Innovation and Technology

Drug price controls will “chill” critical innovation in pharmaceutical manufacturing and do nothing to address the underlying causes of high medication costs, Johnson & Johnson leaders said recently.

What’s going on: J&J Chairman and CEO Joaquin Duato and Executive Vice President and Chief Financial Officer Joseph Wolk told Bloomberg TV earlier this month that the pharmaceutical price controls mandated by the 2022 Inflation Reduction Act do a disservice to patients everywhere.

• “[T]he Inflation Reduction Act … is something that is misguided, and it’s going to chill innovation,” Duato told Bloomberg’s David Gura earlier this month. “When you chill innovation on investment in [research and development], then you have [fewer] cures.”
• The IRA gave the federal government authority to set prices for certain prescription medications in Medicare. In August, the Biden administration released the first 10 Medicare prescription drugs subject to those price controls, which go into effect in 2026.
• “I’d like to see a much more fact-based dialogue around the topic of drug pricing,” Wolk added. “About six years ago, Johnson & Johnson … was paying about 25% in discounts and rebates off [the] list price [of medications]. Today, that [figure is] 60%, yet the patients aren’t receiving the benefit of those discounts.”

The background: Pharmacy benefit managers are supposed to pass the manufacturer discounts they receive on to health plans and patients—but instead, they frequently pocket the discounts, the NAM has told Congress on several occasions.

• That’s one of several problematic business practices Congress must end by enacting comprehensive PBM reform, the NAM has said.
• Such legislation would do far more to benefit consumers than capping drug prices.

Cause and effect: The result of price controls will be fewer breakthrough cures and treatments for patients suffering from various illnesses, J&J told Bloomberg TV.

• “The number of medicines that will be there will be [lower], just because [fewer] investors would be putting money into developing new medicines,” Duato continued. “It’s going to be less attractive for investors to put money there.”
• And as Wolk said in another Bloomberg segment: “Investing in R&D, prioritizing R&D years in advance for [a drug] that may happen 10 years down the road is critically important.”

What should be done: If Congress truly wants to help patients with the cost of medications, it must focus on “the middlemen who are really driving up prices: pharmacy benefit managers,” NAM President and CEO Jay Timmons said recently.

The NAM this week advocated the passage of two pieces of manufacturing-critical legislation, successfully driving the agenda of a Wednesday House Energy and Commerce Committee markup.

What’s going on: The committee—with the NAM’s strong support—approved two bills that address longstanding manufacturing priorities:

• A congressional resolution disapproving of the Environmental Protection Agency’s harmful PM2.5 rule
• A bill instituting important pharmacy benefit manager reforms

Reversing an unworkable PM2.5 standard: The EPA announced a new, more restrictive particulate matter standard in February, reducing allowable levels from 12 micrograms per cubic meter of air to 9 micrograms—despite a standard of 9 being “essentially background levels in some of the country,” as the NAM has pointed out.

• “Manufacturers have sharply reduced particulate matter emissions, or PM2.5; as a result, industry in the United States has some of the cleanest and most efficient operations in the world,” NAM Vice President of Domestic Policy Chris Phalen told the committee.
• “Now, the vast majority of emissions are from sources well outside of our control, with fires, dirt roads and other nonpoint sources accounting for 84% of PM2.5 emissions,” Phalen continued. “[T]he EPA’s rule will make it more difficult for states to issue permits for the construction of new facilities or expansions of existing factories.”
• The committee’s PM2.5 resolution, offered under the Congressional Review Act, seeks to overturn the EPA’s unworkable standard.

Reforming PBMs: PBMs are unregulated middlemen whose business practices drive up health care costs for manufacturers and manufacturing workers.

• “By applying upward pressure to list prices that dictate what patients pay at the pharmacy counter, pocketing manufacturer rebates and failing to provide an appropriate level of transparency about their business practices, PBMs increase health care costs at the expense of all patients in America,” NAM Vice President of Domestic Policy Charles Crain said.
• Provisions in the NAM-supported Telehealth Modernization Act would increase transparency into PBMs’ business practices and delink their compensation from medicines’ list prices.

The last word: “Manufacturers commend the Energy and Commerce Committee for approving these important bills, which will reduce costs and enhance growth at manufacturers across the country—allowing our industry to continue to create jobs here at home and drive U.S. competitiveness on the world stage,” said NAM Managing Vice President of Policy Chris Netram.

