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




           CONTINUING CONCERNS OVER IMPORTED PHARMACEUTICALS

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

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 7, 2001

                               __________

                           Serial No. 107-30

                               __________

       Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

                               __________



                    U.S. GOVERNMENT PRINTING OFFICE 
73-737CC                    WASHINGTON : 2001





                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                    HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio                RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania     EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California          FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia                 SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma              BART GORDON, Tennessee
RICHARD BURR, North Carolina         PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa                    ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia             BART STUPAK, Michigan
BARBARA CUBIN, Wyoming               ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois               TOM SAWYER, Ohio
HEATHER WILSON, New Mexico           ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona             GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING,          KAREN McCARTHY, Missouri
Mississippi                          TED STRICKLAND, Ohio
VITO FOSSELLA, New York              DIANA DeGETTE, Colorado
ROY BLUNT, Missouri                  THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia                  BILL LUTHER, Minnesota
ED BRYANT, Tennessee                 LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland     MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana                 CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California        JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska

                  David V. Marventano, Staff Director

                   James D. Barnette, General Counsel

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

                                 ______

              Subcommittee on Oversight and Investigations

               JAMES C. GREENWOOD, Pennsylvania, Chairman

MICHAEL BILIRAKIS, Florida           PETER DEUTSCH, Florida
CLIFF STEARNS, Florida               BART STUPAK, Michigan
PAUL E. GILLMOR, Ohio                TED STRICKLAND, Ohio
STEVE LARGENT, Oklahoma              DIANA DeGETTE, Colorado
RICHARD BURR, North Carolina         CHRISTOPHER JOHN, Louisiana
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
  Vice Chairman                      JOHN D. DINGELL, Michigan,
CHARLES F. BASS, New Hampshire         (Ex Officio)
W.J. ``BILLY'' TAUZIN, Louisiana
  (Ex Officio)

                                  (ii)


                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Christian, James, Vice President and Head of Global Corporate 
      Security, Novartis International...........................   157
    deKieffer, Donald, deKieffer & Horgan........................   173
    Durant, Elizabeth G., Executive Director of Trade Programs, 
      U.S. Customs Service.......................................    40
    Gibbs, Landon S., First Sergeant, Virginia State Police......    58
    Glover, John D., Vice President, Corporate Security, Bristol-
      Myers Squibb Company.......................................   153
    Haislip, Gene R., Consultant.................................   166
    Hubbard, William K., Senior Associate Commissioner for 
      Policy, Planning and Legislation, Food and Drug 
      Administration.............................................    45
    Leshner, Alan I., Director, National Institute on Drug Abuse.    55
    Nagel, Laura M., Deputy Assistant Administrator, Office of 
      Diversion Control, Drug Enforcement Administration.........    37
    Rode, Rev. Edwin and Helen...................................    24
    Shepherd, Marvin, Professor, College of Pharmacy, University 
      of Texas...................................................   146
    Trundley, William, Vice President of Corporate Security 
      Investigations, GlaxoSmithKline............................   163
    Vereen, Donald R., Jr., Deputy Director, Office of National 
      Drug Control Policy........................................    33

                                 (iii)

  

 
           CONTINUING CONCERNS OVER IMPORTED PHARMACEUTICALS

                              ----------                              


                         THURSDAY, JUNE 7, 2001

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2123, Rayburn House Office Building, Hon. James C. 
Greenwood, (chairman) presiding.
    Members present: Representatives Greenwood, Bilirakis, 
Stearns, Gillmor, Largent, Burr, Whitfield, Bass, Deutsch, 
Stupak, DeGette, and Dingell (ex officio).
    Staff present: Alan Slobodin, majority counsel; Ray 
Shepherd, majority counsel; Will Carty, legislative clerk; and 
Chris Knauer, minority counsel.
    Mr. Greenwood. Good morning. A quorum being present, this 
hearing of the Oversight and Investigations Subcommittee of the 
House Energy and Commerce Committee will come to order.
    The Cambridge Dictionary of American English defines the 
word ``huckster'' as a person who sells things or puts forward 
ideas in a very determined way that is often not completely 
honest.
    Sadly, there is a long and infamous history of hucksterism 
in America. Today, we are here to examine the latest 
incarnation of this unscrupulous practice of selling people 
what they either don't need or shouldn't buy. In this case, it 
is the sale of unapproved mis-branded or adulterated drugs.
    Usually ineffectual, and often unsafe, and increasingly 
over the Internet, the disreputable promoters of these illicit 
products have added a new twist to the way that modern day 
stake oil salesmen prey on the needy and the unsuspecting.
    Their model might very well might be there is a sucker 
logging on every minute. A few weeks ago, Congressmen Deutsch, 
Stupak, and I visited the international mail facility near 
Dulles Airport, and what we found was truly frightening.
    And these are some examples of the drugs that we found. 
This one is labeled, ``Jungle Juice.'' It is amyl nitrite and 
it is a drug that is abused, usually by young people on dance 
floors I am told, and in discos.
    This is a vial of drugs. It is a powder labeled, ``Gamma 
hydroxybuterate.'' We have no idea what it really is. We found 
all kinds of pills, and a virtual drug cabinet full of all 
kinds of products; steroids, illegal drugs, legal drugs, 
misbranded drugs, all very dangerous to the American public.
    Overall, I believe that prescription drugs in the U.S. are 
extremely safe, but it is important to remember that the risk 
is not zero. There is no magic force-field that protects the 
U.S. from imported counterfeit or diverted products.
    We must be aware of the latest threats in the global 
pharmaceutical market and we must deal with them. Perhaps 
nothing more clearly illustrates the dangers of drug 
importation than the evidence turned up in a joint U.S. and 
Thai customs enforcement effort in March 2001.
    Called Operation Chokepoint, it shows what lurks behind 
some of these foreign based Internet pharmacies. This operation 
targeted thousands of illegal pharmaceutical shipments of 
viagra and steroids exported from Thailand by mail from a 
notorious Internet pharmacy to U.S. customers.
    The results of the operation showed a British national, 
still under treatment for hepatitis, operating an illegal 
pharmaceutical processing center in his residence, processing 
the drugs in a filthy, vermin infested kitchen.
    Representatives in the U.S. Congress enact the laws to 
protect consumers from the dangers of unapproved, misbranded, 
or adulterated drugs. As such Representatives, we have a 
responsibility to raise public awareness about these risks, and 
to put an end to them.
    The subcommittee is particularly concerned about the 
dangers of personal importation. In 1998, in response to 
concerns about the personal importation of controlled 
substances at the Mexican land border, the Congress enacted 
legislation that required a valid U.S. prescription for any 
personal import of a controlled substance that was more than 50 
dosage units.
    Unfortunately, it appears from the committee's staff's 
investigation that this 50 dosage unit policy has become well 
known and exploited by drug traffickers. One can even find 
controlled substances blister-packed in 50 dosage units 
amounts.
    Consider also the massing of pharmacies that provide easy 
access to controlled substances at our southern borders. For 
example, in Tijuana, Mexico, it is estimated that there are 
approximately 1,700 pharmacies.
    In contrast, 20 miles north in San Diego, California, which 
has roughly the same population, there are 125 pharmacies. 
Clearly, there is a need to further strengthen Federal policy 
in the area of personal imports of controlled substances.
    I want to note my particular appreciation to Congressman 
John Dingell, the ranking member of the full committee, for 
forcefully raising this important public safety and public 
health issue.
    Mail deliveries represent another personal importation 
problem. In January and February of 2001, the FDA conducted a 
pilot program with the Customs Service on mail deliveries of 
prescription drugs at the international mail facility at Los 
Angeles.
    The FDA was only able to review 1,908 of nearly 16,000 
parcels that came in, roughly 12 percent. Out of these, 554 
were ultimately refused entry. A large percentage of the 554 
refused entries were shipped via a South Pacific Republic 
called Vanuatu.
    It is believed that those shipments were from a single 
source currently under criminal investigation. Extrapolating 
from the pilot program data nationally, it is estimated that up 
to 200,000 parcels per month could be coming into the U.S. 
unexamined.
    Clearly, a serious policy decision needs to be made and new 
procedures instituted. What are the dangers of the prescription 
drugs that are allowed in? We will hear of one tragic story 
from Edwin and Helen Rode.
    I want to thank Reverend and Mrs. Rode for testifying at 
this hearing. It takes a lot of courage to relate their painful 
experience publicly, but by stepping forward, they hope to save 
the lives of others.
    But what about unsuspecting customers who are getting drugs 
within the U.S. health care delivery system? What are the risks 
to them of purchasing counterfeit or substandard drugs? Recent 
events in the U.S. pharmaceutical market have justified this 
subcommittee's vigilance over counterfeiting.
    Last month, three different drug companies reported finding 
counterfeit versions of their drugs in the U.S. One bogus drug 
was for treating patients with AIDS wasting disease, a 
particular vulnerable population.
    So far there do not appear to be any life threatening 
adverse events linked to the counterfeits, but they did make 
their way on to pharmacy shelves and into patient's medical 
cabinets.
    I want to thank the Chairman of the Energy and Commerce 
Committee, Congressman Billy Tauzin, for his support of this 
investigation, and hearing about imported drugs. I also want to 
thank the ranking minority member of the subcommittee, 
Congressman Peter Deutsch, for his support and interest in this 
investigation.
    Likewise, I express my appreciation to Congressman Bart 
Stupak for his particular participation and contribution to 
this subcommittee's efforts. I am well aware of the hard work 
and the preparation for these hearings by all of the witnesses 
on behalf of the subcommittee, and I thank you and I look 
forward to your testimony.
    [The prepared statement of Hon. James C. Greenwood 
follows:]
 Prepared Statement of Hon. James C. Greenwood, Chairman, Subcommittee 
                    on Oversight and Investigations
                              introduction
    When the subject is pharmaceuticals, people usually talk about the 
high prices. But today's hearing will show we still also need to pay 
attention to safety.
    We in Congress are acutely aware of the problem of high prices of 
prescription drugs in the U.S. About a third of our elderly are without 
access to adequate prescription drug coverage. Many Americans, 
especially our senior citizens on fixed incomes, struggle to balance 
their finances to pay for prescription drugs that help keep them alive 
or maintain a decent quality of life.
    Out of these desperate circumstances, some cash-strapped Americans 
are traveling to border pharmacies to obtain what they believe are 
cheaper versions of the U.S. drugs in Mexico or Canada. Some Americans 
are ordering drugs through the mail from foreign-based internet 
pharmacies to obtain prescription drugs without real physician 
supervision. Perhaps it is a measure of the success of the high 
regulatory and industry standards in the U.S. that many Americans in 
their pursuit of affordable medicine appear to take the safety of 
prescription drugs for granted.
    However, what we will learn today, is that drugs obtained from 
outside the United States without proper controls pose real risks to 
American consumers. This hearing will examine these risks by focusing 
on four particular areas of continuing concerns over imported 
pharmaceuticals:

1. controlled substances from Mexican border pharmacies;
2. prescription drugs ordered from foreign-based internet pharmacies;
3. counterfeit or substandard bulk drugs; and
4. international pharmaceutical counterfeiting and diversion.
    In all of these areas, there is a mass of evidence from studies and 
investigations that shows the safety risks. I understand that some 
Americans who feel desperate are willing to take risks purchasing 
prescription drugs from a border pharmacy or a foreign-based internet 
pharmacy. Under current circumstances, I don't want to interfere with 
seniors who are desperately looking for cheaper buys. But I feel sure 
that many senior citizens don't want to see their grandchildren harmed 
by controlled substances from border pharmacies or drugs obtained 
without a prescription from some phantom, foreign website.
    Recent events in the U.S. pharmaceutical market have justified the 
Subcommittee's vigilance over counterfeiting. Last month, three 
different drug companies reported finding counterfeit versions of their 
drugs in the U.S. One bogus drug was for treating patients with AIDS 
wasting disease, a particularly vulnerable population. Another 
counterfeit purported to be a growth hormone that contained human 
insulin, which could be deadly to some individuals. The third fake drug 
was labeled as an anti-infective that had no active ingredient. So far, 
there do not appear to be any life-threatening adverse events linked to 
the counterfeits, but they did make their way to pharmacy shelves.
    We have a responsibility to raise public awareness about the 
dangers of unapproved, misbranded or adulterated drugs, these risks, 
and to help minimize these risks through public education, working with 
the Administration to take sensible and restrained administrative 
actions, and passing new legislation, if necessary. I want Americans to 
get cheaper prescription drugs in the U.S. I don't want any Americans 
hurt in trying to get cheaper drugs from abroad.
               background: the food, drug & cosmetics act
    Prescription drugs are highly regulated and require physician 
supervision for a reason. Drugs are inherently dangerous unless they 
are manufactured precisely and properly, dosed correctly, and used 
appropriately. When used under competent physician care and in 
accordance with instructions, drugs are life-saving. But there is often 
not a large margin between life and death.
    For these reasons and others, it is illegal under the federal Food, 
Drug and Cosmetic Act to import misbranded, adulterated or unapproved 
prescription drugs. However, in a bow to common sense, the FDA decided 
over 40 years ago not to strictly enforce the Act against U.S. 
residents who obtained unapproved foreign-made prescription drugs to 
treat sickness or injury while on travel in a foreign country. Over 
time FDA created a guidance on personal importation of prescription 
drugs that in effect says for reasons of enforcement priorities and 
limited resources, FDA will not enforce the Act against U.S. residents 
who bring in a 90-day supply of foreign drugs for medical purposes 
either from traveling abroad or through mail delivery.
    With regard to personal importation, the Subcommittee is 
particularly concerned about two areas: (1) controlled substances 
obtained at the land border pharmacies (especially Mexico), and (2) 
prescription drugs obtained through mail deliveries. Controlled 
substances represent the most dangerous class of prescription drugs, 
because they can be addicting, and even deadly when used non-medically. 
Because of their high abuse potential, these prescription drugs are 
scheduled under federal law requiring additional regulation.
                            border crossings
    In 1998, in response to concerns about the personal importation of 
controlled substances at the Mexican land border, the Congress passed 
an amendment to the Controlled Substances Import and Export Act. That 
amendment required a valid U.S. prescription for any personal import of 
a controlled substance that was more than 50 dosage units. Perhaps 
sensing that this 50-dosage unit law represented an opportunity for 
clearer guidance to overwhelmed Customs border inspectors, some in the 
Customs Service interpreted the 1998 amendment as justifying an 
enforcement practice that would allow personal imports of 50 dosage 
units or less for each drug per border crossing.
    Unfortunately, it appears from the Committee staff's investigations 
at the Southwest border crossings, internet postings and chat rooms, 
and other information, that this 50-dosage unit policy has become well-
known and exploited by drug traffickers and individuals interested in 
bringing in controlled substances for abuse purposes. One can even find 
controlled substances blister-packed in 50-dosage unit amounts.
    Although we lack comprehensive and definitive data on controlled 
substances importation, it is reasonable to observe that the 50-dosage 
unit policy is contributing to a national drug abuse problem. Consider 
the massing of pharmacies that provide easy access to controlled 
substances at our borders. For example, in Tijuana, Mexico, there are 
estimated to be up to 1700 pharmacies, up from 500 pharmacies in 1997. 
In contrast, twenty miles north, in San Diego, California, there are 
only 125 pharmacies.
    In December 2000, the Texas Commission on Alcohol and Drug Abuse 
noted that a major substance abuse problem is Mexican pharmacies 
selling many controlled substances to U.S. citizens who declare these 
drugs and bring in personal import amounts into Texas. We will hear 
testimony from Landon Gibbs of the Virginia State Police about the 
emerging abuse problem of one controlled substance called oxycontin, a 
powerful painkiller drug with a 12-hour time-release targeted by drug 
traffickers because of the huge narcotic rush when the drug is crushed 
and snorted. Although the vast majority of abuse cases involves drug 
unlawfully obtained within the U.S., recent investigations indicate 
some oxycontin is coming from Mexico, probably some through personal 
importation from Mexico.
    In response to the Committee's bipartisan concerns, several federal 
agencies--the Office of National Drug Control Policy, the Drug 
Enforcement Administration, the FDA, and the Customs Service--have been 
meeting to develop recommendations for strengthening federal policy in 
the area of personal imports of controlled substances. I understand 
that the Drug Enforcement Administration has developed a proposal that 
we hope to be a vast improvement over the status quo. I look forward to 
hearing about this proposal and discussion of this issue with our 
witnesses. I want to note my particular appreciation to Congressman 
John Dingell, the Ranking Member of the Full Committee, for forcefully 
raising this important public safety and public health issue.
                            mail deliveries
    Mail deliveries represent another personal importation problem. In 
the last few years, especially with the explosion of internet 
pharmacies, personal mail deliveries of prescription drugs have 
skyrocketed, overwhelming the Customs Service and the FDA. In January-
February 2001, the FDA conducted a pilot program with the Customs 
Service on mail deliveries of prescription drugs at the international 
mail facility at Los Angeles.
    Typically, the Customs Service screens the parcels by sight and 
through an x-ray machine. Customs sets aside the parcels of 
prescription drugs for an FDA officer to review. The FDA officer 
usually comes for a half-day, once a week, to review the parcels. Under 
the pilot program, two FDA officers were on-site, five-days a week, 
processing the set-aside parcels for 30 days. Even under these ideal 
circumstances, FDA was only able to review 1,908 parcels out of a 
possible 16,000 or only about 12% of the likely universe of 
prescription-drug parcels. Out of these parcels, FDA detained about 700 
out of the 1900, because they appeared violative. Out of the 700 
detained parcels, 554 were ultimately refused entry, usually because it 
was determined that the mail order lacked a valid prescription. A large 
percentage of the 554 refused entries were shipped via a South Pacific 
republic called Vuanuatu and New Zealand. It is believed that those 
shipments were from a single source currently under criminal 
investigation. It is important to note that the parcels that FDA is 
unable to review are released. Extrapolating from the pilot program 
data nationally, it is estimated that up to 200,000 parcels per month 
could be coming in unreviewed.
    In September 2000 the Customs Service conducted a study called 
Operation Safeguard of two U.S. facilities showed that none of the 
pharmaceuticals examined were reimportations of U.S. manufactured 
drugs. None of the 512 parcels fulfilled all the personal use 
requirements. Only three parcels had evidence of medical supervision 
and ten percent of the parcels analyzed contained no active 
ingredients.
    What are the dangers of the prescription drugs that are allowed in? 
We will hear of one tragic story from Edwin and Helen Rode. Their son, 
Todd, was found dead on November 16, 1999. They believe his death was a 
direct result of prescription drugs obtained through the mail from a 
foreign-based internet pharmacy. Although Todd was being treated for 
severe depression, he ordered a combination of prescription drugs 
without any physical examination by a physician. The medical examiner's 
report states that some of these drugs were ingested by Todd at the 
time of his death. I want to thank Reverend and Mrs. Rode for 
testifying at this hearing. It takes a lot of courage to relate their 
painful experience publicly. But by stepping forward, they may help 
save some lives.
                    o&i field trip to dulles airport
    Just a few weeks ago, Congressmen Deutsch, Stupak, and I visited 
the international mail facility near Dulles Airport. We viewed 
firsthand the processing of prescription drug parcels. Here is one 
example. Many of these parcels contained prescription drugs that had 
been withdrawn from the US market, highly dangerous combinations of 
drugs for one person, drugs lacking labeling or instructions, drugs 
masked as something else or not in its original container. The 
overwhelming numbers of prescription-drug parcels is a daunting 
challenge, that would require a tremendous and unrealistic increase in 
personnel and resources. Even if such an increase occurred, the legal 
requirements in processing parcels impose massive burdens. Clearly, a 
serious policy decision needs to be made and new procedures considered. 
In response to a bipartisan inquiry in this area, the FDA in 
consultation with the Customs Service has devised several proposals for 
improving the public health protections related to mail deliveries. 
These proposals and a recommendation are pending with the Secretary of 
Health and Human Services. I look forward to working with the Secretary 
to move in a reasonable and responsible way.
    In the area of personal importation, individuals usually are in 
some way assuming some risk. But what about unsuspecting consumers who 
are getting drugs within the U.S. healthcare delivery system? Are there 
any risks to them of getting counterfeit or substandard drugs? Over the 
last decade, there has been a surge in shipments of bulk drugs or 
``active pharmaceutical ingredients'' (APIs) from overseas. About 70-
80% of brand-name APIs and 90-95% of generic APIs are made overseas. 
Any foreign firm that makes bulk ingredients for the U.S. market must 
be inspected by the FDA. This surge of imports has overwhelmed FDA and 
outstripped its inspectional resources. Last year, the FDA advised the 
Committee that 242 foreign API firms appeared to have shipped 
misbranded drugs to the U.S. in 1999 but were never inspected by the 
FDA.
    Even for those firms that have been inspected, the Subcommittee's 
past investigations have shown how the approved foreign firm in a few 
cases becomes the front for counterfeit or unapproved bulk drugs 
shipped to the U.S. Sophisticated counterfeiting in the chemistry and 
documentation of the drugs is difficult to detect. Last year's 
Subcommittee hearing revealed a link between serious reactions in a 155 
American patients from an antibiotic and a Chinese bulk drug 
manufacturer. The FDA committed to a number of strategies for handling 
imported counterfeit and unapproved drugs. The Subcommittee will want 
to learn how the FDA has approved its intelligence gathering on 
counterfeiting. We will want to find out how the FDA plans to use its 
personnel and equipment to better monitor U.S. ports of entry. We are 
also interested in what, if any, security measures FDA has added and 
what additional resources may be needed.
    Overall, prescription drugs in the U.S. are extremely safe. But it 
is important to remember that the risk is not zero. There is no magic 
force-field that protects the U.S. from imported counterfeit or 
diverted product. We must be aware of the latest threats in the global 
pharmaceutical market and deal with them. We are very fortunate to have 
some of the leading experts on pharmaceutical counterfeiting and 
diversion before us today. Their testimony should greatly assist the 
Subcommittee's understanding of the issues.
    I want to thank the Chairman of the Energy and Commerce Committee, 
Congressman Billy Tauzin, for his support of this investigation and 
hearing about imported drugs. I also want to thank the Ranking Minority 
Member of the Subcommittee, Congressman Peter Deutsch, for his support 
and interest in this investigation. I likewise express my appreciation 
to Congressman Bart Stupak for his participation and contribution to 
the Subcommittee's efforts.
    I am well aware of the hard work and the preparation for these 
hearings by all of the witnesses. On behalf of the Subcommittee, I 
thank you and look forward to your testimony.

