▶ 0:16:42>> the U.S., and adversary of the united states, and they made that decision, sole control of the building blocks -- sold control of the building blocks we rely on? I'm talking about our antibiotics, our diabetes drugs from our blood pressure medications, essential life-saving medicines found in every hospital, every pharmacy, and every medicine cabinet in this country.
▶ 0:17:12This is not speculation. It's a reality. Xi jinping and his have decided to be our enemies and they are controlling the very medications our families rely on to live happy, healthy lives. Today's hearing is about getting to the bottom of why this is the case. I want to be very clear. It did not happen because communist china was clever or lucky. This happened because washington was negligent. Lobbyists are powerful.
▶ 0:17:42Politicians in both parties chose cheap over safe. For 30 years, we watched communist china's government and its leaders execute a deliberate publicly stated plan to capture the global drug supply chain. They were not trying to hide it. The signs were obvious and our government did absolutely nothing to stop it. As a matter of fact, politicians created regulatory barriers and enacted policies that pushed manufacturing overseas right into the ccp's hands.
▶ 0:18:10This committee has spent the last six months exposing this threat and building this case piece by piece, hearing the hearing. In september, we expose how our dependence on foreign generics is threatening drug safety and availability for a patients. -- american patients. In november, we had american manufacturers testify what a rebuilt domestic industry can actually look like.
▶ 0:18:41In january, along with ranking member gillibrand and several members of this committee introduced the clear labels act to inject transparency into our drug supply chain. Because the american people have a right to know where they are drugs in the medicines keeping their mothers, fathers, and children alive come from. We have written to the fda and the secretary of hhs. We have written to group purchasing organizations demanding answers about their foreign sourcing.
▶ 0:19:08We have written to secretary hegseth about what dependence on communist china means for the health and readiness of our troops. We have investigated a report that documents when decades of -- what decades of off shoring has done to the american drug manufacturing industry. Over the last 24 years, domestic production has collapsed, dropping from 84% of the U.S. market in 2002, 80 4%, to just 37% today. 80% of the apis used in these essential medicines have no U.S. source whatsoever.
▶ 0:19:40Thing about that. 80%. During covid-19, the chinese government nationalized its own medical supply production, turned off the exports, turned off the exports and decided which countries got lifesaving drugs based on politics. 37 chinese factories that made the ingredients for american drugs shut -- shut down during the pandemic. U.S. hospitals and health care workers fighting to keep americans alive ran out of sedatives and cancer drugs.
▶ 0:20:08That was a taste of what it looks like when you let and adversary control your supply of essential medicines. It should serve as a warning to all of us. If we sit here without acting, it will happen again but worse. We did not come here today to preside over another -- when all we do is identify the problem and then pat ourselves on the back for a nice hearing.
▶ 0:20:36This committee has been working since day one to sound the alarm, talk to experts, and present real solutions to fix the problem. I hope today will be a moment that becomes impossible to ignore. To all the members in this committee and congressional colleagues, let's continue to work together to fix this problem, find a path forward that will protect american lives , the lives of our constituents. I would like to recognize ranking member gillibrand. >> thank you, chairman scott. Thank you to our witnesses being here today.
▶ 0:21:07As this committee continues to investigate the generic drug supply chain, its safety, its quality, there is one refrain that is repeated at each hearing and that is that the united states has become reliant on china and india for key ingredients to manufacture generic drugs, active pharmaceutical ingredients, and key starting materials. A combination of factors has led to china's dominance in this space.
▶ 0:21:35Subsidies provided by the chinese government, lacks environmental regulations, and lower cost of labor but china is not the sole reason the united states is relying on foreign manufacturers for these critical criminals -- critical chemicals. Underlying factors in the united states have led to a race to the bottom where incentives for manufacturers are solely based on cost and not quality.
▶ 0:22:02While amongst all of the generic drugs that americans take -- while almost all of the generic drugs that americans take our safe, congress must empower the fda to conduct rigorous oversight to make sure foreign manufacturers comply with our safety standards. Congress must also work with industry to move away from cost being the only factor for purchasing.
▶ 0:22:31We must also incentivize manufacturers and purchasers to consider quality when they are sourcing active pharmaceutical ingredients and final dose for medicines. While the united states has unfortunately ceded much territory regarding the generic drug supply chain, there's still steps we can take to reassure sourcing. The united states must keep our global leadership in biopharmaceutical innovation.
▶ 0:23:01China has rapidly scaled up their innovation for these novel medicines and therapies. They have reformed their clinical trial system, invested government funding and development, and improve coordination between early research and commercial scale manufacturing. While the united states does not need to replicate the steps the chinese government has taken exactly, we have to realize that china is moving at a much faster pace than we are.
▶ 0:23:28The united states has been the standard bearer for clinical innovation for decades. It would be a detriment to our global leadership if we let china surpassed us in innovation. I look forward to working with my fellow members of congress to ensure that emerging biotechnology and innovation is supported in a way that incentivizes these companies to stay in the united states.
▶ 0:23:51I also urge my colleagues in congress to adopt the recommendations laid out by the national security commission on emerging biotechnology. Congress has the roadmap to continue our global leadership in biopharmaceutical innovation and we must recognize this sector for the asset that is. I look forward to continuing this robust conversation today and I look forward to collaborating with my colleagues across the aisle on this incredibly important issue.
▶ 0:24:20>> thank you, ranking member gillibrand. We would like to welcome our witnesses. They are experts on communist china and supply chains and they can explain how we got here and what we can do to stop our reliance on the ccp. He served in congress for eight years, formerly chairing the house foreign affairs subcommittee on asia and pacific. Thank you for coming and I look forward to hearing your testimony.
