Hearings to examine foreign dependence, focusing on China and America's drug supply.

1[Senate Hearing 119-416]2[From the U.S. Government Publishing Office]34                                                      S. Hrg. 119-41656                     FOREIGN DEPENDENCE: HOW CHINA7                     CAPTURED AMERICA'S DRUG SUPPLY8=======================================================================910                                HEARING1112                               BEFORE THE1314                       SPECIAL COMMITTEE ON AGING1516                          UNITED STATES SENATE1718                    ONE HUNDRED NINETEENTH CONGRESS1920                             SECOND SESSION2122                               __________2324                             WASHINGTON, DC2526                               __________2728                             MARCH 11, 20262930                               __________3132                           Serial No. 119-263334         Printed for the use of the Special Committee on Aging3536[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]3738        Available via the World Wide Web: http://www.govinfo.gov3940                               __________4142               U.S. GOVERNMENT PUBLISHING OFFICE4363-836 PDF            WASHINGTON : 202644=======================================================================4546                       SPECIAL COMMITTEE ON AGING4748                     RICK SCOTT, Florida, Chairman4950DAVE McCORMICK, Pennsylvania         KIRSTEN E. GILLIBRAND, New York51JIM JUSTICE, West Virginia           ELIZABETH WARREN, Massachusetts52TOMMY TUBERVILLE, Alabama            MARK KELLY, Arizona53RON JOHNSON, Wisconsin               RAPHAEL WARNOCK, Georgia54ASHLEY MOODY, Florida                ANDY KIM, New Jersey55JON HUSTED, Ohio                     ANGELA ALSOBROOKS, Maryland56                              ----------57                McKinley Lewis, Majority Staff Director58                Claire Descamps, Minority Staff Director5960                        C  O  N  T  E  N  T  S6162                              ----------6364                                                                   Page6566Opening Statement of Senator Rick Scott, Chairman................     167Opening Statement of Senator Kirsten E. Gillibrand, Ranking68  Member.........................................................     26970                           PANEL OF WITNESSES7172Hon. Ted Yoho, Former Congressman (Fl-3), Senior Advisor, Kyle73  House Group, Welaka, Florida...................................     474Gordon G. Chang, Author, Plan Red: China's Project to Destroy75  America, Bedminster, New Jersey................................     576Rosemary Gibson, Author, China Rx: Exposing the Risks of77  America's Dependence on China for Medicine, McLean, Virginia...     778Chan Harjivan, Visiting Fellow, Duke Margolis Institute for79  Health Policy, Washington, D.C.................................     88081                                APPENDIX82                      Prepared Witness Statements8384Hon. Ted Yoho, Former Congressman (Fl-3), Senior Advisor, Kyle85  House Group, Welaka, Florida...................................    2686Gordon G. Chang, Author, Plan Red: China's Project to Destroy87  America, Bedminster, New Jersey................................    3088Rosemary Gibson, Author, China Rx: Exposing the Risks of89  America's Dependence on China for Medicine, McLean, Virginia...    3890Chan Harjivan, Visiting Fellow, Duke Margolis Institute for91  Health Policy, Washington, D.C.................................    449293                        Questions for the Record9495Hon. Ted Yoho, Former Congressman (Fl-3), Senior Advisor, Kyle96  House Group, Welaka, Florida...................................    6897Gordon G. Chang, Author, Plan Red: China's Project to Destroy98  America, Bedminster, New Jersey................................    7099Rosemary Gibson, Author, China Rx: Exposing the Risks of100  America's Dependence on China for Medicine, McLean, Virginia...    73101Chan Harjivan, Visiting Fellow, Duke Margolis Institute for102  Health Policy, Washington, D.C.................................    76103104                       Statements for the Record105106AARP Statement...................................................    85107ASHP Statement...................................................    88108109                     FOREIGN DEPENDENCE: HOW CHINA110                     CAPTURED AMERICA'S DRUG SUPPLY111112                              ----------113114                       Wednesday, March 11, 2026115116                                        U.S. Senate117                                 Special Committee on Aging118                                                    Washington, DC.119    The Committee met, pursuant to notice, at 3:32 p.m., Room120216, Hart Senate Office Building, Hon. Rick Scott, Chairman of121the Committee, presiding.122    Present: Senator Scott, Tuberville, Moody, Gillibrand, and123Alsobrooks.124125                  OPENING STATEMENT OF SENATOR126                      RICK SCOTT, CHAIRMAN127128    The Chairman. The Special Committee on Aging will now come129to order.130    What if I told you that Communist China, an adversary of131the United States, and they made that decision, has sole132control of the building blocks of many of the medicines seniors133Americans rely on, completely dependent on. I am not just134talking about a few medicines, I am talking about our135antibiotics, our diabetes drugs, our blood pressure136medications, essential life-saving medicines found in every137hospital, every pharmacy, and every medicine cabinet in this138country.139    This isn't speculation, it is a reality. Xi Jinping and his140thugs in the CCP have decided to be our enemies, and they are141controlling the very medications our families rely on to live142happy, healthy lives. Today's hearing is about getting to the143bottom of why this is the case.144    I want to be very clear. It didn't happen because Communist145China was clever or lucky, this happened because Washington was146negligent. Lobbyists are powerful and politicians in both147parties chose cheap over safe. For years, we watched Communist148China's Government and its leaders execute a deliberate,149documented, publicly stated plan to capture the global drug150supply chain.151    They weren't trying to hide it, the signs were obvious and152our government did absolutely nothing to stop it. As a matter153of fact, politicians created regulatory barriers and enacted154policies that pushed manufacturing overseas and right into the155CCP's hands. This Committee has spent the last six months156exposing this threat and building this case piece by piece,157hearing by hearing.158    In September, we exposed how our dependence on foreign159generics is threatening drug safety and availability for160American patients. In October, we brought in experts to examine161solutions and discuss ideas like procurement reform and supply162chain transparency. In November, we had American manufacturers163testify what a rebuilt domestic industry could actually look164like.165    In January, along with Ranking Member Gillibrand, and166several members of this Committee, introduced the CLEAR LABELS167Act to inject transparency into our drug supply chain, because168the American people have a right to know where their drugs, and169the medicines keeping their mothers, fathers, and children170alive, come from.171    We have written to the FDA and the Secretary of HHS, we172have written to drug distributors, and group purchasing173organizations demanding answers about their foreign sourcing.174We have written to Secretary Hegseth about what dependence on175Communist China means for the health and readiness of our176troops. We even published an investigative report that177documents in plain terms what decades of offshoring has done to178the American drug manufacturing industry.179    Over the last 24 years, domestic production has collapsed,180dropping from 84 percent of the U.S. market in 2002, 84181percent, to just 37 percent today. 80 percent of APIs used in182these essential medicines have no U.S. source whatsoever. Think183about that, 80 percent.184    During COVID-19 the Chinese Government nationalized its own185medical supply production, turned off the exports, turned off186the exports, and decided which countries got life-saving drugs187based on politics, 37 Chinese factories that made ingredients188for American drugs shut down during the pandemic.189    U.S. hospitals and healthcare workers fighting to keep190Americans alive ran out of sedatives, antibiotics, and cancer191drugs. That was a taste what it looks like when you let an192adversary control your supply of essential medicines. It should193serve as a warning to all of us, if we just sit here, hold this194hearing, thank our witnesses, and go home without acting, it195will happen again, but worse.196    We didn't come here today to preside over another197Washington exercise when all we do--where all we do is identify198a problem, and then pat ourselves on the back for a nice199hearing. This Committee has been working since day one to sound200the alarm, talk to experts, and present real solutions to fix201the problem. I hope today will be a moment that alarm becomes202impossible to ignore.203    To all the members of this Committee and all congressional204colleagues, let us continue to work together to fix this205problem. Let us find a path forward that will protect American206patients and American lives, the lives of our constituents.207    I would like to recognize Ranking Member Gillibrand for her208opening statement.209210                 OPENING STATEMENT OF SENATOR211             KIRSTEN E. GILLIBRAND, RANKING MEMBER212213    Senator Gillibrand. Thank you, Chairman Scott and thank you214to our witnesses, being here today.215    As this Committee continues to investigate the generic drug216supply chain, its safety, its quality, there is one refrain217that is repeated at each hearing, and that is that the United218States has become reliant on China and India for key219ingredients to manufacture generic drugs, active pharmaceutical220ingredients, and key starting materials.221    A combination of factors has led to China's dominance in222this space. Subsidies provided by the Chinese Government lacks223environmental regulations and lower costs of labor but China is224not the sole reason that the United States is reliant on225foreign manufacturers for these critical chemicals. Underlying226market factors in the United States have led to a race to the227bottom where incentives for manufacturers are solely based on228cost and not quality, while amongst all of the generic drugs229that Americans take are--sorry--while almost all of the generic230drugs that America takes is safe, Congress must empower the FDA231to conduct rigorous oversight to make sure foreign232manufacturers comply with our safety standards.233    Congress must also work with industry to move away from234cost being the only factor for purchasing. We must also235incentivize manufacturers and purchasers to consider quality236when they are sourcing active pharmaceutical ingredients and237final dose form medicines. While the United States has238unfortunately ceded much territory regarding the generic drug239supply chain, there are still steps we can take to reshore or240friendshore for sourcing.241    However, the United States must keep our global leadership242in biopharmaceutical innovation. China has rapidly scaled up243their innovation for these novel medicines and therapies. They244have reformed their clinical trial system, invested Government245funding into development, and improved coordination between246early research and commercial scale manufacturing. While the247United States does not need to replicate the steps that the248Chinese Government has taken exactly, we have to realize that249China is moving at a much faster pace than we are.250    The United States has been the standard bearer for clinical251innovation for decades. It would be a detriment to our global252leadership if we let China surpass us in innovation. I look253forward to working with my fellow Members of Congress to ensure254that emerging biotechnology and innovation is supported in a255way that incentivizes these companies to stay in the United256States.257    I also urge my colleagues in Congress to adopt258recommendations laid out by the National Security Commission on259emerging biotechnology. Congress has the roadmap to continue260our global leadership in biopharmaceutical innovation and we261must recognize this sector for the asset that it is.262    I look forward to continuing this robust conversation263today, and I look forward to collaborating with my colleagues264across the aisle on this incredibly important issue.265    The Chairman. Thank you, Ranking Member Gillibrand.266    Next, I would like to welcome our witnesses. They are267experts on Communist China and supply chains and they can268explain how we got here and what we can do to address our269reliance on the CCP.270    First, I would like to welcome a fellow Floridian,271Congressman Ted Yoho. Served in Congress for eight years,272formerly chairing the House Foreign Affairs Subcommittee on273Asia and the Pacific. Thank you for coming and I look forward274to hearing your testimony.275276               STATEMENT OF HON. TED YOHO, FORMER277278              CONGRESSMAN (FL-3), SENIOR ADVISOR,279280               KYLE HOUSE GROUP, WELAKA, FLORIDA281282    Dr. Yoho. Chairman Scott, and Ranking Member Gillibrand,283thank you for the opportunity to address your committee on this284important and timely topic.285    The integrity of pharmaceuticals consumed by Americans,286especially our seniors, must be of the highest standards in287quality, purity, and effectiveness and free of adulteration288from toxins and cancer-causing substances that cause illness or289death. The responsibility lies with the pharmaceutical290companies and U.S. Government agencies like the Food and Drug291Administration and the offices--or the Office of the United292States Trade Representative.293    The medical community including drug retail outlets,294insurance companies, hospitals, and doctors all share the295responsibility of ensuring medications are of the highest296standards. China took advantage of the U.S. self-inflicted297wounds which was caused by overly burdensome regulations, tax298policies imposed by the U.S. Government, as well as by299corporations seeking higher profits to appease boardrooms and300investors.301    China enticed U.S. manufacturers to their shores with the302lure of low taxes, lacks regulations, cheap labor and a 1.4-303billion-person market.304    However, the cost to drug makers, the danger to the U.S.305consumers, and the vulnerability to U.S. national security were306missed. Drug makers soon realized they were subject to Chinese307rules, laws, patent agreements. They were required to have308Chinese Communist Party Members on their boards, and relinquish309up to 51 percent of their companies to state-owned enterprises.310    Corporations must give up their drug formula for approval.311If not surrendered freely, they are stolen. Chinese companies312then spring up, creating the exact same drug and selling it313below cost. As a result, U.S. manufacturers cannot compete and314are forced to leave the market. The result is that China315controls the world market, price, and supply chain. This is a316national security risk and a health risk to our country.317    As detrimental as that is, it gets worse. China does not318adhere to or practice the good manufacturing practices set by319the FDA. Nor do they follow the standards set by U.S.320Pharmacopeia, a 200-year-old U.S. organization that establishes321requirements for pharmaceutical manufacturers to ensure the322purity, quality, and effectiveness of the medicines U.S.323consumers take.324    This results in adulterated products entering our markets325that have been documented to contain toxins, cancer-causing-326agents like nitrosodimethylamine, melamine, tainted heparin, or327ineffective medications causing treatment failures or death.328These and many other examples are well covered in Rosemary329Gibson's book, China Rx, printed in 2016.330    Pharmaceuticals are made from key starting materials and331active pharmaceutical ingredients that create the final dose332form. China controls 30 to 60 percent on many of these333components and up to 100 percent on others. With this control334over the raw ingredients in our drugs, it is easy to see how335China has positioned themselves to control much of the U.S. and336the world's drug market.337    The solution, change U.S. policies. First, we must require338all manufacturers and countries wishing to sell or import drugs339into the U.S. market to meet the same FDA inspections as U.S.340manufacturers. That means an unannounced 24/7 inspection. This341is non-negotiable. Congress must create laws requiring all342nations producing pharmaceuticals for sale in the U.S. to meet343U.S. FDA inspections.344    Second, we must encourage U.S. manufacturers to move back345to the U.S. with a combination of investment, tax incentives,346trade policies, and tariffs. President Trump's four executive347orders have already brought back millions of dollars of348pharmaceutical manufacturing investment to our shores.349    Third, we must require quality and purity inspections that350adhere to USP Inc.'s gold standard for drug manufactured in or351entering the U.S.352    Fourth, we must forbid the FDA from relaxing regulations353when drug shortages occur. Permitting this willingly allows354inferior products to be sold to and consumed by U.S. military355and citizen populations.356    Last, we must require all medicines for our military to be357100 percent U.S.