The news: Novartis is the latest Big Pharma firm to expand its US manufacturing capabilities as the threat of tariffs looms on the sector. The Swiss company will invest $23 billion to build seven new facilities in the US while growing production capacity in three existing manufacturing plants.
Novartis’ pledge to expand US production capacity follows other Big Pharma giants including Johnson & Johnson, Merck, and Eli Lilly that have made similar financial commitments.
The bigger picture: Pharmaceuticals evaded the administration’s first round of levies, but President Trump stated that the industry will soon face “major” tariffs on imports. Notably, most of the ingredients that medicines are made up of are manufactured in China and India.
- Novartis’ expansion capacity will cover both active pharmaceutical ingredients (API) and biologics drug substance, as well as secondary production and packaging.
- The company also noted that the new investments will ensure that all “key medicines” for US patients will be able to be produced end-to-end in the US.
The final word: Large pharma companies that have the resources to expand US-based manufacturing can protect themselves against global supply chain disruptions caused by trade wars and pandemics. Generic drugmakers, which supply about 90% of US prescriptions, don’t have the same maneuverability since they sell their products at much lower prices than brand-name medications and have slimmer profit margins.
However, we’ll note that building and expanding manufacturing plants in the US will take years and cost Big Pharma companies billions of dollars—costs that could ultimately be passed onto patients via higher drug prices.
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