[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



                  AGRICULTURE, RURAL DEVELOPMENT, FOOD

                  AND DRUG ADMINISTRATION, AND RELATED

                    AGENCIES APPROPRIATIONS FOR 2002

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS
                              FIRST SESSION
                                ________
     SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG 
                  ADMINISTRATION, AND RELATED AGENCIES
                     HENRY BONILLA, Texas, Chairman
 JAMES T. WALSH, New York            MARCY KAPTUR, Ohio
 JACK KINGSTON, Georgia              ROSA L. DeLAURO, Connecticut
 GEORGE R. NETHERCUTT, Jr.,          MAURICE D. HINCHEY, New York
Washington                           SAM FARR, California
 TOM LATHAM, Iowa                    ALLEN BOYD, Florida         
 JO ANN EMERSON, Missouri
 VIRGIL H. GOODE, Jr., Virginia
 RAY LaHOOD, Illinois               
                         
 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
   Henry E. Moore, Martin P. Delgado, Maureen Holohan, and Joanne L. 
                       Orndorff, Staff Assistants
                                ________
                                 PART 4

                          AGRICULTURAL PROGRAMS
                                                                   Page
 Food and Drug Administration.....................................    1
 Farm Credit Administration.......................................  757
 Commodity Futures Trading Commission.............................  931

                              

                                ________
         Printed for the use of the Committee on Appropriations
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 72-078                     WASHINGTON : 2001

                                  COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                  DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California             JOHN P. MURTHA, Pennsylvania
 HAROLD ROGERS, Kentucky             NORMAN D. DICKS, Washington
 JOE SKEEN, New Mexico               MARTIN OLAV SABO, Minnesota
 FRANK R. WOLF, Virginia             STENY H. HOYER, Maryland
 TOM DeLAY, Texas                    ALAN B. MOLLOHAN, West Virginia
 JIM KOLBE, Arizona                  MARCY KAPTUR, Ohio
 SONNY CALLAHAN, Alabama             NANCY PELOSI, California
 JAMES T. WALSH, New York            PETER J. VISCLOSKY, Indiana
 CHARLES H. TAYLOR, North Carolina   NITA M. LOWEY, New York
 DAVID L. HOBSON, Ohio               JOSE E. SERRANO, New York
 ERNEST J. ISTOOK, Jr., Oklahoma     ROSA L. DeLAURO, Connecticut
 HENRY BONILLA, Texas                JAMES P. MORAN, Virginia
 JOE KNOLLENBERG, Michigan           JOHN W. OLVER, Massachusetts
 DAN MILLER, Florida                 ED PASTOR, Arizona
 JACK KINGSTON, Georgia              CARRIE P. MEEK, Florida
 RODNEY P. FRELINGHUYSEN, New Jersey DAVID E. PRICE, North Carolina
 ROGER F. WICKER, Mississippi        CHET EDWARDS, Texas
 GEORGE R. NETHERCUTT, Jr.,          ROBERT E. ``BUD'' CRAMER, Jr., 
Washington                           Alabama
 RANDY ``DUKE'' CUNNINGHAM,          PATRICK J. KENNEDY, Rhode Island
California                           JAMES E. CLYBURN, South Carolina
 TODD TIAHRT, Kansas                 MAURICE D. HINCHEY, New YorkM LATHAM, Iowa                                 LUCILLE ROYBAL-ALLARD, California
 ANNE M. NORTHUP, Kentucky           SAM FARR, California
 ROBERT B. ADERHOLT, Alabama         JESSE L. JACKSON, Jr., Illinois
 JO ANN EMERSON, Missouri            CAROLYN C. KILPATRICK, Michigan
 JOHN E. SUNUNU, New Hampshire       ALLEN BOYD, Florida
 KAY GRANGER, Texas                  CHAKA FATTAH, Pennsylvania
 JOHN E. PETERSON, Pennsylvania      STEVEN R. ROTHMAN, New Jersey    
 JOHN T. DOOLITTLE, California
 RAY LaHOOD, Illinois
 JOHN E. SWEENEY, New York
 DAVID VITTER, Louisiana
 DON SHERWOOD, Pennsylvania
 VIRGIL H. GOODE, Jr., Virginia     
                     
                 James W. Dyer, Clerk and Staff Director

                                  (ii)

 
   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2002

                              ----------                              

                                           Thursday, March 8, 2001.

                      FOOD AND DRUG ADMINISTRATION

                               WITNESSES

BERNARD SCHWETZ, ACTING PRINCIPAL DEPUTY COMMISSIONER, FOOD AND DRUG 
    ADMINISTRATION
LINDA SUYDAM, D.P.A., SENIOR ASSOCIATE COMMISSIONER
ROBERT BYRD, DEPUTY COMMISSIONER FOR MANAGEMENT AND SYSTEMS
DENNIS P. WILLIAMS, DEPUTY ASSISTANT SECRETARY, BUDGET, DEPARTMENT OF 
    HEALTH AND HUMAN SERVICES
MIKE LANDA, ACTING CHIEF COUNSEL, FOOD AND DRUG DIVISION, OFFICE OF 
    GENERAL COUNSEL
DENNIS BAKER, ASSOCIATE COMMISSIONER FOR REGULATORY AFFAIRS
JOSEPH A. LEVITT, DIRECTOR, CENTER FOR FOOD SAFETY AND APPLIED 
    NUTRITION
STEPHEN SUNDLOF, D.V.M., PH.D., DIRECTOR, CENTER FOR VETERINARY 
    MEDICINE
JANET WOODCOCK, M.D., DIRECTOR, CENTER FOR DRUG EVALUATION AND RESEARCH
DAVID FEIGAL, DIRECTOR, CENTER FOR DEVICES AND RADIOLOGICAL HEALTH
JANICE OLIVER, DEPUTY DIRECTOR, CENTER FOR FOOD SAFETY
    Mr. Bonilla. The subcommittee will come to order. We have 
before us today the Food and Drug Administration very ably 
represented by the Acting Commissioner, Dr. Schwetz, Dr. 
Bernard Schwetz and his associates, and I am sure they are well 
prepared to respond to questions this morning about FDA's 
programs and activities. I appreciate, Dr. Schwetz, the contact 
and open door policy that you've had with this subcommittee. It 
really helps us to do our job better. On February 27, the House 
and Senate met in joint session to hear an address by the 
President outlining his priorities for the coming year. This 
address was followed by the submission of the President's 
budget request for fiscal year 2002, in a functional level of 
detail. That material will permit our colleagues on the Budget 
Committee to begin their work on this years budget resolution, 
and I emphasize to begin. It will be a long process. It will be 
followed in April by an account level of detail that the 
Appropriations Committee needs to receive in order to do its 
work. I think it is important that our subcommittee get started 
right away so we will be able to finish our work in a timely 
fashion.
    In view of the interest the subcommittee has had in the 
activities of the FDA, we have asked you to appear before us 
today to lead off our hearings, and to tell us of your ongoing 
activities and any problems you may currently face. I would 
remind the members that Dr. Schwetz is the Acting Commissioner, 
not an appointee of the new administration. He is here to tell 
us how things are and not to tell us about how things are going 
to be. Before I recognize Dr. Schwetz for his remarks, I will 
recognize Ms. Kaptur and ask if she has any opening remarks.
    Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman. I want to congratulate 
you on your maiden hearing as the chair of this very 
distinguished subcommittee. I think this is the best 
subcommittee in the House. I look forward to the testimony 
today from Dr. Schwetz, and I want to wish our new chairman the 
very best in this Congress. It is a major responsibility to 
take over a subcommittee of this magnitude. I would also like 
to welcome our two new members: one who is here, one who is on 
the way. Congressman Ray LaHood, whose commitment to 
agriculture precedes his presence on this subcommittee. We are 
thrilled to have you. And also Virgil Goode, who is on his way 
here. We welcome him as well. I just ate some Virginia peanuts 
yesterday, and I am reminded that we need that voice in this 
committee.
    I wanted to welcome my colleagues on my side of the aisle. 
I am sure Congresswoman Emerson would agree with me, we are 
very thrilled that there is a woman who is the Secretary of 
Agriculture for this country. We look forward to her coming up 
here this spring and we hope her presence will add a new 
dimension of service to our Nation, and certainly to 
agriculture and all of the responsibilities we have for 
oversight of food and drug.
    I want to say to Dr. Schwetz and to all of your colleagues, 
to Ms. Suydam and Mr. Byrd and Mr. Williams, we thank you very 
much for your professionalism and your service to our country. 
I think it is a sign of your importance that you were the first 
of our witnesses this year. I know we want to move on to the 
hearing, but I do want to thank you all for coming today and 
for the tremendous work that you do in assuring food and drug 
safety for the American people. This is still the best system 
in the world. Not that it doesn't have problems, but you have 
major responsibilities for our people and for our nation and we 
thank you so much for being here today.
    Mr. Bonilla. Thank you, Ms. Kaptur. At this time I would 
like to formally recognize the new members who have joined the 
subcommittee. They are going to help us a lot. They will add a 
lot. Their experiences and representations precede them. Mr. 
Ray LaHood, my friend from Illinois, welcome. We will more 
appropriately welcome Mr. Goode from Virginia when he arrives. 
We welcome you. And I know I speak for every member of the 
subcommittee, that we will be greatly served by yourpresence on 
this subcommittee.
    Mr. LaHood. Thank you.
    Mr. Bonilla. I would also like to recognize the wonderful 
staff on this subcommittee. Hank Moore, Martin Delgado, Maureen 
Holohan, Joanne Orndorff and our new detailee, Leslie Barrack 
who just started today. I would like them to stand for a second 
and be recognized. They are the ones that pull the wagon for us 
every day. Hank and company, stand up please.
    Just a quick note of how we will recognize members in order 
to ask questions on this committee. During the first 10 minutes 
of the hearing, we will take members in order of seniority. 
After that, we will take members in order of their arrival, so 
that allows members to not relinquish their seniority status on 
the subcommittee just because they may happen to be a couple of 
minutes late. If that is not clear, please see me or the clerk 
and we will explain that in greater detail. Also just a note, I 
have a pet peeve about cell phones. We have put a notice up 
about cell phones going off during hearings. I would greatly 
appreciate anyone who is attending or participating in the 
hearing to please put your cell phones on vibrate or turn them 
off.
    Dr. Schwetz, we have received your detailed prepared 
statement, and it will appear in the record in its entirety. 
Having read your statement, as I am sure other members have, we 
would like you to proceed as you would like and touch on the 
highlights of your testimony this morning.
    Dr. Schwetz.

                            Opening Remarks

    Dr. Schwetz. Good morning to all of you, and thank you. Mr. 
Chairman and members of committee, I am honored to appear 
before you today. FDA appreciates the working relationship that 
we have had with this subcommittee in the past and we look 
forward to its continuance under your leadership.
    I am Bernard Schwetz, the Acting Principal Deputy 
Commissioner of the Food and Drug Administration. With your 
permission, I would like to introduce my colleagues, Dr. Linda 
Suydam, Senior Associate Commissioner, FDA; Mr. Robert Byrd, 
Deputy Commissioner for Management and Systems, FDA; and Mr. 
Dennis Williams, Deputy Assistant Secretary, Budget, Department 
of Health and Human Services. We are honored to have this 
opportunity to discuss the challenges of the FDA with you. You 
have seen my written testimony, describing many of the agency's 
recent accomplishments, and I won't go into those in any depth 
today.
    But I would like to discuss with you FDA's role in today's 
rapidly changing scientific environment and the challenges we 
face in answering the increasingly complex questions that arise 
as we review these new technologies. FDA's challenges fall into 
three distinct but interrelated areas. First, innovations in 
science and technology are transforming the type of products 
that FDA regulates and the speed at which they are generated. 
Second, consumers demand for and access to reliable health 
information is growing dramatically. And the third challenge I 
will discuss is the increasing globalization of essentially all 
aspects of the industries and the products that we oversee.
    Let me expand on each of these areas. First, substantial 
government and private sector investments in biomedical 
research are resulting in hundreds of new and innovative 
products that are either in the R&D pipeline or have arrived. 
To put it into perspective, research expenditures by the 
pharmaceutical industry have more than tripled since 1990. 
Likewise, bipartisan efforts are doubling the budget of the 
NIH. As new products are generated by the academic and industry 
research partly fueled by NIH, they must be evaluated by FDA 
employees with the scientific expertise to assess their 
benefits and their risks. FDA does not want to become a 
bottleneck in getting safe and effective products and therapies 
to the public.
    FDA's second challenge, maintaining the public's trust and 
confidence is illustrated by the issues that arise with a 
successful mapping of the human genome. This astonishing feat 
of modern science has generated both hope and concern through 
the scientific community and the public with the promise of new 
genetic tests, gene-based designer drugs, and comprehensive 
genomics-based health care.
    To make the right science-based public health decisions, 
FDA scientists must be on the leading edge of their specific 
scientific disciplines. The third challenge I mentioned is the 
globalization of industry, a trend that is expanding FDA's role 
in protecting, and promoting the health of Americans as we 
strive to assure safety of the products grown or manufactured 
overseas for sale in the U.S.
    Touching briefly on some of our current challenges, we have 
made major improvements in food safety, from decreasing the 
incidence of food-borne illnesses to developing mechanisms to 
monitor anti-microbial resistance. The number of cases of food-
borne illness caused by the nine most important food-borne 
pathogens has been reduced by 20 percent over the last four 
years, and yet an estimated 76 million Americans get sick from 
food-borne illnesses each year, and more than 5,000 die as a 
result. Another food safety challenge for the agency is 
preventing the entry of BSE, or mad cow disease, into the U.S.
    The FDA has been vigilant in this area for many years and 
so far we have seen no cases of BSE in the U.S. We are working 
very hard in conjunction with other Federal, State, and private 
sector groups to keep BSE out of the U.S.
    Bio-engineered foods raise another safety issue. More than 
50 of these food are now marketed in the U.S. While we are 
confident they present little if any risk, we believe strong 
scientific expertise is needed to reassure consumers that these 
products are safe. In the area of medical products, FDA 
reviewed over 17,000 applications for drug biologic and device 
products in the year 2000. Of these, 97 percent were approved. 
160 of these approvals were for products that had never 
previously been marketed in any form in the U.S. Many represent 
advances in the prevention, diagnosis and treatment of serious 
and life-threatening diseases.
    At the same time FDA's responsibilities do not end with 
product approval, but continue through the entire life cycle of 
products. Therefore, new product approvals lead to another set 
of challenges--monitoring adverse event reports for marketed 
products and taking appropriate action when necessary, and 
reducing the incidence of medical errors. Most of these 
products require testing in humans prior to marketing, and the 
protection of human subjects in clinical trials is an ongoing 
challenge for the FDA. This challenge is growing in proportion 
to the increase in complexity of new products and clinical 
trial design, and the increasing number of clinical trials 
conducted in diverse populations as well as in geographically 
diverse areas.
    Inspections and imports represent another challengingarea. 
Although we inspect manufacturing facilities prior to approval of new 
drugs and devices, today FDA performs routine inspections of only 28 
percent of drug facilities and 16 percent of high risk medical device 
facilities each year. FDA currently inspects overseas medical device 
firms only once every 10 to 11 years. From a safety perspective, this 
is unacceptable. Imported products also represent a challenge. The 
majority of active pharmaceutical ingredients marketed in the U.S. are 
manufactured overseas.
    In addition, the importation of food from other countries 
has been growing rapidly over the past decade and continues to 
grow. In FY 2002, we expect to receive 7 million food import 
entries. FDA physically inspects less than 1 percent of all 
imported FDA-regulated products.
    Let me end my comments by emphasizing the importance of 
science to FDA's mission. The number and complexity of products 
and issues coming before the FDA demands that the agency have 
the very best scientific capability to evaluate them. FDA must 
have a critical mass of top notch scientific and medical 
expertise to assess these products and answer new questions. As 
the gatekeeper for new products and technologies, FDA has a 
decisive impact on their safety, their effectiveness and the 
speed of their availability to the public.
    Mr. Chairman, this concludes my statement. My colleagues 
and I will be happy to answer questions that you might have. 
And we will be prepared to discuss the specifics of the 
President's budget as it relates to the FDA's efforts after it 
is announced on April 3.
    Mr. Bonilla. Dr. Schwetz, thank you very much.
    [The prepared statement of Dr. Schwetz and biographies 
follow:]
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    Mr. Bonilla. Before we continue I want to acknowledge Mr. 
Virgil Goode of Virginia has arrived. We want to welcome him as 
a new member of this subcommittee. We are glad you are here. We 
know you will add a lot to our proceedings this year.
    Mr. Goode. Thank you, Mr. Chairman.
    Mr. Bonilla. I would like to point out five subcommittees 
are holding hearings on the appropriations. All of our members 
have to bounce around and make difficult decisions as to how 
much time they can spend at each hearing. In light of that, we 
will hold to the 5-minute rule and we will go as many rounds as 
we can until we are done. But only 5 minutes at a time, and the 
clerk will run a clock, and he will run a clock on me as I 
begin my questions.

                             BSE Activities

    Dr. Schwetz, first of all, you have touched on mad cow 
disease, or BSE. It is a great concern to all of us here today. 
It makes a lot of headlines. People are concerned about what it 
may mean to people in this country. The FDA has a significant 
role in protecting this country from the threat of BSE. What I 
would like you to do is describe FDA's role with regard to BSE, 
what activities FDA specifically undertakes, which regulated 
products BSE may affect and what BSE-related activities will 
the agency emphasize next year?
    Mr. Schwetz. Thank you. I don't think there is an issue in 
the agency that I have personally spent more time on in the 
last 6 months than mad cow disease. So this is also a major 
concern for us. The FDA regulates a wide range of products that 
represent the potential for concern that tissues from bovines 
are in them. It is everything from vaccines, concerns over 
blood products, concern over gelatin that has a lot of 
different uses, everything from medical or cosmetic products--
cosmetics that might contain tissues, dietary supplements. All 
of these are concerns to us beyond the obvious concern about 
the safety of feed being given to animals that might contain 
tissues from other ruminants that has accounted for the spread 
of mad cow disease throughout the countries in Europe.
    The primary responsibility that we have and the primary law 
that we have depended on to help us, to do two things in 
particular: one, if there ever was a case of mad cow disease in 
this country, we have tried to put into place a network that 
would prevent it from spreading like it did in Europe. The 
second primary thing is to keep it from getting into this 
country through our imports. Both of those are extremely 
important to keeping BSE out of this country. Clearly, there 
are a lot of people who spent time in Europe eating beef who 
have come back to the U.S., so it is entirely possible that we 
would see it some time, cases of the human counterpart of BSE. 
The new variant Creutzfeldt-Jacob (CJD) disease. It is possible 
that we will see cases in this country related to mad cow 
disease, not from exposure here, but from among the 31 
countries known to have mad cow disease.
    Within this country we continue to use the law we have that 
allows us to inspect all of the facilities that handle bovine 
tissues. Such as the tissues from cattle that might account for 
the spread of this disease. There are about 10,000 
establishments in this country that have to do either with 
rendering tissues or feed mills or protein blenders or other 
parts of the industry that have to do with these tissues from 
animals.
    The law that we have prohibits the use of these tissues to 
be put into animal feed that would end up in cattle. So the law 
gives us the opportunity to go to feed mills to rendering 
plants to other places that are the control points for the 
spread of any disease. We do not want animal parts from cattle 
to be fed to other cattle. That is how it is spread. So we have 
this law that allows us to do these inspections. We are about 
60 percent, 70 percent of the way through doing the inspections 
of the 10,000 plants that have been identified. And it will be 
a continual process of reinspecting these plants. When we find 
one out of compliance, we go back to look for whether they are 
correcting whatever problems there were and what the problems 
are, everything from record-keeping to failing to 
identifyanimal parts from cattle or the opportunity to have mixing of 
tissues from one feed to another that would act for animals being 
exposed.
    Mr. Bonilla. You certainly have your hands full, don't you?
    Ms. Kaptur.

                   Keeping Pace With New Technologies

    Ms. Kaptur. Thank you, Mr. Chairman and Dr. Schwetz, thank 
you so much for your testimony this morning. I want to focus on 
two questions in this first round. The first is if we look at 
the recent funding increases for the National Institutes of 
Health and then thosed proposed by President Bush specifically 
his interest in doubling the budget of the National Institutes 
of Health, I am a little bit concerned about how this is 
actually spilling over into the work of the Food and Drug 
Administration. I am concerned that you may not have sufficient 
resources to keep pace with the advances in technology and 
medications that you have to approve based on the significant 
amount of research that is being funded by both NIH and 
industry. I pulled out from some of your briefing materials a 
couple of charts and I handed them out to my colleagues.
    [Additional information follows:]
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    Ms. Kaptur. If they want to take a look at those. The first 
chart shows the full-time staff equivalency levels for the FDA 
from 1992 to the present. What it shows is that essentially, 
you have had a reduction in total staff over the past decade. 
The second chart shows that compared to many other agencies, 
which operate on a grant basis or farm out work, your people 
actually do the work, and over half of your staff is in House.
    My question is how is FDA able to keep pace with advances 
in technology? Are you getting more requests? You talk about 
the imports which is my next question. Talk to us a little bit 
more about these staffing levels and how it impacts your work.

                           Workload and Staff

    Dr. Schwetz. Thank you, Ms. Kaptur. We are concerned about 
the same thing that you raise. Because outside of the user fee 
supported areas of the FDA, we have clearly experienced a 
decline in the number of people. We have lost more than 10 
percent over the last 7, 8 years of the number of scientists 
that we have to bring to bear at a time when the workload is 
increasing. The number of new products is increasing, the 
sophistication and complexity of the kinds of products, and the 
issues they raise continues to increase at a time when we have 
fewer scientists to do the work. You are right. This table 
shows that approximately 60 percent of our budget goes to pay 
the salaries of our people. A much smaller percentage of NIH 
budget and other organizations goes to pay for salaries. As 
cost of living increases consume a larger part of our budget, 
since our salary cost are higher and since 1993, we have not 
gotten cost of living increases--that means that money that 
would otherwise have gone for new programmatic work has been 
used to cover salaries. For example, in the food safety area, 
one of the things that we really appreciate is your support in 
the food safety initiative. But of the money that we have 
gotten to cover food safety initiative programs, we could have 
hired another 250 people if we hadn't had to pay cost of living 
increases out of the money we got for food safety initiative 
work.
    So we have continued to pay the salaries out of work that 
should be going for programmatic work. The other agencies 
within our department have much smaller part of their overall 
budget that goes for salaries. You also referred to the fact 
that we are in the process of increasing the budget of NIH, 
which drives new inventions, new products, and creates new work 
coming to us eventually. Our budget hasn't increased in that 
same way, so the increased workload that their budget generates 
will come to us at a time when we are not increasing our budget 
or the number of people that we have able to do that work.

                  New Medical Products in the Pipeline

    Ms. Kaptur. Doctor, I would ask you to submit for the 
record, if you would, perhaps a listing of the additional 
devices and medications that are stemming from NIH research. It 
might help us deal with the interrelationship between this 
subcommittee and the Labor HHS Subcommittee. Please give us the 
data to do that.
    Mr. Schwetz. We will be happy to do that.
    [The information follows:]

    The National Institutes of Health works with the research based 
pharmaceutical industry to promote the development of new medicines. 
NIH spent over $17 billion to fund research last year. In addition to 
the large increase in the amount of research NIH will be able to fund, 
the pharmaceutical industry is also increasing its research 
expenditures. According to the Pharmaceutical Research and 
Manufacturers of America, and industry trade group, the industry 
estimates that it spent $26.4 billion on research and development in 
2000 up from $24 billion in 1999. Rapid scientific progress in many 
fields including genetics holds the promise of developing many new 
medicines that are more effective and have fewer side effects. As the 
mapping of the human genome is completed, new targets for drug 
intervention will expand from 500 to any where between 3,000 to 10,000. 
The increase in drug development is expected to continue to grow. 
Industry figures estimate U.S. pharmaceutical research companies have 
more than 1,000 new medicines in development, including: 96 new drugs 
for heart disease and stroke; 316 anti-cancer medicines; 124 drugs to 
treat AIDS; 146 new drugs and vaccines for children; 17 new treatments 
for Alzheimer's disease; 24 drugs for rheumatoid arthritis; and 21 new 
medicines for diabetes.
    NIH-sponsored research affects all of the FDA. As an example, in 
biological products in affects areas such as blood and blood products, 
therapeutics, and vaccines. Research is being conducted for cancer and 
HIV vaccines, blood substitutes, genomics, transgenic plants and 
animals, and cell and gene therapies. For 1989 to 1993, FDA received 48 
gene therapy investigational new drug applications (INDs), which is 
about 12 per year. In contrast, FDA received 265 gene therapy INDs from 
1994 through 2000, which equates to 44 per year. Additionally, there 
have been over 800 amendments (changes to the product or new protocols, 
etc.) to these INDs submitted since FY 1997. The Agency has yet to 
receive the first application to license a gene therapy product.
    The medical device industry also predicts dramatic advances in 
medical technology in the coming years. AdvaMed represents over 800 
innovators and manufacturers of medical devices, diagnostic products 
and medical information system. AdvaMed's members produce nearly 90 
percent of the $68 billion health care technology products consumed 
annually in the U.S. and nearly 50 percent of the $159 billion 
purchased around the world annually.
    Given that private sector pharmaceutical research continues to 
grow, and the Administration has asked that NIH research be doubled 
over five years, there is every reason to expect the growth in the 
number of products for FDA to review will continue and probably 
accelerate.

    Ms. Kaptur. I will be submitting additional questions 
regarding recruitment and retention of your employees so we get 
a sense of the ability of the FDA to maintain the very best 
staff in the world.

