The health care and life sciences industries could be facing significant changes under a second Trump administration.
From the prospect of new tariffs to the likelihood that the BIOSECURE Act will be enacted, companies are scrambling to adjust to what could be a changed operating environment.
Already, the prospect of higher tariffs is weighing heavily on executives, given that President-elect Donald Trump favors the use of tariffs to deal with a variety of policy issues. Mentions of tariffs skyrocketed in November earnings calls hosted by companies in the S&P 500.
Source: RSM US LLP, Bloomberg LP (data AI-powered)
Then there is the BIOSECURE Act, which has bipartisan support but has not been passed by Congress.
The legislation would prohibit U.S. businesses that receive federal funds from dealing with companies that are considered a risk to U.S. national security.
The act has a phase-out period of seven years, but it would have a significant impact on the supply chains of many businesses in the health care and life sciences industries.
For the 10 largest medtech companies in the United States, more than half of their suppliers are based outside of the U.S., with 8% of those supplier locations in China.
To ensure they can retain appropriate margins, medtech companies with Chinese suppliers may need to pass off any increased tariff costs to customers or shift the sourcing closer to home.
Source: RSM US LLP, Bloomberg LP
For U.S. publicly traded health systems, the exposure to offshore supplier facilities is significant, with 49% and 18% of these facilities residing in China.
Source: RSM US LLP, Bloomberg LP
New tariffs could also pose a challenge for health systems that negotiate fixed reimbursement rates annually with government and commercial payers.
These fixed payments limit health systems’ ability to directly pass on increased costs to consumers. Supply expenses account for 13% of total health care costs.
The U.S. imported $224 billion worth of medical equipment and pharmaceutical preparations through September this year, a 16% increase from the same period in 2023, according to the U.S. Census Bureau.
The takeaway
Already in 2024, the Biden administration added a 50% tariff on syringes and needles and 25% tariff on certain personal protective equipment imported from China. Additional tariffs could impose higher costs for exposed companies purchasing these supplies in certain geographical locations.
As costs rise rapidly and tariff uncertainties loom, health care and life sciences organizations should look to adopt advanced supply chain intelligence tools to mitigate potential supply cost challenges.
For more on this topic, read: To contend with higher tariffs, businesses need to act now and Effective tariff planning for a second Trump administration.
