▶ 0:11:11Chair Scott: As we know from the fd use on people they have a lot importation of drugs from facilities that are noncompliant simply because the potential for a shortage, which we should be making these drugs here in these country in the first place. In our previous hearings on this topic, witnesses have highlighted the ways we can bring back domestic production in an affordable, market-driven way. Today nearly 80% of active ingredients and prescription drugs come from foreign sources.
▶ 0:11:42Chair Scott: That means we depend on our adversaries for the very medicines our families and seniors need to survive. It is not england, it is not germany, it is not japan, it is our adversaries. Consumers, pharmacies, and hospitals don't even know the full extent of where those drugs are made or what is happening inside the plants that make them because we don't have country of origin labeling requirements.
▶ 0:12:05Chair Scott: We have seen the results of that dependence contaminate drugs, dangerous recalls and shortages that force doctors and patients to ration care. It is unacceptable that the most advanced country in the world can't ensure a steady, safe supply of basic medicines for its own citizens. The solution for this is very simple. We must make drugs in america again.
▶ 0:12:29Chair Scott: The health and safety of americans is too important to leave in the hands of other nations, especially our adversaries like communist china. When we manufacture here at home we can control quality, strength and oversight, and protect patients. We also get the benefit of creating good paying jobs and growing our economy. Today's witnesses are proof that american manufacturing works. These companies show that it is possible and profitable to make safe, affordable medicines in the U.S.
▶ 0:13:01Chair Scott: Also faced challenges washington has helped create. Red tape at the fda delays approvals and drives up costs. Something I and many of our colleagues are interested in fixing. By the way, I want to think ranking member gillibrand because she has been a complete partner to make sure we get change. Current procurement rules for government agencies, large purchasers of drugs reward the cheapest overseas better rather than the safest for the most reliable product to the detriment of american manufacturing.
▶ 0:13:32Chair Scott: The difference in cost is often negligible. Foreign governments make nearly -- manipulate pricing. The result is a broken system it leaves our patients vulnerable and businesses at a disadvantage. The federal government should lead by example. The v.a., medicare, and our military health programs should prioritize american-made medicines. Unfortunately they don't.
▶ 0:13:59Chair Scott: Taxpayer dollars should support our american workers, not fund companies in china with ties to forced labor and that don't meet our safety standards. This isn't just an economic issue, it is a matter of national security. Americans should never have to wonder whether their insulin or antibiotics were made safely. We can do better and we must do better. Together, we can build a stronger, safer, more self reliant system here in america.
▶ 0:14:26Chair Scott: And I'd like to recognize ranking member gillibrand for her opening statement. And again, I want to thank her in getting this comport -- this report out and these hearings.
▶ 0:14:37Sen. Gillibrand: Thank you Mr. chairman. Thanks for calling the hearing and thank you to our witnesses for testifying today. We are very grateful for your contribution. I look forward to continuing our conversation on how we can improve the quality and reliability of our generic drug supply.
▶ 0:14:53Sen. Gillibrand: This is an essential issue for our committee to examine, as many aging americans including over 53 million medicare part b enrollees, rely on at least one generic drug to treat a wide range of medical conditions. Unfortunately, the supply chain for these crucial drugs remains vulnerable to disruption, and we consistently witness issues with the quality of foreign drug products causing key medicines to go into shortage. It is unacceptable.
▶ 0:15:24Sen. Gillibrand: Every american should have access to safe and affordable generic drugs. Particularly as older adults navigate the complex, difficult health conditions that they face. They should not have to cope with worsening symptoms, skipping doses, or trying to stretch medicines further because they can't afford them. This is an existential issue for a lot of older americans and for new yorkers. I have heard from many new yorkers about this issue.
▶ 0:15:52Sen. Gillibrand: One of my constituents from brooklyn told me that for the past 1.5 months I have been unable to receive my generic medication because of shortages. Much of my day is spent going back and forth between pharmacies and my doctors office playing phone tag when I should be doing my actual job. I've even had to spend money on third-party services to help find my medication when I am unable to. The entire process is exhausting, demoralizing, and dehumanizing.
▶ 0:16:21Sen. Gillibrand: A key factor driving up these supply chain disruptions is due to the extreme cost pressures and concentrated sourcing, key starting materials, active pharmaceutical ingredients, and finished dosage for generic products are increasingly made outside the united states. We have seen the number of U.S.
▶ 0:16:42Sen. Gillibrand: Facilities that formulate generic drugs fall by 27% since 2013, and in the same timeframe we have seen 38% decrease in the number of domestic facilities producing active pharmaceutical ingredients. 83% of the top 100 generic drugs taken by american consumers now have no U.S.-based source of api and another 11% only have one domestic source of api.
▶ 0:17:10Sen. Gillibrand: This means we increasingly depend on countries like india and china, where the industry has grown for these upstream materials that represent the most vulnerable checkpoint in the supply chain. This is particularly a problem because recent instability in geopolitics and global trade politics is compounding are already limited operational override -- oversight over foreign control and manufacturing of these key materials. The U.S.
▶ 0:17:36Sen. Gillibrand: Decline in manufacturing has not only lead to a domestic job loss, but represents the vulnerability in the supply chain increasingly poses a risk to our nation's public health preparedness and national security. To ensure americans have a reliable supply of safe and affordable drugs, congress will need to work to make targeted investments in biotechnology research and infrastructure to manufacture these key ingredients in the united states.
▶ 0:18:00Sen. Gillibrand: In addition, we have to examine the underlying economic dynamics in the current marketplace and adjust incentives to fix the race to the bottom problem in generic drug pricing, which can drive manufacturing outside the U.S. and because companies to stop production of certain drugs and chemicals altogether.
▶ 0:18:22Sen. Gillibrand: I look forward to hearing from eyewitnesses to discuss these challenges and barriers that face this industry and I am eager to work with chairman scott and the committee's jurisdiction as we strengthen our generic drug supply and bolster our preparedness and national security.
▶ 0:18:36Chair Scott: I would like to welcome our witnesses in the efforts to bring drug manufacturing back to the united states. Now let me turn it over to the ranking member to introduce our first witnesses.
▶ 0:18:53Sen. Gillibrand: I want to move to introduce allan coukell, chief government affairs and public policy officer at civicarx, a not-for-profit organization created by the U.S. health systems in 2018 to address drug shortages by manufacturing quality essential medicines at sustainable prices. Mr.
▶ 0:19:16Sen. Gillibrand: Coukell served on the board of the reagan udall foundation for the fda and was a founding board member and valve's chair of the medical device innovation consortium. Mr. coukell, you may begin your testimony.
▶ 0:19:31Mr. Coukell: Thank you. Civicarx is a nonprofit company created to ensure american patients have a reliable supply of essential medicines. We currently supply 60 health systems around the country with more than 50 injectable drugs. Over seven years we have shipped more than 240 vials.
