Leveling the Playing Field to Restore America's Generic Drug Manufacturing

The US Senate Special Committee on Aging will now come to order. Over this past year, this committee has sounded the alarm on the dangers of America's over-reliance on foreign adversaries' foreign medicines. We've heard from patient advocates, researchers, and manufacturers about their concerns and how it's putting our families at risk every single day. One thing is clear, there's an urgent need to address our dependence on communist China and India for drugs. And that starts with making safe medicines here in America. This week the Trump administration announced a great step toward further investing in American drug manufacturing. I'm glad to note the Trump administration is taking action. Now we need to see more American companies getting contracts with federal agencies to make drugs here in America. That's the test. We need to see urgency in both the executive and legislative branches to make changes that end America's dependence on Communist China for prescription drugs. I'm proud that the Clear Labels Act, which I'm leading with ranking member Gillibrand, passed a help committee almost unanimously in July. I expect to get a vote on the SYN four before the end of the year. That would not have happened but for Senator Gillibrand's hard work on it also. We must pass this bill and make sure Americans know where their drugs are made. Here's why I'm so fired up about getting this done. Amer- America now makes just twenty-seven percent of the medicine it consumes, things that we put into our bodies. In two thousand two, that figure was seventy two percent. We've almost completely lost our ability to make generic drugs in this country. This was no accident. This is the result of decades of Washington's failure to combat Communist China's control of what's in in your medicine cabinet, and the drugs we put in our bodies. Manufacturers in Communist China and India are cheating. We've seen them falsify records as we saw with Rambisca, Rambaxi, Rambaxi. Present fake conditions to FTA inspectors and pre-announced Pre-announced inspections, they cut corners on quality and uh, medicines that people's health and lives depend on.

Definitely. Definitely.

Just recently, the Chinese equivalent of FDA leadership got convicted for taking bribes to approve ineffective drugs. Communist China does not play fair, and they couldn't care less about our safety and well well-being. We cannot take chances by relying on them for medicines. We also know that foreign manufacturers get to the market fastest by undercutting American manufacturers. They're complying with the FDA's approval inspection processes. That can be fixed. The federal government should not reward that. The FDA needs to treat this as a both a national security and safety issue. Congress needs to give the FDA the tools it needs to support domestic manufacturing and the highest quality of manufacturing here in the USA. The federal government should support policies that bring drug manufacturing back without patients and health systems happen to face higher prices and they can One example is the first to file reform proposal in the FDA's twen- fiscal year twenty twenty seven budget request. Market-based solutions like this would give American manufacturers the first chance to become the exclusive manufacturer of drugs going uh going off patent by giving them a one month head start by the way what do you think China is doing? This proposal would have a huge impact give American manufacturers a chance to compete on an even playing field and sending a much needed signal to industry to invest in manufacture here long term. Other ideas such as CMS proposed rule to reimburse more for drugs made in America are a great step in the right direction. The time for action is now. We can't let issues like permitting and government bureaucracy stop manufacturing from coming back to this country. The government needs to take an all hands on deck approach to cut red tape so we can make medicines here in America and save and protect American lives. American manufacturers can compete on quality and cost, and I'm committed to working with ranking member Gillibrand and the Trump administration to make changes happen so they have a fair shot at bringing manufacturing back to our great country. Now I'll turn over to Ranking Member Gillibrand for her opening statement.

Thank you Chairman Scott for calling today's hearing, and thank you for our witnesses. This committee has dedicated an enormous amount of time and resources to studying solutions on how we can strengthen our pha- pharmaceutical supply chain. The Aging Committee has held eight hearings on this topic, and even authored a major policy report on securing the foreign generic pharmaceutical supply chain. And today, we have come to our final hearing on how the United States can restore our edge in generic drug manufacturing for the nine hundred and nineteenth Congress. We studied risks to the supply chain, country of origin labeling reforms, and how the United States must keep its dominance in biotech in the biotech race against China. We've learned that one of the key aspects of strengthening our supply chain is to reform the underlying market incentives that incentivize this race to the bottom. I'm so proud of the bipartisan legislation that originated from this committee, our Clear Labels Act, to the bipartisan Pharmaceutical Investment Oversight and Accountability Act. The resilience of America's pharmaceuticals have been a topic of interest for Congress even before COVID shined a light on our fragility of our supply chain. Drug shortages, drug recalls, um, are issues that are top of mind for Americans when they happen but are quickly forgotten. Thanks to the work of this committee, Congress has finally had time to focus on the issues that impact our patients and constituents I look forward to continuing this bipartisan momentum that the aging committee has uh created to get this done and I look forward to continuing my work with Chairman Scott and our partners in the private sector on how we can address these pressing issues.

Thank you, Ranking Member Gillibrand. I'd like to welcome our witnesses, Witness Panel of Industry and Trade Experts who are here today talk about how we can bring drug manufacturing back to the country, and stop relying on communist China and India for our medicines. First, I'd like to introduce Kurt Orlofski. He is the CEO of PAI Pharma, an American manufacturer based in South Carolina. He boasts over twenty years of experience in the generic drug industry, and welcome him to share his expertise with the committee about how we can make drugs here in America. Thank you for being here today. Please begin your testimony.

