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tv   Government Commission Hearing on Chinas Role in Global Health - PART 3  CSPAN  August 28, 2019 4:21am-6:13am EDT

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sunday night on q&a. university of pennsylvania law on free ofessor expression on college campuses collect surrounded a piece she co-authored in the inquirer.ia not all cultures are alike. we are trying to tap this code suited functional and o our society and comparing it to other cultures which are not as functional. we gave examples and that caused firestorm. >> that is sunday night 8:00 q&a.eastern on next a look at the role of china and obal health industries how that impacts the u.s. commission hosted this
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event. afternoon. we will get started. examine panel will u.s. china links in products marketing opportunities and economic health and national security relationships. we will start with benjamin shobel who is a senior associate international health national borrow of asian -- research and n director of strategy for health business strategy at microsoft engagements with national governments, providers biotechnique. then we will hear from katherine journalistestigative bookrtune magazine and her bottle of lies the inside story drug boom reveals
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fraud and dire conditions in the manufacturing plants where the majority of low cost medicine is made. he theuird is a professor and director of global health he t seton hall directs the global health governance roundtable series and the china and global governance project. president of en the united states china business council. joining that he will a long career in public service included multiple tours in china and asia and culminated as ppointment as a u.s. ambassador.
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witnesses it keep the to keep the minute-- seven minutes. > across washington the last three years have been marked by a regular anything much of with granted -- for taken for granted in the u.s. hina relationship needs to be reassessed. given the stpt it which normalized relationship between and china was es ssumed and taken into account during the construction of supply chains such as pharmaceutical and medical fors much of -- sectors has provoked policy politicians to rethink assumptions that have economy.d the whether we should assume highhcare will be a unique technology sector not subject to the strains that mark other high
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technology industries or whether it is earlier in china's foreign direct investment cycle and has will lt the pressures but requires an assessment. ri risk we must weigh their success is applicable to health occur. and buy yes yo -- it has tan nique ecades of vin he is mement and ties between academia, medical centers and industry. should doubt their appetite caution is worth whether it will be as successful as quickly as it has een in other high technology sectors. should china's ambition prove it 23eu8d r filled companies can experience
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issues.ty over f so health care might find today's more positive relationship with the chinese change.could additional ed of attention learning from other industries in china. first, the impact of trade on bilateral investment unique which has characteristics. anxiety over where you get the one thing.is where you get the antibiotics or is another. the world not just mark has china as theent on source of manufacturing pharmaceuticals. whether mark should have taken best s not a question directed to the u.s. china
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relationship. ather, if american policy makers want to ensure a certain available in times of crisis policies around production and national formulary with be appropriate. our worth calling attention to this. taking a dependence on china for pharmaceutical products has been understood as one much the relationship can and should be thoughts of as safe. new through a ed lens of mistrust. we take them for critical components health characters just two, we are still working in good faith. if we no longer believe america can did so much of what the american era of globalization is no longer vali valid. determination
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that the chinese digital health it company would have divest its $100 million nvestment in the american patient health care platform has investors andn by had a negative effect. third, differences in appetite or investment and risk in relationship it large national b american unded by the and chinese systems. as the sets serve foundation for the 21st century economy. greater diversity and quadrant of data should result an accelerated development of precision medicines this should companies spinning out ew medicine predicated on access to those sets justifying
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overnment led investment has become difficult in the united states in particular. asemitic -- policies needs it be more fully understood. embodied in law and practice, american researchers symmetric ability it work with chinese data assets as chinese researchers to work with american. ability l intelligence o develop new use cases hinges on access to large quantities of training data. country is as serious about funding the aggregation of data a number of verticals which healthcare is one than china. policy makers wrestle with questions around between china and u.s. it would be wise it in machinr mind american
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healthcare benefit if policies exist it allow training. investment levels china will amass a larger and diverse health care set of ata it train a.i. than will china. let me end on five recommendations. gate chinese into american based on e verticals our ability to do. review the national formulary to construct how the splupply china. standards around the sharing across borders of information.th pdate the policies to reflect era of big did tata and mac sur china relative to its new sectors.
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that have a national security implication it them and ly are most critical ly important as to where or economy in connection 100 years. i can do as well with the timing. thank you for having me. i spent a decade investigating the overseas manufacturing are the principal suppliers of generic drugs it that s. market and culminated in my back about the of the the inside story generic drug boom that came out in may. in the readers overseers manufacturing plants where the majorities of low medicine is -- lecost medicines is made. book i traveled it four continents and i was in interviewed , hundreds of sources and obtained ver 20,000 pages of
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confidential documents. 90% generic with the majority overseas indians and 80% of active ngredients in all our drugs come from overseas the bulk of indian.om china and it is crucial to the health and safety of the american public hitted. regular no substandard product should be permitted it enter the market but china has been a continuing recently active ingredients for blood pressure to have a was found the in general used in production of rocket fuel. found fraudtigators and manipulation of quality data plants.se manufacturing after reporting on this topic it f.d.a.conclusion that the
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is not effectively regulating in china including that export to the u.s. market nd officials are allowing substandard drug products to enter the u.s. market making xception for reasons that include concern over drug shortages and confusion in their own authority overseas. he f.d.a. investigate fors are then and some willing to perform inspections. f.d.a. must at the overhaul the foreign inspection force and more strictlien its own regulations it ensure the safety of the american public. i would like it if i have you three examples which are from my book. followed and investigator named peter baker who arrived in
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2015.ng in of 38 manufacturing plants that 48 nspected in china, or data e found fraud manipulation in 38 of them. there is intkpl mick proud because c they have found that themselves. investigation by china's own national medical found administration that 80% of clinical trial data ubmitted by chinese companies to gain approval for new drugs was fabbri indicated. fabbri indicated. plant ker showed up in a of shanghai site pfizer.nt venture with by night plant.