▶ 0:20:03Mr. Coukell: To do this we have worked with a range of manufacturing partners, giving preference to U.S. sourcing. Civicarx has a rigorous oversight process involving in person audits and quality reviews. It is a unique feature of our supply model. Also unique is we maintain a six month buffer inventory of every drug and we offer the same price to every purchaser.
▶ 0:20:27Mr. Coukell: Civicarx's own newly built facility is in petersburg, virginia funded partly with U.S. government support. It is a state-of-the-art facility for manufacturing sterile injectable drugs with the ability to make about 90 million vials a year. We have dozens of generic drugs in development for this facility. Civica has a no china policy in our supply chain, both for finished drugs and active ingredients, unless there is no other supply available.
▶ 0:20:54Mr. Coukell: Civica drugs are chosen by pharmacists and physicians from participating hospitals and chosen because they are at high risk of shortage. These are products that are the bedrock of inpatient care and surgery and emergency medicine. Antibiotics, anesthetics, blood thinners, pain medications. While these are essential medications, they also tend to be very low cost. It is precisely because generic drugs are so inexpensive that manufacturing has been steadily moving to india and china.
▶ 0:21:25Mr. Coukell: Make no mistake, low prices are the principal barrier to on ensuring generic drug manufacturing. It costs millions of dollars to bring a generic injectable drug to market but takes several years that requires costly manufacturing facility and teams of people, r&d and manufacturing, laboratory quality and so on. With many injectable drugs selling for less than one dollar a vial, U.S. production often is not financially viable.
▶ 0:21:56Mr. Coukell: If we want sustainable domestic production, we have to be comfortable that it is worth paying slightly more to have a safe and secure domestic industry. We should provide extra payments to hospitals that take quality into account along with domestic sourcing and buffer inventory. A bipartisan senate finance committee discussion draft takes this approach. Since generic drugs account for 1% or 2% of hospital spending, such a program would have a negligible impact on overall health costs.
▶ 0:22:26Mr. Coukell: In combination with these long-term market fixes, congress should invest now in an insurance policy so we can deliver these drugs as soon as they are needed. Because it takes years to bring a product to market, we should not wait until after a foreign supplier fails or cuts us off to start developing the drugs we need. But we also can't expect companies to invest in products if they won't recover their costs.
▶ 0:22:52Mr. Coukell: Report language in the senate fy-2026 labor h bill instructs asper to partner with the public sector for this purpose. For a modest one time expense we can ensure domestic manufacturers are ready to go as soon as they are needed. You might note that I have been talking more about finished products than about active pharmaceutical ingredients. Sometimes we focus on api because that is where our dependence on china is greatest.
▶ 0:23:20Mr. Coukell: But it won't do us any good to bring api back to the U.S. if we don't have a viable market for domestic finished drugs. We have to get that part right. I want to point out that developing a drug for an existing in your factoring facility is faster and cheaper than building an entirely new facility.
▶ 0:23:38Mr. Coukell: But when new facilities are needed, and they will be for certain antibiotics and cancer drugs, it will require investments of hundreds of millions of dollars and government support as well as some assurance of sustained demand. With modest changes to the current system, generic drugs can be produced cheaply and at scale in the united states but we have to commit to making a market that works. I thank you for your attention and welcome any questions.
▶ 0:24:04Chair Scott: Thank you for your testimony. Now I would like to turn over to senator tuberville for the next witness.
▶ 0:24:25Sen. Tuberville: Thank you, Mr. chairman. I am proud to introduce our witness here, one of my constituents, Mr. tom neely, the chairman of oxford pharmaceuticals burst in -- based in alabama. Mr. neely is also partnered at growth companies in alabama where he is directly responsible for the strategic direction in daily management of oxford.
▶ 0:24:54Sen. Tuberville: He is also involved in investment including broad west and the manufacturing business including a trailer company, and another trailer company. Tom holds extensive experience in executive management strategic money mergers and acquisitions activity and financial oversight.
▶ 0:25:20Sen. Tuberville: By the way, did I mention he is a graduate of auburn university? Go ahead.
▶ 0:25:27Mr. Neely: Thank you chairman scott, ranking member gillibrand, and distinguished members of the committee. I appreciate very much this hearing. My name is tom neely and I am chairman of oxford pharmaceuticals, a manufacturer of low-cost, high-quality generic medicines. Taken daily by millions of our seniors. This is a personal matter for me.
▶ 0:25:59Mr. Neely: My wife has made stage parkinson's disease. Oxford manufacturers one of her generic drugs but he cannot buy it. Hers is manufactured by a chinese company. Oxford broke ground on a world-class facility in 2015 and began selling generics into the U.S. market in 2019. This period was marred by U.S.
▶ 0:26:27Mr. Neely: Generic drug makers going out of business but we invested $130 million. At oxford, we feel that high-quality generic drugs can and should be manufactured domestically. We currently made 13 generic management drugs for conditions including blood pressure, mental health, and mild pain relief. When I say we manufacture these medicines, that is indeed true. We transform raw ingredients into finished oral tablets.
▶ 0:26:58Mr. Neely: We weigh, blend, compress, coat, package the tablet while adhering to an end to end very comprehensive cgmp compliant quality process.
▶ 0:27:14Mr. Neely: Unfortunately in today's domestic market, offshore manufacturing of these generic medications has dangerously weakened our supply chain with china and india controlling the market. These foreign competitors are heavily subsidized by their governments, and studies repeatedly have shown quality of their finished products is inferior to domestic produced generics.
▶ 0:27:37Mr. Neely: In addition, the three big distributors, obm's, and insurance companies care nothing about quality but focus on price. 10 of our drugs have no other U.S.-owned and operated manufacturer, and three are classified as essential medicines. These proven generic drugs have been on the market for decades.
▶ 0:28:03Mr. Neely: On a weighted average of oxford products, we sell 100 tablets for $1.50. Medicare reimbursement for the same quantity and product set averages $13.25, most of which the middleman captures. India and china are aggressive with subsidies.
▶ 0:28:27Mr. Neely: Tax rebates, lower land in rebate costs, expedited approvals, and billions in grants give india and china companies a distinct price advantage. U.S. plants operate under continued fda inspection, and we welcome inspections because american patients live and die on the quality of our products.
▶ 0:28:53Mr. Neely: We believe that it is our moral obligation to produce the highest quality generic medicines possible. Foreign plants go years without inspection. When fda inspectors do visit foreign facilities, they found appalling practices which would have shut down a U.S. manufacturer. At one india generic maker, staff destroyed documents with acid and shredders to hide falsified safety data.
