c-span created by private industry, america's cable television company and brought to you by your television providers. >> good afternoon. i'm lynn goldman, the dean of the milliken institute of public health. .. us today for this discussion. we have the author of an incredibly important book here, rosemary gibson. her book is the topic of a dramatic shift in where our madison's come from. china looks at the position as a pharmacy of the world. i think any i think many of us in the medical public health profession has been unaware of the shift. we may notice at times there are shortages, that their contamination issues, other problems but i think we've 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 are astounding, no matter what country we may be talking about. think about it. what if there's 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 could 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 in far-flung 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 with those who are manufacturing our drugs. the inspections that they could duck, the very hands on work that is involved in making sure that the manufacturers of drugs is safe. they certainly set up offices

all over the world to do that, but that's not the same as having offices -- having manufactured in your own country. and with the u.s. losing manufacturing capacity, which is continuing to happen, the situation could become even more severe. today we'll discuss these critical issues as well as some possible solutions, and i look forward to very robust discussion. d but first let me introduce to you rosemary gibson. rosemary gibson is a 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 recipientne of highest honor for th american medical writers association in 2144 giving the publics of voice in their interest to critical issues of the day. at the george washington gave the 2015e

lecture that we have annual here at the school of public health. at the robert wood johnson foundation rosemary was chief architect of its $250 million decade-long national strategy to establish inpatient palliative care programs that now number 1600. she received the lifetime achievement award from the american academy of hospice and palliative medicine, and work with bill moyers on the pbs documentary on our own terms. she is recipient of the lewis blackman patient safety award from the south carolina hospital association. rosemary is also principal author of medicare meltdown, in 2013, battle over health care, treatment trap, and the the wall of silence. her books have been reviewed in the publishers weekly, "washington post," health affairs, reference and proceedings of the u.s.ng senat, engineered congressional testimony, noted in the "wall street journal", ," new times, a

today," consumer reports and other news outlets too numerous to count. rosemary is chair of the board of an institute, a nonprofit health system featured organization headquartered in ann arbor michigan. she graduated summa cum laude from georgetown university and has a masters degree from the london school of economics. please join in marketing rosemary gibson. [applause] er for now backs is the microphone working okay, wonderful. thank you gentlemen and ladies. good afternoon everyone. doctor goldman, i want to thank you for making this event possible. it is a very timely and it is fitting that we are sitting here at school of health in the nations capital to discuss the public health implications as well as the national security risks associated in the growing

dependence on a single country for our madison. it's timely for another reason. the president is safe to give a major speech in the coming days and weeks about the 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 pressured to reduce the prices and reduce their cost which could potentially drive more manufacturing to china subject to keep a close eye. there's one lesson we draw from today it's the intersection of the medicine and trade and trade policy and who would have ever thought about. i wrote this with the purpose of informing the public about this

very makeshift in where our medicines are coming from. for many of us our medicines were made herein to u.s. and japan but now there's been a dramatic shift eastward. and they wrote it for my mother so my mother could read it but also for the policy wonks and academics because i think we all need access to this information. we want to trust the medicines that we take. the medicines that could mean the difference between life and death. and we need to know where our medicines come from. why are we dependent increase in the own a single country. what are the risks and what can we do about it. i was going to bring my smartphone and medicine bottles of 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 that there is growing dependence in

the united states on china for so many of our medicines. if you take a look at your smartphone handbook o on to at least mine says he signed in california and assembled in china. if you've ever gotten those plastic bottles with the white caps but you have to take your medicine and with the dosage is that it doesn't tell you where it comes from so there is no reason that we should know. let me tell you about this dramatic shift and where the medicine comes from and what looks like. one of the first things we've done that has never been done before is the actually name the medicine that are being made in china by the chinese companies and sold here in the united states. they include antibiotics, antidepressants, birth control pills. a lot of young women are interested in knowing that. medicines for alzheimer's, parkinson's, epilepsy, high

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

should work on exports within the, pharmacies and the united gates would be empty and hospitals would cease to function. so, how did we get here? and what about other countries? one of the interesting fact is that factsthat i learned is evea which is a dominant generic drug manufacturer, even india is dependent for the active ingredients and for all materials and in many of the medicines it makes. only not only for its own people but also for exports. there is a fascinating article in the newspaper that started out with a story of a soldier who's on the border between india and china. they share a border and there is a lot of tension in that part of the world. and so it says something to the

effect a soldier on the border opens up his medical pack and sees this medicine and he is running out and dependent on the people on the other side of the border, the adversary for the components to make essential medicines. that is 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, and i applaud the media for being transparent about it in if there's any interruption in supply that would not only affect the health of the population, the military, but also a very important part of their economy because as you know, they make and export many generic drugs. the so where are we and what is the biggest risk? is when we have the

centralization of the concentration of so much of the medicine within a single count country. if the companies are shut down for months and months and if there is a global pandemic and countries have to line up for medicine, that could be a global test' or the tension in the south china sea is a hot spot right now where does that leave us that is the challenge with concentrating any imported product that we need. so how did we get here? how did this happen? let me start with the prescription i got two months ago today. it was an antibiotic. it was amoxicillin. i was back to my old self.

