With more than $270 billion in commitments to date, a new wave of pharmaceutical manufacturing is slated to hit the US.
At least, that’s what the industry is trying to project.
Take Johnson & Johnson’s (JNJ) $55 billion over the next four years, announced in March, which includes expansions to existing facilities already underway. Eli Lilly (LLY), meanwhile, announced $50 billion in investments in February, with half of that coming from existing plans.
Behind the curtain of the multibillion-dollar promises to reshore drug manufacturing is a more sober reality: While some of the announcements are new, many have been in the works for years.
The reason? A global manufacturing footprint has proven risky, thanks to the COVID-19 pandemic. In addition, patent expiries mean more R&D activity and thus more local manufacturing needs. And then there’s the fact that people are living longer, requiring a higher volume of drugs.
Those are the key reasons behind the long-term manufacturing plans drugmakers began crafting in the last few years.
Sandy Romero, head of life sciences & healthcare insights at Cushman & Wakefield (CWK), said, “It wasn’t like the tariffs came and the pharmaceutical companies [decided to] open plants because of the tariffs.”
It’s likely some plans have been pushed up, she said, to meet the moment in an effort to avoid the tariffs altogether.
“When they decide to actually break ground … it’s been three to five years in planning,” Romero said.
Lilly is one of the few that has announced new plans that align with Trump’s needs, to bring basic chemical component production, currently mostly located in Europe or Asia, back to the US.
Lilly CEO David Ricks previously told Yahoo Finance, “I think if the goal is to repatriate the supply chain, I would say probably the threat of tariffs has already done that.”
Especially since the $270 billion could also be an undercount, as some companies have chosen not to make flashy announcements about their plans, according to experts.
“It’s accurate to state that there was a global supply chain approach to pharmaceuticals and biotech. And the lessons learned from the pandemic, and disruption to the supply chain, created a greater focus into regionalizing those supply chains,” said Jose Jimenez, vice president and business leader of life sciences at major construction firm Gilbane.
And with generations of humans living longer comes greater demand for drugs for chronic and serious diseases that are prevalent in older age groups, Jimenez said.
That’s why the recently announced plans have less to do with Trump’s efforts to revive US manufacturing and more to do with the supply-chain risk and needs of the drug giants.
And it’s why the US is going to see a flurry of construction activity — and the headwinds that will come with it.
Bryan Northrop, Skanska (SKBSY) USA building national executive adviser for science and technology, told Yahoo Finance the announcements signal a “substantial amount of work for all these companies to undertake in the US in the same timeframe.”
Laks Pernenkil, principal and practice leader of US life sciences at Deloitte, said that the construction industry has already been facing delays in current building projects — preceding the election and subsequent tariffs.
At a conference he attended in October, Pernenkil said one of the biggest questions plaguing pharma leaders is, “With all of us making all these announcements, can the construction industry keep up with the demand that’s coming down the pike?”
The new manufacturing announcements could turn into a high-stakes competition for pharma companies hoping to get the best teams assigned to their projects.
With plans in the works for years before the announcements, drugmakers were already looking at factors like location, material costs, and labor.
What they probably didn’t plan for is the cost and time crunch that Trump’s tariffs and immigration policies have created, experts said.
With the cost of steel and aluminum increased due to the tariffs, plus disruptions in immigration visa processing, the construction industry is feeling the pain. Romero noted that overall, construction prices are up 45% since 2020, after a brief decline post-pandemic.
All of that will add to more costs and possible delays.
“We may see more pauses of projects if it’s harder to attract people to work sites, and on top of that, there’s that pausing of immigration into the country,” Romero said.
Pharmaceutical technician’s hands seen in a special laboratory while holding and controlling red and black pills in a sieve during usual procedure after production of the drugs. ·EXTREME-PHOTOGRAPHER via Getty Images
“This is a very interesting historical nexus of events coming together at the same time,” said Arda Ural, Americas life sciences leader at EY.
Each company has a different level of exposure to the problems, since each company has a different project size and scope, he said.
It’s why the new announcements are going to add even more pressure to the construction industry.
Jennie Taveras, vice president and life science sector lead at STO Building Group, said she anticipates a lot more collaboration between bigger construction firms and smaller ones.
“Even the largest builders are going to need help and partners for these accelerated timelines,” she said.
This industrial manufacturing plant flies the american flag out front proudly ·Amanda Wayne via Getty Images
Will this construction rush bring manufacturing back, or even surpass, its historical high in the US? That’s a debate.
Legacy hubs included the northeast of the US, particularly the tristate area and Boston; North Carolina’s “research triangle”; the West Coast; and Chicago. But lately, Ohio, Georgia, Texas, and even Florida have cropped up as potential locations for new sites. And in the Midwest, Indianapolis is booming thanks to the investment of Eli Lilly, maker of one of the leading blockbuster weight-loss drugs, Zepbound.
Manning those facilities is another consideration for drugmakers, because they need highly skilled labor. But the labor requirements of running these sites are one-fourth of what they used to be, thanks to automation and robotics, according to Deloitte’s Pernenkil. So maybe a staff of 1,000, of which a small percentage need to be highly skilled, is needed rather than 4,000.
“I don’t think they will all go to legacy pharma hubs. They will spread out in the US, which is what the [Trump] administration is trying to do,” Pernenkil said.
But Skanska’s Northrop said it isn’t likely to spread to states that aren’t already home to at least one site or planned site.
“You could stand up a plant in the middle of nowhere because it’s cheap land and cheap labor to build the facility,” he said. “But if you can’t get the right workforce to operate it successfully, it’s a no-win situation.”
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. That includes GLP-1s, of course. Follow Anjalee as AnjKhem on social media platforms X, LinkedIn, and Bluesky @AnjKhem.
