Buy American Proposals Rile Manufacturers and Trading Partners

Efforts to shift more production of pharmaceuticals and APIs to the United States as a strategy for reducing drug shortages and ensuring access to needed medicines has gained strength in the White House and on Capitol Hill. The recent $2-trillion COVID economic stimulus legislation, which provides billions in assistance to US industry and individuals losing jobs, also supports exploration of federal “Buy American” policies, ostensibly to reduce US dependence on drugs and medical products imported from overseas.

One proposal advanced by the Trump Administration to encourage more domestic pharmaceutical production would apply domestic sourcing requirements to federal agencies that pay for large volumes of pharmaceuticals, such as the Departments of Defense, of Veterans Affairs, and Medicare and Medicaid. The government also could provide tax incentives and loans to firms looking to establish operations at home.

Leading this initiative is White House trade advisor Peter Navarro, a long-time advocate for strong protectionist policies and now involved in administration efforts to coordinate access to needed medical supplies. Navarro’s prominence in administration pandemic response efforts has upset those policy makers who fear that the Buy American campaign will spark a trade war over government procurement requirements and would run afoul of international trade agreements for accepting bids from foreign suppliers. More troubling is that other governments would respond by curbing exports of medical products, particularly new effective treatments and vaccines to combat COVID-19.

A main factor in the debate is that many drugs and most of their ingredients are imported to the US, largely from India and China. The proportion is even higher for APIs and many widely used, but critical, generic drugs, such as antibiotics. Recent shortages of sedatives required for patients on ventilators has become a crisis at many hospitals. Meanwhile, political leaders in India blocked the export of certain drugs and pharmaceutical ingredients, and other governments similarly look to protect domestic supplies of medical equipment. US–China trade disputes in recent years raise questions about whether the US will be at the top of the list of nations seeking to import any effective COVID vaccine developed in Chinese labs. Some biopharma companies racing to test and gain approval of effective COVID treatments and vaccines have announced plans to expand production in the US, moves that may reflect requirements imposed in R&D funding agreements that involve US research agencies.

Industry opposition

Drug manufacturers, distributors, and dispensers

as likely to reduce reliable supplies and raise product costs. A coalition of brand- and generic-drug makers, pharmacies, distributors, and patient advocates raised these concerns in a March 27, 2020 letter to President Trump, claiming that proposals to “drive all manufacturing to the United States” overestimate the feasibility of making such changes and underestimate the time and effort it would take. A diverse pharmaceutical supply chain is “precisely what enables the industry to respond quickly and make adjustments” in product sourcing during emergencies and global public health crises, the group states. Conversely, Buy American requirements could destabilize the supply chain for pharmaceuticals and medical devices and undermine “complex arrangements between firms” that support efficient delivery of medicines to patients.

Similarly, another group of pharmacists, insurers, and brand and generic manufacturers raised objections in letters to Vice President Mike Pence and Republic and Democratic leaders of the House and Senate. The coalition noted that a contemplated Buy American executive order could have “an immediate and detrimental impact” on access to medicines, particularly for individuals in federal health programs. Instead, the government should issue national clinical guidelines to clarify the appropriate use of existing and new medications to avoid individual stockpiling that can lead to shortages. And federal officials should work with airlines to ensure reasonable shipping costs of critical medicines to maintain supplies of needed medical products amidst wide cuts in air freight transport.

FDA has long required pharma companies to provide advance notice of anticipated shortages of critical medicines, and the recent extension of such reporting requirements to APIs and certain medical devices should fill some information gaps. Those provisions reflect growing concerns in Congress about FDA’s limited oversight of the rising volume of foreign-made drugs, which frequently have raised quality and safety issues over recent years. FDA has long urged manufacturers to adopt advanced manufacturing systems that would support less costly and more efficient drug production, and several Senate and House legislative proposals further such efforts and policies to help reduce industry’s heavy reliance on APIs from China.

But drugs and ingredients made in the US are likely to be more expensive and carry higher price tags, particularly for medicines facing shortages or rising demand. And even low-cost generic- drug makers face strong push-back from price increases, particularly in short-supply situations.