How is it possible that the global supply of medicine components is almost entirely controlled by China?
How is this being used as leverage against other countries, especially the U.S.? What would happen if China decided to stop exporting drug ingredients, especially now, during the CCP virus, or coronavirus outbreak?
Why are special interests like Big Pharma lobbying against a potential “Buy American” executive order?
Is it possible that medicines manufactured in the U.S. could actually be produced cheaper than using global supply chains, as most are today?
In this episode, we sit down with Rosemary Gibson, senior advisor at the Hastings Center and author of “China Rx: Exposing the Risks of America’s Dependence on China for Medicine.”
This is American Thought Leaders 🇺🇸, and I’m Jan Jekielek.
Jan Jekielek: Rosemary Gibson, such a pleasure to have you on American thought leaders.
Rosemary Gibson: Thank you so much for having me today. It’s really a pleasure to be here.
Mr. Jekielek: We’ve seen this CCP Virus or coronavirus pandemic expose big issues in supply chains and manufacturing. And amidst all this, the Chinese Communist Party has threatened to stop drug exports, or even precursor drug exports from China to the US. Tell me what you think would do to America.
Ms. Gibson: As I wrote in “China Rx,” the United States and the rest of the world is dramatically dependent on China for thousands of medicines that are taken every day. These are mostly generic drugs. And if China shut the door on exports of the core chemicals, and other ingredients to make them, we’ll see, the countries waiting in line to get vital medicines to care for their populations. We’re already beginning to see the pricing rivalry for certain drugs that are now becoming more scarce because global demand has increased with coronavirus. It’s a very serious situation that we’re approaching.
We have a perfect storm: Production shutdowns have taken place in China because of coronavirus. Workers were not going to work so they could stay home and take care of themselves and their families. Transportation routes have been constrained, [there’s a] huge demand [of medicine] in China. And then, as the coronavirus spread around the world, global demand increased. And meanwhile, the whole supply chain for the world’s medicines is concentrated in a single country. And now we’re beginning to see countries like the United Kingdom, India, and even Hungary, as well as others, that are banning the exports of medicines, because they want to make sure that they have enough for their own people. These are unprecedented times that we’re in. We’re in uncharted waters. And I did predict this. And regrettably, it’s happening. I wrote in “China Rx” that in the event of a natural disaster or global pandemic, if China shuts the door, countries will indeed line up to get vital medicines for their people.
Mr. Jekielek: White House trade advisor Peter Navarro has been talking about this Buy American executive order that’s in the works, but Big Pharma is lobbying against it. We’d love to get your perspective on this.
Ms. Gibson: My understanding is that the draft executive order being prepared by the White House would have a provision for the Defense Department, the Department of Veterans Affairs, and the Department of Health and Human Services—that they would buy American-made medicines and all of their components. That could revitalize industry here in this country, and also diversify the manufacturing base, which would benefit the rest of the world. But we’re seeing some headwinds coming up against that draft executive order. And it’s really quite surprising that there appears to be opposition to making medicines in America. … It’s really very curious why any company would want to oppose making medicines here in the United States.
We’re so dependent that we can’t even make antibiotics anymore in the United States. That began in the early 2000s, when the United States opened up free trade with China. And the last penicillin plant shut down. The last vitamin C plant shut down. And that happened because China undercut other companies on price and kept prices low for a long time. These are illegal trade practices. And that’s how we lost our penicillin capability and the production of generic antibiotics. We’ve got to think about ways that we can bring our manufacturing back home. Not all of it, but some of it, to assure our national health security.
Mr. Jekielek: China is hardly benign under the Chinese Communist Party. I think this isn’t just a health issue, but a serious national security issue. What do you think?
Ms. Gibson: That’s right. And other countries are feeling this in the same situation. Last year, there was a Dutch public television documentary that highlighted the Netherlands’ dependence on China for critical medicines. What are our pharmaceuticals? They’re basically chemicals formulated to treat and cure disease. And the Dutch authorities and retired industry people have said that they are concerned now that China could withhold medicines. And that was pre-coronavirus. So, now here we are in this situation where we have a global pandemic. So it’s not just the United States that is concerned about this, but other countries are concerned as well.
