Who Pays for Tariff Driven Input Cost Increases?

Rohit Tripathi, VP of Industry Strategy, Manufacturing & CPG at RELEX, addresses the question of who ultimately absorbs higher input costs created by tariffs. In a conversation with Pharmaceutical Executive, he explains that this cost is either absorbed by the manufacturer, absorbed by the distributors, or passed on to consumers through insurance companies.

For the generics segment in particular, where margins are already thin, Tripathi identifies passing the cost directly to the consumer as the biggest risk, because manufacturers in that space have little room left to absorb additional costs without making production economically unviable.

He then adds an important qualifier about what counts as domestic manufacturing. Tripathi notes that a drug made domestically only in its final step will still carry dependencies outside the U.S., meaning the tariff exposure does not disappear simply because the last stage of production happens on U.S. soil. Because of this, he cautions against a blanket reaction to tariffs and specifically warns against blanket stockpiling as an immediate response, since that is the immediate reaction that could come in rather than a considered one.

Tripathi closes his point with a clear statement, inventory is just increasing stock, inventory is not the strategy, targeted resilience is the strategy. In his framing, simply building up stock in reaction to tariff uncertainty is not a genuine solution, and can itself introduce new problems given shelf-life and cold chain limitations. The real answer, in his view is targeted resilience planning, accounting for each product's specific constraints, rather than a reflexive, undifferentiated buildup of inventory across the board.