From Pharma Outsourcing to Insourcing: Seizing Control in a Booming Pharma Market

The U.S. biopharmaceutical industry and contract development and manufacturing organizations (CDMOs) are booming — investing billions in capacity expansion projects — and showing no signs of slowing down. As a result, biotech and pharmaceutical companies are under increasing pressure to reduce risk, improve quality and strengthen operational control while navigating evolving governmental requirements and restrictions. For many firms, that means reshoring manufacturing, testing, quality assurance and other key functions — a major shift from outsourcing models that CDMO partnerships typically employ.

Factors Motivating Pharma Outsourcing to Insourcing Efforts

At Actalent, many of our pharma clients have expressed a desire to bring jobs back to the U.S. and create local opportunities. The convergence of supply chain vulnerability, quality risk and regulatory complexity is making reshoring staffing a strategic imperative.

Supply Chain Vulnerabilities

The pandemic and geopolitical tensions over the last five years have demonstrated the United States’ reliance on overseas suppliers. During pandemic-related drug shortages, it was determined that an estimated 72% of active pharmaceutical ingredient (API) suppliers for the U.S. market were located overseas. Reducing reliance on China, India and other foreign sources may help reduce the risk of future shortages.

Threats to National Security

Drug shortages surged nearly 30% between 2021 and 2022. These shortages are seen as a national security risk, prompting bipartisan calls to increase domestic production. The U.S. government has prioritized strengthening domestic manufacturing, offering various incentives for reshoring. The Inflation Reduction Act (IRA), for example, included up to 30% in tax credits for pharmaceutical manufacturers that modernize or expand facilities with energy-efficient or low-emissions technologies. The intention of the credits is to offset the cost of reshoring by encouraging sustainable infrastructure improvements.

Quality Control Concerns

More than 50% of drug manufacturing sites supplying the U.S. are overseas, where FDA oversight is more challenging. The stringency of requirements and regulations for environmental monitoring in the pharmaceutical industry can vary significantly by country. This makes it challenging to maintain consistent quality when products or ingredients are coming from other parts of the world.

Uncertain Pharmaceutical Regulatory Compliance

The looming threat of U.S. tariffs is an increasing motivator for pharma firms around the world. Regulatory scrutiny is also intensifying. Bringing work in-house offers greater transparency, but only if companies can scale teams quickly enough to meet increased demands for pharmaceutical regulatory compliance.

Supplier Resiliency

Pharmaceutical companies and CDMO partnerships have become dependent on a handful of suppliers. One of the pharmaceutical manufacturing trends we’ve seen is companies overstocking and seeking out secondary suppliers. The trend is a major contrast to the past practice of having all their eggs in one basket. One of the key objectives of reshoring pharmaceutical manufacturing is to help build a supply chain that is better insulated against external shocks and disruptions.