FDA assembles policy toolkit to rebuild U.S. generic drug manufacturing

Overview

Only 9% of the factories that make active pharmaceutical ingredients for American medicines are located in the United States. China and India account for roughly two-thirds of the rest. For decades, this arrangement kept drug prices low and went largely unchallenged — until the COVID-19 pandemic exposed how quickly a foreign export ban could empty American pharmacy shelves. Now the Food and Drug Administration (FDA) is quietly assembling what amounts to a three-layer incentive stack designed to reverse that dependency: the PreCheck pilot program to accelerate new factory buildouts, a priority review track for generics manufactured entirely on U.S. soil, and a proposed three-year fee waiver for new domestic plants under the next Generic Drug User Fee Amendments (GDUFA) reauthorization.

Each piece addresses a different barrier. PreCheck tackles the five-to-ten-year regulatory timeline for standing up a new pharmaceutical plant. The Abbreviated New Drug Application (ANDA) prioritization pilot rewards companies that source both their active ingredients and bioequivalence testing domestically with faster application reviews. The fee waiver, still being negotiated for fiscal years 2028 through 2032, would eliminate annual facility fees that can run into six figures for a new plant's first three years of operation. Taken together, the three programs represent the most coordinated federal attempt in decades to change the economics of making generic drugs in America — though whether the incentives are large enough to overcome the structural cost advantages that drove manufacturing offshore in the first place remains an open question.

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Key Indicators

U.S.-based API manufacturers

Only 9% of active pharmaceutical ingredient manufacturers supplying FDA-approved products are located in the United States, compared to 22% in China and 44% in India.

PreCheck pilot slots

The FDA will select seven facilities for the initial PreCheck cohort, with applications accepted from February 1 to March 1, 2026.

3 years

Proposed fee waiver period

Under GDUFA IV negotiations, the FDA has proposed waiving annual facility fees for three years for new domestic generic drug or API manufacturing plants.

90%+

Generics share of U.S. prescriptions

Generic drugs account for more than 90% of all prescriptions filled in the United States, making domestic manufacturing capacity a mass-market concern.

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People Involved

Marty Makary

Serving as FDA Commissioner; leading onshoring policy efforts

Organizations Involved

U.S. Food and Drug Administration

Federal regulatory agency

Implementing three-pronged domestic manufacturing incentive strategy

The federal agency responsible for approving drugs, inspecting manufacturing facilities, and reviewing generic drug applications — making it the central gatekeeper for any onshoring effort.

Civica Rx

Nonprofit Generic Drug Manufacturer

Building a $140 million sterile injectable facility in Petersburg, Virginia; drugs expected to reach market in 2026

A nonprofit generic drugmaker formed by a consortium of health systems to combat drug shortages, now building one of the first major new domestic injectable manufacturing plants.

Phlow Corporation

Pharmaceutical Manufacturer

Operating under a $354 million BARDA contract to build domestic API and drug production capacity

A Virginia-based company that received the largest-ever federal contract for domestic pharmaceutical manufacturing, tasked with producing essential medicines from raw ingredients through finished dosage forms entirely on U.S. soil.

Timeline

PreCheck Pilot Opens for Applications; Fee Waiver Proposed
Program Launch

The FDA begins accepting applications for the PreCheck pilot, with a March 1 deadline and seven slots in the initial cohort. Simultaneously, during GDUFA IV negotiations, the agency proposes waiving annual facility fees for three years for new domestic generic drug or API manufacturing plants.
February 1st, 2026
BIOSECURE Act Signed into Law
Legislation

The BIOSECURE Act, restricting U.S. government procurement from certain Chinese biotechnology firms including WuXi AppTec and BGI Group, becomes law as part of the National Defense Authorization Act. The law adds legislative pressure to decouple U.S. pharmaceutical supply chains from Chinese companies.
December 18th, 2025
ANDA Prioritization Pilot Launches for Domestic Generics
Policy Launch

The FDA launches a pilot program granting priority review to generic drug applications where the finished product, active ingredient sourcing, and bioequivalence testing all occur within the United States.
October 3rd, 2025
FDA Announces PreCheck Program
Policy Announcement

FDA Commissioner Marty Makary unveils the PreCheck program, a two-phase initiative designed to reduce regulatory uncertainty for companies building new pharmaceutical manufacturing facilities in the United States by front-loading inspections and quality discussions.
August 7th, 2025
GDUFA IV Reauthorization Negotiations Begin
Regulation

