Hearings to examine closing loopholes that kill American patients.

1[Senate Hearing 119-188]2[From the U.S. Government Publishing Office]34                                                        S. Hrg. 119-18856                    BAD MEDICINE: CLOSING LOOPHOLES7                      THAT KILL AMERICAN PATIENTS89=======================================================================1011                                HEARING1213                               BEFORE THE1415                       SPECIAL COMMITTEE ON AGING1617                          UNITED STATES SENATE1819                    ONE HUNDRED NINETEENTH CONGRESS2021                             FIRST SESSION2223                               __________2425                             WASHINGTON, DC2627                               __________2829                            OCTOBER 8, 20253031                               __________3233                           Serial No. 119-153435         Printed for the use of the Special Committee on Aging3637    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]3839        Available via the World Wide Web: http://www.govinfo.gov4041                                   _______4243                 U.S. GOVERNMENT PUBLISHING OFFICE444561-877 PDF                   WASHINGTON : 20264647                       SPECIAL COMMITTEE ON AGING4849                     RICK SCOTT, Florida, Chairman5051DAVE McCORMICK, Pennsylvania         KIRSTEN E. GILLIBRAND, New York52JIM JUSTICE, West Virginia           ELIZABETH WARREN, Massachusetts53TOMMY TUBERVILLE, Alabama            MARK KELLY, Arizona54RON JOHNSON, Wisconsin               RAPHAEL WARNOCK, Georgia55ASHLEY MOODY, Florida                ANDY KIM, New Jersey56JON HUSTED, Ohio                     ANGELA ALSOBROOKS, Maryland57                              ----------58                McKinley Lewis, Majority Staff Director59                Claire Descamps, Minority Staff Director6061                         C  O  N  T  E  N  T  S6263                              ----------6465                                                                   Page6667Opening Statement of Senator Rick Scott, Chairman................     168Opening Statement of Senator Kirsten E. Gillibrand, Ranking69  Member.........................................................     47071                           PANEL OF WITNESSES7273Tony Sardella, Founder and Chair, API Innovation Center,74  Distinguished Fellow of Health Innovation, Washington75  University in St. Louis Olin Business School, Chesterfield,76  Missouri.......................................................     577Tony Paquin, President and Chief Executive Officer iRemedy78  Healthcare, Inc., Stuart, Florida..............................     779Andrew Rechenberg, Economist, Coalition for a Prosperous America,80  Washington, DC.................................................     981Marta E. Wosinska, Ph.D., Senior Fellow, Center on Health Policy,82  The Brookings Institution, Washington, DC......................    108384                                APPENDIX85                      Prepared Witness Statements8687Tony Sardella, Founder and Chair, API Innovation Center,88  Distinguished Fellow of Health Innovation, Washington89  University in St. Louis Olin Business School, Chesterfield,90  Missouri.......................................................    3691Tony Paquin, President and Chief Executive Officer iRemedy92  Healthcare, Inc., Stuart, Florida..............................    4593Andrew Rechenberg, Economist, Coalition for a Prosperous America,94  Washington, DC.................................................    7095Marta E. Wosinska, Ph.D., Senior Fellow, Center on Health Policy,96  The Brookings Institution, Washington, DC......................   1019798                        Questions for the Record99100Tony Sardella, Founder and Chair, API Innovation Center,101  Distinguished Fellow of Health Innovation, Washington102  University in St. Louis Olin Business School, Chesterfield,103  Missouri.......................................................   119104Tony Paquin, President and Chief Executive Officer iRemedy105  Healthcare, Inc., Stuart, Florida..............................   130106Andrew Rechenberg, Economist, Coalition for a Prosperous America,107  Washington, DC.................................................   137108Marta E. Wosinska, Ph.D., Senior Fellow, Center on Health Policy,109  The Brookings Institution, Washington, DC......................   141110111                       Statements for the Record112113Association for Accessible Medicines Statement...................   149114American Hospital Association Statement..........................   156115American Society of Health-System Pharmacists Statement..........   160116Continuus Pharmaceuticals Statement..............................   165117Doctors for America Statement....................................   179118Lupin Statement..................................................   181119Lupin - Coral Springs, FL Statement..............................   183120National Taxpayers Union.........................................   185121Teva Pharmaceuticals Statement...................................   191122123                    BAD MEDICINE: CLOSING LOOPHOLES124                      THAT KILL AMERICAN PATIENTS125126                              ----------127128                       Wednesday, October 8, 2025129130                                        U.S. Senate131                                 Special Committee on Aging132                                                    Washington, DC.133    The Committee met, pursuant to notice, at 3:27 p.m., Room134216, Hart Senate Office Building, Hon. Rick Scott, Chairman of135the Committee, presiding.136    Present: Senator Scott, Tuberville, Johnson, Moody,137Gillibrand, Warren, and Kim.138139                 OPENING STATEMENT OF SENATOR140                      RICK SCOTT, CHAIRMAN141142    The Chairman. The U.S. Senate Special Committee on Aging143will now come to order. Last month, this Committee held a144hearing about the dangers older Americans face due to unsafe145foreign generic drugs. We exposed not only the threat posed by146poor quality, generic drugs that can hurt or even kill American147seniors, but also how dependent the United States is on148dangerous supply chains that threaten shortages, keeping life-149saving drugs from getting to those who need them.150    The terrifying reality we face is that our Nation is151completely beholden to Communist China and India for the vast152majority of our generic drugs and their ingredients. Communist153China is the world's largest producer of active prescription154drug ingredients, and India, relies on Communist China for155approximately 80 percent of the active drug ingredients it uses156in drug manufacturing.157    A study from one of our witnesses, Mr. Tony Sardella, found158that 83 percent of the top 100 generic drugs consumed by U.S.159citizens have no U.S.-based source of active drug ingredients.160Another 11 percent have only one domestic source of active drug161ingredients.162    We also learned in our last hearing that if Communist China163or India shut off the flow of these essential drugs, the U.S.164would only have months of prescription drug supply, forcing us165to begin rationing drugs and turn away all but then the most in166need within a matter of weeks. Let me say that again. If167Communist China, our adversary, or India decided to shut off168supply and generic prescription drugs to the United States, we169would run out of prescription drugs in a matter of months and170be forced to begin rationing drugs and turning away all but the171most desperately in need within a matter of weeks.172    I think everyone here remembers the supply shortages we173faced during the COVID-19 pandemic; PPE supplies and even baby174formula. Think about the catastrophic scenario we would face if175millions of Americans didn't have the prescription drugs they176need to survive.177    The health of older Americans is too important to leave to178chance. Congress has to work with the Trump Administration, and179now, to make sure that Americans have safe and high-quality180drugs, and secure the prescription drug supply chain. Ninety-181one percent of prescriptions filled in the United States are182for generic drugs. It's essential that the quality and safety183of generic prescription drugs meet the same high standards of184brand name drugs.185    A study showed that serious adverse events like186hospitalization, even death, were 54 percent more likely for187foreign generic drugs compared to American-made generic drugs.188I'm not exaggerating when I say that people are dying in189America today because of bad medicine from under-regulated190markets in India and Communist China.191    When I asked Peter Baker, a former FDA inspector, if he192would allow himself or his family to take generic drugs made in193India or Communist China, he said not. He told us that he194believed that Americans were being killed every day from195foreign-made generic drugs. I want to say that again. A former196FDA inspector who worked in China and India, told this197Committee that he believes Americans are being killed every day198from dangerous foreign-made generic drugs.199    Mr. Baker also told a heartbreaking story of having to go200to multiple pharmacies with his elderly grandmother to find a201safe generic drug for her prescription, only to be forced to202accept an Indian-made drug that paid a massive settlement to203the U.S. Department of Justice for falsifying quality testing.204Peter knew that the drug in his grandmother's prescription was205potentially dangerous, but had no other options.206    No American should ever have to deal with what Peter talked207about, and be worried that a family member will be hurt or208killed by the medicine that is supposed to heal or treat them.209It's unacceptable for that to be happening in our country.210Every American needs to get loud and demand change.211    Everyone knows that how I feel about Communist China, but212I'm not the only one concerned about the dangers of foreign,213major generic drugs. The BBC reported earlier, earlier this214year that doctors in Communist China are worried about the215quality of their generic drugs. One doctor said that216antibiotics coming out almost entirely from Communist China217were causing allergies and elevated blood pressure.218    Unsurprisingly, the Chinese Communist Party downplays these219reports just like they've denied using slave labor, but this is220a real problem and we cannot rely on low quality, ineffective221generic drugs from Communist China.222    In our last hearing, our witnesses underscored quality223issues that present real dangers to the health of patients. In2242007 and 2008, heparin that sourced contaminated ingredients225from Communist China killed up to 100 people in the United226States. These problems continue to happen nearly 20 years227later. In 2023, contaminated eye drops from India, killed four228people, and caused adverse events in at least 55 patients. The229Federal Government needs to ensure access to safe and high-230quality drugs today.231    Following our hearing last month, Ranking Member Gillibrand232and I sent a letter to the FDA asking what steps they're taking233to stop dangerous drugs from coming into our country. I also234met with FDA Commissioner Makary and he talked about his fight235to fix the issues we have highlighted. I applaud his attention236to the issue, and the Trump Administration's work to increase237the amount of unannounced foreign inspections, a crucial first238step to holding foreign manufacturers accountable to the same239standards we hold American manufacturers.240    When it comes to solutions, I believe one of the most241important things we can do is to establish a federal buyer's242market. The Federal Government is the largest purchaser of243drugs in the United States, accounting for 40 percent of244outpatient prescription drugs purchased as of 2018.245    On the Senate Armed Services Committee, I have pushed for246the Department of War to leverage its buying power to247prioritize purchasing drugs made in America, using American248ingredients. Senator Warren held a hearing last year on this249same issue. If no American option is available, then the250Federal Government should prioritize drugs and ingredients from251allies and Trade Act-compliant countries.252    The buying power of the Federal Government can move the253needle and bring manufacturing for essential drugs back to the254United States. The national security risk of relying on255Communist China for essential drugs and drug ingredients are256unacceptable. The same risk risks are unacceptable for seniors257who trust they will have access to the drugs they need. In2582024, the U.S. manufactured 37 percent of its consumed drugs.259This number is down from 2002 when it was 83 percent. In just26020 years, we have seeded control of our medical supply chain to261Communist China and India.262    Even if we start prioritizing certain drugs or types of263drugs like antibiotics which come as China's supplies, 90264percent of the ingredients for globally, we'd be making our265medical supply chains much safer, not just for seniors, but for266all Americans.267    I will continue fighting for the Federal Government to268purchase American-manufactured drugs. We cannot rely on269Communist China for something as important as the health of270Americans. Every American deserves to know where the drugs271their purchasing came from. That is why I support mapping our272supply chains as well as our country-of-origin labeling.273    I've introduced the Country of Origin Labeling Online Act274to require country of origin labeling for consumer products.275Consumers deserve to know where items they purchase are made,276and for something as important as the medications you take,277that information is crucial. I will be introducing legislation278on country of origin labeling for prescription drugs that would279require drug labels include the country where each drug280ingredient and the finished drugs are manufactured, processed,281or compounded.282    We've already seen Communist China place export283restrictions on rare earth elements as part of trade284negotiation, and there's no reason why they won't do the same285for medicines. Agencies like the Department of War and Veterans286Affairs stepping in to purchase American made drugs could bring287industry back and create a steady supply of important288medications and ingredients for the American people.289    Other steps like the Department of Commerce Section 232290investigation could level the playing field for American291manufacturers. Section 232 tariffs are for goods that impact292our national security, and I can't think of anything more293crucial to health of our seniors than generic drugs. On Friday,294I sent a letter to Secretary Lutnick and U.S. Trade295Representative Greer, encouraging them to immediately place296Section 232 tariffs on generic drugs.297    This is a national security and a public health issue for298seniors and all Americans. I look forward to this discussion299with our witnesses on how we can make sure Americans never have300to worry about missing a dose of their medication or the301quality of drugs in their medicine cabinet. I'd like to turn it302over to Ranking Member Gillibrand for her opening statement.303304                 OPENING STATEMENT OF SENATOR305             KIRSTEN E. GILLIBRAND, RANKING MEMBER306307    Senator Gillibrand. Thank you, Chairman Scott, for today's308hearing. Thank you to all our witnesses for being here today.309We really appreciate you. I'm looking forward to continuing our310robust discussion on ways to improve and secure our domestic311generic drug supply, which includes ensuring that312pharmaceuticals entering the United States are of the highest313quality and standard.314    During our previous hearing, we heard about some of the315problems that consistently plague the generic drug industry and316some proposals to begin to help to address the issues. Today,317we will dig deeper into some bipartisan solutions that this318Committee and other committees of jurisdiction can work on319together to ensure Americans can access high-quality drugs that320they need when they need them.321    Currently, too many active pharmaceutical ingredients and322key starting materials are made outside the United States.323Given recent instability in geopolitics and international trade324policy, this reliance increases the risk that Americans may not325have access to life-saving drugs in times of crisis,326threatening our national security.327    However, we must approach strengthening and reforming this328extremely complex supply chain thoughtfully and thoroughly.329Generic drug manufacturers cannot simply flip a switch and move330all components of production to the U.S. or other allied331nations. To ensure Americans have a reliable supply of safe and332affordable drugs, Congress will need to work to make more333targeted investments in biotechnology, research, and334infrastructure, to create long-term support and stability for335this critical industry in our Nation.336    We must examine the underlying economic dynamics in the337current marketplace and adjust incentives to fix the "race to338the bottom" in generic drug pricing, which can create drug339quality issues, drive manufacturing outside of the U.S., or340cause companies to stop production of certain drugs altogether.341    Additionally, we must strengthen the ability of federal342agencies to ensure strict oversight of foreign manufacturing343facilities, to strengthen the supply chain and enable patients344to access the quality medicines they need. As we look to345address these issues, we must make sure drugs remain affordable346for our constituents, particularly our seniors, many of whom347are on fixed incomes.348    Americans are already struggling with high costs across the349board, and I'm committed to working with Chairman Scott and my350colleagues across the aisle to find solutions that serve our351constituents by strengthening the generic supply chain,352promoting quality domestic production, and protecting our353national security.354    I look forward to this robust discussion, as well as the355future potential bipartisan legislation on the issue.356    The Chairman. Thank you, Ranking Member Gillibrand. Now,357I'd like to welcome our witnesses who are here to talk about358their work to bring drug manufacturing of essential drugs back359to the United States, and making sure the American people have360access to the drugs they need.361    First, I'd like to recognize Tony Sardella. Mr. Sardella is362the founder and chair of the API Innovation Center, a non-363profit that establishes public-private partnerships to secure a364drug supply chain. He is a distinguished fellow for health365innovation at the Olin Business School at Washington University366in St. Louis. Thank you for the critical work you do and for367being here today. Please begin your testimony.368369        STATEMENT OF TONY SARDELLA, FOUNDER & CHAIR, API370371       INNOVATION CENTER, DISTINGUISHED FELLOW OF HEALTH372373      INNOVATION, WASHINGTON UNIVERSITY IN ST. LOUIS OLIN374375            BUSINESS SCHOOL, CHESTERFIELD, MISSOURI376377    Mr. Sardella. Thank you. Good afternoon, Chairman Scott,378Ranking Member Gillibrand, and members of the Committee. As379chairman indicated, I'm the founder and chairperson of the API380Innovation Center, dedicated to building health security of our381generic drug supply chain. I'm honored to be here this382afternoon and share how our work at the API Innovation Center383is addressing the severe challenge of a vulnerable U.S. generic384pharmaceutical supply chain.385    There are three key things that I want to share with you386today. The first, is the U.S. generic drug supply chain is387over-reliant on foreign manufacturers, and specifically placing388our seniors and veterans at severe risk. Second, the API389Innovation Center's private-public partnership model is showing390promise in addressing this complex issue and the economic roots391that drove the dependency. Third, policy instruments can foster392increased U.S. private sector investment and production to393address our vulnerabilities.394    Our over reliance on foreign sources to meet our Nation's395needs are quite stark. As Chairman Scott mentioned, research396we've done found 83 percent of the top 100 generic medicines397prescribed to Americans have no U.S. source. I'd like to share398some new research we just conducted on behalf of the Committee.399    Our mapping of generic supply chain reveals that for 10 of400the most frequently prescribed medications for our elderly and401veterans, 95 percent of those medicines have no U.S. API402source. Even more stark, 84 have no finished drug production403and they're dependent primarily on China.404    This continues with the research we provided before that405mapped our generic supply chain from drug all the way to key406starter materials, and showed that for 40 critical medicines407that we identified for our Nation to have its own secure408supply, that the key starter materials were exclusively 100409percent dependent on China. For half of them, half of those410critical medicines and nation require.411    The API Innovation Center focuses on addressing this412national security. It emphasizes modernizing existing idle413domestic manufacturing that we uncovered through our research414with manufacturers and doing so to ensure our resiliency and415stable supply chain.416    The model has three key components. First, investment of417public funds that APEC has received from the State of Missouri,418as well as from the bio map as per federal program. That419capital modernizes the production methods to produce these420medicines.421    We not just bring back production, but we're producing it422in modern, advanced, more efficient manners and also using new423technologies, many of which have been developed here in the424United States by equipment manufacturers. We take the425investment in the new modern techniques and we contract426existing idle FDA facilities that exist already to produce427these modern methods of production.428    Third, we partner with long-term agreements with end429healthcare systems, national retail pharmacies, as well as drug430production companies to be able to ensure predictable demand431and supply for the entire network.432    The approach is delivering promising results. Over 70 U.S.-433based manufacturers are collaborating and entering into434agreements with APIIC to build an end-to-end domestic supply435chain capable of sourcing, developing, producing, and436distributing cost-competitive, U.S.-made medicines, with a437near-term focus on 25 priority medicines that we've itemized,438and a long-term goal of 300 medicines made here in the United439States.440    The partnership enables the U.S.-based API and drug441manufacturers to gain certainty of their demand and economic442viability to produce in the U.S. It gives healthcare systems443and national retail pharmacies certainty of supply and444stability of cost, and our citizens and seniors gain a drug445supply resiliency and we as a nation gain national security.446    While innovative partnerships are essential, policy plays a447decisive role. There's a need, a critical need to clarify and448harmonize the definition of made in America. For449pharmaceuticals, current procurement rules allow drugs450assembled in America, but comprised of foreign APIs to be451labeled as USA-made. Second, the Federal Government's452purchasing power can be leveraged. Last, sustained public-453private investment to modernize idle facilities. The454vulnerabilities are significant but solutions visible.455    Thank you for the opportunity to share our research and456perspective.457    The Chairman. Thank you, Mr. Sardella. Now, I'd like to458introduce Tony Paquin, the co-founder, president, and CEO of459iRemedy, a company from my home State of Florida, working to460provide buyers with American made medical products. Mr.461Paquin's company worked tirelessly to supply the Federal462Government with medical supplies during COVID, and he brings a463wealth of expertise into the medical supply chain.464    Mr. Paquin, thank you for being here today. Please begin465your testimony.466467                   STATEMENT OF TONY PAQUIN,468469             PRESIDENT AND CHIEF EXECUTIVE OFFICER470471           IREMEDY HEALTHCARE, INC., STUART, FLORIDA472473    Mr. Paquin. Chairman Scott, Ranking Member Gillibrand, and474members of the Committee. Thank you for the opportunity to475testify.476    For over 25 years, I've worked in the healthcare477technology, logistics, and distribution. At iRemedy Healthcare,478we manage an artificial intelligence procurement platform that479supports manufacturers worldwide. My experience includes480building software, scaling networks, partnering with hospitals,481manufacturers, and government agencies, all of which has given482me a clear view of how our supply chain actually functions on483the ground.484    That vantage point has revealed two urgent truths. First,485that far too much of our production of essential medicines has486been ceded to China and India, leaving our Nation dangerously487exposed to weak oversight, counterfeit risks, and most488importantly, price manipulation. Second, then an unintended489consequence of that globalization is the concentration of our490supply chain into a small group of intermediaries that491restricts the flow of drugs into American hospitals, locking492providers into contracts, and stifling supply chain and market493innovation. Combined, these two truths are deadly.494    I grew up in Flint, Michigan, and have seen firsthand the495prosperity of an active manufacturing economy as well as the496devastation when industries are hollowed out. Today, I'm here497to say bluntly, we must end our dependences on foreign498adversaries, and restore control of our medical supply chain to499the United States.500    During Operation Warp Speed, my company was a key supplier501of needles and syringes. We delivered more than one billion502items for the country's needs. What I witnessed during that503period was alarming. At one point the Chinese Communist Party504seized 40 percent of our China-based inventory awaiting505shipment. We routinely dealt with bad actors attempting to506bribe dock workers and factory managers peddling fake FDA507510(k) certifications.508    As you know, the vast majority of prescription medicines509are generic, yet those drugs overwhelmingly come from high-risk510overseas suppliers. When supply lines are disrupted, we quickly511see shortages of life sustaining medicines for conditions like512diabetes, heart disease, and cancer oversight is essential for513immediate relief.514    We must enforce unannounced FDA inspections overseas as we515do here in the U.S. We must require a clear country of origin516labeling, and independently validate imported shipments for517quality.518    These are Band-Aid fixes that do bring transparency and519deter quality failures, but they won't fix the problem. The520only real cure is to reshore the supply chain, and I'm here to521report that we can do so. First, APIs nearly all come from522overseas, especially China. We must invest in new technologies523and fast track permits for factories. We must treat this as the524national security issue that it is and prevent bureaucratic525delays.526    Second, generic drug manufacturing. Here's the truth. The527technology already exists in this country to make generics528profitably without raising costs for consumers. What we lack is529fair competition. Generics are often a commodity, and foreign530governments have learned how to weaponize commodity pricing531against us. Until we level that playing field, American532manufacturers will never have a chance to compete.533    Let me give you a real-world example. Oxford Pharmaceutical534is an Alabama-based generic drug manufacturer with the535capability to produce life-giving medicines domestically.536They're a high-quality modern U.S.-owned example of American537manufacturing excellence. They make drugs here in America538efficiently, safely, and at scale.539    What stands in their way is a market that has been540deliberately tilted against domestic producers. Even when541companies like Oxford can produce at competitive costs, they're542forced to compete against artificially subsidized Chinese and543Indian importers that are all too often unfairly awarded U.S.544Government contracts. Shockingly, this happened to Oxford just545a few months ago.546    That system has to end. We must protect American producers547with targeted licensing and trade enforcement. We must use548artificial intelligence to overhaul the drug marketplace, and549reform federal procurement so that U.S.-made drugs are the550default, not the exception. If given fair access, domestic551manufacturers can compete and win. If not, we remain captive to552adversaries abroad.553    President Trump has shown leadership with executive orders554to prioritize American made medicines, but we need an all-555government response involving regulation, legislation, and556procurement. We must act now. First, apply the immediate Band-557Aid fixes; unannounced FDA inspections overseas, clear country558of origin, labeling and randomized testing on imported drugs.559    These bias transparency, and time, then cure the disease560reshore API production with new technology manufacture561domestics generics domestically with fair trade protections562free from foreign price manipulation, and use the full weight563of government purchasing power to put resilience above cheap564imports.565    Members of the Committee, this is not just economics. This566is sovereignty. This is national security. It is needed to567protect our seniors, our soldiers, and our families when the568next crisis strikes.569    Thank you, Mr. Chairman, for your leadership, and to the570Committee for this opportunity.571    The Chairman. Thank you, Mr. Paquin. Next, I'd like to572introduce Andrew Rechenberg, with the Coalition for Prosperous573America, a nonprofit organization that represents American574manufacturers and producers across a number of industries and575sectors, to support domestic industry and protect our national576security. Mr. Rechenberg has experience with the Department of577War, as well as the Department of Commerce, and is an expert in578trade industrial policy.579    Mr. Rechenberg, thank you for being here today. You may580begin your testimony.581582           STATEMENT OF ANDREW RECHENBERG, ECONOMIST,583       COALITION FOR A PROSPEROUS AMERICA, WASHINGTON, DC584585    Mr. Rechenberg. Chairman, Ranking Member, and members of586the Committee, thank you for the opportunity to testify here587today. My name is Andrew Rechenberg, and I'm an economist with588the Coalition for Prosperous America, leading analysis on589pharmaceutical supply chains and domestic manufacturing.590    America's medicine supply chain is in a crisis. Two decades591of offshoring have caused domestic pharmaceutical production to592fall from 84 percent of the U.S. market in 2002 to just 37593percent today, leaving 80 percent of active pharmaceutical594ingredients with no U.S. source whatsoever. India and China595have captured the market by undercutting American producers,596not through efficiency, but through state subsidies, poor labor597standards, and safety shortcuts.598    This dependence has consequences. As U.S. production599collapsed, drug shortages tripled from 88 in 2002 to more than600300 in 2024, driving 300 to 500 percent price hikes that erased601any supposed cost savings. This is because 40 percent of our602essential drugs rely on only a single manufacturer.603    When I was in Pharmaceuticals in India and was shut down in6042023 for falsified data and safety failures, U.S. hospitals had605to ration chemotherapy because one factory made half of our606cisplatin supply. These failures show what happens when we607chase the cheapest offshore medicine instead of safe American608production. That is not resilience. It is a national security609breach at the heart of America's healthcare system.610    It can be fixed. At CPA, we've developed a five-pillar611strategy to rebuild pharmaceutical independence. Pillar 1, the612tariff rate quota system restores control. The TRQ allows a613limited volume of imports from trusted countries at zero tariff614rates. Imports above that quota volume or from high-risk615nations face steep tariffs. Quota volumes are based on the gap616between total U.S. demand and current U.S. production, then617adjusted each year as capacity grows.618    Trusted in-quota countries would be limited to those with619equivalent FDA-recognized safety standards. This TRQ system620rebuilds capacity steadily without disrupting short-term621supply.622    Strengthening domestic production directly is just as623vital. Pillar 2, the PILLS Act, provides production and624investment tax credits for U.S. made generics, active625pharmaceutical ingredients and biosimilars, plus a domestic626content bonus for U.S. sourcing. This creates the conditions627for sustained growth in U.S. pharmaceutical manufacturing.628    Rebuilding does take time. Pillar 3, FDA reform, ensures629the safety of current imports. Ninety percent of foreign FDA630inspections are pre-announced, and many plants go five years or631more without review. When inspections do occur, they often632reveal falsified tests and unsafe conditions, reflected in633studies showing that generics made in India have a 54 percent634higher rate of severe adverse events.635    Yet, for imports, the FDA still relies on company paperwork636instead of independent testing. We can address all of this by637requiring independent batch testing for imported drugs in U.S.638labs, regular unannounced foreign FDA inspections, and strict639penalties for offenders, including import bans.640    Next, Pillar 4, federal purchasing realignment treats641medicine procurement as a matter of national security. It642ensures that federal programs prioritize reliable U.S.