▶ 0:29:22Mr. Neely: It is within these constraints that oxford is only operating at 55% of our capacity. We could easily quadruple our monthly output and double our workforce, and we also have land and technical capability to build an on-site integrated api facility. But we need policy certainty, and most importantly, committed demand.
▶ 0:29:50Mr. Neely: Federal policy can help create the environment that we need to undertake this expansion. I urge the committee to support four concrete and practical actions. First, a firm generic pharmaceuticals as a national security industry under section 232 investigation. Second, give procurement priority to legitimate domestic manufacturers through the v.a., dod, and medicare programs.
▶ 0:30:21Mr. Neely: Reward end-to-end domestic manufacturing through long-term government contracts. Third, support investment in domestic pharmaceutical manufacturing and make production through targeted grants and tax incentives. And forth, require complete country of origin information on labeling. Patients deserve to know where their medicines are manufactured.
▶ 0:30:53Mr. Neely: Managing made stage parkinson's is hard enough without worrying about the safety of my wife's medications. The four solutions mentioned will be vital in changing the landscape of generic pharmaceutical manufacturing in this country. Thank you.
▶ 0:31:08Chair Scott: Thank you. Now I would like to introduce patrick cashman, president of usa antibiotics, the last domestic manufacture of amoxicillin. Mr. cashman has decades of experience leveraging partnerships and holding senior leadership positions at pharmaceutical brands based in tennessee, and other teams that work to provide the american people with lifesaving antibiotics.
▶ 0:31:39Chair Scott: Please begin your testimony.
▶ 0:31:42Mr. Cashman: Chairman scott, ranking member gillibrand, distinguished members of the committee, thank you for the opportunity to testify. My name is patrick cashman and I serve as president of usantibiotics, headquartered in tennessee. We are the last remaining domestic manufacture of amoxicillin, the most prescribed antibiotic in the united states. My colleagues and I are in the business of the three f's.
▶ 0:32:09Mr. Cashman: Formulating, finishing, and filling the highest quality amoxicillin in the united states. We never imported finished foreign drugs and we will never purchase our active pharmaceutical ingredients from china or india. Our facility has applied this critical medicine to american patients for more than 40 years. Until 2008, every dose of amoxicillin came in this country was produced at our brick soul plant.
▶ 0:32:35Mr. Cashman: Then came the years of competition from india and chinese drugmakers. By 2020, our production lines had gone dark and our assets were in bankruptcy and the united states had become entirely dependent on foreign sources for the most prescribed antibiotic in america. In 2021, private american investors rescue the facility because they recognized the national security imperative of domestic antibiotic production.
▶ 0:33:06Mr. Cashman: Over the past four years we have revived the plant, we and expanded our workforce, and restored america's ability to manufacture this life-saving medicine. Seniors account for a disproportionate share of antibiotic prescriptions. Adults over 65 receive antibiotics at rates 50% higher than younger americans.
▶ 0:33:27Mr. Cashman: Hip replacements, cardiac procedures, cancer surgeries, all life extending interventions that depend on reliable antibiotic access. Pneumonia alone causes over 50,000 americans annually, with seniors representing the overwhelming majority of deaths.
▶ 0:33:48Mr. Cashman: Without antibiotics, read teens services -- commong services -- common-- china produces approximately 45% of the active pharmaceutical ingredients used in amoxicillin today and supplies the majority of api used by indian manufacturers. The result is most amoxicillin on pharmacy shelves represents chinese chemistry with indian finishing.
▶ 0:34:17Mr. Cashman: We source exclusively from trade agreement complying european partners but we control only about 5% of the U.S. market, despite having capacity to meet 100% of the national demand as we once did. If our facility were to close permanently, it would take at least five years and hundreds of millions of dollars to rebuild domestic capacity.
▶ 0:34:42Mr. Cashman: That timeline assumes favorable regulatory and economic conditions that are far from guaranteed. More realistically, rebuilding could take a decade. Here is the paradox that brought me before you today. In 2021, our amoxicillin facility was rescued from bankruptcy by jackson health care, one of the largest health care staffing firms in the country.
▶ 0:35:09Mr. Cashman: They have invested tens of millions in private capitol to restore domestic manufacturing capacity. Because of that ownership structure, usantibiotics is now excluded from competing as a prime contractor for federal amoxicillin contracts structured as small business. Since january 2023, we have sold roughly $1 million to the federal government through the federal supply schedule.
▶ 0:35:34Mr. Cashman: During that same period, the department of health and human services spent approximately 40 million dollars on foreign origin amoxicillin. That contract was structured as a small business set-aside, thereby excluding america's only domestic manufacturer from competing. The irony is devastating. The company that saved domestic capacity cannot sell to the government that claims to prioritize supply chain security.
▶ 0:36:04Mr. Cashman: Meanwhile, small business re-packagers in chinese and indian drugs and slap american labels on the bottles. To revitalize domestic manufacturing and to protect our health care supply chain, I respectfully offer the following recommendations. First, create procurement pathways that allow domestic manufacturers of critical medicines to compete regardless of parent company size.
▶ 0:36:33Mr. Cashman: Second, defined domestic manufacturing to exclude simple repackaging of foreign products. Third, establish a strategic national stockpile procurement preferences for genuine domestic manufacturers. And forth, provide long-term purchasing agreements that allow capitol investment and workforce retention. We are not asking for subsidies or handouts.
▶ 0:36:58Mr. Cashman: We are asking that when the government buys antibiotics, it prioritizes genuine american manufacturing. Usantibiotics stands ready to secure america's antibiotic supply chain. We have the infrastructure and the expertise and the commitment. But we need congress to align procurement policy with national security reality. Thank you for your attention and I welcome your questions.
▶ 0:37:21Chair Scott: Thank you. Next we would like to introduce our final witness, Dr. eric edwards, the ceo of phlow-usa, a drug manufacturer working to supply medications. With extensive experience, Dr. edwards understands the reliance on foreign medications. Dr.
▶ 0:37:43Chair Scott: Edwards has spearheaded phlow's partnerships with federal agencies like the department of health and human services and department award to shore up supply chains and address the critical need for drug and ingredient manufacturing in the united states. You may begin your testimony. Thanks for being here.
▶ 0:38:06Dr. Edwards: There we go. Thank you for the opportunity to testify on a matter that directly impacts the health and well-being of millions of americans, namely, our nation's growing dependence on fragile, foreign from a cynical drug chains that continued to threaten public safety and national security.
▶ 0:38:31Dr. Edwards: My name is eric edwards, I'm a physician, scientist, and cofounder of a leading american pharmaceutical company created to advance domestic development and manufacturing of critical medicines and help reassure our medicine supply chain. I also continue to serve as a volunteer paramedic in virginia, providing care in my local community where during an emergency, the consequences of drug shortages are most acutely felt.
