Summit on Resilient U.S. Medical Supply Chains

This transcript is from a CSIS event hosted on June 16, 2025. Watch the full video here.

Enoh T. Ebong: Hello and good afternoon. A very, very warm welcome to you all. Thank you for joining us here in the room and online for our Summit on Resilient U.S. Medical Supply Chains, with a particular focus on generic medicines.

My name is Enoh Ebong, and I recently joined CSIS as president for the Global Development Department. I am delighted to be here today to open our discussion on how national, economic, and health security intersect around the issue of delivering medicines to Americans.

Our summit today is hosted by the CSIS Bipartisan Alliance for Global Health Security, co-chaired by former Senator Richard Burr and Dr. Julie Gerberding, who is right here, in partnership, of course, with Cencora.

I actually would like to start with thank-yous because we wouldn’t be here at all without the people that I am about to name. I want to start out, of course, through our partnership with Cencora. We are so proud to bring together the wealth of expertise represented on our panels today. We are especially grateful to David Senior, Beth Mitchell, Gabe Weissman, Lauren Esposito, and many others from Cencora who have collaborated with us to put on this program along with our partners Joe Grogan and Eric Miranda.

I also have to thank Steve. Steve, thank you for your extraordinary leadership.

And I’d also like to particularly mention Michaela Simoneau, who has, I think, taken the laboring of bringing us all together; Sophia Hirshfield; and Caitlin Noe, among others from the Global Health Policy Center.

And our production team, thank you. You know who you are.

And our conferencing staff, without whom we couldn’t gather and convene so successfully.

 So grateful thanks to our panelists for joining us in particular.

I do want to mention that we are very pleased to be joined by Navin Girishankar and Phil Luck from our Economic Security and Technology Department. At CSIS, we are committed to leveraging the expertise across our departments to host discussions like this focusing on how human well-being, economic prosperity, and technology all tie back to our core U.S. national security interests and contribute to global stability.

So just a little digression – I have the podium, so I’ll take advantage of it – to say that in my prior role leading the U.S. Trade and Development Agency, also known as USTDA, I worked with the U.S. private sector and partners in emerging economies to develop projects that strengthened infrastructure and expanded economic opportunity both here at home and in our partner markets. In that work, I saw the challenges and the significant opportunities in aligning public- and private-sector partners to craft innovative solutions to complex problems. Such partnerships are, of course, a critical part of our efforts to ensure resilient U.S. medical supply chains.

In addition to partnerships between the public and private sector, I suspect that partnerships with likeminded friends and allies, and with emerging economies, can play an important role in these developments. From my perspective looking at global development, I would just say that as an example to the extent that nearshoring or manufacturing in friendly geographies is something under consideration, we should think about mutually beneficial frameworks that build capacity in developing and middle-income countries that may not currently have full regulatory or manufacturing capability, but with the right technical assistance and investment could be trusted partners. At USTDA, we worked on health infrastructure efforts in Africa along these lines that could be instructive.

That brings me to the only other point I’m going to use my privilege at the podium to make, and that is that we should be mindful to understand the full government toolkit that is available. Agencies like USTDA and the U.S. International Development Finance Corporation, or DFC, can and do play a useful role when it comes to planning complex activities and financing them, respectively, in overseas markets.

So, OK, that’s enough of my – of my contributions there. But to just move to the panel discussions we have in store for you this afternoon, the first will cover the landscape of supply chain innovation, and really what has been learned over the past decade to stabilize the generic market and reduce the risk of disruptions. At 3:10, we will have a video message from Senator Todd Young about his work chairing the National Security Commission on Emerging Biotechnology and the strategic imperative of making life science and pharmaceutical considerations squarely part of our national security debate. Our second panel will look ahead to how we can craft a strategy for the next five years that stabilizes the global generic medicine supply chain while moving ahead on policy priorities to on- and nearshore manufacturing capabilities.

With that, I will thank you all again online and in the room for attending and participating in these discussions. And I would now like to call on the president of CSIS’s Economic Security and Technology Department, Navin Girishankar, to frame our discussion. (Applause.)

Navin Girishankar: Good afternoon, everyone in the room and online. I’m Navin Girishankar. I head up the Economic Security and Technology Department here. Can you hear me? Yeah?

First of all, thank you so much Enoh. I’m delighted. We served together in government, and delighted that we’re working together at CSIS and we could do our first event together on a very, very important topic. And also, really, congratulations to Steve and Michaela for putting together this phenomenal event, and bringing together leaders like yourselves and those who are listening online.

For you, you may not be aware of the internal organizational setup of CSIS. The essence of it, when you bring all these departments together, is you can’t possibly deal with issues as complex as the one you’re talking about today without bringing many different perspectives to the table and bringing them together. And that’s really at the essence of what we’re trying to do.

And it’s really timely that we’re having this conversation today on the generic medications sector and the complex challenges of ensuring resilient and stable supply chains. The panelists today will consider lessons over the last 15 years, how they can be applied, how they can help address growing economic security concerns especially with regard to dependence on manufacturing capabilities that sit far away from our shores. I don’t need to tell you all this, but I’ll say it nevertheless: 90 percent of American prescriptions are generic, and yet generics account for only 20 percent of the revenue in the pharmaceutical market. These products have exceedingly small profit margins, and there is a great deal of variability and supply chain vulnerabilities across these generic subsectors.

And so you can’t ignore the economic security considerations, ones that we confronted frontally during the COVID pandemic, in particular excessive dependence on generics and APIs emanating from the PRC. Indeed, I would say this is emblematic of the supply chain dependencies and potential chokepoints that we see in a number of sectors. And that’s why today’s convening is timely, urgently needed, particularly as a new economic order begins to take shape.

