booktv archives in 2082018 rosemary gibson discussed the risks of the u.s. depending on china to supply essential ingredient forts maybe of the most widely used drugs. here's her talk from george washington university in washington, dc. ... rosemary gibson, her book explores the topic of a dramatic shift in where our medicines come from as china looks to position itself as the pharmacy of the world. i think many of us in the medical public health profession have been unaware of this shift. you may notice at times that there are shortages, there are contamination issues, other problems, but i think we have not been aware that there is a

systematic issue a major change in the system for manufacturing and delivering pharmaceuticals. the implications of one country controlling the supply of medicine are astounding. no matter what country we may be talking about. think about it, what if there is a global pandemic and it's hard to move product across the world because of that? what if there are heightened tensions within the south china sea, everyone can be vulnerable, everyone could be put at risk. the role of the fda in the situation cannot be overstated because the fda cannot be as effective in assuring the safety of our medicines and force long areas of the world as it can at home. many of us are not aware of the face-to-face contact that the fda has for those manufacturing our drugs. the inspections they conduct.

the very hands-on work involved in making sure the manufacture of drugs is safe. they certainly set up offices all over the world to do that but that is not the same as having offices carrying manufacturing in your own country. and with the u.s. losing many 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 very robust discussions of first let me introduce to you, rosemary gibson, rosemary gibson is senior advisor at the hastings center and the principal author of "china rx" exposing the risks of america's dependence on china for medicine. she is recipient of the highest honor from the american medical writers association in 2014 for

giving the public voice in interest to critical health issues of the day. at the george washington university she gave 2015 gibbs lecture we have annually here at the school of public health. at the robert wood johnson condition rosemary was chief architect of its $250 million decade-long national strategy to establish inpatient palliative care programs that now number 1600. she received lifetime achievement award of the ãb and i worked with bill moyers on the pbs documentary on our own terms. she is recipient of the willis blackman patient safety award from the south carolina hospital association. rosemary is also principal author of medicare meltdown" in 2000 ãband the wall of silence. her books have been reviewed in the publishers weekly, washington post, reference and

proceedings of the u.s. senate dimension and congressional testimony, noted in the wall street journal new york times, usa today consumer reports and other news outlets to numerous accounts. rosemary is chair of the board of ultram institute and nonprofit health systems research organization headquartered in ann arbor michigan.she graduated summa cum laude from georgetown university and a masters degree from the london school of economics. please join me in welcoming miss rosemary gibson [applause] >> should i take over for now? >> yes. >> the microphone working well back there? wonderful. thank you gentlemen and ladies. good afternoon everyone. doctor goldman, i want to thank you for making this event possible it's a very timely and fitting that we are here at public of school health in the nation's capital to discuss the

public health publications as well as national security risks associated with our and growing dependence within a single country within our medicines. 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 medicines but we have to be mindful of unintended consequences, companies might feel pressure to reduce their prices and reduce their costs, which could potentially drive more manufacturing to china. we will have to keep a close eye and there's one lesson we draw from today it's the intersection of our medicines and trade and trade policy. who would have ever thought of that? in looking at leah binder who wrote a wonderful piece on the forbes blog last week that actually made this very brilliant connection. it goes very deep.

i wrote "china rx: exposing the risks of america's dependence on china for medicine" 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 medicines were made here in the united states, europe, japan, now there's been a dramatic shift eastward. i wrote it from my mother so my mother could read it but also for policy walks and academics because i think we all need access to this information. we want to trust the medicine we take. the medicines that can mean the difference between life and death. we need to know where you are medicines come from? why are we dependent increasingly on a single country? what are the risks? what can we do about it? i was going to bring my smart phone and i medicine bottle but make believe i have it here. one of the questions i get

asked the most is how come i didn't know about this how come i didn't know 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 look in the back alleys mine says, designed in california and assembled in china. if you've ever got the amber colored plastic bottles with the whitecaps we've all seen those tells you how to take your medicine, what the dose is, it doesn't tell you where it comes from. there is no reason we should. let me tell you about what this d ship in where our medicines come from looks like. one of the first things we do that's never been done before in "china rx"'s name the medicines being made in china by chinese companies and sold here in the united states. they include antibiotics, antidepressants, birth control pills, a lot of young women i was interested to know

medicines for alzheimer's, parkinson's, 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 says to become the pharmacy of the world. i predict within decade or 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 and so many of our medicines. part of our medicines that give a therapeutic value. they make thousands of active ingredients for many of our medicines we find in our home medicine chest and in hospitals all over the country.

