Buy American Executive Order Raises More Questions than Answers | Citizens Against Government Waste

Buy American Executive Order Raises More Questions than Answers

The WasteWatcher

President Trump has been talking about signing a Buy American Executive Order (EO) since March, 2020. White House Trade and Manufacturing Policy Director Peter Navarro has long called for such a government-wide policy.  The COVID-19 pandemic certainly kicked the effort into high gear, especially because of the shortage of personal protective equipment and China’s problematic actions concerning the coronavirus.  While Citizens Against Government Waste (CAGW) understands the concerns over a shortage of medical supplies, we have discussed why a Buy American policy would be a bad idea, especially during a pandemic.

On August 6, 2020, the President signed the “Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States.”  The EO’s purpose is to “reduce our dependence on foreign manufacturers” of medical products and their components and ensure a reliable long-term domestic production to minimize shortages.

The EO raises more questions than it answers.

Only federal agencies that purchase medical supplies, like the Department of Defense (DoD) and the Department of Veterans Affairs, will be directly affected.  Medicare and Medicaid will not be directly affected because medical products are not procured by the government for these programs.  According to an August 10 Inside Drug Pricing article, the EO will only directly affect 2 to 3 percent of the drug market.

Indirectly, it will cause disruption through the entire supply chain as drug and medical device manufacturers will now have to focus on making changes to their business plans, diverting their attention away from fighting COVID-19.

Essential medicines are medicines “deemed necessary by the U.S.” to be available at all times and in adequate amounts.  The World Health Organization has a list of more than 400 medicines that would “satisfy the healthcare needs of the majority of patients.”

The EO lists its policy goals and directs each executive agency to work with the Food and Drug Administration (FDA) and to use their authority under the law to purchase the required items by limiting competition to only those companies that produce their product in the U.S and dividing procurements among two or more of those manufacturers.

There are various timelines to perform certain tasks.  For example, the Food and Drug Administration, the Office of Management and Budget (OMB), and the Assistant Secretary for Preparedness and Response in the Department of Health and Human Services have 90 days to come up with a list of Essential Medicines, Medical Countermeasures, and Critical Inputs, and then periodically update the list. Medical countermeasures are diagnostic, mitigation, and prevention treatments.  Critical inputs are the components necessary to create a medicine or medical device like an active pharmaceutical ingredient or a part necessary for a device to work properly.  The DoD, in conjunction with OMB, shall have 180 days to “identify vulnerabilities in the supply chain for Essential Medicines, Medical Countermeasures, and Critical Inputs necessary to meet the unique needs of the United States Armed Forces and to mitigate the vulnerabilities identified.”

The Environmental Protection Agency has the task to “identify relevant requirements and guidance documents that can be streamlined to provide for the development of Advanced Manufacturing facilities and the expeditious domestic production of Critical Inputs, including by accelerating siting and permitting approvals.”

While the EO would have a direct impact on a small percentage of the medical supply chain, it will create a disproportionate number of problems.  A SheppardMullin Government Contracts and Investigations blog post called the EO a “tall order” and not easily done.  From making a list of essential medicines and critical supplies, to securing medical supply chains, to accelerating domestic manufacturing requests, to renegotiating terms of international agreements, and updating regulations, the agencies will be in a “Twilight Zone” as they decipher what needs to be done to implement the  plan.  For example, agencies will need to create “a new two-part test to determine whether something actually is ‘produced in the United States.’   Frustratingly, the definition is both ambiguous (defining a phrase by using the same phrase) and potentially very limiting, giving U.S. manufacturers that rely on a global supply chain limited options to provide a product ‘produced in the United States.’”

An August 10 Inside Drug Policy article reported that hospital pharmacies are concerned the EO could disrupt the drug supply chain by “giving the federal government first dibs on domestically made drugs and ingredients that are part of existing private supply chains.”  Because the government can “jump to the front of the line to buy domestically made drugs and ingredients,” pharmacies might have to purchase drugs made from foreign suppliers.

The general belief within the pharmaceutical market is that the EO will raise drug costs.  Inside Drug Policy also reported that The Association for Affordable Medicines, which represents generic drug companies, said that “if the administration wants to increase domestic production, it must be willing to guarantee higher prices in long-term contracts.  The generic drug lobby also says the government should give generic drug makers tax breaks and grants because other countries lured away production with similar incentives.”

CAGW agrees that a better way to encourage the growth of domestic production, rather than using heavy-handed regulation or an EO, would be to utilize the tax code to incentivize U.S. manufacturers to move back to this country.  Currently, manufacturers must deal with its own dangers and deterrents in many areas of the United States, like destructive storms that cause long-term damage, repressive local taxes, unskilled labor, and antibusiness environments.  Plus, a diverse manufacturing base allows manufacturers to transfer production to another area if one location should become unavailable.

The new EO will raise costs and likely fail to work as intended.  It unfortunately follows on the heels of several EOs CAGW opposed that attempt to lower drug costs through implementing price controls, which always disrupts markets.  At a time when the country has never been more reliant on the innovation of the biopharmaceutical and medical device industries, this is absolutely the wrong time to be issuing these kinds of executive orders.