August 11, 2020
Dear Friends and Family,
This is Segment 3 of the Election 2020 series titled “China Rx.” All of the excerpts are from the book China Rx by Rosemary Gibson and Janardan Prasad Singh.
The most impactful sentence in this segment is, Without Firing a Missile or Hacking the Electric Grid, China can take America down by disrupting access to essential drugs.
The excerpts tell you why this can happen – China is the dominant world supplier of the essential ingredients needed to make thousands of medicines found in American homes and hospitals, including prescription, generic, and over the counter drugs. Further it is fairly easy and inexpensive to implement – The Chinese Communist Party simply bans Chinese drug manufacturers from shipping any drugs out of the country and monitors the ports and airlines to ensure compliance.
So, while our government has been debating healthcare insurance for the last 12+ years, in that same time period as a country we have ceded our healthcare system via medication supply to the Chinese. It’s not that the warning signs haven’t been there as this book points out: contaminated heparin from China forcing the FDA having to make choices of using the contaminated medication or letting patients die because of a lack of supply as China is the sole supplier, the rising trade deficits with China, the numerous Congressional testimonies detailing the massive transference of drug manufacturing from the U.S. and Europe to China, the FDA being overwhelmed with the flood of Chinese made drugs, and Vice President Biden being charged to get Chinese visas for FDA officials so they could inspect some manufacturing facilities in China. Even with Biden’s intervention the Chinese refused to process the visa applications for well over a year. Within the past three weeks President Trump has taken two initial action steps to address the drug situation:
How did this happen? Our politicians as well as corporate America were blinded by the aura of globalization and their resultant belief that China would become an international partner in fair trade, adopt a representative type government, and abide by international human rights standards. This hope and belief began with the U.S. – China Trade Relations Act of 2000. So, “blinded” by that allure, politicians and corporate America took their eye off the ball or simply ignored the facts in front of them. Some still remain “blinded,” even with overwhelming evidence to the contrary as reported in segments 1 and 2 of this series. In my judgment, we would be smart to bring drug production back to the U.S. and scratch one unrestricted warfare possibility by China off the potential list.
Next:
Next week’s segment focuses on current conflicts with China, including: 1). Theft of intellectual property, 2). 5G Technology, 3) North Korea, 4). Taiwan, 5). South China Sea, and 6). U.S. – China Trade Negotiations. From that information, you can get a perspective as to whether you agree with the many pundit claims that we are entering Cold War II.
Happy Learning,
Harley
P.S. All FDA inspections in China were suspended on February 24, 2020, because of the COVID – 19 pandemic. The FDA issued a statement which includes the following as to how they are protecting the American public from contaminated foods and medication coming from China. “We already use other tools to help complement our inspections, including import screening, examinations, sampling, and import alerts, relying on a firm’s previous compliance history, and we use information from foreign governments as part of mutual recognition agreements. Thus, at this time, we can rely on these other tools to give us comprehensive oversight of FDA-regulated products entering this country. This is all part of our agency’s risk-based approach to ensuring quality, as well as compliance with applicable FDA requirements.”
Source: FDA Statement: Coronavirus Update: FDA steps to ensure quality of foreign products 2/24/2020.
Dear Friends and Family,
This is Segment 3 of the Election 2020 series titled “China Rx.” All of the excerpts are from the book China Rx by Rosemary Gibson and Janardan Prasad Singh.
The most impactful sentence in this segment is, Without Firing a Missile or Hacking the Electric Grid, China can take America down by disrupting access to essential drugs.
The excerpts tell you why this can happen – China is the dominant world supplier of the essential ingredients needed to make thousands of medicines found in American homes and hospitals, including prescription, generic, and over the counter drugs. Further it is fairly easy and inexpensive to implement – The Chinese Communist Party simply bans Chinese drug manufacturers from shipping any drugs out of the country and monitors the ports and airlines to ensure compliance.