                           Import Inspection

    On to my second question, and then I will withhold until 
the next round. You talked a lot about imports, and this has 
been a continuing concern of mine, particularly the 
displacement of U.S. production by imports that come in from 
other countries and the lack of USDA's fervor in helping our 
farmers recapture the markets that we are losing to other 
countries.
    Now we have come to the inspection issue business, your 
bailiwick. And according to the numbers that I have, import 
entries in 1990, just the last 10 years were estimated at 1.5 
million different entries, and you are estimating for this 
coming year 7 million. That is a staggering increase in less 
than a decade. Yet the number of employees for direct import 
inspection has grown very little since 1990. How are you 
managing; are you able to keep pace with this growing flood of 
imports and the inspection thereof?
    Dr. Schwetz. Ms. Kaptur, it is becoming more difficult 
because we don't have more people to put out there for the 
increasing number of products that are coming in. We have done 
some things to try to do the best we can. One of those is to 
improve our effectiveness in working with other agencies. So we 
work very closely with the Customs group. We work very closely 
with USDA. We work side by side with Customs and USDA. We work 
closely with the design of information technology and 
trafficking information that Customs uses so they are aware of 
products that are of concern to us so they can help us identify 
these as they come into the import areas.
    We work to improve the guidance in the inspection and 
import areas, so it is very clear what we are looking for and 
what are those things that are the highest priority versus 
other priorities.

               Estimate for Increasing Import Inspections

    Ms. Kaptur. Doctor, I will interrupt you because I know my 
time is up, but I will ask you to submit for the record, if you 
could, the answer to a question on inspection. FDA is currently 
inspecting less than 1 percent of what is coming into this 
country. If you were to increase it to 10 percent and 20 
percent, what kind of staff resources would you need? I would 
like to know that.
    Dr. Schwetz. We will be happy to get it to you.
    [The information follows:]

    If FDA were to increase import field examination and 
laboratory analysis coverage to 10 percent, we estimate it 
would cost about $300 million. This funding would be used to 
support approximately 1,800 FTE who would conduct inspections 
of imports including sample analysis. Funding would also 
support mobile laboratories, and improvements to FDA's computer 
systems to facilitate quicker, more accurate reviews.

    Mr. Bonilla. Thank you, Ms. Kaptur.
    Mr. LaHood.

                       EU and Genetic Commodities

    Mr. LaHood. One of the things I am interested in, and I 
don't know if you folks have been involved in it, is the issue 
of the European Union restricting genetically produced 
commodities, particularly corn and beans to be exported to 
Europe. And their reasoning is that, they believe, these 
genetically-produced commodities, could be harmful to their 
people. Have you folks been involved at all in trying to 
provide them with any of the research that you have, and could 
you enlighten me as to what we are doing? There is a recession 
in agriculture and we have had a recession for the last 2 or 3 
years. We have expended over $20 billion here in Congress to 
bail out our hard-hit farmers, and what farmers tell me is that 
if we had markets, that would improve the agriculture economy.
    Part of having markets is the ability to export to Europe. 
And we have been restricted. In my district, 14 counties, we 
grow a lot of corn and beans. So I am interested in that. There 
may be restrictions of fruit and vegetables. Have you folks 
been involved in the European union in trying to get 
information to them to prove to them that our commodities are 
being utilized by our own people and could be used by them?
    Dr. Schwetz. Yes, Mr. LaHood. We have been involved with 
the European union and other organizations in discussion of 
policies that have to do with the safety of products. There are 
questions beyond the safety issues with this as you all 
appreciate, and it has to do with trade from one country to 
another. It has to do with public acceptance. So we are 
involved in the questions about the safety of these kinds of 
products, and we are also involved in what it takes to get 
public acceptance of products that are derived from this kind 
of technology. We are not so involved in these issues that 
specifically relate to trade. But we have been heavily involved 
in the discussions about safety, so that can't be used as an 
excuse for something else that might limit the import or export 
of products.
    Mr. LaHood. What progress are we making? Are we making 
progress or are we at a stalemate of this issue?
    Dr. Schwetz. With your permission, I would ask Mr. Levitt 
from our food safety division to give more information on that.
    Mr. LaHood. Mr. Levitt, let me add, I know the commodities 
we grow in central Illinois are affected. Are there fruit and 
vegetables involved in this also?

                              Codex's Role

    Mr. Levitt. Yes there are about half a dozen of major 
commodities involved. To answer your question, yes, we are 
working with them. Are we making progress? We think we are 
making some progress, but it is slow progress. It is a slow 
process. Probably the area that we are seeing the most positive 
movement in is an international organization called Codex. 
Codex is an international standard-setting body which is 
designed to both develop harmonized standards that both meet 
safety requirements and allow, under those safety requirements, 
fair trade, which is what you were seeking. Last year the Codex 
established special ad hoc committees devoted exclusively to 
the safety of new products derived through biotechnology. It is 
hosted by Japan, so the meetings have been over in Tokyo. We 
have a very active involvement in that. And the delegates that 
have been going to that meeting have consistently reported back 
progress.
    Now, in terms of a timeline, Codex is designed by its 
nature as a slow process because it is trying to get all the 
countries in the world together. And that group set up what was 
viewed in that context as an expedited process over several 
years. Normally a Codex standard might take 8 to 10 years, and 
the goal here was to do it in like 3 or 4 years. So the 
timeline may be not what you are looking for, but inthe setting 
we are dealing with, especially as Dr. Schwetz said, we are dealing not 
just with science issues, but public acceptance, cultural issues, other 
things going on. This is a group devoted to the safety issues trying to 
pass those out from the others and not just the United States, but 
other countries as well. We believe that that progress is being made 
within that context.
    Mr. LaHood. What does Codex stand for.
    Mr. Levitt. Codex Alimentarius Commission. I am not sure 
that Codex itself stands for five separate words, but it is an 
international standard setting body. It is operated jointly by 
the World Health Organization and FAO, the Food Agricultural 
Organization. So it involves both the major health and trade 
organizations of the world in the development of standards to 
promote consumer protection and facilitate world trade.
    In addition, Codex has been recognized under the recent WTO 
agreements as the standard-setting body that WTO will look for 
recognition and acceptance.
    Mr. LaHood. Thank you, Mr. Chairman.

                              FDA Funding

    Mr. Bonilla. Thank you, Mr. LaHood. Just for the record, 
earlier there was some excellent points brought up about 
payroll need and the personnel costs. This subcommittee, in a 
bipartisan way, and I think everyone understands this, has 
tried to give FDA all the funds it needs to do its job 
correctly, and OMB has been the entity that squeezed you guys 
more than we would like to see in the last few years, for the 
record.
    Mr. Farr.

                             Mammalian Feed

    Mr. Farr. Thank you very much, Mr. Chairman. I have three 
questions. I appreciate the panel being here. The first is 
follow up on the mad cow disease. We hear a lot about the 
mammalian protein fed to cattle. What is made up of mammalian 
feed?
    Dr. Schwetz. Part meat and bonemeal.
    Mr. Farr. So we take dead animals and feed them back to 
animals?
    Dr. Schwetz. That is correct.
    Mr. Farr. What kind of animals?
    Dr. Schwetz. It is a source of protein and other materials 
that is good in animal feed. So it can be fed to chickens, to 
pigs, and cattle.
    Mr. Farr. But it is all kind of dead animals that are in 
there.
    Dr. Schwetz. It can be from the rendering process when 
other tissues are being saved for meat or other parts.
    Mr. Farr. It would be just like commercial cows and 
chickens and pigs, or do you get dogs and cats in there too.
    Dr. Schwetz. No, not pets. It is the commercially-grown 
animals and the slaughterhouse activity and the subsequent 
steps in rendering and making products, those parts that were 
not put into other commercial products then can go into animal 
feed. So what we are trying to do is keep the ruminant parts 
from being fed to a ruminant, cattle to cattle. They can still 
be put in chicken feed.
    Mr. Farr. Do the plants that put them into feed import 
the----
    Dr. Schwetz. No.
    Mr. Farr. This is all domestic?
    Dr. Schwetz. Yes.
    Mr. Farr. So your responsibility is to inspect these 
plants?
    Dr. Schwetz. Yes.

                         Feed Mill Inspections

    Mr. Farr. What type of personnel do you have to do that?
    Dr. Schwetz. We have a variety of people within the agency 
that are trained to do these inspections and other settings as 
well. They are trained to inspect feed mills, but we have also 
trained a lot of people in the States. This is a cooperative 
effort.
    Mr. Farr. You have used State agencies?
    Dr. Schwetz. We use State inspectors in the States.
    Mr. Farr. Are we doing enough? How much of the inspections 
are going on? Maybe you answered that.
    Dr. Schwetz. No, I didn't.
    Mr. Farr. We have prevented mad cow disease from being in 
the United States. But are we going to be able to continue to 
prevent it from being here?
    Dr. Schwetz. We are very concerned about that too. We have 
moved other operating money from the FDA into the support of 
State contracts to do more inspections, to do them more 
quickly. We have moved our own inspectors into this area from 
other projects that they would have been working on, so we have 
significantly increased our resources committed to doing these 
inspections and to preventing this from being a probable.

                  Imported Material and Mammalian Feed

    Mr. Farr. And you assure us there is no imported material 
going into mammalian feed?
    Dr. Schwetz. Well, to the extent that we can be, we are 
confident that we are identifying any products that are coming 
in that would be labeled as meat products. But at this stage, 
one of the real concerns we have is there are a lot of cattle 
that are 24, 30 months of age in Europe that are being killed 
because of mad cow disease, and the possibility that they would 
be exported and labeled as something else coming into this 
country has us very nervous.

                          Generic Drug Funding

    Mr. Farr. I hope the CIA is working with you. The other 
question I have is a little longer. It is about consumer 
confidence in the issue with generic drugs. This committee last 
year increased the budget by 1.2 million to essentially 
expedited approval time. Did you get those funds?
    Dr. Schwetz. Yes, we did.
    Mr. Farr. What have you been able to do to reduce the 
application review and arrival times?
    Dr. Schwetz. We have done several things, Mr. Farr. One of 
them is to hire a few more people to the actual review process. 
So we have hired four experts to help with the review of 
generic drug applications. We have also spent some of the money 
to improve our information technology infrastructure.
    Mr. Farr. That is with the other money. We have 
reprogrammed 1.5 million for equipment for information 
technology and you received that money?
    Dr. Schwetz. Yes, we did.
    Mr. Farr. And you have bought that technology?
    Dr. Schwetz. Yes, we did.
    Mr. Farr. I think what this committee is concerned about, 
and particularly in the public interest, is to get a lot more 
generic approvals out there. The whole battle out there is 
prescription drugs. If we can bring down the cost through 
generics, we can substantially have available to the consumers 
out there a lot more affordable medicine or drugs. I am sure 
this year we are going to want to know how you can just shorten 
that time period. Thelag has been embarrassing for the Federal 
Government, and frankly we know there is a lot of interest in the 
private sector not to have some of those drugs be approved as generic. 
So I don't have any more time, but I want to come back to that and talk 
about how we might be able to do this year's budget to make sure that 
we can close that time frame that began.
    Dr. Schwetz. We would be happy to come back to it.
    Mr. Farr. Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Mr. Farr.
    Mrs. Emerson.

                    Prescription Drug Marketing Act

    Mrs. Emerson. Dr. Schwetz, how are you? Thanks for being 
here. I have got some questions about the status of the 
agency's final rule on the Prescription Drug Marketing Act. I 
am happy to see the effective date of this regulation, which 
was initially set to be December 4, 2000, was extended first 
until October 1, of 2001, and recently again it has been 
extended until April 1st of 2002; isn't that correct?
    Dr. Schwetz. Yes.
    Mrs. Emerson. I very much appreciate your doing that. And 
in response to serious concerns from Congress and complaints 
from drug wholesalers that your rule would drive them out of 
business while disrupting the distribution of pharmaceuticals 
in the U.S., I understand you opened the rule for new comments 
and convened a public meeting in October of 2000; is that 
correct?
    Dr. Schwetz. Yes, we did.
    Mrs. Emerson. And based on the comments and the testimony 
at the public meeting and information collected by the 
consultant, I understand that you are using this additional 
information to revise the final rule; is that correct?
    Dr. Schwetz. That is correct.
    Mrs. Emerson. This revision hasn't been sent though to the 
Federal Register for publication. Is it because you are waiting 
for the new administration to review the proposed changes?
    Dr. Schwetz. Mrs. Emerson, that would be part of it, but we 
are also waiting for more information to come in from the 
industry that is being regulated and from the authorized 
distributors and the secondary wholesalers who are continuing 
to provide us information.
    Mrs. Emerson. So you couldn't probably tell me then when 
that review will be completed or when the new regulation will 
be established this Federal Register?
    Dr. Schwetz. We have an extension that goes until March 15 
for getting information.
    Mrs. Emerson. OK.
    Dr. Schwetz. So we are in the last stages of analyzing that 
information and working it through the department.

                             Biotechnology

    Mrs. Emerson. Well, I must say that I am grateful and most 
appreciative that you have taken our concerns to heart and 
extended the time period, because it will really, I think, make 
a big difference because the last thing we want to do is drive 
more people out of the business and put more concentration into 
the hands of just a few manufacturers who have their 
wholesalers tied up unilaterally with themselves. I apologize 
for not being here when Mr. LaHood was asking questions about 
the whole issue of biotech. And I want to ask just one 
question, and again, I apologize if he has already asked you 
this question, but how do you, as an agency, respond to groups 
who say that you have not done your job with regard to ensuring 
food safety, food that has been genetically engineered to some 
extent? How do you respond to them? Because this is so hard for 
those of us representing ag districts trying to make people 
understand that this is safe. If you could help me, I would 
appreciate it.
    Dr. Schwetz. Your question is a very good one. Usually the 
input that we see doesn't just come from one side, so for every 
group that is out there saying we are too careful, there is 
somebody else saying we are not being safe enough. So in this 
case, we have tried to stick to the science that would support 
decisions about these bioengineered foods, foods that are 
derived from new technology, and we have tried to get 
information out to the public that supports our feeling that 
safety is not a major concern for these products.
    We have procedures in place to evaluate the safety of new 
biotech food. And if there are going to be problems, we are 
quite confident, based on our experience with other food 
history, being allergens in particular, that if a new biotech 
food were going to be an allergic problem or anti nutrition or 
toxic problem, we have a pretty good handle on how we could 
predict that.
    But in addition, as we have moved forward in listening to 
the public, we have moved in two directions of providing the 
public the opportunity to tell us what they would like to see 
on labels that have to do with biotech food, and also to move 
away from a voluntary process of manufacturers coming to us and 
giving us information, moving toward a mandatory process with a 
new proposed rule that we have.

                        Labeling of New Products

    Mrs. Emerson. Do you think that labelling will do the trick 
as far as consumer confidence is concerned, or do you think we 
need to go beyond just that?
    Dr. Schwetz. No. Labelling by itself will not satisfy the 
skepticism that is out there about these new products. We have 
to provide more information. We have to be able to answer 
questions about the products more so than we have in the past. 
So that is why over the last couple of years, we have had a 
series of public meetings.
    We are putting labels out to groups of people to review to 
give us input on what would be informative. We realize that the 
public wants to know a lot more than the public has ever asked 
about before about these kind of things, and we don't want this 
technology to be restricted by virtue of unfounded concerns 
that the public might have.
    Mrs. Emerson. Do you think that we will get to the point 
where we can, that the average consumer will feel okay?
    Dr. Schwetz. Well, I would hope so. I mean, there are a lot 
of people who are comfortable with it now and I think with more 
communication and more products out there and more confidence, 
that there will be no surprises from these kind of foods. I 
think we will see a larger part of the public who will be 
satisfied with them. I am sure there will always be some people 
who would never want it just as there is with any new product.
    Mrs. Emerson. I appreciate that. My time is up. Thank you 
very much.
    Mr. Bonilla. Thank you.
    Mr. Hinchey.

                         Personnel for the Job

    Mr. Hinchey. Thank you very much. Thank you, Dr. Schwetz 
for your work at FDA. Since the 1930s,the Food and Drug 
Administration has established a very good record in protecting the 
American public. But the field has changed dramatically over the course 
of the last several years. International trade and the global economy 
have dramatically altered the circumstances and increased your 
responsibilities. Congress gave the FDA $89 million less last year than 
President Clinton asked for. I also note in your testimony that you 
talk about the frequency of inspections. Please give us an idea of the 
level of obligations and responsibilities you have and how they have 
changed in the last several years.
    Dr. Schwetz. Thank you, Mr. Hinchey, for your comments. We 
are obviously very concerned about the very things that you are 
referring to because at a time when we have not been able to 
hire very many people outside of our user fee areas, we feel 
the pinch in being able to respond to the fact that these 
issues have become global in nature. They are no longer just a 
question within the U.S. We are concerned that we have the 
right kind of people to be able to address these new questions.
    And our relatively fixed Federal employee base gives us 
some limits in the flexibility to reach out and get new people 
who are trained to answer new questions. We have a lot of 
people who need additional training every year. We are having 
some problems with recruiting, but when we have the resources 
we have been able to recruit people very effectively. Our 
bigger problem now is retention. We have a lot of people now 
who are available to the industry, and the salaries are higher. 
So we tend to lose people to the industry we regulate. There 
are a lot of things happening at the same time that gives us 
concern about having the right blend and the depth of science 
to be able to deal with these new issues.

                  Illegal Transport of Animal Products

    Mr. Hinchey. Dr. Schwetz, I hope you will be candid with 
this committee in regard to your needs to ensure safety of the 
food system in light of the dramatically expanding challenges 
that are confronting the agency. I am specifically concerned 
with the issues that were raised by our chairman a few moments 
ago, the issue of BSE. BSE is very worrisome indeed. There were 
two incidents in the United States, one in Texas involving feed 
and one in Vermont involving sheep.
    I am very interested in this case, because 20 of the 
infected sheep in Vermont were destroyed in New York. Following 
up on your answer to Mr. Bonilla, I would like you to 
elaborate, in writing because we do not have enough time, on 
the resources you have now and the resources you need to deal 
with this particular problem.
    And finally, I was interested to hear you suggest a few 
moments ago that the brains and spinal cords of ruminant 
animals can be fed to poultry. In other words, they get into 
feed for other kinds of animals. I think this is a very 
interesting fact. I wonder what kind of scientific research has 
been conducted with regard to the ability of poultry to 
contract BSE from the brains and spinal cords of ruminants who 
have been affected by it? What kind of regulations are in place 
to ensure that poultry feed is not being included in feed that 
is being fed to ruminant animals?
    I am also interested in your involvement with regard to the 
activities of organized crime in transporting the remains of 
ruminant animals destroyed in Great Britain. We have seen 
evidence recently that some of those animals are being 
transported illegally to parts of Europe, and specifically in 
large quantities to Africa. I am wondering if you are working 
with the FBI about the illegal transportation of residues of 
destroyed ruminant animals outside of the United Kingdom to 
other parts of the world.
    Dr. Schwetz. I will let Mr. Baker address the question that 
you raised last about illegal movement of these kind of 
tissues. Mr. Baker is the head of our Office of Regulatory 
Affairs. Your other two questions have to do, for example, with 
the use of feed that was prepared for one animals and the fact 
that it would, in fact, be fed to that animal. That is a 
concern for us as well. The possibility is brain and spinal 
cords would be put in chicken feed, and out on the farm that 
feed would be fed to cattle. And we are revisiting that issue 
to see if there is more we need to do there. We are convinced 
there are some more things that we need to look at, and they 
may require additional regulation for us.
    Mr. Hinchey. Why should there not be a ban on the use of 
that type of feed in any case under any circumstance?
    Dr. Schwetz. That is exactly what we are looking at.
    Mr. Baker. Excuse me, my name is Dennis Baker. I am with 
the Office of Regulatory Affairs at FDA. The issue of organized 
crime in the movement of these particular rendered products to 
other countries is something that has everyone concerned. Our 
Office of Criminal Investigations works and consults with 
INTERPOL, which the FBI is a member of. And we do monitor these 
types of situations. In addition, we work with USDA and Customs 
in tracking products that are coming into the country.
    As mentioned earlier, we do have a concern that products 
may be misdeclared coming into the country and may be offered 
as something other than meat and bonemeal, which is something 
that Customs is alerted to, we are alerted to, USDA is alerted 
to. It will take a lot of vigilance and a lot of resources to 
effectively monitor this and follow this through the chain.
    Mr. Hinchey. Mr. Chairman, I would like to request that Mr. 
Baker keep me informed on this issue specifically and send me 
copies of all transmissions that you have with regard to this 
activity regarding organized crime and the illegal 
transportation of these materials. Would you be kind enough to 
do that for me, sir?
    Mr. Baker. Yes, I will.
    [The information follows:]

    The Office of Criminal Investigations (OCI) has not 
received any information regarding organized crime and the 
illegal transportation of rendered products. OCI will notify 
the FBI, U.S. Customs Service and Interpol and request any 
information they may have concerning this subject. We will be 
happy to keep you informed on this issue.

    Mr. Bonilla. Thank you very much, Mr. Hinchey. We have a 
vote on the floor. I will yield to Mr. Latham. Mr. Goode will 
assume the chair when I go vote and the subcommittee will 
continue in the same way we have this morning.
    Mr. Latham.

                        Enforcement of Feed Rule

    Mr. Latham. Good morning. Before you leave, Henry, 
congratulations on your chairmanship, and Ms. Kaptur for the 
honey, honey.
    I guess my concerns are in the same line with the mad cow 
disease and the potential for Iowa being a major livestock 
producer, and what it could do basically to your markets. The 
number one concern obviously is health. Obviously that will 
have a huge economic impact on us also. GAOissued a report last 
year with specific recommendations. Have those recommendations been 
implemented, or where are you in the process. Obviously you have read 
the GAO report?
    Dr. Schwetz. Implementation that are specific for mad cow 
disease?
    Mr. Latham. Right, or BSE.
    Dr. Schwetz. BSE. I would like to have Dr. Stephen Sundlof, 
he is the director of our Center for Veterinary Medicine, to 
address that.
    Dr. Sundlof. Thank you, Congressman Latham. Yes, as a 
matter of fact the GAO report basically pointed out the same 
thing that we have recognized, and that is that we need to make 
sure that the rule is enforced. If we are vigilant in making 
sure that the feed rule is enforced and that no ruminant 
animals are receiving prohibited protein, then essentially, the 
country should be safe from mad cow disease, even in the event 
that it were to enter the country, it couldn't spread 
throughout the U.S. cattle herd. We certainly recognize that 
once the disease gets in here because it has such a long 
incubation period of roughly about 4 years, it could 
potentially spread throughout the entire national cattle herd 
without us knowing for some period of time.
    So it is extremely important and we have certainly stepped 
up efforts to make sure that we are getting out and inspecting 
every facility, that manufactures feed and renders animal 
protein to be used in animal feed. The recent interest in this 
issue, because of the European situation, has really mobilized 
a lot of the agricultural industry to take a great deal more 
responsibility in making sure that the cattlemen are asking for 
certification that the feed that they purchased is free of 
prohibitive material.
    The feed mills are also interested now in certification 
programs so that they can ensure that their customers are 
receiving animal feed that are free from the prohibited 
material. There is a lot of work to be done. This is not the 
scientific glamorous work. It is the kind of shoe leather work 
that FDA has to do to make sure that we are very much on top of 
this issue. And I think what we have decided for this year is 
that by September 30, 100 percent of all establishments that 
handle this material, is somewhere in the area of 10,000 
different establishments, are inspected and are in compliance 
with the rule.

                         bse and other species

    Mr. Latham. Is there an official position or scientific 
proof if BSE can jump species?
    Dr. Sundlof. It looks as though the evidence is very 
convincing at this point. There is no such thing as 100 percent 
proof.
    Mr. Latham. Convincing?
    Dr. Sundlof. That it does jump species. We are fairly 
certain that new variant CJD is the result of mad cow prior 
protein. It also jumps species in cats. It has been shown to be 
able to infect other ruminant animals, antelope, elk, deer, 
sheep, goats, other animals. So we know it has the potential to 
jump species, and unfortunately humans are one of those species 
that it jumps to.
    Mr. Latham. If humans can contract it then it is not 
confined just to ruminants.
    Dr. Sundlof. That is correct.

                      dietary supplements and bse

    Mr. Latham. I understand you are charged with regulating 
drugs, capsules, and health foods. There is an article in 
Newsweek highlighting the coating on capsules made from animal 
protein. What are you doing there?
    Dr. Schwetz. Well, we are concerned about the origin of 
those capsules because they are gelatin from animals. We have 
tried to convince industry within this country that we should 
not be using gelatin substances to make those kind of capsules.
    Mr. Latham. Aren't a lot of those imported?
    Dr. Schwetz. A lot of them are. A large part are European. 
At this point it is certified that those are coming from BSE 
countries are from animals that are not associated with BSE. So 
we have that level of certification, that level of comfort, but 
we would like to increase that to be sure.
    Mr. Latham. Do we know what quantity? Is it one capsule 
that could become infected. Is there any science on that.
    Dr. Schwetz. There isn't enough science to say there is a 
threshold at some point in time. It is probably related to the 
duration over which you continued to be exposed.

                      labeling of irradiated food

    Mr. Latham. If you take a couple of pills every day for 
years--I don't know how we are doing on time here. I am sort of 
chairing? Thanks, Hank. That is very nice.
    I have to run also. The food radiation, how are we doing as 
far as labelling on cold pasteurization, and rather than having 
to say that with the electronic irradiation that the 
terminology change you were going to have rules in place, and 
where are we on that?
    Dr. Schwetz. One of the things that we are doing is trying 
to get information from consumers about how these kind of 
irradiated products should be identified so that we do not hide 
that these are irradiated products. But we don't scare them 
from using the products by the symbols that are there. We are 
currently working with user groups to find out how groups of 
the general public would find the use of the portrayal of the 
symbols that the product has to be irradiated.
    Mr. Latham. How about in ready-to-eat food? I know it took 
5 years to get labelling on red meat, ready-to-eat things, deli 
food, things like that.
    Dr. Schwetz. There are petitions now.
    Mr. Latham. Will it take 5 years to address those again?
    Dr. Schwetz. I would hope not. We will do the best we can.
    Mr. Latham. I will yield to the gentlelady. I will go vote. 
I don't know who will be chairing.

