Rechenberg was not alone in sharing the idea that generic drugs needed life support. He mainly differed on the tariff front, an issue no one spent any time fully disputing, including Brookings and the Democrats on the Committee. In other hearings where tariffs have come up as a solution, Democrats have almost uniformly shot down the idea. Not this time.
Sen. Tommy Tuberville (R-AL) asked him what would happen if we restricted imports. Can we make all the drugs here, he asked.
“Not currently. We propose working with other countries like the UK, Switzerland and the European Union. With them, we would have enough capacity,” Rechenberg said.
Marta E. Wosińska, Senior Fellow at the Center on Health Policy at the Brookings Institute said the main problem with pulling supply from India was that “In 2024, they produced over 60% of fully finished doses of generic drugs in the U.S. You are looking at well over 200 API facilities in India. The size of India’s pharmaceutical supply chain is massive so we are going to need other ways to reshore.”
Gillibrand asked her to prioritize: where do we start? Here, Brookings sounded a lot like CPA here. Rechenberg could just sit back and let a Washington establishment think tank do the talking.
“Antibiotics is by far the most vulnerable. Even India is worried about it and are subsidizing because they are nervous about their reliance on China. I would say that is why we have the most exposure. I’d start with the FDA Essential Medicines list and prioritize those,” she said. (CPA published an article about this on Oct. 7.)
Rechenberg said that even if India was derisking from China, that was not enough. India has its own set of problems, including safety issues and their own cost advantage that makes investing in generics in the U.S. difficult. “India had the same problems as China during the pandemic and they, too, cut off supply to us because they had their own population to cater to,” he said.
Sen. Ashley Moody (R-FL) said consumers have no idea where their drugs are coming from.
“There is very little transparency on that,” said Tony Sardella, Chairman of the API Innovation Center and Distinguished Fellow of Health Innovation at Washington University in St. Louis’ Olin Business School. “In any other supply chain you can look at the ingredients and see where it comes from. Not pharmaceuticals. You can’t even compare quality and as a result, one in every four prescriptions is from a lab that has an FDA violation. Some are simple procedural violations, but still,” he said. “The cost of making generic drugs here is overestimated. With advanced manufacturing, we are talking about pennies more to make it here,” he said.
Sen. Elizabeth Warren (D-MA) asked Rechenberg how subsidies in India and elsewhere harm U.S. manufacturers.
“They can drive you out of the market,” he said, adding the need for tariff rate quotas to impede import volume, long-term federal purchasing contracts, and legislation like the PILLS Act.
Not only can they drive you out of the market because of a government support program, once their American competitor is gone – thanks to the pricing squeeze imposed on them from low-regulation, low-tax, and low-labor cost countries – those foreign producers often raise the price once they have a secure market position. In other words, Americans are not saving money thanks to imported drugs. Drug prices have been going up as fast as U.S. labs have been outsourcing to foreign labs.
For their part, Brookings did warn that the Trump Administration, facing a roughly $2 trillion fiscal deficit still this year, is unlikely going to push Congress to pass legislation that can be viewed as a subsidy. Trump, who has been very critical of the CHIPS Act and whose party reduced a lot of the tax breaks in the ‘Inflation Reduction Act,’ seems to prefer tariffs over government programs. That might include the threat of tariffs to get multinationals to invest in the U.S., a strategy we have seen already deployed in recent weeks.
Sardella agreed on long-term government purchasing orders from the Defense Department in particular. He called it a “significant lever” to onshore.
Sen. Warren’s bill, the ‘Pharmaceutical Supply Chain Defense and Enhancement Act’ (S.5638), would require developing a list of critical drugs important to public health and national security, including their APIs and KSMs. It would require the DoD to enter into long-term contracts to increase domestic manufacturing capacity for those drugs.
“Critics tell me that if we shift to American made drugs, it will be too expensive. But we are already paying the price in vulnerabilities,” Warren said. “Or we are paying the price in lower quality drugs that make you seek or keep you sick. Would shifting to more domestic manufacturing cost us more or save us more in the long run?” she asked Rechenberg.
It would save us more, he said. “We have seen massive price hikes during shortages without any tariffs. With domestic production secured, you will have guaranteed safer and readily available medicine, saving countless dollars through less shortages, more effective treatment, and better health outcomes.”
