going back and forth and that does not get the cloud away. it's now over us and darkening our dialogue. thank you. [applause]. >> thank you very much. copies of my book are available at the checkout desk. please hold up your chairs. [inaudible conversations] >> book tv is on twitter and facebook and we want to hear from you. tweet us, twitter.com. /book tv or post a comment on

our facebook page. facebook.com. /book tv. >> good afternoon. i and the dean of the institute school of public health and i'm delighted to have everyone join us today for this discussion. we have an author of an incredibly important book here, rosemary gibson. her book explores the topic of a dramatic shifts in where our medicine comes from. as china looks to position themselves as the pharmacy of the world. i think many of us in the medical and public health profession have been unaware of this shift. we may notice at times that there are shortages, contamination issues, other problems, but i think we have not been aware that there is a systematic issue, a major change in the system from manufacturing and delivery pharmaceuticals. the implications of one country controlling the supply of medicine is astounding demand

matter what country we may be talking about. think about it. what if there is a global pandemic and it's hard to move products across the world because of that? what if there is heightened tensions within the south china sea? everyone could be vulnerable. everyone could be put at risk. the world of the fda-- ft and situation could not be overstated because the fda cannot be as effective in assuring the safety of our medicine in far-flung areas of the world as a home. many of us are not aware of the face to face contact that the fda has with those who are manufacturing our drugs, the inspections they conduct. the very hands-on work involved in making sure that the manufacturers drugs are safe. they certainly set up offices all over the world to do that. that is not the same as having offices-- having the

manufactured in your own country and with the us losing manufacturing capacity, which is continuing to happen the situation could become even more severe. today we will discuss these critical issues as well as possible solutions and i look forward to a very robust discussion, but first let me introduce to you rosemary gibson. rosemary gibson, senior advisor at hastings center and principal author of "china rx: exposing the risks of america's dependence on china for medicine". she's the recipient of the highest honor from the american medical writers association in 2014 forgetting the public's voice and their interest to critical health issues of the day. at the george washington university she gave a 2015 lecture that we have annually here at the school of public health.

at the johnson foundation rosemary was chief architect of a 250 million-dollar decade-long national strategy to establish inpatient care programs that now number 1600. she received a lifetime achievement award from the american academy of hospice and medicine and worked with bill moyer on the pbs documentary "on our own terms". she's the recipient of the lewis black been patient safety award from the south carolina hospital association. rosemary is also principal author of "medicare meltdown" 2013. battle over healthcare, treatment and the wall of silence. her books have been reviewed in publishers weekly, "washington post", reference and proceeds of the u.s. senate, mentioned in congressional testimony, noted in the "wall street journal", "new york times", "usa today", consumer reports and other outlets to numerous to count. she's chair of the board of a

nonprofit health search-- system 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? >> yes. >> microphone working low back there? thank you. good afternoon. doctor goldman, i want to thank you for making this event possible. it's a very timely and 15 that we are here at a school of public health, a very preeminent school of public health in the nation's 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 grammar does-- our medicine. is timely for another reason.

the president is set 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 of medicine, 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, so we have to keep a close eye. if there is one lesson we draw from today, is the intersection of our medicine and trade and trade policy and who would have ever thought of that. i'm looking at a binder who wrote a wonderful piece that made this brilliant connection. so, i wrote china-- "china rx" with the purpose of informing the public about this very big shift in where our medicines are coming from. for many of us going up our

medicine was made here in the united states, europe, maybe japan. there's been a dramatic shift eastward. i wrote it for my mother so my mother could read it, but also for policy wonks and academics because i think we all need access to this information. we wanted to trust the medicines we take, thus medicines that can mean the difference between life and death and we need to know where to our medicines come from why are we dependent increasingly on a single country what are the risks and what can we do about it. was going to bring my smart phone in my medicine bottle, but make-believe i have it here. one of the questions that i get asked the most is how come i do not know about this. how come i did not know that there is growing dependence from the united states on china for summative our medicines medicines? if you look in your smart phone and you look on the back at least mine says designed in

california and assembled in china. but, if you have ever gotten those amber colored plastic bottles with the whitecaps that tell she had to take your medicine with the doses, but doesn't tell you where it comes from. so, there's no reason we should know. so, let me tell you about what this dramatic shift in where our medicine comes from so looks like. one of the first things we do that's never been done before in china rx is weaning the medicine that's being made in china by chinese companies and it sold here in the united states. they include antibiotics, antidepressants, birth control pills, and a lot of young women are interested to know that, medicine for alzheimer's, parkinson's and, epilepsy, high blood pressure, hiv-aids and much more. for 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 a decade may be less, 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 ingredient in so many of our medicines. they are the part of our medicines they give us that 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 from industry said that if china shuts the door on exports, within months pharmacy shelves and nina did states would be empty and hospitals would cease

to function. so, how did we get here? and what about other countries? one of the most interesting facts that i learned is that even india, which is a dominant generic drug manufacturer, even india is dependent on china for the active ingredients in-- and raw materials in many of the medicines that it makes not only for its own people, but also for export. so, it's a fascinating article in the economic times which is an indian newspaper and it started out with a story of a soldier who's on the border between india and china they share a long border and there's lots of tension in that neighborhood and that part of the world and so it says something due to the effect of imagine an indian shoulder on the border and he opens up his medical pack and sees this medicine and he's running out.

and that soldier is dependent upon the people on the other side of that border, the adversary for the components to make essential medicine. that's a fascinating situation. the article went on to say this is a national security issue. i have yet to see an article here in the united states posing the question and talking about that here and i applaud the indian media for being transparent about it. if there is a content-- any interruption in supply that would not only affect the health of the population, their military, but it would also affect a very important part of their economy because as you know they make and export generic drugs. so, where are we? what's the biggest risk? as doctor goldman said the biggest risk is when we have centralization or the concentration of so much by medicine within a single country no matter what country that is. if there is an event and

companies are shut down for months and months and months, if there's a global health pandemic and countries have two lineup for medicine, that could be a global-- catastrophe or if tension in the south china sea, a hot spot right now and they block trade routes, where does that leave us. that's a challenge with concentrating any important product we need for life in a single country, so how do we get here? how did this happen? i'm going to start with a story of a prescription i got two months ago today. it was an antibiotic, amoxicillin, a form of penicillin. great drug that works really well and i was back to my old self in about two weeks, but 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's and industry including companies like pfizer made sure that there was enough penicillin manufacturing capacity here in this country to help all the wounded soldiers that would walk away from that event. by having that penicillin availability it saved hundreds of thousands of lives where government and industry worked together to make sure we had an adequate supply of that miracle drug. so, let's fast-forward a couple decades. in 2004, the "new york times" reported the last helen's-- penicillin manufacturing plant in the united states was about to shut down. that was the bristol-myers plant in syracuse, new york. but, the "new york times" did not tell the back story. what was really going on in the

