Hearings to examine made in America, focusing on restoring trust in our medicines.

1[Senate Hearing 119-263]2[From the U.S. Government Publishing Office]34                                                        S. Hrg. 119-26356                       MADE IN AMERICA: RESTORING7                         TRUST IN OUR MEDICINES8=======================================================================910                                HEARING1112                               BEFORE THE1314                       SPECIAL COMMITTEE ON AGING1516                          UNITED STATES SENATE1718                    ONE HUNDRED NINETEENTH CONGRESS1920                             FIRST SESSION2122                               __________2324                             WASHINGTON, DC2526                               __________2728                           NOVEMBER 19, 20252930                               __________3132                           Serial No. 119-193334         Printed for the use of the Special Committee on Aging3536[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]3738        Available via the World Wide Web: http://www.govinfo.gov3940                                __________4142                   U.S. GOVERNMENT PUBLISHING OFFICE4362-492 PDF                  WASHINGTON : 20264445-----------------------------------------------------------------------------------4647                       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.........................................................     27071                           PANEL OF WITNESSES7273Allan Coukell, Chief Government Affairs & Public Policy Officer,74  CivicaRx, Lehi, Utah...........................................     475Tom Neely, Chairman of the Board, Oxford Pharmaceuticals,76  Birmingham, Alabama............................................     677Patrick Cashman, President, USAntibiotics, LLC, Bristol,78  Tennessee......................................................     779Eric Edwards, MD, Ph.D, CEO, PHLOW-USA, Richmond, Virginia.......     98081                                APPENDIX82                      Prepared Witness Statements8384Allan Coukell, Chief Government Affairs & Public Policy Officer,85  CivicaRx, Lehi, Utah...........................................    2986Tom Neely, Chairman of the Board, Oxford Pharmaceuticals,87  Birmingham, Alabama............................................    3388Patrick Cashman, President, USAntibiotics, LLC, Bristol,89  Tennessee......................................................    4190Eric Edwards, MD, Ph.D, CEO, PHLOW-USA, Richmond, Virginia.......    519192                        Questions for the Record9394Allan Coukell, Chief Government Affairs & Public Policy Officer,95  CivicaRx, Lehi, Utah...........................................    5796Tom Neely, Chairman of the Board, Oxford Pharmaceuticals,97  Birmingham, Alabama............................................    599899                       Statements for the Record100101Composition of OSCS contaminated heparin occuring in 2008102  Statement......................................................    63103Heparin at the Center of the Storm Statement.....................    69104National Consumers League Statement..............................    71105White Paper: The 2008 Heparin Contamination Crisis Statement.....    73106107                       MADE IN AMERICA: RESTORING108                         TRUST IN OUR MEDICINES109110                              ----------111112                      Wednesday, November 19, 2025113114                                        U.S. Senate115                                 Special Committee on Aging116                                                    Washington, DC.117    The Committee met, pursuant to notice, at 3:41 p.m., in118Room 216, Hart Senate Office Building, Hon. Rick Scott,119Chairman of the Committee, presiding.120    Present: Senator Scott, Tuberville, Johnson, Moody,121Gillibrand, and Alsobrooks.122123                 OPENING STATEMENT OF SENATOR124                      RICK SCOTT, CHAIRMAN125126    The Chairman. The U.S. Senate Special Committee on Aging127will now come to order. This hearing is about something we've128all used, and every American relies on - access to safe,129affordable, and high-quality medicines. Generic drugs are a130lifeline for millions of Americans and are a market miracle131that allows for accessible treatments. That is why it is so132important that we have transparency into their supply chains133and full confidence in their production.134    As we know from the FDA's own people, they have allowed135importation of drugs from facilities that are noncompliant136simply because the potential for shortage--which we should be137making these drugs here in this country in the first place. In138our previous two hearings on this topic, witnesses have139highlighted the ways that we can bring back domestic production140in an affordable, market driven way.141    Today, nearly 80 percent of the active ingredients in our142prescription drugs come from foreign sources. That is foolish.143That means we depend on our adversaries for the very medicines144our families and seniors need to survive. It is not England. It145is not Germany. It is not Japan. It is our adversaries.146    Consumers, pharmacies, and big buyers like hospitals don't147even know the full extent of where those drugs are made or what148is happening inside the plants that make them because we don't149have country of origin labeling requirements. We have seen the150results of that dependence in contaminated drugs, dangerous151recalls, and shortages that force doctors and patients to152ration care.153    It is unacceptable that the most advanced country in the154world can't ensure a steady, safe supply in basic medicines for155its own citizens. The solution for this is very simple, we must156make drugs in America again. The health and safety of Americans157is too important to leave in the hands of other nations,158especially our adversaries that like Communist China. When we159manufacture here at home, we can control quality, strengthen160oversight, and protect patients.161    We also get the benefit of creating good paying jobs and162growing our economy. Today's witnesses are proof that American163manufacturing works. These companies show that it is possible164and profitable to make safe, affordable medicines in the U.S.165However, they also face challenges that Washington has helped166create.167    Red tape at the FDA delays approvals and drives up costs,168something I and many of our colleagues are interested in169fixing. By the way, I want to thank the Ranking Member,170Gillibrand, because she has been a complete partner in the171report we put out, in these hearings to make sure we get172change. Current procurement rules for Government agencies,173large purchasers of generic drugs reward the cheapest overseas174bidder rather than the safest or the most reliable product to175the detriment of American manufacturing.176    The difference in cost is often negligible, and foreign177governments manipulate their pricing to undercut American178manufacturers. The result, a broken system that leaves our179patients vulnerable and our businesses at a disadvantage.180    The Federal Government should lead by example. The VA,181Medicare, and our military health programs should prioritize182American made medicines. Unfortunately, they don't. Taxpayer183dollars should support our American workers, not fund companies184in China with ties to forced labor and that don't meet our185safety standards.186    This isn't just an economic issue. It is a matter of187national security. Americans should never have to wonder188whether their blood pressure medication, their insulin, or189antibiotic was made safely. We can do better, and we must do190better. Together we can build a stronger, safer, more self-191reliant medicine system here in America.192    I now would like to recognize Ranking Member Gillibrand for193her opening statement, and again, I want to thank her for being194a complete partner in getting this report out and these195hearings.196197                 OPENING STATEMENT OF SENATOR198             KIRSTEN E. GILLIBRAND, RANKING MEMBER199200    Senator Gillibrand. Thank you, Mr. Chairman. Thanks for201calling the hearing, and thank you to our witnesses for202testifying today. We are very grateful for your contribution. I203look forward to continuing our conversation about how we can204improve the quality and reliability of our generic drug supply.205    This is an essential issue for our Committee to examine as206many aging Americans, including over 53 million Medicare Part D207enrollees, rely on at least one generic drug to treat a wide208range of medical conditions. Unfortunately, the supply chain209for these crucial drugs remains vulnerable to disruption, and210we consistently witness issues with the quality of foreign drug211products causing key medicines to go into shortage. It is212unacceptable.213    Every American should have access to safe and affordable214generic drugs. Particularly, as older adults navigate the215complex, difficult health conditions that they face, they216shouldn't have to cope with worsening symptoms, skipping doses,217or trying to stretch medicines further because they can't218afford them. This is an existential issue for a lot of older219Americans and for New Yorkers.220    I have heard from many New Yorkers about this issue. One of221my constituents from Brooklyn told me: "for the past month and222a half, I have been unable to receive my generic medication223because of shortages. Much of my day is spent going back and224forth between pharmacies and my doctor's office playing phone225tag when I should be doing my actual job. I have even had to226spend money on third party services to help me find my227medication when I am unable to. The entire process is228exhausting, demoralizing, and dehumanizing."229    A key factor driving up these supply chain disruptions is230that due to the extreme cost pressures and concentrated231sourcing, key starting materials, active pharmaceutical232ingredients, and finished dosage form generic drug products are233increasingly made outside the United States. We have seen the234number of U.S. facilities that formulate generic drugs fall by23527 percent since 2013.236    In the same timeframe, we have seen a 38 percent decrease237in the number of domestic facilities producing active238pharmaceutical ingredients. In fact, 83 percent of the top 100239generic drugs taken by American consumers now have no U.S.240based source of API, and another 11 percent only have one241domestic source of API.242    This means we increasingly depend on countries like India243and China, where the industry has grown for these upstream244materials that represent the most vulnerable chokepoint in the245supply chain. This is particularly a problem because recent246instability in geopolitics and global trade practices is247compounding our already limited operational oversight and248control over foreign sourcing and manufacturing of these key249materials.250    The U.S. decline in manufacturing has not only led to251domestic job losses, but it also represents vulnerability in252the supply chain and increasingly poses a risk to our Nation's253public health preparedness and national security.254    To ensure Americans have a reliable supply of safe and255affordable drugs, Congress will need to work to make targeted256investments in biotechnology research and infrastructure to257manufacture these key ingredients in the United States.258    In addition, we have to examine the underlying economic259dynamics in the current marketplace and adjust incentives to260fix the race to the bottom problem in generic drug pricing,261which can drive manufacturing outside the U.S. and cause262companies to stop production of certain drugs and chemicals263altogether.264    I look forward to hearing from our witnesses today to265discuss these challenges and the barriers facing this industry.266I am eager to work with Chairman Scott and the Committees of267jurisdiction as we address these issues, strengthen our generic268drug supply, and bolster our public health preparedness and269national security.270    The Chairman. Thank you, Ranking Member. I would like to271welcome our witnesses, all of whom are leaders in the efforts272to bring drug manufacturing back to the United States, ensure273that every medicine we take is safe, affordable, and made to274the highest standards, so now let me turn it over to the275Ranking Member to introduce our first witness.276    Senator Gillibrand. Thank you, Chairman Scott. I want to277move to introduce Allan Coukell. Mr. Coukell is the Chief278Government Affairs and Public Policy Officer at CivicaRx, a279not-for-profit organization. CivicaRx was created by the U.S.280health systems in 2018 to address drug shortages by281manufacturing quality, essential medicines at sustainable282prices.283    Mr. Coukell served on the board of the Reagan Udall284Foundation for the FDA and was a Founding Board Member and Vice285Chair of the Medical Device Innovation Consortium. Mr. Coukell,286you may begin your testimony.287288          STATEMENT OF ALLAN COUKELL, CHIEF GOVERNMENT289     AFFAIRS & PUBLIC POLICY OFFICER, CIVICARX, LEHI, UTAH290291    Mr. Coukell. Thank you. Chairman Scott, Ranking Member292Gillibrand, and members of the Committee, I appreciate the293opportunity to speak with you today. My name is Allan Coukell.294I am a pharmacist, and I lead public policy for CivicaRx.295    Civica is a nonprofit generic drug company created to296prevent drug shortages and to ensure that American patients297have a reliable supply of essential medicines. We currently298supply 60 health systems around the country with more than 50299injectable drugs. Over seven years, we have shipped more than300240 million vials.301    To do this, we work with a range of manufacturing partners,302giving preference to U.S. sourcing. Civica has a rigorous303quality oversight process for its suppliers involving in-person304facility audits and ongoing quality reviews. This is a unique305feature of our supply model.306    Also unique is that we maintain a 6-month buffer inventory307of every drug, and we offer the same price to every purchaser.308Civica's own newly built manufacturing facility is in309Petersburg, Virginia, funded partly with U.S. Government310support, this is a state-of-the-art facility for manufacturing311sterile injectable drugs with the ability to make about 90312million vials a year.313    We have dozens of generic drugs in development for this314facility. Civica has a no China policy in our supply chain,315both for finished drugs and for active ingredient, unless there316is no other supply available.317    Civica drugs are chosen by pharmacists and physicians from318participating hospitals, and they are chosen because they are319at high risk of shortage. These are products that are the320bedrock of inpatient care, and surgery, and emergency medicine,321antibiotics, anesthetics, blood thinners, sedatives, pain322medications.323    While these are essential medications, they also tend to be324very low cost. It is precisely because generic drugs are so325inexpensive that manufacturing has been steadily moving to326India and China. Make no mistake, low prices are the principal327barrier to onshoring generic drug manufacturing.328    It costs millions of dollars to bring a generic injectable329drug to market, and it takes several years. It requires a330costly manufacturing facility and teams of people, R&D331manufacturing, laboratory quality, and so on. With many332injectable drugs selling for less than a dollar a vial, U.S333production awfully--isn't simply financially viable.334    If we want sustainable domestic production, we have to be335comfortable that it is worth paying slightly more to have a336safe and secure domestic industry. We should provide extra337payments to hospitals that take quality into account, along338with domestic sourcing and buffer inventory.339    A bipartisan Senate Finance Committee discussion draft340takes this approach, and since generic drugs account for one or341two percent of hospital spending, such a program would have a342negligible impact on overall health costs.343    In combination with these long-term market fixes, Congress344should invest now in an insurance policy so that we can deliver345these drugs as soon as they are needed. Because it takes years346to bring a product to market, we shouldn't wait until after a347foreign supplier fails or cuts us off to start developing the348drugs we need.349    We also can't expect companies to invest in products if350they won't recover their costs. Report language in the Senate351Fiscal Year 2026 Labor H Bill instructs ASPR to partner with352the private sector for this purpose, and Congress should fund353this activity.354    For a modest one-time expense, we can ensure that domestic355manufacturers are ready to go as soon as they are needed. You356may note here that I have been talking more about finished drug357products, vials or tablets, than about active pharmaceutical358ingredients.359    Sometimes, we focus on API because that is where our360dependence on China is greatest, but it won't do us any good to361bring API back to the U.S. if we don't have a viable market for362domestic finished drugs.363    We have to get that part right. I want to point out that364developing a drug for an existing manufacturing facility is365faster and cheaper than building an entirely new facility, but366when new facilities are needed, and they will be for certain367antibiotics and cancer drugs, it will require investments of368hundreds of millions of dollars and probably Government support369with capital, as well as some assurance of sustained demand.370    With modest changes to the current system, generic drugs371can be produced cheaply and at scale in the United States, but372we have to commit to making a market that works. Thank you for373your attention and welcome your questions.374    The Chairman. Thank you for your testimony. Now, I would375like to turn it over to Senator Tuberville to introduce the376next witness.377    Senator Tuberville. Thank you, Mr. Chairman. I am proud to378introduce our--my witness here, one of my constituents, Mr. Tom379Neely, the Chairman of Oxford Pharmaceuticals based in380Birmingham, Alabama. Mr. Neely is also partner at Prost381Companies, a family investment firm located in Huntsville,382Alabama, where he is directly responsible for the strategic383direction and daily management of Oxford.384    He is also involved in the firm's real estate investment,385including Broadwest, and the firm's manufacturing business,386including Dorsey Trailer Manufacturing Company, located in387Elba, Alabama, Mico Boat Trailer Company, located in Braidon,388Florida, and Brown Precision Company in Huntsville.389    Tom has extensive experience in executive management,390strategic planning, mergers and acquisitions activity, and391financial oversight, and by the way, did I mention he is a392graduate of Auburn University? War Eagle--go ahead.393394        STATEMENT OF TOM NEELY, CHAIRMAN OF THE BOARD,395          OXFORD PHARMACEUTICALS, BIRMINGHAM, ALABAMA396397    Mr. Neely. Thank you, Chairman Scott, Ranking Member398Gillibrand, and distinguished members of the Committee. I399appreciate this hearing very much.400    My name is Tom Neely, and I am Chairman of Oxford401Pharmaceuticals, a Birmingham, Alabama based manufacturer of402low cost, high quality, solid dose generic medicines taken403daily by millions of our seniors. This is a personal matter for404me. My wife has mid-stage Parkinson's disease. Oxford405manufactures one of her generic medicines, but we cannot406purchase it in Birmingham. Hers is manufactured by Chinese407company.408    Oxford broke ground on a world-class facility in 2015 and409began selling generics into the U.S. market in 2019. This410period was marked by U.S. generic drug makers going out of411business, but we invested $130 million.412    At Oxford, we feel that high-quality generic drugs can and413should be manufactured domestically. We currently make 13414generic management drugs for conditions including blood415pressure, mental health, and mild pain relief. When I say we416manufacture these medicines, that is indeed true. We transform417our raw ingredients into finished oral tablets. We weigh,418blend, compress, coat, package the tablet while adhering to an419end-to-end, very comprehensive CGMP compliant quality process.420    Unfortunately, in today's domestic market, offshore421manufacturing of these generic medications has dangerously422weakened our supply chain, with China and India controlling the423market. These foreign competitors are heavily subsidized by424their governments, and studies repeatedly have shown quality of425their finished products is inferior to domestic produced426generics.427    In addition, the three big distributors, PBMs, and428insurance companies care nothing about quality but focus on429price. Ten of our drugs have no other U.S. owned and operated430manufacturer, and three are classified as essential medicines.431These proven generic drugs have been on the market for decades.432    On a weighted average of Oxford products, we sell 100433tablets for $1.50. Medicare reimbursement for the same quantity434and product set averages $13.25, most of which the middleman435captures. India and China are aggressive with subsidies. Tax436rebates, lower land and labor costs, expedited approvals, and437billions in grants give India and China companies a distinct438price advantage.439    U.S. plants operate under continued FDA inspection, and we440welcome inspections because American patients live and die on441the quality of our products. We believe that it is our moral442obligation to produce the highest quality generic medicines443possible. Many foreign plants go years without inspection.444    When FDA inspectors do visit foreign facilities, they found445appalling practices which would have shut down a U.S.446manufacturer. At one India generic maker, staff destroyed447documents with acid and shredders to hide falsified safety448data. It is within these constraints that Oxford is only449operating at 55 percent of our capacity.450    We could easily quadruple our monthly output and double our451workforce if we also--and we also have land and technical452capability to build an onsite integrated API facility, but we453need policy certainty, and most importantly, committed demand.454Federal policy can help create the environment that we need to455undertake this expansion. I urge the Committee to support four456concrete and practical actions.457    First, affirm generic pharmaceuticals as a national458security industry under Section 232 investigation. Second, give459the procurement priority to legitimate domestic manufacturers460through the VA, DOD, and Medicare programs. Reward end-to-end461domestic manufacturing through long-term Government contracts.462    Third, support investment in domestic pharmaceutical463manufacturing and API production through targeted grants and464tax incentives, and fourth, require complete country of origin465information on labeling. Patients deserve to know where their466medicines are manufactured.467    Managing mid-stage Parkinson's is hard enough without468worrying about the safety of my wife's medications. The four469solutions mentioned will be vital in changing the landscape of470generic pharmaceutical manufacturing in this country. Thank471you.472    The Chairman. Thank you, Mr. Neely. Now, I would like to473introduce Patrick Cashman. Mr. Cashman is the President of474USAntibiotics, the last domestic manufacturer of amoxicillin.475    Mr. Cashman has decades of experience in the pharmaceutical476industry, leveraging international partnerships and holding477senior leadership positions at globally recognized478pharmaceutical brands.479    Based in Tennessee, he oversees the R&D, quality,480manufacturing, regulatory affairs, and other teams that work to481provide the American people with a life--with lifesaving482antibiotics. Please begin your testimony.483484           STATEMENT OF PATRICK CASHMAN, PRESIDENT,485             USANTIBIOTICS, LLC, BRISTOL, TENNESSEE486487    Mr. Cashman. Chairman Scott, Ranking Member Gillibrand,488distinguished members of the Committee, thank you for the489opportunity to testify. My name is Patrick Cashman, and I serve490as President of USAntibiotics, headquartered in Bristol,491Tennessee. We are the last remaining domestic manufacturer of492amoxicillin, the most prescribed antibiotic in the United493States.494    My colleagues and I are in the business of the three Fs,495formulating, finishing, and filling the highest quality496amoxicillin in the United States. We never import finished form497drugs, and we have never and will never purchase our active498pharmaceutical ingredients from China or India. Our facility499has supplied this critical medicine to American patients for500more than 40 years.501    Until 2008, every dose of amoxicillin came--in this country502was produced at our Bristol plant. Then came the years of503escalating subsidized competition from Indian and Chinese drug504makers. By 2020, our production lines had gone dark, our assets505were in bankruptcy, and the United States had become entirely506dependent on foreign sources for the most prescribed antibiotic507in America.508    In 2021, private American investors rescued the facility509because they recognized the national security imperative of510domestic antibiotic production. Over the past four years, we511have revived the plant, rehired and expanded our workforce, and512restored