How will proposed Trump, China tariffs affect medtech and healthcare? 5 key thoughts

Written by Laura Dyrda | April 23, 2018 | Print  |

After the Trump administration announced new tariffs on imported steel and aluminum, other countries are deciding how to respond. The Trump administration received a list of Chinese products and ingredients that could be subject to 25 percent tariffs on April 3, according to The New York Times.

There were around 1,300 tariff lines listed with an estimated combined value of $50 billion. Stocks of drug manufacturers stayed composed, but medical device companies saw stocks fall after the announcement.

Here are thoughts from five individuals in the healthcare medtech and pharmaceutical space on key trends to watch as the tariff controversy brews.

Edward John Allera. Shareholder at Buchanan Ingersoll and Rooney – Co-chair of the firm's FDA group: "For medical devices, the issue is unclear. Rare metals are normally a small portion of medical devices and costs of goods. A special statue protects certain suppliers so that the small amounts of these components do not subject the suppliers to disproportionate risk, of liability — e.g. polymer coatings on heart devices — and preclude anyone from supplying the industry and killing off research.

For these reasons, the impact that these tariffs will have on the cost of metals is unclear. For pharmaceuticals, the impact could be greater because extensive amounts of the active pharmaceutical ingredients used in finished drug products come from abroad for generic drug, i.e. those whose patents have expired. Greater than 85 percent of the units of pharmaceutical products are generic drugs, and 70 percent of the API comes from Asia, e.g. India and China. The industry is deflationary, and the competition is ruthless. Any cost increases could have an impact."

Danielle Hannah. Owner and Inventor of Mantra Magnets: "I am the inventor of a biomedical device that naturally relieves anxiety. Unfortunately for us, we import all of our manufacturing products from China. These tariffs will substantially hurt our business and inevitably prevent us from helping those who need it. We will most likely have to raise our prices, which is not good for our clients."

Barbara A. Binzak Blumenfeld, PhD, JD. Shareholder at Buchanan Ingersoll and Rooney – FDA & Biotechnology: "Under the Biomaterials Access Assurance Act of 1998 there are legal protections in place to ensure that implantable lifesaving and life-enhancing medical devices remain available to the public. This act protects biomaterial suppliers of raw materials and components of such devices by limiting their liability should an issue arise with the medical device. This further proves that President Trump's tariffs will not immediately affect biomaterial suppliers because of the exemptions and protections put in place established by the act itself."

Steven Shill. Assurance Partner and National Leader of The BDO Center for Healthcare Excellence & Innovation: "Many hospitals use cost-effective supplies manufactured in China. A trade war will likely increase the costs of these supplies, which could result in reduced profit margins for healthcare entities. For healthcare organizations, this warrants a careful re-evaluation of their supply chain and financial contingency plans, especially for non-profit entities that face increased financial risk from other sides.

China's healthcare manufacturing sector is still somewhat catching up when it comes to more complex medical devices and pharmaceuticals. Other countries, including Israel and India, are more advanced in this sector. So the impact may not be as big as some people predict."

Ron Prybella. Senior Director of Marketing for Medegen Medical Products: "Tariffs are the popular topic of the day. I’ve had many e-mails asking similar questions. The international picture changes by the second as different groups posture. The China example is one of those.

There are no specifics or date of implementation. [My] current position is this would impact imports into China but I anticipate that it is in preparation for tariffs on Chinese goods coming into the U.S. that Trump would impose. Steel is active now and may have an effect on the stainless steel part of our contract. Although our products are manufactured in the U.S., it may impact raw material cost directly or indirectly. The tariffs on imported medical products add another complexity as there would be requests to adjust Medicare and Medicaid reimbursement to compensate for price increases which would then be paid by the government. In a sense, it's applying a tariff that the government would pay to itself.

Ultimately it is about what really gets implemented versus used for negotiation. Steel again is a good example. South Korea is now exempt from the steel tariff in exchange for limiting their shipments to 70 percent of the last three year levels; this limits the impact it could have on price but would impact the supply side."

More articles on healthcare:
15 orthopedic, spine device companies that may be affected by Trump's 25% tariff proposal
Trump's tariffs could cost medical device industry $1.5 billion annually

 

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