now a look at the risks of depending on china, to supply the essential ingredients from many of the u.s.'s most widely used medicines. ... >> herbert explores the topic of a dramatic shift where medicines come from. as china looks to position itself as the pharmacy of the world. i think many of us in the medical and health professions have been unaware of the shift. we may notice at times that there are shortages. that there is contamination issues, other problems. but i think we've not been aware that there is a

systematic issue of a major change in the system from manufacturing and delivering pharmaceuticals. the implications of one country with a supply medicines are astounding. no matter what country we may be talking about. think about it. what if there is a global endemic and it is hard to move product across the world? because of that? what if there are heightened tensions within the south china sea? everyone to be vulnerable, everyone could be put at risk. the role of the fda and the situation cannot be overstated because the fda cannot be -- many others are not aware the face-to-face contact that the fda has with those who are manufacturing our drugs. the inspections that they conduct, the very hands-on work involved in making sure that

the manufacturers drugs are safe in the set offices all over the world to do that. it is not the same as having offices or having manufacturers in your own country. and, like the us losing manufacturing capacity, which is continuing to happen, the situation could become even more severe. today, we will discuss the critical issues as well as some possible solutions. and i look forward to very robust discussion. but first, let me introduce you to rosemary gibson. rosemary gibson is a senior advisor at the hastings center and principal author of china rx. exposing the rest of america's dependence on china for medicine. she is the recipient of the highest honor from the american medical writers association in 2014 given a public voice in the interest of critical health

issues today. at the george washington university she gave the 2015 lecture that they have annually at the school of public health. at the foundation she was chief architect of the $250 million decade-long national strategy to establish inpatient care programs that now number 1600 patient related lifetime achievement award from the american academy of hospice and worked with bill moyers on a documentary. recipient of a patient safety award from the south carolina hospital association. rosemary is also principal author of medicare meltdown in 2013, battle over healthcare, and others. she has been in "washington post", reference and proceedings of the u.s. senate

and congressional testimony, noted in the wall street journal, new york times, usa today consumer reports and other news outlets on numerous accounts. rosemary is chair of the board of a nonprofit health resource organization headquartered in ann arbor michigan. she graduated from georgetown university and has a masters degree from the london school of economics. please join me in welcoming rosemary gibson. [applause] >> should i take over for now? >> is the microphone working well back there? wonderful, thank you, gentlemen. and ladies. [laughter] good afternoon everyone. doctor goldman, i would like to thank you for making this event possible. it is a very timely and fitting that we are here at the school of public health. a very permanent school of public health in the nations capital. to discuss the public health implications as well as the

national security risks associated with our dependence and growing dependence on a single country for our medicine. it is timely for another reason. the president is said to give a major speech in the coming days and weeks about drug prices. we know many americans are suffering under the burden of the high cost medicines. but we have to be mindful of unintended consequences. companies might feel pressure to reduce their prices and reduce their cost which could potentially drive more manufacturing to china. we'll have to keep a close eye there is one lesson that we draw from today, it is the intersection of our medicines and trade.trade policy. and who would ever thought of that? i'm looking at -- who wrote a very deep article.

i wrote china rx with the purpose of informing the public about this very big shift in where medicines are coming from. for many of us growing up, our medicines were made in the united states, europe, maybe japan. another has been a dramatic shift eastward. i wrote this for my mother. so my mother could read it. but also for policy wonks and academics. will all of this information. we want the trust and will be taken to medicines that can mean the difference between life and death. we need to know where do our medicines come from? why we are dependent increasingly on a single country? what are the risks? and what can we do about it? i was going to bring my smart phone and my medicine bottle but just make believe that i have it here. one of the questions that i get asked most is how come i did not know about this? how come i did not know that

there is growing dependence in the united states on china for so many of our medicines? if you take a look at your smart phone, and you look on the back, at least mine says, designed in california and assembled in china. if you have ever gotten those amber colored plastic bottles with a white, you have all seen those. it says you have to take your medicine, what the dose is. but it does not tell you where it comes from. so there is no reason that we should know. let me tell you about what this dramatic shift in where medicines come from looks like. the first is that we do that is never been done before in china is that we name the medicine that are being made in china by chinese companies and sold here in the united states. they include antibiotics and antidepressants. birth control pills, a lot of young women are really interested to know that. medicines for alzheimer's.

parkinson's. epilepsy. high blood pressure, hiv/aids and much more. right now, china is just beginning to get into the manufacturing of generic drugs. but it has a plan as doctor goldman said, to become the pharmacy to the world. and i predict that within one decade, maybe less or maybe more, china could overtake india as a dominant generic drug manufacturer. for right now, china's biggest footprint in the united states is making the active ingredients in so many of our medicines. they are part of our medicines that give us the therapeutic value. and they make thousands of active ingredients for many of our medicines that we find in our home medicine chest and in hospitals all over the country. many people that we spoke to both former government

officials and some industries said that if china shut the door on exports, within months, pharmacy shelves in the united states to be empty. and hospitals would cease to function. so, how did we get here? and what about other countries? what are the most interesting facts that i learned, even india, which is a dominant generic drug manufacturer, even india is dependent on china. for the active ingredients and raw materials. in many of the medicines that it makes. not only for its own people, but also for export. it is a fascinating article in the economic times which is an indian newspaper. and it started out with a story of a soldier. who is on the border between india and china. they share a long border and there are lots of tensions that part of the world.

and so it said something to the effect it imagine an indian soldier on the border. he opens up his medical pack and he sees medicine that he is running out. that soldier is dependent upon the people on the other side of that border, for the components to make the essential medicines. that is a fascinating situation. the article went on to say this is the national security issue. i have yet to see an article in united states posing the question and talking about that here. and i applaud the indian media for being transparent about it. and if there's any interruption in supply that would not only affect the health of their population, their military, but it will also affect a very important of their economy because as you know, they make and export many generic drugs. so where are we? what is the biggest risk? as doctor goldman says, the

biggest risk is only have the centralization or the concentration of so much of our medicine that within a single country no matter what country that is. if there is a fukushima type event, and companies are shut down for months and months and months, if there is a global health pandemic and countries have to line up for medicine. that is, could be a global catastrophe. for tensions in the china sea. where does that leave us? that is the challenge of concentrating any important product that we need for life in a single country. so how did we get here? how did this happen? i will start with a story of the prescription i got two months ago today. it was an antibiotic, it was amoxicillin. a former penicillin. a great drug, it worked really well. i was back to my old self in about two weeks.

