    [Senate Hearing 119-188]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 119-188

                        BAD MEDICINE: CLOSING LOOPHOLES
                          THAT KILL AMERICAN PATIENTS

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

                                    HEARING

                                   BEFORE THE

                           SPECIAL COMMITTEE ON AGING

                              UNITED STATES SENATE

                        ONE HUNDRED NINETEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 WASHINGTON, DC

                                   __________

                                OCTOBER 8, 2025

                                   __________

                               Serial No. 119-15

             Printed for the use of the Special Committee on Aging

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Available via the World Wide Web: http://www.govinfo.gov

                                       _______

                     U.S. GOVERNMENT PUBLISHING OFFICE

    61-877 PDF                   WASHINGTON : 2026

                           SPECIAL COMMITTEE ON AGING

                         RICK SCOTT, Florida, Chairman

    DAVE McCORMICK, Pennsylvania         KIRSTEN E. GILLIBRAND, New York
    JIM JUSTICE, West Virginia           ELIZABETH WARREN, Massachusetts
    TOMMY TUBERVILLE, Alabama            MARK KELLY, Arizona
    RON JOHNSON, Wisconsin               RAPHAEL WARNOCK, Georgia
    ASHLEY MOODY, Florida                ANDY KIM, New Jersey
    JON HUSTED, Ohio                     ANGELA ALSOBROOKS, Maryland
                                  ----------
                    McKinley Lewis, Majority Staff Director
                    Claire Descamps, Minority Staff Director

                             C  O  N  T  E  N  T  S

                                  ----------

                                                                       Page

    Opening Statement of Senator Rick Scott, Chairman................     1
    Opening Statement of Senator Kirsten E. Gillibrand, Ranking
      Member.........................................................     4

                               PANEL OF WITNESSES

    Tony Sardella, Founder and Chair, API Innovation Center,
      Distinguished Fellow of Health Innovation, Washington
      University in St. Louis Olin Business School, Chesterfield,
      Missouri.......................................................     5
    Tony Paquin, President and Chief Executive Officer iRemedy
      Healthcare, Inc., Stuart, Florida..............................     7
    Andrew Rechenberg, Economist, Coalition for a Prosperous America,
      Washington, DC.................................................     9
    Marta E. Wosinska, Ph.D., Senior Fellow, Center on Health Policy,
      The Brookings Institution, Washington, DC......................    10

                                    APPENDIX
                          Prepared Witness Statements

    Tony Sardella, Founder and Chair, API Innovation Center,
      Distinguished Fellow of Health Innovation, Washington
      University in St. Louis Olin Business School, Chesterfield,
      Missouri.......................................................    36
    Tony Paquin, President and Chief Executive Officer iRemedy
      Healthcare, Inc., Stuart, Florida..............................    45
    Andrew Rechenberg, Economist, Coalition for a Prosperous America,
      Washington, DC.................................................    70
    Marta E. Wosinska, Ph.D., Senior Fellow, Center on Health Policy,
      The Brookings Institution, Washington, DC......................   101

                            Questions for the Record

    Tony Sardella, Founder and Chair, API Innovation Center,
      Distinguished Fellow of Health Innovation, Washington
      University in St. Louis Olin Business School, Chesterfield,
      Missouri.......................................................   119
    Tony Paquin, President and Chief Executive Officer iRemedy
      Healthcare, Inc., Stuart, Florida..............................   130
    Andrew Rechenberg, Economist, Coalition for a Prosperous America,
      Washington, DC.................................................   137
    Marta E. Wosinska, Ph.D., Senior Fellow, Center on Health Policy,
      The Brookings Institution, Washington, DC......................   141

                           Statements for the Record

    Association for Accessible Medicines Statement...................   149
    American Hospital Association Statement..........................   156
    American Society of Health-System Pharmacists Statement..........   160
    Continuus Pharmaceuticals Statement..............................   165
    Doctors for America Statement....................................   179
    Lupin Statement..................................................   181
    Lupin - Coral Springs, FL Statement..............................   183
    National Taxpayers Union.........................................   185
    Teva Pharmaceuticals Statement...................................   191

                        BAD MEDICINE: CLOSING LOOPHOLES
                          THAT KILL AMERICAN PATIENTS

                                  ----------

                           Wednesday, October 8, 2025

                                            U.S. Senate
                                     Special Committee on Aging
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 3:27 p.m., Room
    216, Hart Senate Office Building, Hon. Rick Scott, Chairman of
    the Committee, presiding.
        Present: Senator Scott, Tuberville, Johnson, Moody,
    Gillibrand, Warren, and Kim.

                     OPENING STATEMENT OF SENATOR
                          RICK SCOTT, CHAIRMAN

        The Chairman. The U.S. Senate Special Committee on Aging
    will now come to order. Last month, this Committee held a
    hearing about the dangers older Americans face due to unsafe
    foreign generic drugs. We exposed not only the threat posed by
    poor quality, generic drugs that can hurt or even kill American
    seniors, but also how dependent the United States is on
    dangerous supply chains that threaten shortages, keeping life-
    saving drugs from getting to those who need them.
        The terrifying reality we face is that our Nation is
    completely beholden to Communist China and India for the vast
    majority of our generic drugs and their ingredients. Communist
    China is the world's largest producer of active prescription
    drug ingredients, and India, relies on Communist China for
    approximately 80 percent of the active drug ingredients it uses
    in drug manufacturing.
        A study from one of our witnesses, Mr. Tony Sardella, found
    that 83 percent of the top 100 generic drugs consumed by U.S.
    citizens have no U.S.-based source of active drug ingredients.
    Another 11 percent have only one domestic source of active drug
    ingredients.
        We also learned in our last hearing that if Communist China
    or India shut off the flow of these essential drugs, the U.S.
    would only have months of prescription drug supply, forcing us
    to begin rationing drugs and turn away all but then the most in
    need within a matter of weeks. Let me say that again. If
    Communist China, our adversary, or India decided to shut off
    supply and generic prescription drugs to the United States, we
    would run out of prescription drugs in a matter of months and
    be forced to begin rationing drugs and turning away all but the
    most desperately in need within a matter of weeks.
        I think everyone here remembers the supply shortages we
    faced during the COVID-19 pandemic; PPE supplies and even baby
    formula. Think about the catastrophic scenario we would face if
    millions of Americans didn't have the prescription drugs they
    need to survive.
        The health of older Americans is too important to leave to
    chance. Congress has to work with the Trump Administration, and
    now, to make sure that Americans have safe and high-quality
    drugs, and secure the prescription drug supply chain. Ninety-
    one percent of prescriptions filled in the United States are
    for generic drugs. It's essential that the quality and safety
    of generic prescription drugs meet the same high standards of
    brand name drugs.
        A study showed that serious adverse events like
    hospitalization, even death, were 54 percent more likely for
    foreign generic drugs compared to American-made generic drugs.
    I'm not exaggerating when I say that people are dying in
    America today because of bad medicine from under-regulated
    markets in India and Communist China.
        When I asked Peter Baker, a former FDA inspector, if he
    would allow himself or his family to take generic drugs made in
    India or Communist China, he said not. He told us that he
    believed that Americans were being killed every day from
    foreign-made generic drugs. I want to say that again. A former
    FDA inspector who worked in China and India, told this
    Committee that he believes Americans are being killed every day
    from dangerous foreign-made generic drugs.
        Mr. Baker also told a heartbreaking story of having to go
    to multiple pharmacies with his elderly grandmother to find a
    safe generic drug for her prescription, only to be forced to
    accept an Indian-made drug that paid a massive settlement to
    the U.S. Department of Justice for falsifying quality testing.
    Peter knew that the drug in his grandmother's prescription was
    potentially dangerous, but had no other options.
        No American should ever have to deal with what Peter talked
    about, and be worried that a family member will be hurt or
    killed by the medicine that is supposed to heal or treat them.
    It's unacceptable for that to be happening in our country.
    Every American needs to get loud and demand change.
        Everyone knows that how I feel about Communist China, but
    I'm not the only one concerned about the dangers of foreign,
    major generic drugs. The BBC reported earlier, earlier this
    year that doctors in Communist China are worried about the
    quality of their generic drugs. One doctor said that
    antibiotics coming out almost entirely from Communist China
    were causing allergies and elevated blood pressure.
        Unsurprisingly, the Chinese Communist Party downplays these
    reports just like they've denied using slave labor, but this is
    a real problem and we cannot rely on low quality, ineffective
    generic drugs from Communist China.
        In our last hearing, our witnesses underscored quality
    issues that present real dangers to the health of patients. In
    2007 and 2008, heparin that sourced contaminated ingredients
    from Communist China killed up to 100 people in the United
    States. These problems continue to happen nearly 20 years
    later. In 2023, contaminated eye drops from India, killed four
    people, and caused adverse events in at least 55 patients. The
    Federal Government needs to ensure access to safe and high-
    quality drugs today.
        Following our hearing last month, Ranking Member Gillibrand
    and I sent a letter to the FDA asking what steps they're taking
    to stop dangerous drugs from coming into our country. I also
    met with FDA Commissioner Makary and he talked about his fight
    to fix the issues we have highlighted. I applaud his attention
    to the issue, and the Trump Administration's work to increase
    the amount of unannounced foreign inspections, a crucial first
    step to holding foreign manufacturers accountable to the same
    standards we hold American manufacturers.
        When it comes to solutions, I believe one of the most
    important things we can do is to establish a federal buyer's
    market. The Federal Government is the largest purchaser of
    drugs in the United States, accounting for 40 percent of
    outpatient prescription drugs purchased as of 2018.
        On the Senate Armed Services Committee, I have pushed for
    the Department of War to leverage its buying power to
    prioritize purchasing drugs made in America, using American
    ingredients. Senator Warren held a hearing last year on this
    same issue. If no American option is available, then the
    Federal Government should prioritize drugs and ingredients from
    allies and Trade Act-compliant countries.
        The buying power of the Federal Government can move the
    needle and bring manufacturing for essential drugs back to the
    United States. The national security risk of relying on
    Communist China for essential drugs and drug ingredients are
    unacceptable. The same risk risks are unacceptable for seniors
    who trust they will have access to the drugs they need. In
    2024, the U.S. manufactured 37 percent of its consumed drugs.
    This number is down from 2002 when it was 83 percent. In just
    20 years, we have seeded control of our medical supply chain to
    Communist China and India.
        Even if we start prioritizing certain drugs or types of
    drugs like antibiotics which come as China's supplies, 90
    percent of the ingredients for globally, we'd be making our
    medical supply chains much safer, not just for seniors, but for
    all Americans.
        I will continue fighting for the Federal Government to
    purchase American-manufactured drugs. We cannot rely on
    Communist China for something as important as the health of
    Americans. Every American deserves to know where the drugs
    their purchasing came from. That is why I support mapping our
    supply chains as well as our country-of-origin labeling.
        I've introduced the Country of Origin Labeling Online Act
    to require country of origin labeling for consumer products.
    Consumers deserve to know where items they purchase are made,
    and for something as important as the medications you take,
    that information is crucial. I will be introducing legislation
    on country of origin labeling for prescription drugs that would
    require drug labels include the country where each drug
    ingredient and the finished drugs are manufactured, processed,
    or compounded.
        We've already seen Communist China place export
    restrictions on rare earth elements as part of trade
    negotiation, and there's no reason why they won't do the same
    for medicines. Agencies like the Department of War and Veterans
    Affairs stepping in to purchase American made drugs could bring
    industry back and create a steady supply of important
    medications and ingredients for the American people.
        Other steps like the Department of Commerce Section 232
    investigation could level the playing field for American
    manufacturers. Section 232 tariffs are for goods that impact
    our national security, and I can't think of anything more
    crucial to health of our seniors than generic drugs. On Friday,
    I sent a letter to Secretary Lutnick and U.S. Trade
    Representative Greer, encouraging them to immediately place
    Section 232 tariffs on generic drugs.
        This is a national security and a public health issue for
    seniors and all Americans. I look forward to this discussion
    with our witnesses on how we can make sure Americans never have
    to worry about missing a dose of their medication or the
    quality of drugs in their medicine cabinet. I'd like to turn it
    over to Ranking Member Gillibrand for her opening statement.

