Tariff threat may shut Bangladesh out of US drug market

Bangladesh is not alarmed by Trump's proposed 200 per cent tariff on imported drugs due to the country's relatively small volume of pharmaceutical exports to the United States, but industry insiders caution that the country could lose the US market altogether if the tariff comes into effect.

That means future potential for export expansion into one of the world's most profitable pharmaceutical destinations will be jeopardised too if such a high tariff is imposed.

In FY25, Bangladesh's pharmaceutical exports rose to $213.16 million from $205.48 million in FY24, according to the Export Promotion Bureau (EPB). Of this, exports to the US stood at roughly $20 million-less than 10 per cent of the total.

Chief Financial Officer (CFO) of Square Pharmaceuticals, Muhammad Zahangir Alam, noted that his company holds a 5 per cent share of this US-bound volume. He said the tariff, if imposed, would have a limited immediate impact due to the low current export figures. However, concerns remain that Bangladesh could miss out on long-term market potential.

Major Bangladeshi pharmaceutical exporters to the US are Beximco Pharmaceuticals, Square Pharmaceuticals, Incepta, Renata, and Eskayef.

They either export as a contract manufacturer hired by US-based firms or through profit-sharing partnerships with the latter. In both models, profits earned are not very high, and so if a 200 per cent tariff is imposed, US companies will feel discouraged to work in collaboration with foreign companies facing high tariffs.

Neighbouring India is still in talks with the United States over a trade deal that could soften the impact of Trump's threatened tariffs on exported items from India.

While it will take some time to know the tariffs to be imposed on India, the US has already announced a 35 per cent tariff on Bangladeshi items, pharmaceuticals excluded, on top of the existing 16 per cent tariff.

The Bangladesh government has been striving to engage with the US government to bring down the tariff before the announced deadline - August 1 - so that garment exports to the US, which bring about $8 billion annually, remain unaffected. Pharmaceutical export is not on the agenda.

The 35 per cent tariff, if not reduced in the meantime, will be effective from August 1, while for drug exports, countries and relevant companies may get a one-year extension before the imposed tariff comes into effect.

Meanwhile, India has established itself as a major supplier of generic drugs to the US, reportedly accounting for around 40 per cent of the market. According to The Hindu, India's pharmaceutical exports reached $30 billion in FY25, driven by a 31 per cent year-on-year surge in March.

Indian drug makers benefit from substantial policy support, said Mr Zahangir Alam, CFO of Square Pharma.

They are allowed unrestricted capital transfers to open offices abroad and access to a $300 billion government fund that provides low-interest credit for export expansion. As a result, Indian companies have set up offices across the US, and the US FDA has established its largest overseas office in India.

Bangladeshi manufacturers, on the other hand, face regulatory hurdles. Capital transfers abroad require phase-by-phase approval, and no clear mechanism exists for equity investment overseas, said Mr Zahangir Alam.

Without offices or operational setups in key markets, Bangladeshi drug exporters must rely on intermediaries or partnership arrangements, which limit their profitability and market presence.

The company secretary of Renata, Md. Jubayer Alam, said the US drug market is highly competitive and subject to strict product approval processes, making entry difficult even without new tariffs.

Despite the challenges, some local drug makers have received US FDA (Food and Drug Administration) certification.

Bangladesh could earn handsome revenue from drug exports if a conducive environment could be created with policy support.

Mr Jubayer Alam said that if a medicine is produced at a cost of Tk 7 per piece, it is sold at $1 a piece in the US market, but Bangladeshi exporters do not get the cost advantage for exporting through agencies.

Amid the policy barriers for exports to the US, Bangladesh's drug makers have continued to explore markets in ASEAN, Asia, Latin America, and Sub-Saharan Africa, where demand is driven by lower prices and flexible payment terms.

Still, industry leaders agree that the US remains an attractive market due to its size and high drug prices.

"The tariff is a matter of headache for us too if we think about further expansion of our global footprint," said Mr Jubayer Alam.

mufazzal.fe@gmail.com