Is The BIOSECURE Act The First Real Step Toward Reshoring?

By Christopher Ohms, Ohms Consulting

For decades, the U.S. pharmaceutical industry has relied heavily on China and India to produce regulatory starting materials (RSMs) and active pharmaceutical ingredients (APIs). These two countries offer substantial economic advantages, established supply chains, and skilled workforces, making them dominant suppliers in the global pharmaceutical market. However, shifts in global trade dynamics, heightened awareness of supply chain vulnerabilities, and a renewed emphasis on domestic production are driving interest in reshoring RSM and API manufacturing to the United States. This transition would reduce reliance on foreign suppliers, enhance quality control, and safeguard national health security.

The COVID-19 pandemic exposed significant weaknesses in the global supply chain, underscoring just how dependent the U.S. pharmaceutical industry is on overseas manufacturing for critical materials. Increasing geopolitical tensions, coupled with potential supply disruptions, have further raised concerns among regulators, industry leaders, and government policymakers. Many now advocate for reshoring these essential components of pharmaceutical production to the United States to bolster resilience, maintain consistent quality standards, and mitigate potential disruptions. This article explores the key factors driving the shift toward domestic production, the challenges involved in establishing a sustainable RSM and API manufacturing base in the U.S., and the potential future of this evolving landscape.

The global API market is expanding rapidly, valued at over $200 billion in 2023 and projected to reach around $400 billion by 2031, with a compounded annual growth rate of approximately 6.5% from 2024 to 2031. This growth reflects increasing demand for pharmaceutical products and highlights the critical need for a stable, sustainable source of APIs and RSMs. While RSMs and APIs can be sourced from various regions worldwide, approximately 60% are produced in China and India, with only about 10% manufactured domestically in the U.S. As a result, a significant dependence on foreign production has developed, presenting both risks and opportunities for reshoring efforts.

Enter: The BIOSECURE Act

To address these vulnerabilities, legislative measures like the BIOSECURE Act have emerged. This act, along with additional policies, could help establish a robust framework for reshoring RSM and API manufacturing, like the approach seen in other industries like semiconductor manufacturing. To ensure a sustainable domestic production base, local, state, and federal agencies must collaborate on a cross-functional strategy. Incentives, financial support, and decentralized manufacturing hubs are essential to creating a scalable and reliable plan that strengthens the U.S. pharmaceutical supply chain and protects public health.

The BIOSECURE Act represents a critical first step in reshoring pharmaceutical manufacturing by setting limitations on U.S. companies’ reliance on foreign-made RSMs and APIs. It provides guidelines for a gradual transition away from foreign suppliers, allowing a five-year unwinding period for preexisting contracts and a seven-year period for certain other agreements. This phased approach gives companies the time needed to develop and establish domestic production capabilities without jeopardizing their current supply chains. In order to be compliant with the phased deadlines (particularly if the government avails waivers and/or extends deadlines), I recommend that you evaluate new partners carefully to prevent future risks and remain informed of legislative changes.

While the BIOSECURE Act is pivotal, it serves as only one piece of a larger legislative puzzle. As with any policy aimed at reshoring, additional initiatives are needed to drive investment, encourage innovation, and support the infrastructure required to manufacture RSMs and APIs in the U.S. effectively. The BIOSECURE Act outlines what companies cannot do in terms of foreign dependency, but complementary measures must be introduced to facilitate the construction of new facilities peppered throughout the country, advance technology adoption, and strengthen the workforce in pharmaceutical manufacturing.

Do We Have Similar Past Legislation As a Model For Success?

The Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, passed in 2022, provides an excellent model for how legislative support can catalyze the reshoring of critical industries. This act, aimed at boosting semiconductor manufacturing in the United States, allocated over $52 billion in subsidies and incentives to encourage companies to expand domestic production facilities. The CHIPS Act also supported research, workforce development, and innovation within the semiconductor sector, addressing national security and economic competitiveness concerns. The success of the CHIPS Act demonstrates the potential of similar legislation to drive change within the pharmaceutical manufacturing industry.

How Could Additional Legislation And Federal Funding Help U.S.-based Pharma?

An “RSM and API Manufacturing Act” modeled after the CHIPS Act could be transformative for the U.S. pharmaceutical sector. Such legislation would involve significant investment, incentives, and subsidies to promote RSM and API production domestically. Grants and tax credits could encourage existing manufacturers to shift or expand operations in the U.S., while targeted funding for small to midsize enterprises (SMEs) could foster innovation and competition in API manufacturing. Just as the CHIPS Act aimed to create a self-sustaining ecosystem for semiconductor manufacturing, an RSM and API Manufacturing Act could establish a stable and scalable framework for pharmaceutical production in the U.S.

One of the most effective strategies to encourage domestic manufacturing is through financial incentives. Like the $52 billion allocated by the CHIPS Act, an RSM and API Manufacturing Act could allocate funds for subsidies and incentives to help offset the high costs of building and maintaining FDA-compliant manufacturing facilities. Additionally, tax credits could make domestic API and RSM production more appealing to pharmaceutical companies, encouraging them to relocate or expand their operations in the United States.