In every sector where there are economic security issues, we must assess vulnerabilities; the robustness of our strategies/policies/instruments, maybe innovate new ones; and see whether the are fit for purpose and whether they can help us navigate the complexities of fragile supply chains around the world, how we can manage potential cost disruptions that can damage the health and well-being of Americans, and how we can lower our dependence particularly on adversarial nations where our well-being is at stake and at risk.

So devising orderly and rational strategies to transition the medical supply chain and the generic supply chain specifically is really the order of the day. It’s not simple, not easy, but it is essential that we work through it. It’s the work of many hands. And it can probably start well – start with coordinated leadership at the White House and the executive branch, including active diplomacy with trusted allies. I note the G-7 summit that’s happening today. The administration should develop a strategy with industry that defines the problems, the goals, and the potential bad outcomes that we can’t tolerate. So, for example, is the chief goal lowering dependence on China, or it is reshoring and rebuilding manufacturing capabilities? Or is it both? And how do you do both of those things?

Secondly, someone’s going to have to pay for the transition in the supply chain, including both government and industry, and we’ll need to closely assess the true cost of lowering dependence/encouraging onshoring. We should consider what the split of responsibilities will be. It’s ultimately a shared activity, but how do you share the risks and the cost?

Given the urgency of these economic security issues, I think the question is how the transition can be affected with deliberate speed but not destabilizing speed. And so the need for a vision in the next several years is paramount.

The administration is actively exploring a number of instruments to seek to creatively deploy public resources and instruments. A former colleague of mine at Bridgewater Associates says that we are now all mercantilists, and I think what he meant was that the role of the state in productive activities is now being rethought in fundamental ways. That doesn’t mean all those ideas are good ones, but when you think about what’s on the table – discussions about a new national sovereign wealth fund, the reauthorization of DFC that’s coming up, the reauthorization of Ex-Im which now has new domestic capabilities – all of these things are on the table, and we should think carefully about how they can be crafted and coherently into a menu of options and instruments that we can use. How do we play all the keys on the keyboard? And these are important opportunities that I hope panelists today will weigh in on.

There’s also a need for industry to convene and brainstorm about what it can do, including potentially financing. Any solution that does not – that simply builds on government handing over public resources to industry I don’t think hits the mark, and so there’s a need for genuine partnership. 

And so, finally, let me make a final comment about tariffs. Of course, that’s on everyone’s mind. I take some comfort in the fact that there’s been something like a momentary détente between the U.S. and China. We can discuss what the underlying implications of that are. There are anticipated announcements, including potentially with some allies, even at the summit that’s ongoing in Canada today.

I think the issue, however, is if you’re talking about supply chain resilience, we have to be exceedingly careful about the – what tariffs imply. There is a kind of a short shrift that you hear sometimes now that slapping on tariffs would automatically lead to reindustrialization. And just – I may be preaching to the choir, but to be clear tariffs are a tax on importers and, therefore, likely on consumers. On again/off again tariffs – and some of us have even seen intra-day tariff rates these days – can create the kind of uncertainty that really cuts against the types of investments that are needed to build supply chain resilience. And so I think one has to think very carefully about this and the role of trade in global supply chains, even if those supply chains are realigning. And in fact, trade can be a useful tool.

And so I hope these topics and others are things that we will talk about today and that we’ll hear from our panelists and our leaders.

I just want to thank you all for coming and for participating in advance. The goal here is pragmatic, bipartisan solutions that can last the test of time, and I believe that we will get there. So thank you very much. (Applause.)

(Break.)

Joseph Grogan: Is the microphone working now? I guess so. OK, good.

So thank you all for being here. We’re the first panel, so it leaves it to me to kick off the discussion and get the energy level up.

So I want to talk a little bit about the – you know, the Trump administration is pursuing onshoring American production in a number of different areas for two reasons. One is economic growth. The other is national security. We’ve seen this pattern in the United States a number of times where the United States establishes dominance in a particular industry – say, automobiles – and then over time we lose that dominance. Solar power and photovoltaics is an example. There are plenty of other ones, including microchips, too.

The pharmaceutical supply chain is, by my estimation – my limited window – the most complicated thing I’ve ever tried to understand ever. And whenever I get into a conversation with somebody – an expert like those on this panel – I learn something. We could be up here for hours and we would not run out of topics.

So offshoring products in the pharmaceutical supply chain has definitely made these products cheaper and freed up resources for research and development, but it has also made supply chains longer and more prone to breakage. There are currently 270 drugs on the FDA shortage list. And while that is not a record, it is markedly higher than the 174 drugs that were on the shortage list in 2017. Additionally, we have geopolitical tensions, regulatory differences across continents and national borders, logistical bottlenecks, and low profit margins on generic drugs. All these discourage manufacturers from expanding production capacity and making these pharmaceutical supply chains less adaptable to sudden increases in demand or supply chain failures.

We have three excellent panelists to have this discussion today.

To my left is Heather Zenk. She is the president of U.S. supply chain at Cencora, formerly AmerisourceBergen. And I apologize if I refer to it as AmerisourceBergen during this discussion; it’s still a challenge for me to think of it in any other term. She’s had over 20 years of experience in pharmacy procurement, distribution, and supply chain, and the overseas and U.S. distribution networks. I won’t go into her full bio, but she played a key role for Cencora in the COVID-19 epidemic as well.

Stephen Colvill, at the end, is the assistant research director at the Duke-Margolis Institute for Health Policy at Duke University. And he is a former official at the Domestic Policy Council in the Biden administration, he’s worked at Pfizer, and he’s worked at Hospira.

