This Congressman Wants to End US Reliance on Pharmaceutical Products From China. Here’s How.

Rachel del Guidice /

Rep. Mike Gallagher, R-Wis., says he wants to end the United States’ dependence on China for pharmaceutical products. Gallagher recently introduced legislation with Sen. Tom Cotton, R-Ark., to accomplish that. He joins The Daily Signal Podcast to talk about why it’s so important to end China’s influence or involvement in creating America’s pharmaceuticals.

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Rachel del Guidice: I’m joined today on The Daily Signal Podcast by Congressman Mike Gallagher of Wisconsin. Congressman Gallagher, it’s a pleasure to have you on The Daily Signal Podcast.

Rep. Mike Gallagher: It’s an honor to be with you.

Del Guidice: You’ve made news lately because you recently introduced legislation with Sen. Tom Cotton of Arkansas to end the U.S.’ reliance on pharmaceutical products coming from China. Can you tell us a little bit about the bill to start off?

Gallagher: First, I would say, for those who doubt America can come together in a time of crisis, here you have an army guy in the form of Tom Cotton and a Marine in the form of myself working across party lines to introduce this legislation.

But we are seeing across the board, as we try and exponentially increase our testing, as we try and ramp up manufacturing of basic personal protective equipment to equip those on the front lines with what they need in order to defeat the disease, we’re discovering all these single points of failure in our medical supply chain.

It is an acute expression of something we’ve known for a while now, which is to say in the last two decades at least, we’ve become dangerously dependent on foreign manufacturing in general, but Chinese manufacturing in particular, and perhaps nowhere is that more dangerous than when it comes to pharmaceuticals.

The fact is that most active pharmaceutical ingredients, what are called APIs that are used for drugs in the United States, are in fact made in China. And these aren’t just exotic or esoteric drugs, this includes 95% of our imports of ibuprofen, 40% to 45% of penicillin, and the list goes on and on.

It’s this situation that allows officials within the Chinese Communist Party in a time of crisis to threaten to shut off exports and “plunge us into a sea of coronavirus.” And particularly at a time when we’re trying to weather a very dangerous crisis, we cannot be that dependent on a foreign country, potentially a country that if not a competitor, is getting increasingly hostile to our interests.

So Sen. Tom [Cotton] and myself proposed to fix that with the Protecting Our Pharmaceutical Supply Chain Act, which, beyond banning purchases from China with [the departments of Homeland Security, Veterans Affairs, and Defense,] and all other federally qualified health facilities from purchasing products that have APIs in China, we would also try and incentivize this supply chain shift and incentivize manufacturing in the U.S. by allowing immediate expensing for firms that incur costs associated with expanding pharmaceutical or medical device manufacturing in the United States.

So we set an ambitious timeline, 2024. But if you consider that within the context of China’s [“Made in China 2025”] initiative, we think it’s a necessary but ambitious proposal.

Del Guidice: Thank you, Congressman Gallagher, for that perspective. You mentioned this a little bit when you were talking how dependent we are on so many drugs from China, but can you talk a little bit about why this is so important, especially given the coronavirus pandemic situation we’re currently in right now?

Gallagher: I would think of it in a few different levels. The first and most obvious and most immediate is that simply, we don’t want to allow a foreign country to, as I alluded to before, threaten us in a time of crisis and potentially create chaos within our own country that could result in death of our own citizens.

So I would argue we have an immediate national security imperative to re-balance some of our supply chain and build resiliency into our system.

By the way, I would say this same argument holds for industries beyond pharmaceuticals or medical devices, particularly within the telecommunications space.

As we think about the future of the internet and 5G internet in particular, the same thing is true. We cannot allow Chinese Communist Party companies like Huawei and ZTE to dominate the future of the internet because so much of our economy and, by extension, our livelihood is dependent upon that, and therefore we don’t want to depend on the largesse of the Chinese Communist Party for our livelihood.

But over the long term, I would say, we are still the leader of the free world. We want to do everything possible to ensure we remain the leader of the free world and also that we remain the world’s dominant power because that is a good investment of our resources and systems where you have a country like that, the United States, unipolar systems tend to be more stable and less violent than a balance of power system. At least that’s my own view.