global market? thanks to some european producers that are very public spirited and have information out on the internet about what happened during that period, we can learn a little bit about what was going on in global markets. in 1980, china very wisely invested heavily in penicillin fermentation capacity on a massive scale. 20 years later, he began to seek chinese companies coming on the global market and they don't penicillin at below market prices and it effectively drove out american, european and even indian companies from that business because they cannot compete. european producers called this a landslide decimation of their industry. and then what happened is there

was a spectacular price increase , it wasn't visible to us, but in some way we paid for it. and "china rx" we call that the penicillin cartel. that's not the only cartel that was happening. if you read "china rx", you can read about the vitamin c cartel. i'm sure many of you take vitamin c. you might take a tablet. it doesn't come from oranges in florida. it's synthetically made in a chemical plant probably in china there is a fascinating story about that vitamin c cartel and that story continues to this day same play book. there were american, european and japanese producer of the sorbet acid, the active ingredient in vitamin c. the couple companies dumped it on the world market, drove out competitors and when they were gone raised the price again

spectacularly. clear violation of antitrust. we could have a whole session today on the vitamin c cartel because that story continues. lawyers are still arguing over it and it has enormous implications for a lot of our medicines and other products we get from china. so, we have these penicillin in vitamin c cartel and 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 and we have to ask ourselves is this a situation that we want to be in. so, what was driving this? what were some undercurrents? we identified two of them, the first is the generic drug law, which is 1984 for those of you

that remember. it made generic drugs available to the american public, a wonderful wonderful step forward took it made them affordable for millions and millions of people. but, that meant that companies had to sell products more cheaply looking for a place to make them more cheaply and so they pivoted east to asia. at that time the fda was not equipped to oversee and regulate a global industry. what else was happening in our research i have a barrett-- very boring life and you find all things on the internet late at night and one of the most interesting things i found was a memo written by very dedicated fda employee, chemist, and he asked the question or said we have no idea where all these drugs active ingredients are coming from and they could get

to the president. so, we had a period of time in the united states where it was the wild west and we didn't know where some of these products were coming from. let's fast-forward to the year 2000. there was another major event that has triggered us dependence on china and that's when right here in washington congress and the white house agreed to grant china access to the us market and also china joined the world trade organization. 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 closed its last apps spring manufacturing plant. same play board-- but.

dumped product on the us market. local producer could not complete-- compete and without a business. something very important also happened in 2004. a major healthcare company and united states, baxter healthcare , switched suppliers of a very important ingredient for a product they make. that product is called heffron, a blood thinner and it is widely used in hospitals. if you have been to a hospital, you've probably had it. a couple years after baxter switched suppliers from the us to a china -based supplier, turns out there was a contaminated ingredients that was found in baxter's products. it came from china. there was deliberate contamination for economically motivated reasons and there were

250 deaths in the united states associated with that contaminated drug and that triggered extraordinary reform, good progress to try to fix what we basically had was a deregulated environment in other countries where we were getting our medicine, but it's still far from perfect. there are a couple lessons here. the first is this globalization has effectively been a form of deregulation. you don't need any laws to change the regulatory structure, just move production overseas and it's effectively deregulation. the united states has had the highest standard, good people at the fda and industry developed to ensure we have high quality safe medicines every pill every time. we were effectively outsourcing the manufacturing of our madness

in the two countries that have few if any standards. it's really remarkable. and back in the period of 2007 some of you might remember the news reports where the head-- did: of the fda in china was executed for taking bribes and government officials in china said we are still at a very early stage of being able to manufacture high-quality medicine, but that did not stop the market moving to a place that acknowledged it had very few standards. really a remarkable transition. the other thing that is fascinating and again to your point about the lack of transparency, turns out we have a trade deficit with china and pharmaceuticals at least as of 2014 and i have never seen a public official in the us acknowledge that we have a trade deficit and pharmaceuticals. maybe it is there and i would

love to see it if you're caught a glimpse of it please send it to me, but what i did find was in a speech that doctor margaret hamburg gave in china to an audience of chinese who are probably very happy to hear that there is a trade deficit for the united states and china and pharmaceuticals, so we have a lack of transparency. so, how depend entirely on china really? i will give you a couple of fascinating examples. in 2015, the fda inspected a plant in china. it did that because it was getting a lot of customer complaints presumably industry complaints about the active ingredients they were getting from this plant. there was bacterial contamination and some of the products did not have their full therapeutic value, which if it's an antibiotic or chemotherapy

that could be devastating. so, the fda went in and found that they call systemic data manipulation. this is a plant that had passed muster by the fda, the chinese fda and other infections over many years. so the fda banned 29 different products from coming into united states, but because the united states is a so dependence the fda had to exempt 14 of those products from its own band and some of those products included antibiotics or ingredients for antibiotics and ingredients for chemotherapy because the fda was concerned about drug shortages here in the united states. that's how dependent we are on the country. there was a fascinating story about the availability after the anthrax attacks took some of you might remember in washington and new york so the us military needed to buy a whole lot.

they went to a very reputable country in europe. this was reported in bloomberg and in the course of writing the book i spoke to the ceo of the company and he said yes, we had to get the starting material from china. think of it, the us military needed this drug after the anthrax attack in the starting material was obtained from china. if someone from the industry-- as a someone from the industry said what if china is the anthrax attacker? our medicine can be used as a strategic weapon. there are other examples where the newspaper in india said maybe our military is dependent on the adversary for medicine and i thought about what-- what about us in the united states so i called at the defense department and communicated with defense logistics agency which purchases medicine on behalf of the military, family members, retirees and they acknowledged

beginning in 2012 that it had to begin purchasing a limited number of drug products from china, apparently because there wasn't any other source. 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's where the commercial market is going. so, what about the risks? what are the hidden costs of cheap drugs? we don't see them, but in china-- "china rx" we identify what some of these risks are. what about consumer protection? what about product liability? so, i called up an american lawyer that works in china and advises western companies and he said you have to understand the china price. that attitude is one of the

reasons our product is so cheap is because we assume no liability for it. it buyer beware. so, let's take an example. say you take a medicine made in china by a chinese company and it sold here in the united states by a distributor and chances are that distributor has no financial assets are very limited assets and you effectively have no legal recourse. ..

