Even as hospitals struggle to keep their spending in check nationwide, a new financial storm is looming. The rising drug costs amid tariffs. Evidence of proposed and existing limits on pharmaceutical tariffs suggests that the U.S. healthcare system will be more susceptible to price surges and drug shortages in 2025.
Most of these tariffs specifically target active pharmaceutical ingredients (APIs) and finished drugs imported mainly by key supplier countries, including India and the European Union members. There are more than 270 drugs in active shortage now. As the global supply chain recovers not only from natural disasters but also from the pandemic, hospital executives are demanding immediate action. Such tariffs may have damaging effects that span various aspects, including patient care and the hospital’s financial stability.
Why Hospitals Are on Edge
The most significant current threat to hospital drug budgets in 2025 is foreshadowed pharmaceutical tariffs. This will affect both finished pharmaceuticals and active pharmaceutical ingredients (APIs). The American Hospital Association (AHA) sounded the same alarm in a May 6 letter to the Commerce Department, urging the preservation of tariff exemptions that would protect patient care due to weak supply chains.
1. Projected Cost Surge
- The growth in drug expenditures is expected to be 2-4% in non-federal hospitals in 2025 (ASHP).
- A 25 percent tariff may impose an additional annual cost of $51 billion on Americans, resulting in a 12.9 % price increase.
- A national survey concluded that 82 percent of healthcare specialists anticipate at least a 15 percent increase in hospital expenses, a condition made probable by a tariff, and 90 percent anticipate procurement gaps that are likely to be affected by a tariff.
2. Supply-Chain Vulnerabilities
- Tariffs on imports from India and the EU—major suppliers of APIs and finished drugs—pose greater disruption than those against China. Even a 10% tariff on essential materials, such as lab supplies, could ripple through to drug production costs.
- Emerging shortages: As of Q1 2025, 270 drugs are already in shortage, including critical IV fluids affected by disruptions such as the Baxter plant shutdown following Hurricane Helene.
3. Tariffs’ Wider Consequences
Beyond increased costs, tariffs may:
- Prompt hoarding behaviors in supply chains, reducing availability and accelerating shortages.
- Force manufacturers like Baxter to absorb or pass on the rising costs of approximately $60–70 million per year.
- Exacerbate specialty drug costs, with Vizient projecting pharmacy spending to rise ~3.8% between July 2025 and June 2026, driven largely by tariffs and inflation.
4. Policy Pushback & Advocacy
- ASHP has urged tailored exemptions for medications and APIs to avert drug shortages and price spikes.
- AHA stresses removing tariff barriers for critical drugs to limit supply chain disruption and uphold patient safety
Final Word
With hospital drug expenditure projected to rise by 2025, healthcare systems can expect tighter budgetary pressure, disruptive procurement strategies, and further growth in drug shortages. Strategies on prescription medication and APIs Tariffs Exemptions need to be preserved. As advocated by ASHP and AHA, to save patient access and to control runaway costs.
