The most vulnerable parts of the supply chain are APIs and raw materials
Currently, approximately 80% of pharmaceutical products in the UAE are imported, with India and China being the primary facilitators. The UAE has had to pivot since these global cost pass-throughs with US tariffs, as it directly affects importers and multinational suppliers that re-export through the region, especially those sourcing from China and India.
Thus, challenges abound. Accordingly, experts anticipate reductions in R&D, workforce adjustments, and intensified pricing negotiations as profit margins tighten, writes Tiffany Brewer, Senior Director, Global Industry Strategy–Life Sciences, Blue Yonder, in this special contribution to www.LogisticsGulf.com
The challenges lie in the industry’s limited ability to immediately transfer these increased costs to consumers, due to existing insurance and pricing structures. This particularly impacts generic manufacturers, who face difficult choices on whether to discontinue production.
The UAE is transforming its pharmaceutical sector by localizing production, with 23 manufacturing centres producing more than 2,500 locally made medicines. That number continues to grow as regional demand and supply shift, and global tariffs and trade policy evolve.
More specifically, potential US tariffs are threatening long-standing strategies of low-cost global sourcing and forcing the global industry to rethink its approach to supply chain resilience.
Minimizing costs
For years, the pharma industry has leveraged global suppliers to minimise costs and ensure the availability of essential materials. However, with the prospect of new US tariffs, signalled by President Donald Trump in April 2025, and the specifics still unclear, experts suggest potential tariffs could mirror the 25% seen in other industries. The result could increase US pharmacy costs by approximately US$ 51bn annually and drive prices up by as much as 13% if the burden is passed on to consumers.
As it relates to the UAE, the country’s pharmaceutical market is projected to reach US$ 9bn by 2031, with a CAGR of 7.5%. This optimistic forecast is driven by population growth, health tourism, and local production mandates.
Moreover, these efforts align with the National Strategy for Industry and Advanced Technology to strengthen the country’s healthcare as well as the UAE’s Vision 2031, which aims to position the nation as a global pharmaceutical partner that enhances healthcare for its residents.
While the exact scope and timing of these tariffs remain uncertain, the industry is currently engaged in extensive scenario planning, including stress-testing financial models, identifying vulnerabilities, and re-evaluating sourcing strategies.
Escalating supply chain risks
The most vulnerable parts of the supply chain are active pharmaceutical ingredients (APIs) and raw materials, both of which the UAE heavily depends on.
India, a key API supplier, sources around 70% of its raw materials from China, creating layered dependencies that affect drug availability and cost stability. When packaging and contract manufacturing are added to the equation, cost pressures escalate rapidly.
Similar risks emerged during Covid-19, when global transport costs surged by over 200%, causing severe logistics bottlenecks. These moments caused logistical challenges disrupting port-based distribution and causing widespread shortages.
Beyond rising costs, pharma faces another major issue. Time. Regulatory requirements make switching suppliers slow. Unlike other sectors, pharma can’t quickly reinvent its supply chain. Vetting and approving new manufacturers can take years, time most companies don’t have when margins are tight or inventories are low.
This makes swift change nearly impossible and reinforces the need for long-term strategic planning.
At the same time, regulatory pressures like the US Drug Supply Chain Security Act (DSCSA) and global serialization mandates are raising the bar for end-to-end traceability. For regional hubs like the UAE, this adds urgency to invest in digital systems that can support secure, transparent, and compliant pharmaceutical supply chains.
The shift to nearshoring
One emerging solution is nearshoring. The pitch is simple: more control, shorter transport timelines, and less geopolitical risk. With the UAE being a central hub to the Gulf and MENA, it has taken an approach to encourage researchers, R&D funding, and regulatory fast-tracking for local manufacturers by offering incentives such as the Golden Visa schemes.
As of 2024, over 20 manufacturing plants were licensed in the UAE and the government is aiming to triple local drug production capacity by 2030.
In parallel, the UAE is expanding its pharmaceutical manufacturing base to support not just local demand, but regional distribution across the Gulf and MENA. Investments in fill-finish, packaging, and last-mile logistics infrastructure are helping manufacturers shorten lead times and reduce dependency on global shipping lanes.
These capabilities are critical for positioning the UAE as a hub for resilient, high-speed pharmaceutical distribution in a tariff-sensitive world – while also supporting sustainability goals through reduced emissions, shorter supply routes, and more localized inventory management.
From US. tax credits to EU initiatives, incentives are growing for regional production. Covid-19 exposed the cracks; now, countries want to future-proof drug supplies. But challenges remain in the form of higher labour costs, a shortage of skilled workers, and limited manufacturing capacity. For some companies, the investment needed may be difficult to justify.
Automate and adapt
This is where digital transformation becomes a survival strategy.
Automation and AI help bridge cost gaps by reducing labour needs, minimizing errors and strengthening compliance. Understanding this, the UAE is investing heavily in health tech and AI, with major projects like G42’s biopharma AI initiatives advancing predictive analytics and personalized medicine. UAE-based pharma logistics firms are also adopting IoT, connected supply networks that enable real-time visibility and end-to-end traceability, and AI for demand forecasting.
Having a strong digital infrastructure is important, and platforms supporting real-time planning and predictive forecasting are now essential. Efforts such as these have helped the UAE earn a top 12 ranking in digital competitiveness globally, in addition to MoHAP (UAE Ministry of Health & Prevention) launching a national digital health strategy in 2023.
Digital transformation also supports broader ESG goals by enabling more efficient routing, lowering carbon emissions through optimized transportation, and reducing waste through demand-driven production and inventory control.
Modern digital tools now allow companies to quickly identify tariff exposure, assess supplier resilience, and model the RoI of nearshoring strategies. Companies that can adapt at speed will win.
Moving forward
For now, the industry is in response mode. With tariff details unclear, companies are modelling scenarios, sourcing routes, and financial impacts. But the conversation has already changed. The alternative is to become a regional leader in pharma self- sufficiency and the GCC is harmonizing to overcome tariff volatility by integrating public-private partnerships and tech-enabled supply chains.
The default to offshore, low-cost supply chains is set to be replaced with a more balanced, resilient, and regionally distributed model. With the right mix of foresight, tech investment, and smart regionalization, the industry has a shot to come out stronger.
