In May 2025, the Trump Administration issued an Executive Order to establish the policy of returning pharmaceutical manufacturing to the United States. What impact might these have on both brand and generic manufacturers?

Return of Manufacturing

On May 5, 2025, the Trump Administration issued an Executive Order which seeks to encourage pharmaceutical manufacturers to increase production in the United States. The Order addresses the fact that over past 50 years, the U.S. lost much of its manufacturing base, including pharmaceuticals, both active pharmaceutical ingredients and finished products.

Post-Covid, the Trump Administration has concluded that the U.S. benefits and increases its national security if it produces its own “critical” pharmaceuticals. The Executive Order encourages the construction of new facilities by making it easier for companies to do so through fewer regulations.

Short-term Impact

The immediate impact has been significant. Along with the Executive Order, the Administration issued an Article identifying several brand companies — both foreign and domestic — such as Roche, Merck, and Bristol Myers Squibb that have announced investment in new manufacturing facilities. With over $200B in new investment, these companies have responded to the policy with enthusiasm. We can expect more investment over the next few years, and as these tend to be long-term projects, over the next decade.

Will Generics Follow?

Absent from the list of companies investing are generic companies. Will generic companies follow with manufacturing in the U.S. with new or re-purposed facilities? This is an important question as many “critical” drugs are off-patent. Most generic drugs sold in the U.S. are made elsewhere in countries like India. This creates a bit of a dilemma for those making these important products.

One the one hand, building a facility and operating it in the United States is relatively expensive compared to other places. At first blush, the economics might dictate that it would not be cost effective to invest such capital or make it profitable to do so. But this leads to the other hand, is there a risk in NOT manufacturing generics here?

How could that play out? What if a large company such as Teva or Mylan were to embrace this return and received favorable pricing treatment to do so (through tariffs or government contracting). Conceivably, they could dominate certain generic market with this approach.

Another scenario: what if a brand company has excess manufacturing capacity? Would it simple idle the facility, lay off its workforce, or choose to pick up some of the slack with a generic product? Sure, the products are less profitable, yet often profitable nonetheless. What if a generic company subcontracted some of the manufacturing excess capacity? Sound far-fetched? Maybe not. This business model has been successful in the telecommunications industry for decades as small companies purchase excess capacity of long-distance and cellular networks from behemoths like AT&T.

This leads to another way to reduce investment risk, if you are a generic company. Could several generic companies reduce risk by investing in facilities together? Of course, this would take a great deal of negotiation – and trust – among them, but would serve the purpose of establishing U.S. facilities but spreading out the downside risk.

Over the next couple of years, we might see glimpses of how this plays out. One key is generic manufacturers. The remaining question is which company makes the first move.