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



                EXAMINING THE ROOT CAUSES OF DRUG SHORT-
                   AGES:  CHALLENGES  IN  PHARMACEUTICAL 
                   DRUG SUPPLY CHAINS

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

                                HEARING

                               BEFORE THE

                      SUBCOMMITTEE ON OVERSIGHT AND 
                             INVESTIGATIONS

                                 OF THE

                         COMMITTEE ON ENERGY AND 
                                COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION
                               __________

                              MAY 11, 2023
                               __________

                           Serial No. 118-35 
                           
                           
                           
                           
              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

              


     Published for the use of the Committee on Energy and Commerce

                   govinfo.gov/committee/house-energy
                        energycommerce.house.gov 
                                 ______

                   U.S. GOVERNMENT PUBLISHING OFFICE

55-967 PDF                 WASHINGTON : 2024 
















                    COMMITTEE ON ENERGY AND COMMERCE

                   CATHY McMORRIS RODGERS, Washington
                                  Chair
MICHAEL C. BURGESS, Texas            FRANK PALLONE, Jr., New Jersey
ROBERT E. LATTA, Ohio                  Ranking Member
BRETT GUTHRIE, Kentucky              ANNA G. ESHOO, California
H. MORGAN GRIFFITH, Virginia         DIANA DeGETTE, Colorado
GUS M. BILIRAKIS, Florida            JAN SCHAKOWSKY, Illinois
BILL JOHNSON, Ohio                   DORIS O. MATSUI, California
LARRY BUCSHON, Indiana               KATHY CASTOR, Florida
RICHARD HUDSON, North Carolina       JOHN P. SARBANES, Maryland
TIM WALBERG, Michigan                PAUL TONKO, New York
EARL L. ``BUDDY'' CARTER, Georgia    YVETTE D. CLARKE, New York
JEFF DUNCAN, South Carolina          TONY CARDENAS, California
GARY J. PALMER, Alabama              RAUL RUIZ, California
NEAL P. DUNN, Florida                SCOTT H. PETERS, California
JOHN R. CURTIS, Utah                 DEBBIE DINGELL, Michigan
DEBBBIE LESKO, Arizona               MARC A. VEASEY, Texas
GREG PENCE, Indiana                  ANN M. KUSTER, New Hampshire
DAN CRENSHAW, Texas                  ROBIN L. KELLY, Illinois
JOHN JOYCE, Pennsylvania             NANETTE DIAZ BARRAGAN, California
KELLY ARMSTRONG, North Dakota, Vice  LISA BLUNT ROCHESTER, Delaware
  Chair                            DARREN SOTO, Florida
RANDY K. WEBER, Sr., Texas           ANGIE CRAIG, Minnesota
RICK W. ALLEN, Georgia               KIM SCHRIER, Washington
TROY BALDERSON, Ohio                 LORI TRAHAN, Massachusetts
RUSS FULCHER, Idaho                  LIZZIE FLETCHER, Texas
AUGUST PFLUGER, Texas
DIANA HARSHBARGER, Tennessee
MARIANNETTE MILLER-MEEKS, Iowa
KAT CAMMACK, Florida
JAY OBERNOLTE, California
                                 ------                                

                           Professional Staff

                      NATE HODSON, Staff Director
                   SARAH BURKE, Deputy Staff Director
               TIFFANY GUARASCIO, Minority Staff Director 
               
               
               
               
               
               
               
           
               
               
               
              Subcommittee on Oversight and Investigations

                      H. MORGAN GRIFFITH, Virginia
                                 Chairman
MICHAEL C. BURGESS, Texas            KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky                Ranking Member
JEFF DUNCAN, South Carolina          DIANA DeGETTE, Colorado
GARY J. PALMER, Alabama              JAN SCHAKOWSKY, Illinois
DEBBIE LESKO, Arizona, Vice Chair    PAUL TONKO, New York
DAN CRENSHAW, Texas                  RAUL RUIZ, California
KELLY ARMSTRONG, North Dakota        SCOTT H. PETERS, California
KAT CAMMACK, Florida                 FRANK PALLONE, Jr., New Jersey (ex 
CATHY McMORRIS RODGERS, Washington     officio)
  (ex officio) 
  
  
  
  
  
  
  
  
  
                             C O N T E N T S

                               ----------                              
                                                                   Page
Hon. H. Morgan Griffith, a Representative in Congress from the 
  Commonwealth of Virginia, opening statement....................     1
    Prepared statement...........................................     4
Hon. Kathy Castor, a Representative in Congress from the State of 
  Florida, opening statement.....................................    10
    Prepared statement...........................................    12
Hon. Cathy McMorris Rodgers, a Representative in Congress from 
  the State of Washington, opening statement.....................    14
    Prepared statement...........................................    16
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................    19
    Prepared statement...........................................    21

                               Witnesses

Alex Oshmyansky, M.D., Ph.D., Chief Executive Officer/Founder, 
  Mark Cuban Cost Plus Drug Company..............................    24
    Prepared statement...........................................    26
Anthony Sardella, Chair, API Innovation Center, and Adjunct 
  Professor and Senior Research Advisor, Center for Analytics and 
  Business Insights, Washington University in St. Louis..........    35
    Prepared statement...........................................    37
Laura Bray, Founder and Chief Change Maker, Angels for Change....    44
    Prepared statement...........................................    46
Fernando J. Muzzio, Ph.D., Distinguished Professor of Chemical 
  and Biochemical Engineering and Director, NSF Engineering 
  Research Center on Structured Organic Particulate Systems, 
  Rutgers University.............................................    58
    Prepared statement...........................................    60

 
                   EXAMINING THE ROOT CAUSES OF DRUG 
                    SHORTAGES: CHALLENGES IN PHARMA-
                    CEUTICAL DRUG SUPPLY CHAINS

                              ----------                              

                         THURSDAY, MAY 11, 2023

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:30 a.m. in 
the John D. Dingell Room 2123, Rayburn House Office Building, 
Hon. Morgan Griffith (chairman of the subcommittee) presiding.
    Members present: Representatives Griffith, Duncan, Palmer, 
Lesko, Crenshaw, Rodgers (ex officio), Castor (subcommittee 
ranking member), Schakowsky, Tonko, Ruiz, Peters, and Pallone 
(ex officio).
    Staff present: Kate Arey, Digital Director; Sean Brebbia, 
Chief Counsel, Oversight and Investigations; Lauren Eriksen, 
Clerk, Oversight and Investigations; Peter Kielty, General 
Counsel; Emily King, Member Services Director; Karli Plucker, 
Director of Operations (shared staff); Gavin Proffitt, 
Professional Staff Member; John Strom, Counsel, Oversight and 
Investigations; Michael Taggart, Policy Director; Joanne 
Thomas, Counsel, Oversight and Investigations; Austin Flack, 
Minority Junior Professional Staff Member; Waverly Gordon, 
Minority Deputy Staff Director and General Counsel; Tiffany 
Guarascio, Minority Staff Director; Liz Johns, Minority GAO 
Detailee; Will McAuliffe, Minority Chief Counsel, Oversight and 
Investigations; Christina Parisi, Minority Professional Staff 
Member; Greg Pugh, Minority Staff Assistant; Harry Samuels, 
Minority Oversight Counsel; Andrew Souvall, Minority Director 
of Communications, Outreach, and Member Services; and Caroline 
Wood, Minority Research Analyst.
    Mr. Griffith. The Subcommittee on Oversight and 
Investigations will now come to order.
    The Chair recognizes himself for 5 minutes for an opening 
statement.

OPENING STATEMENT OF HON. H. MORGAN GRIFFITH, A REPRESENTATIVE 
         IN CONGRESS FROM THE COMMONWEALTH OF VIRGINIA

    Good morning, and welcome to today's hearing. This 
morning's hearing will examine the very serious and growing 
problem of prescription drug shortages.
    Americans need more reliable access to lifesaving drugs. 
According to the American Society of Health-System Pharmacists, 
we currently have over 247 active drug shortages. Between 2021 
and 2022, drug shortages increased by almost 30 percent. It is 
unbelievable that in our great country there is a shortage of 
drugs to treat childhood cancer, and that is just one example. 
It is even more galling when you consider that most shortages 
are in the generic drug space, where there should be 
competition. The median price of a drug in shortage between 
2013 and 2017 was less than $9 per treatment dose.
    Generic drugs account for 90 percent of all prescriptions 
but only 17 percent of drug spending. Generics are perhaps the 
only significant segment of our healthcare industry where costs 
have not increased faster than inflation. The generic 
pharmaceutical industry is plagued with a myriad of issues 
leading to drug shortages.
    We have an economic environment so unappealing to 
manufacturers that lifesaving drugs are produced by one or, at 
most, two companies worldwide, often at unsustainably, 
artificially low prices. There is a broad consensus that the 
root cause of drug shortages is a profound market failure 
caused by economic forces unique to the drug market.
    Middlemen such as Pharmaceutical Benefit Managers, PBMs, or 
group purchasing organizations, GPOs, do not care to look for 
ways to mitigate shortages. By one count, for every $100 spent 
on a generic prescription drug, $44 goes not to the 
manufacturer, not to the producer, but to a middleman. The 
three largest Pharmaceutical Benefit Managers control around 80 
percent of the commercial drug sales.
    The 4 largest group purchasing organizations control 90 
percent of the medical supply market and have massive market 
power. They could help end drug shortages by prioritizing 
generic drugs' availability and quality. Instead, they use 
their market power to force a race-to-the-bottom pricing 
without consideration for quality or availability. Their 
contracts with generic drug manufacturers consist of a take-it-
or-leave-it approach, leaving the generic manufacturer with the 
option of either complying or losing access to the market. Many 
of them choose to lose that access and just go out of business.
    Over the past 10 years, the United States has seen dozens 
of generic drug manufacturing facilities close, and this 
shortage problem isn't limited to just closings. The typical 
generic drug has just two manufacturing facilities. We 
currently do not fully utilize the factories that we have. As 
Professor Sardella notes, we only use about half of our current 
generic manufacturing capabilities. We now have fewer 
manufacturing facilities both in the U.S. and globally, and our 
supply chain has proven to be fragile and vulnerable to 
disruption. Forty percent of generic drugs are made at a single 
facility, thus even a temporary shutdown of a single facility 
triggers a shortage.
    We are also far too dependent on foreign countries for 
generic drugs and active pharmaceutical ingredients, or API, 
especially China and India. Our dependance on China represents 
a serious national security risk. China's new interpretation of 
its national security law may actually make FDA's already 
anemic inspection program in that country a crime.
    As we are holding this hearing, FDA Commissioner Califf is 
appearing before our Health Subcommittee. All too often his 
agency has made drug shortages worse and left us more 
vulnerable. The FDA's response to shortages is to allow for 
foreign-made generics and API to come unfettered to the U.S. 
market. The FDA claims to be focused on collecting information, 
but it does not effectively use the information that it already 
has.
    We need an FDA that prioritizes applications from U.S. 
manufacturers and gives companies the flexibility to address 
shortages with resources based here. Solving drug shortages is 
going to require an all-of-the-above approach. Purchasers of 
generic drugs must incentivize quality and reliability in 
generic drugs, and we must always keep in mind the human toll 
of drug shortages.
    I look forward to hearing from our witnesses today, who are 
working in innovative ways to help solve drug shortages.
    I thank you all for being here, and I yield back.
    [The prepared statement of Mr. Griffith follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
     
    Mr. Griffith. I now recognize the gentlelady from Florida, 
Ms. Castor, ranking member of the subcommittee, for her 5-
minute opening statement.

  OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Ms. Castor. Well, thank you, Mr. Chairman, and thank you 
for calling this critical hearing on the root causes of drug 
shortages.
    These drug shortages are becoming more prevalent due to a 
warped marketplace. And as a witness, Professor Laura Bray, in 
her testimony stated, no patient should have to hear the words, 
``We do not have medicine to treat you.''
    Drug shortages in America are at a 5-year high. In 2022 we 
experienced a 30 percent jump in the number of drugs in 
shortage. FDA has documented 136 drugs on its shortage list, 
and healthcare providers suspect the actual number is far 
higher. These shortages can last years, and some critical drugs 
have been in shortage for over a decade. The impacts of these 
shortages on our neighbors receiving cancer care, children and 
their caregivers, are incredibly upsetting because when drugs 
are in short supply lifesaving care can be delayed, can be 
canceled, patients may be placed on medication that is less 
effective or more expensive.
    The cascading impacts of not receiving appropriate medicine 
can impair a person's ability to live a full life, to attend 
school, to work. Plus, it can lead to increased costs of care 
and more serious health complications like adverse drug 
reactions, increased hospitalizations, or even death.
    Children and their providers can be hit particularly hard 
by drug shortages. Children's hospitals often frantically 
respond to these shortages by scrambling for necessary and 
appropriate drugs. They have to devote additional staff time 
and resources to finding appropriate replacement drugs and 
determine the appropriate dosage for the replacement drug. Is 
it safe for children? It takes children's hospitals 50 percent 
longer to address shortages than other hospitals because of the 
time needed to compound replacement products into pediatric 
dosage forms. And it is so costly. One drug in shortage alone 
can cost a children's hospital north of $50,000 in labor and 
substitute products.
    So we have got to get ahead of these shortages before they 
happen so that our neighbors and providers are not blindsided 
and left scrambling to find workarounds.
    This past winter's triple epidemic of the flu, RSV, and 
COVID-19 were exceedingly difficult because shortages of basic 
medicine like Tylenol and ibuprofen ultimately got so severe 
that retailers began imposing purchase limits at the counter, 
sending parents searching multiple locations for medication to 
take care of their families. FDA took the action it could 
within its limited authority to ensure that more products were 
available for consumers, but the current haphazard approach of 
addressing crisis episode by episode is not working to give 
American families the certainty and the quality of care they 
need and deserve.
    So together we need to require greater transparency from 
manufacturers about where they source raw materials for drugs. 
We know that 72 percent of manufacturers supplying the U.S. 
market with active pharmaceutical ingredients, or API, are 
overseas, mostly in India and China, and the percentage of APIs 
manufactured in those countries by volume may be higher. I sit 
on the Select Committee on the Strategic Competition between 
the U.S. and the Chinese Communist Party, and API manufacturing 
is another example how overreliance on raw materials from China 
creates real-life risks to the well-being of Americans.
    Greater transparency will help us better understand where 
we need to shore up the domestic production and invest in new 
technologies. But the need to address shortages doesn't end 
with manufacturers. We need to make sure that the anticonsumer 
behavior by intermediaries like PBMs and GPOs does not create 
affordability barriers for patients that magnify the effects of 
drug shortages for families in need.
    And we have a model, Mr. Chairman, for action, for 
bipartisan action. When faced with a semiconductor shortage, 
Congress acted to adopt the CHIPS and Science Act and invest in 
Americans and our supply chains. Drug shortages will also 
require a coordinated approach across government but with 
manufacturers, providers, and payers to create domestic 
production, to shore up supply chains, and revitalize 
scientific research that hopefully will strengthen our economy 
and our healthcare system.
    I hope that our witnesses today can help us better 
understand the reasons why shortages occur and persist and how 
better and smarter tools would improve insight into the supply 
chain to better guide strategies to strengthen it. By better 
understanding the root causes of these shortages, Congress and 
our public health institutions can enact policies to address 
them.
    I am really looking forward to our witnesses today and 
covering this topic. So thank you all for being here.
    [The prepared statement of Ms. Castor follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Ms. Castor. And I yield back my time.
    Mr. Griffith. I thank the gentlelady for yielding back and 
now recognize the chairwoman of the full committee, Mrs. 
McMorris Rodgers, for her 5 minutes of opening statement.

      OPENING STATEMENT OF HON. CATHY McMORRIS RODGERS, A 
    REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON

    Mrs. Rodgers. Good morning. Our goal today is to examine 
the complex challenges and root causes that lead to drug 
shortages.
    Just last November, in September--in Spokane parents were 
shocked that Amoxicillin, a common antibiotic, wasn't readily 
available at pharmacies. Parents had to contact multiple 
pharmacies and talk to the doctor to get alternatives, which is 
no small effort when your child is sick.
    Our committee has exposed the harmful consequences of 
consolidation, Federal programs, and malincentives that distort 
the market and make it more difficult for patients to get 
lower-cost medication. Sometimes it is because these 
medications are not on pharmacy or hospital shelves or because 
they are not covered by insurance. These market distortions 
hinder the adoption of quality generic drugs and weaken the 
drug supply chain.
    The FDA has not been an effective partner in combating drug 
shortages. Even after Congress provided FDA new authority in 
2020 to get more information regarding where American 
prescription drugs are made, we still do not have good data on 
where either finished medications or active pharmaceutical 
ingredients, or APIs, are sourced.
    FDA last testified that around 80 percent of API facilities 
and 60 percent of finished dosage facilities are overseas, 
including India and adversarial countries like China. These are 
countries who limit our foreign drug inspection program's 
ability to operate adequately. It is an enormous problem if we 
cannot properly inspect the quality of the ingredients in 
common drugs Americans rely on.
    This situation not only raises concerns over drug quality, 
but it also poses a significant threat to national security. If 
adversarial countries were to cut off the supply of necessary 
APIs to manufacturers, American patients' lives could hang in 
the balance.
    Further, the COVID-19 pandemic taught us that we cannot 
rely on the Chinese Communist Party, which blocked the export 
of PPE and other critical supplies, lied about positive case 
numbers, and has refused to cooperate into any meaningful 
investigation into the origins of COVID-19.
    As we strive to strengthen our supply chain, we must 
encourage American innovation, increase domestic manufacturing 
capabilities, and promote the adoption of quality generic 
drugs. And we need a system that acknowledges and rewards such 
innovation.
    In 2019 HHS programs accounted for 40 percent--41 percent 
of all prescription drug spending. Yet those programs may have 
unintended consequences leading to unsustainably low prices or 
incentivizing middlemen to get the best deal at the expense of 
a secure supply chain. We should look at all Federal programs 
this committee oversees to help create a more secure and 
reliable drug supply chain for our Nation.
    We have gathered a diverse group of witnesses with 
expertise into the pharmaceutical drug supply chain to help us 
start to dig into these complex programs and challenges and 
what potential solutions there are, whether in American 
manufacturing or in trying to innovate around middlemen in the 
system.
    We will also hear from Laura Bray on why this work to stop 
shortages is so important. Laura has heard many times what no 
parent wants to hear, that there is a shortage of medicine 
needed to treat her doctor's--or her daughter's cancer.
    As I close, I want to note that I am encouraged by the 
bipartisan approach to this hearing. This is a critical issue 
that transcends political party lines, and I am confident that 
by working together we can help ensure more people like Laura's 
daughter get the lifesaving care and medicines that they need 
when they need it. Thank you.
    [The prepared statement of Mrs. Rodgers follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Griffith. I thank the gentlelady for yielding back. I 
now recognize the ranking member of the full committee, Mr. 
Pallone, for his 5-minute opening statement.

OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman.
    Today we are examining the root causes of drug shortages, 
which negatively impact the health and well-being of so many 
Americans. Drug shortages are not a new issue, but 
unfortunately, they are currently at a five-year high. 
Shortages can last anywhere from a year to over a decade, with 
15 critical drugs in shortage for over 10 years. This past year 
alone, we have seen harmful disruptions in the availability of 
children's pain medication and medication to create--or to 
treat conditions like ADHD. And these shortages can result in 
delayed care, ineffective treatment, increased 
hospitalizations, and even death.
    So we need to do more to prevent these drug shortages, 
including building a robust and resilient drug supply chain. 
This is not only critical to the health and well-being of 
Americans, but also to our national security. However, we 
cannot effectively tackle the challenges associated with drug 
shortages without more information about the current supply 
chain. Key gaps remain in our understanding of how drugs are 
manufactured and brought to market.
    The Administration for Strategic Preparedness and Response 
has shared that there can be up to 20 key materials per 
pharmaceutical. However, our public health agencies currently 
do not know which materials are used in the production of each 
drug and in what quantity. We also do not know the quantity of 
active pharmaceutical ingredients used in drugs for the U.S. 
market that is manufactured overseas. And while we know that 72 
percent of active pharmaceutical ingredient manufacturers 
serving the U.S. market are overseas, we do not know the actual 
volume of the ingredients that they manufacture, and that 
number is likely much higher than the 72 percent.
    So FDA has some limited tools to examine the supply chain. 
Recently, as part of the CARES Act, Congress took bipartisan 
action to start addressing drug supply chain information gaps. 
The law included a requirement that manufacturers develop risk 
management plans and annually report to FDA on the amount of 
each drug they make available for commercial distribution. This 
is a step in the right direction, providing us more information 
than we had before. And while it has been useful, it is not 
enough to fully address drug shortages caused by supply chain 
issues.
    FDA has repeatedly told us that, with its limited tools, it 
is simply not capable of using its existing authorities to 
directly prevent or mitigate a shortage. For example, FDA's 
current reporting requirements don't allow the agency to 
determine which suppliers of active pharmaceutical ingredients 
manufacturers rely on. This makes it difficult to predict how a 
disruption with one supplier would affect a manufacturer's 
ability to produce their drugs.
    FDA's tools are even more limited when it comes to 
forecasting and anticipating changes in demand. We have seen 
how sudden spikes in demand for certain drugs can cause a 
shortage, most recently in the market for Adderall and 
children's pain medication. However, manufacturers are not 
required to report those demand surges to FDA, which means FDA 
may lack the information it needs to foresee a shortage. 
Without that information, FDA can't take the necessary action 
to identify new manufacturers, expedite additional inspections, 
or review new products that can fill gaps.
    So giving FDA these tools will allow the agency to 
understand why these shortages occur so that we can take action 
to predict and address them. I would like to hear from our 
witnesses how greater visibility into the supply chain will 
help alleviate challenges that drive disruptions in drug 
availability. And most importantly, I look forward to 
discussing how more reliable access to important drugs would 
improve the lives of patients and their families.
    So I am pleased the subcommittee is also hearing from 
experts about what we can do to increase pharmaceutical 
manufacturing efficiency for greater domestic production.
    I especially want to thank Professor Muzzio from Rutgers 
University in my congressional district for being here today. 
Dr. Muzzio directs Rutgers' Center for Structured Organic 
Particulate Systems, and he is a national leader in the 
development of continuous manufacturing methods and 
technologies, which will help us improve drug manufacturing 
efficiency and quality.
    Dr. Muzzio was also instrumental in supporting passage of 
my legislation, the National Centers of Excellence in Advanced 
and Continuous Pharmaceutical Manufacturing Act, which 
President Biden signed into law last year. And that law 
empowers the FDA to partner with universities around the 
country to further develop continuous manufacturing technology, 
which will, hopefully, strengthen domestic pharmaceutical 
manufacturing and help prevent future drug supply chain 
shortages.
    So thank you for being here today, Dr. Muzzio.
    Thank you to all the witnesses.
    [The prepared statement of Mr. Pallone follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Pallone. And with that, Mr. Chairman, I yield back.
    Mr. Griffith. I thank the gentleman for yielding back. That 
concludes the Members' opening statements.
    I remind all Members that, pursuant to committee rules, the 
Members' opening statements will be made a part of the record.
    We want to thank all of our witnesses for being here today 
and take the time to testify before our subcommittee.
    Each witness will have the opportunity to give an opening 
statement, followed by a round of questions from Members.
    Our witnesses today are Dr. Alex Oshmyansky, CEO/founder of 
the Mark Cuban Cost Plus Drug Company; Anthony Sardella, chair, 
API Innovation Center; Laura Bray, founder, Angels for Change; 
and Fernando Muzzio, distinguished professor of chemical and 
biochemical engineering at Rutgers University, which I learned 
is in Mr. Pallone's district.
    We do appreciate you all being here today, and we look 
forward to hearing from you on this important issue. And thank 
you so much for taking your time.
    As you know, and as you are aware, this committee is 
holding an oversight hearing, and when doing so we have the 
practice of taking our testimony under oath. Do any of you have 
an objection to testifying under oath?
    Seeing that no one has objected, we will proceed.
    Further, you are advised that you are entitled by counsel--
you are entitled to have counsel present with you, pursuant to 
House rules. Do any of you wish to have your counsel present 
with you today?
    All right, seeing that none have desired to have their 
counsel with them, would you all rise and raise your right 
hand, please?
    [Witnesses sworn.]
    Mr. Griffith. Recognizing that all responded in the 
affirmative--and you all can be seated, thank you--recognizing 
that all have responded in the affirmative, I would say that 
you are now sworn in and under oath, subject to the penalties 
set forth in title 18, section 1001 of the United States Code.
    All right. We got through all the legal mumbo jumbo that we 
needed to get through. We will now recognize Alex Oshmyansky 
for his 5-minute opening statement.
    Dr. Oshmyansky. Alex is fine.
    Mr. Griffith. All right.
    Dr. Oshmyansky. First, thank you so much to the 
subcommittee.
    Mr. Griffith. Yes, we need you to turn on the mike and----
    Dr. Oshmyansky. Hear me?
    Mr. Griffith. Yes, maybe pull it up a little bit so you are 
loud enough. We could hear you, but then nobody at home----
    Dr. Oshmyansky. Oh, but no one else. Got you.
    Mr. Griffith [continuing]. Or on C-SPAN can hear you.
    Dr. Oshmyansky. OK.

  STATEMENTS OF ALEX OSHMYANSKY, M.D., Ph.D., CHIEF EXECUTIVE 
  OFFICER/FOUNDER, MARK CUBAN COST PLUS DRUG COMPANY; ANTHONY 
 SARDELLA, CHAIR, API INNOVATION CENTER, AND ADJUNCT PROFESSOR 
AND SENIOR RESEARCH ADVISOR, CENTER FOR ANALYTICS AND BUSINESS 
   INSIGHTS, WASHINGTON UNIVERSITY IN ST. LOUIS; LAURA BRAY, 
FOUNDER AND CHIEF CHANGE MAKER, ANGELS FOR CHANGE; AND FERNANDO 
   J. MUZZIO, Ph.D., DISTINGUISHED PROFESSOR OF CHEMICAL AND 
BIOCHEMICAL ENGINEERING AND DIRECTOR, NSF ENGINEERING RESEARCH 
   CENTER ON STRUCTURED ORGANIC PARTICULATE SYSTEMS, RUTGERS 
                           UNIVERSITY

           STATEMENT OF ALEX OSHMYANSKY, M.D., Ph.D.

    Dr. Oshmyansky. Well, first off, thank you so much to the 
committee and the subcommittee for inviting me to speak today. 
It's an honor and a privilege.
    As I speak here today, there are approximately 200 drug 
products listed as in shortage on the U.S. FDA shortage 
database. Many of these medicines are critical lifesaving 
medications such as albuterol, the treatment for an acute 
asthma attack. Several chemotherapeutic drugs for cancer are in 
shortage.
    The rates of morbidity and mortality for pediatric cancers 
in the U.S. have gone up in recent years, as the medications 
necessary to treat them are increasingly unavailable. The 
majority of these medications are relatively simple to make and 
have been available for decades. How is it that they are 
unavailable in the United States, the wealthiest country in the 
history of human civilization?
    The root underlying causes are complex and multifactorial. 
However, Mark Cuban Cost Plus Drug Company is working 
diligently in the background to try to address drug shortages 
through a combination of innovative technologies and business 
model innovation.
    We have constructed an advanced pharmaceutical 
manufacturing plant in Dallas, Texas. The facility utilizes 
robotic fill finish technology optimized by AI machine vision 
systems that are designed to incorporate single-use disposable 
components. The robotic manufacturing systems installed at our 
manufacturing facility can transition between making batches of 
different types of medication within hours, rather than months, 
with full FDA cGMP compliance. This allows us to very rapidly 
pivot from making one drug type to another in order to address 
pharmaceutical drug shortages as they arrive.
    In principle, we can have a new manufacturing line up in 4 
hours. In combination with a regulatory strategy as a 503(b) 
compounding site, we are very rapidly able to pivot from making 
a shortage drug product with full compliance with FDA 
regulations.
    In addition, within the next few months, we will be 
launching Mark Cuban Cost Plus wholesale, which will enable 
independent pharmacies, clinics, and hospitals to get access 
not just to our products, but products from any pharmaceutical 
manufacturer at a true, transparent price. This will enable us 
to ensure distribution of products outside of the conventional 
distribution oligopolies.
    Our pilot manufacturing facility is currently completing 
its validation process and is expected to begin commercial 
sales later this year. It has an estimated capacity of between 
1 and 2 million sterile doses of medication a year, either 
prefilled vials or syringes. Initial products will include 
pediatric chemotherapy agents, lidocaine, and essential ICU 
medications. However, we will be nowhere near meeting the 
national demand for these products.
    Mark Cuban Cost Plus has also drafted preliminary designs 
for a much larger facility, based on similar technologies that 
would hopefully be able to alleviate the majority of acute drug 
shortage issues in the United States. We believe such a 
facility would cost approximately $300 million to construct, 
based on current estimates. We believe that through a private-
public partnership or otherwise, through government investment, 
we will be able to build the infrastructure necessary to ensure 
pharmaceutical drug shortages no longer affect the health of 
Americans.
    Thank you so much.
    [The prepared statement of Dr. Oshmyansky follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Griffith. Thank you.
    And we now recognize Mr. Sardella for his 5-minute opening 
statement.

                 STATEMENT OF ANTHONY SARDELLA

    Mr. Sardella. Good morning. I'd like to thank Chairman 
Griffith, Ranking Member Castor, and the distinguished members 
of the committee for holding this meeting. And it's a privilege 
to speak with you. My name is Tony Anthony Sardella. I'm an 
adjunct professor at the Olin Business School at Washington 
University. I'm also the university's senior analyst for their 
Center for Analytics and Business Insights, and also chair a 
new nonprofit that is dedicated to the reshoring of API to the 
United States, the API Innovation Center.
    The economic viability of the generic pharmaceutical 
industry, which represents over 90 percent of the medications 
prescribed in the United States, is diminishing and 
contributing to supply disruptions, drug shortages, with 
significant negative implications for U.S. health security. 
Economic conditions indicate that this environment will only 
worsen, further jeopardizing the quality and the stability of 
our Nation's pharmaceutical supply chain.
    COVID-19 revealed the country's overreliance on foreign 
production of essential drugs. My research revealed that the 
United States has no domestic-based supply for approximately 83 
percent of the top 100 generic medicines prescribed in America. 
These are highly prescribed medicines such as cardiovascular, 
atorvastatin, and lisinopril that many patients leverage and 
rely on every single day.
    The principal driver to strengthen our health security and 
keep our Nation's drug supply chain secure is economics, not 
just logistics. We must address the economic instability of the 
generic pharmaceutical market. We must expand public and 
private partnerships and incentivize domestic drug 
manufacturing.
    Generic drugs are commodity products, and because they are 
substitutable, price becomes the dominant factor in any type of 
market competition. Since 2016, the generic industry has 
experienced price erosion greater than 50 percent. An average 
high-volume 30-count bottle of medicine is now less than $1.50, 
the equivalent of 5 cents per tablet.
    But there is a high cost to low prices. The implications 
are significant. Reduced earnings lead to cost cutting and 
reduced ability to invest in new product development, factory 
maintenance, and innovation. The economic pressures facing 
generic manufacturers are contributing to increased quality and 
compliance risks, as they are unable to expend capital to 
address FDA warning letters, evidenced by greater than 1 in 4 
prescriptions in the U.S. are filled by a company that has 
received an FDA warning letter in the last 26 months.
    No single entity can solve this complex problem and 
challenge to strengthen our domestic manufacturing. It requires 
a coordinated approach between the public and private sector. 
It involves, first, the derisking of the adoption of advanced 
manufacturing technologies that will make the U.S. 
manufacturing globally competitive.
    Second, it involves leveraging existing available generic 
manufacturing infrastructure. In September last year I 
published a study that revealed that, of the 37 U.S. generic 
manufacturing sites surveyed in my research, they were 
producing at just half of their annual production capacity. And 
by repurposing the existing auto manufacturing base, 57 percent 
of the U.S. manufacturing sites could be operational in 1 year, 
and 86 within 2 years, which equates to 30 billion capsules and 
doses of essential and critical medicines within a 2-year 
period.
    Third, several market-based solutions exist to foster 
industry investment in domestic manufacturing and ensure a 
long-term, sustainable U.S.-based supply. The driver of price 
erosion for generics is the inability to differentiate on 
product quality, a dimension of market competition in virtually 
every other market.
    Quality price trade-offs can be addressed by creating 
transparent quality scores that enables competition on a 
dimension beyond only price while incentivizing manufacturers 
with strong quality.
    Leveraging the buying power of the Federal Government, 
which accounts for approximately 34 percent of total healthcare 
spending in the United States, with sourcing policies that 
favor and incentivize domestic manufacturing or manufacturers 
with strong compliance records--which is a practice already 
employed in Germany, Brazil, India, and China--is another 
important instrument to incentivize U.S.-based manufacturing.
    Improving provider reimbursements for U.S.-made generics 
and realigning preferred drug list formularies can also drive 
incentives.
    I'd like to thank the committee for your time and the 
opportunity to share my research, data, and perspective 
pertaining to the pharmaceutical supply chain and drug 
shortages.
    [The prepared statement of Mr. Sardella follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Griffith. Thank you for yielding back.
    I now recognize Ms. Bray for her 5-minute opening 
statement.