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it was china's largest exporter the u.s.ients it instead of requesting documents inside the he looked using r of the plant and language he looked for words and despite the head it took him about a day it particular out the plant was hidden lab tier operation and -- laboratory and masking the and results in part by turning off he audit trails it leave no evidence of tests. the f.d.a. followed up by planned under an impart alert restricting the 15 of thosescovered drugs were in short supply in united states and lifted the
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restricti restriction. another example of an f.d.a. investigate for showed up plant that makes skin patches for pain and the plant concerned about the inspection and ended up holding hostage in a or conference room for hours and he investigate for was not released until the intervention of chinese police and regulators. despite that, an actual hostage f.d.a. concluded that the plant didn't make a of the d refusal inspection and so did not impose import heaalert. is what is ple happening right now which is a valspartin call of
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ingredients that will a carcinogen. investigator went there in 2017 and found that it was not impurity in the ingredients and recommended to the f.d.a. indicated which would have restricted the drugs the united in states. but the f.d.a. determined the was adequate as investigations peaks onstrated that the didn't impact product. o did not impose an import alert. less than a year later it was restriction wide because its drugs contained impurities. i would suggest that the f.d.a. needs to overhaul its
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foreign drug inspection program nd it tphaoeneeds a go to highy cadre of ll funded inspectors. there should perform short or no notice inspections as opposed to announcing them there in advance and should rarely offrule the recommended sanctions of its own inspectors which happens too often now. thank you very much. >> thank you. dr. wang. >> thank you. hank you for inviting me to this important hearing. i'm going to talk about the u.s. companies' access to the chinese
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healthcare market. my recent testimony i talked about the chinese healthcare market, the u.s. companies' .arket share y oral presentation i will bring up the challenges faced by selling it thems will conclude and with policy recommendations. the u.s. health firms face new to the es in selling chinese market. clearly nment policy targets the chinese domestic its h industry to increase competitiveness making chinese 025 increase the share of materials of medical devices to and 30% by 2025.
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firms arearmaceutical improving their competitiveness. of 2018 they have set of firms gest developing new drugs. t is reported from some multinational pharmaceutical new positions or in chinese pharmaceutical firms. with the steepening of rrpl they pressure by easing .aking drugs more affordable agency in the ealth care security has been charged to lead everything in china and ated
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with forei iating foreigners. imitating the health occur moral of the u.k. replace the ll u.s. d.o.d. to be the world's employer. the negotiations with foreign in a with reliabilitying average price cut of 44% for the in 2017 and 57% 2018. 17 products in in late 2018 the government tpnew procure menment school this listed 31 drugs and covered hospitals in 11 cities. that represented a third of fapharmaceutical market. multi- is process national firms stand it also
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market share because ssurance for the medicines are no longer guaranteed. 2019, they launched a nticipate program of diagnosis related groups because cases.ied hadn't it is expected this program is fully implemented nationwide in five it 10 years. provider of payments aims it lower the cost of health including pharmaceutical products. poses challenges for those marketing products. to ensure they have they are in protocols but they it lower the drug cost doctorsscourage chinese from prescribing new drugs. u.s. ade war threatens
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farm sought confidential -- access utical firms it the market. he list that impose punitive tariffs included commonly used mechanical devices. a leading chinese economist that it should curb the export of ingredients as a urrent measure in a trade war -- a countermeasure in a trade war with the united states. will also talk about the interrogatory burden for the pharmaceutical terms feel efforts to improve process, it y continues it present significant fortune tprpl suit confidential -- foreign pharmaceutical firms. it makes the market out of roof companies.start
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they face tough requirements in applications for products. it is difficult for foreign farm harmaceutical firms to get in the list. they say it is too front involving too many government they have to be on the go across the country to participate. n a centralized system for pharmaceuticals is a regular -- regulatory burden. pol policy the recommendations. -- we have a dynamic that until 2017 enabled
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expand and thrive despite the tphrubg wigs in -- relations. in the bottoming market has created opportunities and challenges for u.s. firms. anythingy can teach us before the sides should avoid industryhe health care at risk of damage. did the right thing by excluding pharmaceuticals and goods from theal proposed tariffs in may. it is also that mportant that we keep in mind that as pharmaceutical become globalized cooperation is the norm we looking at the entire u.s. and china investment prism of national security. in a nutshell, do no harm.