▶ 0:38:57Dr. Edwards: In my own experience there have been moments one clinical drugs for emergencies were simply unavailable. Substituting or improvising can mean the difference between life and death. Our pharmaceutical dependence is not just a public health concern, but rather a national security threat. If conflict disrupt asian trade routes or trigger export bands, the U.S. could lose access to ingredients needed for critical care for oncology, infectious disease treatments.
▶ 0:39:29Dr. Edwards: Furthermore, military readiness could be severely compromised by disruptions in the supply chain, as purposeful adulteration or export bands on key drug ingredients could also leave our war fighters without vital medicines. Over the past few years congress has taken significant steps to secure the rare earth mineral industrial base, including by expanding the national defense stockpile. That level of urgency is required for api's, just as rare earth critical technologies.
▶ 0:40:00Dr. Edwards: Api's underpin the entire pharma supply chain. And without them, we cannot make a single critical medicine. Phlow was created to help solve this problem. In partnership with the united states government we built a state-of-the-art campus in virginia, designed to domestically produced api's at both small and large-scale. Through our groundbreaking partnership with the administration for strategic preparedness and response, phlow is developing and supplying a broad catalog of essential api's.
▶ 0:40:27Dr. Edwards: For each program, phlow reconstructs the chemistry, sources starting materials domestically or from allied nations, and leverages state-of-the-art in development and manufacturing approaches such as continuous manufacturing, to drive efficient, higher-yielding production, cost competitiveness, and a reduction of our environmental impact, all on U.S. soil.
▶ 0:40:50Dr. Edwards: To date we have completed five api development programs, filed four drug master files with the fda, and have a dozen api's in various stages of developing. We are proud to support strengthening the war fighter supply chain. We worked with the U.S. government to conceive of and build the nation's first strategic pharmaceutical reverter program designed to function as a national security buffer for medicine supply chain's.
▶ 0:41:20Dr. Edwards: We are working to maintain an inventory of ingredients for the most essential medicines and precursor chemicals identified by the federal government. Helping to protect americans during future public health emergencies until we can make those medicines on U.S. soil once again. Despite considerable progress, the on shoring movement remains fragile. For this transformation to succeed, certainty, focus and sustainability are essential.
▶ 0:41:46Dr. Edwards: No company can sustain long-term domestic production without predictable demand and multiyear commitments. America must invest in additional capacity. Several key policy enablers are also required.
▶ 0:42:02Dr. Edwards: First, to prevent future shortages and secure our supply chain, the government must create a comprehensive long-term plan as well as support a centralized authority to align policy and funding while bringing stability for patients and predictability for manufacturers. Second, the market will not shift back to the U.S. if buyers of essential medicines remains structurally rewarded for choosing the lowest immediate cost, even when those savings come at the expense of long-term security and patient safety.
▶ 0:42:35Dr. Edwards: Third, to build enduring resilience of the administration and congress must resource these programs with multiyear contracts, similar to how we support defense and energy infrastructure. This allows U.S. manufacturers to plan, invest, and scale of confidence.
▶ 0:42:49Dr. Edwards: Fourth, we must level the playing field and ensure domestic manufacturers can compete fairly against foreign producers who benefit from heavy tax subsidies, lax environmental and labor standards and currency manipulation, advantages that artificially distort global markets.
▶ 0:43:09Dr. Edwards: Finally, as previously recommended by this committee, it is critical that congress prioritizes work to close the loophole that breaks the connection between made in america and the actual location of pharmaceutical ingredient manufacturing, enabling continued dependence on foreign api supply chains, even in federal purchasing programs intended to prioritize domestic production. If we fail to act decisively, the next crisis will not be hypothetical.
▶ 0:43:40Dr. Edwards: The shortages are a great nation has been coping with have shown us the harm they can cause. However, if we succeed in creating a durable, competitive, and secure domestic pharmaceutical industrial base, we will have restored one of the most critical pillars of national resilience. I think this committee for your leadership in shining a light on this issue. Pharmaceutical supply chain vulnerabilities are not inevitable. They are a product of choice.
▶ 0:44:11Dr. Edwards: Together, we can choose to build a safer, more resilient, and more self-reliant future for all americans. Thank you, and I welcome additional questions.
▶ 0:44:21Chair Scott: Thank you. I am comfortable that we are going to see a big change. We are going to see a supply chain plan and we are also going to get legislation passed that will require country of origin for ingredients and manufacturing. For questions we will start with senator johnson.
▶ 0:44:42Sen. Johnson: I want to applaud you for holding these hearings. They are some of the most important hearings we are holding this congress. I want to thank you for your solid testimony and recommendations. I met with Dr. patrick yesterday, a man of incredible accomplishment. He founded american pharmaceutical partners. I mentioned this hearing and he said that is similar to what happened in 2008. This is not a new issue.
▶ 0:45:16Sen. Johnson: We had contaminated heparin in 2008 coming from china. It was on purpose. It was contaminated with a cheaper ingredient that cannot be detected by normal measurements. I see one of our witnesses shaking their head.
▶ 0:45:34Sen. Johnson: I will ask you about it but I want to enter into the record, I have a paper written by app, one by the american health and drug benefits and then one from the science directory, which talk about this. Mr. coukell, you were shaking your head. Describe this. This is nothing new. This happened in 2008, and here we are describing the same problem.
▶ 0:46:01Mr. Coukell: You are exactly right. In 2007, 2008, somebody in china figured out how they could spoof the standard test for the active ingredient in heparin. They did so for economic reasons. We call it economically motivated adulteration. The sold defective drugs into the united states. That led to a kind of realization about how dependent we are on those foreign supply chains.
▶ 0:46:33Mr. Coukell: Fda was given new authorities, the inspectional framework was rejiggered.
▶ 0:46:37Sen. Johnson: Can we solve the problem, right?
▶ 0:46:40Mr. Coukell: Structurally we are still headed in the wrong direction. We have heparin with U.S. api. Heparin comes originally from the intestines of pigs. China has a big pork herd and most of the world's heparin comes from china. We have heparin api from the U.S. but it is more expensive than chinese heparin. So if we are going to fix the problem we have to be willing to source from the U.S.
▶ 0:47:06Sen. Johnson: I want to go back to the precursor chemicals. The key starting to, is that the same thing?
▶ 0:47:16Mr. Coukell: Precursor chemicals even going back to petrochemicals are the chemical starting materials that feed into the intermediates and ultimately the active ingredient.
▶ 0:47:27Sen. Johnson: How many of those key ingredients are there? Are we talking hundreds or a few dozen?
▶ 0:47:34Dr. Edwards: Thousands. Jordi are made in china. -- the majority are made in china.
▶ 0:47:44Sen. Johnson: There are literally thousands? Are there a smaller batch of general categories and specific types within those categories?
