Six Ways White House Proposes to Bring Domestic Drug Supply Back to US

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Will Incentives for Transparency, Resilience, and “Quality” Be Enough?

The proposal outlined in a new Biden White House white paper involves policy considerations that are estimated to cost between $3.26 billion and $5.11 billion over a span of 10 years. This funding is aimed at improving the supply of generic sterile injectable medicines and enhancing the resilience of drug supply chains.

Federal funding to increase domestic production is more than a dent, but will it be enough?

The “Policy Considerations to Prevent Drug Shortages and Mitigate Supply Chain Vulnerabilities in the United States” document underscores the pivotal role of federal funding and initiatives aimed at boosting domestic production of pharmaceuticals, particularly focusing on Active Pharmaceutical Ingredients (APIs) and essential medicines. Here you’ll find the detailed aspects of how federal funding is proposed to increase domestic production:

1. Direct Investment in Domestic Manufacturing:

Allocation: The proposal includes a significant financial commitment, with HHS already investing $17 billion in domestic manufacturing capabilities for the medical supply chain, which includes $500 million specifically allocated to support API manufacturing.
Purpose: These investments are intended to expand public health supply chain manufacturing capacity and flexibility, enhance partnerships between the U.S. Government and the medical countermeasure industry, and foster innovative and adaptable development of medical countermeasures.

2. Use of Defense Production Act (DPA) Authorities:

Presidential Memorandum: On December 27, 2023, a Presidential Memorandum was issued allowing HHS to utilize DPA Title III authorities. This empowers HHS to expand domestic production of essential medicines, medical countermeasures, and their critical inputs.
Strategic National Stockpile (SNS) Expansion: Efforts are being explored to create and expand a virtual national strategic stockpile of APIs and other critical materials for use in public health emergencies, contingent upon additional funding provision.

3. Supporting Domestic Manufacturing Infrastructure:

Facility Development: The proposals suggest providing authority for the acquisition, construction, or alteration of non-federally owned facilities to develop domestic manufacturing capacity for medical countermeasures and related products.
Innovation and Development Funding: Expanding the Other Transaction Authority of ASPR (Administration for Strategic Preparedness and Response) to fund development and scale manufacturing of critical medical products directly.

4. Federal Demand Signals and Procurement Strategies:

Demand Projections: Collaborating with the Office of Management and Budget (OMB) to improve federal demand signals for domestically manufactured critical medical products. This includes developing white papers to compile projected government demand for specific Personal Protective Equipment (PPE) and other medical supplies.
Promotion of Domestic Sourcing: Working to align and leverage Defense Logistics Agency (DLA) acquisition vehicles to aggregate demand and promote domestic sourcing in federal procurement, in line with Executive Order 14005 (“Ensuring the Future Is Made in All of America by All of America’s Workers”).

5. Legislative and Policy Support:

The document calls for legislative action and additional funding to support these initiatives comprehensively. This includes policy proposals in the President’s FY 2025 Budget aimed at bolstering domestic manufacturing capabilities and supply chain resilience.

6. Collaboration with Industry and Academic Institutions:

Public-Private Partnerships (PPPs): Encouraging PPPs to leverage industry and academic expertise in building domestic manufacturing capacity. This approach aims to combine federal resources with the agility and innovation of the private sector and academia.

The overarching goal of these efforts is to mitigate the United States’ reliance on foreign sources for critical pharmaceuticals and medical supplies, thereby strengthening the resilience of the domestic supply chain against disruptions.

Through substantial investment, strategic use of federal authorities, and collaborative efforts with stakeholders, the proposals aim to secure a stable, secure, and sustainable supply of essential medicines and medical components within the country.

Will It Be Enough?

Monday, we’ll look at Enthereal’s internal analysis of the root causes of drug shortages.

Here’s a concise summary of the main components, emphasizing technology’s role in reducing costs, improving quality assurance, and the strategic shift towards domestic production:

Key Highlights and Challenges

Drug shortages are a long-standing issue, impacting patient care, increasing costs, and stressing healthcare systems. These shortages often stem from economic pressures, quality-related manufacturing problems, and a concentrated supply chain.
A significant portion of generic sterile injectable (GSI) drugs, crucial in acute care, face shortages. The complexity of GSI manufacturing and over-reliance on foreign sources for APIs and Key Starting Materials (KSMs), primarily from China and India, exacerbate these challenges.

Importance of a Resilient Supply Chain

Resilience in the supply chain is crucial for minimizing disruptions and ensuring a swift recovery from shortages. Strategies for resilience include diversification of supply sources, investment in efficient manufacturing practices, and ensuring adequate buffer inventory.

