[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                         EXAMINING CHRONIC DRUG
                     SHORTAGES IN THE UNITED STATES

=======================================================================

                                HEARING

                              BEFORE THE

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 6, 2024

                               __________

                          Serial No. 118-FC19

                               __________

         Printed for the use of the Committee on Ways and Means
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 

                              __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
55-926                  WASHINGTON : 2025                  
          
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                      COMMITTEE ON WAYS AND MEANS

                    JASON SMITH, Missouri, Chairman
VERN BUCHANAN, Florida               RICHARD E. NEAL, Massachusetts
ADRIAN SMITH, Nebraska               LLOYD DOGGETT, Texas
MIKE KELLY, Pennsylvania             MIKE THOMPSON, California
DAVID SCHWEIKERT, Arizona            JOHN B. LARSON, Connecticut
DARIN LaHOOD, Illinois               EARL BLUMENAUER, Oregon
BRAD WENSTRUP, Ohio                  BILL PASCRELL, Jr., New Jersey
JODEY ARRINGTON, Texas               DANNY DAVIS, Illinois
DREW FERGUSON, Georgia               LINDA SANCHEZ, California
RON ESTES, Kansas                    TERRI SEWELL, Alabama
LLOYD SMUCKER, Pennsylvania          SUZAN DelBENE, Washington
KEVIN HERN, Oklahoma                 JUDY CHU, California
CAROL MILLER, West Virginia          GWEN MOORE, Wisconsin
GREG MURPHY, North Carolina          DAN KILDEE, Michigan
DAVID KUSTOFF, Tennessee             DON BEYER, Virginia
BRIAN FITZPATRICK, Pennsylvania      DWIGHT EVANS, Pennsylvania
GREG STEUBE, Florida                 BRAD SCHNEIDER, Illinois
CLAUDIA TENNEY, New York             JIMMY PANETTA, California
MICHELLE FISCHBACH, Minnesota        JIMMY GOMEZ, California
BLAKE MOORE, Utah
MICHELLE STEEL, California
BETH VAN DUYNE, Texas
RANDY FEENSTRA, Iowa
NICOLE MALLIOTAKIS, New York
MIKE CAREY, Ohio
                       Mark Roman, Staff Director
                 Brandon Casey, Minority Chief Counsel
                                 ------                                

                         C  O  N  T  E  N  T  S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Hon. Jason Smith, Missouri, Chairman.............................     1
Hon. Richard Neal, Massachusetts, Ranking Member.................     2
Advisory of February 6, 2024 announcing the hearing..............     V

                               WITNESSES

Dr. Stephen Schleicher, MD, MBA, Chief Medical Officer, Tennessee 
  Oncology.......................................................     4
Eugene Cavacini, Senior Vice President and Chief Operating 
  Officer, McKesson Pharmaceutical Solutions & Services (PSaS)...    13
Alan Coukell, BSc, Senior Vice President for Public Policy, 
  Civica Rx......................................................    21
Dr. Stephen Schondelmeyer, PharmD, PhD, Director of the PRIME 
  Institute, University of Minnesota's College of Pharmacy.......    32
Dr. Julie Gralow, MD, Chief Medical Officer and Executive Vice 
  President, ASCO................................................    45
Dr. Jeromie Ballreich, PhD Associate Research Professor, Johns 
  Hopkins Bloomberg School of Public Health......................    52

                    MEMBER QUESTIONS FOR THE RECORD

Eugene Cavacini, Senior Vice President and Chief Operating 
  Officer, McKesson Pharmaceutical Solutions & Services (PSaS)...   261
Allan Coukell, BSc, Senior Vice President for Public Policy, 
  Civica Rx......................................................   263

                   PUBLIC SUBMISSIONS FOR THE RECORD

Public Submissions...............................................   267
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         EXAMINING CHRONIC DRUG SHORTAGES IN THE UNITED STATES

                              ----------                              


                       TUESDAY, FEBRUARY 6, 2024

                          House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:04 a.m., in Room 
1100, Longworth House Office Building, Hon. Jason T. Smith 
[chairman of the committee] presiding.
    Chairman SMITH. The committee will come to order.
    Before we begin, I would like to first recognize a member 
who is returning to the Ways and Means Committee, Mr. Jimmy 
Gomez.
    I am sure that, in your time away, you have been reinforced 
of how this is the best committee in Congress, and so we are 
glad to have you back.
    [Applause.]
    Chairman SMITH. Today in the United States, there are over 
250 medicines in short supply. These drugs treat everything 
from blood clots to asthma. Especially worrisome, some of these 
medications include those needed to treat and beat multiple 
kinds of cancer. Most of these are low-cost generics that make 
a real difference for patients struggling to pay for both 
medication and other health care expenses. Active drug 
shortages are at the highest levels since 2014. Over half of 
the medicines currently in short supply have been limited in 
availability for at least two years.
    Patients are living in fear that they may be unable to get 
the treatments they need when they need them. When a patient's 
drug is out of stock, they don't just worry about access, they 
also worry about how they will afford their medicine. It is 
simple supply and demand that drives up prices. If you can get 
medication in shortage, you pay, on average, 15 percent more. 
Patients forced to switch to alternative therapies may be 
paying as much as three times more than their original 
medication.
    While some temporary shortages might be caused by natural 
disasters or sharp demand increases, poor manufacturing quality 
is the leading driver of chronic shortages, and it is the most 
preventable. Government policies and consolidation in the 
supply chain forced manufacturers to close drug production 
because they can't make the math work.
    Medicare's reimbursement system ensures affordability and 
access for seniors but should be reexamined to avoid making the 
situation worse. Everyone--drug manufacturers, wholesalers, 
group purchasing organizations, and medical providers--should 
be working together to ensure ready access and availability of 
medicine. We aim to learn more today about how these actors can 
prevent shortages and whether our Federal regulations support 
that goal.
    Another concern of our supply chain is that many of the 
medications available to Americans are sourced from countries 
outside America. Over 80 percent of the essential ingredients 
used in medications taken by Americans are made in a foreign 
country.
    China in particular is a major supplier of pharmaceuticals 
and drug ingredients to the United States. In 2021, China was 
the leading source of imported pharmaceutical products by 
weight to the United States. This, as with other aspects of our 
medical supply chain, can pose a serious risk to the American 
people if access to quality medications is subject to the whims 
of a hostile foreign power. Americans should not have to rely 
on adversarial nations to stock their medicine cabinets.
    Fortunately, there are some innovative examples of private 
sector and local government solutions. One of our witnesses 
represents a private business who uses long-term contracts to 
support quality manufacturing. My good friend and former Ways 
and Means Committee member, Governor Kristi Noem, invested 
state funds in buffer stocks for South Dakota. But there is not 
a one-size-fits-all solution, and many small rural hospitals 
and communities may have a harder time procuring this 
medication for their patients or investing in long-term 
solutions.
    Washington has tried and failed to address drug shortages 
before. It is clear to me that we need to incentivize the 
development of higher-quality drugs and improve purchasing 
dynamics without relying on mandates from Washington. Our 
solutions should balance affordability with accessibility. We 
should be using health care, tax, and trade policy to make more 
medicine and their ingredients here in the United States. 
Congress should support access to the lifesaving therapies we 
do have and ensure America realizes the promise of innovative 
future cures to come.
    I hope today's hearing can help us zero in on bipartisan 
solutions that will get more and better medications into the 
hands of the patients who need them.
    Chairman SMITH. I am pleased to recognize the ranking 
member, Mr. Neal, for his opening statement.
    Mr. NEAL. Thank you, Mr. Chairman. First, as you did, I 
want to welcome back Congressman Jim Gomez to the Committee on 
Ways and Means, a valued member in the past as we know he will 
be in the future. And he answered the appropriate question 
during the interviewing process, as you raised it: What is the 
best committee in Congress?
    He quickly said, ``Ways and Means.''
    And we said, ``You are going on the committee.'' 
[Laughter.]
    Mr. NEAL. It is good to have him back on this most storied 
dais in Congress, fighting for workers and their families.
    Today's hearing comes on the heels of major milestones in 
health care, thanks to the Democrats. More Americans have 
health insurance today than ever before: 21 million people 
signed up during the latest open enrollment, with four out of 
five people being able to access high-quality plans for less 
than $10 a month. This committee was responsible for that.
    Our historic Inflation Reduction Act is starting to take 
hold, saving the American people money and delivering more 
breathing room. Last week, Medicare made its first fair price 
offers on 10 of the most common costly drugs used by Americans. 
We are talking about delivering savings of up to 25 percent, 
and yet our Republican colleagues are still making efforts to 
block the law, siding with interests beyond our imagination as 
they keep costs higher for the nation's seniors.
    Our progress is important, but our work is far from 
finished. We also must address access issues that come from 
drug shortages of phenomena like high drug prices that have 
become all too common. Quality challenges in the manufacturing 
of generic drugs have led to shortages, disrupting patient care 
and creating ripple effects that intensify the challenges that 
vulnerable groups already face.
    Meanwhile, supply chain dynamics can worsen shortages 
through short-term contracting prices with exclusivity with one 
manufacturer instead of engaging with many who could fill the 
gaps in case of the challenge, or by squeezing manufacturers in 
a race to the bottom.
    The path forward is clear: Congress must act in a 
multifaceted, bipartisan way to reward quality, reliable 
manufacturing, and incentivize improvements in the process. Joe 
Biden has already taken unprecedented steps to combat these 
shortages by bolstering authorities under the Defense 
Production Act and investing in domestic production of key 
materials.
    While supply chain issues and shortages are extremely 
troubling, it is only half the issue. This committee must also 
be concerned about the millions of Americans who can't access 
lifesaving prescriptions because of costs.
    We had no Republican help when we gave Medicare the power 
to negotiate lower drug prices for the first time in our 
nation's history. At a time when the American people are forced 
to pay three times more for their prescription drugs than some 
counterparts across the world, not a single one of our 
colleagues from the other side helped us out and sided with 
those below the poverty lines. Luckily, we didn't need their 
votes. We took action to put an end to pharma's price gouging, 
capped out-of-pocket costs at $2,000 and insulin at $35 a month 
for seniors.
    Our work brings people the peace of mind they deserve. It 
is fundamentally challenging and a changing health care 
opportunity for America. At the same time, we will all attempt 
to give families some breathing room with lower drug prices. 
There is certainly more to do, and, in a bipartisan manner, we 
certainly are capable of doing it in this committee when we are 
ready and willing to act.
    Mr. NEAL. And, with that, I yield back, Mr. Chairman.
    Chairman SMITH. Thank you, Mr. Neal. I will now introduce 
our witnesses.
    Dr. Stephen Schleicher is chief medical officer of 
Tennessee Oncology.
    We have Gene Cavacini, a senior vice president and chief 
operating officer of McKesson Pharmaceutical Solutions and 
Services.
    And Allan Coukell is senior vice president for public 
policy of Civica Rx.
    Dr. Stephen Schondelmeyer is director of the PRIME 
Institute at the University of Minnesota's College of Pharmacy.
    Dr. Julie Gralow is chief medical officer and executive 
vice president of ASCO.
    And Dr. Jeromie Ballreich, an associate research professor 
at Johns Hopkins Bloomberg School of Public Health.
    Thank you all for joining us today. Your written statements 
will be made part of the hearing record, and you each have five 
minutes to deliver remarks.
    Dr. Schleicher, you may begin when you are ready.

  STATEMENT OF DR. STEPHEN SCHLEICHER, MD, MBA, CHIEF MEDICAL 
                  OFFICER, TENNESSEE ONCOLOGY

    Dr. SCHLEICHER. Chairman Smith, Ranking Member Neal, and 
members of the Committee on Ways and Means, I want to thank you 
for the opportunity to appear here today to discuss severe 
chemotherapy drug shortages.
    I am a medical oncologist at Tennessee Oncology, the 
largest provider of cancer care in Tennessee, where I also 
serve as chief medical officer. I am also a board member of the 
Community Oncology Alliance and a member of the American 
Society of Clinical Oncology.
    Last year presented a significant challenge to our patients 
due to drug shortages of older but essential generic injectable 
chemotherapies. The two drugs I want to discuss today are 
carboplatin, first approved in 1989; and cisplatin, approved in 
1978. These very inexpensive generic chemotherapy agents 
continue to serve as the preferred backbone of many important 
curative and palliative cancer treatments.
    So how bad was the shortage at Tennessee Oncology? For 
carboplatin, at our peak shortage, we were unable to treat 90 
percent of patients as scheduled who should have received the 
drug. For cisplatin, we were unable to treat over 50 percent of 
patients who needed it. We went a full 10 days without a single 
shipment of either drug, and, at the time, there was no end in 
sight.
    What was the impact of these shortages? As oncologists, we 
were suddenly faced with the near-impossible task of 
determining which of our patients could receive our very 
limited drug supply. These are patients who are facing cancer, 
perhaps the scariest word in medicine, and are trusting us to 
guide them through their journey during one of the most 
vulnerable times of their lives. In a country that offers the 
most advanced, cutting-edge cancer therapies, we were put in a 
situation that a decade of medical training did not prepare us 
for: the moral dilemma of how to ration our limited supply of 
these chemotherapies.
    As chief medical officer, I had to send an email to all of 
our providers on June 18 last summer that communicated we had 
only enough cisplatin to be used in patients with testicular or 
bladder cancer, and only enough carboplatin to be used for 
chemo, radiation, and lung cancer. What that meant is that we 
were not--we did not have enough to allow any use in patients 
with breast, metastatic lung, endometrial, cervical, or many 
other cancers.
    The most significant impact, of course, was on the patients 
themselves, who required carboplatin or cisplatin but were 
unable to get them. Imagine being a patient with a hope for 
cure or wanting to live longer with family suddenly being told 
that you don't have the optimal treatment anymore. There are 
hundreds of examples at Tennessee Oncology alone, but for 
interest of time I want to share two.
    Last summer, I was treating a very sweet, 52-year-old 
female with aggressive, triple-negative breast cancer who had 
one shot at cure with a regimen that included carboplatin. 
Unfortunately, halfway through, in the middle of her four-month 
treatment, we ran out of the drug and I was unable to give her 
carboplatin for three consecutive doses. Already paralyzed with 
fear by her diagnosis, her first question to me was whether not 
getting carboplatin would affect her chance of cure. I had to 
tell her I hope not, but I honestly don't know.
    A colleague of mine was treating a 61-year-old female who 
had stage four lung cancer. The goal of her treatment, which 
also included carboplatin, was to try to extend her life and 
extend her quality of life for as long as possible. 
Unfortunately, after needing to stop carboplatin because we ran 
out of supply, her condition deteriorated rapidly, and she died 
soon after. Whether she could have lived an additional several 
months or longer to spend cherished time with family, we--and 
most importantly, the family--will never know.
    Now, I practice at a large oncology group with significant 
purchasing power, but we were still faced with severe 
shortages. It is virtually impossible to predict an inventory 
enough supply in advance of drugs that may have shortages in 
the future. And that is us. I can't even imagine how a small, 
say, one-physician practice in rural America would ever be able 
to navigate these shortages.
    Finally, I want to mention that even if cisplatin and 
carboplatin are improved right now, we are still dealing with 
drug shortages. An example is methotrexate, another older 
generic chemotherapy used to treat CNS lymphoma; and 
vinblastine, a generic chemotherapy used to treat curable 
Hodgkin's lymphoma. The problem of drug shortages is not over 
yet.
    In summary, I testify today as a practicing oncologist 
representing my patients, as well as the thousands of cancer 
patients around the country and their treating oncologists. I 
am not an economist or policymaker, but common sense tells me 
that these shortages of inexpensive, generic drugs must be tied 
to the lack of incentives for manufacturers to produce these.
    We are all concerned with the financial toxicity of 
expensive cancer drugs, but we also need to be equally 
concerned about the chronic shortages of inexpensive but 
essential generic drugs. I implore Congress to act to stop 
these drug shortages, and thank you for the opportunity to 
testify today.
    [The statement of Dr. Schleicher follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman SMITH. Thank you very much.
    Mr. Cavacini, you are now recognized.

 STATEMENT OF EUGENE CAVACINI, SENIOR VICE PRESIDENT AND CHIEF 
   OPERATING OFFICER, MCKESSON PHARMACEUTICAL SOLUTIONS AND 
                        SERVICES (PSAS)

    Mr. CAVACINI. Thank you. Good morning, Chairman Smith, 
Ranking Member Neal, and esteemed members of the committee. My 
name is Gene Cavacini, and I am the senior vice president and 
chief operating officer for McKesson's drug distribution 
businesses. In that role, I oversee distribution, sales, and 
customer service for our operations in the United States.
    McKesson applauds this committee's efforts to mitigate drug 
shortages and shares your goal of strengthening an already 
strong global supply chain. I am grateful for the opportunity 
to be here today to share McKesson's perspective and to offer 
some recommendations.
    McKesson is a diversified health care services company 
founded nearly two centuries ago. We play a critical role in 
health care delivery, making medications and supplies available 
to health care providers and patients across North America. In 
fact, about one-third of the nation's pharmaceutical products 
flow through our facilities each and every day. We are 
passionate about our mission to improve care in every setting 
one product, one partner, and one patient at a time. If you 
visit one of our more than 30 distribution centers, you will 
walk under a banner that reads, ``It is not just a package, it 
is the patient.'' McKesson constantly evaluates our processes 
to help surety of supply to help identify and mitigate 
potential problems.
    When sourcing products, we prioritize three pillars: the 
first is consistent supply and supply chain quality; second, 
clinical importance and therapeutic options; and third, of cost 
or price. These pillars are fundamental to our business model 
and responsible sourcing practices. For vulnerable drug 
categories, we also examine clinical and patient need to ensure 
access to alternative therapies.
    While drug shortages affect only one percent of all 
prescriptions, we know that even that small percentage can have 
significant impact on health care providers, caregivers, and 
most importantly, patients.
    To address drug shortages, we must agree on a common 
definition, and distinguish whether the occasional disconnect 
between supply and demand represents true supply limitations, 
or just temporary gaps in access. Our view is that most drug 
shortages fall within three categories: market-wide supply 
disruptions, product-specific issues, and then reimbursement 
and market access limitations.
    Common causes include sourcing or manufacture problems, 
natural disasters, market economics, changes in prescribing or 
demand patterns, and product discontinuations. The key drugs 
and classes making headlines demonstrate the range of root 
causes and also highlight the need for unique solutions.
    A robust, competitive market is one that naturally buffers 
against drug shortages. Government intervention should correct 
the market to its natural, competitive state, but be careful 
not to create misaligned incentives that could add to 
shortages. Policymakers should focus on products most at risk 
of shortage, like generic, sterile injectables and particularly 
those products for cancer patients.
    As for root causes, we offer the following recommendations.
    We must strengthen access to Active Pharmaceutical 
Ingredients, or APIs, as well as fully manufactured products. 
This will require more than just increasing domestic capacity. 
Preservation programs must be coordinated with all 
stakeholders, including manufacturers, distributors, providers, 
and the national stockpile to be careful that we don't stress 
all very--already vulnerable products or trap precious 
inventory where it might not be accessible. We must provide 
equitable access to all settings of care and all patient 
populations.
    And second, we must examine reimbursement with market 
incentives necessary to revitalize investment in manufacturing, 
especially for drugs with low margins and a limited number of 
manufacturers. This could include temporary relief from rebate 
requirements and inflationary penalties contingent upon 
building manufacturer capacity and investing in quality 
programs.
    And third, we must improve transparency across the supply 
chain. This requires the sharing of insights both up and down 
the supply chain, with safeguards to protect competitive, 
sensitive information.
    McKesson believes strongly that solving drug shortages 
requires the collaboration of all stakeholders in the supply 
chain, and we are committed to doing our part. By addressing 
the variable root causes, bolstering supply preservation 
efforts, and improving communication between stakeholders we 
can make meaningful progress in protecting the health of our 
nation.
    Thank you, and I look forward to your questions.
    [The statement of Mr. Cavacini follows:]
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    Chairman SMITH. Thank you.
    Mr. Coukell, you are now recognized.

  STATEMENT OF ALLAN COUKELL, BSC, SENIOR VICE PRESIDENT FOR 
                    PUBLIC POLICY, CIVICA RX

    Mr. COUKELL. Thank you, Chairman Smith, Ranking Member 
Neal, and members of the committee. I appreciate the 
opportunity to speak with you today about drug shortages, their 
causes, and policies to prevent them. My name is Allan Coukell. 
I am a pharmacist by training, and I lead public policy for 
Civica, also known as Civica Rx.
    Civica is the only pharmaceutical company established 
specifically to address drug shortages. It was founded by a 
group of U.S. health systems and philanthropies who, after more 
than a decade of chronic drug shortages, realized that the 
market is not self-correcting and that a different approach is 
required. They created Civica as a non-profit with a mission to 
deliver a safe, stable, and affordable supply of medicines to 
U.S. patients.
    In our first five years of operation, our hospital 
membership has grown to 1,500 hospitals. We supply more than 80 
drugs today, with more than 150 million vials delivered to 
date. And, with U.S. government support, we have built a state-
of-the-art manufacturing facility in Petersburg, Virginia.
    Civica chooses drugs not for their return on investment. In 
fact, they are chosen by hospitals because they are in shortage 
or at risk of shortage. They tend to be old and low-cost 
products, but absolutely essential to patient care and used in 
every hospital every day.
    Because of our mission, Civica takes a different approach 
from the traditional generic drug supply chain. For example, we 
enter long-term purchase and supply contracts that add 
stability to the market. We maintain a six-month buffer 
inventory of every drug to ensure continuity of supply. We also 
emphasize U.S. sourcing whenever possible, with Canada and the 
EU as our next preference. We don't source from China unless 
there is no other option. And, to reduce the risk of a failure 
to supply, we perform an intensive quality audit of our 
potential suppliers with ongoing data, metrics, and quality 
reviews. And every drug is sold at the same price to any 
purchaser.
    The success of this approach has been proven. In fact, 20 
of our top 25 drugs are currently a national shortage, and yet 
we are supplying our member hospitals without interruption. 
When a tornado hit a manufacturing plant in North Carolina a 
few months back, Civica let our member hospitals know that we 
could supply double their committed volume for all of the drugs 
we supplied that overlapped with those from that facility. And 
recently a top--a study in a top medical journal showed that 
supply through Civica was both more reliable than conventional 
sources, but also produced net cost savings to the health care 
system.
    So the resilience of this model points to steps the 
committee could take to prevent future drug shortages. And make 
no mistake, shortages are not a passing storm that will soon 
blow over. After a dozen years, they must now be understood as 
a built-in and permanent outcome of the current system.
    The U.S. system is designed so that purchasers of drugs are 
incentivized to choose the lowest price, saving pennies on 
already low-cost products, instead of purchasing in a way that 
makes shortages less likely. Civica's member hospitals have 
already taken steps to shift this equation, but there is more 
to be done. Without changes, shortages will get worse, not 
better.
    The immediate cause of most shortages of injectable drugs 
is a quality problem with the manufacture of the finished 
dosage form. But the root cause is widely acknowledged to be 
low prices. And it is remarkable when you think about it. An 
injectable prescription drug that requires extensive testing, 
development, has a complex supply chain, exacting 
manufacturing, and regulatory approval required then sells for 
less than a bottle of water from the corner store. These low 
prices reduce the incentive and ability of manufacturers to 
invest in quality or in newer facilities. That pushes 
production offshore to low-wage markets, where quality problems 
proliferate and the FDA presence is inconsistent.
    So policy responses to shortages need to change the market, 
including measures to incentivize or encourage providers to 
contract for adequate buffer inventory, evaluate manufacturer 
quality on an ongoing basis, and choose ones that are less 
likely to have supply failures, and enter long-term contracts 
that bring stability to the market.
    We also encourage Congress to work directly with 
manufacturers to create an insurance policy. At a modest cost 
of about $4 million per drug, Congress can ensure that we have 
a backup domestic manufacturing capacity ready to go when a 
shortage starts. If the United States had made this investment 
in cancer drugs five years ago, we would have been prepared for 
the shortages that we are experiencing today. We have the 
opportunity now to make a targeted investment to protect the 
drug supply in the future.
    Thank you again for your attention, and I welcome your 
questions.
    [The statement of Mr. Coukell follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman SMITH. Thank you.
    Dr. Schondelmeyer, you are now recognized.

