[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



  ENFORCING THE LAWS ON INTERNET PHARMACEUTICAL SALES: WHERE ARE THE 
                                 FEDS?

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                         COMMITTEE ON COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 25, 2000

                               __________

                           Serial No. 106-112

                               __________

            Printed for the use of the Committee on Commerce

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
69-381                     WASHINGTON : 2000



                         COMMITTEE ON COMMERCE

                     TOM BLILEY, Virginia, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    RALPH M. HALL, Texas
FRED UPTON, Michigan                 RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
CHRISTOPHER COX, California          PETER DEUTSCH, Florida
NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California         BART STUPAK, Michigan
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
GREG GANSKE, Iowa                    TOM SAWYER, Ohio
CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma              GENE GREEN, Texas
RICK LAZIO, New York                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico           BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona             LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING, 
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland

                   James E. Derderian, Chief of Staff

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

              Subcommittee on Oversight and Investigations

                     FRED UPTON, Michigan, Chairman

JOE BARTON, Texas                    RON KLINK, Pennsylvania
CHRISTOPHER COX, California          HENRY A. WAXMAN, California
RICHARD BURR, North Carolina         BART STUPAK, Michigan
  Vice Chairman                      GENE GREEN, Texas
BRIAN P. BILBRAY, California         KAREN McCARTHY, Missouri
ED WHITFIELD, Kentucky               TED STRICKLAND, Ohio
GREG GANSKE, Iowa                    DIANA DeGETTE, Colorado
ROY BLUNT, Missouri                  JOHN D. DINGELL, Michigan,
ED BRYANT, Tennessee                   (Ex Officio)
TOM BLILEY, Virginia,
  (Ex Officio)

                                  (ii)


                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Durant, Betsy, Director, Office of Trade Programs, U.S. 
      Customs Service............................................    29
    Hubbard, William K., Senior Associate Commissioner for 
      Policy, Planning and Legislation, U.S. Food and Drug 
      Administration.............................................    11
    Posner, Ethan M., Deputy Associate Attorney General, U.S. 
      Department of Justice......................................    21
    Stovall, Hon. Carla J., Attorney General, State of Kansas....    34

                                 (iii)

  

 
  ENFORCING THE LAWS ON INTERNET PHARMACEUTICAL SALES: WHERE ARE THE 
                                 FEDS?

                              ----------                              


                         THURSDAY, MAY 25, 2000

                  House of Representatives,
                             Committee on Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice at 10 a.m., in 
room 2125, Rayburn House Office Building, Hon. Fred Upton 
(chairman) presiding.
    Members present: Representatives Upton, Burr, Ganske, 
Bryant, Bliley (ex officio), Klink, Green, Strickland, and 
DeGette.
    Staff present: Lori Wall, majority counsel; Amy Davidge, 
legislative clerk; and Chris Knauer, minority investigator.
    Mr. Upton. Good morning everyone. Here I am a little bit 
late. My second-grader is an author, and they had a little 
presentation at the school. So I needed to be there. I have a 
tape for anyone who wants to watch it.
    The asteroid.
    Today this subcommittee will hold its second hearing on the 
issue of Internet sales of prescription drugs. Since we met 
almost 1 year ago, we have continued our review of this 
important issue. This review has focused not only on domestic 
sales of pharmaceutical drugs over the Internet, but also 
international sales of pharmaceutical products.
    Domestically, States have taken the lead in enforcement 
activities. State Attorneys General met just last week in 
Michigan to look at a number of issues related to Internet 
sales, including the sale of prescription drugs. The National 
Association of Attorneys General has established the Online 
Sales of Drugs Working Group to address issues related to 
Internet pharmacies and has had success in implementing cost-
effective means to take action.
    I have been impressed with the level of coordination and 
cooperation between States on this issue. However, as we have 
heard from Carla Stovall, Attorney General of the State of 
Kansas, at our hearing last July, States are still limited in 
their ability to protect consumers. With the borderless nature 
of the Internet, States will need additional tools to increase 
their effectiveness beyond their State lines.
    In the coming weeks, I plan to introduce legislation that 
would give States the ability in appropriate circumstances to 
go into Federal court to more effectively protect its citizens. 
This will allow the good work of a number of States to have an 
impact in ensuring consumer safety nationwide.
    Unfortunately, the Federal Government has not been as 
effective in dealing with this issue. Despite several working 
groups charged with studying this issue at the Federal level, 
little has changed in the past year.
    Despite the fact that the FDA devoted more than 30,000 
staff hours in the first quarter of fiscal year 2000 alone to 
investigate hundreds of Internet sites, not a single arrest or 
conviction has occurred with respect to Web sites offering to 
sell prescription drugs. I want the FDA to explain today this 
failure to enforce the law.
    As I stated earlier, our investigation has also focused on 
drugs being shipped into the U.S. from foreign Web sites. As 
part of our review, committee staff have visited several U.S. 
Customs mail facilities. At these facilities, staff have 
witnessed significant quantities of pharmaceutical products 
being sent into the United States, many arriving in plastic 
ziploc bags with nothing indicating the bags' content, dosage 
instructions, warnings of potential side effects or possible 
drug interactions.
    I was troubled to learn that despite guidance issued by the 
FDA defining what pharmaceutical products will be allowed into 
the U.S. under the FDA's personal importation policy, in most 
instances this Guidance is being applied piecemeal or not at 
all.
    Clearly, FDA's policy in allowing certain personal 
importations of pharmaceutical products into this country is 
valid--what is troubling is that this policy is being exploited 
by foreign Web sites selling pharmaceutical products in the 
U.S. without even requiring a prescription from the person who 
purchased the drug.
    Evidence of the increase in pharmaceutical products being 
seized at our borders is clear. In 1999, almost 2 million pills 
mailed from overseas were seized by the Customs Service--more 
than 2.5 times the number confiscated in 1998, an increase that 
Customs attributes to foreign-based Internet pharmacies. In 
addition to prescription drugs, controlled substances and 
scheduled drugs such as GHB and Rohypnol, common date rape 
drugs, which that is Congress has now banned, are also being 
sent into country.
    I would encourage FDA and Customs to work together in 
stopping the flow of potentially dangerous drugs into this 
country. I pledge to continue my review of this issue and 
welcome our witnesses here today.
    I now yield time to Mr. Klink, ranking member of the 
subcommittee.
    Mr. Klink. Thank you Mr. Chairman for your vigilance in 
this matter and for holding this hearing.
    For the past 18 months, this subcommittee has looked into a 
range of activities related to online pharmacies, including how 
they operate; where they get their drugs from; what potential 
benefits and what potential threats they pose, and most 
importantly, who's overseeing them.
    Indeed, we know that responsible sites operate online, and 
offer beneficial services to the public. But that is not what 
this hearing is about. Instead, today, we focus on what the 
Federal Government is doing to protect consumers from the 
``rogue'' sites, or those sites that offer prescription drugs 
in violation of both State and Federal law, possibly at the 
expense of public health and safety.
    During our investigation, we have met with a number of 
Federal authorities and repeatedly we have sought detailed 
information on what is being done to address these concerns. 
Yet, with significant time having elapsed since our last online 
pharmacy hearing, and after numerous document requests and 
interviews, I believe we still lack a suitable approach for 
protecting the public.
    Since last July's hearing, the number of sites selling 
prescription drugs seems to have increased, not decreased. 
Moreover, the list of drugs offered by some sites seems to be 
growing. For example, in response to a February 28, letter I 
sent to Customs seeking information on the types of drugs they 
are finding being sent to the U.S.--many of which they believe 
are linked to Internet sites--they're reporting the following: 
Diazepam; various painkillers with codeine; Xanax; Codigesic; 
Lorazepam; Fenfluramine; and Rohypnol, the date rape drug that 
the Chairman mentioned. This agency also reports that they have 
experienced a significant increase in the amount of 
pharmaceuticals that are being shipped to our shores. Last year 
alone, Customs had a more than 400 percent increase over the 
previous year. Much of this increase they believe is linked to 
online pharmacies. At this pace, we have to wonder what next 
year will look like?
    These statistics, Mr. Chairman, suggest the problem is 
getting worse, not better. Yet today, still no Federal 
authority can explain who is coordinating this effort, what 
agency or Department is in charge. And I ask, why is that? We 
all appreciate the complexity of this problem. But with almost 
a year since our last hearing, it is not even clear what the 
two main agencies on this front--the Department of Justice and 
the Food and Drug Administration--are accomplishing.
    Here's an example: On February 1 I wrote to the FDA 
Commissioner Henry asking answers to these questions. After 
months of delay, I then had to send a second letter demanding 
answers to my first letter, I finally got a response on the 
March 23. FDA reported that during the 6-month period ending at 
the end of January 2000, they had spent more than 39,520 hours 
on this matter. That's very impressive. But when I asked if any 
prosecutions during that period of time as a result of this 
effort, they said: ``FDA is not aware that any Federal 
prosecutions or convictions for Internet pharmacy violations 
have occurred at this time.'' Again, I'll remind you that March 
23, the date of that letter, was only 2 months ago.
    I'm confused. This is not a new issue or one we don't know 
anything about. We've heard all the stories about people that 
have been able to obtain drugs online when posing as cats, 
dogs, dead people, young children, or as patients with contra-
indicated conditions. What we don't hear is how the Federal 
Government is aggressively attacking this problem.
    To their credit, many of the States--with far fewer 
resources and limited jurisdiction have attempted to curtail 
the activities of some rogue sites. But why aren't we doing the 
same at the Federal level? The FDA and DOJ repeatedly tell us, 
either ``we're working on it,'' or ``it's an active criminal 
investigation, and therefore we can't tell you anything.''
    Staff from DOJ said they were ``chomping at the bit'' to 
get these cases referred from the FDA whom they call the ``foot 
soldier'' on the front. FDA tells us that they have referred 
the cases to Justice. But where are the indictments and where 
are the prosecutions?
    Mr. Chairman, buying drugs online can be the health care 
equivalent of trick-or-treating in a bad neighborhood. 
Counterfeit or adulterated drugs can find their way into the 
U.S. via rogue sites, with potentially devastating results of 
potentially catastrophic proportions.
    We've seen reports of arrests that were made for smuggling 
in fake Viagra. We've seen accounts of arrests being made for 
the selling of fake Xenical, made from only starch and a small 
amount of an anti-asthmatic drug. We've even seen reports of 
fake ampicillin and AZT made from cassava starch and anti-mold 
powder. How prevalent are these bogus drugs? We don't know. But 
if we don't get some control over the rogue Internet sites, we 
may find out the hard way.
    Now we've heard talk about self-regulation when it comes to 
this Industry. In fact, last July when we had our last hearing 
on this matter, the two companies representing legitimate 
online pharmacies made commitments to this subcommittee that 
they would have online pharmacy summits to discuss how to 
address these problem. At that time, and even to this day, many 
believe that the National Association of Boards of Pharmacy's 
VIPPS program is the most suitable approach for doing this. I 
generally applaud the concept and the sincerity of that 
program. But, again, after almost a year, only five sites have 
bothered to obtain a VIPPS seal. Does this mean that only a 
tiny fraction are willing to play by these rules? Should 
consumers feel safe shopping online when the vast majority of 
sites don't have a VIPPS seal? In what other industry would 
such a low compliance rate be tolerated? In other words, is 
that system working?
    Mr. Chairman, the U.S. has a very strict law on how drugs 
can and cannot be dispensed by doctors and pharmacists. It is a 
good system that has generally served us well for decades. Yet 
many online pharmacies have managed to turn this system on its 
head. A patient in State (A) has his prescription written by a 
mystery doctor they've never seen they've never met. We don't 
even know if they're a doctor. Their drugs are then sent by 
somebody--who may not even be a licensed pharmacist--from a 
source that may or may not even be located in the U.S. Is that 
what we envision as sound public health policy? Is it illegal. 
I'm hard pressed--or is it legal rather. I'm hard-pressed to 
believe that it is.
    In the near future, Mr. Chairman, for some segments of our 
population, online pharmacies could significantly affect how 
drugs are ultimately sold and purchased. So far, we've seen a 
generally narrow range of drugs--mostly lifestyle drugs--sold 
through the Internet and mostly at similar prices. But in the 
future, there will be price competition. Some citizens already 
head to Mexico and Canada to buy their drugs, even though that 
practice is not without risk. What makes us think people won't 
buy from cheaper Internet sites that don't require a doctor or 
pharmacist, once they begin to offer their drugs? What then? 
Will the Internet become a global flea-market for those who 
can't afford today's high-priced prescriptions, or for those 
looking for drugs of abuse? Will we be comfortable with such 
system? We need to think about this, because that is what may 
be on the horizon.
    And, finally, Chairman, we have the question of what role 
the drug companies should be playing in this area. For the most 
part, they've remained oddly quiet. We have not heard much from 
the drug manufacturers. Should they be quiet? Should they be 
participating? After all, it is their products that are being 
offered by many of these rogue sites. Are they comfortable with 
that? What do we as policymakers think they should be doing and 
why? Are we prepared to ask them? At the very least, should 
these companies post consumer information on their official 
promotional sites--such as www.viagra.com, www.propecia.com, or 
www.xenical.com--warning patients about the potential risks of 
buying online? What about providing a link to FDA's web site 
where an in-depth discussion on this matter can already be 
found? Because, this could be done almost immediately, it would 
cost almost nothing, and I am hereby asking each major drug 
company with a promotional site for drugs frequently being sold 
over the Internet to do this immediately. Why not? Rather than 
using these sites only to promote their drugs, what about using 
them also to help consumers make safer decisions about buying 
their drugs, their products online? Be responsible.
    Mr. Chairman, I conclude again by thanking you for holding 
this hearing and being vigilant on this subject. As you clearly 
understand, the online pharmacy world is already and will 
continue to challenge our public health policies. While these 
sites offer many potential benefits, the potential downside and 
risks are very real. We must begin to formulate a comprehensive 
strategy to this matter before people get hurt or killed. So 
far, I don't believe that the Federal Government has lived up 
to this task. I once again look forward to hearing from the 
people who are here in the hearing room today as to how they 
intend to proceed, and I thank you, Mr. Chairman.
    Mr. Upton. Thank you, Mr. Klink.
    Mr. Bliley.
    Chairman Bliley. Thank you, Mr. Chairman.
    For more than a year this committee has looked at the issue 
of Internet pharmacy sales. Since our investigation began, much 
has changed. We have seen a dramatic increase in the number of 
Web sites selling pharmaceutical products. Most sites appear to 
operate legally and provide convenient, affordable service to 
millions of Americans.
    However, there are also Web sites that appear to be 
violating the law. More troubling is there appears to be an 
increase in Web sites outside the United States that are 
dispensing medications to consumers in the U.S. even without a 
prescription.
    Our hearing today will examine what efforts Federal and 
State agencies have taken in order to address this issue and 
enforce the laws that currently govern pharmacies and doctors 
on the Internet.
    As this committee has studied this issue over the last 18 
months, it has become clear that Federal enforcement and 
coordination on this issue have fallen short. At the last 
hearing this subcommittee held on the topic of Internet 
pharmacies in July 1999, I called on the President to establish 
a joint Federal-state Task Force to coordinate current law 
enforcement efforts and to assess whether they are adequate to 
protect consumers.
    Following the hearing, on August 5, 1999, the President 
established by Executive Order a Federal Working Group on 
unlawful conduct on the Internet, including prescription drugs.
    Although I supported the creation of this Working Group and 
its underlying principles, I was disappointed the President 
chose not to include State regulatory and enforcement groups as 
part of this Working Group. Since the practice of medicine and 
pharmacy have traditionally been regulated at the State level, 
I believed it was imperative that they be included.
    To date, States have led the way in enforcing the law 
against illegal actions taking place on the Web. State 
Attorneys General across the country met just last week to 
discuss illegal Internet sales of prescription drugs and more 
than 20 States have brought actions against pharmacies and 
doctors violating their laws. Because the Internet knows no 
boundaries, States have a harder time stopping bad actors.
    Because of this, I join Chairman Upton in announcing a 
proposal to empower State Attorneys General by granting them 
authority in appropriate cases to obtain equitable relief under 
Federal law in Federal court. Chairman Upton and I plan to 
jointly introduce such legislation in the coming weeks. This 
legislation will allow State Attorneys General to continue 
their good work in making the Internet safe for all.
    Unfortunately the strides made by many States to enforce 
the law have not been made at the Federal level. In fact, just 
the opposite has occurred. This committee has witnessed not a 
single enforcement action by the Federal Government related to 
illegal sales of prescription drugs on the Internet.
    Today, the FDA has submitted testimony stating there have 
been 43 arrests and 22 convictions resulting from FDA 
investigations involving products over the Internet. Not a 
single one of those arrests or convictions were related to 
Internet prescription drugs being sold over the Internet. 
Despite no record of stopping illegal prescription drug sales, 
the Administration proposes giving the FDA even more authority 
in the area of Internet pharmacies.
    Moreover, the Administration continues to ignore the 
biggest problem we face--foreign Web sites shipping drugs into 
the United States.
    Today, we will hear from the U.S. Customs Service who have 
documented a 450 percent increase in seizures of 
pharmaceuticals in only 1 year. While the President has called 
for additional regulations to govern domestic Web sites selling 
pharmaceuticals, he has all but ignored the problem we are 
facing at our borders.
    While the President has talked a big game about Internet 
pharmacies, not one arrest or conviction related to Internet 
prescription drug sales has taken place since this subcommittee 
last met on this issue almost 1 year ago.
    While States across the country with fewer resources than 
the FDA or the DOJ have been proactive, the Federal Government 
has been silent in the area of enforcement.
    I will continue to be vigilant in looking at this issue and 
am devoted to holding additional hearings if need be. I look 
forward to hearing from our witnesses today and thank you all 
for joining us.
    Mr. Upton. Thank you, Mr. Chairman.
    Ms. DeGette.
    Ms. DeGette. Thank you, Mr. Chairman. I would like to join 
with my colleagues in thanking you or holding this hearing on 
this important issue.
    This is, as you've just heard from the Chairman, this is 
the second hearing we've had on this topic; the last one was in 
July of last year. And the Chairman is right, much has changed 
in the last year but there is something that has not changed, 
and the thing that has not changed is we still have not had one 
prosecution by the Federal Government for these often illegal 
sales. And so I would echo the concerns expressed by my ranking 
member and by those on the other side of the aisle about this 
issue.
    The good news is, the Internet has opened up a whole new 
world of convenience. We can research any topic, we can chat 
with somebody a half a world away, we can purchase anything. 
But, as we know, hazards exist as well. In the last hearing we 
had on this issue we talked about the benefits of 
pharmaceutical sales on the Internet. And it's true that 
convenience of shopping on the Internet for prescriptions is 
undeniable for some patients. But there are still some problems 
that are dangerous and perhaps even deadly.
    As the co-chair of the Congressman Diabetes Caucus, I know, 
for example, many individuals with chronic illnesses like 
diabetes benefit enormously from being able to buy their 
supplies on the Internet. But if we don't have adequate 
oversight, there can be improper and even illegal dispensing of 
drugs over the Internet and we've got to address this. On some 
Internet pharmaceutical sites we've removed both the doctor's 
role in prescribing drugs and the pharmacist's role in reducing 
adverse effects and providing the patient yet another source of 
medical advice.
    We've seen these sites. We saw them last year and I've 
looked at them since. A few clicks of the mouse on an online 
questionnaire must never be a substitute for medical treatment. 
I don't think that an Internet pharmacy should be a way to 
skirt professional medical practices by allowing individuals to 
access inappropriate and perhaps even illegal drugs.
    And I will also, by the way, join with the Chairman in my 
view that simply that the Federal Government can't simply buck 
their responsibility by saying that oversight of the medical 
and pharmaceutical professions have traditionally been a State 
and local role. The Internet is a national and international 
phenomenon and has to be dealt with in a national manner.
    I've got a study right here from the Institute of Medicine 
called, ``To Err is Human, Building a Safer Health System.'' In 
that report it was estimated that between 44,000 and 98,000 
people die annually as the result of medical errors. According 
to the report, ``A good deal of research has identified 
medication error as a substantial source of preventable 
error.'' The report continues, ``Because the burden of harm to 
patients is great, the cost to society is large, and knowledge 
of how to prevent the most common kinds of errors is well 
known.'' The committee singles out medication safety as a high 
priority area for all health care organizations.
    Well, if we have problems with medication error with folks 
that are actually under medical care, imagine the medication 
error you can get when people are just clicking on a computer 
screen before they get their medications.
    I can't help but remember the lady who was able to get 
Viagra prescribed for both her dead father and her dog. And 
this is a real concern, I think, for this committee, and I know 
for all of us in the medical and pharmaceutical communities as 
well.
    One of the recommendations of the report is that patients 
should tell physicians about all medications they are taking 
and ask for information in terms that they understand before 
accepting medications. Clearly that won't happen if people are 
ordering their own medications on line through simple 
questionnaires or worse.
    We are going to hear testimony today, and I know our 
ranking member referred to this, that the FDA has devoted over 
40,000 staff hours to this important issue, but I'm very 
concerned that the FDA can't point to one single prosecution or 
conviction for Internet pharmacy violations as late as March of 
this year. And I would like to know if any of the witnesses or 
anyone on the committee can point to some changes that we make. 
I have some ideas of my own of how we can perhaps increase the 
commitment both of the Federal agencies and also streamline 
some of the rules and legislation to allow these prosecutions 
to occur.
    Finally, I would like to commend our ranking member 
representative Klink for his outstanding leadership on this 
issue and his continued diligence. I look forward to working on 
both sides of the aisle to see how we can begin to resolve this 
problem, intercept these drugs, and have some more 
prosecutions.
    I yield back the balance of my time.
    Mr. Upton. Thank you.
    Dr. Ganske.
    Mr. Ganske. Thank you, Mr. Chairman. I'm going to listen 
with interest to the testimony today. Let me just throw another 
angle into this issue. I got this letter from a constituent. It 
was actually addressed to Senator First and he sent a copy to 
me. He said, ``I enjoyed your response to President Clinton's 
speech last evening. As a retired hospital administrator and 
someone involved in fundraising, I would like to make a 
suggestion needing investigation.''
    ``For senior citizens, the best thing Congress can do is to 
help with medicine costs, not to pay medical costs, but to make 
the costs fair. Let me give you an example.''
    ``After completing a University of Iowa Study on Celebrex, 
200 milligrams for arthritis I got a prescription from my M.D. 
and picked it up at the hospital pharmacy. My cost was $2.43 
per pill with, `A volunteer discount.' Later on the Internet I 
found the following. I can order through''--and I'll leave out 
the company--``in Geneva, Switzerland after paying either of 
two American doctors $70 for a phone consultation at a price of 
$1.05 per pill, plus handling and shipping.''
    ``I can order through a Canadian pharmacy if I use a doctor 
certified in Canada or my doctor can order it on my behalf 
through his office for 96 cents per pill plus shipping.''
    ``I can send $15 to a Texan and get a phone number at a 
Mexican pharmacy who will sell it without a prescription. A 
friend now in Texas priced them at $52.50 per 100 pills in 
Progresso, Mexico.''
    ``After the Federal Government gives funds for research and 
development and then gives tax breaks to pharmaceutical 
companies via write offs and depreciation, why are Americans 
raped on pharmaceutical costs?''
    Well, I think that we're going to see a lot of senior 
citizens like my constituent making purchases through the 
Internet, Mr. Chairman, and from overseas because there's a 
huge cost differential. And the thing that I hear most about 
the pharmaceutical problem is that there is an inequity between 
drugs that are sold in Canada and Mexico, for instance and what 
their costs are in the United States.
    So one of the things we ought to think about on this is, 
are we going to have increased enforcement so that senior 
citizens who may try to take advantage of these decreased costs 
will find that the FDA, for example, is acting as the policemen 
preventing them from getting their drugs at a reduced price. 
Or, are there problems with verification of the medicines that 
they're actually receiving. That's the line of questioning that 
I want to take in this hearing. And I yield back. Thank you.
    Mr. Upton. Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. I would like to ask 
unanimous consent for my full statement to be placed in the 
record. And following up my Iowa colleague, coming from 
Houston, Texas, I can relate to and I know very well where 
Progresso, Mexico is, along with every other border crossing. 
And the success my constituents have had driving 6 hours to 
fill prescriptions at one time. They would fill them for their 
neighbors, and because of the effort at the border now, it's 
only them and their own prescriptions and a 90-day supply.
    My concern though is the quality and the purity of the 
pharmaceuticals, whether we get it from Thailand or Mexico or 
anywhere else. And, again, I'm concerned about the costs and 
hopefully Congress will address that this year. And sooner or 
later, although hopefully sooner, but I hope this hearing will 
talk about the quality and the purity of those pharmaceuticals 
from around the world to see if people are really purchasing 
what they think they are.
    So with that, Mr. Chairman, I'll just put the remainder of 
my statement in the record.
    Mr. Upton. Without objection all members will be able to 
have the opportunity to put their entire statement into the 
record.
    [The prepared statement of Hon. Gene Green follows:]


  Prepared Statement of Hon. Gene Green, a Representative in Congress 
                        from the State of Texas

    Mr. Chairman, I would like to start by thanking you for holding 
this important hearing.
    While the growth over the past several years in e-commerce has been 
a positive experience for both consumers and retailers alike, this 
Committee has tried to look at ways to balance the right of open access 
to the Internet with responsible safeguards to protect consumers from 
online predators and scams.
    To ensure this continued growth and prosperity, we need to provide 
appropriate safeguards to protect consumers. An emerging area of 
concern is the growth of on-line pharmacies who operate without regard 
for standard practices of medicine.
    While this Congress is attempting to reduce the cost of 
prescription drugs for seniors, we have a responsibility to ensure that 
the cheaper alternatives are safe and effective.
    Currently, the FDA has the authority to protect consumers against 
the importation, sale or distribution of illegal, unapproved or 
counterfeit drugs, while the FTC has jurisdiction to protect consumers 
from unfair or deceptive acts or practices, including the false 
advertisement of drugs.
    Despite this authority, these agencies have been slow to act 
against Web sites selling prescription drugs illegally. This gap has 
been filled, to a certain extent, by the states. Action by the FDA and 
FTC, however, is still necessary.
    Additionally, as the number of Internet sites outside the U. S. has 
grown, the role of the Customs Service has expanded as well. The number 
of seizures at Customs mail branches has increased dramatically, and 
Customs has worked closely with authorities in other countries to 
combat illicit Internet pharmacies. However, without assistance from 
the FDA, the Customs Service cannot be effective in stemming the flood 
of drugs being shipped into this country from abroad.
    We need to encourage state and local authorities to continue their 
efforts against online pharmacies, encourage the FDA and FTC to join in 
those efforts where feasible, and push the, FDA to work more closely 
with Customs to stem the tide of drugs flowing in from outside our 
borders.
    Thank you for the time, Mr. Chairman, and I look forward to the 
testimony of the witnesses.

