Pharma Companies Pour Billions Into US Manufacturing To Avoid Tariffs

Forbes

4 days ago

NEW YORK, NEW YORK - MARCH 12: CEO of Eli Lilly and Company David Ricks speaks at the Economic Club ... More of New York on March 12, 2024 in New York City. The U.S. drugmaker Eli Lilly, has made strategic investments in US manufacturing.
Pharmaceutical imports are on the chopping block, as President Trump is proposing a 200% tariff to boost domestic production and make pharmaceutical production in the US more competitive. The U.S. imported $212 billion in pharmaceuticals in 2024, making it the 5th most imported product. The deadline for this is August 1.
Jena Santoro, Global Head of Research & Analytics at Everstream Analytics, states that the previously reported grace period of approximately one to one and a half years for pharmaceutical companies to relocate their manufacturing operations to the U.S. - before the tariffs take effect - appears to remain in place. This grace period would allow drug manufacturers time to adjust production strategies and investments. Everstream is a provider of AI-based supply chain risk management solutions.
Tariffs are being wielded by this administration as leverage to force reciprocity, extract critical concessions, or safeguard national interests. The pharma industry is one in which this leverage appears to have had considerable success.
Pharma Make Significant Investments in the US
In response to the threat of tariffs, AstraZeneca, British Swedish multinational pharmaceutical and biotechnology company headquartered in Cambridge, UK, reported on July 22 that it would invest $50 billion in U.S. production. A significant portion of this investment will be allocated to a new manufacturing center in Virginia. Upon completion, this facility will be the company's largest single manufacturing hub. CEO Pascal Soriot said the investment 'underpins our belief in America's innovation in biopharmaceuticals and our commitment to the millions of patients who need our medicines in America and globally.'
The company stated that the Virginia plant will anchor its U.S. expansion and serve as a key hub for future pharmaceutical manufacturing. The site will produce small molecules, peptides, and oligonucleotides using AI, automation, and data analytics to optimize production.
AstraZeneca's $50 billion plan also includes expansions in Maryland, Massachusetts, Indiana, Texas, and California. The company's goal is to reach $80 billion in revenue by 2030, with half of that expected to come from the U.S. market.
Roche, headquartered in Basel, Switzerland, also announced today that it will invest $50 billion into the US. The investment will be made over a five-year period. The company's commitment includes new research and development (R&D) sites, and new and expanded manufacturing facilities in Indiana, Pennsylvania, Massachusetts, and California. Roch says their investments will create more than 12,000 new jobs: 1,000 at Roche and more than 11,000 in support of new US manufacturing capabilities.
Their manufacturing investments will include a gene therapy manufacturing facility in Pennsylvania, a new 900,000-square-foot manufacturing facility to support Roche's expanding portfolio of weight loss medicines (the location of this facility has not yet been announced), and a new manufacturing facility for continuous glucose monitoring in Indiana. Once all new and expanded manufacturing capacity comes online, Roche will export more medicines from the US than it imports.
Even before the pharma tariff announcement, Eli Lilly (NYSE: LLY) had announced plans to invest $27 billion to build four new production facilities in the US. The goal of this is to strengthen the country's pharmaceutical supply chain. David Ricks, CEO of Eli Lilly, described the planned facilities as "mega sites."
Three of Lilly's newly announced sites will be dedicated to producing active pharmaceutical ingredients, which are critical components in drug production. The fourth site will focus exclusively on injectable drugs.
China dominates the production of active pharmaceutical ingredients. China's dominant role in producing APIs is widely viewed as a strategic threat, primarily due to the potential for disruptions to the global pharmaceutical supply chain if China chooses to halt these exports as a way of gaining geopolitical leverage.
As relations with China fray, these investments will bring significant manufacturing capabilities back to American soil. "The real gap in the supply chain in the US relates to active ingredient availability," David said. "Importantly, two of those [facilities] will be for synthetic chemistries and these, in particular, have been absent from the landscape in the US for some time."
BioGen (Nasdaq: BIIB), an American biotechnology company also based in Cambridge, UK, announced on July 21 a much smaller investment. The company will invest $2 billion in its existing manufacturing plants in North Carolina. However, the facility in North Carolina's Research Triangle Park (RTP) was already home to the company's largest manufacturing plants. These facilities produce key therapies for multiple sclerosis and Alzheimer's.
However, Biogen remains committed to global manufacturing. 'Biogen's overall global manufacturing supply chain strategy aims at ensuring resilient and high-quality patient supply through robust risk management including geographical risk diversification and dual sourcing.'
Pharmaceutical companies' more recent investments in the US have been driven by both incentives and tariff pressures. Merck (NYSE: MRK) started investing more heavily in the US following the 2017 Tax Cuts and Jobs Act. Since then, Merck has invested more than $12 billion into strengthening its US-based manufacturing and R&D infrastructure. The company plans to invest an additional $9 billion in domestic operations by 2028.
Will the Tariffs Go Into Effect?
Some of these planned investments are likely to be delayed or not implemented if the tariffs don't occur.
The International Emergency Economic Powers Act grants the U.S. President broad authority to regulate economic transactions during a declared national emergency stemming from foreign threats. Traditionally, IEEPA has been used to impose sanctions and freeze assets, but the Trump administration has leveraged it to impose tariffs. This has created legal challenges.
The next appellate hearing on the Trump administration's use of IEPPA is on July 31st. However, if the administration loses, TD Cowen expects them to expand its use of Section 232. This national security statute is designed to shield vital industries. These 'sector' tariffs have been announced for steel, aluminum & global autos/parts. Open investigations are focused on copper, lumber, semi-trucks and parts, critical minerals, aircraft & jet engines, and pharmaceuticals. TD Cowen is a US multinational investment bank and financial services division of TD Securities.