-made643medicines. This aligns directly with the pharmaceutical supply644chain, Defense and Enhancement Act to strengthen domestic645resilience and minimize reliance on risky and adversarial646nations.647    Finally, we must look to the frontier of medicine. Pillar6485, biotechnology leadership. The U.S. must invest heavily in649NIH and biotech startup innovation, and raise clinical trial650standards that protect U.S. patients and ensure drug quality.651These steps will ensure the next generation of cures is652discovered and made here at home.653    These five pillars are how we end shortages, ensure safety,654and restore America's capacity to make the medicines our people655depend on. America's medicine system is fragile by design, but656it does not have to stay that way. Congress can act now to657rebuild what was lost, and ensure that never again will our658patients, our hospitals or our troops depend on foreign supply659for life itself. Thank you.660    The Chairman. Thank you, Mr. Rechenberg. Now, I'll turn it661over to Ranking Member Gillibrand to introduce our next662witness.663    Senator Gillibrand. Thank you, Chairman Scott. I want to664move to introduce our next witness, Dr. Marta Wosinska. Dr.665Wosinska is a senior fellow at the Brookings Institution Center666on Health Policy, with expertise in prescription drugs and667pharmaceutical supply chains. Dr. Wosinska previously served in668the Federal Trade Commission, in the Office of Inspector669General at the U.S. Department of Health and Human Services,670and the U.S. Food and Drug Administration Center for Drug671Evaluation and Research. She's also served as economic advisor672to the U.S. Senate Finance Committee. You may begin.673674           STATEMENT OF DR. MARTA E. WOSINSKA, PH.D.,675676            SENIOR FELLOW, CENTER ON HEALTH POLICY,677678           THE BROOKINGS INSTITUTION, WASHINGTON, DC679680    Dr. Wosinska. Chairman Scott, Ranking Member Gillibrand,681and distinguished members of the Committee, thank you for the682opportunity to testify at this important hearing. My name is683Marta Wosinska, and I'm a senior fellow at the Brookings684Institution. Today, I speak in my personal capacity, reflecting685nearly 15 years of studying drug supply chain issues from686within the government and outside, and with no financial stake687in the outcome.688    Over all these years, I have observed what policy solutions689catch the interest of lawmakers. I have seen that many of the690solutions that resonate sound good, but they don't address the691problem that lawmakers claim they want to solve.692    Today, as we talk about solutions, I urge you to ask the693following questions; What specific problem is the solution694meant to address? What else is needed for this solution to695succeed? How do we handle the unintended consequences? Is this696the most effective and efficient cost effective and efficient697path? Only when you ask these questions, you will be best698prepared to design policies that not only do the job well for699patients, but also assured that taxpayer dollars are used700wisely.701    For instance, if persistent drug shortages in hospitals are702the top priority, durable solutions require shifting hospital703incentives so that reliability, not just low cost is valued.704Transparency to hospitals around supply chain reliability will705be important, and you will want to keep far away from tariffs706unless you fix various payment systems.707    If the concern centers on China, then the focus should be708on antibiotics and, _for pretty much any other drug_ the focus709should shift upstream away from pharmaceutical production steps710and toward chemicals that are not regulated by FDA. You will711also want to think about how to leverage India in de-risking712from China.713    If the objective is to increase domestic drug714manufacturing, which by the way, is a solution to supply715concerns, not the problem, then any new facility counts as716progress, regardless of whether it addresses areas of critical717need or shortage risk. If domestic manufacturing is the goal,718then you may not pay as much attention to whether policies719designed to promote onshoring like tariffs could destabilize720supply.721    What if we're concerned that weak FDA oversight abroad722creates opportunities for defective drugs making their way to723American patients? Onshoring could help because we will be724building newer, more automated facilities, and FDA would have725an easier access to these facilities.726    Let's be realistic. Onshoring will require government727support to undo the economic forces that moved production728offshore. In fact, a lot of government support. With729constrained budgets, this means policymakers should prioritize.730I would urge you to consider that essential medicines and choke731holds with China are much more pressing onshoring targets than732Indian-made statins or blood pressure medications.733    Fortunately, we do have other options for addressing734product defect risks in commonly used medications. FDA can735create greater quality assurance by increasing unannounced736inspections, and Congress can support FDA by providing more737resources, but we would need to do more because many industry738observers and compliance professionals tell me that the current739inspection-based model for oversight is not enough.740    This is where I urge the Committee to consider the proposal741I published this morning, which would require every importer to742designate a qualified person based in the U.S. with personal743responsibility for verifying that each batch meets quality744standards. Mandatory product testing would be part of that745process. This system is already working for drugs in Europe and746has precedent in U.S. drug regulations and other U.S. sectors747like finance, where CFOs must personally certify financial748disclosures.749    To conclude, let me reiterate that lasting policy must750focus on clearly defining the problem, aligning incentives, so751the right behaviors follow, and adapting proven practical752solutions from other settings facing similar challenges. When753reforms are grounded in clear objectives and match to the754challenge, they will best protect patients and ensure prudent755use of public resources.756    Thank you again for inviting me to participate. I look757forward to your questions, and to this Committee's leadership758in advancing meaningful reforms that will enhance both the759quality and reliability of America's drug supply.760    The Chairman. Thank you, Dr. Wosinska. Now, we'll turn it761over to questions we'll start with coach Tuberville.762    Senator Tuberville. Thank you, Mr. Chairman, and thanks for763the panel being here today. I'm going to ask the obvious764question, Mr. Rechenberg. If we closed our borders, do we have765the ability, and the assets, and the chemicals that we could766mine to make every drug that we need in this country?767    Mr. Rechenberg. No, not currently. That's why in the TRQ768plan that I'm proposing, we do work with trusted countries with769regulatory standards equivalent to our own. The FDA already770recognizes this through mutual recognition agreements with the771European Union, the United Kingdom, and Switzerland as well. We772do have enough capacity when working with trusted equivalent773regulatory nations like that, but currently on our own, no, we774do not. That's why we need to rebuild this capacity.775    Senator Tuberville. Would we have to use China at all?776    Mr. Rechenberg. No, we would not.777    Senator Tuberville. Okay. Good. Mr. Paquin, when you talk778about how companies like Oxford Pharmaceuticals should be used779as an example of how it is possible to own shore drug780manufacturing in a competitive environment?781    Mr. Paquin. That's correct, Senator. They are a very well782run, significantly sized, highly automated production facility783in Birmingham, Alabama. They really can produce pretty784competitively. I think sometimes, we sort of misunderstand a785little bit of the cost factor of these drugs.786    Amlodipine, for example, costs about two cents a dose to787manufacture, but it is reimbursed by Medicare Part D at 10788cents. Actually, the manufacturing cost is a very small part of789the total cost that ends up going to the consumer or to the790payer. The manufacturers like Oxford Pharmaceutical here in the791United States can operate pretty competitively if they're not792at target of unfair competitive practices coming out of India.793    Senator Tuberville. What changes do you think we need to794make to have Oxford and other companies to be on a level795playing field? What do we need to do?796    Mr. Paquin. Well, I think there's really two main things we797can do, but there's two immediate actions that we could be798looking at. I think Andrew and the Coalition for Prosperous799America made a good recommendation about, you know, quotas800based on the marketplace, and not allowing a country like India801to overwhelm our supply, thereby driving down the value of802those drugs.803    Second, the VA and the U.S. Government should really804prioritize domestic manufacturing over foreign manufacturing,805and that is something that can be done without any major806additional cost to the government and is not happening807currently.808    Senator Tuberville. You mentioned in your testimony that809Oxford has modern FDA-approved facilities, but still loses810contracts to virtual importers tied to China and India. Can you811explain what that says about the way our current system works?812    Mr. Paquin. Well, first off, I would say it doesn't work813very well in terms of recognizing the national security814implications and just the good sense of supporting a domestic815manufacturer. Those contracts that they recently lost were816probably a lowest price, technically acceptable type of817contract.818    I think what's happening there is the VA is really not819applying the right way to think of technically acceptable. All820generic drugs, I would argue, are not equivalent. A generic821drug manufactured in Birmingham, Alabama, is probably going to822be much higher quality and reliable than a drug made somewhere823in India where we don't have good access to surveillance of824that manufacturer.825    I think that--and then also, when we look at technically826acceptable, we should consider resilience issues, investing in827our domestic manufacturing capability should be one of the828considerations when somebody like the VA is putting a contract829out for bid.830    Senator Tuberville. Thank you. Mr. Rechenberg as we saw831during COVID, United States is way too relying on China, we832mentioned that, and India. How can a well-designed tariff rate833quota system be used to strengthen domestic production and834mitigate shocks or supply shortages in the U.S. market?835    Mr. Rechenberg. Yes. The main cause of the supply shortages836in the market right now is disruptions to these very few sole837manufacturers in China and India. We're very much reliant on838the single source vulnerabilities, but if we give the market839space for U.S. producers through a tariff rate quota system, it840very much encourages companies to reinvest in the U.S. and841bring production because there's this guaranteed market space842that domestic producers can capture.843    Over time, it will bring back and diversify our supply844base, which will lead to less shortages over time as we have845more backup options and more U.S. domestic supply.846    Senator Tuberville. Thank you. Thank you, Mr. Chairman.847    The Chairman. Ranking Member Gillibrand.848    Senator Gillibrand. Senator Kim.849    Senator Kim. Thank you. Dr. Wosinska, I wanted to just850start with you. I was intrigued by what you raised in terms of851that idea about the EU-qualified persons. I guess I just wanted852to start by just asking, does the framework like that model853already exist in other sectors in the United States? I felt854like you said something about on the finance side and others,855but I just wanted to get a little bit more clarity from you856just how novel of an idea this is.857    Dr. Wosinska. It's actually not a novel idea. I mean, for858one, it has been used in Europe for decades, but in the United859States, in terms of FDA and something that FDA is already860familiar with during when FSMA passed, so the Food Security861Modernization Act, there are a couple of programs for drug862importers.863    I discuss in the paper that I published earlier today where864the importer is an extra layer of verification that the product865that is being imported into the United States, they have to do866a certain set of checks, and in a sense, verify. There's a867person who is responsible for verifying and signing off that868everything meets the standards that are expected.869    We have that, we have it in the Sarbanes-Oxley Act. It's870the same general concept that somebody takes on personal871responsibility for what is being put forward. It also exists in872an of other professions where there is actually this kind of873accountability that's added.874    Senator Kim. Given your knowledge about, you know, our875markets and our structures here in terms of this industry, how876challenging would it be to be able to implement this? How877significant of a change would this create?878    Dr. Wosinska. You would have to modify legislation. You879would have to--the HELP Committee would need to make changes to880the Food Drug and Cosmetic Act. That would be necessary.881    In terms of how big of a shift it would be, it would depend882how it would be designed. I don't think we have enough time to883kind of go into the details about what are the levers, but for884example, the qualified person framework in Europe applies to885every manufacturer, including domestic European manufacturers.886    Here, the idea is to, in a sense, complement what FDA is887already doing, complement the areas where they are struggling888much more, which is with countries that don't have comparable889regulatory systems, and so, you could narrow it down in that890particular way.891    You know, there's a question, do you do it? There's892mandatory testing that Europe does, and the product actually893have to make it into Europe first before it gets tested. It894sits there in warehouses. Would that be necessary? It adds to895cost, but then it also adds a certain level of assurance.896    One thing I would like to mention is that there are897different ways of trying to solve this and level the playing898field. If you were to ask me, I would prefer to level the899playing field in a way where we actually have this kind of900quality assurance, because overnight, we're not going to be901able to switch away from our reliance, especially on India.902    India in 2024 produced 61 percent of solid oral dose903products that we sell in the United States, and the full market904is 187 billion pills, and India makes 60-61 percent of them.905We're talking about 180 different facilities. We're talking906about API facilities of probably over 200, well over 200. The907size of this is massive, and I think we need to prioritize. One908way for us to deal with that is to save onshoring for909priorities and figure out some other ways to deal with910manufacturing quality.911    Senator Kim. Well, I think the idea is that we can have912multiple tools that don't have to run sequentially----913    Dr. Wosinska. That's right.914    Senator Kim [continuing]. but simultaneously. Mr.915Rechenberg, you raised the issue about independent batch916testing and things that are somewhat similar to what we just917heard. I don't know how familiar you are with this qualified918person model. What's your sort of initial reaction to that, and919what else can we be thinking about in terms of independent920batch testing?921    Mr. Rechenberg. Yes, I think that this is also a critical922point for anything that we're currently importing needs to be923verified for quality. Because a lot of the time, in the U.S.924currently, we're getting drugs that are imported, and we only925find out after the fact that they have these bad tests, and926then they're recalled, and U.S. patients have already taken927them.928    If we adopt a more European-style model where we have this929independent batch testing that in order to have these drugs930released into the U.S. market, they have to be tested and931verified that they are quality drugs, that they work for what932they say they're going to work for. Then this will greatly933reduce the risk. This is an essential first step.934    Senator Kim. You think it's worth exploring these different935ideas that are out there?936    Mr. Rechenberg. Absolutely.937    Senator Kim. Okay. Well, thank you so much, and with that,938I'll yield back.939    The Chairman. Senator Johnson.940    Senator Johnson.941    Thank you, Mr. Chairman. You know, having supplied the942medical device industry for close to 30 years, I mean, this is943just quality control 101 we're talking about here. It's944actually shocking it's not in place. Chairman knows I'm big945into data, so I want to understand the raw material supply946chain here. We talk about precursor chemicals. Approximately,947how many precursor chemicals do you need? What's the universe948of that? I'll ask you, Mr. Paquin, or whoever knows it.949    Mr. Sardella. I could say within one dimension. We looked950at 40 critical medicines. They were based on seven foundational951chemistries, so seven to make the 40 started with raw952chemistry, seven raw chemicals, they got converted into key953starter materials. Those got converted to active pharmaceutical954ingredients and then drug. The ratio is not of magnitudes of955order that's insurmountable. It's achievable.956    Senator Johnson. How many total drugs are we--how many957total drugs? Anybody have a number?958    