Mr. Jekielek: I was reading recently that China is promising to ramp up its production of at least these precursor chemicals.
Ms. Gibson: I think the question is, is it a good thing to continue concentrating the world’s global supply of medicine in a single country. The world would not appreciate having 80 or 90% of its oil coming from a single country. …We have to diversify the manufacturing base. And there are small companies in the United States that want to do that—to fill that vacuum and to meet that need. And I hope there’s opportunity to do that not only here but around the world.
Now let’s take a look at the medicines that are needed to treat people who are hospitalized with coronavirus. These patients will need sedatives if they’re placed on a ventilator. They will need antibiotics if they get a secondary infection that’s bacterial in nature. They will need medicines if their blood pressure falls precipitously. And 90% of the core chemicals to make those medicines are sourced in China. All those roads lead to China in terms of global supply. And that can actually be dangerous for global public health. It was actually quite remarkable to me that in writing “China Rx,” it took three years to do the research for it, that no one had done this before, that no one had raised the visibility of how concentrated and centralized the supply of medicine is. These are products that are essential for life. And yet, it wasn’t talked about. It wasn’t talked about in this country, and it wasn’t talked about in countries around the world. “China Rx” really is the first endeavor and the first book to put this out there. …We need to act quickly to begin to rectify the situation. And that’s a silver lining of this global pandemic. Will it spur us? Will it motivate us to diversify our manufacturing capability, and bring some of that manufacturing back to the United States and to other countries?
Mr. Jekielek: You mentioned blood pressure medication being important. That reminded me of the opening story that you have in your book. I’m wondering if you could share that briefly for us, in your own words.
Ms. Gibson: The opening in “China Rx” is a story about contamination of a drug that killed hundreds of Americans about 12 years ago. This is a commonly used medicine in hospitals called heparin. It’s also used for people when they’re on kidney dialysis. And it was in short supply back then. And that’s because there was a disease that ravaged the pig population in China called blue ear disease. And it turns out the core material to make it comes from pigs. And China has the largest pig population in the world because the Chinese people love pork. And so when there weren’t enough pigs from which to derive this raw material, enterprising minds came up with a fake substitute. And it mimicked so closely the real product that when the time came to have it tested, this fake contaminant passed under the radar. And it turns out this fake contaminant was lethal in high quantities.
I found a family whose husband was a prominent physician trained at a very prominent medical school here in the United States. He had a thriving practice. He went into the emergency room one night of a bleeding stomach ulcer. [They asked him to stay in the hospital overnight] and for inexplicable reasons, he was given heparin. … And within 11 minutes of getting those doses, his heart began to fail, and his other organs began to fail. And a week later, he had to have his heart removed because it was so damaged. He died three months later, in a horrific death. And there are hundreds and hundreds of other Americans that faced that situation, as well did people in other countries.
So there’s a real price that we’re paying when we have these long supply chains. And it’s not possible to assure the same quality standards that we have in the United States and Europe and other countries. … We should all expect high-quality standards. But I’m increasingly concerned about the diminishment of those standards. What we’re seeing right now is that the Food and Drug Administration has suspended inspections in China because of coronavirus. They don’t want their employees to travel to China because it’s simply not safe. And what they do is they go in and they inspect these plants where our drugs are made. There’s a very specific process that has to be followed to assure that our medicines are made to the quality specifications that we expect. So the FDA won’t be doing that. So who’s checking on the quality of our medicines? This is amplified by recent independent testing that’s been going on with our generic drugs. Independent groups that have tested generics have found that more than 10% of them don’t pass muster. They don’t meet the standards for how the active ingredient dissolves in the body. …Trust in the medicines is eroding.
Most recently, there was a worldwide recall of a very common series of blood pressure medicines—Valsartan, Losartan. And that was because they contain carcinogens. And in some cases, these carcinogens were at lethal levels. There was a plant in China where the amount of this particular carcinogen, which is used to make rocket fuel, was more than 200 times the acceptable limit per pill. And this went out to millions of people, and they were taking it every day. And what’s really troubling is that the company knew it had a problem, but it kept sending products to the United States anyway.
