US postpones 'Drug Tariffs', but industry eyes the situation

Trump Administration sets 25% reciprocal tariff on South Korea... Drug tariffs to be “set separately in the future”

US is the largest drug export destination for Korea since 2022... industry awaits the White House announcement

The US Trump administration announced reciprocal tariffs against the entire world, but “postponed” the application of tariffs on pharmaceuticals, because it is “considering separate industry-specific tariffs” on semiconductors, key minerals, and pharmaceuticals.

 

The domestic pharmaceutical and bio industry is relieved for now but is keeping a close eye on the White House's next move.

 

As the U.S.

 

has been the largest exporter of pharmaceuticals for 3 consecutive years, the specific tariff rates and items subject to the tariffs are expected to have a significant impact on the profits and losses of companies.

 

US President Donald Trump announced on the 2nd (local time) that he would impose a 25% reciprocal tariff on South Korea.

 

However, pharmaceuticals were excluded from this measure.

 

The White House explained that it would impose separate tariffs on pharmaceuticals.

 

The White House said in a separate briefing after President Trump's announcement of tariffs that “this measure does not apply to items already subject to tariffs such as automobiles, steel, aluminum, and lumber under Section 232 of the Trade Expansion Act.” It went on to explain that “President Trump is also considering separate industry-specific tariffs on semiconductors, pharmaceuticals, and key minerals, so these items are also not included in the reciprocal tariffs.” The domestic pharmaceutical and biopharmaceutical industry expressed relief for the time being because the companies have bought time to respond to the US drug tariff, at least temporarily.

 

There are various ways for the pharmaceutical and biopharmaceutical industry to respond to the US drug tariff.

 

In the short term, the method of moving stockpiles to the US in advance can be used.

 

In the mid-to-long term, the industry is also considering producing products directly in the US or outsourcing manufacturing to US companies.

 

Celltrion has secured sufficient inventories of biosimilars that can be procured locally until the third quarter of 2025.

 

In addition, if tariffs are actually applied, the company plans to focus on exporting APIs, which are subject to lower tariffs, rather than finished drugs, which are subject to relatively higher tariffs.

 

Furthermore, in the mid-to-long term, the company is also considering securing manufacturing facilities in the United States.

 

SK Biopharmaceuticals, which sells the new epilepsy drug ‘Xcopri (cenobamate)’ in the United States, has a structure in which it manufactures active pharmaceutical ingredients in Korea, packs them in Canada, and then exports them to the United States.

 

SK Biopharmaceuticals has been promoting this local production strategy in the United States for several years to stabilize its supply chain, and after transferring production technology and completing the verification procedures, it received approval from the US FDA in the second half of last year.

 

Samsung Bioepis, which exports biosimilars to the US, is already cooperating with several contract manufacturing organizations (CMOs) overseas, so it is expected to be able to quickly adjust its strategy if a tariff is imposed.

 

However, as the possibility of imposing tariffs on pharmaceuticals remains high, the pharmaceutical and biopharmaceutical industry is paying close attention to the specific tariff rates for pharmaceuticals and the items subject to tariffs.

 

In this regard, President Trump announced at a press conference on the 18th of last month that the tariff on pharmaceuticals would be “25% or higher.” Some predict that basic and essential drugs will be exempted from tariffs.

 

They note that public opinion in the United States is negative about imposing tariffs on basic and essential drugs.

 

In the case of Huons, it exports lidocaine injections to the United States.

 

This product is a basic drug that is in short supply in the United States and is said to have only one or two local manufacturers.

 

So even if tariffs are imposed on pharmaceuticals, such basic drugs are expected to not be subject to them.

 

The same is true for GC Biopharma.

 

GC Biopharma exports the blood product Alyglo to the United States.

 

Blood products are essential medicines in the United States, and there has been a shortage of supply in the country for several years.

 

The company expects that blood products, including Alyglo, will not be subject to tariffs.

 

In the United States, there is ongoing criticism that tariffs should not be imposed on basic and essential medicines.

 

The Association for Accessible Medicines (AAM), a US generic drug lobby group, has expressed concern that if tariffs are imposed on medicines, the number of medicines in short supply, currently at 127, will surge to 215.

 

The Kaiser Family Foundation, a US non-profit health organization, has warned that imposing tariffs on pharmaceuticals could cause the US healthcare spending growth rate to jump from the current 5% to as much as 60%.

 

The United States has been Korea's largest pharmaceutical export destination for 3 consecutive years since 2022.

 

Last year, pharmaceuticals exported from Korea to the United States amounted to USD 1.35809 billion (about KRW 2 trillion).

 

This is an 18% increase compared to USD 903.3 million in 2023.

 

However, the pharmaceutical trade balance with the United States has been in the red.

 

The trade deficit with the United States was USD 1.1317 billion in 2022, USD 955.54 million in 2023, and USD 292.07 million last year.