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

border and there's lots of tensions in that neighborhood in that part of the world. so it said something to the effective, imagine an indian soldier on the border and he opens up his medical pack and he sees his medicine and is running out. that soldier is dependent upon the people in the other side of the border, the adversary for the components to make essential medicines. 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 that question and talking about that here. i applaud the indian media for being transparent about it. if there's an around interruption and supply that would not only affect the healthcare population the military who also would affect a very important part of their economy because as you know they make export many 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 of our medicine within a single country no matter what country that is if there is a fukushima type sense and companies are shut down for months and months and months if there's a global health pandemic and countries have to line up for medicines, that could be a global catastrophe. or if tensions in the south china sea, is a hot spot right now, 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. how do we get here? how did this happen? i'm going to start with the story of the prescription i got two months ago today in antibiotic it was amoxicillin a form of penicillin it's a great

drug worked really well was back to my old self in about two weeks a real gift. penicillin tells the story of what happened in the making of that particular product. some of you might remember back during world war ii when read before the normandy invasion on d-day the federal government and industry including companies like fives pfizer made sure there was enough penicillin making capacity 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. we are government and industry work together to ensure we had an adequate supply of the miracle drug. let's fast-forward a couple decades in 2004 the new york times reported that the last

penicillin manufacturing plant in the united states was about to shut down. that was bristol-myers plan in syracuse new york. the new york times didn't tell the back story. what was really going on in 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 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 began to see chinese companies come in on the global market and they dumped penicillin at low market prices. it effectively drove our american european and even

indian companies from that business because they could not compete. the european producers call this a landslide decimation of the industry. then what happened was there a spectacular price increase that all of us was invisible to us in some way pay for. in china rx we call that the penicillin cartel. it'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 will take vitamin c may take a tablet it doesn't come from oranges in florida nice sunny florida grove. it synthetically made in a chemical plant used corbett acid probably in china. there's a fascinating story about that vitamin c cartel and that story still continues to this day.

same playbook. they were american european and japanese producers of this corbett acid the active ingredient in vitamin c a couple companies dumped on the world market, drove our competitors and when they were gone, raised the price again spectacularly. clear violations 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 they have enormous applications for a lot of our medicines and other products we get from china. we have penicillin and vitamin c cartel what does this tell us? it tells us that we are losing control over the supplies 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? what was driving it? what were some undercurrents? we identify two, the first is the generic drug law which is 1984 for those of you who remember the waxen act and it may generic drugs available to the american public a wonderful wonderful step forward it made them affordable for millions and millions of people. but that meant companies if they had to sell products more cheaply were looking for a place to make them more cheaply. they pivoted east to asia. but at that time the fda wasn't equipped to oversee and regulate a global industry. what else was happening in our research i have a very boring life you will find all kind of things on the internet late at night and one of the most interesting things i found was

a memo written by a very dedicated fda employee, a chemist, he asked the question or said we have no idea where all these boat drugs active ingredients are coming from and they could get to the president. we have 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 triggered u.s. dependence on china and that's when right here in washington congress and the white house agreed to grant china access to the u.s. market and also china joined the wto. it was fascinating to see 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 aspirin manufacturing plant, same playbook, dumped product on the. [singing] market, local producers couldn't compete without a business. something very important also happened in 2004, a major healthcare company in the united states vector healthcare they switch suppliers of a very important ingredient for a product they make, that product is called tough one, it's a blood thinner. it's widely used in hospitals. if you been to a hospital, you probably had it. a couple years after baxter switch suppliers from the u.s. to a china-based supplier, it

turns out there was a contaminated ingredient that was found in baxter's heparin product. it came from china, there was deliberate contamination for an economically motivated reasons and they were 250 deaths in the united states associated with that contaminated ã that triggered extraordinary reform, good progress, to try to fix what we basically have with the deregulated environment and other countries where we work getting her medicines. 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. about this, the united states has had the highest, the gold

standard good people the fda and industry developed to ensure we have high quality safe medicine every pill every time. we were effectively outsourcing manufacturing of our medicines to countries that had few if any standards. it's really remarkable. back in this period in 2007 some of you might remember the news report where the head of the chinese equivalent of the fda in china was executed for taking bribes. government officials in china with all candor said, we are still at a very early stage of being able to manufacture high quality medicines. that didn't stop the market moving to replace that acknowledged it had very few standards. really a remarkable transition. the other thing that's fascinating and leah binder,

your point about the lack of transparency, it turns out we have a trade deficit with china in pharmaceuticals, at least as of 2014. i've never seen a public official in the united states acknowledge we have a trade deficit in pharmaceuticals, maybe it's there and i'd love to see it if you caught a glimpse of it, please send it to me i would love to cite it. what i did find this data point was in a speech that doctor margaret hamburg gave in china to a group an audience of chinese who were probably very happy to hear that there is a trade deficit for the united states and china in pharmaceuticals. we have a lack of transparency. so how dependent are we 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. it was bacterial contamination and some of the products did not have the full therapeutic value with whether antibiotic or chemotherapy that could be devastating. the fda went in and found what they called systemic data manipulation this is a plant that had passed by the fda, chinese fda and other inspections over many years. the fda ban 29 different products from coming into the united states. because the united states was so dependent, the fda had to exempt 14 of those products from its own ban and some of those products included antibiotics, ingredients for antibiotics, ingredients for chemotherapies. the fda was concerned about drug shortages here in the united states. that's how dependent we are as