Mr. Sardella. It is 3,200 approved drugs for use in the959United States.960    Senator Johnson. Over 3,000?961    Mr. Sardella. Correct.962    Senator Johnson. How many active pharmaceutical ingredients963comprise those 3,000 drugs?964    Mr. Sardella. We don't have specific data on it, but I965would say in the hundreds, not thousands, by any means.966    Dr. Wosinska. For API it would be the same number. Because967a drug is the API. It would be the same number, but the968question is how many intermediates, or reagents, or solvents,969or key starting materials, that will be less.970    Senator Johnson. Again, I'm just--so are there 100971precursor chemicals, or is that overstating the case?972    Mr. Sardella. Probably, a little higher than 100 as raw973chemicals. I mean, within magnitude of order.974    Senator Johnson. Almost all those are produced in China.975    Mr. Sardella. A predominant number of those are produced in976China. Our chemical manufacturing base moved to China many977decades ago, and they control that.978    Senator Johnson. If you're getting a brand name drug, are979those precursor chemicals for the brand name drugs produced980here in America?981    Mr. Sardella. No. They would be likely also produced982elsewhere. Keeping in mind that most of our new branded drugs983are biologicals, and we're talking about drugs that are called984small molecules. They're chemically derived.985    Senator Johnson. We are highly deficient in the base raw986material, right, the precursor chemicals. Most in China, even987with brand name drugs, that's a precursor chemical coming in988from China. Is it easier to quality control than the active989pharmaceutical ingredients?990    Mr. Sardella. The key starter materials from a control991standpoint still have issues in regards to their quality. If992you want to say, like, impurities still exist in those key993chemicals----994    Senator Johnson. Because we're taking those precursors995chemicals now for brand drug, are they also getting the API996then primarily?997    Mr. Sardella. That is correct.998    Senator Johnson. Then, they're just stamping the pill. Dr.999Wosinska, you're shaking your head.1000    Dr. Wosinska. API is largely for branded drugs, is largely1001made in the United States and Europe.1002    Senator Johnson. Okay, say that over again?1003    Dr. Wosinska. For branded drugs, API is overwhelmingly made1004in the United States and Europe, but using----1005    Senator Johnson. Not in China, but using precursor1006chemicals primarily from China.1007    Dr. Wosinska. Only if they are small molecules. Back to the1008point that Tony made, if you have biologics, the ones--and a1009lot of the branded drugs are biologics, those are made with an1010entirely different process. That's not chemical. You actually1011grow them in cells.1012    Senator Johnson. Okay. Then that's done here in the U.S.?1013    Dr. Wosinska. That would be done in U.S. and in Europe.1014    Senator Johnson. The precursor chemicals, that's a1015frightening process, requires permitting. Why was that off1016shored? Because of permitting process? Or is there any kind1017of--I wouldn't think in big man, you know, large refining1018process, you're going to have much cost advantage due to1019offshore. Is it a primary problem of permitting?1020    Mr. Sardella. No, the genesis of that offshoring had1021multitude of factors. One was regulatory oversight in the1022United States for those facilities versus foreign, the cost of1023labor in foreign countries versus the United States.1024    Senator Johnson. Refining, you got a lot of equipment, and1025there's not many people hanging around a refinery plant.1026    Mr. Sardella. Well, and the third part was this a desire1027not to have those facilities here or near populations in the1028United States1029    Senator Johnson. Because it's a dirty manufacturing1030process.1031    Mr. Sardella. Just large emissions, large facilities.1032    Senator Johnson. Correct. We're going to first have to1033overcome that. There're basic and precursor chemicals, and we1034have to have that honest discussion.1035    By the way, Dr. Wosinska, you know, we are staying on the1036same hymnal here. You know, solve a problem. You had to first1037properly define it. That's why I'm--again, I've only got five1038minutes. I'm basically out of time here. We need to properly1039define this problem. We need to understand the raw material1040supply chain. We need to understand volumes. We need to1041understand how many--what we're talking about. Before we leap1042to a solution that's mistargeted, but let's get all this data1043down. Again, this, Mr. Chairman, I really appreciate this1044hearing. This is extremely important. We need to fully1045understand this. We need more data.1046    Mr. Sardella. If I could add to it, one of the things I'd1047mentioned was the fact that we're not just reshoring, we're1048using advanced technology. The ability to convert those large1049facilities into equipment that fits on this table is a critical1050added value. Bringing it to United States with advanced1051technologies, advanced equipment that allow us to make those1052facilities smaller, cleaner, and more efficient.1053    Senator Johnson. But let me, final point. Doing a QC check1054on even imported drugs, this is not rocket science. Now people1055can cheat on it, it needs regulatory oversight. This should not1056be hard. It's shocking that it's not already in place. It shows1057the failure of our federal health agencies. Truthfully, it's1058the utter failure that this is happening today.1059    The Chairman. Well, the fact that we don't have, we don't1060have a supply chain, we don't have a map, right? There was no--1061we haven't thought about having a map. We've allowed ourselves1062to be so dependent, it doesn't make any sense.1063    Senator Johnson. We've known about these drug shortages for1064a long time and we've done nothing about it. Thank you, Mr.1065Chairman.1066    The Chairman. Ranking Member.1067    Senator Gillibrand. Thank you, Mr. Chairman. I welcome this1068Committee's eager efforts on this issue, because I think we can1069make a difference on a bipartisan basis on this.1070    Dr. Wosinska. Let's talk a little bit more about China,1071specifically. You mentioned your concerns about antibiotics,1072and that should be prioritized. Tell us what else you think1073should be prioritized. What specific medicines do you believe1074are most vulnerable to dependency? Lay the out the risk for us.1075    Dr. Wosinska. Thank you for this question. I think every1076one of us here at this table would agree that antibiotics are1077by far the most vulnerable. If you actually look at India and1078what the Indian government is concerned about, they are also1079themselves very nervous about their own reliance on China,1080especially around antibiotics.1081    A lot of the subsidies that they are doing is to actually1082de-risk their own supply chains, actually on our behalf to a1083large extent, so, this is great because they're invest, they're1084making these investments without the American consumers having1085to pay, for taxpayers to pay for this, but there's this concern1086about antibiotics. That's by far the most concerning. I think1087it's much more difficult back to the mapping exactly which1088drugs have the largest exposure to China other than that.1089    I would say is, that we don't have to figure that1090antibiotics need support and we need to move on other things.1091We do need to do more homework and understand it. I will say1092that in terms of mapping, I am a little wary about mapping it1093for everything. I would much rather start with: here are the1094essential medicines, and here, let's figure out where they come1095from, because those are the ones that we know we will be able1096to secure1097    I would probably start prioritizing drugs first in terms of1098their importance, and then really in detail mapping, because1099it's not just figuring out where the KSM comes from. The key1100starting material is only one of the chemicals that you use.1101You need reagents and you need solvents. Those are largely made1102in China.1103    You need to know all the pieces. If you try to do this for11043,000 drugs, we're going to be stuck in analysis paralysis for1105a really long time. I would say yes, absolutely mapping, but1106let's prioritize where we map first.1107    Senator Gillibrand. Does anyone want to add to that answer1108from their perspective?1109    Mr. Sardella. I do. On the mapping, one of the things we've1110found is we have worked to map several hundred, is that there's1111purposeful obfuscation of where the supply comes from and so1112on.1113    Senator Gillibrand. By whom?1114    Mr. Sardella. By companies in China, who in other areas1115where they don't----1116    Senator Gillibrand. They pretend they're from the United1117States.1118    Mr. Sardella. Correct. They are many different versions of1119a company. You can't quite track back to is it produced in a1120China facility? It could be a multitude of reasons. It could be1121that maybe the facility has some sort of FDA warning. It could1122be just based on business and ownership structure that they1123don't want it to be known who owns which company. It's very1124difficult.1125    We've found that although we're working through it, there1126are data sets that allow you to identify where those sources of1127are coming from, from beginning to end.1128    Senator Gillibrand. Tony or Andrew, do you have anything1129you want to add to the China problem?1130    Mr. Paquin. Yes, I would just add that I think it1131underscores our inability, ultimately, to have oversight into1132China, and to really understand what the problem and the1133sourcing is. I agree that we should focus on essential1134medicines. That's a definable problem. We can zero in on that.1135I think the strategy is to then move that into domestic1136manufacturing as quick as possible. Then we have control of the1137supply chain.1138    Mr. Sardella. If I could add to that. We've also taken a1139lens on not only essentials because some of these are very,1140very low-cost medicines, but also what do the healthcare1141systems need? What do national retailers need? What does the1142government need? What makes economic sense to produce here in1143the United States with advanced technology? When we put those1144lists together, we did come together with a prioritized list1145where it makes economic sense. There's demand for those1146medicines, there's a need for them and they can be a1147sustainable investment by the us.1148    Senator Gillibrand. Have you submitted that list to us?1149    Mr. Sardella. We've submitted it in collaboration with1150ASPR, and be happy to submit those as well.1151    Senator Gillibrand. Please submit it to the Committee.1152    Mr. Sardella. I'll be happy to.1153    Senator Gillibrand. Andrew?1154    Mr. Rechenberg. Yes. The final part that I would add is1155that this does have to be a drug-by-drug approach, especially1156for a program like the TRQ. I agree that the antibiotics are1157one of the most critical and one of the most urgent to start1158on. These are going to have different solutions because they1159have different supply chains.1160    Additionally, I would say that India is not necessarily a1161de-risking from China. India has plenty of its own problems,1162whether it's safety issues, FDA flags that have been in Indian1163facilities. As on top of that, India had the same problems1164during COVID. They cutoff some of their supply to the United1165States, not because of any adversarial, geopolitical reasons,1166but they have their own population they're trying to supply.1167The more we can bring back to the U.S., the safer our supply1168chain will be.1169    Senator Gillibrand. Thank you, Mr. Chairman.1170    The Chairman. Senator Moody.1171    Senator Moody. Thank you, Chairman Scott. Thank you to our1172witnesses for being here today, especially a great Floridian.1173Always appreciate seeing a fellow Floridian.1174    You know, I think during the COVID years, a lot of things1175came to light that maybe Americans weren't paying attention to,1176even those in the industry. Dependencies for our drug supply1177chains on these four nations, I think, really started hitting1178home for a lot of people.1179    I don't think most Americans know that more than 50 percent1180of the manufacturers supplying our market, it's coming from1181overseas. I don't think they know that. I don't think that they1182know that, one of you mentioned, 80 percent of active1183pharmaceutical ingredients are manufactured overseas, or that1184China and India combined, make up 85 percent of active API1185filings. I don't think Americans understand that.1186    Just for having this hearing, I think, Chairman Scott, does1187Americans a service in shining a light on this specifically1188when you look at the fact that drug and API manufacturers in1189China and India receive the most FDA warning letters for1190violations, which can mean carcinogens and medicines1191destroying, or falsifying data and non-sterile manufacturing.1192Everybody's shaking their head, correct.1193    I mean, how long has this been prevalent, that we've been1194seeing these types of violations? Has that increased as our1195dependencies on these foreign nations has increased?1196    Mr. Paquin. I think this is a, you know, unintended1197consequence of the globalization activity over the last 201198years. Senator, and I think you make a very good point. COVID1199really created the awareness because it broke the global supply1200chain, and then we all experienced what you're referring to. I1201think that the average person in America is not really aware of1202this problem.1203    I do believe that there is a growing awareness that we1204didn't have maybe five or ten years ago. You know, when we talk1205about the various actions to take place, and obviously, I keep1206going back to the idea of bringing supply back to domesticating1207here, the United States. The idea of country of origin labeling1208on a medication would probably do a lot toward what you're1209describing, and that is making the average consumer, and by1210that, I mean not just patients, but also the doctors, and1211pharmacists, and healthcare professionals aware of this risk,1212and that'll probably serve us well as we try and correct the1213problem.1214    Mr. Sardella. I wanted to add, when we commenced the1215initiative informed the API Innovation Center, it's only been1216three years in existence. The first study we did was a1217perception gap study, and that study looked at the perception1218of our reliance, of shortages, versus real data around the1219shortages.1220    What was striking at that time was the two most important1221stakeholders in our country underestimated the risk scientists1222and government. I really commend these hearings to expose that1223both from a government and a scientific community. By nation,1224we greatly underestimated the risk of shortages and1225overreliance compared to other nations like China, India, and1226Europe.1227    That perception gap is starting to close thanks to these1228types of sessions and the interest. We're working effortly to1229continue with our publications to close those gaps.1230    Senator Moody. I have to imagine that if consumers had the1231information and the choice, knowing where about the increase in1232violations, I mean at this point is are consumers ever informed1233that where the main ingredients and the drugs that they're1234taking are manufactured?1235    Mr. Sardella. Very unlikely. There's no transparency. This1236is a very interesting concept. This is an industry like any1237other supply chain. Any other supply chain, you can look and1238understand where the product comes from, what the ingredients1239are, and where it's sourced. Not our pharmaceuticals.1240    Any other product that you procure has clarity where you1241can compare quality of that product. You cannot compare the1242quality of the pharmaceuticals as a result. One in every four1243prescriptions in the United States is from a facility that has1244an FDA violation. A quarter of the prescriptions have a1245violation. I don't want to create alarm. Some of them are1246simple procedural violations, but nonetheless, it means a1247quarter are being prescribed that have some sort of violation1248on the FDA. It is not known.1249    What's also striking is while we overestimate the cost when1250we work with manufacturers, we're talking like less than a1251penny to have a U.S. existing manufacturer manufacture that1252medicine here in the United States with the highest quality of1253manufacturing standards.1254    Senator Moody. I'm out of time, but I hope you will1255explore, Mr. Chairman, as you do your questioning, the national1256security implications for a failure in that supply chain. Thank1257you.1258    The Chairman. Thank you, Senator. Senator Warren.1259    Senator Warren. Thank you, Mr. Chairman, and thank you1260Ranking Member for holding this hearing today. We're talking1261about a broken supply chain, and I was looking at the numbers1262on this.1263    The U.S. imports seven times the amount of drugs that we1264were importing in the year 2000. That's how much this has gone1265up, and you-all are discussing how our reliance on