he modern pharmaceutical industry supply chain is one of the most complex, delicate, and innovative supply chains to date. This series of interconnected activities involved in the sourcing, manufacturing, distribution, and delivery of pharmaceutical products to end users, including patients, healthcare providers, pharmacies, and hospitals, is designed to ensure patient access by directly enabling the availability and affordability of medicines, as well as the timely delivery of safe and effective medications. Recent geopolitical changes have caused significant rethinking of the supply chain from various industry and regulatory perspectives; many important investments and initiatives are underway to reach a new, more stable state.

How do global pharmaceutical supply chains influence pharmaceutical investment decisions?

The global pharmaceutical supply chain serves as a cornerstone in shaping pharmaceutical investment decisions across regions and significantly influences pharmaceutical investment decisions in several ways.

• Globalization has transformed pharmaceutical supply chains by enabling cost-effective global sourcing, expanding market reach, and fostering innovation. Governments worldwide are recognizing the strategic importance of resilient pharmaceutical supply chains and are introducing policies to support local production and reduce dependency on foreign sources, which also drives investment in pharmaceutical supply chain infrastructure.
• Changes to tariff levels can act as either enabling or restricting measures to a pharmaceutical supply chain and may drive the industry toward greater supply chain localization, which can either positively or negatively impact investment decisions.
• While AI can reshape supply chain operations, establishing Intelligence Centers of Excellence will optimize AI deployment in pharmaceutical companies.
• A notable rise in private equity (PE) deals in pharmaceutical services, driven by the pace of innovation and the shift towards more complex specialty drugs, provides ample consolidation opportunities for PE to capitalize on accelerating healthcare trends and consistent well-above-GDP growth rates.
• Pharmaceutical supply chain partnerships, from pharmaceutical-logistics collaborations to public-private alliances, are empowering companies to better anticipate risks, respond to disruptions, and ensure that medicines reach patients without delay.

These factors collectively shape how pharmaceutical companies approach investment decisions in response to the dynamic nature of global pharmaceutical supply chains.

How are global pharmaceutical supply chains being impacted by geopolitical shifts?

The global pharmaceutical supply chains are facing significant challenges due to geopolitical shifts such as trade policy changes, sanctions and export controls, and geopolitical conflicts.

• In the increasingly globalized pharmaceutical industry, companies must navigate a maze of regulations, including international sanctions. For pharmaceutical companies, noncompliance with sanctions poses significant supply chain disruption risks.
• Tariff uncertainty is driving pharmaceutical companies to focus on risk mitigation, which redirects resources from research and development, supply chain improvements, and innovation. Tariffs on pharmaceuticals fundamentally alter global drug pricing and supply chain strategies across the industry.
• Policy Landscape: Tariffs and Nontariff Measures: Geopolitical shifts are reviving both tariffs and nontariff measures that can disrupt and/or reshape pharmaceutical supply chains. Tariffs—import taxes on raw materials, APIs, intermediates, and finished drugs—have historically been rare but have recently resurfaced amid global trade tensions, notably with API exporters such as China and India. Nontariff measures such as regulatory hurdles, local certifications, quotas, price caps, and “Buy Local” mandates can create hidden barriers and delay market access.
• Political instability poses a significant threat to global supply chains by impacting distributor product sourcing, manufacturing, and delivery.

Pharmaceutical companies have been prompted to adopt new strategies and mitigate risk by diversifying suppliers, localizing manufacturing, and strengthening supply chain resilience in response to persistent geopolitical unpredictability. Several health authorities (as explained below) are pursuing multifaceted strategies such as legislation and directives, incentives for local manufacturing/domestic production, regulatory harmonization, and pilot programs to strengthen pharmaceutical supply chain resilience, to protect patient access, and to preserve their own competitiveness amid these geopolitical shifts.

