With over $270 billion in commitments so far, a new wave of drug manufacturing is expected to hit the United States.
At the very least, that’s what the industry is trying to project.
Johnson & Johnson (JNJ) announced $55 billion in March over the next four years. This includes expansion to existing facilities already underway. Meanwhile, Eli Lily (LLY) announced a $50 billion investment in February, half of which comes from existing plans.
Behind the multi-billion dollar promise, the promise to reissue drug production on the re-shore is a more calm reality. Some of the announcements are new, but many have been working on it over the years.
reason? The global manufacturing footprint has proven to be at high risk thanks to the Covid-19 pandemic. Furthermore, patent expiration dates mean more R&D activities and therefore more local manufacturing needs. And there’s the fact that people live longer and need more drugs.
These are the main reasons behind long-term manufacturing plans. Drugmakers have begun making it in the last few years.
However, the timing of the announcement earlier in the year coincides with another recent reason: tariff threats from the Trump administration over imported drugs.
“It’s not that tariffs come, pharmaceutical companies come,” said Sandy Romero, head of Life Sciences & Healthcare Insights at Cushman & Wakefield (CWK). [decided to] Plants are open for customs duties. ”
She said some plans likely have been pushed up to meet the moment to avoid tariffs entirely.
“When they actually decided to break the ground…it was a plan of three or five years,” Romero said.
Lily is one of the few to announce new plans tailored to Trump’s needs, bringing basic chemical constituent production back to the US, which is now primarily in Europe or Asia.
Lily CEO David Licks previously told Yahoo Finance: “If it’s about repatriating the supply chain, I think the tariff threat is probably already doing that.”
Experts say some companies have chosen not to make flashy announcements about their plans, particularly as they could be short of $270 billion.
“It is accurate to say there was a global supply chain approach to drugs and biotechnology, and the lessons learned from the pandemic and supply chain disruptions focused on localising these supply chains.
And as generations of humans live longer, there will be a greater demand for drugs for chronic and serious illnesses that are common in the elderly, Jimenez said.
That’s why the recently announced plans have little to do with Trump’s efforts to revive US manufacturing, and are linked to the risks and needs of the drug giant’s supply chain.
And that’s why the US is seeing a surge in construction activities.
Brian Northrop, a national executive adviser at Skbsy USA Building Science and Technology, told Yahoo Finance that the announcement signaled “a significant amount of work for all these companies to take on the US in the same time frame.”
Lacuspernenkill, principal leader and practice leader of Deloitte’s US life sciences, said the construction industry is already facing delays in current construction projects prior to the election and subsequent tariffs.
At a meeting he attended in October, Pernenkill said that one of the biggest questions that bothers Pharma leaders was, “Will we all announce all of these things, can the construction industry keep up with the demand coming down the pike?”
The announcement of new manufacturing could turn into a high-stakes competition for pharmaceutical companies that want to win the best team assigned to the project.
With years of work planning before the announcement, drugmakers had already looked at factors like location, material costs, and labor.
What they probably didn’t plan was the costs and time crunch created by Trump’s tariffs and immigration policies, experts said.
The construction industry is in pain as tariffs increase the costs of steel and aluminum, and further disruptions in immigration visa processing have increased. Overall, Romero said construction prices have risen 45% since 2020 after a brief post-pandemic decline.
All of that adds to more costs and possible delays.
“If it’s difficult to attract people to the workplace, there may be more moratoriums on projects. Plus, there’s moratoriums on immigration to the country,” Romero said.
A drug technician’s hands seen in special labs while holding and controlling red and black pills in a sieve during normal treatment after drug production. ・Extreme Photographer via Getty Images
“This is a very interesting link to a historic event,” said Arda Ural, leader of Americas Life Sciences at EY.
Each company has a different level of exposure to the problem, he said, as each company has a different project size and scope.
So this is why the new announcement puts even more pressure on the construction industry.
Jennie Taveras, vice president and lead in the life sciences sector at STO Building Group, said he expects more collaboration between large construction companies and small businesses.
“Even the biggest builders will need help and partners for these accelerated timelines,” she said.
This industrial manufacturing plant proudly pops out the American flag ・Amanda Wayne via Getty Images
Will this construction rush regain or outweigh the US’ historic highs? That’s a debate.
Legacy hubs included the Northeastern United States, particularly the Tristate area and Boston. North Carolina’s “Research Triangle.” West Coast; and Chicago. However, recently, Ohio, Georgia, Texas and even Florida have emerged as potential locations for new sites. Also in the Midwest, Indianapolis is booming thanks to investments from Eli Lily, the maker of Zepbound, one of the blockbuster weight loss pills.
Placement of these facilities is another consideration for drug makers as it requires a very skilled workforce. However, the labor requirements for running these sites are a quarter of what they had before, thanks to automation and robotics, according to Pernenkil of Deloitte. So maybe 1,000 staff members need to be highly skilled at a small percentage of them, but not 4,000.
“I don’t think they’ll all go to the Legacy Pharmahub. They’ll spread to the US. [Trump] The administration is trying to do it,” Pernenkill said.
However, Northrop in Skanska said it is unlikely to spread to states that are not home to at least one site or planned sites.
“It’s cheap land and cheap labor that builds facilities, so plants can be built anywhere,” he said. “But if you can’t get the right workforce to run it well, that’s a situation that’s not an advantage.”
Anjalee Khemlani He is a senior health reporter for Yahoo Finance and covers Pharma, Insurance, Care Services, Digital Health, PBMS, and health policy and politics. Of course, it includes the GLP-1. Follow Anjkhem as Anjkhem on social media platforms X, LinkedIn, and Bluesky @anjkhem.
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