                    STATEMENT OF LAURA BRAY

    Ms. Bray. Good morning. I'm Laura Bray, chief change maker 
at Angels for Change, a volunteer-supported organization on a 
mission to end drug shortages. I appreciate the opportunity to 
speak here today and represent the patient voice.
    Thank you for your leadership and bipartisan work to 
prevent and end drug shortages.
    Four years ago my husband Mike and I were sitting in a 
hospital room when our child, Abby, was diagnosed with 
leukemia. At that moment we became caretakers while our child 
began to fight for her life. We were told we were lucky that 
this leukemia, unlike many other pediatric cancers, has a cure: 
a miracle protocol, a cocktail of drugs given in certain 
timeframes but leading to very successful treatment.
    The doctors used these success numbers--above 90 percent--
to provide assurances but also to alert us that compliance was 
the single most effective thing, as her parents, we could do 
every day for her survival. With our trusted physicians, 
nurses, care team, and child life specialists, we became a team 
using every tool available to ensure our child's compliance of 
this cocktail.
    When a child doesn't want to take her meds anymore, when 
they can't take the pain of being poked and prodded again, when 
they lose their hair, when it's just too much, we all focus on 
the importance of the medicine for their survival.
    I was sitting in a hospital room with Abby when I first 
heard the words, ``We don't have the drug needed today. It's on 
shortage.''
    My Abby, our fierce middle child, caught it right away, and 
said, ``I thought I needed this. Does this mean I die?''
    Before that moment, I didn't know our pharmaceutical supply 
chain was broken. I had the same questions she had. I told her 
the only thing I could: ``We're going to try to find it.''
    With no experience, using my background as a business 
professor, the help of friends and family and Google, we 
successfully found the medicine. But it didn't end there. 
Abby's protocol was impacted by a drug shortage again and then 
again--three lifesaving shortages in nine months, different 
drugs, different root causes. It wasn't enough that my 9-year-
old had to consider her mortality because of cancer. She also 
had to consider it again because our supply chain was not 
making enough medicines of the drugs I told her would save her.
    This experience haunted me, and I began to ask questions 
about how common it was for patients to experience something 
like this. I was surprised by how easy it was to find the 
answers. Twenty years of research outlining this drug shortage 
crisis. There had been calls to actions. There had been 
hearings like this going back many, many years.
    If we had these answers, why did my child and our family 
have to go through this? It was such a cruel place to find 
ourselves. I knew no patient should have to go through a search 
again alone.
    So with my friends and family joined in the mission, we 
launched Angels for Change in 2019, becoming the only patient 
advocacy organization with a mission to end drug shortages in 
the United States. And almost immediately, patients began to 
call. Eventually, hospitals began to call too. I connected with 
members of the supply team, the supply chain. We learned from 
each other. I asked the members to become change makers with 
me.
    The patients stuck in the drug shortage, they are our 
purpose. But it was the people that make up the supply chain 
that stepped up and took on collaborative, patient-focused work 
with us that gave me hope. To date, we have helped patients and 
hospitals find hundreds of courses of medicine stuck in this 
broken supply chain during three dozen different drug 
shortages.
    Proactively, we foster stakeholder collaboration to build 
resiliency, convening members at our summit and helping to 
launch the End Drug Shortages Alliance, which now has 162 
supply chain members ready to do this work. These collaborative 
spaces have led to innovative pilot programs like our Project 
Protect.
    Through prediction, a small manufacturing incentive grant 
of $100,000, we created gap supply of 2 essential medicines. 
Those medicines went short, and it was accessed 650,000 times 
last year for patients in need. This type of multistakeholder 
resiliency work must be supported and scaled.
    Building a resilient supply chain will take more 
transparency, redundancy, and connectivity. Our pathway forward 
is built on six principles. I've outlined them in our written 
testimony. Every stakeholder will need to do their part, but 
together we can ensure no child will ask their parent, ``Will I 
die if I don't get my medicine?''
    Thank you.
    [The prepared statement of Ms. Bray follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Griffith. Wow, thank you.
    Dr. Muzzio, your 5-minute opening statement. Thank you.
    Dr. Muzzio. Thank you. Can you hear me?

             STATEMENT OF FERNANDO J. MUZZIO, Ph.D.