-made from the KSM, to APIs, to the final dose358stage. The role of the pharmacy benefit managers needs to be359reevaluated. Failure to address the Nation's pharmaceutical360dependency on China, or any other nation, jeopardizes our361national security and our citizens' health security, and it362cannot be accepted.363    I yield back and look forward to your questions.364    The Chairman. Thank you, Congressman.365    I now would like to welcome Mr. Gordon Chang, who has366decades of experience as an author and commentator on the CCP.367Mr. Chang has briefed our Nation's top leaders and written368extensively about the CCP. Thank you for being here, and thank369you for your wife being here, Lydia.370371             STATEMENT OF GORDON G. CHANG, AUTHOR,372373              PLAN RED: CHINA'S PROJECT TO DESTROY374375                AMERICA, BEDMINSTER, NEW JERSEY376377    Mr. Chang. Chairman Scott, Ranking Member Gillibrand, and378distinguished Members of the Committee. I am honored to be here379and thank you so much for the opportunity to appear today.380    China, as we just heard, has monopolies over many of our381pharmaceuticals and the question is, what is at stake? The382reason why this is so important is because China could deny383these medications to us. This statement needs context.384    China's regime believes it is at war with us. In May 2019,385People's Daily, the most authoritative publication in China, in386a landmark editorial, declared a "people's war" on us. March3872023 PLA Daily, the official publication of the Chinese388military, defined people's war as "total war," and China to win389this war, and they are serious, China to win this war has a390doctrine of unrestricted warfare.391    In 1999 two Chinese air force colonels wrote a book by that392title, and they argued that China could adopt any tactic to393take down the United States, so unrestricted means394unrestricted. China, we know, has weaponized its near monopoly395over rare earths in the trade discussions, but it has not396weaponized its 100 percent monopoly, 100 percent monopoly, on397the production of pharmaceuticals.398    This is not just a theoretical threat because in March 2020399during the COVID epidemic, the Chinese regime threatened to400throw the United States into, what it called, "a mighty sea of401coronavirus" by cutting off pharmaceuticals and other items402that were needed during the epidemic.403    China, we know, has a monopoly on many of these, so for404instance, a hundred of America's most used antibiotics405pharmaceuticals, they require ingredients that are made in only406one Chinese factory, 100 pharmaceuticals only one Chinese407factory. India the other heavyweight production center for408generics, they get 80 percent of their active pharmaceutical409ingredients from China and with regard to the key starting410materials, 45 percent of them are produced only in China.411    Generics are especially important because 91 percent of all412U.S. prescriptions are filled with them. The generics, they are413produced in China as well. Eighty-three percent of the top414generics are produced only in China. China is the supplier of415at least one of the key starting materials for 679 of the416active pharmaceutical ingredients.417    The Defense Department in 2023 issued a report that showed418that 27 percent of the medications it used were 100 percent419dependent on China and antibiotics, as we just heard, is a420particular American vulnerability, so for instance, the most421widely used antibiotic in America is made from four separate422key starting materials that are produced almost entirely in423China and America gets 45 percent of its penicillin from China424as well.425    FDA officials told us that they did not enforce America's426standards on the importation of foreign-made pharmaceuticals,427because they said if they did that it would cause severe428shortages here.429    We know how we got into this predicament, it was China's430predatory trade policies, but it was also on America, an431America that thought manufacturing was no longer important, and432also thought that the nature of regimes was no longer433important.434    We know that in emergencies foreign countries, even our435friends, will hoard medications and that happened in the 2009436swine flu epidemic for instance, so of course, we need to437onshore our production and to do that, we need to impose438Section 232 tariffs, invoke the Defense Production Act, enhance439the investment tax credit for the production of medications,440require the Federal Government to buy American-made441pharmaceuticals, and authorize federally backed loans for442pharmaceutical production.443    Senators, we do not have a moment to lose. Thank you.444    The Chairman. Thank you, Mr. Chang.445    Our next witness is a leading author and expert on446Communist China and the drug--and drug quality issues. Rosemary447Gibson is the author of China Rx, a book that outlines our448dependence on Communist China for drugs and ingredients. She449has been recognized for her work, including receiving the450highest honor for the American Medical Writers Association.451    Ms. Gibson, thank you for being here. Please begin your452testimony.453454        STATEMENT OF ROSEMARY GIBSON, AUTHOR, CHINA RX:455456           EXPOSING THE RISKS OF AMERICA'S DEPENDENCE457458            ON CHINA FOR MEDICINE, MCLEAN, VIRGINIA459460    Ms. Gibson. Thank you, Chairman Scott, and thank you461Ranking Member Gillibrand.462    China Rx was the first to expose how dependent the United463States is on a single country, and it also exposed that other464countries like India are highly dependent on China also, so all465roads lead to the same source. My comments today are on generic466medicines because they are so prominent in our supply chain.467The centralization of the global supply in a single country is468so open to catastrophic failure, an export ban would turn our469health care system into chaos.470    An export ban is not hypothetical. In June 2025, last year,471a statement came out of China, this was during the trade472negotiations, and it was said that, "If China chose to restrict473pharmaceutical raw materials from the United States, the474situation in the U.S. would be much worse than it is for475critical minerals". We have been warned and we have no time to476waste.477    Today, I am very pleased to share with you the findings of478the Department of War first Generic Drug Testing program which479highlights quality concerns in our medicine supply. For the480first time we have data on how well our generic drugs are made481and whether they meet our standards. The Department of War's482work started in 2019 when I was invited to the DLA and I asked483them a question: Do you test your medicines?484    The Department of War's work followed on the heels of485Kaiser Health Plan, which started testing generic drugs right486beforehand. Here are some of the highlights of the testing487program to date, so far, 13 different generic drugs have been488tested, all the different manufacturers and repackagers.489Fifteen percent of what has been tested fail basic quality490standards. In any industry products with 15 percent491manufacturing defects, it would be shut down.492    Here are some of the test findings: For people who are493recipients of organ transplants, their lives depend on taking a494drug to prevent organ rejection. Some of those products were495not manufactured right. They don't work right, and very496reputable physicians believe patients have died as a result.497Testing has found toxins including thallium which is known as498the poisoner's poison in some products, and then arsenic, lead,499and carcinogens.500    Thirty years ago, when we used to make generic drugs here,501for the most part, people would go to prison for this. The502testing team led by the independent laboratory, Valisure, we503would welcome the opportunity to brief members of the Committee504on the full details of all these 13 generic drugs.505    What do we do? I have three recommendations. The first, as506alluded to, it is absolutely essential that a country that is a507superpower have the capacity to make its own antibiotics. China508Rx was the first to expose that we have no capacity to make509antibiotics end to end here. We have no sovereignty and our510survival is at risk. Let us do what we have done with critical511minerals and bring that manufacturing back home now and not512only for antibiotics, but the most essential generics that are513essential to sustain life and there are a lot of good people in514this country waiting on the sidelines to help do that.515    Second, the federal departments of HHS, the VA, and516Department of War should be directed to use the quality data in517their procurement decisions. When they do that, that quality is518correlated with location that will automatically, if we use the519quality data, drive out substandard generics that are typically520made in Asia and it would support U.S. manufacturers who would521be able to enter and supply quality medicines to our military522and veterans.523    Finally, we have to go right to the tip of the spear and524where the root cause of this is. There is a handful of U.S.525companies that source all the generics that are distributed in526this country and they scour the earth looking for the cheapest.527Now, going forward, it is imperative that they are held528accountable for quality and not just cost.529    The narrative that all generics are the same today, what530this data shows, it is not true. Once again, we welcome the531opportunity to brief the Full Committee on these findings which532we believe are game-changing. A total of 42 drugs will be533tested, and we look forward to the opportunity for this to534really transform our drug supply system. Thank you.535    The Chairman. Thank you, Ms. Gibson. Now, I would like to536recognize Ranking Member Gillibrand to introduce the next537witness.538    Senator Gillibrand. Thank you, Mr. Chairman. I want to move539to introduce our next witness, Dr. Chan Harjivan. Dr. Harjivan540is visiting fellow with the Duke Margolis Institute for Health541Policy. Previously, he was a special assistant to the White542House where he reported directly to President Biden, working to543strengthen the Nation's readiness for biological threats. He544was a key architect of Operation Warp Speed, the historic545federal initiative to develop the COVID-19 vaccine.546    You may begin.547548              STATEMENT OF CHAN HARJIVAN, VISITING549550              FELLOW, DUKE MARGOLIS INSTITUTE FOR551552                HEALTH POLICY, WASHINGTON, D.C.553554    Mr. Harjivan. Chairman Scott, Ranking Member Gillibrand,555and Members of the Committee, thank you for this opportunity to556testify.557    Much of the discussion around pharmaceutical supply chains558have focused on admiring the problem as Chairman Scott has559mentioned, foreign dependence, shortages, and market failure.560Now, sound policy changes are being proposed but today I would561like to focus on an integrated solution set. America still has562the world's largest pharmaceutical market, flexible allocation563capital, and the strongest research system with unparalleled564talent.565    What we need is alignment between policy, markets, and566resilience. In my view, America and its democratic allies567should pursue what I call an allied life-sciences platform, a568strategy built around five mutually reinforcing pillars:569    First, know the chain. We cannot manage risk in a supply570chain that we cannot see. Congress should require auditable571end-to-end supply chain mapping. This is not about burdensome572reporting, much of this information already exists and it573aligns with other industries and other country standards. What574we need are common data frameworks and enforcement mechanisms575that allow Government and industry to identify vulnerabilities576before they become shortages or dependencies. Transparency is577the foundation of flexibility.578    Second, buy resilience. The second pillar is about579providing predictability to makers of drugs. Federal purchasers580including the DoD, the VA, and CMS reimbursement systems shape581a significant share of the pharmaceutical demand. They should582reward supply redundancy, quality manufacturing, surge583capacity, and geographic diversification and in fact,584predictable contracts can lower the price for medications, not585increase them.586    In general, I have always been struck by how these buyers587seem not to understand how stable and reliable demand signals588are valuable to their suppliers and enable them to build more589efficient processes. Analysis by Rios Partners highlights the590significant opportunity to strengthen procurement efficiency591within the VA as hospitals often purchase identical products at592widely varying prices, often exceeding those paid by private-593sector providers. This is costing taxpayers hundreds of594millions a year while not securing the supply chain or serving595patients optimally. If the DoD and the VHA don't value security596of medical supply chain for the war fighter or veterans, who597will?598    Third, build capacity at home and with allies. The goal599should not be complete reshoring of global pharmaceutical600production or creating trade barriers. That would be601unrealistic and unnecessary. Instead, the United States should602maintain domestic manufacturing capacity for a few essential603medicines while building a trusted supply network. Powerhouses604such as India, South Africa, Canada, Europe, and Japan already605play critical roles in the global pharmaceutical system. Let us606work with them to eliminate choke points at the same time lower607costs.608    Fourth, win the biotech stack. The fourth pillar looks609forward. Competition in life sciences