                     OPENING STATEMENT OF SENATOR
                 KIRSTEN E. GILLIBRAND, RANKING MEMBER

        Senator Gillibrand. Thank you, Chairman Scott, for today's
    hearing. Thank you to all our witnesses for being here today.
    We really appreciate you. I'm looking forward to continuing our
    robust discussion on ways to improve and secure our domestic
    generic drug supply, which includes ensuring that
    pharmaceuticals entering the United States are of the highest
    quality and standard.
        During our previous hearing, we heard about some of the
    problems that consistently plague the generic drug industry and
    some proposals to begin to help to address the issues. Today,
    we will dig deeper into some bipartisan solutions that this
    Committee and other committees of jurisdiction can work on
    together to ensure Americans can access high-quality drugs that
    they need when they need them.
        Currently, too many active pharmaceutical ingredients and
    key starting materials are made outside the United States.
    Given recent instability in geopolitics and international trade
    policy, this reliance increases the risk that Americans may not
    have access to life-saving drugs in times of crisis,
    threatening our national security.
        However, we must approach strengthening and reforming this
    extremely complex supply chain thoughtfully and thoroughly.
    Generic drug manufacturers cannot simply flip a switch and move
    all components of production to the U.S. or other allied
    nations. To ensure Americans have a reliable supply of safe and
    affordable drugs, Congress will need to work to make more
    targeted investments in biotechnology, research, and
    infrastructure, to create long-term support and stability for
    this critical industry in our Nation.
        We must examine the underlying economic dynamics in the
    current marketplace and adjust incentives to fix the "race to
    the bottom" in generic drug pricing, which can create drug
    quality issues, drive manufacturing outside of the U.S., or
    cause companies to stop production of certain drugs altogether.
        Additionally, we must strengthen the ability of federal
    agencies to ensure strict oversight of foreign manufacturing
    facilities, to strengthen the supply chain and enable patients
    to access the quality medicines they need. As we look to
    address these issues, we must make sure drugs remain affordable
    for our constituents, particularly our seniors, many of whom
    are on fixed incomes.
        Americans are already struggling with high costs across the
    board, and I'm committed to working with Chairman Scott and my
    colleagues across the aisle to find solutions that serve our
    constituents by strengthening the generic supply chain,
    promoting quality domestic production, and protecting our
    national security.
        I look forward to this robust discussion, as well as the
    future potential bipartisan legislation on the issue.
        The Chairman. Thank you, Ranking Member Gillibrand. Now,
    I'd like to welcome our witnesses who are here to talk about
    their work to bring drug manufacturing of essential drugs back
    to the United States, and making sure the American people have
    access to the drugs they need.
        First, I'd like to recognize Tony Sardella. Mr. Sardella is
    the founder and chair of the API Innovation Center, a non-
    profit that establishes public-private partnerships to secure a
    drug supply chain. He is a distinguished fellow for health
    innovation at the Olin Business School at Washington University
    in St. Louis. Thank you for the critical work you do and for
    being here today. Please begin your testimony.

            STATEMENT OF TONY SARDELLA, FOUNDER & CHAIR, API

           INNOVATION CENTER, DISTINGUISHED FELLOW OF HEALTH

          INNOVATION, WASHINGTON UNIVERSITY IN ST. LOUIS OLIN

                BUSINESS SCHOOL, CHESTERFIELD, MISSOURI

        Mr. Sardella. Thank you. Good afternoon, Chairman Scott,
    Ranking Member Gillibrand, and members of the Committee. As
    chairman indicated, I'm the founder and chairperson of the API
    Innovation Center, dedicated to building health security of our
    generic drug supply chain. I'm honored to be here this
    afternoon and share how our work at the API Innovation Center
    is addressing the severe challenge of a vulnerable U.S. generic
    pharmaceutical supply chain.
        There are three key things that I want to share with you
    today. The first, is the U.S. generic drug supply chain is
    over-reliant on foreign manufacturers, and specifically placing
    our seniors and veterans at severe risk. Second, the API
    Innovation Center's private-public partnership model is showing
    promise in addressing this complex issue and the economic roots
    that drove the dependency. Third, policy instruments can foster
    increased U.S. private sector investment and production to
    address our vulnerabilities.
        Our over reliance on foreign sources to meet our Nation's
    needs are quite stark. As Chairman Scott mentioned, research
    we've done found 83 percent of the top 100 generic medicines
    prescribed to Americans have no U.S. source. I'd like to share
    some new research we just conducted on behalf of the Committee.
        Our mapping of generic supply chain reveals that for 10 of
    the most frequently prescribed medications for our elderly and
    veterans, 95 percent of those medicines have no U.S. API
    source. Even more stark, 84 have no finished drug production
    and they're dependent primarily on China.
        This continues with the research we provided before that
    mapped our generic supply chain from drug all the way to key
    starter materials, and showed that for 40 critical medicines
    that we identified for our Nation to have its own secure
    supply, that the key starter materials were exclusively 100
    percent dependent on China. For half of them, half of those
    critical medicines and nation require.
        The API Innovation Center focuses on addressing this
    national security. It emphasizes modernizing existing idle
    domestic manufacturing that we uncovered through our research
    with manufacturers and doing so to ensure our resiliency and
    stable supply chain.
        The model has three key components. First, investment of
    public funds that APEC has received from the State of Missouri,
    as well as from the bio map as per federal program. That
    capital modernizes the production methods to produce these
    medicines.
        We not just bring back production, but we're producing it
    in modern, advanced, more efficient manners and also using new
    technologies, many of which have been developed here in the
    United States by equipment manufacturers. We take the
    investment in the new modern techniques and we contract
    existing idle FDA facilities that exist already to produce
    these modern methods of production.
        Third, we partner with long-term agreements with end
    healthcare systems, national retail pharmacies, as well as drug
    production companies to be able to ensure predictable demand
    and supply for the entire network.
        The approach is delivering promising results. Over 70 U.S.-
    based manufacturers are collaborating and entering into
    agreements with APIIC to build an end-to-end domestic supply
    chain capable of sourcing, developing, producing, and
    distributing cost-competitive, U.S.-made medicines, with a
    near-term focus on 25 priority medicines that we've itemized,
    and a long-term goal of 300 medicines made here in the United
    States.
        The partnership enables the U.S.-based API and drug
    manufacturers to gain certainty of their demand and economic
    viability to produce in the U.S. It gives healthcare systems
    and national retail pharmacies certainty of supply and
    stability of cost, and our citizens and seniors gain a drug
    supply resiliency and we as a nation gain national security.
        While innovative partnerships are essential, policy plays a
    decisive role. There's a need, a critical need to clarify and
    harmonize the definition of made in America. For
    pharmaceuticals, current procurement rules allow drugs
    assembled in America, but comprised of foreign APIs to be
    labeled as USA-made. Second, the Federal Government's
    purchasing power can be leveraged. Last, sustained public-
    private investment to modernize idle facilities. The
    vulnerabilities are significant but solutions visible.
        Thank you for the opportunity to share our research and
    perspective.
        The Chairman. Thank you, Mr. Sardella. Now, I'd like to
    introduce Tony Paquin, the co-founder, president, and CEO of
    iRemedy, a company from my home State of Florida, working to
    provide buyers with American made medical products. Mr.
    Paquin's company worked tirelessly to supply the Federal
    Government with medical supplies during COVID, and he brings a
    wealth of expertise into the medical supply chain.
        Mr. Paquin, thank you for being here today. Please begin
    your testimony.

                       STATEMENT OF TONY PAQUIN,

                 PRESIDENT AND CHIEF EXECUTIVE OFFICER

               IREMEDY HEALTHCARE, INC., STUART, FLORIDA

        Mr. Paquin. Chairman Scott, Ranking Member Gillibrand, and
    members of the Committee. Thank you for the opportunity to
    testify.
        For over 25 years, I've worked in the healthcare
    technology, logistics, and distribution. At iRemedy Healthcare,
    we manage an artificial intelligence procurement platform that
    supports manufacturers worldwide. My experience includes
    building software, scaling networks, partnering with hospitals,
    manufacturers, and government agencies, all of which has given
    me a clear view of how our supply chain actually functions on
    the ground.
        That vantage point has revealed two urgent truths. First,
    that far too much of our production of essential medicines has
    been ceded to China and India, leaving our Nation dangerously
    exposed to weak oversight, counterfeit risks, and most
    importantly, price manipulation. Second, then an unintended
    consequence of that globalization is the concentration of our
    supply chain into a small group of intermediaries that
    restricts the flow of drugs into American hospitals, locking
    providers into contracts, and stifling supply chain and market
    innovation. Combined, these two truths are deadly.
        I grew up in Flint, Michigan, and have seen firsthand the
    prosperity of an active manufacturing economy as well as the
    devastation when industries are hollowed out. Today, I'm here
    to say bluntly, we must end our dependences on foreign
    adversaries, and restore control of our medical supply chain to
    the United States.
        During Operation Warp Speed, my company was a key supplier
    of needles and syringes. We delivered more than one billion
    items for the country's needs. What I witnessed during that
    period was alarming. At one point the Chinese Communist Party
    seized 40 percent of our China-based inventory awaiting
    shipment. We routinely dealt with bad actors attempting to
    bribe dock workers and factory managers peddling fake FDA
    510(k) certifications.
        As you know, the vast majority of prescription medicines
    are generic, yet those drugs overwhelmingly come from high-risk
    overseas suppliers. When supply lines are disrupted, we quickly
    see shortages of life sustaining medicines for conditions like
    diabetes, heart disease, and cancer oversight is essential for
    immediate relief.
        We must enforce unannounced FDA inspections overseas as we
    do here in the U.S. We must require a clear country of origin
    labeling, and independently validate imported shipments for
    quality.
        These are Band-Aid fixes that do bring transparency and
    deter quality failures, but they won't fix the problem. The
    only real cure is to reshore the supply chain, and I'm here to
    report that we can do so. First, APIs nearly all come from
    overseas, especially China. We must invest in new technologies
    and fast track permits for factories. We must treat this as the
    national security issue that it is and prevent bureaucratic
    delays.
        Second, generic drug manufacturing. Here's the truth. The
    technology already exists in this country to make generics
    profitably without raising costs for consumers. What we lack is
    fair competition. Generics are often a commodity, and foreign
    governments have learned how to weaponize commodity pricing
    against us. Until we level that playing field, American
    manufacturers will never have a chance to compete.
        Let me give you a real-world example. Oxford Pharmaceutical
    is an Alabama-based generic drug manufacturer with the
    capability to produce life-giving medicines domestically.
    They're a high-quality modern U.S.-owned example of American
    manufacturing excellence. They make drugs here in America
    efficiently, safely, and at scale.
        What stands in their way is a market that has been
    deliberately tilted against domestic producers. Even when
    companies like Oxford can produce at competitive costs, they're
    forced to compete against artificially subsidized Chinese and
    Indian importers that are all too often unfairly awarded U.S.
    Government contracts. Shockingly, this happened to Oxford just
    a few months ago.
        That system has to end. We must protect American producers
    with targeted licensing and trade enforcement. We must use
    artificial intelligence to overhaul the drug marketplace, and
    reform federal procurement so that U.S.-made drugs are the
    default, not the exception. If given fair access, domestic
    manufacturers can compete and win. If not, we remain captive to
    adversaries abroad.
        President Trump has shown leadership with executive orders
    to prioritize American made medicines, but we need an all-
    government response involving regulation, legislation, and
    procurement. We must act now. First, apply the immediate Band-
    Aid fixes; unannounced FDA inspections overseas, clear country
    of origin, labeling and randomized testing on imported drugs.
        These bias transparency, and time, then cure the disease
    reshore API production with new technology manufacture
    domestics generics domestically with fair trade protections
    free from foreign price manipulation, and use the full weight
    of government purchasing power to put resilience above cheap
    imports.
        Members of the Committee, this is not just economics. This
    is sovereignty. This is national security. It is needed to
    protect our seniors, our soldiers, and our families when the
    next crisis strikes.
        Thank you, Mr. Chairman, for your leadership, and to the
    Committee for this opportunity.
        The Chairman. Thank you, Mr. Paquin. Next, I'd like to
    introduce Andrew Rechenberg, with the Coalition for Prosperous
    America, a nonprofit organization that represents American
    manufacturers and producers across a number of industries and
    sectors, to support domestic industry and protect our national
    security. Mr. Rechenberg has experience with the Department of
    War, as well as the Department of Commerce, and is an expert in
    trade industrial policy.
        Mr. Rechenberg, thank you for being here today. You may
    begin your testimony.

