At the start of 2020, reducing the prices American patients pay for prescription medications was at the top of the health care priority list for federal policymakers. The coronavirus pandemic sweeping the globe has significantly shuffled the deck on policy priorities. Now, if prescription drugs are on the agenda at all outside of coronavirus-related treatments and vaccinations, it’s in the context of the global supply chain.
It’s ironic that as a result of the pandemic, Congress and the Trump Administration appear more likely to take action actually increasing the costs of pharmaceuticals than bringing them down. There is growing momentum among lawmakers for “Buy American” provisions broadly, and to make changes to the pharmaceutical supply chain specifically in the name of safety, security, and preventing shortages.
One driver of this push is growing discomfort with China. I’m sympathetic to concerns about the threat China poses to America’s national and economic security, but in the case of the pharmaceutical supply chain, our dependence on China may be overstated.
Eric Boehm of Reason recently published a good explainer on how we don’t really know how much of the ingredients for our drugs—active pharmaceutical ingredients (APIs)—actually come from China. We do, however, know that only 13 percent of API manufacturers supplying ingredients for drugs sold in America are based in China.
That’s less than the 18 percent based in India, 26 percent in Europe, or the 28 percent based here in the United States. It would be useful to know—and the Coronavirus Aid, Relief, and Economic Security Act does include provisions aimed at shedding light on—exactly what percentage of the APIs supplied to the U.S. market come from China and elsewhere, but it is apparent now that the global supply chain for U.S. drugs is actually quite diverse.
Of course, for some policymakers the diversity of the supply chain is a problem in and of itself. The “Law of the Instrument” is a familiar concept: When all you have a is a hammer, everything looks like a nail. In the current political context, you can reframe that idea and reverse it: When you believe that globalization is at the root of every problem, then protectionism is your only tool.
Back in those halcyon days of late January, when many still believed the coronavirus to be primarily a Chinese problem, Commerce Secretary Wilbur Ross explained that the coronavirus pandemic could have the positive effect of increasing U.S. employment because companies will have to consider the risk of a global supply chain.
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