Pharmaceutical Tariffs Won’t Cure Ailing Small Businesses

“The new pharmaceutical tariff announced yesterday is not the Rx needed to reduce the high cost of healthcare for small businesses. After payroll, health insurance is the highest expense for most small firms. There’s no doubt that the ever-rising cost of prescription drugs is already a big driver of the skyrocketing costs of healthcare, and very high tariffs on pharmaceuticals will only exacerbate an already bad situation for small businesses.

It’s no surprise that our research found 60% of small businesses that offer health coverage to their employees reported that the cost of prescription drug copays has increased in recent years. The rising cost of medications along with insurance premiums and medical care have forced many entrepreneurs to make changes to their healthcare offerings including increasing employee contributions to health plans, shifting to an insurance plan offering more limited coverage and cutting other employee benefits.

The timing of these latest tariffs could not be worse. Congress recently passed the One Big Beautiful Bill Act, which drastically increased the deficit and made significant cuts to Medicaid. This is potentially catastrophic for small firms. An analysis from Small Business Majority and Georgetown University found that one-third of all people enrolled in Medicaid nationwide are connected to small businesses. In total, more than 21 million small business owners, employees and their dependents rely on Medicaid for affordable healthcare coverage, and in 2023, nearly half of working Medicaid recipients were employed at small businesses with fewer than 50 employees. Meanwhile, Congress is also facing a rapidly approaching deadline to renew enhanced premium tax credits that have made monthly health insurance premiums for plans purchased through the Affordable Care (ACA) Marketplace significantly more affordable for small businesses nationwide. If those tax credits are allowed to expire at the end of this year, many small business owners would see their health insurance premiums double – or more – overnight. Since more than half of all ACA Marketplace enrollees are small business owners, self-employed entrepreneurs or small business employees, that increase would force a significant percentage of small business owners to reduce their coverage or drop insurance entirely as a result.

Pharmaceutical tariffs will likely cause a drastic spike in the cost of some prescription drugs, including medications that save lives. Small business owners can’t simply wait around for drug makers to begin manufacturing more medicines in the United States. Instead, small businesses already straining under the weight of other tariffs and high healthcare costs will be compelled to further reduce their health benefit offerings. If that happens, we may see an exodus of employees away from small businesses, and a wave of small business owners who go work for someone else – all just to have access to affordable health insurance. None of those outcomes would benefit the U.S. economy as a whole, and we implore policymakers to reconsider plans to tax imported medications.”