[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
EXAMINING CHRONIC DRUG
SHORTAGES IN THE UNITED STATES
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HEARING
BEFORE THE
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 6, 2024
__________
Serial No. 118-FC19
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Printed for the use of the Committee on Ways and Means
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
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U.S. GOVERNMENT PUBLISHING OFFICE
55-926 WASHINGTON : 2025
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COMMITTEE ON WAYS AND MEANS
JASON SMITH, Missouri, Chairman
VERN BUCHANAN, Florida RICHARD E. NEAL, Massachusetts
ADRIAN SMITH, Nebraska LLOYD DOGGETT, Texas
MIKE KELLY, Pennsylvania MIKE THOMPSON, California
DAVID SCHWEIKERT, Arizona JOHN B. LARSON, Connecticut
DARIN LaHOOD, Illinois EARL BLUMENAUER, Oregon
BRAD WENSTRUP, Ohio BILL PASCRELL, Jr., New Jersey
JODEY ARRINGTON, Texas DANNY DAVIS, Illinois
DREW FERGUSON, Georgia LINDA SANCHEZ, California
RON ESTES, Kansas TERRI SEWELL, Alabama
LLOYD SMUCKER, Pennsylvania SUZAN DelBENE, Washington
KEVIN HERN, Oklahoma JUDY CHU, California
CAROL MILLER, West Virginia GWEN MOORE, Wisconsin
GREG MURPHY, North Carolina DAN KILDEE, Michigan
DAVID KUSTOFF, Tennessee DON BEYER, Virginia
BRIAN FITZPATRICK, Pennsylvania DWIGHT EVANS, Pennsylvania
GREG STEUBE, Florida BRAD SCHNEIDER, Illinois
CLAUDIA TENNEY, New York JIMMY PANETTA, California
MICHELLE FISCHBACH, Minnesota JIMMY GOMEZ, California
BLAKE MOORE, Utah
MICHELLE STEEL, California
BETH VAN DUYNE, Texas
RANDY FEENSTRA, Iowa
NICOLE MALLIOTAKIS, New York
MIKE CAREY, Ohio
Mark Roman, Staff Director
Brandon Casey, Minority Chief Counsel
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C O N T E N T S
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OPENING STATEMENTS
Page
Hon. Jason Smith, Missouri, Chairman............................. 1
Hon. Richard Neal, Massachusetts, Ranking Member................. 2
Advisory of February 6, 2024 announcing the hearing.............. V
WITNESSES
Dr. Stephen Schleicher, MD, MBA, Chief Medical Officer, Tennessee
Oncology....................................................... 4
Eugene Cavacini, Senior Vice President and Chief Operating
Officer, McKesson Pharmaceutical Solutions & Services (PSaS)... 13
Alan Coukell, BSc, Senior Vice President for Public Policy,
Civica Rx...................................................... 21
Dr. Stephen Schondelmeyer, PharmD, PhD, Director of the PRIME
Institute, University of Minnesota's College of Pharmacy....... 32
Dr. Julie Gralow, MD, Chief Medical Officer and Executive Vice
President, ASCO................................................ 45
Dr. Jeromie Ballreich, PhD Associate Research Professor, Johns
Hopkins Bloomberg School of Public Health...................... 52
MEMBER QUESTIONS FOR THE RECORD
Eugene Cavacini, Senior Vice President and Chief Operating
Officer, McKesson Pharmaceutical Solutions & Services (PSaS)... 261
Allan Coukell, BSc, Senior Vice President for Public Policy,
Civica Rx...................................................... 263
PUBLIC SUBMISSIONS FOR THE RECORD
Public Submissions............................................... 267
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EXAMINING CHRONIC DRUG SHORTAGES IN THE UNITED STATES
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TUESDAY, FEBRUARY 6, 2024
House of Representatives,
Committee on Ways and Means,
Washington, DC.
The committee met, pursuant to call, at 10:04 a.m., in Room
1100, Longworth House Office Building, Hon. Jason T. Smith
[chairman of the committee] presiding.
Chairman SMITH. The committee will come to order.
Before we begin, I would like to first recognize a member
who is returning to the Ways and Means Committee, Mr. Jimmy
Gomez.
I am sure that, in your time away, you have been reinforced
of how this is the best committee in Congress, and so we are
glad to have you back.
[Applause.]
Chairman SMITH. Today in the United States, there are over
250 medicines in short supply. These drugs treat everything
from blood clots to asthma. Especially worrisome, some of these
medications include those needed to treat and beat multiple
kinds of cancer. Most of these are low-cost generics that make
a real difference for patients struggling to pay for both
medication and other health care expenses. Active drug
shortages are at the highest levels since 2014. Over half of
the medicines currently in short supply have been limited in
availability for at least two years.
Patients are living in fear that they may be unable to get
the treatments they need when they need them. When a patient's
drug is out of stock, they don't just worry about access, they
also worry about how they will afford their medicine. It is
simple supply and demand that drives up prices. If you can get
medication in shortage, you pay, on average, 15 percent more.
Patients forced to switch to alternative therapies may be
paying as much as three times more than their original
medication.
While some temporary shortages might be caused by natural
disasters or sharp demand increases, poor manufacturing quality
is the leading driver of chronic shortages, and it is the most
preventable. Government policies and consolidation in the
supply chain forced manufacturers to close drug production
because they can't make the math work.
Medicare's reimbursement system ensures affordability and
access for seniors but should be reexamined to avoid making the
situation worse. Everyone--drug manufacturers, wholesalers,
group purchasing organizations, and medical providers--should
be working together to ensure ready access and availability of
medicine. We aim to learn more today about how these actors can
prevent shortages and whether our Federal regulations support
that goal.
Another concern of our supply chain is that many of the
medications available to Americans are sourced from countries
outside America. Over 80 percent of the essential ingredients
used in medications taken by Americans are made in a foreign
country.
China in particular is a major supplier of pharmaceuticals
and drug ingredients to the United States. In 2021, China was
the leading source of imported pharmaceutical products by
weight to the United States. This, as with other aspects of our
medical supply chain, can pose a serious risk to the American
people if access to quality medications is subject to the whims
of a hostile foreign power. Americans should not have to rely
on adversarial nations to stock their medicine cabinets.
Fortunately, there are some innovative examples of private
sector and local government solutions. One of our witnesses
represents a private business who uses long-term contracts to
support quality manufacturing. My good friend and former Ways
and Means Committee member, Governor Kristi Noem, invested
state funds in buffer stocks for South Dakota. But there is not
a one-size-fits-all solution, and many small rural hospitals
and communities may have a harder time procuring this
medication for their patients or investing in long-term
solutions.
Washington has tried and failed to address drug shortages
before. It is clear to me that we need to incentivize the
development of higher-quality drugs and improve purchasing
dynamics without relying on mandates from Washington. Our
solutions should balance affordability with accessibility. We
should be using health care, tax, and trade policy to make more
medicine and their ingredients here in the United States.
Congress should support access to the lifesaving therapies we
do have and ensure America realizes the promise of innovative
future cures to come.
I hope today's hearing can help us zero in on bipartisan
solutions that will get more and better medications into the
hands of the patients who need them.
Chairman SMITH. I am pleased to recognize the ranking
member, Mr. Neal, for his opening statement.
Mr. NEAL. Thank you, Mr. Chairman. First, as you did, I
want to welcome back Congressman Jim Gomez to the Committee on
Ways and Means, a valued member in the past as we know he will
be in the future. And he answered the appropriate question
during the interviewing process, as you raised it: What is the
best committee in Congress?
He quickly said, ``Ways and Means.''
And we said, ``You are going on the committee.''
[Laughter.]
Mr. NEAL. It is good to have him back on this most storied
dais in Congress, fighting for workers and their families.
Today's hearing comes on the heels of major milestones in
health care, thanks to the Democrats. More Americans have
health insurance today than ever before: 21 million people
signed up during the latest open enrollment, with four out of
five people being able to access high-quality plans for less
than $10 a month. This committee was responsible for that.
Our historic Inflation Reduction Act is starting to take
hold, saving the American people money and delivering more
breathing room. Last week, Medicare made its first fair price
offers on 10 of the most common costly drugs used by Americans.
We are talking about delivering savings of up to 25 percent,
and yet our Republican colleagues are still making efforts to
block the law, siding with interests beyond our imagination as
they keep costs higher for the nation's seniors.
Our progress is important, but our work is far from
finished. We also must address access issues that come from
drug shortages of phenomena like high drug prices that have
become all too common. Quality challenges in the manufacturing
of generic drugs have led to shortages, disrupting patient care
and creating ripple effects that intensify the challenges that
vulnerable groups already face.
Meanwhile, supply chain dynamics can worsen shortages
through short-term contracting prices with exclusivity with one
manufacturer instead of engaging with many who could fill the
gaps in case of the challenge, or by squeezing manufacturers in
a race to the bottom.
The path forward is clear: Congress must act in a
multifaceted, bipartisan way to reward quality, reliable
manufacturing, and incentivize improvements in the process. Joe
Biden has already taken unprecedented steps to combat these
shortages by bolstering authorities under the Defense
Production Act and investing in domestic production of key
materials.
While supply chain issues and shortages are extremely
troubling, it is only half the issue. This committee must also
be concerned about the millions of Americans who can't access
lifesaving prescriptions because of costs.
We had no Republican help when we gave Medicare the power
to negotiate lower drug prices for the first time in our
nation's history. At a time when the American people are forced
to pay three times more for their prescription drugs than some
counterparts across the world, not a single one of our
colleagues from the other side helped us out and sided with
those below the poverty lines. Luckily, we didn't need their
votes. We took action to put an end to pharma's price gouging,
capped out-of-pocket costs at $2,000 and insulin at $35 a month
for seniors.
Our work brings people the peace of mind they deserve. It
is fundamentally challenging and a changing health care
opportunity for America. At the same time, we will all attempt
to give families some breathing room with lower drug prices.
There is certainly more to do, and, in a bipartisan manner, we
certainly are capable of doing it in this committee when we are
ready and willing to act.
Mr. NEAL. And, with that, I yield back, Mr. Chairman.
Chairman SMITH. Thank you, Mr. Neal. I will now introduce
our witnesses.
Dr. Stephen Schleicher is chief medical officer of
Tennessee Oncology.
We have Gene Cavacini, a senior vice president and chief
operating officer of McKesson Pharmaceutical Solutions and
Services.
And Allan Coukell is senior vice president for public
policy of Civica Rx.
Dr. Stephen Schondelmeyer is director of the PRIME
Institute at the University of Minnesota's College of Pharmacy.
Dr. Julie Gralow is chief medical officer and executive
vice president of ASCO.
And Dr. Jeromie Ballreich, an associate research professor
at Johns Hopkins Bloomberg School of Public Health.
Thank you all for joining us today. Your written statements
will be made part of the hearing record, and you each have five
minutes to deliver remarks.
Dr. Schleicher, you may begin when you are ready.
STATEMENT OF DR. STEPHEN SCHLEICHER, MD, MBA, CHIEF MEDICAL
OFFICER, TENNESSEE ONCOLOGY
Dr. SCHLEICHER. Chairman Smith, Ranking Member Neal, and
members of the Committee on Ways and Means, I want to thank you
for the opportunity to appear here today to discuss severe
chemotherapy drug shortages.
I am a medical oncologist at Tennessee Oncology, the
largest provider of cancer care in Tennessee, where I also
serve as chief medical officer. I am also a board member of the
Community Oncology Alliance and a member of the American
Society of Clinical Oncology.
Last year presented a significant challenge to our patients
due to drug shortages of older but essential generic injectable
chemotherapies. The two drugs I want to discuss today are
carboplatin, first approved in 1989; and cisplatin, approved in
1978. These very inexpensive generic chemotherapy agents
continue to serve as the preferred backbone of many important
curative and palliative cancer treatments.
So how bad was the shortage at Tennessee Oncology? For
carboplatin, at our peak shortage, we were unable to treat 90
percent of patients as scheduled who should have received the
drug. For cisplatin, we were unable to treat over 50 percent of
patients who needed it. We went a full 10 days without a single
shipment of either drug, and, at the time, there was no end in
sight.
What was the impact of these shortages? As oncologists, we
were suddenly faced with the near-impossible task of
determining which of our patients could receive our very
limited drug supply. These are patients who are facing cancer,
perhaps the scariest word in medicine, and are trusting us to
guide them through their journey during one of the most
vulnerable times of their lives. In a country that offers the
most advanced, cutting-edge cancer therapies, we were put in a
situation that a decade of medical training did not prepare us
for: the moral dilemma of how to ration our limited supply of
these chemotherapies.
As chief medical officer, I had to send an email to all of
our providers on June 18 last summer that communicated we had
only enough cisplatin to be used in patients with testicular or
bladder cancer, and only enough carboplatin to be used for
chemo, radiation, and lung cancer. What that meant is that we
were not--we did not have enough to allow any use in patients
with breast, metastatic lung, endometrial, cervical, or many
other cancers.
The most significant impact, of course, was on the patients
themselves, who required carboplatin or cisplatin but were
unable to get them. Imagine being a patient with a hope for
cure or wanting to live longer with family suddenly being told
that you don't have the optimal treatment anymore. There are
hundreds of examples at Tennessee Oncology alone, but for
interest of time I want to share two.
Last summer, I was treating a very sweet, 52-year-old
female with aggressive, triple-negative breast cancer who had
one shot at cure with a regimen that included carboplatin.
Unfortunately, halfway through, in the middle of her four-month
treatment, we ran out of the drug and I was unable to give her
carboplatin for three consecutive doses. Already paralyzed with
fear by her diagnosis, her first question to me was whether not
getting carboplatin would affect her chance of cure. I had to
tell her I hope not, but I honestly don't know.
A colleague of mine was treating a 61-year-old female who
had stage four lung cancer. The goal of her treatment, which
also included carboplatin, was to try to extend her life and
extend her quality of life for as long as possible.
Unfortunately, after needing to stop carboplatin because we ran
out of supply, her condition deteriorated rapidly, and she died
soon after. Whether she could have lived an additional several
months or longer to spend cherished time with family, we--and
most importantly, the family--will never know.
Now, I practice at a large oncology group with significant
purchasing power, but we were still faced with severe
shortages. It is virtually impossible to predict an inventory
enough supply in advance of drugs that may have shortages in
the future. And that is us. I can't even imagine how a small,
say, one-physician practice in rural America would ever be able
to navigate these shortages.
Finally, I want to mention that even if cisplatin and
carboplatin are improved right now, we are still dealing with
drug shortages. An example is methotrexate, another older
generic chemotherapy used to treat CNS lymphoma; and
vinblastine, a generic chemotherapy used to treat curable
Hodgkin's lymphoma. The problem of drug shortages is not over
yet.
In summary, I testify today as a practicing oncologist
representing my patients, as well as the thousands of cancer
patients around the country and their treating oncologists. I
am not an economist or policymaker, but common sense tells me
that these shortages of inexpensive, generic drugs must be tied
to the lack of incentives for manufacturers to produce these.
We are all concerned with the financial toxicity of
expensive cancer drugs, but we also need to be equally
concerned about the chronic shortages of inexpensive but
essential generic drugs. I implore Congress to act to stop
these drug shortages, and thank you for the opportunity to
testify today.
[The statement of Dr. Schleicher follows:]
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Chairman SMITH. Thank you very much.
Mr. Cavacini, you are now recognized.
STATEMENT OF EUGENE CAVACINI, SENIOR VICE PRESIDENT AND CHIEF
OPERATING OFFICER, MCKESSON PHARMACEUTICAL SOLUTIONS AND
SERVICES (PSAS)
Mr. CAVACINI. Thank you. Good morning, Chairman Smith,
Ranking Member Neal, and esteemed members of the committee. My
name is Gene Cavacini, and I am the senior vice president and
chief operating officer for McKesson's drug distribution
businesses. In that role, I oversee distribution, sales, and
customer service for our operations in the United States.
McKesson applauds this committee's efforts to mitigate drug
shortages and shares your goal of strengthening an already
strong global supply chain. I am grateful for the opportunity
to be here today to share McKesson's perspective and to offer
some recommendations.
McKesson is a diversified health care services company
founded nearly two centuries ago. We play a critical role in
health care delivery, making medications and supplies available
to health care providers and patients across North America. In
fact, about one-third of the nation's pharmaceutical products
flow through our facilities each and every day. We are
passionate about our mission to improve care in every setting
one product, one partner, and one patient at a time. If you
visit one of our more than 30 distribution centers, you will
walk under a banner that reads, ``It is not just a package, it
is the patient.'' McKesson constantly evaluates our processes
to help surety of supply to help identify and mitigate
potential problems.
When sourcing products, we prioritize three pillars: the
first is consistent supply and supply chain quality; second,
clinical importance and therapeutic options; and third, of cost
or price. These pillars are fundamental to our business model
and responsible sourcing practices. For vulnerable drug
categories, we also examine clinical and patient need to ensure
access to alternative therapies.
While drug shortages affect only one percent of all
prescriptions, we know that even that small percentage can have
significant impact on health care providers, caregivers, and
most importantly, patients.
To address drug shortages, we must agree on a common
definition, and distinguish whether the occasional disconnect
between supply and demand represents true supply limitations,
or just temporary gaps in access. Our view is that most drug
shortages fall within three categories: market-wide supply
disruptions, product-specific issues, and then reimbursement
and market access limitations.
Common causes include sourcing or manufacture problems,
natural disasters, market economics, changes in prescribing or
demand patterns, and product discontinuations. The key drugs
and classes making headlines demonstrate the range of root
causes and also highlight the need for unique solutions.
A robust, competitive market is one that naturally buffers
against drug shortages. Government intervention should correct
the market to its natural, competitive state, but be careful
not to create misaligned incentives that could add to
shortages. Policymakers should focus on products most at risk
of shortage, like generic, sterile injectables and particularly
those products for cancer patients.
As for root causes, we offer the following recommendations.
We must strengthen access to Active Pharmaceutical
Ingredients, or APIs, as well as fully manufactured products.
This will require more than just increasing domestic capacity.
Preservation programs must be coordinated with all
stakeholders, including manufacturers, distributors, providers,
and the national stockpile to be careful that we don't stress
all very--already vulnerable products or trap precious
inventory where it might not be accessible. We must provide
equitable access to all settings of care and all patient
populations.
And second, we must examine reimbursement with market
incentives necessary to revitalize investment in manufacturing,
especially for drugs with low margins and a limited number of
manufacturers. This could include temporary relief from rebate
requirements and inflationary penalties contingent upon
building manufacturer capacity and investing in quality
programs.
And third, we must improve transparency across the supply
chain. This requires the sharing of insights both up and down
the supply chain, with safeguards to protect competitive,
sensitive information.
McKesson believes strongly that solving drug shortages
requires the collaboration of all stakeholders in the supply
chain, and we are committed to doing our part. By addressing
the variable root causes, bolstering supply preservation
efforts, and improving communication between stakeholders we
can make meaningful progress in protecting the health of our
nation.
Thank you, and I look forward to your questions.
[The statement of Mr. Cavacini follows:]
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Chairman SMITH. Thank you.
Mr. Coukell, you are now recognized.
STATEMENT OF ALLAN COUKELL, BSC, SENIOR VICE PRESIDENT FOR
PUBLIC POLICY, CIVICA RX
Mr. COUKELL. Thank you, Chairman Smith, Ranking Member
Neal, and members of the committee. I appreciate the
opportunity to speak with you today about drug shortages, their
causes, and policies to prevent them. My name is Allan Coukell.
I am a pharmacist by training, and I lead public policy for
Civica, also known as Civica Rx.
Civica is the only pharmaceutical company established
specifically to address drug shortages. It was founded by a
group of U.S. health systems and philanthropies who, after more
than a decade of chronic drug shortages, realized that the
market is not self-correcting and that a different approach is
required. They created Civica as a non-profit with a mission to
deliver a safe, stable, and affordable supply of medicines to
U.S. patients.
In our first five years of operation, our hospital
membership has grown to 1,500 hospitals. We supply more than 80
drugs today, with more than 150 million vials delivered to
date. And, with U.S. government support, we have built a state-
of-the-art manufacturing facility in Petersburg, Virginia.
Civica chooses drugs not for their return on investment. In
fact, they are chosen by hospitals because they are in shortage
or at risk of shortage. They tend to be old and low-cost
products, but absolutely essential to patient care and used in
every hospital every day.
Because of our mission, Civica takes a different approach
from the traditional generic drug supply chain. For example, we
enter long-term purchase and supply contracts that add
stability to the market. We maintain a six-month buffer
inventory of every drug to ensure continuity of supply. We also
emphasize U.S. sourcing whenever possible, with Canada and the
EU as our next preference. We don't source from China unless
there is no other option. And, to reduce the risk of a failure
to supply, we perform an intensive quality audit of our
potential suppliers with ongoing data, metrics, and quality
reviews. And every drug is sold at the same price to any
purchaser.
The success of this approach has been proven. In fact, 20
of our top 25 drugs are currently a national shortage, and yet
we are supplying our member hospitals without interruption.
When a tornado hit a manufacturing plant in North Carolina a
few months back, Civica let our member hospitals know that we
could supply double their committed volume for all of the drugs
we supplied that overlapped with those from that facility. And
recently a top--a study in a top medical journal showed that
supply through Civica was both more reliable than conventional
sources, but also produced net cost savings to the health care
system.
So the resilience of this model points to steps the
committee could take to prevent future drug shortages. And make
no mistake, shortages are not a passing storm that will soon
blow over. After a dozen years, they must now be understood as
a built-in and permanent outcome of the current system.
The U.S. system is designed so that purchasers of drugs are
incentivized to choose the lowest price, saving pennies on
already low-cost products, instead of purchasing in a way that
makes shortages less likely. Civica's member hospitals have
already taken steps to shift this equation, but there is more
to be done. Without changes, shortages will get worse, not
better.
The immediate cause of most shortages of injectable drugs
is a quality problem with the manufacture of the finished
dosage form. But the root cause is widely acknowledged to be
low prices. And it is remarkable when you think about it. An
injectable prescription drug that requires extensive testing,
development, has a complex supply chain, exacting
manufacturing, and regulatory approval required then sells for
less than a bottle of water from the corner store. These low
prices reduce the incentive and ability of manufacturers to
invest in quality or in newer facilities. That pushes
production offshore to low-wage markets, where quality problems
proliferate and the FDA presence is inconsistent.
So policy responses to shortages need to change the market,
including measures to incentivize or encourage providers to
contract for adequate buffer inventory, evaluate manufacturer
quality on an ongoing basis, and choose ones that are less
likely to have supply failures, and enter long-term contracts
that bring stability to the market.
We also encourage Congress to work directly with
manufacturers to create an insurance policy. At a modest cost
of about $4 million per drug, Congress can ensure that we have
a backup domestic manufacturing capacity ready to go when a
shortage starts. If the United States had made this investment
in cancer drugs five years ago, we would have been prepared for
the shortages that we are experiencing today. We have the
opportunity now to make a targeted investment to protect the
drug supply in the future.
Thank you again for your attention, and I welcome your
questions.
[The statement of Mr. Coukell follows:]
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Chairman SMITH. Thank you.
Dr. Schondelmeyer, you are now recognized.
STATEMENT OF STEPHEN SCHONDELMEYER, PHARMD, PHD, DIRECTOR OF
THE PRIME INSTITUTE, UNIVERSITY OF MINNESOTA'S COLLEGE OF
PHARMACY
Mr. SCHONDELMEYER. Thank you, Mr. Chairman, and thank you,
Ranking Member Neal and committee. I am Stephen Schondelmeyer,
I am a professor of pharmaceutical economics and management at
the University of Minnesota, and I also direct a resilient drug
supply project.