▶ 0:24:51>> chairman scott, ranking member gillibrand, thank you for the opportunity to address your committee on this important and timely topic. Integrity of pharmaceuticals consumed by americans, especially our seniors, must be of the highest standards in quality, purity, and effectiveness, and free of adulteration from toxins and cancer-causing substances that cause illness or death. The responsibility lies with the pharmaceutical companies in U.S.
▶ 0:25:17Government agencies like the food and the office of the united states trade representative. The medical community including drug retail outlets, insurance companies, hospitals, and doctors all share the responsibility of ensuring medications are of the highest standards. China took advantage of the U.S. self-inflicted wounds which was caused by overly burdensome regulations, tax policies imposed by the U.S.
▶ 0:25:40Government, as well as by corporations seeking higher profits to appease boardrooms and investors. China enticed U.S. manufacturers to their shores with the lure of low taxes, lacks regulations, cheap labor and a 1.4 billion person market. However, the cost to drugmakers, the danger to the U.S. consumers, and the vulnerability to U.S. national security were missed.
▶ 0:26:08Drugmakers soon realized they were subject to chinese rules, laws, agreements. They were required to have chinese communist party members on their boards and relinquish up to 51% of the companies to state owned enterprises. Corporations must give up their drug formula for approval if not surrendered freely they have stolen and then chinese companies spring up creating the exact same drug and selling it below cost. As a result, U.S.
▶ 0:26:33Manufacturers cannot compete and are forced to leave the market and the result is that china controls the world market, price, and supply chain. This is a national security risk and a health risk to our country. As detrimental as that is, it gets worse. China does not adhere to or practice the good manufacturing practices set by the fda nor do they follow the standard set by U.S. from a phobia, a two hundred year old U.S.
▶ 0:27:02Organization that establishes requirements for pharmaceutical manufacturers to ensure the purity, quality, and effectiveness of medicines U.S. consumers take. This results in adulterated products entering our markets that have been documented to contain toxins, cancer-causing agents like melamine or ineffective medications causing treatment failures or death. These and many other examples are well covered in rosemary gibson's book, printed in 2016.
▶ 0:27:35Pharmaceuticals are made from key starting materials and active pharmaceutical ingredients that create the final dose form. China controls 30% to 60% on many of these components and up to 100% on others. With this control over the wrong ingredients in our drugs, it's easy to see how china has positioned themselves to control much of the U.S. and world drug market. The solution, change U.S. policies. First, we must require all manufacturers in countries wishing to sell or import drugs into the U.S.
▶ 0:28:05Market to meet the same fda inspections as U.S. manufacturers. That means an unannounced 24/7 inspection. This is nonnegotiable. Congress must create laws requiring all nations producing pharmaceuticals for sale in the U.S. to meet U.S. fda inspections. Second, we must encourage U.S. manufacturers to move back to the U.S. with a combination of investment, tax incentives, trade policies, and tariffs.
▶ 0:28:33President trump's four executive orders have already brought back millions of dollars of pharmaceutical any factoring investment to our shores. Third, we must require quality and purity inspections that adhere to usp gold standard for drug manufactured in or entering the U.S. and forth, we must forbid the fda from relaxing regulations when drug shortages occur, permitting this willingly allows inferior products to be sold to and consumed by U.S.
▶ 0:29:04Military and citizen populations here last, we must require all medicines for our military to be 100% U.S.-made to the final dose stage. The role of the pharmacy benefit managers needs to be reevaluated. Failure to address the nation's pharmaceutical dependency on china or any other nation jeopardizes our national security and citizens health and it cannot be accepted.
▶ 0:29:32I yelled back and I look forward to your questions. >> thank you, congressman. I would like to welcome Mr. gordon chang who has decades of experience as an author and commentator on the ccp. He has briefed our nation's top leaders and written extensively about the ccp. Thank you for being here and thank you. >> chairman scott, ranking member gillibrand, distinguished members of the committee, I am honored to be here.
▶ 0:30:01Thank you so much for the opportunity to appear today. China, as we just heard, has monopolies over many of our pharmaceuticals and the question is what is at stake? The reason why this is so important is because china could deny these medications to us. This statement needs context. China's regime believes it is at war with us.
▶ 0:30:30In may of 2019, people's daily, the most authoritative publication in china, in a landmark editorial, declared a people's war on us. March of 2023, pla daily, the official publication of the chinese military, defined people's war as total war. And china, to win this war, and they are serious, china, to win this war, has a doctrine of unrestricted warfare.
▶ 0:31:00In 1999, 2 chinese air force criminals wrote a book by that title where they argued china could adopt any tactic to take down the united states. So unrestricted means unrestricted.
▶ 0:31:16China, we know, has weaponized its near monopoly over rare earth's in the trade discussions but it has not weaponized its one hundred percent monopoly, 100% monopoly on the production of pharmaceuticals.
▶ 0:31:31But this is not just a theoretical threat because in march of 2020 during the covid epidemic, the chinese regime threatened to throw the united into what is called a mighty sea of coronavirus by cutting off pharmaceuticals and other items that were on many of these so for instance, 100 of america's most used antibiotics -- sorry,
▶ 0:32:07Pharmaceuticals. They require ingredients that are made in only one chinese factory. 100 pharmaceuticals, only one chinese factory. In the air, the other heavyweight production center for generics, they get 80% of their active pharmaceutical ingredients from china. And with regard to the key starting materials, 45% of them are produced only in china.
▶ 0:32:38Generics are especially important because 91% of all U.S. prescriptions are filled with them. The generics are produced in china as well. 83% of the top generics are produced only in china. China is the supplier of at least one of the key starting materials for 670 nine of the active pharmaceutical ingredients.
