▶ 0:27:42Chair Scott: U.S. senate special committee now come to order. Last month this committee held a hearing on unsafe generic products. We expose not only the threat posed by generic drugs that could hurt or kill american seniors, but also how dependent the united states is on dangerous supply chains that threatened shortages of life-saving drugs getting to those who need help.
▶ 0:28:10Chair Scott: The terrifying reality we face is our nation is completely beholden to communist china and india for the vast majority of generic drugs and ingredients. Communist china is the largest producer of drugs and ingredients and represents 80% of the active drug ingredients used in drug manufacturing. A study from one of our witnesses, Mr.
▶ 0:28:29Chair Scott: 20 sardella, found 83% of the top generic drugs consumed by U.S.-based source of active drug ingredients, and 11% have one source of active drug ingredients. Last year a communist china review shut off the flow of these essential drugs, the U.S.
▶ 0:28:54Chair Scott: Would have months of prescription drugs supply, forcing us to ration drugs for only those in most need. Communist china were to shut off prescription drugs, we would be forced to ration drugs and turn away all but the most desperately in need and a matter of weeks. I think everyone here remembers the supply shortages we faced during the covid-19 pandemic of ppe supplies and baby formula.
▶ 0:29:25Chair Scott: Think about the catastrophic scenario we would face if millions of americans did not have prescription drugs they need to survive. The health of older americans is to important to to important t leave to chance. Congress must work with the trump administration to secure the prescription drug supply chain. 91% of prescriptions filled in the united states are for generic drugs. It is essential that the quality and safety of generic prescription drugs meets the same high standards of brand-name drugs.
▶ 0:29:56Chair Scott: Serious adverse events like hospitalization and death are 54% more likely from foreign generic drugs compared to american-made a generic drug. I'm not exaggerating when I say that people are dying in america today because of bad medicine from underregulated markets in india and communist china.
▶ 0:30:16Chair Scott: When I asked peter baker, former inspector, if you would allow himslelf or his family to take drugs from communist china, he said absolutely not. A former fta inspector who worked in china and india told this committee that he believes americans are being killed everyday from dangerous foreign-made generic drugs. Mr.
▶ 0:30:42Chair Scott: Baker told a heartbreaking story of having to go to multiple pharmacies to help his elderly grandmother to find a safe generic drug for her prescription, only to buy an indian-major drug falsified by quality testing. He knew the drug was dangerous, but had no other option's.
▶ 0:31:07Chair Scott: No american should have to deal with what peter talked about and be worried that a family member would be hurt or killed of a medicine that is supposed to heal with treatment. Every american needs to get loud and demand change. Everyone knows how I feel about communist china, but I'm not the only one concerned about the dangers of foreign-made generic drugs. The bbc reported this year that doctors and communist china are worried about the quality of their generic drugs.
▶ 0:31:37Chair Scott: One doctor said that antibodies almost entirely from communist china were causing allergies and elevated blood pressure. The chinese communist party downplays these reports, just as they deny using slave labor. We cannot rely on low quality, and drugs from communist china. In our last year witnesses underscore the issues facing patients.
▶ 0:32:07Chair Scott: Epinephrine had source contaminated by communist china and killed 100 people in the united states. These stories have nearly 20 years later. Contaminated eyedrops from india because adverse events in at least 55 patients. The government needs to ensure quality to save,-quality drugs today.
▶ 0:32:30Chair Scott: Ranking member gillibrand and I'd sent a letter to the fda asking them what steps they are taking to stop dangerous drugs coming into the country. Deputy commissioner makary talked about issues I have highlighted. The trump administration has worked to increase the amount of unannounced foreign inspections, a crucial first step in holding foreign manufacturers accountable to the same standards we hold american manufacturers.
▶ 0:32:57Chair Scott: I believe one of the most important things we can do is to establish a federal buyer's market. The federal government is the largest purchaser of drugs in the united states, accounting for 40% of outpatient prescription drugs purchased as of 2018. On the armed services committee, I pushed for the department to leverage buying power to prioritize purchasing drugs made with american ingredients. Senator warren held a hearing last year about the same issue.
▶ 0:33:24Chair Scott: If no american option is available, the federal government should prioritize drugs with ingredients from allies. The power of the federal government can move the needle and bring manufacturing drugs back to the united states. The national security risk of relying on communist china for essential drugs and ingredients is an acceptable the same risks are unacceptable for trust for the drugs they need.
▶ 0:33:56Chair Scott: The numbers down from 2002 when it was 83%. In just 20 years we have seen control of her medical supply -- ceded control of our medical supply chain to communist china and india. Communist china supplies 90% of the ingredients globally. We would make our medical supply chain smudge safer not just first -- much safer not just for seniors, but all americans. You cannot rely on communist china for something so important as the health of americans.
▶ 0:34:28Chair Scott: Every american deserves to know where the drugs they are purchasing came from. That is why I support mapping out supply chains as well as the country of origin. I introduced the country of origin labeling online act for country of origin labeling on consumer products. Consumers deserve to know where items they produce are made, and for something as important as medications you take, that medication is actually crucial.
▶ 0:34:50Chair Scott: I will be introducing legislation on country of origin labeling for prescription drugs that require drug labels including the country were each drug ingredient and where they were manufactured and processed. We have seen communist china face export restrictions on rare earth elements as part of trade negotiation, and there is no reason why they won't do the same for medicines agencies like the department of war and veterans affairs stepping into purchase american-made drugs to pretested supply of importing --
▶ 0:35:24Chair Scott: To ensure a steady supply of importing drugs for the american people. Of the legislation could level the playing field for manufacturers. Section 232 tariffs are for goods that impact national security and I cannot think of anything more crucial to they'll the very seniors then generic drugs. On friday I sent a letter to commerce secretary lutnick and ambassador greer asking them to pay p place tariffs on the generic drugs.
▶ 0:35:54Chair Scott: I look forward to this is good question without witnesses on how we can make sure americans can never worry about the quality of drugs in the medicine cabinet. I would like to turn it over to ranking member tillis and for her opening statement -- ranking member gillibrand for her opening statement.
▶ 0:36:10Sen. Gillibrand: Thank you, chairman scott. I look forward to continuing our robust discussion on ways to secure a domestic generic drug supply which includes ensuring that pharmaceuticals entering the united states are the highest quality and standard. During our previous hearing, we heard about some of the problems that consistently plague the generic drug industry and some proposals to begin to help to address the issues.
▶ 0:36:35Sen. Gillibrand: Today we will dig deeper into some bipartisan solutions that this committee and other committees of jurisdiction can work on together to ensure americans can access high-quality drugs they need when they need them. Currently, too many active pharmaceutical ingredients and key starting materials are made outside the united states.
▶ 0:36:55Sen. Gillibrand: Given recent instability in a geopolitics and international trade policy, this reliance increases the risk that americans will not have access to life-saving drugs at a time of crisis, attending our national security. However, we must approach strengthening and reforming this extremely complex supply chain thoughtfully and thoroughly. Generic drug many factories cannot simply flip a switch -- manufacturers cannot subtly flip a switch and move all components of production to the U.S. or allied nations.
▶ 0:37:27Sen. Gillibrand: To ensure americans have a reliable supply of safe and affordable drugs, congress needs to work to make targeted investments in biotechnology, research infrastructure, to create long-term support stability for our nation. We must understand dynamics in the market place and adjust incentives to fix the race to the bottom in generic drug pricing, which can create drug quality issues, drive manufacturing outside the U.S., or cause companies to stop
▶ 0:37:57Sen. Gillibrand: Production of certain drugs altogether. Additionally, we must strengthen the ability of a agency to ensure strict oversight of farming manufacturing facilities to strengthen this -- foreign manufacturing facilities to strengthen the supply chain. As we look to address these issues, we must make sure drugs are made affordable for constituents, particularly our seniors, many of whom are on fixed income.
▶ 0:38:21Sen. Gillibrand: Americans are already struggling with high costs across the board, and I'm committed to working with chairman scott and my colleagues across the aisle to find solutions that serve constituents by strengthening the generic supply chain, promoting quality domestic production and protecting our national security. I look forward to this robust discussion as well as the future of bipartisan legislation on the issue.
