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US Tariffs and Their Impact on Healthcare and Life Sciences

Read | Jul 04, 2025

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AUTHOR(s)

Swadhin Khawas

Global Head of Solutions, Healthcare and Life Sciences

Key Points

The introduction of US healthcare tariffs is triggering a wave of disruption across the ecosystem, compelling pharma companies, providers and payers to re-assess sourcing, operations and cost structures through a future-ready lens.
From rising input costs to supply shortages, the impact of tariffs on pharmaceuticals and medical devices is accelerating the urgency for digital transformation, operational re-design and regulatory collaboration.
This article explores how organizations can build resilience by embracing diversified sourcing models, AI-enabled tools and strategic partnerships to turn trade disruption into long-term competitive advantage.

The global healthcare landscape is shifting. Recent changes in US trade policy – most notably the introduction of new tariffs – mark a turning point for the industry. With a long-term goal to enhance national resilience, the more immediate implications for the pharmaceutical and healthcare sectors are profound. From rising costs to supply chain disruptions, these short-term impacts cannot be ignored, requiring decisive action from organizations to ensure continuity, affordability and care quality.

Whether diversifying supplier networks, re-designing operations or embracing digital transformation, pivoting quickly and collaboratively will prove integral to winning in this landscape. Here we explore how the proposed tariffs will impact different players, categories and geographies, and outline the strategies that will help organizations thrive with resilience and agility.

The Impact of Tariffs on the Healthcare Ecosystem

While the US administration’s comprehensive tariff strategy has imposed a baseline 10 percent tariff on nearly all imported goods, individual regions and countries face steeper rates, from 20 percent in the European Union through to 145 percent on Chinese imports.¹

Steeper levies have also been placed on imports critical to the pharma and healthcare industries. Key categories impacted include tariffs on active pharmaceutical ingredients (APIs), finished dosage forms and critical medical devices, with levies ranging from 15 to 25 percent² – subject to finalization and potential change with limited warning.

With China facing the heaviest tariffs due to geopolitical tensions, its role as the dominant API supplier is set to significantly drive price increases. Other impactful levies include tariffs on medical devices from Canada and Mexico, generics from India and specialty drug categories from the European Union.

The entry into a newly tariff-driven landscape is already creating significant concerns across the industry. Recent research estimates that the price for basic pharmaceuticals will rise by nearly 5 percent due to reciprocal tariffs.³ And with the pharmaceutical sector highly globalized – ~72 percent of FDA-approved API manufacturing facilities are located outside of the US, for instance – higher costs and their fallout for all stakeholders are either already in play or looming on the near horizon.⁴

Take pharma and medical device organizations. Industry leaders have been quick to warn about the impact of tariffs on profitability, setting the scene for a potentially tumultuous year ahead. Executives at Johnson & Johnson⁵ are preparing for a USD 400 Million dent in the company’s financial forecasts, while tech giant Philips expects to take a hit to the tune of USD 340 Million.⁶

On the healthcare front, meanwhile, organizations are preparing to absorb increased costs. Cardinal Health’s attempts to mitigate the impact of new tariff policies have seen the company reduce headcount and diversify supplier networks, with increased costs between USD 200 and USD 300 Million expected.⁷

The thinking behind such immediate actions being taken by providers echoes the sentiments of the wider healthcare industry. A significant 82 percent of healthcare experts expect tariff-related expenses to raise hospital costs by at least 15 percent over the next 6 months – costs that nine in 10 hospital finance executives expect to shift in some way onto insurers and patients.^8,9

Looking ahead, pressures could spur healthcare providers to explore strategic partnership opportunities, driving down costs while seamlessly tapping into the expertise and capabilities of third-parties. Areas like Revenue Cycle Management (RCM) are a case in point, with a direct link to both revenue and cost and an opportunity to re-direct crucial talent to profit-driven, value-based care. Similarly, re-imagined utilization management strategies could help offset costs through improved payer-provider collaboration, driving new standards across the value chain.

Here’s how, why and where different segments will be impacted at a glance:

Pharma: Increased prices and trade disruptions for the pharmaceutical sector will limit the ability of drug manufacturers to produce critical drugs.

APIs and intermediates look set for the biggest disruption, with affected categories including beta-lactam antibiotics, statins and immunosuppressants. Finished drug products – including generics for diabetes and pain relief – will also be subject to tariffs, with 83 of the top 100 generic drugs in the US currently lacking a local source for their APIs.¹⁰
Medical Device Manufacturers: Higher production costs for medical devices will see manufacturers operating in a landscape of growing financial pressure and supply chain complexity.

