Biden Administration Releases Supply Chain Report

June 11, 2021

Earlier this week, the Biden Administration released a report entitled “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth,” stemming from the “America’s Supply Chains” Executive Order (EO) released back in February.

What it is

In February, President Biden signed an EO on America’s Supply Chains. This EO charges the National Security Advisor (Jake Sullivan) and the Director of the National Economic Council (Brian Deese) with coordinating work with agencies and stakeholders to “strengthen the resilience of America’s supply chains. Specifically this EO:

Charged federal agencies with a 100-day review of supply chain vulnerabilities across four high- priority sectors; and suggesting actions for consideration by Congress and the administration:
- Department of Health and Human Services – Pharmaceuticals and Active Pharmaceutical Ingredients (API) (the chemically active part of drug products, the vast majority of which are manufactured oversees)
- Department of Defense – Critical Minerals (raw ingredients used in advanced manufacturing and electronics)
- Department of Commerce – Semiconductors and Advanced Packaging
- Department of Energy – Large Capacity Batteries (such as those that can power electric cars)

Sullivan and Deese are permitted to make additional recommendations after reviewing the reports.

Charged additional federal agencies with a one-year review of six border priority sectors, including policy recommendations to address risks. This review will assess risks to critical goods and materials, “defense, intelligence, cyber, homeland security, health, climate, environmental, natural, market, economic, geopolitical, human- rights or forced-labor risks or other contingencies that may disrupt, strain, compromise, or eliminate the supply chain,” needed capacities, reliance on “unfriendly or unstable” nations, state of the workforce, and requisite future research and development capacity. The named agencies are:
- Department of Defense – defense industrial base
- Department of Health and Human Services – public health and biological preparedness industrial base
- Department of Commerce and the Department of Homeland Security – the information and communications technology (ICT) industrial base
- Department of Energy – energy sector industrial base
- Department of Transportation – transportation industrial base
- Department of Agriculture – agricultural commodities and food production

The Secretaries of these Departments are given the authority to set the scope of these reviews, while Sullivan and Deese are given the authority to refine or expand the scope – including to digital goods.

The new report entitled “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth” accomplishes the first component of the America’s Supply Chain EO. It’s a long report and really dives into the state of the supply chains and the forces that have made them this way.

The overall recommendations in the report include –

Long Term Strategy to Strengthen Supply Chain: This section of the report makes recommendations to Congress for significant investments to strengthen U.S. supply chain resilience by rebuilding the U.S. industrial base, including support for the President’s American Jobs Plan, dedicated funding for at least $50 billion to support semiconductor manufacturing and R&D, and $50 billion for a new Supply Chain Resilience Program at Commerce that would make investments in domestic production across a range of critical products. This program, as envisioned, would give Commerce significant discretion to support projects viewed as critical.

Defense Production Act: The report details plans to invoke DPA authority in specific industries, including pharmaceuticals and defense, but also the formation of a new DPA Action Group to determine how best to leverage the DPA to strengthen supply chain resilience more generally in critical industries, building on the previous Administration’s work responding to COVID-19. Given the broad potential impact of more widespread application of the DPA, this new Action Group may require close monitoring and engagement.

EXIM Authority: The report recommends that the U.S Export-Import Bank (EXIM) develop a proposal for a new Domestic Financing Program to support manufacturing and infrastructure projects that would facilitate U.S. exports. This would be a major expansion of EXIM’s current mission, potentially providing support for a broad new range of projects, but further stretching EXIM’s limited resources.

Unfair Trade Practices: A new trade strike force, led by the U.S. Trade Representative, will propose unilateral and multilateral enforcement actions against unfair foreign trade practices that have eroded critical supply chains, and also look for opportunities to work with partners and allies to strengthen supply chain resilience using trade agreements. This strike force will provide a new vector for collaboration with government for stakeholders impacted by unfair trade practices that have affected global supply chains.

Improve transparency throughout the pharmaceutical supply chain – The Administration is looking to understand all the steps from ingredients to finished products and argues that this information will help them step in to prevent shortages; specifically –

Drug manufacturing volume information and reporting
Complete registration and listing requirements
Distribution data on prescription drugs and certain biological products
Requiring manufacturers to notify FDA of an increase in demand
Requiring that the labeling of API and finished product labeling include original manufacturers

Investments in drug manufacturing: The Administration proposes using Title 7 of the DPA to establish a government and private sector consortium to advise private sector companies looking to build domestic capacity to produce essential medicines. The White House is planning a summit on supply chain resilience, HHS will establish the 50-100 most essential drugs, and through DPA will assess needed financial incentives for onshoring. The Administration highlights the unique market challenges for generic sterile injectable products due to the high complexity of manufacturing coupled with low profit margins and provides specific recommendations (if these seem familiar, you might have read the drug shortages report from 2019). HHS is convening a working group to assess reimbursement policies and to assess if there are sterile injectables at high risk of shortage that are not included on the Critical Drugs List (the report specifically calls out pediatric cancer drugs included). Procurement guarantees to foster investments are also discussed

What’s next?

There are a lot of places where this report notes that it will be seeking stakeholder input, or holding meetings, or providing funding, or starting projects. It’s too early to answer the question about what’s next for each of these specific initiatives, but BGR will continue to track.