[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]



     SAFEGUARDING PHARMACEUTICAL SUPPLY CHAINS IN A GLOBAL ECONOMY

=======================================================================

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 30, 2019

                               __________

                           Serial No. 116-76
                           
                   
                  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]   
                           
                           
      Printed for the use of the Committee on Energy and Commerce

                   govinfo.gov/committee/house-energy
                        energycommerce.house.gov
                        
                        
                              ________
			
			
	            U.S. GOVERNMENT PUBLISHING OFFICE
			
43-881 			  WASHINGTON : 2022
                        
                        
                        
                        
                        
                        
                    COMMITTEE ON ENERGY AND COMMERCE

                     FRANK PALLONE, Jr., New Jersey
                                 Chairman
BOBBY L. RUSH, Illinois              GREG WALDEN, Oregon
ANNA G. ESHOO, California              Ranking Member
ELIOT L. ENGEL, New York             FRED UPTON, Michigan
DIANA DeGETTE, Colorado              JOHN SHIMKUS, Illinois
MIKE DOYLE, Pennsylvania             MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois             STEVE SCALISE, Louisiana
G. K. BUTTERFIELD, North Carolina    ROBERT E. LATTA, Ohio
DORIS O. MATSUI, California          CATHY McMORRIS RODGERS, Washington
KATHY CASTOR, Florida                BRETT GUTHRIE, Kentucky
JOHN P. SARBANES, Maryland           PETE OLSON, Texas
JERRY McNERNEY, California           DAVID B. McKINLEY, West Virginia
PETER WELCH, Vermont                 ADAM KINZINGER, Illinois
BEN RAY LUJAN, New Mexico            H. MORGAN GRIFFITH, Virginia
PAUL TONKO, New York                 GUS M. BILIRAKIS, Florida
YVETTE D. CLARKE, New York, Vice     BILL JOHNSON, Ohio
    Chair                            BILLY LONG, Missouri
DAVID LOEBSACK, Iowa                 LARRY BUCSHON, Indiana
KURT SCHRADER, Oregon                BILL FLORES, Texas
JOSEPH P. KENNEDY III,               SUSAN W. BROOKS, Indiana
    Massachusetts                    MARKWAYNE MULLIN, Oklahoma
TONY CARDENAS, California            RICHARD HUDSON, North Carolina
RAUL RUIZ, California                TIM WALBERG, Michigan
SCOTT H. PETERS, California          EARL L. ``BUDDY'' CARTER, Georgia
DEBBIE DINGELL, Michigan             JEFF DUNCAN, South Carolina
MARC A. VEASEY, Texas                GREG GIANFORTE, Montana
ANN M. KUSTER, New Hampshire
ROBIN L. KELLY, Illinois
NANETTE DIAZ BARRAGAN, California
A. DONALD McEACHIN, Virginia
LISA BLUNT ROCHESTER, Delaware
DARREN SOTO, Florida
TOM O'HALLERAN, Arizona
                                 ------                                

                           Professional Staff

                   JEFFREY C. CARROLL, Staff Director
                TIFFANY GUARASCIO, Deputy Staff Director
                MIKE BLOOMQUIST, Minority Staff Director
                         Subcommittee on Health

                       ANNA G. ESHOO, California
                                Chairwoman
ELIOT L. ENGEL, New York             MICHAEL C. BURGESS, Texas
G. K. BUTTERFIELD, North Carolina,     Ranking Member
    Vice Chair                       FRED UPTON, Michigan
DORIS O. MATSUI, California          JOHN SHIMKUS, Illinois
KATHY CASTOR, Florida                BRETT GUTHRIE, Kentucky
JOHN P. SARBANES, Maryland           H. MORGAN GRIFFITH, Virginia
BEN RAY LUJAN, New Mexico            GUS M. BILIRAKIS, Florida
KURT SCHRADER, Oregon                BILLY LONG, Missouri
JOSEPH P. KENNEDY III,               LARRY BUCSHON, Indiana
    Massachusetts                    SUSAN W. BROOKS, Indiana
TONY CARDENAS, California            MARKWAYNE MULLIN, Oklahoma
PETER WELCH, Vermont                 RICHARD HUDSON, North Carolina
RAUL RUIZ, California                EARL L. ``BUDDY'' CARTER, Georgia
DEBBIE DINGELL, Michigan             GREG GIANFORTE, Montana
ANN M. KUSTER, New Hampshire         GREG WALDEN, Oregon (ex officio)
ROBIN L. KELLY, Illinois
NANETTE DIAZ BARRAGAN, California
LISA BLUNT ROCHESTER, Delaware
BOBBY L. RUSH, Illinois
FRANK PALLONE, Jr., New Jersey (ex 
    officio)
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     1
    Prepared statement...........................................     2
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     3
    Prepared statement...........................................     5
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     6
    Prepared statement...........................................     7
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     8
    Prepared statement...........................................    10

                               Witnesses

Janet Woodcock, M.D., Director, Center for Drug Evaluation and 
  Research, Food and Drug Administration, Department of Health 
  and Human Services.............................................    11
    Prepared statement...........................................    14
    Slides shown during question-and-answer segment..............    40
    Answers to submitted questions \1\...........................   158
Michael R. Wessel, Commissioner, U.S.-China Economic and Security 
  Review Commission..............................................    25
    Prepared statement...........................................    27
    Questions submitted for the record\2\........................   164
Rosemary Gibson, Senior Advisor, The Hastings Center.............    79
    Slides shown during oral presentation........................    81
    Prepared statement...........................................    91
    Answers to submitted questions...............................   167
Edward Price, President and Chief Executive Officer, Seqens N.A..   101
    Prepared statement...........................................   104
    Answers to submitted questions...............................   169
David Gaugh, R.Ph., Senior Vice President, Sciences and 
  Regulatory Affairs, Association for Accessible Medicines.......   108
    Prepared statement...........................................   110
    Questions submitted for the record\2\........................   173

                           Submitted Material

Article, China's grip on pharmaceutical drugs is a national 
  security issue, by Anna G. Eshoo and Adam B. Schiff, The 
  Washington Post, September 10, 2019, submitted by Ms. Eshoo....   136
Letter of October 25, 2019, from Representative Brian Higgins, et 
  al., to Alex Azar, Secretary, Department of Health and Human 
  Services, submitted by Mr. Engel...............................   139
Press release from Mylan Pharmaceuticals, October 25, 2019, 
  submitted by Mr. Burgess.......................................   142

----------

\1\ Questions submitted to Dr. Woodcock were answered by Andrew 
Tantillo, Acting Associate Commissioner for Legislative Affairs, Food 
and Drug Administration, Department of Health and Human Services.
\2\ Mr. Wessel and Mr. Gaugh did not answer submitted questions for the 
record by the time of publication.
Statement of the U.S. Pharmacopeial Convention, October 30, 2019, 
  submitted by Ms. Eshoo.........................................   144
Letter of October 30, 2019, from David Light, Chief Executive 
  Officer, Valisure, to Mr. Pallone and Ms. Eshoo, submitted by 
  Ms. Eshoo......................................................   150
Statement of The Premier Inc. Healthcare Alliance, October 30, 
  2019, submitted by Ms. Eshoo...................................   154

 
     SAFEGUARDING PHARMACEUTICAL SUPPLY CHAINS IN A GLOBAL ECONOMY

                              ----------                              


                      WEDNESDAY, OCTOBER 30, 2019

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:01 a.m., in 
the John D. Dingell Room 2123, Rayburn House Office Building, 
Hon. Anna G. Eshoo (chairwoman of the subcommittee) presiding.
    Members present: Representatives Eshoo, Engel, Butterfield, 
Matsui, Castor, Sarbanes, Schrader, Kennedy, Cardenas, Welch, 
Ruiz, Kuster, Kelly, Barragan, Blunt Rochester, Pallone (ex 
officio), Burgess (subcommittee ranking member), Shimkus, 
Guthrie, Griffith, Bilirakis, Long, Bucshon, Brooks, Mullin, 
Hudson, Carter, and Walden (ex officio).
    Also present: Representatives Soto and Flores.
    Staff present: Jeffrey C. Carroll, Staff Director; Waverly 
Gordon, Deputy Chief Counsel; Tiffany Guarascio, Deputy Staff 
Director; Megan Howard, FDA Detailee; Josh Krantz, Policy 
Analyst; Aisling McDonough, Policy Coordinator; Joe Orlando, 
Executive Assistant; Alivia Roberts, Press Assistant; Tim 
Robinson, Chief Counsel; Kimberlee Trzeciak, Chief Health 
Advisor; C.J. Young, Press Secretary; Jen Barblan, Minority 
Chief Counsel, Oversight and Investigations; Margaret Tucker 
Fogarty, Minority Legislative Clerk/Press Assistant; Peter 
Kielty, Minority General Counsel; J.P. Paluskiewicz, Minority 
Chief Counsel, Health; and Kristin Seum, Minority Counsel, 
Health.
    Ms. Eshoo. Good morning, everyone.
    The Subcommittee on Health will now come to order.
    The Chair now recognizes herself for 5 minutes for an 
opening statement.

 OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    There is a hidden health crisis in this country that will 
affect us all: the crippling inadequacy of the American drug 
supply. And, today, 90 percent of the medications that 
Americans take are generics. That is because they are cheap, 
and they are supposed to be just as safe and effective as 
expensive brand-name drugs. But I believe the generic industry 
is broken, and it is putting millions of Americans' health at 
risk.
    Our generic drug supply is broken in three devastating 
ways: shortages of lifesaving medications, subpar manufacturing 
that contaminates our drugs, and an overreliance on foreign 
production of critical drugs and their ingredients.
    The first crisis is the shortage of lifesaving medications. 
Right now, hospitals are rationing critical drugs. This month, 
children and their families woke up to the news that they may 
not be able to get the pediatric cancer drug vincristine--
little children who, with this drug, would be cured of their 
cancer and now can't get the drug they need. This should not be 
happening in the United States.
    The second crisis is subpar manufacturing contaminating our 
drugs and contributing to shortages. Over the last year, we 
have seen recalls of common blood pressure medications because 
they contain carcinogens. One of the drugs affected, losartan, 
is the ninth most commonly used drug in our country. Our 
generic drug supply is so fragile that the FDA often must make 
the hard choice between enforcing quality at a plant and 
avoiding a shortage.
    The third crisis is an overreliance on foreign production 
for critical medications, which is a national security risk. 
China globally dominates the manufacture of active 
pharmaceutical ingredients, often referred to as API, and China 
has gained a chokehold over the global supply of penicillin. In 
fact, according to a witness on our second panel, Rosemary 
Gibson, there are no plants in the United States that 
manufacture penicillin.
    If tensions with China escalate, Beijing could use U.S. 
dependence on critical drugs as an economic weapon and exploit 
the health and safety of both our Armed Forces and the American 
people, and this is a threat to our Nation's security.
    China flaunts the FDA's rules. An analysis of FDA 
inspection reports published on Tuesday this week in STAT News 
found Chinese plants were cited for data-integrity issues 
nearly twice as often as American plants. These data issues 
include falsifying drug tests or deleting findings that could 
indicate contaminated or poor-quality drugs.
    Taken together, these overlapping crises of shortages, 
subpar manufacturing, and foreign reliance threaten the 
overwhelming majority of drugs taken by Americans every day.
    This is a crisis, and today we will define it in depth. 
And, most importantly, we have to focus on solutions. Much of 
what we will hear today will sound shocking, not only because 
of the scary state we find our drug supply in but also how 
little attention it has received. And it has been years in the 
making.
    I am issuing a call to action to the FDA, to industry, and 
to all Members of Congress, but most especially our committee, 
to take these problems seriously and work together on a 
bipartisan basis to address them. If we fail to act, America 
will continue to be vulnerable to potential foreign adversaries 
and at the mercy of subpar plants or cutbacks on quality, and 
we cannot allow this to happen.
    [The prepared statement of Ms. Eshoo follows:]

                Prepared Statement of Hon. Anna G. Eshoo

    There is a hidden healthcare crisis in this country that 
will affect us all: the crippling inadequacy of the American 
drug supply.
    Today, 90 percent of the medications that Americans take 
are generics. That's because they're cheap, and they're 
supposed to be just as safe and effective as expensive brand 
name drugs.
    But the generic industry is broken, and it is putting 
millions of Americans' health at risk.
    Our generic drug supply is broken in three devastating 
ways: shortages of lifesaving medications, subpar manufacturing 
contaminating our drugs, and an overreliance on foreign 
production of critical drugs and their ingredients.
    The first crisis is the shortage of lifesaving medications. 
Right now, hospitals are rationing critical drugs. This month, 
children and their families woke up to the news that they may 
not be able to get the pediatric cancer drug vincristine. 
Little children, who with vincristine would be cured of their 
cancer, now can't get the drug they need. This shouldn't happen 
in the United States.
    The second crisis is subpar manufacturing contaminating our 
drugs, contributing to shortages. Over the last year, we've 
seen recalls of common blood pressure medications because they 
contain carcinogens. One of the drugs affected, losartan, is 
the ninth most commonly used drug in our country.
    Our generic drug supply is so fragile that the FDA often 
must make the hard choice between enforcing quality at a plant 
and avoiding a shortage.
    The third crisis is an overreliance on foreign production 
for critical medication, which is a national security risk. 
China globally dominates the manufacturing of active 
pharmaceutical ingredients, and China has gained a chokehold 
over the global supply of penicillin. In fact, according to a 
witness on our second panel, Ms. Rosemary Gibson, there are no 
plants in the U.S. that manufacture penicillin. If tensions 
with China escalate, Beijing could use U.S. dependence for 
critical drugs as an economic weapon and exploit the health and 
safety of our Armed Forces and the American public. This is a 
threat to our Nation's security.
    China flaunts the FDA's rules. An analysis of FDA 
inspection reports published on Wednesday in STAT News found 
Chinese plants were cited for data integrity issues nearly 
twice as often as American plants. These data issues include 
falsifying drug tests or deleting findings that could indicate 
contaminated or poor-quality drugs.
    Taken together, these overlapping crises of shortages, 
subpar manufacturing, and foreign reliance threaten the 
overwhelming majority of drugs taken by Americans every day.
    This is a crisis, and today we will define it in depth--and 
most importantly, focus on solutions.
    Much of what we will hear today will sound shocking. Not 
only because of the scary state we find our drug supply in, but 
also how little attention it has received. I'm issuing a call 
to action to the FDA, to industry, and to my fellow MSembers of 
Congress to take these problems seriously and work together to 
address them. If we fail to act, America will continue to be 
vulnerable to potential foreign adversaries and at the mercy of 
subpar plants or cutbacks on quality.
    We cannot allow this to happen.

    Ms. Eshoo. The Chair now recognizes Dr. Burgess, ranking 
member of the Subcommittee on Health, for 5 minutes for his 
opening statement.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. And I thank the Chair for recognition.
    This committee, the Committee on Energy and Commerce, has a 
long history of being engaged in the safety of the 
pharmaceutical supply chain, and certainly our continued 
oversight work today is critically important.
    Our investment in research and development yields 
significant scientific breakthroughs in the form of new 
treatments and new cures for patients that were, in fact, 
probably not even thought of years ago. But there is an 
increased need for an efficient and secure pharmaceutical 
supply chain to ensure safe access to active pharmaceutical 
ingredients coming from across the globe.
    Nearly 80 percent of active pharmaceutical ingredients come 
from other countries. The Food and Drug Administration examines 
these critical ingredients once they are imported or offered 
for import to the United States, subjecting them to the Food 
and Drug Administration's requirements.
    This committee should remember the United States faced a 
deadly contamination of the blood thinner heparin in 2008. I 
think, in fact, as part of that hearing, the question was even 
raised, how would we continue to exist without heparin? As a 
practicing physician, I will tell you, that would be very, very 
difficult.
    Heparin contains an active pharmaceutical ingredient that 
was coming from China, is still coming from China, but that 
ingredient was adulterated, resulting in hundreds of adverse 
effects and the deaths of 81 American patients.
    I have got to tell you, as a physician, you think of 
someone in a dialysis center who pushed the flush solution into 
an AV shunt to clear it for the dialysis, and that patient 
immediately expired? That is obviously terrible for the patient 
and their family, but that doctor or that nurse is going to 
carry that around with them the rest of their lives.
    When we studied at the time, more than 1 million multidose 
vials were sold each month in the United States. Now, the Food 
and Drug Administration did conduct an investigation but was 
unable to pinpoint the exact source of the adulteration, but it 
does appear to have been a Chinese active pharmaceutical 
ingredient production site.
    Ultimately, the manufacturer of the heparin, including the 
adulterated active pharmaceutical ingredient, known as 
hypersulfated chondroitin sulfate in common parlance--
eventually, they did recall all their heparin. This amounted to 
roughly half of the heparin supply in the United States.
    As a result of this contamination, the Food and Drug 
Administration asked manufacturers of products containing 
heparin to test the active pharmaceutical ingredients with not 
one but two tests that were now recommended by the FDA.
    That molecule, that contaminant molecule, was cleverly 
designed so that it hid behind the normal peak of the heparin 
molecule when it was examined by the scientific equipment, and 
it required a more sensitive test to be able to elucidate the 
two peaks on that graph.
    Despite efforts by the Food and Drug Administration, 
numerous letters sent by members of this committee, and 
hearings on this mass heparin contamination, we have still not 
identified the culprit or the contamination source. This 
committee remained engaged on the issue for years and, in fact, 
I dare say, is still engaged on this contamination, but we have 
never learned the true cause of the contamination.
    To this Member, that serves as an example of how seriously 
we must take the safety of the pharmaceutical supply chain. The 
international supply chain for pharmaceuticals is complex. 
Merely investigating contamination after patients start dying 
fails to adequately protect Americans. An understanding of this 
global system is instrumental to ensure a safe pathway for the 
important active pharmaceutical ingredients used in drugs taken 
every single day. This continues to be an issue as 
pharmaceutical manufacturing grows increasingly global and 
manufacturing shifts away from the United States.
    As a physician, I do know the importance of being able to 
prescribe the exact drug or treatment that a patient needs. A 
safe and efficient international supply chain is essential to 
avoid drug shortages and, therefore, ensuring that physicians 
can focus on what their patient needs rather than what is 
available.
    In June of this year, I wrote a letter, along with Chairman 
Pallone, Republican Leader Walden, Ms. DeGette, and Mr. 
Guthrie, to the FDA about a series of recalls involving drugs 
manufactured overseas that contain trace amounts of known 
carcinogens. While it is important to ensure safety by 
recalling these drugs, it shows that the threat of 
contamination is starkly real.
    The Food and Drug Administration Safety and Innovation Act, 
which was signed into law in 2013, codified the Food and Drug 
Administrations's authority to inspect drugs and active 
pharmaceutical ingredients manufactured outside the United 
States. Since then, the FDA has issued guidance and final rules 
on agency procedure concerning adulterated drugs, domestic and 
foreign registration, and inspection and destruction of 
imported drugs refused admission to the United States. This was 
an important step in the direction of ensuring a safe 
pharmaceutical supply chain, and I certainly look forward to 
hearing more about it today.
    Thank you. I will yield back.
    [The prepared statement of Mr. Burgess follows:]

             Prepared Statement of Hon. Michael C. Burgess

    Thank you, Madame Chair. The Energy and Commerce Committee 
has a history of being engaged in the safety of the 
pharmaceutical supply chain, and I look forward to continuing 
our oversight work today. As research and development yields 
amazing scientific breakthroughs in the form of new treatments 
and cures for patients, there is an increased need for an 
efficient and secure pharmaceutical supply chain to ensure safe 
access to active pharmaceutical ingredients (API) coming from 
across the globe. Nearly 80 percent of active pharmaceutical 
ingredients come from other countries. The Food and Drug 
Administration examines API once they are imported or offered 
for import to the United States, subjecting them to the FDA's 
requirements.
    Many of you may remember the United States faced a deadly 
contamination of the blood thinner, heparin, in 2008. Heparin 
contained an active pharmaceutical ingredient from China that 
was adulterated resulting in hundreds of adverse effects and 
the death of 81 American patients. At the time, more than 1 
million multidose vials were sold each month in the United 
States.
    The Food and Drug Administration conducted an investigation 
and was unable to pinpoint the exact source of the 
adulteration; however, it appeared to have been at a Chinese 
active pharmaceutical ingredient production site. Ultimately, 
the manufacturer of the heparin, including the adulterated 
active pharmaceutical ingredient, recalled all heparin. This 
amounted to roughly half of the heparin supply in the U.S. As a 
result of this contamination, FDA asked manufacturers of 
products containing heparin to test the active pharmaceutical 
ingredients with two screening methods recommended by the FDA.
    Despite efforts by the FDA, numerous letters sent by 
members of this committee, and hearings on this mass heparin 
contamination, we have still not identified the culprit or 
contamination source. This committee remained engaged on this 
issue for years following this contamination and never learned 
the true cause of this contamination. This serves as an example 
of how seriously we must take the safety of the pharmaceutical 
supply chain.
    The international supply chain for pharmaceuticals is 
complex. Merely investigating contamination after patients 
start dying fails to adequately protect Americans. An 
understanding of this global system is instrumental to ensure a 
safe pathway for important active pharmaceutical ingredients 
used in drugs taken every single day. This continues to be an 
issue as pharmaceutical manufacturing grows increasingly global 
and manufacturing shifts away from the United States.
    As a physician, I know the importance of being able to 
prescribe the exact drug or treatment that your patient needs. 
A safe and efficient international supply chain is essential to 
avoid drug shortages and therefore, ensuring that physicians 
can focus on what their patient needs, rather than whether the 
drug is even available.
    In June of this year, I wrote a letter along with Chairman 
Pallone, Republican Leader Walden, Ms. DeGette, and Mr. 
Guthrie, to FDA about a series of recalls involving drugs 
manufactured overseas that contained trace amounts of known 
carcinogens. While it is important to ensure safety by 
recalling these drugs, it shows that the threat of 
contamination is still alive and well.
    The Food and Drug Administration Safety and Innovation Act, 
which was signed into law in 2013, codified the Food and Drug 
Administration's authority to inspect drugs and active 
pharmaceutical ingredients manufactured outside the United 
States.
    Since then the FDA has issued guidance and finals rules on 
agency procedure concerning adulterated drugs, domestic and 
foreign registration and inspection and destruction of imported 
drugs refused admission to the U.S. This was an important step 
in the direction of ensuring a safe pharmaceutical supply chain 
and I look forward to learning more about this today. Thank 
you, Madame Chair, I yield back.

    Ms. Eshoo. The Chair thanks the ranking member.
    I now have the pleasure of recognizing the chairman of the 
full committee, Mr. Pallone, for his 5 minutes for an opening 
statement.

OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Chairwoman Eshoo.
    American consumers rely heavily on prescription drug 
products that help them live longer and healthier lives. Over 
the last several months, this subcommittee has taken action to 
lower drug costs to ensure that all Americans can access the 
prescription drugs that they need. And making prescription 
drugs more affordable is a top priority of this committee. 
After all, prescription drugs are essentially useless if people 
cannot afford them.
    Today, we are focusing on another important component of 
prescription drugs, and that is maintaining the safety and 
quality of medications in our marketplace.
    The Food and Drug Administration plays a central role in 
ensuring the safety of drugs in our market. The rigorous drug-
review process at FDA is recognized worldwide as the gold 
standard. While regulatory processes can always be improved, 
American patients should take comfort in the knowledge that 
drug products approved by the FDA are the most rigorously 
reviewed in the world.
    And FDA's authority is not limited to those drugs 
manufactured here in the U.S. It can inspect and review 
information related to both finished-dose drug products and the 
active pharmaceutical ingredients, or API, that come from other 
countries.
    Over the years, this committee has acted to improve FDA's 
authority to the regulate what is a complex and increasingly 
global supply chain. We have provided FDA with the ability to 
inspect facilities on a risk-based schedule. We gave FDA the 
ability to enter into agreements with other regulatory 
authorities to share inspection information for foreign 
facilities. And we required entities in the drug supply chain 
to maintain and track information related to drug products.
    All of these authorities are particularly important given 
recent trends in pharmaceutical manufacturing. Many 
manufacturers are getting their pharmaceutical ingredients from 
manufacturers overseas, particularly from China and India. And 
some of the ingredients from abroad have caused seriously 
quality concerns with certain drug products.
    So we need to make sure that FDA has the authority it needs 
to address these concerns and to remain vigilant over the 
marketplace. We also need to ensure that manufacturers are 
still incentivized to produce their pharmaceutical ingredients 
and products domestically.
    Some manufacturers are implementing innovative 
manufacturing methods, like continuous manufacturing, to make 
their processes more efficient and to keep their facilities 
here in the U.S. Encouraging the use of continuous 
manufacturing methods has long been a priority of mine, not 
only because these methods are the next frontier of 
manufacturing but also because they are quality production 
methods that help U.S. manufacturers compete in the global 
market.
    So, earlier this week, I reintroduced legislation with 
Representative Guthrie to expand support for continuous 
manufacturing. This bipartisan legislation will foster the 
development of emerging technology by expanding opportunities 
for FDA to partner with universities across the country that 
are leading these efforts, including my own Rutgers University, 
in my congressional district. And it is the next step in my 
work on the continuous-manufacturing grants program that was 
included in the 21st Century Cures Act.
    So I look forward to hearing from the witnesses today, 
particularly Dr. Woodcock, about the safety and sourcing of 
active pharmaceutical ingredients. It is critical that we 
ensure American patients have access to the highest-quality 
medications in the world.
    And I particularly want to thank Ms. Eshoo, because she has 
been, you know, advocating that we look into this and have this 
hearing for some time now, and so it is really important that 
we do this. Thank you, Chairwoman.
    I yield back.
    [The prepared statement of Mr. Pallone follows:]

             Prepared Statement of Hon. Frank Pallone, Jr.

