Navigating the new era of deglobalization: 4 steps for pharma leaders

Discussions of the impact of tariffs on the U.S. and global economy have been in the news every day, together with speculation on if and when tariffs or price controls might affect the pharmaceutical industry. While the trade group PhRMA has unsurprisingly pointed out that reducing the financial return of launching a new drug will suppress spending on R&D, this is not the only risk to pharma’s current development model.

Global trends that increase the cost, difficulty or risk of development would all have a similar effect. The modern pharma company is a highly global organization, sourcing innovation from research labs and emerging biotechnology companies all over the world, executing clinical trials across the globe and eventually launching products in as many countries as feasible. Through the entire development process, many people must collaborate at many different points across a long and complex process—all of which is at risk if the world’s countries grow farther apart. Recent events, including U.S. administration policy directives, are putting a strain on this system with significant implications for pharmaceutical companies.

One of these is the international movement of people. A highly global workforce supports the operations of global pharma development, with executives traveling all over the world to attend meetings with innovators, conduct workshops to drive company strategy and monitor trial activity. While early signs suggest that what the administration described as “liberation day” tariffs have suppressed business travel this year, additional challenges loom from longer-term geopolitical trends.

Since the start of the visa waiver program in the 1980s, citizens of most developed countries (and all the world’s major pharma markets) have been able to freely travel to other developed countries for short-term business or tourism purposes. This system suffered a small setback in 2008, when the U.S. implemented the Electronic System for Travel Authorization. For the first time in decades, you could no longer “just show up” at the border—instead, you had to file a form and request permission before you departed. As of today, the European Union plans to implement a similar system in 2026 called the European Travel Information and Authorization System. Similarly, Japan has recently moved up its implementation of a similar system to 2029.

Paperwork alone isn’t likely to create a significant barrier for global business, but this paperwork is evidence of increasing difficulty and risk for global travel. For example, numerous European countries and Canada have recently issued travel advisories warning about potential risks of travel to the U.S., for issues such as immigration-related concerns or difficulties reconciling how different countries define gender identity. There have also been recent examples of Chinese security authorities raiding foreign consulting firms, and the U.S. has reinstituted a travel ban for citizens of countries that are “deficient with regards to screening and vetting” in the issuance of travel documents.

The net result of all these things is that international business travel is likely to continue to decline. This is a much bigger risk to pharma than to many other industries. Manufacturers are also global businesses, but they can often cleanly split work across multiple locations—for example, Apple’s famous “Designed in the U.S., manufactured in China” approach (although it seems it’s now India). Pharma, on the other hand, must seamlessly share ideas and data across national borders at many stages of the lengthy product development process to bring new products to market.

Another factor that has driven the globalization of the pharma workforce is “labor arbitrage”—that is, sending as much work as possible to locations with a high concentration of talent available at a low cost of labor. For example, the creation of global capability centers (GCCs) has been a recent focus of many large pharma companies with the goal of generating efficiencies by centralizing analytics and operations functions in a location such as India. The insights created by these centers drive business activities in the U.S. and other major markets, but the relocation of jobs supporting these insights has affected the U.S. labor market in a similar way to the relocation of factories.

The current philosophy of tariff implementation—that is, taxing goods that enter a country to provide an advantage (or eliminate a disadvantage) to domestic producers of the same good—is a product of industrial revolution-era public policy where manufacturing was the centerpiece of all advanced economies. There has already been recent action to encourage U.S. manufacturing of pharmaceuticals. Today, almost five times the number of people are employed in service-producing jobs than in goods-producing jobs like manufacturing. Additionally, jobs directly making things in the U.S. don’t pay as well as service-related jobs even within factories. If the U.S. government aims to protect American workers from global competition, there is a possibility that barriers to trade will also be erected for services.

Indeed, a first step in this direction was taken recently with President Trump’s consideration of a 100% tariff on movies created outside the U.S. because the “Movie Industry in America is DYING a very fast death” as President Trump posted on the Truth Social platform. This would create a tax not on the finished goods (i.e., a DVD being imported), but instead on the importation of the content of the movie (i.e., the information itself). While no details have been shared on how this would be implemented, it demonstrates that the government is considering implementation of restrictions on information exchange that, if widespread, could greatly hinder pharma’s current operating model.