So, while our government has been debating healthcare insurance for the last 12+ years, in that same time period as a country we have ceded our healthcare system via medication supply to the Chinese. It’s not that the warning signs haven’t been there as this book points out: contaminated heparin from China forcing the FDA having to make choices of using the contaminated medication or letting patients die because of a lack of supply as China is the sole supplier, the rising trade deficits with China, the numerous Congressional testimonies detailing the massive transference of drug manufacturing from the U.S. and Europe to China, the FDA being overwhelmed with the flood of Chinese made drugs, and Vice President Biden being charged to get Chinese visas for FDA officials so they could inspect some manufacturing facilities in China. Even with Biden’s intervention the Chinese refused to process the visa applications for well over a year. Within the past three weeks President Trump has taken two initial action steps to address the drug situation:
- A deal with Eastman Kodak to manufacture pharmaceuticals with a $765 million loan to launch a pharmaceutical division, and
- An Executive Order requiring the federal government to purchase certain drugs from American manufacturers rather than from overseas companies.
How did this happen? Our politicians as well as corporate America were blinded by the aura of globalization and their resultant belief that China would become an international partner in fair trade, adopt a representative type government, and abide by international human rights standards. This hope and belief began with the U.S. – China Trade Relations Act of 2000. So, “blinded” by that allure, politicians and corporate America took their eye off the ball or simply ignored the facts in front of them. Some still remain “blinded,” even with overwhelming evidence to the contrary as reported in segments 1 and 2 of this series. In my judgment, we would be smart to bring drug production back to the U.S. and scratch one unrestricted warfare possibility by China off the potential list.
Next:
Next week’s segment focuses on current conflicts with China, including: 1). Theft of intellectual property, 2). 5G Technology, 3) North Korea, 4). Taiwan, 5). South China Sea, and 6). U.S. – China Trade Negotiations. From that information, you can get a perspective as to whether you agree with the many pundit claims that we are entering Cold War II.
Happy Learning,
Harley
P.S. All FDA inspections in China were suspended on February 24, 2020, because of the COVID – 19 pandemic. The FDA issued a statement which includes the following as to how they are protecting the American public from contaminated foods and medication coming from China. “We already use other tools to help complement our inspections, including import screening, examinations, sampling, and import alerts, relying on a firm’s previous compliance history, and we use information from foreign governments as part of mutual recognition agreements. Thus, at this time, we can rely on these other tools to give us comprehensive oversight of FDA-regulated products entering this country. This is all part of our agency’s risk-based approach to ensuring quality, as well as compliance with applicable FDA requirements.”
Source: FDA Statement: Coronavirus Update: FDA steps to ensure quality of foreign products 2/24/2020.
CHINA SERIES – SEGMENT 3
CHINA RX – EXCERPTS
Note: All excerpts for this segment are from: China Rx – Exposing the Risks of America’s Dependence on China for Medicine (2018) by Rosemary Gibson and Janardan Prasad Singh
INTRODUCTION: Antibiotics, chemotherapies, antidepressants, HIV/AIDS drugs, medicines for Alzheimer’s and Parkinson’s diseases, and birth control pills made in China are now sold in the U.S. People taking them don’t know it, and neither do the physicians who prescribe them. China’s biggest footprint, though, is making the key ingredients in prescription drugs and over-the-counter products. It is the dominant world supplier of the essential ingredients needed to make thousands of medicines found in American homes and used in hospital intensive care units and operating rooms. Why is this a problem? Because we trust blindly, unquestionably, the purity of the medicine we take. We place medicine in our mouths, inject it, or wear patches so it seeps into our bloodstreams. Our medicine becomes part of us. A poorly made athletic shoe is not a matter of life or death. But a poorly made drug could be the difference between life and death for those who take it. With medicine there is no room for error. And it better be available when we need it. Worldwide dependence on a single country for life-saving medicines is breathtaking. “Without question, if China stopped exporting ingredients, within months the world’s pharmacies would be pretty empty,” says the CEO of a major pharmaceutical company. Surgeries would be canceled, cancer treatment halted, kidney dialysis rationed. Infection would spread.
