The Fifth Seminar on Economic Security Economic Security and the Pharmaceutical Industry
On December 15, 2025, the JPMA Industrial Policy Committee's Economic Security Task Force (Economic Security TF) hosted the "5th Economic Security Seminar" in a web-based format for JPMA member companies. In the first part of the seminar, Mr. Takahisa Kawaguchi, Chief Researcher, Business Risk Division, Tokio Marine D.R.K., gave a lecture on "Economic Security and the Pharmaceutical Industry". In the second part, a panel discussion was held by members of the Economic Security TF.
Background of the Meeting
The Economic Security TF was established in October 2021 and has been focusing on the impact of economic security on a wide range of industries. The TF has established three sub-teams (Supply Chain, R&D, and Cyber Security) to exchange opinions with relevant ministries and agencies, respond to public comments on laws and regulations, and provide information to member companies by holding seminars.
With the increasing importance of economic security worldwide, including the current geopolitical risks, tariffs, and the conflict between the U.S. and China, there are concerns that the pharmaceutical industry will be greatly affected, In light of this situation, we have decided to hold a seminar for JPMA member companies on the theme of "The Pharmaceutical Industry and Economic Security," "Issues and Risks in Economic Security and Efforts to Address These Issues and Risks, and Sharing Best Practices, etc.
Opening remarks
On the occasion of the 5th Seminar on Economic Security
Chikara Yoshida, Leader, Economic Security TF, Pharmaceutical Industrial Policy Committee
The pharmaceutical industry is facing an environment in which it is increasingly important to consider economic security issues, and it is necessary to keep a close eye on trends in other countries, including the tariff and MFN policies of the United States. In Japan, synthetic biology, biotechnology, drug discovery, and advanced medicine have been selected as strategic growth areas. In Japan, synthetic biology, biotechnology, drug discovery, and advanced medicine have been selected as strategic growth areas. In addition, strengthening the pharmaceutical supply chain is a common issue among developed countries, and the domestic production of antimicrobials is being promoted in Japan under the Act on the Promotion of Economic Security. We hope that today's seminar will help the activities of our member companies.
Part 1: Lecture
Economic Security and the Pharmaceutical Industry"
Mr. Takahisa Kawaguchi, Chief Researcher, Business Risk Division, Tokio Marine D.R.K.
Today's topic is "Economic Security and the Pharmaceutical Industry". Many Japanese companies became increasingly interested in "economic security" in the summer and fall of 2021, and around this time, the JPMA established an "Economic Security Task Force.
The background to "economic security" was a variety of factors, including a supply crisis triggered by a new coronavirus epidemic, but the major factor was the intensifying conflict between the U.S. and China. There were fears that Japanese companies would be forced to choose between U.S. and Chinese operations, and that they would have to completely separate their value chains and ecosystems. However, today's "economic security" risks stem not only from the U.S.-China confrontation, but also from the U.S. itself and the second Trump administration.
Today, therefore, I would like to introduce policy trends in the U.S. and Japan as the external environment, industry risks based on these trends, and risk management in the corporate sector.
The second Trump administration, which will be in office for one year in January 2026, has from the beginning been oriented toward policy change through executive orders (R-row, etc.). Slide (Figure 1) shows the campaign promises of the Trump-Vance campaign during the 2024 U.S. presidential election and the degree to which they were achieved. Like the first administration, the second Trump administration has been faithful to its campaign promises in shaping and shifting policies.
For example, the "Trump Reciprocal Trade Act," which imposes a uniform "universal basic tariff" on foreign products and additional tariffs similar to those imposed by the other country on imports from the U.S. on the right side of the table, has been realized in the form of the basic and additional parts of the reciprocal tariff, regardless of their logic and legal validity. The Most Favored Nation (MFN) prices that have hit the industry were declared in the form of "the Best Price".
