Behind the Label: Foreign Ownership and Control in America's Drug Supply Chain

The US Senate Sp- Senate Special Committee on Age will now come to order. Um, the ranking member and I were thrilled to see the Older Americans Reauthorization Act pass the Senate yesterday. This legislation is critical to protecting seniors' independence and reaffirms Congress's commitment to the older Americans who built and served this country. As chairman of this committee, I have been privileged to lead the charge in reauthorizing the OAA with the Ranking Member, Jill Abram. We've seen firsthand through multiple hearings the positive impacts legislative solutions can have on seniors and caregivers alike, giving dignity and strength to those living out their golden years. I'm especially proud to have led this effort in the Senate with the Ranking Member. I'd like to personally recognize and thank her for her hard work and partnership on this legislation. I now urge the House representatives to quickly pass the OAA and send it to President Trump's desk. Uh, I also want to thank my Senate Republican and Democrat colleagues for their support of our seniors through the OAA. Here's a question most people uh have never thought to ask. Do you know who actually makes your medicine? Not what's on the bottle, but who owns the facility. Who controls the ingredients? Does a foreign government have any influence over the decision of what goes into them? Most Americans don't know, and in many cases neither does the federal government. Seniors rely on prescription drugs more than any other age group. More than eighty-eight percent of older Americans report being prescribed at least one medication in the past year. Nearly all of those prescriptions are filled with generic drugs. And a huge share of those generic drugs are manufactured in facilities overseas, by companies with complex ownership structures like that the FDA, CIFAS, and other agencies can't fully trace. For most products, that's a trade question. For medicine, it's a matter of life and death. We've seen what happens when something goes wrong with a faulty supply chain. Unfortunately, people die. We've seen what happens when our supply chain gets constrained. Unfortunately, people die. I've said it before, there is no reason why we should be letting our adversary, Communist China, they've decided to be our adversary, control our medicine supply chain. If they wanted to, they could restrict exports tomorrow. of the critical ingredients needed for lifesaving medicines. The difference between a trade disruption and a public health emergency is how dependent we are on the country doing the restriction. Right now, we are very dependent. Today we're going to examine a different but related problem. Not just what drugs are, where drugs are made, but who owns the companies making them. For an ownership and control can create leverage over our drug supply, that is largely invisible to the federal government. So, there's not a federal agency that's been designed to understand this. FTA doesn't have full visibility into it. And current disclosure rules don't require the transparency needed to even know where the risks are. And it goes even further than that. Most people think about foreign threats to our drug supply in terms of what's on the shelf. But, there's another problem that almost nobody's talking about. When American patients participate in a clinical trial, American regulators authorize that trial. American patients take on the risk, But the data those trials produce, what works, what doesn't, what the next generation treatments should look like, can end up flowing directly to a foreign government that doesn't like us, legally with no federal agency able to stop it. That means Communist China doesn't have to steal our medical break breakthroughs, we just hand it over to them. We have witnesses today who have worked on these problems from inside the government. They're going to help us put this on the record. Today I'm announcing the pharmaceutical investment oversight and accountability act with ranking member jillibrand and with senator warren legislation to require the ftc and service to report to congress annually on foreign investment in pharmaceutical manufacturing and related technologies transparency is the first step but it's just the first step this hearing is going to help us identify what has to come after that american people and especially seniors deserve to know who actually controls the medicines keeping them alive I'd like to recognize ranking member Gillibrand.

