Rebuilding pharma supply chains

Donald Trump says he wants more of the medicines US patients use to be manufactured within the US. And to make that happen, he’s brandishing both stick and carrot. He has threatened punitive tariffs on pharmaceutical imports, and on 5 May signed an executive order aimed at lowering barriers to companies wanting to build new pharmaceutical plants in the US, while increasing inspection fees and tightening regulatory enforcement on foreign producers.

Multinational pharmaceutical firms have been queuing up to announce multi-billion-dollar investments in US facilities. Roche, Eli Lilly, Novo Nordisk, Johnson & Johnson, Novartis, AbbVie, Gilead and Bristol Myers Squibb have trumpeted their investments, totalling over $200 billion.

However, crediting all this investment to Trump’s headline-grabbing policies would be a mistake. Companies do not make $10–50 billion decisions on the spur of the moment, nor on the basis of threats of tariffs which, given Trump’s negotiating record, might only operate for a matter of days to months, or never materialise at all. And while smoothing regulations around building new factories will be welcomed, as Novo Nordisk’s chief financial officer Karsten Munk Knudsen told the Guardian, he is ‘sceptical that it will markedly change timelines in our industry’. It takes several years to plan and build a facility in compliance with regulatory quality protocols, and a few small tweaks isn’t going to drastically reduce that.

Companies are already keen to mitigate the risks of being overreliant on global supply chains, and ingredients and medicines from Asia in particular. For over a decade, there has been a gradual movement within US and European industry and government policy to rebuild domestic pharmaceutical supply chains. Progress has been rather slow, largely because manufacturing costs are inherently higher, and cost is a huge driver in pharmaceutical procurement.

Cost is not the only factor, though. Increasing domestic supply is not as simple as building a factory and pumping out drugs. The supply chain for medicines ingredients – from active drugs or the building blocks required to make them, to the innumerable other ingredients that go into finished medicine formulations – is fiendishly complex. And China and India have dedicated vast resources and political support to building up a localised ecosystem that serves a huge chunk of the global industry.

So, even if the industry heavyweights do pour those promised resources into US manufacturing (which is far from certain) it will still be dependent – at least initially – on foreign supply networks. Reordering the entire fine chemicals landscape would require a much bigger political shift, and will certainly not happen during a single presidential term.