This is what happens when we lose control over the supply of something as important as medicine. We lose control over the quality. We see during coronavirus that we’re losing control over price. Because in shortages prices spike, and then we lose control over our national sovereignty. As we think about it, when we lose control over medicines and somebody else’s controlling that supply, whoever controls that supply controls the world. … So we really have to rethink our global supply chains for practical reasons, to ensure that there’s an unfettered supply, but also for issues of our national health security.
Mr. Jekielek: I’m reminded of the CCP’s unrestricted warfare doctrine to employ all different kinds of non-military forms of engagement against another country. You’re saying just simply withholding medicines is probably the most powerful weapon.
Ms. Gibson: So there are two ways to do it. One is in a slightly more obvious way, and that is to contaminate medicines, or to put no medicine in them. And that’s very hard to trace. It is far more insidious. That was the case with the heparin blood thinner. It takes a long time before you find out that people are dying because of a drug that was contaminated. Or a drug that didn’t have the full component of medicine in it… So that’s one issue. And the other issue is simply withholding supply, which is a much more obvious shot across the bow, which really would be a very aggressive and unwise action because that would truly damage the reputation of a country worldwide. It will be viewed as a country that can’t be trusted if they withhold medicines. So there are lots of ways that our medicines can be used to coerce certain behaviors, and force governments to do things that they otherwise would not do.
Mr. Jekielek: It just seems like such a no-brainer that we should have some production here in America. And frankly, every country should have some production of very critical medicines, at least within its borders, or from countries that have rule of law. So why would Big Pharma be so interested in keeping these supply chains?
Ms. Gibson: I think it’d be good first to understand who these special interests are, and have them come forward and describe why they are opposed to Buy American. We’re spending $6 billion a year on generic drugs that are made in China. Why don’t we keep that money here so we can grow our own industry and have real-time quality control? But it is hard to understand why any special interest would want to oppose having medicines made here…. it really is quite puzzling. … You know, the special interests here in Washington are effectively telling the American people that we want you to be more dependent on this entity that’s threatened to kill you. How do you justify that?
Mr. Jekielek: Pharmaceutical companies seem to be very unwilling to explain where their products are made. That’s something you’ve documented extensively.
Ms. Gibson: That’s right. There was country of origin labeling legislation that was proposed about 12 years ago in Congress. And it was killed immediately. And I asked someone in the industry who worked for about 30 years why that legislation was thrown out. And the response was, that businesses probably thought it wouldn’t be good if their customers knew where their product was made. If you think about it, this was back around 2007 in 2008, when the heparin contamination took place. …Back then, the head of the Chinese FDA was executed for taking bribes. It was also a time when thousands of dogs and cats here in this country died because of pet food that was contaminated with an industrial chemical called melamine. Then there was the infant formula. So it’s not just Americans that saw this, but also people in China suffered under this. It surprised me while writing “China Rx” that during that period, those events did not stop the industry from outsourcing product to a country that surely didn’t have the same standards because it was still new in its growth and development. It’s made a lot of progress since then, was really quite remarkable that the industry allowed that to happen. And back then the FDA was not inspecting plants. So we went from a first world standard to really an unregulated standard.
About 10% of the generic drugs in the United States now are made in China, and many of them are made by domestic companies. And these include things like medicines for Alzheimer’s and Parkinson’s and epilepsy, diabetes, HIV AIDS, birth control pills. Meanwhile, we’re seeing our own domestic industry collapse. You know, Western companies are just falling apart. These are the Western generic drug makers, which are different from the innovator companies who we tend to call Big Pharma. If we had the list of generic companies, most people would have never heard of those names. But they are dropping like flies because they can’t compete with Chinese companies. They’re competing with the Chinese government, which subsidizes their companies so they can achieve as a country the global aim to become the pharmacy to the world. So … we have a strategic decision to make. Do we want to continue on the same path of being dependent on a single country with all the risks that that entails? Or do we want to have a capability for a diversified supply chain and bring some of that manufacturing back home?
Mr. Jekielek: We know that it’s roughly 90% of the precursors that are coming from China, but do you have an estimate for the actual number of medicines which are being produced there?
Ms. Gibson: We just don’t have data on the volumes of medicines and the information on the precursors, [which are] chemical molecules that come from people who make products. Chemists and the pharmaceutical engineers… have it in their book. They have to go buy these products to make medicines. So they know, but we don’t have data on the volume and actually how much is produced.
