Dec. 18, 2024 - Epoch Times
23:19
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| You can literally make all the components of all these drugs in China. | |
| You can ship them in a barrel to some plant in New Jersey, mix it, compound it, package and label it, and say made in the USA, and then sell it to the Department of Defense. | |
| Now that's the number one thing I would ask a Congress and the President to fix that loophole through legislation. | |
| They can fix that in the NDAA like a week from now if they were really serious about it. | |
| As part of our special series on the U.S. presidential transition period, I'm sitting down with Victor Suarez, a retired U.S. Army colonel who served for 27 years and saw firsthand serious problems with America's medical supply chains. | |
| In this episode, he breaks down key steps America can take to secure its vital medicines. | |
| This is American Thought Leaders, and I'm Jan Jekielek. | |
| Victor Suarez, such a pleasure to have you on American Thought Leaders. | |
| Thank you for having me. | |
| Let's talk about supply chains. | |
| Specifically, supply chains that are coming from overseas. | |
| More specifically, supply chains that have a national security implication. | |
| What is the state of play here? | |
| I think, well, when you look at the state of play from a national security standpoint, I would say over the last 20 to 30 years, we've shifted with globalization a lot of our critical supply chains to make very important products in the United States, whether it's automobiles, | |
| whether it's electronics, whether it's our pharmaceuticals, have shifted primarily over to Asia over the last 30 years, primarily because it was much cheaper, they had access to free or cheap labor, Environmental regulations weren't as strong over there where they were becoming very difficult here in the United States. | |
| The American public wanted cheaper products and they didn't see that over a 20 or 30 year period that that would put us in a perilous situation. | |
| Where would you say are the biggest vulnerabilities right now from a national security perspective? | |
| I think one area that's a very strong vulnerability that a lot of people don't talk about, but I think an area of critical chemicals, accelerants, propellants, things that are made in chemistry that actually propel some of our most exquisite defense systems. | |
| And as those supply chains moved further to the east, specifically places like China, when you look at that from a national security standpoint, Whatever we have in our own stocks right now may only last a certain period of time. | |
| And so if you studied the history of warfare throughout the decades or the centuries, you really will understand that the nation that culminates the first usually loses the war. | |
| And so that's one area that is a strong vulnerability is propellants and accelerants. | |
| Another area that's really particular to the field that I come from And that is U.S. healthcare and life sciences and biotechnology, and that's really the chemicals and the precursors that go into our everyday medicines for U.S. healthcare. | |
| And as those shifted overseas to places like China, we see an overwhelming majority of those precursor materials coming from our number one adversary, And as a result, what most Americans don't realize is that the entire U.S. healthcare system is really highly dependent on those chemicals to make the finished product of their medicines or even medical devices for that matter. | |
| And as I understand it, some of those precursors actually overlap on the propellant side and on the medical precursor side. | |
| So these are doubly important, would you say? | |
| There's certainly a doubly important reason. | |
| There's actually programs getting after that now. | |
| There's a recognition of that right now. | |
| To solve that problem, it's not an easy problem to have because it's something you can't undo. | |
| If it's something that's gone on for over three decades, you can't undo it overnight. | |
| So you have to really prioritize and you have to understand where our most vulnerable areas are and really come with a priority list of those things that are most essential to protecting some of our critical infrastructure or critical industries in the United States. | |
| Before we dive into that, just tell me a little bit about your background. | |
| I mean, of course, you know, your specialty is these supply chains in the medical field and healthcare. | |
| Tell me about that. | |
| Sure. | |
| So last year in 2023, towards the end, I retired from a career in the military. | |
| I retired as a U.S. Army colonel. | |
| After 27 and a half years on active duty, I was a medical service corps officer as well as an acquisition officer, and I had two specialty areas. | |
| One was healthcare supply chain, and the other was advanced product development as an acquisition officer, mostly of biotechnologies. | |
| Those two areas, a deep understanding of healthcare supply chain as well as, let's say, creating biopharmaceuticals added to a national security background of three decades allows me to see a lot of the problems that we see today in the marketplace and gives me a unique perspective to analyze problems with a different lens And can see it from both a scientific side, | |
| a supply chain side, a business side, and certainly a national security side for those vulnerabilities. | |
| What were you doing in the military all these years? | |
| I was really fortunate. | |
| I started off in the first nine years of my military career in highly deployable combat units. | |