▶ 0:33:05The defense department in 2023 issued a report that showed that 27% of the medications it used were 100% dependent on china. Antibiotics, as we just heard, is a particular american vulnerability so for instance, the most widely used antibiotic in america is made from four separate key starting materials produced almost entirely in china.
▶ 0:33:35And america gets 45% of its penicillin that comes from china as well. Fda officials told us they did not enforce america's standards on the importation of foreign made pharmaceuticals because if they did that, it would cause severe shortages here. We know how we got into this prediction -- predicament.
▶ 0:34:03It was china's predatory trade policies but it was also an america that that manufacturing was no longer important and also thought that the nature of regime's was no longer important. We know that in emergencies, foreign countries, even our friends, will hoard medications and that happened in the 2000 nine swine flu virus than I, for instance, so course, we need to shore our production.
▶ 0:34:29To do that, we need to impose section 232 tariffs, invoke the defense production act, and hence the investment tax credit for the production of medications, require the federal government to buy american-made pharmaceuticals and authorize federally backed loans for pharmaceutical production. Senators, we do not have a moment to lose. Thank you. >> thank you, Mr. chang.
▶ 0:35:00Our next witness is a leading author and expert on communist china and drug quality issues. Rosemary gibson is the author of china rx, a book that outlines our dependence on communist china for your drug ingredients. She has been recognized for her work including receiving the highest honor for the american medical writers association. Thank you for being here. Please begin your testimony. >> thank you, chairman scott. Thank you, ranking member children's.
▶ 0:35:29China rx was the first to expose how dependent the united states is on a single country and also expose that other countries like india are highly dependent. All roads lead to the same source. My comments today are on generic medicines because they are so prominent in our supply chain. The centralization of the global supply in a single country is so open to catastrophic failure.
▶ 0:35:58An export ban would turn our health care system into chaos and an export ban is not hypothetical. In june of 2025, last year, a statement came out of china during the trade negotiations and it was said that if china chose to restrict pharmaceutical raw materials from the united states, the situation in the U.S. would be much worse than it is for critical minerals.
▶ 0:36:28We have been warned and we have no time to waste. Today, I am very pleased to share with you the findings of the department of war first generic drug testing program which highlights quality concerns in our medicine supply for the first time. We have data on how well our generic drugs are made and whether they meet our standards.
▶ 0:36:54The department of war's work started in 2019 when I was invited to the dla and I asked them a question. Do you test your medicines? So it began. The department of war's work followed on the heels of kaiser health plan which started testing generic drugs are before. Here are some of the highlights of the testing program to date. So far, 13 different generic drugs have been tested. All the different manufacturers and the packagers.
▶ 0:37:2615% of what has been tested fail basic quality standards. In any industry, products with 15% manufacturing defects would be shut down. Here's some of the test findings. For people who are recipients of organ transplants, they -- their lives depend on taking a drug to prevent organ rejection. Some of those products were not manufactured right. They don't work right.
▶ 0:38:00Testing has found toxins including thallium which is known as the poisoners poison in some products and then arsenic and carcinogens. 30 years ago when we used to make generic drugs here for the most part, people would go to prison for this.
▶ 0:38:19The testing team led by the independent laboratory welcome to the opportunity to brief members of the committee on the full details of all these 13 generic drugs. So what do we do? I have three recommendations. The first, as alluded to, it's absolutely essential that a country that is a superpower have the capacity to make its own antibiotics.
▶ 0:38:47China rx was the first to expose that we have no capacity to make antibiotics and to end here. We have no sovereignty in our survival is at risk. Let's do what we have done a critical minerals and bring that manufacturing back home now and not only for antibiotics but the most essential generics that are essential to sustain life and there are a lot of good people in this country waiting on the sidelines to help do that.
▶ 0:39:13Second, the federal departments of hhs, the v.a., department of war should be directed to use the quality data in their procurement decisions. When they do that, that quality is correlated with location that will automatically use the quality data to drive out substandard generics that are typically made in asia. And with support, U.S. manufacturers who would be able to supply quality medicines to our military and veterans.
▶ 0:39:43We to have to go right to the tip of the spear and where the root cause of this is here there's a handful of U.S. companies that source all the generics that are distributed in this country and they scour the earth looking for the cheapest. Now going forward, it is imperative that they are held accountable for quality and not just cost. The narrative that all generics are the same today, this data shows it's not true.
▶ 0:40:10Once again, we welcome the opportunity to brief the full committee on these findings which we believe our game changing. A total of 42 drugs will be tested and we look forward to the opportunity for this to really transform our drug supply system. Thank you. >> thank you. I would like to recognize ranking member gillibrand to introduce the next witness. >> I want to move to introduce our next witness, Dr. chan.
▶ 0:40:44He is a visiting fellow with the duke margolis institute for health policy. He was a special assistant to the white house where he reported directly to president biden, working to strengthen the nation's readiness for biological threats. He was a key architect of operation warp speed which was developed for the covid-19 vaccine. You may begin. >> chairman scott, ranking member tillis brand, members of the committee, thank you for this opportunity to testify.
▶ 0:41:15Much of the discussion around pharmacy supply chains have focused on -- as chairman scott has mentioned. Sound policy changes are being proposed but today, I would like to focus on an integrated solution set. America still has the world's largest pharmaceutical market, flexible allocation capital, and the strongest research system with unparalleled talent. What we need is alignment between policy, markets, and resilience.
▶ 0:41:44In my view, america and its democratic allies should pursue what I, an allied life sciences platform and a strategy built around five mutually reinforcing pillars. First, we cannot manage risk in a supply chain that we cannot see. Congress should require auditable end to end supply chain. Much of this information exists an alliance with other industries in another country standards.