a country. there was a fascinating story about the availability of doxycycline after the anthrax attacks some of you might remember here in washington and new york so the u.s. military needed to buy a whole lot of doxycycline so they went to a very reputable company 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 he had to get the starting material from china. think of this, the u.s. military needed doxycycline after the anthrax attack and the starting material was obtained from china. and as someone from the industry said, so what if china is the anthrax attacker? our medicines can be used as a strategic weapon. then there are other examples when india said in the

newspaper said maybe our militaries depended on the adversary for medicine i thought what about us in the united states? where is the defense department picker it's medicine? i called up the defense department and communicated with the defense logistics agency which purchases medicine on behalf of the military it's family members, retirees and the 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. what about the risks what are the hidden costs of sheepdogs? we don't see them but in "china rx" we identify with some of these risks are.

what about consumer protections and product liability g i called up a lawyer an american lawyer who works in china and advises western companies. i said you have to understand the china price, the attitude is, one of the reasons our product is so cheap is because we assume no liability for it. it's buyer beware. 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 distributor and chances are that distributor has no financial assets or very limited assets. you effectively have no legal recourse. one of the hidden prices of cheap drugs is the lack of consumer protection. and then what happens when fda goes into plants and china what is it fine?

there's a plant that was making epilepsy product and the plant lacked any temperature and humidity control system to save money. so when fda inspectors went in it was a hot day and it was humid so the employees open the window and said this is supposed to be made under temperature controlled environment. it's a way you save money. another hidden cost of cheap drugs. seven years after the hepburn tragedy the fda went into a plant in china that makes heparin or said it did. and what followed 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 ban because prior possible complicity in the hepburn tragedy years before. the show factory and the shadow

factory. one of the most stunning things we found while doing this research is that even american companies who have plants in china don't meet the standards we would all come to expect. 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 her hands in the toilet was an open pit in the floor. this is what happens when we outsource production from a country where the highest standards in the world to a place that 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's going to take a long time

for those of you who've ever worked in quality control and quality improvement it takes a long time to build up a culture of quality and meeting standards and safety and to sustain it. those are some of the risks we face. i will close with, what we do? where do we begin? ? one of the first recommendations that we need to have a change in our mindset about our medicines right now they are like cheap commodity no different than a t-shirt, how can we buy them the cheapest possible price even 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.

something a country will fall apart if we don't 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. we have to work more to ensure that we have control over the supply of those medicines we rely on every day. finally can we have to make sure we maintain manufacturing capability at home. it takes knowledge, skill, and experience on how to make drugs and we can't let that go.

i spoke to a person who runs a manufacturing plant for brand-name drugs and she says we do everything right and i can tell that she does. they come from other plants and say the company just built a new plant and they're not even using it they are moving east. this person wonders who's going do this when i retire. i will stop there, i just want to say we are here at the university, the "china rx" just opened the whole landscape and i truly hope there are students and faculty here and others and journalists we dig deeper and we keep this on the radar. we understand what's going on in this very important market

and we can only do that if more people are interested. i hope you will buy a copy of "china rx", told family and friends.it took 3 and a half years to do this research, it's not a transparent industry. >> we are going to move into discussion with our distinguished panel but before going into that i just have to thank you very much for all your research and for bringing this issue forward in a way that is 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 health medicine in this country. i thought first i would turn to dance lane, appear 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 think

were all aware that in today's current political context, there's a lot of concern about global global globalization and trade and commerce.there's a lot of concern about the movement of manufacturing overseas. also how this is continuing to unfold in this current era we are in today. >> this is a country who supplies almost all of our medicine. a country that steals between 250 and $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 advance 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 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 docs, rotted on the ships. about two years ago the japanese seized a chinese fishing vessel in their waters and arrested in the crew. the japanese released the crew and shipments continued. this is a country we have now become dependent upon for our drugs. what's at stake here is we are 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 locations. they are militarizing space and now have the capacity to take out our tps system in space. in addition to that, they are spending hundreds of billions of dollars improving their military, they are graphically reaching parity with us on fighter jets, submarines, and

missiles. and there is stated intention is to push us out of the eastern pacific. 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've met the enemy and it's not china. the enemy is us. shame on us for allowing this irresponsible business procedure to proceed with such a critical component as our drug system. my hope is that 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 will stop there. >> to follow-up we are hearing in the school of public health and the way i first became aware of some of this was in the context of heparin and some

of the heparin from china was contaminated and i think rosemary talked about that a little bit that to my shock i learned that all of our heparin in the u.s. is coming from china. rosemary mentioned 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 to keep it from clotting so you can have ivs, you can't have ivs at the clock. when a flashier iv it's a heparin flush. it's an absolutely essential drug, only for people who need it as a blood thinner but anybody who needs an intravenous drip needs heparin. it's hard for me to understand how that could've happened how

could it have happened that something as essential that basic to medical care could wind up being completely offshore here. >> 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 in china who were pulling the goats of these animals out in very unsanitary conditions in many of these huts have no running water and then shipping them to distributors and ultimately wanda pat baxter in chicago. 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 they will allow in

and that whole program has become completely ineffective. >> if you're talking about hundreds of thousands of households involved somehow in the production of this product it would seem very difficult to inspect. to do an fda inspection here the united states is a lot different from doing inspection 10,000 miles away. i think doctor goldman, the real issue is what happened with this field which is the world's largest pork producer. i know dan, you're certainly familiar with this transaction. where did all the pig intestines go from smithfield here 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 into mcdonald's for sausage, that pork is coming from smithfield which is now owned by a chinese company.