▶ 0:47:55Dr. Edwards: It is important to note for this committee that there are thousands of drugs in our supply chain themselves. And it is really critical for us as a nation to prioritize. We must focus. We cannot boil the ocean.
▶ 0:48:14Dr. Edwards: We must secure our industrial base focusing on those critical industrial medicines prioritized by criticality, vulnerability and reach. There is a smaller subset we can identify linked to a smaller group of active ingredients that are necessary to sustain the health of our population.
▶ 0:48:36Dr. Edwards: Because there are some medicines that have no therapeutic alternative and others where we are not as concerned about the supply chain failing, because alternatives are readily available.
▶ 0:48:46Sen. Johnson: One of the pre- cursor chemicals is oil itself. Then we have plant-based. Would that be considered things extracted from plants or bacteria or from algae? Can you just described that chain, starting from the most basic all the way up to api and into the final drugs?
▶ 0:49:05Dr. Edwards: Certain key starting materials are derived from the petrochemical industry. Some, ironically, are derived from the rare earth mineral industry. There is a connection there. Some of these starting materials are synthesized to create solvents or reagents, like ben zyne, that we require. Still others can be built leveraging synthetic biology.
▶ 0:49:32Dr. Edwards: For example, one of our active pharmaceutical ingredients where we could not source the key starting material in any domestic location, we partnered with a company to leverage a synthetic biology approach or fermentation to help actually manufacture that starting material which is one way to do it more cost competitively. So, across the spectrum there is a variety of chemical sources. Some are synthetically derived, summer bile technologically derived.
▶ 0:50:02Dr. Edwards: Regardless, it starts with the mapping and knowing where they are coming from and focusing and prioritizing to ensure we get a start somewhere.
▶ 0:50:06Sen. Johnson: Real quick, I want to go quickly to tom neely. What are your raw materials? You said you wanted to create the capability to produce api's. Your raw materials are api's from where?
▶ 0:50:23Mr. Neely: Well, the ones I am speaking of comes from china. Of the 13 product families that we produce, two come from china, and everyone else comes from outside the united states, but it's europe mainly.
▶ 0:50:38Sen. Johnson: Because you are compounding these things and turning them into drugs so you have a greater sense of body control. Something like what you did with the heparin where they disguised the alteration.
▶ 0:50:52Mr. Neely: Tell me, it is all about vertical integration and the synergies you get from vertical integration. If you are able to build an api plant right next to a manufacturing plant, you're going to have some cost savings. That is what is going to take. Because china is so cheap.
▶ 0:51:10Sen. Johnson: Mr. chairman, I know you are all over this. We require labeling to know exactly where not just the api comes from but precursor chemicals. I think that will radically change because people will demand complete U.S. supply chain for their drugs. They will demand it and pay a higher price. By the way, generic drugs are not that high of a spend in terms of the overall medical price tag.
▶ 0:51:40Mr. Neely: You are hitting the nail on the head. If I am buying an api from europe, for example, but they are getting the precursor from china, defeats the purpose.
▶ 0:51:53Sen. Johnson: Thank you.
▶ 0:51:55Chair Scott: Ranking member gillibrand.
▶ 0:51:58Sen. Gillibrand: Thank you, Mr. chairman. In this series of hearings, we have heard about a variety of incentives to help support domestic manufacturing such as targeted grants, low-interest loans, tax incentives. From your company's prospective, what is the most economic incentive that will determine how you choose to invest and operate in the U.S.? What is the most significant fact they're currently limiting your ability to operate in the U.S.?
▶ 0:52:29Sen. Gillibrand: And how do current procurement rules shape the market as a race to the bottom? How would purchasing and procurement signals from the federal government impact domestic manufacturing capability? We will start with tom and go across.
▶ 0:52:42Mr. Neely: Thank you ranking member gillibrand. For me, it is all about volume. Keep in mind that one dose at the factory that we work in costs a penny and a half. So we have to add volume, not price. Price is secondary. It is really to maximize the capacity of our plants. So we have to operate 20 47.
▶ 0:53:12Mr. Neely: Today, we have the capability of producing 1.8 billion doses annually. Right now but we are doing is one billion. Because the distributors are focused just on price. So there needs to be a little bit of a break there.
▶ 0:53:31Mr. Neely: And in my mind, and I'm not an economist, but in my mind, if we had a system very similar to sugar, for example -- because we cannot produce today all the domestic demand.
▶ 0:53:52Mr. Neely: But if we had a carve out, a marketplace where you had priority, and if we are producing in the united states and we fulfill our total demand, that would help us tremendously.
▶ 0:54:04Sen. Gillibrand: Interesting.
▶ 0:54:07Mr. Coukell: Thank you. I mentioned that we have a couple dozen generic drugs in development for our facility. Some of those are products that are selling right now at prices that, frankly in the U.S., you couldn't buy an empty glass vial and fillet w -- fill it with sterile water for that price. We don't expect to sell these until there is a drug shortage.
▶ 0:54:36Mr. Coukell: But if you have a pharmaceutical manufacturing facility, you like to run it full. That makes it efficient and -- there's a lot of drugs that at today's prices we can make competitively in the U.S. but for those very low-cost drugs, which are also some of the most essential products, we have got to create a consistent demand for U.S. product.
▶ 0:55:02Sen. Gillibrand: Mr. cashman.
▶ 0:55:06Mr. Cashman: Thank you, senator gillibrand. The federal government in the case of amoxicillin has structured all recent contracts as small business subsidies. It helps small businesses compete against large corporations. But when applied to critical medicines was the pleat -- severe supply chain vulnerabilities it produces negative consequences. For industry, taxpayers and patients.
▶ 0:55:33Mr. Cashman: Usantibiotics would have closed permanently without jackson health care's rescue from bankruptcy in 2021. No one else stepped up. No private equity firm saw a profitable opportunity. No pharmaceutical company wanted to enter the market. Jackson health care viewed this acquisition is a national security imperative, not a moneymaking proposition. Because now with this patriotic investment, we are effectively barred from selling to the federal government as a prime contractor.
▶ 0:56:02Mr. Cashman: The government's rules prevent only american manufacturers from competing while allowing foreign competitors often subsidized by their own government to dominate federal procurement.
▶ 0:56:15Dr. Edwards: Thank you ranking member gillibrand for this question. First and foremost, you all may have seen today the U.S. china and economic security review commission finally released their annual report calling for exactly what senator spoke to relating to urging the disclosure of country of origin for all api's and key starting materials. I think that is really important from a policy perspective.
