Pharmaceutical supply chains are no strangers to disruption – but recent events have added a new layer of uncertainty. A US Supreme Court ruling overturning tariffs imposed under emergency powers has left companies navigating a confusing compliance environment, even as existing duties remain in place. At the same time, rising geopolitical tensions – from trade disputes to conflict in the Middle East – are driving up costs, delaying clinical trials, and forcing companies to rethink where and how they operate.
In this conversation, Dan Bell, chief strategy officer at Marken and a licensed US customs broker with more than 25 years of experience in life science logistics, explains how companies are responding – balancing compliance, cost, and continuity while ensuring critical therapies continue to reach patients.
To start, could you briefly explain the recent US Supreme Court decision around tariffs, and what it means in practical terms for pharmaceutical companies and their supply chains?
The court ruled that the US President does not have the authority under the International Emergency Economic Powers Act (IEEPA) to impose tariffs. The executive branch does have emergency powers, but not to unilaterally levy taxes. Specifically, Judge Roberts mentioned the separation of powers regarding revenue and taxation: “The Constitution ensures that only the House can ‘propose the supplies requisite for the support of government’ by initiating ‘Bills for raising Revenue.’” Clearly stated, the US President overstepped his position by creating blanket tariffs on items and regions.
This leaves many issues to be worked out, and pharma is having a particularly challenging time given its highly integrated global networks. Then there are currently valid tariffs, like those imposed under Section 122 and Section 301, intended to address balance of payment deficits invoked in 150-day cycles. This demands advanced scenario planning to adapt to the cost fluctuations. It is vital to remain operationally agile to navigate a fragmented and rapidly shifting regulatory landscape.
Regulators have standard processes for petitions or appeals, but in the current unusual situation, there has not been any clearly defined process on how to reclaim losses due to the recent tariff ruling. On the one hand, you have the US Government that knows all the information about these past payments, and on the other you have organizations who must calculate the differences without readily available clear information. But, crucially, this does not mean we can’t take action.
What kind of uncertainty has this ruling created for companies moving products into and out of the US, particularly in the short term?
For starters, there is not a solid plan for what is happening between the different agencies of the US Government. Pharma companies can’t clearly define their budget for things like transportation costs. They also cannot create an accurate mark-up for final pricing. Clinical trial costs cannot be accurately forecasted, impacting research and preventing the efficient startup of new trials.
Marken has been busy assisting customers. At this moment, companies are reviewing their contingencies, business continuity plans, drug supply networks, and capacity. Many are also securing stock of key ingredients, reviewing capacity within the supply chain for carriers, and revisiting their costs.
Our bonded warehouses are a strategic advantage, if you know in six months you need to have product brought into the US, you may not want to have customs clear it now, but clear it in the future. These bonded warehouses are here to hold and properly store products at strict environmental conditions.
The notion of proactively procuring and positioning products is an imperative for companies, since fuel charges are likely to continue to go up due to the conflict in the Middle East. This erratic situation translates to increasingly limited flight options, and many will want to stage products closer to their destination.
In practical terms, how are logistics and supply chain teams managing this lack of clarity in the current regulatory compliance environment?
First, an organization must determine how products were impacted, and whether certain tariffs were applied. Right now, we are in a high stakes, granular audit-and-adapt scenario – reviewing HTS codes to determine which categories fall under the now overturned tariffs and those that still fall within other valid duties like “Section 301.”
Second, even after overturning the IEEPA tariffs, companies should understand what the impact of still existing tariffs will be on their business. It is important to search for exemptions or any special treatments to help mitigate the bottom line.
Finally, if a company has paid any tariffs now overturned, they need to contact a broker immediately to begin the process for a refund. This cannot be understated. You do not want to miss out on any reimbursement.
Historically, the method of claiming wrongfully charged or erroneous duties was through a “protest,” which are submitted within a standard window of 180 days. Once this time has closed you can no longer submit, creating an erroneous benchmark for items in the distant past that are due a refund. We are waiting to see how this situation is reconciled.
More broadly, are we seeing companies rethink where they manufacture, or launch clinical trials because of this kind of policy volatility?
Of course. Companies are taking a serious look at their business plans and considering the financial impact, because they do not know what to expect. It is difficult to forecast costs and final pricing. Some companies are assessing feasibility for launching a clinical trial in the US. Others have already planned to launch their clinical trials outside the US or delay a start with US cohorts until there is better clarity.
There are also considerations for the lifecycle of the product; does the pharma manufacturer need to charge more to make up for the price increase from future tariff issues – or from accrued costs due to the Iran conflict?
How do events like the war in Iran factor into pharmaceutical supply chain planning and risk management?
The implications of the tariffs and the war in Iran are numerous. The biggest impact is the cost that will diffuse throughout the global industry. We can also expect delays for the launch of clinical trials.
Another consideration is supply shortages along with the rising costs in all areas. Even a lot of things most don’t consider, like ancillary materials for clinical trials. When aluminum costs rise, think about how this affects packaging. What about costs of deriving products and local transportation infrastructure? Companies will see an increase in costs across the board.
Looking ahead, what does this moment reveal about the resilience – or fragility – of current pharmaceutical supply chains?
Pharmaceutical logistics has always been a complex endeavor. We always are working to mitigate disruption, because in many cases, the life of a patient is on the line. There are shipments with zero-tolerance for error, and since the advent of personalized medicine, many treatments carry an extremely high value for a single dose. Therefore it is our goal to be exemplary at preparing contingencies and getting medical products where they are needed.
When the war in Ukraine started, we were supporting clinical trials in that country, and they continued despite the hazards. Last year when missiles were flying between Iran and Israel, we were still able to get critical therapies in and out of dangerous areas.
No matter the disruption – it might be weather, a pandemic, or even a volcano that shuts down airspace – we have a tremendous network of resources and expertise to deliver what matters.
All it takes is an emergency to throw us into action. We remain proactive and on top of events we know are going to impact logistics. The pharma industry, of its own accord and regulatory discretion, has always had an eye for looking over supply chain complexity and continuity. You must have a backup plan, now more than ever.