April 27, 2020 Reading Time: 4 minutes

Since the onset of the COVID-19 crisis, many calls have gone out for America to become self-sufficient in medical supplies. Self-sufficiency in the production of such supplies sounds appealing. If we produce all of our drugs and medical equipment ourselves, we won’t be at the mercy of foreigners who, in times of crisis, might either withhold such supplies from us altogether or charge extortionately high prices for these supplies.

Avoiding this fate is a benefit. But all benefits have costs. And often these costs are unseen and, hence, underestimated or even completely overlooked.

So I offer here a list of questions that would be wise to answer before embracing a policy meant to make America self-sufficient in medical supplies.

1. Which supplies are classified as ‘medical’? Of course such supplies include the likes of antibiotics and ventilators, as well as familiar over-the-counter items such as aspirin. But does the category ‘medical supplies’ include also epsom salt, antibacterial soap, ointments for athlete’s foot, contact lenses, and prescription medicines for treating erectile dysfunction? What about minoxidil (of which Rogaine is a popular brand) and botulinum toxin (better known as Botox)? Is dental floss a medical supply? Are condoms?

Some people will respond by saying that we should be self-sufficient only in “essential” medical supplies – to which I reply that similar questions apply. How to distinguish essential from nonessential medical supplies? Are adhesive bandages essential? Crutches? Battery packs for wheelchairs? What about cough suppressants? Drugs for hypertension? Drugs for bipolar disorder? Drugs for treating obesity? Vitamin supplements? Latex gloves? 

2. Because to be self-sufficient in medical supplies requires that we Americans buy from no non-Americans any of the inputs we would use to manufacture our medical supplies, which inputs should we not import and, instead, produce ourselves? Should we, for example, prohibit the importation of salicylate (the main ingredient in aspirin) or of white willow bark (a major source of salicylate)? What about the plastic tubing and valves and electronic components used in ventilators – should we be self-sufficient in these inputs?

3. Suppose that researchers at Sinopharm Group, China’s largest pharmaceutical company, develop – and patent – a blockbuster drug that cures leukemia. Should we refuse to import this drug given that importing it would mean that we Americans are no longer self-sufficient in medical supplies? What if a research team at Boehringer Ingelheim, one of Germany’s biggest pharmaceutical firms, invents – and patents – a kidney-dialysis machine that sells for half the price of existing machines and cuts each patient’s time on the machine by 75 percent? Should our wish to remain self-sufficient in medical supplies prevent us from importing any of these new machines?

4. In 2019 we Americans imported $193.1 billion worth of medical products. No country imported as much as did ours. Americans’ large volume of such imports, when combined with purchases from the rest of the world, enabled foreign manufacturers to produce, for selling globally, drugs and devices on larger and more-efficient scales than would otherwise have been profitable. Production on these larger scales, in turn, reduces the per-unit costs and prices of many of the drugs that we import. 

And so if we were to produce for ourselves all that we now import, our manufacturers will not find it profitable to produce these products on such large scales. The cost to us Americans of producing ourselves all that we now import would thus be higher – likely substantially higher – than the nearly $200 billion that we now annually spend on imported medical supplies.

These higher costs, of course, would raise the prices that Americans pay for health care – a reality that prompts this question: What is the maximum price, in terms of a rise in health care costs, that Americans should be forced to pay for self-sufficiency in the production of medical supplies (or ‘essential’ medical supplies)? Is self-sufficiency worth whatever price we must pay to obtain it? If not, can those who plead for such self-sufficiency give us practical guidance on what is the price beyond which self-sufficiency might no longer be worthwhile?

5. Another implication of America being the world’s leading importer of medical supplies is that a move to American self-sufficiency in such supplies would reduce – perhaps significantly – the total number of dollars that we spend on imports. With foreigners thus earning fewer dollars, they would buy fewer of our exports. This fact is pertinent given that the U.S. is also among the world’s leading medical-supply exporters, second only to Germany. (By the way, China – exporting much less than half the value of medical supplies as are exported from the U.S. – is a distant seventh as a medical-supply exporter.)

If, as a result of America prohibiting the importation of all medical supplies, foreigners significantly reduce their purchases of American exports of medical supplies, American manufacturers also will find it to be no longer profitable to produce many such supplies on scales as large as they use today. Per-unit costs of producing, in American factories, some medicines and devices would therefore rise, pushing up Americans’ health-care costs.

How much of an increase in these costs is American medical-supply self-sufficiency worth?

6. Here’s a related question: how high a price for medical-supply self-sufficiency should we Americans pay in the form of reduced health care innovation? Because American self-sufficiency in medical supplies would shrink the size of markets for both foreign and American medical-goods producers, the attractiveness to these producers – American as well as non-American – of engaging in costly research and development would diminish. Smaller markets mean fewer sales over which the high upfront costs of R&D can be spread. Shrinking these markets would, therefore, make some otherwise profitable R&D unprofitable.

Compared to a world in which Americans are not self-sufficient in medical supplies, if Americans were self-sufficient people around the world, including Americans, would thus have access to fewer blockbuster drugs and innovative medical devices and treatments. Improvement in our health care would slow. Is this price one worth paying for self-sufficiency in medical supplies?

7. Because self-sufficiency means protection of domestic producers from foreign competition – and because protection from competition also weakens incentives to innovate – how much of a weakening of these incentives is a price worth paying for medical-supply self-sufficiency?

8. Given that each of the above, and other, questions must be answered if a policy of self-sufficiency is pursued, who will answer these questions? What will be those individuals’ incentives to ask these questions seriously and to answer them thoughtfully, substantively, and in the public interest?

It’s very easy to declare that ‘we should be self-sufficient in medical supplies,’ but it’s not at all easy to define just what this declaration means or to grasp all that it entails.

Donald J. Boudreaux

Donald J. Boudreaux

Donald J. Boudreaux is a Associate Senior Research Fellow with the American Institute for Economic Research and affiliated with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University; a Mercatus Center Board Member; and a professor of economics and former economics-department chair at George Mason University. He is the author of the books The Essential Hayek, Globalization, Hypocrites and Half-Wits, and his articles appear in such publications as the Wall Street Journal, New York Times, US News & World Report as well as numerous scholarly journals. He writes a blog called Cafe Hayek and a regular column on economics for the Pittsburgh Tribune-Review. Boudreaux earned a PhD in economics from Auburn University and a law degree from the University of Virginia.

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