THE DRUG SUPPLY PROBLEM: 89% of prescriptions filled in the U.S. are generic. Consumers and doctors can choose among different manufacturers of a generic drug. But if China accelerates generic drug production and undercuts other sellers in price and drives them out of the market (which is repeatedly been happening), Americans may eventually be unable to live without generics made in China. For now, the U.S. is much more dependent on China for the active ingredients needed to make many generic and brand-name drugs, over-the-counter-products, and vitamins. In the 1990s, the U.S., Europe, and Japan manufactured 90% of the global supply of the key ingredients for the world’s medicines and vitamins. Now, China is the largest global supplier. The centralization of the global supply for essential ingredients for drugs in China makes it vulnerable to interruption, whether by mistake or design. If disruptions occur for an essential ingredient made in China, the U.S. will wait along with other countries to obtain it.
Even for brand name drugs, the building blocks of several of the new drugs that the FDA approves every year are not made in Western countries. For generics, the dependence on China is ever more serious. In terms of security, there’s a big issue that nobody is acknowledging. When we asked what else China has control over. The reply was, “more than half of the four thousand or so active ingredients needed to make a pharmacy depend on China.”
THE DRUG MANUFACTURING PROBLEM: The Story of Contaminated Heparin: The FDA lacked the authority to mandate a recall of the contaminated heparin, a blood thinner used in kidney dialysis, surgery and critical care to prevent blood clots that can trigger a heart attack or stroke, or any other drug. The FDA had to rely on drug companies to issue so-called voluntary recalls. Baxter voluntarily recalled its heparin. But many hospitals kept recalled heparin on their shelves, because pharmacists interpreted the voluntary designation to mean the situation was not urgent. At the time (2008) companies chose active ingredient suppliers in China without ever visiting the manufacturer and had no idea who was making the product ingredients they were buying.
The biggest risk of all: At the time of the contamination, China controlled half the world’s supply of the active ingredient for heparin. FDA officials admitted during congressional testimony that they didn’t ban all Chinese-made heparin because of fear of a shortage. The federal government had the unenviable task of balancing the need to ensure that enough of the blood thinner was available, while preventing lethal copycats from slipping through the safety net and harming the American public. During congressional hearings FDA’s Dr, Woodcock was pressed for assurance that more people wouldn’t be killed by contaminated heparin. “We must remember that this is an essential drug, and we can’t simply stop the heparin supply,” Woodcock said. “We have to balance between access to heparin and ensuring it is not contaminated.” In that brief exchange Woodcock revealed the biggest risk of all. The U.S. was so dependent on China for an essential medicinal ingredient that it had no choice but to keep buying it.
Bulk Drugs: “Production of gigantic volumes of ingredients is taking place in no less than around 3,000 manufacturing sites, many operating under very primitive conditions,” wrote Dr. Oldenhof in Chemistry Today in 2010. “These sites are usually neither operating under any good manufacturing standards nor in compliance with any regulatory submission to health authorities,” he said.
The Call for Cheaper Drugs Drives Manufacturing to China: Cheaper drugs required a cheaper way to make them. China was a perfect place to buy active ingredients to make America’s medicines because of its surfeit of chemists, cheap labor, and virtually nonexistent safety and environmental regulations. And it was legal. There was nothing in the regulations that precluded drug companies from manufacturing in a place like China. Generic drugs and the active ingredients to make them have become commodities. As with any commodity, suppliers sell a similar product differentiated mainly by price. Bottom-feeders can sell at a lower price and drive out companies that make medicines the right way. Noncompliance with U.S. standards is a deliberate competitive strategy. As long as they aren’t caught, they continue to win contracts. Lower prices discourage production in the U.S. and force worldwide sourcing, thereby risking poorer quality products.
