“5th Economic Security Seminar” Held Economic Security and the Pharmaceutical Industry
On December 15, 2025, the “5th Economic Security Seminar,” organized by the Economic Security Task Force (Economic Security TF) of the JPMA Pharmaceutical Industrial Policy Committee, was held online for member companies of the JPMA.A total of 117 participants attended the event. In Part 1, Mr. Takahisa Kawaguchi, Senior Researcher at the Business Risk Division of Tokio Marine DR Co., Ltd., delivered a presentation on the theme of “Economic Security and the Pharmaceutical Industry.” Part 2 featured a panel discussion by members of the Economic Security TF.
Background of the Event
The Economic Security Task Force was established in October 2021 and has been conducting activities focused primarily on examining the impact of a wide range of economic security issues on the industry.Three sub-teams—supply chain, research and development, and cybersecurity—have been established within the task force, and they have been engaged in exchanging views with relevant ministries and agencies, responding to public comments on laws and regulations, and providing information to member companies through seminars.
Amid rising geopolitical risks, tariffs, and U.S.-China tensions—all of which are increasing the global importance of economic security—there are concerns that the pharmaceutical industry will be significantly impacted. In light of this situation,we have decided to hold a seminar for member companies of the JPMA on the themes of “The Pharmaceutical Industry and Economic Security” and “Economic Security Challenges and Risks, as well as Initiatives to Address Them and the Sharing of Best Practices.”
Opening Remarks
On the Occasion of the “5th Economic Security Seminar”
Pharmaceutical Industrial Policy Committee, Economic Security Task Force: Riki Yoshida, Leader
From the perspective of economic security, it is becoming increasingly important to analyze the environment surrounding the pharmaceutical industry, and there is a growing need to closely monitor trends in other countries, including U.S. tariff policies and Most-Favored-Nation (MFN) policies.Furthermore, strengthening the drug discovery innovation ecosystem has become a key policy priority for many countries; in Japan, synthetic biology, biotechnology, drug discovery, and advanced medical care have been designated as areas of the national growth strategy. Additionally, enhancing the resilience of the pharmaceutical supply chain is a common challenge among developed nations, and in Japan, efforts are currently underway to promote the domestic production of antibiotics under the Economic Security Promotion Act.We hope today’s seminar will be of assistance to the activities of our member companies.
Part 1: Presentations
“Economic Security and the Pharmaceutical Industry”
Mr. Takahisa Kawaguchi, Senior Researcher, Business Risk Division, Tokio Marine DR Co., Ltd.
Today, I would like to present on the topic of “Economic Security and the Pharmaceutical Industry.” Interest in “economic security” grew among many Japanese companies from the summer to the fall of 2021, and around this time, the JPMA also established an “Economic Security Task Force.”
While various factors, such as the supply crises triggered by the COVID-19 pandemic, contributed to the rise of “economic security,” the primary driver was the intensifying U.S.-China conflict.There were also concerns that Japanese companies might be forced to choose between doing business in the U.S. or China, or that they might have to completely separate their value chains and ecosystems. However, today’s “economic security” risks stem not only from U.S.-China tensions but also, to a large extent, from the United States itself—specifically, a potential second Trump administration.
Therefore, today we will introduce policy trends in the United States and Japan as part of the external environment, as well as industry risks based on these trends and risk management practices within companies.
The second Trump administration, which will mark its first anniversary in January 2026, has sought to implement policy shifts through executive orders and other administrative measures from the outset.Slide 1 shows the campaign pledges of the Trump-Vance campaign during the 2024 U.S. presidential election and the extent to which they have been fulfilled. As with the first administration, the second Trump administration is faithfully implementing and shifting policies in accordance with its campaign pledges.
For example, the “Universal Basic Tariff”—which imposes a flat tax on foreign products listed on the right side of the table—and the “Trump Reciprocal Trade Act”—which imposes additional tariffs equivalent to the tariffs the partner country applies to U.S. imports—are implemented in the form of a base tariff and a surcharge, regardless of the validity of their logic or legal basis.The “Most-Favored-Nation (MFN) price,” which is having a direct impact on the industry, was declared as “the Best Price.”
