Tom Cotton Debuts Plan to Take Pharma Production Back From China

Sen. Tom Cotton / Getty Images
March 19, 2020

Sen. Tom Cotton (R., Ark.) introduced legislation Thursday to repatriate pharmaceutical manufacturing from China to America, aiming to reduce a dependency that could seriously limit the U.S. coronavirus response.

The bill, which Cotton introduced with Rep. Mike Gallagher (R., Wis.), aims to severely curtail the volume of Chinese active pharmaceutical ingredients (APIs) from the U.S. medical drug supply. The PRC currently produces most of the world's APIs—the "active ingredients" in commonly used drugs—leaving the United States and other nations critically dependent on it for medicines.

Cotton's is just the latest proposal to onshore pharmaceutical supply chains, including a similar one from Sen. Marco Rubio (R., Fla.) and rumblings from the White House about a "buy American" executive order. Prompted by the coronavirus pandemic, many are beginning to see the cost-savings from Chinese-made pharmaceuticals as not worth the risk of undersupply during another pandemic, or during a potential conflict with America's main geostrategic rival.

"China unleashed this plague on the world, and China has to be held accountable," said Cotton during a Fox News interview Wednesday evening. "It's too grave a threat to let our health rest on Chinese drugs."

The Cotton bill would directly target Chinese API producers, requiring the FDA to track the point of origin for APIs and drugs made outside of the United States, as well as requiring drug companies to list the country of origin for APIs on their products. It would also prohibit all federal entities—including the Departments of Health and Human Services, Veterans Affairs, and Defense—from purchasing drugs that use APIs made in China.

The bill also aims to bolster domestic pharmaceutical production capacity. It would allow domestic manufacturers to immediately expense the costs of expanding production capacity, giving such businesses a major write-off on their taxes. If successful, that provision could help U.S.-based manufacturers compete with lower-cost Chinese ones, keeping drug prices low even as production moves back to the United States.

Cotton's plan, and those similar to it, are targeted at changing a major feature of the current system of international trade. Pharmaceuticals are like electronics: Most of the actual innovation is done in the United States, Europe, and Japan, but China does much of the assembly.

In particular, China makes much of the world's API supply. The United States produces about 28 percent of the APIs it uses, compared to importing 13 percent directly from China. But, because China is (along with India) the global leading producer, making about 40 percent of the world's total supply, many finished drugs imported from Europe, India, and other places likely also contain Chinese APIs.

The sale of APIs to the United States has been major business for the Chinese, with the total number of factories producing them in China doubling between 2010 and 2019. Census Bureau data show that pharmaceutical imports have grown from $179 million in 2000 to $1.56 billion in 2019—a nearly 800 percent increase.

Perhaps, in part, because of these profits, discussion of repatriating pharmaceutical production appears to have spooked Chinese authorities. In a Tuesday tweet, the country's ministry of foreign affairs claimed that "trying to move medical supply chains back to the U.S. from China is unrealistic and unhelpful," adding that it would be "a wrong remedy for #COVID19 pandemic."

Published under: China , Tom Cotton