We can’t allow the Chinese Communist Party to dominate industries—whether it’s pharmaceuticals, telecoms, or medical devices—and thereby force other countries around the world to subscribe to their alternative vision for global order, which is a vision that is inimical to U.S. values and interest and those of our free world allies.

I just would say there’s both a short-term imperative here, but also a long-term values-based argument for why we need to think about not only building resiliency into our domestic manufacturing, but figuring out how can we work more closely with like-minded allies, partners, and friends around the world that we might trust a little bit more than we trust China.

Del Guidice: Thank you so much for your leadership on that front.

One of the elements in your bill is keeping pharmaceutical companies in China with active products or pharmaceutical ingredients that are created there. Where would you like to see pharmaceutical products made if this were to come to pass and you were also successful in ending that production in China?

Gallagher: Well, not that I’m parochial at all, but I would love to see it all made in Wisconsin or Northeast Wisconsin in particular, but obviously, domestically manufactured in the United States would be preferable.

I do think there’s room to get creative. For example, a conservative health care expert, Avik Roy, has talked eloquently about how Puerto Rico, which is obviously U.S. territory, can play a key role in the manufacturing of pharmaceuticals, so that’s one creative option as we try and move manufacturing from China closer to home.

But even within Asia, I think there are manufacturing powerhouses that aren’t China, that may not be full-fledged allies, but nonetheless are short-term partners of interest with us in this effort to counterbalance a rising China.

Vietnam comes to mind. Obviously, we are similarly dependent on India, which is an even closer friend of ours, but there are dangers to depending on India as well.

So the more we can move closer to home, the more we can concentrate manufacturing within our free world allies and our Five Eyes allies in particular, I think the better off we’ll be.

Toward that end, I actually think when we get out of this crisis, one of the most important things we can do—and this isn’t a matter of pharmaceutical production, it’s just a matter of economic stability and global prosperity—is to sign a gold standard trade agreement with the United Kingdom, who has, obviously, completed their exit from the European Union.

I think our economies, which are both very advanced, they are financial hubs, they are services hubs, it should be easy to develop a gold standard agreement. And I think that would have the practical effect of drawing us closer to one of our closest allies.

Del Guidice: Another one of the elements in your legislation is providing economic incentives for manufacturing drugs and medical equipment in the U.S. What do you foresee some of those incentives to be?

Gallagher: The incentive we put forward is a tax incentive. It’s giving businesses the ability to immediately expense the costs that they would incur for moving their supply chain.

And again, … this is the so-called Section 179, immediate expensing. I won’t bore everyone on The Daily Signal with that, but basically, we know that we’ve put forward this ambitious … time frame. …

By the way, there’s a waiver, we initially have it on a two-year time frame, but you can get a waiver.

We know that there are going to be costs associated with this and we know, quite frankly, that the pharmaceutical industry is going to fight this with tooth and nail, precisely because their costs will go up and cost to the American people may go up in the short term. But this is just one way we think that we could potentially offset those costs, by giving businesses that have to re-balance a tax break for doing so.

Del Guidice: Speaking of China, … we were talking about how you want to change the U.S. dependence on China for pharmaceuticals, how do you think the U.S. should change its relationship with China in other respects?

I actually think it’s remarkable. There’s a tectonic shift in U.S. foreign policy, a reorientation of U.S. foreign policy—the likes of which we haven’t seen since the end of the Cold War—in the last three years.

What’s interesting to me about this is, this is actually not a Republican versus Democrat thing. I actually think this is a new bipartisan consensus position.

In other words, the new norm is a more hawkish position on China. And even the president’s loudest and most intense critics are not arguing with the fundamental premise of his foreign policy, which is to say after prioritizing counterterrorism operations in the Middle East for two decades, we now have to prioritize great power competition with China in the INDOPACOM [Indo-Pacific Command] region.

That’s a massive, massive shift. I say that as someone who spent most of the last two decades engaged in wars in the middle East, now we are saying something dramatically different and most Democrats actually agree with that fundamental premise.

So that strategic shift is the most important but it has a host of implications.

In the military domain, I would say the most obvious implication is that we need a larger Navy and we need that Navy to be more closely integrated with the Marine Corps. And the Marine Corps right now has actually been the most forward-leaning service in terms of thinking through a whole new force design construct to align itself with what the National Security Strategy and the National Defense Strategy are saying.

