On May 5, the Trump Administration issued a pair of executive orders that could signal big changes for the drug industry and health research efforts in the United States. The orders, in part, direct federal agencies to take actions by this fall to curtail certain pharmaceutical manufacturing and health research activities performed outside the United States. The orders are among the first of many that are anticipated to initiate federal restrictions on offshore health care and life sciences activities and incentivize domestic operations in the industry.
Executive Order 14293 Regulatory Relief To Promote Domestic Production of Critical Medicines (E.O. 14293) restores an effort that was started during the first Trump administration and continued under the Biden administration to attempt to assist companies to bring pharmaceutical manufacturing capacity back to the United States. As with E.O. 14292, this order directs federal agencies to take the next 90 to 180 days to review and offer changes to regulations and subregulatory guidance to help increase American manufacturing capacity for pharmaceuticals.
Executive Order 14292, Improving the Safety and Security of Biological Research (E.O. 14292) seeks to regulate and eliminate “gain of function research” which has been identified by some as the genesis of the novel coronavirus responsible for COVID-19. On top of suspending federal funding for gain-of-function research both in and outside of the United States, the order broadly suspends funding for “other life-science research” that is occurring in countries of concern or foreign countries where there is not adequate oversight. The order also directs federal agencies to revise the framework for oversight and managing risks in biological research.
Both of these executive orders could signal massive changes to the production and importation of drugs as well as the research process behind those drugs. As a result, pharmaceutical manufacturers, research institutions, and health care institutions that dispense, distribute, or otherwise rely on these offshore activities should carefully watch upcoming actions by the various elements of the Department of Health and Human Services (HHS) as well as the Environmental Protection Agency (EPA) for guidance on how these changes will be implemented.
Reshoring production of pharmaceuticals
The primary thrust of E.O. 14293 is to speed up the process of permitting and building pharmaceutical manufacturing capacity within the United States. It does this through both streamlining the regulatory process for new pharmaceutical manufacturing facilities as well as by increasing inspection of foreign manufacturing facilities.
The inspection aspect requires the Food and Drug Administration (FDA) to develop a plan for enhanced inspections of foreign facilities that supply medicine to the United States. The plan will be financed by increased fees on foreign manufacturing and the numbers of these inspections will be publicly released with details by country and manufacturer.
As for streamlining the process, the executive order calls upon the EPA to examine environmental regulations “that apply to the inspection and approval of new and expanded manufacturing capacity of pharmaceutical products, active pharmaceutical ingredients, key starting materials, and associated raw materials in the United States” with an eye toward eliminating any unnecessary regulations and to shorten the time for permitting new and expanded capacity.
Additionally, the order requires the FDA to review all “existing regulations and guidance that pertain to the development of domestic pharmaceutical manufacturing” including regulations and guidance that pertain to “emerging technologies that enable the manufacturing of pharmaceutical products, active pharmaceutical ingredients, key starting materials, and associated raw materials in the United States.” This review will result in changes to licensing inspections both in terms of timing and requirements. It will also involve expansion of FDA programs to provide early technical advice prior to operations of a facility.
This executive order builds on other efforts by the administration to reshore production in various industries. According to a fact sheet put out by the administration in April, the country is faced with a national emergency “posed by the large and persistent trade deficit.” This national emergency declaration has spawned a tariff regime as well as efforts by the administration to bring manufacturing capacity back to the United States.
Restrictions on biological and other health research
In addition to the reshoring efforts from E.O. 14293, the other executive order, E.O. 14292, places restrictions on biological and other health research both in and outside of the United States that pharmaceutical manufacturers and research organizations should be aware of.
E.O. 14292 is not exclusively focused on “gain-of-function” or biological research. Section 3(a)(ii) of the order directs HHS to work with various federal authorities to “end Federal funding of other life-science research that is occurring in countries of concern or foreign countries where there is not adequate oversight to ensure that the countries are compliant with United States oversight standards and policies and that could reasonably pose a threat to public health, public safety, and economic or national security, as determined by the heads of relevant agencies.”
This order could incentivize pharmaceutical companies and other organizations involved in health research to relocate their research and development activities back to the United States. Doing so may reduce the risk of losing funding if any aspect of research might be interpreted as supporting gain-of-function studies or if the research is conducted in a “country of concern” as designated by the administration.
Additionally, the executive order requires federal authorities to modify policies for oversight of research involving pathogens and nucleic acid synthesis screening to help avoid misuse of the research materials. It also requires the director of the Office of Science and Technology Policy to track and manage risks involved in any life science research that has societal impacts, including gain of function research and most other health research.
Under Section 7 of the order, relevant agencies will include in “every life-science research contract or grant award” terms that will require compliance with the terms of the executive order and any regulations stemming from it. Violation of those terms by individual researchers will be considered violations by the employer or institution as well and could result in immediate revocation of grant funds as well as a 5 year ban from future grants offered by the relevant agencies.
What does this mean?
The administration is attempting to move production capacity for pharmaceuticals and health research activities back to the United States. The executive orders seek to accomplish this by making it more difficult to maintain operations in foreign countries with increased inspections and fees as well as restrictions on federal funding for research conducted in other countries. The orders also seek to find a way to make manufacturer permitting and licensing and health research activities easier within the United States to encourage pharmaceutical manufacturers and researchers to onshore their operations.
These orders are likely to introduce additional challenges for life sciences companies and institutions seeking to keep pace with the rapidly changing regulatory landscape for laboratory research, clinical trials, and other product development activities. Some of the most highly utilized and engaged contract development manufacturing organizations (“CDMO”), for example, are located outside of the U.S. and provide extensive support to life sciences companies during both pre- and post-commercial product development and manufacturing.
Life sciences companies will need to assess and consider risks of continuing to engage in manufacturing and research activities offshore, whether directly or through a partner organization such as a CDMO, and the operational and commercial impact for any changes to these practices. Initiating new production and manufacturing, for example, can be costly and significantly impact projected timelines including regulatory or commercial milestones.
What’s more, the orders demonstrate the administration’s commitment to onshoring and reshoring within the health care sector with a focus on national security and supply chain resilience, economic growth, quality control and streamlined regulatory oversight, and strategic independence—a trend we anticipate will begin to impact other areas of the industry, including the provision of and payment for health care services.
Reed Smith will continue to follow developments in these areas. If you have any questions about these executive orders or related policies and regulations, please reach out to the authors of this post or other members of your Reed Smith life sciences and health industry team.