Thank you, Chairman Scott, for today's hearing. Thank you to our witnesses. We appreciate your expertise and testimony. As the Aging Committee continues to examine a range of factors that put seniors' access to essential medicines at risk, we keep hearing the outsized influence of foreign actors on our drug supply chain. We know that America relies too heavily on China and India for the foundational components to manufacture generic drugs. the key starting materials and the active pharmaceutical ingredients. And it's troubling how foreign actors continue to deepen their impact by expanding ownership, investment, and control of our supply chain. This poses a significant risk to Amer- the American public, especially because we currently do not and cannot see the full extent of our upstream dependency on foreign actors within the supply chain. This is in part because these countries try to disguise their involvement and influence in ways that our witnesses we'll discuss later in the hearing. But it also happens because we need stronger tools to understand, evaluate and manage these modern supply chain risks. We must bolster federal oversight efforts and increase transparency on how foreign capital impacts American healthcare infrastructure. This will strengthen our health and national security without discouraging trusted investment. I'm proud to support the work Chairman Scott and Senator Warren do. um, with their pharmaceutical investment oversight and accountability act. But we also have to align policy goals and targeted investments to diminish foreign dominance in our drug supply chain, and maintain our global leadership in biopharmaceutical innovation. This involves addressing market factors in the US that have led to a race to the bottom for generic drugs. Congress must work with industry to make sure manufacturers and purchasers consider quality, not just cost, when they source key pharmaceutical ingredients. and final dose medicines. Foreign countries like China have rapidly scaled up innovation for novel therapies through efforts like clinical trial reform, targeted government investment in drug development, and improved coordination between early research and commercial scale manufacturing. While we do not need to exactly replicate the steps they have taken, we must acknowledge that they are moving at a much faster pace than we are increasing our dependence on their clinical trials and components for essential medicines. We can't let foreign actors, much less our adversaries, surpass us in innovation. It will also, it will only increase our reliance and deepen their control over crucial American health infrastructure and supply chains. I look forward to hearing from our expert witnesses today. I'm committed to working with my colleagues to improve our tools, to understand, evaluate, and manage modern supply chain risks so we can strengthen our health and national security. Thank you.

Thank you, R- Ranking Member Gillibrand. Now I'd like to welcome our witnesses. They're here to help the Commer uh, the committee understand where foreign ownership creates real risk in the drug supply chain and what the federal government can actually do about it. First, I'd like to recognize the Honorable Nasekh Nikattar. How do. OK. In twenty eighteen, she was unanimously confirmed as the Department of Commerce Assistant Secretary for Industry and Analysis and performed the duties of Undersecretary for Industry and Security. performing the non-exclusive functions and duties while nominated. She was Commerce Lead on CFIUS and also and oversaw the government's first whole of government supply chain assessment initiatives. She now chairs the National Security Practice at Wiley Rain. Thank you for being here. Please begin your testimony.

Chairman Scott, Ranking Member Gillibrand, and members of the committee, thank you for hosting this important hearing and leading important legislation to address critical issues. My name, again, is Nizhaka. My testimony today is informed by my work in trade, national security and supply chains over the course of twenty five years, as an economist, attorney and policy expert. The threats posed by China's growth in biotech, fueled by IP, theft and misappropriation, massive state subsidies, and a distorted economy that consistently underprices the rest of the world is well established, so I will not spend time of that. Yet these realities provide the context in which I will discuss our legal shortcomings and proposed solutions. In twenty twenty four to twenty twenty five, China surpassed the United States in biotech innovation, deal value, and clinical output. Its innovations are outpacing ours. For every hundred thousand dollars in US biotech R and D spending, America has one scientist, China has three. China also dramatically outpaces us in STEM graduates by two times and ten times more in engineers. Also, China's distorted economy intentionally to keeps prices low and transfers wealth to the Chinese Communist Party. And the CCP uses its cash flow to underprice the rest of the world in biotech goods and services and subsidize the subsidize their industries, at a scale that out, that dwarfs ours. These predatory economic practices are along with the well-established reality of pervasive IP theft as well as clinical trials being conducted in China, without any regard to the welfare of the population, is very alarming. To underscore, China is a foreign adversary under US law, because its aim is to harm our nation, our citizens, and our allies. So an adversary's ability to reach into and gain greater control of our pharmaceutical supply chain, obviously poses a risk to America, our citizens, and to our allies. We need to look no further than what's happened in the semiconductor, batteries, auto, critical minerals, and robotics sectors as examples of what is yet to come. As to recommendations. First, most Chinese biotech investments in the US seek to acquire American IP and sensitive personal data and disrupt domestic markets through market manipulation. To the extent CFIUS jurisdiction exists, many transactions are cleared today with mitigation measures. But almost always, violations of mitigation measures won't be detected by the US government. This is a risk we cannot afford to take with a foreign adversary. Whenever investments by China come under CFIUS's existing legal jurisdiction, for national security review, we need to institute a presumption of denial, meaning that the parties need to justify why the US government needs to approve this transaction. I've never encountered, in my time in the government in private practice, any scenario where a Chinese investment in a US biotech company did not pose a serious risk to being misused by the CCP to effectuate its militant fusion strategy, to America's detriment. Second, CFIUS's jurisdiction doesn't cover most greenfield investments and joint ventures in the United States which has obviously now become China's preferred way of investing. Legal jurisdiction needs to be extended by Congress through the passage of a firma two point O, and or the president needs to institute IE an IEPA-based executive order to close the gap as it pertains to foreign adversaries. Time is running out and these gaps remain wide o open today today, enabling predatory FDI to occur largely undetected. Third, we need to impose broader expert controls on emerging in foundational biotechnologies, biomaterials, and related data that are exported to China for pharmaceutical manufacturing and trials. Currently, all this flows virtually unrestricted to China, the CCP, and the People's Liberation Army. Broadening controls will permit biological materials and data to be treated in the CFIUS context as critical technologies mandating CFIUS review. Without question, we can could better control data through current export laws, and we should. Fourth, we need to address the fact that US investments in Chinese biotech occur significantly through corporate licensing deals and venture capital. While BINSA, the Biotech Investment National Security Act of two twenty twenty six is an example of a positive step step forward, it needs to be passed and the implementing regulations need to be broad enough to cover all forms of capital flow. Comprehensive bans are effective. Nuance regulations enable widespread circumvention. Fifth, we need to imp- uh, import prohibitions on biotech materials produced in China. We have trade laws, forced labor prohibitions to do that to prevent the American population from being harmed. My final point is this. With respect to anybody claiming that these recommendations will increase US prices, this is a red herring. China's growth in biotech is only a recent event. prior to china's growth the us pharmaceutical industry faced economic pressures that stem from unrelated issues if we have pricing issues at home we need to address them at home relying on china does not solve our competitiveness problem it only adds to it thank you and i look forward to your questions

