what impact does it have on all the other parts of it? I think that's what many of the executives are doing. The industry now is starting to think very strategically. One challenge we have is we may not have all the information today to make the decisions that we need to, but we certainly have the tools available to build the model and forecast so that if someone says tomorrow, the tariff from this country, that country is going to be 22.1%, you can put that into the model and understand what impacts it's going to have on your business, and at least have the information necessary to make those decisions.