Trump’s tariff on drugs targets one of the world’s most globalized supply chains 

“This is done in order to RESHORE Generic Pharmaceutical Production into America, with a penalty to those Companies that decide not to build Plant and Equipment within the stated period of time given to them,” Trump wrote on Truth Social.

The new policy does not change the administration’s approach toward patented and branded medicines, which remain subject to previously announced pharmaceutical tariff policies. 

More than 90% of medicines dispensed in the U.S. are generic drugs, according to the Food and Drug Administration, making the proposal one of the most consequential trade actions affecting the U.S. healthcare supply chain.

Global supply chain heavily dependent on India and China

Although many finished pharmaceuticals are imported from Europe, the U.S. relies heavily on India and China for generic medicines and the active pharmaceutical ingredients (APIs) used to manufacture them.

According to industry research, generic drugs account for more than 90% of U.S. prescriptions, while more than 92% of facilities producing generic APIs for the U.S. market are located overseas, primarily in India, China and Italy. 

The research notes that the United States’ dependence on overseas manufacturers has lowered costs but also increased exposure to supply disruptions and shortages.

Researchers have cautioned that reshoring generic drug production may prove more difficult than moving higher-margin branded pharmaceuticals because generic manufacturing operates on extremely thin margins and remains labor intensive. 

They note that unless tariffs significantly outweigh the higher cost of domestic production, manufacturers may continue relying on overseas suppliers.

Others warn tariffs could unintentionally contribute to higher prices or shortages if manufacturers determine certain low-margin products are no longer economically viable.

The pharmaceutical distribution market is dominated by three companies:

Three companies dominate U.S. drug distribution

Every imported generic drug ultimately moves through a remarkably concentrated U.S. distribution network. 

McKesson, Cardinal Health and Cencora collectively control roughly 92% of pharmaceutical distribution revenue in the country, serving as the primary conduit between overseas manufacturers and American hospitals, pharmacies and healthcare providers.

Pharmaceutical logistics is dominated by strategic coastal gateways equipped with major cold-chain infrastructure and proximity to high-density consumer and manufacturing hubs. The dominating ports include: 

• Port of New York and New Jersey
• Port of Philadelphia
• Port of Los Angeles and Port of Long Beach
• Port Houston
• Port Everglades/Port of Miami

Several global logistics companies dominate pharmaceutical freight, including DHL, UPS, FedEx, Cencora, DSV and Kuehne+Nagel.

How a generic drug reaches U.S. consumers

API supplier
        ↓
Drug manufacturer (India/China)
        ↓
Ocean container / Air cargo
        ↓
U.S. port
        ↓
McKesson
Cardinal Health
Cencora
        ↓
Hospital
Pharmacy
Clinic
        ↓
Patient

Researchers have cautioned that reshoring generic drug production may prove more difficult than moving higher-margin branded pharmaceuticals because generic manufacturing operates on extremely thin margins and remains labor intensive, according to a study titled “Prescription for made in America? Tariffs and U.S. drug manufacturing” by Mariana P. Socal, Maqbool Dada Tinglong Dai. They note that unless tariffs significantly outweigh the higher cost of domestic production, manufacturers may continue relying on overseas suppliers.

Others researchers warn tariffs could unintentionally contribute to higher prices or shortages if manufacturers determine certain low-margin products are no longer economically viable, according to the University of North Carolina Center for the Business of Health.

Why it matters: Generic medicines account for more than 90% of U.S. prescriptions, and the companies that manufacture, import and distribute them operate one of the world’s most complex supply chains. The Trump administration’s phased tariff plan could reshape pharmaceutical sourcing, alter freight flows and increase pressure on importers, distributors and healthcare providers over the next several years.