▶ 0:03:06K.d.
▶ 0:13:35. >> the U.S. senate special committee on aging will now come to order. The ranking member and I were thrilled to see the older americans authorization act pass the senate yesterday. This is critical to protecting seniors' independence and reaffirms congress's commitment to the older americans who built this country.
▶ 0:14:00I am privileged to lead this with ranking member gillibrand. I'm especially proud to have led this effort in the senate with the ranking member. I'd like to personally thank her for her lard work on this. I want to thank my senate republican and democrat colleagues for their support of our seniors through the o.a.a.
▶ 0:14:32Here's a question most people have never thought to ask. Do you know who actually makes your medicine? Not what's on the bottle but who owns the facility, who controls the ingredients. Does a foreign government have any influence over the decision of what goes into them. Most americans don't noe and in many cases neither does the federal government.
▶ 0:14:58Seniors rely on prescription drugs more than nigh other age group. Nearly all of those prescriptions are filled with generic drugs and the huge share of those are manufactured in facilities overseas by companies with complex oakership structures that the f.d. A, cifus and other agencies can't fully trace.
▶ 0:15:26For medicine it's a matter of life and depth. We've seen what happens when something goes wrong with a faulty supply chain. Unfortunately people die. I've said it before, there is no reason why we should be letting our adversary, communist china, control our medicine supply chain. If they wanted to they could restrict exports tomorrow for life-saving medicines.
▶ 0:15:58The difference is how dependent we are on the country coining the restriction, right now we are very dependent. Today we're going to look at a different problem. Who owns the companies making the drugs. The large supply is largely invisible to the federal government. There's not a federal agency that's been designed to oversee this.
▶ 0:16:28It and goes even further than that. Most people think about threats to our foreign drug supply in terms of what's on the shelf but there's another problem. When american patients participate in a critical trial -- american patients take on the risk but the data those trials produce, what works, what doesn't, what the next-generation treatments should look like could end up going directly to a foreign
▶ 0:16:58Government that doesn't like us, legally with no one able to stop it. Communist china doesn't need to steal our breakthroughs, we just hand it over to them. Today I'm announcing the pharmaceutical investment and accountability act with ranking member gillibrand and Sen. warren.
▶ 0:17:27Requiring a report to congress annually. Transparency is the first step but it is just the first step. This hearing is going to help U.S. identify what comes after that. American people and the senior especially need to know who controls the medicines keeping them alive. I'd like to recognize ranking member gillibrand.
▶ 0:17:54Ranking Member Gillibrand: Thank you. We keep hearing the outsized influence of foreign actors on our drug supply chain. We know that america relies too heavily on china and india for the foundational components to manufacture generic drugs, the key starting materials and the active pharmaceutical greens and it's troubling our foreign entities continue to expand
▶ 0:18:26Ranking Member Gillibrand: Investment, ownership and control of our supply chain. We currently do not and cannot see the full dependency on our foreign actors within the supply chain. These countries try and guise their influence and involvement. It also happens because we need stronger tools to understand, evaluate and manage these modern supply chain risks.
▶ 0:18:54Ranking Member Gillibrand: We must bolster federal you're sight efforts. This will strengthen our health and national security without discounseling trusted investment. I'm proud to support the work chair scott and Sen.
▶ 0:19:12Ranking Member Gillibrand: Warren do but we also have to align goals and investments to diminish foreign dominance in our drug supply chain and maintain our little in pharmaceutical innovation. This has led to a race to the bottom for generic drugs. Congress must work with to make sure these meet requirements.
▶ 0:19:44Ranking Member Gillibrand: China has stepped up through efforts like clinical trial reform, drug development and improved coordination between early research and commercial scale manufacturing. While we go do not need to exactly replicate the steps they've taken, they are moving at a much faster pace than we are, increasing their dependence on critical trials.
▶ 0:20:11Ranking Member Gillibrand: We can't let our foreign adverse si we can't let our foreign adverse adversaries surpass us. I look forward to hearing from our guest today and look forward to be able to strengthen our health and national security. Thank you.
▶ 0:20:34Chair Scott: Thank you. Now I'd like to welcome our witnesses. Here to help the committee understand where foreign ownership creates real risk and what the freshman government can do about it. First I'd like to recognize nazak nikakhtar. In 2018 she was unanimous my condition firmed as the secretary of industry and analysis and performed nonexclusive functions and duties while dominated.
▶ 0:21:06Chair Scott: She was congress lead and oversaw the first government supply that I know initiative. She chairs the national security practice at wiley rein. Thank you for being here. Please begin your testimony.
▶ 0:21:21Ms. Nikakhtar: Thank you for hosting this important hearing and leading important legislation. My name is miss that is act nikakhtar and my testimony is informed by my work in trailed and 25 years as an economist and policy expert. The growth fueled by I.p.
▶ 0:21:40Ms. Nikakhtar: And massive state subsidies and a distortive economy that consistently underprices the rest of the world is well established yet these realities provide the context in which I will discuss our legal shortcomings in. 2024-2025 china surpassed the utah in biotech innovation, deal making and clinical output. For every $100,000 in U.S.
▶ 0:22:09Ms. Nikakhtar: B byo tech spending, america has one scientist, china has three. China outpaces us we think nears and they intentionally keep prices low and transfers wealth to the communist chinese party and uses its cash to undercut the rest of the world and subsidize their industry in a
▶ 0:22:41Ms. Nikakhtar: Scale that dwarfs are. These predator practices along with the pervasive I.p. Theft as well as clinical trials being held in china without any regards to the population is alarming. China is a foreign adversery under U.S. law.
▶ 0:23:03Ms. Nikakhtar: An adversary's ability to reach into and grab further control of our supply chain is an oven security risk. We need look no further than batteries, robots and robotic sectors as an example of what is next to come. Most chinese biotech investments in the U.S. seek to get personal dat I've a and disrupt markets.