The FDA was unprepared for the flood on Chinese-made drugs and ingredients. Of the 714 plants in China making drugs and active ingredients for the U.S. at the time, the agency inspected only about 15/year. Meanwhile companies in the U.S. were inspected by the FDA about every two years, a dramatically uneven playing field. Rather than strengthen oversight of drugs made in China, the FDA budget for 2007 included cuts to nearly all of its inspection programs, including foreign plants making drug products bound for the U.S.
The Solution Begins: In Beijing on November 19, 2008, the opening of the first FDA office outside the U.S. was announced. Inspections were having an impact. In September 2009, the FDA place nine Chinese companies and their drug products on import alert, which allowed FDA inspectors at ports of entry in the U.S. to stop these products from entering the country. By 2010, 46 manufacturing plants in China were inspected, and the number climbed to 88 the following year. A new law in 2012 gave the FDA needed authority and money. Although the FDA’s budget included money for additional FDA staff there, China refused to give visas to the staff the agency had hired. Then Vice President Joe Biden tried to break the visa logjam during a visit to China in December 2013. The White House declared victory prematurely, when the Chinese government agreed to allow a substantial increase in the number of FDA inspectors stationed in China. But the time Dr. Christopher Hickey, then head of the FDA China office, testified before the U.S.-China Review Commission in April 2014, China still hadn’t provided the visas. When then FDA commissioner Dr. Margaret Hamburg visited China in November 2014, she said, “We have every reason to believe that we will be getting the visas very shortly.”
FDA inspections in other countries are different from those it conducts in the U.S. One of the biggest differences is that inspectors can’t walk into a manufacturing plant in China or any other country without giving advance notice to government authorities. Foreign inspections are generally announced in advance because the FDA wants to make sure someone is at the facility. Foreign companies do considerable maintenance just before the FDA arrives, as a result. In the U.S., companies can’t do that because the inspections are unannounced.
CHINESE MANIPULATION OF THE MARKET: Penicillin: The Chinese government began to invest in penicillin ingredient production in the 1980s. By 2001, companies in China had built massive production capability on a scale unanticipated in the U.S. and Europe. A lot of manufacturing is in China for environmental reasons, because of its weak rules that tolerate massive amounts of air and water pollution. Using a familiar playbook, Chinese companies dumped penicillin on the global market at very low prices from 2004 to 2006. Western manufacturers couldn’t compete and were forced out of business. When Chinese companies attained a dominant share of the global market, a spectacular price increase followed in 2007.
THE CHINA TRAP: In 2011, more than 2,000 Pfizer researchers were laid off as part of a $2 billion retrenchment in research. Eleven hundred layoffs were at the company’s biggest research site located in Groton, CT. in which penicillin was one of their first products. Pfizer says its aim it to:
CHINA RX – EXCERPTS
Note: All excerpts for this segment are from: China Rx – Exposing the Risks of America’s Dependence on China for Medicine (2018) by Rosemary Gibson and Janardan Prasad Singh
INTRODUCTION: Antibiotics, chemotherapies, antidepressants, HIV/AIDS drugs, medicines for Alzheimer’s and Parkinson’s diseases, and birth control pills made in China are now sold in the U.S. People taking them don’t know it, and neither do the physicians who prescribe them. China’s biggest footprint, though, is making the key ingredients in prescription drugs and over-the-counter products. It is the dominant world supplier of the essential ingredients needed to make thousands of medicines found in American homes and used in hospital intensive care units and operating rooms. Why is this a problem? Because we trust blindly, unquestionably, the purity of the medicine we take. We place medicine in our mouths, inject it, or wear patches so it seeps into our bloodstreams. Our medicine becomes part of us. A poorly made athletic shoe is not a matter of life or death. But a poorly made drug could be the difference between life and death for those who take it. With medicine there is no room for error. And it better be available when we need it. Worldwide dependence on a single country for life-saving medicines is breathtaking. “Without question, if China stopped exporting ingredients, within months the world’s pharmacies would be pretty empty,” says the CEO of a major pharmaceutical company. Surgeries would be canceled, cancer treatment halted, kidney dialysis rationed. Infection would spread.
