The Economic Tug-of-War: How U.S. Tariffs Are Shaping the Healthcare Supply Market

Can you give me some background on Rhino Medical and yourself?

Rhino Medical Supply was founded in response to the COVID-19 pandemic. We got our start on May 7th, 2020, with four founders. We all came from a finance background, having worked at one of the big four banks in the country before branching out to start our own business in the fintech and card payment services sector.

In 2019, we hired someone with 25 years of experience in medical sales. When the COVID pandemic hit, South Carolina, where we are based, faced resource shortages, especially compared to larger states. Local hospitals and facilities started reaching out to their contacts to procure supplies. That’s when we began helping, initially as brokers, to get products into the hands of local facilities.

We knew from the beginning that, even if COVID eventually subsided, we wanted to remain and continue helping these facilities. So, we quickly pivoted, diversifying our offerings to become a full distribution model. By June 2020, we were already working with domestic manufacturers to supply hospitals and doctors’ offices. What’s more, it wasn’t just the healthcare sector that needed PPE; both the public and private sectors were also struggling to get what they needed to reopen. We ended up selling to a wide variety of customers—everything from individual Americans to large corporations, banks, and healthcare facilities.

Over time, we began to see disruptions in the supply chain, particularly around syringes and needles. To address this, we partnered with manufacturers and introduced our own brand to the market. This marked the next phase for us, with two main parts of our business: one focused on distributing products from major manufacturers, and the other on our own in-house brand called ceros.

My background is in finance, and transitioning into healthcare meant a lot of on-the-job learning. I hold a biology degree, and my wife is a pediatrician. Additionally, most of our partners’ spouses are healthcare professionals, mainly pharmacists. We have a strong understanding of the industry and we’ve been able to approach it with fresh ideas. Our size allows us to make quick decisions and adapt rapidly, which I believe has been crucial for our success. We also learn directly from associations that support health industry distributors and from our interactions with hospitals and buyers. It’s essential to keep learning every day.

As the Chief Supply Chain Officer at Rhino, I oversee the entire ceros product line. My role involves everything from product implementation and contracts to working with end-users, group purchasing organizations, and vendors. I also manage the regulatory compliance back to the FDA and ensure that everything is market-ready, including pricing and labeling. This role also includes handling tariff-related issues for the company.

Let’s talk about tariffs. Can you give us a 40,000 ft. view of how the proposed tariffs in the U.S. might affect the healthcare industry?

A common misconception I often hear, especially from the talking heads discussing tariffs, is that when it comes to international trade, the other countries are the ones paying the tariffs. But the reality is, as an American company, we are the ones who pay the tariffs, not the manufacturers in other countries.

We import goods from all over the world and have diversified our portfolio for a few key reasons. One is to ensure that, even in times of global supply chain disruptions, we can still bring products in. But beyond that, diversifying helps us mitigate the impact of tariffs. However, what many people don’t realize is that we, the importer, are the ones who bear the cost of the tariffs—not the manufacturer or the country where the goods are made.

For example, if we import products manufactured in Canada, we’re still responsible for paying any applicable tariffs. Any product that carries a tariff affects our bottom line, not the other country involved in the transaction. This is one area where there’s a lot of confusion, but it’s important to understand that tariffs are a direct cost to us.

The biggest impact, though, is how tariffs make it harder for our company to remain competitive in the market. To cope, we have to raise costs for our end users, which are hospitals and ultimately patients. This means that the cost of healthcare will inevitably rise.

Additionally, supply chain disruptions continue to be a major challenge. As tariffs increase—particularly on syringes and needles, a category that’s already been heavily disrupted—it becomes even harder to secure goods. This only adds more uncertainty to the supply chain and makes procurement more difficult, leading to continued disruptions across the country.

Finally, there’s the issue of market competitiveness. As a small business, we operate with limited resources and capital. When we invest in products and partner with manufacturers to bring them to market, we typically lock in a guaranteed price point through contracts that span several years. Once those contracts are in place, we can’t renegotiate them, which limits our ability to adjust when things change. This creates challenges in maintaining those contracts and makes it harder to win new bids, especially in such a volatile market.

Overall, what we’re likely to see across the market are continued price increases, shortages, and difficulties for providers and hospitals in securing the products they need to deliver patient care.

How would these tariffs affect manufacturers of medical supplies?

It’s definitely a constantly evolving situation. As I mentioned earlier, being a smaller company, we can pivot a bit quicker than some of the larger players in the market, but it still remains a challenge. We've always tried to diversify where we acquire our goods from.

For example, there was a significant crackdown on Chinese-made products, and while some of our goods are still manufactured in China, we decided to explore other options. We began working with European manufacturers, with two facilities in Europe now producing some of our products. This gave us confidence, as we had more diverse sourcing.