I say Navy-Marine Corps team because if you look at the geography of the Pacific, you’re struck by the obvious, which is to say there’s a lot of water, there’s a lot of laterals. So you sort of plan your military strategy based on the geographic realities.

There’s also implications in other domains, for example, in the human rights domains. It is true at times, particularly when we were engaged in the Middle East, we had to make very difficult choices between promoting human rights on the one hand and seeking stability on the other hand.

When it comes to China, we actually don’t have to make that case. In other words, I don’t see any disincentive for members of Congress and for members of the executive branch to be hammering the Chinese Communist Party on their abysmal human rights record.

And as evidence that this is actually a bipartisan shift, I just would say that even the most progressive or radical members of the Democratic Party have actually voted for legislation to, for example, condemn the Chinese Communist Party for its treatment of Uighur Muslims.

You can check me on this, but I believe [Rep.] Ilhan Omar voted for the Uighur Human Rights Policy Act that we passed in the House recently.

So again, a huge shift. There are a ton of implications.

The final thing I would say is that at the end of the day, the most difficult part of this is going to be, and this is what our bill is all about, we will have to find ways to economically decouple from China.

We don’t have to completely cut off trade, obviously, we’re going to want to sell soybeans to China and buy cheap T-shirts from China, but when it comes to pharmaceuticals, when it comes to medical devices, when it comes to 5G and a few other things, we are going to have to decouple.

Del Guidice: Well, President [Donald] Trump hasn’t been shy about his criticism of how the World Health Organization has handled the situation with China. And on Tuesday he tweeted, “The WHO really blew it. For some reason, funded largely by the United States, yet very China centric. We will be giving that a good look.”

I’m curious if you have any concerns about the World Health Organization and its ties to China?

Gallagher: I do and I commend the president for having the courage to speak up about that.

Just look at the interview that the WHO’s mission lead who went to China and returned in February gave. I think his name was Dr. [Bruce] Aylward, if I’m saying his name correctly. He came back praising the Chinese Communist Party’s response. He said, “If I had COVID-19, I want to be treated in China.”

When asked in a subsequent interview about Taiwan’s response to coronavirus, he pretended not to hear the question and then he hung up on the interviewer. She called back and asked a question again about Taiwan and he said, “Well, we’ve already talked about China,” thereby implicitly sort of agreeing with the position that Taiwan belongs to China.

So I think both President Trump and Secretary [of State Mike] Pompeo have been very clear about this and particularly for the United States where we are by far the largest funder of the WHO, at a minimum, we should demand that it do its job better.

I think when the dust settles on all of this, we will see not only significant failures within the WHO bureaucracy, as we’ve seen in previous pandemics, we will also see a significant cover-up within China itself, a complete lack of transparency about the outbreak of the disease.

And the fact is, already, we know that that lack of transparency and allowing millions of people to travel to and from Wuhan—which is a major travel hub throughout January and early February—it probably cost millions of lives globally and internationally, and I do think we will have to hold the Chinese Communist Party accountable for that enormous costs in both blood and treasure.

Del Guidice: Recently, the House passed the coronavirus aid package called the Cares Act. What was your perspective on that legislation?

Gallagher: I think it was a mixed bag for sure. I do think if the government has forced your business to shut down, as is the case with many small businesses in Northeast Wisconsin, you are entitled to just compensation and helping our small businesses weather this crisis when they can’t work is a very critical challenge.

I am incredibly sympathetic to that, I think the attempt to get a bureaucracy-free small business loan program stood up in very short order is essential and we need to do it.

I also think perhaps the most important part of the bill will be the direct appropriation of money to the health care system, upward of $100 billion.

My own simplistic view is that until we control the virus, until we defeat the disease, there simply aren’t enough federal dollars to cover the costs of staying shut down and shut down however necessary in the short term is not a viable long-term strategy. It comes with enormous cost.

So my hope is that money allows us to ramp up testing and defeat the disease, but we will see.

I do think you’re starting to see some unintended consequences though. There has been some just criticism from senators like Tim Scott and Ben Sasse and certainly myself and others in the House that the unemployment provisions, for example, create a disincentive to work, which is obviously bad over the long term.

