Co-Authored by Sharath Patil
Weaknesses in the Public Health Industrial Base
Critical technology shortages have been a focus of President Trump’s trade and industrial policies. In an October 2020 report on the topic, the Trump administration identified medical and public health technologies as a key sector in which the U.S. needs to do more to protect and cultivate its technological advantage. According to some analysts, the COVID-19 pandemic has demonstrated that the United States’ public health industrial base is overly reliant on imports for critical medical and pharmaceutical needs. The first few months of the pandemic were characterized by significant shortages of key medical supplies such as ventilators and personal protective equipment. However, this overreliance pre-dated the pandemic. For example, in October 2019, the U.S. Food and Drug Administration (“FDA”) estimated that the United States accounts for only 28 percent of global active pharmaceutical ingredient (“API”) manufacturing facilities and that 80 percent of APIs consumed in the United States are produced abroad, the majority in China and India.
Many countries (including the U.S.) reacted to the shortage of key supplies in the early months of the COVID-19 pandemic by imposing export restrictions. However, many mainstream economists have argued that placing restrictions on the exports of key medical goods can actually exacerbate shortages by preventing industry from efficiently meeting demand. Furthermore, export restrictions on critical medical goods can present moral dilemmas about how to best distribute essential medical goods. Chad Bown of the Peterson Institute for International Economics has argued that placing export restrictions on critical medical goods during a pandemic can disproportionately harm smaller and poorer countries that lack the industrial base to produce their own essential goods.
On August 6, 2020, President Trump issued Executive Order 13994, titled “Executive Order on Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States.” The order sought to address concerns about weaknesses identified in the public health industrial base (“PHIB”) and creating systems to strengthen the ability of the United States to produce critical inputs and essential medicines domestically. Among other requirements, EO 13994 requires the Secretary of Commerce to submit a report to the Director of the Office of Management and Budget (“OMB”) among others by February 2, 2021 describing any change in the status of the public health industrial base and recommending initiatives to strengthen the public health industrial base. EO 13994 defines “public health industrial base” as the facilities and associated workforces within the United States, including research and development facilities, which help produce essential medicines, medical countermeasures, and critical inputs for the healthcare and public health sector. The PHIB includes all entities domestically manufacturing or producing medical products, including medical devices, medical equipment, medical countermeasures, and medications, pharmaceutical products, and other products designed to improve patient outcomes. This includes the manufacturing of components and materials that are essential to create end-item medical products, as well as ancillary supplies and disposable consumable products.
On December 2, 2020, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) announced in the Federal Register that it is seeking comments from the public to assist the Commerce Department in preparing its report. Comments are due on December 23, 2020. BIS requests comments recommending policies and actions to strengthen the public health industrial base. Specifically, BIS requests comments answering one or more of the following questions:
- What is the condition of the current U.S. PHIB? Commenters in responding to this question are encouraged to reference their position in the PHIB (e.g., research and development facility, manufacturer, distributor, or consumer).
- What policies and actions should the U.S. Government take to strengthen the PHIB in the United States?
- What aspects or parts of the PHIB are most vulnerable during outbreaks of emerging infectious diseases?
- How likely might such an event be, how much of an impact might it have in manufacturing operations, and what mitigation measures might be most effective in offsetting these impacts?
- In responding to this question, commenters are encouraged to include any lessons learned from responding to COVID-19 or other historic pandemics, and the ramping up of U.S. capacity in various areas that did or did not occur to meet these challenges.
- What aspects or parts of the PHIB are most vulnerable to chemical, biological, radiological, and nuclear (“CBRN”) events?
- How likely might such an event be; how much might it impact manufacturing operations; and what mitigation measures might be most effective in offsetting these impacts.
- In responding to this question, commenters are encouraged to include any lessons learned from responding to previous CBRN threats and the ramping up of U.S. capacity in various areas that did or did not occur to meet these challenges.
- For the Essential Medicines, Medical Countermeasures, and Critical Inputs with which your organization is involved under the PHIB, for what percentage of these items are you dependent on foreign suppliers? In responding to this question, please address:
- Whether or not there are foreign dependencies in any part of your supply chain for critical inputs (e.g., active pharmaceutical ingredients (APIs)) or for finished products?
- Whether it would be possible to source these critical inputs and/or finished products from the United States, as well as how long you anticipate it would take to source these items from U.S. suppliers if your foreign supplier(s) was no longer available?
- Are there any costs, regulatory or other factors that make it difficult or impossible to produce or source Essential Medicines, Medical Countermeasures, and/or Critical Inputs in the United States? In addressing this question, please also address:
- Any concerns that you may have regarding sourcing or producing these items in the United States, in contrast to sourcing or producing them outside the United States.
