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I recommend anyone who wants to learn more about generic drug manufacturing to read this article at the New York Times (it’s a gift link, free to read). There’s been a lot of coverage of drug manufacturers “on-shoring” production and packaging in response to pressure from the Trump administration, and there is definitely some of that happening (although it doesn’t happen as quickly as it might seem to). But this is another world entirely.
That’s because the generic drug business is so different from the patented prescription drug business that it might as well be a separate industry. Generics generally compete on price, for one thing, which is what (famously) patented drugs hardly do. And while prescription drug prices are high here in the US, our generic drugs have generally been some of the cheapest in the world. Competition is fierce, and there are a lot of manufacturers of all sizes around the world in the game, from really huge ones (Teva, Dr. Reddy’s, Sandoz and more) to little outfits in places that you would hardly believe.
There are generally a whole list of possible ways to make these older drugs, but most of those routes are in the “now superseded” category as cheaper ones were found. Some of those, though, are really only cheaper on scale or if you have the equipment, so for those small local producers it’s whatever works with whatever’s available. And there’s a lot of confusion even on the large scale, because there are often a number of actual producers of these drugs and even more resellers and repackagers. Trying to figure out just where a given batch of pills was made, all the way down to its various intermediates and reagents along the way, can be very difficult - and by the time you’ve worked it out, those pathways might have changed (!) See this post from back in May for an example.
What’s for sure is that not much of this sort of drug manufacturing takes place in the US, and there doesn’t seem to be much sign of it returning. That NYT article makes this painfully clear with a look at a former Dr. Reddy’s plant in Shreveport. It started out owned by Boots (UK) and then by BASF before being bought by Dr. Reddy’s in 2009, but it shut down earlier this year after losing millions of dollars a year for the company. They were mostly formulating and packaging drug substances that were themselves made overseas, but even that wasn't enough of a foothold. This sort of work has been on a downwards trend here a good twenty years now, both at the manufacturing end and at the formulation/packing end of the business, and the reasons are the same: very small margins in the generic business mean that every possible cost savings will be sought out. And it costs too much do it that sort of thing here as opposed to somewhere else.
That’s it, in one sentence. Which means that the main way the administration would be able to make these things come back to the US would be to make the foreign drugs even more expensive, which is where tariffs come in. The end result is that the consumer pays higher prices for the drugs, whether they even get made in the US or not. I don’t see how you’re going to suddenly make the US manufacturing more competitive under those thin-margin conditions: this isn’t something that you’re going to solve by throwing AI at it. There are machines and production lines, pill presses and coating machines and sorters and cartons and shrink-wrapping machines before things are loaded into boxes and taken away by fork lifts. The people who do this in India (to pick a major example), who run those machines and fill those bottles and load those boxes, cost five to ten times less than American workers cost to do those jobs. Which is why that plant in Shreveport is sitting there, with dust gathering on its increasingly outmoded equipment.