in the making of that particular product the government into thee industry including companies like pfizer made sure there was enough manufacturing capacity here in this country to help all of the wounded soldiers that would walk away from that event and by having that penicillin availability. the government and industry work together to ensure we have an adequate supply of that miracle drug. so let's fast forward a couple of decades in 2004 "the new york times" reported the last penicillin manufacturing plant in the united states was about to shut down.

but they didn't back story. what was really going on in the global market that triggered dot? thanks to some producers that are spirited and have information on the internet about what happened in the period we can learn a little bit about what was going on in the global market. in 1980, china invested heavily in penicillin capacity on a number of scales. 20 years later, we begin to see the chinese companies coming in on the global market and they dumped penicillin at the low market prices and it effectively drove out american european and even indian companies from the business because they could not

compete. the producers called this a landslide definition of their industry and then what happened there was a spectacular price increase for all of us in some way paid for. that is the only cartel that was happening. if you 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, it is made in a chemical plant probably in china where there's a fascinating story about the vitamin c cartel. it's the same playbook as americans, europeans and japanese producers of ascorbic acid and a couple of companies

dumped it on the world market and drove out competitors and when they were gone they raised the price again spectacularly. with antitrust we could have a whole session today on the cartel because that story continued and there's enormous implications for a lot of our medicines and other products we get from china so we have these penicillin and vitamin c cartel's and what does this tell us if told us that we are losing control over the supply of our madison. as a country we are losing control and others are dictating the price and the supply. we have to ask is this a situation that we want to be in. what was driving this and won't for some undercurrent to?

we identified the generic drug laws at his 1984 but are those of you that remember if they've generic drugs available to the public and it made them affordable for 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 so they picketed east to asia but at that time they were not equipped to oversee and regulate the global industry and what else was happening in the research is very boring life when you find all kind of things on the internet late at night and one of the interesting things i found was a memo written by a dedicate very dedia employee, a chemist and he asked

the question or said we have no idea where of peaceful strikes active ingredients are coming from and they could get to the president. so we have a point 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 a year 2000 and it it's triggered the u.s. dependence on china and that's where congress and the white house agreed to grant china access to the u.s. market. it's fascinating to see in a short period of time after that but the penicillin cartel was formed and was up and running

the united states closed its last manufacturing plant dumped on the u.s. market and the local producer couldn't compete without a business. it's something very important that also happened in 2004. a major healthcare company in the united states switched suppliers is a very important ingredient for a product they make and that is called pepper in debate -- heperin and it's a blood thinner. if you've been to a hospital you probably have it. a couple of years after baxter switched suppliers from the u.s. to be china-based supplier, it turns out it was the contaminated ingredient was found in the heperin product.

it came from china and that there was deliberate contamination for economically motivated reasons and that there were 250 deaths in the united states associated with that contaminated the heperin. that triggered extraordinary reform, good progress to try to fix what we basically had a cd with deregulated environment in the countries where we were getting our madison. but it still was far from perfect. there's a couple of lessons here. first the globalization has effectively been a form of deregulation. you don't need the law to change the structure just move production overseas and effectively deregulate. think about this. the united states has had the highest gold standard. the good people at the fda industry developed to ensure

high-quality safe medicines every time. they've had fewer standards and it's really remarkable. back in this period in 2007, some of you might member that is report where the head of the chinese equivalent of the fda in china was executed for taking bribes and government officials said we are still at a very early stage of being able to manufacture high-quality medicines. but that didn't stop the market moving to a place that if is college that had very few standards. really it was a remarkable transition. the other thing that is fascinating, and again the lack of transparency it turned out we had a trade deficit with china at least in 2014.