Regarding additional tariffs in the pharmaceutical sector (sector-specific tariffs based on the Section 232 investigation under the Trade Expansion Act of 1962), President Trump has stated at least four times since April 2025 that “tariffs are imminent,” but their implementation has been postponed to this day.The primary reason for this is said to be that the additional tariffs on brand-name drugs are linked to Most-Favored-Nation (MFN) pricing, and the administration places a high priority on negotiating MFN prices with pharmaceutical companies.
Figure 1. The Second Trump Administration’s Campaign Promises and Degree of Implementation
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*This figure and the following figures are copyrighted works included in Tokio Marine DR Co., Ltd.’s “Geopolitical Risk Intelligence Service.” Please refrain from using or reproducing these works, in whole or in part.
These Trump administration policies are reflected in the “National Security Strategy (NSS)” released in December 2025. The NSS can be regarded as the administration’s top-level document on foreign policy, including national security.While media reports highlight various issues, such as competition with China, a reading of the full text makes it clear that this is a strategy thoroughly grounded in “America First.” The Trump administration places the highest priority on the “Western Hemisphere” and states its intention to advocate for and implement a “Trump Corollary to the Monroe Doctrine.”
It is also telling that the Trump administration explicitly positions access to the U.S. market as a policy tool.This reflects a strategy of using the “economy” as a means to achieve national security objectives. Regarding competition with China, the economic aspect is emphasized, with a focus on the U.S. trade deficit with China, China’s unfair trade practices and intellectual property theft, and China’s excess production capacity.
Figure 2. The Second Trump Administration’s “National Security Strategy”
The additional tariffs on China imposed by the second Trump administration led to a provisional agreement at the U.S.-China summit in Seoul in October 2025, following ministerial-level consultations between the two countries in Geneva, London, Stockholm, Madrid, and Kuala Lumpur.Overall, it can be said that the United States compromised in response to China’s rare earth export restrictions in April and October 2025, and as a result, the U.S. and China are (for the time being) cooperating in the areas of trade and commerce.
While President Trump himself appears to favor and prioritize deals with China regarding tariffs and trade, it cannot be overlooked that “competition” with China is intensifying at the level of the administration as a whole, the executive branch, and Congress.
For example, during the second Trump administration, regulations on Chinese investment in the United States were tightened, and the regulations on the transfer and handling of sensitive personal bulk data—which were finalized during the Biden administration—as well as regulations to protect the information and communications technology and services (ICTS) supply chain remain in effect.Furthermore, in areas directly relevant to the industry, the draft Fiscal Year 2026 National Defense Authorization Act (FY26 NDAA), which is nearing passage, includes the Biosecure Act 2.0. As a result, pharmaceutical companies will be forced to reconsider continuing their business relationships with certain leading Chinese companies in the contract development and manufacturing organization (CDMO) sector.
Figure 3. Areas of Cooperation and Competition Between the U.S. and China
Turning our attention to Japan, in May 2022, the “Economic Security Promotion Act”—the world’s first comprehensive economic security legislation—was enacted.Of the four pillars of the Act, two—strengthening supply chain resilience and developing cutting-edge technologies—support the industrial sector, while the remaining two—enhancing cybersecurity for critical infrastructure and keeping patents for sensitive technologies confidential—regulate and govern private companies.
Furthermore, 2026 is expected to see the most significant progress in economic security policy since 2022. This is because, based on the three-year review of the Economic Security Promotion Act, an amendment bill is expected to be submitted during the regular session of the Diet at the start of the year.
Data security is likely to be of particular relevance to the industry. Based on currently available public information, this involves strengthening risk management for sensitive personal data—such as genomic data, health information, and personally identifiable information—as well as for IT supply chains, including cloud services.One aspect of this strengthening effort is to minimize the adverse effects of foreign ownership, control, and influence (FOCI). Previous U.S. policies have focused on FOCI risks associated with countries such as China and Russia.
Figure 4. Key Issues in Japan’s Economic Security Policy
Given the prospects for a second Trump administration and the situation in Japan, the industry will need to continue addressing several economic security challenges and risks moving forward. These include strengthening supply chain resilience, tariffs (particularly additional tariffs on exports to the U.S.),export controls, preventing technology leakage—including research integrity and research security—technology development (particularly in the biotech sector), cross-border investment regulations (including foreign investment controls in various countries and outbound investment restrictions on China imposed by the U.S. and others), and data security. These issues are wide-ranging and affect corporate and business activities as a whole.