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applies it both china and the united states. thank you. you.ank mr. allen. >> thank you for the opportunity to testify before commission. i'm here as president of the u.s.-champion business council a private nonprofit organization 220 american ely companies across all industry rbgts that do -- sectors including the health consider sector. ambassador er u.s. and trade goshor with the -- goshor where i led the it improve china's arket access for medical devices and farm suit calendarless. dedicated many years it increasing american jobs through bolstering our export sector. remain among the most innovative nations because we free flow of ideas, information and people that gage in a process
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uncourageous and respects at erent opinions to arrive decisions that benefit the greatest good. commission considers the relationship 2010 the u.s. and i antwan u.s. and chinese would like it highlight three man principles that underlay my recommendations. u.s. investments in china benefit the u.s. economy. u.s. companies have benefited greatly from the growth china has provided ostly through rapidly growing exports. it is person to note -- important to note most companies ins have in china to serve their domestic market but the revenue generate in online is also a driver of growth and he united states. china u.s. exports it directly and indirectly jobs in 1.8 million
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the united states. he economic benefits from that investment in china and are 2.6 american jobs. the healthcare sector is an part of this story and u.s., ports of pharmaceuticals reached nearly $3 supports 2018 and it 4 po 4.7 u.s. jobs. medical device industry supports 2 million u.s. jobs. hina is the second largest market for pharmaceuticals and further for mechanical equipment rapidly as owing china ages. it is increasingly important companies participate in this to support u.s. job creation. the second principle is commercial challenges are best engagement.hrough it is my experience chinese
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health care regular hit fors are -- regulate fors are picked on afety and efficacy and want to learn from us and with us. nonetheless, while u.s. health tremendous e opportunities in china, there are remaining market access affect our t equally ' ability i to compete. challenges are technical and unique it ealthcare including interrogatory approval delays, pricing and reimbursement and insufficiently effective intellectual property andment station implementation me. effective approaches to resolving these trade issues if sector industry experts are not closely consulted.
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most effective and sustainable way it resolve pecific commercial issues is through regular dialogue antwan key u.s. and chinese government stakeholders. technical commercial issues and require to trade regular precise and technical discussions. international fora provide ortunities it leverage our bilateral negotiations. we must continue it use multi- institutions to encourage china to adopt practices andbest standards that will indirectly support u.s. exports. health dialogue makes us stronger. the chinese government has improve basic health care and expand access to their aging om population. these are goals that u.s.
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are very well positioned to support. there are mutually beneficial be had by reducing technical barriers to trade and gh cooperation engagement but we need to communicate regularly it compare practices and we need to build on a foundation of and collaborative rag ration. we need to leverage all available tools foreign engagement. the government should seek it engage china through bi-hall and regional and multilateral forums deposfoster improvements. platforms to regularly discuss technical and encourage the chinese government to return to health reforms and find mutually greeable solutions which will
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improve health care and safety happen it expand u.s. exports. consultationshese involve ntinue to private sector industry experts in the technical policy dialogue. is essential that highly echnical health sector issues are systemically addressed policy targeted discussions not only with governments with industry and well.echnical experts as third, please support missions ustda and the f.d.a. deserve continued financial support. we must precisely and e emerging technology foundational technologies as additional export controls are
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out.d it is imperative our policies do limit innovation in american exports if the goal is maintain leadership. thank you for your consideration. thank you. thank all of you for your testimony. of your commissioner cleveland. >> i have one question it start. you noted 80% of the data from estimated to be fraudulent. heard american companies are increasingly relying on the c.r.o.'s. can any of you speak to the rg regulatory process and where did the did the come from that you mentioned in terms of fraud? that is troubling. we talked about the ingredients
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if clinical trials are fraudulent that raises a new level of concern. fraud in nd extensive c.r.o.'s. in fact the major fraud in an that i followed was first triggered by a finding c.r.o.ud at a generally, overseas we are approvals on ug he data that the c.r.o.'s are providing. and it is the drug companies c.r.o.'s, aying the and it is a very sort of front channel have a back agreement it make the -- it make the data work. up to the taskot of detecting the fraud and it and it is the that 's sort of practice
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for almost all overseas the ctions it announces nspection in advance and gives companies six to eight weeks notice that it is coming and companies whether c.r.o.'s or drug companies to the inspections. they make travel arrangements f.d.a., taking them out to dinners and often it is just f.d.a. investigator with a handful of days to inspect the firms firms. so, i think there's a tremendous we are not aud that detecting and our drug supply rom overseas is based on the data that is being produced in that manner. talked about c.r.o. as in your testimony. the c.r.o.'s e
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work about that is one of the forms of the pharmaceutical booming in china. s i pointed out in a recent stateme more than there are glob, .r.o. as around the nearly 30% based in china. hey have the largest, one of the largest is in china. of the world c.r.o. mark market. endemic there is some problems in terms of quality of for example.trials and meantimening it is also
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that pointing out that efforts tondeed made mprove the quality of the development and manufacturing of the drugs. ne of the important measures laun launched by the f.d.a. the requirement. that is to basically part of the effort to chinese around 3,000 pharmaceutical firms and make them big it -- the trying t raorp requirements they are trying to weed out the firms. so they realize it is a problem efforts in making
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it way. >> i will come back the next round. >> thank you all. the truck somewhat by discussion today and on it panel mr. allen understanding all engagement i appreciateagement, that. and core issue we are talking is the safety of the products we are importing. that is not a question of fair or unfair. it is a question of life or death. i don't mean that to burst virtue. -- besmirch you. i don't understand why our desire to have a regulatory totem in china, our desire potentially truck imports of apis or something else if they cannot be validated as safe
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should be viewed as unfair by china. i am not saying you said that but that's what i'm feeling. upwe are asking them to be the world-class standards we are not doing that for protectionist issues we are doing that for the health and safety of our people. protecting their health and safety. share orcting market businesses. can you help me in terms of how the chinese view this? they started out with good
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manufacturing practices and good clinical practices. work toe done a yeomans try to increase standards across the board. benefits u.s. consumers, obviously, as well as chinese consumers. there has been a virtuous cycle between theions fda, the department of converse -- department of commerce for many years. standards forove all. up to u.s. standards or global standards. the higher chinese standards are the better it is for american companies and american exporters. there is a commonality of regulatorsth chinese
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who wish to advocate for and ensure safety first chinese consumers -- safety for chinese consumers. of chinesethe doubts drug and consumer medical device foreign and american companies have a high reputation for quality and our market there is very strong and has been strong for a long time. i would posit there has been a virtuous cycle over many years and that cycle has temporarily stopped. i would argue it is in our interest to renew that cycle and engage with chinese regulators and theican companies
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chinese regulatory space. regulators face terrible problems in trying to regulate their own country. the fda has helped them to do them benefiting not only but all of us. thank you. >> go ahead,. >> a quick follow-up of his comments. the chinese drug safety issue is indeed a big problem. also providing opportunities for the u.s. to break into the chinese market. additional pressure to open the additional chinese markets.