Over my 50-year career, I have studied virtually every drug
product that is on the market in the U.S. I have databases with
information on those drugs and their prices and their
availability and issues over time, and I have used that
database to learn and understand the market.
First, let me point out that the relatively recent COVID-19
pandemic isn't the primary reason for drug shortages. It has
had a bump in drug shortages and increased it a bit, but
really, COVID-19 has exposed vulnerabilities that we didn't
realize previously, and we have some new emerging
vulnerabilities that are coming out in this market, and those
are the things I will address.
I agree with my colleagues. I agree with the chairman and
ranking member and their comments about the patient harm and
critical nature of shortages, but I am going to address
geopolitical risk, quality of production issues, and potential
trade barriers and their impact on drug shortages.
Basically, geopolitical risk is a term that we are using
more and more these days to talk about vulnerabilities that may
be related to the geographic location of where something
happens, may be related to the political orientation of where
something happens, or both. And, in pharmaceuticals, we have
situations where geopolitical risk is both locational and
political in terms of affecting availability of drugs or
potentially affecting them.
Among the things that are important in pharmaceuticals and
geopolitical risk are where active pharmaceutical ingredients
are made and their key starting materials, and where finished
dosage forms are made. And I would remind you, when I go to the
grocery store or the clothing store, I can look at the label
and see where the product was made. In pharmaceuticals, that
isn't always the case. And, even if it does say where the
product was made, you don't know if that is where somebody put
it in the box and called it being made in that country, or
where they actually made the capsule or tablet, or where they
actually made the chemicals that go into the drug. And all
three of those are important in drug supply chains, and yet the
market is very opaque with respect to where products come from.
A stable drug supply relies on complex interdependencies in
international relations, both politically and commercially. The
United States is heavily dependent on foreign manufactures for
active ingredients and finished dosage forms. We get--about 45
percent of our finished dosage forms and as much as 60 percent
of our active ingredients that are in products that people take
every day in America come from either China or India. So we are
heavily dependent on these two countries. That is not
necessarily bad. It is not to say that their products aren't
good all of the time, but there are issues with that.
I would point out from our research at Minnesota that about
80 percent of all U.S. doses taken every day by Americans come
from foreign sources. China and India, as I said, are
responsible for 45 and 60 percent, respectively, of those.
There are about 100 drug products that the only place the
active ingredient is made in the world is China. It is not made
in the U.S., it is not made anywhere else. And so, if China
chose to develop trade policies that prohibited export of those
drugs, we wouldn't have any in the U.S.
Now, we have companies that could begin to make those, but
it may take one, two, three years to come on the market. So I
believe in markets, and I believe markets do self-correct over
time, but that--the catch is in over time, and the U.S. market,
and particularly with pharmaceuticals, we can't begin making a
product as quickly as you could make a clothing item or other
goods. So we have to take into account the timelines in
pharmaceuticals.
I would point out some trade barriers. During the COVID
pandemic, India put an embargo on or an export ban on about 25
products and was going to ban shipping them because they wanted
to make sure they had enough product for their own country.
They later reversed that. But, if every country in the world
took this protectionist approach, only the producing companies
would have product and the non-producers wouldn't. And I remind
you of the generics we have in the U.S. market: 80 percent
aren't produced in the U.S. So what is going to happen if
everybody else starts protecting where they produce the drug?
We won't have generics.
One final comment on what could happen is you might have
recently heard that Florida was approved by the FDA to start a
re-importation program, a very important concept. And I have
worked with and advocated consideration of such policy over
time. As soon as Canada heard that that was approved and it
might actually happen, Canada passed a law prohibiting export
of drug if it resulted in a shortage in Canada. So we are going
to have to have the U.S. administration and the trade
representative and Department of Commerce and others work
together with Canada if that is ever going to work.
My final point is the upstream drug supply in the U.S.
needs to be mapped comprehensively and continuously to identify
vulnerabilities and help us prepare with coordinated responses.
[The statement of Mr. Schondelmeyer follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman SMITH. Thank you.
Dr. Gralow, you are recognized.
STATEMENT OF JULIE GRALOW, MD, CHIEF MEDICAL OFFICER AND
EXECUTIVE VICE PRESIDENT, ASCO
Dr. GRALOW. Thank you, Chairman Smith, Ranking Member Neal,
and members of the committee. It is my pleasure to appear
before you to discuss the drug shortage crisis. I am Dr. Julie
Gralow, chief medical officer and executive vice president of
the Association for Clinical Oncology, or ASCO. I am a
professor emeritus of medical oncology and global health at the
University of Washington School of Medicine.
ASCO is a leading professional organization representing
nearly 50,000 oncology professionals dedicated to improving
cancer care. We appreciate the committee's dedication to
addressing drug shortages. Every day, we hear from oncologists
about the challenges they and their patients are facing. The
drug shortage crisis is forcing providers to make impossible
choices, including deciding which patients receive lifesaving
and life-prolonging cancer drugs on schedule and in established
doses, or whether they are left to use suboptimal alternatives,
reduce doses, delay treatments, and, in the worst situations,
are unable to provide necessary therapies.
An oncologist in Texas shared that a patient's breast
cancer was responding to a commonly used oncology drug,
carboplatin, in combination with immunotherapy. After four
cycles, the cancer was under control. She stopped receiving the
carboplatin due to the shortage, but continued the
immunotherapy, and unfortunately, her cancer quickly
progressed.
An oncologist in California sent a patient with bladder
cancer to an academic center to participate in a clinical
trial, primarily because that was the only way to guarantee
access to cisplatin, another drug in shortage. The oncologist
saw clinical trial enrollment as the only way to achieve the
standard of care that his office could not provide.
An oncologist in Puerto Rico could not treat a head and
neck cancer patient with the preferred regimen because the
practice was projected to run out of the drug during the
treatment. The physician and the patient were forced to select
an alternative.
You can imagine the tremendous emotional toll this places
on patients and their families. These deeply troubling choices
my colleagues frequently face amid the drug shortage crisis are
emotionally taxing the entire health care team. The staff time
and expense of managing shortages includes looking for supply,
allocating limited drugs, changing treatment plans, and
counseling patients.
The U.S. must establish a more resilient pharmaceutical
supply chain. Most oncology drugs in shortage are generic,
sterile injectables that sell for $1 to $8 per dose, leaving
these drugs with slim profit margins, sometimes with production
costs exceeding the selling price, and often driving
manufacturers out of the market or looking to manufacture
outside of the U.S. to keep costs down. There are few
manufacturers of sterile injectables, and they face significant
costs to stay in business.
The leading cause of drug shortages is manufacturing
quality issues, largely driven by economic factors. Disruption
from quality issues can leave the manufacturer unable to ramp
up production for months and at significant expense. When one
manufacturer experiences quality issues, the entire market is
impacted. If another manufacturer is willing to enter the
market to shore up, supply can take months to get FDA approval
and get production up and running due to the complexity of
sterile production requirements.
Current drug payment policies compound quality issues.
Purchasers have limited information, typically only price data,
and don't have access to manufacturing quality or supply
information. This creates adverse market incentives for
manufacturers to prioritize cost cutting over quality
improvements or capital investments. It is particularly
challenging for generic oncology drug manufacturers who operate
on a slim or even negative profit margin.
Approximately half of all newly diagnosed cancer patients
are over 65 years old, making Medicare the largest payer of
cancer care in the country. As such, Congress can take
immediate action in three areas: payment, manufacturing, and
quality. Congress could explore alternative payment
methodologies to provide relief from artificially low generic
reimbursement rates, encouraging a more reliable supply of
drug. Payment reform should factor in quality and reliability
of supply.
In manufacturing, Congress could encourage the adoption of
advanced technology, such as continuous manufacturing for
critical drugs and Active Pharmaceutical Ingredients.
Incentives such as tax credits or government contracts could
help increase manufacturing in the U.S.
Finally, in the area of quality, Congress could consider
stronger requirements for risk management plans and incentives
for purchasers to contract with manufacturers who demonstrate
quality and the ability to provide reliable supply.
The shortage of critical cancer drugs is a crisis. Cancer
patients and their families deserve to know that they will get
the care they need without delay. Providers should not have to
make heartbreaking choices about patient care. We must act.
ASCO stands ready to collaborate with you to advance
comprehensive solutions.
[The statement of Dr. Gralow follows:]
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Chairman SMITH. Thank you.
Dr. Ballreich.
STATEMENT OF JEROMIE BALLREICH, PHD, ASSOCIATE RESEARCH
PROFESSOR, JOHNS HOPKINS BLOOMBERG SCHOOL OF PUBLIC HEALTH
Mr. BALLREICH. Thank you, Chairman Smith, Ranking Member
Neal, and honorable members of this committee. Thank you for
the opportunity to testify about chronic drug shortages. I am
an associate research professor specializing in the economics
of the U.S. pharmaceutical market.
I recommend Congress consider four policy solution sets to
address chronic drug shortages: first, consider policies that
improve the transparency of drug supply chains, notably around
the source of drug raw materials; second, consider policies
that incentivizes long-term market commitments and investment
in the supply chain; third, consider policies to incentivize
the onshoring of drug and ingredient manufacturing; lastly,
consider the implementation of a supply safety net either in
the form of a stockpile or buffer stocks of essential drugs.
Legislation should require drug manufacturers to disclose
information on key supply chain attributes, including site and
capacity of drug manufacturing facilities and the source of
drug ingredients. A recent study identified 87 percent of drug
ingredients and 60 percent of finished products were
manufactured overseas, principally in India and China. This
study used proprietary data. This type of information should be
disclosed to the FDA and shared with key stakeholders in the
drug supply chain, which will allow the identification of
supply chain threats and possible remediation of supply chain
threats.
Congress should consider changes in generic drug
reimbursement to incorporate incentives for manufacturers to
invest in more resilient supply chains. These policies could
include higher payment levels for manufacturers who demonstrate
commitment for resilient supply chains and higher payment
levels for generic drugs with complex manufacturing and small
markets. Currently, the generic market rewards manufacturers
who offer the lowest price. This does not consider long-term
market commitments by manufacturers, nor incentivizes
investment in the supply chain.
One mechanism for incorporating incentives could be payment
which incorporates a grading system based on supply chain
resiliency, where Medicare and Medicaid pay higher prices for
generics with resilient supply chains. This is similar to the
quality measures that Medicare considers for paying hospitals
and Medicare Advantage plans.
Related to payments, I am concerned that provisions of the
Inflation Reduction Act, specifically penalty--inflation rebate
penalties, may incentivize shortages. If a drug company signals
to the FDA that their drug is in shortage, then their drug
could be exempt from inflation rebates. This policy could be
improved by limiting the exemption to shortages that are caused
by external factors to the supply chain and not just simply a
higher demand.
Congress should consider policies to incentivize domestic
drug ingredient manufacturing. These policies could come in the
form of subsidized loans, tax incentives, or even higher
payment rates for drugs produced in the U.S. Onshoring of the
drug supply chain will increase its resilience.
Lastly, policies should be enacted to create a supply
safety net in the form of either stockpile or buffer stock of
essential drugs and/or ingredients. A national stockpile will
provide a centralized location of essential drugs and can be
accessed in times of shortages. In addition, having a single
purchaser of a national stockpile will improve the economy of
scale and lower operating costs.
Alternatively, Congress could also opt for a more
decentralized approach by providing financial incentives in the
forms of grants or tax incentives to wholesalers or hospitals
to increase their inventory of essential drugs beyond short-
term demand needs. CMS has recently proposed a rule to
encourage buffer stocks at hospitals, but this could be
broadened to other intermediary suppliers such as wholesalers.
I applaud the efforts of this committee to consider
policies to improve the supply chain of drugs and improve
supply chain resiliency. Immediate priorities should be the
creation of a national stockpile of essential medicines,
greater transparency of the supply chain, and reform generic
drug reimbursement to incentivize supply chain investments.
Thank you.
[The statement of Mr. Ballreich follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman SMITH. Thank you all for your testimony. We will
now proceed to the question-and-answer session.
As I noted in my opening statement, most of the Active
Pharmaceutical Ingredients that make up our essential medicines
are sourced from outside our country, and China is a leading
source of pharmaceutical product imports. Dr. Schondelmeyer,
can you speak to what dangers we face by being reliant on
foreign sources for our medical supply chain, and how can we
better onshore more production, or at least be less reliant on
hostile countries like China?
Mr. SCHONDELMEYER. Thank you, Mr. Chairman. That is a great
question. There is no simple answer, but we are reliant--we
have to realize you can't just set up a factory and make
tablets or capsules without the chemicals and the raw
ingredients that are needed to make that. And, with the
majority of those made outside of the U.S., then we have to
obtain those from other countries.
Now, remember in my presentation I talked about India put a
ban on export of certain drugs out of India because they wanted
to make sure they had enough for themselves. And, if that ban
had stayed in place, we would have seen shortages over the next
three or four months develop in the U.S., and we would have
been without certain products. And so, if India and/or China
and/or a country that makes a lot of the generics that we need
puts bans or trade embargoes on exporting drugs, we are going
to be without the drug.
And yes, Civica or other drug companies in the U.S. could
begin making them, but they can't do it tomorrow. It is going
to--we can ask Mr. Coukell how long it would take, but it is
months to years to repair that. So we could have patients--
cancer patients or pediatric patients or other patients--
without the drugs they need because a country simply blocks us
from having access to those drugs.
And that is--you know, we don't rely on other countries to
make the bullets when we fight wars, especially our sworn
enemies, and so we want to make sure that the drugs we need to
keep our public and our military healthy are coming from
sources that we have control of.
Chairman SMITH. Thank you. It is easy to get caught up in
the logistical challenges or market forces when discussing drug
shortages, but we have to remember at the end of the supply
chain sits a patient waiting for a treatment to a cure. Dr.
Schleicher, please describe the impact on patients and
providers when they are forced to navigate drug shortages on
top of managing their needed treatments.
And how is this challenge worse in smaller and rural areas?
Dr. SCHLEICHER. Yes, thank you, Chairman. So it is
extremely challenging, especially when you don't know when the
end of the shortage is coming.
A lot of people talk about delaying treatment. For us, in
the peak of this, we thought it might be months until we would
get carboplatin back, so you couldn't delay. So you are just
treating without. And sometimes there are substitutions, but
often there are not. So you are really having to treat patients
without the evidence-based treatment regimen that we are used
to giving, which is incredibly hard, as the oncologist and the
team, of course, having to deliver that news once you have
gained trust with that patient, but obviously way worse for the
patient him or herself.
In addition, all of us are used to evidence, clinical
guidelines, and we were at the first time not having those.
Organizations like ASCO and others did kind of put out
consensus guidelines, but often shortages happened before we
had that. Our group were emailing back and forth, ``How would
you treat this? How would you treat this?'' We had advanced
analytics to help us at least the best way possible figure out
where the drugs were.
Now, if you are a one-doc or two-doc practice in rural
America, one, you don't have access to colleagues to ask for
help on. I can't imagine treating without a certain drug or
knowing what substitution to give if I don't have people to
ask.
Two, inventory management is complicated enough. Tennessee
Oncology had to carry and give 200 different drug formulations
last year to our patients. Being able to add that with also
stockpiling drugs that might be in shortage is almost an
impossible task, even for a group as large as us.
But a one or two-doc practice in rural America would have--
I don't even know how it would be possible to navigate, one,
what to do clinically; and then two, how to actually manage the
inventory.
Chairman SMITH. Thank you.
Mr. Coukell, we heard from your statement that Civica
represents an alternative way of sourcing essential drugs for
health care providers. How are your contracting practices with
manufacturers different from traditional large group purchasing
organizations, and how can these models be implemented in
smaller rural communities?
Mr. COUKELL. Thank you, Mr. Chairman. Let me actually start
with the rural community component.
We have some large for-profit and non-profit health systems
who are part of Civica, but we also have some small rural
hospitals. They have the same access to our drugs at the same
price, which may even be an advantage for the small hospital,
since they don't normally have the buying power. And we hold
stock for them based on whatever volume they have committed.
In terms of our contracting processes, we do a number of
things that are different. One is that we have long-term
purchase and supply contracts. So, when we contract with a
contract manufacturer, they have typically a five-year volume
commitment from us. So they know they are in the game for five
years, and they can invest in their production and they know
that they have stable demand and price. So it creates that
stability in the marketplace.
But we go further. We actually go out and do a physical
audit of a manufacturing facility that we are going to contract
with. Our team goes in, they look at the facility, they look at
the cleanliness, they look at the protocols, they review
documentation, and then we sign a contract--a quality agreement
with them. So on an ongoing basis they are submitting data to
us on product deviations, inspectional reports, all kinds of
things that give us insight into the quality in that facility.
And then finally, sir, each batch of drug, we make a batch-
by-batch decision to release that onto the market based on a
review of the quality documentation associated with that batch.
Chairman SMITH. Thank you. I now recognize the ranking
member, Mr. Neal, for any questions he might have.
Mr. NEAL. Thank you, Mr. Chairman.
Dr. Ballreich, I know you are going to hear a lot today
about the potential for onshoring the manufacture of medicines
to address drug shortages and the need to provide tax
incentives for manufacturers to do so. And one of the most
critical steps is to address the shortage of generic, sterile
injectable drugs in the manufacturing quality arena. What do
you think Congress ought to be doing to consider improving the
reliability and quality of the finished product to mitigate
shortages?
Mr. BALLREICH. Yes, excellent question. Thank you, Ranking
Member Neal.
I think Congress should consider looking at the
reimbursement mechanism for GSIs, or Generic Sterile
Injectables. These are very--these tend to be small-market-type
injectables. Having better transparency of the supply chain,
having a potential scorecard to incentivize quality, rather
than simply let's identify the lowest cost are all possible
solutions to improve the resiliency of the Generic Sterile
Injectable market.
So I think there are a number of potential policy options
for GSIs, and I--out of those, I think increased transparency,
quality scorecard are the two best approaches to improve the
market.
Mr. NEAL. And, as you know, Joe Biden has taken advantage
of the opportunity with the Defense Production Act to enable
more domestic manufacturing of these essential medicines.
Dr. Gralow, you said something that captured my attention
during the testimony. By the way, the testimony was really
good. You said that Medicare is now the biggest provider of
cancer care, or something to that extent, in your comments. Can
you elaborate on that? That is pretty important for members of
the committee to hear.
Would you turn on your----
Dr. GRALOW. Sorry. For the most part, cancer is a disease
of aging. Of course, it can occur in younger people, but the
longer we live the more likely we are to get cancer.
So, with our aging population, more than half of cancers
right now in the United States are being diagnosed at age 65 or
greater. So Medicare can play a big role in how we actually
help strengthen these sterile injectables that are dirt cheap,
and it can build up the whole system.
Mr. NEAL. Thank you. That was really important.
I yield back.
Chairman SMITH. Thank you.
Mr. Buchanan.
Mr. BUCHANAN. Thank you, and I want to thank the chairman
and thank the witnesses today.
As someone that has been in business for a lot of years
before I got here, we had tens of millions of dollars' worth of
inventory that had to be managed. I think we have got a
disaster on our hands in terms of moving forward. That is just
my opinion. We have got to find a way for American companies to
get back in the game.
My point in bringing up the idea of the inventory, I don't
care if you are a two-store, or you are just a small--2 docs or
you have got 500 docs, there is the technology, I have got to
believe, out there. You should have a six-month supply. We
always had a fill rate.
And so we have got to find a way. Frankly--we have got to
be candid about this--you have got India and China producing
70, 80 percent, it depends on what number you want to have, in
terms of the raw materials. That has got to change, and we have
got to get more of our control locally. I represent Sarasota or
the Manatee County Tampa Bay area, and I can tell you I have
200,000-plus seniors there. And this has been going on for
quite a while with the docs in that area, especially as it
relates to cancer. So we have to find a way we can come
together, work together, set the incentives up so we can get
more of our American companies in there.
The other thing I will just say, when you have seen what
happened with COVID, what happened to the inflation? It went
out of sight, and it is because there was no inventory. And
that is what is going to happen here. They said it is 50
percent or something up--the Chinese have been up the last
couple of years in some of their products or whatever, but that
is going to happen here. When the cupboard is bare and there is
no inventory, people are going to pay the difference.
So we have to have adequate supplies. We have got to stop
kidding ourselves and figure out how, looking as we go forward,
how we are going to be in this game in a bigger way, especially
American companies. It means American jobs.
So, Mr. Schondelmeyer, why don't--could you explain to me,
you know, a little bit more your thoughts on just inventory
management--because it was brought up a little bit earlier
today--and why that is such a big problem for this industry?
[Pause.]
Mr. BUCHANAN. Hit your----
Mr. SCHONDELMEYER. Yes, I do think this industry does a
great job of managing inventory, in general. But we have moved
to what you call just-in-time inventory, where you minimize the
amount you keep on hand because one of the fastest ways for a
business to lose money is to have too much sitting in
inventory. But, when you start to run short and have shortages
of raw materials or production, then that small inventory
catches you and leaves you without product. And so we need to
better be able to predict when demand changes will stress that
inventory.
And what really caught us in the pandemic, there were
demand changes that affected the inventory and availability,
but there were also supply disruptions we didn't anticipate.
When a whole city in China was closed on lockdown because of
COVID, and they quit producing products where they made
pharmaceuticals, then we didn't have them. That wasn't a demand
issue, that was a supply issue.
So I think we do need to control the inventory and know how
much--what I look at is the agricultural industry. If we, you
know, are worried about food supplies, we can tell you how much
soybeans we expect to be produced next year, and how much corn,
and which field in Missouri or Arkansas is going to produce
those, or in Iowa, wherever it is coming from. We know that.
But for pharmaceuticals, as a government, we don't have a
single agency that knows where all of our drug products come
from----
Mr. BUCHANAN. Let me----
Mr. SCHONDELMEYER [continuing]. How much is being produced.
Mr. BUCHANAN. I have just got five minutes.
Mr. SCHONDELMEYER. Yes.
Mr. BUCHANAN. So Mr. Coukell----
Mr. SCHONDELMEYER. Sorry.
Mr. BUCHANAN [continuing]. Could you add on to that? You
have talked about inventory management of that, and just your
thought, and your background. And how do we create the
incentives to have more American companies and more American
jobs here in the States?
And I know there is a cost to wages and all these other
factors that come into play, but I am concerned about us not
being at the table because, you know, when I first got in the
business it was all about oil and gas, and they had it, and we
had pay--you got to pay whatever you have got to pay to get it,
and I just don't like that, being backed into a corner, and
that is where I feel, as Americans, we are at right now.
Mr. COUKELL. Thank you. As Dr. Schondelmeyer says, it costs
money to have inventory sitting around in a warehouse, which is
why people mostly try not to do it. But, if somebody drops out
of the market, it takes drug production a long time to
increase. So we need that buffer stock as an insurance policy.
I think we probably shouldn't try to have that sitting in
an individual doctor's office or hospital. They are not set up,
they don't have the space, they don't have the systems, they
don't want the risk of expired inventory. But, if that
inventory buffer is sitting in the supply chain, we are
constantly putting new stock in and selling the older stock,
and we are really managing it, there is an incremental cost to
doing that but it is an incremental cost that would really
compensate for the added resiliency we would have.
Mr. BUCHANAN. Yes. The only thing I would say is that there
is a turn rate and everything else, and maybe it is not six
months, maybe it is three, but to keep things that tight, I
think, is the wrong way going forward.
