Onshoring and global health – has the pandemic sent globalisation into reverse?

The pandemic has been a game-changer for the pharmaceutical industry, sending the seemingly inexorable globalisation trends into reverse, with Big Pharma increasingly seeking more domestic supply chain options. Here, Karen Winterhalter of Onyx Health shares her expert insights on the impact of this emerging trend on the industry.

Global drug supply chain

The recent economic disruption caused by the COVID-19 pandemic sent shockwaves across the pharmaceutical industry, disrupting its supply chains, delaying production and creating a shortage of vital medicines.

It is estimated that 43 percent of acute care medicines such as antibiotics, blood thinners and sedatives ran in low supply during the peak of the crisis.1

One of the key areas affected by the disruption was the active pharmaceutical ingredient (API) market.2 APIs are the biologically active component in tablets or drug capsules used in everyday medications like paracetamol.

Like so many industries, the sector has seen a trend of outsourcing API manufacturing activity away from Europe and North America toward China to cut production costs due to the rise of globalisation.3   

The economic forces of globalisation have reshaped the world economy; accelerating global growth, raising living standards in developing countries and reducing income inequalities between developed and developing countries. However, this has come at a cost for those left behind. It has widened income inequalities within developed countries, hollowing out the West’s pharmaceutical manufacturing capabilities and exposing them to sudden shocks in the global economy.

The pandemic has starkly exposed the fragility of the global supply chain and over-reliance on China as a manufacturing location.

The fragility of global supply chains

When the COVID-19 crisis first started in China’s Wuhan province in January 2020, the Chinese Government imposed nationwide restrictions to tackle the virus’s rapid spread. This quickly exposed the global pharmaceutical industry’s over-reliance on China to produce APIs. It is estimated that 44 companies were left non-operational during the pandemic due to lockdown restrictions in China. As a result, access to vital APIs and medicines we were drastically restricted.1

Red coronavirus particles surrounding Earth globe - idea of COVID-19 pandemic

The relentless rise of outsourcing that has taken place over the past decades has led to a dangerous structural imbalance in the global pharmaceutical market. It is estimated that 80 percent of APIs for essential medicines across key therapeutic areas in the US had no domestic manufacturing source4 and this has serious worldwide health implications. APIs are key components in the medications used to treat chronic underlying health conditions such as cardiovascular disease, strokes, heart attacks, diabetes and more. The shortages were so severe at the peak of the pandemic that the UK’s National Health Service (NHS) publicly called on the UK Government to bring more pharmaceutical manufacturing back to the UK to future proof medicine supply chains.5

The scale of the global problem has been recognised by President Joe Biden, who has made onshoring a key focus of his recently passed Infrastructure Bill and issued an Executive Order to secure and strengthen America’s supply chains, including the pharmaceutical industry.6

Outsourcing comes at a cost

The rise of China as a major player on the world stage has led to it becoming a dominant force in the global pharmaceutical industry.

The sheer size and scale of its production capacity, as well as lower operating costs, mean that China’s APIs have become the most widely used worldwide, surpassing previous market leaders like India, who now receive 70 percent of their API supply from China.7

China’s economic ascendancy meant that Western manufacturers in Europe and North America could no longer compete. They largely outsourced their traditional API manufacturing capabilities to cut costs and remain commercially competitive.

APIs are an asset of strategic importance to the global pharmaceutical industry. There is a need to establish a diverse range of production locations to create a more stable and efficient market”

However, it is clear that outsourcing itself comes at a cost. When the production of APIs vital for the global medicine supply is dominated by one country, the Western world is in a precarious position.

Research by McKinsey shows that supply chains in the pharmaceutical industry are more global than in other sectors and there is a tendency to source certain materials from a particular region. For instance, 86 percent of the streptomycin in North America and 96 percent of the chloramphenicol in the European Union comes from China.8

APIs are an asset of strategic importance to the global pharmaceutical industry. There is a need to establish a diverse range of production locations to create a more stable and efficient market.

The industry is increasingly looking at more production options in their local region to rectify this imbalance. The UK’s Life Sciences Industrial Strategy has set an ambition to attract ten large and ten smaller manufacturing facilities to the UK, through the onshoring of manufacturing.9 Whilst this may be more expensive, it could well be a price worth paying for greater stability and security of supply.

Onshoring is the new outsourcing

The global economic disruption created by the COVID-19 crisis has led to pharmaceutical companies looking to reduce their reliance on Chinese suppliers and become more API independent.