Good afternoon, Chairman Scott, Ranking Member uh, Gillibrand and members of the committee, it's, it really is an honor to be here today and to be invited to testify before the committee. Uh, each year PAI manufactures over one hundred million doses of lifesaving oral liquid and sterile medications, proving that a domestic drug manufacturer can actually thrive and support the US supply chain. Our proposal is, is really three prongs to strengthen domestic drug supply. One, Let Americans see it. Two, make the FDA prioritize it, the " it" being a domestic drug manufacturer, and give Americans a choice. First, let Americans see it. In the US, nearly ninety percent of prescriptions are filled with affordable generic medicines, and FDA reports that nearly seventy percent of generic drugs are manufactured outside the US. Yet, in twenty twenty six, hard to believe, Americans still cannot tell where the drugs are made. PAI supports the Clear Labels Act. Patients should be able to see where the finished medicine and API is manufactured, period. FDA has this information today but does not make it available to consumers. Listing only the domestic distributor's US address can lead a patient to believe the medication is made in the US when we know nearly seventy percent of the time it is not. Second, make the FDA prioritize it. We need more of our Finnish drugs APIs and KSMs domestically manufactured. COVID, as one example, showed us why. In twenty twenty, India restricted exports of thirteen APIs and thirteen formulations, and later restricted even additional medications as COVID went on. Those actions were likely not politically motivated or aimed specifically at the US. However, when an emergency occurs, governments understandably put their own citizens first. At FDA today there is little differentiation between a domestic and a foreign manufacturing entity. Application fees, review timelines, and compliance policies are similar. For example, a foreign finished dose facility pays only fifteen thousand dollars more in annual FDA fees than a domestic facility. That distinction should be more meaningful. FDA reviewer time is finite, as we know. FDA has taken a positive first step with its domestic and a prioritization pilot, a program intended to provide faster reviews to generic companies that manufacture and test in the United States. This incentive for new products needs to also be applied to existing products. An application to move finished-dose manufacturing or API sourcing to the US should have the fastest review time possible. An application for the first or second domestic source of a critical medicine should not wait behind the fifteenth or twentieth foreign application in an already crowded drug market. Third, give Americans the choice. Drug wholesalers and retail chains effectively fill millions of prescriptions daily. They alone decide whether to source a product from a domestic or foreign manufacturer. As of today, there is no requirement or financial incentive for them to source an american-made drug in many cases a domestic manufactured drug is not even available in pharmacies today in us pharmacies today we must start by getting domestic manufactured drugs on our pharmacies our pharmacies shelves the payment system also for prescription should align with an incentivized domestic manufactured drugs first one medicare part d analysis found roughly fifteen dollars of drug payment slash reimbursement per prescription for the drug Donepezil, for example. While the manufacturer receives only about five dollars of the fifteen. This tells us there is economic value available in the system. So before we start asking a senior to pay more for an American-made generic, we should ask whether more of the dollars already in the system can reach the manufacturer making the medication. domestically. And finally, generic pharmaceuticals are currently exempt from the formal section two thirty-two tariffs, but the administration has directed commerce to reassess that within a year. While tariffs need safeguards for shortages and medically v- vulnerable products, for most finished products today they would be an effective and required push for action now. And where tariff revenue is generated, Congress should consider reinvesting some of the revenue in domestic plant modernization, and purchasing incentives for US made generics. So our proposal, pretty simple, let Americans see it, make the FDA prioritize it, and give Americans the choice. These actions will strengthen domestic, the the domestic drug supply starting today. Thank you and I look forward to your questions.

First, congratulations, Lord in Business. Thanks for the testimony. Thank you. Now I'll turn it over to Ranking Member Gillibrand for our next witness.

Thank you, Mr. Chairman. I wanna move to Christine Baeder. Miss Baeder is the President of APO um, Apotex? Apotex USA and LATAM, where she leads efforts to expand the company's commercial footprint in US hospital and specialty care markets, and brought in its portfolio of treatment options. Previously, Miss Baeder was Senior Vice President and Chief Operations Officer for US Generics and Biosimilars at Teva Pharmaceuticals. She serves on the board for the Association for Accessible Medicines and served as chair of the board in twenty twenty three. You may begin.

Good afternoon, Chairman Scott, Ranking Member Gillibrand, and the members of the committee. Thank you for the opportunity to appear before you today. My name is Christine Baeder. I am the president of Apotex Corp. We're based in western Florida. Apotex is proud to supply high quality, life-saving medicines to millions of patients in the United States and around the world. Apotex supplies over a hundred thirty product families to American patients every day. Apotex strongly supports this committee's important work to secure a resilient domestic supply chain for generic medicines for American families. As this committee has correctly observed, generic manufacturers are increasingly reliant on unstable and unsustainable foreign supply chains. As a pharmaceutical executive during COVID, I I approached every day making high stakes decisions to transfer products for the were produced overseas to service the American patients that needed them. We have a responsibility to learn from COVID. Apotex applauds the committee's work to tackle this problem head-on, including providing patients with the information they deserve to know on where their medicines and the ingredients they are composed are come from. Apotex strongly supports the Clear Labels Act and looks forward to working with Congress to see it signed into law. Mister Chairman, in order to implement the solutions that will most effectively secure a resilient domestic supply chain, we need to look at how we got here. The factors that cause generics to leave the United States all flow from one simple reality. Generics for generics, the math doesn't work. Let me say that again. The math does not work. Generics exist in a race to the bottom environment where North American manufacturers cannot compete with lower-cost overseas manufacturers who rely on government subsidies. Apotex has personally lived this reality. We were a leading North American manufacturer of penicillin, perhaps the most essential of all essential medicines. Because of unsustainable market conditions, we had to demolish that plant last year. As an as an industry, we cannot keep tearing down buildings and exiting markets. We must incentivize and empower the generic industry and reverse the economics. Fortunately, we already have a powerful tool that Congress can leverage. It's the central part of what built the generic industry, the hatch, wax, and grand bargain. The tool is the hundred and eighty day exclusivity incentive. Let me be clear, the hundred and eighty day exclusivity is the single most important incentive that drives every decision we make. A hundred and eighty day exclusivity rewards the first generic to trailblaze and take it on the expense of challenging brand patents. Once it was so important that the generic manufacturers would camp outside of the FDA,