▶ 0:42:12What we need our common data frameworks and enforcement mechanisms that allow government and industry to identify vulnerabilities before they become shortages. Transparency is -- resiliency. The second is about providing predictability to makers of drugs. Federal purchasers including the dod, the v.a., and cms reimbursement systems shape demand.
▶ 0:42:39They should reward quality manufacturing, surge capacity, and geographic diversification and predictable contracts can lower the price for medications, not increase them. I have always been struck on these buyers not -- seem to not understand how it is valuable to suppliers to enable them to build more efficient processes. Analysis highlights the significant opportunity to strengthen procurement efficiency within the v.a.
▶ 0:43:07As hospitals often purchase identical products at widely varying prices. This is costing taxpayers hundreds of millions of dollars a year while not securing the supply chain or serving patients . If we don't value security for the war fighter or veterans, who will? Build capacity at home and with allies.
▶ 0:43:31The goal should not be complete restoring of production creating trade barriers. That would be unnecessary. The united states should maintain domestic manufacturing capacity for a few essential medicines while creating a trusted supply network. Powerhouses such as india, canada, europe, japan play critical roles in the system. Let's work with them to lower costs. The fourth pillar looks forward.
▶ 0:44:03Competition in life sciences spans the entire innovation pipeline from aia mabel discovery to advance manufacturing. When I started consulting in 2000, the cost to develop a drug with $500 million paid in 2010, it was $1 billion and it's now $2 billion. We are not efficiently developing or harnessing technological innovation in drug development. The united states should enforce standards that catalyze technologies.
▶ 0:44:30The country that defines the architecture and sets standards -- the industrial revolution. Fifth, mobilize the long duration of capital, the final pillar. We must address the capital gap between scientific discovery and industrial scale in the U.S. a biotech asset is profitable at 200 million.
▶ 0:44:59This will transform the entire capital allocation. One idea to address this is the creation of strategic investment vehicles, professionally governed and designed to transform it into a critical biotechnology platform. This would complement markets by financing the hard middle without that. Let me close with three imperatives.
▶ 0:45:27If we improve visibility and reward resilience economically, the private sector will deliver. This is easy. Second, the united states does not need to produce every medicine domestically but with trusted allies, we can eliminate systemic vulnerabilities. This is common sense. The largest strategic competition is not -- it's about who leads the life sciences platform for the 20 first century and this is existential. For the past 100 years, the united states and its allies built that platform. With the right strategy, we can continue to lead it.
▶ 0:45:58Thank you, and I look forward to your questions. >> thank you, ranking member gillibrand. We start with a senator. >> thank you, Mr. chairman, for this hearing. Can't get any more important than this. Miss gibson, it is becoming common knowledge that for whatever reason, china is often able to circumvent the fda when producing generic medications.
▶ 0:46:28That means americans are often taking drugs that it would be -- if produced in the united states, would meet higher standards. How can we move that leverage that china has over our people making drugs? >> you are correct, sennacherib, that china has outmaneuvered the fda. The former fda commissioner told the house appropriations committee in 2023 that china is a problem. It's not transparent.
▶ 0:46:57The fda cannot get information from them to perform its regulatory functions. He said we should -- we cannot be allowed to depend on china and as you know coming to an eight 23, they started an anti-espionage law where regulators still want to travel there.
▶ 0:47:14I believe the way to get around this regulatory issue is we are importing in my mind de facto unregulated products and in countries that don't respect our regulations, we should not be buying from them. If we use a quality data from the dod testing program, that will churn out and take out manufacturers from countries who do not respect our laws and we will be able to use U.S.
▶ 0:47:42Manufacturers so you -- let's use the quality data to clean up the system. This is setting a market signal rather than regulatory signal. >> you reveal china controls approximately 90% of key starting materials to make apis and generics. How do you think they would be effective if china were to cease those exports today? >> a lot of people would die in this country. We would not be able -- our health care system's would cease to function.
▶ 0:48:15We would not have the tools to be able to treat people. >> he said in your testimony that china has a death grip on america. How do we work to change that at the federal level? Like the most important thing is on an emergency basis.
▶ 0:48:30We need to bring back production here and the reason is china has been able to outmaneuver the fda as you just talked about because they do have such a big monopoly on all parts of the chain and the only way to do that is to break that monopoly and unfortunately, this is going to take some time but it is possible. I am trying to develop this monopoly. We can take it back. We have got to know that within two or three years, there is a period of extreme vulnerability.
▶ 0:49:00>> can we use tariffs to help us out with china? >> section 232 tariffs are very important in that regard. The supreme court struck down the 77 act tariffs but section 301 tariffs and 232 could very well create the conditions where if we had an enhanced investment tax credit and if the president were to invoke the defense production these are things that can stimulate domestic
▶ 0:49:32Production immediately. >> last november, we had a young man that came from my stay in birmingham, oxford pharmaceuticals, to testify to the importance of offshore drug manufacturing. What can we do to encourage pharmaceutical companies to acquire apis domestically a set of sourcing there from places like china or india? Is that possible?
▶ 0:49:55>> it is possible but the first thing we need to do is get the federal government to require the purchase of american made or pharmaceuticals that are from short if they are not available in the U.S., but it is not all of the above approach we can size you mention china is able to get around all of our rules because they know that if they come off production then as rosemary gibson just told us, americans are going to die.
▶ 0:50:26It's an all of the above approach on an emergency basis. I know that is not a satisfactory answer but unfortunately, I think it is close to where we have to be and if we do not do this, the problems are going to get worse because china is becoming more predatory. >> he served on the house foreign affairs committee and you understand the risks. What is at stake if we do not gain control of what is going on here? >> national security.
