by Caspian Hartwell - 12 Comments

Every year, millions of people in the U.S., Europe, and Australia rely on life-saving drugs like insulin, antibiotics, and heart medications. But in 2025, those pills aren’t always on the shelf. Why? Because foreign manufacturing still controls nearly 80% of the active ingredients in prescription drugs - and when that system stumbles, patients pay the price.

How Did We Get Here?

It wasn’t always this way. Decades ago, most medicines were made close to home. But starting in the 1990s, drug companies began chasing lower costs. China and India became the go-to sources for raw materials and finished pills. Why? Because labor was cheaper, regulations were looser, and scale was massive. By 2025, China produces over 40% of the world’s active pharmaceutical ingredients (APIs), and India handles another 30%. Together, they supply nearly 90% of the generic drugs used in Western countries.

This shift saved billions - but it also made the system fragile. A single port closure in Shanghai, a factory shutdown in Gujarat, or a sudden trade ban can ripple across continents. In 2024, when Chinese ports shut down for 45 days due to labor strikes, over 200 drug shortages hit U.S. hospitals. Some lasted more than six months.

The Real Cost of Cheap Medicine

You might think: “If it’s cheaper, why does it matter?” But the hidden costs are staggering.

- Lead times for drug ingredients from Asia to North America have jumped 50% since 2019. What used to take 30 days now takes 45-60.

- Inventory buffers have grown by 15% as companies try to stockpile, but many small pharmacies can’t afford to hold extra stock.

- Tariffs added in 2024 and 2025 have raised the cost of key APIs by 200-300% for some drugs. That doesn’t mean prices at the pharmacy went up - it means manufacturers cut back on production.

In 2025, the U.S. saw 320 drug shortages - the highest number since 2012. Over half were for antibiotics, cancer treatments, and anesthetics. Hospitals rationed doses. Patients waited weeks for replacements. Some skipped doses entirely.

Why Isn’t This Fixed Yet?

You’d think companies would have learned from the pandemic. But changing a global supply chain isn’t like flipping a switch.

Building a single API plant in the U.S. or Europe costs $200 million to $500 million. It takes 3-5 years. And even then, the labor and energy costs are 4-5 times higher than in China. That’s why most companies still rely on Asia - they can’t afford to switch.

Some tried. A major U.S. insulin maker invested $300 million to bring production back to Ohio in 2023. But after two years, they were still struggling with quality control. Their output was 30% lower than their Asian partner’s. They ended up keeping both.

Others turned to nearshoring. Mexico became a popular middle ground. Transportation costs dropped 35%, and lead times shrank to under 10 days. One Fortune 500 medical device maker cut its drug delivery delays by 80% after shifting 40% of production to Monterrey. But labor there still costs 20% more than in India - and skilled workers are hard to find.

A crumbling drug factory made of China and India bricks, with a tiny U.S. plant struggling under a dollar-sign storm cloud.

The Digital Fix: AI, IoT, and Blockchain

Technology is helping - but not fast enough.

- AI-driven forecasting is now used by 68% of major pharma firms, up from 22% in 2020. It helps predict shortages before they happen - but only if the data is accurate. And much of that data still comes from overseas suppliers who don’t always share it in real time.

- IoT sensors on shipping containers now track temperature, humidity, and location. That’s critical for drugs that spoil easily. But only 30% of suppliers in India and China use them.

- Blockchain is being tested to verify the origin of APIs. One pilot in Germany cut counterfeit drug claims by 65%. But adoption is slow. Many suppliers see it as an extra cost - not a safety net.

The truth? Digital tools help, but they don’t solve the core problem: we’re still too dependent on a few countries for the building blocks of medicine.

Who’s Most Affected?

It’s not just hospitals. It’s you.

- Elderly patients on blood thinners can’t get their prescriptions refilled.

- Parents of children with asthma can’t find their inhalers.

- Cancer patients wait for chemotherapy drugs that are delayed by customs delays in Singapore or factory inspections in Bengaluru.

Small pharmacies feel it worst. They don’t have the buying power to stockpile. When a drug disappears, they can’t just order more - they have to tell patients to go elsewhere. Or worse - go without.

A 2025 survey by the National Foreign Trade Council found that 56% of U.S. pharmacies had to reduce or delay drug offerings because of supply issues. In rural areas, that number jumped to 71%.

What’s Changing in 2025?

There’s a slow shift happening.

- Multi-shoring is becoming standard. Instead of relying on one country, companies are now sourcing from three or four. One major U.S. drugmaker now gets its antibiotics from India, Mexico, Poland, and Vietnam. It cost more upfront - but now they’ve cut disruption days by 65%.

