There have been a lot of urgent calls to require manufacturers, particularly companies that make pharmaceuticals and medical devices, to create all products and components in the United States.  While the concept has been around for many years, it is now at a fevered pitch due to Communist China’s actions during the COVID-19 pandemic, starting with not being forthcoming about the nature of the coronavirus, to not accepting U.S. assistance in fighting the disease, to hinting it would withhold pharmaceutical ingredients, to now seizing control of factories making personal protective equipment to keep it for themselves as another wave of virus surfaces.

Numerous bills have been introduced in Congress that would require federal agencies to buy only American-made products.  Several members of congress who support this idea met with White House officials in March to encourage an executive order to end U.S. dependence on foreign countries for the medical supply chain, with a particular focus on eliminating Chinese products.  White House National Trade Council Director Peter Navarro said in a March 11 interview with The New York Times that, “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.  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.”

Instituting a “Buy American” mandate during a pandemic when global supply chains are already stressed to produce enough medical products would be catastrophic, and the argument to do so is likely based on faulty data.  An April 6 Reason article by Eric Boehm, “Why You Shouldn’t Trust Anyone Who Claims 80 Percent of America’s Drugs Come From China,” provides evidence that much of this information is misleading or false, and that in reality the supply chain is quite diverse.  This should cause a pause in any drastic moves by Congress or the White House.

Boehm pointed out that the Food and Drug Administration (FDA) provides information on the percentage of manufacturing facilities for  active pharmaceutical ingredients (API) for all drugs by country or region.  (The API is the part of any drug that provides the desired effect for the condition it is treating.)  In testimony before an October 30, 2019 House Energy and Commerce Subcommittee on Health hearing, FDA Commissioner Janet Woodcock, M.D., said that as of August 2019, 28 percent of FDA registered facilities making APIs are in the U.S.; 26 percent are in the E.U.; 18 percent are in India; 13 percent are in China; 2 percent are in Canada; and, 13 percent are in the rest of the world.

FDA’s figures do not tell how much of each API a facility makes or where it goes.  That information would likely only be available from a pharmaceutical company.  For example, Pfizer, one of the largest drug companies in the world, has three API facilities in the U.S., and stated that less than 2 percent of their API and key materials come from China.

Dr. Woodcock testified that while historically the production for medicines for the U.S. population had been domestically based, that has changed in recent decades and drug manufacturing has gradually moved out of the country for many reasons, like lower costs and fewer regulations.  But she also said, “that advanced manufacturing technologies could enable U.S.-based pharmaceutical manufacturing to regain its competitiveness with China and other foreign countries, and potentially ensure a stable supply of drugs critical to the health of U.S. patients.”  These types of manufacturing facilities include 3D printing and continuous manufacturing.

Technology is certainly changing how pharmaceuticals and medical equipment are made, and it would be better if Congress provided incentives instead of hammers to encourage U.S. manufacturing back to our shores.  The National Association of Manufacturers (NAM) has provided a list of ideas to encourage an American Renewal Action Plan that not only responds to the coronavirus but also its aftereffect.  NAM suggested that Congress utilize the tax code to incentivize manufacturing in the U.S. by creating a new tax credit to support moving operations to the U.S.; investing in capital equipment; purchasing property; and, building facilities.  Other ideas include tax incentives to recruit and train a skilled workforce, upholding the full deduction for Research and Development, and other incentives to help mitigate increase labor costs for a limited period after operations are moved back to the U.S.

Medical companies, like pharmaceutical firms, are not blind to the problems that China creates, including the theft of intellectual property, the lack of a strong rule of law, and a different business culture.  For example, Sanofi announced in February it plans “to create a major leading European company dedicated to the production and marketing to third parties of [APIs], which are the essential molecules responsible for the beneficial effects used in the composition of any drug.”  The new facility is “expected to help in balancing the industry’s heavy reliance on API sourced from the Asian region.”

Companies should not be forced to move all production back to the U.S.  In many instances it would not be practical because manufacturing decisions are based on many factors like availability of raw materials, production costs, and easy access to markets.  Furthermore, the U.S. has its own dangers and deterrents in many regions, like destructive storms that cause enormous long-term damage, stifling taxes, high property costs, antibusiness environments, and an unskilled labor force.  Having facilities all over the world is important because in case there is an emergency or disaster in one area, a company can move production to another area, avoiding shortages of life-saving drugs.

The way to bring more manufacturing home is not with government mandates and controls.  The lightning speed with which promising vaccines and therapies have been produced since the beginning of the coronavirus pandemic demonstrates American ingenuity and innovation.  This achievement has been helped by a significant reduction in regulations and red tape. 

The pharmaceutical industry holds the key to bringing full confidence and stability to both individual and economic health and recovery.  Nothing should be done to impede the development of treatments and cures not just for COVID-19, but also for all other diseases now and in the future.  This can be done in America, but no one should force it all to be made in America.