Pharmaceutical and Medical Supply Chain Called a Security Issue


Rep. French Hill, R-Ark., recently proposed legislation to ensure that the U.S. expands its medical supply chain to decrease dependence on foreign manufacturers, including those in China. Hill joins The Daily Signal Podcast to discuss why is it important to do so, incentives to make it happen, whether decreasing dependence on China for pharmaceuticals would create disruptions and shortages, and more. Read the lightly edited transcript, posted below, or listen to the podcast:

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Rachel del Guidice: I’m joined today on The Daily Signal Podcast by Congressman French Hill of Arkansas. Congressman Hill, it’s great to have you on The Daily Signal Podcast.

Rep. French Hill: Rachel, it’s great to be with you. Thanks for the invitation.

Del Guidice: Well, thank you for making the time. We do appreciate it. You recently introduced legislation to ensure that the United States is less dependent on foreign manufacturers like China. Can you tell us how your legislation would work?

Hill: You bet. And I want to thank [The Heritage Foundation] for its good research here. I thought your interview with Tori Smith was particularly good.

The supply chain is a national security asset and members of Congress on both sides of the hill are thinking about, “Well, how should we approach it? What’s the right way to consider that considering we have a free-market economy and, obviously, we have sources of supply around the world for all countries?”

So my view was let’s amend the Defense Production Act, the DPA. Recently, President [Donald] Trump undertook his authorities under the DPA to compel … greater ventilator construction in the United States.

So the Defense Production Act, dating back to the Korean War and the Truman administration allows America to step up resources in time of war for national security purposes in domestic construction.

My vision was let’s add to that planning node medical supplies, both pharmaceutical ingredients, medical equipment, and what we think of now is PPE—personal protective equipment—and other medical supplies, and make sure that we have a diversified supply chain there.

My bill would add those items to the Defense Production Act as a national security matter and would ask the president to produce a strategy around that.

Here, he would assess those supply chains. How much is already in the United States? How much is in countries friendly to the United States? How dependent are we on active drug ingredients, finished drugs, medical supplies, medical devices?

And then put that strategy in place so that we don’t have the situation that I believe we had this first quarter of 2020 when the tide went out and we found out we really didn’t have any swimming trunks on when the water receded.

We really didn’t have the kind of thoughtful planning I believe that we should have had in this area of strategic medical supplies and pharmaceuticals.

Del Guidice: On that note and talking about being strategic when it comes to our medical supply chain, why is it so important to be less reliant on foreign manufacturers like China?

Hill: If your supply chain is in an authoritarian regime, not a market economy, economy with a lot of government intrusion in it, it means it’s not as transparent. It means it’s not as market-driven as say we are in the U.S.

And while the FDA-regulated pharmaceutical ingredients are spread around the world, as Tori has outlined in her great work for Heritage, you still have these potentials for log jams.

I think the point is to have a strategic study as a part of the Defense Production Act so that we really know where we are, where do we need to be, and how we could ramp up production here more easily. Instead of it being a mystery, which it was as we got into this pandemic.

Del Guidice: One of the provisions in your legislation is … that [the president] could provide incentives to ensure the availability of medical articles that are used for essential national defense. What do you think some of these incentives that you outlined could look like?

Hill: Well, they might be R&D [research and development] incentives. They might be locational incentives to bring a production back to the United States. They might be purchase order incentives from the national stockpile or from [the Defense Department], for example.

There might be a variety of things and I think that’s what would be good in the bill is to have the executive branch study those best ideas and put forward recommendations.

Del Guidice: We’ve heard some people say and talk about how decreasing dependence on China for pharmaceuticals could create a risk that would cause disruptions or shortages that would jeopardize different supply chains or different accesses to medication. What is your response when people talk about those kinds of concerns?

Hill: That’s why the SAVE Act that I proposed is not China-specific. It’s asking the president to have a strategic approach for national security purposes to our pharmaceutical and medical supply chain for that particular purpose.

We want to take advantage of innovation around the world. We want to take advantage of manufacturing capacity around the world. So it’s not meant to disrupt that supply chain, but it is meant to strategically make sure that we have redundant supply chains and critical ingredients.

I think the most recent thing when you look in the press here over the last few weeks, you see that 100% of Ibuprofen for whatever reason is located in China. That would be a non-diverse supply chain of something that’s a very common ingredient in every household in America.

So those are the kinds of things that one would think through and offer a strategy that took into account all the potential manufacturing capacity around the world where it’s located, and we do this now in national security-related aviation production, technology production.

So this is not unusual. I think what’s unusual is that we didn’t have it done previously.

Del Guidice: Another provision that’s in your bill allows the president explicit authority, as you’ve talked about, to use the DPA to protect supply chains by allowing entities to increase the security of supply chains in their activities. And if this were to happen, practically speaking, what would that look like down the road?

Hill: I think if you have a strategy of having redundant supply chains, then you’d have the ability to switch production from one country, one plant to another more easily.

So from that point of view, that when you want to ramp up or you want to isolate supply chain, you have a strategy you can do that. It’s driven by the private sector, driven by private-sector innovators so that [if] they need to turn that switch, they can.

Del Guidice: Looking at what’s happened with China and coronavirus, what do you think America’s relationship should look like with China going forward? We’ve seen different people from both sides talking about how changes need to be made. So, going forward, what are some things you would suggest for the U.S.-China relationship?

