Drug production in the US: An expensive and difficult problem to solve

VTV.vn - Scarce labor, high construction costs, and record-breaking increase in work visas make shifting production to the US not easy.

The US may impose higher taxes on pharmaceuticals than on cars.

Last week, US President Donald Trump said he could impose tariffs on pharmaceuticals and medicines higher than the 25% currently applied to cars.

According to Mr. Trump, pharmaceuticals will be subject to higher taxes because the profit margin of this item is much higher than that of cars. In addition to pharmaceuticals, semiconductor chips are also subject to this category. Previously, President Trump warned that he would impose "quite high taxes" on pharmaceuticals at the rate of 150 - 250%.

Amid the uncertainty surrounding tariffs, a number of major pharmaceutical companies are rushing to bolster their production capacity and inventory in the US.

British pharmaceutical giant GSK said it will invest $30 billion in research and development and supply chain infrastructure in the US over the next five years. The announcement came shortly after US President Donald Trump arrived in the UK for his second state visit to promote investment deals.

Meanwhile, two other European pharmaceutical giants, Roche (Switzerland) and AstraZeneca (UK-Sweden), are not far behind, each pledging to invest $50 billion in the US over the next five years.

Difficulties in moving production facilities to the US

Foreign pharmaceutical corporations plan to build a series of new production facilities in the US. However, this option also faces many difficulties, because this is a long-term investment process, for example, building a new pharmaceutical factory in the US takes many years, not just one or two years.

In addition to the time issue, the problem that pharmaceutical companies must solve is whether drugs produced in the US can be competitively priced compared to drugs produced in other countries. Although the current administration is prioritizing production in the US, production costs here, from land, labor, factory operating costs, are higher than in other countries.

Take human resources, for example. In the US, there is a shortage of human resources in the construction, management and operation of factories. People are still talking about the US immigration agency arresting and deporting more than 300 Korean workers who were building Hyundai Motor's electric car battery factory in Georgia on September 4. The company said that they had to use Korean workers because they could not find American human resources.

The shortage of human resources in the US is not only in the pharmaceutical industry. Meanwhile, the type of visa that allows foreign skilled workers to work in the US, the H1-B visa, has just increased to 100,000 USD per person.

In short, to manufacture drugs in the US, companies will have to find a balance between high manufacturing costs, and pressure to reduce drug prices.

Illustration of medicines. Photo: Pexel

European pharmaceutical companies struggle with tariffs

Investing in the US is a long-term process, while pharmaceutical companies are still struggling to adapt to the current tariff situation, such as upgrading and expanding existing facilities to quickly increase production capacity. Or managing and transferring inventory is also a top priority strategy. All of these solutions require human resources and are not small in cost.

The US imposition of 15% tariffs on most European Union (EU) goods has sent shockwaves through Italy's pharmaceutical exports, one of the country's most valuable industries.

Pharmaceuticals and chemical products have long been among Italy's highest value-added exports to the US. Data shows that by 2024, Italian pharmaceutical exports to the US will reach around 10 billion euros.

With the tariffs in place, the additional costs could rise to as much as 1.95 billion euros, with industry leaders warning that much of this burden will inevitably be passed down the supply chain.

“The tariffs have shaken our export market,” said Gian Maria Morra, an Italian pharmaceutical exporter. “The shaken market has been so strong that in the last three or four months, orders from the US have dropped dramatically. Orders to the US market have dropped by 80%.”

To mitigate the impact of tariffs, pharmaceutical exporters from Italy and several other European countries are shifting their strategies to adapt in the short term, focusing on risk diversification, market rebalancing and product portfolio optimization.

Professor Seamus Coffey - University College Cork, Ireland said: "Ringaskiddy or Carrigaline is home to a large number of pharmaceutical companies, both Irish and foreign. These companies have invested a huge amount of money here. The facilities are very large, the pharmaceuticals are high-end, top quality. I don't know if there will be any production shifts, but I think the impact of tariffs is long-term, so any preparation now is very necessary."

Industry experts point out that companies are prioritizing exports to more stable regions such as the EU and emerging markets, while diversifying product lines and production processes to better withstand the uncertainty brought by tariffs.

The pharmaceutical federation also warned that the new US tariff framework could pose a double threat. In the short term, many European companies will not be able to adjust prices quickly enough, forcing them to absorb the costs, eroding profits and straining supply chains – potentially making medicines harder for patients to access. In the long term, billions of euros could be diverted from research and development, stifling innovation and hurting patients.

Source: https://vtv.vn/san-xuat-thuoc-o-my-bai-toan-dat-do-kho-giai-100250923115016231.htm