penicillin tells the story of what happens. in the making of that particular product. some of you might remember that during world war ii, when right before the normandy invasion on d-day, the federal government and industry including companies like pfizer, make sure there's enough penicillin manufacturing in the country to help all of the wounded soldiers that would walk away from that event. by having a penicillin availability, it saved hundreds of thousands of lives. where government and industry work together to ensure that we have an adequate supply of the miracle drug. let's fast-forward a couple of decades. in 2004, the new york times reported the last penicillin manufacturing plant in the

united states was about to shut down. that was the bristol-myers squibb and syracuse, new york but "the new york times" doesn't tell the back story? what was really going on the global market? that triggered that? thanks to some european producers, that are very public spirited and have information on the internet about what happened during that period, we can learn a little bit about what was going on in the global market. in 1980, china, very wisely, invested heavily in penicillin fermentation capacity. on a massive scale. 20 years later, they began to see chinese companies come in on the global market and they dumped penicillin out at below market prices.

they pushed everyone else because they cannot compete. european producers call this a decimation of the industry, a landslide. then there was a spectacular price increase that was invisible to us. in china rx, recall that the penicillin cartel. it is not the only cartel happening. you really china rx you can read about the vitamin cartel. i'm sure that many of you take vitamin c. you might take tablets. it does not come from oranges in florida from a sunny florida growth. it is made in a chemical plant with ascorbic acid, probably from china. there is a fascinating story about that vitamin c cartel. and that still continues to this day. the same playbook. american, european and japanese producers of ascorbic acid.

the active ingredient in vitamin c. a couple of companies dented on the world market. they drove our competitors and when they were gone, they raise the price again, spectacularly. a clear violation of antitrust. we can have a whole session sam vitamin c cartel because the story continues. lawyers also argue over it. it has enormous implications for a lot of our medicines and other products that china. we have these penicillin in vitamin c cartels. what does this tell us? it tells us that we are losing control over the supply of our medicine. we, as a country, are losing control. others are dictating the price and they are dictating the supply. we have to ask ourselves, is this a situation that we want to be in?

what was driving this? what were undercurrents? we identified two of them. the first is the generic drug law. which is 1984, for those of you that remember this. it made generic drugs available for the american public in a wonderful, wonderful step forward. he made them affordable for millions and millions of people. but that meant that companies had to sell products more cheaply and were looking for ways to make them more cheaply. and so they went east to asia. at the time, the fda was not equipped to oversee and regulate a global industry. what else was happening? in our research, i have a very boring life. we find all kinds of things on the internet late at night. one of the most interesting things that i found was a memo written by a very dedicated fda

employee. a chemist. he asked the question, we have no idea where all of these bulk drugs active ingredients are coming from. and they could get to the president. we had a period of time in united states where was the wild west. we do not know some of the products were coming from. let's fast-forward to the year 2000. there was another major event that triggered us dependence on china. that is when right here in washington, congress and the white house agreed to grant china access to the us market. and also, china joined the wto. it was fascinating to see just within a very short period of time after that, that the penicillin cartel was formed. the vitamin c cartel was up and

running. the united states last closed the manufacturing plant for asking for the same product. dumped product on the us market. local producers cannot compete. went out of business. and something very important also happened in 2004. major healthcare company in united states, they switched suppliers of a very important ingredient for products that they make. that product is called heparin, a blood thinner. and it is widely used. if you been to a hospital you're probably had it. a couple of years after they switched suppliers, from the us to china-based supplier, it turns out it was a contaminated ingredient that was found in

the product. it came from china, it was deliberate contamination for economically motivated reasons. there it 250 deaths in the united states associated with that contaminated heparin. and that triggered extraordinary reform, good progress to try to fix what we basically have one we have a deregulated environment in other countries where we were getting our medicines. but still, far from perfect. there are a couple of lessons here. the first, this globalization has effectively been a form of deregulation. we do not need any laws. to change the structure. just move production overseas. that is effectively deregulation. think about this. united states is have the gold standard. good people at the fda and

industry developed to ensure that we have high quality medicine. every pill, every time. we were effectively outsourcing the manufacturing of our medicine to countries that have few, if any standards. it is really remarkable. back in this. in 2007, some of you might remember news reports with that of the chinese or the equivalent of the fda and child were-- in china were taking bribes. they said we are in the very early stage of being able to manufacture high quality medicine. the market did not stop moving to a place where technology had very few standards we really remarkable transition. the other thing fascinating and again to your point about the lack of transparency, it turns out we have a trade deficit for

china and pharmaceuticals. at least of the 2014. and i've never seen a public official united states acknowledged we have a trade deficit and pharmaceuticals. maybe it is there and i would love to see it. if you caught a glimpse of it, please send it to me. but what i did find this data point was in a speech that doctor margaret hamburg given china to an audience of chinese were probably very happy to share that there is a trade deficit in the united states and china and pharmaceuticals. we have a lack of transparency. how dependent are we on china, really? i will give you a couple of fascinating examples. in 2015, the fda had a plant in china, it was getting a lot of customer complaints. presumably industry complaints about the active ingredients

there were getting from the plants. there is bacterial contamination in some of the products, they did not have full therapeutic value. if it is in sabbatical chemotherapy could be devastating. the fda went in and withdrawn with a cough manipulation for this is a plan half muster by the fda, chinese fda and other inspections over many years. and so the fda banned 29 different products from coming into the united states. but because the united states is so dependent, the fda has exempt 14 was product from the armband. some of those included antibiotics or ingredients for antibiotics and ingredients for chemotherapy. because the fda was concerned about drug shortages in the united states. that is how dependent we are as a country. there was a fascinating story about the availability of --