The FDA holds a public meeting to begin negotiations over the next five-year cycle of the Generic Drug User Fee Amendments, covering fiscal years 2028 through 2032. The current GDUFA III authority expires in September 2027.
July 11th, 2025
Executive Order Directs FDA to Streamline Domestic Manufacturing
Executive Action

Executive Order 14293, "Regulatory Relief to Promote Domestic Production of Critical Medicines," directs the FDA to eliminate duplicative requirements, maximize review predictability, and accelerate development of domestic pharmaceutical manufacturing capacity.
May 5th, 2025
Phlow Corporation Receives $354 Million Federal Contract
Government Action

BARDA awards the largest-ever federal contract for domestic pharmaceutical manufacturing to Phlow Corporation, tasking it with building an end-to-end U.S. supply chain for essential medicines from raw ingredients to finished drugs.
May 1st, 2020
India Restricts Drug Exports as COVID-19 Spreads
Supply Chain Crisis

India bans exports of 26 active pharmaceutical ingredients and their formulations to protect domestic supplies during the pandemic. The move sends shockwaves through U.S. hospitals already facing shortages of antibiotics, anesthetics, and oncology drugs, exposing the fragility of the global pharmaceutical supply chain.
March 3rd, 2020
GDUFA I Launches to Clear 3,000-Application Backlog
Regulation

Congress authorizes the first Generic Drug User Fee Amendments, imposing fees on generic manufacturers to fund FDA review capacity. At the time, roughly 3,000 generic drug applications sit in an unreviewed backlog, with median approval times exceeding 31 months.
October 1st, 2012
Hatch-Waxman Act Creates the Generic Drug Pathway
Legislation

The Drug Price Competition and Patent Term Restoration Act establishes the Abbreviated New Drug Application (ANDA) process, allowing generic manufacturers to rely on existing safety and efficacy data rather than running full clinical trials. Generic prescriptions rise from 19% to eventually over 90% of U.S. prescriptions filled.
September 24th, 1984

Scenarios

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Onshoring Toolkit Attracts Investment, U.S. Generic Capacity Grows Steadily

The three-layer incentive stack — faster regulatory engagement, priority review, and fee relief — proves sufficient to tip the cost-benefit analysis for a meaningful number of generic manufacturers. Over the next five to seven years, a dozen or more new domestic API and finished-dosage plants come online, particularly for high-priority medicines like antibiotics and sterile injectables. The U.S. share of API manufacturing rises from 9% toward 15-20%, reducing vulnerability to foreign supply disruptions without eliminating import dependence entirely. This scenario requires sustained political will across administrations and congressional support for the GDUFA fee waiver.

Discussed by: FDA officials, pharmaceutical trade groups, and analysts at publications like Fierce Pharma and BioSpace who view the combined policy stack as a meaningful shift in domestic manufacturing economics

Consensus —

Cost Gap Proves Too Wide; Programs Remain Symbolic

Despite the new programs, the fundamental economics of generic drug manufacturing remain unchanged. U.S. labor, energy, and regulatory compliance costs continue to make domestic production significantly more expensive than manufacturing in India or China. The seven PreCheck pilot participants proceed through the program, but few additional companies follow. The ANDA prioritization pilot attracts limited interest because so few companies can source APIs domestically. The fee waiver draws industry opposition from existing U.S. manufacturers who object to subsidizing new competitors. After the pilot phase, the programs quietly stall without meaningful expansion.

Discussed by: Generic drug industry executives, health economists at the Kenan Institute, and skeptics cited in Pharmaceutical Technology who note that regulatory incentives alone cannot overcome structural cost disadvantages

Consensus —

Tariff Escalation Forces Rapid — and Chaotic — Onshoring

Escalating tariffs on Chinese pharmaceutical imports — already at 245% for APIs — combine with potential Chinese export restrictions on key starting materials to create acute supply chain disruptions. Generic drug prices spike and shortages emerge for essential medicines. Under crisis pressure, Congress accelerates onshoring incentives well beyond the current FDA toolkit, potentially funding domestic manufacturing directly through appropriations modeled on the CHIPS and Science Act. The result is faster capacity-building than the voluntary incentive approach would produce, but at significantly higher cost to taxpayers and drug purchasers, with a transition period marked by shortages and price increases.