Thank you, and I yield back.
Chairman SMITH. Thank you. I now recognize my friend and
49ers fan, Mr. Thompson.
Mr. THOMPSON. I am going to enjoy that steak you are going
to buy me after the Super Bowl, Mr. Chairman. [Laughter.]
Mr. THOMPSON. Mr. Chairman, thank you very, very much for
this hearing today. It is timely and important.
Prescription drugs is one of the things that I hear the
most about from my constituents. And, as we all know, when you
need a drug, you need it, and you need it fast. The price of
the drug is only part of the battle. It has to be affordable,
but it also has to be accessible. And the witnesses have all
made that an important point--part of their testimony. And they
all seem to agree that fixing current and preventing future
drug shortages requires both transparency and stronger supply
chains.
Dr. Gralow, I think many of us on both sides of the aisle
are frustrated at the lack of transparency in our healthcare
system. Can you talk a little bit more about how increased
transparency would help in this specific area in preventing
drug shortages and ameliorating the ones that we already face?
Dr. GRALOW. Thanks for that question.
There is a severe problem with transparency in where the
raw materials come from, what the manufacturers are doing. We
know which manufacturers the FDA has approved. We can get, but
it can be complicated to understand, what percent of the market
each of the manufacturers are supplying and where each of them
are getting the Active Pharmaceutical Ingredients. That is not
really known.
So, for example, what happened with the cisplatin case is
the Active Pharmaceutical Ingredients made in one plant in
India, that plant was shut down by a surprise FDA visit that
found some major quality problems. We did not know, there was
no transparency that that company supplied the majority of
Active Pharmaceutical Ingredients for all of the manufacturers
across the board. Knowing that up front, we could have reacted
much, much sooner. And it wasn't until we saw the implications
of that with now drug dropping from most of the manufacturers,
that we realized just how much that one plant impacted
everyone.
Mr. THOMPSON. Well, I think that is a good spot for me to
ask you and any of the other witnesses that would like to
comment, what specific things can Congress do to make
pharmaceutical supply chains more resilient?
Dr. GRALOW. I think a better early detection system, which
relies on exactly your initial question on transparency, on
what comes from where. Early notification when there is a
problem so that we can react, we can maybe gear up with some of
our manufacturing. We could even look at sites--to the FDA to
approve manufacturers who aren't currently approved to bring in
lots, for example. So a better early detection system.
What Congress can do is--we are going to have to pay more
money for these drugs, these sterile injectables that are
generic, that cost--you know, this bottle of water costs more
than some of them. We are going to have to. But that is going
to be an exchange for resiliency across the system, you know,
good quality manufacturing, where the plant is----
Mr. THOMPSON. So, in your testimony, you had mentioned the
generic drugs, and the appeal to those for many is in fact the
price. But at the same time, that discourages manufacturers
because they can make more money in other than generic. How do
we fix that?
Dr. GRALOW. So that was to me?
Mr. THOMPSON. Well----
Dr. GRALOW. Everyone?
Mr. THOMPSON. I will ask that to anyone who wants to jump
in.
Mr. CAVACINI. I could offer a comment, sir. Thank you.
Mr. THOMPSON. Please.
Mr. CAVACINI. I think it is important to remember that the
vast majority of generic medications are in strong supply, and
we don't have an issue, and the market works very effectively
to balance cost, quality, and access.
There is a subset of complex and inexpensive and
therapeutically important molecules, largely Generic Sterile
Injectables, that make up the vast majority. I think two-thirds
of generic shortages are in the category of Generic Sterile
Injectables, and I think that is an opportunity to inject some
of the ideas that we have heard from the panel today that are
really consistent around transparency and economic stability
and incenting additional capacity and supply and thinking about
buffer or safety stocks for those subset of molecules.
Mr. THOMPSON. Yes, sir.
Mr. COUKELL. You know the saying. If something seems too
good to be true, it probably is. So, if somebody is offering to
sell you a vial of medicine for $0.40, you probably have to
wonder, am I getting a really good quality drug? But, right
now, the system drives providers, purchasers to chase that to
$0.40. And, if they can get it down to 38, they go there.
We have to take a step back and say we are going to pay
you, so at least some share of your purchasing. It is not price
insensitive, but it also takes into account some knowledge of
the quality and the facility where that drug is coming from.
Mr. THOMPSON. Thank you.
I yield back. Go 49ers.
Chairman SMITH. We will see about that.
Mr. Smith is recognized.
Mr. SMITH of Nebraska. Thank you, Mr. Chairman. Thank you
to our entire panel here for sharing your insight and
expertise.
Obviously, these issues aren't easy. And certainly, Dr.
Schleicher, thank you for your opening and sharing very real
impacts on patients. And it is hard to believe that, as much
technology as we have, and ingenuity, that we are still facing
these shortages, and it should be concerning for all of us.
I happen to deal with a very rural and often times remote
constituency. In fact, my district covers enough area that I
have--I represent over 50 critical access hospitals, over 100
rural health clinics. So to say it is rural is a bit of an
understatement because, like I said, some of those facilities
are in remote locations, and obviously not large enough to
develop an inventory to prevent a shortage. And so, hopefully,
we can find some agility, if you will, and--in that ability to
meet the needs of--the very diverse needs of our patients. And
I know that this is often times exacerbated with, you know,
workforce issues, inflation, and I would say some government-
centered over-regulation, as well.
So I hope that--and I am told that--compounding pharmacies
actually can be a part of the solution, at least. I would
appreciate hearing your perspective on that. But I hope that we
can work together to address these issues.
But, Dr. Schleicher, can you describe perhaps the capital
investment that is needed to keep the steady supply of drugs
available for patients in your practice, such as an oncology
practice, and perhaps how smaller, more rural providers might
have more difficulty with this?
Dr. SCHLEICHER. Great question, thank you very much,
Congressman.
So, as we all talk about the complexities of cancer drugs--
and some are extremely expensive, some are the ones we are
talking about today--the very expensive ones, the capital
requirements to stock, say immunotherapies, are very high
because you purchase the drug first. A large group of 200
providers like us, we can do that because we know if a patient
shows up to the door and doesn't--isn't able to get that
medicine due to toxicity, there is going to be another patient
that comes to our door or to one of our 35 clinics elsewhere
and be able to give it.
With the 200 different drugs that cancer patients need
right now, it is hard to have different inventory strategies
for different types of drugs because we are already trying to
balance patient demand, payers, which drugs they want us to
use, et cetera, but we are able to have some buffer.
If you are--I was visiting a practice, a single physician
in rural Kentucky, a few months ago, and he has actually
stopped even doing traditional buy and build to have the drugs
because he was so scared about buying a drug, a patient coming
up, not being able to get it, and then he is on the hook for
the price of that drug.
So the smaller practice it gets, which often is in rural
America, as you are describing, it becomes very difficult to
afford to have the inventory for all the different categories
of patients you are going to see, especially the high price of
lots of inventory, which is different than these drugs. But
navigating those differences is very challenging to a practice.
Mr. SMITH of Nebraska. Thank you.
Mr. Coukell, could you perhaps reflect on, from your
perspective on distribution and purchasing, how might--your
ideas for addressing rural shortages?
Mr. COUKELL. Thank you. I think if Congress incentivizes
hospitals to purchase in a different way that takes quality
into account, then the market will respond by creating those
pathways to market. And I have given the example of Civica,
which is equally accessible on the same price basis to a rural
hospital as to an urban or a hospital chain.
Mr. SMITH of Nebraska. Okay, thank you.
Mr. Chairman, I yield back.
Chairman SMITH. Mr. Doggett.
Mr. DOGGETT. Thank you, Mr. Chairman, and thanks to each of
our witnesses for testifying.
However, I must say I think the most pressing shortage that
we have in America is the shortage of access of patients here
to brand-name drugs, for which we pay the highest prices in the
world, with one in four patients in our country skipping or
rationing their prescriptions because their unaffordable access
to these drugs is a really pressing challenge.
Claiming outrageous prices are necessary to fund
innovation, many pharma manufacturers spend more enriching
themselves with stock buybacks and dividends than on research
and development. They have invested in this Congress,
outspending every other industry with hundreds of millions
lobbying each year and generous campaign funding. Now, they are
wasting resources on nine separate lawsuits to block an
extremely modest Medicare drug price negotiation program.
At the same time, like our witnesses today, I have heard
from constituents, particularly those unable to access Adderall
for children struggling in school. Many first pointed fingers
at the Drug Enforcement Agency for this shortage, claiming that
their quotas were too low to meet demand, yet DEA has confirmed
that manufacturers did not meet production quotas in 2022,
resulting in a shortfall of about a billion doses. And similar
trends followed last year.
Meanwhile, Teva, the leading manufacturer of generic and
branded forms of Adderall, reported $15.8 billion in revenue in
2023, an increase of 7 percent from the prior year. So they are
certainly not short of profits. Adderall has been in shortage
since October of 2022. So, while children suffer, Teva's
billions did not go to that worthy cause. Teva spent less than
$1 billion in 2023 on research and development, yet its overall
selling and marketing expenses were more than twice that.
We need greater responsibility and less hypocrisy from the
pharmaceutical industry. Studies have found that the
overwhelming majority of shortages, about three-fourths of
them, were due to increased demand. This is not a problem
caused by low prices; it is a failure to invest in capacity and
track and report increased demand. An FDA drug shortages task
force found shortages ``persist after supply disruptions,
despite some price increases. Remarkably, only 42 percent of
drugs in shortage were found to have seen significant
production increases to restore supplies, and only about a
third reached pre-shortage supply levels, even a year after
being in shortage.
With this committee enabling most pharma manufacturers to
pay some of the lowest tax rates in America, much less than
what a mother trying to support two children would pay if she
earned the average wage, with giant tax subsidies that we
provide for research and development, it is difficult to
imagine what other tax incentives this committee could provide.
But I am sure we will get some lobbying help to find them.
Pharma is once again in search of a boogeyman to hide its
wrongdoing, condemning the modest progress that was made in
dealing with unjustified price hikes that, unfortunately,
include only a handful of drugs, none of which are generics.
Nor do the inflation rebates apply to generics in part B, which
is the program most oncology shortages fall under. For part D
inflation rebates, which do encompass generics, there is an
exception for drugs experiencing or at risk of shortage.
Dr. Ballreich, Big Pharma has launched misleading attacks
on the inflation rebates designed to prevent these price
spikes. Can you please elaborate on your shared concern and
your recommendation to further strengthen the rebates to
prevent pharma gaming?
Mr. BALLREICH. Thank you, excellent question.
So, in the Inflation Reduction Act, as you noted, there are
inflation rebates. If a drug is identified in shortage, they
are exempt from the inflation rebates. There are certain
situations--a natural disaster, or other external supply chain
effects--that make a lot of sense. However, one of the biggest
drugs in terms of sales that was in shortage last year was the
new, popular ozempic, the GLP 1 inhibitor, initially, for type
2 diabetes and now for weight loss.
So I think in situations where there is a sudden change in
demand that drives the shortage, these inflation rebates don't
make any economic--the inflation rebate exemption does not make
any economic sense. That exemption should be restricted for
drugs which are facing shortages due to external factors and
not because a branded pharma company did not invest enough in
their own supply manufacturing capacity because they are, in
fact, incentivized to get that drug already to market.
Inflation rebate exemptions are not going to change that.
Mr. DOGGETT. Thank you.
Thank you, Mr. Chairman.
Chairman SMITH. Mr. Kelly.
Mr. KELLY. Thank you, Mr. Chairman, and thank you all for
being here.
At the risk of sounding insensitive, I am in the automobile
business. They currently have 35 cars sitting in our lot that
belong to customers who are waiting for parts to come in to fix
them. When I look at your business and what you are talking
about, we all have the same problems. The global supply chain
that we all rely on has found--that is fine, as long as the
chain doesn't get broken. Once it is broken, it is almost
impossible to take care of.
Now, I am assuming that a lot of the medicines that are on
the shelf have a clock-out time, or a time where they are no
longer effective and they probably have to be discarded at--
somebody does something with them. I am imagining that. But I
know we have these conversations. Each of you have pretty much
said the same thing. And it is about the economy, stupid. We
are talking about the price of drugs, the price of drugs, and
why aren't there more available, and why aren't these people
producing them for less money, and why, and why, and why, and
all they are doing is getting fat and happy over people who are
sick and need these drugs.
I happen to sit on a board for Hyundai Motor Company. It is
called the Hope on Wheels, and it is an effort to make sure
that pediatric cancer gets cured. We have about an 80 percent
cure rate right now, but that also means that 20 percent do not
get cured. We have come out with a lot of different
pharmaceuticals. We come up with some amazing new drugs.
I would just suggest that the boogeyman isn't the people
who produce the drugs, it is the fact that these are products
that age out and need to be replaced, and you rely on a parts
change that is not always consistent. When I hear that India
decided to hang on to their own supply, well, charity always
does begin at home. I would hate to be living in India and
saying, you know what? We found there was a better price in
America, so we sold those drugs to them, our people will just
have to do without them.
I know we have these hearings, and we like to try to get to
the bottom of things, but the real price issue that we are
talking about right now is demand and supply chains. And I got
to tell you, I don't care if it is in the automobile business,
or in the pharmaceutical business, or if you are in the
appliance business, or whatever business you are in. It is all
reliant right now on a global supply chain that we didn't have
in the past, but we have now. And why do we rely on it? Because
we can get those parts cheaper someplace else in the world.
I really appreciate you all coming here today, but, listen,
I am a diabetic. You know, I would hate to hear that I can't
get a hold of insulin, or I would hate to hear that we don't
want to go with a generic form. I would like to go back to
1933, when those scientists at the University of Toronto
decided to sell the patent for $1 because they thought the
value was so important to the American--to humanity that they
would never try to make a profit on it. Unfortunately, this is
an economic problem. This is a business problem.
And again, I said earlier, at the risk of sounding
insensitive, I am not. But I also am not going to be
impractical, thinking that people are going to produce things
and supply them and not make a profit on it and that they would
think that they could stay open for long periods of times by
losing money. That just isn't the way it works.
So, if any of you can help me, is it the supply chain? Is
it the fact that we found other places in the world that can
produce things for less money than we can produce them here at
home, and we rely on them to supply that, as--what we need? If
anybody--if there is something opposite of that--I have
listened to all of you, and your testimonies are all the same.
I will just tell you again, going back to Hope on Wheels,
if you really want to see, go into a children's hospital, where
a small child has no chance of surviving because we don't have
the ability to cure him or her of what it is that they have. It
does come down to dollars and cents, unfortunately.
Do you have any way we can fix this global supply chain,
other than the fact that, if we are willing to pay more for an
American-made product that is actually made in America and
sourced in America, that that may be part of the answer?
Anybody?
Dr. GRALOW. I think that is absolutely part of the answer.
I think bringing the manufacturing and the raw materials back
to the U.S. could be part of the solution.
But I think also rewarding those that are offshore for
good, quality manufacturing, not good-quality drugs--hopefully,
all the drugs themselves are good quality, but for good quality
manufacturing, updating your machinery, and resiliency in the
system.
So this buffer of three, six months, whatever, you know, it
is very hard to have a national stockpile when these drugs
expire. And they do. They do not last long. You would have to
keep changing it out. That is not realistic, but rewarding
companies who have a guaranteed, multiple-month backup supply,
they update their machinery, it is transparent----
Mr. KELLY. So if I could just ask you, who is--would reward
these companies?
Dr. GRALOW. Who would be?
Mr. KELLY. Who would reward these companies?
Dr. GRALOW. We would.
Mr. KELLY. Who is we?
Dr. GRALOW. Well, Medicare pays for half of these drugs----
Mr. KELLY. And that would be the American taxpayer.
Dr. GRALOW. That--the American taxpayer----
Mr. KELLY. Yes.
Dr. GRALOW. The private payers, as well.
Mr. KELLY. No, I mean, it comes down to--every single penny
that we talk about that the government is going to spend comes
out of some hardworking American taxpayer's pocket, okay?
Let's get to the realistics of all this thing. I agree with
you. I am not disagreeing with you. The question is what price
are we willing to pay and when is it that we are going to say
it doesn't matter what the cost is, we are going to produce it,
even if we are losing, and we are still going to do it just
because we have great hearts?
I really start to wonder sometimes when we have these
discussions. It really does come down to the economy, and I
don't say it is about being stupid, it is about being realistic
about it.
There is nothing harder than to watch a loved one pass away
because he or she does not have access to a lifesaving
pharmaceutical. That is why I thought the Trump Administration
with the right to try had a great idea.
Chairman SMITH. Thank you.
Mr. Larson.
Mr. LARSON. Thank you, Mr. Chairman, and I thank you for
this important hearing. I think it underscores what Martin
Luther King would say is the fierce urgency of now and acting
upon this.
I would like to point out, listening to our colleagues talk
and the questions here as well, that this underscores another
specific reason why we shouldn't be shutting down government
because this is so vitally important, as we have just heard,
just on the Medicare side alone.
Also, we have learned--and Mr. Chairman, I would like to
submit for the record an article entitled, ``University of
Connecticut Researchers Lead the National Effort to Improve
Drug Manufacturing for the record.
Chairman SMITH. Without objection.
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Mr. LARSON. And the reason I do that is because, in last
year's spending bill, we authorized the FDA to designate five
higher education institutions as national centers for
excellence in advanced and continuous pharmaceutical
manufacturing. This designation would mean investing in
domestic manufacturing and innovation.
Unfortunately, when we continue to struggle to fully fund
the government, the program remains unfunded. So we are here
talking about a problem that needs specific attention. And yes,
Mr. Kelly is right, it does require government funding. But to
not fund these programs creates enormous problem.
Dr. Gralow, in your comments, you talked about continuing
manufacturing and why that is so vitally important. It should
be of interest to everyone. But could you also explain the
current process of batching and why that leads to extra costs
and inefficiency?
Dr. GRALOW. So continuous manufacturing would mean you have
always got ongoing processing of either the active
pharmaceuticals or of the drug. The batching that you referred
to, which is a more standard practice, older model, there is--
every time you shift in and out, these--these are sterile
injectable drugs that go into patients. So, when you have to
switch your assembly line, there is a cost involved with
switching to another drug, switching, you know, to another
ingredient, whatever. And that shuts it down. So the fits and
starts have inherent cost in the system.
So the continuous process of in the background it is always
being made is just more efficient and more resilient because if
something happens, and it disrupts the whole supply chain, you
don't have big batches of something and then not enough of
another.
Mr. LARSON. Mr. Cavacini, has that been your experience at
McKesson, that the process of batching must be an enormous
cost, as opposed to continuous manufacturing?
Mr. CAVACINI. Thank you for the question.
I would like to emphasize that McKesson is a distributor of
pharmaceuticals and not a manufacturer. We sit between the
manufacturer and providers like hospitals and pharmacies and
community providers. We run distribution centers and invest in
inventory to make sure that needed medications are available to
providers and patients where and when they need them.
But, you know, as we look at the generic market--and I
think many generic manufacturers do share their production
lines----
Mr. LARSON. Right.
Mr. CAVACINI [continuing]. And that process, as described
by the doctor, can contribute to cost and waste and delays in
when we need to surge into new products.
Mr. LARSON. Well, thank you. And I remain concerned that we
have to get on top of this process, and all of you have talked
about the raw materials, et cetera. Is it a question that the
United States does not have the raw materials that China and
India have, or do we have the raw materials, we are just not
producing them?
Anyone who would care to----
Mr. CAVACINI. Thanks for that question. I would say that
the U.S. has raw materials, carbon and oxygen and, you know,
chemicals, but we don't have a lot of the formulated
ingredients to make the drugs that we have.
As I said in my comments, there are at least 100 Active
Pharmaceutical Ingredients that the only place you can acquire
those in the world and they are ready to incorporate in a drug
product form is in China. And there is another set of maybe 250
that are only available from India. There are over 600 that are
not available in the U.S. anywhere. So sometimes it is that the
ingredients do not exist in the U.S. We could set up companies
to make those, but it takes considerable amount of time and
will require a lot of investment in those operations.
Mr. LARSON. Thank you, sir.
I yield back.
Chairman SMITH. Mr. Schweikert.
Mr. SCHWEIKERT. Thank you, Mr. Chairman. I would like--with
your permission, I have a number of articles I would like to
submit for the record.
Chairman SMITH. Without objection.
[The information follows:]
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Mr. SCHWEIKERT. Thank you, Mr. Chairman.
This is an area that we have been actually very interested
in in our office and have spent a couple of years looking on. I
am going to run through a couple policy things, and I have a
fascination with Civica. I have actually done a couple of floor
speeches about your model and some of the things you are doing.
One of the things I want to walk through is, Mr.
Chairman,--I am going to submit a series of articles here that
make it very clear that many of the small molecules,
combination molecules, precursors could not actually right now
get permitted to manufacture in the United States because they
produce really, really toxic byproducts.
A series of articles talking about why certain
chemotherapies were coming out of India. The fact of the matter
is we almost don't have a disposal mechanism from the toxic
byproducts. So this may be something the left and the right
could actually talk about is, if you care about the shortage of
these supplies, we need to understand why you don't make them
here. And they produce some really nasty stuff, and we need to
understand that.
Mr. Chairman and Ranking Member, a couple of the other
things also in here is there is a revolution going on out there
in pharmaceutical manufacturing. And I am going to submit some
articles about everything from three--high-speed 3D printing
now making certain small molecule drugs, making it so you no
longer need a very, very expensive clean room, you can do the
cartridges; discussions about new ways to make insulin.
There also are the economic models. And our friend from
Civica here, you are now making, what is it, eight types of
generic insulin?
Mr. COUKELL. Thank you, sir. We are developing the 3 types
of insulin that account for about 80 percent of use in the U.S.
Mr. SCHWEIKERT. And one of the articles I had was saying
eight.
Mr. COUKELL. It is three. It is insulin, glargine, Aspart
and Lyspro, and we will make those available in both vials and
prefilled pens.
Mr. SCHWEIKERT. So, if I come to you and buy five vials, my
price is what?
Mr. COUKELL. What we have said is it will be available to
the consumer, including all of the supply chain and dispensing
costs, for not more than $30 a vial.
Mr. SCHWEIKERT. And 55 for the----
Mr. COUKELL. Fifty-five dollars for five pens.
Mr. SCHWEIKERT. So that is actually cheaper. And this is
the point I wanted to make, because I did this as a floor
speech. We, right now, as a government, we give $16 billion a
year to Big Pharma to buy down the price of insulin. This was a
Democrat bill, $16 billion to Big Pharma to buy down insulin
when they are going to do it cheaper than a subsidized price.
Maybe we need to really think about this co-op model, these new
manufacturing methods, and the ability to do it better, faster,
cheaper.
Sorry, there are just so many things here on the supply
chain.
Would actually Civica ever consider going into something
such as the chemotherapies, which actually do have other real
complications, particularly you would probably have to find
some way to have a high-temperature incinerator for the throw-
off chemicals. Is that something you would consider?
Mr. COUKELL. Absolutely, and thank you for the question. So
let me answer it in two parts, and I will be quick.
One is all of the elements of our model now in terms of
carrying a buffer stock, vetting our manufacturing partners,
having long-term purchase and supply contracts could equally be
applied to cancer drugs. And we are actually looking at that
now. If we were to manufacture them in our own bricks-and-
mortar facility, you would need a dedicated facility for that
because the cytotoxic drugs do require special procedures and
air handling, and so on. So that would take an additional
capital investment over and above, you know, what we have
invested in the current facility.
But it may be in the long run that we say in the U.S. these
drugs are too important not to have such a facility.
