The global health crisis and economic disruption that resulted from the COVID-19 pandemic has reenergized an important public health and national security debate: Is America’s pharmaceutical industry too dependent on overseas supply chains?
Perhaps the most prominent and potent advocate of bringing more pharmaceutical manufacturing to U.S. soil is Peter Navarro, President Donald Trump’s top trade adviser. With the coronavirus destabilizing the global economy and creating supply shortages of drugs and devices in the early stages of the pandemic, Navarro argues that it’s time to make good on Trump’s campaign promise to bring more manufacturing back to America — specifically when it comes to pharmaceuticals.
“If this crisis has taught us anything across party lines is that we do indeed need to bring home the pharmaceutical supply chain, that it is not just a public health issue, but a national security issue and an economic security issue,” Navarro said in an interview with the Washington Examiner last May.
“Big Pharma at the end of the multinational day cares more about profits than the American people,” Navarro said, explaining why he believes government action is needed to protect American interests. “If they can make a few pennies moving their [advanced pharmaceutical ingredient] production to China or India, they’ll do it in a New York minute. And then when you try to hold them accountable, they’ll come up with every ‘why’ and whine in the lobbying book to stop you from doing it.”
With no relevant legislation having been recently passed by Congress, the Trump administration has recently moved to take matters into its own hands. Last month Trump signed an executive order calling on federal agencies to prioritize certain drugs and medical materials made in the U.S. when making purchasing decisions.
“The executive order will require that US government agencies purchase all the essential medicines that we need from American sources,” Trump said during a speech announcing the order. “The executive order will also sweep away unnecessary regulatory barriers to domestic pharmaceutical production and support advanced manufacturing processes that will keep our drug prices low and allow American companies to compete on the world’s stage.”
The order comes on the heels of a series of four other executive orders aimed at lowering drug prices. The timing could end up being strategic for Trump because some experts caution that transitioning more of the pharmaceutical supply chain to U.S. soil will lead to more expensive drugs.
“We do have many drugs that we supply that are supplied from foreign manufacturing chains. This kind of an action is disruptive and there’s going to be adjustment and transition costs that are accrued from it. And we know this is going to increase the cost of drugs likely,” Dr. Amesh Adalja, an expert on emerging infectious diseases, pandemic preparedness, and biosecurity issues at the Johns Hopkins University Center for Health Security, told CNN. “This will be something that will eventually be reflected in higher prices as companies seek to keep the same profit margin on what they’re doing. They’re going to have to think about raising prices.”
The US Chamber of Commerce urged the Trump administration to tread carefully, saying “careful implementation will be key to avoid driving up prices while strengthening supply chain security.”
Not surprisingly, the pharmaceutical industry was largely critical of Trump’s executive order.
Steve Ubl, head of industry trade group PhRMA, said in a statement that the plan “creates even more barriers to ongoing biopharmaceutical manufacturing and innovation.” Worse, he said, the orders add another roadblock to companies that are working “around the clock” to deliver solutions to COVID-19, “making it harder to fight this pandemic.”
Outside critics of the Trump administration’s trade policy argue that the supposed need to divest from foreign suppliers is overblown. Allison Schrager, a senior fellow at the Manhattan Institute, noted in a June article for instance that the oft-cited statistic that 80 percent of drugs in America come from China is false. The reality is that domestically produced drugs account for about 60 percent of American pharmaceutical spending (though technically speaking, many intermediate inputs from abroad mean that “American-made” is hard to define).
Instead Schrager argued for diversification rather than concentrating supply on one place — even if that place is one’s own country.
“If something happens to disrupt your domestic supply chain, like a disease outbreak, major earthquake, or war, then sourcing from multiple, less affected countries means less risk,” she wrote. “Our supply chain is highly diversified and includes 150 countries; relying on one country is risky. Less trade would also make drugs more expensive and increase health-care costs.”
Instead of mandating a “Buy American” policy, Schrager recommended removing the “distortions” of America’s tax and regulatory policy that make it prohibitively expensive to manufacture in the U.S. in order to “create a natural incentive” to make more drugs domestically.
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Andrew Collins cut his teeth in politics as a congressional campaign staffer during the 2012 election. Since then he has worked in Washington, D.C. as the digital media manager and as a staff writer at the Franklin Center for Government & Public Integrity, and is a recent graduate of the Trinity Fellows Academy (class of ’17). His work has appeared in Politico, US News & World Report, The Chicago Tribune, The Daily Caller, and The Hill. He lives in Seattle, WA.