>> so, but this 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, and what it found was that the company that supposedly was making it was not the actual manufacturer. the real manufacturer was another company that apparently the fda had banned because of prior possible complicity in the heparin tragedy years before. the show factory and the shadow factory. and one of the most stunning things that we found while doing this research is that even american companies who have plants in china don't meet the standards that we would all come

to expect. a major u.s. company, the fda went into its plant in china and cited the plant because it had no hand-washing facilities, no place to wash your hands, and the toilet was an open pit in the floor. this is what happens when we outsource production from a country with the highest standards in the world to a place that's 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's variability. and it's going to take a long time to build up a culture of quality and meeting standards and safety and to sustain it. so those are some of the risks that we face. and i'll close with what do we

do? where do we begin? one of the first recommendations is that we need to have a change in our mindset about our medicine. right now they're like a cheap commodity no different than a t-shirt. how can we buy them at the cheapest possible price even if it's a few cents' difference on a 50-pound drum of product. instead we need to view our medicines as a strategic asset just like we view oil, our 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 we know where our medicines are coming from, global supply, global demand and forecast production and know where the hot spots and the risks are. we do this for energy, we do -- you can go on the department of energy web site, and they track

this. so we don't run out. and the same is true for food. we don't want to run out of food. and a strategic asset is something that a country will fall apart we don't have it. we need to consider our medicines as a strategic asset. they're made by private companies, but they serve a very important public purpose. and so we have to work more together to insure that we have our medicines, we have control over the supply of those medicines that we rely on every day. and finally, we have to make sure that we maintain manufacturing capability here at home. it takes knowledge, skill and experience in how to make drugs, and we can't let that go. i spoke to a person who runs a manufacturing plant for a brand name drug, and she says we do everything right. and i can tell that she does. i get cvs from people who coming looking for a job, they've come from other plants, and they said

our company just built a new plant, and they're not even using it, they're moving east. and this person wonders who's going to do this when i retire. others have said what's going to happen to our companies? they could just end up being, having public relations and marketing and pr without any substance. we can't let that happen. so i'll stop there, lynn, and i just want to say we're here at a university. china rx just opens up a whole landscape. and i truly hope that there are students and faculty here and others and journalists that we we dig deeper and we keep this on the radar and we understand what's going on in this very important market. and we can only do that if more people are interested. so thank you very much, and i hope you'll buy a copy of "china rx." tell your family and friends. it took three and a half years to do this research. it's not a transparent industry. so thank you. >> thank you. so we're going to kind of move into a discussion with our

distinguished panel up here, but before going into that i just have to thank you very much for all of your research and for bringing this issue forward in a way that's so vivid. and 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 how medicine in this country. and i thought i'd, first, turn to dan slane who's up here on the panel with us. he is former commissioner of the u.s./china economic and security review commission, an expert in industrial policies in china. and, i mean, i think we're all aware that in today's current political context there's a lot of concern about globalization of trade and commerce. there's a lot of concern about the movement of manufacturing overseas. but, dan, can you give us some

perspective on how this has occurred for medicines in particular, but also for other things. but also how this is continuing to unfold in this current era that we're in today. >> thank you. yes. this is a country who supplies almost all of our medicine, a country that steals between $250-$600 billion a year of our intellectual property according to the fbi. a country who subsidizes their advanced manufacturing industries which includes pharmaceuticals in violation of the trade laws, a country that protects their domestic advanced manufacturing industries in violation of the trade laws, a country who forces technology

transfer from foreign companies doing business in china in violation of the trade laws. a country who freely buys our advanced manufacturing companies -- 98 in the last four years -- and done on a strategic basis where we are prohibited from buying their advanced manufacturing companies. and a country that uses trade as a weapon. three years ago the chinese seized an island off the coast of the philippines known as scarborough shoal. a confrontation arose between the philippine coast guard and the chinese navy. overnight china canceled all the banana shipments into china. bananas are 10% of the philippine economy. millions of bananas rotted on docks, rotted in the ships.

about two years ago, the japanese seized a chinese fishing vessel in their waters and arrested the crew. the chinese immediately stopped shipping rare earth minerals to toyota that caused the toyota plants in china to shut down. the japanese released the crew, and the shipments continued. so this is a country that we have now become dependent upon for our drugs. and what's at stake here is we're moving from a relationship of a competitor to a relationship of an adversary. the chinese have one aircraft carrier. they are building three more aircraft carriers. aircraft carriers are an offensive weapon. they are building ports all over

asia. they are seizing islands in the east and south china sea belonging to the philippines, japan and vietnam. they are militarizing the islands and putting missile bases on these low can occasions. locations. they're militarizing space and now have the capacity to take out our gps system in space. so you don't have to be -- in addition to that, they're spending hundreds of billions of dollars improving their military. they're rapidly reaching parity with us on fighter jets, submarines and missiles. and their stated intention is to push us 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.

and i speak all over the country, and i always say that i've met the enenemy, and it's not china -- the enemy, and it's not china. the enemy is us, and shame on us for allowing this irresponsible business procedure to proceed with such a critical component as our truck -- as our drug system. so my hope is we can raise the alarm here and start to pressure our congress to do something in a responsible way to protect the american people. and i'll stop there, dean. >> so, dan, to follow up, here here in a school of public health, and the way i first became aware of this, actually, was in the context of heparin. and when some of the heparin from china was contaminated and i think rosemary talked about that a little bit, to my shock, i learned that all of our heparin in the u.s. is coming

from china. >> right. >> and, i mean, rosemary mentioned that it's a blood thinner, but i think many people aren't aware that it's more than that in the way that we use it. it's what coats the inside of all the iv tubing, basically, to keep it from clotting so that you can have ivs. you can't can have ivs if they clot. they stop flowing. when they flush your iv, that's a heparin flush. so it's an absolutely essential drug not only for people who need it as a blood thinner, but actually anybody who needs an intravenous drip needs heparin. so it's hard for me to understand how that could have happened. how could it happen that something that essential, that basic to medical care could wind up being, you know, completely offshored here? >> yeah. heparin comes from the intestines of pigs. >> pigs or cows. >> or cows, yeah. >> yeah. >> and what was going on over

