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Trump’s vow alarms drug industry
Bringing jobs from abroad complicated
By EJ Lane
STAT

SINGAPORE — It looks as if the pharmaceutical industry is the next target of President-elect Donald Trump anti-globalization campaign.

In his first press conference since the election, Trump last week took aim at the US drug industry for producing so many of its medicines overseas.

“We have to get our drug industry coming back,’’ Trump said. “They supply our drugs, but they don’t make them here, to a large extent.’’

Pharma execs have been afraid Trump would seize on this issue.

Many pharmaceutical ingredients sold in the United States are indeed made abroad, in complex supply chains dominated by China and India for generics and by Singapore and South Korea for higher-end biologic drugs. Trump has made it abundantly clear that he’s no fan of outsourcing production in this fashion.

“Our drug industry has been disastrous,’’ he said Wednesday. “They’re leaving left and right.’’

It’s unclear what levers Trump might pull to pressure the drug industry, but pharmaceutical factories in India and China, in particular, may be tempting targets, given that they’ve repeatedly been cited for safety and quality violations, from lying to inspectors to leaving bird droppings and black mold on the factory floor.

Biopharma executives and government officials across Asia have been worried Trump could impose heavy taxes on ingredients coming into the United States or crack down on overseas manufacturing.

Singapore, South Korea, and Australia all have free-trade agreements with the United States that insulate them somewhat from import taxes. But Trump has promised to tear up the Trans-Pacific Partnership trade pact that Japan and 10 other nations painstakingly negotiated in recent years with the Obama administration. That would leave those countries more vulnerable to protectionist policies, such as tariffs.

Adding to the unease in Asia: Trump’s pick of attorney Robert Lighthizer, a piercing critic of China’s trade practices, as US trade representative.

“Pharma firms will have to decide how to handle what is going to be a rocky few years,’’ said Deborah K. Elms, executive director of the Singapore-based Asian Trade Center.

Elms predicted that some companies might shift manufacturing to such nations as Singapore and South Korea, where existing free-trade agreements provide “more certainty’’ about stable trade policy. Others may bring manufacturing back to the United States, “although I think firms may wait to see what happens before making this decision, as costs are higher,’’ she said.

Ending outsourcing won’t be easy: “The cost of manufacturing in Asian countries like India or China is far less, five times less in some cases, than in developed markets,’’ said Singapore-based supply chain consultant Per Karsten Stolle, who has worked for emerging market access firm Zuellig Pharma.

What’s more, several Asian countries require drug companies to do at least some local manufacturing — or risk losing access to massive markets, such as Indonesia’s 258 million people.

Despite those obstacles, manufacturing advocates in the United States are gearing up to start wooing companies to bring jobs back.

Drew Quality Group, a nonprofit based in Massachusetts, aims to boost production of generic drugs in the United States. It’s pushing to secure tax incentives to set up factories in economically depressed areas, hoping for support from insurers, who might welcome lower-cost medicines.

“Our target is to manufacture critical drugs listed as in shortage’’ by the Food and Drug Administration, said chief executive Deborah Drew.

The key, Drew said, is to develop efficiencies that make manufacturing in the United States cost-effective.

“We can’t go back to the old style,’’ she said. “Our aim is to reduce costs, use new technologies, and enforce quality controls.’’

The Obama White House has already started to support such initiatives.

Last month, the Commerce Department announced $70 million in grants to support a new National Institute for Innovation in Manufacturing Biopharmaceuticals. The goal: to scale up the production of complex biologic drugs in the United States.

Many of those drugs are now being made in Asia, in factories approved and regularly inspected by the FDA.

Singapore stands out as a top-end manufacturer, with hundreds of millions of dollars of investment in the past five years from AbbVie, Amgen, and Novartis among others to set up plants to produce biologic drugs. US-based Sigma-Aldrich and Thermo Fisher Scientific provide manufacturing support products and services from a hub in Singapore as well.

India has worked to attract the sector, too, with Prime Minister Narendra Modi’s “Make in India’’ campaign.

And South Korea has also seen an explosion in biologic manufacturing with Seoul-based biotech contract manufacturing firm Samsung BioLogics now home to a state-of-the-art manufacturing operation that serves firms from Bristol-Myers Squibb to Roche. The company is also pushing for European and American approvals of biosimilars — unbranded versions of lucrative biologic drugs, from autoimmune therapy Enbrel to breast cancer therapy Herceptin.

South Korea’s finance minister Yoo Il-ho recently said the country will vigorously defend its manufacturing industries against any “irrational demands from the US’’ on trade.

Elms said pharma companies that have built overseas supply chains should be especially wary of Trump’s threat to impose an import tax on items manufactured abroad. That, she said, is a “looming problem’’ for much of the industry.

“This will tax imports and this is likely to hit pharmaceutical products manufactured abroad and imported back into the United States rather more significantly than tariffs,’’ she said.