Mr. SCHWEIKERT. Thank you. You actually got--you stole my
punchline from me.
Mr. Chairman and fellow members, if I came to you right now
and said in the United States off-patent, generic drugs, are
they more expensive or less expensive than the rest of the
industrialized world--I have a paper here that says they are 16
percent less expensive in the United States. So you actually
have this interesting thing, where we actually have a fairly
competitive model. The non-patented--the non-labeled were
actually less expensive here.
If we could actually work together to deal with the
difficulties in the manufacturing side and also embrace the
fact that there is a revolution coming in even the
manufacturing process, maybe you could actually create a new
renaissance where the discussion of a shortage and pricing just
never comes up again.
And, with that, I yield back, Mr. Chairman.
Chairman SMITH. Mr. Blumenauer.
Mr. BLUMENAUER. Thank you, Mr. Chairman. I find this
hearing fascinating, and I want to follow up on my colleague
from Arizona's conversation about Civica.
I was struck by how you outlined a proposal that--
specifically to address the Generic Sterile Injectable drugs,
non-profit, non-stock, founded by U.S. health systems and
philanthropists.
I am curious as to what the problems are for a broader
application of this model. It seems to me that there are huge
costs that we are incurring now in terms of disruption of
treatment, misallocation of costs that seem to benefit nobody.
Can you describe what the limitations would be to expand your
non-profit, holistic, long-term approach to this supply
problem?
Mr. COUKELL. Thank you for that question, sir. We certainly
aim to continue expanding our model, adding hospitals, adding
drugs, and so on. Whether we are doing these--I will call them
Civica-like practices, buffer inventory, supplier
qualification, and so on--inside a non-profit model or inside a
for-profit model by some of the existing supply chain
stakeholders, I think the friction is the same, which is right
now the system is driving towards one thing which is not
valuing sort of resiliency of the supply chain.
So we have to switch those incentives. And I think that
will allow the Civica model to expand and grow, but also allow
other supply chain entities to step in and have similar
practices.
Mr. BLUMENAUER. Well, I am curious about what the
limitations are to expanding it. It seems to me that the long-
term costs are ultimately higher by having the inefficiencies
that we have described. Is there some reason we can't employ
this through CMS or other Federal agencies to be able to take
your model to scale?
Mr. COUKELL. No, I think we absolutely can and should, and
I think--I am not an economist, but an economist might say that
the stakeholders right now aren't putting a value on those
long-term indirect costs. And so, essentially, what we have to
say is we are willing to pay a bit more not to have those
indirect costs associated with shortages.
Mr. BLUMENAUER. Mr. Chairman, the American consumer pays
the highest prescription drug prices in the world. Most of the
manufacturing is in China or India. The profits are booked to
Ireland, and the taxpayer doesn't get the benefit.
But Americans are the largest market for this, and it seems
to me we are missing the bet if we do not rigorously approach
efforts that are modeled on a non-profit, longer-term
initiative and consider the totality of costs.
In the long run, we are going to end up paying an
inordinate price for the inefficiencies, the misplaced profits,
and the problems for treatment, which can have disastrous
consequences. And I would hope that there is an opportunity for
us to take a step back and look at this model, which appears to
be delivering results in a way that we all should embrace and
think about ways to expand the sweep of it, rather than what we
are doing now, where the American consumer ends up paying more,
less overall benefit at a time when we desperately need to get
more out of the system.
I appreciate this hearing. It was fascinating, looking at
some of these models and thinking about the costs and
consequences, and I hope we will get to a point where we can
look at the overall approach and be able to determine better
quality of service, lower overall costs, and better performance
for American patients.
Thank you, and I yield back.
Chairman SMITH. Thank you.
Mr. LaHood.
Mr. LaHOOD. Well, thank you, Mr. Chairman, for having this
hearing today. I want to thank the witnesses for your valuable
testimony here today.
The title of today's hearing, ``Examining Chronic Drug
Shortages in the United States,'' is real and it is acute. And,
like many of my colleagues, I have heard directly from my
constituents on the issues of persistent drug shortages and the
ramifications and challenges that affect them and their loved
ones.
I have a district that has a lot of rural territory, and
timely access to lifesaving medications is essential to
safeguarding patient health.
During my time in Congress, I have had the great pleasure
of working with an organization in my district, Illinois
CancerCare, ILC, which is a foundation with locations
throughout most of the rural parts of my district and
specializes in the treatment of patients with cancer and blood
disorders. ILC is currently having an incredibly difficult time
locating a supply of Rydapt, which--they have three patients
suffering from acute leukemia requiring this medication. ILC is
spending countless hours calling specialty pharmacists to ask
about their supply chain, and the frustrations with
coordinating with the patient's prescription insurance to allow
for out-of-network overrides has been significant, and ensuring
timely shipment to avoid potential delays. These patient
stories showcase why reducing drug shortages is of paramount
importance.
I have a question for Dr. Schleicher. As I mentioned,
cancer patients are being forced to possibly delay treatment
because the drugs they need are in short supply. Are there
potential disparities between patients being treated for cancer
at a facility in a rural area, compared to a more urban area?
Dr. Schleicher. Thank you very much for the question,
Congressman.
My concern is potentially yes, especially with some of the
suggestions about really emphasizing hospitals having these
drugs. Obviously, there is an importance for hospitals, but
also a lot of these community oncology practices like the one
you are mentioning in rural America are not part of a hospital.
And, where we practice, Tennessee Oncology is very similar
to the practice in Illinois. We have 35 clinics. Most of them
are rural. We help cover hospitals, but we are not part of a
hospital system. So we deliver the treatment in our treatment
rooms where patients live. And, if hospitals get a drug, then
that means we will not if there is a limited supply. So, to
that point, we need to make sure that any solutions don't
further exacerbate disparities based on where patients live.
Or, in our case, we take all the uninsured patients in the
state. One of our large hospital systems, which is actually a
340B, doesn't see uninsured or even Medicaid patients in the
outpatient. So, if we were not able to have those drugs,
patients would, one, not be able to get them close to home; and
two, certain patients, either without ability to pay or
insurance status, would be unable to get them, as well.
Mr. LaHOOD. Thank you for that answer. I am going to pivot
now to another focus, which is supply chains and the dependency
on foreign countries.
Between this committee and the Select Committee on China,
which I also serve on, we regularly discuss our global economy
and the geopolitical challenges we face, and it is important
for this committee to explore proactive measures to address the
underlying causes of drug shortages and strengthen medication
supply chains that are imperative to ensuring continuity of
care and promote overall health care resilience.
It is no secret that the U.S. drug supply is heavily
dependent on foreign suppliers. I share the concerns of many of
my colleagues as it pertains to the CCP, Chinese Communist
Party, and allowing them to operate under a different set of
rules and standards, which they do. Our allies around the globe
are craving U.S. leadership in this space. It is important that
we step up to the plate and find ways to support American
businesses looking to prioritize more domestic drug
manufacturing.
I have been proud to work--I am proud of the work that we
have done with this Congress to identify instances of malign
activities and practices by foreign countries like China that
leave the U.S. more vulnerable, but we need to do more and do
it quickly.
I will now turn to Dr. Schondelmeyer. Can you provide an
example of unfair trade practices that foreign countries,
particularly China, use to undercut American drug
manufacturing?
Mr. SCHONDELMEYER. Thank you for that question.
China, over time, has developed policies as a government
about sectors of the pharmaceutical market that they want to
enter and, in fact, dominate. They subsidize the companies that
are involved, they develop the infrastructure hubs, or they
have whole areas larger than the D.C. area that are
manufacturing products. So they subsidize them.
Then they at times engage in predatory pricing or even
dumping of product in the market to drive other players out of
the market. And one category of drugs that particularly China
dominates is the fermentation antibiotics. About 80 percent of
the antibiotics in the world are produced in China. And so, if
they went out of the market, or if there was a nuclear power
plant in the middle of the three or four companies that make
those antibiotics and we had a Chernobyl incident, we wouldn't
have antibiotics, and it would--yes, Civica and others could
make antibiotics, but they can't do it tomorrow, they can't do
it next year. We are talking years down the line to develop the
capacity to replace that.
So China has used a number of tactics, clear strategy,
investing in infrastructure, predatory pricing, and dumping in
the market.
Mr. LaHOOD. Thank you for that.
I yield back.
Chairman SMITH. Mr. Pascrell.
Mr. PASCRELL. Good morning, Mr. Chairman.
Chairman SMITH. Good morning.
Mr. PASCRELL. To our witnesses, a great group of witnesses
this morning. I can think of few subjects that are more
important than easing access to lifesaving medicines.
Americans received terrific news last week that the
Medicare has begun its historic negotiation to lower the price
of 10 popular drugs. And that will go on each year. Starting
September the first, our seniors will see price cuts for those
drugs. Similarly, the cost of insulin is now capped at $35 for
millions of Americans, thanks to the action that we took.
We want to bring safe, plentiful, and less expensive
prescription drugs to Americans. I think that is all of our
goal. Congress has a big role in protecting these medicines,
and that includes addressing the shortages, which we spent a
lot of time on this morning.
The testimony today should upset a lot of us, that science,
research, and industry has come so far to create lifesaving
medicines, yet gravely ill patients might be denied access
because of shortages. And that is just unacceptable, I hope, to
all of us.
In the wake of the COVID pandemic, we recognized the dire
need for America to fix our supply chains. And we did it. We
have a lot more to do. For too long, our nation has been
relying on other countries for raw materials, big and small.
Domestic manufacturing is a key to unlocking our supply chain
challenges. We have made important changes. We have brought
jobs and technical capacity back home. That is a little
progress. But we are running out of cancer medicines. We just
simply are. And we have not made enough progress here on our
home front. And when we still rely on China for so much, we
have a lot of work to do.
So Mr. Ballreich, thank you for your work at Johns Hopkins.
Your written testimony is very instructive to me. I could speak
for myself. You cited a cancer drug manufacturer who relied on
a plant in India that was red-flagged by the FDA. It sends me
back to 15 years ago, when we debated here, when we debated the
question about drugs from Canada being properly researched,
studied to see if they were pure. A lot of folks from the
Midwest bought those drugs quickly because they were cheaper.
But we did not know, really, the quality. Do you remember that?
I remember it like it happened yesterday.
So how much should Americans be concerned about the quality
of the medicine coming from overseas right now?
Mr. BALLREICH. Great question. I think the Americans should
not necessarily be concerned. We have an excellent FDA.
That being said, medicines being sourced overseas, it does
represent a susceptibility to supply chain. The FDA is under
tremendous stress to make sure all of the parts of the supply
chain are thoroughly inspected. You know, using FDA's own
inspection citation research database, it is a little scary to
actually see how many facilities are cited, how many facilities
have inspections. And this is part of the whole transparency
aspect.
As a researcher, I rely on data to understand the
situation. There is a lack of transparency. More transparency
will give us better information.
Mr. PASCRELL. I want to get in one more question before it
is time out.
Mr. BALLREICH. Ah, yes, please.
Mr. PASCRELL. You argue that most of the--this is what you
say in your testimony, that most of the shortages are the
product of manufacturers themselves. Well, can you expand on
that? What does that mean?
Mr. BALLREICH. Yes.
Mr. PASCRELL. What are you trying to tell us?
Mr. BALLREICH. So most are quality issues. Companies are
not necessarily incentivized to invest in their supply chain,
to invest in their quality. As it has been noted, generics,
they compete on price. You know, companies that procure
generics generally want to find the generic at the cheapest
cost. That does not incentivize that generic company to invest
in additional capacity. It does not incentivize that generic
company to have thorough oversight of their quality.
So, if you are just competing on price, lower cost means
you have a better market position.
Mr. PASCRELL. Thank you.
Thank you, Mr. Speaker.
Chairman SMITH. Thank you.
Dr. Wenstrup.
Dr. WENSTRUP. Thank you, Mr. Chairman, Ranking Member Neal,
and all those that are here today. I appreciate you being here
to examine this problem that we are experiencing in the United
States of America. This has been an issue for me for probably
five years, and certainly the pandemic has highlighted and
exacerbated this tremendously. So I really appreciate the
testimonies here today.
These drug shortages, these vulnerabilities in our supply
chain, they put our national security at risk. They put our
national health security at risk. I am a soldier. I served in
Iraq. If you would have told me that my protective equipment
and my pharmaceuticals relied on an adversary, China, I would
say, ``How in the heck did we get here? How did our military
get here?''
This is a huge problem, and I think it is underestimated,
and we are late to the game in discussing it, but I am glad
that we are. Right now in the United States, there are 252
drugs in shortage, lifesaving drugs: albuterol for asthma,
chemotherapy drugs. This is serious, serious stuff for the
United States of America, and our vulnerability is huge right
now.
And the bottom line up front is we have an over-reliance on
foreign manufacturers. That is the bottom line. And in many
ways, we have regulated our way there.
I would tend to disagree with what was just said about our
FDA. I am not trying to slam them, but, if they are not in
those labs in China, and especially since the pandemic, it is a
problem, you know, and so we will talk about not only the
quantity of medications available that is the problem, but the
quality of medications available.
I have served in the Reserves for 25 years, I just retired
last year. And, before I retired, I was in uniform and in my
administrative position. I was clinical at Walter Reed. My
administrative position I had the opportunity to work with the
defense logistics medical supply chain counsel, working to
reduce or eliminate our supply chain challenges, what they are,
how severe the risk is, why there is a risk, and how they can
start to do it. But they can't do it without us. We cannot turn
this around unless we make some changes here in the United
States, whether it has to do with regulation or not. But the
risk is there. And these are essential medical products.
So it is not only domestic, but it is geographic. Puerto
Rico does a tremendous job in supplying many of our medical
supplies. They have two hurricanes, we can't get saline here.
That is a problem. So it is not only the ability to have the
capabilities and opportunities to do it here, we can't just
have it in one place. We have to have a diverse supply chain.
And working with our allies is fine with me too, but
certainly not relying on an adversary. Because the problem is
it is just like that in a darker day, they cut us off. And as
the CEO of a generic manufacturer in Europe said, ``If China
cuts us off, our supply chain--our shelves are empty in two
months.'' That is a quote.
So today, I plan to release a discussion draft of
legislation I have been working on for years. And I want to
start with our critical battlefield medicines, and provide new,
powerful incentives to locate manufacturing of these medical
products in the United States, all the way down to the Active
Pharmaceutical Ingredients. And I look forward to officially
introducing this bill. I hope my colleagues on this committee
will join me. Take a look at it, offer any advice you may have
to it, and I hope it serves as a template to go across the
board to serve all maladies, not just in the battlefield.
Dr. Schondelmeyer, can you describe as best you can the
degree to which our supply chain for drugs is dependent on
foreign sources, both quantity and quality?
You know, I would like to remind people it wasn't maybe 15
years ago we had 250 Americans die from tainted heparin. Right?
And the opportunity for sabotage is there. There are all types
of things we need to be concerned about as we go forward.
Mr. SCHONDELMEYER. I have commented several times about the
quantity; quality is an important issue. And as you pointed
out, the heparin, more recently we have had eyedrops come out
of India that were contaminated and caused people to lose their
eyes or even die because of that. We have had baby formula
contaminated with bacteria that caused some deaths of babies
using baby formula. I think quality is a major concern.
And remember, I said that India is responsible for 45, 50
percent of all the generics that come to the U.S. India does
not participate in the International Council on Harmonization
of Drug Regulation. The US does, Canada does, Mexico, Europe,
most major westernized countries participate in that group.
India does not. We, as a country, should not continue buying
product from India. We should leverage them to participate in
that conference that will improve the quality of their
products. And that is one example of ways of leveraging them.
So we need to be concerned about quality.
Second, we have had several people comment about we are
going to have to pay more for generics. I agree with that. But
you don't indiscriminately pay more for all generics, because
some companies will continue to free-ride on that and take the
higher price and keep cutting the cost.
So we need quality measures that are specific, that are
product-specific, producer-specific, and reliable, and then we
can pay more for the companies who meet those criteria.
Dr. WENSTRUP. Thank you, and I yield back.
Chairman SMITH. Thank you.
Mr. Kustoff.
Mr. KUSTOFF. Thank you, Mr. Chairman. Mr. Chairman, I seek
unanimous consent to enter into the record Saint Jude
Children's Research Hospital's statement on their perspective
on the impact that chronic drug shortages have on the treatment
of pediatric cancers.
Chairman SMITH. Without objection.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. KUSTOFF. Saint Jude Hospital, which is located in
Memphis, Tennessee, is one of the world's largest pediatric
cancer research hospitals in the world. The statement they are
submitting into the record discusses the current childhood
cancer drug shortages, especially the Generic Sterile
Injectables.
Saint Jude believes that resilience in Generic Sterile
Injectable drug supply must be developed to ensure that they
can continue to focus on their efforts to care for and treat
their patients, rather than procure drugs in short supply.
Thank you, Mr. Chairman.
If I could, Dr. Schleicher, thank you. Thank you to all the
witnesses for appearing today. Dr. Schleicher, I represent part
of Memphis, Tennessee, in west Tennessee to the west of you.
And, if I could, I would like to read a portion of a column
written by Dr. Sylvia Richey. You may know her. She is the
chief medical officer for the West Cancer Clinic that is in
Memphis or Germantown, Tennessee. This is a column, or part of
it, that she wrote on May 28, 2023, in the Daily Memphian. And
I do this because you gave us similar stories about your
patients.
She says, in part, ``Cancer patients throughout the country
are dependent on chemotherapy drugs for their lives. And now
there is a nationwide shortage of two drugs that are the
backbone of many cancer treatments. Many of these treatments
are for cancers that are curable,'' what you said, ``and we
don't want to miss those opportunities. This shortage is
causing oncologists to make difficult decisions.'' That is
similar to what you talked about. ``Treatments are being
skipped and delayed, doses are being reduced. Treatment plans
are being changed and sequences of usual treatments are being
altered. Doctors should never have to put their patients in
these situations. Oncologists are literally rationing
chemotherapy.''
You know, you gave the story about the two patients from
your clinic. Where we are today, February of 2024, is it any
different or any better than during the height of COVID?
Dr. SCHLEICHER. Yes, thank you very much, Congressman
Kustoff, and I know Dr. Richey well.
So it is different drugs now, but it is not over. Cisplatin
and carboplatin were the big ones that hit us last summer. I
know seven patients at our group in the last, you know, few
months with CNS lymphoma for which their treatment was delayed,
awaiting another generic injectable, methotrexate.
Vinblastine is commonly used in Hodgkin's lymphoma, which
is very curable. We thought we were going to run completely out
about three weeks ago, and then ended up getting a supply. And
again, in hindsight, we got a supply, but week by week we
actually thought we were going to run out and have to figure
out a plan.
I heard just last week sandostatin, another drug used for
carcinoid tumors, is running out right now, as well. So the
carboplatin and cisplatin were so common and they are in so
many regimens that that was a big hit, and it was the first
that I have ever experienced.
But it is not over. Still, three drugs just in the last few
months we are still having problems with.
Mr. KUSTOFF. Thank you, Doctor.
Dr. Schondelmeyer, if I could with you, thank you for
appearing today. Dr. Richey, in her column that I just cited a
moment ago, I think this is her closing line and I wanted to
ask you about it because we have been talking about solutions.
You all have suggested solutions. You have talked about the
different countries that we are relying on, and maybe ways that
Congress can alleviate.
But let me ask you about the last statement in Dr. Richey's
column: ``We need the FDA and the White House to focus on
reliable manufacturing of generic drugs, and making sure the
American people have access to the treatments that they need
when they need them.'' So my question to you is, in the very
short term, are there things that the FDA and the White House
could do today?
Mr. SCHONDELMEYER. Yes, I think there are.
First, though, I would remind us that we need to look at
what has FDA been authorized to do and appropriated to do by
Congress. And, to the best of my knowledge, their
authorizations don't include looking at economics or the market
for pharmaceuticals. And we may want to delegate that to other
agencies other than the FDA, and that could be done.
There are some things that have already been done, not
necessarily by FDA, but by various administrations, both the
current and previous administrations. They funded Flow
Pharmaceuticals to make API for 25 critical drugs needed in the
U.S., and they are working on that. They are making, I don't
know how many, 7 or 8 so far, and they will make 25, and that
has been supplemented by funding from the state of Virginia.
Civica, of course, we have heard about, and that was by
hospitals and players from the market who came up to provide
drugs.
And then in Missouri, there is an API innovation center
that was funded by the State of Missouri for development, to
develop an industry to produce API in the State of Missouri,
and to do just what we have been talking about, reshoring.
So there are--we could continue, but we need more than just
Flow and API and Civica. We need 4 or 5 or 10 of each of those,
not just one of each of those.
Mr. KUSTOFF. Thank you, Doctor.
Mr. Chairman, I yield back.
Chairman SMITH. Thank you.
Mr. Davis.
Mr. DAVIS. Thank you, Mr. Chairman, and let me thank you
for this hearing. I also want to thank all of our witnesses.
Your expressions and answers have been so informative. And,
as I listened to Dr. Wenstrup a moment ago, it just reminded me
that this is Black History Month, and I am reminded of a song
that a woman named Billie Holiday used to sing. The lyrics went
sort of like this. ``Them that has got shall get. Them that has
not shall lose. So the Bible says, and that still is the rule.
Mama may have, Papa may have, but God bless the child that has
got his own.''
And, given the impact and the influence that China, India,
perhaps even other countries may have on the production,
control, and distribution of what we need, I am ready to join
with Dr. Wenstrup with the legislation that you have got ready
to go, because all of the other things that we discussed and
talk about, are they really solutions or are they the solutions
that we need?
And I am convinced that no matter how long it takes, how
much it costs, that we need to be in the business of producing
more of what we need.
But, Dr. Coukell, one of the solutions that people are
talking about now and that are being proposed by stakeholders
is a buffer stockpile, where manufacturers of--and hospitals
would maintain a six-month supply of a product and receive some
type of add-on payment or other incentive for maintaining
stockpile. So it is stockpiling. What do you think of that as a
possibility, or a way of alleviating some of the problems?
Mr. COUKELL. Thank you for that question, sir. I think we
need a stockpile, and I will tell you why.
Even if we have got four companies making versions of the
same drug, if one of them drops out of the market by choice, or
because they have a quality problem, it takes the rest time to
increase their production and generate additional batches. And,
if we don't have a buffer stock, we will have a shortage. And
so having that additional stockpile buffers and allows the
market to respond so we have continuity of supply through that.
I don't think it should sit at the hospital level. I think
it should sit upstream at a wholesaler or at a manufacturer,
and that allows for much more efficient allocation. And the
provider, you know, is not set up to manage a six-month
inventory, but that exact approach, I think, would take us a
long way towards resilience.
Mr. DAVIS. Thank you--yes.
Dr. SCHLEICHER. Just to add to that comment, and thank you
for the question, I similarly would be concerned if hospitals
were stockpiling, only because that could worsen shortages at
non-hospitals if it is at the provider level. And, at least in
our market, we are usually the provider in rural America, and
that would hurt access for our patients.
And I mentioned some of the insurance issues beforehand.
Mr. DAVIS. Thank you very much. I was thinking specifically
of rural America and the challenges and difficulties in those
areas.
Thank you very much, Mr. Chairman, I yield back.
Mr. SMITH of Nebraska [presiding]. Thank you. I will next
recognize Dr. Ferguson for five minutes.
Dr. FERGUSON. Thank you, Mr. Chairman, and thank all of you
all for being here today. It is a shame on topics like this we
only get just a few minutes to delve into it.