    Dr. Muzzio. So, Chairwoman Rodgers, Chairman Griffith, 
Ranking Member Pallone, Ranking Member Castor, members of the 
subcommittee, my name is Fernando Muzzio. I'm a distinguished 
professor of chemical and biochemical engineering at Rutgers 
University, and I'm the director of CSOPS, which is an NSF 
engineering research center focused on developing 
pharmaceutical products and processes. I greatly appreciate the 
opportunity to appear in this hearing to talk about the root 
causes of drug shortages, and also share some views on how 
advanced manufacturing could help mitigate this problem.
    I want to make two facts, and I appreciate that my 
testimony may be a little different than the other witnesses'.
    The first fact is that we know that the proximate cause of 
more than 60 percent of shortages is quality issues, whether 
those quality issues are caused by economic reasons or 
something else, but quality issues cause the majority of the 
shortages.
    The second fact is that advanced manufacturing methods can 
improve quality and quality control and therefore may help 
reduce the incidence of some of these issues. Let me explain 
why.
    In the traditional batch manufacturing approach, a 
manufacturer takes a large amount of ingredients, say 500 
kilograms, puts that into a process unit, implements the 
process, then the material moves to another piece of equipment, 
and another piece of equipment, and after several steps over 
many hours to make a large number of product units, let's say a 
million tablets or a million vials. And then they take 10 to 30 
samples from that million tablet batch, send them to the lab, 
get results, assume that those results are representative of 
the whole batch, and make the decision to release the product 
based on those results.
    The process is time-dependent. Things are changing as you 
are going through this particular traditional process, and that 
can affect the quality of the product over time. And this 
provides also a very limited opportunity to observe product 
quality. In contrast, continuous manufacturing is capable of 
much better quality control.
    First of all, the ingredients come into the process at a 
fixed ratio. They move gradually but continuously from process 
unit to process unit, but we keep the process very close to 
steady conditions so that every portion of material experiences 
the same process. There is only a small amount of materials in 
the process at any time, but for every small portion of 
material, we monitor quality in real time. And this allows us 
to diagnose quality issues in real time, exclude faulty 
material from what's going to be dispensed to patients, and 
minimize quality failures.
    Where are we in implementing this? Well, we started 17 
years ago in our center. There were other efforts at the same 
time. We established a full ecosystem of industry, government, 
and academia, attracted over $120 million in funding for this 
work, and we built and demonstrated the first continuous 
manufacturing line that operated in a full state of control, 
and then supported Johnson & Johnson and other companies in 
commercially implementing these technologies.
    In more recent developments--and I want to give credit to 
the FDA for this--the FDA emerging technology teams has 
accepted 42 proposals for continuous manufacturing review. They 
have actually, as of March, approved 13 continuous 
manufacturing applications.
    Direct compression, which is the most common type of 
continuous manufacturing, has now graduated as an emerging 
technology. They led the approval by the International 
Conference on Harmonization of what is called Q13, the global 
guidance in continuous manufacturing, and we have collectively 
built widespread consensus, including the U.S. Government 
through multiple administrations, that advanced and continuous 
manufacturing could be part of the solution.
    Now, this also produces an important opportunity for our 
country. Given the advantages of continuous manufacturing, we 
expect that there will be hundreds of billions of dollars 
manufactured by continuous manufacturing. We can agree that we 
would like that manufacturing to happen in the U.S. Now this is 
feasible, and it can be done in a sustainable manner because 
continuous manufacturing requires less unskilled labor, which, 
because that kind of labor is cheaper in other countries, has 
been one of the reasons why manufacturing moved to those other 
countries.
    However, it's important to recognize that implementation of 
these technologies requires knowledge, requires training, and 
requires access to infrastructure.
    We expect other developments in the next few years. For 
example, we expect that we will be able to implement what we 
would call advanced batch manufacturing, where we will use many 
of the techniques developed for continuous manufacturing, now 
adapted for batch, to be able to inspect 100 percent of the 
product stream so that every single product unit is analyzed in 
real time, and faulty product is sent to scrap.
    We also expect that we're going to expand continuous 
manufacturing to generics, over-the-counter products, 
manufacture of active pharmaceutical ingredients and 
intermediates, as well as injectables, including biologics, and 
that we will use similar methods to create other advanced 
technologies such as distributed manufacturing.
    All of this is possible, but to achieve this we really need 
centers of excellence that will work in a sustained manner in 
reenergizing the partnership between government, regulators, 
and academia so that we can create places where all of the 
workforce can be trained, the know-how is available, and we can 
support industry, continue to move forward.
    As in Public Law 117-328, these centers would also make 
possible to implement a national strategy in workforce 
development that is needed to facilitate this.
    So in concluding, I would request please that my full 
written testimony be included in the record, and I will be 
happy to answer any questions that I may. Thank you.
    [The prepared statement of Dr. Muzzio follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Griffith. Thank you very much for your testimony. Thank 
you to all the witnesses. At this point, we will begin the 
questioning process, and I will begin with 5 minutes of 
questioning.
    Dr. Sardella, can you repeat for us--I think this was in 
your testimony--what percentage of the generic drugs are 
manufactured in facilities that have received an FDA warning 
letter?
    Yes, turn your mike on.
    Mr. Sardella. One out of four prescriptions in the United 
States over the last 26 months.
    Mr. Griffith. So roughly 25 percent.
    Mr. Sardella. Correct.
    Mr. Griffith. In over how many months?
    Mr. Sardella. Twenty-six, the last 26 months.
    Mr. Griffith. And some of those FDA warning letters stay 
open for years, do they not?
    Mr. Sardella. That is correct. And the industry is less 
able, due to low margins, to be able to address them. And so 
their options are shutter, not comply, or continue to operate. 
And----
    Mr. Griffith. Let's talk about noncompliance, because while 
some of these warning letters may be on things that folks back 
home might think are trivial and so forth, but there was an 
open warning letter on the New England Compounding Company at 
the time that they produced a sterile injection which cost--I 
believe it was 38, 40 lives, several of whom were in my area. 
My district was impacted by that outbreak. And that was a 
warning letter because people were trying to cut costs.
    And so I want folks back home--and I think you would agree 
with me that when you have 25 percent of your generic medicines 
being manufactured under a warning letter, most of it is not 
going to be a big deal, but some of it might be a big deal, and 
this is a concern that we need to take, as a nation. Would you 
agree?
    Mr. Sardella. I agree, Chairman. In that spectrum there are 
very much warning letters that don't imply any type of safety 
issue, but there's also those that do, and those are 
significant and have dire consequences.
    Mr. Griffith. Yes, and that is my concern here, is that, 
you know, in our race to save a few pennies here and there, we 
are sacrificing both availability that Ms. Bray talked about 
and quality.
    All right, back to my real questions, the ones that I had 
prepared in advance. In your white paper, Dr. Sardella, you 
wrote that it is unrealistic to fully move our API sourcing and 
manufacturing onshore. Instead, you propose the U.S. API 
industry should achieve a minimum level of self-sustainability. 
Explain that for me.
    Mr. Sardella. We've done some research that estimates the 
cost to bringing the top 40 prescribed medicines and the top 40 
essential medicines. We feel this would begin to stabilize the 
U.S. supply chain, reshoring those productions to the United 
States.
    Our estimates are that that would cost less than $2 
billion, which is less than 1 percent of our total spend on 
pharmaceuticals for those generics, and allow us to have 
greater certainty and control of our drugs, knowing that the 
APIs are the clinical part of the drug that allows it to be a 
great therapeutic. So----
    Mr. Griffith. And would you agree with me that it is 
likely, if we were to do something like that, that then that 
would also encourage other folks to maybe make some APIs that 
weren't in the top 40?
    Mr. Sardella. That's exactly correct. If we can think of 
them--we use at the API Innovation Center the construct of 
critical and essential. If one--critical being ones that are 
critical to our national security. Those cardiovasculars that 
we take, patients take every single day, they're not in 
shortage, but they're core to our national security.
    The ability to incentivize production of those drugs here 
in the United States will allow for capability to produce the 
essentials in the United States, and therefore solving two of 
the issues: national security and our drug shortage for our 
essential medicines.
    Mr. Griffith. All right. You also talked about supply chain 
challenges and how that is exacerbated by inflexible 
regulations. Could you expand on that?
    And are there lessons we can learn from our experience in 
moving up the speed on COVID-19 that we should look to extend?
    Mr. Sardella. Yes. Well, I think on COVID-19 there are some 
efforts to allow for greater inspections of different 
facilities to allow for better quality to be produced. I think 
a couple of the key things that we've learned is any type of 
expedited approvals or processing allow for faster time to 
market, allowing companies to have a quicker return on their 
investment on their capital.
    Mr. Griffith. I have got one more question for you--and I 
had some for the others, so I apologize, but I am running out 
of time. Group purchasing organizations are considered the 
price setters for generic medications in our pharmacy supply 
chain, and they seem to create marketing efficiencies. What 
role have they played in creating current--the current 
environment where we have shortages, and what accountability is 
there for GPOs when shortages occur?
    Mr. Sardella. The GPOs are contributing significantly to 
the aggregation of profits to them versus the manufacturers. 
They're putting the manufacturers out of business, first.
    The second--I would caution--as we develop policy to 
address GPOs, recognize that any redistribution of those 
profits would go to foreign manufacturers, not U.S., because 
that's where they're getting their supply. If the goal is to 
create a sustainable, strong economic, U.S.-based supply, 
that--those incentives have to be established before the--
addressing the GPOs concentration of profits.
    Mr. Griffith. All right. I appreciate it. My time is up, 
and so I will now recognize the ranking member of the 
subcommittee, Ms. Castor, for her 5 minutes of questioning.
    Ms. Castor. Well, thank you, Mr. Chairman.
    Professor Bray, I am so proud that a working mother from 
the Tampa Bay area of three children who grappled with a 
pediatric cancer diagnosis for her young daughter used her 
business acumen to start a nonprofit to help solve the drug 
supply shortage. It's a remarkable story, and your voice is 
very important in this discussion.
    So you explained your daughter went to one of the premier 
children's hospitals in America, St. Joseph's Children's 
Hospital in Tampa, and yet they are grappling constantly with 
shortages of lifesaving drugs. What did you learn as you dug 
into it as to the root causes of the drug shortages, and why is 
it impacting children especially?
    Ms. Bray. Thank you. Thank you for addressing me, and thank 
you for having this meeting today.
    So first, pediatrics are uniquely vulnerable to drug 
shortage because we're a smaller patient population. And when 
you have a broken marketplace, the smaller samples will always 
fall out.
    And then pediatric cancer is even a smaller niche of that 
small, broken place. And what we found is that, actually, 
pediatric cancer is 90 percent more likely to go into shortage, 
their drugs, and they stay short 30 percent longer. But it's--
compounds because their treatment is multilayered and relies on 
many different drugs and very specific protocols. So one or two 
drugs, in short, can have drastic problems to their--to a 
pediatric cancer diagnosis.
    What we have found, both, you know, initially, when we 
navigated the supply chain for my own child, but then as chief 
change maker at Angels for Change, we navigate this crisis for 
patients and hospitals all the time. I like to say, you know, 
the four P's, we're stuck here at the bottom: That's the 
physician, the pharmacist, the purchaser, and the patient. 
We're the consumer of these goods, and we do not have a lot of 
power during a time of disruption. And so together we can 
navigate this crisis a little bit better and be a unified 
voice.
    And so one thing we have found is that collaboration during 
a time of drug shortage would really help. This marketplace is 
deeply fragmented. Everyone, I think, talked about transparency 
today. We do need transparency. There's gaps in knowledge. And 
until we have a clear picture, we can't address the right 
solutions for the right problems. And those are the redundant 
solutions that are--my other wonderful panelists have talked 
about.
    No one solution is going to fix this. It will be 
multilayered and redundant. But to do that we have to be 
connected as an entire supply chain. All members must be at the 
table. There is a space for all of us, especially the patient.
    Ms. Castor. So you did this. You mentioned in your 
testimony you actually initiated something called Project 
Protect, where you just dived in and tried to actually create a 
certain supply chain for certain drugs and shortages. How did 
that work?
    Why did--why was it left to you, without much help from 
government agencies that should be helping?