▶ 0:23:37Ms. Nikakhtar: Many transactions are cleared today with mitigation measures but almost always vialses of mitigation measures won't be detected by the U.S. government. This is a risk we cannot afford to take with a the parties need to justify why the U.S.
▶ 0:24:11Ms. Nikakhtar: Government needs to go along with there. Second, cfius's jurisdiction doesn't cover most greenfield investments in the united states.
▶ 0:24:34Ms. Nikakhtar: Legal jurisdiction needs to be extended by congress through the passage of 2.0 or the president needs to insurance constitute iep a and executive order to close the gap. Time is running out and these gaps remain wide open enabling predator f.d.I. To occur largely unprotected. Third, we need broader controls on biotechnologies biomaterials and related data exported to china.
▶ 0:25:04Ms. Nikakhtar: Currently all of this flows virtually unrestricted to china, the c.c.p. And the people's liberation army. Broadening controls will allow them to be treated in the cfius context, mandating their control. Fourth, we need to address the fax fact that U.S.
▶ 0:25:25Ms. Nikakhtar: Investments in chinese biotech occurs significantly through corporate financing deals and venture capital. While the security act of 2026 is an example of a positive step forward, it needs to be passed and the implementing regulations need to be broad enough to cover all forms of capital flow. Comprehensive bans are effective.
▶ 0:25:52Ms. Nikakhtar: Fifth, we need to import prohibitions on biotech terms produced in china. We have trade laws forced library predictions to do that. My final point, with respect to anybody claiming that these recommendations will increase U.S. prices, this is a red herring. China's growth in biotech is only a recent event. Prior to that, the U.S.
▶ 0:26:21Ms. Nikakhtar: Pharmaceutical companies faced issues that stemmed from unrelated issues. Relying on china does not solve or competitiveness problem, it only on adds to it. Thank you.
▶ 0:26:35Chair Scott: Thank you. Stephen estelle is a vice president for global innovation. He spent his career studying hour ownership structures in the ino vacation field creates competitiveness. Thanks for being here. Please begin your testimony.
▶ 0:27:00Mr. Ezell: Garvin. I appreciate the opportunity to testify today and I appreciate the special committee for looking into foreign influence. The united states and china are locked in a fearless struggle for leadership in advanced technology industries. From aerospace to a.I. To bio form cute cals.
▶ 0:27:31Mr. Ezell: -- pharmaceuticals. China first addressed biopharmaceuticals as an sad ran teenage industry in 2007. China seeks dominance across all phase is of the biopharmaceutical supply and innovation chain.
▶ 0:27:53Mr. Ezell: All the way from the manufacturing of key starting materials and active pharmaceutical ingredients to generic drugs. Including the chin cal trials and the basic science behind them.
▶ 0:28:08Mr. Ezell: We'll hear how china has come to dominant the k.s.m.'s 70% which america uses 69 the policymakers must understand that china now accounts for 31% of accounts for 31% of the new drug development pipeline globally. China has surpassed the U.S.
▶ 0:28:28Mr. Ezell: Now in clinical trial starts for new oncology drugs and therefore their share onion going clinical trials for new doug mcmillonings is -- [indiscernible] china has used every method conceivable.
▶ 0:28:50Mr. Ezell: To be sure some of these are legitimate but a great many prayses are unfair such as rampant I.p. Theft, nonmarket subsidies and predator palaces that allows chinese producers to sell a.b.I.'s for prices frequently 40% to 30% below
▶ 0:29:21Mr. Ezell: Others. The links of chinese companies servicing the U.S. pharmaceutical supply chain. Such chinese false flagging or brand onification in sectors from aerospace to clean energy to boyo technology.
▶ 0:29:44Mr. Ezell: I.t.f.'s written testimony provided several case studies including beijing economics institute. P.g.I., which now operates the largest world sequencing capability brands itself in america under the firm complete gentlemen normallics. It brands itself as complete to obscure the fact that it's owned by the b.g.I. And roughly linked to the p.c.a.
▶ 0:30:16Mr. Ezell: The chinese biotech acquired minnesota testing firm at tech laboratory services in 2008 and is now a leading company in the world organization. Wantsy app maintenance an sensei network of relationships with the c.c.p.
▶ 0:30:41Mr. Ezell: Is involved in the.com strategy and operates the state key laboratory of drug research. Its secretary has state that had "party members of the technical backbone of hoos issue app tech.
▶ 0:31:01Mr. Ezell: " congress should require chinese companies operating in high-tech sectors in america to report beneficial ownership and operational control, iran lewding offshore subsidy lewding offshore subsidies and rights. Companies that fail to do this should be barred from doing business in the united states. The f.t.c.
▶ 0:31:26Mr. Ezell: Should issue guidance on truth and branding practices, requiring companies to clearly disclose their foreign ownership in the marketing, branding and web communications. I.t.I.f.
▶ 0:31:40Mr. Ezell: Provide further recommendations from investing in offshore and stockpiling but we're in a fierce battle and it's critical that congress implement policies that effectively support the industry but also ensure that chinese trade practices don't harm america workers, patients and companies. Thank you.
▶ 0:32:07Chair Scott: Thank you. Edward you is a former f.b.I. Special agent who worked on biotechnology threats at the f.b.I. And director of national intelligence. He haas been featured on cbs's 60 minutes. He now runs ehy consulting l.l.c. Thanks for being here. Please begin your testimony.
▶ 0:32:37Mr. You: Good evening. I want to thank the committee for this opportunity. I am going to do something a little bit different. I appreciate the title of today's hearing, looking behind the label. I'm going to encourage you to look beyond the label. Bbiotechnology has become so advanced -- you heard it being laid out.