A draft Department of Homeland Security rule requiring that certain sectors expedite cyber-incident reporting has several shortcomings that must be addressed before the rule becomes final in the fall of 2025, the NAM told Rep. Andrew Garbarino (R-NY) in a meeting this week.

What’s going on: Rep. Garbarino, chair of the House Homeland Security Subcommittee on Cybersecurity and Infrastructure Protection, met with manufacturers and the NAM Technology Policy Committee Tuesday to talk cybersecurity issues.

• Much of the discussion focused on draft rulemaking published in April by the DHS’s Cybersecurity and Infrastructure Security Agency. It would require “covered entities” in “critical infrastructure sector[s]” to report any major cybersecurity incidents to CISA within 72 hours.
• Under the Cybersecurity Incident Reporting for Critical Infrastructure Act, CISA must finalize the rule by October 2025.

Why it’s a problem: The NAM agrees with the concerns Rep. Garbarino raised with CISA, including:

• The burden associated with imposing onerous reporting mandates on companies recovering from cyberattacks;
• An overbroad scope, which forces into compliance both organizations that are not truly “critical infrastructure” and those that are too small to have the resources needed to complete the required actions;
• An overbroad definition of incidents requiring reporting;
• An excessive amount of required information;
• An unreasonably high cost of compliance and the diversion of resources away from cyber-incident response; and
• The risk that the proposed rule will jeopardize CISA’s role as a trusted partner of industry.

NAM in action: The NAM submitted comments in response to CISA’s proposal earlier this year outlining these concerns, as well as calling for a reduction in both the number of entities required to file incident notifications and the number of incidents they have to report.

The NAM says: “CISA needs to significantly rethink its approach to CIRCIA’s implementation,” said NAM Senior Director of Technology Policy Franck Journoud.

• “The proposed rule requires far too much information about far too many incidents from far too many companies. CISA should not mandate that companies under attack from hackers divert precious security resources to generate mountains of incident data that CISA will not have the means to process or act upon.”

Take precautions: If you are looking to strengthen your company’s cyber protections, check out NAM Cyber Cover, an affordable, broad security program for NAM members that provides proactive monitoring with automated alerts at no extra cost.

The NAM has launched a new wave of ads in D.C. and nine states, extending its seven-figure campaign urging policymakers to reign in pharmacy benefit managers, underregulated middlemen who drive up the costs of prescription medications for manufacturers and manufacturing workers.

A quick refresher: PBMs sit in the middle of the health care industry, negotiating with employer health plans, insurers, biopharmaceutical manufacturers, pharmacies and other players to determine what prescriptions employees can access and what they pay for them. While their job is ostensibly to reduce the costs of medicines, often they do the exact opposite.

• PBMs have been found to steer patients toward pricier options, inflict steep mark-ups and hidden fees and even pocket large portions of the rebates that biopharmaceutical manufacturers intend for American workers and their families.

NAM in action: The NAM has been a staunch voice supporting PBM reform on Capitol Hill, recently laying out manufacturers’ concerns for the House Committee on Oversight and Accountability.

• The committee conducted its third hearing on PBM overreach in July, when it also released a highly critical report on PBMs that echoed many of the NAM’s concerns.
• In addition, the NAM is supporting several key measures to increase oversight of PBMs’ business models and reform their pricing strategies, including the DRUG Act and the PBM transparency provisions in the Lower Costs, More Transparency Act.

What Congress should do: The NAM is advocating for three major reforms to the PBM system, including:

• Increasing transparency in PBMs’ business models, including how their compensation influences health care decisions and how their policies dictate a medicine’s cost and formulary placement;
• Rebate pass-through, which will ensure health care savings are passed directly to manufacturers and their workers rather than being pocketed by PBMs; and
• Delinking PBMs’ compensation from a medicine’s list price, removing their incentive to put upward pressure on list prices to maximize their own profits.

Benefits for all: The NAM is calling on Congress to enact these reforms in the commercial insurance market, not just in government programs like Medicare and Medicaid, so that all Americans can enjoy lower-cost health care benefits.

What to watch: The NAM is calling on Congress to act on this issue during the lame-duck session following the election.

Manufacturers have always been on the cutting edge of tech development and integration—and it’s no different with artificial intelligence. Today, Click Bond, Inc., a manufacturer of adhesive-bonded fasteners for aerospace and industrial use, is finding applications for AI in the supply chain.

The challenge: Supply chain management is an inexact art, according to Click Bond Chief Executive and NAM SMM Vice Chair Karl Hutter, and technology like AI has the capacity to strengthen operations.

