In October 2025, shovels went into the ground in Elkton, marking the start of a $3 billion pharmaceutical expansion project that will add 400,000 square feet to Merck’s existing campus.

It was the latest sign that Virginia rapidly is becoming a major hub for biopharmaceutical manufacturing, fueled by its educated workforce and strategic incentives. In 2025, major drugmakers AstraZeneca, Eli Lilly & Company, and Merck announced plans to build new manufacturing plants in the Commonwealth.

These announcements are part of a larger trend that will see an estimated $370 billion in pledged investments to move biopharmaceutical manufacturing back to U.S. soil over the next five years, said Arda Ural, life sciences leader at EY Americas.

This drive to bring drug manufacturing back to U.S. shores gained new urgency during the COVID-19 pandemic, he said. As illness spread and supply chain disruptions and drug shortages grew, it highlighted a critical weakness: while 92% of the drugs Americans take daily are generics, more than 80% of their ingredients come from countries outside the United States, notably China and India, according to the API Innovation Center. This raised serious concerns about national security, sparking efforts to reduce risk by bringing the supply of critical drugs closer to home.

The federal government made some early pandemic-era moves, including an executive order to create a list of essential medications and initiatives to boost domestic active pharmaceutical ingredient (API) production, but they made little substantive progress. Recently, however, the reshoring effort gathered momentum as the Trump administration bundled tariffs and most-favored-nation pricing policies to align U.S. prices with the lowest prices offered abroad, said Michael Abrams, managing partner at health care consulting firm Numerof & Associates. An uptick in reshoring announcements followed.

THE BRANDED VS. GENERIC DIVIDE

However, announced deals to date only include companies that make brand-name drugs. While their manufacturing plants bring new jobs and opportunities for local workers in states like Virginia, they don’t necessarily address the looming national security risk linked to the wobbly supply of crucial generic drugs.

Large pharmaceutical companies have deep pockets, but those producing low-cost drugs face a high bar moving operations to the United States, Abrams said. Cost and ingredient sourcing are major barriers.

“For the branded products, the issue of supply continuity is not a critical issue of dependence on China or other developing countries,” Ural said.

“For the generic products, it is a different ballgame.”

While the instability of the drug supply gained new attention during the pandemic, the push by branded drugmakers to shift manufacturing to the United States is a continuation of a longer-standing trend to ensure quality, Ural said. A high percentage of FDA drug denials are linked to manufacturing problems, and U.S.-based facilities enable better quality control, helping to expedite drug approvals.

“The other shift that’s happened is that there are new drugs out there which we didn’t have previously,” said Didi Caldwell, president and CEO of site consulting firm Global Location Solutions. “There’s a real push to get them here,” she said.

DECIDING WHERE TO BUILD

However, whether they produce generic drugs or top-shelf products, drugmakers don’t take manufacturing relocation decisions lightly.

“Pharma investments typically are long-term decisions, involving hundreds of millions of dollars, if not billions of dollars,” Ural said. It can take three to five years to establish a plant, and companies need to weigh the value of a move against other priorities, including acquisitions, paying down debt, or technology investments.

Companies are often lured to the United States because of its market appeal. Having a domestic footprint can improve lead and reaction times. This helps drive business and gives them a competitive edge over rivals supplying the market from abroad, said Johan Beukema, managing partner at global business consultancy BCI Global.

They must weigh the benefits of starting at a new location or expanding existing facilities. If they do move, speed to market is a high priority. For example, companies producing blockbuster weight loss drugs, such as Wegovy and Zepbound, want to get up and running quickly to meet demand.

The states that are the most successful in attracting manufacturing offer shovel-ready sites, with an expedited process for approvals and licenses, Beukema said. Site selection is also driven by scalability — the ability to grow and meet the company’s needs, including energy and water considerations.

WORKFORCE IS PARAMOUNT

Among all the considerations for reshoring, the one that often looms the largest in decision-making is labor. “Talent availability is really key in numbers, but in this industry, also in terms of just the quality of the labor,” Beukema said.