we had a problem with smithfield, do you want to talk about that dan? this field controlled a very substantial portion of the pig ãthe 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. where are you spending ãb sending your pig guts? are you shipping them to china were sending them to the united states to make this very important drug called heparin? >> if you can imagine, smithfield was the largest producer of pork in the united states at 36 percent of pork market and the company called shane way for them and paid a huge 30% premium for this company. pork is 50% of the meat diet in china. china is the only country in the world that has a pork

reserve. we have an oil reserve in the united states. you can imagine, every six months they have to turn it over. the problem is, the average chinese pays 40% of their disposable income for food. in the united states we spend 11 percent. slight increases in food prices are rioting and instability in china that's why they did this. the chinese have learned that it was better to buy the coal mine just by the coal. it's better to divide the iron mind then the iron war. they can buy all the pork they want on the commodities market that they chose to buy this company and not only did they get this company they got all of the technology, the handling, genetics, all kinds of very sophisticated

technology that this company originally got from the department of agriculture on our tax dollars. which now the chinese habit. the real problem is that the pork is now coming back into the united states with the smithfield label. you have no idea what you are really eating. they are 18 exemptions to the cool law. you go in and want to buy pork, you can't really come you look at the package you might think, packaged in the united states or process to the united states, it ultimately comes from china. i know from testimony that 85 percent of the tilapia comes from china. if i'm going to buy tilapia i have 85 percent chance of

coming from china, raised and contaminated fish bards. it became a real, it becomes a real problem not knowing what we are even buying and the issue in congress was should they allow the sale to take place under a law called sabia's and ultimately it was determined by congress that this was not pork is not a national security item and allowed the sale to take place. the answer it? >> thank you for that. i'm going to turn to patrick moy who is our second distinguished panelist. patrick is a former assistant secretary of the u.s. department of commerce where he was responsible for the international trade administration during the clinton administration. for this patrick and i were

talking about we were both in the clinton administration at the time the wto was created. in fact, we were both in geneva witness the fact that this was not a smooth process of creating this thing we call 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 some potential risks but we could see also a number of potential upsides and patrick, i thought i would start with that issue, 25 years later i guess, what has been the upside of all that? do you think that has met our expectations? in terms of bringing china into the wto and opening up trade?

>> first off, i first went to china in 1981, china was a poverty-stricken country, they had what they called their century of humiliation where their whole civilization was taken over and crushed by the western powers beginning with the opium war, second opium war, the following emperor, the japanese invasion, the whole thing fell apart they tried to build a communist country it didn't work they couldn't really get their economy going ãbtook over in 1979. he said, we need foreign investment for the technology will foreknow in foreign markets. and that's the way were to build a powerful china and get our wealth and power back. they want to be 2 no, they were

numero uno for centuries out there in asia they want back. okay. so we accept that and i think it's pretty accepted among the a lot of thinkers now. china in the wto. the w geo was created. we used to have the gatt from 45 until 93 when the w geo was created i was there in geneva wasn't as optimistic it was going to work because i was there to keep financial services out of it. if we did think we are getting market opening commitments in asia so we did not want financial service to be covered by the wto because there's something in the wto called mfn meeting if i give britain very low tariffs i can give the same low tariffs to china. because it's called most favored nation treatment and you have to do that when you're wto. china did not come into the wto and 94 what was created. china came into the wto in

2000. because china was a communist country, we cannot get the mfn more than one year at a time because there was a law called the jackson manic law we couldn't give china mfn more than one year at a time. but we were giving them mfn, why do they want to get in this wto? we were already giving them mfn stop they wanted permanent mfn. that meant congress had to change the law. 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 visited 2000 2001 he actually came in congress gave the mfn in 2000 the bush administration document 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 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 article the day after the house boat to give china permanent mfn there was an article in the wall street journal saying this thing was never about exports this was about american companies investing in china both to satisfy chinese market and shipt here. and that's exactly what happened. why? another thing that was going on at the same day period. i saw it. we used to have something called a corporations have the stakeholder obligation in 1990 1981 the business roundtable which is big organization represents all the ceos they said their responsibilities are to their customers, to their employees, to their