                         pediatric exclusivity

    Ms. DeLauro. Tell them to hold the vote.
    Thank you, Dr. Schwetz. It is a pleasure to see you here 
today. I have two or three questions. I will try to be brief in 
the presentation, and if we can't get to answers here, and I 
would ask you to submit them.
    Let me just start with a February 5 Wall Street Journal 
article reporting that drug companies receive a six-month 
extension on their patents to conduct tests on children. I 
understand the merit of the tests in revealing the kind of 
information we need about the safe use of the pharmaceuticals 
for our children. And looking at the article, it does say in 
the headline FDA's law does some good. And I understand that. 
However, I am concerned about what we're dealing with in terms 
of the profits of the drug companies. It says this extension 
boosts the drug companies sales by more than $4 billion 
according to the Wall Street Journal's calculations.
    It also said the tests are relatively small and inexpensive 
costing anywhere from $200,000 to $3 million.There is public 
health impact as well. The longer the drug maker fends off generic 
competition, the longer patients, particularly the poor and the 
uninsured, will be burdened by the premium prices for their medicines. 
And it goes on. Obviously what we want to do is to find out the full 
effect of this policy. We just do not want to cut the pill in half. We 
do not want to grind it up, I understand that.
    On the other hand we are looking at billions of dollars 
here. We are postponing a generic drug. We have information 
that talks about what generic drugs can do and how they can be 
utilized, and we are holding back. And it is, in fact, at this 
juncture, a government agency, that is helping this process 
along, both increasing the billions of dollars and not allowing 
for generic drugs to move forward to address the ills and the 
needs of people in this country. Tell me about this, my 
friends.
    Dr. Schwetz. Thank you, Ms. DeLauro. You portray a 
complicated arena, and you have identified a couple areas of 
that. We are aware that the 6 months exclusivity does delay the 
development of a generic, at least for that 6-month period of 
time. So there isn't a permanent delay, but there is a 6-month 
period that this exclusivity would provide. The length of time 
it would take for the recovery that would occur beyond that, I 
am not sure what those numbers would be, but there is at least 
that possibility of a 6-month delay.
    Of course, as a public health agency, we are most 
interested in having drugs used correctly, and we want drugs 
that have been used in children to be used correctly. We want 
drugs that have been denied children to be available to 
children with good guidance. We will continue to insist that 
the proper studies are done so we can evaluate information that 
is correct in children to be able to create guidance on how 
physicians might use these drugs. So we have to continue to be 
involved primarily in that aspect of it, but understanding the 
impact in the cost itself.
    Ms. DeLauro. I understand that, and I don't have the time 
to pursue this now, but some of the sharpest criticism is that 
companies use the law to extend their exclusivity on hot 
sellers while often not testing other drugs that could help 
children, but aren't large revenue producers. The article 
includes a list of the millions of dollars that this 6 months 
adds to some of these folks when, in fact, some of the testing 
has been done already and it could be a lot less expensive to 
do this.
    If I can't afford to get the drug that is going to save my 
life or my child's life, then quite frankly, it doesn't make 
any difference. I would like to continue to work with you. I 
want to find out about this 6-month business, who is in it, who 
is not in it, where it is going and what is happening with 
this.

                 GAO STUDY AND WOMEN IN CLINICAL TRIALS

    Secondly, there is also a February GAO study revealed. I 
will ask the questions now, but you can get back to me on this. 
A GAO study revealed the fact that eight of 10 drugs withdrawn 
from the market by FDA in the past 4 years have dangerous 
health risks for women, calling into question about what kind 
of review process is being followed. These are the questions. 
Have the FDA's regulations concerning women in clinical trials 
been followed? Specifically, is there mandatory training of 
reviewers so they understand FDA policies and apply them 
consistently for all new products? Are adequate numbers of 
women being included in the trials? Are manufacturers required 
to provide information in a systemic way of the different 
impact of drugs on men and women? Is there a system for 
collecting data on whether or not companies include women 
minorities, seniors and children? Are there any plans to 
develop such a system? How much would such a system cost in a 
fiscal year? What does the FDA plan to do in FY 02 to ensure 
compliance with its regulations? We can list the drugs out for 
you.
    Dr. Schwetz. We will be happy to address the questions that 
you have laid out there.
    [The information follows:]

    The pediatric exclusivity provision of Food and Drug Administration 
Modernization Act of 1977, has been effective for obtaining pediatric 
studies for many drug products. An unprecedented number of pediatric 
studies have been or are projected to be conducted under this 
provision. Many of the studies have been conducted on drugs for 
important childhood diseases and on drugs that are widely used in 
children. These studies are expected to result in new pediatric 
labeling that will improve the medical care of children. Labeling 
changes have already occurred for a wide range of products including 
therapies for pain, HIV, diabetes, obsessive compulsive disorders, and 
allergies. We realize that pediatric exclusivity will increase the 
level of certain health care expenditures, because it will delay the 
introduction of lower-priced generic drugs, which will temporarily 
raise the average price of prescription drugs. However, it is expected 
that the improved health outcomes provided by appropriate labeling of 
drugs used in the pediatric population will likely result in 
significant health care cost savings. The health benefits of the 
pediatric exclusivity program may not be realized until pediatric 
trials are completed and the findings added to the drug labels.
    With regard to the GAO study and women in clinical trials, FDA has 
issued several guidances and regulations concerning the inclusion of 
women in clinical trials: 1988 Guideline on the Clinical and 
Statistical Sections of a New Drug Application (NDA), 1993 Gender 
Guideline, 2/11/98 Demographic Rule, 6/1/00 Clinical Hold Rule, 21 CFR 
314.101 ``Refuse to File.'' Until 1993 women of childbearing potential 
were, based on a 1977 guideline, generally excluded from early trials; 
the 1993 gender guideline was accompanied by a notice rejecting that 
1977 guideline. In 1998, the demographic rule, 21 CFR 314.50, required 
sponsors to provide an analysis of effectiveness and safety data for 
important demographic subgroups, including age, race, and gender. In 
April 1999, 21 CFR 314.101 was revised so the Agency can ``refuse to 
file'' an application that does not contain the required demographic 
information asked for in 314.50. Then in June 2000, a final rule 
amended clinical hold regulations on investigational new drug 
applications for products intended for life-threatening diseases if men 
or women with reproductive potential are excluded from participation on 
the basis of the potential. Recent surveys indicate that regulations 
are generally being followed. After publication of the 1993 guideline, 
training was held for all reviewers to inform them of the change in 
regulations. The Center for Drug Evaluation and Research's (CDER's) 
course entitled ``Topics in Clinical Trials,'' describes these 
regulations and analytic issues related to subgroups. Web-based 
training on gender-related regulations recently has been developed and 
will soon be made available to all FDA employees.
    FDA believes adequate numbers of women are being included, but that 
has generally been true since the first time this was examined. Surveys 
by the Agency in the 1980s and by the General Accounting Office (GAO) 
in 1991 indicate that women are being proportionately included. The GAO 
survey results are given in the Federal Register with the 1993 gender 
guideline. Although women have been included, until we began asking for 
them (1988, 1993, 1998) there were no analyses of whether results 
differed by gender. Under 21 CFR 314.50 manufacturers are required to 
provide information on whether there is a different impact of drugs on 
men and women.
    CDER is developing a system for electronically collecting 
information from companies on the inclusion of women, minorities, 
seniors, and children in ongoing clinical trials. The system includes 
other details about the clinical trial such as the objective of the 
study and the type of information being collected that will provide a 
repository for clinical trial information for both the Agency and the 
public. At this time CDER is piloting a form, ``demographics page,'' to 
collect information from a limited number of NDAs to be completed by 
our reviewers. The results of the pilot will be discussed with all the 
review divisions, finalized and implemented as soon as possible. In 
addition to the web-based training module, the refinement and 
implementation of the ``demographic page'' will allow the Agency to 
more readily identify applications that are lacking the required 
information and look at total data.

    Dr. Schwetz. Let me just comment a little bit to let you 
know we are aware of the findings and the comments that are 
made in that GAO report. And we agree that of those 10 drugs, 
there are eight of them, whether it appears as though there is 
an increase prevalence of problems among women, but there are 
some reasons for that as well.
    It isn't that drugs are automatically more toxic to women 
than men. Four out of eight are drugs prescribed for women much 
more frequently for women than men. So you would see much more 
numbers of adverse effects in women than men because they get 
the drugs more often. Among the other four there are drugs 
where it has been known for some time that there are 
arrhythmias caused by these drugs, and women are more 
vulnerable than men so it isn't a surprise that you have those 
findings with that drug. We are concerned about women in 
clinical trials for drugs to be used for women. And the same 
for children and other subsets of our population where as we 
get better and better drugs, they will be targeted for specific 
sub groups of people.
    So we continue to watch both sides, that we do not approve 
drugs for women or other groups where there is insufficient 
warning that there may be problems and we continue to look so 
that the clinical trials are designed in a way to reveal those 
defects more accurately than we have in the past.

                            Vaccines and BSE

    Ms. DeLauro. I would like to get a comment on the record 
because there is an article that appeared in this morning's 
paper. It also goes back to something that appeared in The New 
York Times on February 8. This is about vaccines. Five drug 
makers use materials with a possible mad cow link. Regulators 
discovered that five companies, including some of the world's 
largest drug companies, were still using ingredients from these 
countries with Mad Cow to make nine widely used vaccines. And 
the companies say they found the FDA's request unclear. I am 
sure you have a comment about that. It says the FDA did not 
discover this in a vaccine supply for the last 7 years. I want 
to bring to the attention the five makers: Glaxo, SmithKline, 
Aventis, American Home Products. I mention that because in this 
morning's paper, and this has to do with the Department of 
Agriculture because this comes under the jurisdiction of the 
Department and this committee as well, the U.S. will buy back 
corn seed. The Agriculture Department is going to spend up to 
$20 million this year to compensate companies for corn mix with 
an unapproved genetically modified variety, produced by 
Aventis.

                             StarLink Corn

    We are not asking them for reimbursement. I understand the 
reasons why we are doing this in reading this article this 
morning. But Aventis was tagged with dealing with this here, 
and also now dealing with the issue of the vaccine supply and 
what is going on there. I would like to have some answers. Is 
the FDA talking to the Department of Agriculture about who is 
doing what and what is happening? This has to do with something 
that my colleague, Tom Latham, asked about the gelatin on the 
caps, but also on supplements. Every year more than $1 billion 
of supplements are imported from high risk countries, according 
to the 1999 FDA study. For its part, the FDA inspects only 
about 60 of the more than 1,000 supplement manufacturers each 
year.
    It probably also goes back to my colleague, Mr. Hinchey's 
question about the staffing. I didn't mean to make speeches. I 
would love to have the opportunity to hear back from you. My 
time is long up. My colleagues will throw me off the panel and 
I have probably missed a vote. So let me just leave things 
there. I don't want to take any more of your time, Mr. 
Chairman.
    Mr. Bonilla. That is all right. If you would like, Dr. 
Schwetz can make a final comment.
    Dr. Schwetz. I would like to. Thank you. Because the 
vaccine issue is of considerable importance to us, and it is 
quite different from the StarLink corn issue. If the Federal 
Government buys up that seed corn, it is not likely to create a 
shortage of seed corn available for planting in the U.S. The 
situation is different for vaccines.
    Ms. DeLauro. I said that I want to make that clear. I will 
take another hard look at that. But I am interested in what is 
going on in some of our companies that find themselves in a 
problem with our vaccine supply, and find ourselves in a 
problem with the corn supply. So that was my purpose.

                           Vaccine Production

    Dr. Schwetz. We have gone back to the companies and after 
we have discovered that there are cells that are used early in 
the process of vaccine production that shouldn't have been 
used, they could have been cells that were from countries with 
BSE. We have gone back and said you can not do that anymore, 
but we have also identified the risk that there might have 
been, from the use of those cells, to produce vaccines that 
were out there. The risk was so small that it was far less than 
the problem there would have been if we had said these vaccines 
have to come off the market. We would have created a huge 
problem by taking these vaccines off the market.
    So the problem will be corrected. It is in the process of 
being corrected. And in the meantime, we have chosen not to 
create a vaccine shortage. The question of whether or not we 
communicate enough with the USDA on these kind of problems or 
with EPA, I assure you, the level of communication and 
interaction between us Federal agencies who were involved in 
the food questions, has escalated greatly over the last few 
years.
    Ms. DeLauro.  We will submit some questions on that.
    Thank you, Mr. Chairman.
    Mr. Bonilla.  Mr. Goode, I want to thank you for helping me 
with the last vote and for being patient as well, so I will now 
yield to Mr. Goode.

                 Obtaining Products Across the Borders

    Mr. Goode.  Thank you, Mr. Chairman. Just a couple of 
things, first thing, a citizen called me about 2 weeks ago, and 
her spouse had cancer. And there was a drug in Central America 
that they could fly down and get. I don't even remember the 
name of it. And they have really liked it. They had flown down 
and it was legal if they fly down and buy it there to bring it 
back in the country. But they said if they mailed it to them it 
was against the law. What penalties would she be looking at if 
they received a drug in the mail? Can you tell me?
    Dr. Schwetz.  I can't, but I would like to ask Mr. Baker if 
he would help us with that. Dennis.
    Mr. Baker.  What they would be doing is violating the 
provisions of Customs law there in bringing the product in, and 
it would be subject to really a detention and possible return 
to the country of
origin. They ordinarily wouldn't impose any type of penalty 
against someone trying to bring it in for treatment of a 
terminal condition or some other devastating disease. They 
could be required to pay if Customs so chose, a penalty worth 
whatever the value of the product is.
    Mr. Goode.  If they mailed it in to them, Customs doesn't 
inspect all mail coming in.
    Mr. Baker.  They come in through a mail facility, and yes, 
Customs is in the mail facility. Yes, that is correct. They 
also call on us if they identify drugs that they have questions 
on, they may call us to ask if this is a legal drug within this 
country, that type of thing.
    Mr. Goode.  The FDA doesn't have a criminal violation for 
that, Customs does.
    Mr. Baker.  That is correct it would be a violation of 
Customs law.
    Mr. Goode.  If they intercept the drug before it reached 
the party, would that be a violation of the law? I know that is 
a legal question.
    Mr. Baker.  Technically it could be, I am not certain of 
the drug you are speaking of.
    Mr. Goode.  Let me ask you this: Suppose I sent you a drug 
and put your name on it from Costa Rica. Don't they have to 
prove that the person solicited it from Customs?
    Mr. Baker.  That is true. They would have to know that the 
recipient ordered the product. If it is small quantity they 
move the drugs along. They are looking at large quantity that 
they stop. It is a personal import situation, they'll consult 
with us and then move the drug along.
    Mr. Goode.  One other question, I guess, to Dr. Schwetz, do 
you have any plans right now to make a proposal to regulate 
tobacco?
    Dr. Schwetz.  At this point we do not have plans that we 
would propose, no.
    Mr. Goode.  All right. That is all I have, Mr. Chairman.
    Mr. Bonilla.  Thank you, Mr. Goode. Dr. Schwetz, there is 
another vote being called on the floor. There is one member who 
indicated to me that he has a couple of questions. So if you do 
not mind, we are going to hold the hearing open a little 
longer. I guess technically we are in recess for a few minutes, 
about 10 minutes. I will go vote and come back to see if that 
member has some questions or if other members may have a second 
round of questions. At that time, we will determine whether or 
not we can recess or continue.
    Dr. Schwetz.  OK.
    Mr. Bonilla.  I appreciate your patience. Thank you.
    [Recess.]

                 Third Party Review of Medical Devices

    Mr. Walsh  [presiding]. We will reconvene. Congressman 
Bonilla is over voting, he will be back soon but we did not 
want to waste time. I am Congressman Walsh from New York. Thank 
you very much for your service for the country and the FDA. I 
have several questions I want to ask. The first one is 
regarding medical devices. Last year the subcommittee included 
language in the report accompanying the fiscal year 2001 
appropriations bill that urged CDRH to continue its work to 
expand the third party review program for medical devices. 
Obviously, the idea is to speed up the process. Historically 
there has been a pretty large backlog of those, and the 
Congress and the administration both urged FDA to deal with 
that through expansion of the third party review program. The 
important language also urged CDRH to actively use its 
authority to contract with outside experts when such expertise 
is needed.
    At this time last year the FDA had made only 154 product 
types eligible for third party review. Those product types that 
were eligible were simpler devices, such as blood pressure 
cups. The FDA has now made more complex issues available for 
review such as, MRI, tomography, and ultrasounds where the 
agency does not have a good review standard. The industry 
responded strongly. Can you tell us what you have done to 
expand the third party review?
    Dr. Schwetz.  We have had experience with third party 
review in the Center for Devices and Radiological Health. And 
the third party review process itself works, but one of the 
things we have observed is that the industry isn't interested 
in having the products reviewed through a third party process. 
I would like to have Dr. David Feigal, the director of that 
center expand more on that process.
    Dr. Feigal.  Thank you for the question. As of February of 
this year, we have expanded the program to all devices, which 
are legally eligible under the statute, and that is 674 
devices. This includes over 70 percent of the devices of the 
510K applications. And in fact, by doing that, it triggers the 
portion in the law where there is a 5-year evaluation period in 
the law and then the law sunsets. Since we have only done the 
full expanses since February, it is hard to tell if we are 
seeing a wider use of the program. But even before February, we 
were running at a rate that the third party reviews were 
picking up, and almost doubling compared to last year. That 
said, 3rd party is only 3 to 4 percent of the applications.
    Mr. Walsh.  3 to 4 percent.
    Dr. Feigal.  Of the applications. Now, if you compare FDA 
performance to 3rd party, the total time saved is about 30 
days. We have no backlogs, but they are actually able to review 
faster. They can cut about a month off the time to market. It 
is about 60 days instead of 90 days for those products. We 
think it is a valuable program. It actually extends our 
resources when industry uses outside resources. We are 
enthusiastic and encouraging this program, and we hope it will 
take off.

                      Medical Device Review Times

    Mr. Walsh.  That is a very positive response to the 
direction of the committee and the executive branch, and we 
encourage you to continue. But it sounds like you arebringing 
down those review periods which is what this is all about. I am sure 
everybody is aware, but the FDA really has the final say on whether or 
not the product is approved. Can you advise on the use of contract 
authority?
    Dr. Feigal. We have always been able to do. Our chief 
limitation has been a shortage of funds because of the 
proportion of our budget, which is used for salaries and other 
purposes. But we have used outside experts. The biggest pool 
which shouldn't be forgotten is the advisory committee and 
panel members, which has hundreds of consultants and which we 
use, not just on the panel, but as individual consultants 
during the review and development process.

                      Production Standards and FDA

    Mr. Walsh. Thank you. A couple of questions on veterinary 
medicine. One specific one, we have a company in my home town 
in Syracuse that makes veterinary penicillin. And they 
obviously are in competition with other companies. One of the 
companies they are in competition with is a northern Ireland 
company, and they have monitored the product of that northern 
Ireland company independently of FDA, and I know FDA has also, 
and there have been incidents where the product from this 
northern Ireland company has had foreign matter in the samples, 
glass, hair, and other paint chips, that sort of thing.
    FDA did at one time discipline this company. They have 
since reallowed, or they are now readmitting the product into 
this country. Out of concern, obviously, is that not only is it 
foreign matter in these products, but it seems that the FDA's 
standards for domestic production of penicillin are higher than 
those of imported products. We were concerned about the safety 
and efficacy of this drug on domestic or on production of 
agriculture. And there was also--we did bring the FDA and 
Hanford, the Syracuse company, together and there was an 
agreement that the FDA would look at the samples that this 
company had.
    This company contracts with an independent lab who are very 
reputable and FDA was going to look at these samples and then 
consider their sampling versus the independent lab sampling, 
and we had a good meeting, I thought, but FDA has not followed 
up on that at all. So it is their view that they are not--the 
FDA is not keeping their end of the bargain.
    Dr. Schwetz. Mr. Walsh, we have obtained samples from the 
company. We have obtained duplicates or we have obtained 
portions of the samples that have already been analyzed by the 
independent analysts, so we are looking at those samples and we 
are looking at samples we took ourselves. One of our FDA 
laboratories is looking at those samples for any evidence of 
debris or contaminants on the materials.
    Mr. Walsh. They have samples of the FDA's own studies and 
the independent lab, and any idea when they will have some sort 
of a response back to where, Hanford?
    Dr. Schwetz. We are expecting an answer next week.
    Mr. Walsh. Very good. Thank you. The last question is 
general on veterinary medicine. I am told by developers, 
manufacturers and labs producing veterinary medicine that there 
seems to be an exceedingly long delay in licensing veterinary 
drugs. And I wonder if you care to respond to that.
    Dr. Schwetz. Well, yes, and what I would ask is for Dr. 
Sundlof to come and address that question.
    Mr. Sundlof. Thank you, Mr. Walsh. Yes, you are correct. We 
were experiencing delays that are longer than are satisfactory 
to us. Some of the issues that you have already heard about in 
terms of the sophistication of the applications has been part 
of it. Other issues, such as international harmonization, has 
taken some of our rear viewers away to work on some of the 
bigger issues, which I think the pharmaceutical industry wants 
us to participate in, which is to develop an international 
standard.
    Up until 2 years ago, we suffered about a 10 percent 
reduction in the number of people that we had for reviewers. 
Over the past 2 years, in large part, thanks to this committee, 
we have been able to hire people. So we have been hiring up for 
the last 2 years. It takes about three years to get these 
people to the point where they are really productive. We were, 
at the same time, trying to improve the efficiency with which 
we approve these products to make the process faster and more 
productive. And I am committed to making sure that the process 
continues. We will always be, we will be limited obviously by 
the resources that we have available but we will do the best we 
can try to get the drug applications reviewed and approved in a 
timely manner. It is a very important issue to us.
    Mr. Walsh. So your feeling is the solution is in hand, it 
is just that you have to get the new people up to speed and 
that will enhance the productivity of the agency?
    Mr. Sundlof. Right. Let me just say that we have no control 
over the workload that comes in. So it is not always possible 
to say that we will have the process fixed. In fact we have 
targeted incremental increases over the years in our budget to 
improve. For instance, we cited a 5 percent increase in the 
speed at which we review products for this year, and when we 
submit our budget, we will have other performance criteria that 
will speak directly to this issue.
    Mr. Walsh. Thank you very much.
    Mr. Nethercutt.

                   Manufacturing Facility Complaints

    Mr. Nethercutt. Thank you very much. I appreciate your 
being here. Whoever wants to answer this is welcome to do so. I 
have received some comments by people in the 5th District of 
Washington who are involved in the biomedical area and need to 
go before the Food and Drug Administration not only to get 
drugs approved, but devices approved. And the complaint has 
been while the 1997 act for speeding up the process of approval 
has improved the record, there seems to be a long time between 
the arrival of the design of a facility to produce a product, 
and the final approval, once the facility is completed. I am 
wondering if you have had any experience with it. Have had 
other complaints? The concern is it costs money to build a 
facility. It costs money to build a facility the right way, and 
once it is done the right way, then it takes some time for 
final inspections to occur. And then you are sitting idle 
before operations can begin. Have you had other complaints? If 
so, how would you address solving that problem?
    Dr. Schwetz. Mr. Nethercutt, I don't have the information 
in front of me, and I don't remember reviewing it in the last 
few weeks that address specifically new kind of products where 
the inspections have held them up. We would be happy to pull 
together that information for you. I think at this point, it is 
a reflection of the overall resources to do inspections as 
opposed to targeting one specific set of the inspections 
thathave to be done. The resources that we have to do inspections in 
general is smaller than the job.
    [The information follows:]

    The requirement for preapproval inspections applies to all 
centers which regulate medical products. FDA can not control 
the time from planning for a new facility until completion of 
construction. We do, of course, control the scheduling of 
inspections after we are notified of the date by when the 
facility will be completed and necessary data to support its 
fitness for use, validation/qualification, will be available to 
FDA. We are not aware of a delay because FDA failed to conduct 
the initial inspection before the application was ready for 
approval. There have, however, been delays because the 
manufacturing operations were not in compliance with GMPs and 
the firm required additional time to make corrections.

    Mr. Nethercutt. I appreciate that. I wonder if there is any 
way to streamline the process such that once preliminary 
approval occurs, maybe there could be continued communication 
to ensure that the facility is what it originally intended to 
be with respect to design and operation. I know it may be 
easier said than done, but on the other hand, it is a very real 
issue, and it involves very real dollars to people who are 
making a substantial investment and to have some delay, a 
substantial delay, I think, doesn't serve the purpose of 
getting new drugs out into the public mainstream.
    Dr. Schwetz. Thank you for bringing that to our attention, 
we will review it internally.

