The Security Review Commission hosted this discussion. It is just under one hour. We will get going in a couple of minutes. Period ofly a short time for our first panel anyway. We will expand it a little by starting a few minutes early. Several commissioners are on the way. D morning, everywhere everybody, welcome to the seventh hearing of the u. S. China hearings. 19 court cycle. Thank you for joining us today. Todays hearing will examine chinas role in Global Health and the National Security, economic, and Public Health concerns stemming from american dependence on Chinese Health products. Our witnesses will also discuss the activities of Chinese Health and biotech firms in the u. S. As well as the opportunities and challenges u. S. Health firms encounter while operating in china or trying to sell into the china market. Globals the biggest source of generic drugs, pharmaceutical ingredients and other Health Products, including dietary supplements, biologics, and medical devices. There are serious deficiencies in health and Safety Standards in chinas medical market. Imports of these Health Products either directly from china or indirectly through companies and 30 countries continues to increase. Including according to the drug imports are from china, as well as 39. 3 of medical device imports. These numbers understate significantly the true sourcing of Health Products from china because china is also the primary supplier of precursors for pharmaceutical companies and other countries such as india, which in turn are major suppliers of the finished products to the u. S. China has emerged as the secondlargest pharmaceutical market in the world by revenue am only behind the u. S. There are several factors contributing to chinas attractiveness as both a market and production site, including the low cost of production, Large Consumer base, and deep talent pull. As the market continues to expand, u. S. Consumers are increasingly reliant on drugs sourced from that country, which presents economic and National Security risks that we will explore today. As the largest source of fentanyl, china plays a role in the ongoing u. S. Opioid epidemic, facing a week with forak regime allowing exploitation of controlled substances. Warrant aese topics thorough investigation and taken together, they raise a serious concerns for american leaders. I want to thank all of our witnesses, we have a number of great ones today, for sharing their expertise. Were looking forward to hearing from all of them. Before we get started, i would like to thank the Senate Committee on Small Business and entrepreneurship for reserving the are used today our used today. I turn it over to my cochair. Good morning. I would like to thank everyone for joining us and think our witnesses for the time and effort they have put into their testimonies. With this Commission Deals a variety of issues in the u. S. China relationship raging from economics to military and Security Affairs to media and freedom, the subject of todays hearing touches upon the daily lives of our citizens. Health care is an issue for every family. Millions take lifesustaining drugs on daily basis, including Blood Pressure medications, diabetes control pills, and a variety of other medications. Statistics, latest 68 take a dietary supplement on a regular basis. If you know where the ingredients in those products come from. The packaging rarely indicates. Increasingly, they are coming from china. What is the quality and safety of those products and what is our exposure . Should the public be concerned . Should they have more information . Are the regulatory standards sufficient to protect their interests and how is that how are the facilities being inspected . These are important questions but they just touch the surface. Understand theo current landscape as well as trace of emerging trends and potential risks. Consider the advances taking place in the field of biotechnology and its potential for new therapies, medicines, and other products. China has designated biotechnology as a strategic, emerging industry and is pouring billions into developing biotech as part of its industrial plans. The Chinese Government encourages investments through Venture Capital investments in u. S. Biotech and health firms. Through a variety of programs, china is seeking to acquire the knowledge of some of our key researchers into the intellectual property of leading companies, and both legal and illegal means are being used. Chinas activities in the u. S. Biotech sector has fueled Technology Transfer enabling the Rapid Development of chinas domestic industry. Chinese companies have accumulated private and medical data on millions of our people. Earlier this year, federal prosecutors charged to chinese nationals for the 2015 act of Health Insurance giant anthem that resulted in the theft of nearly 80 million Americans Health data. But unlike similar attacks, it was targeted at acquiring longitudinal patient data to support the health care sector, including new drugs and treatments. These are the Confidential Health records that are doctors and Health Care Professionals keep. While health care should be a area for corporation in addressing many of the worlds most challenging problems, we have to ask whether we can protect u. S. Intellectual property and valuable health data well deepening collaboration. Scientific research should not be subject to competitive games and strategies. Health and biotech firms meanwhile continue to face regulatory and other market barriers that limit their ability to