    Ms. Bray. Well, I think there's a role for scalability of 
innovative programs that have been working already, for sure.
    So Project Protect, it was--there's a lot of discussion 
about whether prediction can ever fix this, and I believe it 
can. Any healthy supply chain--we're in the world of blockchain 
and AI, that's the stuff I talk about in my business classes 
and, you know, why wasn't this supply chain, you know, in the 
new millennia of supply chain management?
    And so I was like, we've got to start with prediction. So 
we got to--we got to prove that. So we used prediction and 
said, what drugs do we think might go short? We picked two. 
There's a lot of work underway on prediction. I encourage that 
work to be scaled.
    And we then went to a small onshore manufacturer, a 503(b), 
like Alex talked about, and said, ``What would it cost you and 
how much time would it take to ensure this for the American 
people if it did go short?''
    They surprised me by saying about 60 days and $100,000. I 
said, ``Each?'' And they said no, for both. So I wrote a grant 
and signed an agreement with them and told them be ready to 
supply if this--if it goes short. It did go short, and----
    Ms. Castor. And these drugs were?
    Ms. Bray. Pardon?
    Ms. Castor. Name the drugs.
    Ms. Bray. It was potassium chloride and sodium chloride, 
and it was accessed 650,000 times last year during a time of 
shortage. So it didn't stop the disruption. What it was was gap 
supply, efficient, flexible gap supply that was incentivized by 
the marketplace and a private--public-private partnership.
    I think this is a model that can be duplicated over and 
over and over again to protect the American people during a 
time of disruption. And then we do need to do all the work to 
help eliminate some of this disruption that the rest of my 
colleagues have talked about.
    Ms. Castor. Thank you, Professor.
    Ms. Bray. Thank you.
    Mr. Griffith. The gentlelady yields back. I now recognize 
the chairwoman of the full committee, Mrs. McMorris Rodgers of 
Washington, for her 5 minutes of questioning.
    Mrs. Rodgers. Thank you, Mr. Chairman. I wanted to start 
with Dr. Alex.
    In your written testimony you describe how a PBM will 
negotiate rebates and then keep a percentage of the rebate 
negotiated. How do these negotiated rebates distort the drug 
market?
    And specifically, can you explain how rebates negotiated by 
PBMs contribute to high drug prices, shortages of essential 
medicines, or the race-to-the-bottom pricing that undermines 
our drug supply chain, and the impact that this has on 
patients, providers, and pharmacies?
    Dr. Oshmyansky. Sure thing. So, you know, the PBMs, I kind 
of think of them in my head as payment processors, sort of 
similar to Visa or MasterCard. And many years ago they 
realized, ``Hey, we're processing all the payments, we can 
negotiate for drug prices on behalf of the people we're 
processing payments for.''
    And the way they decided to go about it was to negotiate a 
rebate. They wouldn't charge you for this service of 
negotiation, they would just take a cut of the rebate back off 
of a list price. And it soon became very readily apparent that 
the biggest way to make this cut of the rebate as big as 
possible was to make the rebate as big as possible. So the 
standard rebate on a generic drug product now is between 85 and 
88 percent. And where else in life do you get an 88 percent 
discount? Like, something's a little off.
    So--and they capture, you know, let's say 10 percent for 
the sake of talking, percent of that rebate. That serves to, 
you know, increase the cost of the actual drug by 60 to 100 
percent, with none of that actually going to the manufacturer 
itself.
    One of the big misconceptions we have at Cost Plus is that 
we're able to somehow better negotiate the price of these 
medications, or we get a better price. We don't. We actually 
pay more. Manufacturers like working with us because we're a 
small entity as opposed to one of these big purchasing 
conglomerates. So they--we actually pay them marginally more 
than the competition, and yet we're able to still save patients 
significant amounts of money.
    And that 88 percent discount, let's say, that can be just 
an average. We've seen much more extreme discounts--or rebates, 
rather. Imatinib, the chemotherapy agent, has a list average 
wholesale price, the generic, of $10,000 for a month's supply. 
Meanwhile, we sell it at our website with--and again, paying 
more than other suppliers--for $30, about $30, for that same 
month supply. And the actual adjudicated cost, so the actual 
price patients pay, we see at the counter at, like, CVS or 
Walgreens is 2,000, $3,000 for a month supply. And that's not 
going to the manufacturer. So it's just extreme distortions in 
the way drugs are paid for.
    Mrs. Rodgers. Thank you. Thank you for that. And I don't 
think that there is a single, all-encompassing solution for 
shortage problems.
    Would you speak to how transparency, additional 
transparency, might help?
    Dr. Oshmyansky. Oh, sure. You know, I think if patients, 
providers, payers just know what these medications actually 
cost and what percentage are going to intermediaries in the 
supply chain, you know, I think if patients learned that most 
of the money they were spending on insulin went not to the 
insulin manufacturer but to the intermediaries in the supply 
chain, you know, I think that would incentivize, you know, a 
change in the way the supply chains work to have, you know, as 
my colleagues have been saying, more of the revenue going to 
the people that do the actual hard work of the manufacturing 
itself.
    And forgive me, I didn't answer your last question entirely 
as to, you know, what are the dynamics that lead to only a few 
manufacturers getting contracts. Because of the oligopolies at 
the levels of the purchasers, the sourcing programs, rebate 
aggregators, GPOs, all of these subsidiary entities of the big 
purchasing conglomerates, only a couple companies can win that 
battle for the contract. And say there's 12 manufacturers. If 
only two or three win the contracts, you know, the others have 
no incentive to keep their supply chains open.
    Mrs. Rodgers. Thank you.
    Dr. Oshmyansky. So if we just create an open marketplace 
where, you know, the manufacturers themselves can compete on 
quality----
    Mrs. Rodgers. Thank you. I am going to--I am running out of 
time here. I had--and I wanted Dr. Sardella--I am going to have 
to ask others--to address you.
    I wanted to give--Ms. Bray, you started talking about the 
potential of public-private partnerships, and I just wanted to 
give you my remaining time to talk--just hear some more about 
the potential to help meet--solve this problem.
    Ms. Bray. Thank you. And I just realized I never mentioned 
Abby is doing great. She's thriving. She's 13 today, and 
entered survivorship this spring.
    Mrs. Rodgers. Oh, that is great to hear.
    Ms. Bray. So just--since I never mentioned that.
    You know, any healthy, you know, important supply chain 
relies on partnership, and every member will need to have a 
place at this table, especially when we talk about 
incentivizing the right motives.
    The FDA's 2019 ``Root Causes, Possible Solutions'' report 
stated in the executive summary, ``Enduring solutions will take 
multistakeholder efforts and rethinking business practices.'' 
That's basically all I've been doing since we founded.
    How do I collaborate with as many people as possible in the 
supply chain? It includes the FDA, it includes the supply chain 
members, it includes the manufacturers and the hospitals.
    How do we align our incentives to get as many patients the 
needed drugs that they deserve? And that's, you know, the one 
message I want to say: We need to be connected and collaborate, 
but then there needs to be tools of connectivity so we can 
scale.
    Mrs. Rodgers. Thank you.
    Ms. Bray. Thank you.
    Mrs. Rodgers. Thank you very much, thanks for being here.
    I yield back.
    Mr. Griffith. The gentlelady yields back. I now recognize 
the ranking member of the full committee, Mr. Pallone, for his 
5 minutes of questions.
    Mr. Pallone. Thank you, Mr. Chairman. I am still concerned 
that FDA lacks the information it needs about how 
pharmaceutical products are produced and real-time data 
regarding changes in supply and demand for drugs and their key 
ingredients, so let me ask Dr. Muzzio: What gaps remain when it 
comes to our knowledge of the pharmaceutical supply chain, in 
your opinion?
    Dr. Muzzio. I'm sorry, I didn't hear you.
    Mr. Pallone. Let me get closer to the mike here. Dr. 
Muzzio, what gaps remain when it comes to our knowledge of the 
pharmaceutical supply chain?
    Dr. Muzzio. Well, there are many. In addition to the ones I 
have mentioned, I want to point out that there is an additional 
factor that I'm very concerned about, which is in reading all 
the government reports on this issue, you know, on the last 
couple of years, there is only barely a mention of the chemical 
building blocks that are needed to make the drug substances.
    So the discussion is, you know, who makes the finished 
product, or who makes the drug substance, but then it turns out 
that, to make the drug substance, you need to have access to 
pieces of that molecule. And there is very, very limited 
knowledge of where those pieces come from, except to say that, 
for many APIs made in India, which we consider a friendly 
nation, in many cases the building blocks also come from China.
    So we might have to go earlier upstream the supply chain to 
ensure that we are able to actually make things in friendly 
shores, including our shore. So I think that's a big gap in our 
understanding of how--you know, where shortages come from. 
There's been instances where key starting materials were found 
to be contaminated and that triggered a whole sequence of 
events, then bringing other problems as we go--as we went down 
the supply chain. So I think that those are important issues.
    I am aware of efforts at USB, for example, to create a 
substantial map of the entire supply chain. I don't think they 
are unique. There is another organization doing something 
similar. I don't recall their name right now. I think that's a 
very important effort that also needs to be supported and 
strengthened and, you know, completed.
    And we need tools that will allow us to update the model of 
the supply chain dynamically. One important thing is to realize 
that it's not a static object, that once you describe it, it 
remains like that forever. It changes all the time. So we need 
not only to inventory the pathways, we also need to create 
methods to update the model of the supply chain very rapidly 
every time the conditions change. Otherwise, we would be 
fighting last year's war, so to speak.
    Mr. Pallone. All right, thank you. So let me go to 
Professor Bray.
    Where have you seen FDA work most effectively in its 
response to drug shortages, and how could additional visibility 
into the supply chain strengthen that work?
    Ms. Bray. Thank you for asking. I believe the Office of 
Drug Shortage at CDER is doing a lot of great, patient-focused 
work, and it's actually led by people who were our healthcare 
providers. And I think they're doing great work, we work 
together often. They're open to communication and feedback, and 
I'm very appreciative for the work that they do during a time 
of crisis.
    Where we could get better is a lot of the approaches are 
reactive, and there's missing gaps of information, just like 
everybody has said. So I would like to do a mindset shift on 
drug shortages as a crisis, and that mindset shift is to change 
from a focus of mitigation to ending. And so, when you think 
about the fact that our current strategy for drug shortages is 
a word called ``mitigation,'' mitigate means what do we do with 
available supply? And when you ask that question, the answers 
and next questions are, ``Who gets it?'' and ``Who doesn't?'' 
And all you get is disparity and plays for mistrust and power.
    The question we need to be asking, it's a full dynamic 
shift, and it is, how do we end drug shortages? When we ask 
that question, it's how much supply do we need for the American 
people? How do we ensure that we have access to that supply, 
and how do we make sure that supply gets to the people when 
there's disruption?
    And you can see how quickly that mindset shift gets to very 
different solutions. One is potentially reactive that is 
repeated over and over again for 20 years, and one is proactive 
that can work to secure the supply chain for all patients and 
make a more resilient supply chain. Thank you.
    Mr. Pallone. Well, thank you both, and thank you, Mr. 
Chairman.
    Mr. Griffith. The gentleman yields back. I now recognizes 
the gentleman from South Carolina, Chair of our Energy 
Subcommittee, Mr. Duncan, for his 5 minutes of questioning.
    Mr. Duncan. Thank you, Mr. Chair.
    Dr. Sardella, your white paper does a great job in 
outlining the current state of U.S. API infrastructure and its 
potential effects on national security. Your paper discusses 
the vulnerabilities of U.S. pharmaceutical supply chain. In 
particular, you highlight our reliance on foreign sources for 
the active ingredients in our pharmaceutical drugs. Can you 
please share with the committee the potential risk or 
consequences that such a dependency poses to U.S. healthcare 
system?
    Mr. Sardella. Two real risks that we experienced during 
COVID.
    The overreliance on foreign manufacturers leave us 
vulnerable not just to demand shocks like COVID but also supply 
shocks due to geopolitical tensions. During COVID, India had to 
stop any export in order to ensure the safety of their own 
population, which--and, in fact, cut off supplies to the United 
States for critical medicines that we required.
    Second, the chief economist in Beijing--we don't have to 
think it might happen--intimated that our drug supply chain 
was, in fact, a lever to ensure that we cooperated as a country 
on geopolitical issues ranging from trade to Taiwan.
    So we've experienced the risks of being overreliant 
already, from a geopolitical perspective as well as from a 
supply to citizens.
    Mr. Duncan. It points to the need to onshore both 
pharmaceuticals, microchips, energy sources, because in a time 
of war or a pandemic like we saw, when the United States of 
America is reliant on sources for any of those things from 
overseas, then systems stop and the ability to provide the 
medication that our constituents need is important. So the need 
to onshore that is important.
    But when we talk about drug shortages, you have got to keep 
in mind that in many instances making generic drugs is simply 
not profitable. So let's shift to generic. In those situations, 
the manufacture does not have the resources or economic 
incentive to invest in the manufacturing of those products to 
