FederalTexas Lawmakers Call for Moving the Pharmaceutical Supply Chain Away from China

Concerned about a reliance on China for pharmaceuticals, several Texas legislators in Congress have introduced bills aimed at moving the supply chain to the U.S. or allies.
May 26, 2020
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This article is the second in a series looking at legislation introduced by Texas congressional members regarding U.S.-China relations amidst the coronavirus pandemic. 

Since the coronavirus pandemic began, many public officials have grown concerned about U.S. dependence on China — both directly and indirectly — for pharmaceutical supplies.

One pertinent example is the manufacturing of hydroxychloroquine.

After the drug showed promising results in the treatment of COVID-19 patients, demand for the drug skyrocketed and some doctors had difficulty securing the medicine.

70 percent of the hydroxychloroquine supply reportedly comes from India, which has low labor costs and lenient pharmaceutical patent laws.

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But India itself relies heavily on China for its supply of active pharmaceutical ingredients (APIs). About 68 percent of those raw materials are obtained from their northeastern neighbor.

Janet Woodcock, the Director of the Center for Drug Evaluation and Research at the Food and Drug Administration (FDA) told Congress last October that in the past decade, pharmaceutical companies have begun offshoring their production in search of “cost savings and less stringent environmental regulations.”

While the FDA does not have data on the volume of drugs produced by country, they do keep track of the number of registered facilities that manufacture APIs. 

Accordingly, while 28 percent of the facilities are located in the United States, 13 percent are located in China — about twice as many as ten years ago.

“FDA’s information shows that overall, the number of China’s API facilities is somewhat smaller than the United States, but comparable in size and growing,” said Woodstock. “However, because of the limitations of available data, we cannot assess the extent of U.S. dependence on China.”

Woodstock noted that the FDA does not have the information available to know how resilient U.S.-based pharmaceutical manufacturers would be if China withdrew its supply from the U.S. market.

Several Texas members of Congress have introduced legislation in an attempt to encourage more domestic drug manufacturing or at least shift the growth of the industry away from China.

Rep. Chip Roy (R-TX-21): The Bring Entrepreneurial Advancements To Consumers Here In North America (BEAT CHINA) Act

According to a press release, the proposal aims to incentivize medical supply and pharmaceutical companies “to move to the U.S. through tax advantages.”

If passed, such companies moving to the United States from foreign countries “can have non-residential real property purchases considered to be 20-year property instead of 39 years, a change which will allow companies to be eligible for ‘bonus depreciation’ and the purchase of the property to be fully deducted in the first year.”

Further, “Qualifying companies will also be able to exclude from gross income any gain earned on the disposition of assets in the country the company is moving from.”

Companies are required to maintain at least the same production levels as they maintained in their previous location.

The bill has been cosponsored by 10 Republicans, including Reps. Ron Wright (R-TX-06) Lance Gooden (R-TX-05), and Michael Cloud (R-TX-27).

Rep. Bill Flores (R-TX-17): The Safe and Secure Medicine Supply for Hardworking Americans Act

According to a press release from Flores, the legislation accomplishes the following:

  • Penalizes foreign manufacturing facilities if they produce tainted drugs, as well as the companies that import those drugs into the United States;
  • Places tariffs on imported drugs from certain countries to discourage companies from manufacturing drugs outside the United States;
  • Creates a registry of all FDA approved drugs and any active ingredients manufactured outside the U.S.;
  • Requires drug labels to indicate the country of origin for each active ingredient; and
  • Provides incentive grants to drug manufacturers to increase their manufacturing capacity and workforce in the U.S.

Sen. Ted Cruz (R-TX): The Expanding Medical Partnerships with Israel to Lessen Dependence on China (EMPIL-DOC) Act

Cruz announced his intention to introduce this bill alongside Sen. Chris Coons (D-DE) on May 13.

The proposal has the support of members of the Senate Foreign Relations Committee, as well as Sens. Martha McSally (R-AZ), Jacky Rosen (D-NV), Susan Collins (R-ME), Richard Blumenthal (D-CT), Tom Cotton (R-AR), and Ron Wyden (D-OR).

The legislation would provide $4 million to Israel, which the benefiting country would be required to match, in order to promote the development of medical technologies in relation to COVID-19.

In April, Cruz also announced the senators’ intention to push for a similar $12 million appropriation in the potential “Phase 4” coronavirus relief bill.

Cruz has also cosponsored S. 3635, which would ban the use of federal funds for the purchase of drugs manufactured in China.

The other articles in this series on US-China legislation introduced by members of the Texas delegation include:

Part 1: Texas Lawmakers Respond to Chinese Coronavirus Mishandling, Gooden, Crenshaw Request Sanctioning of Chinese Officials

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Daniel Friend

Daniel Friend

Daniel Friend is a reporter for The Texan. He participated in a Great Books program at Azusa Pacific University and graduated in 2019 with a degree in Political Science. He has studied C.S. Lewis’s science fiction trilogy and in his spare time you might find him writing his own novel partly inspired by the series.