What Elements is the Conversation About Bringing Pharma Manufacturing Home Missing?

In early April, President Trump announced 100% tariffs on branded pharmaceuticals. While he allowed exemptions for companies that signed agreements as part of his MFN initiative, the goal of the tariffs is to pressure the industry to reshore its manufacturing plants and rely less on imports.

Charlie Lyon, VP of manufacturing, procurement, and logistics at the API Innovation Center, spoke with Pharmaceutical Executive about the tariff strategy and why many in the industry are criticizing its effectiveness. While bringing manufacturing back to domestic manufacturing has its benefits, experts are saying the situation is much more complicated than the administration believes it to be.

Pharmaceutical Executive: What elements is the conversation about bringing pharma manufacturing home missing?
Charlie Lyon: The conversation today is largely focused on APIs and finished drug products, but it is missing the very front end of the supply chain, key starting materials, or KSMs.

APIs do not exist in isolation. They are made from specialty and fine chemicals, and over the past two decades, production of those materials has largely moved offshore, just like APIs. So, when we talk about reshoring, if we are only addressing APIs, we are solving part of the problem, not the whole system.

Data analysis from QYOBO shows that for all drug products sold on the U.S. market 98% of these drugs rely on foreign manufacturing when we consider where their KSM, API and finished form are manufactured. That highlights the issue. If we bring API manufacturing back but still rely on imported KSMs, we have simply moved the single point of failure upstream.

The other aspect that we should focus on is the economic aspect. Bringing APIs back requires addressing the cost issue that forced APIs offshore. The cost to manufacture can be addressed by developing new chemical synthesis routes and integrating advanced manufacturing technologies.

At APIIC, we are solving for this at our state-of-the-art R&D labs. We also look at the entire value chain, from key raw material inputs to finished dose. That is the only way to build true supply chain resilience.

PE: How does specialty chemical offshoring mirror that of APIs?
Lyon: They followed almost the exact same trajectory.

Over the last 20-plus years, API manufacturing has steadily moved out of the U.S. to Asia, primarily China, and more recently India. At the same time, the specialty chemical industry, which produces the KSMs and intermediates used to make APIs, moved in parallel.

What we see today is offshore dependency at multiple layers of the supply chain. The same economic pressures drove shifts, cost, scale, and regulatory differences.

The result is a tightly coupled system where APIs and their inputs are co-located overseas. That is efficient from a cost standpoint, but it creates overreliance. If disruption occurs at the KSM level, it impacts API production globally. Reshoring is a full supply chain challenge, not just an API challenge.

PE: What problems arise when reshoring doesn’t address KSMs?
Lyon: The primary problem is that you do not eliminate risk, you just relocate it.

If you bring API manufacturing back to the U.S. but continue to import KSMs, you are still dependent on foreign supply chains for upstream inputs. Any disruption - geopolitical, logistical, or quality-related - can still interrupt production. And this logic extends further upstream: the same argument applies to KSMs that rely on raw material inputs, which also largely originate from China. The honest answer is that you must start somewhere, and each layer of reshoring reduces exposure even if it does not eliminate it entirely.

It also limits the effectiveness of domestic investment. You can repurpose facilities and install equipment here, but if your inputs are constrained or unreliable, you cannot fully utilize that capacity.

From a resilience standpoint, it creates a false sense of security. You appear to have domestic manufacturing, but the system is still vulnerable.

That is why our approach prioritizes U.S. sourcing first, then allied countries, and treats China and India as last-resort options. In parallel, we are working to rebuild domestic KSM production where gaps exist. We are not simply replicating existing supply chains onshore. When reshoring KSMs, exploring novel synthesis routes and adopting advanced manufacturing technologies (AMT) opens a potential path to a fully U.S.-based supply chain. Biotechnology and renewable inputs offer another such route. China currently holds a significant lead over the U.S. in the adoption of continuous flow technologies for chemical production and closing that gap requires overcoming both the resistance to change and the investment hurdles that have slowed AMT adoption domestically.

PE: What impact does India’s dependence on Chinese KSMs have on “friendshoring?”
Lyon: It highlights a key limitation of the friendshoring concept.

India has become a major global supplier of APIs, and it is often viewed as a more reliable partner. But the reality is that a significant portion of India’s API production depends on KSMs sourced from China.

So even if you shift API sourcing from China to India, you have not fully diversified your risk. You are still indirectly dependent on Chinese supply chains at the raw material level.

From a system perspective, that means the same upstream vulnerability remains in place. It is just less visible.

That is why we believe friendshoring alone is not sufficient. You must look deeper into the supply chain and address where those inputs are coming from.

Our focus is on building a more complete domestic and allied network, including KSM production, so that we are not just moving dependencies around, but actually reducing or even eliminating them.