communities, to their shareholders and their country. in 1991 ãb1999 with the business roundtable put out there new statement of what their obligations were, it was to their shareholders.that's it. you asked the ceos what to responsibility? shareholders. their own compensation is tied to their ability to make their shareholders wealthy. american corporations their responsibility and china is now in the wto and we are locked in to give them very low tariffs, 2.5 percent average tariff on goods coming from china to united states that did not mean that when we ship goods to china we pay the 2.5 percent tariff we paid about 11 percent tariffs for american goods going to china. mfn means you only get the tariff you get your best ãbif you get 11 percent that's all we got. the incentive is for american companies to go to china and shipped back here. if you read the book that our author has put together you'll

see that's exactly what happened. our companies, we had very talented high level people in this country who were dismissed from their jobs. that's what's driving this whole process. has written extensively on this whole issue of how we move from stakeholder to shareholder capitalism. and what a detrimental effect it's had on this country. because as you see, the average ceo used to make tee times the average worker. now they're making like four or 500 times the average worker the concentrating wealth among a very small group in this country and undermining the average class job in this country.

this is a very important issue and you put your finger right on it in this book and pointing out this has national security implications what were doing in our country really hasn't grasped it yet. i think the american people know something bad is happening 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 committee not to be able to deal with this issue. is that helpful? >> if i can follow on with that. we know that particularly drugs and products like that contain a tremendous amount of intellectual properties that have gone into their development and production but also of course an enormous investment by the american people and all biomedical science and research whether do the prices we paid for drugs in the research done privately by the drug companies nia. i'm happy to see the world

benefiting from that but as we are entering into this period were there is increasing conflict our country and china, we are seeing that there is discussion of tariffs going on such products that include intellectual property including drugs. could you talk a little bit about why those would particularly be targeted for tariffs and what the impacts of those tariffs might be? >> pharmaceuticals of biomedical the chinese put up something called project 2025 they identified 10 key industries they want to be the world's leaders in.both in terms of satisfying their own market but in satisfying global markets. 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 joint venture so that you transfer your know-how and your technology plus they say if you want to do well in china you should put an r&d lab here would be considered a friend of china get better treatment in china.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. that's exactly what bob like kaiser and his administration are doing. they are saying, certain of these industries that you subsidize in your still intellectual property, forcing companies out we will start restricting their access to the american market because were not can help you make those industries global leaders. because for one, we are not going to get access to your market and you are going to

destroy the rest of what we can do here at home here. right now since china came into the wto we've done $4.2 trillion worth of trade deficits with china. i know there's a big discussion among economists do trade deficits really matter. if you look at the gdp there's four factors, one of them is the exports that means the difference between exports and imports. when you're running negative net exports what were doing a very major rate $500 billion last year, $750 billion in manufacturing goods last year that's a very detrimental effect on job growth and wealth in your economy. we got to get this trade situation straightened out. i'm all in favor of what they are 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 her corporations have some

responsibility to this country not just the shareholders. >> rosemary would you think? it's hard for me to understand all the economics behind all of it but one thing i can understand that's a fundamentalist about 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 dear in canada, europe, australia, we have some australians here, that our prices are incredibly high in comparisons to other. is there hope to be able to reverse the flow? will the tariffs help to reverse the flow k-9 are there other policies we would need to do? are there solutions on the horizon? >> and there is couple of issues here, one of the reasons 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 watching, all the middlemen and middle women from the point a drug is manufactured to the point 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 we could sell medicines and a lot of people are making a lot of money off that middle process that drug prices so very high. >> most of us are dumbfounded when we see, if we have insurance that covers prescription drugs that we see the price let's say $125 but none what we pay because the negotiated price by the insurance company is like $12. how is it that 90% of the price goes away so that negotiation that's rather difficult to

comprehend. >> sunlight is one of the best disinfectant sunlight to be 20 degrees sun is here on drug prices how they are sick, who was sitting there because we don't have it now if there is no organized constituency to command, demand that transparency. 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 groton connecticut the place where fives are his had substantial operations in its research programs and for lots of reasons when drugs went off patent, lipitor went off patent and when pfizer was investing in china, billions and billions of dollars research and development pfizer step back and had very substantial layoffs. but it's down to the local

economy i spoke to people who work in real estate. i spoke to the guy who runs the bowling alley in groton and a gentleman who has an insurance company in groton and he describes how what happened to housing prices and jobs in the life of the bowling alley said what's happened with all the layoffs is industry sure loss action if we are seeing an increase in drug use, beautiful shoreline community is just changing. it is changing rapidly. just a couple weeks ago i called the gentleman who i interviewed who rented insurance company there groton to tell him the book was out and he was quoted in it he said thank you but he said i got to shut down the loss of these businesses is having a profound effect on communities around the states you don't hear it in the major newspapers can be but here it in the local paper but

