China’s Stranglehold on America’s Drug Supply: Rosemary Gibson

The United States depends on China for 95% of the key components that are necessary to make our generic drugs. And if China shut the door on exports, within months, our health care system would begin to collapse. It's a disaster waiting to happen. Rosemary Gibson is a top authority on healthc care policy and patient safety and the author of China RX exposing the risks of America's dependence on China for medicine. How come we don't know that our medicines are being made in China? And for years there was actually zero regulation. How do we outsource production from a country with the highest standards in the world to places with no standards? In this episode, we dive into the realities of China's control of America's medical supply chain, the increasing problem of contaminated medications, and what the current administration can do to fix it. A very important drug for people with diabetes, metformin. Some of the manufacturers versions have levels of carcinogens that just shouldn't be there. The FDA's known about this for years, but nothing happens. This is American Thought Leaders, and I'm Ya Kellik. Rosemary Gibson, such a pleasure to have you back on American Thought Leaders. Yan, it's great to be back. Thank you so much for having me. We interviewed almost exactly 5 years ago. This was COVID pandemic time, early days, and you were talking about what this exposed in our supply chains of components of medicines, the the threat that existed there. And I was shocked. I was this this was frankly unbelievable information to me that we could be so vulnerable here in the west to China using these supply chains. Has anything changed? I remember when we met Yan and it was as Washington and the country was shutting down and we talked about China RX and that's what exposed how dependent we are as a country on China for what we need to survive as a country during a pandemic. The United States depends on China for 95% of the key components that are necessary to make our generic drugs. And if China shut the door on exports, within months, our health care system would begin to collapse. That's how dependent we are. And it's not just us. The world is dependent. Europe is dependent because China has a chokeold on those upstream raw materials and chemicals needed to make these active ingredients which makes a medicine medicine and that turns into the pills and vials that that we have and take. And I recall that it's about 91% of the prescribed medicines in the US are actually these generics. So this is massive. It's huge. And whatever hospital you're in, whether it's all the bigname hospitals, what they use are generic drugs and they're about 90 91% of what's administered and prescribed. Well, this may be obvious to some of our viewers. Why is this a problem? Well, as China X predicted, a lot of what happened that in the event of a natural disaster, global pandemic or a geopolitical event, the United States will be waiting in line behind other countries to get vital medicines to save people's lives. We have lost our industrial base and during the pandemic that we had rationing of vital medicines in this country. It wasn't called rationing. that would scare the public. The media didn't call it rationing. The euphemism used in the industry is, "Well, Dr. So and so, well, we won't be able to deliver those drugs to you today. They're quote on allocation," which means they're actually allocating whatever they have in certain priority areas. So, we were rationing drugs in the United States. And this is because what? And spell it out for me here. This is why because we have lost our industrial base to be able to make the medicines 90% of our medicine supply. We can't make it anymore. We can't make antibiotics anymore in this country from beginning to end. We can't make penicellin. We can't make those antibiotics needed to treat sepsis which can kill you. We can't make the antibiotics to treat pneumonia, sexually transmitted diseases. We offshored that and that's a risk of huge you know tremendous national security and if I if I may say while we were very focused on treating viral infections what about bacterial infections and during the pandemic in the early 1900s what people died of was not viral infection but bacterial infections and they died because we didn't have antibiotics and if you remember back in March 2020 China said well if the US doesn't do what we want we could withhold pulled antibiotics from the United States. Think of that. Well, I I think you know I remember when that happened and I was thinking about our interview, right? Because this was basically the case in point. Absolutely right. We have a system that is perfectly designed for catastrophic failure and significant loss of human life. And that has to change and it's fixable. This is a man-made problem. You know, it strikes me there's basically two dimensions here of the problem, right? One is, you know, where where they're being made. So, you know, we know a lot of them come from India, but we also know that a very significant portion of what's made in India, those components come from China. So, it's really China. China RX exposed that. And this was a big shock to me. We all think of India, which is a great generic powerhouse, but then you look more deeply and during uh co pandemic the Indian government actually came out and said that we depend and our generic industry depends on China for 69% of the components it needs for its industry. I can't think of any other product any other food commodity whether it's wheat, rice, corn or energy supplies that we have so c allowed to be centralized in a single country whatever country it is is a disaster waiting to happen. You're giving me a 95% number. explain to me how you got there. Sure. Well, first off, we're talking about thousands of different raw materials and chemicals that are used to make our medicines, generic and branded drugs. And where I got the 95% figure from is from people who actually make medicines. They are pharmaceutical engineers. They're CEOs of companies. So, I'll tell you a quick story. So in February of 2020 when a virus was coming from east to west and going to hit North America, I was having dinner