The Coronavirus and America's Small Business Supply Chain (Senate Small Business Committee hearing, March 12, 2020)
Summary
Printed record of the Senate Committee on Small Business and Entrepreneurship hearing of March 12, 2020, The Coronavirus and America's Small Business Supply Chain, S. Hrg. 116–603, published in 2023. Chairman Marco Rubio presided, meeting at 10:35 a.m. in Room 428A of the Russell Senate Office Building, with Senators Ernst, Young, Romney, Hawley, Cardin, Shaheen, Booker, Hirono and Rosen present. Witnesses were Rosemary Gibson of The Hastings Center, Dr. Gerard Anderson of Johns Hopkins University, Tim Morrison of The Hudson Institute, and Wynne S. Briscoe of the Small Business Development Center for the Southern Maryland Region. Closing exchanges turned on Chinese companies playing by a different set of rules. The record stayed open until March 26 at 5:00 p.m.; the hearing adjourned at 12:03 p.m.
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“The Coronavirus and America's Small Business Supply Chain (Senate Small Business Committee hearing, March 12, 2020).”
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S. HRG. 116–603
THE CORONAVIRUS AND AMERICA’S SMALL
BUSINESS SUPPLY CHAIN
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
MARCH 12, 2020
Printed for the Committee on Small Business and Entrepreneurship
(
Available via the World Wide Web: http://www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
43–665 PDF WASHINGTON : 2023
COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SIXTEENTH CONGRESS
MARCO RUBIO, Florida, Chairman
BENJAMIN L. CARDIN, Maryland, Ranking Member
JAMES E. RISCH, Idaho MARIA CANTWELL, Washington
RAND PAUL, Kentucky JEANNE SHAHEEN, New Hampshire
TIM SCOTT, South Carolina EDWARD J. MARKEY, Massachusetts
JONI ERNST, Iowa CORY A. BOOKER, New Jersey
JAMES M. INHOFE, Oklahoma CHRISTOPHER A. COONS, Delaware
TODD YOUNG, Indiana MAZIE K. HIRONO, Hawaii
JOHN KENNEDY, Louisiana TAMMY DUCKWORTH, Illinois
MITT ROMNEY, Utah JACKY ROSEN, Nevada
JOSH HAWLEY, Missouri
MEREDITH WEST, Republican Staff Director
SEAN MOORE, Democratic Staff Director
(II)
C O N T E N T S
OPENING STATEMENTS
Page
Rubio, Hon. Marco, Chairman, a U.S. Senator from Florida ............................... 1
Young, Hon. Todd, a U.S. Senator from Indiana .................................................. 1
Cardin, Hon. Benjamin L., Ranking Member, a U.S. Senator from Maryland .. 5
WITNESSES
Gibson, Ms. Rosemary, Senior Advisor, The Hastings Center, Arlington, VA ... 7
Anderson, Dr. Gerard, Professor, Johns Hopkins University, Baltimore, MD ... 15
Morrison, Mr. Tim, Senior Fellow, The Hudson Institute, Washington, DC ...... 22
Briscoe, Ms. Wynne S., Acting Director, The Small Business Development
Center—Southern Maryland Region, La Plata, MD ......................................... 30
ALPHABETICAL LISTING
Anderson, Dr. Gerard
Testimony .......................................................................................................... 15
Prepared statement .......................................................................................... 17
Responses to questions submitted by Senator Rosen .................................... 52
Briscoe, Ms. Wynne S.
Testimony .......................................................................................................... 30
Prepared statement .......................................................................................... 32
Responses to questions submitted by Senator Rosen .................................... 54
Cardin, Hon. Benjamin L.
Opening statement ........................................................................................... 5
Gibson, Ms. Rosemary
Testimony .......................................................................................................... 7
Prepared statement .......................................................................................... 10
Morrison, Mr. Tim
Testimony .......................................................................................................... 22
Prepared statement .......................................................................................... 24
Rubio, Hon. Marco
Opening statement ........................................................................................... 1
U.S. Chamber of Commerce Small Business Council
Letter dated March 11, 2020 ........................................................................... 56
Young, Hon. Todd
Testimony .......................................................................................................... 1
(III)
THE CORONAVIRUS AND AMERICA’S SMALL
BUSINESS SUPPLY CHAIN
THURSDAY, MARCH 12, 2020
UNITED STATES SENATE,
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP,
Washington, DC.
The Committee met, pursuant to notice, at 10:35 a.m., in Room
428A, Russell Senate Office Building, Hon. Marco Rubio, Chairman
of the Committee, presiding
Present: Senators Rubio, Ernst, Young, Romney, Hawley, Cardin,
Shaheen, Booker, Hirono, and Rosen.
OPENING STATEMENT OF HON. MARCO RUBIO, A U.S.
SENATOR FROM FLORIDA
Chairman RUBIO. Thank you all for coming today, and I appre-
ciate the witnesses being here on this hearing. The hearing will
come to order. I am going to go out of order quickly because Sen-
ator Young has another related topic event that he has to be at and
I wanted to recognize him just quickly. He wanted to say a few
words on this topic and I wanted to make sure he was able to get
on the record before we begin.
OPENING STATEMENT OF HON. TODD YOUNG, A U.S. SENATOR
FROM INDIANA
Senator YOUNG. Well thank you, Mr. Chairman, for holding this
important hearing, and I first want to get on the record and thank
all our subject matter experts. I think if there is anything we legis-
lative leaders ought to be doing, and more broadly our government
leaders, is listening to the public health experts. So thank you so
much to the experts in some of these discrete areas that will be im-
pacted by the coronavirus.
I do regret that in minutes I have another meeting that also per-
tains to this important topic. I just want to publicly express my in-
tention to submit to the record some important questions I have for
you related to the increasingly integrated supply chains that we
now have between various enterprises. And I guess this situation
has exposed that that creates certain vulnerabilities during times
of what is now a pandemic. I have some questions related to supply
chain mapping that I am hoping someone will be prepared to an-
swer.
And lastly, our reliance on foreign-made medical supplies is
something that I think we are going to have to rethink over the
(1)
2
course of the coming weeks, months, and really years. But it has
certainly caused us to heighten awareness of this important issue.
So your attention to those issues would be much appreciated.
Thank you again, Mr. Chairman, for this opportunity to say a few
words and for holding this important hearing.
Chairman RUBIO. Thank you. So we are going to begin and I am
going to give the Ranking Member the opportunity for opening
comments and then I will go to mine.
Senator CARDIN. I do not mind if you go first.
Chairman RUBIO. Well, he wants me to go first. Very nice people
here. We work on a lot of stuff together.
OPENING STATEMENT OF HON. MARCO RUBIO, CHAIRMAN, A
U.S. SENATOR FROM FLORIDA
Chairman RUBIO. Anyway, as I said, today’s hearing really is
timely, unfortunately, because of the challenges that we are now
seeing, and I want to sort of bifurcate it into two steps. The first
is what we can do, obviously, to help small business weather the
coming storm that is going to be created by the fact that people are
not going to be able to be together with one another in places, and
that is obviously going to impact cash flows and the impact that
has on employees, and in some cases the threat it poses to a busi-
ness’ ability to continue to function. And I think that is of imme-
diate concern. That is the one thing we have got to deal with if we
are triaging this problem right away.
But I think we are beginning to see the outlines of a second prob-
lem, and that is what it means when your supply chain is dis-
rupted. And we all just left a meeting of the entire Senate with
leaders in our country and health care, and what is becoming evi-
dent and apparent is that one of the impediments to the wide-
spread availability of testing is a supply chain unpredictability. It
is not just the tests. If you do not have cotton swabs, if you do not
have protective gear for the lab technicians or the basic ingredients
needed for the test you are going to have a problem in conducting
those tests.
And from our perspective is the role that small business can
play, structurally, now and for years to come, in ensuring that
these sources of supply chain disruptions do not become a national
threat to the country. A lot of it will be focused on China, because
that is where a lot of this activity has gone, but it is not just China.
If you are India, if you are South Korea, if you are a country that
also makes these things, and you are facing this threat, you are
going to hoard it. You are going to act in the best interest of your
nation, and that is understandable. We need to start acting in the
best interest of our Nation in these regards, and so that is impor-
tant.
Later today, if we can bring it here—because I believe we can—
we have been engaged before last night in conversations with the
White House, with Ranking Member Cardin and his team, with in-
dividual members of this Committee, with our counterparts in the
House Small Business Committee, on what relief to small busi-
nesses should look like and how we can help them. And so hope-
fully later today we are going to have an opportunity to present it,
and the crux of it, as I have already outlined to some, is taking the
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commitments the President made last night and funneling it
through our 7(a) program and our community banks, because they
are in the community, they have, through Community Advantage
and other related programs as well, have the ability to process the
paper on this.
We are going to have to give a little flexibility. We are going to
have to allow small businesses to use the funds they have borrowed
to make payroll, to provide paid sick leave for employees that are
hurt or employees that are sick or employees that, frankly, cannot
come to work. We are going to have to give them the flexibility to
do that. We want to make sure that the money is being lent is real
and going to be paid back, but by the same token—and that is
where the community bank process can help—but we also have to
make it quick. These guys cannot wait 90 days to get these funds,
and workers cannot wait 90 days for the paid sick leave that these
will give the small businesses an opportunity.
I am not claiming this solves all the problems. It does help. If
we are going to make that kind of commitment to small business
I believe that it should be in a way that is most effective and re-
sponsible with the taxpayer money, but also most helpful to those
small businesses.