Erez Israeli is the CEO of Dr. Reddy’s Laboratories, based in India. It is among the first in India to export API at scale. He also had a number of senior roles at Teva Pharmaceuticals, at Enzymotec. Excuse me. He holds an MBA from Bar-Ilan University in Israel.

So, Heather and Erez, I want to start with you to understand a little bit of what we’re dealing with the supply chain. The first conversations I had with Cencora many years ago were illuminating to me about how complicated your work is. So, Heather, maybe we can talk just a little bit about you in a day, in a week, in a month running U.S. distribution. What are you looking at as far as managing your supply chain? How many products are you moving around the country? And follow up to that is, when you see something – say, a hurricane headed to Puerto Rico, or a national security event or disruption somewhere in the world – how do you start thinking about preparing for that?

Heather Zenk: So thank you. And easy-peasy, right? (Laughter.) There we go. No, thank you for having me.

So what does a day look like? No day is the same. I will say here in the United States – I’m going to put some numbers out there. If we can’t understand what those numbers are, we’ll try to connect them to something else in the marketplace.

We have 28 distribution locations that are servicing about a third of the United States pharmaceutical market today. We do that with about 5,000-ish team members here in the United States. I have about $17 billion – with a capital B – in inventory positioned throughout the United States, which is twice the amount that our colleagues at Amazon potentially store on a daily basis. We receive on average today about 1,500 different manufacturers’ products, all FDA-approved, into our network. I service every night about 30(,000) to 60,000 locations. And by a location that could be one large academic medical center, but we may shift to or have 18 to 20 different locations inside that medical academic center that we’re putting products into the marketplace. Last night alone, we shipped 4.7 million units out to the United States citizens.

Also, what a day looks like is our sites of care that we deliver into, they could be a retail setting. It could be a dental office. It could be a large academic health center. It could be a specialty physician. So think of the places where, again, none of us wish to ever have to go to, but many of our family members may rely on it: an oncology office, a retinology office. Those types of products, too, they’re ordering from us till about seven p.m. local standard time. We are fulfilling those orders in the evening time and getting 98 percent of those orders to them by noon the next day. So how we really take living the purpose of all health care is local in a community, but we really take seriously how short our operating clock is, how high of service we provide for a third of the United States citizens, and also what it means to be a patient of our customers.

We know that also health care is all local. Many do not go outside of a local ZIP code or two ZIP codes away to receive care in the United States, but it’s very complex how you receive that care. And we take it seriously that we have to have that pharmaceutical – which usually hopes to keep someone out of a health-care setting, helps to keep someone out of a long-term care setting, or potentially out of a setting where you may have to receive surgery – that’s really what we’re doing every and how we’re doing it.

And then we are looking at what is going to disrupt. So, again, fire of the urgent. Last night, some citizens in West Virginia were impacted by severe floods. We had 18 customers that we couldn’t get shipments to today. I knew those numbers by one a.m. this morning. That’s how we’re dealing with the situations of the day, and also then alerting colleagues, you know, like my colleague here on my left of are we going to be able to receive inventory in, should we have inventory diverted to a different location to fulfill orders, what does that look like on a daily basis.

 So that’s kind of what we’re dealing with every day, but I’m sure we’ll get into more details throughout the course of the next 30 minutes or so.

Mr. Grogan Erez, talk a little bit about the generic industry worldwide. You’ve worked at Teva. You run Dr. Reddy’s now. So what are we talking about when Cencora wants to do an order for a generic drug, or let’s say 20 generic drugs? What’s going into that? Where does that drug start and how does it end up in Cencora’s warehouse?

Erez Israeli: Thank you for having me.

So just at when we get an order from Cencora – we anticipate whether we’ll get an order from Cencora. The work actually start 18 months before that, buying the first intermediate for an API. Some of us are making the API and the finished good. Some are doing only the finished good. The finished good is the pharmaceutical itself.

So when you make the first intermediate, just like you have a flavor, every SKU – and you buy how many SKUs?

Ms. Zenk: Twenty-five thousand.

Mr. Israeli: Twenty-first thousand. Every SKU has one hundred different SKUs enter into that. You need to buy the excipients in one place, and the API in a different place, and the market in a different place. And most of this stuff is done in Asia. So, for example, most of the API is done today in India, China, and Italy. Between these three countries, actually, 90 percent of the API in the world exists. And then you have, of course, Qatar and other places.

To make the long story short, Heather needs to take care of something, she gets it one a.m. in the morning, seven a.m. in the morning, we are supposed to anticipate it and prepare for it 18 months before that. And just to add to the people who have the complexity, there are about 200 generics players today serving Cencora, give or take; about 400 to 500 API supplier that serves those 200, some of them with captive use. Each one of them moved and basically build on the paradigm that of, you know, loss of exclusivity, patent expiration that allow the product to go. This is normally what drive the companies to know whether they can actually make the product.

So you have that many players. And in the United States, about seven customers: three retailers and four distributors. So it’s very, very narrow. Most of the products have between eight to 10, on average, competitors. Some of them have 30 or 40. So you don’t know whether you’ll get or you don’t. Most of this market is working on transactional basis; there are no contracts or long-term contracts. You work per order. And you normally plan for what you know, which is what happened to you in the past, but you don’t know what will happen next.

So that’s the paradigm that we’re working on. Normally, the margins are very low because it’s a competition in which, you know, 10 guys needs to get something from three guys, so eventually seven on average will not sell. That’s the reality of the business. And you fight for market share.

Which means one of the key things that is not taking into account, for example, issues like national securities or something like that. It’s not in the discussion because it’s mostly about private people that are buying from private people, and whether it’s available or not. I think it’s part of the issue that we’ll have to take, how do you take other consideration into account.