                           Bioengineered Corn

    Mr. Nethercutt. I have one other question regarding 
biotechnology, and I understand there were questions about this 
today. I know that FDA and Food and Drug Administration and EPA 
all play a role in the approval of GMO products, in food 
products. And the Starlink corn issue has obviously been a 
tough one. It has caused great problems by its introduction 
into the food chain, and markets have been disrupted and 
confidence in food safety has been challenged. I am wondering 
if some of the problem hasn't come because of a 
miscommunication between agencies. The agencies that I 
mentioned that have some cross jurisdiction. I understand EPA 
made the decision to release Starlink, and I am wondering 
whether you can provide the committee with any thoughts 
regarding institutions, regarding interagency analysis and 
communication to prevent this kind of an incident. I know it 
was released as animal feed and, as happens, it gets into the 
food chain and then problems occur. I am wondering if you 
believe enhanced communication agency to agency on these kind 
of food issues might have prevented that or prevent future 
problems.
    Dr. Schwetz. I don't know if further communication before 
would have prevented it or made it significantly different, but 
I assure you that the level of communication has been 
increased, and as we learn from these experiences, we know 
better what to look for as new situations come to us.
    So clearly, the level of communication has increased 
between EPA and us, as EPA talks about the review of 
pesticides, whether it is a chemical or biologic. And we would 
be more heavily engaged in discussions anticipating if there 
ever is a decision, again, which EPA says it won't be where a 
food substance would be approved for feed but not for food. But 
in the event that there are questions that we have to address, 
we will certainly do our best to try to anticipate what things 
might happen down the road, rather than react to them when they 
happen.
    Mr. Nethercutt. Is it a formality or is it just a fact that 
there is increased communication? Is there a structure that is 
set up? Is it more informal?
    Dr. Schwetz. It is more informal than that. But 
nonetheless, we do participate when they have products that are 
reviewed for their approval. There were informal ways for us to 
be consulted. We were on their advisory committees. As a 
liaison member, we do participate as a member in a formal and 
informal way.

                       Glucose Monitoring System

    Mr. Nethercutt. Let me ask one more quick question. For the 
record, if you would kindly advise me or the subcommittee or 
both of any development that is occurring on the approval 
process for a non-invasive diabetes glucose monitor. I happen 
to be very much involved in the whole issue of diabetes and 
trying to help the people who are stricken by it. I understand 
there is a long, ongoing process to try to come up and approve 
an effective device to checking somebody's blood sugar without 
having to stick their finger. If you have that information, 
will you provide it to us?
    Dr. Schwetz. We will be happy to provide that for the 
record.
    [The information follows:]

    On March 22, 2001, FDA approved a new glucose test for 
adult diabetics. The Cygnus, Inc. Automatic Gluco Watch 
Biographer is an automatic, non-invasive glucose measurement 
device. To ensure accurate results, Gluco Watch measurements 
must be used along with finger-prick blood tests to monitor 
glucose. The Gluco Watch is available only by prescription, for 
adults age 18 and older.
    FDA approved MiniMed's home-use, minimally invasive 
Continuous Glucose Monitoring System (CGMS) in June 1999. This 
device is approved for following trends and patterns in 
glucose. It is implantable and records values for up to 3 days 
for later review by a physician. Results are not available to 
the patient.
    A key issue associated with minimally invasive and non-
invasive glucose devices is that the technology still needs to 
evolve to the point where the information generated by these 
devices is as reliable as that generated by conventional 
fingerstick devices. Blood glucose measurements have been the 
traditional base for diabetes management, but the information 
generated by these new devices is different from traditional 
blood glucose information. The benefits or drawbacks to using 
this new type of information are not yet fully known or 
completely understood. FDA hopes that safe and effective non-
invasive devices will be developed to benefit patients and 
physicians in achieving tighter control of glucose levels, 
which may lower the incidences of, and complication from the 
disease.

    Mr. Nethercutt. I wish to apologize to the chairman. I am 
sorry. I am late to the committee and I wish you the best in 
your chairmanship.

                     Regulating Dietary Supplements

    Mr. Bonilla. Thank you very much. I know you were at the 
Defense Appropriations subcommittee hearing that is being held 
simultaneously. But thank you very much.
    Dr. Schwetz, I have a question that might be philosophical. 
In terms of the diet supplements that are on the market now 
that are not synthetic but derivatives of natural products, a 
lot of folks out there say that these should be regulated more 
intensely or should be regulated, period. Other people say a 
person should be free to go to the shelf and research the 
product and take it if they want, if they feel it will help 
them on a weight loss or some other kind of health issue. I 
have always had a problem with prioritizing, looking at 
something like that.
    I happen to be one who doesn't take those products, but if 
another person wants to take them, they ought to have the 
responsibility to read up on these products and determine 
whether or not they will be good for them, and not everybody 
reacts to the same products the same way. Ultimately, I think 
there ought to be a sense of self responsibility versus looking 
to the government to regulate and label all of these things to 
make sure that it is right for me. Isn't there some sense of 
responsibility for the person?
    My question is in terms of priorities with the FDA, should 
this be way down on the list, considering all of the other 
problems that you have outlined today, ranging from mad cow 
disease to FDA personnel problems. Shouldn't this issue go way 
down on the list in terms of priorities, especially since there 
should be some self-responsibility out there exercised by 
consumers?
    Dr. Schwetz. Self-responsibility is good when it works. But 
the American consumers tend to buy things in patterns that 
aren't always in their best interest. Some of them are 
biologically active in ways that we know are harmful to the 
bioavailability of other drugs, for example. Or they have 
constituents in them that were toxic in their own right. So 
there are reasons to be concerned about the safety of dietary 
supplements.
    When you couple that with the facts that millions and 
millions of people take these, and this is a business that has 
doubled in size in the last 7 years, so there is a huge amount 
of human exposure, and people are learning on their own what is 
safe for them and what isn't. As a public health agency, that 
gives us concern that maybe we would allow this experiment to 
happen in public, and we would find problems when before it 
became a full-blown problem.
    So we are kind of caught in the middle on this one because 
we don't want the public to be harmed by these products, but we 
also do not want to unnecessarily keep them from the public 
because the public wants them, by virtue of the fact that the 
volume of sales has doubled in the last 6 or 7 years. And we do 
not want to restrict that unnecessarily. It isn't the same type 
of problem that we were talking about earlier, about the major 
impact on business or human health. But nonetheless, we cannot 
just turn aside and say this isn't something we should be 
concerned about at all.
    Mr. Bonilla. Certainly if there is solid evidence that some 
of the products may be causing harm, I think that is something 
we can agree on that should be looked at more carefully. I am 
talking about areas that there is no specific evidence yet, 
that this may be a threat out there. I just wanted to touch on 
that. I may have more questions as we go on.
    Ms. Kaptur.

                             Import Entries

    Ms. Kaptur. Thank you, Mr. Chairman. Dr. Schwetz, I wanted 
to ask you if you or your staff could provide information on 
the nature of the imports coming into the country. The increase 
over the decade in terms of which countries it is coming from, 
the commodities and the volumes. Do you have the ability to do 
that?
    Dr. Schwetz. We have that kind of information. We know the 
volume has tripled in the last decade. We will provide what we 
can for the record.
    [The information follows:]

    The volume of imported FDA regulated goods has roughly 
tripled in the decade since 1990. In that time changes in 
products imported into the country have mirrored the changes in 
the food preferences of the U.S. population and the 
globalization of product manufacturing. Ethnic foods, many of 
which are packaged for retail sale, are increasing in volume. 
Countries all over the world are exporting food specialties and 
other goods to the U.S.
    Prior to the 1990's most imported products were low 
technology, low value products and much of it arrived in bulk 
shipments. Now as the technical capabilities of our trading 
partners have grown, they are able to produce goods with 
technical specifications that approach or exceed those of goods 
produced by domestic manufacturers. Consequently, there are 
more finished products and technical components among imports 
than ever before.

                    Impact of Trucks Crossing Border

    Ms. Kaptur. I would appreciate that very much. I 
haveanother question on the import issue. Back in February, there was a 
legal ruling by a group that is called the North American Free Trade 
Agreement Tribunal requiring the United States to permit Mexican trucks 
access to our highways. Currently we have about 4 million of those 
trucks that cross our border every year and an additional three million 
that would cross this year if that ruling is implemented. My question 
regards the impact of that ruling and whether or not you are requesting 
any additional funds to cover inspections associated with that ruling?
    Dr. Schwetz. We are concerned about that increase in volume 
as well, Ms. Kaptur. One of the things that happens is all of 
those shipments that come through have to be registered with 
us, with the Federal Government, Customs and USDA. The history 
has been that about 25 percent of those shipments that come 
through would involve FDA-regulated products. So we are 
probably looking at least a million of those trucks that could 
be FDA-regulated materials. How much of that volume is coming 
by trucks that would have come by ships or otherwise, is 
something that we don't know yet. We are trying to figure out 
what impact this will have, how it will play out. We may need 
to come for additional help for resources to help cover that in 
the future.
    Ms. Kaptur. All right. I certainly am very interested in 
that issue. And whether it is the inspection of our plants, let 
us say, meat, that comes in from another country and we have to 
pay our inspectors to go down to the plants and check them out, 
or whether it is trucks coming across the border, what I see 
happening here is that there is a shift to the public sector of 
the cost of private enterprise.
    I know you can't answer this question for me. I don't like 
what I see. In other words, if there is lettuce production that 
gets displaced from Mr. Farr's district into Mexico for 
whatever reason, and then it starts to come back up, the cost 
of inspection and so forth, the changes that we even have to 
make to our roads associated with the shifting of enterprise is 
being placed on the public realm. I am extremely concerned 
about it. It even extends to my part of the country, some of 
the trucks that are coming in, heavy volume, taking roads where 
there are no weight inspections. There are a lot of things 
going on. I want to get a sense of the volume of this and who 
is benefiting and who is paying the cost. So any information 
you can give us on that issue of what is coming across the 
border that falls within your jurisdiction, I am quite 
interested in.

                           Internet Oversight

    On radiated beef I wanted to ask a question, there was a 
story back in The New York Times in February talking about a 
particular company that had placed on its Web site a product 
for sale, without mentioning the word ``irradiation,'' even 
though that is what had been done. And I am wondering if that 
usage is proper because FDA has not yet drafted final 
regulations on labelling. And I am wondering what kind of 
oversight, if any, you provide over the Internet.
    Dr. Schwetz. As an agency, we do have oversight over some 
aspect over what happens on the Internet. If there are claims 
that are made that are important from the standpoint of safety 
of products or interaction with other materials or if there is 
misleading information or if there are health claims that are 
inappropriate or can't be backed up for certain kind of 
products, that is our highest priority, to find out how we 
would solve that kind of a problem.
    So we will approach those companies and let them know that 
what they are doing is probably not something that they should 
be doing, and in most cases, they will make changes to the Web 
site, so that it is consistent with what they could say.
    Ms. Kaptur. They do have it on their packages but not on 
the Web site. In other words, the packages that are ultimately 
shipped to the customer.
    Dr. Schwetz. That would still be a problem that we would 
ultimately deal with.

                            Transplantation

    Ms. Kaptur. All right, I wanted to ask a final question in 
this round, tell me, how you would handle this problem, because 
I am not sure who is responsible? I have a medical college in 
my district. They are heavily involved in transplantation of 
human organs but are now involved with the transplantation of 
human organs, like pig hearts into humans. They have asked me 
to help them figure out how to work through the USDA to get 
special types of animals raised that are raised in very sterile 
environments where those hearts have particular characteristics 
of transportation, particularly certain valves, as I understand 
it.
    Now when I went to USDA about how we raise these animals. 
They said we do not have anything to do with this. This is a 
Health and Human Services issue. This has nothing to do with 
agriculture. And I am wondering how does FDA, how do you look 
at this question of transplantation into human or plant tissue, 
I suppose, into human beings? How is that organized at the 
Federal level so you can deal with the raising of the animals, 
the checking of the sterility, for example? And then the 
ultimate regulation of the procedures themselves. Who is 
responsible for that at the Federal level?
    Dr. Schwetz. Well, Ms. Kaptur, the FDA does have 
responsibility for cells that are used as biologics or cells 
that are used as devices. We have the authority to request that 
if there is research being done on this and the research would 
involve eventually human studies, that would come under our 
purview, either in the Center for Biologics that Dr. Zoon is in 
charge of, or the Center for Devices that Dr. Feigal is in 
charge of. So between the two of those, those are issues we 
deal with on a daily basis.
    Ms. Kaptur. I saw Dr. Suydam shaking her head no when I 
said U.S. Department of Agriculture. Why was that such a strong 
shake no?
    Dr. Suydam. Well, I responded so strongly because FDA has 
responsibility for biologics when they are being researched to 
use in humans. This is a health issue. And that is why it is 
part of the FDA's purview.
    Ms. Kaptur. All right. I thank you for that. And I just 
wanted to say Mr. Chairman, I know there hasn't been time to 
really review the budget of the FDA during this hearing. I am 
hoping that at some point fairly soon we will have the 
opportunity to look at the FDA requests and other requests that 
will be coming at us in a responsible way. We do not have a 
budget document in front of us here like we usually do. And we 
have to look at you and process what you are saying, but we do 
not have a larger document of which it can be a part. I, also 
in this round, want to make sure I introduce the staffers on 
the minority side. I don't know if Martha Foley is here, and 
Christine Malloy, who is a detailee with us. And also in our 
own staff Roger Szemaraj, Julie Little who are both here today, 
and wethank you very much for your work. Thank you very much, 
Mr. Chairman.
    Mr. Bonilla. I thank you very much, Ms. Kaptur. We are all 
anxiously awaiting those budget numbers, and we hope to have 
them no later than the first week in April. As is the case no 
matter what the change is historically, the new folks have to 
get their feet on the ground and planted, obviously. That is 
why it is taking a little longer this year. I thank you, Ms. 
Kaptur.
    Mr. Hinchey.

                          inspection resources

    Mr. Hinchey. Thank you, Mr. Chairman. Dr. Schwetz, in your 
testimony, you note that among the FDA's biggest challenges in 
the future is the whole issue of food safety. Ensuring the 
safety of the food supply from microbial, chemical and 
pesticide contamination as well as keeping BSE out of the 
United States and dealing with genetically modified food. You 
also said in your testimony that your inspection regimen is 
inadequate because you were able to inspect facilities once 
every 5, 6 or 7 years, and perhaps even longer in some cases. I 
wonder if you would tell us what resources you would need to 
conduct an optimum schedule of inspections of the facilities 
that come under your jurisdiction.
    Dr. Schwetz. We would be pleased to provide that for the 
record.
    [The information follows:]

    Over the past several years, FDA's ability to inspect the 
firms under our jurisdiction has been impaired. For example, 
the law requires that FDA inspect certain medical device, human 
and animal drugs, and biologics establishments at least once 
every two years. Coverage has fallen short of meeting these 
statutory requirements. Although at least fifty percent of 
statutory establishments should be inspected annually, FDA 
currently inspects about twenty-eight percent of drug 
facilities, sixteen percent of high risk medical device 
facilities, and thirty-nine percent of animal drug facilities 
each year. If we look only at our statutory inventory of 
domestic firms to be inspected, we believe it would cost at 
least $110 million to meet the fifty percent requirement. This 
does not include coverage of non-statutory firms, such as all 
food manufacturers.
    The inspectional coverage of food manufacturers, 
particularly high risk food manufacturers, has been inadequate 
over the past several years. FDA estimates that we would need 
at least $220 million for an optimum inspection schedule of 
domestic food facilities under our jurisdiction. This would 
provide for inspection of high risk firms twice each year, 
warehouses every three years, and all other food firms every 
two years. In the area of imports, FDA estimates that the 
resources needed to increase food physical examination of 
import line entries from one percent to ten percent would 
require at least $230 million.

                       bse resource requirements

    Mr. Hinchey. Specifically with regard to BSE. Do you have 
enough authority under the law now and do you have enough 
resources under the law to deal with that specific problem?
    Dr. Schwetz. We are reviewing all of the sources of human 
exposure that we regulate. At this point, we think we have the 
regulatory authority that it takes to cover the questions that 
come to us if as we review sources of exposure. Further, if a 
source of exposure that we do not have control over, then we 
would be back to the question of how could somebody get that 
authority. At this point we think we are okay. The question of 
the resources, we will be happy to provide that to you.
    [The information follows:]

    At the start of FY 2001, the agency had planned to expand 
about $4,000,000 for BSE-related activity. Given the recent 
events related to BSE in Europe, FDA has had to readjust its 
plan. By the end of FY 2001, FDA has committed to inspecting 
100 percent of all feed mills, plus reinspection of those 
establishments not in compliance. Within the planned resource 
allocation, this would not have been possible. The Center for 
Animal Drugs and Feeds has reprioritized its inspection 
activities to focus on this issue in FY 2001.

                            bse action plan

    Mr. Hinchey. Do you have the authority to prevent the 
brains and spinal cords of ruminants ending up in feed that 
goes to poultry?
    Dr. Schwetz. No, that is not a law at this point.
    Mr. Hinchey. You do not have the authority.
    Dr. Schwetz. That can be, at this point, that is still 
legal, but if we wanted to impose a ban on being able to do 
that, we can do that.
    Mr. Hinchey. You have the authority to do that----
    Dr. Schwetz. Yes.
    Mr. Hinchey [continuing]. Under the law?
    Dr. Schwetz. Yes.
    Mr. Hinchey. Are you considering doing so.
    Dr. Schwetz. Yes, we are.
    Mr. Hinchey. How close are you to a decision on that 
regard?
    Dr. Schwetz. One of the things that has happened since 
Secretary Thompson has come in and has expressed considerable 
concern about mad cow disease, he has asked us for an action 
plan that goes across all of DHHS, and then will be implemented 
between DHHS and USDA. We are moving quickly. The draft plan 
has already been submitted to him. These are the kinds of 
decisions that we will be making very quickly over the next few 
weeks.
    Mr. Hinchey. So you have or will be recommending such a ban 
to the incoming Secretary.
    Dr. Schwetz. That is part of our plan.
    Mr. Hinchey. That such a ban be implemented?
    Dr. Schwetz. That is not specifically defined in the small 
number of pages of the plan that went to the Secretary, but 
that is what is in our plans internally. That would be a part 
of that, yes.
    Mr. Hinchey. I am a little confused about your answer. Are 
you going to specifically recommend to the incoming Secretary 
that a ban be initiated on the brains and spinal cords of 
ruminants being used in poultry feed?
    Dr. Schwetz. I think we have some more discussion within 
the agency that we need to have before I would say yes or no to 
you. Clearly, that is part of what we have in mind as to what 
it would take to bring more control over this. We have to look 
at the consequences of making that decision right now. We know 
that is what it would take to move towards more control. But we 
have more discussions before I could answer you absolutely yes. 
But we are close to that.
    Mr. Hinchey. You anticipate that decision to be made within 
the next few weeks or months?
    Dr. Schwetz. Within the next few weeks.

             Summaries of Studies on Cell Phones and Cancer

    Mr. Hinchey. I would like to ask you a question with regard 
to your regulation of electronic emitting devices, cell phones, 
specifically. I understand that your agency is about to or has 
already begun a study of dangers associated with the use of 
cell phones; is that correct?
    Dr. Schwetz. That is correct, we have a cooperative 
research and development agreement with an organization that 
can do studies to help us define what level of risk there might 
be, what hazard there is from that exposure.
    Mr. Hinchey. Are you aware of studies that have been 
conducted on this subject in other countries?
    Dr. Schwetz. Yes. There are three epidemiology studies that 
came out recently talking about the relationship between cell 
phone use and brain cancer. And there are a number of other 
studies in the literature that are either whole animal studies 
or exposure of cells in vitro kinds of systems. So there is a 
large body of information out there. For the most part, it 
shows that there is no association between brain cancer and 
exposure, but one of the limitations in those epidemiology 
studies is they involve exposure to this kind of energy for 
just a few years, like three years or less.
    And the question of what is the effect of exposure for 10 
years or anything more than three years, we don't have an 
answer to that yet. But the indications that we have now is 
that there is no association, so at this point--we are not 
doing anything other than looking at the information as it 
comes out.
    Mr. Hinchey. Could you please provide the subcommittee with 
summaries of the information you have with regard to those 
several studies?
    Dr. Schwetz. We will.
    [The information follows:]
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    Mr. Hinchey. And I understand the study you are conducting 
is being paid for by the industry; is that correct?
    Dr. Schwetz. Part of the support is from the industry, and 
we have the opportunity to design the study and ask the 
specific questions and we can help monitor the study, so it is 
one of those leveraging things where we feel that it is our 
questions that are being asked and the industry is also 
interested in the answers to them and they are helping to pay 
the cost.
    Mr. Hinchey. Will they influence the parameters or the 
specifics of the study?
    Dr. Schwetz. No, they will not.
    Mr. Hinchey. Thank you.
    Mr. Bonilla. Thank you, Mr. Hinchey. I will now yield to 
the vice chairman of this subcommittee, Mr. Latham.
    Mr. Latham. Thank you, Mr. Chairman. I just had a couple 
questions. I know Mr. Boyd wants to get some questions in. 
Going back to the BSE/mad cow situation. Do you have the 
authority to regulate pet food?
    Dr. Schwetz. Yes.

                      Pet Food and Animal Products

    Mr. Latham. You talked earlier about cats being susceptible 
and from my understanding when you think about children and 
pets and there is a lot of exchange of licking faces and all 
that type of things. Is that part of what you are going to 
propose to the Secretary?
    Dr. Schwetz. We already have that authority. So that is an 
issue we have looked at.
    Mr. Latham. Your proposal, is that going to be included in 
what you present to Secretary Thompson?
    Dr. Schwetz. No, because that is a question that we think 
we have already addressed, so it is not one of thesethings that 
we need to change to do it better.
    Mr. Latham. So you are saying there is no concern at all 
with pet food?
    Dr. Schwetz. I would like to ask Dr. Sundlof if he would 
expand on that.
    Mr. Bonilla. For the record, Doctor, if you would state 
your name and title for the record.
    Dr. Sundlof. Steve Sundlof, I am the Director for the 
Center of Veterinary Medicine. The FDA has the authority to 
regulate pet foods. We do regulate them at this time. Because 
BSE is not in this country, we allow products from cattle to be 
fed to cats just as we allow products from cattle to be fed to 
humans. Our laws on pet food are basically equivalent to our 
laws on human food. We don't disallow people from eating beef. 
There have been approximately 80 cats that have developed BSE, 
the feline form of it all in Europe. Some of the cats may have 
been infected from pet food, but most cases I believe is from 
butcher shop scraps and those kind of routes of exposure.
    As long as we keep the disease out of this country, all of 
our pets should be safe. And pets cannot transmit, the disease. 
There has been no case in which a pet has transmitted mad cow 
disease to a human. All of the exposures, all of diseases in 
humans to date are believed to have been the result of 
consumption of meat that was from animals that had mad cow 
disease.
    Mr. Latham. Are there any spinal material, anything like 
that put into pet food today?
    Dr. Sundlof. Yes.
    Mr. Latham. I understand what you are saying, and we do not 
normally eat, I don't anyway, brains, although a lot of people 
do, but pet food includes that. I have got a Friskies plant in 
my district, and they have basically cuts of meat, but I don't 
think there is the spinal or brain material in that.
    Dr. Sundlof. It is not prohibited. And so pet food 
companies are free----
    Mr. Latham. Are you looking at prohibiting them?
    Dr. Sundlof. It is not one of our highest priorities. If 
you kind of step back and look at where are the biggest 
concerns for the FDA and what is the likelihood that cats in 
this country are going to develop BSE from consuming pet food. 
And when you look at that on a risk basis, it is extremely 
small compared to the much bigger issue of keeping the disease 
out of the cattle herd.
    Mr. Latham. I agree 100 percent. I am just saying, if we 
have one case here, school's out. We will destroy billions and 
billions of dollars. The first priority is public health, but 
we are also concerned with exports worldwide, and I think it is 
something that we have to address one way or another. I am not 
sure whether legislation will be necessary for a total ban on 
including brains and spinal cord tissue. I don't know where we 
need to be. But there are dollars and human lives at stake on 
this.

                       Adulterated Food Products

    I have one other quick question. Mr. Nethercutt brought up 
the Starlink issue. From my understanding, EPA has authority, 
as far as human consumption, on the Starlink because it is 
considered a pesticide; is that correct?
    Dr. Schwetz. EPA had the authority to approve this product, 
and it was approved as a pesticide. When it comes to a question 
of its presence of the pesticide being present in human food, 
that is our authority.
    Mr. Latham. Okay. Have you had input from the EPA recently? 
I know Adventist was seeking approval for human consumption. 
Have you had input with EPA?
    Dr. Schwetz. We were part of those discussions, yes.
    Mr. Latham. Where are we on that?
    Dr. Schwetz. At this point there is still no approval for 
these to be used in human food.
    Mr. Latham. Do you have any kind of a time line for 
approval or disapproval?
    Dr. Schwetz. No. At this point, to my knowledge, that is 
not an ongoing question at this point. It is not approved for 
human use.
    Mr. Latham. Excuse me? I'm sorry.
    Dr. Schwetz. When this corn is present in food as opposed 
to animal feed, that would be considered to be an adulterated 
food product.
    Mr. Latham. But the request was to approve it for human 
consumption.
    Dr. Schwetz. At this point, I am not aware that is a formal 
request for us. Joe? Joe Levitt.
    Mr. Levitt. Sorry. Joe Levitt, Director, Center for Food 
Safety and Applied Nutrition. I think the confusion is that the 
petition does not get sent to the FDA. It gets sent to the EPA. 
That was sent last fall. There was a scientific advisory panel 
meeting that was held. The scientific advisory panel raised a 
number of questions that are being considered by the EPA. But 
that really is a question that EPA needs to answer. While we 
are in the discussions we are not in the leading role.
    Mr. Latham. I would just point out that because of cross-
pollination, that it has been found in a lot of seed corn not 
intended to have this modification.The USDA apparently is going 
to spend about $20 million buying back the seed corn that is on the 
market this year. Potentially this is another case where we could 
almost have our entire corn exports barred throughout the world if some 
action isn't taken. Some type of approval or disapproval I think would 
clarify the situation a great deal.
    Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you Mr. Latham.
    Mr. Boyd.
    Mr. Boyd. Thank you very much, Mr. Chairman. First, 
congratulations to you.
    Mr. Bonilla. Thank you, Mr. Boyd.