| I was in units like the 82nd Airborne Division as a paratrooper, 7th Special Forces Group in their surgeon's office, and really supplying all of our exquisite 18 Delta Special Forces medics with the latest equipment and gear, and I did that in the 90s. | |
| I transitioned to being a mechanized medical company commander and took a medical company to the northern part of the Sunni Triangle in Iraq in 2004 in support of a 5,000-person brigade combat team in combat in Operation Iraqi Freedom II. But after I did that for about nine years, I transitioned. | |
| I came back to the United States with my family. | |
| We were stationed in Europe. | |
| And multiple deployments during that time. | |
| And I came back to really establish a career in medical acquisition. | |
| Mostly started off with fielding and helping develop and getting new technologies out to the battlefield. | |
| Lifesaving medical devices and sets, kits and outfits and trauma equipment. | |
| To our forces as that industry really modernized during the war. | |
| And then in 2006, I met a mentor who is a giant in the biotechnology industry and he took me under his wing and taught me a little bit about the industry and I started to see some opportunities for additional training and opportunities with the military to start developing certain, you know, biotechnologies, specifically in the U.S. biodefense industry. | |
| I really, for about 27 years, I was going back and forth between Healthcare supply chain, healthcare operations in deployed settings, and then also in the last 10 or so years, product development and leadership positions at places like the Walter Reed Army Institute of Research, where I was the chief of staff, where we did biomedical research in not only infectious diseases, but brain health. | |
| So we did a lot of different things with labs that were subordinate to us all over the world. | |
| And so I got to see a pretty broad perspective of things like global health programs that we had initiated all over the world to everyday just biotechnology development of the latest biodefense vaccine or therapeutic that would be out there to protect our service members as they deploy into vulnerable areas. | |
| And you were actually involved in Operation Warp Speed as well. | |
| Right. | |
| So I had a background, as I mentioned, in advanced development of biodefense vaccines, and so with that I was I was involved in some of the acceleration of the Ebola vaccine and the currently used Mpox vaccine. | |
| Because I had that background in working with industry and working with other elements of the federal government, I was pulled in 2020 to be the program manager of a vaccine at Operation Warp Speed and to work with the team there to kind of lead them. | |
| And the scientific team to, you know, get an emergency use authorization. | |
| So, yes, I was one of those hundred people that worked for General Perna under Operation Warp Speed. | |
| Let me touch on something that happened during the pandemic. | |
| I think that a lot of people didn't fully grasp the threat of this medical precursor supply chain issue, right? | |
| Until the Chinese regime threatened to withhold some of those precursors. | |
| Can you tell me a little bit about that scenario? | |
| Yeah, so COVID and the pandemic was really an eye-opener to the public and to the federal government and everybody that was just in the healthcare industry where people were scrambling for basic things, whether it was PPE or whether it was just everyday common medicines. | |
| That we are super vulnerable when it comes down to a critical commodity like our medicines. | |
| And I think what it did was it opened our eyes to looking at what we call supply chain risk management and looking at things like, hey, well, if you have an essential medicine for lifesaving of a 70-year-old person that has a heart condition, let's start digging into what we call the bill of materials and look at all the components of what goes into that and then ask the other question of where does it come from? | |
| And is there geopolitical risk from where it comes from? | |
| Well, what are the companies that are making those? | |
| And where are they predominantly coming from? | |
| And are those countries adversarial to the United States? | |
| Are they allies to the United States? | |
| I think the pandemic really opened our eyes to that. | |
| And as we moved out of the pandemic, what we saw about two and a half years ago was a bipartisan Congress that started to inquire more about what are we going to do about it. | |
| And that's why we see now a lot of talk about maybe, you know, reshoring a lot of the critical medicines And the precursors and the APIs out of places like China or even India to either here in the United States or with our allied partners across the world. | |
| But we're going to take a quick break and we'll be right back. | |
| And we're back with Victor Suarez, founder of Blue Zone Bio. | |
| What percentage of these medical precursors writ large that, you know, important ones, I guess they're all important, but are actually vulnerable this way? | |
| And let's talk about Communist China specifically. | |
| Yeah, so there's a lot of numbers out there with this area. | |
| I'll give you a couple examples to kind of chew on. | |
| There was a group that partnered with the U.S. Pharmacopeia and the API Innovation Center out of St. Louis who came up with this list of what they call vital medicines, like 100 vital medicines in the United States. | |
| These are medicines that are so essential to U.S. healthcare that if we didn't have them, we would have major, major problems with People that are dependent on these medicines. | |
| These aren't just everyday hay fever allergy medicines. | |