               STATEMENT OF ANDREW RECHENBERG, ECONOMIST,
           COALITION FOR A PROSPEROUS AMERICA, WASHINGTON, DC

        Mr. Rechenberg. Chairman, Ranking Member, and members of
    the Committee, thank you for the opportunity to testify here
    today. My name is Andrew Rechenberg, and I'm an economist with
    the Coalition for Prosperous America, leading analysis on
    pharmaceutical supply chains and domestic manufacturing.
        America's medicine supply chain is in a crisis. Two decades
    of offshoring have caused domestic pharmaceutical production to
    fall from 84 percent of the U.S. market in 2002 to just 37
    percent today, leaving 80 percent of active pharmaceutical
    ingredients with no U.S. source whatsoever. India and China
    have captured the market by undercutting American producers,
    not through efficiency, but through state subsidies, poor labor
    standards, and safety shortcuts.
        This dependence has consequences. As U.S. production
    collapsed, drug shortages tripled from 88 in 2002 to more than
    300 in 2024, driving 300 to 500 percent price hikes that erased
    any supposed cost savings. This is because 40 percent of our
    essential drugs rely on only a single manufacturer.
        When I was in Pharmaceuticals in India and was shut down in
    2023 for falsified data and safety failures, U.S. hospitals had
    to ration chemotherapy because one factory made half of our
    cisplatin supply. These failures show what happens when we
    chase the cheapest offshore medicine instead of safe American
    production. That is not resilience. It is a national security
    breach at the heart of America's healthcare system.
        It can be fixed. At CPA, we've developed a five-pillar
    strategy to rebuild pharmaceutical independence. Pillar 1, the
    tariff rate quota system restores control. The TRQ allows a
    limited volume of imports from trusted countries at zero tariff
    rates. Imports above that quota volume or from high-risk
    nations face steep tariffs. Quota volumes are based on the gap
    between total U.S. demand and current U.S. production, then
    adjusted each year as capacity grows.
        Trusted in-quota countries would be limited to those with
    equivalent FDA-recognized safety standards. This TRQ system
    rebuilds capacity steadily without disrupting short-term
    supply.
        Strengthening domestic production directly is just as
    vital. Pillar 2, the PILLS Act, provides production and
    investment tax credits for U.S. made generics, active
    pharmaceutical ingredients and biosimilars, plus a domestic
    content bonus for U.S. sourcing. This creates the conditions
    for sustained growth in U.S. pharmaceutical manufacturing.
        Rebuilding does take time. Pillar 3, FDA reform, ensures
    the safety of current imports. Ninety percent of foreign FDA
    inspections are pre-announced, and many plants go five years or
    more without review. When inspections do occur, they often
    reveal falsified tests and unsafe conditions, reflected in
    studies showing that generics made in India have a 54 percent
    higher rate of severe adverse events.
        Yet, for imports, the FDA still relies on company paperwork
    instead of independent testing. We can address all of this by
    requiring independent batch testing for imported drugs in U.S.
    labs, regular unannounced foreign FDA inspections, and strict
    penalties for offenders, including import bans.
        Next, Pillar 4, federal purchasing realignment treats
    medicine procurement as a matter of national security. It
    ensures that federal programs prioritize reliable U.S.-made
    medicines. This aligns directly with the pharmaceutical supply
    chain, Defense and Enhancement Act to strengthen domestic
    resilience and minimize reliance on risky and adversarial
    nations.
        Finally, we must look to the frontier of medicine. Pillar
    5, biotechnology leadership. The U.S. must invest heavily in
    NIH and biotech startup innovation, and raise clinical trial
    standards that protect U.S. patients and ensure drug quality.
    These steps will ensure the next generation of cures is
    discovered and made here at home.
        These five pillars are how we end shortages, ensure safety,
    and restore America's capacity to make the medicines our people
    depend on. America's medicine system is fragile by design, but
    it does not have to stay that way. Congress can act now to
    rebuild what was lost, and ensure that never again will our
    patients, our hospitals or our troops depend on foreign supply
    for life itself. Thank you.
        The Chairman. Thank you, Mr. Rechenberg. Now, I'll turn it
    over to Ranking Member Gillibrand to introduce our next
    witness.
        Senator Gillibrand. Thank you, Chairman Scott. I want to
    move to introduce our next witness, Dr. Marta Wosinska. Dr.
    Wosinska is a senior fellow at the Brookings Institution Center
    on Health Policy, with expertise in prescription drugs and
    pharmaceutical supply chains. Dr. Wosinska previously served in
    the Federal Trade Commission, in the Office of Inspector
    General at the U.S. Department of Health and Human Services,
    and the U.S. Food and Drug Administration Center for Drug
    Evaluation and Research. She's also served as economic advisor
    to the U.S. Senate Finance Committee. You may begin.

