Q&A: What Will It Take to Reshore US Drug Manufacturing?

For decades, America's reliance on China for the ingredients behind its medicines was treated as a slow structural problem. In 2026, it became an immediate legal one.

In April, China's State Council issued two regulations, one on industrial and supply chain security and another countering what it calls improper extraterritorial jurisdiction by foreign states, both effective immediately with no grace period. Together, they expand Beijing's power to retaliate against foreign sanctions, export controls, and forced-labor rules, meaning the very compliance steps US, UK, and EU regimes require can now trigger a Chinese investigation or "malicious entity" designation in return.¹ For a drugmaker, an action as routine as auditing a Chinese supplier or pausing a shipment can now create direct legal conflict.

To unpack what that means operationally, Pharmaceutical Commerce spoke with Gerren McHam, vice president, government and external affairs, at the API Innovation Center, about navigating conflicting compliance regimes, the policy tools needed to close the gap between reshoring ambition and real capacity, where that capacity is being built, and what a realistically reshored US supply chain looks like over the next five to ten years.

PC: China's new regulations put pharma companies in a direct conflict. Complying with US regulations can now trigger Chinese retaliation. What does that mean for supply chain teams?

McHam: There's two rules in question here. One is China's industrial base and supply chain regulation, and the other, which targets the views of improper extraterritorial jurisdiction by foreign governments.

Operationally, what this means is selecting a supplier can no longer be treated as routine kind of procurement decisions. Any action you take can no longer be routine. So, auditing a Chinese supplier, pausing shipments or conducting forced labor due diligence could trigger new risk, including Chinese investigations, and import-export restrictions.

Pharma companies need to number one, map exposure. Know which APIs, key starting materials, and other intermediates touch China and identify where that risk sits at the direct supplier, or a tier two supplier or even tier three.

Once you get to that point, the most important part would be to map the legal triggers. What I mean by that is track where legal triggers from one could create conflict with the US, EU, or UK, and how it could relate to a China retaliation risk.

The next thing would be to build escalation protocols. You really need to take a step back and understand procurement should not make major, China-linked sourcing changes – or anyone in procurement should not make those changes in isolation. Your legal, supply chain, and government affairs company leadership need to be clear on the process for reviewing high-risk decisions and document those accordingly.

Last and not least is really protecting continuity, meaning not having single sources of where you're getting your supplies. You need to have dual sourcing where possible and inventory buffers for critical inputs, particularly in key starting materials where we're most vulnerable as a country.

The industry has talked about reshoring API manufacturing for years. What policy tools are needed to close the gap between reshoring ambitions and actual domestic capacity?

In industry and government we've talked about restoring API manufacturing, but to close the gap and build towards actual domestic capacity that is sustainable, we need three things: continued investment, clear demand signaling, and real demand pull-through.

In terms of continued investment, we've seen investments by ASPR (Administration for Strategic Preparedness and Response), for example, in advanced manufacturing technologies and key starting materials. We've seen the executive order last year to fill the strategic active pharmaceutical ingredients stockpile. These are all steps in the right direction, but we also need clear demand signaling.

The US can't reshore everything. We need to have a clear priority list of the most critical key starting materials – the APIs, the finished drug products based on national health security, drug shortages, foreign independence, and clinical need, just to give you a few examples. That helps public and private investment flow to areas where reshoring reduces the most risk. And then we need to pull that through both the federal government and the private sector. Manufacturers need committed buyers. That means long-term federal contracts. That means guaranteed volume agreements, reoccurring purchase commitments, and also, it stands to people who are buying outside of the public side of things. We have the healthcare system, pharmacies, they need to be incentivized for long-term agreements and not rewarding lowest cost but rewarding sustainability and resilience.

Federal procurement policies also need to represent that in some fashion because they also look at the lowest cost and also recognize a drug to be a US product, even if the API is made overseas. Those three things are critical components that need to be addressed to really have a sustainable supply chain and domestic infrastructure.

Where is domestic API manufacturing capacity being built right now? Is it in the right therapeutic categories to reduce dependence on China in a meaningful way?

We are seeing important domestic manufacturing investments and commitments from companies like Eli Lilly in Texas, Alabama, Indiana, or Merck in Virginia – those investments matter and they show that the US is seeing some pharmaceutical investment. But, the deeper question is whether we are building the capacity in the right therapeutic classes, medicines, and the right points of the supply chain as well. There's a lot of attention going around branded products and popular GLP-1s. Those products have their value, but they aren't always the critical, life-sustaining medicines that patients, hospitals, and emergency care providers depend on every day.

If the goal is to reduce dependency on China in a meaningful way, we have to focus on the most fragile products — their key starting materials, the APIs, typically generics — the medicines that, if disrupted, would have real patient care and national health security implications.

First, it'd mean modernizing and repurposing existing FDA-regulated manufacturing infrastructure in the US. And second is through consortium models like we're doing at the API Innovation Center, where we develop new routes to synthesis. We take that new technology to the API manufacturer, and we pull it through to finished dose manufacturing and to committed customers.

For a good example, we're looking at critical generic medicines like albuterol and metoprolol. They have no US source of API and they're widely used for respiratory and cardiovascular care. Those types of categories need to be prioritized. Cardiovascular care, respiratory drugs, antimicrobials, oncolytics – these are the ones that we need to be talking about and focusing on, particularly injectables used in hospital and acute care settings.

I'll end by saying that we talk a lot about finished drug and API, but we can't forget upstream, the key starting materials, where we have the most vulnerability in terms of our exposure to China. We need to start making investments further upstream in those areas and finding key starting materials that have applicability across not just pharmaceuticals, but other critical industries. That's going to take a whole-of-government approach to get to that level of investment and strategic direction.

What does a realistic reshored supply chain look like in five to ten years, and what would it take to get there?

Realistically, you can't reshore every single medicine, every single API, or every single key starting material in the United States. It's just not economically realistic. The goal needs to be really looking at resiliency and targeting the most critical and the most fragile medicines to secure them, to have redundancies, really to have transparency in sources of supply across the full supply chain. From the API Innovation Center's perspective, supply chain over the next couple of years looks really different from today. You have a horizontal approach by which the supply chain works in tandem across key starting materials, APIs, and finished drug manufacturing. You have investments in advanced manufacturing technologies like continuous flow, better process analytics, and flexible production platforms. We have to have all these different things to have innovation, quality, reliability, and efficiency. And then reshoring has to be commercially sustainable. We have to have long-term purchasing commitments from the federal procurement side. We have to reward resiliency and quality. We have to have clear customer demand from the private sector side.

If we don't have all of these things working in tandem and the right policy mechanisms pulling the lever of investments from the federal government, we won't make the meaningful gains we need to have.

We're already making steps in this direction, in terms of investments from the federal government. There's a focus, there's a desire. Now we just need execution. We need to have that pull through, those long-term commitments, that prioritization of quality, reliability, and efficiency. Once we get there, we can start to really reshore these critical medicines and make a meaningful difference.

Reference

1. Mayer Brown, "China Expands Its Playbook," May 2026. Accessed July 13, 2026. https://www.mayerbrown.com/en/insights/publications/2026/05/china-expands-its-playbook-new-industrial-supply-chain-and-counter-extraterritoriality-regulations-create-direct-compliance-conflicts-for-multinationals