【By Wang Li, Editor/ Zhou Yi】
On September 26, US President Trump announced on a social media platform that starting from October 1, a 100% tariff would be imposed on all branded or patented pharmaceutical products imported, unless the relevant companies are building pharmaceutical factories in the United States.
This policy marks the first time that Trump's tariff measures directly target the core area of the global pharmaceutical industry, triggering a collective decline in international pharmaceutical stocks. The most affected include European pharmaceutical giants such as Novo Nordisk and GSK, as well as Asian pharmaceutical companies such as Sumitomo Pharma in Japan and Samsung Biologics in South Korea.
Screenshot from Truth Social
However, Chinese innovative pharmaceutical companies may be less affected due to their unique export model. Currently, Chinese pharmaceutical companies mainly export generic drugs and active pharmaceutical ingredients (APIs) to the US, which are not included in the scope of this tariff. The few domestic innovative drugs that have entered the US market mostly adopt the license-out model or have already established production capabilities in the US, thus possessing strong policy immunity.
This "turning a misfortune into an opportunity" situation may bring new development opportunities for the Chinese pharmaceutical industry, especially against the backdrop of global pharmaceutical industry restructuring, where Chinese pharmaceutical companies are expected to achieve better internationalization through differentiated strategies.
Analysis of Tariff Policy Details: Targeted Strikes and Exemption Conditions
From a timeline perspective, this policy was not suddenly introduced. In April this year, the US Department of Commerce had already initiated an investigation into the impact of all pharmaceutical imports on national security. In July, Trump had threatened to impose a 200% pharmaceutical tariff. Compared with this, the final implemented 100% tax rate, although still severe, has been somewhat relaxed compared to previous threats.
After the announcement of the policy, the global major pharmaceutical stock markets experienced significant fluctuations. In the European market, Novo Nordisk's stock fell by 3.1%, and its key products Ozempic and Wegovy mainly use raw materials produced in Denmark. GSK fell by 1.1%, and AstraZeneca fell by 1.6%. These European pharmaceutical giants hold important shares in the US market, and the tariff policy will directly affect their profitability.
On September 26, the pharmaceutical sector in the Asia-Pacific market generally declined. The A-share pharmaceutical biotechnology sector fell, with the weight loss drug, innovative drug, and CRO indices leading the fall; the Hang Seng Biotech Index opened down nearly 2% and then fluctuated downward; pharmaceutical stocks in Japan and South Korea also fell across the board.
In the A-share market, Xiangri葵 fell more than 10%, and Aosai Kang, Guangsheng Tang, and Jemin Health were among the top losers. In Hong Kong, BeiJi ShenZhou fell 3.5%, while WuXi Biologics, Xinda Biopharma, and Kangfang Biopharma fell nearly 3%.
A-shares pharmaceutical biotechnology sector fell
Japanese Sumitomo Pharmaceutical fell more than 4%, and Dainippon Sumitomo Pharma fell more than 3%; South Korean Samsung Biologics fell more than 3%, and SK Biopharmaceuticals fell more than 2%.
The tariff policy announced by Trump has a high degree of targeting and clear implementation standards. According to the policy terms, the 100% tariff applies only to "branded or patented pharmaceutical products", while generic drugs, biosimilars, and drug intermediates and APIs are not within the scope of taxation.
The only exemption condition is that the company must be "building a pharmaceutical factory in the United States", and Trump clearly stated that "construction has already started" would qualify for duty-free treatment. This wording provides multinational pharmaceutical companies with relatively flexible operational space, as long as they can prove that the US factory project has already broken ground, they can avoid the tariff impact.
It is worth noting that the stock prices of American pharmaceutical companies showed relative resilience, with some even rising. Companies like Pfizer, Merck, and Johnson & Johnson are expected to benefit from the policy, possibly increasing their market share in the US market.
From a technical perspective, a 100% tariff means that the cost of importing medicines will double directly. For example, a patented drug with an annual sales volume of $1 billion would incur an additional $1 billion in tariffs. This cost will be partially passed on to insurance companies and patients, potentially increasing healthcare costs in the United States.
Global Pharmaceutical Companies' Response Strategies: Localization of Production as a Trend
Facing the tariff threat, global pharmaceutical giants have already begun to adjust their production layouts and accelerate investments in the US. This trend began after Trump first mentioned the threat of pharmaceutical tariffs, and now that the policy has officially been implemented, more companies will be forced to join this trend.
Johnson & Johnson was the first to make a statement, planning to invest $5.5 billion in the US over the next five years to strengthen local production capacity and R&D investment. This investment scale sets a new record for single-company investment in the pharmaceutical industry in the US. The company said that the new investment will be mainly used for building production bases, expanding the scale of R&D centers, and strengthening the localization of the supply chain.
GSK followed closely, promising to invest $3 billion in the US over the next five years. The CEO of the company stated that this investment will help ensure the stable supply of its important drugs in the US market and avoid potential trade risks. At present, many of GSK's important products are mainly produced in Europe, and the tariff policy will force the company to accelerate the transfer of production.
Eli Lilly announced that it will invest $2.7 billion to build four large-scale pharmaceutical bases in the US. Notably, Eli Lilly's blockbuster weight-loss drug Mounjaro is currently mainly produced in Ireland, and the new US factory will take over the main production tasks of this product.
Novo Nordisk is also not lagging behind, as the company is building a large pharmaceutical factory covering 1.4 million square feet in North Carolina. Once completed, this factory will be responsible for supplying the US market for products such as Ozempic and Wegovy, effectively avoiding the impact of tariffs.
In addition to building new factories, some companies choose to acquire US-based pharmaceutical companies to quickly gain production capacity. Although this strategy involves higher costs, it can achieve compliance in a short period and avoid tariff impacts.