there, it became an industry for housewives living in small villages in china who were pulling the guts of these animals out in very unsanitary conditions. and literally, many of these huts have no running water and then shipping them to distributers and, ultimately, it wound up at baxter in chicago. and it was from that basis that the problem developed. the fda is trying to get inspections on site in china. the chinese have severely restricted the number of inspectors that they will allow in, and that whole program has become completely ineffective. >> i mean, if you're talking about hundreds of thousands of households involved somehow in the production of this product, it would seem to me to be very difficult to inspect. or to, you know, have much of any enforcement at all. do you have any comment on that,

rosemary? >> it's -- to do an fda inspection here in the united states is a lot different from doing an inspection 10,000ing miles away. 10,000 miles away. but i think, dr. goldman, the real issue is what happened with smithfield which is, was the world's largest pork producer. and i know, dan, you're certainly familiar with this transaction. so where did all those pig intestines go from smithfield here in virginia? if you have sunday morning bacon or if you have a ham on new year's day or if you go into mcdonald's for sausage, that pork is coming from smithfielding which is now a chinese company. dan, do you want to talk about that? because smithfield controlled a very substantial portion of the pig population here in the united states. and that company was sold to china, and with it we lost --

potentially lost, and we don't really know because it's a private company, and congress has no authority over them to ask so where are you sending your pig guts. are you shipping them over to china, or are they staying here in the united states to make this very important drug called heparin. >> yeah. if you can imagine, smithfield was the largest producer of pork in the united states. they had 36% of the pork market, and a company bought them and paid a huge 30% premium for this company. and pork is 50% of the meat diet in china. can china is the only country in -- china is the only country in the world that has a pork reserve. we have an oil reserve in the united states. [laughter] you can imagine, every six months they have to turn this over. and the problem is that the average chinese pays 40% of

their disposable income for food. in the united states, we spend 11%. so slight increases in food prices create rioting and instability in china. and that's why, that's why they did this. and the chinese have learned that it was better to the to buy the coal mine than just buy the coal. it's better to buy the iron ore mine than buy the iron ore. they can buy all the pork they want on the commodities market, but they chose to buy this company. and not only did they get this company, but they got all of the technology -- the manure handling, the genetics, all kinds of very sophisticated china -- that this company originally got from the department of agriculture on our tax dollars, okay? which were then, now the chinese have it. and the real problem is that the pork is now coming back into the united states with the

smithfield label. and so you have no idea what you're really eating. we have a law in the united states, it's called the cool law, certificate of labeling. and there are 18 exceptionings. so you go into harris teeter and you want to buy pork, you can't really -- you look at the package, it might say packaged in the united states or processed in the united states. it ultimately comes from china. i know from testimony that 85% of the city lap ya comes from -- tilapia comes from china. if i'm going to buy tilapia, i've got an 85% chance it comes from china raised in contaminated fish barns. so it became a real -- it becomes a real problem not knowing what we're even buying. and the issue in congress was

should they allow this sale to take place under a law called cfius. and ultimately, it was determined by congress that this was not a national, pork is not a national security item, and they allowed the sale to take place. so did i answer it, rosemary? >> thank you for that. i'm going to turn now to patrick mulloy who's our second distinguished panelist, the former assistant secretary of the u.s. department of commerce where he was responsible for the international trade administration during the clinton administration. and before this patrick and i were talking a little bit about we were both in the clinton administration at the time that the wto was created. >> yeah. >> in fact, we're -- we were actually both in geneva, witnessed the fact that this was not a smooth process, just creating this thing called the wto. that, in fact, there were a lot

of concerned members of the public. but yet i think most of us at that time were quite optimistic about that. and particularly about the prospect of bringing china into some kind of an international trade agreement. we could see sop potential risks -- some potential risks, but we could see also a number of potential upsides. and, patrick, i thought i would start with that issue, you know? twenty-five years later, i guess -- >> okay. >> what has been the upshot of all of that? be what -- do you think that that has met our expectations in terms of bringing china into the wto and opening up trade? >> okay. i'm happy to -- first off, i first went to china in 1981. china was a poverty-stricken country. they had what they call their century of humiliation where

their whole civilization was taken over and crush by the western powers beginning with the opium war, the second opium war, the fall of the emperor, the japanese invasion, the whole thing fell apart. mao tse-tung took control in '49 and tried to build a communist country. it didn't work. they couldn't really get their economy going. the genius deb show ping took over in 1979. he said we need foreign investment, foreign technology, foreign know-how and foreign markets. , and that's the way we're going to build a powerful china and get our power back. they want to be number one, they were number one for centuries out there in asia. they want it back. okay, so if we accept that -- and i think that's pretty accepted among a lot of thinkers now -- china in the wto. the wto was created, we used to have the gat from '45 til '93

when the wto was created. i was there in geneva. i wasn't as optimistic because i was there to keep financial services out of it. i was general counsel of the senate banking committee, and we didn't think we were getting market-opening commitments in asia, so we did not want financial service to be covered because there's something called mfn. meaning if i give britain very low tariffs, i have to give those same very low tariffs to china because it's called most favored nation treatment. and you have to do that when you're in the wto. china did not come into the wto in '94 when the wto was created. >> that's true. >> china only came into the wto in with 2000. now, because china was a communist country, we could not give them mfn more than one year at a time because there was a law called the jackson law that said we couldn't give china mfn more than one year at a time.

but we were giving them mfn. why did they want to get into the wto if we were already giving them mfn? because they wanted permanent mfn. and that meant that the congress had to change our law. the congress was persuaded to do so, and all the lobbying was this will increase american exports to china. when china came into the wto, we had -- this was in 2000, 2001 they actually came in -- congress gave them mfn in 2000, the bush administration brought them in in december 2001. so it was bipartisan. both parties were part of this. 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 this would help increase american exports and decrease the $80 billion trade deficit. it did not. the whole thing was about investment. there was an a article the day

after the house vote to give china permanent mfn, there was an article in the "wall street journal" saying this was never about exports, this was about american companies investing in china both to satisfy the chinese market and to ship back here. and that's exactly what happened. now why? there was another thing that was going on at the same very period. i was general counsel of the senate banking committee, i saw it. we used to have something called that corporations had stakeholder obligation. in 1998 -- 1981, the business round table, which is the big organization that represents all the ceos, they said their responsibilities are to their customers, the their employees, to their commitments, to their -- to their communities, to their shareholders and to their country. in 1999 when the business round table put out their new statement of what their obligations were, it was to their shareholders. that's it. you ask these ceos, what's your