 STATEMENT OF STEPHEN SCHONDELMEYER, PHARMD, PHD, DIRECTOR OF 
   THE PRIME INSTITUTE, UNIVERSITY OF MINNESOTA'S COLLEGE OF 
                            PHARMACY

    Mr. SCHONDELMEYER. Thank you, Mr. Chairman, and thank you, 
Ranking Member Neal and committee. I am Stephen Schondelmeyer, 
I am a professor of pharmaceutical economics and management at 
the University of Minnesota, and I also direct a resilient drug 
supply project.
    Over my 50-year career, I have studied virtually every drug 
product that is on the market in the U.S. I have databases with 
information on those drugs and their prices and their 
availability and issues over time, and I have used that 
database to learn and understand the market.
    First, let me point out that the relatively recent COVID-19 
pandemic isn't the primary reason for drug shortages. It has 
had a bump in drug shortages and increased it a bit, but 
really, COVID-19 has exposed vulnerabilities that we didn't 
realize previously, and we have some new emerging 
vulnerabilities that are coming out in this market, and those 
are the things I will address.
    I agree with my colleagues. I agree with the chairman and 
ranking member and their comments about the patient harm and 
critical nature of shortages, but I am going to address 
geopolitical risk, quality of production issues, and potential 
trade barriers and their impact on drug shortages.
    Basically, geopolitical risk is a term that we are using 
more and more these days to talk about vulnerabilities that may 
be related to the geographic location of where something 
happens, may be related to the political orientation of where 
something happens, or both. And, in pharmaceuticals, we have 
situations where geopolitical risk is both locational and 
political in terms of affecting availability of drugs or 
potentially affecting them.
    Among the things that are important in pharmaceuticals and 
geopolitical risk are where active pharmaceutical ingredients 
are made and their key starting materials, and where finished 
dosage forms are made. And I would remind you, when I go to the 
grocery store or the clothing store, I can look at the label 
and see where the product was made. In pharmaceuticals, that 
isn't always the case. And, even if it does say where the 
product was made, you don't know if that is where somebody put 
it in the box and called it being made in that country, or 
where they actually made the capsule or tablet, or where they 
actually made the chemicals that go into the drug. And all 
three of those are important in drug supply chains, and yet the 
market is very opaque with respect to where products come from.
    A stable drug supply relies on complex interdependencies in 
international relations, both politically and commercially. The 
United States is heavily dependent on foreign manufactures for 
active ingredients and finished dosage forms. We get--about 45 
percent of our finished dosage forms and as much as 60 percent 
of our active ingredients that are in products that people take 
every day in America come from either China or India. So we are 
heavily dependent on these two countries. That is not 
necessarily bad. It is not to say that their products aren't 
good all of the time, but there are issues with that.
    I would point out from our research at Minnesota that about 
80 percent of all U.S. doses taken every day by Americans come 
from foreign sources. China and India, as I said, are 
responsible for 45 and 60 percent, respectively, of those. 
There are about 100 drug products that the only place the 
active ingredient is made in the world is China. It is not made 
in the U.S., it is not made anywhere else. And so, if China 
chose to develop trade policies that prohibited export of those 
drugs, we wouldn't have any in the U.S.
    Now, we have companies that could begin to make those, but 
it may take one, two, three years to come on the market. So I 
believe in markets, and I believe markets do self-correct over 
time, but that--the catch is in over time, and the U.S. market, 
and particularly with pharmaceuticals, we can't begin making a 
product as quickly as you could make a clothing item or other 
goods. So we have to take into account the timelines in 
pharmaceuticals.
    I would point out some trade barriers. During the COVID 
pandemic, India put an embargo on or an export ban on about 25 
products and was going to ban shipping them because they wanted 
to make sure they had enough product for their own country. 
They later reversed that. But, if every country in the world 
took this protectionist approach, only the producing companies 
would have product and the non-producers wouldn't. And I remind 
you of the generics we have in the U.S. market: 80 percent 
aren't produced in the U.S. So what is going to happen if 
everybody else starts protecting where they produce the drug? 
We won't have generics.
    One final comment on what could happen is you might have 
recently heard that Florida was approved by the FDA to start a 
re-importation program, a very important concept. And I have 
worked with and advocated consideration of such policy over 
time. As soon as Canada heard that that was approved and it 
might actually happen, Canada passed a law prohibiting export 
of drug if it resulted in a shortage in Canada. So we are going 
to have to have the U.S. administration and the trade 
representative and Department of Commerce and others work 
together with Canada if that is ever going to work.
    My final point is the upstream drug supply in the U.S. 
needs to be mapped comprehensively and continuously to identify 
vulnerabilities and help us prepare with coordinated responses.
    [The statement of Mr. Schondelmeyer follows:]
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    Chairman SMITH. Thank you.
    Dr. Gralow, you are recognized.

   STATEMENT OF JULIE GRALOW, MD, CHIEF MEDICAL OFFICER AND 
                 EXECUTIVE VICE PRESIDENT, ASCO

    Dr. GRALOW. Thank you, Chairman Smith, Ranking Member Neal, 
and members of the committee. It is my pleasure to appear 
before you to discuss the drug shortage crisis. I am Dr. Julie 
Gralow, chief medical officer and executive vice president of 
the Association for Clinical Oncology, or ASCO. I am a 
professor emeritus of medical oncology and global health at the 
University of Washington School of Medicine.
    ASCO is a leading professional organization representing 
nearly 50,000 oncology professionals dedicated to improving 
cancer care. We appreciate the committee's dedication to 
addressing drug shortages. Every day, we hear from oncologists 
about the challenges they and their patients are facing. The 
drug shortage crisis is forcing providers to make impossible 
choices, including deciding which patients receive lifesaving 
and life-prolonging cancer drugs on schedule and in established 
doses, or whether they are left to use suboptimal alternatives, 
reduce doses, delay treatments, and, in the worst situations, 
are unable to provide necessary therapies.
    An oncologist in Texas shared that a patient's breast 
cancer was responding to a commonly used oncology drug, 
carboplatin, in combination with immunotherapy. After four 
cycles, the cancer was under control. She stopped receiving the 
carboplatin due to the shortage, but continued the 
immunotherapy, and unfortunately, her cancer quickly 
progressed.
    An oncologist in California sent a patient with bladder 
cancer to an academic center to participate in a clinical 
trial, primarily because that was the only way to guarantee 
access to cisplatin, another drug in shortage. The oncologist 
saw clinical trial enrollment as the only way to achieve the 
standard of care that his office could not provide.
    An oncologist in Puerto Rico could not treat a head and 
neck cancer patient with the preferred regimen because the 
practice was projected to run out of the drug during the 
treatment. The physician and the patient were forced to select 
an alternative.
    You can imagine the tremendous emotional toll this places 
on patients and their families. These deeply troubling choices 
my colleagues frequently face amid the drug shortage crisis are 
emotionally taxing the entire health care team. The staff time 
and expense of managing shortages includes looking for supply, 
allocating limited drugs, changing treatment plans, and 
counseling patients.
    The U.S. must establish a more resilient pharmaceutical 
supply chain. Most oncology drugs in shortage are generic, 
sterile injectables that sell for $1 to $8 per dose, leaving 
these drugs with slim profit margins, sometimes with production 
costs exceeding the selling price, and often driving 
manufacturers out of the market or looking to manufacture 
outside of the U.S. to keep costs down. There are few 
manufacturers of sterile injectables, and they face significant 
costs to stay in business.
    The leading cause of drug shortages is manufacturing 
quality issues, largely driven by economic factors. Disruption 
from quality issues can leave the manufacturer unable to ramp 
up production for months and at significant expense. When one 
manufacturer experiences quality issues, the entire market is 
impacted. If another manufacturer is willing to enter the 
market to shore up, supply can take months to get FDA approval 
and get production up and running due to the complexity of 
sterile production requirements.
    Current drug payment policies compound quality issues. 
Purchasers have limited information, typically only price data, 
and don't have access to manufacturing quality or supply 
information. This creates adverse market incentives for 
manufacturers to prioritize cost cutting over quality 
improvements or capital investments. It is particularly 
challenging for generic oncology drug manufacturers who operate 
on a slim or even negative profit margin.
    Approximately half of all newly diagnosed cancer patients 
are over 65 years old, making Medicare the largest payer of 
cancer care in the country. As such, Congress can take 
immediate action in three areas: payment, manufacturing, and 
quality. Congress could explore alternative payment 
methodologies to provide relief from artificially low generic 
reimbursement rates, encouraging a more reliable supply of 
drug. Payment reform should factor in quality and reliability 
of supply.
    In manufacturing, Congress could encourage the adoption of 
advanced technology, such as continuous manufacturing for 
critical drugs and Active Pharmaceutical Ingredients. 
Incentives such as tax credits or government contracts could 
help increase manufacturing in the U.S.
    Finally, in the area of quality, Congress could consider 
stronger requirements for risk management plans and incentives 
for purchasers to contract with manufacturers who demonstrate 
quality and the ability to provide reliable supply.
    The shortage of critical cancer drugs is a crisis. Cancer 
patients and their families deserve to know that they will get 
the care they need without delay. Providers should not have to 
make heartbreaking choices about patient care. We must act. 
ASCO stands ready to collaborate with you to advance 
comprehensive solutions.
    [The statement of Dr. Gralow follows:]
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    Chairman SMITH. Thank you.
    Dr. Ballreich.