| These are sometimes necessary for people so they don't die. | |
| Out of those hundred or so, their analysis came up with over 80% of those vital medicines have some kind of precursor key starting material that originates from China. | |
| And so when people say, well, maybe we can just pivot to buying some of our medicines cheaper from India. | |
| But when you look at India, a supermajority of their precursors, API, comes from China. | |
| And so what I tell people is all roads lead to China when you look at the upstream supply chain of the pharmaceutical industry. | |
| And so some companies have done a good job of figuring out and understanding this risk, and so they've de-risked that. | |
| But they're mostly the bigger pharmaceutical companies that have a brand name drug that they want to protect. | |
| And so they've worked very hard over the last five years or even longer to bifurcate their supply chains and make sure if they make a medicine Potentially in China or for the Chinese market, they do it separately from the supply chain that they make for medicines that they sell to the United States or in Europe. | |
| But not all companies can do that. | |
| And so the supermajority of the companies that are out there are not the big biopharmas that you've heard of. | |
| They're much, much smaller. | |
| And when people look at the problem, Just to give you some perspective, 91% of the prescriptions in the United States are for generic medicines. | |
| These are the low-cost generic medicines. | |
| Only about 9% are the brand name blockbuster drugs and medicines that you've heard from all these companies. | |
| But the value as far as the drugs spend is about 80% on just the 9% of the brand name drugs and only about 19 or 20% of the low cost generic drugs. | |
| But the super majority of the Americans are taking the generic medicines. | |
| That's where the super majority of the risks are because of some of the challenges we have with regulatory oversight and some of the other problems we have in manufacturing quality when we get over into places like China and India. | |
| 80% of vital medicines could be thwarted at this moment, basically. | |
| Is that what you're saying? | |
| Yeah, and then also some further analysis in a publication I did earlier this year with my think tank showed that about 20% of what we call APIs Are solely sourced from China. | |
| So that means there's not even a secondary source in the world. | |
| And if you were to try to create a secondary source, you're now looking at best six months or maybe years of lead time to build that secondary source. | |
| A lot of people say, well, this problem is too big to solve. | |
| We can't really decouple from them. | |
| And what I tell them is, I said, look, you can't boil the whole ocean. | |
| What you have to do is you have to break this down and understand by mapping that supply chain of really where are all our essential medicines coming from, what are their components, and then trace them to the most important things we need for U.S. healthcare. | |
| Then you can clearly start to see priorities of where we can make a difference. | |
| But the area that I'd say we need to really pay attention to is the solely sourced precursors or APIs, the active pharmaceutical ingredients that come from China, which means if they stopped supplying them to the U.S. market or to our allies in Europe, that means we don't have any other alternative. | |
| And of course, in some cases, the levels of production, even when there are things that are available in other places, they might not be at the scale that's needed at the moment, right? | |
| That is true. | |
| I mean, you can make certain things at a bench scale or maybe at a compounding pharmacy or maybe at a small chemical plant, but you're right, not the scale that we need for U.S. healthcare. | |
| So just my one comment is, as you're describing this thing, I think, you know, maybe we should work together on building one of these, you know, famous Epoch Times infographics that traces all these different, you know, key precursors and which ones are the vulnerable. | |
| It could be something that would be very useful, I imagine. | |
| There are efforts right now, academic and governmental, that are looking at those specific things right now. | |
| So I think those will be available and probably published sometime in 2025. I do have some collaborations on those efforts and I think that's a great first start of what our country is doing. | |
| Just visualizing these things can kind of maybe spur people to action a little quicker. | |
| You were alluding to the fact that just some of these precursors that are coming are just simply not the quality that they need to be to make the product. | |
| So that's the other part of the vulnerability. | |
| The product is being delivered but it's substandard or there's some very prominent examples of being even damaging. | |
| Yes, I believe that one of the things that you're going to see as some of these studies come out that I have alluded to is that in some of these cases, organizations have alternatives, right? | |
| And one of the problems we face with some of these precursor chemicals, especially when we're starting to look at elements, if you need something like potassium chloride, that's a mineral, that's something that you're going to be able to mine. | |
| So if you want to save money, And your goal is to lower the cost of goods sold as much as you can because the market's going to reward you for having the cheapest product. | |
| You may not invest in all the different steps to basically purify that product in its form where you're going to sell it to a customer. | |
