Full text of the official published hearing record. Extracted from the source document — verify against the official record for citation.
[Senate Hearing 119-500] [From the U.S. Government Publishing Office] S. Hrg. 119-500 BEHIND THE LABEL: FOREIGN OWNERSHIP AND CONTROL IN AMERICA'S DRUG SUPPLY CHAIN ======================================================================= HEARING BEFORE THE SPECIAL COMMITTEE ON AGING UNITED STATES SENATE ONE HUNDRED NINETEENTH CONGRESS SECOND SESSION __________ WASHINGTON, DC __________ JULY 15, 2026 __________ Serial No. 119-33 Printed for the use of the Special Committee on Aging [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Available via the World Wide Web: http://www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 64-352 PDF WASHINGTON : 2026 ======================================================================= SPECIAL COMMITTEE ON AGING RICK SCOTT, Florida, Chairman DAVE McCORMICK, Pennsylvania KIRSTEN E. GILLIBRAND, New York JIM JUSTICE, West Virginia ELIZABETH WARREN, Massachusetts TOMMY TUBERVILLE, Alabama MARK KELLY, Arizona RON JOHNSON, Wisconsin RAPHAEL WARNOCK, Georgia ASHLEY MOODY, Florida ANDY KIM, New Jersey JON HUSTED, Ohio ANGELA ALSOBROOKS, Maryland ---------- McKinley Lewis, Majority Staff Director Claire Descamps, Minority Staff Director C O N T E N T S ---------- Page Opening Statement of Senator Rick Scott, Chairman................ 1 Opening Statement of Senator Kirsten E. Gillibrand, Ranking Member......................................................... 2 PANEL OF WITNESSES Hon. Nazak Nikakhtar, Partner & Chair of the National Security Practice, Wiley Rein LLP, Washington, D.C...................... 4 Stephen Ezell, Vice President for Global Innovation Policy, Information Technology and Innovation Foundation (ITIF), Washington, D.C................................................ 6 Edward You, Founder and Principal Consultant, EHY Consulting LLC, Fairfax Station, Virginia...................................... 7 Rush Doshi, Ph.D, C.V. Starr Senior Fellow for Asia Studies, Director of the China Strategy Initiative, Council on Foreign Relations, Assistant Professor, Georgetown School of Foreign Service, Washington, D.C....................................... 9 APPENDIX Prepared Witness Statements Hon. Nazak Nikakhtar, Partner & Chair of the National Security Practice, Wiley Rein LLP, Washington, D.C...................... 30 Stephen Ezell, Vice President for Global Innovation Policy, Information Technology and Innovation Foundation (ITIF), Washington, D.C................................................ 35 Edward You, Founder and Principal Consultant, EHY Consulting LLC, Fairfax Station, Virginia...................................... 69 Rush Doshi, Ph.D, C.V. Starr Senior Fellow for Asia Studies, Director of the China Strategy Initiative, Council on Foreign Relations, Assistant Professor, Georgetown School of Foreign Service, Washington, D.C....................................... 81 Questions for the Record Stephen Ezell, Vice President for Global Innovation Policy, Information Technology and Innovation Foundation (ITIF), Washington, D.C................................................ 187 Rush Doshi, Ph.D, C.V. Starr Senior Fellow for Asia Studies, Director of the China Strategy Initiative, Council on Foreign Relations, Assistant Professor, Georgetown School of Foreign Service, Washington, D.C....................................... 189 BEHIND THE LABEL: FOREIGN OWNERSHIP AND CONTROL IN AMERICA'S DRUG SUPPLY CHAIN ---------- Wednesday, July 15, 2026 U.S. Senate Special Committee on Aging Washington, DC. The Committee met, pursuant to notice, at 3:33 p.m., Room G50, Dirksen Senate Office Building, Hon. Rick Scott, Chairman of the Committee, presiding. Present: Senator Scott, Moody, Husted, Gillibrand, Warren, and Alsobrooks. OPENING STATEMENT OF SENATOR RICK SCOTT, CHAIRMAN The Chairman. The U.S. Senate Special Committee on Aging will now come to order. The Ranking Member and I were thrilled to see the Older Americans Reauthorization Act pass the Senate yesterday. This legislation is critical to protecting seniors' independence and reaffirms Congress' commitment to the older Americans who built and served this country. As Chairman of this Committee, I have been privileged to lead the charge in reauthorizing the OAA with the Ranking Member Gillibrand. We have seen firsthand through multiple hearings the positive impacts legislative solutions can have on seniors and caregivers alike, giving dignity and strength to those living out their golden years. I am especially proud to have led this effort in the Senate with the Ranking Member. I would like to personally recognize and thank her for her hard work and partnership on this legislation. I now urge the House of Representatives to quickly pass the OAA and send it to President Trump's desk. I also want to thank my Senate Republican and Democrat colleagues for their support of our seniors through the OAA. Here is a question most people have never thought to ask, do you know who actually makes your medicine? Not what is on the bottle, but who owns the facility? Who controls the ingredients? Does a foreign government have any influence over the decision of what goes into them? Most Americans don't know, and in many cases, neither does the Federal Government. Seniors rely on prescription drugs more than any other age group. More than 88 percent of older Americans report being prescribed at least one medication in the past year. Nearly all of those prescriptions are filled with generic drugs, and a huge share of those generic drugs are manufactured in facilities overseas by companies with complex ownership structures that the FDA, CFIUS, and other agencies can't fully trace. For most products, that is a trade question. For medicine, it is a matter of life and death. We have seen what happens when something goes wrong with a faulty supply chain. Unfortunately, people die. We have seen what happens when our supply chain gets constrained. Unfortunately, people die. I have said it before, there is no reason why we should be letting our adversary, Communist China--they have decided to be our adversary--control our medicine supply chain. If they wanted to, they could restrict exports tomorrow of the critical ingredients needed for life-saving medicines. The difference between a trade disruption and a public health emergency is how dependent we are on the country doing their restriction. Right now, we are very dependent. Today, we are going to examine a different but related problem. Not just what drugs are--where drugs are made, but who owns the companies making them. Foreign ownership and control can create leverage over our drug supply that is largely invisible to the Federal Government so there is not a federal agency that has been designed to understand this. FDA doesn't have full visibility into it and current disclosure rules don't require the transparency needed to even know where the risks are and it goes even further than that. Most people think about foreign threats to our drug supply in terms of what's on the shelf but there is another problem that almost nobody is talking about. When American patients participate in a clinical trial, American regulators authorize that trial. American patients take on the risk, but the data those trials produce, what works, what doesn't, what the next generation treatments should look like, can end up flowing directly to a foreign government that doesn't like us, legally with no federal agency able to stop it. That means Communist China doesn't have to steal our medical breakthroughs, we just hand it over to them. We have witnesses today who have worked on these problems from inside the Government. They are going to help us put this on the record. Today I am announcing the Pharmaceutical Investment Oversight and Accountability Act with Ranking Member Gillibrand, and with Senator Warren. Legislation requires the FTC and CFIUS to report to Congress annually on foreign investment in pharmaceutical manufacturing and related technologies. Transparency is the first step, but it is just the first step. This hearing is going to help us identify what has to come after that. The American people, and especially seniors, deserve to know who actually controls the medicines keeping them alive. I would like to recognize Ranking Member Gillibrand. OPENING STATEMENT OF SENATOR KIRSTEN E. GILLIBRAND, RANKING MEMBER Senator Gillibrand. Thank you, Chairman Scott, for today's hearing. Thank you to our witnesses. We appreciate your expertise and testimony. As the Aging Committee continues to examine a range of factors that put seniors' access to essential medicines at risk, we keep hearing the outsized influence of foreign actors on our drug supply chain. We know that America relies too heavily on China and India for the foundational components to manufacture generic drugs, the key starting materials and the active pharmaceutical ingredients. It is troubling how foreign actors continue to deepen their impact by expanding ownership, investment, and control of our supply chain. This poses a significant risk to the American public, especially because we currently do not and cannot see the full extent of our upstream dependency on foreign actors within the supply chain. This is in part because these countries try to disguise their involvement and influence in ways that our witnesses will discuss later in the hearing. It also happens because we need stronger tools to understand, evaluate, and manage these modern supply chain risks. We must bolster federal oversight efforts and increase transparency on how foreign capital impacts American health care infrastructure. This will strengthen our health and national security without discouraging trusted investment. I am proud to support the work Chairman Scott and Senator Warren do with their Pharmaceutical Investment Oversight and Accountability Act, but we also have to align policy goals and targeted investments to diminish foreign dominance in our drug supply chain and maintain our global leadership in biopharmaceutical innovation. This involves addressing market factors in the U.S. that have led to a race to the bottom for generic drugs. Congress must work with industry to make sure manufacturers and purchasers consider quality, not just cost, when they source key pharmaceutical ingredients and final dose medicines. Foreign countries like China have rapidly scaled up innovation for novel therapies through efforts like clinical trial reform, targeted Government investment in drug development, and improved coordination between early research and commercial scale manufacturing. While we do not need to exactly replicate the steps they have taken, we must acknowledge that they are moving at a much faster pace than we are, increasing our dependence on their clinical trials and components for essential medicines. We can't let foreign actors, much less our adversaries, surpass us in innovation. It will only increase our reliance and deepen their control over crucial American health infrastructure and supply chains. I look forward to hearing from our expert witnesses today. I am committed to working with my colleagues to improve our tools to understand, evaluate, and manage modern supply chain risks so we can strengthen our health and national security. Thank you. The Chairman. Thank you, Ranking Member Gillibrand. Now, I would like to welcome our witnesses. They are here to help the Committee understand where foreign ownership creates real risk in the drug supply chain and what the Federal Government can actually do about it. First, I would like to recognize Hon. Nazak Nikakhtar--how did I do? In 2018, she was unanimously confirmed as the Department of Commerce's Assistant Secretary for