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Trump tariff moves raise fear medicines may not be exempt

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Tariffs on medicines will hurt Trump healthcare aims,

industry

says

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Europe, U.S. have interconnected supply chains for

medicines

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Medicines have long been spared from trade wars due to

likely

patient harm

By Maggie Fick

LONDON, March 18 (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 ( MRK )

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 ( MRK ) mega-blockbuster Keytruda and AbbVie's ( ABBV )

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 ( MRK ) declined to comment for this story. AbbVie ( ABBV ) 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 ( LLY ) 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."