THE DRUG SUPPLY PROBLEM: 89% of prescriptions filled in the U.S. are generic. Consumers and doctors can choose among different manufacturers of a generic drug. But if China accelerates generic drug production and undercuts other sellers in price and drives them out of the market (which is repeatedly been happening), Americans may eventually be unable to live without generics made in China. For now, the U.S. is much more dependent on China for the active ingredients needed to make many generic and brand-name drugs, over-the-counter-products, and vitamins. In the 1990s, the U.S., Europe, and Japan manufactured 90% of the global supply of the key ingredients for the world’s medicines and vitamins. Now, China is the largest global supplier. The centralization of the global supply for essential ingredients for drugs in China makes it vulnerable to interruption, whether by mistake or design. If disruptions occur for an essential ingredient made in China, the U.S. will wait along with other countries to obtain it.
Even for brand name drugs, the building blocks of several of the new drugs that the FDA approves every year are not made in Western countries. For generics, the dependence on China is ever more serious. In terms of security, there’s a big issue that nobody is acknowledging. When we asked what else China has control over. The reply was, “more than half of the four thousand or so active ingredients needed to make a pharmacy depend on China.”
THE DRUG MANUFACTURING PROBLEM: The Story of Contaminated Heparin: The FDA lacked the authority to mandate a recall of the contaminated heparin, a blood thinner used in kidney dialysis, surgery and critical care to prevent blood clots that can trigger a heart attack or stroke, or any other drug. The FDA had to rely on drug companies to issue so-called voluntary recalls. Baxter voluntarily recalled its heparin. But many hospitals kept recalled heparin on their shelves, because pharmacists interpreted the voluntary designation to mean the situation was not urgent. At the time (2008) companies chose active ingredient suppliers in China without ever visiting the manufacturer and had no idea who was making the product ingredients they were buying.
The biggest risk of all: At the time of the contamination, China controlled half the world’s supply of the active ingredient for heparin. FDA officials admitted during congressional testimony that they didn’t ban all Chinese-made heparin because of fear of a shortage. The federal government had the unenviable task of balancing the need to ensure that enough of the blood thinner was available, while preventing lethal copycats from slipping through the safety net and harming the American public. During congressional hearings FDA’s Dr, Woodcock was pressed for assurance that more people wouldn’t be killed by contaminated heparin. “We must remember that this is an essential drug, and we can’t simply stop the heparin supply,” Woodcock said. “We have to balance between access to heparin and ensuring it is not contaminated.” In that brief exchange Woodcock revealed the biggest risk of all. The U.S. was so dependent on China for an essential medicinal ingredient that it had no choice but to keep buying it.
Bulk Drugs: “Production of gigantic volumes of ingredients is taking place in no less than around 3,000 manufacturing sites, many operating under very primitive conditions,” wrote Dr. Oldenhof in Chemistry Today in 2010. “These sites are usually neither operating under any good manufacturing standards nor in compliance with any regulatory submission to health authorities,” he said.
The Call for Cheaper Drugs Drives Manufacturing to China: Cheaper drugs required a cheaper way to make them. China was a perfect place to buy active ingredients to make America’s medicines because of its surfeit of chemists, cheap labor, and virtually nonexistent safety and environmental regulations. And it was legal. There was nothing in the regulations that precluded drug companies from manufacturing in a place like China. Generic drugs and the active ingredients to make them have become commodities. As with any commodity, suppliers sell a similar product differentiated mainly by price. Bottom-feeders can sell at a lower price and drive out companies that make medicines the right way. Noncompliance with U.S. standards is a deliberate competitive strategy. As long as they aren’t caught, they continue to win contracts. Lower prices discourage production in the U.S. and force worldwide sourcing, thereby risking poorer quality products.
