Merck’s decision to shutter its Riverside, PA antibiotic API facility underscores how decades of cost-driven optimization have eroded domestic manufacturing of essential medicines—exposing systemic vulnerabilities in US drug supply resilience that markets alone are unlikely to fix.
The recent choice by Merck to close its Riverside, PA (Cherokee Pharmaceuticals) manufacturing facility may appear, at first glance, to be a routine portfolio and footprint optimization. In reality, it reveals something far more consequential: the fragile state of US resilience in the manufacturing of essential medicines.
The Riverside site produced active pharmaceutical ingredients (APIs) for beta-lactam antibiotics, a foundational class of drugs that includes carbapenems, penicillins, cephalosporins, and beta-lactam/beta-lactamase inhibitor combinations. These medicines underpin modern hospital care, from surgical prophylaxis and oncology support to ICU and sepsis management.
While Riverside may not have been the literal “last” US beta-lactam API plant, its closure marks the near-disappearance of meaningful domestic fermentation-based antibiotic API manufacturing capacity.
That fact alone should give pharmaceutical supply chain leaders pause.
Merck has emphasized that the closure was not driven by quality, compliance, or workforce performance issues. Instead, it reflects broader structural forces that have been reshaping the antibiotics market for decades.
First, antibiotics suffer from chronic economic underpricing. Stewardship programs rightly aim to limit unnecessary use, but the result is low, unpredictable volumes and razor-thin margins, particularly for older but essential hospital antibiotics. Second, beta-lactam API manufacturing is capital-intensive. Facilities require dedicated, segregated production lines to prevent cross-contamination, driving higher fixed costs than many other small-molecule APIs.
Third, global cost asymmetries are stark. Overseas producers, particularly in China and India, benefit from lower labor costs, scale advantages, and historically more permissive cost structures. Finally, capital allocation priorities across the industry have shifted toward biologics, oncology, vaccines, and specialty therapeutics, where returns are higher and more durable.
In short, the market has consistently rewarded efficiency and penalized redundancy. Antibiotic manufacturing, especially onshore, became a casualty of that logic.
The closure of Riverside should not be viewed narrowly as an “antibiotics issue.” It is a case study in how supply chains optimized for cost can quietly lose strategic capabilities.
Beta-lactam antibiotics are not optional therapies. They are essential infrastructure for the healthcare system. Yet the US is now heavily dependent on foreign API sources for many of these drugs. That dependency introduces several systemic vulnerabilities: geographic concentration risk; exposure to geopolitical tensions and trade disruptions; quality and compliance shocks at overseas plants; and limited surge capacity during public health emergencies.
The COVID-19 pandemic briefly exposed similar vulnerabilities across PPE, ventilators, and certain medicines. Antibiotics, however, never fully entered the policy spotlight, despite recurring shortages and persistent warnings from infectious disease experts and supply chain analysts.
From a pharmaceutical commerce perspective, this creates a paradox. Companies are expected to ensure uninterrupted supply of critical medicines, yet the economic and policy environment often undermines the business case for maintaining domestic or diversified manufacturing capacity.
For decades, pharmaceutical supply chains have borrowed heavily from just-in-time and lean manufacturing principles. These approaches work well when demand is predictable, supply is diversified, and disruptions are rare. Essential medicines violate all three assumptions.
Antibiotic demand can spike unpredictably due to outbreaks or seasonal surges. Supply is increasingly concentrated in a small number of global regions. And disruptions, whether from pandemics, natural disasters, regulatory actions, or geopolitical conflict, are no longer rare events.
The Riverside closure underscores a hard truth: resilience is not free. Maintaining onshore or near-shore manufacturing capacity, dual sourcing, and excess capacity carries real costs. Markets left to themselves tend not to pay for those costs, even when the societal value is high.
For manufacturers, the lesson is not simply to reshore everything. It is to rethink how resilience is defined and valued in portfolio and network design. Hybrid models—such as offshore API production paired with onshore or allied-country fill-finish, or strategic retention of fermentation know-how—may offer more balanced risk profiles.
For policymakers, the closure reinforces the limits of relying solely on market forces for essential medicines. Antibiotics increasingly resemble critical infrastructure: indispensable, low-margin, and strategically sensitive. Addressing this may require a mix of targeted incentives, guaranteed purchasing mechanisms, or public-private partnerships focused specifically on sustaining domestic capabilities.
The closure of a single plant in rural Pennsylvania is not, by itself, a crisis. But it is a warning signal. It shows how quietly and incrementally strategic manufacturing capacity can disappear, until rebuilding it becomes prohibitively expensive or operationally impossible.
If resilience is truly a priority for the US drug supply, antibiotic manufacturing should be treated not as a commodity business, but as a strategic asset. The Riverside facility’s closure challenges the industry to confront an uncomfortable question: what other “essential” capabilities are we allowing to erode, simply because they no longer fit traditional commercial logic?
The answer will shape not just the future of antibiotics, but the credibility of pharmaceutical supply chains in an increasingly uncertain world.
About the Author
Thani Jambulingam, PhD, is a professor of food, pharma, and healthcare business at Saint Joseph’s University’s Erivan K. Haub School of Business.
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