Korea's pharmaceutical and biotech industry appears relieved at news that the Korea-U.S. tariff talks have concluded. The burden has eased as concerns have lifted over the "100%–200% tariffs on imported medicines" that U.S. President Donald Trump had mentioned.
Korea and the United States agreed to apply most-favored-nation treatment in the pharmaceutical sector in tariff talks on the 29th. The government will immediately begin legislating to implement the memorandum of understanding (MOU) and plans to carry out the agreement as early as Nov. 1.
Kim Yong-beom, Presidential Chief of Staff for Policy, said at a press briefing after the Korea-U.S. summit held in Gyeongju, North Gyeongsang, that "mutual tariffs will be reduced to 15% and continue to be applied, as has already been the case since the July 30 agreement," adding, "Among item tariffs, pharmaceuticals and wood products will receive most-favored-nation treatment, while aircraft parts, generic drugs, and natural resources not produced in the United States will be subject to zero tariffs."
As a result, tariff uncertainty surrounding domestic pharmaceutical and biotech companies exporting to the United States appears to be easing. Late last month, U.S. President Trump said on his social media that "starting in October, we will impose 100% tariffs on medicines from pharmaceutical companies that do not build factories in the United States," stoking anxiety in the industry.
Lee Hyun-woo, Deputy Minister of the Industry Innovation Division at the Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA), said, "Securing a level of most-favored-nation treatment in pharmaceuticals similar to the European Union (EU) and Japan is expected to have a positive impact on our pharmaceutical exports, which have been expanding sales networks in the United States recently."
Major domestic corporations that have entered the U.S. market include Samsung Bioepis, Daewoong Pharmaceutical, HUGEL, GC Biopharma, Hanmi Pharmaceutical, Samsung Biologics, Celltrion, SK Biopharm, Huons, and Lotte Biologics.
According to the Korea Bio Association, Korea's pharmaceutical exports to the United States last year totaled $3.98 billion (about 5.6 trillion won). Of that, biopharmaceuticals accounted for 94.2% ($3.74 billion), indicating very high dependence on exports to the United States.
However, there is also a "cautious view" that the details must be watched until finalization, including item tariffs on pharmaceuticals. Oh Ki-hwan, head of the Bioeconomy Research Center at the Korea Bio Association, said, "For now, trade negotiations have been conducted at the national level, and the details can be known only when item tariffs on pharmaceuticals are announced."
While zero tariffs have been confirmed for generics, which have a small export volume to the United States, it has not yet been confirmed whether biosimilars (biosimilar) with large export volumes to the United States are also included. Lee Hyun-woo, Deputy Minister of the Industry Innovation Division at the Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA), said, "Further confirmation is needed on specifics such as whether biosimilar products will be tariff-free."
The most-favored-nation tariff rate for pharmaceuticals is 15%. Since medicines were previously zero-tariff items, some interpret this as creating a profitability burden. A person at one of the corporations exporting to the United States said, "It is fortunate that the tariffs were set at levels similar to Europe and Japan," but added, "What was originally zero tariff has risen to 15%, so for corporations, absolute profitability will worsen compared with previous years, and this will eventually act as a factor pushing up prices."
The industry also worries that the pharmaceutical and biotech market could contract overall as the Trump administration is strongly pressuring for drug price cuts. If major global pharmaceutical companies close their wallets and continue to reduce investment, it could narrow the door for technology export opportunities for domestic pharmaceutical and biotech corporations.
Meanwhile, it is expected that the United States will maintain a policy stance of encouraging domestic production alongside its tariff policy. In response, domestic corporations have also been working to secure production facilities in the United States to hedge tariff uncertainty.
Celltrion signed a definitive agreement last month to acquire Eli Lilly's biopharmaceutical manufacturing plant in the United States for about 460 billion won, and SK Biopharm prepared a contract manufacturing organization (CMO) facility last year and received U.S. Food and Drug Administration (FDA) approval for a change in manufacturing site.
An SK Biopharm representative said, "We will maintain production in Canada and the United States and monitor forthcoming detailed tariff-related information to establish an optimal strategy," adding, "Although not all procedures have been finalized and we must wait and see, we believe tariff-related risk has been significantly reduced."