    STATEMENT OF JEROMIE BALLREICH, PHD, ASSOCIATE RESEARCH 
   PROFESSOR, JOHNS HOPKINS BLOOMBERG SCHOOL OF PUBLIC HEALTH

    Mr. BALLREICH. Thank you, Chairman Smith, Ranking Member 
Neal, and honorable members of this committee. Thank you for 
the opportunity to testify about chronic drug shortages. I am 
an associate research professor specializing in the economics 
of the U.S. pharmaceutical market.
    I recommend Congress consider four policy solution sets to 
address chronic drug shortages: first, consider policies that 
improve the transparency of drug supply chains, notably around 
the source of drug raw materials; second, consider policies 
that incentivizes long-term market commitments and investment 
in the supply chain; third, consider policies to incentivize 
the onshoring of drug and ingredient manufacturing; lastly, 
consider the implementation of a supply safety net either in 
the form of a stockpile or buffer stocks of essential drugs.
    Legislation should require drug manufacturers to disclose 
information on key supply chain attributes, including site and 
capacity of drug manufacturing facilities and the source of 
drug ingredients. A recent study identified 87 percent of drug 
ingredients and 60 percent of finished products were 
manufactured overseas, principally in India and China. This 
study used proprietary data. This type of information should be 
disclosed to the FDA and shared with key stakeholders in the 
drug supply chain, which will allow the identification of 
supply chain threats and possible remediation of supply chain 
threats.
    Congress should consider changes in generic drug 
reimbursement to incorporate incentives for manufacturers to 
invest in more resilient supply chains. These policies could 
include higher payment levels for manufacturers who demonstrate 
commitment for resilient supply chains and higher payment 
levels for generic drugs with complex manufacturing and small 
markets. Currently, the generic market rewards manufacturers 
who offer the lowest price. This does not consider long-term 
market commitments by manufacturers, nor incentivizes 
investment in the supply chain.
    One mechanism for incorporating incentives could be payment 
which incorporates a grading system based on supply chain 
resiliency, where Medicare and Medicaid pay higher prices for 
generics with resilient supply chains. This is similar to the 
quality measures that Medicare considers for paying hospitals 
and Medicare Advantage plans.
    Related to payments, I am concerned that provisions of the 
Inflation Reduction Act, specifically penalty--inflation rebate 
penalties, may incentivize shortages. If a drug company signals 
to the FDA that their drug is in shortage, then their drug 
could be exempt from inflation rebates. This policy could be 
improved by limiting the exemption to shortages that are caused 
by external factors to the supply chain and not just simply a 
higher demand.
    Congress should consider policies to incentivize domestic 
drug ingredient manufacturing. These policies could come in the 
form of subsidized loans, tax incentives, or even higher 
payment rates for drugs produced in the U.S. Onshoring of the 
drug supply chain will increase its resilience.
    Lastly, policies should be enacted to create a supply 
safety net in the form of either stockpile or buffer stock of 
essential drugs and/or ingredients. A national stockpile will 
provide a centralized location of essential drugs and can be 
accessed in times of shortages. In addition, having a single 
purchaser of a national stockpile will improve the economy of 
scale and lower operating costs.
    Alternatively, Congress could also opt for a more 
decentralized approach by providing financial incentives in the 
forms of grants or tax incentives to wholesalers or hospitals 
to increase their inventory of essential drugs beyond short-
term demand needs. CMS has recently proposed a rule to 
encourage buffer stocks at hospitals, but this could be 
broadened to other intermediary suppliers such as wholesalers.
    I applaud the efforts of this committee to consider 
policies to improve the supply chain of drugs and improve 
supply chain resiliency. Immediate priorities should be the 
creation of a national stockpile of essential medicines, 
greater transparency of the supply chain, and reform generic 
drug reimbursement to incentivize supply chain investments. 
Thank you.
    [The statement of Mr. Ballreich follows:]
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    Chairman SMITH. Thank you all for your testimony. We will 
now proceed to the question-and-answer session.
    As I noted in my opening statement, most of the Active 
Pharmaceutical Ingredients that make up our essential medicines 
are sourced from outside our country, and China is a leading 
source of pharmaceutical product imports. Dr. Schondelmeyer, 
can you speak to what dangers we face by being reliant on 
foreign sources for our medical supply chain, and how can we 
better onshore more production, or at least be less reliant on 
hostile countries like China?
    Mr. SCHONDELMEYER. Thank you, Mr. Chairman. That is a great 
question. There is no simple answer, but we are reliant--we 
have to realize you can't just set up a factory and make 
tablets or capsules without the chemicals and the raw 
ingredients that are needed to make that. And, with the 
majority of those made outside of the U.S., then we have to 
obtain those from other countries.
    Now, remember in my presentation I talked about India put a 
ban on export of certain drugs out of India because they wanted 
to make sure they had enough for themselves. And, if that ban 
had stayed in place, we would have seen shortages over the next 
three or four months develop in the U.S., and we would have 
been without certain products. And so, if India and/or China 
and/or a country that makes a lot of the generics that we need 
puts bans or trade embargoes on exporting drugs, we are going 
to be without the drug.
    And yes, Civica or other drug companies in the U.S. could 
begin making them, but they can't do it tomorrow. It is going 
to--we can ask Mr. Coukell how long it would take, but it is 
months to years to repair that. So we could have patients--
cancer patients or pediatric patients or other patients--
without the drugs they need because a country simply blocks us 
from having access to those drugs.
    And that is--you know, we don't rely on other countries to 
make the bullets when we fight wars, especially our sworn 
enemies, and so we want to make sure that the drugs we need to 
keep our public and our military healthy are coming from 
sources that we have control of.
    Chairman SMITH. Thank you. It is easy to get caught up in 
the logistical challenges or market forces when discussing drug 
shortages, but we have to remember at the end of the supply 
chain sits a patient waiting for a treatment to a cure. Dr. 
Schleicher, please describe the impact on patients and 
providers when they are forced to navigate drug shortages on 
top of managing their needed treatments.
    And how is this challenge worse in smaller and rural areas?
    Dr. SCHLEICHER. Yes, thank you, Chairman. So it is 
extremely challenging, especially when you don't know when the 
end of the shortage is coming.
    A lot of people talk about delaying treatment. For us, in 
the peak of this, we thought it might be months until we would 
get carboplatin back, so you couldn't delay. So you are just 
treating without. And sometimes there are substitutions, but 
often there are not. So you are really having to treat patients 
without the evidence-based treatment regimen that we are used 
to giving, which is incredibly hard, as the oncologist and the 
team, of course, having to deliver that news once you have 
gained trust with that patient, but obviously way worse for the 
patient him or herself.
    In addition, all of us are used to evidence, clinical 
guidelines, and we were at the first time not having those. 
Organizations like ASCO and others did kind of put out 
consensus guidelines, but often shortages happened before we 
had that. Our group were emailing back and forth, ``How would 
you treat this? How would you treat this?'' We had advanced 
analytics to help us at least the best way possible figure out 
where the drugs were.
    Now, if you are a one-doc or two-doc practice in rural 
America, one, you don't have access to colleagues to ask for 
help on. I can't imagine treating without a certain drug or 
knowing what substitution to give if I don't have people to 
ask.
    Two, inventory management is complicated enough. Tennessee 
Oncology had to carry and give 200 different drug formulations 
last year to our patients. Being able to add that with also 
stockpiling drugs that might be in shortage is almost an 
impossible task, even for a group as large as us.
    But a one or two-doc practice in rural America would have--
I don't even know how it would be possible to navigate, one, 
what to do clinically; and then two, how to actually manage the 
inventory.
    Chairman SMITH. Thank you.
    Mr. Coukell, we heard from your statement that Civica 
represents an alternative way of sourcing essential drugs for 
health care providers. How are your contracting practices with 
manufacturers different from traditional large group purchasing 
organizations, and how can these models be implemented in 
smaller rural communities?
    Mr. COUKELL. Thank you, Mr. Chairman. Let me actually start 
with the rural community component.
    We have some large for-profit and non-profit health systems 
who are part of Civica, but we also have some small rural 
hospitals. They have the same access to our drugs at the same 
price, which may even be an advantage for the small hospital, 
since they don't normally have the buying power. And we hold 
stock for them based on whatever volume they have committed.
    In terms of our contracting processes, we do a number of 
things that are different. One is that we have long-term 
purchase and supply contracts. So, when we contract with a 
contract manufacturer, they have typically a five-year volume 
commitment from us. So they know they are in the game for five 
years, and they can invest in their production and they know 
that they have stable demand and price. So it creates that 
stability in the marketplace.
    But we go further. We actually go out and do a physical 
audit of a manufacturing facility that we are going to contract 
with. Our team goes in, they look at the facility, they look at 
the cleanliness, they look at the protocols, they review 
documentation, and then we sign a contract--a quality agreement 
with them. So on an ongoing basis they are submitting data to 
us on product deviations, inspectional reports, all kinds of 
things that give us insight into the quality in that facility.
    And then finally, sir, each batch of drug, we make a batch-
by-batch decision to release that onto the market based on a 
review of the quality documentation associated with that batch.
    Chairman SMITH. Thank you. I now recognize the ranking 
member, Mr. Neal, for any questions he might have.
    Mr. NEAL. Thank you, Mr. Chairman.
    Dr. Ballreich, I know you are going to hear a lot today 
about the potential for onshoring the manufacture of medicines 
to address drug shortages and the need to provide tax 
incentives for manufacturers to do so. And one of the most 
critical steps is to address the shortage of generic, sterile 
injectable drugs in the manufacturing quality arena. What do 
you think Congress ought to be doing to consider improving the 
reliability and quality of the finished product to mitigate 
shortages?
    Mr. BALLREICH. Yes, excellent question. Thank you, Ranking 
Member Neal.
    I think Congress should consider looking at the 
reimbursement mechanism for GSIs, or Generic Sterile 
Injectables. These are very--these tend to be small-market-type 
injectables. Having better transparency of the supply chain, 
having a potential scorecard to incentivize quality, rather 
than simply let's identify the lowest cost are all possible 
solutions to improve the resiliency of the Generic Sterile 
Injectable market.
    So I think there are a number of potential policy options 
for GSIs, and I--out of those, I think increased transparency, 
quality scorecard are the two best approaches to improve the 
market.
    Mr. NEAL. And, as you know, Joe Biden has taken advantage 
of the opportunity with the Defense Production Act to enable 
more domestic manufacturing of these essential medicines.
    Dr. Gralow, you said something that captured my attention 
during the testimony. By the way, the testimony was really 
good. You said that Medicare is now the biggest provider of 
cancer care, or something to that extent, in your comments. Can 
you elaborate on that? That is pretty important for members of 
the committee to hear.
    Would you turn on your----
    Dr. GRALOW. Sorry. For the most part, cancer is a disease 
of aging. Of course, it can occur in younger people, but the 
longer we live the more likely we are to get cancer.
    So, with our aging population, more than half of cancers 
right now in the United States are being diagnosed at age 65 or 
greater. So Medicare can play a big role in how we actually 
help strengthen these sterile injectables that are dirt cheap, 
and it can build up the whole system.
    Mr. NEAL. Thank you. That was really important.
    I yield back.
    Chairman SMITH. Thank you.
    Mr. Buchanan.
    Mr. BUCHANAN. Thank you, and I want to thank the chairman 
and thank the witnesses today.
    As someone that has been in business for a lot of years 
before I got here, we had tens of millions of dollars' worth of 
inventory that had to be managed. I think we have got a 
disaster on our hands in terms of moving forward. That is just 
my opinion. We have got to find a way for American companies to 
get back in the game.
    My point in bringing up the idea of the inventory, I don't 
care if you are a two-store, or you are just a small--2 docs or 
you have got 500 docs, there is the technology, I have got to 
believe, out there. You should have a six-month supply. We 
always had a fill rate.
    And so we have got to find a way. Frankly--we have got to 
be candid about this--you have got India and China producing 
70, 80 percent, it depends on what number you want to have, in 
terms of the raw materials. That has got to change, and we have 
got to get more of our control locally. I represent Sarasota or 
the Manatee County Tampa Bay area, and I can tell you I have 
200,000-plus seniors there. And this has been going on for 
quite a while with the docs in that area, especially as it 
relates to cancer. So we have to find a way we can come 
together, work together, set the incentives up so we can get 
more of our American companies in there.
    The other thing I will just say, when you have seen what 
happened with COVID, what happened to the inflation? It went 
out of sight, and it is because there was no inventory. And 
that is what is going to happen here. They said it is 50 
percent or something up--the Chinese have been up the last 
couple of years in some of their products or whatever, but that 
is going to happen here. When the cupboard is bare and there is 
no inventory, people are going to pay the difference.
    So we have to have adequate supplies. We have got to stop 
kidding ourselves and figure out how, looking as we go forward, 
how we are going to be in this game in a bigger way, especially 
American companies. It means American jobs.
    So, Mr. Schondelmeyer, why don't--could you explain to me, 
you know, a little bit more your thoughts on just inventory 
management--because it was brought up a little bit earlier 
today--and why that is such a big problem for this industry?
    [Pause.]
    Mr. BUCHANAN. Hit your----
    Mr. SCHONDELMEYER. Yes, I do think this industry does a 
great job of managing inventory, in general. But we have moved 
to what you call just-in-time inventory, where you minimize the 
amount you keep on hand because one of the fastest ways for a 
business to lose money is to have too much sitting in 
inventory. But, when you start to run short and have shortages 
of raw materials or production, then that small inventory 
catches you and leaves you without product. And so we need to 
better be able to predict when demand changes will stress that 
inventory.
    And what really caught us in the pandemic, there were 
demand changes that affected the inventory and availability, 
but there were also supply disruptions we didn't anticipate. 
When a whole city in China was closed on lockdown because of 
COVID, and they quit producing products where they made 
pharmaceuticals, then we didn't have them. That wasn't a demand 
issue, that was a supply issue.
    So I think we do need to control the inventory and know how 
much--what I look at is the agricultural industry. If we, you 
know, are worried about food supplies, we can tell you how much 
soybeans we expect to be produced next year, and how much corn, 
and which field in Missouri or Arkansas is going to produce 
those, or in Iowa, wherever it is coming from. We know that. 
But for pharmaceuticals, as a government, we don't have a 
single agency that knows where all of our drug products come 
from----
    Mr. BUCHANAN. Let me----
    Mr. SCHONDELMEYER [continuing]. How much is being produced.
    Mr. BUCHANAN. I have just got five minutes.
    Mr. SCHONDELMEYER. Yes.
    Mr. BUCHANAN. So Mr. Coukell----
    Mr. SCHONDELMEYER. Sorry.
    Mr. BUCHANAN [continuing]. Could you add on to that? You 
have talked about inventory management of that, and just your 
thought, and your background. And how do we create the 
incentives to have more American companies and more American 
jobs here in the States?
    And I know there is a cost to wages and all these other 
factors that come into play, but I am concerned about us not 
being at the table because, you know, when I first got in the 
business it was all about oil and gas, and they had it, and we 
had pay--you got to pay whatever you have got to pay to get it, 
and I just don't like that, being backed into a corner, and 
that is where I feel, as Americans, we are at right now.
    Mr. COUKELL. Thank you. As Dr. Schondelmeyer says, it costs 
money to have inventory sitting around in a warehouse, which is 
why people mostly try not to do it. But, if somebody drops out 
of the market, it takes drug production a long time to 
increase. So we need that buffer stock as an insurance policy.
    I think we probably shouldn't try to have that sitting in 
an individual doctor's office or hospital. They are not set up, 
they don't have the space, they don't have the systems, they 
don't want the risk of expired inventory. But, if that 
inventory buffer is sitting in the supply chain, we are 
constantly putting new stock in and selling the older stock, 
and we are really managing it, there is an incremental cost to 
doing that but it is an incremental cost that would really 
compensate for the added resiliency we would have.
    Mr. BUCHANAN. Yes. The only thing I would say is that there 
is a turn rate and everything else, and maybe it is not six 
months, maybe it is three, but to keep things that tight, I 
think, is the wrong way going forward.
    Thank you, and I yield back.
    Chairman SMITH. Thank you. I now recognize my friend and 
49ers fan, Mr. Thompson.
    Mr. THOMPSON. I am going to enjoy that steak you are going 
to buy me after the Super Bowl, Mr. Chairman. [Laughter.]
    Mr. THOMPSON. Mr. Chairman, thank you very, very much for 
this hearing today. It is timely and important.
    Prescription drugs is one of the things that I hear the 
most about from my constituents. And, as we all know, when you 
need a drug, you need it, and you need it fast. The price of 
the drug is only part of the battle. It has to be affordable, 
but it also has to be accessible. And the witnesses have all 
made that an important point--part of their testimony. And they 
all seem to agree that fixing current and preventing future 
drug shortages requires both transparency and stronger supply 
chains.
    Dr. Gralow, I think many of us on both sides of the aisle 
are frustrated at the lack of transparency in our healthcare 
system. Can you talk a little bit more about how increased 
transparency would help in this specific area in preventing 
drug shortages and ameliorating the ones that we already face?
    Dr. GRALOW. Thanks for that question.
    There is a severe problem with transparency in where the 
raw materials come from, what the manufacturers are doing. We 
know which manufacturers the FDA has approved. We can get, but 
it can be complicated to understand, what percent of the market 
each of the manufacturers are supplying and where each of them 
are getting the Active Pharmaceutical Ingredients. That is not 
really known.
    So, for example, what happened with the cisplatin case is 
the Active Pharmaceutical Ingredients made in one plant in 
India, that plant was shut down by a surprise FDA visit that 
found some major quality problems. We did not know, there was 
no transparency that that company supplied the majority of 
Active Pharmaceutical Ingredients for all of the manufacturers 
across the board. Knowing that up front, we could have reacted 
much, much sooner. And it wasn't until we saw the implications 
of that with now drug dropping from most of the manufacturers, 
that we realized just how much that one plant impacted 
everyone.
    Mr. THOMPSON. Well, I think that is a good spot for me to 
ask you and any of the other witnesses that would like to 
comment, what specific things can Congress do to make 
pharmaceutical supply chains more resilient?
    Dr. GRALOW. I think a better early detection system, which 
relies on exactly your initial question on transparency, on 
what comes from where. Early notification when there is a 
problem so that we can react, we can maybe gear up with some of 
our manufacturing. We could even look at sites--to the FDA to 
approve manufacturers who aren't currently approved to bring in 
lots, for example. So a better early detection system.
    What Congress can do is--we are going to have to pay more 
money for these drugs, these sterile injectables that are 
generic, that cost--you know, this bottle of water costs more 
than some of them. We are going to have to. But that is going 
to be an exchange for resiliency across the system, you know, 
good quality manufacturing, where the plant is----
    Mr. THOMPSON. So, in your testimony, you had mentioned the 
generic drugs, and the appeal to those for many is in fact the 
price. But at the same time, that discourages manufacturers 
because they can make more money in other than generic. How do 
we fix that?
    Dr. GRALOW. So that was to me?
    Mr. THOMPSON. Well----
    Dr. GRALOW. Everyone?
    Mr. THOMPSON. I will ask that to anyone who wants to jump 
in.
    Mr. CAVACINI. I could offer a comment, sir. Thank you.
    Mr. THOMPSON. Please.
    Mr. CAVACINI. I think it is important to remember that the 
vast majority of generic medications are in strong supply, and 
we don't have an issue, and the market works very effectively 
to balance cost, quality, and access.
    There is a subset of complex and inexpensive and 
therapeutically important molecules, largely Generic Sterile 
Injectables, that make up the vast majority. I think two-thirds 
of generic shortages are in the category of Generic Sterile 
Injectables, and I think that is an opportunity to inject some 
of the ideas that we have heard from the panel today that are 
really consistent around transparency and economic stability 
and incenting additional capacity and supply and thinking about 
buffer or safety stocks for those subset of molecules.
    Mr. THOMPSON. Yes, sir.
    Mr. COUKELL. You know the saying. If something seems too 
good to be true, it probably is. So, if somebody is offering to 
sell you a vial of medicine for $0.40, you probably have to 
wonder, am I getting a really good quality drug? But, right 
now, the system drives providers, purchasers to chase that to 
$0.40. And, if they can get it down to 38, they go there.
    We have to take a step back and say we are going to pay 
you, so at least some share of your purchasing. It is not price 
insensitive, but it also takes into account some knowledge of 
the quality and the facility where that drug is coming from.
    Mr. THOMPSON. Thank you.
    I yield back. Go 49ers.
    Chairman SMITH. We will see about that.
    Mr. Smith is recognized.
    Mr. SMITH of Nebraska. Thank you, Mr. Chairman. Thank you 
to our entire panel here for sharing your insight and 
expertise.
    Obviously, these issues aren't easy. And certainly, Dr. 
Schleicher, thank you for your opening and sharing very real 
impacts on patients. And it is hard to believe that, as much 
technology as we have, and ingenuity, that we are still facing 
these shortages, and it should be concerning for all of us.
    I happen to deal with a very rural and often times remote 
constituency. In fact, my district covers enough area that I 
have--I represent over 50 critical access hospitals, over 100 
rural health clinics. So to say it is rural is a bit of an 
understatement because, like I said, some of those facilities 
are in remote locations, and obviously not large enough to 
develop an inventory to prevent a shortage. And so, hopefully, 
we can find some agility, if you will, and--in that ability to 
meet the needs of--the very diverse needs of our patients. And 
I know that this is often times exacerbated with, you know, 
workforce issues, inflation, and I would say some government-
centered over-regulation, as well.
    So I hope that--and I am told that--compounding pharmacies 
actually can be a part of the solution, at least. I would 
appreciate hearing your perspective on that. But I hope that we 
can work together to address these issues.
    But, Dr. Schleicher, can you describe perhaps the capital 
investment that is needed to keep the steady supply of drugs 
available for patients in your practice, such as an oncology 
practice, and perhaps how smaller, more rural providers might 
have more difficulty with this?
    Dr. SCHLEICHER. Great question, thank you very much, 
Congressman.
    So, as we all talk about the complexities of cancer drugs--
and some are extremely expensive, some are the ones we are 
talking about today--the very expensive ones, the capital 
requirements to stock, say immunotherapies, are very high 
because you purchase the drug first. A large group of 200 
providers like us, we can do that because we know if a patient 
shows up to the door and doesn't--isn't able to get that 
medicine due to toxicity, there is going to be another patient 
that comes to our door or to one of our 35 clinics elsewhere 
and be able to give it.
    With the 200 different drugs that cancer patients need 
right now, it is hard to have different inventory strategies 
for different types of drugs because we are already trying to 
balance patient demand, payers, which drugs they want us to 
use, et cetera, but we are able to have some buffer.
    If you are--I was visiting a practice, a single physician 
in rural Kentucky, a few months ago, and he has actually 
stopped even doing traditional buy and build to have the drugs 
because he was so scared about buying a drug, a patient coming 
up, not being able to get it, and then he is on the hook for 
the price of that drug.
    So the smaller practice it gets, which often is in rural 
America, as you are describing, it becomes very difficult to 
afford to have the inventory for all the different categories 
of patients you are going to see, especially the high price of 
lots of inventory, which is different than these drugs. But 
navigating those differences is very challenging to a practice.
    Mr. SMITH of Nebraska. Thank you.
    Mr. Coukell, could you perhaps reflect on, from your 
perspective on distribution and purchasing, how might--your 
ideas for addressing rural shortages?
    Mr. COUKELL. Thank you. I think if Congress incentivizes 
hospitals to purchase in a different way that takes quality 
into account, then the market will respond by creating those 
pathways to market. And I have given the example of Civica, 
which is equally accessible on the same price basis to a rural 
hospital as to an urban or a hospital chain.
    Mr. SMITH of Nebraska. Okay, thank you.
    Mr. Chairman, I yield back.
    Chairman SMITH. Mr. Doggett.
    Mr. DOGGETT. Thank you, Mr. Chairman, and thanks to each of 
our witnesses for testifying.
    However, I must say I think the most pressing shortage that 
we have in America is the shortage of access of patients here 
to brand-name drugs, for which we pay the highest prices in the 
world, with one in four patients in our country skipping or 
rationing their prescriptions because their unaffordable access 
to these drugs is a really pressing challenge.
    Claiming outrageous prices are necessary to fund 
innovation, many pharma manufacturers spend more enriching 
themselves with stock buybacks and dividends than on research 
and development. They have invested in this Congress, 
outspending every other industry with hundreds of millions 
lobbying each year and generous campaign funding. Now, they are 
wasting resources on nine separate lawsuits to block an 
extremely modest Medicare drug price negotiation program.
    At the same time, like our witnesses today, I have heard 
from constituents, particularly those unable to access Adderall 
for children struggling in school. Many first pointed fingers 
at the Drug Enforcement Agency for this shortage, claiming that 
their quotas were too low to meet demand, yet DEA has confirmed 
that manufacturers did not meet production quotas in 2022, 
resulting in a shortfall of about a billion doses. And similar 
trends followed last year.
    Meanwhile, Teva, the leading manufacturer of generic and 
branded forms of Adderall, reported $15.8 billion in revenue in 
2023, an increase of 7 percent from the prior year. So they are 
certainly not short of profits. Adderall has been in shortage 
since October of 2022. So, while children suffer, Teva's 
billions did not go to that worthy cause. Teva spent less than 
$1 billion in 2023 on research and development, yet its overall 
selling and marketing expenses were more than twice that.
    We need greater responsibility and less hypocrisy from the 
pharmaceutical industry. Studies have found that the 
overwhelming majority of shortages, about three-fourths of 
them, were due to increased demand. This is not a problem 
caused by low prices; it is a failure to invest in capacity and 
track and report increased demand. An FDA drug shortages task 
force found shortages ``persist after supply disruptions, 
despite some price increases. Remarkably, only 42 percent of 
drugs in shortage were found to have seen significant 
production increases to restore supplies, and only about a 
third reached pre-shortage supply levels, even a year after 
being in shortage.
    With this committee enabling most pharma manufacturers to 
pay some of the lowest tax rates in America, much less than 
what a mother trying to support two children would pay if she 
earned the average wage, with giant tax subsidies that we 
provide for research and development, it is difficult to 
imagine what other tax incentives this committee could provide. 
But I am sure we will get some lobbying help to find them.
    Pharma is once again in search of a boogeyman to hide its 
wrongdoing, condemning the modest progress that was made in 
dealing with unjustified price hikes that, unfortunately, 
include only a handful of drugs, none of which are generics. 
Nor do the inflation rebates apply to generics in part B, which 
is the program most oncology shortages fall under. For part D 
inflation rebates, which do encompass generics, there is an 
exception for drugs experiencing or at risk of shortage.
    Dr. Ballreich, Big Pharma has launched misleading attacks 
on the inflation rebates designed to prevent these price 
spikes. Can you please elaborate on your shared concern and 
your recommendation to further strengthen the rebates to 
prevent pharma gaming?
    Mr. BALLREICH. Thank you, excellent question.
    So, in the Inflation Reduction Act, as you noted, there are 
inflation rebates. If a drug is identified in shortage, they 
are exempt from the inflation rebates. There are certain 
situations--a natural disaster, or other external supply chain 
effects--that make a lot of sense. However, one of the biggest 