    American consumers rely heavily on prescription drug 
products that help them live longer and healthier lives. Over 
the last several months, this subcommittee has taken action to 
lower drug costs to ensure that all Americans can access the 
prescription drugs they need. Making prescription drugs more 
affordable is a top priority of this committee--after all, 
prescription drugs are essentially useless if people cannot 
afford them. Today, we are focusing on another important 
component of prescription drugs--maintaining the safety and 
quality of medications in our market.
    The Food and Drug Administration (FDA) plays a central role 
in ensuring the safety of drugs on our market. The rigorous 
drug review process at FDA is recognized worldwide as the gold 
standard. While regulatory processes can always be improved, 
American patients should take comfort in the knowledge that 
drug products approved by the FDA are among the most rigorously 
reviewed in the world.
    And FDA's authority is not limited to those drugs 
manufactured here in the United States. It can inspect and 
review information related to both finished-dose drug products 
and the active pharmaceutical ingredients, or A 09P 09I, that 
come from other countries.
    Over the years, this committee has acted to improve FDA's 
authority to regulate what is a complex and increasingly global 
supply chain. We provided FDA with the ability to inspect 
facilities on a risk-based schedule. We gave FDA the ability to 
enter into agreements with other regulatory authorities to 
share inspection information for foreign facilities. And we 
required entities in the drug supply chain to maintain and 
track information related to drug products.
    All of these authorities are particularly important given 
recent trends in pharmaceutical manufacturing. Many 
manufacturers are getting their pharmaceutical ingredients from 
manufacturers overseas, particularly from China and India. Some 
of the ingredients from abroad have caused serious quality 
concerns with certain drug products.
    We need to make sure that FDA has the authority it needs to 
address these concerns and to remain vigilant over the 
marketplace. We also need to ensure that manufacturers are 
still incentivized to produce their pharmaceutical ingredients 
and products domestically.
    Some manufacturers are implementing innovative 
manufacturing methods, like continuous manufacturing, to make 
their processes more efficient and to keep their facilities 
here in the United States.
    Encouraging the use of continuous-manufacturing methods has 
long been a priority of mine not only because these methods are 
the next frontier of manufacturing, but also because they are 
quality production methods that help U.S. manufacturers compete 
in the global market. Earlier this week, I reintroduced 
legislation with Representative Guthrie to expand support for 
continuous manufacturing. This bipartisan legislation will 
foster the development of emerging technology by expanding 
opportunities for FDA to partner with universities across the 
country that are leading these efforts, including Rutgers 
University in my congressional district. It is the next step in 
my work on the continuous-manufacturing grants program that was 
included in the 21st Century Cures Act.
    I look forward to hearing from the witnesses today, 
including Dr. Woodcock, about the safety and sourcing of active 
pharmaceutical ingredients. It is critical that we ensure 
American patients have access to the highest-quality 
medications in the world.
    Thank you, and I yield back.

    Ms. Eshoo. The Chair thanks the chairman.
    And now it is a pleasure to recognize the ranking member of 
the full committee, who broke our hearts with his 
announcement--and I am going to say this every time I introduce 
him----
    Mr. Walden. No.
    Ms. Eshoo [continuing]. Mr. Walden from Oregon, for his 5 
minutes for an opening statement.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Well, thank you, Madam Chair.
    And I have another big announcement to make here and now. I 
do believe it is our chairman's birthday today, Mr. Pallone.
    Ms. Eshoo. Happy birthday.
    Mr. Walden. So could we do, like, the Boehner birthday 
song? This is your birthday song, it doesn't last too long, 
hey! That is it.
    Mr. Pallone. Thank you.
    Mr. Walden. Yes, and with that age thing happening, this 
hearing is really important for you going forward, I think, so 
we want to get these drugs available, safe.
    Ms. Eshoo. We have to get these drugs----
    Mr. Walden. Yes, I am just about unleashed up here now. 
This is pretty good. I think that is it.
    I appreciate, Madam Chair, you holding this hearing, and, 
Mr. Chairman, thank you as well. This really is serious, 
important work, and we have great witnesses here to help us 
understand what is going on.
    Making sure our Government agencies have the tools 
necessary to ensure safety and quality of the U.S. drug supply 
is a top priority for this committee.
    Recent recalls issued for a class of drugs known as 
angiotensin II receptor blockers, or ARBs, which are generally 
used to treat high blood pressure, and media attention on the 
questionable conditions and practices at foreign manufacturing 
facilities have led to public concern about the country's 
sourcing of finished drug products and active pharmaceutical 
ingredients overseas.
    Historically, medicines intended for use in the United 
States have been produced in the United States. However, over 
the last several years, more drug manufacturing has moved 
offshore. Much of the shift can be attributed to low wages and 
less regulation in other countries, resulting in lower 
production costs for drug manufacturers. With the shift 
overseas, it has become more difficult for us to verify these 
products are made in compliance with what I would say are the 
world's best standards, those in the United States.
    And, as you know, to our witnesses, this committee has had 
a long interest in FDA oversight of the manufacturing of 
finished drug products and active pharmaceutical ingredients 
intended for the U.S. drug supply.
    In 2012, with the passage of the Food and Drug 
Administration Safety and Innovation Act, Congress provided FDA 
with new resources needed to inspect both domestic and foreign 
generic drug facilities.
    Data from the most recently issued GAO report in 2016 found 
that the FDA had increased its foreign drug inspections and it 
had enhanced its ability to prioritize drug establishments for 
inspection. For example, the GAO found that the FDA foreign 
inspections increased from 333 in 2007 to 842 in 2015.
    However, it has been reported that FDA surveillance 
inspections of foreign facilities have declined in the past 2 
years, including in China, where inspections fell by almost 11 
percent.
    And I know, while inspections are not the only means of 
ensuring the drug supply is properly protected, it is an 
important piece of the puzzle, and we must ensure the FDA has 
the appropriate oversight measures in place.
    Because of our continued concern over the quality and 
safety of the U.S. drug supply, we have requested, in a 
bipartisan manner, answers from the FDA about practices 
currently in place to adequately oversee foreign drug 
manufacturing. We have also requested an updated report from 
GAO on the FDA's drug inspection program, because if there are 
gaps in the agency's ability to properly oversee these 
facilities, action must be taken to resolve those shortcomings 
and protect the public's health.
    The United States' reliance on overseas manufacturing not 
only raises quality concerns but it also poses national 
security risks as well. Foreign-manufactured medical products 
critical to the strategic national stockpile are subject to the 
same quality and safety concerns, but dependence on foreign 
countries for drugs used as medical countermeasures could also 
leave Americans vulnerable to chemical and biological threats, 
among others.
    Further reliance on foreign suppliers, particularly in 
those countries with which we have unstable relationships, 
poses an increased risk to Americans. If a country monopolizes 
the production of a drug and wishes to retaliate against the 
United States, they could substantially increase drug prices or 
dramatically reduce supply in an attempt to cause shortages, 
limiting access to critical medications. And that is in the 
absence of a crisis. In a time of crisis, such possible actions 
could cost American lives.
    My concerns are amplified by the fact that some of the 
legislation that is headed to the floor on drug pricing may 
further complicate this matter and drive innovation in 
manufacturing overseas, leaving the American people at the 
mercy of foreign manufacturers, particularly China, who have 
shown a strong interest in creating their own biotech 
manufacturing base for lifesaving and life-sustaining drugs.
    So I look forward to the expert witnesses we have today. I 
really appreciate this hearing. I know this is an issue you 
care deeply about, Madam Chair, and have fought for 
improvements on for a long time.
    And so we look forward to your testimony.
    With that, I yield back.
    [The prepared statement of Mr. Walden follows:]

                 Prepared Statement of Hon. Greg Walden

    Chairwoman Eshoo, thank you for holding this hearing today. 
Making sure our Government agencies have the tools necessary to 
ensure the safety and quality of the U.S. drug supply is a top 
priority for this committee. Recent recalls issued for a class 
of drugs known as angiotensin II receptor blockers, or ARBs, 
which are generally used to treat high blood pressure, and 
media attention on the questionable conditions and practices at 
foreign manufacturing facilities, have led to public concern 
about the country's sourcing of finished drug products and 
active pharmaceutical ingredients (APIs) overseas.
    Historically, medicines intended for use in the United 
States have been produced here. However, over the past several 
years, more drug manufacturing has moved offshore. Much of this 
shift can be attributed to low wages and less regulation in 
other countries, resulting in lower production costs to drug 
companies. With this shift overseas it has become more 
difficult for us to verify these products are made in 
compliance with U.S. standards.
    This committee has long held an interest in FDA oversight 
of the manufacturing of finished drug products and active 
pharmaceutical ingredients intended for the U.S. drug supply. 
In 2012 with the passage of the Food and Drug Administration 
Safety and Innovation Act, Congress provided FDA with new 
resources needed to inspect both domestic and foreign generic 
drug facilities. Data from the most recently issued GAO report 
in 2016 found that FDA had increased its foreign drug 
inspections and enhanced its ability to prioritize drug 
establishments for inspection. For example, GAO found that FDA 
foreign inspections increased from 333 in 2007 to 842 in 2015.
    However, it has been reported that FDA surveillance 
inspections of foreign facilities have declined in the past 2 
years, including in China where inspections fell by almost 11 
percent. While inspections are not the only means for ensuring 
the drug supply is properly protected, it is an important piece 
of the puzzle and we must ensure that FDA has the appropriate 
oversight measures in place.
    Because of our continued concern over the quality and 
safety of the U.S. drug supply, we have requested, in a 
bipartisan manner, answers from FDA about practices currently 
in place to adequately oversee foreign drug manufacturing. We 
have also requested an updated report from GAO on FDA's drug 
inspection program. If there are gaps in the agency's ability 
to properly oversee these facilities, action must be taken to 
resolve those shortcomings and protect the public health.
    The United States' reliance on overseas manufacturing not 
only raises quality concerns, but it also poses national 
security risks as well. Foreign manufacturing of medical 
products critical to the Strategic National Stockpile are 
subject to the same quality and safety concerns, but dependence 
on foreign countries for drugs used as medical countermeasures 
could also leave Americans vulnerable to chemical and 
biological threats, among others.
    Further, reliance on foreign suppliers, particularly in 
those countries with which we have unstable relationships, 
poses an increased risk to Americans. If a country monopolizes 
the production of a drug and wishes to retaliate against the 
U.S., they could substantially increase drug prices or reduce 
supply in an attempt to cause shortages, limiting access to 
critical medications. And that is in the absence of a crisis. 
In a time of crisis, such possible actions could mean American 
lives.
    My concerns are amplified by the fact that we will be 
considering Speaker Pelosi's partisan drug-pricing plan on the 
floor in the coming weeks. This legislation will further drive 
innovation and manufacturing overseas, leaving the American 
people at the mercy of foreign manufacturers--particularly 
those in China, who have shown a strong interest in creating 
their own biotech manufacturing base--for their lifesaving and 
life-sustaining drugs.
    I look forward to hearing from the witnesses today about 
the challenges that face us in the wake of the globalization of 
the pharmaceutical industry and the solutions we can put forth 
to protect the U.S. drug supply and our constituents.
    Thank you, and I yield back.

    Ms. Eshoo. The Chair thanks the gentleman, and he yields 
back.
    I just want to remind Members that, pursuant to committee 
rules, all Members' written opening statements shall be made 
part of the record. So get those excellent statements in.
    I now would like to introduce the first panel of our 
witnesses for today's hearing.
    It is an honor to welcome Dr. Janet Woodcock. She is the 
Director, we all know, of the FDA Center for Drug Evaluation 
and Research.
    And I want to thank you for the work that you have done, 
the work that you have done with my staff. This is in many ways 
a heavy lift, but what you have done has helped to enlighten us 
and prepare us for this all-important hearing today.
    Welcome to Mr. Michael Wessel. He is a Commissioner at the 
U.S.-China Economic Security Review Commission.
    And we are very grateful to you for being here today as 
well.
    Just a word about the lighting system. I think you both 
know, certainly Dr. Woodcock does. Green, you know what that 
is. Yellow means the red light is coming, and then we have full 
stop.
    So, Dr. Woodcock, welcome. Thank you for dedicating your 
adult life to the work at the FDA and, most importantly, at the 
Center for Drug Evaluation and Research. You are recognized for 
5 minutes for your opening statement.

 STATEMENTS OF JANET WOODCOCK, M.D., DIRECTOR, CENTER FOR DRUG 
  EVALUATION AND RESEARCH, U.S. FOOD AND DRUG ADMINISTRATION, 
DEPARTMENT OF HEALTH AND HUMAN SERVICES; AND MICHAEL R. WESSEL, 
     COMMISSIONER, U.S.-CHINA ECONOMIC AND SECURITY REVIEW 
                           COMMISSION

               STATEMENT OF JANET WOODCOCK, M.D.

    Dr. Woodcock. Thank you, Madam Chair and members of the 
committee.
    Lack of a reliable supply of critical medicines creates a 
significant risk for national security, not just for our 
military but for all our citizens.
    An active pharmaceutical ingredient, or API, is the actual 
drug that is then made into a tablet, injection, and so forth. 
APIs are typically made at a site that specializes in their 
production, and then they are sent to other facilities to be 
made into what we call finished pharmaceuticals. I will focus 
on APIs.
    The U.S. has a minority of facilities. We have about 28 
percent of all facilities that manufacture APIs for the U.S. 
market. Twenty-six percent of all such API sites are in the EU 
and 13 percent in China and 18 percent in India.
    Given that many APIs are for minor conditions that are 
treated, say, with OTC drugs, we also looked at the WHO 
Essential Medicines List. Twenty-one percent of those APIs can 
be made in the U.S., 15 percent are made in China, and 64 
percent elsewhere.
    Looking at medical countermeasure drugs, only 11 percent of 
API sites for biological threat agents are in the U.S., 29 
percent of sites for chemical threats, and 46 percent for 
radiation threats.
    You can see that many kinds of disruptions around the globe 
could threaten U.S. patients' access to critical drugs.
    These numbers also don't reflect the relative volume of 
product from any given region, only the existence of facilities 
that FDA has approved to make the specific APIs. FDA currently 
does not get up-to-date information on volume or production and 
capacity of any site around the world. These data are dynamic, 
and they can change rapidly. Further, other critical factors, 
such as availability of raw materials, can also have major 
impact on supply, and the U.S. itself is not a major source of 
these materials.
    The U.S. pharmaceutical sector, as has already been said, 
like many other manufacturing sectors, has moved out of the 
country, starting in the late 1990s. And this trend has been 
accelerating based on economic factors.
    So what can be done about this? I think that is possibly 
the most important question.
    Well, one thing, FDA has been advocating for modernization 
of drug manufacturing since the early 2000s. Advanced 
pharmaceutical manufacturing covers a range of technologies 
that are widely used in other industries, such as continuous 
production, use of automation, and digitization. These 
techniques result in smaller facilities, less environmental 
impact, and the need for a smaller but highly skilled 
workforce--all factors that make production in the U.S. more 
feasible.
    For example, Genzyme Sanofi recently announced they had 
completed test runs in a new bioprocessing facility in 
Framingham, Massachusetts. According to them, this facility 
will make all kinds of biological products in a continuous, 
end-to-end process, will use 94 percent less solvents and 
produce 80 percent less CO2 while consuming 80 
percent less energy, not generate any paper--reams of paper are 
usually generated--but being 80 times more productive.
    Similarly, FDA recently approved a new cystic fibrosis drug 
made by Vertex Corporation that uses continuous processing for 
the finished dosage form, and that is also in Massachusetts. 
These examples show that drug manufacturing in the U.S. is 
quite feasible using advanced technologies.
    FDA is also working with ASPR, BARDA, and DARPA on how we 
might regulate mobile, miniaturized manufacturing modules that 
could be used in crisis or military situations. These are 
dubbed by BARDA ``Pharmacy on Demand.'' These projects 
foreshadow, in my opinion, a new generation of pharmaceutical 
manufacturing techniques that is now emerging and that we can 
put against this problem.
    FDA is working hard to assure a robust and reliable drug 
supply for the U.S. We feel it is important both to reestablish 
the pharmaceutical manufacturing sector in the U.S. but also 
help bring about a high-quality, resilient drug supply for all 
the world's citizens.
    Thank you.
    [The prepared statement of Dr. Woodcock follows:]
    
    

    	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    	
    
    Ms. Eshoo. Thank you, Dr. Woodcock.
    I now would like to recognize our second witness, Mr. 
Wessel.
    You are recognized for 5 minutes for your opening 
statement, sir.