    Mr. Upton. Mr. Bryant.
    Mr. Bryant. Mr. Chairman, I too thank you for this follow-
up hearing that you're holding today and I think just about 
everything that could be said about this issue this semi-
informed panel has been said, and I am going to yield back my 
time. I am anxious to hear from the people who are perhaps a 
little more knowledgeable on this.
    Mr. Upton. Mr. Burr.
    Mr. Burr. No opening.
    Mr. Upton. Welcome. The panel this morning includes Mr. 
William Hubbard, Senior Associate Commissioner for Policy, 
Planning and Legislation at the Food and Drug Administration; 
Mr. Ethan Posner, Deputy Associate Attorney General from the 
Department of Justice; Ms. Betsy Durant, Director, Office of 
Trade Programs, U.S. Customs Service; and The Honorable Carla 
Stovall, Attorney General, State of Kansas. Welcome back.
    As you all know we have had a long tradition in this 
subcommittee of taking testimony under oath. Do any of you have 
objection to that?
    [No response.]
    Mr. Upton. If not, we also have, under the committee rules, 
you're entitled to counsel. Do any of you desire counsel?
    [No response.]
    Mr. Upton. If you would all stand and raise your right 
hands.
    Do you swear to tell the truth, the whole truth, and 
nothing but the truth, so help you God?
    [Chorus of ayes.]
    Mr. Upton. Thank you. You are now under oath. Your 
statements in their entirety are part of the record. We have a 
little clock up here. We would like to limit your remarks, if 
we can, your opening statements to 5 minutes.
    Mr. Hubbard, we will begin with you.

 TESTIMONY OF WILLIAM K. HUBBARD, SENIOR ASSOCIATE COMMISSIONER 
    FOR POLICY, PLANNING AND LEGISLATION U.S. FOOD AND DRUG 
  ADMINISTRATION; ETHAN M. POSNER, DEPUTY ASSOCIATE ATTORNEY 
 GENERAL, U.S. DEPARTMENT OF JUSTICE; BETSY DURANT, DIRECTOR, 
OFFICE OF TRADE PROGRAMS, U.S. CUSTOMS SERVICE; AND HON. CARLA 
         J. STOVALL, ATTORNEY GENERAL, STATE OF KANSAS

    Mr. Hubbard. Thank you, Mr. Chairman. I have a written 
statement for the record, but I'll just make a few opening 
remarks.
    While the Agency has been very aggressive in going after 
unapproved drugs on the Internet, we have also, of course, been 
looking at the issue of approved drugs being sold through these 
online questionnaires, and we've learned a lot since last 
year's hearing.
    We've learned that most of these web sites actually have 
licensed pharmacists and licensed physicians at the other end; 
and that most of the drugs are not diverted; they're being 
purchased through normal channels. We also know that the States 
do not in most cases have laws to adequately address this sort 
of problem.
    There is a gap between Federal and State law that falls in 
there that you suggested that you have some ideas for; and thus 
the cases are harder to make and we certainly can talk about it 
more today. But we have been very active. We have done many 
things. We have set up an education program to tell people that 
this is a potentially dangerous practice and to understand how 
to order drugs over the Internet, because there are, of course, 
good sites. But then there are sites that are not so good.
    We have partnered quite a bit with not only the States, but 
with other Federal agencies. We've done a lot in enforcement. 
We have used search engines and new technology to look at the 
sites that are out there. We have developed the case assessment 
process to follow the leads that come our way. We have 
redeployed personnel in this area. We have given the Congress a 
budget request for next year that would increase our efforts 
here and would evaluate over 400 web sites.
    On the civil side, Mr. Chairman, we have taken action 
already on more than 50 web sites and we have 54 more under 
investigation. And as part of that we have issued 38 warning 
letters, 17 so-called ``cyber letters'' to foreign countries, 
five injunctions have been sought, or have been done, 12 
seizures of drugs have occurred, 11 recalls have occurred, 18 
voluntary destructions of shipments of drugs have occurred, and 
17 import alerts have occurred.
    On the criminal side, we have 132 investigations underway; 
86 are full-blown, open criminal investigations and 46 more 
preliminary ones that are moving in that direction. Of those, 
49 are the sorts of online pharmacy that use questionnaires and 
83 are those that are selling unapproved drugs. And, as you 
noted, that results in 43 arrests and 22 convictions, and we've 
also referred at least 11 cases to the States who are 
independently taking action.
    There is a difficulty, though, in winning these cases with 
these online questionnaires for the approved drugs; it's 
logistically difficult. We have to track down the site, the 
domain, the true business owner. In many cases there are 
multiple sits being operated by one entity. We have to find 
them and their operator. That's a lot of work.
    But then beyond that, when we find that the site exist and 
is selling a drug through a licensed pharmacy and a licensed 
physician, and if the State cannot tell us that that 
prescription being written is not valid, we have a great deal 
of difficulty making a successful case. I'm sure we will be 
talking about that more today, Mr. Chairman.
    Thus, we believe legislation is needed in this area. We 
prepared a legislative bill that is, I believe, before the 
Congress. It requires State licensure of these online 
pharmacies that would build upon Mr. Klink's concepts last year 
of disclosure which were, I think, universally accepted as a 
good idea. That would ask or declare that they are in 
compliance. In other words, it gives the consumer some sort of 
declaration that this is a site that meets the requirements of 
State law, as opposed to one that would not have that.
    We would ask that the site notify us when they beginning to 
operate to understand if there are some skeptical activities 
going on. We have asked for civil money penalties the deter 
some of these activities. And most importantly, as you yourself 
have acknowledged, we believe there needs to be a State cause 
of action. Because, in the end, States are most responsible for 
the regulation of pharmacy and medicine and we believe giving 
the States the cause of action would greatly enhance their 
ability to work, to go into Federal court on these cases.
    And, last, I believe, Mr. Chairman, that the noose is 
slowly tightening over these domestic sites. The States are 
changing their laws, investigations are under way. Progress is 
being made even though we're not seeing the convictions you're 
asking about. But I believe we can get these domestic sites 
under control. The issue will, I think, be, as you're saying 
today, these foreign sites; what can we do about them.
    And one item that we have that we would like to urge you to 
consider is that in our bill we would have a site that's 
legitimate, have some sort of declarational seal identifying a 
legitimate site so at least a consumer, when he's surfing 
through the web, and sees a site that has that declaration, 
he'll know there is a legitimate, licensed, pharmacist at the 
other end; he can call him on the phone, he can talk to him, 
he's a real person there. He's not some guy in a garage in some 
third-world country.
    So with that, Mr. Chairman, I'll end my testimony.
    [The prepared statement of William K. Hubbard follows:]


Prepared Statement of William K. Hubbard, Senior Associate Commissioner 
   for Policy, Planning and Legislation, Food and Drug Administration
                              introduction

    Mr. Chairman and Members of the Committee, I am William K. Hubbard, 
Senior Associate Commissioner for Policy, Planning and Legislation at 
the Food and Drug Administration (FDA or the Agency). I am pleased to 
come before the Subcommittee to discuss with you the benefits and risks 
of pharmaceutical sales over the Internet and what the Agency has been 
doing to address these issues since your hearing last year. The sale of 
consumer products over the Internet has grown rapidly, including the 
sale of drugs. The growth in online drug sales by reputable pharmacies 
is a trend that can provide significant benefits to consumers. On the 
other hand online drug sales also present risks to purchasers and some 
unique challenges to regulators, law enforcement officials and policy 
makers. FDA is concerned about the public health implications of 
Internet drug sales, and we are responding to these concerns as part of 
our overall goal of developing and implementing risk-based strategies 
to protect public health and safety.
    Although other products regulated by the Agency, such as medical 
devices, medical test products, foods, dietary supplements and animal 
drugs also are sold online, this testimony will focus on online drug 
sales. We will discuss the advantages and risks of online drug sales, 
outline FDA's authority and enforcement activities in this area, and 
describe new initiatives we are taking to better respond to the 
regulatory challenges we face.
    In the context of prescription drug sales over the Internet, the 
private sector has an important role to play in promoting consumer 
education and in providing assurance to consumers about the quality of 
products and services. Our challenge is to make sure that the same 
safety net that protects the consumer who purchases prescription drugs 
at the corner store is just as strong when the click of a mouse is used 
to purchase from a venue in cyberspace. Rapid technological 
developments have changed the nature of the challenges we face today 
and we must be flexible in developing solutions that are appropriate to 
meeting these challenges. As electronic commerce embraces global 
markets, we should strive for consistent principles across State, 
national, and international borders that promote safety and efficacy, 
regardless of the jurisdiction in which a particular buyer or seller 
resides.


                     benefits of online drug sales

    The use of the Internet by our nation's citizens, from school age 
children to seniors, has opened up vast new opportunities for the 
exchange of information and for enhancing commerce in all types of 
consumer products. Electronic mail and chat groups have dramatically 
facilitated communications. Information gathering that once took hours 
or days of research, whether for a student's homework assignment or to 
look up information on the medical condition of a family member, can 
now be accomplished in minutes.
    The Internet is rapidly transforming the way we live, work, and 
shop in all sectors of the economy. In the health sector, tele-medicine 
allows people in remote areas to access the expertise of doctors in the 
nation's finest academic health centers. The Internet permits an 
increasing number of individuals to obtain a plethora of medical 
information that often helps them to understand health issues and 
treatment options. In fact, more than 22 million Americans used the 
Internet last year to find medical information, either in documentary 
resources or through online discussions with health professionals. 
According to Investor's Business Daily, 43 percent of web surfers 
access health care data online each year. Conducting research regarding 
their health concerns is the sixth most common reason that people use 
the Internet, and according to the market research firm, Cyber Dialogue 
Inc. The number of persons accessing health care data is growing by 70 
percent a year.
    Prescription drug sales on the Internet can provide tremendous 
benefits to consumers. These benefits are many and include: access to 
drugs for the disabled or otherwise home-bound, for whom a trip to the 
pharmacy can be difficult; the convenience of shopping 24 hours a day; 
an almost unlimited number of products for customers; and privacy for 
those who don't want to discuss their medical condition in a public 
place. Hyperlinks and search programs provide online customers with 
written product information and references to other sources of 
information much more easily than in the traditional storefront. 
Finally, as the use of computer technology to transmit prescriptions 
from doctors to pharmacies expands, a reduction in prescription errors 
may be possible.
    While online pharmaceutical sales will be important for some 
customers, it must be noted that the traditional ``brick and mortar'' 
pharmacy offers benefits or services that are often not available 
through the Internet, such as immediate access to prescription drugs 
needed for immediate treatment. These pharmacies will undoubtedly 
remain an essential component in the delivery of effective health care.
    The challenge for government at both the State and Federal level is 
to pursue policies that will allow legitimate electronic commerce to 
flourish but provide that safety is assured. Consumers will have 
confidence in the quality of the medical prescription and in the 
medicine delivered because the protection for online consumers is 
equivalent to the safeguards of the traditional local pharmacy and the 
practice of medicine and pharmacy.


                      concerns about online sales

    As beneficial as this new technology can be, the Internet also 
creates a new marketplace for activity that is already illegal, such as 
the sale of unapproved new drugs, prescription drugs dispensed without 
a valid prescription, or products marketed with fraudulent health 
claims. As FDA considers the issues related to online drug sales, we 
recognize that there are various types of websites used for drug sales. 
Many sites focus on selling prescription drugs and have been referred 
to by some as ``Internet pharmacies.'' These sites offer for sale 
either FDA-approved prescription drug products, or in some cases, 
unapproved, illegal versions of prescription drugs. The sales sites of 
legitimate, properly licensed pharmacies provide benefits to consumers, 
however, those that are unlicensed or otherwise engaged in the illegal 
dispensing of prescription drugs pose a serious threat to the health 
and safety of American citizens. Other drug sales sites offer for sale 
unapproved drug products, products making fraudulent health claims, or 
drugs for recreational use. Examples of these sites are those that sell 
products containing gamma hydroxy butyrate (GHB), an unapproved drug 
used recreationally, for body building and for incapacitating the 
victims of sexual assaults, or sites that offer unproven cancer 
therapies. It should be noted that with regard to GHB, early this year 
the President signed legislation, which originated in this 
subcommittee, placing GHB in Schedule 1 of the Controlled Substances 
Act. While the increase in ``Internet pharmacy'' sites engaged in 
illegal sales is seen by some as a particularly potent threat, FDA 
believes that the non-pharmacy sites are harmful, or in some cases more 
so, and we have moved aggressively against those that operate 
unlawfully.
    The unique qualities of the Internet, including its broad reach, 
relative anonymity, and ease of creating new websites or removing old 
ones, pose new challenges for the enforcement of existing laws. FDA has 
found that most drug sale websites are actually made up of multiple 
related sites and links, thereby making investigations much more 
complex and resource intensive. The global nature of the Internet 
creates particular problems for effective law enforcement. Different 
approaches to drug approval and marketing in foreign countries further 
complicate law enforcement issues for United States' (U.S.) officials. 
FDA and other U.S. government agencies need to work closely with 
foreign governments to share information and to develop mechanisms for 
cooperative law enforcement.


FDA Authority

    As you know, the establishment of FDA as it exists today grew out 
of a time early in the century when consumers were victimized by 
dishonest purveyors of fraudulent potions and compounds that were 
ineffective, dangerous, or both. A system of drug regulation was 
established in this country that has served us well. Under this system, 
FDA reviews new drugs to assess their safety and efficacy. In addition, 
certain types of drugs must be prescribed and dispensed only by 
licensed health care professionals. The prescribing requirement is 
based on the principle that certain drugs have risks of such 
significance associated with them that they should be administered only 
under the supervision and recommendation of a ``learned 
intermediary''--that is, a licensed practitioner with the education and 
training necessary to oversee the administration of potentially harmful 
drug products. Similarly, these products may only be dispensed by a 
licensed professional that can help to assure proper dosing and 
administration and can provide important information on the drug's use 
to patients. These requirements are crucial components of the risk 
management system for drugs in the U.S.
    The types of unlawful conduct involving online drug sales that FDA 
has identified are similar to unlawful activities that occur in other 
sales contexts. Under the Federal Food, Drug, and Cosmetic (FD&C) Act, 
FDA has the legal authority to take action against:

 the importation, sale, or distribution of an adulterated or 
        misbranded drug;
 the importation, sale, or distribution of an unapproved new 
        drug;
 illegal promotion of a drug;
 the sale or dispensing of a prescription drug without a valid 
        prescription; and,
 counterfeit drugs.
    When the Internet is used for an illegal sale, FDA, working with 
the Department of Justice (DOJ), must establish the same elements of a 
case, develop the same charges, and take the same actions as it would 
if another medium, such as a storefront or a magazine, had been used. 
FDA has investigated and referred cases for criminal prosecution and 
initiated civil enforcement actions against online sellers of drugs and 
other FDA-regulated products, particularly sellers of drugs not 
approved by the Agency. As will be described later, FDA has 
significantly expanded its enforcement activities during this past year 
with regard to online drug sales.


State Regulation of Practice of Medicine, Pharmacy and Dispensing of 
        Drugs

    The States have enacted laws regulating the practice of pharmacy 
and the practice of medicine in order to protect patients from harm 
resulting from the use of unsafe drugs, counterfeit drugs, and the 
improper practice of medicine and pharmacy. Under many of these laws, 
to receive a prescription drug for the first time, a patient generally 
must be physically examined by a licensed health care practitioner who 
determines the appropriate treatment and issues a prescription for an 
FDA-approved drug. The patient then has the prescription filled by a 
registered pharmacist working in a licensed pharmacy that meets state 
practice standards.


Use of the Internet to Bypass the Regulatory System

    Even with these Federal and State systems in place, there are those 
who try to circumvent established safeguards, and the Internet provides 
them with new opportunities for doing so. It is fair to say that the 
speed and ease of ordering products on the Internet that attracts 
consumers can likewise entice unscrupulous sellers to use the Internet 
as their new medium of choice. Individuals not licensed to sell 
prescription drugs can easily create websites that appear to represent 
legitimate pharmacies. The fact that operators can easily change the 
location and appearance of their Internet sites makes enforcement all 
the more difficult. Unlike most other forms of electronic commerce, the 
unauthorized sale of prescription and unapproved drugs poses a 
potential threat to the health and safety of consumers.
    Patients who buy prescription drugs from an illegitimate site are 
at risk of suffering adverse events, some of which can be life 
threatening. These risks include potential side effects from 
inappropriately prescribed medications, dangerous drug interactions or 
contaminated drugs, as well as the possible ill effects of impure or 
unknown ingredients found in drugs manufactured under substandard 
conditions. Further risk to patients is posed by their inability to 
know what they are really getting when they buy some of these drugs. 
Although some patients may be purchasing genuine product, some may 
unknowingly be buying counterfeit copies that contain inert 
ingredients, outdated legitimate drugs that have been diverted to 
illegitimate resellers, or dangerous sub-potent or super-potent 
versions that were improperly manufactured. Moreover, consumers who are 
desperate for a cure to a serious medical problem may be more 
susceptible to purchasing an unapproved product.
    FDA is concerned about the proliferation of sites that substitute a 
simple online questionnaire for a face-to-face examination and patient 
supervision by a health care practitioner. According to the American 
Medical Association, a health care practitioner who offers a 
prescription for a patient they have never seen before, based solely on 
an online questionnaire, generally does not meet the appropriate 
medical standard of care. Just last month, the Federation of State 
Medical Boards received the report of its Special Committee on 
Professional Conduct and Ethics, which found that ``Prescribing of 
medications by physicians based solely on an electronic medical 
questionnaire clearly fails to meet an acceptable standard of care and 
is outside the bounds of professional conduct.'' This finding is 
especially important in light of the primary responsibility of States 
in regulating the practice of medicine. Additionally, FDA is concerned 
that the use of such questionnaires may jeopardize the privacy of a 
patient's medical records. We will continue to play a role in the 
Administration's efforts with the private sector to implement 
appropriate protections for patient's medical information. We also will 
continue to distinguish legitimate online communications from unlawful 
conduct that increases patient risk.
    The Agency is equally concerned that in some Internet transactions, 
there is an apparent absence of any health professional/patient 
relationship. This is a particular concern where the prescription 
involves a first-time use by a patient or where the patient may be 
taking other medications. FDA is concerned that the selection of 
prescription drug products or treatment regimens for a particular 
patient should be made with the advice of a licensed health care 
practitioner familiar with the patient's current health status and past 
medical history. In situations where a customary physician-patient 
relationship does not exist, the patient may be essentially practicing 
self-diagnosis. Consequently, the risk of negative outcomes such as 
harmful drug interactions, contraindications, allergic reactions or 
improper dosing is greatly magnified.