increasingly spans the610entire innovation pipeline, from AI-enabled discovery, to611clinical trials, to advanced manufacturing. When I started612consulting in 2000 the cost to develop a drug was $500 million,613in 2010 it was one billion, it is now two billion. We are not614efficiently developing or harnessing technological innovation615in drug development. The United States should invest in and616enforce standards that catalyze technologies. The country that617defines the architecture and set standards will own the AI618biology industrial revolution. We don't want to win the generic619supply chain battle and lose the global war in life sciences.620    Fifth, mobilize long-duration capital, the final pillar. We621must address the capital gap between scientific discovery622industrial and industrial scale in the U.S. The implication is623stark. A Chinese biotech asset is profitable at 200 million. An624American equivalent is considered a failure unless it hits one625billion. This imbalance transformed the entire calculus of626capital allocation. One idea to address this is the creation of627strategic research investment vehicles. Mission oriented,628professionally governed investment vehicles designed to deploy629existing long-term institutional capital into critical630biotechnology platforms and manufacturing capacity. These631entities would complement private venture markets by financing632the hard middle between laboratory discovery and industrial633scaleup without taxpayer funding.634    Let me close with three imperatives. First, if we improve635supply chain visibility and reward resilience economically, the636private sector will deliver. This is easy. Second, the United637States does not need to produce every medicine domestically,638but together with trusted allies, we can eliminate systemic639vulnerabilities. This is common sense and the third, the640largest strategic competition is not simply about today's drug641supply chains, it is about who leads the life sciences platform642for the 21st century. This is existential.643    For the past hundred years, the United States and its644allies built that platform. With the right strategy, we can645continue to lead it.646    Thank you, and I look forward to your questions.647    The Chairman. Thank you, Ranking Member Gillibrand. Mr.648Harjivan, we appreciate you joining us today.649    Let us go to questions. Let me start with Senator650Tuberville.651    Senator Tuberville. Thank you, Mr. Chairman. Thank you for652this hearing. It can't get any more important than this.653    Ms. Gibson, it is becoming common knowledge that, for654whatever reason, China is often able to circumvent the FDA when655producing generic medications so worldwide. That means656Americans are often taking drugs that, if produced in the657United States, would meet higher standards. How can we move658that leverage that China has over our people making drugs?659    Ms. Gibson. You are correct, Senator, that China has660outmaneuvered the FDA. The former FDA Commissioner, Dr. Robert661Califf, told the House Appropriations Committee in 2023 that662China quote, "Is a problem. It is not transparent. The FDA663cannot get information from them to perform its regulatory664functions" and he said we cannot be allowed to depend on China665and as you may know in 2023 they started an anti-espionage law666where regulators don't want to travel there.667    I believe the way to get around this regulatory issue is,668we are importing, in my mind, de facto unregulated products and669the quality data demonstrate that in countries that don't670respect our regulations then we should not be buying from them.671If we use the quality data from the DoD testing program that672will turn out and take out manufacturers in countries who do673not respect our laws and we will be able to use U.S.674manufacturers, so let us use the quality data to really cleanup675the system. I think it is sending a market signal rather than a676regulatory signal.677    Senator Tuberville. Thank you. In your book, the China Rx,678you reveal that China controls approximately 90 percent of key679starting materials to make APIs and generics. How do you think680the U.S. would be affected if China were to cease those exports681today?682    Ms. Gibson. A lot of people would die in this country. We683would not be able--our health care systems would cease to684function and you know----685    Senator Tuberville. We have--yes.686    Ms. Gibson [continuing]. if China wanted to spread687infectious disease, we would not have the tools to be able to688treat people.689    Senator Tuberville. Mr. Chang, you said in your testimony690that China has a pharma death grip on America. How do we work691to change that at the federal level?692    Mr. Chang. The most important thing is on an emergency693basis, we need to bring back production here and the reason is,694China has been able to outmaneuver the FDA, as you just talked695about, because they do have such a big monopoly on all parts of696the chain and the only way to do that is to break that697monopoly, and unfortunately this is going to take some time but698it does--it is possible. China developed this monopoly, we can699take it back, but we have got to know that within two or three700years there is a period of extreme vulnerability.701    Senator Tuberville. Can we use tariffs to help us out with702China?703    Mr. Chang. Section 232 tariffs I think are very important704in that regard. Other tariffs are also possible. The Supreme705Court in the Learning Resources decision struck down the 1977706Act tariffs, but Section 301 tariffs and 232s could very well707create the conditions where, if we had an enhanced investment708tax credit, and if the President were to invoke the Defense709Production Act, these are things that could stimulate domestic710production immediately.711    Senator Tuberville. Thank you. Last November, we had a712young man that came from my State in Birmingham, Oxford713Pharmaceuticals, to testify the importance of onshore drug714manufacturing. Mr. Chang, what can we do to encourage715pharmaceutical companies to acquire APIs domestically instead716of sourcing them from places like China or India? Is that717possible?718    Mr. Chang. It is possible but the first thing I think we719need to do is get the Federal Government to require the720purchase of American-made pharmaceuticals, or pharmaceuticals721that are friendshored if they are not available in the U.S. It722is an all-of-the-above approach because, as I mentioned, China723is able to get around all of our rules because they know that724if they cutoff production then, as Rosemary Gibson just told725us, Americans are going to die.726    It is an all-the-above approach on an emergency basis. I727know that is not a satisfactory answer, but unfortunately, I728think it is close to where we have to be and if we don't do729this, the problems are just going to get worse because China is730becoming more predatory.731    Senator Tuberville. Yes. Congressman, you served on the732House Foreign Affairs Committee, you understand the risk. What733is at stake if we do not gain control of what is going on here?734    Dr. Yoho. National security. I mean, we would be beholden735to another country, i.e. China. This is something, it is736imperative that we get this right. We get it done now. The737Defense Production Act, as President Trump used in his first738term to create those products here, you know, the PPEs, is739something we could do now.740    The other thing is the ABCs of manufacturing anywhere but741China, friendshore, nearshore, onshore. Use the tools we have742to bring that stuff home now. We know where China is going. We743know what their end intent is, and we need to do it now.744    Senator Tuberville. Yes. This CLEAR LABELS Act that the745Chairman has--of putting absolutely what is in the drugs that746we take. How important is that?747    Dr. Yoho. It is real important. I like it. I think it is748something that needs--but for it to be effective people have to749read it.750    Senator Tuberville. Yes.751    Dr. Yoho. We tried that on the Ag Committee with the COOL752Amendment. I think legislation like that is strong and I think753we need to do it but I think we need to put more force on the754FDA to regulate drugs or inspect them the same way they do here755and tell those countries, you are going to do it our way or756don't sell here. It is your choice.757    Senator Tuberville. Thank you. Thank you, Mr. Chairman.758    The Chairman. Senator Moody.759    Senator Moody. Thank you. Thank you for being here. It760seems like yesterday that our country was reeling when we761received a rude awakening from the COVID-19 pandemic and the762millions of Americans that needed medical care so quickly and763in that moment of national vulnerability, we began to realize764just how heavily our country depends on China for medical765supplies, including pharmaceuticals. Since their entry into the766World Trade Organization in 2001, China has concentrated its767efforts to circumvent international trade norms, committing768economic espionage by stealing our IP, and disrupting our769economy and this is one of the many ways I think our Chairman770and Ranking Member have been great about holding hearings to771show how vulnerable we are to this dependence on China for our772drugs, and specifically how it can be a national security773threat.774    I am grateful, Chairman, that you are willing to commit the775time today to hold this hearing. I think it is one of the most776important things we can be doing on this Committee since so777many of our citizens in Florida, our seniors, and otherwise,778dependent on recurring daily medications. This is so very779important.780    Many of the shortages that Americans have had to face are781not because of natural market dynamics but because of the782coordinated Chinese engineered multi-decade effort to subvert783our economy, and really much of the west. In the past decade,784from what I can see, we have seen a decrease of 61 percent in785our domestic API manufacturing facilities, which are essential786for our drug production.787    One of the things that we heard from in the opening788statements was something that concerns me, which is that they789are--the Chinese notoriously ignore quality and safety790standards, manipulate prices and utilize dubious labor791standards. FDA import alerts routinely cite carcinogenic792impurities, falsified batch records, and nonsterile conditions793from manufacturers in China, with roughly one-third of all FDA794import alerting on Chinese facilities.795    I am grateful for the administration. They are trying to796fix this problem. At least they are focusing on it. They are797aware of it. In the course of the last year, the administration798announced multiple hundred-billion-dollar investments being799made in the American economy and of these investments, the800White House announced in December that 150 billion will be801invested into American pharmaceutical manufacturing, reducing802our reliance on foreign industries, in places like China.803    We know not only will this secure up our supply market and804make sure that we can trust the ingredients in our805pharmaceuticals, but that we have ready access to them in times806of vulnerability. Also hopefully brings back American jobs in807that industry.808    Mr. Yoho, again, thank you for being--former Congressman809Yoho, I would like to say, as you know, I have been very strong810in pushing back on the way China has meant to infiltrate the811strength of this country, or undermine the strength of this812country. I am the lead sponsor of a bill to halt visas for813Chinese nationals and students when their laws require them to814cooperate with the CCP. I am fighting hard to keep illegal815Chinese vapes from coming in. They keep dumping them over and816over, and we have no idea what is in them, and our kids are817being affected.818    This is another way, I think, that we can focus on ways to819protect Americans. Are there any ways that you can tell us820today that we can take quick concrete action here in the Senate821that would--what is the most effective thing we can do right822now as senators in terms of legislation, or otherwise, to make823sure that we are reshoring domestic manufacturing of drugs?824    Dr. Yoho. Awareness. I think the biggest thing is fill this825room up with people, the news people, American people knowing826what is going into their pharmaceuticals. Second thing is get827on the FDA through legislation that you all can introduce to828require, and this is not directing the FDA, but you are saying829any country producing pharmaceuticals for the United States830will meet FDA standards anytime, anywhere, 24/7. If not, it is831your choice not to sell into my market, and you need to enforce832that.833    I was with an FDA inspector last week who was the one doing834the inspections in China when we beefed it up so they could go835in there, but it was kind of like the IAEA with Iran. They836would let you go where they wanted you to go and you couldn't837ask too many questions or they would shut it down, so China838saying they are more tolerant and are going to abide by the839rules, it is a joke. We need to put the pressure on them and840stop that and the other thing is bring that production here841using any tool we have, whether it is the DFC, using the842Defense Production Act, or any other tool like that but we843don't have time to play around with this. This is imperative844that we get this done within the next year and a half, two845years, period.846    Senator Moody. Well, I want to thank the people that showed847up today because we almost filled this room. That was a great848recommendation. Thank you, Chairman.849    The Chairman. Thank you, Senator Moody.850    Senator Gillibrand. Thank you, Mr. Chairman. I really851appreciate this testimony that you have all given. You have852highlighted for us why this is such an urgent crisis and I853could hear from each of your testimonies how concerned you are.854It is something the Chairman and I are very focused on and we855hope to have meaningful legislation to move us in the right856direction in this Congress.857    For Dr. Harjivan, the United States holds a key advantage858over India and China in the biomedical and biotechnological859space with its strong support for universities that produce860world-renowned scientific research. Historically, we have been861able to recruit the top talent from nearly anywhere including862China and India.863    One of the pillars that you talked about in your written864testimony was the importance of securing U.S. biotech865leadership. China has treated investments in biotech as866strategic infrastructure. The final report that was recently867released by the National Security Commission on Emerging868Biotech created robust framework for policymakers about what we869can do to rapidly support this advancing industry.870    Can you expand upon the role the Federal Government should871play in securing our global leadership in biotech and how872important is it for the United States to set the global873standard for biotech research and development? What are the874national security risks of the U.S. losing its leadership to875China in this space?876    Mr. Harjivan. I mean, the threat is real about losing877leadership. I think my analogy would be, and we are all of that878age where we remember the internet, how it was developed. With879the early days of the internet, it was a bit of chaos, right.880We put structure around it, we put standards around it, we put881HTTP and then HTTPS, because of that industry could coalesce882around that. We had Facebook, we had Meta, we had Uber, we had883Netflix, these are all American companies, so we control the884internet through innovation, but we set the standards for