Free Trade

The Trump Administration Wants To Subsidize Domestic Drug Manufacturing. The First Contract Looks Like a $350 Million Grift.

A member of the five-month-old company's board has been touting bogus stats about America's supposed dependency on Chinese-made drugs.


The Trump administration just handed a $350 million contract to a relatively unknown Virginia-based pharmaceutical company that doesn't have any history of mass producing pharmaceutical drugs and appears to have been founded this year for the purpose of cashing in on protectionist politics.

The contract is one of the largest ever given by the federal government to a single pharmaceutical company, according to BioPharma Dive, a trade publication. "While that's noteworthy in itself," it noted, "it's made more so by the fact that Phlow is a relatively unknown entity in the drug manufacturing world."

Indeed, the company was only founded in January. Despite that, a Phlow spokesman told BioPharma Dive that the company's leaders had been "communicating with government officials about the U.S. pharmaceutical supply for more than a year" and that Phlow's "stated mission" is "reducing the U.S.' dependence on foreign supply chains."

Phlow Corp. "has no track record in drug manufacturing, and it's not clear when its assembly lines will begin churning out products," Politico reports. The whole arrangement leaves the impression that the contract awarded to Phlow Corp. has more to do with politics than pharmaceuticals.

Nevertheless, White House officials called this week's deal with Phlow Corp. a "landmark" accomplishment, according to The Washington Post. "This is a great day for America," White House trade advisor Peter Navarro told the paper. "This has all of the elements of the Trump strategy."

If that's true, then President Donald Trump's strategy looks a lot like crony capitalism built on a misunderstanding of economics and trade—specifically, the global trade in pharmaceutical products. The Phlow Corp. contract will inject millions of taxpayer dollars into a single company, but the effort is unlikely to do much to reshape those pharmaceutical supply lines. It is perhaps the best signal yet that the protectionism sought by Republican neo-nationalists is just corporatism in a new wrapper.

Even setting aside the possibility of cronyism, the deal is both unnecessary and likely to be ineffective.

Ineffective because a few hundred million dollars won't address the biggest obstacle to manufacturing drugs in the United States. "The investment that would be needed to restart some of the API [active pharmaceutical ingredient] 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," Susan Capie, managing director of PharmaVantage, a New York-based consulting firm, told the Post.

Unnecessary because America's drug supply chains are not overly reliant on China.

"The United States' supply of medicine is very well diversified," writes Jacqueline Varas, director of immigration and trade policy for the American Action Forum, in a comprehensive review of America's pharmaceutical supply chains. "China does not supply anywhere close to a majority of APIs, antibiotics, or vaccines in the United States."

In 2019, the United States imported $127 billion worth of pharmaceutical goods. Ireland was the top source, according to data from the International Trade Commission (ITC). China ranked 17th, supplying just over 1 percent of those imports. Even though that category includes more than just drugs—the ITC also counts bandages, test kits, and some dental products as pharmaceutical goods—the overall picture shows no crippling dependence on Chinese products.

And all the emphasis on imported drugs also obscures a critical part of the picture. A 2019 FDA report shows that the United States has nearly twice as many API manufacturing facilities as China and more than any other nation in the world.

Source: FDA; Safeguarding Pharmaceutical Supply Chains in a Global Economy, October 2019

But why let the facts get in the way of some federal subsidies?

For months, media outlets ranging from the right-wing American Greatness to the center-left Atlantic have been claiming that 80 percent of America's drugs come from China. (I debunked this claim here.) The misleading statistic's source is often Rosemary Gibson, a senior fellow at the Hastings Center and the author of China RX, a 2018 book detailing "the risks of America's dependence on China for medicine." As I wrote, Gibson has

become the darling of right-wing media and politicians who see the coronavirus outbreak as an opportunity to ramp up a U.S.-China cold war. "All Our Drugs To Treat The Coronavirus Depend on Chinese Suppliers" noted a headline in The American Conservative on February 17 in which she argued that "we depend on China for 80 percent of the core components" that go into U.S. drugs. She had used the same "80 percent" stat in a December 13 article too, both times without attribution. In the December Politico piece highlighting how policy makers were worried about China "weaponizing" drug exports, Gibson was the first expert quoted. "Medicines can be used as a weapon of war against the United States," she warned.

Gibson has also been called to testify in front of Congress about this supposed threat. In March 12, she told the Senate Committee on Small Business and Entrepreneurship that "the United States faces an existential threat posed by China's control over the global supply of the ingredients in thousands of essential generic medicines." Her dire warnings about America's pharmaceutical supply chains have caught the eye of nationalist lawmakers like Sen. Josh Hawley (R-Mo.) and conservative pundits like National Review editor Rich Lowry.