foreign-made1266pharmaceuticals exposes Americans to drug shortages, to safety1267risks, and exposes seniors more than anyone.1268    For years I've been working with my colleagues to try to1269advance reforms, establishing stronger transparency rules,1270closing loopholes in the Buy American requirements. I just want1271to say we've gotten a lot of pushback from people who make a1272lot of money by keeping all of this opaque, and maximizing1273their profits, and minimizing safety for the American people.1274    Today, I want to hit on something that you all have1275mentioned, and that is how we get more drugs manufactured1276domestically. How do we move our supply chain here to the1277United States. Mr. Rechenberg, you're an expert on drug supply1278chains. You know that other countries are subsidizing the1279manufacturer of prescription drugs. How does that affect our1280ability to make these drugs here in the United States?1281    Mr. Rechenberg. Yes, and this is one of the main problems;1282that these foreign companies are being subsidized by their own1283governments. They're able to severely underprice U.S. producers1284and drive them out of the market.1285    We really need a comprehensive approach here, starting with1286something like a tariff rate quota system to create a space in1287the market for U.S. producers. We need to supplement that with1288direct production incentives for companies, whether through an1289act like the PILLS Act or through federal procurement. Federal1290procurement can be a huge part of this, and incentivizing and1291prioritizing American-made medicine.1292    Senator Warren. Let's talk a little bit about buying here1293in the United States. The Federal Government could make it1294easier and less risky for manufacturers to make their products1295in the U.S. if we would just leverage the power of our federal1296contracts.1297    That means the government makes a deal with the1298manufacturer, and says, we guarantee we will buy a certain1299volume of drugs over the next several years. That makes it1300better for you. Make the investments, you get out there, you1301produce the drugs.1302    Now, the DOD actually has contracts for essential1303medicines, because for obvious reasons, it is important to make1304sure that our service members have the drugs they need as a1305national security issue. I have been pushing DOD to make those1306contracts, domestic production advances.1307    Mr. Sardella, you lead the API Innovation Center, and1308you've actually looked in to how many critical drugs rely on1309ingredients manufactured exclusively in China, I think you were1310talking about this earlier. Would it help national security to1311expand federal contracting programs at DOD and other agencies1312and focus them on domestic drug manufacturing?1313    Mr. Sardella. Absolutely. It would be a significant lever1314to bring back a strong U.S. industrial base for manufacturing.1315I commend all the incredible work you've done in this area.1316Then second, one of the elements that would be also very1317effective is shifting the contracting vehicle from what is an1318IDIQ, indefinite demand, indefinite quantity, in business.1319    Indefinite demand and indefinite quantity does not reduce1320the risk. There's no certainty you could lose a contract or1321volume turning that into a certainty of demand and volume and1322even cost or price so that a manufacturer can make an1323investment. We have a small business in Missouri where we've1324placed two medicines for manufacturing for a healthcare system.1325We've provided them our technology that we developed. They are1326now making investments to expand their facility because they1327have certainty that the healthcare system is giving them a1328long-term agreement. If the newest government did the same, we1329expect the same.1330    Senator Warren. You and I are in the same place on this;1331that more robust federal contracting can create the kind of1332sustained demand that manufacturers need so that we can1333eliminate these supply chain vulnerabilities and protect our1334national security.1335    For me, that is reason enough to implement them. Some1336critics have warned that, oh, if you shift to American-made1337drugs, it will be too expensive. On the other hand, we're1338paying a price, A for vulnerability, and B, if our seniors end1339up taking drugs that are ineffective and so they are sicker,1340they stay sick, or if our hospitals are getting price gouged1341during shortages.1342    Mr. Rechenberg, do you think that shifting to more domestic1343manufacturing of pharmaceuticals would over the long run cost1344more money or save more money?1345    Mr. Rechenberg. It would save far more money. We've seen,1346as I mentioned in my opening statement, 300 to 500 percent1347price hikes during a shortage. That's one way we would save1348money, but also, we're paying a lot more every time the1349medicine's not there, and the PE have to be in the hospital1350longer, or you have to have substandard medicine or the1351hospitals have to pay extra staff to take care of people. Over1352the long run, you save much more money than you would otherwise1353because you stop these shortages and you guarantee safer, more1354effective medicine.1355    Senator Warren. Thank you. You know, Americans shouldn't1356have to worry about the quality of their prescriptions, whether1357they're safe to be able to take, whether they're effective,1358what will happen if the supply chain breaks. For me, that's1359reason enough to manufacture right here in the United States1360and using federal contracts to lower those production costs.1361    I think there are a lot more benefits for doing this. That1362is why I have a bill, the Pharmaceutical Supply Chain Defense1363Enhancement Act that would do just that. I hope we can get some1364bipartisan support and get that moving. Thank you very much.1365Again, thank you Mr. Chairman for holding this hearing today.1366    The Chairman. Thanks. Senator Warren, we served on a1367subcommittee together, Subcommittee on Armed Services. We had1368she had a hearing and the individual from DOD tried to explain1369that he couldn't buy American because there's regulation that1370required him to buy foreign, and then, we found out that there1371was no regulation.1372    Senator Gillibrand. I think there's a regulation that says1373to buy the cheapest. There's always a cheap thing, and that's1374the problem that we talked about.1375    The Chairman: He couldn't explain.1376    Senator Gillibrand. He probably didn't know.1377    Mr. Sardella. We have analyzed those costs for specific1378molecules among our industrial base, and we verify that they1379can be produced by U.S. manufacturers an equivalent price.1380What's preventing that is certainty that they will have a long-1381term agreement to supply it so that they can make the1382investment.1383    Then, second, we submitted data for the Congressional1384Budget Office based on this bill that showed one must and think1385of it as one temporal point in time where an adversarial1386country or a foreign manufacturer purposely to drive out, all1387U.S. manufacturers put the price way below the cost.1388    If you look at it on a five-year average, as Andrew said,1389you would save significant dollars because once they drive1390every U.S. manufacturer out, they increase the price, massive1391volatility. It has to be looked at from a budgeting office on a1392five-year average basis. That's not even, to bring in what1393Andrew said, it costs over tens of millions of dollars per1394shortage of drug within a healthcare system. They're incurring1395significant costs of those shortages as well.1396    The Chairman. You know, and I just get followup----1397    Senator Warren. I was just going to say, I get really1398frustrated on this, that people treat risk as if it's free. We1399are paying a price for risk, for the fact that yes, we got it1400right down to the tightest nickel on how to purchase this1401stuff. It's a very fragile system for way, just pay for another1402way. That's a cost.1403    The Chairman. We'll go back to what Senator Warren was1404bringing up. If we had--if we took the DOD and we took the VA,1405right, if we just took those two and they--I'll just take their1406drug buying, would that be enough volume to move volume?1407    Mr. Sardella. You would transform the U.S. generic supply1408chain, and you would also cause a force function for private1409markets to then also now procure from U.S. manufacturers,1410because of the reasons we just said, you don't want a quarter1411of your pharmaceuticals in an FDA violation site. You want to1412have certainty in local response time resiliency. You would1413fundamentally transform our generic supply chain.1414    The Chairman. What percent of the generic drugs that the--1415if the DOD and VA did just their generics, what percent of the1416volume that come into the country, would that be you? Just1417like, is that of 100 percent of generics sold? What percentage1418does DOD of that 100 percent and VA together.1419    Mr. Sardella. Oh, I don't have specifically those numbers,1420but it from a standpoint of moving the market and creating an1421industrial base, 200, 300 medicines into generic would cause a1422significant resiliency base and a U.S. manufacturing base.1423    The Chairman. All right. Then Mr. Sardella, so you've1424worked with companies that have opened up plants----1425    Mr. Sardella. Expanded.1426    The Chairman [continuing]. so have they been able to make1427the price almost equivalent to what's being bought from1428overseas?1429    Mr. Sardella. Correct. With new technology. We're not just1430saying make it the same way. We're through the private1431investment in public from State of Missouri and ASPR, they're1432making it in modernized methods. I give the example, it's like1433they currently make them in batches, the size of this room.1434Now, they make them in equipment that's the size of this table.1435    The Chairman. Do you have what the return on investment is?1436Do you know if--so if you were going to invest, how much would1437it take to open up a plant and how, what would be the how long1438would it take to get your money back? Do you have any idea yet?1439    Mr. Sardella. On some of the drugs, because we're focused1440on expansion because there's 30 billion doses of idle capacity1441in the United States, 30 billion just sitting there. We're1442focused on taking those idle facilities that are already FDA-1443approved. What it means is they can get the drug commercialized1444in less than five years and they get a return on investment in1445three years.1446    The Chairman. Three years. Okay. We actually don't have to1447invest money--I'm a business guy. If you gave me a three-year1448return, I'll do that every day. Right?1449    Mr. Sardella. Absolutely.1450    The Chairman. I mean, so, okay, so number one, we can get1451the cost down and number two, we can get the investor gets a1452return.1453    Mr. Sardella. Correct. The return's so strong that our1454partners are going and getting their own loans to be able to1455expand facilities.1456    The Chairman. What we got to do is go back to what Senator1457Warren said; we got to commit volume.1458    Mr. Sardella. Correct.1459    The Chairman. If just DOD and VA did it, and that's it.1460    Mr. Sardella. It'd be transformational.1461    Dr. Wosinska. Can I just add? It's in maybe 10 percent of1462total volume. I mean, it absolutely would bring some domestic1463manufacturing to the U.S., it would help secure supplies for1464VA, but it's too small of a fraction to really create change in1465the rest of the market. It's not to do it, I absolutely1466encourage you to do it. This is a perfect thing to that, you1467know, very sensible thing to do. We need to think beyond that1468because we need to sort of change the dynamics in the rest of1469the markets in the 90 or so percent, in the markets, to change1470how those markets operate and what they value.1471    The Chairman. Just a caution, I ran a hospital company, and1472I was two percent of the entire healthcare dollar. I focused1473on, you know, I could move all the volume in the whole country,1474I could force everybody to change based on buying, based on1475quality. Everybody had to change. I would just even--because1476nobody would, there's no--I was the biggest committed buyer in1477the VA. I think you're--what you said makes sense, but reality1478is most people are not committed buyers. That's why if we have1479really committed buyers, then I think it'd have a bigger1480impact.1481    Dr. Wosinska. I'm sorry that Senator Warren left because1482Senate Finance actually has a proposal on that that was put1483forward last year, that exactly does this; the idea for the1484most vulnerable supply chains, which are a lot of the generic1485sterile injectables is to create committed contracts, and then1486have add-on payments for choosing reliable manufacturers.1487Absolutely, the same concept. It really would be great to see1488movement on that side.1489    The Chairman. Have any of you done business with the DOD or1490VA?1491    Mr. Paquin. Yes, we've done business with the DOD and the1492VA.1493    The Chairman. Did they care about quality?1494    Mr. Paquin. No. You know, I was going to bring that up. I1495commented earlier about technically acceptable, and I think1496that's a mis defined term in this circumstance. They're not1497considering resilience. For example, they're not considering1498the benefits of supply chain, and they're viewing that drug1499overseas as equivalent to the drug domestically made. I think1500that's the big mistake. I would say that what we could use1501would be a DOD set aside requirement for American made for1502example. I completely agree that the VA could lead the charge.1503    I think you'll find that private hospitals or the1504commercial hospital business that you're familiar with would1505actually follow that lead. I think they're ready to recognize1506the need for resiliency and stability in the supply chain. You1507need that big buyer to step up and start the process. I think1508that's the VA and the DOD.1509    Mr. Sardella. I can confirm what Tony is saying, because we1510are aggregating demand with healthcare systems and retail1511pharmacies knowing that this is a national priority for our1512Nation. They are willing, as he said, and that would give a1513further indication to aggregate demand across their systems to1514procure U.S.-based supply for the benefit of the system.1515    The Chairman. For each of you, if you had a choice, there's1516two different, same drug, and you had one little bottle that1517said, "Made in the United States," okay. The other bottle said,1518"Made in China." How many of you would buy same price? Look,1519they both look really nice. Same little, pretty bottle. How1520many of you would buy China?1521    Mr. Sardella. I might want to disclose that my original1522background is as a toxicologist in this context, I would1523absolutely buy the U.S. medicine.1524    The Chairman. Anybody buy China? No? What if it added on1525there that whether American or Chinese, that it's under an FDA1526violation, however small. There's some website that you can go1527to see what it was. Would that have an impact on you?1528    Mr. Paquin. Yes. Clearly, we would avoid buying anything1529that had an FDA violation. You know, when you think about1530something so sensitive as a drug, right, we're not buying a toy1531or a vitamin. We're buying something that affects our health in1532a very personal way. We'd buy quality.1533    The Chairman. The thing about the buyers in this country,1534Federal Government, hospitals, nursing homes, GPOs, doctors,1535pharmaceutical chains, have you known any of them that1536required--they did it based on quality?1537    Mr. Paquin. No, I regularly do business with all those1538entities, and they don't really require--they may want to, but1539there isn't a method for them to assess that quality as we've1540been describing. There's really no independent way to measure a1541report.1542    The Chairman. Good, but Tony, they could say, "I'm not1543doing it. If you haven't had an FDA inspection within three1544years, I won't do it."1545    Mr. Paquin. They could do it for sure.1546    Dr. Wosinska. Can I add something?1547    The Chairman. Sure.1548    Dr. Wosinska. I have studied generic sterile injectable1549shortages really for 15 years. Transparency often comes up that1550we don't know which manufacturer is reliable, but at the end of1551the day, it's the lack of incentives, and the fact that1552hospitals and GPOs do not fully internalize the harm that comes1553with it. The numbers that Andrew commented on----1554    The Chairman. Can you go through--when you say the harm,1555how would you define the harm?1556    Dr. Wosinska. Yes. The amount of money that hospitals--and1557there was a study, $360 million from additional costs resulting1558from shortages. It seems like a large number. This comes out--1559--1560    The Chairman. Just because of costs.1561    Dr. Wosinska. Right. They have to have additional staff and1562whatnot that comes out to $60,000 per year. That's nothing for1563a hospital. That $60,000 is nothing for a hospital. If you look1564at how much for a day----1565    The Chairman. That's for a