WASHINGTON, D.C. – Today, Senator Rick Scott and Senator Elizabeth Warren, ranking member and chair of the Senate Armed Service Subcommittee on Personnel, led their colleagues, Senators Marco Rubio, Chris Murphy, Joni Ernst and Mike Rounds, in writing to the Department of Defense (DoD) for an update on its pharmaceutical acquisition strategy following the decision in Acetris Health, LLC v. United States (Acetris), which loosened requirements on federal agencies to preference American-made products in purchasing decisions. The lawmakers raised concerns about the decision’s potential to increase DoD’s reliance on foreign pharmaceuticals. 

Additionally, Senator Scott is fighting to pass his Accelerating Movement of Essential Rx Items to Create Access to National Drug Resources for US Government Services Act (AMERICAN DRUGS Act) to create a strong incentive for companies to invest in domestic pharmaceutical production; address the ongoing and prevent future drug shortages; and shift away from reliance on Communist China. Currently, about 90% of drugs dispensed at U.S. pharmacies are generic drugs that overwhelmingly come from Communist China and India. The AMERICAN DRUGS Act seeks to fix this problem by leveraging the buying power of the federal government and requiring federal health programs to purchase American-manufactured generic drugs, if there are two or more American manufacturers of a generic drug.

Federal agencies typically make decisions about acquiring medications and drugs based on the Federal Acquisition Regulations (FAR), which prohibit federal agencies from purchasing products from a country that does not comply with the Trade Agreements Act (TAA). 

In Acetris, the Court considered the Department of Veterans Affairs’ (VA) restriction on drugs manufactured by Acetris, a New Jersey-based pharmaceutical company, whose products were formed with active ingredients from India, a TAA non-compliant country. Evidence from Customs and Border Patrol showed that the Acetris manufacturing process did not substantially transform the India-sourced active ingredients, confirming “that the tablets were a product of India for purposes of US government procurement ...” Despite this evidence, the Court found that Acetris’s drugs were in compliance with the FAR, thereby rendering the VA’s restriction improper. 

This decision poses significant risks to the military’s drug supply chain, which is already over-reliant on foreign-sourced pharmaceuticals. DoD’s interim report on Pharmaceutical Supply Chain Risks revealed that “54% of the DoD pharmaceutical supply chain is considered either high or very high risk, with dependency on non-[TAA] compliant suppliers, sourcing from China and India, or unknown.”

At a hearing of the Senate Armed Services’ Subcommittee on Personnel in April 2024, Col (ret) Victor Suarez explained that as a result of this decision, “a Chinese firm could make all the [active pharmaceutical ingredients] and precursor materials for a medicine, ship it to a U.S. subsidiary that does packaging and final labeling, and still be able to label it as American made. This would be considered an American-made drug and principally illustrates this loophole.”

The senators requested that DoD explain how the Acetris decision has affected its pharmaceutical acquisition strategy by September 30, 2024.

Read the full letter HERE.

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