Why Onshoring Alone Won't Secure Pharma Supply Chains

Pharmaceutical manufacturing is moving rapidly up the policy agenda. The FDA's PreCheck Pilot Program is designed to support new US manufacturing facilities through earlier engagement, pre-operational review and more predictable evaluation of facility information. Seven companies were selected for the initial cohort in June 2026.^1,2

The rationale is understandable. FDA reports that 53% of branded drug products and 69% of generic drug products distributed in the United States are manufactured abroad. Only 11% of active pharmaceutical ingredient manufacturers are US-based, compared with 22% in China and 44% in India.¹

Building more domestic capability can shorten certain supply lines, reduce exposure to trade restrictions and create additional capacity for critical medicines. But it is important not to confuse domestic capacity with supply resilience.

A facility can be geographically close and operationally fragile. It may rely on a single API source, specialist equipment with long replacement lead times, one qualified analytical laboratory, one batch-release pathway or economics that do not support sustained reinvestment. A domestic site can therefore become another concentrated point of failure rather than a true source of redundancy.

Resilience is not determined by the flag above the facility. It is determined by whether the network can continue supplying patients when one part of it fails.

Geography Is Only One Layer of Concentration Risk

The current debate often frames pharmaceutical supply chains as a choice between offshore dependence and domestic self-sufficiency. In practice, the vulnerabilities are more layered.

A manufacturer may relocate finished-dose production while continuing to depend on a single foreign source for an API or key starting material. Two supposedly independent suppliers may purchase intermediates from the same upstream producer. Multiple manufacturing sites may rely on the same equipment design, analytical method, transport gateway or specialist workforce.

Even apparent diversification may therefore conceal common dependencies.

The US Pharmacopeia identifies geographic concentration as one factor associated with shortage risk, alongside low prices, manufacturing complexity and quality concerns. Its 2024-2025 Vulnerable Medicines List identified 100 medicines at elevated risk, 71% of which were injectables. Significantly, 61% of the listed medicines were not yet in shortage when the assessment was made.³

That distinction matters. Resilience should not begin when product availability has already deteriorated. The commercial objective must be to identify vulnerability while the supply chain still appears to be functioning normally.

Quality Remains the Most Important Form of Capacity

A production line creates nominal capacity. It does not create reliable capacity unless the facility can consistently manufacture, test, release and distribute compliant product.

FDA continues to identify manufacturing quality issues as the most common reason for drug shortages. Other causes include production delays, unavailable materials, unexpected demand and commercial discontinuations.⁴

This is why quality maturity should be treated as a commercial asset rather than a compliance overhead.

A facility that repeatedly generates deviations, invalid investigations, delayed batch disposition or regulatory observations may appear inexpensive on a sourcing spreadsheet. In reality, it carries a substantial continuity cost. That cost is expressed through quarantined stock, emergency freight, missed customer commitments, shortage mitigation, regulatory remediation and lost confidence across the channel.

Commercialization plans should therefore distinguish between three different forms of capacity:

• Installed capacity: what equipment could theoretically produce

• Qualified capacity: what the facility is technically and regulatorily capable of producing

• Dependable capacity: what it can repeatedly supply under real operating conditions

Only the third supports a resilient commercial model.

The Hidden Danger of "Identified" Alternatives

Many business-continuity plans list alternative manufacturers, suppliers or transport routes. Fewer establish whether those alternatives could actually be activated within a clinically and commercially meaningful period.

An alternative API supplier that has not completed qualification is not yet an alternative. Neither is a backup manufacturing site that requires a major regulatory variation, an unvalidated analytical transfer or months of stability work. A second logistics provider is of limited value if the lane, packaging configuration, systems interface and quality agreement have never been tested.

Resilience requires qualified optionality.

For every material product, commercial and supply-chain leaders should understand:

• Which alternatives are already approved and operational
• Which could be activated through a defined regulatory pathway
• How long activation would take
• What inventory would be required during the transition
• Which internal executive has authority to initiate the change

Without those answers, redundancy may exist on paper but not in practice.

How the Commercial Model Can Create — Or Destroy — Resilience

Supply vulnerability is not solely a manufacturing problem. It is frequently an economic one.

Older generics and hospital medicines can involve technically demanding manufacturing, strict quality requirements and low commercial returns. When purchasing systems reward only the lowest visible unit price, suppliers may have little room to maintain reserve capacity, modernize equipment, develop alternative sources or absorb unexpected quality costs.

This creates a difficult contradiction. The market expects uninterrupted, high-quality supply while often treating manufacturing reliability as if it has no economic value.

The consequence may not be an immediate shortage. It may first appear as supplier withdrawal, deferred maintenance, limited investment, longer recovery periods or gradual concentration among the few manufacturers still willing to remain in the market.

Commercial organizations therefore need to move beyond acquisition price and measure the total cost of continuity.

That analysis should include:

• History of reliable supply

• Quality and inspection performance

• Upstream concentration

• Financial sustainability of the supplier

• Recovery time following disruption

• Cost of qualification and technology transfer

• Availability of reserve capacity

• Inventory exposure

• Patient and customer consequences of non-supply

A supplier offering the lowest price may remain the right choice. But the decision should be made with visibility into the risk being accepted.

