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| Celltrion plant in Songdo, Incheon. / Courtesy of Celltrion |
By Kim Hyun-bin
Korean biopharmaceutical companies are expected to face pressure from the U.S. government to set up production facilities there, as the world's largest economy is moving to favor locally manufactured drugs and other medical products, according to industry officials, Tuesday.
Samsung Biologics, Celltrion and other companies, which produce a range of drugs for multinational pharmaceutical firms, could face the same fate as the makers of semiconductors, electric vehicles and secondary batteries, which have pledged to invest tens of billions of dollars in the U.S., they said.
The reaction came as U.S. President Joe Biden signed an executive order launching the National Biotechnology and Biomanufacturing Initiative, Monday, which focuses on expanding domestic production in the bio sector to create jobs in the U.S. and substitute supply chains abroad for new medicine, chemicals and other products.
Earlier, the Biden administration signed the Inflation Reduction Act (IRA) and the CHIPS and Science Act, which provide tax incentives for domestically produced electric and fuel cell vehicles and batteries, along with funding for the domestic research and production of semiconductors. They are designed to create a global supply chain without China and pressure foreign companies to build plants and create jobs in the U.S.
"The global industry is on the cusp of an industrial revolution powered by biotechnology," the White House said. "(The U.S. has) relied too heavily on foreign materials and bioproduction, and our past off-shoring of critical industries, including biotechnology, threatens our ability to access materials like important chemicals and active pharmaceutical ingredients."?
If the Biden administration's bio policy includes encouraging domestic production, it is predicted that the Korean industry will have no choice but to consider setting up factories in the U.S. However, some experts believe local bio companies could benefit in the long run if they decide to establish production bases in the U.S.
In particular, as the U.S. government emphasizes domestic production, there is a possibility of disruptions even for contract manufacturing for U.S. pharmaceutical companies.
There are many cases in which Korean companies are consigned to produce U.S. companies' products, such as Samsung Biologics making Moderna vaccines for COVID-19 and SK Bioscience making Novavax vaccines in Korea.
"The executive order is not specified so we are keeping a close eye on how it progresses. However, the move aims to put China in check, and one of our key competitors is China's WuXi Biologics, which is expected to be impacted, so there is a possibility that we could benefit, as there are not many large CDMO companies in Asia," an official from a major biologics company here said. "Also, we are considering constructing a factory in the U.S."
Korea's semiconductor and electric vehicle (EV) sectors have also been impacted by the IRA and CHIPS and Science Act signed by the Biden administration.
The IRA stipulates that consumer tax credits of up to $7,500 will be granted in full only to EVs produced in the U.S. that are using batteries and core minerals manufactured in that country. The stipulation has become a major disadvantage for Hyundai Motor Group, which manufactures all of its EVs in Korea.
The CHIPS Act prevents U.S.-subsidized companies from investing in high-tech semiconductor factories in China. Both bills are seen as being unfavorable to Korea and have emerged as a pending trade issue between the two countries.
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