Dodging tariffs: Korean biopharma rethinks US market playbook

US President Donald Trump's recent announcement of potential tariffs on imported pharmaceuticals has sent ripples through the global supply chain, with Korea’s biopharmaceuticals industry bracing for possible repercussions.

Last week, Trump signed a proclamation imposing a 25 percent tariff on all steel and aluminum imports into the US, effective March 12. While doing so, he also hinted that his administration is reviewing potential tariffs on pharmaceuticals, cars and semiconductors.

However, just two days later on Wednesday, Republican US House Speaker Mike Johnson said in an interview with Reuters that four categories, including automobiles and pharmaceuticals, may possibly be exempt from reciprocal tariffs, further adding to uncertainty surrounding the matter.

"Trump clearly understands the importance of the pharmaceutical industry, as CEOs who have met with him in person have discussed this," a US-based bioscience industry source commented. "Unfortunately, US presidential policy remains highly unpredictable at this point. We don’t know what Trump is considering from one day to the next."

The source added that, as with other tariff policies, the pharmaceuticals industry inevitably remains in a state of uncertainty due to constant shuffling.

Under the free trade agreement between Korea and the US, which took effect in March 2012, pharmaceuticals, classified as an essential good, are exempt from tariffs.

About a decade after the agreement, leading Korean biopharmaceuticals firms have come to expand their presence in the US market. According to industry data, Korea’s pharmaceuticals exports to the US reached $1.5 billion last year, marking a 50 percent increase compared to 2023.

Given that the US pharmaceuticals market is the world's largest, comprising over 40 percent of global sales, Trump's next moves will have significance to Korean biotech firms.

From new drug developers to contract drug manufacturers, Korean companies tied to the US market are mapping out strategies to mitigate the impact of potential Trump tariffs.

Celltrion outlined its midterm strategy in a recent shareholder letter, including plans to acquire or establish a US production facility. The company is also considering exporting raw pharmaceutical ingredients, which may face lower tariffs, while producing finished drugs within the US.

Similarly, SK Biopharmaceuticals, which currently relies on contract manufacturing of its epilepsy drug Cenobamate in Canada, is exploring options for a dual production system between the US and Canada.

"I believe that rather than maintaining a single large manufacturing plant, it is important to maintain multiple production facilities flexibly in order to prepare for various risks arising from changing tariff environments and political landscapes between countries," SK Biopharmaceuticals CEO Lee Dong-hoon said.

"Ultimately, Korean pharmaceutical and biotech companies must adopt a strategy of diversifying their manufacturing bases for both active ingredients and finished drug products.

However, establishing a US-based facility that meets current Good Manufacturing Practice standards is a lengthy and complex process, typically requiring five to 10 years.

Trump's tariff action could paint a different picture to contract development and manufacturing organizations ― CDMOs ― like Samsung Biologics.

"Many of the top Korean bio firms that provide CDMO services through domestic plants are exploring the option of passing tariff costs directly onto their client companies," an official from a leading biopharmaceutical company here said.

"However, this approach would ultimately impact US medical businesses and consumers, causing drug shortages and price increases. Given that pharmaceuticals are as crucial to national security just like food supply chains, the industry also views that any imposed tariffs would likely be reversed in the long term."

Meanwhile, the US pharmaceutical industry has urged the Trump administration to exempt global pharmaceuticals from tariffs, including China.

Currently, roughly one-third of the raw materials used in key US pharmaceuticals production come from China. The impact of such ongoing trade tensions was also evident at the JP Morgan Healthcare Conference in January, where the vast majority of Chinese biotech firms, once major participants, did not show up at the event.

The Korean pharmaceuticals and biotech industry sees this situation as a growing reality and is calling for collaboration between the government and industry leaders to develop an effective diplomatic response.

"Right now, both the government and bio companies must focus on the biosimilar business and CDMO market, where we already have strong capabilities and significant investment," said Lee Seung-kyu, vice president of the Korea Bio Association.

"For instance, Japan’s Fujifilm Diosynth Biotechnologies is building multiple plants in the US, aligning with Trump’s long held ‘Buy American, Hire American’ policy. Without immediate lobbying efforts and strategic actions, our market share could shrink and be overtaken by competitors within a few years."