Jurisdictional Issues

    In addition to magnifying existing problems by reaching potentially 
millions of consumers worldwide, online drug sales create unique issues 
for regulatory and law enforcement bodies at the State, Federal and 
international level. Internet technology can obscure the source of the 
product as well as provide some degree of anonymity to persons 
responsible for making and shipping the product. The participants in a 
transaction can be widely dispersed geographically (in different States 
or countries) and they may never meet. Thus, the regulatory issues 
cross traditional regulatory boundaries as well as Federal and State 
jurisdictional lines. If one or more participants in the transaction 
are located outside of the U.S., the task of regulating the activity is 
further complicated.
    The sale of drugs to U.S. residents via foreign websites is an 
extremely challenging area. Some medications sold on the Internet may 
be legal in foreign countries but not approved for use in the U.S., and 
some products may include addictive and dangerous substances. Products 
not approved for sale in the U.S. often do not conform to the good 
manufacturing practice and quality assurance procedures required by 
U.S. laws and regulations, and it is illegal for a foreign pharmacy to 
ship such drugs into the U.S. Foreign sales pose the most difficult 
challenge for U.S. law enforcement because the seller is not within 
U.S. boundaries. Although FDA has jurisdiction over a resident in a 
foreign country who sells to a U.S. resident in violation of the FD&C 
Act, from a practical standpoint, the Agency is hard pressed to enforce 
the law against foreign sellers. FDA confronts the same obstacles 
facing other U.S. regulatory and law enforcement agencies seeking to 
hold foreign actors accountable for violations of Federal law. FDA 
efforts are mostly limited to requesting the foreign government to take 
action against the seller of the product, or asking the U.S. Customs 
Service (USCS or Customs) to stop the imported drug at a U.S. port-of-
entry.
    Foreign governments are also struggling with how to address the 
problem of illegal drug sales over the Internet. For instance, 
pharmaceutical industry officials in Italy are recommending that the 
issue be addressed by the European Community as a whole.
    The New Zealand Health Ministry has begun to look at options to 
prevent pharmaceuticals from being dispensed from New Zealand to 
overseas consumers without a prescription, after a court decision 
revealed a loophole that prevents regulators from preventing the 
practice.


                 fda's internet drug sales action plan

    Over the past several years, FDA has sharpened its focus on the 
issue of Internet promotion and sale of drugs as online activity has 
expanded. In the fall of 1996, FDA held a public meeting on the use of 
the Internet to promote drug products at which we heard from consumers 
and health professionals on this emerging issue. In February 1999, the 
Agency hosted a meeting with representatives of health professional 
organizations to look at the prescribing and dispensing of drugs on the 
Internet.
    In July 1999, FDA adopted, and has since been implementing, an 
Internet Drug Sales Action Plan to expand and improve the activities of 
the Agency in addressing the unlawful sale of drugs over the Internet. 
This plan is based on internal deliberations, meetings with Federal and 
State regulatory and law enforcement bodies, as well as organizations 
representing consumers, health care practitioners, and the 
pharmaceutical and pharmacy industries. Details of the action plan's 
elements and FDA's activities in implementing them are as follows.


 Engage in Public Outreach

    At a minimum, every drug sale involves at least a purchaser and a 
seller. Consumers buy drugs on the Internet for different reasons, and 
some may be targets of unscrupulous business practices, such as the 
selling of unsafe, unapproved, expired, counterfeit or otherwise 
illegal drugs. Public outreach offers one mechanism by which the Agency 
can help protect consumers from dangerous or inappropriate drugs. FDA 
is expanding its public outreach to inform the public about dangerous 
practices involving Internet purchases and to explain what compliance 
and enforcement actions we already have taken. This outreach effort 
includes FDA Talk Papers; articles in the FDA Consumer Magazine; and 
information on FDA's website to help educate consumers about safely 
purchasing drugs online and provide consumers with an opportunity to 
submit to the Agency information on sites that may be violative.
    This year, FDA has launched a new media campaign about safe ways to 
purchase pharmaceutical products over the Internet. The campaign 
includes placing advertisements on health related websites; taping 
public service announcements for distribution to television and radio 
stations nationwide; and developing a ``safety checklist'' to be posted 
online and distributed through health care providers and consumer 
advocacy organizations.
    The Agency will keep working with consumer groups, health care 
practitioner organizations, and industry to encourage these parties to 
keep their constituents and the public informed about safe practices 
for purchasing drugs online.


Engage in Professional Outreach and Partnering

    At the February 1999 meeting with health professional 
organizations, FDA, the Federation of State Medical Boards of the 
United States, the National Association of Boards of Pharmacy (NABP), 
the American Medical Association and the Association of Food and Drug 
Officials discussed the roles that each organization plays in 
regulating prescribing and dispensing on the Internet and how the 
various roles could better compliment each other. At that meeting, the 
NABP announced its program to verify the legitimacy of Internet sites 
dispensing prescription drugs. The program, known as the Verified 
Internet Pharmacy Practice Sites, or VIPPS, provides a NABP ``seal of 
approval'' to sites meeting State licensure requirements and NABP's 
standards. Over time, this seal of approval may help to assure 
consumers that the designated sites are offering FDA approved 
pharmaceuticals. The VIPPS program is voluntary.
    FDA continues to meet with organizations representing State 
regulatory and law enforcement bodies, consumers, health care 
practitioners and industry. The purpose of these meetings are to gather 
information on: 1) how issues relating to online drug sales should be 
addressed, 2) who should regulate and how they should regulate; 3) 
whether and what changes to the current law should be enacted; and 4) 
when to develop partnering arrangements. These organizations include:

 the National Association of Boards of Pharmacy,
 the Federation of State Medical Boards,
 the National Association of Attorneys General,
 the American Medical Association,
 the American Pharmaceutical Association,
 the American Association of Retired Persons,
 the National Consumers League,
 the American Society of Health-Systems Pharmacists,
 the National Association of Chain Drug Stores,
 the National Community Pharmacists Association, and,
 the Pharmaceutical Research and Manufacturers Association.


Coordinate Activities with other State and Federal Agencies

    Several Federal agencies, as well as the States, have the authority 
to regulate and/or enforce U.S. laws related to the sale of drug 
products online. Due to the growth of potential cases involving the 
Internet, there are instances when working with another agency or State 
could result in a more effective enforcement action. Working closely 
with the States is essential to effectively regulate the domestic sale 
of both approved and unapproved drugs, as well as the sale of 
prescription drugs without a valid prescription over the Internet. FDA 
has established partnership agreements with several State bodies, 
including the National Association of Boards of Pharmacies and the 
Federation of State Medical Boards, to coordinate Federal and State 
activities aimed at questionable practices associated with the selling 
and prescribing of prescription drugs. Additionally, we are talking 
with the National Association of Attorneys General about a possible 
agreement.
    FDA has increased its coordination of efforts with other 
governmental bodies and has met several times over the past year with 
Federal agencies and State officials to share information, discuss the 
roles and responsibilities of the parties regarding online drug sales 
and identify opportunities for partnering in enforcement actions. FDA 
has established cooperative working relationships with the Department 
of Justice (DOJ), including the Drug Enforcement Administration (DEA) 
and Federal Bureau of Investigation (FBI), the U.S. Postal Inspection 
Service, USCS and other appropriate Federal and State law enforcement 
and regulatory agencies. FDA believes an important area where 
cooperation among federal agencies is critical is the sale of drugs to 
U.S. residents by foreign sellers. The USCS, the U.S. Postal Service, 
FDA, and the DEA all play important roles in taking action against the 
illegal importation of drugs.
    Generally, determinations of when and with whom FDA would engage in 
joint enforcement is based on the kinds and severity of violative 
conduct identified through Internet monitoring. Although FDA is 
expanding its own Internet monitoring capabilities, the Agency also is 
developing partnerships in this area with other agencies. In addition, 
FDA was a participant in the Administration's Working Group on Unlawful 
Conduct on the Internet, which issued its report to the President this 
past March. In its analysis of the problems associated with online drug 
sales, the report calls for legislation requiring online pharmacies to 
disclose certain information to consumers and for a system of assurance 
that they comply with appropriate Federal and State requirements.


 Cooperate Internationally

    Because FDA and the other Federal agencies possess limited 
investigatory jurisdiction over sellers in foreign countries, we must 
work with foreign governments to bring action against such individuals. 
Internet crime and the practice of online pharmacy are a growing 
concern throughout the international law enforcement community. FDA's 
Office of Criminal Investigations (OCI), maintains ongoing liaison with 
numerous government agencies in Canada, the United Kingdom, Spain, 
Germany, Belgium, the Netherlands, Ireland, Brazil, Singapore and 
others.
    An example of this cooperation involved OCI contact with 
authorities in a Pacific Rim country where a website operator alleged 
that he used the services of two legitimate doctors to review his 
online questionnaire. Through our foreign counterparts, we were able to 
have the doctors interviewed. Both denied any involvement in the 
scheme, thus exposing the operator to possible mail and wire fraud or 
other charges.
    In another case, OCI made an undercover purchase of drugs from a 
site operating out of a European country. The site made no pretense of 
a medical review. OCI was looking for a domestic connection for charges 
in the U.S. While none was found, ourcontacts with the health 
authorities in that country resulted in their initiation of an criminal 
investigation. Finally, OCI is involved in two cases with USCS overseas 
offices regarding foreign websites selling prescription and controlled 
pharmaceuticals. Enforcement activity by Customs resulted in numerous 
arrests and the seizure of over 1.5 million pills and several 
computers.


 Customize and Expand Enforcement Activity

    FDA's emerging role in regulating online drug sales is consistent 
with its traditional regulatory role. Existing approaches to 
enforcement, including close cooperation with State agencies, are being 
adapted to focus more effectively on the problems posed by online drug 
sales. An effective Internet enforcement process requires establishing 
priorities, identifying and monitoring potentially violative websites 
and making appropriate referrals for criminal prosecution and/or civil 
enforcement actions. FDA is enhancing its enforcement efforts by 
undertaking the following actions:
    Establishing Priorities--FDA has initially focused its online drug 
sales-related enforcement activities to the following areas, 
particularly where there is a significant public health risk: 
1
---------------------------------------------------------------------------
    \1\ A significant public health risk exists when a consumer is at 
risk for harm (1) from the use of the product, (2) as the result of not 
taking approved drugs for a specific disease or condition, or (3) by 
delaying medical treatment recognized as safe and effective for a 
specific disease or condition.

 Unapproved new drugs,
 Health fraud, and
 Prescription drugs sold without a valid prescription.
    Improving Data Acquisition--FDA has increased its capability to 
monitor the Internet and identify potentially violative sites through 
the use of various search tools and by upgrading its data handling 
capabilities. This is helping the Agency to better understand the kind 
and extent of unlawful conduct on the Internet and to more accurately 
assess whether its enforcement efforts have had an impact on illegal 
Internet behavior.
    In an attempt to better comprehend the universe of websites selling 
drugs, OCI reviewed thousands of websites early this year and 
identified approximately 326 websites involved in the sale of drug 
products. This review was based on a search of websites performed by 
Internet search software, which was followed by a manual review of 
sites that appeared to involve the sale of drug products. Because new 
websites are put up everyday and old ones are taken down, the total 
number of these sites is subject to change and will not be consistent 
over time. Additionally, because OCI's technology and methodology 
probably differs from those used in studies by other organizations, the 
results of this study are not directly comparable to other studies.
    Coordinating Case Assessment--In June 1999, FDA established a case 
assessment, or ``triage'' team with representatives from the Office of 
Enforcement and OCI within the Office of Regulatory Affairs (ORA), the 
Center for Drug Evaluation and Research (CDER), the Office of the Chief 
Counsel (OCC) and the Office of Policy. Under the triage process, FDA 
obtains leads on potentially violative sites from internal Internet 
monitoring activity, State, other Federal or foreign law enforcement 
agencies, consumers, Congress, and the press. The triage team evaluates 
the leads and decides whether they should initially be pursued through 
a civil or criminal investigation. Priority is given to cases involving 
unapproved new drugs, health fraud, prescription drugs sold without a 
valid prescription and products with the potential for causing serious 
or life-threatening reactions. The triage team makes referrals, when 
appropriate, to FDA's civil and criminal enforcement units for follow-
up.
    The triage process results in a better coordination of criminal and 
civil enforcement actions at the appropriate Agency components and 
reduces overlapping effort. This process better ensures that decisions 
are made in a timely way, with an appropriate balance in terms of 
achieving a maximum deterrent effect while taking action, if needed, to 
remove harmful products from the market. The team will continue to 
oversee Internet-related enforcement activities while they are being 
investigated and will ensure that they are brought to appropriate 
completion. In addition, the scope of this group is being broadened to 
include all FDA-regulated products.
    Enhancing Enforcement Resources--In general, FDA's investigative 
and enforcement activity regarding Internet drug sales has been 
accomplished by re-deploying FDA personnel, which necessarily results 
in a reduction of investigation and enforcement activity in other 
areas. The Agency has drawn from existing resources to increase its 
current enforcement efforts because we believe that illegal online drug 
sales pose a significant public health risk. As explained in more 
detail later, the President has requested $10 million in additional 
funding for Internet enforcement activities in the Fiscal Year (FY) 
2001 budget.
    Results to Date--Using information generated by Internet searches, 
as well as leads from all parts of the Agency, other State and Federal 
law enforcement units, and the public, FDA has performed at least 
cursory reviews of thousands of websites related to drug sales. FDA 
(the offices of ORA, CDER Compliance, OCC and OCI) has evaluated well 
over 400 websites for possible regulatory or criminal action and has 
taken enforcement action on many of those sites, as follows: Currently, 
FDA has 54 sites under active review for possible regulatory or civil 
action. Regulatory action has been taken on more than 50 sites as 
follows. Thirty-eight (38) warning letters have been sent by the Office 
of Compliance to domestic online sellers. A warning letter is a written 
communication from FDA notifying an individual or firm that the Agency 
considers one or more products, practices, processes, or other 
activities to be in violation of the FD&C Act, or other relevant 
statutes, and that failure of the responsible party to take appropriate 
and prompt action to correct and prevent any future repeat of the 
violation may result in administrative and/or regulatory enforcement 
action without further notice.
    Additionally, OCC has sent seventeen (17) ``cyber letters'' to 
operators of foreign-based Internet sites offering to sell online 
prescription drugs. These sites may be engaged in illegal activity such 
as offering to sell prescription drugs to U.S. citizens without valid 
(or in some cases without any) prescriptions. Cyber letters, which are 
sent over the Internet to the suspect websites, warn these operators 
that they may be engaged in illegal activities, and informs them of the 
laws that govern prescription drug sales in the U.S. FDA has received 
seven responses from ``cyber'' letter recipients and FDA is continuing 
to monitor these sites.
    Other civil and regulatory actions include the following. In 
cooperation with DOJ, two preliminary injunctions have been imposed on 
the sale of a illegal products--one marketed as a weight-loss aid that 
contains a potent thyroid hormone, which could cause heart attacks or 
strokes, and the other an unapproved cancer therapy. FDA and DOJ are 
pursuing an additional injunction against the sale of another 
unapproved cancer therapy over the Internet. Additionally, twelve (12) 
product seizures, eleven (11) product recalls, and the voluntary 
destruction of eighteen (18) violative products have been achieved, 
generally pertaining to unapproved new drug products including GHB, 
gamma butyrolactone (GBL), Triax, 1,4 butanediol, and laetrile. 
Seventeen (17) import alerts have been issued targeting products 
offered by foreign online drug sellers.
    OCI, working with OCC, is responsible for investigations of 
pharmacy sites and other Internet drug sites whose operations involve 
potential criminal activity. The information collected by OCI 
headquarters is analyzed by the Investigative Analysis Branch. After 
the suspect sites are researched they are sent to the OCI field offices 
for investigative work, which often includes undercover buys. Further 
investigation determines the bona fides of the pharmacy and doctor(s), 
and looks at the relationship between the patient and doctor and the 
doctor and pharmacy. OCI has ongoing cooperative relationships with the 
USCS, DEA, FBI, the Postal Inspection Service and appropriate State law 
enforcement and regulatory agencies, and this has enhanced their 
investigative capabilities with regard to Internet drug sales.
    Currently, OCI has 132 Internet related investigations underway, 
including 86 open criminal investigations and 46 preliminary 
investigations. Of these 132 investigations, 49 cases are 
investigations of sites selling prescription drugs, while 83 cases are 
related to various types of health fraud, or unapproved drug products 
such as GHB or other illegal drug sales. Forty-three (43) arrests and 
twenty-two (22) convictions have resulted from OCI investigations 
involving products being sold over the Internet.



   the administration's fiscal year 2001 budget request and proposed 
                               initiative

    On December 28, 1999, the Administration announced a new initiative 
to protect consumers from the illegal sale of pharmaceuticals over the 
Internet. The initiative includes a $10 million request in the 
President's FY 2001 budget to enhance FDA's enforcement capabilities, 
and called for legislation to help ensure that Internet pharmacies 
comply with State and Federal laws.
Budget Request
    The Administration's FY 2001 budget request contains a new $10 
million investment to take action against those who engage in illegal 
drug sales over the Internet. The funding would be used to identify, 
investigate, and prosecute operators of websites selling prescription 
drugs without a valid prescription, unapproved new drugs, counterfeit 
drugs, and expired or illegally diverted pharmaceuticals. This funding 
initiative will also help crack down on the marketing of products based 
on fraudulent health claims.
    The $10 million appropriation would be used primarily to sustain 
the number of investigative and enforcement personnel we are currently 
investing in this area. FDA will continue to employ Internet hardware 
and software to identify suspect websites, and will use the additional 
personnel resources to investigate and take enforcement action against 
the operators of these sites. To date, FDA's enforcement activity on 
Internet drug sales has been accomplished by re-deployment of existing 
personnel resources, which necessarily results in a reduction of 
investigations in other areas.
    Enactment of the $10 million request would allow FDA to re-direct 
its currently re-deployed resources back to other enforcement 
priorities and establish a significant, permanent presence on Internet 
pharmacy enforcement. In addition, the requested funding would help FDA 
step up efforts to educate consumers about the risks involved online 
and what types of sites or practices they should avoid.
    Drugs marketed and sold illegally over the Internet present real 
risks for the American consumer. Enforcement activities targeting these 
sites have been made a budget priority for FY 2001.


                          legislative proposal

    On May 2, 2000, Secretary Shalala sent to Congress the 
Administration's proposed legislation, the ``Internet Prescription Drug 
Sales Act of 2000''. The Administration's objective in developing this 
legislation is to protect the health of consumers by providing them 
with a level of protection equivalent to that enjoyed by customers of 
traditional ``brick and mortar'' pharmacies without hindering the 
enormous potential benefit of the Internet. We see this proposal as a 
first step in the process of developing appropriate protections for 
online consumers of drugs, and we look forward to working with the 
members of this subcommittee and others in the Congress on this 
important matter.
    The bill is also designed to enhance the effectiveness of the 
Federal-State partnership in regulating prescription drugs and 
recognize the importance of the States' traditional role in regulating 
the practice of medicine and pharmacy. Accordingly, the bill would 
support and strengthen the States' authority to enforce applicable laws 
within their borders, while providing enhanced Federal authority to 
monitor the multi-state and interstate aspects of Internet prescription 
drug sales. By filling gaps in Federal and State authority, the bill 
seeks to curb illegal sales of prescription drugs and to ensure that 
consumers are receiving safe and effective drugs prescribed by licensed 
health care professionals, and dispensed by pharmacies that are 
properly licensed, and in compliance with, all applicable State and 
Federal laws.
    Specifically, the bill would require online pharmacies to be 
licensed in each State in which they operate or to which they deliver 
prescription drugs. They would have to comply with all applicable 
Federal and State laws governing the practice of pharmacy which 
include, among others, requirements for proper storage and handling of 
prescription drugs, record keeping, and other consumer protections 
including safeguards on patient privacy and confidentiality of medical 
records.
    The online pharmacy would be required to provide to the Secretary 
and relevant State boards of pharmacy, prior to launching an online 
site, a notification containing the information required to be posted 
on the site and assurances of compliance with the requirements of the 
bill. The online pharmacy also would be required to post on its website 
a declaration that this notification has been made and to post 
information about the business, including the name of the pharmacy as 
it appears on its State license(s), the street address of its principal 
place of business, the name and licensing information of the pharmacist 
in charge, and a phone number where consumers can contact a pharmacist 
with questions or concerns.
    If the online pharmacy failed to comply with any requirement, the 
Secretary, after providing notice and an opportunity for a hearing, 
could prohibit the pharmacy from displaying the declaration. Violators 
would be subject to substantial civil money penalties. Finally, States 
would be authorized to bring civil actions against online pharmacies 
for violations of these requirements.
    This bill would fill gaps in current consumer protection and 
enforcement authority. The compliance and disclosure requirements for 
online pharmacies would afford substantial public health benefits and 
provide enhanced tools for law enforcement. Legitimate online 
pharmacies could be much more easily distinguished from illegal online 
pharmacies. Consequently, enactment of this bill would enhance consumer 
safety and confidence in the Internet, and level the playing field for 
legitimate online pharmacies by reducing illegal competition.


                               conclusion

    Mr. Chairman, online shopping for pharmaceutical products clearly 
provides many benefits for consumers, however, it also has a number of 
significant risks. Additionally, the nature of Internet technology 
presents law enforcement and policy makers with unique challenges. FDA 
is grappling with the challenges posed by online drug sales and with 
our need to carefully balance consumer access to information and 
products with protecting the public health. We are adapting our 
compliance and enforcement techniques to the new electronic marketplace 
and we will continue to evaluate what changes in our procedures, 
regulations, or the law might be appropriate. We want to ensure, as 
much as possible, that the protections afforded to consumers who 
purchase drugs from their corner drugstore are extended to consumers in 
the electronic marketplace.
    We look forward to working further with Congress on this important 
issue, and I would be happy to answer any questions you may have.

    Mr. Upton. Thank you.
    Mr. Posner.