It is probably not a coincidence that Gibson happens to be on the board of Phlow Corp.

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  1. So let’s import from friendly countries with good trade agreements and not import from lousy tyrants and communists, while bolstering our own manufacturing.

    Anyway sounds like we’re talking chump change compared to the trillions we are already in debt and the 200 trillion in underfunded liabilities for the next several decades. Although nobody simply cares about any of that now and it’s unlikely to come up during this election cycle except as throw away lines of balancing the budget or some nonsense.

    1. “So let’s import from friendly countries with good trade agreements and not import from lousy tyrants and communists, while bolstering our own manufacturing.”

      Which is, you know, essentially what is happening. We source our drug components from all over the world. As noted in the linked debunking article, there is no evidence that the US is overly dependent on China for its components. This was all a big scare started from some offhand statistic about all our imports, misinterpreted to be “all these imports come from china” which is now used to justify a bunch of shell games to pay off manufacturers in the States to make drugs more expensive for us here.

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      2. Did you link a debunking article? I couldn’t find it.

    2. Yes, because industrial policies have always worked so well, relying on the wisdom and knowledge of mindless bureaucrats whose only skin in the game is increasing their government budget, as opposed to relying on capitalists risking their own money using their own direct knowledge and years of experience.

      Good plan. Now tell me where anyone, including you or Trump, gets the moral authority to steal from me and tell me how to run my business.

  2. But the Drug Shortage Staff within the FDA’s Center for Drug Evaluation and Research (CDER) is monitoring the availability of active pharmaceutical ingredients. It must be a real issue.

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  3. Sounds like a phlow job to me.

  4. > “This has all of the elements of the Trump strategy.”

    Sure it does. The US company I work for has had a pharmaceutical division for a hundred years. But because we also have European and Asian divisions, we don’t get this pork. And that’s what it is, pork.

    If you can make a pharma product domestically, then go make it! You don’t need any damned taxpayer dollars to do. Go get the money from the private sector, just like everyone else does. Head to the bank with a solid business plan, convince the investors, issue stocks, etc. Don’t be sucking on gub’ment tit you fucking freeloader!

  5. Remember Solyndra?

    1. Solyndra was Trump’s fault, somehow.

      1. Did the poster you replied to mention, or even imply, Trump?

        Go find a real fight, would you? There should be plenty of them.

  6. I’m missing an important detail here: By what act of Congress is the US government directly buying drugs? What are they to be used for? I didn’t see an explanation at the link either. That’s the real thing I want to know about, not this particular contract, but why contracts are being let at all. Will they be for resale? For use by the DVA?

  7. So the Chinese threat to impose export controls after which the United States will be “plunged into the mighty sea of coronavirus” isn’t a real threat?

    80% of all active drug ingredients are imported and the vast majority of them are imported from an unpredictable nation with no regard for human life or rights. So while I agree with the need for questioning the award of the contact to an unknown entity, I also agree with the need to bring more of this production into the country.

    I find the authors pathetic attempt to frame this issue as nationalism with a Nazi inference laughable. The COVID-19 policies implemented have clearly shown Democrat governors and mayors favor Nazi methods for imposing their will, not Republicans.

    1. Even after the US is caught with its pants down from #CCPBiologicalWarfare, Reason still wants America eternally dependent on the whims of Emperor Xi for our very lives.

      Because #AmericaLast.

  8. Um…. What ever happened to the principle of, “Good products are worth *earning*” ….. now it’s all about “Lobbying profits” (i.e. Use a gun to enforce the criminalistic-law and just TAKE the money.)

    Moving towards slavery principles again I see.

  9. The whole covid pan(dem)ic is the biggest grift the world’s ever seen.
    And Reason has been right alongside the rest pushing it

  10. I suspect that if you looked at all the chemicals and other supplies that go into making a drug for the US market, China could easily disrupt production of 80% of our drugs. That said, I do think it’s a fool’s errand to try to alter this situation significantly.

  11. 350 million? Wtf is that? A week of free school lunches? One goddamn private jet? Who gives a fuck? If it were an order of magnitude higher, this article would be apropos. It’s not, so why even bring this up?

    1. Boehm is a little short on his Orange Man Bad quota of articles this week.

  12. King Rat Trump

    Trading DC swamp rats for NYC sewer rats has gotten us, only, even more septic rats.

    “CDC Warns Coronavirus Lockdown May Lead to Surge of ‘Aggressive Rodent Behavior'”

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