Industry and Analysis, performed the duties of Undersecretary for Industry and Security, performing the non-exclusive functions and duties while nominated. She was Commerce Lead on CFIUS, and oversaw the Government's first Whole of Government Supply Chain Assessment Initiative. She now chairs the National Security Practice of Wiley Rein. Thank you for being here. Please begin your testimony. STATEMENT OF HON. NAZAK NIKAKHTAR, PARTNER & CHAIR OF THE NATIONAL SECURITY PRACTICE, WILEY REIN LLP, WASHINGTON, D.C. Ms. Nikakhtar. Chairman Scott, Ranking Member Gillibrand, and members of the Committee, thank you for hosting this important hearing and leading important legislation to address critical issues. My name, again, is Nazak Nikakhtar. My testimony today is informed by my work in trade, national security, and supply chains over the course of 25 years as an economist, attorney, and policy expert. The threats posed by China's growth in biotech, fueled by IP theft and misappropriation and massive state subsidies, and a distorted economy that consistently underprices the rest of the world is well established, so I will not spend time of that. Yet these realities provide the context in which I will discuss our legal shortcomings and propose solutions. In 2024-2025, China surpassed the United States in biotech innovation, deal value, and in clinical output. Its innovations are outpacing ours. For every $100,000 in U.S. biotech R&D spending, America has one scientist, China has three. China also dramatically outpaces us in STEM graduates by two times and 10 times more in engineers. Also, China's distorted economy intentionally keeps prices low and transfers wealth to the Chinese Communist Party, and the CCP uses its cash-flow to underprice the rest of the world in biotech goods and services and subsidizes our industries at a scale that dwarfs ours. These predatory economic practices are along with the well- established reality of pervasive IP theft, as well as clinical trials being conducted in China without any regard to the welfare of the population, is very alarming. To underscore, China is a foreign adversary under U.S. law because its aim is to harm our Nation, our citizens, and our allies so an adversary's ability to reach into and gain greater control of our pharmaceutical supply chain obviously poses a risk to America, our citizens, and to our allies. We need to look no further than what has happened in the semiconductor, batteries, auto, critical minerals, and robotics sectors as examples of what is yet to come. As to recommendations, first, most Chinese biotech investments in the U.S. seek to acquire American IP and sensitive personal data and disrupt domestic markets through market manipulation. To the extent CFIUS jurisdiction exists, many transactions are cleared today with mitigation measures, but almost always violations of mitigation measures won't be detected by the U.S. Government. This is a risk we cannot afford to take with a foreign adversary. Whenever investments by China come under CFIUS's existing legal jurisdiction for national security review, we need to institute a presumption of denial, meaning that the parties need to justify why the U.S. Government needs to approve this transaction. I have never encountered, in my time in the Government and private practice, any scenario where a Chinese investment in a U.S. biotech company did not pose a serious risk to being misused by the CCP to effectuate its Mil-Civ fusion strategy to America's detriment. Second, CFIUS's jurisdiction doesn't cover most greenfield investments and joint ventures in the United States, which has obviously now become China's preferred way of investing. Legal jurisdiction needs to be extended by Congress through the passage of FIRRMA 2.0. and, or the President needs to institute an IEEPA based Executive Order to close the gap as it pertains to foreign adversaries. Time is running out and these gaps remain wide open today, enabling predatory FDI to occur largely undetected. Third, we need to impose broader export controls on emerging and foundational biotechnologies, biomaterials, and related data that are exported to China for pharmaceutical manufacturing and trials. Currently, all this flows virtually unrestricted to China, the CCP, and the People's Liberation Army. Broadening controls will permit biological materials and data to be treated, in the CFIUS context, as critical technologies, mandating CFIUS review. Without question, we can better control data through current export laws, and we should. Fourth, we need to address the fact that U.S. investments in Chinese biotech occur significantly through corporate licensing deals and venture capital. While BINSA, the Biotech Investment National Security Act of 2026, is an example of a positive step forward, it needs to be passed, and the implementing regulations need to be broad enough to cover all forms of capital flow. Comprehensive bans are effective. Nuanced regulations enable widespread circumvention. Fifth, we need to import prohibitions on biotech materials produced in China. We have trade laws and forced labor prohibitions to do that to prevent the American population from being harmed. My final point is this. With respect to anybody claiming that these recommendations will increase U.S. prices, this is a red herring. China's growth in biotech is only a recent event. Prior to China's grow, the U.S. pharmaceutical industry faced economic pressures that stemmed from unrelated issues. If we have pricing issues at home, we need to address them at home. Relying on China does not solve our competitiveness problem, it only adds to it. Thank you, and I look forward to your questions. The Chairman. Thank you. Next, I would like to introduce Stephen Ezell. He is the Vice President for Global Innovative Policy at the Information Technology and Innovation Foundation, where he directs their Center for Life Sciences Innovation. He spent his career studying how ownership structures and innovation policies shape global competitiveness, including where foreign control creates hidden risks in strategic industries. Thanks for being here. Please begin your testimony. STATEMENT OF STEPHEN EZELL, VICE PRESIDENT FOR GLOBAL INNOVATION POLICY, INFORMATION TECHNOLOGY AND INNOVATION FOUNDATION (ITIF), WASHINGTON, D.C. Mr. Ezell. Good afternoon, Senator Scott, Ranking Member Gillibrand, and members of the Committee. I appreciate the opportunity to testify today, and I appreciate this special Committee for examining the critical issue of foreign ownership control and influence, especially with regard to China and America's drug supply chain. The United States and China are locked in a fierce struggle for leadership in advanced technology industries, as China challenges America for global leadership across a range of sectors, from aerospace and automobiles to semiconductors and AI, to biopharmaceuticals. China first identified biopharmaceuticals as a "strategic and emerging industry" in 2007 but since then, China's growth in the industry has been tremendous, as China's value added in this industry has grown from just $15 billion in 2002 to $190 billion by 2024. China seeks dominance across all phases of the biopharmaceutical supply and innovation chain. All the way from the manufacturing of key starting materials, KSMs, and active pharmaceutical ingredients, to generic and innovative drugs, in addition to the conduct of the clinical trials and the basic science behind them. We are here today about how China has come to dominate globally in KSMs and APIs, accounting for 94 percent of the KSMs for amoxicillin and 74 percent of heparin that America uses but policymakers must understand that China's drug prowess isn't just APIs and generics. China now accounts for 31 percent of the new drug development pipeline globally. China has surpassed the U.S. now in clinical trial starts for new oncology drugs, and overall their share of ongoing clinical trials for new drugs, the most innovative ones in the world, is now just three percent off the U.S. share. China has deployed every possible policy lever conceivable to turbocharge its biopharmaceutical competitiveness. To be sure, some of these are legitimate, such as increasing R&D investment, educating scientists, or reforming clinical trial procedures, but a great many practices are unfair, such as rampant IP theft, non-market subsidies, and predatory pricing practices that enables Chinese producers to sell APIs for prices often 40 to 50 percent below global levels and there is another unfair strategy. Intentional Chinese obscuration about the true ownership nature, or CCP, or PLA links of Chinese companies servicing the U.S. pharmaceutical supply chain. Recent ITIF reports have documented such Chinese false flagging or brand obfuscation in sectors from aerospace to clean energy, to biotechnology as China directs its companies to downplay the company's home country identity when they operate in the United States. ITIF's written testimony provided several case studies in the biotechnology industry, including Beijing Genomics Institute and Wuxi AppTec. BGI, a leading provider of precision medicine services, which now operates the world's largest genomic sequencing capability, brands itself in America under the firm Complete Genomics, which it acquired in 2012. It brands itself as Complete to obscure the fact that it is owned by the BGI and directly linked to the CCP and PLA. The Chinese biotech Wuxi Pharmatech acquired Minnesota- based biologics and medical device testing firm AppTec Laboratory Services in 2008, transforming the entity into Wuxi AppTec. The company is now a world-leading contract research development and manufacturing organization. While the company has sought to disclaim its China ties, Wuxi AppTec maintains an extensive network of relationships with the CCP, is involved directly in the Chinese military civil fusion development strategy and operates the PRC's state key laboratory of drug lead compound research. Its CCP party vice secretary Li Wenbun has stated that "party members are the technical backbone of Wuxi AppTec." To deal with these obscuration practices, ITIF recommends that Congress should expand the Corporate Transparency Act to require Chinese origin companies operating in high-tech sectors in America to report beneficial ownership and operational control, including minority stakes, joint ventures, offshore subsidies, and IP transfer rights. Companies that fail to provide full transparency should be barred from doing business in the United States. For entities owned or controlled by companies from designated countries of concern, the FTC should issue guidance on truth in branding practices, requiring companies to clearly disclose this foreign ownership or their foreign ownership in marketing, branding, and web communications. ITIF's written testimony provides further policy recommendations for how America can enhance the security of our drug supply chain, from investing in novel bio-manufacturing processes, to fend shoring, and strategic stockpiling. We must recognize we are in a fierce struggle for biopharmaceutical leadership, and it is critical that Congress implement policies that effectively support the industry, but also ensure that Chinese predatory trade and economic practices don't harm American patients, workers, and companies. Thanks, and I look forward to your questions. The Chairman. Thank you. Now, I would like to introduce Edward You. He is a former FBI Supervisor Special Agent who spent over 20 years working on biosecurity and emerging technology threats at the FBI, the White House, and the Office of the Director of National Intelligence. He represented the United States at the United Nations Biological Weapons Convention and has been featured on