CPA Economist Leads Rare Bipartisan Push to Fix America’s Generic Drug Crisis
Wednesday’s Senate Special Committee on Aging hearing smashed the Washington stereotype of a hotly divided government. There was not a single member of the committee that blamed the other side for America’s generic drug crisis, and everyone agreed on at least some key measures required to reshore a sector of the pharma business that is almost entirely dominated by imports.
CPA Economist Andrew Rechenberg gave his testimony and answered questions in a four- panelist hearing. It was arguably the most agreeable hearing in years. A bipartisan consensus on America’s generic drug supply chain is nearly fully formed now.
Rechenberg gave the committee CPA’s five pillar strategy to rebuild generic drug manufacturing, including tariff rate quotas (TRQ) adjustable each year as domestic capacity grows. He also touted the ‘PILLS Act’ by Rep. Claudia Tenney (NY-24) H.R. 1396 in the House (a bill CPA supports), and Sen. Tom Cotton’s (R-AR) companion bill S. 1891 in the Senate – which provides tax credits and other incentives like a ‘CHIPS Act’ for generics.
FDA reform is also needed to “ensure safety of current imports with many plants going five years without an inspection and where lab tests are often falsified,” he said, referring to the many documented safety failures and FDA citations for both Indian and Chinese companies. “The FDA relies on company paperwork instead of independent batch testing by the FDA and that needs to change.”
Federal purchasing is where everyone agreed with the CPA take.
“We need to treat medicine procurement by government agencies like the Department of Defense as a national priority,” he said. “This is how you begin to minimize reliance on risky and adversarial nations.”
Opening Remarks by Chairman Rick Scott
“The national security risk of relying on China for drugs is unacceptable,” Chairman Rick Scott (R-FL) said at the opening. “I can’t think of anything more crucial than helping our seniors with quality generic drugs. This is a national security and a public health issue for all Americans,” he said. Scott supports the Section 232 investigation into generic drugs, which is ongoing at Commerce despite a lot of lobbying against it. Tariffs were already announced on branded drugs, but the real problem is with generics. As it is, President Trump already signaled an exemption of those tariffs to Big Pharma companies that pledged investments in the U.S. The EU and Japan are also exempt.
Ranking Member Kirsten Gillibrand (D-NY) Wants Legislative Fix
Like Chairman Scott, Senator Gillibrand seemed to understand the issue at hand.
“Too many APIs and key starting materials (KSM) are made outside the United States,” she said about active pharmaceutical ingredients and the main chemical and organic compounds that go into making them.
She was a bit tepid on tariffs, taking her cue from the Brookings Institute on American labs not being up to the task to make up for imports should a blanket tariff policy go into effect at some point. “Generic drug makers cannot just flip a switch and make it in the U.S.,” she said. She likes incentives. “We need to make more targeted investment and adjust incentives,” she said.
EVEN BROOKINGS AGREES: “Hospitals do not know what their supply chain risks are because they have so little visibility, and because there is no visibility as to who is making what and where, they simply go for the price,” Rechenberg told the Committee. On shortages, the FDA often is forced to weigh supply and safety. Surprisingly, safety does not always win. The FDA is concerned about shortages and when everything is imported, even from labs with bad grades from inspectors, the FDA will lean on supply instead. Brookings Institute panelist Marta E. Wosińska said one shortage of a drug can lead to death when alternatives are not available. “When you look at the cost of life, a single shortage can cost billions.” There is no accountability, and the hospital doesn’t pay that cost – the government does.
Rechenberg: In Good Company
Rechenberg was not alone in sharing the idea that generic drugs needed life support. He mainly differed on the tariff front, an issue no one spent any time fully disputing, including Brookings and the Democrats on the Committee. In other hearings where tariffs have come up as a solution, Democrats have almost uniformly shot down the idea. Not this time.
Sen. Tommy Tuberville (R-AL) asked him what would happen if we restricted imports. Can we make all the drugs here, he asked.
“Not currently. We propose working with other countries like the UK, Switzerland and the European Union. With them, we would have enough capacity,” Rechenberg said.
Marta E. Wosińska, Senior Fellow at the Center on Health Policy at the Brookings Institute said the main problem with pulling supply from India was that “In 2024, they produced over 60% of fully finished doses of generic drugs in the U.S. You are looking at well over 200 API facilities in India. The size of India’s pharmaceutical supply chain is massive so we are going to need other ways to reshore.”
Gillibrand asked her to prioritize: where do we start? Here, Brookings sounded a lot like CPA here. Rechenberg could just sit back and let a Washington establishment think tank do the talking.
