Strategizing for an Uncertain Trade War: Q&A with Anshul Mangal

Anshul Mangal
President
Project Farma

The United States currently finds itself in the midst of an uncertain trade war with multiple countries. The biggest challenge the industry faces at the moment is uncertainty. The current administration has enacted tariffs against various foreign countries, only to pull them back or delay them. It’s uncertain which tariffs will go into or remain in effect. Anshul Mangal, president of Project Farma, spoke with Pharmaceutical Executive about the situation and how pharma companies can strategize around it.

Pharmaceutical Executive: In what ways could tariffs affect biopharma manufacturing?
Anshul Mangal: The recent tariffs imposed by the Trump administration, including a 25% duty on pharmaceutical imports, could significantly impact biopharma manufacturing by increasing production costs, disrupting global supply chains, and forcing companies to reevaluate their manufacturing locations. A substantial portion of the US pharmaceutical supply chain depends on international production, particularly for APIs, with China and India supplying a majority of these components. US imports of Chinese-made APIs have grown by approximately 24% since 2020, and any disruption could drive up drug costs. Generic drug manufacturers may struggle the most, as their ability to absorb cost increases is limited, potentially leading to drug shortages or price hikes for consumers. There are also heavy implications for medical devices, as analysts have estimated that about 75% of the hardware marketed within the US is manufactured outside the country. While groups like The American Hospital Association (AHA) and AdvaMed are lobbying for tariff exemptions, citing risks to supply chains for surgical tools, diagnostic equipment, and hospital essentials, no exemptions have been granted. Reshoring pharmaceutical manufacturing to the US presents its own challenges. High labor costs, lengthy timelines, and regulatory considerations make a rapid transition difficult and unlikely.

PE: What are the key considerations for Big Pharma vs. Small Biotech Companies in this new environment?
Mangal: Big Pharma companies and small biotech firms face vastly different challenges as they navigate the evolving landscape shaped by tariffs and shifting manufacturing policies. Big Pharma, with its extensive global infrastructure and strong financial reserves, can absorb short term tariff related costs and leverage its influence to negotiate favorable policies. Companies that already have a significant US manufacturing presence, like Eli Lilly and Pfizer, can easily pivot by increasing domestic production. This is demonstrated by Lilly’s recent announcement of plans to invest $27 billion in four new US manufacturing plants.

Small biotech firms, often operating with limited capital to begin with, may struggle with increased costs if their supply chains rely on overseas production. Biotechs that rely on CMOs in regions like China and India could face disruptions, forcing them to seek alternative suppliers or absorb higher production costs, ultimately impacting their ability to scale efficiently. Smaller and early stage companies may need to shift R&D focus or explore alternative funding strategies to cope with higher costs. While Big Pharma can wait for the dust to settle before making major capital investments, small biotech firms must be more strategic and proactive in managing supply chain risks and securing stable manufacturing partners.

PE: How might the new administration impact US vs. Ex-US manufacturing decisions?
Mangal: The Trump administration's aggressive tariff policies and emphasis on reshoring manufacturing are already prompting shifts in investment decisions, with Eli Lilly’s recent $200 million expansion of its Suzhou, China facility standing in contrast to its $27 billion commitment to US manufacturing. Merck also opened its doors to a new $1 billion, 225,000-square-foot manufacturing plant in North Carolina and has stated plans to spend another $8 billon in US capital investment through 2028.

Retaliatory tariffs could further complicate decisions for multinational biopharma firms. China's recent ban on Illumina’s DNA sequencers in response to US tariffs highlights the risk of escalating trade tensions, which could lead to supply chain disruptions and force companies to diversify their manufacturing footprints. Corporate tax policies remain a key factor, Lilly explicitly tied its previous US investment to Trump-era tax cuts, suggesting that if the administration extends or expands tax incentives, more companies could be incentivized to increase domestic manufacturing. However, the FDA approval and manufacturing timelines remain a bottleneck for rapid reshoring.

If the administration extends corporate tax incentives or streamlines regulatory approvals, we could see even greater investment and efforts to reshore US biopharma manufacturing. However, if trade tensions escalate further, especially if China expands retaliatory measures beyond Illumina’s ban, biotech companies may face new barriers to global collaboration, potentially disrupting clinical trials and innovation pipelines. Ultimately, while tariffs may encourage more US-based production, the complexities of global trade, supply chain, and operational costs will continue to shape long-term investment decisions.