                 STATEMENT OF MICHAEL R. WESSEL

    Mr. Wessel. Chairwoman Eshoo, Ranking Member Burgess, 
members of the subcommittee, thank you for the invitation to 
appear here today.
    This hearing addresses a critical issue for our economic 
and national security interests and directly affects every one 
of our citizens. To paraphrase Samuel L. Jackson, what's in 
your medicine cabinet? Our citizens have a right to know.
    My name is Michael Wessel, and I am a member of the U.S.-
China Economic and Security Review Commission, but my remarks 
today represent my views and not those of the Commission or any 
individual Commissioner.
    In July, the Commission held a hearing exploring the 
growing U.S. reliance on China's biotech and pharmaceutical 
products. Five years ago, the Commission held a hearing on 
China's healthcare sector, drug safety, and the U.S.-China 
trade in medical products.
    In the 5 years between hearings, I can't say my confidence 
in the safety of Chinese drug and active pharmaceutical 
ingredients has gotten better. Our reliance on Chinese supplies 
has increased while their regulatory system has failed to keep 
pace with the growth of the sector. And we are losing our 
ability to meet our needs at a faster pace.
    Chairwoman Eshoo, your op-ed in the Washington Post with 
Congressman Schiff was spot-on. As you indicated, the problem 
demands action and bipartisan solutions. The U.S.-China 
Commission was unanimous in its call for action, and we look 
forward to working with you and your colleagues to produce 
workable solutions to protect our country's interests.
    The issue, as I said, is of critical importance. 
Pharmaceuticals are often life-sustaining or lifesaving. For 
many, taking medication is not an option, it is a necessity.
    Consumers generally don't have an option on what drug to 
procure based on the source of its ingredients. And all too 
often, they have no idea where those sources are.
    China has an active plan to become an increasingly dominant 
source of medicines to the world. Pharmaceuticals and medical 
devices are a key sector in their ``Made in China 2025'' and 
13th 5-year industrial plans. Billions of dollars of support 
are coupled with government policies, investment strategies, 
and intellectual property acquisition approaches, both licit 
and illicit. China wants to win, and it has a plan to do so.
    Already, they supply significant portions of the APIs, as 
much as 80 percent by some estimates. Our concerns are not 
limited to just direct impacts from China, as drug firms across 
the globe often utilize Chinese APIs.
    China understands the importance of the sector as an 
economic and innovation engine but also because of its national 
security implications. Our increasing dependence on China poses 
many risks, not only due to potentially unsafe medications but 
because of China's ability to potentially weaponize its supply 
chains should it so choose.
    Let's not forget that several years ago China blocked 
exports of rare-earth minerals to Japan over a territorial 
dispute. What would happen if China threatened supplies of 
certain critical drugs and APIs?
    As a DoD witness told our Commission, quote, ``The national 
security risks of increased Chinese dominance of the global API 
market cannot be overstated.'' We are losing our ability to 
supply not only the medicines our warfighters may have to rely 
on but the ability to address other critical health crises 
here.
    The bioeconomy is increasingly important. As global 
competition and manufacturing has increased, some areas of our 
country have been able to weather the changes with a rise in 
employment in the healthcare sector. We can't afford to trade 
away this sector.
    In terms of global medical supply chains, increasingly, all 
roads lead to China. Those roads are rocky, sometimes 
treacherous, and all too often unsafe. With thousands of 
suppliers in the still-developing regulatory infrastructure, we 
can't trust the safety and security of Chinese supplies. Our 
experience, from heparin to valsartan to other drugs, indicates 
that there are clear and present dangers.
    Our inspectors--and we have far too few--do not have 
unfettered access to inspect Chinese facilities. Problems with 
visas, delayed and often limited access to facilities, and the 
need for additional resources have all hampered our ability to 
protect our interests.
    So, in short, we are overly reliant on China, we cannot 
trust the supply chains, and our national and economic security 
demand that we act. We must reduce our vulnerabilities.
    In my prepared testimony, I identified several 
recommendations made by the China Commission that will appear 
in our upcoming report. It is not a partisan issue. It is one 
where we can apply commonsense solutions to address a national 
concern.
    Thank you.
    [The prepared statement of Mr. Wessel follows:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Eshoo. Thank you very much, Mr. Wessel.
    I just wanted to--first of all, I ask for unanimous consent 
to place into the record the Washington Post op-ed dated 
September 10, 2019.
    Hearing no objections, so ordered.
    [The information appears at the conclusion of the hearing.]
    Ms. Eshoo. We did invite Christopher Priest, the Acting 
Deputy Assistant Director of the Defense Health Agency. He is 
out of the country. And I hope in subsequent hearings that we 
will have the benefit of his testimony as well.
    But we thank both of you for your excellent testimony. 
There is much to get to. And I will start by recognizing myself 
for 5 minutes of questions.
    Dr. Woodcock, does the FDA know what percentage of American 
drugs have their active ingredient sourced from China?
    Dr. Woodcock. We do not know the volume. We know the sites 
that we have approved and that they can--are capable of 
providing drug API. However, we don't know which suppliers 
might be used. Many applications have multiple suppliers of API 
that they can use. And so we don't know on a real-time basis.
    Ms. Eshoo. So there isn't any requirement from FDA relative 
to the drugs that you approve, what the source is?
    Dr. Woodcock. Yes, we do know all the sources, but----
    Ms. Eshoo. You do know the sources, but----
    Dr. Woodcock [continuing]. We do not know what percentage 
of----
    Ms. Eshoo. I see.
    Dr. Woodcock. Yes.
    Ms. Eshoo. Now, Rosemary Gibson, who is going to testify on 
the next panel, has raised concerns about U.S. reliance on 
China for API in antibiotics. Does the FDA know how much of the 
ingredients for antibiotics are sourced from China?
    Dr. Woodcock. We know where the facilities are that can 
produce antimicrobials around the world, but, again, we don't 
know the percentage of that that currently is being sourced 
from China.
    We get annual reports every year, and so we can 
retrospectively see what happened. But we don't have--this is a 
dynamic situation, and so we don't know in real-time.
    Ms. Eshoo. What is the capacity of the United States to 
take this back, relative to API?
    I know that cost is always a factor, and so we end up what 
I call bottom fishing. But the testimony so far is that I think 
we all agree that this poses a threat. I mean, drugs are not 
any old commodity in our country. This is the health and 
security of our people and our national security.
    So how do we regain the capacity? Do we have a capacity for 
API in the United States?
    Dr. Woodcock. There is capacity. There is the potential to 
do it. But there isn't an economic incentive.
    Ms. Eshoo. That is what it is, is the economic incentive. 
Uh-huh.
    Dr. Woodcock. Our assessment is that the companies in the 
U.S. could not compete, using current technology, against other 
countries who have lower labor costs, less environmental 
regulation, and so on.
    Ms. Eshoo. But, in your estimation, if we moved to advanced 
pharmaceutical manufacturing, that we can indeed recapture the 
API market?
    Dr. Woodcock. The APIs are going to be a little bit harder 
than making the finished-dosage forms with advanced 
manufacturing, because every API, every synthesis, if you think 
about it, making each molecule has different steps. However----
    Ms. Eshoo. But we did that at one time. China hasn't always 
dominated the global market on this.
    Dr. Woodcock. We and Europe, back many--maybe decades ago, 
did have API manufacturing here, but they moved. If you recall, 
Congress gave incentives for Puerto Rico, and a lot of 
pharmaceutical plants moved to Puerto Rico. And then, as the 
economic situation evolved, they moved to India, China, and 
other countries.
    Ms. Eshoo. But as I understand it, India is at least 80 
percent dependent on China's API.
    Dr. Woodcock. We showed, in the testimony I gave, where 
approved API facilities are. They are not dominant, China is 
not dominant, as far as the number of facilities it has. Now, 
whether it is dominant on volume, we can't currently----
    Ms. Eshoo. But you can't just go by the number of 
facilities. You have to go by what each facility produces. That 
is the key number.
    Dr. Woodcock. And that changes over time.
    Ms. Eshoo. Uh-huh.
    In my opening statement, I referred to our generic drug 
supply being so fragile that the FDA has to make hard choices 
between enforcing quality at a plant and avoiding a shortage. 
Can you speak to this, please?
    Dr. Woodcock. Sometimes this is true, both for innovator 
drugs and generic drugs. If we have quality problems at a 
plant, we have to make a medical decision, OK, is the patient 
foregoing that, or can we put in remediation additional steps 
that would render the product safe enough to use in that----
    Ms. Eshoo. But it is a squeeze for you. It is a----
    Dr. Woodcock. Yes. Well, it----
    Ms. Eshoo [continuing]. Squeeze for you to do that.
    Dr. Woodcock [continuing]. Puts us in a difficult position.
    Ms. Eshoo. Yes. Uh-huh. It is. These are hard choices.
    Commissioner Wessel, your mandate is to report on national 
security implications of U.S. trade with China. Can you just 
spend a moment describing the national security implications of 
our dependence on China for these active pharmaceutical 
ingredients?
    Mr. Wessel. Well, yes. Thank you. And, again, your piece 
with Congressman Schiff helped identify much of that.
    We are increasingly dependent on China by volume, both 
directly and indirectly. They have the opportunity, of course, 
to weaponize those supplies should they so choose. They did 
that with Japan. We have seen them in these current trade 
tensions with the U.S. favor certain sectors over others.
    They have also a plan to dominate the sector globally, not 
just directly the APIs and pharmaceuticals but biotech. They 
want to be 70 percent indigenously self-sufficient. That means 
that they are going to exclude and preclude others from 
producing these products.
    They are pricing us out of the market. That happened, as 
you will hear later, on penicillin and on other products. Price 
is the critical issue, but when China gives tens of billions of 
dollars of subsidies to their manufacturers, those who operate 
based on market principles simply can't compete.
    Ms. Eshoo. Thank you. They have a plan----
    Mr. Wessel. Yes.
    Ms. Eshoo [continuing]. And we don't.
    Thank you very much.
    I now would like to yield to the ranking member for his 5 
minutes of questions. Dr. Burgess, you are recognized.
    Mr. Burgess. Thank you.
    And thanks to our witnesses.
    Dr. Woodcock, always good to see you. You are a frequent 
flyer at our committee, and we appreciate that.
    Mr. Wessel, you have posed an interesting question about 
China weaponizing their supply chain. I was here in 2008 when 
we studied the heparin problem, and I referenced hypersulfated 
chondroitin sulfate. That was not just a contaminant that got 
into the heparin. That was a molecule that had been developed 
and patented under Chinese authority.
    Who knows why someone thought it was a good idea to put it 
in their heparin supply. I am presuming it was like an 
unscrupulous shopkeeper who puts a thumb on the scale, because 
this would increase the test for the bioavailability of blood 
thinner, which is one of the things that made it so difficult 
to detect when it was realized there was a problem.
    But, look, I am from Texas. I never attribute anything to 
coincidence if I can explain it in conspiracy. So when you talk 
about weaponizing the supply chain--and I remember all of that 
discussion around heparin--it is almost like that was a test of 
someone testing our system: Can we detect and react, and how 
quickly do we come to that conclusion, and how do we react? So 
that is what I think of when you talk about China weaponizing 
the supply chain.
    Mr. Wessel. Well, thank you. And 12 years later, we haven't 
taken all the steps that we need to. Their test--if, in fact, 
that is what it was--they came up with the ability to plan 
forward and dominate the industry and make us further 
vulnerable. So the question is now, are we going to take all 
the information we have and put together a plan, an action 
plan, to try and mediate and mitigate the risks we face?
    Mr. Burgess. Right. And, of course, we are not even talking 
about the melamine in the dog food, which poisoned all of our 
pets.
    So, Dr. Woodcock, let me ask you, does the FDA have a role 
to play in the redevelopment of bringing that--onshoring that 
industry?
    I remember, a few years ago--well, it has been a number of 
years ago--we were worried about bird flu, the first bird flu, 
not the second one. And there was a contaminant, Serratia, in 
the vaccine, and suddenly there wasn't enough flu vaccine to go 
around. And our defense appropriations bill in that year, 2005, 
included dollars to re-shore or re-our-onshore development of 
the flu vaccine.
    Does the FDA have a role to play in those scenarios?
    Dr. Woodcock. In the sense of, as you know, we have been 
working on pushing advanced manufacturing. Part of the problem 
with influenza vaccine is the method of manufacture, which is 
very limiting. So we have been supporting advanced 
manufacturing.
    And probably these new, sort of, idea of mobile, 
miniaturized units, we are going to require somewhat of a new 
regulatory scheme.
    But all this leads to more regional manufacturing around 
the world rather than what we have now, which is world 
travelers. They are made in this country, and then they are 
sent over here, and then they go over here. We have these long 
supply chains. This is not a good situation, really, for 
anyone.
    Mr. Burgess. Do you have a role in looking at, what is it--
are there other agencies? You mentioned the environmental 
concerns. Are there ways to streamline this? Does the FDA have 
a role to play in streamlining interagency work to streamline 
and reshore some of this manufacturing?
    Dr. Woodcock. We certainly--you know, our partners in this 
have primarily been the agencies, the Defense Department and 
HHS, ASPR, and BARDA, that are actually working on developing 
these new technologies. We do work with EPA and others but not 
in--we don't get into their regulations and requirements.
    Mr. Burgess. Yes.
    I am going to run out of time, but let me just ask you 
quickly, when we had the issue with the heparin and there was 
some discussion then and, of course, with swine--some illness 
that is occurring in pigs in China right now, do we have a 
contingency plan?
    I know at one time we said we don't want to use heparin 
that is recovered from bovine sources because of mad cow 
disease. But do we have a plan to look at that?
    Dr. Woodcock. Yes, we do. And we have been in discussion--
we had a Science Board--I took this question to the FDA Science 
Board a number of years ago. They endorsed the fact that we 
should move forward. We are in discussion--have discussed with 
potential manufacturers of bovine heparin. And we have done 
studies with CBER about inactivation of the potential agent of 
BSE through the manufacturing process to----
    Mr. Burgess. And let me just ask you--I am going to run out 
of time. But on the vincristine question, in 2012, you helped 
us when Doxil, doxorubicin, was in short supply in this country 
and we got--so I guess an emergency reimportation question.
    Dr. Woodcock. Uh-huh.
    Mr. Burgess. Is that possible for the short term with 
vincristine to help our patients who are suffering?
    Dr. Woodcock. My understanding about vincristine is Pfizer 
has told us--and we have a number posted on our website, as do 
they--they have supply, and people can call and get vincristine 
right now. Our shortage people are staying on top of that 
situation day by day.
    Mr. Burgess. All right. Is that plainly visible on your 
website? The----
    Dr. Woodcock. Yes.
    Mr. Burgess [continuing]. FDA website, or is it Pfizer?
    Dr. Woodcock. A phone number, uh-huh, posted on our 
shortage website.
    Mr. Burgess. All right. Thank you.
    Ms. Eshoo. And, Dr. Woodcock, that was as of when that 
Pfizer posted this and you did?
    Dr. Woodcock. Two days ago, I think.
    Ms. Eshoo. I see. All right. Because I mentioned it in my 
opening statement that--and I didn't want Members to think that 
it was an error. When I wrote that, these were not available.
    Dr. Woodcock. Yes. This is a very dynamic situation.
    Ms. Eshoo. It is. It is. Very important one. I mean, it is 
a critically important one. The idea that there are small 
children that need this drug in order to live, and it wasn't 
available. But thank God we have some supply now. But it just 
points to this peak-and-valley situation that we have.
    Mr. Pallone isn't here, so I am going to go to our friend 
Mr. Butterfield.
    You have 5 minutes for your questions.
    Mr. Butterfield. Thank you very much, Ms. Eshoo.
    And thank you to the two witnesses for your testimony 
today.
    You know, as I have sat here listening to the testimony, 
this is a big deal. This is very, very important. And I am glad 
you are having this hearing, because I am learning so much 
about this. We must ensure that FDA is equipped to oversee this 
very complex and global drug supply.
    Some years ago, I heard the statistic that 80 percent of 
our drug supply comes from overseas. I didn't know if that was 
an exaggeration, but it appears not to be an exaggeration. It 
appears to be the case. And the testimony today seems to 
reflect different data points on the reliance, which I would 
like to better understand.
    And so, Dr. Woodcock, you note in your testimony that, as 
of August of this year, only 28 percent of the manufacturing 
facilities making APIs that supply the United States were 
located here in the U.S., and the remaining 72 percent of API 
manufacturers were located overseas. Thirteen percent of the 
overseas API manufacturers were located in China.
    I was sitting here trying to do the math a few moments ago, 
and it has been many years since I have really done a deep dive 
into mathematics, but if it is 13 percent of the foreign 
market, wouldn't that be a greater percent of the total? I 
guess that is my first question.
    We hear that 13 percent of the APIs are manufactured 
outside of the U.S.--in China. But if you take that 13 percent 
and compare it to the total, I would say somewhere around 20 
percent--I have done the math, I think it is about 22 percent 
of the market would be in China, if you look at the overall 
supply chain.
    Dr. Woodcock. If I could have the first slide up?
    Mr. Butterfield. Yes.
    Dr. Woodcock. Could I have the slides up? And I will show 
you.
    Having trouble advancing it. I don't know where the 
projector is. There we go.
    [Slides follow:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    Dr. Woodcock. All right. So there you see. That 13 is a 
percentage of the whole.
    Mr. Butterfield. Oh, it is of the whole, not just----
    Dr. Woodcock. Yes.
    Mr. Butterfield. OK.
    Dr. Woodcock. So that is why the pie chart--that is the 
whole API, all the facilities. But this, as we said, is by 
facilities. It is not by volume.
    Mr. Butterfield. All right.
    Dr. Woodcock. China has----
    Mr. Butterfield. Let me ask you this. Do these numbers 
reflect both brand and generic API facilities?
    Dr. Woodcock. They do.
    Mr. Butterfield. OK.
    You note in your testimony that the data available to FDA 
related to API manufacturers has several limitations. Some have 
suggested that FDA should also have access to information 
related to volume. You told Ms. Eshoo that a few moments ago.
    Does the FDA have access to information today about the 
volume of API or finished-dose products produced in each 
facility? And I think the answer is no. You get it 
retroactively.
    Dr. Woodcock. Correct.
    Mr. Butterfield. You get it retroactively. And how would 
this information be helpful to you in your work?
    Dr. Woodcock. Well, I believe we have--in the President's 
budget, we have a request for certain different authorities, 
because, first of all, we could use this in shortages. Because, 
as you all have been saying, it is very difficult to understand 
our vulnerabilities unless we understand where the drugs are 
actually being made, how much.
    For example, vincristine had two suppliers for a while, but 
one supplier had 98 percent of the market. OK? So when that 
supplier goes out, then we are in deep trouble, right?
    So it would help with shortages. It would also help with 
the kind of vulnerabilities that Commissioner Wessel was 
talking about, and others, and the Members, which is to 
understand where, actually, we have sourcing that is 
concentrated in one region, particularly for drugs that are 
critical.
    Frankly, China has a lot of API manufacturers for over-the-
counter drugs, such as toothpaste, wart removers, and so forth. 
We probably wouldn't be in a national security issue if we 
didn't have those. So what we really need to do, as the 
chairwoman was saying, is look at penicillin or look at other 
critical drugs. And we would have that information then.
    Mr. Butterfield. Thank you, Madam Chair. I don't have time 
for my third question. I will yield back. Thank you.
    Ms. Eshoo. The Chair thanks the gentleman.
    And I now would like to recognize Mr. Shimkus for his 5 
minutes of questioning.
    Mr. Shimkus. Thank you, Madam Chairman.
    I have been writing, trying to scribble down notes, and I 
think I am failing, but let me go first to this question, 
Commissioner Wessel. So we know that the Chinese rip us off, 
and we know that they steal our intellectual property.
    So, similar to the fights we have had recently on steel, 
the President responded with tariffs and fights because, in my 
part of the woods and a lot of steelmaking regions, obviously 
coal regions, there is dumping. And they just undercut our 
prices, drove the manufacturing business--so I think that is a 
valid concern.
    This is a tough dilemma, because we are driving--we want 
low-cost drugs. We are having all these fights on how we get 
low-cost drugs. So we, in essence, by that push for low-cost 
drugs, have encouraged foreign manufacturers of at least part 
of the processes, the APIs, to go where they can produce it at 
lower cost.
    We were in this--Dr. Woodcock, we were in this debate a 
couple years ago on the inspection regime. And so I was just 
curious, in listening to the statements, how--and I know the 
answer is going to be we need more inspectors. We need more 
money to have inspectors, inspection in foreign facilities.
    And then I countered years ago, saying, well, I was a risk-
based-system guy, not just hit, hit, hit. And I thought maybe 
our facilities were overinspected versus what we were doing 
overseas.
    You are shaking your head ``yes.'' You believe that is 
true?
    Dr. Woodcock. We have, since that time, and with the help 
of Congress and FDASIA, we now do more inspections overseas 
than domestic, but that was definitely not the case back in the 
early 2000s.
    Mr. Shimkus. And that is good clarification.
    I guess my question is, with all these areas, we give FDA 
the--we give them the stamp of approval, right, that then they 
can enter in our market. We need to follow that up with an 
inspection regime. Are we creating more facilities that get the 
stamp of approval versus our ability to inspect those?
    In other words, I mean, sometimes we look at it the other 
way. We look at, we need more inspectors. But maybe we should 
slow up the approval process so that we have the right amount 
for the amount of inspectors we need.
    Dr. Woodcock. I don't think we have the ability to say, 
well, we are going to stop pharmaceutical innovation or the 
generic drug program because we have run out of inspectors.
    Mr. Shimkus. No, I am not saying that. I am saying, do we 
have the authority to say we are going to make a choice 
between--we only have this many inspectors, they can only do 
this amount of facilities, and that is the approval process 
that we are going to have overseas?
    Dr. Woodcock. Right. Well, under the generic drug user fee 
program, as you know, the generic drug industry pays fees based 
on the number of inspections that are done. So we do get 
income. Most recently, in the last several years, we have had 
trouble with hiring people, and that is why our inspections 
have gone down.
    We peaked in foreign inspections around 2015, 2016, with 
1,041 foreign inspections, both preapproval and surveillance 
inspections. So I am not sure that----
    Mr. Shimkus. OK. Let me move on real quick, because I am 
running out of time, and I want to--you talked about advanced 
manufacturing practices and how, you know, we are leading the 
way.
    My concern would be, again, Commissioner Wessel, is that we 
need to be smart about where we allow these. If you talk to 
manufacturers who go to China, they allow the facility to be 
built. While it is being built, there is a Chinese national 
right next to the U.S. manufacturer who then observes, 
recreates, retrains, and builds a facility right next door, the 
same one, ripping off our technology.
    So if we are ahead in advanced manufacturing practices, I 
would hope--and it is safer, more efficacious, at lower cost--
then I would hope our manufacturers would be very, very careful 
about trusting a regime that right now, in the international 
trade arena, that we cannot trust.
    And, with that, my time has expired. Thank you, Madam 
Chair.
    Ms. Eshoo. The gentleman yields back.
    I just want to make a comment about the drugs that we are 
talking about. We are talking mainly about generic drugs. And I 
think it is important to keep in mind that manufacturing does 
take place offshore, obviously, but we are not talking about 
development. We are talking about manufacturing and the 
challenges that that represents----
    Mr. Shimkus. But if the gentlelady would yield, I mean, you 
do have a risk of shortages even in the generic space in this 
debate.
    Ms. Eshoo. Agreed.
    Mr. Shimkus. So, then, shortages require increased cost. So 
even though they are generic, they may not be inexpensive.
    Ms. Eshoo. But there is a linkage, and it is generics, and 
it is manufacturing versus development. And we are talking 
about old generics, like penicillin.
    I now would like to recognize the gentlewoman from 
California, Ms. Matsui, for her 5 minutes of questioning.
    Ms. Matsui. Thank you, Madam Chair.
    And I would like to thank the witnesses for appearing here 
today.
    As our pharmaceutical supply chain becomes increasingly 
global, it is critical that we continue to assure the quality 
of medicines manufactured abroad in order to protect the safety 
of Americans at home.
    While our focus today is on the manufacturing of our drug 
products, I would like to quickly raise an issue that impacts 
access. The Ryan Haight Online Pharmacy Act of 2008 provided 
vital consumer protections against the distribution of 
dangerous substances via the internet, yet it preserved the 
value of telemedicine where appropriate.
    Community addiction and mental health treatment centers 
were largely excluded from the legislation due to a 
registration issue with DEA. My bipartisan bill, the Improving 
Access to Remote Behavioral Health Treatment Act of 2019, would 
ensure that these facilities could register with DEA to 
remotely prescribe controlled substances, using telemedicine in 
a secure and effective environment.
    And I want to thank my colleagues on the subcommittee, 
Representatives Brooks and Kuster, for leading this effort with 
me. And I encourage the consideration of patient access 
policies as we continue our work to strengthen the drug supply 
chain.
    Now, most healthcare organizations experience drug 
shortages. They result in nearly $230 million in additional 
costs annually for hospitals because of higher costs of 
substituting drugs. Shortages can be caused by a variety of 
issues, from low-quality manufacturing processes to supply-
chain disruptions, to manufacturers simply leaving the market.
    The importance of preventing drug shortages has long been a 
priority of this committee. And in the manufacturing context, 
we know that low-quality processes, those that result in 
failures or disruption in production, can lead to shortages.
    Dr. Woodcock, do you believe that drug manufacturers are 
minimizing investments in manufacturing quality? And if so, how 
do these quality problems contribute to drug shortages?
    Dr. Woodcock. Yes. As we go over in our report we issued 
yesterday on drug shortages, about 62 percent of the shortages 
can directly be traced to manufacturing problems, which usually 
have to do with lack of keeping up in investment and so forth.
    And we feel that there is a market failure here, there is 
an economic problem, where cost minimization and driving to the 
lowest price then disincentivizes investment by manufacturers, 
which then gets them out of the market or gets them eventually 
into manufacturing difficulties.
    Ms. Matsui. Right.
    Now, could you speak a bit more about FDA's recent 
announcement that the agency is considering allowing 
manufacturers to voluntarily disclose quality ratings? How 
would such a disclosure help incentivize a greater focus on 
quality generally?
    Dr. Woodcock. What we found in our analysis is that the 
market, the people who purchase drugs, are pretty much blind to 
any quality above the fact that FDA has approved it, all right, 
which is a standard that ensures those drug products are OK----
    Ms. Matsui. Right.
    Dr. Woodcock [continuing]. But it doesn't ensure that 
reliability over time. And, more and more, hospital systems and 
every--are calling for that reliability.
    Ms. Matsui. Sure.
    Dr. Woodcock. They want to know they can get the drug over 
time. And so we feel, if we could rate quality maturity, which 
is something that ensures reliability, and assign some type of 
system, that that would then hopefully incentivize some 
rewarding value----
    Ms. Matsui. Right.
    Dr. Woodcock [continuing]. Out in the healthcare system 
purchasing chain.
    Ms. Matsui. Sure.
    Now, you mention in your testimony that FDA has determined 
that there are three drugs in the World Health Organization's 
essential medicines list whose API manufacturers are based only 
in China, including a drug to treat tuberculosis and other 
infections. Well, that is a small portion of the overall 370 
U.S.-marketed medicines on the list. I am still concerned about 
the sole reliance on China for these key ingredients globally. 
How can Congress and the FDA work together to encourage more 
manufacturing domestically? That is a big question, I know, but 
broadly.
    Dr. Woodcock. Right. Well, I think the steps that have been 
taken already to work on advanced manufacturing--and, as you 
know, there are some organizations now stepping forward that 
are interested primarily because of the shortage problems in 
supplying drugs to the United States more as a nonprofit type 
of entity or under certain different arrangements. They will 
require, though, assurance, the manufacturing, that there is a 
stable market for their product at a reasonable price. For 
example, the vincristine, which is a lifesaving drug for 
children with leukemia and other cancers. I understand for that 
sterile vial it costs about $8, which is less than, you know, a 
couple venti lattes or something like that. And so we are 
sowing what we reap, so to speak. If we are only willing to pay 
that much, then people are going to drop out of the market.
    Ms. Matsui. Absolutely, yes.
    Dr. Woodcock. And so I think--but what these manufacturers 
tell me, these new type of manufacturers are going to use 
advanced manufacturing. That is what they tell me, that that is 
how they think they can do sustainable supply for short-supply 
drugs in the United States.
    Ms. Matsui. OK. Good. Thank you. I have gone over my time.
    I yield back.
    Ms. Eshoo. With every Member's questioning and your 
answers, we keep learning more.
    It is a pleasure to recognize Mr. Guthrie for his 5 minutes 
of questions.
    Mr. Guthrie. Thank you. We couldn't have planned--Ms. 
Matsui and I work well together, but we couldn't have planned 
that question leading to my question. You said that continuous 
manufacturing is going to be the answer to some of these 
problem issues. Chairman Pallone and I introduced a bill this 
week to create a grant program into an FDA and university to 
look at continuous--to grant programs for advances in advanced 
manufacturing, continuous manufacturing. How specifically is 
that going to help?
    Dr. Woodcock. Well, as we talked about in many hearings 
before, there hasn't been an academic base supported in 
pharmaceutical manufacturing in the United States for a long 
time. This has been a neglected area. I mean, it is such an 
important commodity when you think about semiconductors or you 
think about other things. There is all this study of it and so 
forth. This has gone on behind sort of a firewall, is make the 
drug over here and get it to us, right? And so I think we need 
a strong academic base because, as I said, even these 
miniaturized mobile units, that is a whole new concept, and it 
is going to take a lot of study and research to really bring 
this, but it has so much promise for small-volume drugs, like 
for rare diseases or for outbreaks and so forth, but if we 
don't have the academic base, and they don't produce the 
workforce that we need, right, to actually bring about this 
change, then we are not going to get there.
    Mr. Guthrie. OK. Thank you for that. And, also, Dr. 
Woodcock, we have learned today that FDA currently has several 
limitations for API data. In your testimony, you mentioned that 
manufacturers are not required to report to FDA whether they 
are actually producing an API at a facility and the quality of 
that at the facility. Does FDA have the administrative 
authority to require this API data?
    Dr. Woodcock. We can get this in annual reports, but as I 
said, that is too late, OK? That is what happened before, and 
so, no, we don't have the authority to ask for the sort of 
real-time data on a continuous basis.
    Mr. Guthrie. Do you think manufacturers should be required 
in some cases to report this information in order to help CDER 
fully monitor APIs?
    Dr. Woodcock. Yes. We have several proposals along with the 
President's budget, one of which is that certain manufacturers 
are making really critical components have risk-management 
plans, OK, that they really have contingency plans for what is 
going to happen if there is a shortfall of their suppliers, for 
example. But second of all, we think for certain drugs that 
might be very useful for us to get that real-time information 
so we can respond earlier, and we know what is going on for 
critical drugs.
    Mr. Guthrie. But to get the real-time information, it is 
going to take legislatively--there is not authority there 
currently to do what you think we need to do?
    Dr. Woodcock. Not to my knowledge.
    Mr. Guthrie. So Congress is going to have to act?
    Dr. Woodcock. That is correct.
    Mr. Guthrie. So, when Congress acts, how would you ensure 
the proprietary information is kept properly?
    Dr. Woodcock. Well, we get giant amounts of proprietary 
information now, so we would probably use advanced technology, 
cloud-based, blockchain, and so forth to have that 
electronically submitted to us, but we are pretty good about 
keeping data safe.
    Mr. Guthrie. OK. Thanks. And then, also, my colleague Eliot 
Engel has been very interested in the drug shortages, as 
everybody on the committee, but Eliot Engel and I sent a letter 
to FDA in September on this issue. I was very pleased to see 
the drug shortage report that came out yesterday. It is clear 
work is needed to stop these shortages and assure Americans 
have the drugs they need. What are the main root causes of drug 
shortages, and to what extent are shortages due to the API 
manufacturing primarily being based in foreign countries? And, 
Mr. Wessel, you can answer if you would like to as well.
    Dr. Woodcock. Sure. Our root cause analysis said, you know, 
really it is--first of all, you know, there is an economic 
problem here.
    Mr. Guthrie. It seems to always be the lower-priced drugs.
    Dr. Woodcock. It is a market problem that drives to the 
bottom, and there is no incentive to make these drugs when you 
could make--if you are a generic manufacturer, you could make 
newer generics, OK, that have much higher prices, right, and so 
people drop off, and so maybe the last person standing is 
someplace, you know, someplace far away, and then they have a 
problem with their--you know, there is also no incentive to 
upgrade your facilities and so forth because there is no 
transparency to the purchasers about the robustness of that 
manufacturing site.
    Mr. Guthrie. And in the pricing mechanism--oh, Mr. 
Commissioner has something.
    Mr. Wessel. Let me just add--and I agree with all of that. 
Part of this is also about the ecosystem as we move forward. So 
we are talking about continuous manufacturing, advanced 
manufacturing. China is already on that. We have seen with the 
Thousand Talents Program, which is their program of bringing 
educated researchers and executives from the U.S. to China 
where they pay a bounty of $160,000 on average to those 
individuals--so some of the experts we are relying on to help 
rebuild our industry are migrating to China, so some of the 
continuous manufacturing they will be doing as well. We have to 
ring fence our intellectual property, provide greater support 
for it, and also look at this as a national security asset and 
treat it differently.
    Mr. Guthrie. All right. Thank you. My time has expired.
    I yield back.
    Ms. Eshoo. The Chair thanks the gentleman. Excellent 
questions.
    It is a pleasure to recognize the gentlewoman from Florida, 
Ms. Castor, for her 5 minutes of questions.
    Ms. Castor. Well, thank you, Chair Eshoo, for calling this 
hearing, and welcome to our witnesses.
    Dr. Woodcock, I would like to investigate in greater detail 
FDA's ability to directly monitor and ensure the safety of 
products that are manufactured outside the United States, 
specifically China. This committee has heard various--in 
hearings, this one and in prior hearings--problems with access 
to Chinese facilities. In past hearings, the FDA has noted the 
difficulty in gaining access even to necessary travel documents 
to be able to travel to China to perform inspections. Some have 
even noted that, when FDA is able to obtain the necessary 
travel documents, some facilities receive warning of an FDA 
impending inspection. Witnesses on our next panel have claimed 
that, even where the manufacturer has not received a direct 
warning about an impending FDA inspection, facilities may 
refuse to comply with FDA inspectors.
    In your testimony, you said there are 13 percent of active 
pharmaceutical ingredients manufacturing sites in China. So 
that is probably a manageable number. Has FDA had ready access 
to these facilities in order to verify the safety of the 
products and ingredients manufactured there?
