WASHINGTON, D.C. – Over 250 medications are currently in short supply, covering everything from asthma and blood clots to treatments for multiple kinds of cancers. At the same time, America is too dependent on foreign countries for ingredients and medical supplies, warned witnesses at a Tuesday Ways and Means Committee hearing on the drug shortage crisis. 

Over 80 percent of the active pharmaceutical ingredients used in essential medications taken by Americans are made in a foreign country. China and India, in particular, are major producers of medicine used by Americans. The two nations produce the active pharmaceutical ingredients used in 60 to 70 percent of generic drugs in the United States. Witnesses urged Congress to examine policies that make our medical supply chain less reliant on foreign countries.

Well-intentioned Medicare reimbursement structures meant to lower health care costs for taxpayers and patients may be incentivizing providers to seek low-cost drugs without regards for quality, further contributing to the shortage of generic drugs. To ensure more Americans can access medicine, witnesses shared innovative models that keep drugs supplied during a shortage and secure domestic production of more affordable generic drugs. 

“We Don’t Rely on Other Countries to Make the Bullets”: America’s Dangerous Dependence on Foreign Countries for Medicine

Many Americans cannot live without access to a certain medication, which may be made abroad or made with key ingredients procured from abroad. Ways and Means Committee Chairman Jason Smith (MO-08) highlighted how our nation’s reliance on foreign nations for drugs could have serious consequences for patients should a hostile power choose to stop exporting drugs or drug ingredients to the United States.

Chairman Smith: “Most of the active pharmaceutical ingredients that make up our essential medicines are sourced from outside our country. And China is a leading source of pharmaceutical product imports. Dr. Schondelmeyer, can you speak to what dangers we face by being reliant on foreign sources for our medical supply chain and how can we better onshore more production, or at least be less reliant on hostile countries like China?”

Dr. Stephen Schondelmeyer, pharmaceutical economics professor: “And so if India, and/or China, and/or a country that makes a lot of the generics that we need, puts bans or trade embargoes on exporting drugs, we’re going to be without the drug…We could have patients, cancer patients, or pediatric patients, or other patients without the drugs they need, because a country simply blocks us from having access to those drugs. We don’t rely on other countries to make the bullets when we fight wars, especially our sworn enemies. We want to make sure that the drugs we need to keep our public and our military healthy are coming from sources that we have control of.”

Drug Shortages Hit Small, Rural Hospitals the Hardest

Medical providers can either build stockpiles of critical drugs in anticipation of a shortage or spend exorbitant amounts to obtain these drugs once the shortage starts. Small, rural hospitals and doctors are the ones least able to build or buy adequate inventories because of a lack of resources. In response to Rep. Adrian Smith (NE-03), a Tennessee oncologist shared how the high capital needed for cancer drugs stops some rural doctors from providing life-saving chemotherapy.

Rep. Adrian Smith: “I represent over 50 critical access hospitals, over 100 rural health clinics…Some of those facilities are in remote locations and obviously not large enough to develop an inventory to prevent a shortage…I know that this is oftentimes exacerbated with workforce issues, inflation, and some government-centered over regulation, as well…Dr. Schleicher, can you describe perhaps the capital investment that is needed to keep the steady supply of drugs available for patients in your practice, such as an oncology practice? And perhaps how smaller, more rural providers might have more difficulty with this?”

Dr. Stephen Schleicher, Tennessee oncologist: “…The capital requirements to stock, say immunotherapies, are very high, because you purchase the drug first…I was visiting a practice of a single physician in rural Kentucky a few months ago. He’s actually stopped even doing traditional buy-and-bill to have the drugs because he was so scared about buying a drug, patient coming and not being able to get it, and then he’s on the hook for the price of that drug. The smaller the practice is, which [it] often is in rural America, it becomes very difficult to afford to have the inventory for all the different categories of patients you’re going to see. The high price of lots of inventory…is very challenging to a practice.”

