Recent reports indicate that the administration may propose a “Buy American” executive order that would impose domestic purchasing requirements on pharmaceuticals and medical supplies.
If implemented this Buy American mandate would disrupt existing supply chains at a time that medical care is needed now more than ever.
It would lead to higher costs, could prompt retaliatory actions from foreign countries, and could further harm economic growth. At the very least, this issue should be debated at a time when the country and the world is not in a global pandemic.
The supply chain for biopharmaceuticals is inherently global and diverse. It is complex and incorporates numerous inputs from across the globe including raw materials, active pharmaceutical ingredients, and high precision analytical tools.
By design, it is also efficient and flexible in order to protect against emergencies including regional disruptions in manufacturing or shortages.
A Buy American mandate threatens this efficiency and flexibility. It would increase costs and make the industry less efficient. A best-case scenario would require significant and time-consuming changes to existing supply chains that would result in increased long and short-term costs.
At worst, there would be significant disruptions to pharmaceuticals due to a lack of access to raw materials, labor force issues, and existing regulations hampering manufacturing.
The fact is, manufacturing is capital intensive and requires numerous inputs, regardless of whether it involves pharmaceuticals, machinery, or electronics. Recent policy proposals that restrict the supply chain such as tariffs have already crushed many types of manufacturing. It has also led to retaliatory measures from foreign trading partners that have further harmed American businesses.
A buy American mandate risks doing the same to the pharmaceutical industry.
If the administration wants to encourage American manufacturing, it should promote policies that encourage investment and allow businesses to grow and avoid new mandates.