Strategies to Ensure Continued Investment and Access: EU

The European Medicines Agency (EMA), the European Commission (EC), and the wider European Union (EU) have designed key strategies, legislative initiatives, and policy frameworks that reinforce pharmaceutical supply chains to ensure patient access, foster continued investment in the pharmaceutical sector, and bolster this sector’s international competitiveness.

EU Critical Medicines Act (CMA)

The EU’s pharmaceutical sector is globally competitive and a key driver of the EU economy, with production increasingly concentrated on more complex medicines. Production of generic medicines has increasingly moved outside Europe, although 70% of the medicines dispensed in Europe are generics.

The EU faces increasing challenges, such as over-reliance on imports of APIs, logistical complexities, quality/regulatory hurdles for supplier changes, and demand volatility (shortages of specific drugs), to secure a stable and resilient supply of medicines critical to ensure the health of EU patients. In March 2025, the European Commission proposed the Critical Medicines Act (CMA) to improve the availability, supply, and production of critical medicines within the EU. Key elements of the act include authorizing strategic projects for critical medicines/ingredients, public and joint procurement to boost supply resilience and access, international partnerships to diversify suppliers, and state aid guidelines to fund these projects.

The EU “Pharma Package”

In April 2023, the EC published the “pharma package,” the first major revision of EU pharmaceutical laws since 2004. The European Council agreed upon its negotiating position (mandate) on 4 June and reached agreement with the Parliament on the final shape of the new rules on 11 December 2025. Its aim is to better meet patient needs by assuring fair access to safe, effective, affordable medicines; enhancing the competitiveness of the EU’s pharmaceutical industry; addressing supply security issues; and mitigating the environmental impact of medicines.

EU Biotech Act

A new EU Biotech Act was announced in President von der Leyen’s political guidelines for the new commission in July 2024. The biotechnology sector is crucial for economic growth, global competitiveness, public health, and environmental sustainability in the EU. Strategically, the sector is key to the EU’s aim of achieving autonomy in critical technologies and reducing dependence on external sources for essential materials, particularly in pharmaceuticals and agriculture.

Strategies to Ensure Continued Investment and Access: US

Executive Order 14293, Regulatory Relief to Promote Domestic Production of Critical Medicines, issued May 2025

In May 2025, the US executive branch issued an Executive Order (EO) regarding the domestic manufacturing of “essential medicines, medical countermeasures, and critical inputs,” continuing an executive effort from this administration’s first term. The EO promotes domestic production by streamlining regulations to accelerate production facility approval and promote a risk-based approach for prior approval of licensure inspections to ensure they occur only as needed and are timely, efficient, and compliant with the FD&C Act and other federal laws. Pharmaceutical companies now face heightened pressure—and new incentives—to relocate operations domestically, as well as new challenges to sourcing or manufacturing finished pharmaceuticals and their components abroad.

Executive Order 14336, Strategic Active Pharmaceutical Ingredients Reserve (SAPIR) initiative, issued August 2025

The aim of Executive Order 14336, strengthening the Strategic Active Pharmaceutical Ingredients Reserve (SAPIR), is to secure a resilient, domestically sourced supply of active pharmaceutical ingredients. Stockpiling APIs can be advantageous because APIs are generally lower cost and have longer shelf lives than the finished drug products they make. SAPIR aims to insulate the US from the concentration of foreign nations in the worldwide supply of the Key Starting Materials used to make APIs. Pharmaceutical ingredient stockpiles can provide a solid foundation to stabilize the economy, advance the continuity of high-quality patient care and long-term health outcomes, and provide essential predictability to patients, government and first responder actors, and the pharmaceutical and healthcare industries.

Key FDA Guidance and Other Support to the Pharmaceutical Supply Chain

The US FDA, in partnership with other federal agencies and industry, has launched a comprehensive set of regulatory actions and strategic initiatives to bolster pharmaceutical supply chains amid escalating geopolitical and post-pandemic risks. Like initiatives in the EU, these efforts aim to ensure patient access, stimulate domestic investment, and strengthen global competitiveness in the US pharmaceutical sector.