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in 28 t1 of the largest chinese vaccination makers had substandard doses of vaccines for diphtheria, tetanus and whooping cough. they did a survey of more than 300,000 parents and found that scandal that before the they would have given their children a chinese made vaccine. they said only 60% after the toident -- only 40% wanted use the chinese medicine after the scandal. 60% said they would consider having their children inoculated outside of mainland china. in my reporting i came across
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example after example of the fda pulling its punches with chinese plants. detecting fraud and substandard -- potentially substandard products and choosing not to sanction those plants. what seemed clear is that diplomatic concerns are interfering with public health and safety. we don't have this problem in the u.s.. inspectors show up unannounced and stay as long as they need to and find what they find. what is going on in china is different. i would say if we choose to get tough on china the way we do it drugs want to sell your into the market. you want to give fda investigators the says and they will come over and inspect unannounced or on short notice. note it ise
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sometimes hard for people here to understand when they see the activities being taken. more than thousands of internet wanted toif china regulate and ensure the safety of its products and it it just chooses not to. >> i want to talk about unannounced inspections. in the context of engagement. if the people you are negotiating with do not accept the premise of unannounced inspections why would you waste your breath after the fact on an issue like this? them ifagree to engage
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they agreed to do unannounced inspections and i would engage them after i prove i can do unannounced inspections. does anybody know any regulatory system anywhere in the world that is robust that doesn't include unannounced inspections? is there one? >> no there isn't. >> how many of you therefore are comfortable with the fact that produced in the world's are coming in the u.s. in our drugs are produced by those folks? personally?ortable, >> i am definitely not comfortable with that. that the fda did do a
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pilot program in india of unannounced inspections from as a result2015 and of those unannounced inspections the rate of official action indicated findings which is the most severe finding increased by all must 60%. inexplicably discontinued that program. as i understand that there was no law on the book preventing them from doing this. >> thank you. are you comfortable with china supplying apis without unannounced inspections? no american would become
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trouble with that. especially considering the quality and efficacy problems of the country. what i have a different opinion is we don't one to dependence on chinese drugs. we don't want to make that a national problem. the u.s. relies on china for their drugs because of the shifting global pharmaceutical -- also because of the 2000 u.s. china failed trade agreement itt enabled multinational -- is because of china the lack of competitiveness.
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it does not reflect a clear strategy like china against the u.s.. the technology used to make not theugs -- china is only country that can make these drugs. china became the leading producer and exporter because the cost to make it is low. we have alternatives available but they are more expensive. >> perhaps the president should throw tariffs. -- to drive the production somewhere else where they do unannounced visits. >> let me say something. drugnal security -- the ingestion security of the
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american people is a national security problem. whether it is a traditional national security problem or not it is a national security problem. i think we view that this way. i am done for now. you didn't answer my question about how comfortable you are with us being so dependent for country that is not allowing the most fundamental private inspections to exist. i am not addressing the question of whether 16 inspectors are sufficient, i know they are not.
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i am questioning the fundamental premise of the inspections. >> i am not even certain that china has said no to unannounced inspections. to u.s. fda has said no and innced inspections email after email i obtained in the course of my reporting they are concerned about diplomatic incidents and that's why they don't want to do it. there is a long history of various subjects where the u.s. has sought to inspect and the unannounced does not happen. the inspection can take up to six to eight weeks. it is a sovereignty issue they express sometimes. it doesn't matter what they explain it has. >> in terms of unannounced
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fdats the chinese and the -- this health regulation, they relied more and more frequently on the non-visit inspections. scandal wasccine uncovered by an unannounced visit. we should encourage china to use those visits more and more. we could have our fda office in china joined those inspections. withuld use our leverage tode negotiations in china ask china to allow the u.s. fda to enjoy those inspection -- join those inspections. we are talking about how we rely on china.