CBS's 60 Minutes for his work protecting U.S. biotechnology. He now runs EHY Consulting, LLC. Thanks for being here. Please begin your testimony. STATEMENT OF EDWARD YOU, FOUNDER AND PRINCIPAL CONSULTANT, EHY CONSULTING LLC, FAIRFAX STATION, VIRGINIA Mr. You. Good afternoon, Chairman Scott, Ranking Member Gillibrand, and I want to thank the Committee for this opportunity. I am going to be doing something a little bit different. I appreciate the title of today's hearing, looking at behind the label. I am going to ask you to look beyond the label. What I mean by that is the acknowledgment that biotechnology has become so advanced in my 20 years in the FBI, now currently in my consultancy. You have heard disparate technologies being laid out. What I am witnessing, and we should be acknowledging, is that there is absolute convergence of these technologies happening. What this is translated into is that biotechnology is impacting multiple critical infrastructure sectors. It is not just health. It is also agriculture, manufacturing, renewable energy production so it is strategic in its nature, and by the way, the fact of that matter is the Chinese government has acknowledged that. You are seeing that in a lot of their statewide policies, their 15th Five Year Plan. They are acting on it. Mr. Chairman, you already mentioned about the CAR-T cell therapy issue, and the fact that our own FDA has cleared multiple Chinese startups with CAR-T cell therapies. It is a breakthrough cancer treatment, and they are being brought over to the U.S. and being put into U.S. patients, and the resulting clinical trial data is then being sent back to China. What that means is that that data is then supercharging their AI to analyze and come out with the iteration for the next round of therapeutics but then, what is even worse is that our companies as it was mentioned is licensing those products. Then our government is funding it through reimbursements, through Medicare. It is a double, triple whammy, and it is something that we need to be acknowledging but with that in mind, it also means that data is absolutely the new oil, and we need to be looking at it that way. The thing about this is that oil doesn't--data doesn't spoil. That means it is going to be a continuing challenge. It also means that we challenge cyber security. It is not traditional cyber security. It impacts Medicare and Medicaid. It impacts health records, especially for our senior citizens who are dependent upon that. We have to acknowledge that that is what is happening in this space. To broaden it even further, I also want to include agriculture, because the U.S. has historically been a powerhouse in agriculture. That has been on the backbone of our economy. The point is, is that now agriculture is not just a commodity or for food. It is now being targeted as a possible solution for renewables, for biofuels, but also for pharmaceuticals. We are looking at the evolution of not just farm to fork, but farm to fiber, farm to fuel, and farm to pharmacy. With that in mind, the Chinese have already declared that as a priority in their most recent plans. They just launched a 5-year smart farming plan to integrate AI, robotics, automation, to supercharge their ability to expand their agricultural manufacturing capabilities, not just, again, for traditional, but also for their future pharmaceutical capabilities as well. How is this all looking for us? If you look at China's 15th Five Year Plan, their Healthy China 2030 Strategy, but more importantly, their China Standards 2035 Strategy, what that means is that they already know it is not just about the technology, it is not just about implementation. It is understanding how do they determine what the rules of the road is for the global markets. That they understand that if you are able to influence the standards, you will influence the markets, and therefore we have to become subservient to that so the issue here is that unless we understand what the implications are, my recommendations are, one, is understanding that it is absolutely strategic in nature--that we are in the midst of this global biotech space race. Second is I recommend looking at the National Security Commission on Emerging Biotechnology that is supporting Congress. A lot of their legislative recommendations address everything I just mentioned. Third, we absolutely need to do a better job in assessing the risks associated with biotechnology and the bioeconomy because historically, when the National Security Community, including the Intelligence Community, comes to the bodies like this, what are the predominantly characterized threats? It is pandemics or an engineered bioweapon, but we are talking about something more strategic now, and we cannot be isolated in our silos. We absolutely have to acknowledge the convergence. As it stands right now, we are not established to understand holistically what these threats are. I think the most important one is we just need to out-compete. You do not win a space race by playing defense all the time. It is more than just CFIUS and protections and export control. We out- compete, we out-innovate, and we are not established to do that right now. Finally, though, if we don't, what we are losing is not just market share, but we are losing in the promise of protecting our senior population, but also we are not fulfilling the promise of the generation that we leave the world a better place, and we put ourselves in a position to have our children to be able to succeed beyond us. We are failing that right now. With that, I thank you again for this opportunity and I welcome your questions. The Chairman. Thank you. Ranking Member Gillibrand, I think you are going to introduce the next witness. Senator Gillibrand. Thank you, Mr. Chairman. I would like to introduce Rush Doshi. Dr. Doshi is a C.V. Starr Senior Fellow for Asia Studies and Director of the China Strategy Initiative at the Council on Foreign Relations. Previously, Dr. Doshi was the Deputy Senior Director for China and Taiwan on President Biden's National Security Council, drafting the Administration's China strategy, and aiding the launch of AUKUS, a security partnership for Indo- Pacific region between Australia, United Kingdom, and United States. You may begin. STATEMENT OF RUSH DOSHI, PHD, C.V. STARR SENIOR FELLOW FOR ASIA STUDIES, DIRECTOR OF THE CHINA STRATEGY INITIATIVE, COUNCIL ON FOREIGN RELATIONS, ASSISTANT PROFESSOR, GEORGETOWN SCHOOL OF FOREIGN SERVICE, WASHINGTON, D.C. Mr. Doshi. Chairman Scott, Ranking Member Gillibrand, distinguished members of the Committee, thank you very much for the opportunity to testify today. My argument today is simple. We moved our pharma supply chain offshore. We then became dependent on China for essential medicines. Now we are making the same mistake again in biotechnology, and none of this is good for our patients. My testimony draws from a year-long study we published last month of the Council on Foreign Relations, but in my limited time today, I want to focus on just three priorities from that report. The first is essential medicines. We want to reduce our dependence on China on these medicines. The second is our biotechnology innovation ecosystem. We are shipping that system to China, and we are losing the ability to generate innovation at home. The third is our biomanufacturing ecosystem. We are offshoring that to China as well, and we are increasingly unable to make the medicines of the future here in America. These trends are serious, but with your leadership, they are reversible. I will now turn to address each in turn. First, essential medicines. A drug label might say, Made in America, but our team looked at the data and found the upstream inputs, what we call, of course, KSM, key starting material, or API, active pharmaceutical ingredients, increasingly come from China and only from China. That creates a dangerous dependency. Take amoxicillin. We write 60 million prescriptions a year, but China controls 94 percent of the world's starting material. Or take heparin, 12 million Americans receive it every year in hospitals, but 80 percent of global crude supply is from China. In fact, nearly 700 medicines approved for use in the United States depend on at least one upstream chemical produced solely in China. How did this happen? We focused on price, not resilience. Meanwhile, China ran the rare earth's play in pharma. They extended subsidies, tolerated pollution, and created prices to lock in a global monopoly position. It all happened fast. American amoxicillin production fell from nearly 100 percent of our market to 0 in just 12 years. What should we do? First, we need to find our upstream dependencies through legislation like clear labels and address them. Second, we to change incentives. Medicines that use Chinese inputs should face higher tariffs and lower Government reimbursement rates than medicines that use allied inputs. Third, we should work with our allies. We cannot bring everything back so we should divide and conquer dependencies together. Fourth, we should stockpile finished drugs and their upstream inputs so we can weather disruption. Finally, we build supply. That means funding leapfrog innovation from cell-free methods to green chemistry and providing low-cost capital. A single $50 million grant made an Austrian plant competitive with China in penicillin. We can do the same here. The second trend I would like to address is the offshoring of our biotech innovation ecosystem. Our system is breaking down. American pharma companies are licensing therapies developed in China instead of investing in therapies developed in America. In the last five years, they committed $53 billion to Chinese assets that now make up one-third of new drug pipelines. These vast sums are rapidly building China's innovation ecosystem while starving our own. Why is this happening? Partly it is because China is genuinely innovative, but a larger part is because China has a looser regulatory regime. To put biologics in humans, we have to go through a formal FDA process. They just have to ask a hospital review board for a green light. American pharmaceutical companies can get initial data that a therapy might work faster from Chinese companies than from American companies, and with that, dollars flow accordingly so what do we do? First, we should regulate but not prohibit in- licensing from China. We want to reward Chinese innovations that help patients, but we want to disincentivize arbitrage that hollows out our system. We can use differential tax rates, differential reimbursement, or regulatory scrutiny of licensing under the Biotech Investment National Security Act, or BINSA, to find a middle ground between bans and deregulation. Second, we have to strengthen our system. We need to reform our clinical trial process to move faster to first in human trials, drawing perhaps from Australia's model. That will make arbitrage less likely. We have to fund basic science now more than ever to keep our ecosystem going. The third trend I would like to address is the offshoring of our biomanufacturing capability. We are losing the ability to make the medicines of tomorrow. Roughly 80 percent of U.S. biopharma companies now work with Chinese contract manufacturers like Wuxi Bio, who gain experience and knowledge that compounds their lead over us, all financed by us. Meanwhile, we are locked in to deals with them because biomanufacturing is hard to move from one facility to another. When we do bring it back home, we are increasingly dependent on Chinese upstream inputs, so we can't do it without them. How do we fix this? Well first, the Biosecure Act rightly disincentivizes some of the offshoring, but we also need to build our own capacity with low-cost loans, a national center for