into the fx attack. many may have remembered in washington and new york so the us military need to purchase a lot of it. they went to a very reputable company in europe. this was reported in bloomberg and of course in writing the book i spoke to the ceo of the company parties and yes, he had to get material from china. about this. the us military needed doxycycline after the anthrax attacks and it was obtained from china. someone from the industry said, sort of china is the anthrax attacker? our medicines can be used as a strategic weapon. then there are other examples. when india said that in the newspaper they said maybe i'll military is dependent on the adversary for medicines.i thought about what about us in the united states? where's that? i called up the defense

department and communicated with the defense logistics agency which purchases medicine on behalf of the military family members, retirees and the acknowledged beginning of 2012 that it had to begin purchasing a limited number of drug products from china. apparently because it wasn't any other source. and what about our veterans? veterans hospitals now, the federal government has made it easier for the va to purchase drugs made in china simply because that is where the commercial market was going. what about the risks? what are the hidden costs of cheap drugs? we don't see them. but in china rx, we identify with some of these are. what about consumer protections? and product liability?

i called up the lawyer. an american lawyer that works in china and advised the western companies. he said you have to understand this, the attitude is, one of the reasons the product is so cheap is because we assume no liability for it. it is buyer beware. so let's take an example. say that you take a medicine that is made in china. by a chinese company. and it is in the united states by distributor. chances are the distributor has no financial assets or very limited assets. effectively, there is no legal recourse. one of the hidden prices of cheap drugs is the lack of consumer protection. what happens when the fda opens plants in china, what did i find? there was a plant making

epilepsy products. and the plant lacked any temperature and humidity control systems to save money. and so in the fda inspectors when in the employees opened the window, it was under temperature controlled environment. it is a way that you save money. another hidden cost of cheap drugs. seven years after the heparin tragedy, the fda went into a plant in china that makes heparin. or sedatives. what it found was that the company that was making it was not the actual manufacturer. the real manufacturer was another company that apparently, the fda headband because of prior possible complexities and heparin tragedy years before. the show factory and the shadow factory. one of the most stunning things

that we found while doing the research is that even american companies who have plants in china, do not meet the standards that we would all come to expect. a major us company, the fda went into the plant in china. inside of the plant, because it had no handwashing facilities, no place to wash her hands, and the chore that was an open pit in the floor. this is what happens when the outsourced production from a country with the highest standards in the world to a place that is still on a growth trajectory. that said, we have to be clear that there are some plants in china that are close to and or meet western standards. but there is variability. it will take a long time for those if you have ever worked in quality control and quality

improvements, it takes a long time to build a culture of quality and meeting standards and safety and to sustain it. those are some of the risks that we face. i will close with what do we do? where do we begin claimant one of the first recommendations is that we need to have a change in our mindset about medicine. right now, it was like a commodity no different than a t-shirt. how can we buy them at the cheapest possible price even if is a future sense different on a 50 pound drama product. instead, we need to view or medicine as a strategic asset, just like we view oil, energy supplies and basic food commodities like wheat and corn. let's treat them like a strategic asset. the second thing we need to do is set up a tracking and forecasting system. so that we know where our medicines come from, global

supplies, global demand and forecast production and know where the hotspots are. we do this for energy. we can go on the department of energy website and track this. so we do not run out. and the same is true for food. we do not want to run out of food. a strategic asset is something that a country will fall apart if we do not have it. we need to consider our medicines as strategic assets. they are made by private companies. but they serve a very important public purpose. and so we have to work more together to ensure that we have our medicines. control over the supply. of those medicines that we rely on every day. finally, get picture that we maintain the capabilities here at home. it takes knowledge, skill and

standby to nazi victims. we cannot let that go. i spoke to the person was a manufacturing plant grand drug. she said we do everything right and i can tell he does. i have people coming in looking for a job that accompanied other plans and they said our company just built a new plant they are not using it. they are moving east. just present wonders who will do this? what will happen to our company if they can just end up having public relations and marketing and pr without any substance? we cannot let that happen. i will stop there. i just want to say that we here at the university. china rx just opens up the whole landscape. and i truly hope that their students and faculty here and others, journalists. that we dig deeper. we keep this on the radar. we understand what's going on in this very important market and inject particular interest in serious thank you very much

and i hope that you will buy a copy of trent a. tell your family and friends. it's a great and a half years to research. it is not the issue. thank you. >> thank you. we're going to have a discussion with our distinguished panel. the foregoing is that i have to thank you. very much for bringing this issue forward so vivid. in some ways a bit of a wake-up call for many of us in terms of realizing that this is a very real issue in terms of medicine in this country person go to church at daniel slane -- i'm going to turn to daniel slane. -- i think we are all aware that there is a lot of concern

about globalization of trade and commerce. a lot of concern about the movement of manufacturing overseas perspective on how this has occurred for medicine and also for other things. but also, how this is continuing to unfold in this current era that we are in. >> this is a country whose supplies almost all of our medicine. a country that steals between 250 and $600 billion a year of our intellectual properties according to the fbi. a country subsidizes their advanced manufacturing industries. which includes pharmaceuticals in violation of the trade laws.

a country that protects the domestic advanced manufacturing industry in violation of the trade wars. a country that forces should technology transfer form company doing business in china in violation of the trade. a country who really buys advanced manufacturing companies, 98 in the last four years. and done on a strategic basis where we are inhibited from buying their advanced manufacturing companies.in a country that uses trade as a weapon. three years ago, the chinese sees an island off the coast of the philippines known as scarborough, and competition between the coast guard in the

navy overnight, china canceled all of the banana shipments into china. that is our 10 percent of the philippine economy. millions of bananas rounded on docs, riding in ships. about two years ago, the japanese seized a chinese shipping vessel in their waters and arrested the crew. the chinese immediately stopped shipping where minerals to toyota. it caused the toyota plant in china to shut down. the japanese released the crew and the ship is -- this is a country that we have now become dependent on for our drugs. what is at stake here is, we are moving from the relationship of the competitor to the relationship of an adversary.