America's ability to manufacture this lifesaving513medicine.514    Seniors account for a disproportionate share of antibiotic515prescriptions. Adults over 65 receive antibiotics at rates 50516percent higher than younger Americans. Hip replacements,517cardiac procedures, cancer surgeries, all life extending518interventions that depend on reliable antibiotic access.519Pneumonia alone causes over 50,000 Americans annually, with520seniors representing the overwhelming majority of deaths.521    Without antibiotics, routine surgeries become lethal522gambles, and common infections become death sentences. Yet the523U.S. remains dangerously exposed. China produces approximately52445 percent of the active pharmaceutical ingredients used in525amoxicillin today and supplies the majority of API used by526Indian manufacturers. The result is most amoxicillin on527pharmacy shelves represents Chinese chemistry with Indian528finishing.529    We source exclusively from trade agreement compliant530European partners, but we control only about five percent of531the U.S. market, despite having capacity to meet 100 percent of532the national demand as we once did. If our facility were to533close permanently, it would take at least five years and534hundreds of millions of dollars to rebuild domestic capacity.535    That timeline assumes favorable regulatory and economic536conditions that are far from guaranteed. More realistically,537rebuilding could take a decade. Here is the paradox that538brought me before you today. In 2021, our amoxicillin facility539was rescued from bankruptcy by Jackson Healthcare, one of the540largest healthcare staffing firms in the country.541    They have invested tens of millions in private capital to542restore domestic manufacturing capacity. Because of that543ownership structure, USAntibiotics is now excluded from544competing as a prime contractor for federal amoxicillin545contracts structured as small business set asides.546    Since January 2023, we have sold roughly $1 million to the547Federal Government through the federal supply schedule. During548that same period, the Department of Health and Human Services549spent approximately $40 million on foreign origin amoxicillin.550That contract was structured as a small business set aside,551thereby excluding America's only domestic manufacturer from552competing. The irony is devastating.553    The company that saved domestic capacity cannot sell to the554Government that claims to prioritize supply chain security.555Meanwhile, small business re-packagers import Chinese and556Indian drugs and slap American labels on the bottles. To557revitalize domestic manufacturing of generic antibiotics and to558protect our healthcare supply chain, I respectfully offer the559following recommendations.560    First, create procurement pathways that allow domestic561manufacturers of critical medicines to compete regardless of562parent company size. Second, define domestic manufacturing to563exclude simple repackaging of foreign products. Third,564establish a strategic national stockpile procurement preference565for genuine domestic manufacturers.566    Fourth, provide long-term purchasing agreements that enable567capital investment and workforce retention. We are not asking568for subsidies or handouts. We are asking that when the569Government buys antibiotics, it prioritizes genuine American570manufacturing.571    USAntibiotics stands ready to secure America's antibiotic572supply chain. We have the infrastructure, we have the573expertise, and the commitment, but we need Congress to align574procurement policy with national security reality. Thank you575for attention. I welcome your questions.576    The Chairman. Thank you, Mr. Cashman. Next, I would like to577introduce our final witness, Dr. Eric Edwards. Dr. Edwards is578the CEO of Phlow, a domestic drug ingredient manufacturer579working to secure the supply chain for medications. With580extensive experience in the pharmaceutical industry, Dr.581Edwards understands the Nation's acute reliance on foreign582generic medications.583    As CEO of Phlow, Dr. Edwards has spearheaded Phlow's584partnerships with federal agencies like the Department of585Health and Human Services and Department of War to shore up our586supply chains and address the critical need for drug ingredient587manufacturing in the United States. You may give begin your588testimony. Thanks for being here.589590             STATEMENT OF ERIC EDWARDS, MD, PH.D,591              CEO, PHLOW CORP., RICHMOND, VIRGINIA592593    Dr. Edwards. Chairman Scott, Ranking Member Gillibrand, and594distinguished members of the Committee, thank you for the595opportunity to testify on a matter that directly impacts the596health and well-being of millions of Americans, namely our597Nation's growing dependence on fragile foreign pharmaceutical598supply chains and resulting drug shortages that continue to599threaten patient safety, public health, and national security.600My name is Eric Edwards.601    I am a physician, scientist, and co-founder of Phlow Corp,602a leading American pharmaceutical company created to advance603the domestic development and manufacturing of critical604medicines and help reshore our medicine supply chain. I also605continue to serve as a volunteer paramedic in Virginia,606providing care in my local community where, during an607emergency, the consequences of drug shortages are most acutely608felt.609    In my own clinical experience, there have been moments when610critical drugs, such as epinephrine for allergic emergencies,611were simply unavailable. Substituting or improvising can mean612the difference between life and death. Our pharmaceutical613dependence is not just a public health concern, but rather a614national security threat.615    If conflict disrupt Asian trade routes or trigger export616bans, the U.S. could lose access to medicine ingredients needed617for critical care, for oncology, for infectious disease618treatments. Furthermore, military readiness could be severely619compromised by disruptions in the supply chain as purposeful620adulteration or export bans on key drug ingredients could also621leave our warfighters without vital medicines.622    Over the past few years, Congress has taken significant623steps to secure the rare earth mineral industrial base,624including by expanding the national defense stockpile. That625level of urgency is required for APIs. Just as rare earths626underpin critical technologies, APIs underpin the entire pharma627supply chain, and without them, we cannot make a single628critical medicine.629    Phlow was created to help solve this problem. In630partnership with the U.S. Government, we have built a state-of-631the-art advanced manufacturing campus in Virginia designed to632domestically produce APIs at both small and large scale.633Through our groundbreaking partnership with the Administration634for Strategic Preparedness and Response, Phlow is developing635and supplying a broad catalog of essential APIs.636    For each program, Phlow reconstructs the chemistry, sources637starting materials domestically or from allied nations, and638leverages state-of-the-art in development and manufacturing639approaches such as continuous manufacturing to drive efficient,640higher yielding production, cost competitiveness, and a641reduction of our environmental impact, all on U.S. soil.642    To date, we have completed five API development programs,643filed four drug master files with the FDA, and have a dozen644additional API programs in various stages of development. We645are also proud to support the DoD/DOW in strengthening the646warfighter supply chain. Importantly, we worked with the U.S.647Government to conceive of and build the Nation's first648strategic active pharmaceutical ingredient reserve, or SAPIR649Program, designed to function as a national security buffer for650medicine supply chains.651    Through SAPIR, we are working to maintain an inventory of652ingredients for the most essential medicines and precursor653chemicals identified by the Federal Government, helping to654protect Americans during future public health emergencies until655we can make these medicines on U.S. soil once again.656    Despite considerable progress, the onshoring movement657remains fragile. For this transformation to succeed, certainty,658focus, and sustainability are essential. No company, no matter659how mission driven, can sustain long-term domestic production660without predictable demand and multi-year commitments.661    America must invest in additional advanced manufacturing662capacity. Several key policy enablers are also required. First,663to prevent future shortages and secure our supply chain, the664Government must create a comprehensive long-term plan, as well665as support a centralized authority to align policy and funding,666while bringing stability for patients and predictability for667manufacturers.668    Second, the market will not shift back to the U.S. if669buyers of essential medicines remain structurally rewarded for670choosing the lowest immediate cost, even when those savings671come at the expense of long-term security and patient safety.672    Third, to build enduring resilience, the Administration and673Congress must resource these programs with multi-year674contracts, similar to how we support defense and energy675infrastructure. This allows U.S. manufacturers to plan, to676invest, and to scale with confidence.677    Fourth, we must level the playing field and ensure that678domestic manufacturers can compete fairly against foreign679producers who benefit from heavy tax subsidies, lacks of680environmental and labor standards, and currency manipulation,681advantages that artificially suppress prices and distort global682markets.683    Finally, as previously recommended by this Committee, it is684critical that Congress prioritizes work to close the Acetris685loophole. This loophole breaks the connection between made in686America and the actual location of pharmaceutical ingredient687manufacturing, enabling continued dependence on foreign API688supply chains--even in federal purchasing programs intended to689prioritize domestic production.690    If we fail to act decisively, the next crisis will not be691hypothetical. The shortages our great nation has been coping692with have shown us the harm they can cause. However, if we693succeed in creating a durable, competitive, and secure domestic694pharmaceutical manufacturing industrial base, we will have695restored one of the most critical pillars of national696resilience.697    I thank this Committee for your leadership and shining698light on this issue. Pharmaceutical supply chain699vulnerabilities are not inevitable. They are a product of700choice. Together, we can choose to build a safer, more701resilient, and more self-reliant future for all Americans.702Thank you, and I welcome additional questions.703    The Chairman. Thank you. I am comfortable that we are going704to see big change. I mean, we are going to--you know, we are705going to see a plan, a supply chain plan, and we are also going706to get legislation passed that is going to require a country of707origin for ingredients and for manufacturing, so let me turn it708over to questions. We will start with Senator Johnson.709    Senator Johnson. Thank you, Mr. Chairman. Again, I just710want to applaud you for holding these hearings. I think they711are probably, you know, if not the most important, some of the712most important hearings we are holding in this Congress. I want713to thank the witnesses for the solid testimony and solid714recommendations.715    Now, it is interesting I met with Dr. Patrick Soon-Shiong716yesterday, a man of incredible accomplishment, but one of the717things he did, he is the founder of American Pharmaceutical718Partners. I mentioned this hearing, and he said, well that is719you know, similar to what happened in 2008 with heparin.720    This is not a new issue. We had contaminated heparin back721in 2008 coming from China. It was on purpose. It was722contaminated with a cheaper ingredient that could not be723detected by normal measurements, and I see one of our witnesses724shaking their head, but I will ask you about it, but I would725like to enter into the record.726    I have got a white paper I think written by API--APP. One727by the American Health and Drug Benefits, and then one from the728Science Director, European Journal of Pharmaceutical Sciences,729which we have talked about this.730    Senator Johnson. Mr. Coukell, you were shaking your head.731What--describe this. Again, this is nothing new. This happened732in 2008 and here we are in 2025. We are describing the same733problem which we have not addressed.734    Mr. Coukell. You are exactly correct, Senator. In 2007,7352008, somebody in China figured out how they could spoof the736standard test for the active ingredient in heparin. They did so737for economic reasons.738    We call it economically motivated adulteration, and they739sold defective drug into the United States. That led to a kind740of realization about how dependent we are on those foreign741supply chains. FDA was given new authorities, the inspectional742framework was rejiggered, but structurally----743    Senator Johnson. We solved the problem, right? We fixed it?744    Mr. Coukell. Structurally we are still headed in the wrong745direction. Civica actually has heparin with U.S. API. Most of746the heparin comes originally from the intestinal mucosa of747pigs. China has a big swine herd and most of the world's748heparin comes from China.749    Civica has heparin API from the U.S., but it is more750expensive than the Chinese heparin, so you know, if we are751going to fix the problem, we have to be willing to source from752the U.S.753    Senator Johnson. Let's talk because I want to go back to754the precursor chemicals. A new term I have--the key starting755materials. Is that the same thing?756    Dr. Edwards. Yes. Precursor chemicals, even going back all757the way to petrochemicals, are the chemical starting materials758that feed into the intermediates and ultimately the active759pharmaceutical ingredients.760    Senator Johnson. How many of those key starting materials,761precursor chemicals are there? I mean, are we talking about762hundreds? Are we talking about a few dozen?763    Dr. Edwards. No, thousands and they are--the majority are764made in China.765    Senator Johnson. That is a refining process?766    Dr. Edwards. Correct----767    Senator Johnson. There are literally thousands. I mean, are768there a smaller batch of general categories and then specific769types within those categories?770    Dr. Edwards. I think it is important to note for this771Committee--and thank you, Senator, for raising this--that there772are thousands of drugs in our supply chain themselves, and it773is really critical for us as a nation to prioritize. We must774focus. We cannot boil the ocean. We must secure our industrial775base, focusing on those critical essential medicines that are776prioritized by criticality, vulnerability, and reach.777    I would say there is a smaller subset that we can identify778linked to a smaller group of active ingredients that are779necessary to sustain the health of our population, because780there are some medicines that have no therapeutic alternative,781and others where we are not as concerned about the supply chain782failing because alternatives are readily available.783    Senator Johnson. You know, so one of the key precursor784chemicals is oil itself, correct? Then we have plant based.785Would that be considered, you know, things that are extracted786from plants, or from bacteria, or from algae, or from--I mean,787can you just describe that chain starting from the most basic788all the way up to API and then to the final drugs?789    Dr. Edwards. Sure. Certain key starting materials are790derived from the petrochemical industry. Some, ironically, are791derived from the rare earth mineral industry. There is a792connection there.793    Some of these starting materials are synthesized to create794solvents or reagents like toluene or benzene that we require in795order to manufacture these active ingredients. Still others can796be built leveraging synthetic biology, to your point, Senator.797    For example, one of our active pharmaceutical ingredients798where we could not source the key starting material in any799domestic location, we partnered with a company to leverage a800synthetic biology approach or fermentation to help actually801manufacture that starting material, which is one way to do it802more cost competitively, so across the spectrum, there is a803variety of chemical sources.804    Some are synthetically derived. Some are biotechnologically805derived. Regardless, it starts with mapping and knowing where806they are coming from and focusing and prioritizing in order to807ensure that we get a start somewhere.808    Senator Johnson. If I could just real quick, Mr. Chairman,809because I want to go quick to Tom Neely. What are your raw810materials? Because you said you wanted to create the capability811to produce API, so your raw materials are still API from where?812    Mr. Neely. Well, the one I am speaking of comes from China.813Of the 13 product families that we produce, two come from814China, and everyone else comes from outside the United States,815but it is Europe mainly.816    Senator Johnson. Again, because you are compounding these817things or you are turning them into drugs, probably have a818greater sense of quality control, unless they are doing819something like they did with the heparin, where they disguised820the adulteration.821    Mr. Neely. To me, it is all about vertical integration and822the synergies you get from vertical integration. If you are823able to build an API plant right next to a manufacturing plant,824you are going to have some cost savings. That is what it is825going to take because China is so cheap.826    Senator Johnson. Again, my guess, I know, Mr. Chairman, you827are all over this, is we require labeling to know exactly where828not just the API comes from but precursor chemicals.829    I think that will radically change because people will830demand complete U.S. supply chain for their drugs. They will831demand it, and they will pay a higher price. By the way, drugs832are not--particularly generic drugs are not that high a spend833in terms of our overall medical bill, price tag, so.834    Mr. Neely. Senator Johnson, you are hitting the nail on the835head because if I am buying an API from Europe, for example,836but they are getting their precursor from China, it defeats the837purpose.838    Senator Johnson. Right. Thank you, witnesses. Thank you,839Mr. Chairman.840    The Chairman. Ranking Member Gillibrand.841    Senator Gillibrand. Thank you, Mr. Chairman. In this series842of hearings, we have heard about a variety of incentives to843help support domestic manufacturing, such as targeted grants,844low interest loans, tax incentives.845    From your company's perspective, what is the most impactful846economic incentive that would determine how you choose to847invest and operate in the U.S.? What is the most significant848factor currently limiting your ability to operate in the U.S.?849How do current procurement rules shape the market as a race to850the bottom?851    How would purchasing and procurement signals from the852Federal Government impact domestic manufacturing capability? We853can start with Tom and go across.854    Mr. Neely. Thank you, Ranking Member Gillibrand. For me, it855is all about volume. Keep in mind that one dose at the factory856that we work in costs a penny and a half. We have to add857volume, not price. Price is secondary, but it is really to858maximize the capacity of our plant.859    We have to operate 24/7. Today, we have the capability of860producing 1.8 billion doses annually, and what right now we are861doing is one billion, and because the distributors are focused862just on price, so there needs to be a little bit of a break863there, and in my mind, and I am not an economist, but in my864mind, if we had a system very similar to sugar, for example,865because we cannot produce today all the domestic demand.866    If we had a carve out, a marketplace where you had867priority, and if we are producing in the United States and we868fulfill our total demand, that would help us tremendously.869    Senator Gillibrand. Interesting. Allan.870    Mr. Coukell. Thank you, Senator. I mentioned that we have a871couple of dozen generic drugs in development for our facility.872Some of those are products that are selling right now at prices873that frankly in the U.S. you couldn't buy an empty glass vial874and fill it with sterile water for that price.875    We are developing these products, but we don't expect to876sell them unless and until there is a drug shortage. As Mr.877Neely says, if you have a pharmaceutical manufacturing878facility, you would like to run it full. That makes it879efficient and amortizes the cost of all of your personnel and880quality over more units.881    There are a lot of drugs that at today's prices we can make882competitively in the U.S., but for those very low cost drugs,883which are also some of the most essential products, we have got884to create a consistent demand for U.S. products.885    Senator Gillibrand. Mr. Cashman.886    Mr. Cashman. Thank you, Senator Gillibrand. The Federal887Government, in the case of amoxicillin, has structured all888recent contracts as small business set asides, and this policy889exists for good reasons, helping small businesses compete890against larger corporations.891    When applied to critical medicines with severe supply chain892vulnerabilities, it produces negative consequences for893industry, taxpayers, and patients. USAntibiotics would have894closed permanently without Jackson Healthcare's rescue from895bankruptcy in 2021. No one else stepped up.896    No private equity firm saw a profitable opportunity. No897pharmaceutical company wanted to enter a low margin generic898antibiotics market. Jackson Healthcare viewed this acquisition899as a national security imperative, not a money making900proposition. Because now with this patriotic investment, we are901effectively barred from selling to the Federal Government as a902prime contractor.903    The Government's rules prevent only American manufacturers904from competing while allowing foreign competitors, often905subsidized by their own government, to dominate federal906procurements.907    Senator Gillibrand. Dr. Edwards.908    Dr. Edwards. Thank you, Ranking Member Gillibrand, for this909question. First and foremost, you all may have seen today the910U.S., China, and Economic Security Review Commission finally911released their annual report calling for exactly what Senator912Johnson spoke to relating to urging the disclosure of country913of origin for all APIs and key starting materials.914    I think that is really, really important from a policy915perspective, but the central obstacle in restoring the916reliability of our pharmaceutical supply chain is not a lack of917data here. It is actually a lack of aligned incentives.918    The market will not shift back to the United States if the919buyers of essential medicines, including hospitals, clinics,920wholesaler intermediates, GPOs, remain structurally rewarded921for choosing the lowest immediate cost, even when those savings922come at the expense of long-term security and patient safety.923    Candidly, information about quality sourcing and supply924chain fragility is important, it is critical, but it is little925more than a warning label if purchasers are neither financially926supported nor contractually required to act on those labels.927    To change outcomes, federal entities should adopt928procurement policies that value supply chain reliability and929quality. Strategic investment in domestic sourcing helps save930lives by strengthening national health security, reducing drug931shortages, and mitigating the potential future for the wide932disruptions they can cause.933    Senator Gillibrand. Thank you. Thank you, Mr. Chairman.934    The Chairman. Senator Tuberville.935    Senator Tuberville. Thank you, Mr. Chairman. Gentlemen,936thanks for being here. Mr. Neely, you mentioned in your937testimony the need for federal procurement reform. Do you938currently sell to the VA or the DOD?939    Mr. Neely. We do, but it is a slow process right now. We940need to see a lot of growth in that area. It is a very941important channel for our products. It starts, I believe, with942the 232, and then it migrates into changes in a few policies of943the VA, and DOD, and Medicare, quite frankly, so that we can944source the VA and the DOD effectively. At the same time, we945maximize the capacity of our operation.946    Senator Tuberville. Is this a bid process?947    Mr. Neely. There is two parts to it. There is FSS, which is948the Federal Supply Schedule, and we have seen growth there.949Now, we have bid unsuccessfully on several opportunities.950    We have been shut out to date. The last bid we got shut out951by a firm that is Chinese American, and that is partnered with952India American. Now, they followed the policy, so I am not953saying that they didn't. There is gray area in the policy, but954if it could be clearer and give us the opportunity, and level955the playing field, we would have won that bid.956    Senator Tuberville. You said that in your opening statement957that you could quadruple your production. You know, what would958you need to do that?959    Mr. Neely. We have a facility set up so that all we would960need is about $18 million of capital expenditure and equipment.961The plant is available for additional packaging lines and962granulation processing.963    All we need is $18 million. Now, we