[비즈한국] With the inauguration of Donald Trump as the 47th U.S. President just over two months away, South Korea's pharmaceutical and biotech industry is keeping a close watch on market shifts. A positive signal is the potential increase in demand for biosimilars, following the same trend of drug price reduction seen during Trump's first term. Furthermore, his campaign pledge to ban the import of Chinese pharmaceutical products is expected to benefit the domestic CDMO (Contract Development and Manufacturing Organization) industry.
As the second Trump administration aims to reduce healthcare spending, it is expected to be favorable toward the use of generics and biosimilars. Previously, the Trump administration pushed for legislation to lower prescription drug prices and ban pharmaceutical companies from providing rebates to PBMs (Pharmacy Benefit Managers). If this trend continues, it is expected to be a positive development for the domestic biosimilar industry.
South Korea is the country with the second-highest number of FDA-approved biosimilars, following the United States. According to the Korea Biotechnology Industry Organization, with three products approved this year, South Korea now holds a total of 13 approved products. By country, the U.S. has 24, South Korea 13, Switzerland 6, Germany 5, and India 5. Among domestic companies, Samsung Bioepis holds 8 products, and Celltrion068270 holds 5.
In his campaign pledge, ‘Agenda 47,’ Trump stated he would bring the production of all essential medicines back to the U.S. by implementing tariffs and import restrictions in stages. China is the largest producer of essential medicines for the U.S., producing 95% of ibuprofen and 91% of hydrocortisone. Trump plans to reinstate Executive Order 13944, which he signed in 2020. This order contains provisions for sourcing essential medicines through domestic supply chains.
Additionally, with the Biosecure Act—jointly proposed by the Republican and Democratic parties—expected to pass, analysts suggest that domestic CDMO companies could benefit by filling the void left by China. The Biosecure Act focuses on restricting transactions with Chinese biotech companies. Five companies, including BGI Group, WuXi Biologics, WuXi AppTec, MGI, and Complete Genomics, have been identified as companies of concern. If the bill passes within the year, international competition to capture the market share held by Chinese CDMOs is expected to intensify.
Domestic pharmaceutical and biotech companies are actively entering the CDMO business. Industry leader Samsung Biologics207940 currently possesses an annual production capacity of 600,000 liters. Its 180,000-liter production plant under construction in Songdo, Incheon, is scheduled to begin operations next April. Upon completion, Samsung Biologics will secure a total production capacity of 784,000 liters, the largest in the world.
Celltrion announced its entry into the CDMO business this past October. The company stated it would establish a 100%-owned subsidiary and invest over 1 trillion won starting next year to build a plant with an 180,000-liter capacity. In a 'Letter to Shareholders' last month, Celltrion noted, "There is a prevailing analysis in the market that the Biosecure Act will lead to a diversification of supply chains centered on allied nations with industrial competitiveness, such as South Korea, Japan, and India," adding, "In line with this industrial trend, we are preparing to complete the establishment of our CDMO subsidiary within the year to take advantage of the opportunity to secure demand currently met by Chinese companies."
However, there are also negative outlooks. If the U.S. restricts the use of Chinese products, the domestic finished drug industry could take a hit. The self-sufficiency rate for domestic finished drugs stood at approximately 70% as of 2022. The Korea International Trade Association, in a recently published report titled 'Supply Chain Reorganization Policies in Major Countries' Pharmaceutical and Biotech Industries and Implications,' assessed that "as the trend of protecting domestic drug production strengthens, if China weaponizes active pharmaceutical ingredients (API) by restricting exports, or if the deepening U.S. trend of 'de-risking' from China limits the use of Chinese products, it could negatively impact South Korea's finished drug industry, which relies heavily on Chinese raw materials."
Voices are also calling for preparation against the intensification of "nation-first" protectionism. According to the Korea Institute for Industrial Economics and Trade, during the KORUS FTA renegotiations in 2018, the Trump administration’s demands led to the removal of the preferential drug price clause that had been applied to new drugs from domestic innovative pharmaceutical companies. The institute explained, "While the impact of promises for reduced regulations and corporate tax cuts on local investments by Korean firms may be minimal, there are concerns that the removal of these clauses could lower the motivation for new drug development due to trade policies."