▶ 0:56:43Dr. Edwards: But the central obstacle in restoring the reliability of our pharmaceutical supply chains is not a lack of data here, it is actually a lack of aligned incentives. The market will not shift back to the united states if the buyers of essential medicines including hospitals, clinics, wholesaler intermediates, gpo's, remains a structurally rewarded for choosing the lowest immediate cost, even when those savings come at the expense of
▶ 0:57:14Dr. Edwards: Long-term security and patient safety. Candidly, information about quality sourcing and supply chain fragility is important, it is critical. But it is little more than a warning label if purchases are neither financially supported, nor contractually required to act on those labels. To change outcomes, federal entities should adopt procurement policies that value supply chain reliability, quality.
▶ 0:57:40Dr. Edwards: Strategic investment in domestic sourcing helps save lives by strengthening national health security reducing growth ship -- drug shortages and mitigating the potential future for costs.
▶ 0:57:50Sen. Gillibrand: Thank you.
▶ 0:57:52Sen. Tuberville: Thank you. Thanks for being here. Mr. neely, you mentioned the need for a federal procurement reform. Do you currently cell the v.a. Of the dod?
▶ 0:58:08Mr. Neely: We do but it is a slow process. It is a very important channel for our products. I believe it starts with the 232, and then it migrates into changes in a few policies at the v.a. And dod and medicare, quite frankly. So that we can source the dod and v.a.
▶ 0:58:37Mr. Neely: Effectively, at the same time we maximize the capacity of our operation.
▶ 0:58:44Sen. Tuberville: Is this a bid process?
▶ 0:58:47Mr. Neely: There's two parts to it. Fss, the federal supplies schedule, and we have seen growth there. Now,w e've bid unsuccessfully on several opportunities and we have been shut out today. The last bid we got shut out by a firm that is chinese-american and that is partnered with india american. Now, they followed the policy.
▶ 0:59:19Mr. Neely: I am not saying that they didn't. There's grey area in the policy. But if it can be clearer and give us the opportunity and level the playing field, we would have won that bid.
▶ 0:59:30Sen. Tuberville: So, you said in your opening statement that you could quadruple your production. What would you need to do that?
▶ 0:59:41Mr. Neely: We have a facility set up so that all we would need is about $18 million of capitol expenditure and equipment. The plant is available for additional packaging lines and granulation processing. So all we need is $18 million. We have $130 million invested in the plant right now.
▶ 1:00:12Mr. Neely: But it comes down to a business decision and return on investment. And so, if we could get to that point, we would increase our capacity from 180 million doses a month to over 600 million doses a month. But right now all we are doing is selling 100 million doses a month because the distributors all care about is cost. That is it.
▶ 1:00:40Sen. Tuberville: Thank you. Mr. coukell, is that how you pronounce that? Ok. Your commitment to domestic manufacturing is a no china policy. Is that correct?
▶ 1:00:56Mr. Coukell: Unless the product is not available anywhere else.
▶ 1:01:01Sen. Tuberville: What changes do you think are most important to make U.S. generic drug production financially viable?
▶ 1:01:07Mr. Coukell: Thank you. As I mentioned, there are some injectable drugs that with today's prices are financially viable now. But there are drugs that are selling at $.30, $.40, and those are not financially viable in the U.S. and so we need some system where purchasers select for quality, select for domestic manufacturer.
▶ 1:01:38Mr. Coukell: And if that costs a little more, we will probably need to make them whole for that cost.
▶ 1:01:44Chair Scott: Thank you. Mr. neely, something about inspections. Does the fda tell you when they are going to inspect you?
▶ 1:01:55Mr. Neely: No.
▶ 1:01:56Chair Scott: So what if they walked in and found a violation. What would happen?
▶ 1:02:01Mr. Neely: Depending on the severity of that violation, if we received a 483 we be closed. A 483 is against the law. Our president and I would probably be indicted.
▶ 1:02:16Chair Scott: All right. The fda often announces for an inspection weeks in advance. It gives manufacturers plenty of time to prepare. Recently the fda found lizards and roaming caps in an indian plant. If that happened to you what would happen?
▶ 1:02:37Mr. Neely: We would be closed. The difference is right now in india, since we receive so much generic product from india, that all they do is either they move their operations to another plant and swap the different medications produced, or they threaten the united states by saying if you close this plant, you are going to incur a shortage of product.
▶ 1:03:09Mr. Neely: That is the national security issue that we face today.
▶ 1:03:11Chair Scott: Have you ever heard of the fda waving a violation? Would they waive a violation for you?
▶ 1:03:23Mr. Neely: No.
▶ 1:03:24Chair Scott: Have they for a foreign operation?
▶ 1:03:27Mr. Neely: Anecdotally I have heard they have.
▶ 1:03:30Chair Scott: How do you limit shortages?
▶ 1:03:33Mr. Coukell: We do a number of things different from the traditional generic supply chain. It starts with long-term commitments. The hospitals that partner with civica commit to multi-year fixed volume contracts. We, in turn, provide that commitment to our supplier. So that creates a level of stability that does not usually exist in the generic drug business. We commit to price as well.
▶ 1:04:05Mr. Coukell: And so that lets companies know that they are going to have market share, lets them invest in quality, gives them a commitment to that product. Another thing we do that is unique is we target a six-month buffer inventory of every drug and the reason we do that is if somebody drops out of the market, then we can draw down on that inventory while somebody is making new batches. It takes a while for companies to ramp up production even if they have fda approval to make that drug.
▶ 1:04:36Mr. Coukell: We also do a really rigorous oversight quality of our suppliers. So we are going out and visiting facilities, walk in the floors, doing an audit, looking at records, and we do that on an ongoing basis to make sure we choose suppliers less likely to have a failure of supply in the future.
▶ 1:04:55Chair Scott: Mr. cashman, what would happen to our nation's supply of antibiotics if you closed?
▶ 1:05:04Mr. Cashman: We would be completely dependent on india and china. All of the api comes from either china or india with the exception of several producers in europe. With our plant closing there would be no finished doses whatsoever produced in the united states.
▶ 1:05:21Chair Scott: And how many months or years of supply of amoxicillin do we have in the country? Do you have any idea?
▶ 1:05:29Mr. Cashman: No, I don't know that. What I can comment on is we keep a years worth of api at our facility and we have about a years worth of finished goods product in our facility as well.
▶ 1:05:41Chair Scott: Does the fda inspect your facility?
▶ 1:05:45Mr. Cashman: Yes it does.
▶ 1:05:47Chair Scott: If you had flying birds and lizards, what would happen?
▶ 1:05:51Mr. Cashman: We would be shut down.
▶ 1:05:53Chair Scott: Would they care if there is a shortage?
▶ 1:05:57Mr. Cashman: No, I don't think they would care.
▶ 1:06:01Chair Scott: Dr. edwards, why is it so important we make active drug ingredients right here in the united states?
▶ 1:06:08Dr. Edwards: They are components of the drug that give that medicine the therapeutic effect. Some might say it is the most critical component given that definition. For us, we've llost this industrial base over four to five decades now and it has gotten to the point where in many cases abroad, we rely on a single source. Outside the united states.