                  TESTIMONY OF ETHAN M. POSNER

    Mr. Posner. Mr. Chairman and members of the subcommittee, 
good morning. On behalf of the Department of Justice, I 
appreciate the invitation to appear today and address the 
important issue of online drug sales.
    In approaching this issue and in enforcing the law in this 
area, the Department has tried to strike a balance between 
protecting the public from the dangers of online drug sales 
without undermining the benefit the Internet provides to 
consumers.
    In my opening statement I will briefly highlight some of 
the Department's accomplishments in this area over the past 12 
months.
    Mr. Chairman, first, we have, just in the last 12 months, 
filed at least ten cases involving online drug sales, seven 
criminal and three civil. Two of these criminal cases very 
recently resulted in convictions. Both involved the sale of 
prescription drugs online.
    In the first case, prosecuted by our United States 
Attorneys Office in Tampa, a jury just yesterday convicted two 
individuals of distributing and conspiring to distribute 
Depranol without a prescription and with the intent to defraud 
or mislead. This prescription drug was sold on web sites and by 
mail in the United States and abroad. The jury found multiple 
violations of the Federal Food, Drug, and Cosmetics Act and 
other Federal laws.
    In the second case, the United States Attorneys Office for 
the District of Hawaii obtained a guilty plea from an 
individual for selling Viagra, a prescription drug, over the 
Internet without a prescription. This guilty plea was obtained 
exactly 1 month ago.
    In addition to these two convictions, we have at least five 
other indicted criminal cases in various stages involving 
online drug sales. Some cases have been indicted recently, 
another case is in the middle of trial as we speak. These cases 
involve the sale of prescription drugs and controlled 
substances on the Internet. The drugs involved range from Fen-
Phen to GBL and GHB, the so-called ``sex drug,'' to unapproved 
dietary supplements, to marijuana, to nitrous oxide.
    In addition to the criminal cases, Mr. Chairman, we have 
filed at least three civil cases in the last year involving the 
sale of online drugs. In addition to the cases we have filed in 
court, we have opened at least 30 criminal investigations 
involving the sale of drugs on the Internet; approximately 20 
of these cases involve the sale of prescription drugs by online 
pharmacies. These 20 cases, which encompass at least 60 
different web sites, were all opened in the past 12 months.
    In addition to bringing criminal and civil cases, and 
supervising active investigations, the Department of Justice 
has spent considerable time in the past year analyzing the law 
as applied to online drug sales, building the blocks for future 
convictions and future prosecutions.
    We have held training sessions for our prosecutors and 
agents on Internet crimes generally and Internet drug cases in 
particular. We have continued to train our agents on how to 
investigate computer crimes, including online drug sales, 
again, building the blocks for future cases and future 
convictions. Also in the past year we have coordinated and 
reached out to other Federal and State agencies regarding 
online pharmacy cases. We have hosted interagency coordination 
meetings on this issue. We have met with State medical pharmacy 
boards, we have met with State prosecutors. We have entered 
into alliances with State prosecutors. We have worked with 
State enforcement authorities to make arrests, execute search 
warrants, and seize dangerous and unlawful products that were 
being sold on the Internet.
    We have sent enforcement alerts on at least two occasions 
to the National Association of Attorneys General regarding 
online drug sales. We have offered the assistance of the Drug 
Enforcement Agency, the Federal Bureau of Investigation and our 
own prosecutors to prosecute these cases and we have done all 
of that in the past 12 months.
    We have also begun to address the difficult issues 
associated with drug sales by foreign web sites. We have 
increased our efforts to cooperate with authorities abroad 
regarding the global problems associated with the use of the 
Internet to sell prescription drugs and controlled substances.
    And, Mr. Chairman, we have a suggestion we hope to discuss 
with Members of the committee on how current law can be amended 
to give the Department additional authority to enjoin and stop 
the transfer and dissipation of funds to and from those who 
operate illegal foreign and domestic online pharmacy sites.
    In short, Mr. Chairman, although there is much to be done, 
the Department of Justice has made considerable progress on 
this issue in the past year. We are bringing cases, we are 
obtaining convictions, we are investigating cases, and we look 
forward to working with our investigative partners at the 
States, at FDA, at DEA, and Customs to bring more cases in the 
future.
    Thank you for the opportunity to present the views of the 
Department on this important topic. We look forward to working 
with you on this issue.
    [The prepared statement of Ethan M. Posner follows:]


   Prepared Statement of Ethan M. Posner, Deputy Associate Attorney 
                  General, U.S. Department of Justice

    Mr. Chairman and Members of the Subcommittee, Good Morning. I am 
Ethan Posner, Deputy Associate Attorney General at the Department of 
Justice. On behalf of the Department, I appreciate the invitation to 
appear today and describe the many efforts underway at the Department 
to address the sales of pharmaceuticals and other drugs on the 
Internet.
    Like the Subcommittee and the other agency representatives who 
appear before you today, the Department of Justice recognizes that 
online drug sales present many important questions for enforcement 
authorities. On the one hand, Internet prescription drug sales have the 
potential to provide significant societal benefits, particularly to 
those such as the elderly and those living in rural communities who 
have difficulty going to traditional ``brick and mortar'' pharmacies. 
Online sales of prescription medications also may foster price 
competition, again to the benefit of consumers. On the other hand, the 
risks posed by online drug sales are obvious. First, online pharmacy 
sites often circumvent the traditional protections built into the 
doctor-patient relationship, such as a diagnosis based on a physical 
examination. Second, consumers may not be able to confirm the 
legitimacy of online pharmacies, many of which might be located 
overseas, increasing the risk that the drugs are mislabeled or 
counterfeit. Therefore, the Department of Justice has attempted, in 
establishing its enforcement strategy, to set a course that will 
protect the public from the dangers of online drug sales without 
undermining the benefits the Internet provides to consumers.

    a. the role of the department of justice in internet drug sales

    The Department of Justice--through its Civil and Criminal 
Divisions, local United States Attorney's Offices, the Federal Bureau 
of Investigation, and other components--enforces numerous consumer 
protection statutes for which the primary regulatory authorities are 
administrative agencies such as the Food and Drug Administration (FDA), 
the Drug Enforcement Administration (DEA), and the Federal Trade 
Commission (FTC). Over the past year, the Department has analyzed 
carefully the application of these statutes to online drug sales.

1. Legal Theories: Enforcement under the Food, Drug, and Cosmetic Act

    The Food, Drug and Cosmetic Act (FDCA) generally prohibits the 
manufacture and distribution of misbranded and adulterated drugs, thus 
requiring drugs to be labeled accurately and handled in ways that 
prevent them from becoming contaminated or misused. In 1951, to protect 
the public from abuses arising from the sale of potent prescription 
drugs, and to relieve retail pharmacists from burdensome and 
unnecessary restrictions on the dispensing of over-the-counter drugs, 
Congress established the system that currently governs the sale of 
prescription drugs. See 21 U.S.C. Sec. 353(b)(1). Under that system, 
Congress relied on two health professionals--the patient's physician 
and pharmacist--to protect patients from the knowing or accidental 
misuse of medicines that are toxic or that have the potential for 
causing harm.
    Accordingly, drugs that are considered prescription drugs under the 
FDCA may be distributed only with a valid prescription under the 
professional supervision of a licensed practitioner. See 21 U.S.C. 
Sec. 353. A prescription drug is considered ``misbranded'' if it is not 
dispensed pursuant to a valid prescription in accordance with 21 U.S.C. 
Sec. 353(b). Introduction or distribution of misbranded drugs into 
interstate commerce violates the FDCA. 21 U.S.C. Sec. 331(a). An online 
pharmacy that provides prescription drugs without a prescription would 
therefore be in violation of this requirement. Legal action to curtail 
such conduct may be brought criminally or civilly. For a felony 
conviction, the government must establish that the defendant acted with 
an intent to defraud or mislead either the consumer or the government, 
or that the defendant is a repeat offender. Civil cases and misdemeanor 
prosecutions do not require proof of an intent to defraud or mislead.
    For online pharmacies that offer online diagnosis, prescription, 
and distribution of medication, the issue is whether the online 
interaction results in a valid ``prescription'' under 21 U.S.C. 
Sec. 353(b). This is a significant issue for online prescription drug 
sales based solely or primarily on an online questionnaire completed by 
the consumer. The legality of this practice often will turn on whether 
the relevant state law considers such a sale a valid prescription. If 
not, the online pharmacy may be found to be distributing ``misbranded'' 
medication in violation of the FDCA. In this regard, it is significant 
that Kansas, Maryland, and Washington have taken legal action against 
doctors, websites, and pharmacies that dispense prescription drugs over 
the Internet based upon an online questionnaire. We also recognize that 
the State Federation of Medical Boards has adopted the position that 
the ``[p]rescribing of medication by physicians based solely on an 
electronic medical questionnaire clearly fails to meet an acceptable 
standard of care and is outside the bounds of professional conduct.''

2. Other Enforcement Theories

    Apart from enforcement under the FDCA, the Department can rely on 
other legal authorities. For instance, the Controlled Substances Act 
prohibits the dispensing of a controlled substance without a valid 
prescription. See 21 U.S.C. Sec. Sec. 822, 829, and 841. A regulation 
issued by DEA defines ``prescription'' in a way that may exclude 
``prescriptions'' for controlled substances that are obtained through 
an online questionnaire. Relying on these statutes, a grand jury in 
Maryland last year returned a 34-count indictment against a physician 
for dispensing several controlled substances, including phentermine and 
fenfluramine, without a legitimate medical purpose.
    Another potential avenue for enforcement is the Federal Trade 
Commission Act (FTC Act), 15 U.S.C. Sec. 45 et seq., under which the 
Department is authorized to proceed with a civil enforcement action in 
conjunction with the FTC. The FTC Act protects consumers from unfair or 
deceptive acts or practices. Many online pharmacies operate by making 
important representations to consumers. For example, the FTC has found 
websites that advertise that a physician reviews each application to 
purchase prescription medications. To the extent these representations 
are false or deceptive, or if a website operator sells prescription 
drugs and represents that the drugs are safe and effective without 
disclosing their possible adverse effects, then such operators may be 
engaging in unfair or deceptive trade practices.
    Indeed, some online pharmacies may suggest that completion and 
analysis of an online medical questionnaire is the equivalent of a 
visit to a doctor's office. In our view, in almost all circumstances, 
that is not the case. In fact, some prescription drugs, such as Viagra, 
have package insert labeling that recommends that a physical 
examination be performed before prescribing. Because some of these 
websites appear to provide deceptive information, these sites may 
violate the FTC Act, and thereby subject the website operator to a 
civil enforcement action.
    The Department can also pursue similar theories under the federal 
mail and wire fraud statutes whenever an online or other pharmacy 
defrauds consumers in any way. Whether such a suit would be criminal or 
civil, under 18 U.S.C. Sec. Sec. 1341, 1343, or 21 U.S.C. Sec. 332, 
would depend on the precise facts of the case and the evidence of 
fraudulent intent. Schemes involving the sale of drugs or health 
products over the Internet may violate other related federal criminal 
laws. Some websites offer to bill private or public health care 
programs or insurers for a ``doctor's'' advice or for the price of the 
drug or product itself. If any false representations are made to the 
insurer to obtain payment, violations of a number of federal criminal 
laws may occur, and the civil fraud laws also may be implicated.

3. The Department's Experience In Related Areas

    Although the Internet and online prescribing are recent phenomena, 
the Department has prosecuted similar conduct perpetrated using 
different media. In the 1950's, for example, the Department prosecuted 
doctors and pharmacists who sold prescription and other drugs by mail 
or to undercover agents without any prior examination or diagnosis. We 
have also brought many cases over the years against doctors and 
veterinarians for dispensing drugs without a valid prescription. More 
recently, the Department prosecuted several cases in which doctors 
prescribed and distributed anabolic steroids to athletes and 
entertainers. The evidence showed that they distributed steroids not to 
treat medical conditions, but for purely cosmetic purposes, and that 
they did not examine the patients before dispensing the steroids. In 
these cases, we argued successfully that under section 353(b) of the 
FDCA, one may distribute prescription drugs only if (1) there is a bona 
fide doctor-patient relationship, and (2) the distribution is pursuant 
to a course of individualized treatment for a legitimate medical 
purpose.

    b. current doj enforcement activity, training, and coordination

1. Indictments, Investigations

    Just in the past year, the Department of Justice, working with its 
investigative partners at DEA, FBI, and FDA, has filed several cases 
involving sales of drugs on the Internet. In addition to the cases we 
have filed in court, the Department has opened, again in the past year, 
approximately 30 cases involving the sale of drugs on the Internet, of 
which approximately 20 involve the sale of prescription drugs by online 
pharmacies. Those 20 investigations encompass at least 60 different web 
sites.Our filed cases include:

 In July 1999, the United States Attorney's Office in Maryland 
        obtained the indictment of former Internet diet doctor Pietr 
        Hitzig on 34 counts of illegal drug distribution. The 
        indictment charges that between 1996 and 1998 Hitzig ran a 
        Baltimore-based Internet practice through which he provided 
        controlled substances such as phentermine and fenfluramine to 
        patients worldwide based on their e-mail requests alone.
 On September 30, 1999, a grand jury in the Middle District of 
        Florida returned a thirty-one count indictment against Jose A. 
        Perez Menchaca, Paul Cabaniss, and Bondtech-Klebrig Corporation 
        alleging Internet sales of the unapproved drug gamma 
        butyrolactone (GBL), an ingredient of Gamma hydroxy butyrate 
        (GHB). A co-conspirator pled guilty to related charges last 
        December.
      GHB is a black-market drug sold illicitly throughout the country 
        for its alleged ability to cause euphoria, induce sleep, 
        increase sexual arousal, and increase muscle mass. GHB 
        consumption has caused serious adverse health effects, 
        including vomiting, sudden and uncontrollable onset of sleep, 
        uncontrollable shaking, coma, convulsions, and death. The 
        indictment charges that Menchaca sold ``GHB kits'' from 1996 to 
        October 1998. The criminal schemes were allegedly facilitated 
        by computers through electronic communications and the 
        Internet: According to the indictment, the defendants used a 
        website to both advertise and solicit orders from customers 
        within the United States and from around the world; used 
        various aliases to pose as a ``satisfied'' customer while 
        touting their GHB kits on computer ``newsgroups;'' and used 
        email to communicate with each other and to advise 
        international customers how to avoid detection of the kits' 
        contents by foreign Customs.
 On December 9, 1999, the United States Attorney's Office in 
        Hawaii charged Kent Aoki Lee with one count of selling Viagra 
        over the Internet. The indictment also charged the defendant 
        with unrelated fraudulent activity. The defendant offered 
        Viagra for sale through a website in the Japanese language. He 
        did not require any form of prescription. On April 25, 2000, 
        the defendant pled guilty to one count of wire fraud and one 
        count of dispensing a misbranded drug.
 On December 10, 1999, the Department filed a civil action to 
        enjoin a purported dietary supplement manufacturer from 
        distributing products that are actually promoted for the cure 
        or treatment of disease. United States v. Lane Labs-USA, Inc., 
        and Andrew J. Lane, No. 99-5782 (D.N.J.). The products, 
        including shark cartilage ``dietary supplement,'' a 
        glycoalkaloid skin cream, and a rice bran extract ``dietary 
        supplement,'' are promoted through Internet links and other 
        sources as being effective in treating or preventing cancers 
        and HIV infection. The complaint seeks to enjoin the defendants 
        from engaging in interstate commerce in these products, or any 
        other products containing the same or similar ingredients, 
        unless and until they are approved as drugs by the FDA.
 On February 11, 2000, the United States Attorney's Office in 
        the Eastern District of Louisiana obtained an indictment in a 
        case involving the Internet distribution of marijuana. United 
        States v. Aronov and Arizona Company Medical. Indictment 
        followed a DEA investigation into the illegal sale of ``medical 
        marijuana'' by Michael David Aronov via the Internet. Aronov 
        and his business, Arizona Company Medical, were indicted on 7 
        drug distribution counts and 1 count of placing a written 
        advertisement in a publication, the Internet, for the purpose 
        of seeking, or offering illegally to receive, or distribute 
        marijuana.
 On March 2, 2000, the Federal District Court for the Eastern 
        District of Missouri entered a preliminary injunction barring 
        Syntrax Innovations, Inc., from manufacturing or distributing 
        any product containing the thyroid hormone tiratricol. Prior to 
        this order, the company had been marketing over the Internet a 
        tiratricol-containing product called ``Triax'' as a dietary 
        supplement for weight loss. The use of tiratricol can cause 
        hyperthyroidism, which can lead to hypertension, insomnia, 
        nervousness, cardiac arrhythmia, heart attacks, and strokes. 
        The preliminary injunction bars Syntrax from selling any 
        tiratricol products during the pendency of the litigation.
 On April 20, 2000, the Department obtained a preliminary 
        injunction against Christian Bros. Contracting Corp. and its 
        president, Jason Vale, prohibiting them from making or 
        distributing amygdalin, Laetrile, ``Vitamin B-17,'' or apricot 
        seeds during the pendency of the action. We brought suit after 
        learning that the defendants were defrauding thousands of 
        vulnerable cancer victims by advertising and selling apricots 
        seeds and Laetrile products as a cure for cancer through 
        numerous Web sites and millions of ``spam'' e-mails. On April 
        24, the Wall Street Journal discussed the impact this ruling 
        may have on other Internet purveyors of unapproved drugs, in an 
        article entitled ``Judge Orders Online Laetrile Vendor to Quit 
        Business, Signaling U.S. Stance.''
 On May 17, 2000, the proprietor of an Internet-based 
        ``virtual'' retail business was indicted by a federal grand 
        jury in Roanoke, Virginia, for the interstate marketing of the 
        misbranded drug, nitrous oxide, a substance blamed for the 
        death of a Virginia college student. The grand jury charged the 
        defendant (of Tempe, Arizona) with selling nitrous oxide to 
        customers in the Western District of Virginia via the web site 
        BONGMART.com, which the defendant operates. The web site sold 
        nitrous oxide and other drug paraphernalia.
 Currently, a case involving individuals who solicited 
        customers to buy unapproved drugs over the Internet is on trial 
        in Baltimore. This case, which was indicted in June 1999, is 
        likely to go to the jury soon.
 Just yesterday, a jury in the Middle District of Florida 
        convicted two individuals of distributing prescription drugs in 
        interstate commerce without a prescription with the intent to 
        defraud and mislead. One individual was also convicted of 
        distributing deprenyl, a misbranded prescription drug. The 
        product ``Liquid Deprenyl Citrate'' was offered for sale on the 
        Internet as a ``fountain of youth'' drug and for a long list of 
        other diseases.

2. Training and Education

    With the array of new and challenging issues posed by unlawful 
conduct on the Internet, it is critical to educate and train our 
prosecutors and agents about the applicable legal principles and the 
techniques and tools required to investigate unlawful online conduct. 
When someone sells drugs on the street corner, law enforcement is 
familiar with the steps required to investigate the crime. Similarly, 
when someone promises in a newspaper advertisement that he has the cure 
for cancer or AIDS, law enforcement typically know how to identify the 
responsible individual or entity. But when a web page makes similar 
claims, the methods for determining who is making the claim, where that 
person might be located, and how to obtain and preserve evidence 
present new challenges to law enforcement. For this reason, the 
Department of Justice has embarked on an active and wide-ranging 
training and education program. As part of our effort, computer crimes 
specialists and coordinators have been designated in each United States 
Attorney's Office. Other activities include:

 In December 1999, the Department's Office of Legal Education 
        conducted an Internet Fraud Seminar. This seminar, presented 
        jointly with the National District Attorneys Association, 
        addressed such topics as investigative approaches to Internet 
        fraud, obtaining electronic evidence (for example, search 
        warrants and the Electronic Communications Privacy Act), the 
        online investigative principles and their application to 
        Internet fraud investigations, and likely defenses in Internet 
        fraud prosecutions.
 In February 2000, the Department's Office of Legal Education 
        sponsored a Computer Crimes and Electronic Evidence Seminar. 
        This seminar, which will be repeated in July, assists attorneys 
        in the prosecution of information technology crimes. Topics 
        covered include telephone networks and telephone switching, 
        investigative approaches to computer crimes, obtaining and 
        using electronic evidence, Electronic Communications Privacy 
        Act, data forensics and analysis, and online investigations.
 In February 2000, the Department's Office of Legal Education 
        also sponsored a presentation on Internet Prescription Sales at 
        the Advanced Health Care Training seminar for experienced 
        Assistant United States Attorneys. This course instructed 
        prosecutors on how to investigate an Internet pharmacy case, 
        how to charge an Internet pharmacy case, how to structure the 
        agent's investigation, how to analyze the evidence, and what 
        specific charges could be filed against rogue Internet 
        pharmacies, web-sites, and prescribing professionals.
    On several occasions in the past year, the Department, acting 
through the Executive Office for United States Attorneys, has alerted 
our 94 United States Attorney's Offices about online drug sales. We 
have also provided legal support about online drug sales to these 
offices. The Department also educates its attorneys and agents through 
the Health Care Fraud Working Group, which consists of experienced 
health care fraud specialists from the FBI, United States Customs 
Service, State Attorneys General Offices, the Department of Health and 
Human Services, and Assistant United States Attorneys from across the 
country.

3. Coordination with Other Federal and State Agencies

    One of the most significant challenges we face in this area is 
coordination of enforcement policies and initiatives among a variety of 
federal, state, and other entities. We rely heavily, for example, on 
the hard work and dedication of federal and state investigating 
agencies such as the FDA. For this reason, just in the past year, we 
have hosted meetings of the Online Sales of Drugs and Medical Products 
Interagency Working Group, which has convened at least three times in 
the past year. That group consists of representatives from DOJ, DEA, 
FBI, FDA, the Customs Service, the Postal Inspection Service, the 
Department of Health and Human Services, the Department of Defense and 
the Defense Criminal Investigation Service, the National Association of 
Attorneys General, the Attorney General's offices of Kansas and 
Pennsylvania, and the Texas Department of Health. We have also hosted 
meetings of a subgroup of that Working Group to more closely coordinate 
law enforcement actions.
    Finally, the Department coordinates with state law enforcement 
agencies and investigators. Just in the past six months, we have 
discussed online pharmacy enforcement issues with representatives from 
State Boards of Medicine and Pharmacy in Arizona, California, Texas, 
Virginia, North Carolina, and Ohio. Last month, we sent an online 
pharmacy ``alert'' to the Attorneys General of all 50 states, the 
National Association of Attorneys General (NAAG), the National District 
Attorney's Association, the National Sheriff's Association, and the 
International Association of Chiefs of Police. That alert highlighted 
the Department's concerns over online drug sales and offered the 
assistance of the Drug Enforcement Administration and the Department of 
Justice in investigating and prosecuting such cases. Department lawyers 
also participate in the NAAG working group that deals with online 
pharmacy issues.
    This federal-state coordination recently led to a very successful 
crackdown on the ``date rape'' drug GHB, which was added as a ``List I 
Chemical'' under the Controlled Substances Act by the Hillory J. Farias 
and Samantha Reid Date-Rape Drug Prohibition Act of 1999. In February 
2000, the California Department of Justice sought assistance in an 
investigation of the sale of GBL, a key GHB ingredient, via the 
Internet to persons in California. The Department of Justice, DEA, and 
the California Department of Justice combined resources to investigate 
an individual in Arizona who allegedly marketed GBL on the Internet 
under the name ``Inova Products.'' On March 15, two days after the 
federal scheduling of GHB, the subject's premises were searched under a 
federal search warrant. The individual was arrested, extradited to 
California, and is being held in state custody. Inova allegedly sold 
GBL in 55-gallon drums that contained more than 98,000 doses each, with 
a street value of $5 per dose, or a value of almost $500,000 per drum. 
On March 15 and 16, 2000, California agents made controlled deliveries 
of 55-gallon drums of GBL to persons located in Orange County and San 
Mateo County, California. Two suspects were arrested and charges are 
pending. On March 28, federal agents arrested another Inova customer, a 
registered sex offender, after he accepted a controlled delivery of a 
55-gallon drum of GBL in Florida. In April 2000, California agents 
arrested five additional Inova customers. Thus far, this effort has 
resulted in the seizure of more than 400 gallons of GBL and the 
identification of six GHB labs in three states.
    Another example of federal and state coordination is the alliance 
entered into recently by the Kansas Attorney General's Office and the 
U.S. Attorney's Office for the District of Kansas. In addition to these 
two offices, the alliance includes representatives from the Kansas 
Pharmacy Board, Kansas Board of Healing Arts, Consumer Protection 
Division, the Medicaid Fraud and Abuse Division, and the Food and Drug 
Administration's Office of Criminal Investigations. In this coalition, 
state authorities have taken the lead in dealing with online pharmacies 
that may not satisfy state regulations but are attempting to offer 
legitimate pharmaceutical services. The Kansas authorities have found 
that these entities will generally conform their conduct to satisfy 
state regulations after notification. For its part, the U.S. Attorney's 
Office is assisting the state with the identification of individuals, 
including doctors responsible for illegal online pharmacy sites. In 
turn, Kansas authorities are taking legal action against doctors, 
websites, and pharmacies that dispense prescription drugs over the 
Internet in violation of state law on grounds that ``prescriptions'' 
issued based on online interaction are not valid.

