It is expected that any day now, the White House will release an executive order requiring certain drugs to be manufactured in the United States. It’s part of a wider push by both the administration and Congress to force the federal government to buy more American-made goods and reduce reliance on countries like China.
This push is misguided. The administration’s “Buy America” agenda would derail our response to COVID-19 and could have long-lasting negative consequences for our economy. The best way to maintain efficient, high-quality production of drugs and other medical equipment is to embrace a dynamic, global supply chain.
The White House’s draft executive order would require federal agencies to “maximize domestic procurement of essential medicines.” Congress has gotten in on the act, too. Sens. Tim Kaine, D-Va., and Marco Rubio, R-Fla., have introduced the Strengthening America’s Supply Chain and National Security Act, the most prominent of several Buy America plans circulating Congress.
Both plans would restrict federal agencies’ abilities to import crucial medical supplies from abroad. The executive order would force the Departments of Defense, Veterans Affairs and Health and Human Services to purchase all vaccines, pharmaceutical ingredients and more from American suppliers.
Advocates claim we need to take drastic measures to protect the country’s health and safety. They think COVID-19 proves the dangers of relying on foreign countries – particularly China – to source essential medical goods. When the world locks down, the argument goes, we should have everything we need to produce drugs and other essential medical goods on our shores.
These Buy America plans would do more harm than good. Only 28 percent of plants that make active pharmaceutical ingredients for FDA-approved drugs are located in the United States. If drug makers were suddenly unable to import these ingredients, the country would face a severe shortage of everything from painkillers to cancer drugs.
Shifting production to the United States would leave the country short of more than drugs. Last year, the United States imported more than $3 billion worth of gloves, masks and other medical supplies from China, Germany and Mexico.
Shortages like these would be particularly dangerous now, amid the COVID-19 pandemic. That’s why more than 200 of the nation’s top economists petitioned the White House to abandon the Buy America order.
Moreover, moving a single pharmaceutical plant can take over a decade and cost over $2 billion. Rushing through this process would be dangerous. But it doesn’t even make sense to repatriate the supply chain over time.
A diverse global supply chain helps American companies produce affordable, high-quality drugs. Producing an active pharmaceutical ingredient in India can cost up to 40 percent less than doing so in the United States, thanks to the subcontinent’s abundance of raw materials and lower costs of production. Sourcing these materials entirely from the United States would increase costs for manufacturers, which they’d pass on to consumers in the form of higher prices.
The global supply chain is hardly as dangerous as Buy America advocates suggest. China accounted for just 1 percent of pharmaceutical imports to the United States in 2019 and only 18 percent of active pharmaceutical ingredient imports. Further, China is home to just 15 percent of the manufacturers of active pharmaceutical ingredients that U.S. drug makers rely on to produce drugs on the World Health Organization’s Essential Medicines list.
More importantly, global supply chains help the United States in times of crisis. When Hurricane Maria struck Puerto Rico in 2017, it damaged 50 pharmaceutical plants. The United States only avoided a drug shortage because it was able to rely on foreign manufacturers. Global supply chains have similarly aided our nation’s efforts against COVID-19 – and will help us endure future crises as well.
If lawmakers want to strengthen the supply chain, they can do so by defending U.S. intellectual property abroad and investing in advanced manufacturing techniques at home. Neither of these reforms would jeopardize the health of the American people.
The rapid spread of COVID-19 shows just how globalized our world is. Despite what Buy America advocates claim, global problems require global solutions – and supply chains.