    Dr. Woodcock. Well, we currently are not having trouble 
getting visas and getting people into the country. We also have 
people in the country office who do inspections. We have 
inspection personnel in China. If we are refused, what we do is 
put out an import alert and not let that product be imported 
into the United States, or a finished drug product made from 
that facility be imported into the United States. And that has 
happened somewhat recently a number of times, but there is a 
very effective and very fast sanction that we can put into 
place to prevent American patients from being exposed to those 
medicines.
    Ms. Castor. So would you say over the past couple of years 
you have been refused inspections a number of times? Do you 
know how many times?
    Dr. Woodcock. I don't have--we can get back to you on the 
exact figures.
    Ms. Castor. So, when that happens, you do issue a report 
because you can't guarantee the safety of the product?
    Dr. Woodcock. Right. That is correct.
    Ms. Castor. What about the FDA office in China? There are 
certain staffing concerns. We have heard that it is difficult 
for the FDA to hire and retain staff in China and that the 
staff numbers have decreased by as much as 25 percent in the 
last 2 years, with some offices closing. Why has it been so 
difficult for the agency to hire and retain professional staff 
in China and what, if anything, can Congress or FDA do to 
address these issues?
    Dr. Woodcock. Well, it is a complicated process to get 
people to go and move with their family and stay in a different 
country for quite a number of years, but we have had--overall, 
we have had hiring problems overall, and we are shorthanded at 
the agency, including our field organization ORA who these 
inspectors come from.
    Ms. Castor. How many authorized positions in China for the 
FDA? Do you know?
    Dr. Woodcock. I think there are 30--somebody can give me 
that graph--something like that.
    Ms. Castor. And what is the current staffing level?
    Dr. Woodcock. Well, the numbers I had that we were fairly 
up to speed, but then I was told by the ORA senior leadership 
yesterday that those numbers have dropped, so it sounds like it 
is a dynamic situation, and I would have to get back to you on 
the exact numbers who are there today.
    Ms. Castor. OK. But FDA has other tools that it can employ 
postmarket to analyze the products coming out of these 
facilities, so those are in addition to inspections. Can you 
discuss the additional regulatory tools and authorities FDA has 
in the postmarket space to monitor the safety and quality of 
those products, and are they helpful in mitigating some of the 
challenges with inspections?
    Dr. Woodcock. Well, in general, we monitor safety of all 
drug products. We get 2 million reports a year from doctors, 
pharmacists, patients, manufacturers, and so forth about 
problems, including quality problems, that are noted. We follow 
up and analyze all those. We also have our Sentinel network 
that actually monitors adverse events around the country, and 
we have several hundred million lives of people in that 
network, and then we do a testing program. We do sample. 
Sometimes we do random. Sometimes we do directed samples, and 
we test them according to USP standards, and generally they 
all--they pass. So the drugs in the United States that we test 
pass the USP standards for marketed drugs. So we have--and we 
can, Congress gave us the authority, to ask in lieu of or in 
advance of inspection to ask for data from the plants so we can 
remotely look at the information either before we go or in lieu 
of getting there, so we have multiple ways.
    In addition, for APIs, we require the finished dosage for 
manufacturer to do testing and also to audit their supply chain 
to make sure that that API manufacturer is, you know, doing the 
right thing, and it is in their best interest to do that. And 
we inspect the finished dosage for a manufacturer, we make sure 
that they are doing those activities to monitor their raw 
ingredients or their APIs. So there are multiple redundant 
things in the system.
    Ms. Castor. Thank you very much.
    Yield back.
    Ms. Eshoo. I thank the gentlewoman.
    But, Dr. Woodcock, in the FDA, Center for Drug Evaluation 
and Research is not in charge of inspections, correct?
    Dr. Woodcock. Correct. Correct.
    Ms. Eshoo. I think it is important for us to note, but we 
can always get the person that is responsible for that in 
future hearings.
    The gentleman from Virginia, Mr. Griffith, is now 
recognized for his 5 minutes of questioning.
    Mr. Griffith. Thank you very much, Madam Chairman.
    Dr. Woodcock, as always, it is good to see you here. You 
are one of my favorite witnesses because I can always count--
even if I don't like the answer--I can always count on you 
telling me what you know, or sometimes you have to say ``we 
don't have that information,'' and that may be in that 
situation now.
    Zantac, is any of that manufactured, or was any of that 
manufactured, in the United States?
    Dr. Woodcock. I don't think so. There are some manufactured 
in Europe, but ranitidine, which is Zantac, it is a different 
problem. It isn't an inherent contaminant.
    Mr. Griffith. So we have made that determination, because 
some of the early articles that came out in September thought 
it was a contaminant and then there were other articles that 
said it is the drug itself is unstable. So have you all made a 
decision on that?
    Dr. Woodcock. Our chemists think, all right, that the 
ranitidine in the presence of nitrite, which might be in the 
excipients, it might be during the manufacturing process----
    Mr. Griffith. Hang on. Not only me, but people back home--
might be in the--tell me what that word was?
    Dr. Woodcock. Excipient.
    Mr. Griffith. Excipient, what does that mean?
    Dr. Woodcock. The stuff, the powder that is put into the 
pill along with the active ingredient to make a tablet, uh-huh.
    Mr. Griffith. So--but you think it was not that there was 
lax manufacturing anywhere. You think it was that component. 
How quick are you going to be able to tell whether it is the 
powder or the base drug?
    Dr. Woodcock. What we have found is very low levels of NDMA 
in various ranitidine preparations we have looked at.
    Mr. Griffith. And for the folks back home, NDMA is the 
contaminant item which is a carcinogen that causes cancer?
    Dr. Woodcock. Yes. Well, it is a genotoxic agent, yes. And 
we have found various levels of that in different preparations 
of ranitidine, almost all of them. And our chemists believed 
that it is formed by a molecule ranitidine reacting with 
something either during the manufacturing synthesis or during 
the finished dosage form or during storage, all right? And 
there has also been an allegation that in the body it is 
transformed into higher doses of NDMA. We have not been able to 
verify that yet. We are still doing testing to look at that.
    Mr. Griffith. OK. So my followup question is, is that if--I 
don't think we are manufacturing here either, but I figured you 
would know better than I, if we were manufacturing it in the 
United States instead of having to follow the Europeans and the 
Canadians and other countries, would we have been in the lead 
because we would have picked up on this problem sooner, or do 
you think it just didn't matter?
    Dr. Woodcock. This is a product that was approved in 1984 
and is used worldwide very widely, all right, and nobody found 
it. It was developed in Europe, all right? I don't think this 
had anything to do with where it was manufactured or what have 
you, and the fact that Canadians and the Europeans have--
Europeans announced that they are doing an assessment. We have 
been in the lead, in my mind, in many ways. We developed the 
test assays for this contaminant in the product and we posted 
them, and these are being used internationally, and we have 
tested a huge number of samples, maybe 1,500 samples, to try 
and figure out what is going on here.
    Mr. Griffith. All right. So, again, for folks back home, 
for those of us who use the Zantac or the generic--and I use 
both--it has a histamine blocker, which most of the other 
antacid-type medicines do not have, which for people with 
allergies, the histamine blocker made Zantac the go-to product. 
Is there another product with histamine blockers in it?
    Dr. Woodcock. Well, we have famotidine and the others we 
have tested, they do not have nitrosamine.
    Mr. Griffith. So they don't have the cancer-causing drug, 
but they do have a histamine blocker.
    Dr. Woodcock. Yes, yes.
    Mr. Griffith. All right. I appreciate that.
    Dr. Woodcock. We have posted that on our website, so it 
should be available.
    Mr. Griffith. I will be looking it up later. That being 
said, you know, one of the concerns that happens is, because 
there is a concern in the public--and I think rightfully so--
that foreign manufacturers, particularly China, maybe even 
India, is happening with so many of our drugs, the minute you 
hear there is a problem, the first instinct is, well, it got 
contaminated because of lax standards overseas. Don't you think 
that is fair for the public to think that?
    Dr. Woodcock. I think it is fair for the public to think. 
It simply is not probably the case with ranitidine.
    Mr. Griffith. I understand, yes, ma'am. I appreciate it.
    And I yield back.
    Ms. Eshoo. We are going to work hard so you don't have any 
heartburn, but you got to switch.
    Mr. Griffith. Too late.
    Ms. Eshoo. But many countries have removed it from the 
market, and there are other, older remedies that you could use. 
I appreciate what FDA has done, but know that a lot of 
countries removed this from their shelves before we did.
    Now, I would like to recognize the gentleman from Oregon, 
Mr. Schrader, for his 5 minutes of questions. No. Am I right? 
Yes.
    Mr. Schrader. Thank you very much, Madam Chair. Appreciate 
it.
    Ms. Eshoo. Thank you.
    Mr. Schrader. Dr. Woodcock, thank you for coming before the 
committee again. Appreciate it very much. You gave some 
statistics regarding the origin of some of the APIs. How 
confident are you in those numbers? Seems to be a lot of 
discussion out there about it.
    Dr. Woodcock. We are quite confident. It is simply that it 
doesn't talk about the volume. It just says, OK, U.S. can 
produce 28 percent. We have an API manufacturer in our country 
that can produce, right. But it doesn't say how much of those 
the U.S. is producing.
    Mr. Schrader. I think that is a key factor as you are 
alluding to the volume of actual production that gets into the 
hands of the consumer and stuff. It is something that I think 
we would all like to know. There have been some interesting 
books--we are going to hear from an author later today--that 
talk about some of the historic issues that we have had in 
terms of monitoring some of the generics, some of the APIs from 
China and India, in particular. What has FDA done since that 
time period to increase the inspections and make sure, to the 
best of your ability, that Americans are protected with the 
right ingredients uncontaminated?
    Dr. Woodcock. Well, after Congress passed FDASIA, it really 
gave us a lot more authorities. We had begun increasing for an 
inspections in 2005 because the industry had kind of moved 
before that, and we had to react and get more inspectors 
overseas, but under FDASIA, we were allowed--before we were 
supposed to, according to statute, inspect domestic facilities 
every 2 years, and there was no requirement to inspect foreign 
facilities. These were older statutes, right. So that was 
changed. We were given a risk-based approach, which we have 
implemented, and, as I said, by 2015, 2016, we had reversed 
that ratio and we had more foreign inspections every year, 
which we continue to have, than we have domestic inspections.
    Mr. Schrader. Do you feel that your abilities or your 
manpower is commensurate with the need at this point in time?
    Dr. Woodcock. I couldn't say. If we were fully staffed, it 
might be, but right now we are not fully staffed, and so we are 
not, I would say, getting our reaches into what it needs to be.
    Mr. Schrader. All right. I appreciate that. Mr. Wessel, I 
appreciate your being here today, and your perspective is 
pretty unique. China is encouraging a lot of manufacturing, 
particularly in this area, generics, APIs. India now following 
suit. Are we doing enough in this country to encourage American 
manufacturing of some of these critical ingredients that Dr. 
Woodcock references threats to our national security?
    Mr. Wessel. I certainly don't think we are. It certainly 
goes across a number of different industries, but just for this 
one, I don't think we are up to the task. We are not responding 
to the priority that China and other countries place on the 
sector.
    Mr. Schrader. Very good. While I would tend to agree, 
obviously, based on the concerns and what we have been hearing 
and hopefully out of this hearing will come some opportunities, 
some thoughts about how we might incentivize some domestic 
manufacturers for some of the critical ingredients, some of the 
critical generics that we struggle to get to every American in 
a cost-effective manner.
    And I will yield back the balance of my time.
    Ms. Eshoo. The Chair thanks the gentleman.
    Pleasure to recognize the gentleman from Florida, Mr. 
Bilirakis, for his 5 minutes.
    Mr. Bilirakis. Thank you, Madam Chair, appreciate it. And 
thank you so much for really holding this hearing and having so 
much interest in it, and I really appreciate it.
    And, also, I want to thank you on another note with regard 
to the genocide resolution yesterday. I know you were an 
integral part of getting that on the floor, and I know it 
affects your family as well mine as well, so I appreciate it so 
much, and I was happy to be the Republican lead on that.
    So, Dr. Woodcock, in 2013 FDA created a pilot program in 
India that eliminated advanced notice and instead used short 
notice or unannounced visits. For additional secrecy leading up 
to visits, FDA inspectors' travel were arranged through U.S. 
embassies instead of through the FDA offices or manufacturers, 
as I understand. According to reports, the program exposed 
widespread malfeasance that had otherwise been hidden due to 
advanced warning. Among the findings, inspectors found bird 
infestations, missing samples, and fake labs. Under this 
program, FDA issued a 60 percent increase in Official Action 
Indicated findings. However, in 2015, it was shut down without 
explanation.
    Are you aware of the pilot program that I am referencing, 
first of all?
    Dr. Woodcock. I am aware. This was within ORA, as was said. 
That is not within the Center for Drugs, it is the Office of 
Regulatory Affairs, which runs the inspectorate, and my 
understanding is the India office itself on its own initiative 
ran this program for several years.
    Mr. Bilirakis. OK. Thank you.
    Mr. Wessel, you mentioned in your testimony that patients 
ought to have a right to know where their medication comes 
from. In what ways could labeling country of origin for active 
ingredients improve patient safety?
    Mr. Wessel. I believe sunshine is a great disinfectant. The 
fact that, as we saw with lead paint on toys many years ago, 
melamine in dog food, that simply consumer awareness and having 
the information can help put pressure on the system to make 
some changes. So this would allow consumers to be able to 
pressure manufacturers, distributors, and government to make 
sure that there is more attention to where the products are 
coming from.
    Mr. Bilirakis. Well, thank you very much.
    And, again, I really thank you, Madam Chair, for holding 
the hearing, but also, again, we want inexpensive drug prices 
for our constituents, but they have got to be safe. They have 
got to be safe, and I really appreciate it. Thank you.
    Mr. Burgess. Will the gentleman yield?
    Mr. Bilirakis. Yes, I will. Please.
    Mr. Burgess. Thank you.
    Dr. Woodcock, I just wanted to ask you briefly. You talked 
with Morgan Griffith about the Zantac. There is an anti-anxiety 
drug that was also recently named. I think it was Ativan or the 
generic of Ativan, can you give us any update on that?
    Dr. Woodcock. No, I am not actually aware of it, so I will 
get back to you on that.
    Mr. Burgess. All right. Thank you.
    Ms. Eshoo. The gentleman yields back.
    I want to thank him for his questions.
    It is a pleasure to recognize the gentlewoman from 
Delaware, Ms. Blunt Rochester, for her 5 minutes of 
questioning.
    Ms. Blunt Rochester. Thank you, Madam Chairwoman, for 
holding this important hearing on the heels of last week's 
critical committee action to protect patient access to 
prescription drugs. In addition to making drugs more 
affordable, we should ensure that access is not further impeded 
by vulnerabilities in the U.S. pharmaceutical supply chain. I 
have some questions that I would love to ask, but I just wanted 
to follow up on something that you said, Dr. Woodcock. The work 
that you do is so critical and you mentioned the fact that you 
are not fully staffed, and I was curious, is that a recruitment 
issue? Is that a retention issue? Is that a funding issue? What 
causes the lack of full staffing?
    Dr. Woodcock. Well, it appears to be a process issue, so 
government personnel issues are, you know, very difficult, but 
we have put in place some corrective plans, and we hope 
particularly for the field organization, they have received a 
direct hiring authority, and, hopefully, they will rapidly 
rebuild their staffing.
    Ms. Blunt Rochester. Thank you for sharing that. I served 
as State personnel director in the State of Delaware, and so 
when I hear workforce issues, it kind of piques and especially 
for, again, something as critical as the work that you are 
doing.
    I am curious about the kind of data FDA collects related to 
the location of manufacturing facilities today and whether or 
not we can do anything to improve the quality of FDA's data. 
Particularly, I am interested in whether FDA receives enough 
information about the supply chain to get a full picture of 
where active pharmaceutical ingredients and finished products 
are currently manufactured.
    Dr. Woodcock, you noted in your testimony that CDER 
maintains a site catalog of all drug manufacturing facilities 
making drugs for the U.S. market. You said this information 
comes from approved applications or facility registrations. 
Importantly, you also noted that manufacturers which produce 
APIs are not responsible for noting the volume of APIs they 
produce. I want to better understand how FDA interacts with API 
manufacturers currently and whether those interactions vary 
depending on the type of product. My understanding is that, 
under the Generic Drug User Fee Amendments, otherwise known as 
GDUFA, API manufacturers are required to register with the FDA 
and to pay a GDUFA fee. Is that accurate?
    Dr. Woodcock. Yes.
    Ms. Blunt Rochester. Are API manufacturers also required to 
register and pay a fee under other user fee programs, or is 
GDUFA the only program with this requirement?
    Dr. Woodcock. I think the--I would have to get back to you. 
We have so many user fees. There are a couple exceptions, 
though, on registration that I think are loopholes that we are 
concerned about. One is, if an API manufacturer is going to 
send to a finished-dosage form manufacturer who is not in the 
U.S. either, then they could import into the United States 
without us necessarily knowing about it.
    Ms. Blunt Rochester. OK.
    Dr. Woodcock. And it is very technical, so we would have to 
work with you on that.
    Ms. Blunt Rochester. OK. We will follow up with you.
    Dr. Woodcock. Second, for OTC, both domestic and foreign 
for OTC drugs, the finished-dosage form manufacturer--they can 
ship before they register, and the same is true for compounding 
bulks, APIs. They can ship without registering necessarily with 
the FDA, so these are, we feel, loopholes. So, if there is 
interest in tightening the scheme, that these are things that 
should be looked into.
    Ms. Blunt Rochester. Excellent. Thank you. We will follow 
up with you on that. And as a result of the differences between 
these programs, do you feel that the FDA has more information 
or a better understanding of the facilities which are producing 
API which is used to make generic drugs, and should we consider 
other requirements in other product areas that would provide 
FDA with more information about the facilities that manufacture 
API?
    Dr. Woodcock. Well, the thing that probably isn't clear is 
that for most of these that are applications--so if you do a 
new drug application, biosimilar application, they have to file 
with their separate entity what is called a master file with 
FDA that has all the technical information in it, and we have 
to review that, and we inspect the facility. And so, if they 
don't pass the inspection or pass the review, their scientific 
information, then we won't approve the finished dosage form. So 
that is how that--we have quite a bit of control in the new 
drug space, and that is how we do it.
    Ms. Blunt Rochester. Excellent. We will follow up with you 
on the two areas, but thank you.
    And I yield back.
    Ms. Eshoo. The gentlewoman yields back. Now it is a 
pleasure to recognize the ranking member of the full committee, 
Mr. Walden, for his 5 minutes of questions.
    Mr. Walden. Thank you very much, Madam Chair.
    So, Dr. Woodcock, again, thank you for being here. I had to 
go up to the other hearing and back and forth. With respect to 
the contaminated lots of ARBs that were found to contain traces 
of carcinogens, FDA stated that those byproducts could not have 
been detected in routine inspections. Is that correct?
    Dr. Woodcock. That is correct. We had to develop special 
tests for them. They are in that nanogram or microgram range, 
so they are very low levels.
    Mr. Walden. And so you now feel like you have the right 
capabilities to do the test for impurities during routine 
inspections?
    Dr. Woodcock. Yes--no, not inspections. We are requiring 
the manufacturers to test for these, all right, and there are 
multiple nitrosamines, so we have discovered five or six 
different nitrosamines in different ARBs. So the tests that we 
have put forth will detect all of those, and we are asking the 
API manufacturers and the FDF manufacturers to test. And so, 
during inspection, the inspectors can look and make sure they 
are performing those tests correctly.
    Mr. Walden. You know, when this whole issue of drug supply 
and purity and all that really came to light for me, both in 
the classified briefings we have had on some of these matters, 
but also after I led the bipartisan delegation down to Puerto 
Rico and the Virgin Islands, and, you know, things we just 
think fundamentally will always be there suddenly weren't. And 
that whole supply chain becomes real real fast in our today 
modern, in real-time delivery systems, and we have got to 
address this somehow, and so it is a big concern.
    In his written testimony, Commissioner Wessel referenced a 
statement made by the Commission's July hearing about FDA's 
ability to address safety violations in China. At that hearing, 
a witness testified that, from 2013 to 2018, out of 864 
inspections in China that FDA recommended as Official Action 
Indicated, FDA officials downgraded 78 of those. By contrast, 
in the same time period of 11,642 inspections that FDA 
investigators conducted in the U.S. and recommended as OAI, 
only one inspection was downgraded in that time. Why might a 
recommendation for Official Action Indicated be downgraded? 
What does that mean?
    Dr. Woodcock. After--an inspector's findings, which are--
they put in their 483 form that they leave with the company--
are their observations. They go back and work with their 
compliance officer and try to work up a case based on that, and 
then they send it to Center for Drugs and say, ``We think this 
case should be like this,'' OK?
    Then we look at it, also at the same time the manufacturer 
has responded to the 483. They have a brief amount of time to 
respond to that form. They put in a list of corrective actions 
or clarifications or whatever. Then all this information is 
sent to the Center for Drugs and we make a decision. Right now, 
for domestic, the downgrade rate is 60 percent, and the upgrade 
rate that we do is 4 percent. In foreign, the downgrade rate is 
27 percent, and the upgrade rate is 3 percent, OK. So there is 
a difference between--we look at the legality of the sites, all 
right, that are being made and the charges. We look at other 
tools that we have. We can do regulatory meetings. We can ask--
we can do a whole lot of other activities to bring the firm 
into compliance, and so we make an overall decision, and we 
feel that some differences between us and the ORA are 
reasonable. We are kind of like the central group that tries to 
bring consistency across the entire--as far as--we call them 
the sentencing standards might be, or whatever you want to call 
it, right, yes.
    Mr. Walden. So let me ask you one other question. I 
mentioned in my opening statement the media reports have cited 
a decline in the number of surveillance inspections of foreign 
drug factories conducted by FDA over the last 2 years. Has 
there been a decline in the number of surveillance inspections 
of foreign drug factories performed by the agency over the last 
2 years, and if so, why?
    Dr. Woodcock. There certainly has. We went from a 1,041 
down to 740. We also had a decline in our domestic inspections, 
although they continue to be lower--fewer, and the reason is we 
have staffing issues.
    Mr. Walden. Have we appropriated the right amount of money 
to solve your staffing issues, or is it a hiring issue?
    Dr. Woodcock. I believe we have the funding, but we are 
having trouble bringing people on board.
    Mr. Walden. OK. Thank you, Madam Chair, my time's expired.
    Ms. Eshoo. Dr. Woodcock, the inspections abroad, are they 
surprise inspections, or do they inform the outfit that they 
are arriving tomorrow so that they can clean out the mice, the 
manipulated data? I could go on and on, but I think that that 
is an important thing for us to know.
    Dr. Woodcock. We have discussed this with the field. Most 
of the inspections are preannounced, and there are several 
reasons for that.
    Ms. Eshoo. Why would you do that? Why give them a heads up? 
It seems to me that you give them 24 hours or 48 hours to clean 
up the mess, and then it is--I don't get it.
    Dr. Woodcock. Currently, for an inspection, it costs the 
agency about $76,000. We have tried doing unannounced 
inspections, and the firm may not be in production, in which 
case it is not useful to inspect them. They may be shut down 
due to some national holiday that we didn't understand.
    Ms. Eshoo. But you would know that when you set the date 
for an inspection? I mean, you show up that date or--I mean----
    Dr. Woodcock. We don't know whether they will be in 
production or not. We have tried and our for-cause inspections 
where we have a whistleblower or we have a problem, those are 
not announced, and so we do do unannounced inspections. But 
most of the ordinary surveillance inspections are announced in 
foreign countries. In some countries where we have----
    Ms. Eshoo. Do you think it was a prudent policy what you 
are describing?
    Dr. Woodcock. Well, I think it is a tradeoff because we, as 
you hear, we are having trouble getting--doing enough 
inspections because we are short staffed, and if we send a lot 
of people to plants that aren't open or aren't producing and so 
forth, then we waste people's time and we even have less 
coverage.
    Ms. Eshoo. Well, I think with each question and each 
answer, I add to my list of things that we need to work on, so 
thank you.
    I now would like to recognize Dr. Ruiz from California for 
his 5 minutes of questioning.
    Mr. Ruiz. Thank you. As an emergency department physician, 
I know all too well the challenges that healthcare providers 
and health systems face when the drugs they need and rely on to 
treat patients are not available, especially in the emergency 
department when you need to treat emergencies. I hear a lot of 
concerns here today about the reliance on foreign sourcing for 
our API and finished-drug products and what that means for a 
safety and quality standpoint. We have charged FDA with 
ensuring the safety and efficacy of our drug products before 
these products come to market, but we must be vigilant in 
ensuring that manufacturers continue to meet this standard 
postarrival.
    Prior to the enactment of the Food and Drug 
Administration's Safety and Innovation Act, FDA was mandated to 
inspect domestic drug facilities every 2 years but had no 
similar mandate for foreign facilities. As a result, 
manufacturers located here at home were routinely inspected, 
whereas foreign competitors could sometimes go years before 
being inspected. FDASIA addressed this by modifying FDA's 
authority to allow them to set their inspection schedule based 
on risk.
    Dr. Woodcock, can you further discuss the risk-based 
inspection schedule that FDA uses today to guide inspections, 
and what criteria does the agency use, and how has that worked 
in practice?
    Dr. Woodcock. Certainly. Well, we think it has worked 
pretty well because, in 2014-2015, the number of foreign 
inspections got higher than the number of domestic inspections 
and has remained that way since. We do a risk-based approach 
like, what if it has never been inspected, OK, that is a very 
strong factor. The inherent risk of the drug, perennial drugs, 
sterile drugs--they are harder to make, they are harder to keep 
sterile, that is a higher risk. We put that in. We look at the 
volume of the facility. We look at the inspectional history of 
the facility. If it has had problems, we should get back there 
quicker. Right now, we are inspecting foreign sites more 
frequently than U.S. sites.
    Mr. Ruiz. OK. Some stakeholders have been critical of this 
risk-based inspection model and question whether it has 
provided the agency enough flexibility to target facilities 
abroad, such as in China, that may be cutting corners in 
quality manufacturing practices or data maintenance. Do you 
believe that the current risk-based inspection model has been 
helpful in allowing agency to target the facilities of most 
concern, and do you believe any changes are needed to this 
current model?
    Dr. Woodcock. We would like to refine the model, but we 
don't believe country of origin should be a high-risk factor. 
For example, if you are making fluoride for toothpaste in 
China, that probably--you are probably a higher risk if you are 
making a sterile drug----
    Mr. Ruiz. Is data maintenance and transparency, access to 
information and how cumbersome it could be a part of your risk 
assessment? Because some countries are not as transparent as 
others.
    Dr. Woodcock. Right. Well, we make, as we said earlier, 
because FDASIA gave us, if manufacturers give us a hard time in 
facilities, we can now declare the drugs adulterated if we 
can't get in and get the inspection done.
    Mr. Ruiz. I would definitely consider transparency and how 
easy it is to get information that you need as part of the 
risk, right? I agree wholeheartedly that FDA should target its 
personnel/financial resources to the facilities in countries of 
most concern. That I definitely agree, but I also want to 
ensure that we do not return back to a situation where some 
facilities are inspected every 2 years, and others may go 4 
years or longer without an inspection. So how is FDA working to 
ensure that this is not the case?
    Dr. Woodcock. Well, the time since last inspection is part 
of the model.
    Mr. Ruiz. OK. So why have there been no inspections on some 
facilities for 4 years then? Are you allowing some inspections 
to go on for that long? Is that part of the model?
    Dr. Woodcock. No.
    Mr. Ruiz. So is it an implementation background? Do you 
need more personnel to conduct these facilities, because they 
are not happening.
    Dr. Woodcock. I believe they are happening. We have--right 
now we know 100 facilities we haven't inspected. A few of them 
are in China. These probably are the loophole ones that I 
talked about earlier, where they can ship before they register 
if they make OTC drugs, for example.
    Mr. Ruiz. Well, loophole or nonloophole, if they are not 
happening within the loophole, then we need to address the 
loophole.
    Dr. Woodcock. Well, I agree with that.
    Mr. Ruiz. So I think that is my point, and so how are we 
going to ensure that these facilities don't go 4 years without 
inspections?
    Dr. Woodcock. As part of our risk model, we look at how--
facilities that haven't been inspected, and we have kind of a 
limit on that. You have to be inspected within a certain 
frequency.
    Mr. Ruiz. Thank you for what you are doing. Thank you.
    I yield back.
    Ms. Eshoo. The gentleman yields back.
    Pleasure to recognize Mr. Bucshon from Indiana for his 5 
minutes.
    Mr. Bucshon. Thank you very much, Madam Chairwoman. I was a 
doctor before I was in Congress, much like Dr. Ruiz. I was a 
cardiovascular surgeon. This is really important. One of the 
things I wanted to say right at the beginning is, I do 
appreciate the initial measured response to some of the 
contamination that was found in some of these products because, 
you know, you find something that immediately if you take the 
pill, you fall over dead, that is, obviously, you stop taking 
the medication. But there are millions of people who take 
really critical medications that should not be stopping them 
immediately without the advice of their physician. I want to 
make that clear, that I think that measured response that came 
out of the FDA was really important, and I just wanted to 
mention that because, you know, you say something causes 
cancer, you know, people immediately stop taking their ARB or, 
honestly, their Zantac could result in pretty substantial 
health risks. So talk to a doctor. That is my point.
    Dr. Woodcock, in your testimony you mentioned that adoption 
of advanced manufacturing technologies may pose a challenge to 
the current regulatory framework. Can you expand on this a 
little bit and what that means? What you mean by that.
    Dr. Woodcock. We have a lot of regulations that were 
written a long time ago back when drug manufacturing resembled 
a very large compounding pharmacy, for example, so some 
entities in the Government and otherwise are thinking of little 
mobile manufacturing units and so forth that wouldn't even have 
a fixed site, OK. They travel around and so forth. That is just 
one example. And they could be turned on and make different 
things at different times and so forth, so we are going to have 
to change or adapt somehow our regulations to meet these new, 
innovative methods. It is not like they are going--as long as 
they make safe and effective products reliably, we need to have 
a way to make this happen.
    Mr. Bucshon. Yes. I think that is very important. The 
advice from the FDA to the Congress would be probably really 
important about what these barriers are, right, rather than the 
other way around, where we try to--what I will call nonexperts 
in the area might try to look at changing regulations that 
actually may not help you.
    Dr. Woodcock. We would be happy to work with----
    Mr. Bucshon. So that is an area I think in advanced 
manufacturing that not only this committee but others should 
probably look at, not only related to the drug supply chain but 
other products that we produce in our country, and it might 
help us produce more in the U.S. versus overseas, right, can 
cut down the cost of production.
    In addition, you know, what other barriers, other than 
regulatory barriers? Are there other barriers to advanced 
manufacturing here at home? We talked about maybe the labor 
cost and other things, but I mean, are there other barriers you 
think that are causing this problem?
    Dr. Woodcock. Well, the primary barrier--first of all, we 
don't have, as we already said, academic base of ideas coming 
forth. We don't have a workforce that is used to this. We have 
a workforce that is used to traditional manufacturing. There is 
an upfront investment that has to be made, and some companies 
have put their stake in the ground and said, ``we are going do 
this,'' but of course the generic industry isn't exactly, you 
know, have a lot of--they have commodity products, and so that 
upfront investment, I think, is one of the biggest barriers to 
having this----
    Mr. Bucshon. So capital costs are a problem.
    Dr. Woodcock. Yes, and some costs too in brick-and-mortar 
facilities around the world that would change.
    Mr. Bucshon. I want to touch on one more thing, and that is 
drug shortages. This is off of the beaten path a little bit 
from the contamination and where we are producing things, but 
my wife's an anesthesiologist. She still practices every day, 
and every day there is shortages of sometimes propofol, which 
is a critical drug, and also paralytic agents, which are 
important. Do we know how many drug shortages can be attributed 
to quality issues surrounding the API ingredients as compared 
to quality issues related to the finished-dosing form in the 
facilities? Are there issues there?
    Dr. Woodcock. We don't know. I can get numbers. We haven't 
performed that analysis, but I can tell you, for sterile drug 
production, a lot of it is in the finished-dosage form because 
that has to be made sterile, and of course that is problematic, 
especially if you can only sell it for a couple bucks.
    Mr. Bucshon. A number of years ago, former Congressman 
Carney and I--who is now the Governor of Delaware--put in some 
language into the FDA reauthorization to address drug shortages 
to try to help the FDA streamline some of these processes, and 
also the last thing I will say, with your indulgence, is single 
sourcing is a big problem, right. And so I think the FDA, where 
they see single sourcing as a potential critical issue with a 
critical drug, that we need to do better maybe in trying to 
figure out ways to, maybe, at least have another option, so I 
appreciate that.
    I yield back.
    Ms. Eshoo. The gentleman yields back.
    A pleasure to recognize the gentlewoman from Illinois, Ms. 
Kelly, for her 5 minutes of questioning.
    Ms. Kelly. Thank you, Madam Chair, and I wanted to tell my 
colleague who just spoke that my spouse is an anesthesiologist 
also. Thank you for all your testimony today.
    And thank you, Madam Chair and Ranking Member, for hosting 
this committee.
    Dr. Woodcock, you noted in your testimony that our domestic 
U.S. manufacturing facilities won't be able to offset the cost 
advantages of manufacturing in China by simply increasing the 
productivity of traditional manufacturing techniques, such as 
batch manufacturing. Importantly, you also noted that advances 
in manufacturing technology, such as continuous manufacturing, 
could help manufacturers gain their competitiveness with China.
    Would you discuss further why simply increasing the 
productivity of traditional manufacturing isn't enough?
    Dr. Woodcock. The traditional way these are made is called 
batch, and what they have is they call it unit operations, so I 
suppose if you are baking a cake, OK, so first you mix up the 
ingredients dry and then you try to get them uniformly mixed. 
So, if you think of a vat the size of this room and then you 
are trying do that, and then you have to store it and take 
samples and test for uniformity, OK. Then you might add some 
liquid ingredients or whatever and you do something, and then 
you have to store it and test and make sure the reaction 
occurred the way you thought, and then you might move it to 
another vat, OK.
    Continuous is more like an assembly line where the 
reactions occur along, you know, tubing--looks like the mad 