• “There are many spots … [where] a guess has to be taken or padding has to be put in because of the known unreliability of data,” said Hutter. “This is where technology has a big role to play.”

Improving efficiency: AI can break through these challenges, separating signal from “noise” and avoiding presumptions that can cause inefficiencies.

• “We need to have a better sense of the supply, the demand, the schedule,” Hutter said. “This is where those kinds of tools can fit in—so we as a supplier can optimize our production runs, meet our customers’ needs efficiently and be responsive to just-in-time supply.”
• “AI does that key job of finding what matters and correlating historic data and making predictions in a way a human can’t,” he continued.

Translating data: Because there is no single, industry-wide method for formatting data, it can be difficult for manufacturers to combine their knowledge. Happily, AI can help.

• “My data tables might look different than my customers’ and suppliers’,” said Hutter. “AI can understand the rules of data structure, and that of our customers and suppliers, and it can be a translator between them.”
• For example, Click Bond has supplied products to the Boeing Company for almost 40 years, contributing to every type of product made across its military, civil and space divisions. AI stands to take that collaboration to an even higher level.

Enhancing production: AI tools also help manufacturers during the production process by translating different kinds of data and pointing toward solutions.

• “[AI’s translation capability] applies to the technical data environment, too—how you go from a model and simulation to a produced part,” said Hutter. “It’s the same thing. How do you do technical data interchange confidently and securely? This technology [can help].”

Advice for other manufacturers: Hutter recently took part in a workshop on these tools, and he encourages manufacturers who are curious about the technology to find similar opportunities.

• “There is nothing that makes these concepts come to life [like] getting your hands on them,” said Hutter. “You can sit there and furrow your brow and read a bunch of articles, but the best thing to do is to find one of the many opportunities for some hands-on education—and you’ll start to understand what these tools can do.”

Middlemen created to manage the price of prescription drugs are instead driving up health care costs for manufacturers and manufacturing workers, the NAM told the House Committee on Oversight and Accountability on Tuesday, the same day the committee released a report on pharmacy benefit managers’ practices and held a hearing on the matter.

What’s going on: “PBMs’ business models have the direct effect of increasing health care costs at the expense of manufacturers and manufacturing workers,” NAM Vice President of Domestic Policy Charles Crain said in advance of the hearing, the latest in a series examining PBM practices.

Crain told lawmakers PBM reform legislation should include:

• “Increased transparency into PBMs’ business models and the many factors that contribute to a drug’s costs, formulary placement and the PBMs’ compensation;
• Rebate passthrough, which will ensure 100% of negotiated pharmaceutical savings are passed from the PBM to the health plan sponsor and workers; and
• Delinking of PBM compensation from the list price of medication.”

Report highlights: The committee’s report, the culmination of a 16-month investigation, is in line with the NAM’s longstanding advocacy. The report found that PBMs:

• Drive increased drug prices, which inflate PBM profits;
• Extract high rebates from biopharmaceutical manufacturers, often pocketing a significant portion of any savings rather than reducing costs for patients;
• Dictate whether and how medicines appear on formularies, which determine insurance companies’ coverage decisions and patients’ out-of-pocket costs;
• Steer patients toward drugs based on PBMs’ profit margins rather than patient costs; and
• Operate without sufficient transparency into their business practices.

What it all means: The committee “identified numerous instances where the federal government, states and private payers have found PBMs to have utilized opaque pricing and utilization schemes to overcharge plans and payers by hundreds of millions of dollars,” the report states.

• The report indicates that the present role of PBMs in prescription drug markets is failing and requires change, something the NAM has long advocated. “Congress and states must implement legislative reforms to increase the transparency of the PBM market and ensure patients are placed at the center of our health care system, rather than PBMs’ profits.”

The last word: “Manufacturers provide health care benefits so they can effectively attract and retain employees, to maintain a healthy and productive workforce and because they believe it is the right thing to do—but PBMs are a meaningful cause of the skyrocketing costs of health care,” Crain said.

• “Congress must enact reforms to the PBM system so that employers can negotiate, compete and achieve health care savings for their workers.”

Requirements proposed earlier this year by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency are overbroad and would prove burdensome to manufacturers if adopted, the NAM told the Biden administration last week.

What’s going on: In April, CISA published draft rulemaking under the Cyber Incident Reporting for Critical Infrastructure Act of 2022—scheduled to go into effect next year—that would require “covered entities” in “critical infrastructure sector[s]” to report major cyber incidents to CISA within 72 hours. It also mandated that any ransomware payments be reported within just 24 hours.