day, by the way,1566    Dr. Wosinska. This is for a year, right?1567    The Chairman. I know.1568    Dr. Wosinska. If that's the level of the cost, you know,1569hospitals are very strongly incentivized to buy the cheapest.1570In a sense, it makes sense. These drugs are therapeutically1571equivalent. You're paying for quality, right?1572    The Chairman. We're not paying for quality.1573    Dr. Wosinska. We are not paying for quality. We're not1574paying for quality. I will say that I have to disagree with1575Andrew here. I don't think there's free lunch. If we want to1576have reliability, if we want to have resilience, if we have to1577want to have quality, we will have to pay for it. I think it's1578a--you know, we have to ask ourselves how much are we willing1579to pay for it? But there are ways to do it, but you have to1580change incentives.1581    I think, you know, Civica Rx, I don't know if you're1582familiar with that organization, right? They do a lot of1583homework around where the drugs are made. They have stockpiles,1584they have long-term contracts. Hospitals are not signing up for1585these contracts. They're really wary about this because, oh, my1586goodness, they might actually end up paying more, right? We1587have to change the fundamental incentives, and shift sort of1588how hospitals are thinking about it.1589    The Chairman. Well, the problem--I used to be in the1590business, I just say nobody came to my hospital because I1591served Pepsi over Coke. Nobody came because I did this, you1592know, I had this drug or that drug, or I bought my drugs in the1593United States, or I bought my drugs someplace else.1594    Dr. Wosinska. There isn't accountability for hospitals1595either. If they have a shortage, they point as the1596manufacturer, right? It ultimately ends up with the patient,1597unfortunately.1598    The Chairman. Andrew, when you say that it pays for it,1599have you been able to do a study of what the additional costs,1600additional hospitalization, blah blah blah, any of those1601things? Have you done that?1602    Mr. Rechenberg. Yes. We're currently working on a study to1603get an exact number here. From all the research that we've done1604so far, looking at the productivity costs, the shortage costs,1605and as well as just the worst patient outcomes, whether it's1606delayed care, rationed care, or getting substandard treatment,1607the cost vastly outweighs.1608    We're currently in the process of making a study to get an1609exact number on this, but it is clear already that the long-1610term cost is much, much more savings than it would be by paying1611the marginally more rates in the beginning.1612    Then on top of that, I'll add for this buyer's side, for1613the hospital, because we don't have this mandatory country of1614origin labeling, the hospitals themselves often don't know what1615the supply chain risks are1616    The Chairman. Even if they wanted to do the right thing.1617    Mr. Rechenberg. Exactly. Especially when it comes back to1618the API. They have so little visibility into the quality side,1619they have to go for the price, and that inevitably pushes1620things more offshore.1621    Dr. Wosinska. I can tell you that where it really does pay1622off is for the patient. There was one study that looked at one1623particular shortage, one shortage of a drug, and the fact that1624more patients ended up dying of septic shock because the1625alternative was not available. When you looked at the cost of1626life, and you calculated the number of patients that died, that1627single shortage cost over $13 billion.1628    Senator Gillibrand. The hospital doesn't pay that cost.1629    Dr. Wosinska. Exactly. The hospital does not pay that cost.1630There's a big gap between the----1631    The Chairman. It's worse.1632    Senator Gillibrand. You pay the hospital.1633    The Chairman. That's right. The worst is that we don't pay1634for results like we should pay. We should pay different. Like,1635if somebody doesn't do your car, fix your car, right, you don't1636pay, but every healthcare provider thinks, well, you still have1637to pay. Why?1638    Senator Gillibrand. The problem is, you're talking about1639dynamic scoring, which is not how the hospitals balance their1640budgets. When you do your analysis, you say it's only costing1641them $60,000 a year because they're not obligated to factor in1642all the costs and harm caused to the patient, or to society, or1643to any other stakeholder outside of their bottom line. That's1644the problem. Like, the costs are spread to us. The profits are1645given to the provider.1646    When they're doing their cost-based analysis, they're1647saying, "Well, we are going to go with the cheaper drug." The1648DOD is the same. Every purchaser in the system today has1649multiple factors, but cost is almost always the factor. I1650believe----1651    The Chairman. It's the decision today, not the long-term1652cost.1653    Senator Gillibrand. Correct. No one does dynamic scoring.1654No one actually wants to bear the full brunt of the cost. I1655think part of this Committee's job is to really do all the1656pieces that you've all suggested; country of origin labeling,1657making sure we know the quality upfront, have an incentive as1658you say, to do the quality testing, make sure that the cost, as1659you've decided, Andrew is documented to the world, to the1660patient, to the United States.1661    Then to the other piece of national security that's not1662even you calculable. You can't calculate what will happen if1663we're at war. The risk if we're at war with China and you can't1664get antibiotics into this country and how many millions of1665people die, the cost of that is trillions of dollars. It's1666incomprehensible.1667    The truth is, this is a reason why no one's done this work1668before because the cost is incalculable. I'm really excited1669about the work this Committee's doing, and I think it's1670important.1671    The Chairman. It seems like if you go through the process1672to make movement, the easiest thing is because they report to1673us, DOD and VA, right, if they started buying based on buying1674American, that would move the needle, right? That would move it1675the fastest. The other is why doesn't--we talk about these1676violations, FDA, or the FDA knowing that we only have one1677supplier. Why aren't they doing something?1678    Mr. Sardella. In regards to diversifying?1679    The Chairman. Yes, I mean, why wouldn't they? I mean if1680they're responsible for us staying safe, right?1681    Mr. Sardella. Well, their mandate is to ensure that1682manufacturers comply with CGMP manufacturing practices, and1683that before they even produce those medicines, that they've1684been vetted through analysis of them. Going beyond as to1685managing the supply chain itself and saying how many, that1686would be outside their bounds in regards to what they would1687work on. I would also ask----1688    Dr. Wosinska. Yes----1689    Mr. Sardella. I would also say that--sorry Marta. Just one1690line. I would also say that that strategy also does something1691very different as well. It's a strategy of redirecting as1692opposed to countering, right, as opposed to countering and1693trying to counter India and counter China, which will be very1694resourceful, right? Being able to start with redirecting1695manufacturer through procurement U.S.-based requirements, U.S.-1696based prioritization.1697    Which by the way, we're the only nation that does not1698prioritize their domestic manufacturing source over foreign.1699The ability to do that is a far more higher probability of1700success because you're redirecting, you're not countering,1701which is difficult.1702    The Chairman. Did you want to say something? Okay. Just off1703the top of our head, we can think about the VA, DOD, we should1704have some sort of map. Even if we start, like you said, you1705can't start big, you should even if we start small and then we1706should have higher expectations for all of our buyers.1707    Senator Gillibrand. Demand transparency, I definitely think1708that can require transparency.1709    The Chairman. Sorry, go ahead.1710    Senator Gillibrand. We should require transparency. We1711should require labeling. We should require information. Then,1712that also can move a market because you can shame people into1713not--like if they're not caring where their drugs are coming1714from, and they're not caring about the outcome to their1715patients, you can shame them into better participation.1716    Then, if the DOD and the VA can be the standard bearer or1717the hallmark of success, and show that long-term their costs1718aren't going skyrocketing high, they can then make the case you1719should do these long-term investments, get the quality drugs1720you need.1721    Then pushing Governors and pushing Presidents to invest1722domestically, because the other point you all raised up is that1723most of our adversaries and most of our competitors, they do1724domestic investment. I mean every company in China is wholly1725owned by China. Like, they will do all the baseline1726investments.1727    We can create an investment fund that actually invests in1728domestic production to incentivize it. Even if we don't want to1729create a pot of money, we certainly can create massive tax1730incentives. There's many ways to create carrots.1731    The Chairman. Well, and what if Tony said it's right,1732there's a three-year payback. I mean you don't have to invest a1733dime.1734    Mr. Sardella. Especially, if you're using existing1735facilities, and that's the key.1736    The Chairman. At least short-term, we have plenty of1737capacity.1738    Mr. Sardella. We have over 30 billion doses of capacity.1739    Senator Gillibrand. Also, you can use the Defense1740Production Act to require us to use that capacity.1741    Mr. Sardella. That is correct.1742    Senator Gillibrand. Once we map capacity, if you've already1743done that, we can publish that to say we will then ask the DOD,1744and the VA, and the President to ask each of these1745manufacturers to use all their capacity to begin to ramp up1746domestic production of the top 10 required generic drugs for1747our safety and survival.1748    Mr. Sardella. You have facilities that are highly1749experienced at producing these medicines. They should be1750leveraged first and foremost because they're experts in these1751areas, like the companies that Tony brought up. Before even1752starting up new facilities, we will need, ideally--hopefully,1753we'll be able to open new facilities. Leveraging the incredible1754experience we already have in this industrial manufacturing1755base that is elite and being able to provide them new1756technologies, that's where the investment, I believe, is the1757greatest place.1758    It's about investing and allowing for sustainable1759independence by these manufacturers. We don't want the1760government to continue to have to invest in them, modernize1761their facility, leverage their expertise. Let them invest1762themselves now that there's a market and allow them to be1763sustainable long-term economically to produce these medicines.1764    You've created the demand. Demand investment in1765modernization so they can compete so long-term we don't have to1766revisit this and have to continue to fund it. The industries1767themselves can do it.1768    The Chairman. Great. Okay, go ahead.1769    Dr. Wosinska. Can I comment on transparency? I think it's1770really, really critical. The way I think about transparency is1771who needs what information and what are they going to do with1772it? I think it's really, really critical to ask that question1773because some transparency for the sake of transparency is not1774going to get you anywhere. Transparency can actually sometimes1775backfire.1776    I am a very big proponent about the government having1777transparency. This is how you decide what to prioritize, where1778to invest. This is why it's important for FDA to know that1779manufacturers might have a problem and this buys them time. For1780example, hospitals really want an early warning system of1781shortages. You know what that means? That means that they1782basically have a sign to a stockpile really early, and then FDA1783actually has much less time to try to fix the problem.1784    Where I get really nervous is transparency to consumers.1785I'll tell you why. I actually have a story very similar to1786Peter Baker's story, and it actually involves my mother, if I1787would be allowed to share this story. I've never shared it1788publicly.1789    My mother was diagnosed with cancer in early 2020, and she1790needed to get radiation, and chemotherapy, and it was going to1791be oral chemotherapy. It was a 60-day supply of a pill, and it1792was going to be an old generic, and knowing what I know, I got1793very nervous. I started to--I basically thought; if my mom1794doesn't respond well to this therapy, I will never forgive1795myself because what if that product was not made to1796specification?1797    I actually have access to a lot of information, and I1798looked at who the manufacturer is for this NDC, and I looked,1799you know, where it might be manufactured and what are the1800alternatives. It was really difficult for me, and I have access1801to really top information. You would think that I would be the1802first person to say, "We need to fix it."1803    You know, what I learned from this experience is the1804complete opposite because of what happened next. I went to one1805pharmacy, and I said, "Can you dispense me this NDC?" They1806said, "No, we don't do special orders." I went to another1807pharmacy, I got the same answer. Pharmacies are reimbursed in1808exactly the same way. It's a low business margin.1809    You have one option when you go to a pharmacy. Unless we1810were to fix how pharmacies are reimbursed and how pharmacies1811stock, the patient only has one choice; to pick it up or not1812pick it up. This is not like going to a store where you have1813five shirts and you get to choose one. They don't have a1814choice.1815    By giving this information to consumers where there's1816absolutely no (financial) incentive for a pharmacy to do1817anything about it and respond, that is a recipe for a lot of1818non-adherence. Yes, I would prefer to choose the non-Chinese1819drug over a Chinese drug, but in a pharmacy, I'm not going to1820have that option. It's really, really, really important that we1821either fix the pharmacy reimbursement policy or look for1822solutions elsewhere.1823    The Chairman. Let me give you my response. I really believe1824in transparency, and I'll give you a story. I've run a bunch of1825companies, and you know what every employee wants, they want1826every hospital in the network. That means you get no discounts,1827right? The reality is if I had two plans, and everybody's1828included in a plan that's cheaper with just one hospital,1829include a smaller network.1830    Some people would pick one because they know it, but some1831people would pick a bit more expensive. I actually really1832believe that people, they'll look at it and look, is it going1833to be perfect? No. People buy bad, ugly sweaters sometimes, but1834I believe over time it'll force whoever the pharmacy is.1835    If I walked in, and I had one, and it said if I would1836just--I'd start bugging them. We see it now. We see it with1837people buying America. You know, you can even get on Amazon,1838which still doesn't disclose all country of origin, but you go1839to Amazon now and they have sections. I can tell you, I've1840talked to people that make it America, they put the label on1841made the America, their revenues go up.1842    I believe it's--I agree with you, it's not going to be1843easy. It's not going to be perfect. The information never is1844perfect, if we do it all, it will force people to change. They1845will change. I've seen it in too many businesses. Do you want1846to add anything?1847    Senator Gillibrand. No, you can close us out.1848    The Chairman. I want to thank everybody for being here1849today and participating. I look forward to continue working1850with members across the aisle, down the dais. If any Senator1851has additional questions for the witnesses or statements to be1852added, the hearing record will be open until next Wednesday at18535:00 p.m.1854    I want to thank each of you for being here, and if you have1855any suggestions for either one of us going forward, we are1856going to get this fixed. Thank you.1857    [Whereupon, at 5:01 p.m., the hearing was adjourned.]18581859=======================================================================18601861                                APPENDIX18621863=======================================================================18641865=======================================================================18661867                      Prepared Witness Statements18681869=======================================================================18701871                 U.S. Senate Special Committee on Aging18721873     "Bad Medicine: Closing Loopholes That Kill American Patients"18741875                            October 8, 202518761877                      Prepared Witness Statements18781879                             Tony Sardella18801881    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]18821883                 