the885internet.886    As we enter the age of AI and biology we also need to be887setting the standards. NIST, the FDA, need to work really hard888so we set global standards. The world trusts U.S. standards,889not Chinese standards. Once we set that, I trust industry to890coalesce around that develop innovation. We don't know where891these innovations are going to go, for the next 50 years these892innovations will be transformative in our society. We need to893own that.894    Our allies will also trust our standards as well. We need895to work with them, but we need to work at pace. I feel we are896not working fast enough in developing innovations in standards.897We use AI now to develop drugs, but the FDA still uses the same898time lines to approve those drugs. We need to accelerate that,899so we need to develop new metrology. We need to work with NIST,900with FDA, to work with industry partners to develop standards901that we can work against.902    Senator Gillibrand. Okay. Would anybody else like to answer903that question?904    Mr. Chang. China has certainly made the development of905biotechnology a priority. If you go back to the Made in China9062025 Initiative, that is one big World Trade Organization907violation but nonetheless, the regime continued to do that and908that is one of the reasons why China has become innovative in909biotech, where before it was just making drugs for other910countries, especially us.911    Rosemary Gibson has mentioned that we need to be as912determined in this area as China has been. That doesn't mean913that we have to violate norms and guidelines on trade, but it914does need--but it does mean that we need to put the resources915there and that is of course going to be a partnership but the916Federal Government does need to lead and to make it clear to917industry that this is a critical national security threat, and918it is a something that must be done as we have just heard.919    Senator Gillibrand. Thank you. In some of your testimony,920you talked about how federal procurement reform through HHS,921the VA, and the DoD is a way to incentivize quality922manufacturing for generic drugs. Can you each talk about that a923little more? Dr. Chan Harjivan, you have talked about it, and924Ms. Gibson, you mentioned it as well in your testimony.925    Ms. Gibson. Yes, I will start. I think a way to do this926expeditiously is to have the Department of Veterans Affairs,927HHS, and the Department of War to use the data that Department928of War paid for to guide procurement decisions. If we buy based929on quality, you are more--they will be more likely buying930products made in the United States and other countries that931actually care about the quality of the drugs that they produce,932so automatically deal with some of these issues and bring in933some of the companies that you had in the hearing back in934November.935    I think it is important to even go further upstream. China,936and India, and other countries that don't respect our laws,937their products cannot be sold here unless they have a buyer,938unless they have those who source them, so who is sourcing939them? There is a handful of companies, about six of them, that940source all the generics and they go on the basis of the941cheapest product.942    I know from talking with CEOs of ethical U.S. companies943say, we can't compete if they are going to be buying and944sourcing from companies that have a litany of FDA recalls,945warning letters, and 483s, so we have to go to the tip of the946spear, the root cause and this might be tough to do947politically, but I think the CEOs of these companies should be948convened, and to indicate that we can no longer--they should no949longer be sourcing vital medicines only on the basis of cost.950They have to include quality and we have the testing data to951begin to do that and that will affect everything else that is952distributed around the country.953    Senator Gillibrand. Thank you.954    Mr. Harjivan. I would add that it does not need to be955costly either. We can--with longer term contracts, with956visibility into supply chain, we can actually have lower term957contracts because they will have predictability of demand.958Visibility into that is very important. When I go buy a car, I959can see where it is made. They will tell me which parts come960from which country. When I put a drug into my mouth, I have no961idea about the quality, nor do I know where it is made.962    We also need diversity. When we buy--you know my963restaurant, my favorite restaurant chain gets its tomatoes from964three different sources, California, Mexico, and Texas maybe,965right. When I buy a drug, it is often a single-source supplier.966I actually don't worry whether it comes from Idaho, India, or967Ireland, or China, but I don't want it to come from only India968or China, or Ireland, shortages often come up in the United969States as well because we have single-source suppliers.970    It is transparent supply chain and diversity of supply but971with long-term contracts and building in these quality measures972I think will lower the cost and I have talked to generic973manufacturers who agree with me as well. We could actually974lower the cost of generics by having this process in place.975    Ms. Gibson. If I may add just one further point? The976Generic Drug Testing Program has found that we are actually977paying more for poor quality generics, and some of the cheaper978ones are the better quality ones.979    Mr. Chang. One of the issues is going to be FDA rules and980regulations that restrict innovation. Obviously, this is the981competing considerations here because we do want drugs to be982effective, we do want them to be safe, but we also want to983encourage innovation here and really the alternative to984innovation here is innovation in countries that consider us to985be an enemy.986    When we think about FDA regulation, I think that we should987believe--it should look at what the alternative is. We don't988want to have drugs manufactured in China, so we need to989encourage them here, and that very well may mean a real change990in the way the FDA looks at new drugs.991    Senator Gillibrand. Congressman, would you like to add992anything.993    Dr. Yoho. Yes. In addition to what I have said about the994FDA changing the regulations with the power of Congress doing995that, I think holding CEOs at drug companies and996pharmaceuticals, if they know they--if they brought something997in and it didn't meet the correct standards, hold them998accountable. You know, somebody has got to be held accountable999because they put those drugs on the market that goes to our1000consumers, and the seniors, you know, unfortunately I am one--I1001am happy to be one of those now. We take more medication than1002when I was in my youth.1003    They are more dependent on that and we have got to make1004sure of that. Just something of interest here on, when you look1005at pharmacy--or the antibiotics virtually all that is in China.1006When you look at the fermentation and the fluorination process,1007India relies on that but they have closed down their1008fermentation and fluorination processes, so 100 percent of that1009comes from China. That is a national security and health risk1010that needs to be addressed now and I think those are things1011that we need to put the money in our NIH and the research used1012properly.1013    I was at a meeting last week and they said: Too many of our1014scientists and researchers are going to Africa or being courted1015by China to go over there, so five years from now the brain1016drain, we are going to lose that cutting edge, and it is hard1017to get back to first place when you are falling behind. We need1018to entice people to stay here to do the research and support1019that.1020    The Chairman. Mr. Harjivan, why is it so difficult for the1021Federal Government to buy American drugs? I mean, we have got1022Department of War, we have the VA, we have, you know, prison1023system, we have all these groups, why is it so hard?1024    Mr. Harjivan. I mean, they are not the largest part of1025purchasing, but they are significant part of purchasing. I1026think it is a few things, I think--I will be honest, I worked1027at the White House and had a lot of discussions with the VA and1028the DoD, I think there is a bit of lethargy there. I think1029there are also entrenched incumbents who supply them a lot of1030the people who do the contracting for them as well.1031    I think that they need a bit of a nudge, right and I think1032they need to understand the value of this as well. I think if1033you look at the cost of quality, if you look at the cost of1034contracts, and the cost of switching, we have been--literally,1035the DoD and the VA having helped enable Chinese to come in when1036there is spot pricing and they come in with these spot--to spot1037lower prices.1038    I think we can resolve this as we look at other supply1039chains as well, and mimic them as well, so this is not--this my1040point is, this is not hard to do. There is just a little bit of1041a nudge they need to understand the value to the warfighter, to1042veterans by doing this. I think they need a better1043understanding of procurement as well. They often default to a1044lot of these organizations that was referred to earlier but I1045think by having better procurement practices they can make1046better educated buyers and that is the whole chain.1047    I am going to add one more thing though. It is not just1048buying the end product, if we pay more for a generic, we could1049see, it is about economic rents along the way, right, so if you1050look at maybe a KSM supplier, they make three-to five-percent1051profitability. Maybe an API, three-to five-percent1052profitability. Distributors make what, one or two percent? Then1053all of a sudden it is a big leap when you look at the PBMs,1054GPOS, et cetera.1055    What we don't want is to raise the price and they simply1056capture the economic rents. We have to understand that when we1057pay more, it has got to flow back down, so we can have1058onshoring, friendshoring of some of these capabilities as well.1059The other part of it is the complexity of the supply chains.1060    It is not just KSMs and APIs, it is excipients, it is1061solvents, et cetera, as well, so we need transparency as part1062of that of purchasing and paying for a little bit more for1063these products to understand the visibility of all the choke1064points as well. As was mentioned, China is really good1065identifying the choke points. It is not just owning the market.1066It is the choke points that they are owning. We need to1067understand those choke points.1068    We also need to own some of those choke points ourselves1069and that has happened in other--in our Operation Warp Speed we1070saw lots of choke points that we owned we can use as1071countermeasures as well. We need to make sure we continue to1072have those.1073    The Chairman. Yes. Every successful business person figures1074out where their leverage point is, where people need to do1075business with them, and we have got to do the exact same thing.1076China has done it, yes?1077    Mr. Harjivan. Actually, these companies are doing what1078their shareholders want them to do, right, maximize1079profitability but we just need to change the metrics a little1080bit so that the patients actually benefit more as well.1081    The Chairman. Yes. Now, I when I was in business, I always1082tried to figure out how to make sure that I was indispensable.1083You got paid better when you were indispensable. Shocking.1084    Mr. Harjivan. You want to be--I am a pharmacist, but you1085want to have a monopoly, right and that is what these companies1086are doing but we are allowing them to have monopolies, the role1087of the government and policy is to not have monopolies in many1088industries, including this one.1089    The Chairman. Congressman Yoho, you have been vocal about1090Communist China's use of economic coercion as a foreign policy1091tool. How does leverage of drugs and APIs compare to what we1092have seen with rare earth, or semiconductors in terms of the1093speed and severity with which Beijing could deploy it against1094us?1095    Dr. Yoho. I think you are going to see pharmaceuticals play1096in there a lot more. I had to wonder when Secretary of State1097Rubio said they were going to revoke the student visas for1098267,000 Chinese students, and about a week or two later,1099President Trump says: No, we are going to have 600,000. I1100wonder if there was a backdoor meeting where Xi puts his arm1101around the President and said: Donald, let us talk about this.1102You know, we control the drugs here.1103    Those are the kind of things that could happen. I am not1104saying it happened, but I don't want to be in that situation.1105We need to have what is best for America at heart, and we need1106to be prepared for that and it needs to start five, six years1107ago but you can't start fast enough and so I think that kind of1108leverage is something you are going to see. We have already1109seen them do with the rare earth minerals. They have done it to1110Japan. They have done it to us and it is only going to ramp up1111as things escalate.1112    The Chairman. There are companies and lobbying interests1113that benefit from keeping Chinese drug supply chains intact,1114and resist reshoring efforts as we heard, right? Congressman,1115you have never been shy about naming those names. Who are the1116players most invested in maintaining or enforcing the status1117quo, and how should Congress think about their influence as it1118considers legislation?1119    Dr. Yoho. Well, I think your big pharma companies that have1120the lobbyists that come up here. You know, again, I think those1121companies ought to be held accountable. If you bring in a1122tainted drug, I mean, when I was practicing as a veterinarian,1123melamine was being put into the dog food, killed thousands of1124dogs, does kidney damage, but there was over 300,000 people in1125China that was fed to their--in their baby formula and you1126know, there were a handful of people died, but what about the1127long-term health risk? You know, chronic--kidney disease and1128things like that.1129    I think you need to call people out and say, if you are1130going to sell this drug into my market, if it is tainted, it1131goes back to you, and you are going to be 100 percent1132reliable--or liable for this. It is hard ball, but I think this1133is time to play hard ball.1134    I guarantee you if you go to those manufacturers and the1135CEOs of those c companies and you tell them that these are the1136new rules, and I think we need to do--really put the pressure1137on the FDA, but it is going to require legislation so that1138another administration doesn't waive those FDA rules, if1139Congress mandates that, and says, this is how these drugs will1140come into this country, I feel better--I will feel better in1141the future.1142    The Chairman. Ms. Gibson, how has the lack of1143accountability for foreign manufacturers allowed subpar drugs1144to enter our market?1145    Ms. Gibson. Because they can, and we are buying only on the1146basis of cost irrespective of quality and if I may, Senator,1147your question about why is it so hard for the DoD to do the1148right thing? In 2019, as a private citizen, I had this idea1149that since so much of our manufacturing base was decimated, I1150came up with a core of an idea for an executive order, and it1151is very simple, that is what China does and that was the DoD,1152the VA, and HHS should give priority to U.S.