    Mr. Greenwood. With that, the Chair yields 5 minutes to the 
ranking member of the full committee, Mr. Dingell.
    Mr. Dingell. Thank you. I commend you for holding this 
hearing. I am saddened that we are again having to relearn the 
lessons that should be all too familiar to this Congress and to 
the subcommittee.
    I will not elaborate on why we passed the Prescription Drug 
Marketing Act more than decade ago, because I believe that my 
views were made rather clear during last year's misguided 
attempt to lower drug prices by opening up the borders of the 
United States.
    It is sufficient to say, however, that PDMA was 
specifically designed to prevent the kinds of activities we are 
reading about today, and discovering through the investigative 
efforts of this subcommittee.
    Our systems for protecting the U.S. consumers from drugs of 
poor or dangerous quality are eroding, as recent evidence bears 
out: First, last week, it was discovered that not one, but 
three counterfeit drugs--Amgen-Serono, and Genentech--being the 
victimized innovator companies, have been found on the shelves 
of U.S. pharmacies.
    It is unclear how much more exists, nor is it even clear 
where counterfeit drugs may next surface. Second, drugs shipped 
into this country by mail are overwhelming existing safeguards.
    A recent pilot project conducted by the U.S. Customs 
Service and the Food and Drug Administration stopped 16,000 
parcels as you mentioned in approximately 1 month that were 
being illegally shipped into the United States from foreign 
sources.
    Because the regulatory system at the Nation's mail 
facilities is so overwhelmed and antiquated, 14,000 of these 
parcels were simply sent to the public without any regulatory 
review whatsoever.
    And each day this scene is played out all over the country 
as hundreds, if not thousands, of products enter this country 
from abroad, and are sent to consumers without any safety check 
whatsoever.
    In testimony that will be given today, the FDA now admits 
that approximately 2 million parcels containing FDA regulated 
products are entering the United States each year through 
international mail facilities, and most of these appear to have 
received no review by FDA, and are simply released by Customs.
    This is not a new problem, and the FDA has been put on 
notice about it for years. Countless letters have been sent by 
this subcommittee, by the Customs, to FDA warning about the 
disintegration of the system and the hazards to the American 
public that stem therefrom.
    Customs now freely admits that while the present system 
envisions that its staff hold all pharmaceuticals for FDA 
review when they enter the country, in reality most are 
delivered to consumers without knowing whether the drugs are 
safe, or without any testing whatsoever, to protect American 
consumers.
    The FDA has so far demonstrated virtually no leadership on 
how to fix a failed system that springs in large measure from 
its own reimportation policies, and which we will examine 
today.
    We have never expected miracles nor instant success, but 
after countless meetings, letters, discussions held by this 
subcommittee and Customs imploring the FDA to retool a system 
that places the public at severe risk, the FDA continues its 
foot dragging.
    Third, prescription drugs are flooding into the country 
across the Mexican border. As you know, hundreds of Mexican 
pharmacies now dot the border from Texas to California on the 
Mexican side.
    These pharmacists sell almost any type of drug to any 
person wishing to buy them. As in the words of one of our 
witnesses, ``like some stores sell candy.''
    Buttressed by the FDA's vague and often misused and 
misunderstood personal use policy, thousands of U.S. residents 
cross the border each day to purchase their drugs from Mexico. 
This practice raises many public health and safety issues as we 
will hear from witnesses today.
    How safe are these drugs and where do they come from? How 
were they manufactured and how have they been stored, and are 
the drugs counterfeit? Do they contain ingredients that will 
harm a consumer? Have good manufacturing practices--required by 
U.S. law--been practiced with regard to these pharmaceuticals?
    Today, the testimony will suggest that the quality of 
Mexican drugs are often difficult, if not impossible, to 
determine. Some are perfectly safe, and some are counterfeit, 
and some contain no active ingredient, and others contain too 
much or too little active ingredient, posing similar risks.
    Some, while clearly intended to be used under the close 
supervision of a doctor, are prescribed with little or no 
guidance, and most are prescribed without any significant 
follow-up supervision.
    Despite having policies that encourage this activity, our 
government has almost no meaningful data from Customs, the Drug 
Enforcement Administration, or the FDA, to address these issues 
and questions.
    And the budgets of the three agencies to carry out their 
responsibilities on these matters is grossly inadequate, as are 
the number of their personnel. Fourth, a questionable U.S. 
policy allows U.S. residents to legally bring in large amounts 
of potentially addictive and dangerous scheduled drugs without 
a prescription.
    This policy is open to significant abuse, and I believe 
that we will find significant abuse is taking place. Last year 
in a letter that I sent to the FDA concerning this matter, I 
raised a number of questions relating to this problem by citing 
the rather sobering findings of Dr. Marvin Shepherd.
    I note that he is here today, and I hope that he will 
receive the commendations of the committee. I thank him in 
advance for his testimony, as well as the excellent work that 
he has done on these matters over the years.
    I also look forward to hearing from other witnesses, 
including the DEA and the White House, as to whether they 
believe that the potential good of the current policies 
outweigh the enormous opportunity and potential for abuse 
inherent in this policy.
    Mr. Chairman, we indeed have several major policy problems 
coming together here today. Our citizens are looking to other 
countries to lower the cost of prescription drugs. They are 
increasingly taking desperate measures to obtain them.
    They are traveling to Mexico, and they are buying drugs 
from Thailand, from China, from India, and everywhere else 
through the Internet. The Federal Government must act and soon 
to protect the safety of prescription drugs supplied, and 
American consumers.
    The Federal Government, however, must do more. Some 
citizens are seeking alternative sources for drugs because they 
believe that they have no choice. The high costs of 
prescription drugs is driving them to take both legal and 
health risks.
    We must face that reality and seek to address the problem 
of cost, whether it is through meaningful Medicare prescription 
drug benefits intended through the use of expanded generic 
drugs, the exercise of governmental purchasing power, or 
otherwise, and action is needed and soon.
    I hope that this hearing and continued subcommittee work 
can lead to the long and short term steps needed to resolve 
these problems, and again I commend you and thank you, Mr. 
Chairman.
    [The prepared statement of Hon. John D. Dingell follows:]
    Prepared Statement of Hon. John D. Dingell, a Representative in 
                  Congress from the State of Michigan
    Mr. Chairman, thank you for holding this hearing. I am somewhat 
saddened that we are yet again having to go over lessons that should be 
all too familiar to this Subcommittee by now.
    I will not elaborate on why we passed the Prescription Drug 
Marketing Act (PDMA) more than a decade ago because I believe I made my 
views rather clear during last year's misguided effort to attempt to 
lower drug prices by opening up our borders. Suffice it to say, 
however, that the PDMA was specifically designed to prevent the kinds 
of activities we are reading about today and discovering through the 
investigative efforts of this Subcommittee. Our systems for protecting 
U.S. consumers from drugs of poor or dangerous quality are eroding, as 
recent evidence bears out.
    First, last week, it was discovered that not one, but three 
counterfeit drugs--Amgen, Serono, and Genentech being the victimized 
innovator companies--have been found on the shelves of U.S. pharmacies. 
It is unclear how much more exists, nor is it even clear where 
counterfeit drugs may surface next.
    Second, drugs shipped into the country by mail are overwhelming 
existing safeguards. A recent pilot project conducted by the U.S. 
Customs Service (Customs) and the Food and Drug Administration (FDA) 
stopped 16,000 parcels in approximately one month that were being 
illegally shipped into the United States from foreign sources. Because 
the regulatory system at the nation's mail facilities is so overwhelmed 
and antiquated, 14,000 of these parcels were simply sent to the public 
without any regulatory review. And each day, this scene is played out 
all over the country as hundreds, if not thousands, of products enter 
this country from abroad, and are sent to consumers without any safety 
check. In testimony that will be given today, FDA now admits that 
approximately two million parcels containing FDA-regulated products are 
entering the U.S. each year through the international mail facilities, 
and most of these appear to receive no review by the FDA, and are 
simply released by Customs.
    This is not a new problem, and FDA has been put on notice about it 
for years. Countless letters have been sent by this Subcommittee, and 
by Customs, to FDA warning about the disintegration of this system. 
Customs now freely admits that while the present system envisions that 
its staff hold all pharmaceuticals for FDA review when they enter the 
country, in reality, most are delivered to consumers without knowing 
whether these drugs are safe.
    FDA has so far demonstrated little leadership on how to fix a 
failed system that springs in large measure from its own reimportation 
policies. We have never expected miracles or instant success. But after 
countless meetings, letters, and discussions held by this Subcommittee 
and Customs imploring FDA to retool a system that places the public at 
risk, the FDA continues its foot-dragging.
    Third, prescription drugs are flooding into the country across the 
Mexican border. As you know, hundreds of Mexican pharmacies now dot the 
border from Texas to California. These pharmacies sell almost any type 
of drug to any person wishing to buy them--as in the words of one of 
our witnesses, ``like some stores sell candy.''
    Buttressed by FDA's vague and often misused personal-use policy, 
thousands of U.S. residents cross the border each day to purchase their 
drugs from Mexico. But this practice raises many public health and 
safety issues, as we will hear from the witnesses today. How safe are 
these drugs and where do they come from? How are they manufactured, and 
how are they stored? Are these drugs counterfeit? Do they contain 
ingredients that can harm a consumer?
    Testimony today suggests that the quality of Mexican drugs is often 
difficult, if not impossible, to determine. Some are perfectly safe. 
Some are counterfeit and contain no active ingredient. Others can 
contain too much or too little active ingredient, posing similar risks. 
Some, while clearly intended to be used under the close supervision of 
a doctor, are prescribed with little or no guidance, and most are 
prescribed with little or any followup supervision.
    Despite having policies that clearly encourage this activity, our 
government has almost no meaningful data from Customs, the Drug 
Enforcement Administration (DEA), or the FDA to address any of these 
issues and questions.
    Fourth, a questionable U.S. policy allows U.S. residents to legally 
bring in potentially large amounts of potentially addictive and 
dangerous scheduled drugs without a prescription. This policy is open 
to significant abuse. Last year, in a letter I sent to the FDA 
concerning this matter, I raised a number of questions relating to this 
problem by citing the rather sobering findings of Dr. Marvin Shepherd. 
I see that he is before us today, and I thank him in advance for his 
testimony as well as the excellent work he has done on this matter over 
these years. I also look forward to hearing from our other witnesses, 
including the DEA and the White House, on whether they believe the 
potential good outweighs the potential abuse inherent in this policy.
    Mr. Chairman, indeed, we have several major policy problems coming 
together here. Our citizens are looking to other countries for lower 
cost prescription drugs, and are increasingly taking more desperate 
measures to obtain them. They are traveling to Mexico. They are buying 
drugs from Thailand, China, India, and everywhere else, through the 
Internet. The Federal Government must act, and soon, to protect the 
safety of the prescription drugs supply.
    But the Federal Government must do more. Some citizens are seeking 
alternative sources for drugs because they believe that they have no 
choice. The high cost of many prescription drugs is driving them to 
take both legal and health risks. We must face that reality and seek to 
address the problem of cost. Whether that is through a meaningful 
Medicare prescription drug benefit, expanded use of generic drugs, 
exercise of governmental purchasing power, or otherwise, we must act, 
and soon.
    I hope this hearing, and continued Subcommittee work, can lead to 
both the short-term and long-term steps needed to solve these problems.

