Hospitals face rising costs, supply chain disruptions as tariff uncertainty continues

Photo: Suriyapong Thongsawang/Getty Images

The Trump administration’s proposed tariffs on imported goods from Canada and Mexico may currently be on pause, but uncertainty over their potential reinstatement is having a ripple effect across the healthcare and pharmaceutical industries.

An additional 10% tariff on Chinese imports went into effect on Tuesday.

Hospitals and drugmakers are urging the president to exempt pharmaceuticals and medical goods from the new tariffs on Chinese imports.

In a letter to President Trump on Tuesday, the American Hospital Association said, “The U.S. imports many cancer and cardiovascular medications, immunosuppressives, antibiotics and combination antibiotics from China.”

WHY THIS MATTERS

If imposed, these tariffs could increase costs for hospitals, physicians, insurers and patients, and strain an already fragile medical supply chain.

A Black Book survey of 160 healthcare professionals included input from supply chain executives, pharmaceutical distributors, hospital finance leaders and medical equipment manufacturers, The survey suggests the impact on healthcare could be considerable.

Respondents overwhelmingly anticipated significant price hikes for medical supplies, prolonged supply chain disruptions and cost pressure across the healthcare industry.

Those concerns were echoed by the Healthcare Distribution Alliance (HDA), which issued a statement warning broad tariffs on pharmaceutical products could exacerbate drug shortages and increase costs for essential medications, affecting millions of patients.

Black Book’s report revealed 164 out of 200 respondents (82%) predicted hospital and health system costs would increase by at least 15% over the next six months due to higher import expenses.

The pharmaceutical sector is particularly vulnerable. Nearly 70% of respondents estimate the cost of medications could rise by at least 10% due to higher prices for the active pharmaceutical ingredients (APIs) that are critical components in drug manufacturing – from China.

Medical equipment manufacturers and healthcare IT vendors are also bracing for higher costs and longer supply chain lead times, with 81% of medical device producers predicting delays in procurement and production.

Ninety percent of healthcare supply chain professionals surveyed said they expect major disruptions in supplier negotiations due to pricing volatility.

For hospitals and physicians, the increased costs are likely to be passed along to insurers and patients.

While some organizations are exploring alternative sourcing strategies, only 27% of respondents report actively seeking domestic or alternative international suppliers.

However, this shift presents challenges, as 92% of pharmaceutical manufacturers warn that switching suppliers could lead to regulatory delays, supply inconsistencies, and potential medication shortages – particularly for life-saving drugs.

Ninety percent of hospital finance executives surveyed indicated rising costs would force them to increase service charges, while 94% of healthcare administrators anticipate delays in medical equipment upgrades and reductions in procurement volumes to offset financial strain.

Amid these concerns, the HDA strongly urged the administration to reconsider imposing tariffs on pharmaceutical products.

“Tariffs on pharmaceuticals would strain the pharmaceutical supply chain and could adversely affect American patients, whether through increased medical product costs or manufacturers leaving the market,” the HDA cautioned.

The organization also called for exemptions for pharmaceutical products and long implementation timelines to prevent widespread disruptions.

Instead of broad tariffs, the HDA called for strategic federal investments to strengthen domestic pharmaceutical manufacturing, including increased production of APIs, key starting materials, and finished-dose medicines.

“HDA supports strategic federal investments to boost domestic manufacturing of medical products,” the statement continued. “To this end, we encourage President Trump and his administration to explore long-term strategic investments and incentives for domestic manufacturing that will augment the availability and affordability of medicines.”

THE LARGER TREND

The White House announced the tariffs on February 1, saying, “The extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency under the International Emergency Economic Powers Act (IEEPA). Until the crisis is alleviated, President Donald J. Trump is implementing a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China. Energy resources from Canada will have a lower 10% tariff.”

China responded with its own targeted tariffs.

Trump suspended a threat of 25% tariffs on goods from Mexico and Canada, agreeing to a 30-day pause after speaking with the leaders of those countries, according to Reuters.