Source: Blog – Alliance for American Manufacturing

A scientist works in a Eli Lilly research center in Boston in August 2024. | Getty Images

Eli Lilly’s plans to reshore the manufacture of Active Pharmaceutical Ingredients for its drugs would reduce a dependency on Chinese imports.

Last week, Indianapolis-based pharmaceutical giant Eli Lilly made a big announcement: It will invest $27 billion in four new U.S. manufacturing plants, creating 3,000 permanent jobs and more than doubling the amount it put down on domestic capital expansion from 2020 to 2024.

Perhaps more importantly, though, is what those plants will be making: Three of them will produce the active pharmaceutical ingredients (APIs) for Lilly’s drugs.

Their locations have not yet been disclosed, but it’s a big deal. While plenty of drug manufacturing already takes place in the U.S. – Lilly, for instance, built out production facilities and acquired others during its earlier round of spending, and there are regional initiatives like Virginia’s Alliance for Building Better Medicine working to build out production capacity – the international drug industry is reliant on countries such as China for APIs, notes the Wall Street Journal. In fact, China and India supply 80% of active ingredients in America’s pharmaceutical and over-the-counter drugs, wrote Rosemary Gibson and Janardan Prasad Singh in their 2018 book China Rx: Exposing the Risks of America’s Dependence on China for Medicine. And, as evidenced by the supply chain problems that chronically plague drug manufacturing, that’s a dangerous dependency.  

This big deal is also a business decision. Lilly’s CEO suggested to the Journal it ultimately hinges on Washington extending tax cuts enacted during President Donald Trump’s first term. And the announcement comes shortly after Trump suggested raising 25% tariffs on pharmaceutical imports in April. Pfizer, a Lilly competitor, said Monday it was considering moving more production into the country to avoid those tariffs. It would be a boon for the country’s health security if both companies follow through, and especially if API manufacturing begins taking place here.  

“Think of oil, other energy supplies, and food commodities like wheat and corn, those are strategic assets the government tracks to make sure we have enough and don’t run out,” Gibson said in a 2018 interview on the Alliance for American Manufacturing’s Manufacturing Report podcast. “Medicines need to be considered a strategic asset and treated as such. They’re a private good made by private companies, but many of them serve the public interest and, like any strategic asset, the country would fall apart if we didn’t have them.”

That sentiment was echoed by U.S. Commerce Secretary Howard Lutnick at Lilly’s press conference last week.

“We need steel mills, we need precursor medicines,” he said. “These are the fundamental underpinnings of America that we need to reshore.”

Read more about Lilly’s manufacturing announcement here.

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