On the supply chain issue, I think the backdrop to our general
economy, even before—and this Committee issued a report a year
ago that warned about it—even before all of this is that we are
dangerously reliant, in particular, on China for the production of
critical goods, and that includes goods, as I have already outlined,
that are needed to fight the coronavirus.
And I think we rely on far more goods than we know, and part
of the economic pain that is going to be inflicted on the country as
a result of these disruptions will be directly related to disruptions
in the supply chain, because of an outbreak that shut down fac-
tories that end up impacting the availability of important consumer
goods.
Just a brief review that our staff put together for this hearing,
last year—and this is according to the Census Bureau—China ac-
counted for 88 percent of electric hand drill and saw imports, 87
percent of air conditioning machinery imports, 83 percent of hy-
draulic jacks and hoists, 72 percent for cell phones and its parts,
58 percent of forklifts, 51 percent of lithium ion batteries. The list
goes on and on. Disruptions in these supply chains tell you that
even after the virus is contained and starts coming under control
we could have shortages, and you know the industries that are reli-
ant upon this. This is where the spread of this becomes much more
serious.
So the focus is on three things that we really want to talk about.
First is the immediate consequence of not having the capacity to
produce these essentials to your home. And small businesses are
going to experience a great deal of economic pain as a result of sup-
ply chain disruptions.
But there is also going to be increased demand, increased de-
mand for medical supplies and surgical masks and pharmaceutical
drugs, and our small businesses can be a part of the answer to
that, to filling in those gaps in the supply chain for critical sectors
4
that have been exposed, as weakened because of offshoring of our
productive capacity to China and elsewhere.
The absence of having these domestic businesses that can ramp
up production to meet demand for these critical goods limits our
ability to mitigate the worst effects of this virus beyond its broader
economic impact, and the result is that the virus could end up
being more damaging than it needed to be, and the economic im-
pact, as a result, greater than it needed to be.
As I pointed out earlier, we are already seeing this. One of the
reasons why we have struggled to produce the testing kits is be-
cause we rely on foreign producers for the chemicals that are need-
ed to make them. And there is a growing shortage because more
people are testing, and as I said earlier, the countries that have it
are going to be less willing to provide it.
So I truly believe that one of the things we should look at after
we provide the initial set is what can we do, through the SBA,
through the work of this Committee, and it has to be bipartisan—
there is no other way to do it—to help small business be a growth
sector in our economy to meet some of this increased demand.
Second, obviously, that we will discuss, and I am sure you will
point to, is the long-term consequences of the vulnerability, particu-
larly when it comes to China. This was not the accidental byprod-
uct of globalization. It is an outcome of a deliberate strategy on
their part which made biomedicine and high-end medical equip-
ment a priority. In their Made in China 2025 plan they put it in
writing. It has long been practiced. It encourages domestic compa-
nies and their predatory practices, and provides a short-term bar-
gain for foreign companies, but big-time costs for our Nation and
the world.
For years, China has been able to entice American multinational
corporations with access to its markets in exchange for offshoring
and sharing intellectual property, and we have watched as Beijing
captured critical portions of the global supply chain. Today, 80 per-
cent of the active pharmaceutical ingredients in the United States,
in the drugs that are here, are sourced somewhere else, and a lot
of that is China. And now, in the face of the pandemic, as I said,
the absence of this capacity in the medical sector is endangering
our health care system, and that is something we have to figure
out, in the short term and forever.
So it is hopefully something that we are able to act on to find
out what role can small business play in growth and in taking back
the ability to make these critical goods in the United States right
now and in the future.
So I hope that we can come up with a second wave of proposals
that will empower small businesses to bring the production of crit-
ical goods all in-house and getting American multinationals to buy
domestically from them, not as a matter of economic protectionism
but as a matter of national security and national economic sta-
bility. This is good for our public health, it is good for our economy,
it is good for, as I said, our national security, and it is good for our
people.
So I look forward to hearing from our witnesses who are experts
on these topics about what we can do to help small business be a
5
part of solving this challenge, and now I turn it to the Ranking
Member.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN,
RANKING MEMBER, A U.S. SENATOR FROM MARYLAND
Senator CARDIN. Well, Mr. Chairman, thank you very much for
convening this hearing. As you pointed out, we came from an all-
Senate members briefing on the COVID–19 virus and its con-
sequences. We learned from that briefing, we heard last night that
it has struck our family. Senator Cantwell’s staff person has the
virus, Senator Cantwell, former Chair and Ranking Member of this
Committee, and a senior member of this Committee, and that there
are members of her staff that are now in quarantine as a result,
and, of course, one needing treatment. So we know this impacts all
of us.
I want to just underscore the last point that you made. Our first
priority is to triage, to deal with the circumstances that we are con-
fronting today, whether they are the medical circumstances or the
economic circumstances. But I hope that we will follow your advice
and recognize this will not be the last crisis that we are going to
have, and in regards to the supply chain we need to take a look
at making sure that we are better prepared for the next crisis that
comes down than we were for this one. So I agree and I look for-
ward to working with you in regards to those issues.
Clearly our first priority is to deal with the medical challenges.
That is our first priority. We still are not where we should have
been or need to be in regards to testing. We are developing the vac-
cines and drugs that will hopefully be available. The drugs, the
therapeutic drugs, may be available to help us in this crisis; it is
possible. The vaccines will not. But I am proud of our leadership
in regards to those developments at institutions located in the state
of Maryland, including the National Institutes of Health and Johns
Hopkins University and University of Maryland Medical Center.
We need to deal with local responses, make sure they have the
capacity, the hospital capacity, mitigate the spread. And the emer-
gency supplemental dealt with many of those needs, and as the
Chairman pointed out that is the first installment. It is not going
to be the last installment.
And we also have to deal with the economic impact, including the
disruption of the supply chain to American small businesses. I was
pleased to see that it was recognized in the supplemental. There
was a recognition of the problems small businesses are confronting.
We recognize that small businesses are very much impacted by the
facts that Americans are self-quarantining and not using the busi-
ness community as much as they would, the avoidance of gath-
erings, the cancellation of events, the school closures, the trip can-
cellations. All of that has an impact on American small businesses.
I can give you specific examples in Maryland. Johns Hopkins has
just announced that they are closing their campus from the point
of view of students and faculty. I can tell you Charles Village in
Baltimore City, a lot of small businesses are located in Charles Vil-
lage. They depend upon the students and faculty. They are not
going to be there, and it is going to impact those small businesses.
6
We can give you many, many more examples. Chanell Wallace,
who owns a hair salon in Bowie, Maryland, shared that order for
her hair extensions placed in January has yet to be filled with her
vendor in China because of the coronavirus. Jerry Chan, who owns
a noodle restaurant in Gaithersburg, reported in the middle of Feb-
ruary that his restaurant has already experienced a 30 percent de-
cline in sales, and the spread of the coronavirus is only going to
make that situation worse. Sterling Forever, a jewelry company
based in Towson, reported that not only were some of the factories
in their supply chain closed, their distributors were requesting ad-
vanced payment to help with the crisis. And the list goes on and
on and on.
So we know that we are just starting to see this. It is getting
worse by the—I would say by the day, but it seems like it is getting
worse by the hour. So we know we have an immediate crisis.
Capital is the lifeblood of small businesses. We need to deal with
that issue. The emergency supplemental allowed small businesses
to qualify for economic injury disaster loans, EIDL, and provided
some resources to the Small Business Administration in order to
administer that. We need to build on that supplemental.
Let me point out, Mr. Chairman, that I have already heard from
some small businesses. They need to get the information on how
they qualify, so we need to get that help out to small businesses
so that they can take advantage of what was in the first supple-
mental dealing with the coronavirus.
Our resource partners need to be better empowered. They are the
ones in which small businesses will go to for help. Our Women
Business Centers, our Minority Business Development Centers,
and the other resource partners, we need to make sure that they
have the resources.
We all heard last night, as President Trump mentioned a num-
ber for small businesses that I thought was one that we could work
with, $50 billion. Let us work with that in the most effective way.
Chairman, I agree. We all need to come together with a bipartisan
solution.
I would hope that the disaster loans will provide help and will
deal with resiliency the issues that you talked about—paid leave
for the workers of small business, dealing with telecommuting.
That is going to cost some resources. Do we have the resources to
provide that? Let us take a look at the SBA loan packages. Let us
make them easier, more generous, and less costly for small busi-
nesses to be able to take advantage of those, including looking at
the costs of taking out a small business loan.
And Mr. Chairman, I would hope we would also look at one addi-
tional factor. If you have seen a 30 percent decline in your reve-
nues, will you qualify for a loan? The disaster loans are direct
loans—that is good—from the SBA. But they have to be repaid. If
you do not have the revenues, how are you expected to repay, and
will the SBA structure allow those loans to take place? We need
to take a look at a targeted grant program to keep small businesses
afloat. Why? Because that is where job growth, innovation, and our
economy depends upon it.
This is an extraordinary crisis that requires us to respond in
kind. Let us act in that regard to triage the current situation, be
7
prepared for the future. I think we can work together and get this
done. We need to do that for the sake of American businesses. As
Congress begins to address this economic impact of the
coronavirus, we must ensure that we focus on being prepared to
withstand the economic disruption that is occurring in our econ-
omy.
I look forward to hearing from our very distinguished witness
panel, and look forward to all their testimony.
