US offers funding to make medicines on shore

People in the pharmaceutical industry had long worried that it was coming. Then, during the pandemic, their fears were realized. The US imports most of the active substances used in generic drugs, and shipments dried up. The result was shortages of essential medicines that left patients and clinicians in the lurch.

Democratic and Republican administrations alike have acknowledged the need for the US to build a self-reliant supply chain for active pharmaceutical ingredients (APIs). They have made efforts to attract domestic production, but major changes have been hard to come by. Now more federal dollars are making their way to projects to boost domestic API production. Experts call it a step in the right direction but say more government support is needed to bring lasting change.

Among the recipients of the new funding is the Advanced Pharmaceutical Manufacturing (APM) Tech Hub, in Virginia, a consortium led by the public-private coalition Alliance for Building Better Medicine. The US Economic Development Administration has infused nearly $16 million to strengthen the cluster’s ability to produce essential medicines in the US from start to finish.

The APM Tech Hub was established on $1.7 billion in federal, state, philanthropic, and private investment, the group says. For now, the consortium will make four generic injectable medicines used in emergency, anesthesia, and critical care settings: ketamine, midazolam, norepinephrine, and succinylcholine.

“The goal is to demonstrate an integrated domestic pathway for four essential medicines,” says Joy Polefrone, regional innovation officer for the APM Tech Hub and the Alliance for Building Better Medicine. “This is an important step toward strengthening America’s ability to develop, manufacture, and deliver essential medicines domestically.”

Most medicines, be it pills or injectables, have their roots in key starting materials—chemical building blocks generally made from petroleum. And most of those materials are made in China. According to an analysis by the nonprofit US Pharmacopeia, China supplies at least one critical starting material for nearly 680 distinct APIs used in the US.

The starting materials are the feedstock for synthesizing APIs. The US also largely outsources API manufacturing to companies in China and India—especially the ones used for making generic drugs. The APIs, along with other ingredients, are then packaged into pills, capsules, or injectables.

The APM Tech Hub aims to perform the entire process of drug manufacturing in the US. Occam System, a company kick-started with funding from the US Defense Advanced Research Projects Agency, will develop domestically sourced key starting materials. Phlow, a start-up founded in 2019 that has received $93 million in private capital and $600 million in government contracts, will deploy its continuous manufacturing process to produce the APIs.

Meanwhile, Civica Rx, a nonprofit pharmaceutical company that will lead the project, will package the APIs into pills or injectables. It will also be responsible for navigating regulatory pathways, procuring contracts with hospitals, and supplying them with medicines.

“This is less about US-made everything,” Polefrone says. “It’s more about reducing supply chain risks and having the capacity to be able to do end-to-end manufacturing, which is something that almost no place in the world can actually do, [except] maybe China.”

Capra Biosciences, a biomanufacturing company, also recently received US funding—$9.2 million from the Department of Health and Human Services—taking its total funding to nearly $17 million.

Rather than chemical synthesis, Capra uses genetically engineered yeast to produce APIs. Cofounder and chief technology officer Andrew Magyar says the biomanufacturing approach is versatile: the same reactor can manufacture different APIs depending on the strain of yeast, which makes it cheaper than conventional synthesis.

“Our view is that these new technologies are needed to compete on cost on the global markets,” Magyar says about approaches like biomanufacturing.

The technology also allows for easy scaling of production according to demand, says Capra cofounder and CEO Elizabeth Onderko, who acknowledges that not every drug is amenable to biomanufacturing. The new funding will help the firm file for regulatory approval needed to commercialize five molecules, including the pain relievers aspirin and acetaminophen and the Parkinson’s disease medicine L-DOPA.

The European Union is trying a similar approach through consortia such as PIPAC (Production Intelligente de Principes Actifs, or Smart Production of APIs). Composed of De Dietrich, Alysophil, Bruker, and Novalix, PIPAC recently announced the completion of a pilot program to produce APIs using continuous-flow chemistry.

Experts call such initiatives for onshoring API and medicine production a much-needed move. Prashant Yadav, senior fellow at the Council on Foreign Relations, a nonprofit think tank, says the hub model caught his attention because it is unusual. “The government is not just saying that we will have Phlow try to make API or Civica formulate them. It is saying we want to create the ecosystem in Virginia, and that ecosystem will have full end to end.”

If the APM model works, it might spur similar initiatives that could boost domestic production of more-specialized generic drugs such as sterile injectables, which are typically used in hospital settings, Yadav says. But not much will change for the common prescription medicines people pick up from pharmacies, he says. “It won’t be the amoxicillin, which is for at-home use, because those are very high volume, very low margin.”

Gerren McHam, vice president of government and external affairs at the API Innovation Center, a nonprofit focused on ramping up domestic supply of essential medicines, says it is clear that the government needs to be the primary driver of these changes. “It is not going to happen organically because the margin is just not there to make the shift,” he says. One way the government can help fuel the change is by committing to purchase US-produced APIs and finished drugs, McHam adds.

Meanwhile, manufacturing investments by innovator drug companies, which focus on developing patented drugs, are surging. Almost all major pharma companies, including GSK, Eli Lilly and Company, and Bristol Myers Squibb, have announced massive manufacturing projects in the US against the backdrop of President Donald J. Trump’s tariff threats.

It should be a priority to ensure that production of generic versions of those innovator drugs occurs in the US when their patents expire, McHam says. “How can we make sure that these products don’t leave the United States so that we don’t have to reshore those drugs?”