▶ 0:38:43Chair Scott: Thank you, ranking member gillibrand. I would like to welcome our witnesses to talk about bringing essential drugs back to the united states and making sure american people have access to the drug they need. I would like to recognize Mr. tony sardella, the founder and chair of the api innovation center, a nonprofit that establishes public-private partnerships to secure the drug supply chain.
▶ 0:39:08Chair Scott: He is a distinct fellow for health innovation at the all in business school of washington university in st. Louis. Please begin your testimony.
▶ 0:39:17Mr. Sardella: Thank you. Good afternoon, chairman scott, ranking number gillibrand, and members of the committee. As the chairman indicated, I am the founder and chairperson of the api innovation center, dedicated to building health security of the generic drug supply chain for some I'm honored to be to share how our work at the desk -- building health security of the generic supply chain. I'm honored to be here to share our work at the center.
▶ 0:39:49Mr. Sardella: There is three key things I want to share with you today. The first is the U.S. generic drug supply chain is overreliance on foreign manufacturers and specifically placing our seniors and veterans at severe risk. Second, the api innovation center's public-private ownership model is showing promise in addressing this complex issue and the economic roots that drove the dependency. And third, policy instruments can foster increased U.S.
▶ 0:40:17Mr. Sardella: Private sector investment and production to address vulnerabilities. Our overreliance on foreign sources to meet our nations needs are quite stark. As chairman scott mentioned, research we have done found 83% of the generic medicines prescribed to americans have no U.S. source. I would like to share some new research just conducted on behalf of the committee.
▶ 0:40:44Mr. Sardella: Our mapping of generic supply chain reveals that for 10 of the most frequently prescribed medications for elderly and veterans, 95% of those medicines have no U.S. api source. And 84, even more stark, 84 have no finished drug product adoption. And they are dependent primarily on china.
▶ 0:41:11Mr. Sardella: This continues with the research we have provided before that mapped out generic supply chain from drug all the way to starting materials, and show that for 40 critical medicines that we identified for our nation to have its own secure supply, the key starting materials were exclusively 100% dependent on china for half of them. Half of those critical medicines.
▶ 0:41:38Mr. Sardella: The api innovation center focuses on addressing national security. It emphasizes modernizing domestic manufacturing that we uncovered in our research of manufacturers, and ensuring resiliency of this -- and ensuring resiliency of the supply chain. It has three key component. First, investment of public funds received from the state of missouri as well as the federal program.
▶ 0:42:06Mr. Sardella: The capital modernizes the production methods to produce these medicines, so w00t you just bring back production, but -- we do not just bring back production, but we enhance it with modern efficiency. Also using new technologies, many of which have been developed in the united states by equipment manufacturers. We take the investment in new modern techniques and we contract existing facilities that exist already to produce these modern methods of production.
▶ 0:42:37Mr. Sardella: Third, we partner with long-term agreements with health-care systems, national retail pharmacy, as well as drug production companies to be able to ensure predictable demand and supply for the entire network. The approach is delivering promising results.
▶ 0:42:54Mr. Sardella: Over 70 U.S.-based manufacturers are collaborating and entering into agreements to build an end-to-end domestic supply chain capable of sourcing, developing, producing, and distributing cost competitive U.S.-made medicines, with a near-term focus on 25 priority medicines that we have itemized and a long-term goal of 300 medicines made here in the united states.
▶ 0:43:21Mr. Sardella: The partnership enables the U.S.-based api drug manufacturers to gain certainty of demand and economic viability to produce in the U.S. it gives health-care systems and national retail pharmacies certainty of supply instability of cash certainty up -- certainty of supply and stability of cost. While innovative partnerships are essential, policy plays a decisive role.
▶ 0:43:50Mr. Sardella: There is a critical need to clarify and harmonize the definition of made in america for pharmaceuticals. Current procurement rules allow drugs assembled in america but comprised of foreman api's to be labeled U.S.-made/ the government's purchasing power can be leveraged. Lastly, sustained public-private investment to modernize idle facilities.
▶ 0:44:19Mr. Sardella: Thank you for the opportunity to share our research and perspective.
▶ 0:44:23Chair Scott: Thank you, Mr. sardella. I would like to introduce tony paquin, cofounder and ceo of iremedy, a company from my state of florida. Mr. paquin's company work details I deta tirelessly to supply the government with medicine complies during covid. -- medical supplies during covid. Thank you for being here today. Please begin your test money.
▶ 0:44:53Mr. Paquin: Thank you for the opportunity to justify. For over 25 years I have worked in health care technology, logistics, and distribution. At iremedy health care, we manage a procurement platform that supports manufacturers worldwide.
▶ 0:45:12Mr. Paquin: Mike's parents includes building software, scaling networks cap -- my experience includes building software, scaling networks, and working with government agencies, all of which gives me a view of how our supply chain actually functions on the ground. That vantage point has revealed two urgent truths.
▶ 0:45:30Mr. Paquin: First, far too much about production of essential medicines has been ceded to china and india, leaving our nation dangerously exposed to weak oversight, counterfeit risk, and most importantly, price manipulation. Second, that an unintended consequence of globalization is the concentration of our supply chain into a small group of intermediaries that restricts the flow of drugs into american hospitals, locking providers into contracts, and stifling supply and market innovation.
▶ 0:46:02Mr. Paquin: Combined, these two truths are deadly. I grew up in flint, michigan, and I've seen firsthand the prosperity of an active manufacturing economy, as well as the devastation when industries are hollowed out. Today I am here to say bluntly we mustend our dependence -- we must end our dependence on foreign adversaries and restore the medical supply chain to the united states. During operation warp speed, my company was a key supplier of needles and syringes.
▶ 0:46:33Mr. Paquin: What I witnessed during that period was alarming. At one point, the chinese communist party seized 40% of our china-based inventory awaiting shipment. We routinely dealt with bad actors attempting to bribe dockworkers and factory managers peddling fake certifications.
▶ 0:46:53Mr. Paquin: As you know, the vast majority of prescription medicines are generic, yet those drugs overwhelmingly from high-risk overseas suppliers. When supply lanes are disrupted, we have quickly seen shortages of lifesaving medicines for conditions like diabetes, heart disease, and cancer. Oversight is essential for immediate relief. We must enforce unannounced fda inspections, overseas as we do in the U.S..
▶ 0:47:24Mr. Paquin: We must require clear country of origin labeling and independent lee validate shipments for quality. But these are band-aid fixes that do bring transparency and deter quality failures, but they won't fix the problem. The only real cure is to reassure supply chain -- reshore supply chain, and I'm here to report that we can use open first, ---that we can do so. We must invest in a new technologies and fast-track permits for factories.
▶ 0:47:54Mr. Paquin: We must treat this as the national security issue it is and prevent bureaucratic delays. Second, numeric drug manufacturing. Here generic drug manufacturing closer here is the truth, that technology the technology exists in this country to make drugs properly without raising costs for consumers. What we lack is fair competition . Generics our commodity, and foreign governments have learned how to weaponize commodity pricing against us.
▶ 0:48:23Mr. Paquin: Until we level the playing field, american manufacturers never have a chance to compete. Let me give you a real-world example. Oxford pharmaceutical is in alabama-based generic manufacturer with the capability to produce lifesaving medicines mystically. They -- domestically. They are U.S.-owned example of manufacturing excellence. They make drugs in america efficiently and at scale.
▶ 0:48:52Mr. Paquin: What stands in the way is a market deliberately tilted against domestic producers. Even when companies like oxford can produce a competitive cost, they are forced to compete against artificially subsidized chinese and indian importers that are all too often unfairly awarded U.S. government contracts. Shockingly, this happened to oxford a few months ago. That system has to end. We must protect american producers with targeted licensing and trade enforcement.
▶ 0:49:24Mr. Paquin: We must use artificial intelligence to overhaul the drug marketplace and perform federal procurement so that U.S.-made drugs are the default, not the exception. If given fair access, domestic manufacturers can compete and win. If not, we remain captive to adversaries abroad.
▶ 0:49:44Mr. Paquin: President trump has shown leadership with executive orders to prioritize american-made medicines, but we need an all- government response including regulation, legislation, and procurement. We must act now. First, apply the immediate band-aid fixes -- unannounced fda inspections overseas, clear country of origin labeling, and randomized testing on port of drugs. These buy us transparency and time.