“Antibiotics is by far the most vulnerable. Even India is worried about it and are subsidizing because they are nervous about their reliance on China. I would say that is why we have the most exposure. I’d start with the FDA Essential Medicines list and prioritize those,” she said. (CPA published an article about this on Oct. 7.)
Rechenberg said that even if India was derisking from China, that was not enough. India has its own set of problems, including safety issues and their own cost advantage that makes investing in generics in the U.S. difficult. “India had the same problems as China during the pandemic and they, too, cut off supply to us because they had their own population to cater to,” he said.
Sen. Ashley Moody (R-FL) said consumers have no idea where their drugs are coming from.
“There is very little transparency on that,” said Tony Sardella, Chairman of the API Innovation Center and Distinguished Fellow of Health Innovation at Washington University in St. Louis’ Olin Business School. “In any other supply chain you can look at the ingredients and see where it comes from. Not pharmaceuticals. You can’t even compare quality and as a result, one in every four prescriptions is from a lab that has an FDA violation. Some are simple procedural violations, but still,” he said. “The cost of making generic drugs here is overestimated. With advanced manufacturing, we are talking about pennies more to make it here,” he said.
Sen. Elizabeth Warren (D-MA) asked Rechenberg how subsidies in India and elsewhere harm U.S. manufacturers.
“They can drive you out of the market,” he said, adding the need for tariff rate quotas to impede import volume, long-term federal purchasing contracts, and legislation like the PILLS Act.
Not only can they drive you out of the market because of a government support program, once their American competitor is gone – thanks to the pricing squeeze imposed on them from low-regulation, low-tax, and low-labor cost countries – those foreign producers often raise the price once they have a secure market position. In other words, Americans are not saving money thanks to imported drugs. Drug prices have been going up as fast as U.S. labs have been outsourcing to foreign labs.
For their part, Brookings did warn that the Trump Administration, facing a roughly $2 trillion fiscal deficit still this year, is unlikely going to push Congress to pass legislation that can be viewed as a subsidy. Trump, who has been very critical of the CHIPS Act and whose party reduced a lot of the tax breaks in the ‘Inflation Reduction Act,’ seems to prefer tariffs over government programs. That might include the threat of tariffs to get multinationals to invest in the U.S., a strategy we have seen already deployed in recent weeks.
Sardella agreed on long-term government purchasing orders from the Defense Department in particular. He called it a “significant lever” to onshore.
Sen. Warren’s bill, the ‘Pharmaceutical Supply Chain Defense and Enhancement Act’ (S.5638), would require developing a list of critical drugs important to public health and national security, including their APIs and KSMs. It would require the DoD to enter into long-term contracts to increase domestic manufacturing capacity for those drugs.
“Critics tell me that if we shift to American made drugs, it will be too expensive. But we are already paying the price in vulnerabilities,” Warren said. “Or we are paying the price in lower quality drugs that make you seek or keep you sick. Would shifting to more domestic manufacturing cost us more or save us more in the long run?” she asked Rechenberg.
It would save us more, he said. “We have seen massive price hikes during shortages without any tariffs. With domestic production secured, you will have guaranteed safer and readily available medicine, saving countless dollars through less shortages, more effective treatment, and better health outcomes.”
CPA submitted extensive comments to the Commerce Department’s Section 232 investigation into pharma, documenting how America’s dependence on foreign-made generic drugs poses severe national security risks.
“From all the research we have done so far, the costs of shortages, worse patient care, and lost production vastly outweigh what we save in the long run by reshoring,” Rechenberg told the Committee. “In the long run, paying a little more up front for generics delivers far greater savings.”
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
TRENDING
CPA Calls for Replacing USMCA with Two Bilateral Agreements to Restore U.S. Trade Sovereignty
CPA Releases New Economics Report: “Section 232 Steel Tariffs Are Necessary For National Security”
Beef Prices: Blame the Packers, Not America’s Ranchers
Senate Witnesses Discuss Reshoring and Making China’s Massive Biotech Ecosystem Less Attractive for Big Pharma
With China Agreement Complete, CPA Urges Trump Administration to Prioritize 232 Investigations and Domestic Producers
The latest CPA news and updates, delivered every Friday.
WATCH: WORTH FIGHTING FOR
Get the latest in CPA news, industry analysis, opinion, and updates from Team CPA.
CHECK OUT THE NEWSROOM ➔