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drugs, look at the other side of the coin. china also relies on us. the most effective and innovative drugs. this is especially important, it is not just about the market. medical and pharmaceutical products, it is also about legitimacy. government legitimacy is performance-based. it delivers good health to the people and helps deliver effective medicine to the people. currently that can only be provided by multinational farmers. >> dr., you talked about
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i have other, and witnesses and other panels talking about consolidation as well that the chinese government wants to consolidate. nobody went into detail. what have they done and what numbers are available, have they announced any concrete plans? ort are they going to do have they done to consolidate the companies that make pharmaceuticals? chineseu look at the pharmaceutical industry, the government started to notice this in the 80's. , despite theed production of the gmp's. fragmented, there is competitiveness.
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today with all that consolidated around 3000 pharmaceutical firms. important players in the chinese pharmaceutical market. of the entire market. how fragmented the chinese market is. government wants to consolidate pharmaceuticals, like the u.s. type of big pharma. in the meantime they want to improve the quality of our efficacy and safety of the chinese drugs. this new regulation, the , the quality of
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generic drugs for example. you will produce a generic drug and at the same time you have to achieve the high standards of that same generic drug. anyone can answer this question. it's not a trick question. i'm trying to find out what they are doing to consolidate. government has made efforts to consolidate its pharmaceutical industry. in the same thing. normally you read a statement and it says they did this. are there any concrete plans they have to consolidate? are they subsidizing acquisitions or what?
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to imposeheir efforts higher safety standards, that is the consolidation? they are hoping that by imposing higher safety standards -- they also encourage the acquisitions and mergers. some of the biggest pharmaceutical firms in china increasing merger and acquisitions activity internationally. >> how is the government encouraging that? they know how to encourage something when they want to encourage it. there are no concrete policies directed at consolidating for the pharmaceutical industry. any?here have not seen any specific
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government industrial policy type of measure. >> they would like it to be consolidated but they are not doing anything? >> in addition to what the professor has mentioned it is also about how they are reforming the tendering process for hospitals. that is a significant function in addition to quality standards and inspection. it is an important factor we cannot lose sight of that the new ministry in this type of technocratic capacity they possess should not be overstated. they view the tendering process for public hospitals as a winanism by which they can over a list of pharmaceutical companies that persist in the supply chain. if you are not part of procurement or tendering you will not be able to sustain yourself. >> they will do it primarily through the hospitals. >> they will do it through two vectors.
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one is continuing to empower the nmda to have additional inspection capacity across the country the second is how they are utilizing the tendering process. >> if you think of something else we write these reports and we will have a section on chinese operations. wedon't want to say anything cannot factor in. i don't want to say they are going to consolidate if they are not consolidating and it is just an aspirational goal. >> three quick points. as i read your testimony and yourned i was struck with emphasis on the role of our fda and wanted to provide you a chance to comment. the impression is that our fda .s the problem the first order problem is chinese and origin.
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limits to what the fda can accomplish. any points of clarification? where we this model are sourcing our pharmaceuticals from overseas. that is the number one issue or problem. we don't necessarily have -- the question that is being debated is what levers of control we have to get different results from china. is in charge fda of protecting u.s. consumers from substandard drug products. as an investigative journalist that is where i focus my attention. there is no question that we are facing a tsunami of compromised drug products in china.
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againproven over and over and we have a current ongoing quality crisis with this recall of generic blood-pressure medicine that millions of americans got from china. i focused on the u.s. fda. >> dr. wong said we should not of apis ofthe trade high-end pharmaceuticals. are you aware of any structure of export of high-end pharmaceuticals to china? >> in my testimony i mentioned a couple of things. incomplete intellectual property rights enforcement and the implementation of the international copyright regime. there are pricing issues, dr.
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wong mentioned provincial pricing mechanisms and an urge to attempt down pricing to keep health care expenditures relatively low. the approval process for new leadingich can be slow to long delays. generically a chinese comes up quickly after the patent product is approved giving the chinese manufacturer some advantages. american pharmaceutical manufacturers have a good number of issues in china. it is the first second or third largest market
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in the world. it is a rapidly growing market for virtually all of them. is an important market for american jobs. >> to complete the thought the impediments are chinese, not u.s. policy impediments. the last question on data. there are two levels that you address it at. the first is existential and how we will think about data in the future. you may be somewhat indirectly suggesting we ought to hedge our bets with regard to how we share data with china and i was hoping you might elaborate on that. maybe just a little more time to explain why this issue matters. as we think about the global economy over the next 100 years
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one of the most important areas we get right in the u.s. and globally is precision medicine. precision medicine is predicated on the development of these large data sets, these curated data sets. to the extent they continued to be asymmetries in what american researchers can do in china and vice versa that is one of the more basic learnings we should be pulling out of other high-technology sectors that have struggled with asymmetries relative to what they can do in china and what a chinese competitor can do here. need tothink we approach that in a militaristic manner. i think it needs to be a technologist as a way in which trade protocol we are designed to anticipate an era of cast metal and aluminum sheeting don't necessarily do well in a narrative of big data and cloud computing and artificial intelligence.
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it is relevant not just interested in medicine but in it is hard to overstate how important it is that we get this issue right. >> commissioner bartholomew? >> thank you for interesting panel. i have so many questions. the fda inspectors on the ground, do they have chinese language skills? >> you have touched on a huge issue. in fact, because it was only seven minutes -- mostly they don't. often the translators are provided by the company they are inspecting. instances to document where there are wild deceptions because of that.