▶ 0:50:14Mr. Paquin: Then cure the disease for then cure the disease f manufacture generics domestically with fair trade protections free from foreign price manipulation. And use the full weight of government purchasing power to put resilience above cheap imports. Members of the committee, this is not just economics, this is sovereignty, this is national security.
▶ 0:50:40Mr. Paquin: It is needed to protect our seniors, soldiers, and families when the next crisis strikes. Thank you, Mr. chairman, for your leadership, and to the committee for this opportunity. Thank you, chair scott:--
▶ 0:50:53Chair Scott: Thank you, Mr. paquin. Next I introduce and directing berg, economist with the coalition for a prosperous america, which supports domestic industry and protect national security. Mr. rechenberg has expense with the department of war and the department of commerce --has experience with the department of war and the department of commerce. You may begin your testimony.
▶ 0:51:17Mr. Rechenberg: : chairman, ranking member, and members of the committee, thank you for the opportunity to testify today. My name is andrew rechenberg, and I am an economist with the coalition for a prosperous america. America's medicine supply chain is in a crisis. Two decades of offering has caused the mystic production to fall from 84% of the U.S.
▶ 0:51:41Mr. Rechenberg: Market in 2002 to just 37% today, leaving 80% of active pharmaceutical ingredients with no U.S. source whatsoever. You and china have cap -- india and china have capture the market by undercutting american producers with state subsidies, poor labor standards, and safety shortcuts. This dependence has consequences. As U.S.
▶ 0:52:05Mr. Rechenberg: Production collapsed, drug shortages tripled from 88 in 2002 to more than 300 in 2024 , driving price hikes that erased any supposed cost savings. 40% of essential drugs rely on a single manufacturer. When a manufacturer in india was shut down in 2003 for falsified data can U.S.
▶ 0:52:27Mr. Rechenberg: Hospitals had to ration chemotherapy because one factory made have to supply for this shows what happens when we chase the cheapest offshore medicine instead of safe american production. That is not resilience it is a national security breach at the heart of america's health care system. But it can be fixed. At cpa, we have developed a five-pillar strategy. Pillar one, the tariff rate quota system.
▶ 0:52:57Mr. Rechenberg: R trq allows imports at zero tariff rates and imports above that quota value or from high-risk nations face steep tariffs. Quota vines are based on the gap between total demand and current U.S. production and are adjusted as capacity grows. Trusted in-quota countries will be organized with the safety standards. This system rebuild capacity steadily without disrupting short-term supply.
▶ 0:53:26Mr. Rechenberg: Strengthening domestic production directly is just as vital. Pillar two provides production and investment tax credits for U.S.-made generics, active pharmaceutical ingredients, plus a domestic content bonus for U.S. sourcing. This creates the conditions for sustained growth in U.S. from surgical manufacturing. But rebuilding -- pharmaceutical many country. But rebuilding does take time, so pillar three ensures the safety of current imports.
▶ 0:53:54Mr. Rechenberg: 90% of foreign inspections are pronounced and many go five years or more without review. When inspections do occur, they often reveal falsified tests and unsafe conditions, reflected in studies showing that generics made in india have a 54% higher rate of severe adverse events. Yet for imports, the fda still relies on company paperwork instead of independent testing. We can address all of this by requiring independent batch testing for imported drugs in U.S. labs.
▶ 0:54:24Mr. Rechenberg: Regular unannounced foreign fda inspections. And strict penalties for offenders including import bans. Pillar four, federal purchasing realignment treats procurement as a national security party. It prioritizes U.S.-made medicines, aligning with the defense and enhancement act, to strengthen domestic resilience and minimize reliance on risky and adversarial nations.
▶ 0:54:53Mr. Rechenberg: Finally, we must look to the frontier of medicine. Pillar five, biotechnology leadership U.S. must invest in biotech innovation and ensure drug quality. These steps will enter the next generation of cures is discovered and made here at home. These five pillars are how we end but it is, ensurethe safety---- end shortages and ensure the safety of medicines of people depend on.
▶ 0:55:23Mr. Rechenberg: Congress can act now to rebuild what was lost and ensure that never again will outpatients, our hospitals-- our patients, our hospitals, or our troops depend on foreign supply for life itself.
▶ 0:55:37Chair Scott: Thank you, Mr. rechenberg. I will turn it over to ranking number gillibrand to introduce the next witness.
▶ 0:55:44Sen. Gillibrand: I want to introduce the next witness, Dr. marta wosinska, a senior fellow at the brookings institution center on health policy with expertise in prescription drugs and pharmaceutical supply chains. Previously, -- Dr. wosinska. Lee serve in the federal trade commission in the department of health and human services and the U.S. food and drug administration center for research.
▶ 0:56:15Sen. Gillibrand: She served as economic advisor to the U.S. senate finance committee. You may begin.
▶ 0:56:19Ms. Wosinska: Chairman scott, ranking member gillibrand, distinguished members of the committee, thank you for the opportunity to testify at this important hearing. My name is marta wosinska, and I am a senior fellow at the brookings institution. Today I speak in my personal capacity, reflecting nearly 50 years of studying drug supply chain issues from within the government and outside, and with no financial stake in the outcome.
▶ 0:56:48Ms. Wosinska: Over all these years, I have observed what policy solutions catch the interest of lawmakers. I have seen that many of these solutions that resonate sound good, but they don't address the problem that lawmakers claim they want to solve. So today, as we talk about solutions, I urge you to ask the following questions. What specific problem is the solution meant to address? What else is needed for this solution to succeed?
▶ 0:57:19Ms. Wosinska: How do we handle the unintended consequences? And is this the most effective and efficient -- most cost-effective and efficient path? Because only when you ask these questions you will be best prepared to design policies that not only do the job well for patients, but also assure that taxpayer dollars are used wisely .
▶ 0:57:42Ms. Wosinska: For instance, if a persistent drug shortages in hospitals are the top priority, durable solutions require shifting hospital incentives so that reliability, not just low-cost, is valued. Transparency to hospitals around supply chain reliability will be important. And you will want to keep far away from tariffs unless you fix various payment systems.
▶ 0:58:05Ms. Wosinska: If the concern centers on china, then the focus should be on antibiotics and for pretty much any other drug, the focus should shift upstream, away from pharmaceutical production steps and towards chemicals that are not regulated by fda. You will also want to think about how to leverage india in derisking from china.
▶ 0:58:29Ms. Wosinska: If the objective is to increase domestic drug manufacturing, which, by the way, is a solution to supply concerns, not the problem, any new facility counts as progress, for carless of whether it addresses areas of critical need or shortage risk. If domestic manufacturing is the goal, you may not pay as much attention to weather policies designed to promote on showing, like tariffs, could destabilize supply.
▶ 0:58:55Ms. Wosinska: And if we are concerned that week fda oversight abroad creates opportunities for defective drugs making their way to american patients, on showing could help because we would be -- on showing could help because we will be built-- onshoring could have because we be building new facilities and fda will have access. But let's be realistic, onshoring will requiring undoing the economic forces that move production offshore -- in fact, a lot of government support.
▶ 0:59:24Ms. Wosinska: With constrained budgets, this means piracy makers -- alissia makers should prioritize. I would urge you to consider that essential medicines and chokeholds with china are much more pressing onshoring targets than indian-made statins and medications. We have other options for addressing risks and commonly used medications for the fda can create greater quality assurance might increasing unannounced inspections, and congress cans support fda by providing more resources.
▶ 0:59:54Ms. Wosinska: But we need to do more because many industry observers and compliance professionals tell me the current inspection-based model for oversight is not enough. This is where I urge the committee to consider the proposal I published this morning, which would require every importer to designate a qualified person based in the U.S. with personal responsibility for verifying that each batch meets quality standards. Mandatory product testing would be part of the process.
▶ 1:00:24Ms. Wosinska: This system is already working for drugs in europe and has precedent in U.S. drug regulations and other U.S. sectors like finance where cfos was personally certified financial disclosures. To conclude, let me reiterate that lasting policy must focus on clearly defining the problem, aligning incentives so the right behaviors follow, and adopting proven practical solutions from other studies facing similar challenges.
