CDMOs, OEMs, and Used Equipment Resellers are Joining Forces to Onshore Pharmaceutical Manufacturing
The US pharmaceutical industry is making a concerted effort to bring a greater share of drug production onshore. Over the past several decades, pharmaceutical manufacturing has increasingly moved offshore, driven in part by lower manufacturing costs and other economic advantages.1 The COVID-19 pandemic highlighted vulnerabilities in these increasingly global pharmaceutical supply chains and reinforced concerns about the resilience of US drug manufacturing.2 At the same time, US dependence on foreign sources for APIs and key starting materials, including significant manufacturing capacity in China and India, has become an increasing national security concern.3
To encourage onshoring, the current administration imposed tariffs under Section 232 of the Trade Expansion Act of 1962, establishing a 100% default rate on imported patented pharmaceuticals, with reductions available based on commitments to US manufacturing and other factors.4 Together, these policies are increasingly making offshore dependence a financial and regulatory liability.
APIs are particularly difficult to onshore because the United States has limited domestic production capacity, and building new capacity requires significant capital, specialized infrastructure, technical expertise, and time.
Although onshoring presents substantial challenges, efforts are advancing, and pharmaceutical companies are assessing the best paths for their organizations. Some are making substantial investments in domestic manufacturing infrastructure. Lilly, for example, has committed more than $50 billion to expanding US manufacturing since 2020, including multiple new facilities dedicated to API production.5 Others are turning to domestic manufacturing partners. Lifecore Biomedical, for example, announced an agreement in 2025 to transfer commercial manufacturing of an injectable pharmaceutical product from overseas facilities to its US operations.6 In September 2026, Lifecore signed the agreement to handle the technical transfer for commercial manufacturing, and revenue is expected by 2028.7
The Case Against Building
Building domestic facilities is a natural impulse for pharmaceutical companies looking to bring manufacturing onshore. But building a pharmaceutical manufacturing facility entails steep costs and difficult economic, regulatory, and timeline trade-offs.
Costs vary widely, from $500 million for a small-volume facility producing low-complexity products to $6.5 billion or more for a high-volume facility producing complex, advanced therapeutics.8 Timelines are equally daunting, as a new facility typically takes 5 to 10 years to come online, from groundbreaking through validation and regulatory approval.9
In theory, it is easier to justify building a plant for a patent-protected drug with higher margins than for low-cost generics; however, by the time a plant is built and running, much of the drug’s patent life has already expired, which cuts into the returns that made the investment attractive.
Labor is another constraint, specifically a shortage of workers with pharmaceutical or biopharmaceutical experience in certain regions of the US. Industry research estimates that roughly 60,000 biopharma manufacturing jobs in the US remain unfilled, and 80% of pharmaceutical manufacturers report a substantial gap between their workforce’s current capabilities and the digital skills modern operations require.10
Equipment acquisition timelines add another layer of complexity. The multi-year backlogs that plagued industrial machinery during and after the COVID-19 pandemic have largely eased, but new bottlenecks have emerged, driven by geopolitical factors, material shortages, and surging demand for advanced biologic and sterile filling equipment.
Given these challenges, many pharmaceutical companies are turning to CDMOs and CDMOs with available gray space are especially attractive.
CDMOs with Available Gray Space
A CDMO partnership can make onshoring less difficult. There’s no capital outlay; staffing and talent issues become the CDMO’s responsibility, and the regulatory groundwork, including quality systems, standard operating procedures, and established FDA relationships, is already in place.
The real challenge is finding a CDMO partner with the right capabilities, equipment, capacity, and flexibility. For many companies working to onshore, one solution is to choose a CDMO with ample gray space and strong relationships with resellers of used equipment.
Gray space is unbuilt area adjacent to or within an operational, registered good manufacturing practice (GMP) pharmaceutical manufacturing facility. This space is not yet outfitted with equipment or utilities. However, it sits within or is attached to a facility or campus that already holds the necessary FDA registration, established quality systems, and existing site infrastructure. A CDMO can generally expand into its gray space quickly because the infrastructure is already in place, allowing it to respond rapidly to client needs and sudden shifts in capacity demands.
In short, CDMOs with gray space offer much of the same flexibility as a pharmaceutical company would enjoy by building its own facility, with the advantage of no capital outlay and CDMO management.
The Path to Rapidly Equipping Gray Space
New equipment from major original equipment manufacturers (OEMs) can take 18 to 36 months to arrive, and even a straightforward new tablet press typically requires 10 to 12 months to build. Used equipment dealers can significantly shorten that timeline, enabling CDMOs to equip available manufacturing space more quickly and respond to customer demand.
The pharmaceutical industry already offers many examples of redeploying manufacturing assets. When Par Pharmaceuticals, an Endo company, closed its pharmaceutical manufacturing campus in Huntsville, Alabama, Federal Equipment Company and its partners acquired the 110-acre site and worked to redeploy its manufacturing infrastructure and equipment. The site ultimately became home to CDMO operations under TriRx Pharmaceutical Services, demonstrating how existing pharmaceutical assets can be repurposed rather than recreated from the ground up.11
When the right equipment is already available, a CDMO can acquire and install it in a fraction of the time required to order a new machine. Equipment held in inventory can often ship within days or weeks after inspection and any required refurbishment, although installation, qualification, and validation timelines ultimately depend on the equipment, facility, process, and the CDMO’s quality requirements.
In this model, the CDMO and the used equipment dealer complement each other. The CDMO provides manufacturing space, technical expertise, and the regulatory and quality infrastructure required to operate the equipment. The used equipment dealer provides access to existing pharmaceutical manufacturing assets, potentially reducing both procurement time and capital requirements. OEMs can further support the process with parts, upgrades, installation, qualification support, and ongoing maintenance.
Collaboration Between CDMOs, Used Equipment Dealers, and OEMs
Pharmaceutical manufacturers used to face a clear choice: buy new equipment from an OEM or buy used equipment. Rather than viewing each other as competitors, reputable used equipment dealers and OEMs now work with CDMOs to meet clients’ needs.
When pre-owned equipment remains supported by the OEM, the OEM may provide key technical support, including replacement parts, upgrades, installation and maintenance services, and documentation and technical assistance for equipment requalification. The OEM still earns service revenue under this arrangement, and if the CDMO later needs additional equipment, established brand loyalty often leads to new equipment sales.
