By: Brady Bizarro, Esq.

As the self-insurance industry braces for potential changes under President Trump’s administration, one issue looms large: impending tariffs on pharmaceutical drugs. These proposed tariffs, aimed at boosting domestic manufacturing, could ripple through the healthcare ecosystem, affecting employers sponsoring self-funded health plans, third-party administrators (TPAs), stop-loss carriers, brokers, and vendors. For an industry built on balancing cost control with quality care, understanding these impacts and preparing strategically is critical. More importantly, as we navigate these changes, we must remain steadfast in our commitment to ensuring that our members get access to quality, affordable prescription drugs.

President Trump has signaled plans to impose “major” tariffs on pharmaceutical imports, with the goal of incentivizing drug companies to relocate manufacturing to the U.S. While pharmaceuticals were initially exempt from his recent reciprocal tariffs, which included a baseline 10% on most imports and higher rates for countries like China and the European Union (EU), the administration has made it clear that drug-specific tariffs are on the horizon. These could range from 20% to 25% or higher, targeting the global supply chain that delivers roughly $213 billion in medicines to the U.S. annually.

For self-funded health plans, the implications are multifaceted. First, most obviously, tariffs could increase the price of imported drugs, particularly generics, which make up about 90% of U.S. prescriptions. Countries like India, which supply nearly half of America’s generics, may pass these costs on, raising expenses for plan sponsors and members. Even drugs manufactured domestically could see price hikes if they rely on imported active pharmaceutical ingredients (APIs), with China and India dominating this market. In addition, the threat of tariffs has already prompted some companies to stockpile drugs or shift to air transport, signaling potential shortages. For self-funded plans, shortages could limit access to critical medications, complicating care management and increasing reliance on costlier alternatives.

There will be other impacts as well. Higher drug prices would likely translate to increased premiums for employers and higher out-of-pocket costs for employees. For TPAs and brokers, this could mean tougher negotiations with plan sponsors seeking to maintain affordability without sacrificing coverage. Rising drug costs and potential specialty medication shortages could elevate claims volatility, prompting stop-loss carriers to adjust premiums or tighten underwriting criteria. This could squeeze smaller employers, who rely on stop-loss coverage to manage catastrophic claims. Pharmacy benefit managers (PBMs) and other vendors may face margin pressures if tariffs shrink their negotiating leverage with manufacturers. This could lead to revised contracts or service models, affecting the broader self-insurance ecosystem.

These challenges underscore a broader truth: when healthcare costs rise, it’s not just balance sheets that suffer - it’s the hard-working Americans who rely on these plans for their families’ well-being. A tariff-driven price hike could mean a factory worker in Ohio skips a refill to cover rent, or a teacher in Texas delays treatment to afford school supplies for her kids. Our industry has a responsibility to mitigate these impacts, ensuring that access to life-saving medications remains within reach for all.

While the full scope of the tariffs remains uncertain, proactive measures can help self-funded health plan stakeholders navigate this landscape and uphold affordability. TPAs and brokers can leverage predictive analytics to model tariff-related cost increases. By analyzing drug utilization trends and identifying high-cost therapies, stakeholders can advise employers on budget adjustments or benefit design tweaks, such as tiered formularies, to cushion the blow. Similarly, vendors and PBMs can explore relationships with domestic manufacturers or alternative international suppliers less exposed to tariffs. While shifting production entirely to the U.S. may take years (industry estimates suggest 5-10 years and $2 billion per facility), diversifying now can reduce reliance on vulnerable markets like China or India, stabilizing supply for plan members.

Brokers and TPAs play a pivotal role in educating employers and members about potential changes. Providing information about generic drug options, therapeutic alternatives, or patient assistance programs can help members stretch their dollars. This not only mitigates cost increases but also reinforces our shared goal of providing plan members with access to the care they need without financial strain.

Finally, the self-insurance industry has a powerful voice. We should collaborate with our industry representatives (the Self-Insurance Institute of America (SIIA)) to advocate for phased tariff implementation or exemptions for essential, lifesaving drugs. Highlighting the human toll - how tariffs could limit access for low-income workers or rural communities - can shape policy to prioritize patient outcomes over short-term trade goals.`