responsibility? make our shareholders wealthy. and their own compensation is tied to their ability to make their shareholders wealthy. so american corporations, if that's their responsibility -- and china now is in thewto and locked in to give them very low tariffs, 2.5 average tariff. that does not mean when we ship goods to china we pay the 2.5% tariff. we pay about 11%. so mfn means you only give the tariff that you give to your best trading partner. so the incentive is for american companies to go to china and ship back here. and if you read the book that our author has put together, you'll see that's exactly what happened. our companies, these big drum companies, weed had very talented -- we had very talented, high-level people in this country who were dismissed from their jobs, and those factories were taken from here

to china. and that's what's driving this whole process. ralph gomery who is the former chairman of the alfred p. sloan foundation and the former vice president of ibm has written extensively on this whole issue of how we moved from stakeholder to shareholder capitalism. and what a detrimental effect it's had on this country. because as you see, the inequality -- the average ceo used to make 50 times the average worker. now they're making, like, 4 and 500 times the average worker. they're concentrating wealth among a very small group in this country, and they're undermining the average middle class job in this country. and this is a very important issue, and you put your finger right on it in this book in pointing out this has national security implications of what we're doing. and our country really hasn't grasped it yet. i think the american people know something bad is happening to them, and i think trump tapped

into this when he won the election. he talked about this issue. i'm not sure he has all the policies in place to really address it, because unless you deal with this issue, corporate governance, you're not going to to be able to deal with that issue. is that helpful to you? >> yeah, patrick, if i can just follow on with that. i mean, we know particularly drugs and products like that -- >> yeah. >> -- contain a tremendous amount of kind of intellectual property. >> absolutely. >> that's gone into their development and production. >> yeah. >> but also, of course, an enormous investment by the american people and all the biomedical science and research whether it's through, you know, the crisis we've paid for drugs and the research that's been done privately by the drug companies or by the nih, university research, all the rest of that. and i'm happy to see the world benefiting from that. >> so am i. >> but yet as we're now entering into this period where there's increasing conflict between our country and china, we're seeing that there's discussion of

tariffs going on such products that include, you know, intellectual property including the drugs. could you talk a little bit about why, you know, why those would particularly be targeted for tariffs -- >> yeah. >> -- and what the impacts of those tariffs might be. >> pharmaceuticals or biomedical, the chinese have put up something called project 2025. they've identified ten key industries that they want to be world leaders in. both in terms of satisfying their own market, but in satisfying global markets. and they are pumping subsidies, they are stealing intellectual property from american companies. when american companies invest in china, they require it to be done through a joint venture so you transfer your know-how and your technology. plus, they say if you want to do well on china, you should put an r&d lab here, and you'll be considered a friend of china,

and you'll get better treatment in china. so all that is going on. so what the administration is doing, there's something called section 301 of our trade law that says if we identify unfair trade practices, we can target those practices with tariffs. and that's exactly what bob lite heiser and this administration are doing. they're saying certain of these industries that you're subsidizing, you're stealing intellectual property, you're forcing companies out, we're going to start restricting their access to the american market because we're not going to help you make those industries global leaders. because, one, we're not going to get access to your market. and secondly are, you're going to destroy the rest of what we can do here at home and be flooding us. when you -- right now since china came into the wto we've run $4.2 trillion worth of trade deficits with china. now, i know there's a big

discussion among economists do trade deficits really matter. well, if we only look at gdp -- there are four factors, one of them is net exports. that means the difference between your exports and imports. when you're running negative net exports, which we're doing at $500 billion in last year, $750 billion in manufacturing goods last year, that has a very detrimental effect on job growth and wealth in your economy. so we've got to get this trade situation straightened out. as i said, i'm all in favor of what they're doing on section 301. i do not think it's adequate. i think we have to get after this corporate governance issue and reshape that our corporations have some responsibility to this country and not just to their shareholders. >> i mean, rosemary, what do you think? you know, i guess it's hard for me to understand all the economics behind all of this. >> yeah. >> but one thing i can understand that's kind of a fundamental of economics is the extent to which the prices of

drugs are driving the cost of medical care in this country and the differential between what we pay for the very same drugs in this country compared to what people pay if they're in canada, if they're in europe, if they're in australia. we have some australians here. that our prices are incredibly high in comparison to others. is there some hope to be able to, you know, reverse the flow? will the tariffs help to reverse the blow? are there other policies we would need to do? are there solutions that are on the horizon? >> sure. i think there's a couple of issues here. first, one of the reasons that drug prices can be so high in the united states may have nothing to do with china, but our own internal market manipulation. and for those of you, if you were watching all the middle men and middle women from the point that a drug is manufactured to the point that you pick it up at a pharmacy, there's a lot of things going on there. what should be a costco model

where it's open competition, it's been turned upside down to be one of the most expensive ways that we could sell mid r -- medicines. and a lot of people are making money off that middle process that can make drug prices so very high. >> i mean, i have to say most of us are just dumbfounded when we see, you know, if we have insurance that covers a prescription drug that we see the price at, say, $125. but then what we pay, because of a negotiated price by our insurance company, it's like $12. and then, you know, how is it that 90% of the price goes away through that negotiation? that's rather difficult to comprehend. >> well, sunlight is one of the best disinfectants, and where we need sunlight to be 120 degrees in the blazing sun is here on drug prices, how they're set, who's setting them. because we don't have it now. and there's no organized constituency to demand that

transparency. that's what we need. i also want to respond to a point that patrick was making about the impact of our loss of industries in communities. in the book i tracked a little bit about grotten, connecticut, which is the place where pfizer has had substantial operations and its research program. and for lots of reasons when drugs went off a pat lent, when lipitor went off patent and plus when pfizer was investing in china billions and billions of dollars for research and development and building plants there, you see what happens is pfizer stepped back and had very substantial layoffs. what it's done to that local are economy. i spoke to people who work in real estate. i spoke to the guy who runs the bowling alley, a gentleman who has an insurance company, and he described what's happening to

housing prices and jobs. and the guy from the bowling alley said what's happened with all these layoffs is industry has moved offshore, and we've lost patent protection. we're seeing an increase in drug use. a beautiful shoreline community, it's just changing. and it's changing rapidly. just a couple weeks ago i called the gentleman who i interviewed who ran an insurance company there in grotten to tell him the book was out, he was quoted in it. he says, thank you, but he said i've got to tell you, i had to shut down my business. so the loss of these businesses is having a profound effect on communities around the united states. you don't hear it in the major newspapers. you might hear it in the local paper, but it's devastating to people, to their families. and these are in the case of pharmaceuticals, very highly trained people. we talk about we need more people in the s.t.e.m. fields. well, we have people in the s.t.e.m. fields, but some of

