Pharma Will be Leaving China to Come Home to the United States

Earlier this week, in Moving Your Manufacturing From China: Look South (Again) to Mexico and Puerto Rico, I highlighted a recent New York Post editorial that decried America’s “serious over-reliance on China for pharmaceutical production”, and called for Puerto Rico to once again become a “central hub of U.S. drug manufacturing”.

Then on the same day CNBC reported the introduction of a bipartisan Senate bill “that would funnel $100 million to develop U.S. manufacturing of drugs”. The bill’s sponsors—Sens. Marsha Blackburn (R-TN) and Bob Menendez (D-NJ)—are “concerned about possible drug shortages amid the coronavirus outbreak”. According to CNBC:

About 72% of manufacturers of pharmaceutical ingredients supplying the U.S. are overseas, including 13% in China, according to FDA testimony last year. That could make U.S drug companies vulnerable to shortages if COVID-19 forces factories to shutter and shipments to the United States to stall, experts have warned.

This bill “is at least the third legislative proposal addressing the issue”. The other two measures are also bipartisan in nature, suggesting broad support for incentivizing, and in some cases forcing, a return of pharma to the United States.

U.S. legislators are not just concerned about pharma offshoring generally, but about China specifically. Introducing the Pharmaceutical Independent Long-Term Readiness Reform Act, Rep. Vicky Hartzler (D-MO) bluntly stated:

China having control over the production of our military’s medicine poses a grave national security threat. Not only does it open the possibility of them deliberately manipulating our servicemember’s medical regimens to cause physical harm, but the Chinese government’s lack of proper oversight and regulatory standards on prescription drugs is also deeply alarming to me. We need to ensure that our military’s medicine is American-made.

The bill’s cosponsor, Rep. John Garamendi (R-CA), piled on.

Right now, China has the ability to attack the United States without firing a single shot by poisoning our servicemembers’ medicines or cutting off their supply. The Chinese government is the principal developer of generic prescriptions, which account for approximately 90 percent of pharmaceuticals. China’s chokehold on the global pharmaceutical market leaves our servicemembers and our nation vulnerable to attack. We need to reinvigorate the United States industrial base to produce generic medicines and antibiotics domestically.

I know from conversations with Puerto Rican business leaders that they are gearing up to take advantage of the opportunities. But whether a considerable part of any repatriated pharma production ends up in Puerto Rico specifically is beside the point. In fact, Sen. Menendez is hoping that with its “leadership in the life sciences industry and institutes of learning”, his home state of New Jersey “can lead the way and make a difference”.

What matters is that there will be enormous pressure for U.S. pharma to come back home, powered by national security concerns. And as we discussed in our post earlier this week on forced labor in China, pharma is likely just be the beginning.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.