thank you next i can introduce stephen nizel he is the vice president for global innovative policy at the information technology and innovation foundation where he directs uh their center for life sciences innovation

Good afternoon, Senator Scott. I'm ranking member Gillibrand and members of the committee. I appreciate the opportunity to testify today, and I appreciate the special committee for examining the critical issue of foreign ownership control and influence especially with regard to China, in America's drug supply chain. The United States and China are locked in a fierce struggle for leadership in advanced technology industries. As China challenges America for global leadership across a range of sectors, from aerospace and automobiles to semiconductors and AI to biopharmaceuticals. China first identified biopharmaceuticals as a quote " strategic and emerging industry" in two thousand seven. But since then China's growth in the industry has been tremendous, as China's value-added in this industry has grown from fifteen billion dollars in two thousand two to a hundred and ninety billion dollars by twenty twenty four. China seeks dominance across all phases of the biopharmaceutical supply and innovation chain, all the way from the manufacturing of key starting materials, KSMs, and active pharmaceutical ingredients, to generic and innovative drugs, in addition to the conduct of the clinical trials and the basic science behind them. We hear today about how China has come to dominate globally in KSMs and APIs, accounting for ninety-four percent of the KSMs for amoxicillin and seventy-four percent of heparin that America uses. But policymakers must understand that China's drug prowess isn't just APIs and generics. China now accounts for thirty-one percent of the new drug development pipeline globally. China has surpassed the US now in clinical trial starts for new oncology drugs. And overall, their share of ongoing clinical trials for new drugs, the most innovative ones in the world, is now just three percent off the US share. China has deployed every possible policy lever conceivable to turbocharge its biopharmaceutical competitiveness. To be sure, some of these are legitimate, such as increasing R and D investment, educating scientists, or forming clinical trial procedures. But a great many practices are unfair, such as rampant IP theft, non-market subsidies, and predatory pricing practices that enables Chinese producers to sell APIs for prices often forty to fifty percent below global levels. And there's another unfair strategy. Intentional Chinese obscuration about the true ownership nature of or CCP or PLA links of Chinese companies servicing the US pharmaceutical supply chain. Recent ITF reports have documented such Chinese false flagging or brand obfuscation in sectors from aerospace to clean energy to biotechnology. as China directs its companies to downplay the company's home country identity when they operate in the United States. ITF's written testimony provided several case studies in the biotechnology industry including Beijing Genomics Institute and Wuxi Apptech. BGI, a leading provider of precision medicine services, which now operates the world's largest genomic sequencing capability, brands itself in America under the firm Complete Genomics, which it acquired in twenty twelve. Uh, it brands itself as complete to obscure the fact that it's owned by the BGI and directly linked to the CCP and PLA. The Chinese biotech Wuxi Pharmatec acquired Minnesota-based biologics and medical device testing firm Aptek Laboratory Services in two thousand eight, transforming the entity into Wuxi Aptek. The company is now a world-leading contract research development and manufacturing organization. While the company has sought to disclaim its China ties, Wuxi App Tech maintains an extensive network of relationships with the CCP, is involved directly in the Chinese military civil fusion development strategy, and operates the PRC's state key laboratory of drug lead compound research. Its CCP party vice uh secretary, Lien Wenben, has stated that " party members are the technical backbone of Wuxi App Tech". To deal with these obscuration practices, ITF recommends that Congress should expand the corporate trend to require Chinese origin companies operating in high-tech sectors in America to report beneficial ownership in operational control, including minority steaks, joint ventures, offshore subsidies, and IP transfer rights. Companies that fail to provide full transparency should be barred from doing business in the United States. For entities owned or controlled by companies from designated countries of concern, the FTC should issue guidance on truth in branding practices, requiring companies to clearly disclose this foreign ownership or their foreign ownership in the marketing, branding, and web communications. ITF's written testimony provides further policy recommendations for how America can enhance the security of our drug supply chain, from investing in novel biomanufacturing processes, to fend shoring and strategic stockpiling. Um, but we must recognize we're in the first struggle for biopharmaceutical leadership, and it's critical that Congress implement policies that effectively support the industry, but also ensure that Chinese predatory trade and economic practices don't harm American patients, workers and companies. Thanks Natalie for your questions.