I think there’s also a set of optimistic assumptions surrounding the Small Business Administration’s ability to administer a $350 billion loan program in short order when it’s just not staffed or resourced or equipped to do that.

So no doubt there’s going to be some flaws. Perhaps most egregious of all of this was just the pure politics that [House Speaker] Nancy Pelosi played with the bill, inserting funding for the Kennedy Center, even as they were laying off their employees.

There’s a bunch of pork in there that does not need to be there, and my hope is that if Congress comes back to do a 4.0, we do not jam it full of pork items that just distract from the more important effort here to defeat the disease and get our economy working again.

Del Guidice: Thank you for unpacking that and, actually, that was my next question. I wanted to ask you how Speaker Nancy Pelosi has talked about having a fourth stimulus package. Does Congress need to do anymore legislation in the near term? What is your perspective there?

Gallagher: My perspective is rather than thinking about a 4.0 when the ink is barely dry on a 3.0, which was the biggest spending bill in American history, we should probably look at 3.0 and figure out what did we get wrong? What did we get right? How can we stop funding failure and reinforce success?

I mentioned some of the fixes. I think there are concerns that people who have applied for small business loans are not getting them. There’s concerns that the direct cash payment in the form of a direct deposit from the IRS is not going to arrive for another two months, that’s too late.

There are a variety of things in there that need to be technically corrected and substantively corrected. And I think rather than thinking about a 4.0, which inevitably I fear Pelosi would use as a 2020 messaging bill, let’s think about perhaps a 3.5, let’s figure out how to fix what we’ve already started based on the information we’ve gained in the intervening weeks.

Presumably, hopefully, given that we’re spending so much money to defeat the disease, we should have more information about what’s working and what isn’t. Have we slowed the spread? What do we know about the disease we didn’t know a month ago? And we have to be in that process of learning on a daily basis and evolving.

I know Congress isn’t constructed or optimized to be that sort of quick response organization, but this is a situation in which we really need to be careful that we don’t cause more harm through our intervention and abide by that Hippocratic Oath that legislators should keep in mind.

Del Guidice: You recently held a personal protective equipment drive to collect donations from locals in your area and have them donated to medical personnel in Northeast Wisconsin. I’m curious, what was the response to that drive?

Gallagher: It was overwhelming and positive. We had a whole room in my office just filled from the floor to the ceiling with supplies. We were able to give that to a local fire station and then the Brown County Health [and Human Services] Department, which is my home county where Green Bay is, was able to distribute the rest to our hospital system.

We continue to get inundated with calls just from manufacturers, small businesses, families who have extra supplies and want to help.

So I know the country is going through a very difficult time right now, but this is precisely the type of moments where Americans show what they’re made of. And at least in my neck of the woods, people are really stepping up and trying to take care of each other, trying to help out. And that’s really inspiring.

Del Guidice: Yeah, that is beautiful to hear. Thank you for sharing that. And speaking of medical personnel in Northeast Wisconsin, what have you been hearing from hospitals in your state? Do doctors and other medical staff have enough supplies and so forth?

Gallagher: The short answer is no. And you think about that in an area where we haven’t been overwhelmed yet like New York is right now, there’s a few interrelated concerns.

One, there is just a basic lack of personal protective equipment in the form of masks and gloves and gowns and the more high-speed N95 masks, things like that.

There is a concern that the stockpile of that equipment is being diverted by FEMA [Federal Emergency Management Agency] to other higher priority areas, which I understand why FEMA would do that, but we want to prepare now precisely before we weather the worst part of this virus or a surge of this virus.

But I think the most interesting and concerning thing I hear from the providers is right now, they are trying to ramp up testing. In some cases, they’re building drive-thru testing facilities in a matter of hours. And it’s awesome. It’s all the stuff you’ve seen South Korea do that allowed them to handle this disease effectively.

The problem is when those tests need to be processed after they’re collected and they get sent down to the state labs in Madison and Milwaukee or the private labs that are doing this, and our ability to process those tests is constrained by our lack of certain supplies, in particular testing reagent, which is something you need to process the test.

But as we started this conversation with the discussion of how fragile our pharmaceutical supply chain is, the same is true for our testing supply chain and we just simply don’t have enough reagent right now to process the test.