Why it’s a problem: The proposed rulemaking could affect more than 300,000 entities, according to CISA’s own estimate (JD Supra). Many of these organizations are either not truly “critical infrastructure” or too small to have the resources to undertake the outlined actions in the specified time, the NAM told CISA.

• Furthermore, the regulations themselves are too expansive, mandating the reporting of incidents that do not even affect the operation of critical infrastructure.
• They also require huge amounts of information in a short period—from companies in the throes of recovery from devastating cyberattacks.

The NAM says: “[T]he NAM respectfully encourages the agency to drastically reduce the number of entities required to report, and the number of incidents they have to report,” NAM Vice President of Domestic Policy Charles Crain told the agency during the public comment period on the proposed regulation, which ended last week.

• “Doing so will ensure that CISA receives useful information about cybersecurity incidents—without overburdening manufacturers with overbroad and unworkable disclosure requirements.”

What to do: In addition to narrowing the scope of “covered entities,” CISA should revise several aspects of the rulemaking before implementing it, the NAM said. Changes should include:

• Limiting the volume of reported cyber-incident information;
• Narrowing the scope of reportable cyber incidents; and
• Lightening and safeguarding the contents of cyber-incident reports.

As manufacturers move toward building smarter factories with connected machines, the data those systems produce can offer a host of benefits: improved efficiency, better productivity, informed decision-making, value creation and, ultimately, competitiveness. Yet becoming a data-driven business comes with its share of challenges. In this year’s Manufacturing in 2030 Survey, Data Mastery: A Key to Industrial Competitiveness, the NAM’s Manufacturing Leadership Council sheds light on the successes and opportunities for how manufacturers are transforming their operations with data.

Security and privacy concerns: As factories become more connected, cybersecurity becomes a greater imperative. For this reason, survey respondents validated that both data security and data privacy are essential.

• More than 90% of respondents have a formal or partial policy on data security and data privacy.
• About two-thirds of manufacturers have a formal or partial policy on data quality.
• More than 60% have a corporate-wide plan, strategy or guidelines for data management, but only 15% follow the plan in its entirety.

How data is used: As manufacturers advance along their M4.0 journey, data is becoming their lifeblood, driving insights and decision-making. Yet the survey revealed a gap between available data sources and their utilization, a notable area for improvement as the industry looks toward the future.

• Spreadsheets are still king: 70% of manufacturers enter data to them manually, and 68% still use them to analyze data.
• 44% of manufacturing leaders say the amount of data they collect is double what it was two years ago, and they anticipate it will triple by 2030.
• While nearly 60% of manufacturers use data to understand and optimize projects, there is a shift toward using data to make predictions about operational performance, including machine performance, in the next decade.

Business impact: Most manufacturers leverage data to find ways to save money or promote business growth. However, less than half have a good understanding of the dollar value of their data.

• Only about 25% of manufacturers have high confidence that the right data is being collected.
• Most manufactures have only moderate confidence in their analytic capabilities.
• Top challenges include data that comes from different systems or in different formats (53%), data that is not easy to access (28%) and lack of skills to analyze data effectively (28%).
• However, despite those challenges, 95% of manufacturers say data makes for faster and/or higher-quality decision-making.

The bottom line: An overwhelming majority of manufacturers (86%) believe that the effective use of manufacturing data will be “essential” to their competitiveness. But to realize data’s potential, manufacturers must figure out how to organize and analyze their data effectively, ensure that their data is trustworthy and align their business strategy closely with their data strategy.

Explore the survey: Get a deeper look at the current state of data mastery in manufacturing. Click here to download your copy.

It’s not every day that an international company meets an ambitious sustainability goal two years early. But last May, that’s exactly what happened at 119-year-old transportation logistics provider C.H. Robinson.

• The goal under discussion: a company-wide reduction in intensity of Scope 1 and 2 emissions—those emissions generated by the company’s own operations—of 47% (more than the 40% targeted). C.H. Robinson had previously calculated meeting the objective by 2025.

Simple but effective: “Most of it was looking at where we could find inefficiencies” and correcting them, said C.H. Robinson Vice President of Environment, Social and Governance Rachel Schwalbach. Some changes came from suggestions “our own employees brought forward: LED lighting, responsible use” of electricity.