them are devastated, and meanwhile, companies are setting up very high investments in china, and they're hiring the ph.d. researchers at a third of the cost. so we have this adapt impact on our economy. and the final point is we have to decide as a country do we want to have an industry like pharmaceuticals here in the united states. do we want to have it? do we want to maintain that manufacturing capability? if the answer's no, then we're good to go. just let things happen. but if our answer is yes, what do we need to do differently? and that's where we hope "china rx" will stimulate a consideration. >> patrick, you were -- >> yeah. i wanted to -- she has a terrific -- let me just read something from this book, because it's right on. pharmaceutical manufacturing plants are among the 70,000 u.s. plants that have shut their doors since china joined the wto

in 2001. there's been a tremendous outsourcing of u.s. productive capabilities. everybody says, well, we're going to be the innovators and let them do the -- when you can't, when you're not making things, you're not going to be the innovators. and we say, oh, we're getting the cheaper drugs. wait until china is in the position to control the price of these drugs. you're not going to get three cheaper if they're the supplier because they're going to be in a monopoly position. >> yeah. >> we're on a very hazardous road for this country. and i think the american people, i think they're waking up that we had a huge problem. i see it going on in both parties. >> that's why i like this issue of our medicines because sometimes we can't identify with steel and autos and aluminum. >> yeah. >> we can identify with the pills that we put in our mouths and things that we rely on to take care of our infections --

>> yeah. well, but arguably you need those other things -- >> sure. >> -- devices and, i mean, all kinds of health care is dependent on those things too. dan, you know, in talking through these issues about kind of the intersection between with, you know, kind of the rules of the road for trade and then the things you describe to us about how china is actually capturing these markets, i'm having trouble kind of, you know, 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 abilities to kind of use the trading regime to enforce that people follow certain rules. finish? >> yeah. unfortunately, the rules were

set up on the wto on the basis that everybody was going to follow the rules. and the chinese chose -- they only follow rules that benefit them. and the mechanism is so slow and so difficult to enforce that it's ineffective. and in addition to that, you have to have a company that complains. and american companies are so intimidated by the chai these that -- chinese that we can't even get them to file the complaint, okay? if they import an automobile into the united states, the tariff is 2.5%. if we import an automobile into china, the tariff is 25%, okay? and the tariff for auto parts is 20%. i mean, how does that make

any -- they're so intimidated by the chinese government -- >> only the companies would have standing. >> yeah, the companies -- >> public health officials would not have standing -- >> the u.s. government has to bring your case in the wto. >> the government. >> but you have to provide the government with the information -- i see. >> -- to bring your case. and if they're hesitant because the chinese be will punish them with their operations in china they'll have a trade group -- for the china commission on which dan and i served for many years in the congress. i worked in the senate banking committee for 15 years. i've seen this up close. boeing, we used to -- i remember we would wonder, well, when boeing makes a sale to china, china says you have the make a part of the plane here in china in order to sell it here.

and we used to think, why is that? they say we're not forcing your companies, we're doing it on our own. they make the shareholders wealthier, themselves wealthier, it's a very short-term problem, and it's very bad for the united states long term. >> so i really want to maybe have each of you comment on what might be some possible paths forward, you know, maybe starting with dan and then, patrick. let you finish, rosemary. you know, trying to think constructively, because it seems we have gone down a path that isn't leading us out of this. >> okay. you have the united states that is process-oriented.

we have a constitution, we have laws, we sign treaties, and we, for the most part, we follow them. then you have a country, china, in which the end justifies the means; stealing, lying, cheating. anything else is encouraged and fostered by the chinese government. so you have these two desperately different systems that can't blend together. and so i think the only -- we are the only industrialized country in the world that does not have an industrial policy. germany, canada, china, japan, everybody else has an industrial policy. and what we have to do is if we don't start to subsidize our advanced manufacturing industries, we will cede that whole industry to china. okay?

and they have completely wiped out the opto-electronics industry. the entire industry has moved to china. lasers, sensors, digital, okay? all the stuff of the future is now in china, okay? they're in the process of moving the entire semiconductor industry from the united states to china. imagine having all of our chips made in china. the white house called us and asked us to look into a company called global foundries in santa clara, california. they were moving to china. i called the president of the company up, he said to me the 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 it went on and on and on. he said i didn't even know who to talk to in the u.s. government. i said, well, it wouldn't have made any difference, because

nobody would have done anything for you anyway. and he said to me, what would you do if you were me? i mean, and, of course, you know, the incentives were so great that we're moving to china. and they're doing this with all of these critical -- unless the u.s. government starts to incentivize these companies to stay here, now, we had -- there's a lot of problems with the tax bill, but we had to get our corporate income tax down to where everybody else is paying. that was a problem. the corporate income tax in china, i think, is 15%. in ireland it's 12. in the united states it was 35, wasn't it, pat? >> 33, i think. >> is 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 incentivizing

them to move. and, because if you -- the profit that a company made overseas was not subject to u.s. corporate income taxes unless they repatriated the money. so they would just leave the money over there and continue to build other factories. >> yep. >> 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 r&d facilities, paying for r&d in the software industry and the semiconductor 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 talk to intel and they say -- one thing the u.s. government could do is to say we will pay your tuition, anybody who studies electrical engineering at a state university in the united states,

we'll reimburse your tuition after you graduate if you stay here and work. it's things like that that we need to do. otherwise we're going to lose -- i mean, imagine, artificial intelligence, robotics, supercomputing -- >> electric automobiles is going there. >> yeah. >> yep. >> the other thing that we're doing is supercomputing is the basis for innovation in the united states for advanced technology, okay? it is critical. and the united states opened up the first supercomputing station at lawrence livermore laboratory in california in 1946. up until a few years ago, the united states led the world in supercomputing. about two years ago, the chinese exceeded the united states in supercomputing, and now the gap is getting wider.

