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EU-branded medicines face 15% import tariff; certain

generic

drugs might be exempt

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Tariffs may raise consumer prices unless mitigated,

analyst says

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Pharma companies stockpile, make deals to absorb some

costs

By Bhanvi Satija

July 28 (Reuters) - The European Union's trade deal with

the United States could cost the pharmaceutical industry between

$13 billion and $19 billion as branded medicines become subject

to a tariff of 15%, analysts said on Monday.

The added costs could raise prices for consumers unless

pharmaceutical companies take action to mitigate the impact of

the tariffs, one of the analysts said.

Pharmaceuticals had historically been exempt from duties.

Medicines are the largest European exports to the United States

by value and the EU accounts for about 60% of all pharmaceutical

imports to the U.S.

On Sunday, European officials said that a bilateral trade deal

for an across-the-board 15% tariff included pharmaceuticals,

except for some generic drugs, which would be subject to no

tariffs.

The U.S. has been conducting a national security

investigation into the pharmaceutical sector and the industry

has been bracing for separate sectoral tariffs. President Donald

Trump said earlier this month, before negotiating the bilateral

deal, that pharmaceutical tariffs could be as high as 200%.

Some Wall Street analysts said that they do not expect

additional tariffs on the EU as a result of the investigation,

but others cautioned that the deal was not yet signed and that

several questions remained unanswered.

UBS analyst Matthew Weston said that he expects details of

the trade deal to include protective measures for EU pharma

exports from the U.S. investigation, especially since such

measures are being discussed in negotiations with the United

Kingdom and Switzerland.

ING analyst Diederik Stadig also said that while tariffs on

top of the 15% were not expected, even after the conclusion of

the national security investigations, nothing is completely

clear "until a trade deal is inked."

Stadig estimates that these levies could add $13 billion to

industry expenses without any mitigation strategies, and some of

that could be ultimately borne by the consumer.

Bernstein analyst Courtney Breen puts the additional

expenses at $19 billion for the industry, but she notes that

companies might be able to absorb some of the costs with the

measures they have been implementing - such as stockpiling of

drug products and new deals with contract researchers.

Earlier this month, Sanofi said it will sell a

manufacturing facility in New Jersey to Thermo Fisher,

where the French drugmaker's therapies will continue to be

manufactured. Roche's CEO Thomas Schinecker said last

week that the company was increasing its U.S. inventories to

avoid any immediate disruption from tariffs.

UBS' Weston said that it was not immediately clear which

generic drugs were exempted from duties under the deal, but any

impact for generic drugmaker Sandoz for this year should

mostly be manageable.

Shares in pharmaceutical companies Sanofi, Roche and Sandoz

Group all closed up between 0.5% and 1% on Monday.