The COVID-19 pandemic has revealed weaknesses in the US healthcare supply chain as the lockdown at Chinese manufacturing plants spills over the shortage of personal protective equipment (PPE) and is also covered in medical products, such as contrast dyes used in CT scans.
The crisis prompted the formation of a committee by the National Academy of Science, Engineering and Medicine, which published its 2022 report at the request of the U.S. Department of Health and Human Services, entitled “Building Resilience in the National Medical Product Supply Chain.”
The report detailed seven key recommendations. These include increased transparency from pharmaceutical and medical device manufacturers and potential vulnerabilities. We award contracts to companies that can demonstrate reliability. Modernize the national stockpile to better deal with shortages. Negotiate multinational treaties to ensure continuous trade in key elements of medical products, even during public health emergencies.
But three years after the report's publication, leaders in the US healthcare sector say the healthcare supply chain remains vulnerable as they support the impact of changes in US trade policies, including rising tariffs that could increase the costs of medical supplies, medical devices and other products used in medical care.
“We have not made any progress in understanding the weaknesses of our supply chain,” said Erin Fox of Pharmd, executive director of shared services at Utah University of Health. “I'm frustrated.”
Generally, the healthcare sector has yet to see dramatic price increases related to tariffs enacted in the first half of 2025. The tariffs, which have been changed several times and changed by country, were blocked by US federal courts in a May 28 ruling, and the Trump administration said it extended its power to implement them. The administration has appealed the decision, saying financial experts could potentially use workarounds to implement tariffs.
“There's so much uncertainty that it's very difficult to plan,” Fox says. “I'll wait a moment and readjust my approach.”
Economic impact braces
One recent industry survey found that 45% of US healthcare organizations have established crisis teams to address current economic uncertainties, and in many of them the plans include renegotiating vendor contracts to mitigate the potential impact of new tariffs on medical supply chains.
Industry leaders are particularly concerned about trade with China, with trade with China being subject to a new 145% tariff, and as negotiations continue, China responded to US goods with 125% taxes on US goods before the country agreed to temporarily lower the tax rate to 30% and 10% respectively.
On May 19, the American Hospital Association (AHA) issued a statement outlined that tariffs could “have a major impact on healthcare.” AHA data analysis found that the US imported more than $75 billion in medical equipment and supplies in 2024.
Medical institutions, including the AHA and Association of American Medical Colleges (AAMC), have urged the government to exempt medications, medical supplies and materials used for medical purposes from customs duties. For example, the US sources 80% of rare earth materials internationally, even if the medical devices that use them are manufactured domestically. For example, half of tungsten, the metal used in linear accelerators that provide radiation therapy, comes from China.
“Our hospitals and healthcare systems members are very adaptable. They constantly evaluate their supply chains to create contingency plans and mix in sourcing of products where possible, but says Demehin, AHA, vice president of MPH. “For academic health centers that provide highly specialized care, their care can be very specific devices or rely on certain types of drugs. Confusion can have a big impact on the care they provide.”
Drugs are currently exempt from tariffs, but President Donald Trump said he plans to enact tariffs with the goal of bringing more manufacturing into the United States. And so far, several major pharmaceutical companies, including Eli Lilly, Roche and Novartis, have committed to investing a total of $100 billion over the next five years to “investment in domestically manufactured after manufacturing overseas).
However, Dr. Tinlong Dye, PhD of Bernard T. Ferrari Business at Johns Hopkins Carry Business School, and global supply chain experts, are skeptical that the healthcare sector can meet its needs through these repurposed investments.
For one thing, the US has acquired many active pharmaceutical ingredients (APIs) from India and the European Union, and he says many important drug categories such as antibiotics are almost exclusively dependent on API APIs. India relies on China for many of the important starting materials to manufacture APIs and supplies the most common drugs. These are the cheapest and most common types of medicines used in the United States.
