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U.S. trade deal has pharma firms on edge despite 'most favored nation' status

Published: 31 Jul. 2025, 18:49 Updated: 31 Jul. 2025, 18:54

Presidential Director of National Policy Kim Yong-beom speaks during a press briefing on trariff negotiations between Korea and the United States at the presidential office in Yongsan District, central Seoul, on July 31. [NEWS1]

Following the Korea-U.S. tariff negotiations on Wednesday, the Korean government said Washington has promised most-favored-nation (MFN) treatment under its upcoming pharmaceutical tariff policy — a development that brought cautious relief to the local pharmaceutical and biotech industry.

With the bio sector included in the government’s planned $200 billion U.S.-bound investment fund, more companies are expected to build local production facilities. However, since details remain unclear on how tariffs will be applied to specific items such as active pharmaceutical ingredients and finished drugs, many firms are adopting a wait-and-see approach.

Presidential Director of National Policy Kim Yong-beom said during a briefing at the presidential office in Yongsan on Thursday that “tariffs set to be imposed on semiconductors and pharmaceuticals will not be less favorable than those applied to other countries” and that Korea will receive “most-favored-nation treatment.”

The United States has already agreed to a 15 percent tariff on pharmaceuticals coming from Europe and Japan, and the same is expected for Korean drugs. On July 8, U.S. President Donald Trump warned during a Cabinet meeting that imported drugs could face tariffs of up to 200 percent, sparking concern across the industry.

The United States is the world’s largest pharmaceutical market. Korea exported approximately $1.49 billion worth of pharmaceuticals to the United States last year.

Celltrion's factory located in Songdo, Incheon [CELLTRION]

Despite the MFN assurance, Korean biotech firms remain wary. Pharmaceuticals were previously tariff-free, and even a 15 percent tariff could significantly erode profitability.

Uncertainties persist over whether both active pharmaceutical ingredients (API) and finished products will be taxed and whether biosimilars — biological generics — will be included.

Contract manufacturing organization and contract development and manufacturing organization, the mainstay of Samsung Biologics, fall under API categories in product-based tariff classifications. Companies like Celltrion and Samsung Bioepis export large volumes of biosimilars.

Samsung Biologics' factory in Incheon is seen on May 31, 2023. [JOONGANG ILBO]

Celltrion, which handles everything from API production to finished product sales, is taking a more proactive stance. It plans to expand capacity to one and a half times that of its second plant in Songdo, Incheon.

“Half the facility will produce key products for the U.S. market, while the other half will be used for contract manufacturing,” a Celltrion spokesperson said.

SK Biopharmaceuticals' booth at the American Epilepsy Society Annual Meeting held at the Washington Convention Center in Washington is seen on Dec. 1, 2017. [NEWS1]

Samsung Biologics is also cautious. Building a U.S. plant could help bypass tariffs, but it would miss out on economies of scale already available at its Incheon site. Industry sources estimate that around 25 percent of the company’s 4.55 trillion won ($3.26 billion) in revenue last year came from the U.S. market.

“Korea has strengths in biosimilars and contract drug manufacturing, and could become a strong partner for U.S. drug pricing reforms and domestic production initiatives,” said Lee Seung-kyou, vice president of the Korea Biotechnology Industry Organization. “The government should pursue strategic negotiations to ensure local companies can outcompete rivals from Japan or India when expanding production capacity in the United States.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM KYUNG-MI [[email protected]]