advanced biologics manufacturing, and investments in leapfrog production methods. Second, we need to incentivize diversification. Federal funders, NIH, BARDA, the Defense Department, and regulators like the FDA should require China risk plans or a qualified alternative manufacturer in the United States or an allied country before a program reaches a defined milestone. Let me end with this. American purchasers, and above all American taxpayers, account for roughly 70 percent of global pharmaceutical profits. That spending should be consistent with our supply chain security, our innovation ecosystem, and our strong manufacturing base, and good for all patients. Thank you for your time, and I look forward to your questions. The Chairman. Great. I want to thank each of you for your testimony. Let me ask you a simple question. How many warships and fighter planes do we buy from China? Yeah, zero right? Why don't we? They probably get it cheaper, right? Because we don't want to be dependent on them. I mean, we are building a military, so we are not dependent on them. We don't want our service men and women dependent on their equipment. What I don't understand is, why are we buying any drugs from China? Ms. Nikakhtar, you were Congress' lead on CFIUS. CFIUS is built around the idea of control, but in this industry, real control can come from a minority stake, a board seat, licensing deal, or data cross access right. When you were sitting in that chair, were there pharmaceutical or biotech deals you were worried about that CFIUS simply had no clear authority to touch? Ms. Nikakhtar. I am sorry, I did not hear all of it. Were you asking about the scope--how much of it? It is pretty astounding. The U.S. Government, we don't have a good sense of what CFIUS doesn't touch, because you get Chinese companies who pretend like they want to invest in American companies, pretend like they go through the due diligence, go in the data room, get all the information they need, and they say, oops, we don't want to invest in you, and none of it comes before CFIUS. You have versions of that going on and on, so there is no way--even if an FDI doesn't occur, you don't know how much of the predatory actions have actually robbed our companies of their sensitive data and it is not just including IP, right. It is the data, it is their know-how, it is how they test, etcetera. We have got a real problem in not detecting things, which is why I really commend your and Senator Gillibrand's legislation on just trying to get better visibility into what is going on, so legislation is at least buttressed by more facts. The Chairman. Does a board seat come to CFIUS? Ms. Nikakhtar. Is a board--. The Chairman. If they were just putting somebody on a board. They didn't make any investment. They just said, oh, I have got this great scientist from China who is going to go on some company's board. That wouldn't come in front of CFIUS, right? Ms. Nikakhtar. In very few instances, it would, but by and large, it wouldn't. That board seat could get, again, as you are pointing out, access to sensitive information, but only in very limited instances if other conditions are met, only if others trigger CFIUS jurisdiction. The Chairman. How about licensing deals? Do they all come in front of CFIUS? Ms. Nikakhtar. Nope. Not if there is no investment. The Chairman. How about data? What if they just paid the fee for data access right? Ms. Nikakhtar. They are doing lots of that, and they are doing sneakier ways to get data, and that does not come under U.S. Government's review jurisdiction. The Chairman. Mr. Ezell, your testimony says China controls the key starting materials for 94 percent of amoxicillin, 74 percent of heparin, and 100 percent of the ingredients of drugs that treat high blood pressure. Every blood pressure pill in this country traces back to a single source Chinese ingredient. That is right, correct? What happens if they just stop giving it to us? Talk about what is going to happen to a senior. We don't get anything tomorrow. Mr. Ezell. Yes, exactly. The critical point is that China is looking for leverage over the United States. It has identified critical minerals. It has identified rare earth magnets at critical areas it can get leverage. There is no question that biotechnology, KSMs, and the APIs are special choke points that they could use to weaponize against the United States at their time of choosing should we not have an ability to respond to that contingency. The Chairman. Mr. You, in your years at the FBI, what methods did foreign state actors use to gain influence over U.S. pharmaceutical and biotech companies that would never trigger a CFIUS review, and the FDA would never see coming? Mr. You. That is a broad question, sir, because it is a full court press. Let me start by saying that I think, understanding about the bioeconomy, understanding that China-- it is silver bullet for them, right, because they actually have real world challenges. They have population sustainability issues. They have food security. They have energy insecurity. They are dealing with environmental remediation challenges. Biotechnology offers that to them so you see the full court press and from the whole scope in either funding research and development, acquiring talent development, right, so we have seen that happen right now too, looking at the talent going overseas. As was mentioned before, looking at investments that may not necessarily trip the bar but then also looking at downstream, too. As I mentioned, the standards aspect of it as well, is that it is not just about theft of IP, but if you also are able to manage what the--things like the International Council for Harmonization, which provides global instructions on how you determine medicine treatments, how you conduct clinical trials, especially for cutting edge treatments like CAR-T cell therapies or mRNA vaccines, which is uncharted territory, they get first mover advantage. I think that is the way we need to be understanding. That it is not necessarily always us be reactive but understanding that they have huge incentives to make it happen, but it goes back to what I said before, we have to do a better job in understanding how we conduct our risk assessments. Because yes, we are losing our shirts when it comes to IP theft and a lot of the investments, but then they are absolutely leaning forward on trying to out-innovate us because they need it but then that also means that not only do we have to be able to address that, but we also need to counter that as well too. Meaning that you don't win a space race playing defense all the time. You out-innovate. The Chairman. Yes. Dr. Doshi, your report models what happens if China restricts just 25 percent of the inputs for amoxicillin. You find peak shortages in the United States within six to nine months. Can you describe what that looks like inside an American nursing home or hospital? Mr. Doshi. Thank you, Senator Scott. This challenge is enormous. Amoxicillin has 60 million prescriptions a year. The ability to have a shortage or an increase in price, I mean, that will ripple through the healthcare system, and that is just one drug where we have a dependency. We have heard about many, many other drugs, and at least 700 have an upstream dependency on KSM that comes from only China so we are talking about potentially a magnitude of impact that would be devastating to seniors. The Chairman. All right. Ranking Member. Senator Gillibrand. The biotechnology space race is likely to define this century, and the United States's continued lack of strategic investment risks seeding our competitive edge in global development. The National Security Commission on Emerging Biotechnology's 2025 report cautioned that the U.S. is dangerously close to falling behind China and urged immediate action to scale biomanufacturing. If the United States fails to maintain global leadership in biotechnology, in what ways would this impact seniors' health security and their ability to access the high quality medicines that they need? Mr. You. Thank you for the question so it translates in more than just what we tend to think of. Like the medical tourism is something that we tend to bring up. It is more existential threat than I think we fully appreciate, especially again, with the convergence of AI. The nightmare scenario I see is not just becoming completely dependent upon a foreign supply chain for our critical medicines, but if you game it out, if you look at the coming storm of the internet of things, of the interconnected world, of 6G, and not understanding where our data is going and how it could then be leveraged and where they out innovate, the nightmare scenario from where I sit is that we may end up seeing that every single biological input that sustains us, not just our seniors, but us as individuals, our food, our medicine, our energy production, what happens if that all is influenced by an authoritarian regime that is antithetical to not only economically, but to our standards and our values. I think we need to understand that that is a slippery slope that we are about to embark on if we do lose that first mover advantage. Anecdotally, when we had the wake-up call in the first space race--when the Soviets launched the Sputnik satellite, that was a wake-up call moment. One of the things that Congress did was pass the National Defense Education Act, which dropped billions of dollars from K through 12 to college education to make sure that it shored up our workforce, the future computer scientists, engineers, physicists, to make sure that we maintained our advantage. If we acknowledge that this is space race, we need bold moves like that to be able to counter it, because otherwise, that nightmare scenario I just articulated could potentially become a reality. Senator Gillibrand. Yes. You previously discussed developing a bioeconomic strategy to ensure the U.S. retains its global competitive edge. What should the pillars of this proposal be, and what agency or coordinating body should be charged with implementing such a proposal? Mr. You. I want to reference, as you mentioned, the National Security Commission on Emerging Biotechnology. One, they had a recommendation that there should be a coordinating office within the executive branch, which I acknowledge. Quite frankly, something like the NSCEB, which is set to sunset this year, from my standpoint, is a little bit of a shame, because that has been a phenomenal body to kind of do a survey of where biotechnology--what the current status is and be able to engage the different sectors in academia and private sector to kind of forecast where it is going, and then support Congress with the potential policy recommendations. There is that but quite frankly too, that one of the challenges that I faced personally during my time at the Bureau, and it still exists today, and I just touched on my recommendations, is that we need to do a better job in doing the risk assessments. Because if the Intelligence Community is forecasting biotechnology, and if the resulting products that are provided to you, the decisionmakers, is looking at pandemic preparedness or a bioweapon, those are important, yes. If it is not also incorporating what is happening in the bioeconomy space, then we are flying blind. It is not just what the risks are, but it is actually missing out on the opportunity spaces where what are the next greenfield areas that we should be launching into? As I mentioned before, the U.S. is an agricultural biomanufacturing powerhouse, and we are just not leveraging that. Senator Gillibrand. Yes. Dr. Doshi, what advantages does China have over the U.S. in biotechnology development? How did they gain these advantages, and what steps should the U.S. take to regain them? If you