But it seems that we have--and I say we, America--has three
major failures in what we are talking about today: one of them
is a regulatory failure; the other one is a trade failure; and
the other one is a marketplace failure. Okay?
So, as I go through this, I want to touch on each of those
in the beginning, but I also want to do it with the notion
that, no matter what we do as a nation, when we decide to fix
something we generally can find a way to do it. We may not
always agree specifically. But let's look at the threat that we
had to America with semiconductor production, and this body
voted to spend a lot of money to make sure that we had access
to chip production. And I would think that we might want to
consider that in the same vein as it relates to the production
of the most basic pharmaceutical products.
But as I go through this, I want to ask each of--you know,
a couple of you some specific questions as it relates to the
regulatory failure.
Mr. Coukell, if you were going to look at the regulatory
environment, give me two things real quickly that if we could
change dramatically would have an impact on manufacturing here
in the U.S.
Mr. COUKELL. Thank you for that question, sir.
You know, we see the FDA as a key part of ensuring quality
across the system. We look to them to identify poor-quality
facilities, and we look to their guidance on how to ensure good
quality. But they are not often in--especially these overseas
facilities--as often as we would like them to be. And so we may
have a situation where domestic facilities are getting
inspected on a regular basis, but we are not having the
insights that we might need on the overseas facilities.
Dr. FERGUSON. Okay. You did not mention the--you mentioned
the FDA. What about the EPA? Isn't there an environmental
component that, as my colleague from Arizona pointed out, in
many cases we can't make some of the very basic things here in
America because of the EPA. Shouldn't we be investing in not
only the production of that, but technologies that allow us to
meet our own regulatory rules here so that we can produce it
here in America?
Mr. COUKELL. So we are a manufacturer of finished dosage
drugs, so nothing comes out of our facilities except finished
dosage drugs. There are no waste products.
Dr. FERGUSON. Yes.
Mr. COUKELL. But, if you are making API, that is
essentially a chemical plant, and there are waste products. And
several witnesses and members today have talked about
continuous manufacturing of API, which is a newer technology
for API which produces much less waste.
Dr. FERGUSON. Yes, all right----
Mr. COUKELL. And so in terms of bringing it back, that may
be the future for the U.S.
Dr. FERGUSON. So there is a regulatory component.
I mentioned a trade component. Dr. Schondelmeyer, two
things. With trade, can you speak to how important it is that
we protect our intellectual property here in the U.S. and that
we create a level playing field with countries that have unfair
practices?
Mr. SCHONDELMEYER. Well, certainly, intellectual property
is a valuable asset and needs to be protected. By and large,
the drug shortage issue isn't centered around intellectual
property issues, however. It may be an issue on the brand name
product sides and products like Ozempic, Wegovy, and Zepbound.
But on the drug shortages, remember, those are largely
generic and sterile injectables. So intellectual property isn't
the major issue in that component.
Dr. FERGUSON. Okay.
Mr. SCHONDELMEYER. But there are plenty of trade issues
that do affect drug shortages.
Dr. FERGUSON. All right. You know, we are going to have to
come up with some short-term solutions.
Mr. SCHONDELMEYER. Right.
Dr. FERGUSON. And we are going to have to come up with
long-term solutions that are going to require investment.
Mr. SCHONDELMEYER. Yes.
Dr. FERGUSON. You know, we have talked about antibiotics.
AMR is very important. We have we--you know, the next pandemic
could be bacterial--and not viral--in nature. And we have been
working in a both a bipartisan and bicameral way to address
that with the PASTEUR Act that fixes a marketplace problem,
where we are not able to pull drugs into the marketplace. We do
the basic research, we do the basic investment, but these are
usually done by startups that are strapped for cash, and we
don't have a stable marketplace. And the PASTEUR Act fixes that
because it is a pull incentive to get it into the market.
Doctor, do you believe that that would be helpful in the
near term in developing new antibiotics to fight resistant
bacteria?
Mr. SCHONDELMEYER. Yes. Antibiotics are a concern anyway,
because we have resistance and issues, and the ones--the
antibiotics we have that do work, many of them are made in
China and we are in trouble if they put a trade barrier in
place, anyway.
So, yes, we must focus on antibiotics, and that does
involve intellectual property and stimulation of production in
the U.S.
Dr. FERGUSON. Thank you, Doctor. Thank you all of you for
your time and expertise.
I yield back.
Mr. SMITH of Nebraska. Thank you. I now recognize Mr. Hern
for five minutes.
Mr. HERN. Thank you, Mr. Chairman, for holding this hearing
today, and I want to thank the witnesses for being here today
to help us better understand the issue we have at hand.
For the past year, I have been getting calls and written
messages from distraught constituents that weren't able to get
their prescription drugs they needed, everything from ADHD
medications to chemotherapy treatments. I can only imagine the
distress patients feel when they hear that their treatments
could be paused today because of the supply chain issue. As we
all know, lapses in treatment can be devastating for patients'
health outcomes.
I have also heard from hospitals in my district about the
effect drug shortages have had on them. In Oklahoma
specifically, they have been dealing with the shortages of
clindamycin, one of the few effective drugs against MRSA, and
they now have to restrict the use of this injectable.
Physicians are having to switch orders to other oral
antibiotics, even if it is not ideal for their patient. Not
only does this affect daily patient care; physicians now worry
about how the overuse of these broad spectrum antibiotics will
contribute to antimicrobial resistance. This is a clear example
of how having a stable supply of drugs is a public safety
issue.
In addition, there is a real concern from hospitals that,
if cancer drug shortages continue, they will need to consider
triaging patients and no longer treating palliative care
patients. What a sad and grim thought that is.
The COVID pandemic exposed how fragile our supply chains
really are, and it is clear to me that the drug supply chain is
no different. It is extremely concerning that, even as the
pandemic ended, drug shortages still do not subside.
As you all have highlighted today, the drug supply chain is
complicated, with many different factors able to cause a
disruption. We have heard today how drug shortages affect
patients, health systems, and the negative effects they have on
public health and safety.
I am also curious as to how the drug shortages not only
affect those we have mentioned today, but the drug market as a
whole.
Dr. Gralow, it is interesting to me how you brought up the
topic of clinical trials in the context of drug shortages. How
do you think drug shortages affect clinical trials,
particularly combination drug trials?
Dr. GRALOW. Thank you for that question.
Well, an example I gave was of a clinical trial that
supplied both a standard of care, which was the drug that they
were looking for, as well as comparing it to an experimental
arm, where we tested would it be better or not. What we found
during these drug shortages was most clinical trials didn't
cover the standard of care arm, so that option of being able to
go in a clinical trial and get the standard of care as one of
two choices wasn't available for most.
You asked about combinations. A lot of new agents that we
test are built on the backbone of old drugs. So you would test
maybe the standard drug plus or minus the new drug. And, if you
don't have the standard drug, that trial just gets shut down,
you know, because that is covered by standard of care.
So our clinical trials were affected by these drug
shortages, paused. Many of them couldn't continue for a while.
Mr. HERN. So these--you know, these could affect--these
affect delays, new treatments being brought to the market. And
how will this ultimately affect patients who are waiting for
these treatments that are so badly needed?
Dr. GRALOW. We need to speed up our trials. We need to get
our promising new therapies tested and, if they are effective,
out to the patients as soon as possible.
So in these cases, the drug shortages can delay the
evidence that is required to determine if a drug should be
approved and if it is better than something prior. So it is
also holding back research.
Mr. HERN. Thank you for your thoughtfulness.
And Mr. Chairman, I yield back.
Mr. SMITH of Nebraska. Thank you, Mr. Hern. I now recognize
Ms. Sanchez for five minutes.
Ms. SANCHEZ. Thank you. I want to thank the chairman and
Ranking Member Neal for holding this hearing on a very
important issue today, and I want to thank our witnesses for
their thoughtful testimony.
A stable, affordable drug supply is critical to our
nation's public health and its infrastructure. And patients who
experience drug shortages report increased out-of-pocket costs,
increased rates of drug errors, sometimes adverse health
effects, and even increased mortality. So we do need to get our
hands around this issue.
I just want folks to know that the Biden Administration is
aware of those gaps, and I want to talk about a few things that
we have done in response.
In November, President Biden announced additional
investment in our domestic production of materials for
injectable medicines through the Defense Production Act. And
Democrats have also worked to improve access and reduce the
cost of care through the Inflation Reduction Act. We put money
back in millions of Medicare recipients' pockets and capped
out-of-pocket prescription costs and insulin costs at $35 a
month, and that has very real impacts. I hear about that from
my constituents.
But we are here today to talk about additional solutions to
the related and growing problem that affects every American
and, disproportionately, unfortunately, impacts disadvantaged
communities more. Over 80 percent of drugs reported in shortage
are generics or branded generics, and the FDA reported that in
2023 that pain management and cardiovascular diseases were the
top disease areas with drug shortages and, sadly, two
diseases--these are two diseases that disproportionately affect
Black and Latino patients more. Medicaid enrollees are also
more likely to be affected by those drug shortages.
Dr. Gralow, can you expand on how drug shortages exacerbate
existing health gaps in access, care, and quality?
Dr. GRALOW. Thanks for that question. It is always the
underserved who, when the system is stressed, become more
underserved. So the inequities just get exacerbated.
Whether it is racial and ethnic minorities, whether it is
the rural communities, whether it is older populations, the
ability to get access to these drugs in the cancer drug
shortages is limited. You don't have as many options if you
have to drive farther, take more time off work, et cetera, et
cetera. You just have less options. So sadly, it was very clear
that these drug shortages just exacerbated the already existing
inequities in access to care.
Ms. SANCHEZ. Thank you. And how has that impacted
providers' ability to practice medicine?
Dr. GRALOW. I think we have talked about some heart-
wrenching examples of how do you make these choices? We are
calling them impossible choices. How do you decide who gets a
potentially lifesaving or life-prolonging drug?
We have, you know, had our members have to make decisions
about taking patients who have metastatic disease that might
not be curable, but they are being held in--it is being held in
check, and they are still living a productive life, and
removing them from treatment so a newly diagnosed patient with
a curable disease could get the drug. I mean, how do you make
that kind of decision? How do you explain that to the patient,
to the family? It is impossible.
Ms. SANCHEZ. Thank you for your testimony, Dr. Gralow.
Quality deficiencies in our supply chains cause those
devastating drug shortages, and the Biden Administration
created the Council on Supply Chain Resilience to try to
address this. HHS is also working to designate a new supply
chain resilience and shortage coordinator to build on that
work.
Dr. Schondelmeyer, you also discussed the need to shift
drug manufacturing for Active Pharmaceutical Ingredients from
the Asian Pacific region to the Western Hemisphere. What are
some of the potential barriers for reshoring our API supply
chains to Mexico, Canada, or other countries in the Americas?
Mr. SCHONDELMEYER. Thanks for that question. We have heard
people address this around the edges. That is, the reason
products have gone to Asia rather than the West is they have
lower environmental regulation, lower labor costs, and other
government policies that encourage them to work there. So we
need to begin to do the same things, evaluate can we develop
technologies that make this possible within the U.S. or within
Mexico or Canada and the Western--in terms of environmental
conditions.
How can we help lower the cost? This investment in
continuous manufacturing that people have talked about, this is
like--remember Henry Ford, when he started making cars on the
assembly line? That was a continuous flow process. Before, we
made cars one at a time. We are still making drugs one batch at
a time like one batch of cookies at a time. We need a
continuous flow process. It is leaner, greener, more effective,
more efficient in a lot of ways. And so--but we need to invest
and help the industry in America and in Mexico and Canada and
the West develop the capital costs and capital equipment to
produce drugs efficiently.
And then finally, I think we tie this with increased
transparency and disclosure. The Government of New Zealand has
a database called Medsafe, and they require in New Zealand
every product that is approved to be on the market to disclose
their supply chain. What is the name of the company who makes
the API, and where is the factory located, and the street
address, and what is the company that makes the finished dosage
form and address, street address? And you can actually go to
the Medsafe New Zealand website and look up any drug product in
their market and tell what its supply chain is.
Ms. SANCHEZ. We do that----
Mr. SCHONDELMEYER. We need a----
Ms. SANCHEZ. We do that with our defense contracting that
way.
Mr. SCHONDELMEYER. Yes, and we need a similar database in
the U.S.
Ms. SANCHEZ. Yes. Thank you so much for your testimony. I
thank all of you.
And I yield back.
Mr. SMITH of Nebraska. Thank you. I now recognize Mr. Estes
for five minutes.
Mr. ESTES. Well, thank you, Mr. Chairman, and I appreciate
the opportunity to talk about this important topic today. And
thank you to all our panelists for joining us today to go
through this important issue.
Americans depend on a robust health care system in the
United States, and we are grateful to the countless doctors and
nurses who care for us in times of sickness and great
difficulty. We have come to expect that when we are facing a
health care crisis, health care providers will be ready to
assist us.
Unfortunately, many Americans are now facing a drug
shortage crisis, causing delays in treatment that produces
unnecessary hardships and cost. This can be especially
devastating to folks living in rural parts of our country. In
my district in Kansas, a large part of our population lives
outside of a major metropolitan area, relying on community and
critical access hospitals for care. When the medical supply
chain breaks down, too often it is the rural Kansans I
represent who are at the end of the line and are impacted the
most.
Unfortunately, the problems don't just stem from one part
of our system. An over-reliance on foreign countries like China
and India, complex supply chains and distribution processes,
and unsustainable Medicare reimbursements aren't just hurting
many drug manufacturers, they are hurting Americans who rely on
those medicines.
A particular area of concern, as we have talked about
before, is the amount of Active Pharmaceutical Ingredients, or
API, that is produced in China. Kansans have rightfully shared
their concerns with me about relying so heavily on China to
produce these critical medicines that we rely on every day. And
it is not just specialty drugs or uncommon medicines, it is
products like ibuprofen, hydrocortisone, and acetaminophen.
When Americans are reaching for a common, over-the-counter
medicine to relieve a headache or a backache, they are more
likely opening a pill bottle with drugs from China.
While this has been a growing problem for a while, the
COVID-19 pandemic highlighted the awareness and exposed the
potential pitfalls of ceding our critical medical manufacturing
processes overseas. Now, with drug shortages throughout the
country, we are reaping the detriments of depending on China
and others for our pharmaceuticals.
Dr. Schondelmeyer, you talked a lot earlier, and I wanted
to follow up on a couple of things that you had mentioned. You
know, typically or historically, how much finished product and
API has been produced domestically, kind of as a percentage or
component versus internationally?
Mr. SCHONDELMEYER. Well, 30 years ago, the majority of API
was made in the U.S. and finished dosage forms were made in the
U.S. But over the last 30 years or so, that has moved to the
Asian market, just like almost all consumer goods.
You know, if you listen to Mr. Wonderful on Shark Tank, he
will say, ``I am going to take that product and I am going to
move it to Asia and decrease your cost of production.'' That
has happened in pharmaceuticals, too, but we haven't paid
attention to the quality and other ramifications of that, and
now we are paying the price for that, that we haven't kept the
quality up when we did that.
Mr. ESTES. And how open or how available is it for the FDA
to test and inspect and make sure that there is good quality,
safe--in that development in a country like China or India or
someplace else?
Mr. SCHONDELMEYER. Well, the first thing that I am sure
you, as, you know, Members of Congress, realize is that when we
send a person from the FDA, an official representative of our
government to China, we have to notify China ahead of time that
they are coming and the purpose of their visit. And so
suddenly, the factory gets whitewashed, and all of the problems
they might have get cleaned up, and you don't find many
problems when you go inspect it.
And, secondly, just the cost in time and budget to--for FDA
to inspect these facilities exceeds the resources that they
have, anyway.
So we really can't regulate factories in China like we
would factories in Canada or Mexico or the U.S. because of time
and cost and because of the government helping those companies
hide things they don't want people to see.
Mr. ESTES. Yes, and I am just so glad that you all have
been here talking through this at this hearing. It is--it
really became exposed during COVID-19, the risk that we are at
for the country. And we saw countries, as mentioned earlier,
India threatened to not release pharmaceuticals and drugs to
help us, and we saw the similar comments coming out of China,
more for some of the equipment and manufacturing that they made
there. So it highlights how important it is to bring that back
to the United States.
So thank you, and I yield back, Mr. Chairman.
Mr. SMITH of Nebraska. Thank you. I now recognize Ms.
Sewell for five minutes.
Ms. SEWELL. First I would like to thank all of our
witnesses for being here today.
Chronic drug shortages are having a detrimental effect on
the health of patients and providers across the country. Access
and affordability are the key components of health equity, yet
84 percent of generic drugs experience shortages. These
shortages have had a disproportionate impact on the most
vulnerable in our communities.
In the spring of my very first year in Congress, nine
Alabamians died in one of the worst known cases of drug
shortage-related deaths at the time. Their deaths were
attributed to bacterial contamination of a hand-mixed batch of
liquid nitrogen because the pre-mixed liquid wasn't available.
Mr. Chairman, I would like to enter into the committee
record this article by CBS highlighting the 2011 public health
crisis created by drug shortages in my home state of Alabama.
Mr. SMITH of Nebraska. Without objection, so ordered.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. SEWELL. Now, over a decade later, drug shortages
continue to compromise patient care and threaten lives. As a
representative of a constituency with high rates of chronic
illness, I am particularly concerned about these shortages. My
citizens, the citizens in my district, have historically
struggled to afford their medication and access to basic health
care. Drug shortages only exacerbate these challenges.
There is a story of Gary. Gary is a constituent of mine
from Marengo County, Alabama. He is a veteran who is prescribed
a monthly pain medication for PTSD-induced pain. Just this past
week Gary drove from his rural home to the nearest city, two
hours away, only to be told that his pain medication was not in
stock. Unbeknownst to him, pain medication across the country
is experiencing one of the highest rates of drug shortages.
Gary was sent home not knowing when he would be able to receive
this medication which was already two weeks overdue. Though he
has now gotten his prescription filled, he is already wondering
if he will be able to fill his prescription next month. No one,
especially our veterans, should have to experience the anxiety
associated with not knowing whether or not you will be able to
have the medication that you rely on.
Since joining Ways and Means seven years ago, I focused my
attention on policies that remove barriers to health care for
rural and underserved communities like the one I represent.
This is why I have sponsored the Nancy Gardner Sewell Multi-
Care [sic] Multi-Cancer Early Detection Screening Act, along
with my colleague, Congressman Jodey Arrington. If enacted, our
legislation will create access to the first-of-its-kind multi-
cancer screening technology. These screenings will be in vain
if patients cannot access lifesaving therapies due to drug
shortages.
Generic drugs are often a part of the foundational cancer
treatment. Due to shortages, many cancer patients go without
these lifesaving drugs. In many cases, doctors must choose
which patients will receive available cancer treatments,
putting the most vulnerable patients at risk. As a matter of
fact, Medicaid cancer patients are more likely to be affected
by cancer drug shortages than anything else.
To add insult to injury, small rural hospitals are unable
to gain the preferential access to scarce drugs that larger
counterparts enjoy. We cannot continue to have a health care
industry that does not prioritize health equity. We must do all
that we can to ensure that quality drugs are both affordable
and available and public.
I would like to thank all of our oncology experts who are
testifying at the hearing today. In particular, I would like to
ask a question of Dr. Gralow.
Could you speak to how the oncologists within the American
Society of Clinical Oncology servicing in rural and underserved
communities, have been impacted by the drug shortages?
Dr. GRALOW. The rural communities have been impacted even
more than those in the rural--in the big cities. They are
frequently small practices. They don't have the ability to
stockpile, if you will. Most sites that do have a drug that
might be nearby are not willing to send the supply over, so
those patients would have to travel a greater distance to get
it. We talked earlier about----
Ms. SEWELL. Like my constituent, Gary.
Dr. GRALOW. Like your constituent.
Ms. SEWELL. Yes.
Dr. GRALOW. And then you get into the insurance issue of
out of network. So, even if they could find drugs somewhere two
hours away, then they deal with the insurance company that
says, no, we won't pay for an out-of-network provider. So the
rural communities were tremendously impacted.
Ms. SEWELL. Thank you.
I yield back the rest of my time.
Mr. SMITH of Nebraska. Thank you. I now recognize Dr.
Murphy for five minutes.
Dr. MURPHY. Thank you, Mr. Chairman.
Thank you all for coming today. I am actually still in this
fray and have faced, especially over the last five or six
years, when I ask for a drug and all of a sudden the hospital
or whatever says it is not available.
I was just looking at the drug list of ones that are not
available, generic. It is 238 names long, 238: Tylenol
suppositories; acyclovir; BCG, which I use a lot for bladder
cancer patients. It is unconscionable. I mean, we can't even
get injectable epinephrine. So now we have to mix it with
other, you know, anesthetics to do something like that. So I
guess it really comes down--it is cost, it is higher
regulation, and it is the environment.
And Dr. Schondelmeyer, you made a good comment about New
Zealand. It just makes me think how we could, in one way, fix
this. We ask our pharmaceutical companies--I have a real thing
about direct-to-consumer advertising--that we take some of
those costs, that we actually turn it into generic
manufacturing for our people. You know, it is funny because you
said New Zealand. The United States and New Zealand are the
only two countries on Earth that allow generic--I mean allow
direct-to-consumer advertising. It is a real bee in my bonnet.
We don't need it, it is an added expense.
So with Dr. Ferguson, I would just agree that we could go
on, I could go on for minutes, for a long time.
Predatory pricing. I wonder if you could accent this a
little bit about this. Was this most exacerbated during the
pandemic, and what was done about it?
Mr. SCHONDELMEYER. Actually, the examples I am aware of
were with respect to antibiotics about a decade before in the
late 2000s, although there has been predatory pricing of
medical equipment, you know, masks and other things, coming out
of the U.S. and out of China during the COVID epidemic. And we
saw some products offered on eBay or online or other places for
five, tenfold, as much as a hundredfold what their true cost
was. That is----
Dr. MURPHY. That is one of the things, actually, that our
government does very poorly.
Mr. SCHONDELMEYER. Yes.
Dr. MURPHY. It doesn't allow us to--and everything has to
be done in a particular market, taken from a particular place--
--
Mr. SCHONDELMEYER. Yes.
Dr. MURPHY [continuing]. Rather than some of these
individuals.
Mr. SCHONDELMEYER. Yes.
Dr. MURPHY. Why the FDA today is not going over and looking
at India, which does not have the stringent policy, is my
understanding, that China does, and looking in those labs is
beyond me. Why we allow eyedrops to cause bacterial infections
or fungal infections is just ridiculous.
Well, this is for Dr. Schleicher and Dr. Gralow
specifically with oncology, because I still deal with a lot of
oncology patients. You know, when cisplatin was an issue,
carboplatin was an issue--have there been studies now within
journals to look at reduction of dose, and how this has
affected?
Because, you know, I know when BCG was given--was predicted
for six doses, that literally was picked because that was what
the packaging has. So, you know, truth be told, have there been
any studies to look at reduction of dose, whether that is doing
anything with survival, whether it has done anything in that
regard?
Dr. SCHLEICHER. So thank you very much for the question.
So I don't know of any--and you might, Dr. Gralow--any
large studies yet, just because there probably hasn't been
enough time.
So I know hundreds of patients who did not get the full
dose from this study, as you mentioned. So we are actually
missing doses. And for ours, it wasn't just delay, because we
were up against potential months so people actually did not get
the doses they needed----
Dr. MURPHY. It is going to be extremely hard to randomize
people to say----
Dr. SCHLEICHER. A hundred percent.
Dr. MURPHY [continuing]. You are going to get a full dose,
you are going to get half a dose.