               STATEMENT OF DR. MARTA E. WOSINSKA, PH.D.,

                SENIOR FELLOW, CENTER ON HEALTH POLICY,

               THE BROOKINGS INSTITUTION, WASHINGTON, DC

        Dr. Wosinska. Chairman Scott, Ranking Member Gillibrand,
    and distinguished members of the Committee, thank you for the
    opportunity to testify at this important hearing. My name is
    Marta Wosinska, and I'm a senior fellow at the Brookings
    Institution. Today, I speak in my personal capacity, reflecting
    nearly 15 years of studying drug supply chain issues from
    within the government and outside, and with no financial stake
    in the outcome.
        Over all these years, I have observed what policy solutions
    catch the interest of lawmakers. I have seen that many of the
    solutions that resonate sound good, but they don't address the
    problem that lawmakers claim they want to solve.
        Today, as we talk about solutions, I urge you to ask the
    following questions; What specific problem is the solution
    meant to address? What else is needed for this solution to
    succeed? How do we handle the unintended consequences? Is this
    the most effective and efficient cost effective and efficient
    path? Only when you ask these questions, you will be best
    prepared to design policies that not only do the job well for
    patients, but also assured that taxpayer dollars are used
    wisely.
        For instance, if persistent drug shortages in hospitals are
    the top priority, durable solutions require shifting hospital
    incentives so that reliability, not just low cost is valued.
    Transparency to hospitals around supply chain reliability will
    be important, and you will want to keep far away from tariffs
    unless you fix various payment systems.
        If the concern centers on China, then the focus should be
    on antibiotics and, _for pretty much any other drug_ the focus
    should shift upstream away from pharmaceutical production steps
    and toward chemicals that are not regulated by FDA. You will
    also want to think about how to leverage India in de-risking
    from China.
        If the objective is to increase domestic drug
    manufacturing, which by the way, is a solution to supply
    concerns, not the problem, then any new facility counts as
    progress, regardless of whether it addresses areas of critical
    need or shortage risk. If domestic manufacturing is the goal,
    then you may not pay as much attention to whether policies
    designed to promote onshoring like tariffs could destabilize
    supply.
        What if we're concerned that weak FDA oversight abroad
    creates opportunities for defective drugs making their way to
    American patients? Onshoring could help because we will be
    building newer, more automated facilities, and FDA would have
    an easier access to these facilities.
        Let's be realistic. Onshoring will require government
    support to undo the economic forces that moved production
    offshore. In fact, a lot of government support. With
    constrained budgets, this means policymakers should prioritize.
    I would urge you to consider that essential medicines and choke
    holds with China are much more pressing onshoring targets than
    Indian-made statins or blood pressure medications.
        Fortunately, we do have other options for addressing
    product defect risks in commonly used medications. FDA can
    create greater quality assurance by increasing unannounced
    inspections, and Congress can support FDA by providing more
    resources, but we would need to do more because many industry
    observers and compliance professionals tell me that the current
    inspection-based model for oversight is not enough.
        This is where I urge the Committee to consider the proposal
    I published this morning, which would require every importer to
    designate a qualified person based in the U.S. with personal
    responsibility for verifying that each batch meets quality
    standards. Mandatory product testing would be part of that
    process. This system is already working for drugs in Europe and
    has precedent in U.S. drug regulations and other U.S. sectors
    like finance, where CFOs must personally certify financial
    disclosures.
        To conclude, let me reiterate that lasting policy must
    focus on clearly defining the problem, aligning incentives, so
    the right behaviors follow, and adapting proven practical
    solutions from other settings facing similar challenges. When
    reforms are grounded in clear objectives and match to the
    challenge, they will best protect patients and ensure prudent
    use of public resources.
        Thank you again for inviting me to participate. I look
    forward to your questions, and to this Committee's leadership
    in advancing meaningful reforms that will enhance both the
    quality and reliability of America's drug supply.
        The Chairman. Thank you, Dr. Wosinska. Now, we'll turn it
    over to questions we'll start with coach Tuberville.
        Senator Tuberville. Thank you, Mr. Chairman, and thanks for
    the panel being here today. I'm going to ask the obvious
    question, Mr. Rechenberg. If we closed our borders, do we have
    the ability, and the assets, and the chemicals that we could
    mine to make every drug that we need in this country?
        Mr. Rechenberg. No, not currently. That's why in the TRQ
    plan that I'm proposing, we do work with trusted countries with
    regulatory standards equivalent to our own. The FDA already
    recognizes this through mutual recognition agreements with the
    European Union, the United Kingdom, and Switzerland as well. We
    do have enough capacity when working with trusted equivalent
    regulatory nations like that, but currently on our own, no, we
    do not. That's why we need to rebuild this capacity.
        Senator Tuberville. Would we have to use China at all?
        Mr. Rechenberg. No, we would not.
        Senator Tuberville. Okay. Good. Mr. Paquin, when you talk
    about how companies like Oxford Pharmaceuticals should be used
    as an example of how it is possible to own shore drug
    manufacturing in a competitive environment?
        Mr. Paquin. That's correct, Senator. They are a very well
    run, significantly sized, highly automated production facility
    in Birmingham, Alabama. They really can produce pretty
    competitively. I think sometimes, we sort of misunderstand a
    little bit of the cost factor of these drugs.
        Amlodipine, for example, costs about two cents a dose to
    manufacture, but it is reimbursed by Medicare Part D at 10
    cents. Actually, the manufacturing cost is a very small part of
    the total cost that ends up going to the consumer or to the
    payer. The manufacturers like Oxford Pharmaceutical here in the
    United States can operate pretty competitively if they're not
    at target of unfair competitive practices coming out of India.
        Senator Tuberville. What changes do you think we need to
    make to have Oxford and other companies to be on a level
    playing field? What do we need to do?
        Mr. Paquin. Well, I think there's really two main things we
    can do, but there's two immediate actions that we could be
    looking at. I think Andrew and the Coalition for Prosperous
    America made a good recommendation about, you know, quotas
    based on the marketplace, and not allowing a country like India
    to overwhelm our supply, thereby driving down the value of
    those drugs.
        Second, the VA and the U.S. Government should really
    prioritize domestic manufacturing over foreign manufacturing,
    and that is something that can be done without any major
    additional cost to the government and is not happening
    currently.
        Senator Tuberville. You mentioned in your testimony that
    Oxford has modern FDA-approved facilities, but still loses
    contracts to virtual importers tied to China and India. Can you
    explain what that says about the way our current system works?
        Mr. Paquin. Well, first off, I would say it doesn't work
    very well in terms of recognizing the national security
    implications and just the good sense of supporting a domestic
    manufacturer. Those contracts that they recently lost were
    probably a lowest price, technically acceptable type of
    contract.
        I think what's happening there is the VA is really not
    applying the right way to think of technically acceptable. All
    generic drugs, I would argue, are not equivalent. A generic
    drug manufactured in Birmingham, Alabama, is probably going to
    be much higher quality and reliable than a drug made somewhere
    in India where we don't have good access to surveillance of
    that manufacturer.
        I think that--and then also, when we look at technically
    acceptable, we should consider resilience issues, investing in
    our domestic manufacturing capability should be one of the
    considerations when somebody like the VA is putting a contract
    out for bid.
        Senator Tuberville. Thank you. Mr. Rechenberg as we saw
    during COVID, United States is way too relying on China, we
    mentioned that, and India. How can a well-designed tariff rate
    quota system be used to strengthen domestic production and
    mitigate shocks or supply shortages in the U.S. market?
        Mr. Rechenberg. Yes. The main cause of the supply shortages
    in the market right now is disruptions to these very few sole
    manufacturers in China and India. We're very much reliant on
    the single source vulnerabilities, but if we give the market
    space for U.S. producers through a tariff rate quota system, it
    very much encourages companies to reinvest in the U.S. and
    bring production because there's this guaranteed market space
    that domestic producers can capture.
        Over time, it will bring back and diversify our supply
    base, which will lead to less shortages over time as we have
    more backup options and more U.S. domestic supply.
        Senator Tuberville. Thank you. Thank you, Mr. Chairman.
        The Chairman. Ranking Member Gillibrand.
        Senator Gillibrand. Senator Kim.
        Senator Kim. Thank you. Dr. Wosinska, I wanted to just
    start with you. I was intrigued by what you raised in terms of
    that idea about the EU-qualified persons. I guess I just wanted
    to start by just asking, does the framework like that model
    already exist in other sectors in the United States? I felt
    like you said something about on the finance side and others,
    but I just wanted to get a little bit more clarity from you
    just how novel of an idea this is.
        Dr. Wosinska. It's actually not a novel idea. I mean, for
    one, it has been used in Europe for decades, but in the United
    States, in terms of FDA and something that FDA is already
    familiar with during when FSMA passed, so the Food Security
    Modernization Act, there are a couple of programs for drug
    importers.
        I discuss in the paper that I published earlier today where
    the importer is an extra layer of verification that the product
    that is being imported into the United States, they have to do
    a certain set of checks, and in a sense, verify. There's a
    person who is responsible for verifying and signing off that
    everything meets the standards that are expected.
        We have that, we have it in the Sarbanes-Oxley Act. It's
    the same general concept that somebody takes on personal
    responsibility for what is being put forward. It also exists in
    an of other professions where there is actually this kind of
    accountability that's added.
        Senator Kim. Given your knowledge about, you know, our
    markets and our structures here in terms of this industry, how
    challenging would it be to be able to implement this? How
    significant of a change would this create?
        Dr. Wosinska. You would have to modify legislation. You
    would have to--the HELP Committee would need to make changes to
    the Food Drug and Cosmetic Act. That would be necessary.
        In terms of how big of a shift it would be, it would depend
    how it would be designed. I don't think we have enough time to
    kind of go into the details about what are the levers, but for
    example, the qualified person framework in Europe applies to
    every manufacturer, including domestic European manufacturers.
        Here, the idea is to, in a sense, complement what FDA is
    already doing, complement the areas where they are struggling
    much more, which is with countries that don't have comparable
    regulatory systems, and so, you could narrow it down in that
    particular way.
        You know, there's a question, do you do it? There's
    mandatory testing that Europe does, and the product actually
    have to make it into Europe first before it gets tested. It
    sits there in warehouses. Would that be necessary? It adds to
    cost, but then it also adds a certain level of assurance.
        One thing I would like to mention is that there are
    different ways of trying to solve this and level the playing
    field. If you were to ask me, I would prefer to level the
    playing field in a way where we actually have this kind of
    quality assurance, because overnight, we're not going to be
    able to switch away from our reliance, especially on India.
        India in 2024 produced 61 percent of solid oral dose
    products that we sell in the United States, and the full market
    is 187 billion pills, and India makes 60-61 percent of them.
    We're talking about 180 different facilities. We're talking
    about API facilities of probably over 200, well over 200. The
    size of this is massive, and I think we need to prioritize. One
    way for us to deal with that is to save onshoring for
    priorities and figure out some other ways to deal with
    manufacturing quality.
        Senator Kim. Well, I think the idea is that we can have
    multiple tools that don't have to run sequentially----
        Dr. Wosinska. That's right.
        Senator Kim [continuing]. but simultaneously. Mr.
    Rechenberg, you raised the issue about independent batch
    testing and things that are somewhat similar to what we just
    heard. I don't know how familiar you are with this qualified
    person model. What's your sort of initial reaction to that, and
    what else can we be thinking about in terms of independent
    batch testing?
        Mr. Rechenberg. Yes, I think that this is also a critical
    point for anything that we're currently importing needs to be
    verified for quality. Because a lot of the time, in the U.S.
    currently, we're getting drugs that are imported, and we only
    find out after the fact that they have these bad tests, and
    then they're recalled, and U.S. patients have already taken
    them.
        If we adopt a more European-style model where we have this
    independent batch testing that in order to have these drugs
    released into the U.S. market, they have to be tested and
    verified that they are quality drugs, that they work for what
    they say they're going to work for. Then this will greatly
    reduce the risk. This is an essential first step.
        Senator Kim. You think it's worth exploring these different
    ideas that are out there?
        Mr. Rechenberg. Absolutely.
        Senator Kim. Okay. Well, thank you so much, and with that,
    I'll yield back.
        The Chairman. Senator Johnson.
        Senator Johnson.
        Thank you, Mr. Chairman. You know, having supplied the
    medical device industry for close to 30 years, I mean, this is
    just quality control 101 we're talking about here. It's
    actually shocking it's not in place. Chairman knows I'm big
    into data, so I want to understand the raw material supply
    chain here. We talk about precursor chemicals. Approximately,
    how many precursor chemicals do you need? What's the universe
    of that? I'll ask you, Mr. Paquin, or whoever knows it.
        Mr. Sardella. I could say within one dimension. We looked
    at 40 critical medicines. They were based on seven foundational
    chemistries, so seven to make the 40 started with raw
    chemistry, seven raw chemicals, they got converted into key
    starter materials. Those got converted to active pharmaceutical
    ingredients and then drug. The ratio is not of magnitudes of
    order that's insurmountable. It's achievable.
        Senator Johnson. How many total drugs are we--how many
    total drugs? Anybody have a number?
        Mr. Sardella. It is 3,200 approved drugs for use in the
    United States.
        Senator Johnson. Over 3,000?
        Mr. Sardella. Correct.
        Senator Johnson. How many active pharmaceutical ingredients
    comprise those 3,000 drugs?
        Mr. Sardella. We don't have specific data on it, but I
    would say in the hundreds, not thousands, by any means.
        Dr. Wosinska. For API it would be the same number. Because
    a drug is the API. It would be the same number, but the
    question is how many intermediates, or reagents, or solvents,
    or key starting materials, that will be less.
        Senator Johnson. Again, I'm just--so are there 100
    precursor chemicals, or is that overstating the case?
        Mr. Sardella. Probably, a little higher than 100 as raw
    chemicals. I mean, within magnitude of order.
        Senator Johnson. Almost all those are produced in China.
        Mr. Sardella. A predominant number of those are produced in
    China. Our chemical manufacturing base moved to China many
    decades ago, and they control that.
        Senator Johnson. If you're getting a brand name drug, are
    those precursor chemicals for the brand name drugs produced
    here in America?
        Mr. Sardella. No. They would be likely also produced
    elsewhere. Keeping in mind that most of our new branded drugs
    are biologicals, and we're talking about drugs that are called
    small molecules. They're chemically derived.
        Senator Johnson. We are highly deficient in the base raw
    material, right, the precursor chemicals. Most in China, even
    with brand name drugs, that's a precursor chemical coming in
    from China. Is it easier to quality control than the active
    pharmaceutical ingredients?
        Mr. Sardella. The key starter materials from a control
    standpoint still have issues in regards to their quality. If
    you want to say, like, impurities still exist in those key
    chemicals----
        Senator Johnson. Because we're taking those precursors
    chemicals now for brand drug, are they also getting the API
    then primarily?
        Mr. Sardella. That is correct.
        Senator Johnson. Then, they're just stamping the pill. Dr.
    Wosinska, you're shaking your head.
        Dr. Wosinska. API is largely for branded drugs, is largely
    made in the United States and Europe.
        Senator Johnson. Okay, say that over again?
        Dr. Wosinska. For branded drugs, API is overwhelmingly made
    in the United States and Europe, but using----
        Senator Johnson. Not in China, but using precursor
    chemicals primarily from China.
        Dr. Wosinska. Only if they are small molecules. Back to the
    point that Tony made, if you have biologics, the ones--and a
    lot of the branded drugs are biologics, those are made with an
    entirely different process. That's not chemical. You actually
    grow them in cells.
        Senator Johnson. Okay. Then that's done here in the U.S.?
        Dr. Wosinska. That would be done in U.S. and in Europe.
        Senator Johnson. The precursor chemicals, that's a
    frightening process, requires permitting. Why was that off
    shored? Because of permitting process? Or is there any kind
    of--I wouldn't think in big man, you know, large refining
    process, you're going to have much cost advantage due to
    offshore. Is it a primary problem of permitting?
        Mr. Sardella. No, the genesis of that offshoring had
    multitude of factors. One was regulatory oversight in the
    United States for those facilities versus foreign, the cost of
    labor in foreign countries versus the United States.
        Senator Johnson. Refining, you got a lot of equipment, and
    there's not many people hanging around a refinery plant.
        Mr. Sardella. Well, and the third part was this a desire
    not to have those facilities here or near populations in the
    United States
        Senator Johnson. Because it's a dirty manufacturing
    process.
        Mr. Sardella. Just large emissions, large facilities.
        Senator Johnson. Correct. We're going to first have to
    overcome that. There're basic and precursor chemicals, and we
    have to have that honest discussion.
        By the way, Dr. Wosinska, you know, we are staying on the
    same hymnal here. You know, solve a problem. You had to first
    properly define it. That's why I'm--again, I've only got five
    minutes. I'm basically out of time here. We need to properly
    define this problem. We need to understand the raw material
    supply chain. We need to understand volumes. We need to
    understand how many--what we're talking about. Before we leap
    to a solution that's mistargeted, but let's get all this data
    down. Again, this, Mr. Chairman, I really appreciate this
    hearing. This is extremely important. We need to fully
    understand this. We need more data.
        Mr. Sardella. If I could add to it, one of the things I'd
    mentioned was the fact that we're not just reshoring, we're
    using advanced technology. The ability to convert those large
    facilities into equipment that fits on this table is a critical
    added value. Bringing it to United States with advanced
    technologies, advanced equipment that allow us to make those
    facilities smaller, cleaner, and more efficient.
        Senator Johnson. But let me, final point. Doing a QC check
    on even imported drugs, this is not rocket science. Now people
    can cheat on it, it needs regulatory oversight. This should not
    be hard. It's shocking that it's not already in place. It shows
    the failure of our federal health agencies. Truthfully, it's
    the utter failure that this is happening today.
        The Chairman. Well, the fact that we don't have, we don't
    have a supply chain, we don't have a map, right? There was no--
    we haven't thought about having a map. We've allowed ourselves
    to be so dependent, it doesn't make any sense.
        Senator Johnson. We've known about these drug shortages for
    a long time and we've done nothing about it. Thank you, Mr.
    Chairman.
        The Chairman. Ranking Member.
        Senator Gillibrand. Thank you, Mr. Chairman. I welcome this
    Committee's eager efforts on this issue, because I think we can