▶ 0:33:03Mr. You: There's absolutely convergence of these technologies happening and biotechnology is impacting multiple critical infrastructure sectors. Not just health, agriculture, manufacturing, renewable energy production so it is strategic in its nature. The fact of the matter is that the chinese government have acknowledged that. You're seeing that in a lot of their statewide policies. Their future plan.
▶ 0:33:34Mr. You: They're acting on it. You mentioned about the fact that our own f.d.a. Has cleared multiple chinese start-ups. With a break flu cancer treatment and they're being brought over to the U.S. and being put in U.S. patients and the resultling clinical trial data is being sent back to china. That data is then supercharging their a.I.
▶ 0:33:59Mr. You: To it rise it and come up with the next round offer that puttics but what's even worse is our company is licensing those products so our government is funding it through reimbursements, through medicare. It is a double-triple whammy. With that in mind it also means that data is absolutely the new oil and we need to be looking at it that way. The thing about this is the data doesn't spoil.
▶ 0:34:29Mr. You: That means it's going to be a continuing challenge. It also means that we challenge cybersecurity. Not the traditional cyberconsult security. It impacts medicare, medicaid. It impacts health records. We have to acknowledge that that's what's happening in this space. I also want to include agriculture because the U.S.
▶ 0:34:52Mr. You: Has historically been a powerhouse in agriculture and it's been on the backbone of economy. Now agriculture is not just a comod di for food. It's diagnose targeted as a solution for biofuels and pharmaceuticals.
▶ 0:35:16Mr. You: We're looking at the evolution of not just farm to fork but farm to fiber, farm to fuel and farm to pharmacy. With that in mind the chinese have already declared that as a priority.
▶ 0:35:30Mr. You: They just launched a five-year smart farming plan to integrate robotics, automation to supercharge and expand their inferring automation capabilities. For their pharmaceutical capabilities as well. If you look at china's 15 five-year plan.
▶ 0:35:57Mr. You: More importantly their 2035 strategy. What that means is they already know it's understanding how do they determine what the rules ott read are for the global market. That they understand that if you are able to influence the standards, you influence the markets and there we have to become subservant to that. So unless we understand what the implications are.
▶ 0:36:27Mr. You: My recommendations are one, understanding that it is actually a strategic initiative and second I recommend looking at the national commission on emerging biotechnology that is supporting congress and a lot of their legislative wedges address everything I just mentioned.
▶ 0:36:45Mr. You: Third, we absolutely need to do a better job in assessing the risks associated with biotechnology and the bioeconomy because historically when the national security community comes to bodies like this where we typically characterize threats, it's pandemic, or engineering bioweapons. But we're talking about something more strategic and we can't be isolated in our silos.
▶ 0:37:14Mr. You: As it stands right now we are not established to understand ho listically what these threats are and I think the most important one is we just need to outcompete. You do not win a space race by just playing defense all the time. We out-compete, out-innovate and we're not established to do that right now.
▶ 0:37:37Mr. You: If we don't, what we're losing is not just market share but on the promise of protecting our senior population but also we're not fulfilling the promise of the generation that we leave the world a better place and we put ourselves in a position to have our children succeed without us. And we're failing that right now. With that, I thank you and welcome your questions.
▶ 0:38:03Chair Scott: Merchandise jill brand?
▶ 0:38:16Ranking Member Gillibrand: I'd like to Dr. Dr. doshi. He drafted the security strategy and the pact between the united states, australia and the united kingdom. You may again. >> thank you very much for the opportunity to tv today.
▶ 0:38:48Ranking Member Gillibrand: Now we're making the same mistake in biotechnology and none of this is good of our patients. We published a yearlong study last month. We want to reduce our dependence on china. We are shipping our biotechnology to china and losing that ability to generate at home. And we're offshoring our bioecosystem to china as well.
▶ 0:39:19Ranking Member Gillibrand: These trends are serious but with your little they are reversible. I'll now address each in turn. First, essential medicines. A drug label might say made in america but our team looked at the data and looked at key starting merle. They increasingly come from china and only china. That takes a dangerous dependency. Take amoxicillin. China controls 94% of the world's starting material. Heparin.
▶ 0:39:49Ranking Member Gillibrand: 12 million americans receive it every year in hospitals but 80% of the global sny is from china. How did this happen? We focus on price, not resilience. Meanwhile, china ran the rare etc. Play in pharma. They created prices to lock in a global monopoly position. It happened fast.
▶ 0:40:18Ranking Member Gillibrand: Amoxicillin fell from nearly 10 100% of our market to 0% in only 12 years. We need to change incentives. Medicines that use chinese input should face higher tariffs. Third, we should work with our allies. We cannot bring everything back to divide and conquer dependencies together. Third, weather disruption.
▶ 0:40:50Ranking Member Gillibrand: Finally, rebuild supply. Providing low-cost capital, a single $50 million grant made an austrian plant competitive with china in penicillin. We can do the same here. Our biotech echo system is breaking down. America pharma companies are licenses companies developed in china instead of investing in therapies designed in america.
▶ 0:41:19Ranking Member Gillibrand: Chinese assets now make up 1/3 of chinese pipelines. These are driving china's ecosystem while starving our own. Why? Partly because china is genuinely innovative but they also have a much less regulatory environment.
▶ 0:41:43Ranking Member Gillibrand: American pharmaceutical companies can get initial data that a therapy might work faster from chinese than american companies and with that dollars flow accordingly. We should regulate but not prohibit china. We want to disinsent vise arbitrage that hollows out our system.
▶ 0:42:10Ranking Member Gillibrand: We need to find a middle ground ground between bans and deregulation. Second, we need to reform our clinical trials to move faster and fund basic science now more than ever to keep our ecosystem going. The third friend is the offshoring of our biomanufacturing capability. Roughly 80% of U.S.