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sometimes chinese companies will pool resources and paper one show factory that looks out of central casting. because the fda investigators cannot even read the street signs they are each inspecting the same facility but they think it is four different companies. the language barrier has created an opportunity for wild deceit. >> thank you. i want cannot how the chinese got to the point where they are the lowest cost producer on these things. it is stunning they can produce at a lower cost than india. government subsidies, what is the pattern that has allowed them to produce at the lowest cost.
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in my reporting i traced the rise of china as the leading manufacturer of antibiotics which was the rise of china in the pharmaceutical space. was because of very lax environmental regulations and these pharmaceutical plants create a lot of pollution. they had hundreds of years of expertise in fermentation in soy sauce and there are fermentation processes in the production of antibiotics. is like opening the door to them as they go to producer of very cheap pharmaceuticals and it went on from there. >> you see similar patterns throughout all the camel or -- chemical industries. dyes forochemicals to
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textiles. china would be the low cost producer around the world. with thet has to do cost of capital being relatively low and very large economies of scale. as well as entrepreneurial culture and universities that are pouring out engineers. china, as i understand will graduate 1.8 billion engineers this year. that chinannatural would have a very large industry here
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>> biochemical, are there subsidies? what advantages are they providing to their companies that have allowed them to do it? what other advantages are they oing to build an industry? >> massive investments. there is a massive amount of state led investment in the creation of the biotech industrial parks. it was characterized by digging holes and pouring concrete jobs and tax monies. now it is becoming to a home of molecules being developed as a result of people returning to china. they view it as an opportunity to grow. there is no way to talk about this without talking about the
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massive growth. >> what we have seen an industry after industry, china is moving up the chain. we have seen this process and what it does to our economy. in this case, it's not just our economy being affected. this is not really a national security ssue. thank you. >> one of the interesting things that came out of the hort visit to china at the end of may and some meetings here in the u.s. with the american chamber of commerce,
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corporations as a result of the tariffs are realizing they are entirely too entangled in china and supply chains and they are disentangling. i think it's a great place. t creates some strong areas in a short period of time. i want to pose this question, i don't know that there's a right answer but i think there are two ways that they protect american health in securing the economy could be imposed by the president. really high tariffs on drugs, they use chinese apr. the second would be the international emergency economic powers act. so the president has the authority to declare an unusual and
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extraordinary threat to the national security foreign policy for economy of the u.s. and originate outside of the u.s. he has the authority to say we are done on this issue. you were involved in looking at
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the industrial side. what with that due to companies? if you looked three months from the day, six months and nine months, where would they go? how would they reinstitute supply chains? >> one of the challenges for companies that are reliant on api and the manufacturers that they are buying from are all listed in their files, so if you have to get a change of supplier approved by the fda, you can't just change where you are procuring, it have to be pproved. >> that's a regulation. >> any of us would want that. >> when you want the fda to be nspecting those providers? that's exactly what happened in the headline crisis. provider must not inspected by the fda because of a glitch in over 81 americans were killed.
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>> we are wrestling with how to put the toothpaste back in the tube. i think we have to ask the right question to get the right nswer. i think the right question is broader than this hearing is designed for. we properly gate what was in china? shame on us for not paying more attention to something as is what was referred to earlier assuming that industry self egulates itself.
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there is a role here for a strong fda and especially, their nontrivial matters. what do we do now? my answer is that it would be a good time to be in india business. we get stood up in india probably in about 30 days. i think the. mark that is made, i don't think we should have any reason there are more serious issues. >> what i am trying to do is determine what we can authoritative. n her testimony, she wrote a book and i think this sums up
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our conclusion, you say your investigation reveals fraud in dire conditions in an industry where companies repeatedly alsify data. that's your conclusion. the rest of you, would you agree or disagree with that? would you say it may be true but we don't know? i want to see how much isagreement we have on that. >> i would say i agree. i agree it means the attention of regulators. > yes.
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>> for my examination of the chinese, history of regulating these products, i believe that is a systematic issue. there is reason beyond the regulatory control. this political economic reason behind that, we haven't laborated. in the meantime, we lso need to recognize, not just we are caring about safety issues, chinese government has poor reason to be concerned about the safety of their product as well.
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>> i think everybody would agree with that. they care about their own reputation. one of you said this is a big motivator because the chinese expect the government to deliver on this. i don't think anybody should be shocked that what they found is true. we have a system where there are incentives not to worry about safety. it generates costs that were never brought home to the people generating them. the companies never pay a price for this. so yes, under those circumstances. they have a va, hey pay a price. i don't see hy anybody should be
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uncomfortable when it's obviously going to happen. >> i want to add from my testimony that i submitted, the fda investigators believe that hese companies figured out how to gain our system, down to the issue of drug shortages. they know even if they are caught committing fraud, they know if they are making drugs in short supply, it will function like a get out of jail free card. they will not restrict the drugs and they will continue with the income flow there. they feel they are choosing to make drugs in short supply.
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>> how big are the barriers at entry? if the market opens up, how quickly somebody else set up shop? you implied in india or a low cost country, this could be done quickly. that persisted in india. there was this white paper circulated, did you know he indians, the pharmaceutical industry is coming from china? that was a nontrivial moment of truth for that sector. >> going to raise a politically sensitive topic without trying to be politically sensitive.