it's devastating to people, to their families and in the case of pharmaceutical commitment severely highly trained people we talked about we need more people in the stanfield. we have people in the stanfield. some of them have been devastated and companies are setting up very high investments in china and they are hiring phd researchers at the cost. we have these dramatic dislocations that have a huge impact on our economy. we have to decide is country do we want to have an industry like pharmaceuticals here in the united states? do we want to have it. do want to maintain the manufacturing capability if the answer is no then we are good to go just let things happen but if her answer is yes, then what we need to do differently and that's what we hope "china rx" will stimulate a conversation about.>> she has a terrific section, i want to

read something from this book. pharmaceutical manufacturing plants are among the 70,000 u.s. lancet shut their doors since china doing the wto in 2001. there's been a tremendous outsourcing of u.s. productive capabilities. when you're not making things coming back to be the innovators. they will be the innovators. we say we are getting cheaper drugs. not necessarily getting cheaper drugs if they are the supplier. because they will be in a monopoly position. we are on a very hazardous road for this country. i think the american people are waking up.

....... in talking through the issues about the intersection between kind over to rules of the road for trade and then the things you describe to us, about how china is actually capturing the markets. i'm having trouble kind of squaring the circle here. doesn't make sense to me that this has been possible given the kinds of what i thought were abilities to kind of use the

trading regime to enforce that people follow certain rules. >> unfortunately, the rules were set up on the wto on the basis that everybody was going to follow the rules. and chinese chose the -- they only follow rules that benefit them and the mechanism is so slow and so difficult to enforce that it is ineffective, and in addition to that, you have to have a company that complaints, and american companies are so intimidate by the chinese that we can't even get them to file the complaint. and so if they emport an automobile into the united states, the tariff is 2.5%.

if we import an automobile into china the waiver is 25% and the terrify for auto parts ir20%. how does that make -- why aren't we complaining at the wto because we can't get auto companies to actually -- they're so intimidated by the chinese government. >> only the companies would have standing. >> the companies have to file -- >> public health official would not have standing about the -- >> the u.s. government has to bring your case in the wto the government. >> but you have to provide the government with the information to bring your case. >> i see. >> 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 even testify. they'll have a trade group testify so they're not identified. both before the china commission 0, on which dan and i served for many years, and in the congress. worked in the senate banking

committee for 15 years. i've seen this up close. boeing, i remember we would wonder, when boeing makes a sale to china, china says you have to make a part of the plane near china and order to sell it here. we used to think. why is that? sewso we put michigan the wto you can't do forced technology tran fer, chinese completely ignore it and say we're not forcing your companies. they're doing it on their own, of course because at least they want to make share holders weltier, a very short term problem and very bad for the united states in the long run. >> i want to have each of you comment on what might be some possible -- maybe starting with dan and then patrick and then let you finish, rosemary, but 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 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 china 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. and they have completely wiped out the opt to electronics industry. the entire industry has moved to china. lasers, sensors, digital. all the stuff of the future is now in china. they're in the process of moving the entire semi conductyear industry from the united states to china. imagine, having all of our chips made in china. the white house called us and asked to us look into a company call global foundaries in santaa clarea, california, they withmooring to china. i called the president of the company and he said the chinese offers us free use of a $4 billion chip manufacturing

plant, no taxes for ten years, they'll train our workers and went on and on and on help said i didn't even know who to talk to in the u.s. government. i said wouldn't have made any difference because nobody would have bun anything for you anyway. he said what we woo -- what would you do? the incentives were so great we're moving to china. so, they're doing this for all 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. and the corporate income tax in china i think is 15%. ireland it's 12 and the united states it was 35. or -- >> 33. >> so we were way out of whack.

so that was a good first step. but there's a lots of things the u.s. government can do to incentivize these companies to stay here. we actually were incentivizing them to move, and because if you profit that a company made overseas was not subject to u.s. corporate income taxes unless they repatriate the money so they would just leave me my over there and build other factories. so, the answer to i think the drug problem that we're talking about here today is that the united states has to incentivize drug idaho manufacture here, and that is a function of providing them with r & d facilities, paying for r & d, and in the software industry, in the semi conductor industry, one of the biggest problems that's can't find enough electrical engineers and they have plenty of

electrical engineers in china. so when i talk to intel and they said -- one thing u.s. government could do is to say, we will pay your tuition, anybody who studies electrical engineering at a state university in out we'll reimburse your tuition if you graduate and stay here and work. it's things like that we need to do. otherwise we're going to lose -- imagine artificial intelligence, robotics, super computing, and the other thing that we're doing -- >> electric automobiles is one of the other -- >> yeah. the other thing that we're doing is super computing is the basis for innovation in the united states for advanced technology. and it's critical. and the united states opened up first super computer station at

lawrence livermore laboratory in california in 1946. up until a few years ago the united states led the world in supercompute hing, to yearsing into the chinese succeeded the united states and now the gap is getting wider. what does congress do? they but the budget of lawrence livermore, that's like eating your seed corn. this is insanity. i have met the enemy and it's not china. we do all of these crazy things that just harm us, and 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 for an economic point of view but those days are over, and if we don't do anything, we're going to lose all of thieves critical industries -- all of these critical industries. >> pat? >> here's what i think. one, wrote a famous article in fortune magazine saying the trade deficit is going to sell