Chairman RUBIO. Thank you, and just along those lines, before
I turn it over to our witnesses, items we have discussed with your
staff, as you are aware, in the 7(a) loan part, is allowing the loans
to be used for payroll support. That would include paid sick leave,
so employers could use that. We waive the fees on both the bor-
rower and the lender to lower the costs.
On the particular of the SBA express loans, increasing the loan
limit for those, those turn around in about 36 hours. And on the
EIDL loans, which have already been approved for coronavirus im-
pact, and 20 states have already applied, the SBA will be able to
determine repayment solely on the applicant’s credit score. They
are not going to have to go and get tax returns or transcripts, and
they do not have to prove that they could not get credit from some-
where else.
So some of those ideas to address some of the issues you raised.
It will not solve every problem, obviously, but certainly we are try-
ing to move as quickly as we can on these topics. But it will have
to be done, because of the nature of this place, not to mention the
nature of this crisis, in a bipartisan way, and I think we can get
to a point where we can put something forward that would achieve
the President’s purpose of getting $50 billion available to small
business, but do it in a way that works, is responsible, and works
for the borrower.
So with that I appreciate everyone who has come here. We are
going to try to move on this now, and we are going to begin with
all of our witnesses. I will begin with Ms. Gibson, who is a Senior
Advisor at The Hastings Center. She led the National Health Care
Quality and Safety Initiatives at the Robert Wood Johnson Founda-
tion. She is the author of China Rx: Exposing the Risks of Amer-
ica’s Dependence on China for Medicine. So, Ms. Gibson, thank you
for being here.
STATEMENT OF ROSEMARY GIBSON, SENIOR ADVISOR, THE
HASTINGS CENTER, ARLINGTON, VA
Ms. GIBSON. Good morning. Thank you, Chairman Rubio and
members of the Committee for the opportunity to be here today. I
am here to talk about small businesses that are prepared to start
production of critical medicines that are in short supply, that are
needed to care for people who are hospitalized with coronavirus.
The medicines I am talking about today are generic drugs, and
generics are 90 percent of the medicines that we take. Members of
Congress take them, occupants of the White House—the focus is
generic drugs. And right now we are rationing, in the United
States of America—the term is ‘‘on allocation’’—essential medi-
cines, including critical antibiotics that are necessary to treat hos-
pitalized patients with coronavirus.
8
I visited a hospital last week and there is an antibiotic that they
can no longer get. There are other antibiotics that are in short sup-
ply. There was a volunteer EMS worker who goes out on ambu-
lances in her community and she said they do not have epinephrine
on their ambulance, which is used to revive people. I said, ‘‘So what
do you do?’’ and she said, ‘‘We just drive faster to the hospital.’’
The $8.3 billion emergency package for coronavirus was an im-
portant step forward. There is support for research for vaccines for
coronavirus, therapies to actually cure people with coronavirus, but
there was nothing in that supplemental package to make, here in
the United States, the essential generic drugs that are necessary
to treat critically ill people with coronavirus, as well as critically
ill people under normal circumstances in our Nation’s hospitals.
China is the dominant global producer of the core chemicals to
make thousands of our generic drugs. It was mentioned of the ac-
tive ingredients coming from China and other countries. We have
to look beyond the active ingredients. That is the data the FDA
has. But what is missing are the core chemicals to make those ac-
tive ingredients. For essential medicines to treat coronavirus pa-
tients—sedative, pressers to raise their blood pressure, anti-
biotics—90 percent of those core chemicals are sourced in China.
There is talk that we should let the free market fix this. The re-
ality is that there is no free market. Generic manufacturing has
collapsed in the United States. There are only two Western compa-
nies left that are making generic drugs, and they announced last
year they are dropping half their products because they can no
longer make them, so they are on the FDA shortage list.
And how does this happen? It is because patterns of China form-
ing cartels, which has driven out production of so many of our core
medicines—we cannot make penicillin anymore because of what I
wrote about in China Rx, the penicillin cartel. We cannot make vi-
tamin C. We cannot even make aspirin, and thousands and thou-
sands of other medicines.
And India put out its export ban because its giant generic indus-
try, which supplies us with 25 percent of our generics, depends on
China for those core chemicals.
So what can we do? In doing this work on China Rx, small com-
panies have approached me, and these are brilliant people pre-
pared tomorrow to start using advanced manufacturing technology
to make medicines fully made here in the United States that are
in short supply.
There is a precedent for the U.S. government to fund medicinal
manufacture, namely flu vaccines, through HHS and BARDA.
BARDA knows how to do this. We could use that same model to
make critical essential generic drugs through BARDA, through
public-private partnerships. They do investment for capital and for
equipment, but the production costs of using new technology would
make our drugs much less expensive.
I would like to close by saying there is another thing we have
to address, and this has nothing to do with coronavirus. But there
are thousands of children who have died in recent years because
we can no longer make the old staple, generic drugs that are nec-
essary to sustain them. These are children with rare diseases.
There are small companies that approached me. They want to
9
make them, and together we can make a difference, not only for
coronavirus patients but for these children.
I look forward to working with the Committee and the staff on
how we together can do a lot of good to ensure that every patient
has the medicines that they need when they need them.
Thank you very much.
[The prepared statement of Ms. Gibson follows:]
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15
Senator CARDIN [presiding]. Thank you, Ms. Gibson, for your tes-
timony. I will now call on Dr. Gerald Anderson, who is a professor
of Health Policy and Management and professor of International
Health at the Johns Hopkins University Bloomberg School of Pub-
lic Health and a professor of Medicine at the Johns Hopkins Uni-
versity School of Medicine. He is also the director of the Johns
Hopkins Center for Hospital Finance and Management.
Dr. ANDERSON.
STATEMENT OF GERARD ANDERSON, Ph.D., JOHNS HOPKINS
UNIVERSITY, BALTIMORE, MD
Dr. ANDERSON. Thank you, Senator Cardin, Senator Rubio, and
members of the Committee.
I have been a professor at Johns Hopkins School of Public Health
for the last 37 years, and let me tell you about my greatest fear
about coronavirus.
Yesterday I went to the local grocery store. Tonight, I will go to
the dry cleaners and maybe go out to dinner with my wife. My
greatest concern is these people in these small businesses will go
to work with coronavirus. The shop keeper will want to keep this
business open because they do not have the funds to keep the office
closed for 14 days. The worker will not want to report that she has
coronavirus because she probably does not have sick leave.
The uninsured worker will not have the $200 or so that is nec-
essary for the coronavirus test. Remember, 10 percent of Americans
are uninsured and they are most likely to be working in small busi-
nesses.
So what Congress do to alleviate my fears? Pay the shopkeeper
to close the business for 14 days if they do have an employee with
coronavirus. A loan probably will not do the trick because most of
them have huge bad debts anyway. As Senator Cardin said, grants
may be necessary.
At least for the next 90 days, make sure the person has at least
14 days of paid six leave. And for the next 90 days, pay the pro-
vider giving the test to the uninsured person at Medicare rates.
While larger companies allow the people to work from home, and
Johns Hopkins is doing that for me, many small businesses do not
have the option because they have to work with their clients face-
to-face. Helping the cruise line is under discussion. From a public
health perspective, small businesses are so much more important
than the cruise lines. We can get along without vacations. We can-
not get along without the small businesses that feed us.
Let me change the subject for a minute. The good news in my
testimony is that small business is doing to develop the vaccine for
coronavirus. A significant portion of the world’s new drugs come
from the uniquely American public-private partnership that in-
volves the NIH, our universities and medical centers, small biotech
companies and, finally, large pharmaceutical companies. Most of
the initial drug development occurs in universities and small
biotech companies, not the big pharmaceutical industries.
For example, this is how the first drug that was effective in
treating hepatitis C was developed. It began in a lab at Emory Uni-
versity with funding by the National Institutes for Health. With
promising results, they started a small business and attracted ven-
16
ture capital. After the clinical trials showed positive results, a big
company, Gilead in this case, purchased the small company
Pharmasset. One year after that, we had hepatitis C drugs with
FDA approval and it was brought to market.
One of the companies with a promising coronavirus right now is
a small business. Its name is Moderna. It began operations in
2011. The first clinical-grade batch of this drug was shipped to the
NIH for a Phase 1 clinical trial in late 2019, and the clinical trials
have already begun.
In my written testimony, I list three other small companies that
are developing coronavirus and there are 40 other ones developing
vaccines.
So how can the Congress help these small biotech companies de-
velop a vaccine? The key is knowing that the small business will
get paid for developing the vaccine. Congress can guarantee the
purchase of a certain volume of vaccine at a price or giving them
advance market commitments to purchase safe and effective prod-
ucts.
In my written testimony, I also discuss some other ways that
Congress could help the small businesses provide services to ad-
dress the coronavirus epidemic. Small business can provide tele-
health services to people in quarantine and in rural communities.
People in quarantine need to discuss their health condition with
medical professionals without subjecting the clinician or the public
to the disease. Medicare now pays for telehealth but most private
insurers do not.
Congress could ensure that more generic drugs are made in
America. In my written testimony, I explained how we helped cre-
ate a small non-profit company that is going to manufacture drugs
that are overpriced and in short supply. Working with Inter-
mountain Healthcare, we created Civica Rx. It has gotten up and
running and it is now manufacturing 20 drugs with 20 more in the
pipeline. BlueCross just gave them $55 million to expand into the
outpatient market.
