Biopharma Manufacturing and R&D Shift Overseas Despite US Tariffs

Biopharma companies are increasingly shifting drug manufacturing and research activities overseas despite U.S. efforts to incentivize domestic production through tariffs. In 2025, Europe recorded more than triple the U.S. deal volume for contract manufacturing of FDA-approved drugs, with Germany accounting for 12 of those deals and averaging nine CM deals per year for U.S. drug manufacturing over a six-year period.

Last year saw the largest fall in U.S. contract manufacturing deals for FDA-approved drugs in five years. Despite 15% import tariffs on EU pharmaceuticals implemented to incentivize domestic manufacturing, biopharma companies appear to be increasingly turning to contract manufacturing in Europe. In 2025, nine out of 14 U.S.-based pharma companies that outsourced manufacturing invested in a total of 13 Europe-based manufacturing deals, while less than half of these companies invested in U.S.-based facilities, signing only eight CM deals.

Companies are also following this trend with their in-house manufacturing facilities. Earlier this year, Novo Nordisk and Eli Lilly announced investments of $501 million and $3 billion, respectively, to expand their in-house European manufacturing sites. With the recent FDA approval and success of Novo's Wegovy pill, which is currently the first and only oral glucagon-like peptide-1 receptor agonist available in the Western market, Novo is planning to expand its tabletting facility in Ireland to meet current and future U.S. market demand.

The shift of CM deals for FDA-approved drugs toward Europe highlights the limited impact that European import tariffs have had to sway biopharma companies away from European-based CM and towards the U.S. The region, with Germany in particular, is growing to be an attractive and well-established hub for pharmaceutical manufacturing for the U.S. market. Such a shift may hinder the current U.S. administration's plans to reshore domestic contract manufacturing.

Meanwhile, with manufacturing onshoring a continuing point of discussion in the industry, many pharma companies went the opposite way for R&D in 2025, deciding to conduct innovation overseas. According to a survey of pharma executives by consultancy firm Ayming UK, nearly half (47%) of respondents said they offshored R&D last year. Companies cited collaboration opportunities with partners and proximity to new markets and customers as two of the primary motivating factors for their strategy, along with enhanced access to R&D talent and lower wage costs in certain territories.

The UK ranked the highest for those offshoring pharma innovation. Reports published in the past year by trade bodies have lamented the lack of commercial opportunity in the UK despite the region's high-quality scientific expertise in universities and early-stage companies. As per data from the BioIndustry Association, equity financing and venture capital dropped 49% and 13%, respectively, in 2025 compared to 2024. R&D investment meanwhile fell nearly £100 million to £8.7 billion in 2023.

In January 2026, AstraZeneca, the UK's most valuable company, pledged $15 billion to fund an R&D and manufacturing expansion in China. This follows the drugmaker shelving certain expansion plans in the UK in September 2025. Rumors continue to circulate regarding more operational moves to the U.S. for AstraZeneca.

The global state of the pharmaceutical industry has been under the spotlight in the past year amid key policies introduced by the U.S. administration, including threatening pharma companies with tariffs in a bid to prioritize U.S. drug manufacturing and development. Some experts have said onshoring creates a more resilient global supply chain, while critics cite higher domestic labor costs.