Can – and Should – Pharma Manufacturing Heed Calls to Come Home?

The COVID-19 pandemic underscored weaknesses in critical industries in the U.S. In the pharmaceutical industry, the global nature of the business, long considered a benefit, became not just a weakness but a national security threat.

Now political leaders of both parties are calling for manufacturing in critical industries to return to the U.S. The question for pharma is whether it will comply.

The bulk of the ire is directed toward China. Reasons include its treatment of Hong Kong, which is a breach of the Sino-British Joint Declaration. That contract specified how Hong Kong was to be governed between 1997 (when the colony was returned to China) and 2047.

Another concern is the corporate social credit system that is being instituted this year to pressure corporations to take positions that align with Beijing’s interests.

“That could hamper your ability to continue manufacturing or to access logistics services,” Patti Seymour, managing director of the bioprocess technology group at BDO, told BioSpace.

A history of spotty quality issues – including hundreds of thousands of defective masks and test kits sold to several European nations and to the U.S. – hasn’t helped China’s case.

Janet Woodcock, M.D., director of the FDA’s Center for Drug Evaluation and Research (CDER), outlined the risks of over-reliance on offshore manufacturing in 2019, a few months before the pandemic became news. Testifying before the House Committee on Energy and Commerce, Subcommittee on Health, she noted that “…72% of the active pharmaceutical ingredient (API) manufacturers supplying the U.S. market were overseas, and 13% are in China.”

The implications for national security were unknown because, as Dr. Woodcock said, “Since we do not currently know whether API manufacturing facilities are actually producing the drug, or in what volume, or what portion of U.S. drug consumption is dependent on APIs from China or India, or another country, we cannot perform a reliable gap analysis.”

In response, since the beginning of the pandemic, some 20 bills have been introduced in Congress to bring manufacturing back to the U.S., reduce reliance on foreign countries for critical products or ingredients or eliminate drug sourcing from China specifically. “I think some legislation will pass. It’s a topic that needs a lot of attention,” Seymour said.

“With COVID-19 pandemic, the big issue was the inability to move things around,” she continued. “If more nationalistic issues were to hamper trade, the repercussions could be significant for some of the medications. Therefore, it’s important to have some manufacturing brought home or into countries that are less likely to have potential issues.”

That’s easier said than done.

As PhRMA spokesperson Nicole Longo told BioSpace, the organization supports efforts to foster more manufacturing in the U.S. but, “Proposals to drive all pharmaceutical manufacturing to the U.S. underestimate the significant time, resources and other feasibility challenges and the complexities involved.”

Bringing pharmaceutical manufacturing back to the U.S. could take 20 years and cost hundreds of millions of dollars, by some estimates.

“There are over 400 key ingredients or APIs that need to be produced to be fully-integrated, and the U.S. has no personnel resources since big pharma left API manufacturing 20 years ago,” Stanley Chao, author of “Selling to China,” and managing director, All In Consulting, told BioSpace.

The regulatory environment is a factor, too. Noting the “millions of tons of bio-waste,” Chao said the Environmental Protection Agency (EPA) and the Occupational Safety & Health Administration (OSHA) “would play a heavy hand in the overseeing of production, causing delays and red tape.” He speculates U.S. regulations would escalate API costs five-fold.

U.S. manufacturers turned to China a few decades ago in a joint bid to obtain low-cost manufacturing and access to vast markets. Now, Chao said, “There’s an ‘If it ain’t broke, don’t fix it,’ mentality.” Writing in Supply Chain Management Review, he said, “Even with quality that is sometimes suspect, big pharma and its shareholders have profited greatly from China’s supply chains.”

As one of the reasons, Chao told BioSpace, “API production is a low-margin, high capital investment business. Executives cannot justify the return on investment for spending hundreds of millions of dollars for API production. The money is better spent on new drug development.”

Beyond the challenges, there’s a real business reason to sustain a geographically diverse supply chain, Longo pointed out. “It enables manufacturers to make adjustments as needed to avoid shortages, which is especially important during national disasters and global pandemics.”

But there’s also a need to ensure our nation can care for itself. For example, although the FDA inspects manufacturing facilities abroad the COVID-19 pandemic hampered inspectors’ ability to go overseas to conduct those inspections, Seymour said. “The plan was to subcontract inspections to regional health authorities.” The result requires a great deal of trust.

The objective in all the talk isn’t to remove manufacturing capabilities from China as much as it is to build pharmaceutical factories in the U.S. It’s a matter of self-sufficiency – a way to protect Americans by ensuring their access to medications isn’t hampered by geopolitics.