For years, U.S. pharmaceutical companies knew that relying heavily on offshore manufacturing left their supply chains exposed. Yet, the economics of production in low-cost markets were too compelling, and tax rules allowed companies to defer U.S. tax on profits earned abroad indefinitely.
However, key factors have converged to change this dynamic, and many pharmaceutical companies have shifted, or are shifting, a greater percentage of their production to the U.S.
First, the COVID-19 pandemic showed how easily global supply chains can break down. Additionally, geopolitical tensions with China, which produces a large share of the world’s API and other pharmaceutical inputs, have prompted federal policy changes to encourage greater domestic production. For example, the BIOSECURE Act, signed into law in December 2025, restricts dealings with biotech companies tied to China, and Section 232 of the Trade Expansion Act of 1962 applies 100% tariffs on certain pharmaceutical imports. Add the Trump administration’s Most-Favored-Nation drug pricing policy, and the result has been U.S. pharmaceutical companies announcing more than $158 billion in domestic investment since early 2025.
Organizations moving manufacturing to the U.S. or expanding their domestic manufacturing footprint face the decision of how best to secure the capacity they need. Primarily, the choice is either to build or expand an owned facility or to partner with a contract development and manufacturing organization (CDMO). For those pursuing CDMO partners, especially for specialty pharmaceutical production, capacity is filling. The following are five reasons capacity is quickly becoming scarce.
1. The Offshore Cost Advantage Has Eroded
Roughly 72% of FDA-registered API facilities sit outside the U.S., with China producing about 44% of global API volume and India another 20%. That concentration looked efficient until the COVID-19 pandemic forced U.S. manufacturers to compete for scarce inputs, with no domestic backup. At the same time, automation has closed much of the labor cost gap that made offshore production attractive in the first place. Robotics and advanced process controls have reduced labor requirements at U.S. facilities to the point where domestic manufacturing can compete on cost in ways it couldn’t a decade ago, without the supply chain exposure that comes with overseas production.
2. National Security Policy Has Made Offshoring a Liability
The BIOSECURE Act bars any organization receiving U.S. federal payments from using biotech services from designated entities in China, Iran, and North Korea, with full compliance required by 2032. By default, Section 232 imposes a 100% tariff on imported patented pharmaceutical products, and companies can receive relief only if they commit to and execute U.S. manufacturing plans. The changes in federal policy convert offshore dependency into a direct financial and regulatory cost, on top of substantial supply chain risks.
3. Quality Control Favors Domestic Production
FDA inspections of foreign facilities have always been less frequent than domestic ones, largely because the agency doesn’t have the resources to inspect everywhere equally. A U.S. facility provides manufacturers with tighter control over process consistency, a faster path to addressing any deviations, and a more predictable relationship with the FDA.
4. Logistics Costs and Risks Have Shifted
Largely as a result of the impact of international conflicts on the oil and gas market, long-haul freight costs have become much less predictable. Shipping from China or other Asian manufacturing hubs typically takes weeks or months, and that lag adds inventory carrying costs and forecasting risk that domestic supply chains mostly avoid. Manufacturers that once accepted these costs as the price of cheaper production are now increasingly determining that the risks outweigh the rewards.
5. Specialty Pharmaceutical Manufacturing Capacity Was Already Scarce
Due to the high costs and long timelines involved in building manufacturing facilities, as more therapeutic companies execute their onshoring plans, they are turning to CDMO partners. Generally speaking, there is ample CMDO capacity for more straightforward drug products, like oral solid dosage forms. However, specialty formats, including dry powder inhalation, complex encapsulation, and high-potency compounds, never had much domestic capacity to begin with.
First Movers Will Have the Best Options
Partnering with the right CDMO solves many of the challenges that come with onshoring. There’s no capital outlay, staffing and talent recruitment are managed by the CDMO, and the regulatory infrastructure (quality systems, standard operating procedures, established FDA relationships) is already in place.
However, CDMO capacity in the U.S. for specialty pharmaceutical production is tightening as the forces driving onshoring converge. Companies that move now to secure a CDMO partner with immediate capacity and room to scale will have far more options than those that wait.
To learn more about the current onshoring trends and selecting the best CDMO partner, we invite you to read our article, “How to Win the Race for U.S. Specialty Pharmaceutical Manufacturing Capacity.”
If you are evaluating U.S.-based CDMO partners for a DPI, encapsulation, or clinical supply program, contact us.