the country out from under us. the name of the wall. way buffett. he said when you're running massive trade deficit outside sending the guys dollars they're not sending dollars back to buy your goods, they can buy your industries. that's what is happening now. president kennedy did not know how to get a man to the moon. he set a national goal bus because he thought was american's interest. congress bought on to it and we figure it out. to me the best thing the united states ought to do is say, we're going set a national goal and balance our trade and figure out how to do it. part of is corporate governance reform is a key part. part of it is providing these 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, the, this corporate -- the tax bill. i would have done it's different way. i would say 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 due your infrastructure china, and she it back here we'll have a different tax rate because we want to reenven vice production and jobs in the united states. to you have to set a goal. once you set the goal then you can figure out how to do it. >> the other thing -- i'll stop after this -- is that what is really hurting the country are buybags. buybacks are where corporations buy their stock, and up until -- ronald reagan changed the -- a securities law that prohibited corporations from doing that because it artificially inflate their stock. reagan changed that, and today in the first three months of this year, tens of billions of dollars of stock had been bought back by corporations. that mean is instead of the revenues being used to grow the company, or to put into r & d, it's going back to the major stock holderred who are usually

the president and chief executives and hedge funds. it hurts the economy and it hurts the country, and that is another law that we need to put into place to stop stock buybacks, and that money should be used to grow companies, not be enriching ceos. >> do you have -- peeking about how cop fused our priorities are from the standpoint of public half. you talk about china subsidizing the manufacture of things like drugs and semi conductorsors ane subsidize sugar and that's very sad. that's very sad. rosemary, i'm going to give it to you to talk to us about the path forward. >> sure. reason i wrote "china rx" so my mother and father could read it, i 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 they're more stories about the dangers of goetting your drugs from canada than there are stories about the reality of what its happening to our drug supply. a story that's been hidden in plain sight 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 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 book we can expand the conversation with people who know that something is not right. one of you said that. american public knows there's just something not right. but they're not being educated because we have frankly had a news blackout. you can't get this topic on the nightly news and a lot of the mainstream media, and so how can we find alternative news sours.

no democratic or republican issue. if you have it in your work and other part of you've life where we can have this conversation, please let us know. we are going to start something here. i've been so impressed if within just two weeks how much ordinary people and even people in the industry, who can't speak publicly, but they know we have serious problem. they're caught. they're 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 do the right thing. >> all right. thank you. >> thank you very much.

thank you all. >> thank you. [applause] >> we have a couple of minutes for questions from the audience. a couple of mics here in the aisles. i if you don't mind, just introduce yourself,. >> [inaudible] -- the section 301 case that's brought by the office of the trade representative and much anticipate move, 45 pages of proposed tariffs were released, and they included a lot of chemicals for pharmaceuticals and pharmaceuticals. have you seen the list and whether that is -- would do what you're intending to incentivize production here or have a perverse effect of more production in china.

>> my understanding what 301 is being used is to focus on the industries that china has put in their project 2025 they're going to -- these are high-tech industries, as dan talked pout, which ones they are but among them is biotechnology or -- and so if you put tariffs on those industries, one you protect yourself from the subsidies the chinese is giving to those industries and secondly you make them more expensive for those goods to be coming into the out and wiping out our people so we have a chance to move up the food chain and haves those kinds of products developed here. my understanding that is what usdr is trying to focus on in the 301 on the project 2025.

>> next question. >> building off of that, my name is isabelle with inside u.s. trade. sounds like tariffs are not the answer here to reducing the u.s. dependence on pharmaceuticals factors and critical minerals used in these products. what other congressional solutions do you think are available aside from including incentives in the tax bill? in 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. >> anybody. >> go ahead and start. >> 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 say penicillin. we can't be 100% dependent on china for our penicillin and one thing that congress can do is identify the critical drugs and require them to be made here and maybe the issue some kind of subsidies, incentives or whatever they want to, but that would protect us from anyied a very cereal action china might want to make, five years from now. >> i'll just jump in while you're thinking. the case of heparin. researches who are making progress in coming up with a synthetic heparin so we don't have rely on pigs and china for it, but the incentive to turn that synthetic product into a market drug is -- not good because currently heparin 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. >> for pandemic preparedness we have a strategic national stockpile and the government stockpiles certain products, not just drugs, but other products. 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. i should say also in the case of the heparin, what really happened that really shut down our manufacturers of heparin was when there was the problem with so-called mad cow disease in the cattle in the uk, and it would felt it would be sensible to stop using cows to make help

rip, and cows in p guts are bigger that pig guts. so from a cow you got more heparin and that was how we manufactured it ourselves, and when they stopped the use of the cow guts, they -- it kind of 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 low. hes in the cattle, you can see that is safe and that would be a way 0 to be more efficient for us to manufacture it because it's not efficient to manufacture it out of pig guts. it's not fun in my field. you have to talk about things like guts which is not a very pretty picture. >> let me comment onemer thing if was the banking commit year when he did the ada trade bill, 30 years ago.