    Mr. Greenwood. The Chair thanks the ranking member of the 
full committee, and recognizes now the chairman of the 
Subcommittee on Health, Mr. Bilirakis, from Florida.
    Mr. Bilirakis. Thank you very much, Mr. Chairman. I, too, 
am grateful that you are holding this hearing, and of your 
interest in this particular subject. Access to affordable 
prescription drugs, particularly for our seniors, is a very 
serious concern.
    Many Members of Congress, myself included, and particularly 
myself because of the district that I represent in Florida, 
have heard from constituents who are upset about paying more 
for prescription drugs than citizens of other countries.
    And some of these Americans travel outside the United 
States to purchase their pharmaceuticals. The Food and Drug 
Administration currently allows under certain circumstances and 
bounds for patients to bring in a 3 month supply of 
prescription drugs for their personal use.
    Today, drugs are often purchased by an individual through 
the mail or the Internet. However, the policy allowing the 
importation for these uses was not intended, I think, to 
promote these practices on such a broad, broad basis.
    As I understand it, the consensus view within the FDA and 
the Customs Service is generally not to interfere with seniors 
who decide to assume the health risks of buying drugs for 
personal use.
    Furthermore, the FDA and Customs are overwhelmed by the 
amount of drugs coming in over our borders and through the 
mail, and I know, Mr. Chairman, that I have heard you talk 
about your visit out to Dulles and seeing the amount of drugs 
coming in and how it has overwhelmed Customs out there.
    Over the last decade, there has also been an increase in 
the shipments of bulk or active pharmaceutical ingredients from 
overseas. Any foreign firm that makes bulk ingredients for the 
U.S. market must be inspected by the FDA.
    Therefore, it is important to understand the impact of 
these developments on the agency's limited resources. I am 
hopeful that today's hearing will shed light on these and other 
important issues related to the safety of imported 
pharmaceuticals.
    Mr. Chairman, I have to go and do an organ transplant type 
of a thing in a few minutes, and so I will break loose, but I 
would like to come back, because this is of great interest. 
Thank you very much, sir.
    [The prepared statement of Hon. Michael Bilirakis follows:]
   Prepared Statement of Hon. Michael Bilirakis, a Representative in 
                   Congress from the State of Florida
    Thank you Chairman Greenwood for holding today's hearing on the 
safety of imported pharmaceuticals. I look forward to hearing from our 
witnesses and learning more about this important issue.
    Access to affordable prescription drugs, particularly for our 
seniors, is a serious concern. Many Members of Congress--myself 
included--have heard from constituents who are upset about paying more 
for prescription drugs than citizens of other countries. Some of these 
Americans now travel outside the United States to purchase their 
pharmaceuticals.
    The Food and Drug Administration (FDA) currently allows patients to 
bring in a three-month supply of prescription drugs for their personal 
use. Today, drugs are often purchased by an individual through the mail 
or the Internet. However, the policy allowing importation for personal 
use was not intended to promote these practices on such a broad basis.
    As I understand it, the consensus view within the FDA and the 
Customs Service is generally not to interfere with seniors who decide 
to assume the health risks of buying drugs for personal use. 
Furthermore, FDA and Customs are overwhelmed by the amount of drugs 
coming in over our borders and through the mail.
    Over the last decade, there has also been an increase in the 
shipments of bulk or ``active pharmaceutical ingredients'' from 
overseas. Any foreign firm that makes bulk ingredients for the U.S. 
market must be inspected by the FDA. Therefore, it is important to 
understand the impact of these developments on the agency's limited 
resources. I am hopeful that today's hearing will shed light on these 
and other important issues related to the safety of imported 
pharmaceuticals.

    Mr. Greenwood. Hopefully that is testimony and not surgery. 
The Chair thanks the subcommittee chairman and recognizes the 
ranking member of the Oversight and Investigations 
Subcommittee, the gentleman from Florida, Mr. Deutsch.
    Mr. Deutsch. Thank you, Mr. Chairman, and thank you for 
holding this hearing. Mr. Chairman, this committee has always 
had a great interest in the safety of the U.S. drug supply, and 
has always had a rich tradition of monitoring any threats to 
that system.
    Lately, however, there are a number of issues with which we 
must concern ourselves. Several years ago, this subcommittee 
began an investigation into how prescription drugs were being 
sold both domestically and internationally through the 
Internet.
    When this subcommittee first began its inquiry only a 
handful of firms existed, and only a trickle of drugs were 
entering the U.S. as a result of these activities. It was 
predicted then that if this problem was not quickly addressed 
by the FDA and other key agencies that the existing systems 
used to process incoming parcels of mail would quickly be 
outpaced by the volume of foreign shipments.
    This prediction has become a reality, Mr. Chairman. But 
once merely an annoyance to the regulatory system, the volume 
of unregulated drugs now entering the U.S. through the Nation's 
13 international mail facilities threatens to undermine the 
original intent of the Prescription Drug Marketing Act, 
legislation passed by the Committee on Energy and Commerce for 
the purpose of protecting our citizens from adulterated or 
substandard drugs from abroad.
    Currently, tens of thousands of unregulated parcels 
containing a variety of drug products enter the U.S. each week. 
U.S. Customs inspectors can't keep pace with the workload, nor 
do they have meaningful guidance or sufficient help from the 
FDA to properly process them.
    Instead, the U.S. Customs is overwhelmed. They are often 
forced to release the shipments to the public without any FDA 
scrutiny. It now appears more the exception that the FDA 
examines the bulk of these incoming parcels.
    The situation at many of these ports of entry has thus 
become a ticking public health time bomb. Indeed, the amount of 
wholly unregulated drug parcels coming into this country 
through our mail facilities is not trivial.
    Just a few weeks ago, Mr. Stupak, Chairman Greenwood, and 
I, visited the Dulles Airport facility. What we found was 
sobering. Before our arrival, the U.S. Customs inspectors 
detained 167 parcels containing drugs in just 4 hours.
    Most of what we saw was a haphazard collection of unmarked 
and misbranded drugs. Many contained no labels, while many 
drugs were mixed with other drugs. Some parcels had false 
declarations, while most contained no prescription nor any 
indication that a drug was being taken under supervision of a 
doctor or a pharmacist.
    In recent pilot projects at the Los Angeles mail facility, 
Customs detained an astonishing 16,000 shipments in just over a 
1-month period. But because the system used today is so archaic 
and understaffed, the FDA had time to examine only about 1,900 
of these parcels.
    What happened to the other 14,000 parcels? The same thing 
that happens every day across this country. They were released 
to the public without any FDA review. Were they safe? Who 
knows. Were they real? Who knows.
    Were they properly stored? Who knows? But what is known is 
that this practice is the pharmaceutical version of Russian 
Roulette, placing the public at risk. Nevertheless, despite 
mounting evidence for the past several years that this system 
is spiraling out of control, and after receiving numerous 
letters from the U.S. Customs Service and this subcommittee to 
examine this system to put forth rational proposals on how to 
address this problem. The FDA, which is responsible for the 
system, has failed to act. Instead, by taking a head in the 
sand approach and ignoring years of warning signs, the agency 
inaction has only contributed to the chaos.
    I look forward to this hearing and hearing from FDA, who is 
finally making proposals, specific proposals, to retool a very 
broken system.
    Mr. Chairman, let me quickly shift gears here to mention 
another issue that we will be discussing today, which is the 
matter of drugs coming in from Mexico. Currently, tens of 
thousands of U.S. citizens are making monthly trips to Mexico 
to buy a group of drugs from the hundreds of pharmacies that 
exist within easy walking distance of the border.
    Currently, a number of policies now exist that allow and 
may even encourage U.S. citizens to shop for their drugs in 
Mexico. Aside from the fact that our regulatory agencies seem 
to know almost nothing about the quality or sources, many of 
our witnesses will voice concerns about some of these 
practices.
    For example, current policy allows for a U.S. citizen to 
walk across the border and bring back a vast array of powerful 
and potentially addictive controlled substances as long as they 
are declared to U.S. Customs upon reentering the U.S.
    This means that while U.S. citizens must have a 
prescription from a doctor to obtain a potentially dangerous 
substance in San Diego, if they walk across the border to 
Tijuana, they can buy an almost endless supply of Schedule II 
to V drugs as long as each drug does not exceed 50 tablets.
    Why is that, Mr. Chairman? As many controlled substances 
also have inexpensive generic versions available here in the 
U.S., serious questions must be raised about the objective of 
such a policy.
    And as Dr. Shepherd, who will testify here later, points 
out, evidence suggests that many of these drugs are being 
purchased by younger persons for recreational use or resale on 
the street.
    But whatever our decisions are to be in this regard, at a 
very minimum, we need better information. If we intend to allow 
persons to obtain drugs from Mexico, we should better assess 
what risks are involved in this practice to at least allow U.S. 
citizens to make informed choices.
    Currently, despite the fact that tens of thousands of U.S. 
Citizens purchase their drugs from Mexico every month, there is 
little data to tell us what the public health implications of 
such practices are.
    If we are going to have policies that permit and even 
encourage such behavior, we must better assess all the risks 
involved. Let me conclude, Mr. Chairman, by also saying that we 
must also attempt to analyze why is it that many U.S. citizens 
are purchasing their medications through these poorly regulated 
channels.
    This is not an easy task, but it is an essential ingredient 
in attempting to address some of the public safety issues 
raised by the activities that we will discuss today. Clearly, 
while some might be seeking drugs for their abuse potential, 
others clearly travel to Mexico or purchase their drugs through 
the Internet because they feel such practices save them money.
    In some cases involving certain countries, this may be a 
dangerous practice. Providing better and affordable 
alternatives to these practices is an essential stepping stone 
toward effective solutions to some of these problems.
    I believe that if we wish to be successful in addressing 
the massive amounts of drugs entering the U.S. through 
unregulated channels, we need to come to an agreement on how to 
make prescription drugs more affordable for all U.S. citizens 
that need them, and I welcome this debate.
    Thank you, Mr. Chairman, and I look forward to hearing from 
the witnesses today.
    [The prepared statement of Hon. Peter Deutsch follows:]
Prepared Statement of Hon. Peter Deutsch, a Representative in Congress 
                       from the State of Florida
    Thank you Mr. Chairman, and thank you for holding this hearing.
    Mr. Chairman, this Committee has always had a great interest in the 
safety of the U.S. drug supply and it has always had a rich tradition 
of monitoring any threats to that system. Lately, however, there are a 
number of issues with which we must concern ourselves.
    Several years ago, this Subcommittee began an investigation into 
how prescription drugs were being sold both domestically and 
internationally through the Internet. When this Subcommittee first 
began its inquiry, only a handful of firms existed and only a trickle 
of drugs were entering the U.S. as a result of these activities.
    It was predicted then that if this problem was not quickly 
addressed by the FDA and other key agencies, existing systems used to 
process incoming parcels of mail would quickly be out-paced by the 
volume of foreign shipments. That prediction has become a reality, Mr. 
Chairman.
    While once merely an annoyance to the regulatory system, the volume 
of unregulated drugs now entering the U.S. through the nation's 13 
international mail facilities threatens to undermine the original 
intent of the Prescription Drug Marketing Act, legislation passed by 
the Committee on Energy and Commerce for the purpose of protecting our 
citizens from adulterated or substandard drugs from abroad.
    Currently, tens of thousands of unregulated parcels containing a 
variety of drug products enter the U.S. each week. U.S. Customs 
inspectors can't keep pace with the workload, nor do they have 
meaningful guidance or sufficient help from FDA to properly process 
them.
    Instead, U.S. Customs is overwhelmed. They are often forced to 
release the shipments to the public without any FDA scrutiny. It now 
appears more the exception that FDA examines the bulk of these incoming 
parcels. The situation at many of these ports of entry has thus become 
a ticking public-health time bomb.
    Indeed, the amount of wholly unregulated drug parcels coming into 
this country through our mail facilities is not trivial. Just a few 
weeks ago, Mr. Stupak, Chairman Greenwood, and I visited the Dulles 
airport facility.
    What we found was sobering. Before our arrival, U.S. Customs 
inspectors detained 167 parcels containing drugs in just four hours. 
Most of what we saw was a haphazard collection of unmarked and 
misbranded drugs. Many contained no labels, while many drugs were mixed 
with other drugs. Some parcels had false declarations, while most 
contained no prescription nor any indication that the drug was being 
taken under the supervision of a doctor or a pharmacist.
    In a recent pilot project at the Los Angeles mail facility, Customs 
detained an astonishing 16,000 shipments in just over a one-month 
period. But because the system used today is so archaic and 
understaffed, FDA had time to examine only about 1,900 of these 
parcels.
    What happened to the other 14,000 parcels? The same thing that 
happens every day across this country--they were released to the public 
without any FDA review. Were they safe? Who knows. Were they real? Who 
knows. Were they properly stored? Who knows. But what is known is that 
this practice is the pharmaceutical version of Russian roulette, 
placing the public at risk.
    Nevertheless, despite mounting evidence for the past several years 
that this system is spiraling out of control, and after receiving 
numerous letters from the U.S. Customs Service and this Subcommittee to 
examine this system to put forth rational proposals on how to address 
this problem, the FDA--which is responsible for this system--has failed 
to act. Instead, by taking a ``head-in-the-sand'' approach and ignoring 
years of warning signs, the agency's inaction has only contributed to 
the chaos. I look forward to hearing whether the FDA finally has any 
meaningful proposals on how to retool a very broken system.
    Mr. Chairman, let me quickly shift gears here to mention another 
issue that we will be discussing today, which is the matter of drugs 
coming from Mexico.
    Currently tens of thousands of U.S. citizens make monthly trips to 
Mexico to buy a myriad of drugs from the hundreds of pharmacies that 
exist within easy walking distance of the border. Currently, a number 
of policies now exist that allow--and may even encourage--U.S. citizens 
to shop for their drugs in Mexico. Aside from the fact that our 
regulatory agencies seem to know almost nothing about the quality or 
sources, many of our witnesses will voice concerns about some of these 
practices.
    For example, current policy allows for a U.S. citizen to walk 
across the border and bring back a vast array of powerful and 
potentially addictive controlled substances, as long as they are 
declared to U.S. Customs upon reentering the U.S. This means that while 
a U.S. citizen must have a prescription from a doctor to obtain a 
potentially dangerous substance in San Diego, if they walk across the 
border to Tijuana they can buy almost an endless supply of schedule II-
V drugs, as long as each drug does not exceed 50 tablets. Why is that, 
Mr. Chairman?
    As many controlled substances also have inexpensive generic 
versions available here in the U.S., serious questions must be raised 
about the objective of such a policy. And as Dr. Shepherd, who will 
testify later today, points out, evidence suggests that many of these 
drugs are being purchased by younger persons for recreational use or 
resale on the street.
    But whatever our decisions are to be in this regard, at a very 
minimum we need better information. If we intend to allow persons to 
obtain drugs from Mexico we should better assess what risks are 
involved in this practice to at least allow U.S. citizens to make 
informed choices. Currently, despite the fact that tens of thousands of 
U.S. citizens purchase their drugs from Mexico every month, there is 
little data to tell us what the public health implications of such 
practices are. If we are going to have policies that permit and even 
encourage such behavior, we must better assess all risks involved.
    Let me conclude, Mr. Chairman, by also saying that we must also 
attempt to analyze why it is that many U.S. citizens are purchasing 
their medications through these poorly regulated channels. This is not 
an easy task, but it is an essential ingredient in attempting to 
address some of the public safety issues raised by the activities we 
will discuss today. Clearly, while some might be seeking drugs for 
their abuse potential, others clearly travel to Mexico or purchase 
their drugs through the Internet because they feel such practices save 
them money. In some cases involving certain countries, this may be a 
dangerous practice. But providing better and affordable alternatives to 
these practices is an essential stepping stone toward effective 
solutions to some of these problems.
     I believe that if we wish to be successful in addressing the 
massive amount of drugs entering the U.S. through unregulated channels, 
we need to come to agreement on how to make prescription drugs more 
affordable for all U.S. citizens that need them, and I welcome that 
debate.
    Thank you, Mr. Chairman, and I look forward to hearing from our 
witnesses today.