             Background Information on CJD and Variant CJD

    Mr. Boyd. Welcome, ladies and gentlemen. I have got several 
questions, so, Mr. Chairman, you cut me off when my time is up. 
I want to start with Mr. Williams. I am looking, Mr. Williams, 
at your HHS fax sheet, and I see where, and this is going to 
the BSE issue, that you state that neither BSE among cattle or 
the human variant of CJD, human variant. There is a new 
variation of CJD that evidently attacks humans which has been 
found in the U.S. I didn't realize that. I had a friend die 
last week and the diagnosis was CJD. And I just wondered if the 
Department was aware of that in Florida?
    [Additional information follows:]
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    Mr. Williams. I think that is a question more appropriate 
for Dr. Schwetz to answer.
    Dr. Schwetz. I would be happy to provide more information, 
Mr. Boyd. CJD occurs at a low background incidence in people. 
It has been there among humans before we were worried about mad 
cow disease. So even before 1985, there was a history of CJD 
occurring at an occurrence of about one in a million humans. 
The variant that we see now has a different characteristic than 
CJD that has through various studies associated it with 
exposure to the same prions that are related to mad cow 
disease. So there is a difference between CJD and new variant 
CJD.
    So people will continue to have the traditional CJD and 
will die from that because it is always a fatal disease, but 
what we have not seen in this country are cases of the variant 
that are related to the mad cow disease.
    Mr. Boyd. Okay, I probably don't know as much about this as 
I should, but I would be glad to work with you all, because the 
diagnosis and the reporting in the press was that it was--and I 
am not sure what whether it was that variant or not. But 
anyway, thank you for comments.
    Mr. Schwetz. We will be happy to provide more background 
information on that.
    [The information follows:]

    Since 1996, evidence has been increasing for a causal 
relationship between ongoing outbreaks in Europe of a disease 
in cattle, called bovine spongiform encephalopathy (BSE, or 
``mad cow disease''), and a disease in humans, called new 
variant Creutzfeldt-Jakob disease (nvCJD). Both disorders are 
invariably fatal brain diseases with unusually long incubation 
periods measured in years, and are caused by an unconventional 
transmissible agent BSE has not been detected in the United 
States, despite active surveillance efforts since May 1990).
    BSE (sometimes referred to as ``mad cow disease'') and 
variant and classic Creutzfeldt-Jakob disease (CJD) belong to 
the unusual group of progressive, degenerative neurological 
diseases known as transmissible spongiform encephalopathies 
(TSEs). Theses diseases are characterized by a long incubation 
period of up to several years, during which there is no visible 
indication of the disease. The incubation period for BSE among 
cattle ranges from three to eight years; for vCJD among humans, 
the incubation period is unknown, but is at least five years 
and could extend up to 20 years or longer. The diseases are 
invariably fatal; there is no known treatment or cure. The TSE 
diseases include scrapie, which affects sheep and goats; 
transmissible mink encephalopathy; feline (cat) spongiform 
encephalopathy; and chronic wasting disease of deer and elk. 
There are six TSE diseases that affect people: kuru, classical 
CJD and variant Creutzfeldt-Jakob disease (vCJD), Gerstmann-
Straussler-Scheinker syndrome, fatal familial insomnia, and 
sporadic fatal insomnia. The human diseases are very rare; for 
example, classical CJD has been well studied and occurs 
sporadically worldwide at a rate of about one case per one 
million people.
    It is believed that vCJD may be acquired from eating food 
products containing the BSE agent, and there is strong 
epidemiologic and laboratory evidence for a causal association 
between vCJD and BSE. The absence of confirmed cases of vCJD in 
geographic areas free of BSE supports a causal association. BSE 
and vCJD have never been identified in the United States.
    Cases of variant CJD are very rare, and most have occurred 
in the United Kingdom. The latest information (October 2, 2000) 
issued by the Department of Health, United Kingdom 
(www.doh.gov.uk/cjd/) indicates that there have been 73 
confirmed cases of vCJD in the United Kingdom. These cases have 
all been diagnosed since 1995. France has reported two cases. 
The Republic of Ireland reported one case in 1999. No cases of 
nvCJD have been detected in the United States through CDC's 
surveillance program. In fact, no illnesses in livestock or 
humans caused by BSE have ever been diagnosed in the United 
States, despite 10 years of active surveillance.

                          Dietary Supplements

    Mr. Boyd. Thank you. Mr. Chairman, I too have an interest 
in some issues that I understand have already been covered 
here. The dietary supplement issue is an issue that my office 
has been working on for about four years. We are totally 
frustrated by the action of the Food and Drug Administration in 
the way that they have dealt with this issue as it relates to 
AERS and as it relates to the GAO report which gave a scathing 
report of the Department's actions. And so I am not going to 
ask any questions on that. I will submit those questions for 
the record, Mr. Chairman. I understand that you have touched on 
that already.
    Mr. Bonilla. I asked a very general question about the 
priorities of FDA's involvement in this issue. My concerns, 
perhaps, should not be as high in the pecking order as others 
would like to see it.
    Mr. Boyd. We spent a lot of time and a lot of money, and 
this committee appropriated some extra money to the FDA to get 
things done--review the AERS--which have not been done. We have 
still have Freedom of Information Act provisions which haven't 
been complied with. There just seems to be a total breakdown in 
complying and getting the job done on this issue. But I will 
submit my questions, Mr. Chairman, since you have already 
covered those.
    Also I had some questions on the medical device issue, 
which I understand Mr. Walsh has covered. So I will submit my 
questions for the record.
    Ms. Kaptur covered the invasive species issue. I want you 
to know that is a near and dear subject to my heart. In 
Florida, we have currently, and I recognize they are all kinds 
of invasive species, and some that would apply to your work. In 
Florida, we are fighting some 38 or 40 invasive species that 
come through our ports on a regular basis because we do not 
have the resources to do a good job at our ports. I am very 
interested in the work that you are doing applicable to your 
jurisdiction on the invasive species issue. I know that you 
have addressed it in your remarks, and so I will submit those 
questions also.
    Mr. Chairman, I would like to pass the time and I will 
catch you on the next round with my next question.
    Mr. Bonilla. Thank you, Mr. Boyd.
    Ms. Kaptur.

                        Drugs for Mental Illness

    Ms. Kaptur. Thank you, Mr. Chairman. I wanted to thank FDA 
for providing me with information in the last fiscal year 
relative to the number of drugs that had been approved for 
people who present with serious mental illness, and I had asked 
for a time line from FDA about the numbers of applications for 
these drugs, and the nature of the approval. The reason I ask 
this question is I am very concerned about this set of 
illnesses, and I want to make clear in my own mind, are we 
making progress in this country in the research and treatment 
of these really crippling illnesses? And in looking over the 
data that was provided me, I realize that the words ``serious 
mental illness'' were not included in the material that was 
given to me.
    Basically, it was just about drugs that had been approved 
which related to mental health. So I am going to ask you, 
Doctor, to go back and to be much more specific about whether 
or not the approvals that are waiting in the applications that 
are waiting in line for approval are those that have been 
approved related to this very significant subset of illnesses 
in our society.

                             Seafood Safety

    My final set of questions deal with questions relating to 
seafood inspection and shellfish. And since we last had a 
committee hearing, I got sick for the first time in my life and 
traced it to fish. And I wanted to ask you, on shellfish, what 
steps can the FDA take to reduce the number of deaths and 
illnesses from contaminated shellfish?
    Dr. Schwetz. Ms. Kaptur, there are a number of things that 
we are doing to better understand why some of these products 
are not as safe as they could be and how we could improve the 
safety. For example, one of the organisms, that cause illness 
from eating seafood is vibrio. This is a pathogen known to be a 
problem with oysters. We have gone through risk assessments of 
this organism, and we are looking at risks that are associated 
with other ones, looking at how these products are brought to 
market, where they come from, how can we reduce the number of 
pathogens in some of these products that people like to 
consume. How can we treat these products either through 
radiation or through cold treatment, hot treatment, whatever it 
might be, to reduce the pathogen load from the time they are 
harvested to the time they are consumed. We are continuing to 
look at a variety of control measures to reduce the number of 
poisonings that might occur from things like vibrio, the number 
of illnesses that might occur. We are also looking through our 
HACCP procedure to better inspect the seafood industry and have 
better records of performance. There are a variety of things 
that we are doing, looking at specific organisms to try to get 
better food safety.
    Ms. Kaptur. I can tell that in the local supermarkets where 
I come from, there is a lot more attention to, the way fish and 
shrimp are presented, and how employees wear rubber gloves. And 
I noticed changes in the way the seafood is handled. I don't 
know if it is true all over the country, but it is very 
encouraging to me because more care is being taken with this 
particular line of products. I understand that in terms of 
seafood that USDA, under their HACCP requirements for meat and 
poultry, have both industry and government doing microtesting, 
but that in terms of seafood and FDA's jurisdiction under 
HACCP, you don't do that. There is no microtesting; is that 
correct?
    Dr. Schwetz. Testing for pathogens in the food?
    Ms. Kaptur. Yes.
    Dr. Schwetz. That is something we have done at some level 
and our plans on how to deal with this, include more of the 
testing that you are talking about, an increased level.
    Ms. Kaptur. Do you expect to have a parallel system to what 
USDA has for meat and poultry?

                 System for Assessing Safety of Seafood

    Dr. Schwetz. I would ask Janice Oliver, who is here, to 
replace Mr. Levitt, from our Center for Food Safety, to address 
that.
    Janice.
    Ms. Oliver. My name is Janice Oliver. I am Deputy Director 
for the Center for Food Safety and Applied Nutrition. What we 
have planned in the area of seafood in testing is an increased 
testing, microtesting of seafood. But seafood and meat and 
poultry are not the same. Meat and poultry have a heavier 
burden of pathogens. Seafood generally has a much lower level 
of pathogen, so the type of testing and comparability would be 
different. We have information from one study that we have done 
in a salmonella in seafood that was done by an outside firm 
under contract with us that showed, indeed, salmonella levels 
in raw seafood are very, very low. So you would have to have a 
different type of testing. But we are increasing our testing 
and asking our field to do that.
    Ms. Kaptur. In layperson's language could you describe, in 
terms of shellfish and seafood, what the American people can 
expect in the next 5 years in terms of greater certainty of 
that particular element of the food supply? What are you going 
to be doing differently a year from now in order to ensure that 
shellfish and seafood are even safer?
    Ms. Oliver. In the area of shellfish, I would say there are 
a number of new technologies that are out there, such as 
hydrostatic pressure or IQF freezing, which is freezing very 
rapidly, and low temperature pasteurization that FDA has 
reviewed and seen that it does kill organisms. We are working 
with the ISSC, the Interstate Shellfish Sanitation Conference, 
to get these into more of the firms on a particular basis. And 
there will be an issue that comes up in the ISSC meeting this 
summer, which we expect and are optimistic will increase the 
use of this throughout the shellfish industry. To go to seafood 
and the seafood HACCP, we are changing our directions in the 
field and are now targeting some specific controls that 
dealwith the pathogens and targeting specific controls that deal with 
histamines and associated illness, so that we are not spending our time 
going back to firms that are already in compliance and are doubling our 
efforts in other areas. And that is already changing.
    Mr. Boyd. Would the gentlelady yield?
    Ms. Kaptur. I would be pleased to yield.
    Mr. Boyd. You struck Vibrio a cord when you have start 
talking about oysters and VV, Vibrio vulnificus. Mr. Chairman, 
I wonder if I might ask a question. Vibrio vulnificus is an 
organism that exists in our own bodies and in the waters 
naturally at low levels, and it is not dangerous to humans 
except as I understand it, Mrs. Oliver to a very small portion 
of the population that might have liver disease or some other 
specific condition, and then it becomes dangerous to them; is 
that correct?
    Ms. Oliver. The people that have had the most serious 
illness and have died from VV are generally people who have had 
some type of liver disease.
    Mr. Boyd. Is it your intention then, or the agency's 
intention to require all raw oysters, for example, to be 
treated postharvest. Is that where you think we are headed down 
the road?
    Ms. Oliver. What we have been doing is----
    Mr. Boyd. In spite of the fact that 99.9 percent of the 
population is not at risk.
    Ms. Oliver. I would say two things. I would say we are very 
concerned that there are any deaths from V.V., and the industry 
is also, as are the States. The Interstate Shellfish Shippers 
Program is a cooperative program with the States. The States 
enforce a lot of the National Shellfish Shippers Program 
because of the thousands of miles of waterways that we have in 
the United States. But with respect to the V.V., the industry 
itself, has also taken and gone forward with putting into place 
more of these procedures, such as the hydrostatic pressure 
because it takes care of V.V., and some of it takes care of 
other things as well. And we are working with the ISSC, 
together with the States, in moving forward, which would 
decrease the V.V. As well as provide other controls.
    Mr. Boyd. Just one follow up. It is not really a question. 
We have several entities in the industry that are working on 
these different treatment, what we have call PHT, post harvest 
treatment methods. And you mention them, you mention cryogenic 
freezing and irradiation and so on and so forth. I think one of 
the things this Congress will be looking into is for your 
agency to give a blessing to one or more of these treatment 
procedures. Up to this point in time, we have not had that.
    Ms. Oliver. It is not quite true. We have said something 
about the low temperature pasteurization and said what it could 
say. We also have under expedited review, there is a petition 
for irradiation of shellfish that is in. And the expedited 
review process for food additives put that our food additives 
that might have a public health impact at the head of the queue 
and it is being reviewed.
    Mr. Boyd. So my specific question is, are you working with 
the ISSC to determine an appropriate treatment method for 
people to eat oysters and know they are safe?
    Ms. Oliver. We don't approve all methods, but those that we 
do we are reviewing and doing that.
    Mr. Boyd. I would be interested in that time line. I wonder 
if you could provide that for me. Thank you.
    Ms. Kaptur. I know our time is up here. I would ask the 
agency if you could also let us know, and we will submit 
questions on this, whether there is a difference in terms of 
the presence of some of the bacteria in aquaculture 
environments versus open water. That would be interesting to 
me. Thank you, Mr. Chairman.
    Mr. Latham [presiding]. Thank you. The gentleman from 
Georgia, Mr. Kingston.
    Mr. Kingston. I wanted to thank the distinguished member 
for Ohio for the honey. And I would note we have no prize from 
Florida or Iowa. The ranking member always takes care of us 
with tomatoes or something.
    Mr. Boyd. Will the gentleman yield. You will have a bag of 
citrus delivered in your office this afternoon along with the 
other members.
    Mr. Latham. I would like to register the same complaint.
    Mr. Boyd. I wanted to make the point that we have already 
arranged to have bags of fruit delivered to every member of the 
subcommittee. So that will happen this afternoon. Thank you.

                            Drug Importation

    Mr. Kingston. All right. You are the man. Mr. Chairman, 
last year in the final appropriations bill as you now we had 
the drug reimportation language, and that appropriated, I 
believe, $23 million to the Secretary to implement the rules 
and regulations, and I think around December she said we can't 
do it and threw up her hands. Where is that $23 million today?
    Dr. Schwetz. Mr. Kingston, that $23 million never came to 
us.
    Mr. Kingston. Was it contingent on implementing the plan?
    Dr. Schwetz. Yes.
    Mr. Kingston. Where would that money go, Mr. Chairman, or 
anybody? Was there a trigger in it that we did not know about? 
So there was a trigger in it. The language that the Secretary 
could not implement, has anybody in FDA looked at language that 
would work either in part or in whole? And I know that you are 
not in the law writing branch of government. Yet at the same 
time, it would be helpful to see exactly, you know, where we 
could improve the language.
    Dr. Schwetz. From the standpoint of the FDA, the things 
that the Secretary was asked to certify that couldn't have been 
certified, one was that the drugs as they came back in and were 
used by Americans, they would be safe and the other one was 
that the cost of the drugs would be less. And she was unable to 
certify the two of those. At this point, it is Secretary 
Thompson's decision on what he wants to do as a follow up to 
the situation.
    Mr. Kingston. You know, this committee doesn't really want 
to put the language on our bill, but it was the train that was 
absolutely leaving town, and as you know, these things do get 
stuck on our bill. But it is likely because of the interest of 
members on this committee that we will see that in some form. 
So, you know, anything that Mr. Thompson could provide to the 
committee members would be helpful.
    Dr. Schwetz. Okay.
    [The information follows:]

    In order of the MEDS Act to be implemented, the Secretary 
of the Department of Health and Human Services must certify 
that the new law will result in a significant cost savings to 
the American public, and that it will pose no additional risk 
to U.S. consumers. Former Secretary Shalala declined to make 
this certification prior to leaving office. Secretary Thompson 
is reexamining this issue, but has not yet made a final 
determination.

    Mr. Kingston. If you could even go so far as to say that I 
would like to see something, whatever you have it would be 
useful to me to get an idea on it. Just what kind of language, 
what kind of appropriations. And again, if there is $23 million 
is the magic number or whatever, but there is just such a 
critical need out there for not just seniors, but for parents 
with small children and anybody who can, you know, we need to 
have more competition in the drug bills. Let me ask you this, 
also, why is it so much higher domestically than it would be 
just over the boarder in Canada and Mexico. What is your reason 
for that?
    Mr. Schwetz. I can't answer that. The FDA doesn't have 
jurisdiction over the pricing of drugs, so I can't answer that 
without any confidence.

                           Drug Review Times

    Mr. Kingston. Okay. Now switching gears, on drug approval, 
what is the approval time frame and what was it?
    Mr. Schwetz. I would like to have Dr. Woodcock answer 
questions on that because she can give you more information 
than I can.
    Mr. Kingston. I don't know if there is a general category 
on one type of drugs versus another type for approval, but this 
is something that we constantly hear from pharmaceutical 
companies.
    Dr. Woodcock. What you have to do is make the distinction 
here between FDA review time and the time it actually takes for 
a drug to get to the market, which is what people call the 
approval time. The review times for new drugs, not generic 
drugs, but new types of drugs to come into the market are set 
by the Prescription Drug User Fee Act, and the agreements we 
made under that. And for a standard drug, a drug that is not 
providing a public health benefit in our mind, the time for FDA 
to review it is between 10 and 12 months. For a priority drug, 
a drug that provides a new benefit to the population, the FDA 
review time is 6 months. But we turn drugs down sometimes, and 
they come back and cycle back to us. And therefore for those 
drugs, their review time, their approval time may be several 
years. This is confusing because if the application isn't 
complete, all our questions are not answered, or we believe 
additional clinical studies are required, then the company must 
come back and form those studies and come back later with 
another cycle of applications.
    Now, as far as FDA review times, we are meeting all of our 
goals under the FDA Prescription Drug User Fee Act, so we 
review those within the 10-month period or within a 6-month 
period. A number of them are approved on the first cycle. If 
there are deficiencies or problems, then it might take 2 years 
for that drug to get on the market or sometimes longer.
    Mr. Kingston. Now if a drug is being used in another 
country versus a new invention, does that drug generally have a 
faster review period, than you know something that is brand 
new?
    Dr. Woodcock. Could you restate your question.
    Mr. Kingston. Here is what we hear from constituents. There 
is a drug for epilepsy that you all approved about 2 years ago, 
but it had been used in Europe for some years. You know, we 
always hear from your constituents they can get it in another 
country, why can't we get it in America? So you have that drug 
and then you have some say brand new invented drug, which one 
gets the faster approval?
    Dr. Woodcock. The review times are set by whether or not we 
think there is a public health benefit for that drug. So we 
would if a new epilepsy drug seemed to provide a benefit over 
existing drugs, it would get a 6-month review time. If it was 
just another drug, another alternative and did not offer any 
new benefits, it would be a 10-month to a year time. But to 
answer your questions about drugs approved in other countries, 
regulatory judgment sometimes may differ and FDA may review the 
application and send it back to the manufacturer. At the same 
time another country is satisfied and goes ahead and approves 
that drug. So that drug may be available in the other country 
when it isn't available in the United States because we are 
asking for additional information.

                             Generic Drugs

    Mr. Kingston. Okay. Let me ask you this now. On generic 
drugs versus name brand drugs, what a lot of pharmacists tell 
me and a lot of doctors, is that there is still an 
overprescription for name brand drugs when generic drugs would 
suffice.
    Dr. Woodcock. That is correct.
    Mr. Kingston. That is correct? I am a little surprised, but 
I am glad you are saying that. Is that an official FDA's 
position, I am not trying to trick you on this, because that is 
the word on the street. But there is always and there is 
certainly two sides of the story, and this is a complex issue 
but I think it is something Congress and the FDA needs to start 
addressing.
    Dr. Woodcock. With the generic drug program that we have 
right now we can really stand behind it to say that generic 
drugs approved in the United States are the same quality as the 
innovator drug. But that wasn't always the case. I think health 
professionals are quite conservative sometimes when it comes to 
medicines, and in some part of the community there is a 
lingering concern, partly sometimes fueled by certain campaigns 
on the part of some manufacturers, that the generic drugs are 
not the same and are of lower quality and that leads to 
continued prescribing of the name brand drug.
    Mr. Kingston. My time expired. If I could ask for time for 
a follow up question.
    Does the FDA have a list of drugs that are generic that are 
a substitute for the name brand drugs?
    Dr. Woodcock. Yes we have it. It is called the OrangeBook, 
and we list all drugs that are equivalent all generics that are 
equivalent to the name brand drugs and that is updated continually.
    Mr. Kingston. Thank you.
    Mr. Latham. I am sure the Orange Book has something to do 
with Florida citrus.
    Mr. Boyd.
    Mr. Boyd. Or gators. Thank you, Mr. Chairman.
    Mr. Latham. If I could, I think we will try to cut this off 
shortly here.

                    Veterinary Antibiotic Approvals

    Mr. Boyd. I will be very brief then. Dr. Schwetz, there is 
a lot of concern that is expressed to me back home by some 
poultry producers on the way the FDA is handling a new 
framework for the veterinary antibiotic approvals. You have 
concluded that the Center For Veterinary Medicine should 
establish a threshold for resistance before removing products 
from the market. Yet the CVM wants to withdraw approval for 
fluoroquinolones. Did I say that right?
    Dr. Schwetz. Yes.
    Mr. Boyd. Baytril is an example of an antibiotic that is 
used. The way I understand it, in a very small percentage of 
chickens, when they are 7 weeks old, about one percent or so 
have to be treated with this antibiotic. It is a very expensive 
antibiotic. It is not something people are overusing. They have 
to get a prescription for it from the veterinarian, as I 
understand, to use it. Most poultry producers in this day and 
time of high energy costs are not looking for ways to increase 
their costs. They are looking for ways to decrease them. My 
question is, can you talk about where you are going with this 
in establishing these thresholds, but yet recommending 
withdrawal before you establish a threshold?
    Dr. Schwetz. In the case of the fluoroquinolones, the 
information that has prompted the decision that the approval of 
fluoroquinolone for use in poultry should be withdrawn is that 
the antibiotic resistance and that has built up to a level 
where because the organism that is involved is an organism that 
is pathogenic to humans, it triggered--and because the 
resistance would continue to increase--it triggered the 
decision that we should do something about continuing to 
approve fluoroquinolones for this use. It doesn't involve the 
use in cattle or other animals for which fluoroquinolones also 
have therapeutic uses. But because of the buildup of antibiotic 
resistance, the decision was made that it had reached that 
threshold that continuing to use fluoroquinolones and 
continuing to increase the antibiotic resistance was not 
something that we thought was a good public health practice.
    Mr. Boyd. I assume that fluoroquinolones are not just used 
in chickens, that particular active ingredient is used in other 
places, too. Do you have any scientific basis, particularly 
since only about 1 percent of the poultry that we know of is 
treated with this? Have you done any studies that would show 
what percentage is being prescribed by doctors to humans rather 
than coming through chickens. I just don't understand how--
until you establish thresholds and the scientific basis for 
this--why you want to do this.
    Dr. Schwetz. I would ask Dr. Sundlof to give you more 
information than I can on this.
    Mr. Latham. We have a situation on the floor if you are not 
aware. We have a 15-minute vote now and then there is about 5 
minutes of debate and then there is a series of five more votes 
on the floor. So if we could finish now, Mr. Hinchey.
    Mr. Boyd. Mr. Chairman, in deference to Mr. Hinchey, if I 
could get a reply in writing to my question, then I yield to 
Mr. Hinchey.
    Mr. Hinchey. I would ask for a reply in writing to a 
question or two as well.

