The United States leads the world in pharmaceutical innovation and drug development, but over 70% of these drugs are manufactured outside the US. Recently, the Trump administration has called for repatriation of drug manufacturing in the US, alongside “most favored nation” status with regard to drug pricing. Several pharmaceutical companies have recently announced multi-billion dollar plans to reinvest in US manufacturing. Many others are determining whether manufacturing costs could be lowered in order to offer more competitive pricing in the US. At present, it’s nearly impossible to do both at the same time, and companies must choose to either onshore manufacturing or lower the price of drugs.
But here are three steps the Trump administration can take in order to achieve both objectives, while supporting US pharmaceutical companies and furthering American innovation:
First, cut the bureaucracy and increase accountability at FDA. Developing new drugs is an extremely expensive and time-consuming process, often taking decades and hundreds of millions of dollars to complete the testing and clinical trials necessary for FDA approval. Layered into this is the unpredictable and often opaque nature of FDA reviews, which can be dependent on the mindset and personal views of the review team as they apply the regulations to a particular drug or disease. Only a small percentage of drugs ever make it to the commercial market. Therefore, in order for pharmaceutical companies to be profitable, the cost of the drugs that are approved must also cover the cost of development for the drugs that failed. If we are able to reduce the cost and timeline of drug development, and increase the predictability of regulatory approval, we will be able to decrease drug pricing and make healthcare more affordable.
Second, accelerate the use of AI in drug development and manufacturing. The pharmaceutical industry has been slow to adopt AI – in part, because AI has been less accurate to date with regard to scientific problems. Also, it’s been unclear whether US regulators will accept AI substitution for humans in drug manufacturing (and the FDA can often be unpredictable – see point above). Recently, the White House unveiled the AI Action Plan, which specifically notes that the healthcare industry has been slow to adopt AI, citing a complex regulatory landscape amongst other factors. The National Institute of Standards and Technology (NIST) and the Department of Commerce (DOC) will convene public, private, and academic stakeholders to accelerate the development and adoption of AI in specific domains, including healthcare. If these efforts are successful in establishing a more efficient path to drug development and manufacturing through AI, we may actually be able to onshore drug manufacturing and decrease costs simultaneously, which would be a win for both the pharmaceutical industry and patients.
Third, offer financial incentives for onshoring manufacturing. One way to lower the cost of drugs has been to manufacture them in countries with the lowest cost of goods and labor, like China and India. However, offshoring manufacturing can put the country at risk in the event of a global pandemic and can potentially result in a risk to national security through dependence on countries with contentious leadership. For this reason, the current administration has made repatriation of drug manufacturing a national priority. However, the cost of manufacturing is higher in the US, raw materials will still need to be imported from other countries, and tariffs may greatly impact the cost of these raw materials. It’s possible that over time the US could source raw materials domestically, but this will be a much longer process. If the government is able to offer exemption from tariffs for raw materials for US manufacturing and decrease taxes for companies that manufacture drugs in the US, the overall financial impact to companies onshoring manufacturing could be mitigated.
It's critical that we ensure that innovation in the pharmaceutical industry continues. It’s also critical that we do everything possible to bring drug manufacturing back to the US. In recent years, drug development has advanced our understanding of complex diseases, and offered treatments for many conditions that were previously fatal or untreatable. If we are thoughtful about the priorities of the pharmaceutical industry alongside the needs of our country, we will be able to drive innovation, repatriate drug manufacturing, and decrease costs simultaneously – which would ultimately be a triumph for patients above all else.
