How Could Tariffs Impact the Pharmaceutical Industry?

Tariffs used to be a cost-of-goods line item managed by finance. In today’s globalized life-science ecosystem, a sudden duty hike reverberates through every corner of a drug maker’s operations. A 25 percent surcharge on an intermediate can: 

• Erode margins overnight — especially on thin-priced generics. 

• Trigger supplier switches that demand fresh audits, re-validation studies, and new regulatory filings. 

• Delay batch release when import paperwork stalls in customs. 

• Increase safety-stock levels to hedge against border slowdowns, inflating inventory-carrying costs. 

In short, tariffs turn quality, compliance, and even R&D scheduling into moving targets.

Tariff Basics for Pharma 

A tariff is an import duty set by a government to raise revenue or, more often, to pressure trading partners. The United States imposed waves of tariffs on  goods beginning in 2018; duties on chemicals and pharmaceutical precursors run as high as 25 percent. Washington’s 2025 review proposes keeping many of those lines in place while adding a 10 percent surcharge on goods already hit. 

Why does that matter to life-science companies? Because roughly 80 percent of the active pharmaceutical ingredients (APIs) used in U.S. medicines are imported. In 2024 the two countries accounted for 57.6 percent of total U.S. pharma imports by weight. When duties rise, the cost of every capsule, vial and prefilled syringe rises with them. 

How Could Tariffs Influence Drug Prices 

When a duty lands on an API, the cost flows straight through the finished-dose ledger: 

1. Raw-material mark-ups – A 10 percent duty on a solvent that represents 3 percent of cost of goods can wipe out half of a product’s margin. 
2. Packaging surcharges – Duties on aluminum foil, glass vials, and polymer films add pennies per unit that scale to millions across blockbuster volumes. 
3. Pass-through pricing – CMOs and contract packagers pass new costs to sponsors, who then face a choice: absorb the hit or raise list prices. 
4. Patient impact – Higher wholesale acquisition costs (WAC) ripple down the channel, threatening affordability and formulary access. 

A 2023 Congressional Budget Office study estimated that every 1 percent increase in API duties translates into a 0.3 percent rise in average drug prices within a year—small per script but massive across therapeutic portfolios.

When Should Pharmaceutical Companies Prepare for Tariff Changes 

The answer is “before they happen.” Trade measures arrive with little warning, so readiness hinges on: 

• Continuous horizon-scanning of proposed tariffs, Section 301 reviews, and retaliatory lists. 

• Real-time tariff monitoring integrated into ERP and Quality Management System dashboards, flagging cost spikes the moment a customs code change. 

• Pre-approved alternate suppliers that have already passed quality audits and can be activated the day a new duty lands. 

• Scenario modelling in finance and supply-chain teams to test margin impact at different duty levels. 

Companies that rehearse tariff scenarios in tabletop exercises move faster when the real notice is published in the Federal Register.

7 Major Impacts of Tariffs on Pharmaceutical Industry 

The implementation of tariffs by the US administration can significantly impact the Quality Management Systems (QMS) of pharmaceutical organizations in several ways: 

Increased Costs and Margin Pressures 

• Raw Materials and APIs: Tariffs on imported raw materials, active pharmaceutical ingredients (APIs), and other components can directly increase production costs. Many pharmaceutical companies rely on global supply chains, and tariffs, especially on major suppliers, can lead to substantial cost hikes. For example, the US has imposed significant tariffs on imported goods. 

• Medical Devices and Equipment: Tariffs on imported medical devices, equipment, and laboratory supplies can also increase operational costs for pharmaceutical companies involved in research, development, and manufacturing. 

• Impact on Pricing: Increased costs may pressure organizations to raise drug prices, potentially affecting patient access and affordability, or to absorb the costs, squeezing profit margins. 

Supply Chain Disruptions and Diversification 

• Need for Alternative Suppliers: Tariffs can make existing suppliers in affected countries less competitive, forcing pharmaceutical companies to seek alternative suppliers in regions with lower or no tariffs. This diversification can be complex and time-consuming, requiring thorough qualification and auditing of new suppliers to maintain quality standards. 

• Potential for Shortages: Disruptions in the supply chain due to tariffs or the transition to new suppliers could lead to potential shortages of essential medicines and materials, impacting on patient care. 

• Increased Lead Times: Tariffs can sometimes lead to increased customs processing times and logistical challenges, potentially increasing lead times for critical materials. 

Changes in Internal Quality Processes 

• Supplier Qualification: Changes in suppliers due to tariffs necessitate a robust supplier qualification process within the QMS. New suppliers must undergo thorough audits and quality assessments to ensure they meet the required standards and do not compromise product quality. 

