Localisation is reshaping pharmaceutical and medtech markets as policy, resilience, and access pressures converge. What distinguishes successful projects is how these arrangements are structured across jurisdictions.

Across the globe, governments are accelerating initiatives to localise pharmaceutical and, to a slightly lesser extent, medtech manufacturing as part of broader industrial policy agendas focused on security of supply and strategic autonomy.

New incentive schemes and policy announcements are emerging in the European Union, the United States, Saudi Arabia, China, and beyond. While the political objectives differ, the underlying message to industry is increasingly consistent: local presence matters.

Against this backdrop, pharmaceutical and medtech companies are reassessing long-standing global manufacturing models and considering whether, where, and how to localise parts of their supply chain. Based on what we see in practice, several recurring realities tend to shape these projects, often in ways that are not immediately obvious at the outset but are vital for their success.

1. Localisation is often about preserving market access, not growing market share

Localisation initiatives are frequently assumed to be growth strategies, driven by the prospect of subsidies, procurement-related advantages, or preferential pricing. In practice, the dynamic is often more defensive. In many jurisdictions, localisation becomes relevant once policy signals suggest that continued market access may, over time, be contingent on local manufacturing or technology transfer. The commercial objective is therefore less about gaining market share but more about avoiding exclusion.

One example can be seen in markets such as Saudi Arabia, where public procurement increasingly favours locally manufactured products. In practice, companies without a local footprint may find themselves at a disadvantage in tender processes, even where their products are otherwise competitive. Ultimately, the market may be fully lost to competitors who have localised.

From a legal perspective, this shifts the focus of documentation away from upside-driven projections and towards long-term access, changing rules of origin, compliance in the local environment, and, very importantly, exit optionality.

2. Localisation rarely lowers costs and often increases them

Another persistent assumption is that local manufacturing would ultimately benefit both patients and manufacturers through lower costs. While this may hold true in exceptional cases, most localisation projects are not cost optimisation exercises.

Local production often entails higher unit costs due to scale, duplicated infrastructure, regulatory friction, or local sourcing requirements. The commercial rationale is therefore grounded less in margin expansion than in operational resilience, regionalisation, and security-of-supply concerns.

Experience in markets such as China illustrates this tension. Localisation may be necessary to participate in procurement systems or regulatory pathways, but can expose manufacturers to significant pricing pressure.

For legal departments, this has consequences for mandatory pricing and margin mechanisms, subsidy and incentive clawback provisions, and the allocation of long-term economic risk between partners.

3. Friction and disruption are features, not exceptions

Localisation projects are sometimes approached with an implicit assumption of steady execution: build, transfer, operate, scale. Reality tends to be less linear.

Over a 10-15 year horizon, projects will almost inevitably encounter disruptions, whether from regulatory changes, supply chain interruptions, geopolitical events, changes in demand, competition from new therapies, or shifts in industrial policy. Seen in this light, localisation is less a single project but more a continuous stress test.

The COVID-19 pandemic provided the clearest stress test of global healthcare supply chains, exposing the limits of models built primarily around efficiency and cost. Rather than a one-off disruption, it marked the beginning of a sequence of unrelated events, from armed conflict in Ukraine, Israel, and Iran to increasing trade fragmentation, trade restrictions, and tariff barriers, that have underlined the structural nature of these risks.

These developments have fundamentally reshaped how companies think about resilience.

Well-drafted project agreements anticipate this by (i) addressing change in law, sanctions and export control constraints, (ii) mitigating risks around disclosures and confidentiality, (iii) managing technology transfer and IP protection, (iv) addressing force majeure and hardship in a meaningful way, (v) providing rebalancing and price-adjustment mechanisms, (vi) establishing governance escalation and deadlock resolution pathways, (vii) anticipating changes of control, (viii) creating neutral contractual mechanisms that work in a changing political environment, (ix) structuring corporate holding chains, and (x) allowing clear exit and unwinding rights.

4. Localisation does not suspend fundamental deal logic

Localisation does not justify abandoning well-established legal principles. While local specifics matter, they do not render neutral structuring obsolete.

In practice, the same fundamentals continue to prove their value: (i) neutral governing law and dispute resolution forums, (ii) holding structures in stable jurisdictions, (iii) careful allocation of geopolitical and regulatory risk, and (iv) clear separation between operational localisation and ownership control.

Localisation is not about replacing established deal logic for the sake of a gold rush, but about applying it with greater precision. The discipline remains global, while execution becomes local. This requires using experienced transaction support to establish structures that are robust across jurisdictions and responsive to changing regulatory and commercial conditions.

5. Not localising is increasingly the riskier choice

For many global pharmaceutical and medtech companies, centralised manufacturing has long delivered efficiency and control. However, recent years have exposed the fragility of concentrated supply chains, particularly for critical medicines.

As a result, the strategic question is less whether localisation is attractive than whether inaction creates unacceptable exposure and liability. Multi-sourcing, regional manufacturing hubs, and selective localisation are increasingly viewed as tools to reduce risk rather than to pursue growth.

This shift is increasingly reflected in regulatory and procurement frameworks, with a growing emphasis on securing reliable access to critical medicines. For companies, this further blurs the line between commercial strategy and regulatory positioning.

What this means from a legal perspective

Successful localisation projects, whether through joint ventures, toll manufacturing, licensing, or M&A, combine local regulatory and commercial insight with global structuring discipline. From a legal perspective, the task is not to reduce downside risk to the minimum, but to structure how it is shared, priced, and reflected across the relationship.

That requires documentation aligned with the commercial reality of the project: higher cost structures, policy-driven market dynamics, extended implementation horizons, and an environment in which change is expected.

The question is no longer whether to localise, but how to do so without undermining the integrity of the overall business model. Firms that approach localisation as a standard market entry exercise tend to struggle. Those that treat it as a structuring exercise, in which exposure, incentives, and control are deliberately aligned, are more likely to build arrangements that endure.