    Mr. Greenwood. The Chair thanks the gentleman, and 
recognizes for 5 minutes the gentleman from Michigan, Mr. 
Stupak.
    Mr. Stupak. Thank you, Mr. Chairman, and thank you for 
holding this very important hearing on imported 
pharmaceuticals, and thanks for your work on this issue.
    Mr. Chairman, we are facing a problem of immense 
proportions and are simply unprepared to deal with it. 
Unregulated and unsupervised drugs are pouring into this 
country, and with the advent of Internet pharmacies, the volume 
of pharmaceutical products being shipped into the United States 
has exploded.
    Unfortunately, the resources that we have put together to 
deal with this problem has not met the needs, and the hearing 
that we are holding today is the first of hopefully more 
hearings that we will have on this all too familiar topic for 
me.
    In the last Congress, I, myself, Mr. Dingell, Mr. Klink, 
Mr. Waxman, and others, actually tried to introduce a bill, and 
did introduce a bill to specifically deal with the sale of 
prescription drugs through the Internet.
    And I intend to reintroduce a very similar bill again 
shortly. This bill will help, but will not stop, the flow of 
unregulated drugs into this country. We simply cannot allow 
this situation to continue unchecked, and we need to work with 
all the authorities to make sure that when we do pass a bill 
that we get it right.
    Mr. Chairman, you, I, and the ranking member, Mr. Deutsch, 
saw the problem of mail order prescription drugs first-hand 
several weeks ago on our trip down to the Dulles Airport mail 
facility.
    Hundreds of packages of illegal drugs pulled from a mere 3 
days worth of international mail lay on the tables in the 
Customs area for our inspection, and I suppose that some of 
those packages there are what we saw at Dulles.
    The packages were breathtaking in their variety; pink 
pills, red pills, green pills, white pills, yellow liquid, 
brown liquid, clear liquid, capsules, tablets, powder, paste, 
blister packs, zipped lock baggies. You name it, it was there.
    We saw pills stuffed in bras, pills stuffed in cotton, 
pills stuffed in carbon paper, because the smugglers think that 
the x-ray will be fooled with the carbon wrapped around their 
pills. And pills wrapped in birthday presents. All of these 
were headed to the American public.
    American citizens have no idea if the pharmacy that they 
receive their pills from is an FDA-approved facility, or a 
vermin-filled kitchen table in a flophouse, run by an 
individual in Thailand with hepatitis, working with a 
prostitute as his assistant.
    But I am sure that they have a very nice video web page or 
website to get us all to buy their drugs. And these are just 
the pills that the individuals order. It does not take into 
account or begin to address the problem of bulk and counterfeit 
drug ingredients and products, more and more which are showing 
up in today's health care market.
    Mr. Chairman, a lot of us reviewed the report of the L.A. 
Airport, in which we looked at and found what was coming into 
L.A. in just 4 to 5 weeks. We have a list here today, and there 
were over 16,000 parcels that came in within that 4 to 5 weeks.
    And in that 4 to 5 weeks, like in one parcel, three bottles 
of unknown medication, approximately 300 tablets. The tablets 
are green and the bottles are labeled in a foreign language. No 
English.
    Or another one, 1,080 dosage units; 1,080 tablets of an 
unknown tablet, dark brown in color. That is what we are seeing 
coming through the mail. And today it is estimated that over 2 
million parcels a year comes into this country unknown, 
unmarked, and where they are going, and what they contain. The 
American consumer has no idea.
    And this number is only going to continue to grow unless we 
do something about it. What we need to do in today's hearing is 
not to simply figure out who is responsible for these illegal 
drugs coming into our country, but take some action, and take 
some action now.
    The FDA has been asked time and time again for direction. 
Letter after letter has been sent to the FDA, not only from 
Customs, but also from this Congress and this subcommittee, 
asking for guidance.
    These letters and pleas have not yielded any substantive 
answers, strategies, nor proposals. Because of the FDA's 
failure to act, what started out to be a small problem is now 
flooding this country.
    It is time for the FDA to move off-center. We also have the 
50 fill problem, 50 pills without prescription, at the Mexican 
border; and Mr. Dingell, and Mr. Deutsch, and others have spoke 
up today, and that needs to be addressed, and once again, we 
need to address it now.
    We have in front of our committee today all the interested 
parties, and I hope that we can come up with a defined 
consensus on what should be done on each of these issues.
    I look forward to continuing to work with you, Mr. 
Chairman, and others on this committee, on this very, very 
important and deadly matter. Thank you.
    Mr. Greenwood. The Chair thanks the gentleman from 
Michigan, and recognizes for an opening statement for 5 minutes 
the gentlelady from Colorado, Ms. DeGette.
    Ms. DeGette. Thank you, Mr. Chairman, and thank you for 
holding this hearing today. This is at least the third hearing 
in a row that we have had annually regarding the importation of 
pharmaceuticals.
    I hope this hear that we can actually make some progress so 
that we don't find ourselves again next year about the same 
time in this same room, in the same chairs rehashing the 
information, when frankly our constituents' lives continue to 
be at risk.
    I am hopeful that it won't take another t.v. expose, a 
newspaper series, some reporter ordering viagra for their dog, 
or worse, and seriously, an incident of patient deaths, and for 
meaningful action to be undertaken immediately.
    As I said last year in my opening statement about this same 
time, on-line access to pharmaceuticals can be a wonderful took 
and one that has opened up a whole new world of convenience to 
patients.
    One thing that hasn't been focused on today is the ease 
with which chronic patients can get information and can easily 
get their prescription drugs on-line at a decent price.
    That can be a benefit to patients.
    I am the Co-Chair of the Congressional Diabetes Caucus, and 
for those with chronic long term illnesses, it can be an 
enormous convenience to use the Internet. But with this ease 
comes risks. One of the biggest risks as we have heard is the 
explosion in the counterfeit prescription drug market and its 
potential to do great harm to individuals.
    Mr. Chairman, I know how this can affect a community, 
because it happened right in my district in Denver, Colorado. 
In 1998, six patients at a Denver hospital had toxic reactions 
to counterfeit pharmaceuticals.
    According to Dr. Michael Earnest, who is a physician at the 
Denver Health Medical Center, failure of the FDA to adequately 
inform the hospital of the potential for counterfeit 
pharmaceuticals contributed to this frightening occurrence.
    Health officials in other States according to U.S. News and 
World Report, have echoed this concern. This problem is 
beginning to be a real threat to the health of the American 
people when you can't even count on avoiding counterfeit 
pharmaceuticals in a hospital.
    If the United States does not begin to seriously address 
this problem and step up oversight activities, there will be 
more counterfeit drugs in the United States and more Americans 
put in harm's way.
    Improper oversight has permitted individuals to remove both 
the doctor's role of prescribing drugs and equally important 
the pharmacist's role in providing the patient another source 
of medical advice.
    We need to have standard policies regarding pharmaceutical 
purchases. It doesn't make sense to require a prescription for 
drugs purchased in the United States, but then to look the 
other way when someone walks back into the States with 
regulated substances, or purchases them on the Internet without 
a prescription.
    We simply cannot any longer allow the elimination of 
important safeguards. Purchasing pharmaceuticals without the 
help of real doctors, or without the advance of real 
pharmacists, is extremely dangerous.
    Mr. Chairman, these issues are a product of a larger living 
problem for our Nation; the explosion in the cost of health 
care, including pharmaceutical drugs. And Mr. Stupak talked 
about this for a moment.
    One of the reasons that folks are turning toward these 
Internet pharmaceuticals or the border is because they are 
trying to obtain needed medications as a way to stretch or fix 
on limited budgets.
    We cannot, however, lose sight of that larger story. We owe 
it to our constituents to provide protections wherever the 
pharmaceuticals are purchased. As Dr. Shepherd, who is 
testifying today, suggests, many purchases are not made by the 
Nation's poor and elderly to save costs.
    Individuals who do not intend to personally use them 
purchase a significant amount of these drugs, and this is 
further substantiated by the DEA's testimony which we will hear 
today, which is stating that a healthy stream of people is 
going across the border to purchase controlled substances.
    Enforcement of the current laws is going to be critically 
important in this effort. According to an FDA pilot program 
that ran for 30 days earlier this year, potentially 16,000 
parcels could have been referred by Customs to the FDA.
    Clearly, there is a torrential flood of prescription drugs 
entering the U.S. I think it is safe to assume that a large 
percent of them are illegal and potentially lethal. If 
controlling this flow is a matter of resources, Mr. Chairman, 
we need to know what the magnitude of the problem is, and we 
need to allocate the resources for enforcement of current laws.
    I think it is important that we discuss today the current 
law, and whether that is being adequately enforced, and whether 
we need changes to the law or more resources; what is the 
extent of the problem, and what do we need to do to resolve the 
situation.
    Mr. Chairman, I look forward to hearing the witnesses' 
testimony, and their responses to questions posed by members, 
and I yield back the balance of my time.
    Mr. Greenwood. The Chair recognizes the arrival of Mr. 
Whitfield and Mr. Gillmor. Do either of those gentlemen have 
opening statements to make?
    Mr. Gillmor. I waive my opening statement.
    Mr. Whitfield. I waive.
    Mr. Greenwood. The gentlemen both waive their option of 
making an opening statement.
    [Additional statements submitted for the record follow:]
Prepared Statement of Hon. Cliff Stearns, a Representative in Congress 
                       from the State of Florida
    Thank you Chairman Greenwood for holding this important hearing. I 
also want to thank our witnesses for being here today and I look 
forward to hearing their testimony.
    Today we will hear about several very troubling aspects related to 
imported pharmaceuticals. A chief concern is that many individuals are 
purchasing pharmaceuticals along the Mexican borders. What many of 
these consumers may not know is that they may not necessarily be 
getting what they think they are purchasing. Without strict standards 
such as those required in the United States, these drugs could be 
nothing more than placebos, or could contain ingredients that could 
pose a health risk. In particular, seniors seek these cheaper 
prescription drugs. While they do so at their own risk and this is not 
against the law, it is nevertheless puts them at risk. Hearings such as 
this will provide individuals who cross the border to buy their drugs 
with valuable information about the potential dangers involved.
    More and more individuals are going on-line to order prescriptions 
through the mail from foreign countries. How can consumers know whether 
these products are genuine? Another question that individuals who 
purchase their prescription from overseas need to consider is how safe 
is to go on-line and divulge personal information about themselves. 
There is no way to verify whether the companies selling these products 
are legitimate. Let the buyer beware is very apt when such buying 
practices are being conducted.
    I wonder if it would be beneficial to have more regulation of these 
drugs that are flowing into our country through the mail. 
Counterfeiting of bulk drugs has become one of the most lucrative and 
also one of the most potentially dangerous issues associated with 
imported drugs.
    These look a like drugs are produced all over the globe and make 
their way to this country in vast quantities. I have seen these drugs 
and they appear to be authentic because they look identical to drugs 
produced by pharmaceuticals made in this country. The packaging looks 
identical and sadly enough can have detrimental effects because the 
patients will not be getting the medications they need to treat their 
illness.
    I hope today's hearing will provide us with some answers and 
perhaps some reassurance that we can stop these dangerous products from 
entering our country.
                                 ______
                                 
 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce
    Chinese cough medicine filled with poisonous anti-freeze kills 89 
children in Haiti.
    Counterfeit imported anti-seizure drugs suspected of killing 
several epileptics in the U.S.
    Thousands of drugs sold to Americans through the mail from foreign 
internet pharmacies made in filthy, vermin-infested labs.
    Powerful, deadly painkillers declared and brought from Mexico or 
Canada into the U.S.
    People who die or are injured by self-medicating with prescription 
drugs of unknown quality, unknown dosage levels, unknown impurities, 
unknown side effects, and unknown interactions.
    These are examples of the dangers of many imported pharmaceuticals.
    Drum-by-drum, parcel-by-parcel, consumer-by-consumer, imported 
pharmaceuticals are arriving from unapproved sources, border 
pharmacies, and even bathtubs or dirty kitchens. Many of these products 
threaten the public health.
    The problem of counterfeit drugs is not just a phenomenon of the 
developing world. Our lucrative market and ineffective import controls 
are increasingly making the United States an attractive target for drug 
counterfeiters and diverters. Last month, three counterfeit 
prescription drugs were found in the shelves of pharmacies of several 
states. It is not known whether these fake drugs were made in the 
United States or overseas. But such a cluster of counterfeits has not 
been seen for years in this country.
    This public health threat of imported pharmaceuticals is getting 
worse virtually by the day. More Mexican border pharmacies. More 
foreign internet pharmacies. More drugs in the international mail. More 
pharmaceutical ingredients from overseas. More people in desperate 
straits who seek cheaper medicines from abroad. More hucksters, 
criminals, snake-oil salesmen, slick-willies, and con artists who prey 
upon consumers, distributors, and manufacturers.
    Meanwhile, our federal agencies responsible for keeping out 
dangerous drugs are no longer maintaining the pretense that the problem 
can be controlled. For example, in its December 2000 Performance Plan 
Summary, the Food and Drug Administration stated: ``The Agency is 
unable to assure the U.S. public that it can prevent unsafe imports 
from entering the country.'' The data from a recent joint project 
between the FDA and the U.S. Customs Service show only a small fraction 
of drugs in the mail ever gets examined by the FDA and even a visual 
examination of these products cannot detect the full extent of 
counterfeit or substandard product. On one side, the FDA and the 
Customs Service are overwhelmed by a flood of commercial shipments of 
imported bulk ingredients. On the other, these agencies are confronted 
by thousands of individuals with personal imports, an army of ants 
overrunning the system.
    Unless we find new effective solutions soon, I believe it is only a 
matter of time that these uncontrolled imported drugs will lead to an 
epidemic here that will kill, maim or severely sicken people. 
Fortunately, this hearing is an important start in reaching solutions. 
In so doing, we won't lose sight of the real-life problems seniors and 
other Americans are facing with high drug prices. I know many Americans 
are resorting to getting what they believe--or have been told to 
believe--are cheaper versions of U.S. drugs in Canada and Mexico. In 
many cases, these foreign drugs are not cheaper and they are not the 
same as U.S. drugs. But the problem of high drug prices and 
prescription drug coverage is one that we will deal with directly in 
this Committee. While we tackle affordability, we will pursue safety 
solutions that target the greatest health risks, and at the same time, 
minimize disruption and risks for those who feel they must avail 
themselves of pharmaceuticals in Canada and Mexico.
    I congratulate the Subcommittee Chair, Congressman Jim Greenwood, 
for this essential hearing. He has invited an impressive array of 
expert witnesses to assess the issues and to discuss proposals and 
recommendations. I look forward to hearing the testimony, examining the 
evidence, and getting some answers.
                                 ______
                                 
Prepared Statement of Hon. Bobby L. Rush, a Representative in Congress 
                       from the State of Illinois
    Mr. Chairman, thank you for holding this important hearing on the 
importation of drugs. More than ever before, Americans rely on drugs to 
treat chronic health conditions, protect themselves from disease and 
improve the quality of their lives. Whether the illness be high blood 
pressure, diabetes or cholesterol, pharmaceuticals allow many to enjoy 
a better quality of life. Some of the safety concerns surrounding the 
issue of imported drugs could potentially undermine this ability.
    A New York Times article from April of this year reported that 
American law enforcement officials have estimated the percentage of 
counterfeit and substandard imported drugs could be as high as 25 
percent of the imports. In the past two years, this Committee has 
investigated the FDA's oversight of counterfeit foreign bulk drugs and 
uncovered a severe failure by FDA to identify and pursue counterfeit 
drug makers and distributors, despite internal FDA documents 
highlighting the dangers posed by specific imported medicines.
    We must continue to ensure that Americans have access to safe drugs 
and I look forward to hearing from the witnesses as to what we can do.