Figure 5. Economic Security Risks for the Industry
Finally, I would like to touch on risk management frameworks that take economic security into account.
Not limited to the field of economic security, the “ideal model” for corporate risk management frameworks and operational execution is referred to as the “three-line” system. This consists of the “first line” of risk management carried out by individual workplaces and functional departments such as R&D, production, and sales;the “Second Line,” which specializes in addressing specific risks such as human resources and labor issues or cyber risks while supporting and supervising the First Line; the “2.5 Line,” which promotes company-wide risk management; and the “Third Line,” which verifies and improves the entire system through internal audits.
In the pharmaceutical industry, it appears that risk management departments (Line 2.5) and policy and government affairs departments (Line 2) often take the lead in addressing economic security risks.In fact, the majority of participants in today’s seminar belong to such departments. However, the economic security risks I mentioned earlier—whether they involve supply chain resilience or export controls—are risks and challenges that other organizations and departments (Line 1 and Line 2) have traditionally addressed.
In this context, what is the role of the department in charge of economic security? One role is to evaluate, from a company-wide perspective, whether there are any gaps in the monitoring and response to critical economic security risks, and whether resource allocation and the organizational structure for response are appropriate.Another is to continuously track policy trends that are difficult for front-line and second-line units to monitor—such as the trade and commerce policies of a second Trump administration or the economic security policies of a Koizumi administration—and provide insights to senior management, as well as front-line and second-line units.
Figure 6. Risk Management Framework Incorporating Economic Security
The domestic and international environment surrounding economic security is undergoing significant changes. Companies should view this as an opportunity to re-examine and review their existing risk management systems and processes from the perspective of economic security.
Q&A
Following the presentation, participants from attending companies posed a lively round of questions to Mr. Kawaguchi, and we received the following valuable feedback.
In addition to Mr. Kawaguchi, we also received insightful comments from Mr. Makoto Nakayama and Mr. Teruo Nakamura of the company’s Research and Development Subteam (ST).
Part 2: Panel Discussion
A panel discussion was held featuring members of the Economic Security Task Force.
Panelists: Research and Development Subteam (ST) – Mr. Makoto Nakayama, Mr. Teruo Nakamura
Supply Chain ST – Mr. Kazuya Doi
Cybersecurity ST – Mr. Kazutaka Maeda (Data Security)
Moderator: Mr. Yoshida, TF Leader
質問１：パネリスト各位の担当分野から見る経済安全保障上の課題やリスクは。
Mr. Nakayama (Research and Development ST)
- Risk management related to digital technology utilization remains a challenge. While responsibilities for laws and regulations pertaining to pharmaceutical manufacturing are clearly defined, there is a very limited number of personnel with expertise in addressing economic security risks and regulatory compliance in the digital sector—which is treated as a solution. It has become essential to investigate what regulations exist and what technologies the company handles, and the company has begun considering its own response.
Mr. Nakamura (R&D ST)
- Measures to prevent technology leakage are crucial. In May 2025, the Ministry of Economy, Trade and Industry (METI) published guidance on measures to prevent technology leakage, which not only addresses regulations under the Foreign Exchange and Foreign Trade Act but also outlines pathways such as leakage through personnel and joint research.Although bio and healthcare have been designated as areas of national strategic technology, an “open-closed” strategy is expected to be crucial in this field, and accountability regarding this approach may also be required.
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In the future, the Institute for Strategic Technology is expected to be established, and technologies critical to economic security are expected to be re-selected. When conducting R&D related to these technologies under national funding, compliance with the “Procedures for Ensuring Research Security,” which is currently being finalized, will be required, and the contents should be reviewed.Although the current regulations do not include penalties, participation in certain programs requires disclosure of information such as past affiliations with research institutions, support received in addition to research grants, relationships with companies treated as organizations of concern in other countries, and any history of participation in foreign talent recruitment programs.
- On the other hand, if companies pursue zero risk and spend excessive amounts on such measures, research and development will be hindered; therefore, the industry must also make its voice heard in shaping the rules.
