Trump takes a first step toward returning medical supply chains to the U.S.

“This is a great day for America. This has all of the elements of the Trump strategy. It’s made in the USA. It’s innovation that will allow American workers to compete with the pollution havens, sweatshops and tax havens of the world,” said Peter Navarro, a White House adviser who has led the effort to return manufacturing to the United States.

But some experts questioned whether the White House ambitions for a broader supply chain repatriation were achievable. The environmental and financial considerations that originally drove production of active pharmaceutical ingredients (API) offshore remain compelling, they said.

“The investment that would be needed to restart some of the API business here in the U.S., especially with much more stringent [environmental] and wastewater requirements, it’s really unrealistic to think that could be done and still be price competitive,” said Susan Capie, managing director of PharmaVantage, a consultancy in Babylon, N.Y.

During the initial four years, the company will develop a “rapid surge” capability for critically-needed medicines and their ingredients and build advanced manufacturing facilities to produce drugs that are in short supply, Eric Edwards, Phlow’s chief executive, said in an interview.

The company promises higher yields, less waste and more affordable medicines as a result of its continuous chemical process. Initial planning began about a year ago, Edwards said. Once the coronavirus materialized, he said he warned administration officials in early February of inevitable drug shortfalls.

Phlow later submitted a bid under a BARDA contract competition, he said.

“I think it’s a good thing, a really interesting step forward to put an investment into our pharmacy supply chain,” said Erin Fox, pharmacist and drug-shortages expert at the University of Utah hospital.

Maintaining adequate drug supplies — such as sedatives and painkillers for ventilator patients — has been a problem amid soaring demand during the pandemic, she said. Such shortages could worsen, as states reopen and hospitals resume performing elective surgeries.

“You need some of those very same drugs for surgery that you need for critically ill and intubated patients with covid-19,” she said.

To date, Phlow already has delivered to the government 1.6 million doses of antibiotics, sedatives, painkillers and blood pressure drugs, Edwards said.

The U.S. imports annually more than $150 billion worth of biologics, human and animal drugs, and medical devices, the Food and Drug Administration said last year.

Some experts were skeptical that Phlow’s relatively modest contract will mean much change. “This production has moved abroad for business reasons,” said Thomas Bollyky, director of the Council on Foreign Relations’ Global Health Program. “So it’s going to have to operate [in the U.S.] with a subsidy. The question is: how long are we willing to maintain that subsidy?”

The contract can be extended to a 10-year total of $812 million, according to the Health and Human Services Department, which oversees BARDA. The agency’s former director, Rick Bright, recently filed a whistleblower complaint alleging he was dismissed from his job after resisting pressure from administration officials to stockpile the anti-malaria drug hydroxychloroquine, an unproven covid-19 treatment.

Phlow is organized as a public benefit corporation, a for-profit venture that prioritizes positive social impact as one of its goals.

Edwards is a veteran pharmaceutical executive who spent 18 years at Kaléo, a company that produced auto-injectible pens, including for emergency anti-allergy treatment.

His tenure at that company, which he co-founded with his twin brother, was the subject of a Senate investigation. Between 2014 and 2017, at the height of the opioid crisis, Kaléo raised the price of a naloxone auto-injector, which reverses the effects of drug overdoses, from $575 to $4,100, according to a report by the Senate Homeland Security and Governmental Affairs’ permanent subcommittee on investigations. The increases cost taxpayers $142 million, the subcommittee concluded.

In response, a Phlow spokesman said that Edwards “had nothing to do with drug pricing decisions” while at Kaléo. Edwards, who remains a Kaléo shareholder, left the company more than one year ago on “good terms,” the spokesman said.

Phlow’s co-founder, Frank Gupton, also heads VCU’s Medicines for All Institute, which receives funding from the Bill and Melinda Gates Foundation. Rosemary Gibson, a senior advisor at the Hastings Center, and a prominent critic of U.S. dependence upon Chinese pharmaceuticals, is a member of the company’s board.

The United States still manufactures many cutting-edge biotech drugs, which tend to be more profitable, branded medications. Such drugs, typically delivered by injection or infusion, are produced by genetically modified cells in a complicated process dominated by Western manufacturers.

The chemical synthesis used to make traditional pills, including most generics, is a more routine form of manufacturing that shifted to China and India decades ago.

Capie said China imported most of its drugs before boosting domestic production in the 1980s. “When China started ramping up their own industry, the goal was to be self-sufficient in what they needed rather than having to import,” she said.

At the same time, increasing price competition among generic drugs in the West prompted U.S. and European manufacturers to outsource production of those medicines to low-cost factories in Asia, she said.

Production of the starter chemicals used to make drugs — the most environmentally toxic step of the process — has shifted to India as China, the former leader, has raised its environmental standards, Capie said. China now imports these starter chemicals to make intermediate powders known as active pharmaceutical ingredients, or API. Then Chinese or Indian companies turn that API into finished pills.

Quality concerns have dogged Indian and Chinese generic manufacturers in recent years, with FDA inspectors repeatedly flagging them for regulatory infractions.

The contract with Phlow could be “a game changer that could significantly strengthen the U.S. drug supply chain and relieve many of the factors that contribute to drug shortages,” said Tom Kraus, vice president of government relations for the American Society of Health-System Pharmacists.