Pharmaceutical supply chain transparency executive order could have momentum

Erin McCallister Senior Manager, Health Research Institute, PwC US August 13, 2020

A two-part executive order (EO) from President Donald Trump addressing the US medical supply chain is unlikely to have short-term re-shoring impacts but it may shed light on where products are sourced, a goal that enjoys some congressional support.

On Aug. 5, President Trump announced an EO that adds new reporting requirements for medical product manufacturers, illuminating source materials and putting domestic production facilities on more equal footing with those located abroad. The EO also requires certain federal agencies to purchase “essential medicines, medical countermeasures and critical inputs” from domestic sources. It would also accelerate approval or clearance of domestically produced products.

“It is critical that we reduce our dependence on foreign manufacturers for Essential Medicines, Medical Countermeasures, and Critical Inputs to ensure sufficient and reliable long-term domestic production of these products, to minimize potential shortages, and to mobilize our Nation’s Public Health Industrial Base to respond to these threats,” the order stated.

What’s in the EO?

Supply chain transparency:

  • Within 180 days, the Secretary of HHS will identify vulnerabilities in the supply chain for “essential medicines, medical countermeasures, and critical inputs and to mitigate those” via new regulations or guidance to collect information from manufacturers during the regulatory application and review process, including sources of finished products, the use of any scarce or “critical” inputs and the date of the last inspection and subsequent results.
  • The National Security Council, Departments of State, Defense, and Veterans Affairs will also need to disclose information about the security and vulnerabilities in their supply chains for essential medicines.
  • FDA regulations will also be reviewed to determine if they are a barrier to domestic production and determine whether they should be repealed or amended. At the same time, the EO calls on the agency to negotiate with countries to increase foreign site inspections, specifically unannounced inspections.

Domestic manufacturing and procurement:

  • Over the next six months, the FDA commissioner will identify a list of essential medicines, countermeasures and “critical inputs.” US trade agreements will be altered to exclude these products and the Secretary of Defense shall use his authority under the Defense Federal Acquisition Regulation Supplement to restrict procurement of these products to domestic sources.
  • It would also allow the FDA to accelerate approval or clearance of products manufactured in the US and require the agency to draft guidance and recommendations related to advanced manufacturing, while also accelerating EPA siting and permitting approvals of advanced manufacturing facilities.
  • There are exceptions, including where the relevant products are not yet produced in the US “insufficient and reasonably available commercial quantities and of a satisfactory quality” or the product would increase procurement costs by 25% or more.
  • It will also not apply for the procurement of items “that are necessary to respond to any public health emergency declared,” or any major disaster or emergency declared under the Stafford Disaster Relief and Emergency Assistance Act.

HRI Impact analysis

Given the caveats within the EO and the implementation timeline, it’s unlikely that the EO will have an immediate effect on domestic production of pharmaceuticals or medical devices for which the majority of production occurs overseas. However, a closer look at the details suggest that the supply chain elements could have bigger ramifications in the short term.

For example, in cases where much of the product is already produced overseas, the domestic production requirement wouldn’t apply. According to the FDA, as of May 2020, active pharmaceutical ingredient manufacturing facilities in China accounted for 13% of drugs in the US market while India accounted for 19%.

Alternatively, some generic medicines such as antibiotics are almost exclusively manufactured outside the US. According to a February testimony by former FDA Commissioner Scott Gottlieb, 80% of antibiotics in the US are made in China and 40% of heparin is imported from the country.

While the timeline for many of the supply chain elements in the EO run into the next presidency, they could have more stamina.

HRI has identified multiple bills in Congress that include many of the elements in the executive order, including the Securing America’s Medicine Cabinet Act (H.R. 6801, S. 3432) and the Medical Supply Chain Security Act (HR 6049, S. 3343

While all of the bills are sponsored by Republicans, they each have at least one Democratic co-sponsor.

The CARES Act passed earlier this year also contains language around shoring up the US supply chain, including increasing contingency planning requirements for drug and medical device manufacturers.

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Contact us

Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Crystal Yednak

Senior Manager, Health Research Institute, PwC US

Erin McCallister

Senior Manager, Health Research Institute, PwC US

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