Additional tariffs on the pharmaceutical sector (industry sector-specific tariffs under the Section 232 investigation of the Trade Expansion Act of 1962) have been postponed until today, although President Trump has stated at least four times since April 2025 that the tariffs were about to take effect. The major reason for this is believed to be the integration of additional tariffs on original drugs and MFN prices, and the administration's emphasis on negotiating MFN prices with pharmaceutical companies.
Figure 1. 2nd Trump Administration's Election Pledges and Realization Level
- *This and subsequent figures are copyrighted works included in the "Geopolitical Risk Intelligence Service" of Tokio Marine D.R. Inc. Please refrain from using or copying these works in whole or in part.
This policy of the Trump administration is reflected in the National Security Strategy (NSS), which was released in December 2025; the NSS can be seen as the top-level document of that administration's foreign policy, including security. Although media reports have pointed out various issues, such as competition with China, it is clear from reading the entire document that the strategy is thoroughly "America First" oriented. The Trump administration's top regional focus is the "Western Hemisphere," and it claims to assert and implement a "Trump Corollary of Monroeism" (Trump Corollary).
It is also suggestive that the Trump administration explicitly positions access to the U.S. market as a policy tool. The idea of using the "economy" as a means to achieve security objectives is evident. Regarding competition with China, the emphasis is on the economic aspect, with emphasis on the U.S. trade deficit with China, China's unfair trade practices and theft of intellectual property, and China's overcapacity.
Figure 2: The Second Trump Administration's National Security Strategy
Additional tariffs against China imposed by the second Trump administration were tentatively agreed to at the October 2025 U.S.-China summit in Seoul, following U.S.-China ministerial talks in Geneva, London, Stockholm, Madrids, and Kuala Lumpur. Overall, it can be said that the U.S. and China are (for now) cooperating on trade and commerce as a result of the U.S. compromises made by China's rare earth export restrictions in April and October 2025.
While President Trump himself appears to be oriented toward and focused on dealing with China in the areas of tariffs, trade, and commerce, it cannot be overlooked that the administration as a whole, the Y-row, and the Congress are developing a "race" with China.
For example, the second Trump administration tightened restrictions on Chinese investment in the U.S., and regulations on the transfer and handling of sensitive personal bulk data and protection of the information and communications technology and services (ICTS) supply chain that were put in place during the Biden administration have continued. Also, in areas directly relevant to the industry, the proposed Fiscal Year 2026 National Defense Authorization Act (FY26 NDAA), which is nearing passage, includes the Biosecure Act 2.0. This will force pharmaceutical companies to reconsider their continued business dealings with certain Chinese companies that are prominent in the field of biotech contract development and contract manufacturing.
Figure 3. Areas of Cooperation and Competition between the U.S. and China
In Japan, the Economic Security Promotion Act, the world's first comprehensive economic security legislation, was passed in May 2022. Of the four pillars of the law, two are to strengthen supply chains and develop advanced technologies to support industry, and the other two are to strengthen cyber security of core infrastructure to regulate and discipline the private sector and to make sensitive technology patents private.
And 2026 is expected to see the most significant economic security policy developments since 2022. This is because, based on the three-year review of the Economic Security Promotion Law, a revised bill is expected to be submitted to the ordinary Diet session at the beginning of the year.
Of particular relevance to the industry will be data security. Based on current public information, this will strengthen risk management of sensitive personal data such as genomic, health, and personal identification information, as well as IT supply chain risks such as cloud services. One aspect of the strengthening is to minimize the negative effects of foreign ownership, control, and influence (FOCI). Prior U.S. policies have been designed with FOCI risks from China, Russia, and other countries in mind.
Figure 4. Japan's Economic Security Policy Issues
In light of the second Trump administration and the situation in Japan, the industry will need to continue to address several economic security challenges and risks. These range from supply chain resilience, tariffs (especially additional tariffs on exports to the U.S.), export controls, prevention of technology leakage including research integrity and research security, biotechnology and other technology development, cross-border investment regulations (inbound investment regulations in various countries and outbound investment regulations in the U.S. and other countries to China), data security and and concerns the entire range of corporate and business activities.