    Mr. Greenwood. For the benefit of the witnesses, the bells 
that you just heard indicate that we have a vote on the floor.
    And since we would all like to be here for your testimony, 
the committee will recess for 15 minutes, and reconvene at 11 
o'clock.
    [Brief recess.]
    Mr. Greenwood. The committee will reconvene. Without 
objection, a statement from U.S. Representative Gil Gutknecht 
will be entered into the record, and hearing no objection, it 
is so ordered.
    [The prepared statement of Hon. Gil Gutknecht follows:]
Prepared Statement of Hon. Gil Gutknecht, a Representative in Congress 
                      from the State of Minnesota
    Mr. Chairman, as a Member of Congress long concerned with our 
Nation's policy regarding imported pharmaceuticals, and who authored 
legislation regarding mail order imports signed into law just a few 
months ago (PL 106-948, Sec. 746), I appreciate this opportunity to 
offer my opinion about the direction our drug import policy should 
take. I have a long-term vision for what our wholesale importation 
policy should be, but today I want to address the narrower subject of 
this hearing: government treatment of prescription drugs mail-ordered 
from another country for personal use. My point is simple. The FDA's 
personal use importation policy is currently fatally flawed, as it 
favors the most dangerous, unapproved drugs, while disfavoring commonly 
prescribed, FDA-approved drugs that can be safely imported for personal 
use.
    I learned about this issue several years ago, when some of my 
constituents--who would soon be joined by thousands of Americans--
traveled to Canada on buses to buy commonly-prescribed, FDA-approved 
drugs available at about half the price for which those same drugs are 
sold in the United States. These constituents' faced no difficulty at 
the border importing their Coumadin, Prilosec, and Lipitor--commonly 
prescribed, FDA-approved drugs. However, when they tried to reorder 
those same drugs through the mail, the FDA stopped the packages, opened 
them, and enclosed warning letters saying the drugs appeared to be 
illegal and might be confiscated if they were imported again.
    Needless to say these constituents were confused by the FDA's 
disparate treatment of the same product--easy admission on the bus at 
the border, strict warnings in the mail. As it turns out, my 
constituents had encountered what is only one of the many 
inconsistencies and, indeed, flaws in the FDA's personal use 
importation policy--a patchwork quilt of written and unwritten rules 
that finds no basis in statute. Because I've explained these flaws in 
detail in a letter to the Secretary of Health and Human Services, Tommy 
Thompson, I will only briefly outline them here and request that my 
letter to the Secretary be entered into the Record.
    The first problem with the FDA's personal use policy today is that 
it favors unapproved drugs over approved drugs. In the early 1990s, the 
FDA evolved a ``compassionate use'' policy regarding importation of 
prescription drugs. This policy allowed individuals seeking medical 
treatments not available in this country to bring unapproved drugs into 
the United States for their personal use. However, in the last few 
years, this policy has evolved into the FDA's current, unwritten, 
``personal use'' policy. Under this policy, the FDA allows individuals 
to bring up to a three-month supply of drugs into the United States on 
their person, whether the drugs are approved for use in the United 
States or not. My constituents took advantage of this policy when they 
brought lower-cost drugs back into the United States by bus.
    Thus, the FDA's written policy expressly allows imports of 
unapproved, experimental drugs, but disallows imports of FDA-approved 
drugs. This doesn't make any sense. As I wrote to Secretary Thompson, 
``While I certainly agree that the very sick should have formal access 
to unapproved products, it makes no sense . . . that the very poor 
should not have formal access to approved products.''
    The second problem with the FDA's personal use policy is that it 
favors drugs carried across the border to drugs mailed across the 
border. As my constituents found out, the FDA currently allows drugs to 
be carried across the border that it disallows when they appear at the 
border in the mail. This, too, makes no sense. Why should the FDA allow 
an individual to carry a drug into the United States on their person, 
but stop that individual from refilling the very same prescription from 
the same pharmacy through the mail? I have yet to hear a compelling 
answer to this question.
    But perhaps what is most interesting, and disturbing, about the 
FDA's complex array of written and unwritten drug importation rules is 
that none of them has a basis in statute. The FDA has used its 
discretionary authority to create an ad hoc drug importation system 
that favors the most dangerous products while stopping the safest. To 
put it in Biblical terms, the FDA's policy strains out a gnat, but 
swallows a camel. When I have raised this point with the FDA, the 
Agency claims that all importation of prescription drugs--experimental 
or FDA-approved--is technically illegal. I'm not convinced this is the 
case. But even if it is, the question remains: if the FDA can make up 
an importation system out of whole cloth, shouldn't such a system make 
sense? If the FDA can use it's discretion to allow Americans to carry 
experimental and FDA-approved drugs into the United States, shouldn't 
the Agency be able to use that same discretion to allow Americans to 
mail-order commonly-prescribed, FDA-approved drugs from countries like 
Canada? Our goal, as I told Secretary Thompson, should be ``a clear and 
logical, written regulatory program that allows consumers access to 
imported, U.S.-approved drugs'' while stopping dangerous, unapproved 
medicines imported without a prescription.
    Supporters of prescription drug importation are often criticized 
for jeopardizing patient safety. However, we must remember to balance 
legitimate safety concerns with very real safety concerns for seniors 
who cannot afford high American drug prices. Often living on fixed 
incomes, it is not unusual for seniors to break pills in half to make 
their prescriptions stretch further. At the least, taking the wrong 
dosages detracts from a drug's desired effect. In addition, I believe 
what safety concerns do exist might be solved by simply re-allocating 
the FDA's current border enforcement resources. At present, the FDA 
appears to be focusing its staff resources on the wrong borders, 
intercepting what are almost certainly the safest drug packages. 
According to the FDA's website, this year the FDA has stopped and 
detained 18 times more packages coming from Canada (54) than from 
Mexico (3). Last year, the FDA stopped 90 packages coming from Canada 
and only one from Mexico. This is inexplicable, particularly given the 
FDA's testimony today concerning dangerous medicines entering the 
United States through Los Angeles.
    In conclusion, the FDA must certainly address legitimate safety 
concerns in its approach to mail ordered prescription drugs. However, 
such concerns should not discourage the Agency from overhauling what 
has become a confusing, contradictory array of written and unwritten 
policies that prevent importation of safe, FDA-approved products. At 
the end of the day, the FDA should not be standing between the American 
consumers and safe, lower-cost prescription drugs.
    I thank the Chairman again for the opportunity to contribute to 
this discussion.
                                 ______
                                 
                      Congress of the United States
                                   House of Representatives
                                                        May 2, 2001
The Honorable Tommy G. Thompson
Secretary of Health and Human Services
200 Independence Avenue SW
Washington, D.C. 20201
    Dear Tommy: When you visited the House Budget Committee recently, I 
mentioned my concern that the Food and Drug Administration (FDA) is 
inappropriately interfering with mail order shipments of prescription 
drugs from Canada for the personal use of Americans. I have looked into 
this matter further, and I find that not only is the FDA acting in 
violation of a new law requiring due process for mail order importers, 
but the Agency's entire policy regarding personal use importation is 
deeply flawed and inconsistently applied. I write to ask you to give 
both problems your prompt attention.
Personal Use Policy
    In the 1990s, the FDA evolved a written policy allowing individuals 
seeking medical treatments not available in this country to bring drugs 
not approved for use in the United States for their personal, 
``compassionate use.'' Additionally, the FDA allowed licensed 
practitioners in the United States to prescribe for their patients 
drugs approved in a foreign country but not in the United States. In 
the last few years, this sensible compassionate use policy has further 
evolved into the current, unwritten ``personal use'' policy. Under the 
personal use policy, the Agency allows individuals to bring up to a 
three-month. supply of drugs into the United States, whether the drugs 
are approved for use in this country or not.
    This combination written/unwritten personal use policy is flawed 
for a number of reasons.
    First, it favors unapproved drugs over approved drugs. Written FDA 
policy explicitly allows foreign, unapproved drugs into the United 
States (Regulatory Procedures Manual, Chapter 9). Yet that same written 
policy explicitly rejects importation of products available 
domestically. While I certainly agree that the very sick should have 
formal access to unapproved products, it makes no sense to me that the 
very poor should not have formal access to approved products. When I've 
proposed extending the written ``compassionate use'' policy to 
medications available in the United States, the FDA has responded that 
such imports are technically illegal. While I am not convinced this is 
the case, this argument, if true, would also destroy FDA's written 
personal use exemption for unapproved drugs as well, as, according to 
the FDA, that policy finds no basis in the law either. My point is 
this: if FDA can compassionately use its discretion to allow, in 
writing, experimental, unapproved drugs into the United States, it 
surely ought to be able to use its discretion to allow, in writing, 
common, FDA-approved medications into the United States--given the 
FDA's position that both types of imports are technically illegal.
    Second, the FDA's unwritten personal use policy favors drugs 
carried across the border to drugs mailed across the border. This is 
yet another layer of discrimination and inconsistency in the FDA's drug 
importation policy. Under current FDA practice--which is what the 
unwritten personal use policy amounts to--Americans are freely allowed 
to carry common, FDA-approved drugs across the border on their person. 
Yet, when the same individuals have tried to refill the same 
prescriptions through the mail, the FDA has stopped the packages, 
opened them, and sent importers threatening warning letters. (As you 
know, this egregious aspect of the FDA's unwritten personal use policy 
prompted me to write the Drug Import Fairness Act, which requires due 
process to mail order importers. Unfortunately the FDA is violating the 
letter and spirit of this law. I discuss this matter further, below.) 
When approached on this disparate and illogical treatment of mail 
orders, the FDA responds that all imports of FDA-approved drugs are 
technically illegal. Again, while I am not convinced this is the case, 
this argument, if true, would also destroy the FDA's unwritten policy 
of allowing FDA-approved drugs to be carried across the border. That 
is, if FDA can use its discretion to allow approved drugs into the 
United States if carried across the border, it surely ought to be able 
to use its discretion to allow approved drugs if mailed across the 
border--given, again, the FDA's position that both types of imports are 
technically illegal.
    In light of these flaws and inconsistencies, which only benefit 
Americans wealthy enough to travel abroad, I am requesting that your 
Department oversee an immediate revision of FDA's personal use policy. 
Our goal should be a clear and logical, written regulatory program that 
allows consumers access to imported U.S.-approved drugs, whether those 
consumers live in San Diego or Kenosha. Given the FDA's apparently 
broad discretion in these matters, why not have a policy that makes 
sense for all Americans? I would love to sit down with you to discuss 
how this might work.
Warning Letters
    Another reason I believe the FDA's personal use policy is fatally 
flawed is the immense difficulty I have had forcing the Agency to give 
mail order importers a simple explanation of what the FDA believes the 
importers are doing wrong. I mentioned earlier the Drug Import Fairness 
Act, which required the FDA to give mail order importers due process. 
Simply put, the law directs the FDA to advise mail order importers, in 
detail, why the particular import appeared to violate the law,
    The FDA has defied this law and is now holding up mail order 
shipments from Canada and sending intimidating detention letters to 
American consumers stating that the drugs, such as Lipitor, appear to 
be unapproved and misbranded and therefore are refused admission--and 
may be destroyed. While the letters state that the consumer is not 
being accused of breaking the law, they state that the package appears 
to be unapproved and they threaten the consumer that future shipments 
may be denied entry thus sounding very much like the warning letters 
the FDA was sending before. (Indeed, under the definitions section of 
the Drug Import Fairness Act, these letters are, in fact, warning 
letters.)
    But what's most disturbing about the new letters is that, while 
some of them cite which section of the law the packages appear to 
violate (the Drug Import Fairness Act requires this of all such 
letters), the letters do not give reasons, based on the facts of the 
particular package, for making that determination. This is a patent 
violation of the Drug Import Fairness Act (section 746(g)(1)(C)). It 
also violates long-established case law (L&M Industries v. Kenter, 458 
F.2d. 968, 970-71 (2nd Cir. 1972)).
    I request that your Department examine the FDA's current policy 
regarding letters to individuals mail ordering prescription drugs. 
Specifically, I would like to know what the Agency will be doing to 
fully comply with the Drug Import Fairness Act's requirement that such 
letters ``state the reasons underlying the [FDA's]'' decision that an 
import appears to be unapproved-including an explanation of the facts 
involved in each specific imported package.
    Our own FDA should not stand between sick seniors, living on fixed 
incomes, and lower drug prices. Basic fairness won't tolerate it. And 
neither will the Congress.
    Thank you for your attention to both of these important matters.
            Sincerely,
                                              Gil Gutknecht
                                                 Member of Congress

    Mr. Greenwood. The Chair welcomes our first witnesses, the 
Reverend and Mrs. Edwin Rode. We thank you very much for coming 
to Washington, and we thank you very much for your patience.
    As I explained to you last night, you have to listen to us 
first, and then we will listen to you. We are very pleased that 
you have joined us. As we mentioned to you last night, you are 
aware that the committee is holding an investigative hearing, 
and in doing so, we have had the practice of taking testimony 
under oath.
    Do either of you have any objections to testifying under 
oath? Seeing that you do not, the Chair also advises you that 
under the rules of the committee that you are entitled to be 
advised by counsel. Do you desire to be advised by counsel 
during your testimony?
    Mr. Rode. No.
    Mr. Greenwood. Seeing your response in the negative, would 
you please rise then and raise your right hand, and will swear 
you in.
    [Witnesses sworn.]
    Mr. Greenwood. You are now under oath, and you may give 
your testimony. You are recognized for 5 minutes, but you may 
testify for as long as you care to. Thank you.

             TESTIMONY OF REV. EDWIN AND HELEN RODE

    Mrs. Rode. Good morning, Chairman Greenwood, and good 
morning to the rest of the committee. My name is Helen Rode, 
and this is my husband, Ed Rode. We are grateful for the 
opportunity to speak before this committee to share what has 
happened to our family.
    Our son, Todd, was found dead in his apartment on November 
16, 1999. We are convinced that his death was caused by drugs 
that he obtained from a foreign country through the Internet. I 
would like to tell you a little bit about our family. Todd's 
death has changed the lives of all of us.
    My husband is a retired United Methodist pastor. I am a 
wife, a mother, and a homemaker. We moved from the Chicago area 
to Athens, Georgia in 1992 when we retired.
    Our daughter, Lisa, is a registered nurse. She and her 
husband, Kevin, live in a suburb of Chicago with their 
children, Nathan, Neal, and Claire. Our younger son, Curt, 
lives in Knoxville and teaches in the English Department at the 
University of Tennessee.
    Todd was our middle child. Until the age of 15, he was a 
high achieving child, interested in music and sports. In high 
school, he began exhibiting the behavior of teenage depression 
syndrome. He battled this illness the rest of his life.
    Todd had the heart and soul of a musician and wanted to 
make this his major in college. However, he was drawn to the 
field of psychology and counseling. He graduated magna cum 
laude with a major in psychology and a minor in music. The 
faculty named him the outstanding senior in the Psychology 
Department.
    Todd worked for several years as a counselor with young 
people in a hospital setting. Discovering that this was not 
good for his own mental health, he took a post-graduate course 
at DePaul University in Chicago to become a computer 
programmer.
    He worked in this field for a number of years, constantly 
fighting bouts of depression and anxiety. Periodically, he 
would check himself into the hospital, but become anxious about 
insurance coverage and check himself out.
    At the time of his death, Todd was on disability leave and 
losing his job and health insurance. During this time he was 
under the care of a psychiatrist and counselor at a mental 
health facility in Chicago.
    In October 1999, when no one in the family could reach Todd 
by phone or E-mail, we became seriously alarmed. We assumed 
that he had checked himself into a hospital without telling us, 
or was too sick to be in communication with anyone.
    My husband called the Chicago Police Department on November 
16, 1999 and they, along with his sister, went into Todd's 
apartment and discovered that he had died. When our daughter 
went to his apartment, she gathered all the medications she 
could find.
    It was at this time that we learned that Todd had ordered 
controlled drugs from a pharmacy and doctor in another country. 
In going through Todd's records, we could trace the Internet 
source, the medications ordered, the date they were ordered, 
and how he paid for them.
    These drugs were Venlafaxine, Propoxyphene, and Codeine. 
All of these drugs are controlled substances, which were 
secured from an overseas pharmacy without any safeguards. The 
report of Chicago's Medical Examiner and Coroner stated that 
Todd's death was due to an accidental massive overdose of these 
drugs.
    After a few weeks of numbing grief, I began to feel intense 
anger that someone as ill as our son could be tempted to obtain 
medication that required nothing but filling out a 
questionnaire on the Internet.
    We tried to channel that anger into action. We sent a 
letter to every elected official and agency that we could think 
of. We were pleased that we received replies from most of these 
letters.
    Agents from the FDA and Customs Departments in Atlanta came 
to our home in Athens on two different occasions. We gave 
copies of all our information to them. Sometime later, they 
contacted their counterparts in Chicago, who then visited our 
daughter and took from her the medications that Todd had 
received from the foreign pharmacy.
    This all happened a number of months ago, and we had heard 
nothing more until a counsel from Chairman Greenwood's 
committee called us. He told us about this hearing concerning 
Internet use to order drugs from foreign countries.
    We then sent to him all of our information regarding Todd's 
use of the Internet to obtain these drugs. It was then asked by 
this counsel if we would be willing to speak to this panel and 
tell our story. We agreed to do this, knowing that other very 
ill people and their families are suffering and grieving like 
we are.
    This grief extends beyond our immediate family. Todd's 
aunts, uncles, cousins, friends, nephews and niece have felt 
Todd's death very deeply. Todd will never hear Nathan play 
saxophone in the middle school jazz band. He will not see 
Neal's skills playing first base. He will never read Clare's or 
Curt's poetry.
    He will not grow into middle and old age with his brother 
and sister. And, we, his parents, have lost a child of our 
hearts. We are left to grieve, not only for the struggles that 
he constantly faced in his life, but also the horrifying 
circumstances of his death.
    Our plea to you is to do whatever is possible to enact 
legislation and allocate funds to the appropriate agencies to 
control and eliminate this dangerous use of the Internet. We 
want to thank you for permission to tell our story before this 
committee.
    [The prepared statement of Helen Rode follows:]
                    Prepared Statement of Helen Rode
    Good Morning.
    My name is Helen Rode. This is my husband Ed Rode.
    We are grateful for this opportunity to speak before this 
Committee--to share what has happened to our family. Our son, Todd, was 
found dead in his apartment on November 16th of 1999. We are convinced 
that his death was caused by drugs that he obtained from a foreign 
country through the internet.
    I would like to tell you a little bit about our family. Todd's 
death has changed the lives of all of us.
    My husband is a retired United Methodist pastor. I am a wife, a 
mother, and homemaker. We moved from the Chicago area to Athens, GA in 
1992 when we retired.
    Our daughter, Lisa, is a registered nurse. She and her husband, 
Kevin, live in a suburb of Chicago with their children, Nathan, Neal, 
and Claire.
    Our younger son, Curt, lives in Knoxville and teaches in the 
English Department at the University of Tennessee.
    Todd was our middle child. Until the age of 15, he was a high 
achieving child, interested in music and sports. In High School, he 
began exhibiting the behavior of teen-age depression syndrome. He 
battled this illness the rest of his life.
    Todd had the heart and soul of a musician and wanted to make this 
his major in college. However, he was drawn to the field of psychology 
and counseling. He graduated magna cum laude with a major in psychology 
and a minor in music. The faculty named him the outstanding Senior in 
the Psychology Department.
    Todd worked for several years as a counselor with young people in a 
hospital setting. Discovering that this was not good for his own mental 
health, he took a post-graduate course at De Paul University in Chicago 
to become a computer programmer. He worked in this field for a number 
of years, constantly fighting bouts of depression and anxiety. 
Periodically, he would check himself into the hospital, but become 
anxious about insurance coverage and check himself out.
    At the time of his death, Todd was on disability leave and losing 
his job and health insurance. During this time he was under the care of 
a psychiatrist and counselor at a Mental Health facility in Chicago.
    In October of 1999, when no one in the family could reach Todd by 
phone or Email, we became seriously alarmed.
    We assumed that he had checked himself into a hospital without 
telling us or was too sick to be in communication with anyone.
    My husband called the Chicago police department on November 16, 
1999 and they, along with his sister, went into Todd's apartment and 
discovered that he had died.
    When our daughter went to his apartment, she gathered all the 
medications she could find. It was at this time that we learned that 
Todd had ordered controlled drugs from a pharmacy and doctor in another 
country.
    In going through Todd's records we could trace the internet source, 
the medications ordered, the date they were ordered and how he paid for 
them. These drugs were Venlafaxine, Propoxyphene, and Codeine. All of 
these drugs are controlled substances which were secured from an 
overseas pharmacy without any safeguards.
    The report of Chicago's Medical Examiner and Coroner stated that 
Todd's death was due to a massive over-dose of these drugs.
    After a few weeks of numbing grief, I began to feel intense anger 
that someone as ill as our son could be tempted to obtain medication 
from a source that required nothing but filling out a questionnaire on 
the Internet.
    We tried to channel that anger into action. We sent a letter to 
every elected official and agency that we could think of. We were 
pleased that we received replies from most of the letters.
    Agents from the FDA and Customs Departments in Atlanta visited us 
in Athens on two different occasions. We gave copies of all of our 
information to them. Sometime later, they contacted their counterparts 
in Chicago who then visited our daughter and took from her the 
medications that Todd had received from the overseas pharmacy.
    This all happened a number of months ago, and we had heard nothing 
more until a counsel from Chairman Greenwood's committee called us. He 
told us about this hearing concerning Internet use to order drugs from 
foreign countries. We then sent to him all of our information regarding 
Todd's use of the Internet to obtain drugs from a foreign country. It 
was then asked by this counsel if we would be willing to speak to this 
panel and tell our story. We agreed to do this, knowing that other very 
ill people and their families are suffering and grieving like we are.
    This grief extends beyond our immediate family. Todd's aunts, 
uncles, cousins, friends, nephews and niece have felt Todd's death very 
deeply.
    Todd will never hear Nathan play saxophone in the middle school 
jazz band. He will not see Neal's skills playing first base in 
baseball. He will never read Claire's or Curt's poetry.
    He will not grow into middle and old age with his brother and 
sister. And, we, his parents have lost a child of our hearts. We are 
left to grieve, not only for the struggles he constantly faced in his 
life, but, also, the horrifying circumstances of his death.
    Our plea to you is to do whatever is possible to enact legislation 
and allocate funds to the appropriate agencies to control and eliminate 
Internet access to drugs.
    We want to thank you for permission to tell our story before this 
committee.

