“We are not in a transient moment – this will affect industry profitability for decades. The previous era of rule-based international trade is gone”
Frank Binder, Managing Director at GSCA (Global Supply Chain Advisors) and former Head of Supply Chain at Santen and Celgene, has watched the pharmaceutical supply chain undergo unprecedented disruption in 2025. The wave of US tariff announcements, regulatory complexity, and forced regionalization has created what he calls a fundamental shift in how the industry must operate.
In the latest PharmaSource podcast episode, Frank explains why waiting for clarity isn’t an option anymore – and shares practical steps companies should take now to build resilient supply chains for this new era.
The Tariff Impact
The US accounts for over 10% of global trade across all industries, but pharmaceuticals tell a different story. The market dominance of the US in pharma has made the recent tariff announcements particularly unsettling for the industry.
“For pharma, it has been quite unsettling,” Frank explains. “Even though the US makes about 10% of all trades globally, for pharmaceuticals it’s very different. The US as a market is still number one in the world.”
The announced 100% tariffs on pharmaceuticals would represent an unprecedented move for an industry that has previously been exempt. While many of these tariff threats have been suspended in favor of company-by-company price negotiations, the uncertainty around both tariffs and pricing (due to Most Favored Nation policy) have combined to paralyze decision-making.
Short-Term Disruptions: Anticipatory Shipping and Import Complexity
The immediate impact has already appeared in shipping patterns. Swiss and European pharma companies moved significant volumes of finished products into the US ahead of tariff implementation, creating artificial spikes and subsequent declines in shipping activity.
But the less visible challenge is import complexity. “When I talk to my colleagues who are engaged in trade compliance in the US, it has become much more complex to import products,” Frank notes. “The rules have multiplied. They are not always very clear. At the same time, Customs and Border Protection and FDA have stepped up their enforcement actions.”
Companies uncertain about their import compliance should seek expert help immediately. The straitjacket of registered sources of materials means major sourcing shifts haven’t happened yet—but they’re coming once trade deals are finalized.
The Investment Decision Paralysis
While companies announced over $400 billion in US manufacturing investments, Frank is skeptical about full realization of these commitments. “There is certainly a lot of positioning and making the company look like a good child following the desires of the US government. But it’s not random. There is certainly a movement to reshoring that’s very clear.”
The real problem is making sound investment decisions when every variable is uncertain. “It’s impossible to continue a wait and see approach, because the current situation—these are new rules to the game. Not something that will go away in a couple of months. I think we will have to live with that for years or even decades.”
The previous rules of rules-based international trade and widespread exemption of pharmaceuticals from tariffs are gone. Companies need to figure out how to make network decisions despite uncertainty.
Infrastructure Reality Check
Even genuine reshoring commitments face practical obstacles. Investments will likely concentrate in existing pharma clusters like Research Triangle Park, Boston, and San Diego—creating competition for construction workers, operators, and specialized equipment.
“All these investments will be in competition with each other during the building and then during operation,” Frank warns. “Workforce for construction people, but also workforce for operators would be in conflict with each other.”
Construction costs will rise due to tariffs on aluminum, steel, and other building materials. Securing specialized equipment simultaneously will be difficult and expensive.
From Global to Regional: The New Supply Chain Model
Frank expects clear movement toward regionalization, though not universally applied. “I don’t expect that this will apply to each and every product. Some API, some drug products will definitely continue to be globally sourced. Maybe the volume is just too small to be manufactured in several places.”
For top revenue drivers and tariff-exposed drugs, he expects companies to increase supply chain resilience through dual sourcing while optimizing tariffs. The trend toward region-for-region models—manufacturing in Europe for Europe, in the US for the US—will affect many products.
“Companies will find that maybe for their top revenue drivers, for drugs that are most exposed to tariffs in a certain region and also most at risk, they would increase supply chain resilience, certainly including dual sourcing.”
The CDMO Opportunity: Speed and Flexibility
Contract manufacturers offer a faster path to diversification than building new plants. “If you start with a project to build a new manufacturing plant, that’s going to take years and hundreds of millions of dollars,” Frank explains. “If you find a CDMO that suits the product you’re making and is also in the right place, you can be considerably faster and do it without major investments.”
CDMOs with the right geographical footprint can provide strategic additions to any pharma company’s network. Standardization is becoming a competitive advantage—companies like Wuxi are driving this by offering dual sourcing from the start, even during clinical development, using single-use technology to ensure identical equipment and processes across multiple sites.
“They’re really going very far in that. They’re offering setting up dual sourcing, even right from the start, even during clinical development.”
This standardization significantly speeds up technology transfers if they become necessary. Dual sourcing provides supply chain resilience, and as protectionist actions multiply, the ability to quickly activate a second and even a third sourcing region becomes increasingly valuable.
The API Challenge
Active pharmaceutical ingredients (APIs) represent a crucial point where the chemical supply chain converges before branching into drug product manufacturing. API inventory offers substantial benefits for supply chain resilience due to longer shelf life and retest options.
“APIs could be stored much more easily because the volume is smaller, and over a much longer time,” Frank notes. “I think it would give a lot of supply chain resilience just to be able to have API inventories.”
The Rare Earths Warning
Frank points to rare earth elements as a cautionary example. China controls 80% of global supply—not because only China has rare earths, but because most countries let their industries decline as extraction and refining weren’t profitable. China strategically built up this capability to create leverage.
“All of a sudden, now countries are realizing that they do not have supply chain resilience for high tech, which is kind of a problem,” Frank observes. “As a pharma industry, we shouldn’t get ourselves into this kind of situation.”
The lesson: risk assessment and strategic thinking need much sharper focus. Companies must evaluate not just economic factors, but also geopolitical leverage in their sourcing decisions.
What Companies Should Do Now
Frank recommends companies implement comprehensive Enterprise Risk Management programs that identify which products need protection and where resilience is critical. “It is necessary for pharma companies to make sure they have a comprehensive Enterprise Risk Management programme in place that considers what the priorities are from a senior leadership perspective.”
Business continuity management plans should contain specific actions to create supply chain resilience, flexibility, and agility to switch sources when needed. This is a multi-year program requiring proper resources and funding.
“I would recommend every company to have a comprehensive, well-resourced and well-funded programme in place that looks at the right commercial priorities.”
Technology plays a crucial role—particularly end-to-end planning systems that support scenario planning. The flexibility to react to disruptions will be essential.
Looking Three to Five Years Ahead
Frank expects the forces driving onshoring and regionalization to persist. “Governments all over the world are saying, ‘Hey, we want to have our own industry. We want to protect it.’ There are strong forces to drive regionalization and onshoring, and they’re not going to go away anytime soon.”
Pharma supply chains will be more regionalized within three to five years, though global elements will remain. The trade-off: higher costs. “The cost of goods will go up, so profitability of the industry is likely to be less in the future.”
Companies that build resilient, flexible networks now – with proper risk assessment, business continuity plans, and technology infrastructure – will be better positioned for this new era of supply chain management.