The new FDA PreCheck program aims to strengthen the domestic pharmaceutical supply chain by increasing regulatory predictability and facilitating the construction of manufacturing sites in the United States. Launched in response to Executive Order 14293, it streamlines/expedites the construction and approval of domestic drug manufacturing facilities through a two-phase approach: (1) Facility Readiness Phase, and (2) Application Submission Phase (early [CMC] feedback). PreCheck opens the competitive landscape for smaller companies.

The Commissioner’s National Priority Vouchers (CNPV) Pilot Program opens an opportunity to reduce drug and biological product application or efficacy supplement (ES) review times from 10-12 months to just 1-2 months for products that align with specific national health priorities.

The new ANDA Prioritization Pilot for review of abbreviated new drug applications (ANDAs) is also designed to strengthen generic drug manufacturing and testing, spur domestic R&D, and bolster the pharmaceutical supply chain in the US.

FDA plays a vital role in advancing supply chain resilience, including working closely with government partners, regulated industry, healthcare providers, international partners, and other interested parties and supply chain partners. Key efforts include FDA’s Supply Chain Security Toolkit for Medical Products, the Drug Supply Chain Security Act (DSCSA), strengthening pharmaceutical quality through inspections and compliance, and the Drug Shortage Assistance Award to help manufacturers manage disruptions and strengthen resilience in the pharmaceutical supply chain to sustain patient access.

FDA’s Emerging Technology Program (ETP), innovative technologies initiative, advanced manufacturing initiative, and CBER Advanced Technologies Team (CATT) are also designed to support medical product manufacturing technologies and the pharmaceutical supply chain.

US Tariff Avoidance Incentives, Programs, and Vouchers in the Pharmaceutical Sector

The US has also recently introduced aggressive tariff policies targeting the pharmaceutical sector but correspondingly provided targeted incentives to help companies avoid them:

a) Key Tariff Policy: 100% Tariff on Imported Branded Drugs: The US had announced a 100% tariff on all imported branded or patented pharmaceutical products starting October 1, 2025, as part of its wider strategy to reshore pharmaceutical manufacturing. However, the US has delayed implementing this tariff as it pursues negotiated drug pricing agreements with major manufacturers.

b) Tariff Reduction Incentive: This tariff aims to boost US manufacturing by providing exemptions for companies building domestic facilities.

c) EU-Specific Incentive: On 27 July, the US government announced an additional 15% tariff on branded pharmaceutical products imported from the EU.

Industry Response: Aggressive Expansion and Reshoring Leads to Massive Investment in US Manufacturing

Many pharmaceutical firms in the US are responding by investing billions to expand domestic R&D, manufacturing, and supply chain security. AbbVie, AstraZeneca, Johnson & Johnson, Roche, Bristol Myers Squibb, Eli Lilly, Novartis, Sanofi, and GSK have announced significant US investments to expand manufacturing and R&D and strengthen domestic supply chains—commitments intended to accelerate revenue growth, tap into domestic innovation, increase capacity, and reinforce supply chain resilience in the face of potential tariff risks. In addition, Indian firms Biocon and Lupin have invested in R&D, infrastructure, and new pharmaceutical manufacturing plants in the US.

Biotechnology offers additional potential to strengthen food security and agricultural resilience, and cure life-threatening diseases in the US. The latest report from the National Security Commission on Emerging Biotechnology (NSCEB) highlighted the need for rapid and significant investment in US biotechnology innovation to realize these benefits.

Geopolitical dynamics exert significant impact on multifaceted pharmaceutical supply chains. In response, governments are streamlining facilitation measures to safeguard patient access and sustain competitiveness in pharmaceutical investment. Governments now face responsibility for supporting implementation and execution of these new policies and pilots, and for providing practical support to manufacturers and developers. In parallel, pharmaceutical companies should strategically leverage relevant policies and pilot programs to reinforce their business models, which ultimately ensures the continuity and sustainability of patient access.