and i've never seen a public official in the united states acknowledged that we have a trade deficit in pharmaceutica pharmaceuticals. maybe it's there and i would love to see it if you've caught got aglimpse of it please send o me that where we did find the data point was in the speech that doctor margaret gave to a group that were probably very happy to hear there was a trade deficit with the united states and china and the pharmaceuticals. so, we have a lack of transparency. how dependent are we on china? i will give you a couple of fascinating examples. in 2015, the fda inspected a plant in china that was because it was getting a lot of customer complaints, presumably industry complaints about the active ingredients that they are getting from the plant. it was bacterial contamination

at some of the products didn't have the full therapeutic value for which it is an antibiotic or chemotherapy, that could be devastating. the fda went in and found what they called systemic data manipulation. this is a plant with the chinese fda and other inspections over many years. so they banned 29 different products from coming into the united states. but because the united states is so dependent, the fda had to exempt 14 of the products from its own ban and some of those included antibiotics were in the audience for antibiotics and ingredients for chemotherapy because the fda was concerned about drug shortages here in the united states. that's how the pen and they are as a country. there was a fascinating story about the availability of the

anthrax attacks. some of you might remember here washington and new york the u.s. military needed to buy a whole lot so they went to a very reputable company in europe this was reported in bloomberg and in the course of writing that i spokthe book ispoke to the ceo y and they said yes he had to get the starting material from china. so think of it the military needed this after the attacks into the starting material was obtained from china and as someone from the industry said that if china is the anthrax attacker, medicine can be used as a strategic weapon. then there's other examples when india said maybe our military is dependent on the adversaries for medicine i thought about the united states. so i called up the defense department and communicate it to

the logistics agency that purchases this on behalf of the military and its family members and retirees and acknowledged beginning in 2012 that he had to begin purchasing a limited number of drug products from china apparently because there wasn't any other sports. and what about the veterans? veterans hospitals now have the federal government has made it easier to purchase drugs made in china simply because that is where the commercial market is going. what about the risks of wax what are the hidden costs of cheap drugs? we don't see them but in china they identify with some of these far. what about consumer protection and product liability? i called up a un-american lawyer

that works in china and advises the companies that he says you have to understand the price. the attitude is one of the reasons the product is so cheap is because they assume no liability for it. it's buyer beware. so, let's take an example is a you take a medicine that is made in china and sold in the united states by a distributor and the chances are that distributor has no financial asset and you effectively have no legal recourse. it's the lack of consumer protection. and then what does it find a there's a plant thathere is a pg an epilepsy product. and it lacked any control system to save money.

the employees open the window but it's supposed to be made under a cu temperature controlld environment, another cost of cheap drugs. the fda went into a plant that makes heperin or a sedative and what it found was the company that was making it wasn't the actual manufacture, the real manufacturer is another company that apparently it was to hospital complicity in the heperin tragedy from years before. one of the things we found in

doing this research is even american companies that have plants in china don't meet the standards that w we've all comeo expect. they went into the plant in china and because it had no handwashing facilities and it was an opium hitting the floor. there were the highest standards in the world to a place that's still in the growth trajectory. it will take time for those that work in quality control and the improvement. it takes a long time to build

the standards and safety and to sustain it. so those are some of the risks that they face. where do we begin. we need a change in the mindset of the medicine. right now there is a commodity no different than a t-shirt. how can we buy them at the cheapest possible price eve evea few cents difference on a 50-pound drum of product lacks a. it's a strategic asset just like the energy supplies. let's treat them like a strategic asset. the second to think we need to do is set up a tracking and forecasting system.

we do this for energy and you can go on the website and the track this. it's something that a country will fall apart if we don't have it. they are made by private companies, but they serve a very important public purpose and so we have to work more together to ensure that we have our medicines and control over the supplies over those do we rely on everything they do today. it takes knowledge, skill and experience and we can't let that go. a person that runs the manufacturing plant for a brand-name drug and we do

everything right. we see people coming to look for the job that come from other plants and they said the company built a new plant and they are not even using it. they are moving east into this person wonders who is going to do this when i retire. what is going to happen to the companies that they could end up having public relations and marketing and pr without any substance. we can't let that happen. i will stop there. i just want to say we are here at the university. it opens up a whole landscape and i truly hope that there are students and faculty here and that we dig deeper and 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 interested so thank you very much and i hope you'll buy a copy. 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. >> before going into that i just want to thank you very much for all of your research and for bringing this discussion forward in a way that it's 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. and i thought maybe i would first turn over to dan appeared on a panel with us. he's the former commissioner of the u.s. china economic security commission. that's the industrial policies in china and i think that we are all aware and today's current political context there's a lot of concern over the globalization of trade and commerce and of concern about

the movement of manufacturing overseas. can you give us a perspective on how this has occurred from medicines in particular but also for other things that are so its continuing in this current era that we are in today. >> this is a country that supplies almost all medicine and steals between 250 to $600 billion a year according to the fbi. a country that subsidizes their advanced manufacturing industries which includes pharmaceuticals in violation of trade law. a country that protects the

domestic advanced manufacturing industries in violation of the trade clause and the country who forces technology transfers from foreign companies doing business in china in violation of the trade off. it's the advanced manufacturing companies, 98 in the last four years and is done on a strategic basis where we are prohibited from buying their advanced manufacturing. in a company that uses trade as a weapon three years ago the chinese seized an island off the coast of the philippines known as scarborough and it arose between the philippine coast guard and chinese navy overnight to try to cancel all of the

banana shipments into china and that is the 10% of the philippine economy. about ten years ago they seized a chinese fishing vessels and arrested the crew and they stopped shipping the minerals. a. the ship is continued. so, this is a country that we have not become dependent upon for drugs and what's at stake is we are moving from a relationship. the chinese have one aircraft carrier.