compete with chinese firms in the Chinese Market. In recent years, the Chinese Government has approved procedures to allow foreign medical products to enter the Chinese Market more quickly. Overrns remain, however chinas week commitment to protecting Property Rights and willingness to favor domestic providers of services and products. We will question market access, outline regulatory challenges and Market Opportunities for u. S. Firms accessing Chinas Health market. I would like to remind our audience that witness testimonies and witness transcript is available on our website. Examining keyng place september 4. Its my honor to introduce our first panel that will provide the perspective of the Defense Health agency. Fda submitted a record for this Panel Available on our website. We will hear from christopher priest, who serves as the Deputy DirectorHealth Care Operations under the Defense Health agency. He is responsible for the policy, procedures, and director of direction of health care in the military. Earlier in his career, he served in the u. S. Army and retired as a kernel after 30 years of service. Mr. Priest, welcome. Please keep your remarks to seven minutes so we can ask questions. We appreciate your time and effort to be here and also thank you for your service to this country. Senator talent, mr. Wessel, fellow commissioners, i am honored to represent the Health Agency to discuss the safety and sourcing of materials critical to medical support of Service Members and beat 9. 5 million and a fishy areas for whom we are a nsible have responsible. As a retired army officer followed by five years and civil onvice, my family has relied military medicine for our care. My colleagues still in uniform and those who have retired and all of their families have placed trust and confidence in the system to protect and care for them. Both on the battlefield and here at home. Tohare in the responsibility sustain the trust and ensure they receive highquality and safe care. Reliance by the u. S. On foreign sources is an issue. Hat must be addressed allowing other departments to address this piecemeal will solutions. Optimal way tot effective address this issue is to use the buying power of the federal government in conjunction with effective laws and funding, to partner with the nations pharmaceutical production producers as one example to obtain necessary and for structuring capabilities, to independently meet u. S. The mystic and to compensate producers adequately for maintaining these capabilities. Dod is wholly dependent on the Consumer Market to produce and distribute pharmaceutical products it requires, spending approximately 7. 5 billion annually. Dod must work with the constraints of the commercial sector and Market Forces that drive or shape it. Depending on the commercial sector is a twoway sword. To reapes dod efficiencies of the competitive commercial marketplace and also makes dod dependent on the sources that competition produces. Dod, through our colleagues at the Defense Logistics Agency and at the policy level monitor available stocks and capabilities to meet contingencies and work with other departments responsible for u. S. Pharmaceutical production capabilities. Like other federal agencies, we rely on existing laws and other federal agencies, including the department of health and Human Services and fda, and the department of commerce to monitor Foreign Investment in distribution medical supplies. Certainirs products are required to be manufactured in the United States or designated countries with which the u. S. Has a Free Trade Agreement or other trade relationship. It applies to all federal supply schedule contracts, including medical devices. The taa andes by ensures references are included in our procurement contracts. Products available. Although dod produces a small amount of finished products from chinese sources, we are aware that 80 of the active pharmaceutical agreements used by commercial sources to produce finished products come from china. Noncomplaint countries such as india. We are concerned about any situation where foreign actors, including china, control substantial access to critical, or fighting material appeared we expect the trend toward chinese dominance to continue following past trends. Increased raised by chinese dominance in the market cannot be overstated. There is risk that existing regulations, programs, and funding are insufficient to guarantee u. S. Independence from unreliable foreign suppliers. Our concern is the ability of domestic manufacturing capability to adjust to that risk come alternate sources if any, and how long it will take to produce results. Have existed for some time and they are growing as the Opening Statements said. There is not a single solution to these challenges. It requires a sophisticated approach that entails National Security, economic, health, and diplomatic considerations. We are working closely with colleagues in dod and across the federal government toward this end. Thank you again for inviting me tospeak with you today, and demonstrate how we currently integrate our efforts with dod and other agencies to better support health and readiness for those we are proud to serve. I look forward to answering your questions. Healthide and ensure delivery across a number of partners who are responsible for management and administration of our military Treatment Facilities. As you may know, we have transitioned that to the Defense Health agency. Tricareaintain the program, which falls under my pure view. If any my purview. If