Rebuilding American Generics Market

A Strategic Opportunity for Health Security and Market Resilience

The United States pharmaceutical market can be a paradox: despite being the world's largest and most profitable pharmaceutical market, accounting for nearly half of global pharmaceutical revenues, the nation lacks a robust domestic generic drug manufacturing industry. This disparity is particularly striking given that generic medications constitute over 90% of all prescriptions filled in the United States and deliver tens of billions of dollars in annual cost savings to the healthcare system. The overwhelming majority of these generic medicines are manufactured abroad, predominantly in India and China, creating a strategic vulnerability that warrants careful examination and thoughtful policy response.

The Structural Evolution of Generic Drug Manufacturing

The current state of American generic drug manufacturing is a dramatic transformation from previous decades. Once home to thriving generic pharmaceutical companies such as Mylan, Par Pharmaceuticals, and Hospira, the United States has witnessed the systematic absorption of these domestic champions by foreign or global conglomerates. Today, the American generic drug market is dominated by international players: Teva Pharmaceutical Industries from Israel, Sandoz from Switzerland, the global entity Viatris, and Indian pharmaceutical giants Sun Pharmaceutical Industries and Aurobindo Pharma. These companies, while maintaining significant market presence in the United States, conduct the vast majority of their manufacturing operations overseas.

This transformation did not occur overnight but resulted from a confluence of economic, regulatory, and market forces that systematically disadvantaged domestic production. The consolidation and offshoring of generic drug manufacturing represents more than a simple economic shift; it constitutes a fundamental restructuring of the pharmaceutical supply chain with far-reaching implications for national health security and economic resilience.

Recent Policy Evolution and Administrative Actions

Federal policymakers have increasingly acknowledged the barriers facing the U.S. generics and biosimilars market and have taken targeted actions to address them. Recent executive orders have directed federal agencies to implement strategies to lower prescription drug costs, with a strong emphasis on expanding access to generics and biosimilars. These policy directives include accelerating FDA approvals for generics and biosimilars, improving Medicare price negotiations, enhancing supply chain transparency, and curbing anticompetitive practices.

These measures are designed to harness the cost-saving potential of biosimilars and generics. In 2023, generic and biosimilar medicines created $445 billion in savings with over $3 trillion in savings in the past decade. Biosimilars medicines accounted for $12.4 billion in savings in 2023 and $36 billion since their introduction in 2015. However, these initiatives face significant headwinds, including debates over potential tariffs on imported pharmaceuticals. Industry leaders have warned that such measures could force companies to withdraw products from the U.S. market, directly affecting patient access to affordable medicines. This tension between promoting domestic manufacturing and maintaining current supply chain dependencies illustrates the complexity of addressing America's generic drug challenges. While protective measures might incentivize domestic production, they can risk creating short-term challenges for patients who depend on affordable medications before domestic capacity can be established.

The Contrasting Success of Biosimilars

While traditional generic manufacturing has largely migrated overseas, a notable countertrend is starting to surface in the biosimilar sector. American companies like Amgen are demonstrating remarkable success in developing and marketing biosimilars. Amgen's biosimilar products recorded $735 million in sales in the first quarter of 2025, representing roughly 9% of the company's revenues and marking a 35% increase compared to the previous year. The company's biosimilar of Johnson & Johnson's Stelara, marketed as Wezlana, generated $150 million in sales in its first quarter alone. This rapid uptake shows that American pharmaceutical companies can succeed in the competitive field of generic alternatives when the products involve more complex manufacturing processes and higher technological barriers to entry. Amgen's broader biosimilar portfolio includes successful products like Mvasi (a biosimilar to Avastin) with $179 million in sales.

Economic Foundations of Offshore Manufacturing

The migration of generic drug manufacturing overseas stems from fundamental economic disparities between the United States and competing nations. American manufacturing operates within an inherently more expensive cost structure, encompassing higher labor costs, elevated utility expenses, stringent regulatory compliance requirements, and comprehensive environmental standards. Generic pharmaceuticals, by their nature, operate on extremely thin profit margins, leaving minimal room to absorb these cost differentials while maintaining competitive pricing.

The economic challenges facing domestic generic manufacturing are compounded by the absence of comprehensive industrial policy. Unlike India and China, which have implemented coordinated national strategies to foster their generic pharmaceutical sectors, the United States lacks comparable policy infrastructure. There are no procurement guarantees for domestic manufacturers, limited targeted tax incentives specifically designed to support generic drug production, and no national tendering system that might prioritize domestic manufacturing capabilities.

Capital market dynamics present an additional obstacle to domestic generic manufacturing. American investors have a pronounced preference for high-growth, high-intellectual property biotechnology startups over established generic manufacturers. Generic pharmaceuticals, characterized by their off-patent status, low margins, and extensive regulatory requirements, are often perceived as less attractive investment opportunities.

Market Concentration and Pricing Pressures

The structure of the American generic pharmaceutical market has evolved to concentrate tremendous buying power in the hands of a small number of entities. Three major buying consortia—Red Oak, ClarusONE, and WBAD—collectively control over 90% of generic drug volume in the United States. These organizations leverage their extraordinary scale to drive down prices aggressively, creating market conditions that systematically favor overseas manufacturers operating with lower cost structures and greater economies of scale.

This concentration of buying power has created a self-reinforcing cycle that further disadvantages domestic manufacturing. As prices are compressed to levels that make domestic production economically challenging, manufacturers are compelled to move operations overseas or exit the market entirely. The resulting reduction in domestic capacity further concentrates the market and increases dependence on foreign suppliers, creating additional vulnerabilities in the pharmaceutical supply chain.