Production of tools for diagnostic imaging, surgical tools and point-of-care diagnostics will come under significant pressure in particular, with the potential to drive up costs for the industry or create shortages as alternative suppliers are sought.
Healthcare Providers: As well as absorbing the likely increased costs of drugs, healthcare providers will also be impacted by tariffs on medical devices, shortages of which could disrupt patient care.

At the same time, tariffs may lead to delayed deliveries and shortages of essential supplies, especially in smaller rural or non-profit hospitals, impacting care quality. Healthcare employees are experiencing the fallout too, with recent research revealing that tariff-driven supply chain disruptions have complicated wellbeing initiatives for 55 percent of healthcare organizations.¹¹
Payers: Payer behavior must adapt to a more cost-sensitive landscape as the impact of tariff-driven price increases ripples through the healthcare ecosystem. Focus will shift toward realizing short-term efficiencies as payers streamline operations.

Partnership dynamics will also push payers who rely on single offshore locations to explore re-imagined sourcing models, with vendor footprints undergoing similar assessments. Pharmacy Benefit Managers (PBM), meanwhile, will come under increased pressure, with a volatile landscape making negotiations more difficult.
Patients: The impact of tariffs placing added pressure on the industry will trickle down to payers and then patients, with knock-on effects including paying more for prescriptions or facing drug shortages.¹²

The short-term barriers to access and quality of care could also be joined by longer-term impacts on healthcare innovation, stagnating progress toward patient-centricity and value-based care.

Navigating the Tariff-driven Healthcare Landscape

As the impact of the US administration’s tariffs reverberates across the healthcare ecosystem, an already complex landscape is becoming even harder to navigate. However, as well as a moment of reckoning, it also represents an opportunity to build resilience and re-think how value is created. The right strategies can enable organizations to navigate near-term disruption while positioning for long-term success.

Building Operational Resilience: The first step toward building operational resilience in 2025 requires organizations to continue to invest in and transform the healthcare supply chain and how it operates. Supply chain diversification is one such approach, with future-facing companies looking to establish secondary sourcing hubs in countries like Mexico, Brazil and Vietnam. Domestic investment represents another smart move for US-based pharma companies, able to utilize government grants and tax incentives under the Domestic Production Act to build or local facilities.

Hospitals and healthcare providers, meanwhile, should seek to embark on greater collaboration, with expanded participation in Group Purchasing Organizations (GPO) enhancing collective bargaining power. This could prove crucial over the next 12 months as organizations search for greater efficiencies.
Driving Digital Transformation: Digital transformation will also prove integral to navigating the challenges of 2025. For pharma companies, leveraging AI and blockchain for supply chain transparency, demand forecasting and vendor risk management can provide the holistic view required to harness disruption. Similarly, hospitals that adopt AI-based inventory and procurement software can achieve the same foresight, anticipating shortages and optimizing stock levels.

More generally, healthcare organizations can also weather financial pressures through ongoing digital transformation efforts like AI-powered RCM, with efficiencies integral: 94 percent of healthcare administrators say tariffs mean they will need to reduce procurement volumes or delay equipment upgrades.¹³ Looking ahead, this lays a foundation to embrace developments like the transformative power of Generative AI (Gen AI), enhancing patient experience when it is most needed.

Digital transformation also brings the industry closer to achieving true ‘digital twin’ status, with organizations able to plan or prepare for disruption through digital models of the entire value chain that replicate and predict system dynamics. This can empower decision-making and enable the industry to understand the impact of a tariff, policy or decision, whether top-down or bottom-up, before it is made.
Pre-empting Policy and Regulatory Shifts: Thriving in a tariff-driven landscape will also require a new era of regulatory collaboration. Forced to shift sourcing strategies and production methods at speed, pharma companies should seek to work closely with organizations like the FDA on accelerated approvals for alternative suppliers and ingredients.

Meanwhile, in a policy environment shaped by growing protectionism and economic nationalism, collaboration with the likes of the American Healthcare Association (AHA) and the American Medical Association (AMA) can empower moves to push for tariff exemptions on critical medicines and devices.

The Road Ahead: Thriving Through Decisive Collaboration

While the rationale behind the imposition of tariffs is rooted in strategic autonomy and economic security, short-term disruptions cannot be ignored. Pharma companies and hospitals must act decisively – re-imagining operations, investing in digital tools and brokering new collaborative relationships – to deliver patient-centric care.

Identifying the right partners in this collaborative era will prove critical for organizations seeking to pivot quickly, operate efficiently and build all-new resilience. In doing so, companies can access the digital tools, insights-driven solutions and domain excellence required to continue to improve people’s wellbeing during tumultuous times.

Ready to re-think operations in a tariff-driven world? Discover how we enable smarter, future-ready healthcare and life sciences organizations. Connect with our experts.