Executive Summary

• A prominent objective of the Trump Administration is onshoring pharmaceutical manufacturing to the United States to secure supply lines and enable American pharmaceutical self-reliance; its most recent attempt to enact this policy is the recent Section 232 tariff announcement on patented pharmaceuticals and associated pharmaceutical ingredients.
• Given the complexity of the pharmaceutical manufacturing chain, the administration’s failure to articulate how, exactly, it defines onshoring for the industry or how it would measure success compounds operational issues.
• This insight provides an overview of the manufacturing process, highlighting the many ways onshoring could be interpreted, and demonstrates – even if a definition was agreed upon – there are many challenges that may not yield promised benefits.

Introduction

A prominent objective of the Trump Administration is onshoring pharmaceutical manufacturing to the United States to secure supply lines. President Trump has also signed executive orders and announced Section 232 tariffs to attempt to develop America’s pharmaceutical independence. A strengthened supply chain may help to protect against future shortages akin to those experienced during the COVID-19 pandemic. Despite onshoring being a prominent administration objective, there is a lack of a clear definition in federal policy or regulation, which has forced companies to operate in ambiguity.

Relocating the entire manufacturing process to the United States is not straightforward and the current U.S. policy environment is not durable enough to support the long-term commitment needed to onshore, and ensuring success in strengthening supply lines is very difficult. Operationalizing a pharmaceutical manufacturing facility can take nearly a decade between construction and approval and cost up to $2 billion. Onshoring can exponentially raise costs of production and cannot guarantee it’s going to solve the global supply chain issues. Manufacturers may be forced to plan long-term construction of facilities without the labor or regulatory environment to support them. This insight outlines the multifaceted process of pharmaceutical manufacturing, and how the process is complicated by the lack of a clear definition of onshoring. Even with a definition, though, there are potential obstacles companies could face, including labor shortages, regulatory issues, and geographic and environmental concerns.

What Is the Goal of Onshoring?

Onshoring has become a popular discussion topic in recent years, accelerating in the wake of supply chain disruptions during the COVID-19 pandemic. While integrated global trade reduces costs, interruptions in the flow of pharmaceuticals and other goods make domestic sourcing more appealing. The geopolitical environment has seen the United States shift to a more protectionist posture across industries, including health care. The administration’s goals are to secure supply lines and promote national security. While the rhetoric may be appealing, determining success of onshoring in general could be difficult without a clear, agreed-upon definition from the administration.

Discontinuing or foregoing manufacturing operations abroad and relocating them to the United States is easier said than done. Manufacturing can be a complicated, multi-stage, decentralized process. The complications are particularly true in the pharmaceutical industry, which contains distinct labor- and resource-intensive steps. A broad and vague definition of onshoring, as seemingly applied by the administration, does not provide an opportunity to measure policy success since the pharmaceutical manufacturing process contains iterative instances of manufacturing, from small-scale in initial drug discovery and formulation through the large-scale commercial manufacturing step.

Despite little clarity, the administration is asking companies to create an onshoring plan by July or September 2026 (depending on company size), or face Section 232 tariffs. The lack of definition and resultant instability may make the investment environment too unreliable for companies to execute this move effectively. It takes time and resources to develop the facilities and infrastructure needed to operate.

Defining the Manufacturing Process

Outlining pharmaceutical production helps illustrate the problems created by a vague onshoring definition. The manufacturing process broadly contains four steps: drug discovery and development, formulation development, clinical research trials, and commercial manufacturing. Each step contains some amount of manufacturing of key starting materials (KSMs), active pharmaceutical ingredients (APIs), or finished drug products. As seen below, unclear expectations for companies could lead to different interpretations of onshoring and complicates any determination of success by the government.