▶ 1:06:35Dr. Edwards: To produce the medicines that are seniors and americans rely on every single day to treat a variety of acute and chronic issues. For us, this truly is a matter of national public health security, but also a matter of national security as our war fighters on the battlefield have to deal with the fact that they would be having to utilize a drug that is made with ingredients coming from a potential foreign adversary. It is simply unacceptable.
▶ 1:07:03Chair Scott: Is it too much to ask that plants don't have flying birds and lizards?
▶ 1:07:09Mr. Neely: No, it's not. I think it's important to state that quality is not cheap. For every dollar of expense that we spend, $.38 is spent on quality.
▶ 1:07:27Chair Scott: Say that again?
▶ 1:07:29Mr. Neely: Every dollar of expense that is spent at our plant, $.38 is based on quality. We spend on quality. So, what I am saying is our foreign competition is cutting their cost so that they can come up with the lowest price possible to sell to the
▶ 1:08:00Mr. Neely: Distributors to get the contracts.
▶ 1:08:03Sen. Gillibrand: Related, jug manufacturers around the globe are frequently the target of cyberattacks. These attacks are perpetrated for a wide range of reasons by competitors and even nonstate actors and can cause disruptions to the supply chain that impact the availability of key drugs. Which link of the supply chain is most vulnerable to cyber attacks and in what ways does cyber resilience protect domestic production?
▶ 1:08:32Sen. Gillibrand: What measures does your company take to protect cybersecurity? How much does this cost under your operating budget? And for Mr. coukell directly, how can new and existing drug manufacturers engage with the fbi, dhs and other authorities about cybersecurity protections?
▶ 1:08:50Mr. Coukell: It's an important risk to flag. We often think about what if a country were to cut off our supply. But you can shut down a pharmaceutical plant the way you can shut down any business, with a cyber attack or a cyber ransom attack. If you google india cyber ransom attack, you will find a long list of companies there targeted. It is not to say we are not also at risk in the U.S.
▶ 1:09:21Mr. Coukell: Those kind of attacks know no borders. But it is reasonable to assume a company cutting corners on manufacturing is not also investing in cybersecurity the way it should. So there are a number of federal programs to support U.S. manufacturers but there is no doubt that to ensure our supply, we need to ensure our domestic manufacturers and manufacturing partners have top-notch cybersecurity.
▶ 1:09:50Dr. Edwards: Yes, this is a critical, critical aspect of the pharmaceutical supply chain in resiliency across them. Every single node of the supply chain is at risk, not one more than another. In combination and partnership with the administration for strategic preparedness and response, phlow's government program incorporated cybersecurity into the infrastructure build from day one.
▶ 1:10:15Dr. Edwards: We partnered with the fbi, homeland security and sees that to test our systems and to come on top of this infrastructure bill because we know that fragility and vulnerability is real. In 2017 for example merck received a ransomware attack that ended up having an impact of over $1 billion in potential damages. So this is not something that is theoretical, it has happened in the past.
▶ 1:10:44Dr. Edwards: In the age of where we are today and the vulnerabilities we are experiencing from a geopolitical conflict potential, this is only going to become even more of a threat. For us, it's about not building an infrastructure and then trying to decide on let's lay our cybersecurity on top of it. It is about integrating that cyber posture from day one and ensuring that anyone who works alongside the government supply chain to secure our critical industrial base is making sure that we are prepared for the future as a matter of public health security.
▶ 1:11:18Mr. Neely: I do think that the new regulation in serialization has improved. So that we track every batch, every case, every bottle, down to the consumer level. So, if there is ever a recall, we can identify where it is.
▶ 1:11:39Sen. Gillibrand: Helpful. Also related, Mr. neely, you talked about that there needed to be some support. You are not specific about what the support was, but I want to challenge some of the witnesses about what supports would matter. Dr. edwards, you mention your groundbreaking partnership with the administration for strategic preparedness and response. Mr.
▶ 1:12:05Sen. Gillibrand: Coukell, you mentioned in your testimony that your facility in virginia is funded with U.S. government support with aspr. So can you both speak about your experiences, what is working, what is not working? And if you want to add what kinds of support you would want. Because it is relevant for us.
▶ 1:12:35Sen. Gillibrand: We are definitely going to do the transparency stuff. That is very much common ground, something the chairman and I want to work on immediately. But more is needed, and we need more color on the more.
▶ 1:12:49Dr. Edwards: Thank you for that question. You know, aspr has undertaken a critical mission since we first got started with them over five years ago through now multiple administrations and a pandemic and on the other side of that pandemic. To try and address pharmaceutical supply chain pharmacy. However, they need help.
▶ 1:13:16Dr. Edwards: The gao repeatedly recommended hhs implements a formal departmentwide mechanism to coordinate drug shortage activities. This would ensure that fda, cm asked, dod, do w, aspr and other agencies work together rather than in -- rather than in silos. What is happening today. There need to be defined goals, roles, and outcomes among the agencies.
▶ 1:13:45Dr. Edwards: Any agency that is tasked with this extremely important should ensure that they receive long-term sustainable funding as well to support companies like ourselves, but also others working to bring back this industrial base as this is not something that we can do alone. You need multiple flows.
▶ 1:14:05Dr. Edwards: You need multiple companies working together and really helping them raise up on their posture and have the support they need going back to the centralized authority would be a critical step in the right direction specifically. >> thank you, senator. The funding we received to invest in our plant was very important, taking into account the capital costs and the start up costs, nearly one third of that funding.
▶ 1:14:35Dr. Edwards: That was during the pandemic when there were resources to make those kinds of investments. In recent years, the office of industrial base management supply chain within the office that has the expertise and the mandate to make these targeted investments has had very low, very flat budget, and hasn't had the ability to take investments.
▶ 1:15:07Dr. Edwards: >> ranking member, mine is pretty simple. I would think this committee would want a plant that is fairly new to be at full capacity. To be at full capacity, and $18 million grant to build out three packaging lines and another granulating piece of equipment could quadruple the throughput through our operation.
▶ 1:15:40Dr. Edwards: >> I would second that, ranking member. I would also add we need a comprehensive approach. Strategic antibiotic manufacturing fund with targeted grants and low interest loans would be helpful. Similar to the chips act.
▶ 1:16:00Dr. Edwards: Tax incentives for api production, including immediate expensing of new equipment, enhanced r&d deductions, third supply chain visibility which you mentioned, which is important for patients and doctors and hospitals to know where the medication comes from. Fourth recognition to essential medicines are national security assets, making manufacturers eligible for industrial based support available to other critical sectors.
