Should U.S. Health Care Depend on China?

Two new books expose the health dangers posed by the import of pharmaceuticals from the People's Republic of China. The dependence of America's medical system on products of questionable quality does not just endanger patients today, but risks long-term problems as the push for "Medicare for All" or some similar national health insurance scheme grows in popularity. The enormous costs of such a government-run program will pressure bureaucrats and politicians to embrace the continued outsourcing of drug production to low-cost foreign sites to keep budgets down.

China Rx: Exposing the Risks of America's Dependence on China for Medicine by Rosemary Gibson and Janardan Prasad Singh is the latest work by two authors with a long record of pushing for improved safety protocols. Gibson is senior advisor at the Hastings Center Bioethics Research Institute and Singh is an economic advisor at the World Bank. Bottle of Lies: The Inside Story of the Generic Drug Boom is by Katherine Eban, an Andrew Carnegie Fellow. Their extensive documentary research and interviews with officials and whistle-blowers can not be adequately covered in a column. Gibson, however, has summed up the problem succinctly in an interview, "Millions of Americans are taking prescription drugs made in China and don’t know it, and neither do their doctors. We can’t make penicillin anymore in the United States. That happened after the US opened up free trade with China. It’s the steel story with a twist; Chinese producers sold it at such low prices they drove out all U.S. and European producers. Once we stopped making penicillin, prices shot back up. Now, we’re hugely dependent on China for penicillin and other antibiotics including those for superbugs."

It is the familiar story of outsourcing to widen profit margins. And when inspections and integrity are lacking, and corruption is rampant, cost cutting may not just involve cheap labor. Counterfeit ingredients are also cheap. While there are safety hazards from outsourcing parts used in transportation equipment and national security risks from embedding foreign components in electronics, the dangers from diluting or substituting ingredients in prescriptions used by millions of people to treat life-threatening maladies is even more alarming. The problem is not just that patients may be poisoned, but that the drugs they take will not cure or alleviate what ails them.

While many non-generic drugs are still made in the U.S. because they are protected from "simulators" by intellectual property protections; generics have moved offshore. The list includes everything from antidepressants and chemotherapy to treatments for Alzheimer’s and epilepsy. Even the U.S. military depends on China for its medicines, an incredible vulnerability given Beijing's increasingly aggressive behavior.

There are signs that "progressive" politicians are as greedy for cheap drugs as any corporation. Consider what has become the primary opposition to the U.S.-Mexico-Canada trade agreement (USMCA) that is to replace NAFTA. According to a New York Times report widely circulated by the Citizens Trade Campaign (a Ralph Nader group with ties to organized labor and the Democrats), provisions that provide intellectual property protection for new drugs developed by American scientists are under attack because they "could hinder development of generic drugs. Democrats, who say they gained control of the House with a mandate to address spiraling health care costs, are seizing on the pharmaceutical provisions as a way to make an impact on the trade deal." Of course, generic drugs are not the result of "development;" they are copied from those who did do the development. Copycats are not innovators. The Left calls innovators "monopolists" when they create something no one else has been able to create and want to recoup their research costs in their pricing. Operating on the frontiers of knowledge requires an enormous investment in time and money.

Democratic strategist Stan Greenberg, in a Washington Post op-ed, argued, "Consider what protecting intellectual property means... policies that guarantee pharmaceutical companies 10 years of special monopoly rights on a special class of drugs and other special protections that block competition and mean higher drug prices in all three countries." The Left does not believe what they call "Big Pharma" should profit from developing new drugs (or even recover R&D costs). Foreign firms should be allowed to copy their work and undersell them. Consumers and patients will supposedly benefit from ripping off developers, but this is very short-sighted since it will kill any incentive for creating new treatments. The Left has never understood the role of private property in generating economic progress.

The Association for Accessible Medicines has also criticized the USMCA. The AAM supposedly represents American generic drug producers, but their true nature was revealed when they opposed placing tariffs on Chinese imports, "We are concerned that the proposed tariffs may lead to increased costs of manufacturing for generics and biosimilars and thus higher prescription drug prices for patients in the U.S." There is a major difference between manufacturing in America and merely mixing ingredients imported from overseas. That difference should be recognized in law and policy.

The AFL-CIO has long based its lobbying on this distinction. In a recent declaration on the USMCA, it complained that "the new NAFTA does little to stop the continued outsourcing of U.S. jobs to Mexico across all sectors, including aerospace, electronics, appliances, food processing, heating, ventilation and air conditioning (HVAC) products, paint finishing systems and booths, and other manufacturing." Yet, only four paragraphs later, it claims the agreement will "keep drug prices high by expanding monopoly power for brand-name pharmaceutical companies...We cannot limit the future health policy choices for North American countries simply because Big Pharma seeks to use NAFTA to lock in and increase its profits." In other words, there is one domestic industry in which the unions don't mind outsourcing. We can't risk using Mexican food processors, but it is fine to swallow Chinese pills to save a few bucks. 

To protect public health, the domestic pharmaceutical industry must be seen as a strategic source of innovation and national security. The industry should not be sacrificed on the neo-socialist altar of "free stuff" and false economy when the stakes are so high.

William R. Hawkins is a consultant specializing in international economic and national security issues. He is a former Republican staff member on the U.S. House Foreign Affairs Committee.