Additionally, we started working with a Canadian manufacturer, and we were optimistic about it—thinking there wouldn’t be issues. However, now there's the potential for a 25% tariff on goods coming from Canada, which complicates things. So, while having diverse options is valuable, it's still incredibly challenging because the tariff landscape keeps shifting. Tariffs are sometimes proposed and then delayed, or they only apply to certain products. The unpredictability is causing a lot of confusion in the marketplace.

We don’t know exactly when tariffs will go into effect or if they ever will. Proposals have included a 100% tariff on specific goods from China, a 10% tariff on other Chinese goods, and a 25% tariff on products from Canada and Mexico. There's even talk of a 20% tariff on any goods coming into the U.S. from outside the country.

For industries like manufacturing, it might be easier to reshore production, but for healthcare, it’s much more complicated. The regulatory requirements alone are daunting. Gaining FDA approvals, site certifications, facility inspections, and getting everything compliant can take months or even years. The capital required to establish manufacturing lines in the U.S. is significant, and many companies that have been relying on overseas production can’t just pick up and move.

Overseas facilities have highly skilled labor, robotic manufacturing, and advanced clean room technology that we don’t have in the U.S. To expect companies to reshore production quickly is unrealistic. Even with the tariffs meant to encourage reshoring, it’s a lengthy process.

There's really only one major company that manufactures all of its goods in the United States, and their ability to compete has been affected by this dynamic. The rest of the market is facing significant challenges, and that company’s ability to remain competitive in this environment is becoming increasingly difficult. Meanwhile, they are making investments to strengthen their presence in the U.S. market, but it’s clear that tariffs are creating more competition issues than solutions.

What about providers?

We’ve built strong relationships with many of the Group Purchasing Organizations (GPOs) we work with, and a lot of our communication happens directly with them. They have the ability to quickly share information across the C-suite and decision-makers within the different IDNs they support.

Given all the changes that have occurred, we’ve relied heavily on these GPOs to help disseminate key information. However, we’re facing some challenges, especially since we’re on a contract that ends in September of next year. We’re currently bidding on the next version of that contract, which will go into effect in September and could last for either three or five years. It’s a difficult time to determine where we can offer competitive pricing and fit into the market.

My advice to providers and IDNs is to consider diversifying where they source their products. In our industry, particularly within hypodermics (standard and safety), there aren’t many manufacturers. It’s a limited category, and there’s been heavy reliance on one major player. My goal is for IDNs to differentiate who they work with. This will help mitigate some of the supply chain disruptions, allocations, and backorders that continue to plague the market.

Take, for example, the IV bag shortage that began last October. It was directly caused by the damage from Hurricane Helene at the Baxter plant in North Carolina, and we’re still feeling the effects of that today. It’s mid-February, and the market is still disrupted. Many facilities are adapting their protocols and changing how they use IV bags. For instance, they’re moving away from smaller sizes of IV sets, which increases usage of flush syringes, empty syringes, and needles to administer medications. This has created a domino effect of shortages across several categories.

My primary goal is to reduce the reliance on one manufacturer or supplier. I want IDNs to look at other players in the market—both during these challenging times and in more stable periods—so that the supply chain becomes more resilient and less dependent on any single group.

Any final words of wisdom?

It’s interesting—when the tariffs were first proposed, the U.S. Trade Representative put out a request for information, and I believe they received around 1,000 responses. I read somewhere that it detailed how many responses were submitted and what the status of those responses was. Naturally, we responded, and I submitted our comments on behalf of Rhino, expressing the same concerns I’ve shared with you today: that the tariffs would affect pricing, patient care, and availability in the market. We hoped that enough people would submit similar comments, potentially preventing the tariffs from being implemented.

Unfortunately, things went in the opposite direction. The U.S. Trade Representative reported that a large number of responses argued that the 25% tariffs weren’t enough to offset the companies importing goods into the U.S. and that they weren’t effective in bringing manufacturing back to the U.S. As a result, they decided to increase the tariff to 100% on items in this category.

This is particularly challenging for us because nearly every other manufacturer in our category relies on importing goods. The increase in tariffs forces a direct change in buying habits, affecting which manufacturers we work with and forcing us to make significant adjustments in order to stay competitive moving forward.

Looking at history, we’ve seen instances where large tariffs were introduced with the aim of boosting the economy, encouraging domestic manufacturing, and increasing government revenue. However, in most cases, these tariffs have had the opposite effect—leading to recessions, depressions, and significant economic instability. I truly hope that doesn’t happen this time.

I believe it’s essential for there to be a thorough review of the impact of these tariffs, especially in light of past lessons. Research should be done to assess what these tariffs could mean if they continue to be implemented. Hopefully, some changes can be made, but that’s my final thought.