keep them on the market, especially if it's a loss leader.
    So could you speak--with the passage of the Inflation 
Reduction Act, which is a misnomer, is it possible that brand 
products selected for negotiation have generics in development?
    And if a drug selected for negotiation makes it harder or 
less profitable for generics to come to market, could we see an 
increase in the shortages?
    Mr. Sardella. Well, first, in regards to the shortages from 
overreliance, the strategy should not be to just move the same 
type of manufacturing to the United States to produce them at 
economic low profitability or losses. It should be to leverage 
the advanced technologies, technologies that Fernando mentioned 
such as continuous flow, that allow for significant cost 
reductions.
    The API Innovation Center is focused on a series of 
oncology drugs. We took a crisis in oncology, the drug called 
lomustine, built a consortium of innovators who had developed 
new, novel techniques to produce it using continuous flow, 
existing manufacturers with capacity to produce it here in the 
United States on behalf of the Glioblastoma Foundation.
    It also engaged with critical entities such as Emerson that 
makes the control systems. It took numerous stakeholders. The 
impact of that is a 90 percent cost reduction on a drug that 
now, all of a sudden, becomes feasible to manufacture in the 
United States for the Glioblastoma Foundation.
    So it requires very much technology to do that, to compete 
long term. It also requires changing to incentivize that U.S.-
based manufacturer, allowing for changes in formularies and 
preferred drug lists to, in fact, allow for that manufacturer 
with advance technologies that are more environmentally 
favorable, less footprint, as well as economically more 
favorable, to be chosen in the formulary.
    Mr. Duncan. Is the hangup to do that the FDA?
    Mr. Sardella. There's numerous instruments that can be 
brought to bear that wouldn't require significant legislative 
change in regards to allowing it. So there's an ability to 
designate on those formularies what the requirements are for 
preferred drug. And it could be U.S.-made, made from a facility 
that has no warning letter. And third, using even advanced 
technologies, which would allow for more energy efficiency, 
lower environmental footprint, and as well, higher quality 
standards, as Fernando had indicated.
    This is within our grasp, very reasonable grasp.
    Mr. Duncan. Thank you so much.
    Chairman, I yield back.
    Mr. Griffith. The gentleman yields back. I now recognize 
the gentleman from New York, Mr. Tonko, for his 5 minutes of 
questioning.
    Mr. Tonko. Well, I thank the Chair and ranking member for 
the opportunity today and welcome the witnesses.
    Getting ahead of drug shortages will allow us to increase 
access to lifesaving medications for patients when they need 
them most. As we have seen this past year, shortages can happen 
because of unanticipated spikes in demand for drugs. I am 
thinking today about parents of sick children who couldn't 
obtain children's Tylenol during this year's confluence of RSV, 
COVID-19, and influenza, or people with ADHD who could not 
consistently obtain important medications because of an 
anticipated surge in demand due to a sharp increase in 
prescriptions through the pandemic.
    One of my constituents from Saratoga Springs shared how she 
could no longer find her daughter's medication. And she said, 
``As a mother, I can't believe this, that a child that needs 
medication can't get it.'' It is a sentiment of both shock and 
outrage I share along with many of my constituents.
    My understanding is that, without more drug information 
about the demand for drugs, we don't know how much production 
is required to meet that need. For example, a study in 2022 
from Brandeis University found that there was a shortage of 
naloxone, a critical drug used to reverse overdose in nearly 
every U.S. State. The study found that the shortage was in part 
created because there was no comprehensive data on how much 
naloxone was needed and who was using it. So I want to be sure 
our agencies have all the tools they need to be able to 
accurately gauge demand fluctuations so that we know where we 
need to fill in gaps.
    You noted in your testimony, Professor Bray, that FDA 
currently has limited visibility into spikes in demand for 
pharmaceutical drugs. Why is having greater visibility into 
that demand for prescription drugs so important, and what would 
having that information allow FDA to do?
    Ms. Bray. Thank you for asking. Well, I think we've spent a 
lot of time talking about the supply-side issues of this 
crisis, but there are demand-side issues. And just because we 
fix the supply-side issues doesn't mean patients are going to 
get equal and disparity-free access. So we at Angels for Change 
spend a lot of time making sure available supply onshore is in 
the right place at the right time, instead of stuck somewhere 
in the supply chain.
    So it does--we are blind a lot when we don't know what's 
happening with spikes of demand. The entire supply chain is. 
And so when we throw in a potential solution based on old 
information, what happens is that solution actually works, but 
then a spike of demand makes it fail, and then it builds 
additional distrust in the entire supply chain.
    So I do think--I often am flying blind about what's going 
on with the demand, and where the actual drug is, and it is a 
very laborious noneconomies-of-scale process built on a 
painstaking network of American people who care. Like, emails 
and phone calls, ``What are we doing? Where is it?'' This is 
unnecessary. We could have, you know, not--but it's not just 
the information, it's what are we going to do with it? What's 
the tool we're going to do to make sure people have access?
    And then you got to the beginning--the beginning part of 
your question was actually about Adderall and amoxicillin. You 
know, it's the information before then. Those were predictable. 
There were people who are subject matter experts who knew those 
things were happening, who tried to ring those bells well 
ahead. And some of us put in some safeguards because of them. 
And so we need data that leads to prediction so that we don't 
have disruption, and that's the key.
    And just like my colleague said, there is amazing work 
being done. We have many times worked with USP and their 
medicines supply map. They are doing unbelievable work mapping 
the entire global supply chain. It isn't effective until it's 
used to solve it for the American people.
    Mr. Tonko. Thank you.
    And Dr. Oshmyansky, you, in your testimony, share that the 
manufacturing systems used in your facility can transition 
between making batches of different medications within hours, 
when it usually takes months. How would collecting greater 
insights into unanticipated demand allow facilities like yours 
to respond in a nimble and agile way to a shortage?
    Dr. Oshmyansky. Oh, sure. So the longest lead time item for 
our manufacturing is not really switching over to supply lines. 
It's sourcing the active ingredient.
    So our plan is to have a portfolio of active ingredient of 
the drugs we anticipate will go into shortage, send them to 
independent laboratories for quality and safety testing. That 
process takes a few months. Once we've done that process, we 
don't need to repeat it. But if we can anticipate what the drug 
shortages are predicted to be ahead of time, we can have that 
API in our portfolio ready to go.
    Mr. Tonko. Thank you so much.
    And with that, Mr. Chair, I yield back.
    Mr. Griffith. I thank the gentleman for yielding back. I 
now recognize the gentleman from Texas, Mr. Crenshaw, for his 5 
minutes of questioning.
    Mr. Crenshaw. Thank you, Mr. Chairman. Thank you for this 
hearing, and thank you to our witnesses for being here today. 
It is an important subject.
    You know, in the Houston area, just outside my district, 
Texas Children's Hospital, 80 percent of their patients are 
impacted by drug shortages. That is the whole hospital. They 
currently have 101 medications on back order, 350 medications 
on allocation, where they are limited in the quantity that they 
can produce. Eight of these are chemotherapy agents that are 
used in first-line treatment of pediatric cancer.
    So I want to, in as little time as possible--because this 
is a much longer conversation--but Mr. Sardella, I want to 
figure out how this supply chain looks with active 
pharmaceutical ingredients to the--in the best way that we can. 
Eighty-five percent of APIs are from foreign countries. Sixty 
percent of our finished dose forms are from foreign countries. 
And, you know, a lot of people wonder why.
    So what is in an API? Just a variety of other chemicals? Is 
there--are there--is there, like, a top three chemicals that 
are in APIs? Can you describe that really quickly?
    Mr. Sardella. Yes, and you bring up an excellent point. The 
API itself is the chemical that produces the medicinal effect. 
It is the most important element in that capsule tablet, in 
that drug.
    Mr. Crenshaw. But the----
    Mr. Sardella. The remaining elements are elements that 
allow for either the transport through your digestive system or 
other type of elements to allow it to survive and be effective.
    And quite interesting, what you bring up is something that 
we've seen. It's API, even we've heard capsules or the caps of 
a bottle will be in shortage and have a supply chain challenge 
which may prevent--we always think of just the active--but all 
these other areas, the excipients, et cetera.
    Mr. Crenshaw. But I want to focus on APIs for a second. So 
an API is a chemical, but it is a chemical made up of other 
chemicals.
    Mr. Sardella. Correct.
    Mr. Crenshaw. Right? And where do those other chemicals 
come from?
    Mr. Sardella. Oh, yes.
    Mr. Crenshaw. You know, and----
    Mr. Sardella. So----
    Mr. Crenshaw. Go ahead.
    Mr. Sardella. Yes. So we are reliant on what would be 
called starter materials. And these are the original chemicals 
that allow us to make those APIs. The majority of them are 
carbon-carbon, carbon-nitrogen, carbon-oxygen bonds. They're 
the foundational elements.
    To build a sustainable API, we need to also allow for the 
creation of starter materials here in the United States.
    Mr. Crenshaw. And this is--I do have a point to this. So 
those starter materials are widely available in the United 
States.
    Mr. Sardella. Mm-hmm.
    Mr. Crenshaw. Right? They are generally derived from 
petrochemicals. So, like, benzene, which is like a natural gas-
derived chemical, is used to make ibuprofen.
    Mr. Sardella. Mm-hmm.
    Mr. Crenshaw. I didn't know that. We have a lot of natural 
gas and benzene. Like, these are easy base chemicals to get. So 
we are exporting these base chemicals to other countries so 
they can make the APIs, so they can send back those APIs to us 
to make the more advanced drugs, the final product, and then we 
complain about our supply chains.
    What is stopping us from cutting out that middleman? Is it 
a policy issue? Is it a market issue? What is happening there?
    Mr. Sardella. It would be having economically viable 
domestic API manufacturers that can be the purchasers of those 
starter materials.
    Mr. Crenshaw. OK.
    Mr. Sardella. That would be the key to its consumption and 
use here in the United States.
    Mr. Crenshaw. Nobody just--nobody has had that business 
idea?
    Mr. Sardella. Well, the APIs, a majority of the generic 
ones, are not economically viable to produce in the United 
States. And so they've been offshored. And so that demand, that 
U.S. domestic demand----
    Mr. Crenshaw. Why aren't they economically viable? What do 
they state as their reasons for not opening up shop?
    Mr. Sardella. Yes, they'll cite lower labor costs as one 
reason. They'll cite economies of scale, government incentives 
that these other countries have received to build their 
facilities. Even right now, India is subsidizing new facilities 
being built so that they wouldn't be reliant on China----
    Mr. Crenshaw. Well, in a very short amount of time we did--
we did get a lot out of you, so I appreciate it, but I want 
to--I want to move on, please, to Laura Bray.
    Thank you for being here with Mother's Day coming up, and 
the problem we have with especially cancer drugs for kids. So 
real quick, what roadblocks are currently in place at the FDA 
that really create the problem you are trying to solve? What 
would be your top three? Or one.
    Ms. Bray. So, I mean, I think part of the problem here is 
this is a very, very large risk solution for any one member to 
take on, right? So there are a lot of barriers everywhere. 
There's not just barriers in one member, there is a lot of risk 
of any one member taking----
    Mr. Crenshaw. I totally get that. But I--you know, we have 
to focus on one thing, and I like to focus on the FDA. So, 
like, from your perspective, what would change at the--what 
would be a better way the FDA would do business that would help 
what you are trying to accomplish?
    [No response.]
    Mr. Crenshaw. It is OK if you are not--if it is----
    Ms. Bray. I--you know, I think we all have--every member 
needs to come to this table because it is so multifaceted, and 
there are true and real reasons for every single policy that 
has been put in place. But we're--keep putting policies on top 
of policies of broken marketplace. And so I think we all need 
to be at the table saying, here's the solution, here's what my 
part can do, here's what my part can do.
    And so to pick one thing from one member to do, as my 
colleague said, it's such a dynamic marketplace, it would 
quickly become extinct, right?
    Mr. Crenshaw. Yes.
    Ms. Bray. We need to all be at the table.
    Mr. Crenshaw. We need solutions. You know, and----
    Ms. Bray. So the----
    Mr. Crenshaw [continuing]. So, you know, one of the things 
I would point out----
    Ms. Bray. So the solutions are we've got a six-point plan.
    It's first, align the incentives and motives. Everybody 
needs to be at the table, aligning those motives.
    It's employing prediction and forecasting, followed by 
being ready to supply the American people.
    Then we have to empower the collaboration of this 
multifaceted supply chain.
    Patients need to be at the center of the solution, so we're 
ending shortages instead of mitigating them.
    And we need to establish an entrance and exit ramp so that 
the marketplace can evolve without patients getting left 
behind.
    That's the steps. And it's multilayered.
    Mr. Griffith. The gentleman----
    Mr. Crenshaw. I appreciate it, I yield back.
    Mr. Griffith [continuing]. Yields back, but we may very 
well have some what we call QFRs, questions after the hearing, 
and we will get an opportunity to answer at that time.
    I now recognize the gentlelady from Arizona, Mrs. Lesko, 
