To protect the medical supply chain, ‘made in America’ will be key

The Covid-19 pandemic exposed a serious flaw in the United States’ medical supply chain: an overreliance on imported supplies. Reinvigorating a domestic supply chain is an important step toward protecting Americans’ health and the country’s national security.

During the height of the Covid-19 pandemic, supply chain breakdowns and export restrictions made it difficult, if not impossible, for hospitals to import crucial materials, from N95 masks to life-saving drugs. China, which then accounted for more than 85% of all U.S. imports of personal protective equipment (PPE) — including N-95 and other disposable and non-disposable face masks, surgical drapes, and surgical towels — decreased its exports of PPE, removing critical supplies from markets across the globe.

In the first year of the pandemic, there were shortages for 29 of the 40 critical drugs for treating people with Covid-19. Between a combination of factory shutdowns, shipping delays, and a dramatic increase in global demand for Covid-19 therapies, shortages of essential medicines quickly arose. Today, the Food and Drug Administration reports shortages of more than 120 drugs in the U.S., which is about three times pre-pandemic levels.

To better prepare the U.S. medical system for future pandemics, the Centers for Medicare and Medicaid Services recently finalized a proposed rule that will provide financial assistance to hospitals buying domestically produced N95 masks. That is a step in the right direction. It will both encourage domestic PPE manufacturing and wean hospitals off of foreign supplies. As the U.S. works to boost its domestic production capabilities, this bottom-up approach is essential.

But the government must build on this initial effort by encouraging domestic production of more complex medical supplies, such as pharmaceuticals, ventilators, and other life-saving devices.

Pharmaceuticals are a logical focal point for this work — the U.S. has long offshored far too many of the essential drugs it needs. Bolstering American-made pharmaceutical production will support high-paying jobs and ensure that the country isn’t exposed to future supply chain breakdowns, whether due to a pandemic, war, or some other unforeseen crisis. This is the intent of the American Made Pharmaceuticals Act (S. 3991 and H.R. 7400), introduced into Congress earlier this year.

An alarming number of drugs are in short supply these days. Antibiotics are 42% more likely to be in shortage in the United States compared to other types of drugs, according to an analysis by the U.S. Pharmacopeia. The Adderall shortage is so severe that many people with ADHD are unable to fill their prescriptions. Last year, the decades-old chemotherapy drug fludarabine could be purchased wholesale for $110. Yet now, due to shortages, its price has risen to as high as $2,736.

A key factor driving these shortages and price hikes is a dependence on foreign manufacturing, with an overreliance on Chinese and Indian facilities. According to Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations, before the Covid-19 pandemic emerged in early 2020, Chinese pharmaceutical companies provided more than 90% of America’s antibiotics, ibuprofen, and hydrocortisone, along with much of its acetaminophen and heparin.

Covid-19 served as a wake-up call for American manufacturing, revealing the outsized dependence the country had on imported crucial necessities, from semiconductors to life-saving drugs and medical equipment. In light of the supply chain shocks caused by Russia’s invasion of Ukraine and the looming specter of additional regional conflicts, it is imperative that the U.S. quickly onshore as much drug and supply manufacturing as possible.

This effort must occur across the drug value chain, from easily-produced generics to complex biologics. One way the U.S. can protect itself from drug supply chain shocks and bolster domestic production is through supporting U.S. biosimilar manufacturers. Akin to generic versions of brand-name small molecule drugs, biosimilars have no clinically meaningful difference in function as the reference biologic medicines, such as insulin, hormones, and various drugs to treat cancer.

Biologics are extremely expensive to produce. Biosimilars help alleviate the cost to both patients and manufacturers, as they are, on average, 27% less expensive to make than their brand-name reference biologics. The RAND Corporation estimates that biosimilars could drive down the cost of biologics used to treat severe illnesses such as cancer and rheumatoid arthritis to the tune of $38.4 billion from 2021 to 2025, or 5.9% of the projected total U.S. spending on biologics in that period.

The FDA has approved 39 biosimilar drugs — compared to the European Union’s 73 approved — but only around a dozen of them are currently produced in the U.S. The U.S. government can incentivize domestic production through mechanisms similar to the PPE rule. Providing assistance to hospitals to buy domestically produced biosimilars and other drugs would do a great deal to spur additional U.S.-based manufacturing. Tax incentives to develop biosimilar manufacturing capacity is another approach Congress can take to encourage companies to develop and produce drugs here.

Another option is expanded use of the Strategic National Stockpile, the U.S.’s emergency cache of antibiotics, vaccines, chemical antidotes, antitoxins, PPE and other critical medical supplies. Providing tax incentives to American biosimilar manufacturers on the condition that a portion of their biosimilars be sold to the stockpile can both ensure a stable emergency supply of life-saving drugs and support American businesses and jobs.

With the American Made Pharmaceuticals Act, Congress has an opportunity for a mission-critical, bipartisan win. It must make domestic manufacturing of medical supplies a key priority, and should look to pharmaceuticals as a leader in the cause. By passing the act and bolstering the domestic production of biosimilars, other drugs, and other medical supplies, the U.S. can create high-paying jobs for its citizens, protect against future supply shocks whether by pandemic or war, and lower the cost of life-saving medical supplies for Americans.

Tony Paquin is the president and CEO of iRemedy Healthcare. David Sanders is the vice president for government affairs and policy at Coherus BioSciences and the executive director of the Securing America’s Medicine and Supply coalition, whose members include AmerisourceBergen, Amneal Pharmaceuticals, and Coherus BioSciences — all of which make biosimilars — and other drug and medical supply manufacturers. Both of the authors are on the coalition’s board of directors.

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