U.S. President Donald Trump said he will impose a 100% tariff on medicines from pharmaceutical companies that do not build factories in the United States starting next month, putting the pharmaceutical and biotech industries that produce drugs outside the United States and export them to America on high alert.
Trump said on the 26th on the social media platform Truth Social, "Starting Oct. 1, we will impose a 100% tariff on brand-name or patented medicines unless companies build their pharmaceutical plants in the United States."
There are immediate concerns about a hit to domestic pharmaceutical and biotech corporations that export products to the United States. Korea's exports of medicines to the United States last year reached about $1.49 billion (about 2 trillion won). The industry said a shift in the production structure of the pharmaceutical and biotech sector is inevitable.
Samsung Biologics, which runs a contract development and manufacturing organization (CDMO) business for biologic medicines, could be a prime example of potential damage. That is because global drugmakers, its clients, are more likely to push for local production in the United States. Samsung Biologics is known to be reviewing investments such as building a new U.S. plant and mergers and acquisitions, but nothing has been made official. A Samsung Biologics official said, "We are reviewing the details."
An industry official said, "Because it is difficult for global drugmakers to switch existing production plants or contract manufacturing in the short term, there will be no immediate shock to Samsung Biologics," adding, "However, at the initial stages of new product manufacturing or new drug development, it may become difficult to choose plants outside the United States."
By contrast, domestic corporations that moved early on strategies to respond to U.S. tariff measures say they will face little impact. They have pursued U.S.-based production by acquiring medicine manufacturing plants in the United States or outsourcing contract manufacturing (CMO).
Celltrion on the 23rd signed a main contract to acquire a biologics manufacturing plant from U.S. drugmaker Eli Lilly for about 460 billion won. The company said it will carry out a 700 billion won investment including the purchase price and expand production facilities on idle land within the acquired plant. Seo Jeong-jin, chairman of Celltrion Group, said in an online briefing, "With the acquisition of the U.S. plant, Celltrion has completely removed tariff uncertainty."
SK Biopharm, which sells the new epilepsy drug "cenobamate (U.S. brand name Xcopri)" in the United States, also said it expects little impact. To prepare for tariff uncertainty, SK Biopharm secured CMO facilities last year and obtained U.S. Food and Drug Administration (FDA) approval for a change in production facilities. The company said, "We secured inventory in advance and have also begun local production in the United States."
Trump's tariff policy could jolt the global pharmaceutical industry as a whole. An official at a domestic biotech corporation that exports to the United States said, "A structural shift across the global drug industry toward producing medicines in the United States seems unavoidable," adding, "In fact, the impact will likely be greater on global big pharma, which relies more on overseas manufacturing plants than domestic firms do."
Because the ratio of cost of goods sold to sales is low to begin with for drugmakers, a simple calculation suggests that the cost burden from tariff application can be contained. But if corporations have to build new plants in the United States or acquire local plants, the considerable time and expense required would increase the burden.
Earlier, after President Trump signaled tariffs on the pharmaceutical sector, global big pharma rushed to announce investment plans. United Kingdom-based GlaxoSmithKline (GSK) on the 16th said it would invest $30 billion over five years in U.S. research and development (R&D) and supply chain infrastructure. U.K.-based AstraZeneca said it would invest $50 billion in the United States by 2030.
U.S. drugmakers are no exception. Eli Lilly also said on the 16th it will spend $5 billion to build a manufacturing facility in Virginia. U.S.-based Johnson & Johnson (J&J) said it will invest $55 billion over the next four years in U.S. manufacturing and research and technology.
Meanwhile, in the domestic industry, there were varying interpretations of Trump's separate definition of the term "under construction." On Truth Social, Trump wrote, "'Under construction' means groundbreaking or construction in progress," adding, "If construction has started, there will be no tariff on such medicines."
A domestic biotech corporation official said, "It means to 'onshore (moving overseas production facilities back to the home country)' to the United States," adding, "Since the early part of this year, when Trump's tariff signal began, some companies have announced investment plans only declaratively; the message is to break ground quickly and follow through."
Another domestic biotech corporation official asked in return, "President Trump specifically used the term 'under construction'; I do not know whether corporations that have acquired plants in the United States are included in that."