Dr. SCHLEICHER. So I don't know doses. I can tell you my
patients who didn't get that, if their cancer comes back, they
are always going to wonder.
Dr. MURPHY. Sure, that was----
Dr. SCHLEICHER. The palliative side, when patients did not
get it--because we did have to ration--if they died sooner, the
family always wondered.
So without data it still----
Dr. MURPHY. It is going to be up here, anyway.
Dr. SCHLEICHER. It still has a huge impact.
Dr. GRALOW. I don't think that there are any new studies I
am aware of to define this.
But with carboplatin, for example, the various trials in
different disease types, ranged doses--so we use an area under
the curve as the dose for carboplatin. And so recommendations
for treating ovarian cancer could be you use an AUC of four to
six and give it every three to four weeks because we have never
head-on compared those, and different trials showed that those
were better than alternatives.
So during this crisis and shortage, [inaudible] recommended
use the lower dose since we don't have proof that the higher
dose is better since we recommend this range----
Dr. MURPHY. Right.
Dr. GRALOW [continuing]. And use the longer interval. We
haven't head-on compared those, and I don't think we ever will.
Dr. MURPHY. You know, I personally think--and we--you know,
to your point, Dr. Schondelmeyer, about the fact that we did
this 10 years ago or 15 years ago, and we offshored so much, it
is labor costs, it is supply chain. And the fact that we don't
onshore these things or nearshore--and I am talking about
Central America, where the big border crisis occurred, this was
an absolute opportunity when they opened the southern border--
is to say if we are going to look for ``root causes,'' why are
we not using Central America?
You know, I have done plenty of work. I have worked in
Nicaragua, probably been there 20 times. There are people
begging for jobs. And why are we putting those in India, China,
rather than Nicaragua and El Salvador, et cetera?
Mr. SCHONDELMEYER. You are exactly right. If we nearshored
these in Central America, it would provide better economy,
jobs, keep those people from marching to the U.S. saying, hey,
we want in, you know, take care of us. It would help with the
economy of these countries around us. It would help with the
border issues and other things.
Dr. MURPHY. It----
Mr. SCHONDELMEYER. It won't solve all of them, but it will
help.
Dr. MURPHY. It is a win-win for everybody.
Mr. SCHONDELMEYER. Yes.
Dr. MURPHY. Why have we have not explored that in the
politic of the last two-and-a-half years and for the decade
prior?
Mr. SCHONDELMEYER. Yes.
Dr. MURPHY. It is unbelievable to me. I have visited
Nicaragua a bunch of times, worked there, and there is so much
that is done there. But gosh, so much more.
Thank you, Mr. Chairman, I will yield back.
Mr. SMITH of Nebraska. Thank you. I now recognize Mr.
Fitzpatrick for five minutes.
Mr. FITZPATRICK. Thank you, Mr. Chairman, and thank you to
our witnesses for being here today to provide your insight on
the chronic drug shortages that are facing our nation. I am the
co-chair of the bipartisan Cancer Caucus. This issue is at the
very, very top of our list of priorities.
There are currently over 250 drugs that are in shortage in
the United States. And it has also been reported by 86 percent
of surveyed cancer centers that they themselves are
experiencing drug shortages. Through conversations with
constituents and doctors in my home community back in
Pennsylvania, I have heard the following story.
A doctor must deliver the news not only that their patient
has cancer, but that they don't have the lifesaving cancer
drugs available to help cure them because it is in shortage.
And to further compound this issue, the rate of cancer
incidences across America, including in our communities, is
increasing for certain types of cancers. Therefore, the fact
that chemotherapy drugs are in shortage has to be at the top of
all of our priorities.
Mr. Schleicher, first question for you. In your testimony,
you noted that there was an interval of over 10 days during
which you did not receive any shipments of two generic
injectable chemotherapies. In your experience as a chief
medical officer, can you speak about how this changed the
decision-making process for oncologists treating patients, and
what other options were available to patients during that 10-
day period?
Dr. SCHLEICHER. Thank you very much for the question. Yes,
it was terrible, and that was just the worst, where we had 10
days before that. And it is in the written testimony, there is
a huge graph of declines before that where we already had to
start thinking about what diseases we could treat, and then a
slow pick-up.
So we actually had to sit and make the decision. Are we
going to prioritize palliative, which means not curable yet
still very important to extend quality of life and extend life
for patients with families? Are we going to do it where there
are diseases where there might be a substitution, even if it is
not randomized data to show it is adequate? Or are we going to
pick small diseases, where, hey, at least we can do one group
of patients, then divide up patients with curative cancer--
curative breast cancer, and half get, half don't?
So it was hard. And, at one point in my email that I had to
send to the group last June, at the worst we were only able to
use carboplatin for curative chemo radiation with lung cancer,
which means that every patient who needed it for breast cancer,
metastatic lung cancer, tons of women's health cancers like
gynecologic malignancies were unable to get it for a period of
time.
Mr. FITZPATRICK. Thank you.
Dr. Gralow, obviously, this issue extends not just to
adult, but to pediatric cancers, as well. Could you shed some
light on how shortages affect the treatment of pediatric
cancers and the unique challenges faced in providing care to
this vulnerable population, and what can Congress do to address
this?
Dr. GRALOW. Pediatric cancers were actually where it came
on ASCO's radar back in 2011, 2012. We actually had a pediatric
oncologist who was our president at the time. But this is where
we really started to see several pediatric oncology drugs that
were critical for high cure rates in these diseases start to go
into shortage.
Now, the amount of drug that is made, you know, they--it
rebounded. It goes up and down. One drug goes out, another drug
goes out. It is a small amount compared to this recent big
cisplatin, carboplatin shortage. But these pediatric drug
shortages have never really stopped. It is just they wax and
wane. A new drug goes in or out. Right now we have shortages of
several drugs that are critical to pediatric cancer. And,
without them, we really impact the survival. So this is a big
problem in pediatric oncology.
What can we do about it? I think all the things we are
talking about for adult oncology drugs, too, you know,
bringing, you know, quality manufacturing into the U.S., you
know, having earlier insight and transparency into what is
happening so that companies like Civica, that model, that they
can jump in well before the drug isn't on the shelf anymore.
Mr. FITZPATRICK. Thank you, Dr. Gralow, thank you to all of
our witnesses for being here.
Mr. Chairman, I yield back.
Mr. SMITH of Nebraska. Thank you. I now recognize Ms. Chu
for five minutes.
Ms. CHU. Thank you to all the witnesses for providing your
testimony today. I have heard from so many constituents,
patients, and providers across my field who have all been
negatively affected by the strain of drug shortages. It is
shocking that there is so little concrete information on why
they occur. There are no standardized shortage reporting codes,
and manufacturers are not obligated to give detailed
information on the cause of the shortage. And, shockingly, more
than half of drug shortages as of June 2023 did not have a
declared cause.
It is clear that increasing transparency over the supply
chains is necessary to address the root cause of shortages, and
ultimately solve this crisis. It is important to note where our
drugs and their ingredients are being made so that when a drug
shortage or other supply interruptions happen, FDA
manufacturers can respond appropriately. And we must ensure
that the FDA knows at the earliest possible time when a surge
in demand for a drug is likely to cause a shortage.
So, Dr. Ballreich, under current law there are no
requirements for reporting shortages caused by increases in
demand. How can early notification by manufacturers help the
FDA address drug shortages?
Are there ways we can better align the supply chain to
allow for more accurate predictive modeling and give us earlier
warnings for drugs in danger of going into shortage?
Mr. BALLREICH. Excellent question. Generally, more
information is better. If we had information about anticipated
changes in demand, anticipated changes to circumstance, to
manufacturers regarding, you know, shortages or regarding
access to APIs, it could allow additional players in the supply
chain to think about additional sources, think about
remediation of that, just identifying the risk.
You know, we could have a situation if there are 5 generic
manufacturers or 10 generic manufacturers where you might
think, oh, that sounds fairly resilient. But, if they are all
sourcing from the same single API, like what happened with the
chemotherapy drugs and sourcing it from Intas, the manufacturer
in India, that exposes a significant supply chain threat.
So more information, more transparency is obviously, I
think, going to make it a lot better, and it is going to be a
better option.
Ms. CHU. Thank you so much.
Dr. Coukell, drug shortages are intertwined with the
problem of high prescription drug costs. That is why Democrats
worked through the Inflation Reduction Act to negotiate the
price of prescription drugs. It is so important.
But there are other solutions that can help address both
shortages and high costs. For example, my home state of
California launched the Cal Rx program in 2020 to empower the
state to develop, produce, and distribute generic drugs, and
sell them at a low cost. And, in March of last year, they
announced the program's first project, called the Cal Rx
Biosimilar Insulin Initiative, to support the development of a
generic version of the three most popular insulin medications.
So, Dr. Coukell, how might more partnerships like the one
between Cal Rx and Civica Rx help to alleviate generic drug
shortages, while also lowering drug prices for consumers?
Mr. COUKELL. Thank you for that question.
You know, first of all, I think when we are talking about
these issues, sometimes we have to hold two problems in our
minds simultaneously. And so sometimes cost is a barrier to
access, and we have to address that. When we are talking about
drug shortage, though, as we have said, we are really talking
about extremely low-cost drugs for the most part, where the
problem is the margins are so low that companies are not
investing and not staying in the market.
But to your question, Civica is developing affordable
insulin, the three insulins that are used most commonly in the
U.S. Even for a biosimilar, insulin, that is a very expensive
undertaking. And so we are happy to have a partnership with the
State of California, which has contributed a substantial sum
towards the cost of bringing those products to market.
Ms. CHU. Thank you.
Dr. Ballreich, we have heard people say that some shortages
are due to the results of prices being too low, but I am
concerned that Republican proposals to address the root cause
of this would give free rein to raise prices on consumers. So,
Dr. Ballreich, what should be done to make sure that that
raising prices won't cause harm to products and patients?
Mr. BALLREICH. Yes, excellent. I think any change to
reimbursement should be tied to some meaningful change to
supply chain resiliency.
You know, in my testimony, I suggested a scorecard type
approach. You know, we--Congressman Kelly talked about car
parts. You know, we--when we look at other consumer products,
we know where they are from, we know brands, we know the
quality of that product. In generic drugs, we don't. And right
now, in the generic drug market, we are--it is solely based on
price. Everything is trying to drive down the price, which is
great for patients. But if that price is not tied to some sort
of meaningful investment into the supply chain, then it doesn't
really help patients if they can't get access to that drug.
So I think any change to reimbursement should be tied to
some sort of meaningful aspect that either incentivizes
investment or some sort of tie to the quality of that product.
Ms. CHU. Thank you.
I yield back.
Mr. SMITH of Nebraska. Thank you. I now recognize Mr.
Steube for five minutes.
Mr. STEUBE. Thank you, Mr. Chairman.
The Hatch-Waxman Act, formerly known as the Drug Price
Competition and Patent Term Restoration Act of 1984, was
originally designed to create more competition in the generic
drug market. Congress sought to balance the need to incentivize
drug research and development with a desire to increase
competition and make drug prices more affordable. The law made
several key changes that initially helped foster competition in
the drug manufacturing space and drove down the cost of
essential medicines.
A loophole in the legislation, however, led to the
hollowing out of America's public health industrial base. While
the law rolled back some regulatory barriers in order to make
it easier for new companies to enter the market, the law's
original intent was never to create a race to the bottom that
forced companies to cut corners in order to manufacture drugs
for less than the price of a cup of coffee in order to remain
competitive.
China and India both provide significant subsidies to
generic manufacturers. China's Made in China 2025 plan openly
states Beijing's goal of having their top 20 national champion
manufacturers of essential drugs control at least 80 percent of
the global market for those goods. As part of the Chinese
Communist Party's strategy to accomplish this, China imposes a
5.5 to 6.5 percent tariff on most drug imports, in addition to
a 17 percent value added tax on all imported goods, which works
similarly to an additional tariff. By contrast, the United
States imposes no costs on imports.
India offers an even larger incentive program with over 24
separate subsidy programs funding its generic pharmaceutical
manufacturers. Indian generics are refunded on everything from
FDA user fees to 100 percent expensing in some cases. Combine
this with India's purchasing of cheap Russian oil and low-cost
Chinese imports. The Indian producers are at a significant
advantage. And it is apparent from recent reports that these
subsidies have directly resulted in the offshoring of America's
generic pharmaceutical manufacturing industry, and today they
place U.S. firms at a significant disadvantage.
That is why I am honored to cosponsor Representative
Tenney's PILLS Act to restore the U.S. generic drug supply
chain through production-based tax and investment tax credits.
This bill is comprehensive to cover all materials, testing, and
packaging involved at every step of the manufacturing process.
The byproduct of this hearing must be policy solutions to
solve our drug shortage, including countering China and India's
presence in this space by reshoring our domestic drug making
capabilities.
Dr. Stephen Schondelmeyer--did I say that right?
Mr. SCHONDELMEYER. Yes.
Mr. STEUBE. Can you recommend some changes to the tax code
to promote Made in America investments and onshoring?
Mr. SCHONDELMEYER. I probably could. I can't off the top of
my head in terms of tax code, but I think there are issues.
We need to look--most of the companies that we call
manufacturers in the U.S. that are the sponsors at the FDA
don't really manufacture the drug. They contract with someone
else to make it. And so, often the product might be made
somewhere else, and even the revenue may be booked somewhere
else, like Ireland or in other countries. So we need to look
at, for the products used in America and the profits made by
selling those in America, are we capturing those in our tax
code?
Mr. STEUBE. What trade barriers currently exist that would
affect the supply of generic drugs?
Mr. SCHONDELMEYER. Well, as I said, we saw emerge some bans
on exporting of drugs to the U.S. And I think we need to look
carefully at what Florida is trying to do by importing drugs
from Canada----
Mr. STEUBE. Yes.
Mr. SCHONDELMEYER [continuing]. And Canada now saying we
don't want to export them. We need to work through that with a
trusted trade partner, Canada, and figure out how can we make
this work for both of us?
Mr. STEUBE. Mr. Cavacini, am I pronouncing that correctly?
Mr. CAVACINI. Yes, sir.
Mr. STEUBE. Can you describe how wholesalers make decisions
on which manufacturers to purchase drugs from?
Mr. CAVACINI. Thank you for the question.
Our sourcing strategy really is centered around three
pillars: the first is consistent supply; the second is clinical
importance; and the third would be price and cost. And when we
think about those three pillars, they might flex in priority
based on what is happening with that specific molecule.
When we think about consistent supply, we are looking at
manufacturers' historical performance, their financial strength
to the extent that we can find out where the raw materials come
from and how the products are made.
And then clinical importance, are--these primary agents,
are they curative? Are there other alternatives available?
And, in places where we have really strong supply and
performance and a lot of alternatives, we might prioritize
price. If that is not the case, where there are few options,
high concentration, and risky, we would enter into long-term
contracts and potentially pay more to make sure that we have
the supply that we need.
Mr. STEUBE. Can wholesalers predict drug shortages?
And how do they mitigate that?
Mr. SCHONDELMEYER. I think predicting is difficult, based
on the information we have. There are clear indicators of
higher-risk products, and we have talked a lot about those
today. Those medications that have been around a while are
often very inexpensive, have complex manufacturing processes,
and could be made in riskier places based to geopolitical or
weather or other environments. Those are high-risk for a drug
shortage.
The way that we mitigate is really a couple-fold. You know,
first is that we invest and hold inventory in our 30
distribution centers that are positioned across the United
States, close to patient populations that we can deliver to
within hours. We might have days to months on hand based on the
supply. And then we also use allocation strategies to make sure
equitable and fair distribution of the products that are in the
supply chain, especially those that are vulnerable.
Mr. STEUBE. Thank you guys for being here today.
I yield back.
Mr. SMITH of Nebraska. Thank you. I now recognize Ms. Moore
for five minutes.
Ms. MOORE of Wisconsin. Let me just thank this
distinguished panel and the ranking member and the chair for
convening this important meeting that, really, all of our
constituents are facing.
I guess I want to direct my questions--maybe first with
you--with Dr. Gralow and Mr. Coukell. I am trying to understand
better the drug shortage prevention strategies that you have.
And I am wondering, you are saying we--and I have heard
others--I heard you telling others that we need a database. The
FDA has a drug shortage database. But what am I missing here?
Is it stockpiling and hoarding?
I am thinking about my own situation in Milwaukee,
Wisconsin, where we have, for over a year, been having a
problem with amoxicillin. Now, amoxicillin is just--it is like
an everyday drug. I mean, you can anticipate with all of the
RSV and flu and stuff. I don't understand why that drug, as an
example, is facing a shortage. And, using that as an example,
can you please explain to me how this database strategy, for
example, would stop that problem?
Pick and choose, Dr. Coukell or Dr. Gralow, okay.
Mr. COUKELL. Thank you for that question. What I
highlighted in my testimony are, I think, three kind of pillars
that would move us towards a resilient supply. One is holding a
buffer stock of roughly six months' inventory. Another is
ensuring that, when we choose suppliers, we have a process to
validate their quality maturity, and that we are choosing not
just based on price but based on the likelihood of a shortfall
of supply. And the third is entering long-term purchase and
supply contracts that bring stability to the market. If we move
in that direction, I think that we will address a lot of the
shortages that we are facing right now.
I haven't called for a database in my testimony, and
certainly you can always make, you know, better decisions with
more information. But the biggest predictor of a future
shortage is a past shortage. So we are actually quite good at
predicting what drugs are going into shortage in the future.
Ms. MOORE of Wisconsin. Okay. Can I ask Mr. Cavacini?
As you know, mifepristone is an important medication in
women's health care. And it has been in the market for over 20
years. The FDA has done thorough, evidence-based research to
determine that it is safe. And it is so safe for women that it
is sort of the number-one method for an abortion strategy. And
it is sold over the counter.
So I am asking you, as a prescription distributor, how--and
McKesson, of course, is one of the key components in ensuring
that women have access to this safe and effective medication.
Can you just give us a status update and how you are working
with pharmacies to make this happen? And when will distribution
begin?
Mr. CAVACINI. Well, thank you for the question. As you
mentioned, McKesson's role as a distributor is centered around
the principle of making sure that FDA-approved, appropriate
medications are available for prescribers and patients where
and when they need them.
At the current time, we are not an authorized distributor
of mifepristone. The manufacturer of those products has set up
a limited distribution network with another company in the
supply chain.
Ms. MOORE of Wisconsin. Okay, well, that is good to know.
I have 41 seconds. Great. So Dr. Gralow, let me come back
to you. Mr. Hern mentioned how decisions are being made with
regard to alternative treatments. And in the case of
amoxicillin, the drug stores were doing the compounding
themselves, getting the powders. Does that compromise the
quality of these drugs, or is that actually a solution for
making sure that there aren't shortages?
Dr. GRALOW. I think that is a great question. I am an
expert in oncology, not antibiotics and amoxicillin, and we
don't usually compound our drugs either. So I would defer to a
colleague on the panel, if you----
Ms. MOORE of Wisconsin. Thank you.
Mr. Chairman, with an indulgence, can somebody answer that?
Is that a solution, or is that a quality--does that risk
quality and contamination?
Mr. SCHONDELMEYER. Actually, I believe the antibiotics that
are made in powders and then pharmacy simply adds sterile water
to that and prepares it, and that makes the drug stable longer
because, if you had it mixed in the water initially, the drug
may not be stable for as long. So that probably does help in
the process.
That is different, though, than compounding from raw
ingredients a drug. And so it technically is a type of
compounding, but it is really to help extend the shelf life of
the drug, basically.
Ms. MOORE of Wisconsin. Okay. Well, thank you so much, and
I yield back.
Mr. SMITH of Nebraska. Thank you. I now recognize Ms.
Tenney for five minutes.
Ms. TENNEY. Thank you, Mr. Chairman and Ranking Member, for
holding this important hearing. And thank you to all of you
witnesses. This is really interesting work that you are doing,
and your testimony is very insightful, so I appreciate the work
you are doing.
And, obviously, as you know, for years our country has
witnessed an increasing number of drug shortages, with patients
and providers now seeking--seeing the largest spike in a
decade. This has coincided as our nation has become
increasingly reliant on nations such as China and India for
Active Pharmaceutical Ingredients and the final forms of drugs,
which you have all pointed out today.
Due to this offshoring to less regulated nations, these
shortages have been especially noticed in injectable generics,
which have justifiably much tighter regulatory tolerances than
other medications, which many of you touched on today, as well.
In my own district I have seen this, especially with oncology
drugs, leaving doctors scrambling to track down the supplies of
limited treatments or requiring patients to delay their
lifesaving care for weeks. This is indeed not only devastating,
it is life-threatening.
This is why I introduced the Producing Incentives for Long-
Term Production of Lifesaving Supply Medicines, or the PILLS
Act. I like to say the whole thing out there. I want to thank
my colleagues who have cosponsored, Representatives Steube,
Malliotakis, Miller, Murphy, and Representative Kelly, as well.
This bill will provide pharmaceutical manufacturers incentives
to reshore their production to the United States, shortening
supply lines, and making access to these cures more reliable
for American patients.
A cure does not really mean anything if you cannot get a
hold of it when you need it, as you all know. I wanted to first
just ask Mr. Cavacini a question.
And, in your remarks, you noted how McKesson works to
diversify suppliers and incentivize higher quality
manufacturing, but you do not expand as to how much and what
incentives McKesson, your company, uses in providing and
encouraging near-shoring of the supply chains closer to home.
Could you maybe explain how McKesson is willing to do that, or
how you do that, if you do it at all?
Mr. CAVACINI. I think it is important to remember that
McKesson's primary role is as a distributor and is making sure
that products manufactured by manufacturers are available to
providers and patients where and when they need them.
What I shared in my testimony is that in our sourcing
strategies we try to source from reliable supply. As I think
you shared in your comments, a cure if you can't get the drug
doesn't do anybody any good. In our business, a great price, if
I can't sell it to my provider partners, doesn't do anybody any
good either. So we need to make sure that we secure a
consistent, predictable supply. And that is a pillar of our
sourcing strategy.
Ms. TENNEY. So is that--and so that means you would be
willing to continue to invest to pay for pharmaceuticals from
these reliable onshore--you do that already, then, with your
company?
Mr. CAVACINI. We balance consistency of supply, clinical
importance, and price. The focus on price is often driven by
our provider partners. They are under intense reimbursement
pressure. And absent of other incentives, the only metric that
they lever on is price.
Ms. TENNEY. Well, let me ask you. What kind of incentives
can you provide manufacturers who want to reshore their
products? Say the critical active ingredients of
pharmaceuticals, like--can you--are there other incentives you
can give them to encourage them to make their products here, in
the United States? Or, as you--we indicated earlier, in South
America and other places closer to home, not China, not India.
Mr. CAVACINI. Well, as a distributor, I don't know that we
could provide the incentives, but I think we support incentives
in the system that would create the right environment for
manufacturers to continue to invest in redundancy and quality
manufacturing and their supply chain.
I think what we have heard from the panel today is that the
economics of many of these products have been competed down to
a point, that they are very inexpensive, and that does not
support investment in redundancy. And there is no incentive
because they are competing on price in the system that we have
today.
Ms. TENNEY. You raise an interesting point. I just wanted
to ask Dr. Schondelmeyer.
Did the Chinese and Indian Governments provide program
incentives for API and API production to compete with us in
that way? Did they provide similar incentives, those countries?
Mr. SCHONDELMEYER. Well, they provided incentives to the
manufacturers in their country to make those products. That is
different than reimbursement----
Ms. TENNEY. Would you----
Mr. SCHONDELMEYER [continuing]. Like we are talking about.