they are building three more aircraft carriers and i into thr and offensive weapon. they are building ports over asia. they are seizing on the ones in the east and south china seas and belonged to the philippines and japan and vietnam and militarizing the island. they are militarizing space and now have the capacity to take out or gps system. in addition to that, they are spending hundreds of billions of dollars in improving the military. they are rapidly reaching parity with us on the fighter jets, submarines and missiles.

it's what this may lead to and i speak over the country and i always say that i met the enemy and it is in china. the enemy is us. shame on us for allowing this irresponsible business procedure to proceed with such a critical component as our truck system. so, my hope is that we can raise the alarm and start to pressure our congress to do something in a responsible way to protect the american people, and i will stop there. >> the way that i first became aware when it was contaminated i

learned that all of it is coming from china and most manchin it's a blood thinner but most people are not aware that it's more than that. you cannot have them if they clot. when they flush it is a helper heperin flush so it is essential not only for people who needed is a blood thinner but actually anybody that needs an intravenous drug heperin. and so, it is hard for me to understand how that could have happened. could it have happened if it's something that essential and basic to medical care could wind up being completely offshore

here. >> heperin comes from [inaudible] what was going on there became a from the small villages in china that were pulling these animals out in very unsanitary conditions and literally many of them have no running water and then shipping them to distributors and ultimately it wound up in chicago. and it was from that basis that the problem developed. the fda is trying to get in sections on site and they have severely restricted the number of inspectors they would allow and it has become completely ineffective. >> if you are talking about hundreds of thousands of households involved in the production of the product, it

would seem to me that it would be a very difficult one to inspect. it wouldn't have much of any enforcement at all. do you have a comment on the? >> to do in fda inspection here in the united states is different from an inspection 10,000 miles away. but i think that the real issue is what happened with the world's largest producer. i know you are familiar with this transaction. so, where d, where'd all those contestants go from smithfield here in virginia and by the way, if you have sunday morning bacon or ham on new year's day or go to mcdonald's for sausage, it is coming from smithfield which is now owned by a chinese company. so, we had a problem and if you want to talk about that because smithfield controlled a very

significant portion of the population here in the united states and then that company was sold to china and we potentially lost but we don't know if congress has no authority over them to ask so where are you sending them, are you shipping them over to china or are they stating here in the united states to mak to make this bookg called heperin. >> if you could imagine smithfield was the largest producer of pork in the united states, 36% of the pork market in a company that bought them anoften and paida huge 30% prem. pork is 50% of the diet in china. china is the only country in the world that has a pork reserve.

every six months they have to is over. the problem is that the average chinese pays 40% so slight increases in food prices create rioting and instability in china, and that's why they did this. ... >> originally department of

agriculture. the real problem is that work is now coming back into the united states with this label. and so you have no idea what you're really eating. we have a lot in the united states that's called the cool law. there are 18 18 exemptions to e cool law. you go into paris and you want to buy pork, you can't come to look at the package, it won't say packaged in the united states are processed in the trinity. it ultimately comes from china. i know from testimony that 85% of the tilapia comes come from, for example. so i have an 85% chance coming from china, raised in contaminated fish markets. it becomes a real problem

knowing what were even buying. the issue in congress was shared that allow the 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 here did i answer it, rosemary? >> thank you for that. now the former assistant secretary at us department of commerce and with the international trade administration. before this project we were talking about the administration at the time the wto was created and in geneva

and with that wto in fact there were a lot of concerned members. but most of us at that time were quite optimistic particularly about the process of china and in international trade agreement there is a potential risk but potential upside and and five years later what is the upshot of all of that? had that met our expectations? >> first i went to china in

1981. there was a horribly stricken country. it is the century of humiliation by the western powers beginning with the opium war the second opium more, the fall of the emperor, japanese invasion, the whole thing fell apart. and now trying to build a communist country it didn't work to keep the economy going and then they took over in 1979 for foreign technology in foreign know-how in foreign markets so we will get our wealth and power back they want it back they were number one for centuries.