How China Undercuts American Drug Manufacturers

Chinese companies, with support from their government, have a long history of engaging in unfair trade practices. Drug manufacturing is no exception. Rep. Darin LaHood (IL-16)asked a pharmaceutical expert to expose what unfair practices Chinese companies use to dominate medical markets. 

Rep. LaHood: “I’m proud of the work that we’ve done with this Congress to identify instances of malign activities and practices by foreign countries like China that leave the U.S. more vulnerable. But, we need to do more and do it quickly…Can you provide an example of unfair trade practices that foreign countries, particularly China, use to undercut American drug manufacturing?”

Dr. Stephen Schondelmeyer, pharmaceutical economics professor: “China over time has developed policies as a government, about sectors of the pharmaceutical market that they want to enter and, in fact, dominate. They subsidize the companies that are involved. They develop the infrastructure hubs or they have whole areas larger than the D.C. area that are manufacturing products. They subsidize them. Then they at times engage in predatory pricing or even dumping a product in the market to drive other players out of the market.”

Low-Quality Foreign Drugs Are a Life and Death Issue

Americans have paid a high price for low-quality drugs imported from countries with lower drug safety standards than those in the United States. Rep. Brad Wenstrup (OH-02), Co-Chair of the Doctors’ Caucus, highlighted some of the instances where Americans have been harmed by those drugs and warned America’s reliance on foreign countries for drugs gives adversarial nations an opening to harm Americans. 

Rep. Wenstrup: “Dr. Schondelmeyer, can you describe the degree to which our supply chain for drugs is dependent on foreign sources, both quantity and quality? I’d like to remind people, it wasn’t maybe 15 years ago we had 250 Americans die from tainted heparin. The opportunity for sabotage is there. There are all types of things we need to be concerned about as we go as we go forward.”

Dr. Stephen Schondelmeyer, pharmaceutical economics professor: “…Quality is an important issue. As you point out, the heparin; more recently, we’ve had eye drops come out of India that were contaminated and caused people to lose their eyes or even die because of that. We’ve had baby formula contaminated with bacteria that caused some deaths of babies using baby formula.”

Tennessee Oncologist: Drug Shortage Forced My Practice To Divide Drugs Among Cancer Patients 

Currently, America has a shortage of treatments for multiple kinds of cancer. Rep. Brian Fitzpatrick (PA-01) asked Dr. Schleicher to describe the tough choices he and his colleagues were forced to make when faced with a shortage of critical chemotherapy drugs.

Rep. Fitzpatrick: “Mr. Schleicher, in your testimony you noted that there was an interval of over 10 days during which you did not receive any shipments of two generic injectable chemotherapies. In your experience as a chief medical officer, can you speak about how this changed the decision-making process for oncologists treating patients and what other options were available to patients during that 10-day period?”

Dr. Schleicher: “It was terrible…We actually had to sit and make the decision: are we going to prioritize palliative, which means not curable, yet still very important to extend quality of life and extend life for patients with families? Are we going to do it where there might be a substitution, even if there is not randomized data to show it’s adequate? Are we going to pick small diseases where at least we can do one group of patients, then divide up patients with curative breast cancer? Half get it, half don’t.”

Federal Regulations Contribute to Drug Shortages

Market dynamics have helped lower the cost of generic drugs that millions of Americans use every day. However, low margins on these drugs mean manufacturers are frequently unable to recover the costs of producing those drugs, leading to a shortage created by a shut down in production.  As Rep. Blake Moore (UT-01) pointed out, Medicare reimbursement rules have the same effect on domestic drug manufacturers. 

Rep. Moore: “I’d like to ask about incentives in the federal health programs and how they affect the generic market. Do you think that certain Medicare reimbursement mechanisms encourage a sort of a ‘race to the bottom’ pricing of generic drugs and contribute to shortages? Are there any current policies that are particularly to blame?”

Allan Coukell, non-profit generic drug company vice president: “I think the market dynamics we’ve been talking about today exist… but they drive a situation where we’ve got very low margins on some of these very low-cost drugs. Anything else that adds further erosion to those margins, makes it that much harder for companies to keep producing these products. I think that goes to some of the programs you’re talking about.”