with five extraordinary people who had a combined experience of 150 years in making medicine. So I asked him this question as you know the entree was being served. I said, 'So, we're going to need generic medicines to take care of very sick people in intensive care units or emergency rooms. What percentage of the components needed to make those medicines are sourced from China? And it was 90% 95% 90% 95% 95%. as we went around the table. So that's one data point from people who have to go source from distributors and they in turn this is their business. It's what they do. It's like you're a chef and you know where all your ingredients come from and who are the best sources and the country of origin often of where they're made, where they're produced. Another data point is um a wonderfully respected leader in Europe who ran and a company that supplied actually generics to our military. He said that it's about 98% of our generic drugs depend on some component from China. and another executive uh from Holland now retired. He said China owns that raw material market globally and even the Europeans are concerned that what if they decide to withdraw that and talking about this first dimension right which is where you know all of these things coming from China hard to fathom that that could have ever happened you know after that threat of withholding during the covid pandemic what has changed have we been rushing to bring back those supply chains, repatriate them to America in the west or you know friend shore as they call it perhaps as well. Overall I think there's been very little change. Companies have habits of how they purchase and they want to purchase the cheapest product and we can talk more about this later and how that system works. But if you have a focus only on cheap and not quality and value, it can really get you into trouble. Here's how the antibiotic market, how we lost that. Our last penicellin fermentation plant, China dumped penicellin raw material on the global market in the mid 2000s. dumped it means they sold it at a very low price with the intention of driving out US, European and even Indian producers and at the end of the day China became the dominant global supplier of penicellin material and then they raised the price. So, I think the reason that we're not winning on this yet is because China has a strategy and it knows exactly the pain points of each country and each region. And if they see a move in one direction for an important product, they can say, "Well, we're going to dump a product, lower the price, and that will deter Western manufacturers from getting back into the game." Well, and we don't have a strategy like that. And Rosemary, one quick sec. We're going to take a break, and folks, we'll be right back. And we're back with the author of China RX, Rosemary Gibson. Let me just qualify this that there's the strategy is not just commercial. This is an industrial strategy by a foreign government to remain dominant in this sector and as it sees fit to use that as leverage over any country that it wants to get what it wants. Well, and it's very interesting that you mentioned quality, of course, because this is the other dimension, right? Right. Um, we know all sorts of goods. You know, I had a a trip to the Neutramax uh production facility. You know, they make some very very mostly mostly veterinary drugs, but also a few things, supplements, veterinary supplements and uh supplements for humans. A few as well, some very interesting ones. One thing they told me, their quality chief of quality control told me is, you know, they would get some large amount of precursor that would arrive or large amount of component to make to make the the supplement, right? And they said they would notice, they had a bar, it said it had to be 95% pure, but something would come and be 94% pure. And what they discovered was that if they ever accepted that 94% pure when 95 was the benchmark, subsequent shipments would be even lower in terms of purity, right? And so they would had they learned they have to ship back that entire ton or whatever large amount was so that people understood no that's our benchmark. And that's astonishing. I mean that that itself was an astonishing realization. So there's there's just this kind of natural uh I guess incentive to have cheaper products or these components come in, never mind nefarious intent, which is from a from an enemy country, right? Well, another prediction in China RX is that the FDA would lose control over its ability to perform its regulatory functions and ensure a safe supply of medicines being sold in America. And that's exactly what's happened. And the the pace of that, the the decline in what we're seeing in terms of quality has just um accelerated. And if we don't fix this now, we're in deep trouble. I was uh it was fascinating to hear in February of actually March of 2023, the then FDA commissioner, Dr. Robert Caiff, was testifying before House Appropriations, it was budget season for the FDA. So, this was the most candid uh comments from an FDA commissioner that I've ever heard, and I've been following this now for 11 years. He was ex very concerned about the AY's ability to deal with the Chinese government and its manufacturers. He said the agency had been blocked from traveling to China to conduct on-site inspections of manufacturing facilities. That's a very important part of FDA's regulatory oversight. They check to see if the building really exists. That's where the drugs are being made. that they follow very strict good manufacturing practices. So the agency had been blocked from going. A second concern he raised is the lack of transparency, lack of just being forthcoming. So if you're a manufacturer here in the US, you provide a lot of information to the FDA about your product and your process, your quality control, and that's part of FDA's due diligence. And Dr. Dr. Caleiff said China is just not transparent. And a third point that he raised was uh something that Congress had done which was a good thing to do. Congress gave FDA $10 million to conduct what's called unannounced inspections. So imagine you have friends coming over for dinner. You say, "Why don't you come over and on a Saturday night, you know, next