have $130 million964invested in the plant right now, but it comes down to a965business decision and a return on investment.966    If we could get to that point, we would increase our967capacity from 180 million doses a month to over 600 million968doses a month, but right now all we are doing is selling 100969million doses a month because the distributors all care about970just cost. That is it.971    Senator Tuberville. Thank you. Mr. Coukell. Is that how you972pronounce that?973    Mr. Coukell. Senator, Coukell.974    Senator Tuberville. Coukell, okay. Your commitment to975domestic manufacturing is a no China policy, is that correct?976    Mr. Coukell. Unless the product is not available anywhere977else.978    Senator Tuberville. Yes. What changes to the market price979do you think are the most important to make U.S. generic drug980production financially viable?981    Mr. Coukell. Thank you, Senator. As I mentioned, there are982some injectable drugs that with today's prices are financially983viable now. There are drugs that are selling at, you know, at984$0.30, $0.40, and those aren't financially viable in the U.S.985    We need some system where purchasers select for quality,986select for domestic manufacturers, and if that costs a little987bit more, we probably need to make them whole for that cost.988    Senator Tuberville. Thanks, Mr. Chairman.989    The Chairman. Thank you, Senator Tuberville. Mr. Neely990let's talk about inspections, so do they--does the FDA tell you991when they are going to inspect you?992    Mr. Neely. No.993    The Chairman. Okay. What if they walked in and found a994violation, what would happen?995    Mr. Neely. Depending on the severity of that violation, if996we received a 483, we would be closed, and a 483 is against the997law. John Schultz, our President, and I would probably be998indicted.999    The Chairman. The FDA often announces foreign inspection1000weeks in advance. It gives manufacturers plenty of time to1001prepare. Just recently, the FDA found an Indian facility in1002violation citing flying birds, skittering lizards, and roaming1003cats in the right of the manufacturing plant. If that happened1004to you, what would happen?1005    Mr. Neely. We would be closed. The difference is right now1006in India, since we receive so much generic product from India,1007that all they do is either they move their operation to another1008plant and swap the different medications produced, or they1009threaten the United States by saying if you close this plant,1010you are going to incur a shortage of product. That is the1011national security issue that we face today.1012    The Chairman. Have you ever heard of the FDA waiving a1013violation? Would they waive a violation for you if it was going1014to cause a shortage?1015    Mr. Neely. No, sir.1016    The Chairman. Have you heard them ever waive a violation1017for a foreign manufacturer?1018    Mr. Neely. Anecdotally, I have heard it in the press.1019    The Chairman. Mr. Coukell, how does Civica's model serve to1020limit shortages?1021    Mr. Coukell. Thank you, Senator. We do a number of things1022that are different from the traditional generic supply chain.1023It starts with long-term commitments. The hospitals that1024partner with Civica commit to multi-year fixed-volume1025contracts. We in turn provide that commitment to our suppliers.1026That creates a level of stability that doesn't usually exist in1027the generic drug business.1028    The Chairman. You have to commit to price to that.1029    Mr. Coukell. We commit to price as well.1030    The Chairman. Yes----1031    Mr. Coukell. That is right. That lets companies know that1032they are going to have market share, lets them invest in1033quality. That gives them a commitment to that product. Another1034thing that we do that is unique is we target a six-month buffer1035inventory of every drug.1036    The reason we do that is if somebody drops out of the1037market, then we can draw down on that inventory while somebody1038is making new batches, because it takes a while for companies1039to ramp up production, even if they have FDA approval to make1040that drug. We also do a really rigorous quality oversight1041process of our suppliers.1042    We are going out actually visiting their facilities,1043walking the floors, doing an audit, looking at their records,1044and then we do that on an ongoing basis to ensure that we are1045choosing suppliers that are less likely to have a failure to1046supply in the future.1047    The Chairman. Thank you. Mr. Cashman, what would happen to1048our Nation's supply of antibiotics if your plant were closed?1049    Mr. Cashman. Chairman Scott, we would be completely1050dependent on Indian and China. All of the API comes from either1051China or India, with the exception of one producer in--well,1052several producers in Europe. With our plant closing, there1053would be no finished dosage forms whatsoever produced in the1054United States.1055    The Chairman. How many months or years of supply of1056amoxicillin do we have in the country? Do you have any idea?1057    Mr. Cashman. No, sir. I don't know that. What I can comment1058on is we keep a year's worth of API supply at our facility, and1059we have about a year's worth of finished goods products in our1060facility as well.1061    The Chairman. Does the FDA inspect your facility?1062    Mr. Cashman. Yes, it does.1063    The Chairman. Okay. If you had flying birds and lizards,1064what would happen?1065    Mr. Cashman. We would be shut down.1066    The Chairman. Would they care if there was a shortage?1067    Mr. Cashman. Excuse me?1068    The Chairman. Would do you think they would care if there1069was a shortage--?1070    Mr. Cashman. Chairman Scott, no, I don't think they would1071care.1072    The Chairman. Dr. Edwards, why is it so important that we1073make active drug ingredients or APIs right here in the United1074States?1075    Dr. Edwards. The active pharmaceutical ingredients are the1076components of the drug that give that medicine the therapeutic1077effect. Some might say it is the most critical component, given1078that definition. For us, we have lost this industrial base over1079four to five decades now.1080    It has gotten to the point where, in many cases abroad, we1081rely on a single source outside the United States to produce1082the medicines that our seniors and Americans rely on every1083single day to treat a variety of acute and chronic issues.1084    For us, this truly is a matter of national public health1085security, but it is also a matter of national security as our1086war fighters on the battlefield have to deal with the fact that1087they may be having to utilize a drug that is made with1088ingredients coming from a potential foreign adversary. It is1089simply unacceptable.1090    The Chairman. Mr. Neely, is it too much to ask that plants1091don't have flying birds and skittering lizards?1092    Mr. Neely. No, sir, it is not, and I think it is important1093to state that quality is not cheap. For every $1.00 of expense1094that we spend, $0.38 is spent on quality. What I am seeing is--1095--1096    The Chairman. Say that again.1097    Mr. Neely. Every $1.00 of expense that is spent in our1098plant, $0.38 is based on quality--is spent on quality. What I1099am seeing is our foreign competition is cutting their cost so1100that they can come up with the lowest price possible to sell to1101the distributors to get the contracts or get the formulary.1102    Senator Gillibrand. Related. Drug manufacturers around the1103globe are frequently the target of cyber-attacks. These attacks1104are perpetrated for a wide range of reasons by competitors,1105adversarial nations, even non-state actors, and can cause1106disruptions in the supply chain and impact the availability of1107key drugs and their components.1108    Which link of the supply chain is most vulnerable to cyber-1109attacks, and in what ways does cyber resilience protect1110domestic drug production? What types of measures does your1111company take to promote cybersecurity?1112    How much does this cost out of your operating budget? For1113Mr. Coukell directly, how can new and existing domestic drug1114manufacturers engage with CISA, the FBI, DHS, and other federal1115authorities for robust cybersecurity protections? You can start1116Mr. Coukell.1117    Mr. Coukell. Thank you, Senator. I think it is an important1118risk to flag. We often think about what if a country were to1119cutoff our supply, but you can shut down a pharmaceutical plant1120the way you can shut down any business with a cyber-attack or a1121cyber ransom attack, and if you Google, India cyber ransom1122attack pharma, you will find a long list of companies there1123that have been targeted.1124    Which is not to say that we are not also at risk in the1125U.S. Of course, those sorts of attacks know no borders, but it1126is reasonable to think that a company that is cutting corners1127on its manufacturing quality is probably not also investing in1128cybersecurity the way it should.1129    There are a number of federal programs to support U.S.1130manufacturers, but there is no doubt, to ensure our supply, we1131need to be ensuring that our domestic manufacturers and our1132manufacturing partners have top notch cybersecurity.1133    Dr. Edwards. Yes. Thank you, Ranking Member Gillibrand.1134This is a critical, critical aspect of the pharmaceutical1135supply chain and resiliency across them, and I think every1136single node of the supply chain is at risk, not one more than1137another.1138    In combination and in partnership with the Administration1139for Strategic Preparedness and Response, Phlow's government1140program incorporated cybersecurity into the infrastructure1141build from day one. We have partnered with the FBI, Homeland1142Security, and CISA in order to test our systems and to come on1143top of this infrastructure build because we know that fragility1144and that vulnerability is real.1145    In 2017, for example, Merck experienced a ransomware attack1146that ended up having an impact of over $1 billion in potential1147damages. This is not something that is theoretical. It has1148happened in the past, and in the age of where we are today and1149the vulnerabilities that we are experiencing from a1150geopolitical conflict potential, this is only going to become1151even more of a threat.1152    For us, it is about not building an infrastructure and then1153trying to decide on, let's layer cybersecurity on top of it. It1154is about integrating that cybersecurity posture from day one1155and ensuring that anyone who works alongside the Government1156supply chain to secure our critical industrial base is making1157sure that we are prepared for the future as a matter of1158national public health security.1159    Mr. Neely. I do think that the new regulation around DSCSA1160and serialization has improved so that we track every batch,1161every case, every bottle down to the consumer level. If there1162is ever a recall, we can identify where it is.1163    Senator Gillibrand. Also related, Mr. Neely, you talked1164about that there needed to be some support. You weren't1165specific about what the support was, but I want to challenge1166some of the witnesses about what supports would actually1167matter.1168    Dr. Edwards, you mentioned your groundbreaking partnership1169with the Administration for Strategic Preparedness and1170Response, known as ASPR, in your testimony. Mr. Coukell, you1171mentioned in your testimony that your facility in Petersburg,1172Virginia is funded with U.S. Government support with ASPR1173through the Biomedical Advanced Research and Development1174Authority, known as BARDA. Can you both, Dr. Edwards and Mr.1175Coukell, speak about your experiences, what is working, what is1176not working.1177    Mr. Neely and Mr. Cashman, if you want to add, what types1178of support you would want. Because it is relevant for us1179because we are definitely going to do the transparency stuff.1180That is like very much common ground--something the chairman1181and I want to work on immediately, but more is needed, and we1182need more color on the issue. Go ahead, Dr. Edwards.1183    Dr. Edwards. Thank you for that question, Ranking Member1184Gillibrand. You know, ASPR has undertaken a critical mission1185since we first got started with them over five years ago1186through now multiple Administrations, and a pandemic, and on1187the other side of that pandemic, to try to address1188pharmaceutical supply chain sovereignty.1189    However, they need help. The GAO has repeatedly recommended1190that HHS implements a formal department wide mechanism to1191coordinate drug shortage activities. This would ensure that1192FDA, CMS, DOD, DOW, and ASPR, and other agencies work together1193rather than in silos, which is really what is happening today.1194There need to be clearly defined roles, goals, and outcomes1195among the agencies.1196    Finally, ASPR and any other agency that is tasked with this1197extremely important mission should ensure that they receive1198long-term sustainable funding as well, to support companies1199like ourselves, but also others who are working to bring back1200this industrial base, as this is not something that Phlow can1201do alone.1202    You need multiple Phlow's. You need multiple companies1203working together. Really helping them raise up their posture1204and have the support they need going back to that centralized1205authority would be a critical step in the right direction,1206specifically.1207    Mr. Coukell. Thank you, Senator. The funding that we1208received from ASPR to invest in our plant was very important.1209Taking into account the capital costs and the startup costs,1210nearly a third of that funding came from ASPR. That was during1211the pandemic when there were resources to make those kinds of1212investments.1213    In recent years, the Office of Industrial Base Management1214and Supply Chain within ASPR, which is the office that has the1215expertise and the mandate to make these sort of targeted1216investments, has had very low, very flat budget, and hasn't had1217the ability to make additional investments, so they can do1218more, but we have to support them to do more.1219    Mr. Neely. Ranking member, mine is pretty simple. I would1220think that this Committee would want a plant that is just1221fairly new to be at full capacity. To be at full capacity, an1222$18 million grant to build out three packaging lines and1223another granulating piece of equipment could quadruple the1224throughput through our operation.1225    Mr. Cashman. I would second that, Ranking Member. I would1226also add that we need a very comprehensive approach. Strategic1227antibiotic manufacturing fund with targeted grants and low1228interest loans would be very, very helpful, similar to the1229CHIPS Act.1230    Second, tax incentives for domestic API production,1231including immediate expensing of new equipment and enhanced R&D1232deductions. Third, supply chain visibility, which you1233mentioned, which I think is so important for patients and1234doctors and hospitals to know where their medications come1235from.1236    Fourth, recognition that essential medicines are a national1237security assets, making manufacturers eligible for industrial1238based support available to other critical sectors. You know,1239there is a lot of different tools we could employ here, but we1240need a sustained commitment. I think that is a message we hear1241from every one of us up here, and it has to be a long-term1242sustained commitment. Thank you.1243    The Chairman. I think Mr. Coukell, didn't you say about--1244you were talking about the hospitals ought to be compensated1245for quality, didn't you say in your testimony? Right now I1246think under Medicare Advantage they are. I think--so but it has1247nothing to do with medicines, right?1248    Mr. Coukell. Thank you, Senator. Let me clarify. What I1249really meant is right now the thing that drives generic drug1250purchasing is price.1251    The Chairman. Only price?1252    Mr. Coukell. To the exclusion of everything else. What we1253need I think is a system as we have at Civica where when we are1254looking at a supplier, we are looking at what supplier is less1255likely to fail us in the future? What are their quality1256systems? What is their quality maturity? We need to drive1257purchasing to factor that in.1258    Which is not to say we become indifferent to price, but we1259ought to weigh some other things that are pretty important1260along with price when we choose what drug suppliers we are1261going to use.1262    The Chairman. You know, we have to look at this, but I bet1263CMS already ranks people enough on quality that they have the1264ability to put information out whether hospitals and probably1265Medicare Advantage for sure, or all the health plans, are doing1266this. They probably--and I bet they already have that ability1267without even any new legislation, if it was important to them.1268    I will find out. What would happen--what would happen for1269each of you if you got 100 percent of the volume from the1270Department of War and the VA of the things you do today? What1271would happen to your business?1272    Mr. Neely. Quite frankly, Chairman, I would make money for1273the first time in 10 years.1274    Mr. Coukell. I think every company would welcome that, and1275for the company that got that business, it would be1276tremendously significant. I do want to make the point that DoD1277and VA are both one or two percent of the total market.1278    Changing how they procure drugs, very meaningful to1279whatever company gets that business, but it is not enough to1280shift the whole market and bring back. For that we are going to1281have to get into Medicare and the commercial market.1282    Mr. Cashman. In our case at USAntibiotics it would be1283transformational. It would be so important for us to have that1284volume. It would give us a solid base of manufacturing volume1285to grow on and grow our commercial business on as well.1286    Dr. Edwards. In our case, it would help us baseload our1287facilities, support the 1.5 million active duty soldiers,1288secure a supply chain of 25 to 50 drugs that these soldiers1289depend on a daily basis, and enable us to send a market signal1290that is real. That will help spur additional private investment1291and help us grow and sustain our business when that type of1292demand signal starts to reveal itself because, where do we1293start?1294    We start on the federal supply schedule and what the1295Government actually has authority to do. Ultimately, it can1296then move into CMS and some of the other challenging1297environments. Starting somewhere is better than nowhere and we1298need to get started.1299    The Chairman. What would happen to--let's take it from the1300patient standpoint. If that happened, what would be the benefit1301to a soldier or sailor, or to a--somebody in a VA facility?1302What would happen to their quality of care?1303    Dr. Edwards. Chairman Scott, we know that not only patients1304but also physicians, they don't have a clue where their1305medicines are made or what they are using, so the first thing1306that we would emphasize in this is that we would restore trust.1307    We would begin making sure that we are able to restore1308trust in the quality of these medicines. We would know where1309they are coming from. It is really important that we not only1310emphasize location, but we also emphasize quality manufacturing1311as well. They both go hand in hand.1312    I think what would happen is we would experience the health1313and well-being, and more important, the national resiliency, we1314would experience a change in that, that is significant. It is1315significant for the well-being and the quality of care that is1316being provided.1317    Based off of some of the testing and the reports coming out1318of the Pentagon and Kaiser and others, we would hopefully1319experience less adverse events or subpotent medications that1320have entered our supply chain when we know where they are1321coming from.1322    Mr. Neely. If I could just expand on that, I did an1323informal poll of my family. We take 23 generic drugs. Now, they1324are all Medicare, okay. Of the 23, 20 are produced in India,1325two were in China, one in Canada. Not one is made in the United1326States.1327    The Chairman. You probably--and you don't even know where1328the ingredients are from.1329    Mr. Neely. The only way I was able to find out is because I1330am in the industry. I research the NDCs, but for example, take1331a cholesterol medication. It is repackaged. It is owned by a1332distributor.1333    You would think, okay, it is a United States product. You1334do the NDC, it comes from a plant in India. It is labeled in1335India. India ships it to the United States. They send the bill1336to Ireland, and but the owner of that business is here in the1337United States, but they never touched that medicine.1338    The Chairman. Did you want to add something?1339    Mr. Coukell. Well, I will just make one additional point,1340Senator, which is I think there is an important difference1341between a product defect on a given day, which is important and1342that is a risk to a patient, but it is different from a company1343that has inadequate quality systems.1344    At some point in the future, the FDA is going to come along1345and find they are pouring acid on their records or cutting1346corners in some other way, and they will have a failure to1347supply.1348    Part of what we want to do is shift the market to companies1349that are less likely to cause a drug shortage and have a1350failure to supply, which doesn't necessarily mean that on a1351given day their product is defective.1352    The Chairman. We had testimony from Dr. Ball from the1353University of Indiana that you have an over 50 percent1354increased chance of hospitalization and death if you take a1355generic drug from India or China.1356    Would any of you like to talk about the--how the Department1357of Commerce should use their Section 232 investigations to1358support domestic manufacturers? Anybody want to comment on1359that?1360    Mr. Neely. Well, I will because I think it jump starts the1361whole reformation of what we need to do. It provides some1362ability to go in and fix the procurement problem, number one.1363    You know, we have a long time, it seems to me, to reform1364the entire industry. We have got to get started and we have got1365to get started as fast as possible. That 232 is the first part1366of making sure that we can respond to other problems that we1367have in this industry faster.1368    The Chairman. Mr. Cashman, why don't you have contracts1369with the Department of War, or with the VA--you don't have1370contracts with the Department of War or VA, right?1371    Mr. Cashman. No, Chairman Scott, we do not. The reason for1372that is we are not considered a small business.1373    Many of the amoxicillin contracts--all of the amoxicillin1374contracts in recent years, have been small business set asides.1375Because Jackson Healthcare, a fine Georgia corporation, made an1376investment in our facility, and they spent millions of dollars1377saving our facility, our facility is not considered a small1378business, and therefore we can't compete for those small1379businesses set asides.1380    The Chairman. Are any of you familiar with any independent1381quality testing for imported medicines from China and India? Is1382that happening?1383    Mr. Coukell. Senator, I am not aware of any.1384    The Chairman. Anybody else?1385    Mr. Cashman. The Department of Defense has a quality1386investigation or testing program, which is something we think1387all imported medications should have tested before they are1388sold in the United States.1389    Dr. Edwards. I am familiar with a couple of pilot programs1390that are looking to test.1391    The Chairman. It doesn't surprise you that every drug that1392comes in is not tested?1393    Dr. Edwards. Yes, I think----1394    The Chairman. Think about--USDA, you can't buy meat unless1395you have a USDA inspector at that plant, right?1396    Dr. Edwards. We operate off of an honor system, Chairman,1397Scott.1398    The Chairman. For something you put in your body.1399    Dr. Edwards. Correct.1400    The Chairman. We don't do it for cattle.1401    Dr. Edwards. Or groceries, or clothing, or anything else.1402    Mr. Neely. Yet at our plant--excuse me, but at our plant,1403we have an end-to-end testing process and program.1404    We test every raw material that comes into our plant. We do1405efficacy testing. We do dis-solvency testing. We do breakage1406testing throughout the entire process, from the beginning of1407the raw material to when it is packaged.1408    The Chairman. All right. Do you have any other questions?1409All right. Does anybody else want to add anything that we1410didn't ask? Anything we should have asked that we didn't ask?1411    Okay. I think I want to thank everyone for being here today1412and participating. I look forward to continuing to work with1413members on this Committee.1414    I want to thank--especially thank the ranking member for1415her efforts in this and the fact that we have been able to do1416this on a bipartisan manner.1417    If any Senators have additional questions for the witnesses1418or statements to be added, the hearing record will be open1419until next Wednesday at 5:00 p.m. Thanks, everybody.1420    [Whereupon, at 04:57 p.m., the hearing was adjourned.]1421=======================================================================14221423                                APPENDIX14241425=======================================================================14261427                      Prepared Witness Statements14281429=======================================================================14301431                 U.S. Senate Special Committee on Aging14321433          "Made In America: Restoring Trust In Our Medicines"14341435                           November 19, 202514361437                      Prepared Witness Statements14381439                             Allan Coukell14401441Summary of Testimony:14421443      