Commercial manufacturing – large-scale production of an approved drug – is probably the step most people envision when discussing pharmaceutical manufacturing. It includes both finished drug products – containing at least one API among other ingredients in finished package form – and unfinished drugs, with an API either alone or together with other ingredients, not in package form. This step requires appropriate quality control and adherence to all relevant government mandates and regulations, including the Food and Drug Administration’s (FDA) current Good Manufacturing Practices (cGMP). If policymakers seek to onshore only commercial manufacturing, it would represent an exorbitant share of the pharmaceutical manufacturing process. Manufacturing occurs outside of this step, but a clear definition is needed to inform companies which steps of the pharmaceutical manufacturing process constitute onshoring.

Manufacturing also occurs during the drug approval process, however, when product is made to administer during clinical research trials. The trials require small-scale manufacturing to test the drug in thousands of human subjects across multiple phases for a period of years to assess safety and efficacy, followed by submitting data to regulatory authorities for approval. Although they can be run around the world, recent FDA proposals suggest increased U.S.-based trials are a key goal of the administration. Increasing U.S. clinical trials could dramatically shape the process of onshoring small-scale manufacturing occurring in the United States, but further manufacturing happens even earlier in the process.

To reach the clinical trial step of the drug approval and manufacturing process, though, medicines require extensive formulation development – the study of a drug substance’s physical and chemical properties. This step determines if the selected compound can be produced in a suitable dosage form to ensure stability and minimized toxicity levels. Formulation scientists work on optimizing the drug’s bioavailability, minimizing side effects, and improving patient tolerance. Validating the equipment, processes, and analytical methods used in manufacturing is necessary prior to production of clinical trial batches and scaling production for future commercial sales. The small-scale manufacturing occurring during formulation development is an example of how clarity is needed to specify how onshoring applies.

Prior to formulation development, companies must undertake drug discovery and development to identify useful compounds with potential to mitigate or prevent disease. This key phase of research and development focuses on identifying potential drug targets and lead molecular compounds from KSMs and APIs. Scientists use KSMs and APIs to test thousands of molecules for a new drug and require steady supplies for drug safety and efficacy testing. A clear definition of onshoring would address whether KSMs and APIs must be produced domestically, or if they can be imported.

Reviewing the process for pharmaceutical development and production, it is clear manufacturing occurs consistently and at every stage. For companies to comply with the administration’s desires, they require clear goals, timetables, and policy definitions to understand what is necessary to meet onshoring expectations.

Potential Complications

Defining onshoring is vital to determining the feasibility, and potentially success, of the administration’s goals. Due to the costly, long-term, investments manufacturing requires, government policy stability, consistent labor availability, geographic concerns, and regulatory burden are all factors companies must consider in determining to what degree, if any, to onshore production. Each factor may contribute to a company’s decision, and each may pose a complication to current and future onshoring efforts.

Ensuring the safety and quality of the manufacturing process is a top priority whether production is in the United States or abroad. The FDA highlighted the issue of manufacturing quality problems in 2019 testimony to Congress, identifying it as a challenge for both U.S.-based and foreign producers. As This recurring issue – affecting an already-domestic facility – shows even U.S.-based manufacturers are not immune to approval issues. Recent budget The facility issues above may only be amplified if budget and staff restraints continue to impede FDA capabilities.

Manufacturing is also not simply an end state. The FDA requires manufacturers to complete post-market monitoring, in line with cGMP. This monitoring requires sufficient staff to provide post-approval technical assistance and perform routine facility inspections. Given the FDA’s responsibility for approving pharmaceutical manufacturing facilities, agency operational and regulatory issues could limit inspection abilities, creating bottlenecks that increase costs and delaying the manufacturing process. Pharmaceutical companies operate more efficiently when the federal policy environment is predictable and stable to assist in the long-term planning required for manufacturing investment.

