Trade tariffs on pharmaceuticals ‘not the way to go’: U of T expert releases new study showing disruptions and cost increases

Trade tariffs on Canadian pharmaceuticals expected to increase costs in the U.S. and strain drug supply chains

New U of T-led research shows that up to $3 billion worth of pharmaceuticals used in the United States are produced in Canada. A proposed 25% trade tariff on these drugs could hike costs by $750 million and potentially disrupt the U.S. drug supply chain over the long term.

The analysis, published today in JAMA, focused on drugs with final production in Canada, a subset of the overall $6.75 billion in pharmaceuticals exported from Canada to the U.S. This accounts for more than 400 different ready-for-use medications, of which 28 have no alternative supplier.

“The proposed tariffs could affect a wide range of medications, from antibiotics to mental health treatments,” said Mina Tadrous, lead author and assistant professor, Leslie Dan Faculty of Pharmacy, University of Toronto. “Straining this supply chain could trigger drug shortages and jeopardize patient care. We know that drugs with only one manufacturer and rapidly shifting supply chains increase the risk of shortages,” he said.

Trade tariffs have been imposed twice on Canadian imports by the current U.S. administration, with specific products exempted, including pharmaceutical products imported under the terms of the U.S.-Mexico-Canada Trade Agreement. However, future proposed tariffs will no longer exempt pharmaceutical imports after April 2, 2025, raising concerns about drug availability, affordability, and supply stability.

To assess the potential magnitude of tariff impact on the U.S. drug market, researchers conducted a cross-sectional analysis of drugs manufactured in Canada and exported to the U.S. using data from the DailyMed package inserts database and IQVIA’s MIDAS® quarterly sales and volume data. Using a validated tool, they assessed the clinical importance of each drug and determined its shortage history, as reported by the American Society of Health-System Pharmacists and the U.S. Food and Drug Administration (FDA).

Based on this new data, the researchers suggest that pharmaceuticals should be exempt from tariffs to prevent higher healthcare costs and worsening U.S. supply disruptions. “Our work highlights that perhaps the U.S. should consider removing medications from its list of imports, in line with previous tariffs, to avoid disruptions to supply chains and potential shortages that may affect U.S. patients,” said Tadrous, who is also the Canada Research Chair in Real World Evidence and Pharmaceutical Policy.

The researchers note that although Canada is not the largest supplier of medications to the U.S., the impact of tariffs could be substantial. Extending tariffs to larger suppliers, such as China, India, or Europe, could worsen the predicted effects.

While the researchers focused on the impacts on the U.S. market, introducing pharmaceutical tariffs sets a concerning precedent and can have a broader ripple effect, Tadrous notes. Applying tariffs increases the risk of retaliatory counter-tariffs, which could jeopardize access to essential medicines for Canadians and globally.

“Policymakers can leverage other tools or create tax incentives to attract domestic manufacturing, but abruptly applying tariffs to a crucial sector with already strained supply chains is not the way to go. People’s health is at stake.”