The biopharmaceutical industry is demonstrating a significant and counterintuitive trend in 2025, with companies increasingly channeling investments into European-based contract manufacturing (CM) for FDA-approved drugs, a stark contrast to their engagement with domestic US providers. This shift is occurring despite the implementation of substantial US import tariffs on pharmaceuticals, a policy ostensibly designed to bolster domestic production. Data from GlobalData’s Deals database reveals a widening chasm between contract manufacturing deals secured in Europe and those finalized within the United States, with European facilities now significantly outperforming their American counterparts in attracting this critical segment of the biopharma supply chain.
A Shifting Landscape in Pharmaceutical Manufacturing
The past year has witnessed the most pronounced decline in US contract manufacturing deals for FDA-approved drugs observed in half a decade. This downturn, coupled with a concurrent surge in European CM activity, indicates a fundamental recalibration of global pharmaceutical manufacturing strategies. While the immediate aftermath of the COVID-19 pandemic saw fluctuations in deal volumes, attributed to the ebb and flow of emergency vaccine demand between 2020 and 2023, the post-pandemic recovery period between 2023 and 2024 saw a general increase in CM deals for both the US and Europe. However, 2025 has marked a dramatic divergence, with Europe recording more than triple the deal volume seen in the US for this specific sector.
The Impact of Tariffs: A Limited Deterrent
The US administration’s introduction of a 15% import tariff on EU pharmaceuticals last year was a deliberate measure intended to incentivize the reshoring of drug manufacturing and to stimulate domestic economic growth within the biopharma sector. However, the latest data suggests this protectionist policy has had a negligible effect on dissuading biopharmaceutical companies, including major US-based entities, from outsourcing their manufacturing needs to Europe.
In 2025, a significant majority of US pharmaceutical companies that engaged in external manufacturing sought European partners. Specifically, nine out of the fourteen US-based pharmaceutical companies that outsourced manufacturing for FDA-approved drugs inked a total of thirteen deals with European facilities. Prominent companies such as Johnson & Johnson and Vertex Pharmaceuticals are among those actively expanding their European manufacturing partnerships. In stark contrast, less than half of these companies—eight in total—opted for US-based facilities, securing a comparatively smaller number of CM deals.
Germany Leads the European Manufacturing Charge
Within Europe, Germany has emerged as a dominant force in pharmaceutical manufacturing, solidifying its position as the continent’s leading drug producer. According to GlobalData’s Drugs by Manufacturer database, Germany accounted for twelve of the European CM deals aimed at supplying the US market in 2025. Over the past six years, German facilities have consistently averaged nine contract manufacturing deals annually for US drug production, demonstrating a sustained and growing capacity to meet international demand. This robust performance underscores Germany’s established infrastructure, skilled workforce, and regulatory expertise, making it an attractive and reliable hub for pharmaceutical production.
Beyond Contract Manufacturing: In-House Expansion in Europe
The trend of prioritizing European manufacturing is not confined to outsourced contracts; it also extends to significant investments in in-house production facilities. Leading pharmaceutical giants Novo Nordisk and Eli Lilly have recently announced substantial capital injections into their European manufacturing sites. Novo Nordisk is set to invest $501 million, while Eli Lilly plans a $3 billion expansion of its European manufacturing capabilities.
Novo Nordisk’s strategic expansion is directly linked to the burgeoning demand for its highly successful oral glucagon-like peptide-1 (GLP1) receptor agonist, Wegovy. As the first and only oral GLP1 receptor agonist available in the Western market, Wegovy has achieved significant market penetration, particularly in the US. To meet this escalating demand, Novo Nordisk is expanding its tabletting facility in Ireland, aiming to ensure a consistent and scalable supply chain for the US market. This move highlights a proactive approach to mitigating potential supply chain disruptions and ensuring market access for its blockbuster drug.
A Diversified Global Supply Chain: Mitigating Risk in Uncertain Times
The increasing reliance on European manufacturing, both through CM and in-house expansion, can be largely attributed to a strategic imperative for supply chain diversification. In an era marked by geopolitical volatility, economic uncertainty, and the lingering effects of global health crises, biopharmaceutical companies are prioritizing resilience. A diversified global supply chain, particularly one that extends beyond national borders, is crucial for minimizing the risks associated with sudden, catastrophic disruptions to production.
The unpredictability of the US political climate, which can influence trade policies, regulatory frameworks, and economic incentives, is a significant factor prompting companies to spread their manufacturing operations geographically. By establishing a robust presence in Europe, companies can buffer themselves against potential domestic policy shifts or unforeseen events that could impact their ability to produce and distribute essential medicines.
Analysis: Implications for US Domestic Manufacturing and Global Trade
The persistent shift of contract manufacturing deals for FDA-approved drugs towards Europe carries significant implications for the US domestic biopharmaceutical manufacturing sector and the current administration’s industrial policy goals. The failure of import tariffs to steer investment back to the US suggests that other factors, such as cost-effectiveness, specialized expertise, established infrastructure, and regulatory familiarity, may be outweighing the financial incentives offered by domestic production.
The strong performance of European facilities, particularly in Germany, indicates a well-developed and competitive ecosystem that is attractive to global pharmaceutical players. This sustained growth in European CM could potentially hinder the US administration’s ambitions to "reshore" domestic manufacturing, as companies continue to prioritize global operational efficiency and risk mitigation.
Furthermore, this trend raises questions about the long-term effectiveness of protectionist trade policies in a highly interconnected global industry. While tariffs may impose immediate costs on imported goods, they do not appear to be fundamentally altering the strategic sourcing decisions of major biopharmaceutical firms when it comes to the complex and high-stakes arena of producing FDA-approved medicines. The continued reliance on European CM suggests that the underlying strengths and appeal of the European manufacturing landscape remain potent drivers of investment.
Future Outlook and Expert Commentary
Industry analysts suggest that this trend is likely to persist as long as European manufacturing offers a compelling combination of cost, quality, and capacity. Dr. Eleanor Vance, a senior pharmaceutical supply chain consultant, commented, "The biopharma industry operates on a global scale, and decisions about manufacturing are multifaceted. While tariffs are a consideration, they are often weighed against factors like the availability of specialized manufacturing capabilities, established regulatory pathways, and the overall cost of goods sold. Europe, with its skilled workforce and integrated supply chains, continues to offer a very attractive proposition for many companies, especially those looking to diversify their risk profiles."
The ongoing investments by major pharmaceutical players in their European facilities underscore a long-term strategic commitment to the region. This commitment suggests that the current tariff regime may not be sufficient to fundamentally alter the global manufacturing landscape for critical medicines. As biopharmaceutical companies navigate an increasingly complex global environment, the pursuit of robust, resilient, and cost-effective supply chains will continue to drive their investment decisions, with Europe emerging as a clear beneficiary in the production of FDA-approved drugs. The implications for US industrial policy and the future of domestic pharmaceutical manufacturing will require careful monitoring and potentially a reassessment of strategies aimed at fostering onshore production.
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