Grants could also play a significant role, particularly in supporting SMEs that may not have the resources to enter the market independently. For instance, these grants could enable smaller companies to develop innovative manufacturing processes or invest in advanced technology like continuous manufacturing, which allows for more cost-effective and scalable production.

R&D support is crucial to establishing a competitive and resilient domestic API and RSM manufacturing sector. Continuous manufacturing and alternative synthesis pathways could enable pharmaceutical companies to produce high-quality RSMs and APIs domestically, reducing the need to rely on imports from countries like China and India. By investing in R&D, the U.S. can foster new technologies that enhance efficiency, improve product quality, and support long-term sustainability in pharmaceutical manufacturing.

Government funding for R&D could be structured to encourage collaboration between academia, private industry, and research institutions, mirroring the approach taken by the CHIPS Act. Such partnerships would accelerate innovation and establish the U.S. as a leader in API manufacturing, ultimately strengthening the entire supply chain.

Additional Factors That Would Stabilize New Reshoring Initiatives

To establish a sustainable RSM and API manufacturing base, the U.S. must foster strong partnerships between government, academia, and private industry. Universities and research institutes could be instrumental in developing training programs for a skilled workforce, creating a talent pipeline tailored to the unique needs of pharmaceutical manufacturing. Public-private partnerships would support initiatives such as centers of excellence, which could serve as hubs for innovation and knowledge-sharing.

Workforce development is essential for maintaining a high standard of quality in pharmaceutical manufacturing. By investing in education and training, the U.S. can develop a pool of skilled workers who are well-versed in regulatory requirements, advanced manufacturing techniques, and quality control standards. The CHIPS Act’s success in boosting semiconductor-related education could serve as a template for similar initiatives in the pharmaceutical industry.

To expedite the establishment of domestic RSM and API production facilities, regulatory agencies could implement streamlined approval processes. While maintaining rigorous safety and quality standards, regulatory bodies like the FDA could provide guidance to help companies navigate the complexities of setting up compliant manufacturing facilities in the U.S. Simplified regulatory pathways would make it easier for companies to initiate production while ensuring adherence to strict quality control measures.

Additionally, pilot programs could allow companies to test new manufacturing technologies under controlled conditions, encouraging innovation in pharmaceutical production. Regulatory flexibility would support a rapid transition toward a more resilient and sustainable supply chain for essential drug components.

To create a stable environment for domestic RSM and API production, the U.S. government could establish long-term procurement contracts with domestic manufacturers. This approach would guarantee a consistent demand for RSMs and APIs, reducing the risks associated with fluctuating market conditions. A stable demand would make it more feasible for companies to invest in U.S.-based production facilities, ensuring a reliable supply of essential materials for the pharmaceutical industry.

An essential component of reshoring RSM and API manufacturing is the strategic establishment of regional manufacturing hubs across the country and strategic stockpiling. By building these centers in multiple regions, ideally positioned near critical infrastructure like major airports, highways, railways, and ports, the U.S. can create a flexible and efficient network of production sites capable of mitigating risks associated with regional disruptions, supply chain bottlenecks, and transportation challenges. These hubs would not only help maintain continuous supply in times of crisis but would also streamline deployment and distribution across the country. National stockpiling of critical RSMs and APIs could further enhance supply chain resilience, providing a buffer in case of disruptions caused by trade tensions, natural disasters, or geopolitical conflicts. By proactively managing inventory, the U.S. could better protect public health and ensure the availability of essential medicines in times of crisis.

A Practical Look At Moving Into The Future

While the potential benefits of reshoring RSM and API manufacturing are substantial, significant challenges remain. High production costs, limited domestic infrastructure, and the need for skilled labor all present obstacles that must be addressed. Implementing financial incentives, fostering public-private partnerships, and investing in workforce development are crucial steps in overcoming these barriers. Moreover, international trade relations and existing commercial contracts may complicate the transition to domestic manufacturing. To navigate these complexities, policymakers must work closely with industry leaders, trade partners, and regulatory agencies to develop a cohesive strategy that balances short-term needs with long-term goals.

The BIOSECURE Act represents a significant initial effort to reduce reliance on foreign-made RSMs and APIs, but a broader strategy is required to achieve a self-sufficient pharmaceutical supply chain in the U.S. Drawing inspiration from the CHIPS Act, a comprehensive approach involving financial incentives, public-private partnerships, regulatory flexibility, and workforce development is necessary to create a viable and sustainable RSM and API manufacturing base. By investing in these initiatives, the U.S. can not only enhance supply chain resilience but also ensure the safety and quality of its pharmaceutical products. As the demand for APIs continues to grow, the U.S. must take proactive steps to reduce its dependence on foreign suppliers, safeguard national health security, and strengthen its position in the global pharmaceutical market.

About The Author:

Christopher Ohms is a consultant at Ohms Consulting and is a San Francisco Bay Area native. He has held positions at Gilead Sciences, Patheon, Stanford School of Medicine, Pain Therapeutics, and ALZA.