The FDA was unprepared for the flood on Chinese-made drugs and ingredients. Of the 714 plants in China making drugs and active ingredients for the U.S. at the time, the agency inspected only about 15/year. Meanwhile companies in the U.S. were inspected by the FDA about every two years, a dramatically uneven playing field. Rather than strengthen oversight of drugs made in China, the FDA budget for 2007 included cuts to nearly all of its inspection programs, including foreign plants making drug products bound for the U.S.
The Solution Begins: In Beijing on November 19, 2008, the opening of the first FDA office outside the U.S. was announced. Inspections were having an impact. In September 2009, the FDA place nine Chinese companies and their drug products on import alert, which allowed FDA inspectors at ports of entry in the U.S. to stop these products from entering the country. By 2010, 46 manufacturing plants in China were inspected, and the number climbed to 88 the following year. A new law in 2012 gave the FDA needed authority and money. Although the FDA’s budget included money for additional FDA staff there, China refused to give visas to the staff the agency had hired. Then Vice President Joe Biden tried to break the visa logjam during a visit to China in December 2013. The White House declared victory prematurely, when the Chinese government agreed to allow a substantial increase in the number of FDA inspectors stationed in China. But the time Dr. Christopher Hickey, then head of the FDA China office, testified before the U.S.-China Review Commission in April 2014, China still hadn’t provided the visas. When then FDA commissioner Dr. Margaret Hamburg visited China in November 2014, she said, “We have every reason to believe that we will be getting the visas very shortly.”
FDA inspections in other countries are different from those it conducts in the U.S. One of the biggest differences is that inspectors can’t walk into a manufacturing plant in China or any other country without giving advance notice to government authorities. Foreign inspections are generally announced in advance because the FDA wants to make sure someone is at the facility. Foreign companies do considerable maintenance just before the FDA arrives, as a result. In the U.S., companies can’t do that because the inspections are unannounced.
CHINESE MANIPULATION OF THE MARKET: Penicillin: The Chinese government began to invest in penicillin ingredient production in the 1980s. By 2001, companies in China had built massive production capability on a scale unanticipated in the U.S. and Europe. A lot of manufacturing is in China for environmental reasons, because of its weak rules that tolerate massive amounts of air and water pollution. Using a familiar playbook, Chinese companies dumped penicillin on the global market at very low prices from 2004 to 2006. Western manufacturers couldn’t compete and were forced out of business. When Chinese companies attained a dominant share of the global market, a spectacular price increase followed in 2007.
THE CHINA TRAP: In 2011, more than 2,000 Pfizer researchers were laid off as part of a $2 billion retrenchment in research. Eleven hundred layoffs were at the company’s biggest research site located in Groton, CT. in which penicillin was one of their first products. Pfizer says its aim it to:
Help accelerate China’s transition to an innovative economy by catalyzing the upgrade of local R&D capabilities, technologies/IP, and culture to address unmet medical needs, and create a world-class biopharmaceutical R&D ecosystem for China.
Pharmaceutical industry consultant David Shlaes is concerned about the loss of scientists from layoffs. “If you think about it, it’s like a guaranteed brain drain” at a time when the threat of life-threatening superbugs resistant to many existing drugs is escalating and new drugs are needed. A large talent pool awaits. Eighty thousand graduates of PhD programs in the sciences from Western University have returned to their home country. More than two million Chinese students in science, technology, engineering and math fields graduate every year, five times the number in the United States.
China’s race for a cure for cancer reportedly includes cyber espionage and hacking U.S. healthcare companies that provide cancer treatment. The attackers are not random tech geeks. Advanced persistent threat attackers (APT) receive direction and support from an established nation state. Research and product information are appropriated by Chinese companies to meet government targets for industry growth without the cost or bother of doing the research. Hundreds of thousands of American workers spent decades imagining, creating, building, and continuously improving state-of-the art research, development and manufacturing. American ingenuity created a highly productive and disciplined culture that spawned a golden era in the making of medicines to relieve suffering and treat disease. All of this is being given away for a short window of revenue to appease shareholders. This is the China trap. China thinks long term. America thinks short term. China plays chess. America plays checkers. As China manufacturers the old drugs and steals the intellectual property for the new ones, what is left?