next Saturday night." So you probably clean up your house a little bit and you know, get things in order. That's very different from your friends popping up, ringing the doorbell, say, "Hey, we're here for dinner." And they get to see what your house is like in, you know, in real life, day-to-day. So unannounced inspections are those where, and this happens every day in the United States, the FDA can come to your facility 8:30 in the morning and say, "We're here. We're going to be here for a week or two, and we're going to take a really close look and conduct our inspection." And those are are very very rigorous. Unannounced inspections are enable you to see in real time what's happening. Those have not happened at all in China which has refused them. So Cong Congress spent this money. FDA has tried and Congress has wanted to see this asking for accountability from the agency. But the agency can only do so much. It cannot act if a foreign government does not wish to respect our laws and our intent to protect the American public. So, we're at a crossroads here. And the icing on the cake or the nail in the coffin here was four months later when China said, "We have this new anti-espionage law." And under that law, foreign nationals who come to our country are at risk of being detained if we see whatever vague uh information you may be taking out of our country or doing whatever we think is not right. Which indeed would be the job of the inspector to do precisely that. Exactly. Right. So imagine you're an FDA, you're a federal employee and you have to travel thousands of miles to a country and you got to be really careful. So say you see some things are not right. and you write and you write up your report and you you have to give that report to the uh employees there and the CEO of the company and what if they don't like what you're saying because that report will be used as a basis if they find really serious problems to send a warning letter saying you're in violation of our regulations and the worst case the FDA could ban product and you would lose money. So, how would you feel as an employee coming up against that? What we we got a real good picture of this and it's not just the US that where this is happening. There was a very candid piece in the German trade press and they came out and said that they have their own drug regulators in Germany and other countries counterparts to FDA and they said um our people are afraid and don't want to travel to China because they don't want to be arrested. And what was even more cander was the pharma industry said this is a big problem for us. This means these folks can't go and so we can't have these facilities certified as being compliant with our high standards. We can't get that certificate and that means we cannot sell those products from that facility in Germany. Think about that. Without doubt that is happening here in the United States. If FDA inspectors can't go and the agency cannot perform its regulatory functions, we we have nothing. Isn't shouldn't that mean that the product can't come here? That's exactly right. And so now we have to ask the question, how are these products coming here? How do they get into our marketplace? It turns out there are six US companies that source 90% of the generic drugs that enter commerce that end up in hospitals that end up in retailies and they scour the earth looking for the cheapest price and they look to the FDA. Well, the FDA will take care of us. We'll we'll we'll hide behind their skirts and if they allow us to bring it in, then everything is fine. And even if it hasn't been inspected in a few years, they can say, "Oh, well, this is, you know, the FDA has, you know, said this is okay. The FDA hasn't blocked it." And it's really hard to block in advance a a whole company. It's it takes a lot of effort to do that. And if if we did this across all the substandard drugs that are coming in, we would have shortages up, you know, in in tremendous numbers. So they can bring it into the United States because they focus only on price. And I'll give you an example of how this really works on the ground. So there was a very ethical uh CEO of a generic company in the Midwest. And a couple years ago, he was describing how he was asked by one of the reps from one of these companies, "We'll buy your product, and but here's the price we'll we're willing to pay you." And by the way, this Midwest company had never had a product recall, never had a warning letter, never had a bad um inspection. And so the CEO said, "I'm sorry, I can't make a quality product at that price. Can't do it. this is how we've lost example microcosm of how we've lost our industrial base. So he later found out that this um sourcing company had contracted with a manufacturer elsewhere that had a host of product recalls FDA warning letters which said, "Hey, you're violating our our rules here and our regulations and our law." That is who this sourcing company contracted with. So there's no incentive at all to bring value into the equation. It's only on price. And I watched the trade press over the years, Yan, and they would laugh at, oh well, it's hammer time for generic manufacturers. They would literally hammer down on the price paid to manufacturers. And if you hammer down too hard on anything, it's going to break, right? Quality is broken. Our industrial base is broken. the trust among doctors and patients. You know, people are picking this up. They see that some of their generics don't seem to be working right. You know, it strikes me that, you know, this may be another, not that I believe that every the tariffs are the solution to every problem, but it strikes me that, you know, for poor quality product, it would seem obvious. It'll be really great to see how that turns out and the impact on the market. It's been very interesting to hear that so far, you know, the pharmaceutical industry has always been against tariffs, particularly when it comes to China. So, we'll see how this plays out. Well, Rosemary Gibson, it's such a pleasure to have had you on again. It's great to be here. Yan, thank you so much. Thank you all for joining Rosemary Gibson and me on this episode of American Thought Leaders. I'm your host, Yana Kell. [Music]