          c. the internet prescription drug sales act of 2000

    The Department of Justice supports the Internet Prescription Drug 
Sales Act of 2000, transmitted by Secretary Shalala to Speaker Hastert 
on May 2, 2000. As the FDA explains in its testimony, the Act would do 
the following:

 require online pharmacies to be licensed in each State in 
        which they operate or to which they deliver prescription drugs;
 require compliance with all applicable Federal and State laws 
        governing the practice of pharmacy, including those laws that 
        require proper storage and handling of prescription drugs, 
        proper record keeping, and other consumer protections;
 require online pharmacies to post on their web site a notice 
        of their physical location, a list of States in which the 
        online pharmacy is licensed to dispense prescription drugs and 
        a list of applicable license numbers, the name, degree, and 
        license of the pharmacist in charge; a telephone number for 
        contacting a licensed pharmacist associated with the website, 
        and a statement that the online pharmacy shall dispense 
        prescription drugs only upon a valid prescription by a licensed 
        practitioner.
    Under the Act, if the online pharmacy fails to comply with these 
requirements, the FDA could seek to prohibit the pharmacy from selling 
drugs online, after providing notice and opportunity for a hearing. 
Also, the Justice Department could seek criminal sanctions, civil money 
penalties, or an injunction from a federal court. The Act also provides 
the Justice Department with subpoena authority to obtain important 
records in connection with investigations into violations of the Act. 
Finally, the states are also authorized to bring civil actions against 
online pharmacies for violations of the Act.
    In addition, the Act would provide consumers with the same level of 
protections they enjoy in traditional ``brick and mortar'' pharmacies. 
When an offline consumer walks into a traditional pharmacy, for 
example, he or she can readily identify the location of the pharmacy 
and the name(s) and license(s) of the pharmacist(s), all of which help 
to assure the consumer that the pharmacy satisfies the relevant health 
and safety requirements. Under the Act, online pharmacies will have to 
provide the same information to consumers and investigators.
    Like the FDA, the Department of Justice believes that the Act fills 
an important gap in current regulatory and enforcement authority. One 
of the most significant regulatory and investigative challenges in this 
area is the difficulty in identifying the name and location of the 
online pharmacy, a telephone number where the operator or pharmacist 
can be reached, and the State licensure information of the pharmacist 
in charge. The compliance requirements of the Act would require that 
online pharmacy sites provide this critical information under threat of 
civil or criminal sanction, benefitting both consumers and enforcement 
authorities.

           d. the challenge of foreign online pharmacy sales

    An increasing percentage of online drug distribution is conducted 
by firms operating outside of the United States. Some of these off-
shore sites sell prescription drugs approved by the FDA without a 
prescription; some sites sell drugs that have not been approved for 
sale in the U.S.; and other sites sell drugs that are classified as 
Controlled Substances in the United States.
    Under U.S. law, it is illegal for a foreign-based online pharmacy 
to sell prescription drugs to consumers in the U.S. without a 
prescription. Prescription drugs dispensed within the U.S. without a 
valid prescription are misbranded under the FDCA. It is also illegal 
for a domestic or foreign online pharmacy to sell drugs not yet 
approved by the FDA. Likewise, it is illegal for an off-shore web site 
to sell controlled substances to consumers in the United States. 
Indeed, the foreign sale of pharmaceutical controlled substances to 
U.S. consumers via the Internet violates the United Nations Convention 
Against Illicit Traffic in Narcotics and Psychotropic Substances. 
Similarly, it is illegal under U.S. law for a consumer to order or 
obtain a controlled substance from an off-shore pharmacy for delivery 
in the U.S. If the operator of an off-shore online pharmacy that 
illegally sold controlled substances or unapproved drugs to U.S. 
residents enters the United States, he or she could be prosecuted in 
the U.S.
    The difficulties inherent in any investigation and prosecution of 
an online pharmacy are magnified when the web site, the dispensing 
pharmacy, and the operator(s) are located overseas. But there are 
several actions that government agencies are taking and can take to 
address the investigative challenges posed by off-shore sales of drugs 
through the Internet.
    First, the United States must continue to obtain the cooperation of 
foreign governments in reducing the use of the Internet to commit 
illegal activity. The United States already is working with other 
nations to address this problem. With the support and encouragement of 
the United States, the Council of Europe is drafting a Cybercrime 
Convention, which will define cybercrime offenses and address such 
topics as jurisdiction, international cooperation, and search and 
seizure. The Group of Eight (``G-8'') nations are also working to 
enhance the abilities of law enforcement to investigate and prosecute 
computer and Internet-facilitated crimes; a G-8 working group recently 
established a 24-hour/7-day-a-week network of high-tech points of 
contact in each of the G-8 nations and in a number of non-G-8 nations. 
These and other instances of international cooperation will benefit the 
investigation and prosecution of many international cybercrimes, 
including those involving off-shore Internet pharmacies.
    Next, the Justice Department and other enforcement authorities can 
work with American financial institutions to reduce the flow of money 
to these foreign web sites and their operators. Like domestic online 
pharmacies, off-shore online pharmacies often rely on credit card 
transactions processed by U.S. banks and credit card networks. Federal 
agencies already work cooperatively on occasion with financial 
institutions and credit card companies to investigate transactions that 
are made in furtherance of illegal activity. If enforcement agencies 
and financial institutions can stop even some of the credit card orders 
used for the illicit sale of controlled substances or prescription 
drugs, then the operations of some of these ``rogue'' online pharmacies 
may be disrupted significantly.
    To enhance the Department's ability to act effectively in this 
area, it is important for prosecutors to have the option of seeking 
injunctive relief from a court. Under 18 U.S.C. Sec. 1345, the 
Department has the authority to seek injunctive relief against ``any 
person'' who withdraws, transfers, removes, or dissipates any property 
(including money) traceable to a violation of a defined list of banking 
law and health care fraud offenses. See 18 U.S.C. Sec. 1345(a)(1)-
(a)(2)(B). The Department has relied on section 1345 to enjoin the 
dissipation of assets from particular bank accounts or other types of 
accounts. We recommend that 18 U.S.C. Sec. 1345 (and the 
Administration's online pharmacy bill) be amended so that the 
Department can, where appropriate, seek to enjoin certain financial 
transactions traceable to unlawful online drug sales. Such an amendment 
would provide the Department with an important weapon to combat the 
harms posed by off-shore (and domestic) online pharmacies. We would be 
happy to work with Members of Congress on drafting such an amendment. 
We would also welcome the opportunity to work with Congress to 
formulate additional strategies to address the problem of violative 
off-shore (and domestic) Internet pharmacies.
    Mr. Chairman, thank you for the opportunity to present the views of 
the Department of Justice on this important topic. I would be pleased 
to answer any questions that you might have.

    Mr. Upton. Thank you very much and thank you for that offer 
to help as well.
    Ms. Durant.

                     TESTIMONY BETSY DURANT

    Ms. Durant. Thank you, Mr. Chairman and members of the 
subcommittee. I appreciate the opportunity to present U.S. 
Customs' efforts to prevent illegal importation of 
pharmaceuticals and other dangerous drugs into the U.S. via the 
Internet.
    I brought with me today a sample on the table and some 
pictures of pharmaceutical seizures made at our international 
mail branches. Before I begin to explain what Customs does to 
combat the importation of illicit pharmaceuticals, I believe 
it's important to relate Customs' core mission activities. The 
U.S. Customs Service is the protector of our Nation's borders. 
We are vigilant against the ever-present threats of narcotics 
smuggling, money laundering, and unwarranted threats against 
American industry.
    On a typical day, Customs officers process 1.3 million 
passengers and nearly 350,000 vehicles at ports and border 
crossings around the country. They seize nearly 4,000 pounds of 
narcotics and about a million dollars in ill-gotten proceeds. 
Customs also protects domestic industries from unfair 
competition; keeps tainted and spoiled products from making 
their way to consumers; and defends intellectual property 
rights and deters the corrosive effects of economic fraud.
    To this end, U.S. customs understands the dangers of 
unregulated and illicit pharmaceuticals entering our Nation. 
Not only is there a potentia danger to those ingesting these 
drugs, but there is a clear and economical danger to the 
domestic pharmaceutical industry. Many of the pharmaceuticals 
that are smuggled into our Nation lack the quality control that 
most Americans rely upon.
    The numbers of pharmaceuticals seized by U.S. Customs 
entering the U.S. are staggering. In 1999, seizures soared from 
2,139 in 1998 to nearly 10,000 in 1999, an increase of 450 
percent. Fiscal year 2000 seizures are on pace to equal or 
surpass 1999 levels.
    The Customs Service has recognized the unique challenges of 
enforcement that comes with the information age. Customs has 
recently transferred ten special agents from the field to the 
Customs CyberSmuggling Center in Fairfax, Virginia. The 
CyberSmuggling Center was established in 1997 primarily to 
combat online child pornography and coordinate computer 
forensic examination. However, the Internet is now being used 
to facilitate a variety of crimes investigated by Customs 
including intellectual property rights, illegal sale of 
cultural property, and importation of a variety of prohibited 
merchandise including pharmaceuticals.
    In July 2000 the CyberSmuggling Center will establish a 
Cyber crimes unit to compliment the existing international 
child pornography unit and computer forensic unit. The 
CyberSmuggling Center, C3, can play a significant role in 
addressing this issue. Upon the establishment of it, the C3 
will proactively search the Internet to identify foreign-based 
targets marketing prohibited drugs to the U.S. Agents will use 
a variety of investigative techniques unique to Internet 
investigation to identify individuals and businesses utilizing 
the Internet web sites or e-mail to sell prohibited drugs.
    The U.S. Customs Service staffs 14 international mail 
branches at various postal facilities. These international mail 
branches are located at various ports or entry with high 
volumes of cargo. Customs' 14 facilities process hundreds of 
millions of flats and parcels per year. With less than 220 
Customs personnel, personnel available at these facilities, we, 
as with all shipments, must take a risk management approach. 
Resources are such that we must make conscious decisions to 
look at some mail, but not all mail. Most often this is done by 
choosing to inspect mail from countries that provide a higher 
threat for illegal activity.
    Customs feel that our current manual targeting is a catch 
as catch can approach and provides little assurance that we can 
successfully achieve our enforcement mission with respect to 
the interdiction of prohibited pharmaceuticals. Customs also 
has several ongoing investigations involving U.S. persons 
operating foreign pharmaceutical web sites. All of these 
investigations are being worked jointly with the Food and Drug 
Administration's Office of Criminal Investigation.
    The CyberSmuggling Center participates with FDA, DEA, and 
the Postal Service in an informal working groups to work 
together on these issues.
    To make the most of this enforcement loop, it is imperative 
that the Federal agencies responsible for stopping the 
importation of pharmaceuticals, namely Customs and the Food and 
Drug Administration, work closely together at the point of 
entry.
    For example, often pills being smuggled into the U.S. have 
been stripped of all packaging and labeling, to enable them to 
be concealed in innocuous items. Upon discovery, it can be 
difficult to identify whether or not the pills are prohibited. 
The multi-agency effort to identify and determine admissibility 
needs to be accomplished with speed, so that if necessary, 
further enforcement action such as controlled deliveries can 
take place.
    Very recently executives and managers from the Food and 
Drug Administration and U.S. Customs met to discuss how 
together we can streamline our enforcement and interdiction 
efforts of illegal pharmaceuticals. In this meeting FDA 
promised that they would provide us with uniform guidance that 
will assist our field offices in dealing with this difficult 
aspect of our mission.
    Customs is also working with the Food and Drug 
Administration to ensure that as the Internet grows, as a means 
for conducting business, the Government will be able to provide 
a responsive and effective enforcement Internet driven--
enforcement of Internet driven illicit trade. With the proper 
tools interagency cooperation and resources Customs can 
facilitate legal international trade and stand poised at 
America's frontline, protecting our citizens and Nation's 
borders. Thank you, Mr. Chairman.
    [The prepared statement of Betsy Durant follows:]


Prepared Statement of betsy Durant, Director, Office of Trade Programs, 
                     United States Customs Service

    Good Morning Chairman Upton, Ranking Member Klink and Members of 
the Subcommittee. Thank you for the opportunity to present US Customs' 
efforts to prevent the illegal importation of pharmaceuticals and other 
dangerous drugs into the US via the internet.
    Before I begin to explain what Customs does to combat the 
importation of illicit pharmaceuticals, I believe it is important to 
relay Customs core mission activities. The U.S. Customs Service is the 
protector of our Nation's borders. We are vigilant against the ever-
present threats of narcotics smuggling, money laundering, and 
unwarranted threats against American industry. On a typical day, 
Customs officers process 1.3 million passengers and nearly 350,000 
vehicles at ports and border crossings around the country. They seize 
nearly 4,000 pounds of narcotics and about a million dollars in ill-
gotten proceeds. Customs also protects domestic industries from unfair 
competition; keep tainted and spoiled products from making their way to 
consumers; and defend intellectual property rights and deter the 
corrosive effects of economic fraud.
    To this end, US Customs understands the dangers of unregulated and 
illicit pharmaceuticals entering our Nation. Not only is there a 
potential danger to those ingesting these drugs but also there is a 
clear and economical danger to the domestic pharmaceutical industry. 
Many of the pharmaceuticals that are smuggled into our Nation lack the 
quality control that most Americans rely upon.
    The numbers of pharmaceuticals, both scheduled and non-scheduled 
seized by U.S. Customs entering the US are staggering. In 1999, 
seizures soared from 2,139 seizures in 1998 to 9,725 in 1999, an 
increase of 450%. Most of these seizures involved controlled 
substances. Fiscal year 2000 seizures are on pace to equal or surpass 
1999 levels.
    There is no doubt that the internet is playing a major role in the 
increase in illegal pharmaceutical imports. Many web sites offer 
assistance on how to order prescription drugs without a doctor's 
prescription. Typically these sites, for a fee, provide publications 
that list foreign pharmacies in Central & South America, Asia and 
Europe that allegedly will ship prescription drugs to the US. In 
addition, some overseas individuals advertise in news groups and 
conduct their business via Email. A curious consumer who sends an email 
will receive an auto-reply price list and information on how to order. 
In addition, there are online pharmaceutical web sites that allow for 
direct ordering of drugs.
    Customs faces many significant interdiction challenges at the point 
of entry, primarily in our international mail facilities. The growth of 
this challenge is commensurate with the phenomenal growth of the small 
package delivery industry. The Express Consignment Industry, comprised 
of companies such as FedEX, UPS and DHL, to name a few, has enjoyed 
huge growth in their markets since its inception. The Postal Service 
also has seen significant increases in the use of its Express Mail 
service. Today, the industry sees a continuation for further growth, 
not only domestically, but also in the global marketplace. Much of this 
growth can be attributed to e-commerce. The consumer is now able to 
purchase goods directly from overseas manufacturers or suppliers via 
the Internet. As a result, the number of individual shipments sent 
through Express Consignment Operators and the U.S. Postal Service will 
increase dramatically.
    With the shift in this industry, Customs has found itself wrestling 
with the way it handles the processing of international mail and 
express consignment shipments so that it can provide efficient entry of 
legal shipments, while maintaining a strong and effective contraband 
interdiction capability.
    Customs is under continuing pressure to move shipments quickly, yet 
our ability to maintain control of these small parcels is vastly 
different between the postal and express consignment environments. The 
express industry, with its requirements to provide manifest 
information, present outbound shipments for examination, and to 
reimburse us for costs of service have enabled us to respond to this 
growth while preserving our enforcement mission. However, the lack of 
this capability and authority in the Postal setting has hindered 
meeting our enforcement goals.
    The Customs Service has recognized the unique challenges of 
enforcement that comes with the information age. Customs has recently 
transferred 10 Special Agents from the field to the Customs 
CyberSmuggling Center in Fairfax, Virginia. The CyberSmuggling Center 
was established in 1997 primarily to combat online child pornography 
and coordinate computer forensic examinations. However, the internet is 
now being used to facilitate a variety of crimes investigated by 
Customs including Intellectual property rights, illegal sale of 
Cultural property and the importation of a variety of prohibited 
merchandise including pharmaceuticals. In July 2000, the CyberSmuggling 
Center will establish a Cyber Crimes Unit to compliment the existing 
International Child Pornography Unit and Computer Forensics Unit.
    The CyberSmuggling Center (C3) can play a significant role in 
addressing this issue. Upon the establishment of the Cyber Crimes Unit, 
the C3 will proactively search the internet to identify foreign based 
targets marketing prohibited drugs to the US. Agents will use a variety 
of investigative techniques unique to internet investigations to 
identify the locations, individuals and businesses utilizing internet 
web sites or e-mail to sell prohibited drugs.
    In 1999, Thailand emerged as one of the most prolific source 
countries for illegal pharmaceutical seizures. Controlled deliveries, 
whereby an undercover agent poses as a delivery person, of Thai origin 
mail seizures, by the Office of Investigations, often resulted in the 
subject admitting to buying the drugs from Thai Web Sites. US Customs 
brought this problem to the attention of Thai authorities who upon 
looking into the matter discovered that most of the Thai online 
pharmacies were violating a variety of Thai laws including, exporting 
pharmaceuticals with out an export license and dispensing unauthorized 
drugs. In January 2000, Customs agents from the Customs CyberSmuggling 
Center and the Customs Attache in Bangkok provided technical assistance 
to Thai authorities in the execution of search and arrest warrants 
against 7 online pharmacy sites. In all, 22 Thai citizens were arrested 
and 2.5 million pharmaceutical dosage units were seized. As a result, 
Thai seizures have decreased dramatically.
    Despite this, analysis of seizure volumes for the first half of 
this fiscal year indicate that the overall 1999 figures were not a 
short term variance; the problem is persistent. While the highly 
successful Thai operation did result in an initial drop in seizures, 
data for the past three months indicates that seizures are again on the 
rise, mirroring the FY 1999, pre-Thai rate. This only highlights the 
very power and problem, of the Internet. Electronic Commerce is 
essentially borderless, and web sites can be closed down and reopened 
in very short order and with very little difficulty. Countering this 
aspect of Internet crime at the point of entry requires three critical 
elements: automation, consistent and uniform interagency action, and 
resources.
    The U.S. Customs Service staffs 14 International Mail Branches at 
various Postal facilities across the United States. These International 
Mail Branches are located at ports of entry with high volumes of cargo, 
and service more than one mode of transportation. Customs' 14 
facilities process hundreds of millions of flats and parcels per year. 
With less than 220 Customs personnel at these facilities, we, as with 
all shipments, must take a risk management approach to our day to day 
operations. Resources are such that we must make conscious decisions to 
look at some mail, but not all mail. Most often this is done by 
choosing to inspect mail from countries that provide a higher threat 
for illegal activity. While the Postal Service is required to present 
all the international mail to Customs, the selection or targeting 
process for mail is entirely manual.
    Customs does not encounter the same enforcement difficulties with 
the Express Consignment Operators. In exchange for reimbursed expedited 
clearance during non-traditional business hours and at locations where 
we would not ordinarily provide service, the couriers agreed to 
regulations that require them to integrate sophisticated automation 
systems into their daily operations. Furthermore, advance manifest 
information is required for all Express Consignment shipments so that 
Customs may pre-screen these shipments before arrival. The availability 
of advance, automated manifest information allows Customs to both 
expedite the automatic release of lower risk shipments, and at the same 
time to maximize the effectiveness of our targeting of higher risk 
shipments. Specifically, the availability of such data allows Customs 
to capitalize on intelligence developed by our Office of Investigations 
and other members of the domestic and international law enforcement 
community, knowledge of past transgressors, and analyses of smuggling 
trends and shipment patterns.
    Conversely, over 95 percent of the Postal Service's international 
mail parcels are not individually manifested. By law, Express 
Consignment Operators are required to maintain extensive records for 
each shipment or transaction solely for Customs review, whereas the 
Postal Service is under no such obligation to keep these records.
    Prevention and point of entry interdiction aspects of the Internet 
pharmaceutical issue are inextricably linked. Seizures generate 
intelligence used by investigators in their prevention efforts, and 
intelligence generated by investigators may be used to assist in 
interdiction.
    Customs also has several ongoing investigations involving US 
persons operating foreign pharmaceutical web sites. All these 
investigations are being worked jointly with the Food and Drug 
Administration's (FDA) Office of Criminal Investigation. The Customs 
Office of Investigations has a great working relationship with FDA 
investigators. The CyberSmuggling Center participates with FDA, DEA and 
Postal in an informal working group that meets on a monthly basis to 
discuss on going investigations and other related topics.
    To make the most of this enforcement loop, it is imperative that 
the Federal agencies responsible for stopping the importation of 
prohibited pharmaceuticals, namely Customs and the FDA, work closely 
together at the point of entry. For example, often the pills being 
smuggled into the U.S. have been stripped of all packaging and labeling 
to enable them to be concealed within innocuous items. Upon discovery, 
it can be difficult to identify whether or not the pills are 
prohibited. The multi-agency effort to identify and determine 
admissibility needs to be accomplished with speed, so that if 
necessary, further enforcement action such as controlled deliveries can 
take place.
    Very recently, executives and managers from the Food and Drug 
Administration and U.S. Customs met to discuss how together we could 
streamline our enforcement and interdiction efforts of illegal 
pharmaceuticals. In this meeting, FDA promised they would provide us 
with clearer guidance that will assist our field offices in dealing 
with this difficult aspect of our mission. We also discussed additional 
education and training efforts. Clear guidance, which can lead to more 
consistent application of enforcement policy, is critical to the point 
of entry interdiction effort
    Lastly, to effectively enforce the laws governing the importation 
of pharmaceuticals, it is imperative that the resources needed to 
effectively meet these responsibilities are available to Customs. While 
the importation of prohibited pharmaceuticals is prevalent in any mode 
of transport that focuses on small parcel delivery, it is manifested 
primarily in the international mail operating environment. Customs 
currently provides clearance of international mail at little or no 
expense to the Postal Service. The Postal Service does not reimburse 
Customs for expenses incurred to examine inbound international mail.
    On the other hand, Express Consignment Operators are required by 
statute to fully reimburse Customs for the processing of their 
shipments. This includes all expenses associated with the Customs 
operations within the Express Consignment facility. By regulation, 
Customs office space, personnel and equipment are all paid for by the 
Express Consignment operator.
    As I stated earlier, with automated, parcel level manifest 
information provided to Customs in advance of shipment arrival, Customs 
can greatly increase its targeting capabilities and its ability to 
capitalize on intelligence information. The Postal Service is working 
to develop electronic messaging data sets that would support such a 
badly needed automated system. This would be similar to the level of 
data that the Express Consignment Operators are currently providing 
Customs; Customs desperately needs this information. A cooperative 
initiative with the European Community began in April of this year to 
develop an international electronic message that will provide uniform 
information for mail shipments for the European Community, the United 
States, Canada, and possibly Australia. Customs has been invited to 
serve as a technical advisor to the European Community on this project. 
The successful results of this initiative would greatly increase 
Customs capability to interdict prohibited pharmaceuticals in our 
International Mail Branches.
    In summary, Customs believes that the manual nature in which mail 
arrives and is entered into the United States, severely inhibits our 
ability to interdict prohibited pharmaceuticals. We believe that we 
need to work with the Postal Service to change the standards for 
processing Postal Service shipments. Doing so will decrease the 
vulnerability our Nation currently faces with respect to pharmaceutical 
smuggling, and the smuggling of other forms of contraband.
    Customs is also working with the Food and Drug Administration to 
ensure that as the Internet grows as a means for conducting business 
for a fast paced U.S. economy, the government will be able to provide 
responsive, effective enforcement of Internet driven, illicit trade. 
With the proper tools, interagency cooperation, and resources, Customs 
can both fairly facilitate legal international trade, and yet enable us 
to stand poised as America's frontline, protecting our citizens and 
Nation's borders. We are cognizant of the dangers that these 
unauthorized drugs pose to our citizens. We stand ready to work with 
the Congress and other Executive agencies to fully ensure that these 
smuggled items never harm our citizens and the legitimate 
pharmaceutical industry.
    Mr. Chairman, this concludes my written statement. I will be happy 
to answer any questions that you or any other Members may have.

    Mr. Upton. Thank you.
    Ms. Stovall.