Civica is a non-profit generic drug company created by1444US health systems and philanthropies to prevent and mitigate1445drug shortages.1446      
Civica currently delivers more than 50 injectable1447medications,\1\ each chosen by US hospitals because they are at1448risk of shortage, with more than 240 million vials of medicine1449delivered to date.1450---------------------------------------------------------------------------1451    \1\ In nearly 80 distinct presentations.1452---------------------------------------------------------------------------1453      
Civica prioritizes domestic manufacturing, both in1454sourcing from contract suppliers and in our own U.S. sterile1455injectable fill-finish manufacturing facility located in1456Petersburg, Virginia. We also conduct direct quality oversight1457of our suppliers.1458      
Civica has a "no China" policy in our supply chain, both1459for finished drugs and for active pharmaceutical ingredient,1460unless there is no other supply available.1461      
Despite this commitment to domestic production, the1462financial model for producing generic drugs is challenging with1463many generic drugs selling below the marginal cost of domestic1464production.1465      
There isn't a single "silver bullet" policy that will1466restore domestic manufacturing, but a key component of any1467successful effort will be ensuring market prices that allow for1468domestic production. Targeted investments can also create new1469manufacturing capacity at an affordable cost.1470      
Onshoring active ingredient production cannot succeed1471unless a manufacturer has FDA approval to turn that API into a1472finished drug product and a viable domestic market.14731474Full Testimony:14751476    Chairman Scott, Ranking Member Gillibrand, and1477Distinguished Members of the Committee, thank you for the1478opportunity to speak with you today on the issue of "Made in1479America" pharmaceuticals.1480    My name is Allan Coukell. I am a pharmacist by training,1481and I lead public policy for Civica, Inc., also known as Civica1482Rx, which is a non-profit generic drug company created1483specifically to mitigate and prevent drug shortages by ensuring1484a reliable supply of quality essential medicines for U.S.1485patients.1486    Civica currently provides more than 50 drugs to 60 health1487systems, accounting for 1400 hospitals around the country. Over1488the past seven years, we have delivered more than 240 million1489vials, serving about 90 million American patients. To provide1490these medications, we work with a range of manufacturing1491partners, giving preference to U.S. sourcing whenever possible.1492Civica has a rigorous quality oversight process for its1493suppliers involving in-person facility audits and ongoing1494quality reviews.1495    We also have our own newly built pharmaceutical1496manufacturing facility located in Petersburg, Virginia, funded1497partly with U.S. government support from ASPR/BARDA. It is a1498state-of-the-art sterile injectable finished dosage form1499manufacturing facility with the ability to make 90 million1500vials and 50 million pre.lled syringes per year, as well as to1501fill and assemble autoinjector pens used for insulin and other1502products. We have dozens of generic drug products in1503development for this facility.1504    Civica has a "no China" policy in our supply chain, both1505for finished drugs and for active pharmaceutical ingredients1506(API), unless there is no other supply available.1507    The drugs that Civica supplies are chosen by pharmacists1508and physicians from US health systems because they are at risk1509of being in shortage. These are the products that are the1510bedrock of emergency and in-patient health care- products like1511antibiotics, anesthetics, blood thinners, sedatives, and pain1512medications. These tend to be long-established, low-cost drugs.1513Most of them are on one or more essential drugs lists.1514    As this Committee knows, generic medications account for 901515percent of prescriptions in this country, but less than 151516percent of drug spending.\2\ While branded drugs are mostly1517produced domestically, generic drugs are more likely to be1518produced offshore - increasingly in low-cost manufacturing1519environments such as China and India. Our dependence on1520foreign-made active ingredients is even greater than our1521dependence on foreign finished drug products - a point I will1522return to.1523---------------------------------------------------------------------------1524    \2\ Association for Accessible Medicines. The U.S. Generic &1525Biosimilar Medicines Savings Report (Sept. 2024), available at https://1526accessiblemeds.org/resources/blog/2024-savings-report./1527---------------------------------------------------------------------------1528    It is precisely because generic drugs are so inexpensive -1529and because U.S. systems for drug procurement are so efficient1530at pushing prices down - that manufacturing has been steadily1531exiting the US for decades. Make no mistake: low prices are the1532principal barrier to onshoring generic drug manufacturing.1533    Let me provide a real-world example. There is a widely1534prescribed antinausea medication that typically sells for under1535$0.40 per vial. That is an astonishingly low price for a1536medicine that can only be produced in an expensive1537manufacturing facility after a complex process of scientific1538development, quality oversight, time-consuming testing and1539analytics, facility inspection and regulatory approval. Even1540the packaging is subject to strict regulatory requirements.1541While each of these steps is necessary to ensure patient1542safety, it would be difficult or impossible at that price for a1543US manufacturer to compete. Numerous injectable drugs sell for1544less than $1.15451546Creating a sustainable market15471548    Generic drugs are the foundation of inpatient medical care.1549They also cost less in the United States than they do in other1550OECD countries.\3\ In discussing how we create a sustainable1551market for domestic production, we must be comfortable that it1552is worth paying slightly more for a reliable and safe supply of1553quality domestic medication.1554---------------------------------------------------------------------------1555    \3\ For every dollar the other countries on average pay for generic1556drugs, in the U.S., consumers pay 67 cents. Andrew W. Mulcahy, et al.1557"International Prescription Drug Price Comparisons: Current Empirical1558Estimates and Comparisons with Previous Studies," July 1, 2022, https:/1559/aspe.hhs.gov/reports/international-prescription-drug-price-comparisons1560---------------------------------------------------------------------------1561    The good news is that - at least for the sterile injectable1562drugs that I am focused on today - it should be possible to1563substantially increase domestic supply at a manageable cost and1564in a reasonable timeframe. Indeed, while I focused a moment ago1565on products selling for less than a dollar, there are others at1566higher prices that don't need support. Therefore, a policy that1567puts a floor price on domestic drugs would achieve the desired1568goal.1569    One possible approach, developed as a bipartisan discussion1570draft by the Senate Finance Committee, would be to provide1571extra payments to hospitals that take into account quality and1572supply resiliency, along with domestic sourcing, when1573purchasing generic drugs. Since generic drug spending accounts1574for only one to two percent of total hospital expenditures,1575such a program would have a negligible impact on overall health1576spending but could help to incentivize hospitals to purchase1577from domestic and/or more resilient suppliers.1578    The Senate Finance discussion draft was framed in response1579to drug shortages, but the general approach can also be applied1580to onshoring. Stakeholders generally recognize that that1581framework, in its 2024 form, needs to be streamlined.1582Nevertheless, this approach is directionally correct in that it1583offsets the incremental costs associated with choosing1584domestic, higher quality suppliers and holding a buffer1585inventory to mitigate supply disruptions.15861587Targeted investments as an insurance policy15881589    In combination with long-term market .xes, Congress should1590invest in an insurance policy so that domestic manufacturers1591can develop low-cost products now so the drugs can be ready1592when they are needed. It takes two to three years to develop a1593generic drug for an existing manufacturing facility, but1594companies cannot invest in products if they won't recover their1595costs. We should support companies to develop these products1596now and obtain FDA approval, rather than waiting for the day1597when the foreign supply fails. The FY26 Senate Labor HHS1598Appropriations bill has report language instructing the1599Administration for Strategic Preparedness and Response (ASPR)1600Industrial Base and Supply Chain Management office (IBMSC) to1601fund generic drug development. Congress should direct funding1602to ASPR to implement the policy.16031604Creating new manufacturing facilities16051606    The above policies would support manufacturing of domestic1607drugs in existing facilities. The cost to onshore a drug into1608an existing facility is two orders of magnitude less than the1609cost to create a new manufacturing facility where none1610currently exists. However, in some cases entirely new1611manufacturing facilities will be required. New facilities are1612capital intensive - typically in the hundreds of millions of1613dollars - and the facility startup costs can be as high, or1614higher, than the capital costs. Because of the complex1615development and approval process mentioned previously, more1616than four years may elapse from the start of construction to1617the first commercial sales.1618    No single facility can produce every drug. For example, in1619the injectable drug space, liquid-fill vials require different1620equipment than powder-fill vials. Some drugs, such as1621penicillin-type antibiotics, require their own dedicated1622facilities. Many cancer drugs also must be separated from1623facilities where other products are produced.1624    At current market prices, if new facilities need to be1625built to enable domestic production, it will require government1626support for capital investment - combined with some assurance1627of sustained demand in the face of low-cost foreign production.1628    Active pharmaceuticals ingredient (API) facilities are1629different from the facilities that produce finished dosage1630forms, such as vials and tablets. They require different1631equipment and expertise. While policymakers interested in1632onshoring drug production often focus on API (because that is1633where our dependence on China is greatest), it does no good to1634produce domestic API unless there is a U.S. facility with an1635FDA-approved finished dosage form.16361637Removing harmful market distortions16381639    Generic drugs are beyond doubt the single most effective1640cost-saving strategy ever deployed in American healthcare.\4\1641They reduce prices as much as 95 percent below the pre-1642competition prices of branded drug products.\5\ And yet1643government policies distort the market by introducing mandatory1644rebates that disincentivize production and prevent prices from1645rising the way they sometimes need to in a properly functioning1646market. Congress should remove the market distortions from1647mandatory rebates on generic drugs, allowing prices to rise to1648sustainable levels.1649---------------------------------------------------------------------------1650    \4\ The Association of Accessible Medicines, the generic industry1651trade association, calculates savings of $445 billion from generics and1652biosimilars in 2023 and $3 trillion over the prior decade alone.1653    \5\ Ryan Conrad & Randall Lutter, Generic Competition and Drug1654Prices: New Evidence Linking Greater Generic Competition and Lower1655Generic Drug Prices (2019), available at https://www.fda.gov/media/1656133509/download?attachment.16571658---------------------------------------------------------------------------1659Regulatory reforms16601661    Finally, I would like to address the potential for1662regulatory reform to support domestic manufacturing. Building1663and qualifying a new pharmaceutical manufacturing facility is a1664multi-year process. Even developing a new drug for an existing1665facility is typically a two- to three-year undertaking, The1666first federal oversight is typically an FDA inspection that1667occurs in the months after a drug application is filed with the1668agency. There are opportunities to de-risk this by allowing FDA1669inspection to occur earlier, and the agency has recently1670announced a program to enable such earlier engagement.\6\1671---------------------------------------------------------------------------1672    \6\ Food and Drug Administration. FDA Announces New FDA PreCheck1673Program to Boost U.S. Drug Manufacturing. 07 August 2025. https://1674www.fda.gov/news-events/press-announcements/fda-announces-new-fda-1675precheck-program-boost-us-drug-manufacturing1676---------------------------------------------------------------------------1677    However, most or all generic drug facilities are multi-1678product facilities, meaning they are not breaking even until1679they have multiple different FDA-approved products. The1680financial viability for a new generic drug facility typically1681depends not only on the first product approved, but on having a1682portfolio of approved drugs, each with a typical FDA review1683time of one year. By shortening the review time for drugs1684manufactured on already-approved lines and allowing1685manufacturers to submit drug stability data on a rolling basis,1686this cycle could be reduced by as much as nine months. This1687change would have a major impact for new domestic facilities.1688Conclusion16891690    Thank you again for your attention to this important topic1691and for the opportunity to be with you today. I welcome your1692questions.16931694                 U.S. Senate Special Committee on Aging16951696          "Made In America: Restoring Trust In Our Medicines"16971698                           November 19, 202516991700                      Prepared Witness Statements17011702                               Tom Neely17031704    Chairman Scott, Ranking Member Gillibrand, and Members of1705the Committee:1706    Thank you for the opportunity to testify on an issue1707central to our nation's health security: strengthening domestic1708manufacturing to produce safe, affordable, and dependable1709medicines.1710    My name is Tom Neely, and I am the chairman of Oxford1711Pharmaceuticals, a U.S. manufacturer of generic oral solid-dose1712medicines based in Birmingham, Alabama. Our 150,000-square-foot1713facility-built from the ground up with a total investment1714exceeding $130 million during an almost 10-year development1715period-was approved by the FDA in 2019 and is among the most1716modern generic pharmaceutical production plants in the country.1717    Oxford produces 13 product families of generic medicines,171810 of which have no other U.S.-"owned" and operated1719manufacturer, and three of which are classified as critical1720medicines. Our portfolio is focused on chronic disease1721management, spanning cardiovascular and blood pressure1722treatments, mental health, and pain management therapeutics.1723From amlodipine, the fifth-most prescribed drug in America, to1724trazodone, the 11th-most prescribed therapy, we manufacture1725high-quality generics on which millions of Americans rely1726daily.1727    We founded Oxford on the belief that these medicines can be1728made in America to the highest standards of quality and1729accountability. Our team takes pride in the enormous value we1730deliver to consumers. Unlike many generic manufacturers-in-1731name-only, including those with significant federal procurement1732awards, we don't import finished tablets from India and China1733only to repackage or relabel them. We procure raw materials,1734weigh, blend, compress, coat, package, and perform quality1735tests on everything within the four walls of our facility. We1736perform the full transformation of active pharmaceutical1737ingredient into finished dosage form that defines end-to-end1738American manufacturing.1739    At Oxford, our purpose is simple: ensuring that Americans1740can trust and afford the medicines they take and proving that1741we can still make them here at home.17421743I. A Fragile System Subject to Overseas Dependence17441745    Two decades of offshoring and price compression from1746imports have gutted American generic pharmaceutical1747manufacturing. Our domestic peers are a dying breed, leaving1748Oxford as one of the last remaining U.S. manufacturers of1749generic pharmaceuticals.1750    Understanding the pharmaceutical supply chain reveals how1751deeply foreign governments have penetrated every stage of1752American medicine production. The process begins with key1753starting materials, the basic chemical building blocks. These1754materials are synthesized into active pharmaceutical1755ingredients, the compounds that provide therapeutic effects.1756Manufacturers then transform APIs into finished dosage forms1757through weighing, blending, compressing, and coating.1758Wholesalers distribute these finished products to pharmacies,1759hospitals, and clinics. China dominates the first two stages1760while India controls much of the third stage but is itself1761heavily reliant on China for its precursor chemicals. American1762manufacturers like Oxford operate in stage three but depend1763heavily on foreign-origin APIs. This nested dependence means a1764single disruption or chokepoint in China or India cascades1765through the entire system, potentially leaving American1766patients without essential medicines.1767    More than 80 percent of the active pharmaceutical1768ingredients (API) used in U.S. prescription drugs have no1769domestic source.1 With China being the sole source for1770approximately 45 percent of all key starting materials on the1771global market, Beijing casts a long and dangerous shadow over1772the pharmaceutical supply chain.2 Meanwhile, India produces1773about half of the generic finished drugs used in the United1774States but remains heavily dependent on China for its own1775active ingredients and starting materials.31776    America's foreign dependence is both deliberate and1777engineered. As a manufacturer that has fought to sustain robust1778domestic operations, we face competitors backed by entire1779foreign countries and their industrial policies. Building a1780pharmaceutical plant in India costs a fraction of what it costs1781in the U.S. For a low-margin, high-volume business like1782generics, these advantages are already almost insurmountable.1783In addition, India has dedicated roughly $4.5 billion in1784production-linked subsidies for pharmaceutical exports through1785its national incentive program. It also provides discounted1786utilities and financing to its companies as well as minimal1787regulatory overview and barriers.1788    China offers its own tax rebates, cheap industrial power,1789and soft loans. In China's "12th Five-Year Plan," the central1790government allocated CNY 10,000 million (about $1.65 billion)1791for the Key Drug Innovation Program. Local governments added1792another CNY 30,000 million (about $4.96 billion).4 These state-1793backed advantages make it nearly impossible for U.S. producers1794to compete on price alone.1795    Every tablet that leaves our factory is undercut by foreign1796government-subsidized competitors who treat medicine as a1797strategic export. The current U.S. trade model has distorted1798and manipulated the market, directly harming U.S. manufacturers1799like us and ultimately the well-being of American citizens.1800    U.S. policy opened our market to unlimited, unfettered drug1801imports from anywhere, letting the chips fall where they may.1802Other countries then ruthlessly dominated and captured our1803industry.1804    The consequences are visible across our country. The number1805of U.S. plants producing generic drugs has fallen by more than180640 percent since 2013.5 Facilities in states such as Louisiana,1807New Jersey, and California have closed or gone idle. In1808Shreveport, Dr. Reddy's Laboratories abandoned its 1980s-build1809facility, which now stands empty after years of losses.6 That1810facility once supplied household medicines used by tens of1811millions of Americans weekly but today is little more than a1812monument to our policy failures. Its closure shows what happens1813when we treat medicine as an ordinary consumable. We cannot1814watch our industry get offshored under the false belief that1815America has simply been outcompeted.1816    For Oxford and other U.S. manufacturers, the message is1817clear: we are on borrowed time. The current policy threatens1818our livelihood and existence.18191820II. Foreign Safety Failures and Double Standards18211822    Unrestricted generic pharmaceutical trade has failed1823American consumers and patients because of foreign states'1824determination to own the global means of production and their1825willingness to subvert safety standards in a race to the1826bottom. Foreign governments have succeeded in creating an1827enormous U.S. national security weakness that can be weaponized1828or leveraged at will.1829    Our own government has created a widening divide between1830what it demands of American manufacturers and what it tolerates1831from foreign suppliers. No country should accept a two-tiered1832system of drug safety with one standard for domestic producers1833and another more lax regime for importers, but that's the1834reality U.S. manufacturers and patients face today.1835    U.S. plants operate under continuous FDA inspection, strict1836documentation, and full compliance with Good Manufacturing1837Practices. These are sound safety measures that we're proud to1838follow. They guarantee the integrity of our medicines. Every1839Oxford employee understands that quality isn't optional-it1840defines who we are. When our team upholds those standards,1841they're not just satisfying a regulation; they're protecting1842someone's health.1843    Our facility was built to exceed FDA requirements, with1844HEPA-filtered environments, validated cleaning systems,1845serialized packaging, and duplicated digital and paper-base1846batch recording safeguards. We welcome inspectors at any time1847because transparency and safety define our operation.1848    This commitment becomes unsustainable when not everyone1849plays by the same rules. Many foreign manufacturing facilities1850go five years or more without FDA inspection.7 When inspected,1851advance notice is given in at least 90 percent of cases.81852Recently, the FDA began conducting more surprise inspections of1853overseas facilities. Still, the FDA's foreign inspection1854program fails to provide the same level of quality assurance as1855U.S. products because of funding and staffing realities and the1856massive volume of foreign-origin KSM, API, and generic drugs.1857    When oversight is this inconsistent, patient outcomes1858suffer. Indian-made generic drugs have a 54% higher rate of1859severe adverse events compared to those made in the United1860States.91861    Recent FDA reports reveal what these safety gaps look like1862in practice. The lack of consistent oversight lets foreign1863plants conceal unsafe practices until U.S. inspectors finally1864arrive. At India-based Intas Pharmaceuticals, for instance,1865investigators discovered shredded and acid-doused documents in1866an apparent attempt to hide falsified safety tests and1867records.101868    When FDA inspectors entered an undisclosed Indian facility1869run by Hetero Labs, they found birds flying through storage1870areas, lizards crawling over raw ingredients, and cats weaving1871between pallets.11 Damaged drums with torn labels sat open to1872the air, and an uninspected truck full of material drove away1873after staff refused to allow the FDA team access.12 Inspectors1874had already been denied entry to the facility for two hours1875while the assistant manager and warehouse staff "had ran out of1876plain sight upon announcing our intent to inspect the1877facility."13 Such conditions are unthinkable in any U.S.1878facility-they would trigger an immediate shutdown. Yet this1879site still ships medicine into our supply chain.1880    Hundreds of foreign producers have received FDA Form 4831881letters for data falsification, contamination, or document1882destruction. Foreign-site inspections uncover severe violations1883more than twice as often as U.S. sites, but penalties remain1884rare.14 This double standard puts patients at risk by creating1885uneven regulatory burdens that punish companies like ours that1886invest heavily in safety, people, and process controls.1887    At Oxford, quality is a moral obligation. Every batch we1888make is tested, recorded, and traceable. Our employees know the1889medicines they manufacture serve their own families and1890neighbors. Only domestic production ensures