U.S. Senate Special Committee on Aging18841885     "Bad Medicine: Closing Loopholes That Kill American Patients"18861887                            October 8, 202518881889                      Prepared Witness Statements18901891                              Tony Paquin18921893    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]18941895                 U.S. Senate Special Committee on Aging18961897     "Bad Medicine: Closing Loopholes That Kill American Patients"18981899                            October 8, 202519001901                      Prepared Witness Statements19021903                           Andrew Rechenberg19041905    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]19061907                 U.S. Senate Special Committee on Aging19081909     "Bad Medicine: Closing Loopholes That Kill American Patients"19101911                            October 8, 202519121913                      Prepared Witness Statements19141915                         Dr. Marta E. Wosinska19161917    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]19181919=======================================================================19201921                        Questions for the Record19221923=======================================================================19241925                 U.S. Senate Special Committee on Aging19261927     "Bad Medicine: Closing Loopholes That Kill American Patients"19281929                            October 8, 202519301931                        Questions for the Record19321933                             Tony Sardella19341935                  Ranking Member Kirsten E. Gillibrand19361937    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]19381939                 U.S. Senate Special Committee on Aging19401941     "Bad Medicine: Closing Loopholes That Kill American Patients"19421943                            October 8, 202519441945                        Questions for the Record19461947                         Dr. Marta E. Wosinska19481949                  Ranking Member Kirsten E. Gillibrand19501951    Question:19521953    You have written about how federal transparency initiatives1954will fall short of their goals if purchasers, such as1955hospitals, have no economic or institutional motivation to act1956on such information.1957    How can hospitals be incentivized to consider quality and1958reliability over the cost of drugs?What are some of the1959potential downsides of transparency initiatives should they not1960be executed alongside other initiatives, such as reforming1961economic incentives?19621963    Response:19641965    Transparency initiatives in drug manufacturing often fail1966to achieve their intended goals-not because the information is1967wrong, but because they lack the right incentive structures to1968motivate action. Simply making information available is not1969enough; those who receive it must be both motivated and1970equipped to act on it in ways that align with broader economic1971incentives or institutional structures. Without this alignment,1972transparency efforts become costly nice-to-haves, and may even1973produce unintended consequences that worsen the very problems1974they were designed to solve.1975    To understand which transparency approaches are most likely1976to succeed, it is useful to first examine the main types of1977transparency initiatives and how they interact with underlying1978economic incentives-which often diverge from what serves1979patients best. There are three main types of transparency1980initiatives:1981      1.Government-facing initiatives1982      2.Patient-facing initiatives1983      3.Institutional buyer initiatives1984    Existing government-facing initiatives primarily focus on1985mapping supply chains to identify geopolitical exposure and1986with it identify which drugs require alternative sources in1987which production stages of supply chains. Incentives to act on1988this information will be driven, to a large extent, by Congress1989(by setting out the tools and directives as well as1990appropriating funds to follow through) and the administration1991(by identifying which existing tools they can deploy).1992    Patient-facing initiatives include adding to the pharmacy1993label either the Country of Origin or a rating of product1994quality. The goal of these efforts is to shift markets through1995patients as they begin to shop for versions that presumably are1996less likely to have product defects. There are two intertwined1997reasons, however, why such initiatives could go astray. First,1998without reforms for how pharmacies are reimbursed, patients1999have limited options in how they respond to sourcing2000information, other than deciding not to fill the prescription.2001Second, neither measure is strongly correlated with actual2002product quality, making potential misinterpretation by patients2003particularly concerning.2004    When it comes to institutional buyers, efforts have focused2005largely on creating transparency in the hospital and clinic2006sector, not the retail pharmacy sector (where the consumer-2007facing measures seem to have gotten more attention). In the2008hospital space, there are two main types of transparency2009initiatives:2010      
 Supply chain reliability assessments and;2011      
 Early warning systems.2012    The data needed to support these transparency initiatives2013varies depending on the goal. Supply chain reliability2014assessments focus on evaluating the long-term dependability of2015a manufacturer's supply chain over the duration of a multi-year2016contract, using indicators such as plant redundancy, inventory2017controls, raw material sourcing, risk management practices, and2018historical shortage records. In contrast, early warning systems2019aim to detect abrupt risks or disruptions in the near term-2020drawing on real-time signals like new shortage posts on the2021ASHP website, reports of product discontinuations, sudden order2022limits from any wholesaler, newly announced adverse FDA2023inspection findings, recalls, or reports of supply2024interruptions in global logistics. The economic incentives for2025these two transparency approaches diverge sharply.2026    Early warning systems enable hospitals to continue2027prioritizing low-cost procurement without regard for long-term2028supply reliability, only shifting tactics and rapidly2029increasing orders at the first hint of trouble. This dynamic2030offers clear advantages to well-resourced institutions equipped2031to act quickly, which in turn has driven commercial vendors to2032develop various rapid alert tools. Yet this competitive2033hoarding erodes the advance notice intended for regulators,2034limits FDA's ability to intervene, and accelerates the very2035shortages these transparency initiatives are supposed to help2036prevent.2037    In turn, purchasing in times of relative stability-whether2038through spot buys or contracts-is dominated by the strong2039incentive to choose the lowest-cost option. There is little to2040push hospitals or group purchasing organizations toward2041factoring in supply chain reliability or resilience, as most do2042not directly bear the costs when a disruption occurs. While2043there are tools and frameworks available to inform more2044resilience-focused procurement, hospitals have options but2045typically lack a meaningful reason to use them, absent clear2046financial rewards or contractual requirements.2047    Policymakers would be wise not to fuel early warning2048systems for hospitals but to support supply chain reliability2049efforts in two ways: by supporting the related transparency2050efforts and by creating economic incentives.2051    Policymakers can promote supply chain reliability in drug2052procurement by ensuring purchasers have access to meaningful,2053actionable information. Changes to current reporting2054requirements-such as requiring suppliers to specify not only2055who a drug is "manufactured for" but also who it is2056"manufactured by"-would make it far easier to track products to2057facilities that do not have a good compliance record.2058Supporting FDA's Quality Management Maturity (QMM) initiative2059is another foundational step, as public disclosure of QMM2060ratings would highlight manufacturers that invest in robust2061quality and operational practices, allowing buyers to consider2062reliability and performance in addition to price during2063contract negotiations.2064    Policymakers should complement transparency efforts by2065pursuing payment and contracting policies that create2066meaningful economic incentives for hospitals and manufacturers2067to prioritize supply chain reliability. Current proposals-such2068as those from the Senate Finance Committee and HHS-would2069authorize financial rewards or penalties based on a buyer's or2070supplier's record of ensuring supply continuity, product2071quality, or timely response during shortages. By tying payment2072rates directly to reliable performance-or imposing2073disincentives for repeated supply failures-these initiatives2074aim to move the market beyond cost alone, encouraging long-term2075investments in resilience throughout the supply chain.20762077    Question:20782079    In your research you recommend a broad strategy when it2080comes to deciding which drug supply chain resiliency efforts to2081prioritize and support. More specifically, you recommend that2082the Administration for Strategic Preparedness and Response2083shift from a fixed list of essential drugs toward a longer list2084that stratifies drugs by how critical they are, their reach,2085and how vulnerable they are to disruption.2086    Could you say more about how this longer, stratified list2087would better enable the federal government to support2088resilience efforts?20892090    Response:20912092    When it comes to supporting drug supply chain resilience2093efforts, setting priorities is important because of the scale2094and complexity of the drug supply chain. There are well over20952,000 approved prescription drugs, spanning a large array of2096ingredients, manufacturing technologies, and production sites2097that collectively produced 187 billion tablets and capsules for2098American patients in 2024, not counting other dosage forms. The2099lack of economic incentives in the market coupled with the2100magnitude of what it would take to secure all drug supply2101chains requires that the government prioritizes where to2102engage.2103    Prioritization is not only needed but possible because not2104all drugs are equally important. For example, some drugs are2105lifesaving in emergencies, such as epinephrine auto-injectors2106for severe allergic reactions or insulin for patients with type21071 diabetes. Others, like certain chemotherapy agents or2108antibiotics, are critical for treating serious infections and2109cancers. Drugs for chronic conditions, such as2110antihypertensives and statins, affect large patient populations2111but interruptions are not generally life threatening,2112especially in the short term.2113    U.S. government prioritization began with the FDA's list,2114created under a 2020 Executive Order, which identified over 2202115drugs and medical countermeasures most needed for immediate and2116life-saving medical use in hospitals. The Administration for2117Strategic Preparedness and Response (ASPR) subsequently2118narrowed this to 86 drugs, focusing more tightly on those2119deemed essential for acute care. Most recently, at the2120direction of the administration, ASPR further narrowed the2121target to about 26 drugs, selecting those for strategic2122stockpiling initiatives.2123    Budget and time constraints have made this narrowing2124process unavoidable. With limited new funds appropriated by2125Congress for comprehensive supply chain resilience, the2126administration's current efforts are focused on building and2127maintaining a six-month supply of active pharmaceutical2128ingredients (APIs) for this small subset of drugs. If2129policymakers pursue costlier or more complex resilience2130strategies such as supporting new domestic manufacturing of API2131and all its inputs, not even all 26 may be covered, and2132prioritization within this short list would become necessary2133under a limited budget.2134    A broader, stratified list would give policymakers2135flexibility to adjust investments as resources change. If2136Congress allocates additional funds, efforts could expand2137without reworking the prioritization framework. Such a list2138would guide readiness planning, clarify what additional money2139could achieve, and allow for a quick response as budget2140realities evolve.2141    In practice, criticality and reach remain fairly stable for2142most products unless major therapeutic advances occur;2143vulnerability can change quickly. Initial reviews should focus2144on identifying drugs with the greatest health impact and reach.2145Detailed, regularly updated vulnerability assessments can then2146be reserved for a larger list of higher-priority drugs,2147concentrating resources where they matter most and avoiding2148exhaustive analysis of less critical products.2149    To build a practical, ranked drug framework, it is also2150essential to factor in resilience-building cost and capacity2151constraints. The main cost drivers are often tied not to the2152price of the drug itself, but to the logistics of production-2153such as the potency of the active pharmaceutical ingredient2154(affecting how much can be handled in existing facilities if2155capacity is limited) and the specialization required of2156manufacturing processes. These realities can force tradeoffs,2157requiring policymakers to choose between covering more drugs2158that fit within common, flexible plant capacity, or2159prioritizing medicines that do not demand highly specialized2160production setups and supply chains.21612162    Question:21632164    Your work highlights why drug manufacturers outsource2165chemical synthesis for drug manufacturing to China. Chemical2166synthesis can create toxic materials and could be quite harmful2167to the environment. You recommend that the U.S. fund chemical2168industrial parks as part of onshoring efforts.2169    Could you say more about how funding domestic industrial2170parks could help to reduce American reliance on chemicals2171synthesized in China?21722173    Response:21742175    Efforts to derisk pharmaceutical supply chains from China2176require developing alternative sources for critical chemical2177inputs. Diversification does not necessarily mean full2178onshoring; establishing production capacity in allied, cost-2179competitive countries can often achieve greater efficiency2180while mitigating geopolitical risk. However, for strategically2181sensitive or high-risk materials, selective onshoring can2182enhance national resilience.2183    An important part of derisking supply chains from China is2184at the earliest, unregulated steps: key starting materials,2185intermediates, and auxiliary chemicals like reagents and2186solvents used in synthesis. This is where U.S. drug supply2187chain exposure is the greatest.2188    The reliance is driven by Chinese firms' strong cost2189advantage through significant economies of scale coupled with2190lower labor, energy, and transportation costs. Historically, a2191lax regulatory framework allowed Chinese producers to operate2192with higher environmental and workplace risks than Western and2193Indian competitors, enabling their cost advantage. Following2194the Beijing Olympics, China began to reckon with environmental2195pollution and began raising standards and investing in greener2196manufacturing methods.2197    The question is then, how should the U.S. respond if it2198chooses to onshore chemical manufacturing. Environmental2199deregulation alone will not succeed in shifting production to2200America because China will continue to hold an insurmountable2201cost advantage driven by lower energy, lower labor, and deep2202economies of scale. In fact, a race to the bottom on2203environmental standards would require the U.S. to set2204regulations lower than even India and China are willing to2205accept-countries that have already rejected the dirtiest2206manufacturing practices as economically and socially2207unsustainable.2208    The future of chemical manufacturing lies in advanced green2209chemistry technologies that represent the next generation of2210global competitive advantage. These approaches are more2211efficient, create higher value-added products, and generate2212more skilled, higher-paying jobs than legacy chemical2213processes.2214    Chemical industrial parks offer a more sustainable and2215scalable alternative to traditional one-company-at-a-time2216funding. By co-locating multiple manufacturers within shared2217infrastructure-centralized wastewater treatment, utilities,2218analytical testing facilities, and logistics-these parks2219significantly lower the per-unit overhead for each producer.2220This model is widely used in Europe, India, and certain U.S.2221states.2222    Parks also create resilience: if one tenant exits, another2223can step in using the same infrastructure, protecting the2224government's investment and maintaining supply continuity. For2225policymakers working within budget constraints, industrial2226parks provide a mechanism to support multiple products and2227processes simultaneously, rather than betting