A more subtle risk to pharma’s global business model also exists in divergence of views on what data is needed to approve and reimburse a new pharma product. While individual national standards have always existed, pharma has benefited from the fact that a single clinical trial result was generally sufficient to launch globally. However, as tariffs, public policy and geopolitical tensions all push the world to deglobalize, there is also a risk of the deharmonization of requirements across markets.

Small moves in this direction have been happening for a long time. For example, Japan adopted a new health technology assessment in 2019 that requires submission of cost-effectiveness evidence during the approval process for new medication, which could potentially alter the way pivotal trials are designed.

EU countries have long had individual preferences for what data they liked to see, but each small market had limited ability to influence global development. Starting this year, the joint clinical assessment (JCA) creates an EU-wide set of standards that will harmonize requirements within the EU, but not necessarily with the U.S. or Japan. This will also give it more bargaining power to impose unique requirements than any EU country previously held and creates a risk for pharma if the JCA’s bargaining power is used to diverge from the requirements in the rest of the world.

Meanwhile, in the U.S., we have entered a period of regulatory uncertainty with staffing cuts at the FDA potentially delaying drug review and approval and uncertainty around the future of vaccine policy with the replacement of all currently serving Advisory Committee on Immunization Practices members. There is already evidence to suggest that increased regulatory burdens suppress total clinical trial activity. The risk of diverging regulations across the globe creates a long-term threat to the development of pharma products that, today, share both the costs and benefits of innovations across patients from many countries.

An even bigger risk comes from data generated by global clinical trials. Today, clinical development takes place all over the world, with North America, Western Europe, Asia-Pacific, China and Eastern Europe each contributing more than 10% to pharma’s trial activity. While cost is certainly a factor in locating trials outside developed countries, other factors such as the desire to recruit quickly, the need to find a diverse population, ethical considerations around trial comparators and the current standard of care and regulatory requirements for data in specific populations all drive trial location. All the factors discussed in this article—the movement of the workforce, taxes on the trade in services and information and diverging values and approaches—are potential threats to the ability to consistently execute a clinical trial across the globe. This creates significant new costs and risks for pharma.

While risks abound, there are a few no-regret moves that leaders of global pharma organizations should pursue to ensure their business can continue in an uncertain global environment.

• Prepare for a postglobalization world: Reconsider the balance between strong local affiliate capabilities and global centralization. Whether we think deglobalization is desirable for our organizations or not, today, many forces are pushing the world in that direction. Pharma has long faced tension between the need to create strong local teams in each country of operations versus creating efficient central capabilities that can be leveraged globally. Pharma must prepare for the risks that accessing global talent is more difficult and costly than in the past and that expertise may be less universally applicable. This should lead to more investment in capabilities local to each regional and country affiliate.
• Hold on to the benefits of globalization where possible: Strengthen connections between team members across your organization. Barriers to the flow of information across borders are not new; they have always existed for language, cultural and logistical reasons. The good news is that we also know how to overcome them by fostering a culture of transparency and communication between our teams. Even if travel becomes restricted, during the COVID-19 pandemic we proved that almost all collaborative tasks can be done remotely. The skills and knowledge that sustained us during the “remote work” years can also keep us connected to global teams.
• Critically assess risks: Understand your organization’s exposure to international data and intellectual property. Now is a good time to map out the data that each organization needs to function from a strategic decision-making and daily operation perspective and understand which parts of that data are collected, analyzed or processed overseas. As we watch developments such as the expansion of tariffs into information and services, understanding an organization’s exposure to information overseas will be critical to developing a mitigation plan should these policies expand outside the entertainment industry. As we have learned from the tariffs on manufactured goods, we may not have much time to assess the impact and develop alternative approaches once new policies are announced.
• Advocate for the value of a global pharmaceutical industry: Remind everyone of the successes of pharma’s global development and commercialization model. Pharmaceuticals are characterized by high development cost and risk and low marginal cost of goods once developed. They are a perfect example of everyone benefiting from sharing both the costs of development and the benefits once a new drug is created. There is certainly an argument that can and will be made about the appropriate sharing of those costs, but pharma must advocate for the value of a market where new drugs can be launched globally with as little friction as possible.