the chinese have one aircraft carrier they are building three more aircraft carriers. aircraft carriers are an offensive letter. their building ports all over asia. they are seizing islands to the east and south china sea belonging to the philippines japan and vietnam. they are militarizing the island and cutting military bases on the onions. they now have the capacity to take out our system in space. you do not have to be, in addition to that, they are spending hundreds of billions of dollars improving their military. they are rapidly reaching parity with us of fighter jets, submarines and missiles. and they say their stated intention is to purchase out of the eastern pacific.

so you don't have to be a military expert to see what's going on here and what this may lead to. i speak all over the country and i always say, that i have met the enemy and it is not china. the enemy is us. and shame on us for allowing this irresponsible business procedure to proceed with such a critical proponent as our drug system. my hope is that we can raise the alarm here and start to pressure congress to do something in a responsible way to protect the american people. i will stop there. >> and over here, the way i first became aware of some of this was in the context of heparin. when some of the heparin from

china was contaminated and i think they talked about that a little bit, that to my shock, i learned that all of the heparin in the us is coming in from china. and i mean most know that is a blunt dinner but i think a lot are not aware that it is more than that in the way that we use it. it is what puts the inside of the iv to keep it from clotting. you cannot have an idea for clots. when they flush the iv it is a heparin flush. and it is an absolutely essential drug not only for people that need this as a blood thinner but anyone that needs an intravenous drip needs heparin. and so, it is hard for me to understand how that could have happened. how is it something that is essential, basic to medical

care can wind up being completely off short? >> heparin comes from the intestines of pigs. >> pigs or cows. >> what was going on over there, it became an industry for housewives. living in small villages who were pulling out the depth of his animals in very unsanitary conditions. many of them have no running water. and then shipping them to distributors and ultimately around to chicago. it was from that that the problem develops. the fda is trying to get inspection on site in china. the chinese have severely restricted the number of inspections that they will allow and the whole program has become completely ineffective. >> if you talk about hundreds of thousands of households in

the production of this product it would seem to me to be very difficult to inspect. or that there is much enforcement at all. you have any comments on that? let's to do an fda inspection of the united states is -- i think the real issue is, what happened with the worlds largest pork producer. a note certainly you're familiar with this transaction. where did all of the pig intestines go in virginia? by the way if you have sunday morning bacon or if you have ham on new year's day or if you go to mcdonald's for sausage, the fourth is coming from smithfield. which is now owned by a chinese company. so we had a problem with smithfield. do you want to talk about that?

because smithfield controls a very substantial portion of the pig population in the united. the company was sold to china and with it, we lost, we don't really know because it is a private company and congress has no authority over that to us. so where are they sending the pig guts? are they shipping them off to china for the staying in the united states make very important drug called heparin? >> they have 36 percent of fourth market in a company that bought them. he is 30 percent. pork is 50 percent of the meat diet in china. china is the only country in the world that has a pork. we have an oil reserve.

you can imagine, every six months -- the problem is, the average chinese pays 40 percent of their disposable income and food. in the united states we spend 11 percent. so slight increases in food prices create writing and instability in china. that is why they did this. and the chinese have learned that it was better to buy the coal mine than just the cold. it is better to buy the iron line than the ironworker they can have the pork that they want. but they chose to buy this company. not only did they get the company, but they cannot all of the technology, the handling, genetics, all kinds of very sophisticated technology that this company originally got

from the department of agriculture from our tax dollars. now the chinese have it. the real problem is that the pork is not coming back into the united states with the smithfield label. and so, you have no idea what you are really eating. we have a law in the united states called the cool law. there are 18 exemptions. so if you go and you want to buy pork you look to the name i think his pet scans are processed in the united states. but ultimately it comes from china. i know from testimony that 85 percent of this tilapia comes from china. i'm going to buy tilapia i have an 85 percent chance it is coming from china. raised in contaminated fish markets.

it became or becomes a real problem not knowing what we are even buying. the issue in congress was, should they allow the sale to take place under a law and ultimately, it was determined by congress that this was not pork is not national security item and they allowed the sale to take place. so to answer? >> thank you for that. i'm going to turn onto patrick, the second distinguished panelist. patrick is the former secretary of the us department of commerce. he was responsible for the international trade administration in the clinton administration and before this patrick and i were talking a little bit about the clinton administration at the time that

the -- was created.we were both in geneva witness, this was not the process of creating this and it would call the wto that in fact, there were a lot of concerned members of the public. but yet, i think most of us at the time were quite optimistic about this. particularly about the prospect of bringing china into some kind of an international trade agreements. we can see the potential risks but we can see also a number potential upsides and i thought i would start with that issue. 25 years later, i guess. what has been the upside of on that? do you think that it has met our expectations? in terms of bringing china into the wto and opening up trade? >> i am happy to, first off i

went to china in 1981. he was a poverty-stricken country. they had with the cold the century of humiliation. with the whole civilization was taken over and crushed by western powers. beginning with the opium war. the second opium war, the fall of the emperor, the japanese invasion, the whole thing fell apart. they took control and 49 intractability a communist country. they cannot get the economy going. then they had a takeover in 1979. the sunni foreign investment, technology, know-how and foreign markets. that is the way we will build this a more powerful china and get our power back. they wanted to do number one. they were number one for centuries out there in asia. they want it back. we accept that and it is pretty

accepted among a lot of countries napa china and the wto. the wto was created. we used to have -- for 45 until 93 until the wto was created. i was in geneva. i was not as optimistic it would work because i was there to keep financial services out of it. i was on the senate banking committee. we did i think were getting market openings in asia so we did not want to be covered by the wto. there's something that says if i can bring variable terrified to get the same very low tariffs to china. because it is called favored nation treatment. and you have to do appear china did not commit to the wto and 94 when it was created. china came into the wto in 2000. now, because they were a

communist country, we cannot get them more than one year at a time. because there was a law that said we could not get china that more than one year at a time. but we were giving him that. what did they want to get into the wto if we weren't given a map because they wanted permanently. the congress was persuaded to do so and all of the lobbying was, this will increase american exports,. when china came and told wto in 2000, 2001 they came in. congress gave them this in 2000. the administration recommended 2001. it was bipartisan. when they came in we had an $80 billion trade deficit with china. right now, we have a $370 billion trade deficit with china. congress was told -- the end

decreased the $80 billion trade deficit. it did not. the whole thing was about investment. there was an article to give them permanent mfn. they say this is not about experts it was about us investing in china. why? there was nothing going on. i saw this. please have something called a corporation had a stakeholder obligation. in 1990, 1981, the business roundtable, the big organization for all the ceos, they said the responsibilities are to the customers, employees, communities, shareholders and country.