▶ 0:42:38Ranking Member Gillibrand: Biopharma companies work with chinese companies who grow knowledge that come pounds their lead over us. We are locked in because it's hard to move mastering from one facility to another. And when we do, we're extremely dependent on china so we can't do it without them. We need to build our own capacity with low cost loans.
▶ 0:43:12Ranking Member Gillibrand: And investments in leapfrog methods. We should require before it reaches a defined milestone. America taxpayers account for nearly 0% of global security profits. That should be good for all patients.
▶ 0:43:42Ranking Member Gillibrand: Thank you for your time and I look forward to your questions.
▶ 0:43:48Chair Scott: I want to thank each of you for your testimony. How many warships and fighter planes do we buy from china? Yeah, zero, right? Why don't we? They'd probably be cheaper, right? Because we don't want to be dependent on them. I mean, we're building a military so we're not dependent on them.
▶ 0:44:10Chair Scott: We don't want our servicemen and women dependent on area equipment so why are we buying nitration from china? Ms. nikakhtar, cfius is built around the idea of control but that can cover licensing and access rights.
▶ 0:44:34Chair Scott: There are pharmaceutical and biotech deals you were worried about, cfius had no authority to touch?
▶ 0:44:44Ms. Nikakhtar: I'm sorry, were you asking about the scope? It's pretty astounding. The U.S. government, we don't have a good idea of what yfius covers. Because you get chinese company who pretend they want to invest but then they say oops after all the research. There's no way, even if an f.d.I. Doesn't occur.
▶ 0:45:13Ms. Nikakhtar: You tonight know how many of the predator practices has robbed our companies of the sensitive data. It's their data, know how, how they test, etc., we need to get better visibility of what is going on.
▶ 0:45:37Chair Scott: Does the board seat come through ffius? If they were just putting somebody on a board. Not making any investment. Saying I have to this great scientist from china, I'm going to put them on the board. That wouldn't come under cfius, would it?
▶ 0:46:03Ms. Nikakhtar: In very limited conditions.
▶ 0:46:06Chair Scott: How about licensing deals? Do they fall under cfius?
▶ 0:46:15Ms. Nikakhtar: Not if there's no investment. They're getting sneakier in gathing information and it does not come up U.S. government review. Yo.
▶ 0:46:34Chair Scott: Every blood pressure pill in this country traces back to a single sourced chinese iningredient, correct? So what happens if they stop giving them to us. Talk about what's going to happen to a senior. We don't get anything from them?
▶ 0:46:56Me Zelle: The critical points is that china is looking for leverage over the united states over critical areas it can get it and there's no question that biotechnology, k.s.m.'s and a.p.I.'s are special choke points they could use to weaponize against the united states at their choosing.
▶ 0:47:22Chair Scott: Mr. you in your years in the f.b.I., what methods did foreign actors use to about things that would never be under review and the U.S. government would never see coming?
▶ 0:47:42Mr. You: Understanding about the bioeconomy. China, it's a silver bullet for them because they have real world chaps. They have food insecurity, energy insecurity. They are dealing with environmental remediation challenges. Biotechnology offers that to them so you see the full court press and from the whole scope in either funding and research and development. Acquiring talent development.
▶ 0:48:10Mr. You: We've seen that happen right now too looking at the talent going overseas. As was mentioned before, looking at investments that may not necessarily trip the bar but then also looking at downstream too. As I mentioned, the standards aspects of it as well is it's not just about theft of I.p.
▶ 0:48:29Mr. You: If you if you manage things like the international council for -- how you conduct medical treatments and clinical trials, especially for uncharted territory, they.net first mover advantage and I think that's the way we need to be understanding that it's not necessarily always us being reactive but understanding that they have huge incentives to make it
▶ 0:49:00Mr. You: Happen and we have to do a better job in understanding how we conduct our risk assessments. Yes, we are losing our shirts when it comes to I.p. Theft and a lot to have investments butter in absolutely leaning forward on trying to out-innovate us because they need it. That means that not only do we need to address that but we have to counter it before.
▶ 0:49:27Chair Scott: Dr. doshi, you report models of what happens if china restricts just 20% of the imports of amoxicillin. Can you describe what that looks like within an american nursing home or hospital?
▶ 0:49:43Dr. Doshi: Thank you, senator scott. That challenge is enormous. Amoxicillin, 60 million prescriptions a year. That's just one drug where we have a dependency. At least 700 have an upstream dependency on k.s.m. That comes from only china. We're talking about an impact that would be devastating to seniors.
▶ 0:50:10Chair Scott: Thank you. Ranking member?
▶ 0:50:14Reigning Member Gillibrand: The biotechnology space race is likely to define this century and up seating our competitive edge in global development. The emerging technologies 2025 report cautioned that the U.S. is dangerously close to falling behind china and urged immediate action to scale by biomanufacturing. Mr.
▶ 0:50:43Reigning Member Gillibrand: You, if the united states fails to maintain global little in biotechnology in what ways would in impact seniors' health security and their ability to access the high-quality meldses that they need?
▶ 0:51:01Mr. You: Thank you for the question. It tends to go beyond medical tourism, something we tend to bring up. The nightmare scenario I see is not just becoming completely dependent upon a foreign supply chain for our critical medicinessings but if you look at the coming storm of the internet of things, the interconnective world of 6g and not understanding where our data
▶ 0:51:33Mr. You: Is going. We may end up seeing that every single biological input that sustains us, not just our seniors but us as individuals, our food, medicine, energy production. What happens if that all is are you? Ed by an authoritarian regime antithetical to not only economy but our values and standards.
▶ 0:52:04Mr. You: That is a slippery slope-year about to embark on with if we do lose that first mover advantage. When the chinese launched the sputnik satellite, that was a wake-up call moment. The congress dropped billions of thats on education to make sure that it shored up our workforce, the future computer scientists, physicist, engineers to maintain our advantage.