Mr. Jekielek: Are there efforts now to identify where the medicines are created?
Ms. Gibson: There isn’t much happening on that score. There have been some bills that mentioned country of origin, but I think that’s going to be a very challenging piece of legislation to get enacted. I’d rather see us start moving more quickly with a plan to reassure production of those most critical products.
We are talking about coronavirus now, which is an infection caused by a virus. What about bacterial infections? You know, there’s biowarfare and if we don’t have antibiotics to treat bacterial infections, we’re in deep trouble. Now, after the anthrax attacks in Washington in New York in 2001, the federal government had to buy about 20 million doses of an antibiotic to treat anthrax exposure. It’s called doxycycline and it is used for a lot of other things like Lyme disease. And we didn’t make it here. And we still don’t make it here. And so the federal government had to go to a European company. And I interviewed the CEO of that firm and he said he had to get the starting material from a plant in China.
When we’re in the midst of a pandemic, we won’t have time to source it from other countries. And the consequences could be very, very devastating. So we have to fix it. We have to fix it now. The free market will not fix this. People will say “let the private sector do this, let the free market fix this.” Well, what is the free market?… Let’s say you and I start a manufacturing plant. And we want to sell products. But we’re undercut by Chinese companies that are subsidized by their government. There’s no way that we can win that. So the United States government and Congress has to understand this and decide whether or not we want to support the capability to make medicines here at home. It’s going to take more than just incentives. Our infrastructure is demolished for generic drug manufacturing. There’s a very large plant not far from Washington DC that used to employ about 2,500 people and it’s slated for closure. They were making generic products. Are we as a country going to let that go? This is happening right now in the midst of a pandemic.
So we have some very important strategic decisions to make as a country. …If you ask people on the street, no matter where they are on the political spectrum, they understand the importance of having the capability to make medicines. And people still remember when their dogs and cats died because of contaminated pet food. So there’s a mistrust out there.
We’re seeing mistrust of generic drugs now even among physicians. I had the pleasure of doing grand rounds at a hospital. And I met a physician during that visit. He showed me a cabinet in his office, and it had those amber-colored plastic bottles with white caps on them that are hard to open. I said, “where’d you get those?” [He had asked patients for them because] he had some concern about whether those medicines were actually working as they should. He saw that some patients didn’t seem to get better. And these are people who are pretty sick. And these medicines can make the difference between life or death. He said, “I want to have those tested.” So we’re now in a situation where physicians are doubting the quality of the medicines they’re giving to patients. And once you lose that trust, it is very hard to regain it. I’ve been calling for public reporting of the quality of medicine, to have test results put out there in a Consumer Reports-type model—independent testing—and that will automatically turn the market around.
But we still have to invest in US and other western companies’ capability for manufacturing again, because there they will not be subsidized by [the CCP]. We subsidize things like agriculture to make sure we have enough food. We subsidize roads and highways and bridges. We subsidize a military; we wouldn’t have our aircraft carriers or nuclear submarines made in China. We realize that there are some things that are so sacred, that are essential to the functioning of a society, that we make them here. That’s smart, and we need to start thinking of our medicines as a strategic asset and not outsource them thousands of thousands of miles away in a country that is threatening the United States to cut off supply. Imagine if China issued a threat to cut off food supply, say if they controlled the supply of wheat or corn to the United States. There’d be an immediate reaction in Congress not to allow that, along with efforts to encourage farmers here to grow wheat. But here we have a situation with medicine…
Mr. Jekielek: Did you say that there are medicine manufacturing plants in the US right now that have been functioning but are threatened with closure? Did I catch that right?
Ms. Gibson: Yes. And there are plants that have already closed that have equipment in them. So why don’t we take advantage of that infrastructure? We don’t have to rebuild all of it. They might have to be retooled and upgraded, but let’s take advantage of that manufacturing capability. What we need is buyers, like the Department of Defense and the VA—they have 20 million people that they have to take care of. Why don’t we make those medicines here in those plants that have been abandoned, or are going to be shutting down. That would be good for communities, good for jobs, and good for our national security. And my goodness, it’s really quite remarkable that there are some companies that won’t even tell the Department of Defense where they source their product from.