However, domestic production in the US also faces many challenges. First, there is the issue of cost. The labor costs, land costs, and regulatory compliance costs in the US are significantly higher than in other major pharmaceutical production areas. Industry estimates suggest that the comprehensive cost of producing medicines in the US is 20-30% higher than in Ireland and Singapore.
Secondly, there is the problem of talent shortages. The US pharmaceutical industry is facing a serious shortage of skilled workers, especially in areas such as production processes and quality control. The simultaneous construction of a large number of new factories will further intensify the competition for talent, pushing up labor costs.
Regulatory complexity is also a major challenge. The FDA's approval process for new production lines is strict and time-consuming, usually requiring 2-3 years from factory construction to obtaining production licenses. This means that even if companies start building now, they will not be able to avoid tariff impacts in the short term.
Supply chain reconfiguration is equally complex. Many drug production processes involve global supply chains, with raw materials, intermediates, and packaging materials possibly coming from different countries. Establishing a complete localized supply chain in the US requires substantial investment and a longer time.
Despite these challenges, localization of production has become an irreversible trend. The US government's policy direction is clear, namely, to push manufacturing back to the US through trade barriers. For multinational pharmaceutical companies, building factories in the US is not just a temporary measure to avoid tariffs, but a long-term strategic choice to adapt to the new trade environment.
Chinese Pharmaceutical Companies' Unique Model Builds Immune Barrier
Compared to the anxiety of their European and American counterparts, Chinese pharmaceutical companies have shown a relatively calm reaction to Trump's tariff policy. This is mainly due to the unique development model and export strategy of the Chinese pharmaceutical industry, which gives them strong immunity against this round of tariff shocks.
From the perspective of export structure, China's pharmaceutical exports to the US mainly consist of generic drugs, APIs, and pharmaceutical intermediates, none of which are within the scope of the 100% tariff. According to data from the China Association of Importers and Exporters of Medicines and Health Products, in 2024, over 60% of China's pharmaceutical exports to the US were generic drugs, and APIs and intermediates accounted for about 25%, while the proportion of patent drugs exported was less than 15%.
Hua Hai Pharmaceutical, a leading enterprise in China's generic drug exports, has almost no impact from the tariff on its US business. The company's relevant person in charge stated that all the finished dosage forms sold by Hua Hai Pharmaceutical in the US are generic drugs, and they are approved by the FDA through the ANDA (Abbreviated New Drug Application) pathway. These products do not fall under the category of "branded or patented pharmaceutical products," so they are completely unaffected by the new tariff policy.
Haizheng Pharmaceutical's situation is similar. The products sold by the company in the US market mainly consist of generic drug formulations and APIs, and at present, there are no patent drugs on sale. The company stated that even if patent drugs enter the US market in the future, it will prioritize the license-out model to avoid tariff risks associated with direct exports.
For the few Chinese innovative drugs that have already entered the US market, their response strategies are representative. Yifan Pharmaceutical's F-627 is one of the few Chinese innovative drugs directly exported to the US. Facing the tariff threat, the company quickly adjusted its supply chain strategy, planning to transfer the quality release and shipping segments of this product to the US.
More importantly, the mainstream export model of Chinese innovative pharmaceutical companies naturally has tariff immunity. According to incomplete statistics, over 80% of Chinese innovative drugs currently entering the US market or applying for entry use the license-out model, i.e., licensing the product patents to US or multinational pharmaceutical companies for development and sales.
Bijsi Jingzhu is a typical example of this model. Although its key product Zebutini is sold in the US market, the production process has been outsourced to the US-based CMO company Catalent. In this model, Bijsi Jingzhu does not directly involve commercial exports, so it is not directly affected by the tariff policy.
Xinda Biopharma's Darbushu and Kangfang Biopharma's Pailianpuli Monoclonal Antibody also adopted similar strategies. These companies collaborate with multinational pharmaceutical companies such as Eli Lilly and Merck, licensing their products to these companies for production and sales in the US market, thereby avoiding trade risks and sharing product revenues.
CXO (pharmaceutical outsourcing service) companies are also affected to a limited extent. Leading Chinese CXO enterprises such as WuXi Biologics, Kailiying, and Botong share their products mainly consist of APIs, biopharmaceutical raw materials, and intermediates exported to the US, which are not subject to tariffs. Even if there is a small amount of formulation exports, most of them are generic drug formulations.
From a more macro perspective, Trump's tariff policy may bring unexpected development opportunities for Chinese pharmaceutical companies. As European and American pharmaceutical companies are forced to move production to the US, their competitiveness in other markets may decline due to increased costs. This creates space for Chinese pharmaceutical companies to expand their market share internationally.
At the same time, the restructuring of the global pharmaceutical industry also brings new opportunities for Chinese CXO companies. As multinational pharmaceutical companies accelerate their localization of production, the demand for outsourcing services may further increase. Chinese CXO companies, relying on their cost advantages and technical capabilities, are expected to gain more orders in this round of industrial restructuring.
Jiaojiao International pointed out in its latest research report that the actual impact of Trump's increased pharmaceutical tariffs on Chinese pharmaceutical stocks is "minimal," and investors need not worry excessively. The report believes that the results of the upcoming medical insurance negotiation in October and November, the commercial insurance innovation drug list, and the key data from the ESMO conference could serve as catalysts for the rebound of Chinese pharmaceutical stocks.
Overall, although Trump's tariff policy caused short-term shocks to the global pharmaceutical market, Chinese pharmaceutical companies have demonstrated strong policy adaptability due to their unique development models and export strategies. This "turning a misfortune into an opportunity" situation may provide an opportunity for the Chinese pharmaceutical industry to develop better in the new international trade environment.
Original article: https://www.toutiao.com/article/7554387563054793216/
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