Regulatory Innovation and Modernization

Having worked with the FDA's Office of Generic Drugs (OGD) during 2017-2018, I had an opportunity to closely observe the agency's concerted efforts to enhance the efficiency and transparency of the generic drug review process. Our collaborative team implemented comprehensive solutions ranging from technological innovations to process improvements to significantly streamline generic drug approvals.

We developed automated document analysis systems that could rapidly compare new submissions against established reference standards, dramatically reducing review times. New workflows were designed to eliminate redundant processes and create clearer pathways for applicants. These technical solutions included standardized review templates that improved consistency in feedback to manufacturers and digital tracking systems to enhance transparency throughout the approval process.

These initiatives yielded tangible results, with the FDA achieving record numbers of generic drug approvals. The agency successfully addressed longstanding challenges with complex generics through clearer regulatory guidance and enhanced stakeholder engagement. The Biosimilars Action Plan further focused on improving the development and approval process for biological alternatives.

However, while these regulatory improvements significantly enhanced efficiency, they alone cannot overcome the fundamental economic disparities that drive manufacturing offshore. The challenge remains in ensuring approved generics reach the market promptly and maintaining sufficient competition to drive down prices without addressing underlying industrial policy gaps.

Strategic Implications and National Security Concerns

The heavy dependence on offshore generic drug manufacturing carries implications for American health security and economic resilience. Supply chain fragility has become increasingly apparent through recurring drug shortages, with several recent examples that include sterile injectable medications and antibiotics. These shortages are frequently attributable to quality control issues or operational disruptions at foreign manufacturing facilities, highlighting the vulnerability of extended global supply chains.

Geopolitical considerations add another layer of complexity to this challenge. Political tensions with major pharmaceutical manufacturing nations could potentially jeopardize the continuity of essential medicine supplies. The United States currently imports between 70% and 80% of its active pharmaceutical ingredients from foreign sources, creating a strategic vulnerability that extends beyond simple economic considerations.

A Comprehensive Framework for Domestic Revitalization

To enable a thriving biosimilar and generics market in the United States, policymakers can consider a comprehensive set of measures that address fundamental economic and structural challenges while building on existing regulatory improvements.

First, incentivizing domestic manufacturing through targeted financial support is essential. Implementation of tax credits, grants, or low-interest loans could encourage the establishment and expansion of domestic production facilities for generics and biosimilars. These incentives should be structured to offset the inherent cost disadvantages of American manufacturing while ensuring long-term sustainability.

Second, continued enhancement of regulatory support through clear and consistent guidance for generic and biosimilar developers remains crucial. Building on the technological advances and workflow improvements during my tenure, further investment in FDA resources and capabilities can handle increased application volumes while maintaining quality standards.

Third, addressing anticompetitive practices requires strengthening enforcement against tactics that delay generic and biosimilar market entry. This includes addressing "pay-for-delay" agreements and misuse of patent laws that can artificially extend market exclusivity for branded drugs.

Fourth, promoting education and awareness through targeted campaigns can help healthcare providers and patients understand the safety and efficacy of biosimilars. Increased acceptance and use of these products can create larger markets that justify domestic manufacturing investments.

Economic Realignment and Industrial Strategy

The path forward calls for a fundamental realignment of American industrial policy regarding pharmaceutical manufacturing. This realignment needs to recognize that while generic drugs may be commoditized products, their production is a critical component of national health infrastructure that cannot be left entirely to global market forces that are susceptible to political disruption.

A National Generics Manufacturing Initiative could serve as the cornerstone of this strategy, establishing guaranteed procurement contracts for essential medications and providing the revenue predictability necessary to justify domestic manufacturing investments. The strategic deployment of federal purchasing power through Medicare and Veterans Affairs procurement could create stable demand for domestically manufactured generics.

The creation of a public-private generics consortium could facilitate coordination between payers, manufacturers, and regulators. Building on successful models such as Civica Rx, this national consortium could focus on domestic production of medications prone to shortage or significant price volatility, ensuring reliable access to critical therapeutics.

Balancing Global Trade and National Security

The tension between global trade efficiency and national security requirements necessitates a nuanced approach to pharmaceutical manufacturing policy. Rather than implementing overly protectionist measures that might create immediate challenges to patients, a more sophisticated approach would combine targeted incentives for domestic manufacturing with strategic partnerships that ensure supply chain resilience.

This could include establishing bilateral agreements with trusted allies for critical pharmaceutical ingredients while simultaneously building domestic capacity for essential medications. Such an approach recognizes the benefits of global trade while addressing strategic vulnerabilities in the pharmaceutical supply chain.

The revitalization of American generic drug manufacturing is both an economic imperative and a national security requirement. Current policy initiatives, while promising, can be expanded and refined to address the fundamental structural challenges that have led to the offshoring of generic drug production.

The success of American companies in the biosimilar market demonstrates that with proper support and strategic focus, domestic pharmaceutical manufacturing can thrive even in highly competitive markets. By implementing comprehensive policies that incentivize domestic production, enhance regulatory efficiency, combat anticompetitive practices, and promote market acceptance of generic alternatives, the United States can build a more resilient pharmaceutical supply chain.

As the COVID-19 pandemic demonstrated, supply chains for critical health products must be trusted, transparent, and geographically resilient. Generic pharmaceuticals, which form the backbone of American healthcare delivery, deserve no less consideration. The time has come for a comprehensive national strategy that repositions the United States not merely as a consumer but as a producer of the medicines that safeguard the foundations of our national public health priorities.