▶ 1:16:27Dr. Edwards: There's a lot of different tools we could employ, but we need a sustained commitment. That is what we hear from every one of us up here. It had to beat a long-term sustained commitment. -- it has to be a long-term sustained commitment. >> didn't -- you were talking about hospitals ought to be compensated for quality in your testament. Right now I think under medicare advantage, they are.
▶ 1:16:55Dr. Edwards: It has nothing to do with medicines. >> thank you, senator. What I really meant is right now, the thing that drives generic drug purchasing is price. To the exclusion of everything else. I think what we need is a system when we are looking at a supplier, what supplier is less likely to fail us in the future, what are their quality systems, quality maturity?
▶ 1:17:25Dr. Edwards: We need to drive purchasing to factor that in. Not to say we become indifferent to price, but we ought to weigh some other things that are important along with price when we choose what drug suppliers we will use. >> I will bet cms ranks people enough on quality that they have the ability to put information out, whether hospitals or medicare advantage, for sure, or all of the health plans are doing this.
▶ 1:17:53Dr. Edwards: They already have that ability without any new legislation. So I will find it out. What would happen for each of you if you got 100% of the volume from the department of war and the v.a. Of the things you do today? What would happen to your business?
▶ 1:18:20Dr. Edwards: >> quite frankly, chairman, I would make money for the first time in 10 years. >> I think every company would welcome that. The company that got that business, it would be tremendously significant. I want to make the point that dod and v.a. Are both 1% or 2% of the total market. Changing how they procure drugs, meaningful to whatever company gets that business, that it is not enough to shift the market.
▶ 1:18:49Dr. Edwards: For that we will have to get into medicare and the commercial market. >> in our case, antibiotics would be transformational. So important for us to have the volume and give us a solid base of manufactured volume to grow our commercial business on.
▶ 1:19:09Dr. Edwards: >> in our case it would help as base load our facilities, support the 1.5 million active-duty soldiers, secure a supply chain of 25 to 50 drugs these soldiers depend on and enable us to send a market signal that is real. It will help spur additional private investment and help us grow and sustain our business when that type of demand signal starts to reveal itself. Because where do we start?
▶ 1:19:38Dr. Edwards: On the federal supply schedule and what the government has authority to do. Ultimately it can then move into cms and some of the other challenging environments. But starting some more is better than nowhere. We need to get started. >> let's take it from the patient standpoint. What would be the benefit to a sailor or somebody in the v.a. Facility?
▶ 1:20:06Dr. Edwards: What would happen to their quality of care? >> chairman scott, we know that not only patient, but also physicians, they don't have a clue where they're medicines are made or what they are using. The first thing that we would emphasize in this is that we would restore trust.
▶ 1:20:23Dr. Edwards: We would begin making sure we are able to restore trust in the quality of these medicines, we would know where they are coming from, and it is important that we not only emphasize location, but we also emphasize quality manufacturing as well. They both go hand in hand. I think what would happen was we would experience the health and well-being, and more important, the national resiliency -- we would experience a change in that that is significant.
▶ 1:20:55Dr. Edwards: Significant for the well-being and quality of care being provided, but based off of some of the testing and reports coming out of the pentagon and kaiser and others, we would hopefully experience less adverse events, or some potent medications that have entered our supply chain when we know they are coming from. >> if I could expand on that. Why did an informal poll of my family. We take 23 generic drugs.
▶ 1:21:28Dr. Edwards: They are all medicare. Of the 23, 20 are produced in india. Two are in china. One in canada. Not one is made in the united states. >> you don't even know where the ingredients are from? >> the only way I was able to find out is because I'm in the industry. So I researched.
▶ 1:21:57Dr. Edwards: But for example, take a cholesterol medication. It is a repackaged -- it is owned by a distributor. So you would think it is a united states product. You do the ndc, it comes from a plant in india. It is labeled in india. India ships it to the united states. They send the bill to ireland.
▶ 1:22:32Dr. Edwards: But the owner of that business is in the U.S. they never touch that medicine. >> I will make one additional point, senator.
▶ 1:22:47Dr. Edwards: I think there is an important difference between a product defect on a given day, which is important and that is a risk to a patient, but it is different from a company that has inadequate quality systems, and in the future, the fda will come back pouring records or in other ways and they will have a failure to supply.
▶ 1:23:14Dr. Edwards: Part of what we want to do is shift the market to companies that are less likely to cause a drug shortage and have a failure to supply, which does not necessarily mean on a given day that their product is defective. >> we have testimony from a doctor from the university of indiana, over a 50% increased chance of hospitalization and death if you take a generic drug from india or china.
▶ 1:23:41Dr. Edwards: Would any of you like to talk about how the department of commerce should use their section 232 investigations to support domestic manufacturers? >> I will, I think it jump starts the whole reef formation of what we need to do. It provides some ability to go in and fix a procurement problem, number one.
▶ 1:24:09Dr. Edwards: So we have a long time, it seems to me, to reform the entire industry. We've got to get started as fast as possible. That 232 is the first part of making sure that we can respond to other problems we have in this industry faster. >> why don't you have contracts for the department of work?
▶ 1:24:39Dr. Edwards: -- you don't have the contracts? >> no, chairman scott, we do not. The reason for that is we are not considered a small business. Many of the amoxicillin contracts, all of them in recent years, have been small business set-asides.
▶ 1:24:58Dr. Edwards: Because jackson health care, a fine georgia corporation, made an investment in our facility and spent millions of dollars saving our facility, our facility is not considered a small business, therefore we cannot complete -- compete for those set-asides. >> are you familiar with any independent quality testing for imported medicines from china or india? Is that happening?
▶ 1:25:27Dr. Edwards: >> senator, I'm not aware of any. The department of defense has a quality investigation or testing program, something we think all imported medications should have tested before they are sold in the U.S. >> I'm familiar with a couple of pilot programs. It did not surprise you every drug is not tested?
▶ 1:25:56Dr. Edwards: Think about it -- the usda, you cannot buy meat unless you have an inspector at that plant. >> we operate off of an honor system, chairman scott. >> for stuff you put in your body. But we don't do it for -- >> or groceries or clothing or anything else. >> and yet at our plant, excuse me, but we have an end to end testing process program.
▶ 1:26:24Dr. Edwards: We test every raw material that comes into our plant. We do efficacy testing, solvency testing, breakage testing throughout the entire process from the beginning of the raw material, to when it is packaged. >> do you have any other questions? >> does anybody want to add anything we should have asked?
▶ 1:26:54Dr. Edwards: Ok. I want to thank everyone for being here today and participating. I look forward to continuing to work with members on this committee. We want to thank the ranking member for her efforts in this and the fact we were able to do this at a bipartisan manner. If any have additional questions or statements to be added, the hearing record will be open until next wednesday at 5:00 p.m. Thanks, everybody.