so now being subjected to a lot of countries, the wto was created until 93 when the wto was created. i was there in geneva i wasn't optimistic it would work i was there to keep financial services out of it. we did not want financial services because there is something that it could be tied to china with the most favored nation treatment. china did not come into the wto when it was created. they came in 2000. now because china was a communist country they cannot

commit more than one year at a time that said we could not give them more than when you're at a time. but why they wanted to get in they wanted permanent and that met congress had to change our law. the congress has debated to do so and all the while being will increase american exports to china. in china came into the wto in 2001 they came in and congress gave it to them the bush administration brought them in 2001 so it was bipartisan both parties were a part of it there was an 80 billion-dollar trade deficit with china right now $300 billion trade deficit congress said it would help the american exports and

decrease the trade deficit but it did no not. the whole thing was about investment to give china permanent msn it was about american companies investing in china both with the chinese market to send their stuff back here. why? i was general counsel of the senate finance committee i saw it corporation to be a stakeholder and in 1990 the roundtable said their responsibilities to their employees and communities and shareholders. and in 1999 it was to their

shareholders. and their own compensation is tied to their ability for who was wealthy so american corporations and china is now in the wto with two.5 percent that does not mean we should ship to china we think about 11 percent tariffs so that doesn't mean you get the best trading partner. so the incentive is for american companies to go to china and shipped back to hear. if you read the book the other one - - author put together that's exactly what happened

these companies have very high level people in this country and were taking those jobs to china and that is what is driving this. the former chairman of the sloan foundation has written extensively on this whole issue from stakeholder to shareholder. because as you see the ceo is to make 50 times now for 500 times the average worker. it's among a very small group in the country and they are undermining the average middle-class job in this country this is a very important issue if you point

out the implications of what we are doing the american people know something is happening and trump talked about this issue i'm not sure he has all the policies in place to address it because unless you deal with corporate governance you can't handle that. is that helpful? >> so we know particularly to contain a tremendous amount of intellectual property but also an enormous investment and then the crisis in the drugs and the research and nih. i'm happy to see the world benefiting from that but now

were in this. where it is an interest of conflict between our country and china that we see this succession of care and so tell us why to be targeted for tariffs and the impact might be. >> pharmaceuticals are biomedical is called project 2025. there are ten key industries in terms of satisfying their own market. and they are pumping subsidies and stealing intellectual property from american companies when american companies invest in china it

is required to be done through a joint venture plus they say if you want to do well in china you should be considered a friend of china to get better treatment so what the administration is doing is section three oh one of the trade thought so if we identify unfair trade practices we can identify that with tariffs that's what bob light heiser and this administration says you are subsidizing we will start restricting their access to the american market because we will not get access to your market for what we could do here at home when right now

with the wto four.2 trillion dollars of trade deficits with china. do trade deficits really matter? one is not exports if you run negative net exports 750 billion manufacturing that is detrimental with wealth and the economy so with that situation we have to get into corporate governance. >> it's hard for me to

>> it's hard for me to understand all the economics behind this but one thing i can understand that's the fundamental of economics is the extent to which the prices of drugs are driving the cost of medical care in thise country, and the differential between what we pay for the very same drugs in this country compared to what people pay if they are in canada, in europe, australia. that our prices are incredibly high, in comparison to others. is there some hope to be able to reverse the flow? what the terrorists reversed to help the flow? what solutions on the horizon? >> there's a couple of issues here. first, one of the reasons that prices can be so why in the united states may havee nothing to doo with china but her own internal market manipulation. and for those if you you are watching, all the middlemen and middle women from the point that

a drug is manufactured to the point that you pick it up at the 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 medicine. a lot of people are making a lot of money off that metal process that can make drugs prices so very high. >> i have to say most of us are just dumbfounded when we see, if we have insurance, that covers the prescription y drug, that we see the price, let's say $125 but then what we pay because of the negotiated price by insurance company is like $12. how is it that 90% of the price goes away? that's rather difficult to comprehend. >> 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 are set, who is setting them because we don't have it now and that there is no organized constituency to man that the 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 and communities. in the book i track a little bit about groton connecticut which is a place where pfizer has had substantial operations in its research program. for lots of reasons when drugs were no patents, when lipitor without patent, plus when pfizer was investing in china, , billis and pains of dollars in research and development and building plants there. what happens is pfizer stepped back and a very substantial layoffs. what it's done 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.