▶ 0:52:33Mr. You: We need bold moves like that to be able to counter. Otherwise that nightmare scenario I just articulated could potentially become a reality.
▶ 0:52:43Ranking Member Gillibrand: Yes, what should the pillars of this proposal be and what agency or coordinating body should be charged with implementing such a proposal?
▶ 0:52:59Mr. You: I want to reference the national security council on emerging biotechnology. They recommended that there could be a coordinating office within the executive branch, which I knowledge but something like the nsaeb, which is scheduled to sunset this year is a little bit of an a shame because it's able to gauge the
▶ 0:53:30Mr. You: Different sectorrings to forecast it's going and then support congress with the potential policy recommendations. There's that but quite frankly, too, one of the challenges that I faced personally during my time in the bureau and still exists today is that where he need too do a better jock in doing the risk assessments.
▶ 0:53:55Mr. You: If they're forecasting biotechnology and the resulting products is looking at pandemic preparedness or bioweapons, those are important, yes, but if it's not also incorporating what's happening in the bioeconomy space then we're flying bind blind. Not only the risks with you missing opportunities. What are the next green field areas we should be launching into. And we're not leveraging that.
▶ 0:54:29Mr. You: Dr. doshi, what advantage does china have, how did they gain this advantage and what steps should we take?
▶ 0:54:38Dr. Doshi: The first advantage they have right now is that they've neitherred significant capacity and to -- can do manufacturing at scale far less than we can. Often below cost. That's one advantage but perhaps not the most important advantage. What I'm worried about is the fact that their clinical trial processes are able to move much faster.
▶ 0:55:07Dr. Doshi: In china, you just grow to a hospital. In our country, we have to go further f.d.a. The difference in time can be a year. For an american company, the chinese asset comes with that special exquisite pre-risk data. So we have to pay a premium for it. It comes it cit is a powerful incentive.
▶ 0:55:36Dr. Doshi: China is hollowing out drug discovery while basically taking away biomanufacturing from the united states. One we can do reform and number two, incentivize and boost investment and derisk from chinese biomanufacturing by creating incentives not to rely on biomanufacturing abroad.
▶ 0:56:00Dr. Doshi: Some of that is happening under biosecure but there's more to be done.
▶ 0:56:07Chair Scott: Senator husted?
▶ 0:56:11Sen. Husted: Thank you. Thanks to the committee for working on this important issue. Welcome to all the witnesses today. I know that there was a point in time in america's past where we thought it was a good idea to export -- we let china into the world trailed orb.
▶ 0:56:30Sen. Husted: We decided that collectively as a country at least the policymakers at the time, it would be a good idea to make things in other places because it was cheaper to make them there. But as you talk to people in different industry sectors -- I'm more for where the manufacturing sector will not only tell you that we lost our jobs and companies but we lost the talent.
▶ 0:56:57Sen. Husted: The talent, the engineers, the people that know how to make things, do complicated, efficient, effective manufacturing processes, whether it be a for rare earth, manufacturing goods, chips, electronics and I'm curious about what you any the impact of the youth sourcing of things in the pharmaceutical sector have had on our ability to actually compete from the standpoint of
▶ 0:57:30Sen. Husted: Talent. Any of you want to have a thought on that? Go ahead, thank you.
▶ 0:57:39Ms. Nikakhtar: I appreciate the question. Semiconductors is a good example. We had the brain drain when we decided to give everything to asia. We don't have enough investors who understand the technology to know where to invest. I do a lot of manufacturing and a lot of sort of building domestic industry.
▶ 0:57:58Ms. Nikakhtar: What is super fascinating is that, with the money that is going to recitallize domestic industry right now in the government, companies are investing and partnering with local nearby universities to develop the workforce to go into those factories. From my perspective, the brain drain needs to stop but partner with the universities and train those that we're going to lose.
▶ 0:58:30Sen. Husted: They go hand in hand. We need to build that pipeline but it doesn't exist to the extent it needs to, is that right?
▶ 0:58:42Ms. Nikakhtar: I think in biotech it still exists but we really need to make sure that we don't lose it.
▶ 0:58:51Sen. Husted: Mr. ezell, how do large lash purchasers of medicines such as hospitals chump assess the supply chain at the risk of selecting drugs. How do they think about it?
▶ 0:59:11Mr. Ezell: Let me add to the last comment. There are a whole range of technologies that we invented in american labs and universities that are now manufactured, scaled and commercialized in asia, especially china. Flat-panned televisions, solar panels. Batteries. These are things america invented but we can't manufacture them in america.
▶ 0:59:40Mr. Ezell: New things like synthetic biology needs to happen here in the united states.
▶ 0:59:53Sen. Husted: Apparent there's a virtue in an economy that is more individual courthouse perhaps than the lowest price.
▶ 1:00:06Mr. Ezell: Precisely.
▶ 1:00:09Sen. Husted: It's dependability, efficient issue, reliability, all of those things are all virtues in an economic decision.
▶ 1:00:22Mr. Ezell: When we let china in to who, they've grown into a there 7 billion trade surplus over the united states which has gone to a foreign acquisition fund that has snatched up a number of american and western companies.
▶ 1:00:43Mr. Ezell: We have allowed china to use the trade surplus they got from us to not only finance them but go out and buyer that own companies.
▶ 1:00:57Sen. Husted: Look, this is important that people understand it. We put ourselves in in position.
▶ 1:01:05Ms. Nikakhtar: We did. China is not cheaper, it's just a distorted price and it can manipulate up and down once it gets monopoly to our detriment.
▶ 1:01:18Sen. Husted: You want to touch on the supply risk and how we think about that?
▶ 1:01:25Mr. Ezell: Policymakers can equip hospitals to better understand.
▶ 1:01:35Sen. Husted: It creates understanding, awareness. Why should the average american care about knowing about this? You've touched on some of it. Would you like to -- anyone quickly? Why the average american should care about this issue. Why it's vital to them to know these things.