scientist, right--and there are sensors that are automated and 
computers watching to make sure everything is going the way it 
is supposed to be.
    So you could see that the kind of workers and the kind of 
setup you have is very different between these two, and they 
are just inherent limitations on sort of mass mixing and mass 
reactions that don't happen so much in a continuous flow setup 
with advanced oversight, with computerized oversight.
    Ms. Kelly. One of my colleagues asked about manufacturing 
in the United States, and I am also interested in the future of 
domestic manufacturing and especially learning more about the 
advances in drug manufacturing processes and whether such 
advances could help to bring pharmaceutical manufacturing back 
to the U.S.
    Dr. Woodcock. Yes. Well, I definitely believe that would be 
the case, and I think this new generation, which hasn't been 
talked about very much, which is miniature setups that are 
mobile and kind of plug-and-play and so forth, are going to be 
eventually the new generation, but we are far from there, and I 
think we need to put our brains against that. We need to 
invest, and we need to invest in academic research in that area 
and so forth, and I know that, in the military fields, they 
really need this kind of capacity, and we may need it for 
emergencies as well. So I think there are multiple 
opportunities and scenarios where we really need to push on 
advances in manufacturing.
    Ms. Kelly. Can you tell us about the current state of 
advanced manufacturing in the U.S.? Do these new methods 
produce higher-quality products or many manufacturers using 
this technology?
    Dr. Woodcock. The adoption has been slow. We have approved 
I think five different applications, not all in the United 
States, but certainly a couple--a number of them in the United 
States using advanced manufacturing. We approved a 3D-printing 
drug that is printed, and I think that is something that we 
could see in the future much more, and we are working--our 
emerging technology team is working with many manufacturers who 
said, ``We are going here. We are going to go in this 
direction.''
    So I think the future is starting to unfold particularly in 
biomanufacturing, bioprocessing for biological products.
    Ms. Kelly. Where are we compared to other developed 
countries, and either one of you, what can we do more to help 
you?
    Dr. Woodcock. Right. Well, leave the--what we have received 
under Cures to give academic grants and support the academic 
base in the United States has been very helpful. We also got an 
appropriation, and we set up a center of excellence at FDA, and 
we are able to put in a little pilot lab, so our people can 
learn about these advanced techniques and so forth, a pilot 
plant. So this type of investment, I think, continuing 
investment is very important.
    Mr. Wessel. Let me just add quickly, and I had the ability 
to serve on President Obama's advanced manufacturing 
partnership. He had both amp 1.0 and 2.0, and that went to many 
of these issues. This administration just had a summit on the 
bio economy. The FBI, the DoD, many others are looking at it. 
We have great advanced manufacturing. The question is whether 
we can take things off the lab bench into the production arena, 
whether we can ensure that the IP that we have developed 
remains here. The largest component of Chinese investment in 
the United States last year was in biotechnology through 
venture capital, et cetera. So, when you look at whole of 
government, we have to look at the entire food chain, if you 
will, for developing these capabilities.
    Ms. Kelly. Thank you very much.
    I yield back.
    Ms. Eshoo. I thank the gentleman. I have to tell you, if 
anyone was looking at me while Congresswoman Kelly was asking 
her questions and getting the answers, it is just really a slow 
burn up here to hear of the advances of China and how poised 
they are to grab what we have and run with it. So we have our 
work cut out for us here. We have to turn this around. We have 
to turn this around.
    Pleasure to recognize the gentlewoman from Indiana, Mrs. 
Brooks, a wonderful partner on many things, and highly 
knowledgeable about BARDA. We have worked together on that and 
the reauthorization of it, and I know it has come up in the 
testimony. So I look forward to your questioning, and you are 
recognized.
    Mrs. Brooks. Thank you, Madam Chairwoman, and thank you so 
much for holding this incredibly important national security 
hearing and with the focus on our supply chain. The chairwoman 
of this committee and I are cochairs of the Biodefense Caucus, 
and we were very pleased that the work that was done last 
Congress, as well as this Congress, we were able to finally get 
PAHPA reauthorized and signed into law. Specifically in the 
reauthorization, we directed the ASPR to consider manufacturing 
capacity, and we have been talking about that quite a bit, and 
the outside sources, medical supplies, replenishing the 
products in the Strategic National Stockpile. And I might, 
Madam Chairwoman, as you continue to put a focus on this, may 
we bring the leader of ASPR, Dr. Kadlec, and BARDA, Dr. Bright, 
in to talk about this, because I think we need to continue to 
keep a focus on these vulnerabilities and issues and what are 
we doing to focus on the manufacturing as well.
    I think I want to focus on the medical countermeasures and 
the Strategic National Stockpile. And I appreciated that you 
put--there was a category in your written remarks, Dr. 
Woodcock. You mentioned what I will just call Cipro and 
doxycycline, critical drugs used to treat anthrax and plague, 
which are medical countermeasures. What is our American 
capacity to produce these two drugs in the case of a disaster, 
if you know?
    Dr. Woodcock. I do not know.
    Mrs. Brooks. If you could get back with us.
    Dr. Woodcock. I could definitely get back to you on that, 
yes. We didn't pursue our analysis for individual drugs.
    Mrs. Brooks. That is fine, but obviously, things that are 
part of our Strategic National Stockpile is something that we 
are critically interested in learning what our capacity 
relative to American production is.
    Dr. Woodcock. We have a chart here that says we have one 
U.S. API site for Cipro and two for doxy in the United States, 
but how much volume and capacity they have, I do not know.
    Mrs. Brooks. Right. And I think those would be important 
things for us to have, maybe even in a secured discussion. And 
relative to all of our medical countermeasures, and anything 
that is in the Strategic National Stockpile, I think it is 
important for us, as Members of Congress, to understand, in a 
classified setting, what our capabilities are.
    And I am also interested, because you have talked many 
times, and I am also interested, Commissioner Wessel, about 
incentivizing U.S. manufacturers and incentivizing U.S. 
producers to add, whether it is essential medicines or 
medicines as part of our medical countermeasures. The products 
that are part of medical countermeasures are not something that 
Americans just run out and purchase. The Government is the only 
real customer to have in the case of emergency, but even 
essential medicines--does the FDA monitor, on essential 
medicines, who is API manufacturing? Is it less than two 
countries of origin? Can you talk about that, essential 
medicines, not even medicines that are for, you know, either 
attacks natural or manmade?
    Dr. Woodcock. No, we do not. And we would probably need 
that volume information in order to do that accurately, because 
simply knowing someone could produce an API, they have U.S. 
approval to produce an API, doesn't mean they have the ability 
or capacity to do it, especially if they have to do a surge 
production.
    Mrs. Brooks. And so what should we be doing to incentivize 
government and industry working together to incentivize, to 
bolster the resources and capacity?
    Dr. Woodcock. Well, we have been working with ASPR, DARPA, 
and BARDA, because in my opinion--and I know this maybe goes 
against the flow--but instead of having finished-dosage form 
that you store, the ideal scenario would be, you would have 
regionalized instant-production capacity, using advanced 
techniques, so you could rapidly produce whatever 
countermeasure you needed in a very fast manner. And I believe 
the military is also looking at the need for that as well. So 
that is where advanced manufacturing for everyone and then for 
countermeasures kind of comes together.
    We, the FDA, are not, you know, in the sort of incentive 
business, so we help everybody as much as we can, but we are 
not on the economic side, which are most of the barriers.
    Mrs. Brooks. Commissioner, any incentive ideas----
    Mr. Wessel. One of the--our Commission, which is six 
Democrats and six Republicans, was unanimous in the view, the 
recommendations, which are in my testimony. One of those is 
looking at our procurement systems like DoD, VA, et cetera, to 
be able to prefer domestically produced items, to look at 
critical shortages, critical commodities and make sure, just as 
we do with Buy America as it relates to other products, that we 
apply certain procurement preferences to make sure we have the 
capacity.
    Mrs. Brooks. Thank you both for your long and very 
important work. I yield back.
    Ms. Eshoo. I thank the gentlewoman.
    Pleasure to recognize the gentleman from New York, Mr. 
Engel, for his 5 minutes of questions.
    Mr. Engel. Thank you, Madam Chairwoman.
    Manufacturing issues at facilities that produce APIs can 
lead to drug shortages, which can have health consequences for 
patients with serious ailments. Recently, the childhood cancer 
community has experienced a shortage of an important pediatric 
drug.
    So, Madam Chairwoman, I would like to ask unanimous consent 
to submit into the record a letter led by Representatives Brian 
Higgins and Pete King, both of New York, cochairs of the House 
Cancer Caucus, highlighting this important issue.
    Ms. Eshoo. So ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Engel. Thank you.
    Dr. Woodcock, I have long been concerned with ensuring that 
FDA has all the authorities the agency needs to be efficient 
and effective in regulating the complex drug supply chain. I am 
very focused on ensuring the safety of products for our U.S. 
patients, but I am equally interested in ensuring that our U.S. 
manufacturers are able to continue to be leaders in drug 
development in a rapidly growing global economy. In my time on 
this committee, I have supported the passage of many bills to 
enhance the authorities and resources of the FDA, including 
FDASIA, DQSA, the 21st Century Cures, and more recently FDARA. 
As part of these bills, we have included provisions that would 
help to incentivize innovation and to ensure that manufacturers 
continue to bring their products to the FDA for approval first 
before any other country.
    It is imperative that American patients continue to have 
access to safe, high-quality, and innovative medicines. So I 
want to better understand the risks of having API and finished 
products manufactured abroad rather than in the United States. 
I know there are real and important negative effects on 
American workers and on the U.S. economy to having this 
manufacturing go overseas, but are there real safety risks that 
arise exclusively from the fact that a product is manufactured 
abroad? In other words, are products that are manufactured 
abroad inherently worse than products manufactured in the 
United States?
    Dr. Woodcock. Well, if you look at our inspection outcomes 
by country, all right, the EU has the highest rate of 
minimally--of acceptable or better.
    Mr. Engel. Did you say the EU?
    Dr. Woodcock. Yes.
    Mr. Engel. Yes, OK.
    Dr. Woodcock. That is outside the United States. Rest of 
world is 94 percent, and the U.S. is 93 percent, which is not 
significantly different. Now, if you get to China, that is 90 
percent, but that means 90 percent of facilities we inspect in 
China meet the acceptable standards. And India is 83 percent 
currently. So we believe that products that reach the United 
States are of adequate quality. They are fit for purpose. That 
is the whole point of our whole system.
    But, of course, we acknowledge that, in various countries, 
there are more barriers to our oversight than there has been in 
the United States. It has changed since you all passed FDASIA, 
which has been extremely helpful to us in many ways and really 
has enabled us to increase our inspection presence tremendously 
overseas. That has resulted, though, in a flood of OAI, 
unacceptable results, all these reports of problems. As we 
looked, we found a lot of problems. We think, though, over 
time, as we keep that inspectional intensity up, we will make 
sure that those facilities are at the level that the rest of 
the world is at. So that is kind of the state.
    We don't believe there is inherent risk in making a drug in 
another country, other than the economic and those--and the 
risk of natural disasters or shenanigans or whatever, but we 
believe that we need to make sure that the quality standards 
are uniform around the world. And it would be very nice for the 
U.S. to have an industrial base, because redundancy is 
important. It is really important to have backup for all these. 
When we get to a single supplier in a remote area, you know, we 
are going to get into trouble.
    Mr. Engel. Well, thank you. And I have another question, 
but I want to just note that, while you were talking, 
Commissioner Wessel was nodding his head in agreement. I hope I 
am not telling secrets or anything, but thank you.
    Recent press reports, as well as some of the testimony 
submitted for today's hearing, seem to imply that the safety 
and quality issues that we are seeing from drugs manufactured 
overseas are exclusive to generic drugs. Would you agree that 
safety and quality issues associated with foreign API and 
finished drug products are unique to only one segment of the 
industry?
    Dr. Woodcock. Could you repeat that? I am very sorry.
    Mr. Engel. Yes. Press reports and some of the testimony 
that we have heard seem to imply that the safety and quality 
issues we are seeing from drugs manufactured overseas are 
exclusive to generic drugs. Is that true?
    Dr. Woodcock. No. I don't believe so. I believe we also see 
safety and quality issues in drugs manufactured in the United 
States. And we take action against those as well, promptly.
    Mr. Engel. OK. Thank you.
    Thank you, Madam Chair.
    Ms. Eshoo. I thank the gentleman. Recognize Mr. Mullin from 
Oklahoma for his 5 minutes of questioning.
    Mr. Mullin. Thank you, Madam Chair.
    Mr. Wessel, you had brought up a couple things in your 
testimony, and I kind of want to recircle back to those. How 
did China become the world's largest supplier of APIs?
    Mr. Wessel. China has for a number of reasons. One, they 
have had a plan to do so. They have been developing their 
chemical sector for a substantial period of time, and that goes 
all across from fertilizers through APIs, et cetera. So that is 
number one. Number two, beginning, I believe it was with their 
11th, 12--11th 5-year plan--we are now on to the 13th 5-year 
plan, as well as Made in China 2025, they have prioritized the 
development of the bio-economy, from APIs through biotech, 
through medical equipment, et cetera, for development.
    As part of Made in China 2025, they want to be indigenously 
self-sufficient for 70 percent of its need--their needs. So 
that means you have to develop your own industrial capacity to 
support it.
    Mr. Mullin. What China is doing, do you feel like they 
could weaponize our drug system?
    Mr. Wessel. I think they very well could, and they have, as 
I have said, they have shown their willingness to do it with 
rare earths a number of years ago with Japan. I would say they 
have weaponized certain responses to the current tariff 
tensions, trade tensions between our two countries, to try and 
maximize their political response. They could very well do it 
in this sector if they so choose.
    Mr. Mullin. Can you describe some of the ways that 
corruption impacts China's products?
    Mr. Wessel. As I said in my testimony, and I think has 
been, the Chinese people have been more victim to this than we 
have in terms of----
    Mr. Mullin. Which is one reason why they don't really have 
confidence in their own drug system.
    Mr. Wessel. Well, that is certainly true, that certain test 
data, certain production capabilities, they have cut corners, 
they have bribed officials relating to testing regiments, et 
cetera. And when found, they have been met with swift and 
decisive action by the government leaders. But because there 
are more than 4,000 facilities in China, all across the 
country, the opportunity for corruption is great.
    Mr. Mullin. What do you say when they were found by 
government officials? I thought some of the reports we have 
seen, some of the government officials were part of this 
corruption process.
    Mr. Wessel. Correct.
    Mr. Mullin. So would you agree it is more accurate to say 
that the ones fell out of favor with the federal government 
was----
    Mr. Wessel. It is--the----
    Mr. Mullin. Not our Federal Government, their government.
    Mr. Wessel. The corruption fight probably is focused on two 
things: One, trying to root out opposing forces in the party, 
number one, but number two, there really is an effort at times 
to make sure that corruption, as in these areas, is addressed.
    Mr. Mullin. I appreciate your testimony. I just make a 
point here. Listen, I am not a big pharmaceutical fan when it 
comes to what has happened with the opioid epidemic. They have 
brought a lot of scrutiny on themselves for what they have 
done. But I do think they play a very important role, and we 
play a role in this too. If we overregulate and we push out, 
where we make it not conducive for these pharmaceutical 
companies to do business inside the United States, those needs 
are going to be met for the American people by someone. Someone 
is going to fill that gap in. And this is kind of the dangers 
in my opinion that we face when we overregulate any industry, 
because we can regulate them to death, where it is not 
conducive for them to continue working inside the United 
States, and then we lose control over being able oversee it.
    Dr. Woodcock, you have a very difficult job when you are 
trying to regulate industries outside the United States. We 
only have that ability to regulate them if we have a 
partnership with the government. But when you are talking about 
China, who is neck deep in corruption, that inspection only 
goes so far. So I really don't have a question for you. I just 
commend you for the work that you are trying to do. It is 
difficult. But I do think Congress plays a role in this thing 
too. We have kind of stepped on our own tail, and we find 
ourselves in this situation. So thank you guys for both being 
here.
    Ms. Eshoo. The gentleman yields back. A pleasure to 
recognize our resident pharmacist, the gentleman from Georgia, 
Mr. Carter, for his 5 minutes of questioning.
    Mr. Carter. Thank you very much, Madam Chair, and let me 
clean up a few things from the hearing today. Dr. Woodcock, we 
were talking earlier about vincristine and about the fact there 
has just been a shortage because Teva stopped manufacturing. 
Teva was only manufacturing 3 percent, and Pfizer was notified 
that they were going to stop the production of it. Yet we still 
ended up with a shortage that reached to the level where I was 
getting phone calls in my office, reached to congressional 
level. How could a drug that a company that is only providing 3 
percent of the market share, how could that have happened?
    Dr. Woodcock. That didn't--wasn't the cause. All right? 
Pfizer became the single source and developed a problem with 
finished dosage for manufacturing, and that is--they stocked 
out. They were not able to make--to supply the----
    Mr. Carter. So it was just coincidence that both of those 
things happened at the same time?
    Dr. Woodcock. Right. Well, Teva notified us properly that 
they were going off the U.S. market----
    Mr. Carter. Right.
    Dr. Woodcock [continuing]. And gave us the advance 
notification that Congress asked for. So we knew that was 
happening. That was known. We didn't hear from Pfizer about 
their--that they were going to stock out. We heard about this 
from MD Anderson.
    Mr. Carter. OK. Let me get into some other stuff here. 
First of all, I want to talk about compounded drugs and how 
they factor into this issue as well. We have been talking about 
finished manufacturer drugs, but what about bulk API products 
that a compounder here in America may purchase? Can any 
manufacturer register themselves with the FDA and begin selling 
bulk API products?
    Dr. Woodcock. Well, we feel that there are--we would like 
to talk to you about this, because we feel there is a--there is 
sort of a loophole here----
    Mr. Carter. Yes.
    Dr. Woodcock [continuing]. To register, but you can ship--
you can ship the product.
    Mr. Carter. So what you are telling me, that it is possible 
that, you know, for repackagers of API bulk products, that they 
could register and sell an API in bulk product without first 
being inspected by the FDA?
    Dr. Woodcock. That is correct.
    Mr. Carter. Wow. We need to fix that. We need to fix it. 
Because essentially it would be possible for a repackager to 
sell into the supply chain, and to then go out of business, 
without ever being inspected by the FDA?
    Dr. Woodcock. Right. And we have seen some APIs that were 
mislabeled. They had a correct--a different certificate of 
analysis, but they were actually a different drug----
    Mr. Carter. How do we fix that ASAP?
    Dr. Woodcock. That would probably--the fastest way would be 
Congress to get involved.
    Mr. Carter. Wow. We need--that is--OK, well, we are going 
to get involved, OK?
    Talking about compounding and the important role that 
compounders play in the broader supply chain. What about your 
MOU? I know that you are coming up on one. Can you give me an 
update on where we are at with that?
    Dr. Woodcock. Yes. Well, as you know, the MOU process has 
been attended with a lot of controversy. We recently had an 
agreement, cooperative agreement, with NABP, and we were able 
to provide them funding because much of the concerns of the 
States were about, how are we going to do this reporting to 
FDA?
    Mr. Carter. Right.
    Dr. Woodcock. And so what we would like is, they can report 
to NABP, which is something they do already, and if we can make 
a system that is very easy and seamless to you, so there 
wouldn't be a lot of paperwork making----
    Mr. Carter. Right.
    Dr. Woodcock [continuing]. IT systems, and we hope that 
will then make States, once that is apparent to them, happy to 
sign on to the MOU.
    Mr. Carter. OK. Because your intention and your hope is 
that all States are going to sign on to it?
    Dr. Woodcock. Absolutely.
    Mr. Carter. Do you expect that to happen?
    Dr. Woodcock. Not initially, but we hope eventually.
    Mr. Carter. OK. Well, that is very important, because as 
you well know, I am one who believes that patients should be 
able to get the medication of their choice at where they want 
to get it from. So that is just something that is very 
important to me.
    While I am on this, let me ask you this. You talked about 
the inspection of manufacturers and how that was scheduled. 
What about 503B pharmacies? Are they scheduled, or are they 
just surprise inspections?
    Dr. Woodcock. They are domestic, so we don't need to 
schedule. We don't need to, like----
    Mr. Carter. So what you are telling me is, with the mass 
manufacturers, you schedule the inspections, but with the 503B 
pharmacies, you do that by surprise?
    Dr. Woodcock. Domestic manufacturers, we do not--we do by 
surprise, too, or we can. OK?
    Mr. Carter. That is even worse.
    Dr. Woodcock. However, foreign, because of the logistical 
problems, we can do surprise inspections and we do do 
unannounced inspections, but typically the field organization 
does announced inspection.
    Mr. Carter. OK. Let me shift real quick to counterfeit 
drugs, because that is something that is very important as 
well. What about the FDA's role in protecting Americans from 
counterfeit drugs, which we know that the cartels are producing 
this now?
    Dr. Woodcock. Well, since Congress passed the DSCSA and the 
track-and-trace provisions are being put into place, I think 
what I call the distribution chain is getting a lot safer, 
right, because we are tracking it from distribution. However, 
of course, there is still coming through mail facilities, small 
packages and so forth, and other ways of entry into the drug 
supply.
    Mr. Carter. Madam Chair, if you will indulge me for just 
another second. You know, this committee is working on 
prescription drug pricing, and one of the things that has come 
about during this discussion has been the reimportation of 
drugs. Does that concern you when we are talking about 
counterfeit drugs?
    Dr. Woodcock. Well, of course, that is one of the main 
concerns about importation, is that a lot of the people who 
order drugs on the internet now, they are getting counterfeits, 
right? Canada Drug Pharmacy, right, and they are getting it 
from who knows where, and it isn't what they think it is.
    Mr. Carter. It is not--and, you know, this committee, 
which, you know, I am just proud to be on it and proud of the 
work that we do, we are attacking it from two angles. Not only 
are we attacking it from the reimportation of drugs, but we are 
also attacking it from the technology part and with the 
internet, with the servers--not servers, but the internet 
providers making sure that they are helping us in curtailing 
that.
    Dr. Woodcock. Right.
    Mr. Carter. Good. Thank you, Madam Chair. I appreciate your 
indulgence, and I yield back.
    Ms. Eshoo. I thank the gentleman. I just want to--I think 
that this is correct, and you can say yes or no, Dr. Woodcock--
on the children's cancer drug, from 2015 to 2018, Teva had 
between 10 and 15 percent of the market. They then dropped it 
to 2 percent, and then they informed you that they were 
dropping the U.S. market and--that's correct?
    Dr. Woodcock. That is my understanding, correct.
    Ms. Eshoo. And they were dropping the U.S. market, or what 
was left of it, because they wanted to go to foreign markets 
where it was more profitable. Now, we are talking about 
lifesaving drugs. These are--it is an injectable, isn't it?
    Dr. Woodcock. Yes.
    Ms. Eshoo. Yes. OK, thank you. Now we are going to our--
well, are those that waved on, don't they--oh, Mr. Sarbanes is 
here, right. The Chair recognizes the gentleman from Maryland, 
Mr. Sarbanes, for his 5 minutes of questioning.
    Mr. Sarbanes. Thanks very much, Madam Chair. I just want to 
say as an aside, I enjoyed the clinic between Dr. Woodcock and 
Congressman Carter, which I think is probably a testament to 
the expertise and experience both of you bring to this topic. 
So thanks for bringing me up very quickly on a lot of the 
issues as I walked into the room.
    I wanted to talk with you, Dr. Woodcock, about these 
shortages. And as I am going through my district, I hear much 
more frequently than makes me comfortable from providers and 
hospitals about this difficulty they are seeing in getting 
access to products they need, because of these ongoing and 
persistent drug shortages. It is actually shocking sometimes 
when you have those conversations, because you don't expect it. 
And then to hear about it and the constraints it is placing on 
these key providers is very worrisome.
    Getting access to, in a reliable way, to critical 
medicines, is obviously imperative to ensuring that we can 
deliver high-quality and impactful healthcare to patients in 
this country. You have talked today about that impact, and we 
certainly appreciate it. And you have spoken as well or alluded 
to the benefits that advanced manufacturing technologies can 
offer in increasing the quality and safety while managing and 
mitigating those shortages. Can you discuss a little bit more 
about the Emerging Technology program and how it incentivizes 
the approval of these advanced manufacturing processes?
    Dr. Woodcock. Certainly. We have been working on advanced 
technology pharmaceutical manufacturing since the early 2000s, 
and we have tried to be--first, we tried to remove regulatory 
barriers. A number of years ago, we put together the Emerging 
Technology Team, which is a group of people from our quality 
organization who kind of provide a concierge service to people 
who are trying to bring about advanced manufacturing. And they 
help them through all points of the regulatory process. So that 
people, you know, who are used to regulating one type of 
manufacturing don't, you know, recoil from some really novel 
idea. As a result, we have approved five different applications 
that use different kinds of advanced manufacturing, and we have 
also approved a 3D-printed product, but I really think this is 
just the tip of the iceberg. And in my opening remarks, I 
talked about some of the announcements that have been made by 
firms that they are getting really big into advanced 
bioprocessing, which means they would make biological products 
this way, in a way that is much more efficient and will----
    Mr. Sarbanes. Since I have--I still have 2 minutes. Maybe 
you could just give me an example of one of those five 
applications that you approved so we can get a better sense of 
what we are talking about here.
    Dr. Woodcock. Well, we have approved actually a couple 
applications from Vertex Company, which is in Massachusetts. 
They make drugs for cystic fibrosis, and they are making their 
finished dosage form with a continuous process. This is a rare 
disease, cystic fibrosis, and this allowed them to scale up to 
their commercial product without going through many, many 
months or perhaps a year and a half of scale-up activities. 
They could just run their machine faster. So that is an example 
of advanced manufacturing that is actually operating in the 
United States.
    Mr. Sarbanes. And before you put in place the procedures 
and the processes through this program at FDA to facilitate 
approval of that kind of technology, can you give me a sense of 
what it would have taken, how long it would have taken, the 
hoops that they would have had to jump through then versus what 
you have been able to create as a different pipeline now, just 
to get a sense of that?
    Dr. Woodcock. Sure. I don't think it would have happened. 
This is a highly regulated industry who operates at risk in the 
new drug side.
    Mr. Sarbanes. Yes.
    Dr. Woodcock. And so they are not going to risk an 
important asset to some experimental technology, right? We have 
had a couple where the people have taken very high-volume new-
drug products, you know, that have been huge commercial 
successes, and switched them over to advanced manufacturing. 
Because it is more cost effective and, you know, it is better 
to do that. But in general I don't think this transformation 
would have happened, because the industry is so regulated. Now, 
the concern is that the generic drug industry, which really is 
a commodity type of product, that they don't basically have the 
resources to move to this new paradigm, and other people are 
going to have to lead the way.
    Mr. Sarbanes. Right. Thanks very much. I yield back.
    Ms. Eshoo. I thank the gentleman.
    I now would like to recognize Mr. Flores of Texas who has 
requested to wave on today to participate. Welcome, and you are 
recognized for 5 minutes for your questions.
    Mr. Flores. Thank you, Madam Chair, for allowing me to wave 
on today.
    Dr. Woodcock, you know historically that the production of 
medicines for the U.S. population has been domestically based. 
However, in recent decades, drug manufacturing has gradually 
moved out of the United States. I agree with the rest of the 
panel that this is concerning in part because of the safety 
implications that we have discussed today.
    One policy would be to change the factors that influence a 
drug company's decision to source its API from overseas. So I 
would like your thoughts and feedback on a policy where, if we 
did it, we would expand the definition of a banned foreign 
facility to include one where a class 1 or class 2 recall was 
issued for a drug that was manufactured or processed at that 
facility, and then we make the importation of a drug that was 
manufactured at such facility a prohibited action under section 
331. So would such a policy, if implemented, be an effective 
tool that FDA could use to protect patients from the risk of 
imported drugs that contain adulterated API?
    Dr. Woodcock. Well, it would be a tool we have to use very 
carefully because, as a witness in the next panel is going to 
talk about, you know, we can't cut off the drug supply in the 
United States for certain products in order to, you know, 
enforce a certain level of, what, domestic production or 
whatever. So we have to--we don't let facilities that have OAI 
that are very poor, we don't let them import drugs into the 
United States now. We are able to do that unless if they are 
making critical drugs and they are the sole source, then we 
have to figure out how we are going to get drugs--good drugs--
to the patients. So----
    Mr. Flores. I think the issue is here, to start, if we had 
a policy like that, again not to cut our nose off with respect 
to critical drugs but to begin to influence the companies that 
are offshoring production of these drugs, so that they change 
their behavior so that they don't get offshored in the first 
place. That is what I think we need to look at.
    Dr. Woodcock. I see.
    Mr. Flores. So I would like you to continue to think about 
that. Dr. Woodcock, you also--well, let me say this. This 
question is also directed at Dr. Woodcock, but Mr. Wessel, feel 
free to weigh in as we go through this. In Mr. Wessel's written 
statement, he references testimony given before the U.S.-China 
Economic and Security Review Commission concerning FDA's 
ability to address safety violations in China. That testimony 
was as follows: ``According to FDA's own data from 2013 to 
2018, out of 864 inspections of facilities in China that FDA 
investigators recommended as Official Action Indicated, FDA 
officials downgraded 78 of those. By contrast, in the same 
period, out of 11,642 inspections that the FDA investigators 
conducted in the U.S. and recommended as Official Action 
Indicated, only one inspection was downgraded at that time.'' 
It was then stated that this reflects FDA's willingness to give 
foreign plants, particularly in China, an opportunity to reform 
without sanctions.
    Dr. Woodcock, first, would you agree with that assessment?
    Dr. Woodcock. Well, I don't agree. Our most recent data 
over the past 5 years shows that domestic downgrades are 16 
percent and foreign overall are 27 percent. So there is a 
difference, but I don't agree that it is due to our willingness 
to grant foreign entities some kind of pass or something like 
that.
    Mr. Flores. OK.
    Dr. Woodcock. These are technical reasons.
    Mr. Flores. When an investigator recommends Official Action 
Indicated after inspecting a facility, what does that mean?
    Dr. Woodcock. Officially, that is--the investigator is 
simply putting observations in the 483. Those are investigator 
observations. They don't have official weight. Then we have an 
agreement on concept of operations, we call it, with the field 
organization, Office of Regulatory Affairs, on who does what, 
when, and how this process goes, and it is all very clearly 
laid out.
    Then the field organization looks at these recommendations. 
They have compliance officers who then they make an overall 
recommendation, and they get more information from the firm. 
The firm must respond within a very short period of time, to 
the observations, and talk about their corrective actions or 
explanations or so on. At that point, then all of this goes to 
the Center for Drugs Compliance Office, where we take into 
account the legal issues and everything and make a final 
determination. And we do have other authorities that we can do 
that don't necessarily require an OAI, but also ensure the 
compliance that we are seeking.
    Mr. Flores. OK. Thank you. I have an enforcement question 
that I will submit for the record, and I thank the chairman, 
and I look forward to working with you as we protect our 
Nation's drug supply. I yield back.
    Mr. Wessel. If I could just add very quickly, I think, as 
has been talked about here, that you are looking at potentially 
updating the earlier GAO study at the question of what happens 
in this, to follow up on your question, merits further 
attention, there have been instances where there have been 
questions raised by inspectors, but where there is a critical 
nature of a drug, and, therefore, whether it is limited 
sourcing, et cetera, it has been allowed in. How often that has 
happened and what the entire process is, I think, deserves 
greater attention.
    Mr. Flores. Thank you.
    Ms. Eshoo. A point very well taken. I would like to thank 
our witnesses. You have been really excellent.
    Mr. Burgess. Will the chairwoman yield for a unanimous 
consent request?
    Ms. Eshoo. Certainly.
    Mr. Burgess. I just have unanimous consent to ask that this 
report from Mylan Pharmaceuticals about their voluntary, 
nationwide recall of alprazolam tablets, and I misspoke when I 
said Ativan. It is alprazolam, the generic, and I would like to 
put that for the record and----
    Ms. Eshoo. So ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Burgess [continuing]. If that will help you get the 
information back to us.
    Ms. Eshoo. So ordered. Again, thank you to the witnesses. 
Dr. Woodcock, Commissioner Wessel, you have been outstanding. 
It won't be the last time on this. We have a lot of work to do. 
I think that the whole issue of how much, in terms of America's 
drug supply is manufactured elsewhere, and our country's 
dependence on foreign countries for such a critically needed--
our drug supply, that this just really can't stand. And we are 
going to have to work very hard to come up with the United 
States of America plan for our drug supply, and we are going to 
have to work with industry, with FDA, with the stakeholders, 
but my ultimate goal is that we have an American supply. We 
have an American supply. So thank you very much.
    And we would now like to bring up the second panel of 
witnesses. At 1 o'clock, there is going to be a secured 
briefing for the entire House of Representatives on Syria. So 
we want to move and get our witnesses to the table as quickly 
as possible.
    Are you going to stay, Susan?
    Mrs. Brooks. Yes.
    Ms. Eshoo. OK, wonderful.
    All right. Now we will hear from our second panel of 
witnesses. Thank you for your patience. But I think you must 
have found from 10 o'clock on interesting because of, you know, 
where you sit in terms of this issue. So I just want to say, 
for the record, that Teva was asked to provide a witness today 
for this panel, but they declined. And they referred my staff 
to the Association for Accessible Medicines, and I am pleased 
that they are here today to testify.
    So let me introduce, starting with Rosemary Gibson, she is 
the senior adviser at The Hastings Center and author of the 
riveting book ``China Rx.'' She is a hero to me, and I thank 
her for the time that she has spent with myself and my staff to 
walk me through so many of these issues earlier this year. 
Welcome. Thank you for agreeing to testify today.
    To Mr. Ed Price, the president and CEO of Seqens, thank you 
for being here, and to Dr. David Gaugh, the senior vice 
president for sciences and regulatory affairs at the 
Association for Accessible Medicines.
    So, with that, let's begin with Rosemary Gibson. You have 5 
minutes for your opening statement, and thank you again.