a gentleman who has an insurance company in groton. and he described how what's happened 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 lost patent protection, is that we see an increase in drug use. a beautiful shoreline community, it's just changing and the changing rapidly. just a couple of weeks ago i called a gentleman who i interviewed who ran anca insurae company there in groton, tell in the book is out and his quota. he said thank you but i had to tell them i had 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 in the major newspapers. you might hear in thee local paper but it's a devastating to people, to the families. in the case of the pharmaceutical, very highly

trained people. talk about wind more people in the s.t.e.m. fields. 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 hiring the phd researchers at a third of the cost. with this dramatic dislocations that have huge impact on our economy. the final point is where 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 is no, then where good to go. just let things happen. but if ourpa answer is yes then what do we need to do differently? that's what we hope that "china rx" will stimulate a conversation about. >> patrick? >> 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 join the wto in 2001. there's been a tremendous outsourcing of u.s. productive capabilities. everybody says we're going to be the innovators and let them do the lower. .. be. and we say we get the cheaper jobs they are in the position to control the price of the drugs if they are the supplier they're going to be in a monopoly position. we're on a very hazardous road for this country and i think the american people, i think we're waking up, we have a huge problem. i see it going on in both parties. >> that's why i hike-- that's why i like this with our

medications, sometimes with autos and other things these medications we put in our mouth. >> and the devices and all kinds of health care, and those things, too, but you know, in talking through these issues of kind of the intersection of the rules of the road for trade and the things you described 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.

>> 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 chinese, that we can't even get them to file the complaint, okay? and it's -- and so 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-- i mean, why aren't we complaining at the-- because we can't get auto companies to actually-- they're so intimidated by chinese government. >> and the companies would have standing. >> the companies have to file-- >> the public health official would not have standing about the-- >> the u.s. government has to bring your case to the wto. and you have to provide the government with the information. >> i see. >> to bring your case and if they're hesitant because the chinese will punish them with their operations in china, if they provide the government with the information, you'll see that many of these companies won't even testify. they'll have a trade group testify so they're not identified and both before the china commission on which dan and i served for many years and in the congress. i worked in the senate banking committee for 15 years, i've seen this up close. boeing, i remember, we would

wonder, well, when boeing makes a sale to china, china says you have to make a part of the plane here this china in order to sell it here and we used to think that well, why is that? so we put something in the wto, you can't do technology transfers, the chinese completely ignored this and they say, well, we're not forcing your companies. they're doing it on their own. >> well, of course, they're doing it on their own because they make the shareholders wealthier and make themselves wealthier, a very short-term problem and it's very bad for the united states long run. >> so, maybe want to have each of you comment on what might be some possible paths forward, maybe starting with ben and then patrick and let you finish, rosemary, but, you know, trying to think constructtively because it seems that we have gone down a path that isn't leading us out of this. >> okay.

you have the united states that's process oriented. we have a constitution, we have laws, we sign treaties and for the most part you 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 opt-out electronics industry. the entire industry has moved to china, lasers, sensors, digital, 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 and 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 10 years, ne they'll train all of our workers on and on and on and i

didn't even know who to talk to in the u.s. government. i said it wouldn't have made any difference because nobody would have done anything for you general way and he said to me what would you do if you were me? of course, the incentives were so great that we're moving to china and so-- and they're doing this for all of these critical-- what if 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 have to get our corporate income tax down to where everybody else is paying. that was the problem. and the corporate income tax in china, i think, is 15%. higher limits 12, and in the united states it was 35, wasn't it, pat or-- >> 33, i think. >> yeah, so we were way out of whack, so that was a good first step. but there's lots of things that we -- that the u.s. government can do to incentivize these

companies to stay here. we actually were innocecentivii them to move and because if you -- if you profit that a company made overseas was not subject to u.s. corporate income taxes unless they repatriated the money so they would leave the money over there and continue to build other factories. so the answer to, i think, to the drug problem that we're talking about here today is that the united states has to incentivize drug companies to manufacture here and that's a function of providing them with r & d facilities, paying for r & d, in the software industry, in 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 talked to intel and they said that's -- 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 tuition after that if you stay here and work. in other words, we're going to lose -- imagine, artificial intelligence, robotics, super computing, and the other thing that we're doing-- >> electrical automobiles is one of their other. >> yeah, the other thing that we're doing is super computing is the basis for innovation in the united states for advanced technology. okay? it is critical and the united states opens up, first super computing station at lawrence laboratory in california. up until a year ago the united

states led the world in super computing. about two years ago, the chinese exceeded the u.s. in super computer. and what does congress do? they cut the budget for lawrence livermore, it's like eating your seed core. and i have met the enemy, it's not china. 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 whether-- >> here is 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. that was the number of the article, warren buffett is a

