HBI Deals+Insights / Interviews

Navigating the global pharma order in 2026 —in conversation with ING’s Stephen Farrelly and Diederik Stadig

As the pharmaceutical sector navigates the impact of a turbulent 2025, there’s been mounting pressure on drug pricing and supply chains, with geopolitical forces reshaping global markets. Europe, meanwhile, risks being left behind as the US consolidates its dominance and China accelerates its ambitions in pharma innovation and manufacturing.

Ahead of the HBI 2026 session ‘The new global pharma order: Trump, China and Europe’s uncertain future’, HBI spoke to Stephen Farrelly, Managing Director, Global Lead Healthcare & Pharma at ING and Diederik Stadig, Senior Economist, Healthcare & Pharma at ING on what the future holds for pharma investment and strategy, from regulatory risks and European biopharma’s structural challenges to the evolving role of CDMOs, CROs, and the role of private equity.

HBI: With Trump’s tariffs pushing drugmakers to explore localisation and domestic investment, what does it mean for the economics of global drug pricing?

Diederik Stadig: Tariffs are here to stay. There is still some uncertainty around the 16 deals with drug manufacturers, but we expect them to hold, particularly the tariff exemptions linked to US-based investment (a set of 16 companies have struck pricing agreements with the Trump administration). The broader push to onshore more of the pharmaceutical supply chain is also likely to continue, given that the US remains the world’s most important pharma market.

There will be localisation in a few core markets over time, primarily through a reallocation of investment away from Europe and into the US in terms of manufacturing capacity. While this shift will take time, tariffs are inherently inflationary. As a result, global drug prices are likely to continue rising.

In Europe, the story is a bit different, where discussion on prices and manufacturing has evolved into a discussion on innovation. We expect upward pressure on prices in Europe, though this will likely stem from policy changes rather than tariffs.

Stephen Farrelly: GLP-1 therapies are an exception, effectively operating in their own market. We expect continued downward pressure in this segment as access expands at scale across the US and beyond.

HBI: With China accelerating its biotech ambitions and the BIOSECURE Act in place, how are Western pharma companies navigating this landscape?

Farrelly: European big pharma companies will still see 40 to 50% of their revenues originating from the US, and they will see two-thirds of their profits originating from the US.

China, however, has evolved significantly. A decade ago, it was largely a generics manufacturing hub. In 2014, only 4% of new molecules came from China. By 2026, that figure is expected to reach around one-third. This firmly positions China as a key source of innovation.

Cities such as Beijing and Shanghai are now competing with established hubs like Boston and the Bay Area. As a result, Western pharma companies are increasingly looking to China to replenish pipelines, primarily through licensing deals rather than acquisitions.

Looking ahead, the next phase of China’s evolution will be the emergence of fully scaled biopharma players. Some companies will move beyond licensing and build their own portfolios, potentially becoming global competitors over the next decade.

HBI: What does this mean for Contract Research Organisations (CROs) and Contract Development and Manufacturing Organisations (CDMOs)?

Farrelly: The CDMO market in Asia has been one of the fastest-growing and is expected to expand at roughly double the rate of the pharma industry. This is driven in parts by tariffs and the shift towards onshoring in the US.

Asian CDMOs benefit from strong manufacturing capabilities, although maintaining high standards and process integrity remains critical. CROs are less mature and face greater scrutiny around data quality and clinical trial execution as they scale globally.

The CRO market is also segmented. Early-stage research remains fragmented, while later-stage trials are dominated by large global players. As Chinese biopharma grows, its CRO ecosystem is likely to develop in parallel, provided it aligns with Western standards.

Stadig: The BIOSECURE Act could encourage greater self-sufficiency in China and drive diversification of global partnerships. For smaller players such as CROs and CDMOs, this may lead to increased demand from a wider range of clients.

HBI: Europe stands at a strategic inflexion point — but fragmented regulations and persistent pricing pressures continue to undermine its competitiveness. How can Europe secure a lasting competitive advantage?

Stadig: We’ve seen Europe’s share of global R&D spend decline from 50% in 1990 to around 25% today, while the US has strengthened its position. The US benefits from integrated ecosystems where capital, academia, and innovation intersect, something Europe lacks.

Fragmented regulation, weaker capital markets, and slower approval processes all contribute to this gap. Addressing these structural challenges is essential. Pricing can support this, but it is not the primary solution.

Farrelly: Europe needs to define its role in the global biopharma landscape. Competing effectively will require stronger incentives for innovation and greater investment across the ecosystem.

This includes funding both successful and unsuccessful drug development, which is a necessary but costly part of innovation.

HBI: Where can private equity capitalise if Europe increases R&D investment?

Stadig: Early-stage drug development is typically not suited to private equity due to long timelines and high risk.

Where private equity can possibly benefit is when a company becomes a proper scale-up, and they’re nearing the end of their clinical trials. CDMOs represent a key area of opportunity. Demand is increasing due to supply chain shifts and the growth of biologics, and these businesses require capital to scale quickly.

HBI: As the global manufacturing supply chain shifts, how do you expect the pharma services ecosystem, specifically CDMO, to evolve alongside it?

Farrelly: CDMOs are clear beneficiaries of current dynamics. They provide a flexible pathway to onshoring without requiring large upfront investment from pharma companies.

Given the fact that they’re already global and the shift that you’ve seen in geography, there has been more gradual development towards Asia, whereas the manufacturing need is much more immediate and therefore requires a more immediate response. So we anticipate private equity will continue to be involved in CDMO assets.

HBI: Beyond tariffs and legislation, what geopolitical and regulatory risks pose the biggest challenges for the pharma industry, and how do you see the global supply chain evolving over the next three to five years?

Stadig: Generic drug supply chains are likely to receive greater attention as an issue of national security. In the US, generics account for 92% of prescriptions but have not received the same focus as branded drugs.

We expect increased emphasis on supply chain resilience, including sourcing and manufacturing capacity. This may involve stronger partnerships with key producers such as India, alongside targeted localisation for critical medicines like antibiotics.

Farrelly: In branded pharma, manufacturing will continue to shift towards the US, partly at Europe’s expense. At the same time, China’s role as both an innovation hub and future competitor will continue to grow.

Europe’s response remains uncertain and will be critical in shaping its future position. We are also seeing potential regulatory divergence between the US and Europe, which could create opportunities for Europe as a stable regulatory environment.

Finally, there is ongoing uncertainty around the long-term impact of MFN pricing policies and increased scrutiny of intermediaries such as PBMs (Pharmacy Benefit Managers).

 

The session on ‘The new global pharma order: Trump, China and Europe’s uncertain future,’ at HBI 2026 will feature a panel including Stephen Farrelly, Managing Director, Global Lead for Pharma & Healthcare, ING, Diederik Stadig, Sector Economist for TMT & Healthcare, ING, Miquel Bachs, CEO, Inke, and Cristina Niculescu, EIB.

We would welcome your thoughts on this story. Email your views to Hemani Vipul Sheth or call 0207 183 3779.