Early Notification Demonstrates the Value of Time

FDA's 2025 Drug Shortages Report illustrates how much can be achieved when risks are identified before the market loses supply.

During 2025, 167 manufacturers notified the agency of 1,424 potential shortage situations. FDA reported working with manufacturers to prevent 330 shortages, while four new shortages were identified during the year.⁵

Those figures do not mean that the system is free from longstanding or clinically serious shortages. They do demonstrate that early information creates options.

Time allows regulators and manufacturers to assess alternative production, accelerate reviews and inspections, extend expiry dates where justified, qualify additional sources or manage existing inventory more deliberately. Once available inventory has been exhausted, those options become narrower and more expensive.

The same principle should govern corporate supply-chain management. Escalation should not wait until customer orders cannot be fulfilled. Quality trends, delayed batches, supplier financial signals, transport disruption and demand volatility should feed into a common decision process before the problem becomes a shortage.

Europe Is Also Moving Beyond Simple Localization

The European Commission's proposed Critical Medicines Act reflects a similarly nuanced approach. It includes support for strategic manufacturing projects and resilient procurement, but it also calls for international partnerships intended to broaden supply chains and reduce dependency on single suppliers.⁶

That is an important acknowledgment: resilience cannot always be achieved through isolation.

Modern medicines depend on specialized chemistry, complex manufacturing platforms, technical expertise and global flows of materials. Attempting to reproduce every capability within every market would be economically unrealistic and may create inefficient capacity without addressing the most clinically significant vulnerabilities.

The more practical goal is selective localization combined with qualified international diversification.

Critical products may justify domestic or regional capacity, long-term purchasing commitments and strategic inventories. Other products may be better served through geographically diversified sources, provided those sources operate under robust quality oversight and can be activated without prolonged regulatory delay.

A Better Executive Test for Resilience

Boards and commercial leaders should be cautious about accepting "we have a second supplier" or "we are moving production domestically" as complete answers.

A more useful review would ask:

Can we see the whole dependency chain? Visibility should extend beyond the contracted manufacturer to critical intermediates, APIs, testing laboratories, specialist equipment and transport gateways.

Are alternatives qualified or merely identified? The organization should know what is approved today, what requires regulatory action and how long each pathway would take.

Can the quality system move at the speed of the contingency plan? Technology transfer, method validation, data review, quality agreements and batch disposition must be built into recovery assumptions.

Does the commercial model reward dependable supply? Contracting and procurement should distinguish between low unit cost and low total continuity cost.

Who has authority during disruption? Quality, regulatory, supply chain, finance and commercial teams need predetermined decision rights. Visibility without authority produces delay rather than resilience.

From Manufacturing Policy to Patient Continuity

The current movement toward domestic pharmaceutical manufacturing is strategically important. FDA's PreCheck program may reduce avoidable uncertainty for companies investing in new US facilities, while similar initiatives elsewhere can strengthen regional capability.

But infrastructure investment should be judged by more than the number of facilities announced or the value of capital committed.

A resilient network must be capable of detecting risk early, producing consistently, switching through qualified alternatives and sustaining the economics required for long-term quality. It must connect manufacturing decisions to regulatory pathways, commercial contracts, inventory strategy and patient need.

Onshoring can be part of that architecture. It should not become a substitute for it.

The objective is not to create a supply chain that never experiences disruption. No network can offer that guarantee.

The objective is to create one that can absorb failure without transferring the consequences to patients.

That is a more demanding definition of resilience, but also a more useful one.

Vishal Chakravarty is founder and chief executive officer of NovaPharm Healthcare Ltd.

References

1. U.S. Food and Drug Administration. FDA PreCheck Pilot Program. Accessed July 31, 2026. https://www.fda.gov/industry/fda-precheck-pilot-program
2. U.S. Food and Drug Administration. FDA selects seven participants for PreCheck Pilot Program to advance U.S. drug manufacturing. Published June 29, 2026. Accessed July 31, 2026. https://www.fda.gov/news-events/press-announcements/fda-selects-seven-participants-precheck-pilot-program-advance-us-drug-manufacturing
3. U.S. Pharmacopeia. 2024-2025 Vulnerable Medicines List for the United States. Published March 4, 2025. Accessed July 31, 2026. https://www.usp.org/news/usp-publishes-vulnerable-medicines-list-to-inform-efforts-to-reduce-risk-and-increase-supply-chain-reliability-for-patients
4. U.S. Food and Drug Administration. Frequently asked questions about drug shortages. Accessed July 31, 2026. https://www.fda.gov/drugs/drug-shortages/frequently-asked-questions-about-drug-shortages
5. U.S. Food and Drug Administration. Drug shortages: CY 2025 report to Congress. Published 2026. Accessed July 31, 2026. https://www.fda.gov/media/193637/download?attachment=
6. European Commission. Critical Medicines Act. Proposed March 2025. Accessed July 31, 2026. https://health.ec.europa.eu/medicinal-products/critical-medicines-act_en