                   Food Safety and Foodborne Illness

    With regard to the food safety issue, you note in your 
testimony that in spite of the fact that we have a good program 
that works very well, nevertheless, there are 300,000 people 
who are hospitalized and 5,000 people die every year from food-
borne illnesses in this country. If you could inform us as to 
what steps could be taken to dramatically reduce the number of 
illnesses and deaths as a result of food-borne illnesses, and 
what steps we could help you with on this subcommittee in that 
regard. I would also like to know what we need to do to reduce 
the problems associated with chemical and pesticide 
contamination, particularly that come from outside of the 
country on foods that are imported. And then finally, with 
regard to fish. There are some serious problems that are 
associated with seafood, particularly from seafood that is 
processed on board the ships that catch the seafood. I would 
appreciate if you could tell us what needs to be done to 
substantially reduce the risks associated wtih on-board 
processing.
    Mr. Schwetz. We will address all three of those.
    Mr. Latham. You will respond in writing for the gentleman.
     [The information follows:]

    Over the past several years, with your support, the FDA has made 
great strides in improving the safety of the nation's food supply. In 
just three years, 1996-1999, CDC reported a 20 percent decrease in 
illness due to the 9 most common food pathogens across the United 
States. This reduction is extraordinary, and reflects the hard work of 
not just FDA, but other Federal agencies, as well as our state and 
local counterparts.
    Still, more needs to be done. FDA has been developing a plan for a 
strong credible and comprehensive food safety system. This 10 point 
plan includes the following elements: Research and risk assessment to 
understand the science on how pathogenic organisms and chemical 
contaminants enter the food supply and cause illness; strengthened 
domestic and international surveillance system through improvements in 
FoodNet, and PulseNet; outbreak response; regulations, policies, and 
standards such as assisting states to adopt the FDA food code for 
retail and developing national prevention standards for food 
processors; increased domestic inspections and enforcement, including 
leveraging with the states, so that high risk firms are inspected twice 
a year and other firms are also inspected much more frequently than 
they are currently; same level of protection for imported food, 
includes increased sampling at the border, increased foreign onsite 
inspections and increased efforts at international harmonization; pre-
market review of food additives; consumer education and outreach, and 
technical assistance to the states and industry; modern facilities and 
equipment to ensure application of the latest technologies; and 
information technology throughout the agency.
    In the area of chemical contaminants, FDA needs substantial 
investment in its monitoring and surveillance capacity to enforce EPA's 
pesticide tolerances for domestic and imported foods, expand Total Diet 
market study of the U.S. diet for trace nutrients, heavy metals, 
pesticides and chemical contaminants and conduct research on methods to 
detect and assess these chemicals in foods.
    With the increasing volume of imported foods estimated at 5.1 
million entries in 2002 and rising to more than 6 million in succeeding 
years, we need to have an adequate laboratory staff, methods, 
technology, instrumentation and facilities to sample, test and enforce 
tolerances and other public health standards to ensure the U.S. food 
supply remains safe, nutritious and wholesome.
    To the extent that fishing vessels perform activities on board 
other than catching and storing, the majority of these activities 
involve heading, evisceration and freezing to prepare fish for storing 
during the trip back to shore. These are low risk activities that 
generally do not introduce food safety hazards.

    Mr. Latham. Ms. Kaptur.

                         drug reimportation law

    Ms. Kaptur. Very briefly, Mr. Chairman. I just want to 
thank our wonderful witnesses this morning for being with us 
and it is always a joy to work with you. I will be submitting a 
few questions for the record dealing with breast implants and 
some of the latent problems, some of the reoperations. In fact 
some of the criminal investigations ongoing related to this 
particular set of technologies. And I know the women of America 
will be very interested in FDA's answers on that. My final 
question deals with reimportation of prescription drugs. Back 
in January Senator Jeffords released a report from the 
Congressional Research Service stating that even though 
Secretary Shalala, former Secretary of HHS, refused to 
implement the drug reimportation law that we passed here, that 
her action did not preclude a future secretary from 
implementing the law. I am wondering if the FDA concurs in that 
decision and whether Dr. Schwetz feels that Secretary Thompson 
has the authority to implement the reimportation law that we 
passed.
    Dr. Schwetz. Mr. Thompson is reviewing this Jeffords bill 
again under the decision that Dr. Shalala made, he has that 
under review right now and will be coming forward with his 
recommendations.
    Ms. Kaptur. Is the general counsel in the room? I would 
like to ask his opinion. Great. This is really good. Could you 
bring us up to date on this issue. You know this was a very 
heated issue in Congress.
    Mr. Landa. My name is Michael Landa and I am the deputy 
general counsel. Secretary Thompson, we believe, has 
theauthority to review, to make the requisite determinations or not as 
he sees fit.
    Ms. Kaptur. And is the counsel's office currently involved 
in analyzing this and making recommendations to him?
    Mr. Landa. We are not involved in that review at this time.
    Ms. Kaptur. Who would be within the agency, within the 
department, do you know?
    Mr. Schwetz. At this point it would be the Secretary and 
his immediate staff who I am assuming in time will come to us 
for what additional input he wants from us.
    Ms. Kaptur. But at this time he hasn't asked for it.
    Dr. Schwetz. No.
    Ms. Kaptur. Thank you very much and I thank the chairman 
and members.
    Mr. Latham. Thank you, Mr. Kingston.

                           Importation Notice

    Mr. Kingston. I wanted to ask one more question, Mr. 
Commissioner, and I think we did actually pass this 
successfully, but FDA when a private citizen goes to Canada or 
Mexico and gets a prescription drug, FDA sends out a letter and 
says you are not supposed to be doing that, and I believe there 
was language in a bill that did make it successfully through 
that said to quit doing that. And so did Secretary Shalala do 
that or was that a separate issue or did that get kind of lost 
as well?
    Mr. Schwetz. That is a separate issue from the Jeffords 
bill.
    Mr. Kingston. Yes, it is. So did you quit sending out the 
letter?
    Dr. Schwetz. The letter is undergoing revision so it is 
more consistent with what was requested of us.

                                ritaline

    Mr. Kingston. Could you provide to me a copy of that 
letter? Because my question was since that was a separate 
issue, it did stand on its own or did it get wrapped in the big 
one? And then I wanted to also ask you, which you certainly 
will need to reply in writing because of the time, Ritalin, are 
we overprescribing it? Is it becoming the yuppie drug of 
choice? The substitute for discipline? Is it abused and is FDA 
studying it in any way in that regard? I am just interesting in 
what is going on inside the FDA on the big picture view of 
Ritalin.
    Dr. Schwetz. That has been a topic of discussion within the 
agency. We will be happy to provide you a more detailed 
discussion in writing.
    [The information follows:]

    FDA has drafted a revised personal importation notice. FDA 
will be happy to provide a copy of the notice when it is 
finalized.
    We acknowledge that Ritalin (a product approved for 
children six years and older) is widely used. It is our intent 
to evaluate the diagnostic tools for attention deficit 
hyperactivity disorder (ADHD) in pre-school children to enable 
us to construct appropriate trials in this age group so that we 
can evaluate the proper use of the drug in children.

    Mr. Kingston. Great.
    Mr. Latham. Thank you. On behalf of the chairman, I thank 
everyone on the panel. I will have another couple questions as 
well to submit in writing. But again, I appreciate everyone 
being here, the great testimony, your candor and a very, very 
good hearing. Thank you. The hearing is adjourned.
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                                         Wednesday, March 21, 2001.

                  COMMODITY FUTURES TRADING COMMISSION

                               WITNESSES

JAMES E. NEWSOME, ACTING CHAIRMAN COMMODITY FUTURES TRADING COMMISSION
EMORY BEVILL, ACTING DIRECTOR OF FINANCIAL MANAGEMENT, COMMODITY 
    FUTURES TRADING COMMISSION

                       Introduction of Witnesses

    Mr. Bonilla. The subcommittee will come to order.
    We have before us today the Commodity Futures Trading 
Commission, which is responsible for keeping integrity in our 
markets and protecting customers from fraud. This is a daunting 
task, due to both complexity and volume. Last year we had 
nearly 600 million total contracts traded. This agency serves a 
national interest. Folks on the street back home may not 
understand the specifics of CFTC's work, yet they would 
certainly experience the consequences if CFTC failed in its 
job.
    The Commission is represented today by Jim Newsome, the 
Acting Chairman of the CFTC. I want to welcome Mr. Newsome. I 
know you had a difficult time getting in this morning, and so 
did a lot of folks around here.
    Mr. Newsome. Yes.
    Mr. Bonilla. You are putting into action a major 
reauthorization, as we speak, the Commodity Futures 
Modernization Act of 2000. This act is far reaching, and I am 
sure it requires a tremendous investment of your staff 
resources to implement. We would certainly like to hear more 
about that during today's hearing.
    Ms. Kaptur, I am told, is going to join us momentarily, and 
at that time I will yield to her.
    Mr. Newsome, we have received your written statement and 
will print it in the record. I would invite you now to describe 
some of the highlights of the past year and the challenges that 
you face ahead.
    I see you spoke at the annual Futures Industry Association 
Conference in Boca Raton last week, and I am sure you have some 
fresh insights and possibly some concerns from colleagues 
there.
    I appreciate you coming by and visiting with me one-on-one, 
and with some other members of the subcommittee. We always want 
to have an open-door policy and a two-way communication. We 
think that helps everyone on the subcommittee, yourself and 
your agency.
    So with that, we would love to hear from you.

                           Opening Statement

    Mr. Newsome. Thank you very much, Mr. Chairman. Certainly, 
it is an honor, and I appreciate the opportunity to be here to 
testify before you as Acting Chairman of the Commodity Futures 
Trading Commission.
    Since creating the commission in 1974, Congress has tasked 
the CFTC with protecting participants in the commodity futures 
and options markets against manipulation, abusive trade 
practices and fraud, and with enabling the markets to better 
serve their critically important economic role of providing a 
mechanism for price discovery and a means of managing risk.
    Most of the participants in the futures and options markets 
are commercial or institutional users of the commodities they 
trade, and those commodities ultimately wind up in countless 
food and consumer products or are consumed in the provision of 
many, many important services.
    I believe strongly in the oath I took to pursue our mission 
faithfully, to maintain the integrity of the futures and 
options markets, and to protect participants against fraud and 
manipulation.
    As you are very well aware, 2000 was a very exciting and 
challenging year for our agency and for this industry, and we 
expect this year to bring even more of the same. The Commodity 
Futures Modernization Act, or the CFMA, was signed into law on 
December 21st of the year 2000, and with its enactment, we were 
given the monumental task of overhauling the entire regulatory 
structure of the commodity futures and options industry. While 
we recognize the pressures this will bring to bear on staff and 
resources, we are extremely pleased to have the opportunity to 
carry out the mandates of our new, flexible oversight 
structure, and we are firmly committed to doing so in 
accordance with the timetables that are set forth in the 
statute.
    The CFMA provides legal certainty for over-the-counter 
markets, lightens regulatory burdens on domestic exchanges, and 
lifts the ban on single-stock futures. In each area the new act 
requires action by the Commission, including 15 rule makings 
and 3 studies. In some cases we are required to coordinate 
these efforts with other Federal regulators. The timetables, 
quite properly in my opinion, are aggressive, and our staff is 
working diligently to insure that we meet each deadline.
    The CFMA also clarified the Commission's authority with 
regard to prosecuting foreign exchange bucket shops, and 
provided a new framework for the oversight of designated 
clearing organizations. Implementation of these provisions will 
require a tremendous commitment of resources and effort, both 
this year and next.
    Additionally the Act moved the Commission from a role as a 
front-line regulator to a more flexible oversight role. Some 
may believe, in this new capacity, that the agency will need 
fewer resources than in the past. I would respectfully submit 
to you, Mr. Chairman, however, that just the opposite is true. 
It seems to me that a driving force behind passage of the CFMA 
was the desire to liberate the markets and allow innovation and 
flexibility, and to permit clearing organizations to respond 
appropriately to these market developments. I believe the 
market participants will respond enthusiastically to this 
opportunity. Indeed, they have already begun to do so.
    For example, rapid developments in technology, particularly 
in telecommunications and the Internet especially, have sparked 
great interest in electronic exchanges and trading platforms. 
In just the last year or so, the Commission has approved three 
new exchanges, and granted no-action relief to two electronic 
trading platforms for energy products. By comparison, only two 
new exchanges were designated during a more than 10-year period 
prior to that, and neither became economically viable trading 
platforms. I suspect that these three new exchanges represent 
just the tip of the iceberg. We are currently reviewing the 
applications of, or have received serious inquiries from, 
another half dozen proposed electronic exchanges, and we 
anticipate that some of the B-to-B electronic cash markets may 
also give rise to additional electronic futures exchanges. This 
growth and innovation in the marketplace has certainly begun, 
and I think will continue, to provide real benefits to market 
participants, customers and the economy as a whole.
    However, because our primary responsibilities have not 
changed, growth and innovation will also place increasingly 
greater demands on our resources. Several areas in particular 
appear to me to require significant attention and effort: 
first, new exchanges incorporating alternative trading 
platforms, tailored oversight must be fashioned to fit each 
market along a spectrum of regulatory classifications from full 
oversight to basic fraud and manipulation protection; second, a 
brand new product area, single-stock futures, which potentially 
will lead to many more new contracts; third, advancements in 
the practices of clearinghouses to respond properly to these 
new products and new trading platforms; a fourth, an expansion 
of our enforcement mission with respect to investigations and 
prosecutions in the increasingly problematic area of foreign 
exchange bucket shops.
    To effectively fill our responsibilities in these areas, 
the Commission and its staff must rely heavily upon information 
management and telecommunications resources that are capable, 
efficient and up-to-date, in order to allow flexible, fast and 
appropriate responses to market conditions and events. I should 
emphasize that, as a financial regulator, and particularly as a 
regulator that is witnessing phenomenal growth in 
electronically-based market activity, the Commission depends 
upon its information management and telecommunications 
resources for far more than the mere administrative task of 
facilitating interoffice communication. Without adequate 
resources in this area, we cannot effectively monitor markets 
to detect potential problems on a timely basis, nor can we 
reconstruct market events when disputes arise or violations are 
alleged. These monitoring and investigative responsibilities 
require the processing of vast amounts of information. And our 
Office of Information Resources Management represents not a 
support function, but rather a mission critical, core 
competency of the Commission.
    However, our human resources, the dedicated people that 
interpret and act upon the information provided by our computer 
resources, are even more critically important to the 
performance of the Commission and to our mission, to the 
protection of market participants and to the markets 
themselves. This mission requires staff with the proper 
training and solid experience in the specifics of markets we 
oversee. All too often, however, we lose good people, just as 
they are coming into their own as commodity lawyers, economists 
and trading specialists. In most cases the CFTC's ability to 
compensate such highly-skilled professionals lags not only far 
behind the private sector, but I think more critically, well 
behind other Federal financial regulators. This is particularly 
hard on our Enforcement Division, where we hire and train 
excellent litigators, who then leave for higher compensation at 
other agencies.
    Now, I recognize that this situation is not entirely 
unique. However, as an agency, we operate and compete primarily 
in the financial sector. Therefore, Mr. Chairman, I 
respectfully request this Committee's support in removing the 
agency from the Title 5 restrictions regarding pay, so that we 
may successfully hire and retain the dedicated staff that we 
need to accomplish the important mission that we have in front 
of us.
    Again, Mr. Chairman, I am proud to be here to represent the 
Commission, and certainly would attempt to answer any questions 
that you might have.
    [The prepared statement of James E. Newsome and biographies 
follow:]
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    Mr. Bonilla. Mr. Newsome, thank you for your testimony. I 
know you have a heavy load to carry with what you do day in and 
day out. Before we begin a round of questioning, I would like 
to yield at this time to Ms. Kaptur, if she has any opening 
remarks.
    Ms. Kaptur. Thank you, Mr. Chairman, very much, and like 
you, I want to welcome Chairman Newsome to our subcommittee, 
and to thank you for your appearance today. This actually is 
the first appearance of the Commodity Futures Trading 
Commission in two years before our subcommittee, and you have 
very important functions to fill, and we need to hear about 
your work and how it impacts on what is happening in American 
agriculture, particularly at this time.
    I also wanted to say that this is the perfect opportunity 
to point out that members like myself can best increase our 
understanding about what is happening to people in agriculture 
by having witnesses appear before us. I hope that we will be 
able to have more agencies appear before this subcommittee, 
from the Department of Agriculture, that we will be able to 
have all relevant witnesses, so they can share their experience 
and recommendations for us at a time that I view as extremely 
troubling for the future of agriculture in this country.
    And so I just again want to welcome Mr. Newsome. I also 
want to thank him very much for his personal courtesy in coming 
by our office yesterday, and discussing some of the concerns 
that we each have, and I look forward to the question period 
this morning.
    Thanks, Mr. Chairman.

                  Commodity Futures Modernization Act

    Mr. Bonilla. Thank you, Ms. Kaptur. Excuse me. I'm losing 
my voice this morning.
    Mr. Newsome, in regards to the Modernization Act, I would 
like you to tell us if there are some fixes that you already 
believe are needed in this legislation, and if so, are you 
talking to the authorizers about this?
    Mr. Newsome. We have begun discussions with the authorizing 
committees, and I am not prepared today to say, exactly which 
problems that we have found that may need fixing, but I know 
that there have been a multitude of discussions between the 
staff at the Commission and the staffs of both the House and 
Senate reauthorizing committees, and we feel our responsibility 
to look more--just from the pure technical side, some variances 
in language between different sections of the bill, and we have 
committed to work with the committees in order to find those 
and make appropriate change recommendations as they ask.
    Mr. Bonilla. This act establishes three different levels of 
regulations by market category: traditional exchanges, 
derivative facilities and exempt markets. Do you think this 
tiered approach offers a level playing field for each type 
ofmarket? Does it provide adequate protection for the public who are 
trading, Mr. Newsome?
    Mr. Newsome. Yes, sir, I think it does. In fact, I am very 
excited about the tiered level of regulation that the new act 
has, because I think what it does, it looks most specifically 
at the types of products being traded and the market 
participants that are trading those products.
    In the past it was a one-size-fits-all, and you had the 
agricultural contracts regulated exactly the same as the 
financial contracts, and obviously, there is tremendous 
difference between liquidity, underlying supply, the nature of 
the participants, in these market places. So I think the 
attempt was--and I think a very successful attempt--to look at 
contracts by what kind of contract? What is the underlying 
supply? What is the real risk of manipulation if there is any? 
Who are the participants trading in that marketplace? And to 
develop different tiers of regulations that meet those needs. 
And I think the new act does a very good job of recognizing 
that there are different regulatory needs for different 
contracts and addresses it such.
    Mr. Bonilla. In terms of how you organized CFTC, do you 
feel you are organized in a good way now to respond to the 
changes in the act, or do you feel like you have to do some 
reshuffling or reorganization just to comply with what the act 
has outlined?
    Mr. Newsome. We intend to do some restructuring internally. 
We are operating under the voluntary moratorium and hiring 
freeze, and not moving staff vertically at the Commission. So 
right now we are operating with the historic framework that we 
have had, and operating effectively. I think given our new 
charges, we have got the opportunity to restructure the 
Commission so that we can be even more responsive to not only 
the new act, but to changes within the marketplace itself. This 
is something that we have worked on for several months. We have 
had a tremendous input from the Commissioners, from our senior 
staff at the Commission about how to go forward. I feel 
comfortable that we have a good plan in place to move forward 
with when we are given that opportunity.
    Mr. Bonilla. At this time I will yield to Mr. Kingston.

                             Comparable Pay

    Mr. Kingston. Thank you, Mr. Chairman.
    On this Title 5, the pay situation, can you give me an 
example, just what do you pay lawyers and what are they able to 
get in the private sector?
    Mr. Newsome. The average pay of our professional staff is 
roughly $90,000. I don't have it broken out.
    Mr. Kingston. I don't need it. Just generally.
    Mr. Newsome. I think not only the salary, but the benefits 
are an extremely important package, and I think just in terms 
of numbers. If you look at an average over the last couple or 
three years, we are losing close to 20 percent of our attorneys 
a year, 15 percent of our economists a year, and in a very 
complex, technical area, you know, it is hard to overcome that. 
So we have discussed this with OMB for several years, and they 
have encouraged us to utilize all of the administrative actions 
that are available to us to try and cut off the bleeding, and 
we have attempted to do so.
    Mr. Kingston. But if you were exempted from Title 5, you 
could go in, when a lawyer is offered a better offer in the 
private sector, and maybe match it or come up with a 
combination of benefits to offset it, be competitive?
    Mr. Newsome. Yes, sir. If we were taken out from Title 5, 
then we would not be held to the traditional pay levels in the 
GS scale, that we could be more aggressive in trying to retain 
those attorneys and economists and trading specialists who we 
considered extremely valuable to our function.

                              Pork Futures

    Mr. Kingston. Okay. I have a question which will expose my 
ignorance in the greatest of ways, but, several years ago when 
pork absolutely just crashed, and yet I remember at the time 
going to the Chicago Board of Trade, and a lot of pork bellies 
were being traded and some folks were making money off pork, 
but the farmers back home certainly were not. Are you the guys 
we can come with--I can never find the answer to that, who is 
making money in pork? Could you guys--would you be the source 
for enlightenment on something like that?
    Mr. Newsome. We would be the source as far as it relates to 
the futures trading of the lean pork contract or the pork belly 
contract. The cash market, which I think is more specifically 
what you are referring to, is outside our jurisdiction. What 
our responsibility would be in oversight at the Chicago 
Mercantile Exchange on those contracts, would make sure that 
the markets are moving based upon economics. We have daily 
surveillance in those pits. We look at the trader reports 
coming out of those pits to see who the participants are, what 
kind of positions they are taking, and if it makes economic 
sense based upon what is happening in the underlying cash 
market. So in terms of the futures trading in those pits, yes, 
we would most definitely be the agency that you would want to 
talk to. I think the bigger problem in the particular situation 
you are talking about with $9 hogs was definitely much more in 
the cash market than it was in the futures market.
    Mr. Kingston. Well, as I said, that is just my own 
ignorance, because the folks in the market were great about it, 
and tried to educate me as best they could. They had a very 
difficult time on their hands trying. But I just wanted to know 
for future reference, because I know a lot of members of this 
committee--I remember Ms. Kaptur--we were getting lots and lots 
of calls.
    Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Mr. Kingston.
    Ms. Kaptur.

                            Price Discovery

    Ms. Kaptur. I am glad Mr. Kingston brought up that issue 
because I want to follow a line of questioning here. I hope I 
can do it coherently.
    Chairman Newsome, how important do you think the futures 
markets are in establishing price in this country and globally?
    Mr. Newsome. I think they are playing a more and more 
important role in not only--maybe not necessarily establishing, 
but in the discovery process, because as more and more of our 
cash markets get fragmented--and I know across small-town 
America, in many cases there is not competition for our ag. 
commodities at the local level. So I think more and more of the 
markets, the grain elevators, the livestock yards, are relying 
upon the price discovery function of the contracts traded on 
our domestic exchanges, because in many cases that is the only 
place now that you have real competition of many buyers and 
many sellers coming together. So I think, at least if we follow 
the current trends in agriculture, I think the price discovery 
mechanism at the exchanges is going to get more and more 
important. And we have tried to be very careful in the new act 
and through our rules, that we make sure that those markets are 
transparent so that everyone has access to that price 
discovery.
    Ms. Kaptur. If I might say, Mr. Kingston was talking about 
pork. I know that one of the difficulties in our area, 
obviously, is the lack of faith of the ordinary farmer or 
rancher in the price discovery mechanism, and when pork was 
selling for 9 cents--or they were getting 9 cents a pound and 
it was taking them 43 cents to break even, retail markets were 
selling it for $2.50 to $6.00 a pound. And so there is not a 
lot of faith that there is actually price elasticity, that we 
have a free market in agriculture left in this country. I am 
sitting here this morning as the last livestock auction barn in 
my section of the country is about to close. So we have no 
local price discovery mechanism. We become more and more tied 
to some market far away from us that is supposed to tell us 
what the price is.
    One of my questions to you is, you unfortunately didn't 
mention the word ``farmer'' or ``rancher'' in your testimony at 
all, and I realize that this is a small part of the trades that 
occur on the various exchanges, but I have to express some 
disheartenment with that--what I view as a major omission in 
your appearance before this subcommittee this morning. What 
percent of the farmers and ranchers of this country directly 
participate in your markets? We discussed this, the markets 
that you regulate--we discussed this yesterday in my office. I 
think it is important to state for the record what that percent 
is, just approximately.
    Mr. Kingston. If the distinguished ranking member would 
yield a minute.
    Ms. Kaptur. I would be glad to yield.

                        Agricultural Background

    Mr. Kingston. Maybe in that question--I know you had a 
commission that came up with some recommendations that are 
listed in your testimony. Do you have farm representation on 
that commission?
    Ms. Kaptur. Thank you.
    Mr. Newsome. Let me approach that from several standpoints. 
One, certainly, it was not intentional not to mention farmers 
and ranchers, since I am one. In fact, all four of the current 
Commissioners at the CFTC come from agricultural backgrounds. 
So even though the marketplace has moved definitely toward the 
financial sector, the agricultural representation at the 
Commission is very, very strong. In fact, while only about 15 
percent of the futures volume now is agricultural contracts, 
the volume of ag. contracts this past year was the second 
greatest it has ever been. So it is not that we have seen a 
decrease in the volume of ag. contracts, we have just seen 
tremendous growth in other areas.
    But even though with only 15 percent of the volume, we have 
estimated that the Commission, because of dealing with the 
physical commodities, that agricultural probably gets 25 to 30 
percent of our time. So I mean, it is an area that we 
concentrate on from a very strong standpoint.
    Back more specifically to your question. We estimate that 
roughly 30 percent of producers actually are directly involved 
in the use of the futures markets, a much greater percent as 
the grain or livestock move to the next level, whether it be 
the elevator, the order buyer, the feed yard, whatever the case 
might be. And I think there are multiple reasons for that, and 
I think both the Commission and exchanges have tried and are 
trying to address the needs of smaller producers or producers 
who are not as educated about the usefulness of a complete risk 
management program, of which futures is just one piece of the 
pie.
    For example, the Chicago Mercantile Exchange, in their 
Globex electronic system, has just listed what they call an e-
mini lean hog contract, which is separate from the normal 
contract traded in the pit. This is a smaller contract, so 
those with smaller numbers of pigs could have the opportunity 
not only to participate with less numbers, but to participate 
electronically as a method of managing the risk. And I think 
the Merc. has the intent of adding more and more of these e-
mini contracts to that system to try and expand to a greater 
base of farmers.