drugs in terms of sales that was in shortage last year was the 
new, popular ozempic, the GLP 1 inhibitor, initially, for type 
2 diabetes and now for weight loss.
    So I think in situations where there is a sudden change in 
demand that drives the shortage, these inflation rebates don't 
make any economic--the inflation rebate exemption does not make 
any economic sense. That exemption should be restricted for 
drugs which are facing shortages due to external factors and 
not because a branded pharma company did not invest enough in 
their own supply manufacturing capacity because they are, in 
fact, incentivized to get that drug already to market. 
Inflation rebate exemptions are not going to change that.
    Mr. DOGGETT. Thank you.
    Thank you, Mr. Chairman.
    Chairman SMITH. Mr. Kelly.
    Mr. KELLY. Thank you, Mr. Chairman, and thank you all for 
being here.
    At the risk of sounding insensitive, I am in the automobile 
business. They currently have 35 cars sitting in our lot that 
belong to customers who are waiting for parts to come in to fix 
them. When I look at your business and what you are talking 
about, we all have the same problems. The global supply chain 
that we all rely on has found--that is fine, as long as the 
chain doesn't get broken. Once it is broken, it is almost 
impossible to take care of.
    Now, I am assuming that a lot of the medicines that are on 
the shelf have a clock-out time, or a time where they are no 
longer effective and they probably have to be discarded at--
somebody does something with them. I am imagining that. But I 
know we have these conversations. Each of you have pretty much 
said the same thing. And it is about the economy, stupid. We 
are talking about the price of drugs, the price of drugs, and 
why aren't there more available, and why aren't these people 
producing them for less money, and why, and why, and why, and 
all they are doing is getting fat and happy over people who are 
sick and need these drugs.
    I happen to sit on a board for Hyundai Motor Company. It is 
called the Hope on Wheels, and it is an effort to make sure 
that pediatric cancer gets cured. We have about an 80 percent 
cure rate right now, but that also means that 20 percent do not 
get cured. We have come out with a lot of different 
pharmaceuticals. We come up with some amazing new drugs.
    I would just suggest that the boogeyman isn't the people 
who produce the drugs, it is the fact that these are products 
that age out and need to be replaced, and you rely on a parts 
change that is not always consistent. When I hear that India 
decided to hang on to their own supply, well, charity always 
does begin at home. I would hate to be living in India and 
saying, you know what? We found there was a better price in 
America, so we sold those drugs to them, our people will just 
have to do without them.
    I know we have these hearings, and we like to try to get to 
the bottom of things, but the real price issue that we are 
talking about right now is demand and supply chains. And I got 
to tell you, I don't care if it is in the automobile business, 
or in the pharmaceutical business, or if you are in the 
appliance business, or whatever business you are in. It is all 
reliant right now on a global supply chain that we didn't have 
in the past, but we have now. And why do we rely on it? Because 
we can get those parts cheaper someplace else in the world.
    I really appreciate you all coming here today, but, listen, 
I am a diabetic. You know, I would hate to hear that I can't 
get a hold of insulin, or I would hate to hear that we don't 
want to go with a generic form. I would like to go back to 
1933, when those scientists at the University of Toronto 
decided to sell the patent for $1 because they thought the 
value was so important to the American--to humanity that they 
would never try to make a profit on it. Unfortunately, this is 
an economic problem. This is a business problem.
    And again, I said earlier, at the risk of sounding 
insensitive, I am not. But I also am not going to be 
impractical, thinking that people are going to produce things 
and supply them and not make a profit on it and that they would 
think that they could stay open for long periods of times by 
losing money. That just isn't the way it works.
    So, if any of you can help me, is it the supply chain? Is 
it the fact that we found other places in the world that can 
produce things for less money than we can produce them here at 
home, and we rely on them to supply that, as--what we need? If 
anybody--if there is something opposite of that--I have 
listened to all of you, and your testimonies are all the same.
    I will just tell you again, going back to Hope on Wheels, 
if you really want to see, go into a children's hospital, where 
a small child has no chance of surviving because we don't have 
the ability to cure him or her of what it is that they have. It 
does come down to dollars and cents, unfortunately.
    Do you have any way we can fix this global supply chain, 
other than the fact that, if we are willing to pay more for an 
American-made product that is actually made in America and 
sourced in America, that that may be part of the answer?
    Anybody?
    Dr. GRALOW. I think that is absolutely part of the answer. 
I think bringing the manufacturing and the raw materials back 
to the U.S. could be part of the solution.
    But I think also rewarding those that are offshore for 
good, quality manufacturing, not good-quality drugs--hopefully, 
all the drugs themselves are good quality, but for good quality 
manufacturing, updating your machinery, and resiliency in the 
system.
    So this buffer of three, six months, whatever, you know, it 
is very hard to have a national stockpile when these drugs 
expire. And they do. They do not last long. You would have to 
keep changing it out. That is not realistic, but rewarding 
companies who have a guaranteed, multiple-month backup supply, 
they update their machinery, it is transparent----
    Mr. KELLY. So if I could just ask you, who is--would reward 
these companies?
    Dr. GRALOW. Who would be?
    Mr. KELLY. Who would reward these companies?
    Dr. GRALOW. We would.
    Mr. KELLY. Who is we?
    Dr. GRALOW. Well, Medicare pays for half of these drugs----
    Mr. KELLY. And that would be the American taxpayer.
    Dr. GRALOW. That--the American taxpayer----
    Mr. KELLY. Yes.
    Dr. GRALOW. The private payers, as well.
    Mr. KELLY. No, I mean, it comes down to--every single penny 
that we talk about that the government is going to spend comes 
out of some hardworking American taxpayer's pocket, okay?
    Let's get to the realistics of all this thing. I agree with 
you. I am not disagreeing with you. The question is what price 
are we willing to pay and when is it that we are going to say 
it doesn't matter what the cost is, we are going to produce it, 
even if we are losing, and we are still going to do it just 
because we have great hearts?
    I really start to wonder sometimes when we have these 
discussions. It really does come down to the economy, and I 
don't say it is about being stupid, it is about being realistic 
about it.
    There is nothing harder than to watch a loved one pass away 
because he or she does not have access to a lifesaving 
pharmaceutical. That is why I thought the Trump Administration 
with the right to try had a great idea.
    Chairman SMITH. Thank you.
    Mr. Larson.
    Mr. LARSON. Thank you, Mr. Chairman, and I thank you for 
this important hearing. I think it underscores what Martin 
Luther King would say is the fierce urgency of now and acting 
upon this.
    I would like to point out, listening to our colleagues talk 
and the questions here as well, that this underscores another 
specific reason why we shouldn't be shutting down government 
because this is so vitally important, as we have just heard, 
just on the Medicare side alone.
    Also, we have learned--and Mr. Chairman, I would like to 
submit for the record an article entitled, ``University of 
Connecticut Researchers Lead the National Effort to Improve 
Drug Manufacturing for the record.
    Chairman SMITH. Without objection.
    [The information follows:]
   [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. LARSON. And the reason I do that is because, in last 
year's spending bill, we authorized the FDA to designate five 
higher education institutions as national centers for 
excellence in advanced and continuous pharmaceutical 
manufacturing. This designation would mean investing in 
domestic manufacturing and innovation.
    Unfortunately, when we continue to struggle to fully fund 
the government, the program remains unfunded. So we are here 
talking about a problem that needs specific attention. And yes, 
Mr. Kelly is right, it does require government funding. But to 
not fund these programs creates enormous problem.
    Dr. Gralow, in your comments, you talked about continuing 
manufacturing and why that is so vitally important. It should 
be of interest to everyone. But could you also explain the 
current process of batching and why that leads to extra costs 
and inefficiency?
    Dr. GRALOW. So continuous manufacturing would mean you have 
always got ongoing processing of either the active 
pharmaceuticals or of the drug. The batching that you referred 
to, which is a more standard practice, older model, there is--
every time you shift in and out, these--these are sterile 
injectable drugs that go into patients. So, when you have to 
switch your assembly line, there is a cost involved with 
switching to another drug, switching, you know, to another 
ingredient, whatever. And that shuts it down. So the fits and 
starts have inherent cost in the system.
    So the continuous process of in the background it is always 
being made is just more efficient and more resilient because if 
something happens, and it disrupts the whole supply chain, you 
don't have big batches of something and then not enough of 
another.
    Mr. LARSON. Mr. Cavacini, has that been your experience at 
McKesson, that the process of batching must be an enormous 
cost, as opposed to continuous manufacturing?
    Mr. CAVACINI. Thank you for the question.
    I would like to emphasize that McKesson is a distributor of 
pharmaceuticals and not a manufacturer. We sit between the 
manufacturer and providers like hospitals and pharmacies and 
community providers. We run distribution centers and invest in 
inventory to make sure that needed medications are available to 
providers and patients where and when they need them.
    But, you know, as we look at the generic market--and I 
think many generic manufacturers do share their production 
lines----
    Mr. LARSON. Right.
    Mr. CAVACINI [continuing]. And that process, as described 
by the doctor, can contribute to cost and waste and delays in 
when we need to surge into new products.
    Mr. LARSON. Well, thank you. And I remain concerned that we 
have to get on top of this process, and all of you have talked 
about the raw materials, et cetera. Is it a question that the 
United States does not have the raw materials that China and 
India have, or do we have the raw materials, we are just not 
producing them?
    Anyone who would care to----
    Mr. CAVACINI. Thanks for that question. I would say that 
the U.S. has raw materials, carbon and oxygen and, you know, 
chemicals, but we don't have a lot of the formulated 
ingredients to make the drugs that we have.
    As I said in my comments, there are at least 100 Active 
Pharmaceutical Ingredients that the only place you can acquire 
those in the world and they are ready to incorporate in a drug 
product form is in China. And there is another set of maybe 250 
that are only available from India. There are over 600 that are 
not available in the U.S. anywhere. So sometimes it is that the 
ingredients do not exist in the U.S. We could set up companies 
to make those, but it takes considerable amount of time and 
will require a lot of investment in those operations.
    Mr. LARSON. Thank you, sir.
    I yield back.
    Chairman SMITH. Mr. Schweikert.
    Mr. SCHWEIKERT. Thank you, Mr. Chairman. I would like--with 
your permission, I have a number of articles I would like to 
submit for the record.
    Chairman SMITH. Without objection.
    [The information follows:]
  [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. SCHWEIKERT. Thank you, Mr. Chairman.
    This is an area that we have been actually very interested 
in in our office and have spent a couple of years looking on. I 
am going to run through a couple policy things, and I have a 
fascination with Civica. I have actually done a couple of floor 
speeches about your model and some of the things you are doing.
    One of the things I want to walk through is, Mr. 
Chairman,--I am going to submit a series of articles here that 
make it very clear that many of the small molecules, 
combination molecules, precursors could not actually right now 
get permitted to manufacture in the United States because they 
produce really, really toxic byproducts.
    A series of articles talking about why certain 
chemotherapies were coming out of India. The fact of the matter 
is we almost don't have a disposal mechanism from the toxic 
byproducts. So this may be something the left and the right 
could actually talk about is, if you care about the shortage of 
these supplies, we need to understand why you don't make them 
here. And they produce some really nasty stuff, and we need to 
understand that.
    Mr. Chairman and Ranking Member, a couple of the other 
things also in here is there is a revolution going on out there 
in pharmaceutical manufacturing. And I am going to submit some 
articles about everything from three--high-speed 3D printing 
now making certain small molecule drugs, making it so you no 
longer need a very, very expensive clean room, you can do the 
cartridges; discussions about new ways to make insulin.
    There also are the economic models. And our friend from 
Civica here, you are now making, what is it, eight types of 
generic insulin?
    Mr. COUKELL. Thank you, sir. We are developing the 3 types 
of insulin that account for about 80 percent of use in the U.S.
    Mr. SCHWEIKERT. And one of the articles I had was saying 
eight.
    Mr. COUKELL. It is three. It is insulin, glargine, Aspart 
and Lyspro, and we will make those available in both vials and 
prefilled pens.
    Mr. SCHWEIKERT. So, if I come to you and buy five vials, my 
price is what?
    Mr. COUKELL. What we have said is it will be available to 
the consumer, including all of the supply chain and dispensing 
costs, for not more than $30 a vial.
    Mr. SCHWEIKERT. And 55 for the----
    Mr. COUKELL. Fifty-five dollars for five pens.
    Mr. SCHWEIKERT. So that is actually cheaper. And this is 
the point I wanted to make, because I did this as a floor 
speech. We, right now, as a government, we give $16 billion a 
year to Big Pharma to buy down the price of insulin. This was a 
Democrat bill, $16 billion to Big Pharma to buy down insulin 
when they are going to do it cheaper than a subsidized price. 
Maybe we need to really think about this co-op model, these new 
manufacturing methods, and the ability to do it better, faster, 
cheaper.
    Sorry, there are just so many things here on the supply 
chain.
    Would actually Civica ever consider going into something 
such as the chemotherapies, which actually do have other real 
complications, particularly you would probably have to find 
some way to have a high-temperature incinerator for the throw-
off chemicals. Is that something you would consider?
    Mr. COUKELL. Absolutely, and thank you for the question. So 
let me answer it in two parts, and I will be quick.
    One is all of the elements of our model now in terms of 
carrying a buffer stock, vetting our manufacturing partners, 
having long-term purchase and supply contracts could equally be 
applied to cancer drugs. And we are actually looking at that 
now. If we were to manufacture them in our own bricks-and-
mortar facility, you would need a dedicated facility for that 
because the cytotoxic drugs do require special procedures and 
air handling, and so on. So that would take an additional 
capital investment over and above, you know, what we have 
invested in the current facility.
    But it may be in the long run that we say in the U.S. these 
drugs are too important not to have such a facility.
    Mr. SCHWEIKERT. Thank you. You actually got--you stole my 
punchline from me.
    Mr. Chairman and fellow members, if I came to you right now 
and said in the United States off-patent, generic drugs, are 
they more expensive or less expensive than the rest of the 
industrialized world--I have a paper here that says they are 16 
percent less expensive in the United States. So you actually 
have this interesting thing, where we actually have a fairly 
competitive model. The non-patented--the non-labeled were 
actually less expensive here.
    If we could actually work together to deal with the 
difficulties in the manufacturing side and also embrace the 
fact that there is a revolution coming in even the 
manufacturing process, maybe you could actually create a new 
renaissance where the discussion of a shortage and pricing just 
never comes up again.
    And, with that, I yield back, Mr. Chairman.
    Chairman SMITH. Mr. Blumenauer.
    Mr. BLUMENAUER. Thank you, Mr. Chairman. I find this 
hearing fascinating, and I want to follow up on my colleague 
from Arizona's conversation about Civica.
    I was struck by how you outlined a proposal that--
specifically to address the Generic Sterile Injectable drugs, 
non-profit, non-stock, founded by U.S. health systems and 
philanthropists.
    I am curious as to what the problems are for a broader 
application of this model. It seems to me that there are huge 
costs that we are incurring now in terms of disruption of 
treatment, misallocation of costs that seem to benefit nobody. 
Can you describe what the limitations would be to expand your 
non-profit, holistic, long-term approach to this supply 
problem?
    Mr. COUKELL. Thank you for that question, sir. We certainly 
aim to continue expanding our model, adding hospitals, adding 
drugs, and so on. Whether we are doing these--I will call them 
Civica-like practices, buffer inventory, supplier 
qualification, and so on--inside a non-profit model or inside a 
for-profit model by some of the existing supply chain 
stakeholders, I think the friction is the same, which is right 
now the system is driving towards one thing which is not 
valuing sort of resiliency of the supply chain.
    So we have to switch those incentives. And I think that 
will allow the Civica model to expand and grow, but also allow 
other supply chain entities to step in and have similar 
practices.
    Mr. BLUMENAUER. Well, I am curious about what the 
limitations are to expanding it. It seems to me that the long-
term costs are ultimately higher by having the inefficiencies 
that we have described. Is there some reason we can't employ 
this through CMS or other Federal agencies to be able to take 
your model to scale?
    Mr. COUKELL. No, I think we absolutely can and should, and 
I think--I am not an economist, but an economist might say that 
the stakeholders right now aren't putting a value on those 
long-term indirect costs. And so, essentially, what we have to 
say is we are willing to pay a bit more not to have those 
indirect costs associated with shortages.
    Mr. BLUMENAUER. Mr. Chairman, the American consumer pays 
the highest prescription drug prices in the world. Most of the 
manufacturing is in China or India. The profits are booked to 
Ireland, and the taxpayer doesn't get the benefit.
    But Americans are the largest market for this, and it seems 
to me we are missing the bet if we do not rigorously approach 
efforts that are modeled on a non-profit, longer-term 
initiative and consider the totality of costs.
    In the long run, we are going to end up paying an 
inordinate price for the inefficiencies, the misplaced profits, 
and the problems for treatment, which can have disastrous 
consequences. And I would hope that there is an opportunity for 
us to take a step back and look at this model, which appears to 
be delivering results in a way that we all should embrace and 
think about ways to expand the sweep of it, rather than what we 
are doing now, where the American consumer ends up paying more, 
less overall benefit at a time when we desperately need to get 
more out of the system.
    I appreciate this hearing. It was fascinating, looking at 
some of these models and thinking about the costs and 
consequences, and I hope we will get to a point where we can 
look at the overall approach and be able to determine better 
quality of service, lower overall costs, and better performance 
for American patients.
    Thank you, and I yield back.
    Chairman SMITH. Thank you.
    Mr. LaHood.
    Mr. LaHOOD. Well, thank you, Mr. Chairman, for having this 
hearing today. I want to thank the witnesses for your valuable 
testimony here today.
    The title of today's hearing, ``Examining Chronic Drug 
Shortages in the United States,'' is real and it is acute. And, 
like many of my colleagues, I have heard directly from my 
constituents on the issues of persistent drug shortages and the 
ramifications and challenges that affect them and their loved 
ones.
    I have a district that has a lot of rural territory, and 
timely access to lifesaving medications is essential to 
safeguarding patient health.
    During my time in Congress, I have had the great pleasure 
of working with an organization in my district, Illinois 
CancerCare, ILC, which is a foundation with locations 
throughout most of the rural parts of my district and 
specializes in the treatment of patients with cancer and blood 
disorders. ILC is currently having an incredibly difficult time 
locating a supply of Rydapt, which--they have three patients 
suffering from acute leukemia requiring this medication. ILC is 
spending countless hours calling specialty pharmacists to ask 
about their supply chain, and the frustrations with 
coordinating with the patient's prescription insurance to allow 
for out-of-network overrides has been significant, and ensuring 
timely shipment to avoid potential delays. These patient 
stories showcase why reducing drug shortages is of paramount 
importance.
    I have a question for Dr. Schleicher. As I mentioned, 
cancer patients are being forced to possibly delay treatment 
because the drugs they need are in short supply. Are there 
potential disparities between patients being treated for cancer 
at a facility in a rural area, compared to a more urban area?
    Dr. Schleicher. Thank you very much for the question, 
Congressman.
    My concern is potentially yes, especially with some of the 
suggestions about really emphasizing hospitals having these 
drugs. Obviously, there is an importance for hospitals, but 
also a lot of these community oncology practices like the one 
you are mentioning in rural America are not part of a hospital.
    And, where we practice, Tennessee Oncology is very similar 
to the practice in Illinois. We have 35 clinics. Most of them 
are rural. We help cover hospitals, but we are not part of a 
hospital system. So we deliver the treatment in our treatment 
rooms where patients live. And, if hospitals get a drug, then 
that means we will not if there is a limited supply. So, to 
that point, we need to make sure that any solutions don't 
further exacerbate disparities based on where patients live.
    Or, in our case, we take all the uninsured patients in the 
state. One of our large hospital systems, which is actually a 
340B, doesn't see uninsured or even Medicaid patients in the 
outpatient. So, if we were not able to have those drugs, 
patients would, one, not be able to get them close to home; and 
two, certain patients, either without ability to pay or 
insurance status, would be unable to get them, as well.
    Mr. LaHOOD. Thank you for that answer. I am going to pivot 
now to another focus, which is supply chains and the dependency 
on foreign countries.
    Between this committee and the Select Committee on China, 
which I also serve on, we regularly discuss our global economy 
and the geopolitical challenges we face, and it is important 
for this committee to explore proactive measures to address the 
underlying causes of drug shortages and strengthen medication 
supply chains that are imperative to ensuring continuity of 
care and promote overall health care resilience.
    It is no secret that the U.S. drug supply is heavily 
dependent on foreign suppliers. I share the concerns of many of 
my colleagues as it pertains to the CCP, Chinese Communist 
Party, and allowing them to operate under a different set of 
rules and standards, which they do. Our allies around the globe 
are craving U.S. leadership in this space. It is important that 
we step up to the plate and find ways to support American 
businesses looking to prioritize more domestic drug 
manufacturing.
    I have been proud to work--I am proud of the work that we 
have done with this Congress to identify instances of malign 
activities and practices by foreign countries like China that 
leave the U.S. more vulnerable, but we need to do more and do 
it quickly.
    I will now turn to Dr. Schondelmeyer. Can you provide an 
example of unfair trade practices that foreign countries, 
particularly China, use to undercut American drug 
manufacturing?
    Mr. SCHONDELMEYER. Thank you for that question.
    China, over time, has developed policies as a government 
about sectors of the pharmaceutical market that they want to 
enter and, in fact, dominate. They subsidize the companies that 
are involved, they develop the infrastructure hubs, or they 
have whole areas larger than the D.C. area that are 
manufacturing products. So they subsidize them.
    Then they at times engage in predatory pricing or even 
dumping of product in the market to drive other players out of 
the market. And one category of drugs that particularly China 
dominates is the fermentation antibiotics. About 80 percent of 
the antibiotics in the world are produced in China. And so, if 
they went out of the market, or if there was a nuclear power 
plant in the middle of the three or four companies that make 
those antibiotics and we had a Chernobyl incident, we wouldn't 
have antibiotics, and it would--yes, Civica and others could 
make antibiotics, but they can't do it tomorrow, they can't do 
it next year. We are talking years down the line to develop the 
capacity to replace that.
    So China has used a number of tactics, clear strategy, 
investing in infrastructure, predatory pricing, and dumping in 
the market.
    Mr. LaHOOD. Thank you for that.
    I yield back.
    Chairman SMITH. Mr. Pascrell.
    Mr. PASCRELL. Good morning, Mr. Chairman.
    Chairman SMITH. Good morning.
    Mr. PASCRELL. To our witnesses, a great group of witnesses 
this morning. I can think of few subjects that are more 
important than easing access to lifesaving medicines.
    Americans received terrific news last week that the 
Medicare has begun its historic negotiation to lower the price 
of 10 popular drugs. And that will go on each year. Starting 
September the first, our seniors will see price cuts for those 
drugs. Similarly, the cost of insulin is now capped at $35 for 
millions of Americans, thanks to the action that we took.
    We want to bring safe, plentiful, and less expensive 
prescription drugs to Americans. I think that is all of our 
goal. Congress has a big role in protecting these medicines, 
and that includes addressing the shortages, which we spent a 
lot of time on this morning.
    The testimony today should upset a lot of us, that science, 
research, and industry has come so far to create lifesaving 
medicines, yet gravely ill patients might be denied access 
because of shortages. And that is just unacceptable, I hope, to 
all of us.
    In the wake of the COVID pandemic, we recognized the dire 
need for America to fix our supply chains. And we did it. We 
have a lot more to do. For too long, our nation has been 
relying on other countries for raw materials, big and small. 
Domestic manufacturing is a key to unlocking our supply chain 
challenges. We have made important changes. We have brought 
jobs and technical capacity back home. That is a little 
progress. But we are running out of cancer medicines. We just 
simply are. And we have not made enough progress here on our 
home front. And when we still rely on China for so much, we 
have a lot of work to do.
    So Mr. Ballreich, thank you for your work at Johns Hopkins. 
Your written testimony is very instructive to me. I could speak 
for myself. You cited a cancer drug manufacturer who relied on 
a plant in India that was red-flagged by the FDA. It sends me 
back to 15 years ago, when we debated here, when we debated the 
question about drugs from Canada being properly researched, 
studied to see if they were pure. A lot of folks from the 
Midwest bought those drugs quickly because they were cheaper. 
But we did not know, really, the quality. Do you remember that? 
I remember it like it happened yesterday.
    So how much should Americans be concerned about the quality 
of the medicine coming from overseas right now?
    Mr. BALLREICH. Great question. I think the Americans should 
not necessarily be concerned. We have an excellent FDA.
    That being said, medicines being sourced overseas, it does 
represent a susceptibility to supply chain. The FDA is under 
tremendous stress to make sure all of the parts of the supply 
chain are thoroughly inspected. You know, using FDA's own 
inspection citation research database, it is a little scary to 
actually see how many facilities are cited, how many facilities 
have inspections. And this is part of the whole transparency 
aspect.
    As a researcher, I rely on data to understand the 
situation. There is a lack of transparency. More transparency 
will give us better information.
    Mr. PASCRELL. I want to get in one more question before it 
is time out.
    Mr. BALLREICH. Ah, yes, please.
    Mr. PASCRELL. You argue that most of the--this is what you 
say in your testimony, that most of the shortages are the 
product of manufacturers themselves. Well, can you expand on 
that? What does that mean?
    Mr. BALLREICH. Yes.
    Mr. PASCRELL. What are you trying to tell us?
    Mr. BALLREICH. So most are quality issues. Companies are 
not necessarily incentivized to invest in their supply chain, 
to invest in their quality. As it has been noted, generics, 
they compete on price. You know, companies that procure 
generics generally want to find the generic at the cheapest 
cost. That does not incentivize that generic company to invest 
in additional capacity. It does not incentivize that generic 
company to have thorough oversight of their quality.
    So, if you are just competing on price, lower cost means 
you have a better market position.
    Mr. PASCRELL. Thank you.
    Thank you, Mr. Speaker.
    Chairman SMITH. Thank you.
    Dr. Wenstrup.
    Dr. WENSTRUP. Thank you, Mr. Chairman, Ranking Member Neal, 
and all those that are here today. I appreciate you being here 
to examine this problem that we are experiencing in the United 
States of America. This has been an issue for me for probably 
five years, and certainly the pandemic has highlighted and 
exacerbated this tremendously. So I really appreciate the 
testimonies here today.
    These drug shortages, these vulnerabilities in our supply 
chain, they put our national security at risk. They put our 
national health security at risk. I am a soldier. I served in 
Iraq. If you would have told me that my protective equipment 
and my pharmaceuticals relied on an adversary, China, I would 
say, ``How in the heck did we get here? How did our military 
get here?''
    This is a huge problem, and I think it is underestimated, 
and we are late to the game in discussing it, but I am glad 
that we are. Right now in the United States, there are 252 
drugs in shortage, lifesaving drugs: albuterol for asthma, 
chemotherapy drugs. This is serious, serious stuff for the 
United States of America, and our vulnerability is huge right 
now.
    And the bottom line up front is we have an over-reliance on 
foreign manufacturers. That is the bottom line. And in many 
ways, we have regulated our way there.
    I would tend to disagree with what was just said about our 
FDA. I am not trying to slam them, but, if they are not in 
those labs in China, and especially since the pandemic, it is a 