One of the recommendations I gave when I testified to the US-China Economic and Security Review Commission is that companies should be required to tell the Department of Defense the source of the drugs they sell to the DOD and the components to make. That’s just common sense. Recently the USS Theodore Roosevelt that was on patrol in the South China Sea…24 members of the crew were diagnosed with coronavirus. And so they went into port to have everybody tested. Just think of those young men and women. They’re dependent on the adversary for the antidotes for coronavirus.
I’m really delighted that the “China Rx” book was the first to put this out there for policymakers in the [government] and in the private sector. The first recommendation in the book is to have the federal government know who controls the supply of our medicine. One of the most shocking findings in writing the book was that it’s no one’s job in the federal government to know who controls our drug supply. And that’s changed now. Now, federal agencies and others are looking to see where they are vulnerable…
And the next step is [to see who can] make masks and ventilators. We’re beginning to see a similar thing underway with regard to our prescription drugs. But again, the challenge is, where do the core chemicals come from? For many of our medicines, they are sourced primarily in China. You saw that India withheld exports of critical drugs. And that’s because India is the largest generic drug maker in the world. But it depends on China for about 70% of the core chemicals that sustains its industry. So if you don’t have those chemicals then you can’t take care of your own population. And so why would you want to export medicines that you might need? The good news is in India, they have very few cases. They’re on a 21-day lockdown, but they have very few cases of coronavirus. So there isn’t a huge spike in demand for these critical drugs. But it goes to show again all roads overtly to China.
… How are we going to invigorate [domestic] plants? …We’re going to need some reinvestment in these manufacturing facilities. We have brilliant minds and tremendous ingenuity in this country. And there are people who can make our generic drugs faster, cheaper, with real-time quality control. And in a smaller environmental footprint. …People say, well, it will cost more to make in the United States. That’s not true.
Once the investment is made in new infrastructure and new equipment, we can actually make generic drugs at least 20% cheaper. But, those manufacturers will need guaranteed contracts because if you put that product on the open market, China will come in and undercut it and investors will have no incentive to invest. So we need long term contracts with the Department of Defense, Health and Human Services, for the Strategic National Stockpile, for veterans. That’s how we can start as a country to rebuild our industrial base. That would be a great boon for our economy, and plus, it will keep taxpayers money here in this country. But we have to get policymakers to take that next step. It’s good to see that there’s a lot of awareness now about dependence on a single country on China. But are we going to act? Will we turn those words and intent, good intentions, and to actually making those investments that matter?
Mr. Jekielek: It’s quite the claim to say that we could actually produce a lot of these things 20% cheaper in America. How did you arrive at that number?
Ms. Gibson: The technology that we’re using now to manufacture medicines is 100 years old. We are making drugs now the way we did 100 years ago. There’s been more innovation in the manufacture of potato chips than in the manufacture of our medicines. And that’s because branded companies just don’t have the incentive to invest. They’ve made a few drugs using advanced manufacturing technology. But on the generic side, the margins are so slim that generics companies are barely hanging on. They’re not going to make that investment again if China comes in and undercuts them.
…There could be a renaissance in advanced manufacturing in the sector, but the private sector is not going to do it. So we have a choice either to give up, or invest in some public-private partnerships and make it here in the US. We have a precedent for this. There was a time when right before flu season, the US government got word that about 50 million doses of flu vaccine were not going to be available. … And so Congress acted and established a public-private partnership with industry to make flu vaccines. So there is precedent in the United States, for the manufacturing of medicinal products. And somehow there’s a hesitancy to do this for our generic drugs. We’ve got to get over that because this is, we’re hitting a critical inflection point and the coronavirus pandemic is certainly a giant wake-up call.
Mr. Jekielek: We’re seeing considerable industrial mobilization, most of it voluntary, a little bit through the War Powers Act being enacted. There seems to be no reason why it couldn’t go in the direction of creating medicines.
Ms. Gibson: It was very surprising to me that in the $8.3 billion coronavirus spending package, that there was money for manufacturing ventilators, respirators, masks, and gloves. But there wasn’t any money for the manufacturer of medicines that, even before coronavirus, were in shortage. Even in the big spending bill, the $2 trillion, there was no money for the manufacture of medicine. Somehow it’s been off-limits to think about this in a public interest perspective rather than a private interest perspective. We’ve got to break through that.