there are any questions i cant answer, i will ensure you have a timely response. Thank you for your testimony, your service, and i appreciate you be here. Senator talent. Want to thank you and i know the Defense Health agency has a wide range of challengesities and your confronting, and it is frustrating to have another one on your plate that, as you point out in your statement, is really that wasse of anything within the responsibilities of the department of defense. You mentioned in your statement, and 50 there is hundred lines of drugs or pharmaceuticals that out of over 6000, you are purchasing from countries outside the buy american act. By a special exception. Can you tell us how much of the total, which drugs are the most sensitive . In other words, if there were an issue, either National Security or otherwise, and access to drugs or precursors from china were substantially limited, do you know the areas where you would have immediate problems . Are you aware of that and at the point where you know that . I think we speak. There is a number of government there is a and policy looking at this. We have an inventory of this, i dont have that available. I think as stated in the written testimony, overall, the number we received directly from china is not very large. However, the risk still continues. As we collect that information and look at it, we do know, and i give one example i think ms. Gibson will talk about that in her panel. Medication that is produced not domestically. A large portion is produced in china. That is a leading indicator of the seriousness of the conversation. In certain aspects, this is a battlefield issue. I would think that you all would be preparing, at least on that level, and exploring the possibilities like stockpiling. I dont how feasible that is with a lot of these medications. Thank you. If we have another round, i might have another one or two. Mr. Wessel let me ask a couple of questions if i can. You talked about the trade agreements act, and having spent some time with buy american statutes, my understanding is that to qualify under the act, and i understand you may not be a trade lawyer, is simply pressing a pill into its final form, it will designate origination. When we say we will buy it from japan or wherever else, all of , 80 are coming from china, simply pressing the pill after they bought all of the supplies from china would designated as acceptable under the act. That is a trade policy issue. But what it says to me is we dont really have the ability to pierce through the supply chains as well as we might like. To protect the war fighters and their families. That as they are on the battlefield and subject to being an harms way and subject potentially to injury, our primary interest is in making sure they are able to come home to their families. Doddo a tremendous job, the come at the advances are startling in terms of survivability for what you, your colleagues, and people on the battlefield are able to do. But it seems to me we dont even have all of the information we need to assess the risks. And if we, if conflict potential increases, our vulnerability will increase as well, and we need to have some way of assessing that. Is that kind of assessment would that assessment be helpful to you and your colleagues as you look at the Treatment Options for the people under your care . Mr. Priest i think the answer is absolutely. I think the value of all of the work you are producing, along with the work being conducted within the administration, across all of the departments, absolutely gets to that point. Again, representing the bottom of that supply chain, and particularly the providerpatient interaction. I would like to give a shout out to my good friend, captain rick friedman, who is commanding a hospital. He is a dental officer but we dont hold that against him. Andink he represents, he his team, they are actively taking care of patients in an active theater, they represent the risks you talk about. The risk to the supply chain. I do believe, and i think the fda comments in their written statements also point to the murkiness of that data, and that just adds to the risk. Youre absolutely right. Lawyer, and aade Simple Healthcare administrator, simile having simply being compliant is not guarantee safety either from the sources from china, or frankly, any source of reduction. It was always the risk that those drugs are not as effective as they should be. There may be manufacturing defects. A lot of this conversation we are talking about is on the pharmaceutical side. There are a host of implications when you start looking at devices, laboratory services, the whole sphere of bio economics of which health care is one small piece. I agree with you that that is our concern. Theobligation is to provide best Services Using those materials, and again, what we have achieved in almost 20 years of operation and across those rateers, the survivability is highly dependent on technology, research and development, and having the tools, including supplies and equipment, that we know are safe. Thank you. I have a couple of questions. Spend 7. 5 that you billion per year on pharmaceuticals. Obviously the u. S. Pharmaceutical companies are going to china for lowcost production. Any did munition reduction in the cost of pharmaceuticals . The cost of pharmaceuticals is on everyones mind. Mr. Priest the military Health System is not immune to the pressures of cost. We work hard in there are certain provisions and how we are able to deliver that service, and we use it throu