America’s dependence on foreign generic manufacturing is a real national security and supply concern. The vast majority of drug shortages in the U.S. are generics and shortages have increasingly burdened pharmacies across the country and disrupted care for the patients who rely on them, particularly those with chronic pain and cancer.
But President Trump’s most recent policy is unlikely to fix that problem. It’s far more likely to make American medicine cabinets less reliable, not more.
In July, President Trump announced that imported generic drugs will carry a zero tariff for two years starting August 1, 2026, before jumping to 100% in August 2028 and doubling to 200% the following year, with the stated goal of “reshoring” generic drug manufacturing to the United States.
America’s dependence on foreign generic manufacturing is a real national security and supply concern. According to a 2025 report by the Senate Committee on Aging, India supplies more than half of the generic prescriptions filled in the U.S, and China dominates the raw ingredients that go into generic medicines. The vast majority of drug shortages in the U.S. are generics and shortages have increasingly burdened pharmacies across the country and disrupted care for the patients who rely on them, particularly those with chronic pain and cancer.
But this policy, as announced, is unlikely to fix that problem. It’s far more likely to make American medicine cabinets less reliable, not more.
The economics don’t add up
Generic drugs are, by design, cheap. That’s the point of the generic system, where the introduction of competition drives prices down to a few cents a pill. A 200% tariff on a product priced at pennies is a rounding error for the U.S. Treasury, but it’s a knockout blow for the manufacturer, because generic profit margins are already stretched thin to begin with. In previous research, we show how low prices in the generic and biosimilar markets appear to be a key driver of drug shortages, and how the system costs of those shortages can be huge. The rational short-term choice for manufacturers would be to pass-on tariffs to US wholesalers and patients or exit the U.S. market, not invest in it, which could worsen the national security and supply concerns rather than improve them. Building a factory to manufacture high-volume, low-margin generics in one of the most expensive places in the world simply doesn’t make any sense at these price points.
The timeline undercuts its own credibility
The 100% tariff doesn’t come until August 2028 — a few months before President Trump leaves office — and the 200% rate only arrives after he’s gone. While a grace period for any policy change is beneficial, in this particular case it is unlikely that any company is going to sink hundreds of millions of dollars into a new facility, then wait the additional years it takes the FDA to approve a manufacturing site transfer, on the strength of a policy that may not survive the next administration.
Contract manufacturing doesn’t offer an easy workaround either. Domestic contract capacity is limited and smartly concentrated in higher-value products rather than the high-volume generics this policy targets. Using contract manufacturers wouldn’t remove the cumbersome process of securing FDA approval of the new site either.
Reshoring generics still means importing the ingredients
Finally, this policy may end up taxing the very production it’s trying to build. The administration hasn’t confirmed whether the ingredients needed to manufacture medicines in the U.S. will be carved out. It’s a curious omission since most of the active ingredients that go into American-made generics are themselves imported, largely from China and India. Unless those inputs are explicitly exempted, this policy risks taxing domestic manufacturers on the raw materials they need — raising the cost of the very reshoring it’s meant to encourage. If the goal is to promote the security of Americans, it will leave raw materials needed to make medicines subject to “ransom” by exporters.
Similarly, there is no indication as to whether the tariffs will apply to biosimilars (highly similar versions of biologic medicines). This adds to further uncertainty for manufacturers – and if they choose to exit the market, it is American patients who will lose out.
Conclusion
The U.S. faces a genuine problem in ensuring the stability of generic medicine access. Overreliance on a handful of manufacturing hubs for medicines Americans use every day is a real vulnerability – a problem that is just as true for many other countries. But the policy response needs to make investment in U.S. manufacturing more attractive. Other policy solutions, like addressing pricing pressures and burdensome regulatory hurdles at the FDA, merit real discussion and debate.
Generic medicines serve the backbone of pharmaceutical treatments for patients in the U.S., even though they contribute a small amount to total pharmaceutical expenditure. A policy that pushes manufacturers to exit low-margin products rather than invest in them is a policy that risks making an already fragile market less secure for the health systems, health care professionals, and – most importantly – the patients who rely on it.