Thank you. Now I'd like to introduce Edward Yu. He's a former FBI Supervisor Special Agent who spent over twenty years working on biosecurity and emerging technology threats at the FBI, the White House and the Office of the Director of National Intelligence. He represented the United States at the United Nations Biological Weapons Convention and has been featured on CBS's Sixteen Minutes. for his work protecting us biotechnology. He now runs EHY consulting LOC. Thanks for being here. Please begin your testimony.

So good afternoon, uh uh Chairman Scott, uh Ranking Member Jill Brandon, I wanna thank the committee for this opportunity. Um I'm gonna be doing something a little bit different. Um I appreciate the title of today's uh hearing, looking at behind the label. I'm gonna ask you to look beyond the label. And what I mean by that is a acknowledgement that biotechnology has become so advanced in my twenty years in the fbi and now currently in my in my consultancy you heard disparate technologies being laid out what i'm witnessing and we we should be acknowledging is that there is an absolute convergence of these technologies happening and what this is translated into is that biotechnology is impacting multiple critical infrastructure sectors it's not just health it's also agriculture manufacturing renewable energy production so it is strategic in its nature and by the way the the fact of the matter is the chinese government has acknowledge that. You're seeing that in a lot of their uh uh statewide policies, their fifteenth five year plan. They're acting on it. And, Mister Chairman, you already mentioned about the CAR T cell therapy um issue, and the fact that our own FDA has cleared uh multiple Chinese start-ups with CAR T cell therapies that were, it is a breakthrough cancer treatment. And they are being brought over to the US, and being put into US patients, and the resulting clinical trial data is then being sent back to China. what that means is that that data is then supercharging their ai to analyze and come out with the iteration for the next uh round of therapeutics but then what is even worse is that our company's as i was mentioned is licensing those products so then our government is funding it through reimbursements um through medicare it is a double triple whammy and it's something that we need

