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Contested Capital

From the series Industry and pharmaceuticals

On August 15th, the White House published a long list of the most recent investments in American manufacturing. The statement emphasised the role of President Donald Trump who, with the aim of revitalising American industry [...], has spurred trillions of dollars of investments in US manufacturing, production, and innovation [The White House, “Trump Effect: A Running List of New US Investment in President Trump’s Second Term”].

The list includes around twenty pharmaceutical companies, which have announced a total commitment of over $340 billion in investments, more than half from European companies. Stephen Farrelly, an analyst at ING, estimates that investments in the United States announced by pharmaceutical multinationals amount to more than $400 billion [Il Sole 24 Ore, October 15th].

Political pressures and old problems

This is a response to the tariffs imposed by the Trump administration, and to the promise of exemption in exchange for the transfer of production activities to the US. In many cases, the mere threat was enough. The companies announced their investment plans before the US-EU agreement, which formalised a maximum tariff of 15% on the most expensive, branded medicines. The multibillion-dollar investments will be used to build new production facilities and research and development (R&D) centres in the United States, as well as to expand existing ones. The timeline for the projects is generally four-five years, in some cases extending up to ten. On the other hand, according to industry analysts, the construction and certification of a new production facility can take up to five years, without taking into account potential shortages of skilled labour [Reuters, September 26th]. The Big Pharma companies have indicated their willingness to respond to political pressures, notes the German newspaper Handelsblatt. This consideration also applies to American multinationals that have moved production abroad.

For European companies, the flow of capital is also responding to the pre-existing difficulties of the Union’s biopharmaceutical sector. Vas Narasimhan and Paul Hudson, CEOs of Novartis and Sanofi respectively, in a letter to the Financial Times on April 23rd, highlighted the decline in competitiveness of the European pharmaceutical industry. The uncertainty of tariffs is further reducing incentives to invest in the EU, where innovation is not valued, unlike in the United States and China. The US pharmaceutical market is twice the size of Europe’s, despite a smaller population [Letter: Brussels Must Get the Incentives Right for Pharma Investment”, Financial Times, April 23rd, 2025]. For European Life Sciences companies, Novartis and Sanofi believe, it is becoming more advantageous to invest in the US or China than in Europe.

The protectionist policy of the Trump administration on pharmaceutical products has therefore accelerated a flow of investment towards the US that was already underway. These are investments that the industry would have made anyway, is the view of the portfolio manager of an investment bank [Handelsblatt, October 1st].

The European pharmaceutical industry depends on the US market for 40-50% of its sales [Financial Times, April 24th]. The largest European companies have been present in the United States with production or R&D sites for decades, attracted not only by the size and profitability of a market where prices are much higher, but also by its scientific and technological strength. In his Report, Mario Draghi emphasised that in the US, innovation hubs that combine industry, universities, and investors have a critical mass that cannot be achieved in Europe. Meanwhile, the innovative capacity of Chinese biotechnology clusters is growing rapidly [The Future of European Competitiveness”, September 2024].

“Unexpected” effects

On September 25th, with a notice published in the Federal Register, the Trump administration announced the implementation of the framework agreement reached with the EU in July. A 15% tariff on a range of goods was formalised and exemptions were specified for hundreds of products. For medicines, the new tariff will be applied to branded drugs (patent-protected), but not to generic drugs and their chemical precursors, non-patented articles for use in pharmaceutical applications [Federal Register, “Implementing Certain Tariff-Related Elements of the US-EU Framework on an Agreement on Reciprocal, Fair, and Balanced Trade”, September 25th, 2025].

The certainties provided by the government's announcement were disturbed on the very same day by President Trump’s threat to increase tariffs on branded drugs to 100% starting October 1st, unless they are produced in the United States. The enforcement of the new tariff was suspended the following day and, in any case, the reaction of European industries was mild, owing to the US-EU agreements and the promised investments. Nearly all major pharmaceutical companies are present in the US and most have announced significant investments, including Swiss and British ones that are not part of the European Union [Handelsblatt, September 26th].

The effects of tariffs on the prices and availability of medicines in the American market, as well as on industry structure, are still uncertain. Under current provisions, it is not enough for European companies to have production sites in the US for their drugs to be exempt from the tariff; only drugs actually produced in the US will be exempt. Exemption can also be granted to products when the company has started to build a plant on American soil. Generic drugs and imported raw materials will not be subject to tariffs; the major producers of these are in India and China.

According to The New York Times, big corporations, which have the financial strength to invest in the US and the margins to negotiate significant price discounts with the administration, will in the end be largely spared. John Crowley, president of the Biotechnology Innovation Organization, which represents biotechnology companies and most of the large pharmaceutical firms, believes that the tariffs will hit small and mid-sized companies. Small brand-name drug manufacturers, who lack the billions of dollars to build new plants in the US and often rely on one or two niche products, will be penalised [“Trump’s Tariffs Would Spare Many Rich Drugmakers While Punishing Some Small Ones”, The New York Times, September 26th, 2025].

It is possible that one of the effects of Trump’s tariff policy will be a push towards industrial consolidation.

Between America and China

While the American market remains fundamental, Chinese innovative capacity exerts an ever-stronger attraction on Life Sciences multinationals. In the last five years, eleven of the largest Big Pharma companies have invested a total of $150 billion as part of agreements with Chinese companies [Nature, September 1st].

The case of the Anglo-Swedish company AstraZeneca serves as an example of the commitment of European biopharmaceutical companies to the world’s two main markets. The multinational, listed in London and Stockholm, with a turnover of $54 billion and about 94,000 employees in 2024, is the sixth largest pharmaceutical company worldwide. It is the result of the merger, which took place in 1999, between the Swedish company Astra and the UK’s Zeneca; the latter, as part of the break-up of the historic giant ICI (Imperial Chemical Industries), inherited its pharmaceutical activities in 1993.

At the end of July, the company announced its intention to invest $50 billion to boost pharmaceutical production and research over a period of five years. Chief Executive Pascal Soriot describes it as a historic investment, which justifies the ambition of earning $80 billion in turnover by 2030 [Financial Times, July 30th]. On November 12th last year, before the trade war broke out, the company had already announced the suspension of investments in the United Kingdom and an investment of $3.5 billion in production and R&D in the United States. A multi-billion-dollar investment — declared Soriot — that reflects the attractiveness of the business environment together with the quality of talent and innovation capabilities here in the United States [“AstraZeneca Invests $3.5 Billion in R&D and Manufacturing in the United States”, November 12th, 2024].

The company reports having seven sites in the US, covering production, marketing, and R&D, with around 18,000 employees, spread across twelve States. The US is AstraZeneca’s largest market, accounting for 42% of total revenue. The announced investments are intended for the construction of new production and R&D facilities and the expansion of existing ones, targeting a broad spectrum of pathologies, with particular focus on chronic and oncological conditions. For example, last May the company announced the opening of its new cell therapy production site in Maryland, where it has invested $300 million [Fierce Pharma, May 6th]. Investments announced at the end of July include the construction of a new plant in Virginia for the production of active pharmaceutical ingredients.

AstraZeneca is among the pharmaceutical multinationals that invested the most in China in 2025, signing strategic agreements with Chinese biotechnology companies for a potential value of over $10 billion.

In the current tariff dispute, it is not only — or even chiefly — goods that are at stake, but rather the export of capital.

Lotta Comunista, October 2025

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