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With more than $270 billion in commitments to date, a new wave of pharmaceutical manufacturing is slated to hit the US.
At least, that’s what the industry is trying to project.
Take Johnson & Johnson's (JNJ) $55 billion over the next four years, announced in March, which includes expansions to existing facilities already underway. Eli Lilly (LLY), meanwhile, announced $50 billion in investments in February, with half of that coming from existing plans.
Behind the curtain of the multibillion-dollar promises to reshore drug manufacturing is a more sober reality: While some of the announcements are new, many have been in the works for years.
The reason? A global manufacturing footprint has proven risky, thanks to the COVID-19 pandemic. In addition, patent expiries mean more R&D activity and thus more local manufacturing needs. And then there's the fact that people are living longer, requiring a higher volume of drugs.
Those are the key reasons behind the long-term manufacturing plans drugmakers began crafting in the last few years.
But the timing of the announcements in the first half of the year coincide with another more recent reason: the threat of tariffs from the Trump administration on imported pharmaceutical goods.
Sandy Romero, head of life sciences & healthcare insights at Cushman & Wakefield (CWK), said, “It wasn’t like the tariffs came and the pharmaceutical companies [decided to] open plants because of the tariffs."
It's likely some plans have been pushed up, she said, to meet the moment in an effort to avoid the tariffs altogether.
"When they decide to actually break ground ... it’s been three to five years in planning," Romero said.
Lilly is one of the few that has announced new plans that align with Trump's needs, to bring basic chemical component production, currently mostly located in Europe or Asia, back to the US.
Lilly CEO David Ricks previously told Yahoo Finance, "I think if the goal is to repatriate the supply chain, I would say probably the threat of tariffs has already done that."
Especially since the $270 billion could also be an undercount, as some companies have chosen not to make flashy announcements about their plans, according to experts.
"It's accurate to state that there was a global supply chain approach to pharmaceuticals and biotech. And the lessons learned from the pandemic, and disruption to the supply chain, created a greater focus into regionalizing those supply chains," said Jose Jimenez, vice president and business leader of life sciences at major construction firm Gilbane.
