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Eyes on BioPharma & Tariffs
Jana Chisholm- 4 days ago
- 10 min read
As the quarterly results wind down, we're back to catching up on the latest BioPharma News. We've been keeping Eyes On the news and views swirling around Pharma and Tariffs. The landscape is evolving quickly; take a look at some of the topics we've been following.
Chinese President Xi Jinping is luring international investment, especially from pharmaceutical companies, while U.S. President Donald Trump is threatening a fresh round of tariffs as part of an onshoring campaign. In Beijing, Xi met with more than 40 global business leaders, including CEOs from major pharmaceutical companies AstraZeneca, Sanofi, Bayer, Pfizer, Boehringer Ingelheim, Eli Lilly, GSK and Merck KGaA. The pharmaceutical business was the most well-represented industry sector at the convention.
According to state news agency Xinhua, seven prominent corporate leaders from various nations spoke during the gathering, including Hudson, the CEO of Sanofi. In December, the French pharmaceutical company invested approximately $1.08 billion, its largest investment to date, in China to set up a new production facility in Beijing. FedEx CEO Subramaniam was the American representative who spoke during the Xi conference.
In the face of growing trade tensions with the United States, Xi is attempting to attract global investments. Trump recently imposed a 20% tax on Chinese goods and threatened to impose additional "reciprocal" tariffs on his main trade partner starting in April.
The meeting with Xi coincides with the annual Boao Forum for Asia and the China Development Forum in Beijing, two consecutive events in China that bring together prominent figures from the government, academia, and business community to discuss policy and the economy. Foreign CEOs of pharmaceutical companies have frequently attended both events.
Pharma CEOs have been walking a fine line between China and the U.S. ever since relations between the two major economies began to deteriorate during Trump's first term in office. The biopharma industry has fallen into the administration's net as Trump has reaffirmed his promise to increase pharmaceutical tariffs. Drug manufacturers have expressed concerns that country-specific tariffs on the EU, Canada, and China will increase the cost of producing medications even before the anticipated arrival of the sectoral tariffs.
Lilly quickly announced a $27 billion investment in domestic manufacturing after meeting with Trump in February. The CEO informed Chinese Commerce Minister Wang Wentao in a separate meeting prior to the meeting with Xi that Lilly will boost investment and expand production capacity in China.
Although it cannot afford to lose China either, Johnson & Johnson stated that it will invest $55 billion in the United States over the next four years, including plans to construct three new manufacturing facilities domestically.
Soriot, the CEO of AstraZeneca, seemed to have struck a balance. Astra Zeneca announced a $2.5 billion investment in China. The investment includes plans to establish a vaccine production facility, partnerships with local biotechs, and a worldwide strategic research and development centre in Beijing. The China investment comes after the British pharmaceutical company committed $2 billion to expand its U.S. operations, including manufacturing, and research and development capabilities. By 2026, the company plans to invest a total of $3.5 billion in the U.S.
For more details, see below:
In his speech, Senator Wyden, who has been leading an investigation into the tax tactics of big pharmaceutical companies, accused Pfizer of some of the most heinous financial practices the legislature has discovered. Probable tax-dodging strategies by businesses such as AbbVie, Bristol Myers Squibb, Merck & Co., and Amgen have also been discovered as a result of the ongoing probe by Democrats on the Senate Finance Committee. The investigation's most recent findings indicate that Pfizer recorded about $20 billion in sales in the United States in 2019 but failed to disclose any taxable profits in the United States because it linked those revenues to offshore entities. The Committee claimed in a report of its findings last week that Pfizer was able to avoid paying billions of dollars in federal income taxes in a single year.
Additionally, according to the investigation, Pfizer did not disclose any taxable income in the United States in 2018 or 2020. The committee also charged Pfizer of entering into agreements with Singapore and Puerto Rico that shield the firm from income taxes in those nations and using non-disclosure agreements to thwart the probe.
According to the inquiry, Pfizer's actions are related to a tax ploy known as round-tripping, in which American businesses declare sales revenue to American clients as overseas for taxation purposes, a practice related to tax laws signed into legislation by President Donald Trump in 2017 that encourage big pharmaceutical companies to split their earnings with other countries. Foreign subsidiaries of American corporations are eligible to claim the global intangible low-taxed income rate of 10.5% instead of the corporate tax rate of 35%, which was reduced to 21% by the 2017 tax bill.