have any recommendations on the last two questions, please include those. Mr. Doshi. Thank you very much, Ranking Member Gillibrand. I will just start by saying that the first advantage they have right now is that they have invested significantly in their capacity so they are able to do bio manufacturing at scale for far less than we can, often below probably cost. That is one enormous manufacturing advantage, but it is perhaps not the most important advantage. What I am more concerned about right now is the fact that their clinical trial process or their pre-IND investigations are able to move much faster than ours. In China, if you want to get a biologic into a human being, you just go to a hospital and you get a green light from their ethics board. In our country, we have to go through the FDA. The difference in time can be a year but for a pharma company in America, when they have to compare buying an American asset or licensing a Chinese asset, the Chinese asset comes with that very exquisite, special de-risked data. They are willing to pay a premium for it. That premium comes at the expense of patient access and quality and other kinds of considerations that we care about. Patient rights, for example but it is still a powerful incentive. Those two forces together mean that China is hollowing out drug discovery, while also basically taking biomanufacturing away from the United States. Our solutions--very quickly in the time left--are first, to fix our clinical trial process through reform, and the FDA is considering that right now. Number two, to incentivize and boost investment into our biomanufacturing capability and number three, to de-risk from Chinese biomanufacturer by creating incentives not to rely on biomanufacturing abroad. Some of that has happened under Biosecure, but there is more to be done. Senator Gillibrand. Thank you, Mr. Chairman. The Chairman. Senator Husted. Senator Husted. Thank you, Mr. Chairman. Thanks to you and the Ranking Member for hosting this--working on this important issue. Welcome to all the witnesses today. I know that there was a point in time in America's past where we thought it was a good idea to export when we let China into the World Trade Organization. We decided that collectively as a country, at least the policymakers at the time, that it would be a good idea to make things in other places because it was cheaper to make them there but as you talk to people in different industry sectors, I know I am more familiar with the manufacturing sector, they not only tell you that we lost our jobs and we lost our companies, but we lost the talent. We actually lost the talent, the engineers, the people that know how to make things, do complicated, efficient, effective manufacturing processes, whether that be for rare earth, whether that would be for manufactured goods, chips, electronics. I am curious about what you think the impact of the outsourcing of things in the pharmaceutical sector have had on our ability to actually compete from the standpoint of talent. Any of you want to--have a thought on that? Go ahead. Yes, thank you. Ms. Nikakhtar. Yes, I appreciate the question. I mean, we-- semiconductors is a really good example, because we had the brain drain when we offshored everything to Asia. Then when we decide we want to invest, not only do we not have enough engineers and experts and we don't have enough investors who understand the technology to know where to invest. I do a lot of manufacturing, and I do a sort of building domestic industry. What is super fascinating is that with the money that is going to revitalize domestic industry right now in the Government, companies are investing, and they are partnering with local nearby universities to develop the workforce that will go into those factories. From my perspective, the brain draining needs to be stopped, but once we reinvest here, it is those companies who are going to co-locate with universities, train those students to rebuild the workforces that we are going to lose. Senator Husted. Yes, they go hand in hand, but we are at a disadvantage at the moment. We need to build that talent pipeline, but it doesn't exist to the extent that it needs to. Is that correct? Ms. Nikakhtar. In biotech, it should be, but in other sectors, we have lost a lot, so we need to build. I think in biotech, it still exists, but we really need to make sure that we don't lose it. Senator Husted. Yes. Mr. Ezell, I am just curious, how do large purchasers of medicines such as hospitals and health systems currently assess the supply chain risk that they have as it relates to the risk of selecting drugs? How does that-- how they think about it? Mr. Ezell. I will answer that, but also, if I may add to Nikakhtar's comment, is there a whole range of technologies that we invented in American labs and universities that are now manufactured, scaled, and commercialized in Asia, especially China. Things like flat panel television, solar panels, lithium- ion batteries. These are things that America created, but we can't manufacture them in America so we need a comprehensive manufacturing strategy, as Ms. Nikakhtar talked about, to ensure that the technologies of the next generation, new things like gene editing, synthetic biology happen here in the United States. Senator Husted. I will just interject on that point, that apparently there is a virtue in an economy that is more virtuous perhaps than the lowest price. Mr. Ezell. Precisely. Because we care about, you know, innovating the next generation of products, services, and drugs that benefit Americans. Senator Husted. Because that is dependability, it is efficiency, it is those other things, reliability. All of those are also virtues in an economic decision. Mr. Ezell. You know, on that point, by the way, when we let China into the WTO, China had a grand total of $200 million of foreign currency reserves. By 2025, that was $4 trillion. Guess where that came from? A $7.2 trillion trade surplus with the United States over the past 20 years, which has gone to a $1 billion foreign technology acquisition fund that has snapped up a number of American and Western companies. We have permitted China to use the trade surplus they got from us to not only finance their, you know, innovation and R&D wherewithal, but to go out and buy our own companies in a very surreptitious interface. Senator Husted. Look, this is important that people understand it. Like, we put ourselves in this position. Ms. Nikakhtar. We did. We need to correct our vocabulary too. China is not cheaper. It is just a distorted price. Senator Husted. Yes. Ms. Nikakhtar. It can manipulate up and down once it gets monopoly to our detriment. Senator Husted. Well, do you want to touch on it, I know I am out of time but do you want to touch on the supply risk and how you think about that. Mr. Ezell. You know, I think it is something that we with policymakers can equip hospitals to better understand those dynamics. You know, certainly the legislation you have called for Senator Scott and Warren, you know, I think would help hospitals have---- Senator Husted. Well, it creates understanding and awareness. You know, why should the average American care about knowing about this? You have touched on some of it. Is there another--would you like to, anyone quickly, with the Chairman's permission--why the average Americans should about this issue. Why it is vital to them to know these kinds of things. Ms. Nikakhtar. I will give one example that will resonate with every American. China right now controls our vitamin supply chain that goes in our food. They can easily whether intentionally or accidentally, look at COVID, introduce pathogens in our foods supply chain. Let's say they really want to give America the medicine to get better, but they use all of their capacity at home. We have nothing. In America we can direct companies to make more, but when those supply chains are located abroad, we can't. That is why every American should care. Mr. You. I wanted to also showcase a potential opportunity. This is a little anecdote that came off from Operation Warp Speed, so at the time there was a key component that went into one of the vaccines that we happened to have an extreme shortage because it came from South America and we were scrambling to try to find a source of that. One of the things that we tried to propose is that this component, chemical, could have been manufactured through synthetic biology. You could program basically baker's yeast to synthesize it. If we had done that, we could, you know, deputize all the microbreweries across the U.S. to then ferment it and distill it. That is just a small snapshot of what we potentially could do here in the U.S. if we just invested in that core biomanufacturing capacity. It is not just about taking back what we lost but it is also about, what are we doing strategically to really super chart what we already have? That includes developing our workforce, talent base, but then also looking at our infrastructure. Again, that kind of goes back to what I said, is that we just need to do a better job in conducting our risk assessments, because it is not just vulnerabilities, but it also identifies what the opportunity spaces are. Senator Husted. Thank you, Mr. Chairman. The Chairman. Senator Warren. Senator Warren. Thank you, Mr. Chairman. I appreciate the attention that the Chairman and the Ranking Member have given to scrutinizing the United States' dependence on foreign-made pharmaceuticals, and on the impact that has on seniors' access to medicine. It is just powerfully important, and you all have been really ringing the alarm bell on this, and I appreciate it. I am also especially glad that today's hearing focuses on part of the problem that receives a whole lot less attention and that is the impact of foreign investment in U.S. manufacturing capacity. Foreign direct investment in American pharmaceuticals and medicines has skyrocketed from just over $89 billion in 2020 to nearly $566 billion in 2024. That is an increase of over 500 percent in just that short time. At the same time, countries like China are now outpacing the U.S. in drug licensing and research and development, challenging America's leadership in biomedical innovation and that is why we have the Committee on Foreign Investment in the United States, CFIUS, whose job it is to investigate these investments for national security risks. Now, Ms. Nikakhtar, you led the Department of Commerce's participation in CFIUS during your time in Government. Why is it important to scrutinize foreign investments in pharmaceutical manufacturing? Ms. Nikakhtar. Well, there are a number of reasons, and thank you for that question so one important reason is to see, look behind the veil. If it is a company that has actually links to foreign adversaries, somebody has to look at that. It might not be readily apparent, but the U.S. Government needs to look it. The other one is really important. It is not always about IP theft. If a foreign adversary invests in the United States, we have seen so many instances of them creating disruptions to upstream and downstream supply chains, or actually bankrupt a company, take all that capability, and offshore it so we don't have it in the United States. These are just examples, but the realm of predatory FDI into the United States by foreign adversaries--and our allies don't do that. That is the important thing. It is a pattern we see over and over again with foreign adversaries. We need to review it, but also importantly, we need to ban those transactions. Senator Warren. This is a really great point. I am just going to start with something that is just even more threshold to get started. We need greater visibility into it. Ms. Nikakhtar. Much greater visibility. Senator