Finally, small business can assist in worker training. Many hos-
pitals are not prepared to train their employees, and small busi-
ness can do that.
I am happy to answer any questions.
[The prepared statement of Mr. Anderson follows:]
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Chairman RUBIO [presiding]. Thank you, Dr. Anderson.
Tim Morrison is a Senior Fellow at the Hudson Institute, where
he specializes in Asia-Pacific security, missile defense, nuclear de-
terrent modernization, and arms control. He was previously Deputy
Assistant to the president for national security and has written and
spoken extensively about the national security aspects of supply
chain issues.
Thank you for being here.
STATEMENT OF TIM MORRISON, SENIOR FELLOW, THE
HUDSON INSTITUTE, WASHINGTON, DC
Mr. MORRISON. Thank you, Chairman Rubio, Ranking Member
Cardin, and members of the Senate Small Business Committee.
Thank you for the invitation to be here today.
I would like to start with the cold reality and the simple fact: ac-
cording to the World Health Organization, the National Health
Commission of the People’s Republic of China initially knew of the
Wuhan virus as early as December 8 of 2019. Yet, initial sub-
stantive disclosures to the WHO did not take place until approxi-
mately January 11, 2020.
I do not think it is too much to ask how many people in the
United States and elsewhere have been infected, gotten sick, or
worse as a consequence of the Chinese Community Party’s decision
to sit on the fact of this epidemic?
In fact, I think you as our elected officials must demand the an-
swer to this question and determine how to respond.
In 2004, as Ms. Gibson has explained, the United States stopped
making penicillin domestically. This happened without a vote in
this body. It happened without decision in the Executive Branch.
It is a decision that was consulted about this decision. It was a de-
cision prompted by China’s Made in 2025 plan to dominate what
the Chinese Community Party determined were strategic sectors
which Chinese industry should control globally.
And so we are here today to ask, ‘‘on a good day, what does it
mean to rely on the People’s Republic of China for our basic health
care commodities?’’
Larry Wortzel, a member of the U.S.-China Commission, will tell
you about his blood pressure medicine making him sick because it
was contaminated with rocket fuel in a Chinese manufacturing fa-
cility. Rocket fuel.
Surgeons around this country may tell you about the hundreds,
if not thousands, of surgeries that were canceled because millions
of surgical gowns had to be recalled because they may not have
been sterile when they were packaged up in the People’s Republic
of China and sent to the United States. This was in January of this
year.
Now what if there was a malign intent? For example, what if
this body passes a resolution demanding a high-level visit of an
American official to Taiwan in furtherance of the Taiwan Travel
Act of 2018? What if the United States chooses to sanction Huawai,
or another Chinese state-proxy, for the Uyghur suppression? What
if the Chinese Communist Party decides to retaliate to these sov-
ereign decisions by cutting off the shipment of medicines to the
United States?
23
Do you think it cannot happen? Ask the Japanese who lost access
to rare earth elements from the People’s Republic of China in 2010
over a territorial dispute.
The People’s Republic of China’s state-owned Xinhua, a com-
munist party propaganda outlet, recently noted that the PRC
could—and I quote—‘‘plunge the U.S. into the mighty sea of
coronavirus’’ if it wanted to do so.
I ask you to think about all of the tools of economic statecraft
that you can use to support American producers, including small
businesses and strategic industries. For example, I know that sev-
eral of you were involved in the passage of the BUILD Act in 2018.
This was an effort to leverage private sector investment in inter-
national development to counter China, Inc.
What other tools are available to do the same at the Small Busi-
ness Administration or the Export-Import Bank?
I urge you, do not allow America’s job creators and innovators to
be unilaterally disarmed. Their government can and should defend
them from foreign aggression.
Chairman Rubio, your amendment to last year’s National De-
fense Authorization Act concerning reliance on the PRC for phar-
maceuticals was a key step. You sounded the alarm on this risk.
Lastly, I know several of you serve on the Senate Foreign Rela-
tions Committee and related national security committees. I urge
you to investigate the influence of the People’s Republic of China
in international organizations like the World Health Organization.
Ask yourselves why, despite meeting all of its established criteria,
the World Health Organization waited more than three months to
label COVID–19 a pandemic? Why is the World Health Organiza-
tion choosing now to adopt the Chinese Communist Party’s play-
book by removing Taiwan from its country list?
I want to thank you for the opportunity to testify here today and
I stand ready to answer your questions.
[The prepared statement of Mr. Morrison follows:]
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Chairman RUBIO. Thank you.
And our final witness is Ms. Wynne Briscoe, the Acting Director
of the Small Business Development Center in the Southern Mary-
land Region. Thank you for being with us.
STATEMENT OF WYNNE S. BRISCOE, ACTING DIRECTOR,
MARYLAND SMALL BUSINESS DEVELOPMENT CENTER,
SOUTHERN REGION, LA PLATA, MD
Ms. BRISCOE. Good morning. Thank you all for having me this
morning. Again, Wynne Briscoe, the Acting Director for the Small
Business Development Center. In that capacity, I consult with
manufacturers throughout the State of Maryland. Based on those
experiences, I wish to offer some recommendations to your Com-
mittee.
I see the coronavirus pandemic and the supply chain disruptions
that it has caused for some companies offering an opportunity to
address the supply chain concern with a longer-term question:
What opportunities do the current crisis offer U.S. businesses to fill
newly emerging supply chain vulnerabilities within other compa-
nies? And how can these supply chain opportunities assist Amer-
ican small businesses long after the current health crisis has come
and gone?
In other words, I believe that we should act and think about the
supply chain disruption and the current crisis in a way that will
take us beyond the current crisis and set our economy on a level
plane.
When I consult with Maryland manufacturing companies, I insist
that they have at least three alternative sources for the products
that they produce. This is something that is going to be long be-
yond the current health crisis and something that the SBA can
help make happen. And my idea I have created based on my expe-
rience with manufacturing companies is that I am recommending
that you direct the Small Business Administration to produce a na-
tionwide list of companies. Let them self-identify their supply chain
concerns, those that have current supply chain concerns and those
that forecast in the future of having supply chain concerns.
From there, it would be a self-identified list of Made in America
products and services the SBA would be monitoring, and these
would be an opt-in list for those businesses that wish to partici-
pate. This would be businesses that the SBA has worked with
throughout the country currently as well as over the last 10 years.
This list would be compiled and it would be monitored by the Small
Business Administration.
For example, if they find when they are doing their outreach ef-
forts, hypothetically a company in Miami that might be producing
paper and its largest manufacturer might be China, can we find an
American company to replace that source?
Again, another example might be a Maryland-based company
that may be looking to replace its suppliers of key ingredients for
its bakery supply products of a specialty product that it sells lo-
cally. The SBA does not have to do this process alone. They can
work together with other Federal agencies such as the Department
of Commerce or the Minority Business Development Administra-
tion to identify additional smaller companies that may be having
31
concerns. With SBA compiling this Made in America master list, it
could be sorted through NAICS Codes and have descriptions that
would describe it, such as ‘‘paper products’’ or ‘‘sweeteners’’ so that
it would be easy to sort and address. These companies would re-
ceive this information on a regular basis, and it would be distrib-
uted throughout our network of Small Business Development Cen-
ters as well as the agencies that the SBA regularly communicates
with.
This process and something similar to it, using the SBA to iden-
tify companies looking to expand their American supply chain sup-
pliers as well as the companies looking to bolster their supplies do-
mestically is essential to our Nation’s economy. May we learn from
this time and learn from this crisis using this to strengthen our
Nation’s supply chains well into the future.
Developing alternative suppliers of key products and services
well in advance is how we like to prepare our businesses with the
Maryland Small Business Development Center. And it is how I
suggest that we move the Nation forward and proceed. We should
look at this situation as a way to strengthen America’s supply
chain and ways to benefit America’s smaller businesses.
So I appreciate you listening to my suggestion of creating a vol-
untary, opt-in nationwide list of supply chain opportunities of Made
in America products and services and for recognizing the insights
of America’s Small Business Development Center consultants and
what we bring into solving this national problem by inviting me to
this panel today.
Thank you for your time.
[The prepared statement of Ms. Briscoe follows:]
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Chairman RUBIO. Thank you.
The Ranking Member, are you ready for questions?
Senator CARDIN. Let me thank all four of our witnesses. Ms.
Briscoe, let me just ask a question where you ended off. I think
your suggestion is an excellent suggestion, but it does point out the
fact that we need to be better prepared for the next crisis. I said
that in my opening statement. We need to have better supply
chains locally, and there is real opportunity for small businesses in
helping us in that regard.
The challenge will be to connect the opportunities with the busi-
nesses that are there, and there is where our resource partners can
be of tremendous help. I appreciate what you do in the State of
Maryland in our Minority Business Development Centers, our
Women Business Centers. All those are places of contact where this
type of a list could connect to the companies that are out there
with investors to really provide new opportunities for small busi-
nesses.
So I just really wanted to underscore and get from you your ca-
pacity today to reach out. We have already modified the disaster
relief programs so that small businesses can qualify. I know that
they are going to be knocking on your door saying, ‘‘Can we get
help under this program?’’ The State of Maryland will help, but
they are going to be your offices that are going to be called upon
to do this.
Do you have the capacity to expand your reach to take care of,
for example, the suggestion you made on developing a list?
Ms. BRISCOE. Well, it would initially start with compiling the
data from the businesses, so the SBA is what I am recommending
start from the top down, utilizing the Small Business Development
Centers, utilizing all of the agencies that work along with the SBA,
and find the businesses that currently do produce products here in
this country that can be of assistance to other businesses that they
may not be aware of.