Hmm.

like fans do for a college basketball game in hope of getting that first slot. Recalibration of this extraordinarily important incentive is necessary. In recent years, the value of the hundred and eighty day exclusivity for brand drugs known as new chemical entities or NCEs has eroded. This is a big deal for patients, as the drugs are the most critical breakthrough drugs on the market, the exact ones that are desperately needed at lower cost alternatives. But under the current system, the math once again does not work. Let me explain. In two thousand and three, FDA decided to grant shared exclusivity to the generics who submit on the same day for NCEs. Instead of crowning a winner, the hundred and eighty-eight day prize is now split amongst the crowd. As an example, Eliquis, a blockbuster drug subject to Med- Medicare price negotiation, has twenty-five first applicants. Stripping the value of the incentive in this way has a predictable consequence. Prices drop to unsustainable levels. Manufacturers flee overseas and we're right back where we started. A hundred and eighty day exclusivity is the ideal place to start repairing our broken system. As with any incentive, the details matter. I wanna make sure three points clear today. First, we need a strong incentive for APIs to return to the United States. Hard stop. It is not acceptable for us to merely take Chinese inputs, finish them in the United States, and deem on-shoring a success. We need to target API, which is the root cause of the issue. Second, on-shoring will take time. A- as you recognize, Apotex is supportive of different phased approaches. That said, our immediate pri- priority is on-shoring and friend-shoring of API. Third, the current NCE submission rules should stay in place. Even when there is no domestic manufacturer, certainty is required for an incentive to work. Apotex applauds the committee's efforts to tackle the critical issues facing the generic supply chain and protect American families. It is not too late to right this ship. Apotex stands ready to partner with Congress. Thank you again, and I welcome your questions.

Thanks for your thanks for your testimony and You you sometimes you you sit and think why can't this, this stuff is not that hard. Right? Why why can't it's like if i was running a one of these federal agencies like you do it today alright you do it you make the changes now so alright next i'd like to introduce our final witness um here uh torsikar is a senior economist with the coalition for a prosperous america and is here today shares over fifteen years experience in the international trade sector and the intersection of national security and trade his work has been featured in major publications i appreciate him being here to discuss the critically important issue of securing our supply chains and bringing generic drug manufacturing back to our country. Thanks for being here and please begin your testimony.

Chair Chairman Scott, Ranking Member Gillibrand, and members of the committee, thank you for the opportunity to testify today. My name is Mihir Torsekar, Senior Economist at the Coalition for a Prosperous America, and I'm presenting CPA's research on generic drug manufacturing. Led by my colleague, Andrew Reschenberg, including our report, The Hollowing Out of America's Medicine Cabinet. The generic plants America has lost over the past decade held every FDA approval and every permit they needed. They closed because the price of the medicines they made fell below the cost of making them reliably. Regulatory reform is necessary, but on its own it produces faster approvals for plants that can't stay open. The United States now makes twenty-seven percent of the medicine it consumes, down from seventy-two percent in two thousand two. Two categories of medicine show what that means. The first is liquid acetaminophen and ibuprofen. the medicines for patients who cannot swallow a tablet. Imports have doubled since early twenty twenty four, and since January of last year, India has supplied eighty three percent of them, and China has supplied ninety nine percent of the imported ibuprofen ingredient. The second category is eleven tablets that mil- tens of millions of Americans take every morning for blood pressure, heart failure, diabetes, seizures. The United States imports seventy eight percent of its solid oral generics. India makes sixty one percent of what we dispense. And American plants only make twenty-two percent. China subsidized the chemistry, India subsidized the finishing. At home, a handful of buying groups control about ninety percent of generic purchasing and award contracts at the lowest price. And Melodipine, which now sells for a penny and a half, uh now sells for a penny and a half a tablet. At those prices, plants in West Virginia, Maryland, and Alabama all closed over the past decade, rendered unprofitable by American generic prices. on a playing field tilted toward India. Nearly half of the shortages that began this year involve a drug with a single supplier, so one plant's problem becomes a national shortage. There are two hundred twenty-seven active shortages today and the average one lasts more than five years. Oversight is tilted as well. Domestic plants are inspected without warning, while foreign plants received advance notice nearly ninety percent of the time, and many went five years or more with no FDA visit. Generics made in India are associated with a fifty for four percent more serious adverse events than the same drugs made here. Reliable domestic supply is cheap. Only thirty-six cents of every retail generic dollar reaches the manufacturer. If making a generic in America costs about forty percent more on average than in India, the premium for reshoring is only six and a half cents on the retail dollar. In CPA's case study, reshoring pays for itself. If it cuts the annual risk of a major shortage by about one percentage point, and roughly thirty billion doses of FDA approved generic capacity already sit idle. CPA proposes five per- reforms. First, fix the FDA approval process, make priority review for US made generics permanent, and let American plants that use ingredients from trusted MRA sources qualify. Second, apply one inspection standard everywhere. Foreign plants should face unannounced inspections at domestic and high-risk imports should be independently tested. Third, clear the path for new plans. Use the GDUFA reauthorization now to raise and index the foreign facility surcharge and spend it on inspectors and put a clock on permitting for essential medicine facilities. Fourth, pay for reliability, finalize CMS's domestic procurement designation, sign multi-year federal contracts, and pass the Pills Act. Then, use section seven O eight of the Defense Production Act. to bring the buying alliances that control ninety percent of generic purchasing to the table, under a voluntary agreement. The authority, uh that authority is permanent, and HHS can use it now. Fifth, fix the market economics, set the generic tariff as a specific duty, cents per dose, on imports from high-risk countries, with trusted MRA supply at low or zero rates. A one hundred percent tariff on a penny and a half tablet, adds a penny and a half and it moves nothing. The duty should arrive sooner rather than later, and the contracts should be signed now. None of this raises costs for seniors at the pharmacy counter. The domestic premium is under a dollar a prescription, and it falls on the thirty-six cents of each dollar that reaches the manufacturer. What reaches seniors is the shortage. Paying for resilience by design costs cents on the dollar. Paying for it during a shortage costs hospitals hundreds of millions of dollars, and costs older Americans their medicines. Congress can choose the cheaper options, and it should choose it now. Thank you.