    Mr. Greenwood. Thank you, Mrs. Rode, for your testimony. We 
know how difficult this is for both of you. We are indeed sorry 
for your loss. Your son had prescriptions, or is it correct 
that your son had prescriptions at one point? Both of you can 
share that microphone and either one of you can respond to the 
questions.
    Mrs. Rode. All right.
    Mr. Greenwood. Is it the case that your son at one point in 
the course of his psychiatric care had prescriptions for 
certain drugs; is that correct?
    Mr. Rode. Yes, sir, that's true.
    Mr. Greenwood. Do you know what they were?
    Mr. Rode. At this point, I do not. Todd was very secretive 
about that. He kept a lot of this information to himself. I 
think he was embarrassed by his sickness, and at that point was 
a very private person.
    Mr. Greenwood. So you are not sure if he had prescriptions 
prior to this for drugs?
    Mr. Rode. I was sure that he did, yes, because he was under 
psychiatric care.
    Mr. Greenwood. So you assume so, although I understand from 
talking to you last night that for reasons of confidentiality 
the psychiatrist is not willing to share or not able to share 
that information?
    Mr. Rode. Well, we have of course talked to the--not to the 
psychiatrist, but talked to the office of the psychiatrist, and 
we never did talk to the psychiatrist. And we were told at that 
time that we were not by law permitted to get the information 
that we requested.
    That the only people that could get that information was 
the FDA and a subpoena.
    Mr. Greenwood. Okay. But he certainly had no prescriptions 
for the drugs that he obtained?
    Mr. Rode. That's correct. That is absolutely correct.
    Mrs. Greenwood. And he did not use a prescription to obtain 
those drugs. And how many different drugs were found in his 
body?
    Mr. Rode. Three.
    Mr. Greenwood. So Todd purchased three drugs and there was 
no one able to monitor whether he should be taking any or all 
of those drug?
    Mr. Rode. That is correct, sir.
    Mr. Greenwood. And no doctor, no psychiatrist, no 
pharmacist to monitor that, let alone to describe to him the 
interactions and the dangers of taking those drugs in certain 
dosages.
    And I would assume that we don't know yet whether the 
dosage, the actual dosage of the pills that he was taking, was 
equal to what was written on the label; is that right?
    Mr. Rode. I think that is correct. Todd was pretty astute 
with understanding drugs, but I think that we--we assume that 
the drugs that he received from overseas were probably heavier 
dosages, and were not his proper dosage, even though on the 
information that we received, in which the comptroller for this 
particular group has--there was a dosage listed, but whether it 
was the actual dosage that he received, we are not sure of.
    Mr. Greenwood. Well, from what we have seen, when one 
orders prescription drugs over the Internet from foreign 
countries, there is no way of knowing what the drug that is 
actually ingested contains.
    And there is no way of knowing what is in it, or what the 
dosage is, because the labels are often counterfeit, and the 
container is counterfeit, and that is of course that we are 
trying to get at here.
    Mr. Rode. This hearing has opened up a new aspect to us of 
the whole problem.
    Mr. Greenwood. Right. Now, all of this information was 
shared with the Food and Drug Administration how long ago?
    Mrs. Rode. I am not sure when they first came to our house. 
We sent our letter out to these agencies in July of last 
year,and within a few weeks, I think we heard. I am not really 
sure when they first contacted us.
    Mr. Greenwood. Have they given you any indication to date 
as to where their investigation has led them?
    Mrs. Rode. No, we do not know that.
    Mr. Rode. Prior to our coming here, we were in Chicago to 
visit our daughter, and a person from Customs called and warned 
us not to give the foreign country name or the pharmacist's 
name.
    Mr. Greenwood. Because there is an ongoing criminal 
investigation----
    Mr. Rode. Yes, sir, that is correct.
    Mr. Greenwood. [continuing] underway, and hopefully we will 
find the source of the drugs and prosecute the perpetrators if 
there is evidence of criminal wrongdoing. I would yield back my 
time and recognize for purposes of inquiry the gentleman from 
Florida, Mr. Deutsch.
    Mr. Deutsch. Thank you very much, and again, I know how 
painful it must be for you to be here, and again thank you for 
really sharing this with us. I think all of us are hoping that 
by this hearing, and by our actions, and by your actions, we 
can at least attempt to make sure that no other parents in 
America would ever experience what you have experienced.
    Do you have any specific suggestions of--I am asking maybe 
beyond, but any recommendations of what you think Congress 
should be doing to prevent these kinds of tragedies in the 
future?
    Mrs. Rode. Well, I think that the Oversight Committee--we 
know nothing about all of this, let me assure you. But I feel 
that it has to be approached from several different angles.
    I think certainly the Legislature needs to be involved with 
the laws, and see that the laws are carried out. If we need 
more laws, and then the appropriate agencies, then we need to 
do what is needed to be done.
    Mr. Rode. They need to be funded in order to be able to do 
the things that are required by the law. It is just a 
horrendous problem. The Customs man, when he first came out, he 
said that most of the Customs things came through Memphis, and 
he said it was just impossible to investigate all of them.
    We were kind of surprised that Customs and the FDA came 
together. They both came together out to visit us twice.
    Mr. Deutsch. Now, have you heard from any of the parents or 
any of the relatives of people that this has happened to also?
    Mr. Rode. No, sir, we have not; or from Customs or the FDA 
either.
    Mr. Deutsch. I thank you, and I yield back the balance of 
my time.
    Mr. Greenwood. I recognize Mr. Stupak for questioning.
    Mr. Stupak. Thank you, Mr. Chairman. I am sorry to hear 
about your loss. Let me just leave it at that. You indicated 
that your son was taking heavier dosages than what he should 
have been, and that is what you assumed, correct?
    Mr. Rode. No, this is what the coroner and the medical 
examiner's report told us.
    Mr. Stupak. Was it a specific drug then that caused this?
    Mr. Rode. We did name the drugs in our presentation.
    Mr. Stupak. Is that drug obtainable in the United States?
    Mr. Rode. I am not familiar with drugs, and so I can't 
answer your question. I'm sorry.
    Mr. Stupak. When we introduced our legislation last year, 
we asked for simple things like the pharmacist, who is supposed 
to be--when you go on the Internet, and you order your 
prescription, there has to be a licensed pharmacist who would 
display his license and certificate from the State where they 
are practicing in.
    We asked that there be a physical location, where you can 
know whether it is in Menominee, Michigan, or Chicago, 
Illinois, or wherever; as opposed to using some bogus address, 
and you know it is really back in Thailand or China where these 
drugs are being produced.
    And then we put penalties in there if they did not have 
these two simple requirements; a licensed physician or 
pharmacist, excuse me, and a physical location. And we were 
accused of trying to stifle freedom of speech under the 
Internet, and trying to regulate the Internet.
    Do you think that that is asking for too much of these web 
pharmacy companies to at least display the license of their 
pharmacist and a physical location so you will at least know 
where they drugs are coming from?
    Mr. Rode. I would hope that that would be essential. I 
really do.
    Mr. Stupak. I understand that there is some restrictions on 
what we can say because of an ongoing investigation, but you 
said something in response to a question from the Chairman 
about some information that you would like to obtain. And is 
that information from the FDA? Who is that that you would like 
to obtain some information from?
    Mr. Rode. We were told by the counsel that--in fact, we 
have a session scheduled with Customs later in the day. We just 
want to know what is being done. That's all. We have had no 
knowledge at all, and we have been told nothing as to what is 
being done. And coming back to your previous question----
    Mr. Stupak. Before you do that, if there are some questions 
that you need to know after you meet with counsel or the FDA, 
and they don't tell you, would you let us know? Would you let 
us know?
    Mr. Rode. We will inform you; yes, sir, we will. We want to 
cooperate in every way we can. That's why we are here.
    Mr. Stupak. This is the Oversight Committee, and we have 
extra power that we can get some of these things questioned. We 
are not trying to stifle an investigation, but you certainly 
have a right to know.
    Mr. Rode. I understand.
    Mr. Stupak. You had another question?
    Mr. Rode. Well, coming back to your question, I think the 
Freedom of Information is important, but I think that there are 
some things that just can't be put out, you know? I think there 
should be some restrictions.
    And I don't feel telling the information that you were 
suggesting about the Internet and the pharmacy, and the 
pharmaceutical number or whatever it is, I feel that 
information should be very vital to helping solve this kind of 
problem.
    Mr. Stupak. Well, when we started looking at this almost 18 
months ago, some of us--there were maybe a dozen or two dozen 
of these pharmaceutical sites, and when we had our hearing last 
year, it was like 300 or 400, and now I think we are closer to 
a thousand.
    And we introduced our legislation, and we were told not to 
worry, and that the Internet community will police ourselves, 
and we will take care of that. Obviously, they are not, and the 
number of websites continue to explode. And as I said in my 
remarks, they are very attractive when you think you are 
getting a good deal, and you think you are getting the drugs 
that you want.
    But as we have seen, whether it was L.A. or Dulles, it is 
anything but what you can imagine is coming through, and people 
are consuming it. They have no idea. You know, we are still 
searching for a direction.
    And we have other cases like yours throughout this country, 
and it is time that we do something together as a Congress and 
regulatory agencies in this country. That is what we rely upon 
them to do for the American public, and to offer that simplest 
degree of protection, and obviously they are not doing it.
    Mr. Rode. Thank you.
    Mr. Stupak. Thank you, Mr. Chairman, and I yield back.
    Mr. Greenwood. The Chair thanks the gentleman, and 
recognizes the gentleman from Florida, Mr. Bilirakis.
    Mr. Bilirakis. Thank you, Mr. Chairman. Reverend and Mrs. 
Rode, I, too, offer my sympathy. As I was on the elevator, and 
I don't remember whether it was on the way up or the way back, 
with Mr. Dingell, the Ranking Democrat, who sat over on the 
other side, said Mike, we have got to do something about this. 
Well, yes, I guess we do, but I don't know what. This is the 
sort of thing that we are going to be looking at over a period 
of time.
    I am curious though. Let me ask you, and forgive me again 
for bringing up Todd, but if there were warnings, educational 
statements. For example public service announcements, where the 
t.v. studios are required to offer so much time.
    In other words, if there were warnings out there, would 
Todd still have gone forward? Forgive me, but is that a 
difficult question?
    Mr. Rode. I think that is a hard question to answer, 
because Todd's circumstances were that he was chronically 
depressed, and chronically depressed people don't always make 
the wisest decisions at certain times. And I think that more 
needs to be done than just warnings.
    Mr. Bilirakis. Yes, and I am not disputing that. Maybe 
there is a lack of education out there, in terms of the 
concerns. I knew someone going through medical school in 
Australia, who befriended my family, and I guess somebody said 
something about a bad stomach, and the next thing I knew, we 
received this stuff from China in the mail that he made 
arrangements for.
    So, those things take place. Well, you understand. I had a 
lot of confidence in the gentleman, but I didn't take it. But 
again I wasn't sure. So I wonder if that might be of some help 
from an immediate standpoint.
    Mr. Rode. I am sure that it will be, but it is not the 
total answer.
    Mr. Bilirakis. No, it is not the total answer. All right. 
Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentleman, and 
recognizes the gentlelady from Colorado for questioning.
    Ms. DeGette. Thank you, Mr. Chairman. I just echo what 
everyone else has said, and let me say that part of the 
frustration that this committee has had is the very nature of 
the Internet, and how someone can go on a computer, and they 
find a site that says this is a pharmacy, and order these 
drugs, and fill out a questionnaire, and unlike a traditional 
pharmacy, which has a physical location, the Internet doesn't 
have that.
    And so we are really stricken with a very high degree of 
uncertainty as to what should the laws that we pass say. But 
having said that, I think you heard in my opening statement and 
others that some of us are very frustrated that we keep having 
these hearings, and these drugs keep coming in.
    And people like your son are dying, and it seems that there 
is an approach. Congressman Stupak and others have a bill, and 
I just want you to know that we intend to redouble our efforts 
to both enforce existing laws to stop this from coming into the 
country, and also to pass any news laws that we can.
    But I think you have realized, and I think other families 
like yours need to realize just passing a law banning this on 
the Internet is not going to immediately stop it, because it is 
hard to shut down these sites.
    Having said that doesn't mean we shouldn't try. And I guess 
I would just ask you a simple question, which is don't you 
think that other families like yours, who maybe have not 
experienced a tragedy yet, knew of the dangers and risks, and 
knew of the regulatory challenges, they would support any 
efforts Congress might make both to enforce existing laws and 
to try to pass new laws?
    Mrs. Rode. I certainly think so.
    Mr. Rode. I would hope so.
    Ms. DeGette. And I will yield the balance of my time to 
Congressman Stupak.
    Mr. Stupak. Thanks for yielding. In your statement here, we 
have seen the drugs that your son was taking, and all of those 
were controlled substances. Therefore, there should have been a 
prescription. Do you know if with any of those containers there 
was a prescription for him to receive these drugs?
    Mr. Rode. What we picked up in his apartment, counsel has 
that. So the prescriptions were listed.
    Mr. Stupak. Was there a prescription with the packaging? 
You see, underneath current law, and I am sure that someone 
will correct me if I am wrong, but under current law, he could 
not have even received them unless there was a valid 
prescription with that package, because you have to have a 
prescription with it. That's what I am asking.
    Mr. Rode. Rephrase this question. I am having a little 
trouble with it.
    Mr. Stupak. Sure. In order for a drug to be received 
through the mail in the United States, especially a controlled 
substance, there has to be a number of requirements if it is 
going to come through the m ail, and that's where he got the 
drugs, through the mail, right?
    Mr. Rode. That is our assumption, yes, sir.
    Mr. Stupak. Okay. One of them is that there has to be a 
prescription if it is a controlled substance.
    Mr. Rode. Well, we did not find anything like that.
    Mr. Stupak. And technically you can't even ship it without 
a valid prescription and that is what is getting flooded in 
this country.
    Mr. Rode. Well, this is what we were told by Customs.
    Mr. Stupak. Okay.
    Ms. DeGette. I yield back, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentlelady, and 
recognizes for 5 minutes for inquiry the gentleman, Mr. 
Whitfield.
    Mr. Whitfield. Thank you, Mr. Chairman, and thank you all 
for coming today to help us examine what we might be able to do 
to alleviate problems like this in the future. I just have a 
couple of questions.
    One, would you repeat for me the drugs that were involved 
in this instance? I think you were pronouncing them, but I 
wasn't sure. You said one was codeine?
    Mr. Rode. One was codeine.
    Mrs. Rode. The drugs that we were mentioned were the ones 
that were named on the death certificate as being having toxic 
doses, the ones that I mentioned earlier.
    Mr. Whitfield. Okay. And do you have the spelling of those?
    Mrs. Rode. Yes. I can spell it better than I can pronounce 
it. It is b-e-n-l-a-f-a-x-i-n-e.
    Mr. Whitfield. And what was the other?
    Mrs. Rode. P-r-o-p-o-x-y-p-h-e-n-e. And the third substance 
that was found to be toxic was codeine.
    Mr. Whitfield. Okay. And all of those were listed on Todd's 
death certificate?
    Mrs. Rode. On Todd's death certificate, yes.
    Mr. Whitfield. And how old was Todd?
    Mrs. Rode. Thirty-eight.
    Mr. Whitfield. Okay. And you know from which country this 
came, but you have been requested not to talk about it?
    Mr. Rode. That is correct.
    Mrs. Rode. All this information has been given though to 
the agencies.
    Mr. Whitfield. Okay. And I think they will be here today, 
and so I will yield back the balance of my time, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentleman for his 
information. The common names of two of those drugs are Darvon 
and Zanax. The Chair recognizes for inquiry for 5 minutes the 
gentleman from Oklahoma, Mr. Largent.
    The gentleman passes. Mr. Bass. The gentleman passes. In 
that case, we have completed our inquiry. Again, Reverend and 
Mrs. Rode, thank you so very much for coming to Washington to 
testify, and you can be assured that this committee is going to 
work very, very hard to come up with a solution so that this 
doesn't happen to the parents of other Americans. Thank you 
very much for coming.
    Mrs. Rode. Thank you very much.
    Mr. Rode. We appreciate all you have done, sir.
    Mr. Greenwood. You are excused. The Chair then calls 
forward the second panel, Dr. Donald Vereen, Office of the 
National Drug Control Policy; Ms. Laura Nagel, of the Drug 
Enforcement Administration; Mr. William Hubbard of the Food and 
Drug Administration; Ms. Elizabeth Durant, of the U.S. Customs 
Service; Dr. Alan I. Leshner, Director of the National 
Institute on Drug Abuse; and Landon Gibbs, First Sergeant, of 
the Virginia State Police. Will you please come forward and be 
seated.
    I thank the witnesses for their presence. You are aware 
that the committee is holding an investigative hearing, and 
when doing so, we have had the practice of taking testimony 
under oath. Do any of you have objections to testifying under 
oath?
    Seeing no objections, the Chair then advises you that under 
the rules of the House, and of the committee, you are entitled 
to be advised by counsel. Do you desire to be advised by 
counsel during your testimony?
    Seeing no such interest, the Chair asks if you please rise 
and raise our right hand, and I will swear you in.
    [Witnesses sworn.]
    Mr. Greenwood. Please be seated, and you are now under 
oath. And we will recognize first for testimony Dr. Vereen. 
Thank you, sir. You are recognized for 5 minutes.

