The US needs a more diversified pharmaceutical supply chain, but the transition may need to be more delicate than current policy proposals would suggest, FDA Commissioner Robert Califf said.
Key Takeaways
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FDA Commissioner Robert Califf stressed the US needs a more diversified drug supply chain that is less reliant on China, but cautioned against taking action that is too extreme given the two countries’ interconnectedness.
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Califf said US pharma does not want to lose access to the Chinese market for exports.
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Califf also said his agency needs more staff with global expertise.
Almost all key starting materials for pharmaceuticals used in the US come from China, creating a supply chain imbalance that puts the US “in serious jeopardy,” Califf said 27 September when asked about balancing national security concerns with drug shortage concerns at an Alliance for a Stronger event.
His remarks did not directly mention the BIOSECURE Act, legislation that would force the US pharmaceutical industry to separate from certain Chinese manufacturing and contract development companies, and the FDA declined to respond to Pink Sheet’s follow up questions about the comments. But Califf seemed to be alluding to the potential ramifications BIOSECURE could have for the US drug supply.
The BIOSECURE Act has been given unusually high odds of clearing Congress this year. (Also see "BIOSECURE Act: Potential Supply Chain Hits And Pharma’s Path Ahead" - Pink Sheet, 26 September, 2024.)
Califf previously warned that pharmaceutical supply chains will likely remain dependent on worldwide operations despite rising political opposition to globalization. (Also see "Anti-Globalism Policy Cannot Stifle International Cooperation, US FDA’s Califf Says" - Pink Sheet, 20 June, 2024.)
While BIOSECURE would not entirely cut off the US from the Chinese drug supply, the bill would make it challenging to work with some of the country’s biggest players. Shifting business to firms not targeted by the law could be tricky because many alternative manufacturers also rely on the BIOSECURE-targeted companies.
US-based manufacturers may need a financial boost from the federal government to help fill the void internally. (Also see "Who Will Reap The BIOSECURE Spoils? US Industry Boost Not Guaranteed" - Pink Sheet, 13 September, 2024.)
In addition, BIOSECURE’s passage could push China to retaliate.
“I think everybody knows it’s a significant adversarial relationship right now,” Califf said about the US and China. “At the same time, we’ve always counted on the fact that the Chinese economy and our economies are so intertwined that it would be not a wise move to create problems related to this dependence we have.”
“But recognizing that we do have dependence, it’s critical that we invest in reshoring and nearshoring those elements,” he added.
Califf also said that while there has been attention on the need to rethink the locations of drug ingredient manufacturing, less attention has been paid to medical devices “where things may even be more extreme right now.” He noted the US has just one domestic manufacturer of syringes.
Califf Worried About Harming US Export Market
Califf said businesses should move away from preferring the lower prices from companies overseas without any long-term thinking about the harm it could cause over time.
In June, the Biden administration announced a newly formed coalition of the US, European Union, India, Japan and South Korea to develop alternatives to Chinese-sourced active pharmaceutical ingredients. (Also see "Can BIOSECURE Maintain Its Virality In The TikTok Era?" - Pink Sheet, 2 July, 2024.)
In September, the House Energy and Commerce Committee advanced legislation aimed at diversifying the domestic manufacturing supply chain for drugs. The United States-Abraham Accords Cooperation and Security Act (H.R. 7155) would require the FDA to establish an office in a country that is party to the Abraham Accords, a series of agreements to normalize relations between Israel and several Arab countries. The measure could be included in the next government funding bill, which must pass by late December. (Also see "Pediatric And Rare Disease Drug Development Legislation Clears US House Committee" - Pink Sheet, 19 September, 2024.)
For Califf, rebalancing does not mean becoming isolationist or abandoning one country like China.
There are 1.5 billion people in China and Califf hopes that the US and China will work together “for mutual human benefit.”
US exports are also “very important,” he added. “We don’t want to cut off access of American companies to other countries when they’re selling products there, which is good for the health of other countries and good for our economy. So there is a balance.”
More FDA Staff Needed
In addition, the FDA could use additional staff to work on global issues, Califf said.
“I think the global strategy is an area that needs to be revitalized,” he said. “At FDA, we have good people, but we don’t have many of them, and it’s a big world out there, increasingly so many of the products touching other parts of the world. We need to work on that strategy.”
Those remarks came as Republicans in Congress have increased their scrutiny of the FDA’s international work, especially the agency’s China-centric activities. (Also see "US FDA Asked To Tighten China Risk Control By Legislators As Markup Looms" - Pink Sheet, 11 May, 2024.)
Califf also suggested legislation that would provide the FDA more insight into global supply chains so that it could develop computer systems to help predict drug shortages. The idea has not yet gained much traction in Congress. (Also see "Supply Chain Confidentiality Doesn’t Stand “Sunshine Test,” Califf Says In Comments On Drug Shortages" - Pink Sheet, 24 October, 2023.)
“At FDA we have a lot of insight into the problem and a lot of responsibility for dealing with supply chain disruptions when they occur, but the solutions on the supply chain are mostly not within FDA control or purview because they involve commerce and so it really falls to the broader government to put policies in place,” Califf said. “We need legislation in order to deal with this problem, but its not just FDA legislation.” He added that the Centers for Medicare and Medicaid Services would need to have a critical role.
Califf also said the three major US wholesales who he called “middlemen,” Cencora (formerly AmerisourceBergen Corporation.), McKesson Corp. and Cardinal Health, Inc., should be held encouraged to make purchasing decisions that take into account quality and stability of the supply chain long term rather than the lowest cost.
