00:00Today on Forbes, Trump promised to make your medicines cheaper.
00:05His tariffs will make them more expensive.
00:08During the recent presidential campaign,
00:11President-elect Donald Trump repeatedly promised to lower drug prices,
00:15to the point where he falsely claimed credit for capping insulin prices,
00:19a policy actually enacted by the Biden administration.
00:23He's also pledged to hike in tariffs across the board,
00:26making it the centerpiece of his economic policy.
00:29At a campaign event in October, he said,
00:37But Trump can have one or the other, not both.
00:40And if his incoming administration succeeds in enacting the tariffs
00:44he's touted on the campaign trail,
00:46the end result will be higher drug prices for consumers
00:49and a slowdown of innovation in developing new therapies.
00:53Trump has promised a tariff between 10-20% on imports from most countries,
00:58with tariffs on Chinese goods at a minimum of 60%,
01:02and tariffs on Mexican imports ranging from 25% to 100%.
01:07Jack Zhang, director of the Trade War Lab at the University of Kansas,
01:11said that
01:16But this time around, Trump's proposing a universal tariff
01:19that would hit pretty much everything.
01:22The United States imports about $10.2 billion a year worth of pharmaceuticals
01:27from China alone, according to the Atlantic Council.
01:31That means heart medication, cancer treatments, and antibiotics,
01:35as well as over-the-counter pain relievers like ibuprofen and cough syrup,
01:39will all be more expensive with universal tariffs.
01:43Even domestic manufacturers rely on global supply chains,
01:47in particular for active pharmaceutical ingredients, also known as APIs.
01:52Here, tariffs would have an even bigger impact,
01:55as an estimated 72% of APIs in the U.S. market are manufactured overseas,
02:0013% of which come from China, according to USP.
02:05Beyond that, many of the key raw ingredients for those APIs
02:09are produced in China, per a 2022 report from Nikkei Asia.
02:14Mariana Sokal, associate professor at the Johns Hopkins Bloomberg School of Public Health,
02:19told Forbes,
02:21Drug supply is not easy to change overnight.
02:24As an example, just shifting from one production facility to another
02:28requires FDA inspections and approvals.
02:31Sokal added,
02:44If such a shift occurs, it's more likely that production would move
02:47from a higher tariff area like China to a country that has a lower one, like India,
02:52not back to the United States.
02:54And Trump's last round of tariffs during his first administration,
02:58which Biden continued, didn't work as hoped.
03:01It took government-enacted programs like the CHIPS Act to boost domestic manufacturing.
03:06Sokal points out that the capacity for increasing production of drugs and APIs
03:11simply doesn't exist in the U.S. right now.
03:14Building that out requires investment,
03:16which would be paid back in the form of higher prices.
03:19And establishing it in the United States is expensive enough
03:22that simply paying the tariffs may prove more cost-effective
03:26when it comes to the low-cost generics produced overseas in China, India, and Mexico.
03:31She said that patients will simply,
03:33face higher prices for the same product,
03:35with no change in the quality or supply or anything.
03:39Tariffs may also undermine new research and development in the pharmaceutical industry,
03:44because increased costs across global supply chains means less resources.
03:49Expect companies to focus on surer bets and fewer risks.
03:53Tariffs may also contribute to the Fed raising interest rates again to control inflation,
03:58which broadly have a cooling effect on investment in riskier companies,
04:02like those developing new gene therapies or new technology classes
04:06that haven't seen FDA approvals before.
04:09Similar raises during the Biden administration forced a slowdown in biotech investment
04:14that a JP Morgan report projects will bounce back in the fourth quarter this year,
04:18in part due to interest rate cuts.
04:21For full coverage, check out Alex Knapp's piece on Forbes.com.
04:27This is Kieran Meadows from Forbes.
04:29Thanks for tuning in.
04:32For more information visit www.forbes.com
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