Warren. We need to be able to see what is happening with these acquisitions. Obviously, it is not just national security that is at risk here. It is whether or not Americans get access to essential medications. Now, that is the essential reason behind why Congress passed legislation back in 2018 during the first Trump Administration that expanded the scope of CFIUS's review to better capture foreign investment in the biotech companies that are so critical to U.S. innovation but here is what troubles me. A recent report from the bipartisan National Security Commission for Biotechnology found numerous instances of foreign-owned companies still acquiring American pharmaceutical and biotech companies without undergoing any review whatsoever. Ms. Nikakhtar, why are biotech and life science acquisitions still falling through the cracks? We actually changed law on this. Why is this still happening? Ms. Nikakhtar. There are a number of reasons. I will mention the key. Usually, and I see this over and over again, it makes me want to pull my hair out, and I am surprised I have any hair left. Congress legislates and gives the executive branch comprehensive authority, and the executive branch self- limits its implementation of those authorities. It constrains all the authority that Congress gives it. That is what happened with FERMA and number two, there is a lot of transactions that are simply just voluntary for CFIUS. Companies can elect not to notify the U.S. Government, and how will the U.S. Government find out about it? Number three, CFIUS jurisdiction doesn't extend to most greenfield investments, joint ventures, so guess what--how China circumvents CFIUS? It goes down those avenues where CFIUS doesn't exist. They know the lawyers to hire. They go hire them--help me craft this to circumvent CFIUS jurisdiction. There is no way we can find out. Senator Warren. Well, it is obvious that there is a lot of work to do. At a minimum, we need more visibility into what is happening in these transactions when it has the potential to influence such an important part of our pharmaceutical chain, so today, I think Chairman Scott and the Ranking Member have already talked about it, but I am going to do it one more time. Chairman Scott, Ranking Member Gillibrand, and I are introducing a bill to do just that. The Pharmaceutical Investment Oversight and Accountability Act would require the Federal Government to uncover who owns and controls key parts of our drug supply chain, and then to investigate the effect of foreign investment on our ability to make essential medications and maintain innovation right here at home. Now, I am glad we are doing this, but frankly, we shouldn't stop there. The bill is one provision in my larger Pharmaceutical Supply Chain Defense and Enhancement Act which would pair oversight of foreign investment in the U.S. pharmaceutical industry with greater use of federal purchasing power to create a sustained demand so we can make these markets work domestically. Mr. Doshi, how would leveraging federal procurement power make our pharmaceutical supply chain more resilient and strengthen domestic pharmaceutical manufacturing capacity? Mr. Doshi. Thank you, Senator Warren. Thank you for your leadership on this issue. I will be very brief in my answer. The U.S. Government has incredible purchasing power, but right now we effectively focus on low cost, not resilience, and not quality. As a result, people are not incentivized, purchasing groups are not incentivized to purchase, you know, with any knowledge of upstream KSM or API dependency. That means they buy, perhaps, into the Chinese dependency that we already have. That is a huge problem. It could change, and it wouldn't necessarily be that expensive to change it for many of these generic drugs. We are talking about differences in price of pennies on the dollar. Finding a way to leverage the procurement power of the Government and its ability to set standards across the industry is indispensable to solving this problem and creating predictable, stable demand, which brings on more supply. Senator Warren. Yes, I really appreciate it. I think that is exactly right. The Pharmaceutical Investment Oversight and Accountability Act is a really important place to start but cracking down on foreign investment alone is just one tool in the toolbox. We are in an emergency situation, and we need to be using all the tools we have to make more medicines here at home. That should include federal contracting and procurement policy. I look forward to continuing to work with my colleagues on this and hope we can advance some serious legislation here. Thank you all for being with us. Thank you. The Chairman. We are now going to hear from Senator Alsobrooks. Senator Alsobrooks. All right. Thank you so much to Chairman Scott and Ranking Member Gillibrand for holding today's hearing. I want to say thank you as much as well to our witnesses for being here. For seniors in Maryland and across our country, the security of our drug supply chain is not merely a policy conversation. It can be a matter of life and death. Those disruptions can especially be dangerous for older Americans, many of whom are managing multiple chronic conditions and depend on consistent access to medications. Even a brief delay can put their health at risk, and I know this most especially because I am a part of what they call the sandwich generation, where I have recently realized that I went from at some point carrying around a stroller in my trunk and now carry around a wheelchair for my mom, for whom I am her caregiver. That is why this conversation cannot only be about where a drug is manufactured or who owns a facility. It must also be about whether our federal agencies have the information, staffing, and tools necessary to identify risks early, respond quickly, and prevent disruptions from becoming shortages that reach patients. Real security means catching problems before an older American is left waiting for a medicine that they cannot safely go without. My first question is for Mr. Ezell. It is true that we often talk about drug shortages as though they appear overnight. By the time a patient is told that the medication is unavailable, there may have already been months of warning, a quality concern, a delayed inspection, or a product without a backup manufacturer. My question is, why is our system still designed to manage shortages after they happen, instead of acting when the warning signs first appear? Mr. Ezell. Well, drug shortages reflect a culmination of root issues that have snowballed over time. There are key factors, such as low profit margins that we have talked about for APIs that cause hospitals or the Government to purchase offshore, geographic production concentration, and manufacturing complexity, quality concerns. There is a lack of incentive and too much financial risk to produce less profitable drugs, like statins and antibiotics and cancer medications, so these are, you know, very complex challenges that have built over time, haven't been adequately addressed in Americans' health security and health resilience. That is all of what we are talking about. We also have to recognize that--amoxicillin, heparin, antibiotics, these are distinct products that have distinct, you know, aspects across the global supply chain, so we need to have tailored strategies for how we are going to deal with these particular drug shortages on a case by case basis. There is not going to be a one-size fits all solution here, but we need a comprehensive set of policies like we are talking about to deal with these types of challenges. One thing I think we have to do, it has been mentioned today, is we have got to invest in technology and innovation. I think that a lot of the challenges we face in APIs and generic drugs and critical minerals are the same. What we have to do is invest in new refining, processing, and biomanufacturing processes so that we can manufacture these types of things cost-effectively and in an environmentally friendly and at scale to the United States. I think policymakers should look at the manufacturing USA network of advanced product and process institutes that was stood up during the Obama administration. We should stand up a manufacturing USA for critical minerals and APIs so that we there can conduct the PhD level research to develop these new processes and ensure that they occur in the future here in the United States, so we address these types of shortages. Ms. Nikakhtar. May I add one more thing? I think we would see a lot more investments, Senator, if investors knew that China wouldn't underprice them, so investment is key, but that investment will come a lot easier if they knew that they would be protected. The value of the investment would be to be protected from dumping practices, for example. Senator Alsobrooks. Thank you. Just one more question for Mr. Doshi. I want to bring you in on that same point, so when the same essential medicines fall into shortage again and again, that pattern begins to look like more than an isolated manufacturing or market problem, so at what point should recurring shortages of essential medications be treated as a national security warning, not simply as a public health or market failure? Mr. Doshi. Thank you, Senator. I think the warning point was COVID. We should have understood that the shortages we were experiencing beginning in COVID, that continued after COVID, and that we still encounter now were a sign that something was wrong in the supply chain. What was wrong wasn't simply concentration on China, although that is a big part of it for KSM but what was also wrong was that we didn't actually know what was upstream. We didn't know our upstream dependencies, so we might have a label, we may have a drug that has the right label on it. We may say it is TAA compliance, so it comes from an allied jurisdiction, but we don't know upstream where the chemicals that go into that drug come from. Now is the time with efforts like Clean Labels to basically--or Clear Labels, excuse me, to make sure we know exactly where the upstream dependencies are so we can get ahead of them. We should build resiliency, not just in API, not just a drug finishing, but again, in the KSM portion of the supply chain as well. Senator Alsobrooks. Thank you. The Chairman. Thank you, Senator Alsobrooks. Ms. Nikakhtar, Senator Warren, Gillibrand, and I are all announcing this legislation today that is going to require a report from Congress every year, so what is next? What is step two, and what is step three? Ms. Nikakhtar. Okay, luckily, once we have better visibility into the problem, we have got to do a couple of really important things. We really have to build at home, which means, you know, workforce development, giving the companies the capital and the incentives that they need to rapidly build, but the build will not go anywhere unless we have protections in place. Because right now, across the U.S. industrial base, investors are worried that China is going to underprice them so we understand the scope of the problem. I should also add, you know, customs has really incredible data -- how you are going to access that proprietary data is going to be a separate issue. Everything that crosses our border, customs has in a really great level of detail so visibility, this legislation is excellent. I was really pleased by looking at it. Enhance visibility, then we know what to build. We incentivize the building, and we protect, and then I think we have a home run. The Chairman. Thanks. Mr. Ezell, in March and April, China made two degrees--put two degrees into effect, as I understand them. One of them makes it a punishable offense for a company to cooperate with foreign supply chain origin tracing. have