this1891accountability.1892    Quality isn't cheap, but unsafe imports cost much more in1893recalls, shortages, and adverse patient outcomes.18941895III. The Economics of Survival for U.S. Manufacturers18961897    Major U.S. institutional buyers of generic drugs prioritize1898price over quality or safety. Generic drug production is a low-1899margin, high-volume business where price trumps all. This1900business reality facilitates capture by state actors who can1901heavily subsidize their own industries. They know that if1902subsidies can be maintained for even a relatively short period,1903domestic U.S. production can be displaced.1904    But this does not mean that Americans have seen price1905savings.1906    For a typical Oxford product, we receive about $1.50 per1907hundred tablets. Medicare reimbursement for the same quantity1908averages $13.25. A handful of large intermediaries absorb the1909difference. Wholesalers, pharmacy benefit managers (PBMs), and1910group purchasing organizations (GPOs) dominate this space.1911    Three Group Purchasing Organizations-Vizient, Premier, and1912HealthTrust-control about 90 percent of hospital generic1913contracting,15 while three PBM-aligned distributors handle1914roughly 90 percent of retail generic purchases,16 giving a1915handful of intermediaries near-total market power.1916    These middlemen now capture at least $64 of every $1001917spent on generic drugs.17 Rather than passing savings from1918importing cheap drugs on to patients, these intermediaries use1919their market power to extract profits from both ends-forcing1920U.S. manufacturers to sell at ever-lower prices while inflating1921downstream markups to preserve their own margins. They pit1922domestic producers directly against imports, leveraging1923subsidized foreign bids to drive U.S. firms into unsustainable1924pricing. The result is a race to the bottom, in which1925production shifts to the lowest-cost, least-regulated source1926regardless of safety or reliability.1927    India and China's drug pricing playbook is elegantly1928simple, if devious. It begins with highly subsidized foreign1929manufacturers flooding the U.S. market with cheap drugs,1930allowing middlemen to leverage those low prices to force price1931concessions from U.S. producers. Of course, once U.S. producers1932are edged out of the market, foreign suppliers raise prices.1933    For small and midsize U.S. producers, this system is1934economically impossible to survive. When subsidized foreign1935competitors undercut prices through government subsidization1936and shortcuts on quality, U.S. facilities close-and once that1937happens, domestic capacity and technical expertise disappear.1938    Oxford currently operates at 55-60% production capacity1939because import-dominated market conditions dominate the1940landscape, but with the right policy support and a relatively1941modest $17 million investment, we could quadruple output to 7501942million doses per month and double employment. That production1943capability already exists within our facility. The missing1944piece is a stable home-market environment that values security1945and quality over the imagined benefits of global free trade and1946the short-term arbitrage of middlemen.19471948IV. Rebuilding U.S. Capacity: What the Industry Needs to Expand1949Production and Secure the Supply Chain19501951    The collapse of America's generic pharmaceutical1952manufacturing base didn't happen overnight, and rebuilding will1953take some years, but we can and must start-and we must start1954now. Every month of delay means another factory closure,1955another skilled team lost, and deeper dependence on inferior1956imports.1957    For decades, federal policy on drug imports has been1958simple: keep the borders open and hope cheap imports don't1959destroy domestic capacity. That hasn't worked. For certain1960agricultural commodities like sugar and peanuts, U.S. policy1961has always favored a "managed trade" approach in which import1962volumes-actual outcomes-are capped through quotas. The U.S.1963generic pharmaceutical supply chain should be at least as1964secure as the U.S. peanut butter supply chain.1965    Oxford sees four immediate steps that Congress can take to1966rebuild capacity and restore a reliable supply of American-made1967medicine.19681969    1. Affirm Generic Pharmaceuticals as a National Security1970Industry Under Section 23219711972    We strongly support the Department of Commerce's Section1973232 investigation into imports of generic pharmaceuticals and1974pharmaceutical ingredients. From our perspective on the ground,1975it is clear that imports of generic drugs are impairing U.S.1976national security.1977    The stakes are staggering. More than 133 million Americans,1978roughly 40 percent of the U.S. population, live with at least1979one chronic disease requiring daily medication. Cardiovascular1980disease alone affects 127 million adults who depend on blood1981pressure and cholesterol medications. Another 38 million1982Americans manage diabetes with daily therapies. Mental health1983conditions requiring pharmaceutical treatment affect 57 million1984adults. If China or India restricted access to key starting1985materials, APIs, or finished dose generics, these Americans1986would face immediate treatment interruptions. Patients managing1987hypertension would risk stroke. Diabetics would face dangerous1988blood sugar swings. Heart disease patients could suffer cardiac1989events. Americans battling depression or anxiety would lose1990access to stabilizing therapies. The human cost would be1991catastrophic, measured not in dollars but in preventable deaths1992and suffering.1993    Once the Department of Commerce has made this finding, the1994President is delegated broad authority to adjust imports.1995    Simply deploying a sweeping ad valorem tariff of 25, 50, or1996even 100 percent will not work. That's because most of the1997markup on generic drugs is in domestic distribution,1998intermediary margins, and retail. If the declared import value1999of a particular product is half a penny, a 100 percent tariff2000that adds another half a penny to the cost of a dose will not2001be sufficient for sourcing decisions. Foreign suppliers can2002easily absorb these kinds of changes.2003    Instead, we believe a quota system can simultaneously2004rebuild our domestic supply chain, one drug and API at a time,2005without disrupting domestic availability or inflating consumer2006prices.2007    Rather than across-the-board ad valorem tariffs, we propose2008"specific tariffs" applied against the actual measured export2009volume that shows up on a ship, not whatever price the importer2010claims they paid overseas.2011    Policymakers should pair these specific tariffs with a2012finite import quota limited to licensed importers and regularly2013adjust that based on forecasted domestic consumption and2014production at home and in import-concession countries. We2015guarantee market space for domestic producers and allow limited2016imports only for what's beyond current capacity.2017    Our business collaborated with the Coalition for a2018Prosperous America to sketch out how such a system could work,2019with real-world drug examples: See "To Restore Generic Drugs,2020Use Sugar's Sweet Model", October 22, 2025, available at2021https://prosperousamerica.org/to-reshore-generic-drugs-use-2022sugars-sweet-model.2023    Our proposed quota system will not increase costs for U.S.2024patients or Medicare reimbursement expenses. Historically,2025changes in production costs have been absorbed by market2026intermediaries-wholesalers, pharmacy benefit managers (PBMs),2027and group purchasing organizations (GPOs)-who capture roughly202864 percent of the final drug cost.18 When these middlemen began2029sourcing cheaper imported drugs, production costs fell, yet2030patient prices and Medicare reimbursement amounts did not. The2031same logic applies in reverse: restricting imports will not2032raise prices-it will simply redirect profits away from2033intermediaries and toward sustainable domestic production.2034Under this proposal the Medicare reimbursement would remain2035flat.2036    Any price correction from a quota system would amount to2037pennies per dose, but it would finally allow U.S. manufacturers2038to compete in their own market on a sustainable footing and2039would encourage a wave of onshoring to meet national security2040objectives. It is essential that both finished generic drugs2041and active pharmaceutical ingredients (APIs) be included in the2042scope of the quota system, with product-specific quotas2043adjusted as domestic capacity ramps up for that product. A2044petitioning system modeled on the U.S. International Trade2045Commission's Miscellaneous Tariff Bill System, or more recently2046the U.S. Department of Commerce's Inclusion Rounds in the steel2047and aluminum Section 232 actions, would perfectly suit the2048proposed product-by-product reshoring. These systems give U.S.2049producers official, regular input in determining which products2050are covered and what tariff rates apply.20512052    2. Reform Federal Procurement to Reward Quality and U.S.2053Production20542055    U.S. manufacturers need a CHIPS-style approach to medicine2056production-one that treats generic pharmaceuticals as a2057strategic industry rather than a disposable commodity. Federal2058purchasing power through the Department of Veterans Affairs,2059the Department of Defense, and Medicare can serve as a2060cornerstone of market stability and a strong signal for2061investment in domestic capacity.2062    The Department of Health and Human Services (including2063Medicare and Medicaid programs, plus BARDA and ASPR), the2064Department of Veterans Affairs, and the Pentagon collectively2065account for roughly 45 percent of all U.S. prescription-drug2066expenditures, giving the federal government unparalleled2067leverage over pricing and supply stability.19 20 21 That2068leverage should be used not just to help seniors and low-income2069Americans, but to reward and rebuild reliability, resilience,2070and safety through domestic manufacturing.2071    Long-term federal contracts for essential generics and2072active pharmaceutical ingredients can anchor demand for U.S.2073plants-ensuring steady production, higher quality, and2074preventing shortages driven by today's concentrated import2075reliance. Tools like the Strategic National Stockpile and the2076Defense Production Act can further help sustain a baseline of2077domestic essential medicine manufacturing. The cost of these2078reforms would be minimal-pennies per dose-but the benefits2079would be enormous: secure supply chains, consistent quality,2080and thousands of well-paying American jobs.2081    Domestic medicine production strengthens supply-chain2082reliability and upholds rigorous quality standards. That2083stability benefits both patients and manufacturers alike. The2084federal government can provide the demand signals we need to2085compete and scale.20862087    3. Reshore and Vertically Integrate API Production20882089    Every manufacturer knows that a supply chain is only as2090strong as its weakest link. For pharmaceuticals, that link is2091the active pharmaceutical ingredient. We cannot rebuild our2092pharmaceutical base without rebuilding ingredient production.2093    At Oxford, we currently import most of our APIs because2094virtually no U.S. suppliers remain, but we have both the land2095and the engineering capability to build a dedicated API plant2096on our Birmingham site. With predictable demand and the right2097policy support, companies like ours can bring API manufacturing2098back to U.S. soil.2099    Policies such as production and investment tax credits2100under the proposed PILLS Act would directly reduce the cost gap2101that has driven API and finished drug production overseas and2102jumpstart new U.S. capacity. A 35 percent production tax credit2103on U.S.-made ingredients, paired with a 25 percent investment2104tax credit for new or modernized facilities, would make2105domestic manufacturing economically viable again. Combined with2106long-term federal procurement contracts that provide a stable2107demand signal and a Section 232 framework that limits unfairly2108subsidized imports, these measures would give American firms2109the certainty needed to invest.2110    Building that capacity would mean traceability, quality,2111and reliability from molecule to medicine. It would make our2112supply chain safe and resilient against disruptions, whether2113from politics, pandemics, or natural disasters.21142115    4. Restoring Geographic Transparency and Safety in the2116Medicine Supply Chain21172118    Patients deserve to know where their medicines come from.2119Country-of-origin labeling should be required for both active2120pharmaceutical ingredients (APIs) and finished dosage forms.2121This simple step would introduce transparency, empower2122hospitals, federal procurers, and other buyers to choose safer2123sources, and reward companies that uphold the highest2124standards.2125    Even the FDA and the Department of Defense struggle to2126determine where the ingredients in essential medicines are2127originate.22 Roughly 22 percent of active pharmaceutical2128ingredients for the military's essential drugs lack a2129verifiable source country.23 This lack of visibility leaves2130federal buyers, hospitals, and pharmacies alike blind to risk,2131making it impossible to track vulnerabilities before they cause2132shortages or safety failures.21332134    Congress should require full supply-chain disclosure:21352136      
Country of origin listed on all drug labels for both API2137and real manufacturing drug labels.2138      
Public FDA database linking each finished product to its2139manufacturing and API sites.2140      
Mandatory reporting of production changes, site2141closures, and inspection outcomes.21422143    Moreover, to secure a safe medicine supply, additional FDA2144reforms are essential-including unannounced foreign inspections2145and tougher enforcement when violations occur, such as import2146bans. By closing the loopholes that let unsafe suppliers hide2147behind opaque distribution chains, we can protect American2148patients from risks that are too often discovered only after2149the medicine has been taken.2150    Ultimately, this reform is about restoring trust. Patients2151and hospitals should know whether their medicines were produced2152under U.S., European, or other trusted regulatory systems-or in2153a high-risk plant overseas that has not been inspected for2154years. Transparency empowers accountability. It ensures that2155safety, reliability, and quality once again guide the U.S.2156medicine supply chain.21572158V. The Human Cost of Inaction21592160    This issue affects American citizens every day. With the2161shuttering of the Shreveport facility, we lost more than a2162building. We lost skilled workers: chemists, operators,2163technicians who spent decades producing lifesaving medicines,2164only to see their plant close because they could no longer2165compete with subsidized imports.2166    Across the country, former pharmaceutical production-linked2167communities in New Jersey, Pennsylvania, Louisiana, and beyond2168are now home to idle or demolished facilities. These plants2169once supported thousands of good-paying, middle-class jobs and2170sustained local economies. The economic damage is long-lasting,2171and rebuilding those capabilities takes years. If we lose the2172remaining domestic producers, we lose not only capacity but an2173entire generation of expertise. At some time in the future our2174national security may require this workforce.21752176VI. Why This Matters for Seniors and Patients21772178    The Committee on Aging is right to make this a priority.2179America's seniors are the largest users of generic medicine and2180the most at risk when shortages occur.24 Generic medicines2181serve as the foundation of treatment for roughly 90 percent of2182Americans taking prescription drugs. More than 270 million2183people in this country filled at least one prescription last2184year, and the vast majority of those prescriptions were2185generics.2186    When a foreign plant halts shipments or fails inspection,2187it's seniors who face delays, rationing, or sub-optimal2188treatment.25 Hospitals scramble to stretch limited supply,2189pharmacists search for less-than-ideal substitutes, and2190patients face higher costs and worse care.26 27 For vulnerable2191and elderly patients, drug shortages can be life-threatening.2192Delays or interruptions in treatment can worsen health outcomes2193and significantly increase the risk of serious illness or2194death.282195    These crises result from a global race to the bottom, where2196foreign manufacturers cut corners and American producers are2197close amid unsustainable pricing. The real cost of cheap2198imports is an unstable drug supply that puts patients at risk.2199    The cost of rebuilding U.S. capacity is small compared to2200the cost of dependence. For Oxford's products, the difference2201between a sustainable domestic price and a foreign import price2202is often less than one cent per tablet. In return, Americans2203would gain a reliable supply, verified safety, and high-quality2204domestic manufacturing jobs.22052206VII. Oxford's Commitment and Readiness22072208      
Oxford stands ready to do its part. We have the2209workforce, the technology, and the physical capacity to expand2210immediately. With capital support and stable demand, we could:2211      
Quadruple monthly output from 180 million to 750 million2212doses.2213      
Employ 200+ people in skilled pharmaceutical2214manufacturing roles.2215      
Build an on-site API facility to vertically integrate2216our supply chain domestically and reduce foreign reliance.22172218    Our experience proves that making medicines in America is2219possible. What's needed now is a framework that rewards2220companies for doing the right thing and allows the domestic2221industry to expand nationwide-producing safe, consistent, high-2222quality products under U.S. oversight.22232224VIII. Securing America's Medicines: The Path Forward22252226    Rebuilding trust in our medicines starts with rebuilding2227the ability to make them.Congress has recognized that2228industries like semiconductors, aluminum, rare earth minerals,2229and batteries represent national strategic assets. Generic2230pharmaceuticals deserve the same recognition. If we lose2231control of medicine production, we lose control of public2232health itself.2233    This is an issue we must confront-and we must begin now.2234The industry stands at a crossroads between continued collapse2235and lasting renewal. Rebuilding capacity becomes more2236challenging and costlier every year we delay.22372238    Oxford urges Congress to:22392240    1. Affirm generic domestic pharmaceutical manufacturing as2241a national security priority under Section 232.2242    2. Create procurement incentives and long-term contracts2243for U.S.-made medicines.2244    3. Support investment in domestic API production and2245vertical integration.2246    4. Require U.S.-level safety standards for all imported2247drugs and full transparency so patients and hospitals know2248where their medicines come from.22492250    Protecting America's seniors means protecting America's2251medicine supply. At Oxford, we have the skill, the knowledge,2252and the determination to help rebuild our nation's generic2253pharmaceutical supply chain. What we need now is the will of2254the federal government to act.2255    Submitted by: Tom Neely Chairman Oxford Pharmaceuticals2256Birmingham, Alabama22572258References2259--------------------------------------------------------------2260--------------226122621Olin Business School, Washington University in St. Louis.2263(2021, August). U.S. Health Security at Risk Because of2264Medicine Manufacturing Limits. https://olin.washu.edu/about/2265news-and-media/news/2021/08/study-us-health-security-at-risk-2266because-of-medicine-manufacturing-limits.php226722682Council on Strategic Risks. (2024). The National Security2269Rationale for Stockpiling Key Pharmaceutical Ingredients2270https://councilonstrategicrisks.org/2024/03/05/the-national-2271security-rationale-for-stockpiling-key-pharmaceutical-2272ingredients227322743Exiger. (2020). A Bitter Pill: America's Dependence on China-2275Made Pharmaceuticals. https://www.exiger.com/perspectives/a-2276bitter-pill-america-dependence-on-china-made-pharmaceuticals/227722784Huang, M., et al. (2014). Key Drug Innovation Program in2279China: A Review of Policy and Outcomes. Health Research Policy2280and Systems, 12(27). https://health-policy-2281systems.biomedcentral.com/articles/10.1186/1478-4505-12-27228222835Stolberg, S. G. (2025, November 4). Trump's New Plan for2284Generic Drug Manufacturing Draws Mixed Reactions. The New York2285Times. https://www.nytimes.com/2025/11/04/health/generic-drug-2286manufacturing-trump.html228722886Ibid.228922907U.S. Government Accountability Office. (2024). FDA: Foreign2291Drug Manufacturing Inspections - Challenges Persist (GAO-24-2292107359). https://www.gao.gov/products/gao-24-107359229322948White & Case LLP. (2025). FDA Foreign Inspections: Key2295Developments and Strategic Shifts. https://www.whitecase.com/2296insight-alert/fda-foreign-inspections-key-developments-and-2297strategic-shifts229822999Kelley School of Business, Indiana University. (2025, February230019). All Generic Drugs Are Not Equal: Study Finds Generics Made2301in India Have More Severe Adverse Events. https://2302blog.kelley.iu.edu/2025/02/19/all-generic-drugs-are-not-equal-2303study-finds-generics-made-in-india-have-more-severe-adverse-2304events/2305230610U.S. Food and Drug Administration. (2023). Inspection Report:2307Intas Pharmaceuticals Limited. https://www.fda.gov/media/2308164602/download2309231011FiercePharma. (2024, October 3). Finding Birds, Lizards, and2311Cats - FDA Says "Oh My!" in Scathing Hetero Form 483. https://2312www.fiercepharma.com/manufacturing/finding-birds-lizards-and-2313cats-fda-says-oh-my-hetero-scathing-form-4832314231512Ibid.2316231713Ibid.2318231914White & Case LLP. (2025). FDA Foreign Inspections: Key2320Developments and Strategic Shifts. Ibid. https://2321www.whitecase.com/insight-alert/fda-foreign-inspections-key-2322developments-and-strategic-shifts2323232415Association for Accessible Medicines. (2023, June 22). White2325Paper on Drug Shortages. https://accessiblemeds.org/wp-content/2326uploads/2024/11/AAM--White--Paper--on--Drug--Shortages-06-22-23272023.pdf2328232916Ibid.2330233117USC Schaeffer Center for Health Policy & Economics. (2017).2332The Flow of Money Through the Pharmaceutical Distribution2333System. https://schaeffer.usc.edu/research/flow-of-money-2334through-the-pharmaceutical-distribution-system/2335233618Ibid.2337233819U.S. Department of Health and Human Services, Office of2339Inspector General. (2024). Drug Spending in Federal Programs.2340https://oig.hhs.gov/reports/featured/drug-spending/2341234220U.S. Government Accountability Office. (2025). Prescription2343Drugs: Federal Spending and Oversight Gaps (GAO-25-107187).2344https://www.gao.gov/assets/gao-25-107187.pdf2345234621U.S. Government Accountability Office. (2021). Prescription2347Drugs: Federal Purchasing and Contracting Trends (GAO-21-111).2348https://www.gao.gov/assets/gao-21-111.pdf2349235022U.S. Government Accountability Office. (2020). Drug Supply2351Chain Security and FDA Oversight Gaps (GAO-20-718363). https://2352www.gao.gov/assets/720/718363.pdf2353235423U.S. Senate. (2023). FY23 National Defense Authorization Act2355Section 860: Risk Management for DoD Pharmaceuticals. https://2356www.warren.senate.gov/imo/media/doc/FY23/20NDAA/20sec/20860/235720Risk/20management/20for/20DoD/20Pharmceuticals1.pdf2358235924Association for Accessible Medicines. (2024, January). 