             TESTIMONY OF THE HON. CARLA J. STOVALL

    Ms. Stovall. Thank you very much, Mr. Chairman, and members 
of the committee for the opportunity and the invitation to come 
and update you on what States have done since the last time we 
were gathered to talk about this topic. We always appreciate 
the opportunity to be able to visit about what we've done. We 
share the committee's concern about the illegal sites. 
Obviously there are some good sites, legitimate sites that are 
conducting business appropriately, and we think the convenience 
to consumers, to patients, the privacy, the cost savings that 
can result from, that is important. And so we always want to be 
very clear that there are good sites and we certainly approve 
those and would like to facilitate their operation.
    It is the roughly 400 web sites, though, that are not 
legitimate that give us great concern. The AMA and then 
recently the Association of State Medical Boards has voted to 
say that prescribing online was out at a prior position paper 
relationship is not consistent with the standards of 
professional conduct and that is from where Attorneys General 
derive the authority, in our opinion, to classify these actions 
as violative of the Consumer Protection Acts. That to sell 
prescription drugs without valid prescriptions is 
unconscionable. And that's where AGs have stepped in and used 
their Consumer Protection Act to be the basis for the lawsuits 
we have filed.
    As many of you know, because you've mentioned in your 
comments, States have been very active in this area. Many 
States have sued a total of 54 entities and/or individuals have 
been sued by States as a result of prescribing unlawfully on 
line.
    We see, most of the time, when the State of Kansas, for 
example, would sue a particular illegitimate pharmacy, we'll 
get an injunction against it and so it will then stop 
prescribing or stop distributing those drugs within our State.
    What our hope always had been is that there could be 
national injunctive relief and the proposed legislation that 
Chairman Upton and Congressman Bliley talked about. We would 
hope we would have something like that in it for us so that 
there would be the opportunity to maximize resources, so that 
when I sue a company, not only do they stop selling to Kansas 
citizens, but they stop selling to citizens around the country 
as well. And that would allow the very minimal resources that 
State Attorneys General have to be maximized.
    In my office we have--I'm quite proud to say that we have 
taken the lead on this issue, but we have only one attorney 
working on this. And so that's the way it is in many AG offices 
around the country. There just are not very many resources. So 
if we can maximize by getting injunctive relief, nationally, it 
would add a tremendous benefit to the resources that we are 
able to devote to it.
    NAG, the National Association of Attorneys General, as some 
of you have mentioned, have monthly conference calls. We have a 
task force set up to deal with this regularly so that we can 
try to coordinate activities and coordinate enforcement action 
and keep track of one another.
    The conference that we had just last week apparently got 
lots of recognition by Congress because several of you 
mentioned that we are very proud of the attendance and think 
that the information provided there really helps train 
assistant attorneys general around the country to be able to 
continue this work in the most effective way possible.
    We welcome the opportunity to continue to work with this 
committee, other Members of Congress, as well as the Federal 
agencies, to try to get a handle on what is a great public 
health concern to citizens of our country. We share your 
concern with that as well, and we appreciate the opportunity to 
come and be a part of these discussions.
    Thank you.
    [The prepared statement of Hon. Carla J. Stovall follows:]


    Prepared Statement of Carla J. Stovall, Kansas Attorney General

    Chairman Upton, Ranking Member Klink, members of the Subcommittee, 
thank you for the invitation to testify today on the important issues 
the Subcommittee is considering.
    Beginning with Kansas' lawsuit in February, 1999, six States have 
filed a total of 18 lawsuits, eight administrative actions, and nine 
notices of intended action against more than 54 individuals, 
pharmacists, pharmacies, doctors, and other entities who participated 
in the online prescribing, sale and dispensing of prescription drugs to 
our States' citizens. None of them required any in-person examination 
or consultation prior to prescribing and dispensing those drugs, using 
instead the ``online application'' method.
    Ohio has criminally indicted a doctor for drug trafficking as a 
result of this practice, and his trial is scheduled for June 12, 2000. 
That same doctor is also being pursued civilly by at least three other 
States, and he has filed his own civil suit against the State of Ohio.
    Approximately fifteen additional States are investigating sites 
with a review toward litigation, investigations which are not yet 
public.
    In most of the Kansas cases, we are in the process of negotiating 
settlements, with provisions not to engage in the practice of online 
prescribing and to comply with the laws and regulations of our State 
before dispensing drugs to our citizens. We have settled with one 
defendant, and have filed an action requesting the court enforce the 
settlement agreed upon in another case.
    Most of the entities sued by the States are in the process of 
negotiating settlements, but a few continue to hide from us. It is 
worth noting one case where the Defendants are not only not hiding, 
they are actively pursuing the State. Attorney General Jennifer 
Granholm of Michigan has been sued in the Federal District Court in 
Virginia by one of the Defendants in a case that she filed earlier this 
year. The Defendants are claiming the Michigan Attorney General has, 
among other things, unreasonably burdened interstate commerce by 
requiring pharmacies and pharmacists to be licensed in Michigan before 
they distribute the drugs in Michigan. That case has not yet been 
docketed for hearing.
    In general, however, most websites sued or notified by the States 
are voluntarily not shipping to consumers in all States that have 
brought action against any site. Additionally, the publicity from these 
actions has helped boost our consumer education campaigns regarding the 
dangers of buying prescription drugs from sites that sell without the 
benefit of a valid prescription. There is no way to confirm the number 
of sites offering drugs for sale in this manner has changed, however, 
we know several of the sites that have been sued have gone out of 
business, and many of the doctors have ceased practicing in this 
dangerous manner.
    I have submitted with my testimony a summary of the cases filed by 
the States--and legislation proposed in State legislatures. I ask that 
this summary be included in the hearing record.
    In each of these cases, it is clear our law enforcement actions are 
aimed at stopping the illegal Internet sale of drugs to our citizens--
more appropriately named ``online prescribing.'' We are not interested 
in shutting down websites operating in compliance with all licensing 
and registration laws and regulations in the State to where they 
dispense the medication. We certainly have no problem with the 
legitimate pharmacies that utilize the Internet as an effective mode of 
communication with their patients.
     ``Online pharmacies'' should not be treated differently than 
traditional, ``brick and mortar'' pharmacies. The standards should be 
the same. If a pharmacy wants to transact business in a certain State, 
then it should submit to the laws and regulations of that State.
    That is the basic theory of our cases: by prescribing drugs to 
citizens in our States, the pharmacy, pharmacist, prescribing physician 
and website are practicing and operating within our States' 
jurisdiction and are subject to our States' laws. If they do not have 
the legal authority to dispense these drugs, they are breaking our 
laws.
    All the Defendants in the lawsuits filed by the States have one 
thing in common--they did not require a valid physician-patient 
relationship to prescribe and to dispense prescription-only drugs. 
These Defendants merely asked their customers to fill out a 
questionnaire about their health and claimed that a physician would 
review the application and prescribe the drug if appropriate. In all of 
our cases, however, it was apparent that if a physician reviewed the 
application, it was a feckless review indeed. A 16-year-old boy in 
Kansas ordered and received Viagra, a medication for erectile 
dysfunction, as well as Meridia and Phentermine, both controlled 
substances, even though he entered his true date of birth on the online 
order applications. No company asked for parental consent before 
sending drugs to that minor. The ease with which these drugs, 
especially the controlled substances, were distributed without an exam, 
without even a conversation with the recipient, is shocking and should 
be terrifying to those invested in public health--and especially as 
children's access to these drugs is unfettered.
    Additionally, we have found many more problems than just the 
licensing issues. These sites use unconscionable tactics to lure 
consumers and to mislead them about the drugs they are buying and their 
rights in the transaction. For example, many of these sites require the 
consumer to accept a waiver before they will ship the medication. These 
waivers purport to exonerate the physician who writes the prescription, 
the pharmacy that fills it, and the website and its operators who 
coordinate the transaction from all liability. The violations of State 
consumer protection laws the States have seen are too numerous for me 
to list here. Requiring a licensure verification will not erase all the 
problems inherent in the ``rogue online pharmacy'' industry.
    The National Association of Attorneys General (NAAG) is 
coordinating a united effort among the States to combat these problems, 
and that has served all of our citizens well. NAAG has established the 
Online Pharmacy Working Group to address the issues surrounding 
Internet pharmacies, and I am proud to say that Kansas has led the 
effort. The group has accomplished a great deal by implementing simple, 
cost-effective ideas which allow the most expedient action to be taken. 
For example, the members of the group have established a procedure to 
notify the State medical board where a defendant doctor is licensed or 
the board of pharmacy where a defendant pharmacy is located after a 
lawsuit is filed. Each State licensing entity can use the information 
to conduct its own investigation, if appropriate, and take any action 
it deems necessary, which can result in license suspension.
    As a direct result of this interstate cooperation, the State of 
Washington summarily suspended one doctor's license to practice 
medicine. This Washington doctor prescribed Viagra to a 16-year-old boy 
in Kansas, without ever seeing or talking to him. This boy was truthful 
about his age in his ``online questionnaire,'' yet that doctor 
prescribed and the company dispensed and shipped the drug directly to 
his home. My office coordinated with Attorney General Gregoire's 
office, and not only were we able to enjoin this company from selling 
to Kansans, the State of Washington was able to prevent him from 
prescribing to anyone online, pending the outcome of their licensing 
action.
    A carefully organized and unified campaign of both State and 
Federal resources will be the most effective way to attack this 
dangerous practice of dispensing potentially dangerous drugs without a 
valid prescription. Kansas can't stop this practice alone, nor can 
Illinois, Missouri, or Michigan. But all States working together with 
the Federal government can make the cost of operating illegal online 
pharmacies so high as to price the bad actors out of this business.
    Efforts in the direction of State and Federal coordination have 
already begun. On its March conference call, the NAAG Online Pharmacy 
Working Group included representatives from several Federal agencies, 
including the Department of Justice, Food and Drug Administration, and 
the Federal Trade Commission. The cooperative relationships that have 
developed between the States and between the State and Federal 
representatives as a result of this group have been extremely 
productive.
    At the most recent annual meeting of The National Association of 
Attorneys General, my colleagues and I adopted a resolution calling for 
cooperative federalism in addressing Internet issues. A copy of that 
resolution is attached and I ask that it be incorporated into the 
record for this hearing.
    As applied to online pharmacies, we have two substantive 
recommendations for any federal proposal:
    First, respect the States' historical role in setting substantive 
requirements for the regulation of doctors and pharmacies that operate 
within our borders. States are the primary enforcers of laws relating 
to the health of their citizens, and we should continue that tradition 
in this important issue.
    Second, the most important tool the Federal government can give the 
States is nationwide injunctive relief. Several States' Attorneys 
General have filed suit against the same companies and the same 
doctors. Because each State only has the power to obtain a restraining 
order under its own State law, it is only operable in that particular 
jurisdiction. To simply prevent those actors from doing business in 
their State, each Attorney General has to file an action in his or her 
State court. This duplication of effort drains our resources. We 
obtained a temporary injunction preventing the Defendants in our cases 
from doing business in Kansas, pending the outcome of the litigation. 
Five other cases were filed by other States against some of the same 
Defendants--essentially duplicating our efforts but because no 
nationwide injunctive relief is currently available, this replication 
is required to adequately protect all our citizens. Had we been able to 
file our cases in Federal court under a statute that allowed an 
injunction to apply nationwide, those States' citizens would have been 
protected from those entities and their practices, and their Attorneys 
General could have used their resources to file actions against 
different offenders. Since the States' most important goal in this area 
is to prevent these businesses from harming our citizens, this simple 
tool would allow each State to help protect all the citizens of this 
nation.
    The States advocate a regime modeled on the federal telemarketing 
statute that would allow State Attorneys General to take action in 
Federal court to curb online pharmacies. This arrangement would allow 
States to obtain an injunction effective nationwide, and yet not 
prohibit any State from filing an action in its State court, based on 
State law. Therefore, the first State suing an entity could obtain an 
injunction effective in every State and prevent harm to citizens in the 
entire nation, yet other States could still seek restitution for their 
State's consumers and seek penalties and fees in their own State 
courts. In crafting this relief, we ask that any legislation recognize 
the unique qualities of the Internet and clearly state both the 
nationwide nature of the relief and that the jurisdiction to act is 
based upon the location of the consumer at the time that the 
transaction takes place.
    In addition, I emphasize the need for an effective national 
registration or disclosure requirement for entities that sell 
prescription medications across State borders. One of the most 
difficult challenges in the States' prosecutions has been finding the 
companies and people responsible for selling these drugs to consumers 
in our States. We all had to sort through multiple shell corporations, 
addresses that turned out to be mail drops, overlapping physical and 
Internet addresses shared by different entities, and similar evasive 
tactics. Companies selling dangerous drugs across State lines should be 
required to maintain current, accurate, accessible information about 
their principals, their physical addresses, and their identities. We 
should not have to struggle to find them. The National Association of 
Boards of Pharmacy has established an excellent system for certifying 
these online pharmacies. We encourage you to use their program, the 
Verified Internet Pharmacy Practice Sites, VIPPS TM, as a 
model. We strongly support the VIPPS TM program and believe 
mandating it would not only provide the information Attorneys General 
want displayed on the websites, but would also obviate the need for a 
second and federal disclosure scheme.
    What role do the States want the Federal government to take? Most 
importantly, the Federal government should continue the effort at 
consumer education. The Food and Drug Administration and Federal Trade 
Commission have both begun campaigns to inform the public of the 
dangers of essentially writing your own prescription over the Internet. 
We applaud their programs but respectfully submit that it is not 
enough. The States would welcome federal resources to provide 
information to our citizens at our local hospitals, doctors' offices, 
even our State fairs! We would like to see a nationwide campaign 
including Public Service Announcements, brochures at Veterans' 
Administration hospitals and federal social service agencies, and model 
education campaigns for schoolchildren. Just weeks ago, a preteen 
character on the television show ``ER'' ordered growth hormone via the 
Internet and suffered significant health effects--hence, the need for 
the emergency room! Such an incident is not, unfortunately, limited to 
television fiction. Art, in this case, has imitated life. Our children 
are much more sophisticated in their use of computers and the Internet 
than most of us are, and they need to know about these dangers.
    Another important place for federal involvement is in combating the 
problem of off-shore sites. A commonly held fear is that the States' 
actions will merely force these companies out of the country, where 
laws are less stringent and enforcement frequently non-existent. But 
because of the borderless Internet, these rogue companies still can get 
their products to our consumers--and we have no reasonable method to 
stop them. The FDA's recent ``cyber'' letter-writing campaign is an 
encouraging step, and we would like to see the Federal government focus 
more of its efforts on these type of companies. The Department of 
Justice has recently designated contacts within the Drug Enforcement 
Administration to work with the States. Both of these steps recognize 
the need for the States to look to their Federal law enforcement 
partners in addressing the threat from entities in other countries.
    Just last week, NAAG hosted a conference in Ann Arbor, Michigan, to 
discuss issues arising from State Regulations and e-commerce. Both 
State and Federal representatives met to discuss issues such as 
investigative techniques, protecting consumers from online fraud, how 
to effectively present a case at trial, and interagency cooperation. 
Training sessions such as this are absolutely crucial if we as law 
enforcement want to stay ahead of the bad actors.
    Kansas has led the cooperative effort among the States, with the 
continued support of the National Association of Attorneys General. We 
welcome a partnership with Federal agencies to solidify our enforcement 
of the laws of our States.
    Thank you.
                                 ______
                                 
               National Association of Attorneys General
                                Adopted

          spring meeting, march 22-24, 2000, washington, d.c.

                               RESOLUTION

In Support of Legislation Encouraging Cooperative Federalism to Protect 
                       Consumers on the Internet

    WHEREAS, fraud, which continues to victimize consumers across state 
lines, has expanded from telephone lines to cyberspace; and
    WHEREAS, Congress in the last decade has recognized that it is 
neither desirable nor cost-effective for the federal government to 
pursue all forms of consumer fraud that cross state lines; and
    WHEREAS, State Attorneys General have had an ongoing, longstanding, 
and valuable partnership with federal agencies in protecting consumers 
nationwide; and
    WHEREAS, joint state-federal initiatives, including sweeps and 
Internet ``surfs'' targeting false health claims, fraudulent business 
opportunities, fraudulent investment opportunities, and fraudulent 
online sales are helping to protect the consumers; and
    WHEREAS, as a result of Congressionally-enacted legislation, State 
Attorneys General have gone into federal court for nationwide equitable 
relief using vehicles such as the Telemarketing Sales Rule, and this 
has proven highly effective; and
    WHEREAS, a joint enforcement approach has been effective because it 
complements and enhances, rather than preempts, state consumer 
protection enforcement, allowing state officials the option to 
determine which law and relief is appropriate, as well as allowing a 
consultive process with federal enforcers; and
    WHEREAS, authorizing the State Attorneys General to proceed in 
federal court would further protect citizens from fraud which ``knows 
no boundaries,'' eliminate the need for wasteful duplication of state 
and federal resources, and promote closer state-federal relations;
    NOW, THEREFORE, BE IT RESOLVED THAT THE NATIONAL ASSOCIATION OF 
ATTORNEYS GENERAL:

1. Supports federal legislation that would grant authority to State 
        Attorneys General to obtain nationwide equitable relief in 
        federal court to combat unfair and deceptive acts or practices 
        occurring over the Internet; and
2. Supports federal legislative efforts to ensure that state consumer 
        protection laws are not preempted; and that states have the 
        option to enforce both federal and state consumer protection 
        laws in federal court; and
3. Authorizes the Executive Director and General Counsel to transmit 
        these views to Congress, the Federal Trade Commission, the 
        Department of Justice, and other interested parties.
Abstain: Attorney General John Cornyn