So the first short term would be identifying what is made here
in this country, and from there SBA would then follow up with sort
of an opt-in matching, if there is a company that is looking for that
product or service and they are now being matched with a product
and service that is made here with that business in exchange.
So that is how we see foresee this rolling out from the top down
through SBA, through the resource partners such as the Small
Business Development Center and SCORE and the Minority Busi-
ness Centers and the Women Business Centers and our Veteran
Business Centers, and connecting with the key stakeholders
throughout the State, and then not just doing it alone, throughout
the country working along with the Commerce Department and all
of the other Federal agencies that work with businesses so that we
can from a higher level identify what is being made here currently
and how that can be a gap in the supply chain for the businesses
that need them here nationally.
Senator CARDIN. I think it is an excellent suggestion, and I am
just trying to figure out how we encourage that to be done and
where the resources need to be placed in order to make that a re-
ality. And I think you have given us a good blueprint, so I thank
you for that.
35
Ms. BRISCOE. You are welcome.
Senator CARDIN. Dr. Anderson, you gave a pretty chilling ac-
count. You are small business owner. You are running a cleaning
establishment that depends upon you and perhaps one or two other
workers. You do not feel well. The advice is for you to go home and
stay home, and perhaps someone in your operation, in fact, did get
the virus. Now you have got to be treated and be isolated for a pe-
riod of time. That is what we want you to do. We do not want you
to spread that disease to people coming into your establishment be-
cause you need to keep your business open.
So how do we provide the financial help to that type of a small
business owner, which is in our interest to stop the spread of the
virus, but also to keep that business open because of the impact it
has on the local community? The Chairman talked about and we
are working on a program that is going to make it easier for SBA
loans, including how we determine whether they are creditworthy.
Those are important steps. But if you are talking about closing a
business, it is hard to understand how you can deal with another
loan on top of that, and that is why I appreciate your response in
regards to perhaps looking at a grant program. It is a little more
complicated because we have not done that in the past. But I take
it that your comment means that in our toolbox, if we really are
interested in dealing with this crisis, we are going to have to look
beyond the traditional loans.
Dr. ANDERSON. Yeah, I mean, my local person that does my dry
cleaning—there are two people that work in that place. I am sure
there is somebody in the back office, but there are two people in
the front office. And if one of them has coronavirus, that place has
to close because they are essentially—you know, they just cannot
work with just one person. And they are not going to be able nec-
essarily to take out a loan. It is going to be a lot of work. They are
going to need help to open again 14 days later, and I think a grant
is what they are going to actually need.
Senator CARDIN. I thank you. I think we just have to have—we
have got to be flexible. This is a crisis that no one could anticipate
how it is impacting. Every hour it is becoming more and more dev-
astating to our economy. So we are going to need to develop in Con-
gress a flexible toolkit in order to keep businesses going in our
community, particularly small businesses.
Again, I thank you all for your testimony.
Chairman RUBIO. Thank you.
Senator Hawley.
Senator HAWLEY. Thank you, Mr. Chairman, and thank you for
holding this hearing today and for focusing our attention on what
is obviously a very hugely significant topic. I think it has been
clear for a while now that we are far too reliant on China for our
domestic production, especially for essential products that we rely
on, and, of course, our medical supply chain is at the very top of
that list, as we are sadly finding out. This is one of the reasons
that I introduced legislation 2 weeks ago that would give the FDA
more authority to require that our medical product manufacturers
report all the details of their supply chain, report where they are
facing potential shortages, and then give the FDA new authority to
36
speed potential replacements, including, of course, replacements
ideally that are made in this country.
Ms. Gibson, can I just start with you? You stated in your testi-
mony that we know China produces about 9 percent of our generic
drugs, which is a lot, but do you have any sense of how many of
our drugs involve Chinese production? In other words, maybe they
are not made wholly there, but Chinese production is involved.
Ms. GIBSON. Thousands. Thousands of our generic drugs and
even some of the brand-name products and perhaps even new
therapies for coronavirus may depend on the chemicals that are
sourced primarily in China. If you are hospitalized with
coronavirus, if you have a severe case, which, thankfully, is small
numbers of people, a small percentage, you will need—you might
be on a ventilator, so you will need sedatives like fentanyl and
propofol. Your blood pressure may get dangerously low, so you will
need pressors like dopamine or epinephrine. You might get a sec-
ondary infection, bacterial in nature, and you will need antibiotics.
You might become septic, which is life-threatening.
I was sitting in a room where the people actually make medi-
cines. These are the men and women in pharmaceutical engineer-
ing, pharmaceutical chemistry. I said, ‘‘So tell me, if you have to
make these tomorrow, where do the core chemicals come from to
make it? How much are we dependent on China?’’ They said 90
percent of the chemicals to make those basic generic drugs depend
on China.
The good news is that there are advanced manufacturing tech-
nology and really brilliant chemists right here in the United States
that want to make it, are capable of starting production tomorrow.
And Civica Rx, they have committed to all their APIs being made
outside of China. But they want to take the next step and make
sure all the chemical components were not dependent on China.
Advanced manufacturing technology—and we have brilliant people
in this country, and they want to do it. So we can make a lot of
these medicines here. They just need the investment to get started.
Senator HAWLEY. It just strikes me, based on your testimony,
which I think is really eye-opening, that we probably do not appre-
ciate or have not appreciated until now the extent of our reliance,
the true scale of the vulnerability in our medical supply chain.
Dr. Anderson, let me ask you, in your view, what is the most
helpful thing the Federal Government can do to support these
small biotech companies that you have spoken about and that you
write about? What are the right incentives that we ought to be pro-
posing or adopting?
Dr. ANDERSON. Essentially, that they have a guaranteed place to
sell their products. So right now, they are coming up with these
great new ideas, and they do not always have a place to sell their
products. And it is true mostly in—not in cancer where there is a
lot of profit in there, but in anti-infectives, in antibiotics, and
things like that. You develop something new in that area, and the
current system does not work. So that is why we had to create
Civica Rx, which is this thing that is run out of Intermountain
Health Care in Utah and other places. We just did not see that the
marketplace was producing certain areas because the profitability
was not high enough.
37
Senator HAWLEY. Let me ask you about something else I found
interesting. You wrote in your testimony that while small biotech
companies often make the initial discoveries during a vaccine or
drug development process, it is the large pharma companies that
then often buy them up.
Dr. ANDERSON. Correct.
Senator HAWLEY. And gain ownership over the IP. I am won-
dering if that trend accelerates the offshoring of our capacity to
China. Are those things related?
Dr. ANDERSON. Well, I think what we are seeing now is, in fact,
that is happening. So all of a sudden, you know, Pfizer has their
major manufacturing plant in China. So the big companies are
looking where they can produce it the least expensively and are
going there, especially in the generic because it is all price-driven.
Senator HAWLEY. Mr. Morrison, before I run out of time, I was
reading your testimony and was astounded to learn—you reiterated
this fact; Ms. Gibson, you mentioned it, too—that we stopped mak-
ing penicillin domestically in this country in 2004, right? Yet the
CDC says 62 million penicillin prescriptions were filled in the
United States in 2015. I have got two little boys at home. I think
the Hawley household accounted for a number of those prescrip-
tions.
[Laughter.]
Just to make it clear here, is it correct to characterize the deci-
sion to move the production of penicillin overseas as an economic
decision, it was economically driven, it was a profit-driven decision?
Is that your understanding?
Mr. MORRISON. Yes, sir. I think the point of Made in China 2025
is essentially to destroy the free market and create incentives to
offshore production in China. And originally this seemed like a
good thing. We will save prices, we will move value where value
could be moved. We will continue to do the innovation. But China
is scooping that up as well. And so without any decision by any
Government authority, this happened, and now we are going to
deal with the consequences. And, of course, an antibiotic is not in-
strumental to treat a virus, but the respiratory infection, it is.
Senator HAWLEY. Right. It just strikes me—and this is my last
comment, Mr. Chairman—that our current drug policy seems to
privilege economic considerations of maybe a few companies over
public health considerations. Is that fair to say, Mr. Morrison?
Mr. MORRISON. I would largely agree, sir.
Senator HAWLEY. Thank you, Mr. Chairman.
Chairman RUBIO. Senator Booker.
Senator BOOKER. Mr. Chairman, thank you very much.
I have got three areas that I want to try to get to in a very short
5 minutes, and, Dr. Anderson, maybe I can just get you, because
I am uncomfortable right now. The Senate is about to go on a re-
cess. We see this curve, the bell curve that we are in right now,
of increasing levels of infections and it is going to continue to go
up. Any modeling would say that our control actions to try to bend
this curve are not doing that well. Having been an executive during
a number of crises, including Superstorm Sandy, it is the first
order of keeping people safe, but it is the second-order con-
sequences when something like that happens.
38
We are about to face nationwide second-order consequences of
what it means to have schools closed, what it means to be told to
go home and stay home. And so could you just take 30 seconds for
me to sound the alarm a little more dramatically than you did, just
like saying going out tonight to your—what does it mean if we have
large-scale orders for social isolation as well as basically people
sheltering in place in terms of the local economies that depend
upon small businesses? Can you just paint this picture for me? Be-
cause I think that we need to be taking a lot more dramatic action
to try to stabilize a lot of the small businesses and help people who
are going through this crisis.