Thank you, pretty common sense. So, not that hard to do. OK, Mister Orlofski, American manufacturers are being undercut left and right, with foreign manufacturers from communist China and India cheating at every corner. How can the federal government combat this cheating and support American manufacturers who do things by the book?

I We believe that there's a the there's clearly a a multi-pronged approach to this too, right. Number one is is the FDA obviously has to do the do the work and they have to inspect those facilities equally and unannounced as, as they do for the US facilities. Um that that's super important. I think secondly though you can't have a US you can't have a US consumer buy the product if it isn't on the shelf. it it has to be on the shelf. And so what can the US government do to get those products on the shelf? We've we spent a lot of time thinking about that. And the government, the through through CMS and and Medicare and and DOD, those purchases are significant, they're meaningful. Um but a lot of that goes through the wholesale, the wholesalers. Um so we believe that if if the government can make can begin to require a certain portion of purchases come from domestic manufacturers, and even do it over time, in the first year maybe it's a third, the second year another third, something like that, um, where if you wanna participate in those programs with the government you have to source X amount of it domestically. That's probably the, the second thing the government can do, and um, to what my colleague Mahir said, that we've seen proposals out there that starts this five, ten, fifteen years in the future that it needs, it, there's no reason it can't start right now. The last thing is, you know, um, as I was on my, on the train this morning I thought to myself, let, let me see if I can identify every piece of clothing I'm wearing, and where it's manufactured, and you know I can.

You can.

Every piece of clothing and I'll, I'll leave it at that, I won't tell you which ones. But I know some are, one's Italy, there's a few that are America. Um, but yet the medication, I took three pills this morning. I looked at my bottles this morning, I don't know where they're made. I'm in the industry. I don't know where they're made, and the pharmacist can't tell me that either. So, we think the most important thing of, of all of this, is the Clear Labels Act. And so you have to start with Americans, and it's not just Americans, not just the consumer. If you go up to a pharmacist and ask a pharmacist, where is it made?

Don't know.

They don't know.

I ask.

It's more important, actually it's just as important that the pharmacist knows that.

Right.

as the consumer and then they can start demanding change.

You know I asked, I asked the other day uh, the pharmacy if um, if I, I, you know, there was a generic and it was less than five bucks, I said if I won the brand, what would it cost? You know what they told me?

Hmm.

Eight hundred and it would take three months.

Wow.

For a five dollar prescription. Cuz we've just decimated all the, all the, all the um, manufacturing in this country.

That's terrible.

It's just, it's, it's like, it's stupidity. Alright. It's better to break out our defense on, to break our defense on communist China, we need a healthy market for generic drugs. What incentives can the federal government use to attract manufacturers to make domestic investments?

So, so again, I think the, the biggest incentive that you have that isn't in play is the hundred and eighty day exclusivity. It moves all the big drugs, um, and

Why aren't they doing that, by the way?

Um.

Why not?

I I don't know. It's like they don't care. I don't know. I don't know. I don't know if it's that simple. I think there is a a fear that a hundred and eighty day exclusivity built the industry. And if you look at the generic industry in the US, I think it is the sole example of something the government got right. Regulators worked with legislatures, worked with private industries, and we built an enormous industry. And then we eroded that incentive and the industry moved east. And that's what's happened, and we need to reinvigorate that incentive to bring it back.

Why aren't they doing it though? You think China goes out there and says, I'm gonna help American manufacturers? Think it's think it's a level playing field in China?

Do I think that? No.

No.

No. I,

So what

look, I I I think that we need a legislative a a way to address that incentive. There's statutory limitations, and I think that we should move forward with that.