But in general – and this is the last thing I do – when there is an issue in supply chain – I’ll give two examples. You know, there was a war now in the Middle East. I am from Israel, so, obviously, I am also personally heavily emotionally involved. We in India could not use the Suez Canal. In order to supply to Qatar on a timely basis, we normally use the time that of shipping because normally most of it is heavy and you are not doing it by air; you are doing it by sea in order to save money. In the last now almost two years, we have to bypass it to go to Africa. That’s the reality. And most of this stuff that’s coming to India, most of the SKUs are coming from Asia and has to do this route. That’s made it three weeks longer and, obviously, more expensive.

A different example was during COVID. During COVID, obviously, everybody had their challenges. In our case, how can you distribute goods from India to the United States when there are no planes, there are no ships, at least for a certain period of time? And when they started to come, it was in much less, obviously, capacity than it used to be. So these kind of the challenges that you are dealing with when you are in the outside in order to give a good service here.

Mr. Grogan: Stephen, let’s go to you for a second. So you worked in the Biden administration at the Domestic Policy Council, and now you work at the Duke-Margolis Center. President Trump recently signed an executive order on regulatory relief to promote domestic manufacturing of critical medicines. How does this approach differ from what the Biden administration was trying to pursue? And when you look at the levers available to the federal government, we – I mean, we heard in the intro that this shouldn’t be about taking money from the Treasury and giving it to the private sector. I’d also suggest the opposite, right, that maybe the private sector shouldn’t be shipping more money off to the government and we need to balance this. But how do you think, when you look at the different levers at the federal level, we can alleviate the supply chain shortage issue?

Stephen Colvill: Yeah, absolutely. Well, first of all, thanks for having me, CSIS and Cencora, and for – thanks for hosting this event. 

I think on the domestic manufacturing executive order there are some important pieces in there that were being worked on before as well in terms of streamlining regulatory review and enabling domestic manufacturers to be successful. But I think before we get into specific policy levers, it’s important to think about the very distinct problems that we’re talking about here, which are – which are different. 

So, you know, you have drug shortages, when a patient has a drug and can’t get it. You have questions around pharmaceutical quality assurance. You have geopolitical risks and national health security risks. And then you have a need for economic growth and job creation. And those are all really important, but all very different, and different policy solutions are needed for each of those. 

So, in terms of what are those right policy solutions, I’d highlight two things that are also bipartisan and have been, you know, worked – there’s been progress made over time on these two issues, but we need to do more. 

One is on strategic planning. We need to get a lot better about identifying what success looks like for supply chains. You know, what are some measurable objectives that we should be working towards? From a domestic manufacturing perspective, can we identify some specific products and then identify a target? Should 25 percent of volume be coming from the U.S., 50 percent? What’s the right amount? It’s not going to be a hundred percent, but maybe for critical products it probably should be higher than what it is today. But not just around domestic manufacturing targets; we also need targets around drug shortages. Can we reduce the duration of drug shortages? Can we reduce the number of new drug shortages by, you know, say, 50 percent by 2030, or something along those lines? If we can set those tangible targets, then that starts to catalyze action and gets people thinking about, OK, what do we need to do to actually change the system to get there rather than being more so crisis-driven, which I think has been the approach frequently in the past to this issue? 

And actually, at the Duke-Margolis Institute we just released a white paper a couple weeks ago explaining more details about how a strategic planning initiative could be established to bring together all the agencies within the federal government that are needed to set these targets and to put a strategic plan together, because no one agency can really own this on their own; it needs to be multiple people working together, including with the private sector and including with Congress as well. So that’s number one, strategic planning. 

Then the second policy step, I think, is around competition on resilience. If there was something I could put on my business card or, like, on my email signature – I need to start doing this – it would be competition on resilience. Right now there’s too much competition on who can be the cheapest – which is important, you know, saving costs, of course, but we need to factor in resilience and reliability to that more as well, and enable health-care providers and others to shop based on resilience, not just shop based on who can be the cheapest, and select more reliable suppliers. 

So what can we do to get there? I think there have been some innovations recently that are working towards resilience, like new committed-contracting models. I’d highlight Civica Rx, their model. Cencora has a sure supply program. Other wholesalers and group-purchasing organizations have programs that have a real commitment between a manufacturer and a purchaser where there’s actually a contract. Like Erez was saying those are not prevalent right now, but can we move towards increasing the strength of those committed-contracting models? 

And also, supply chain assessment programs. How do we collaboratively evaluate manufacturers and determine who is more resilient relative to their competition? There are a few recent examples like the Healthcare Industry Resilience Collaborative and U.S. Pharmacopeia, which both have recently either launched or announced new benchmarking programs to enable purchasers, again, to better shop for more resilient, more reliable suppliers. And I think those innovations have started, but they’re not really prevalent in the market yet. And to get them to be more prevalent, I think we need to have additional incentives put into place. For example, one thing – one type of incentive we’re working on at Duke-Margolis is around CMS payment mechanisms that could support health-care providers in participating in these kinds of programs more frequently, you know, providing the additional incentive payments if providers are engaging in committed contracts or purchasing from suppliers that are more resilient or more reliable. Especially when you think about drugs that are in shortage, you know, oftentimes they’re injectable products frequently used in the hospital setting. Medicare accounts for 50 percent of inpatient days in the U.S. Medicaid accounts for another 25 percent. So I mean, that’s – to really move the needle, that’s the lever that needs to be pulled to make that happen for resilience and also for domestic manufacturing. 