- Does your organization have mechanisms to determine whether Essential Medicines, Medical Countermeasures, and Critical Inputs are produced in the United States? What, if any, are the limitations to those mechanisms? Commenters are encouraged to be as specific as possible in their comments regarding the particular issues that may exist. For example, an example of a regulatory provision accompanied by a specific example of how the provision hinders domestic production is more helpful to Commerce than a statement that the regulatory environment in the United States discourages domestic production.
- How significant of a concern is “pricing” in being able to achieve maximum domestic production?
- What is the U.S. Government doing or could do to foster private and public sector investment and innovation in the U.S. PHIB, including, for example, investments in upgrades to equipment, or the adoption of emerging technologies, and/or automation that would increase productivity and competitiveness. Should the U.S. Government do more to foster U.S. PHIB investment, particularly in automation and emerging technologies? If so, what policy actions should it undertake?
- With respect to the U.S. PHIB, what are the challenges to investing in automation and other productivity-enhancing technologies in the United States as compared to moving operations abroad to lower-cost labor countries? Would increased investment in, or higher use of, more efficient and cost-effective automation and productivity enhancing technologies affect your decisions to source all or some of your Essential Medicines, Medical Countermeasures, and Critical Inputs in the United States?
- Briefly assess whether the amount of federal funds spent on U.S. PHIB research and development (R&D) is adequate; if not, specify why spending should be increased or decreased. Which types of R&D projects, if adequately funded, would have the most impact on the competitiveness of the U.S. PHIB supply chain?
- Briefly assess U.S. Federal procurement policy with respect to the U.S. PHIB and how it encourages or discourages investment in the PHIB. How should U.S. Federal procurement policy to make the PHIB more productive and more internationally competitive, as well as to encourage investment in automation and other emerging technologies?
- What are the workforce challenges to strengthening the U.S. PHIB, and what are best practices or suggestions for how U.S. industry can overcome these challenges? What have you done to address these challenges? How might Start Printed Page 77430emerging technologies in the PHIB create new workforce training needs? Which skillsets will the job market most demand in the future?
- How can the U.S. Government or the private sector help to accelerate the development of cost-effective and efficient domestic production of Essential Medicines and Medical Countermeasures and to have adequate redundancy built into the domestic supply chain for Essential Medicines, Medical Countermeasures, and Critical Inputs?
- What are the three most important things that can be done by the U.S. Government or the private sector to ensure long-term demand for the Essential Medicines, Medical Countermeasures, and Critical Inputs that are produced in the United States?
- What are the three most important things that can be done by the U.S. Government or the private sector to create, maintain, and maximize domestic production capabilities for the Critical Inputs, Finished Drug Products, and Finished Devices that are essential to protect public safety and human health and to provide for the national defense?
- How significant of a problem is trafficking of counterfeit Essential Medicines, Medical Countermeasures, and Critical Inputs over e-commerce platforms and from third party online vendors also involved in the U.S. Government procurement process? In responding to this question, commenters are encouraged to provide specific examples of how these practices may have undermined production in the United States, endangered U.S. citizens, or undermined the reliability of the U.S. supply chain.
- How great of a threat is cybercrime or malicious cyber activity to your organization and other organizations that you depend on as part of your supply chain for Essential Medicines, Medical Countermeasures, and Critical Inputs? In addressing this question, commenters are encouraged to provide specific examples of how cyber threats (e.g., ransomware, distributed denial of service attacks (DDoS) and malware) have undermined production in the United States and the reliability of the U.S. supply chain for Essential Medicines, Medical Countermeasures, and Critical Inputs. How can the U.S. Government or the private sector strengthen the PHIB sector’s ability to prevent, detect, and recover from malicious cyber activity? To what extent, if any, does dependence on foreign suppliers increase your organization’s exposure to cybercrime or create additional burdens because of the complexities involved in dealing with different countries’ laws on cyber issues?
- From your organization’s perspective, how dependent is the U.S. supply chain on foreign suppliers for items for use in Personal Protective Equipment (PPE)? In addressing this question, please address whether there are specific factors that undermine U.S. competitiveness in this area and provide any recommendations that your organization may have for reducing foreign dependency and increasing U.S. competitiveness. In addressing this question, specify whether your organization produces, sells or uses PPE.
Diaz Trade Law has extensive expertise on pharmaceutical trade matters and in submitting comments. Please reach out to us if you would like to submit comments to BIS informing the agency of your business’ recommendations for strengthening the U.S. public health industrial base. Diaz Trade Law can be reached at email@example.com and 305-456-3830.