The US pharmaceutical supply chain is heavily reliant on foreign manufacturing. A significant portion of drugs sold in the US are produced abroad, primarily in China. The numbers speak for themselves:
- Ibuprofen: 95% of imports come from China
- Hydrocortisone: 91% of imports come from China
- Acetaminophen: 70% of imports come from China
- Penicillin: 40–45% of imports come from China
- Heparin: 40% of imports come from China
- Antibiotics: 80% of the US supply is made in China
According to the FDA, 72% of active pharmaceutical ingredient (API) facilities that supply the US market are located overseas. This overreliance on foreign production poses risks to national health security, as supply disruptions due to geopolitical tensions, quality control issues, or global crises like COVID-19 could have serious consequences for American patients. In August of this year, pharmaceutical active ingredients were listed as a critical sector for potential cooperation under the IPEF Supply Chain Agreement.
Why Restoring US Pharmaceutical Manufacturing Is Critical
The pandemic and recent natural disasters exposed vulnerabilities in the global supply chain when several countries limited exports of critical medical supplies to prioritize their populations. A domestic approach to pharmaceutical production would create a more resilient supply chain, ensuring essential medications remain accessible during emergencies. Beyond the supply chain, restoring domestic manufacturing could improve quality control, reduce environmental impacts, and create jobs across various industries.
How Long and How Much It Will Cost to Restore US Pharmaceutical Manufacturing
Restoring pharmaceutical manufacturing in the US is a significant undertaking that involves both time and financial investment. Depending on the scale of the operation and the technology being implemented, estimates for how long it takes and the associated costs can vary widely. Based on industry research and government studies, the following factors influence the timeline and cost of reshoring pharmaceutical production:
- Timeline for Restoring Pharmaceutical Manufacturing
- Short-term Goals (2–5 years): Initial steps such as investing in infrastructure for API manufacturing, upgrading existing facilities, and launching workforce training programs can begin immediately. Companies that already have facilities in the US may be able to ramp up production within 2 to 5 years by adopting advanced manufacturing technologies like continuous manufacturing, which streamlines production.
- Long-term Goals (5–10+ years): Building new, fully operational domestic pharmaceutical manufacturing facilities from the ground up takes longer. Large-scale projects typically require 5 to 10 years, accounting for construction, regulatory approval, workforce development, and technological integration. These timelines could extend further depending on the scale of operations and regulatory hurdles, such as gaining FDA approval for new processes.
- Cost of Restoring Domestic Manufacturing
- Infrastructure Investment: Building new API and drug manufacturing facilities is capital-intensive. According to a 2021 study by the Congressional Research Service, constructing a modern pharmaceutical manufacturing facility can cost between $500 million to $2 billion. This includes costs for land, construction, equipment, and technology implementation.
For example, Phlow Corporation’s project in Virginia, part of a government contract to produce essential medicines domestically, was funded with an initial investment of $354 million. The total project cost is expected to surpass $1 billion when fully operational, demonstrating the high cost of building advanced manufacturing infrastructure.
- Technological Upgrades: Adopting advanced technologies such as continuous manufacturing, AI-driven quality control, and automation can cost an additional $50 million to $200 million depending on the size of the facility. However, these technologies can increase efficiency, reduce waste, and lead to long-term cost savings.
- R&D Investment: Companies that are reshoring manufacturing will also need to invest in research and development (R&D) to ensure that new manufacturing processes comply with FDA regulations and industry standards. The FDA’s Emerging Technology Program supports companies working on these innovations, but R&D costs typically run in the tens of millions of dollars, depending on the complexity of the products being manufactured.
- Workforce Training and Development: Developing a skilled workforce for advanced pharmaceutical manufacturing is another significant cost. Companies can expect to spend between $10 million and $50 million on workforce development initiatives, including vocational training programs, education partnerships, and on-the-job training to equip workers with the necessary skills to operate new technologies.
