Tariffs to Raise Healthcare Supply Chain Costs, Premier Says

June 19, 2018 - The Trump Administration’s recent move to impose tariffs on goods imported from China could have a serious impact on healthcare supply chains, healthcare improvement company Premier Inc. said in a statement.

“Premier is extremely disappointed with the administration’s plans to move ahead with a 25 percent added tariff on medical/surgical products imported from China,” Premier’s Senior Vice President of Public Affairs Blair Childs stated.

“Increased supply costs will apply additional fiscal pressures on hospitals’ already strained budgets during a time in which they are making critical long-term investments in care improvements. It’s a step backward in our nation’s efforts to curb healthcare costs and spending.”

President Trump announced in May 2018 that US would move forward with an additional 25 percent duty on about $50 billion worth of Chinese imports starting next month.  He directed the Office of the United States Trade Representative (USTR) to identify products that would be affected by the additional duty.

The Trump Administration aims to protect American intellectual property and boost the nation’s industries by imposing the tariff on products included on an initial list containing 818 separate US tariff lines by July 6, 2018, the USTR recently announced. This first list covers about $34 billion worth of imports from China.

The USTR will also consider applying the 25 percent duty to products covered on another list. The second list contains another 284 separate US tariff lines, covering approximately $16 billion worth of imports from China.

These lists primarily center on products from industrial sectors that “contribute to or benefit from” the “Made in China 2025” policy, which is a 2015 strategic plan in China to modernize the country’s industry. The industry sectors affected by China’s plan and the new US tariffs include aerospace, information and communications technology, robotics, industrial machinery, new materials, and automobiles, the USTR reported.

While healthcare was not specifically mentioned, healthcare supply chains depend on Chinese imports for items such as sterilization tools and imaging equipment. Chinese imports used in healthcare supply chains that are targeted by the first list of US tariffs include:

• Parts of certain medical, surgical or laboratory sterilizers, nesoi (not elsewhere specified or included)
• Ultrasonic scanning electro-diagnostic apparatus used in medical, surgical, dental or veterinary sciences
• Magnetic resonance imaging electro-diagnostic apparatus used in medical, surgical, dental or veterinary sciences
• Scintigraphic electro-diagnostic apparatus used in medical, surgical, dental or veterinary sciences
• Ultraviolet or infrared ray apparatus used in medical, surgical, dental or veterinary sciences, and parts and accessories thereof
• Optical instruments and appliances nesoi, used in medical, surgical, dental or veterinary sciences, and parts and accessories thereof
• Anesthetic instruments and appliances nesoi, used in medical, surgical, dental or veterinary sciences, and parts and accessories thereof
• Electro-medical instruments and appliances nesoi, and parts and accessories thereof
• Apparatus based on the use of X-rays for medical, surgical or veterinary uses (other than computed tomography apparatus)
• Apparatus based on the use of alpha, beta or gamma radiations, for medical, surgical, dental or veterinary use

With several healthcare supplies landing themselves on the list of goods impacted by the tariff, Premier expressed concerns that provider organizations would be shouldering the financial burden.

“We know the added cost of the tariff will be passed on to healthcare providers,” Childs explained. “And since providers operate on fixed, contracted prices, this is an assault on an industry that is already facing dire financial strains, with margins at a 10-year low of -9.6 percent – lower than levels seen during the last recession.”

In light of such concerns, the USTR also announced that it will “soon provide an opportunity for the public to request the exclusion of particular products from the additional duties subject to this action.” The office will issue a notice in the Federal Register with information on the exclusion process “within the next few weeks.”

But provider organizations may face greater healthcare supply chain challenges as the trade war heats up. China has threatened to impose retaliatory tariffs on American goods, which has prompted the Trump Administration to propose additional tariffs on another $200 billion worth of Chinese goods, news sources reported.

More healthcare supply chain items could end up on the list of products affected by US tariffs in the coming weeks.