Trump’s 100 percent duties on patented drugs rattle sector as uncertainty hangs
Australia’s pharmaceutical sector is bracing for the impact of the United States’ latest 100 percent tariffs on related products, with stakeholders opposing the move as it adds uncertainty to the industry.
US President Donald Trump imposed the tariffs late last week on pharmaceutical imports, in line with a bid to tax foreign-made drugs to pressure manufacturers to shift production to the US.
In a statement on April 2, Trump said the moves were necessary to address “threats” to US national security and the economy posed by imports of pharmaceuticals and ingredients.
The latest tariffs apply to patented drugs made outside the US, but the rate will be reduced to 20 percent for companies that move their operations to the US.
The move follows a 10 percent baseline tariff on most Australian goods imports imposed by the US, in addition to a 50 percent tariff on Australian steel and aluminum imports, as part of worldwide tariffs rolled out by the Trump administration earlier last year.
“This is one of several different announcements we’ve heard over the last 12 months about the possibility of tariffs on pharmaceutical exports but this latest one, as with earlier ones, is deeply disappointing and deeply concerning, and is not the act of a friend,” Australia’s Health Minister Mark Butler told local reporters on April 3.
“A friend that has shared, for more than 20 years, free and fair trade including pharmaceutical exports going from both different directions to the benefit, not just of our mutual economies, but (also) to the benefit of patients here in Australia and patients over in America,” he said.
“We’re going to work through the details of this latest announcement, work with companies that might be impacted here in Australia who have a tradition of exporting pharmaceuticals to America. We’re obviously very concerned about their businesses and the jobs of the people that they employ,” Butler said.
The minister added that Australian biotech giant CSL, which is a major exporter of blood plasma products to the US, “don’t expect a material impact on their business, at least this year”, with the company investing significantly in US operations in recent years.
Strong opposition
Medicines Australia, a trade group representing the country’s research-based pharmaceutical industry, said it firmly opposes the US tariffs.
The organization and its members “support free, fair, and open trade and firmly oppose” the tariffs on Australian branded and patented medicines exported to the US, according to a statement.
The tariffs are more likely to impact Australian companies “seeking opportunity in the US market”, its CEO Liz de Somer said.
Australia has a pharmaceutical trade deficit with the US. Last year, the country exported about A$1.91 billion ($1.32 billion) in pharmaceutical products to the US but imported A$3.34 billion, the group said, highlighting government figures.
Ben Udy, lead economist for economic advisory Oxford Economics Australia, told China Daily that about 45 percent of Australia’s total pharmaceutical exports go to the US, with the vast majority consisting of blood and plasma products.
The “area of greatest uncertainty” posed by the latest US move is smaller exporters focused on patented branded medicines that fall outside tariff exemptions, he said.
“For those companies, two paths forward exist: Engaging with the US administration to negotiate relief, or pivoting to alternative markets,” Udy said.
Medicines Australia’s CEO added that there is also significant concern about a reference pricing benchmark proposed by the US on the sector that could impact drug prices in Australia which are lower compared with those of other developed countries.
Under Australia’s Pharmaceutical Benefits Scheme, its federal government negotiates medicine prices directly with suppliers to make them cheaper and subsidized for Australians, a framework which has drawn criticism from US lobbyists as an “unfair trade practice”.
Some countries such as the United Kingdom and Japan “have undertaken negotiations with the US administration to address both tariffs and US reference pricing policies”, Liz de Somer said.
“We must now consider the consequences of not addressing these global developments,” she said.
Contact the writers at alexishooi@chinadaily.com.cn