Mr. Doi (Supply Chain ST)
- Dependence on overseas sources of active pharmaceutical ingredients (APIs) and the risk of U.S. tariffs are the two major risks. Measures to address these risks involve some conflicting elements.
- Regarding reliance on overseas sources for active pharmaceutical ingredients (APIs), there is excessive dependence on China and India. While this varies by product, the Ministry of Health, Labor and Welfare has conducted supply chain surveys on several occasions in the past and has consistently pointed out the particularly high level of dependence on China.Even when products are purchased from suppliers in Europe or elsewhere, tracing the origin often leads back to China. Problems arising from dependence on China include supply disruptions caused by changes in Chinese policy (such as the tightening of environmental regulations in 2019), as well as disruptions due to foreign matter contamination, fires, or explosions.Initially, companies relied on purchases from Chinese API manufacturers due to relatively lenient environmental regulations and low labor costs, but these risks are now becoming acutely apparent. That said, given the nature of pharmaceuticals—which are directly linked to human life and health—the risk of China suddenly and arbitrarily halting API exports or raising prices is considered low.However, we cannot rule out the possibility of supply constraints occurring under the guise of stricter environmental regulations and other factors. As countermeasures, in addition to reshoring production domestically, there are options such as collaboration with like-minded countries for biopharmaceuticals, and similar approaches could likely be taken for small-molecule pharmaceuticals as well.
- Meanwhile, the U.S. has announced a policy encouraging the return of manufacturing to U.S. soil, making it increasingly difficult to collaborate with like-minded nations that involve the U.S. Furthermore, promoting domestic production will drive up costs, raising concerns about drug prices. No government policy regarding government procurement has been announced yet, so this remains an ongoing challenge.
Mr. Maeda (Cybersecurity ST)
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Against the backdrop of U.S.-China tensions, the United States views access by hostile nations to large volumes of sensitive data on U.S. citizens and U.S. government-related data as a threat.The Biden administration introduced comprehensive data transfer restrictions by issuing Executive Order 14117, “Executive Order on Preventing Access by Countries of Concern to Large Volumes of Sensitive Personal Data of U.S. Citizens and U.S. Government-Related Data,” and directed the Department of Justice to create regulations prohibiting or restricting such data transfers.The regulations targeted companies and individuals in China, Russia, Iran, Venezuela, and Cuba.
- Furthermore, since there were similar legislative initiatives in 2024, depending on how those developments unfolded, they could have had a significant impact on the pharmaceutical industry as well. It is expected that balancing compliance with laws and regulations with risk management will become increasingly important going forward.
Question 2: Sharing Approaches to Challenges and Risks, Best Practices, etc.
Mr. Nakayama (R&D ST)
- I am typically involved in company-wide risk management. Until now, unlike the automotive and semiconductor industries, the pharmaceutical industry had not been directly affected by economic security issues and felt quite distant from them. However, the launch of the second Trump administration in the United States has created a direct impact. Under these circumstances, we faced challenges in raising awareness and disseminating information within the company.
- Over the past year, our department has conducted extensive awareness and outreach activities, targeting executive management, department heads and other managers, and general employees.While the Foreign Exchange Act and the prevention of technology leakage are the main focuses, regarding economic security risks, it is important not only to ensure compliance but also to raise awareness of how “near-misses” can occur in daily business operations. As a result of prioritizing the consideration of economic security risks and raising awareness at every level, the number of consultations with our department has increased, and we are beginning to see results.We are steadily proceeding with individual briefings.
Mr. Nakamura (R&D ST)
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Positive effects are also anticipated from the amendment to Japan’s Economic Security Promotion Act, particularly regarding financial support for critical technologies.For example, under the Economic Security Critical Technology Development Program (K Program), a 3 billion yen project led by the New Energy and Industrial Technology Development Organization (NEDO) is underway to develop and demonstrate hemostatic agent manufacturing technology in preparation for emergencies. Pharmaceutical companies and contract development and manufacturing organizations (CDMOs) are also participating.A new R&D vision for the K Program is expected to be formulated in the future, and it is important for pharmaceutical companies to commit to this initiative in a timely manner.