Figure 5. Economic Security Risks for Industry
Finally, I would like to mention risk management posture in consideration of economic security.
Not only in the area of economic security, the "ideal" risk management posture and business execution side of a company is called a "three-line" system. The "first line" of risk management is the "first line" of risk management at each workplace and in each functional department such as R&D, production, and sales, etc. The "second line" is responsible for supporting and supervising the first line by professionally handling individual risks such as personnel and labor issues and cyber risks, etc. The "second and fifth lines" promote a company-wide risk management system, and the "third line" verifies and improves the overall risk management system through internal audit. The third line is to verify and improve these overall systems through internal audits.
In the pharmaceutical industry, it appears that the risk management department (Line 2.5) and the policy and external affairs department (Line 2) often play a central role in dealing with economic and security risks. In fact, the majority of today's seminar participants belong to such departments. However, the economic security risks I mentioned earlier, whether it is supply chain resilience or export control, are risks and issues that have been handled by other organizations and departments (first and second lines).
In this context, what is the role of the economic security lead department? One is to monitor critical economic security risks from a company-wide perspective and assess whether there are any omissions in the response, and whether resource allocation and response organization are appropriate. The second is to continuously follow policy trends that are difficult for the first and second lines to follow, such as the trade and commerce policies of the second Trump administration and the economic security policies of the Takaichi administration, and to provide input to management and the first and second lines.
Figure 6. Economic Security Risk Management
The domestic and international environment for economic security is undergoing major changes. Companies should take this opportunity to reconfirm and review their existing risk management systems and processes from an economic security perspective.
Question and Answer Session
After the lecture, participating companies actively asked questions to Mr. Kawaguchi, who provided valuable feedback as follows.
In addition to Mr. Kawaguchi, responses were also provided by Mr. Makoto Nakayama and Mr. Teruo Nakamura of the company's Research and Development Subteam (ST), who offered thought-provoking comments.
Part 2: Panel Discussion
A panel discussion was held by members of the Economic Security TF.
Panelists: Mr. Makoto Nakayama, Research and Development Subteam (ST), Mr. Teruo Nakamura
Mr. Kazuya Doi, Supply Chain ST
Mr. Kazutaka Maeda, Cyber Security ST (Security over Data)
Moderator: Mr. Yoshida TF Leader
Question 1: What are the economic security challenges and risks from the perspective of each panelist's area of responsibility?
Mr. Nakayama, Research and Development ST
- Risk management related to digital utilization is an issue. While the responsibility for laws and regulations related to pharmaceutical manufacturing is well-defined, the number of personnel with knowledge of handling economic and security risks and laws and regulations related to the digital field, which is handled as a solution, is very limited. Research on what laws and regulations exist and what kind of technology the company handles is essential, and the company has begun to consider how to respond to these issues.
Mr. Nakamura (R&D ST)
- Countermeasures against technology leakage are important. In May 2025, the Ministry of Economy, Trade and Industry (METI) released guidance on countermeasures against technology leakage, which outlines not only regulations under the Foreign Exchange and Foreign Trade Law, but also routes for leakage through human interactions and joint research. Biotechnology and healthcare have been selected as national strategic technology areas, and an open-close strategy is expected to become important in this area, and accountability for this may also be required.
- In the future, the Institute for Key Technology Strategy is expected to be established, and technologies that are important for economic security are expected to be selected again. If research and development on these technologies is to be conducted under government funding, the "Procedures for Efforts to Ensure Research Security," which is currently being compiled, must be addressed, and the contents should be confirmed. Although there are no penalties under the current regulations, when participating in a specific program, it is necessary to ascertain past affiliations with research institutions, support received other than research funding, relationships with companies treated as organizations of concern in other countries, and whether or not the applicant has participated in programs to recruit foreign personnel.
