The U.S. leads the world in pharmaceutical innovation, yet a handful of critical drugs the U.S. relies on now come almost entirely from abroad. As global tensions rise, dependence on any single nation for essential ingredients carries real risks. The challenge is finding a path that protects patients without sacrificing affordability or access.
The U.S. pharmaceutical market is strong. Over half of all active pharmaceutical ingredients (APIs) used domestically are produced in the U.S., which is also the third-largest exporter of pharmaceuticals in the world. Thirty-three states and Puerto Rico have at least 10 pharmaceutical manufacturing plants, and four—California, New Jersey, New York, and Pennsylvania—each have more than one hundred. The vast majority of medicines used in the U.S. are produced by the U.S. or allies.
However, a few drugs have become either wholly or largely supplied by one country: China. The APIs capreomycin and streptomycin—used to treat tuberculosis—as well as sulfadiazine—a treatment for infections—are produced exclusively by Chinese companies. China also produces 95 percent of U.S. Ibuprofen imports, 91 percent of hydrocortisone, 70 percent of acetaminophen, and 45 percent of penicillin.
China exports low-cost bulk medicines—mostly generics—that cannot be made as cheaply in the U.S. In 2023, pharmaceutical imports from China totaled 217 million kg, representing 31.5 percent of all U.S. pharmaceutical imports, worth a total of $7.8 billion. Although the U.S. exported fewer medicines to China, they were higher-value products, worth $9.9 billion.
Some organizations such as the Reshoring Initiative have proposed onshoring generic drug manufacturing. The major problem is that the U.S. is not an ideal location for producing low-margin generics. These medicines yield very little profit per pill, and higher American labor costs would require price increases that undermine the very purpose of generics. Certain barriers can be reduced—like allowing immediate full expensing of capital investments—but large-scale domestic production remains unlikely.
In an attempt to address this, the Coalition for a Prosperous America proposed treating generic imports like sugar imports—applying variable tariffs and import quotas. The only thing that can be said in defense of this idea is that sugar and generic drugs share one trait: the U.S. far from the best place to produce either. Sugar tariffs and quotas are widely recognized to double U.S. sugar prices, something no patient wants to face when buying their medicines.
Tariffs are a tax on consumers—in this case patients seeking medicine—and quotas would only create shortages. Higher prices and reduced supply mean more Americans skipping doses or forgoing prescriptions altogether. If we are worried foreign governments could withhold medicines from Americans, we certainly should not impose policies that would do the same to ourselves—especially when they would fall hardest on those least able to pay.
Instead of focusing on onshoring all drug production, the U.S. should adopt a targeted approach by incentivizing companies to diversify overseas pharmaceutical manufacturing and building a strategic reserve of critical drugs and APIs that depend on a single source.
If pharmaceutical companies distribute production more widely, neither natural disasters nor political tensions could jeopardize U.S. drug supplies. While this may raise costs slightly as compared to producing in China, the differences is far smaller than the cost of U.S. production, minimizing the impact on patient prices.
A balanced strategy can safeguard both affordability and security. By spreading production across trusted partners and stockpiling essential medicines, the U.S. can protect patients from foreign disruptions without driving up costs. This approach preserves the benefits of open trade while reducing risk. It strengthens national security while protecting patients and keeps medicines available while also keeping them affordable.
Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on X @ConsumerPal.