problem, you know, and so we will talk about not only the 
quantity of medications available that is the problem, but the 
quality of medications available.
    I have served in the Reserves for 25 years, I just retired 
last year. And, before I retired, I was in uniform and in my 
administrative position. I was clinical at Walter Reed. My 
administrative position I had the opportunity to work with the 
defense logistics medical supply chain counsel, working to 
reduce or eliminate our supply chain challenges, what they are, 
how severe the risk is, why there is a risk, and how they can 
start to do it. But they can't do it without us. We cannot turn 
this around unless we make some changes here in the United 
States, whether it has to do with regulation or not. But the 
risk is there. And these are essential medical products.
    So it is not only domestic, but it is geographic. Puerto 
Rico does a tremendous job in supplying many of our medical 
supplies. They have two hurricanes, we can't get saline here. 
That is a problem. So it is not only the ability to have the 
capabilities and opportunities to do it here, we can't just 
have it in one place. We have to have a diverse supply chain.
    And working with our allies is fine with me too, but 
certainly not relying on an adversary. Because the problem is 
it is just like that in a darker day, they cut us off. And as 
the CEO of a generic manufacturer in Europe said, ``If China 
cuts us off, our supply chain--our shelves are empty in two 
months.'' That is a quote.
    So today, I plan to release a discussion draft of 
legislation I have been working on for years. And I want to 
start with our critical battlefield medicines, and provide new, 
powerful incentives to locate manufacturing of these medical 
products in the United States, all the way down to the Active 
Pharmaceutical Ingredients. And I look forward to officially 
introducing this bill. I hope my colleagues on this committee 
will join me. Take a look at it, offer any advice you may have 
to it, and I hope it serves as a template to go across the 
board to serve all maladies, not just in the battlefield.
    Dr. Schondelmeyer, can you describe as best you can the 
degree to which our supply chain for drugs is dependent on 
foreign sources, both quantity and quality?
    You know, I would like to remind people it wasn't maybe 15 
years ago we had 250 Americans die from tainted heparin. Right? 
And the opportunity for sabotage is there. There are all types 
of things we need to be concerned about as we go forward.
    Mr. SCHONDELMEYER. I have commented several times about the 
quantity; quality is an important issue. And as you pointed 
out, the heparin, more recently we have had eyedrops come out 
of India that were contaminated and caused people to lose their 
eyes or even die because of that. We have had baby formula 
contaminated with bacteria that caused some deaths of babies 
using baby formula. I think quality is a major concern.
    And remember, I said that India is responsible for 45, 50 
percent of all the generics that come to the U.S. India does 
not participate in the International Council on Harmonization 
of Drug Regulation. The US does, Canada does, Mexico, Europe, 
most major westernized countries participate in that group. 
India does not. We, as a country, should not continue buying 
product from India. We should leverage them to participate in 
that conference that will improve the quality of their 
products. And that is one example of ways of leveraging them. 
So we need to be concerned about quality.
    Second, we have had several people comment about we are 
going to have to pay more for generics. I agree with that. But 
you don't indiscriminately pay more for all generics, because 
some companies will continue to free-ride on that and take the 
higher price and keep cutting the cost.
    So we need quality measures that are specific, that are 
product-specific, producer-specific, and reliable, and then we 
can pay more for the companies who meet those criteria.
    Dr. WENSTRUP. Thank you, and I yield back.
    Chairman SMITH. Thank you.
    Mr. Kustoff.
    Mr. KUSTOFF. Thank you, Mr. Chairman. Mr. Chairman, I seek 
unanimous consent to enter into the record Saint Jude 
Children's Research Hospital's statement on their perspective 
on the impact that chronic drug shortages have on the treatment 
of pediatric cancers.
    Chairman SMITH. Without objection.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. KUSTOFF. Saint Jude Hospital, which is located in 
Memphis, Tennessee, is one of the world's largest pediatric 
cancer research hospitals in the world. The statement they are 
submitting into the record discusses the current childhood 
cancer drug shortages, especially the Generic Sterile 
Injectables.
    Saint Jude believes that resilience in Generic Sterile 
Injectable drug supply must be developed to ensure that they 
can continue to focus on their efforts to care for and treat 
their patients, rather than procure drugs in short supply. 
Thank you, Mr. Chairman.
    If I could, Dr. Schleicher, thank you. Thank you to all the 
witnesses for appearing today. Dr. Schleicher, I represent part 
of Memphis, Tennessee, in west Tennessee to the west of you. 
And, if I could, I would like to read a portion of a column 
written by Dr. Sylvia Richey. You may know her. She is the 
chief medical officer for the West Cancer Clinic that is in 
Memphis or Germantown, Tennessee. This is a column, or part of 
it, that she wrote on May 28, 2023, in the Daily Memphian. And 
I do this because you gave us similar stories about your 
patients.
    She says, in part, ``Cancer patients throughout the country 
are dependent on chemotherapy drugs for their lives. And now 
there is a nationwide shortage of two drugs that are the 
backbone of many cancer treatments. Many of these treatments 
are for cancers that are curable,'' what you said, ``and we 
don't want to miss those opportunities. This shortage is 
causing oncologists to make difficult decisions.'' That is 
similar to what you talked about. ``Treatments are being 
skipped and delayed, doses are being reduced. Treatment plans 
are being changed and sequences of usual treatments are being 
altered. Doctors should never have to put their patients in 
these situations. Oncologists are literally rationing 
chemotherapy.''
    You know, you gave the story about the two patients from 
your clinic. Where we are today, February of 2024, is it any 
different or any better than during the height of COVID?
    Dr. SCHLEICHER. Yes, thank you very much, Congressman 
Kustoff, and I know Dr. Richey well.
    So it is different drugs now, but it is not over. Cisplatin 
and carboplatin were the big ones that hit us last summer. I 
know seven patients at our group in the last, you know, few 
months with CNS lymphoma for which their treatment was delayed, 
awaiting another generic injectable, methotrexate.
    Vinblastine is commonly used in Hodgkin's lymphoma, which 
is very curable. We thought we were going to run completely out 
about three weeks ago, and then ended up getting a supply. And 
again, in hindsight, we got a supply, but week by week we 
actually thought we were going to run out and have to figure 
out a plan.
    I heard just last week sandostatin, another drug used for 
carcinoid tumors, is running out right now, as well. So the 
carboplatin and cisplatin were so common and they are in so 
many regimens that that was a big hit, and it was the first 
that I have ever experienced.
    But it is not over. Still, three drugs just in the last few 
months we are still having problems with.
    Mr. KUSTOFF. Thank you, Doctor.
    Dr. Schondelmeyer, if I could with you, thank you for 
appearing today. Dr. Richey, in her column that I just cited a 
moment ago, I think this is her closing line and I wanted to 
ask you about it because we have been talking about solutions. 
You all have suggested solutions. You have talked about the 
different countries that we are relying on, and maybe ways that 
Congress can alleviate.
    But let me ask you about the last statement in Dr. Richey's 
column: ``We need the FDA and the White House to focus on 
reliable manufacturing of generic drugs, and making sure the 
American people have access to the treatments that they need 
when they need them.'' So my question to you is, in the very 
short term, are there things that the FDA and the White House 
could do today?
    Mr. SCHONDELMEYER. Yes, I think there are.
    First, though, I would remind us that we need to look at 
what has FDA been authorized to do and appropriated to do by 
Congress. And, to the best of my knowledge, their 
authorizations don't include looking at economics or the market 
for pharmaceuticals. And we may want to delegate that to other 
agencies other than the FDA, and that could be done.
    There are some things that have already been done, not 
necessarily by FDA, but by various administrations, both the 
current and previous administrations. They funded Flow 
Pharmaceuticals to make API for 25 critical drugs needed in the 
U.S., and they are working on that. They are making, I don't 
know how many, 7 or 8 so far, and they will make 25, and that 
has been supplemented by funding from the state of Virginia.
    Civica, of course, we have heard about, and that was by 
hospitals and players from the market who came up to provide 
drugs.
    And then in Missouri, there is an API innovation center 
that was funded by the State of Missouri for development, to 
develop an industry to produce API in the State of Missouri, 
and to do just what we have been talking about, reshoring.
    So there are--we could continue, but we need more than just 
Flow and API and Civica. We need 4 or 5 or 10 of each of those, 
not just one of each of those.
    Mr. KUSTOFF. Thank you, Doctor.
    Mr. Chairman, I yield back.
    Chairman SMITH. Thank you.
    Mr. Davis.
    Mr. DAVIS. Thank you, Mr. Chairman, and let me thank you 
for this hearing. I also want to thank all of our witnesses.
    Your expressions and answers have been so informative. And, 
as I listened to Dr. Wenstrup a moment ago, it just reminded me 
that this is Black History Month, and I am reminded of a song 
that a woman named Billie Holiday used to sing. The lyrics went 
sort of like this. ``Them that has got shall get. Them that has 
not shall lose. So the Bible says, and that still is the rule. 
Mama may have, Papa may have, but God bless the child that has 
got his own.''
    And, given the impact and the influence that China, India, 
perhaps even other countries may have on the production, 
control, and distribution of what we need, I am ready to join 
with Dr. Wenstrup with the legislation that you have got ready 
to go, because all of the other things that we discussed and 
talk about, are they really solutions or are they the solutions 
that we need?
    And I am convinced that no matter how long it takes, how 
much it costs, that we need to be in the business of producing 
more of what we need.
    But, Dr. Coukell, one of the solutions that people are 
talking about now and that are being proposed by stakeholders 
is a buffer stockpile, where manufacturers of--and hospitals 
would maintain a six-month supply of a product and receive some 
type of add-on payment or other incentive for maintaining 
stockpile. So it is stockpiling. What do you think of that as a 
possibility, or a way of alleviating some of the problems?
    Mr. COUKELL. Thank you for that question, sir. I think we 
need a stockpile, and I will tell you why.
    Even if we have got four companies making versions of the 
same drug, if one of them drops out of the market by choice, or 
because they have a quality problem, it takes the rest time to 
increase their production and generate additional batches. And, 
if we don't have a buffer stock, we will have a shortage. And 
so having that additional stockpile buffers and allows the 
market to respond so we have continuity of supply through that.
    I don't think it should sit at the hospital level. I think 
it should sit upstream at a wholesaler or at a manufacturer, 
and that allows for much more efficient allocation. And the 
provider, you know, is not set up to manage a six-month 
inventory, but that exact approach, I think, would take us a 
long way towards resilience.
    Mr. DAVIS. Thank you--yes.
    Dr. SCHLEICHER. Just to add to that comment, and thank you 
for the question, I similarly would be concerned if hospitals 
were stockpiling, only because that could worsen shortages at 
non-hospitals if it is at the provider level. And, at least in 
our market, we are usually the provider in rural America, and 
that would hurt access for our patients.
    And I mentioned some of the insurance issues beforehand.
    Mr. DAVIS. Thank you very much. I was thinking specifically 
of rural America and the challenges and difficulties in those 
areas.
    Thank you very much, Mr. Chairman, I yield back.
    Mr. SMITH of Nebraska [presiding]. Thank you. I will next 
recognize Dr. Ferguson for five minutes.
    Dr. FERGUSON. Thank you, Mr. Chairman, and thank all of you 
all for being here today. It is a shame on topics like this we 
only get just a few minutes to delve into it.
    But it seems that we have--and I say we, America--has three 
major failures in what we are talking about today: one of them 
is a regulatory failure; the other one is a trade failure; and 
the other one is a marketplace failure. Okay?
    So, as I go through this, I want to touch on each of those 
in the beginning, but I also want to do it with the notion 
that, no matter what we do as a nation, when we decide to fix 
something we generally can find a way to do it. We may not 
always agree specifically. But let's look at the threat that we 
had to America with semiconductor production, and this body 
voted to spend a lot of money to make sure that we had access 
to chip production. And I would think that we might want to 
consider that in the same vein as it relates to the production 
of the most basic pharmaceutical products.
    But as I go through this, I want to ask each of--you know, 
a couple of you some specific questions as it relates to the 
regulatory failure.
    Mr. Coukell, if you were going to look at the regulatory 
environment, give me two things real quickly that if we could 
change dramatically would have an impact on manufacturing here 
in the U.S.
    Mr. COUKELL. Thank you for that question, sir.
    You know, we see the FDA as a key part of ensuring quality 
across the system. We look to them to identify poor-quality 
facilities, and we look to their guidance on how to ensure good 
quality. But they are not often in--especially these overseas 
facilities--as often as we would like them to be. And so we may 
have a situation where domestic facilities are getting 
inspected on a regular basis, but we are not having the 
insights that we might need on the overseas facilities.
    Dr. FERGUSON. Okay. You did not mention the--you mentioned 
the FDA. What about the EPA? Isn't there an environmental 
component that, as my colleague from Arizona pointed out, in 
many cases we can't make some of the very basic things here in 
America because of the EPA. Shouldn't we be investing in not 
only the production of that, but technologies that allow us to 
meet our own regulatory rules here so that we can produce it 
here in America?
    Mr. COUKELL. So we are a manufacturer of finished dosage 
drugs, so nothing comes out of our facilities except finished 
dosage drugs. There are no waste products.
    Dr. FERGUSON. Yes.
    Mr. COUKELL. But, if you are making API, that is 
essentially a chemical plant, and there are waste products. And 
several witnesses and members today have talked about 
continuous manufacturing of API, which is a newer technology 
for API which produces much less waste.
    Dr. FERGUSON. Yes, all right----
    Mr. COUKELL. And so in terms of bringing it back, that may 
be the future for the U.S.
    Dr. FERGUSON. So there is a regulatory component.
    I mentioned a trade component. Dr. Schondelmeyer, two 
things. With trade, can you speak to how important it is that 
we protect our intellectual property here in the U.S. and that 
we create a level playing field with countries that have unfair 
practices?
    Mr. SCHONDELMEYER. Well, certainly, intellectual property 
is a valuable asset and needs to be protected. By and large, 
the drug shortage issue isn't centered around intellectual 
property issues, however. It may be an issue on the brand name 
product sides and products like Ozempic, Wegovy, and Zepbound.
    But on the drug shortages, remember, those are largely 
generic and sterile injectables. So intellectual property isn't 
the major issue in that component.
    Dr. FERGUSON. Okay.
    Mr. SCHONDELMEYER. But there are plenty of trade issues 
that do affect drug shortages.
    Dr. FERGUSON. All right. You know, we are going to have to 
come up with some short-term solutions.
    Mr. SCHONDELMEYER. Right.
    Dr. FERGUSON. And we are going to have to come up with 
long-term solutions that are going to require investment.
    Mr. SCHONDELMEYER. Yes.
    Dr. FERGUSON. You know, we have talked about antibiotics. 
AMR is very important. We have we--you know, the next pandemic 
could be bacterial--and not viral--in nature. And we have been 
working in a both a bipartisan and bicameral way to address 
that with the PASTEUR Act that fixes a marketplace problem, 
where we are not able to pull drugs into the marketplace. We do 
the basic research, we do the basic investment, but these are 
usually done by startups that are strapped for cash, and we 
don't have a stable marketplace. And the PASTEUR Act fixes that 
because it is a pull incentive to get it into the market.
    Doctor, do you believe that that would be helpful in the 
near term in developing new antibiotics to fight resistant 
bacteria?
    Mr. SCHONDELMEYER. Yes. Antibiotics are a concern anyway, 
because we have resistance and issues, and the ones--the 
antibiotics we have that do work, many of them are made in 
China and we are in trouble if they put a trade barrier in 
place, anyway.
    So, yes, we must focus on antibiotics, and that does 
involve intellectual property and stimulation of production in 
the U.S.
    Dr. FERGUSON. Thank you, Doctor. Thank you all of you for 
your time and expertise.
    I yield back.
    Mr. SMITH of Nebraska. Thank you. I now recognize Mr. Hern 
for five minutes.
    Mr. HERN. Thank you, Mr. Chairman, for holding this hearing 
today, and I want to thank the witnesses for being here today 
to help us better understand the issue we have at hand.
    For the past year, I have been getting calls and written 
messages from distraught constituents that weren't able to get 
their prescription drugs they needed, everything from ADHD 
medications to chemotherapy treatments. I can only imagine the 
distress patients feel when they hear that their treatments 
could be paused today because of the supply chain issue. As we 
all know, lapses in treatment can be devastating for patients' 
health outcomes.
    I have also heard from hospitals in my district about the 
effect drug shortages have had on them. In Oklahoma 
specifically, they have been dealing with the shortages of 
clindamycin, one of the few effective drugs against MRSA, and 
they now have to restrict the use of this injectable. 
Physicians are having to switch orders to other oral 
antibiotics, even if it is not ideal for their patient. Not 
only does this affect daily patient care; physicians now worry 
about how the overuse of these broad spectrum antibiotics will 
contribute to antimicrobial resistance. This is a clear example 
of how having a stable supply of drugs is a public safety 
issue.
    In addition, there is a real concern from hospitals that, 
if cancer drug shortages continue, they will need to consider 
triaging patients and no longer treating palliative care 
patients. What a sad and grim thought that is.
    The COVID pandemic exposed how fragile our supply chains 
really are, and it is clear to me that the drug supply chain is 
no different. It is extremely concerning that, even as the 
pandemic ended, drug shortages still do not subside.
    As you all have highlighted today, the drug supply chain is 
complicated, with many different factors able to cause a 
disruption. We have heard today how drug shortages affect 
patients, health systems, and the negative effects they have on 
public health and safety.
    I am also curious as to how the drug shortages not only 
affect those we have mentioned today, but the drug market as a 
whole.
    Dr. Gralow, it is interesting to me how you brought up the 
topic of clinical trials in the context of drug shortages. How 
do you think drug shortages affect clinical trials, 
particularly combination drug trials?
    Dr. GRALOW. Thank you for that question.
    Well, an example I gave was of a clinical trial that 
supplied both a standard of care, which was the drug that they 
were looking for, as well as comparing it to an experimental 
arm, where we tested would it be better or not. What we found 
during these drug shortages was most clinical trials didn't 
cover the standard of care arm, so that option of being able to 
go in a clinical trial and get the standard of care as one of 
two choices wasn't available for most.
    You asked about combinations. A lot of new agents that we 
test are built on the backbone of old drugs. So you would test 
maybe the standard drug plus or minus the new drug. And, if you 
don't have the standard drug, that trial just gets shut down, 
you know, because that is covered by standard of care.
    So our clinical trials were affected by these drug 
shortages, paused. Many of them couldn't continue for a while.
    Mr. HERN. So these--you know, these could affect--these 
affect delays, new treatments being brought to the market. And 
how will this ultimately affect patients who are waiting for 
these treatments that are so badly needed?
    Dr. GRALOW. We need to speed up our trials. We need to get 
our promising new therapies tested and, if they are effective, 
out to the patients as soon as possible.
    So in these cases, the drug shortages can delay the 
evidence that is required to determine if a drug should be 
approved and if it is better than something prior. So it is 
also holding back research.
    Mr. HERN. Thank you for your thoughtfulness.
    And Mr. Chairman, I yield back.
    Mr. SMITH of Nebraska. Thank you, Mr. Hern. I now recognize 
Ms. Sanchez for five minutes.
    Ms. SANCHEZ. Thank you. I want to thank the chairman and 
Ranking Member Neal for holding this hearing on a very 
important issue today, and I want to thank our witnesses for 
their thoughtful testimony.
    A stable, affordable drug supply is critical to our 
nation's public health and its infrastructure. And patients who 
experience drug shortages report increased out-of-pocket costs, 
increased rates of drug errors, sometimes adverse health 
effects, and even increased mortality. So we do need to get our 
hands around this issue.
    I just want folks to know that the Biden Administration is 
aware of those gaps, and I want to talk about a few things that 
we have done in response.
    In November, President Biden announced additional 
investment in our domestic production of materials for 
injectable medicines through the Defense Production Act. And 
Democrats have also worked to improve access and reduce the 
cost of care through the Inflation Reduction Act. We put money 
back in millions of Medicare recipients' pockets and capped 
out-of-pocket prescription costs and insulin costs at $35 a 
month, and that has very real impacts. I hear about that from 
my constituents.
    But we are here today to talk about additional solutions to 
the related and growing problem that affects every American 
and, disproportionately, unfortunately, impacts disadvantaged 
communities more. Over 80 percent of drugs reported in shortage 
are generics or branded generics, and the FDA reported that in 
2023 that pain management and cardiovascular diseases were the 
top disease areas with drug shortages and, sadly, two 
diseases--these are two diseases that disproportionately affect 
Black and Latino patients more. Medicaid enrollees are also 
more likely to be affected by those drug shortages.
    Dr. Gralow, can you expand on how drug shortages exacerbate 
existing health gaps in access, care, and quality?
    Dr. GRALOW. Thanks for that question. It is always the 
underserved who, when the system is stressed, become more 
underserved. So the inequities just get exacerbated.
    Whether it is racial and ethnic minorities, whether it is 
the rural communities, whether it is older populations, the 
ability to get access to these drugs in the cancer drug 
shortages is limited. You don't have as many options if you 
have to drive farther, take more time off work, et cetera, et 
cetera. You just have less options. So sadly, it was very clear 
that these drug shortages just exacerbated the already existing 
inequities in access to care.
    Ms. SANCHEZ. Thank you. And how has that impacted 
providers' ability to practice medicine?
    Dr. GRALOW. I think we have talked about some heart-
wrenching examples of how do you make these choices? We are 
calling them impossible choices. How do you decide who gets a 
potentially lifesaving or life-prolonging drug?
    We have, you know, had our members have to make decisions 
about taking patients who have metastatic disease that might 
not be curable, but they are being held in--it is being held in 
check, and they are still living a productive life, and 
removing them from treatment so a newly diagnosed patient with 
a curable disease could get the drug. I mean, how do you make 
that kind of decision? How do you explain that to the patient, 
to the family? It is impossible.
    Ms. SANCHEZ. Thank you for your testimony, Dr. Gralow.
    Quality deficiencies in our supply chains cause those 
devastating drug shortages, and the Biden Administration 
created the Council on Supply Chain Resilience to try to 
address this. HHS is also working to designate a new supply 
chain resilience and shortage coordinator to build on that 
work.
    Dr. Schondelmeyer, you also discussed the need to shift 
drug manufacturing for Active Pharmaceutical Ingredients from 
the Asian Pacific region to the Western Hemisphere. What are 
some of the potential barriers for reshoring our API supply 
chains to Mexico, Canada, or other countries in the Americas?
    Mr. SCHONDELMEYER. Thanks for that question. We have heard 
people address this around the edges. That is, the reason 
products have gone to Asia rather than the West is they have 
lower environmental regulation, lower labor costs, and other 
government policies that encourage them to work there. So we 
need to begin to do the same things, evaluate can we develop 
technologies that make this possible within the U.S. or within 
Mexico or Canada and the Western--in terms of environmental 
conditions.
    How can we help lower the cost? This investment in 
continuous manufacturing that people have talked about, this is 
like--remember Henry Ford, when he started making cars on the 
assembly line? That was a continuous flow process. Before, we 
made cars one at a time. We are still making drugs one batch at 
a time like one batch of cookies at a time. We need a 
continuous flow process. It is leaner, greener, more effective, 
more efficient in a lot of ways. And so--but we need to invest 
and help the industry in America and in Mexico and Canada and 
the West develop the capital costs and capital equipment to 
produce drugs efficiently.
    And then finally, I think we tie this with increased 
transparency and disclosure. The Government of New Zealand has 
a database called Medsafe, and they require in New Zealand 
every product that is approved to be on the market to disclose 
their supply chain. What is the name of the company who makes 
the API, and where is the factory located, and the street 
address, and what is the company that makes the finished dosage 
form and address, street address? And you can actually go to 
the Medsafe New Zealand website and look up any drug product in 
their market and tell what its supply chain is.
    Ms. SANCHEZ. We do that----
    Mr. SCHONDELMEYER. We need a----
    Ms. SANCHEZ. We do that with our defense contracting that 
way.
    Mr. SCHONDELMEYER. Yes, and we need a similar database in 
the U.S.
    Ms. SANCHEZ. Yes. Thank you so much for your testimony. I 
thank all of you.
    And I yield back.
    Mr. SMITH of Nebraska. Thank you. I now recognize Mr. Estes 
for five minutes.
    Mr. ESTES. Well, thank you, Mr. Chairman, and I appreciate 
the opportunity to talk about this important topic today. And 
thank you to all our panelists for joining us today to go 
through this important issue.
    Americans depend on a robust health care system in the 
United States, and we are grateful to the countless doctors and 
nurses who care for us in times of sickness and great 
difficulty. We have come to expect that when we are facing a 
health care crisis, health care providers will be ready to 
assist us.
    Unfortunately, many Americans are now facing a drug 
shortage crisis, causing delays in treatment that produces 
unnecessary hardships and cost. This can be especially 
devastating to folks living in rural parts of our country. In 
my district in Kansas, a large part of our population lives 
outside of a major metropolitan area, relying on community and 
critical access hospitals for care. When the medical supply 
chain breaks down, too often it is the rural Kansans I 
represent who are at the end of the line and are impacted the 
most.
    Unfortunately, the problems don't just stem from one part 
of our system. An over-reliance on foreign countries like China 
and India, complex supply chains and distribution processes, 
and unsustainable Medicare reimbursements aren't just hurting 
many drug manufacturers, they are hurting Americans who rely on 
those medicines.
    A particular area of concern, as we have talked about 
before, is the amount of Active Pharmaceutical Ingredients, or 
API, that is produced in China. Kansans have rightfully shared 
their concerns with me about relying so heavily on China to 
produce these critical medicines that we rely on every day. And 
it is not just specialty drugs or uncommon medicines, it is 
products like ibuprofen, hydrocortisone, and acetaminophen. 
When Americans are reaching for a common, over-the-counter 
medicine to relieve a headache or a backache, they are more 
likely opening a pill bottle with drugs from China.
    While this has been a growing problem for a while, the 
COVID-19 pandemic highlighted the awareness and exposed the 
potential pitfalls of ceding our critical medical manufacturing 
processes overseas. Now, with drug shortages throughout the 
country, we are reaping the detriments of depending on China 
and others for our pharmaceuticals.
    Dr. Schondelmeyer, you talked a lot earlier, and I wanted 
to follow up on a couple of things that you had mentioned. You 
know, typically or historically, how much finished product and 
API has been produced domestically, kind of as a percentage or 
component versus internationally?
    Mr. SCHONDELMEYER. Well, 30 years ago, the majority of API 
was made in the U.S. and finished dosage forms were made in the 
U.S. But over the last 30 years or so, that has moved to the 
Asian market, just like almost all consumer goods.
    You know, if you listen to Mr. Wonderful on Shark Tank, he 
will say, ``I am going to take that product and I am going to 
move it to Asia and decrease your cost of production.'' That 
has happened in pharmaceuticals, too, but we haven't paid 
attention to the quality and other ramifications of that, and 
now we are paying the price for that, that we haven't kept the 
quality up when we did that.
    Mr. ESTES. And how open or how available is it for the FDA 
to test and inspect and make sure that there is good quality, 
safe--in that development in a country like China or India or 
someplace else?
    Mr. SCHONDELMEYER. Well, the first thing that I am sure 
you, as, you know, Members of Congress, realize is that when we 
send a person from the FDA, an official representative of our 
government to China, we have to notify China ahead of time that 
they are coming and the purpose of their visit. And so 
suddenly, the factory gets whitewashed, and all of the problems 
they might have get cleaned up, and you don't find many 
problems when you go inspect it.
