Amidst a flurry of policymaking from the White House last week, President Trump issued the Executive Order on Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States on August 6, 2020 (the “Order”), aimed at ensuring certain “Essential Medicines” (and associated materials required to manufacture them) are produced in the United States.

In short, the Order directs executive departments or agencies (“Agencies”) involved in the procurement of Essential Medicines, Medical Countermeasures and Critical Inputs to consider a variety of actions designed to (i) accelerate the development of cost-effective, efficient and redundant domestic production thereof; (ii) ensure long-term demand for such items produced in the United States; (iii) maximize domestic production capabilities thereof to protect public health and safety; and (iv) combat the counterfeit trafficking thereof over the internet (the “Policy”).

The Order is organized into five corresponding Agency directives in furtherance of the Policy: (i) to maximize domestic production in procurement; (ii) to identify vulnerabilities in supply chains; (iii) to streamline regulatory requirements; (iv) to prioritize and allocate Essential Medicines, Medical Countermeasures and Critical Inputs; and (v) to periodically report certain information regarding its procurement practices relative to Essential Medicines, Medical Countermeasures, and Critical Inputs.

Maximizing Domestic Production in Procurement

The Order requires each Agency, in consultation with the Food and Drug Administration ("FDA") Commissioner, to (i) tailor procurement policies to limit competition to only those manufacturers who are established in the United States; (ii) divide procurement requirements among two or more manufacturers located in the United States, as appropriate; and (iii) review (and report to the President) its authority to limit online procurement via e-commerce platforms to only those (a) whose platforms are certified to comply with the Department of Homeland Security’s (“DOHS”) best practices and (b) who agree to submit to audits by the DOHS to confirm compliance therewith.

The Order provides narrow exceptions to the foregoing to the extent (i) the head of an Agency determines that (a) applying the directives would be inconsistent with the public interest, (b) the items at issue are not produced in the United States in sufficient and reasonably available commercial quantities and of a satisfactory quality, or (c) procuring such items in the United States would be at least 25 percent more costly than the foreign alternative; or (ii) procurement of such items outside of United States is necessary to respond to a public health emergency, any major disaster or a national emergency.

Identifying Vulnerabilities in Supply Chains

The Order directs the FDA Commissioner to take all necessary and appropriate action to identify supply chain vulnerabilities, including by (i) considering new or revised regulations, guidance or official recommendations that would enable the collection from manufacturers of certain information relevant to assess such vulnerability, such as the source of Critical Inputs and the date the FDA last inspected the manufacturer’s regulated facilities; and (ii) entering into new agreements with other Agencies, as appropriate, to disclose records that are relevant to assessing such vulnerability in supply chains.  Further, the Order instructs the FDA Commissioner to take all appropriate action, consistent with the law, to accelerate the approval of domestic manufacturers and increase the frequency of inspections of all facilities manufacturing Essential Medicines, Medical Countermeasures or Critical Inputs.

Streamlining Regulatory Requirements

The Order directs the Environmental Protection Agency (“EPA”) to take appropriate action to identify requirements and guidance documents that can be “streamlined” to provide for the certification of manufacturing facilities in the United States, such as accelerating permitting and facility approvals.

Prioritizing and Allocating Essential Medicines, Medical Countermeasures, and Critical Inputs

The Order directs the Secretary of Health and Human Services to use the authority of the Defense Production Act to prioritize the performance of government contracts or orders for Essential Medicines, Medical Countermeasures or Critical Inputs over performance of any other contracts or orders and to allocate such materials, services and facilities as the Secretary deems necessary or appropriate to promote the national defense.

Periodic Reporting Requirements

The Order requires each Agency to submit by December 15, 2021, and each year thereafter, a report covering the preceding three fiscal years that contains (i) a list of all Essential Medicines, Medical Countermeasures and Critical Inputs procured; (ii) itemized and aggregate expenditures on such Essential Medicines, Medical Countermeasures and Critical Inputs; (iii) the sources of all Essential Medicines, Medical Countermeasures and Critical Inputs; and (iv) the Agency’s plan to support domestic production of such products in the forthcoming fiscal year. Each Agency report will be published in the Federal Register, subject to redaction for legally protected information.

Discussion

The scope and impact of the Order remains highly in question, as the FDA Commissioner has 90 days to publish a list of “Essential Medicines.” At a minimum, however, the Order will apply to drugs and supplies needed to combat emergencies, such as pandemics, bioterror attacks and other national security threats, according to Peter Navarro, President Trump’s Director of Trade and Manufacturing Policy.

While the Order offers flexibility for Agencies in implementing its primary directives, the Order’s language creates uncertainty for businesses unsure of which drugs will be covered and how the Order will impact existing government contracts. Industry leaders and economists have already voiced several concerns that the Order will result in seismic disruptions to existing supply chains, which currently depend upon foreign providers of their pharmaceutical products to a significant degree. Further, the Order’s seeming contradiction with certain provisions in the President’s July 24 orders requiring sharp cuts in drug prices have several industry leaders seriously questioning whether the President’s series of executive actions will result in weaker access and affordability of critically important prescription medicines.

Snell & Wilmer continues to monitor commentary, guidance and other updates associated with the Order. Please check back for periodic updates on this topic.