Ms. TENNEY. So would you describe them as incentives or
subsidies, or both?
Mr. SCHONDELMEYER. Both.
Ms. TENNEY. Okay.
Mr. SCHONDELMEYER. We could find examples of both in India
and China.
Ms. TENNEY. So what would--I mean, you are a professor.
What would you say is the--I have just got a couple of seconds
left. What would you say are the--the most effective way for us
to do this? Would it be through incentives? Would it be through
subsidies in the United States?
Mr. SCHONDELMEYER. I think, again, a mixture of both could
be used effectively.
The most critical question, though, is which products are
we going to incentivize. And there is where we do need a
database to understand. I agree in the past we know past
shortages might reoccur, but we are having new reasons of
shortages. We had Acorn, a drug company, go bankrupt, and
that--you couldn't have predicted that from past shortages. We
have had companies go bankrupt because of the opioid crisis,
and all of their products, even beyond their opioid drugs, have
gone out of the market and caused shortages.
So we have other reasons for shortages beginning to show up
in the market and new reasons. And, with databases we could
predict where are we vulnerable, where do we have products that
are critical in the U.S. market that are only made in one
country in the world, and why don't we start making it here?
Let's incentivize those. Let's subsidize those.
Ms. TENNEY. That is a great point. And diversification,
definitely.
Mr. SCHONDELMEYER. Yes.
Ms. TENNEY. I appreciate your--thank you, everyone. My time
has expired.
Chairman SMITH. Thank you. I now recognize Mrs. Fischbach
for five minutes.
Mrs. FISCHBACH. Thank you very much, Mr. Chair.
And first of all, I would just like to say thank you to Dr.
Schondelmeyer for coming from Minnesota, and it is always
wonderful to have a Minnesotan on the panel. And I know that
they have grilled you fairly well today, so I will probably
stay away----
Mr. SCHONDELMEYER. Okay.
Mrs. FISCHBACH [continuing]. From asking you additional
questions, but I did want to----
Mr. SCHONDELMEYER. I would just respond, ``Yeah, you
betcha.''
Mrs. FISCHBACH. There you go, there you go. Okay, I
appreciate that. Only I understood that in the room, though,
so--but I want--I did want to ask Mr. Cavacini a couple of
questions.
And first, I wanted to mention that on Monday it is going
to be 37 in Minnesota, and it might snow in the afternoon, so
bring a coat. I did tell him I would find the weather report
for him because he is visiting Minnesota.
But in all seriousness, I do have a question. You know, can
you describe how the drug shortages are not in the business
interest of wholesalers?
Mr. CAVACINI. I think there are a couple things to consider
there, and I appreciate the question. It is an important part
of the discussion.
You know, our core business model is to make sure that
providers and patients have access to the medications that they
need. We often contract with hospitals and health systems, from
large academic medical centers to small community rural
hospitals, to health systems like the VA, pharmacies from
national chains and household names to your mom-and-pop
community pharmacy, as well as community practitioners and
specialty like oncology. And our relationship with them is for
all of their pharmaceutical needs. They look to McKesson to
supply tens of thousands of products. They can order up until
8:00 or 9:00 the next day, and we deliver to their sites of
care the following morning.
Our model is optimized when there is robust and ample
supply, and we are filling orders in full to serve providers
and patients.
Mrs. FISCHBACH. I appreciate that. And then, just changing
a little bit, but do you feel that you have good quality
indicators regarding the drugs you purchase from manufacturers?
And is it pretty standardized, or is it more difficult with
different manufacturers to get that--information on that?
Mr. CAVACINI. Yes. Well, I think we have talked about
quality a lot today.
Mrs. FISCHBACH. Yes.
Mr. CAVACINI. And I think it is important to highlight
that, as I have mentioned quality, I am talking about quality
of the supply chain and the infrastructure around those
medications.
We only purchase FDA-approved medications. We, in our full-
line wholesale distribution business, only purchased direct
from the manufacturer, and we defer to the FDA and other
agencies on the quality of the meds. But we do look really hard
at the quality of the companies that we partner with. You know,
what is their historical practice? What is any regulatory
enforcement action, their financial stability, their
diversification to the extent that we can find out where their
plants are in the world and where do they source their
materials.
But there are limitations. There is no obligation on
manufacturers to share that information with us, and sometimes
it is hard for us to make the best decision.
Mrs. FISCHBACH. All right. Well, thank you very much. And,
given I have just--I have a little more time, what I am going
to do is, since I am towards the end, is there anything that
any of the panelists wanted to say but didn't have the
opportunity to? I will give you a few minutes if there is
anything you think.
You answered all the questions fully and you didn't have
anything else to add? You have been here a long time, so I
appreciate that.
But I do want to just say thank you all for being here,
because it has been incredibly informative and very helpful.
And the quality of the panel today is just exceptional. So
thank you very much.
And with that I will yield back, Mr. Chairman.
Mr. SMITH of Nebraska. Thank you. I now recognize Mr.
Kildee for five minutes.
Mr. KILDEE. Thank you, Mr. Chairman. And, to Chairman Smith
and Ranking Member Neal, I appreciate the opportunity to
participate in and listen to these really, really thoughtful
witnesses on a subject that is, obviously, a really important
one.
Last year--I am from the State of Michigan, so you can only
imagine where I am going with this--last year in my state, as
in other states, we saw this problem come home in really
significant ways. The severe chemotherapy drug shortage caused
people that I represent to reach out.
And, to hear their stories of having illness that could not
be treated not because of the lack of the science, but just the
lack of access to what science has proven to be effective was
really hard to hear. Stories that we have talked about a bit
today that Dr. Gralow, Dr. Schleicher, and others have shared
about drug shortages preventing doctors from treating patients
in the way that they know they should and, as a result, patient
cancers progressing as a result.
Dr. Gralow, you mentioned an instance of head and neck
cancer. It is a subject that is very close to me. It has only
been a few months since I was diagnosed and treated for head
and neck cancer. It has been a really difficult path, and I am
not quite yet fully recovered. I am cancer free. But I only
mention my own personal story because I know exactly how
anxious I was when I first got that diagnosis, and how anxious
I was to get on with it, to get treatment going. I was
persistent, as you can only imagine. You know this, you deal
with folks who go through this.
I could not even imagine if my physician, my oncologist
told me that, you know, ``We do have a treatment path for you
that will likely be quite successful. That is the good news.
The bad news is it is not available.'' I couldn't even imagine,
as an anxious as I was in that moment, to hear those words. And
I know that I represent people that have had to hear that.
So this is a subject, obviously, to the extent Congress can
have an impact on this, we need to hear from you. And you have
been very helpful in that to help us calculate what steps we
ought to be taking to make sure we don't go through this again.
Too many patients just are not getting access to the care that
would be lifesaving and life-affirming for them. This is the
richest country in the world. And as you have stated, it is
unacceptable that we find ourselves in this particular
situation.
What I am curious about is that I represent a group of
older, industrial cities in the State of Michigan: Saginaw, Bay
City, Flint, Michigan, all with great manufacturing capacity
and a great manufacturing heritage. And I am curious. And, if I
could start with Mr. Coukell, you noted that Civica Rx
emphasizes sourcing in the United States wherever possible.
And I wonder if you might comment on what I think is a
unique opportunity, and I think you did, as well, to reshore
some of that manufacturing capacity in a way that not only does
the very important work of providing access to these important
therapies, but also helps communities that have a great
manufacturing legacy, capacity, training programs, et cetera,
to benefit from reshoring our manufacturing, and to see both a
renaissance in terms of manufacturing capacity, but also
securing a supply of necessary therapies in a way that is much
more predictable. Could you comment on that possibility, and
what you might suggest?
Mr. COUKELL. Yes, thank you for that question. I think, as
you point out, there are multiple reasons to reshore the
pharmaceutical supply. Surety of supply is one. Protecting
against, you know, geopolitical strategic risks is another. But
these are also good-paying jobs in manufacturing communities
that have lost them in the last decades. And so there is a lot
of potential to bring those back.
And I think the kinds of things we have been talking about
today are the kinds of policies that we need to look at. And it
is not one size fits all. I think tax incentives, I think
shifting the market towards preferring domestic or higher
quality producers, but there are also places--and the example
of penicillin and cephalosporin antibiotics is a good one. No
U.S. manufacturer can invest right now, I think, in those
products on a purely commercial basis, given the global price
for those products. And so, if we want to make them here, it is
going to take some government investment to bring those
facilities back.
Mr. KILDEE. I really appreciate the panel. Thank you so
much.
And again, I thank you for listening to my personal story.
Members of the committee, I think, appreciated my recovery, but
I think they especially appreciated that for a period of time
after my very extensive surgery I completely lost my voice.
Quite a number of you found me to be a much more reasonable
person during that period of time. But I am back.
Thank you, I yield back.
Mr. SMITH of Nebraska. Thank you.
Dr. Ballreich, I understand you had some response to Mrs.
Fischbach's----
Mr. BALLREICH. Yes.
Mr. SMITH of Nebraska [continuing]. In her extra time.
Mr. BALLREICH. Totally fine, yes. You asked about what has
not really been said.
I think, first and foremost, there is no single solution.
You know, there is a wide range of solutions because the
problem is across the board in different medications. You know,
it is totally different, talking about branded versus generic.
It is different talking about mass market generic versus small
market generic. It is different from, you know, small molecule
generic versus a complex generic like a Generic Sterile
Injectable, which requires a much more extensive manufacturing
footprint. So I think we talk about a wide range of solutions,
and just a recognition that there is not really one single one.
Also, I think there has been a lot of emphasis on improving
the supply through tax incentives, tax subsidies. Also, we need
to balance that with demand. There is no Made in the USA, you
know, pill label. I think there is a lot of people, you know,
Americans, who would want to know that the medications they are
taking, it is U.S.-based.
So I just want to kind of highlight those two kind of
facets of this problem that I think have--they have been
mentioned, but maybe not articulated enough yet. Thank you.
Mr. SMITH of Nebraska. Thank you. I now recognize Mr. Moore
for five minutes.
Mr. MOORE of Utah. Thank you, Chairman.
One of the last things patients should have to hear from
their provider is that they can't get the best treatment for
their illness because of a medicine shortage. We often talk
about prices, and we need to keep that focus on making sure
things are affordable. But we are talking a medicine shortage.
Patients in Utah are being told this exact same thing far
too often. And, according to the American Society of Health-
System Pharmacists, there are currently over 250 drugs in
shortage in the U.S. Unsurprisingly, the private sector, I
believe, has stepped up to help solve this issue. I am proud to
have a member of the Civica Rx community here. In 2018, Civica
Rx, which is headquartered just south of my district in Lehi,
Utah, was founded by several health systems to address ongoing
drug shortages and make sure patients have access to the
medications they need. We have made some improvements, but
recent shortage spikes have shown that we must do better for
our patients.
Mr. Coukell, again, I mentioned Civica Rx. You know, I have
been excited to learn more about this. As I came onto the stage
three years ago into this role, and particularly on the Health
Subcommittee of Ways and Means, I appreciate the engagement and
helping us understand and my team understand the complexities
around this, but the efforts that you are trying to do with the
patient in mind. And these things are important to do.
I would like to ask about incentives in the health--or in
the Federal health programs, and how they affect the generic
market. Do you think that certain Medicare reimbursement
mechanisms encourage a sort of race-to-the-bottom pricing of
generic drugs and contribute to shortages?
And are there any current policies that are particularly to
blame?
Mr. COUKELL. Well, thank you for that, and we are proud to
be in Lehi.
You know, I think the market dynamics we have been talking
about today exist in the commercial market as it stands. But
they drive a situation where we have got very low margins on
some of these very low-cost drugs. So anything else that adds
further erosion to those margins makes it that much harder for
companies to keep producing these products. And so I think that
goes to some of the programs you are talking about, yes.
Mr. MOORE of Utah. Any other solutions that Congress should
look at that balance generic manufacturers' economic viability
with the ability of health care providers to reliably obtain
quality and affordable generic medicines?
I mean, that is the question, right? Like, how--what can we
do or not do or try to avoid creating an environment where you
all can better navigate the economic viability of this market?
Mr. COUKELL. Well, you know, I think not long ago the
Center for Medicare proposed a bonus payment for, you know,
additional buffer stock. And that is one example. And they
decided not to move forward with that for a number of reasons.
And there were some things that needed to be fixed there. But
that is the kind of thing that sits in the jurisdiction of this
committee, where you can say we can use our levers over
providers and provider payment to shift purchasing towards much
more resilient models.
Mr. MOORE of Utah. Yes, so I welcome Dr. Schleicher into
this questioning, as well, Mr. Coukell.
Just speak to rural health care for a minute, and about how
this affects rural health care, making sure that the, you know,
physician practices in northern Utah particularly, or
throughout the rest of rural America, how they are impacted by
drug shortages. What can Congress do to make sure that we
better address this need, Dr. Schleicher?
Dr. SCHLEICHER. Well, thank you very much for the question.
I think the--my main thought would be that, as people are
thinking about solutions--and I don't know the magic solution--
make sure that you are understanding the different sites of
care where hospitals are and take care of patients, which is
obviously a very important thing.
And then, often in rural America, where there aren't
hospitals around and there might be a one-physician community
practice, and make sure that, for instance, stockpiling doesn't
influence one, and then the other actually has a shortage that
might not have been there.
And just any solution, really make sure that we understand
exactly who is going to get the benefit of that, and that we
don't end up accidentally having patients in rural America or
patients who might not be able to get in--or might be out of
network for other sites of care get penalized for just where
they live and their ability to pay.
Mr. MOORE of Utah. Mr. Coukell, anything to add for--to
make sure that we have reliable access to affordable generic
drugs in our rural markets?
Mr. COUKELL. You know, our model is set up to be equally
accessible to any hospital of any size, and they all pay the
same prices. And, I think, if we are up front creating a buffer
stock, that not only benefits the entities that are providing,
but it also creates a buffer that benefits everyone else
because more stock anywhere in the system helps smooth out the
effect of a supply interruption.
Mr. MOORE of Utah. Yes, thank you. Thank you to all of you
for being here and sharing your perspective.
I yield back.
Mr. SMITH of Nebraska. Thank you. I now recognize Mrs.
Steel.
Mrs. STEEL. Thank you, Mr. Chairman and Ranking Member
Neal.
If the COVID-19 pandemic taught us anything, it is that we
cannot trust the CCP as a reliable source for any part of our
supply chains, especially vital medical supplies including
drugs, PPE, and medical equipment. Unfortunately, drug
shortages are still prevalent and are occurring more
frequently, impacting patient care.
A recent Johns Hopkins University study found that over 90
percent of hospital systems across the country are now impacted
by significant shortages of essential medicines to help treat
patients. For a patient, this leaves them with unimaginable
circumstances, delayed treatments, and delayed procedures. And,
for an oncology or a pharmacist, it means rationing lifesaving
drugs.
I believe promoting domestic manufacturing and building a
trusted network of allied trading partners in the
pharmaceutical sector will promote alternate sources for Active
Pharmaceutical Ingredients and encourage resilience in
pharmaceutical and medical goods supply chains, which is why I
introduced the Medical Supply Chain Resilience Act with
Congressman Brad Schneider and Senator Tom Carper and Thom
Tillis. This legislation will create strong supply chains for
medical goods and services between the United States and key
allies and partners around the world.
Having said that, you know, we asked so many different
questions. And actually, we ended up asking double and triple,
the same questions from these members. And I am one of the
ending part of these members. So, instead of that, I am asking
you any questions. If you can give any additional advice to
this committee that what we can do, make sure that we can have
enough drug supplies. And you tell us, because bottom line is
we need to stop this shortage of medications and, you know,
pharmaceutical supplies.
So whoever wants to tell us and give us more advice that
you missed it, then I am just welcoming that.
Yes.
Dr. GRALOW. So I will start, just add a little information
on a topic we haven't discussed in great detail. We have talked
about these drug shortage lists that the FDA, that the American
Society of Health-System Pharmacists put out, but, you know,
right now, we have about 15 cancer drugs that are listed on
these lists with very little additional data about why they are
on the list. And I think it is a little bit of crying wolf.
You know, you have these drugs on, and in the clinic we are
not seeing the problem. And so it is like, oh, yes, it is on
this list, but it is not really in effect. If we understood why
each one was on the list, I mean, you do know is it [sic]
because one manufacturer went out of business, but what you
don't know is, did they have 10 percent of the market or 90
percent of the market? You do know if there is a quality issue,
but you don't know where, when, how long they expect it will be
fixed. And, without knowing that, we just look at the list and
say, ho hum, we will just see what happens when we don't get
our orders placed.
So these lists are important, but this gets to--some of--it
is the authority of the FDA to actually ask where you are
getting your Active Pharmaceutical Ingredients, but what
percentage you are getting from each place. They know they have
to list all the places they might be getting it from because
they are subject to having audits, but you don't know what
percent they are getting from what. So I think more
transparency around how drugs make it to the list, with
explanation and estimated timeframes could be incredibly
helpful.
It doesn't solve the economic and market problem, but it
helps with the early detection.
Mrs. STEEL. I think Dr. Schondelmeyer was talking about
that, too, that transparency, and then where these drugs came
from, where they are manufacturing, and how they are making,
right?
Mr. SCHONDELMEYER. Right. Just a quick comment on something
that is happening in the marketplace.
There is public-private cooperation to address drug
shortages. There is a group that has been formed, a non-profit
called End Drug Shortages Alliance. McKesson is a member,
Civica is a member, the University of Minnesota and others are
members, and there are over 200 hospital systems in the country
that are members. And this group, as soon as we get any signal
of a possible shortage, we try to dig and find out--we have a
rapid response team that tries to find out the details of what
is going on, everything we can, and then publish that so we can
deal with the shortage more effectively.
I will say FDA has been somewhat cooperative, but FDA has
said they can't officially share information with us or said on
that rapid response team. And so, if you could find ways to
authorize FDA to share with this public-private partnership to
address shortages as they are happening, we could be much more
effective in what we do.
Mrs. STEEL. Thank you so much. Actually, my time is up.
Thank you, I yield back.
Mr. SMITH of Nebraska. Thank you.
Mr. Beyer, you are recognized for five minutes.
Mr. BEYER. Mr. Chairman, thank you very much, and thank you
all for being here.
Drug shortages are not a new problem. We saw the impact
very clearly after Hurricane Maria hit Puerto Rico. We were
able to see it more clearly during the pandemic, when demand
for certain drugs like ADHD medicine surged. I have engaged
with it many times. When children's Tylenol was scarce, Raul
Grijalva and I led an inquiry to see if the administration
could take action. And, on ADHD medicine, Abigail Spanberger
has been leading the charge.
The key issue with drug shortages is understanding where in
the supply chain is the issue. Constituents complain to us,
thinking the issue often lies with the Drug Enforcement
Administration, when, unfortunately, we have continually found
that the issue lies with the drug manufacturers themselves.
I would like to submit a letter to the record on--from the
DEA. This letter, dated November 1, 2023, states, ``DEA does
not manufacture drugs and cannot require a pharmaceutical
company to make a drug, make more of a drug, or change the
distribution of a drug.'' It also states, for amphetamine
medications like Adderall, ``Our data shows that in 2022
manufacturers did not produce the full amount that the limits
permitted them to make, resulting in a shortfall of 1 billion
doses that could have been produced, but were not shipped. And
the data for 2023 has shown a similar trend.'' The letter then
proceeds to indicate the actions DEA has taken, like requiring
drug manufacturers to submit their anticipated production
timelines.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
I want to give credit to the Energy and Commerce Committee.
This is where the leadership has been helpful. In addressing
the black box of the pharmaceutical supply chain,
Representative Anna Eshoo has been leading on this issue with
several bills, including the Drug Origin Transparency Act,
which, if this Congress is serious about this, should pass into
law. We have also seen the importance of the need for more
resilient supply chains.
So, Dr. Ballreich, in your testimony, you talk about how
India and China produce most of the raw material for drugs. If
one of those countries has an issue, be it a quality control
issue, another virus, or a hurricane, we immediately see the
impacts. Thanks to Congress appropriating money to BARDA, BCU
and Flow were able to establish domestic manufacturing of
vulnerable pharmaceutical ingredients.
Flow is also building the United States''s first strategic
Active Pharmaceutical Ingredients Reserve, a long-term national
stockpile to secure key ingredients used to manufacture the
most essential medicines on U.S. soil, reducing America's
dependency on foreign nations to supply its drug chain. Dr.
Ballreich, can you speak to the importance of continuing such
an effort?
Mr. BALLREICH. Absolutely, and a really great question.
This, you know, drug shortage, it is a national security
issue, it is a health issue. So I think very direct efforts by
government to support things such as Flow to develop an API
stockpile, it is part of the solution package.
You know, we could talk about--and we have--the economics
to increase incentives for companies to invest in their supply
chain to build out resiliency. We talked about onshoring,
manufacturing. All of that, I think, is also part of the
solution. But having a stockpile--because inevitably, you know,
look what happened in Puerto Rico. That is a U.S. territory.
You know, we had a lot of concentration of manufacturing there,
and we still experienced a shortage of several important
medicines, including injectable azithromycin. So I think
efforts to develop a stockpile is very important.
The buffer stocks--you know, CMS proposed a change to the
inpatient prospective payment system that incentivized the
build-up of buffer stocks, but they were only looking at three
months. The average shortage is over 200 days long. So, if we
really want to make sure we have our bases covered, I think we
need to start thinking about six months, and we really need to
prioritize essential medicines, you know.
Mr. BEYER. Thank you.
Very quickly, Dr. Gralow, the Biden Administration has
taken numerous steps to address drug shortages: the supply
chain coordinator, HHS, investments in BARDA, numerous actions
at the FDA. Of the things they have done, which do you think
are most promising, or what should be the next step?
Dr. GRALOW. I think, frankly, what is most promising is the
attention that they have helped bring to the problem. Not one
specific action, but, you know, this has been ongoing for over
a decade. I think the depth of the problem, the Biden
Administration's interest in cancer has now brought this to the
forefront, where you are having hearings like this so that
knowledge, that education, that discussion and dialogue is what
I really think is the most important thing that has happened,
and that we will now maybe be able to fix a problem that has
been going on for more than a decade.
Mr. BEYER. Okay, thank you very much.
Mr. Chairman, I yield back.
Mr. SMITH of Nebraska. Thank you. I now recognize Mr.
Arrington for five minutes.
Mr. ARRINGTON. Well, thank you, Chairman. Thanks to the
panelists.
It is quite stunning to read how many drugs are on the list
of drug shortages for this--the greatest nation in human
history. To think that for over 20 years we have had 50 drugs
added to that--there were some good things that came out of
COVID, one of them being the revelation of our dependance on
China and other foreign countries like Taiwan with respect to
computer chips. This supply chain dependency on materials,
products that have tremendous import to the safety and security
of the country is something I suspect both sides agree is
alarming, and I don't think we have done enough. We are doing--
we are digging into it now.
I mean, I am a free market guy. I think too often we think
government is the solution, and I think all too often when we
do, and create some government strategy, it can result in a
worse scenario, or certainly more ill effects--unintended, but
nevertheless more problems--than we started with.
I am shocked by the data that suggests that 86 percent of
surveyed cancer centers report experiencing drug shortages. I
am surprised that the pharmacists, the retail community
pharmacists in west Texas, estimate that 40 to 50 percent of
their daily calls are people from across west Texas asking
about medication that they just don't have access to. Forty to
fifty percent of the calls?