    And, secondly, just the cost in time and budget to--for FDA 
to inspect these facilities exceeds the resources that they 
have, anyway.
    So we really can't regulate factories in China like we 
would factories in Canada or Mexico or the U.S. because of time 
and cost and because of the government helping those companies 
hide things they don't want people to see.
    Mr. ESTES. Yes, and I am just so glad that you all have 
been here talking through this at this hearing. It is--it 
really became exposed during COVID-19, the risk that we are at 
for the country. And we saw countries, as mentioned earlier, 
India threatened to not release pharmaceuticals and drugs to 
help us, and we saw the similar comments coming out of China, 
more for some of the equipment and manufacturing that they made 
there. So it highlights how important it is to bring that back 
to the United States.
    So thank you, and I yield back, Mr. Chairman.
    Mr. SMITH of Nebraska. Thank you. I now recognize Ms. 
Sewell for five minutes.
    Ms. SEWELL. First I would like to thank all of our 
witnesses for being here today.
    Chronic drug shortages are having a detrimental effect on 
the health of patients and providers across the country. Access 
and affordability are the key components of health equity, yet 
84 percent of generic drugs experience shortages. These 
shortages have had a disproportionate impact on the most 
vulnerable in our communities.
    In the spring of my very first year in Congress, nine 
Alabamians died in one of the worst known cases of drug 
shortage-related deaths at the time. Their deaths were 
attributed to bacterial contamination of a hand-mixed batch of 
liquid nitrogen because the pre-mixed liquid wasn't available.
    Mr. Chairman, I would like to enter into the committee 
record this article by CBS highlighting the 2011 public health 
crisis created by drug shortages in my home state of Alabama.
    Mr. SMITH of Nebraska. Without objection, so ordered.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. SEWELL. Now, over a decade later, drug shortages 
continue to compromise patient care and threaten lives. As a 
representative of a constituency with high rates of chronic 
illness, I am particularly concerned about these shortages. My 
citizens, the citizens in my district, have historically 
struggled to afford their medication and access to basic health 
care. Drug shortages only exacerbate these challenges.
    There is a story of Gary. Gary is a constituent of mine 
from Marengo County, Alabama. He is a veteran who is prescribed 
a monthly pain medication for PTSD-induced pain. Just this past 
week Gary drove from his rural home to the nearest city, two 
hours away, only to be told that his pain medication was not in 
stock. Unbeknownst to him, pain medication across the country 
is experiencing one of the highest rates of drug shortages. 
Gary was sent home not knowing when he would be able to receive 
this medication which was already two weeks overdue. Though he 
has now gotten his prescription filled, he is already wondering 
if he will be able to fill his prescription next month. No one, 
especially our veterans, should have to experience the anxiety 
associated with not knowing whether or not you will be able to 
have the medication that you rely on.
    Since joining Ways and Means seven years ago, I focused my 
attention on policies that remove barriers to health care for 
rural and underserved communities like the one I represent. 
This is why I have sponsored the Nancy Gardner Sewell Multi-
Care [sic] Multi-Cancer Early Detection Screening Act, along 
with my colleague, Congressman Jodey Arrington. If enacted, our 
legislation will create access to the first-of-its-kind multi-
cancer screening technology. These screenings will be in vain 
if patients cannot access lifesaving therapies due to drug 
shortages.
    Generic drugs are often a part of the foundational cancer 
treatment. Due to shortages, many cancer patients go without 
these lifesaving drugs. In many cases, doctors must choose 
which patients will receive available cancer treatments, 
putting the most vulnerable patients at risk. As a matter of 
fact, Medicaid cancer patients are more likely to be affected 
by cancer drug shortages than anything else.
    To add insult to injury, small rural hospitals are unable 
to gain the preferential access to scarce drugs that larger 
counterparts enjoy. We cannot continue to have a health care 
industry that does not prioritize health equity. We must do all 
that we can to ensure that quality drugs are both affordable 
and available and public.
    I would like to thank all of our oncology experts who are 
testifying at the hearing today. In particular, I would like to 
ask a question of Dr. Gralow.
    Could you speak to how the oncologists within the American 
Society of Clinical Oncology servicing in rural and underserved 
communities, have been impacted by the drug shortages?
    Dr. GRALOW. The rural communities have been impacted even 
more than those in the rural--in the big cities. They are 
frequently small practices. They don't have the ability to 
stockpile, if you will. Most sites that do have a drug that 
might be nearby are not willing to send the supply over, so 
those patients would have to travel a greater distance to get 
it. We talked earlier about----
    Ms. SEWELL. Like my constituent, Gary.
    Dr. GRALOW. Like your constituent.
    Ms. SEWELL. Yes.
    Dr. GRALOW. And then you get into the insurance issue of 
out of network. So, even if they could find drugs somewhere two 
hours away, then they deal with the insurance company that 
says, no, we won't pay for an out-of-network provider. So the 
rural communities were tremendously impacted.
    Ms. SEWELL. Thank you.
    I yield back the rest of my time.
    Mr. SMITH of Nebraska. Thank you. I now recognize Dr. 
Murphy for five minutes.
    Dr. MURPHY. Thank you, Mr. Chairman.
    Thank you all for coming today. I am actually still in this 
fray and have faced, especially over the last five or six 
years, when I ask for a drug and all of a sudden the hospital 
or whatever says it is not available.
    I was just looking at the drug list of ones that are not 
available, generic. It is 238 names long, 238: Tylenol 
suppositories; acyclovir; BCG, which I use a lot for bladder 
cancer patients. It is unconscionable. I mean, we can't even 
get injectable epinephrine. So now we have to mix it with 
other, you know, anesthetics to do something like that. So I 
guess it really comes down--it is cost, it is higher 
regulation, and it is the environment.
    And Dr. Schondelmeyer, you made a good comment about New 
Zealand. It just makes me think how we could, in one way, fix 
this. We ask our pharmaceutical companies--I have a real thing 
about direct-to-consumer advertising--that we take some of 
those costs, that we actually turn it into generic 
manufacturing for our people. You know, it is funny because you 
said New Zealand. The United States and New Zealand are the 
only two countries on Earth that allow generic--I mean allow 
direct-to-consumer advertising. It is a real bee in my bonnet. 
We don't need it, it is an added expense.
    So with Dr. Ferguson, I would just agree that we could go 
on, I could go on for minutes, for a long time.
    Predatory pricing. I wonder if you could accent this a 
little bit about this. Was this most exacerbated during the 
pandemic, and what was done about it?
    Mr. SCHONDELMEYER. Actually, the examples I am aware of 
were with respect to antibiotics about a decade before in the 
late 2000s, although there has been predatory pricing of 
medical equipment, you know, masks and other things, coming out 
of the U.S. and out of China during the COVID epidemic. And we 
saw some products offered on eBay or online or other places for 
five, tenfold, as much as a hundredfold what their true cost 
was. That is----
    Dr. MURPHY. That is one of the things, actually, that our 
government does very poorly.
    Mr. SCHONDELMEYER. Yes.
    Dr. MURPHY. It doesn't allow us to--and everything has to 
be done in a particular market, taken from a particular place--
--
    Mr. SCHONDELMEYER. Yes.
    Dr. MURPHY [continuing]. Rather than some of these 
individuals.
    Mr. SCHONDELMEYER. Yes.
    Dr. MURPHY. Why the FDA today is not going over and looking 
at India, which does not have the stringent policy, is my 
understanding, that China does, and looking in those labs is 
beyond me. Why we allow eyedrops to cause bacterial infections 
or fungal infections is just ridiculous.
    Well, this is for Dr. Schleicher and Dr. Gralow 
specifically with oncology, because I still deal with a lot of 
oncology patients. You know, when cisplatin was an issue, 
carboplatin was an issue--have there been studies now within 
journals to look at reduction of dose, and how this has 
affected?
    Because, you know, I know when BCG was given--was predicted 
for six doses, that literally was picked because that was what 
the packaging has. So, you know, truth be told, have there been 
any studies to look at reduction of dose, whether that is doing 
anything with survival, whether it has done anything in that 
regard?
    Dr. SCHLEICHER. So thank you very much for the question.
    So I don't know of any--and you might, Dr. Gralow--any 
large studies yet, just because there probably hasn't been 
enough time.
    So I know hundreds of patients who did not get the full 
dose from this study, as you mentioned. So we are actually 
missing doses. And for ours, it wasn't just delay, because we 
were up against potential months so people actually did not get 
the doses they needed----
    Dr. MURPHY. It is going to be extremely hard to randomize 
people to say----
    Dr. SCHLEICHER. A hundred percent.
    Dr. MURPHY [continuing]. You are going to get a full dose, 
you are going to get half a dose.
    Dr. SCHLEICHER. So I don't know doses. I can tell you my 
patients who didn't get that, if their cancer comes back, they 
are always going to wonder.
    Dr. MURPHY. Sure, that was----
    Dr. SCHLEICHER. The palliative side, when patients did not 
get it--because we did have to ration--if they died sooner, the 
family always wondered.
    So without data it still----
    Dr. MURPHY. It is going to be up here, anyway.
    Dr. SCHLEICHER. It still has a huge impact.
    Dr. GRALOW. I don't think that there are any new studies I 
am aware of to define this.
    But with carboplatin, for example, the various trials in 
different disease types, ranged doses--so we use an area under 
the curve as the dose for carboplatin. And so recommendations 
for treating ovarian cancer could be you use an AUC of four to 
six and give it every three to four weeks because we have never 
head-on compared those, and different trials showed that those 
were better than alternatives.
    So during this crisis and shortage, [inaudible] recommended 
use the lower dose since we don't have proof that the higher 
dose is better since we recommend this range----
    Dr. MURPHY. Right.
    Dr. GRALOW [continuing]. And use the longer interval. We 
haven't head-on compared those, and I don't think we ever will.
    Dr. MURPHY. You know, I personally think--and we--you know, 
to your point, Dr. Schondelmeyer, about the fact that we did 
this 10 years ago or 15 years ago, and we offshored so much, it 
is labor costs, it is supply chain. And the fact that we don't 
onshore these things or nearshore--and I am talking about 
Central America, where the big border crisis occurred, this was 
an absolute opportunity when they opened the southern border--
is to say if we are going to look for ``root causes,'' why are 
we not using Central America?
    You know, I have done plenty of work. I have worked in 
Nicaragua, probably been there 20 times. There are people 
begging for jobs. And why are we putting those in India, China, 
rather than Nicaragua and El Salvador, et cetera?
    Mr. SCHONDELMEYER. You are exactly right. If we nearshored 
these in Central America, it would provide better economy, 
jobs, keep those people from marching to the U.S. saying, hey, 
we want in, you know, take care of us. It would help with the 
economy of these countries around us. It would help with the 
border issues and other things.
    Dr. MURPHY. It----
    Mr. SCHONDELMEYER. It won't solve all of them, but it will 
help.
    Dr. MURPHY. It is a win-win for everybody.
    Mr. SCHONDELMEYER. Yes.
    Dr. MURPHY. Why have we have not explored that in the 
politic of the last two-and-a-half years and for the decade 
prior?
    Mr. SCHONDELMEYER. Yes.
    Dr. MURPHY. It is unbelievable to me. I have visited 
Nicaragua a bunch of times, worked there, and there is so much 
that is done there. But gosh, so much more.
    Thank you, Mr. Chairman, I will yield back.
    Mr. SMITH of Nebraska. Thank you. I now recognize Mr. 
Fitzpatrick for five minutes.
    Mr. FITZPATRICK. Thank you, Mr. Chairman, and thank you to 
our witnesses for being here today to provide your insight on 
the chronic drug shortages that are facing our nation. I am the 
co-chair of the bipartisan Cancer Caucus. This issue is at the 
very, very top of our list of priorities.
    There are currently over 250 drugs that are in shortage in 
the United States. And it has also been reported by 86 percent 
of surveyed cancer centers that they themselves are 
experiencing drug shortages. Through conversations with 
constituents and doctors in my home community back in 
Pennsylvania, I have heard the following story.
    A doctor must deliver the news not only that their patient 
has cancer, but that they don't have the lifesaving cancer 
drugs available to help cure them because it is in shortage. 
And to further compound this issue, the rate of cancer 
incidences across America, including in our communities, is 
increasing for certain types of cancers. Therefore, the fact 
that chemotherapy drugs are in shortage has to be at the top of 
all of our priorities.
    Mr. Schleicher, first question for you. In your testimony, 
you noted that there was an interval of over 10 days during 
which you did not receive any shipments of two generic 
injectable chemotherapies. In your experience as a chief 
medical officer, can you speak about how this changed the 
decision-making process for oncologists treating patients, and 
what other options were available to patients during that 10-
day period?
    Dr. SCHLEICHER. Thank you very much for the question. Yes, 
it was terrible, and that was just the worst, where we had 10 
days before that. And it is in the written testimony, there is 
a huge graph of declines before that where we already had to 
start thinking about what diseases we could treat, and then a 
slow pick-up.
    So we actually had to sit and make the decision. Are we 
going to prioritize palliative, which means not curable yet 
still very important to extend quality of life and extend life 
for patients with families? Are we going to do it where there 
are diseases where there might be a substitution, even if it is 
not randomized data to show it is adequate? Or are we going to 
pick small diseases, where, hey, at least we can do one group 
of patients, then divide up patients with curative cancer--
curative breast cancer, and half get, half don't?
    So it was hard. And, at one point in my email that I had to 
send to the group last June, at the worst we were only able to 
use carboplatin for curative chemo radiation with lung cancer, 
which means that every patient who needed it for breast cancer, 
metastatic lung cancer, tons of women's health cancers like 
gynecologic malignancies were unable to get it for a period of 
time.
    Mr. FITZPATRICK. Thank you.
    Dr. Gralow, obviously, this issue extends not just to 
adult, but to pediatric cancers, as well. Could you shed some 
light on how shortages affect the treatment of pediatric 
cancers and the unique challenges faced in providing care to 
this vulnerable population, and what can Congress do to address 
this?
    Dr. GRALOW. Pediatric cancers were actually where it came 
on ASCO's radar back in 2011, 2012. We actually had a pediatric 
oncologist who was our president at the time. But this is where 
we really started to see several pediatric oncology drugs that 
were critical for high cure rates in these diseases start to go 
into shortage.
    Now, the amount of drug that is made, you know, they--it 
rebounded. It goes up and down. One drug goes out, another drug 
goes out. It is a small amount compared to this recent big 
cisplatin, carboplatin shortage. But these pediatric drug 
shortages have never really stopped. It is just they wax and 
wane. A new drug goes in or out. Right now we have shortages of 
several drugs that are critical to pediatric cancer. And, 
without them, we really impact the survival. So this is a big 
problem in pediatric oncology.
    What can we do about it? I think all the things we are 
talking about for adult oncology drugs, too, you know, 
bringing, you know, quality manufacturing into the U.S., you 
know, having earlier insight and transparency into what is 
happening so that companies like Civica, that model, that they 
can jump in well before the drug isn't on the shelf anymore.
    Mr. FITZPATRICK. Thank you, Dr. Gralow, thank you to all of 
our witnesses for being here.
    Mr. Chairman, I yield back.
    Mr. SMITH of Nebraska. Thank you. I now recognize Ms. Chu 
for five minutes.
    Ms. CHU. Thank you to all the witnesses for providing your 
testimony today. I have heard from so many constituents, 
patients, and providers across my field who have all been 
negatively affected by the strain of drug shortages. It is 
shocking that there is so little concrete information on why 
they occur. There are no standardized shortage reporting codes, 
and manufacturers are not obligated to give detailed 
information on the cause of the shortage. And, shockingly, more 
than half of drug shortages as of June 2023 did not have a 
declared cause.
    It is clear that increasing transparency over the supply 
chains is necessary to address the root cause of shortages, and 
ultimately solve this crisis. It is important to note where our 
drugs and their ingredients are being made so that when a drug 
shortage or other supply interruptions happen, FDA 
manufacturers can respond appropriately. And we must ensure 
that the FDA knows at the earliest possible time when a surge 
in demand for a drug is likely to cause a shortage.
    So, Dr. Ballreich, under current law there are no 
requirements for reporting shortages caused by increases in 
demand. How can early notification by manufacturers help the 
FDA address drug shortages?
    Are there ways we can better align the supply chain to 
allow for more accurate predictive modeling and give us earlier 
warnings for drugs in danger of going into shortage?
    Mr. BALLREICH. Excellent question. Generally, more 
information is better. If we had information about anticipated 
changes in demand, anticipated changes to circumstance, to 
manufacturers regarding, you know, shortages or regarding 
access to APIs, it could allow additional players in the supply 
chain to think about additional sources, think about 
remediation of that, just identifying the risk.
    You know, we could have a situation if there are 5 generic 
manufacturers or 10 generic manufacturers where you might 
think, oh, that sounds fairly resilient. But, if they are all 
sourcing from the same single API, like what happened with the 
chemotherapy drugs and sourcing it from Intas, the manufacturer 
in India, that exposes a significant supply chain threat.
    So more information, more transparency is obviously, I 
think, going to make it a lot better, and it is going to be a 
better option.
    Ms. CHU. Thank you so much.
    Dr. Coukell, drug shortages are intertwined with the 
problem of high prescription drug costs. That is why Democrats 
worked through the Inflation Reduction Act to negotiate the 
price of prescription drugs. It is so important.
    But there are other solutions that can help address both 
shortages and high costs. For example, my home state of 
California launched the Cal Rx program in 2020 to empower the 
state to develop, produce, and distribute generic drugs, and 
sell them at a low cost. And, in March of last year, they 
announced the program's first project, called the Cal Rx 
Biosimilar Insulin Initiative, to support the development of a 
generic version of the three most popular insulin medications.
    So, Dr. Coukell, how might more partnerships like the one 
between Cal Rx and Civica Rx help to alleviate generic drug 
shortages, while also lowering drug prices for consumers?
    Mr. COUKELL. Thank you for that question.
    You know, first of all, I think when we are talking about 
these issues, sometimes we have to hold two problems in our 
minds simultaneously. And so sometimes cost is a barrier to 
access, and we have to address that. When we are talking about 
drug shortage, though, as we have said, we are really talking 
about extremely low-cost drugs for the most part, where the 
problem is the margins are so low that companies are not 
investing and not staying in the market.
    But to your question, Civica is developing affordable 
insulin, the three insulins that are used most commonly in the 
U.S. Even for a biosimilar, insulin, that is a very expensive 
undertaking. And so we are happy to have a partnership with the 
State of California, which has contributed a substantial sum 
towards the cost of bringing those products to market.
    Ms. CHU. Thank you.
    Dr. Ballreich, we have heard people say that some shortages 
are due to the results of prices being too low, but I am 
concerned that Republican proposals to address the root cause 
of this would give free rein to raise prices on consumers. So, 
Dr. Ballreich, what should be done to make sure that that 
raising prices won't cause harm to products and patients?
    Mr. BALLREICH. Yes, excellent. I think any change to 
reimbursement should be tied to some meaningful change to 
supply chain resiliency.
    You know, in my testimony, I suggested a scorecard type 
approach. You know, we--Congressman Kelly talked about car 
parts. You know, we--when we look at other consumer products, 
we know where they are from, we know brands, we know the 
quality of that product. In generic drugs, we don't. And right 
now, in the generic drug market, we are--it is solely based on 
price. Everything is trying to drive down the price, which is 
great for patients. But if that price is not tied to some sort 
of meaningful investment into the supply chain, then it doesn't 
really help patients if they can't get access to that drug.
    So I think any change to reimbursement should be tied to 
some sort of meaningful aspect that either incentivizes 
investment or some sort of tie to the quality of that product.
    Ms. CHU. Thank you.
    I yield back.
    Mr. SMITH of Nebraska. Thank you. I now recognize Mr. 
Steube for five minutes.
    Mr. STEUBE. Thank you, Mr. Chairman.
    The Hatch-Waxman Act, formerly known as the Drug Price 
Competition and Patent Term Restoration Act of 1984, was 
originally designed to create more competition in the generic 
drug market. Congress sought to balance the need to incentivize 
drug research and development with a desire to increase 
competition and make drug prices more affordable. The law made 
several key changes that initially helped foster competition in 
the drug manufacturing space and drove down the cost of 
essential medicines.
    A loophole in the legislation, however, led to the 
hollowing out of America's public health industrial base. While 
the law rolled back some regulatory barriers in order to make 
it easier for new companies to enter the market, the law's 
original intent was never to create a race to the bottom that 
forced companies to cut corners in order to manufacture drugs 
for less than the price of a cup of coffee in order to remain 
competitive.
    China and India both provide significant subsidies to 
generic manufacturers. China's Made in China 2025 plan openly 
states Beijing's goal of having their top 20 national champion 
manufacturers of essential drugs control at least 80 percent of 
the global market for those goods. As part of the Chinese 
Communist Party's strategy to accomplish this, China imposes a 
5.5 to 6.5 percent tariff on most drug imports, in addition to 
a 17 percent value added tax on all imported goods, which works 
similarly to an additional tariff. By contrast, the United 
States imposes no costs on imports.
    India offers an even larger incentive program with over 24 
separate subsidy programs funding its generic pharmaceutical 
manufacturers. Indian generics are refunded on everything from 
FDA user fees to 100 percent expensing in some cases. Combine 
this with India's purchasing of cheap Russian oil and low-cost 
Chinese imports. The Indian producers are at a significant 
advantage. And it is apparent from recent reports that these 
subsidies have directly resulted in the offshoring of America's 
generic pharmaceutical manufacturing industry, and today they 
place U.S. firms at a significant disadvantage.
    That is why I am honored to cosponsor Representative 
Tenney's PILLS Act to restore the U.S. generic drug supply 
chain through production-based tax and investment tax credits. 
This bill is comprehensive to cover all materials, testing, and 
packaging involved at every step of the manufacturing process.
    The byproduct of this hearing must be policy solutions to 
solve our drug shortage, including countering China and India's 
presence in this space by reshoring our domestic drug making 
capabilities.
    Dr. Stephen Schondelmeyer--did I say that right?
    Mr. SCHONDELMEYER. Yes.
    Mr. STEUBE. Can you recommend some changes to the tax code 
to promote Made in America investments and onshoring?
    Mr. SCHONDELMEYER. I probably could. I can't off the top of 
my head in terms of tax code, but I think there are issues.
    We need to look--most of the companies that we call 
manufacturers in the U.S. that are the sponsors at the FDA 
don't really manufacture the drug. They contract with someone 
else to make it. And so, often the product might be made 
somewhere else, and even the revenue may be booked somewhere 
else, like Ireland or in other countries. So we need to look 
at, for the products used in America and the profits made by 
selling those in America, are we capturing those in our tax 
code?
    Mr. STEUBE. What trade barriers currently exist that would 
affect the supply of generic drugs?
    Mr. SCHONDELMEYER. Well, as I said, we saw emerge some bans 
on exporting of drugs to the U.S. And I think we need to look 
carefully at what Florida is trying to do by importing drugs 
from Canada----
    Mr. STEUBE. Yes.
    Mr. SCHONDELMEYER [continuing]. And Canada now saying we 
don't want to export them. We need to work through that with a 
trusted trade partner, Canada, and figure out how can we make 
this work for both of us?
    Mr. STEUBE. Mr. Cavacini, am I pronouncing that correctly?
    Mr. CAVACINI. Yes, sir.
    Mr. STEUBE. Can you describe how wholesalers make decisions 
on which manufacturers to purchase drugs from?
    Mr. CAVACINI. Thank you for the question.
    Our sourcing strategy really is centered around three 
pillars: the first is consistent supply; the second is clinical 
importance; and the third would be price and cost. And when we 
think about those three pillars, they might flex in priority 
based on what is happening with that specific molecule.
    When we think about consistent supply, we are looking at 
manufacturers' historical performance, their financial strength 
to the extent that we can find out where the raw materials come 
from and how the products are made.
    And then clinical importance, are--these primary agents, 
are they curative? Are there other alternatives available?
    And, in places where we have really strong supply and 
performance and a lot of alternatives, we might prioritize 
price. If that is not the case, where there are few options, 
high concentration, and risky, we would enter into long-term 
contracts and potentially pay more to make sure that we have 
the supply that we need.
    Mr. STEUBE. Can wholesalers predict drug shortages?
    And how do they mitigate that?
    Mr. SCHONDELMEYER. I think predicting is difficult, based 
on the information we have. There are clear indicators of 
higher-risk products, and we have talked a lot about those 
today. Those medications that have been around a while are 
often very inexpensive, have complex manufacturing processes, 
and could be made in riskier places based to geopolitical or 
weather or other environments. Those are high-risk for a drug 
shortage.
    The way that we mitigate is really a couple-fold. You know, 
first is that we invest and hold inventory in our 30 
distribution centers that are positioned across the United 
States, close to patient populations that we can deliver to 
within hours. We might have days to months on hand based on the 
supply. And then we also use allocation strategies to make sure 
equitable and fair distribution of the products that are in the 
supply chain, especially those that are vulnerable.
    Mr. STEUBE. Thank you guys for being here today.
    I yield back.
    Mr. SMITH of Nebraska. Thank you. I now recognize Ms. Moore 
for five minutes.
    Ms. MOORE of Wisconsin. Let me just thank this 
distinguished panel and the ranking member and the chair for 
convening this important meeting that, really, all of our 
constituents are facing.
    I guess I want to direct my questions--maybe first with 
you--with Dr. Gralow and Mr. Coukell. I am trying to understand 
better the drug shortage prevention strategies that you have.
    And I am wondering, you are saying we--and I have heard 
others--I heard you telling others that we need a database. The 
FDA has a drug shortage database. But what am I missing here? 
Is it stockpiling and hoarding?
    I am thinking about my own situation in Milwaukee, 
Wisconsin, where we have, for over a year, been having a 
problem with amoxicillin. Now, amoxicillin is just--it is like 
an everyday drug. I mean, you can anticipate with all of the 
RSV and flu and stuff. I don't understand why that drug, as an 
example, is facing a shortage. And, using that as an example, 
can you please explain to me how this database strategy, for 
example, would stop that problem?
    Pick and choose, Dr. Coukell or Dr. Gralow, okay.
    Mr. COUKELL. Thank you for that question. What I 
highlighted in my testimony are, I think, three kind of pillars 
that would move us towards a resilient supply. One is holding a 
buffer stock of roughly six months' inventory. Another is 
ensuring that, when we choose suppliers, we have a process to 
validate their quality maturity, and that we are choosing not 
just based on price but based on the likelihood of a shortfall 
of supply. And the third is entering long-term purchase and 
supply contracts that bring stability to the market. If we move 
in that direction, I think that we will address a lot of the 
shortages that we are facing right now.
    I haven't called for a database in my testimony, and 
certainly you can always make, you know, better decisions with 
more information. But the biggest predictor of a future 
shortage is a past shortage. So we are actually quite good at 
predicting what drugs are going into shortage in the future.
    Ms. MOORE of Wisconsin. Okay. Can I ask Mr. Cavacini?
    As you know, mifepristone is an important medication in 
women's health care. And it has been in the market for over 20 
years. The FDA has done thorough, evidence-based research to 
determine that it is safe. And it is so safe for women that it 
is sort of the number-one method for an abortion strategy. And 
it is sold over the counter.
    So I am asking you, as a prescription distributor, how--and 
McKesson, of course, is one of the key components in ensuring 
that women have access to this safe and effective medication. 
Can you just give us a status update and how you are working 
with pharmacies to make this happen? And when will distribution 
begin?
    Mr. CAVACINI. Well, thank you for the question. As you 
mentioned, McKesson's role as a distributor is centered around 
the principle of making sure that FDA-approved, appropriate 
medications are available for prescribers and patients where 
and when they need them.
    At the current time, we are not an authorized distributor 
of mifepristone. The manufacturer of those products has set up 
a limited distribution network with another company in the 
supply chain.