- Ongoing Operational Costs: Operating a pharmaceutical facility in the US tends to be more expensive than in countries with lower labor costs. Companies will need to account for higher wages, stricter environmental regulations, and energy costs. However, advanced manufacturing techniques can help offset some of these operational costs by improving efficiency and reducing resource consumption.
Steps Toward Restoring Pharmaceutical Manufacturing in the US
- Federal Assistance and Investment in Domestic API Production One of the key resources available for companies interested in reshoring pharmaceutical manufacturing is financial support through federal programs. For example, the Defense Production Act (DPA) and the CARES Act have been used to fund domestic production of critical health supplies, including APIs. The Department of Health and Human Services (HHS) has partnered with private companies to invest in advanced manufacturing technologies to boost domestic production of essential medicines.
In 2020, the HHS awarded a $354 million contract to Phlow Corporation, a Virginia-based company, to build the infrastructure for domestic API manufacturing. This partnership aims to develop an end-to-end advanced manufacturing process that can reduce costs and improve efficiency, creating a more sustainable supply of essential medicines like antibiotics and generics.
- Educational Programs and Workforce Development Restoring domestic pharmaceutical manufacturing will require a skilled workforce. Companies can leverage resources from the National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL), a public-private consortium that supports innovation and workforce development in biopharmaceutical manufacturing. NIIMBL offers funding opportunities and training programs to help companies adopt new technologies and educate the next generation of workers.
- Public-Private Partnerships Public-private partnerships have been critical to reshoring efforts. In addition to Phlow Corporation, the Biomedical Advanced Research and Development Authority (BARDA) has invested in domestic production of vaccines and APIs. BARDA supports the development of new technologies and facilities that can increase production capacity and reduce reliance on foreign suppliers.
- Tax Incentives and Policy Support Legislative efforts to provide tax breaks and other financial incentives for reshoring pharmaceutical production have gained momentum. For instance, The Pharmaceutical Supply Chain Review Act, introduced in 2020, called for a comprehensive review of the US pharmaceutical supply chain and proposed policies to incentivize domestic manufacturing.
- Sustainable Manufacturing and Environmental Considerations Companies can access assistance from agencies like the Environmental Protection Agency (EPA) for implementing sustainable manufacturing practices. The EPA provides guidance on reducing waste and pollution during pharmaceutical production through programs such as Green Chemistry initiatives. These programs aim to support environmentally friendly production methods while maintaining competitiveness.
- Utilizing Advanced Manufacturing Technologies The shift toward continuous manufacturing, which allows for more efficient production, has been gaining traction in the US. Companies can explore grants and funding opportunities through the National Science Foundation (NSF) for R&D in this area. Continuous manufacturing, when paired with artificial intelligence and automation, can make domestic pharmaceutical production competitive with low-cost manufacturing abroad.
Conclusion: A Collaborative Approach to Restoring Pharmaceutical Manufacturing
Restoring pharmaceutical manufacturing in the US is a significant and costly endeavor, with timelines ranging from 2 to 10 years depending on the scale of investment and infrastructure development. Initial costs can run into the billions of dollars for constructing and upgrading facilities, with additional expenses for workforce development and R&D. However, the long-term benefits—improved drug security, job creation, and reduced dependence on foreign suppliers—make this effort crucial for the nation’s health and economic resilience. Any plan will require coordination between public and private entities and a long-term strategic approach that covers critical need APIs now, and covering future products so that some percentage of the demand is always available from a US-manufacturer.
References:
- U.S. Food & Drug Administration (FDA): Drug Shortages & Supply Chain Information
- Phlow Corporation: HHS Contract for Domestic Pharmaceutical Manufacturing
- Defense Production Act (DPA) and CARES Act
- National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL)
- Biomedical Advanced Research and Development Authority (BARDA)
- American Innovation and Manufacturing Act, CHIPS and Science Act
- Congressional Research Service: Costs of Building Pharmaceutical Manufacturing Facilities