**London**: In a recent interview, Brad Stewart from BDO discussed the impact of tariffs on the reshoring of life sciences manufacturing, highlighting the complexities of supply chains and calling for enhanced internal capacity to navigate escalating uncertainties and risks in the sector.
In a recent video interview with Pharmaceutical Commerce, Brad Stewart, the national life sciences co-leader at BDO, discussed the significant challenges that tariffs present for the reshoring of manufacturing services within the life sciences industry. Stewart highlighted the intricate nature of supply chains in this sector, which are characterized as large, long, highly-regulated, and resistant to change. This complexity is compounded by the uncertainty regarding how future administrations may alter tariff policies, necessitating careful consideration when making reshoring decisions.
According to Stewart, the life sciences supply chain encompasses not only finished products but also the raw materials and components sourced globally. Typically, drug substance production occurs in one country, while the fill-finish processes are conducted in another. The fluctuating tariffs on goods at various production stages further complicate these operations, especially when interwoven with elements such as transfer pricing and taxes. Consequently, Stewart argues that companies must develop robust strategies to manage these types of risks more effectively.
To mitigate these challenges, Stewart advocates for a shift towards increased manufacturing capacity within the United States. Although this may incur higher initial costs, he asserts that such a move can provide manufacturers with greater stability amid evolving tariff and tax climates. Stewart noted that while establishing new manufacturing facilities in the U.S. comes with its own set of expenses, it is a prudent decision for companies making long-term investments. This approach allows firms to manage risks more efficiently, enabling them to concentrate on their primary mission of producing life-saving products.
During the interview, Stewart also addressed the internal challenges faced by life sciences companies, revealing that nearly a quarter of CFOs in the sector have identified internal manufacturing constraints as a major obstacle. “There are a lot of different challenges hidden there,” he remarked. He pointed out that while large corporations like Pfizer have extensive global manufacturing operations, many smaller companies lack internal manufacturing capabilities and often rely on contract development and manufacturing organisations (CDMOs) for support.
Stewart elaborated on the struggles faced by these smaller entities, many of which are still in the discovery phase of drug development and moving towards clinical trials. “Some of those just don’t have the capability or capacity for internal manufacturing and wonder how to do that,” he explained. This confluence of challenges presents a particularly complicated landscape for firms attempting to navigate their growth during uncertain times.
The amended regulations under the Biosecure Act, proposed last year, add additional pressure by constraining relationships with potential Chinese partners involved in the production of biologics. The ongoing discussions around tariffs further obscure the future, leaving many within the sector uncertain about how to proceed. Stewart concluded that this unpredictability makes it exceedingly difficult for companies to devise effective plans and strategies.
Source: Noah Wire Services
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