    Ms. MOORE of Wisconsin. Okay, well, that is good to know.
    I have 41 seconds. Great. So Dr. Gralow, let me come back 
to you. Mr. Hern mentioned how decisions are being made with 
regard to alternative treatments. And in the case of 
amoxicillin, the drug stores were doing the compounding 
themselves, getting the powders. Does that compromise the 
quality of these drugs, or is that actually a solution for 
making sure that there aren't shortages?
    Dr. GRALOW. I think that is a great question. I am an 
expert in oncology, not antibiotics and amoxicillin, and we 
don't usually compound our drugs either. So I would defer to a 
colleague on the panel, if you----
    Ms. MOORE of Wisconsin. Thank you.
    Mr. Chairman, with an indulgence, can somebody answer that? 
Is that a solution, or is that a quality--does that risk 
quality and contamination?
    Mr. SCHONDELMEYER. Actually, I believe the antibiotics that 
are made in powders and then pharmacy simply adds sterile water 
to that and prepares it, and that makes the drug stable longer 
because, if you had it mixed in the water initially, the drug 
may not be stable for as long. So that probably does help in 
the process.
    That is different, though, than compounding from raw 
ingredients a drug. And so it technically is a type of 
compounding, but it is really to help extend the shelf life of 
the drug, basically.
    Ms. MOORE of Wisconsin. Okay. Well, thank you so much, and 
I yield back.
    Mr. SMITH of Nebraska. Thank you. I now recognize Ms. 
Tenney for five minutes.
    Ms. TENNEY. Thank you, Mr. Chairman and Ranking Member, for 
holding this important hearing. And thank you to all of you 
witnesses. This is really interesting work that you are doing, 
and your testimony is very insightful, so I appreciate the work 
you are doing.
    And, obviously, as you know, for years our country has 
witnessed an increasing number of drug shortages, with patients 
and providers now seeking--seeing the largest spike in a 
decade. This has coincided as our nation has become 
increasingly reliant on nations such as China and India for 
Active Pharmaceutical Ingredients and the final forms of drugs, 
which you have all pointed out today.
    Due to this offshoring to less regulated nations, these 
shortages have been especially noticed in injectable generics, 
which have justifiably much tighter regulatory tolerances than 
other medications, which many of you touched on today, as well. 
In my own district I have seen this, especially with oncology 
drugs, leaving doctors scrambling to track down the supplies of 
limited treatments or requiring patients to delay their 
lifesaving care for weeks. This is indeed not only devastating, 
it is life-threatening.
    This is why I introduced the Producing Incentives for Long-
Term Production of Lifesaving Supply Medicines, or the PILLS 
Act. I like to say the whole thing out there. I want to thank 
my colleagues who have cosponsored, Representatives Steube, 
Malliotakis, Miller, Murphy, and Representative Kelly, as well. 
This bill will provide pharmaceutical manufacturers incentives 
to reshore their production to the United States, shortening 
supply lines, and making access to these cures more reliable 
for American patients.
    A cure does not really mean anything if you cannot get a 
hold of it when you need it, as you all know. I wanted to first 
just ask Mr. Cavacini a question.
    And, in your remarks, you noted how McKesson works to 
diversify suppliers and incentivize higher quality 
manufacturing, but you do not expand as to how much and what 
incentives McKesson, your company, uses in providing and 
encouraging near-shoring of the supply chains closer to home. 
Could you maybe explain how McKesson is willing to do that, or 
how you do that, if you do it at all?
    Mr. CAVACINI. I think it is important to remember that 
McKesson's primary role is as a distributor and is making sure 
that products manufactured by manufacturers are available to 
providers and patients where and when they need them.
    What I shared in my testimony is that in our sourcing 
strategies we try to source from reliable supply. As I think 
you shared in your comments, a cure if you can't get the drug 
doesn't do anybody any good. In our business, a great price, if 
I can't sell it to my provider partners, doesn't do anybody any 
good either. So we need to make sure that we secure a 
consistent, predictable supply. And that is a pillar of our 
sourcing strategy.
    Ms. TENNEY. So is that--and so that means you would be 
willing to continue to invest to pay for pharmaceuticals from 
these reliable onshore--you do that already, then, with your 
company?
    Mr. CAVACINI. We balance consistency of supply, clinical 
importance, and price. The focus on price is often driven by 
our provider partners. They are under intense reimbursement 
pressure. And absent of other incentives, the only metric that 
they lever on is price.
    Ms. TENNEY. Well, let me ask you. What kind of incentives 
can you provide manufacturers who want to reshore their 
products? Say the critical active ingredients of 
pharmaceuticals, like--can you--are there other incentives you 
can give them to encourage them to make their products here, in 
the United States? Or, as you--we indicated earlier, in South 
America and other places closer to home, not China, not India.
    Mr. CAVACINI. Well, as a distributor, I don't know that we 
could provide the incentives, but I think we support incentives 
in the system that would create the right environment for 
manufacturers to continue to invest in redundancy and quality 
manufacturing and their supply chain.
    I think what we have heard from the panel today is that the 
economics of many of these products have been competed down to 
a point, that they are very inexpensive, and that does not 
support investment in redundancy. And there is no incentive 
because they are competing on price in the system that we have 
today.
    Ms. TENNEY. You raise an interesting point. I just wanted 
to ask Dr. Schondelmeyer.
    Did the Chinese and Indian Governments provide program 
incentives for API and API production to compete with us in 
that way? Did they provide similar incentives, those countries?
    Mr. SCHONDELMEYER. Well, they provided incentives to the 
manufacturers in their country to make those products. That is 
different than reimbursement----
    Ms. TENNEY. Would you----
    Mr. SCHONDELMEYER [continuing]. Like we are talking about.
    Ms. TENNEY. So would you describe them as incentives or 
subsidies, or both?
    Mr. SCHONDELMEYER. Both.
    Ms. TENNEY. Okay.
    Mr. SCHONDELMEYER. We could find examples of both in India 
and China.
    Ms. TENNEY. So what would--I mean, you are a professor. 
What would you say is the--I have just got a couple of seconds 
left. What would you say are the--the most effective way for us 
to do this? Would it be through incentives? Would it be through 
subsidies in the United States?
    Mr. SCHONDELMEYER. I think, again, a mixture of both could 
be used effectively.
    The most critical question, though, is which products are 
we going to incentivize. And there is where we do need a 
database to understand. I agree in the past we know past 
shortages might reoccur, but we are having new reasons of 
shortages. We had Acorn, a drug company, go bankrupt, and 
that--you couldn't have predicted that from past shortages. We 
have had companies go bankrupt because of the opioid crisis, 
and all of their products, even beyond their opioid drugs, have 
gone out of the market and caused shortages.
    So we have other reasons for shortages beginning to show up 
in the market and new reasons. And, with databases we could 
predict where are we vulnerable, where do we have products that 
are critical in the U.S. market that are only made in one 
country in the world, and why don't we start making it here? 
Let's incentivize those. Let's subsidize those.
    Ms. TENNEY. That is a great point. And diversification, 
definitely.
    Mr. SCHONDELMEYER. Yes.
    Ms. TENNEY. I appreciate your--thank you, everyone. My time 
has expired.
    Chairman SMITH. Thank you. I now recognize Mrs. Fischbach 
for five minutes.
    Mrs. FISCHBACH. Thank you very much, Mr. Chair.
    And first of all, I would just like to say thank you to Dr. 
Schondelmeyer for coming from Minnesota, and it is always 
wonderful to have a Minnesotan on the panel. And I know that 
they have grilled you fairly well today, so I will probably 
stay away----
    Mr. SCHONDELMEYER. Okay.
    Mrs. FISCHBACH [continuing]. From asking you additional 
questions, but I did want to----
    Mr. SCHONDELMEYER. I would just respond, ``Yeah, you 
betcha.''
    Mrs. FISCHBACH. There you go, there you go. Okay, I 
appreciate that. Only I understood that in the room, though, 
so--but I want--I did want to ask Mr. Cavacini a couple of 
questions.
    And first, I wanted to mention that on Monday it is going 
to be 37 in Minnesota, and it might snow in the afternoon, so 
bring a coat. I did tell him I would find the weather report 
for him because he is visiting Minnesota.
    But in all seriousness, I do have a question. You know, can 
you describe how the drug shortages are not in the business 
interest of wholesalers?
    Mr. CAVACINI. I think there are a couple things to consider 
there, and I appreciate the question. It is an important part 
of the discussion.
    You know, our core business model is to make sure that 
providers and patients have access to the medications that they 
need. We often contract with hospitals and health systems, from 
large academic medical centers to small community rural 
hospitals, to health systems like the VA, pharmacies from 
national chains and household names to your mom-and-pop 
community pharmacy, as well as community practitioners and 
specialty like oncology. And our relationship with them is for 
all of their pharmaceutical needs. They look to McKesson to 
supply tens of thousands of products. They can order up until 
8:00 or 9:00 the next day, and we deliver to their sites of 
care the following morning.
    Our model is optimized when there is robust and ample 
supply, and we are filling orders in full to serve providers 
and patients.
    Mrs. FISCHBACH. I appreciate that. And then, just changing 
a little bit, but do you feel that you have good quality 
indicators regarding the drugs you purchase from manufacturers?
    And is it pretty standardized, or is it more difficult with 
different manufacturers to get that--information on that?
    Mr. CAVACINI. Yes. Well, I think we have talked about 
quality a lot today.
    Mrs. FISCHBACH. Yes.
    Mr. CAVACINI. And I think it is important to highlight 
that, as I have mentioned quality, I am talking about quality 
of the supply chain and the infrastructure around those 
medications.
    We only purchase FDA-approved medications. We, in our full-
line wholesale distribution business, only purchased direct 
from the manufacturer, and we defer to the FDA and other 
agencies on the quality of the meds. But we do look really hard 
at the quality of the companies that we partner with. You know, 
what is their historical practice? What is any regulatory 
enforcement action, their financial stability, their 
diversification to the extent that we can find out where their 
plants are in the world and where do they source their 
materials.
    But there are limitations. There is no obligation on 
manufacturers to share that information with us, and sometimes 
it is hard for us to make the best decision.
    Mrs. FISCHBACH. All right. Well, thank you very much. And, 
given I have just--I have a little more time, what I am going 
to do is, since I am towards the end, is there anything that 
any of the panelists wanted to say but didn't have the 
opportunity to? I will give you a few minutes if there is 
anything you think.
    You answered all the questions fully and you didn't have 
anything else to add? You have been here a long time, so I 
appreciate that.
    But I do want to just say thank you all for being here, 
because it has been incredibly informative and very helpful. 
And the quality of the panel today is just exceptional. So 
thank you very much.
    And with that I will yield back, Mr. Chairman.
    Mr. SMITH of Nebraska. Thank you. I now recognize Mr. 
Kildee for five minutes.
    Mr. KILDEE. Thank you, Mr. Chairman. And, to Chairman Smith 
and Ranking Member Neal, I appreciate the opportunity to 
participate in and listen to these really, really thoughtful 
witnesses on a subject that is, obviously, a really important 
one.
    Last year--I am from the State of Michigan, so you can only 
imagine where I am going with this--last year in my state, as 
in other states, we saw this problem come home in really 
significant ways. The severe chemotherapy drug shortage caused 
people that I represent to reach out.
    And, to hear their stories of having illness that could not 
be treated not because of the lack of the science, but just the 
lack of access to what science has proven to be effective was 
really hard to hear. Stories that we have talked about a bit 
today that Dr. Gralow, Dr. Schleicher, and others have shared 
about drug shortages preventing doctors from treating patients 
in the way that they know they should and, as a result, patient 
cancers progressing as a result.
    Dr. Gralow, you mentioned an instance of head and neck 
cancer. It is a subject that is very close to me. It has only 
been a few months since I was diagnosed and treated for head 
and neck cancer. It has been a really difficult path, and I am 
not quite yet fully recovered. I am cancer free. But I only 
mention my own personal story because I know exactly how 
anxious I was when I first got that diagnosis, and how anxious 
I was to get on with it, to get treatment going. I was 
persistent, as you can only imagine. You know this, you deal 
with folks who go through this.
    I could not even imagine if my physician, my oncologist 
told me that, you know, ``We do have a treatment path for you 
that will likely be quite successful. That is the good news. 
The bad news is it is not available.'' I couldn't even imagine, 
as an anxious as I was in that moment, to hear those words. And 
I know that I represent people that have had to hear that.
    So this is a subject, obviously, to the extent Congress can 
have an impact on this, we need to hear from you. And you have 
been very helpful in that to help us calculate what steps we 
ought to be taking to make sure we don't go through this again. 
Too many patients just are not getting access to the care that 
would be lifesaving and life-affirming for them. This is the 
richest country in the world. And as you have stated, it is 
unacceptable that we find ourselves in this particular 
situation.
    What I am curious about is that I represent a group of 
older, industrial cities in the State of Michigan: Saginaw, Bay 
City, Flint, Michigan, all with great manufacturing capacity 
and a great manufacturing heritage. And I am curious. And, if I 
could start with Mr. Coukell, you noted that Civica Rx 
emphasizes sourcing in the United States wherever possible.
    And I wonder if you might comment on what I think is a 
unique opportunity, and I think you did, as well, to reshore 
some of that manufacturing capacity in a way that not only does 
the very important work of providing access to these important 
therapies, but also helps communities that have a great 
manufacturing legacy, capacity, training programs, et cetera, 
to benefit from reshoring our manufacturing, and to see both a 
renaissance in terms of manufacturing capacity, but also 
securing a supply of necessary therapies in a way that is much 
more predictable. Could you comment on that possibility, and 
what you might suggest?
    Mr. COUKELL. Yes, thank you for that question. I think, as 
you point out, there are multiple reasons to reshore the 
pharmaceutical supply. Surety of supply is one. Protecting 
against, you know, geopolitical strategic risks is another. But 
these are also good-paying jobs in manufacturing communities 
that have lost them in the last decades. And so there is a lot 
of potential to bring those back.
    And I think the kinds of things we have been talking about 
today are the kinds of policies that we need to look at. And it 
is not one size fits all. I think tax incentives, I think 
shifting the market towards preferring domestic or higher 
quality producers, but there are also places--and the example 
of penicillin and cephalosporin antibiotics is a good one. No 
U.S. manufacturer can invest right now, I think, in those 
products on a purely commercial basis, given the global price 
for those products. And so, if we want to make them here, it is 
going to take some government investment to bring those 
facilities back.
    Mr. KILDEE. I really appreciate the panel. Thank you so 
much.
    And again, I thank you for listening to my personal story. 
Members of the committee, I think, appreciated my recovery, but 
I think they especially appreciated that for a period of time 
after my very extensive surgery I completely lost my voice. 
Quite a number of you found me to be a much more reasonable 
person during that period of time. But I am back.
    Thank you, I yield back.
    Mr. SMITH of Nebraska. Thank you.
    Dr. Ballreich, I understand you had some response to Mrs. 
Fischbach's----
    Mr. BALLREICH. Yes.
    Mr. SMITH of Nebraska [continuing]. In her extra time.
    Mr. BALLREICH. Totally fine, yes. You asked about what has 
not really been said.
    I think, first and foremost, there is no single solution. 
You know, there is a wide range of solutions because the 
problem is across the board in different medications. You know, 
it is totally different, talking about branded versus generic. 
It is different talking about mass market generic versus small 
market generic. It is different from, you know, small molecule 
generic versus a complex generic like a Generic Sterile 
Injectable, which requires a much more extensive manufacturing 
footprint. So I think we talk about a wide range of solutions, 
and just a recognition that there is not really one single one.
    Also, I think there has been a lot of emphasis on improving 
the supply through tax incentives, tax subsidies. Also, we need 
to balance that with demand. There is no Made in the USA, you 
know, pill label. I think there is a lot of people, you know, 
Americans, who would want to know that the medications they are 
taking, it is U.S.-based.
    So I just want to kind of highlight those two kind of 
facets of this problem that I think have--they have been 
mentioned, but maybe not articulated enough yet. Thank you.
    Mr. SMITH of Nebraska. Thank you. I now recognize Mr. Moore 
for five minutes.
    Mr. MOORE of Utah. Thank you, Chairman.
    One of the last things patients should have to hear from 
their provider is that they can't get the best treatment for 
their illness because of a medicine shortage. We often talk 
about prices, and we need to keep that focus on making sure 
things are affordable. But we are talking a medicine shortage.
    Patients in Utah are being told this exact same thing far 
too often. And, according to the American Society of Health-
System Pharmacists, there are currently over 250 drugs in 
shortage in the U.S. Unsurprisingly, the private sector, I 
believe, has stepped up to help solve this issue. I am proud to 
have a member of the Civica Rx community here. In 2018, Civica 
Rx, which is headquartered just south of my district in Lehi, 
Utah, was founded by several health systems to address ongoing 
drug shortages and make sure patients have access to the 
medications they need. We have made some improvements, but 
recent shortage spikes have shown that we must do better for 
our patients.
    Mr. Coukell, again, I mentioned Civica Rx. You know, I have 
been excited to learn more about this. As I came onto the stage 
three years ago into this role, and particularly on the Health 
Subcommittee of Ways and Means, I appreciate the engagement and 
helping us understand and my team understand the complexities 
around this, but the efforts that you are trying to do with the 
patient in mind. And these things are important to do.
    I would like to ask about incentives in the health--or in 
the Federal health programs, and how they affect the generic 
market. Do you think that certain Medicare reimbursement 
mechanisms encourage a sort of race-to-the-bottom pricing of 
generic drugs and contribute to shortages?
    And are there any current policies that are particularly to 
blame?
    Mr. COUKELL. Well, thank you for that, and we are proud to 
be in Lehi.
    You know, I think the market dynamics we have been talking 
about today exist in the commercial market as it stands. But 
they drive a situation where we have got very low margins on 
some of these very low-cost drugs. So anything else that adds 
further erosion to those margins makes it that much harder for 
companies to keep producing these products. And so I think that 
goes to some of the programs you are talking about, yes.
    Mr. MOORE of Utah. Any other solutions that Congress should 
look at that balance generic manufacturers' economic viability 
with the ability of health care providers to reliably obtain 
quality and affordable generic medicines?
    I mean, that is the question, right? Like, how--what can we 
do or not do or try to avoid creating an environment where you 
all can better navigate the economic viability of this market?
    Mr. COUKELL. Well, you know, I think not long ago the 
Center for Medicare proposed a bonus payment for, you know, 
additional buffer stock. And that is one example. And they 
decided not to move forward with that for a number of reasons. 
And there were some things that needed to be fixed there. But 
that is the kind of thing that sits in the jurisdiction of this 
committee, where you can say we can use our levers over 
providers and provider payment to shift purchasing towards much 
more resilient models.
    Mr. MOORE of Utah. Yes, so I welcome Dr. Schleicher into 
this questioning, as well, Mr. Coukell.
    Just speak to rural health care for a minute, and about how 
this affects rural health care, making sure that the, you know, 
physician practices in northern Utah particularly, or 
throughout the rest of rural America, how they are impacted by 
drug shortages. What can Congress do to make sure that we 
better address this need, Dr. Schleicher?
    Dr. SCHLEICHER. Well, thank you very much for the question.
    I think the--my main thought would be that, as people are 
thinking about solutions--and I don't know the magic solution--
make sure that you are understanding the different sites of 
care where hospitals are and take care of patients, which is 
obviously a very important thing.
    And then, often in rural America, where there aren't 
hospitals around and there might be a one-physician community 
practice, and make sure that, for instance, stockpiling doesn't 
influence one, and then the other actually has a shortage that 
might not have been there.
    And just any solution, really make sure that we understand 
exactly who is going to get the benefit of that, and that we 
don't end up accidentally having patients in rural America or 
patients who might not be able to get in--or might be out of 
network for other sites of care get penalized for just where 
they live and their ability to pay.
    Mr. MOORE of Utah. Mr. Coukell, anything to add for--to 
make sure that we have reliable access to affordable generic 
drugs in our rural markets?
    Mr. COUKELL. You know, our model is set up to be equally 
accessible to any hospital of any size, and they all pay the 
same prices. And, I think, if we are up front creating a buffer 
stock, that not only benefits the entities that are providing, 
but it also creates a buffer that benefits everyone else 
because more stock anywhere in the system helps smooth out the 
effect of a supply interruption.
    Mr. MOORE of Utah. Yes, thank you. Thank you to all of you 
for being here and sharing your perspective.
    I yield back.
    Mr. SMITH of Nebraska. Thank you. I now recognize Mrs. 
Steel.
    Mrs. STEEL. Thank you, Mr. Chairman and Ranking Member 
Neal.
    If the COVID-19 pandemic taught us anything, it is that we 
cannot trust the CCP as a reliable source for any part of our 
supply chains, especially vital medical supplies including 
drugs, PPE, and medical equipment. Unfortunately, drug 
shortages are still prevalent and are occurring more 
frequently, impacting patient care.
    A recent Johns Hopkins University study found that over 90 
percent of hospital systems across the country are now impacted 
by significant shortages of essential medicines to help treat 
patients. For a patient, this leaves them with unimaginable 
circumstances, delayed treatments, and delayed procedures. And, 
for an oncology or a pharmacist, it means rationing lifesaving 
drugs.
    I believe promoting domestic manufacturing and building a 
trusted network of allied trading partners in the 
pharmaceutical sector will promote alternate sources for Active 
Pharmaceutical Ingredients and encourage resilience in 
pharmaceutical and medical goods supply chains, which is why I 
introduced the Medical Supply Chain Resilience Act with 
Congressman Brad Schneider and Senator Tom Carper and Thom 
Tillis. This legislation will create strong supply chains for 
medical goods and services between the United States and key 
allies and partners around the world.
    Having said that, you know, we asked so many different 
questions. And actually, we ended up asking double and triple, 
the same questions from these members. And I am one of the 
ending part of these members. So, instead of that, I am asking 
you any questions. If you can give any additional advice to 
this committee that what we can do, make sure that we can have 
enough drug supplies. And you tell us, because bottom line is 
we need to stop this shortage of medications and, you know, 
pharmaceutical supplies.
    So whoever wants to tell us and give us more advice that 
you missed it, then I am just welcoming that.
    Yes.
    Dr. GRALOW. So I will start, just add a little information 
on a topic we haven't discussed in great detail. We have talked 
about these drug shortage lists that the FDA, that the American 
Society of Health-System Pharmacists put out, but, you know, 
right now, we have about 15 cancer drugs that are listed on 
these lists with very little additional data about why they are 
on the list. And I think it is a little bit of crying wolf.
    You know, you have these drugs on, and in the clinic we are 
not seeing the problem. And so it is like, oh, yes, it is on 
this list, but it is not really in effect. If we understood why 
each one was on the list, I mean, you do know is it [sic] 
because one manufacturer went out of business, but what you 
don't know is, did they have 10 percent of the market or 90 
percent of the market? You do know if there is a quality issue, 
but you don't know where, when, how long they expect it will be 
fixed. And, without knowing that, we just look at the list and 
say, ho hum, we will just see what happens when we don't get 
our orders placed.
    So these lists are important, but this gets to--some of--it 
is the authority of the FDA to actually ask where you are 
getting your Active Pharmaceutical Ingredients, but what 
percentage you are getting from each place. They know they have 
to list all the places they might be getting it from because 
they are subject to having audits, but you don't know what 
percent they are getting from what. So I think more 
transparency around how drugs make it to the list, with 
explanation and estimated timeframes could be incredibly 
helpful.
    It doesn't solve the economic and market problem, but it 
helps with the early detection.
    Mrs. STEEL. I think Dr. Schondelmeyer was talking about 
that, too, that transparency, and then where these drugs came 
from, where they are manufacturing, and how they are making, 
right?
    Mr. SCHONDELMEYER. Right. Just a quick comment on something 
that is happening in the marketplace.
    There is public-private cooperation to address drug 
shortages. There is a group that has been formed, a non-profit 
called End Drug Shortages Alliance. McKesson is a member, 
Civica is a member, the University of Minnesota and others are 
members, and there are over 200 hospital systems in the country 
that are members. And this group, as soon as we get any signal 
of a possible shortage, we try to dig and find out--we have a 
rapid response team that tries to find out the details of what 
is going on, everything we can, and then publish that so we can 
deal with the shortage more effectively.
    I will say FDA has been somewhat cooperative, but FDA has 
said they can't officially share information with us or said on 
that rapid response team. And so, if you could find ways to 
authorize FDA to share with this public-private partnership to 
address shortages as they are happening, we could be much more 
effective in what we do.
    Mrs. STEEL. Thank you so much. Actually, my time is up.
    Thank you, I yield back.
    Mr. SMITH of Nebraska. Thank you.
    Mr. Beyer, you are recognized for five minutes.
    Mr. BEYER. Mr. Chairman, thank you very much, and thank you 
all for being here.
    Drug shortages are not a new problem. We saw the impact 
very clearly after Hurricane Maria hit Puerto Rico. We were 
able to see it more clearly during the pandemic, when demand 
for certain drugs like ADHD medicine surged. I have engaged 
with it many times. When children's Tylenol was scarce, Raul 
Grijalva and I led an inquiry to see if the administration 
could take action. And, on ADHD medicine, Abigail Spanberger 
has been leading the charge.
    The key issue with drug shortages is understanding where in 
the supply chain is the issue. Constituents complain to us, 
thinking the issue often lies with the Drug Enforcement 
Administration, when, unfortunately, we have continually found 
that the issue lies with the drug manufacturers themselves.
    I would like to submit a letter to the record on--from the 
DEA. This letter, dated November 1, 2023, states, ``DEA does 
not manufacture drugs and cannot require a pharmaceutical 
company to make a drug, make more of a drug, or change the 
distribution of a drug.'' It also states, for amphetamine 
medications like Adderall, ``Our data shows that in 2022 
manufacturers did not produce the full amount that the limits 
permitted them to make, resulting in a shortfall of 1 billion 
doses that could have been produced, but were not shipped. And 
the data for 2023 has shown a similar trend.'' The letter then 
proceeds to indicate the actions DEA has taken, like requiring 
drug manufacturers to submit their anticipated production 
timelines.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    I want to give credit to the Energy and Commerce Committee. 
This is where the leadership has been helpful. In addressing 
the black box of the pharmaceutical supply chain, 
Representative Anna Eshoo has been leading on this issue with 
several bills, including the Drug Origin Transparency Act, 
which, if this Congress is serious about this, should pass into 
law. We have also seen the importance of the need for more 
resilient supply chains.
    So, Dr. Ballreich, in your testimony, you talk about how 
India and China produce most of the raw material for drugs. If 
one of those countries has an issue, be it a quality control 
issue, another virus, or a hurricane, we immediately see the 
impacts. Thanks to Congress appropriating money to BARDA, BCU 
and Flow were able to establish domestic manufacturing of 
vulnerable pharmaceutical ingredients.
    Flow is also building the United States''s first strategic 
Active Pharmaceutical Ingredients Reserve, a long-term national 
stockpile to secure key ingredients used to manufacture the 
most essential medicines on U.S. soil, reducing America's 
dependency on foreign nations to supply its drug chain. Dr. 
Ballreich, can you speak to the importance of continuing such 
an effort?
    Mr. BALLREICH. Absolutely, and a really great question.
    This, you know, drug shortage, it is a national security 
issue, it is a health issue. So I think very direct efforts by 
government to support things such as Flow to develop an API 
stockpile, it is part of the solution package.
    You know, we could talk about--and we have--the economics 
to increase incentives for companies to invest in their supply 