-made generics in1153their procurement process.1154    Turns out that got into an executive order signed in August11552020. The same day that that executive order came out, there1156was a press release from the Pharmatrade group, and this was1157during a pandemic when we were rationing drugs, and the comment1158was that that--and just for essential drugs--that this would1159cause chaos, and it would destabilize the global supply chain.1160    That same year the Generic Trade Association came out with1161almost the same wording: It would cause instability and two1162days after that statement came out, the Chinese President at a1163G20 meeting said, "We have to ensure that global supply chains1164remain stable." Is that coincidence or is it coordination? You1165know, I have been thinking about the speech that former U.S.1166Attorney General Bill Barr gave in Grand Rapids, Michigan, in11672020, and he explained what goes on. He says that, as you1168alluded to, that U.S. executives with businesses in China, they1169are expected by the Chinese Government to lobby for them here1170in Washington if they want their businesses in China to go1171smoothly, and if they don't, it will go the other way.1172    We have companies here that are lobbying on behalf of China1173and against the American interests and so that executive order1174is still active but nothing has been done, and we just need to1175say this is the directive and it shall be done, and to help1176them, the different departments actually execute on those1177executive orders.1178    The Chairman. Mr. Chang, you have argued for years that the1179Chinese Communist Party pursues comprehensive national power1180through means that Western policymakers consistently1181underestimate. In that framework, how deliberate and how1182dangerous is Communist China's dominance of the global1183pharmaceutical supply chain?1184    Mr. Chang. Mr. Chairman, we know what the Chinese have done1185with rare earths, and there they don't even have 100 percent1186monopolies, so given that their maliciousness, then clearly1187this is the next item to be concerned--for them to actually1188weaponize and we can go back and look at the Communist Party's1189policies toward the United States. We can see what they say, we1190can see what they have done and it is malicious and we as1191Americans have refused to acknowledge that because we have1192wanted to integrate the Chinese into the international system,1193we have wanted to get along, and because we are a democracy, we1194are slow to recognize threats, so that is where we are and so1195to answer some of the previous questions, as the Congressman1196has said, we just need to acknowledge the aims of the Chinese1197regime and deal with it with the determination and vigor that1198is necessary and one of those things you mentioned where you1199are talking about accountability, why don't we make drug makers1200strictly liable for the damages caused by pharmaceuticals that1201are manufactured abroad and imported into the United States?1202    That is not an unreasonable thing to do because we had1203about 150 Americans die in 2008-2009 because of adulterated1204heparin that was made in China. We had another problem in 20191205with Zantac and other heartburn medications, so this is a1206problem that continues, and because we know that the Chinese1207will weaponize every point of contact with our society, it is1208something that we need to do.1209    If we do this, I think that drug manufacturers are going to1210shy away from importing from China and they will rush to make1211in the United States or in jurisdictions where they have1212confidence, so that is one of the things that we can do too1213onshore as quickly as possible.1214    As I mentioned, with regard to Senator Tuberville, there is1215going to be a period of vulnerability because the Chinese do1216have this 100 percent monopoly on perhaps 800 pharmaceuticals,1217and we can't ignore that but we can do all we possibly can in1218the interim, and that means we have got to move fast.1219    The Chairman. Ms. Gibson, when you first began research in1220China Rx, what was the reaction from the drug industry, from1221government officials, and from the medical community?1222    Ms. Gibson. Denial.1223    The Chairman. They weren't accepting, they weren't saying,1224a good job?1225    Ms. Gibson. No there was all this clamoring about: Oh, no,1226the numbers are wrong. It is not that high and there was a lot1227of manipulation of that but China Rx was very well researched,1228and I got the information from the actual manufacturers, the1229people in the manufacturing plants. They know what is going on.1230They know where product comes from. They know where they have1231to get their key starting materials and antibiotics. It doesn't1232come from the lobby groups and the researchers, so it was1233absolutely sound.1234    In fact, right before the pandemic hit home here in early12352020, I was with a group of pharmaceutical engineers, great1236people with 150 years' experience. I went around the table and1237said: Okay, so what percentage of our key starting materials1238for the drugs we need to treat all these people who are going1239to get sick and be hospitalized? They all said: 90 percent, 951240percent, 90 percent, so that is it.1241    There was--but you know, what I am really pleased at,1242Senator, is that now everybody in Washington knows about APIs,1243and they know that APIs don't fall from the sky, that they are1244made of key starting materials and where our dependence is, so1245I consider that partial success but we have such a long way to1246go.1247    If I may say something about this product liability issue.1248You know, if you have to go buy tires for your car and you go1249to a retailer, and there is 15 percent of those products could1250blow out while you are going 60 miles an hour on the beltway,1251the market fixes that. It fixes it through reputational risk,1252and also product liability and I believe we need to start move,1253not just from a regulatory point of view, but from a market1254signaling point of view that this is not acceptable, that you1255are putting products on that are harming people and we have--1256you know, arsenic is arsenic, thallium is thallium, you can't1257debate that, and there was secondary testing to verify these1258findings for the DoD, so I think we need to send this market1259signal that this is not acceptable and begin to use those1260tools.1261    The Chairman. Mr. Harjivan, is Communist China moving up1262the drug chain from generics to brands, and what risk does this1263pose to our national security and patient access to medications1264and I think what you will say is, they are even--they are going1265further than that. They are the main--they are the main--they1266own the drug--the brand now too?1267    Mr. Harjivan. Yes. In fact, I would say, you know, the1268generic industry, it is kind of fungible, right, so it is not1269like rare earths or semiconductors, you don't need a billion-1270dollar fab, you don't need to dig up, you know, the earth to1271get this material. The KSMs and APIs could move pretty quickly1272if we have the right incentives over here. It is not a supply1273chain issue, it is a demand issue.1274    Now, for them moving up the value chain in life sciences,1275to me, that is an existential threat because they are moving1276very fast in this area. If you look at the number of, you know,1277different publications that they have, if you look at their1278work on gene therapy, look at advanced manufacturing, it is1279tremendous how quickly they are moving.1280    What they are doing though, is they are putting the right1281incentives for those technologies to move ahead at a rapid1282pace. They are putting in very quick regulatory standards.1283Sometimes they are not that great, but often it is because they1284are putting in innovative regulatory standards that actually1285are of high quality, not poor quality, but they are using1286innovation around the regulatory standards, which we should1287adopt.1288    Around quality, I think there is actual innovation there1289that can occur as well. When I worked on Operation Warp Speed,1290we were able to remotely look at manufacturing quality. We1291didn't have to do inspections necessarily. We could remotely1292monitor quality. That has advanced a lot in the last five years1293and so we can reduce the cost and have real-time monitoring of1294quality.1295    The big CDMOs do that already. We can require that of China1296and by the way, India is a big problem here too, we could do1297that of India as well and so I think there is cheaper1298solutions. Again, innovation is the key and I am telling you1299right now that the next 50 years is going to be all about the1300biology revolution, and if we don't invest right now, it is1301going to be really important.1302    I think the other part is, they invest but they are1303sclerotic, they invest top down, and we have got wonderful1304flexible capital market here, but we are not leveraging it. We1305need to leverage it much more efficiently in creating demand1306mechanisms for these products, for innovation, and then1307standards. Again, I think we can do it, but we are not focused1308on that right now, and that is a big problem.1309    The Chairman. Ranking Member?1310    Senator Gillibrand. It is okay.1311    The Chairman. All right. I want to thank everybody for1312being here. I think this is--I think this is an unbelievable1313important issue. I want to thank the Ranking Member for being a1314partner in this. I am actually optimistic, I actually believe1315that the American public is getting more informed. I think the1316Congress is clearly getting more informed, and I think we are1317going to get something done.1318    If you take a pill every morning for a chronic condition,1319there is a very good chance that pill was made using key1320ingredients from Communist China. There is also a good chance1321that you, your doctor, your pharmacist, and even the FDA have1322no way of knowing for certain where the pill ingredients come1323from, because we don't require disclosure and by the way, if1324anybody feels comfortable putting something in their mouth from1325China, I think they are a fool. The standards in China are1326despicable whether you--if you are buying food from China, I1327think it is unsanitary. The conditions where things are1328produced is horrible.1329    Unfortunately, Congress has failed to demand transparency,1330and for 30 years lawmakers have prioritized the lowest possible1331price over everything else and I think what Mr. Chang said, I1332think a lot of us--a lot of people thought: Oh, we are going to1333bring China into the fold and all that stuff. It never1334happened.1335    COVID-19 showed us what happens when we do that, and the1336system breaks. Thirty-seven factories that made ingredients for1337American medicines shut down and the shortages hit within1338weeks. The Chinese Government is despicable. They nationalize1339its own medical supply production and decide who got what based1340on politics, not need. That was a warning, we didn't take the1341hint. This hearing is meant to change that.1342    Our incredible witnesses today made a clear, documented1343evidence-based case that what we are dealing with is not market1344inefficiency. It is a national security vulnerability that has1345been intentionally engineered by an enemy nation, not the1346People of China, the Government of China, enabled and supported1347by our own policy failures.1348    The solutions aren't a mystery, my and Ranking Member1349Gillibrand's CLEAR LABELS Act is a first step. Soon we will1350have legislation on closing loopholes in our system and finding1351ways to support additional domestic manufacturing focused on1352federal procurement. The seniors of our country didn't create1353this problem, but they are the ones paying the price and this1354Committee is committed to fighting for them and for solutions.1355    If any senators have additional questions for the1356witnesses, or statements to be added, the hearing record will1357be open until next Wednesday at 5:00 p.m.1358    I want to thank everybody for being here.1359    [Whereupon, at 4:40 p.m., the hearing was adjourned.]1360=======================================================================13611362                                APPENDIX13631364=======================================================================13651366                      Prepared Witness Statements13671368=======================================================================13691370[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]13711372=======================================================================13731374                        Questions for the Record13751376=======================================================================13771378                 U.S. Senate Special Committee on Aging13791380     "Foreign Dependence: How China Captured America's Drug Supply"13811382                             March 11, 202613831384                        Questions for the Record13851386                             Hon. Ted Yoho13871388                        Senator Elizabeth Warren13891390    Question:13911392    What short and long-term actions should the Administration1393and Congress take to protect the U.S. pharmaceutical supply1394chain from disruptions, including during periods of1395international conflict or against foreign adversaries'1396retaliation?13971398    Response:13991400    Short Term: United States Government (USG) should continue1401with tariffs and tax incentives to entice pharmaceutical1402companies to move back to the US. These should not be give1403ways, but strong motivations to relocate back to the US. If not1404done, regardless of a conflict or not, the country that1405controls the pharmaceutical supplies can/will dictate the1406terms. Up to 80% of the US Military's pharmaceuticals are1407controlled by China or India with the majority of the key1408starting materials, KSMs coming form China. The likelihood of1409China providing essential medicines during a conflict between1410the US and China is nil.14111412    Question:14131414    How would increase domestic manufacturing of1415pharmaceuticals help achieve this goal?14161417    Response:14181419    Increasing the domestic manufacturing will do several1420things to secure national security. Assurance that FDA quality1421control is in place with the production of KSMs, APIs and FDF1422in the manufacturing process. Currently our FDA cannot conduct1423unannounced inspections in China as they do with US domestic1424manufacturers. This results in substandard or adulterated1425products entering the consumer/medical supply chain. This leads1426to failed treatments, iatrogenic illness and death. This is1427well documented in Rosemary Gibson's book, China Rx.1428    Domestic production will secure the pharmaceutical supply1429chain eliminating another country from using that control to1430leverage or force compliance from the US to their demands. It1431would help reduce the FDA shortlisted medications from being on1432frequent backorders that disrupts treatments for human and1433animal patients.14341435    Question:14361437    How would the U.S. population benefit from government-1438owned, government-operated or government-owned, contractor-1439operated pharmaceutical manufacturing facilities?14401441    Response:14421443    It is doubtful the US population would realize an1444appreciable benefits from government involvement in1445pharmaceutical production for the following reasons.14461447      
This would limit the free market from the equation1448reducing competition, limit selection and be subject to stopped1449productions with government shutdowns and layoffs.1450      
It would disincentivize private research and discovery1451of new medications and treatments.1452      
It would create a situation where the government assigns1453winners and losers in drug manufacturing and decrease the1454choice of medicines.1455      