- On the other hand, if the industry pursues a zero-risk approach and spends a great deal of money on such measures, research and development will be delayed.
Mr. Doi (Supply Chain ST)
- The two major risks are dependence on foreign suppliers of APIs and the risk of U.S. tariffs. These measures have conflicting aspects.
- Regarding overseas dependence on APIs, there is an excessive reliance on China and India. Although it depends on the product, the MHLW has conducted supply chain surveys several times in the past and has pointed out the high dependence on China in particular. In many cases, products purchased from suppliers in Europe and elsewhere are traced back to China. Problems caused by dependence on China include supply stoppages due to changes in Chinese policy (e.g., stricter environmental regulations in 2019), supply stoppages due to foreign object contamination or fire and explosion. Initially, the company relied on purchasing from Chinese API manufacturers because of lax environmental regulations and cheap labor costs, but the risks are now becoming apparent all at once. Nevertheless, due to the characteristics of pharmaceuticals, which are directly related to human life and health, the risk of arbitrarily suspending exports of APIs or suddenly raising prices is low. However, the possibility of supply restrictions under the cover of tighter environmental regulations cannot be denied. In addition to a return to domestic production, there are also measures such as cooperation among like-minded countries in the biopharmaceutical industry, and the same may be taken in the case of small molecule pharmaceuticals.
- On the other hand, the U.S. has announced a policy of encouraging a return to manufacturing in the U.S., making it more difficult to forge alliances involving the U.S. In addition, if domestic production is promoted, costs will rise and drug prices will become an issue. There is no policy yet for the government to purchase the drug, and this remains an issue to be addressed.
Mr. Maeda (Cyber Security ST)
- Against the backdrop of the U.S.-China conflict, the U.S. views access by hostile countries to large amounts of sensitive data on U.S. persons and related data of the U.S. government as a threat. With the issuance of Executive Order No. 14117, "Presidential Decree on Preventing Countries of Concern from Accessing Large Amounts of Sensitive Personal Data of U.S. Citizens and Data Related to the U.S. Government," the Biden Administration has proposed comprehensive data transfer regulations and directed the Department of Justice to create rules prohibiting and regulating data transfer. The regulations at that time targeted companies and individuals in China, Russia, Iran, Venezuela, and Cuba.
- In addition, there was a move toward similar legislation in 2024, which would have had a significant impact on the pharmaceutical industry, depending on how it played out. It is likely that both understanding of laws and regulations and risk management will become important in the future.
Question 2: What are the challenges/risks being addressed, best practices, etc. to be shared?
Mr. Nakayama, Research and Development ST
- I am usually involved in company-wide risk management. Until now, economic security and the pharmaceutical industry, unlike the automobile and semiconductor industries, have not been directly affected and have been distantly related. However, the inauguration of the second Trump administration in the U.S. has had a direct impact. Under these circumstances, there was a challenge in raising awareness and informing the public within the company.
- Over the past year, my department has conducted a wide range of awareness-raising and public awareness activities divided among management, department heads and other management personnel, and general employees. Although the main focus is on the Foreign Exchange and Foreign Trade Control Law and the prevention of technological leaks, it is important to make employees aware of how many near-misses occur in their daily business activities, in addition to compliant compliance with economic security risks. As a result of emphasizing the importance of thinking about and increasing sensitivity to economic security risks at each layer, consultations with their own departments have been increasing and are beginning to produce results. We are making steady progress in explaining the situation on an individual basis.
Mr. Nakamura (R&D ST)
- Positive effects of the amendment to the Economic Security Promotion Act in Japan are also expected. In particular, financial support for key technologies, etc. For example, under the Economic Security Key Technology Development Program (K Program), the New Energy and Industrial Technology Development Organization (NEDO) is leading a 3 billion yen project to develop and demonstrate a hemostatic agent manufacturing technology for use in contingency situations. Pharmaceutical companies and contract drug 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 make a commitment in time for this vision.