Hill: We’ve been making many of those changes over the last three years during the administration of President Trump.

We’ve seen CFIUS, the Committee [on Foreign] Investment in the United States, broaden its analysis of intellectual property and joint ventures, which affects not just China, but Chinese companies particularly.

We’ve tried in the House Financial Services Committee to graduate China from its ability to borrow from the World Bank, for example. We’ve encouraged the World Bank have more transparency in China’s predatory pricing as a sovereign country in the Third World.

So my view of it is, when you look at national security policy in the South China Sea, when you look at the pandemic medical supply issue, when you look at One Belt, One Road and China’s predatory economic policies, China’s reputation now in Europe and Asia and here in the United States is in tatters. I think they really are going to have to dig out of a deep hole …

So I believe that America will continue this approach of trust, but verify in a number of categories when it refers to China, economic, national security, diplomatic, all of the above.

Del Guidice: Speaking of trusting and verifying and moving forward, how do you think China should be held accountable and the Chinese Communist Party should be accountable for their role in what’s happened?

Hill: There’s no doubt that an investigation leads to ensue on what did the Chinese know? When did they know it? When did they share that with the World Health Organization and other international bodies and bilaterally with countries, including the U.S.?

We know we were told, basically, the genetic makeup of this virus around Jan. 12. The question I think we should have is, how much earlier should we have known so that we could have been better prepared and the world been better prepared?

That’s why I appreciate President Trump’s skepticism about the World Health Organization and its influence by China. I think that’s something that should be looked at as well.

Del Guidice: Before coming to Congress, you were an investment manager and founder, chairman and chief executive officer of the Delta Trust & Banking Corp. Given your experience in the banking sector, what is your perspective on the Paycheck Protection Program?

Hill: Well, it was a remarkable task to stand up a $350 billion small business lending program in basically a week and then, 13 days later, have made over a million loans for that amount of money.

From one point of view, it’s a stunning achievement of American can-do attitude. But, of course, anytime the government attempts to engage and intervene in the private economy, you’re going to have challenges. And so the PPP program, the Paycheck Protection Program, is no exception to that.

They had technology programs, they had borrower definitional programs, they had bank understanding of the program. All those things were business challenges around it. But nonetheless, it’s helped a lot of small businesses.

The Treasury estimates over 30 million Americans were kept in their job by that first troche of the PPP program. And today, as we record this, $310 billion has been added to that program to help more small businesses, particularly sole proprietors.

Del Guidice: How have the people of Arkansas been affected by coronavirus, whether it’s looking at the medical and health aspect or the economic impact of coronavirus? What are you seeing in your state?

Hill: It’s been very disruptive here, as it has been across the country. As of yesterday, we had about 3,000 cases and we’ve lost 49 Arkansans through the virus, for which we lament that.

But Gov. [Asa] Hutchinson has had a go slow, more prudent approach to shutting down business. So while we’ve had over 100,000 Arkansans apply for jobless claims, we have a lot of Arkansans still working.

The governor is now focused on reopening the economy during May. He’s being equally cautious about the reopening approach. So I’m optimistic that here in Arkansas we have weathered the storm about as well as possible.

But as we all know in America, hard work and ingenuity is what we’re all about. But this virus has thrown us for a loop on how fast we can get our economy back to full capacity.

Del Guidice: … On Friday, the House passed another stimulus bill. And the numbers that came out recently were, I think, 4 million people in unemployment. So going forward, what would you say are next steps that would be prudent for Congress to take?

Hill: Well, Rachel, this is a staggering amount of money that Congress has appropriated. We’ve appropriated nearly $3 trillion, 60% of what we would spend in any one budget year running the entire federal government.

When you combine that spending in that appropriated money with the ability of the Federal Reserve to leverage it, it’s almost $7 trillion that’s being injected into the American economy in just say three months or so.

My personal view is we need to assess the appropriated money that we’ve already contributed to fighting the virus in public health and getting the economy stable before we go and sign up for another spending package. Let’s take stock of where we are and what we’ve accomplished, and see how well it’s working.

Del Guidice: On that note, and lastly, how would you encourage people to talk to their members of Congress about this issue itself and how much has already been appropriated and, while trying to respond, also trying to be fiscally responsible?

So, … given your experience in banking and finance, how would you encourage the average person who is very concerned about the economic state of the country to talk about this and share their concern with their lawmakers?

Hill: Well, we didn’t ask for this black swan to sweep across the globe and disrupt the entire economy, and particularly disrupt the best economy here in the United States we’ve had in five decades.

So, we didn’t ask for it. We have to muster the resources to fight it, fight it effectively, and then get the economy back.

I would say all Americans are filled with common sense and if they know the rules, they will adopt accordingly, help us get the economy back to full capacity, take care of their families.

I think citizens should contact their representatives and talk about their own personal experience. How they safely got back to the church. How they safely got back to work. How they safely taught their kids how to social distance and yet still maintain a great relationship with all of their friends.

We have to operate from a community level up to beat this virus and get back to work.

Del Guidice: Well, Congressman French Hill, it’s been a pleasure to have you on The Daily Signal Podcast. Thank you so much for joining us.

Hill: Rachel, thank you. And thanks for all the good work that you do. My best wishes.





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