Tariffs, a biologics boom and the industrialisation crisis in cell and gene therapy are converging to force the most significant rethink of pharmaceutical manufacturing in a generation.

For most of the past three decades, the logic of pharmaceutical manufacturing was simple: make drugs where it is cheapest, and ship them where they are needed. Active pharmaceutical ingredients flowed from India and China into formulation facilities in Europe and the United States. The system was efficient, globalised and, as the Covid-19 pandemic made clear, extraordinarily fragile. In 2026, that logic is being comprehensively dismantled, driven simultaneously by geopolitical pressure, a structural shift in the medicines being developed and a growing realisation that the manufacturing infrastructure for the next generation of therapies barely exists at scale.

The industry is not adapting incrementally. It is rebuilding.

Tariffs Trigger an Unprecedented Investment Wave

The most immediate driver of change is political. On 2 April 2026, President Trump signed an executive order invoking Section 232 of the Trade Expansion Act to impose tariffs on imported patented pharmaceuticals and their active ingredients. Beginning 31 July 2026 for large companies, a 100% tariff will apply to patented pharmaceutical products and their APIs, with generic pharmaceuticals and biosimilars exempt for now. Companies that commit to approved onshoring plans can access a reduced 20% rate, though that rate itself escalates automatically to 100% by 2030.

The announcement crystallised a pressure campaign that had been building for over a year. Even before the April proclamation, pharmaceutical companies had begun announcing domestic investment at a scale not seen before. Eli Lilly’s commitment is the most striking example. In February 2025, Lilly announced a $27 billion effort to expand domestic manufacturing of active pharmaceutical ingredients and sterile injectables. Since then, 13 additional companies have announced investments, pledging a total of more than $480 billion over the next four to ten years, including the establishment of 22 new manufacturing sites and approximately 44,000 new jobs.

The challenge, as the industry is discovering, is that announcing investment and executing it are very different things. Lilly is standing up mega sites in areas that have historically lacked the massive utility and specialised labour infrastructure required for high-tech GMP manufacturing, with challenges in the complex logistics of capital delivery, the philosophy of smart replication, and the need to ensure facilities are flexible enough to handle the next generation of therapies. Regulatory approval for new manufacturing sites is a lengthy process. Skilled workforce pipelines take years to develop. The gap between pledge and production is measured in years, not months.

Biologics Reach a Tipping Point

Whilst tariffs are reshaping where drugs are made, a parallel shift in what drugs are being made is creating its own manufacturing crisis. For the first time, biologics in development now outnumber small molecules, according to Citeline’s Pharma R&D Annual Review 2026, which describes the milestone as a tipping point for the industry. The pipeline is increasingly dominated by monoclonal antibodies, antibody-drug conjugates and, at the more complex end, cell and gene therapies. Each category carries manufacturing requirements that are fundamentally different from the small molecule pills that dominated twentieth-century pharma.

Compared to small molecules, biologics manufacturing requires more planning, investment and a multi-disciplinary workforce. Biologics are generally less robust, being both light and temperature-sensitive and more prone to shear forces, creating significant production challenges around stability, aggregation and purification. The surge in antibody-drug conjugates, which grew more than 30% over the 2025 to 2026 period, is particularly demanding. These molecules combine a targeting antibody with a cytotoxic payload, requiring highly specialised containment and handling infrastructure that most existing facilities were not designed to accommodate.

Pipelines are now filled with high-concentration biologics and next-generation antibodies that push the limits of current manufacturing processes, creating bottlenecks in stability, aggregation and purification that manufacturers are being forced to solve whilst simultaneously scaling output. Continuous bioprocessing, modular facilities and multi-column chromatography are emerging as solutions, but adoption at commercial scale remains limited.

Cell and Gene Therapy: Science Ahead of Its Supply Chain

Nowhere is the manufacturing challenge more acute than in cell and gene therapy. The science is advancing at pace: CAR-T therapies are now being trialled in autoimmune disease, gene editing tools are entering the clinic for rare inherited conditions, and epigenetic reprogramming therapies are approaching first-in-human studies. The manufacturing infrastructure needed to deliver these therapies at scale is struggling to keep up.

Cell and gene therapy faces a critical juncture in 2026, where the challenge is no longer the science. It is industrialisation. Developers are hitting a wall where process robustness, supply-chain variability and capacity specialisation collide. The cost of goods remains structurally too high, and variability across sites, particularly in viral vector production, continues to impede scale-out.

The cost dimension is stark. The cost of manufacturing cell therapies often exceeds $100,000 per patient and can be prohibitively expensive even in high-income countries. Distribution is challenged further by relatively short shelf life and complex cold-chain logistics. For autologous therapies, in which a patient’s own cells must be extracted, engineered and returned, every batch is unique. That is not a scalable model at the volumes needed to treat large patient populations.

The solutions being pursued are automation, standardisation and a shift towards allogeneic platforms, where cells from a single donor can be processed into treatments for multiple patients. The field is moving beyond a narrow focus on single therapeutic modalities and towards broader manufacturing considerations that support commercial deployment, with developers increasingly assessing which modalities are best suited for particular biological and manufacturing challenges.

The CDMO Squeeze

Cutting across all of these pressures is a capacity crunch in contract development and manufacturing. CDMOs, which provide outsourced manufacturing services to companies that do not operate their own facilities, are caught between surging demand and the long lead times required to build and validate new capacity.

CDMO capacity is expected to stay tight in 2026, with timelines planned rather than promised. Specialised unit operations, including containment work for highly potent APIs, are becoming a bottleneck, and validation strategies are trending towards multi-batch approaches to de-risk scale-up. For smaller biotechs bringing novel therapies to the clinic, access to qualified manufacturing capacity has become a strategic constraint that influences not just operations but also the ability to raise capital.

CDMOs are simultaneously being pulled in new directions. CDMOs are moving beyond traditional large-scale antibody production to offer capabilities in cell and gene therapies, viral vectors and specialised fill-finish services, with the cell and gene therapy segment anticipated to grow at the fastest rate between 2026 and 2033. Building those capabilities requires investment, expertise and regulatory validation that takes years to accumulate.

A Structural Reset, Not a Temporary Disruption

What is happening in pharmaceutical manufacturing in 2026 is not a response to a single policy or a temporary market pressure. It is a structural reset driven by the convergence of geopolitical risk, a generational shift in the medicines being developed and the accumulated underinvestment in manufacturing infrastructure for advanced therapies.

The companies best positioned to navigate it will be those that treat manufacturing not as a cost centre to be optimised but as a strategic capability to be built. Whether the $480 billion in announced US investment translates into functional capacity on the timelines being promised, and whether the industry can genuinely industrialise cell and gene therapy production at accessible cost, are the two manufacturing questions on which the next decade of medicine will turn.

The science is running ahead of the factories. Closing that gap is now one of the most consequential challenges in life sciences.

Sources include Citeline’s Pharma R&D Annual Review 2026, PharmaSource Global, Pharma Manufacturing, BioPharm International, Think Global Health, BioPharma Dive, the White House Section 232 Proclamation and the US Department of Commerce.