▶ 1:00:52Ms. Wosinska: When reforms are grounded in clear objectives and matched to the challenge, they will best protect patients and ensure prudent use of public resources. Thank you again for inviting me to participate. I look forward to your questions and this committee's leadership in advancing meaningful reforms that will advance the quality and reliability of america's drug supply.
▶ 1:01:13Chair Scott: Thank you, Dr. wosinska. We will turn it over to questions. We will start with coach turberville.
▶ 1:01:20Sen. Tuberville: Thank you, Mr. chairman. If we close our borders, do we have the ability and the assets and the chemicals that we could mine to make every drug we need in this country?
▶ 1:01:40Mr. Rechenberg: Not currently and that is why in the plan I'm proposing -- the fbi recognizes this through mutual recognition agreements with european union, united kingdom, and switzerland as well. We do have enough capacity when working with trusted equivalent regulatory nations like that. But currently on our own, no, we do not, and that is why we need to rebuild this capacity.
▶ 1:02:02Sen. Tuberville: Would be have to use china?
▶ 1:02:04Mr. Rechenberg: No, we would not.
▶ 1:02:06Sen. Tuberville: Mr. paquin, you talk about how companies like oxford pharmaceutical should be used as an example of how it is possible to onshore drug manufacturing in a competitive environment.
▶ 1:02:21Mr. Paquin: That is correct, senator. They are a very well-run, significantly sized, highly automated production facility in birmingham, alabama, and they really can produce competitively. I think sometimes we misunderstand a little bit the cost factor of these drugs.
▶ 1:02:42Mr. Paquin: In low dependent -- lodapin, for example, it cost two cents but does to manifest your but it is manufactured at $.10. The manufacturing cost is a very small part of the total cost that ends up going to the consumer. The manufacturers like oxford pharmaceutical in the united states can operate competitively if they are not a target of unfair competitive practices coming out of india.
▶ 1:03:12Sen. Tuberville: So what changes do you think we need to make to have oxford and other companies to be on a level playing field? What do we need to do?
▶ 1:03:26Mr. Paquin: I think there is two main things we can do, but two immediate actions. Andrew and the coalition for a prosperous america made a good recommendation about quotas based on the marketplace and not allowing a country like india to overwhelm our supply, thereby driving down the value of those drugs. And secondly is the v.a. And U.S.
▶ 1:03:54Mr. Paquin: Government should prioritize the mastic manufacturing --domestic manufacturing over foreign manufacturing. That is something that could be done without additional cost to the government and is not happening currently.
▶ 1:04:08Sen. Tuberville: You mentioned in your testimony that oxford has modern fda-approved facilities but still loses contracts to virtual importers tied to china and india. Can you explain what that says about the way our current system works?
▶ 1:04:24Mr. Paquin: Well, first off, I would say doesn't work very well in terms of recognizing the national security implications and just the good sense of supporting a domestic manufacturer. The contract they recently lost were probably the lowest price technically acceptable type of contract. I think what is happening there is the v.a. Is not applying the right way to think of technically acceptable.
▶ 1:04:55Mr. Paquin: All generic drugs are not equivalent. A generic drug manufacturer in birmingham, alabama, is probably going to be much higher quality and reliable than a drug made somewhere in india where we don't have good access to surveillance of the manufacturing. And then also when we look at technically acceptable, we should consider resilience issues come investing in our domestic manufacturing capability should be one of the considerations when somebody like the v.a. Is putting a contract out for bid.
▶ 1:05:26Sen. Tuberville: Thank you. Mr. rechenberg, as we saw during covid, the united states is way to align on china, we mentioned that, and india. How can a well-designed tariff rate quota system be used to strengthen domestic production and mitigate shots or supply shortages in the U.S. market?
▶ 1:05:44Mr. Rechenberg: Yes, absolutely, and the main cause of the shortages is disruptions to these very few sole manufacturers in china and india, very much relying on the single source vulnerabilities. If we give the market space for U.S. producers through a tariff rate quota system, it encourages committee to reinvest in the U.S. and bring production, because there is guaranteed market space that domestic producers can capture.
▶ 1:06:12Mr. Rechenberg: Over time it will bring back and diversify our supply base, which will lead to less shortages over time as we have more backup options and more U.S. domestic supply.
▶ 1:06:20Sen. Tuberville: Thank you, Mr. chairman.
▶ 1:06:22Chair Scott: Ranking member gillibrand.
▶ 1:06:31Sen. Kim: Dr. wosinska, I was intrigued with the idea you raised about qualified persons. With a framework like that model already existing in other sectors of the united states -- I feel like you said something about the finance site and others will I wanted to get a little bit more clarity from you about how novel an idea this is.
▶ 1:06:52Ms. Wosinska: Absolutely. It is actually not a novel idea. It has been used in europe for decades. But in the united states, in terms of fda, something that fda is familiar with, when the food security modernization act, there were a couple of programs, one for drug importers come and I discuss it more in the paper I
▶ 1:07:22Ms. Wosinska: Published earlier today comes where the importer is an extra layer of verification that the product being imported into the united states, they have to do a certain set of checks and in a sense verify -- and there is a person who is responsible for verifying and signing off that everything meets the standards that are expected. So we have that.
▶ 1:07:46Ms. Wosinska: We have it in the sore veins-- sarbvanes-oxley bil, the same concept that someone takes on responsibility for what is being put forward. And it also exists in a number of other professions where there is this kind of accountability that is added.
▶ 1:08:05Sen. Kim: Given your knowledge about our markets and structures here in terms of this industry, how challenging would it be to be able to implement this? How significant of a change would this create?
▶ 1:08:19Ms. Wosinska: So you would have to modify legislation. The health committee would need to make changes to the drug and cosmetic act. That would be necessary. In terms of how big of a shift it would be, it would depend how it would be designed. I don't think we have enough time to go into the details about what are the levers.
▶ 1:08:42Ms. Wosinska: For example, the qualified person framework in europe applies to every manufacturer, including domestic european manufacturers. Here the idea is to in a sense complement with the fda is already doing and in areas where they are struggling much more, which is countries that don't have comparable regulatory systems. So you could narrow it down in that particular way.
▶ 1:09:09Ms. Wosinska: You know, there was a question -- soi there is mandatory testing that europe does, and the product has to make it into europe before it gets tested. So it sits there in warehouses. Would that be necessary? It adds to costs but it also adds a certain level of assurance.
▶ 1:09:32Ms. Wosinska: One thing is -- one thing that I would like to mention is there are different ways of trying to solve this and level the playing field. If you were to ask me, I would prefer to level the playing field in a way where we actually have this quality assurance, because overnight we are not going to be able to switch away from our reliance, especially on india.
▶ 1:09:53Ms. Wosinska: India in 2024 produced 61% of the solid those products we sell in the united states and the full market is 187 billion pills, and india makes 61% of them. We are talking about 180 different facilities. We are talking about api facilities of about -- well over 200. The size of this is massive.
▶ 1:10:22Ms. Wosinska: And I think we need to prioritize -- one way for us to deal with onshoring is to figure out some other ways to help them.
▶ 1:10:28Sen. Kim: I think the idea is we can have multiple tools that don't have to act sequentially, but simultaneously. Mr. rechenberg, you raised the issue about independent batch testing and things that are somewhat similar to what we just heard. I don't know how familiar you are with this qualified persons model. What is your initial reaction to that, and what else can we be thinking about in terms of independent batch testing?
▶ 1:10:54Mr. Rechenberg: Yeah, I think this is also a critical point for anything we are currently porting needs to be verified for quality, because a lot of time in the U.S. currently we are getting drugs that are imported and we only find out after the fact that they had these bad tests and U.S. patients have already taken them. If we have this european-style model with independent -- testing where in order-- batch testing work in order to be released in U.S.
▶ 1:11:22Mr. Rechenberg: Market, they have to be verified to be quality drugs, this will greatly reduce the risk.
▶ 1:11:28Sen. Kim: So you think it is worth exploring these different ideas out there?
▶ 1:11:33Mr. Rechenberg: Absolutely.
▶ 1:11:35Sen. Kim: Thank you so much. I yield back.
▶ 1:11:38Chair Scott: Senator johnson.
