WASHINGTON, DC – Today, U.S. Senator Rob Portman (R-OH), Ranking Member of the Senate Homeland Security and Governmental Affairs Committee, questioned witnesses at a second hearing to examine supply chain vulnerabilities during the unprecedented COVID-19 pandemic and what the United States can do to be better prepared for future pandemics. All four of the expert witnesses agreed with Senator Portman that the United States is too dependent on foreign countries, like China, for supplies critical for the pandemic response. Portman highlighted the importance of diversifying supply chains away from China, and reshoring manufacturing to the United States.
Portman has led efforts to reshore personal protective equipment (PPE) production and his bipartisan Make PPE in America legislation passed the Senate Homeland Security and Governmental Affairs Committee last week. This legislation will strengthen efforts to onshore production of PPE in the United States by requiring federal agencies to issue long-term contracts for American-made PPE. Reshoring production will ensure American workers, health care professionals, and more have the PPE they need during future pandemics and other public health threats.
A transcript of his opening remarks can be found below and a video can be found here.
Portman: “Great, thank you, Mr. Chairman. I appreciate all of the experts who are here today. Let me just start with something simple, we know from data that we’ve been able to uncover that 70 percent of the medical protective gear that we needed in the United States was based in China. And in February 2020, China nationalized medical supply production and then imposed export controls, of course, on many of those critical supplies because they wanted them for their own citizens. So, the first question is for all four of you. A quick yes or no, do you think we were too dependent on China, yes or no?”
All witnesses: “Yes.”
Portman: “Okay, that’s a good start. And you know, it was 70 percent, but also it was not a reliable supply, obviously, given the fact they put the export controls in place and making it even worse, despite a lot of competition from around the world. So that dependence impeded our COVID-19 response, right? No question about it, and the question is what do we do about it? One of the things that we’ve talked about today and we’re trying to figure out is how to make more PPE here, but use market forces to do it, so make it make sense. And, we have manufacturers here in this country who are willing to make stuff, but they need to know they’ve got a market. And if they don’t, they can’t make the significant investments, millions of dollars, to be able to convert their plants and this has, particularly, been tough on the textile industry, and Ms. Glas, I want to thank you for being here but also your hard work and support of the Make PPE in America Act, which you mentioned we introduced and was passed in the Committee just last week. In 1991, 56 percent of all clothes purchased in the United States were made in the United States. By 2012, it was 2.5 percent, so we have had a big reduction in our textile manufacturing here. Has the general trend in the offshoring of apparel and textile products that we’ve seen over the last generation contributed to this specific lack of manufacturing of PPE during the pandemic?”
Kimberly Glas, President and Chief Executive Officer of National Council of Textile Organizations: “Undoubtedly, Senator Portman. Absolutely, 100 percent.”
Portman: “And, there’s this goal, as you know, of the Make PPE in America Act is to require agencies to actually issue longer-term contracts. Why are long-term contracts an effective way to use those market forces to incentivize production here in the United States?”
Ms. Glas: “Because, Senator, it provides a critical demand signal for our industry that there will be a purchaser and that they can invest in the new equipment necessary. We have Ohio manufacturers, like Standard Textile, who have looked at trying to invest more here in the United States, but they won’t without a strong demand signal. And a strong demand signal are long-term contracts and other countries, like Canada, are issuing long-term contracts to their manufacturers to bolster production. Some of their contracts are as big and as large as ten years because they know these as essential production chains.”
Portman: “As you know, I’ve had a great frustration with our Department of Defense in this area, and particularly their refusal to issue those long-term contracts, which I never understood. At the height of the pandemic, they still weren’t willing to do it, but can you talk a little about the Department of Defense’s role here and what they could do better?”
Ms. Glas: “So, throughout the pandemic, there were several different purchasers across the federal government, including FEMA, Department of Defense, HHS, and a lot of these contracts were structured for 90 days, 120 days. And while our industry responded overwhelmingly to those solicitations, that’s not enough production time to invest in new equipment here in the United States and make a long-term commitment that you’re going to make something here. And we found so many fits and starts with the Department of Defense purchasing, not just in terms of the contract period, but the vetting process associated with this and the kinds of products, that there were conflicting demand signals that went to our industry. In fact, I’m just going to leave you this one anecdote. Our industry ran for a very short-term contract, I think it was 120 days, millions of yards of fabric for gowns, for reusable gowns, that are sitting in warehouses that was never used because the government decided at the last minute that they wanted to purchase disposable gowns. And that was because there was a lack of coordination across the government. DOD was purchasing for HHS and the specifications and requirements weren’t clear.”
Portman: “Well those are all things that can be fixed. And, as you know, I’m also not sure that disposable gowns make sense. I mean why not have a gown that’s reusable? So much better deal for the taxpayers, particularly that they tend to be better gowns and safer in terms of the use by hospitals in particular. With regard to drugs, I just learned from you, Dr. Schondelmeyer, that 80 percent of finished drugs are made elsewhere. 90 percent of the components, you said, are made elsewhere, which was actually a higher figure than I had thought. I understand that labor costs are cheaper in places like China, and that China also intervenes in its economy in a non-market way to help their businesses. Are these the primary reasons that China is so dominant in the manufacturing of active pharmaceutical ingredients, APIs?”
Dr. Stephen Schondelmeyer, Professor, College of Pharmacy, Co-Principal Investigator, Resilient Drug Supply Project at the University of Minnesota: “Sir, I think those are among the primary reasons, but there are large and multiple factors. I think China, as a government, has set the intention in certain therapeutic categories to become the dominant producer and influence those markets in ways that affect trade policy, in ways that allow them to dominate economically. I point out, and just during this pandemic, of the active pharmaceutical ingredients made in China that are shipped to India to make products in the U.S. market, we’ve seen price increases of 100 percent, 200 percent, or more. China threatened to limit shipment of some products to India and the U.S. market. Although they haven’t acted on the threat, India itself did limit some export of certain drugs for a period of time to the U.S., so there are a number of factors and those certainly are a part of the process.”
Portman: “Any reason why the United States can’t figure out a better way to produce API here?”
Dr. Schondelmeyer: “We can and we have some. Actually, there’s a new wave of what we call green manufacturing – people that use more efficient processes, cleaner processes, that actually can reduce the cost compared to what it’s costing in China given the old technology and old processes. So we could turn this around, but we have to have a concerted, developed national policy within the U.S., and to my knowledge, there’s no agency that sets broad, industry-wide policy for the pharmaceutical market. FDA approves drug safety and effectiveness, but they have no authority to look at economic and market-based factors. In fact, they’re told not to.”
Portman: “That should be a priority, I would think. We learned from this. I have a lot of questions on the Strategic National Stockpile, and we don’t have time to get all the answers, I don’t want to go over my time because we have a lot of colleagues that want to talk but to Dr. Elnahal and Dr. Handfield, if you could supply us with more information on what the Strategic National Stockpile ought to be, clearly the 50-state pandemic was not something they prepared for, right? You made that clear today, so one criteria is to be prepared for this possibility. But we’re going to submit some additional questions to the record for you all, and I would appreciate your getting back to us so that we can, again, try to put together some legislation that actually helps to move us forward and be better prepared next time. Thank you, Mr. Chairman.”