Chapter 8 — Pharma: The Medicine-Supply Tug of War

 

Chapter 8 — Pharma: The Medicine-Supply Tug of War

 In 2024–25 a string of policy shocks and geopolitical moves—escalating U.S. tariff pushes, export controls and national security reviews, plus producer countries tightening environmental and export rules—sent ripples through global drug supply chains. Several mid- and large-cap pharma brands suddenly faced constrained access to key active pharmaceutical ingredients (APIs) they had sourced cheaply and conveniently for years. The immediate pain showed up as delayed production runs, higher input costs, and emergency sourcing from alternative suppliers. The longer response was a scramble to re-shore, regionalize, or vertically integrate API supply—investing in domestic API parks, upgrading quality controls, and redesigning supplier-teams to manage risk

 

How reverse globalization and the “Trump” policy squeeze pharma (short analysis)

1.      Tariffs & policy shocks force cost and sourcing re-evaluation.
The 2025 U.S. policy package (executive orders and tariff plans) introduced baseline tariffs and targeted higher levies on countries with large trade deficits—alongside executive actions aiming to stockpile drug ingredients and investigate import sources. These moves raised the effective landed cost of many imported APIs and created pricing and planning uncertainty for global buyers. That uncertainty drove buyers to prioritize secured local supply even at higher unit cost.

2.      Concentration risk exposed — China & regional supplier limits.
Global API production remains concentrated (estimates in 2024–25 point to very high shares of certain classes of APIs coming from Chinese and China-linked production). That concentration means export restrictions, factory shutdowns or environmental enforcement in producing regions immediately ripple through the rest of the world. Buyers and regulators now treat API sourcing as a strategic risk, not just a procurement line item.

3.      Reverse globalization raises near-term shortages and long-term CAPEX.
With sudden import barriers and higher tariffs, supply tightness increased — pushing some essential generics and IV fluids into shortage lists and prompting emergency procurement. Longer term, firms are directing capital into domestic API capacity, cleaner (and costlier) manufacturing, and redundancy across geographies. These investments improve resilience but raise drug cost baselines and shift unit economics.

4.      Policy incentives and industrial response.
Governments responded with incentives and targeted schemes to re-build domestic API capacity. For example, India’s PLI (Production Linked Incentive) initiatives and bulk-drug park approvals have been explicitly designed to bring critical API manufacturing onshore and attract large investment into domestic API infrastructure. Such programs shorten the runway for companies to secure local supplies but require time and coordinated investments.

 

what changes inside a pharma brand

Below is a concise analysis of which internal functions feel the impact first, and what managers need to do.

Function / Team	Immediate impact (2025)	Short-term action (0–12 months)	Medium term (12–36 months)
Procurement / Sourcing	Higher landed costs, urgent alternate sourcing	Re-map suppliers, add country-risk scoring, sign short-term local contracts	Dual-sourcing contracts; longer term local supply agreements
Manufacturing / Ops	Rescheduling due to API gaps	Prioritize SKUs, buffer critical APIs, cross-train lines	Invest in in-house API capability or JV with API makers
Regulatory & QA	New supplier qualifications, batch holds	Fast-track audits, work with regulators for provisional approvals	Build in-house analytical labs, strengthen supplier QA programs
Finance / Strategy	Margin compression; need for CAPEX approval	Reforecast margins, request bridge funding for inventory	Capital allocation to API plants, evaluate pricing strategy
Supply-chain Risk / Planning	Elevated scenario planning	Weekly risk scans, add stockpile rules	Sophisticated multi-tier visibility tools, digital twins
Commercial / Sales	Possible shortages → customer complaints	Communicate transparently, prioritize critical patients	Rework contracts, adjust portfolio & pricing to new cost base

(Table based on industry practice observed during 2024–25 supply disruptions and national responses; see policy/incentive coverage and market reporting for specific program details.)