- Furthermore, while pharmaceutical companies often receive financial support from the Japan Agency for Medical Research and Development (AMED) and NEDO, I would like to suggest that they also consider funding from the Ministry of Defense (Defense Equipment Agency).Although the “Security Technology Research Promotion Program” exists, its actual scope is positioned to support cutting-edge technologies, provided they have the potential to lead to dual-use applications in the future.Although private companies account for about 40 percent of applicants (FY 2025), very few drug discovery and life sciences companies are selected for funding. The program’s usability has also been improved, and support is expanding in the form of grants awarded to submitted research proposals, rather than through commissioned research.Furthermore, the Defense Innovation Science and Technology Institute—sometimes referred to as Japan’s version of the U.S. Defense Advanced Research Projects Agency (DARPA)—is promoting innovative breakthrough research. Particularly in fields where high versatility is expected for responding to pandemics, natural disasters, and accidents, concrete ways to utilize funding from the Ministry of Defense could be explored.
Mr. Doi (Supply Chain ST)
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At this point, there is no clear-cut solution, and best practices in this field are yet to be established; however, bringing the domestic production of APIs back to Japan to reduce the risk of reliance on overseas sources is one option. In fact, press releases have already been issued by companies certified under the Plan to Ensure a Stable Supply of Specified Critical Materials, announcing the completion of manufacturing facilities for antimicrobial drugs.While some companies may have limited experience with domestic API manufacturing, they could consider building supply chains with friendly nations. The Japan-India Economic Security Initiative calls for strengthening the supply chain for biopharmaceuticals.There are also examples of technical partnerships between Meiji Seika Pharma and overseas companies, so acquiring know-how for API manufacturing from abroad may be a realistic option. However, given Japan’s geopolitical situation—and considering scenarios such as a naval blockade or the inability to use ports and airports in the event of a crisis—there are risks associated with “friend-shoring” (relocating manufacturing to like-minded nations).Given these factors, a certain degree of reshoring is likely to proceed.
- There is no single “best practice” for responding to U.S. tariffs. The extent to which companies strengthen their manufacturing in the U.S. will vary depending on factors such as the scale of their manufacturing and sales operations there.It is not advisable to rely solely on specific strategies such as reshoring or friendshoring; rather, companies will likely respond on a case-by-case basis, taking into comprehensive consideration the impact of a supply disruption for each pharmaceutical product and the availability of alternatives.
Mr. Maeda (Cybersecurity ST)
- In 2024, regulations regarding large-scale transfers of sensitive personal data, based on U.S. Executive Order 14117, were advanced.During the public comment period for the final draft rule, the JPMA received inquiries via the Ministry of Foreign Affairs and the Ministry of Health, Labor and Welfare; however, since data related to clinical trials—a critical issue for the industry—remained exempt from the scope of the final draft rule, the JPMA did not submit any comments.It appears that JPMA and the U.S. Chamber of Commerce submitted detailed comments regarding the implementation of the regulations. The final rule was issued in December 2024 and took effect in April 2025, but the exemption for clinical trial data was maintained. It is effective for a diverse range of organizations to submit comments.
Mr. Kawaguchi, Tokio Marine DR
- We believe that, as an industry, economic security is an area that should be addressed through “cooperation” rather than “competition.” It is important to engage in risk management and initiatives that lead to positive outcomes through information sharing and cooperation within the Economic Security Task Force and among member companies of the JPMA.
Key Takeaways and Closing Remarks
Riki Yoshida, Task Force Leader
Back in 2021, when the Economic Security Task Force was launched, concerns arose—driven by fears of U.S.-China decoupling—as to whether operations should be completely separated between the U.S. and China.However, the scope of economic security is vast, and after Japan became the first country in the world to enact comprehensive economic security legislation, it became clear that the EU faced similar challenges. Since then, cybersecurity has come to be prioritized even more in Japan, and U.S. tariff issues have also come into play.It has become increasingly difficult to conduct business in this industry without considering the context of economic security. Although this encompasses such a broad range of topics, ensuring that each company has a thorough understanding of these issues leads to appropriate risk management. Among the three lines of defense in risk management, the first line is primarily responsible for dealing with risks, so we believe it is crucial for these departments to be aware of these risks.
(Pharmaceutical Industrial Policy Committee, Economic Security Task Force)