Tariffs – They’re Not the Answer for our Medicines
I would have never guessed that someday I’d be writing a blog about tariffs. I do remember President Trump during his campaign talked about how unfair other countries tariffs were, but I didn’t imagine how he would approach changing them. As a champion of the free market, I’ve always been against anything that built barriers to the free exchange of goods and services. The President was of this thinking in his first term when he helped close a free trade agreement between the U.S., Canada, and Mexico. I believe that the tariffs imposed by other countries are just a way for them to make quick profits because of manufacturing, geological or political advantages. This approach is not conducive to long term efficiency and doesn’t promote price competition. I hoped that when President Trump won the election, he would institute structured and meaningful steps toward eliminating these inefficient and damaging tariffs.
I certainly didn’t expect the tariff chaos that has been a big part of the President’s first 100 days. It will take some time for the final results of this flurry of actions to be revealed and I’m certainly not one to say that there won’t be some positive results. It is especially difficult to predict the impact when the situation is so fluid, but I do know that some of the statements about imposing tariffs on prescription drugs has caused much anxiety with those involved in healthcare.
For a little bit of context let’s look back at the vaccinations that were developed in response to the COVID 19 pandemic. For more than a decade prior to 2020, two scientists, working at a German pharmaceutical firm, collaborated with the drug maker Pfizer on discovering how mRNA interacts with our immune system. Their discovery was key in the development of the COVID 19 vaccine which was then manufactured and distributed using the worldwide facilities of Pfizer. The financing to support these scientists was made possible based on the tariff free assumptions of the investors and the established worldwide facilities that Pfizer had built over the years. You might remember that Pfizer took no government money during the pandemic because they had already invested in the scientists who made the discovery and the efficient manufacturing and distribution facilities. This worldwide capability is so valuable that historically prescription drugs have been exempted from tariffs. The application of tariffs on drugs at this point would be an abrupt departure from this policy and threaten long-established worldwide innovation and manufacturing infrastructure.
It is a valid goal to want to move business infrastructure back to the United States. It might seem that tariffs would encourage this move, but it took years to build this ability, and it will take years to move it to the U.S. It just doesn’t seem worth it to go through the higher prices and interruption of supply.
I’ve talked many times about barriers to innovation, highlighting the fact that lowering the return on investment (ROI) for those investing money in new medicines is truly a barrier. Increasing the cost for manufacturing and distributing the drug after the discovery of a new medicine would absolutely lower the ROI and would again be a true barrier to innovation. We need to do everything we can to encourage innovation, we don’t need to build more barriers.
The pharmaceutical industry is still working through the impacts of the price fixing aspects of the Inflation Reduction Act. It doesn’t need another variable that tariffs would represent. It’s so hard to predict what actions the other countries would take and what that would do to the pipeline of medicines that we all rely on. It’s not a bad goal to search for safer suppliers from reliable allies but any changes need to be made in an orderly and well-planned way to avoid price increases and shortages.
The last few months have seen many changes in our nation’s healthcare system. We probably haven’t seen the last of these changes and it is extremely difficult to predict their impact. What I do know is that tariffs have never been a viable long-term solution, and it is especially true when it comes to the medicines that we rely on every day. I hope the administration will recognize the danger in using tariffs on the medicines that we rely on.
Best, Thair