so what does congress do? they cut the budget of lawrence livermore. it's like eating your seed corn, you know? it's just, this is the insanity. that's why i say i've met the enemy, and it's not china, okay? and we do all of these crazy things that just harm us. so if we, for 150 years we didn't have to do anything. we didn't have to have an industrial policy because we dominated the world from an economic point of view. but those days are over. and if we don't do anything, we're going to lose all of these critical industries. >> pat, i don't know -- >> yeah, pat. >> i'll give you -- here's what i think. warren buffett wrote a famous article in "fortune" magazine saying the trade deficit is going to sell the country out from under us. warren buffett is a pretty smart guy. you're sending the other guys the dollars. they're not sending those dollars back to buy your goods, they can go back and buy your

industries. that's what's happening now. president kennedy did not know how to get a man to the moon. he set a national goal because he thought it was in america's interest. 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 set a national goal and balance our trade, and we'll figure out howed to do it. i mean, part of it is corporate governance reform, the key part of it. part of it is providing incentives that dan is talking about for our own children, not all the foreign students, to be getting science and technology education in the united states. and, three, this corporate -- the tax bill. i would have done it a different way. i would have said if you're an american company and you produce in the united states, we're going to give you a very low tax. if you're going to be apple and you're going to do all your production in china and ship it back here, we're going to have a different tax rate for you, because we want to reincentivize production and jobs in the united states of america. there are a lot of ways to do in this, but you've got to set a

goal. once you set the goal, then you can figure out how to do it. >> the other thing, and i'll stop after this, is that what's really hurting this country are buybacks. buybacks are where corporations buy their stock, okay? and up until -- ron reagan changed, there was a securities law that prohibited corporations from doing because it artificially inflated their stock. reagan changed that. and today in the first three months of this year tens of billions of dollars of stock have been bought back by corporationings. that means that instead of those revenues being used to grow the company or to put into r&d, it's going back to the major stockholders who are usually the president and the chief executives 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 enriching ceos. >> speaking about how confused our priorities are from the standpoint of public health when you talk about china, you know, subsidizing the manufacturer of things like drugs and semiconductors or, and we subsidize sugar. [laughter] and that's, it's very sad. >> right. >> that's very sad. rosemary, i'm going to give it to you to talk to us about the path forward. the last word here. >> sure. the reason that i wrote "china rx" so my father and mother could read it was because i think we have to bring in what i call the common sense norms of ordinary people. and if you look at the media today, there's more stories about the dangers of getting your drugs from canada than there are stories about the reality of what's happening to our drug supply. this is a story that's hidden in plain sight that, frankly, they

don't want us to know. so i think we have to draw in and expand the conversation to know that people come to washington, it's an inner circle, a relatively small group of people who are making the policies that have created the situation 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 expand the conversation with people who know that something's not right. one of you said that. the american public know there's something just 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 in a lot of the mainstream media. and so how can we find alternative news sources across the spectrum? this is not a democratic issue, this is not a republican issue. this affects all of us. and so that's what we intend to do for the next number of months, and if there are places where you have it in your work

and in your other parts of your life where we can have this conversation, please let us know. that's the intent. we're going to start something here. i've been so impressed within just two weeks how much ordinary people and even people in the industry who can't speak publicly, but they know we have a serious problem, they're caught. there are good people in pharma 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 those people and the common sense norms of the public and change the conversation and inform the people. and informed people can to the right thing. >> all right. >> thank you. >> well, thank you very much. thank you all. >> thank you. [applause] >> [inaudible] >> we have a couple minutes if we have any questions from the audience. there are a couple of mics that

are here in the aisles. i see somebody coming forward. if you don't mind, just introduce yourself. hello. >> [inaudible] >> patrick mentioned the section 301 case that's brought by the office of the u.s. trade representative, and in a much-anticipated move, 45 pages of proposed tariffs were released, and they included a lot of chem cats -- chemicals for pharmaceuticals and pharmaceuticals. i wonder if you've all seen the list and whether that would, you know, do what you're intending to incentivize production here or have a perverse effect of, you know, more production in china. >> yeah. my understanding of that 301 -- of what 301 is being used is to focus on the industries that china has put in their project 2025 that they're going to -- these are high-tech industries,

as dan has talked about which ones they are. but among them is biotechnology. and so if you put tariffs on those industries, one, you protect yourself from the subsidy that the chinese is giving to those industries. secondly, 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 kinds so that we have a chance to move up the food chain and have those kinds of products being developed here. my understanding that's what the ustr is trying to focus on in their 301 on the project 2025. >> next question. >> and building off of that, my name is isabelle, i'm with inside u.s. trade. it sounds like tariffs are not the answer here to reducing the u.s. dependence on these, on

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 a aside from the tax bill? >> you speaking to me or -- >> anybody. >> okay. >> do you want me to start? >> go ahead. >> yeah. i think that one thing congress can do is declare that certain drugs are critical to the national security of the united states. and those drugs must be -- a certain amount of them must be made here. let's say penicillin, okay? we can't be 100% dependent upon china for our penicillin. and so one thing that congress can do is identify those critical drugs and require them to be made here. and maybe they issue some kind of subsidies, incentives or

whatever they want to do, but that would protect us from any adversarial action that china may want to take next year or five years from now. pat, you may have more -- i don't -- >> i'll jump in -- >> oh, i'm sorry. >> i'll jump in while you're thinking. you know, in the case of heparin there are actually researchers who are making progress and coming up with a synthetic heparin so we don't have to rely on pigs and china for it. but the incentives to turn that synthetic product into a market drug are not good because currently heparin is, the heparin we have now is still very cheap. so the market isn't aligned to want to buy a more expensive product. but public investment that's very targeted and strategic on essential medicines, we need to think about public investments in that research and bringing products like that to market that will preserve and protect us from dislocations and interruptions in supply.