for her 5 minutes of questioning.
    Mrs. Lesko. Thank you, Mr. Chair, and thank you for all of 
you being here. I apologize, I had to go to another committee 
hearing and come back here.
    Mr. Sardella, a key role of the FDA's mission to ensure 
drug safety, effectiveness, and ultimately, availability 
includes its foreign and domestic drug manufacturing facility 
inspections program. While the COVID-19 pandemic effectively 
halted nearly all overseas inspections for 2020 and part of 
2021, the number of inspections conducted both in the U.S. and 
overseas has been precipitously declining since 2016.
    In 2019, in its 2019 report of FDA inspection data, the GAO 
identified FDA's inability to oversee the global supply chain 
as a high-risk issue and concluded with recommendations to the 
agency to increase the number of inspections of foreign drug 
establishments.
    Unfortunately, GAO's 2022 followup report on FDA's 
inspection capabilities did not conclude that the agency is in 
any better off--is any better off in conducting timely and 
reliable foreign inspections. In fact, GAO found that the share 
of foreign facilities that have not been inspected in over 5 
years has increased from 30 percent in 2020 to nearly 80 
percent in 2022.
    Furthermore, GAO shared that the FDA inspected just 6 
percent of facilities overseas in 2022. Given that most U.S. 
drugs and APIs are manufactured in foreign facilities, this 
raises serious concerns with FDA's ability to ensure the 
quality and availability of human medical products manufactured 
overseas.
    So my question to you is, how critical are timely and 
effective inspections of both domestic and foreign 
manufacturing facilities for ensuring the security of our drug 
supply chain?
    Mr. Sardella. They're absolutely essential for us ensuring 
the quality and the safety of the medicines that U.S. citizens 
consume.
    They're also extremely important in ensuring the stability 
of the market because, through those inspections, the ability 
to understand which manufacturers are complying, which 
manufacturers are delivering on quality manufacturing 
processes.
    And then the next element there is incentivizing that, 
rewarding those that don't have any warning letters for decades 
and decades, as opposed to those who, in fact, would. The 
ability to make that distinction on quality is to have a robust 
inspection, auditing process that allows us to make those 
distinctions, both to ensure the market is stable and to allow 
for safety of the medicines.
    Mrs. Lesko. I agree, and I think most U.S. people would be 
surprised at the low number of inspections that are going on 
for the drugs that they are taking each and every day, and 
foreign drug makers.
    This past December the President authorized $10 million for 
a pilot program to increase the number of foreign inspections 
at the FDA. However, the agency has cited challenges in the 
agency's ability to recruit and retain investigators as a major 
factor in the delay or dereliction of timely foreign 
inspections.
    Again, Mr. Sardella, how confident are you that this pilot 
program will close the gap in the share of overseas 
establishments that remain uninspected, while there remains a 
fundamental challenge within FDA to retain investigators and 
prioritize foreign inspections?
    Mr. Sardella. Yes, I feel FDA is no dissimilar to any 
organization in its struggles to develop talent, recruit talent 
to conduct its efforts. I feel they, like all organizations, 
will be challenged to be able to allow for the right workforce 
that enables them to go overseas as well as globally to do 
their inspections.
    I also feel that there's other opportunities to allow for 
understanding the quality of medicines that are more technical 
in nature versus only inspection in nature.
    Modernizing the monitoring systems. Fernando had talked 
about the new emerging advanced manufacturing technologies, 
control systems that monitor the productions every second as 
these medicines are produced. Those will allow inspection and 
observation without being at the facility, only through data 
transport in real time, every second. Those will be very 
transformational capabilities that we should look into and 
enable the FDA to utilize and leverage.
    Mrs. Lesko. Thank you, and I yield back.
    Mr. Griffith. I appreciate the gentlelady yielding back. I 
now recognize Dr. Ruiz of California for his 5 minutes of 
questioning.
    Mr. Ruiz. Thank you, and thank you all for your testimony 
today.
    Drug shortages have serious impacts on quality and safety 
of patient care in this country. Before Congress I practiced as 
an emergency physician at Eisenhower Medical Center in 
California. I have seen firsthand the effects that drug 
shortages can have on patients, their providers, and their 
families by causing delayed care or second-choices treatments, 
especially when I want to intubate a patient and we don't have 
succinylcholine, and I have to use another paralytic that is 
not used very often, OK?
    Professor Bray, how have you seen shortages play out for 
patients seeking emergency care?
    Ms. Bray. Thank you for asking. There is severe patient 
impact happening every day, and not just in missing, skipping, 
or changing doses. Ninety percent of oncologists state that 
drug shortages have led to patient harm, up to death.
    We also can't forget the emotional trauma that you're 
putting on a family in a medical crisis. Patients deserve 
access to these medicines. The patient--the physicians and 
nurses and care team who are trying to solve these crises and 
save them deserve easy and equal access to these medicines.
    Mr. Ruiz. Thank you. Generic drugs are particularly 
vulnerable to shortages: 40 percent of drugs--40 percent of 
drugs--have only one manufacturer, and most generic drugs have 
only one competitor per drug. Having limited sources for 
essential drugs or medical supplies is dangerous, particularly 
when an emergency strikes.
    So, for example, when Hurricane Maria devastated Puerto 
Rico in 2017, a major saline manufacturer was damaged. This 
caused a shortage for hospitals throughout the country of this 
very basic and critical lifesaving medical supply.
    Dr. Muzzio, can you--how can the Government support more 
diversified drug manufacturing that is less susceptible to 
supply chain disruptions?
    Dr. Muzzio. Thank you for the question. We've been looking 
at this very carefully because, as my colleagues mentioned, 
there are a number of economic constraints. And we have also a 
30-year history now of offshoring and losing manufacturing 
shares. So the reversal of that process is going to take 
sustained plan over many years with, you know, a lot of insight 
into not only how to make it profitable again but also how to 
regain the know-how that we have lost and how to build better 
systems that are more nimble, able to do more flexible 
manufacturing of a larger number of products. I'm very 
encouraged by some of the things that I've been hearing.
    One way the Government can do it is by recognizing the 
following. There are reasons why the generic manufacturers are 
having trouble implementing the newer technologies, right? They 
cost a lot of money, they take a long time, and they don't have 
access in-house to people with the knowledge. So this is the 
perfect opportunity to create, again, centers of excellence, 
places where we have the knowledge, we have the people, and we 
have the equipment needed to implement the solutions, working 
closely with contract manufacturers that can then very rapidly 
pick up the required manufacturing tasks----
    Mr. Ruiz. Thank you.
    Dr. Muzzio [continuing]. Like 503(b)s or other 
manufacturers. It will take a network----
    Mr. Ruiz. Thank you.
    Dr. Muzzio [continuing]. To solve the problem.
    Mr. Ruiz. Center of excellences.
    Mr. Sardella, in its July 2021 Report on Supply Chain 
Resiliency, the White House proposed several recommendations to 
strengthen the generic market. The report recommended providing 
greater predictability in production costs, pricing, and volume 
sold to manufacturers, as well as increasing government and 
private-sector flexibility in contracting and sourcing. How 
would enacting these recommendations help strengthen the 
generic market and help prevent future shortages?
    Mr. Sardella. The ability to have certainty in your demand, 
from a business perspective, would drive economic investment 
and production of these.
    A common instrument of contracting in the United States 
Government is what's called the IDIQ--Indefinite Demand, 
Indefinite Quantity. There's no ability to have certainty in 
your investments if you have an indefinite demand or an 
indefinite quantity. Solidifying those quantities, the years of 
demand, will allow for businesses to make investments and 
understand their return to their shareholders or to their 
owners.
    Mr. Ruiz. Thank you.
    So drug shortages cause severe adverse health outcomes and 
are an urgent problem. We need to support policy and resources 
that help address supply chain vulnerabilities so that 
shortages are less frequent and can be quickly addressed, stat.
    I yield back.
    Mr. Griffith. I thank the gentleman for yielding back. I 
now recognize Mr. Palmer of Alabama for his 5 minutes of 
questions.
    Mr. Palmer. Thank you, Mr. Chairman. Thank you for holding 
the hearing, and for the witnesses' testimony today.
    Dr. Sardella, one of the things that I am concerned about 
is the FDA's role in the shortages. And in your testimony you 
mentioned the expensive and complex compliance challenges that 
so many drug companies face.
    In a previous Congress, we had had a number of hearings 
related to drug manufacturers and the massive increase in cost, 
and one of the things that we discovered was how regulations 
had forced a lot of companies either out of business or into 
being sold to other companies so that the company that bought 
them basically became the sole manufacturer. We saw that with 
drugs like insulin and EpiPens, things like that.
    I just want your thoughts, a little more clarity from what 
you said in your testimony about how this is impacting the cost 
and availability of these drugs.
    Mr. Sardella. Yes. So, as a manufacturer, if we start with 
the understanding that their profitability is already low, when 
they have a warning letter from the FDA there is therefore an 
expense that they have to incur to bring the facility up to 
standards to meet that. Sometimes the businesses cannot 
afford--their return on their capital is so low already, less 
than 5 percent--I mean, in business school we teach if you're 
anywhere below 20 percent you should be out of business.
    So then when you couple the request to have to comply, the 
facility will shutter. They will not make the investment. Only 
4 percent in recent data--from numbers in the 2020s, only 4 
percent of the FDA warning letters are now being addressed, a 
drastic drop, and that's a result of their inability 
economically to resolve them. So the facilities shut down. 
Akorn, a facility, just recently shut down.
    Mr. Palmer. Right, I saw that.
    Mr. Sardella. Nesher, as well.
    Mr. Palmer. Yes. And then, when you combine that with the 
need to upgrade the manufacturing processes with newer 
equipment and things like that, and the stranded cost that's 
involved in that, plus for newer drugs the stranded costs 
involved in that, it really becomes an economic issue in many 
respects that we have to address.
    And again, listening to your testimony and reading your 
testimony, you make excellent points about the order of 
magnitude increases in drug production if we--if the companies 
had the ability to upgrade their equipment.
    Would you think that incentives or tax credits, things like 
that, would be helpful to companies?
    Mr. Sardella. Incentives, very much. One we are--we have an 
example.
    The API Innovation Center is working with the State of 
Missouri. The State of Missouri is funding the derisking of 
their adoption of new technology. So what we've done, as a 
nonprofit, we've procured the new advanced manufacturing 
technology, developed it, and are placing it in existing 
Missouri manufacturing, manufacturers that have been there, 
some for 100 years, some new ones for 30 years, and some for 
just 10 years. And that now is being able to bring supply for 
cancer drugs like lomustine and a suite of an additional six.
    In some respect, those incentives derisk the adoption, very 
effective. The one element of the tax incentive is when you 
have an industry with such low profitability, tax incentives 
are less effective than creating certainty of demand by 
changing formularies.
    Mr. Palmer. Well, you set me up perfectly for where I want 
to go with this.
    And this is a little different direction, Mr. Chairman, 
because in 1996 the Clinton administration repealed section 936 
of the U.S. Internal Revenue Code, which provided tax 
incentives for drug manufacturers, and it had a devastating 
impact on the pharmaceutical industry in Puerto Rico. And what 
people don't realize is that, of U.S. territories, including 
the States, Puerto Rico even today still manufactures more 
pharmaceutical products than any State, including Indiana.
    But after the repeal of 936 we saw an exodus of drug 
manufacturers to other countries. In a number of respects I 
remember Horizon Pharma out of Chicago moved enough of their 
production and headquarters to Ireland because if they reached 
a certain percentage of foreign ownership they were not subject 
to U.S. taxes, and their tax went down to 12\1/2\ percent.
    So what do you think about reinstating section 936, and 
particularly in how it would impact our ability to produce the 
drugs that we need?
    Mr. Sardella. Yes, I don't know the regulation or 
legislation well enough to comment, but I do believe tax in 
that case would be a strong instrument to incentivize 
manufacturing in the U.S.
    Mr. Palmer. Well, it was a huge industry in Puerto Rico. It 
was--obviously, the problems were compounded with Hurricane 
Maria years later. I think it was 8 years later, that.
    Mr. Chairman, I think that is something that we need to 
explore. We might not be the right committee for that since it 
is a tax issue, but I do think it is part of the solution.
    I yield back.
    Mr. Griffith. I thank the gentleman for yielding back.
    Seeing no further Members wishing to ask questions, I would 
like to thank each of our witnesses for being here today. Thank 
you all so much.
    In pursuance of committee rules, I remind Members they have 
10 business days to submit additional questions for the 
record--that is the QFR, questions for the record--and I ask 
that witnesses submit their responses within 10 business days 
upon receipt of those questions.
    Without objection, this committee is adjourned.
    [Whereupon, at 12:15 p.m., the subcommittee was adjourned.]

                                 [all]