New Report Shows “Buy American” Provision for Drugs and Medical Products Is Wrong Cure for Supply Chain Concerns

June 15, 2020

WASHINGTON—Fears of U.S. dependency on foreign suppliers like China have prompted Congress and the Trump administration to consider “Buy American” provisions for federal procurement of medical products and essential medicines as part of an effort to boost domestic production. But a new report released today by the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy, argues that, while boosting onshore production is desirable, breaking with finely tuned international supply chains would introduce significant challenges while doing little to boost U.S. innovation or competitiveness, and thus would inhibit America in the medical innovation race against China.

“A ‘Buy American’ prescription is the wrong cure for the condition. It would risk fragmenting the global trade system while encouraging other nations to follow suit and would inflict far more damage on U.S. firms, which would struggle to sell in competitive foreign markets,” says Stephen Ezell, ITIF’s vice president for global innovation policy, who authored the report. “The administration and Congress are right to focus on improving the competitiveness and innovation capacity of America’s biopharmaceutical and medical device and supply industries, such as by creating a national medical products strategy. But the way to achieve these objectives is to attract rather than compel reshoring of production. It requires innovation, not restrictions.”

The report argues that, in order to increase domestic production of essential drugs and medical products, public policy should focus on spurring research and development for process innovation to shift the economics of where active pharmaceutical ingredients (APIs) and other drugs can be profitably produced back in the United States. The report also calls for tax and investment incentives for reshoring, including measures to encourage production in U.S. territories such as Puerto Rico, and allowing first-year expensing of any costs associated with relocating manufacturing facilities to the United States.

“A ‘Buy American’ approach wouldn’t work. The United States should instead tune its trade policies to reflect the real challenge, which is China’s pernicious and unrepentant innovation mercantilism,” Ezell adds. “That requires affirming our faith that rules-based global markets led by private enterprise maximize value for America and the world.”

Read the report.