Why It Matters

U.S. generic drug manufacturers told lawmakers that low prices and foreign competition are making domestic production increasingly difficult to sustain, as Congress considers ways to reduce U.S. dependence on overseas pharmaceutical supply chains.

At a Senate hearing held on September 23, U.S. manufacturers of generic drugs told lawmakers that low prices, competition from abroad, and federal policies have made it increasingly difficult to keep domestic production going, since Congress and the Trump administration are considering measures to reduce the United States' dependence on medicines made in foreign countries.

Christine Baeder, President of Apotex USA and LATAM, disclosed that her company demolished its North American penicillin plant last year because of unsustainable market conditions. The hearing took place six days before Section 232 tariffs on certain patented pharmaceuticals and associated pharmaceutical ingredients were scheduled to take effect Sept. 29, sharpening the debate around a policy landscape the administration has been reshaping through executive action.

The Big Picture

The hearing, titled "Leveling the Playing Field: Restoring America's Edge in Generic Drug Manufacturing," was the latest in a series led by Chairman Rick Scott (R-FL) examining U.S. dependence on foreign pharmaceutical manufacturing.

As of June, the American Society of Health-System Pharmacists had 227 drug shortages that were still active, and IBISWorld stated that the market value of the U.S. generic pharmaceutical manufacturing industry fell at a compound annual growth rate of 7.8 percent from 2021 to 2026.

Bipartisan legislation has already emerged from the committee's work, including the Consumer Labeling for Enhanced API Reporting and Legitimate Accountability for Base Entity Listings (CLEAR LABELS) Act, introduced by Scott and Ranking Member Kirsten Gillibrand (D-NY), which would require prescription drug labels to disclose the original manufacturers of generic drugs and active pharmaceutical ingredients (APIs). The legislation advanced from the Senate Health, Education, Labor and Pensions Committee on a 21-1 vote in July.

What They're Saying

The most incisive comment of the hearing was made by Baeder, who said, "The figures don't add up; generics are operating in an environment driven by competition at the lowest level, where North American manufacturers are unable to compete with overseas manufacturers who have lower costs and rely on government subsidies."

Kurt Orlofski, who is the CEO of PAI Pharma, turned the issue of transparency into a personal matter by saying, "I took three pills this morning, but I have no idea where they were manufactured. I am part of the industry."

Mihir Torsekar, a Senior Economist with the Coalition for a Prosperous America, pointed to the drop in domestic production and said the United States now produces 27 percent of the medicine it uses, compared with 72 percent in 2002.

The sharpest exchange of the hearing took place when Scott asked Baeder if the FDA already has the power to reform its inspection practices. Baeder replied, "I don't think that they consider themselves to have that power. Even if they do or don't, I am not an expert at the FDA." Scott then replied, "It just irritates you... because their role is to ensure safety for Americans."

Witnesses also disagreed among themselves. When Gillibrand asked about hospital procurement incentives, Baeder praised a Centers for Medicare and Medicaid Services (CMS) proposal, but Orlofski immediately undercut it: "It doesn't go far enough. None of the incentive flows back to the manufacturer."

Political Stakes

The CLEAR LABELS Act has garnered bipartisan and bicameral support, with a House companion bill.

A version of the Securing America's Biosecure Supply Chain and Ensuring Domestic Resilience (BIOSECURE) Act was included in the final fiscal year 2026 National Defense Authorization Act (NDAA), signaling that national security concerns surrounding pharmaceutical and biotechnology supply chains have already influenced major legislation.

The Section 232 pharmaceutical tariffs introduced by the Trump administration are adding a new aspect to the discussion. The tariffs set to come into force on Sept. 29 cover patented pharmaceuticals and the ingredients associated with them, while at this time generic pharmaceuticals and their associated ingredients are exempt from the Section 232 tariffs.

The Bottom Line

The hearing highlighted the fact that members of both political parties are concerned about the United States' reliance on foreign manufacturing of pharmaceuticals as they consider changes to labelling, procurement, and regulation aimed at boosting domestic production. At the same time, the administration is carrying out its own strategy for bringing pharmaceutical manufacturing home by means of Section 232 trade policy, even though generic drugs are currently excluded from those tariffs.

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