Hospitals and health systems are facing a potential shock to pharmaceutical pricing and supply chains following President Donald Trump’s announcement of new tariffs on imported medical goods, including pharmaceuticals. President Trump has proposed tariffs as high as 250% on some drugs and components, dramatically increasing the cost of key medications for U.S. hospitals.
What’s Changing
The Trump administration announced on Aug. 5 that it will begin imposing pharmaceutical tariffs on certain countries, notably targeting Australia and other non-European sources of drug imports. While Europe has been temporarily spared, the administration warned that this could change if trade negotiations falter.
The White House says the tariffs are meant to bolster domestic drug manufacturing and address foreign trade imbalances. “We’re not going to rely on other countries for life-saving drugs anymore,” President Trump said during a campaign-style event announcing the tariffs CNBC.
Australia, a major exporter of cancer treatments and active pharmaceutical ingredients (APIs), has expressed deep concern over the impact on its $2.5 billion pharmaceutical export market. As Reuters reports, Australian officials are scrambling to assess the consequences for their biopharma sector, which exports high-value drugs such as immunotherapies to U.S. hospitals.
Hospital Supply and Cost Impacts
U.S. hospitals could soon pay significantly more for a range of specialty medications, particularly oncology drugs and injectables that are commonly imported from Australia and other non-European nations. According to Axios, the list of affected products is still evolving, but hospitals should prepare for price hikes across a range of branded therapies.
Pharmacy directors and CFOs should also anticipate ripple effects in the generic drug market, where U.S. manufacturers rely heavily on imported ingredients. Delays and shortages could follow, further straining clinical operations.
While some large health systems may have short-term buffer stock or group purchasing power, smaller and rural hospitals will be disproportionately affected. Increased drug costs without proportional reimbursement adjustments could destabilize already narrow margins.
What Health System Leaders Should Do Now
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Conduct a tariff risk audit: Work with your pharmacy and supply chain teams to identify imported medications and ingredients from countries likely to be affected by new tariffs.
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Engage group purchasing organizations (GPOs): Coordinate with GPOs to explore pooled procurement, risk-sharing agreements, and alternative sourcing options.
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Advocate for reimbursement updates: Engage with CMS, commercial insurers, and Congress to adjust reimbursement models to reflect sudden increases in drug acquisition costs.
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Review contracts and price escalation clauses: Ensure your legal and procurement teams are reviewing vendor contracts to account for tariff-driven pricing volatility.
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Join national advocacy efforts: Partner with organizations like the American Hospital Association (AHA) to voice concern over the downstream impact of these tariffs on patient care and health system sustainability.
Looking Ahead
While the administration argues these tariffs are aimed at strengthening U.S. pharmaceutical independence, health systems may face significant short- and medium-term cost burdens. Unless offset by parallel federal investment in domestic production and timely regulatory approvals for alternative suppliers, hospitals are likely to absorb the financial shock.
The U.S. imported over $80 billion in pharmaceuticals in 2024, according to FirstWord Pharma. With no immediate domestic substitutes for many of these drugs, health systems should act now to mitigate operational and financial disruption.
Hospitals have endured multiple waves of supply chain disruption since 2020. With pharmaceutical tariffs now entering the mix, proactive leadership and strategic preparedness will be essential.