But doesn't the FDA have the ability to make these decisions already?

I I don't believe that they think they do. Whether they do or not, I'm not an FDA expert.

God, they they they make all these other decisions, like they're required to do these inspections. They made the decision to do pre-announced here and not pre-announced there. That's not statutory. Just makes you mad. You just think if you're if you're gonna take these jobs why do I mean and you think but there's Their job is the safety for Americans, right? That the primary job. Couldn't you say, I can, oh, I can justify this cuz it's safer for Americans.

I would also say to that point that we need to think about the AF the APIs and the KSMs.

Yeah, I agree.

Like if we address just the finished dose, not that that's a bad thing, but it's not enough, because from a national security perspective, if we sort of do something, you know, punitive on finished dose manufacturing, there could be a response on APIs that could start drug shortage that makes me very cautious of that approach. So I think we need to have a measured approach to make sure we bring the entire supply chain back to to French shores.

You think if the American public knew where things were made, that it'd make a difference?

I I would like to think so, but I don't I don't know.

Yeah. Yeah. There's no test. There's studies, but who knows, right?

Yes.

Um. Mister Torsekar, over the past two decades we've seen drug manufacturing go overseas. Much of this can be blamed on failures here in Washington. What role can the federal government play in addressing these failures and bringing manufacturing back back to the United States?

Well, thank you, Mister Chairman, I think one of the big things the federal government could do right now is to create a, uh, send out a strong demand signal, and one of the things you can do is the VA, uh, the DOD, uh, they have immense purchasing power and they can set contracts up for long-term agreements with manufacturers right now to make sure

and there's no limitation they can do that today

right right and

there's nothing there's no law that says they can't do that

exactly and it makes it makes uh it makes such a difference because when these manufacturers have a guaranteed market in place uh that means that they can take out loans against uh against that from the bank things like that uh and also

they can invest

utilize capacity uh right now capacity utilization is relatively low and that's this makes a big difference but that's only one sliver of the market you also have to uh do things like invoke uh section seven seven O eight of the DPA, Defense Production Act. Um, HHS can actually convene all of the uh three major uh purchasing alliance groups for the uh retail pharmacies and the GPOs, convene them together to get them to agree to set up a um, you know, sort of like a voluntary agreement that they are going to purchase more domestically. But I think the biggest thing they can do right now is to uh set a mark, send a strong demand signal to our manufacturers.

Right. Thank you, Member Gillibrand.

Thank you, Mister Chairman. Um. Think you covered most of my questions, so let me get to one that you didn't cover. Um. For uh Mister Tor- Torsocar. In your written testimony you highlight that roughly ninety percent of FDA foreign inspections in two thousand twenty-three were pre-announced with up to twelve weeks' advance notice you highlighted prior testimony that uh exposed how unannounced inspections identify manufacturing problems roughly forty percent of the time, compared to only five to ten for announced visits. Based on your research, to what extent does this oversight asymmet asymmetry function as an un-priced regulatory subsidy for foreign manufacturers, enabling them to undercut compliant US produ producers? And in pillar twel two of your, sorry, in pillar two of your proposed strategy, You call for making unannounced inspections. There are concerns that foreign governments could use visa delays or administrative obstacles to block unannounced visits. How can Congress work to ensure that? And last, you recommend requiring independent batch testing in certified US laboratories for high-risk imported drugs paid by the importer fees. How would this requirement be put into practice without creating supply delays for medications Americans depend on?

Thank you, Ranking Member member member member Gillibrand um so the the big issue that i see here um at play is the is the guidufa um user fee disparity right now right it it's only been about fifteen thousand dollars between uh the delta between like india and the united states that's only about six percent of of of a difference and it's been in place for about you know since twenty twelve so the first thing you can do is in the uh latest updated guidufa uh resolutions i think the plan is to increase that uh to about twenty five thousand uh twenty five thousand dollars would go a long way to helping to finance those unannounced inspectors pay for visas and things like that um but the importance you you highlighted it uh just in your question about the importance of uh unannounced inspections because when you give i mean yes the the study that we found uh for fiscal year twenty twenty three uh the year for which we have the most uh comprehensive year long data found that ninety percent of the time a foreign labs were given a uh up to twelve weeks of notice before an inspector came. Uh and that's important because unannounced inspections are associated with a forty percent finding of of of problems in in their labs. Whereas if an an an inspection is announced prior to um prior to arrival, it accounts for only about like five percent, five to ten percent um you know problems. So I think one of the biggest things is uh getting that uh commitment from um from foreign producers to pay increased user fees and using those fees to uh finance additional lab support.

Thank you. Uh, Miss Baeder, you very effectively testified that the hundred and eighty day um exclusivity is the brass ring but you indicated there were some challenges or prior or problems with it, and need to be updated. Can you be s- be more specific on um what you wanna update, how you would update it, how you would improve upon it, and why is this the most effective tool in shifting generic industry behavior across the entire market compared to direct federal.

So, so the incentive that built the industry i- is, is a gold standard of a, of an incentive. The issue is in two thousand and three because of the camping out that the manufacturers were doing to get that first in line,

Right.

they, they decided, OK, if everybody's there on day one, it's a tie. So when you, when you take the tie and you change it into economic terms, now it's, in, in the case of Eloquist, which I,

Yeah.