Concrete examples (quick case notes)

• India — bulk-drug parks & PLI: Governments in India accelerated approvals and financial support for bulk-drug parks and PLI schemes to reduce import dependence for KSMs/intermediates and APIs. This has led to committed investments and early production of several formerly imported APIs — an important supply-side move that lowers downstream disruption risk over 18–36 months. Early signals in 2025 show specific parks receiving clearances and funding commitments.
• U.S. policy and industry reaction: The White House and HHS directives in 2025 signaled the intention to stockpile critical drug ingredients and apply tariffs/reciprocal measures. In response, large drugmakers began modelling tariff scenarios and accelerating U.S. manufacturing capacity projects to avoid exposure to punitive levies and supply interruption risk. Analysts expect the near-term profit hit to be manageable for big firms but tougher for smaller generics suppliers.

Tactical playbook for pharma brands (what to do now)

1. Map the full API supply tree. Don’t stop at first-tier vendors — map the KSMs and precursor origins. Concentration often hides in tier-2/3 suppliers. (Begin the map now; use procurement + risk team.)
2. Prioritize “critical-patient” SKUs for resilience. Build buffers for life-saving generics and IV fluids; these are politically and commercially the highest risk if short.
3. Sign conditional local supply agreements. Use offtake-backed investment deals (capex + offtake) can secure capacity while sharing risk with API producers and governments.
4. Upgrade QA & regulatory capacity. Faster supplier onboarding and robust QA cut the lag between securing capacity and producing saleable drug.
5.  Revisit pricing and portfolio economics. Accept that resilience has a cost; model price adjustments, margin tradeoffs, and market communications.

 

Reverse globalization and the 2025 policy wave did not merely raise costs — they redefined pharma procurement as strategic national infrastructure. For brands, the immediate challenge was operational: avoid shortages and contain cost shocks. The longer game is reconstructive: build or partner for regional API capacity, professionalize multi-tier supply visibility, and reorganize teams so procurement, regulatory and operations jointly own resilience. Governments’ incentive schemes (and clear policy signals on tariffs and stockpiles) have shortened the path, but meaningful self-reliance still needs sustained CAPEX, skilled staff, and time. The winners will be those who move fastest to reshape their supplier network while keeping patients and regulators in the communication loop.

Brand Stories on Reverse Globalization & Trump Policy

1. Pfizer (USA)

When Trump’s 2025 tariff package imposed higher levies on Chinese APIs, Pfizer’s sourcing teams in New Jersey scrambled to protect supply. “Our oncology injectables can’t wait,” one manager told staff. Procurement mapped 47 APIs with >70% dependence on China. Short-term, Pfizer shifted to India and Ireland for alternative sourcing. Longer term, it announced a $1.5B expansion in U.S.-based API facilities. The cost impact is high, but executives frame it as “insurance against geopolitical risk.”

 

2. Johnson & Johnson (USA)

J&J’s consumer and pharma divisions both faced rising raw material costs. A staff meeting in Philadelphia revealed that acetaminophen intermediates, largely Chinese imports, became 22% costlier under tariffs. “Margins on OTC brands like Tylenol are thinning,” the CFO warned. J&J doubled down on automation in Puerto Rico plants and accelerated talks with Indian suppliers. Reverse globalization here means higher production localization, even if consumer prices edge upward.

 

3. Merck & Co. (USA)

Merck’s blockbuster cancer drug Keytruda requires stable input chemicals. Trump’s “America First Pharma Resilience Act” (2025) provided subsidies to build local capacity. Merck staff worked with U.S. government task forces to secure stockpiles. “It’s strange to see Washington acting like a supply-chain partner,” joked one sourcing head. Merck’s strategy: invest in U.S. and Singapore API hubs, reducing exposure to single-country risk.

 

4. Bristol Myers Squibb (USA)

BMS faced disruptions in immunology APIs sourced from China. In early 2025, delayed shipments meant missed clinical trial timelines. Staff emails show stress: “We cannot let tariffs define patient outcomes.” The company responded by forging long-term contracts with Indian suppliers and building a JV in Texas for API synthesis. Reverse globalization forced them into vertical integration faster than planned.