    make a difference on a bipartisan basis on this.
        Dr. Wosinska. Let's talk a little bit more about China,
    specifically. You mentioned your concerns about antibiotics,
    and that should be prioritized. Tell us what else you think
    should be prioritized. What specific medicines do you believe
    are most vulnerable to dependency? Lay the out the risk for us.
        Dr. Wosinska. Thank you for this question. I think every
    one of us here at this table would agree that antibiotics are
    by far the most vulnerable. If you actually look at India and
    what the Indian government is concerned about, they are also
    themselves very nervous about their own reliance on China,
    especially around antibiotics.
        A lot of the subsidies that they are doing is to actually
    de-risk their own supply chains, actually on our behalf to a
    large extent, so, this is great because they're invest, they're
    making these investments without the American consumers having
    to pay, for taxpayers to pay for this, but there's this concern
    about antibiotics. That's by far the most concerning. I think
    it's much more difficult back to the mapping exactly which
    drugs have the largest exposure to China other than that.
        I would say is, that we don't have to figure that
    antibiotics need support and we need to move on other things.
    We do need to do more homework and understand it. I will say
    that in terms of mapping, I am a little wary about mapping it
    for everything. I would much rather start with: here are the
    essential medicines, and here, let's figure out where they come
    from, because those are the ones that we know we will be able
    to secure
        I would probably start prioritizing drugs first in terms of
    their importance, and then really in detail mapping, because
    it's not just figuring out where the KSM comes from. The key
    starting material is only one of the chemicals that you use.
    You need reagents and you need solvents. Those are largely made
    in China.
        You need to know all the pieces. If you try to do this for
    3,000 drugs, we're going to be stuck in analysis paralysis for
    a really long time. I would say yes, absolutely mapping, but
    let's prioritize where we map first.
        Senator Gillibrand. Does anyone want to add to that answer
    from their perspective?
        Mr. Sardella. I do. On the mapping, one of the things we've
    found is we have worked to map several hundred, is that there's
    purposeful obfuscation of where the supply comes from and so
    on.
        Senator Gillibrand. By whom?
        Mr. Sardella. By companies in China, who in other areas
    where they don't----
        Senator Gillibrand. They pretend they're from the United
    States.
        Mr. Sardella. Correct. They are many different versions of
    a company. You can't quite track back to is it produced in a
    China facility? It could be a multitude of reasons. It could be
    that maybe the facility has some sort of FDA warning. It could
    be just based on business and ownership structure that they
    don't want it to be known who owns which company. It's very
    difficult.
        We've found that although we're working through it, there
    are data sets that allow you to identify where those sources of
    are coming from, from beginning to end.
        Senator Gillibrand. Tony or Andrew, do you have anything
    you want to add to the China problem?
        Mr. Paquin. Yes, I would just add that I think it
    underscores our inability, ultimately, to have oversight into
    China, and to really understand what the problem and the
    sourcing is. I agree that we should focus on essential
    medicines. That's a definable problem. We can zero in on that.
    I think the strategy is to then move that into domestic
    manufacturing as quick as possible. Then we have control of the
    supply chain.
        Mr. Sardella. If I could add to that. We've also taken a
    lens on not only essentials because some of these are very,
    very low-cost medicines, but also what do the healthcare
    systems need? What do national retailers need? What does the
    government need? What makes economic sense to produce here in
    the United States with advanced technology? When we put those
    lists together, we did come together with a prioritized list
    where it makes economic sense. There's demand for those
    medicines, there's a need for them and they can be a
    sustainable investment by the us.
        Senator Gillibrand. Have you submitted that list to us?
        Mr. Sardella. We've submitted it in collaboration with
    ASPR, and be happy to submit those as well.
        Senator Gillibrand. Please submit it to the Committee.
        Mr. Sardella. I'll be happy to.
        Senator Gillibrand. Andrew?
        Mr. Rechenberg. Yes. The final part that I would add is
    that this does have to be a drug-by-drug approach, especially
    for a program like the TRQ. I agree that the antibiotics are
    one of the most critical and one of the most urgent to start
    on. These are going to have different solutions because they
    have different supply chains.
        Additionally, I would say that India is not necessarily a
    de-risking from China. India has plenty of its own problems,
    whether it's safety issues, FDA flags that have been in Indian
    facilities. As on top of that, India had the same problems
    during COVID. They cutoff some of their supply to the United
    States, not because of any adversarial, geopolitical reasons,
    but they have their own population they're trying to supply.
    The more we can bring back to the U.S., the safer our supply
    chain will be.
        Senator Gillibrand. Thank you, Mr. Chairman.
        The Chairman. Senator Moody.
        Senator Moody. Thank you, Chairman Scott. Thank you to our
    witnesses for being here today, especially a great Floridian.
    Always appreciate seeing a fellow Floridian.
        You know, I think during the COVID years, a lot of things
    came to light that maybe Americans weren't paying attention to,
    even those in the industry. Dependencies for our drug supply
    chains on these four nations, I think, really started hitting
    home for a lot of people.
        I don't think most Americans know that more than 50 percent
    of the manufacturers supplying our market, it's coming from
    overseas. I don't think they know that. I don't think that they
    know that, one of you mentioned, 80 percent of active
    pharmaceutical ingredients are manufactured overseas, or that
    China and India combined, make up 85 percent of active API
    filings. I don't think Americans understand that.
        Just for having this hearing, I think, Chairman Scott, does
    Americans a service in shining a light on this specifically
    when you look at the fact that drug and API manufacturers in
    China and India receive the most FDA warning letters for
    violations, which can mean carcinogens and medicines
    destroying, or falsifying data and non-sterile manufacturing.
    Everybody's shaking their head, correct.
        I mean, how long has this been prevalent, that we've been
    seeing these types of violations? Has that increased as our
    dependencies on these foreign nations has increased?
        Mr. Paquin. I think this is a, you know, unintended
    consequence of the globalization activity over the last 20
    years. Senator, and I think you make a very good point. COVID
    really created the awareness because it broke the global supply
    chain, and then we all experienced what you're referring to. I
    think that the average person in America is not really aware of
    this problem.
        I do believe that there is a growing awareness that we
    didn't have maybe five or ten years ago. You know, when we talk
    about the various actions to take place, and obviously, I keep
    going back to the idea of bringing supply back to domesticating
    here, the United States. The idea of country of origin labeling
    on a medication would probably do a lot toward what you're
    describing, and that is making the average consumer, and by
    that, I mean not just patients, but also the doctors, and
    pharmacists, and healthcare professionals aware of this risk,
    and that'll probably serve us well as we try and correct the
    problem.
        Mr. Sardella. I wanted to add, when we commenced the
    initiative informed the API Innovation Center, it's only been
    three years in existence. The first study we did was a
    perception gap study, and that study looked at the perception
    of our reliance, of shortages, versus real data around the
    shortages.
        What was striking at that time was the two most important
    stakeholders in our country underestimated the risk scientists
    and government. I really commend these hearings to expose that
    both from a government and a scientific community. By nation,
    we greatly underestimated the risk of shortages and
    overreliance compared to other nations like China, India, and
    Europe.
        That perception gap is starting to close thanks to these
    types of sessions and the interest. We're working effortly to
    continue with our publications to close those gaps.
        Senator Moody. I have to imagine that if consumers had the
    information and the choice, knowing where about the increase in
    violations, I mean at this point is are consumers ever informed
    that where the main ingredients and the drugs that they're
    taking are manufactured?
        Mr. Sardella. Very unlikely. There's no transparency. This
    is a very interesting concept. This is an industry like any
    other supply chain. Any other supply chain, you can look and
    understand where the product comes from, what the ingredients
    are, and where it's sourced. Not our pharmaceuticals.
        Any other product that you procure has clarity where you
    can compare quality of that product. You cannot compare the
    quality of the pharmaceuticals as a result. One in every four
    prescriptions in the United States is from a facility that has
    an FDA violation. A quarter of the prescriptions have a
    violation. I don't want to create alarm. Some of them are
    simple procedural violations, but nonetheless, it means a
    quarter are being prescribed that have some sort of violation
    on the FDA. It is not known.
        What's also striking is while we overestimate the cost when
    we work with manufacturers, we're talking like less than a
    penny to have a U.S. existing manufacturer manufacture that
    medicine here in the United States with the highest quality of
    manufacturing standards.
        Senator Moody. I'm out of time, but I hope you will
    explore, Mr. Chairman, as you do your questioning, the national
    security implications for a failure in that supply chain. Thank
    you.
        The Chairman. Thank you, Senator. Senator Warren.
        Senator Warren. Thank you, Mr. Chairman, and thank you
    Ranking Member for holding this hearing today. We're talking
    about a broken supply chain, and I was looking at the numbers
    on this.
        The U.S. imports seven times the amount of drugs that we
    were importing in the year 2000. That's how much this has gone
    up, and you-all are discussing how our reliance on foreign-made
    pharmaceuticals exposes Americans to drug shortages, to safety
    risks, and exposes seniors more than anyone.
        For years I've been working with my colleagues to try to
    advance reforms, establishing stronger transparency rules,
    closing loopholes in the Buy American requirements. I just want
    to say we've gotten a lot of pushback from people who make a
    lot of money by keeping all of this opaque, and maximizing
    their profits, and minimizing safety for the American people.
        Today, I want to hit on something that you all have
    mentioned, and that is how we get more drugs manufactured
    domestically. How do we move our supply chain here to the
    United States. Mr. Rechenberg, you're an expert on drug supply
    chains. You know that other countries are subsidizing the
    manufacturer of prescription drugs. How does that affect our
    ability to make these drugs here in the United States?
        Mr. Rechenberg. Yes, and this is one of the main problems;
    that these foreign companies are being subsidized by their own
    governments. They're able to severely underprice U.S. producers
    and drive them out of the market.
        We really need a comprehensive approach here, starting with
    something like a tariff rate quota system to create a space in
    the market for U.S. producers. We need to supplement that with
    direct production incentives for companies, whether through an
    act like the PILLS Act or through federal procurement. Federal
    procurement can be a huge part of this, and incentivizing and
    prioritizing American-made medicine.
        Senator Warren. Let's talk a little bit about buying here
    in the United States. The Federal Government could make it
    easier and less risky for manufacturers to make their products
    in the U.S. if we would just leverage the power of our federal
    contracts.
        That means the government makes a deal with the
    manufacturer, and says, we guarantee we will buy a certain
    volume of drugs over the next several years. That makes it
    better for you. Make the investments, you get out there, you
    produce the drugs.
        Now, the DOD actually has contracts for essential
    medicines, because for obvious reasons, it is important to make
    sure that our service members have the drugs they need as a
    national security issue. I have been pushing DOD to make those
    contracts, domestic production advances.
        Mr. Sardella, you lead the API Innovation Center, and
    you've actually looked in to how many critical drugs rely on
    ingredients manufactured exclusively in China, I think you were
    talking about this earlier. Would it help national security to
    expand federal contracting programs at DOD and other agencies
    and focus them on domestic drug manufacturing?
        Mr. Sardella. Absolutely. It would be a significant lever
    to bring back a strong U.S. industrial base for manufacturing.
    I commend all the incredible work you've done in this area.
    Then second, one of the elements that would be also very
    effective is shifting the contracting vehicle from what is an
    IDIQ, indefinite demand, indefinite quantity, in business.
        Indefinite demand and indefinite quantity does not reduce
    the risk. There's no certainty you could lose a contract or
    volume turning that into a certainty of demand and volume and
    even cost or price so that a manufacturer can make an
    investment. We have a small business in Missouri where we've
    placed two medicines for manufacturing for a healthcare system.
    We've provided them our technology that we developed. They are
    now making investments to expand their facility because they
    have certainty that the healthcare system is giving them a
    long-term agreement. If the newest government did the same, we
    expect the same.
        Senator Warren. You and I are in the same place on this;
    that more robust federal contracting can create the kind of
    sustained demand that manufacturers need so that we can
    eliminate these supply chain vulnerabilities and protect our
    national security.
        For me, that is reason enough to implement them. Some
    critics have warned that, oh, if you shift to American-made
    drugs, it will be too expensive. On the other hand, we're
    paying a price, A for vulnerability, and B, if our seniors end
    up taking drugs that are ineffective and so they are sicker,
    they stay sick, or if our hospitals are getting price gouged
    during shortages.
        Mr. Rechenberg, do you think that shifting to more domestic
    manufacturing of pharmaceuticals would over the long run cost
    more money or save more money?
        Mr. Rechenberg. It would save far more money. We've seen,
    as I mentioned in my opening statement, 300 to 500 percent
    price hikes during a shortage. That's one way we would save
    money, but also, we're paying a lot more every time the
    medicine's not there, and the PE have to be in the hospital
    longer, or you have to have substandard medicine or the
    hospitals have to pay extra staff to take care of people. Over
    the long run, you save much more money than you would otherwise
    because you stop these shortages and you guarantee safer, more
    effective medicine.
        Senator Warren. Thank you. You know, Americans shouldn't
    have to worry about the quality of their prescriptions, whether
    they're safe to be able to take, whether they're effective,
    what will happen if the supply chain breaks. For me, that's
    reason enough to manufacture right here in the United States
    and using federal contracts to lower those production costs.
        I think there are a lot more benefits for doing this. That
    is why I have a bill, the Pharmaceutical Supply Chain Defense
    Enhancement Act that would do just that. I hope we can get some
    bipartisan support and get that moving. Thank you very much.
    Again, thank you Mr. Chairman for holding this hearing today.
        The Chairman. Thanks. Senator Warren, we served on a
    subcommittee together, Subcommittee on Armed Services. We had
    she had a hearing and the individual from DOD tried to explain
    that he couldn't buy American because there's regulation that
    required him to buy foreign, and then, we found out that there
    was no regulation.
        Senator Gillibrand. I think there's a regulation that says
    to buy the cheapest. There's always a cheap thing, and that's
    the problem that we talked about.
        The Chairman: He couldn't explain.
        Senator Gillibrand. He probably didn't know.
        Mr. Sardella. We have analyzed those costs for specific
    molecules among our industrial base, and we verify that they
    can be produced by U.S. manufacturers an equivalent price.
    What's preventing that is certainty that they will have a long-
    term agreement to supply it so that they can make the
    investment.
        Then, second, we submitted data for the Congressional
    Budget Office based on this bill that showed one must and think
    of it as one temporal point in time where an adversarial
    country or a foreign manufacturer purposely to drive out, all
    U.S. manufacturers put the price way below the cost.
        If you look at it on a five-year average, as Andrew said,
    you would save significant dollars because once they drive
    every U.S. manufacturer out, they increase the price, massive
    volatility. It has to be looked at from a budgeting office on a
    five-year average basis. That's not even, to bring in what
    Andrew said, it costs over tens of millions of dollars per
    shortage of drug within a healthcare system. They're incurring
    significant costs of those shortages as well.
        The Chairman. You know, and I just get followup----
        Senator Warren. I was just going to say, I get really
    frustrated on this, that people treat risk as if it's free. We
    are paying a price for risk, for the fact that yes, we got it
    right down to the tightest nickel on how to purchase this
    stuff. It's a very fragile system for way, just pay for another
    way. That's a cost.
        The Chairman. We'll go back to what Senator Warren was
    bringing up. If we had--if we took the DOD and we took the VA,
    right, if we just took those two and they--I'll just take their
    drug buying, would that be enough volume to move volume?
        Mr. Sardella. You would transform the U.S. generic supply
    chain, and you would also cause a force function for private
    markets to then also now procure from U.S. manufacturers,
    because of the reasons we just said, you don't want a quarter
    of your pharmaceuticals in an FDA violation site. You want to
    have certainty in local response time resiliency. You would
    fundamentally transform our generic supply chain.
        The Chairman. What percent of the generic drugs that the--
    if the DOD and VA did just their generics, what percent of the
    volume that come into the country, would that be you? Just
    like, is that of 100 percent of generics sold? What percentage
    does DOD of that 100 percent and VA together.
        Mr. Sardella. Oh, I don't have specifically those numbers,
    but it from a standpoint of moving the market and creating an
    industrial base, 200, 300 medicines into generic would cause a
    significant resiliency base and a U.S. manufacturing base.
        The Chairman. All right. Then Mr. Sardella, so you've
    worked with companies that have opened up plants----
        Mr. Sardella. Expanded.
        The Chairman [continuing]. so have they been able to make
    the price almost equivalent to what's being bought from
    overseas?
        Mr. Sardella. Correct. With new technology. We're not just
    saying make it the same way. We're through the private
    investment in public from State of Missouri and ASPR, they're
    making it in modernized methods. I give the example, it's like
    they currently make them in batches, the size of this room.
    Now, they make them in equipment that's the size of this table.
        The Chairman. Do you have what the return on investment is?
    Do you know if--so if you were going to invest, how much would
    it take to open up a plant and how, what would be the how long
    would it take to get your money back? Do you have any idea yet?
        Mr. Sardella. On some of the drugs, because we're focused
    on expansion because there's 30 billion doses of idle capacity
    in the United States, 30 billion just sitting there. We're
    focused on taking those idle facilities that are already FDA-
    approved. What it means is they can get the drug commercialized
    in less than five years and they get a return on investment in
    three years.
        The Chairman. Three years. Okay. We actually don't have to
    invest money--I'm a business guy. If you gave me a three-year
    return, I'll do that every day. Right?
        Mr. Sardella. Absolutely.
        The Chairman. I mean, so, okay, so number one, we can get
    the cost down and number two, we can get the investor gets a
    return.
        Mr. Sardella. Correct. The return's so strong that our
    partners are going and getting their own loans to be able to
    expand facilities.
        The Chairman. What we got to do is go back to what Senator
    Warren said; we got to commit volume.
        Mr. Sardella. Correct.
        The Chairman. If just DOD and VA did it, and that's it.