Dr. ANDERSON. So I just walk through my neighborhood, and I
see basically restaurants basically empty. I see dry cleaners, no one
going. I see in the last week or so a fundamental change in how
the economy is working, and I think the stock market is telling you
that is what is happening. And I think what we are seeing in the
real world in our neighborhoods every day is just so——
Senator BOOKER. So something as basic as schools closing, child
care crises—I live in a community at the poverty line where people
if they miss one paycheck, they cannot make a rent payment, they
cannot make their car payment. Their lives spiral out of control. So
telling a food service worker, for example, to stay home for 2 weeks
is just not going to happen, right?
Dr. ANDERSON. Unless they get paid.
Senator BOOKER. Right.
Dr. ANDERSON. And you have got to make sure that they are
willing to stay home because they are going to get paid.
Senator BOOKER. Eighty percent of our food service workers do
not have paid family leave. Every year we see the spread of flu and
like that because they are handling our food. Right now in this cri-
sis we cannot bend the curve unless we find a way to make it so
people can stay home without putting themselves in pending doom.
I want to stop there and pivot real quick. The testimony of Mor-
rison and Gibson, I wish every Senator could read that because
clearly this is a national security issue. It is not just pharma-
ceuticals. It is rare earth metals. I can go through the things,
should something more major in terms of a conflict between us and
China breaks out, that would cripple our economy and our health
and well-being and safety. And so this idea that it is a free market,
when I know this from New Jersey that people are luring compa-
nies to manufacture over in China, and so, again, knowing—here
we are in a time of crisis, it is too late. Shouldn’t we as a Federal
Government be doing more on these issues to make sure we are
building manufacturing capacity here?
Ms. Gibson.
Ms. GIBSON. Yes, what we can do and what small businesses
want to do to prevent a future situation with drug shortages, they
want to make the active ingredients, which is what makes the
medicine medicine. They can make it fully here in the United
States using advanced manufacturing technology. Stockpile that,
because it lasts longer than the finished drugs. And if we have an-
other coronavirus outbreak, have a stand-up facility ready to go,
which we have with—you know, companies have these as backup,
redundant capability. Take that API out and make those medicines
39
that are in critical shortages. This is what small business, the inno-
vative thinking and the technology and the brilliance——
Senator BOOKER. But this takes conscious, long-term planning.
You cannot just flip a switch and have the manufacturing capacity
here. I have a bill that tries just talking about seeding critical
startup capacity here so that we build it, correct?
Ms. GIBSON. There are small businesses that can start produc-
tion of active ingredients made here in the United States. They
could start within weeks. It would take maybe 9 months to start
making small quantities of these key ingredients fully made in the
United States, not dependent on China for chemicals. They could
do that in about 9 months.
Senator BOOKER. Mr. Morrison.
Ms. GIBSON. And they could start for the stockpile DOD and VA,
use our Government purchasing power to stimulate that market.
Mr. MORRISON. That is, in fact, where I was going, sir. You have
tremendous purchasing power through Medicare, Medicaid,
TRICARE, the Department of Veterans Affairs. These are some of
the largest health care consumers in the world. You can control
their procurement regulations.
And if I could just make one more pitch, right now the Federal
Government may be about to allow the TSP I Fund to invest in the
MSCI Index. We are going to be investing in Chinese enterprises.
I have worked 19 years for the Federal Government. Please do not
put my pension in nontransparent Chinese companies.
Senator BOOKER. And so I just want to make just a massive ap-
peal to my Chairman right now that this should be a Committee
urgency. We can address this. It is actually not that hard. We just
do not have the collective will. This is a national security crisis
that one of our serious adversaries is doing things strategically to
undermine our health and economic well-being, which at any point
they could cripple our economy. And, actually, this has a win-win.
It corrects for a national security crisis, and it actually helps our
overall economy, and the fact that they are doing it and we are not.
So I would just appeal to the Chairman and the Ranking, let us
work on this as a project. This is an obvious area where we should
have bipartisan commitment to fill these vulnerabilities and actu-
ally build more American economic manufacturing.
Chairman RUBIO. Absolutely. And that is the goal of the second
tranche of work we are going to have to do on this. We are trying
to figure out what can we do to help assist small business quickly
right now. But we are going to have to come back and do more on
a host of issues. This hearing has actually been scheduled for over
a month and a half before this, so we already identified this in our
report last year. And I agree with you. There are still a couple peo-
ple that debate whether we have a supply chain issue. I am not
sure they will be able to make that argument here any longer in
any event.
Senator CARDIN. Let me just underscore what the Chairman is
saying. We are going to try to see whether we can get something
done as early as today, if at all possible. We recognize that within
the next couple weeks we really need to put together a package
that is going to make a broader appeal to some of the issues that
40
are here. We are not talking about months. We are talking about
we need to respond while there is an interest.
So we are going to try to work with everyone and try to see what
we can get done.
Chairman RUBIO. Yes, and one last point before I turn to Senator
Hirono. We want to do it in a way that obviously respects the juris-
diction of this Committee, which is small businesses that have sup-
ply chain disruption vulnerability, but also small businesses as the
answer to the supply chain vulnerability. And that will require ac-
cess to capital and the ability to invest to ramp up. So we have got
some work to do, but I am glad we have a head start on some of
this.
Senator Hirono.
Senator HIRONO. Thank you, Mr. Chairman.
Did I hear you say that we can reduce or totally eliminate the
overdependence we have on China, that we in our country have the
capacity to create or manufacture these chemicals that are so nec-
essary?
Ms. GIBSON. For a lot of medicines, brilliant chemists and phar-
maceutical engineers can make these chemicals here.
Senator HIRONO. So why is that not happening?
Ms. GIBSON. Well, on the generic side, the margins are so slim
that companies would not invest in the new plant and equipment
to do it, and also our last large generic company, Mylan, in Mor-
gantown, West Virginia, merged with Pfizer, and Pfizer last year
announced the opening of its global generic headquarters in Shang-
hai. So we do not have these companies. In 5 years—there are two
more Western companies—they will be gone.
Senator HIRONO. So we have a so-called free marketplace where
companies can make those kinds of relocation decisions. So are you
suggesting that there be some kind of legislation that will prevent
or effect a cost on these companies that will take their manufac-
turing to places like China?
Ms. GIBSON. Well, I think sort of the horse is out of the barn on
that. How can we grow and incent small businesses that are eager
to fill this very large vacuum that we have. They want to do it.
Civica, I am sure, would want to purchase essential medicines and
all their ingredients made here in the United States. The DOD
could purchase it, the VA. We could start a whole new market with
manufacturing here in the United States.
Senator HIRONO. I think we are going to need to figure out,
though, because if a small business creates these chemicals, et
cetera, and they get bought up by a larger company that is inter-
ested in the bottom line, they go off to China, that is not resolving
the situation. So we are obviously going to need to come up with
some really, in my view, tightly drafted legislation that will get us
to where we need to go.
Ms. GIBSON. There are some provisions that can be done, that
you cannot sell your plant for national security reasons. If we make
any investment, it——
Senator HIRONO. I think those are the kind of ideas we need to
put in place, I would say.
Dr. Anderson, here we are in the midst of a pandemic. It is here
and now. And, you know, any State that is so dependent on tour-
41
ism as a major part of their economy, I would say most States tour-
ism is their number one or number two driving factor. So we are
already seeing thousands of people losing their jobs. Most of them
probably do not have paid leave, sick leave, or anything else. So
here and now, I agree with you that we really need to figure out
how to ease the impact on workers and their families in the here
and now, because if we expect people, 20 percent who are not even
insured, to go to the doctor, that is not likely to happen.
I think this crisis has really illuminated and illustrated the huge
gaps in health care coverage in our country and how it is creating
a risk for all of us. So we can have that conversation later. But for
the here and now, I am wondering whether you think, Dr. Ander-
son, that we obviously need to have a lot more testing in our coun-
try so that we can get a sense of how far this—how much of this
virus is already in our country. We do not know that, so testing.
And then, obviously, we are going to see this continue if we do
not develop a vaccine. Would you agree that testing and developing
a vaccine are critical to our ability to get a handle on the spread
of coronavirus in our country?
Dr. ANDERSON. First of all, the vaccine is absolutely critical, but
it is going to take a year or whatever.
Senator HIRONO. And in the fall this virus can come back.
Dr. ANDERSON. Hopefully, it will not happen again, but it may
resurge in the fall. Let me go back to the question, though, about
what we can do besides for generic drugs, because we are now
working with the State of California, and they have said that they
want to essentially manufacture or produce drugs for the 13 million
people that they insure. And they are trying now to do that based
upon plants in California. And so they have the power of 13 million
people that could manufacture drugs, and they are trying to do it
with Civica and other places based in the United States.
So the Government has this huge purchasing power and can use
it to do things that are manufactured or produced in the United
States.
Senator HIRONO. I am all for Government using its purchasing
power, but I would note that we cannot even under Medicare have
a discussion about, you know, drug purchasing where we cannot
even negotiate those things. So I am all for our Government using
its power to create the kind of situation where drugs that we need
are being produced for our people, and we apparently are not there
yet. But whatever you can do to raise your voices to head us in the
right direction along these lines, I am grateful.
Dr. ANDERSON. Medicare cannot, but Medicaid can. DOD can, VA
can. So there are a number of very important buyers in the public
system that can.
Senator HIRONO. Yes. Medicare, though, is a huge gap.
Dr. ANDERSON. I understand.
