Proposed tariffs on Canadian pharmaceutical imports could significantly affect the U.S. drug supply chain, potentially increasing costs and exacerbating shortages of certain medications.

According to a research letter published in JAMA, approximately $3 billion in U.S. pharmaceuticals depend on Canadian manufacturing. The proposed 25% tariffs could potentially add $750 million in costs.

In an interview with lead author Mina Tadrous, PharmD, PhD, of the University of Toronto, he said that supply chain disruptions extend beyond the tariffs themselves.

"The main concern here is that as tariffs are placed, the supply chains may begin to move. Historically, maneuvering and shifting supply chains increases the risk for shortages—which will likely hurt more than just the U.S.," Tadrous said to Conexiant News.

While the potential impact is concerning, Tadrous suggested a measured approach for health care providers. "We are in the wait-and-see phase. I would suggest they monitor drugs they are concerned with from the list," he advised. "Initially there won't be any impacts that will be immediate, but [providers should] continue monitoring the supply chain and see how the market and supply chains shift in response to the proposed tariffs."

He noted that supply chain disruptions typically have a delayed effect: "From supply chain shift and shock, it usually takes months before we start to see impacts."

The cross-sectional analysis examined pharmaceutical drugs manufactured in Canada and exported to the U.S. using data from the National Institutes of Health's DailyMed package inserts database and IQVIA's MIDAS quarterly sales and volume data.

Of particular concern are 28 drugs with no alternative suppliers outside Canada, which Tadrous noted "cover a wide number of areas from antibiotics to pain medications to antidepressants." These sole-source medications could face significant supply disruptions if tariffs force manufacturing changes.

"Although Canada is not the largest supplier of medications to the U.S., tariffs could raise costs and strain supply chains," the authors noted in their research letter. "We estimate that $3 billion in U.S. pharmaceuticals depend on Canadian manufacturing, with 25% tariffs adding $750 million in cost."

Tadrous and team identified 22,082 drug products sold in the U.S. market from the fourth quarter of 2022 to the third quarter of 2023. Of these, 411 (1.9%) were manufactured in Canada, representing $3 billion in sales. Among the Canadian-manufactured products, 79% (n = 323) were generic products and 21% (n = 88) were brand-name products,

While the Inflation Reduction Act provisions limit cost pass-through to some payers (i.e., Medicare), manufacturers may still adjust production or alter distribution in response to tariffs, potentially increasing supply chain fragility.

Tadrous also highlighted concerns about upstream dependencies in the pharmaceutical supply chain, suggesting that active pharmaceutical ingredients and other components sourced globally could further complicate the impact of tariffs on final drug products manufactured in Canada.

"To avoid increasing health care costs and worsening disruptions in U.S. supply," pharmaceuticals should be exempt from tariffs, concluded Tadrous and team.

Disclosures can be found in the research letter.