WASHINGTON — The global spread of the coronavirus is reigniting efforts by the Trump administration to encourage more American manufacturing of pharmaceuticals and reduce dependence on China for the drugs and medical products that fuel the federal health care system.
The effort includes a push by the White House trade adviser Peter Navarro to tighten “Buy American” laws so federal agencies are required to purchase American-made pharmaceuticals and medical equipment, according to people with knowledge of the plans.
The administration has been preparing an executive order, which could be released in the coming days, that would close loopholes allowing the government to purchase pharmaceuticals, face masks, ventilators and other medical products from foreign countries. The hope is that increasing government demand for American-made drugs and medical products will provide an incentive for companies to make their products in the United States, rather than China.
To help facilitate such production, the White House is also pushing for streamlined regulatory approvals for American-made products and more detailed labeling of the origin of products made offshore, these people said.
“China has managed to dominate all aspects of the supply chain using the same unfair trade practices that it has used to dominate other sectors — cheap sweatshop labor, lax environmental regulations and massive government subsidies,” Mr. Navarro said in an interview. “As President Trump has said, what we need to do is bring those jobs home so that we can protect the public health and the economic and national security of the country.”
China is known as the world’s factory for car parts, toys and electronics, but it also churns out much of the penicillin, antibiotics and pain medicines used across the globe, as well as surgical masks and medical devices.
While the United States remains a global leader in drug discovery, much of the manufacturing has moved offshore. The last American plant to make key ingredients for penicillin announced it would close its doors in 2004.
Chinese pharmaceutical companies have supplied more than 90 percent of U.S. antibiotics, vitamin C, ibuprofen and hydrocortisone, as well as 70 percent of acetaminophen and 40 to 45 percent of heparin in recent years, according to Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations.
Supporters of reducing reliance on China have used the coronavirus epidemic to highlight what they say is a longstanding vulnerability that could leave Americans dangerously short of medicines in the event of a war, trade conflict or pandemic.
“If China shut the door on exports of core components to make our medicines, within months our pharmacy shelves would become bare and our health care system would cease to function,” said Rosemary Gibson, a senior adviser with the Hastings Center and an author of “China Rx: Exposing the Risks of America’s Dependence on China for Medicine.”
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“In the event of a natural disaster or global pandemic, then the United States will wait in line with every other country for essential medicines,” she said.
Some in China have also noted these vulnerabilities. An article posted last week by the state news agency Xinhua argued that the world should thank China, rather than blame it for spreading the virus, saying that if China banned the export of drugs, “the United States would sink into the hell of a novel coronavirus epidemic.”
China does not appear to be explicitly blocking the export of pharmaceuticals, though it has cut off exports of face masks by requiring manufacturers to sell masks straight to the government for distribution, leaving none to send overseas.
Factory closings and transportation restrictions in China have disrupted supply chains for drugs as well. Public health officials are watching to see whether the coronavirus epidemic will lead to more shortages of essential drugs in the United States in the coming weeks.
On Feb. 28, the Food and Drug Administration warned that one drug was already in short supply in the United States because of manufacturing issues, and said it was monitoring about 20 others that rely on China.
Last week, the Indian government ordered its pharmaceutical companies to stop exporting 26 drug and drug ingredients, most of them antibiotics. And South Korea, Germany, India, Taiwan and others have clamped down on exports of masks and other protective gear over worries that their own supplies will fall short.
“The coronavirus shows the importance of bringing all of that manufacturing back to America, and we will have that started,” President Trump said in a meeting last week at the White House with the chiefs of major pharmaceutical and biotechnology companies. “It’s already started, frankly. It started about a year ago.”
In Mr. Trump’s lunch meeting with Senate Republicans on Tuesday, Senator Marco Rubio of Florida urged lawmakers to move quickly to leverage government programs, like Small Business Administration loans, to ramp up American production. Mr. Trump agreed with the plan, according to a representative for Mr. Rubio.
“The coronavirus outbreak has made clear we must combat America’s supply chain vulnerabilities and dependence on China in critical sectors of our economy,” Mr. Rubio said in a statement.
He called the administration’s coming executive order “a very strong first step in incentivizing domestic production.”
But there are big questions about how much the government can influence the behavior of private companies and reconfigure a global supply chain that is heavily invested in Chinese manufacturing.