                         Producer Participation

    Ms. Kaptur. I realize that my time is up, but if I could 
just beg the committee's indulgence here for one more minute. 
If in fact, only 30 percent of those who are actually doing the 
production are engaged in the market directly, then who are the 
others that are trading on their behalf? Who is really 
participating in the market, just for the record? Because if 70 
percent of those doing the work out there in the fields aren't, 
then who is using this whole super structure that we have 
created in this country to discover price--who is actually 
really in the driver's seat?
    Mr. Newsome. Well, you get--again, you get producers 
involved in the market. A lot of their market involvement comes 
through Futures Commission Merchants or FCMs, who then take 
those bids and/or offers to the floor. You have the 
agribusiness companies, the Cargills and the ADMs, who are 
trying to manage their price risk and supply in those market 
places.
    Ms. Kaptur. Might I inject, sir, what percent of the trades 
would their involvement represent, over half?
    Mr. Newsome. I don't have that number at my fingertips, but 
I will be more than happy to get it for you. But then you have 
speculators in the market as well, who are participating. And 
some people look at that kind of as a two-edged sword. They 
don't want speculators in the market, but they love the 
liquidity that speculators bring to the market, and that is one 
of the key things. In fact, many people will tell you that the 
liquidity is the most important part of the contract, being 
able to buy and sell when you need to, or when you have got 
bids and offers out, you know that there is always somebody 
willing to take the opposite position that the market will move 
and you are not stuck trying to sell, but having no one to sell 
to.
    [The information follows:]

                       producer's share of trades

    We have no data on producers' share of trading or open 
interest. Since most producers would not hold large futures or 
option positions, they do not appear in our large trader 
reporting system. Consequently, their participation in exchange 
markets would be included in the nonreportable category of the 
``commitments of traders'' reports.

    Ms. Kaptur. I just thank again the committee for their 
indulgence, but I guess I still have a fundamental 
philosophical concern about an institution that functions where 
a majority of those who actually are involved in production 
don't directly participate. There isn't a mechanism for them to 
have their voices heard in this price discovery effort.
    And I will end just with the last time I visited the 
markets. I asked at the Chicago Board of Trade, I said, ``What 
does it cost to have a seat?'' And I had a group of farmers and 
ranchers with me from Ohio, and at that point it was going for 
$600,000 a seat. Do you know what the price is today?
    Mr. Newsome. It would be in that same----
    Ms. Kaptur. Same ballpark.
    Mr. Newsome. Same ballpark.
    [The information follows:]
                               seat costs
    The current cost of a full seat on the Chicago Board of Trade is 
$330,000.

    Ms. Kaptur. All right. Thank you very much, Chairman.
    Mr. Bonilla. Thank you, Ms. Kaptur.
    Mr. Boyd.
    Mr. Boyd. Thank you, Mr. Chairman. And good morning, Mr. 
Newsome, and welcome.
    Mr. Chairman, as the only member of the subcommittee from 
Florida, I want the members of the subcommittee to note Mr. 
Newsome's resume, and that he is a Florida native. He is a 
graduate of our Land Grant College System in Florida, the 
University of Florida, and we are actually very proud of Mr. 
Newsome for his success in the agricultural world.
    Mr. Newsome. Thank you.
    Mr. Boyd. And you will notice also on that resume that he 
was formerly the executive director, I think, of the 
Mississippi Cattlemen's Association.
    Mr. Newsome. Yes, sir.

                             comparable pay

    Mr. Boyd. And Beef Council. So he has a solid agricultural 
background.
    My questions--I have several questions. And first let me 
ask you on your Title 5 exemption, do you know of other 
agencies that are exempt? This is sort of new to me. Maybe I am 
showing my own ignorance too, but there are other agencies that 
are exempt from Title 5?
    Mr. Newsome. Yes. The Federal Reserve Board is exempt, the 
SEC--in fact, I think it is in a bill now that is coming before 
Congress, to exempt them. And certainly, if the SEC gets out 
from under Title 5, it would be even much, much more critical 
to us. The FDIC is outside Title 5. The Comptroller of the 
Currency is outside. The majority of the financial regulatory 
community operates outside Title 5 restrictions.
    Mr. Boyd. Thank you. That is good information. So we 
wouldn't be plowing new ground.
    Mr. Newsome. Right.

                              2002 budget

    Mr. Boyd. So to speak. My next question really has to do 
with the budget. This is the Appropriations Committee, as you 
know, and I think--I guess we are working under somewhat of a 
handicap this year in that we are having testimony and hearings 
without having any talk about budgeting and appropriations, 
which is a little bit of an unusual process. But can you share 
with us your budget request to the administration, or would you 
care to--I notice you didn't comment on that in any of your 
presentation, so would you care to comment on that?
    Mr. Newsome. Let me check. I have been told what we could 
talk about, what we couldn't talk about, so I wasn't sure.
    Mr. Boyd. If you had given me that list, Mr. Newsome. I 
would have avoided those questions you couldn't talk about, 
since you are from Florida.
    Mr. Newsome. Our request was $81 million.
    Mr. Boyd. And we don't have any other information about how 
that will be--that request will be acted on----
    Mr. Newsome. No, sir.
    Mr. Boyd [continuing]. By the administration?
    Mr. Newsome. No, sir. That would put us at--that $81 
million would fund 600 FTEs at the Commission.
    Mr. Boyd. Which would be an increase of 44, 45 FTEs?
    Mr. Newsome. Many of those are in the IT area. We did a 
comprehensive review last year of what we were currently making 
available from an IT standpoint, and the independent group that 
came in and did the study, recommended an increase of nearly 40 
percent just to put--40 positions, just to put us in the normal 
range, in looking at other financial regulators in the industry 
in which we regulate.
    Mr. Boyd. Thank you very much. Would this also--the 
request, cover your needs under Title 5 exemption?
    Mr. Newsome. No, it would not.

                         hoof and mouth disease

    Mr. Boyd. One additional question, Mr. Chairman, and that 
is, my constituents in the cattle business are very concerned 
about what is happening in Europe, more so I think with the 
Hoof & Mouth Disease than maybe some of the other problems. And 
we have not had a discussion in this hearing room about the 
Hoof & Mouth Disease, I don't believe, up to this point. Would 
you care to share with us, Mr. Newsome, at least from your 
perspective in terms of future prices any modeling you are 
doing in this area or have you taken a look at what might 
happen if we have a case discovered here?
    Mr. Newsome. We haven't looked specifically at what would 
happen if there was an outbreak of Foot & Mouth. What we have 
done is looked most specifically at general emergencies, 
certainly of which Hoof & Mouth would fall under, and there are 
mechanisms in place to deal with such emergencies, not only in 
the agricultural contracts but in all the contracts. Certainly, 
if an issue like that arose, then we would heighten our 
surveillance, you know, over that market. I mean, typically we 
have got people, we have got the large trade reports that we 
are getting every day, but we would pay much closer attention.
    Mr. Boyd. Can you reflect on what is happening in Europe on 
the futures market as a result?
    Mr. Newsome. Well, I can't specifically give you numbers 
about the ag. contracts in Europe. Their contracts are, from an 
agricultural standpoint, are not nearly as substantial as those 
in this country. In fact, they tend to concentrate more on the 
financial side. They don't have the agricultural or historic 
approach that we have got in this country. But I think, 
certainly, when you look at the markets in general,whether it 
is there or whether it is here, the markets are driven by supply and 
demand and what is happening in the cash market. And since they have 
had those outbreaks, certainly the supply has greatly decreased for 
their product, so it has obviously hurt the cash market, and my 
assumption would be that it has hurt the futures markets as well.

                              Speculators

    Mr. Boyd. Thank you. Mr. Chairman, if you might indulge me 
just for one brief verification of the follow up in terms of 
where Ms. Kaptur was going, and I think she talked about only 
30 percent of the producers actually use the market, which 
probably is an educational problem more so. And even if all of 
them were using the market, still we have speculators in the 
market. Can you tell us what percentage of the market is done 
by speculators? Maybe that goes more to her question.
    Mr. Newsome. I don't have on the tip of my tongue--I am 
sure it would vary by market----
    Mr. Boyd. A third or----
    Mr. Newsome [continuing]. Contract.
    Mr. Boyd. A quarter?
    Mr. Newsome. Yes, I would say a quarter to a third. But in 
most of our contracts we have speculative limits that are 
placed on those speculators as the contract comes to a close. 
So the involvement in speculators as a contract closes would be 
diminished over the last days, their involvement in that 
contract.
    [The information follows:]

                       speculators in the market

    The amount of speculative participation in agricultural 
futures and option markets varies considerably across markets 
and over time. Recently, speculators with reportable positions 
have held about a quarter to a third of the total open interest 
in the grain futures and option markets. But, in most 
contracts, we have speculative limits that are placed on those 
speculators as the contract comes to a close. So, the 
involvement in speculators as a contract closes would be 
diminished over the last days.

    Mr. Boyd. Thank you very much, Mr. Newsome.
    Mr. Newsome. I wanted to mention as well, when you were 
talking about the emergencies in the market, there are circuit 
breakers in place. Certainly the market is going to operate 
based on many things that affect supply and demand. But if an 
emergency happened and the market turned down, there are 
circuit breakers which would stop the market from trading, for 
everyone to kind of gather their thoughts and try and figure 
out what is going on. The market would then start trading 
again, at a certain level, it would stop for the day. So there 
are mechanisms like that in place.
    Mr. Boyd. Thank goodness. Thank you, Mr. Newsome, for your 
testimony and for your service to American agriculture.
    Mr. Newsome. Thank you very much.
    Mr. Latham [presiding]. Good morning.
    Mr. Newsome. Good morning.
    Mr. Latham. Jim, how are you doing?
    Mr. Newsome. I am fine. How are you, Mr. Latham?
    Mr. Latham. Good, good. And the reason I am here is so I 
can give you a harder time from this position. Actually, the 
chairman's voice is a little weak this morning. I also want to 
recognize I have a very good friend and constituent here this 
morning, Gene Herbeck from Sioux City. I don't know why he is 
here other than to watch you, I guess, this morning.
    And I want to congratulate you for being--serving as the 
chairman here on an interim basis. I am obviously very 
supportive of the idea of making you permanent, and I think 
that would make the transition and all the issues that we have 
before us, go much more smoothly, if we have that kind of 
consistency and continuity.
    The bill we passed last year repeals the 18-year-old ban on 
trading single-stock futures. I am just wondering how you are 
working together with the SEC and what is happening there, if 
there is any real problems, or what--how you see that 
happening? I think we are going to start trading, what, in 
August?

                          Single-Stock Futures

    Mr. Newsome. Yes, sir. I think the discussions have gone 
very well. I have sat down and met personally with Acting 
Chairman Unger at the SEC. We have developed a very aggressive 
time frame to go forward with making sure that come August 
21st, if markets are not participating in single-stock futures, 
it is because they choose not to, and not because of any 
regulatory bureaucracy. We have, I think, a very capable team 
of staff members in place, as well as the SEC, and they have 
been meeting for, I would say, close to two months now, talking 
about the primary issues, ways to address those issues, and the 
meetings have gone very cordially, very professionally, and we 
are coming to the table in a very good faith effort, and I 
think up to this point, everything is operating just as you 
members would hope that it would.
    Mr. Latham. Well, what are the most difficult problems you 
envision?
    Mr. Newsome. You know, margins are a difficult problem. Of 
course, I think in the legislation, the Federal Reserve Board 
was given some oversight there. They have shifted that within 
their authority back to the SEC and the CFTC to work out. And I 
think the problem--I mean, you have got--even though there are 
exchanges involved and commissions, we just come from very 
different sides of the fence. You have got one market that is 
set up to create capital. You have got another market that is 
set up to manage risk. And they operate very differently. The 
underlying themes are very different. So there is not as much 
in common as it might appear just looking over the fence.
    So we have undergone education training to learn more about 
their markets; they have done the same to learn more about our 
markets, with the hope that better education on both sides of 
the table will lead to a better job of coming together to work 
out single-stock futures.
    But right now, I would say that everything is going forward 
very nicely.

                             Comparable Pay

    Mr. Latham. OK. I think it has been touched on a little 
bit, but the difference in pay for staff is a critical issue, 
and there is legislation over in the Senate, the Competitive 
Market Supervision Act of 2001, to bring the SEC to the same 
pay standard as banking regulators. And apparently there will 
be legislation on the House side. Vito Fossella will introduce 
that. What will happen if that goes through and you are left 
out? I imagine it will make the situation even worse for you.
    Mr. Newsome. I think it would be devastating to us because, 
as I mentioned briefly earlier, we have got nearly a 20 percent 
turnover in attorneys and a 15 percent turnover in economists, 
which is more than double the normal rate of the Federal 
Government.
    Mr. Latham. Say that again. What is your turnover?
    Mr. Newsome. Right at 20 percent for attorneys, 15 percent 
for economists. So it would be devastating to us. And I think 
the government averages 6 percent.
    Mr. Latham. Well, what--if that legislation were amended to 
include you as well, then that would be a great help to you 
then, obviously.
    Mr. Newsome. Most definitely.
    Mr. Latham. How much would you have to change your budget 
request?
    Mr. Newsome. We estimate--and it depends on what level of 
increased compensation the Commission decides to participate 
in, but we have estimated $8 to $10 million.
    Mr. Latham. OK. My time has expired.
    Ms. Kaptur.

                          2002 Budget Request

    Ms. Kaptur. Thank you, Mr. Chairman. I just wanted to 
clarify.
    Chairman Newsome, now you mention on page 6 of your 
testimony that your appropriation for fiscal year 2000 was 
$62.8 million, 2.6 percent increase over your fiscal year 1999 
level. What is your request for this coming fiscal year, 2002? 
Do you have that in your testimony this morning?
    Mr. Newsome. No. We have got the number. The OMB budget 
request is $81 million.
    Ms. Kaptur. $81 million. What percent increase is that over 
last year? Do you----
    Mr. Bevill. Over last year's appropriation, it would be 
around 19 percent.
    Ms. Kaptur. 19 percent. And a large share of that is for 
this increase in full-time equivalencies, 33 FTEs is that it?
    Mr. Newsome. Yes, ma'am. If you look at our budget, 
roughly, a little over 75 percent of our budget is in salaries. 
We run about 25 percent in overhead. We do very little 
contracting. So as we look at dollars, both potential increases 
and cuts, we are basically talking about people, because that 
is where the majority of our funds go.

                        Agriculture and Futures

    Ms. Kaptur. Thank you. Chairman Newsome, I wanted to go 
back to my original line of questioning here about the role of 
the futures markets in our economy and their connection to 
those who do production. You understand this very well from 
your own life. And though I have a greater knowledge than the 
general public about what the futures markets do, I know that 
most of the producers in my community do not, and we have 
instituted all these classes and education to get them to 
participate through the local university. We give them credit 
and so forth to learn about the futures market. But I can't 
tell you there is a great comfort level there. In fact, there 
is a lot of distrust. And I am of the school of thought that 
people have to have faith in the institutions of their country, 
the institutions that they participate in, or ultimately those 
institutions fail.
    And when I look at what is happening to my community, our 
local producers are being frozen off the shelves. This has 
nothing to do with you personally or your regulatory function. 
But, for example, in eggs, you can't go to the big grocers now 
and buy locally-produced eggs in my community. The same is true 
with pork. The same is true with beef. I don't care what it is. 
The only way that local producers can get to market is if they 
are lucky enough to go to a farmer's market or maybe there are 
a few independent grocers who are left, but essentially the so-
called market is very far away from production.
    And so here I look at you, such a powerful individual 
engaged in the regulation of these futures markets, but then I 
have to be forced to look at my own community, because that is 
my job. And I see what is happening, and I ask myself sometimes 
what market are we talking about, and how do I get our 
producers connected to some kind of a market where they can get 
a price? And the institutions that former generations created 
don't seem to be able to reach the people that I represent, the 
majority of them, not the minority, the majority of them.
    And so I mentioned our last livestock auction barn. This is 
a productive area of the eastern corn belt. So they are going 
to lose it. I hope I can change this, I hope I can do 
something. I don't know what I can do to try to keep it open, 
but they lose an opportunity to get to market and to have price 
discovery in our region. Then I say, so then what is next? Then 
they have got to go back to Chicago in order to find where this 
market is when they can't even get on the shelves of our local 
supermarket? Something is wrong with the fundamental way in 
which we have structured their ability to get to market.
    And so when I look at you and the Commission, in my mind 
right now, I am not satisfied with the institutions that we 
have set in place because they aren't permitting our people to 
participate, and they can't pay for a seat on the Board of 
Trade. So there is something wrong here.
    I have one specific question in this round of questioning 
that relates to something that happened in our community last 
year, when the Commission approved a modified version of a 
proposal from the Board of Trade to eliminate my community as a 
delivery point for corn and soybeans. And we argued against 
this. My gosh, we learned more about the futures market. We 
traveled everywhere. We got all our witnesses in and so forth. 
And it went into effect.
    Now, can you tell me what--or any of your staff--what has 
been the impact of that change and the results of that change?
    Mr. Newsome. Yes, ma'am. I will be more than happy to. The 
Commission granted this action to the exchanges in May of 1998. 
They were implemented in the year 2000, which has replaced the 
warehouse receipt delivery system in Chicago, Toledo and St. 
Louis, and changed that into a shipping certificate delivery 
system. And if you look at the primary markets in Toledo--in 
fact, I brought them with me because I thought that you may be 
interested in that--if we look just over the last three years 
in terms of corn, it is--excuse me--in terms of wheat, which it 
still serves as the deliverypoint, a major delivery point for 
the Chicago Board of Trade wheat contract, in 1998 there were roughly 
2.8 million bushels moved through Toledo, in 2000 there were 4.5 
million bushels, so not quite double. Corn moved from 33.8 million 
bushels to 38.8 million bushels, so there was an increase there. 
Soybeans, there was a slight decrease from 22.2 million; that moved to 
20 million last year, and then 17.7 million in fiscal year 2000.
    I think the thing that--because Toledo serves as a primary 
wheat delivery point, and when you look at what has happened in 
the underlying price and supply of these commodities, the 
storage in Toledo is covered up with wheat, and continues to be 
covered up with wheat, because it is simply not moving. But 
still, there tends to be a tremendous cash market in both 
soybeans and corn continuing to move through the Toledo point, 
even though it doesn't serve the function as delivery point as 
it did prior to the year 2000. So those markets are still very 
active. The volume moving through has increased, like I say, in 
two of the three commodities that I just mentioned.
    Ms. Kaptur. All right. Thank you very much.
    Mr. Newsome. Can I take just a moment? I want to go back 
and address some of your earlier concerns, because I assure 
you, they are concerns of mine.
    Ms. Kaptur. Thank you. I am so glad to hear that.
    Mr. Newsome. I came from a small family farm, and it is 
still a small family farm, but we raise cattle and grow 
vegetables in Florida. I touched on the agricultural history of 
the Commission, the fact that all four Commissioners have 
agricultural backgrounds, so I think that is important. But 
there are a multitude of things that we are trying to do, and I 
think that it can and will help.
    Our Agricultural Advisory Committee at the Commission, I 
think, is the most active advisory committee we have. They meet 
at least twice a year. In fact, they are meeting next week. And 
all of the major commodity and farm organizations, I think 
totaling 30 in number, are active in our advisory committee. 
And we have taken their lead, we have followed their 
suggestions. In fact, through that advisory committee, the Ag. 
Trade Options Program was developed. Now, as we spoke about 
yesterday, that program has not been successful, and we are 
trying--we have revamped it once, and we are going back to look 
at it again. It will be the major topic of discussion at the 
advisory committee meeting next week to try and make it more 
useful.
    We are partners with USDA in the risk management education 
program. Commissioner Spears, who chairs our Ag. Advisory 
Committee, serves as the CFTC representative, and that 
educational program goes beyond futures. It is risk management 
in general, but the futures side of risk management is a major, 
major part of it.
    And then I think most exciting for the producers that are 
like my family, and I think the ones that you are speaking of, 
technology is changing so rapidly, and the day is very quickly 
approaching, that if you want to trade a live cattle contract 
or a corn contract, you are going to have more options than the 
Chicago Mercantile Exchange or the Chicago Board of Trade. For 
whatever reasons, if there is a trust factor or just the 
complexity of that trading system, makes people uncomfortable, 
they are going to have opportunities to go into the comfort of 
their own office and pull up an exchange site, without having 
to pay to be a member of that exchange site, I mean there will 
be no----
    Ms. Kaptur. I hope you give me the names and addresses of 
where those places are.
    Mr. Newsome. Okay.
    [The information follows:]

                          electronic exchanges

    FutureCom Commodity Exchange, Ltd.
    800 South Monroe
    Amarillo, TX 79101

    OnExchange, Inc.
    Reservoir Place
    1601 Trapelo Road
    Waltham, MA 02451

    NexTrade Futures Exchange, Inc.
    301 South Missouri Avenue
    Clearwater, FL 33756

    Hedge Street, Inc.
    c/o Pareto Partners
    108 Portola Road, Suite 138
    Portola Valley, CA 94028-7899

    Merchants' Exchange of St. Louis, LLC
    1010 Market Street
    Suite 1400
    St. Louis, MO 63101-2000

    Efidex, Inc.
    1285 Avenue of the Americas, 35th Floor
    New York, New York 10019

    BrokerTec Futures Exchange, LLC
    One Evertrust Plaza
    Jersey City, NJ 07302

    Mr. Newsome. So I think technology is allowing great 
expansion in this area, and I think there are going to be 
opportunities for the small and mid-size producers who don't 
currently utilize the market, to do so if they choose.
    Ms. Kaptur. The Chairman has allowed me to ask an 
additional question. And I wanted to thank you, Chairman 
Newsome. I hope that because of your background, you will be an 
outstanding leader there, and that you will help to reach 
producers in communities like mine and others up here on the 
panel and around our country, where really there is a 
totaldisconnect between the markets and the producers in our 
communities, and what the markets do in Chicago serve a certain set of 
actors in this society, but they, in many cases, pull apart the fiber 
of what we have described as local economy, and somebody in this 
country better care about this.
    I just came back out of Iowa. Actually, I was in Tom 
Latham's district--I didn't know I was in his district--over 
the weekend, and, you know, the saddest thing about that trip, 
almost every single person I talked to said, ``You know, we 
really didn't want our kids to have to move out of state, but 
they can't get work here. We really didn't want them to go to 
California and to Washington and to Chicago or wherever. You 
know, they really wanted to stay in Iowa, but there isn't work 
for them.'' And I asked what their educational backgrounds were 
and so forth. I met so many people. The husband and wife each 
had a separate job off the farm because it can't work. 
Something is wrong with a country that can't connect to these 
people who very much want to be engaged in agricultural. It 
isn't just your fault, but I will tell you, you are a piece of 
the solution. Our Justice Department is a part of the solution. 
Our farmers learning more how to meet the age of technology is 
a part of the solution, but if everybody just says we go a long 
way, we have been bumping along, we have the last generation 
out there. That is all there is, average age 57. There isn't 
going to be any more. And I don't want to live in an America 
that imports all of its food, and the numbers are all in the 
wrong direction in that regard.
    So all I am saying to you is, whatever your authority is 
over there, use it to the maximum. Figure out a way to use 
whatever authorities were given to you by that new authorizing 
legislation. If there is something missing, come back to us. I 
respect the people on this committee. I think they all face 
significant problems, as I do in my district, and by golly, if 
we have got to change the law, then let's do it. But let's not 
have 70 percent of those people out there dying because they 
can't even serve their local market because of the way that we 
bring food from the field to the table in this country. And we 
can't have systems that eliminate the majority of producers, 
and unfortunately, you oversee one of those systems. I would 
spend hours with you to figure out how better to engage them. I 
would invite you and your people to my community, and I bet you 
other members up here would do that too. Figure out how to 
connect them, and whatever resources you have, so that they 
regain some respect for the institutions that this Nation has 
to allow them to actually compete in a marketplace that is 
fair.
    My last question is that many of my shippers have told me 
that the convergence of the cash and the futures markets have 
created a skewed impression since the market is based on 
largely export of commodities, even though the overwhelming 
majority of those are intended for domestic use. It was my 
impression the Chicago Board of Trade was expected to conduct 
an assessment of the changes in the market with an annual 
review for several years. Is the commission responsible for 
seeing to it that this assessment is done? And if not, who is 
responsible, please?
    Mr. Newsome. I am not sure, Ms. Kaptur. It is not an 
assessment that I have seen. That doesn't mean it hasn't been 
made available to the Commission, but I will have to check on 
that and get the information back to you. I am just not sure.
    [The information follows:]

             chicago board of trade delivery system report

    At the time of the Commission's approval of the Chicago 
Board of Trade's (CBT's) revised corn and soybean futures 
contracts in May 1998, the Commission stipulated that the CBT 
provide annual reports on the performance of the new delivery 
system for a period of five years following January 2000. Among 
other things, the Commission specified that the CBT report on 
the experience with deliveries and expiration performance in 
the corn and soybean futures contracts and on the extent to 
which particular locational price differentials 
disproportionately may discourage or encourage deliveries to be 
made. The Commission understands that the CBT is completing its 
initial report on the performance of the corn and soybean 
futures delivery system during calendar year 2000 and expects 
to submit it for the Commission's review in the near future. We 
would be pleased to provide a copy of the CBT's report upon 
request by the committee, or any members thereof, after it is 
received by the Commission.