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daca, what if we were to have a requirement that the only way an insurance company could reimburse you is if the products, the apis came from regulated or expected facilities? it seems to me the companies have every interest in getting you to use generics, they move you as quickly as they can because this is where all the oney is in the system. if they know they are required to only allow patients to buy inspected products, it seems we drive the system. either china will do what they should be doing because they want to continue to sell and build up its capacity or we well. i'm not getting to the question of where the products should come from but rather they should come from regulated inspected
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facilities. >> everything we are talking about today is the regulated system. every plant i mentioned, everything is subject to regulation. this is supposedly the regulated drug supply. > if you were to require greater inspections on a regular basis -- > they are required. the generic drug user act, under that, they are required to achieve parity, foreign inspections and parity with u.s. inspections to achieve the fda reduce their u.s. inspection. all of the plans we are talking about are supposed
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to be inspected roughly every two years. >> what you're describing is maybe to do, reviewed by congress to make sure flowing through the inspections are happening on a regular basis without the diplomatic -- >> right. to be clear, the inspections are happening but what we are talking about is the quality. >> certain protocols about wanting certain protocols, unannounced on an x basis by individuals who speak the language. we have the existing mechanism, it's just improving it in some way. >> overhauling the inspection program and making it less on
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her face and making it rigorous and making sure the standards re verifiable, i think i'm maybe not enough of a tiny expert but they certainly want into our market. they do have a political and image problem at home about appearing to be regulating hings. some of the investigators i is something where china's domestic ambitions in terms of securing public safety and its role in being the global supply chain is a i would encourage the ommission to say this is omething we can be much more
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definitive about in terms of hat we want. >> so many things, i'll just note gibson earlier talked bout new railroads, hear about hen the chinese are the only producers of something, i have two questions.
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you talked about the chinese industry relying on u.s. innovation. i was wondering what you are specifically meaning and is the chinese industry monetizing the rnd being done here in the u.s. on innovation? either by buying it for stealing it or sending graduate students over who are replicating labs. also, the issue of hiring leaders. how are they trying to get access to our innovation? if this industries follows patterns, we will be displaced even in our innovation. >> for now, i think the u.s. is the leader on the high-tech
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pharmaceutical industry. that are developed. the u.s. system, the leader in the field. but china wants to improve their competitiveness of the mystical industry. they identified medicine as one , the approaches, this pharmaceutical industry, they pay close attention to the development in this field. i
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hink if you look at the -- when i say the chinese rely on s, the ability to develop, deliver medicine, huge disease crisis. diabetes, cardiovascular diseases, cancer. they are just increasing significantly over the past year. there's a huge demand for this most effective pharmaceutical product, which can only be met by multi- natural national
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operation. only made by the big farmers. chinese produced some of these drugs in 2011. now ith some new drug on the arket, they will see the umbers drop significantly. that is an example that shows there's this very huge thing on u.s. products. they are very competitive so we don't want to underestimate resilience, of our pharmaceutical industry when we talk about our
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detainment on chinese drugs. > you have 30 seconds. > the question is not a thirty second question. >> for the record, i am married into a family of hog farmers. they will be excited to hear about the hogs. >> the only question i have -- s the chinese leadership aware of what you have been telling s today? >> my understanding is that it is.
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the fda over in china did do a series of workshops with the industry and government officials to try to talk to them about integrity issues in the good manufacturing practice standards are. i should add that i've been made an offer for publication of my book in china. if they are not aware right now, maybe they will be. >> this is an intensely political issue. the quality of rugs and healthcare in china and from the premier down, there is a mandate to improve quality and safety and efficacy. as recently as two months ago, the premier himself spoke about the demand of the chinese people for quality healthcare. also education and
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ood. this is something the chinese leadership is focused on and wishing to improve. >> when they find out, do they do anything to the companies that are violating what they ant? >> there are many different types of problems. corruption is one, their ability to get out to the factories is another one. subcontracting is a third type of problem. i would note, however that at least from corruption side, if chinese
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regulators, pharmaceuticals are found to be corrupt, it's a bullet in the head as punishment. it's very severe. that is indicative of the importance to which the chinese government looks at this issue. that has not resolved the problems yet but i think it's probably inaccurate because the officials responsible for safety and efficacy are not rying to address this issue. >> the bullet in the head metaphor is perhaps very apt to this case. this has the highest priority, highest attention of the chinese government at the highest of levels. >> we heard before chinese government violates, there's
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nothing being done about that. >> the higher the visibility the problem, the more direct the chinese government involvement is. broadly speaking, the government is rying to do what they can to crack down on these and kills the occasional monkey to lessen the chickens. i think i got hat right. >> let me start by saying, the idea that we would shift manufacturing production from hina to india causes me as uch pause as leaving the
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system in place because during my tenth year at the bank, we had a series of orphic scandals that involved the bank financing the production of kits that produced significant risk and harm. globalizing safety standards probably the better approach rather than making assumptions. i was interested in your discussion about phi. this orning, there is concern about the possibility of a risk of health information being used to target specific americans. i'd be interested in your omments about the risk. what data do the chinese currently have access to? how are they
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using it? i'm interested in your follow on in the health sectors, they will be willing to engage in that kind of a. >> a lot of questions. let me start with the higher order question, what is the objective? i would argue that it's just a hunt for data. data enriches what an artificial intelligence can do. it's a scale. china
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might very well spend $16 billion on a.i. but the question of the quality needs to be asked and answered. in china where they can have a ustainable competitive advantage. the question it leads us to, what type of investments are both countries aking? i think would be fair to say it's a widely held opinion, the chinese appetite for investing significantly outpaces hours.