        Mr. Sardella. It'd be transformational.
        Dr. Wosinska. Can I just add? It's in maybe 10 percent of
    total volume. I mean, it absolutely would bring some domestic
    manufacturing to the U.S., it would help secure supplies for
    VA, but it's too small of a fraction to really create change in
    the rest of the market. It's not to do it, I absolutely
    encourage you to do it. This is a perfect thing to that, you
    know, very sensible thing to do. We need to think beyond that
    because we need to sort of change the dynamics in the rest of
    the markets in the 90 or so percent, in the markets, to change
    how those markets operate and what they value.
        The Chairman. Just a caution, I ran a hospital company, and
    I was two percent of the entire healthcare dollar. I focused
    on, you know, I could move all the volume in the whole country,
    I could force everybody to change based on buying, based on
    quality. Everybody had to change. I would just even--because
    nobody would, there's no--I was the biggest committed buyer in
    the VA. I think you're--what you said makes sense, but reality
    is most people are not committed buyers. That's why if we have
    really committed buyers, then I think it'd have a bigger
    impact.
        Dr. Wosinska. I'm sorry that Senator Warren left because
    Senate Finance actually has a proposal on that that was put
    forward last year, that exactly does this; the idea for the
    most vulnerable supply chains, which are a lot of the generic
    sterile injectables is to create committed contracts, and then
    have add-on payments for choosing reliable manufacturers.
    Absolutely, the same concept. It really would be great to see
    movement on that side.
        The Chairman. Have any of you done business with the DOD or
    VA?
        Mr. Paquin. Yes, we've done business with the DOD and the
    VA.
        The Chairman. Did they care about quality?
        Mr. Paquin. No. You know, I was going to bring that up. I
    commented earlier about technically acceptable, and I think
    that's a mis defined term in this circumstance. They're not
    considering resilience. For example, they're not considering
    the benefits of supply chain, and they're viewing that drug
    overseas as equivalent to the drug domestically made. I think
    that's the big mistake. I would say that what we could use
    would be a DOD set aside requirement for American made for
    example. I completely agree that the VA could lead the charge.
        I think you'll find that private hospitals or the
    commercial hospital business that you're familiar with would
    actually follow that lead. I think they're ready to recognize
    the need for resiliency and stability in the supply chain. You
    need that big buyer to step up and start the process. I think
    that's the VA and the DOD.
        Mr. Sardella. I can confirm what Tony is saying, because we
    are aggregating demand with healthcare systems and retail
    pharmacies knowing that this is a national priority for our
    Nation. They are willing, as he said, and that would give a
    further indication to aggregate demand across their systems to
    procure U.S.-based supply for the benefit of the system.
        The Chairman. For each of you, if you had a choice, there's
    two different, same drug, and you had one little bottle that
    said, "Made in the United States," okay. The other bottle said,
    "Made in China." How many of you would buy same price? Look,
    they both look really nice. Same little, pretty bottle. How
    many of you would buy China?
        Mr. Sardella. I might want to disclose that my original
    background is as a toxicologist in this context, I would
    absolutely buy the U.S. medicine.
        The Chairman. Anybody buy China? No? What if it added on
    there that whether American or Chinese, that it's under an FDA
    violation, however small. There's some website that you can go
    to see what it was. Would that have an impact on you?
        Mr. Paquin. Yes. Clearly, we would avoid buying anything
    that had an FDA violation. You know, when you think about
    something so sensitive as a drug, right, we're not buying a toy
    or a vitamin. We're buying something that affects our health in
    a very personal way. We'd buy quality.
        The Chairman. The thing about the buyers in this country,
    Federal Government, hospitals, nursing homes, GPOs, doctors,
    pharmaceutical chains, have you known any of them that
    required--they did it based on quality?
        Mr. Paquin. No, I regularly do business with all those
    entities, and they don't really require--they may want to, but
    there isn't a method for them to assess that quality as we've
    been describing. There's really no independent way to measure a
    report.
        The Chairman. Good, but Tony, they could say, "I'm not
    doing it. If you haven't had an FDA inspection within three
    years, I won't do it."
        Mr. Paquin. They could do it for sure.
        Dr. Wosinska. Can I add something?
        The Chairman. Sure.
        Dr. Wosinska. I have studied generic sterile injectable
    shortages really for 15 years. Transparency often comes up that
    we don't know which manufacturer is reliable, but at the end of
    the day, it's the lack of incentives, and the fact that
    hospitals and GPOs do not fully internalize the harm that comes
    with it. The numbers that Andrew commented on----
        The Chairman. Can you go through--when you say the harm,
    how would you define the harm?
        Dr. Wosinska. Yes. The amount of money that hospitals--and
    there was a study, $360 million from additional costs resulting
    from shortages. It seems like a large number. This comes out--
    --
        The Chairman. Just because of costs.
        Dr. Wosinska. Right. They have to have additional staff and
    whatnot that comes out to $60,000 per year. That's nothing for
    a hospital. That $60,000 is nothing for a hospital. If you look
    at how much for a day----
        The Chairman. That's for a day, by the way,
        Dr. Wosinska. This is for a year, right?
        The Chairman. I know.
        Dr. Wosinska. If that's the level of the cost, you know,
    hospitals are very strongly incentivized to buy the cheapest.
    In a sense, it makes sense. These drugs are therapeutically
    equivalent. You're paying for quality, right?
        The Chairman. We're not paying for quality.
        Dr. Wosinska. We are not paying for quality. We're not
    paying for quality. I will say that I have to disagree with
    Andrew here. I don't think there's free lunch. If we want to
    have reliability, if we want to have resilience, if we have to
    want to have quality, we will have to pay for it. I think it's
    a--you know, we have to ask ourselves how much are we willing
    to pay for it? But there are ways to do it, but you have to
    change incentives.
        I think, you know, Civica Rx, I don't know if you're
    familiar with that organization, right? They do a lot of
    homework around where the drugs are made. They have stockpiles,
    they have long-term contracts. Hospitals are not signing up for
    these contracts. They're really wary about this because, oh, my
    goodness, they might actually end up paying more, right? We
    have to change the fundamental incentives, and shift sort of
    how hospitals are thinking about it.
        The Chairman. Well, the problem--I used to be in the
    business, I just say nobody came to my hospital because I
    served Pepsi over Coke. Nobody came because I did this, you
    know, I had this drug or that drug, or I bought my drugs in the
    United States, or I bought my drugs someplace else.
        Dr. Wosinska. There isn't accountability for hospitals
    either. If they have a shortage, they point as the
    manufacturer, right? It ultimately ends up with the patient,
    unfortunately.
        The Chairman. Andrew, when you say that it pays for it,
    have you been able to do a study of what the additional costs,
    additional hospitalization, blah blah blah, any of those
    things? Have you done that?
        Mr. Rechenberg. Yes. We're currently working on a study to
    get an exact number here. From all the research that we've done
    so far, looking at the productivity costs, the shortage costs,
    and as well as just the worst patient outcomes, whether it's
    delayed care, rationed care, or getting substandard treatment,
    the cost vastly outweighs.
        We're currently in the process of making a study to get an
    exact number on this, but it is clear already that the long-
    term cost is much, much more savings than it would be by paying
    the marginally more rates in the beginning.
        Then on top of that, I'll add for this buyer's side, for
    the hospital, because we don't have this mandatory country of
    origin labeling, the hospitals themselves often don't know what
    the supply chain risks are
        The Chairman. Even if they wanted to do the right thing.
        Mr. Rechenberg. Exactly. Especially when it comes back to
    the API. They have so little visibility into the quality side,
    they have to go for the price, and that inevitably pushes
    things more offshore.
        Dr. Wosinska. I can tell you that where it really does pay
    off is for the patient. There was one study that looked at one
    particular shortage, one shortage of a drug, and the fact that
    more patients ended up dying of septic shock because the
    alternative was not available. When you looked at the cost of
    life, and you calculated the number of patients that died, that
    single shortage cost over $13 billion.
        Senator Gillibrand. The hospital doesn't pay that cost.
        Dr. Wosinska. Exactly. The hospital does not pay that cost.
    There's a big gap between the----
        The Chairman. It's worse.
        Senator Gillibrand. You pay the hospital.
        The Chairman. That's right. The worst is that we don't pay
    for results like we should pay. We should pay different. Like,
    if somebody doesn't do your car, fix your car, right, you don't
    pay, but every healthcare provider thinks, well, you still have
    to pay. Why?
        Senator Gillibrand. The problem is, you're talking about
    dynamic scoring, which is not how the hospitals balance their
    budgets. When you do your analysis, you say it's only costing
    them $60,000 a year because they're not obligated to factor in
    all the costs and harm caused to the patient, or to society, or
    to any other stakeholder outside of their bottom line. That's
    the problem. Like, the costs are spread to us. The profits are
    given to the provider.
        When they're doing their cost-based analysis, they're
    saying, "Well, we are going to go with the cheaper drug." The
    DOD is the same. Every purchaser in the system today has
    multiple factors, but cost is almost always the factor. I
    believe----
        The Chairman. It's the decision today, not the long-term
    cost.
        Senator Gillibrand. Correct. No one does dynamic scoring.
    No one actually wants to bear the full brunt of the cost. I
    think part of this Committee's job is to really do all the
    pieces that you've all suggested; country of origin labeling,
    making sure we know the quality upfront, have an incentive as
    you say, to do the quality testing, make sure that the cost, as
    you've decided, Andrew is documented to the world, to the
    patient, to the United States.
        Then to the other piece of national security that's not
    even you calculable. You can't calculate what will happen if
    we're at war. The risk if we're at war with China and you can't
    get antibiotics into this country and how many millions of
    people die, the cost of that is trillions of dollars. It's
    incomprehensible.
        The truth is, this is a reason why no one's done this work
    before because the cost is incalculable. I'm really excited
    about the work this Committee's doing, and I think it's
    important.
        The Chairman. It seems like if you go through the process
    to make movement, the easiest thing is because they report to
    us, DOD and VA, right, if they started buying based on buying
    American, that would move the needle, right? That would move it
    the fastest. The other is why doesn't--we talk about these
    violations, FDA, or the FDA knowing that we only have one
    supplier. Why aren't they doing something?
        Mr. Sardella. In regards to diversifying?
        The Chairman. Yes, I mean, why wouldn't they? I mean if
    they're responsible for us staying safe, right?
        Mr. Sardella. Well, their mandate is to ensure that
    manufacturers comply with CGMP manufacturing practices, and
    that before they even produce those medicines, that they've
    been vetted through analysis of them. Going beyond as to
    managing the supply chain itself and saying how many, that
    would be outside their bounds in regards to what they would
    work on. I would also ask----
        Dr. Wosinska. Yes----
        Mr. Sardella. I would also say that--sorry Marta. Just one
    line. I would also say that that strategy also does something
    very different as well. It's a strategy of redirecting as
    opposed to countering, right, as opposed to countering and
    trying to counter India and counter China, which will be very
    resourceful, right? Being able to start with redirecting
    manufacturer through procurement U.S.-based requirements, U.S.-
    based prioritization.
        Which by the way, we're the only nation that does not
    prioritize their domestic manufacturing source over foreign.
    The ability to do that is a far more higher probability of
    success because you're redirecting, you're not countering,
    which is difficult.
        The Chairman. Did you want to say something? Okay. Just off
    the top of our head, we can think about the VA, DOD, we should
    have some sort of map. Even if we start, like you said, you
    can't start big, you should even if we start small and then we
    should have higher expectations for all of our buyers.
        Senator Gillibrand. Demand transparency, I definitely think
    that can require transparency.
        The Chairman. Sorry, go ahead.
        Senator Gillibrand. We should require transparency. We
    should require labeling. We should require information. Then,
    that also can move a market because you can shame people into
    not--like if they're not caring where their drugs are coming
    from, and they're not caring about the outcome to their
    patients, you can shame them into better participation.
        Then, if the DOD and the VA can be the standard bearer or
    the hallmark of success, and show that long-term their costs
    aren't going skyrocketing high, they can then make the case you
    should do these long-term investments, get the quality drugs
    you need.
        Then pushing Governors and pushing Presidents to invest
    domestically, because the other point you all raised up is that
    most of our adversaries and most of our competitors, they do
    domestic investment. I mean every company in China is wholly
    owned by China. Like, they will do all the baseline
    investments.
        We can create an investment fund that actually invests in
    domestic production to incentivize it. Even if we don't want to
    create a pot of money, we certainly can create massive tax
    incentives. There's many ways to create carrots.
        The Chairman. Well, and what if Tony said it's right,
    there's a three-year payback. I mean you don't have to invest a
    dime.
        Mr. Sardella. Especially, if you're using existing
    facilities, and that's the key.
        The Chairman. At least short-term, we have plenty of
    capacity.
        Mr. Sardella. We have over 30 billion doses of capacity.
        Senator Gillibrand. Also, you can use the Defense
    Production Act to require us to use that capacity.
        Mr. Sardella. That is correct.
        Senator Gillibrand. Once we map capacity, if you've already
    done that, we can publish that to say we will then ask the DOD,
    and the VA, and the President to ask each of these
    manufacturers to use all their capacity to begin to ramp up
    domestic production of the top 10 required generic drugs for
    our safety and survival.
        Mr. Sardella. You have facilities that are highly
    experienced at producing these medicines. They should be
    leveraged first and foremost because they're experts in these
    areas, like the companies that Tony brought up. Before even
    starting up new facilities, we will need, ideally--hopefully,
    we'll be able to open new facilities. Leveraging the incredible
    experience we already have in this industrial manufacturing
    base that is elite and being able to provide them new
    technologies, that's where the investment, I believe, is the
    greatest place.
        It's about investing and allowing for sustainable
    independence by these manufacturers. We don't want the
    government to continue to have to invest in them, modernize
    their facility, leverage their expertise. Let them invest
    themselves now that there's a market and allow them to be
    sustainable long-term economically to produce these medicines.
        You've created the demand. Demand investment in
    modernization so they can compete so long-term we don't have to
    revisit this and have to continue to fund it. The industries
    themselves can do it.
        The Chairman. Great. Okay, go ahead.
        Dr. Wosinska. Can I comment on transparency? I think it's
    really, really critical. The way I think about transparency is
    who needs what information and what are they going to do with
    it? I think it's really, really critical to ask that question
    because some transparency for the sake of transparency is not
    going to get you anywhere. Transparency can actually sometimes
    backfire.
        I am a very big proponent about the government having
    transparency. This is how you decide what to prioritize, where
    to invest. This is why it's important for FDA to know that
    manufacturers might have a problem and this buys them time. For
    example, hospitals really want an early warning system of
    shortages. You know what that means? That means that they
    basically have a sign to a stockpile really early, and then FDA
    actually has much less time to try to fix the problem.
        Where I get really nervous is transparency to consumers.
    I'll tell you why. I actually have a story very similar to
    Peter Baker's story, and it actually involves my mother, if I
    would be allowed to share this story. I've never shared it
    publicly.
        My mother was diagnosed with cancer in early 2020, and she
    needed to get radiation, and chemotherapy, and it was going to
    be oral chemotherapy. It was a 60-day supply of a pill, and it
    was going to be an old generic, and knowing what I know, I got
    very nervous. I started to--I basically thought; if my mom
    doesn't respond well to this therapy, I will never forgive
    myself because what if that product was not made to
    specification?
        I actually have access to a lot of information, and I
    looked at who the manufacturer is for this NDC, and I looked,
    you know, where it might be manufactured and what are the
    alternatives. It was really difficult for me, and I have access
    to really top information. You would think that I would be the
    first person to say, "We need to fix it."
        You know, what I learned from this experience is the
    complete opposite because of what happened next. I went to one
    pharmacy, and I said, "Can you dispense me this NDC?" They
    said, "No, we don't do special orders." I went to another
    pharmacy, I got the same answer. Pharmacies are reimbursed in
    exactly the same way. It's a low business margin.
        You have one option when you go to a pharmacy. Unless we
    were to fix how pharmacies are reimbursed and how pharmacies
    stock, the patient only has one choice; to pick it up or not
    pick it up. This is not like going to a store where you have
    five shirts and you get to choose one. They don't have a
    choice.
        By giving this information to consumers where there's
    absolutely no (financial) incentive for a pharmacy to do
    anything about it and respond, that is a recipe for a lot of
    non-adherence. Yes, I would prefer to choose the non-Chinese
    drug over a Chinese drug, but in a pharmacy, I'm not going to
    have that option. It's really, really, really important that we
    either fix the pharmacy reimbursement policy or look for
    solutions elsewhere.
        The Chairman. Let me give you my response. I really believe
    in transparency, and I'll give you a story. I've run a bunch of
    companies, and you know what every employee wants, they want
    every hospital in the network. That means you get no discounts,
    right? The reality is if I had two plans, and everybody's
    included in a plan that's cheaper with just one hospital,
    include a smaller network.
        Some people would pick one because they know it, but some
    people would pick a bit more expensive. I actually really
    believe that people, they'll look at it and look, is it going
    to be perfect? No. People buy bad, ugly sweaters sometimes, but
    I believe over time it'll force whoever the pharmacy is.
        If I walked in, and I had one, and it said if I would
    just--I'd start bugging them. We see it now. We see it with
    people buying America. You know, you can even get on Amazon,
    which still doesn't disclose all country of origin, but you go
    to Amazon now and they have sections. I can tell you, I've
    talked to people that make it America, they put the label on
    made the America, their revenues go up.
        I believe it's--I agree with you, it's not going to be
    easy. It's not going to be perfect. The information never is
    perfect, if we do it all, it will force people to change. They
    will change. I've seen it in too many businesses. Do you want
    to add anything?
        Senator Gillibrand. No, you can close us out.
        The Chairman. I want to thank everybody for being here
    today and participating. I look forward to continue working
    with members across the aisle, down the dais. If any Senator
    has additional questions for the witnesses or statements to be
    added, the hearing record will be open until next Wednesday at
    5:00 p.m.
        I want to thank each of you for being here, and if you have
    any suggestions for either one of us going forward, we are
    going to get this fixed. Thank you.
        [Whereupon, at 5:01 p.m., the hearing was adjourned.]