I use, is it's twenty-five percent of an of a of an incentive as opposed to an exclusive incentive so i think if you narrow the field

right exclusive yeah

assuming that you know domestic manufacturers are going to be a subset of those twenty five at least in the beginning then that should help bring value back to the incentive as well as incentivizing the behavior that you're wanting to see which is onshoring of the domestic supply chain

got it thank you um And um, does how does your proposal ensure that the standard of NCE minus one submission rules remain intact so that the generic applicants are still incentivized to file at the earliest possible date even when no domestic manufacturer is initially available?

Yeah, so so I I'm very clear that I believe that the incentive should continue to stand for exclusivity. And that only once everyone has filed, the FDA can then make a differentiation between a domestic uh supplier that will get an additional incentive and then the NCE minus one. So in that period of time of transformation as we're moving from one uh set of standards to a second set of standards we're not creating ambiguity ambiguity for the FDA and we're also not creating uncertainty for the industry and, therefore, patients having less access to generic drugs.

Um, mister uh uh Orlovsky, Um, how should Congress convert the FDA's discretionary pilot into a permanent statutory priority review framework, to give companies the long-term certainty they need to build US facilities? Specifically, would a tiered system strike the right balance in the interim as the domestic API capacity is ramped up?

Um, so number one, make it permanent, right? Uh, uh number two, uh they have to put the resources to it. And so I I don't I don't know um exactly how many drugs are in the pilot today.

Mm-hmm.

Um, but it's probably not much more than a handful. Um, so it needs to be really staffed and prioritized by the FDA to, you know, to give priority to it. I I think the second thing, though, uh, about it is, and I I agree with Christine, um, on the the one hundred eighty day exclusivity is is the gold standard and it's, it's very important. Um, but it's future-looking as well. And, you know, I keep coming back to the ninethe- sorry, to the seventy percent of our prescriptions today are filled with foreign manufacturer products. And so, what are we doing about that today, if if another pandemic hits six months from now or a year from now, the the the first defile on a drug twelve years from now isn't going to help.

Right.

Um, so we need to start bringing that seventy. percent back today and we you know the fda can put a very similar program in place to say ok if you file an application to bring a drug back we'll approve it assuming it's approvable in four months

right so shorten the timeline

and shorten the timeline but also you know i i could quote you i think i forget which month it was a couple of months ago the fda approved the twenty fourth version of one drug and the twenty fifth of another

yeah

Now those were resources, reviewer resources, and my application is behind that, because I,

Right.

you know,

So maybe don't make that the priority.

so But you have to give FDA

Guidance on how to review applications.

You have to make it very clear, cuz if there's anything gray for FDA,

Yeah.

that seems to be where they

Well, along the same lines, how can hospitals, GPOs and other purchasers be incentivized and supported in choosing to purchase high-quality drugs from

So, as, so there's no incentive today. Uh, um, and in general the decision isn't even made by the hospital, or even any independent retail pharmacy, it's it's made by the wholesaler and the, the chain. So, the, the train, the chain purchasing. So, what really needs to happen there is you need to take some portion of that reimbursement, and shift it. So, let's just say a drug is reimbursed fifteen dollars. Let's

Mm.

just say that's that's pretty normal uh for

So, higher reimbursement if it's uh acquired in the United States.

Correct, sixteen for one and fourteen for the other.

Good idea. I'd love that. Uh, Miss Baeder, do you have a idea, too, on that issue?

No, I mean, I I agree, there needs to be a differentiation and some of the what's exciting about what the administration has done so far, uh uh and and and this committee is you're starting to put all the tools of the government uh in play right so i i am excited about the cms proposal that incentivizes hospitals to use domestic supply chain that's a good it's a good proposal but it doesn't go far enough none of the incentive flows back to the manufacturer and we all know hospitals have their own financial challenges so it's doubtful that that will actually flow back to the manufacturer to incentivize the investment that you need at the manufacturing site.

I get it. I mean, this

But uh, but the concept of using that type of a strategy is something

It's a good idea.

we haven't seen from government before and very encouraging.

Mister Torsekar, do you have a a a tourist card, do you have a um thought on that question?

Nothing additional, just I think I can't um underscore enough the importance of CMS adding uh that additional criteria for reimbursement to um reimburse locally or US produced uh goods.

To make it a higher reimbursement. Thank you. Thank you, Mister Chairman.

Thank you. Uh, Mister Orlofski, what does our reliance on common strain india look like for patients, and what would happen if they cut off their supply and people couldn't get their medications?

So, um, you know, the reliable supply only really matters when you need it, right? Um, and, um, I I have a personal experience with this. Uh, in in right in the beginning of COVID, uh, I got COVID unfortunately, and then I wound up with pneumonia. uh like two days in. And uh they gave me an antibiotic, the doctor, and then another doctor said, oh no no, I have experience, the one you need is this one. Um and I took it and I'm alive today. The doctor said if well if you didn't take that one, you probably would have died, as many did at that time. So, becomes a very personal thing, you know if you get into a a pandemic situation like that or, we we're seeing the same thing happen right now with oncology drugs you know it's the sickest of people and their direst of need and they they can't get it so it's life or death it really is

what um mister what can i what role can our allies neighboring countries play in supplying the api

i'd say the first part

what what can our allies do to help us on supplying the api

our allies Uh, that's a really good question. Uh, you know, I, I think to the, to the extent that we can trust them to supply us in our time of need, the way we supply them and theirs, um, I, I just don't know how you can trust that, given what we've seen. And I'm not speaking ill of our allies, it's, it's,

They're in the same position.

do you help your own?