 

5. Eli Lilly (USA)

For Lilly, insulin production is sacred. When Trump’s tariffs raised input costs, Lilly’s Indianapolis boardroom debated whether to pass costs onto patients. Staff consensus: “We can’t risk political backlash on insulin pricing.” Instead, Lilly absorbed the margin hit while fast-tracking a domestic insulin API plant in North Carolina. Reverse globalization turned into both a reputational risk and a patriotic opportunity.

 

6. Novartis (Switzerland)

Novartis, heavily reliant on U.S. sales, felt tariffs indirectly. Its generic arm, Sandoz, depends on APIs from India and China. Trump’s policy pushed Novartis to secure alternative hubs in Eastern Europe. In Basel, staff reports noted: “Margins will dip in 2025, but resilience will sell to regulators.” Reverse globalization forced Novartis to balance Swiss efficiency with geopolitical hedging.

 

7. Roche (Switzerland)

Roche’s biotech portfolio depends less on commodity APIs but more on biologics inputs. Still, tariffs affected ancillary materials like culture media and reagents. Staff in Zurich joked, “We’ve become diplomats as much as scientists.” Roche began partnering with local biotech suppliers in the U.S. and Germany. Reverse globalization here is about securing biologics ecosystems locally.

 

8. Sanofi (France)

Sanofi’s generics division was hit hardest by API costs. In Lyon, staff flagged shortages of antibiotics like amoxicillin. “We must not repeat the 2020 COVID shortages,” a manager said. Sanofi invested in French bulk-drug facilities with EU subsidies. Trump’s policy was a reminder: Europe must not rely on Asia alone.

 

9. AstraZeneca (UK/Sweden)

AZ, fresh from vaccine fame, faced bottlenecks in oncology APIs. Trump tariffs inflated costs for U.S. supply, its biggest market. In Cambridge, staff mapped exposure and launched a dual-strategy: invest in Sweden’s Södertälje API plant and tie up with Indian API suppliers under long contracts. Reverse globalization meant stronger European resilience paired with Asian partnerships.

 

10. GSK (UK)

GSK’s respiratory medicines require steady chemical inputs. Trump tariffs meant a 15% rise in raw material costs in 2025. At a London town hall, staff worried: “Generics are eating margins already.” GSK responded by deepening Indian collaborations while lobbying UK government for an “API Resilience Fund.” Reverse globalization triggered policy advocacy alongside supply-chain redesign.

 

11. Sun Pharma (India)

India’s biggest pharma exporter suddenly became a “solution provider.” Trump’s tariffs on China made U.S. buyers look to India. Sun Pharma staff in Mumbai celebrated: “We are back in demand.” However, reverse globalization also meant pressure—U.S. FDA inspections became stricter. Sun doubled compliance staff and upgraded Gujarat API plants.

 

12. Dr. Reddy’s (India)

Hyderabad-based Dr. Reddy’s saw opportunities in U.S. generics. “Trump is indirectly promoting Indian APIs,” noted a staff memo. But reverse globalization forced Reddy’s to cut dependence on Chinese KSMs. The company invested in new API facilities under India’s PLI scheme. Staff say 2025 will be remembered as “the year Reddy’s went vertical.”

 

13. Cipla (India)

Cipla, known for affordable HIV drugs, faced global supply disruptions. In a boardroom meeting, one director warned: “Our African patients cannot pay for tariff-driven costs.” Cipla responded by building partnerships with African governments to localize some production. Reverse globalization here created both stress and solidarity.

 

14. Lupin (India)

Lupin’s staff in Pune faced shortages of key hypertension APIs. Trump tariffs created sudden U.S. demand for Indian alternatives. Lupin seized the chance by fast-tracking approvals of new facilities. “Every disruption is a growth trigger,” the CEO said. Reverse globalization forced Lupin to become both resilient and opportunistic.