In recent years, Wyden's ongoing inquiry has implicated several pharmaceutical companies, notably Merck, for allegedly shifting revenues from Keytruda offshore in order to avoid paying billions of dollars in U.S. taxes. The committee stated in a 2022 report that Merck reported only $1.85 billion in local pretax income, but that $22.24 billion of its 2021 sales were from the U.S. Merck had about $12 billion in foreign pretax income from over $27 billion in foreign sales in that same year.
For more details, see below:
The Biotechnology Innovation Organisation, a trade group, is cautioning about the potential impact that extra pharmaceutical tariffs could have on patients' access to medications, as President Donald Trump has reiterated his threat of such measures.
According to a February BIO poll, nearly 90% of U.S. biotech companies depend on some imported components for at least half of their FDA-approved products.
Industry-wide worries that the tariffs proposed by the White House could hinder access to affordable medications, impede innovation, and impose unnecessary red tape where reflected in the survey, which surveyed both commercial enterprises with $1 billion or more in annual revenue and up-and-coming drug manufacturers.
On February 1st, Trump signed an executive order imposing 10% tariffs on Chinese goods, which were later doubled to 20%, and 25% tariffs on Canadian and Mexican imports. The president then threatened to impose 25% or greater taxes on drugs in mid-February, and he has since doubled down on that threat. 94% of businesses surveyed stated that they anticipate higher manufacturing costs as a result of EU tariffs. In contrast, 82% of respondents believe that tariffs on Canada will raise manufacturing costs, with the same effect anticipated by 70% regarding tariffs on China and 56% regarding taxes on India.
Although manufacturing appeared to be the most persistent issue, the biotechs also raised concerns that tariffs on a number of different nations and areas would hinder research and development, the sourcing of raw materials, regulatory filings, and collaborations with contractors like CROs or CDMOs.
About half of the respondents also mentioned that possible European levies could require rewriting or postponing regulatory filings abroad, and 50% of the companies stated that they anticipate planned tariffs on the EU will compel them to look for new research and manufacturing partners.
According to 44% of respondents, businesses anticipate that it will take more than two years to adjust their supply chains in response to the tariff threat. 21% of respondents believe they could complete such a task in less than a year, while 36% of respondents stated they anticipate those improvements will take one to two years to accomplish.
While acknowledging that strengthening the U.S. manufacturing base is a commendable goal, BIO’s CEO Crowley cautioned that the process would take years and that in the meantime, the sector and the present administration should be aware of the detrimental effects of Trump's planned tariffs.
For more details, see below:
Following comparable financial commitments from Johnson & Johnson and Eli Lilly, Novartis (based in Switzerland) has come up with a significant plan to expand its presence in the United States. Over the next five years, Novartis plans to invest $23 billion in the construction and expansion of ten sites in the United States. The expenditure is the most recent in a string of actions that appear to have been prompted by the possibility of pharmaceutical import taxes under the second Trump term.
In terms of manufacturing, Novartis plans to construct new radioligand therapy factories in Florida and Texas in addition to four additional manufacturing sites in states that will be decided soon. Furthermore, the business plans to expand its current radioligand manufacturing plants in California, New Jersey, and Indiana.
The additional locations in Novartis' production network will focus on manufacturing biologic drug substances, final drug products, chemical drug substances, and oral solids in addition to the radioligand plants, which are expected to support the company's commercial radiopharmaceuticals Lutathera and Pluvicto. The plants will also be prepared to perform tasks like packing and device assembly.
All things considered, Novartis anticipates that the additional capacity will put the business in a position to manufacture all of its important medications for American patients domestically.
Many of Novartis's important medications, such as radiopharmaceuticals and cell and gene treatments, are already produced in the United States for use by patients in the United States and other nations. The pharmaceutical company claims that the additional investments would strengthen its manufacturing power in fields like oncology, immunology, and neuroscience and bring its small interfering RNA (siRNA) production muscle to the U.S. for the first time.
In terms of domestic drug discovery, Novartis' U.S. cash influx also includes a $1.1 billion investment in a new research and development centre in San Diego. When the facility opens in 2028 or 2029, it will be the focal point of Novartis' West Coast research presence. Overall, it is anticipated that Novartis will add 1,000 new positions as a result of the U.S. investment boom.
