Following the shift of Chester “Chip” Davis from the Assn. of Affordable Medicines (AAM) to the leadership of the Healthcare Distribution Alliance earlier this year, AAM has now elected its new president and CEO: Dan Leonard, most recently president and CEO of the National Pharmaceutical Council. He also has prior executive experience at America’s Health Insurance Plans, the trade association for that part of healthcare.
Leonard joins the organization at a crucial time: as a result of the Covid-19 pandemic, shortcomings in the US’ domestic pharmaceutical supply chain have become more visible—specifically, the dependence of the US pharma industry on non-US suppliers, particularly APIs that are often transformed into finished goods here. (Finished goods coming from abroad are also a concern.) AAM issued a “Blueprint for Enhancing the Security of the Pharmaceutical Supply Chain” in April in which, after getting FDA and other agencies to agree on essential medicines, the federal government should provide:
- Long-term price and volume guaranteed contracts, including for resupplying the Strategic National Stockpile (SNS) and for Veterans Administration supply agreements
- Grants to build or renovate facilities, and/or relocating ones from abroad
- Tax Incentives of 50% offsetting drug-manufacturing costs, a 20% R&D tax credit and excluding grants from calculations of taxable income
- Regulatory efficiencies to compel FDA to “streamline” regulatory review and to “collaborate” with the manufacturer
- Trade agreements with “US allies” (including India but excluding China) to ensuring coordinated responses to pandemics and natural disasters.
This is one heckuva wish list; perhaps the only thing it leaves out is for the US government to build and run the facilities for the manufacturers.
The Trump administration has been on its own path toward addressing domestic drug manufacturing (in fact, there is a problem in that multiple parts of the White House are pursuing different paths.) President Trump signed an executive order on Aug. 6 (amplifying one signed earlier in the spring), “Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States.” Like the AAM Blueprint, it calls for defining essential medicines, and then goes on to recommend steps to “accelerate the development of cost-effective and efficient domestic production of Essential Medicines and Medical Countermeasures and have adequate redundancy built into the domestic supply chain.” However, other than allowing for a somewhat higher price for domestically supplied essential medicines (versus imported ones), it has no recommendations to fund manufacturing expansion. It also invokes the Defense Production Act as a means to obtain essential medicines—but that’s already existing authority.
Where’s the money?
Which is not to say the Trump administration hasn’t ponied up any funds. There was a $354-million grant (expandable to $814 million) to Phlow Corp. in May for generic API production. That originated with HHS’ Biomedical Advanced Research and Development Authority (Barda) and the Defense Dept. On a separate track, under the direction of Trump’s economic adviser Peter Navarro, a $765-million loan agreement with Eastman Kodak was announced in July. The loan would originate under Defense Production Act authority, and be administered by something called the US International Development Finance Corp. (which, according to press reports, has primarily been involved in smaller-scale funding of humanitarian projects abroad). However, wildly gyrating Kodak stock pricing in the aftermath of the announcement has put the project on hold, pending an investigation by the Securities and Exchange Commission. Navarrro has been quoted as calling Kodak’s actions “the dumbest decisions made by executives in corporate history” for how the news was announced; Kodak says that it was merely trying to comply with White House directions.
Left unsaid, mostly, in all this buzz around the domestic generics supply chain is that any federal action would take years to have an effect on US production of generics. The Phlow announcement did include mention of making some APIs immediately available to the SNS, but that appeared to be based on existing supplies; a new manufacturing plant is to be built. Kodak was in the selection process in Navarro’s office because it has a history as a chemicals producer—but not an FDA-regulated one. Both AAM and the White House are taking advantage of the crisis pandemic conditions to propose a new foundation to domestic production. (The Trump administration has been pushing for reshoring US manufacturing of all sorts since it came into office, of course, but the results have been highly mixed.)
There is a backdrop to all this: for most of the past decade, the US pharma supply chain has suffered drug shortages, mostly of generics and mostly of sterile injectables within that. Studies have shown that one of the factors leading to these shortages is the cutthroat competition to fulfill the pricing dictates of group purchasing organizations (hospitals’ suppliers), resulting in shuttered domestic production and more imports. It’s a little ironic, too, that allowing for more-generous pricing of generics would be proposed at the very time that the Trump administration is pushing for lower drug prices overall. AAM’s Leonard is facing a major challenge, but also a major opportunity.