Ms. Zenk: Can I add one thing too? One of the really foundational things that helps support what Stephen’s talking about is, again, a crisis came about – don’t let a good crisis pass you by – and the Supply Chain Control Tower was set up by our colleagues at ASPR. And what that entailed is we were all submitting – the pharmaceutical wholesaling space in the United States was submitting data on where products were in the United States. So there was a lens where an entity – ASPR was at the time leading that effort – could look and see if they were seeing an outbreak in Kansas City where maybe a steroid wasn’t available for use for a patient. They could look across and see. So some data visibility as a foundation is needed for some of the things that Stephen’s saying so you can see end-to-end supply chain. 

Because, as Joe alluded to, this is a very complex supply chain with high-quality needs. And we sometimes, you know, say this isn’t duct tape and toothpicks; these are, you know, pharmaceuticals that all of our families are taking, all of the – you know, many in the marketplace. How do we help enable that? And really, a foundational dataset where we can exchange information. 

Also foundational for that was the same definition. You lean into a space – we heard, you know, the FDA drug shortage list. We have visibility to that many months sooner to when that gets posted by our colleagues and friends at the FDA and our colleagues at ASHP, which is the American Pharmaceutical Association’s health society, they take – we see it months earlier, signals of potential disruption in the marketplace, and it takes quite some time for that to get initiated. And realistically, what do we go from as what’s a shortage? If we have a customer that wants to order a product that we don’t have available on the market. Again, many different reasons for that – high demand, disruption, sometimes it’s weather, sometimes if there’s other regulatory issues that are driving – but there are many reasons why those come about. But realistically, we need a foundational way to talk about the same things in the same way to help our policy partners understand more effectively and efficiently to engage versus the marketplace talking about the definition, which happens a lot in this space. 

Mr. Grogan: We’re going to go to a couple questions in a – in a minute or two, so think of what you want to ask. 

But, Erez, you made reference to Israel. That’s a country that, obviously, takes national security seriously. How do they ensure that they have an adequate pharmaceutical supply chain internally for their citizens? Are they manufacturing it all for themselves, or do they take a different approach? 

Mr. Israeli: No, it’s a different approach. Obviously, Israel is a very small country and it doesn’t have the capability of, obviously, United States or any other big country. So the approach is inventory. If you need atorvastatin, you just buy atorvastatin for five years and replenish it. By the way, I think it might be a good idea also here, you know. Obviously – (laughs) – 

Mr. Grogan: It’s a – it’s a supply – it’s a five-year supply or it’s a five-year contract?

Mr. Israeli: It’s five years of inventory sitting with the – with the right expiration date that can be supplied anytime. It’s a matter of national security. So there is a body in the government that decide how much inventory to keep and for which product. And accordingly, they are buying it with a certain replenishment mechanism. It might be a good idea here, at least for those items that it will take really a long time before it can be onshored again. 

I’ll just give an example. If we asked to make – and we will do it gladly – to build API plant in the United States that make, let’s say, product like atorvastatin – Lipitor – if we start today, the first kilo will be available maybe in 2030. It’s not – it takes time to take land, to build. These are – these are not digital facility; these are kind of what you call the low-tech type of facilities. So if there is an urgent need, this is a methodology that, I mean, I’m sure people can look at. 

Mr. Grogan: You said that India, China, and Italy dominate the market. Why – how did the U.S. lose this capability, if we ever had it? And why does Italy continue to have a role in this market? 

Mr. Israeli: No, so it’s a kind of interesting history. The API industry actually started in Italy, primarily leveraging two things that they had in the past, and this goes back to the history. One, they had amazing universities that educate, department for chemistry. And actually, to make API you need chemists and you need chemical engineers. And they were really, really good at it. These were private companies, normally relative to today small factories, and they did it for years. And they actually lost that. I remember when I started to work in the United States – this is more than 25 years ago, when I actually lived here and worked with the API – 90 percent of the API actually came from Italy. We at Teva, my previous company, had six plants in Italy that made some of this product. 

Then they put a patent law that did not allow them to make new products, and in China and India at that time there was no such patent. So, obviously, the industry migrated to a place that you could work before that. And then, obviously, the cost advantage and the availability of talent in both countries – China with the incentive of the government, India as a result of private people; in India, they call them promoters, those private people – actually created that. And also, the ecology laws were very, very different. And so, if you wish, the basis of low cost – which is the main driver, like you said, for this industry – low cost, good quality, high level of service, that’s the main principle of this industry – were created over there, and they leveraged the fact that if you want to make something in India or in China for sure in the past it’s one-twenty percent of the cost that we’ll have to do it in the Western world. Even today, it’s in this magnitude, give or take. That’s why – I’m sorry, I may be preempting – 10 percent or 20 percent tariff will not change that, because we are talking about magnitude of scale of cost. 

But to address these questions, so historically it moved because of patent law, ecology, access to talent, motivation of people. And then it was very, very hard to get it back – very, very hard. 

Mr. Grogan: Yeah. Yeah. 

Do we have any questions? In the back. 

Q: Hi. I’m Bautistav Ivankov from the Cato Institute. 

I was wondering if you would be able to explain what a resilient supply chain looks like versus a non-resilient supply chain looks like, just to give us an example of where are the areas or issues in particular that companies and manufacturers should be focusing on, you know, whenever they are designing these supply chains. Thank you. 

Ms. Zenk: Or Stephen? Yeah.

Mr. Colvill: I could jump in and start, and then you would be great to speak to that too. 

But I think we have a lot of examples of what really, really resilient supply chains look like when you look at branded drugs that have high profit margins. I mean, they have dashboards that the CEOs are looking at around, you know, every little risk in the supply chain that could happen that could threaten the supply of that – of that drug because it has a major financial – it’s a major financial driver for the company. So I think we’re fortunate in that we can look to some examples of supply chains that have redundancy and inventory strategies and strong investments in quality culture. And there are generic manufacturers that are good at those things as well – maybe not to the level of one of your blockbuster branded drugs, but we do have generic manufacturers that are good at this too. So we just need to get better at measuring and then communicating out the relative levels of resilience that exist, and get people competing over each other, jumping over each other to see who can be more resilient. 