mmm

to be acknowledging but with that in mind it also means that data is absolutely the new oil and we need to be looking at it that way. And the thing about this is that oil doesn't, data doesn't spoil. And so that means it's gonna be a continuing challenge. It also means that we challenge cyber security. It's not traditional cyber security. It impacts Medicare, Medicaid. It'll impacts um health records. Um, especially if our senior citizens are are dependent upon that. We have to acknowledge that that's what's happening in this space. And to broaden it even further, um i also want to include um agriculture because the us has historically been a powerhouse in agriculture that has been on the backbone of our economy and the point is is that now agriculture is not just a commodity for or for food it is now being targeted as a possible for a solution for uh renewables for biofuels but also for uh pharmaceuticals and so we are looking at the evolution of not just farm to fork but farm to fiber farm to fuel and farm to pharmacy and with that in mind the chinese have already declared that as a priority in their most recent plans they just launched a five year smart farming plan to integrate um ai uh robotics automation to supercharge uh their ability to uh expand their agricultural uh manufacturing capabilities not just again for traditional but also for our uh their future uh pharmaceutical capabilities as well what is this all looking at for us if you look at china's fifteen five year plan their healthy china twenty thirty strategy but more importantly their china standards twenty thirty five strategy what that means is that they already know it's not just about the technology it's not just about um implementation it's understanding how do they determine what the rules of the road is for the global markets that they understand that if you are able to influence the standards you will influence the markets and therefore we have to become subservient to that so the the issue here is that unless we understand what the what the implications are my recommendations are one is understanding that it is absolutely strategic in nature that we are in the midst of this global biotech space race second is i recommend looking at the national security commission on emerging biotechnology that is supporting congress and a lot of their legislative recommendations address everything i just mentioned third we absolutely need to do a better job in assessing the risks associated with biotechnology in the bio-economy because historically when uh the national security community, including the intelligence community comes to the bodies like this, what are the predominantly um uh characterized threats? It's pandemics or um engineer bio-weapon. But we're talking about something more strategic now, and we cannot be um isolated in our silos, we absolutely have to acknowledge the convergence. And as it stands right now, we are not established to understand holistically what these threats are. And I think the most important one is we just need to out-compete. You do not win a space race by playing defense all the time. It's more than just um CFIUS and protections and export control. We out-compete, we out-innovate, and we are not established to do that right now. And finally though, if we don't, what we're losing is not just market share, but we're we're losing on the promise of um protecting our senior population, but also we're not fulfilling the

Thank you. Uh, Marky, remember Gillibrand, you have, I think you're gonna introduce the next witness.

Thank you, Mister Chairman, I'd like to introduce uh Rush Doshi. Miss Doctor Doshi is the CV star senior fellow for Asia studies and director of the Chinese strategy,

Chairman Scott, Ranking Member Gillibrand, distinguished members of the committee, Thank you. thank you very much for the opportunity to testify today. My argument today is simple. We moved our pharma supply chain offshore. We then became dependent on China for essential medicines. Now we're making the same mistake again in biotechnology, and none of this is good for our patients. My testimony draws from a year-long study we published last month at the Council on Foreign Relations. But my limited time today, I want to focus on just three priorities from that report. The first is essential medicines. We want we want to reduce our dependence on China for these medicines. The second is our biotechnology innovation ecosystem. We are shipping that system to China, and we are losing the ability to generate And the third is our biomanufacturing ecosystem. We're offshoring that to China as well, and we are increasingly unable to make the medicines of the future here in America. These trends are serious, but with your leadership they are reversible. I'll now turn to address each in turn. First, essential medicines. A drug label might say made in America, but our team looked at the data and found the upstream inputs, what we call of course KSM key-starting material or API, active pharmaceutical ingredients, increasingly come from China and only from China. That creates a dangerous dependency. Take Amoxicillin. We write sixty million prescriptions a year, but China controls ninety-four percent of the world's starting material. Or take Heparin. Twelve million Americans receive it every year in hospitals, but eighty percent of the global crude supply is from China. In fact, nearly seven hundred medicines approved for use in the United States depend on at least one upstream chemical produced solely in China. How did this happen? We focused on price, not resilience. Meanwhile, China ran the rare earths play in pharma. They extended subsidies, tolerated pollution, and created prices to lock in a global monopoly position. It all happened fast. American amoxicillin production fell from nearly one hundred percent of our market to zero in just twelve years. So what should we do? First, we need to find our upstream dependencies through legislation like clear labels and address them. Second, we need to change incentives. Medicines that use Chinese inputs should face higher tariffs and lower government reimbursement rates than medicines that use allied inputs. Third, we should work with our allies. We cannot bring everything back, so we should divide and conquer dependencies together. Fourth, we should stockpile Finnish drugs and their upstream input so we can weather disruption. And finally, we should build supply. That means funding leapfrog innovation from cell-free methods to green chemistry and providing low-cost capital, a single fifty million dollar uh uh grant made in Austrian plant competitive with China in penicillin. We can do the same here. The second trend I'd like to address is the off-shoring of our biotech innovation ecosystem. Our system is breaking down. American pharma companies are licensing therapies developed in China, instead of investing in therapies developed in America. In the last five years, they committed fifty-three billion dollars to Chinese assets that now make up one third of new drug pipelines. These vast sums are rapidly building China's innovation ecosystem while starving our own. Why is this happening? Partly it's because China is genuinely innovative, but a larger part is because China has a looser regulatory regime. To put biologics in humans, we have to go through a formal FDA process. They just have to ask a hospital review board for a green light. So American pharmaceutical companies can get initial data that a therapy might work faster from Chinese companies than from American companies, and with that, dollars flow accordingly. So what do we do? First, we should regulate but not prohibit in-licensing from China. We wanna reward Chinese innovations that help patients, but we'd we wanna disincent disincentivize arbitrage that hollows out our system. We can use differential tax rates, differential reimbursement, or regulatory scrutiny of licensing under the Biotech Investment National Security Act, or BINSA, to find a middle ground between bans and deregulation. Second, we have to strengthen our system. We need to reform our clinical trial process to move faster to first in human trials drawing perhaps from Australia's model that will make arbitrage less likely and we have to fund basic science now more than ever, to keep our ecosystem going. The third trend I'd like to address is the offshoring of our biomanufacturing capability. we are losing the ability to make the medicines of tomorrow. Roughly eighty percent of US bio-pharma companies now work with Chinese contract manufacturers like Wuxi bio who gain experience and knowledge, that compounds their lead over us, all financed by us. Meanwhile, we're locked in to deals with them because bio-manufacturing is hard to move from one facility to another. And when we do bring it back home, we're increasingly dependent on Chinese upstream inputs, so we can't do it without them. How do we fix this? well first the bio-secure act rightly dis-incentivizes some of the off-shoring, but we also need to build our own capacity with low-cost loans, a national center for advanced biologics manufacturing, and investments in leapfrog production methods. second we need to incentivize diversification, federal funders, NIH, BARTA, the defense department, and regulators like the FDA should require china risk plans or a qualified alternative manufacturer in the united states or an allied country, before a program reaches a defined milestone. let me end with this american purchasers and above all american taxpayers account for roughly seventy percent of global pharmaceutical profits that spending should be consistent with our supply chain security our innovation ecosystem and our strong manufacturing base and good for all patients thank you for your time and i look forward to your questions

