The Corner Newsletter: August 16, 2024
Welcome to The Corner. In this issue, we look at the BIOSECURE Act, and how it fails to address chokepoints and dangerous dependencies in the supply of vital drugs. We also look at the DOJ’s transformative victory in the Google search case.
BIOSECURE Act Aimed at Curbing China’s Role in U.S. Drug Supply Does Little to Address Shortages or Dependencies
Garphil Julien
One of President Biden’s legislative priorities before he leaves office is likely the passage of the bipartisan BIOSECURE Act. The bill, introduced in January by Republican Congressman Mike Gallagher and Democratic Congressman Raja Krishnamoorthi, aims to help break U.S. dependency on Chinese pharmaceutical manufacturers by restricting certain partnerships with U.S. biotech companies. But while a key goal of the bill is to prevent the weaponization of pharmaceutical supply chains, the bill fails to address U.S. access to critical pharmaceutical materials. It also does little to address the closely related problem of acute drug shortages.
Today, many U.S. manufacturers and distributors rely on single-source suppliers of pharmaceutical ingredients, with 83 of the top 100 generic medicines produced in the U.S. sourcing ingredients from a single location offshore. These locations are often in China and many Chinese drugmakers have monopolies over the production of critical ingredients needed for these drugs. Any disruption or slowdown in their manufacturing process, as has happened in the past, can reduce or even cut entirely the global production of key pharmaceuticals.
China is the sole source for about 20% of the total ingredients in our most vital medicines and 45% of key starting materials. The U.S. is heavily reliant on China for the supply of drugs that treat a host of illnesses and conditions including but not limited to obesity, blood pressure, trachoma, blood clots, cancers, bacterial infections, cystic fibrosis, HIV, dementia, diabetes, and neutropenia. The current shortage of antibiotic Penicillin G Benzathine, which is fueling concerns of a major public health crisis, is due to failure by monopolistic suppliers in China to increase production. These suppliers control three of the four factories in the world that produce ingredients for the drug.
The BIOSECURE Act also comes as shortages of critical medicines hit an all-time high this summer in the U.S. According to the American Society of Health Care Pharmacists, a total of 323 drugs were in short supply, breaking a record set in 2014 and up 86% from its 10-year low of 174 in 2017. This year’s total includes 66 first-time drug shortages.
The BIOSECURE Act aims to identify “biotechnology companies of concern,” a designation which would prevent manufacturers from receiving U.S. government contracts or grants from sourcing any material or service from these concerned entities. While the act also claims it will prevent the weaponization of pharmaceutical supply chains, its narrow definition of reasons for “concern” does not include concentration of production in a single location or instances where a producer is a single or sole-source supplier to other manufacturers that serve the U.S.
An example of why this point is so important are China and India’s actions on pharmaceuticals during the Covid pandemic. At the onset of the crisis in 2020, India placed export bans on a total of 26 pharmaceutical ingredients and their formulations, including antibiotics. In total, India supplies nearly half of generic drugs for the U.S. In 2022 as a result of China’s mandatory Covid lockdowns, GE Healthcare’s plant in Shanghai stopped producing the CT scan contrast agent Omnipaque. One result was a disruption in the U.S. of the ability to measure arterial blockages, identify heart conditions, and spot cancerous tumors.
In many respects, the situation continues to get worse. Over the last decade in the United States, there has been an 18% decrease in the number of manufacturing facilities producing active pharmaceutical ingredient, or APIs. Just between 2019 and 2023, the number of plants fell 10%. During this same period, China continued to add new facilities, increasing the total number of API plants by 55 percent.
While the BIOSECURE Act may promote some diversification of production, simply limiting Chinese control over new drugs does not get at the most pressing and immediate threats. Most of the pharmaceutical supply chain is still hyperconcentrated, and this continues to pose a variety of threats, including to U.S. national security, the day-to-day supply of vital drugs, and to the taxpayers and patients who must still pay outrageous prices for monopolized medicines.
Open Markets Applauds Judge’s Decision Deeming Google a Monopoly
The Open Markets Institute last week welcomed a Court decision that Google violated the Sherman Act by illegally maintaining its monopoly in general online search and search text advertising. The case was the first of two that have been filed by the Department of Justice against Google. Executive director Barry Lynn said “The Google Search ruling was a long time coming and is a historic win for our antitrust enforcers and internet users everywhere,” Center for Journalism & Liberty director Dr. Courtney Radsch also weighed in, saying, “Google's threats to censor journalism and prevent news publishers from accessing its monopoly must be met with swift and decisive action from all those who care about a free press and democracy." The Washington Post quoted Lynn on the decision as saying, “For a long time, Google was regarded as untouchable. This is the most powerful corporation perhaps in human history.” PC Magazine quoted from the statement issued by Open Markets.