▶ 1:02:03Ms. Nikakhtar: One example. China supply is our vitamin supply chain that goes in our food. They could look at covid, introduce pathogens in our supply change. In america we can direct companies to make more but when those supply chains are located abroad, we can't. That's why every american should care.
▶ 1:02:33Ms. Nikakhtar: >> I wanted to also share a case of potential opportunity. This is an an deck dote in -- anecdotal from operation warp speed. At the time there was a vaccination we had an extreme shortage of because it came from south america. At the time we were scrambling trying to finds a source for that.
▶ 1:02:58Ms. Nikakhtar: This chemical could have been manufactured through boyology and yo and y you could use basically baker easiest to sin these that. That's a small snapshot of what we potentially could do here in the U.S. if we just invested in that core biomanufacturing capacity.
▶ 1:03:20Ms. Nikakhtar: It's not just about taking back what we lost but what are we doing strategically to supercharge what we already have? Including developing our workforce and talent base but also looking at our infrastructure. We need too do a better job in correcting our risk.
▶ 1:03:45Chair Scott: Thank you. Senator warren?
▶ 1:03:48Sen. Warren: Thank you. I appreciate the attention that the chairman and ranking member have given to scrutinizes the united states' dependence on foreign-made pharmaceuticals and on the impact it has to seniors' access to medicine. It's powerfully important and you-all have really been ringing the alarm bell on this and I appreciate it.
▶ 1:04:11Sen. Warren: I'm also appreciative of the focus of today's hearing, the impact of foreign investment in U.S. manufacturing capacity. Foreign investment in american pharmaceuticals and medicines have skyrocketed in just over 89 billion in 2020 to nearly 456 billion in 2024.
▶ 1:04:38Sen. Warren: That is an increase-just over 500% in that short time. At the same time countries like china are outpacing the U.S. this drug licensing and research and development, challenging america's leadership in biomedical innovation and that's why we have the committee on foreign investment in the united states, cfius whose job it is to investment these investments for national security risks. Ms.
▶ 1:05:07Sen. Warren: Nikakhtar, you led the department of commerce's participation in cfius during your time in government. Why is it important to jute nice foreign investments in pharmaceutical manufacturing?
▶ 1:05:21Ms. Nikakhtar: There's a number of reasons and thank you for that question. So one important reason is to look behind the veil, if it's a company that has links to foreign adversaries. Somebody has to look at that. It might not be readily pay apparent. The other one is really important. It's not always about I.p. Theft.
▶ 1:05:45Ms. Nikakhtar: If a foreign adversary invests in the united states, we've seen so many instance of them creating disruptions to ply chains and take that capabilities and offshore it so we don't have it in the united states. The predator f.d.I. Into the united states that foreign adversaries bring and our allies don't do that. We need to review it but also, importantly, we need to ban nose transactions.
▶ 1:06:14Sen. Warren: This is a really great point and I'm going to start with something that's even more threshold to get started. We need greater visibility into it. We need to be able to see what's happening with these acquisitions and it's not just national security at risk. It's whether or not americans get access to essential medications.
▶ 1:06:38Sen. Warren: Now, that is the essential reason behind why congress passed legislation back in 2018 during the first trump administration that expand expanded the scope of qfius's review to better capture foreign investment in the biotech companies that are so critical to U.S. innovation.
▶ 1:07:00Sen. Warren: But a recent report from the bipartisan national security commission for biotechnology found numerous instances of foreign-owned companies still acquiring american pharmaceutical and biotech companies without undergoing any review whatsoever. So, Ms., nikakhtar, why are biotech and life science acquisitions still falling through the cracks? We actually changed law on this. Why is it still happening?
▶ 1:07:31Ms. Nikakhtar: There are a number of reasons. Usually and I see this over and over again. Congress slates and gives the executive branch comprehensive north and the executive branch self-limits its implementationings of those authorities. It constrains all the authority congress gives it. That is what happened with firm that is what happened with fi firma.
▶ 1:07:58Ms. Nikakhtar: Companies can elect not to notify the U.S. governor and number three, cfius jurisdiction doesn't extend to most greenfield ventures, investments, so it goes down those avenues where cfius doesn't exist. They know the lawyers to hire. They're cirque vent the jurisdiction and there's no way we can find out.
▶ 1:08:25Sen. Warren: It's obvious that there is a lot of work to do at a minimum. We need more visibilities in what's happening in these transactions. So today I think chairman scott and ranking member have already talked about it but I'm going to do it once more. Chairman scott, ranking member gillibrand and I are introducing a bill to do just that.
▶ 1:08:50Sen. Warren: The pharmaceutical investment oversight and accountability act would require the federal governor to uncover who owns and controls key parts of our drug supply chain and then to investment the effect of foreign investment on our ability to make essential medications and maintain innovation right here at home. Now, I'm glad we're doing this put frankly, we shouldn't stop there.
▶ 1:09:15Sen. Warren: The bill is one provision in my larger pharmaceutical supply change chain defense enhancement act which would mayor oversight in the U.S. pharmaceutical entry with greater use of federal purchasing power to create a sustained demand. Mr.
▶ 1:09:42Sen. Warren: Doshi, how would leveraging federal procurement power make our federal supply chain more resilient and strengthen domestic pharmaceutical capa capacity?
▶ 1:09:56Dr. Doshi: Thank you. The U.S. government has incredible purchasing power but right now we effectively focus on low cost, not resilience and not quality. As a result purchasing groups are not incentivized to purchase with any knowledge of dependency. That means they buy perhaps into the chinese dependency that we already have and that's a huge problem. It could change and it wouldn't be that hard to change.
▶ 1:10:28Dr. Doshi: We're talking aboutpennys on the dollar. It's indispensable to solving this problem and creating printable, stable demand which brings on more supply.
