ISLE OF PALMS, S.C. (WCSC) – Local experts explain what a new tariff on imported pharmacy drugs may mean for American buyers.
President Donald Trump announced new import tariffs on imported items, including a 100% import tax on pharmaceuticals, starting Oct. 1.
Certain imports are excluded from the taxes, such as generic medications and imports from the European Union. College of Charleston economics professor Mark Witte says the European Union already has a 10% tax agreement in place.
Witte says the exception covers a majority of medical companies based in Switzerland and the United Kingdom.
A reason behind the administration’s decision was to promote investments in the United States’ pharmaceutical production.
The tax would not apply to companies with a footprint in the United States. The administration defines an established footprint as either a company breaking ground or under construction in the nation.
“A lot of the generics that we get in the United States come from China and India,” Witte says. It’s entirely possible that these Chinese and Indian companies are looking to sell branded medications in the United States, to get patent protection in the United States. And this is one way of telling those companies that, ‘you can do that, but you’ll need to have a substantial footprint in the United States.’”
Witte says the majority of people purchasing prescriptions will not see the effects of the new tax as a result of the conditions.
The U.S. Food and Drug Administration reports that nine out of 10 prescriptions filled are generic drugs.
Isle of Palms Delta Pharmacy Manager Joe Gandy agrees that the majority of customers entering the pharmacy will not see impacts on their generic drug pick-ups.
“There’s a lot of factors at play in drug pricing, and increasing prices of some of the expensive brand-name medicines, for one, would not affect that many people overall,” Gandy says. “The mass majority of our prescriptions are generics.”
Gandy says the companies that sell the few prescriptions that would be impacted are possibly looking into creating domestic footprints. He says the action would help with issues in the supply chain that he saw during COVID-19.
Gandy says any potential impacts would fall on pharmacy benefit managers that act as the middleman in medicine pricing between companies and patients.
“It would be up to them basically to see if they would absorb that or it would be passed along. And as pharmacies, we all hope that they keep that fair and increase how they reimburse in that whole system, and that’s what’s been a lot of trouble for pharmacies lately.”
The work also ties in to a recent administration deal with pharmaceutical company Pfizer to lower the price of drugs. Witte says the administration’s work to negotiate branded drug prices in the country is also linked to an upcoming administration website to sell products.
“This might be a way to convince other companies that, ‘Hey, maybe you don’t want these tariffs in place, maybe you don’t want to see the United States engage in trade protections with pharmaceuticals,’” Witte continues. “And if you want that, then perhaps having lower prices for your branded medications in the United States, as sold through this government website, would be in your best interest.”
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