▶ 0:50:52We would be beholden to another country, I.e., china, and so it's imperative that we get this done now. The defense production act that president trump used to create the products here, it's something we can do now. The abcs of manufacturing, everywhere but china. Use the tools mean that -- we know where china is going.
▶ 0:51:19We know what their end intent is and we need to do it now. Courts putting what is in the drugs that we take, how important is that? What's really important. I think it is something but for it to be effective, people have to read and we tried that on the ag committee with the amendment.
▶ 0:51:46I think legislation like that is strong and we need to do it but I think we need to put more force on the fda to regulate drugs or inspect in the same way they do here until this countries you are going to do it our way or do not sell here. >> senator moody? >> you microphone? >> thank you for being here.
▶ 0:52:17It seems like yesterday that our country was reeling when we received a rude awakening from the covid-19 pandemic and the millions of americans that needed medical care. So quickly. In that moment of national vulnerability, we began to realize how heavily our country depends on jennifer medical supplies including pharmaceuticals.
▶ 0:52:42Since their entry into the wto in 2000 one, china has concentrated its efforts to circumvent international trade wars, creating economic espionage by stealing our ip and disrupting our economy and this is one of the many ways I think our chairman and ranking member have been great about holding hearings to show how vulnerable we are to this dependence on china power drugs and
▶ 0:53:13Specifically how it can be a national security threat so I am grateful, chairman, and that you're willing to commit the time today to hold this hearing, one of the most important things we can be doing on this committee since so many of our citizens in florida from our seniors and otherwise dependent on recurring daily medications is so very important so many are of the shortages americans have had to face or not because of financial market dynamics but because of the coordinated
▶ 0:53:45Chinese engineer multi-decorate effort to subvert our economy and much of the west. In the past decade, from what I can see, we have seen a decrease of 61% in our domestic api manufacturing facilities which are essential for our drug production. One of the things that we heard from in the opening statements was something that concerns me which is that they -- the chinese notoriously ignore quality and safety standards.
▶ 0:54:14Manipulate prices and utilize dubious labor standards. Fda import alerts routinely cite carcinogenic impurities, falsified -- records and nonsterile conditions for manufacturers in china with roughly one third of all fda import alerting on chinese facilities. So I am grateful for the administration. They are trying to fix this problem. At least they are focusing on it and they are aware of it.
▶ 0:54:40In the course of the last year, the administration announced multiple 100 billion dollar investments being made in the american economy and of these investments, the white house announced in december that 100 $50 billion will be invested into american pharmaceutical manufacturing. We see our reliance on places like china.
▶ 0:54:59So we know not only will this secure up our supply market and make sure that we can trust the ingredients in our pharmaceuticals but we have ready access to them in times of vulnerability and also hopefully brings back american jobs in that industry.
▶ 0:55:21Again, thank you -- former congressman, I would like to say , as you know, I have been very strong in pushing back on the way china has meant to infiltrate the strength of this country or undermine the strength of this country.
▶ 0:55:42There laws require them to cooperate with the ccp, fighting hard to keep illegal chinese vapes -- they keep dumping them over and over and we have no idea what is in them and our kids are being affected. This is another way I think that we can focus on ways to protect americans.
▶ 0:56:03Are there any ways that you can tell us today that we can take quick, concrete action here in the senate that would -- what is the most effective thing we can do right now as senators in terms of legislation or otherwise to make sure that we are reassuring domestic manufacturing of drugs? >> awareness.
▶ 0:56:27I think the biggest thing is to fill this room up with the news people, the american people knowing what is going into their pharmaceuticals. The second thing is to get on the fda through legislation that you all can introduce to require and this is not directing the fda but we are saying any country producing pharmaceuticals for the united states will meet fda standards anytime, anywhere, 24/7. It's your choice not to sell in a market and you need to enforce that.
▶ 0:56:58With -- I was within fda inspector who was the one doing the inspections in china when we beefed it up so they could go in there but it was kind of like the iaea with iran. They would let you go where they want to do to go and you could not ask too many questions or they would shut it down so china saying they are more tolerant and going to abide by the rules is a joke.
▶ 0:57:20We need to put the pressure on them and stop that and the other thing is to bring that production here using any tool we have, whether it is the dfc using the defense production act or any other tool like that but we don't have time to play around with this. This is an imperative that we get this done within the next two years, period. >> I want to thank the people that showed up today because we all must fill the room. Great recommendation. Thank you, chairman.
▶ 0:57:50>> thank you, Mr. chairman. I really appreciate this testimony that you have all given. You highlighted for -- highlighted for us why this is such an urgent crisis and I could hear how concerned you are , something that chairman and I are very focused on and we hope to have meaningful legislation to move us in the right direction for this congress.
▶ 0:58:13The united states holds a key advantage over india and china in the biomedical and biotechnological space with his strong support for universities that produce world-renowned scientific research. Historically, we have been able to recruit the top talent from nearly anywhere including china and india. One of the pillars that you talked about in your written testimony was the importance of securing U.S. biotech leadership. China is treating investments in biotech as strategic infrastructure.
▶ 0:58:41The final report that was recently released by the national security commission on emerging biotech created a robust framework for policy makers about what we can do to rapidly support this advancing industry. Can you expand upon the role the federal government should play in securing our global leadership in biotech and how important is it for the united states to set the global standard for biotech research and development and what are the national security risks of the U.S. is losing its leadership to china in this space? >> the threat is real about losing leadership.
▶ 0:59:11I think my analogy would be we are all that age where we remember the internet and how it was developed. With the early days of the internet, it was a bit of chaos. We put structure and standards around it. Because of that, industry could coalesce around that. We have facebook, we had uber, we had netflix. These are all -- we control the internet through innovation but we set the standards for the internet.