Senior reporter Karina Montoya published an article in Tech Policy Press offering a breakdown of the key points from the nearly 300-page decision by Judge Amit Mehta. Montoya notes that a key point in the decision was that a monopoly in one market can beget monopolies in others, writing, “Default distribution also enabled Google to monopolize another market: search text ads, which are displayed as links on search results in response to users’ queries — the foundation of Google’s ad search business.” Open Markets’ policy counsel Tara Pincock also commented on the ruling in The Washington Post and in Ars Technica. Pincock played a key role in drafting one of the early iterations of the case, which developed out of an investigation of Google by 50 state attorneys general. Meanwhile, senior legal analyst Daniel Hanley was quoted in The Daily Upside on the case.
Open Markets Closely Follows Trial to Stop Major Network Sports Cartel
The Open Markets Institute last week closely followed the opening of a trial to prevent the launch of a sports streaming service called Venu Sports. The service — which is owned by Disney/ESPN, Warner Bros. Discovery, and Fox — would control some 80 percent of the national market for live sports broadcasts. OMI reporter Austin Ahlman attended the New York-based trial, which was based on a suit by sports streaming service Fubo. Ahlman laid out the stakes in an article in Common Dreams. “With that market power, these giants could destroy what remains of the cable television market and stifle competition in the market for live programmatic streaming services before it fully gets off the ground.” He also wrote about Fubo’s complaint in the Corner and gave live updates on X. Open Markets also joined partner organizations in filing an amicus brief on behalf of Fubu.
Open Markets Comments on USDA’s Proposed Reforms to Poultry Tournament Systems
Open Markets Institute food program manager Clare Kelloway submitted a comment to the U.S. Department of Agriculture in support of the agency’s proposed reforms to poultry tournament payment system. Kelloway also proposed additional actions that would allow USDA to better enforce the Packers and Stockyards Act against powerful chicken processing companies, improve fair competition in the poultry market, and help independent growers remain viable. In addition to ensuring fair base pay rates, OMI suggests that the USDA limit the portion of pay that can come from performance-related bonuses; ensure that poultry contracts are long enough for farmers to pay off additional capital investments demanded by chicken companies, and establish certain thresholds to guarantee growers a non-comparison-based payment option if they desire. Read the full comment here.
📝 WHAT WE'VE BEEN UP TO:
The American Prospect quoted Center for Journalism and Liberty director Dr. Courtney Radsch on the loss of news programming amid the growing trend in streaming networks. “It’s already not very profitable to run a news outlet on cable or broadcast,” she said. “I don’t think policymakers are either addressing the current challenges adequately nor are they looking to the history of governing our information communication technology. We’ve got to get on top of this faster and not wait two decades.”
Open Markets Institute’s legal director Sandeep Vaheesan was quoted in The American Prospect in an article on private equity investors entering the college sports market. “You’d think if they’re so worried about the financial burden of paying players, [colleges] wouldn’t want to auction off another portion of the revenue to Wall Street,” Vaheesan said.
Vaheesan gave an interview to PlayerFM’s podcast Money on the Left to discuss his upcoming book Democracy in Power: A History of Electrification in the United States. On the podcast he spoke about the need to transition from a carbon-based energy industry dominated by a few private players to one powered by publicly owned clean energy.
CJL’s Dr. Radsch was quoted in a report from Aspen Digital discussing the harmful impact AI poses to local news outlets as big AI players seek partnerships with larger news organizations, leaving smaller outlets to fend for themselves. “How do smaller newsrooms afford to use some of these technologies?” Radsch said. “And does using them just entrench the power of the large platforms that control these tools?”
The Orange County Register reprinted a quote OMI legal director Sandeep Vaheesan gave to the New York Times on algorithmic price-fixing by RealPage, which helps landlords collude to set rent. Vaheesan said the government can utilize their legal advantage over private attorneys through civil investigative demands that “pop open the hood” on RealPage’s software, analyzing how its algorithm works before going to court.
🔊 ANTI-MONOPOLY RISING:
Video game distribution giant Valve is facing a federal class action antitrust lawsuit in Seattle over alleged abuses of its market power relating to its practices that restrict publishers’ ability to offer their games at lower prices through competing distributors. (Reuters)
Several federal agencies, including the Federal Communications Commission and the Federal Trade Commission, teamed up to roll out a “Time is Money” initiative aimed at cracking down on exploitative practices that force consumers to waste significant amounts of time on basic tasks like canceling subscriptions and accessing product information and services. (Associated Press)
The Department of Justice is suing TikTok on behalf of the FTC for alleged violations of the Children’s Online Privacy Protection Act’s regulations on the collection and use of data from minors under the age of 13. The FTC has had a consent order with TikTok dating back to 2019 for its repeated violations of the law. (Security Magazine)
📈 VITAL STAT:
$35 Billion
The value of a proposed merger between chip design software giants Synopsys and Ansys. The deal is under investigation by the UK’s Competition and Markets Authority over concerns the deal will dramatically shrink competition in a key part of the microchip development chain. (CIO)
📚 WHAT WE'RE READING:
The Money War: In a sweeping series of investigative and data-driven pieces in the Washington Post, White House economic reporter Jeff Stein and data reporter Frederica Cocco chart the increasing use of sanctions by U.S. officials over the last three decades. Stein and Cocco’s reporting demonstrates how unilateral American sanctions policy has become one of the primary molders of international trade and relations, especially under the presidencies of Donald Trump and Joe Biden.