pretty smart guy. when you're running a trade deficit, you're selling goods and they can come back and buy. president kennedy did not know how to get to man to the moon. congress bought into it and we figured out how to get a man to the moon. the best thing the united states could do, we're going to set a national goal and set our trade and form of it is government reform is a key part. part of it is providing incentives that dan is talking about for our own children. allowing the foreign students to get the technology education in the united statesment 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 it in the united states, we're going to give you a very low tax. if you're going to be apple and do all of 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 this, but you've got to set a goal. once you set the goal, you can figure out how to do it. >> the other thing, i'll stop after this, is what's really hurting this country are buybacks. buybacks are where corporations buy their stock, okay? and up until-- ronald reagan changed -- there was a securities law that prohibited corporations from doing that 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 had been bought back by corporations. 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 stock holders who are usually the president and the chief executive and some edge h had-- 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 ceo's. >> thinking about how confused our priorities are from the standpoint of public health and you talked about china subsidizing the manufacture of things like drugs and semiconductors and we subsidize-- that's very sad. rosemary, i'm going to give it to you to talk about the path forward. the last word here. >> the reason i wrote chinese rx so my mother and father could read it, we need to bring in the common sense norms of ordinary people. if you look at the media today, there's more stories about the dangers of getting your drugs

from canada than the reality of what's happening to our drug supply. this is a story that's been hidden in plain sight that frankly they don't want us to know. and so, i think we have to draw in and expand the conversation to know that the 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 -- with this book and we can expand the conversation with people who know that something's not right. one of you said that. people -- the american public know that there's something just not right, but it they're not being educated b because frankly there's a news blackout. you can't get this on the nightly news and the mainstream media. how can we get this across the spectrum. this is not a democratic issue, this is not a republican issue,

this affects all of us. that's what we intend to do the next number of months. if there are places where you could have at your work, in your life we could 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 -- 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 there's a bathroom with a hole in the floor. how can we draw on those people and common sense norms of the public ap 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] questions?

>> we have a couple of minutes if we have questions in the audience, there are a couple of mics here in the aisle. i see somebody coming forward. if you don't mind introduce yourself. hello. >> as mentioned section 301 case that's brought by 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 chemicals for pharmaceuticals and pharmaceuticals. i wonder if you've seen the list and whether that is, you know, would 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 what 301 is being used to focus

on the industry that china has put in their project 2025. and 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 can tell from the subsidy that the chinese are having to those industries, secondly, you point -- you make them more expensive for those goods to be coming into the united states and wiping out our people who might want to be making those kinds so that we have a chance to move up the food chain and have those kinds of products being developed here. my understanding is that that's what usdr is trying to focus on in the 301 is on the project, 2025. 2025. >> building off of that, my name is isabel inside u.s.

trade. it sounds like tariffs are not the answer to end the u.s. depe depens -- dependence on the pharmaceuticals and these products. what or congressional solutions available aside from including incentives in the tax bill? are there any sort of congressional-- you mentioned putting pressure on congress to solve this and what are some ways in doing that aside from the tax bill? >> are you speaking to me or-- >> anybody. >> do you want to start? >> go ahead. >> i think that one thing congress can do is to 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 pencicillipenicillin, can't be 100% dependent on

china for our penicillin. one thing congress can do is required them to be made here. and issue subsidy, incentives, 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'll jump in while you're thinking. you know, the case of heparin, there are actually researchers who are making progress in 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 product. but it's target 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 supplies. >> for pandemic preparedness, we have a strategic national stockpile and the government stockpiles certain products, not just drugs, but other products, you know, n95 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 could say also in the case of the heparin, what really happened and that really shut down our manufacture of the heparin was when there was the problem with the so-called mad cow disease in the cattle in the u.k. and it would thought it would be sensible to stop using cows to make heparin and of course, cow are bigger than a pig and

you got a lot more heparin and that's how we manufactured it ourselves. when they stopped the use of the cow, it kind of the shifted to china to be done with the pigs. which is to say, if we had a better way, and people had been working on this, to monitor for p preones in the kalt, you could detect that that was safe and that would be more efficient for us to manufacture it because it's not efficient to manufacture out of pigs. and it's not fun and i feel, you know, you have to talk about things like guts which is not a pretty picture, but-- >> and let me comment on one more thing. as i said i was on the general counsel of the senate banking company ada trade bill, 30 years ago. senator bird and i think that jim wright was the house speaker, they charged each

committee to look at each, and do hearings on how to make the u.s. more competitive. we haven't done it in 30 years. i think that congress needs to get into this business, do the hearings and develop the different provisions of law that can help us compete better in a global economy. in that '88 trade bill we covered exchange rights for the first time. we put sifius, which had been referred to here. there are a lot of great things in that bill, but it's 30 years out of date. the wto wasn't in existence. china wasn't in the wto, we need to update the competitive strategy of the united states and you have to do it through the congress. >> we'll take two more questions, starting with this gentleman. >> you mentioned to treat pharmaceuticals strategically. i wonder if you could elaborate a little bit how-- the presence, 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. 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 the products that we need. the questions, can we-- how much can we stock pile. my understanding. stockpile is more discrete events. >> i wasn't meaning this would be stockpiled. you want the continuous manufacturing, it would have to be running. >> there's another point here, there's new--