great i wanna thank each of you for your testimony let me ask you a simple question how many warships and fighter planes do we buy from china Yeah. Zero, right? Why no, why don't we? They probably get it cheaper, right? Cuz we don't wanna be dependent on them. I mean, we're building a military, so we're not dependent on them. We don't want our servicemen and women dependent on their, on their equipment. So, what I don't understand is, why are we buying any, any drugs from China? So, um, so, Miss Nikitar, you were of Congress' lead on CFIUS. CFIUS is built around the idea of control, but in this industry, real control can come from minority stakes. a board seat licensing deal or data cross uh access right when you're sitting in that chair were there pharmaceutical or biotech deals you were worried about that cepheus simply had no clear authority to touch

i'm sorry i did not hear all of it were you asking about the scope how much it

yeah

it's pretty astounding the us government we don't have a good sense of what cepheus doesn't touch because you get chinese companies who pretend like they wanna invest in american companies pretend like they go through the due diligence, go in the data room, get all the information they need, and they say, oops, we don't wanna invest in you, and none of it comes before CFIUS. And you have versions of like that going on and on. So there's no way, even if an FDI doesn't occur, you don't know how much of the predatory actions has actually robbed our our companies of their sensitive data. And it's not just including IP, right? It's the data, it's their know-how, it's h- it's how they test, et cetera. So we've got a real problem in in not detecting thing, which is why I really commend um your and senator gilbert and legislation on just trying to get better visibility into what is going on so legislation is at least buttressed by more facts

is the board seat come through sophias they came on a board if somebody if they were just putting somebody on a board they didn't make uh any investment they just

is a board

said oh i've got this great scientist from china who's gonna go on uh some company's board would that that wouldn't come in front of sophias right

in in very few instances it would but by and large it wouldn't and that board seat could get again as you're pointing out access to sensitive information in very limited instances if other conditions are met only if others with sophia's jurisdiction by

how about licensing deals do they all come in front of sophia's no

no not not if there's no investment

how about how about data and what if they just paid a fee for a data access right

they're doing lots of that and they're doing sneakier ways to get data and that does not come under us government's review jurisdiction

ok mr. your testimony says china controls the key starting materials for ninety four percent of amoxicillin seventy four percent of heparin and a hundred percent of the drugs that treat high blood pressure every blood blood pressure pill in this country traces back to a single source chinese ingredient that's right correct so what happens if if they just stop giving to us what is so talk about what's gonna happen to a senior just that we don't we don't get anything tomorrow

it's well yeah exactly well my the the critical point is that china is looking for leverage over the united states it's identified critical minerals it's identified rare earth magnets at a critical areas it can get leverage and there's no question that biotechnology ksms and the apis are a special choke points that they could use to weaponize against the united states at their time of choosing should we not have an ability to respond to that contingency

Mr. Yu, in your years at the FBI, what methods did foreign state actors use to gain influence over US pharmaceutical and biotech companies, that would never trigger a CFIUS review and the FDA would never see coming?