Mr. Jekielek: In your book, you mentioned that there were 200 to 300 medicines in short supply well before coronavirus. How does that happen? Some of them are critical medicines, right?
Ms. Gibson: For the past 20 years in the United States, we’ve had shortages of critical drugs. Some of these are antibiotics, medicines for surgery. And if you think about it, we have shortages of nothing in this country except vital medicines. Why is that? Because in a normal market if there was a shortage of pizza because we couldn’t get the tomatoes, well, entrepreneurs would go out there and contract tomato growers. Of course, we can fix it. But for some reason, there’s been an extreme reluctance. There’s something wrong in that shadowy system that has allowed these shortages to persist.
There has been an innovation with a nonprofit group called Civica RX, which is composed of 1,300 hospitals that are buying medicines differently because they’ve been so concerned about shortages. So they all chipped in money, and they’re doing exactly what someone making pizza [but] couldn’t get tomatoes would do. They’re going out to find reputable companies in trustworthy countries to make medicines and they’re buying as much of the active ingredient they can that’s not made in China. And their secret sauce is to give manufacturers long-term contracts, pay them a fair price, and full transparency on country of origin, and they test them and they give them a certificate.
This is about restoring market forces to the making of essential products. Within the first year of operation to show that this is indeed fixable, they delivered their first very important antibiotic. … In the first year, they started making about 20 drugs and they eventually want to have their own manufacturing plant here in the United States. That’s how we have to think differently to use our purchasing dollars to buy a quality product. And the private sector is leading that. But we have to get our government, our taxpayer dollars, directed in the same way to buy differently.
Mr. Jekielek: We’re hearing all sorts of reports from around the country of small manufacturers stepping up to retool. It seems like we do have a great model to study and emulate.
Ms. Gibson: We have the companies showing up to make respirators and masks because the federal government put money out for it. … Let’s have a public debate on this. Let’s have those who oppose making medicines in the United States for our military come out publicly and say it, and tell us the rationale, and do it on national television. Tell the American people why that’s beneficial. Instead of hiding behind the shadows of special interest lobbying, let’s have a public debate about it. Maybe The Epoch Times could support that.
Mr. Jekielek: Looking at this draft letter that opposes Buy American on the pharma side, the argument, curiously, is precisely that it will disrupt the supply chains.
Ms. Gibson: Well, our medicine supply chain is already in a shambles because of poor quality and persistent shortages. So there’s a lot of improvement that needs to be made. But what was really striking is that two days after that letter, the Chinese leader came out to the virtual G 20 meeting, and made a similar talking point. So both the talking points of the special interests in Washington seem to be so aligned with the talking points of the head of China. … You know, if the United States does it (increases production of medicines), that’s considered nationalism. But if China does that, it’s okay. And of course, there is no concern among special interests that this will persist this monopoly and grow the monopoly that China has on the global supply. This is putting the world at risk. Without doubt.
Mr. Jekielek: Looking at the way that the Chinese Communist Party has handled the coronavirus outbreak, what should we expect in terms of medicine production?
Ms. Gibson: It’s all about trust, isn’t it? Trust is essential for the world to function. … It’s not the first time China has threatened us with drug shortages. They’ve threatened the United States with drug shortages before. But this threat was very visible. The other threat was a very quiet threat. And I learned about it when I was writing “China Rx.” This is a threat to kill Americans by withholding medicines. You can’t get more brazen than that. And if that’s not a wake-up call, I don’t know what is.
Mr. Jekielek: Rosemary, that’s a powerful place to finish up, but before we do, any final thoughts?
Ms. Gibson: I just think we have an opportunity together to do so much good for the world. You know, the coronavirus has caused a lot of angst and fear. How can we work together to come out of it? And for the next thing that happens, we can be so much better prepared. … These events are like hurricanes in that they’re predictable. We plan for hurricanes, we prepare for them. But we don’t do that for situations like this. And if nothing else, we’re in a moment in time where we have a chance to learn from this.
Mr. Jekielek: Rosemary Gibson, such a pleasure to have you on.
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