The pharmaceutical industry is witnessing a significant shift towards domestic manufacturing in the United States. This trend, driven by government incentives, the need for supply chain resilience, and strategic efforts to reduce dependency on international manufacturing, is poised to have far-reaching implications for drug costs, production quality, and regulatory compliance. Some of the most influential players in the industry are investing heavily in establishing new facilities across the country. These moves are not just about expanding production capacity but also about fortifying the overall pharmaceutical supply chain and enhancing drug quality.
California-based Amgen has emerged as a leader in this initiative by opening a new 300,000-square-foot biomedicine assembly and packaging facility in Ohio this year. This facility marks a billion-dollar commitment to enhancing its production capacity within the US. Furthermore, the company will open a drug substance manufacturing plant in North Carolina next year, aiming to meet the rising domestic demand for its medicines. These strategic investments have not gone unnoticed, with Ohio’s Lt. Governor, Jon Husted, lauding the move as essential for the “Made-in-America supply chain we need to live and thrive.”
Rising Investments in US Manufacturing Facilities
Amgen’s commitment to domestic manufacturing is part of a broader trend in the pharmaceutical sector. Robert Khachatryan, CEO and founder of Freight Right Global Logistics, notes that this shift is driven by various factors, including government incentives and the necessity for a robust supply chain strategy. Khachatryan emphasizes that this is not a transient trend but rather a strategic reframing of pharmaceutical production, one that is reshaping the landscape of national security and healthcare resilience. The move toward local manufacturing facilities addresses vulnerabilities exposed during disruptions like the COVID-19 pandemic, highlighting the crucial need for an uninterrupted supply of medicines.
Khachatryan’s perspective is corroborated by the actions of several leading pharmaceutical companies. With the fragility of global supply chains becoming glaringly evident during the COVID-19 pandemic, the industry experienced a wake-up call. It revealed the risks of heavily relying on international manufacturing, where nearly 80% of global trade passes through countries with declining political stability, according to the World Bank’s 2020 statistics. Furthermore, 72% of facilities that produce active pharmaceutical ingredients (APIs) for the US market are located abroad, primarily in China and India. In sharp contrast, only 10% of these ingredients are produced domestically.
Due to these challenges, pharmaceutical giants such as Pfizer, Eli Lilly, and Merck are now channeling substantial resources into building domestic infrastructure. Forecasts predict that the global pharmaceutical API market will grow from $206.95 billion in 2023 to $219.76 billion in 2024, with a projected compound annual growth rate (CAGR) of 6.2%. This growth trajectory is expected to culminate in a market worth $279.03 billion by 2028. Such robust growth provides a firm foundation for sustained investments in US-based production facilities.
The Impact of the COVID-19 Pandemic on Supply Chains
The fallout from the COVID-19 pandemic laid bare the susceptibilities ingrained in the global supply chain, driving the pharmaceutical industry to reassess and fortify its production strategies. The disruption caused by the pandemic served as an undeniable wake-up call, prompting a recognition of the vulnerabilities that come with heavy reliance on international manufacturing. Kluz, a venture capitalist and managing director of Venture Lab, highlights that up to 80% of global trade moves through nations experiencing political instability, which adds another layer of uncertainty to the supply chain.
The pandemic revealed the precarious nature of international dependencies, with 72% of facilities producing active pharmaceutical ingredients (APIs) for the US market based overseas, mainly in China and India. Comparatively, only a mere 10% of these crucial ingredients are manufactured domestically, posing a potential risk to the availability and consistency of drug supplies in the United States. This overreliance on foreign manufacturing prompted leading pharmaceutical companies like Pfizer, Eli Lilly, and Merck to make significant investments in domestic infrastructure. According to industry forecasts, the global pharmaceutical API market is anticipated to grow from $206.95 billion in 2023 to $219.76 billion in 2024, with a sustained growth rate pointing toward a market size of $279.03 billion by 2028.
In response to these challenges, pharmaceutical companies are not merely fortifying their supply chains but also aligning their strategies with broader federal initiatives aimed at boosting domestic production capabilities. The fragile state of international supply chains catalyzed a concerted effort to ensure that critical industries like pharmaceuticals are better insulated from global disruptions. This refocusing on domestic manufacturing is a direct consequence of the lessons learned during the pandemic, highlighting an industry-wide shift towards securing and stabilizing supply lines within the United States.
Federal Initiatives and Industry Response
A key driver in this shift is Federal Executive Order 14017, implemented by the US Food and Drug Administration (FDA). This order is focused on bolstering US supply chains, especially for essential goods like pharmaceuticals. The directive has been a significant catalyst, encouraging pharmaceutical companies to ramp up their domestic production capabilities. Eli Lilly, for instance, is investing $4.5 billion in a new manufacturing facility in Indiana, while BeiGene has earmarked $800 million for a flagship site in New Jersey. Meanwhile, AstraZeneca is developing a $300 million state-of-the-art facility in Maryland.
While there may be initial increases in production costs due to higher domestic labor and stringent regulatory compliance requirements, the overall efficiency gained in supply chains and reduced dependency on international manufacturing could potentially stabilize or even decrease drug prices over the long term. Khachatryan argues that savings on logistics and the avoidance of import tariffs are likely to balance out the higher costs associated with domestic manufacturing. Additionally, local manufacturing reduces transportation risks, such as temperature fluctuations during drug handling, which is especially crucial for sensitive medications.
The implementation of Executive Order 14017 and the industry’s enthusiastic response underline a concerted effort to fortify the US pharmaceutical supply chain. This federal initiative aims to provide a stable and reliable foundation for pharmaceutical production within the United States, minimizing the risks and uncertainties associated with international dependencies. The investments by top pharmaceutical companies are a clear testament to the strategic realignment that places a premium on domestic manufacturing.
Quality Control and Regulatory Compliance
The pharmaceutical industry in the United States is experiencing a substantial shift towards domestic manufacturing. This transformation, driven by government incentives, the need for supply chain resilience, and efforts to reduce reliance on international manufacturing, is expected to significantly impact drug costs, production quality, and regulatory compliance. Major industry players are heavily investing in new facilities nationwide, not just to increase production capacity but also to strengthen the pharmaceutical supply chain and improve drug quality.
California-based Amgen stands out in this movement by opening a new 300,000-square-foot biomedicine assembly and packaging facility in Ohio this year. This facility represents a billion-dollar commitment to enhancing production capacity within the US. Additionally, Amgen plans to open a drug substance manufacturing plant in North Carolina next year to meet rising domestic demand for its medications. These strategic investments have received praise, with Ohio’s Lt. Governor, Jon Husted, praising the initiative as vital for the “Made-in-America supply chain we need to live and thrive.”
