A major realignment of the global pharmaceutical supply chain is underway after U.S. President Trump announced that a tariff of up to 100% will be imposed on branded drugs imported from countries outside the European Union (EU), effective October 1.
This measure is part of the Trump administration's ‘reshoring’ strategy aimed at expanding domestic production in the United States. It aligns with the policy of re-centering the U.S. economy around American interests. Large and small-to-medium-sized pharmaceutical companies are expected to respond in starkly different ways.
According to foreign media reports on the 28th, the Trump administration's tariff policy will apply a maximum tariff of only 15% to branded drugs manufactured in the European Union. Products manufactured within the U.S. will be fully exempt.
Global Big Pharma companies are positioned to avoid the direct impact of this measure, as they already have numerous production facilities in the U.S. and Europe. Companies like Merck, Eli Lilly, Johnson & Johnson (J&J), Gilead, and AstraZeneca (AZ) are already expanding their production lines in states such as Indiana, North Carolina, Pennsylvania, and Delaware.
These major pharmaceutical firms are meeting the tariff exemption requirements by either moving parts of their production to the U.S. or constructing new factories. In fact, President Trump has stated, “Companies that build factories in the U.S. or submit plans to relocate production can be exempted from tariffs,” encouraging increased manufacturing investment within the country. Major investment banks like Jefferies have analyzed that “this measure is seen as a policy designed to favor Big Pharma.”
● Small Pharma: “A 100% Tariff Is Unmanageable”…Facing Pressure to Exit Market or Raise Prices
Small and medium-sized pharmaceutical companies with production bases concentrated in Canada, Mexico, India, and the Middle East are set to take a direct hit. In an interview with The New York Times, Aaron Kesselheim, a professor at Harvard Medical School, commented, “While large pharmaceutical companies can absorb the tariff shock with their high-profit blockbuster products, smaller companies focused on niche therapies have no choice but to raise prices or exit the market.”
The Biotechnology Innovation Organization (BIO) also expressed concern, stating, “Small biotech companies lack the financial capacity to quickly establish a production base in the U.S.” and “In the long term, this could reduce patient access and lead to shortages of some treatments.” Particularly for product categories without substitutes, such as rare disease therapies or drugs for special conditions, the tariff burden is highly likely to translate directly into higher costs for patients.
John Maraganore, former CEO of the mid-sized pharmaceutical company Alnylam, said, “For companies whose revenue is concentrated on a single product, a 100% tariff is devastating. Ultimately, the only options are to raise prices or withdraw from the market.” In fact, some pharmaceutical companies based in Canada and Mexico are reportedly considering halting their exports to the U.S. following the tariff implementation.
● Generic Drugs Exempt…“Impact on Most U.S. Patients Will Be Limited”
This measure does not apply to generic drugs. Since generics account for about 90% of all prescriptions, the majority of patients in the U.S. are not expected to experience direct price increases. However, some analysts suggest that for certain branded drugs, there could be increases in insurance co-payments or contractual price adjustments.
Industry experts point out that the tariff's actual impact on the cost structure could be complex, as a significant portion of active pharmaceutical ingredients (APIs) are still produced in China. The U.S. administration has specified that the tariff will be “applied based on the location of final assembly and finished product manufacturing,” but prolonged disruptions in the API supply chain cannot be ruled out as a potential driver of increased production costs.
Experts note that while these moves may lead to short-term job creation and a manufacturing revival in the U.S., they also have the side effect of increasing the costs of ‘redundancy’ in the global supply chain. In a media interview, pharmaceutical industry analyst Peter Kolchinsky warned, “This measure is an opportunity for large multinational corporations, but it could create an unfavorable environment for innovative small and medium-sized biotech companies in the U.S. Without a grace period to build factories, there is a risk that technologically advanced companies could actually be weeded out.”
Major South Korean pharmaceutical companies have begun securing factories in the United States. Celltrion has acquired Eli Lilly's biologics manufacturing plant in Branchburg, New Jersey, for $330 million (approximately 465.3 billion KRW) and plans to invest an additional 700 billion KRW to expand the production line. Through a total investment of 1.4 trillion KRW, the company aims to establish a ‘Made in USA’ system. The acquired plant, spanning about 45,000 pyeong (approx. 1.6 million sq ft), is equipped with a ready-to-operate drug substance (DS) production facility, a warehouse, and a technical support building.
In an online press conference on the 23rd, Celltrion Group Chairman Seo Jung-jin emphasized, “The answer to the Trump administration's tariff demands is ‘Made in USA.’ With this deal, we have completely moved away from the tariff risk.”