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

                                    APPENDIX

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

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

                          Prepared Witness Statements

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

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                          Prepared Witness Statements

                                 Tony Sardella

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                          Prepared Witness Statements

                                  Tony Paquin

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                          Prepared Witness Statements

                               Andrew Rechenberg

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                          Prepared Witness Statements

                             Dr. Marta E. Wosinska

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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

                            Questions for the Record

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

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                            Questions for the Record

                                 Tony Sardella

                      Ranking Member Kirsten E. Gillibrand

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                            Questions for the Record

                             Dr. Marta E. Wosinska

                      Ranking Member Kirsten E. Gillibrand

        Question:

        You have written about how federal transparency initiatives
    will fall short of their goals if purchasers, such as
    hospitals, have no economic or institutional motivation to act
    on such information.
        How can hospitals be incentivized to consider quality and
    reliability over the cost of drugs?What are some of the
    potential downsides of transparency initiatives should they not
    be executed alongside other initiatives, such as reforming
    economic incentives?

        Response:

        Transparency initiatives in drug manufacturing often fail
    to achieve their intended goals-not because the information is
    wrong, but because they lack the right incentive structures to
    motivate action. Simply making information available is not
    enough; those who receive it must be both motivated and
    equipped to act on it in ways that align with broader economic
    incentives or institutional structures. Without this alignment,
    transparency efforts become costly nice-to-haves, and may even
    produce unintended consequences that worsen the very problems
    they were designed to solve.
        To understand which transparency approaches are most likely
    to succeed, it is useful to first examine the main types of
    transparency initiatives and how they interact with underlying
    economic incentives-which often diverge from what serves
    patients best. There are three main types of transparency
    initiatives:
          1.Government-facing initiatives
          2.Patient-facing initiatives
          3.Institutional buyer initiatives
        Existing government-facing initiatives primarily focus on
    mapping supply chains to identify geopolitical exposure and
    with it identify which drugs require alternative sources in
    which production stages of supply chains. Incentives to act on
    this information will be driven, to a large extent, by Congress
    (by setting out the tools and directives as well as
    appropriating funds to follow through) and the administration
    (by identifying which existing tools they can deploy).
        Patient-facing initiatives include adding to the pharmacy
    label either the Country of Origin or a rating of product
    quality. The goal of these efforts is to shift markets through
    patients as they begin to shop for versions that presumably are
    less likely to have product defects. There are two intertwined
    reasons, however, why such initiatives could go astray. First,
    without reforms for how pharmacies are reimbursed, patients
    have limited options in how they respond to sourcing
    information, other than deciding not to fill the prescription.
    Second, neither measure is strongly correlated with actual
    product quality, making potential misinterpretation by patients
    particularly concerning.
        When it comes to institutional buyers, efforts have focused
    largely on creating transparency in the hospital and clinic
    sector, not the retail pharmacy sector (where the consumer-
    facing measures seem to have gotten more attention). In the
    hospital space, there are two main types of transparency
    initiatives:
           Supply chain reliability assessments and;
           Early warning systems.
        The data needed to support these transparency initiatives
    varies depending on the goal. Supply chain reliability
    assessments focus on evaluating the long-term dependability of
    a manufacturer's supply chain over the duration of a multi-year
    contract, using indicators such as plant redundancy, inventory
    controls, raw material sourcing, risk management practices, and
    historical shortage records. In contrast, early warning systems
    aim to detect abrupt risks or disruptions in the near term-
    drawing on real-time signals like new shortage posts on the
    ASHP website, reports of product discontinuations, sudden order
    limits from any wholesaler, newly announced adverse FDA
    inspection findings, recalls, or reports of supply
    interruptions in global logistics. The economic incentives for
    these two transparency approaches diverge sharply.
        Early warning systems enable hospitals to continue
    prioritizing low-cost procurement without regard for long-term
    supply reliability, only shifting tactics and rapidly
    increasing orders at the first hint of trouble. This dynamic
    offers clear advantages to well-resourced institutions equipped
    to act quickly, which in turn has driven commercial vendors to
    develop various rapid alert tools. Yet this competitive
    hoarding erodes the advance notice intended for regulators,
    limits FDA's ability to intervene, and accelerates the very
    shortages these transparency initiatives are supposed to help
    prevent.
        In turn, purchasing in times of relative stability-whether
    through spot buys or contracts-is dominated by the strong
    incentive to choose the lowest-cost option. There is little to
    push hospitals or group purchasing organizations toward
    factoring in supply chain reliability or resilience, as most do
    not directly bear the costs when a disruption occurs. While
    there are tools and frameworks available to inform more
    resilience-focused procurement, hospitals have options but
    typically lack a meaningful reason to use them, absent clear
    financial rewards or contractual requirements.
        Policymakers would be wise not to fuel early warning
    systems for hospitals but to support supply chain reliability
    efforts in two ways: by supporting the related transparency
    efforts and by creating economic incentives.
        Policymakers can promote supply chain reliability in drug
    procurement by ensuring purchasers have access to meaningful,
    actionable information. Changes to current reporting
    requirements-such as requiring suppliers to specify not only
    who a drug is "manufactured for" but also who it is
    "manufactured by"-would make it far easier to track products to
    facilities that do not have a good compliance record.
    Supporting FDA's Quality Management Maturity (QMM) initiative
    is another foundational step, as public disclosure of QMM
    ratings would highlight manufacturers that invest in robust
    quality and operational practices, allowing buyers to consider
    reliability and performance in addition to price during
    contract negotiations.
        Policymakers should complement transparency efforts by
    pursuing payment and contracting policies that create
    meaningful economic incentives for hospitals and manufacturers
    to prioritize supply chain reliability. Current proposals-such
    as those from the Senate Finance Committee and HHS-would
    authorize financial rewards or penalties based on a buyer's or
    supplier's record of ensuring supply continuity, product
    quality, or timely response during shortages. By tying payment
    rates directly to reliable performance-or imposing
    disincentives for repeated supply failures-these initiatives
    aim to move the market beyond cost alone, encouraging long-term
    investments in resilience throughout the supply chain.

        Question:

        In your research you recommend a broad strategy when it
    comes to deciding which drug supply chain resiliency efforts to
    prioritize and support. More specifically, you recommend that
    the Administration for Strategic Preparedness and Response
    shift from a fixed list of essential drugs toward a longer list
    that stratifies drugs by how critical they are, their reach,
    and how vulnerable they are to disruption.
        Could you say more about how this longer, stratified list
    would better enable the federal government to support
    resilience efforts?

        Response:

        When it comes to supporting drug supply chain resilience
    efforts, setting priorities is important because of the scale
    and complexity of the drug supply chain. There are well over
    2,000 approved prescription drugs, spanning a large array of
    ingredients, manufacturing technologies, and production sites
    that collectively produced 187 billion tablets and capsules for
    American patients in 2024, not counting other dosage forms. The
    lack of economic incentives in the market coupled with the
    magnitude of what it would take to secure all drug supply
    chains requires that the government prioritizes where to
    engage.
        Prioritization is not only needed but possible because not
    all drugs are equally important. For example, some drugs are
    lifesaving in emergencies, such as epinephrine auto-injectors
    for severe allergic reactions or insulin for patients with type
    1 diabetes. Others, like certain chemotherapy agents or
    antibiotics, are critical for treating serious infections and
    cancers. Drugs for chronic conditions, such as
    antihypertensives and statins, affect large patient populations
    but interruptions are not generally life threatening,
    especially in the short term.
        U.S. government prioritization began with the FDA's list,
    created under a 2020 Executive Order, which identified over 220
    drugs and medical countermeasures most needed for immediate and
    life-saving medical use in hospitals. The Administration for
    Strategic Preparedness and Response (ASPR) subsequently
    narrowed this to 86 drugs, focusing more tightly on those
    deemed essential for acute care. Most recently, at the
    direction of the administration, ASPR further narrowed the
    target to about 26 drugs, selecting those for strategic
    stockpiling initiatives.
        Budget and time constraints have made this narrowing
    process unavoidable. With limited new funds appropriated by
    Congress for comprehensive supply chain resilience, the
    administration's current efforts are focused on building and
    maintaining a six-month supply of active pharmaceutical
    ingredients (APIs) for this small subset of drugs. If
    policymakers pursue costlier or more complex resilience
    strategies such as supporting new domestic manufacturing of API
    and all its inputs, not even all 26 may be covered, and
    prioritization within this short list would become necessary
    under a limited budget.
        A broader, stratified list would give policymakers
    flexibility to adjust investments as resources change. If
    Congress allocates additional funds, efforts could expand
    without reworking the prioritization framework. Such a list
    would guide readiness planning, clarify what additional money
    could achieve, and allow for a quick response as budget
    realities evolve.
        In practice, criticality and reach remain fairly stable for
    most products unless major therapeutic advances occur;
    vulnerability can change quickly. Initial reviews should focus
    on identifying drugs with the greatest health impact and reach.
    Detailed, regularly updated vulnerability assessments can then
    be reserved for a larger list of higher-priority drugs,
    concentrating resources where they matter most and avoiding
    exhaustive analysis of less critical products.
        To build a practical, ranked drug framework, it is also
    essential to factor in resilience-building cost and capacity
    constraints. The main cost drivers are often tied not to the
    price of the drug itself, but to the logistics of production-
    such as the potency of the active pharmaceutical ingredient
    (affecting how much can be handled in existing facilities if
    capacity is limited) and the specialization required of
    manufacturing processes. These realities can force tradeoffs,
    requiring policymakers to choose between covering more drugs
    that fit within common, flexible plant capacity, or
    prioritizing medicines that do not demand highly specialized
    production setups and supply chains.

        Question:

        Your work highlights why drug manufacturers outsource
    chemical synthesis for drug manufacturing to China. Chemical
    synthesis can create toxic materials and could be quite harmful
    to the environment. You recommend that the U.S. fund chemical
    industrial parks as part of onshoring efforts.
        Could you say more about how funding domestic industrial
    parks could help to reduce American reliance on chemicals
    synthesized in China?

