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US biopharma innovation can be harmed by ongoing trade war with China

The ongoing trade war between the US and China will have huge ramifications on the biopharmaceutical industry for both countries. However, it seems that China is in a much well position from a negotiation viewpoint, according to leading data and Analytics Company.

On 3 April 2018, the US Trade Representative’s (USTR) office announced its intention to add a 25% tariff on around $50bn worth of Chinese imports across 1,300 product categories, many of which are used by drug makers. According to the Food and Drug Administration (FDA), approximately 80% of active pharmaceutical ingredients (APIs) used by US manufacturers come directly from China and India.

The Trump administration has continuously mentioned reducing drug prices in order to drive patient costs down, but the proposed tariff is expected to do just the opposite.

An Oncology expert says that: “US generics drug makers such as Novartis’ Sandoz, Pfizer, Teva and Mylan, and potentially even firms that produce biosimilars this could a concern for them, as the projected tariff could increase manufacturing costs and result in higher prescription drug costs for patients across the US.”

China responded by imposing a 25% duty on 106 US goods, but decided not to add such tariffs for US drugs being imported into China. In addition, the Chinese government offered a preferential tax rate of 15% to generic drug makers in the hope to help reduce medical bills for patients and foster innovation.

Following China’s actions, President Trump instructed the USTR on 5 April 2018 to consider adding an additional $100bn worth of tariffs on Chinese imports. The US government will place a 25% tariff on raw drug ingredients, insulin, epinephrine and vaccines.

According to a data and Analytics Company, China currently appears to be in a much better position from a negotiation standpoint, as the Chinese biopharma industry does not seem to be threatened by this move.

Oberoi concludes: “The uncertainty of these new proposed tariffs may diffuse through the entire value chain of the biopharma industry and negatively affect US patients, payers, and generics and biosimilar drug makers. It may lead to reduced trade with China as the US biopharma companies may opt for procuring APIs from other countries such as India.

“In a state where prices are capped, there may be less investment going into R&D, which could potentially harm US innovation in the longer term.”

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