in 1999 when the business roundtable put out this statement about the obligations were, it was to the shareholders. that's it. if you ask what is the responsibility? to make shareholders money. and that was tied to their ability -- american corporations, china now is in the wto and we are locked in to give them low tariffs. 2.5 percent average tariffs on goods coming from china to the united states. this then does not mean that we have that same tariff. if you want to give an 11 percent, check that the incentive was for american companies to go to china and shipped back here. read the book, the author has put together, you'll see that is exactly what happened.

our companies had very talented high level people in this entry were dismissed from their jobs. factors were taken from here to china. that is what striving whole process. ralph, the former chairman of the foundation in the former president of ibm have written extensively on this whole issue of how we move from stakeholder to shareholder capitalism. what detrimental effect it had. as you see, the average used to be 50 cent at the fourth is another meeting for 500 tons. it concentrating on personal country and their underlying the average middle-class country. this is a very important issue in this book and pointing up,

this is necessary applications what we're doing. in our country really hasn't grasped that yet.i think the president got this when he won the election. he talked about this. i am not sure he has all of the policies in place to address it. because unless you deal with corporate government you will not be able to deal with this issue. is that helpful to you? >> effective follow on that. we know particularly, products like that, contain a tremendous amount of intellectual property into the development and production. but also, an enormous investment by the american people and all biomedical science and research. the prices we pay for some of the research, -- and kathy to see the world benefiting from that but yet, we are now

entering into this. where there is increasing conflict between our country and china. we are seeing that there is tariffs going on such products including intellectual product, including drugs. he chuckled a bit about why those are particularly being targeted for tariffs and what the impact of the tariffs might be. >> pharmaceuticals are biomedical. the chinese put up something called project 2025. they identified 10 key industries that they wanted to be the world leader. both in terms of satisfying their own market and global markets. and their pumping subsidies, there stealing intellectual property from american companies. when an american company invest in china, they required to be

done through joint venture. see transfer the technologies plus they say they want to do well in china, he should put a lab here and be considered a friend of china. so all of that is going on. with the administration is doing is something called section 301. he says if we identify unfair trade practices, we can target those practices with tariffs. that is exactly what they administration is doing. they are saying, certain of these industries, that you are subsidizing. your stealing intellectual property, you are forcing companies, we will start restricting your access to the american market. we will not help you make those industries global leaders. because for number one, we will not get access to your market. and second, you will destroy the rest of what we can do here

at home. right now, since china came into the wto, we run $4.2 trillion worth of trade deficits to china. i know is a big discussion among economists. the trade deficits, do they really matter? if you look at this therefore factors. one is net exports. it means the difference between exports and imports. when you're running negative net exports which we are doing at a major rate, $500 billion in the last year. $750 billion in manufacturing last year. it is a very detrimental effect on job growth and wealth in the economy. we have to get this situation figured out. as i said, what they are doing a section 301, i do not think it is adequate. i think we have to go after this issue and appreciate our corporations have some responsibility to this country.

>> what do you think? i guess, it is hard for me to understand all the economics behind all this. one thing i can understand that is the fundamental, the extent to which the prices of drugs are driving the cost and the differential between what we pay for the very same drugs in this country compared to what people pay if they are in canada, europe, australia. our prices are incredibly high. compared to others, is there some hope to be able to reverse the flow or will the tariffs talk to reverse the flow? what other things we need to do, what other solutions are on the horizon? >> i think there are a couple of issues here. part of the reason that they prices can be so highly as this may have nothing to do with china got our own internal market manipulation. to those watching, all of the

middlemen and the middle woman from the point that they manufacture to the point they pick it up at a pharmacy, there's a lot of things going on there. what should be a model where it is open, competition. it has been turned upside down. in one of the most extensive ways that we could sell medicine. a lot of people are making a lot of money off of that middle process that can make drug prices so very high. >> at say most of us are dumbfounded when we see, if we have insurance, the coverage that we see price. let's just say $125. you will be paid, the negotiated price of $12. and how is it that 90 percent of the price goes away? the negotiation, it is rather difficult to comprehend. >> sunlight is one of the best

disinfectants. and where we need summit to be hundred and 20 degrees in the blazing sun, is here and bread prices. how they are set in who is getting them. because we do not have it now. and there is no organized constituency to demand the transparency. that is what we need. i also want to respond to a point that patrick was making about the impact of our loss of industries and communities. in the book, i tracked a little bit about the place where pfizer has had substantial operations with research programs. for lots of reasons, when drugs went off patent, when lipitor went off patent, when pfizer was investing in china, billions and billions of dollars of research and development. and building plants there. we see what happened as they stepped back and had very substantial layoffs. what extends the local economy, i speak with people that work in real estate. i spoke to the guy who runs the

bowling alley. a gentleman who has an insurance company. he described how what is happened to jobs. and that guy from the bowling alley said, what happened with all these glasses industry moved offshore and lost patent protection. we see an increase in drug use. beautiful shoreline communities are changing. and it is changing rapidly. a couple of weeks ago i called joan and i interviewed who ran an insurance company there. i told him the book without and he was quoted in it he said thank you but i have to tell you, i had to shut down my business. so, the loss of these businesses having a profound effect on communities around the united states. you do not hear this in the major newspapers. you might here in the local paper. but it is devastating to people, to their families and

in the case of pharmaceuticals you're very highly trained people. we are talking about anymore people in the stem fields. we have people in the stem fields. but some of them are devastated. meanwhile companies are setting up very high investment in their hiring the receptors and one third of the cost. we have these dramatic dislocations i have huge impact on our economy. the final point is, we have to decide as a country, we want to have an industry like pharmaceuticals here in the united states? do we want to have enough we want to maintain in effect a capability and if the answer is no then we are good to go. just let things happen. but the answer is yes, then what do you need to do differently? that is what we hope that china rx can stimulate a conversation about. let me just read something.

