As President Trump’s tariff restrictions are imposed on China, the pharmaceutical industry has been deciphering how it will be impacted and ways to reduce the effect.
After striking separate agreements with the US President, both Mexico and Canada have managed to pause the introduction of tariffs for the next month. Trump has since threatened the UK and European Union (EU) with tariffs, stating both have been acting ‘out of line’. However, the President added that he hopes he can ‘sort it out’ with Prime Minister Keir Starmer.
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If tariffs come in all these geographical areas, experts question whether it will begin to make the US a less attractive place to conduct studies. While it is well acknowledged that drug costs will increase with tariffs due to China’s current grip on drug manufacturing, other clinical trial-related costs are also likely to impact the overall cost of running studies – and these costs will not only come from the sponsor’s back pocket.
Onshore manufacturing will struggle
If sponsors want to keep manufacturing costs down, they must seek alternative manufacturing options for their IP and any generics they source in studies.
Around half of generics and four-fifths of active pharmaceutical ingredients (APIs) used by the US pharmaceutical industry are manufactured abroad, with China having a giant hold on the global manufacturing market. During questioning at a Senate HELP Committee hearing, Trump’s nominee to lead the United States Secretary of Health and Human Services (HHS), Robert F. Kennedy Jr, known as RFK Jr., said it was vital for the US to take back control of drug manufacturing.
“There is heavy reliance on Chinese imports for APIs and generics,” explains Cyrus Fan, a research analyst in the GlobalData Life Sciences team focusing on the US and Canadian markets.
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By GlobalDataDoug Drysdale, CEO of Cybin, a biopharma running trials of psychedelics including psilocin, says that generic drugs, which are sometimes used as active controls in studies, are the therapies most likely to be impacted by tariffs. “Generic drugs are subject to intense price competition so manufacturers must find locations where they can make these compounds on a competitive cost basis and tariffs will not help. As a result, these treatments are going to become more expensive and, in some cases, it might stop those treatments from being available at all. It may also force some manufacturers to move production to the US – companies may as well manufacture in the US if it’s going to cost as much.”
The looming threat of the BIOSECURE Act has seen many biotechs and pharma companies contemplate moving manufacturing away from China, possibly towards India. The bill would ban federal funding for companies that collaborate with manufacturers of concern, with one of the main global manufacturers, China-based contract development and manufacturing organisation (CDMO) WuXi Biologics and Wuxi AppTec on the hit list. The bill passed through the House in September 2024 but is yet to pass through the Senate and it is unclear at this stage whether this is a bill the Trump administration would be looking to advance.
“WuXi is one of the biggest CDMOs on the planet, even if they bypass the BIOSECURE Act coming into force, the additional costs of importing API from tariffs will have a significant impact. I think that the market will be more so captured by other countries that can produce drugs at the same type of cost as China can,” says Anshul Mangal, president of Project Farma, a manufacturing solutions firm.
“The BIOSECURE Act has already made some companies act and re-evaluate their supply chains. Whether that is onshoring their manufacturing or finding contract manufacturers outside of China such as in Europe and India. Not everyone has acted immediately but it looks like they are prepared to act quickly when the BIOSECURE Act is finalised. Companies moving manufacturing domestically will probably hold an advantage in light of these tariffs,” Fan says.
The act also saw an increase in onshore manufacturing deals being struck in the US. The question now is whether the threat of tariffs will see more companies sign US manufacturing agreements and whether the US has the capacity for manufacturing at the demand required.
“Major shortages across a range of drugs are currently seen and before 2025, there had not been much incentive to onshore manufacturing,” Fan explains.
And even if CDMOs are able to manage the demand, the higher costs of US manufacturing may be a barrier for some companies, Mangal says.
US could become less attractive to overseas sponsors
There are some concerns that tariffs could make the US a less attractive place to run clinical trials, especially for small and medium-sized biotechs who will feel the biggest impact if their trial costs increase due to tariffs.
Mangal adds: “As costs rise in the US, sponsors may ship clinical trials to other countries where investigational drugs can be produced more affordably – India, South Korea and Europe may become more attractive for trial sponsors looking to minimise research costs.”
Drysdale disagrees about the potential impact of sponsors running trials in the US, saying the country has too much influence in the global market for these tariffs to put sponsors off running trials. “The US market, typically, is about half of the global market in terms of value. Ultimately, companies will have to run studies in the US so I can’t see tariffs stopping that. It may cause some different corporate structures and production sites, but it would take a lot for companies to ignore the US market completely,” says Drysdale.
Sites will also be impacted
Although sponsors will likely feel the brunt of the financial hit from tariffs, research sites will also be impacted, according to Mangal.
“Sites need supplies such as gowns, gloves, syringes, and high-value equipment like CT scanners and X-ray machines. These supply expenses account for about 13% of hospital costs, and increased tariffs will raise hospital spending on essential research tools. These disruptions could hinder the efficient conduct of clinical trials,” says Mangal.
Mexico is the eighth-leading global manufacturer of medical devices, according to American Industries Group, and is the number one exporter of medical equipment and devices to the US. The country exports a variety of medical devices to the US, including patient examination devices, peripheral vascular devices, electrophysiology devices, cardiovascular surgery devices and respiratory devices, among others.
“Tariffs on Mexican medical device imports would increase costs for clinical trial infrastructure, affecting trial site setup and operations, and the higher cost for diagnostic kits and laboratory supplies may reduce the number of US sites involved in international trials,” Mangal added.