Ms. Zenk: We look at it similarly, resiliency, but also redundancy across the board, but in every step of this – of supply chain channel. So, again, when I get a finished good from Erez, what do I have? Do I have strong technology where we can place orders for customers in different locations? Do I use different transportation assets? Do we have team members that if we need to, do we migrate team members to different locations to work? So we look at each step in the supply chain as a way to make sure we have redundancy, and quality always leads that. So do we have the right cold-chain assets? Do we have the right storage temperature? Do we have the right locations? All of that looks into what we think is, again, a redundant supply chain and resilient supply chain. 

But it’s not easy. You know, you’re talking an 18-month cycle, if not longer. It’s very difficult. And then if we need to change a manufacturer if there is a disruption, the rest of the market doesn’t have limitless inventory to pick up and manage. So then we look at what other supply chain tools do we have. 

We tend to talk a little bit about the word “allocation.” I know for us it’s a supply chain stabilizer. For some in the market I think it feels as if, you know, I want more inventory to care for patients. We really look at it as how do we make sure all sites of care could have viable inventory to support – maybe not every single unit they want, but enough to be able to manage the care of the patients that they have. So there’s also using technology and tools and indicators and demand that also drives some resiliency on our side. 

Mr. Grogan: Can I ask you a question? Sorry to interrupt, but you mentioned in your first answer about the – was it 18 billion that you’re moving every – so what’s –

Ms. Zenk: No, we have 18 billion in inventory.

Mr. Grogan: In inventory.

Ms. Zenk: We put about a billion in transit every day as large of an organization as we are at this point in time.

Mr. Grogan: So what’s the breakdown in that of branded versus generics? 

Ms. Zenk: About 90/10. So we heard about, you know, 90 percent of my inventory numbers is in the – in the innovation space, and about 10 to 15 percent is in our generic colleagues. 

Mr. Grogan: That’s in value, but not in – not in, like, weight or unit numbers, correct? 

Ms. Zenk: Correct. It’s inverted the other way for units. So we ship 90 percent generic molecules and generic bottles every day, and about 10 percent of our volume that gets shipped is in the innovation space. 

Mr. Grogan: And is the – dumb question, but I just want to go back to Steve’s point.

Ms. Zenk: No.

Mr. Grogan: Is this – you see the same thing as far as resilience in the supply chain. Obviously, the branded manufacturers are going to have a stronger supply chain than the generics. It’s going to be thinner and more easily – 

Ms. Zenk: You see the – we see exactly how Stephen said it, yes. 

Mr. Grogan: Yeah.

Mr. Israeli: Just to add two more points to that, one is it will be great to have more commitment. You know, when we ship inventory United States – and we are holding about three months in the United States. We have, of course, inventory in the relevant supply chain place outside of the U.S. But let’s say in the U.S. So when Cencora is ordering from us, we are naturally giving it from the warehouse we have in New Jersey. In order to have these three months – three months based on the past; it’s not three months with committed orders. The orders are coming sometimes a week before, sometimes two weeks before. So you have to match the one or two weeks of ordering time to 18 months. So at least for those SKUs that it’s important to have resilience, it’s important to create some commitment to it because then people can work on it and put emphasis on it and make sure that it’s happening, it will be in the CEO dashboard to your point, et cetera. This is one. 

The second one – and there is a different one than 90/10 – when a product is going off patent, the price is going down up to 99.5 percent. Not all of them, but let’s say it’s normally more than 90 percent. So there is a reason for that value. And after this – after this erosion, normally people are fighting on the nickels and the dimes to get the market share. So, obviously, in this environment you have less of an incentive to keep inventory or to do this kind of stuff. Again, that’s the nature of the business. That’s the – that’s the reality of the business. We are living that. But naturally, the part that is related to national security or resilience of supplies was not a parameter that we used to talk. I believe that it’s great that we are doing it, but we need now to think about then how do we weight it and how we are actually coming together, at least in those areas that are very important to the people in America. 

Mr. Grogan: When you – Heather, when you think about that transfer of data and opportunity for transparency at the assistant secretary for preparedness and response, is that – how broad is that? And what are you tracking at Cencora? Are you looking at not just natural disasters and potential supply; are you looking at the economic data? I remember when I was at the Food and Drug Administration we had a terrible problem with tainted heparin coming out of China, and after the fact we realized, oh, we should have figured this out because the price of heparin was skyrocketing because there had been a supply chain disruption there. And we kept on thinking, oh, you know, in the future we should – we should get economic intelligence for this to prevent adulteration, but not much was done over time. But what are you looking about in the private sector to figure out – to anticipate these shortages before they – before they become critical? 

Ms. Zenk: So we’re looking at a few factors. One of them is to – how many competitors are in a space. So we still have generic products that might only have one or two manufacturers in the space. Those tend to, of course – if one of those gets disrupted, it’s a likelihood that you will have a longer duration or a drug shortage at that point if they’re difficult to manufacture. So there are certain types of formulations – which, by the way, full disclosure, chemists, for all the pharmacists in the room – yeah, a little chemistry, which didn’t know if I’d get through third year but got there – (laughter) – so also are difficult to manufacture because those also tend to have disruption or quality concerns that usually the manufacturer will self-identify ahead of time. So there are formulations that are more difficult to manufacture. 

We also see new players to market. So if a new manufacturer enters a market, does that do something to the marketplace? Does the price drive down significantly? What will that do to the market stability and marketplace? 