▶ 0:59:37As we enter the age of ai and biology, we also need to be setting the standards. The fda needs to work really hard so we set global standards. The world trusts U.S. standards, not chinese standards. Once we set that, I trust industry to coalesce around that, develop innovation. We don't know where these innovations are going to go for the next 50 years. These innovations will be transformative in our society. We need to own that. Our allies trust our standards as well.
▶ 1:00:06We need to work with them at pace. We are not working fast enough in developing innovations and standards. Use ai to develop drugs. The fda still uses the same time lines to approve those drugs. We need to accelerate that so we need to develop -- we need to work with fda to work with industry partners to develop standards we can work against. >> would anybody else like to answer that question?
▶ 1:00:36>> china has certainly made the development of biotechnology a priority. If you go back to the made in china 2025 initiative, that is one big wto violation. But nonetheless, the regime continued to do that and that is one of the reasons why china has become innovative in biotech where before it was just making drugs for other countries, especially us.
▶ 1:01:03Rosemary gibson has mentioned that we need to be as determined in this area as china has been. That doesn't mean that we have to violate norms and guidelines on trade. But it does mean that we need to put the resources there. That is of course going to be a partnership. The federal government does need to lead and to make it clear to industry that this is a critical national security threat and something that must be done as we have just heard.
▶ 1:01:33>> thank you. In some of your testimony, you talked about how federal procurement reform through hhs, the v.a., the dot is a way to incentivize quality manufacturing for generic drugs. Can you each talk about that a little more? You talked about it. Miss gibson, you mentioned it as well in your testimony. >> I will start.
▶ 1:01:59I think a way to do this expeditiously is to have the department of veterans affairs, hhs, and the department of war to use the data that the department of war paid for to guide procurement decisions.
▶ 1:02:22Based on quality, they will be more likely buying from products made in the united states and other countries that actually care about the quality of the drugs that they produce. So automatically deal with some of these issues and bring in some of the companies that you had in the hearing that in november but I think it is important to even go further upstream. China and india and other countries that don't respect our laws, their products cannot be sold here unless they have a buyer.
▶ 1:02:52Unless they have those who source them. So who is sourcing them? There's a handful of companies, about six of them, that source all the generics, and they go on the basis of cheapest product. I know from talking with ceo's of ethical U.S. companies, they say we cannot compete if they are going to be buying and sourcing from companies that have a litany of fda recalls, warning letters, and 483's.
▶ 1:03:23We have to go to the tip of the spear, the root cause, and this might be tough to do politically but I think the ceo's of these companies should be convened and to indicate that we can no longer -- they should no longer be sourcing vital medicines only on the basis of cost. They have to include quality and we have the testing data to begin to do that and that will affect everything else that is distributed around the country. Thank you.
▶ 1:03:53>> I would add that it does not need to be classy either. Longer-term contracts with visibility to supply chain, we can have lower term contracts because they allow predict ability of demand. Visibility to that is very important. When I buy a car, I can see where it is made. They will tell me which parts come from which country. When I put a drug into my mouth, I have no idea about the quality, nor do I know where it is made. We also need diversity. My favorite restaurant chain gets its tomatoes from three different sources. California, mexico, and texas.
▶ 1:04:23When I buy a drug, it is often a single source supplier. I don't worry whether it comes from idaho, india, ireland, or china. I don't want it to come from only india or china or ireland. Quality issues often come up in the united states as well because we have single source suppliers so transparency of supply chain and diversity of supply. With long-term contracts building in these quality measures, I think it will lower the cost and I have talked to generic manufacturers who agree with me as well.
▶ 1:04:51We can lower the cost of generics by having this process in place. >> one further point. The generic drug testing program has found that we are actually paying more for poor quality generics and some of the cheaper ones are the better quality ones. >> one of the issues is going to be fda rules and regulations that restrict innovation. Obviously, this is a competing consideration here.
▶ 1:05:21Because we do want drugs to be effective. We do want them to be safe but we also want to encourage innovation here. Really, the alternative to innovation here is innovation in countries that consider us to be an enemy self when we think about fda regulation, I think that we should -- it should look at what the alternative is. If you don't want to have drugs manufactured in china.
▶ 1:05:47So we need to encourage them here and that very well may mean a real change in the way the fda looks at new drugs. >> in addition, what I have said about the fda changing the regulation with the power of congress doing that, I think holding ceo's and drug companies and pharmaceuticals, if they brought something in and it did not meet the correct standards, hold them accountable.
▶ 1:06:17Somebody has got to be held accountable because they put those drugs on the market and that goes to our consumers. Seniors -- I'm happy to be one of those now. We take more medication than when I was in my youth so they are more dependent on that and we have got to make sure that something of interest here, when you look at the antibiotics, virtually all of that is in china.
▶ 1:06:40When you look at the fermentation and fluorination process, india relies on that but they closed down their fermentation and fluorination processes so 100% of that comes from china. That's a national security and health risk that needs to be addressed now and I think those are things that we need to put the money in our nih and research used properly.
▶ 1:07:07They said to many of our scientists and researchers are going to africa or being courted by china to go over there so five years from now, the brain drain, we are going to lose that cutting edge and it's hard to get back to first place when you have fallen behind. We need to entice people to stay here, do the research, and support that. >> why is it so difficult for the federal government to buy american drugs?
▶ 1:07:35I mean, we got the v.a., prison system, all these groups. Why is it so hard? >> they are not the largest part of purchasing but they are a significant part of purchasing so I think it is a few things. I will be honest. I worked at the white house and had a lot of discussions with the v.a. And the dod and I think there's been a lethargy there. They supply them. A lot of the people who do the contracting for them as well.