- Government incentives are starting. The U.S. Inflation Reduction Act now includes $1.2 billion in grants for domestic API production. The EU launched a similar fund. Australia is quietly investing in local sterile injectable manufacturing.

- Regulations are tightening. The FDA now requires more frequent inspections of foreign facilities. In 2024, they shut down 17 plants in India and China for quality violations - up from 5 in 2020.

But progress is uneven. Only 40% of Asian-based manufacturers have fully adopted multi-shoring. Most still bet everything on China.

Half-empty pharmacy shelf with labeled drug origins, patients reaching out as pharmacist examines a globe.

The Hard Truth

There’s no magic solution. You can’t just bring all drug manufacturing home. It’s too expensive. Too slow. Too complex.

But you can reduce the risk. And you should.

The goal isn’t to eliminate foreign manufacturing. It’s to stop depending on it.

That means:

  • Investing in diversified suppliers - not just cheaper ones.
  • Building buffer stock for critical drugs - even if it costs more.
  • Supporting local production for essential medicines - antibiotics, insulin, epinephrine.
  • Pushing for transparency - knowing where your drugs come from, not just how much they cost.
In Perth, a small community pharmacy started tracking the origin of every drug it stocks. They now label shelves: “Made in India,” “Made in Germany,” “Made in Australia.” Patients ask questions. Pharmacists have conversations. It’s not a fix - but it’s a start.

What You Can Do

You don’t control global supply chains. But you can influence them.

- Ask your pharmacist: “Where is this drug made?” If they don’t know, ask why.

- Support policies that fund domestic pharmaceutical production.

- Don’t assume cheaper is better. A drug made in a regulated facility with traceable ingredients is worth more than one that’s just cheap.

- If you’re on a long-term medication, keep a 30-day backup supply - if your doctor allows it.

The next time you pick up a prescription, remember: that little bottle didn’t just appear. It traveled thousands of miles, passed through multiple factories, and survived customs, tariffs, and delays. And if one link breaks - your health might be the one that suffers.

Will This Get Better?

Maybe. But not on its own.

The OECD predicts global GDP will grow just 2.9% in 2025 - partly because trade barriers are slowing everything down. If countries keep treating drug supply chains like a cost-cutting exercise, shortages will keep happening.

The companies that survive? Those that treat supply chains like lifelines - not line items.

The patients who survive? Those who demand better.

Why are drug shortages still happening in 2025 if companies know about the risks?

Because switching suppliers is expensive and slow. Building a new manufacturing plant takes 3-5 years and costs hundreds of millions. Most companies still rely on low-cost Asian suppliers because they can’t afford to change overnight. Even when they try, quality control and workforce shortages make it harder than expected.

Is it safer to buy drugs made in Australia or the U.S.?

Not necessarily. Where a drug is made doesn’t automatically mean it’s safer. What matters is whether the facility follows strict quality standards like FDA or EMA regulations. Some Indian and Chinese factories meet those standards - others don’t. The key is transparency: know which facility made your drug and whether it’s been inspected recently.

How does nearshoring to Mexico help with drug shortages?

Mexico cuts shipping time from weeks to days - reducing lead times by 30-40% compared to Asia. It’s also politically stable and has strong trade ties with the U.S. Some companies have cut delivery delays by 80% after shifting production there. But labor costs are higher, and skilled workers are still in short supply.

Can AI really prevent drug shortages?

Ai helps predict shortages by analyzing supplier data, weather patterns, and shipping delays. But it only works if the data is accurate and shared in real time. Many foreign suppliers still use outdated systems or refuse to share data, which limits AI’s effectiveness. It’s a tool - not a fix.

What’s being done in Australia to reduce reliance on foreign drug manufacturing?

Australia is quietly investing in local sterile injectable production - things like IV antibiotics and anesthetics. The Therapeutic Goods Administration has started offering grants to local manufacturers who can meet high-volume, high-quality standards. But for most pills and generics, Australia still imports over 85% of its active ingredients - mostly from India and China.

Are generic drugs more vulnerable to shortages than brand-name drugs?

Yes. Generic drugs have razor-thin profit margins, so manufacturers cut corners to stay competitive. They often rely on a single supplier for active ingredients. If that supplier has a problem, there’s no backup. Brand-name drugs usually have multiple suppliers and bigger budgets to buffer disruptions.

How long does it take to build a new drug manufacturing plant?

At least 3-5 years. That includes land acquisition, environmental reviews, regulatory approvals, construction, equipment installation, and FDA inspections. Even then, ramping up to full production takes another 12-18 months. That’s why most companies are trying to diversify existing suppliers instead of building new ones.