>> you know, for pandemic preparedness we have a strategic national stockpile. and the government stockpiles certain products. not just drugs, but other products, you know? masks and all kinds of things to be there in case of a major pandemic. and so it's not a foreign concept of a national interest in having the availability of certain drugs. and i should say also in the case of the heparin, what really happened that really shut down our manufacture of the heparin was when there was the problem with so-called mad cow disease in the cattle in the u.k. and it would be sensible to stop using cows to make help rip. and, of course, cow guts are bigger than pig guts. so from a cow you got a lot more heparin. and that was how we manufactured it ourselves. and when they stopped the use of the cow guts, it kind of shifts

shifts -- shifted to china to be done with the pigs. which is to say if we had a better way and people have been working on this to monitor to detect very low levels in the cattle, you could feel that that's safe, and that would be a way that would be more efficient for us to manufacture it because it's not efficient to manufacture them out of pigs' guts. it's not fun rl when you have to talk about things like guts which is not a pretty picture, but anyway -- >> let me just comment one more thing. as i said, i was general counsel of the senate banking committee when we did the '88 trade bill. that's 30 years ago what senator byrd and i think jim wright was house speaker, they charged each committee to look at areas under their jurisdiction, do hearings and develop ideas of how to make the u.s. more competitive. we haven't done it in 30 years.

uh-uh think congress needs to do the -- i think congress needs to do the hearings and develop the provisions of law. in that '88 trade bill we covered exchange rates for the first time. we put cfius, which has been referred to here. there were a lot of great things in that bill, but it's 30 years out of date now. the wto wasn't even in existence. china wasn't in the wto. we need to really update the whole competitive strategy of the united states, and you have to do it through the congress. >> going to take two more questions starting with this gentleman. >> [inaudible] for rosemary, you mentioned to treat pharmaceutical as a strategic good. i wonder if you could elaborate a little bit how would -- [inaudible] that should we have strategic reserve of key medicines, and what would that list look like? >> well, dr. goldman brought this up, and i think it would be really desirous to identify a

group of public health experts, physicians and others to identify what is the list of essential medicines that we need to have. and to dan's point, that we should not be allowing other countries to produce in such a substantial share of the market. so that would be a first step. and have physicians and those who are users of these products -- and, by the way, most physicians have no clue about the situation that we're in. so that would be a first step, to have the experts identify what are those products that we need. the question is can we stockpile -- how much can we stockpile. my understanding of the stockpile is they're for more discreet events. >> and i wasn't really meaning stockpile -- >> sure. >> you want it to be continuously manufactured, to have a manufacturing capacity. >> absolutely. >> they have on the running. >> yeah, there's another point here. there's a new technology that's appropriate for the manufacture of some medicines called continuous manufacturing. there hasn't been that much advances in the manufacturing of

our medicines. it hasn't taken advantage of new technologies. so i would see another role as how can congress and the federal government incentivize companies to advance in its making of drugs. there's some products where you can make within 4 hours -- 24 hours, it was a technology developed at mit, and it was actually funded by a european company, not a u.s. company. but that technology is there. there's prefabricated drug plants that china is buying from general electric. how come china's buying it? why aren't we buying them here? so incentives to upgrade our pharmaceutical manufacturing is another step in the right direction. >> hi. >> [inaudible] my name is cindy, i'm from kaiser health news, and my question is for rosemary. we've been hearing for a while that 40% of finished drug products and 80% of apis are made in foreign countries, but between -- but that number is from 2009.

the fda hasn't updated it since. between that and the lax labeling laws that say that your drug only has to say where it's manufactured or who labeled it or where it was distributed, how are you able to figure out that the number of fame suit calls in china -- pharmaceuticals was, indeed, growing? >> that's a great question. the numbers that are out there are old. i think they obfuscate, and where our data points came from is from people who work in the industry who can come out and, frankly, talk turkey about how, in fact, dependent that we are. and we don't have good official numbers, and is we have to ask the question -- and we have to ask the question why not. the obfuscation about, well, 80% of our ingredients come from two countries. well, they just don't want to split up india and china, and what they also don't want to do is split up the active ingredients from the raw materials. so india may be making the

active ingredient, but it may be dependent on china for the raw material. they don't get into that level of detail to really pinpoint the amount of dependence that we really have. so to answer your questions question, our data point came from interviewing people in the field who said that if china shut the door, within months we'd have to shut down our hospitals and our pharmacy shelves would be bare. you can't get better than that. we need to know who's making our drugs, what are supply and demand. we need to do risk assess by country, by plant. we don't do that. at least in the public interest. there's commercial databases, but we don't have this in the commercial interest, and that's stunning. we wouldn't allow that for food, we wouldn't allow it for oil and energy supplies, but we allow it for medicine. there's lots of reasons for that. i think there's a lot of people that don't really want us to get into this sphere under the

terms, well, it's proprietary trade secrets. national security should take precedence. so we've got to open that big can of worms, shine a light on it with 180-degree sunlight. >> what you're saying is it's actually a quite complicated industry. >> it is. >> there are raw chemicals, specialty chemicals that are then used to make the actives that are then formulate ared. and i think that what we see on the containers is where they were actually packaged which is the last step. and so you don't really have a way of understanding where those ingredients were before they were actually packaged and into 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 which is defined as where did the active ingredient come from. so when it comes in the country,

you have to label where the active ingredient comes from. so we have -- that information exists somewhere. and we don't use it very well. i don't know how many people actually know it. and then there's fda rules, and they allow a wile west. it could be the packager -- wild west. >> the retail package. >> right. >> which is different than -- >> than the customs package coming in -- >> it's a complicate system. >> correct. >> could i ask a question? >> but we -- can i -- there's tips on 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 even the active ingredients. and if you can't find that out from the label, then you can try to call up your company. and some companies will tell you, others will not. it's worth a try. >> i ask one follow-up, how much

of this does the fda know? given they haven't put out a new breakdown. does the fda know where all these things are made? do they keep it in a locked-up place? >> they know, they know. the question is why can't they tell us. >> i have a question. [inaudible conversations] when i was first on the china commission, one of the things we found out was like walmart would tell american companies that are making goods in the united states if you want to stay in our supply chain, you better move to china and meet the lower costs. are the drugstores like cvs, are they pressuring the american companies like pfizer and others to move their operations to china in order to stay in their supply chain? how does this work? do you have a fix on 245? >> pat, i don't have an answer to that, but what i do hear is that there's a real hammering down on manufacturers. and we can't underestimate what

it takes to run a high quality manufacturing facility. there's perhaps a lack of sophistication or maybe it doesn't matter because procurement departments and companies want to make sure that we get the lowest possible price. and that -- and you have a challenge then between quality and safety. and too often safety doesn't win out. >> yep. >> this is where we need the transparency on what this market looks like and who's pressuring whom, because it's so complex. >> there ought to be congressional hearings on something like this, shouldn't there? >> i would love for members of congress to have the courage to do that. >> well, again, i just want to thank you all, thank our speakers, especially rosemary gibson, author of "china rx." thank you, all of you, this was a really enlightening session. thank you so much. >> thank you. thank you very much. thank you. [applause]

[inaudible conversations] [inaudible conversations] >> good afternoon, everyone. i'm the editor of the journal of democracy, and it's my very great pleasure to welcome you to this afternoon's event. one big question has really been preto occupying analysts of democracy over the past several years; namely, why