Policy Alert: Executive Order on Promoting US Pharmaceutical Manufacturing

Action: On May 5, the President signed an Executive Order seeking to promote domestic manufacturing of prescription drugs. The Order directs the Food and Drug Administration (FDA) to reduce the approval times associated with pharmaceutical manufacturing capacity including new and expanded manufacturing sites, “emerging technologies,” key starting materials, and associated raw materials. The Order includes a review of the FDA’s licensure, inspection, and enforcement apparatus in favor of accelerated timelines and reduced regulations.

Under the Order, the FDA Commissioner must also assess the current inspection regime of manufacturing facilities involved in the US medicine supply, with a particular focus on foreign facilities. The Order also directs the Environmental Protection Agency (EPA) to issue new guidance reducing regulatory barriers associated with the construction of relevant facilities and better coordinate the permitting process for these facilities with relevant agencies. This process will be centralized through the White House Office of Management and Budget (OMB).

Key Insights

• The Order comes after the President ordered the Commerce Department to begin an investigation into the national security implications of imported pharmaceuticals and related materials, now potentially concluding with an announcement of new tariffs by the end of May. Pharmaceuticals are currently exempt from the Administration’s general 10% reciprocal tariffs.
• The global pharmaceutical industry is largely interdependent. Under the WTO Pharmaceutical Agreement pharmaceuticals traded between many advanced economies are exempt from tariffs. The US remains a leading importer of pharmaceuticals, with the FDA estimating about 40% of finished drugs and 80% of active drug ingredients being manufactured overseas.
• In response to the planned tariff announcement, some pharmaceutical companies have unveiled plans to open new manufacturing facilities within the next few years in support of efforts to reshore manufacturing. This continues trends of announcements for new and expanded manufacturing facilities in the US.
• The Administration’s focus on foreign facilities will likely yield stronger regulations, with changes in the inspection regime funded by increased fees paid by foreign facilities, according to the Order. During the announcement, FDA Commissioner Marty Makary lamented more lax inspections on some foreign pharmaceutical manufacturing facilities in comparison to stricter US requirements. However, FDA has reportedly struggled to restore their inspection capacity to pre-pandemic levels, leaving nearly 42% of drug producing firms overdue for safety and quality inspections, with the issue particularly acute in overseas facilities. HHS also claims that while 3,500 FDA employees are scheduled to have their positions eliminated, this will not adversely impact food and drug inspections.