TESTIMONY OF DONALD R. VEREEN, JR., DEPUTY DIRECTOR, OFFICE OF 
NATIONAL DRUG CONTROL POLICY; LAURA M. NAGEL, DEPUTY ASSISTANT 
 ADMINISTRATOR, OFFICE OF DIVERSION CONTROL, DRUG ENFORCEMENT 
  ADMINISTRATION; ELIZABETH G. DURANT, EXECUTIVE DIRECTOR OF 
   TRADE PROGRAMS, U.S. CUSTOMS SERVICE; WILLIAM K. HUBBARD, 
    SENIOR ASSOCIATE COMMISSIONER FOR POLICY, PLANNING AND 
  LEGISLATION, FOOD AND DRUG ADMINISTRATION; ALAN I. LESHNER, 
   DIRECTOR, NATIONAL INSTITUTE ON DRUG ABUSE; AND LANDON S. 
          GIBBS, FIRST SERGEANT, VIRGINIA STATE POLICE

    Mr. Vereen. Good morning. Chairman Greenwood, Ranking 
Member Deutsch, and distinguished members of the subcommittee, 
my name is Dr. Donald Vereen, and I have the distinct honor of 
coming before the subcommittee today as the Deputy Director of 
the Office of National Drug Control Policy.
    First, as the father of two children, I want to extend my 
heart-felt condolences to Reverend and Mrs. Edwin Rode on the 
loss of their son, Todd. Drug prevention, education, and 
treatment for youth and adults must remain the heart and soul 
of our counter-drug efforts in the Federal, State, and local 
levels of drug control.
    On May 10, President Bush stated that the most effective 
way to reduce the supply of drugs in America is to reduce the 
demand for drugs in America. Therefore, this administration 
will focus unprecedented attention on the demand side of this 
problem. We recognize that the most important work to reduce 
drug use is done in America's living rooms and classrooms, 
churches, synagogues, mosques, the work place, and in our 
neighborhoods.
    ONDCP is committed to continuing to improve our drug 
prevention efforts to avoid such tragedies in the future. I 
want to thank the subcommittee for the opportunity to testify 
on the subject of personal importation of controlled 
substances.
    ONDCP greatly appreciates your continuing interest in this 
public health and safety issues associated with the importation 
of pharmaceuticals. I realize that my time is limited, and I 
will keep my opening remarks brief, and focused on ONDCP's 
coordinating role in this issue. I respectfully request that 
the subcommittee enter my written statement into the record.
    Mr. Greenwood. That will be done, sir.
    Mr. Vereen. ONDCP recently began to assist in coordinating 
a response to the challenges posed by the personal importation 
of controlled substances across the land border of the United 
States.
    Although ONDCP is well suited to provide assistance on 
issues transcending the jurisdictional boundaries of several 
departments and agencies, we recognize the institutional 
expertise that resides in other agencies that are represented 
here today.
    The DEA, the FDA, the Customs Service, and NIDA, the 
National Institute on Drug Abuse, are working closely together 
to ensure that citizens of our country can continue to rely on 
the guidelines established for using controlled substances in a 
manner that maximizes health, safety, and efficacy.
    The solution to these challenges is complex. We must 
consider the interaction among a variety of statutes, 
regulations, enforcement practices, research, and citizen 
awareness.
    Let me be clear that despite the challenges, the DEA and 
FDA have assured us that they will continue to provide the U.S. 
Customs Service with the guidance that they require to carry 
out their mission relating to the importation of 
pharmaceuticals effectively, and with limited inconvenience to 
licit commerce and personal travel.
    Since becoming involved in assisting and coordinating a 
U.S. response to the personal importation of personal-use 
pharmaceuticals, and in particular controlled substances, ONDCP 
last month convened four separate meetings with the DEA, FDA, 
U.S. Customs Service, and NIDA.
    We have made substantial progress, and I believe that we 
are moving forward toward forms of resolution. We know that 
there is some diversion of legally produced pharmaceutical 
controlled substances in the U.S., and that drug users and 
traffickers also obtain these controlled substances from other 
places. For example, Mexican pharmacies.
    Both the U.S. and Mexican governments understand the issues 
and will continue to work together to address them. In fact, 
the DEA has two diversion investigators assigned to Mexico 
City--where they are responsible for coordinating bilateral 
regulatory efforts in any investigations of this sort of 
diversion.
    Turning to the science, we are fortunate to have NIDA 
providing the scientific basis for our policies. In fact, I 
would like to commend NIDA for the major initiative that it 
recently launched on prescription drug abuse and misuse.
    Unfortunately, there are a number of factors that indicate 
prescription drug use and abuse are increasing. I will give an 
illustrative example of this research, and I am certain that 
Dr. Leshner will address this issue more completely in his 
remarks.
    In 1999, more than 9 million Americans, age 12 and older, 
reported past year use of prescription drugs for non-medical 
reasons.
    That is from the National Household Survey from SAMHSA at 
HHS. Of these 9 million people, one-quarter or more misused 
prescription drugs for the first time the year prior to the 
survey.
    Furthermore, of these 9 million people, an estimated 4 
million reported using prescription drugs for non-medical 
purposes in the month prior to the survey. So, in conclusion, 
developing policy and implementing procedures to manage 
effectively the use and movement of controlled substances 
requires a holistic, long-term, and research-based approach.
    ONDCP is confident that the agencies involved will continue 
to make steady and significant progress on all of those fronts. 
Mr. Chairman, I am pleased to answer any questions at this 
time, or whenever it is appropriate.
    [The prepared statement of Donald R. Vereen follows:]
Prepared Statement of Donald R. Vereen, Jr., Deputy Director, Office of 
                      National Drug Control Policy
                              introduction
    On behalf of the Office of National Drug Control Policy (ONDCP), I 
want to thank the Subcommittee for the opportunity to testify before 
you on the subject of personal importation of controlled substances. 
Chairman Greenwood, Ranking Member Deutsch, distinguished members of 
the Subcommittee, we greatly appreciate your continuing interest in the 
public health and safety issues associated with the importation of 
pharmaceuticals. The critical oversight of this Subcommittee assists 
ONDCP in its coordinating role in ensuring continuity and consistency 
in the Executive Department and agency efforts to provide a 
comprehensive response to the issue of personal importation and 
potential diversion of controlled substances. This comprehensive 
response is essential to our success in reducing drug use and its 
consequences in our nation. We know that there is no single solution 
that can effectively address this multifaceted challenge. Drug use 
prevention, treatment, and research; as well as law enforcement, 
protection of our borders, drug interdiction, and international 
cooperation remain necessary components of our efforts.
coordination issues surrounding the personal importation of controlled 
                               substances
    As the Subcommittee is aware, ONDCP is a unique organization within 
the Executive Office of the President that has the dual mission of 
serving as the President's primary Executive Branch support for 
counter-drug policy and program oversight while managing several 
diverse programmatic responsibilities. ONDCP's policy role consists 
primarily of developing national drug control policy, developing drug 
control budget priorities, coordinating and overseeing the 
implementation of that policy, and evaluating drug control programs to 
ensure that federal departments and agencies remain focused and 
coordinated for maximum efficiency and effectiveness.
    ONDCP was recently asked to assist in coordinating a response to 
the challenges posed by the personal importation of controlled 
substances across the land border of the United States. ONDCP is 
particularly well-suited to provide such assistance, as this issue 
transcends the typical jurisdictional boundaries of one department or 
agency. However, ONDCP recognizes the great institutional expertise 
that resides in the other agencies represented today. ONDCP takes great 
pride in the fact that the Drug Enforcement Administration (DEA), the 
Food and Drug Administration (FDA), the United States Customs Service 
(USCS), and the National Institute on Drug Abuse (NIDA) are working 
closely together to ensure the citizens of our country can continue to 
rely on the guidelines established for using controlled substances in a 
manner that maximizes health, safety, and efficacy.
    ONDCP is committed to supporting our inter-agency counterparts in 
their efforts to implement a system with respect to the import of 
controlled substances that draws the appropriate balances among the 
need to prevent diversion, promote public health and safety by 
permitting travelers to have the pharmaceutical controlled substances 
they need, and the need for straightforward standards for Customs to 
apply at our busy ports of entry. Clearly, the solution to these 
challenges, is complex; it involves a variety of statutes, regulations, 
enforcement practices, research, and citizen awareness. As with any 
complex, multi-jurisdictional solution to a public health and safety 
issue, the perfect solution will not be conceived, or implemented 
overnight. There is no silver bullet approach; all affected departments 
and agencies must bring their own expertise and authorities to bear if 
we are to succeed. Recognizing that ONDCP only recently became involved 
in this coordination, the DEA and FDA have advised us that they will 
continue to provide the USCS with the guidance they require to carry 
out their mission relating to the importation of pharmaceuticals 
effectively and with limited inconvenience to licit commerce and 
personal travel. Clear guidance is essential if we expect Customs 
officials to continue their efforts, which typically process 1.3 
million passengers and nearly 350,000 vehicles at ports and border 
crossings across the United States each and every day of the year.
    The cross-border diversion of pharmaceutical controlled substances 
obviously has an international component. Some diversion of foreign 
produced pharmaceutical controlled substances involves U.S. drug users 
or traffickers who obtain controlled substance pharmaceuticals, 
including Rohypnol and OxyContin, from Mexican pharmacies. The U.S. 
government highlighted the need to better control the movement of 
prescription drugs during the April 2-3, 2001, U.S/Mexico Senior Law 
Enforcement Plenary. The Mexican government understands the issues and 
agreed to address them, although they have not yet presented a specific 
course of action. We will continue to follow-up with them. DEA has two 
diversion investigators assigned to Mexico City where they are 
responsible for coordinating bilateral regulatory efforts and any 
investigations of this sort of diversion.
    We cannot forget that the basis for our involvement is preserving 
the safety of our citizens. In order to maintain credibility with those 
we seek to protect, the approaches we employ must be rational and 
research-based. We are fortunate to have NIDA providing the scientific 
basis for our policies. In fact, I would like to commend NIDA for the 
major initiative it recently launched on prescription drug abuse and 
misuse, resulting in a Research Report on Prescription Drugs Abuse and 
Addiction. NIDA should also be recognized for its ability to translate 
its findings into clear, concise messages which it disseminates to 
professionals and the general public alike.
    Unfortunately, there are a number of factors that indicate 
prescription drug use and abuse are increasing:

 In 1999, more than nine million Americans aged 12 and older 
        reported past year use of prescription drugs for non-medical 
        reasons. (National Household Survey on Drug Abuse)
 Of those nine million people, one quarter or more misused 
        prescription drugs for the first time the year prior to the 
        survey.
 Furthermore, of those nine million people, an estimated 4 
        million reported using prescription drugs for non-medical 
        purposes in the month prior to the survey.
 NIDA's Community Epidemiology Work Group which monitors 21 
        major U.S. metropolitan areas for community-level drug use and 
        abuse trends, also reports a general increase in abuse of 
        selected prescription drugs in several cities in recent years.
                               conclusion
    Developing policy and implementing programs and procedures to 
manage effectively the use and movement of controlled substances 
requires a holistic, long-term, and research-based approach. While we 
cannot expect to resolve these challenges overnight, we can and will 
continue to make steady and significant progress on all fronts. Since 
becoming involved in this issue, ONDCP has convened several inter-
agency meetings to identify the myriad of issues involved in maximizing 
the effectiveness of our policy concerning the personal importation of 
controlled substances across the U.S. land borders. ONDCP will remain 
an active participant in the decision-making and implementation 
processes.
    We look to this Subcommittee, and indeed the entire Congress, to 
continue providing bipartisan leadership in this effort. ONDCP is 
committed to working within the Executive Branch, as well as with 
Congress, state and local governments, international participants, and 
private citizens to reduce drug use and its consequences in our nation.

    Mr. Greenwood. The Chair thanks the gentleman and we will 
hear from each of our witnesses, and then begin the 
questioning.
    Ms. Nagel.

