Report Outlines New Solutions to U.S. Dependence on China for Essential Medicines
Generic Drugs Chokepoint Is as Severe as Rare Earth Minerals, Requires Immediate Action
Washington, D.C. — Following the COVID-19 pandemic and new Chinese export restrictions on rare earth minerals, both of which exposed the danger of U.S. reliance for essential goods on too few producers in too few locations, and especially in China, the American Economic Liberties Project today released a new report, “Making Medicine in America Again: Why Breaking Monopolies Is Key to Building a Resilient U.S. Pharmaceutical Manufacturing Base.” The report explains why a combination of competition, industrial, and trade policies is necessary to successfully rebuild the U.S. capacity to make key medicines. The antimonopoly solution set the paper proposes would remedy current U.S. supply chain frailty and the dangers of overdependence on foreign suppliers for essential medicines – those generic drugs needed for emergency rooms and making up 90% of Americans’ prescriptions.
“The United States no longer makes most essential medicines and is particularly dependent on China for their components, known as active pharmaceutical ingredients and key starter materials. This overreliance is a threat to national security and public health that demands urgent action,” said Sally Hubbard, Senior Fellow at Economic Liberties and lead author of the report. “To solve this crisis, federal policymakers must address both policy-driven offshoring and domestic consolidation. Without fixing broken market structures that make domestic manufacturing of critical generic drugs unsustainable, piecemeal attempts – like tariffs alone – will not only fail but could also exacerbate drug shortages and unaffordability.”
Over several decades, federal policymakers have enabled and incentivized profit-maximizing corporations to relocate pharmaceutical manufacturing abroad and consolidate pharmaceutical middlemen markets – including pharmacy benefit managers (PBMs), group purchasing organizations (GPOs), and wholesale drug distributors – at home. In conjunction with policy-driven offshoring, these anti-competitive market structures and practices have resulted in constant shortages of life-saving medications despite steady consumer demand.
The paper then provides a three-part anti-monopoly solution set for policymakers to end this crisis by enacting:
- Competition policies to restructure pharmaceutical market structures and rein in the monopolistic middlemen that squeeze generic manufacturers out of business or force them overseas.
- Industrial policies to invest in and create demand for a resilient U.S. pharmaceutical manufacturer base that can withstand supply chain shocks.
- Trade policies, including strategic tariffs, to promote domestic manufacturing of essential medicines – phased in once the aforementioned reforms are underway.
Read the full report, “Making Medicine in America Again: Why Breaking Monopolies Is Key to Building a Resilient U.S. Pharmaceutical Manufacturing Base,” here.
Read the executive summary of the report here.
Learn more about Economic Liberties here.
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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; international trade arrangements that promote balanced trade and benefit workers, farmers and small businesses; and wealth is broadly distributed to support equitable political power.