Unlike many fields, the focus isn’t typically on cost. “The talent consideration is less about how much you have to pay for talent. It’s more about how skilled they are,” Caldwell said. “And so you have to go to places that have Ph.D.-level scientists, that have people at the technician level, who are really well trained, accustomed to working in conditions that are required by the pharmaceutical industry, such as clean room environments.”

Skilled labor availability is one of the top reasons why Virginia has become an attractive location for manufacturing. The Commonwealth is taking steps to build on that workforce with the announcement of the Virginia Center for Advanced Pharmaceutical Manufacturing, a workforce training partnership between AstraZeneca, Eli Lilly, Merck, the Virginia Innovation Partnership Corporation, and numerous Virginia colleges and universities that will graduate 2,000 workers with a degree or credential each year.

However, while Virginia is attracting big deals, there are ways it could make itself more marketable, Caldwell said. “Virginia has not been very attractive for the small-to-medium-sized players because the ecosystem and the dots have not been connected.” The state should increase investment-ready pharmaceutical manufacturing sites, develop infrastructure to support specialized drug storage, and improve housing availability, she said.

SHORING UP THE GENERIC DRUG MARKET

While the United States is enticing branded pharmaceutical companies to relocate, it’s a much more difficult proposition for generic drug manufacturers, who are substantially constrained by costs.

“They’re working with small margins in a very competitive space. Much of the time, they cannot afford to build their own plant and pay U.S. labor rates unless there’s some other offset,” Abrams said.

The government is exploring other avenues to solve the problem. It has established a strategic reserve of critical medications to buffer drug shortages, rolled out reshoring incentives, and waived tariffs on these products. “They are trying to make this as economically plausible for generics to manufacture in the United States. But that’s a low-value, high-volume situation,” Ural said. In early February, the FDA announced the FDA PreCheck pilot program, which is designed to enable faster approvals, prioritizing companies that make critical drugs. But experts say all these efforts aren’t enough, and shortages are still a problem. As of June 2024, there were still 102 active drug shortages, 84% of them related to generic medicines, according to health care consultants IQVIA.

Virginia companies are doing their part in the effort to improve the supply. Phlow Corp., a pharma contract development and manufacturing organization, partnered with Antheia, a pharmaceutical ingredient manufacturer, in 2024 to build the supply of essential medicines in the United States. Civica Rx, a nonprofit launched by several U.S. health care systems, has a similar mission. With prices hovering around $4 a vial, many generics are priced too low for U.S.-based pharma companies to develop and sell them at a profit, according to Civica. The company is stepping in to fill that gap.

Civica’s Petersburg manufacturing facility is expected to produce 200 million units of generic medicines and biosimilar insulins, said Liz Power, the company’s vice president of communications. It’s also building a quality laboratory in Chesterfield County with backing from the federal Economic Development Administration.

“Civica emphasizes U.S. sourcing whenever possible, with the European Union and Canada as a second choice,” she said. “We don’t source finished drugs or APIs from China unless there is no other option.”

LOOKING TO THE FUTURE

Looking ahead, experts predict this pharmaceutical reshoring trend will likely continue, but it may face legal, financial, and political hurdles that could change its trajectory. This includes a pending U.S. Supreme Court ruling challenging federal tariff policy that could put reshoring deals into question or cause some to fall through.

There are also macroeconomic factors at play, including political uncertainties. At the same time, investment is tightening as private equity firms pull back and weigh decisions more carefully, Caldwell said.

As these issues continue to play out, Virginia has positioned itself well to benefit as companies look for U.S. locations. “I think it is great that states are competing by offering lower-cost power, better real estate and land, incentives for labor, and tax breaks,” Ural said. “That’s great for the United States, because these are high-quality technologies.” Whether those initiatives will be enough to create long-term resilience in the drug supply, particularly in the market for generic drugs, remains to be seen.