TODAY’S GAIN: TOMORROW’S PAIN: China’s 13th Five-Year Plan, presented by the state council of the People’s Republic of China (PRC) in 2016, targeted medical devices as one of the strategic emerging industries for investment and development. Medical imaging machines and radiation therapy are among the products slated for domestic manufacture for China and the global market. U.S. and European medical device manufacturers are creating their own competitors by establishing joint ventures with Chinese firms, moving manufacturing to China, transferring intellectual property, and opening up their global distribution channels to Chinese companies. From 2008 to 2012, U.S. multinationals invested in at least 30 projects to establish new research and development facilities, manufacturing centers, and education and training programs for Chinese workers, according to the U.S. International Trade Commission. The Chinese government has a plan to grow a core industry, but the U.S. has no plan to keep an advanced technology sector at home.
The Bottom Line: The turning point in this lopsided trade relationship was the U.S.-China Trade Relations act of 2000. President Clinton’s predictions are tragic for how wrong they were. To reject permanent normal trade relations with China would be a mistake of hugely historic proportions, he said. The truth is that history will judge free trade with China, rather than fair trade, to have been a blunder of truly historic proportions from which America will never recover. [Note: Senator Biden supported and voted for this legislation].
CHINA’S TAKEOVER PLANS: In testimony before the U.S.—China Economic and Security Review Commission, Jeffrey Johnson, presented an analysis of the breadth and depth of China’s systematic cyber-economic campaigns to gain control of strategic global industries that are among those targeted by China’s campaigns. Johnson revealed a common pattern in the Chinese government strategy:
China’s race for a cure for cancer reportedly includes cyber espionage and hacking U.S. healthcare companies that provide cancer treatment. The attackers are not random tech geeks. Advanced persistent threat attackers (APT) receive direction and support from an established nation state. Research and product information are appropriated by Chinese companies to meet government targets for industry growth without the cost or bother of doing the research. Hundreds of thousands of American workers spent decades imagining, creating, building, and continuously improving state-of-the art research, development and manufacturing. American ingenuity created a highly productive and disciplined culture that spawned a golden era in the making of medicines to relieve suffering and treat disease. All of this is being given away for a short window of revenue to appease shareholders. This is the China trap. China thinks long term. America thinks short term. China plays chess. America plays checkers. As China manufacturers the old drugs and steals the intellectual property for the new ones, what is left?
TODAY’S GAIN: TOMORROW’S PAIN: China’s 13th Five-Year Plan, presented by the state council of the People’s Republic of China (PRC) in 2016, targeted medical devices as one of the strategic emerging industries for investment and development. Medical imaging machines and radiation therapy are among the products slated for domestic manufacture for China and the global market. U.S. and European medical device manufacturers are creating their own competitors by establishing joint ventures with Chinese firms, moving manufacturing to China, transferring intellectual property, and opening up their global distribution channels to Chinese companies. From 2008 to 2012, U.S. multinationals invested in at least 30 projects to establish new research and development facilities, manufacturing centers, and education and training programs for Chinese workers, according to the U.S. International Trade Commission. The Chinese government has a plan to grow a core industry, but the U.S. has no plan to keep an advanced technology sector at home.
The Bottom Line: The turning point in this lopsided trade relationship was the U.S.-China Trade Relations act of 2000. President Clinton’s predictions are tragic for how wrong they were. To reject permanent normal trade relations with China would be a mistake of hugely historic proportions, he said. The truth is that history will judge free trade with China, rather than fair trade, to have been a blunder of truly historic proportions from which America will never recover. [Note: Senator Biden supported and voted for this legislation].