▶ 1:11:41Sen. Johnson: You have not supplied the medical device industry for 30 years, this is quality control 100 the chairman knows I'm big into data. I want to understand the raw material supply chain here. We talk about precursor chemicals. Approximately how many precursor chemicals do you need? What is the universe of that? I will ask you, Mr. paquin. Or whoever knows it.
▶ 1:12:12Mr. Sardella: Within one dimension. We looked at 40 critical medicines and they are based on seven find seven f foundational chemistries. It started with raw chemistry, seven raw chemicals. They converted into key starter materials. This got converted into active pharmaceutical ingredients. The ratio is not magnitudes of order that is insurmountable.
▶ 1:12:38Sen. Johnson: How many total drugs -- how many total drugs do we have? Mr. sardella 2,200 approved drugs for use in the united states.
▶ 1:12:48Sen. Johnson: Over 3000. How many active from russ vought ingredients comprise those 3000- --active pharmaceutical ingredients comprise the 3000 drugs?
▶ 1:12:59Mr. Sardella: Hundreds, not thousands.
▶ 1:13:02Ms. Wosinska: Api would be the same number. The question is how many intermediates or solvents --
▶ 1:13:11Sen. Johnson: So are there 100 precursor chemicals? Is that overstating the case?
▶ 1:13:18Mr. Sardella: Probably higher than 100. Within a magnitude --
▶ 1:13:23Sen. Johnson: Almost all of those are produced in china?
▶ 1:13:27Mr. Sardella: A predominant number are produced in china. They can wiggle manufacturing base moved to china many decades ago -- --the chemical manufacturing base moved to china many decades ago --
▶ 1:13:39Sen. Johnson: Are those brand-name drugs produced in america?
▶ 1:13:42Mr. Sardella: They would likely be produced elsewhere, noting that most of our new branded drugs are biologicals. You're talking about drugs that are small molecules.
▶ 1:13:51Sen. Johnson: We are highly deficient in the base raw materials, precursor chemicals, even the brand-name drugs, precursor chemical coming from china. Is that easy to quality control than the active pharmaceutical ingredients?
▶ 1:14:08Mr. Sardella: Key starter materials c1 they still have issues with regard to your these.
▶ 1:14:18Sen. Johnson: We are taking those precursor chemicals. Are they also with api primarily?
▶ 1:14:27Mr. Sardella: That is correct.
▶ 1:14:29Sen. Johnson: Then they just stamp the pill?
▶ 1:14:33Ms. Wosinska: Api is largely made in the united states and europe.
▶ 1:14:38Sen. Johnson: Say that over again.
▶ 1:14:40Ms. Wosinska: Orr branded drugs, api is overwhelmingly made in the U.S. and europe.
▶ 1:14:49Sen. Johnson: But using precursor chemicals primarily in china.
▶ 1:14:54Ms. Wosinska: Only if they are small molecules. If you have biologics, a lot of the branded drugs are biologics, those are made with an entirely different process that is not chemical. They grow them in cells.
▶ 1:15:10Sen. Johnson: That is done in the U.S.?
▶ 1:15:13Ms. Wosinska: In the U.S. and europe.
▶ 1:15:15Sen. Johnson: Precursor chemicals requires permitting. Why was that offshore do? Because of the permitting process? I wouldn't think. You could have cost advantage due to offshore. Was it primarily a problem of permitting?
▶ 1:15:34Mr. Sardella: No, the genesis of that off shoring had a multitude of factors, one was regulatory oversight in the united states in those facilities versus foreign, the cost of labor in those countries versus the united states.
▶ 1:15:49Sen. Johnson: Refining, you've got a lot of equipment, but you don't have many people hanging around in a refinery plant.
▶ 1:15:57Mr. Sardella: A third reason was the desire not to have it here in the united states near population centers.
▶ 1:16:07Sen. Johnson: Because it is dirty?
▶ 1:16:09Mr. Sardella: Just large facilities.
▶ 1:16:13Sen. Johnson: We are going to have to overcome that. I've only got five minutes and then basically out of time here. We need to properly define the problem and understand the raw materials supply chain, volumes, how many of what we are talking about. Before we leap to a solution that is missed targeted, let's get all this data down. Mr. chairman, I appreciate this hearing, this is extremely important. We need more data.
▶ 1:16:43Mr. Sardella: If I could add a, one of the things I had mentioned was the fact that we are not just re-shoring, we are using advanced technology to convert those large facilities into equipment that fits on this table is a critical added value, so bringing it to the united states with advanced technologies and equipment that allow us to make those facilities smaller, cleaner, and more efficient.
▶ 1:17:06Sen. Johnson: Final point. Doing a qc check on imported drugs, this is not rocket science. Now, people can cheat on it, it needs regulatory oversight, but this should not be hard and it is shocking it is not already in place. It shows the failure of federal health agencies. The utter failure that this is happening.
▶ 1:17:29Chair Scott: The fact that we don't have a supply chain, we don't have a map. Nobody ever even thought about having amassed. It doesn't make any sense.
▶ 1:17:39Sen. Johnson: We have known about this for a long time and have done nothing about it. Thank you, Mr. chairman. >> Mr. chairman and I welcome this committees eager efforts on this issue because I think we can make a difference on a bipartisan basis on this. Let's talk a little bit about china.
▶ 1:18:06Sen. Johnson: You mentioned concerns about antibiotics and that should be prioritized. Tell us what else you think should be prioritized, what specific medicines are most vulnerable to dependency?
▶ 1:18:27Dr. Wosinska: Thank you, I think everyone would agree that antibiotics are the most vulnerable. If you look at what the indian government is concerned about, they are also very nervous about their own reliance on china, especially around antibiotics, so a lot of the subsidies they are doing is to de-risk their own supply chains on our behalf to a large extent, so this is great because they are making these investments without the
▶ 1:18:59Dr. Wosinska: American consumers or taxpayers having to pay for this, but there is this concern about antibiotics that it's by far the most concerning. I think it is much more difficult back to the mapping exactly which drugs have the largest exposure to china other than that. I would say that in a sense we don't have to wait to figure out if antibiotics needed to move on. Other things, we do need to do more homework and understand it. I'm a little worried about mapping for everything.
▶ 1:19:30Dr. Wosinska: I would much rather start with here are the central medicines and let's figure out where they come from because those are the ones we know we will be able to secure. I would probably start prioritizing drugs first in terms of their importance and then in detail mapping. It is not just figure out where it comes from.
▶ 1:19:55Dr. Wosinska: You need reagents and solvents and those are largely made in china. If you try to do this for 3000 drugs, we are going to be stuck in analysis paralysis for a very long time. I would say absolutely mapping the let's prioritize where me map -- where we map first. Does anyone else want to answer that?
▶ 1:20:18Mr. Sardella: I do. We have worked to map several hundred. There is purposeful obfuscation of where the supply comes from.
▶ 1:20:26Sen. Gillibrand: By whom?
▶ 1:20:28Mr. Sardella: Buy companies in china and other areas.
▶ 1:20:31Sen. Gillibrand: They pretend they are from the united states?
▶ 1:20:35Mr. Sardella: Correct. There are many different versions of the company so you can't quite track back to where it was produced in china. It could be a business or ownership structure that they don't want it to be known which company owns it. From beginning to end.
▶ 1:21:08Mr. Rechenberg: I would just add that it underscores our ability to have oversight with the problem and the sourcing. I agree we should focus on essential medicines. That is a definable problem. I think the strategy is to move that into domestic manufacturing as quick as possible. Then we have control of the supply chain.
▶ 1:21:32Mr. Sardella: If I could add to that, we have not only taken a lens on essentials because some of these are very low cost medicines, but also what do the health care systems need? What do national retailers need? What do the governments need? What makes sense to produce here with advanced technologies? When we put those lists together, we came together with a list that made economic sense, there is a demand for those medicines, there is a need for them.
▶ 1:22:02Sen. Gillibrand: Have you submitted that list to us?
▶ 1:22:05Mr. Sardella: We have submitted it.
▶ 1:22:09Sen. Gillibrand: Submitted to the committee as well.