President Donald Trump's much-awaited "Liberation Day" tariffs, which levied basic charges of 10% on almost all U.S. imports and set various retaliatory trade penalties for many other nations with large trade deficits, prompted Novartis to announce its investment plan. Trump then said that most of those reciprocal duties would be suspended for 90 days, but he kept imposing more on China, whose tariff rate is currently an absurd 145%. Pharmaceuticals were spared from this most recent wave of tariffs, but industry share prices have fallen as a result of the president's repeated threats of sector-specific taxes. Trump has already hinted that tariffs on pharmaceuticals would increase to 25% or more.
For more details, see below:
According to the head of the US Pharmacopoeia, tariffs on generic medications might have a devastating effect on everyone if supply chains are not resilient. Although branded pharmaceutical companies have been the focus of much of the discussion surrounding the Trump administration's proposed pharmaceutical import tariffs, generic medications and the businesses that produce them will be particularly at risk in the event of a trade war because of the industry's lack of resilience in comparison to its patented counterpart.
Ultimately, for off-brand pharmaceutical companies and the American patients who rely on their drugs, any disruption to the already precarious generics ecosystem may lead to production halts, shortages, and a range of other problems. Since import duties are quite unpredictable interruptions, given when and where they apply, the generics pharma sector already frequently struggles with those issues without the added danger of import fines.
Only 12% of the active pharmaceutical ingredients (API) for medications sold to Americans are produced in the United States, according to a USP analysis. While the rate for generic components is comparable to the national 12% statistic, the rate for branded pharmaceuticals is slightly higher, with 15% of API manufacture occurring in the United States.
The European Union accounts for 43% of branded pharmaceutical API, with non-member countries like Norway and Switzerland also making significant contributions, according to USP's medication supply map. In the meantime, generic medications make up 90% of all prescriptions written in the US, with 35% of them using APIs produced in India. The potential disruption in USP's supply chain serves as a clear reminder of the strains and disturbances that industry-specific pharmaceutical import levies may cause.
Pharmaceuticals were not subject to the reciprocal and basic import tariffs that President Donald Trump announced in early April, but industry analysts have indicated that industry-specific penalties, which are anticipated to be imposed at a rate of at least 25%, are still expected to be implemented.
A Section 232 inquiry into possible national security risks associated with pharmaceutical imports is also underway at the administration. If such a threat is found, the investigation empowers President Trump to implement trade restrictions, such as tariffs. Numerous well-known pharmaceutical companies will probably have the means to withstand a tariff storm. However, generics manufacturers, who already work on extremely narrow margins, will be far more vulnerable.
Tariffs, according to industry analysts, have the potential to cause supply chain disruptions and shortages. The best solution is tax policy, not tariffs, if the goal is to increase manufacturing capacity in the United States for both pharmaceuticals and medical technology.
As one of the main goals of Trump's trade strategy, industry insiders believe tariffs might offer a powerful incentive for producers of profitable, patent-protected medications to expand their production facilities in the United States. However, in the case of generic medication manufacturers, it remains unclear if a tariff is a real inducement to relocate or merely a motivator to manufacture a different product or buy for a different market.
Right now, USP is keeping an eye out for possible tariff interruptions on two fronts and creating backup plans. Initially, the company is examining supply chain components such as API and charting the production and sourcing of those ingredients and other essential materials. USP is also investigating various synthesis pathways or alternative techniques to produce authorized medications that can utilize a variety of available raw materials.
USP's 2024-2025 Vulnerable Medicines List for the United States can be used to determine which medications are most at risk. The analysis listed 49 medicines for chronic disorders and another 51 for acute care that have less-than-resilient supply chains, albeit it did not directly address tariff risk concerns. According to USP's assessment, the most vulnerable groups of medications were antibacterial drugs, hospital solutions, and pain and cancer therapies. USP maintains that 61% of the medicines on the list—the majority of which are injectables—were not in limited supply as of January.
According to the Commerce Department earlier this month, the Trump administration's 232 examination will focus on both completed generic and non-generic medicines, as well as medical countermeasures for medical emergencies and essential inputs like API and starting materials.
According to a recent survey by the trade group Biotechnology Innovation Organization, the investigation is a prelude to industry-specific tariffs, which many U.S. biotechs have cautioned could raise manufacturing costs and interfere with important production steps like sourcing raw materials.
For more details, see below:
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