That’s concerning because our hospitals want to do the right thing, they want to test because if you don’t test, you don’t have data; if you don’t have data, you don’t have intelligence; and if you don’t have intelligence, you can’t fight a war effectively. So that’s the biggest concern I’m hearing right now.

Del Guidice: Thanks for sharing that and it is heartening to hear how many people have stepped up and you talking about Wisconsin people in your area, that is very helpful to hear how generous people have been.

Something else you’ve talked about is the top priority is defeating coronavirus, but that doesn’t mean that we should shy away from planning how to reopen the economy when it’s time. I’m curious, what [are] your thoughts on how that should take place when it is appropriate to start reopening the economy?

Gallagher: Well, I recently wrote an op-ed for a Wisconsin publication where I try to put out a framework for what I called “Phase Two” would look like.

In other words, I don’t think come Easter or even at the end of April we’re going to flip a switch and it’s going to go back to normal. I suspect we’ll have to be in an interim phase for a while.

And to me, what makes sense for that Phase Two, that interim phase would be a few things. One, I think you continue a strict but strategic quarantine of the most vulnerable based on what we know now, that’s the elderly population, that’s those with preexisting conditions.

I think we should do everything in our power to protect them, to isolate them, and make sure they have the support that [they] need.

But ultimately and secondarily, I think we’re going to need to trust our businesses, our nonprofits to figure out what does social distancing look like within the unique context of your organization.

Because the reality is, no president, no governor, and certainly no member of Congress can design a one-size-fits-all solution that makes sense for every state, let alone every county and every city within those states. And so I think we have to shift to a bottom-up approach where we put some trust in our local communities.

Related to that, I think we need to require, or governors need to require, every local school district to come up with a plan for how our kids can finish the school year, even if it requires bleeding into the summer, because they simply can’t afford to fall further behind.

But I would also say we still need to continue to use data, as I mentioned before, to fight smarter. [A] forward-leaning governor should think about providing what I in the military would’ve called a battle update brief.

We have the technology and we have amazing companies that can track this stuff in terms of how we’re doing with infection rates, deaths, supply chain in near real time. Let’s be fully transparent with the American people. Let’s get that out there.

I think that’s how you best mobilize the American people to support what you’re asking them do. So I do think we need to think about that interim phase and we can’t let that become a politicized issue.

Del Guidice: Thank you for your perspective on how a one-size-fits-all approach probably isn’t best. As we close out, one more question, you recently tweeted about how the world should know the full scope of the Chinese Communist Party’s role in what we’re in right now with the coronavirus pandemic. How do you think the Chinese Communist Party should be held accountable?

Gallagher: In a few ways. I think the most obvious thing to do is an international investigation similar to how we’ve done this in the past. For example, the North Koreans sunk a South Korean vessel, I believe in 2009 or 2010, and there was an international investigation that determined North Korea’s culpability.

Similarly, we could have an international investigation, one called for by my colleague [Rep.] Elise Stefanik and Sen. Josh Hawley, a resolution that I fully support, in order just to figure out what happened, where were they deficient, where were they not, etc., etc.

Once having established that, I do think we should consider sanctioning officials that covered this up and thereby endangered the global economy.

I think related to that, and perhaps most ambitiously, we could think about amending, for example, the Foreign Sovereignties Immunities Act to allow individuals, families, governments to sue the Chinese Communist Party if indeed it was determined they were culpable.

And there’s already been persuasive arguments in different publications like War on the Rocks, for example, that suggest China is in violation of things they agreed to when they joined various international health forums.

So there’s a lot of different things that we can do, but I think perhaps at the most basic level, we just need to stick with the premise of President Trump’s National Security Strategy and National Defense Strategy.

We need to continue to figure out how can we deter bad Chinese behavior in INDOPACOM and around the world, and that is going to be a question that we’re going to be debating and answering for at least the next decade. That is the question of our time.

I think we are in the early stages of the new cold war with China, and in some ways it’s more difficult than the Cold War with the Soviet Union because our economies are so intertwined. So it’s very difficult for us to disentangle our economy from that of China.

Del Guidice: Congressman Gallagher, thank you so much for joining The Daily Signal Podcast today. It’s been a pleasure to have you on.

Gallagher: Thanks for having me. I really appreciate it.

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