20242360U.S. Generic and Biosimilar Medicines Savings Report. https://2361accessiblemeds.org/wp-content/uploads/2025/01/AAM-2024-Generic-2362Biosimilar-Medicines-Savings-Report.pdf2363236425Rowland, C. (2023, June 27). Cancer Drug Shortage Highlights2365Fragile Generics Supply Chain. The Washington Post. https://2366www.washingtonpost.com/business/2023/06/27/cancer-drug-2367shortage-generics/2368236926Owens, C. (2023, March 21). Drug Shortages Upend Cancer2370Treatments Across U.S. Axios. https://www.axios.com/2023/03/21/2371drug-shortages-upend-cancer-treatments2372237327Johns Hopkins Bloomberg School of Public Health. (2023). Drug2374Shortages Are Affecting Cancer Treatments. https://2375publichealth.jhu.edu/2023/drug-shortages-are-affecting-cancer-2376treatments2377237828National Center for Biotechnology Information. (2023). Drug2379Shortages and Their Impact on Patient Care. https://2380www.ncbi.nlm.nih.gov/books/NBK608930/23812382                 U.S. Senate Special Committee on Aging23832384          "Made In America: Restoring Trust In Our Medicines"23852386                           November 19, 202523872388                      Prepared Witness Statements23892390                            Patrick Cashman23912392    Chairman Scott, Ranking Member Gillibrand, and2393distinguished members of the committee:2394    On behalf of the millions of Americans who require2395antibiotics every year to protect against life-threatening2396bacterial infections, thank you for your attention to the2397security and resilience of the United States' pharmaceutical2398supply chain.2399    My name is Patrick Cashman, and I serve as President of2400USAntibiotics, headquartered in Bristol, Tennessee.2401USAntibiotics is the last remaining end-to-end domestic U.S.2402manufacturer of amoxicillin, the most prescribed antibiotic in2403the country.2404    The facility I lead has a proud history of supplying this2405critical generic medicine to American patients for more than 402406years. Until around 2008, every dose of amoxicillin needed to2407treat life-threatening bacterial infections in this country was2408produced at our Bristol plant. The years that followed were2409punctuated by escalating subsidized competition from Indian and2410Chinese generic drugmakers. In the space of 12 years, we had2411crashed from 100 percent of the U.S. market to zero, our2412production lines were dark, and our assets had been placed into2413bankruptcy.2414    But our story didn't end there. The company was rescued in24152021 by its first-ever American owners, who felt passionately2416that the United States could not be dependent on hostile2417foreign powers for such a critical resource as antibiotics.12418Over the last four years, we've revived the facility, rehired2419and grown our staff, and restored consumer confidence in2420America's antibiotic supply chain with the assistance of great2421partners like Walmart.2422    The challenge of creating a resilient domestic antibiotic2423supply chain is enormous and urgent. It's not simply a question2424of public health but national security. A country without2425stable, secure access to life-saving antibiotics cannot grow2426its economy or defend itself against threats.2427    My testimony today will outline the unique challenges faced2428by U.S. manufacturers of critical generic medicines, such as2429amoxicillin. I will devote particular attention to well-2430intentioned but counterproductive government contracting2431barriers that sideline U.S. manufacturers like ours. I will2432also propose policy recommendations to ensure our healthcare2433supply chain remains secure, resilient, and American-made.24342435I. The Strategic Importance of Domestic Antibiotic2436Manufacturing24372438    Antibiotics are the backbone of modern medicine. Without2439them, routine surgeries become life-threatening and common2440infections become lethal. Our nation's health security,2441military readiness, and emergency preparedness hinge on2442reliable access to antibiotics.2443    According to the Centers for Disease Control and2444Prevention, amoxicillin alone accounts for approximately 502445million prescriptions annually in the U.S., making it the2446single most prescribed antibiotic.2 It treats a wide range of2447infections, particularly in children. Yet the overwhelming2448majority of today's U.S. amoxicillin supply is sourced from2449overseas, often from a small handful of producers, many of2450which are concentrated in India and China. Today, USAntibiotics2451serves approximately 5% of the U.S. market, even though we have2452the underutilized capacity to meet 100% of the country's demand2453once again.2454    Seniors account for a disproportionate share of antibiotic2455prescriptions and surgical procedures. According to CDC data,2456adults over 65 receive antibiotics at rates 50 percent higher2457than younger Americans.3 Hip replacements, cardiac procedures,2458and cancer surgeries-all of these life-extending interventions2459depend on reliable access to antibiotics.2460    Now, consider the post-operative risks when antibiotics are2461unavailable or of low quality. A routine hip replacement2462becomes a life-threatening gamble. A cardiac stent placement2463risks deadly infection. Cancer surgery-already traumatic-2464becomes even more dangerous. During the 2022 and 20232465amoxicillin shortages, hospitals across the country were forced2466to ration antibiotics, delay elective surgeries, and substitute2467less effective treatments.4 Elderly patients and children were2468impacted most by these shortages.2469    This vulnerability extends beyond surgeries. Pneumonia2470kills roughly 50,000 Americans annually, with seniors2471representing the overwhelming majority of deaths.5 Urinary2472tract infections, which disproportionately affect older women,2473can become life-threatening sepsis without prompt antibiotic2474treatment. Skin infections from minor wounds become dangerous2475without reliable antibiotic access.2476    These shortages occurred during peacetime and under normal2477economic conditions alike, without any overt effort by foreign2478manufacturers to restrict supply. Imagine what happens during a2479crisis when foreign governments decide to prioritize their own2480populations over exports. Imagine what happens if China decides2481to weaponize pharmaceutical exports the way Russia weaponized2482energy exports to Europe.2483    We must treat antibiotic production with the same strategic2484urgency as energy independence or semiconductor manufacturing.2485Rebuilding domestic capacity is not optional. It's essential to2486ensure a safe, stable supply chain.2487    If our facility were to shutter operations permanently, it2488would take at least five years and hundreds of millions of2489dollars to construct a new facility capable of producing2490amoxicillin. That timeline assumes favorable regulatory2491treatment, available capital, and a skilled workforce-none of2492which are guaranteed. More realistically, rebuilding domestic2493amoxicillin capacity from scratch could take a decade.2494    That would be half a decade or more in which this country2495would be entirely reliant on China and India, during which time2496one or both countries could restrict our access. Quality2497matters. Source matters. Security of supply matters.2498    The quality gap is equally alarming. A 2025 peer-reviewed2499study found that serious adverse events-including2500hospitalization, disability, and death-were 54 percent higher2501for generic drugs manufactured in India than for equivalent2502drugs made in the United States.6 That difference represents2503real people, real harm, and real cost. When quality fails,2504patients suffer-and our entire healthcare system pays for it in2505higher costs, longer hospital stays, and lost trust.2506    The FDA's inspection system also requires urgent reform.2507Domestic facilities are typically inspected without notice,2508allowing regulators to see real working conditions. By2509contrast, foreign inspections are often announced up to twelve2510weeks in advance, giving manufacturers time to conceal2511problems. That is not a level playing field, and it does not2512ensure safety. Although the FDA announced in May of this year2513that it would expand its use of unannounced inspections at2514foreign manufacturing facilities, it is not clear that FDA has2515the funding or workforce capacity to fulfill that commitment.72516    Mandatory, independent quality testing of all imported2517medicines is both reasonable and essential. The Department of2518Defense testing program with Valisure provides a potential2519model for larger-scale safety assurance testing of imported2520pharmaceuticals.825212522II. Recognition and Validation of Our Strategic Importance25232524    Earlier this year, the U.S. Food and Drug Administration2525launched the Commissioner's National Priority Voucher program2526to recognize critical pharmaceutical manufacturing that2527addresses urgent public health needs. This competitive program2528represents the FDA's acknowledgment that certain medicines and2529certain manufacturers warrant special regulatory recognition2530and support.2531    USAntibiotics was selected for this distinction based on2532our production of AugmentinTM XR. This recognition validates2533what we've long argued: domestic antibiotic manufacturing2534represents a strategic national priority. The FDA understands2535the vulnerability created by foreign dependence.2536    Federal pharmaceutical procurement policy needs to catch up2537with what the FDA already knows. The agency charged with2538ensuring drug safety and efficacy has recognized our2539importance. The agencies charged with purchasing life-saving2540medications for the federal government have not.25412542III. The Fragility of Global Antibiotic Supply Chains25432544    Antibiotic manufacturing contains multiple single points of2545failure, and almost all of them are overseas. The supply chain2546spans continents and involves dozens of steps, from key2547starting materials to active pharmaceutical ingredients to2548finished drug products. Any interruption along this complex2549chain would have catastrophic consequences for public health.2550    China produces approximately 45% of the active2551pharmaceutical ingredients used in amoxicillin today, and it2552also accounts for a majority of the global key starting2553material market.9 Even as India leads the world in finished2554form amoxicillin exports, its drugmakers are highly reliant on2555Chinese-made amoxicillin API. The result is that the majority2556of amoxicillin on pharmacy shelves today is simply Chinese2557chemistry with Indian finishing.2558    USAntibiotics has never purchased, and will never purchase,2559Chinese API. We source exclusively from Trade Agreement Act-2560compliant partners in Europe, but many of our subsidized2561foreign competitors don't share these supply chain concerns,2562buying instead from wherever the prices are lowest.2563    The concentration risk is staggering. Suppose China2564restricted API exports, whether for economic leverage or during2565a geopolitical crisis, millions of Americans could lose access2566to life-saving medicine within weeks. The Strategic National2567Stockpile would likely not sustain the country for more than a2568few months in the event of a bacterial pandemic. The United2569States has no domestic manufacturing alternative to2570USAntibiotics-which is why the risk of our closure is so2571significant.2572    This vulnerability extends beyond amoxicillin. The same2573dynamics affect dozens of other critical generic medicines. The2574U.S. has offshored our pharmaceutical industrial base to2575countries that may not share our interests, and we've done so2576without any meaningful contingency planning. The Department of2577Defense has conducted multiple studies documenting these2578vulnerabilities, yet procurement practices have not changed.2579    Some might argue that market forces will naturally correct2580these vulnerabilities, that if Chinese or Indian supply becomes2581unreliable, manufacturers will diversify, but that argument2582ignores the economics of generic drug manufacturing. Margins2583are so thin that manufacturers cannot afford to maintain2584redundant supply chains. They source from the cheapest2585supplier, which is often the most subsidized, meaning China.2586    Others might argue that stockpiling provides adequate2587insurance against supply disruptions, but stockpiles are2588expensive to maintain, have limited shelf life, and cannot2589possibly cover all essential medicines in sufficient2590quantities. Stockpiles are a temporary buffer, not a strategic2591solution.2592    The only real solution is domestic manufacturing capacity2593for critical medicines. That capacity must be maintained during2594peacetime even if it costs more than foreign alternatives,2595because once it's gone, it cannot be quickly rebuilt - and may2596never return.25972598IV. Unique Challenges to Domestic Generic Antibiotic2599Manufacturing26002601    While all pharmaceutical manufacturers face global2602competitive pressures, generic antibiotics like amoxicillin2603represent a uniquely challenging market.260426051. Unfair Global Competition and Market Distortions26062607    Generic antibiotics are among the lowest-cost2608pharmaceutical products in the world. Amoxicillin, in2609particular, is often sold at razor-thin margins. A typical2610bottle of generic amoxicillin might wholesale for just a few2611dollars, leaving manufacturers with pennies in profit per2612prescription.2613    Indian and Chinese manufacturers benefit from significant2614state subsidies, lower labor costs, and less stringent2615environmental, regulatory, quality, and safety standards. These2616advantages allow them to undercut U.S. manufacturers on price,2617often selling at or below their production costs. One 20222618study found that a lack of regulatory oversight in China and2619India allows their drugmakers to cut production costs by as2620much as 25 percent.102621    These pricing tactics often resemble anti-competitive2622dumping practices, in which foreign producers flood the market2623to eliminate competition. The playbook is straightforward:2624subsidized manufacturers offer below-market pricing to drive2625out unsubsidized competitors, then raise prices once2626competition is eliminated. We've seen this pattern in steel,2627solar panels, and countless other industries.2628    Recently, some Indian drugmakers have been selling2629amoxicillin at a price below our chemical costs for active2630pharmaceutical ingredients. That means they're offering2631finished products for less than we pay just for the raw2632materials. Either they're selling at a loss (subsidized by2633their government) or they're using such substandard ingredients2634that quality is suspect.2635    U.S. manufacturers must comply with rigorous FDA2636regulations, maintain higher quality standards, and absorb2637higher input and operational costs. Our workers earn middle-2638class wages with benefits. Our facilities meet U.S.2639environmental standards. We pay U.S. taxes. While these2640standards are vital for public safety and American prosperity,2641they create an uneven playing field that deters domestic2642investment.2643    The competitive disadvantage compounds over time. Foreign2644manufacturers gain scale advantages by supplying not just their2645domestic markets but global markets. They invest in newer2646equipment and more efficient processes. They develop expertise2647and institutional knowledge. Meanwhile, domestic manufacturers2648like USAntibiotics struggle to survive on a five percent market2649share, unable to invest in growth because we're fighting for2650survival.265126522. Lack of Long-Term Purchasing Commitments26532654    Generic manufacturers often operate without secure or long-2655term purchasing agreements. Most buyers, whether they are2656pharmacy chains, hospitals, or distributors, prioritize cost2657over reliability or origin. They purchase on short-term2658contracts, often as short as 90 days, and switch suppliers2659solely on price.2660    This purchasing behavior leaves U.S. manufacturers2661vulnerable to market fluctuations and unable to make long-term2662capital investments or retain specialized labor. A U.S.2663generics manufacturer cannot reasonably invest tens of millions2664in new equipment when its largest customer might switch to a2665foreign competitor next quarter based on a price difference of2666pennies per unit.2667    Contrast this with defense or semiconductor procurement,2668where the federal government frequently uses multi-year2669contracts to ensure stability and scalability. Defense2670contractors operate under contracts that span years or even2671decades. These long-term commitments allow contractors to2672invest in facilities, retain skilled workers, and plan for the2673future.2674    The Berry Amendment has required the Defense Department to2675buy American textiles, food, and hand tools since 1941. The2676Trade Agreements Act restricts government purchases to U.S. and2677designated country products. The Buy American Act requires2678federal agencies to procure US domestic materials and products,2679subject to conditions. Federal agencies routinely avoid Chinese2680telecommunications equipment despite lower costs. The2681government pays premiums for American-made vehicles,2682construction materials, and technology solutions.2683    Why? Because economic security, supply chain security, and2684national security sometimes require paying more for domestic2685production. Because supply chain resilience has value beyond2686immediate cost savings. Because maintaining domestic industrial2687capacity serves strategic objectives that transcend quarterly2688purchasing decisions.2689    Pharmaceutical procurement should align with these existing2690practices. Yet it doesn't. Antibiotics are treated as2691commodities to be purchased from the lowest bidder, regardless2692of source or supply chain resilience.2693    The government could transform this dynamic with relatively2694modest changes to procurement practices. Long-term contracts2695with domestic manufacturers provide the revenue stability2696needed to justify capital investments and workforce2697development. Even if those contracts cost pennies more per unit2698than foreign-origin alternatives, the national security2699benefits would far exceed the incremental costs.270027013. Lack of Recognition for National Security Relevance27022703    Generic antibiotics are not treated as strategic assets in2704the same way that weapons systems or critical minerals are.2705This means manufacturers cannot access the same financing2706tools, tax incentives, or industrial base support programs2707available to other critical infrastructure sectors.2708    Defense contractors can access Defense Production Act2709authorities, guaranteed loans, and preferential tax treatment.2710Semiconductor manufacturers received tens of billions in direct2711subsidies through the CHIPS Act. Energy manufacturers and2712operators benefit from investment tax credits and accelerated2713depreciation.2714    Generic drug manufacturers receive none of these benefits,2715even though pharmaceutical supply chain failures could kill2716more Americans than most military threats.2717    The threat to U.S. national security and public health2718posed by antibiotic shortages is just as real, and arguably2719more acute and more immediate, than many threats that receive2720significant federal support. We must reclassify generic2721critical medicines as national security assets and build policy2722around that recognition.27232724V. The Small Business Set-Aside Paradox: How Government Policy2725Threatens America's Last Antibiotic Manufacturer27262727    In 2021, USAntibiotics was rescued from bankruptcy by2728Jackson Healthcare, one of the largest healthcare staffing2729agencies in the United States.2730    When the Bristol facility faced permanent closure, Jackson2731Healthcare and its founder, Rick Jackson, recognized the2732national security imperative in restoring domestic antibiotic2733production. He stepped in when no one else would, including our2734government. Over the last four years, Jackson has spent many2735tens of millions to reactivate our production lines and even2736more to underwrite our losses. They are the only reason that2737the United States still possesses antibiotic manufacturing2738capacity.2739    But by virtue of our ownership by a larger company,2740USAntibiotics has been precluded from participating as a prime2741contractor in small business set-aside contracts for2742amoxicillin. The federal government has recently structured2743virtually all amoxicillin contracts on a small business set-2744aside basis, effectively locking out America's only domestic2745manufacturer from competing as a prime for federal government2746business.2747    This is the height of irony. USAntibiotics would have2748closed permanently without Jackson Healthcare's ownership. No2749one else was willing to rescue this facility. No private equity2750firm saw a profitable opportunity. No pharmaceutical company2751wanted to enter the low-margin generic antibiotics market.2752Jackson Healthcare stepped up when others walked away - viewing2753the acquisition out of bankruptcy of USAntibiotics not as a2754profitmaking opportunity, but as a U.S. national security2755imperative.2756    Jackson has subsidized our losses while we've worked to2757rebuild market share and achieve profitability. They've2758invested tens of millions when others invested nothing. They've2759created jobs when other pharmaceutical facilities were closing.2760They've restored domestic manufacturing capacity when the trend2761was toward greater foreign dependence.2762    And now, because of that patriotic investment, we're2763effectively barred from selling to the federal government2764through prime contracts.2765    The government's small business set-aside policies exist2766for good reasons. They're designed to help small businesses2767compete against larger corporations. They prevent large firms2768from using their scale and resources to crowd out smaller2769competitors. These goals are admirable, and the policies serve2770essential purposes in many contexts.2771    But when applied to critical medicines with severe supply2772chain vulnerabilities, these policies can produce perverse and2773dangerous consequences. In practice, they prevent the only2774American manufacturer from selling to the government while2775allowing foreign competitors, often subsidized by their own2776governments, to dominate federal procurement. They treat2777domestic manufacturers owned by successful American companies2778worse than foreign manufacturers owned by Chinese state-owned2779enterprises.2780    This paradox has created a reality in which a U.S.-based2781small business repackager of foreign-origin drugs can partner2782with a Chinese or Indian enterprise to the detriment of the2783only U.S. end-to-end manufacturer of that critical medicine.2784    Since January 2023, USAntibiotics has sold around $12785million directly to government purchasers through the United2786States Department of Veterans Affairs and the United States2787Public Health Service via the Federal Supply Schedule System.2788This amount represents a tiny fraction of government antibiotic2789purchases, and it's only possible through the Federal Supply2790Schedule, which operates differently from direct contracts.2791    In September 2022, the U.S. Department of Health and Human2792Services issued an approximately $40 million award for the2793provision of amoxicillin for the Strategic National Stockpile.2794This contract was structured as a small business set-aside,2795excluding USAntibiotics from competing. That means during2796roughly the same period in which the last U.S. domestic2797manufacturer of amoxicillin sold less than $1 million of2798amoxicillin to U.S. government purchasers, our government spent279940 times that amount on foreign-origin amoxicillin.2800    Every dollar spent on Chinese or Indian amoxicillin2801strengthens their industrial base while weakening ours. It2802sends a clear message to any entrepreneur considering domestic2803pharmaceutical manufacturing: the U.S. government won't support2804you. Even if you invest tens of millions of private capital,2805create high-quality manufacturing jobs, and address a critical2806national security and supply chain security vulnerability, the2807government will continue buying from foreign competitors2808because its procurement rules don't account for strategic2809considerations and prioritize lowest cost over quality.2810    The $40 million Strategic National Stockpile contract2811perfectly illustrates the problem. The stockpile exists to2812protect Americans during public health emergencies. Its entire2813purpose is to supply security during crises when normal supply2814chains fail. Yet HHS structured the contract in a way that2815excluded the only American manufacturer from competing.2816    The government's approach to stockpile procurement2817demonstrates a fundamental misunderstanding of the stockpile's2818purpose. The stockpile should prioritize American manufacturers2819for critical medicines where domestic capacity exists. This2820approach serves dual purposes: it ensures supply security and2821resilience during crises while providing the revenue stability2822that domestic manufacturers need to survive.2823    But current policy does the opposite. It treats stockpile2824procurement the same as any other government purchase,2825prioritizing short-term cost savings over long-term supply2826security.2827The Repackager Problem28282829    Some U.S. companies import foreign-origin amoxicillin, slap2830a new label on the bottle, and market it as "Made in America."2831These repackagers add no manufacturing value. They don't2832operate pharmaceutical manufacturing facilities that create2833jobs at the scale that true end-to-end pharmaceutical2834manufacturing provides.2835    Yet current procurement rules often treat them the same as2836genuine domestic manufacturers like USAntibiotics.2837    When the government buys from a repackager instead of2838USAntibiotics, it's not buying American. It's buying Chinese or2839Indian antibiotics with an American sticker. That might satisfy2840the letter of some procurement rules, but it violates the2841spirit of domestic preference policies and does nothing to2842strengthen our U.S. pharmaceutical industrial base.2843    Some repackagers are transparent about their business2844model. Others use carefully worded marketing that implies2845domestic manufacturing without explicitly claiming it.2846Procurement officers who lack pharmaceutical industry expertise2847may not understand the difference between genuine manufacturing2848and simple repackaging.2849    A 2023 Department of Defense review found that the country2850of origin for API used in 22% of essential military drugs could2851not be identified.11 That's not supply chain management-that's2852negligence.2853    USAntibiotics is the only end-to-end domestic manufacturer,2854meaning we control the entire production process from API to2855finished drug. We source our API from Trade Agreement Act-2856compliant European manufacturers, not from China. When you buy2857USAntibiotics amoxicillin, you're buying genuine American2858manufacturing with genuine supply chain security, but2859procurement rules don't distinguish between our approach and2860that of repackagers in a race to the bottom.2861    What