Even when a drug finishes its production in the U.S., its active and inactive components often come from overseas. While pharmaceutical companies have been unveiling plans for new U.S. manufacturing plants in response to the Trump administration’s threat of tariffs, few of these plans mention the production of active pharmaceutical ingredients, or APIs.
The Trump administration’s policy goal of bringing of bringing drug manufacturing back to the U.S. is now expanding to APIs under a new executive order signed Wednesday. The administration is making a list of medicines “especially critical to the health and security interests of the Nation.” Based on that list, the government will stockpile APIs for these drugs.
In the order, the administration states that nearly two in five prescription drugs are finished in the U.S. But by volume, only about 10% of APIs for these finished products are made in the U.S. The executive order builds on a stockpiling initiative started under the first Trump administration. In 2020, the administration created the Strategic Active Pharmaceutical Ingredient Reserve (SAPIR) to stockpile APIs.
According to the order, drug procurement and stockpiling did not increase under President Biden and the SAPIR is now nearly empty. The order directs the Office of the Assistant Secretary for Preparedness Response (ASPR), a part of the Department of Health and Human Services (HHS), to develop a list of about 26 critical drugs. The order also directs the office to account for funds that can be used to stock and maintain SAPIR, maintaining a six-month supply of APIs for these medicines.
“Stockpiling APIs is advantageous as APIs are generally lower-cost and have longer shelf lives than the finished drug products they make,” the order states. “Filling the SAPIR will also insulate the United States from the concentration of foreign, sometimes adversary, nations in the world-wide supply of the Key Starting Materials used to make APIs. Moreover, Government purchases of APIs to fill the SAPIR can encourage more domestic production of APIs.”
There is some movement in domestic API production. Ahead of the executive order, AbbVie this week announced plans to invest $195 million in an existing North Chicago-based facility to expand its API manufacturing capabilities. The announcement is part of more than $10 billion in capital investments planned by the drugmaker. Construction of the API facility will begin later this year and is projected to become operational in 2027. When Eli Lilly last year announced plans for a $5.3 billion expansion of an Indiana site, the company said this location will make the active pharmaceutical ingredient in its metabolic medicines Mounjaro and Zepbound. But it’s not clear that such products would make the cut of being critical or essential medicines.
In 2020, the Trump issued an executive order directing the FDA to make a list of essential medicines, medical countermeasures, and critical inputs. ASPR later narrowed that list to 86 essential medicines. The latest executive order directs ASPR to update the list of essential medicines and provide a plan for obtaining these drugs, with a preference for domestic manufacturers. SAPIR will also maintain a six-month supply of these essential medicines (if they are not already on the critical drug list).
It doesn’t appear Trump will seek new Congressional funding for the stockpile. The order states that the Office of Management and Budget will help HHS facilitate repurposing of available funds, consistent with the law. This step will happen within the next 30 days. Within 120 days of the order, and subject to the availability of funding, ASPR will prepare SAPIR to receive APIs. The order also calls for a proposal and cost estimate for opening a second SAPIR in the U.S. within one year.
In a note sent to investors, Leerink Partners analyst Puneet Souda said it’s hard to assess the order’s impact until the 26 critical drugs are selected. He’s also awaiting clarity on financial details, such as whether the administration is willing to pay much higher prices for stockpiling API and generics that are manufactured in the U.S. when cheaper alternatives are available from other countries, mainly India and China.
“The essential medicines list published by FDA in 2020 is skewed toward generics such as amoxicillin, acetaminophen, and antibiotics, i.e., low-cost, high-volume drugs,” Souda said. “Manufacturing such APIs in the U.S. would likely increase the cost per pill due to higher labor, energy, and compliance costs.”
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