pharmaceutical manufacturing plants are among the 70,000 us plants that shut their doors since china joined the wto in 2001. ... i think they're wake withing up we have a huge problem i see it going on in both parties. >> that's why i like this shall of our medicines because how to

identify with auto and aluminum but we can identify with the pills pills that we put in mouths and things that we rely on take care of our infections. >> that arguably you need other things -- >> sure. >> devices and, i mean, all kinds of health care is dependent on those things too. but -- then -- you know in talking to the issues of kind of the intersection between, you know, kind of the rules of the roads for trade and then the things described to us about how -- china is actually capturing these markets. i'm having trouble kind of squaring the circle here it doesn't make sense to me that this has been possible given the kinds of what i thought, you know, were ability to kind of use the trading regime to enforce that people follow

certain rules. unfortunately rules for set up that basis that everybody was going to follow the rules and the chinese chose the only rules that benefit them. and the mechanism is so slow and so difficult to ten enforce that it is ineffective and in addition to that you have take a a take, take company that complains and american companies are so intimidated by the chinese that we with can't even get them to file the complaint okay. and so -- if they import and automobile into the united states is the tariff is 2.5% if we import an automobile into china, the tariff is 25%.

okay, and the tarve autopart is 20%. i mean, how does that make and look why are we complaining at the w because we with can't get autocompanyies to actually they're so intimidated by the chinese government. >> company have standing. to file -- >> the government but then you have to provide the government with the information to bring your case and if they're hesitant because the chinese will punish them with their operations in china, if they provide the government with the information, you'll see that many of these companies won't testify but a trade group testify so they're not identified. and both before the china commission an with served for many years and in the congress i worked in the senate banking committee for 15 years i've seen this up close.

boeing -- we, i remember we would wound where bog make sail to chyna says you have to make a part of the plane and china in order to sell it here and we used to think why is that in so we put something in wto that you keact do for technology transfer and they ignored us and said we're not forcing your companies. they're doing it on their own. well, orveg of course they are because one -- they make the shareholders wealthier and themselves wealthier and short-term problem and it is very bad for the united states long run. >> so -- i want to maybe have each of you comment on possible paths forward with stan and patrick and lets you finish. vary a little bit but trying to think -- constructively because it seems we've gone down a path that's not leading us out of this.

>> you have -- the united states that is process oriented. we have a constitution we sign theories for the most part we follow them. then you have a country china ih the end justifies the me. stealing, lying, cheating anything else is -- is encouraged and fostered by the chinese government. so you have two desperately different systems that can't blend together. and i think the only we are the only industrialized country in the world that doesn't have industrial policy, germany, canada, japan, china everybody else has an industrial policy. and what we have to do is if we don't fight to subsidize how

advance manufacturing industries, we will feed that whole industry to china. okay, and but opt out electronics industry, the entire industry has most offed to china, laser, sensor digital all of the stuff of the future is now in china. they're in the process of moving the entire semiconductor industry from the united states to china. if the white house call us and ask is us to look into a company called global foundries in santa clara,, moving to china i called the president of the company up. he said to me, that chinese offered us free use of a $4 billion chip manufacturing plant no taxes for ten years. they'll train all of our

workers, and went on and on and on. he said i didn't know who to talk to in the u.s. government. i said well wouldn't have made any difference because nobody would have done anything for you anyway so if you don't -- and he said to me what would you do if you were me. i mean, and, of course, you know the incentive so great that we're moving to china, and so -- and they're doing this for all of these critical unless the u.s. government -- starts to incentivize these companies to stay here, now we had -- we had -- there's a lot of problems with the facts bill. but we had to get our kormt corporate income tax down and that was a problem and corporate income tax in china sing i think is 15% higher limit is 12 and in the united states it was -- 35 wasn't it pat or -- 33 -- yeah. >> so we were way out of whack so that was a good first step but there's lots of things that the u.s. government can do to

incentivize these companies to stay here. we actually were insent vising them to move and -- because if you -- if you a profit overseas was not subject to u.s. income taxes unless they repay traited the money and continue to build other facts so -- the answer to i think, to the drug problem that we're talking about here today is that the united states has to incentivize drug companies to manufacture here. and that's a function of -- providing them with r&d facilities in the software industry in the semiconstruct tore industry one of their biggest problems is they can't find enough electrical engineers. and they have -- plenty of electrical engineers in china. so when i talked to intel they said that's -- you know one thing u.s.

government could do is to say we will -- we will pay your tuition as state university in the united states we'll reimburse your tuition if you graduates and stay here to work. things like that that we need to do otherwise we're going to lose these -- or imagine artificial intelligence, robotics -- supercompute and the other thing that we're doing electronic dollar bills is one of their own -- the other thing that -- that we're doing is -- supercomputing for advance technology. and it is critical, and the united states opens up first supercomputing station at more laboratory in california to 1946, up until a few years ago,

the united states led the world in supercomputing about two years ago chinese exceed the yietle in supercomputing now gap is getting wider so what does congress do? they cut the budgets of large -- it is like eating your seed core. you know, it's like this is the insanity. that's why i -- i met the enemy and it's not china. okay -- we do all of these crazy things that just harm us and -- so if we -- if for 150 years, we didn't have to do anything we didn't have to have industrial policy because we dominated the world from an economic point of view. but those, those days are over and if we don't do anything we're going lose all of these critical industries. i don't know here's what i think. wrote a famous article in fortune magazine saying trade deficit is going to sell the country out from under us that was the name of the article. warren buffett is a smart guy. so when you're running massive