on individual2228companies or isolated facilities.2229    Centralized environmental controls-shared wastewater2230treatment plants equipped to handle toxic intermediates, air2231quality monitoring, and hazardous waste management-enable cost-2232efficient pollution control far more effective than individual2233facilities can achieve. This allows domestic chemical2234production to meet U.S. environmental standards without2235imposing prohibitive costs on each manufacturer, reversing the2236historical trend of exporting pollution alongside production.22372238                        Senator Raphael Warnock22392240    Question:22412242    Rural health providers in Georgia rely on access to2243affordable drugs to treat patients, including older Americans.2244Due to financial vulnerability, rural providers have limited2245capacity to build a stockpile of drugs in preparation for2246supply shortages.2247    How can Congress work to ensure rural hospitals and clinics2248can provide affordable and safe drugs to seniors in times of a2249drug shortage crisis?2250    What kind of policy changes would incentivize domestic drug2251suppliers to develop generic drugs and improve aging rural2252populations' access to prescription drugs?22532254    Response:22552256    It is indeed the case that rural providers, especially2257those not part of a large health system, have severely limited2258ability to withstand supply disruptions. This stems partly from2259scale: they often lack staff dedicated to supply chain2260management, operate on thin financial margins that leave little2261room for inventory investment, and cannot leverage the2262purchasing power of larger systems. Independent rural2263facilities face a particularly acute challenge: unlike small2264hospitals within integrated systems that can at least access2265their parent organization's negotiating leverage and shared2266contracts, truly independent rural providers must navigate2267procurement entirely on their own.2268    A 2023 STAT article illustrated this dynamic during the2269national shortage of carboplatin and cisplatin. Large health2270systems weathered the disruption easily, using their purchasing2271power and strong supplier relationships to stockpile supplies.2272Small, often rural, independent oncology clinics could not-they2273lacked these advantages and were sidelined by allocation2274systems favoring historical bulk orders. Many small clinics had2275to ration care, send patients to distant centers, or delay2276lifesaving treatment altogether, intensifying distress and2277risking poorer outcomes for vulnerable populations. The2278shortage exposed systemic flaws in drug procurement practices2279and underscored the urgent need for reforms to ensure more2280equitable access to essential drugs.2281    Analytics and data systems play a major role in the2282disparities seen during chemotherapy drug shortages because2283large hospital systems typically have sophisticated analytics2284tools that allow them to monitor drug inventory, predict2285shortages, and swiftly respond by stockpiling or reallocating2286supplies across their networks. These systems provide2287actionable data on usage rates, inventory levels, and shortage2288signals, enabling proactive strategies like early purchasing or2289redistribution before official shortage notifications are2290issued. In contrast, small independent clinics often lack2291access to such analytics and automation, making it difficult2292for them to anticipate shortages or compete for limited supply-2293further widening the gap in access during crises like the2294carboplatin and cisplatin shortage.2295    Expanding the use of advanced analytics with small2296providers has the potential to help these providers better2297anticipate drug shortages, optimize inventory, and negotiate2298more effectively with suppliers, reducing vulnerability during2299supply chain disruptions. However, the cost, technical2300complexity, and need for specialized staff pose significant2301obstacles. Many small clinics operate with tight budgets and2302limited personnel, making it difficult to adopt and maintain2303sophisticated data systems even if the technology itself is2304available. They will always be behind the curve and therefore2305last in line.2306    For most small and rural clinics, greater resilience may2307come from direct preparedness strategies, such as regional2308stockpiling programs, collaborative purchasing efforts, and2309supportive policy reforms that redistribute essential drugs2310during crises.2311    One such recent effort was CMS establishing a separate2312payment system for small independent facilities, many of them2313rural, to help them create and maintain a buffer inventory of2314essential medicines. This authority is based on the same legal2315mechanism used for N95 mask stockpiling during the pandemic.2316The program allows qualifying hospitals to receive targeted2317Medicare payments specifically for the costs of purchasing and2318storing a reserve supply of designated drugs, with eligibility2319focused on hospitals most likely to face financial and2320logistical barriers to stockpiling.2321    However, this authority is limited by statutory language2322that restricts reimbursement to only "reasonable costs." The2323"reasonable costs" constraint ties reimbursement only to2324Medicare's share of a hospital's business, meaning that2325hospitals must maintain buffer inventory sufficient to serve2326their entire patient population-including Medicaid, uninsured,2327and commercially insured patients-but can only be reimbursed2328for the Medicare portion of those inventory costs.2329Additionally, the costs of tracking, monitoring, and reporting2330on buffer stock inventory are not reimbursed under the program.2331These limitations mean that the payments offered may not fully2332cover the financial and operational burdens of creating and2333maintaining a substantial buffer stock, limiting participation.2334    To address these limitations, Congress should strengthen2335the existing CMS framework by amending the statutory authority2336that currently restricts reimbursement to "reasonable costs"2337tied only to Medicare's share of hospital business.2338Specifically, Congress should authorize CMS to provide full2339reimbursement for buffer stock costs regardless of payer mix,2340recognizing that hospitals must maintain inventory for all2341patients, not just Medicare beneficiaries.2342    Additionally, the statute should be amended to support a2343fixed payment model rather than the current submit-a-bill2344approach, which would reduce administrative burden and make2345participation more attractive to resource-constrained rural2346hospitals. The fixed payment should also cover the costs of2347tracking, monitoring, and reporting on buffer stock inventory-2348costs currently excluded from reimbursement.2349    Congress and CMS can also influence how wholesalers2350allocate scarce products during shortages. Wholesalers2351typically allocate based on historical purchasing patterns over2352a short lookback period (often 3-6 months), which2353systematically disadvantages small rural providers with2354variable ordering patterns. A rural hospital that orders 1002355units of a critical drug every 12 months may receive zero2356allocation if the lookback period captures only the months2357between orders. Meanwhile, large integrated health systems have2358a significant advantage: they can bypass wholesalers entirely2359and purchase directly from manufacturers during shortages,2360securing supply outside the allocation system altogether-an2361option unavailable to small independent hospitals.2362    To level the playing field, CMS could mandate that2363wholesalers use longer, smoothed lookback periods as a2364condition of participation in Medicare or Medicaid programs-for2365example, calculating allocations based on 12-24 month rolling2366averages rather than recent 3-6 month snapshots. Additionally,2367Congress could direct FDA or CMS to establish minimum fairness2368standards for allocation methodologies during shortages,2369similar to how other federal agencies regulate allocation of2370scarce resources. Finally, allocation formulas should be2371reformed to use objective metrics tied to patient population2372served, licensed bed capacity, or facility size, rather than2373pure historical purchasing volume.2374    Beyond influencing allocation during shortages, Congress2375can also make the entire pharmaceutical supply chain more2376reliable by reducing the risk and frequency of supply2377disruptions themselves. Legislative actions may include2378requiring redundancy and diversification among manufacturers,2379strengthening federal oversight for manufacturing quality and2380inspections, incentivizing domestic production, and supporting2381proactive stockpiling at the national level. These measures2382would help prevent supply shocks from occurring and limit their2383scale, ensuring that small rural hospitals are not perpetually2384vulnerable to access disparities even when major disruptions2385occur.23862387    Question:23882389    Hurricane Helene shut down Baxter International's North2390Carolina facility and caused a nationwide intravenous (IV)2391fluid shortage. Hospitals across the country were forced to2392ration their IV fluids until the company restored its2393manufacturing capability. I sent a letter to the Food and Drug2394Administration and the Department of Health and Human Services2395leadership pushing them to provide relief during this crisis.2396    How could Congress leverage technology like predictive2397analytics to strengthen the resilience of domestic drug supply2398chains in times of natural disasters?23992400    Response:24012402    Predictive analytics can be an invaluable tool for2403monitoring supply chains and anticipating shortages, but their2404use during a crisis-such as the IV fluid shortage following2405Hurricane Helene-can compound existing vulnerabilities. When2406predictive analytics signal an emerging scarcity, large health2407systems often respond by accelerating stockpiling or bulk2408purchasing, which can deplete inventory faster and outcompete2409smaller hospitals for limited resources. This dynamic can leave2410rural and independent providers even more exposed, intensifying2411the very shortages that technology is aiming to mitigate.2412    Better, real-time tracking of saline usage at both2413inventory and patient levels would significantly improve a2414hospital system's ability to allocate scarce resources during a2415shortage. Saline and other IV fluids are FDA-approved drugs,2416yet many hospitals treat them as supplies rather than2417medications. This classification outside the pharmacy system2418means administrations and usage are often not barcode-scanned2419or tracked like medications, making it difficult for health2420systems to know where the product is being used or how much.2421    To address this tracking problem, CMS could require health2422systems to reclassify and track IV fluids as FDA-approved drugs2423rather than allowing them to be handled outside pharmacies as2424untracked supplies. Enhanced analytics could identify which2425units or patients have the greatest clinical need, optimize2426distribution, and reduce waste or unnecessary stockpiling2427throughout the network.2428    While real-time tracking and robust analytics enable2429smarter, more equitable allocation of supplies during a2430shortage, hospitals also need practical and systemic strategies2431to prepare for major disruptions. For high-volume products like2432saline, maintaining a buffer inventory is particularly2433challenging given the heavy usage, physical volume, and cost of2434storage. Hospitals must adopt additional safeguards and2435diversify their approaches beyond stockpiling to prepare for2436potential shortages.2437    For hospitals, avoiding sole-source contracts is a key2438step. Reliance on a single supplier for saline or other2439essential fluids can dramatically widen the impact of any2440supply disruption, whereas maintaining relationships with2441multiple vendors lessens vulnerability-enabling continued2442provision of urgent services even during supply chain shocks.2443Recent shortages have exposed disparities based on with which2444manufacturer a hospital contracts. During the 2024 saline2445shortage following Hurricane Helene, hospitals contracting with2446Baxter received only 40-60% of normal allocations, while those2447using B. Braun experienced minimal disruption as B. Braun's2448facilities were unaffected.2449    Manufacturers can help by investing in more flexible or2450'fungible' production systems that allow rapid pivots to2451different bag sizes or formulations as market demand and2452regulatory priorities shift. Facilities able to quickly change2453production lines or scale outputs for alternative product sizes2454improve overall supply chain resilience, reducing the risk and2455magnitude of shortages from specific disruptions. Encouraging2456manufacturers to adopt these adaptive capabilities can increase2457redundancy and responsiveness, ultimately protecting the entire2458healthcare system during crises.2459    Congress and the administration can play vital roles in2460supporting alternative hospital preparedness strategies for2461saline shortages-using both regulatory "sticks" and financial2462"carrots." On the regulatory side, policymakers could2463strengthen antitrust enforcement and oversight to discourage2464anticompetitive practices, such as exclusive or sole-source2465contracts that undermine supply resilience and limit access2466during disruptions. On the incentive side, Congress could2467expand payment models or grant programs to encourage hospitals2468to diversify suppliers and invest in logistics for alternative2469sourcing.24702471=======================================================================24722473                       Statements for the Record24742475=======================================================================24762477                 U.S. Senate Special Committee on Aging24782479     "Bad Medicine: Closing Loopholes That Kill American Patients"24802481                            October 8, 202524822483                       Statements for the Record24842485             Association for Accessible Medicines Statement24862487    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]24882489                 U.S. Senate Special Committee on Aging24902491     "Bad Medicine: Closing Loopholes That Kill American Patients"24922493                            October 8, 202524942495                       Statements for the Record24962497                American Hospital Association Statement24982499    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]25002501                 U.S. Senate Special Committee on Aging25022503     "Bad Medicine: Closing Loopholes That Kill American Patients"25042505                            October 8, 202525062507                       Statements for the Record25082509        American Society of Health-System Pharmacists Statement25102511    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]25122513                 U.S. Senate Special Committee on Aging25142515     "Bad Medicine: Closing Loopholes That Kill American Patients"25162517                            October 8, 202525182519                       Statements for the Record25202521                  Continuus Pharmaceuticals Statement25222523    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]25242525                 U.S. Senate Special Committee on Aging25262527     "Bad Medicine: Closing Loopholes That Kill American Patients"25282529                            October 8, 202525302531                       Statements for the Record25322533                     Doctors For America Statement2534    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]25352536                 U.S. Senate Special Committee on Aging25372538     "Bad Medicine: Closing Loopholes That Kill American Patients"25392540                            October 8, 202525412542                       Statements for the Record25432544                            Lupin Statement2545    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]25462547                 U.S. Senate Special Committee on Aging25482549     "Bad Medicine: Closing Loopholes That Kill American Patients"25502551                            October 8, 202525522553                       Statements for the Record25542555                  Lupin - Coral Springs, FL Statement25562557    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]25582559                 U.S. Senate Special Committee on Aging25602561     "Bad Medicine: Closing Loopholes That Kill American Patients"25622563                            October 8, 202525642565                       Statements for the Record25662567                   National Taxpayers Union Statement25682569    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]25702571                 U.S. Senate Special Committee on Aging25722573     "Bad Medicine: Closing Loopholes That Kill American Patients"25742575                            October 8, 202525762577                       Statements for the Record25782579                             Teva Statement25802581    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]25822583                        [all]