▶ 1:10:41Sen. Warren: I really appreciate that. The federal oversight and accountability act is a really important place to start but cracking down on foreign investment alone is just one tool in the tool box. We're in an emergency situation and we need to be using all the tools we have to make more medicines here at moment and that could include federal contracting and procurement processes.
▶ 1:11:09Sen. Warren: I look forward to continuing to work with my colleagues and hope we can advance so have serious legislation here. Thank you all for being with us. Thank you.
▶ 1:11:18Chair Scott: Senator alsobrooks?
▶ 1:11:23Sen. Alsobrooks: Thank you so much for championship skyrocket and ranking member gillibrand for holding this hearing. For seniors in maryland and across our country the security of our drug supply chain can be a matter of life and death and those disruptions can especially will dangerous for older americans, many of whom are managing multiple chronic conditions and depend on squint access to medications.
▶ 1:11:53Sen. Alsobrooks: Even a breech delay can put their health at west coast risk it I know this especially because I am a part of what they call the sandwich generation where I recently went from some point carrying around stroller in my trunk to now carrying around a wheel chair for my mom as her caregiver.
▶ 1:12:17Sen. Alsobrooks: It must also be about whether our federal agencies have the information, staffing and tools necessary to identify risks early, respond quickly and prevent disruptions from becoming shorns that reach patients. Real security means catching problems before an older american is waiting for medicine that they cannot safely go without. My first question is more Mr. ezell.
▶ 1:12:44Sen. Alsobrooks: It is true that we often talk about drug shortages as though they appear orient and by the time a patient is told that the medication is unavailable there may have already been months of warning. A quality concern, a delayed inspection or product without a backup manufacturer. So why is our system still designed to manage shortages after their happen instead of acting when the warning signs first appear?
▶ 1:13:16Mr. Ezell: Well, direct shortages reflect a culmination of issues and a half sneed over time. Key factors such as low profit margins for e.p.I.'s, geographic concentration. Manufacturing complexity, quality concerns. A lack of incentive and too much financial risk to produce less profitable drugs like statins.
▶ 1:13:46Mr. Ezell: These are very complex challenges that have built over time. Vice president been adequately address the in americans' health security and health resilience. So that's all -- and you also have to recognize that amoxicillin, he amoxicillin, heparin, antibiotics, these are distinct products and a half distinct
▶ 1:14:17Mr. Ezell: Aspects of crossing the global supply chain so we have to have strategies on how to deal with these on a case by case basis. It's not going to be one size fits all. We have to invest in technology and innovation. I think that a lot of the challenges we face this effort p.I.'s and generic drugs and critical minerals are the same.
▶ 1:14:43Mr. Ezell: We have to invest in new refining, processioning and biomanufacturing processions to so that we can manufacture these types of things cost cost-effecy types of things cost cost-effect scale for united states. I think policy members should look at the manufacturing usa network that was stood up during the obama administration.
▶ 1:15:04Mr. Ezell: We should stand up a manufacturing usa for critical minerals and api's to conduct the phd level research to develop these new processes to ensure they continue in the united states.
▶ 1:15:21Sen. Alsobrooks: I think we would see --
▶ 1:15:27Ms. Nikakhtar: I think we'd see more investment if investors do that china would not underbid them.
▶ 1:15:38Sen. Alsobrooks: Thank you. I want to bring you in on that same point. When essential medicines fall into that pattern and its more than an isolated or market problem, at what point should recurring shortages of essential medications be treated as a national security warning and not simply public health or market failure?
▶ 1:16:08Mr. Doshi: I think the warning point was covid . It was a sign that something was wrong in the supply chain. It wasn't something concentration on china although that's a big part of it. We didn't actually know what was upstream. We didn't know our dependencies. The drug might have the right label on it. It might come from an ally jurisdiction but we don't know where the chemicals come from.
▶ 1:16:44Mr. Doshi: We need to know where they come from and build resiliency not just in api or drug finishing but in every portion of the supply chain as well.
▶ 1:16:57Chair Scott: Thank you. Senator warren and gillibrand and I are announcing this legislation today, what is step two and three?
▶ 1:17:13Ms. Nikakhtar: Luckily once we have better visibility, we've got to do some important things, we have to build at home, which means workforce development, giving the companies the capital and incentives need to rapidly build but the build will not go anywhere unless we have protections in place. Right now across the U.S. industrial base, investors are worried china will underpriced them.
▶ 1:17:44Ms. Nikakhtar: We understand the scope of the problem. Customs has really incredible -- how you accessed proprietary data is a separate issue -- but everything that crosses our border customs has in the great level of detail. Visibility is great. It was really pleased looking at it. We incentivize the building and protect and I think we have a homerun.
▶ 1:18:12Chair Scott: In march and april, china put two things into effect, one makes it a punishable offense, congress is trying to mandate a disclosure, beijing is trying to criminalize it. What do we do?
▶ 1:18:45Mr. Ezell: These decrees would establish supply chain for china as an independent concern. The other identifies responding to improper use of jurisdiction.
▶ 1:19:08Mr. Ezell: Essentially what they are trying to do is lay groundwork to even say we wouldn't have the ability to inspect fair factories. I think american policymakers need to be forceful that this is an industry that directly affects the lives of american citizens and we will have the ability to inspect our facilities and not let these get
▶ 1:19:42Mr. Ezell: In the way of that. There's a lot we need to be doing as reports in the past have laid out in achieving parity in the inspections, as opposed to now where the inspections are announced. We need to make it clear we will not allow this disparity to happen anymore.
▶ 1:20:10Mr. Ezell: And we need to staff and resource the fda so they have the capability they need to conduct more extensive api's and chinese facilities.
▶ 1:20:21Chair Scott: Thanks. You say american patients take the risk. Is there anything that stops the data generated from ending up in the hands of a foreign government? We allowed this to happen, right?
