President Trump signed an executive order Thursday that would require the federal government to buy "essential medicines" and certain medical supplies from American manufacturing plants.
The big picture: Similar to Trump's recent executive orders that target drug prices, it's unclear how much this policy would change the drug and device supply chain, and there are several loopholes.
How it works: Under the executive order, which is fiercely opposed by the pharmaceutical and drug supply industries, the Food and Drug Administration has 30 days to make a list of medications, drug ingredients and medical devices that federal agencies would have to purchase from U.S. manufacturing facilities.
Yes, but: The executive order does not apply if the drugs and supplies are not already made in the U.S., or if the policy would "cause the cost of the procurement to increase by more than 25 percent."
Between the lines: The coronavirus outbreak raised concerns that the country is too reliant on foreign manufacturing, especially if things unexpectedly shut down and create shortages of lifesaving drugs and protective gear.
- But experts say drug manufacturers, wholesalers, pharmacies and others involved in making and dispensing drugs and supplies have strong financial incentives to produce and buy cheap — especially when it comes to generic drugs — and that usually means looking overseas.
- A vast majority of pharmaceutical ingredients, for example, are made in China and India. The executive order doesn't change the lower cost of labor or materials in those countries.
"It's not going to have a major impact," said Awi Federgruen, a supply chain professor at Columbia Business School. "You've got to create an incentive structure that will simply make it attractive for manufacturers to produce here rather than produce overseas."
