Drug Prices Are Rising. Can Your Supply Chain Hold the Line?

The life sciences sector is feeling the sting of rising tariffs — and patients may soon feel it too. With the U.S. imposing sweeping duties on imports from key partners like China, Mexico, and the EU, the pharmaceutical and medtech industries are under pressure to respond. In 2024 alone, the U.S. imported $200 billion worth of prescription drugs and $41 billion in medical instruments. These global supply chains are now being tested by escalating trade tensions, and the consequences go well beyond boardrooms. 

Margins Are Tight. Tariffs Make Them Tighter. 

For generics manufacturers, many of whom already operate on razor-thin margins, even modest cost increases from tariffs can be devastating. Some may be forced to raise prices — others may have to exit markets altogether. 

Medical device makers are facing similar challenges, with rising input costs likely to ripple through hospitals, insurers, and ultimately to patients. 

What’s more, the shift away from “just-in-time” inventory models to “just-in-case” stockpiling ties up working capital and creates new supply chain headaches. As one example, medtech manufacturers relying on Mexico are now rethinking their assembly lines to avoid 25% duties — rerouting high-cost work back to the U.S. while shifting subassemblies elsewhere. 

Retaliation Risks Can Hurt Exports 

Retaliatory tariffs threaten to choke off U.S. exports of pharmaceutical products, eroding demand and leaving domestic facilities underused. And smaller firms — often without the capital or scale to weather these shocks — may find themselves acquisition targets. For companies engaged in clinical trials, tariffs can stall timelines and force CROs and CDMOs to relocate key activities to different geographies, potentially delaying drug development. 

How Life Sciences Companies Can Respond 

Despite the disruption, life sciences leaders have options. Many are adopting a mix of quick wins and longer-term strategies to stay ahead of the curve. 

Short-Term Moves: 

Run the numbers

A total cost of ownership (TCO) analysis can uncover whether it’s better to absorb a tariff or switch to a higher-priced supplier with better lead times or reliability. 

Adjust inventory

Stockpiling key materials or fast-tracking shipments before tariff deadlines can help maintain continuity — even if it requires tying up capital in the short term. 

Look to Innovate

Work closely with suppliers to find smart workarounds: cost-sharing, consolidated shipments, AI-driven forecasts, or even re-engineered products that qualify for lower tariffs. 

Get creative with customs

Strategies like tariff engineering, valuation optimization, or routing through tariff-friendly jurisdictions can reduce the duty burden. 

Leverage FTZs

Foreign Trade Zones can help defer or eliminate tariffs on goods that are processed, stored, or re-exported before entering the U.S. market. 

Mid-Term Strategy: 

Diversify your geographic footprint

Companies are moving from single-region sourcing to multi-regional models, spreading manufacturing across the Americas, Europe, and Asia-Pacific to avoid overexposure. 

Build supplier redundancy

Multi-sourcing adds flexibility and resilience, particularly for firms heavily reliant on high-tariff countries. 

Invest for adaptability

From co-investing in flexible infrastructure to leasing instead of buying, supply chains built for change will outperform those built solely for cost. 

An Opportunity to Build a More Resilient Future 

While tariffs present a significant challenge, they also offer an opportunity to rethink and future-proof the life sciences supply chain. Greater agility, smarter sourcing, and closer partnerships are not merely crisis responses; they are the fundamental building blocks of a more resilient and cost-effective future. 

So, is your supply chain ready?