  STATEMENTS OF ROSEMARY GIBSON, SENIOR ADVISOR, THE HASTINGS 
 CENTER; EDWARD PRICE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 
  SEQENS N.A.; AND DAVID GAUGH, R.PH., SENIOR VICE PRESIDENT, 
  SCIENCES AND REGULATORY AFFAIRS, ASSOCIATION FOR ACCESSIBLE 
                           MEDICINES

                  STATEMENT OF ROSEMARY GIBSON

    Ms. Gibson. Thank you, Madam Chair, and members of the 
committee for this very important hearing on a subject of great 
import to our health security and our national security.
    I have three points. The first is that China is deeply 
embedded in our medicine supply. We have to look beyond the API 
facilities. Where does API come from? It is made from raw 
materials and chemical building blocks. We have to look at 
where they come from. My understanding is that the FDA 
typically doesn't inspect that. They are not part of GDUFA. But 
that is what is really important.
    So what role does China play in going upstream in those 
other materials to make the API? It is not a state secret that 
India is a huge generic drug maker. Its industry will collapse 
in weeks, not because of API coming from China but because it 
needs the raw material. It needs the chemical building blocks 
to make API, and China is the source.
    Second, if you ask--because I have CEOs of three different 
generic manufacturers who have more than a hundred years of 
experience, these are the guys and gals that have to go out and 
find the material to make API--and you ask them, ``Where does 
it come from, the raw material, and the chemical building 
blocks?'' and they say ``China.'' So we have to look beyond API 
to the raw material and chemical building block plants to know 
our vulnerability.
    Let me tell you the story of penicillin, which will 
illustrate this. The United States can no longer make 
penicillin anymore. And how did that happen? It just wasn't 
because of lower labor costs and, you know, less regulation. 
This is a slide that came from the European industry, and we 
can talk more in the Q&A.
    [Slides follow:]
    