The drug supply chain often has so many stages in the middle where each company can absorb some of the costs of tariffs, resulting in minimal price increases to what consumers and his colleagues wrote in a paper published in April. For many products, manufacturers are far cheaper to absorb the costs of tariffs than to go through an expensive and laborious regulatory process to boost US manufacturing capabilities. Furthermore, companies do not guarantee how policies will change over the next few years, explaining that key investments are more risky.
“Resilience means rethinking not retreating. To build resilience, you need to remove the illusion that everything should be made in the US,” he says. “There's no way to build manufacturing capacity in the US, not part of a global supply network. Yes, they need to be balanced, but they can't be scaled down to a national system. On the surface of the globe, there's no need to trade self-sufficiently.
Advocating transparency
Fox worries that the healthcare system's limited ability to prepare for potential drug disruptions. This is because the manufacturer and supplier do not need to reveal the ingredients, so they exist from where they are being supplied. Such information is considered a protected trade secret.
“There is a lot of opacity in the pharmaceutical supply chain,” says Fox.
Hospitals and pharmacies may not know if current suppliers rely on raw materials in countries where tariffs are highest. It also means that manufacturers will ultimately stop producing low-cost generic drugs (already low profit margins) that patients rely on. Already, pharmacists have to find workarounds for 270 drugs currently on the American Association of Health System Pharmacists' Association drug shortening list. According to Fox, these can require a long process to find the right alternative to communicate with your doctor or insurance company.
“One of the things that need to be more transparent,” she says. “There is no window where a company has a more reliable manufacturing industry for other companies. All you need to buy is price. You will need a scoring system and you can start a better (manufacturer contract) decision.”
According to the National Rural Health Association (NRHA), tariffs can raise prices and cause disruption across the health sector, but hospitals in rural areas, especially can cause more severe tensions.
“For rural hospitals, these changes can have great results due to less purchasing power, tougher margins, and less flexibility to absorb price increases compared to larger healthcare systems,” NRHA wrote in a recent blog post.
Rural hospitals have struggled for decades. A report from the US Department of Agriculture Economic Research Service found that 146 rural hospitals closed or stopped care for hospitalized patients between 2005 and 2023. Data from the Healthcare Quality and Payment Reform Centre shows that an additional 700 people or a third of the remaining rural hospitals are at risk of closures in the near future.
Similarly, a report from National Public Radio shows that tariff-related price increases could hit independent pharmacies, already facing high operating costs and low insurance reimbursements.
A thoughtful approach to strengthening the supply chain
Premier, a group purchasing organization (GPO), wrote in an April report that “when in effect, it is evaluating new contracts to identify potential risks as a result of tariffs,” but that “the tariffs simply seek clear answers and add stress to model potential impacts.”
Dai says it has advocated a reassessment of medical supply chains that minimizes potential disruptions such as those seen during the Covid-19 pandemic, those caused by wars in Ukraine, and other global events. He supports some of the tariffs to encourage amendments and coastal areas (trade with geographically close countries such as Canada and Mexico). For example, the Biden administration has imposed tariffs on syringes, surgical gloves and other basic medical supplies to boost the production of these supplies in the United States.
“I think what healthcare leaders should do is advocate for lowering barriers and for manufacturers to make it easier for them to build capacity at home,” says Dai.
The Premier Report also argued that while the company is helping new domestic manufacturers enter the market, the US government needs to reinvest tariff revenues to provide tax incentives to domestic manufacturers, promote approval from the US Food and Drug Administration, and develop real-time inventory data management systems.
The problem is that this capacity building could take years, says Dai.
In the meantime, in the short term, price increases and shortages exacerbated by new tariffs could begin to affect the health system in the short term, according to the AHA.
“The long-term goal of strengthening the domestic supply chain to make the supply chain more resilient is the right goal, but it is a complicated and time-consuming transition,” Demehin says. “In the short term, ensuring patients have access to care is our priority.”