• Change Control: Introducing new materials, components, or suppliers requires a stringent change control process to evaluate and mitigate any potential impact on product quality, safety, and efficacy. This includes updating documentation, revalidating processes, and ensuring regulatory compliance. 

• Risk Management: Tariffs introduce new risks to the supply chain and cost structure. The QMS must incorporate these risks into the overall risk management framework, identifying potential impacts on quality and implementing mitigation strategies. This may involve developing contingency plans for supply disruptions or cost increases. 

• Inventory Management: Organizations may need to adjust their inventory management strategies to account for potential supply chain disruptions or increased costs due to tariffs, ensuring they maintain sufficient stock levels without incurring excessive holding costs. 

• Focus on Local Sourcing/Reshoring: Tariffs might incentivize companies to explore local sourcing or reshoring of manufacturing activities. This shift would require adjustments to the QMS to ensure compliance with local regulations and standards, as well as the establishment of quality systems for new or expanded domestic operations. 

Manufacturing & Quality-Management Ripples 

• Re-validation needs: When you switch suppliers to dodge tariffs, you trigger process-validation, stability studies and often agency notification. That can swallow six months and millions of dollars. 

• CAPA and audit pressure: Unvetted material changes show up fast in audit observations. FDA warning letters already cite “inadequate supplier qualification” after tariff-driven sourcing changes. Each finding expands your Corrective and Preventive Action (CAPA) workload and extends cycle time. 

• Inventory and lot tracking: To hedge against tariff volatility, many firms build larger safety stocks. Bigger inventories mean more ageing products, tighter control of retest dates and heavier reconciliation burdens in the QMS. 

Regulatory and Compliance Challenges 

• Evolving Trade Regulations: Pharmaceutical companies must stay abreast of changing tariff regulations and their impact on imports and exports. This requires updating their QMS documentation and procedures to reflect these changes and ensure ongoing compliance. 
• Customs and Documentation: Increased scrutiny on imports due to tariffs may lead to more rigorous customs checks and documentation requirements, necessitating meticulous record-keeping and adherence to import/export regulations within the QMS. 

Market-Access Challenges 

Tariff-driven cost surges can push a drug’s unit price beyond the thresholds that payers, pharmacy-benefit managers, and health-technology-assessment (HTA) bodies use to decide what stays on—or is bumped off—their formularies. When an API suddenly costs 20 % more, the manufacturer either absorbs the hit or raises its wholesale acquisition cost. A higher list price can make the product fail cost-effectiveness models like ICER in the United States or NICE’s QALY benchmarks in the U.K. Plans may downgrade the drug’s tier, impose prior authorization, or drop it entirely in favor of lower-priced competitors. In parallel, regulators in markets with reference-pricing or price-control regimes can freeze or even mandate reductions, eroding margins further and delaying patient access. 

Innovation & R&D Disruptions 

When input costs balloon, R&D budgets feel the squeeze. One large-capsule manufacturer diverted US $20 million from an orphan-drug program to cover tariff-driven API costs last year. Clinical-trial material—often imported in gram quantities at eye-watering prices—becomes even more expensive once duties layer on. That erodes the number of sites a sponsor can activate, or patients can enroll, dragging timelines and eroding Net Present Value models. 

Does This Reflect Any Opportunities?

Every challenge comes with an opportunity to improve and innovate. Here are some opportunities you can look forward to: 

• Increased Focus on Domestic Manufacturing: Tariffs could create opportunities for domestic pharmaceutical manufacturers by making them more competitive against imports. This could lead to investment in local manufacturing and a strengthening of domestic quality infrastructure. 

• Innovation in Sourcing and Manufacturing: The challenges posed by tariffs might drive innovation in sourcing strategies, such as developing new, cost-effective materials or manufacturing processes that reduce reliance on tariff-affected imports. 

Therefore, the implementation of tariffs can create significant challenges for the pharmaceutical QMS organizations by increasing costs, disrupting supply chains, and requiring adjustments to quality processes and regulatory compliance. Organizations need to be agile and proactive in adapting their QMS to mitigate these risks and ensure the continued quality and availability of their products. 

Key Considerations for Pharma Companies Facing Tariffs 

• Diversify suppliers across geographies to reduce single-country exposure. 

• Optimize HS codes and leverage free-trade agreements or duty-drawback programs. 

• Embed tariff risk in FMEA and supplier-scorecard frameworks inside the QMS. 

