The U.S. Senate Finance Committee held the first of its two hearings on the supply chains for a variety of products vital to the response to the COVID-19 pandemic. While electoral politics were on full display during the hearing, a recurrent theme was the need to bring supply chains back to the Western Hemisphere as a solution to the fraudulent products shipped to the U.S. from Hong Kong and China.

The first hearing featured three officers at U.S. federal agencies. Committee Chairman Chuck Grassley (R-Iowa) said the second hearing, scheduled for July 30, would feature witnesses from the private sector. Grassley said that while the pandemic “has exposed several vulnerabilities of our medical supply chain,” some of these were already an issue prior to the onset of the pandemic.

Grassley said he and Ranking Member Ron Wyden (D-Ore.) had been looking into the counterfeit medical products issue before the pandemic, identifying China and Hong Kong as the two most conspicuous sources of counterfeit and poor-quality health care products. Grassley said China manufactures roughly 40% of global personal protective equipment (PPE) volume, adding that Beijing had scoured the globe for supplies of PPE even as it downplayed the threat posed by the SARS-CoV-2 virus.

Wyden blamed the Trump administration for the impact of the pandemic, adding the federal government’s response to attacks on a federal courthouse in Portland, Ore., as an example of skewed priorities at the White House. “The reason Americans are suffering because Donald Trump refuses to exercise leadership,” Wyden said.

Berry Amendment a statutory mandate for return

Sen. Rob Portman (R-Ohio) argued that PPE production should at least be returned to the Western Hemisphere, if not to the U.S. He said the Berry Amendment, which came into existence in 1941 as part of Department of Defense appropriations legislation, requires that federal government procurement rely on resources located in the Western Hemisphere when domestic sources are exhausted or at capacity.

Portman also said that executives have argued that they need some certainty that any investments in expanded production won’t ultimately be a loss, adding that many federal contracts for PPE are at present only 90-day contracts. “If we want to bring it back, there’s a simple way to do it,” he said of PPE manufacturing, by offering longer procurement contracts.

Soraya Correa, chief procurement officer at the U.S. Department of Homeland Security (DHS), said the department has “a very robust small business program” for procurement. However, she said Congress could help the DHS procurement effort by making permanent the Commercial Solutions Opening pilot program. Correa said the more information the federal government can offer manufacturers about longer term needs, “the better they can respond to that.”

Business leaders, Correa said, generally will follow a federal agency’s lead where procurement agreements are concerned, but government officials need a clear picture of what is needed and when that need will arise. However, it is also vital that Congress offer assurances that the money will be there as well, Correa said. Portman replied, “we hope to offer legislation shortly” that provides those fiscal assurances.

Number of new actors ‘has increased dramatically’

Thomas Overacker, who serves as the executive director for cargo and conveyance security for the U.S. Customs and Border Protection, said there has been a substantial drop in the value of PPE imports in recent months, but added, “the number of new actors … has dramatically increased” where subpar PPE products are concerned.

There have been delays of delivery of products imported to the U.S., but Overacker explained that the FDA may place a hold on products for review prior to distribution, a delay his office is not authorized to override. He said China is still the largest supplier of N95 masks imported into the U.S., and that any effort to significantly boost domestic production would have to be preceded by a significant jump in domestic production and/or importation of the related raw materials. At least one of the drug manufacturers involved in the vaccine effort likely will begin importing the required raw materials for production at some point in August.

Steve Francis, assistant director for the Global Trade Investigations Division with Homeland Security Investigations and the director of the National Intellectual Property Rights Coordination Center, said roughly 56% of seizures of pandemic-related counterfeit goods originated in China or Hong Kong. He said Congress has appropriated no funds for the intellectual property rights office since its inception, adding, “we would greatly appreciate appropriated funds.”

His center works with other agencies to investigate illicit and patent-infringing imports of active pharmaceutical ingredients (APIs). Francis noted that illicit APIs from China often are smuggled across the border between the U.S. and Mexico, particularly the region adjacent to the American Southwest, Francis said.

Roughly 85% of all seizures of counterfeit goods over the past five years have come from China and Hong Kong, Francis stated, adding that any effort to develop sources of intelligence in other nations might help suppress introduction of these counterfeit goods. He said DHS receives support from officials in these nations in investigations into fraudulent products. However, Sen. Bill Cassidy (R-La.) suggested that much of this is pro forma collaboration rather than a substantive effort on the part of the other national government.

Many of the organizations that take part in intellectual property fraud in connection with life science products also are involved in money laundering, although Francis said intellectual property theft comes with fewer risks to these criminal organizations than some of their other activities. Operation Stolen Promise was launched to address these and other considerations, and Francis said the program will inevitably “change the way we look at intellectual property theft” of drugs and devices.

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