And also, we look at the – we try to get as much information as we can from our manufacturer partners to see, do we have single-threaded locations of active pharmaceutical ingredients, key starting materials? I know we talk about those two a lot, but one of the things that put heparin on the shortage list too is rubber stoppers, the little rubber stopper that went in the glass vial. They struggled to get those consistently and at a sterility level that would make it viable in a therapeutic environment. So something as simple as – had nothing to do with the active ingredients. 

All of those things the manufacturers are looking at, and it becomes every single product has a journey. Every single product has a hundred things that make it the finished good. It could be any one of those hundred that drive it. So we talk a lot about the active pharmaceutical ingredient and key starting material, but it can be something as simple as the rubber stopper or the glass vial or the label. So those things are also things we try to say, do we know if it’s single-threaded through one location? And that elevates it also in the marketplace. 

Mr. Grogan: OK. Any other questions? Yes. 

Q: Hi. David Senior from Cencora. 

Question for Erez. How do you – how do you assess the U.S. as – from a market attractiveness standpoint versus other markets in how you think about prioritizing markets around the world?

Mr. Israeli: Yeah, no, thank you for that. It’s a great question. 

For most organization outside of the U.S., the U.S. is their number-one market. Obviously, being the number one, very, very important in many of the products, if you are – because you are trying to reach global scale. For example, when we are selecting a generic to develop, we are normally doing it globally. 

I’ll just give you an example. And if it’s OK, I’ll even use what Heather example just did on the stoppers. To give an example, we decided to do all the GLP-1 products, and the first product that we are going to launch actually very soon is a product called, you know, generic version of Ozempic, obviously being very popular as we speak. In order to – Ozempic will be generic – the first market to be open, actually, will be Canada, in January ’26, while the United States is somewhere in 2033. So, first off, the consideration is where you can actually clearly want to be in this kind of a product or products, a family. For example, the GLP-1 family will be, like, 26 products over the course of a decade with different – lots of exclusivity dates between 2026 and 2036. This is where the Eli Lily product will become off patent as well. So you select those products and going accordingly, we will launch – and this is going to be manyfold – the Ozempic in 87 markets, but not in the United States. Therefore, there will be less of a consideration for this kind of – that because of that together. 

The second is, obviously, the price point. If we are – we have places in which we can sell let’s call it more easily, whatever “easily” means, because we see less competition – in some of the SKUs in the United States, we see 20, 25 different players competing with us, and the prices in the United States can be lower than what we can achieve even in markets like Turkey, believe it or not in Africa, believe it or not in India. So it’s just the nature of the competition and the commitment of the people to buy. 

Going back to the Ozempic example, in order to make Ozempic you need to achieve three things at the same time. You need to have a device with all the stoppers and all the stuff. It’s pretty interesting stuff; I will not go into too many details. You need to have a cartridge that you can fill in an antiseptic way, what we call sterile manufacturing, sterile fill and finish. And you need to have an API which is 39 amino acid peptide. All of that needs to take into account the supply chain of that is three different sites, that you need to assemble at one go, and you need only one stopper, one stuff that is not there that you will not have Ozempic. And I know Ozempic is not yet on the essential list that we are discussing, but likely that it will come with the evolution of this GLP-1. 

So, just to make sure that I answer it properly, you take into account loss of exclusivity, take size of the market, the prices that you take, the competition that you have, the commitment that the customers will have, and obviously the importance of the customers. This is eventually the most important one, how important it is to have a long-term relationship with these partner. All of that taken into account. 

I can tell you that for us the U.S. is by far number one and likely to stay number one, and I want it to be number one. At this time, like in the United States like everywhere, you have challenges that we have to overcome. And we need to build the right coalition to do that. The two factors that came recently, tariff and national security and that stuff, are adding to that complexity, and we need to take care of that. 

Mr. Grogan: Anyone else? Yes. You, yeah.

Q: Allan Coukell with Civica.

I have a question for Dr. Israeli. 

Mr. Israeli: Erez. No, I’m Dr. yet. (Laughter.) 

Q: A question for Erez. You talked about a five-year timeline if you started to make atorvastatin until the first kilos came available. The president has signed an executive order aiming to get regulators out of the way and streamline permitting. What’s the potential gain there, both for API and for finished drug?

Mr. Israeli: So we need to decide whether we make it for national security or we make it because it’s commercially the right thing to do. There is enough capacity of – from if we look at it – and I’m ignoring presidential orders and, like, taking it as a normal course of business – there is enough capacity for atorvastatin in the world, but not in the United States. In the United States there is none. My understanding is that atorvastatin is an important product for national security. And then, of course, it’s up to the United States what to do with that, either to build a site or to buy inventory. Both are possible to do. 

The question is, OK, if we need to build a plant in the United States for atorvastatin, it will cost tens of millions of dollars. Who is going to pay for it? We don’t need it. Cencora will not order atorvastatin because of that. So who is going to pay for it? And we can do it. And likely that this will be maybe ten times more expensive than a kilo that will be made today in India. It is absolutely possible to do. 

Mr. Covill: And as another question on top of who’s going to pay for the – for the new plant, how are you going to ensure ongoing sustainability of that plant, you know, after it’s been constructed and once you have products on the market? Is there going to be an ongoing market that enables that plant to be successful? 

Mr. Grogan: Steve, let me ask you that. I mean, the U.S. federal government does buy a fair amount of drugs, PEPFAR being a great example. Would that solve this if you – for those – say, for antivirals, could you say five-year commitment from this manufacturer, product this generic, could you do it for the pharmaceutical stockpile? You know, we use that for countermeasures. And should that be built in? Have you explored, either at Margolis or when you were at DPC, building this in in any of the other payment programs – Medicare and Medicaid? 

