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US drug onshoring is more complex than Trump, Biden political pitches – experts

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President Donald Trump and Democratic presidential nominee Joe Biden.
Source: Biden campaign

President Donald Trump and Democratic presidential nominee Joe Biden have each made bringing drug manufacturing back to U.S. shores part of their 2020 campaign pitches to Americans, but the idea is far more complicated than the politicians have laid out in their proposals.

Onshoring will take a number of reforms and new types of investments to implement, experts told S&P Global Market Intelligence.

It will also take confronting the reality that rebuilding domestic manufacturing capacity to better secure the nation's supply chain for critical drugs does not mean that all of those medicines can be solely made and purchased inside U.S. borders, said Ronald Piervincenzi, CEO of United States Pharmacopeia, or USP, a global organization that develops quality standards for drugmakers and helps them meet those benchmarks.

"Why would you want to make all of our drugs in this country? We don't do anything else that way," Piervincenzi said in an interview.

While it is reasonable for the U.S. to want to participate in producing its own medicines, particularly for those that are often in shortage, like certain antibiotics, shutting out foreign drug manufacturers is unrealistic and would ultimately harm global competition, resulting in Americans likely not getting the best quality products, Piervincenzi said.

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US Pharmacopeia CEO Ronald Piervincenzi
Source: United States Pharmacopeia

The COVID-19 pandemic has highlighted the nation's reliance on foreign suppliers for drugs, vaccines and other medical supplies and the urgency to have a stronger domestic manufacturing base after many healthcare providers found themselves unable to obtain certain products.

Even before the pandemic, the U.S. Food and Drug Administration reported shortages of about 200 medicines, many of them considered essential for patient care.

Many of the drugs in shortage are older products that U.S. manufacturers stopped making because they are not profitable.

For drugs regulated by the FDA, 26% of the manufacturing facilities producing active pharmaceutical ingredients, or APIs, are in the U.S., while 19% of those plants are in India and 13% are in China, according to the agency. The remainder are made in other foreign countries.

However, the FDA has acknowledged it does not know the percentage of the chemical substances used in the APIs made in foreign countries.

About 46% of manufacturing facilities producing finished dosage forms of medicines sold to Americans are in the U.S.

In July, Biden said if he wins the White House, he will direct the FDA to identify a list of essential medicines and other countermeasures and tell federal agencies they must purchase those products from U.S. manufacturers.

A month later, Trump issued an order outlining the same requirements. Trump has repeatedly said his administration "lives by two rules: Buy American and hire American" — key tenets of his "America First" agenda.

Legislation

In his proposal, Biden said he plans to tackle tax code provisions that have incentivized drugmakers to move their production overseas.

He also vowed to work with Congress to create new targeted investments and incentives, like tax deductions and research and development credits, to spur domestic production of critical products in the U.S. — ideas supported by the Association for Affordable Medicines, which lobbies on behalf of generic manufacturers.

However, that group has also called for a supply chain that involves plants outside the nation's borders, like in Canada, Europe, India, Israel, Japan, Jordan and Mexico.

The Pharmaceutical Research and Manufacturers of America, or PhRMA — the trade group for innovator biopharmaceutical companies — said it supports efforts to foster more manufacturing in the U.S. But it said proposals aimed at driving all drug manufacturing to the U.S. "underestimate the significant time, resources and other feasibility challenges and complexities involved."

Such ideas also "ignore the strength of a robust and geographically diverse global supply chain," PhRMA spokeswoman Nicole Longo told S&P Global Market Intelligence in an email. "Geographic diversity in the pharmaceutical supply chain enables manufacturers to make adjustments as needed to avoid shortages, which is especially important during national disasters and global pandemics."

Lawmakers on Capitol Hill have introduced a number of legislative proposals intended to boost domestic drug manufacturing.

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Sen. Elizabeth Warren
Source: Office of Sen. Elizabeth Warren

Rep. Buddy Carter, R-Ga., and Sen. Tim Scott, R-S.C., unveiled a bill in May that would provide additional tax credits for drug manufacturers that set up facilities in U.S. economically distressed communities, known as Opportunity Zones.

Sen. Elizabeth Warren, D-Mass., and Rep. Jan Schakowsky, D-Ill., sponsored a bill that would establish and authorize a federal office of drug manufacturing within the U.S. Department of Health and Human Services that could make generic medicines under certain conditions.

Warren also co-authored legislation with Sen. Marco Rubio, R-Fla., that calls for the Federal Trade Commission and the Department of Treasury to analyze how relying on foreign countries for medicines impacts the U.S. supply chain and domestic manufacturing capacity and how direct investment from abroad affects America's ability to produce drugs.

Sen. Tom Cotton, R-Ark., and Rep. Mike Gallagher, R-Wis., introduced a bill in March that would prohibit the federal government from paying for any pharmaceuticals or drugs with APIs made in China by 2022. The legislation would require drug companies to list the APIs and their countries of origin on the labels of imported and domestically produced finished medicines.

Advanced manufacturing

Both Trump and Biden have promoted the adoption of advanced manufacturing technologies and have urged companies to onshore their production through the SelectUSA initiative — a program launched in 2011 by former President Barack Obama.

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FDA Commissioner Stephen Hahn
Source: U.S. Food and Drug Administration

In May, the U.S. government awarded a contract potentially worth $812 million to a cadre of American generic medicine manufacturers, led by newly formed Phlow Corp., which is using a continuous flow processing technology developed by the Medicines for All Institute at Virginia Commonwealth University's College of Engineering.

The adoption of advanced manufacturing technologies "may actually reduce the regulatory burden on companies, as techniques such as real-time assessments of drug quality would provide better data for monitoring and could reduce the frequency with which manual techniques such as offline testing are required," FDA Commissioner Stephen Hahn and Deputy Commissioner for Medical and Scientific Affairs Anand Shah wrote in a Sept. 10 CNBC op-ed.

The U.S. has been far behind other nations in adopting advanced manufacturing, USP's Piervincenzi said. Some foreign governments have invested in facilities in office park-like settings to support it, he said.

"That's not happening in the U.S.," he said.

'Hard work to be done'

But investment in facilities and technology is not enough, Piervincenzi said. The U.S. is also far behind on adopting the data analytics, laboratory techniques and the regulatory standards and pathways that are needed to support advanced manufacturing.

"You can't simply say here's the money to build it because we haven't defined it yet," he said. "You can't build the plant until you've done the first part."

Also lacking in the U.S. is the talent — "the people who have been trained to know how to use the tools and equipment," Piervincenzi said.

Unfortunately, hiring people with the right skills is far less politically exciting than ribbon-cutting on big new manufacturing facilities, he said.

"There's hard work to be done," Piervincenzi said.

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