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, how can congress and the federal government incentivize companies to advance in its making of drugs. there are some products you can make within 24 hours, it was a technology at mit, funded by a european company, not a u.s. company, but that technology is there. there's pre fabricated drug plans that china is buying from general electric. how come china is buying it? why aren't we buying them here? so incentives to upgraded technology in our pharmaceutical manufacturing is another step in the right direction. >> hi. >> i'm from keiser health news and my question is to rosemary. we've been hearing for a while that 40% of finnish drug

products and api's are made in foreign countries, but that number is from 2009. the fda hasn't updated it since, between that and the lax labeling laws that your drug om has to say where it was manufactured or who labeled it. how are you able to figure out the number of pharmaceuticals made in china 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 we are. and we don't have good official numbers and we have to ask the question why not? the obfuscation about 80% of our active ingredients come from two countries. they don't want to split up india and china, they just don't want to do that. and what they don't want to do

is split up the active ingredients from the raw materials and 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 question, our data point came from interviewing people in the fields 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 and frankly we should have the answer to that information. we need to know who is making our drugs, what are supply and demand. we need to do risk assessments by country, by plant. we don't do that. at least in the public interest. there's commercial data bases, but we don't have it in the public interest and it's nobody's job in the federal government to do that and that's stunning. we wouldn't allow that for food. we wouldn't allow it for oil and energy supplies, but we allow it for medicine.

there's lots of reasons for that. there's a lot of people who don't want to get into this under the terms, it's proprietary trade secrets. national security should take precedence over that. got to open up the big can of words and shine it with 180 degree sunlight. >> and what you're saying is interesting and it's actually a quite complicated industry. there are raw chemicals and specialty chemicals that are then used to make the actives that are then formulated, and then formulated and then i think 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 in that final product. >> right, there's actually conflicting laws. there's customs law that requires companies to put on

their packaging the country of origin, which is defined as where did the active ingredient come from. so when it comes in the country, we 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 wild west. it could be the packager, it could be the business. >> the retail package. >> right. >> which is different than-- >> than the customs package coming in for imports. >> it's a complicated system. >> correct. >> could i ask a question. >> but, there's a tip on china that's rx where you can see the label of the medicine. in some cases those indicate, who is the manufacturer, where it was manufactured, and in some cases, even the active ingredient. 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. >> how much of this does the fda know given that they haven't put out a new breakdown about that? does the fda know where all of 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. >> when i was-- when i first was on the china commission, one of the things we found out was like walmart, we tell american companies making goods in the ideas, if you want to stay in our supply chain you better move to china and meet the lower cost. are the drug stores 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 that?

>> i don't have an answer to that, but what i do hear, there's a hammering down on manufacturers. and we can't underestimate what it takes to run a high quality manufacturing facility. there's a -- 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. >> that this is where we need the transparency on what this market looks like and who is pressuring whom because it's so complex. >> the congressional hearing on something like that. >> 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", thanks to all of us, this was a really

enlightening session. thank you so much. >> thank you. [applaus [applause]. [inaudible conversations] [inaudible conversations] >> week nights this week, we feature book tv programs showcasing what's available every weekend on c-span2. tonight books and reading, first, pamela paul, editor of the new york times book review, offers her thoughts on how to get children interested in reading books. and then mary anne wolf explores how our brains process reading print versus digital mediums. after that, book seller and publishing executive on the 1,000 books he says a person

should read in their lifetime. watch book tv this week and every weekend on c-span2. this weekend on book tv's after words, abc news chief white house correspondent jonathan carl has a look at the presidency with the book "front row at the trump show", he reads the stories, he watches news conference. he once privately called sentevo, the earliest dvr was the greatest to mankind. he has all the shoes on dvr and sees how he's being portrayed. i recall him-- phil rocker with "the washington post," a really good reporter. at a press conference the president made reference to a story that phil had written

before the new york primary, okay? in 2016 about the staten island ferry and about, you know, phil basically went and ent view-- interviewed people on the staten island ferry a lot of people liked donald trump and he wrote a story about it. i mean, i didn't even see the story. you know, trump not only saw the story and red it, it's now been a couple of years earlier and he becomes president and he goes through all that he's been through and he sees phil rocker, not exactly a household name, by the way, a great reporter, we all know him and he's like, yeah, that story you wrote about the staten island ferry, that was a wonderful storiment i mean, it's mind blowing. >> you can see that entire interview between abc news chief white house correspondent jonathan karl and former white house press secretary