• Efforts also included a marked increase in the company’s use of renewables generally. From 2019 to 2023, C.H. Robinson renewable-energy purchases rose 40%.

Not an either/or proposition: The Eden Prairie, Minnesota–based company—which solves logistics challenges for clients through freight forwarding and other innovative transportation solutions—is proof positive that businesses don’t have to choose between good environmental stewardship and profitability.

• In fact, “sometimes the sustainable option is actually the less expensive option,” Schwalbach told the NAM. “C.H. Robinson is working with suppliers every day to drive out waste, and often that’s been because we’ve looked at it through a lens of cost savings or time reduction. Now it’s also through the lens of sustainability.”
• What’s more, “if you’re approaching sustainability right, it should be tied to your overall business strategy. Sometimes it’s as simple as making sure you’re compliant with rules and regulations” as you meet sustainability requirements.

A competitive advantage: Reducing the footprint of operations can be a competitive advantage for manufacturers, too.

• “We get asked about sustainability by nearly all our stakeholders, so it really has to be a part of strategic decision making across the business,” Schwalbach continued. “Our shippers are also getting asked about [sustainability] by their investors and customers. People across the business are thinking about it, so it’s [to our advantage to] make sure it’s integrated across all areas.”

No business is an island: Businesses must keep in mind that sustainability is a shared interest, and the environment’s health is best served by teamwork, not isolated efforts, according to Schwalbach.

• “As companies continue to put big [sustainability] goals out there, I cannot emphasize enough the need for collaboration across industries, as clichéd as it sounds,” Schwalbach said. “Having people who are willing to come to the table and say, ‘Hey, let’s figure this out together,’ is going to be pretty critical.”
• For C.H. Robinson, that means engaging with customers, carriers and a broad range of other stakeholders.

Supporting climate-friendly practices: The right moves by policymakers can also help support the private sector’s sustainability efforts.

• “As we’re looking increasingly at alternative fuels and electric vehicles here in the U.S., we need an electric grid that can support the transition to a lower-carbon economy,” Schwalbach said. “Continuing to invest in [strengthening] the grid will help us invest in the right technologies. We need to be able to move forward quickly in a way that doesn’t cause disruption to the supply chain and transportation.”
• Companies want clarity around regulations, too. “There are so many [regulations] coming out right now, and companies want to know, ‘How do I get the right [climate-related] data? How do I make sure the data are accurate?’”

In for the long haul: So what’s next for C.H. Robinson? A continued focus on conservation, for one thing.

• “You meet your goals, and that’s really exciting, but there’s no time to sit around,” Schwalbach said, adding that the company is now in the process of figuring out “what new sustainability goals will look like for carbon reduction.”
• Ultimately, those goals will be met by ensuring a commitment to the environment remains a company-wide focus, she told us.
• “Doing sustainability well means it’s integrated. C.H. Robinson is a 119-year-old company, and sustainability is about making sure we’re going to be successful for another 119 years.”

The NAM is pressing the U.S. Senate to support a bill that would promote clean nuclear energy development.

What it does: The legislation, called the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act, offers a number of components to accelerate the development and commercialization of advanced nuclear reactor technologies. It includes:

• Permitting and approval reform to make it easier for reactor projects to locate on brownfield sites, land that is underused or has been abandoned because of industrial waste;
• “Early licensing work” provisions to help deploy reactors more quickly at national security infrastructure sites;
• A series of awards to encourage companies to develop advanced-reactor technology; and
• Hiring support for the Nuclear Regulatory Commission, which is understaffed to deal with the level of applications for new reactors.

Where it stands: The legislation was reported out of the Senate Environment and Public Works Committee with a bipartisan vote of 16–3, and companion legislation was passed in the House of Representatives by an overwhelming vote of 365–36. Now, the NAM is pushing the Senate to pass the bill.

Why it matters: “Nuclear-generated power is an important part of an all-of-the-above energy strategy, which is necessary to meet the power needs of a growing manufacturing sector,” said NAM Managing Vice President of Policy Chris Netram. “The ADVANCE Act would accelerate the development and commercialization of advanced nuclear reactor technologies through reforms to the existing licensing and permitting systems.”

Our action: The NAM is urging Congress to support the bill ahead of the Senate’s vote, detailing its benefits in a letter to senators.

The last word: “Manufacturers create jobs that support families, and develop and deploy innovative technologies that make our environment cleaner,” said Netram. “Increasing our nation’s energy supply, including the growth of nuclear power, will support manufacturing investments and jobs across America.”