    Mr. Upton. Thank you very much, all of you.
    We are now going to proceed to the stage where I am sure 
that we will have a couple of rounds of questions, and because 
we have so many members here, I'm going to try to maintain 
strict control of the 5-minute rule for us beginning now.
    Mr. Hubbard, under the Food, Drug, and Cosmetic Act, the 
FDA has the legal authority to take action against the 
importation, sale, or distribution of a misbranded drug, the 
importation, sale, or distribution of an unapproved new drug, 
illegal promotion of a drug, the sale or dispensing of a 
prescription drug without a valid prescription, and obviously 
counterfeit drugs as well. What enforcement actions has the FDA 
taken under any of the above-mentioned legal authorities 
related to prescription drugs?
    Mr. Hubbard. I think you're talking about approved drugs 
from a pharmacy. As I said, we have 132 investigations underway 
now and in the criminal area about 50 of which are dealing with 
the sorts of online pharmacies that offer drugs to patients via 
a questionnaire. Patients just ask a few questions, sometimes 
more, sometimes less and then the patient sends the 
questionnaire back to the site along with a credit card number 
and the site at the other end in most cases apparently has a 
physician and a pharmacist. The physician then reads the 
questionnaire, determines that patient who wants that drug, and 
perhaps the patients ask for that drug, say Viagra, by name, 
writes the prescription and the site which may be a pharmacy or 
may be associated with a pharmacy will take the prescription 
and fill it and then drop the drug into the mail and mail it 
back to the patient.
    Now, the medical profession had said, I think, uniformly 
that is bad medicine. The patient is not seen, there is no 
medical history taken, there is no physical examination. 
There's no question of things such as, in the case of Viagra, 
for instance, does the patient have a pre-existing heart 
condition. And in that case the patient should not take Viagra 
because it could be a lethal drug in that circumstance.
    What FDA has done in those circumstances and in a number of 
these sites out there, we go in and we find a site, we trace it 
to its ISP source, then we attempt to trace it to the actual 
individual or storefront or the business or whatever the 
location is, and then we make purchases over the Internet. We 
use a dummy credit card; I won't go too much into investigative 
procedures, but we do make purchases. And then the drug is 
mailed to us. At that point this site is selling a drug and so 
we are well on our way.
    Mr. Upton. At that point do you alert the Justice 
Department?
    Mr. Hubbard. No, not usually at that point.
    Mr. Upton. You do everything on your own?
    Mr. Hubbard. Usually at that point.
    Mr. Upton. Okay.
    Mr. Hubbard. We try to work the case up, as it were, into a 
case with all the pieces of evidence. In a criminal case then 
we go to the appropriate U.S. attorney in whatever State or 
region it is. Now, a civil case would go to the Office of Civil 
Litigation at the Department of Justice here in Washington. So 
we now have a case in which we have gotten the evidence we 
need, that there is a site offering the drug, selling the drug, 
we have made purchase of the drug, and the key piece at that 
point is, is it a valid prescription.
    And the way it would work is, if we go into court, the 
State official there, the State Medical Board would be asked to 
come testify and say, whether this is a valid prescription in 
your State. If that State individual says yes, we're done. If 
he says, no, we have no valid prescription, it's a violation of 
the Food, Drug, and Cosmetic Act and we can bring criminal 
action. And we could bring civil action. This would all be done 
through Justice, of course, but there could be an injunction, 
there would be a seizure, there could be a number of 
activities.
    Mr. Upton. Let me just--I am watching my clock. According 
to your budget request for 2001 you indicated that you had 
devoted more than 30,000 staff hours to investigate the 
Internet illicit sales which I presume is under the scenario 
that you just described. So you spend 30,000 hours--time hours 
on that--identifying cases, and yet the Justice Department has 
had what, two, three convictions? How many? You have a few more 
now in the pipeline, but until recently, there were none.
    Mr. Hubbard. I believe we referred 33 cases to the Justice 
Department.
    Mr. Upton. Is that based on 30,000 hours of checking these 
out?
    Mr. Hubbard. That is actually over only 6 months. We've 
actually devoted on the annual basis more like 80,000.
    Mr. Upton. It just seems like 80,000 hours coming up with--
--
    Mr. Hubbard. Well, first of all, many of those resources 
have gone into the unapproved drugs and we have many arrests, 
prosecutions, convictions, injunctions, seizures, many, many 
different things are done. On the approved drugs, those 
investigations have not ripened to the point of a prosecution 
yet. Because of the problem that I've explained to you about 
the valid prescription, if a State official cannot attest that 
that is an invalid prescription in that State, it's not a 
violation of the Food, Drug and Cosmetic Act.
    Mr. Upton. If I am going to maintain the relevance of this 
clock I have to obey it myself. But I am going to come back.
    Mr. Klink.
    Mr. Klink. I would start, if I can, with Mr. Posner.
    I mentioned this in my opening statement. It is my 
understanding that in a meeting with the subcommittee staff 
that the Department of Justice reported the Justice Department 
was chomping at the bit to receive online pharmacy referrals 
from the FDA. The Department of Justice was waiting to get some 
of these cases to really jump on; is that an accurate 
description?
    Mr. Posner. Well, the Department is certainly very 
interested in prosecuting these cases. We have gotten a couple 
dozen referrals from the FDA over the last year. A couple of 
them have resulted in convictions.
    You know, we remain ready and eager to work these cases, 
but Mr. Hubbard quite accurately summarizes the difficulty and 
the length involved in investigating these cases. The Chairman 
asked a very good question which is, when do you come to the 
Justice Department with these cases and Mr. Hubbard answered 
quite correctly, well, really at the end. You've got to do a 
lot of work first. And even when the first referral is made, 
frequently more work needs to be done. Sometimes the FDA will 
decide maybe they will take it to the State prosecutor because 
the facts and the law in that particular case justify that. 
That happens all the time with a range of substantive areas the 
Department is involved with.
    But, Congressman Klink, we are quite eager to take these 
cases. The U.S. Attorneys are quite eager to take these cases, 
and our prosecutors in the Office of Consumer Litigation, our 
experts in criminal cases under the FDCA, and they are ready to 
take cases as well.
    Mr. Klink. Of the cases then referred to DOJ by the FDA, 
the so-called ``foot soldiers'' in this whole thing, do they 
have the necessary elements to go forward? Are these good 
cases? What can you tell us about the referrals after these 
tens of thousands of hours, whatever it is, of manhours and 
womanhours that have been put into this research by FDA. What 
happens then when DOJ gets it. What sort of shape are you in on 
making these cases?
    Mr. Posner. Well, I want to steer a little clear from 
actual cases, but I can tell you what we have. I say we have 30 
active criminal investigations, 20 involving prescription 
drugs. But it is not like we are ready to go to trial at that 
point. That means that the investigative agent has done a lot 
of work, has prepared a case, but it will depend on the facts 
and the law and the judgment of the prosecutor as to whether 
the case is ready for indictment, ready for a search warrant, 
what have you. Sometimes the cases aren't ready. Prosecutors--I 
know we have at least one former U.S. Attorney on the 
committee. Prosecutors make decisions every day about whether 
something is ready for a search warrant or an indictment or 
what have you, sometimes the cases are ready, sometimes they 
are not.
    All I can say here is we have a number of active grand jury 
investigations in online prosecution drug cases.
    Mr. Klink. What I cannot understand, let me jump back to 
Mr. Hubbard for a second, if I heard your testimony right, you 
said that initially when you began this investigation as 
determining who is operating the site, where the site is being 
operated from, kind of getting some formation out of what is 
jello. Why would not the FDA fully be behind the bill that we 
offered a year ago on disclosure and force these sites--
wouldn't that be a way--at least if you're a police officer and 
a car is driving down the street and it doesn't have a license 
plate it lets you know it is something that you ought to check. 
At least if we had some kind of disclosure like you display a 
license a lot of these questions would be answered for you 
right away, or at least if they didn't answer them for you by 
having that accurate information, you would know those are the 
sites you have to look at.
    And, yet, I will tell you, I am very dismayed that this 
bill that you mentioned that FDA and the administration has 
come forward with, you didn't work with us on it. We want to be 
partners in this, we don't want to be advocates. I do not 
believe that you work with the majority or the minority in 
putting this together, and quite frankly the disclosure in your 
bill was much weaker than that that we put forward in our bill 
in the beginning. So if this is such a problem why don't you at 
least want some strong disclosure laws on this?
    Mr. Hubbard. I think we absolutely support your disclosure 
provisions, Mr. Klink, and did include them in our bill.
    Mr. Klink. Doctors in your bill do not have to do any 
disclosure at all. We do not know who is doing the 
prescription.
    Mr. Hubbard. We had a concern that without any teeth behind 
it could lead to people disclosing things that were not 
truthful.
    Mr. Klink. Should doctors have to disclose who they are and 
whether or not they have the authority and the education to be 
prescribing these medications; is that something that should be 
done to protect the public?
    Mr. Hubbard. We saw that bill as the beginning of a process 
and we would very much like now to engage the committee on what 
the right ideas are. But we are hoping this bill is a point of 
departure for discussion.
    Mr. Klink. If it is a point of departure for discussion, 
why did we not work together on this from a year ago? Why was 
there not some coordination between the people at FDA and our 
staff? You knew we had an interest in this, yet you kind of 
thrust this--well, I got a phone call the day you were 
releasing the bill. That's not a way to cooperate with us, to 
have a dialog on how we are going to solve this problem, but I 
think it is potentially a difficult problem.
    Mr. Hubbard. Well, first of all, this bill was not totally 
driven by FDA. It was an administration bill and I believe----
    Mr. Klink. Whose bill was it?
    Mr. Hubbard. Well, I think it was a joint effort with the 
Electronic Commerce Working Group at the White House, with the 
Department of Justice, with FDA.
    Mr. Klink. Everybody but the Members of Congress.
    Reclaiming my time for just one moment. I understand I'm 
running over.
    General Stovall, do you think disclosure is an important 
part in this process giving you the tools to know automatically 
if we know who this person is, if we know if they have the 
authority of the licensure where they're operating from, is 
that important to you?
    Ms. Stovall. We think that is absolutely, incredibly 
important. That was the most difficult task that all the States 
face in bringing the litigation was to be able to find out who 
it was that we could bring action against. So that was 
important.
    Mr. Klink. So, then, Chairman, I think what we have gotten 
out of this from General Stovall who has really been on the 
frontline in this, if we put together a bill that has 
disclosure and injunctive relief, we are on our way; is that 
right?
    Ms. Stovall. Absolutely. Absolutely.
    Mr. Klink. Thank you, Mr. Chairman.
    Mr. Upton. Thank you. Dr. Ganske.
    Mr. Ganske. Thank you, Mr. Chairman.
    Let us think about the elderly widow who is existing on her 
Social Security as her only source of income. She also has 
significant pharmaceutical costs. She is forced to make a 
decision between paying her rent and picking which one of her 
pharmaceuticals not to purchase for the month. So she has a 
friend in AARP who has a computer who can get on the internet 
and can order through PharmaWorld in Geneva, Switzerland after 
paying either of two American doctors $70 for a phone 
consultation and get her medication at one half the cost it 
would cost her in her local pharmacy.
    I would like a response from each of you as to is this lady 
doing something illegal, is it safe, what would you recommend 
to her? Let's start with Mr. Hubbard.
    Mr. Hubbard. Under the law as currently written, it is 
illegal to bring a drug in from another country that's not 
approved by the FDA. So in that case if she goes to a foreign 
web site and makes such a purchase of the drug whether it be a 
completely unapproved drug or a foreign version of an approved 
drug, she is violating the law. And FDA is empowered to stop 
that drug and not let it in. The practical reality has been 
somewhat different because there is an intent to show some 
compassion in some circumstances, but this is a very vexing 
problem in which more and more seniors are seeing less 
expensive drugs in other countries, going to those other 
countries, more often in our experience by traveling to those 
such as to Canada and Mexico and then bringing them back in. 
And that is a very difficult problem because we are not 
inclined to board a bus and go through the purses of little old 
ladies and take their prescriptions away from them.
    However, technically she's doing two things; she has 
violated a law and second she is taking risks that she may get 
a drug that's a real drug or a counterfeit drug or a subpotent 
drug, or a superpotent drug, or anything else. And we cannot 
guarantee that she is getting the real drug, but she is 
probably saving money in many cases.
    Mr. Ganske. Let's say that she goes through a group called 
``Canada Prescriptions'' a group of retail pharmacies in 
Canada. How big a risk is she taking?
    Mr. Hubbard. Well, obviously I don't know anything about 
that group, but any time you get outside the system, you're 
taking a risk.
    Mr. Ganske. Are we talking about a 5 percent risk if she 
goes through this group PharmaWorld? While I understand you do 
not know the specifics about some of these cases, what can you 
tell this elderly person? What is it? Is it a 50 percent risk 
that she may not be getting the drugs she's supposed to be 
getting? How would she distinguish which of these overseas 
places might be reputable and which would not be?
    Mr. Hubbard. She is totally incapable of doing that. And I 
believe the FDA is totally incapable of doing that.
    Mr. Ganske. And so let us say that she orders this and pays 
for it by MasterCard and this drug is coming into the United 
States. Ms. Durant, are you going to confiscate that medicine?
    Ms. Durant. If it does not meet the legal detainment for 
the FDA petition. If it does not meet the guidance that we have 
from the FDA. Now, if she is coming over the border, we have 
guidance from the FDA on the amount of dose, et cetera, and we 
generally do not detain those from Canada and Mexico. We do 
have guidance from the FDA on this. So in the mail however our 
experience has been that that is generally not the kind of 
drugs we are finding and seizing.
    Mr. Ganske. In other words, you wouldn't be so concerned 
about a drug like Celebrex? I mean, you are really looking at 
some other types of drugs?
    Ms. Durant. Correct. Correct. But we do take our guidance 
from the FDA and we have received complaints from members, from 
the constituents on some seizures that we have made and, again, 
we work closely with the FDA to take this practical approach to 
those situations and have guidance----
    Mr. Ganske. Do any of the panel members have any idea of 
the type of volume that we are talking about for this type of 
practice for senior citizens? Do any of you have any ideas?
    Mr. Hubbard. Anecdotally we understand that people are 
increasingly traveling by car or bus or whatever to Canada and 
Mexico to make these purchases. We are not seeing big increases 
in the common carriers. There are increasing amounts of some 
drugs, I believe, that Customs is seeing, but they tend to be 
more of these sorts of products you have here today, the 
steroids and the control substances that are regulated by the 
Drug Enforcement Administration, not by the FDA.
    Mr. Ganske. I wonder if Ms. Stovall would have a comment on 
this as it relates to citizens in Kansas who may be struggling 
with paying for their drugs and are looking at the Internet and 
saying, gee, I can send $15 to a Texan and get a phone number 
at a Mexican pharmacy and I can get that pill for one-fourth of 
what I have to pay for it in Kansas.
    Ms. Stovall. We understand and are empathetic with that. 
The safety concern is paramount though. We have a drug approval 
system in this country for a reason, and that is to be sure 
that consumers get the drug that they think they're getting and 
so that would be our great concern with getting drugs from 
overseas when they have not been approved. We do not know what 
they are----
    Mr. Ganske. So is the State of Kansas looking at 
intercepting those medications as they're coming into the 
State?
    Ms. Stovall. We do not have the resources to do that.
    Mr. Ganske. Do you think you should?
    Ms. Stovall. It absolutely is not a priority frankly. We do 
not--in a perfect world, yes, we would be able to protect our 
consumers from getting drugs overseas and know what the quality 
of them--of those drugs were. But we don't have the resources 
to do that. We have just concerns about the convenience of the 
Internet and we think that the valid pharmacies operating over 
the Internet are wonderful and if we can give some seal of 
approval to the pharmacies that are legitimate so that 
consumers know the good ones to buy from, the hope is they get 
cost savings there as well and don't have to risk their health.
    Mr. Ganske. Okay. I guess my time is up. Thank you.
    Mr. Upton. Ms. DeGette.
    Ms. DeGette. Thank you, Mr. Chairman. I think we are all 
struggling with the same issue here today and that issue is, 
what is going to be the most effective approach to stop the 
online pharmacies from inappropriately and illegally selling 
prescription drugs. So let me try to get a little bit better 
handle here.
    As I understand it, Mr. Hubbard, the FDA, has identified 
potentially up to maybe 400 of these online pharmacies that are 
inappropriately----
    Mr. Hubbard. We evaluated 400 sites, yes.
    Ms. DeGette. Yes. And the reason I was confused is I have 
this March 23, 2000 letter from the FDA to this committee which 
says that the FDA is not aware of any Federal prosecutions or 
convictions for Internet pharmacy violations that have occurred 
at this time. Mr. Posner has updated us and apparently there 
have been a couple since this letter and there is more in the 
pipeline. But here is my concern, we have maybe 400 of these 
pharmacies and I used to practice law myself, so I know, 
particularly for cases like this, it can be very difficult to 
collect evidence that will make a criminal prosecution stick. 
And I do empathize with that. But here's the thing I'm 
struggling with and I would like to hear your comments on it.
    First of all, Mr. Hubbard, how many States--you say you 
refer a lot of these cases to the State prosecutors, how many 
of these cases have actually resulted in convictions at the 
State level, if you know?
    Mr. Hubbard. I know of at least 11 where the State has not 
so much prosecuted criminally, but has issued a cease and 
desist order for the pharmacy.
    Ms. DeGette. So as far as you know there are no State 
criminals?
    Mr. Hubbard. No, no, I believe the States are pursuing----
    Ms. DeGette. No, no, do you know of any though?
    Mr. Hubbard. I believe we do. I can't name them here. I 
could certainly get that for you for the record.
    Ms. DeGette. Wait a minute.
    Mr. Chairman, with unanimous consent, can I ask that they 
supplement their response and if you can please let us know, 
have your staff let us know how many actual State convictions 
there have been.
    Mr. Hubbard. There have been--about half the States are 
being active in this area.
    Ms. DeGette. Okay. What I want to know is criminal 
prosecutions and convictions. Because here's the other thing, 
what I am wondering is currently these prosecutions as I 
understand, Mr. Posner, are misdemeanor prosecutions at the 
Federal level; is that right?
    Mr. Posner. The jury in Florida yesterday convicted on 
felony counts.
    Ms. DeGette. They did. What was that felony?
    Mr. Posner. I believe it was felony FDCA counts. It might 
have been a felony false statement count. It might have been a 
felony conspiracy count. There were multiple counts and I think 
at least one of the defendants was convicted on multiple felony 
counts. The plea last month in Hawaii was to a misdemeanor 
charge that the United States brought as a misdemeanor charge--
--
    Ms. DeGette. Okay. But are most of these cases brought as 
misdemeanor cases and being investigated as misdemeanor cases 
or are they being investigated as felonies?
    Mr. Posner. I think most of them are filed criminal cases 
but charge felony violations. Obviously, in the investigations 
underway now, if the prosecutor determines that the facts and 
the law support a felony charge, the Department could seek 
that. And the Department is looking at an array of very serious 
charges. I don't want to get into what we're thinking about in 
particular matters, but it would be fair to say that the 
Department is considering felony charges in a number of online 
prescription----
    Ms. DeGette. Okay. So you one of your suggestions would be 
we need to look at legislation to give a more serious 
designation to some of these crimes? Would that help? Because 
practically speaking, I know when you have limited resources 
you're going to generally pursue felonies versus misdemeanors.
    Mr. Posner. Well, the Department is very interested in 
these cases and we will pursue a misdemeanor if that's what the 
facts and the law support in this particular case. I think our 
view is that the penalties are generally adequate, we are very 
supportive of the administration's bill, the disclosures and 
all that, but I think that we are certainly satisfied with the 
penalties of the FDCA.
    Ms. DeGette. All right. Now, you referred in your testimony 
today and you talked about it in your written testimony to a 
suggestion that you folks have that could help in the civil 
arena. Could you talk just briefly about that?
    Mr. Posner. I will. Under 18 U.S.C. Section 1345, the 
Attorney General can seek civil injunctive relief to stop 
disposition of assets that are traceable to a violation of the 
banking laws and a defined array of health care fraud offenses. 
That's what Section 1345 currently says.
    We recommend adding violations of perhaps the FDCA and also 
the Administration's Online Pharmacy Bill to that list of 
defined----
    Ms. DeGette. I see. And do you think that would help you 
then in your ability to get civil injunctive relief against 
these folks?
    Mr. Posner. Yes, certainly, Congresswoman, but I think it 
will also help along with the subpoena power the Department has 
in the new bill. When you take those two things together, we 
believe that we may be able to stop some of the money from 
United States consumers flowing to foreign sites. That is, I 
think, a creative and potentially quite useful way of 
combatting the problem of foreign sites. And obviously you do 
that with domestic sites as well.
    So the answer to your question is yes.
    Ms. DeGette. Thank you.
    Mr. Upton. Mr. Burr.
    Mr. Burr. Thank you, Mr. Chairman.
    Let me, Mr. Hubbard, go back to the lady that Dr. Ganske 
was talking about. She fills her prescription via an Internet 
pharmacy--online pharmacy. You said that if the drug were not 
approved by the FDA or was manufactured out of the country, 
that that would be illegal. How about if the drug were 
manufactured in this country?
    Mr. Hubbard. I think the big issue there would be--you're 
talking about a foreign Internet site?
    Mr. Burr. Correct.
    Mr. Hubbard. This committee led the way to legislation 
about 15 years ago that would prohibit the reimportation of 
drugs exported from the United States. The problem that the 
committee found at the time was that drugs were going offshore, 
expiring or otherwise being contaminated or having problems and 
then being reimported into the United States and that became 
very problematic. So the Congress enacted legislation under 
this committee's auspices called the Prescription Drug 
Marketing Act that would make that particular practice illegal.
    Mr. Burr. So what you're saying to us is that there is no 
international online pharmacy that has a product that can 
legally be shipped into this country; is that correct?
    Mr. Hubbard. There may be some exception, but generally, a 
drug brought in from another country that is not subject to a 
specific FDA approval would be violative, and, of course, both 
those would come in, in commercial shipments to the 
manufacturer and then the manufacturer would distribute them to 
a wholesaler and then to a pharmacy to dispense them to a 
patient.
    Mr. Burr. Mr. Posner, is that also the U.S. code that 
allows pharmaceutical companies and manufacturers here under 
patent protection the ability to refuse for a reimportation?
    Mr. Posner. I don't--are we still on the hypothetical with 
the----
    Mr. Burr. I think we're down to reality now. I mean, Mr. 
Hubbard just said----
    Mr. Posner. Right.
    Mr. Burr. [continuing] under the current rules maybe 
there's an exception out there and I grant him that leeway, 
there's not an international online pharmacy that it could be 
legal to sell products here because they might not be approved 
by the FDA, not manufactured in this country and for those that 
are manufactured in this country, there is a law that says it's 
illegal to reimport them to this country. There is also an 
additional U.S. code that allows manufacturers of patented 
goods to deny their re-entry into this country after they've 
been manufactured here and shipped somewhere else and then 
tried to ship back to the U.S.
    Mr. Posner. I think I generally agree with the FDA's 
position. I am hesitant to offer a definitive legal opinion on 
a set of facts.
    Mr. Burr. Well, since you quoted U.S. Code, I thought you 
might be familiar with that about patent protection.
    Mr. Posner. I'm not----
    Mr. Burr. So let me go to Ms. Durant, if I can. Does that 
mean that the U.S. Customs is in fact stopping every shipment 
that comes into the United States from an international online 
firm?
    Ms. Durant. No, the U.S. Customs Service does not have the 
resources.
    Mr. Burr. Has the FDA ever shared with you that their 
opinion is that anything that is shipped from an international 
online pharmacy into this country would be breaking the law?
    Ms. Durant. We have some rules from the FDA on 
circumstances----
    Mr. Burr. Is this the first time you have ever heard 
Justice or the FDA say that any product, any pharmaceutical 
product shipped internationally back into this country in fact 
breaks either FDA regulations or U.S. law?
    Ms. Durant. This is the first time that I have personally 
heard that.
    Mr. Burr. We are making tremendous progress today.
    Which I would say for the purposes of everybody's testimony 
which I believe without exception they had it in there, this 
paragraph on cooperation. I would tell you that we still have 
something to strive for as it relates to the communication 
between all the entities.
    Mr. Posner, let me go to you for two quick questions. In 
March of this year the Department of Justice released a report 
on the President's Working Group on unlawful conduct and the 
Internet. The report of the Department of Justice concluded, 
``existing Federal law appears generally adequate to encompass 
the unlawful sale of prescription drugs over the Internet.'' 
However, the Administration recently released their draft 
proposal to impose new Federal regulations on the Internet. How 
do you explain the inconsistency with the Department of 
Justice's conclusion and what the proposal of the 
Administration currently was?
    Mr. Posner. Well, Congressman, we don't see an 
inconsistency. What we testified actually in the committee last 
year was that we said that----
    Mr. Burr. Let me read you a quote, if I could, one more 
time, and you tell me where I've misunderstood it. And I quote, 
``Existing Federal law appears generally adequate to encompass 
the unlawful sale of prescription drugs over the Internet.''
    Mr. Posner. That's right. Existing substantive laws 
generally are adequate, although we say in the report that 
there were a lot of different investigatory issues. And what we 
said last year and what we say in the Administration's report 
is that you need to match up the offline world and the online 
world. That is, disclosure in the offline world, you walk into 
a CVS on Wisconsin Avenue and there is an array of disclosure 
for you, pharmacy license with names, addresses, phone numbers, 
all of that. That's what you see in the offline world. So it's 
critical to match up the disclosures in the online world. 
That's why that bill is, in our view, perfectly consistent with 
the Administration's report which calls for consistency because 
it requires all that disclosure to match offline pharmacies.
    Mr. Burr. One of the challenges that we deal with is the 
consistency of what you tell us and what it is next month. And 
in this particular case in March you made a statement and here 
at the first of May we get a bill that basically says 
everything that you told us that everything wasn't adequate.
    Let me just ask this last question, I know with the 
committee's indulgence. Also in the President's Working Group 
the report said that the U.S. continues to seek and obtain 
cooperation from foreign governments with regard to foreign web 
sites illegally importing drugs into the United States. I think 
we would all conclude today that is now defined as 100 percent 
of the foreign sites that ship into the United States.
    What type of cooperation is the U.S. seeking and have we 
had meetings with foreign governments on this topic?
    Mr. Posner. Congressman, the Department is involved in a 
range of negotiations, the Department and other Federal 
agencies, Customs, FDA, and others, the State Department, 
involved in a range of discussions about cyber crimes committed 
internationally. These are very significant issues. They cut 
across a lot of substantive areas. There are a number of 
international agreements in place, there will be more 