Already used it against a company facing a European investigation. Congress is trying to mandate a disclosure. Beijing is trying criminalize it. How does this end and what do we do? Mr. Ezell. Yes, Senator. You are referring to two new decrees that were promulgated in this past several months by China. These are decrees 834 and 835. Decree 834 would generate an effect on March 31st, would establish that China's industrial supply chain security is an "independent regulatory concern." Decree 835 establishes a framework for identifying and responding to foreign acts that China views as improper use of extraterritorial jurisdiction. Essentially, what they are trying to do is to lay groundwork to even say we wouldn't even have the ability to go in and inspect their API factories if it were taken to that extreme. I think American policymakers need to be absolutely forceful that this is an industry that directly affects the lives of American citizens, and we will indeed have the ability to go and inspect their facilities and not let 834 or 835 get in the way of that. There is a lot we need to be doing as your reports in the past have laid out in achieving parity in the inspections and dealing with the asymmetries, we have now where inspections must be announced in the United States, but they are not announced ahead of time in China. We need to make it clear that we are not going to allow this disparity to happen anymore. We need to properly staff and resource the FDA so that they have the capability they need to conduct more extensive APIs of Chinese facilities and others like in India if we are going to continue to use them. The Chairman. Thanks. Mr. You, your testimony calls clinical trial data a strategic national asset. American patients take the risk, and American regulars authorize the trial. Is there anything today that stops the data of those patients generated from ending up in the hands of a foreign government? I mean, we allow this to happen, right? Mr. You. Yes. Thanks, Mr. Chairman. It is more challenging than you actually realize. It is about the existing policies and how do we harmonize that. I am sorry if I sound like I broke a record, but it goes back to how do we conduct our risk assessments. Just let me just give you a real-world scenario, so say we take your DNA sequence. I won't do that personally, but you take that one sequence, and it is all contextual. Meaning that if you take your sequence and you submit it as a volunteer for an NIH research project, then you are going to be provided a consent form and be identified for some of the risks. Which, by the way, a lot of the things that we talked about as far as risk exposure is not covered, for example, that your data might be used by China for generating the next breakthrough pharmaceutical. We don't cover that. That same sequence can then be used as a patient. As it stands right now, HIPAA doesn't quite cover all the different applications. It transcends privacy. Now you are looking at national security and economic implications. Then finally, that same sequence, if you submit it and say you have mailed it off to a commercial DNA sequencing company to find out--I want to find out what percentage of ethnicity I am, right, that is completely covered--is not covered by the FTC or some other consumer protections as it stands right now. Even our harmonization of that same DNA sequence, it all depends on how it is being applied, and so there are gaps. That is why we are--basically we are setting ourselves up to be vulnerable. The Chairman. All right, thank you. Mr. Doshi, your report says federal oversight of DNA synthesis is scattered across multiple agencies and that the Government lacks visibility into the commercial supply chain. You also recommend a White House level coordinating body and a joint FDA, Commerce monitoring function for pharmaceuticals. Is the core failure today fragmented authority, missing data, both? Which agency should be held accountable for maintaining a government wide map of foreign ownership and control across the drug supply chain? Mr. Doshi. Thank you for the question, Mr. Chairman. It is both. One problem, which I know you have focused quite a bit on, is the information that we need. We don't have all the information, whether that is on investments in our supply chain or on the upstream dependencies that we have. Those dependencies are often talked about in the context of small molecule drugs, like API and KSM, but we also have the dependencies in biotech that are emerging. Biomanufacturing in the U.S. now has significant upstream dependencies where we rely on China, and so we don't all the information. On the information side, we have got gaps. On the coordination side, we would need some kind of White House like body, I think, to bring all the different agencies together to get after this problem. There are many agencies that are involved, and all of them have different kinds of data. FDA data, customs data, excuse me, Department of Commerce data, all of that can be combined to give us a better picture of where our dependencies are. Then coordinated solutions are also going to require some degree of the Government coming together coherently to figure out how to do policy, industrial strategy, if you will, to compete with China. If I may, Mr. Chairman, let me add one additional point. Earlier you asked about national--the State Council Directive 834 and 835 out of China. I just had to add that this set of directives is absolutely insane. It is a crazy combination of directive that prohibit--they criminalize pretty much any kind of normal behavior in China. If we tried to move a factory out of China, that could be criminal. If we try to not have compliance with an FDA inspection, that could be criminal. The important thing here is that these three directives create a sword hanging over the neck of every U.S. company operating in China, and they should all be aware of it. I think it is incumbent upon all of us, Congress, and the executive branch to help inform these companies of the growing risks. What has occurred now is so shocking that I think even the Chinese don't fully understand the implications if we decide to take it seriously. Ms. Nikakhtar. May I add something just because it is an important question. The 1260, the 1260H List is a perfect example of where the Government fails so Congress legislates, let's say you create a body in the White House or somewhere else. Then they are not going to look at all the companies that they need to for foreign ownership and risks, and then what, then the Chinese are going to sue. Then, they are dropped off the list, right? There has got to be a mandate that there is really robust, comprehensive reviews of as many companies as humanly possible and standards for that. There should be something like CFIUS--a CFIUS Presidential determination cannot be litigated. A U.S. Government designation cannot be litigated. The Chairman. That makes sense. Ranking Member. Senator Gillibrand. Mr. Ezell, fully onshoring the generic drug supply chain at this moment is functionally impossible and strategically counterproductive. Reliance on a single location, even if the U.S., can leave our system exposed to environmental and operational barriers that may completely halt production and jeopardize access to essential medications. There are ways to minimize risk and promote resilience in building a globalized supply chain. Why is it more feasible and beneficial to coordinate with allies to produce generic drugs than isolating production within the U.S.? How can we enhance this coordination with allied nations to reduce reliance on malign actors like China? What advanced manufacturing technologies should U.S. drug developers adopt to support the supply chain, and how could the Federal Government encourage adoption of these practices? Mr. Ezell. Thank you for the question, Senator. You are absolutely right. The United States cannot solve this problem alone. We need to enroll allies who share common challenges we do, as in the Chinese dependence. You know, there are distinct capabilities that countries such as Mexico, South Korea, or India could bring to the table that we can support. If you look at South Korea for instance, it presents a compelling manufacturing partner, not primarily because of cost, but also due to its advanced manufacturing capabilities, strong IP protections, improving capacity and pharmaceutical production. In the more complex APIs, we can turn to Korea for support there. This is an area we could look at in the USMCA renewal with Mexico to set up a US-Mexico collaboration for API and precursor material manufacturing. We obviously have the U.S.- India Trust Initiative, where we are looking to deepen partnership with India in areas like semiconductors and AI. Critical minerals and APIs drugs should be a critical part of this. We should work with India both on the supply and the demand side. On the supply side, we could work--we can direct the U.S. Development and Finance Corporation to deploy more capital in India to support loan guarantees and total rest insurance for their API manufacturing. We could, you know, purchase more APIs from India, which is more trustworthy, I would think, than China. Senator Gillibrand. Thank you. Ms. Nikakhtar, based on your experience, does CFIUS have sufficient authority to identify and mitigate national security risks associated with foreign acquisition of critical pharmaceutical and biotechnology assets, or are there gaps Congress should address? How can CFIUS continue to encourage trusted foreign investment, while ensuring strategic competitors cannot gain undue influence over America's pharmaceutical supply? Ms. Nikakhtar. The better CFIUS works, the better certainty it gives investors in the United States that the rug isn't going to be pulled out from under them from predatory FDI. CFIUS does a pretty good job of looking at a company's ownership and working its way, all the way up to the ultimate beneficial owner. What I found that CFIUS isn't so good at is the interagency does not agree about the national security threats. When that happens, the chair sort of has the authority to sort of override other agencies' views so that is one thing. The other thing I see--so the disagreement among the CFIUS members is a big issue that has to be addressed. The other issue that has to be addressed is mitigation measures. Harmful foreign investment in the United States is in many times cleared with national security agreement and mitigation measures but when you are looking at really harmful acts by harmful actors, they have every incentive to hide it. They are not going to give it to this CFIUS mitigation monitor and say, look, I am guilty. With foreign adversaries, these mitigation measures don't work. Then there is a final issue we talked about. There shouldn't be mitigation measures with foreign adversary with every incentive to cheat, but the final thing is that there is just, CFIUS jurisdiction doesn't apply to so many transactions. Then, you know, many of them are voluntary. We really got to close these gaps because American industries who invest here deserve the protections that CFIUS offers. The Chairman. Well, thank each of you for coming. We have got a lot of work to do. I think we are making some progress. I think we've got a path--hopefully, the Clear Labels this year. Hopefully, we will have a clear path to some other things. The Ranking Member has been a great partner in getting this done. Look forward to continuing to work with members on both sides of the aisle. The security of the drug supply chain is not a partisan question. Every Senator on this Committee has seniors in their state who are at risk. If any Senators have additional questions for the witnesses or statements