trade deficits you're sending other guys ballot and not sending dollars book buy your goods but they can go back and buy your industries that's what is happening now. >> president kennedy did not know how to get a man to the moon. hehe set a national goal because congress bought on to it and we figured out how to get a man to the moon to me the best thing the united states ought to do is say we're going to set a national goal and balance our trade. and figure out how to do it. i mean, part of is is government reform is key part it have. part of is abiding incentives that he's talking about for our own children. and the students getting science and technology education in the united states. and -- three, is corporate that tax bill. i would have done it a different way. i would have said if you're an american company, and you produced in the united states, we're going to give you a very low tax. if you're going to be doing production in china, and ship it

back here we'll have a different tax rate for you to reinsent vise production and united states of america there's a lot of ways to do this. but you've got to set a goal once you set the goal then you can figure out how to do it. other thing i'll stop in for this. is that what's really hurting this country are buybacks. buybacks are where corporations buy their stock. okay, and up until ronald reagan changed the security law that prohibited corporations from doing that because -- it artificially inflated their stocks reagan changed that. and today in the first three months this have year, tens of billions of dollars of -- of stock had been bought back by corporations. that mean it is that instead of those revenues, being used to grow the the company or put into r&d is going back to the major stockholders who are usually the president and chief executive and some hedge funds it hurts the --

economy, and it hurts the country. and that's another law that we need to put into place to stop stock buybacks and -- that money should be used to grow companies not to be -- en riching ceos. [inaudible conversations] they have to think about how confused our priorities are in the public health when -- you talk about china. you know, subsidizing manufacture of drug and semiconductors and we subsidize -- that's very sad rosemary i'll give it to you to talk about the path forward. the last words here. >> wrote china rx for my mother and father could read it. was because i think question of to -- bring in what i call the common sense norms of ordinary people. if you look at the media today there's more stories about the dangerous of getting your drugs

from canada than there's stories about the reality of what's happening to our drug supply is a story that has been hissen in plain sight that frankly they don't want us to know. and so i think question of to draw in and expand the conversation to know that -- the people come to washington to inner circle of relatively small group of people who are making the policies that have created the situation that we have now from corporations and government and it's not working for ordinary people. >> and so i hope with this -- with this book and we can expands the conversation with people who know that something is not right one of you said that. american public know it is that there's just something not right. but they're not being educated because we've -- frankly had a news blackout you can't get this topic on the nightly news and a lot of mainstream media. and so how can we find alternative news sources across the spectrum this is not a democratic issue or a republican issue.

this affects all of a us. and so that's what we intend to do for next number of months and if there are places that you have it in your work and other parts of your life where we can have this conversation, please let us know. that's the intengt we're going to start is something here, have been so impressed within two weeks how people and even people in the industry who can't speak publicly -- but they know we have a serious problem. they're caught they're good people in farm that companies who don't like the fact that there's a plant with their company name on it where the bathroom is a hole in the floor i can't imagine there's any person who likes that situation. so how can we draw on common sense norm of the public to change the conversation and inform the people and informed people can dot right thing. all right thank you all very much. >> thank you. [applause]

question. we have a couple of minutes we have questions from the audience there are a couple of mics i see comb coming forward if you don't mind introduce yourself -- hello. [inaudible conversations] mentioned section 301 case that is by the office of the administrative representative and much anticipate ad mover of 45 pages of proposed tariffs were released included pharmaceuticals that i wonder if you have seen the list -- and whether that is, you know, qowld do what you're intending to insent vise production here or have a perverse effect of -- more production in china. >> yeah, my understanding of what --

301 is being used to focus on the industry that china has put in their project 2025 that they're going to have a high-tech industry are is dan has talked about which one they are. but among them is -- biotechnology or -- and so if you put tariffs on those industries, the have industries that chinese is giving to those industries. secondly, you point -- you make them more expensive for those goods to be coming into the united states. and wiping out our people who might want to be making those so we have a chance to move up the food chain and have those kinds of products being developed here. but my understanding that's what usdr is trying to pox on in their 301 on the project 2025. >> building off that, my name is

isabel with inside u.s. trade, it sounds like tariffs are not the answer here to reducing the u.s. dependence on these -- pharmaceutical sectors and critical minerals used in these products. what other congressional solutions do you think are available aside from including incentives in the tax bill are there any sort of congressional you mentioned -- putting pressure on congress to solve this and what are some ways in doing that aside from the tax bill? >> are you speaking to me or -- >> anybody -- go ahead. >> i think that -- wog r one thing congress can do is clear that drugs are critical for the the national security of the united states and certain at must be made here so let's say penicillin we can't be 100% dependent upon china for our

penicillin so one thing that congress can do is critical drugs to require them to be meads here. and -- maybe they issue incentives but that would protect us from -- from any adversarial action that china might want to take next year or five more years from now. pat you may have more -- >> i'll jump in while you're -- while you're thinking. you know the case of there's researchers who are making progress in coming up with synthetic so we don't have are to rely pigs and china for it but incentive to turn that product into a market trug is not good because currently heprin we have is still very cheap so the market isn't aligned to want to buy a more expensive product but public investment that is very -- targeted and strategic on essential medicine we need to think about public investments

in that research and bringing products like to market to preserve and protect us from dislocations and interruptions and supply. epidemic preparedness we have a stockpile and the government stockpiles certain products not just drugs but other products. you know, and 95 mask and all kinds of things to be there in case of a major pandemic, and so it's not a concept of national interest of having availability of certain drugs i should say in the case of the heprin what really happened that set down our manufacture -- was when there was the problem with so-called meds how to be free on disease in cattle in the u.k. to be sensible to stop using cows to make it. and, of course, cows are bigger than pickup and seek to imagine