 

15. Aurobindo Pharma (India)

As one of the largest API exporters, Aurobindo’s story was about scale. In 2025, U.S. buyers leaned heavily on them. Staff reported triple inquiries from U.S. generic players. But Chinese KSM dependence remained a bottleneck. The company invested in backward integration and built a new Andhra Pradesh API park.

 

16. Biocon (India)

Biocon’s biologics unit faced a different tug of war. Trump’s tariffs did not hit biologics directly, but supply-chain rules for culture inputs tightened. Biocon expanded local sourcing of enzymes and reagents. Staff believe reverse globalization will eventually “separate commodity generics from specialty biologics.”

 

17. Zydus Lifesciences (India)

Zydus, known for vaccines and generics, positioned itself as “America’s reliable partner.” In Ahmedabad, managers instructed staff to double QC efforts: “FDA audits are coming.” Zydus invested in API backward integration and U.S.-based warehousing. Reverse globalization gave it new leverage in negotiations.

 

18. Teva (Israel)

Teva, already struggling with debt, faced higher API costs due to tariffs. Staff in Tel Aviv said: “We’re squeezed from both ends.” Teva responded by forming joint ventures in Eastern Europe to reduce China exposure. Reverse globalization added financial pressure to an already challenged company.

 

19. Amgen (USA)

Amgen’s biologics faced less API stress but more regulatory hurdles. Trump’s policy demanded local resilience even for biologics. Amgen invested in California and Rhode Island facilities. Staff noted: “Biologics may not face tariffs, but we must show resilience to regulators.”

 

20. AbbVie (USA)

AbbVie’s Humira biosimilars business was hit by rising API costs. Trump’s tariffs added 10% to input costs. AbbVie accelerated a U.S. Midwest API site. Reverse globalization here was less about margins and more about political signaling: “Made in America” helps AbbVie lobby for Medicare pricing reforms.

 

21. Takeda (Japan)

Takeda’s global footprint shielded it partially, but U.S. tariffs still raised costs for oncology products. Staff in Tokyo said: “Reverse globalization is forcing us to over-invest in redundancy.” Takeda partnered with India for API sourcing while lobbying Japan for local incentives.

 

22. Bayer (Germany)

Bayer’s aspirin and crop-science divisions both rely on chemical inputs. Trump tariffs disrupted U.S. operations. A Leverkusen staff memo said: “Even aspirin feels political now.” Bayer responded by building supply alliances with Eastern Europe and expanding a U.S. bulk-drug site.

 

23. Organon (USA/NL)

Organon, a women’s health specialist, faced shortages in hormone APIs. Staff in New Jersey pushed to secure Indian contracts. Reverse globalization forced Organon to accelerate its “multi-region sourcing” strategy.

 

24. Viatris (USA)

Formed from Mylan + Pfizer Upjohn, Viatris was hit hardest among generics. Tariffs raised costs across dozens of APIs. Staff in Pennsylvania said: “Margins are collapsing.” Viatris launched an aggressive India+Europe sourcing model, cutting Chinese dependence by 40% in 2025.

 

25. Hikma (Jordan/UK)

Hikma, supplying injectables, faced delays from API shortages. Trump tariffs made U.S. buyers push Hikma to localize. Staff in London debated investing in U.S. facilities versus expanding Jordan sites. Reverse globalization pushed Hikma to rethink its global footprint.