• Automate change control so new materials flow through validation and regulatory checks without bottlenecks. 

• Use AI-driven inventory forecasting to balance safety stock with carrying-cost discipline. 

• Track tariff impact metrics—cost per batch, CAPA cycle time, audit-finding trends—in a single dashboard. 

Impact of pharmaceutical tariffs in the United States

The United States imports roughly four-fifths of its APIs and a third of its finished-dose medicines. Since 2018: 

• Section 301 duties of up to 25 percent have remained on hundreds of  chemical inputs. 

• Retaliatory tariffs have bounced back from major trading partners, complicating two-way supply chains. 

• FDA warning letters increasingly cite “inadequate supplier qualification” after tariff-driven material changes. 

• Shortage lists published by FDA have grown, with tariffs cited as a contributory factor in public hearings. 

How Qualityze EQMS turns turbulence into resilience?

Qualityze is a cloud-based Enterprise Quality Management System (EQMS) that can help organizations mitigate the impact of tariffs in several ways, particularly through its robust supplier quality management features and overall process optimization. 

Qualityze gives pharmaceutical manufacturers and sponsors the data discipline to navigate tariff shocks without quality drift. It ensures: 

1. Enhanced Supplier Quality Management

• Supplier Qualification and Evaluation: Qualityze allows for a more rigorous and data-driven approach to supplier selection and evaluation. By establishing clear quality criteria and tracking supplier performance metrics (e.g., on-time delivery, defect rates), organizations can identify and prioritize suppliers who offer the best value and reliability, potentially including those in regions less affected by tariffs or offering more competitive pricing. 

• Risk Assessment of Suppliers: The platform enables thorough risk assessments of suppliers, considering factors like geographical location and potential exposure to tariff fluctuations. This allows organizations to proactively identify vulnerabilities in their supply chain and develop mitigation strategies, such as diversifying suppliers or negotiating contract terms that account for potential tariff changes. 

• Improved Communication and Collaboration: Qualityze facilitates better communication and collaboration with suppliers. This can be crucial for renegotiating contracts, exploring alternative sourcing options, or working together to find cost-saving measures in response to tariffs. 

• Auditing and Compliance: The audit management features in Qualityze help ensure that all suppliers, new or existing, meet the required quality and compliance standards. This is especially important when considering new suppliers in different regions due to tariff pressures, ensuring that quality is not compromised in the pursuit of cost reduction. 

• Managing Approved Supplier Lists (ASL): Qualityze helps maintain and manage ASLs effectively. This ensures that only qualified and reliable suppliers are used, minimizing the risk of quality issues that could further exacerbate the financial impact of tariffs through waste or rework. 

2. Supply Chain Optimization and Efficiency

• Centralized Data and Visibility: Qualityze provides a centralized platform for all quality-related data, including supplier information, material specifications, inspection results, and non-conformances. This enhanced visibility allows organizations to identify inefficiencies in their supply chain and optimize processes to reduce overall costs, potentially offsetting some of the tariff burdens. 

• Nonconformance and CAPA Management: Effective management of nonconformances and Corrective and Preventive Actions (CAPA) within Qualityze can help reduce waste, rework, and recalls related to supplier materials or components. Minimizing these quality-related costs becomes even more critical when facing increased input costs due to tariffs. 

• Document Control: Robust document control features ensure that accurate and up-to-date information regarding material specifications, supplier agreements, and quality procedures is readily available. This reduces errors and ensures smoother transactions, potentially mitigating delays or complications arising from tariff-related changes in sourcing. 

• Change Control: When changes in suppliers or materials are necessitated by tariffs, Qualityze's change control process ensures that these changes are managed systematically, with proper evaluation of potential quality impacts and implementation of necessary validations, minimizing risks associated with new sources. 

3. Data-Driven Decision Making

• Reporting and Analytics : Qualityze offers comprehensive reporting and analytics capabilities, allowing organizations to track key quality metrics related to their suppliers and supply chain. This data can inform strategic decisions regarding sourcing, supplier selection, and process improvements in response to tariff impacts. 

• Trend Analysis: By analyzing historical data within Qualityze, organizations can identify trends in supplier performance or material quality that might be exacerbated by tariff-related changes. This proactive approach allows for early intervention and mitigation. 

Together, these capabilities let you see tariff risk early, act on it quickly, and document every move for regulators—turning trade turbulence into a controllable variable rather than a crisis. 

Ready to protect your margins and your market license? 

Run your own numbers with our Tariff-Impact Self-Assessment and see where an AI-powered QMS can save you seven figures.