▶ 1:22:12Mr. Rechenberg: The final part that I would add is it does have to be a drug by drug approach for a program like the tr q. I agree that the antibiotics are one of the most critical and urgent to start on. These will be difficult because they have different supply chains. India is not necessarily de-risking from china. India has plenty of its own problems. Safety issues, fda flags.
▶ 1:22:42Mr. Rechenberg: On top of that, india had the same problems during covid. They cut off some of their supply to the united states not because of any adversarial geopolitical regions, but they have their own population they are trying to supply. The more we can bring back to the united states the safer our supply will be.
▶ 1:23:00Chair Scott: Senator moody.
▶ 1:23:03Senator Moody: Thank you for being here. I always appreciate seeing a fellow floridian. During the covid years, a lot of things came to light that maybe americans weren't paying attention to even those in the industry and the dependence for our drug supply on these foreign nations I think really started heading home for a lot of people but I don't think most americans know that more than 50% of the
▶ 1:23:37Senator Moody: Manufacturers supplying our market is coming from overseas. I don't think they know that. I don't think that they know that these are manufactured overseas or that china and india make up the percentage of api filings that they do. I don't think americans understand that.
▶ 1:24:04Senator Moody: Just for having this hearing I think chairman scott does americans a service in shining a light on this specifically when you look at the fact that drug and api manufacturers in china received the most fda warning letters for violations which can mean carcinogens and medicines and nonsterile manufacturing. Everybody is shaking your head correct.
▶ 1:24:33Senator Moody: How long has this been prevalent, have we been seeing these types of violations? Has it increased as our dependence has increased?
▶ 1:24:43Mr. Paquin: I think this is an under canned -- unintended consequence of globalization over the last 20 years, senator and I think you make a very good point. Covid really created the awareness because it broke the global supply chain and then we all experienced what you are referring to. I think the average person and aware in america is not aware of this problem. We have a growing awareness that we didn't have five or 10 years ago.
▶ 1:25:13Mr. Paquin: When we talk about the various actions to take place and I keep going back to the idea of bringing domestic supply back to the united states but the idea of country of origin labeling of medication would probably do a lot toward what you are describing. Making health care officials aware of this.
▶ 1:25:44Mr. Sardella: When we commenced the initiative, it has only been three years in existence, the first study we did was a gap study. We looked at shortages. What was striking at that time was the two most important stakeholders in the country underestimated the risk. Scientists and government.
▶ 1:26:13Mr. Sardella: I really commend these hearings to expose that from a government and a scientific community and as a nation we underestimated the risk of shortages and over lions -- overreliance on other nations like china, india, and europe. The perception gap is starting to close thanks to these types of sessions. And we need to continue with our publications to close those gaps.
▶ 1:26:39Sen. Gillibrand: I have to
▶ 1:26:42Imagine -- Senator Moody: I have to imagine that if consumers had the information and the choice knowing about the increase in violations, I mean at this point, our consumers ever informed where the main ingredients are taking manufacturers?
▶ 1:27:02Mr. Sardella: Very unlikely. This is an industry like very -- like every other supply chain. Every other supply chain you can look and understand where the product comes from, where the ingredients are and where it is sourced. Not our pharmaceuticals. Any other product you can compare the quality of the product.
▶ 1:27:30Mr. Sardella: One in every four prescriptions in the united states is from a facility that has an fda violation. A quarter of the prescriptions have a violation. I don't want to create alarm, some of them are simple procedural violations, but nonetheless it means a quarter are being prescribed that have some sort of violation on the fda.
▶ 1:27:53Mr. Sardella: What is also striking is that while we overestimate the cost, when we work with manufacturers, we are talking less than a penny to have an existing manufacturer manufacture that medicine here with the highest quality manufacturing standards.
▶ 1:28:12Sen. Moody: I'm out of time, but I hope you will explore, Mr. chairman, in your questioning, the national security implications for failure in this area.
▶ 1:28:22Chair Scott: Senator warren.
▶ 1:28:27Senator Warren: Thank you, Mr. chairman, and thank you ranking member for holding the hearing today. We are talking about a broken supply chain. I was looking at the numbers on this. The U.S. imports seven times the amount of drugs we were importing in the year 2000. That is how much this has gone up.
▶ 1:28:53Senator Warren: You all are discussing how our reliance on foreign-made pharmaceuticals exposes americans to drug shortages, safety risks, and exposes seniors more than anyone.
▶ 1:29:08Senator Warren: For years, I've been working with my colleagues to try to advance reforms establishing drunker spent -- transparency rules, closing loopholes in by american requirements and we've got a lot of pushback from people who make a lot of money by keeping all of this opaque and maximizing their profits and minimizing safety for the american people so today I want to hit on something you all have mentioned and that is how we got
▶ 1:29:38Senator Warren: More drugs manufactured domestically, how we move our supply chain to the united states. Mr. rechenberg, you are an expert on drug supply chains. You know other countries are subsidizing the manufacturer of prescription drugs. How does that affect our ability to make these drugs in the united states?
▶ 1:30:02Mr. Paquin: This is one of the main problems, the foreign companies are being subsidized by their own governments so they are able to severely undercut U.S. producers and drive them out of the market. We need a comprehensive approach starting like a tariff rate quota for U.S. producers and we need to supplement that with direct production incentives whether through federal procurement.
▶ 1:30:31Mr. Paquin: It can be a huge part of this in incentivizing and prioritizing american-made medicine.
▶ 1:30:40Sen. Warren: The federal government could make it easier and less risky for manufacturers to make their products in the U.S. if we would leverage the power of our federal contracts. That means the government makes a deal and guarantees we will buy a certain volume of drugs over the next several years.
▶ 1:31:08Sen. Warren: You make the investments, you produce the drugs. The dod actually has contracts for medicines because for obvious reasons it is important to make sure our servicemembers have the drugs they need as a national security issue. I have been pushing dod to make those contracts domestic production advances.
▶ 1:31:42Sen. Warren: Mr. sardella, you lead the api innovation center and you have looked into how many drugs with critical ingredients are manufactured in china. Would it help national security to expand federal contracting programs at dod and other agencies and focus them on a domestic drug manufacturing?
▶ 1:32:03Mr. Sardella: Absolutely. It would be a significant lever to bring back strong U.S. industrial base manufacturing, I commend all the incredible work you have done in this area.
▶ 1:32:19Mr. Sardella: Secondly, one of the areas that would also be very effective is shifting the contracting vehicle from indefinite demand, indefinite quantity, that does not reduce the risk. There is no certainty. You could lose a contract or volume. Turning that into a certainty of demand or cost or price so manufacturer can make an investment.
▶ 1:32:48Mr. Sardella: We have a small business in missouri where we have placed two medicines for manufacturing, we have been provided them technology and we are making investments to expand their facility with certainty that health care is giving them a long-term agreement. If the U.S. government did the same, we expect the same.
▶ 1:33:12Sen. Warren: So more robust federal contracting can create the kind of sustained demand that manufacturers need so that we can eliminate these supply chain vulnerabilities and protect our national security and for me, that is reason enough to implement them, but some have warned that if you shift to american-made trucks, it will be more expensive.
▶ 1:33:40Sen. Warren: We are paying a price for vulnerability. And seniors are taking drugs that are ineffective. They are sicker, they stay sick every lower quality drugs or if our hospitals are getting price gouged during shortages, so Mr. rechenberg, do you think shifting to more domestic manufacturing of pharmaceuticals would over the long run cost or save more money?
▶ 1:34:08Mr. Rechenberg: It was a far more money. We have seen 300 percent to 500% price hikes during a shortage. We are paying a lot more every time the medicine is not there and people have to be in the hospital longer or you have to have a substandard standard of care. You save much more money in the long run because you stop these shortages.
▶ 1:34:33Sen. Warren: Thank you. Americans shouldn't have to worry about the quality of their prescriptions, whether they are safe to be able to take, whether they are effective. For me, that is reason enough to manufacture right here in the united states and using federal contracts to lower those production costs. But I think there are a lot more benefits for doing this.
▶ 1:34:59Sen. Warren: That's why I have a bill, the pharmaceutical supply chain defense and enhancement act that would do just that and I hope we can get bipartisan support and get that going. Thank you very much and thank you Mr. chairman for holding this hearing today.