| And if you just save a little bit of money by not taking additional purification steps, you save additional money by not doing chemical analytical testing that sometimes costs a lot of money, you don't have quality audit agreements with your trading partners, you don't allow for your quality team within your company to actually have a robust capability because that's very expensive as well. | |
| You can start to take market share over companies that are doing all those things because their costs of goods sold are going to be a lot higher. | |
| And what most Americans don't realize is that there's probably about 10 or 15 percent of the medicines that they take in everyday U.S. healthcare that are of low quality. | |
| And there are efforts right now to get better understanding of that. | |
| And I would just say that organizations like the Defense Department is taking a lead role in that right now. | |
| It strikes me right off the bat that if there's these dumping practices that you were describing to price out, it's a common practice to try to price out American companies. | |
| The obvious thing here is some kind of heavy tariff regime to prevent that from happening. | |
| That's just what jumps to my mind. | |
| What would you say are the top priority areas right now in your realm? | |
| I think the number one thing, and I testified about this at the SASC in April, is we need to have the Congress and the President close the Citrus loophole. | |
| The Citrus loophole was a court case that was settled in early 2020, right before the pandemic. | |
| So I believe it settled in February or early March. | |
| And essentially what happened was the year prior to that, the VA was actually trying to say that a certain medicine did not meet the Trade Agreement Act requirements. | |
| And so the Trade Agreement Act compliant law that was passed in the 1970s basically said that if you make a product and you sell it to the federal government, We are going to look at the country of origin. | |
| And if you're not a TAA-compliant nation, we can't sell you a final product to the VA, the Defense Department, one of the federal agencies. | |
| Now, it doesn't apply to just normal commercial sales to civilian hospitals for a medicine, but it does apply to federal sales. | |
| And so what happened was that the VA was saying, hey, there's a particular medicine that gets after one of the hepatitis strains, and we are deeming that as not being TA compliant, so we're not going to buy it from this supplier. | |
| Well, this particular company took this to federal court, and they basically convinced after precedent of saying, hey, from a medicine, if it wasn't manufactured in the United States, what was considered a drug made in the United States was the API, the core essential element of the drug itself, the active pharmaceutical ingredient, was really deemed to be made in a TAA-compliant country or the U.S. to be sold to the U.S. government. | |
| Well, they convinced a court to say that even though the active ingredient was made in a foreign country, it could be shipped here to, let's say, a manufacturing finishing plant in New Jersey, | |
| And mixed in with excipients, non-active ingredients, pressed into a pill, packaged around and labeled, and then sold as an American-made drug, even though the core element of the drug was not really substantially transformed. | |
| And there's two qualifications. | |
| There's manufactured or substantially transformed. | |
| Again, to be argued in court is whether or not the substantial transformation of just compressing it into a pill with the coatings, colorings, and fillings was really substantial transformation because what people would argue, what precedence was, was the active pharmaceutical ingredient is the actual drug. | |
| Everything else is just delivering it to the person, keeping it in place so it doesn't degrade and break down. | |
| And so that's a really important case because what it does is it creates this huge loophole that allows this whole thing we've been talking about to actually continue in perpetuity, which is you can literally make all the components of all these drugs in China. | |
| You can ship them in a barrel to some plant in New Jersey and Mix it, compound it, package and label it, and say, Made in the USA. And then sell it to the Department of Defense. | |
| Now, that's the number one thing I would ask a Congress and the President to fix that loophole through legislation, like, immediately. | |
| They can fix that in the NDAA, like, a week from now if they were really serious about it. | |
| That's number one. | |
| Okay? | |
| Number two is we need to do something about the Strategic API Reserve. | |
| I call this out in my white paper that I published back in March of 24. The Strategic API Reserve is a facility that we spent hundreds of millions of dollars building. | |
| It's tornado rated. | |
| It's a secure building. | |
| And it was designed to have the nation's stockpile of active pharmaceutical ingredients, key starting materials, and other chemicals that were pertinent to stabilize essential medicines for the United States in time of crisis. | |
| To be paralleled with the Strategic Petroleum Reserve, that facility is only 1% full. | |
| And I argue that for a couple tens of millions of dollars, you could pretty much go on a shopping spree and fill that up and basically take off all the leverage from our adversaries on essential medicine production. | |
| Well, Victor Suarez, it's such a pleasure to have had you on. | |
| Thank you. | |
| Thank you all for joining Victor Suarez and me on this episode of American Thought Leaders. |
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