    Ms. Kaptur. OK. Thank you. Thank you, Mr. Chairman, and 
thank you, Chairman Bonilla.
    Mr. Latham. Thank you. Where were you? Were you in Ames?
    Ms. Kaptur. Yes, I was in Ames, and then I was over in 
Emmittsburg for the St. Paddy's parade.
    Mr. Latham. OK. I am sure I will hear about it. You know, I 
share the same concerns that the ranking member does, and I 
appreciate her comments. Justfor historical perspective, about 
a month ago my mother pulled out scrapbooks from when we were small, 
and she was named a master farm homemaker back in 1954 or 1955, and 
they had a picture--I have four older brothers--but the five of us 
standing there with my mother. And the caption underneath, which really 
struck me, said that, ``While Mr. and Mrs. Latham would like all of 
their children to be able to stay on the farm, the odds are that maybe 
only one of them would stay on the farm because of the opportunities 
that are outside of agriculture.'' And, you know, this is 1954.
    So I am not sure if--as much as I love agriculture and I 
live on a farm yet myself, in the suburbs of a town of 158 
people, you know, a mile outside of town on a farm, I am not 
sure what the government can do sometimes to change the 
economic realities sometimes. In Iowa, where you were, we have 
the highest percentage of both parents working in the country, 
and a lot of that has to do with agriculture, but a lot of it 
has to do with the fact that if you are a farmer, you can't 
afford to buy health insurance. The other spouse has to work in 
town someplace to get insurance. And there are a lot of other 
causes to the situation. The elderly population we have, Iowa's 
got the highest percentage of people over 85. Dr. Herbeck here 
can tell you that we have got--most all of our hospitals are 70 
to 90 percent Medicare dependent, and we have one of the worst 
rates of medicine reimbursement. There is a huge inequity as 
far as reimbursement in rural America to our hospitals. We 
can't have economic growth if we don't have hospitals and basic 
fundamental services. So there are a lot of parts to the 
equation.
    I want to touch on one of the points that you brought up 
about individuals being able to somehow manage risk. I am 
thinking of livestock producers primarily, but under the crop 
insurance reform that we passed there is a pilot program in 
Iowa for livestock producers to buy coverage not only for 
mortality, I mean, which we have always had, but to lock in a 
price under an insurance policy. I am wondering how much 
contact you have had from insurance companies regarding their 
use--I guess they would have to use options, probably on the 
Mercantile Exchange to cover their exposure? Has that worked at 
all, or is there any movement in that direction so that we can 
have tools out there for our producers?

                        CROP INSURANCE COMPANIES

    Mr. Newsome. We have had insurers come to the Commission 
and talk to us about utilizing the markets. I don't have any 
numbers about whether they are actually utilizing options to 
manage their risk once they have sold a contract. I just--I 
don't have access to that.
    Mr. Latham. I would like to know if they are actually going 
to use the program, and we are talking about the companies who 
are going to be offering these policies. They have to find a 
way, obviously, to cover their risk too.
    Mr. Newsome. It seems logical that they would.
    [The information follows:]

                        price insurance policies

    While FCIC has been authorized to begin a pilot program 
offering price insurance policies to livestock producers, such 
a program has not yet been implemented. Once the program is in 
place, insurance companies might be expected to use a variety 
of mechanisms to hedge the risk associated with offering these 
insurance policies, including exchange-traded futures and 
option contracts, reinsurance contracts, and/or swap 
agreements. The actual tool or combinations of tools that an 
insurer would use would be the choice of the insurer based on 
the costs of using the various tools. To the extent, however, 
that a subsidized reinsurance program would be offered by the 
FCIC, it would be likely that insurers would tend to elect to 
use reinsurance contracts rather than exchange-traded futures 
or option contracts to hedge their risk.

    Mr. Latham. Right. Now, the Chairman is going to submit 
some questions because he cannot vocalize his own this morning.
    Mr. Newsome. Okay.
    Mr. Latham. Again, I thank you on behalf of the Committee, 
and I think all of us--this is kind of a love fest for you here 
this morning, which really breaks my heart, because I would 
like to see somebody get you. I appreciate your friendship very 
much, and look forward to working with you and the Chairman and 
the ranking member. And with that, we will adjourn.
    Mr. Newsome. Thank you very much.
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                           W I T N E S S E S

                              ----------                              
                                                                   Page
Baker, Dennis....................................................     1
Bevill, Emory....................................................   931
Byrd, Robert.....................................................     1
Feigal, David....................................................     1
Landa, Mike......................................................     1
Levitt, J.A......................................................     1
Newsome, J.E.....................................................   931
Oliver, Janice...................................................     1
Reyna, M.M.......................................................   757
Schwetz, Bernard.................................................     1
Sundlof, Stephen.................................................     1
Suydam, Linda....................................................     1
Williams, D.P....................................................     1
Woodcock, Janet..................................................     1


                                 INDEX

                              ----------                              

                      Food and Drug Administration

                                                                   Page
Advisory Committees..............................................    99
Advisory Committees Used in FY 2000 and Projected................    99
Animal Drugs and Feeds:
    Animal Drug Review...........................................   104
    Animal Health Drug Applications Approved.....................   104
    APHIS and FDA Protections for BSE............................   125
    Bovine Spongiform Encephalopathy (BSE).....................120, 124
    BSE Communications...........................................   260
    BSE and Other Species........................................    57
    Center for Veterinary Medicine's Strategic Plan--Stopping BSE   258
    Enforcement of Feed Rule.....................................    56
    Feed Mill Inspections........................................    50
    Fluoroquinolones.............................................   329
    Foot and Mouth Disease.......................................   273
    Illegal Transport of Animal Products.........................54, 56
    Imported Material and Mammalian Feed.........................    51
    Program Justification........................................   432
    Mad Cow Disease............................................296, 317
    Mammalian Feed...............................................    50
    Pet Food and Animal Products.................................    80
    Production Standards and FDA.................................    65
    Veterinary Antibiotic Approvals..............................    94
Antibiotic/Antimicrobial Resistance:
    Antibiotic Use in Livestock..................................   304
    Antibiotic Regulations/Thresholds............................   329
    Antibiotic Resistance............................282, 319, 324, 328
    Antimicrobial Resistance.....................................   104
    Antimicrobial Resistance-Risk Assessment..............320, 322, 323
    Framework for Antimicrobial Resistance.......................   323
    National Antimicrobial Resistance Monitoring System (N261, 318, 324
    Regulatory Thresholds........................................   323
    Summary of Results of Campylobactor..........................   326
Biographical Sketches:
    Dr. Bernard Schwetz..........................................    37
    Dr. Linda A. Suydam..........................................    38
    Mr. Robert J. Byrd...........................................    39
    Mr. Dennis Williams..........................................    40
Biologics:
    AIDS.........................................................   100
    Approval Times for Approved HIV/AIDS Drugs...................   100
    Blood and Blood Products Resources...........................   120
    Blood Safety.................................................   117
    Blood Safety and Crohn's Disease.............................   306
    Blood Safety and Mad Cow Disease.............................   306
    BSE and Blood Supply.........................................   121
    BSE and Vaccines............................................61, 122
    FDA AIDS Activities..........................................   100
    FDA Guidance on Deferral of Blood Donations..................   118
    Program Justification........................................   420
    Prescription Drug User Fee Act (PDUFA)................215, 249, 262
    Tissue.......................................................   300
    Transplantation..............................................    71
    Vaccine Production...........................................    62
Biotechnology:
    Bioengineered Corn...........................................    67
    Bioengineered Foods..........................................   267
    Biotechnology...............................................52, 297
    Congressional Directives..............................143, 148, 151
    Genetically Modified Foods.................................280, 285
    StarLink Corn................................................61, 81
Bioterrorism.....................................................   117
Bovine Spongiform Encephalopathy (BSE):
    Action Plan..................................................    73
    Activities...................................................    41
    APHIS and FDA Protections for BSE............................   125
    Background Information on CJD and Variant vCJD...............82, 87
    Blood Safety and Mad Cow Disease.............................   306
    Blood Supply.................................................   121
    Bovine Spongiform Encephalopathy (BSE).....................120, 124
    BSE Resource Requirements....................................    73
    Communications...............................................   260
    Center for Veterinary Medicine's Strategy Plan--Stopping BSE.   258
    Dietary Supplements and BSE..................................    57
    Mad Cow Disease............................................296, 317
    Other Species................................................    57
    Resource Needed for BSE......................................    54
    Special Precautions to Keep ``Mad Cow Disease'' Out of the 
      U.S........................................................    83
    Vaccines....................................................61, 122
Budget:
    Application Review Resources.................................   288
    Appropriations Language Changes..............................   251
    Blood and Blood Products Resources...........................   120
    BSE Resource Requirements....................................54, 73
    Budget.....................................................126, 129
    Codex Alimentarius Commission..........................49, 131, 148
    Congressional Justification..................................   336
        Foods....................................................   387
        Human Drugs..............................................   402
        Biologics................................................   420
        Animal Drugs and Feeds...................................   432
        Devices and Radiological Health..........................   446
        National Center for Toxicological Research...............   460
        Tobacco..................................................   467
        Office of Regulatory Affairs (Field Activities)..........   469
        Other Activities.........................................   491
        Rent Activities..........................................   503
        Building and Facilities..................................   387
    Contingency Fund.............................................   131
    Contracting Out Authority....................................   289
    Distribution of Rescission by Program........................   131
    FDA Funding..................................................    50
    Food and Drug Administration FY 2002 Requested Increases.....   130
    FY 2000 Crosswalk from Current Estimate to Actuals...........   127
    FY 2001 Rescission...........................................   131
    Inspection Resources.........................................    72
    Pay Raise Absorption.........................................   132
    Reprogrammings...............................................   251
    Research.....................................................   252
    Research Spending............................................   252
    Summary of Additional Resources Needed.......................   289
    Unauthorized Appropriations..................................   258
Buildings and Facilities:
    Buildings--FOB8..............................................   250
    Current Field Laboratories FY 2001...........................   165
    Facilities..................................................163,166
    Federal Lawsuit--White Oak...................................   257
    Field Consolidation Plan--Completion.........................   164
    Headquarters Consolidation Status............................   162
    Program Justification........................................   506
    Los Angeles Laboratory.....................................211, 271
    Rent.........................................................   250
Cell Phones and Cancer...........................................74, 75
Clinical Trials/Medical Errors:
    Adverse Events.............................................107, 116
    Adverse Events Reports--Dietary Supplements..................   334
    Human Subject Protection.....................................   262
    The Safety of Newly Approved Medicines.......................   109
    Women in Clinical Trials....................................59, 301
Congressional Directives:
    Biotech Foods--Premarket Review..............................   149
    Biotechnology--Safety........................................   151
    Blood Safety--Premarket Review Increase......................   149
    Clinical Pharmacology Grants.................................   150
    Codex Alimentarius Funding...................................   148
    Competitive Exclusion Products.............................140, 152
    Contact Dermatitis...........................................   141
    Dietary Supplements--Collaborative Research..................   150
    Dietary Supplements--Health Claims...........................   142
    Dietary Supplements--Safety..................................   142
    Dietary Supplements--Ten Year Plan...........................   142
    Direct Food Additive Reviews.................................   152
    Electronic Facial Toning.....................................   155
    Expansion of Food Contract Inspections in Alaska.............   148
    Expedited Review of Competitive Exclusion Products...........   152
    Gene Therapy Patient Tracking System.........................   150
    Generic Drugs..............................................143, 154
    Genetically Modified Foods...................................   143
    Heart Healthy Labeling on Salmon.............................   151
    Labeling of Irradiated Foods.................................   155
    Medical Devices..............................................   144
    Mutual Recognition Activities/International Harmonization....   145
    National Center for Food Safety and Technology...............   145
    New Mexico State University..................................   154
    Orphan Product Grants--Increases.............................   154
    Radiopharmaceuticals.........................................   145
    Reprocessed Devices--Premarket Review Increase...............   149
    Salmonella enteritidis.......................................   153
    Secondary Market for Prescription Drugs......................   146
    Shellfish Safety.............................................   147
    Vibrio vulnificus............................................   147
    Waste-Management Education and Research Consortium...........   148
Dietary Supplements:
    Adverse Events Reports.......................................   334
    Collaborative Research.......................................   150
    Dietary Supplements and BSE..................................    57
    Dietary Supplements....................................88, 139, 331
    Examples of AERS Data........................................   333
    Health Claims................................................   142
    Regulating Dietary Supplements...............................    68
    Safety.......................................................   142
    Ten Year Plan................................................   142
Field:
    Inspections of Imports.......................................   268
    Inventory of Firms.........................................183, 184
    Program Justification........................................   469
    Office of Criminal Investigations............................   215
    Office of Criminal Investigations Budget.....................   215
    Regulatory Activities........................................   295
    Regulatory Thresholds........................................   323
    Tampering and Threat Complaints............................255, 256
Foods/Food Safety:
    Adulterated Food Products....................................    81
    Bottled Water................................................   258
    Bioengineered Corn/Foods....................................67, 267
    Crohn's disease..............................................   305
    Ephedra......................................................   317
    Egg Safety...................................................   161
    Food Inspections--Domestic............................166, 167, 310
    Food Labeling................................................   168
    Food Labeling Health Claims..................................   294
    Food Recalls..........................................168, 169, 170
    Food Safety...........................................167, 176, 335
    Food Safety Initiative................................170, 171, 330
    Food Safety Initiative Surveillance........................173, 175
    Food Safety and Foodborne Illnesses..........................95, 96
    Food Safety--Irradiated Foods................................   272
    Foodborne Illnesses..........................................   287
    Genetically Modified Foods............................143, 280, 285
    Program Justification........................................   387
    Labeling of Irradiated Food.................................57, 155
    Listeria.....................................................   309
    Methylmercury in Seafood...................................281, 308
    Milk Protein Concentrate...................................285, 286
    Outbreaks Traced to Regulated Products.......................   173
    Safe Food Act................................................   304
    Safety of Milk...............................................   305
    Salmonella enteritidis Outbreaks.............................   174
    Seafood HACCP/Regulations.............................253, 307, 308
    Seafood Inspections........................................252, 254
    Seafood Safety...............................................    89
    StarLink Corn................................................61, 62
    Summary of Recent Actions Using Irradiation Technology.......   273
    System for Assessing Safety of Seafood.......................    90
    Vibrio vulnificus............................................   147
Human Drugs:
    Abbreviated New Drug Applications............................   179
    Additional Resources needed to meet Statutory Deadlines......   161
    Adverse Events...............................................   107
    Direct-to-Consumer Advertising...............................   291
    Drug Application Review......................................   156
    Drug Application Summary.....................................   157
    Drug Importation.............................................    92
    Drug Reimportation Law.......................................    96
    Drug Review Times...........................................93, 158
    Drugs for Mental Illness.....................................    88
    Foreign Drug Purchases.......................................   274
    Generic Drug Funding.........................................    51
    Generic Drugs.....................................94, 178, 180, 182
    Generic Drugs Approvals......................................   180
    Generic Drugs Resources......................................   178
    Importation Notice...........................................    97
    Program Justification........................................   402
    Mental Illness...............................................   271
    NDA and NME Approval Times...................................   158
    Office of Generic Drugs...............................179, 181, 314
    Office of Generic Drugs Resources............................   181
    Prescription Drug Marketing Act.............................52, 300
    Prescription Drug User Fee Act (PDUFA)................215, 249, 262
    PDUFA Financial Report FY 2000...............................   218
    PDUFA Goals and Performance..................................   216
    Pediatric Exclusivity........................................    58
    Ritalin......................................................    97
    Safety Based Withdrawals of Human Drugs......................   264
    Statutory Requirements of Applications.......................   159
    Statutory Requirements for Drug Review.......................   158
    Testing of U.S. Drugs........................................   303
    The Safety of New Approved Medicines.........................   109
    Withdrawal of Drugs from the Market..........................   263
Imports and Inspections:
    Activities by Region for Imports.............................   269
    Estimate for Increasing Import Inspections...................    48
    Food Inspections--Domestic............................166, 167, 310
    Impact of Trucks Crossing Border.............................    70
    Import Entries..........................................69, 70, 182
    Import Inspection............................................    47
    Imports......................................................   182
    Inspections of Imports.....................................268, 310
    Inspection Resources.........................................    72
    Inventory of Firms.........................................183, 184
    Manufacturing Facility Complaints............................66, 67
    Obtaining Products Across the Borders........................    62
    Percentage of Statutory Requirement Inspections..............   183
    Seafood Inspections........................................252, 254
International Activities:
    EU and Genetic Commodities...................................    48
    Export Certificates..........................................   292
    First Annual Report of the Medical Devices Annex to the US/EU 
      Mutual Recognition Agreement...............................   190
    Implementation of the US-EU Mutual Recognition Agreement...187, 188
    International Activities...................................184, 185
    International Cooperative Agreements.........................   186
    Second Annual Report of the Medical Devices Annex to the US/
      EU Mutual Recognition Agreement............................   203
Internet:
    Breakdown of Currently Open Internet Drug Investigations.....   210
    Internet Drug Purchases......................................   274
    Internet Drug Sales..........................................   210
    Internet Drug Sales Action Plan..............................   275
    Internet Oversight...........................................    71
    Regulation of the Internet...................................   278
Justification of Estimates for Appropriations Committees:
    FY 2002 President's Budget...................................   336
    Organization Chart...........................................   338
    Budget in Brief..............................................   339
    Performance Plan Summary.....................................   370
    Appropriations Language and Analysis.........................   376
    Summary of Change............................................   379
    Crosswalk for Summary of Change to Budget Authority by 
      Activity...................................................   380
    Budget Authority by Activity (All Purpose Tables)............   382
    Program Justifications.......................................   387
    Exhibits.....................................................   509
Medical Devices and Radiological Products:
    510(k) Applications..........................................   132
    510(K) Review Performance....................................   133
    Breast Implants.......................................283, 311, 312
    Breast Implants--Informed Consent............................   284
    Breast Implants--Saline......................................   312
    Breast Implants--Silicone....................................   311
    Citizen Petition--Needlesticks...............................   307
    Comparison of Medical Device Program Resources...............   136
    Establishment Classification.................................   136
    FY 2000 Extramural Projects..................................   138
    Glucose Monitoring System....................................    68
    Program Justification........................................   446
    Listed Devices, by Class.....................................   137
    Mammography................................................212, 214
    MQSA Object Class............................................   213
    New Medical Products in the Pipeline.........................    46
    Regulatory Actions...........................................   135
    Review and Enforcement.......................................   135
    Review Times......................................64, 134, 290, 330
    Third Party Reviews of Medical Devices.......................    63
    Summaries of Studies on Cell Phones and Cancer...............74, 75
Moyer Cross-Cutting Material.....................................   724
Opening Remarks by Dr. Schwetz, FDA Commissioner.................     3
Other:
    Application Review Resources.................................   288
    Contracting Out Authority....................................   289
    GAO Study and Women in Clinical Trials..................59, 60, 301
    Human Genome.................................................   261
    Keeping Pace with New Technologies...........................    42
        Historical FTEs..........................................    43
        Pay as Percentage of budget..............................    44
        Historical import entries................................    45
    Labeling of New Products.....................................    53
    Statutory Requirements of Applications......................53, 159
    U.S. Code Citations..........................................   256
Performance Plan:
    Performance Plan and Summary.................................   557
    Performance Plan Report by Programs/Areas....................   602
Personnel: General Budget & Staffing:
    New Hires..................................................214, 215
    Personnel for the Job........................................    54
    Workload and Staff...........................................    46
Questions Submitted for the Record:
    Mr. Bonilla..................................................    99
    Ms. Kaptur...................................................   271
    Mr. Obey.....................................................   285
    Mr. Walsh....................................................   287
    Mr. Kingston.................................................   292
    Mr. Latham...................................................   296
    Ms. Emerson..................................................   297
    Ms. DeLauro..................................................   301
    Mr. Farr.....................................................   314
    Mr. Boyd.....................................................   319
Statement by Dr. Schwetz, FDA Commissioner.......................     6
Tobacco........................................................256, 302
Tobacco Resources................................................   256
Witness List.....................................................     1

                       Farm Credit Administration

Accountability Report Fiscal Year 2000...........................   777
Annual Performance Plan..........................................   911
Audit............................................................   775
Compensation Consulting..........................................   862
Computer Network Security Consulting.............................   863
Condition of the Farm Credit System..............................   764
Corporate Activities.............................................   763
Examination Issues...............................................   775
Examination Programs.............................................   759
Farm Credit Leasing Services Corporation.........................   873
Farm Credit System Financial Condition...........................   773
Farm Credit System Insurance Corporation.........................   866
Farm Credit System Senior Officer Compensation...................   865
Farm Credit System Structure.....................................   772
Farmer Mac.......................................................   870
FCA Operations...................................................   768
FCA Staffing.....................................................   768
FCS Market Share.................................................   873
Federal Agricultural Mortgage Corporation........................   766
Fiscal Year 2000 Accomplishments.................................   759
Fiscal Year 2002 Budget Request..................................   758
Fiscal Year 2002 Proposed Budget.................................   876
Legal Consulting.................................................   861
Litigation Involving FCA.........................................   864
Mission of the Farm Credit Administration........................   757
National Charters................................................   859
National Consumer Cooperative Bank...............................   774
Organizational Development and Team Building Consulting..........   861
Questions Submitted by Chairman Bonilla..........................   768
Regulatory, Policy, and Philosophy Initiatives...................   761
Risk Assessment..................................................   857
Sole Source Contracts and Consulting Services Contracts..........   860
Strategic Planning and Performance Plans.........................   761
Testimony--Michael M. Reyna......................................   757
Young, Beginning, and Small Farmers..............................   873

                  Commodity Futures Trading Commission

Advisory Committees..............................................   990
Agricultural Background..........................................   995
Agricultural Commodities Added/Deleted from Futures Markets......  1008
Agriculture and Futures..........................................   962
Agricultural Trade Option Rules..................................   971
Agricultural Trading Volume......................................   971
Annual Performance Plan:
    Goal 1.......................................................  1152
    Goal 2.......................................................  1172
    Goal 3.......................................................  1188
Appropriations and Authorized FTEs...............................   990
Bevill Biography.................................................   951
Budget:
    Executive Summary............................................  1017
    Mission Statement............................................  1022
    Significant Developments.....................................  1025
    Market Surveillance Analysis and Research....................  1042
    Trading and Markets..........................................  1051
    Enforcement..................................................  1059
    Proceedings..................................................  1068
    General Counsel..............................................  1073
    Executive Direction and Support..............................  1082
    Improving Efficiency and Effectiveness.......................  1090
    Working Relationships........................................  1103
Carryover Funds..................................................   968
Changes from OMB Request.........................................   968
Chicago Board of Trade Delivery System Report....................   966
Civil and Administrative Proceedings.............................   988
Civil Monetary Penalties Imposed and Collected...................   979
Commodity Futures Modernization Act..............................   952
    Regulations for Implementation...............................   998
Commodity Futures Trading Comm. and National Futures Association.   972
Comparable Pay............................................953, 957, 961
Confidentiality Clauses..........................................  1000
Contract Market Designations/Rule Reviews under Fast-Track Review   995
Cooperative Enforcement and Regulation...........................   982
Crop Insurance Companies.........................................   967
Derivatives Policy Group.........................................   968
Dual Trading.....................................................   976
Dual Trading Fraud...............................................   977
Dual Trading Investigations/Exchange Database System.............   977
Electronic Exchanges.............................................   964
Electronic Trading:
    Challenge for US Exchanges...................................  1001
    Implications for CFTC Surveillance...........................  1002
Enforcement Investigations.......................................   982
Farmers Use of Futures Markets...................................  1003
Firm Failures....................................................   978
Foreign Assistance...............................................   980
Futures Market Predictions.......................................  1004
FY 2000 Activities of the Office of International Affairs........   991
FY 2002 Budget.................................................958, 961
Hoof and Mouth Disease...........................................   958
Inspector General Audits and Investigations......................   969
International Futures Markets....................................  1005
Local Market Changes.............................................  1007
Memorandum of Understanding with Russia..........................  1005
    Negotiating with Russia......................................  1006
    Additional Involvement.......................................  1007
New Contracts Approved...........................................   989
Newsome:
    Testimony....................................................   935
    Biography....................................................   950
NFA Disciplinary Actions.........................................   974
Non-Electronic Oversight.........................................   976
Opening Statement................................................   932
Opt Out of Segregation...........................................  1000
Pending Designation Applications.................................   988
Pilot Project on Trading Options in Agriculture..................  1003
Pork Futures.....................................................   954
President's Working Group on Financial Markets...................   977
Price Discovery..................................................   954
Price Insurance Policies.........................................   967
Producer Participation...........................................   956
    Producer's Share of Trades...................................   957
Profile of Average Farmer Using Futures Markets..................  1004
Questions Submitted by Chairman Bonilla..........................   968
Reauthorization Highlights.......................................   997
Reauthorization Resources........................................   998
Registered Introducing Brokers...................................   991
Reparations Program..............................................   994
Seat costs.......................................................   957
Self-Policing Activities.........................................   978
Service Fees.....................................................   973
Single-Stock Futures.............................................   960
    Regulation...................................................  1000
Speculators......................................................   959
    Speculators in the Market....................................   959
Travel Budget....................................................   980
Unauthorized Appropriations......................................   998
Witnesses, Introduction of.......................................   931
Working Relationship Between the SEC and the CFTC................   975