CHINA’S TAKEOVER PLANS: In testimony before the U.S.—China Economic and Security Review Commission, Jeffrey Johnson, presented an analysis of the breadth and depth of China’s systematic cyber-economic campaigns to gain control of strategic global industries that are among those targeted by China’s campaigns. Johnson revealed a common pattern in the Chinese government strategy:
These campaigns consist of state-sponsored and supported criminal cartels focused on leveraging cyber-enabled espionage and sabotage to execute industry-wide fraud, market manipulation, and anti-trust schemes designed to accelerate China’s entry and domination of each key global industry.
China’s aim is to assert monopoly-like control of key industries and the global economy by infiltrating companies research enterprises, and governments to gain insider access to sensitive intellectual property. Iconic companies with global brand-name recognition have not had an easy time in China: Google, Siemens (the German engineering company) and Apple, among many others. Headwinds have forced some to trim their sails, or exit an unfriendly Chinese market, steered by the not so invisible hand of the government.
The End Game: The endgame for American and other Western companies is clear. China aims to destroy their market share in China, the U.S., and around the world, and its long-term strategy is to take over vital industries. The president of the Information Technology and Innovation Foundation, said during testimony at the U.S. – China Economic and Security Review Commission:
The End Game: The endgame for American and other Western companies is clear. China aims to destroy their market share in China, the U.S., and around the world, and its long-term strategy is to take over vital industries. The president of the Information Technology and Innovation Foundation, said during testimony at the U.S. – China Economic and Security Review Commission:
It’s become clear that the path we thought China was going on becoming more market-oriented, more rule of law, more respectful of intellectual property – that path hasn’t emerged. The old strategy was about gaining commodity production, largely in manufacturing through low cost, largely through inducing U.S. firms and others to go there. That was very successful … The new strategy is to go after our core competencies and technology. That’s a very different strategy. We could have a trade balance with China tomorrow and it wouldn’t address that problem, which is going after the kinds of advanced industries in which the U.S. is still competitive in. That’s the new war.
A TEN-STEP PLAN TO BRING IT HOME: The Centralization of the global supply of key ingredients for America’s medicines in a single country poses enormous risks that must be mitigated. Free market advocates may contend that the U.S. is better off outsourcing medicine making to China and allowing Americans to keep more of their money to spend on other goods. But medicines are essential for life. A country needs them to function. Not unlike the manufacture of other consumer products, business decisions about manufacturing essential drugs and their therapeutic ingredients have been left to the invisible hand of the market. Financial and human capital have migrated to countries with the lowest cost of doing business. These decisions are too important to leave to the invisible hand. As China rapidly pursues a determined strategy to become a pharmaceutical power, U.S. dependence on a single country will rise dramatically. Without firing a missile or hacking the electric grid, China can take America down by disrupting access to essential drugs. Here are ten steps to advance America’s health security, economic vitality, and national security.
- Consider Medicines a Strategic Asset Not a Commodity to be Bought at the Lowest Price.
- Track and Forecast Vulnerabilities in the Supply of America’s Medicines.
- Prioritize a List of Medicines for which a Supply Interruption Poses an Immediate Danger to Public Health.
- Investigate Chinese Drug Cartels to Find Out if They cause Drug Shortage in the U.S.
- Provide Incentives to Bring Drug Manufacturing Home.
- Ensure the US Military Does Not Depend on China for essential Medicines.
- Strengthen, Don’t Weaken Government Oversight of Drug Manufacturers.
- Don’t Cede US Regulatory Oversight of Drug Manufacturing to China.
- Increase FDA Testing of Medicines.
- Luck is not a Strategy: Identify Problem Products Rapidly.
Source: China Rx – Exposing the Risk America’s Dependence on China for Medicine by Rosemary Gibson and Janardan Prasad Singh.
The unabbreviated version of the above can be found in the pdf document below.
| 3_china_long_china_rx_--_segment_3.pdf |