It would have little affect at reducing and may increase1456counterfeit, unregulated and unsafe pharmaceutical products1457entering the US market and jeopardizing US citizen health.14581459    Domestic production would have a positive impact if KSMs,1460APIs, and FDF were all produced adhering to FDA inspections and1461meeting USP, Inc (US Pharmacopeia, Inc) standards. However,1462this can be accomplished in the private sector with out1463increasing government employment and the added expense to the1464American taxpayer.1465    Question:14661467    How do pharmaceutical supply chain challenges, drug1468shortages, or exposure to unsafe pharmaceuticals result in1469direct additional health care expenditure?14701471    Response:14721473    Direct costs increase when pharmaceuticals are not1474manufactured with the proper ingredients or follow USP, Inc.1475standards. When ineffective or adulterated drugs are produced1476it increases the duration of treatment, can lead to other1477illnesses or organ failure. Death have been reported that are1478associated with adulterated drugs entering the US market from1479both domestic and foreign produced drugs. When treatments are1480ineffective due to inferior pharmaceuticals it increases ER,1481(emergency room) visits and lengthier hospital stay ultimately1482adding more costs for the US healthcare system.14831484    Question:14851486    How do pharmaceutical supply chain challenges, drug1487shortages, or exposure to unsafe pharmaceuticals result in1488indirect costs resulting from higher rates of illness?14891490    Response:14911492    The indirect costs are longer treatment durations for an1493illness which increases cost. A decreased quality of life for1494the patient, family members, and caregivers is a consequence of1495the adulterated/ineffective medicines. Inferior medicines can1496cause protracted debilitating disease, add to income stress,1497has forced people into bankruptcy. Adulterated/inferior drugs1498have caused cancers, driven people into bankruptcy and either1499directly caused deaths from those drugs or from suicide linked1500to the drug or the depression associated with their health1501condition or financial situation.15021503                 U.S. Senate Special Committee on Aging15041505     "Foreign Dependence: How China Captured America's Drug Supply"15061507                             March 11, 202615081509                        Questions for the Record15101511                            Gordon G. Chang15121513                        Senator Elizabeth Warren15141515    Question 1:15161517    New reporting indicates that the closure of the Strait of1518Hormuz due to the Trump Administration's war in Iran threatens1519the United States' supply of generic drugs. Around half of the1520country's generic prescriptions originate in India - a country1521that "relies on the Strait of Hormuz for the arrival of key1522inputs in drug manufacturing including petroleum-based1523materials," according to reporting by CNBC.1524          a.What supply chain disruptions could the war1525trigger, and how would these disruptions affect Americans'1526ability to access their prescriptions?1527          b.Which pharmaceuticals would be most seriously1528compromised by the war?1529          c.How much would any such disruptions cost to the1530U.S. health care system, patients, or taxpayers?1531          d.What would these supply chain disruptions mean for1532national security and military readiness?1533          e.If the Strait of Hormuz remains closed, how long1534would it be before Americans experience the effects of1535significant pharmaceutical supply chain disruptions, including1536drug shortages?15371538    Question 2:15391540    If the war against Iran causes serious pharmaceutical1541supply chain disruptions, how long would it take for the United1542States to address vulnerabilities in its supply chain and1543resolve subsequent drug shortages?1544          a.What actions could the United States take to remedy1545these disruptions, and how much would these actions cost?15461547    Question 3:15481549    China is one of the biggest buyers of oil from Iran, buying1550more than 80 percent of Iran's shipped oil. How much does1551China's ability to manufacture finished drug products, active1552pharmaceutical ingredients, and key starting materials rely on1553this supply of oil, and how would disruptions to Iran's oil1554supply due to the war between the United States and Iran affect1555China's supply of pharmaceuticals?1556          a.How would these disruptions to China's1557manufacturing capacity of pharmaceuticals in turn disrupt the1558United States' pharmaceutical supply chain?15591560    Question 4:15611562    The United States has seen China ban or threaten to ban its1563export of critical minerals in response to the Trump1564Administration's trade agenda, jeopardizing national security.1565Given the Trump Administration's war against Iran and its1566intervention in Venezuela - and the impact this could have on1567China's oil imports - what is the likelihood of China1568retaliating against the United States's actions by restricting1569or banning the export of pharmaceuticals, including final1570dosage forms, active pharmaceutical ingredients, and key1571starting materials, to the United States?1572          a.What would a ban on pharmaceuticals exports from1573China mean for Americans' ability to access their1574prescriptions?1575          b.How soon after a ban on pharmaceutical exports from1576China would the United States experience disruptions in its1577pharmaceutical supply chain, including drug shortages?1578          c.How many pharmaceuticals on the Food and Drug1579Administration's essentials medicine list would be impacted by1580a ban on pharmaceutical exports from China?1581          d.What would be the impact of such a ban on national1582security?1583          e.What would be the impact of such a ban on the1584ability for the department of defense to keep service members1585healthy and maintain military readiness?1586    Question 5:15871588    What short- and long-term actions should the Administration1589and Congress take to protect the U.S. pharmaceutical supply1590chain from disruptions, including during periods of1591international conflict or against foreign adversaries'1592retaliation?1593          a.How would increased domestic manufacturing of1594pharmaceuticals help achieve this goal?1595          b.How would the U.S. population benefit from1596government-owned, government-operated or government-owned,1597contractor-operated pharmaceutical manufacturing facilities?15981599    Question 6:16001601    How do pharmaceutical supply chain challenges, drug1602shortages, or exposure to unsafe pharmaceuticals result in1603direct additional health care expenditure?16041605    Question 7:16061607    How do pharmaceutical supply chain challenges, drug1608shortages, or exposure to unsafe pharmaceuticals result in1609indirect costs resulting from higher rates of illness?16101611    Question 8:16121613    How do pharmaceutical supply chain challenges, drug1614shortages, or exposure to unsafe pharmaceuticals result in1615higher rates of illness and increased medical complications?16161617    Response to Question 1:16181619    The ongoing Iran war can radically reshape the world in1620different directions.1621    If America prevails, the war can lead to decades of peace.1622    On the other hand, the war, given the current fragility of1623the current situation, could spread. In the late 1930s,1624separate conflicts merged into what we now call World War II.1625If that happens now-the chance of that is not insubstantial-1626Americans undoubtedly would not have access to the hundreds of1627medicines made in China.1628    We have known of this critical vulnerability for years, and1629every American administration this century is at fault for this1630critical dependence on a hostile China. The current1631administration is taking steps to onshore manufacturing, but1632onshoring will take years at the current pace.1633    If China goes to war with us now, Americans will be1634deprived of medicines and the consequences will be1635catastrophic.1636    If we assume the worst does not occur, the disruption to1637supply chains could still be substantial. Companies are nimble,1638however, so they will reconfigure their supply chains quickly.1639Costs will increase, but I do not expect a substantial1640reduction in pharmaceutical production.16411642    Response to Question 216431644    If the United States acts on an emergency basis-a total1645mobilization of society-I think it would take a little over two1646years to onshore the most-used generics and other medicines.1647    A total mobilization would include the President invoking1648the Defense Production Act and Congress giving the President1649additional war-time powers to onshore production.16501651    Response to Question 316521653    China has the world's largest strategic petroleum reserve-1654perhaps as much as 140 days of import cover-and China has1655alternative sources of oil. A complete closure of the Strait of1656Hormuz by itself should not significantly disrupt China's1657production of pharmaceuticals.16581659    Response to Question 416601661    There are, as some have argued, several reasons why China1662would not deny pharmaceuticals. Beijing is deterred by the1663prospect of retaliation, such as America denying China advanced1664cancer treatments and other things available only here.1665    More important, Beijing would be cutting off important1666revenue streams. Yes, America has to buy, but China as a1667practical matter has to sell. This is especially true as the1668Chinese economy is now deteriorating.1669    The United States in the so-called "trade war" has more1670leverage over a trade-dependent China than China has over the1671U.S. The Trump administration, however, has chosen not to1672employ much of this leverage. If China were to threaten to cut1673off pharmaceuticals or actually do so, the administration would1674almost certainly employ all the tools at its disposal.1675    Response to Question 5:16761677    There are a number of technical fixes. The U.S., for1678example, should establish a "federal buyer's market" and1679prioritize American-made products for, among others, the1680Pentagon, the Veterans Administration, and Medicare. If1681American-made medicines are not available, the government1682should try to buy those produced in friendly countries.1683    Congress should require sellers to disclose country of1684origin, and it's necessary to close loopholes that now allow1685foreign-made products to be labeled "Made in America."1686    It's also time to eliminate the FDA's red tape, which1687unnecessarily delays approvals and increases costs.1688    Congress must also ban the importation of medicines that1689are either uninspected or inadequately inspected. Moreover, it1690is way past time to vigorously enforce Section 307 of the1691Tariff Act of 1930, which prohibits the importation of goods1692made with forced labor.1693    Ultimately, cost is the name of the game. Beijing1694suffocates foreign competitors by lowering prices and by1695flooding markets with artificially high supplies. U.S.1696manufacturers would feel confident of moving production to1697American soil if they felt sure that Washington was fully1698committed to protecting them from vicious Chinese price1699tactics.1700    There are also non-technical fixes. Washington can restart1701domestic production with incentives, such as low-cost loans-the1702first Trump administration experimented with this approach with1703a proposed $765 million loan to Eastman Kodak in 2020 to make1704active pharmaceutical ingredients-and, more important, an1705enhanced investment tax credit.1706    Tariffs are also needed so these measures will have a1707chance to succeed.1708    Finally, we need collaborative international policies so1709that we have access to the production of friendly countries.17101711                 U.S. Senate Special Committee on Aging17121713     "Foreign Dependence: How China Captured America's Drug Supply"17141715                             March 11, 202617161717                        Questions for the Record17181719                            Rosemary Gibson17201721                        Senator Elizabeth Warren17221723    Question 1:17241725    You are part of a working group that is performing quality1726risk assessments of drugs on the Department of Defense's1727pharmaceutical supply chain. In your testimony, you indicated1728that around two of the thirteen generic drugs analyzed so far1729by the working group (or 15 percent) have serious manufacturing1730defects. How significant are these findings, and how can the1731Department of Defense use these findings to inform its1732procurement decisions?17331734    Response to Question 1:17351736    Thank you for the opportunity to respond to these1737questions. Please note that I receive no compensation with1738regard to the quality risk assessments.1739    In my testimony I reported that 13 different generic drugs1740were tested including all products sold by manufacturers and1741re-packagers.1742    For example, in the case of one of the drugs, metoprolol,1743which is prescribed for heart failure and chest pain, 251744different metoprolol products were tested.1745    For all 13 generic drugs tested including all their1746manufacturers and re-packagers, 15% of the total number of1747products tested have manufacturing defects. This level of1748defects reflects very poor quality in virtually any modern1749manufacturing context. World class manufacturing would have1750less than 1% defects and closer to .01%.1751    The Department of Defense can use these findings to inform1752procurement decisions and avoid purchasing products with high1753levels of toxins and dissolution failures.17541755    Question 1a:17561757      a.How can the working group's findings be used to support1758the onshoring of domestic manufacturing?17591760    Response to Question 1a:17611762    Quality has been found to be correlated with location. In1763locations/countries where FDA has limited ability to perform1764its full regulatory functions due to limited respect for U.S.1765law and regulations, products made there may be more likely to1766have product defects. Additional research is being conducted on1767this point.17681769    Question 1b:17701771      b.How can other federal procurement practices - such as1772long-term contracts or domestic purchasing requirements - help1773address the vulnerabilities exposed by the working group's1774findings?17751776    Response to Question 1b:17771778    Long-term contracts, guaranteed volume purchasing, and1779price floors are contract features that would attract U.S.1780owned and operated generic drug and API manufacturers.17811782    Question 2:17831784    New reporting indicates that the closure of the Strait of1785Hormuz due to the Trump Administration's war in Iran threatens1786the United States' supply of generic drugs. Around half of the1787country's generic prescriptions originate in India - a country1788that "relies on the Strait of Hormuz for the arrival of key1789inputs in drug manufacturing including petroleum-based1790materials," according to reporting by CNBC.17911792      a.What supply chain disruptions could the war trigger,1793and how would these disruptions affect Americans' ability to1794access their prescriptions?17951796      b.Which pharmaceuticals would be most seriously1797compromised by the war?17981799      c.How much would any such disruptions cost to the U.S.1800health care system, patients, or taxpayers?18011802      d.What would these supply chain disruptions mean for1803national security and military readiness?18041805      e.If the Strait of Hormuz remains