▶ 1:20:42Mr. You: Yes. It's more than you realize, it's about existing polities -- policies and how we harmonize that and it goes back to the assessments. Limit give you a real-world scenario.
▶ 1:20:57Mr. You: Say you take your dna sequence, it is all contextual, meaning if you take your sequence and submit as a volunteer for an nih research project, you will be provided a consent form and be identified for some risks, a lot of things we talked about as far as risk exposure is not covered, that your data might be used by china to generate the next breakthrough pharmaceutical --
▶ 1:21:29Mr. You: We don't cover that. The same sequence can be used as a patient. As it stands right now, hit but doesn't quite cover all the different applications and transitions privacy.
▶ 1:21:48Mr. You: That same sequence, if you submit it and say you've nailed it to a commercial company, that's not covered by the ftc or other consumer protections as it stands right now. Even our harmonization, that same dna sequence, it all depends on how it's applied. So there are gaps. Basically we are setting ourselves up to be vulnerable.
▶ 1:22:18Chair Scott: Thank you. Your report says dna synthesis is shared across agencies in the government lacks visibility into the commercial supply chain. You also recommend a white house level coordinating for pharmaceuticals.
▶ 1:22:38Chair Scott: Is the core failure missing data , fragmenting authority, both, and what agency should be held accountable for control across the drug supply chain?
▶ 1:22:50Mr. Doshi: Thank you for the question. It's both. One problem I know you focus quite a bit on his information we need, we don't have all the information. Our dependencies are often talked about in the context of small molecule drugs but we also have dependencies in biotech. We rely on china and we don't have all the information.
▶ 1:23:19Mr. Doshi: On the coordination side, we would need a white house like body to bring the agencies together. Many agencies are involved and they all have different data. Fda data, customs, commerce. A solution will also require the government coming together coherently to figure out how to do industrial strategy to compete with china. Let me add one additional point.
▶ 1:23:49Mr. Doshi: You asked earlier, I have to add the set of directions -- directives is insane. They criminalize pretty much any normal behavior in china. Try to move up factor out of china, that's criminal, to have compliance with fda inspection, that could be criminal.
▶ 1:24:12Mr. Doshi: These directives create soared over the neck of every company operating in china and I think it's incumbent on all of us to help inform these companies of the growing risks. What has occurred is so shocking that I think even the chinese don't fully understand the implications if we try to take it seriously.
▶ 1:24:34Ms. Nikakhtar: 1260 is a perfect example of where government fails. Congress legislates, let's say you create a body in the white house or somewhere else, they will not look at all the companies they need to for foreign ownership and risks and then the chinese are going to sue and they are dropped off the list.
▶ 1:24:56Ms. Nikakhtar: There's got to be a mandate that there's really robust, comprehensive reviews of as many companies as humanly possible and standards, and there should be something like cfius. A U.S. government designation cannot be negated.
▶ 1:25:15Chair Scott: Thank you.
▶ 1:25:21Sen. Gillibrand: Reliance on a single location in the U.S. could leave our system exposed to environmental and operational barriers that could halt production and jeopardize access to essential medications. But there's ways to create resilience.
▶ 1:25:44Sen. Gillibrand: Why is it important to coordinate with allies and how can we enhance coordinations with allies rather than china? And what can the federal government do to encourage these practices?
▶ 1:26:05Mr. Ezell: Thank you for the question. The united states cannot solve this alone, we need to enroll allies who share common challenges that we do. There are distinct capabilities countries such as mexico, south korea or india could bring to the table that we could support.
▶ 1:26:26Mr. Ezell: If you look at south korea, it presents a compelling partner not just because of costs but capabilities. In the more complex api's, we could go to korea. Usmca renewal with mexico to set up a U.S.-mexico collaboration for api and precursor manufacturing.
▶ 1:26:55Mr. Ezell: We also have the-india trust initiative. We should work with india on the supply and demand side. We could direct the finance corporation to deploy more capital in india to support loan guarantees for api manufacturing. We could purchase more from india, which is a more trustworthy ally.
▶ 1:27:27Sen. Gillibrand: Based on your experience, does cfius have authority to mitigate national security risks for pharmaceutical assets or shows -- or are there gaps that should be addressed? And how do you ensure strategic competitors can't gain undue influence over the supply chain?
▶ 1:27:55Ms. Nikakhtar: The better cfius works, the better certainty it gives investors the rug won't be pulled out from under them. It does a pretty good job of looking at a company's ownership and working all the way up to the ultimate beneficial owner. What I found cfius isn't so good at his interagency doesn't agree about the national security threats.
▶ 1:28:23Ms. Nikakhtar: When that happens, the chair sort of has the authority to override other agency views. The other thing I see -- the disagreement among the cfius members is a big issue that has to be addressed. The other is mitigation measures. Harmful foreign investment in the united states is many times cleared.
▶ 1:28:52Ms. Nikakhtar: But when you're looking at really harmful acts by harmful actors, they have every incentive to hide it. They won't go to this monitor and say I'm guilty. With foreign adversaries, the mitigation measures don't work.
▶ 1:29:10Ms. Nikakhtar: There's the final issue we talked about -- there should be mitigation measures but the final thing is it doesn't apply to so many transactions and many are voluntary and we've got to close these gaps because american industries who invest should enjoy the protections cfius offers.
▶ 1:29:34Chair Scott: Thank each of you for coming. We have a lot of work to do and I think were making progress. We have a path hopefully to clear labels this year and hopefully a path to other things. The ranking member has been a great partner inning this done. Look forward to working with members on both sides of the aisle. The security of the drug supply chain is not a partisan question. Every senator on this committee has seniors in their state at risk.
▶ 1:30:04Chair Scott: If you have additional questions for the witnesses, you may some of them until next wednesday at 5:00 p.m. Thank you. [gavel]