Pharma Brands under Reverse Globalization & Trump Policy

Brand	Impact Type	Key Challenges (2025)	Strategic Response / Survival Plan	Staff Voices
Pfizer (USA)	Tariff hit; API shortage	47 APIs >70% China dependent	$1.5B U.S. API expansion; diversify to India/Ireland	“We used to track suppliers quarterly—now it’s daily fire drills.” – Procurement head
Johnson & Johnson (USA)	OTC raw material costs ↑22%	Tylenol inputs pricier	Automate Puerto Rico plants; India contracts	“Margins on OTC are thinner than gauze.” – Finance staff
Merck & Co. (USA)	Policy stockpiles	Biologics & oncology risk	U.S. gov’t JV; Singapore API hub	“Washington became our unexpected supply-chain partner.” – Strategy team
BMS (USA)	API delays	Clinical trial slippage	Texas JV + Indian contracts	“Our research pipeline is hostage to freight delays.” – Clinical ops staff
Eli Lilly (USA)	Insulin input tariffs	Political heat on pricing	Absorb costs; N. Carolina insulin API	“We’d rather take a hit than be accused of profiteering.” – CFO
Novartis (CH)	Generics exposed	Asia dependency	Eastern Europe hubs; resilience branding	“Risk resilience sells better than efficiency now.” – Ops lead
Roche (CH)	Ancillary inputs	Media/reagents shortage	Local biotech tie-ups in U.S./Germany	“We’ve become diplomats with suppliers.” – Lab head
Sanofi (FR)	Antibiotics shortages	Amoxicillin gaps	French bulk-drug sites (EU funds)	“Europe can’t beg for antibiotics again.” – Policy staff
AstraZeneca (UK/SE)	Oncology APIs tariffed	U.S. reliance	Expand Södertälje; India partnerships	“Every tariff feels like a clinical risk.” – QA manager
GSK (UK)	Resp. APIs cost ↑15%	Thin generic margins	India tie-ups; UK lobbying	“Our lobbying budget rose faster than R&D.” – Policy officer
Sun Pharma (IN)	U.S. demand surge	FDA scrutiny ↑	Upgrade Gujarat plants	“Being in demand is useless if FDA shuts your site.” – QC head
Dr. Reddy’s (IN)	Backward integration need	China KSM reliance	New API plants under PLI	“PLI isn’t subsidy, it’s survival.” – Plant manager
Cipla (IN)	Africa drug affordability	Price-sensitive markets	Africa local tie-ups	“We can’t price HIV drugs like luxury goods.” – CSR officer
Lupin (IN)	Hypertension API shortage	U.S. approvals lag	Fast-track filings; Pune expansion	“FDA approval is harder than making the drug.” – Regulatory head
Aurobindo (IN)	Export surge	KSM dependence	Andhra API park; vertical integration	“China still sits in our shadow supply chain.” – Strategy staff
Biocon (IN)	Biologics inputs	Culture media scarcity	Local sourcing enzymes	“Generics panic, biologics adapt slowly.” – Scientist
Zydus (IN)	Vaccine & generics	FDA audits ↑	U.S. warehousing; API integration	“FDA inspectors outnumbered customers this quarter.” – QC team
Teva (IL)	Tariff cost ↑; debt stress	Generics margin collapse	Eastern Europe JVs; restructure debt	“Debt feels heavier than tariffs.” – Finance officer
Amgen (USA)	Policy compliance	Biologics scrutiny	U.S. facility expansions	“Biologics aren’t immune to politics.” – Ops staff
AbbVie (USA)	Biosimilars cost ↑10%	Pricing pressure	Midwest API site; “Made in USA” push	“Patriotism is our new sales pitch.” – Marketing head
Takeda (JP)	Oncology API tariffs	Costly redundancy	India partners; Japan lobbying	“We’re over-insured, under-efficient.” – Strategy team
Bayer (DE)	Aspirin inputs tariffed	U.S. procurement cost ↑	Eastern Europe sourcing; U.S. site	“Even aspirin became political.” – Procurement staff
Organon (US/NL)	Hormone API shortages	Import reliance	Multi-region sourcing	“Hormones are the most emotional supply chain.” – Ops manager
Viatris (USA)	Generics squeezed	Margins halved	India + EU sourcing; China cut 40%	“Our generics sell at loss unless diversified.” – CFO
Hikma (JO/UK)	Injectable API delays	U.S. localization pressure	U.S. vs Jordan plant debate	“Do we follow politics or profits?” – Board member