Senator HIRONO. Thank you.
Chairman RUBIO. Senator Shaheen.
Senator SHAHEEN. Thank you all very much for being here and
for your testimony.
The President last night talked about one of the actions that he
was taking would be to invoke a travel ban on passengers coming
from the EU, and initially it sounded like he was also saying cargo,
42
although that got corrected later. But given what Senator Hirono
said and what I know to be true in New Hampshire about the im-
portance of the tourism industry and the impact on so many small
businesses of our European travelers, can you speak to what the
impact of that might be on the small businesses that you are work-
ing with? I had some questions, as did other Senators earlier, out
of a briefing on the coronavirus about why the U.K. was exempt
from that travel ban, and what we were told is because they are
no longer, because of Brexit, part of the Schengen zone, which is
where people can travel across borders without screening. But they
are a part of that zone until December of 2020, so they are still
very much in the Schengen zone, so I am just saying that I guess
as a point. I am not necessarily asking you to comment on that,
but if you could comment on what the impact you think will be on
small business of the travel ban from European customers.
Dr. ANDERSON. So, I think it is going to be huge for the people.
I mean, if you are just in the Washington, D.C., area, we get so
many visitors. You get them for skiing and other things. So you
know, these are huge industries that are going to lose 20, 30 per-
cent of their business literally overnight. They do not have contin-
gency plans for a 20 or 30 percent reduction in their business.
And it is not just oh, take out a loan. You are going to need some
real cash immediately that you know you do not have to pay back
because you are going to be in the hole for a while.
Senator SHAHEEN. Ms. Briscoe, have you heard from any folks
through the SBDCs in Maryland about the potential impact? Or is
too soon to know?
Ms. BRISCOE. We have not had, at this current time, any busi-
nesses that have reached out to us specifically about the supply
chain impact at this moment. But we will be sending out a cor-
respondence to our caseload to ask them have they had an impact
or how do they feel about a future impact. They may have supplies
that can sustain them currently but is it something that, for the
long run, that they can maintain. So we will be in communication
with them.
Senator SHAHEEN. Great, thank you.
On February 27th, the FDA pointed out that it had received its
first notification from a drug manufacturer about a drug shortage.
I am sorry, I did not hear all of the testimony earlier from Ms. Gib-
son and Dr. Anderson, so you may have referenced this. But the
question that I have is how do we balance the public’s need to
know on an issue like that without it creating a run on those drugs
and a real panic about how to respond to that kind of situation?
Ms. GIBSON. I think the FDA did the right thing in not naming
the medicine because that would have contributed to hoarding and
precluded the opportunity to allocate it to those people who need
it the most.
But I also think, we have had drug shortages in this country for
more than 20 years and we have not been honest about the impact
that it has had on patients. So at some point, maybe when
coronavirus—we get through this, we have to have an honest con-
versation about the shortages of medicines in this country, the ter-
rible impact it has, what the real root causes are, and address
those.
43
Dr. ANDERSON. So the FDA says there are about 100 drugs. At
places like Johns Hopkins, we know that there are 250, 300 drugs
that are, in fact, on shortage. And we sort of borrow it from the
University of Pennsylvania and then pay it back to the Mayo Clinic
and do all sorts of bartering on this when there, in fact, a shortage.
But this is not a new thing. It is just going to get worse with
the travel bans because so many of the drugs are manufactured
overseas.
Senator SHAHEEN. And of course, that does not address the cost
of so many drugs which, while they may be available, if you cannot
afford to use them because you do not have insurance and cannot
cover the cost, you are in the same position.
Dr. ANDERSON. Well, that is particularly true in this case for the
uninsured because if you go to the doctor, it is going to cost you
$200 just to get a simple test. And if you need to get some kind
of x-ray or something, it is going to be now $1,000. And if I am un-
insured, I probably do not have $200 or $1,000.
Senator SHAHEEN. Well, as you all point out, this is an oppor-
tunity for us to look at some of those issues and hopefully respond
in a more positive way going forward.
Mr. Morrison, I would just like to share your concern about in-
vestment of the Thrift Savings Plan and the MSCI index, using
that as the index for how to make those investments. Senator
Rubio and I have been beating that drum for a while without much
support from the administration.
Mr. MORRISON. Time is running out.
Senator SHAHEEN. Thank you.
Chairman RUBIO. Just on that point, we have reason to believe
that they have actually expedited moving in that direction. It is
just crazy. It is crazy. And I mean, it is not a term that you nor-
mally use to describe public policy, but this is nuts, taking the re-
tirement funds of Federal employees and the military to be in-
vested in companies in China that are actively working to under-
mine our national security, our health care security, and our eco-
nomic security. It just cannot happen. I mean, if it was not so seri-
ous, you would laugh at it and say that cannot be true, that is
something from the Enquirer, or whatever.
But it is real, and hopefully we can see action taken on this
promptly, among other things.
Senator Rosen, are you ready?
Senator ROSEN. Yes, thank you.
Thank you, Mr. Chairman. Thank you to the Ranking Member.
Thank you all for being here today.
Needless to say, it has been quite the roller coaster since the
coronavirus has reared its ugly head, and it is going to probably
get worse before it gets better.
And so, practically speaking, I can tell you that people think of
Nevada and Las Vegas as these giant casinos. And we are those.
But in fact, 99 percent of businesses in Nevada are small busi-
nesses in support of a lot of—especially in the Southern Nevada
area—in support of those large businesses. They provide over 40
percent of the private jobs in our state. They really are the back-
bone of our economy. You think about all of the weddings we have.
They are the vendors who bring the flowers and the candles. All
44
of those people that make that happen, make the magic happen in
Las Vegas, of course, in Reno and all across our state. And we have
nearly 50 million of those visitors a year.
So as far as small businesses go, what suggestions do you have
for those businesses to be able to adapt in some way to the current
environment. Maybe specifically, if you could speak to the people
in the travel and tourism industry, do you suggest working through
the Small Business Development Center? Are they a good coopera-
tive partner, the SBA? Can you just talk about how some of these
supportive businesses from our tourism industry, if you can? Any-
one at all? Or just in general?
Dr. ANDERSON. Let me try.
I mean, I think the key thing is to make sure that they are going
to be around in three months or two months. And I think what the
challenge is, if you just give them a loan, they are going to be in
trouble because they are now going to have to pay for it and not
get any money for the last two months or so for the flowers and
all those things because nobody is going to be having weddings and
using all those flowers because they cannot bring all their friends
and relatives to the wedding.
Senator ROSEN. Right.
Dr. ANDERSON. And so, you are going to have to essentially, if
you want them to survive after two months, is to give them a grant
to survive. You are going to have to give the worker who might
have coronavirus 14 days of paid sick leave so that they can quar-
antine at home. And you are going to have to give the uninsured
person who needs to go to the doctor but does not have the $200
to go to the doctor some money and pay them on the basis of Medi-
care rates. You will not make them a medicare beneficiary but pay
them on the basis of Medicare rates so they actually do get tested.
And so when they are working in one of these small businesses, we
know that you are safe to go to a small business.
Because as soon as we feel like it is not safe to go to small busi-
ness, we are going to stay at home.
Senator ROSEN. So we have to just remove the obstacles for spe-
cifically getting testing and being quarantined. I think that is the
best thing. And then financial support that may not need to be re-
paid back is really the way to do it because it is going to take a
while for everything to recover when we do, hopefully, all go into
recovery.
I know this is going to sound—this is happening, I know, across
the country and not specific to tourism. But we have a lot of won-
derful things about our entire Nation. A lot of it is diversity. I have
heard stories about people and businesses, that they are not buying
frozen Chinese food in a grocery store. They are not going—because
they think that the virus is going to be at the Chinese restaurant.
Or they think that oh, now that it has been in Italy, so I should
not do this or that.
So how do you think the mechanism for some of our small busi-
nesses—I guess they can put up signs. But how do we just try to
dispel these myths that you shopping or going to a Italian res-
taurant in Henderson, Nevada, is not going to give you—it is not
getting the coronavirus from Italy if we are living there.
45
Ms. GIBSON. Well, I will take a stab at that. To the extent that
food service companies import food from China, we do have a lot
of food imports from China, we should be mindful that the FDA
withdrew its inspectors from there to protect them from what was
going on.
So the big question is who is going to be inspecting the places
that are making our food in China or elsewhere to ensure that it
is safe? The same is true for our medicines.
Senator ROSEN. Again, that is an imports issue.
Ms. GIBSON. That is a different issue from what you are talking
about but there is some concern there. And I think it is going to
be a long time before the FDA meaningful can get back into cer-
tainly China and some of these other countries to really do the
work they need to do to protect the American people.
Senator ROSEN. Thank you.
Chairman RUBIO. Go ahead and follow up, because I have a num-
ber of questions.
Senator CARDIN. I just was going to thank your panelists.
But I do want to respond to Ms. Gibson’s point about drug short-
ages because there is no question the coronavirus is causing a con-
cern in our supply chain on drugs. That is a fact. And we need to
be able to have domestic productions. That is a need.
But make no mistake about it, the couple hundred drugs that
were short before the coronavirus had nothing to do with the sup-
ply chain issue because they were produced domestically. It had all
to do about the economics of productions of those medicines be-
cause they were basically inexpensive medicines in which the phar-
maceutical companies were not making big profits off of. And that
is a fact.