- In many cases, pharmaceutical companies receive financial support from the Japan Agency for Medical Research and Development (AMED) and NEDO, but we suggest that funding from the Ministry of Defense (Defense Acquisition Agency) be considered as well. The actual scope of the program is to support cutting-edge technologies, but it is positioned to have the potential to lead to dual use in the future. About 40% of the organizations that applied are private companies (in FY2025), but very few drug discovery and life science companies have adopted the program. The program has also improved in terms of usability, and is expanding its support in the form of promulgating grants to research projects that have applied, rather than commissioned research. In addition, the Defense Innovation Science and Technology Laboratory, also known as the Japanese version of the U.S. Defense Advanced Research Projects Agency (DARPA), is promoting innovative breakthrough research. The use of defense funding could be specifically considered, especially in areas where high versatility in response to pandemics, natural disasters, and accidents can be expected.
Mr. Doi (Supply Chain ST)
- An area where the right answer is not clear at this point and best practices will be identified in the future is the return to domestic production of APIs to reduce the risk of dependence on overseas suppliers. A press release was issued by a company that has been approved for a plan to ensure a stable supply of specified critical supplies, stating that it has completed a manufacturing facility for antimicrobial agents. Some companies may have small experience in domestic manufacturing of APIs, and in this case, the establishment of supply chains with countries with which they have friendly relations may be considered. The Japan-India Economic Security Initiative calls for SC strength for biopharmaceuticals, and with the example of meiji seika pharma's technical tie-up with a foreign company, it may be realistic to obtain API manufacturing know-how from overseas. However, there are risks involved in friend-shoring (transfer of manufacturing to a like-minded country), given Japan's geopolitical situation, such as a maritime blockade in the event of an emergency, and the inability to use ports and airports. In light of these factors, a return to a certain level of domestic production is likely to continue.
- There is no best practice in dealing with U.S. tariffs. The degree to which manufacturing in the U.S. should be strengthened will depend on the scale of manufacturing and sales in the U.S. of each company. It is not desirable to focus exclusively on specific measures such as returning to the domestic market or friend-shoring, etc., and individual measures will be taken while comprehensively considering the impact of supply disruptions for each drug and the availability of alternatives.
Mr. Maeda (Cyber Security ST)
- In 2024, the regulations on sensitive large-scale personal data transfers, etc. under U.S. Executive Order 14117 were advanced. During the pubic comment period on the proposed final rule for this regulation, inquiries were also made to the JPMA via the Ministry of Foreign Affairs and the MHLW, but no comments were submitted because data related to clinical trials, an important industry issue, was not covered by the proposed final rule as well. The JPMA and the U.S. Chamber of Commerce apparently submitted detailed comments on the rule's operation; the final rule was issued in December 2024 and became effective in April 2025, but the exemption for data on clinical trials was maintained. It is useful to have comments from a variety of organizations.
Tokio Marine Dealer Mr. Kawaguchi
- We believe that economic security is an area that should be addressed through "cooperation" rather than "competition" as an industry. It is important to encourage risk management and positive outcomes through information sharing and cooperation among the Economic Security TF and JPMA member companies.
Closing Remarks
Chikara Yoshida TF Leader
When the Economic Security TF was established in 2021, there were concerns about whether management should be completely divided between the U.S. and China due to concerns about U.S.-China decoupling. However, the economic security domain is diverse, and after Japan became the first country in the world to enact comprehensive economic security legislation, it became clear that the EU had similar challenges. Subsequently, cybersecurity became more important in Japan, and then the U.S. tariff issue was added to the mix. It has become increasingly difficult to develop our industry's activities without the context of economic security. Although this includes a broad range of topics, a broad knowledge of the issues in each company will lead to appropriate risk management. Of the three lines of risk management, the first line is the primary area of contact with risk, and we believe it is important to make these departments aware of the risks.
(Economic Security Task Force, Pharmaceutical Industrial Policy Committee)