chain to build out resiliency. We talked about onshoring, 
manufacturing. All of that, I think, is also part of the 
solution. But having a stockpile--because inevitably, you know, 
look what happened in Puerto Rico. That is a U.S. territory. 
You know, we had a lot of concentration of manufacturing there, 
and we still experienced a shortage of several important 
medicines, including injectable azithromycin. So I think 
efforts to develop a stockpile is very important.
    The buffer stocks--you know, CMS proposed a change to the 
inpatient prospective payment system that incentivized the 
build-up of buffer stocks, but they were only looking at three 
months. The average shortage is over 200 days long. So, if we 
really want to make sure we have our bases covered, I think we 
need to start thinking about six months, and we really need to 
prioritize essential medicines, you know.
    Mr. BEYER. Thank you.
    Very quickly, Dr. Gralow, the Biden Administration has 
taken numerous steps to address drug shortages: the supply 
chain coordinator, HHS, investments in BARDA, numerous actions 
at the FDA. Of the things they have done, which do you think 
are most promising, or what should be the next step?
    Dr. GRALOW. I think, frankly, what is most promising is the 
attention that they have helped bring to the problem. Not one 
specific action, but, you know, this has been ongoing for over 
a decade. I think the depth of the problem, the Biden 
Administration's interest in cancer has now brought this to the 
forefront, where you are having hearings like this so that 
knowledge, that education, that discussion and dialogue is what 
I really think is the most important thing that has happened, 
and that we will now maybe be able to fix a problem that has 
been going on for more than a decade.
    Mr. BEYER. Okay, thank you very much.
    Mr. Chairman, I yield back.
    Mr. SMITH of Nebraska. Thank you. I now recognize Mr. 
Arrington for five minutes.
    Mr. ARRINGTON. Well, thank you, Chairman. Thanks to the 
panelists.
    It is quite stunning to read how many drugs are on the list 
of drug shortages for this--the greatest nation in human 
history. To think that for over 20 years we have had 50 drugs 
added to that--there were some good things that came out of 
COVID, one of them being the revelation of our dependance on 
China and other foreign countries like Taiwan with respect to 
computer chips. This supply chain dependency on materials, 
products that have tremendous import to the safety and security 
of the country is something I suspect both sides agree is 
alarming, and I don't think we have done enough. We are doing--
we are digging into it now.
    I mean, I am a free market guy. I think too often we think 
government is the solution, and I think all too often when we 
do, and create some government strategy, it can result in a 
worse scenario, or certainly more ill effects--unintended, but 
nevertheless more problems--than we started with.
    I am shocked by the data that suggests that 86 percent of 
surveyed cancer centers report experiencing drug shortages. I 
am surprised that the pharmacists, the retail community 
pharmacists in west Texas, estimate that 40 to 50 percent of 
their daily calls are people from across west Texas asking 
about medication that they just don't have access to. Forty to 
fifty percent of the calls?
    A pharmacist in Abilene, Texas recently informed my office 
that, of the 10 medications he dispenses, the most, 60 percent, 
were made in China. Furthermore, we were informed that over 
half the medications he carries in his pharmacy were made in 
China. This same pharmacist, who also compounds specialized 
medication for his patients, estimated that out of 100 pure 
ingredients on the shelves in their lab, 90 of them were made 
in China. And I could go on and on.
    So I would hope there is no debate about the problem. Now, 
we have to figure out the solution. Let me orient around market 
forces and the--or the lack thereof that should provide best 
value to the customer, to our patients here in the country. I 
understand there are unfair trade practices that need to be 
addressed, but let's just talk about the dials that we have 
control over here with respect to tax regulations. And tell me, 
from--and other policy interventions that--tell me what the 
most--the central perverse incentives to the current system 
that yield this problem of drug shortages.
    Again, I know it is bigger and broader, but what would you 
say are the top two, and just go down the list, perverse 
incentives that need to be addressed and adjusted so that we 
can maximize the competitive forces and the best value and 
reduce that shortage while giving folks, you know, the best 
value, low-cost access to drugs?
    So just give me one or two--we control--perverse incentives 
to address, starting with the gentleman at this end of the 
table.
    Mr. BALLREICH. Yes, absolutely. Right now, generics, they 
compete on low price. So, if you sell a pill for $0.10 a pill 
and a competitor comes in at $0.09 a pill, they are going to 
take your entire market share. There is no--you know, there is 
this drive for the lowest price.
    And the result of that is, after 4 years of a generic 
company entering a specific market for that product, after 4 
years, 50 percent of them will leave. You know, so it is--we 
are competing solely on price. We are not thinking about 
incentives for that company's supply chain. That company has a 
perverse incentive to cut corners, to try to drive down that 
lowest price. So it means moving your company, you know, your 
manufacturing facility to India or China, and----
    Mr. ARRINGTON. Okay. With 10 seconds, since----
    Mr. BALLREICH. Sorry, yes, sorry.
    Mr. ARRINGTON. That is okay. I just--do you all agree, the 
rest of the panelists, that there is--you should just kind of 
shake your head yes or no. Do you agree?
    Okay. Well, it seems like we ought to be able to focus on 
at least that together to address it. And we can talk about the 
solutions later. But I appreciate all that you guys are doing 
to give--lend your counsel and insight to us so we can have a 
more resilient supply chain and better and more secure future.
    Thank you, Mr. Chairman.
    Mr. SMITH of Nebraska. Thank you. I now recognize Mr. 
Smucker for five minutes.
    Mr. SMUCKER. Thank you, Mr. Chairman, and thank you to our 
witnesses for being here today. I am glad that we are diving 
into this issue of drug shortages, which, as we have heard from 
you and have--we have heard from our constituents, really 
impact every community, certainly impact millions of patients 
across the country.
    I can tell you in my congressional district--I represent a 
district in Pennsylvania--our hospitals are regularly telling 
me they are monitoring lists of critical drugs, comprehensive 
lists of critical drugs that are in shortage, and they are 
worried--there are new additions to that every single day. They 
are taking proactive steps to guard against this. One hospital 
system with a presence in my district has told me about 
instituting a weekly meeting in which its pharmacy team members 
are developing strategies to combat these shortages and 
mitigate the impact on patients.
    And I think what one of the things I am hearing from you 
today--and I heard it from Mr. Arrington's questions now--drug 
shortages are largely a function of it being sort of an 
economic problem, certainly most prevalent, as you have said, 
among low-cost Generic Sterile Injectable drugs, mostly, or 
GSIs, which, of course, are a staple of hospital care.
    And so I think what I have heard you say is we are seeing 
market pressures--reimbursement mechanisms, maybe more than 
anything--that are creating this environment, sort of cost-
cutting environment which forces GSI manufacturers to produce 
the drugs. Maybe you could call it a race to the bottom. They 
are producing drugs at the thinnest margins possible, sometimes 
at a loss, which creates a great deal of instability in the 
market, which--and to the detriment of patients, if that is 
true.
    So we really should be pursuing policies that encourage 
market stabilization, encourage quality assurance. So I would 
just like to ask our witnesses a bit more on these topics.
    Mr. Cavacini--and I don't know if I pronounced that 
correct, but we know, of course, the GSIs require very precise 
manufacturing, as they are injected directly into the 
bloodstream. And when there is very little return of--to 
reinvest in the quality of the facilities, we have seen 
problems that can occur. Recent FDA data shows that 62 percent 
of shortages can be attributed to quality issues, and I would 
like you to just talk about that a little bit.
    Can you explain the difficulties of balancing contract 
demands geared towards lowest price with the need for quality 
when purchasing the drugs?
    And how could we change--to the previous question, how 
could we change the system to drive the right incentives?
    Mr. CAVACINI. Thank you for the question. I appreciate the 
opportunity, and I think we have talked a lot about today, you 
know, how we might be able to strengthen the system, bolster 
supply, and bring economic stability to markets. I think it is 
important. And you mentioned reimbursement opportunities. We 
have talked a little bit about today how we might incent, 
through differential reimbursement, providers to choose 
products on dynamics other than price.
    I think there are also some barriers in the system that 
prevent generic markets from returning to normal economic 
forces. There are barriers that prevent generic manufacturers 
from raising prices. When things are in short supply, when 
their costs of input go up, when manufacturing costs change, 
they are often capped on if they can raise price. And, since 
they can't, they might choose to exit, which can cause a 
shortage.
    So we have put forth a policy recommendation, and would ask 
the committee to consider, you know, where those barriers 
exist, maybe in the Medicare drug rebate cap or possibly in the 
Inflation Reduction Act, which does include some carve-out for 
drugs in shortage. But I think clarifying and codifying that in 
the regulation would be steps to consider.
    Mr. SMUCKER. Thank you.
    Mr. Coukell, you have talked about in your organization 
contracts are structured differently at times from a typical 
group purchasing organization. Is it more appropriate sometimes 
to structure a long-term contract versus short-term?
    Mr. COUKELL. Thank you for that question. Yes, if we want a 
manufacturer to stick around, then we have to give them some 
reason to believe that there is a long term. And so, if you 
enter a contract but you don't know that tomorrow somebody is 
going to come along and say, ``Sorry, somebody beat your price 
and we are shifting our volume,'' then you don't have much 
incentive to stay in there. Whereas, if you can enter a 
contract and know that I have got a predictable volume for five 
years, then you can make a commitment to stay in the market for 
that long. And so that is why we contract in that way.
    Mr. SMUCKER. Thank you. I am out of time.
    Thank you, Mr. Chairman.
    Mr. CAREY [presiding]. The chair now recognizes Mr. 
Panetta.
    You are now recognized for five minutes.
    Mr. PANETTA. Thank you, Mr. Chairman.
    Mr. CAREY. And only five minutes.
    Mr. PANETTA. Understood. Trust me, they want it less than 
five minutes, I get it.
    But what I say by that is thank you to all the witnesses, 
for being here for such a long amount of time, but, more 
importantly, answering some very important questions.
    Obviously, thanks to Chairman Smith and Ranking Member Neal 
for holding this hearing, which I think we can all agree, as we 
have heard today, is long overdue. And I say that based on the 
fact that my constituents in the 19th congressional district of 
California have been telling me for quite some time now about 
the shortage of cancer drugs.
    And I think we can all agree that nobody, after receiving a 
cancer diagnosis, should then face the indignity of learning 
that our health system can't even provide the basic generic 
drugs to help them fight their disease. That is why I 
appreciate the bipartisan attention that this issue is 
receiving, that this hearing is attracting, and look forward to 
finding solutions for all of our constituents, not just in my 
district but across the country.
    Now, in this committee, I have repeatedly raised the issue 
of the costs that are stretching the providers in my district, 
and the impact it is having on care. And, Dr. Schondelmeyer, 
you hit on this in your testimony when you talked about the 
measurable cost for everyone when providers face a drug 
shortage. You mentioned how some of the effects on our--some of 
the effects can be on our health systems, like having to hire 
and train more staff, patients who face new emergency room 
visits or even hospitalization. And you mentioned how the 
broader health system suffers. And, in some cases, patients may 
even need to switch from a generic to a much more expensive, 
brand-name drug.
    I guess my question to you, Doctor, is in what ways is this 
the case in the current cancer drug shortage?
    And then, two, what is the economic and opportunity cost 
for providers and patients when drug distribution breaks down?
    Mr. SCHONDELMEYER. Well, thank you for that question, Mr. 
Panetta.
    With cancer drugs, as there are with most drug shortages, 
there are costs clinically to the patient. They may not do as 
well with an alternative drug. Usually, the therapeutic 
protocols we use for cancer are carefully designed to use the 
optimum drug and the optimum doses. But when that is not 
available, then we have to look at alternatives. And we haven't 
necessarily done detailed studies on all of the alternatives 
and where they fit in, or we haven't constructed peer review 
panels to tell us what the optimal alternative therapy is. So 
patients suffer and providers have to make decisions with less 
information than they are used to.
    But the health systems also--I am aware of a number of 
hospital systems around the country that have had to hire a 
pharmacist just to manage drug shortages, and that is an added 
cost that we don't see covered anywhere. It is not covered by 
Medicare, it is not covered by Medicaid, but it is a cost to 
the health system.
    So there are a number of costs, both clinically and 
economically, in the system that we aren't managing. But they 
are there, we are spending the money, we are just not getting 
good value for it.
    Mr. PANETTA. Great. Thank you for that summary. Now, I want 
to kind of piggyback on what the chairman of the Budget 
Committee, my good friend, Mr. Arrington, talked about with 
kind of the global supply chain, especially when it comes to 
Active Pharmaceutical Ingredient supply issues.
    Now, Mr. Cavacini, excuse my friend from Pennsylvania. But 
obviously, as an Italian heritage, I understand how to say your 
name. [Laughter.]
    Mr. PANETTA. In your testimony, you talk about the steps 
that your company takes to oversee its supply chain and build 
redundancies, but that distributors--and I quote--
``distributors have limited insight and even less control over 
upstream issues.''
    You also talked about the productive work between private 
companies and the Federal Government to increase supply chain 
oversight. So does your company support that type of supply 
chain transparency work, and what other tools can Congress 
consider when it comes to supply chain oversight?
    Mr. CAVACINI. Thank you. Thank you for the question and the 
pronunciation. My grandfather will be proud.
    Mr. PANETTA. So would mine.
    Mr. CAVACINI. We do support, and we think access to 
information--good information to make good sourcing decisions 
and provide good information to our downstream partners. We 
heard the doctor talk about when he doesn't know when it is 
going to end, he doesn't know how to manage. So that visibility 
up and down is important.
    We work with many manufacturer partners that share the same 
vision that we do and that are open and share their production 
facilities, their sources. But there are some that don't. And, 
quite candidly, I understand why those could be competitive 
reasons. But I think increasing that transparency and helping 
us all have visibility to where the drugs are made and the 
manufacturing to assess vulnerabilities can lead to better 
decisions.
    But we need to be careful to not also incent additional 
potential bad behavior. The minute anybody finds out that 
something is at risk, their first reaction is to take care of 
themselves and their patients, and source additional supply 
that can further stress an already vulnerable supply chain. So 
making sure that our buffer stock programs are coordinated and 
centralized would be important considerations, as well.
    Mr. PANETTA. Great. Thank you. Thanks to all the witnesses.
    Mr. Chair, I yield back.
    Mr. CAREY. I thank the gentleman. Mr. Feenstra, you are now 
recognized for five minutes.
    Mr. FEENSTRA. Thank you, Mr. Chair, and I want to thank the 
witnesses for being here. This is a serious issue, and you guys 
all understand it, so I am very grateful.
    So I am from rural Iowa, and the number-one issue that I 
hear in my 36-county tour is the concern about health care. 
Because in my district, men and women families are traveling 50 
to 75 miles for care. I mean, it is very significant. And the 
biggest issue that I am hearing is the shortage, ranging from 
IV fluids to seizure medications, chemotherapy drugs.
    And it is such a delicate balance. You have the rural 
hospitals, you have your pharmacies, you have your federally-
qualified health centers, your critical access hospitals. And 
so they all play this great role. So my question is in the 
critical access hospitals we are seeing that patients that are 
seeing their oncologists, they don't--they can't get the drug, 
or there is a waiting time for the drug. So they are spending 
days before that drug gets to them.
    Dr. Schleicher, can you talk about this?
    Obviously, you are from Tennessee. What is your perspective 
on this shortage in rural centers, and how can we remedy that?
    Dr. SCHLEICHER. Yes, thank you. Thank you very much for the 
question.
    I will say, too, a lot of rural hospitals like critical 
access hospitals aren't incentivized to even provide oncology 
services because they are kind of reimbursed cost plus one 
percent. So that is already an issue with hospitals in rural 
areas being able to deliver this care, which is a separate 
discussion.
    A lot of the hospitals we are seeing deliver care, at least 
in our area, are the 340B hospitals, which are largely urban 
based.
    Mr. FEENSTRA. That is right. And that is what mine are, 
right----
    Dr. SCHLEICHER. So----
    Mr. FEENSTRA [continuing]. 340B hospitals.
    Dr. SCHLEICHER. Exactly. So leaving for--at least I can 
speak for Tennessee. Most rural care is done in small, 
community clinics, of which we provide about 50 percent across 
the state.
    One of the large hospitals in urban Tennessee did not have 
near the same shortage we had. I will say they were great 
partners. We communicated, they helped us with recommendations. 
But our patients live an hour-and-a-half from Nashville and 
were not driving downtown.
    Mr. FEENSTRA. That is right.
    Dr. SCHLEICHER. And they couldn't really share a drug with 
us, either, because everybody wanted to hold on to their own. 
So there was a huge discrepancy of where the shortage was, 
based off the type of hospital and the size, leaving, at least 
in Tennessee, the big gaps in care in rural.
    I will also add that, again, I had mentioned that some of 
the hospitals that had the most supply also were the ones that 
don't take a lot of insurances in the outpatient.
    Mr. FEENSTRA. That is right.
    Dr. SCHLEICHER. So we were seeing uninsured and local 
patients----
    Mr. FEENSTRA. Yes.
    Dr. SCHLEICHER [continuing]. And we were out of drug--way 
more severe than some of our hospital counterparts. Not their 
fault, of course, but it shows the system does have inherent 
discrepancies, and I think rural was effaced way heavier.
    Mr. FEENSTRA. So do you have any solutions, or how do we 
address this gap?
    I mean, do you have any--I am a solutions-oriented guy. I 
am trying to figure this out. What can we do?
    Dr. SCHLEICHER. So, with this--at least what we dealt with, 
with cis and carboplatin, it was one amount of drug, period. We 
tried to stockpile ourselves because we saw it coming. And, 
even with months of as much as we could, we just simply ran 
out. So there was a net--just there wasn't enough supply.
    And there were, obviously, issues in terms of where the 
supply went, which is why when people talk about stockpiling, 
maybe doing it more upstream, so with some transparency so we 
figure out patients who need it get it, versus just assuming 
some side of care needs it.
    Mr. FEENSTRA. Got you.
    Dr. SCHLEICHER. And then one other thing that is not this, 
but I can't help but mention, is the ability to ship drugs 
right now, which we are unable to do, really affects our rural 
patients who also live an hour away, and we are unable to ship 
drugs to their homes anymore.
    Mr. FEENSTRA. Yes, thank you. And this is--so Congresswoman 
Beth Van Duyne is not here, and she has a McKesson facility in 
her--in north Texas, and so I wanted to ask Mr. Cavacini.
    Her question is, is there a sufficient early warning signal 
to alert others to the potential of a potential drug shortage?
    And is there a way that we have enough time, or a timely 
manner to do this in an appropriate way?
    Mr. CAVACINI. Thank you. And I believe our U.S. 
headquarters is in Congresswoman Van Duyne's district.
    Mr. FEENSTRA. That is what she said.
    Mr. CAVACINI. Yes. As we heard from the panel today, there 
is not a centralized, standardized system or early warning 
system. There is a lot of information, public and private, and 
people are working to get at--the answers to the questions that 
you ask.
    But, you know, drug shortages are unique. There are some 
that are very predictable, unfortunately, and there are others 
that aren't. So I think keeping an eye on multifaceted 
solutions to this complex problem is one that is important.
    Mr. FEENSTRA. Good, thank you.
    And, finally--and I don't have time for this, Dr. 
Schondelmeyer, but I am working on a study to analyze the 
supply chain when it comes to our drugs. And to me, this is 
very significant because a lot of the underlying ingredients 
come from China, especially when it comes to electronic devices 
and stuff.
    I know you talked about this in your research, but I would 
love to get in contact with you. and work with you on a policy 
or legislation that we could address this.
    Thank you, and I yield back.
    Mr. CAREY. I thank the gentleman. Ms. Malliotakis, you are 
now recognized for five minutes.
    Ms. MALLIOTAKIS. Thank you. Well, thank you guys so much 
for being--for this entire hearing. I know it is difficult to 
sit for a long period of time and answer all these questions 
from Members of Congress.
    But I really appreciate you actually giving us a lot of 
insight and ideas of how we can address this issue, because I, 
like my colleagues, are very concerned with the fact that China 
and India provide the APIs that account for roughly 60 to 70 
percent of our generic drugs here in the United States, and 
anything can happen at any time, as we saw with COVID, and that 
would leave our population very vulnerable if they are in need 
of medication they can't seem to reach.
    And it seems almost illogical and odd and scary that a 
country like the United States would be in this position, where 
we are already seeing a shortage of roughly 250 drugs. I just 
had a couple of questions.
    I assume China and India, they provide programs and they 
incentivize and they subsidize their API manufacturing. So how 
does the United States compete with countries that subsidize a 
large, significant--the production of these particular drugs?
    Dr. Schondelmeyer, if you could, respond.
    Mr. SCHONDELMEYER. Well, we may have to compete by 
subsidizing and incentivizing equivalently so we can bring 
manufacturers into the U.S. space or near-shored manufacturers 
that can do those same things. So we may have to compete by 
using the same techniques they do, but do it better.
    Ms. MALLIOTAKIS. Okay. So how do we incentivize domestic 
generic drug manufacturing, though, without exacerbating 
existing drug shortages or creating disturbances in the supply 
chain?
    Mr. SCHONDELMEYER. Well, I think that the Flow example, 
BARDA identified 25 critical acute drugs that--many of them are 
cancer drugs, and many of them are sterile injectables we have 
been talking about, and BARDA has funded them to develop API 
stockpiles of those drugs. So that will fill in some shortages 
that we might expect in the near future.
    But we have to realize this is--that one act in 25 drugs 
doesn't solve the problem when there are 250 drugs, and there 
are new drugs all the time. So we can't just--this is not just 
a whack-a-mole process. We can keep whacking the moles, but we 
have got to do something to avoid whacking the moles, and get 
behind the problem, and solve it in a bigger scheme. With that, 
we could identify a broad spectrum, 400 or 500 drugs that need 
to be produced and available in the U.S. market.
    Ms. MALLIOTAKIS. Yes.
    Mr. COUKELL. This is actually an area where the current 
administration and the prior administration have issued very 
similar executive orders and directives, which is a good thing. 
There is at a high-level, I think, bipartisan agreement on 
where we need to go.
    There is now, within the Administration for Strategic 
Preparedness and Response, ASPR, an office focused on 
industrial base manufacturing. And there is a presidential 
directive charging them with looking at domestic manufacturing 
and drug shortages. They have a lot of authorities now, but 
what they do need is some budget to be able to take steps.
    Ms. MALLIOTAKIS. Yes, and, I mean, I think one interesting 
idea would be looking at areas like like Guam, for example, 
Puerto Rico, places that can certainly use that type of 
investment, and I think--we talk about near-shoring and friend-
shoring. Why not do it in these U.S. areas? I mean, that would 
even be better, right?
    Onshoring, I think, is the way to go. And do you--what 
changes to the tax code would you recommend to try to onshore 
some of this manufacturing?
    And I was thinking possibly we can look at the opportunity 
zones as an area to kind of tie something together there that 
could perhaps allow for this and also create jobs in areas that 
need it in the process.
    Mr. SCHONDELMEYER. Well, certainly, Puerto Rico has a large 
pharmaceutical industry that was created, like, three decades 
ago, and there are a lot of tax incentives and other things 
that helped support and create that. And it was very effective 
for a time.
    Now many of those facilities are older, not necessarily up 
to date, need to be regenerated. But we could look at what we 
did in the past to create the Puerto Rican pharmaceutical 
industry and say, how can we, with modern techniques and with 
advanced manufacturing and continuous flow and other things, 
how can we redo that to bring them to Puerto Rico or Guam or to 
the American Samoas or, you know, other places?
    And I would point out I support fully onshoring, but 
onshoring alone is not sufficient. We do need some redundancy 
in multiple places. Because remember, we also had the problem 
of Puerto Rico. When a hurricane hit the place, it wiped out a 
lot of our large volume parenteral production, and the U.S. had 
a shortage because we had it all concentrated in one place.
    Ms. MALLIOTAKIS. Well, thank you very much. I mean, 
certainly we agree on that. But friend-shoring is an important 
one, right? I think relying on Communist China for a large 
portion of our APIs is not wise, particularly right now.
    So thank you for your time.
    Mr. CAREY. Okay. Mr. Gomez, you are now recognized for five 
minutes.
    Mr. GOMEZ. Thank you so much.
    First, it is great to be back on this committee. Ways and 
Means is not only just a prestigious committee, but it actively 
plays a role on so many issues that my district cares about, 
everything from, of course, drug pricing, but to child care, 
child tax credit, housing, you name it. So I am very excited to 
be back on the committee and to have an opportunity to ask our 
distinguished panel some questions.
    And of course, this issue of drug prices, drug shortages is 
nothing new in the United States. But we often get--we often in 
this building and across the country like to be in the blame 
game. Who is at fault for the high drug prices? And we don't 
always have a holistic view of what we are dealing with. And it 
is very much, you know, if it is not the drug companies, it is 
the PBMs. If it is not the PBMs, it is the insurance companies. 
If it is not the insurance companies, right, it is the patient 
themselves. So a lot of folks like to place blame.
    But--so I think this is a timely hearing to deal with this 
issue, and I am glad that this committee has taken some steps 
in the past when it came to, like, monthly--capping the monthly 
cost of insulin for Medicare beneficiaries, limit Part D out-
of-pocket costs, and allow Medicare to negotiate drug prices 
for the first time ever. And those were big accomplishments, 
but I know that there is a lot more to do.
    I come from California, so I want to ask a specific 
California question. Mr. Coukell, your company is partnering 
with my state of California to manufacture low-cost insulin. 
Can you speak to how this agreement will address both shortages 
and the high cost of insulin facing patients?
    Mr. COUKELL. Thank you for that question, sir.
    Our focus on insulin is really focused on saving money for 
the consumer at the pharmacy counter, not so much on shortages, 
which tends--has not been a problem in this space so far. But 
we are developing three biosimilar insulins, the ones that 
account for about 80 percent of insulin use in the U.S., and we 
intend to make them available at the lowest sustainable cost 
and without all of the high-list prices and rebates that can 
distort the market. They will be available at a low and 
transparent price.
    But it takes a substantial investment to bring those to 
market, and that is where the partnership with the State of 
California is extremely important, because California has--we 
have partnered with California, and they have contributed a 
substantial amount of funds towards developing these products 
and bringing them to market.
    Mr. GOMEZ. Do you see that investments are sufficient 
enough to be able to have an impact on the market, or is it 
just the first step, is it just the beginning?
    Mr. COUKELL. We will be able to supply a substantial share 
of the market, if needed. As a mission-driven non-profit, we 
always say, though, our goal is market impact, not market 
share. So we want everyone in the country to have access to 
affordable insulin if they need it.
    Mr. GOMEZ. And can this agreement serve as a model for 
ensuring a steady supply of generic medications while bringing 
down costs?
    Mr. COUKELL. I think it can. You know, it does--developing 
drugs, even generic drugs, is capital intensive. And so these 
kinds of partnerships can help us and other organizations do 
more and bring--make drugs available on a public interest 
basis.
    Mr. GOMEZ. Well, I appreciate the testimony of this 
committee. I am going to have to run back and catch up on my 
votes.
    One of the things about being the, I guess, the most junior 
member, I don't have a lot of time. So with that I yield back, 
Mr. Chairman.
    Mr. CAREY. Okay, I thank the gentleman. I want to thank the 
chairman and the ranking member for this hearing. I would also 
like to thank our witnesses for appearing before us today.
    Please be advised that members have two weeks to submit 
written questions to be answered later in writing, which I will 
be submitting to you since I have to run to vote. Those 
questions and your answers will be made part of the formal 
record.
    With that, the committee now stands adjourned.
    [Whereupon, at 2:04 p.m., the committee was adjourned.]
      

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