international agreements in place.
    I mean, Customs can speak to a very successful story about 
international cooperation resulting in arrests and seizures in 
Thailand. There is more and more of that international 
cooperation, particularly involving the Internet which 
obviously presents global problems. There is a lot of activity 
in that area as to cyber crime generally and as to online 
pharmacies specifically and I think we are beginning to see 
quite tangible results including convictions and arrests.
    Mr. Burr. I thank you for your thoroughness in that answer 
and have also been informed that in the proposal that was 
recently sent to Congress that the bill also contains the 
administrative subpoena power and civil monetary penalties that 
do not exist in the offline world. So if we are trying to reach 
a point of equity between the online and offline, the pendulum 
might have gone too far.
    I haven't had an opportunity to sit down and read the 
proposal word-for-word, but I assure you that I will and I 
think that from Mr. Klink's comments, we're all interested in 
playing a part of whatever the solution is. I am amazed to find 
out that today is the first day that we've all realized that 
international sites based upon any criteria that we choose 
would be illegal for a shipment to come to the United States. 
And I hope that in fact Ms. Durant carries that back to the 
Customs because I don't think she was aware of it based upon 
her testimony. I thank the Chair and I thank the members.
    Mr. Upton. The gentleman yields back the balance of his 
time.
    Mr. Hubbard, according to your testimony the FDA has sent 
17 cyber letters to operators of foreign-based Internet sites 
offering to sell online prescription drugs; what has happened?
    Mr. Hubbard. I understand----
    Mr. Upton. Did they stop? Did you scare them?
    Mr. Hubbard. One of them notified us that they had ceased 
immediately. Two others agreed to stop selling Viagra, but were 
considering other drugs and I don't believe we heard from the 
others. These are not orders, because these are sites in 
foreign countries.
    Mr. Upton. How long ago did you send them?
    Mr. Hubbard. Oh, I think a month ago----
    Mr. Upton. Could you keep us posted on the response?
    Mr. Hubbard. Sure.
    Mr. Klink. Would the Chairman yield for just one follow up?
    Mr. Upton. Sure.
    Mr. Klink. When you sent those letters did you coordinate 
with the Department of Justice or Customs to make sure that 
notifying these people they were under investigation didn't 
interfere with other actions that other Federal agencies are 
taking?
    Mr. Hubbard. I understand while we did not do that in 
advance, we've obviously shared them at the time we sent them 
and I understand that there were no problems there.
    Mr. Klink. Do you know that for sure?
    Mr. Hubbard. I asked that question specifically and was 
told by investigators that that was the case. But I did not 
personally talk to Customs.
    Mr. Upton. Ms. Durant, is that answer----
    Ms. Durant. We were notified. It was after the fact and 
there were no problems.
    Mr. Upton. Mr. Posner, how are you coordinating with the 
State enforcement agencies? And I want to get Ms. Stovall's 
response to that as well. I want to hear a little bit about the 
conference and how you all are interacting between the States.
    Mr. Posner. Well, I know that our prosecutors both in 
Washington and in U.S. Attorneys Offices around the country 
have been in a number--I mean, we've all had plenty of 
interagency meetings on this. The State AG's are quite involved 
in this. We sent at least two notifications to NAAG, I think in 
the last year about our interest and said here's a contact and 
a phone number at DEA, here is a contact and a phone number for 
a prosecutor in Washington.
    My understanding, it's in my prepared remarks is that we 
have a pretty good working relationship, an alliance between 
the U.S. Attorney's office in Kansas, and Ms. Stovall's Office. 
She can obviously speak to that in more detail as could our 
Kansas prosecutor. But we have alliances with State prosecutors 
and we have a lot of defined, longstanding, and ongoing 
relationships with State prosecutors in a number of the 
substantive areas and we use that with this subject matter as 
well.
    Mr. Upton. Ms. Stovall?
    Ms. Stovall. In terms of the cooperation there is a Federal 
group that was put together, a Federal/State working group and 
it meets about quarterly and AGs have been invited to 
participate in that. I'm not aware of specific examples of 
times that we have called upon the U.S. Attorney in Kansas 
although the U.S. Attorney is an outstanding individual, and I 
know would be ready to help if we were to ask. But I'm not 
aware of particular examples where we have asked for that to 
occur.
    Mr. Upton. Ms. Durant, Mr. Posner referenced the working 
relationship with Thailand.
    Ms. Durant. Yes.
    Mr. Upton. What other relationship--that has been fairly 
successful by I think everyone's admonition. What other 
countries are you trying to build a similar relationship with?
    Ms. Durant. We have not proceeded as dramatically as we 
have with our Thailand attache's office. We are looking forward 
to making that success in Thailand a model when the 
CyberSmuggling Center adds these ten agents in July to the 
Cyber Crimes Unit that we're forming in Customs.
    But the way we do that is through our attache's office. 
Customs has attaches overseas and they work with the foreign 
governments to provide technical assistance to the foreign 
governments which is what happens in Thailand such that they 
shut down the Thai Government, seven online sites.
    Mr. Upton. This subcommittee's investigative staff has 
spent a little time at a couple of different facility sites and 
they noted that the customs officials were applying different 
standards in determining the pharmaceutical products that would 
be allowed into the United States. And I would just note that 
there is some cue perhaps in terms of the allowance of drugs 
from other countries in we have a guidance sheet here that--
maybe we can make copies of this and share with you now, but 
can you explain, Ms. Durant, why a Customs official might apply 
a different standard depending on where the mail facility that 
a package might go through?
    Ms. Durant. We stress uniform application of our guidance 
through our field offices.
    Mr. Upton. San Diego, right, and San Francisco, and 
Oakland, and Los Angeles. Dramatically different procedures as 
you identified products that were coming in from whether it 
would stored, whether it would be sent back, how long you would 
have it, whether it would be sent along to the individual that 
it was addressed to. It was remarkable the differences that 
were----
    Ms. Durant. We do have some differences. Some of those 
differences frankly stem from guidance that we get from FDA at 
the various FDA locations in the field. We do take our guidance 
there. There are some variances we've been working with the FDA 
to get a uniform policy and they, I believe, are issuing some 
fairly strident instructions to their field offices not to 
deviate from the national guidance.
    Having said that, we need to work as well with our mail 
branches to make sure that they too are following the guidance 
and not deviating from that guidance. Part of the problem, 
frankly, is just the overwhelming amount of mail and this 
manual targeting that we're forced to use. We have only the 
country information, X-rays and some dogs in our mail units to 
be able to select those articles. We are fairly overwhelmed in 
the mail in terms of our ability to cope with what is coming at 
us. Be we are working with the FDA and working with our own 
mail branch to make sure they follow the guidance that they're 
given.
    Mr. Upton. Mr. Klink?
    Mr. Klink. I want to follow up on that, Mr. Chair. It was a 
good line of questioning and it's the direction I wanted to go. 
But before I do that, I had mentioned in my opening statement, 
we see these promotional web pages, Mr. Hubbard, for some of 
the drugs that are most frequently sold on these rogue sites 
and I mentioned Propecia, Xenical, Viagra, and I've got copies 
of them here. And I will tell you if you will accept my word 
for it, there is nothing on these sites that jumps out front as 
to where or where not to buy these. It does not really lead you 
to the FDA where you could give some warning, and I understand 
your site gives some warning as to these drugs. Does it make 
good sense to you that these companies should be encouraged to 
at least post certain basic consumer information at their 
promotional web site talking about where or where not to buy 
these drugs and there is safety and risk to associated 
purchasing these on line?
    Mr. Hubbard. These are by the manufacturer of the drug or 
by the----
    Mr. Klink. The promotional site done by the manufacturer; 
yes.
    Mr. Hubbard. Right. That is an issue, Mr. Klink, and I 
think it's an important one. We have told companies that their 
promotional material on these sites is subject to FDA 
regulation. We have sent warning letters on that, we are 
monitoring those because there is a real potential for abuse 
and you're absolutely correct.
    Mr. Klink. So what we're saying, these are promotional 
sites that talk about these drugs, obviously very popular drugs 
like Propecia, Xenical, and Viagra, and we're simply saying if 
a company, and not to pick on any one of them, but they should 
have something on that web site that would lead to the FDA or 
say, look, obviously they list the risks associated with the 
drug, but also there should be something on there that would 
say where it's safe to buy this or where not to buy it?
    Mr. Hubbard. I think that's good advice, Mr. Klink. I'm not 
sure we can require that. We do, however, require that if they 
promote the drug that they must have balanced information about 
risks and contraindications and other problems with the drug or 
what we call ``fair balance''.
    Mr. Klink. I don't think that I'm making myself clear. 
You've got at the FDA this online pharmacy facts----
    Mr. Hubbard. Yes.
    Mr. Klink. [continuing] and tips and warnings for 
consumers.
    Mr. Hubbard. Right.
    Mr. Klink. If, for example, and I'll use Propecia, for 
example, and this is Merck, if at Merck they had a place to 
click here----
    Mr. Hubbard. I think that's a good idea, Mr. Klink.
    Mr. Klink. [continuing] but not to require them, but to 
encourage them to say, why don't you click on FDA and when you 
do, you're going to be at least----
    Mr. Hubbard. That is a very reasonable suggestion, Mr. 
Klink. Let me take that back and see if we can look at that.
    Mr. Klink. I would like the FDA to join us in encouraging 
these pharmaceutical companies--we have a lot of pharmaceutical 
people I've noticed in the room today. I don't know why they 
would want to be here, but we would encourage them to take that 
message back and act responsibly in that issue.
    I want to follow up, if I can on this whole issue of 
because I agree with Mr. Burr, and it has been my supposition 
that these illegal--that the shipping in of these drugs from 
overseas sights is illegal from the very beginning and that is 
why we wanted to deal with a disclosure bill. I have a copy of 
the FDA's personal use importation guidance and Mr. Hubbard, I 
would like you to walk me through it and explain exactly how 
FDA intends this policy to be applied by U.S. Customs agents 
and inspectors at the mail facilities. We think there is a 
great discrepancy in how they are interpreting this. In other 
words, how should they determine if a package of pills or 
something that looks like pills should be released to the 
addressee?
    Now, would you say here that the general guidance section 
states that FDA should consider not taking enforcement action 
against such importation when No. 1, the intended use of the 
drug is unapproved for serious conditions for which effective 
treatment may not be available domestically either through 
commercial or clinical means?
    Mr. Hubbard. First of all remember all of these imported 
drugs are illegal. This policy was derived with compassion in 
mind, that if a person with a serious or life threatening 
illness cannot get a therapy in this country because there is 
nothing here, and they travel to another country to get 
treatment or they order a drug over the Internet or mail to get 
treatment, unapproved drugs for a serious condition, we have 
adopted an enforcement discretion policy that says if the 
patient is aware that they are bringing in unapproved illegal 
drugs, if there is a physician here that is going to monitor 
their use of it, we will let small amounts of it, personal use 
amounts, in.
    Mr. Klink. Well, let me jump in because I'm going to run 
out of time here. The question here is--and I just want to read 
through this real quick--the other two points is there are is 
no known commercialization or promotion to a person residing in 
the U.S. by those involved in the distribution of the product 
at issue, the product is considered not to represent an 
unreasonable risk, and the individual seeking to import those 
products affirms in writing that it is for the patient's own 
use generally not more than 3 months supply and provides the 
name and address of the doctor that's licensed in the U.S. for 
his or her--is responsible for his or her treatment with the 
product or provide evidence that the product is for 
continuation of treatment begun in a foreign country.
    So the question here is, what criteria should they use? 
Because we have visited different sites with the people in 
Customs. They are confused, and I think rightfully so. They 
don't understand or if they're not confused they are 
interpreting this all differently.
    So we have to make a determination as to how this gets done 
and there really needs to be coordination with FDA. We are 
hearing from some Customs people they pull these drugs off to 
the side and nobody from FDA ever shows up and then it goes 
back to the addressee. So the question I would ask, Ms. Durant 
very quickly, what percentage of the mail packages that your 
inspectors stop actually meet all or even a majority of the 
criteria as outlined by the FDA in the guidance document; do 
you have any idea?
    Ms. Durant. I don't know.
    Mr. Klink. We are told very little.
    Ms. Durant. Very little, very little. In fact, in the mail 
what we are seeing, we do see these quantities coming over 
under this guise, it's more on the border with accompanying 
passengers, but not so much in the mail shipments. Most of the 
mail shipments and the seizures that we are making and the 
detentions we are making are for illegal drugs, but very 
little. Most of it and the way the inspectors recognize that it 
doesn't meet any of this criteria in terms of labeling, 
prescriptions accompany, et cetera.
    Mr. Klink. So as a result of the clarification of Mr. 
Burr's questioning earlier and this questioning now, we should 
eventually be very close to almost drying up entirely the 
amount of pharmaceutical products that U.S. Customs finds 
coming through unless it clearly meets the majority----
    Ms. Durant. The criteria.
    Mr. Klink. [continuing] of these criteria; is that correct?
    Ms. Durant. Correct. That is correct.
    Mr. Klink. So these or whatever drugs are coming through 
right now, after this hearing it should be very clear working 
with FDA and the Department of Justice, we should not have a 
vast amount of drugs or vast quantity of drugs coming through 
U.S. Customs either by the mail or being carried by 
individuals; would that seem to be correct?
    [Simultaneous conversation.]
    Mr. Klink. Or to rework the policy with the FDA and 
Justice.
    Ms. Durant. We are working with the FDA so that we have 
very clear policy on what is allowed and what we should be 
detaining. I am hesitant to say that we won't have illegal 
drugs coming through the mail.
    Mr. Klink. Mr. Chairman, I would like to know if we could 
as the three agencies that are represented here within a 2-week 
period of time to report back to this subcommittee as to the 
manner in which they will be developing a clarified policy in 
how this will be done, what criteria will be used as far as 
personal exemptions. I think your concerns under your line of 
questioning were the same. Clearly there needs to be a process 
set in place immediately where these three agencies are working 
together and I would ask unanimous consent that this 
subcommittee make that request of the DOJ, the FDA, and 
Customs.
    Mr. Upton. Without objection.
    Mr. Klink. Thank you.
    Mr. Upton. Dr. Ganske?
    Mr. Ganske. Well, Mr. Chairman, I want to follow up on this 
because I think I'm reading from the same document that Mr. 
Klink has, subchapter and coverage of personal implications and 
under ``general guidance'' it says, ``FDA's personnel may use 
their discretion to allow entry of shipments of violative FDA 
regulated products when the quantity and purpose are clearly 
for personal use and the product does not represent an 
unreasonable risk to the user. Even though all products that 
appear to be in violation of statutes administered by FDA are 
subject to refusal. FDA personnel may use their discretion to 
examine the background risk and the purpose of the product 
before making the final decision. Although FDA may use 
discretion to allow admission of certain violated items, this 
should not be interpreted as a license to individuals to bring 
in such shipments.''
    Mr. Hubbard, is that correct?
    Mr. Hubbard. Yes, that's right.
    Mr. Ganske. And that is FDA policy?
    Mr. Hubbard. Yes, it is policy. It is a form of enforcement 
discretion.
    Mr. Ganske. My point would be that I think when Congress 
looks at the issue of prescription drug benefits we will want 
to examine the inconsistancies in place between countries and 
the fact that I think that we are going to see a big increase 
in the shipments as our senior citizens start using that 
Internet more. And I think we would need more information on 
this. We need to know how much is going on. You know you could 
get on the Internet and go to a site in the United States and 
order a prescription drug and but what you get back might not 
necessarily be the drug that you ordered and which was part of 
your potential problem in getting it from a foreign source.
    I mean, when we go to a pharmacist we are pretty certainly 
that the pharmacist has gotten the drug from the pharmaceutical 
manufacturer. There aren't too many places where somebody is 
going to see a lot and take off the cellophane, substitute a 
drug, put it back on--reseal it or something like that. But I 
think that there is a potential for more abuse through an 
Internet site than not.
    I want to finish by just asking this, we are not here 
saying that you cannot order drugs over the Internet in the 
United States, i.e., we all see advertisements in the 
newspapers for Viagra, etc. What is the legal and proper 
procedure for a citizen to order a drug like Viagra through the 
Internet?
    Mr. Hubbard. I will be glad to answer that. It is to go to 
your physician and give a history and be examined and be 
determined that Viagra is appropriate for your condition and 
also that you don't have heart disease or other reasons not to 
be given it. The physician would then write the prescription. 
You go online to an Internet site, give your name and address 
and other necessary information, and then you would probably 
mail in the prescription, although a physician could fax it. 
Then that online site would mail you your drug and it would 
arrive 2 or 3 days later. That is perfectly legitimate and 
legal practice and, if anything, we encourage it.
    Mr. Ganske. Ms. Stovall, is it legal for somebody to go on 
the Internet to a site for Viagra and then interact on the 
Internet with a physician that's employed by that Internet 
pharmaceutical and get the prescription; is that legal or 
illegal?
    Ms. Stovall. You maintain that's a violation of the law. 
That it is not a valid physician/patient relationship and it is 
violative under the Consumer Protection Act.
    Mr. Ganske. And Mr. Hubbard, do you agree with that?
    Mr. Hubbard. Yes, if there is no valid relationship then 
there is no valid prescription. But we have relied upon the 
States to tell us within that State whether the valid 
prescription exists.
    Mr. Ganske. I thank you.
    Mr. Upton. Ms. DeGette?
    Ms. DeGette. Thank you, Mr. Chairman. I would like to 
follow up briefly on my previous questioning. Mr. Posner, in 
listening to all of this, it seems to me that the criminal 
prosecutions are because of the proof issue very time consuming 
to investigate at the FDA level and then once they get to the 
prosecutor still more investigation is needed. And I'm sitting 
here wondering if maybe you can talk briefly about whether we 
should be focusing our efforts more on the civil injunctive 
end. For example, passing legislation that Ms. Stovall is 
advocating, talking about the legislative improvements you are 
talking about. I mean, certainly there is always going to be an 
egregious example where you need to use the criminal statute, 
but wouldn't we be better off right now really focusing on 
injunctive efforts to put these online pharmacies out of 
business?
    Mr. Posner. Well, the enforcement of criminal laws is 
important. I mean, we are----
    Ms. DeGette. We all agree with that.
    Mr. Posner. [continuing] violation so we obviously need to 
continue that. We do have several civil injunctions in cases 
that have been filed and that are under investigation.
    I would say, though, that it is still time consuming to 
work up a civil injunctive case. I mean, these are complex 
cases and you have got some different ens rea requirements for 
the civil side, that's true, but you still need the identities 
and the numbers and we need to understand conduct and we need 
to understand State law. We need to understand a lot of things. 
It is fairly time consuming to put together a civil----
    Ms. DeGette. Right. But if you put together the civil case 
then you can get an injunction stopping them from sending this 
to anybody, whereas the criminal case is going to be sometimes 
a little more attenuated. And also I'm concerned because I know 
that Ms. Stovall did a wonderful job and some of the other AGs 
too, but when you rely completely on States for either criminal 
or civil injunctive relief, you're going to have a spotty 
result. And, of course, these pharmaceuticals are coming into 
every State.
    So you know, in Kansas it may be a great enforcement effort 
particularly on the civil end, but in Wyoming it might not be.
    Mr. Posner. We are very eager to do civil cases. We have a 
unit in Washington, the Office of Consumer Litigation that does 
both criminal and civil cases. We would encourage FDA to look 
to them for many cases. We are ready and eager to do a lot of 
these cases.
    Ms. DeGette. And I guess that brings me to kind of the 
ultimate question which is, it doesn't seem to me that we have 
a lead agency or a point person coordinating what our strategy 
is on this to identify both legislative issues and 
administrative issues, and I am wondering, Mr. Hubbard and Ms. 
Posner, if that wouldn't be a good idea to figure out and then 
to pursue aggressively?
    Mr. Hubbard. I would note on the legislation I think there 
was a very coordinated effort among the----
    Ms. DeGette. No, I know, but who is in charge? Do you know 
exactly who is in charge?
    Mr. Hubbard. Well, I think for the legislation I would say 
that the Electronic Commerce Working Group at the White House.
    Ms. DeGette. Okay. But what about in terms of enforcement 
both criminal and civil? Who is in charge of coordinating that 
effort?
    Mr. Hubbard. We have a working group----
    Ms. DeGette. No, but who is in charge?
    Mr. Hubbard. There has not been a designated lead agency on 
that.
    Ms. DeGette. And do you not think that would be helpful to 
figure our strategy, Mr. Posner?
    Mr. Posner. You raise a very good question. The States have 
a very important role here and they are very active and have 
longstanding expertise in a lot of these areas. The Federal 
Government also has a role. This comes up in a number of 
different subject matters.
    Ms. DeGette. Right.
    Mr. Posner. Because the State and the Federal Government 
and then within the Federal Government there are obviously 
multiple agencies that have a role.
    Ms. DeGette. Right.
    Mr. Posner. And it is frequently difficult to just put 
somebody in charge. What you want to do is obviously have 
effective cooperation and coordination, but I am not sure at 
this point you can just say somebody is in charge when all of 
the State and Federal Governments have very important roles to 
play.
    Ms. DeGette. Exactly. And I would never disagree with that 
coming out of the State legislature myself. But, you know, we 
have many, many very effective State and Federal working groups 
and agreements and it would seem to me you want someone to be 
the lead agency in helping coordinate. Because when no one is 
in charge, what happens is everybody is running around pursuing 
often less effective solutions. So I would really urge you to 
look at that.
    And one last question which is related to this, we heard 
from Ms. Durant about the international side and it seems to me 
that there is no interagency cooperation being discussed on the 
international side. I don't know if you would agree with that 
or not?
    Mr. Posner. I think the international--there are a lot of 
challenges, challenges to domestic sites are magnified through 
international operations. That's been part of the discussions 
in all the agencies and State/Federal cooperation, that's 
always a part of the discussion. Obviously Customs has the lead 
there, the FDA plays a very important role in that and our DEA 
obviously is very on top of the controlled substances. So, yes, 
that is a part of the interagency cooperation, but there have 
been a lot of challenges.
    Ms. DeGette. I mean, it would seem to me, and I would ask 
you to look at this, it would probably be really useful, the 
recently released legislation didn't address this international 
site at all and it might be very useful for you folks to figure 
out how that fits in and whether we can put some legislative--
on that end as well?
    Mr. Posner. The only thing I would say about the 
legislation there is that we do have a suggestion on an 
amendment as I discussed earlier that may help us on the 
foreign sites.
    Ms. DeGette. Okay. Thank you.
    Thank you, Mr. Chairman.
    Mr. Upton. Thank you. I have just a statement, no further 
questions on my part. You know, I just want to say this has 
been a very instructive hearing and I am encouraged, always 
have been encouraged by the amount of bipartisan thought and 
commitment we have not only on this panel, but on the committee 
as well, and I certainly look forward to working with Mr. Klink 
and Ms. DeGette and others on drafting legislation to solve a 
problem that really is out there. And I hope this doesn't open 
maybe a can of worms, but as I have been listening to your 
testimony, and some of your thoughts with regard to guidance--
the policy guidance that you have particularly in personal use, 
drugs that perhaps have not been approved by the FDA, and often 
life threatening illnesses and our hearts extend to all those 
individuals that are those cases that are not so often unique, 
but something that you've arrived for some guidance and 
flexibility, I guess you could say in where the law actually 
is. I'm not sure what gives you--not being a lawyer myself, I'm 
not sure what precisely gives you the authority to bend the law 
to allow those things to happen.
    But as we look at legislation that may move into our 
committee and get to the floor, I will be most interested to 
see what thoughts, particularly from Justice, and FDA, in terms 
of what leeway language we might include that would in your 
best judgment allow us to in fact give you that leeway when you 
think that it's necessary. And, again, it would be a very 
difficult thing for us to take up, but clearly one that is in 
practice has been going on for some time and allows us to be 
responsive to the needs of those that are suffering life 
threatening diseases when in fact they think that those that 
particularly drugs may in fact extend their quality of life in 
a meaningful way.
    So that being said, I just want to appreciate your 
testimony this morning. We may have additional questions for 
you by all members of this panel and if that happens, if you 
would respond quickly to those, that would be appreciated. I 
also would ask unanimous consent that letters and other things, 
periodicals that were mentioned from us can be inserted into 
the record by unanimous consent.
    I will yield to Mr. Klink.
    Mr. Klink. Yes. Mr. Chairman, I just want to again 
compliment you. This was a good hearing. I think by my count we 
come out with at least three action items. One is that we do 
want to draft a bill which would include this merger and 
injunctive relief and we look forward to working--and, again, I 
would say to the FDA and to Justice and to Customs and to the 
Attorneys General, we want to work together on this and we want 
to be a part of the discussion. This disclosure the bill has 
been out there for a long time and we could use some support in 
that language. If it's wrong, tell us what is wrong with it, 
and let's go on with it. Let's get it done.
    I think also I agree with the Chairman, in regarding this 
whole issue of personal use exemption. I know it is intended to 
be humane, but it is like a screen door on a submarine, you are 
protecting someone who has got a life threatening illness or 
that has got a problem; we are allowing other drugs to come 
through that could cause the problem. Because it, again, has 
less substance than Jello that hasn't set yet. No one really 
has an idea on the front lines, I think, exactly how they are 
supposed to deal with it. So we would like to know within 2 
weeks how the agencies are going to work together to resolve 
this issue, how that is going to be done.
    That is extremely important to us and I also would like to 
hear from the FDA that we take a manner of encouragement to the 
drug companies to see that they post some kind of or that we 
encourage them--obviously we can't require them--we would 
encourage them to be good corporate citizens and to have 
information on their product web sites that would lead to the 
FDA warning sites, I think that that is a minimum step that 
would begin to solve the problem if indeed they are concerned 
about their products are being used in a manner which would be 
adverse to public health and would risk potentially human life. 
And I am sure that the drug companies are concerned about that 
so I know that they will take our suggestion very seriously and 
will comply.
    And with that, Mr. Chairman, again, thank you for the 
courtesy and thanks for the witnesses today.
    Mr. Upton. Ms. DeGette, do you have further questions?
    Ms. DeGette. No.
    Mr. Upton. Mr. Strickland?
    Mr. Strickland. No. Thank you, Mr. Chairman.
    Mr. Upton. Thank you to everyone.
    [Whereupon, at 12:01 p.m., the subcommittee was adjourned.]
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