    
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    Ms. Gibson. Just briefly, a handful of Chinese companies 
dumped penicillin product--not the API, the raw material--on 
the global market at below-market prices beginning in 2004. And 
they kept the price low for 4 years. During that time, all the 
U.S., European, and even Indian penicillin fermentation plants 
were driven out of business. So this is not just the market 
operating and it is cheaper--this is a deliberate strategy to 
drive out and take control of the global supply of penicillin. 
This is the playbook for other generic antibiotics: 
cephalosporins, doxycycline. Again, get control of the raw 
material.
    I ask people in the industry, do you know any antibiotic 
fermentation plants in the continental United States? We used 
to have these plants all over this country. They can't name 
one. Maybe there is one. We should know it. So we can't--we are 
dependent on China for, I would say, most, virtually all of our 
antibiotics, for that raw material and chemical--there might be 
others, but China is the dominant source globally.
    There was one--and talking about API facility, there was 
one plant in China that exploded. And there was a global 
shortage of a really important antibiotic to treat sepsis. And 
doctors had to substitute, and some of those patients got a 
terrible infection called C. diff. So we have a really serious 
problem. China is deeply embedded, and it is a very concerted 
strategy.
    This is why we have shortages. If you narrow the supply 
chain into a single country, we are going to have shortages 
just because. We wouldn't have all the oil of the world from 
one country. You would have shortages. There would be problems.
    The second thing I want to address is finished drugs. We 
will hear today that about 8 percent of our generic drugs, 
finished drugs, the pills we take, are coming from China. Let's 
make this real. These are some of the generic drugs made in 
China by Chinese companies that comprise an 8.5 market share. 
This is doxycycline for anthrax exposure. And China gained 8.5 
percent market share, if that is true, just within 10 years. 
Where are they going to be in another 10 years from now and 
another 10 years from now? Doxycycline, birth control pills, 
made in China by Chinese domestic companies. HIV-AIDS 
medicine--this was the one that had rocket fuel in it, made by 
a Chinese company. Antidepressants made in China by Chinese 
companies. Chemotherapies. Alzheimer's medicine. And we could 
go on. Diabetes medicine, epilepsy, Parkinson's.
    So China is gaining a foothold in our finished generic drug 
industry as our Western generic companies, like Teva, Sandoz, 
they are collapsing. And we are already spending--I did a 
really rough back-of-the-envelope calculation, 8.5 percent of 
generics--we are already sending $6 billion of our American 
money. Seniors, hardworking families, our military, veterans, 
our taxpayer dollars are going to support China's generic 
industry as ours is collapsing.
    I love country-of-origin legislation, but you know what, by 
the time that happens, by the time we get it done, China will 
have it. And I predict in ``China Rx: Exposing the Risk of 
America's Dependence on China for Medicine,'' which I wrote in 
the public interest--no one paid me to do it, I do it because I 
care about the health of our country--I predict that China will 
overtake India in generic drug production because China has a 
plan, and nobody else does. It is just a matter of time.
    And even you look in the Indian media, the senior 
government officials in India, and they call it a national 
security risk, their dependence on China. China can use that 
leverage against India.
    National security risks, China is rolling out its social 
credit score for businesses operating in China, including U.S. 
and other drug manufacturers. I have no doubt, in the event of 
a global pandemic or whenever China wants to, it could order 
those companies not to send medicines to the United States, to 
keep them in China.
    I have three recommendations. We really do need a point of 
accountability in this country, in our national security 
apparatus, to know who controls our medicine supply, to do what 
the FDA can't do, which is to conduct risk assessments of 
countries, to track market intelligence on what is happening. 
We need that capability. Somebody needs to be in charge. 
Because I was shocked when writing ``China Rx,'' it is nobody's 
job in the Federal Government to do that. We just cannot rely 
on the FDA, and we have to work in a whole-of-government 
approach.
    A second recommendation--this was talked about, we need to 
begin immediately--Strategic National Stockpile. I am sorry. 
This is such an important topic. We need to use our Federal 
procurement dollars differently and start buying here in the 
U.S. And we need the advanced manufacturing for generic drugs, 
not just brand name.
    And, finally, we need Consumer Reports-type testing of 
every batch of every generic drug. Valisure, the online 
pharmacy, they test. Whatever they have tested, 10 percent of 
generics have not met the standards for API or dissolving in 
the body properly or active ingredient. Sorry to go over. Thank 
you very much.
    [The prepared statement of Ms. Gibson follows:]
    
    
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    Ms. Eshoo. Thank you, Ms. Gibson, very much. I wanted you 
to be able to get as much as you can in. You waited a long time 
to do it, and it is really high-value information.
    Mr. Price, you are recognized for your 5 minutes of 
testimony, and thank you for your patience in waiting to speak 
on the second panel and being willing to testify today.

                   STATEMENT OF EDWARD PRICE

    Mr. Price. Madam Chairwoman, ranking members, and members 
of the committee, thank you very much for your invitation 
today. It is encouraging to hear that this committee is 
considering this issue a crisis and is willing to take the 
action that is appropriate.
    My name is Edward Price. I am the president and CEO of 
Seqens North America, a fully integrated pharmaceutical 
contract development and manufacturing organization. We are 
headquartered in Newburyport, Massachusetts, and before 2018, 
Seqens North America was known as PCI Synthesis, a firm I 
founded in 1998 and then subsequently sold to Seqens, which is 
a global pharmaceutical ingredients manufacturer headquartered 
in Leon, France.
    My firm is a developer and manufacturer of active 
pharmaceutical ingredients, APIs, doing it here in the United 
States. We have two sites in Massachusetts, and we have 130 
employees. As a manufacturer of APIs, we thus produce the key 
raw material for our customers, for use in drug products and 
therapeutics that may be looking to bring to market, and we 
have three main areas of activity with our organization.
    First, we develop and supply clinical API material for use 
in clinical trials for new drugs. We are a commercial 
manufacturer of active ingredients for generic products, and we 
are a commercial manufacturer of new chemical entities for 
therapies that are still covered by patent, also known as 
branded drugs.
    I think it is important that the committee understand that 
any drug that is approved by the FDA is essentially the 
combination of two things: the drug substance, which is the 
active ingredient that my organization produces, and the drug 
product, which, of course, is the vehicle in which it is 
delivered to the body, may that be the pill or cream or 
ointment or other delivery mechanism formulated with the drug 
substance.
    These two activities require vastly different skill sets, 
they require different science and technology, different 
equipment, and very different facilities. The reality of 
today's pharmaceutical supply chain, especially in the generic 
sector, is that the overwhelming majority of drug product 
manufacturers are not drug substance manufacturers, and vice 
versa. If you add in globalization and the ever-increasing 
trend of outsourcing of both of these activities by 
pharmaceutical firms, you have an ever-increasing intertwined 
global industry in many countries around the globe.
    Considering that there is nearly a billion and a half 
dollars of pharmaceutical products consumed in the United 
States each and every day, produced by thousands of fragmented 
manufacturers around the world, the competing goals of reliable 
supply, safety and high-quality products, and low cost are 
truly going to be very difficult to achieve in the long term.
    The FDA has steadily increased the bar on manufacturers 
throughout the supply chain, most notably over the last 10 
years. The industry accepts that this is the way it is and 
assumes this will be the case, and it has responded 
appropriately. Pharmaceuticals, however, is a business like any 
other. So increased oversight and increased regulation 
increases costs. And increase in costs forces business 
decisions. In the last 5 years, due to consolidation, most of 
the recognized U.S.-based independent API manufacturers have 
been acquired by multinational firms, my own firm included. The 
manufacture of smaller-volume products with modest sales 
volumes are harder to justify and to continue when you become 
part of a large, multinational firm. As an independent, you 
have more leeway on products you can develop. And I can tell 
you that, from personal experience, we decided to be acquired 
by a European manufacturer rather than an Asian manufacturer, 
for some of the issues that were brought up today.
    Ms. Eshoo. Thank God for that.
    Mr. Price. In the meantime, our clinical supply business, I 
have to tell you, is very robust and has grown steadily over 
the last few years. Due to both perceived as well as published 
quality issues with overseas suppliers, many early-stage, 
emerging pharma companies want to work here in the U.S. They 
prefer to work with entities like myself that are regularly 
inspected, they can visit easily, they can work with closely on 
very complex and technology advanced programs and manage them 
closely. This ultimately can be more efficient and outweigh any 
potential savings by working with an overseas supplier.
    The problem is that many of these overseas suppliers that 
they don't want to work with and prefer to come to me are also 
commercial suppliers supplying into the United States. This is 
a complicated situation. For the benefit of U.S. patients, we 
shouldn't broad-brush positively or negatively any particular 
country or region of the world. But pharmaceutical suppliers 
should be judged on their own merits after robust inspections, 
and only should appropriate restrictions be put in place.
    It costs millions of dollars to bring a generic drug to the 
marketplace. You have to--and the business case for doing so 
can be very complicated because a good program today could be a 
disaster 3, 4 years from now if there is multiple approvals and 
the business opportunity evaporates after you make that 
investment. Just this calendar year alone, my firm had to 
contend with EPA, OSHA, IRS, DEA, and FDA, all simultaneously 
while trying to run a business. And in a number of instances, 
we were dealing with issues brought about by activist agencies 
critical of our operations that they previously approved of or, 
in another instance, changed their interpretation of existing 
rules or simply that our number came up.
    In short, we are an overregulated industry, and it would be 
impossible to start my company today as I did in 1998. At the 
same time, I have 10 job openings I cannot fill because I can't 
find enough qualified employees to do so.
    What can the Government do? First, beyond the FDA, the 
scope and scale of regulation in my sector is unwarranted, 
overreaching, and unprecedented in the last 5 years. Common 
sense has to be brought back into the system. We need to 
encourage the FDA to further expand inspection of overseas 
facilities and making sure facilities are adhering to GNPs and 
only allow into the U.S. products from inspected facilities.
    We need to target at-risk and sectors of the industry to 
address existing shortages, have the FDA partnering with 
companies to develop and make sure there is adequate, safe and 
supply; limiting approvals, maybe giving exclusivities or 
expediting reviews; promoting STEM education so that the 
industry can have a steady stream of qualified workers here in 
the U.S. Eighty percent of my technical staff is foreign-born, 
and when H-1B visas are limited, it is very difficult for us to 
expand both our business and the activities that we do.
    And, additionally, State and Federal authorities need to 
partner with industry and the FDA to be able to allow 
facilities like mine to expand their capacity and do more 
manufacturing here, but more essentially, we need the business 
climate to be able to do so successfully. Thank you.
    [The prepared statement of Mr. Price follows:]
    
    
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    Ms. Eshoo. Thank you, Mr. Price.
    Mr. Gaugh, thank you for agreeing to testify today. You 
have your 5 minutes for your opening statement.

                    STATEMENT OF DAVID GAUGH

    Mr. Gaugh. Thank you, Chairwoman Eshoo and Ranking Member 
Burgess, and the rest of the members of the Subcommittee on 
Health. Let me start by making one point clear: Patient safety 
is the number-one priority of AAM and our member companies who 
manufacture FDA-approved generic and biosimilar medicines. FDA 
ensures generic and biosimilar medicines are just as safe and 
effective as their brand-name drug counterparts. Patients 
should know and be confident in the quality of the generic 
medicines prescribed and picked up at the pharmacy because of 
FDA's rigorous approval and inspection processes.
    And it is critical the patients take their medication as 
prescribed by their physicians. As the FDA has emphasized and 
stated here earlier this morning, not taking one's medications 
as prescribed could have the undesired effect of exacerbating a 
patient's illness and lead to worse health outcomes.
    Now, we understand why the subcommittee would be concerned 
about the recent reports that paint a distorted picture of the 
global supply chain, that it is heavily reliant on China and 
other countries of API. Our generic and biosimilars are part of 
the same global pharmaceutical supply chain as the one brand-
name drug and manufacturers use.
    And as the FDA noted earlier in Dr. Woodcock's testimony, 
the agency looks at the supply chain comprehensively, inclusive 
of all drugs on the U.S. market, such as brand-name, generic, 
over-the-counter, and compounded medicines. With this said, let 
me provide the subcommittee with AAM's analysis of the global 
location of where generic, finished-dose, and API facilities 
are located.
    We conducted this analysis of data publicly available on 
the FDA's website, and our analysis for 2020 data shows that, 
for generic API facilities, 31 percent are in the European 
Union, 31 percent in India, 17 percent in China, 13 percent in 
the U.S., and 8 percent in rest of world.
    For the finished-dose facilities, we found 40 percent in 
the United States, 24 percent in India, 17 percent in European 
Union, 8 percent in China, and 11 percent in the rest of the 
world.
    Considering this analysis of FDA's data, it is important to 
accurately depict and not overstate where generic API and FDF 
facilities are located. It is also important to note the robust 
regulatory environment that is in place today to ensure safety 
and efficacy of prescription drugs. All pharmaceuticals, 
whether brand or generic, must be manufactured in accordance 
with rigorous regulatory standards that require high levels of 
diligence and accompanying documentation.
    And when the FDA finds the deviation from the strict 
standards of production, FDA takes swift action. The FDA also 
utilizes a risk-based inspection strategy to maintain a robust 
inspection footprint around the world, and the number of 
inspections, both domestically and internationally as we heard 
earlier, have increased over the last 5 years. All this is in 
place in no small part due to the significant financial 
investment and commitment from AAM and its member companies 
through the GDUFA fees.
    GDUFA, that was passed in 2012 and reauthorized in 2017, 
includes a $4 billion commitment to the generic drug industry 
alone. The FDA uses this funding for its rigorous approval 
process, to develop and uphold manufacturing regulations, and 
to conduct inspections of manufacturing facilities globally. 
This ensures FDA-approved medicines are at a level of the 
supply chain from active pharmaceutical ingredients to the 
finished medicines sold to the consumers at the pharmacy 
counter are safe, effective, and high quality. This, combined 
with a daily commitment to quality from AAM's member companies, 
ensures the U.S. has one of the safest drug supply chains in 
the world.
    Thank you for the opportunity to testify, and I am glad to 
answer any questions now or separately after the hearing is 
over.
    [The prepared statement of Mr. Gaugh follows:]
    
