White House Seeks To 'Onshore' Key Drug Manufacturing

By Daniel Wilson
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Law360 (August 6, 2020, 10:42 PM EDT) -- President Donald Trump issued an executive order Thursday seeking to ensure essential medicines are made in the U.S. by shoring up domestic production capabilities and requiring federal agencies to purchase those drugs exclusively from domestic sources.

The order covers the production of essential medicines and medical countermeasures for chemical, biological, radiological and nuclear threats and emerging infectious diseases, as well as "critical inputs" needed to make them, requiring the U.S. Food and Drug Administration to come up with a list of essentials.

Peter Navarro, director of the White House's Office of Trade and Manufacturing Policy, said on a press call Thursday that the COVID-19 pandemic had made clear the need for the executive order, another in a long line of "Buy American" and "Hire American" directives introduced during the Trump administration.

"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," he said.

Navarro said countries like China and India have unfair competitive advantages in pharmaceutical manufacturing due to "their lax regulatory environment," while countries like Ireland, Singapore and Switzerland, in addition to China and India, use tax incentives specifically designed to attract drug manufacturing.

"So … the critical element here, which is part of the broader Trump strategy, is to onshore our production," he said.

To support that, the order requires federal agencies to buy domestically produced versions of essential medicines "to the maximum extent permitted by applicable law," with acquisition requirements to be split among two or more U.S. manufacturers whenever possible, as well as to come up with broader procurement strategies meant to shore up the domestic public health industrial base.

Using the Defense Production Act, agencies can also require those contracts to be prioritized over other contracts or orders if considered necessary for national defense.

The U.S. Department of Defense has also been given the authority to reject "otherwise acceptable" offers of essential drugs from foreign countries for defense reasons.

To back up the domestic production requirement, the Office of the U.S. Trade Representative would have 30 days after the FDA comes up with its initial list to modify related procurement coverage clauses in free trade agreements and the World Trade Organization Agreement on Government Procurement to remove those drugs.

And agencies will need to stop buying essential drugs from e-commerce platforms unless certified by the U.S. Department of Homeland Security to meet best practices for preventing the sale of counterfeit goods, a move intended to prevent mainly counterfeit drugs from China, Navarro said.

There will be limited exceptions for medicines needed to respond to a public health emergency or major disaster, or for when an agency determines that a particular essential medicine is not produced in the U.S. at the needed quantity. The restriction will also not apply when U.S.-made drugs are more expensive than foreign sources by 25% or more.

The FDA has also been tasked with examining potential vulnerabilities in the essential medicines and countermeasure supply chain, including scarce ingredients, and come up with possible regulatory or legislative changes, while being empowered to accelerate the approval process for domestic production of these drugs.

It is also now allowed to ramp up site inspections of international facilities that make those drugs, which Navarro said was intended to subject overseas facilities to the same standards that apply to U.S. plants, and block imports if facilities refuse or "unreasonably delay" inspections.

The DOD has also been directed to look into its own supply chain for any vulnerabilities that need to be addressed to meet any unique military needs for essential medicines, while the U.S. Environmental Protection Agency has been asked to look for any rules that may need to be streamlined to speed up development of related manufacturing facilities.

Industry groups representing the pharmaceutical industry were not supportive of the order in statements on Thursday.

Stephen Ubl, president and CEO of Pharmaceutical Research and Manufacturers of America, which represents brand-name drugmakers and biotechnology companies, said that although it supports increasing U.S. manufacturing of medicines, the order "creates even more barriers to ongoing biopharmaceutical manufacturing and innovation."

Drugmakers are currently reliant on an international supply chain, and the order could disrupt that supply chain, leading to shortages, Ubl said.

"The administration is forcing biopharmaceutical companies to shift their critical attention and resources away from COVID-19 work to focus on making substantial changes to their business models necessary to comply with this and other recent executive orders," he said.

Also, the order is "contradicted and undermined" by July 24 executive orders intended to sharply cut drug prices, which will create "a huge disincentive to invest in U.S. biopharmaceutical research and manufacturing," according to Ubl.

"None of these executive orders will help patients access or afford their medicines," he said.

The Association for Accessible Medicines, which represents generic drug manufacturers, said it supports diversification in the pharmaceutical supply chain and is working with lawmakers and the White House to add to its members' "significant manufacturing presence" in the U.S.

But its interim CEO, Jeff Francer, argued that policymakers need to address "the undervaluation of generic and biosimilar medicines in the U.S. with sustainable market supply plans," or there won't be the necessary "scale and sustainability" to properly secure the domestic pharmaceutical market.

--Additional reporting by Jeff Overley. Editing by Aaron Pelc.

For a reprint of this article, please contact reprints@law360.com.

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