Mr. Covill: Yeah. So in terms of direct federal procurement, I think that’s an important lever. In many cases it’s already in place where there’s buy-American preference that has enabled some base of production. You know, it’s helped in some instances for a base of production to stay in the U.S. But it could certainly be improved. There’s steps that could be taken to make it more, you know – defining the product, American-made products, better and that sort of thing. But the real lever is Medicare and CMS payment preference that could be provided to domestic or reliable manufacturers. 

Mr. Grogan: But in the – in the stockpile and PEPFAR, are there multiyear contracts when the federal government chooses to buy them? I didn’t mean to put you on the spot, but I – Erez mentioned a five-year commitment in Israel, so I was – I was trying to figure out of that’s – 

Ms. Zenk: There is.

Mr. Grogan: Is it?

Ms. Zenk: There is, yes.

Mr. Grogan: OK.

Ms. Zenk: Yeah. I think it’s two to three years – correct me on this – for the stockpile. 

I will say I do think, too, we have different stockpiles, too. Many of the states have taken actions also, which is I think where good private-public partnerships – so we don’t have redundancy. And there is some support so the manufacturer isn’t potentially creating multiple scenarios. It would be – it would be great to have some public-private partnerships. And then, again, you can use the supply chain channel, such as ourselves, to move that inventory through so it doesn’t expire – through the commercial channel, but hold some aside, which, again, we have some policies out there that can help do that. But how would we – how would we do that in a public-private partnership? I believe it’s a three-year contract, if I’m not mistaken. 

Mr. Covill: I’m not sure about the details of that, but I think for a lot of products federal procurement represents maybe 1, 3, 5 percent, you know, somewhere in that range. So, helpful, yes, but how much does it move the needle is the question.

Mr. Grogan: Question?

Q: Yeah, thanks. Paul Friedrichs, senior – (comes on mic) – sorry, didn’t mean to have you have to hustle over here. Paul Friedrichs, senior advisor here at CSIS and formerly at the White House and then in DOD. 

So this concept of public-private partnerships is one that you guys have referenced several times. In Europe, they’ve picked 11 drugs, focused on those, and then identified what public-private partnerships were needed in order to mitigate those specific drugs. Japan’s done something similar with antibiotics. Korea’s done some really interesting public-private investments to maintain manufacturing capacity. Could I ask each of the three of you: If you were advising this administration on what the most beneficial public-private partnerships could be, what would that advice be? 

Ms. Zenk: I would say what has been started. We have to start somewhere. I think this is a great forum to start and I think it’s a great forum to have, but to start and look at 10, 12, 15 pharmaceuticals that we deem as, you know, essential in the United States, and let’s target those, and let’s get going. I think that we have – we don’t want to let perfect be the enemy of better or good, and at times we get there. And I think it would be very exciting to have that type of public-private partnership for an entire supply chain to be able to have some stability around pharmaceuticals that particularly we feel would be targeted to drug shortages or in critical short supply frequently. 

Mr. Israeli: Yeah. I want to join that. I would start with the inventory, assuming that it’s on top, because it at least address it relatively fast with certain replacement, which is easy because you can use the private movement to change and to sell stuff that way before it will expire, so you don’t need to, you know, throw it away. 

The second is if it’s indeed essential to make stuff in the United States, and you actually want the manufacturing capability, it’s more of a coalition of the entire supply chain. Like I mentioned, we make the API. We make the pharmaceutical. But we buy many of the stuff before we do. It’s not that it start with us. The intermediates we need to buy, the stoppers we need to buy, the device we need to buy, et cetera. So it’s – so even for those operation, they will need to buy somewhere. So it’s more about creating a coalition for those essential products to make sure that all the parties are fully engaged and fully, you know, support the program on a long-term basis. 

And number three is to create a coalition. I am very much advocating for coalitions. So naturally, Cencora being a very important player in the market, they will have their priority to suppliers that they can rely on. Obviously, if we are chosen to be one, then we have certain responsibility. And if it means that we need to do something for the United States, including to make stuff here or to bring the inventory here or to do anything else, this is part of our job to do that. In return, we know that we are valued by the United States and can do business for many, many years here. This is the kind of relationship. 

So I am very much about let’s see what are the priorities, obviously dictate by the relevant parties in the United States. And let’s see how we can help. 

Mr. Grogan: Steve?

Mr. Covill: Thanks for the question, Paul.

I would start with, within the government, creating the strategic planning initiative that I mentioned earlier at the HHS level to bring all the agencies together to work on setting the future direction. And then in the process of doing that work I would leverage public-private partnerships, or maybe private industry consortiums that already exist like the End Drug Shortages Alliance, like the Healthcare Industry Resilience Collaborative, or like U.S. Pharmacopeia that I’ve mentioned previously where industry has banded together in coalitions working on this topic, just could benefit from some additional, you know, collaboration with the government, I think. 

Mr. Grogan: And we’re a few minutes over. Unless there’s a pressing question, I’ll try and get us back on track. This was a great kickoff with a tremendous amount of expertise. We talked about public-private partnership. We set the stage about some of the dynamics of the supply chain. 

And I realized about halfway through that I was so focused on getting this kicked off and introducing the experts that I forgot to say who I was. (Laughter.) So I’m a fellow here at CSIS, Joe Grogan, and a scholar at the University of Southern California Public Policy School, the Schaeffer Institute, and former Trump administration domestic policy and OMB, as well as the Bush administration. 

But we were dealing with this in Bush, dealt with this again in Trump. I’m sure we’ll be dealing with this again in this term and for many times. But to your point, Heather, we have to get started somewhere. So thank you very much. (Applause.) 

Ms. Zenk: Thank you. (Applause.)

(Break.)