Credit: Alexander Raths/Shutterstock
Any new federal prescription drug "tariffs," or import taxes, will hit commercial plans harder than they hit Medicare or Medicaid, according to a health policy economist at the Brookings Institution.
The economist, Marta Wosińska, predicts in a new paper that extra import taxes would increase plan spending more for spending on drugs with little competition and drugs with narrow rebates.
Recommended For You
She writes about the impact of the taxes on plans' short-term drug price trends as part of a look at how likely the tariffs are to lead to a resurgence in drug manufacturing in the United States.
The impact of new tariffs "would depend in large part on whether tariffs are expanded to drugs coming from Europe and India," Wosińska writes.
Related: Drugmakers lobby for gradual tariff implementation to avoid immediate shock
She notes that commercial plans could face bigger drug price increases than Medicare or Medicaid, because commercial plans face fewer legal protections against price increases, and drugs already account for a much higher share of spending at commercial plans than at public health programs.
The tariffs: The Trump administration kept pharmaceutical imports out of the big wave of tariff increases announced Wednesday. But the administration said it will likely conduct a "Section 232" national security investigation, which could still lead to new tariffs on pharmaceutical imports.
"The pharmaceutical companies are going to come roaring back," Trump said during a briefing on the new tariffs. "They're coming roaring back. If they don't, they've got a big tax to pay."
The pricing backdrop: A drug rebate agreement lets a patient, employer, insurance company or pharmacy benefit manager get some of the money a health plan spends on prescription drugs back from the manufacturer, the wholesaler or some other party.
Current federal law effectively caps increases in what prescription drug sellers can charge Medicare and Medicaid to the Consumer Price Index inflation rate.
Current employer plan drug costs: Prescription drug spending now averages about $1,400 per year for a participant in a typical employer-sponsored health plan, according to Milliman.
Mercer predicted in September that employers' prescription spending would increase 7% this year.
How drug prices could change: The limit on drug price increases imposed on public health programs will push drug sellers to compensate for any new tariffs by cutting the size of rebates rather than by increasing list prices, Wosińska writes.
But, when a hot new drug or a hard-to-make drug has little competition, "rebates are low, so increasing list prices is the only way to pass through the tariff," the economist writes.
One force protecting employer plans from sudden, tariff-related spikes in cost could be the calendar.
"Commercial plans will have limited protection through the end of the year, when their pharmacy contracts and rebate agreements expire," Wosińska says.
She says another force protecting plans could be drug manufacturers' and distributors' concerns about their public image.
"Political considerations can limit manufacturers' willingness to increase prices," she says.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Allison Bell
Allison Bell, a senior reporter at ThinkAdvisor and BenefitsPRO, previously was an associate editor at National Underwriter Life & Health. She has a bachelor's degree in economics from Washington University in St. Louis and a master's degree in journalism from the Medill School of Journalism at Northwestern University. She can be reached through X at @Think_Allison.