A pharmacist in Abilene, Texas recently informed my office
that, of the 10 medications he dispenses, the most, 60 percent,
were made in China. Furthermore, we were informed that over
half the medications he carries in his pharmacy were made in
China. This same pharmacist, who also compounds specialized
medication for his patients, estimated that out of 100 pure
ingredients on the shelves in their lab, 90 of them were made
in China. And I could go on and on.
So I would hope there is no debate about the problem. Now,
we have to figure out the solution. Let me orient around market
forces and the--or the lack thereof that should provide best
value to the customer, to our patients here in the country. I
understand there are unfair trade practices that need to be
addressed, but let's just talk about the dials that we have
control over here with respect to tax regulations. And tell me,
from--and other policy interventions that--tell me what the
most--the central perverse incentives to the current system
that yield this problem of drug shortages.
Again, I know it is bigger and broader, but what would you
say are the top two, and just go down the list, perverse
incentives that need to be addressed and adjusted so that we
can maximize the competitive forces and the best value and
reduce that shortage while giving folks, you know, the best
value, low-cost access to drugs?
So just give me one or two--we control--perverse incentives
to address, starting with the gentleman at this end of the
table.
Mr. BALLREICH. Yes, absolutely. Right now, generics, they
compete on low price. So, if you sell a pill for $0.10 a pill
and a competitor comes in at $0.09 a pill, they are going to
take your entire market share. There is no--you know, there is
this drive for the lowest price.
And the result of that is, after 4 years of a generic
company entering a specific market for that product, after 4
years, 50 percent of them will leave. You know, so it is--we
are competing solely on price. We are not thinking about
incentives for that company's supply chain. That company has a
perverse incentive to cut corners, to try to drive down that
lowest price. So it means moving your company, you know, your
manufacturing facility to India or China, and----
Mr. ARRINGTON. Okay. With 10 seconds, since----
Mr. BALLREICH. Sorry, yes, sorry.
Mr. ARRINGTON. That is okay. I just--do you all agree, the
rest of the panelists, that there is--you should just kind of
shake your head yes or no. Do you agree?
Okay. Well, it seems like we ought to be able to focus on
at least that together to address it. And we can talk about the
solutions later. But I appreciate all that you guys are doing
to give--lend your counsel and insight to us so we can have a
more resilient supply chain and better and more secure future.
Thank you, Mr. Chairman.
Mr. SMITH of Nebraska. Thank you. I now recognize Mr.
Smucker for five minutes.
Mr. SMUCKER. Thank you, Mr. Chairman, and thank you to our
witnesses for being here today. I am glad that we are diving
into this issue of drug shortages, which, as we have heard from
you and have--we have heard from our constituents, really
impact every community, certainly impact millions of patients
across the country.
I can tell you in my congressional district--I represent a
district in Pennsylvania--our hospitals are regularly telling
me they are monitoring lists of critical drugs, comprehensive
lists of critical drugs that are in shortage, and they are
worried--there are new additions to that every single day. They
are taking proactive steps to guard against this. One hospital
system with a presence in my district has told me about
instituting a weekly meeting in which its pharmacy team members
are developing strategies to combat these shortages and
mitigate the impact on patients.
And I think what one of the things I am hearing from you
today--and I heard it from Mr. Arrington's questions now--drug
shortages are largely a function of it being sort of an
economic problem, certainly most prevalent, as you have said,
among low-cost Generic Sterile Injectable drugs, mostly, or
GSIs, which, of course, are a staple of hospital care.
And so I think what I have heard you say is we are seeing
market pressures--reimbursement mechanisms, maybe more than
anything--that are creating this environment, sort of cost-
cutting environment which forces GSI manufacturers to produce
the drugs. Maybe you could call it a race to the bottom. They
are producing drugs at the thinnest margins possible, sometimes
at a loss, which creates a great deal of instability in the
market, which--and to the detriment of patients, if that is
true.
So we really should be pursuing policies that encourage
market stabilization, encourage quality assurance. So I would
just like to ask our witnesses a bit more on these topics.
Mr. Cavacini--and I don't know if I pronounced that
correct, but we know, of course, the GSIs require very precise
manufacturing, as they are injected directly into the
bloodstream. And when there is very little return of--to
reinvest in the quality of the facilities, we have seen
problems that can occur. Recent FDA data shows that 62 percent
of shortages can be attributed to quality issues, and I would
like you to just talk about that a little bit.
Can you explain the difficulties of balancing contract
demands geared towards lowest price with the need for quality
when purchasing the drugs?
And how could we change--to the previous question, how
could we change the system to drive the right incentives?
Mr. CAVACINI. Thank you for the question. I appreciate the
opportunity, and I think we have talked a lot about today, you
know, how we might be able to strengthen the system, bolster
supply, and bring economic stability to markets. I think it is
important. And you mentioned reimbursement opportunities. We
have talked a little bit about today how we might incent,
through differential reimbursement, providers to choose
products on dynamics other than price.
I think there are also some barriers in the system that
prevent generic markets from returning to normal economic
forces. There are barriers that prevent generic manufacturers
from raising prices. When things are in short supply, when
their costs of input go up, when manufacturing costs change,
they are often capped on if they can raise price. And, since
they can't, they might choose to exit, which can cause a
shortage.
So we have put forth a policy recommendation, and would ask
the committee to consider, you know, where those barriers
exist, maybe in the Medicare drug rebate cap or possibly in the
Inflation Reduction Act, which does include some carve-out for
drugs in shortage. But I think clarifying and codifying that in
the regulation would be steps to consider.
Mr. SMUCKER. Thank you.
Mr. Coukell, you have talked about in your organization
contracts are structured differently at times from a typical
group purchasing organization. Is it more appropriate sometimes
to structure a long-term contract versus short-term?
Mr. COUKELL. Thank you for that question. Yes, if we want a
manufacturer to stick around, then we have to give them some
reason to believe that there is a long term. And so, if you
enter a contract but you don't know that tomorrow somebody is
going to come along and say, ``Sorry, somebody beat your price
and we are shifting our volume,'' then you don't have much
incentive to stay in there. Whereas, if you can enter a
contract and know that I have got a predictable volume for five
years, then you can make a commitment to stay in the market for
that long. And so that is why we contract in that way.
Mr. SMUCKER. Thank you. I am out of time.
Thank you, Mr. Chairman.
Mr. CAREY [presiding]. The chair now recognizes Mr.
Panetta.
You are now recognized for five minutes.
Mr. PANETTA. Thank you, Mr. Chairman.
Mr. CAREY. And only five minutes.
Mr. PANETTA. Understood. Trust me, they want it less than
five minutes, I get it.
But what I say by that is thank you to all the witnesses,
for being here for such a long amount of time, but, more
importantly, answering some very important questions.
Obviously, thanks to Chairman Smith and Ranking Member Neal
for holding this hearing, which I think we can all agree, as we
have heard today, is long overdue. And I say that based on the
fact that my constituents in the 19th congressional district of
California have been telling me for quite some time now about
the shortage of cancer drugs.
And I think we can all agree that nobody, after receiving a
cancer diagnosis, should then face the indignity of learning
that our health system can't even provide the basic generic
drugs to help them fight their disease. That is why I
appreciate the bipartisan attention that this issue is
receiving, that this hearing is attracting, and look forward to
finding solutions for all of our constituents, not just in my
district but across the country.
Now, in this committee, I have repeatedly raised the issue
of the costs that are stretching the providers in my district,
and the impact it is having on care. And, Dr. Schondelmeyer,
you hit on this in your testimony when you talked about the
measurable cost for everyone when providers face a drug
shortage. You mentioned how some of the effects on our--some of
the effects can be on our health systems, like having to hire
and train more staff, patients who face new emergency room
visits or even hospitalization. And you mentioned how the
broader health system suffers. And, in some cases, patients may
even need to switch from a generic to a much more expensive,
brand-name drug.
I guess my question to you, Doctor, is in what ways is this
the case in the current cancer drug shortage?
And then, two, what is the economic and opportunity cost
for providers and patients when drug distribution breaks down?
Mr. SCHONDELMEYER. Well, thank you for that question, Mr.
Panetta.
With cancer drugs, as there are with most drug shortages,
there are costs clinically to the patient. They may not do as
well with an alternative drug. Usually, the therapeutic
protocols we use for cancer are carefully designed to use the
optimum drug and the optimum doses. But when that is not
available, then we have to look at alternatives. And we haven't
necessarily done detailed studies on all of the alternatives
and where they fit in, or we haven't constructed peer review
panels to tell us what the optimal alternative therapy is. So
patients suffer and providers have to make decisions with less
information than they are used to.
But the health systems also--I am aware of a number of
hospital systems around the country that have had to hire a
pharmacist just to manage drug shortages, and that is an added
cost that we don't see covered anywhere. It is not covered by
Medicare, it is not covered by Medicaid, but it is a cost to
the health system.
So there are a number of costs, both clinically and
economically, in the system that we aren't managing. But they
are there, we are spending the money, we are just not getting
good value for it.
Mr. PANETTA. Great. Thank you for that summary. Now, I want
to kind of piggyback on what the chairman of the Budget
Committee, my good friend, Mr. Arrington, talked about with
kind of the global supply chain, especially when it comes to
Active Pharmaceutical Ingredient supply issues.
Now, Mr. Cavacini, excuse my friend from Pennsylvania. But
obviously, as an Italian heritage, I understand how to say your
name. [Laughter.]
Mr. PANETTA. In your testimony, you talk about the steps
that your company takes to oversee its supply chain and build
redundancies, but that distributors--and I quote--
``distributors have limited insight and even less control over
upstream issues.''
You also talked about the productive work between private
companies and the Federal Government to increase supply chain
oversight. So does your company support that type of supply
chain transparency work, and what other tools can Congress
consider when it comes to supply chain oversight?
Mr. CAVACINI. Thank you. Thank you for the question and the
pronunciation. My grandfather will be proud.
Mr. PANETTA. So would mine.
Mr. CAVACINI. We do support, and we think access to
information--good information to make good sourcing decisions
and provide good information to our downstream partners. We
heard the doctor talk about when he doesn't know when it is
going to end, he doesn't know how to manage. So that visibility
up and down is important.
We work with many manufacturer partners that share the same
vision that we do and that are open and share their production
facilities, their sources. But there are some that don't. And,
quite candidly, I understand why those could be competitive
reasons. But I think increasing that transparency and helping
us all have visibility to where the drugs are made and the
manufacturing to assess vulnerabilities can lead to better
decisions.
But we need to be careful to not also incent additional
potential bad behavior. The minute anybody finds out that
something is at risk, their first reaction is to take care of
themselves and their patients, and source additional supply
that can further stress an already vulnerable supply chain. So
making sure that our buffer stock programs are coordinated and
centralized would be important considerations, as well.
Mr. PANETTA. Great. Thank you. Thanks to all the witnesses.
Mr. Chair, I yield back.
Mr. CAREY. I thank the gentleman. Mr. Feenstra, you are now
recognized for five minutes.
Mr. FEENSTRA. Thank you, Mr. Chair, and I want to thank the
witnesses for being here. This is a serious issue, and you guys
all understand it, so I am very grateful.
So I am from rural Iowa, and the number-one issue that I
hear in my 36-county tour is the concern about health care.
Because in my district, men and women families are traveling 50
to 75 miles for care. I mean, it is very significant. And the
biggest issue that I am hearing is the shortage, ranging from
IV fluids to seizure medications, chemotherapy drugs.
And it is such a delicate balance. You have the rural
hospitals, you have your pharmacies, you have your federally-
qualified health centers, your critical access hospitals. And
so they all play this great role. So my question is in the
critical access hospitals we are seeing that patients that are
seeing their oncologists, they don't--they can't get the drug,
or there is a waiting time for the drug. So they are spending
days before that drug gets to them.
Dr. Schleicher, can you talk about this?
Obviously, you are from Tennessee. What is your perspective
on this shortage in rural centers, and how can we remedy that?
Dr. SCHLEICHER. Yes, thank you. Thank you very much for the
question.
I will say, too, a lot of rural hospitals like critical
access hospitals aren't incentivized to even provide oncology
services because they are kind of reimbursed cost plus one
percent. So that is already an issue with hospitals in rural
areas being able to deliver this care, which is a separate
discussion.
A lot of the hospitals we are seeing deliver care, at least
in our area, are the 340B hospitals, which are largely urban
based.
Mr. FEENSTRA. That is right. And that is what mine are,
right----
Dr. SCHLEICHER. So----
Mr. FEENSTRA [continuing]. 340B hospitals.
Dr. SCHLEICHER. Exactly. So leaving for--at least I can
speak for Tennessee. Most rural care is done in small,
community clinics, of which we provide about 50 percent across
the state.
One of the large hospitals in urban Tennessee did not have
near the same shortage we had. I will say they were great
partners. We communicated, they helped us with recommendations.
But our patients live an hour-and-a-half from Nashville and
were not driving downtown.
Mr. FEENSTRA. That is right.
Dr. SCHLEICHER. And they couldn't really share a drug with
us, either, because everybody wanted to hold on to their own.
So there was a huge discrepancy of where the shortage was,
based off the type of hospital and the size, leaving, at least
in Tennessee, the big gaps in care in rural.
I will also add that, again, I had mentioned that some of
the hospitals that had the most supply also were the ones that
don't take a lot of insurances in the outpatient.
Mr. FEENSTRA. That is right.
Dr. SCHLEICHER. So we were seeing uninsured and local
patients----
Mr. FEENSTRA. Yes.
Dr. SCHLEICHER [continuing]. And we were out of drug--way
more severe than some of our hospital counterparts. Not their
fault, of course, but it shows the system does have inherent
discrepancies, and I think rural was effaced way heavier.
Mr. FEENSTRA. So do you have any solutions, or how do we
address this gap?
I mean, do you have any--I am a solutions-oriented guy. I
am trying to figure this out. What can we do?
Dr. SCHLEICHER. So, with this--at least what we dealt with,
with cis and carboplatin, it was one amount of drug, period. We
tried to stockpile ourselves because we saw it coming. And,
even with months of as much as we could, we just simply ran
out. So there was a net--just there wasn't enough supply.
And there were, obviously, issues in terms of where the
supply went, which is why when people talk about stockpiling,
maybe doing it more upstream, so with some transparency so we
figure out patients who need it get it, versus just assuming
some side of care needs it.
Mr. FEENSTRA. Got you.
Dr. SCHLEICHER. And then one other thing that is not this,
but I can't help but mention, is the ability to ship drugs
right now, which we are unable to do, really affects our rural
patients who also live an hour away, and we are unable to ship
drugs to their homes anymore.
Mr. FEENSTRA. Yes, thank you. And this is--so Congresswoman
Beth Van Duyne is not here, and she has a McKesson facility in
her--in north Texas, and so I wanted to ask Mr. Cavacini.
Her question is, is there a sufficient early warning signal
to alert others to the potential of a potential drug shortage?
And is there a way that we have enough time, or a timely
manner to do this in an appropriate way?
Mr. CAVACINI. Thank you. And I believe our U.S.
headquarters is in Congresswoman Van Duyne's district.
Mr. FEENSTRA. That is what she said.
Mr. CAVACINI. Yes. As we heard from the panel today, there
is not a centralized, standardized system or early warning
system. There is a lot of information, public and private, and
people are working to get at--the answers to the questions that
you ask.
But, you know, drug shortages are unique. There are some
that are very predictable, unfortunately, and there are others
that aren't. So I think keeping an eye on multifaceted
solutions to this complex problem is one that is important.
Mr. FEENSTRA. Good, thank you.
And, finally--and I don't have time for this, Dr.
Schondelmeyer, but I am working on a study to analyze the
supply chain when it comes to our drugs. And to me, this is
very significant because a lot of the underlying ingredients
come from China, especially when it comes to electronic devices
and stuff.
I know you talked about this in your research, but I would
love to get in contact with you. and work with you on a policy
or legislation that we could address this.
Thank you, and I yield back.
Mr. CAREY. I thank the gentleman. Ms. Malliotakis, you are
now recognized for five minutes.
Ms. MALLIOTAKIS. Thank you. Well, thank you guys so much
for being--for this entire hearing. I know it is difficult to
sit for a long period of time and answer all these questions
from Members of Congress.
But I really appreciate you actually giving us a lot of
insight and ideas of how we can address this issue, because I,
like my colleagues, are very concerned with the fact that China
and India provide the APIs that account for roughly 60 to 70
percent of our generic drugs here in the United States, and
anything can happen at any time, as we saw with COVID, and that
would leave our population very vulnerable if they are in need
of medication they can't seem to reach.
And it seems almost illogical and odd and scary that a
country like the United States would be in this position, where
we are already seeing a shortage of roughly 250 drugs. I just
had a couple of questions.
I assume China and India, they provide programs and they
incentivize and they subsidize their API manufacturing. So how
does the United States compete with countries that subsidize a
large, significant--the production of these particular drugs?
Dr. Schondelmeyer, if you could, respond.
Mr. SCHONDELMEYER. Well, we may have to compete by
subsidizing and incentivizing equivalently so we can bring
manufacturers into the U.S. space or near-shored manufacturers
that can do those same things. So we may have to compete by
using the same techniques they do, but do it better.
Ms. MALLIOTAKIS. Okay. So how do we incentivize domestic
generic drug manufacturing, though, without exacerbating
existing drug shortages or creating disturbances in the supply
chain?
Mr. SCHONDELMEYER. Well, I think that the Flow example,
BARDA identified 25 critical acute drugs that--many of them are
cancer drugs, and many of them are sterile injectables we have
been talking about, and BARDA has funded them to develop API
stockpiles of those drugs. So that will fill in some shortages
that we might expect in the near future.
But we have to realize this is--that one act in 25 drugs
doesn't solve the problem when there are 250 drugs, and there
are new drugs all the time. So we can't just--this is not just
a whack-a-mole process. We can keep whacking the moles, but we
have got to do something to avoid whacking the moles, and get
behind the problem, and solve it in a bigger scheme. With that,
we could identify a broad spectrum, 400 or 500 drugs that need
to be produced and available in the U.S. market.
Ms. MALLIOTAKIS. Yes.
Mr. COUKELL. This is actually an area where the current
administration and the prior administration have issued very
similar executive orders and directives, which is a good thing.
There is at a high-level, I think, bipartisan agreement on
where we need to go.
There is now, within the Administration for Strategic
Preparedness and Response, ASPR, an office focused on
industrial base manufacturing. And there is a presidential
directive charging them with looking at domestic manufacturing
and drug shortages. They have a lot of authorities now, but
what they do need is some budget to be able to take steps.
Ms. MALLIOTAKIS. Yes, and, I mean, I think one interesting
idea would be looking at areas like like Guam, for example,
Puerto Rico, places that can certainly use that type of
investment, and I think--we talk about near-shoring and friend-
shoring. Why not do it in these U.S. areas? I mean, that would
even be better, right?
Onshoring, I think, is the way to go. And do you--what
changes to the tax code would you recommend to try to onshore
some of this manufacturing?
And I was thinking possibly we can look at the opportunity
zones as an area to kind of tie something together there that
could perhaps allow for this and also create jobs in areas that
need it in the process.
Mr. SCHONDELMEYER. Well, certainly, Puerto Rico has a large
pharmaceutical industry that was created, like, three decades
ago, and there are a lot of tax incentives and other things
that helped support and create that. And it was very effective
for a time.
Now many of those facilities are older, not necessarily up
to date, need to be regenerated. But we could look at what we
did in the past to create the Puerto Rican pharmaceutical
industry and say, how can we, with modern techniques and with
advanced manufacturing and continuous flow and other things,
how can we redo that to bring them to Puerto Rico or Guam or to
the American Samoas or, you know, other places?
And I would point out I support fully onshoring, but
onshoring alone is not sufficient. We do need some redundancy
in multiple places. Because remember, we also had the problem
of Puerto Rico. When a hurricane hit the place, it wiped out a
lot of our large volume parenteral production, and the U.S. had
a shortage because we had it all concentrated in one place.
Ms. MALLIOTAKIS. Well, thank you very much. I mean,
certainly we agree on that. But friend-shoring is an important
one, right? I think relying on Communist China for a large
portion of our APIs is not wise, particularly right now.
So thank you for your time.
Mr. CAREY. Okay. Mr. Gomez, you are now recognized for five
minutes.
Mr. GOMEZ. Thank you so much.
First, it is great to be back on this committee. Ways and
Means is not only just a prestigious committee, but it actively
plays a role on so many issues that my district cares about,
everything from, of course, drug pricing, but to child care,
child tax credit, housing, you name it. So I am very excited to
be back on the committee and to have an opportunity to ask our
distinguished panel some questions.
And of course, this issue of drug prices, drug shortages is
nothing new in the United States. But we often get--we often in
this building and across the country like to be in the blame
game. Who is at fault for the high drug prices? And we don't
always have a holistic view of what we are dealing with. And it
is very much, you know, if it is not the drug companies, it is
the PBMs. If it is not the PBMs, it is the insurance companies.
If it is not the insurance companies, right, it is the patient
themselves. So a lot of folks like to place blame.
But--so I think this is a timely hearing to deal with this
issue, and I am glad that this committee has taken some steps
in the past when it came to, like, monthly--capping the monthly
cost of insulin for Medicare beneficiaries, limit Part D out-
of-pocket costs, and allow Medicare to negotiate drug prices
for the first time ever. And those were big accomplishments,
but I know that there is a lot more to do.
I come from California, so I want to ask a specific
California question. Mr. Coukell, your company is partnering
with my state of California to manufacture low-cost insulin.
Can you speak to how this agreement will address both shortages
and the high cost of insulin facing patients?
Mr. COUKELL. Thank you for that question, sir.
Our focus on insulin is really focused on saving money for
the consumer at the pharmacy counter, not so much on shortages,
which tends--has not been a problem in this space so far. But
we are developing three biosimilar insulins, the ones that
account for about 80 percent of insulin use in the U.S., and we
intend to make them available at the lowest sustainable cost
and without all of the high-list prices and rebates that can
distort the market. They will be available at a low and
transparent price.
But it takes a substantial investment to bring those to
market, and that is where the partnership with the State of
California is extremely important, because California has--we
have partnered with California, and they have contributed a
substantial amount of funds towards developing these products
and bringing them to market.
Mr. GOMEZ. Do you see that investments are sufficient
enough to be able to have an impact on the market, or is it
just the first step, is it just the beginning?
Mr. COUKELL. We will be able to supply a substantial share
of the market, if needed. As a mission-driven non-profit, we
always say, though, our goal is market impact, not market
share. So we want everyone in the country to have access to
affordable insulin if they need it.
Mr. GOMEZ. And can this agreement serve as a model for
ensuring a steady supply of generic medications while bringing
down costs?
Mr. COUKELL. I think it can. You know, it does--developing
drugs, even generic drugs, is capital intensive. And so these
kinds of partnerships can help us and other organizations do
more and bring--make drugs available on a public interest
basis.
Mr. GOMEZ. Well, I appreciate the testimony of this
committee. I am going to have to run back and catch up on my
votes.
One of the things about being the, I guess, the most junior
member, I don't have a lot of time. So with that I yield back,
Mr. Chairman.
Mr. CAREY. Okay, I thank the gentleman. I want to thank the
chairman and the ranking member for this hearing. I would also
like to thank our witnesses for appearing before us today.
Please be advised that members have two weeks to submit
written questions to be answered later in writing, which I will
be submitting to you since I have to run to vote. Those
questions and your answers will be made part of the formal
record.
With that, the committee now stands adjourned.
[Whereupon, at 2:04 p.m., the committee was adjourned.]
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