The instinct to stockpile — be it milk, eggs, bread, toilet paper, or hand sanitizer — is as ancient as humanity itself. Having essentials on-hand is invaluable in an emergency. It's why as a young CIA officer stationed in Africa decades ago, I ordered dry goods in bulk and filled a freezer with impala and warthog meat. That instinct has served us well, but the reemergence of fear-driven protectionism demonstrates how that instinct, in the extreme, can lead us astray.
Countries fearing medical equipment and drug shortages during the pandemic have acted to ensure domestic needs are met first — at least 54 countries have placed some sort of export restriction on COVID-19 related medical equipment since the beginning of 2020, according to a report from the University of St. Gallen. This includes personal protective equipment, critical medicines, and ventilators. Feeling the pinch, Israel tasked its spy agency with procuring desperately needed medical equipment.
The U.S. of course must act to protect against drug and medical equipment shortages, but in a way that does not feed the flames of trade nationalism created by the current pandemic. Globalization has proven benefits for the U.S. and the world, yet excessive reliance on foreign-produced medical supplies exposes a strategic risk for the U.S.
It is stunning that the U.S. has such glaring vulnerabilities. The U.S. imported roughly one-third of its medical devices in 2018, according to a report by Fitch Solutions, and nearly three-quarters of facilities registered to produce Active Pharmaceutical Ingredients (API) — the key components of drugs — for the U.S. market are located abroad.
Worse, the U.S. lacks a comprehensive understanding of these vulnerabilities. Companies are not required to report API orders, tally quantities, and specify markets, according to 2019 Congressional testimony by Janet Woodcock, an FDA official.
Changes are afoot. Pending legislative efforts—some introduced before the crisis and many since the outbreak—would incentivize reshoring of production and force diversification of sources abroad. March's stimulus bill codified and expanded the reporting requirements of drug companies and requires they develop risk management plans.
These are positive steps, but if done improperly, the overall effort could come at a serious cost and will result in intractable trade disputes, reduced manufacturing efficiency, less innovation, higher healthcare costs, and most important, weaker preparedness during the next global medical crisis.
Congress can help by mandating more stringent reporting requirements on supply chains and production, specifically for the most vital medical devices and drugs; any broader requirements would be a drag on the industry. Funds should also be appropriated to ensure a system for confidential transmission of such information, similar to how banks have a portal to report sensitive information to the government on suspected illicit activity.
Executive Branch agencies need to work with the private sector to identify and mitigate supply chain risks by encouraging diversification and redundancy. This would reduce the risk that a disruption in one country would cut the United States off from the supply of a drug or product.
Forcing production back to the United States should be done selectively. Only the most critical drugs and equipment should be retrenched. Decision makers must realize the reality that on-shoring production will increase drug and device costs, adding additional stress to our healthcare system.
The Executive Branch can also reduce the need for such reshoring by putting in place emergency production plans less heavy-handed than the Defense Production Act. For example, this initiative would identify firms capable of redirecting resources and ramping up production of certain products. Participating firms would maintain a certain level of preparedness in exchange for financial incentive.
Additionally, The U.S. can increase the quantity of emergency medical equipment in the Strategic National Stockpile. A similar international stockpile can be created by an international organization like the United Nations which would distribute supplies based on pre-determined, apolitical criteria, thus alleviating some protectionist tendencies during a crisis.
Medical supply companies should ramp up efforts to understand and strengthen their supply chains by researching foreign partners, categorizing those likely to face disruptions or export restrictions, and identifying new, back-up suppliers in other countries. These companies should institute periodic assessments, inherent in their emergency planning for COVID-19 waves and other pandemics. These companies should also publicize information on supply chains and production when possible and share concerns with the US government.
First and foremost, nations have the duty to protect the security and safety of their citizens, yet viruses like COVID-19 do not respect borders — a deadly reminder that first does not mean alone.
Ambassador Henry A. Crumpton is chief executive of Crumpton Group, a business intelligence firm, a former CIA clandestine officer and U.S. coordinator of counterterrorism.