By Maggie Fick
LONDON (Reuters) -Drugmakers are urging the Trump administration and European Union officials to exclude medical goods from expanding tariff wars, hoping to avert price spikes on top-selling medicines made in Europe from Novo Nordisk’s Wegovy for weight loss to Merck’s cancer immunotherapy Keytruda.
In conversations with U.S. officials, the pharmaceutical industry argued that tariffs on the EU would increase drug costs and create access barriers for patients, endangering priorities outlined in President Donald Trump’s health-related executive orders on drug pricing and increasing life expectancy of Americans, according to more than a half dozen pharma industry sources with direct knowledge of the discussions.
Some are signalling a willingness to expand manufacturing in the United States, while pressing for tax breaks and regulatory changes that would make it easier to make that happen, according to three of the sources.
“We are firmly delivering the message to the Trump administration and to the European Union that patients will pay the price” for tariffs, said a senior executive at a European drugmaker.
Industry executives are also pressing their case with officials in Brussels, urging the EU hold off on retaliatory tariffs even if Trump includes medicines in a trade dispute, several of the sources said. Some raised the fact that lifesaving medicines were excluded from sanctions on Russia following its invasion of Ukraine.
“We as Western countries have interconnected supply chains in this sector. Interrupting these flows will hurt patient access to lifesaving medicines,” said a senior executive at another large European drugmaker. “It’s a lose-lose” situation.
Pharmaceutical products have long been spared from trade wars due to the potential harms. But Trump’s move to increase tariffs on goods from China, including finished drugs and raw ingredients, as well as an initial round of tariffs between the U.S. and EU on goods like steel and bourbon, has raised expectations that medicines will join the list.
The majority of medicinal supplies imported from China are of low monetary value. But the U.S. depends on medicines partly produced in Europe that bring in hundreds of billions of dollars in revenue.
For example, Novo Nordisk partially makes some of the active pharmaceutical ingredient for obesity injection Wegovy in Denmark, while Merck’s mega-blockbuster Keytruda and AbbVie’s wrinkle treatment Botox are made in Ireland.
Novo Chief Executive Lars Fruergaard Jorgensen said this month that his company would experience short-term impacts from tariffs, but is moving to produce domestically more of its medicines sold in the U.S. The company last year announced a $4.1 billion investment to expand production in North Carolina.
Merck declined to comment for this story. AbbVie declined to comment on where individual medicines are manufactured but said it has a robust manufacturing network globally.
The U.S. government, a major buyer of drugs for its massive Medicare and Medicaid health programs, may face higher prices to account for the cost of tariffs, said Simon Baker, head of global biopharma research at Redburn Atlantic.
Emily Field, head of European pharma equity research at Barclays, told Reuters that until very recently she thought tariffs on prescription drugs were not a serious threat. Now she is “getting asked about this nonstop by clients,” she said.
‘NOT BROKEN’
Industry sources declined to say how the Trump administration has responded to its messages. The U.S. president has previously announced tariffs on trade partners only to subsequently suspend or delay them or allow exceptions. One source said it was impossible to know which of several trade policy philosophies would prevail in the White House.
Trump last week called out Ireland for luring pharmaceutical companies with tax breaks, contributing to a “massive deficit.” White House officials did not immediately respond to a request for comment. The European Commission declined to comment.
The COVID-19 pandemic highlighted the dependency of the U.S. and EU on China and India for raw ingredients to make critical drugs and hospital supplies, as governments competed for materials used in vaccines and protective gear.
Many large drugmakers have since sought to delink supply chains for the Western and Chinese markets. But the notion of separating production ties between Europe and the U.S. was not seriously considered, several of the sources said.
Indianapolis-based Eli Lilly recently announced plans to spend at least $27 billion on four new manufacturing plants in the U.S., but many drugmakers would find it difficult to follow suit, several of the sources said.
Building a new production facility in the U.S. can cost up to $2 billion and take 5 to 10 years before it is operational, including time and costs related to fulfilling regulatory requirements, according to industry trade group PhRMA.
A senior executive from one of the European drugmakers said creating a wholly U.S.-based manufacturing process would mean diverting funds from researching future medicines, and amounts to “fixing something that is not broken.”
(Reporting by Maggie Fick;Additional reporting by Michael Erman in New York and Philip Blenkinsop in Brussels; Editing by Michele Gershberg and Bill Berkrot)
Comments