U.S. Manufacturers of Generic Antibiotics Need2862    We are not asking for a U.S. government subsidy or handout.2863We're not asking for protection from competition or guaranteed2864profit margins. We're not asking for special treatment beyond2865what the government already provides to defense contractors,2866semiconductor manufacturers, and countless other strategic2867industries.2868    We're asking that when the government buys antibiotics, it2869prioritizes genuine U.S. manufacturing over cheap foreign2870imports, whether those imports arrive directly or are disguised2871by domestic repackagers.2872    We're asking that procurement policies align with national2873security imperatives rather than purely with short-term cost2874minimization.2875    We're asking that the government not allow well-intentioned2876small business rules to prevent the only American manufacturer2877from competing for contracts for medicines designated as2878critical to national security.28792880VI. How America's Allies Handle Pharmaceutical Sovereignty28812882    The United States is not alone in recognizing2883vulnerabilities in the pharmaceutical supply chain. Our allies2884have taken aggressive action to secure domestic manufacturing2885capacity for critical medicines. Their approaches offer lessons2886for American policymakers.2887    The European Union launched the Critical Medicines Alliance2888to reshore manufacturing of essential medicines.112 This2889initiative identifies critical drugs where European dependence2890on Asian manufacturing poses unacceptable risks, then provides2891funding and regulatory support to rebuild European capacity.2892    France announced a ?160 million fund explicitly dedicated2893to rebuilding domestic pharmaceutical production.13 The French2894government identified 30 essential medicines for which domestic2895production had been lost to Asian competitors, then offered2896financial incentives to pharmaceutical companies willing to2897reshore manufacturing.2898    Japan has prioritized the reshoring of critical drug2899manufacturing through direct government investment and2900preferential procurement policies. The Japanese government2901maintains a list of strategic medicines where domestic2902production receives substantial support.2903    Germany has launched multiple initiatives to reduce its2904reliance on China for pharmaceuticals, including research2905funding for domestic API production and requirements that2906government purchasers consider supply chain security alongside2907price.2908    Australia established the Sovereign Manufacturing2909Capability Plan to identify and support critical industries,2910including pharmaceutical manufacturing. The plan includes2911direct subsidies, tax incentives, and preferential procurement2912for strategic goods.2913    These countries understand that pharmaceutical sovereignty2914is national security. They've moved beyond studies and reports2915to actual policy implementation with real funding. They've2916recognized that maintaining domestic pharmaceutical2917manufacturing capacity requires government support, not just2918market forces.2919    Yet while our allies act decisively, America dithers.2920Meanwhile, our last domestic manufacturers close their doors2921or, in USAntibiotics' case, operate on the edge of insolvency2922while the government buys from foreign competitors.2923    We can learn from our allies' approaches without copying2924them wholesale. European subsidies may not be appropriate for2925the U.S. market. Japanese procurement policies may not fit2926American legal frameworks, but we must act with similar urgency2927and similar commitment to the principle that critical medicines2928require domestic industrial capacity.2929    The longer we delay, the more difficult rebuilding becomes.2930Manufacturing expertise is lost, workforces transition,2931facilities deteriorate, and supply chains become reliant on2932foreign sources. Each passing year makes domestic2933pharmaceutical manufacturing less viable, not more.29342935VII. Policy Recommendations29362937    To revitalize domestic manufacturing of generic antibiotics2938and protect our healthcare supply chain, I respectfully offer2939the following recommendations:29402941      1. Create Procurement Pathways for Critical Domestic2942Manufacturers29432944    When the federal government solicits contracts for2945medicines designated as essential medicines by the2946Administration for Strategic Preparedness and Response (ASPR),2947domestic manufacturers engaged in the end-to-end production of2948finished-form critical medicines should be allowed to compete2949regardless of whether their parent company is large or small.2950We respectfully submit to this committee that amoxicillin is2951critical to national security, because it is a reliable and2952highly effective treatment for bacterial infections.2953    When the only domestic source of a strategic good is owned2954by a larger company, that ownership structure should not2955prevent government purchases if those purchases serve national2956security objectives.2957    Alternatively, Congress could direct agencies to split2958contract awards between set-aside and open competition,2959ensuring that domestic manufacturers have opportunities to2960serve their government. A $40 million contract could be split2961into a $20 million small business set-aside and a $20 million2962open competition. This approach preserves support for small2963businesses while allowing domestic manufacturers to compete.2964    Or Congress could create a national security exception to2965small business set-asides for critical medicines where domestic2966manufacturing capacity is at risk. This exception would apply2967narrowly to situations in which a domestic manufacturer faces2968closure due to its inability to compete for government2969contracts.2970    The specific mechanism matters less than the outcome:2971America's last domestic amoxicillin manufacturer should be able2972to compete on a level playing field for government contracts.2973The current situation in which we're excluded from competing2974while foreign manufacturers dominate government procurement is2975indefensible from an economic security, national security, and2976supply chain security perspective.29772978      2. Define "Domestic Manufacturing" to Exclude Repackagers29792980    Any Buy American or domestic preference policy for2981pharmaceuticals should require that the finished dosage form be2982manufactured domestically through a process or combination of2983formulating, filling, and finishing, not simply labeled or2984repackaged domestically. Further, it should require that the2985active pharmaceutical ingredients be manufactured either2986domestically or by a supplier from a TAA-compliant country that2987has submitted to regular FDA on-site inspections. Repackagers2988who import foreign-origin drugs should not qualify for domestic2989preference treatment.2990    A domestic manufacturer, for purposes of federal2991procurement preference, should be defined as a company that2992performs all steps necessary to convert API from a designated2993country under the TAA regulations into a finished dosage form,2994including formulation, blending, granulation, tableting or2995encapsulation, and final packaging.2996    Companies that merely repackage or relabel foreign-2997manufactured drugs should be explicitly excluded from domestic2998preference provisions. Companies that manufacture finished2999drugs in the United States using Chinese and Indian API should3000likewise not qualify for domestic preference, at least in the3001context of critical medicines (i.e., medicines for which it is3002important to maintain a domestic manufacturing capability for3003national security purposes).3004    The government should also require country-of-origin3005disclosure for APIs in all federal pharmaceutical procurement.3006Full supply chain transparency from key starting materials3007through finished drug products should be mandatory for any3008government contract. Every government pharmaceutical contract3009should require detailed disclosure of the country of origin for3010all APIs and key starting materials.3011    This transparency serves multiple purposes, enabling3012procurement officers to make informed decisions about supply3013chain security, preventing repackagers from disguising foreign3014products as domestic, and creating accountability and enabling3015oversight.30163017      3. Establish Strategic National Stockpile Domestic3018Purchase Requirements30193020    The Strategic National Stockpile exists to protect3021Americans during public health emergencies. The stockpile3022should prioritize American manufacturers for critical medicines3023where domestic capacity exists. Congress should direct HHS to3024develop procurement strategies for the Strategic National3025Stockpile that give preference to domestic manufacturers of3026medicines designated as critical to national security.3027    Congress should appropriate multi-year funds to HHS to3028provide for multi-year stockpile procurement contracts that3029enable manufacturers to make long-term capital investments.3030    These longer-term contracts would serve dual purposes. They3031would ensure fresher stockpile inventory by enabling regular3032rotation rather than allowing medicines to age to expiration,3033and they would provide domestic manufacturers with the revenue3034stability needed to justify continued operations and capital3035investments.30363037      4. Incentivize Long-Term Purchasing Agreements30383039    Beyond the Strategic National Stockpile, encourage federal3040agencies broadly to enter into long-term contracts with3041domestic producers of essential medicines. This requires3042Congress to appropriate multi-year funds, but multi-year3043agreements will provide stability and predictability for3044manufacturers and will help us weather the storms caused by3045anti-competitive pricing from foreign competitors.3046    Defense contractors and semiconductor manufacturers operate3047under multi-year agreements that provide revenue stability and3048enable long-term capital planning. Generic drug manufacturers3049of critical medicines deserve the same consideration.3050    The government could establish Indefinite Delivery,3051Indefinite Quantity contracts for critical medicines, similar3052to those used in defense procurement. These IDIQ contracts3053would guarantee minimum purchase volumes while providing3054pricing predictability for both the government and3055manufacturers.3056    An IDIQ contract might guarantee that a manufacturer will3057supply between 20% and 80% of federal agency needs for a3058particular medicine over a five-year period, with specific3059delivery orders issued based on actual requirements. This3060structure provides manufacturers with enough certainty to3061justify capital investments while maintaining flexibility for3062government purchasers.3063    The Department of Veterans Affairs, the Department of3064Defense, the Public Health Service, and other federal3065healthcare providers collectively purchase enormous quantities3066of antibiotics. Coordinating these purchases through IDIQ3067contracts with domestic manufacturers would provide significant3068support to domestic manufacturing without requiring direct3069subsidies.30703071      5. Create a Strategic Antibiotic Manufacturing Fund30723073    Provide targeted grants, low-interest loans, and tax3074incentives to companies investing in domestic API and3075antibiotic production. The CHIPS Act offers a model that could3076be replicated for pharmaceuticals.3077    Just as semiconductor manufacturing received tens of3078billions in federal support to rebuild domestic capacity,3079critical pharmaceutical manufacturing deserves similar3080investment. The amounts needn't be comparable to CHIPS Act3081funding-pharmaceutical manufacturing requires far less capital3082than semiconductor fabs-but they should be meaningful enough to3083offset the competitive disadvantages that domestic3084manufacturers face.3085    This fund could support multiple activities. Direct grants3086could help manufacturers upgrade facilities and equipment. Low-3087interest loans could finance the construction of new API3088manufacturing capacity. Tax incentives could offset higher3089domestic labor and compliance costs.3090    The fund should prioritize medicines designated as critical3091to national security, particularly those where domestic3092manufacturing capacity has been lost or is at risk. Antibiotics3093would be a logical initial focus, but the fund could expand to3094cover other essential medicine categories.30953096      6. Enforce Trade Rules to Counter Predatory Pricing30973098    Instruct the Department of Commerce and USTR to investigate3099and, where appropriate, penalize unfair trade practices in the3100pharmaceutical sector. We cannot allow predatory pricing to3101destroy our last line of defense.3102    We support the ongoing Section 232 investigation regarding3103the national security effects of imports of pharmaceuticals and3104pharmaceutical ingredients. Section 232 investigations have3105been used to address perceived national security threats from3106steel, aluminum, and other strategic materials imports.3107Pharmaceuticals deserve the same scrutiny.3108    When foreign manufacturers engage in below-market pricing3109that threatens to eliminate domestic capacity, the government3110should use all available trade tools to counter those3111practices. This includes anti-dumping duties, countervailing3112duties to offset foreign subsidies, and tariffs justified by3113national security considerations.31143115VIII. Conclusion31163117    Rebuilding America's generic critical medicines3118manufacturing capacity is not just a matter of economics or3119public health. It is a matter of U.S. national security.3120    The federal government faces a choice. It can continue3121policies that inadvertently favor foreign sources over the3122dwindling number of American generics manufacturers, or it can3123align its procurement policies with its stated national3124security goals. It can ensure that small business rules don't3125prevent critical domestic manufacturers from competing, demand3126transparency in pharmaceutical supply chains, and provide long-3127term contracts and policy support that domestic manufacturers3128need to thrive. It can recognize that pharmaceutical3129sovereignty requires the same commitment we've shown to3130semiconductor sovereignty, energy independence, and defense3131industrial base preservation.3132    USAntibiotics stands ready to play our part. We have the3133infrastructure, the expertise, and the commitment. We have the3134capacity to supply 100 percent of America's amoxicillin needs.3135We employ skilled workers who take pride in producing medicine3136that saves American lives. We source our ingredients from3137allied countries, not adversaries.3138    But we need Congress to act boldly and urgently. It's time3139for procurement policy to align with the national security3140realities of global pharmaceutical trade. Preserving3141pharmaceutical manufacturing in America is as important as3142keeping semiconductor manufacturing, defense manufacturing, or3143any other strategic industry. It's time to stop rewarding3144foreign dependence and start supporting domestic resilience.3145    Thank you for the opportunity to testify. I look forward to3146your questions and working together on solutions that protect3147the health and safety of every American.3148    Respectfully submitted, Patrick Cashman, President,3149USAntibiotics Bristol, Tennessee31503151Resources3152-----------------------------------315331541Georgia Public Broadcasting. (2024, September 18). The only3155American maker of generic antibiotics wants the government to3156buy local. GPB News. https://www.gpb.org/news/2024/09/18/the-3157only-american-maker-of-generic-antibiotics-wants-the-3158government-buy-local31592Outpatient Antibiotic Prescriptions - United States. CDC.3160(2022) https://archive.cdc.gov/www--cdc--gov/antibiotic-use/3161data/report-2022.html31623Kabbani, S., et al. (2018). Outpatient Antibiotic Prescribing3163for Older Adults in the United States: 2011 to 2014. Journal of3164the American Geriatrics Society, 66(10), 1998-2005. https://3165pmc.ncbi.nlm.nih.gov/articles/PMC7909599/316641 in three U.S. hospitals severely affected by drug shortages,3167survey finds. NBC News. (August 2023) https://www.nbcnews.com/3168health/health-news/drug-shortages-causing-hospitals-skip-delay-3169ration-care-survey-finds-rcna9900731705Holland, E., et al. (2025). Demographic and regional trends of3171pneumonia mortality in the United States, 1999 to 2022.3172Scientific Reports, 15(1), 10103. https://www.nature.com/3173articles/s41598-025-94715-631746All generic drugs are not equal, study finds; Generics made in3175India have more `severe adverse events'. Indiana University3176Bloomington. (Feb 2025) https://blog.kelley.iu.edu/2025/02/19/3177all-generic-drugs-are-not-equal-study-finds-generics-made-in-3178india-have-more-severe-adverse-events31797U.S. Food and Drug Administration. (2025, May 6). FDA3180Announces Expanded Use of Unannounced Inspections at Foreign3181Manufacturing Facilities. https://www.fda.gov/news-events/3182press-announcements/fda-announces-expanded-use-unannounced-3183inspections-foreign-manufacturing-facilities31848Valisure. (2023, August 8). Valisure Signs Agreement with3185Department of Defense to Independently Test & Quality Score3186Drugs. PRNewswire. https://www.prnewswire.com/news-releases/3187valisure-signs-agreement-with-department-of-defense-to-3188independently-test--quality-score-drugs-301895301.html31899China's position and competitiveness in the global antibiotic3190value chain: implications for global health. Globalization and3191Health. (2024) https://3192globalizationandhealth.biomedcentral.com/articles/10.1186/3193s12992-024-01089-x319410Young, C. (2022, February). America's other health care3195crisis: Generic medicine supply chains. American Affairs3196Journal. https://americanaffairsjournal.org/2022/02/americas-3197other-health-care-crisis-generic-medicine-supply-chains319811Warren, E. (2023). FY23 NDAA section 860: Risk management for3199DoD pharmaceuticals. U.S. Senate. https://3200www.warren.senate.gov/imo/media/doc/FY23/20NDAA/20sec/20860/320120Risk/20management/20for/20DoD/20Pharmceuticals1.pdf320212European Commission. (2024, April 24). Commission launches3203the Critical Medicines Alliance to help prevent and address3204shortages of critical medicines. https://health.ec.europa.eu/3205health-emergency-preparedness-and-response-hera/overview/3206critical-medicines-alliance--en320713France to re-shore production of 50 key medicines. Le Monde.3208(June 2023) https://www.lemonde.fr/en/france/article/2023/06/320913/france-to-re-shore-production-of-50-key-medicines--6031218--32107.html32113212                 U.S. Senate Special Committee on Aging32133214          "Made In America: Restoring Trust In Our Medicines"32153216                           November 19, 202532173218                      Prepared Witness Statements32193220                            Eric Edwards, MD32213222    Chairman Scott, Ranking Member Gillibrand, and3223distinguished members of the Committee, thank you for the3224opportunity to testify on a matter that directly impacts the3225health, security, and well-being of millions of Americans,3226namely, our nation's growing dependence on fragile, foreign3227pharmaceutical supply chains and the resulting drug shortages3228that continue to threaten patient safety, public health, and3229national security.3230    My name is Eric Edwards. I am a physician, scientist, and3231co-founder of Phlow Corp., a leading American advanced3232pharmaceutical contract development and manufacturing3233organization (CDMO) and certified B-Corporation created to3234advance the domestic development and manufacturing of critical3235medicines and help reshore medicine manufacturing on U.S. soil.3236I also continue to serve as a volunteer paramedic in Virginia,3237providing care in emergency settings. These are also the3238settings where the consequences of drug shortages are most3239acutely felt.32403241I. The Human Cost of Drug Shortages32423243    Drug shortages are not abstract supply-chain problems. They3244are real crises unfolding daily in our nation's emergency3245rooms, ambulances, and operating suites. Across the country,3246clinicians are being forced to substitute unavailable3247medications with less effective or unfamiliar alternatives,3248increasing the risk of medication errors, adverse reactions,3249and patient harm. In my own clinical experience, there have3250been moments when critical drugs such as epinephrine for3251allergic emergencies, midazolam for seizures, or3252succinylcholine for intubating critical patients were simply3253unavailable. Every second counts for patients in these3254situations. Substituting or improvising can mean the difference3255between life and death.32563257II. Overreliance on Fragile, Foreign Supply Chains32583259    The U.S. today relies on foreign manufacturers, primarily3260in China and India, for most of its active pharmaceutical3261ingredients (APIs) and associated precursor chemical3262ingredients, including pharmaceutical intermediates and key3263starting materials (KSMs). In many essential medicine3264categories, there is only one qualified source, and it is often3265overseas. Although drug shortages have not been primarily3266attributed to geopolitical conflicts in the past, the risk is3267significant due to growing global tensions and supply chain3268vulnerabilities, leading to an unacceptable strategic3269vulnerability.32703271III. The Geopolitical and National Security Dimension32723273    Our pharmaceutical dependence is not just a public-health3274concern but rather a national-security threat. Rising global3275tensions make our fragile drug supply increasingly risky. If3276conflicts disrupt Asian trade routes or trigger export bans,3277the U.S. could lose access to essential APIs and precursor3278chemical ingredients needed for critical care, oncology, and3279infectious disease treatments. Future drug shortages may be3280significantly more severe, affecting a broader range of3281medications than we have seen in the past. The Defense3282Logistics Agency and the Department of Defense Inspector3283General have both warned that military readiness could be3284severely compromised by disruptions in the medical supply3285chain. A purposeful adulteration or export ban on key drug3286ingredients could leave warfighters without vital medicines.3287    Over the past few years, Congress has taken significant3288steps to secure rare earth minerals, once 80-90% imported,3289including by expanding the National Defense Stockpile through3290actions such as the purchase of critical minerals.3291    That same level of urgency is required for APIs and their3292chemical precursors, including KSMs, which underpin every3293essential medicine and medical countermeasure. Just as rare3294earths underpin critical technologies, APIs underpin the entire3295pharmaceutical supply chain, and without them, we cannot make3296critical medicines. Yet, the U.S. still imports over 80% of3297APIs, primarily from China and India, creating a hidden but3298serious risk exposed during the COVID-19 pandemic.3299    Just as Congress views the rare earth critical industrial3300base as vital to national security, the API industrial base for3301key medicines and medical countermeasures should also be3302safeguarded as essential health infrastructure. The same3303bipartisan resolve that drove progress in rare earths can, and3304must now, be harnessed to restore America's pharmaceutical3305sovereignty, ensuring that the lifeblood of our healthcare3306system is made safely, reliably, and here at home.33073308IV. What Phlow Is Doing to Address the Crisis33093310    Phlow was created to help solve this problem. In3311partnership with the U.S. Government, we have built a state-of-3312the-art advanced manufacturing campus in Virginia, designed to3313domestically produce APIs for medicines at both small and large3314scale. We share a campus with Civica Rx, which can produce the3315finished drug product for sterile injectable essential3316medicines. Our pharmaceutical campus integrates advanced3317manufacturing, process analytical technology, and digital3318quality control systems that are state-of-the-art, offering a3319high-quality, more efficient, and more sustainable way to make3320medicines entirely on U.S. Soil once again. Through our3321groundbreaking partnership with the Administration for3322Strategic Preparedness and Response (ASPR), Phlow is developing3323and supplying a broad catalogue of essential APIs. For each3324active ingredient program, Phlow reconstructs the chemistry,3325sources starting materials domestically or from allied nations3326if not possible to source or manufacture in the U.S., and3327leverages state-of-the-art development and manufacturing3328approaches, such as green chemistry and continuous3329manufacturing, to drive efficient, higher-yielding production,3330cost competitiveness, and a reduction of our environmental3331impact.3332    To date, we have completed five API development programs,3333filed four drug master files, and have a dozen additional APIs3334in various stages of development. Our latest program,3335epinephrine, is now making its way into a finished drug3336product, creating a product with both API and finished product3337manufactured in the U.S. - something that has not occurred in3338decades. This API was previously majority manufactured in3339Taiwan, highlighting the vulnerability of