▶ 1:08:02I think they need a bit of a nudge. They understand the value of this as well. I think you look at the cost of quality and the cost of contracts, cost of switching. The dod and the v.a. Have helped enable chinese to come in with lower prices. We can resolve this as we look at other supply chains as well and mimic them as well. This is not hard to do.
▶ 1:08:27There is a little bit of a knowledge they need to understand the value to the war fighter and to veterans by doing this. I think they need better understanding of procurement as well. They often default to a lot of these organizations that was referred to earlier but I think by having better procurement practices, they can have better educated buyers. I will add one more thing. It's not just buying the end product.
▶ 1:08:50If we pay more for a generic, we could see -- if you look at maybe a supplier, they make 3% to 5% profitability. Distributors make 1% or 2%. It is a big leap when you look at that. What we don't want is to raise the price and they simply capture the economic rents. We have to understand that when we pay more, it has got to flow back down so we can have on shoring up some of these capabilities as well.
▶ 1:09:19The other part is the complexity of supply chains. His solvents as well so we saw lots of chokepoints that we
▶ 1:09:49Owned and we can use as counter measures as well and we need to make sure we continue to have those. >> every successful business person figures out where people need to do business with them. We have to do the exact same thing china has done. >> these companies are doing what they're sure that shareholders want them to do but we need to change the metrics a little bit so the patient benefits more as well.
▶ 1:10:11>> when I was in business, I tried to make sure I was indispensable. >> you want to have a monopoly. The policy is to not have monopolies in many industries. >> you have been vocal about communist china's use of economic coercion as a foreign policy tool.
▶ 1:10:38How does leveraging drugs compared to what we have seen with semiconductors in terms of speed and severity with which beijing can deploy it against us. >> you will see pharmaceuticals play in there a lot more. I had to wonder when secretary of state rubio said they were going to revoke the student the -- student visas and a week or two later, president trump says we are going to have 600,000.
▶ 1:11:03I wonder if there was a backdoor meeting where xi put his arm around the president and said, donald, let's talk about this. We control the drugs here. Those are the kind of things that could happen. I am not saying it happened but I don't want to be in that situation. We need to have what is best for america at heart and we need to be prepared for that and it needs to start five or six years ago. But you cannot start fast enough.
▶ 1:11:33We have seen them do it at the rare earth minerals. They have done it to japan and to us. It is only going to ramp up as things escalate. >> there are companies and lobbying interests shoring efforts as we heard, right? Congressman, you have never been shy about naming those names. Who are the players most invested in forcing the status quo and how should congress think about the influence as they consider legislation?
▶ 1:12:03>> the big pharma companies have lobbyists that come up here. Those companies ought to be held accountable. If you bring in a tainted drug when I was practicing as a veterinarian, melanie was being put into the dog food, does kidney damage, but there's over 300,000 people in china that was said to them in their baby formula.
▶ 1:12:31There was a handful of people who died but what about the long-term health risk? Chronic kidney disease and things like that. So I think you need to call people out and say if you are going to sell this drug into my market, if it is tainted, it goes back to you and you are going to be 100% reliable -- liable for this. It is horrible but I think this is time to play hardball -- it is hard ball but I think it's time to play hardball.
▶ 1:12:58If you tell them that, these are the new rules and I think we need to really put the pressure on the fda but it's going to require legislation so that another administration doesn't waive those fda rules. If congress mandates that and says this is how these drugs will come into this country, I will feel better in the future. >> miss gibson, how has a lack of accountability for foreign manufacturers allowed subpar drugs to enter our market?
▶ 1:13:26>> because they can and we are buying only on the basis of cost irrespective of quality. If I may him a senator, your question about why is it so hard for the dod to do the right thing -- in 2019 as a private citizen, I had this idea that since so much of our manufacturing base was decimated, I came up with the core of an idea for an executive order and it is very simple. It's what china does.
▶ 1:13:55And that was the dod, the v.a., and hhs should give priority to U.S.-made generics in their procurement process. Turns out that got into an executive order signed in august of 2020. The same day that that executive order came out, there was a press release from the from a trade group and this was during a pandemic when we were rationing drugs.
▶ 1:14:18And the comment was, just or essential drugs, that this would cause chaos and it would destabilize the global supply chain. That same year, the generic trade association came out with almost the same wording. It would cause instability. And two days after that statement came out, the chinese president at a g20 meeting said we have to ensure to ensure thel supply chains are stable. Is that coincidence?
▶ 1:14:50Four is that coordination? -- or is that coordination? I was thinking about the speech bill barr gave in 2020. He explains what goes on. U.S. executives or businesses in china are expected by the chinese government to lobby in washington if they want their businesses in china to go smoothly.
▶ 1:15:19If they don't, they will go the other way. We have companies here lobbying against american interests. The executive order is still active but nothing has been done and we need to say this is a directive, it shall be done. To help them in different departments, actually execute on the executive orders.
▶ 1:15:45Chair Scott: You have argued for years the comprehensive national power through means of western policymakers consistently underestimate. When that framework how to live right and how dangerous is china's dominance in the global pharmaceutical supply chain?
▶ 1:16:03Mr. Chang: We know what the chinese have done with rare earths. They do not even have a 100% monopoly. Given that there maliciousness, truly this is the next item for them to actually weaponize. We can go back and look at the communist party's policies toward the united states.
▶ 1:16:30Mr. Chang: We can see what they say, we could see what they have done, and it is malicious. We as americans refuse to acknowledge that because we have wanted to integrate the chinese into the international system. We have wanted to get along. Because we are a democracy we are slow to recognize threats. That is where we are.
▶ 1:16:54Mr. Chang: To answer some of the previous questions, as the congressman has said, we need to acknowledge the aims of the chinese regime and deal with it with a determination and vigor that is necessary. You were talking about accountability.
