On April 8, local time, US President Trump delivered a speech saying that the United States will impose tariffs on drugs. This news has once again attracted market attention to pharmaceutical companies that were "exempted" in the previous round of tariff increases.

From the market reaction on the 9th, the decline of individual stocks in the API sector was the largest. Data shows that 90% of active pharmaceutical ingredients (API) in the US market rely on imports, of which 60% come from China. In the short term, API companies that rely on US export business may be affected by the tax increase, but in the long term, the tax increase on imported APIs may cause a surge in the cost of US pharmaceutical research and development and manufacturing.

Industry insiders believe that US tariffs mainly have a certain impact on the low-end pharmaceutical industry, and have little impact on the high-end pharmaceutical industry in the United States that has no alternative industry.

Several pharmaceutical companies responded

According to CCTV News, Trump said that the United States does not produce its own drugs and other products that improve health. The price paid by the United States for drugs is often many times higher than that of countries that produce drugs. Trump believes that once tariffs are imposed on drugs, pharmaceutical companies will open factories in the United States because the United States is the "largest market." According to the exemption list previously released by the United States, some pharmaceutical products have become the "lucky ones" exempted - in pharmaceutical preparations, except for four specific drugs such as insulin and antimalarial drugs, common therapeutic drugs such as antibiotics, vaccines, antibodies, etc. maintain the original tax rate of 20%; in APIs, "just-needed" raw materials such as vitamins, hormones, and antibiotics are exempted, but varieties such as ibuprofen and fentanyl precursors still need to bear a high tariff of 54%; in plant extracts, the tax rates of three types of products such as rutin are stable at 21% to 48%, and have not been affected for the time being. On April 9, judging from the reaction of the capital market, APIs that the US pharmaceutical industry relies heavily on, medical device companies that originally bear heavy taxes, generic drug companies that contribute to overseas sales revenue, and innovative drug companies have all been affected to varying degrees. As of the close, Rundu shares fell to the limit, Hanyu Pharmaceutical fell 6.62%, Jianyou shares fell 4.51%, and Huahai Pharmaceutical fell 3.89%. However, it is worth noting that public information shows that 90% of active pharmaceutical ingredients (APIs) in the US market rely on imports, of which 60% come from China. This deep dependence makes any tariff adjustment likely to trigger a "collateral effect". If the United States adjusts the scope of taxation on APIs, it will cause a surge in the cost of US pharmaceutical research and development and manufacturing in the long run.

Therefore, if it is an API product with high demand and high concentration in the US market, the degree of impact of tariffs may be low. Taking Jianyou shares as an example, 80% of heparin APIs in the US market rely on imports, of which about 60% come from China, and Jianyou shares are one of the core companies in China's heparin exports. On the 9th, Jianyou shares responded to the public that "the company's sales to the United States are mainly short-supply drugs. The shortage of some drugs in the United States continues to occur, and the market demand will not disappear. The possibility of the company's products being replaced is relatively low, so the bargaining power is relatively strong. And we have made some preparations through diversified market layout, such as expanding sales in Europe and emerging markets."
Hanyu Pharmaceutical, which exports GLP-1 liraglutide injection and API to the United States, told the reporter of Daily Economic News that the commercial contract of Hanyu Pharmaceutical's existing business has been signed long ago, and both parties have performed in accordance with the contract, which has limited impact on the profit of the drugs on sale. In addition, the GLP-1 liraglutide injection currently exported to the United States is a product on the US FDA's list of drugs in short supply, which is not easily replaced.
Hanyu Pharmaceutical also stated that the company currently adopts the external authorization model of "front-end shipping price + back-end gross profit sharing", and can respond flexibly according to tariff policies in the future. Regarding the issue of the proportion of the US market in the company's revenue, Hanyu Pharmaceutical stated that according to the third quarter report of 2024, overseas revenue contribution accounted for about 50% of the consolidated financial statements. The company is responding to policy uncertainties through a global layout. In addition to the US market, it has established a layout in emerging markets such as Southeast Asia, Europe, and South America to effectively reduce the risk of a single market. At present, the United States has not included drugs in the tax increase list. The company will continue to pay attention to the future international situation and will dynamically adjust its strategy according to the tariff policy.
In addition, Tonghua Dongbao responded to the reporter of "Daily Economic News" that according to the tariff policy announced by the United States on April 2, medicines were listed as exempted goods. At the same time, the company has no products exported to the United States, so the current US tariff policy has no impact on the company's production and operation. Data shows that the company's overseas revenue in 2024 will be about 100 million yuan, accounting for a small proportion of total revenue, and the countries currently exported are all countries along the "Belt and Road", and the policy environment is relatively stable. Tonghua Dongbao said that the company will continue to pay close attention to changes in the international environment, flexibly respond to the complex and changing external environment, and ensure the company's long-term stable development.

Innovative drug companies emphasize the importance of emerging markets

Innovative drug companies that need to earn R&D costs in overseas markets, especially mature pharmaceutical markets in Europe and the United States, have also attracted much attention in this round of tariff adjustments.

Among innovative drug companies, BeiGene is one of the companies with the highest proportion of revenue from exports to the United States. In 2024, the US market accounted for 51.4% of BeiGene's revenue, and the sales of the star anti-cancer drug Baiyueze in the United States reached 13.89 billion yuan. In July 2024, BeiGene announced the official opening of its new flagship base at the Hopewell Princeton West Innovation Park in New Jersey, USA. The company said the new base ensures the resilience of the supply chain and avoids global supply disruptions.

But BeiGene has also noticed the importance of overseas markets outside the United States. The reporter noted that in November last year, Wu Xiaobin, global president and chief operating officer of BeiGene, said that in the global pharmaceutical map, Europe and the United States are the markets that pharmaceutical companies value most. Not only are the market sizes large, but there is also a higher room for drug pricing, especially the US market has a siphon effect, and more innovative drugs are willing to be listed in the United States for sale. Wu Xiaobin said that in contrast, developing countries and emerging markets are areas that have not been paid attention to in the past. These markets account for less than 10% of the global sales of innovative drugs. If Chinese pharmaceutical companies' PD-1 can enter the local market at an affordable price, it may be able to treat hundreds of thousands of patients and completely subvert these markets.

For innovative drug companies that do not have physical drug exports and sales for the time being, they can also temporarily avoid the impact of separate taxation policies. Kelun Pharmaceutical said that Kelun Pharmaceutical's holding subsidiary Kelun Biotech has business cooperation with the US pharmaceutical company Merck, which is a business under the service trade and does not involve actual goods trade. Therefore, the tariff has no impact on Kelun Biotech's business. In addition, although Kelun Pharmaceutical's preparations and APIs have export business, they do not export to the United States, so the issue of US tariffs has no impact on Kelun Pharmaceutical for the time being.
Overall, people in the pharmaceutical industry believe that US tariffs mainly have a certain impact on the low-end pharmaceutical industry, and have little impact on the high-end pharmaceutical industry in the United States that has no alternative industry. In an interview with a reporter from the Economic Daily, Notai Bio said that the tariff war will have a certain impact on domestic companies in the short term. In the medium and long term, companies need to increase R&D investment, dig deep into the moat, further consolidate and strengthen the leading position of the subdivided track, and maintain the company's advanced nature on the world stage.

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