and that might be the case so you got more, and that was how we manufactured it ourselves and -- when they thought the use of the cow -- they it kind of shifted to china to be done with the pigs. which is to say if we have a better way and people have been working on this to monitor to detect low levels in the cattle, you could see how much thats and that would be a more that would be more efficient for estimate manufacture not efficient to manufacture and out of pigs. but -- that's not fun in any field that's not a pretty picture but anyway. >> one more thing, as i said i was on the senate committee when we did the 88 trade bill that's 38 years ago and what -- when senator byrd i think jim -- wright was house speaker, they charged each committee to look

at areas under their jurisdiction do hearings and develop ideas how to make the u.s. more competitive. we haven't done it in 30 years. i think congress need to get into this business, do the hearings to develop different provisions of law that can help us compete better in a global economy. in that 88 trade bill we covered rates for the first time and put referred to here a lot of great things in that bill but it's 30 years out of the date now and china wasn't in the w20 to jucht the get tiff strategy of the united states and you have to do it through the congress. and take two more questions starting with this gee man -- gentlemen. >> rosemary you issued a strategic, wongd per you could collaborate and should we have a reserve or key medicines and

what would they list look like? well doctor brought this up and i think it would be desirous to identify group of public health experts and physicians and others to identify what is list of essential medicines that we need to have and to dance point that we should not be allowing other countries to produce in such a substantial share of the markets. so that would be a first step and have physicians and those who are users of these products by the way most physicians is have no clue about -- the situation we're in and what experts to identify what we need and question is how much can we stockpile my understanding therefore sort of more discreet event -- >> i wasn't meaning this as a stockpile because, i mean -- yowpght it to be continuous manufacture to have a manufacturing capacity absolutely. that have to be running. other point here.

there's new -- new technology called continuous manufacturing there haven't been enough and hasn't taken advantage are of new technologies. so i would see another role as how can congress and federal government incentivize companies to advance in its making of drugs. there's some products where you can make within 24 hours that was a technology developed at m.i.t. funded by a european company not a u.s. company but prefabricated drug programs that is buying from general electric. how come china is buying it and why aren't we buying them here so incentive to upgrid a company in pharmaceutical manufacturing another step in the right direction. >> i'm from kyes or health news and my question is for rosemary. we've been hearing for a while that --

40% of finish drug products and 80.of api are are made in foreign countries but that number of is from 2009. the fda hasn't updated it since. between that and lax labeling laws that say that your drug only has to say where is manufactured or -- who labeled it or where it was distributed. how are you able to figure out that the number of pharmaceuticals made in china wases indeed growing? >> that's a great question the numbers that are out there are old. i think they go about and where our data points came from is from people who work in the industry who can come out frankly talk turkey how, in fact, dependent that we are, and we don't have good official numbers and we have to ask the question why not. you know, the question about 80% of our active ingredients come from two countries well they don't want to split out i understood why and china they don't want to do that and what

they also don't want to do is split up aboutive ingredients from the raw materials. and so -- india may be making the active ingredient but it may be dependent on china for the withdraw material. they don't get into that level of detailed to really pinpoint the amount of dispense that we really have. so answer your question, our data point came from interviewing people in the field who said -- that if china shut the door within months -- we would have to shut down our hospitals and our pharmacies shelves would be bear you can't get better than that. >> frankly we should have the answer to that information we we need to know who is making our drugs what are supply and demanding we need to do risk assessment by country, by plant we don't do that. at least in the public interest. it's commercial databases but we don't have this in the public interest and it's nobody's job in the federal government to do that. and that's stunning. we wouldn't allow that for foods or allow it for -- for oil and energy supplies, but

we allow it for medicine with lots of reasons for that a lot of people don't want us to get into of this proprietary trade secrets national security to take precedence over that. so we've got to open up that -- big can of worms shine a light on it. with 180 degree sunlight. >> what you're saying i think it is interesting that is, it is actually a quite complicated industry. that there are raw chemicals that are then used to make the active better than formulated better than formulated and i think that what we see on the containers is where they were actually packaged was this the last step and you have -- you don't really have a way of understanding where the ingredients were before they were actually packaged in that final product. right there's actually conflicting laws there's customs law. that requires companies to put

on their packaging the country of origin on which is defined as what are active ingredients come from? so when it comes to the country you have to label where the active ingredient comes from so we have that information exist somewhere. and we don't use it very well. i don't know how many people actually know it. then there's fd airings rules and they allow a wild west it could be the -- packager -- the place of business -- retail package. >> right with different than -- custom package which is just a complicated, it's a complicated system. >> correct. but i ask the question -- >> there's a chip in china rx where you can see the label of the medicine and in some cases those labels indicate who is the manufacturer, where it was manufactured and in some cases the active ingredient if you

can't find that out from the label then you can call up a company and some companies will tell you others will not if it's worth a try. how much of this does the fda know since they don't have a break daven that do they know where these things are made do they keep it this a locked up place? >> they know. they know. yeah with a question is why can't they tell us? >> i have a question -- when i first on china commission one of the things we found out was like wal-mart. with american companies making good in the united states if you want to stay in our supply chain, you better move to china and meet the lower cost so there would be -- arby drugstore like cvs are they pressuring american companies like -- pfizer and others to move their operations to china in order to stay in their supply chain or how does this work?

do you have a fix on that? >> i don't have an answer to that but what i hear is there'sa hammering down on manufactures. and we can't underestimate what it takes to run a high quality manufacturing facility. there's a perhaps a lack of specification or maybe it doesn't matter because procurement departments and companies want to make sure that question get the lowest possible price. you have a challenge between quality and safety and too often safety doesn't win out. yeah. >> this is where we need to transparency on -- on what this market looks like and who is pressuring whom becauses it is so complex. >> congressional hear haddings on something like this shouldn't there? >> i would love for members of congress to have the courage to do that. again i want to thank you all thank our speakers especially rosemary an author of china rx thanks to all of you this was

really enlightening segment. thanks. >> thank you. [applause] okay -- booktv is on twitter twitter and facebook and we want to hear from you tweet us twitter.com/booktv, or post a comment on our facebook, facebook.com/booktv. [silence]