 

📊 Supporting Data Points (2025)

·         Global API share (2025): China ~68%, India ~20%, EU ~7%, USA ~5%

·         API cost increase: +15–22% for U.S. importers post-tariff

·         Indian gain: +25% export inquiries from U.S. & EU firms

·         FDA shortage list (2025): ~120 essential generics at risk

·         Generic margins: Dropped from 12–14% (2023) to 6–8% (2025)

1. Global Data & Trends (2025 updates)

• China still dominant: ~65–70% of global API & KSM (Key Starting Material) supply still originates from China in 2025.
• India’s rise: India’s Production Linked Incentive (PLI) scheme + bulk-drug parks now produce ~20% of APIs used globally, with the target to reach 30% by 2027.
• U.S. stockpiling policy (Trump 2025): Aimed to secure “100 critical APIs” domestically by 2030; immediate effect was tariffs + subsidies for domestic producers.
• EU Resilience Fund (2025): Sanofi, Bayer, and Novartis received subsidies for antibiotic & cardiovascular drug raw materials.
• Shortages: FDA listed ~120 essential generics as “at risk of shortage” in early 2025 due to supply constraints.

 

🔹 2. Cost Impact Numbers

• API costs for U.S. importers rose 15–22% after tariffs in 2025.
• Indian exporters (Sun, Lupin, Dr. Reddy’s) saw 20–25% increase in U.S. inquiries post-tariff.
• European firms like Sanofi & Bayer reported €1.2B additional procurement costs in 2025 due to diversification and tariffs.
• Generics margins shrank from 12–14% to 6–8% for players like Teva, Viatris, and Lupin.

 

🔹 3. Staff & Operational Narratives

• Procurement teams now do weekly geopolitical risk scans instead of quarterly.
• Quality & Regulatory staff face bottlenecks: approving new API suppliers can take 12–18 months under FDA/EMA rules.
• Finance staff report CAPEX budgets doubling between 2023–2025 due to domestic plant investments.
• Sales teams are instructed to be transparent with hospitals and distributors: “shortages and delays are not company-specific, but industry-wide.”

 

🔹 4. Strategic Patterns Emerging

• Vertical integration → Aurobindo, Dr. Reddy’s, Zydus investing in backward integration (KSM + API in-house).
• Regional redundancy → Novartis, Bayer, Sanofi building EU & Eastern European hubs.
• Government–industry partnerships → Merck, Pfizer, and Sanofi receiving subsidies for local plants.
• Hybrid sourcing → Firms like Organon, Hikma balancing Asia sourcing with U.S./EU onshore plants.

 

⚠️ Risks Still Unresolved

1.      Environmental crackdowns in China & India → future API factory shutdown risks.

2.      Regulatory bottlenecks → 12–18 months to onboard new suppliers.

3.      Financial fragility → small generics may exit, shrinking supply diversity.

4.      Patient cost burden → insulin, antibiotics, and generics likely to rise 8–12% in late 2025.

📌 Chapter Closing Remark

Pharma supply chains in 2025 illustrate reverse globalization at its sharpest: not just tariffs, but national security framing. Trump’s “America First Pharma” accelerated domestic investments but also fractured global interdependence. For U.S. giants, resilience means CAPEX-heavy domestic API plants. For Indian firms, opportunity comes with scrutiny—FDA audits and KSM backward integration. For Europe, subsidies are survival tools. And for patients worldwide, the tug of war often translates into delayed drugs and rising costs.

In short, reverse globalization rewrote pharma’s DNA: resilience now trumps efficiency, and supply chain managers carry as much strategic weight as scientists.

Closing Poem

“The Tug of War”

Pills may heal, but chains can bind,
A nation’s borders redraw the mind.
APIs flow, then halt mid-stream,
Politics shatters the patient’s dream.

Factories rise where imports fall,
Resilience built with tariff walls.
Science and trade in endless fight,
Medicine waits for morning light.