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you always have to ask whether or not this is an effective use of capital. china has other advantages that are worth noting. one of the predicates that you take, you have to not just cap the data then you have to annotate the data. labeling allows you to build the models in question. that is inherently a very high labor content job. that's another aspect to the investment in a.i. and has some advantages. if you map that out, it draws attention to the question of, one of the opportunities we hould be thinking about?
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it's important that we not be naive, we owe it to ourselves and corporations to make sure you're thinking about data access are perhaps better. we need to set that legacy and view them as a competitor. a way that should inform both companies on both sides and it should lead to new economic development opportunities. let e land on the last question, ome of the beers i've heard in the last panel i served on, a uestion as to whether or not the kinase would have the ability for that bio weapon.
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disadvantages and whether or not we are making these investments. that will lead to he 21st century economy. how would you do that? you talk about the barriers in place, it has to be a chinese entity or institution, what are the concrete steps you would recommend? we need to rely on how phi will be handled. i think that is the simple answer. there are competing standards, tiny has
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one view. the u.s. leans heavily on hipaa. if your phi as all the identifiers, it's considered that your data is not properly identified. if we want to have phi flow across orders, that would likely lead o our conversation about the global norm around the identification. i think it's air to say the u.s. has a much more lax view on what constitution whether the data has been identified.
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>> sci-fi today may not be sci-fi tomorrow. e've heard some pretty interesting things over the 18 years this commissioner has been in business including teleportation. number two, i think there is a concern about some of the data in dna, as a risk to the country, the dna for family members and other things. i agree in general but i don't think we should diminish the potential threats that are out there. we need to
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be willing to discuss them to make sure they are just in the future and not within grasp. >> i'd like to throw questions out and just see what i get back. the european countries seem to have the same problem we do. if so, how do they pproach the problem? is there anything to learn from hem? the third would be, if we share the same problem, what's the possibility of a coalition approach? either to developing other suppliers or resolving it with china?
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>> carcinogen in dna that was etected in the generic was irst flagged by european regulators. the europeans caught it. one thing the europeans do that we don't is routine surveillance testing of all the drugs coming in through their ports. there's quite a it of surprise that the fda is not engaged in any routine surveillance of testing. number two, there has long been iscussion of having global treaties on pharmaceutical
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quality to which various countries would be signatory and model for that is the aviation industry. hat's something that various countries have worked on through an organization called ics. it hasn't really happened yet. ne of the ways countries cooperate is through mutual recognition, european regulators, if you go inspect a plan, share your plan with me and that's good enough for me. we recently signed a mutual recognition agreement with europe. the problem is then he would have regulators from the baltic states who are not as
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well equipped to detect things as our own regulators, giving us the okay on plans that we have not seen. global regulatory approach and maybe you could do that with unannounced inspections. >> it strikes me, it wouldn't have to be all of europe. we got four or five or six across the countries. to help with the rest. >> up for your next diplomatic ost. too much rocket fuel. the title of this panel is u.s. china inks and risks and opportunities. you inserted a sentence at the end of your nswer. opportunities for
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american pharmaceutical companies in china, elaborate on that. >> 20% of the world population re facing a terrible demographic problem exacerbated by the one child policy. t's growing rapidly, we will continue to do well provide the overall relationships remain stable. it's a matter of fact that chinese patients who are able to obtain foreign pharmaceuticals or medical devices will prefer them into this offers a tremendous opportunity. it's a matter of fact that a large percentage of global engineers that will contribute are coming from
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china and they will be innovating in the future and our companies are wishing to work with them to grow global businesses with them. it is a fact that our pharmaceutical industries are well integrated and interdependent into the future of american pharmacy -- t's at least to some extent, redicated on the ability to be able to serve chinese customers nd sell into that market. to take advantage of a very large harmaceutical market will have unintended consequences on
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productivity and ompetitiveness and rofitability of american pharmaceutical firms. we should be very careful as we regulate so as not to -- as to avoid unnecessary negative, unintended negative onsequences. >> you mentioned the european country found this, to our ports. >> would you recommend we do hat? >> yes. >> they oppose that? >> sure.
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>> a moments hesitation. we have come to the end of our day. we are very appreciative of all your time, testimony. our participation. i want to thank you all for a great job putting this hearing together. thanks to our staff and we are adjourned until september 4.
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>> our guest sunday from noon to 2:00 p.m. eastern. ms. freeman's latest book the ield of blood. at 9:00 p.m. eastern on after words, the book the moral majority. whether choosing political power over christian values. >> i think the lesser evil argument is tempting but dangerous. it contributes to keeping a system in place that takes accountability out of the system. i think it also is an easy way to bring in something like evangelicalism and then use that as a way to get votes which seems about the worst possible way you could use it.
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>> coming up this morning. senior fellow at the world resources institute discuss it is effects of climate change on the u.s. then the heritage foundation, talks about economics of environmental policies. and politico on campaign 2020 and where candidates stand on energy and environmental issues. watch c-span's "washington journal" live at 7:00 eastern this morning. join the discussion. >> retired harvard law professor was the key note speaker friday at a dinner hosted by the steam both institute in

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