▶ 1:17:18Mr. Chang: Why don't we make drugmakers strictly liable for the damages caused by pharmaceuticals that are manufactured abroad and imported into the united states? That is not an unreasonable thing to do. We had about 150 americans die in 2008-2009 because of adulterated heparin that was made in china. We had another problem in 2019 with heartburn medications. This is a problem that continues.
▶ 1:17:49Mr. Chang: Because we don't the chinese weaponize every point of contact with our society, it is something we need to do. If we do this I think drug manufacturers will shy away from importing and they will rush to make in the united states or in jurisdiction where they have confidence. That is one thing we can do to ensure as quickly as possible.
▶ 1:18:11Mr. Chang: As I mentioned with regard to senator tuberville, there will be a period of vulnerability because the chinese have a 100% monopoly on 800 pharmaceuticals, and we cannot ignore that. We can do all we possibly can in the interim, and that means we have to move fast.
▶ 1:18:31Chair Scott: Ms. gibson, when you first started researching what was the reaction from the drug industry, medical officials and the community?
▶ 1:18:40Ms. Gibson: Denial.
▶ 1:18:43Chair Scott: They were not accepting? They were not saying, "good job ?"
▶ 1:18:50Ms. Gibson: There was this clamoring about, the numbers are wrong, manipulation of that. China rx was very well researched. I got the information from the actual manufacturers. They know what is going on. They know where product comes from. They know where they get their antibiotics. It does not come from lobby groups. It was absolutely sound.
▶ 1:19:17Ms. Gibson: Right before the pandemic hit home here in early 2020, I was with a group of pharmaceutical engineers -- great people with 150 years of experience. We said what percentage of our key starting materials for the drugs we need to treat -- they said 90%. 95%. 90%.
▶ 1:19:41Ms. Gibson: You know, what I'm really pleased at, senator, is now everyone in washington knows about apis and they know that apis do not fall from the sky, they are made of key starting materials and where our dependence is. I consider that a partial success.
▶ 1:20:00Ms. Gibson: If I may say something about the product line, if you have to go buy tires for your car and you go to a retailer and 15% of those products blow out while you go 60 miles per hour on the beltway, the market fixes that. It fixes it through risk, and also product liability. I believe we need to move not just from a regulatory point of view but a market point of view that this is not acceptable.
▶ 1:20:31Ms. Gibson: You are putting products on that are harming people. Arsenic is arsenic. Thallium is thallium. You cannot debate that. There was secondary testing to the findings from the -- this is unacceptable.
▶ 1:20:49Chair Scott: Mr. harjivan, what risk this dispose to our national security and patient access? They are going further than that. They own the brand now, too.
▶ 1:21:06Dr. Harjivan: I would say the generic industry is fungible. You do not need to dig up the earth to get this material. Apis can move quickly with the right incentives. For them moving up the chain in life sciences, to be, that is an existential threat.
▶ 1:21:33Dr. Harjivan: Moving very fast in this area can lead to a number of different publications. You look at their work on gene therapy and advanced manufacturing, they're putting the right incentives for those technologies to move ahead in a rapid pace. They are putting in quick regulatory standards. They putting in innovative standards that are high quality. They're using innovation which we should adopt.
▶ 1:22:02Dr. Harjivan: Around quality, I think there is innovation there can occur, as well. We were able to remotely look at quality. We did not need inspections. We could remotely monitor quality. That is advanced a lot in five years. When we can have real-time monitoring of quality, the big companies do that already. We can require that of china and india. There are cheaper solutions. Innovation is the key.
▶ 1:22:31Dr. Harjivan: The next 50 years will be all about the biology revolution. If we do not invest right now, that will be important. They invest but they are sporadic. We have wonderful, flexible capital market but we are not leveraging it. We need to leverage it more efficiently and create demand mechanisms. I think we can do it. We are not focused on that right now.
▶ 1:22:56Chair Scott: Ranking member. >> I want to thank everybody for being here. This is unbelievable. I want to thank the ranking member for being a partner in this. I am optimistic. I believe the american public is getting more informed. Congress is clearly getting more informed and I think we will get something done.
▶ 1:23:25Chair Scott: If you take a pill every morning for a chronic condition, there is a very good chance that pill was made using key ingredients from communist china. There is a good chance that you, your doctor, your pharmacist or the fda have no way of knowing where the ingredients come from. We don't require disclosure. If anyone feels comfortable putting something in the mouth from china, I think the ra fool. The standards in china are despicable.
▶ 1:23:55Chair Scott: If you are buying food from china, it is unsanitary. The way things are produced and the conditions are horrible. Congress has failed to demand transparency. For 30 years. I think what Mr. chang said, a lot of people thought we would bring china into the fold and all that stuff. It never happened. Covid-19 showed us what happens when we do that in the system breaks.
▶ 1:24:24Chair Scott: 37 factories that made ingredients for american medicine shutdown. The chinese government is despicable. They nationalize their own medical supply collection and discarded who got what based on politics. That was a warning. We did did not take the hint. Our witnesses made it clear that what we are dealing with is not market inefficiency.
▶ 1:24:50Chair Scott: It is a national security vulnerability that has been intentionally engineered by an enemy nation -- not the people of china, the government of china and supported by her own policy failures. Solutions are not a mystery. Our clear labels act as a first step. Soon we will have legislation on closing loopholes in our system and finding ways to support manufacturing focused on federal procurement. The figures of our country did not create this problem but they are paying the price.
▶ 1:25:21Chair Scott: This committee is committed to fighting for them and solutions. If any senators have additional questions for the witnesses, the hearing record will be open until next wednesday at 5:00 p.m. I thank everyone for being here. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap.org]