That's a broad question, sir, because it's a full court press. Um, let me start by saying that I think uh understanding about the bioeconomy, um, understanding that China, it's a silver bullet for them, right? Because they actually have real world challenges. They have population sustainability issues they have food security they have energy insecurity um they have they have are dealing with an environmental remediation uh challenges biotechnology offers that to them so you see the full court press for you know from the whole scope it either funding um in research and development acquiring talent development right so the um uh we've seen that happen right now too looking at um uh the talent uh going overseas um as as mentioned looking at investments that may not necessarily trip the bar but then also looking at downstream too as i mentioned um the the standards aspect of it as well is that it's not just about theft of ip but if you also are able to manage what the things like the international council for harmonization which um provides global instructions on how you determine medicine treatments how you conduct clinical trials especially for cutting edge um treatments like car t cell therapies or m r n a vaccines which is uncharted territory they get first mover advantage. And I think that's the way we need to be under understanding that it's not necessarily always um us be reactive, but understanding that it's it's in they have huge incentives to make it happen. But it uh goes back to what I said before, we have to do a better job in understanding what the how we conduct our risk assessments. Because yes, we are losing our shirts when it comes to IP theft and a lot of the investments, but then they are absolutely leaning forward on trying to out-innovate us because they need it. But then that also means that not only do we have to be able to address that, but we also need to counter that as well too, meaning that you don't win a space race playing defense all the time, you out-innovate.

Yeah.

Doctor Doshi, your report models what happens if China restricts just twenty-five percent of the inputs for Amoxicillin. You find peak shortages in United States within six to nine months. Can you describe what that looks like inside an American nursing home or hospital?

Uh, thank you Senator Scott. This uh, this challenge is enormous. um amoxicillin had sixty million prescriptions a year and so the ability to have a shortage or an increase in price i mean that will that will ripple through the healthcare system and that's just one drug where we have a dependency we've heard about many many other drugs at least seven hundred have an upstream dependency on ksm that comes from only china so we're talking about potentially a a magnitude of impact that would be devastating to seniors

right thank you member

ok

The biotechnology space race is likely to define this century, and the United States' continued lack of strategic investment risks seating our competitive edge in global development. The National Security Commission on Emerging Biotechnologies twenty twenty five report cautioned that the US is dangerously close to falling behind China, and urged immediate action to scale bio-manufacturing. Mister Yu, if the United States falls, if the United States fails to maintain global leadership in biotechnology, in what ways would this impact seniors' health security and their ability to access the high quality medicines that they need?

Thank you for the question. So it translates more than just what we tend to think of um like the uh medical tourism is t- so something that we tend to bring up um. It is more existential threat than I think we fully especially again with the convergence of ai the nightmare scenario i see is not not just um becoming complete dependent upon a foreign supply chain for critical medicines but if you game it out if you look at the coming storm of the internet of things of the connect interconnected world at six g and not understanding where our data is going and how it could then be leveraged and where they out innovate the nightmare scenario from where i sit is that we may end up seeing that every single biological input that sustains us not just our seniors but us as individuals our food our medicine our energy our energy production um what happens if that all is influenced by an authoritarian regime that is antithetical to not only um economically but to our standards and our values i i think we need to understand that that's a slippery slip that we are about to embark on if we do lose that first mover advantage um so and you know

mmm

anecdotally when we were had the wake-up call in the first space rate when the soviets launched the sputnik uh satellite that was a wake-up call moment one of the things that that congress did was pass the national defense education act which dropped billions of dollars from k through twelve to college um education to make sure that we it shored up our workforce the future computer scientists engineers physicists to make sure that we maintain our advantage if we acknowledge that this is space race we need bold moves like that be able to count it, cuz otherwise that that nightmare scenario I I just articulated could potentially become a reality.

Yes. Um, you previously discussed developing a bio-economic strategy to ensure the US retain its global competitive edge. What should the pillars of this proposal be, and what agency or coordinating body should be charged with implementing such a proposal?