        Response:

        Efforts to derisk pharmaceutical supply chains from China
    require developing alternative sources for critical chemical
    inputs. Diversification does not necessarily mean full
    onshoring; establishing production capacity in allied, cost-
    competitive countries can often achieve greater efficiency
    while mitigating geopolitical risk. However, for strategically
    sensitive or high-risk materials, selective onshoring can
    enhance national resilience.
        An important part of derisking supply chains from China is
    at the earliest, unregulated steps: key starting materials,
    intermediates, and auxiliary chemicals like reagents and
    solvents used in synthesis. This is where U.S. drug supply
    chain exposure is the greatest.
        The reliance is driven by Chinese firms' strong cost
    advantage through significant economies of scale coupled with
    lower labor, energy, and transportation costs. Historically, a
    lax regulatory framework allowed Chinese producers to operate
    with higher environmental and workplace risks than Western and
    Indian competitors, enabling their cost advantage. Following
    the Beijing Olympics, China began to reckon with environmental
    pollution and began raising standards and investing in greener
    manufacturing methods.
        The question is then, how should the U.S. respond if it
    chooses to onshore chemical manufacturing. Environmental
    deregulation alone will not succeed in shifting production to
    America because China will continue to hold an insurmountable
    cost advantage driven by lower energy, lower labor, and deep
    economies of scale. In fact, a race to the bottom on
    environmental standards would require the U.S. to set
    regulations lower than even India and China are willing to
    accept-countries that have already rejected the dirtiest
    manufacturing practices as economically and socially
    unsustainable.
        The future of chemical manufacturing lies in advanced green
    chemistry technologies that represent the next generation of
    global competitive advantage. These approaches are more
    efficient, create higher value-added products, and generate
    more skilled, higher-paying jobs than legacy chemical
    processes.
        Chemical industrial parks offer a more sustainable and
    scalable alternative to traditional one-company-at-a-time
    funding. By co-locating multiple manufacturers within shared
    infrastructure-centralized wastewater treatment, utilities,
    analytical testing facilities, and logistics-these parks
    significantly lower the per-unit overhead for each producer.
    This model is widely used in Europe, India, and certain U.S.
    states.
        Parks also create resilience: if one tenant exits, another
    can step in using the same infrastructure, protecting the
    government's investment and maintaining supply continuity. For
    policymakers working within budget constraints, industrial
    parks provide a mechanism to support multiple products and
    processes simultaneously, rather than betting on individual
    companies or isolated facilities.
        Centralized environmental controls-shared wastewater
    treatment plants equipped to handle toxic intermediates, air
    quality monitoring, and hazardous waste management-enable cost-
    efficient pollution control far more effective than individual
    facilities can achieve. This allows domestic chemical
    production to meet U.S. environmental standards without
    imposing prohibitive costs on each manufacturer, reversing the
    historical trend of exporting pollution alongside production.

                            Senator Raphael Warnock

        Question:

        Rural health providers in Georgia rely on access to
    affordable drugs to treat patients, including older Americans.
    Due to financial vulnerability, rural providers have limited
    capacity to build a stockpile of drugs in preparation for
    supply shortages.
        How can Congress work to ensure rural hospitals and clinics
    can provide affordable and safe drugs to seniors in times of a
    drug shortage crisis?
        What kind of policy changes would incentivize domestic drug
    suppliers to develop generic drugs and improve aging rural
    populations' access to prescription drugs?

        Response:

        It is indeed the case that rural providers, especially
    those not part of a large health system, have severely limited
    ability to withstand supply disruptions. This stems partly from
    scale: they often lack staff dedicated to supply chain
    management, operate on thin financial margins that leave little
    room for inventory investment, and cannot leverage the
    purchasing power of larger systems. Independent rural
    facilities face a particularly acute challenge: unlike small
    hospitals within integrated systems that can at least access
    their parent organization's negotiating leverage and shared
    contracts, truly independent rural providers must navigate
    procurement entirely on their own.
        A 2023 STAT article illustrated this dynamic during the
    national shortage of carboplatin and cisplatin. Large health
    systems weathered the disruption easily, using their purchasing
    power and strong supplier relationships to stockpile supplies.
    Small, often rural, independent oncology clinics could not-they
    lacked these advantages and were sidelined by allocation
    systems favoring historical bulk orders. Many small clinics had
    to ration care, send patients to distant centers, or delay
    lifesaving treatment altogether, intensifying distress and
    risking poorer outcomes for vulnerable populations. The
    shortage exposed systemic flaws in drug procurement practices
    and underscored the urgent need for reforms to ensure more
    equitable access to essential drugs.
        Analytics and data systems play a major role in the
    disparities seen during chemotherapy drug shortages because
    large hospital systems typically have sophisticated analytics
    tools that allow them to monitor drug inventory, predict
    shortages, and swiftly respond by stockpiling or reallocating
    supplies across their networks. These systems provide
    actionable data on usage rates, inventory levels, and shortage
    signals, enabling proactive strategies like early purchasing or
    redistribution before official shortage notifications are
    issued. In contrast, small independent clinics often lack
    access to such analytics and automation, making it difficult
    for them to anticipate shortages or compete for limited supply-
    further widening the gap in access during crises like the
    carboplatin and cisplatin shortage.
        Expanding the use of advanced analytics with small
    providers has the potential to help these providers better
    anticipate drug shortages, optimize inventory, and negotiate
    more effectively with suppliers, reducing vulnerability during
    supply chain disruptions. However, the cost, technical
    complexity, and need for specialized staff pose significant
    obstacles. Many small clinics operate with tight budgets and
    limited personnel, making it difficult to adopt and maintain
    sophisticated data systems even if the technology itself is
    available. They will always be behind the curve and therefore
    last in line.
        For most small and rural clinics, greater resilience may
    come from direct preparedness strategies, such as regional
    stockpiling programs, collaborative purchasing efforts, and
    supportive policy reforms that redistribute essential drugs
    during crises.
        One such recent effort was CMS establishing a separate
    payment system for small independent facilities, many of them
    rural, to help them create and maintain a buffer inventory of
    essential medicines. This authority is based on the same legal
    mechanism used for N95 mask stockpiling during the pandemic.
    The program allows qualifying hospitals to receive targeted
    Medicare payments specifically for the costs of purchasing and
    storing a reserve supply of designated drugs, with eligibility
    focused on hospitals most likely to face financial and
    logistical barriers to stockpiling.
        However, this authority is limited by statutory language
    that restricts reimbursement to only "reasonable costs." The
    "reasonable costs" constraint ties reimbursement only to
    Medicare's share of a hospital's business, meaning that
    hospitals must maintain buffer inventory sufficient to serve
    their entire patient population-including Medicaid, uninsured,
    and commercially insured patients-but can only be reimbursed
    for the Medicare portion of those inventory costs.
    Additionally, the costs of tracking, monitoring, and reporting
    on buffer stock inventory are not reimbursed under the program.
    These limitations mean that the payments offered may not fully
    cover the financial and operational burdens of creating and
    maintaining a substantial buffer stock, limiting participation.
        To address these limitations, Congress should strengthen
    the existing CMS framework by amending the statutory authority
    that currently restricts reimbursement to "reasonable costs"
    tied only to Medicare's share of hospital business.
    Specifically, Congress should authorize CMS to provide full
    reimbursement for buffer stock costs regardless of payer mix,
    recognizing that hospitals must maintain inventory for all
    patients, not just Medicare beneficiaries.
        Additionally, the statute should be amended to support a
    fixed payment model rather than the current submit-a-bill
    approach, which would reduce administrative burden and make
    participation more attractive to resource-constrained rural
    hospitals. The fixed payment should also cover the costs of
    tracking, monitoring, and reporting on buffer stock inventory-
    costs currently excluded from reimbursement.
        Congress and CMS can also influence how wholesalers
    allocate scarce products during shortages. Wholesalers
    typically allocate based on historical purchasing patterns over
    a short lookback period (often 3-6 months), which
    systematically disadvantages small rural providers with
    variable ordering patterns. A rural hospital that orders 100
    units of a critical drug every 12 months may receive zero
    allocation if the lookback period captures only the months
    between orders. Meanwhile, large integrated health systems have
    a significant advantage: they can bypass wholesalers entirely
    and purchase directly from manufacturers during shortages,
    securing supply outside the allocation system altogether-an
    option unavailable to small independent hospitals.
        To level the playing field, CMS could mandate that
    wholesalers use longer, smoothed lookback periods as a
    condition of participation in Medicare or Medicaid programs-for
    example, calculating allocations based on 12-24 month rolling
    averages rather than recent 3-6 month snapshots. Additionally,
    Congress could direct FDA or CMS to establish minimum fairness
    standards for allocation methodologies during shortages,
    similar to how other federal agencies regulate allocation of
    scarce resources. Finally, allocation formulas should be
    reformed to use objective metrics tied to patient population
    served, licensed bed capacity, or facility size, rather than
    pure historical purchasing volume.
        Beyond influencing allocation during shortages, Congress
    can also make the entire pharmaceutical supply chain more
    reliable by reducing the risk and frequency of supply
    disruptions themselves. Legislative actions may include
    requiring redundancy and diversification among manufacturers,
    strengthening federal oversight for manufacturing quality and
    inspections, incentivizing domestic production, and supporting
    proactive stockpiling at the national level. These measures
    would help prevent supply shocks from occurring and limit their
    scale, ensuring that small rural hospitals are not perpetually
    vulnerable to access disparities even when major disruptions
    occur.

        Question:

        Hurricane Helene shut down Baxter International's North
    Carolina facility and caused a nationwide intravenous (IV)
    fluid shortage. Hospitals across the country were forced to
    ration their IV fluids until the company restored its
    manufacturing capability. I sent a letter to the Food and Drug
    Administration and the Department of Health and Human Services
    leadership pushing them to provide relief during this crisis.
        How could Congress leverage technology like predictive
    analytics to strengthen the resilience of domestic drug supply
    chains in times of natural disasters?

        Response:

        Predictive analytics can be an invaluable tool for
    monitoring supply chains and anticipating shortages, but their
    use during a crisis-such as the IV fluid shortage following
    Hurricane Helene-can compound existing vulnerabilities. When
    predictive analytics signal an emerging scarcity, large health
    systems often respond by accelerating stockpiling or bulk
    purchasing, which can deplete inventory faster and outcompete
    smaller hospitals for limited resources. This dynamic can leave
    rural and independent providers even more exposed, intensifying
    the very shortages that technology is aiming to mitigate.
        Better, real-time tracking of saline usage at both
    inventory and patient levels would significantly improve a
    hospital system's ability to allocate scarce resources during a
    shortage. Saline and other IV fluids are FDA-approved drugs,
    yet many hospitals treat them as supplies rather than
    medications. This classification outside the pharmacy system
    means administrations and usage are often not barcode-scanned
    or tracked like medications, making it difficult for health
    systems to know where the product is being used or how much.
        To address this tracking problem, CMS could require health
    systems to reclassify and track IV fluids as FDA-approved drugs
    rather than allowing them to be handled outside pharmacies as
    untracked supplies. Enhanced analytics could identify which
    units or patients have the greatest clinical need, optimize
    distribution, and reduce waste or unnecessary stockpiling
    throughout the network.
        While real-time tracking and robust analytics enable
    smarter, more equitable allocation of supplies during a
    shortage, hospitals also need practical and systemic strategies
    to prepare for major disruptions. For high-volume products like
    saline, maintaining a buffer inventory is particularly
    challenging given the heavy usage, physical volume, and cost of
    storage. Hospitals must adopt additional safeguards and
    diversify their approaches beyond stockpiling to prepare for
    potential shortages.
        For hospitals, avoiding sole-source contracts is a key
    step. Reliance on a single supplier for saline or other
    essential fluids can dramatically widen the impact of any
    supply disruption, whereas maintaining relationships with
    multiple vendors lessens vulnerability-enabling continued
    provision of urgent services even during supply chain shocks.
    Recent shortages have exposed disparities based on with which
    manufacturer a hospital contracts. During the 2024 saline
    shortage following Hurricane Helene, hospitals contracting with
    Baxter received only 40-60% of normal allocations, while those
    using B. Braun experienced minimal disruption as B. Braun's
    facilities were unaffected.
        Manufacturers can help by investing in more flexible or
    'fungible' production systems that allow rapid pivots to
    different bag sizes or formulations as market demand and
    regulatory priorities shift. Facilities able to quickly change
    production lines or scale outputs for alternative product sizes
    improve overall supply chain resilience, reducing the risk and
    magnitude of shortages from specific disruptions. Encouraging
    manufacturers to adopt these adaptive capabilities can increase
    redundancy and responsiveness, ultimately protecting the entire
    healthcare system during crises.
        Congress and the administration can play vital roles in
    supporting alternative hospital preparedness strategies for
    saline shortages-using both regulatory "sticks" and financial
    "carrots." On the regulatory side, policymakers could
    strengthen antitrust enforcement and oversight to discourage
    anticompetitive practices, such as exclusive or sole-source
    contracts that undermine supply resilience and limit access
    during disruptions. On the incentive side, Congress could
    expand payment models or grant programs to encourage hospitals
    to diversify suppliers and invest in logistics for alternative
    sourcing.

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

                           Statements for the Record

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

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                           Statements for the Record

                 Association for Accessible Medicines Statement

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                           Statements for the Record

                    American Hospital Association Statement

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                           Statements for the Record

            American Society of Health-System Pharmacists Statement

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                           Statements for the Record

                      Continuus Pharmaceuticals Statement

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                           Statements for the Record

                         Doctors For America Statement
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                           Statements for the Record

                                Lupin Statement
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                           Statements for the Record

                      Lupin - Coral Springs, FL Statement

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                           Statements for the Record

                       National Taxpayers Union Statement

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. Senate Special Committee on Aging

         "Bad Medicine: Closing Loopholes That Kill American Patients"

                                October 8, 2025

                           Statements for the Record

                                 Teva Statement

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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