closed, how long would1806it be before Americans experience the effects of significant1807pharmaceutical supply chain disruptions, including drug1808shortages?18091810    Response to Question 2:18111812    I do not have knowledge and expertise to answer questions18132-4. A general comment is that any prolonged disruption of1814essential medicines can adversely affect national security. In1815the case of China, its control over the global supply of key1816starting materials coupled with a prolonged disruption of1817upstream material for antibiotic production could be1818extraordinarily serious. In a matter of weeks, Americans could1819experience the impact of supply chain disruptions.18201821    Question 3:18221823    If the war against Iran causes serious pharmaceutical1824supply chain disruptions, how long would it take for the United1825States to address vulnerabilities in its supply chain and1826resolve subsequent drug shortages? What actions could the1827United States take to remedy these disruptions, and how much1828would these actions cost?18291830    Response to Question 3:18311832    I do not have knowledge and expertise to answer questions18332-4. A general comment is that any prolonged disruption of1834essential medicines can adversely affect national security. In1835the case of China, its control over the global supply of key1836starting materials coupled with a prolonged disruption of1837upstream material for antibiotic production could be1838extraordinarily serious. In a matter of weeks, Americans could1839experience the impact of supply chain disruptions.18401841    Question 4:18421843    China is one of the biggest buyers of oil from Iran, buying1844more than 80 percent of Iran's shipped oil. How much does1845China's ability to manufacture finished drug products, active1846pharmaceutical ingredients, and key starting materials rely on1847this supply of oil, and how would disruptions to Iran's oil1848supply due to the war between the United States and Iran affect1849China's supply of pharmaceuticals? How would these disruptions1850to China's manufacturing capacity of pharmaceuticals in turn1851disrupt the United States' pharmaceutical supply chain?18521853    Response to Question 4:18541855    I do not have knowledge and expertise to answer questions18562-4. A general comment is that any prolonged disruption of1857essential medicines can adversely affect national security. In1858the case of China, its control over the global supply of key1859starting materials coupled with a prolonged disruption of1860upstream material for antibiotic production could be1861extraordinarily serious. In a matter of weeks, Americans could1862experience the impact of supply chain disruptions.18631864    Question 5:18651866    The United States has seen China ban or threaten to ban its1867export of critical minerals in response to the Trump1868Administration's trade agenda, jeopardizing national security.1869Given the Trump Administration's war against Iran and its1870intervention in Venezuela - and the impact this could have on1871China's oil imports - what is the likelihood of China1872retaliating against the United States's actions by restricting1873or banning the export of pharmaceuticals, including final1874dosage forms, active pharmaceutical ingredients, and key1875starting materials, to the United States?18761877      a.What would a ban on pharmaceuticals exports from China1878mean for Americans' ability to access their prescriptions?18791880      b.How soon after a ban on pharmaceutical exports from1881China would the United States experience disruptions in its1882pharmaceutical supply chain, including drug shortages?18831884      c.How many pharmaceuticals on the Food and Drug1885Administration's essentials medicine list would be impacted by1886a ban on pharmaceutical exports from China?18871888      d.What would be the impact of such a ban on national1889security?18901891      e.What would be the impact of such a ban on the ability1892for the department of defense to keep service members healthy1893and maintain military readiness?18941895    Response to Question 5:18961897    China has reportedly threatened to withhold generic drugs1898and critical inputs at least since 2008 during the heparin1899contamination that killed many Americans. Further, it1900threatened to withhold antibiotics in early 2020 during the1901pandemic. Hence, such threats are not new.1902    What is new is that the U.S. has become more dependent on1903China and hardly any action has been taken in recent decades to1904reduce dependence.1905    Looking ahead, the impact of a ban on exports would depend1906on the scope and duration.1907    Within months, if not weeks, hospital and retail pharmacy1908shelves would be depleted of vital medicines as would the1909military health system.1910    While the U.S. government has known about this risk for1911many years, as noted, little action has been taken which is in1912contrast to how a threat to ban exports of critical minerals1913generated immediate action by the government and private sector1914to boost domestic production. Similar actions are needed in1915this sector.1916    For example, China Rx exposed in 2018 how dependent the1917U.S. is on China for antibiotics and again, eight years later,1918no action has been taken to create domestic sources for end-to-1919end production here. Meanwhile, China's leverage over the U.S.1920as well as the EU regarding antibiotics has increased.19211922    Question 6:19231924    What short- and long-term actions should the Administration1925and Congress take to protect the U.S. pharmaceutical supply1926chain from disruptions, including during periods of1927international conflict or against foreign adversaries'1928retaliation?19291930      a.How would increased domestic manufacturing of1931pharmaceuticals help achieve this goal?19321933      b.How would the U.S. population benefit from government-1934owned, government-operated or government-owned, contractor-1935operated pharmaceutical manufacturing facilities?19361937    Response to Question 6:19381939    An immediate first step is to stockpile APIs for critical1940generics where foreign dependency poses a national security1941concern. The focus here is not to "boil the ocean" but instead1942focus on the most critical life-sustaining generics.1943    Next, the federal government should support public-private1944partnerships with U.S.-owned companies to make APIs for1945critical medicines in the U.S. Federal procurement should give1946preference to critical generic medicines and APIs made in the1947U.S. with long-term contracts, price floors, and volume-based1948contracts.1949    In the Medicare program, hospitals can be provided1950incentives to procure domestically produced essential generics1951with critical inputs made in the U.S.1952    As for government-operated manufacturing facilities, it is1953unclear how that would be implemented.19541955    Question 7:19561957    How do pharmaceutical supply chain challenges, drug1958shortages, or exposure to unsafe pharmaceuticals result in1959direct additional health care expenditure?19601961    Question 8:19621963    How do pharmaceutical supply chain challenges, drug1964shortages, or exposure to unsafe pharmaceuticals result in1965indirect costs resulting from higher rates of illness?19661967    Question 9:19681969    How do pharmaceutical supply chain challenges, drug1970shortages, or exposure to unsafe pharmaceuticals result in1971higher rates of illness and increased medical complications?19721973    Response to Question 6-9:19741975    In response to questions 6, 7, 8 and 9, an emerging body of1976literature is documenting the cost of poor quality generics due1977to exacerbation of serious medical conditions, and additional1978medical expenses for patients, their families and society at1979large. The testing team would be pleased to share some of this1980literature if this is of interest.19811982                 U.S. Senate Special Committee on Aging19831984     "Foreign Dependence: How China Captured America's Drug Supply"19851986                             March 11, 202619871988                        Questions for the Record19891990                           Dr. Chan Harjivan19911992                        Senator Elizabeth Warren19931994    Question:19951996    New reporting indicates that the closure of the Strait of1997Hormuz due to the Trump Administration's war in Iran threatens1998the United States' supply of generic drugs. Around half of the1999country's generic prescriptions originate in India - a country2000that "relies on the Strait of Hormuz for the arrival of key2001inputs in drug manufacturing including petroleum-based2002materials," according to reporting by CNBC.What supply chain2003disruptions could the war trigger, and how would these2004disruptions affect Americans' ability to access their2005prescriptions?20062007    Response:20082009    A Hormuz closure would stress three interdependent nodes2010simultaneously: maritime transportation, petrochemical2011feedstock availability, and Key Starting Material (KSM) supply2012for API manufacturing. India-which supplies roughly half of all2013U.S. generic prescriptions-depends on petroleum-based raw2014materials routed through the Strait. Rising input costs and2015production delays in India would cascade directly into U.S.2016drug availability. China compounds the risk: Indian firms2017source approximately two-thirds of their key APIs from China,2018and that dependence reaches 87 percent for antibiotic2019ingredients. Disruptions to Chinese feedstock costs would2020further strain the world's dominant upstream pharmaceutical2021supplier. The result for American patients would be reduced2022drug availability, significant price increases, and shortages2023of essential medicines, with the greatest impact on those2024managing chronic conditions.20252026    Question:20272028    Which pharmaceuticals would be most seriously compromised2029by the war?20302031    Response:20322033    Generic sterile injectables-including oncology drugs such2034as carboplatin and cisplatin, antibiotics, anesthetics, and2035critical care medications-would be most immediately affected.2036Sterile injectables are particularly vulnerable because they2037have no simple substitutes, require precise manufacturing, and2038depend on cold-chain logistics. Antibiotics present a second2039acute risk: Chinese suppliers hold near-monopolies on2040penicillin and cephalosporin intermediates, including 6-2041aminopenicillanic acid (6-APA), the critical KSM underlying2042amoxicillin and several other widely used antibiotics. India2043manufactures 47 percent of all API volume used for chronic2044conditions in the U.S.; cardiovascular drugs, diabetes2045medications, and essential antibiotics representing tens of2046millions of daily prescriptions would all be at elevated risk.20472048    Question:20492050    How much would any such disruptions cost to the U.S. health2051care system, patients, or taxpayers?20522053    Response:20542055    Drug shortages generate direct costs-higher drug2056acquisition prices, pharmacy and nursing labor for workarounds,2057wastage, and premium sourcing fees-as documented in Vizient2058research and analyses published in JAMA and by the HHS2059Assistant Secretary for Planning and Evaluation (ASPE).2060Indirect costs are equally significant: delayed surgeries,2061extended hospital stays, and preventable complications from2062treatment interruptions add costs that dwarf the price of the2063original medicine. The U.S. system has minimal surge capacity,2064having seen more than 3,000 generic product discontinuations2065since 2010 due to unsustainably low reimbursement. A Hormuz-2066driven supply shock would be of a scale the system is2067structurally unprepared to absorb.20682069    Question:20702071    What would these supply chain disruptions mean for national2072security and military readiness?20732074    Response:20752076    The U.S. military procures from the same commercial generic2077drug supply chains as the civilian health system. Disruptions2078to sterile injectables, antibiotics, and chronic disease2079medications would impair military treatment facilities' ability2080to care for service members and maintain force readiness.2081Beyond the direct military impact, pharmaceutical supply chain2082resilience is a dimension of national security in its own2083right: the ability of a geopolitical event-or an adversary-to2084constrain access to essential medicines represents a strategic2085vulnerability comparable to energy or semiconductor supply2086chain exposure. Pharmaceuticals should be designated as2087critical infrastructure accordingly.20882089    Question:20902091    If the Strait of Hormuz remains closed, how long would it2092be before Americans experience the effects of significant2093pharmaceutical supply chain disruptions, including drug2094shortages?20952096    Response:20972098    The effects would be felt within weeks. Just-in-time2099inventory practices throughout the pharmaceutical distribution2100system mean most hospitals and distributors carry only weeks of2101stock for many generic medicines. Shortages of carboplatin and2102cisplatin are already documented. Indian manufacturers2103operating on thin margins cannot readily absorb rapid input2104cost increases; a prolonged closure would force production2105cutbacks. A closure lasting more than a few weeks would2106generate visible U.S. drug shortage reports; one lasting months2107would produce a systemic crisis across multiple therapeutic2108categories.21092110    Question:21112112    If the war against Iran causes serious pharmaceutical2113supply chain disruptions, how long would it take for the United2114States to address vulnerabilities in its supply chain and2115resolve subsequent drug shortages?What actions could the United2116States take to remedy these disruptions, and how much would2117these actions cost?21182119    Response:21202121    There are no adequate short-term solutions. Rebuilding2122pharmaceutical manufacturing capacity requires years of2123investment and regulatory work; onshoring API production at2124meaningful scale would cost billions and take three to five2125years at minimum. Near-term mitigations include expanding the2126Strategic National Stockpile with critical APIs and finished2127dosage forms, facilitating emergency imports from allied2128partner countries with existing API capacity, and activating2129FDA compounding and substitution authorities. Critically,2130upstream supply chain visibility-which the U.S. currently2131lacks-is itself a solution: without knowing where each API and2132KSM is manufactured, policymakers cannot identify chokepoints,2133prioritize stockpiling, or activate contingency plans. The2134Clear Labels Act would enable this mapping for finished dosage2135forms and APIs; USP's KSM mapping work would remain essential.2136Mechanisms to measure and reward resilience, quality, and2137geographic diversification would create durable incentives over2138time.21392140    Question:21412142    China is one of the biggest buyers of oil from Iran, buying2143more than 80 percent of Iran's shipped oil. How much does2144China's ability to manufacture finished drug products, active2145pharmaceutical ingredients, and key starting materials rely on2146this supply of oil, and how would disruptions to Iran's oil2147supply due to the war between the United States and Iran affect2148China's supply of pharmaceuticals?How would these disruptions2149to China's manufacturing capacity of pharmaceuticals in turn2150disrupt the United States' pharmaceutical supply chain?21512152    Response:21532154    China's API and KSM manufacturing is heavily energy-2155intensive, and the Chinese government subsidizes energy costs2156for its pharmaceutical sector-a primary reason Chinese2157suppliers have achieved near-monopoly positions in categories2158such as penicillin intermediates, aspirin, and acetaminophen.2159Disruptions to China's Iranian oil supply would increase those2160energy costs and create feedstock shortages for petroleum-2161derived pharmaceutical chemicals. Given that China supplies2162eight percent of U.S. generic APIs directly and substantially2163more through Indian intermediation-and that India sourced 872164percent of its antibiotic ingredients from China by value as of21652024-any meaningful reduction in Chinese manufacturing output2166would rapidly translate into Indian production shortfalls and2167U.S. drug shortages. India's PLI scheme has begun reducing some2168of this dependence, but the transition is incomplete,2169particularly for antibiotics.2170    Question:21712172    The United States has seen China ban or threaten to ban its2173export of critical minerals in response to the Trump2174Administration's trade agenda, jeopardizing national security.2175Given the Trump Administration's war against Iran and its2176intervention in Venezuela - and the impact this could have on2177China's oil imports - what is the likelihood of China2178retaliating against the United States's actions by restricting2179or banning the export of pharmaceuticals, including final2180dosage forms, active pharmaceutical ingredients, and key2181starting materials, to the United States? What would a ban on2182pharmaceutical exports from China mean for Americans' ability2183to access their prescriptions?21842185    Response:21862187    The impact would be severe. Although China directly2188supplies only three percent of finished oral doses and 92189percent of injectables consumed in the United States, its2190upstream dominance means its true influence is far greater-a2191report to the U.S.