    
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    Ms. Eshoo. Thank you very much.
    I now recognize myself for 5 minutes of questions. Dr. 
Gaugh, what percentage of American generic drugs are 
manufactured in the United States?
    Mr. Gaugh. The finished dose? Roughly 40 percent of 
finished dose are manufactured in the United States.
    Ms. Eshoo. So, of the world's API, how much is manufactured 
in the United States?
    Mr. Gaugh. That is a smaller number of 13 percent.
    Ms. Eshoo. Facilities, not volume.
    Mr. Gaugh. Thirteen percent facilities, yes.
    Ms. Eshoo. How many?
    Mr. Gaugh. Thirteen percent.
    Ms. Eshoo. Thirteen percent.
    Mr. Gaugh. As Dr. Woodcock mentioned this morning----
    Ms. Eshoo. Of all facilities, 13 percent in the United 
States?
    Mr. Gaugh. Yes, ma'am.
    Ms. Eshoo. That is a really small number.
    Mr. Gaugh. Yes.
    Ms. Eshoo. Now, the FDA yesterday published a report on 
drug shortages that I think really speaks to the challenges 
that we have that are facing the generic drug industry. Do you 
agree with the FDA's findings that generic companies are 
discouraged from manufacturing older prescription drugs? Yes or 
no?
    Mr. Gaugh. So discouraged in the fact of, at some point in 
time, the pricing of those----
    Ms. Eshoo. Do you agree, yes or no, with their findings? 
Did you read the report?
    Mr. Gaugh. Yes, I have.
    Ms. Eshoo. OK. Do you agree or disagree?
    Mr. Gaugh. With many parts of the reports, yes, I do.
    Ms. Eshoo. Yes, you do what? Agree?
    Mr. Gaugh. Agree with many parts of the report, yes.
    Ms. Eshoo. Do you agree that this leads to shortages?
    Mr. Gaugh. Yes, it can.
    Ms. Eshoo. Do you agree with the FDA's findings that 
generic companies may not be investing in manufacturing quality 
for older, low-priced prescription drugs?
    Mr. Gaugh. I do not.
    Ms. Eshoo. You do not agree?
    Mr. Gaugh. I do not agree.
    Ms. Eshoo. Could minimizing the investments in 
manufacturing quality lead to quality problems?
    Mr. Gaugh. It could. I am not aware.
    Ms. Eshoo. Well, if you minimize investments in 
manufacturing quality, it seems to me that that leads to 
quality problems. It kind of answers its own question, but you 
may not agree. Based on this, is it true that the generics 
industry is facing three overlapping crises: shortages, which 
is what we have talked about this morning, quality problems, 
and foreign reliance?
    Mr. Gaugh. So, to answer your question for number one, yes. 
Number two and number three are the same for the brand 
pharmaceutical companies: reliance on foreign market.
    Ms. Eshoo. Mr. Price, you said something about, you know, 
the cost for generics, and much of what you said I am really 
taken by because we have to take this into consideration in 
order to resolve the problems that we have heard about, and 
there are many of them this morning, but I am also struck by 
the following, that the generics industry gets something for 
free. They get the recipe. Once the patent expires from the 
pharmaceutical companies, you get the information, and then you 
start manufacturing those pills.
    Mr. Price. That is not entirely accurate.
    Ms. Eshoo. It is not entirely accurate. What isn't 
accurate, and what is?
    Mr. Price. Because----
    Ms. Eshoo. You don't buy it from them, you get it from 
them.
    Mr. Price. When a product becomes off-patent, what they 
have access to is the clinical data that was done, and they 
don't have to perform the clinical trials.
    Ms. Eshoo. Right.
    Mr. Price. They don't get necessarily access to the actual 
formulation of the drug. They are afforded samples. They can 
reverse engineer it, but they have to come up with their own 
formulation, which then has to go into bio-equivalence studies 
to prove that it's equivalent. My part in this whole process is 
the drug substance, the API. We have to prove chemical 
equivalence.
    Ms. Eshoo. How much of the U.S. market do you dominate in 
API?
    Mr. Price. Me personally? We are a 130-person organization. 
We are a fraction of a fraction, but, anecdotally, I can tell 
you that from 2005 to 2015, we developed about a dozen generic 
products. We have developed nothing new in the last 3 years 
because none of our generic partners can afford to help work 
with us to cover the cost of development and I will 
subsequently introduce new products.
    Ms. Eshoo. And that is based on the API?
    Mr. Price. And that is based on the API. Because we don't 
get any formula of an off-patent drug, I have to put a whole 
team together of roughly a dozen people to develop the 
chemistry, scale it up, develop all the analytics. Costs my 
organization alone upwards of a million dollars to develop an 
active ingredient.
    Ms. Eshoo. I wish we had more time with you.
    To Rosemary Gibson, I am just going to squeeze this in. We 
have heard from other witnesses' testimony today that cheaper 
labor and lower environmental standards contribute to China's 
dominance of the pharmaceutical ingredient manufacturing, but 
you disagree. Can you just very quickly explain why you 
disagree on that?
    Ms. Gibson. Sure. U.S. and Western companies are not just 
competing with other Chinese companies, they are competing with 
the Chinese government, which is willing to subsidize its 
domestic industry. It was the Chinese government that invested 
in all the infrastructure to make antibiotics for the world. 
That is the challenge that we are facing. It is not just lower 
labor costs and weaker regulatory regime, it is the Chinese 
government subsidies and, frankly, their violation of antitrust 
rules, stealing of intellectual property through all legal and 
illegal means. China is advancing to become the global pharmacy 
of the United States and for the world.
    Ms. Eshoo. This is chilling testimony, and I thank you for 
it.
    I now would like to yield to the gentlewoman from Indiana, 
Mrs. Brooks, for her questioning.
    Mrs. Brooks. Thank you, Madam Chairwoman.
    I would like to start with you, Ms. Gibson, because I am 
very interested and because of the work that we have done in 
the Biodefense Caucus, very interested in the notion of having 
a position at the National Security Council focused on 
biodefense. And it has been a recommendation of the blue ribbon 
study panel, one of their top recommendations, but I think what 
you are recommending is going even further than that in that 
you are recommending a national security review of all 
medicines, not just what we were focused on on biodefense. Who 
would you have oversee that type of position, or where would 
that--is it the ASPR? Is it DoD? Is it FDA? NSC?
    Ms. Gibson. I would have to engage with you in conversation 
to figure out what the right locus of responsibility is, but I 
can tell you what some of the functions should be. This should 
be an entity that should collect market intelligence way beyond 
what an individual private citizen does as I have done. Collect 
the market intelligence, the environmental intelligence about 
China and its plans--and this is an ongoing function--conduct 
country risk assessments, conduct supplier risk assessments, 
think about the risks of natural disasters, like there is a lot 
of pharmaceutical plants in Italy where there were earthquakes. 
What about natural disasters that could hit China? This is the 
type of ongoing risk assessment function--tracking global 
supply and demand. Just not look now, but where are we headed 
in the future, where are we headed in the future with heparin 
as China grows its healthcare industry, and we do have to move 
beyond pigs because there is just only so many pigs, so those 
are some of the functions.
    Mrs. Brooks. And so, while we might not have that position 
currently, is there an entity in the world that does that now?
    Ms. Gibson. I am not aware of it, no.
    Mrs. Brooks. And would you--would all medicines essentially 
be subject to the review that you would like to see?
    Ms. Gibson. I would like to see this done for the medicines 
that are essential for the business continuity of our 
healthcare system, that are essential for life, that if we 
don't have, our society would collapse.
    Mrs. Brooks. And have you studied, yes, what our Department 
of Defense does relative to this issue?
    Ms. Gibson. Well, I have recommended a whole-of-government 
review with the DoD just because they are very proactive. They 
have a real vested interest just like they did with the review 
of their defense industrial base, which was really stellar. 
They had a terrific methodology for how to do that, a 
framework. That is the kind of framework we need to assess our 
vulnerability when it comes to China for our medicine supply.
    Mrs. Brooks. Thank you. Switching gears briefly, Mr. Price, 
thank you so much. You are one of the very few API producers in 
the country, correct? There are----
    Mr. Price. Just a handful.
    Mrs. Brooks. What is a handful, roughly? About how many 
really that you are aware of, your competitors?
    Mr. Price. Dozens, probably number in the dozens, and, 
frankly, most of my competitors have disappeared over the last 
4 or 5 years as the industry has gone through a tremendous 
amount of consolidation.
    Mrs. Brooks. And I know you have certainly talked about all 
of the agency regulations that are involved, but yet I am also 
concerned what you were just talking about relative to the 
workforce. You are a relatively small company, but yet you have 
10 openings, and can you talk about what are those--what are 
the kinds of jobs that you have openings for, because we keep 
talking about the workforce issues, and this is highly 
technical, correct? And so can you just share with us a little 
bit about that workforce issue, because, if we are going to try 
to invest and try and get more government investment in some 
way or incentivizing companies to invest in this, it still 
doesn't mean that they have the people to do the work.
    Mr. Price. It is a significant threat, and it is a 
significant issue that we deal with on a daily basis. As a 
manufacturer and a technical organization, our workforce runs 
the gamut from high-school-educated working on the plant floor 
all the way to Ph.D.s with multiple degrees and very 
sophisticated science, as well as business people, financial 
people. We really are a broad cross section of the talents that 
you need in the workforce, and it is a significant issue across 
the board for us to find people at all levels. It is not any 
one in particular.
    Mrs. Brooks. I have one last completely unrelated question. 
The types of raw materials that you focus on, are these raw 
materials found only in China?
    Mr. Price. I would say that better than 90 percent of the 
key raw materials that we purchase and use to synthesize our 
APIs come either from India or China.
    Mrs. Brooks. So the actual raw material comes from India as 
well?
    Mr. Price. The building blocks that Ms. Gibson was 
referring to, the raw materials, there is almost no fine 
chemical manufacturing left in the United States.
    Mrs. Brooks. But at some point----
    Mr. Price. I actually began my career in the fine chemicals 
industry but migrated into pharmaceuticals because the fine 
chemical industry was disappearing.
    Mrs. Brooks. But are the actual raw materials for--and 
maybe I don't know the terms well enough--at one point, were 
they in the United States?
    Mr. Price. Yes. Oh, sure, absolutely.
    Mrs. Brooks. OK. Thank you. I yield back.
    Ms. Eshoo. Recognize the gentlewoman from California, Ms. 
Matsui.
    Ms. Matsui. Thank you very much, Madam Chair, and I find 
this all very fascinating as we get into this.
    When you are a generic manufacturer, you depend on reliable 
access to APIs to produce affordable treatment options for 
patients. I understand that, between navigating global 
regulations and various delivery systems, sourcing ingredients 
can be a complicated, time-consuming process for generic 
manufacturers looking to quickly scale up production.
    Dr. Gaugh, at what point in the generic drug application 
process does a prospective generic drug developer need to scale 
up its manufacturing to prepare for a commercial launch?
    Mr. Gaugh. So you first go through the development stage 
for that product. That is done on what we call bench 
development. Once bench development is complete, it goes into 
the manufacturing floor and developed in the manufacturing 
floor. So it is all done prior to the application being 
submitted to the FDA.
    Ms. Matsui. OK. Now, after obtaining approval, what steps 
do generic drug developers need to take to ensure that they 
will be able to meet the demand for their product?
    Mr. Gaugh. So that is portfolio management, if you will, 
and in the brand world, you know that your product is 100 
percent of the market and you know what that is going to look 
like. In the generic world, you look at how many applications 
have been approved by the FDA, and then you start the 
contracting process with a third-party contractor. It is very 
difficult to tell what your market share is going to be from 
time to time.
    Ms. Matsui. OK, but this is a certain time frame that you 
sort of do this in, right? I mean, I am just looking at this as 
a scale-up process.
    Mr. Gaugh. So, in general, I would say that when a company 
looks at a product, they usually know who their competitors are 
going to be in the market, and so they are going to develop 
their market-share analysis based on that competitors. If it is 
two or three or four, that would give you one percentage to 
look for for production. If it is 13 or 14, which you would 
find in the oral solid market, that would give you a different 
percentage. So that number can be anywhere from 10 percent to 
40 percent that you might think you would capture the market 
share, or if you are the only product, 180-day exclusivity, you 
know you have potentially most of the 100 percent.
    Ms. Matsui. OK. A concern I have is how downward pressure 
on prices in the drug supply chain may influence generic drug 
makers to exclusively rely on cheaper foreign API 
manufacturers.
    Dr. Gaugh, what tradeoffs, if any, do you see generic 
manufacturers making between quality and price when it comes to 
sourcing APIs to meet production goals?
    Mr. Gaugh. I don't see any difference, quality and price. 
We don't cut back quality to get a better price. Most of the 
reasons going to foreign countries is because it is not 
available, as we have already said, in the United States. If 
you look at API manufacturers, our numbers show that there are 
105 generic API manufacturers in the United States. If you look 
at Dr. Woodcock's numbers, that would tell you there is 
probably roughly 210, 215 API manufacturers in the United 
States.
    Companies that produce products, specifically generics, 
have several hundred products in their portfolio. They don't 
have the capability of producing the API themselves, and, in 
general, you can't get the same--you can't get APIs from the 
same manufacturer. There is different technology, different 
chemistry, different expertise, different manufacturing 
facilities, and therefore you have to go to the company that 
will make that and can make that for you. Many times you go to 
Europe, foreign, China, India, et cetera, yes.
    Ms. Matsui. Well, how do we--what can we do to incentivize 
the use of high-quality products, particularly for generic 
manufacturers limited by smaller operating budgets? There is--
--
    Mr. Gaugh. Again, I don't see that budgets and quality have 
anything to do with each other. We still produce high quality, 
and the FDA guarantees that we will produce high-quality 
products. And we are ourselves as companies all have quality 
systems. Dr. Woodcock in the drug shortage document that she 
put out yesterday--or the FDA put out yesterday--talked about 
mature, quality systems and having a potential rating system 
around those. She wasn't talking about the general approval of 
inspectional facilities, she is talking about steps above and 
beyond.
    Ms. Matsui. Do you have a comment, Ms. Gibson?
    Ms. Gibson. When I read what is going on in some of the 
plants in China, the one that sent the valsartan, this is a 
company that knowingly sent a substandard product to the United 
States. It reprocessed a batch rather than doing a root cause 
analysis to find out what was wrong. So it knowingly sent a 
really important medicine to this country with a genotoxic 
impurity. This is unthinkable from what we used to do 20, 30 
years ago.
    Ms. Matsui. OK. Thank you very much.
    And I yield back.
    Ms. Eshoo. I thank the gentlewoman for her examination.
    Pleasure to recognize Mr. Guthrie from Kentucky for his 5 
minutes of questioning.
    Mr. Guthrie. Mr. Gaugh--actually, I wanted to start--I am 
not clarifying Mrs. Brooks' question because she was pretty 
clear, but it piqued something in my mind. And I don't know the 
ingredients--I mean, the raw ingredients. You said fine 
chemicals, such as Birmingham, Alabama, existed as a steel town 
because it is set on a mountain of iron ore, and so it made 
sense to make iron--or steel--in Birmingham. I guess the 
question that piqued my interests are the raw materials for 
pharmaceuticals in China or India, or is it only we are sending 
the raw materials through China and India? Because what you are 
saying is that it is a manufacturing issue. They manufacture 
the ingredients, therefore, that you use in your process? It is 
not like they have a natural advantage.
    Mr. Price. I think you need to appreciate that an active 
pharmaceutical ingredient is the result of multisteps of 
chemistry, so you have to start with something, and you can't 
start with water and tree bark and dirt. You have got to start 
with some organic molecules that you can build upon, so those 
are the raw materials.
    Mr. Guthrie. Is what you are talking about as the fine 
chemical?
    Mr. Price. That is what I am talking about.
    Mr. Guthrie. And not much of that is done here?
    Mr. Price. Not much of that. We resource all over the 
world, but some of the more advanced molecules which we then 
take as raw materials to make the final active ingredient are 
in many cases sourced in India and China. And we suffered 
severe shortages, even for some of our commercial products, 
when the Chinese started to shut down facilities over the last 
couple of years because of environmental issues and other 
regulatory concerns that they had over in China.
    Mr. Guthrie. So there is really not a mined product or 
anything that is the beginning of your process? It is the 
molecule itself as the beginning----
    Mr. Price. Exactly.
    Mr. Guthrie. Mr. Gaugh, thanks for being here today. So I 
am just kind of getting back to the continuous manufacturing 
issues that Chair Pallone and I have talked about. I am just 
trying to understand--I used to be in manufacturing--so the 
root cause analysis and so forth. So when a problem occurs and 
the manufacturer is required to notify FDA, so you say, ``Here 
is the problem''--this is one to the level of notification-- 
how does that--could you walk me through that process, like 
what is the timeline, and what is your root cause analysis you 
are required to submit to FDA for the resolution?
    Mr. Gaugh. So that is a depends question.
    Mr. Guthrie. So we are not clear, or the FDA is not clear?
    Mr. Gaugh. No. To answer your question, it depends on the 
product and the situation and what was the quality issue that 
occurred. Not all are equal, so there wouldn't be one----
    Mr. Guthrie. Just any that rises to this----
    Mr. Gaugh. There is a bracketed process, yes, that each 
company goes through once a quality issue is uncovered, and 
they go through that issue, work through that, and then send a 
report in to the FDA. That could take days, or it could take 
weeks to accomplish. It depends on the situation.
    Mr. Guthrie. And in the meantime, what, the products are 
produced? The products--depends on the level----
    Mr. Gaugh. Again, it depends on the level of what the issue 
is that was found. It could stop production immediately because 
of that, or production could continue while the investigation 
is ongoing. The companies work with the FDA through that.
    Mr. Guthrie. OK. What role do you think the AAM companies 
have in securing the global supply chain?
    Mr. Gaugh. I am sorry. Say again?
    Mr. Guthrie. What role do the AAM companies have in 
securing the global supply chain?
    Mr. Gaugh. So each company secures its own products for its 
production, and again, if you are looking at the large 
manufacturers of generics, there is usually somewhere in the 
realm of 500 to 1,000 products in their portfolio. Smaller 
companies could be one to five. In fact, when we did GDUFA, we 
based that on small, medium, and large companies, but they all 
sourced their own.
    Mr. Guthrie. So, just on generics, I thought since you are 
here, I would ask you just on generics in general. A lot of 
times I hear from people who are concerned about their health 
insurance or what is being provided to them, and you will say, 
``Well, this costs X amount of dollars, but I can take the 
generic if that is what is on my formulary.'' But if I take the 
generic, it is my understanding is a generic--a chemical 
generic is the same as a branded generic?
    Mr. Gaugh. That is correct.
    Mr. Guthrie. But people will say, ``This one doesn't work 
for me, but I still have to pay out of pocket for the other,'' 
but generics are essentially the same----
    Mr. Gaugh. Yes.
    Mr. Guthrie [continuing]. In the chemical part? Do you want 
to talk about--you must hear that too?
    Mr. Gaugh. As a patient and a pharmacist, that is a very 
true statement. So not every human, or no human, reacts the 
same as a human sitting next to them when they ingest a drug. 
So there is going to be a difference in absorption. There is 
going to be a difference in the way----
    Mr. Guthrie. But they should react to the same human, if 
they have this drug that is branded and this drug that is not, 
if it is identical? The same human should have the same 
reaction?
    Mr. Gaugh. Except that the API is identical, yes, but the 
excipients used to----
    Mr. Guthrie. So there is a difference?
    Mr. Gaugh [continuing]. That product can be different and 
can make a difference.
    Mr. Guthrie. OK. That is fair. The generics supposedly--so 
I learned something here today as well, so thank you. I 
appreciate it.
    And I will yield back.
    Ms. Eshoo. The gentleman yields back.
    Pleasure to recognize Mr. Schrader of Oregon for his 5 
minutes.
    Mr. Schrader. Thank you, Madam Chair.
    I apologize to the panel for not being here for your 
remarks. I was in another hearing, but very interested in this 
area.
    I read, Ms. Gibson, I read your book and found it very 
compelling, very disturbing; hence the earlier line of 
questioning about what has FDA done, so to speak, since then. 
They have obviously made some improvements, tried to broaden 
their inspection overseas. There is apparently a manpower 
issue, and you detail in your comments, you know, other 
recommendations, what would be the top two or so that FDA 
should pursue that they haven't done quite at this point in 
time that we have been most helpful?
    Ms. Gibson. With our medicine supply chain being so complex 
and so many challenges, I think--I have come to the conclusion 
it is almost out of the hand of the FDA to really ensure that 
every pill from every manufacturer is what it should be. That 
is why I recommend, and this isn't for the FDA, but we are 
beginning to see a private entity, this company in New Haven, 
that is beginning to test before it sells it as an online 
pharmacy, they are testing every generic product before it 
sells it, three batches. And they found that more than 10 
percent of what they tested did not meet standard. The API 
wasn't what it was supposed to be.
    The disillusion in the body--so say if you have an 
extended-release pill--there was one in epilepsy medicine, 
which is really important. You have to have that consistently 
in the body to prevent seizures, but if it is not really 
extended release, that is a huge risk to patients.
    Mr. Schrader. Do you think that is beyond FDA's ability to 
test for those sort of things?
    Ms. Gibson. I think that we need a market-based approach in 
real time, and I would love to see--and I would love to see 
companies crop up, every pharmacy that sells it says ``we have 
tested everything independently'' and even have third-party 
verification, because I think we really have to restore trust 
in our medicines--I think there is a crisis of confidence in 
our medicines among the American people and physicians.
    Mr. Schrader. So that gets to your comment, I think, that 
we need some central repository where at least different 
people, different organizations could bring to the attention of 
the FDA and others where there are serious problems and be able 
to move beyond there.
    Ms. Gibson. That is right. We need a national security 
apparatus attention here at a very high level, which is really 
outside the purview of what FDA's mission is. This is, again, 
from a national security perspective, what is going on in 
China, the trends, and what we are facing.
    Mr. Schrader. Again, I missed some of the hearing and I 
apologize, but what--is there a room then for the United States 
either to incentivize some of the API or generic manufacturing 
that Mr. Price and others are trying to do, or things we should 
do to go after China for the marketplace manipulation that they 
are doing right now?
    Ms. Gibson. I think we got to start rebuilding our own 
manufacturing capability here. I visited a biotech place at 
Virginia Commonwealth University a couple months ago, and they 
have an incredible capability. They want to start tomorrow 
making, you know, the API using continuous manufacturing, 
stockpile that, and then there is private--Civica Rx is out 
there. They said, ``If these folks can make the API, we will 
buy it, and we will set up a manufacturing plant next door to 
make the finished drug.''
    The challenge and the limitation is what we have talked 
about. These folks need a little capital investment to 
refurbish an existing plant in Petersburg, Virginia. We got a 
lot of, you know, plants that are lying fallow. A little bit of 
money to refurbish that, and once we begin to use continuous 
manufacturing, I am told that you can make it at 40 cents less 
than our traditional way of manufacturing. Once we make the 
investment, we can actually make them cheaper than what we are 
making them now.
    Mr. Schrader. Mr. Price, do you have a comment on 
continuous manufacturing?
    Mr. Price. Yes, I do. I think continuous manufacturing is 
extremely exciting and extremely promising. However, the 
testimony by Ms. Woodcock from the FDA, whenever she spoke 
about continuous manufacturing, she mentioned the name Sanofi 
and Genzyme and Vertex, which are all multibillion dollar 
companies, OK?
    Mr. Schrader. OK.
    Mr. Price. So to think that continuous manufacturing is 
going to solve the issue of a small volume oncology cancer drug 
that is an older product that is in short supply, I think, is 
wishful thinking.
    Mr. Schrader. I just think there is--I am sorry to 
interrupt--final comment is this Civica Rx came to visit me. It 
is a nonprofit made up of a variety of folks around the country 
that see the shortage that Mr. Price is trying to address and 
be very important, I think, for the United States Government to 
step in and help small enterprises like Mr. Price's and others 
to incentivize that production, the continuous manufacturing so 
it's nimble. It is not just one drug, it is drugs that are 
needed at a given point in time in different regions of our 
country. So something for us to pursue, Madam Chair. Thank you 
very much.
    Ms. Eshoo. I thank the gentleman.
    This is all about our taking a decision that we are going 
to make this a top priority in our country, that we are going 
to bring this back to the United States of America, that we can 
and how we work with industry to make sure that the resources 
are there, that the underlying resources relative to developing 
this through university system, the advanced manufacturing. We 
have people that are here today relative to Zantac and the 
assurance that that was actually--it was their work that 
brought about the attention of the FDA and its efficacy, so 
these are things we can do, but we have to take a decision that 
it is a top priority for our country and develop a plan and 
stick to it. So let's see, who's next? Dr. Burgess?
    Mr. Burgess. Go to Mr. Griffith. Morgan's been sitting here 
quite a while.
    Ms. Eshoo. Oh, he has been waiting. You don't have to be 
waived on, you are a member of the committee. There was one 
more Member--who was it that didn't come back that had waived? 
Anyway, Mr. Griffith, you are recognized. Thank you for your 
patience.
    Mr. Griffith. Thank you very much. And I would just say, 
based on some earlier testimony, Mr. Gaugh--is that correct? I 
am sorry, I was in another committee hearing earlier when you 
were introduced.
    Mr. Gaugh. Gaugh.
    Mr. Griffith. Gaugh. When you were talking about different 
people reacting differently, I am one of those people, and some 
of my generics work just fine, but I take Synthroid. And I 
tried going to the generic, just because I was trying to figure 
out ways to save money. Don't think it would have saved me any 
money, but the insurance company, if we all work together, we 
can make a difference. Oh, my goodness. I had a terrible time 
with the generic, and I went into my pharmacist and said, ``I 
don't care what it costs. Give me the brand name. This is 
driving me nuts.''
    So everybody does react a little bit differently, and 
sometimes the generics are fabulous, and many--I use many 
generics for that reason. Sometimes they just don't work with 
your body chemistry because of the excipients? Did I say that 
correctly?
    Mr. Gaugh. Correct.
    Mr. Griffith. So we have to try and work on that.
    Ms. Gibson, I found your testimony very interesting, and I 
am just curious, what makes pig guts the rare earth of medical 
care?
    Ms. Gibson. So I was trying to find a way to communicate 
how dependent we are on a single country for a really important 
component, and there has been a lot in the media about rare 
earths in our consumer products. You can't make your iPhones 
and hybrid cars and wind turbines. So I was trying to reach out 
to sort of a broader constituency to understand that really our 
medicines, they are like the ``rare earths,'' in quotes, for 
the continuity of our healthcare system. If we don't have them, 
it will shut down.
    Mr. Griffith. And you were specifically referencing heparin 
and pigs and so forth and raised concern about Smithfield 
having been acquired, I think back in 2013, by a Chinese 
company, but the pigs are still, even though not part of my 
Virginia, they are still Virginia and North Carolina pigs 
predominantly. And so I am just wondering, was your concern 
more about the way that a Chinese company could affect the 
production amounts of the distribution locations? It is really 
not about the pigs being grown in Virginia or North Carolina, 
or the pig guts raised that are produced there?
    Ms. Gibson. It is about where those pig intestines that are 
the raw material for heparin, where they are going. Do we have 
any information? Smithfield is a private company. Are they 
willing to tell Congress and our national security apparatus 
where those pig guts are going? Are they going to China to make 
for that population? Are they going to Europe? Or are they 
staying here in the United States? I understand we slaughter 15 
million pigs a year in this country, and if there is a shortage 
of heparin because of what is happening in China with the pigs, 
that would be good information to know so we can ensure a 
supply of heparin here.
    Mr. Griffith. All right. And I do appreciate that.
    I mean, Smithfield tells me that they are continuing to 
invest in expansion, and it is a beneficial practice even when 
that process occurs in the United States, but what you are 
saying is, is that you want more of that staying here in the 
United States and being able to track it. And how do we get 
other pork producers in the United States to allow their rare-
earth pig guts to be used in the United States for the 
production of medicine here?
    Ms. Gibson. To create demand for API in the United States, 
and that will happen--we are facing already--a shortage of 
heparin is going to be really severe, and then prices go up 
when there are shortages. So that could incent certain 
companies here in the United States from wanting to make 
heparin closer to home and not rely on China, but we have to 
think of this in the long term. That is why we need a national 
security long-term view here, but that is one thing that could 
be done to incent some manufacturing here.
    Mr. Griffith. Now, let me sidestep just a little bit. So 
heparin is made from the pig guts, and I don't know if it 
creates a reaction, but I have read reports that say 20 percent 
of the American population in the southeast United States now 
has some sensitivity to the alpha-gal protein found in all 
mammals, including pigs. Is there any research going on on 
that, and is that a part of the problem, if there is not 
research here--this is not a problem that China is facing. It 
is the southeast United States that is facing the largest 
outbreak of this alpha-gal condition.
    Ms. Gibson. I am sure there is some fine experts that we 
can identify to answer that important question.
    Mr. Griffith. I understand. I appreciate it.
    And, Madam Chair, I yield back.
    Ms. Eshoo. The gentleman yields back.
    Now, I would like to recognize the ranking member of the 
subcommittee, Dr. Burgess, for his questioning.
    Mr. Burgess. Thank you, and thanks for the recognition.
    Ms. Gibson, I haven't read all of your book, but I have 
read some of it. I got to the part where you described an 
indolent Congress in 2008. Well, we were in the minority then, 
so if there was indolence, it had to be on the part of the 
other side of the dais.
    Ms. Eshoo. Thank you, Dr. Burgess.
    Mr. Burgess. You are welcome. Let me just make sure I 
understood your answer or your discussion with Mr. Griffith. On 
the farm that is raising the pigs in this country, were you 
leading us in the direction that, since that company is now 
owned by Chinese interests, that they might just discard this 
raw material so that it didn't interfere with the API product 
stream coming from China?
    Ms. Gibson. I think the question is, do we know where it is 
going? Is it going to support heparin production in China, or 
is it going to support heparin production for the United States 
and for the hospitals in our country?
    Mr. Burgess. Well, that obviously is the critical question, 
and I will--I think it was Dr. Woodcock when we had the hearing 
in 2008 made the observation, well, what are we going to do? 
Just go without heparin, and as a practicing physician, I was 
like, yikes, that would not be a good day. We do have some 
other things we can do as far as anticoagulation, but heparin 
is the gold standard.
    You state in your written testimony that the current 
approach of hammering down on manufacturers on price is the 
root cause of contaminated and lethal drugs in the legitimate 
supply chain and rationing and shortages of lifesaving 
medicines. Do I have that substantially correct?
    Ms. Gibson. That is right.
    Mr. Burgess. And I don't know if you are aware, but 2 weeks 
ago, we had a lengthy markup in this committee. Everyone is 
concerned about the cost of pharmaceuticals. So some of the 
tools that were proposed to use to control the price of 
pharmaceuticals was a fairly significant excise tax. What kind 
of effect would that have, if your concern is the hammering 
down on manufacturers?
    Ms. Gibson. There is a difference between the price that is 
paid to manufacturers and the price that you and I would pay 
when we go to the drugstore to get a medicine. So I asked 
someone recently, what does a bottle of pills cost--how much 
would a manufacturer be paid for a bottle of 30 pills? They 
said maybe a penny a pill. What I think is very important for 
us to understand is transparency and the difference. Where does 
all that money go from what the manufacturers pay to the price 
that we pay when we go to pick it up at the drugstore? There is 
no R&D. There is no marketing. I think transparency for us to 
understand that differential will help us know whether we are 
actually getting value from the money that we are spending.
    Mr. Burgess. Well, on this, I think if I understood 
correctly, was the administration's position with proposing the 
rebate rule so that there would be more transparency on the 
dollars that go into the purchase of a compound and how they 
are distributed throughout the supply chain. For whatever 
reason, Congressional Budget Office considerations, completion 
of that rule or the promulgation of that rule did not occur 
because of the concern that removal of the rebate or visibility 
transparency of that rebate would somehow in turn drive up 
prices in other parts of that ecosystem, insurance premiums or 
hospital charges.
    I am not sure about that. I don't think that is the case, 
but in any event, that was the concern voiced by the 
Congressional Budget Office, and the administration backed off 
from promulgating the rule because it had some other budgetary 
implications if they had gone forward and then had to withdraw 
it, but it is a concern to me that people don't know. And for 
years, I had a health savings account where I had a very high 
deductible, and I go into the pharmacy and I just pay the list 
price. Kind of a shock to me later on to learn that, at some 
point along the line, there is a rebate paid, but I don't get 
to participate in that.
    In fact, I had an amendment during that lengthy markup 2 
weeks ago that two of the things that have really driven this 
discussion on pricing of pharmaceuticals has been the cost of 
the EpiPen and the cost of insulin. So I recommended that, for 
insulin, in Medicare and Medicaid and CHIP, that that rebate 
just be given to the patient at the point of sale. 
Unfortunately, that was not accepted, but I think it is an idea 
that we should still continue to pursue, because relief for the 
consumer is really where we were headed.
    I am concerned about, yes, we can all make the argument 
that prices are just too high for pharmaceuticals, but on the 
other hand, as we hammer down--your words--as we hammer down on 
the manufacturers, there is going to be, whether you want it or 
not, there is going to be an effect, and one of those effects 
may be shortages or some other problem. So, anyway, I 
appreciate the indulgence.
    I will yield back.
    Ms. Eshoo. I thank the ranking member, and he yields back.
    I can't help but observe that, when it comes to our 
military and what we need to defend our country, we don't 
outsource it to China or any other country. We don't have our 
jets, we don't have our carrier ships, our submarines, we don't 
outsource that, and we don't for a very good reason. We depend 
on American ingenuity, American IP, American manufacturing for 
our own national security, and I believe that the testimony 
that we have had today, underlying it all is that the drug 
supply for the United States for the people of our country is 
part of the security of our country.
    So we have, I think, really been blessed by the testimony 
we have received today from experts from the first panel, the 
second panel. We have big decisions to make, and they are 
political decisions. We have to collectively make a decision to 
develop a plan that is for the security of the United States of 
America and its people. So I want to thank this panel.
    Ms. Gibson, thank you for your extraordinary advocacy, your 
thinking, your writing, your research. You have been a great 
asset to the committee and to myself and my staff, and I thank 
you.
    Mr. Price, thank you. I would like to see a whole new U.S. 
market for API, and I will consider it, you know, a collective 
success of this committee to develop that market. We want to 
work with you on it.
    Mr. Gaugh, thank you very much for your testimony.
    And, with that, I would like to ask for unanimous consent 
to place the following documents for the record: the statement 
from the U.S. Pharmacopeia Convention, the letter from 
Valisure, and a statement from the Premier Inc. Healthcare 
Alliance.
    Hearing no objections, so ordered.
    [The information appears at the conclusion of the hearing.]
    Ms. Eshoo. And the Health Subcommittee will now adjourn. 
Thank you.
    [Whereupon, at 1:43 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    
    
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