▶ 1:35:14Chair Scott: Senator warren, we served on a subcommittee in armed services and she had a hearing, the individual from dod explained he couldn't buy american because there were regulations and then we find out there was no regulation. Yeah. He couldn't explain it.
▶ 1:35:50Mr. Sardella: We have analyzed those costs and verified that they can be produced by manufacturers. There is the prevention of the long-term agreement that is not there.
▶ 1:36:10Mr. Sardella: One mustn't think of it as one temporal point in time where an adversarial country or foreign manufacturer, but it put the price way below the cost. If you look at it on a five year average, you would save significant dollars because once they drive every U.S. manufacturer out, they increase the price, massive volatility.
▶ 1:36:39Mr. Sardella: It has to be looked at from a budgeting office on a five-year average basis. Costs over tens of millions of dollars per shortage of drug within the health care system so they are incurring significant costs as well.
▶ 1:36:54Sen. Warren: I get really frustrated on this that people treat risk as if it is free. We are paying a price for risk, for the fact that we got it right down to the tightest nickel.
▶ 1:37:11Chair Scott: Can we go back to it senator warren was bringing up? If we took the dod and we took the dea and they unstick their drug buying, would it be enough volume?
▶ 1:37:31Mr. Sardella: You would transform the supply chain. You would also cause a force function for private markets to procure for U.S. manufacturers because of the reasons you just said, you don't want a quarter of your pharmaceuticals in fda violation site.
▶ 1:37:59Chair Scott: What percent of the generic drugs, if the dod did their generics, what percentage would that be? Of 100% of generics old, what percentage is the 100%?
▶ 1:38:22Mr. Sardella: I don't specifically have those numbers, 200 or 300 medicines would cause a significant resiliency base and manufacturing base.
▶ 1:38:38Chair Scott: You have worked with companies that have opened up plants.
▶ 1:38:45Mr. Sardella: Expanded.
▶ 1:38:47Chair Scott: Have they been able to make the price equivalent?
▶ 1:38:50Mr. Sardella: Correct, with new technology. We are not just saying make is the same way. Through the private investment they are making it in modernized methods to give the example, they currently make them in batches.
▶ 1:39:12Chair Scott: Do you have with the return on investment is? How much would it take?
▶ 1:39:27Mr. Sardella: There are 30 billion doses of idle capacity, 30 billion. We are focused on taking those idle facilities that are already fda approved, you can get the drug commercialized in less than five years and get a return on investment in three years.
▶ 1:39:44Chair Scott: Ok, so we actually don't have to invest money. I'm a business guy, if you give me a three year return, I would do that every day.
▶ 1:39:53Mr. Sardella: Absolutely.
▶ 1:39:57Chair Scott: Number one, we can get the cost down. Number two, the investor gets a return.
▶ 1:40:05Mr. Sardella: The returns are so strong our partners are getting their own loans to expand.
▶ 1:40:09Chair Scott: We have to commit as senator warren said. If dod and d.a. Did it?
▶ 1:40:20Mr. Sardella: It would be transformational.
▶ 1:40:21Dr. Wosinska: It is maybe 10% of total volume. It absolutely would bring domestic manufacturing to the U.S., it would help secure supplies for v.a., but it is too small of a fraction to create change in the market. This is a perfect thing, a very sensible thing to do but we need to think beyond that.
▶ 1:40:51Dr. Wosinska: We need to change the dynamics and the rest of the market. We need to change how this markets operate and how they value.
▶ 1:41:00Chair Scott: I ran a hospital company and it was 2% of the entire health care dollar. I can move all the volume and the whole country, I could force everybody to change based on buying or quality. Everybody had to change. I was the biggest committed buyer. What you said makes sense, but the reality is most people are not committed buyers.
▶ 1:41:31Chair Scott: We have real, committed buyers.
▶ 1:41:32Dr. Wosinska: I'm sorry that senator warren left because senate finance has a proposal that was put forward last year that exactly does this, that it idea for the most vulnerable supply chains is to create committed contracts and have added on payments for choosing reliable manufacturers, so absolutely the same concept and it would be great to see movement on that side.
▶ 1:42:04Chair Scott: Have any of you done business with the dod or v.a.? >> yes, we have.
▶ 1:42:11Chair Scott: Did they care about quality?
▶ 1:42:15Mr. Paquin: I was going to bring that up earlier about technically acceptable and that is a mystifying term in this circumstance. They are not considering resilience, they are not considering the supply chain. They are viewing that drug overseas similar to the drug that was made. It would be a set-aside requirement for american-made.
▶ 1:42:46Mr. Paquin: I think the dod could lead the charge. You will find the private hospital or commercial hospital business, we follow that lead. They are ready to recognize the need for resiliency and stability in the supply chain. 1 >> >> I can confirm what tony is saying because we are aggregating demand with health care systems and retail pharmacies.
▶ 1:43:20Mr. Paquin: It would give a further indication to aggregate demand for the benefit of the system.
▶ 1:43:30Chair Scott: For each of you, if you get two choices. One bottle said made in the united states and the other bottle said made in china, same price, they both look really nice, same little bottle, how many of you would buy china?
▶ 1:43:52Mr. Sardella: I might want to disclose my original background is as a toxicologist in this context. I would absolutely by the U.S. one.
▶ 1:44:05Chair Scott: Would any buy china? No? What if we added on that whether american or chinese, that it is under an fda violation however small and there is a website to go to to see what it was?
▶ 1:44:20Mr. Paquin: We would clearly avoid anything that had an fbi violation. We are not buying a toy or a vitamin, this affects my health in a very personal way. Absolutely.
▶ 1:44:34Chair Scott: Think about it, the buyers in this country, the federal government hospitals, nursing homes, doctors, have you known any of them based on quality?
▶ 1:44:54Mr. Paquin: No, I regularly do business with all those entities. They don't require, but there isn't a method for them to assess that quality even if they want to. There is really no way to measure independently.
▶ 1:45:10Chair Scott: They could say I'm not doing it if you haven't had an fda inspection within three years. They could do it.
▶ 1:45:20Dr. Wosinska: Can I add something? I've studied generic sterile injectable shortages for 15 years. And transparency often comes up. We don't know which manufacturer is reliable. At the end of the day it is the lack of incentives and the fact that hospitals and gpo's do not fully internalize the harm that comes with it. The numbers that andrew commented on.
▶ 1:45:47Chair Scott: When you say the harm, how do you define the harm?
▶ 1:45:53Dr. Wosinska: There was a study, 300 $60 million from additional costs resulting from shortages, right? It seems like a large number. They have to have additional staff and whatnot. That comes down to $60,000 per year. That is nothing for a hospital. And this is for a year, right?
▶ 1:46:26Dr. Wosinska: That is the level of the cost. In a sense, it makes sense. These drugs are therapeutic.
▶ 1:46:35Chair Scott: We are not paying for quality.
▶ 1:46:38Dr. Wosinska: We are not paying for quality. I will say I have to disagree with andrew here. I don't think there is free lunch. If we want to have reliability, if we want to have quality, we have to pay for it. We have to ask ourselves, how much are we willing to pay for it? You have to change incentives.
▶ 1:47:02Dr. Wosinska: I don't know if you are familiar with this organization, they do a lot of homework about where the drugs are made. They are stockpiled. They have long-term contracts. Hospitals are really worried about this because they might end up paying more. We have to change the fundamental incentives and shift how hospitals are thinking about it.
▶ 1:47:28Chair Scott: The problem I'm having is nobody came to my hospital because I served pepsi over coke. Nobody can because I had this drug or that drug or about my drugs in the united states.
▶ 1:47:43Dr. Wosinska: There isn't accountability for hospitals either. If they have a shortage, they pointed manufacturers.
▶ 1:47:52Chair Scott: Andrew, when you say that it pays more, have you have been able to do a study of what additional costs on hospitalization?
▶ 1:48:13Mr. Rechenberg: When we look at productivity costs, worst patient outcomes, or getting substandard treatment, the costs vastly outweigh. It is clear. On top of that I will add this fireside on the hospital.
▶ 1:48:42Mr. Rechenberg: The hospitals themselves often, especially when it comes back to the api. When they have so little visibility, it pushes things more offshore.