to be added, the hearing record will be open until next Wednesday at 5.00 p.m. Thank you all. [Whereupon, at 04:45 p.m., the hearing was adjourned.] ======================================================================= APPENDIX ======================================================================= Prepared Witness Statements ======================================================================= [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] ======================================================================= Questions for the Record ======================================================================= U.S. Senate Special Committee on Aging "Behind the Label: Foreign Ownership and Control in America's Drug Supply Chain" July 15, 2026 Questions for the Record Stephen Ezell Senator Raphael Warnock Question: The Food and Drug Administration (FDA) plays a critical role in inspecting foreign and domestic drug manufacturers to ensure patient safety and supply chain security. However, a recent GAO report found a growing backlog of foreign drug inspections at the FDA.1 The report also highlighted how the FDA's foreign drug inspections, compared to domestic inspections that mostly occur unannounced, are often preannounced up to 12 weeks in advance, providing foreign manufacturers with opportunities to mask problems before the inspection. How many FDA foreign drug inspections were pre-announced in 2025? Response: It's estimated that the FDA conducts approximately 12,000 domestic inspections and 3,000 foreign inspections annually in over 90 countries.2 On May 6, 2025, the FDA announced its intent to expand unannounced inspections at foreign manufacturing facilities that produce foods, essential medicines, and other medical products.3 This initiative builds upon a pilot program to conduct unannounced inspections in India starting in March 2022 and in China starting in July 2023. From this initiative the National Science Foundation reported that, as of May 2024, the FDA has conducted 94/114 pilot inspections unannounced in India and 16/28 in China.4 Beyond this, ITIF was unable to determine an exact number of pre-announced inspections in 2025. Question: How does FDA's inconsistent oversight over foreign and domestic drug manufacturers disincentivize domestic manufacturing of generic drugs? Response: The FDA's inconsistent oversight over foreign and domestic drug manufacturers holds only domestic drug manufacturers to a consistently high standard and this can encourage offshoring of elements of the pharmaceutical ecosystem that Americans rely on. Foreign manufacturers benefiting from pre-announced inspections lowers the operational hurdles they confront and increases the chances of missing critical safety concerns that could threaten American consumers. The FDA workforce is limited in how many inspections it can conduct, therefore inspections that are conducted must be completed at the highest possible standards for all drug manufacturers, and this usually takes the form of conducting unannounced inspections. If a company is found to not be in compliance with FDA regulators and receives an official action indicated (OAI) classification the FDA may also withhold approval of any pending drug applications listing that facility, withhold export certificates for drugs intended for distribution outside of the United States, and withhold Current Good Manufacturing Practice (CGMP) declarations for drugs intended for distribution outside of the United States.5 Additionally, an FDA OAI classification may also negatively impact government purchasing contracts.6 The FDA typically only changes OAI inspection classification after comprehensive actions are taken, and an in-person follow up inspection occurs.7 If a company is found to be noncompliant and receive an OAI classification, financial and reputational damages can be significant. FDA noncompliance was estimated to cost $14.8 million per violation in 2026.8 If fewer facilities abroad are adequately evaluated for noncompliance, domestic facilities face reduced competitiveness and greater compliance and safety costs while foreign entities cutting corners are not penalized. An inequitable inspection environment is only one of many components of the pharmaceutical ecosystem that encourages offshoring of drug manufacturing but it unnecessarily risks the health and safety of consumers and needlessly penalizes quality American drug manufacturers. Question: What can Congress do to address the gap in FDA's regulatory oversight of foreign and domestic drug manufacturers? Response: Congress can aid the FDA in addressing regulatory oversight gaps of foreign and domestic drug manufacturers by increased FDA's funding to expand their workforce, enable them to conduct more inspections, and to expand their unannounced foreign inspection program. Congress can ensure that the FDA has the adequate funding/resources it needs to meet its mission. Congress can pass the Pharmaceutical Supply Chain Defense and Enhancement Act, which would boost supply chain transparency by requiring drug makers to annually report to the FDA information about the source of active pharmaceutical ingredients (APIs) and key starting materials used to make drugs consumed in the United States; require drug makers to report to any federal agency that it supplies drugs with information on the foreign manufacturers that produce those drugs and components; and require the FDA to issue both public and classified reports to Congress on the strength of the U.S. supply chains.9 REFERENCES 1. U.S. Government Accountability Office, "Drug Safety: FDA Has Faced Persistent Challenges Overseeing Foreign Drug Manufacturing," GAO-24-107359, February 6, 2024, https:// www.gao.gov/products/gao-24-107359. 2. Food and Drug Administration, (FDA), "FDA Announces Expanded Use of Unannounced Inspections at Foreign Manufacturing Facilities" (FDA, May 2025), https://www.fda.gov/news-events/ press-announcements/fda-announces-expanded-use-unannounced- inspections-foreign-manufacturing-facilities. 3. Ibid. 4. National Science Foundation, "US FDA: Expanded use of unannounced inspections outside of the USA" (May, 2025), https://www.nsf.org/life-science-regulatory-news/us-fda- expanded-use-of-unannounced-inspections-outside-of-the-usa. 5. "Pharmaceutical Inspections and Compliance," accessed August 8, 2026, https://www.fda.gov/drugs/guidance-compliance- regulatory-information/pharmaceutical-inspections-and- compliance. 6. Ibid. 7. Ibid. 8. Infodesk, "Ensuring regulatory compliance in the pharmaceutical industry," news release, January 23, 2026, https://www.infodesk.com/blog/ensuring-regulatory-compliance- in-the-pharmaceutical-industry. 9. U.S. Senator Elizabeth Warren (D-MA) and U.S. Senator Tina Smith (D-MN), "U.S. Pharmaceutical Supply Chain Defense and Enhancement Act," www.warren.senate.gov/wp-content/uploads/ media/doc/Pharmaceutical/%20Supply/%20Chain/%20Defense/ %20and%20Enhancement/%20Act/%20One/%20Pager1.pdf U.S. Senate Special Committee on Aging "Behind the Label: Foreign Ownership and Control in America's Drug Supply Chain" July 15, 2026 Questions for the Record Dr. Rush Doshi Senator Raphael Warnock Question: According to the Association for Accessible Medicines, generic drugs account for approximately 90 percent of prescriptions filled in the United States. Although generic drugs have been found to improve older adults' access to affordable, quality medications and reduce overall U.S. health care spending, domestic generic drug manufacturers have gradually transitioned their operations in recent years to countries with lower production and labor costs, leading to overreliance on foreign manufacturing of generic drugs. What specifically is driving the transition of generic drug manufacturing from the United States to lower-cost countries? Response: The structure of the US procurement system incentivized wholesalers, distributors, and supply chain intermediaries to purchase their volumes from the lowest-cost manufacturer, sometimes at the expense of quality and resilience. That was a structure that inadvertently benefited China. We made domestic manufacturing more difficult and more expensive, while permitting Chinese producers to export into our market tariff- free and permitting drug finishers and API makers to avoid disclosing their upstream China dependency. Beijing, for its part, ran the same play it ran in rare earths: it subsidized capacity, discounted energy and inputs, tolerated pollution that Western regulators would not accept, and priced below cost to deter entry-thereby locking in a durable monopoly position. As in rare earths, it is now working to defend that position, flooding markets with below-cost exports to harm alternative suppliers in India and elsewhere. We were also slow to see this transition coming, because the pharmaceutical supply chain is not transparent. A drug label may indicate where the product was finished, but it says nothing about a dependency two tiers upstream. Transshipment and repackaging compound the problem: a 2023 Department of Defense review found that fifty-four percent of the medicines it purchased under domestic-sourcing rules in fact originated in China, India, or sources unknown. Question: How can Congress incentivize foreign direct investment in domestic drug manufacturing facilities? Response: We need to reinvest in our own innovation and manufacturing ecosystem to make it more attractive for foreign investment. Congress should not only restore federal funding for basic research; the federal government should also extend low-cost capital to manufacturers and use tools like the Defense Production Act Title III to offer financing for domestic manufacturing. There is precedent for what a modest, targeted subsidy can accomplish: a single fifty-million-euro grant made an Austrian plant cost-competitive with Chinese penicillin chemistry. Second, we should encourage partners to align around a shared, trusted standard to incentivize increased allied cooperation and investment. By framing allied coordination as a supply guarantee rather than a consultative forum, built on shared inventories, mutual inspection recognition, and joint purchase commitments, we can embed investment guarantees into these relationships. Congress can advance these partnerships by pursuing a plurilateral critical medicines trade bloc offering preferential terms to allied partners, and by pushing regulatory synchronization and expedited U.S. market-entry pathways for allied suppliers with equivalent GMP standards. Question: How would investment in private-public partnerships, such as Operation Warp Speed during the COVID-19 pandemic, bolster the domestic manufacturing of generic drugs? Response: Public-private partnerships can bolster generic manufacturing where the market fails on its own. Generics no longer generate sufficient economic returns to justify domestic vertical integration, so the incentives and investment in our manufacturing base described above will be critical for filling the gap private capital has failed to close. The federal government can also work with industry to reduce demand uncertainty, for example through ensuring higher Medicare Part B reimbursement rates for domestically-made products and by guaranteeing advance purchase commitments for fermentation- based facilities. The caution is that new or expanded capacity resulting from public investments may not continue long term as market demand for the product changes. A company that took Title III funds to boost swab production for COVID-19 testing closed manufacturing sites in 2023 after a drop in demand. Without a coordinated mix of longer-term demand and supply interventions, not just isolated fixes, capacity built during a surge doesn't survive the return to normal. [all]