-China Economic and Security Review2192Commission found the U.S. is "substantially more exposed to2193Chinese raw pharmaceutical ingredients," with India often2194serving as a conduit. A ban covering KSMs would effectively2195halt Indian production of amoxicillin and related penicillin-2196based antibiotics within weeks. For patients, the result would2197be rationed antibiotics in hospitals, delayed or cancelled2198chemotherapy, forced substitutions, and significant price2199spikes. Tens of millions of Americans relying on daily generic2200medicines for chronic conditions would face treatment2201uncertainty, with lower-income patients and those with serious2202illnesses most severely affected.22032204    Question:22052206    How soon after a ban on pharmaceutical exports from China2207would the United States experience disruptions in its2208pharmaceutical supply chain, including drug shortages?22092210    Response:22112212    Disruptions would begin almost immediately. Just-in-time2213inventory practices throughout the distribution system mean the2214pipeline from a Chinese export ban to a U.S. drug shortage is2215measured in weeks for the most critical categories. For2216products already in shortage, the timeline would be shorter2217still. A simultaneous Hormuz closure and Chinese export ban2218would create a multi-vector supply crisis for which the U.S.2219health system has no adequate response capacity under current2220policy frameworks.22212222    Question:22232224    How many pharmaceuticals on the Food and Drug2225Administration's essential medicines list would be impacted by2226a ban on pharmaceutical exports from China?22272228    Response:22292230    USP's Medicine Supply Map (MSM) research provides the most2231granular available data. India produces 27 percent of the U.S.2232supply of APIs designated essential under the FDA's Essential2233Medicines, Medical Countermeasures, and Critical Inputs list or2234the WHO's Essential Medicines List-and Indian production of2235those APIs is itself heavily dependent on Chinese KSMs. A2236Chinese export ban would therefore indirectly compromise a2237large proportion of essential medicines consumed in the United2238States. A precise count requires the multi-tier supply chain2239mapping the U.S. currently lacks, underscoring the urgency of2240requiring manufacturers to report tier-2 and tier-3 supplier2241information.22422243    Question:22442245    What would be the impact of such a ban on national2246security?22472248    Response:22492250    A Chinese pharmaceutical export ban would constitute a2251national security threat of the first order. China's2252demonstrated willingness to use supply chains as geopolitical2253instruments-evidenced by its restrictions on rare earth2254elements and critical minerals-makes this scenario credible.2255The near-term consequences would be severe: rationed2256antibiotics in military and civilian hospitals, constrained2257infectious disease treatment capacity, and degraded population2258and workforce health. These systemic effects, even without2259targeted weaponization of specific military medicines, would2260represent a major strategic vulnerability. Precisely2261quantifying the national security impact would require2262comprehensive data currently unavailable, but the direction and2263severity of harm are not in doubt.22642265    Question:22662267    What would be the impact of such a ban on the ability of2268the Department of Defense to keep service members healthy and2269maintain military readiness?22702271    Response:22722273    The Department of Defense procures pharmaceuticals from the2274same commercial generic drug supply chains as the civilian2275market. A ban affecting KSMs, APIs, or finished dosage forms2276would constrain availability of medicines essential to military2277readiness: antibiotics, analgesics, cardiovascular medications,2278and critical care injectables. The extent of DoD's independent2279strategic pharmaceutical stockpiles would determine the precise2280timeline before readiness degraded, but the underlying2281dependence on commercially sourced generic medicines means a2282large-scale Chinese export ban would impair military medical2283readiness and potentially affect force availability. This alone2284justifies treating pharmaceutical supply chain security as a2285defense priority.22862287    Question:22882289    What short- and long-term actions should the Administration2290and Congress take to protect the U.S. pharmaceutical supply2291chain from disruptions, including during periods of2292international conflict or against foreign adversaries'2293retaliation? How would increased domestic manufacturing of2294pharmaceuticals help achieve this goal?22952296    Response:22972298    Increased domestic manufacturing reduces exposure to2299geopolitical disruptions by shortening supply chains, reducing2300adversarial upstream dependencies, and building surge capacity2301that currently does not exist but domestic manufacturing alone2302cannot solve the problem in the near term-it must be paired2303with allied diversification through the Bio5 framework with the2304EU, Japan, South Korea, and India. Short-term priorities2305include expanding the Strategic National Stockpile with2306critical APIs and finished drugs, enacting advanced purchase2307commitments by Tricare and the VHA to provide manufacturers the2308revenue certainty needed for long-term investment, and2309mandating tier-2 and tier-3 supplier reporting. Medium- and2310long-term levers include CHIPS Act-style tax credits and grants2311for domestic API and KSM manufacturing, regulatory2312harmonization through mutual recognition agreements, and2313investment in continuous flow manufacturing and AI-enabled2314process control. One critical point: KSM dependency remains a2315risk even when finished drug or API manufacturing is onshored.2316A durable strategy must address the full upstream chain.23172318    Question:23192320    How would the U.S. population benefit from government-2321owned, government-operated or government-owned, contractor-2322operated pharmaceutical manufacturing facilities?23232324    Response:23252326    Government-owned manufacturing facilities offer a targeted2327capability for producing strategically important medicines that2328the commercial market consistently underproduces due to2329structural incentive failures. The benefit would be2330concentrated in two areas: greater assurance of supply2331continuity for essential medicines during disruptions, and a2332price anchor during shortage conditions. However, government-2333owned manufacturing is expensive, and important questions about2334governance and operational efficiency warrant careful analysis.2335Advanced purchase commitments, long-term contracts, and2336resilience-weighted reimbursement are likely more cost-2337effective near-term interventions; government-owned facilities2338may play a complementary role for a defined set of the most2339strategically critical molecules.23402341    Question:23422343    How do pharmaceutical supply chain challenges, drug2344shortages, or exposure to unsafe pharmaceuticals result in2345direct additional health care expenditure?23462347    Response:23482349    Shortages generate direct costs throughout the health care2350system: higher acquisition prices for alternative agents,2351pharmacy and nursing labor for workarounds, wastage from unused2352preparations, and premium sourcing and expedited shipping fees,2353as documented by Vizient. Exposure to unsafe or adulterated2354pharmaceuticals-such as the valsartan contamination of 2018 and2355heparin adulteration of 2008-adds further direct costs through2356recalls, replacement procurement, monitoring, and clinical2357management of harmed patients.23582359    Question:23602361    How do pharmaceutical supply chain challenges, drug2362shortages, or exposure to unsafe pharmaceuticals result in2363indirect costs resulting from higher rates of illness?2364    Response:23652366    When patients cannot access prescribed medicines, treatment2367is interrupted, and underlying disease progresses. For chronic2368conditions-cardiovascular disease, diabetes, cancer, epilepsy-2369interruptions increase the risk of acute events requiring2370emergency care, hospitalization, and long-term complication2371management, all generating costs that far exceed the cost of2372the unavailable medicine. Delayed chemotherapy due to shortages2373of carboplatin and cisplatin has been associated with worse2374outcomes and increased mortality. Treatment delays do not2375simply defer costs; they generate new and higher costs through2376worse clinical outcomes and extended treatment courses.23772378    Question:23792380    How do pharmaceutical supply chain challenges, drug2381shortages, or exposure to unsafe pharmaceuticals result in2382higher rates of illness and increased medical complications?23832384    Response:23852386    Supply chain failures increase illness and complications2387through treatment interruption, forced substitution to less2388effective alternatives, and direct patient harm from2389substandard or adulterated medicines. Forced substitution2390increases the risk of adverse drug events, subtherapeutic2391dosing, and clinical failure. The moral and clinical distress2392placed on providers who must ration scarce medicines-deciding2393who receives a critical chemotherapy agent or antibiotic when2394supply is insufficient-is itself a systemic consequence that2395undermines the integrity of care. Supply chain resilience is a2396patient safety issue. Addressing it is not only an economic and2397national security imperative-it is an ethical one.23982399                        Senator Raphael Warnock24002401    Question:24022403    Health care providers across Georgia are concerned about2404the growing shortage of pharmaceutical drugs, including generic2405medications. Due to limited access, patients must wait longer2406for their treatments or turn to alternative drugs. You2407highlight how procurement reforms at federal agencies like the2408Department of Defense can address generic drug shortages and2409incentivize domestic manufacturing of pharmaceutical drugs.2410What type of procurement reforms should Congress pursue to2411ensure states like Georgia have access to quality medications?24122413    Response:24142415    The most impactful reform is adopting quality-based2416contracting frameworks that break the current race to the2417bottom in generic drug pricing. Federal purchasers-Tricare, the2418Veterans Health Administration, and Medicaid programs-currently2419award contracts primarily on lowest price, driving2420manufacturers toward cost-cutting that undermines quality and2421eliminates the margin needed to sustain domestic or allied2422production of essential medicines. The Drug Shortage2423Comprehensive Recovery and Improvement (DSCRI) framework and2424related proposals would reform contracting to reward2425manufacturers for quality, resilience, and domestic or allied-2426nation sourcing. Multi-award contracts preserve supplier2427diversity; long-term contracts provide the revenue2428predictability manufacturers need to invest in infrastructure.2429CMS reimbursement reforms incentivizing medicines made with2430domestic or allied APIs would shape incentives across the2431entire commercial market-with broader impact than direct2432government procurement alone. For states like Georgia, these2433systemic reforms are the most durable path to reliable access2434to quality medications.24352436    Question:24372438    According to a Government Accountability Office report,2439there have been inspection workforce shortages at the Food and2440Drug Administration (FDA) since 2018. From November 2021 to2441June 2024, the vacancy rate of investigators who oversee drug2442manufacturers increased from 9 percent to 16 percent, leading2443to fewer safety inspections of generic drugs. The Trump2444administration also dismissed more than 3,500 FDA employees in2445April 2025, further exacerbating the FDA's inspection workforce2446capacity.2447    You mention how limited FDA inspection workforce capacity2448hinders the agency's ability to regulate generic drugs and2449conduct quality inspections in foreign countries like China and2450India. How can Congress help stabilize the FDA inspection2451workforce and improve oversight over foreign manufacturing of2452generic drugs?2453    Response:24542455    Congress should prioritize funding to restore the FDA's2456foreign inspection capacity. The FDA's inspection program is2457chronically under-resourced relative to the scale of overseas2458manufacturing it oversees; as I noted in my testimony, OAI2459outcomes in India are 13 percent-compared to two percent in2460Europe and eight percent in the U.S.-reflecting both real2461quality variability and insufficient inspection frequency.2462Domestic manufacturers face a structural disadvantage because2463U.S. facilities are inspected far more frequently than foreign2464counterparts without commensurate benefit to overall supply2465safety. Congress should direct the FDA to implement a risk-2466based inspection model calibrated to a facility's prior2467history, product criticality, and supply chain concentration-2468regardless of location. Risk-based border inspection2469authorities and point-of-care quality testing tools provide an2470additional layer of assurance against substandard products2471entering the U.S. market. Congress should also support mutual2472recognition agreements with trusted regulatory partners-the EU,2473Japan, and comparable advanced economies-to share inspection2474data and free FDA resources for the higher-risk environments in2475India and China where they are most needed.2476=======================================================================24772478                       Statements for the Record24792480=======================================================================2481[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]24822483                   [all]