The specter of drug tariffs is killing the biotech industry (which was already reeling from RFK FDA fears). Half of biotech companies are trading below cash, an all-time high. In addition to killing innovation (and gifting China future industry leadership), tariffs would mean drug shortages, and higher insurance premiums. That is the future we’re facing if drug tariffs look like the others the WH has announced so far.
If we must use tariffs, there is a way to bring back manufacturing without killing the industry and even make US biotech the undisputed leader of the world. Here’s how:
- Announce tariffs that take effect in 5 years (the minimum amount of time to set up a new facility) for each drug, which escalate by year, eg 10, 20, 30, 40% etc.
- Create new programs to reduce the time to set up a new manufacturing plant from 5 to 2 years.
- Create special industrial zones in the heartland that fast track all local regulatory approvals, eg for construction, energy, environment, etc. Give tax breaks to the businesses, people (no state income tax, vocational scholarships, etc) who decide to live and work there. Give tax breaks to companies that can get their factories built for every year before 5 years.
- Mandate FDA cut manufacturing review turnaround times to 30 days for new facilities.
On FDA, people are assuming the layoffs will grind things to a halt. That fear alone is killing investment. Reassurance is critical. Here’s how:
- Hire pro-innovation leadership at FDA who supports innovation publicly.
- Get people excited that leadership not only knows what the current bottlenecks are, but wants to make things go even faster. Here are the problems and solutions:
- US is now the slowest country to get Phase 1 studies started, and most conservative on Phase 1 design. Bottleneck is FDA pharmtox and manufacturing. Say will match China, the UK, and New Zealand’s speed through reform.
- For product approvals manufacturing approvals are now gating. Shift to risk benefit related framework, cut the list of regulations that don’t materially impact safety, and push non-safety related requirements to post-approval.
- Push academic institutions to speed up their contracting and IRBs, which are huge bottlenecks to trials. Give NIH grant incentives (eg bonus on top of negotiated indirect costs) to universities with the fastest stats and to encourage tech/AI adoption.
If you like any of these ideas, please pass them on. If you have ways to improve them, please share.