Discussed by: Atlantic Council analysts, the Coalition for a Prosperous America, and trade policy experts tracking the 245% tariff on Chinese APIs and potential retaliatory Chinese export controls on pharmaceutical precursors

Consensus —

Allied 'Friend-Shoring' Emerges as the Practical Middle Path

Rather than full domestic production, the market settles on a hybrid model. U.S. onshoring efforts focus on the highest-priority medicines — sterile injectables, antibiotics, and a small set of essential APIs — while the bulk of generic production shifts from China to allied nations like Japan, South Korea, and European Union members. The FDA PreCheck program evolves to accommodate this reality, and trade agreements formalize pharmaceutical supply chain commitments among allies. The U.S. share of API manufacturing grows modestly, but the primary risk reduction comes from geographic diversification rather than self-sufficiency.

Discussed by: Brookings Institution researchers, Johns Hopkins public health analysts, and multinational pharmaceutical companies exploring supply chain diversification across allied nations

Consensus —

Historical Context

CHIPS and Science Act (2022)

August 2022

What Happened

Facing a similar concentration-of-supply problem in semiconductors — with 92% of advanced chips made in Taiwan — Congress passed the CHIPS and Science Act, committing $39 billion in manufacturing subsidies and a 25% investment tax credit to bring chip fabrication back to the United States. The law was a response to COVID-era chip shortages that had shut down auto factories and disrupted electronics production.

Outcome

Short Term

Major chipmakers including Intel, TSMC, and Samsung announced over $200 billion in planned U.S. factory investments. The Commerce Department began distributing subsidies in 2024.

Long Term

The law established a template for industrial policy as supply chain security, demonstrating that direct subsidies and tax incentives can attract manufacturing investment — though whether new plants will be cost-competitive without ongoing support remains unproven.

Why It's Relevant Today

The FDA's onshoring toolkit uses regulatory incentives and fee waivers rather than the tens of billions in direct subsidies that the CHIPS Act deployed. Whether the pharmaceutical approach — lighter on funding but tailored to the industry's specific regulatory bottlenecks — can produce comparable results is the central policy experiment.

India's 2020 Pharmaceutical Export Ban

March 2020

What Happened

As COVID-19 spread globally, India restricted exports of 26 active pharmaceutical ingredients and their finished drug formulations to protect its own domestic supply. India supplies roughly 40% of U.S. generic drugs and is itself dependent on China for 70% of its API inputs, meaning the ban simultaneously exposed two layers of American vulnerability.

Outcome

Short Term

U.S. hospitals reported shortages of antibiotics, anesthetics, and critical care medications. India reversed most restrictions within weeks under diplomatic pressure, but the episode demonstrated how quickly supply could be cut off.

Long Term

The crisis catalyzed bipartisan support for pharmaceutical supply chain reform and led directly to the $354 million BARDA contract with Phlow Corporation to build domestic manufacturing capacity.

Why It's Relevant Today

The 2020 export ban is the inciting event for the entire FDA onshoring effort. Every program now being launched — PreCheck, the ANDA pilot, and the GDUFA fee waiver — traces its political urgency to the moment Americans realized a single foreign government decision could cause domestic drug shortages.

GDUFA I and the Generic Drug Backlog Crisis (2012)

October 2012

What Happened

By 2012, the FDA had accumulated a backlog of nearly 3,000 unreviewed generic drug applications, with median approval times exceeding 31 months. Congress authorized the Generic Drug User Fee Amendments, allowing the FDA to collect fees from generic manufacturers to fund dedicated review staff. The user-fee model had already worked for brand-name drugs under the Prescription Drug User Fee Act since 1992.

Outcome

Short Term

The FDA hired hundreds of new reviewers and began systematically clearing the backlog. By the end of GDUFA I's five-year term, 90% of pre-2012 applications had been reviewed.

Long Term

GDUFA established the fee-funded review infrastructure that the current onshoring pilots now build upon. It also created the facility fees that the proposed three-year waiver would temporarily eliminate for new domestic plants.

Why It's Relevant Today

The GDUFA framework is both the tool and the constraint. The ANDA prioritization pilot works within GDUFA's existing review structure, and the fee waiver is being negotiated as part of GDUFA IV reauthorization. Understanding that the FDA's generic drug review capacity depends on manufacturer-funded user fees explains why the fee waiver is controversial — waiving fees for new entrants means existing manufacturers effectively subsidize their future competitors.