Diversifying supply chain materials is an option that pharma companies could pursue to reduce their exposure through onshoring. McKinsey estimates that 38 to 60 percent of the international pharma trade, worth $236 billion to $377 billion in 2018, could be considered for onshoring.8

There has been a growing clamour for indigenous API and intermediary production to create more secure supply chains and lay stronger structural foundations.

A striking example is the Indian Government setting aside $1.3 billion to invest in domestic API production, shifting its pharmaceutical industry away from its reliance on Chinese APIs.7 India hopes the investment will enable it to reclaim some of the market share it previously lost to China and shore up its domestic supply to safeguard against a future crisis.

Global supply chain/logistics/distribution concept with world map covered in aeroplanes, boats and trucks as well as lines connecting countries indicating transport routes

The European Commission (EC) has set out its vision for the future of supply chains in its EU Pharmaceutical Strategy, which includes initiatives to lead the charge on reshoring pharmaceutical production10. It includes a specific commitment to “strengthen the resilience of pharmaceutical supply chains and ensure the security of supply of medicines, without compromising the affordability of medicines”, which will take place across EU member countries.9

A recent example of this is the French pharmaceutical giant Sanofi announcing plans to launch a spin-out API European manufacturer.11 It will combine Sanofi’s API commercial and development activities with six production sites across Europe, securing domestic supply capacity.11

We must remember that diversifying supply chains is expensive for companies and the cost of reconfiguring them will either fall on consumers or governments. The UK’s Vaccine Taskforce is currently undertaking work to build and strengthen the UK’s vaccine supply chain by focusing on increasing domestic supply capabilities and engaging with pharmaceutical companies to invest in domestic production.12 However, it remains to be seen who will pick up the bill.

One of the fascinating economic consequences created by the present crisis has been to send the seemingly inexorable trends of globalisation into reverse, highlighting the need for an indigenous API strategy. Locally sourced API production will likely become an increasingly important part of Government policy and pharmaceutical companies’ commercial strategy. Tony Blair once famously said globalisation is a fact, not a choice; however, the reality in a post-COVID-19 world may be more complex.13 Whilst globalisation may remain a fact of economic life; companies may increasingly choose to onshore their manufacturing capabilities to increase their resilience to global economic headwinds. 

About the author

Karen Winterhalter, Managing Director of Onyx Health, founded the company in 2009 when she returned to her native North East to set up her own communications agency. She has over 30 years of experience in pharmaceutical communications, having previously been European Director at Weber Shandwick and EMEA Managing Director for Burson Marsteller for their healthcare divisions.


  1. Silverman E. As Covid-19 intensifies, shortages of staple drugs may grow worse [Internet]. STAT. 2020 [cited May 2022]. Available from:…
  2. Reynolds N. Understanding disruptions to the antibiotic supply resulting from COVID-19 [Internet]. 2020 [cited May 2022]. Available from:…
  3. Outsourcing API Manufacturing to Asia: Pros, Cons, & Considerations – PCI Synthesis [Internet]. PCI Synthesis – API Manufacturing, cGMP Contract API Manufacturer. 2017 [cited May 2022]. Available from:
  4. Jimenez D. Has Covid-19 exposed the weakness of the US pharma supply chain? [Internet]. Pharmaceutical Technology. 2021 [cited May 2022]. Available from:
  5. Quelch R. Building the UK’s domestic pharma manufacturing capability [Internet]. European Pharmaceutical Review. 2021 [cited May 2022]. Available from:…
  6. The White House. The Biden-⁠Harris Plan to Revitalize American Manufacturing and Secure Critical Supply Chains in 2022 [Internet]. 2022. Available from:…
  7. Palmer E. India investing $1.3B to cut dependence on Chinese APIs [Internet]. Fierce Pharma. 2020 [cited May 2022]. Available from:…
  8. Foster T, Patel P, Skiba K. Four ways pharma companies can make their supply chains more resilient [Internet]. McKinsey & Company. 2021 [cited May 2022]. Available from:
  9. Our strategy for regional growth and national change in health, life sciences and medicines manufacturing. [Internet]. North East Local Enterprise Partnership; 2021 [cited May 2022]. Available from:
  10. A pharmaceutical strategy for Europe [Internet]. European Commission. 2021 [cited May 2022]. Available from:
  11. Pagliarulo N. Sanofi API spinout takes step toward market listing [Internet]. BioPharma Dive. 2022 [cited May 2022]. Available from:…
  12. Byrne J. Call to single use technology suppliers: Taskforce looks to build resilience in UK vaccine supply chain [Internet]. 2022 [cited May 2022]. Available from:…
  13. Bourne R. Tony Blair is right – globalisation is a fact not a choice [Internet]. The Telegraph. 2019 [cited May 2022]. Available from:…