At a Senate Armed Services Committee hearing last week, Sen. Elizabeth Warren (D-MA) questioned witness about purchasing pharmaceuticals.
Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:
https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript
Stay Connected
Forbes on Facebook: http://fb.com/forbes
Forbes Video on Twitter: http://www.twitter.com/forbes
Forbes Video on Instagram: http://instagram.com/forbes
More From Forbes: http://forbes.com
Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:
https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript
Stay Connected
Forbes on Facebook: http://fb.com/forbes
Forbes Video on Twitter: http://www.twitter.com/forbes
Forbes Video on Instagram: http://instagram.com/forbes
More From Forbes: http://forbes.com
Category
🗞
NewsTranscript
00:00Thank you, Colonel Suarez.
00:01I appreciate it.
00:02So I'm going to start the questions here.
00:06Most of the time, DOD will continue
00:08to purchase drugs from the commercial drug market.
00:12But there are some instances when
00:14it makes sense for DOD to produce the medication itself,
00:17for example, when DOD is the only customer.
00:20An example is the adenovirus vaccine.
00:23While adenovirus typically causes mild, cold, or flu-like
00:28symptoms, it is a major cause of serious respiratory illness
00:33among service members, particularly
00:35during basic training.
00:37And that is why Rare developed an adenovirus vaccine, which
00:43it then licensed to private industry.
00:46But because there isn't a broad market for the adenovirus
00:50vaccine, it has sometimes been difficult to find
00:53a manufacturer that was willing to produce it.
00:56In fact, for over a decade, DOD was
00:59unable to vaccinate new recruits for adenovirus
01:04because the manufacturer decided to stop producing the vaccine.
01:08And there was no other manufacturer
01:09who was interested in doing this.
01:12Mr. Mendez, you've studied the defense health care system
01:15closely.
01:16So first, let's start with, how did this disruption affect
01:20the health of service members?
01:23Thank you for the question, Senator.
01:25And that's correct.
01:26DOD exhausted their last supply of the adenovirus vaccine
01:29in about 1998, 1999.
01:32At that time, DOD estimated that the absence
01:34of that supply of vaccine would lead to about over 10,000
01:39preventable infections from adenovirus,
01:42over 4,200 medical visits of recruits in the recruit
01:46training pipeline who are at risk for adenovirus,
01:50and over 850 hospitalizations within a year.
01:54To an extent, DOD did observe that
01:56in the absence of the vaccine.
01:58OK, so in other words, people got sick.
02:00They had to go to the doctor.
02:01There were even some deaths associated
02:03with these adenovirus.
02:05And all of that potentially affects warfighter readiness.
02:09You've got all these young people who are together.
02:12And the disease is moving among them, right?
02:15The virus is moving among them.
02:17So Dr. Barber, you are an expert on pharmaceutical
02:22manufacturing.
02:23What did it take to finally get a new manufacturer
02:27to produce the adenovirus vaccine for DOD?
02:31So after stocks were depleted in 1999,
02:34DOD does what it usually did.
02:36It put out a tender.
02:37And the previous manufacturer that had pulled out
02:39of the market, Wyeth, they agreed to do tech transfer,
02:42but only if DOD would reimburse them for it, which
02:44is quite the demand given, as we've heard today,
02:46DOD developed that vaccine and had done tech transfer
02:49to them free of charge in the first place.
02:51So only one manufacturer even considered bidding
02:53at the time, Greer, but they withdrew
02:55because they asked DOD for $10 million up front,
02:58and DOD could not agree to it at the time.
03:00All in all, it's estimated that it took about $100 million
03:03in 10 years for new vaccines to become available again.
03:07This is just stunning.
03:09So DOD, as you say, does the research, develops the vaccine,
03:13gives it away to try to be able to get a manufacturer going.
03:18And they end up paying a private manufacturer,
03:21I think you said $100 million, is that about right?
03:24In the end, yes.
03:25In the end.
03:27In order to build a facility to manufacture this vaccine
03:31that we need, on top of the money
03:33they paid to purchase the vaccine from the manufacturer,
03:38all because DOD is at the mercy of private actors
03:44who just aren't interested in marketing these products
03:47for a relatively small market.
03:50Mr. Mendez, is the adenovirus vaccine
03:53the only example of a product that the private market
03:57has been unwilling to manufacture for DOD?
04:01No, the adenovirus is not a unique case.
04:03DOD has many challenges in finding
04:06a lot of medical countermeasures over many decades.
04:09Current challenges that they experience
04:12and are working through include products
04:14to address anthrax, botulism, cholera, hemorrhagic fevers,
04:19tularemia, and other health threats.
04:21All right.
04:21So this is a real problem with where the market just
04:25doesn't meet what it is that DOD needs.
04:27And this is going to continue.
04:29We're going to continue to have medications
04:32that DOD requires in order to keep service members healthy
04:37and that simply aren't profitable for private industry
04:40to come in and produce.
04:43Dr. Barber, what would be the advantages
04:46if DOD decided to manufacture these drugs itself?
04:52So public manufacture is likely, depending on the drug,
04:55to be enormously cost-saving.
04:57So to bring back the adenovirus example,
04:59the current contract with Teva is worth about $38 million
05:02per year.
05:03That's actually a lot of money to pay for a single vaccine.
05:06As a point of comparison, it's about 80%
05:08annually of how much California has
05:10budgeted to build an entire insulin factory.
05:12A report by the Army estimated adenovirus factory startup
05:15cost at $100 million, with annual cost of $10 million
05:19per year.
05:19So that works out to DOD breaking even
05:21from building and running a manufacturing facility
05:24in just three years.
05:25Besides costs, by manufacturing their own drugs,
05:28DOD could ensure reliable supply and support
05:30wider strategic aims in restoring domestic production
05:33capacity.
05:33OK, so you pencil this out and discover,
05:35at least for some of these drugs,
05:37it would be cheaper for DOD to manufacture it themselves.
05:40And it would have the added benefit of you
05:42know what your supply chain is.
05:44There wouldn't be any secrets in the supply chain.
05:47And we'd have a reliable source for these drugs.
05:52This is why I'm introducing a new bill, the Keep DOD's Drug
05:56Supply Secure Act, to direct DOD to manufacture
06:01the drugs, devices, vaccines, and other medical products when
06:06there is a risk of shortage or quality concerns.
06:10This bill gives us an opportunity
06:13to resolve drug shortages, to secure the pharmaceutical
06:16supply chain, and to ensure safe and effective drugs
06:20for our service members.
06:23Thank you.
06:23Senator Scott.