So I I wanna reference the uh as you mentioned the National Security Commission on Emerging Biotechnology. Um, one they had to had a a recommendation that there should be a coordinating office, um, within the executive branch, which uh I acknowledge. But quite frankly, um, something like the NSEB, which is tr- uh, set scheduled to sunset this year, um, from my standpoint is is a little bit of a shame because uh that is a uh, uh, been a phenomenal body to kind of do a survey of where biotechnology, what the current status is, and be able to engage the different sectors in academia, private sector, to kind of forecast where it's going. and then support congress with uh the potential policy recommendations.

Mm-hmm.

There is that. But quite frankly too that one of the uh challenges that I faced personally during my time at the bureau um and and it still exists today and I just touched on in my recommendations is that we need to do a better job in doing the risk assessments because if the

Mm.

intelligence community is forecasting by technology and if the the resulting products that are provided to you the decision makers is looking at pandemic preparedness or bio-weapon, those are important, yes, but if it is not also incorporating what's happening in the bio-economy space, then we're flying blind.

Yeah.

And it's not just what the risks are, but it's actually missing out on the opportunity spaces where what are the next greenfield areas that we should be launching into. And as I mentioned before, the US is an as a as a agricultural bio-manufacturing powerhouse, and we're just not leveraging that.

Yeah. Doctor Doshi, what advantages does China have over the US in biotechnology development? How did they gain these advantages and what steps should the US take to regain them? And if you have any recommendations on the last two questions, please include those.

Thank you very much, thank you member Gillibrand, uh I'll just start by saying that the first advantage they have right now is that they've invested significantly in their capacity. So they're able to ma do buy manufacturing at scale for far less than we can, often below probably cost. That is one enormous manufacturing advantage, but it's perhaps not the most important advantage. What I'm more concerned about right now is the fact that their clinical trial process or their pre-IND investigations are able to move much faster than ours in China if you wanna get a biologic into a human being you just go to a hospital and you get a green light from their ethics board in our country we have to go through the FDA the difference in time can be a year but for a pharma company in America when they have to compare buying an American asset or licensing a Chinese asset the Chinese asset comes with that very exquisite special de-risked data so they're willing to pay a premium for it Now that premium comes at the expense of patient access and quality, and other kinds of considerations that we care about, patient rights for example, but it's still a powerful incentive. Those two forces together mean that China is hollowing out drug discovery, while also basically taking biomanufacturing away from the United States. And our solutions very quickly in the time left are first, to fix our clinical trial process through reform, and the FDA is considering that right now. Number two, to incentivize and boost uh investment into our biomanufacturing capability. And number three, to de-risk from Chinese biomanufacturing by creating incentives not to rely on bioman biomanufacturing abroad. Some of that has happened under BioSecure, but there's more to be done.

Thank you, Mr. Chairman.

Sir Houston. Thank you, Mr. Chairman. Uh, uh, thank thanks to you and the ranking member for hosting this uh, working on this important issue. Uh, welcome to all the witnesses today. I um i know that uh there was a point in time in america's past where we thought it was a good idea to uh export when we let china into the world trade organization we decided uh collectively as a country least the policy makers at the time it would be a good idea to make things in other places because it was cheaper to make them there um but as you talk to people in different industry sectors i know i'm more of a familiar with the manufacturing sector, they not only tell you do we we lost our jobs, we lost our companies, but we lost the talent. We actually lost the talent, the engineers, the people that know how to make things, do complicated, efficient, effective manufacturing processes, whether that be uh for rare earth, whether that be for manufactured goods, chips, electronics, uh and uh and um I'm curious uh about what you think the impact of of uh the outsourcing of things in the pharmaceutical sector uh have had on our ability to actually compete from the standpoint of talent uh any of you wanna have a thought on it go go right ahead yes thank you

yeah i appreciate the question um i mean we semiconductors is really good example because we had the brain drain when we offshored everything to asia and then when we decide we wanna invest, not only do we not have enough engineers and experts, but we don't have enough investors who understand the technology to know where to invest. I do a lot of manufacturing and I do a lot of sort of building domestic industry. What is super fascinating is that with the money that is going to revitalize domestic industry right now in the government, companies are investing and they're partnering with local, nearby universities to develop the workforce that'll go into those factories. So from my perspective, the brain drain thing needs to be stopped, but once we reinvest here, it's those companies who are gonna co-locate with universities, train those students to rebuild the workforces that we're gonna lose.