They're, they gotta represent their country and they gotta take care of their own people first.

We would probably do the same.

Yeah. Ms. Baeder, um, is the federal government doing enough?

I I don't think the federal government yet has a holistic plan for APIs, never mind KSMs, right? We need to prioritize the downstream supply chain. The finished dose supply chain is easier to prioritize, but that doesn't mean it's more important.

Yeah. So, so if you were on the FDA.

Mm-hmm.

What are the three things you would do right now?

As as to encourage API on touring?

Yeah.

Um, I don't know if the FDA is the right place to start. Um, certainly they can be a piece of it. You they need to be on board, but you need to

But if you if there if the only agency that you could you're running, the only one you could you you only won't get any other job and you no one else to talk to, what would you do?

Um, quit? Um, no. No. no um i i would um i would figure out

mmm

what i could do to make the inspection of fda of of apis and ksms easier using approved api sources now i would support a friend-shoring approach at least as a transitionary step let's work with our allies and get apis um and the know-how for apis back into the western hemisphere so that we can then extrapolate and then build it.

So you make the APIs, how difficult is it to compete with China?

Uh, that you can't compete with China, it's not a level playing field.

So what are they, what are they doing?

At their government subsidized facilities.

Is that a, is that a violation of the WTO?

I don't know that.

It is, so. Um, so, so they've got subsidies that they just, they drive the price down so you don't even have a have a shot.

That is always the fear, that as soon as they enter a mar- and and look that's i think we're on the prep precipice if you look at my testimony you can see there's charts on apis and ksms and what you see is that we're more dependent on apis in india and more dependent for ksms in in china but if you look at the rate of filings of dmfs which is the file for the apis in china they're skyrocketing so if you if we do nothing and we come back and have this conversation again in three years then I'm gonna be telling a very different story about our now increased dependence on APIs in China.

So, um, what if China, India stopped all antibiotics coming to United States, what would happen?

That would be a catastrophic to that disaster.

Like what would some would it would it cause death?

Yes.

And so, so, so, um, of any one drug, antibiotics probably is the most important, right? And have you and have

Well, whatever drug you need is the most important,

Yeah, that's true.

quite frankly. I mean insulin is important, like there's a lot of different categories where we're very overly reliant on foreign sources.

Have you have um has does the DOD um have do they take this seriously?

Yeah, the DOD is very proactive, I think, at this phase.

So so they have they have um they have a US sourcing for all their antibiotics?

They have a drive towards US sourcing. I don't know if they've completely been able to find all of them here.

OK. OK. And so you know companies that have gotten, on Anamox you know companies that have gotten contracts with DOD to supply it?

Yes.

That's good, that's.

Yes.

That's very positive. Mr. Torsekar, um, we've prev- previously talked for the need for federal government to buy American drugs. Um, so, are you seeing that happen?

Um, I, I'm, I'm actually not aware of, of a whole host of, of examples. I mean, I know there's isolated instances where you know hhs has um signed a contract for uh an api manufacturer uh using a continuous dose or continuous process which is less environmentally um damaging i think that was back in twenty twenty some isolated instances that i'm aware of but um broad scale not i'm i'm not as familiar with that

i think you talked a little bit about the difference between price and value can you explain how how how much of like the how much the end purchaser How much money actually goes to the manufacturer?

Yeah, so

Where's all the money going?

So for every retail dollar uh that is spent on a generic drug, roughly sixty-four cents of it goes to the middleman in the chain, and then thirty-six cents is going to go to the manufacturer. Of that thirty-six cents, uh sixteen cents is accounted for by the actual manufacturing process. So it's a it's a small fraction.

Do you think that uh foreign drug companies ought to pay a a higher FDA user fee?

Oh, absolutely. I mean, we absolutely endorse the um, the GDUFA uh, update uh, for them to pay up to twenty five thousand dollars. Uh, and that should be indexed to inflation by the way, so that we're not in a situation where that, you know, allowed to exist into perpetuity.

Good. Thank you, member Gillibrand.

I've asked all my questions.

Alright. Well, I think we we um I mean I

OK. Kim is on his way.

Pardon?

Senator Kim is on his way.

Oh, sorry. OK. i think uh we have sooner coming so i've got something else um so mister when fda negotiates the generic drug user fee it negotiates with the industry representative that is the association for accessible medicines for generic drugs is the fda negotiating with us man manufacturers are ultimately negotiating with indian companies

yeah

who are they negotiating with

i i'm sorry yeah i couldn't really answer that right now

ok

just yeah

alright um Why don't, why don't foreign companies pay a higher FTA user fee?

Unfortunately, I don't have a good answer for that. It's, it seems kind of like common sense that the, the fee has been the same since, you know, twenty twelve, right? So, it's hard to say.

So, if you're running the FTA, what would you do?

Well, one, I think that the first thing I would enforce is, um, unannounced inspections. Uh, I would also, uh, make sure that we're, um, expediting reviews for domestically produced drugs. Uh, right now, I mean, I think the the process works that the regardless of what the origin of where your drugs are produced, there's no distinction between, you know, a US made versus a foreign made um drug. So I think we have to uh prep uh prioritize US made manufacturing in the pipeline.

