The announcement of the tariff policy on pharmaceuticals, promised by U.S. President Donald Trump, is just a day away. Consequently, the domestic pharmaceutical and biotech industry is on high alert. In particular, companies like Samsung Bioepis, Celltrion, and SK Biopharm, which have a high proportion of sales in the U.S., have begun preemptive measures. Given that the U.S. is the largest export market for domestic pharmaceuticals, the imposition of tariffs is expected to have an inevitable impact on the local industry.
◇Trump: 'Pharmaceutical companies back to America'
The tariff bomb initiated by Trump has expanded globally based on the policy of 'America First' to cover all countries following Canada, Mexico, and China, which are the three major trading partners. Following tariffs on items such as steel, aluminum, and automobiles last month, plans to impose tariffs on pharmaceuticals are expected to be announced on the 2nd.
On the 28th (local time), President Trump met with reporters on his private jet and said, 'We will soon announce item-specific tariffs on pharmaceuticals,' adding, 'We need to bring pharmaceutical companies back to America.' When asked about the tariff rates on pharmaceuticals, he emphasized, 'We are looking for appropriate figures as pharmaceutical companies bring their products into the U.S.' and 'I do not want a situation where we rely on drugs from other countries like during the COVID-19 pandemic.'
The U.S. imports a significant portion of its raw materials for pharmaceuticals (DS) from China and India, and during the COVID-19 pandemic, global supply chain issues highlighted the need to expand domestic production. President Trump aims to reduce reliance on foreign raw materials and strengthen the domestic supply chain through tariff measures.
The tariff on pharmaceuticals will also apply to U.S. corporations. In February, President Trump summoned the chief executive officers (CEOs) of major U.S. pharmaceutical companies like Eli Lilly, Pfizer, and Merck (MSD) to the White House, urging them to transfer overseas production bases back to the U.S. He pressured them by stating, 'I will impose a minimum tariff of 25% on pharmaceuticals imported into the U.S.,' but added, 'There will be no tariffs if you transfer your production facilities to the U.S.'
Eli Lilly was the first to announce plans to invest $27 billion (approximately 38.77 trillion won) in the construction of four new production facilities just six days after meeting with Trump. MSD followed with an announcement to invest $1 billion (1.47 trillion won) to build a vaccine plant in the U.S. Johnson & Johnson (J&J) also stated plans to invest $55 billion (81 trillion won) over four years. Pfizer, which has 13 plants in the U.S., indicated it would quickly transfer its overseas manufacturing facilities to the U.S. depending on future policy directions.
◇Korean corporations respond with U.S. contract manufacturing
Major domestic corporations that have entered the U.S. are preparing countermeasures according to the tariff rate ranges. They are closely monitoring to see how much of the tariff targets will include finished pharmaceuticals, raw materials, and contract development manufacturing (CDMO).
Celltrion, which exports biosimilars (copies of biopharmaceuticals) to the U.S., has rapidly prepared long-term countermeasures. To ensure a stable supply of products currently sold in the U.S., it plans to transfer raw materials needed until the third quarter of this year to minimize the tariff impacts on this year's sales. The company plans to export lower tariff burden raw materials and produce finished pharmaceuticals through local CMO companies. It is also considering acquiring or establishing additional production facilities in the U.S.
Samsung Bioepis is taking a wait-and-see approach. Given that it is already collaborating with several contract manufacturing organizations (CMOs) overseas, it is anticipated that the company will be able to quickly modify its strategy if tariffs are imposed.
SK Biopharm, which sells the epilepsy treatment 'cenobamate' (market name Xcopri) in the U.S., has stated that it has already established response strategies by transferring production technology locally, obtaining approval from the U.S. Food and Drug Administration (FDA), and securing inventory supplies. It has prepared to be able to start production immediately at FDA-approved CMO facilities in the event tariffs are imposed.
Experts predict that the imposition of tariffs on pharmaceuticals may not significantly impact the Korean pharmaceutical and biotech industry. The proportion of domestic pharmaceuticals exported to the U.S. is higher in raw materials and CMOs rather than finished goods, so if tariffs apply only to finished goods, the impact on domestic corporations is expected to be minimal.
Hwang Joo-ri, head of external cooperation at the Korea Bio Association, noted, 'Looking at Trump’s campaign promises, it seems likely that tariffs will only be imposed on essential medicines.' She added that only some large corporations that export essential medicines to the U.S. would be subject to tariffs, accounting for only 5% of the total, and most biotech companies currently undergoing research and development will likely be less affected.
There is also a forecast that if tariffs are imposed on raw materials, the impact will be limited. Seo Geun-hee, a researcher at Samsung Securities, stated, 'In sectors like automobiles and steel where the proportion of raw materials in sales is large, the impact will be significant if tariffs are applied, whereas in pharmaceuticals, the proportion of raw materials in total sales, which includes production, R&D, and marketing costs, is less than 10%.' She analyzed, 'While revenue estimates may drop slightly, and stock prices may fall, the damage is not at a level to be overly concerned about.'