“If we want to reduce that dependence, there is no easy fix to the problem,” said Mr. Huang of the Council on Foreign Relations. “Technically I think it’s possible, but unlikely from a cost effectiveness perspective.”
The Trump administration has urged companies making electronics, steel, toys and many other products to move their supply chains out of China, with mixed success.
Some companies have left China in response to tariffs Mr. Trump placed on more than $360 billion of Chinese goods. But many have moved to other low-cost countries like Vietnam, India and Mexico, rather than returning to the United States. And many products that are made in the United States still contain Chinese components.
Critics of China’s dominance of global pharmaceuticals say Beijing has used the same strategies to gain a foothold in drug making that it has in other industries — including generous government subsidies and lax environmental rules.
China is also a key producer of the chemicals that go into making drugs, and home to a vast supply of well-educated but low-paid scientists. And pharmaceutical companies say they are drawn to China as a large and rapidly growing health care market in its own right.
David Gaugh, a senior vice president at the Association for Accessible Medicines, which represents the generics industry, said that the globalization of the supply chain was “a market reality” for all kinds of drug makers, and that the United States had one of the world’s safest drug supply chains.
The Food and Drug Administration does not gather precise figures on the volume of drugs made overseas — only the number of facilities making them. According to that data, 72 percent of manufacturing facilities making active pharmaceutical ingredients for American drugs were overseas, with 13 percent in China.
But Michael R. Wessel of the U.S.-China Economic and Security Review Commission said that those figures understated the American reliance on China, which has some of the world’s largest factories. And when the United States imports finished drugs from Europe and India, they often contain Chinese components as well.
“The coronavirus crisis puts into sharp focus the unacceptable dependence of the U.S. on China for critical medicines and their ingredients,” Mr. Wessel said.
The federal government maintains a strategic stockpile of drugs and medical supplies, but those could fall short in a pandemic. In the private sector, as in many other industries, pharmaceutical companies have shifted from stockpiling goods in warehouses to a “just in time” logistics model that ships products as need arises — reducing costs but also increasing the likelihood of shortages.
The question is whether the government has enough levers to encourage more private companies to rework their supply chains, or encourage new manufacturing start-ups in the United States.
Administration officials say Buy American laws, which require the federal government to purchase American-made products where it can, offer one powerful lever.
The government buys vast amounts of drugs and medical equipment through the Departments of Defense, Health and Human Services, and Veterans Affairs. A series of waivers and trade agreements allow those agencies to purchase products from foreign countries, with the decisions often based on price.
Mr. Navarro is examining agreements struck by the Defense Department, as well as the World Trade Organization’s government procurement agreement, which allow the government to purchase drugs from dozens of countries around the world, according to people with knowledge of the initiative.
Where American-made drugs are not available, the government will still be able to buy foreign drugs. But over time, the administration expects the policy will encourage manufacturers to invest more in the United States.
“If we have strong Buy American procurement, that will establish a robust base level of demand that provides the appropriate incentives for our pharmaceutical manufacturers to invest and locate domestically,” Mr. Navarro said. He added that the United States also needed to invest in “advanced manufacturing technologies” to aid drug production.
The government has funded research in recent years into new types of manufacturing systems that are smaller-scale and more flexible than operations run in China.
The F.D.A. has said these types of operations, which can potentially be reconfigured to produce different types of pharmaceuticals in times of need, could enable American-based manufacturing to regain competitiveness with China and potentially ensure a stable supply of drugs.
But expanding beyond a few trial manufacturing projects in the United States could be hard: Supporters say these projects need more funding and a specialized approval process with the agency.
The issue has attracted the attention of some lawmakers. Mr. Rubio has introduced a bill that would require drugmakers to report to the F.D.A. the source of the active ingredients in their pharmaceuticals, as well as tighten Buy American laws for the Veterans Affairs Department.
Senator Josh Hawley, Republican of Missouri, has introduced separate legislation to give the F.D.A. expanded authority to request sourcing information from drug and device manufacturers. And Representative Anna G. Eshoo, Democrat of California, has set up a bipartisan working group to examine funding and incentives for domestic drug production and introduced legislation to strengthen reporting requirements around drug shortages.
Keith Bradsher contributed reporting from Shanghai, Katie Thomas from Chicago and Emily Cochrane from Washington.
Source: Economy - nytimes.com