Two new books expose the health dangers posed by the import of pharmaceuticals from the People's Republic of China. The dependence of America's medical system on products of questionable quality does not just endanger patients today, but risks long-term problems as the push for "Medicare for All" or some similar national health insurance scheme grows in popularity. The enormous costs of such a government-run program will pressure bureaucrats and politicians to embrace the continued outsourcing of drug production to low-cost foreign sites to keep budgets down.

China Rx: Exposing the Risks of America's Dependence on China for Medicine by Rosemary Gibson and Janardan Prasad Singh is the latest work by two authors with a long record of pushing for improved safety protocols. Gibson is senior advisor at the Hastings Center Bioethics Research Institute and Singh is an economic advisor at the World Bank. Bottle of Lies: The Inside Story of the Generic Drug Boom is by Katherine Eban, an Andrew Carnegie Fellow. Their extensive documentary research and interviews with officials and whistle-blowers can not be adequately covered in a column. Gibson, however, has summed up the problem succinctly in an interview, "Millions of Americans are taking prescription drugs made in China and don’t know it, and neither do their doctors. We can’t make penicillin anymore in the United States. That happened after the US opened up free trade with China. It’s the steel story with a twist; Chinese producers sold it at such low prices they drove out all U.S. and European producers. Once we stopped making penicillin, prices shot back up. Now, we’re hugely dependent on China for penicillin and other antibiotics including those for superbugs."

It is the familiar story of outsourcing to widen profit margins. And when inspections and integrity are lacking, and corruption is rampant, cost cutting may not just involve cheap labor. Counterfeit ingredients are also cheap. While there are safety hazards from outsourcing parts used in transportation equipment and national security risks from embedding foreign components in electronics, the dangers from diluting or substituting ingredients in prescriptions used by millions of people to treat life-threatening maladies is even more alarming. The problem is not just that patients may be poisoned, but that the drugs they take will not cure or alleviate what ails them.

While many non-generic drugs are still made in the U.S. because they are protected from "simulators" by intellectual property protections; generics have moved offshore. The list includes everything from antidepressants and chemotherapy to treatments for Alzheimer’s and epilepsy. Even the U.S. military depends on China for its medicines, an incredible vulnerability given Beijing's increasingly aggressive behavior.

There are signs that "progressive" politicians are as greedy for cheap drugs as any corporation. Consider what has become the primary opposition to the U.S.-Mexico-Canada trade agreement (USMCA) that is to replace NAFTA. According to a New York Times report widely circulated by the Citizens Trade Campaign (a Ralph Nader group with ties to organized labor and the Democrats), provisions that provide intellectual property protection for new drugs developed by American scientists are under attack because they "could hinder development of generic drugs. Democrats, who say they gained control of the House with a mandate to address spiraling health care costs, are seizing on the pharmaceutical provisions as a way to make an impact on the trade deal." Of course, generic drugs are not the result of "development;" they are copied from those who did do the development. Copycats are not innovators. The Left calls innovators "monopolists" when they create something no one else has been able to create and want to recoup their research costs in their pricing. Operating on the frontiers of knowledge requires an enormous investment in time and money.

Democratic strategist Stan Greenberg, in a Washington Post op-ed, argued, "Consider what protecting intellectual property means... policies that guarantee pharmaceutical companies 10 years of special monopoly rights on a special class of drugs and other special protections that block competition and mean higher drug prices in all three countries." The Left does not believe what they call "Big Pharma" should profit from developing new drugs (or even recover R&D costs). Foreign firms should be allowed to copy their work and undersell them. Consumers and patients will supposedly benefit from ripping off developers, but this is very short-sighted since it will kill any incentive for creating new treatments. The Left has never understood the role of private property in generating economic progress.

The Association for Accessible Medicines has also criticized the USMCA. The AAM supposedly represents American generic drug producers, but their true nature was revealed when they opposed placing tariffs on Chinese imports, "We are concerned that the proposed tariffs may lead to increased costs of manufacturing for generics and biosimilars and thus higher prescription drug prices for patients in the U.S." There is a major difference between manufacturing in America and merely mixing ingredients imported from overseas. That difference should be recognized in law and policy.

The AFL-CIO has long based its lobbying on this distinction. In a recent declaration on the USMCA, it complained that "the new NAFTA does little to stop the continued outsourcing of U.S. jobs to Mexico across all sectors, including aerospace, electronics, appliances, food processing, heating, ventilation and air conditioning (HVAC) products, paint finishing systems and booths, and other manufacturing." Yet, only four paragraphs later, it claims the agreement will "keep drug prices high by expanding monopoly power for brand-name pharmaceutical companies...We cannot limit the future health policy choices for North American countries simply because Big Pharma seeks to use NAFTA to lock in and increase its profits." In other words, there is one domestic industry in which the unions don't mind outsourcing. We can't risk using Mexican food processors, but it is fine to swallow Chinese pills to save a few bucks. 

To protect public health, the domestic pharmaceutical industry must be seen as a strategic source of innovation and national security. The industry should not be sacrificed on the neo-socialist altar of "free stuff" and false economy when the stakes are so high.

William R. Hawkins is a consultant specializing in international economic and national security issues. He is a former Republican staff member on the U.S. House Foreign Affairs Committee.