Under the wave of tariffs, the costs for export pharmaceutical companies may double, and the global supply chain may be reshaped

According to the Zhitong Finance APP, U.S. President Donald Trump plans to impose a 100% tariff on branded and patented drugs, which could significantly increase costs for pharmaceutical companies without U.S. production capabilities, while putting greater pressure on companies that have not yet started building factories.

If companies fail to start construction before the October 1 deadline, this move could double the costs of major therapies (from cancer immunotherapy to weight loss injections) for global pharmaceutical companies. Companies such as Novartis (NVS.US) and Sanofi (SNY.US) have announced large-scale investments in the U.S., but the progress of these projects is not yet clear from publicly disclosed information.

Since 2023, companies such as Merck (MRK.US), Novo Nordisk (NVO.US), and Eli Lilly (LLY.US) have initiated plans to build factories in the U.S., located in Delaware, North Carolina, and Texas, respectively. These projects aim to root the supply chain in the U.S. and provide production support for major drugs in the fields of cancer, diabetes, and immunology.

AbbVie (ABBV.US) co-promotes the cancer drug Imbruvica and produces the major immunology drug Skyrizi. The company stated that it will begin expanding its manufacturing facility in Illinois this fall.

Bloomberg Intelligence economists Nicole Gorton-Caratelli and Maeva Cousin estimate that the new tariffs could affect approximately $220 billion in U.S. drug imports and raise the average tariff rate by 3.3 percentage points. However, there remains a great deal of uncertainty, such as whether countries or regions that reach trade agreements with the U.S. can be exempted from this new tariff.

For example, the trade agreement reached by the European Union at the end of July specifies a 15% tariff on pharmaceuticals, but it is still unclear whether this arrangement can offset the latest tariff policy.

Operational Impact

Tony Ren, head of Asian healthcare research at Macquarie Securities Ltd., stated that the operational impact of the new tariffs on Asian pharmaceutical companies may be limited.

"For Japanese pharmaceutical companies, this move is more likely to affect market sentiment rather than fundamentals," he noted, "among companies in China, India, or South Korea, few sell branded drugs to the U.S."

Nevertheless, following the announcement of the tariff policy, major pharmaceutical companies' stock prices in Tokyo, Seoul, and Hong Kong all fell—investors are assessing the risks of this policy on Japan's major drugs, such as Chugai Pharmaceutical Co.'s Hemlibra and Daiichi Sankyo Co.'s Enhertu.

Additionally, Shionogi & Co. stated in August that it is still considering whether to move its antibiotic production line for treating multi-drug-resistant infections to the U.S Novartis, Sanofi, China National Pharmaceutical Group, and other Japanese pharmaceutical companies have not immediately responded to requests for comment.

In addition, Trump's tariff measures may trigger a competition for pharmaceutical production capacity in the United States, especially for production bases operated by third-party companies that provide research and development and manufacturing services for pharmaceutical brands.

Fujifilm Holdings Corp. is a biotechnology contract manufacturer that recently opened a factory in North Carolina, touted as one of the largest cell culture biomanufacturing bases in North America. During Friday's trading in Tokyo, the company's stock price rose by as much as 5.2%.

Manageable Risk Exposure

Only a few Chinese companies sell branded drugs in the United States, and most do so through multinational partner channels. Cui Cui, head of healthcare research at Jefferies Asia, stated, "Given the collaboration model with multinational companies, most Chinese pharmaceutical/biotech companies will not be affected."

An analyst team led by Jialin Zhang at Nomura International HK Ltd. pointed out that currently, only BeiGene, which originated in China and is now headquartered in Switzerland, has achieved significant sales in the United States. The company's cancer therapy Brukinsa is partially manufactured by a U.S. contract manufacturer, highlighting the challenge of defining "imported drugs."

Morgan Stanley analysts wrote in a report that the tariffs could impact the long-term plans of Chinese companies to enter the U.S. market directly. They noted that many Chinese pharmaceutical companies are eager to bring innovative therapies to U.S. patients, and "if tariff barriers persist, this 'breakthrough' path into the U.S. market may face another layer of uncertainty."

Analysts at Leerink Partners pointed out that there are still a series of unanswered questions regarding the implementation details of this tariff policy. Key issues include: how to define "under construction"; whether using U.S. contract manufacturing bases can allow companies to obtain tariff exemptions; and whether this tariff policy can withstand potential legal challenges. Previously, Trump proposed giving pharmaceutical companies 12 to 18 months to relocate production back to the U.S., which adds further uncertainty to the sudden designation of October 1 as the effective date for the policy