Technological Opportunities and Quality Assurance

Advancements in technology can play a pivotal role in enhancing supply chain resilience by improving manufacturing processes, quality assurance, and transparency throughout the supply chain.
Emphasizing quality management maturity (QMM) and implementing modern manufacturing technologies can reduce the risk of quality-related failures, thus minimizing supply disruptions.

Prioritizing Domestic Production

There is a strategic push towards bringing production “closer to home” to reduce dependency on foreign sources, mitigate risks of global supply chain disruptions, and improve the security of pharmaceutical supplies.
Supporting domestic manufacturing capabilities for APIs and essential medicines is seen as critical to ensuring supply chain resilience. This includes incentivizing domestic production through various programs and partnerships between the public and private sectors.

Legislative and Policy Recommendations

The document outlines several policy considerations and legislative proposals aimed at addressing the root causes of drug shortages and strengthening supply chain resilience. These include developing a Manufacturer Resiliency Assessment Program (MRAP) and a Hospital Resilient Supply Program (HRSP), which would encourage transparency, investment in resilient manufacturing practices, and diversification of the supply chain.
Proposals also emphasize the need for additional authorities and funding to support these initiatives, highlighting the importance of federal investment and legislative action to promote supply chain security and prevent future drug shortages.

Overall, the focus on leveraging technology to simplify and enhance the economics around APIs, improve quality assurance, and prioritize domestic production reflects a comprehensive approach to mitigating drug shortages and building a more resilient healthcare supply chain.

What’s MRAP, HRSP, and QMM?

The document outlines several key policy concepts and proposals aimed at preventing drug shortages and strengthening the pharmaceutical supply chain, particularly concerning Active Pharmaceutical Ingredients (APIs) and generic sterile injectable medicines. Here are the main aspects of the proposed policies:

1. Manufacturer Resiliency Assessment Program (MRAP):

Objective: To measure and improve the resilience of manufacturers by assessing their practices and past performance.
Implementation: Through a public-private partnership, a private entity would assign resilience scores to manufacturers based on their quality management maturity, manufacturing redundancy, and diversity in sourcing APIs and Key Starting Materials (KSMs).
Transparency and Incentives: The program aims to enhance market transparency by making resilience metrics available, encouraging hospitals and pharmacies to preferentially purchase from manufacturers with higher resilience scores. Manufacturers are incentivized to participate as it could lead to hospitals paying higher prices for drugs from more resilient supply chains.

2. Hospital Resilient Supply Program (HRSP):

Objective: To create demand incentives or penalties that encourage hospital purchasing practices to prioritize supply chain resilience.
Implementation: The HRSP would link Medicare payments and/or penalties to hospitals based on a scorecard reflecting their progress in adopting practices that promote supply chain resilience. This could include inventory management practices, contracting practices that ensure supply continuity, and diversifying purchasing to include more domestic sources.
Focus on Inpatient Services: Initially targeting hospitals that provide inpatient services, the program aims to optimize existing resources and expertise in a timely manner while allowing for industry adaptation to changes for long-term success.

3. Quality Management Maturity (QMM)

A framework to evaluate the adoption of management practices that support a more reliable drug supply chain by reducing quality-related failures and improving manufacturers’ ability to maintain performance during supply chain disruptions.

4. Transparency and Data Sharing

Initiatives to increase the visibility of drug manufacturing and supply chain vulnerabilities by requiring more detailed reporting from manufacturers about their production volumes, suppliers, and potential disruptions.

5. Investment in Domestic Manufacturing

Recognizing the critical role of domestic manufacturing in supply chain resilience, policies propose supporting and rewarding domestic manufacturing of essential medicines and their ingredients. This includes federal investment to bolster domestic API manufacturing and leveraging federal procurement to encourage domestic production.

6. Legislative and Budgetary Proposals

The document highlights the need for additional statutory authorities and funding to fully implement these programs. It provides a broad budget estimate for these initiatives, underscoring the necessity of federal investment to support the proposed changes.

7. Collaboration and Stakeholder Engagement

Emphasizes the importance of collaboration between government agencies, the private sector, healthcare providers, and other stakeholders to implement these policies effectively and achieve a more resilient pharmaceutical supply chain.

These proposed policies represent an extensive approach to addressing the root causes of drug shortages, with a particular focus on enhancing the resilience of the supply chain for critical medications.

Next week, we’ll look at Enthereal’s internal analysis of the root causes of the drug shortage crisis, and why we believe that nothing short of recreating the Active Pharmaceutical Ingredient manufacturing paradigm will solve the increasingly serious problem of small molecule drug shortages.