Want to grow America's manufacturing base? Develop globally competitive tax and regulatory policies.

Over at Xconomy, Brian Patrick Quinn of Vertex Pharmaceuticals (the company that developed Kalydeco) discusses the need for a strong American manufacturing sector:

Manufacturing - as many others have argued - is vital to many strong businesses and to all strong societies, even in the 21st century.

Quinn makes a strong case for a resurgence in American manufacturing, making the important distinction that modern-day manufacturing, is not the bleak, Dickensian dystopia that it was in days of yore. And while we hear every day about China's comparative advantage at manufacturing, we tend to forget about our own edge - technology.

Vertex for instance, started construction on a new production plant; one that is more efficient and capital-intensive than the old-fashioned, labor-heavy factories abroad. It allows higher quality drug production at significantly lower cost, and as Quinn rightly notes, having the research lab next door allows new discoveries to be implemented more quickly.

This advantage isn't unique to Vertex either; the entire American pharmaceutical industry is ever more tech-savvy and innovative. The personalized medicine revolution underscores the need for a tight knit relationship between production and research, in order to adapt on the fly - something that factories abroad may have difficulty with. And this is essential in supporting innovation:

Perhaps the most valuable trait of the manufacturing sector is its capacity for supporting innovation. In fact, experience shows that innovation and manufacturing processes are too interdependent to work well when they're separated...

But supporting American manufacturing requires more than just sitting back - reducing regulatory barriers and appropriate push/pull incentives will be critical.  Uncertainty about the FDA's future course makes these investments more risky, and makes it less likely for investors to see a particular company as a 'winner'. After all, to have a manufacturing plant, you need to have something to manufacture.   On this front, having strong and consistent leadership from Commissioner Hamburg is a plus, as is the FDA's willingness to reform clinical trials requirements for antibiotics, accelerate access to "breakthrough therapies", and rationalize regulation in other ways.  While companies can innovate anywhere in the world, assuring rapid access to America's large pharmaceutical market is certainly an attraction in locating R&D and manufacturing facilities in the U.S., close to regulators.

States are doing their part as well.  For instance, Massachusetts, for instance, has funded a 10-year $1 billion life sciences initiative to support the existing biotech cluster in the region. Similar public-private partnerships at the local level can give companies incentive to establish (or maintain) manufacturing plants in the region.

At the federal level, reforming the decrepit American tax system will also make the U.S. a more competitive location for global headquarters (and consequently manufacturing). After all, pharmaceutical manufacturing requires appropriate funding from venture capitalists and other investors who can choose from an international menu of tax regimes.  Our tax system, at a minimum, shouldn't be chasing them away.  

Let's hope Washington gets the memo.

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