By Ken Rapoza, CPA Industry Analyst
Major pharmaceutical importers have pushed back against the White House's proposal to support domestic labs. But on Thursday, American manufacturers got a break. We think there is more to come.
If there really is a “new normal” spawned by the global coronavirus pandemic, it’s the localizing of critical supply chains. Both political parties in Congress are largely in agreement on this issue, but the government must take action in a fight that we are in to win.
On Thursday, President Trump is set to sign an Executive Order that will require government purchasers to buy “essential” medicines from U.S. labs. It’s an important victory for domestic drug producers competing against low-cost producers and predatory, government-subsidized, low regulation states like China, in particular.
“This is a huge win for domestic pharmaceutical producers,” said CPA CEO Michael Stumo. “The U.S. needs to be self-sufficient in the production of critical medical supplies and this Executive Order will put federal government spending power behind U.S. drug manufacturers. We’ve been pushing for this for many months and we’re thrilled with this step forward.”
White House advisors have also been pushing for this since winter. CPA has been advocating for bringing critical drug supplies back home since February, just when the new coronavirus was becoming a household name.
As part of our efforts, a group of congressional leaders sent a letter to the White House and to Peter Navarro in May in support of what was at the time just a draft Executive Order to localize critical drug supplies. They noted in that letter how problematic it was that China was nearly a sole supplier of important active pharmaceutical ingredients and added that building a bigger drug lab base here meant creating jobs and protecting health security for many years to come.
When word of a draft EO spread throughout Washington faster than the virus itself, the multinational pharmaceutical importers and a generic drug importers association called the Association for Accessible Medicines worked to stop the White House from taking action.
People inside the West Wing were working on the EO as recently as July, while Trump was asking drug companies to come to some sort of agreement to cut drug prices or face import competition from Canada. Pharmaceutical giants hated this idea as they see it as a profit risk. They pounded Trump with political ads. Now that Trump realizes the global pharmaceutical companies are not going to work with the White House, pulling the trigger on an EO for domesticating essential medicine production makes sense.
Bringing critical medical supply home attracts bipartisan support in Congress. Vicky Hartzler (R-MO) and John Garamendi (D-CA) have had a bill out on this since November. Their Pharmaceutical Independence Long-Term Readiness Reform Act (H.R. 4710) would require the Defense Department to procure medicines for the military only from American labs. There are other, similar bills out there.
The Food and Drug Administration said it will come up with the list of essential medicines covered by the EO, but no specific date's been given yet.
“We’re dangerously over-dependent on foreign nations for our essential medicines, for medical supplies like masks, gloves, goggles and the like, and medical equipment like ventilators,” Navarro said today. “Across the world we have sweatshop labor, we have pollution havens, we have tax havens which have pulled our manufacturing offshore particularly for pharmaceuticals.”
Strict FDA regulations for U.S. drug makers and a slower approval process for new drugs also put domestic labs at a disadvantage.
Through the peak of the pandemic in the northeast, hospitals struggled to get drugs as basic as Tylenol or equipment as basic as surgical masks because they were mainly coming from China. China couldn’t make them fast enough and was prioritizing serving its home market before any export markets. The entire world was ordering the same items, from the same places.
Domestic drug producers and some members of Congress are well aware of the importance of reshoring critical medical supplies not just for the bottom line, or job growth, but for health care security in times of crises. Shortages of these items during the pandemic have made it much harder for the importers to make their case. And much easier for domestic drug makers to make theirs. We will continue advocating on their behalf.
President Trump said he wants to prepare for future pandemics and wants to stockpile ingredients used in making medicine.
For the first half of 2020, U.S. pharmaceutical companies exported $28.4 billion worth of medications, down from $29.6 billion. But we imported $82.3 billion, and that’s made pharmaceutical imports the biggest import item of the year. The importers are happy. Today, the domestic manufacturers are even happier. And so are we at CPA.