New Year, New geopolitical shifts to navigate: Impacts and advice for life sciences supply chain leaders

By Robyn Coward, Director, Life Sciences, QAD.

The United States, as the largest consumer of pharmaceuticals, accounts for nearly 45% of the global market, reflecting its vital role in the life sciences industry. However, the supply chain for pharmaceuticals and medical devices relies heavily on international collaboration. A significant portion of active pharmaceutical ingredients (APIs) comes from India, China, and the US, while South Korea and Taiwan lead in semiconductor production critical for medical devices. These interdependencies highlight the supply chain’s vulnerability to disruptions.

As geopolitical tensions rise, environmental regulations tighten, and policy shifts loom, life sciences organisations face a transformative year ahead. Adapting to these changes will be essential to maintaining supply chain resilience and ensuring the continued delivery of vital innovations.

With components, raw materials, and active pharmaceutical ingredients sources located around the world, recent developments such as the presidential election in the US, the significance of the US consumption of pharmaceuticals and medical devices, escalation of tensions between nations at war, and policy initiatives in the US, the EU and China, will undoubtedly significantly impact medical device and pharmaceutical supply chains in the coming year. 

While exact outcomes will be determined in time, close monitoring of proposed legislation and other geopolitical developments can best position life sciences supply chain leaders and their organisations to take proactive measures to build upon any existing supply chain resiliency initiatives immediately and consider ways in which to adapt to unforeseen changes as efficiently and as cost effectively as possible.

Buy American Policies and the Push for Re-shoring 

The incoming US administration has signaled an expansion of ‘Buy American’ policies aimed at reducing reliance on non-US suppliers and stimulating domestic manufacturing. Proposed measures include steep tariffs on Chinese imports – ranging from 60-100% – and a 20% universal tariff on all imports, alongside significant investments in infrastructure and energy production to support US manufacturers. While these efforts are intended to bolster domestic capabilities, they could trigger global price increases for raw materials and APIs if trade partners retaliate with tariffs of their own. 

In response, many life sciences companies are actively pursuing reshoring – bringing supply chains closer to home – and friend-shoring, which prioritises sourcing materials from geopolitically stable and allied nations. These strategies aim to enhance supply chain resilience and reduce the risk of disruptions stemming from geopolitical tensions or trade disputes. 

Jennifer E., Senior Procurement Manager at IMRIS | Deerfield Imaging, explains: “Most of our supply base has intentionally been shifted to more local and domestic partners due to the rising costs of freight, tariffs, and global interruptions of supply. It is anticipated that this will help us to mitigate many of the possible side effects. Though we have made this shift, our suppliers still rely on internationally sourced materials at times. This will likely induce some level of cost increase and temporary increases in lead time as suppliers either look to domestically source or source from a geography with lower tariffs.” 

Adding to this shifting landscape, in September, 2024 the US House of Representatives passed the BIOSECURE Act which prohibits entities receiving federal funds from using biotechnology supplied by companies in countries considered foreign adversaries, particularly targeting China. The Senate is considering it, as well as their own version of the bill. As the BIOSECURE Act has strong bipartisan support, it is speculated that it will likely become law. Should this legislation pass, it will put additional pressure on pharmaceutical companies to reassess their supplier bases, especially for key ingredients sourced from affected regions.

For example, some manufacturers have shifted a significant portion of their supplier base to domestic or neighboring countries to mitigate rising freight costs, tariffs, and global interruptions. While this approach can shorten lead times and reduce dependencies, it is not without challenges. Certain critical materials, including some APIs, remain geographically concentrated and cannot be easily sourced locally. 

To address this, companies are increasing safety stock levels for essential internationally sourced materials, ensuring uninterrupted production despite potential delays or price increases. These strategies highlight the delicate balance required to strengthen supply chains while acknowledging the realities of global realities. 

Regulatory and Environmental Considerations

China’s Environmental Regulations

In addressing environmental impacts, life sciences organisations must also consider the evolving regulatory landscape, particularly in countries like China, which is signaling increased efforts to curb pollution in heavily polluting industries. According to the US National Library of Medicine, pharmaceutical companies have a considerable environmental impact. In response, China has issued 70 national standards targeting carbon footprints, energy efficiency, and carbon capture, among other areas, and plans to establish 100 carbon emission management standardisation pilots by 2025. The pharmaceutical industry’s environmental footprint – notably higher than the car industry – places added pressure on companies to comply with evolving regulations. Companies must assess their supplier relationships in China and account for compliance costs in future planning.  

Regulatory Harmonisation between the EU and the US 

In 2024, the FDA took steps to align a key regulation for medical devices with international standards, particularly those adhered to and favored by the European Union. The FDA’s alignment of its Quality System Regulation (QSR) with ISO 13485:2016. The final rule aligned U.S. medical device regulatory requirements with ISO 13485:2016 marks a significant step toward harmonized international standards, and it is set to take effect in February 2026.

Semiconductor Supply and Medical Devices

Semiconductor shortages have disrupted the medical device industry, but recent developments, such as the construction of a $12 billion TSMC plant in Arizona under the CHIPS Act, signal progress. Taiwan’s continued advancements in semiconductor research and production further support stability. These efforts exemplify the potential of near shoring to alleviate supply chain vulnerabilities.  

2025: A New Year, New Challenges

To navigate the complexities of today’s supply chain landscape, life sciences organizations must adopt a multifaceted approach. Firms prepared for the regulatory, geopolitical and regulatory change can benefit from reduced regulatory burdens and enhanced global competitiveness. 

Investing in advanced technologies is another critical step. Tools like Supplier Relationship Management (SRM) systems can enhance transparency and collaboration across the supply chain, while automation tools for Foreign-Trade Zones provide real-time tariff analysis, helping organisations optimise costs in a dynamic regulatory environment.

By embracing these strategies, life sciences companies can thrive amid ongoing challenges and position themselves for long-term success.