▶ 1:49:03Dr. Wosinska: There was one study that looked at one particular shortage of a drug and the fact that more patients ended up dying of septic shock because the alternative was not available. When you looked at the cost and you calculated the number of patients that died, the single shortage cost over $13 billion. In the hospital does not pay that cost.
▶ 1:49:33Dr. Wosinska: >> you pay the hospital.
▶ 1:49:35Chair Scott: The worst is is we don't pay for results like we should. We should pay different. If somebody doesn't do or fix your car right, they don't pay. Every health care provider thinks you still have to pay. >> the problem is you are talking about dynamic scoring which is not how hospitals balance their budgets.
▶ 1:50:01Chair Scott: When you do your analysis you are saying it is only costing $60,000 a year because they are not obligated to factor in all the costs and harm caused to the patient or society or any other stakeholder outside of their bottom line. That is the problem. The costs are spread to us, the prophets are given to the provider. When they are doing a cost base analysis, they are going with the cheaper drug.
▶ 1:50:29Chair Scott: So every purchaser in the system today has multiple factors, but cost is almost always the factor. No one does dynamic scoring. No one wants to bear the full brunt of the cost. I think part of this committee's job is to really do all the things you have suggested. Making sure we know the quality upfront. Have an incentive as you say to do the quality testing.
▶ 1:51:01Chair Scott: Make sure that the cost, as you have decided is documented to the world, to the patient, to the united states. And then to the national security peace, that is not even calculable. You can't even calculate what will happen if we are at war. If we are at war with china and you can't get antibiotics and how many millions of people die, the cost of that is trillions of dollars, it is incomprehensible.
▶ 1:51:28Chair Scott: The truth is that the reason why no one has done this work before is the cost is incalculable. I'm really excited about the work this committee is doing and I think it is important.
▶ 1:51:40Chair Scott: It seems like if you go through the process to make moves, the easiest thing is because dod and v.a. Because they report to us. If they started buying based on buying american, that would move the needle. The other is we talk about these violations of the fda or the fda knowing we only have one supplier.
▶ 1:52:10Mr. Sardella: In regards to diversifying?
▶ 1:52:13Chair Scott: If they are responsible for us staying safe?
▶ 1:52:17Mr. Sardella: Well, their mandate is to ensure manufacturers supply -- comply with manufacturing practices and that before they even produce those medicines that they have been vetted through analysis. So going beyond is managing the supply chain itself. That would be outside their bounds in regard to what they would work on.
▶ 1:52:40Mr. Sardella: I would also say that that strategy also does something very different as well. It is a strategy of redirecting as opposed to countering. As opposed to countering and trying to counter india and china, which would be very resourceful.
▶ 1:53:01Mr. Sardella: Being able to start with redirecting manufacturing through procurement, U.S.-based requirements, U.S.-based prioritization which we are the only nation that does not prioritize domestic manufacturing source over foreign. The ability to do that is to -- far more higher probability of success because you are redirecting, you are not countering, which is difficult.
▶ 1:53:29Chair Scott: Ok, off the top of her head, we can think about the v.a., dod, we should have some sort of map, even if we start small. And then we should have higher expectations for all of our suppliers.
▶ 1:53:55Sen. Gillibrand: We should require transparency and labeling and information. That also could move the market. If they are not caring whether drugs are coming from and they are not caring about the outcome to their patients, you can shame them into better participation.
▶ 1:54:19Sen. Gillibrand: If the dod can be the standardbearer and the hallmark of success and show that costs are not skyrocketing high, you could make the case to do the long-term investments. And pushing presidents to invest domestically is that most of our adversaries and competitors do domestic investment.
▶ 1:54:49Sen. Gillibrand: Every company in china is owned by china. So we can create an investment fund that actually invests in domestic production and even if we don't want to create a pot of money we certainly can create massive tax incentive. There are many ways to create carrots.
▶ 1:55:06Chair Scott: And tony said a three year payback.
▶ 1:55:09Mr. Sardella: Especially if you are using existing facilities and that is the key.
▶ 1:55:16Chair Scott: An short-term we have plenty of capacity.
▶ 1:55:20Sen. Gillibrand: And also you can use the defense production act to require us to use that capacity. Once we map capacity we can say we will ask the dod and the president to ask each of these manufacturers to begin to ramp up domestic production of the top generic drugs for our safety and survival.
▶ 1:55:50Mr. Sardella: And you have facilities that are highly experienced at producing these medicines. They should be leveraged first and foremost before even starting up new facilities.
▶ 1:56:04Mr. Sardella: We will hopefully be able to open new facilities but leveraging the incredible experience we already have in this industrial manufacturing base that is elite and being able to provide them new technologies, that is where the investment is the greatest place. It is about investing in sustainable manufacturing. You don't want the government to have to continue manufacturing them.
▶ 1:56:31Mr. Sardella: Let them invest themselves now that there is a market and allow them to be sustainable long-term economically to produce these medicines and you have created the demand. Demand, investment and modernization so we don't have to continue to fund it and the industries themselves can do it.
▶ 1:56:50Dr. Wosinska: Can I comment on transparency? I think it is really critical. The way I think about transparency is who needs what information and what are they going to do with it? I think it is really critical to ask the question because transparency for the sake of transparency is not going to get you anywhere and transparency can sometimes actually backfire. I'm a very big proponent about the government having transparency.
▶ 1:57:19Dr. Wosinska: This is how you prioritize what to invest. This is why it is important for fda to know. Hospitals really want an early warning system. But that basically means they have assigned to stockpile really early and then fda has much less time to fix the problem. It is not always that way. When I get really nervous, it is transparency to consumers.
▶ 1:57:47Dr. Wosinska: I will tell you why and I have a story very similar to peter's story and it involves my mother. If I would be allowed to share this story. And I have never shared it publicly. My mother was diagnosed with cancer in early 2020 and she needed to get radiation and chemotherapy. It was going to be a brutal chemotherapy and it was a 60 day supply of a pill and it was going to be a generic and knowing what I know I got very nervous.
▶ 1:58:17Dr. Wosinska: And I started, I basically thought if my mom doesn't respond well to this therapy, I will never forgive myself because what if the product was not made to certification. I have access to a lot of information and I looked at who the manufacturer is and I look where it might be manufactured and what are the alternatives?
▶ 1:58:41Dr. Wosinska: You would think I would be knowing and it was very difficult for me and I have access to really top information and you would think I would be the first person to say we need to fix it and you know what I learned? It is the complete opposite because of what happened next. I went to one pharmacy and I said, could you dispense me this? They said, we don't do special orders. Pharmacies are reimbursed in exactly the same way. It is a low business margin and you have one option with the pharmacy.
▶ 1:59:12Dr. Wosinska: Unless we were to fix how pharmacies are reimbursed and how pharmacies stock, the patient only has one choice. To pick it up or not pick it up. This is not like going to a store where you can go to it and pick out five shirts. When there is no incentive for pharmacies to respond to it.
▶ 1:59:41Dr. Wosinska: I would prefer to use the non-chinese jogged over a chinese drug but in a pharmacy of not going to have that option. It's really important that we either fix that problem or look for solutions elsewhere.
▶ 1:59:51Chair Scott: Let me give you a response. I really believe in transparency and I will give you a story. If you run a bunch of companies, you know what every employee wants? They want every hospital in the network. That means you get no discounts, right?
▶ 2:00:09Chair Scott: So, the reality is if I had, if I had two planes and everybody is included in the plan is cheaper, somebody would pick one , I believe people will look at it, is it going to be perfect?
▶ 2:00:34Chair Scott: People buy ugly sweaters sometimes but I believe over time it will force whoever the pharmacy is, if I have one, I would start bugging them. And we see it now. We see it with people, you can get on amazon which doesn't come you go to amazon now and they have sections. I talk to people who say made in america, their revenues go up.
▶ 2:01:02Chair Scott: I agree with you, it's not going to be easy, the information is never perfect. But it will force people to change if we all do it. I have seen it into many businesses. Did you want to add anything? Ok, I want to thank everybody for being here today and participating and I look forward to working with members across the aisle and down the dais.
▶ 2:01:29Chair Scott: The hearing record will be open until next wednesday and I want to thank each of you for being here and if you have any suggestions for each one of us going forward, we are going to get this fixed. Thank you. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap.org]