what-when senator byrd and jim write was house speaker, they charged each committee to look at aread under their jurisdiction, do hearings, and develop ideas of how to make the u.s. more competitive. we haven't done that in 30 years. think congress need to get into this business, do the hearings, and develop the different provisions of law that can help us be better in a global economy. in that 88 trade bill we covered exchange rates and put cfius, which has been referred to her. great things in bill but it's 30 years out of date now. this wto want even interest existence, china wasn't in the wto. we need to update the whole competitive strategy of the united states. and you have to do it through the congress. >> take two more questions starting with this gentleman. >> you mentioned to treat pharmaceutical as strategic good. i wonder if you could elaborate

how would that look -- should we have strategic reserve of key medicines and what would that list look like? >> well, dr. geldman brought this up. i think it would be really desirous to identity a group of public health exhibiters, physicians and others, to identity the his of essential medicines we need to have and should not be allowing other countries to produce in such a substantial share of the market. so that would be a first step. have physicians and those who are users of the products -- most physicians have no clue about the situation that we're in, so that would be a first step. to have the experts identity the products we need. the question is can we stockpile -- how much can we stockpile. >> i wasn't meaning this would be stockpiledful you want to be continuously manufactured to

hear the manufacturing capacity. >> absolutely. >> have to be running. >> another point here. there's new technology that is appropriate for the manufacture of some medicines called tippous manufacturing. there hasn't been that much advance inside manufacturing of our medicines. it hasn't taken advantage of new tech tolling. another role is how congress and the federal government incentivize companies to advance in making of drugs. some products you can make within 24 hours, technology delved at m.i.t. and was fund 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 champ china is buying it, why went re buying them sneer so inventsives to upgrade the technology in our pharmaceutical manufacturing is another step in the right direction. >> i'm from kaiser health news and my question is for rosemary.

we have been hearing for a while that 40% of finished drug products and 80% of apis are made in foreign countries, but between -- that number is from 2009. the fda has not update it it since. between that and the lax labeling laws that say your drug only has to say where it's manufactured or who labeledded or where it was distributed, howl are you able to figure out that the number of pharmaceuticals made in china was 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 how in fact dependent we are. we don't have good official numbers and we have to ask the question, why not? the obfuscation, i 80% of our

active ingredients come from two countried. don't want to split out india and china. and what they also don't want to do is split up the active ingrediented from the raw materials. and so india may be making the active ingredient but may be dependent on china for the raw material. than it don't get to into that level of detail to pin point the dependence we really have. so to answer your question our data point came from interviewing people in field who said if china shut the door within months we would have to shut done our hospitals and our pharmacies, the shelf wood be bare. we should have the answer to that information. we node to know who is making our dries, what-under supply and demand do risk assessment by country, by plant. we don't do. that at least in the public interest. this commercial database but be don't have this in the public interest and it's nobody's job in the federal government to do

and that that's stunning. wouldn't allow that for food or for oil and energy supplies but we allow it for medicine. there's a lot of reason ford that. a lot of people don't want us to get into this sphere or the terms 0 it's proprietary trade secrets. national security should take precedence over that so we have to enup the big can of worms, shine a light on it with 180-degree sunlight. >> it's actually a quite complicated industry. there are raw chemicals-specialty chemicals that have been used to the actives, then formulated, 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 the ingrediented were before they were package ped into the final

product. >> there's conflict laws. there's customs law that requires companies to put on their packaging the country of origin which is define where did the active ingredient constant from. so it comes in he country, have to label where the active ingredient comes from so we have that inflammation existing somewhere. and we don't use it very well. i dent know how many people know it. then there's fda rules and they allow a wild west. could be the packager, the -- >> in the retail package. >> right. >> which is different than the -- >> the customs package. >> which is is a complicated -- it's a make indicated system. >> correct. >> can i ask a -- >> there's a -- in "china rx" you can see the label of the medicine in and some cases the labels indicate who is the manufacturer, where it was

manufactured, and some cases even the active ingredient. if you can't fine 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. >> how much of this does the fda know, given they haven't put out a new breakdown, dot the fda know where all these thing are made? do they keep in a locked up place? >> they know. >> they know. >> the question is why can't they tell us? >> i have a question. when i was first on the china commission, one thing we found out was like walmart, american companies 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 so there would be -- are the drugs stores like cvs, are they pressuring the american companies like fiser and others, to move their operations to

china in order to stay in their supply chain? how does this work? >> i don't have an to answer that. what i do hear is there's a real hammering down on manufacturers, and we can't underestimate what it takes to run a high quality manufacturing facility. ...

>> i just want to thank you all. this was really enlightening session. so thank you. [applause]. [background sounds]. >> this is just one of many programs book tv is covered on pandemics. to review the fullest of the booktv.org, and type pandemic. in the book into the search bar at the top of the page. [background sounds].