As tariffs affect the pharma industry, business strategies must evolve

The trade conflict with China seems to escalate, although it can change with a tweet. The first of two rounds of tariffs on billions of dollars’ worth of Chinese goods is now in effect, even as the final positioning or even talk of deals and delays are in flux. These tariffs have implications for pharmaceutical companies’ supply chain planning for active pharmaceutical ingredients (APIs), the components of drugs that produce their therapeutic effects. Tariffs on APIs imported from China pose risks for pharmaceutical companies, both for generic and name-brand products. According to IHS Markit, in 2017, the U.S. imported $3.9 billion worth of generic ingredients from China. Further, an estimated 80% of all APIs come from abroad, mainly China and India. Due to the fact that the Food and Drug Administration generally defines a drug’s country of origin as the final stop in the manufacturing process, companies can claim origins of a product in the U.S. even if they contain APIs from China, meaning that name brands are just as subject to the threat of tariffs. Compromising API importation will have financial impact on pharmaceutical companies and the patients they serve and could limit access to treatments because of potential slowdowns in production caused by limited API availability.

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