With America’s drug supply chain reliant on countries such as China, a bipartisan bill introduced in the U.S. Senate is looking to bring greater transparency on the full scope of foreign influence and control of domestic pharmaceutical manufacturing.

Senate Aging Committee Chairman Rick Scott (R-Fla.), Ranking Member Kirsten Gillibrand (D-NY), and committee member Elizabeth Warren (D-Mass.) this week sponsored the Pharmaceutical Investment Oversight and Accountability Act, which would require the Federal Trade Commission (FTC) and the Committee on Foreign Investment in the United States (CFIUS) to analyze foreign control and influence over U.S. drug manufacturing.

“America has let the Chinese Communist Party and other foreign entities quietly buy their way into our drug supply for too long, and it needs to end,” Scott said in a statement. “Everything from manufacturing and ingredient suppliers to genomic sequencing technology is at stake. Washington has looked the other way for too long.”

Scott’s committee held a hearing on Wednesday to examine overseas influence on the U.S. drug supply chain and to discuss the need for the FTC and CFIUS to report to Congress annually on foreign investment in domestic pharmaceutical manufacturing.

“Foreign ownership and control can create leverage over our drug supply that is largely invisible to the federal government,” Scott warned during the hearing. “There hasn’t been a federal agency that’s been designed to understand this. FDA doesn’t have full visibility into it and current disclosure rules don’t require the transparency needed to even know where the risks are.”

Gillibrand noted the outsized influence of foreign actors on America’s drug supply chain, particularly China and India which provide the key starting materials (KSMs) and active pharmaceutical ingredients (APIs) to manufacture generic drugs.

“This poses a significant risk to the American public, especially because we currently do not and cannot see the full extent of our upstream dependency on foreign actors within the supply chain — this is in part because these countries try to disguise their involvement and influence,” Gillibrand said. “We must bolster federal oversight efforts and increase transparency on how foreign capital impacts American healthcare infrastructure.”

Chinese false flagging?

Stephen Ezell, vice president for global innovation policy at Washington, DC-based think tank Information Technology and Innovation Foundation (ITIF), testified that some Chinese companies obscure their ownership and strategic intent in the U.S. economy, gaining access to markets, talent, intellectual property (IP), and U.S. government subsidies.

Ezell cited China-headquartered contract research, development, and manufacturing organization (CRDMO) WuXi AppTec as an example of a Chinese company operating in the drug supply chain that is attempting to hide its ownership, affiliation, or ties to the Chinese Communist Party (CCP).

“While WuXi AppTec may not be so much a case of ‘false flagging,’ it’s certainly a case of the company making an effort to conceal its incredibly deep ties to the CCP and PLA [People’s Liberation Army],” according to Ezell’s written testimony.

Last month, the Department of Defense (DoD) added WuXi AppTec to its 1260H List of “Chinese military companies” operating in the U.S. Ezell noted that Wuxi AppTec has rejected allegations of ties to China’s government and has filed a lawsuit against DoD for inflicting reputational, commercial, and operational damage to the CRDMO.

Still, Ezell testified that WuXi AppTec “maintains an extensive network of relationships with the CCP, is involved in the Military-Civil Fusion Development Strategy, and has alignment with the People’s Republic of China’s (PRC) national development plans.”

However, in an emailed statement to Pharma Manufacturing, a WuXi AppTec spokesperson said DoD incorrectly included the CRDMO in the 1260H List.

“The allegation basis for our 1260H list designation is factually incorrect: we are not owned or controlled by or affiliated with any PRC military or government entity; we do not provide services to the PRC military; and we are not associated with the PRC’s defense industrial base or military-civil fusion programs.”

Nonetheless, Ezell insists that China is directing Chinese companies to “downplay” their home country identities and there is “intentional obfuscation” by firms servicing the U.S. pharmaceutical supply chain “about the true ownership nature or CCP or PLA links.”

To address the problem, Ezell said the ITIF recommends that Congress expand the Corporate Transparency Act to require Chinese-origin companies operating in high-tech industries in the U.S. to report beneficial ownership and operational control, including minority stakes, joint ventures, offshore subsidiaries, and IP transfer rights.

“Companies that fail to provide full transparency should be barred from doing business in the United States,” according to Ezell.