OK. Um. Is better um you support the clear label side?

Yes.

OK. Um, why would somebody in the pharmaceutical industry not do that? Because it seems like it's it's helpful to and then it's like if you're an American company and you're worried about American patients, you're worried about the safety of American patients, you're worried about our defense industry, all these things, why wouldn't you support it?

I don't know. I think that the American consumers are becoming increasingly educated, increasingly focused on their health, and increasingly are interested in not only where their finished goods is made, but also where their APIs are made.

So if they're not supporting it and it seems like they're not as committed to the american consumer

it seems like they're definitely out of trend with where the american consumer is going

ok senator kim

just catching my breath here thank you chairman and and the ranking member for pulling this together and thank you to the three of you uh for coming on out here uh miss Baeder i wanted to just just start with you here um kind of build it off of what someone was already talked about you know i've seen a number of different policy uh you know just the policy incentive proposed to strengthen domestic manufacturing of pharmaceutical products uh the fda even proposed offering incentives to the companies that shift production to the us to try and build infrastructure i guess my question to you is what factors should congress consider when determining the scale for certain incentives like whether a product was domestically manufactured as a finished dosage uh if they use domestically manufactured apis we're just trying to get a sense of how to be able to frame that in our minds here

yeah so so for me i think uh finished dose manufacturing is probably easier to to fix um it's it's not something that we oppose in any way shape way shape or form but then we're just gonna get to the real choke point which is apis So we are really focused on incentives that would be more holistic on in getting the whole supply chain back to the Western hemisphere and focused on um not being reliant on any one nation that may not be supportive of our our political agendas.

Yeah, I mean, I think there's so broad agreement on that, I mean, something that I know you've mentioned in your testimony about, you know, how to be able to address the over-reliance on overseas apis on the ksms uh and so you know we're we're trying to think through how to consider this uh i think the challenge though is how do we consider the options that will protect our supply chain resiliency uh especially we're given some of the most essential medicines and generic products that are out there so i guess my the way i would sort of frame it now is you know could you share what considerations we should keep in mind um so we are both achieving a sustainable domestic manufacturing infrastructure and also preventing the unintended consequences or vulnerabilities for our supply chain like how do we achieve that type of transition yeah without uh putting ourselves at risk

so the generic manufacturing supply chain is extremely complex global and functions on very tight margins so it's very um fragile when it comes to shocks to the system so whatever you think about um as long as you have time factored in as a variable that you are very intentional about and clear of what the industry about then i think you can do anything that you need to do but what is hard for the industry is if the if for example there is uh a large tariff on a on a on an api that comes into the to the country that may make that domestic manufacturing not not uh financially reimbursable because those those reimbursement rates aren't owned by the same people that own the manufacturing right we have a a divergent system so with time and with the appropriate incentives the industry can make the appropriate choices but if you do it instantaneously you can actually cause a negative reaction and create um more dependence on on foreign producers.

Yeah. Mister uh Ororovsky, I just wanted to bring you in on this, get your perspective on on this in terms of just how how do we try to think through that type of transition and and resilience while making sure we're not leaving ourselves vulnerable?

Uh, supporting uh Miss Peter's point, it it you know Rome wasn't built in a day, we're not going to solve this problem in six months or a year, but you have to start. And so we think about it in a in a uh in a phased approach. You start with finished goods and source them domestically. We have a lot of unused capacity in the United States still to make finished dose products and yes we're still gonna be relying on APIs from foreign nations, but at least if you have the dosage form here, it's a start. Now, there's also a difference in quality when it's manufactured in the US, potentially as well, and we can see that in all the statistics. Uh, and it's uh, there's a difference in jobs too. Because if the, if the, if the finished product is made in the United States, the API, the excipients, that's all tested here as well. So you get that quality check, but also all of the corresponding jobs, the bottles, the labels, the caps, all the labor, all of that comes back to the US as well. So we think start with finished goods, make them here. And then. Begin to incentivize incentivize through. Um, through differentiated reimbursement, the the domestic manufactured drugs through the government purchases. Those two things, I think, really get the ball rolling.

Yeah. Uh, Mr. Chairman, can I just ask one quick uh follow-up, uh, uh, miss Baeder, back to you. I'm trying to think through how do we do this in a way that's gonna clear create sustainable production too like how do we know that this if we if we move in this direction that is not just something where again these companies at a later point will just transfer production back overseas i mean i'm trying to think through like what would actually anchor what would be that that type of anchor that could

i think i think kurt

kinda keep us

started that with uh dedicated programs of government procurement that are are based on a differentiation of the the entirety of the supply chain. Um second to that, the the challenge with government procurement as the sole instrument is that it's relatively a smaller, it's it's meaningful, it's not nothing, but it's you know five, ten percent depending on how you look at the number. You need to do something to get the commercial reimbursement to move. And whatever you can do to have a real conversation with those buyers and those reimbursement entities to incentivize the same behavior, that will be actually what un- finally unlocks it.

OK, great. Thank you and I'll, you're back.

Thank you, Senator Kim. I want to thank everyone for being here today and participating. Look forward to continuing to work with our members. If any senators have additional questions for the witnesses or statements to be added, their hearing record will be open until next Wednesday at at five PM. Thanks, everybody, everybody, for being here.