Pharmaceutical manufacturers also face geographical and environmental concerns. A notable example is the synthesis of KSMs which often produces toxic byproducts. Environmental Protection Agency (EPA) regulations regarding standards for managing hazardous waste resulted in the closure of facilities capable of KSM production. EPA regulations deter U.S. pharmaceutical manufacturers from producing the ingredients necessary for KSM formulation domestically. Comparatively looser Chinese environmental regulation allows for manufacturers to establish robust KSM production in China. In addition to environmental regulatory issues, actual geographic location may also impact manufacturing. In 2024, Hurricane Helene disabled a plant in North Carolina that produces more than 60 percent of the United States’ intravenous and peritoneal fluid bags, causing shortages and forcing imported supplies from abroad. Hurricanes, tornados, ice storms, and other natural disasters are all considerations when companies select locations for factories; thus, onshoring the U.S. manufacturing process cannot guarantee successfully strengthened supply lines.

Another complication to onshoring efforts is the scarcity of skilled manufacturing workers in the United States generally. Preliminary Bureau of Labor Statistics figures from January 2026 show 495,000 open U.S. manufacturing jobs. Labor shortage issues highlight how onshoring the manufacturing process could exacerbate current issues, rather than providing a solution. An example of these issues is the Taiwanese Semiconductor Manufacturing Company (TSMC), which constructed chip manufacturing plants in the United States for the same supply chain and national security reasons, but gained attention for consistent delays and supply chain issues. TSMC had severe workforce issues related to U.S. workers and faced controversy for hiring workers from Taiwan.

Comparatively lighter regulation and co-locating manufacturing facilities with central sources of KSM and API precursors could be a reason for manufacturers to hesitate onshoring their entire process to the United States. This co-location is especially seen in drug ingredient manufacturing taking place abroad. Chinese firms are embedded in a network of raw materials and intermediary suppliers which allow for low shipping and transaction costs for raw materials. Industry analysis shows manufacturing in China and India can offer a potential cost advantage of 50 to 65 percent compared to the United States. India is the world’s main source of API manufacturing, and China is the sole supplier of KSMs used in 37 percent of the APIs. The United States does not possess the resources to produce the raw materials necessary to develop KSMs and APIs. This means even if KSM manufacturing was onshored, manufacturers operating in the United States would still have to import ingredients and continue supply chain reliance on China.

Geographic and environmental considerations, regulatory struggles, and labor shortages reinforce the concerns for a U.S.-centric solution to a global supply chain problem. Onshoring the entire manufacturing process to the United States may be unreasonable, as the current U.S. policy environment is not durable enough to support the long-term commitment needed to onshore. Despite the lack of clarity and potential complications of the current state of U.S. manufacturing, large companies have invested billions of dollars in domestic pharmaceutical manufacturing facilities. The same companies, though, are investing in, expanding, and strengthening global manufacturing, including in China, where some of the comparative complications may be less prohibitive. While the overall increase in global pharmaceutical manufacturing capacity can contribute to strengthened supply lines and create resiliency for the global market, it may undermine the perception of onshoring progress generated by To avoid undermining this potential progress, the administration must publish a declared definition of onshoring in order to appropriately measure success.

Conclusion

Despite the Trump Administration’s intense interest in onshoring the pharmaceutical industry, it has failed to provide an explicit definition of what, exactly, that would entail or how it would measure success. Moreover, while the stated objective of strengthening supply lines via onshoring is reasonable, there are significant challenges to consider.

The pharmaceutical manufacturing process contains more steps than just commercial manufacturing; it includes drug discovery and development, formulation development, clinical research trials, and post-market product monitoring. Lacking a clear definition of onshoring may leave manufacturers uncertain about how to proceed, especially with an ambitious 2026 timeline and a reduced federal workforce available to communicate and implement necessary guidelines and regulations. The associated ambiguity may force manufacturers to plan long-term facility construction without the labor or regulatory environment to support them. Complete onshoring of the pharmaceutical manufacturing process would be costly and inefficient, even if companies knew (and agreed with) what the Trump Administration defines as onshoring. A regulatory environment that incentivizes manufacturers to invest in the United States could strengthen supply lines; punishing them for manufacturing abroad restricts potential supply lines, contradicting the stated objective.