So when we are dealing with the shortages of drugs, let us make
it clear that we have responsibilities to make sure drugs are avail-
able in this country, and it is not just supply chain. It is the eco-
nomics of how the pharmaceutical industry is organized here in the
United States.
Dr. ANDERSON. And that is why, when we created Civica, we had
to have a guaranteed market. And so 1,200 hospitals jumped up
and said we know there are shortages. We will buy these drugs
from Civica. We will guarantee the purchase of those.
So having a guaranteed purchase is the key thing for these small
businesses.
Ms. GIBSON. If I may add, American companies are competing
not with companies in China, they are competing with the Chinese
government because their domestic companies are subsidized. So it
really is an unlevel playing field.
Senator CARDIN. Again, I want to thank the witnesses for their
testimony.
Chairman RUBIO. Thank you.
Before we conclude, I had a number of observations and I wanted
to elicit points from you. Let us start with the first, and that is—
let me begin by saying I am a big believer in capitalism. I am a
big believer in free markets. And one of the reasons I am is be-
cause I believe it provides for the most efficient allocation of capital
to the most productive place.
46
However, there are times in which the most efficient allocation
of capital does not align with our national interests. And in those
times in which it does not align with our national interest, it is in-
cumbent upon public policymakers to make adjustments. So we are
now facing that.
And for many months and years we have been making this con-
versation, we have been talking about this in conversation with
people. The answer always was that either a denial that a problem
existed or accusing this of being some sort of rejection of the mar-
ket. It was theoretical.
Now, it is no longer theoretical. We have before us, just in the
health care and medical field, a market decision that it was more
efficient, that you can do it at lower costs despite transportation
and everything else, if you made these things somewhere else. And
that is what the market did, destroying jobs and companies here
and providing that there.
And this is now couched now in some anti-China narrative and
so forth, but it really is not. There is a national security component
to the fact that China is a geopolitical, near-peer competitor. But
beyond it is the reality that even if they did not do it on purpose,
the shutdown of factories because of an outbreak of this virus has
impacts that end up hurting us here.
So the question now becomes how do we address it? And what
can we do to incentivize investment in critical industries? And the
topic of critical industries today is broader than it has ever been
in the history of the world.
So we have to identify what those critical industries are and then
decide, from a small business perspective, what do we need to do
to incentivize investment in those industries? And that will require
potentially government investment but also incentivizing private
investment in those fields.
Is that an accurate way to assess the challenge before us now?
That what we have seen these things leading is the combination
of our adherence to let the market decide where it goes, which is
generally the right decision, combined with a deliberate policy aim
on behalf of the Chinese government to attract that capacity away
from us. And the result is we have reached an efficient market out-
come despite market interference in their part that now places our
national security and economic security interests in danger.
Dr. ANDERSON. So I agree with you totally. I would just make
one slight modification. That is saying not government investment
but government purchase. I think it is important for these small
businesses——
Chairman RUBIO. Meaning on the demand side?
Dr. ANDERSON. On the demand side. That they essentially have
to have a guaranteed market. So when we are working in Cali-
fornia, they are going to buy for 13 million Californians—the state
is going to buy those. And that allows a company to get started in
California because they have a guaranteed market.
Civica has a guaranteed market for 1,200 hospitals. They are
willing to get started. Otherwise, they would not get started. So
guaranteed purchase is the critical thing.
Chairman RUBIO. And in that realm, let me say that there is a
court decision that undermined the ability to do that. There is a
47
DOD and VA requirement to Buy American on key components and
drugs. And the Court ruled against it. And so this requires a legis-
lative fix.
Dr. ANDERSON. Correct.
Chairman RUBIO. And there is hopefully, any moment now or
any day now, an Executive Order issued by the White House that
will strengthen these Buy American requirements. Because now
the Federal Government, in addition to driving the investment, one
of the things that will drive investment is that there is a customer
that is going to buy it. And we can be a big customer in some sec-
tors.
Again, that is not government ownership of the means of produc-
tion, that is what socialism is. But it is government saying it is in
our national interest to do these things.
This is not just about—this is not even protectionism. This is se-
curity. So I hope we can fix that.
Ms. GIBSON. If I may add, Senator Rubio, and thank you for your
leadership on this. We would not have our aircraft carriers or mili-
tary equipment fully made in China. If we wanted to do a free mar-
ket, we could do that and just outsource all of that. But we realize
there is a point which we do not want to cross.
I will say that if we want to have manufacturing here in the
United States for our essential drugs as a national security issue,
if we look at how we have been making medicines it is the same
way we have been doing it 100 years ago. We have the opportunity
to bring manufacturing home to make it more efficient, less costly.
And that will take some initial investment so the DOD and the VA
can have all of their components made here in the U.S.
Otherwise, if we just buy—and Civica has found this. Civica is
still finding it. It still has to get the core ingredients from China.
New types of manufacturing, we can bring all of it back to the
United States.
Chairman RUBIO. And this is something that I hope that we will
be able to do together. Part of these hearings and the report we did
is to create awareness about these challenges.
I wanted to ask you about that in a second, Mr. Morrison.
But I wanted to ask you, Ms. Briscoe, from the small businesses
perspective—so we view the small business sector as a place that
we can see some of the stuff happen. It is easy to focus on the guys
on the cover of the magazines and on the stock market on a daily
basis. But there is a lot of potential capacity out there now. And
you have done a good job of addressing small businesses through
your idea.
Small business is vulnerable to supply chain disruption. But also,
small businesses who could fill supply chain disruptions.
Ms. BRISCOE. Correct.
Chairman RUBIO. But finding the way small businesses could fill
that is a key thing.
So right now we are focused on just keeping people in business;
right? There are a substantial number of small businesses that
cannot afford to go seven to 10 days without operating. They do not
have that kind of cash reserve, and things of this nature.
Ms. BRISCOE. They basically would be the problem and the solu-
tion at the same time. And that is what we are looking to do.
48
Chairman RUBIO. So what can we do, as we move forward on this
first tranche of work, which is just making available in the most
appropriate way, through 7(a) and Community Advantage—and
using and leveraging the community banking industry which is
there and on the ground, providing an increase in the percentage
of guarantees to make the loans easier to issue.
What would be the best thing we can do for small businesses to
be able to access it quickly and stay afloat? Obviously, we have to
make them aware of it, and from a paperwork standpoint and so
forth. Do you have any practical advice as to how to make that—
because one thing is to pass a bill that allows it and another thing
is utilization, knowing it is there. And for some businesses, frankly,
it may not be the solution.
But what can we do on the ground level to actually make the
program accessible?
Ms. BRISCOE. It should be a step-by-step process that is going to
be easily and readily accessible for business owners to understand
what they make and how it can benefit. As they have stated, a
guaranteed buyer. If they have a matchmaking process, if I know
I am making something and I know you are interested in pur-
chasing, it should be just as simple as that.
They will need an infusion of capital if they are going to scale
up their production. So that is something that we are going to have
to address as far as cash flow. And also work force. Those are two
major things.
Chairman RUBIO. And that second point, about the infusion of
capital, ties right in to one of the things that we have been talking
about as far as the second step, and that is not only do you want
to make more capital available for companies to stay afloat. But to
the extent possible, we want to try to focus as much of that as pos-
sible not just to small business writ large, but in specific critical
industries that could help fill these gaps and that are tied to all
of this.
Which leads me to the question for you, Mr. Morrison, and that
is is not one of the challenges we face now that the definition of
a critical industry for the country has to be broader than it has his-
torically been? Everyone will agree aircraft carriers and airplanes
are things we need to make. It takes a little while to convince peo-
ple that making forklifts or pharmaceutical ingredients that, at an
individual level may not mean anything to most people around this
country but in the cumulative have enormous impact. Part of the
challenge we have is identifying a much broader scope of what
qualifies for a critical industry or critical supply need for the coun-
try in the 21st century which either we took for granted in the past
or never had to address.
Mr. MORRISON. Mr. Chairman, I think that is exactly right.
There is a reason that we have effectively lost the race for 5G. It
is because we have relied on the market and now there are no
American companies left that do this work.
The Chinese had a plan. They are on the cusp of their 14th five-
year plan. They have Made in China 2025 and Made in China 2035
is about to come out.
They have determined the strategic sectors that they want to
dominate in the future economy. And what they do in the domestic
49
market is they boost up the price, they restrict the ability for out-
side companies, American companies and other companies to com-
pete, and then they provide all manner of trade promotion tools,
zero interest loans, to dominate export markets.
And so our small businesses, our medium-sized businesses and
other American ventures are playing by one set of rules and the
Chinese companies are playing by another set of rules. In another
realm of national security, we would call that unilateral disar-
mament.
And so that is the question to investigate. That is why I talked
about the BUILD Act. That is why I talked about your amendment
to the Defense Authorization Act last year.
Using our market power, determine what industries are critical,
and then taking steps to level the playing field. Do not put our
businesses on a different playing field and tie them to different
rules than the Chinese hold its businesses.
Chairman RUBIO. I appreciate all of you being here today and
your patience on the hearing. The Senate is voting now, so we will
have to head to that.
But I want to thank you because your expertise and your ideas
are aligned with a lot of the work we are already doing. We have
come up with some good new ideas, as well.
The hearing record will stay open for two weeks and any state-
ments or questions for the record should be submitted by Thurs-
day, March 26 at 5:00 p.m.
With that, the hearing is adjourned.
[Whereupon, at 12:03 p.m., the Committee was adjourned.]
APPENDIX MATERIAL SUBMITTED
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