such a critical3340medicine supply chain. We are also proud to support the3341Department of Defense (DoD) in strengthening the warfighter3342supply chain through a pilot program focused on developing and3343manufacturing critical drug ingredients for medical3344countermeasures.3345    Phlow also co-founded the Children's Hospital Coalition,3346dedicated specifically to solving pediatric drug shortages. To3347date, we have delivered over 1.8 million doses of critical3348essential pediatric medicines to the Coalition to support a3349reliable supply of medicines that have experienced drug3350shortages. Furthermore, we have begun a domestic end-to-end3351program, from KSM to API to finished drug product, for3352ketamine, recently receiving the Commissioner's National3353Priority Review Voucher as a part of the FDA's inaugural pilot3354to support rapid development and approval of this critical3355essential medicine. Despite some misconceptions, ketamine3356remains vital to modern medicine as a fast-acting, versatile3357anesthetic that clinicians depend on for safe surgical3358procedures, emergency interventions, and battlefield care.3359    Phlow also worked with the U.S. Government to conceive of,3360and build, the U.S. Strategic Active Pharmaceutical Ingredient3361Reserve (SAPIR) program. SAPIR is designed to function as a3362national security buffer for medicine supply chains. Through3363SAPIR, we are working to maintain an inventory of end-to-end3364domestically produced or allied-nation-sourced KSMs,3365intermediates, and APIs for the most essential medicines3366identified by the federal government. This forward-leaning3367model not only allows the U.S. to secure a much larger number3368of critical APIs in larger quantities but also ensures that if3369global supply chains are disrupted, the U.S. retains the3370ability to rapidly convert reserve materials into finished drug3371products to protect Americans. Unlike traditional stockpiling,3372which often relies on imported finished products with limited3373shelf life, SAPIR focuses on the building blocks of3374pharmaceuticals, enabling immediate domestic surge3375manufacturing, longer stability windows, and far greater3376resilience.33773378V. What Is Needed for Sustainable Onshoring Success33793380    As we discuss how to strengthen America's medicine supply3381chain, it is important to be clear: the goal should not be to3382reshore every single medicine or chemical precursor ingredient.3383The U.S. pharmaceutical market encompasses more than 2,0003384approved medications. Attempting to onshore everything would be3385economically unrealistic and strategically unfocused.3386    Instead, we must take a disciplined, risk-based approach,3387one that prioritizes medicines based on clinical criticality,3388population reach, and supply-chain vulnerability. Some3389medicines, such as certain injectables used in emergency care,3390have no substitutes and are essential for saving lives within3391minutes. Others treat millions of Americans daily, meaning any3392disruption would have broad population-level impacts. We are at3393serious risk when essential drugs depend on fragile or highly3394concentrated foreign supply chains that can be disrupted, or3395even weaponized, without warning.3396    A national resilience strategy must therefore begin with3397the right-tiered list of essential medicines, regularly updated3398and informed by federal agencies, healthcare systems, and3399manufacturers. This list should continue to identify which APIs3400and KSMs require domestic or allied-nation production, which3401can be supported through diversified global sourcing, and which3402pose minimal risk. By doing this, we focus on the medicines3403that keep Americans alive in emergencies, followed by certain3404medications that stabilize chronic conditions and support3405national preparedness in times of crisis.3406    Despite considerable progress, the onshoring movement3407remains fragile. For this transformation to succeed, certainty3408and sustainability are essential. No company, no matter how3409mission-driven, can sustain long-term domestic production3410without predictable demand and multi-year commitments. America3411must invest in domestic and allied API manufacturing capacity,3412particularly through shared-infrastructure ecosystems that3413dramatically lower production costs while enabling3414environmentally responsible synthesis.3415    For Phlow, this aligns directly with our work under ASPR3416and the SAPIR program: if the U.S. cannot secure these earliest3417building blocks of medicines, it cannot secure the medicines3418themselves. Strategic API manufacturing is only as strong as3419the weakest upstream link. Therefore, this is not a one-company3420solution. We need a competitive marketplace of U.S.3421manufacturers aligned under a national strategy for medicine3422security.34233424    Several key policy enablers are required:342534261. Develop a Long-term and Comprehensive Strategy34273428    Restoring our nation's pharmaceutical supply chain cannot3429be achieved through isolated, short-term interventions. To3430prevent future shortages and secure our supply chain, the3431government must create a comprehensive, long-term plan that3432encompasses demand forecasting, industrial base growth,3433research and development, workforce development, and3434procurement reform. Congress should support a centralized3435authority to align policy and funding, while bringing stability3436for patients and predictability for manufacturers. Developing3437and then executing such a strategy requires sustained, cross-3438functional partnership across the federal government; siloed3439decision-making is a vulnerability.3440    Given the finite time and resources available, this3441strategy must prioritize those essential medicines and medical3442countermeasures that treat life-threatening conditions and for3443which no suitable clinical alternatives exist. Prioritization3444is not optional, but rather necessary, to ensure that federal3445investments protect the most critical and high-risk segments of3446our healthcare system.3447    At the same time, this strategy should leverage advanced3448development and manufacturing technologies, such as continuous3449manufacturing, that improve yields, reduce costs, strengthen3450quality, and enable greener, more sustainable chemistry.3451Integrating such technologies into the federal industrial base3452plan will not only accelerate domestic production but also3453ensure it is economically viable and environmentally3454responsible for the long term.345534562. Realign Payment and Procurement Policies with Reliability34573458    The central obstacle in restoring the reliability of3459America's drug supply is not a lack of data, but rather a lack3460of aligned incentives. The market will not shift back to the3461U.S. if the buyers of essential medicines, especially3462hospitals, clinics, and wholesaler intermediaries, remain3463structurally rewarded for choosing the lowest immediate cost,3464even when those savings come at the expense of long-term3465security and patient safety. Information about quality,3466sourcing, or supply-chain fragility becomes little more than a3467"warning label" if purchasers are neither financially supported3468nor contractually required to act on it. To change outcomes,3469federal entities should adopt procurement policies valuing3470supply chain reliability. Strategic investment in domestic3471sourcing can help save lives by strengthening national health3472security, reducing drug shortages, and mitigating the3473widespread disruptions they cause.34743. Ensure Predictable, Long-Term Resourcing3475    To build enduring resilience, the Administration and3476Congress must resource these programs with multi-year3477contracts, similar to how we support defense and energy3478infrastructure. This allows U.S. manufacturers to plan, invest,3479and scale with confidence.3480    There is much to learn from the Department of Defense's3481long-term industrial base planning and its disciplined use of3482multi-year procurement, which has enabled stable domestic3483production of critical materials for decades. Defense3484contracting models demonstrate that when the government3485provides predictable demand signals, industry responds with3486sustained investment, innovation, and surge capacity.348734884. Level the Playing Field34893490    We must ensure that domestic manufacturers can compete3491fairly against foreign producers who benefit from heavy state3492subsidies, lax environmental and labor standards, weak3493intellectual property protections, and currency manipulation -3494advantages that artificially suppress prices and distort global3495markets. Without corrective action, U.S.-based pharmaceutical3496manufacturers are forced to compete not on innovation or3497quality, but against foreign governments underwriting the true3498cost of production.349935005. Close the Acetris Loophole35013502    As previously recommended by this Committee, it is critical3503that Congress prioritizes work to close the Acetris loophole.3504This loophole breaks the connection between "Made in America"3505and the actual location of pharmaceutical value creation and3506strategic risk, enabling continued dependence on vulnerable3507foreign API supply chains even in federal purchasing programs3508intended to prioritize domestic or allied production.3509    Fixing the Acetris loophole is not about limiting trade or3510restricting competition; it is about aligning federal3511procurement with national security reality. APIs account for3512the greatest concentration of risk in the entire pharmaceutical3513supply chain. When the U.S. government buys drugs formulated3514domestically but sourced from adversarial nations upstream, it3515inadvertently reinforces the very dependencies we are working3516so hard to reduce. For essential medicines, particularly those3517relied upon by vulnerable patient populations, our military,3518and our emergency response systems, this loophole leaves the3519U.S. exposed to disruptions, coercion, and shortages3520originating far outside our borders.3521    Closing this gap would also give companies like Phlow the3522market signals needed to invest boldly in U.S. advanced3523manufacturing, end-to-end pharmaceutical ingredient synthesis,3524and strategic API reserves.35253526VI. Looking Ahead35273528    If we fail to act decisively, the next crisis will not be3529hypothetical. The shortages our great Nation has been coping3530with have shown us the harm they can cause. If the United3531States is not adequately prepared, the repercussions could be3532even more severe than those seen during past shortages of3533saline or chemotherapy treatments. We could see dangerous3534situations where anesthetics are unavailable in emergency3535rooms, saline or antibiotics are unavailable for a sepsis3536patient, or the inability of our military to access life-saving3537countermeasures in the midst of conflict.3538    However, if we succeed in creating a durable, competitive,3539and secure domestic pharmaceutical manufacturing base, we will3540have restored one of the most critical pillars of national3541resilience. Phlow is honored to play a role in this mission,3542and we stand ready to partner with the U.S. Government and our3543fellow innovators to make medicine security a permanent reality3544for the American people.35453546Conclusion35473548    Chairman Scott, Ranking Member Gillibrand, and members of3549the Committee, thank you for your leadership in shining a light3550on this issue. Drug shortages are not inevitable; they are the3551product of choices. Together, we can choose to build a safer,3552more resilient, and more self-reliant future for American3553healthcare.3554    Thank you, and I welcome your questions.35553556?35573558=======================================================================35593560                        Questions for the Record35613562=======================================================================35633564?35653566                 U.S. Senate Special Committee on Aging35673568          "Made In America: Restoring Trust In Our Medicines"35693570                           November 19, 202535713572                        Questions for the Record35733574                              Alan Coukell35753576                        Senator Raphael Warnock35773578    Question:35793580    Health care providers across Georgia are concerned about3581shortages of pharmaceutical drugs, including generic3582medications. Due to limited access to drugs, patients have been3583seeking alternative drugs and waiting longer periods for3584treatments.3585    What type of federal procurement reforms should Congress3586lead to address pharmaceutical drug shortages in states like3587Georgia?35883589    Response:35903591    The most common cause of a drug shortage is a quality3592problem in the manufacture of the finished dosage form (i.e.3593the vial or the tablet). Most shortages occur among injectable3594drugs, because these products are more complex with more3595exacting requirements for sterility.3596    Shortages are also highly correlated with price: lower cost3597drugs are more likely to go into shortage.\1\ Every3598authoritative investigation into the causes of drug shortages3599has concluded that low prices are the root cause.\2\ This is3600because when a drug is produced at low (or even negative)3601margins, a manufacturer loses the ability or the incentive to3602invest in quality. In addition, maintaining rigorous quality3603systems is expensive, so a manufacturer that cuts corners on3604quality can undercut prices and gain market share.3605---------------------------------------------------------------------------3606    \1\ United States Pharmacopoeia. USP Annual Drug Shortages Report:3607Longstanding drug shortages persist in 2024. https://go.usp.org/36082025drugshortagesreport?--gl=1*hrts0*--gcl--3609au*MTA1MzEwODM0MS4xNzY0NjkyOTg1*--ga*MTc3MTU5MDcxNS4xNzY0NjkyOTg1*--3610ga--DTGQ04CR27*czE3NjQ2OTI5ODUkbzEkZzEkdDE3NjQ2OTI5OTckajQ4JGwwJGgw3611    \2\ For example, see FDA "Drug Shortages: Root Causes and Potential3612Solutions," 2019; Brookings "Federal Policies to Address Persistent3613Generic Drug Shortages," 2023; Duke Margolis, "Advancing Federal3614Coordination to Address Drug Shortages" 2023.3615---------------------------------------------------------------------------3616    Thus, the ever-downward trend in generic drug prices is3617also a story of poor quality driving out good quality, which3618leads to shortages. This same pressure on price and quality3619also leads to a move of manufacturing from the United States to3620countries with low cost of labor and less well-developed3621regulatory systems, which enable manufacturers to cut corners.3622    Domestic manufacturing is not automatically synonymous with3623good quality oversight, nor is off-shoring automatically a3624cause of drug shortages. Nevertheless, the "race to the bottom"3625on generic drugs prices fuels both offshoring and quality3626problems. In general, purchasers of generic drugs treat all3627FDA-approved products as equivalent. The only factor used to3628discriminate between them is price. Purchasing decisions do not3629take into account quality history or other practices that could3630ameliorate the risk of shortages - practices such as3631diversifying sources of supply or maintaining a reserve3632inventory to buffer any demand or supply shock.3633    To mitigate and prevent future drug shortages, federal3634procurement should require or incentivize drug purchasing that:36353636      1. Selects suppliers with superior quality management3637practices that are less likely to result in a future shortage.3638This could be based on a physical audit of manufacturing3639facilities by, or on behalf of, the purchaser and informed by3640regulatory history from recent FDA inspections. Related3641approaches include FDA's ongoing work on "Quality Management3642Maturity" assessments and various third-party programs in3643development.3644      2. Involve multi-year committed volume contracts, which3645bring stability to the generic drug market. Such agreements3646provide a manufacturer with a clear stable demand signal that3647is often lacking in the current highly labile commodity market3648for generic drugs.3649      3. Include reserve inventory that can buffer supply3650shocks if the supplier (or another company making a competing3651generic) is unable to supply. While a buffer inventory cannot3652prevent a shortage indefinitely, it can frequently prevent an3653interruption in supply while manufacturers make additional3654batches of drug.3655      4. Ensure appropriate diversity of supply. If multiple3656manufacturers each hold a significant market share, they are3657more likely to have the ability to increase production in3658response to a shortfall by another supplier.36593660    Such an approach has been proposed in a recent bipartisan3661discussion draft from the Senate Finance Committee.\3\ With3662improvements to simplify and streamline, this draft could be3663the basis for shifting procurement towards a more resilient3664supply. Other authorities could be used to achieve the same3665goal, such as changes to the Medicare In-patient Prospective3666Payment Ssytem rule or a demonstration program through the3667Center for Medicare and Medicaid Innovatoin (CMMI).3668---------------------------------------------------------------------------3669    \3\ Senate Committee on Finance, Medicare Drug Shortage Prevention3670and Mitigation Program (May 3, 2024 discussion draft), available at3671https://www.finance.senate.gov/imo/media/doc/050124--sfc--drug--3672shortages--discussion--draft--legislative--text.pdf3673---------------------------------------------------------------------------3674    Importantly, the SFC draft uses Medicare payment authority3675but would affect all purchases by providers that receive3676Medicare reimbursement (i.e. based on purchase invoices, not on3677which patients are covered by Medicare). This approach is3678essential to achieving a scale that would impact the supply.3679Direct federal procurement, such as through the Veteran's3680Administration and the Department of Defense, would affect only3681a small portion of the market and would therefore not3682meaningfully mitigate shortages in the wider market beyond a3683discrete effect in these systems.36843685                 U.S. Senate Special Committee on Aging36863687          "Made In America: Restoring Trust In Our Medicines"36883689                           November 19, 202536903691                        Questions for the Record36923693                               Tom Neely36943695                        Senator Raphael Warnock36963697    Question:36983699    Health care providers across Georgia are concerned about3700shortages of pharmaceutical drugs, including generic3701medications. Due to limited access to drugs, patients have been3702seeking alternative drugs and waiting longer periods for3703treatments.3704    In your testimony, you mentioned that Group Purchasing3705Organizations (GPOs) and Pharmacy Benefit Managers (PBMs)3706manage nearly all hospital generic contracting and retail3707generic purchases in the United States. What steps should3708Congress take to increase transparency into GPOs and PBMs and3709ensure profits captured by these entities are passed on to3710patients?37113712    Response:37133714    One of the central drivers of the cheap-import surge and3715resulting chronic drug shortages is the highly consolidated3716structure of purchasing intermediaries-especially Group3717Purchasing Organizations (GPOs) and Pharmacy Benefit Managers3718(PBMs). Three GPOs control 90% of hospital generic contracting,3719and three PBM-aligned alliances control 90% of retail generic3720purchasing.3721    Their contracting structures drive prices below sustainable3722production costs by pitting subsidized imports against domestic3723producers. This dynamic has pushed U.S. manufacturers out of3724the market and deepened reliance on single foreign suppliers.3725    To correct this structure, Congress can take the following3726steps:37273728      
Revisit the GPO safe harbor and vendor-fee model. The3729Anti-Kickback safe harbor that allows GPOs to collect vendor3730fees biases contracts toward large, subsidized foreign3731incumbents, reinforces offshoring, and creates barriers for3732domestic and emerging producers.3733      
Require contracts-especially where federal dollars are3734involved-to weigh security and quality, not only price.3735Medicare, Medicaid, DoD, and VA purchasing, as well as GPO/PBM3736contracts, should explicitly factor FDA compliance history,3737redundancy of supply, and safe domestic or allied sourcing3738rather than rewarding the lowest unit cost.3739      
Expand supply-chain transparency and oversight. Congress3740should require clear disclosure of manufacturing sites and API3741country-of-origin. The FTC and DOJ should strengthen scrutiny3742of exclusionary contracting practices that shut out new or3743domestic suppliers.37443745    These steps realign purchasing incentives so that the3746system rewards reliable, high-quality, and domestically3747anchored supply rather than opaque, lowest-bid foreign3748sourcing.37493750    Question:37513752    According to the Georgia Chamber of Commerce,3753pharmaceutical drugs are one of the largest imports in Georgia.3754As tariffs continue to increase the price of pharmaceutical3755drugs, Georgians might face a greater barrier to accessing3756medications.3757    How can Congress lead long-term solutions for strengthening3758domestic drug supply chains while also securing Georgians'3759immediate access to affordable pharmaceutical drugs?37603761    Response:37623763    The core tools for rebuilding the generic and API base are3764a Section 232 pharmaceutical Tariff-Rate Quota (TRQ), the PILLS3765Act production and investment incentives, and the realignment3766of federal purchasing toward secure, reliable supply.3767    First, a TRQ under the Section 232 national-security3768authority would set quota volumes for critical generics and3769APIs, allowing needed imports from trusted FDA-standard-3770equivalent partners to enter at zero tariffs while imposing3771high, specific tariffs only on over-quota volumes and on risky,3772subsidized supply from countries such as China and India.3773Quotas are set at U.S. demand minus domestic capacity and3774adjusted regularly, ensuring patients maintain access while3775domestic capacity is rebuilt.3776    Second, the PILLS Act framework provides a production tax3777credit for U.S.-made generics, APIs, and biosimilars, plus an3778investment tax credit for new and modernized facilities.3779Together, these credits can offset much of the foreign cost3780advantage rooted in subsidies and weaker standards abroad,3781making it economically viable to reshore and expand3782manufacturing.3783    Third, federal procurement-Medicare, Medicaid, DoD, and the3784VA-is the single largest buyer of medicines in the country.3785Prioritizing safe, reliable U.S.-made products, using long-term3786anchor contracts, and expanding strategic API reserves all3787guarantee stable demand for domestic producers and reduce3788dependence on single overseas suppliers.3789    These tools do not raise out-of-pocket costs for patients3790in Georgia or elsewhere. Only about 36% of a generic's retail3791price is manufacturing; the remaining 64% goes to wholesalers,3792PBMs, pharmacies, and insurers. Federal reimbursement systems3793in Medicare Part B, Medicaid, and Part D already absorb modest3794cost shifts. It is the lack of domestic production that drives3795the 300-500% gray-market price spikes hospitals face during3796shortages.3797    A Section 232 TRQ, PILLS-style incentives, and aligned3798federal procurement give Congress a clear path to strengthen3799domestic drug and API capacity over time while keeping3800medicines affordable and available for Georgians right now.3801=======================================================================38023803                       Statements for the Record38043805=======================================================================38063807                 U.S. Senate Special Committee on Aging38083809          "Made In America: Restoring Trust In Our Medicines"38103811                           November 19, 202538123813                       Statements for the Record38143815  Composition of OSCS contaminated heparin occuring in 2008 Statement3816[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]38173818                 U.S. Senate Special Committee on Aging38193820          "Made In America: Restoring Trust In Our Medicines"38213822                           November 19, 202538233824                       Statements for the Record38253826              Heparin at the Center of the Storm Statement3827[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]38283829                 U.S. Senate Special Committee on Aging38303831          "Made In America: Restoring Trust In Our Medicines"38323833                           November 19, 202538343835                       Statements for the Record38363837                  National Consumers League Statement3838[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]38393840                 U.S. Senate Special Committee on Aging38413842          "Made In America: Restoring Trust In Our Medicines"38433844                           November 19, 202538453846                       Statements for the Record38473848      White Paper: The 2008 Heparin Contamination Crisis Statement3849[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]38503851                              [all]