Korean biotechs on alert over Trump's tariff threats

By Nam Hyun-woo

U.S. President Donald Trump threatened to impose tariffs of around 25 percent on pharmaceutical imports on Tuesday, raising concerns among Korean biopharmaceutical firms.

Korean biotechs were optimistic about their U.S. business in the second Trump presidency, given his previous efforts to lower drug prices during his first term. However, with Trump now considering pharmaceuticals as another front in his trade war, Korean biotechs are scrambling to devise countermeasures while expressing a cautious view that such policy may end up pushing up drug costs for American consumers.

Under the Korea-U.S. Free Trade Agreement, Korea exports pharmaceutical drugs to the U.S. duty free. As the world's largest pharmaceutical market, the U.S. imported $1.5 billion worth of drugs from Korea last year, with U.S.-bound shipments accounting for 16 percent of Korea’s total pharmaceutical exports.

“The top priority for now is closely monitoring whether the tariff will actually be imposed, what will be the target and how other details will be set,” an official at a Korean biotech said.

“Pharmaceuticals are fundamentally different from industrial goods and often have been exempt from tariffs in international trade because it is a matter of human lives. If tariffs are imposed, it will inevitably impact drug prices in the United States, which would, in turn, affect American citizens.”

On Tuesday (local time), Trump suggested imposing a 25 percent tariff on pharmaceutical imports but did not provide further details.

To address concerns, biosimilar maker Celltrion on Wednesday published a letter for investors containing the companies’ countermeasures on possible U.S. tariffs.

Celltrion said it remained uncertain whether the tariff will actually be imposed but noted that it had secured sufficient inventory in the U.S. to meet demand for at least nine months this year without needing additional imports.

The company also said it “has been manufacturing finished drug products through local contract manufacturing partners even before the tariff risks emerged,” and its primary business is exporting drug substances, which has a significantly lower tax burden compared to finished drug products.

Celltrion’s sales in the North American market accounted for 28.74 percent of its total global sales of 810 billion won in the third quarter of last year. The company’s North American sales in the first three quarters of 2024 have surpassed that of the entire 2023.

Samsung Bioepis, which develops biosimilar products and sells them in the U.S., is also feared to be affected by possible tariffs.

“Currently, there are no details known regarding the possible 25 percent tariff, so our basic approach is closely monitoring the progress of the situation,” an official at Samsung Bioepis said, adding that the company is now looking into various countermeasures.

Biosimilar companies, including Celltrion and Samsung Bioepis, are pinning hopes that their products may be exempted from the tariff because the first Trump administration aimed to lower drug costs by increasing competition between chemical drugs and their biosimilars. If biosimilar drugs also become the subject of tariffs like pricey branded drugs, this will undermine efforts to lower drug prices through competition, directly affecting average drug costs.

The tariff threat places contract manufacturer Samsung Biologics in a complex situation as well.

A Samsung Biologics official said the company will “closely monitor the progress until there are tangible updates,” but industry officials said the company is also busy exploring its countermeasures to the possible tariffs.

Initially, Korean contract development and manufacturing organizations (CDMOs), including Samsung Biologics, were anticipated to face weaker impacts from possible tariffs, since their clients mostly shoulder the costs related to making drug substances and other additional expenses, including tariffs.

However, as Trump floated a 25 percent tariff, Korean CDMOs may lose their cost-competitiveness compared to their U.S. rivals, enticing more global pharmaceutical firms to select U.S.-based CDMOs.

Rumors have since alleged that Samsung Biologics may decide to establish a plant in the U.S., which will help the company hedge some of the risks stemming from the tariffs.

A Samsung Biologics official said, “The company is still reviewing the feasibility of a U.S. plant, but it is still too early to comment on anything beyond that.”