                  TESTIMONY OF LAURA M. NAGEL

    Ms. Nagel. Chairman Greenwood, Ranking Member Deutsch, and 
other members of the subcommittee, I would like to thank you 
for the opportunity to address the subcommittee regarding 
current Federal law and DEA regulations which allow for the 
importation of controlled substances under the personal medical 
use exemption.
    I would also like to extend my personal condolences to the 
Rode family. Mr. Chairman, on behalf of Administrator Marshall, 
I would like to thank the subcommittee for its interest and 
support in assisting the DEA in carrying out our mission of 
enforcing the Nation's drug laws.
    The U.S. is party to two international treaties which 
control the international trade in licit narcotic and 
psychotropic substances: The United Nations Single Convention 
on Narcotics of 1961; and the United Nations Convention on 
Psychotropic Substances of 1971.
    The DEA is designated as the U.S. competent authority for 
ensuring the U.S. meets its obligations under these treaties. A 
critical obligation is our regulation and control of the import 
and export of licit narcotic and psychotropic substances.
    The U.S. law pertaining to licit controlled substances is 
contained in the Controlled Substances Act of 1970. Enforcement 
of the CSA is the responsibility of the DEA. The FDA also plays 
a critical role in regard to controlled substances.
    As the Federal authority for regulating all controlled and 
non-controlled prescription drugs from a health and safety 
perspective, the FDA's authority is contained in the Food, 
Drug, and Cosmetic Act.
    Thus, controlled substances are subject to regulation by 
both the FDA and DEA. Together, the FDCA and the CSA provide a 
framework to protect the health and safety of the American 
public, and collaboratively, the DEA and FDA strive for 
consistent application of Federal laws.
    Additionally, the United States Customs Service is 
responsible for enforcing the import and export provisions of 
the CSA at U.S. land borders. The CSA contains a personal 
medical use exemption to allow international travelers, both 
U.S. citizens and others, to leave and enter the U.S. with 
controlled substances for their personal legitimate medical 
use.
    This exemption is consistent with the 1971 Convention on 
Psychotropic Substances. The treaty clearly seeks to provide a 
means to allow international travelers to carry personal use 
quantities of controlled substance medications while visiting 
foreign countries.
    The CSA exemption does the same. However, neither the 
treaty nor the U.S. statutes permit controlled substances to be 
imported under the medical use provision via overnight courier, 
unaccompanied baggage, parcel service, U.S. or international 
mail.
    Nor does the exemption permit one person to enter the U.S. 
with controlled substances intended for the personal use of 
another person. The Controlled Substances Trafficking 
Prohibition Act was introduced in the U.S. House of 
Representatives on April 1, 1998, to amend the medical use 
exemption.
    It was signed into law by the President on November 10, 
1998. The Act addressed the fact that large quantities of 
controlled substances were being brought into the U.S. from 
Mexico by individuals misusing the exemption in order to divert 
pharmaceutical controlled substances into illicit channels.
    The bill amended the Controlled Substances Act to prohibit 
any U.S. resident from entering the U.S. with more than 50 
dosage units of a controlled substance through a land border 
crossing with Mexico or Canada unless they could demonstrate 
they possessed a valid prescription for the substance, and it 
was issued by a properly licensed U.S. physician.
    This does not mean that any U.S. resident may enter the 
U.S. with up to 50 dosage units of a controlled substance, no 
questions asked. Rather, the resident must satisfy all the 
requirements set forth in 21 CFR 1301.26.
    This includes the requirement that the importation is 
authorized or permitted under other Federal and State law. For 
example, if there is evidence that the drugs are not for 
legitimate personal medical use, and the same person makes 
repeated attempts over a short period of time to import new 
packages of controlled substances for claimed personal medical 
use, or the person has a variety of different controlled 
substances under circumstances that are indicative of 
diversion, the importation does not comply with either 
9569a)(1), or the DEA regulations, and therefore must be 
disallowed.
    Since the passage of the Act, the DEA has received 
information from the U.S. Customs Service that indicates that 
individuals are circumventing provisions of the personal 
medical use exemption.
    We are currently considering ways of addressing this 
problem, such as amending our regulation to provide the clarity 
and guidance that the Customs Service needs to develop a clear, 
concise, and enforceable policy for its inspectors at the 
Nation's borders.
    Before concluding, I would like to thank my colleagues at 
the FDA and U.S. Customs Service, and ONDCP for their 
cooperation in addressing this very important issue. Finally, 
Mr. Chairman, I think you and the members of the subcommittee 
for the opportunity to comment on this topic. I look forward to 
addressing any questions that you may have.
    [The prepared statement of Laura M. Nagel follows:]
 Prepared Statement of Laura M. Nagel, Deputy Assistant Administrator, 
      Office of Diversion Control, Drug Enforcement Administration
    Chairman Greenwood, Ranking Member Deutsch, and other members of 
the Subcommittee, I would like to thank you for the opportunity to 
address this Subcommittee regarding current federal law and DEA 
regulations which allow for the importation of controlled substances 
under the personal medical use exemption. Mr. Chairman, on behalf of 
Administrator Marshall, I would like to thank the Subcommittee for its 
interest and support in assisting the Drug Enforcement Administration 
(DEA) to carry out our mission of enforcing the Nation's drug laws.
    The United States is a party to two international treaties which 
control the international trade in licit narcotic and psychotropic 
substances: the United Nations Single Convention on Narcotics (1961) 
and the United Nations Convention on Psychotropic Substances (1971). 
The DEA is designated as the U.S. competent authority for ensuring that 
the United States meets its obligations under these treaties. A 
critical obligation is DEA's regulation and control of the import and 
export of licit narcotic and psychotropic substances.
    The U.S. law pertaining to licit controlled substances is contained 
in the Controlled Substances Act of 1970 (CSA). Enforcement of the CSA 
is the responsibility of the DEA. The Food and Drug Administration 
(FDA) also plays a critical role with regard to controlled substances. 
As the federal authority for regulating all controlled and non-
controlled prescription drugs from a health and safety perspective, the 
FDA's authority is contained in the Food, Drug and Cosmetic Act (FDCA). 
Thus, controlled substances are subject to regulation by both the FDA 
and the DEA. Together, the FDCA and the CSA provide a framework to 
protect the health and safety of the American public, and 
collaboratively, DEA and FDA strive for consistent application of 
federal laws. Additionally, the United States Customs Service is 
responsible for enforcing the import and export provisions of the CSA 
at U.S. land borders.
    The CSA contains a personal medical use exemption to allow 
international travelers, both U.S. citizens and others, to enter and 
leave the U.S. with controlled substances for their legitimate personal 
medical use. Specifically, Section 956(a) of the CSA, entitled 
``Exemption Authority, Individual Possessing Controlled Substance,'' 
states that the ``Attorney General may by regulation exempt from 
sections 952(a) and (b), 953, 954 and 955 of this title any individual 
who has a controlled substance (except substances in Schedule I) in his 
possession for his personal medical use, or for administration to an 
animal accompanying him, if he lawfully obtained such substance and he 
makes a declaration (or gives such other notification) as the Attorney 
General may by regulation require.''
    This exemption is consistent with the 1971 Convention on 
Psychotropic Substances. Article 4 (a) of the Convention states, with 
respect to psychotropic substances other than those in Schedule I, 
parties may permit: ``The carrying by international travellers of small 
quantities of preparations for personal use; each Party shall be 
entitled, however, to satisfy itself that these preparations have been 
lawfully obtained[.]'' The official commentary to the treaty explains 
the purpose of this provision: ``[This provision] applies only to small 
quantities needed for personal use, i.e. to such quantities as the 
traveller may require during his journey or voyage and until he is able 
to provide himself with the medicine in question in the country of 
destination . . . In view of the express provision that each Party 
(i.e. the countries of transit and destination) is entitled to satisfy 
itself that the preparations have been lawfully obtained, it would be 
useful to require the traveller to carry a medical prescription or in 
cases in which the prescription is withheld by the pharmacist, a 
duplicate or satisfactory copy of the prescription showing that the 
preparations have been lawfully acquired.''
    Clearly, the treaty seeks to provide a means to allow international 
travelers to carry personal use quantities of controlled substance 
medications while visiting foreign countries. The CSA exemption does 
the same; however, neither the treaty nor U.S. statutes permit 
controlled substances to be imported under the personal medical use 
provision via overnight courier, unaccompanied baggage, parcel service, 
U.S. or international mail. Nor does the exemption permit one person to 
enter or depart the U.S. with controlled substances intended for the 
personal medical use of another person.
    As set forth in the DEA regulation on this issue, 21 CFR Section 
1301.26, anyone who seeks to import a controlled substance for personal 
medical use must satisfy all of the following requirements:

(a) The controlled substance is in the original container in which it 
        was dispensed to the individual; and
(b) The individual makes a declaration to an appropriate official of 
        the U.S. Customs Service stating:
    1) The controlled substance is possessed for his/her personal use, 
            or for an animal accompanying him/her;
    2) The trade or chemical name and the symbol designating the 
            schedule of the controlled substance if it appears on the 
            container label, or if such does not appear on the label, 
            the name and address of the pharmacy or practitioner who 
            dispensed the substance and the prescription number, if 
            any; and
(c) The importation of the controlled substance for personal medical 
        use is authorized or permitted under other Federal laws and 
        state law.
    The ``Controlled Substances Trafficking Prohibition Act'' (``the 
Act'') (Pub. L. 105-357), was introduced in the U.S. House of 
Representatives on April 1, 1998, to amend the Personal Medical Use 
Exemption. It was signed into law by the President on November 10, 
1998. The Act addressed the fact that large quantities of controlled 
substances were being brought into the U.S. from Mexico by individuals 
misusing the exemption in order to divert pharmaceutical controlled 
substances into illicit channels. The bill amended the CSA to prohibit 
any U.S. resident from entering the U.S. with more than 50 dosage units 
of a controlled substance through a land border crossing with Mexico or 
Canada unless they demonstrate that they posses a valid prescription 
for the substance, issued by a properly licensed U.S. physician. This 
does not mean that any U.S. resident may enter the United States with 
up to 50 dosage units of a particular controlled substance ``no 
questions asked.'' Rather, the resident must satisfy all the 
requirements set forth in 21 CFR 1301.26. States may impose additional 
requirements as well.
    For example, if there is evidence that the drugs are not for 
legitimate personal medical use (e.g., the same person has made 
repeated attempts over a short time period to import new packages of 
controlled substances for claimed personal medical use; or the person 
has a variety of different controlled substances under circumstances 
that are indicative of diversion), the importation does not comply 
either with Sec. 956(a)(1) nor the DEA regulations and must, therefore, 
be disallowed.
    Furthermore, the requirement specified in 21 CFR 1301.26(c)--that 
the importation for personal medical use is authorized or permitted 
under other Federal laws and state law--must be satisfied regardless 
whether the person importing is a U.S. resident with no more than 50 
dosage units of a controlled substance. For example, if a person were 
seeking to import a particular controlled substance for personal 
medical use, and the Food and Drug Administration advised the United 
States Customs Service that importation of the drug should be 
disallowed under the Food, Drug, and Cosmetic Act, the importation 
would not comply with 21 CFR 1301.26(c) and would have to be denied.
    In the same way, if a person sought to import a controlled 
substance for purported personal medical use when entering the United 
States in a border state that prohibits either the importation or 
possession of the controlled substance, such importation must be 
disallowed under 21 CFR 1301.26(c).
    Since the passage of the Act, DEA has received information from the 
United States Customs Service that indicates that individuals are 
circumventing provisions of the Personal Medical Use Exemption by 
making repeated trips across the border to obtain controlled 
substances. We are currently considering ways of addressing this 
problem, such as amending DEA's regulations to provide the clarity and 
guidance that the Customs Service needs to develop a clear, concise and 
enforceable policy for its inspectors at the Nation's land borders.
    Before concluding, I would like to thank my colleagues at the Food 
and Drug Administration, the United States Customs Service, and the 
Office of National Drug Control Policy for their cooperation in 
addressing this very important issue. Finally, Mr. Chairman, I thank 
you and the members of this Subcommittee for the opportunity to comment 
on this topic. I look forward to addressing any questions that you may 
have at the appropriate time.

    Mr. Greenwood. The Chair thanks the gentlelady for her 
testimony, and recognizes Mrs. Elizabeth Durant from the U.S. 
Customs Service for hers.

                TESTIMONY OF ELIZABETH G. DURANT

    Ms. Durant. Mr. Chairman, and members of the committee, 
thank you for this opportunity to testify. I man Elizabeth 
Durant, Executive Director of Trade Programs at the U.S. 
Customs.
    Today, I would like to discuss with you the U.S. Custom's 
efforts to address the rising trend of personal and bulk 
importations of pharmaceutical products into the United States. 
I would also like to extend our sympathy on behalf of the U.S. 
Customs to the Rode family.
    The Customs Service enforces over 400 regulations for more 
than 40 other Federal agencies at U.S. borders. These include 
the laws that prohibit the importation of illegal or unapproved 
pharmaceuticals that fall under the jurisdiction of both the 
FDA and DEA.
    The Customs Services is concerned with three particular 
aspects of the importation of pharmaceuticals; those that are 
purchased through the Internet and shipped through our 
international mail facilities; those carried into the United 
States by individuals transiting our land borders; and imports 
of bulk shipments of pharmaceuticals.
    The growth of the Internet has spawned a wave of 
pharmaceutical purchases on-line. These purchases are most 
commonly sent through the U.S. mail. We have Customs Inspectors 
stationed at 14 international mail branches at postal 
facilities across the United States to contend with these 
shipments.
    Detecting prohibited pharmaceuticals among the tens of 
millions of parcels passing through our mail facilities each 
year presents a massive challenge. Our limited resources 
require a risk management approach with which we utilize 
advance intelligence, records of past seizures, and other 
factors to locate packages that present the most significant 
threat.
    Customs laboratories also play a critical part in our 
investigations. Their expertise is world-renowned. We maintain 
fully equipped labs at seven locations around the country. In 
addition, we have three mobile labs to deploy at any point 
along our borders.
    We are confident in the forensic capability of our labs to 
find discrepancies in shipments of bulk and finished 
pharmaceuticals. But where we do require assistance, 
specifically from the Food and Drug Administration, is in the 
establishment of effective national standards for the 
interdiction of pharmaceuticals subject to FDA laws.
    The development of such standards is critical to customs. 
To that end, we have been working closely with FDA to develop 
the needed guidelines. We began by forming a joint task force 
to examine pharmaceutical purchases shipped by U.S. mail.
    The task force set up a pilot in Los Angeles at the Carson 
mail facility. During that time the FDA detailed four full-time 
employees, who observed first-hand the daunting volume of 
packages screened by Customs every day.
    Over a period of 24 work days, the FDA detained a total of 
721 parcels, or just over 93 percent of this amount were denied 
entry, and only 44 were released. It is important to note that 
without the presence of FDA inspectors, U.S. Customs would have 
had to detain 3,000 packages per week, or about 16,000 packages 
over an equal time span under the existing guidelines provided 
to your personnel.
    In light of these results, we understand that the FDA is 
revising its current policy to reflect a more practical and 
workable approach. Customs is working with the FDA to devise 
additional means to improve screening for these products.
    However, we are awaiting the FDA's final policy before we 
decide whether or not to move ahead with these initiatives. 
Travelers who attempt to import pharmaceuticals upon their 
return to the U.S. are also a source of concern.
    Again, we are seeking guidance from FDA and DEA on this 
front. Recently, Customs proposed a plan that more sharply 
defines the current broad discretion given to Customs 
Inspectors to decide whether or not an importation is for a 
legitimate personal medical use. That plan is currently under 
review by both agencies.
    While the Customs Service is currently focusing a great 
deal of effort on the interdiction of finished pharmaceuticals, 
we also recognize the threat posed by the importation of bulk 
pharmaceuticals.
    In meetings with the Pharmaceutical Security Institute and 
other members of the pharmaceutical security community, the 
problem of counterfeit bulk pharmaceuticals continues to be a 
priority.
    PSI asserts the opinion that foreign trade zones that 
produce finished pharmaceuticals habitually import cheap 
counterfeit bulk pharmaceuticals to support their production. 
In response, Customs initiated a multi-faceted counterfeit 
pharmaceutical interdiction program called Operation Safeguard.
    Operation Safeguard was carried out between September and 
October of 2000 at the International Mail Branches at Dulles 
Airport and Oakland, California. The operation was intended to 
give Customs a snapshot of the types of pharmaceutical products 
entering the United States.
    That snapshot revealed that a vast percentage, perhaps as 
much as 90 percent of the pharmaceuticals that enter the U.S. 
via the mail do so in a manner that violates FDA and/or DEA 
requirements.
    Counterfeit pharmaceuticals enter in both wholesale and 
retail quantities. Additional problems include expired 
materials, products that have not been approved by the FDA, 
products made in facilities not under proper regulation, and 
products not having the proper usage instructions.
    To offer an example, our seizures included a 3,000 tab 
shipment of a counterfeit drug with an expiration date of 1980.
    Under the second stage of Operation Safeguard, scheduled to 
begin shortly, Customs will focus on bulk pharmaceuticals 
processed in various facilities around the country, including 
foreign trade zones. This will help us to determine the level 
of counterfeiting taking place.
    In addition, our Office of Investigations is continuing to 
work with the FDA and DEA to combat the sale of prohibited 
pharmaceuticals via the Internet. Customs' CyberSmuggling 
Center is playing a leading role in these cases. Our efforts to 
date have included a successful investigation with authorities 
in Thailand that closed down seven on-line pharmaceutical sites 
operating in that country.
    Just last March, Thai authorities, again using information 
developed by Customs, executed three search warrants at the 
headquarters of an illegal Internet pharmacy marketing steroids 
and Viagra.
    From an overall perspective, a spiraling volume of goods at 
our borders has put immense pressure on our ability to enforce 
the Nation's laws while facilitating international trade. We 
have taken many steps to address the anticipated challenges.
    I want to thank you and the members of the committee for 
considering the Customs Service in your review of the 
importation of personal and bulk pharmaceuticals. This is an 
issue that speaks directly to our mission.
    We will continue to make every effort possible to work with 
Congress and our fellow inspection agencies to address the 
health and safety concerns of the American people. Mr. 
Chairman, we have a short video. If you have time, we would 
like to show you so that you can see.
    Mr. Greenwood. Without objection, we would be delighted to 
see the video.
    [Video shown.]
    Ms. Durant. This is a video of operations at our mail 
facility at Dulles International Airport. You can see that the 
mail comes to us on conveyer belts delivered from the Postal 
Service. We x-ray all packages of foreign mail. From the x-rays 
and other factors, based on the experience of our inspectors, 
sort from this vast number to determine those that present the 
greatest risk for evasion.
    The Dulles facility receives approximately 70,000 packages 
a week. I know, because I was just in Memphis that our Fed Ex 
hub receives 70,000 packages a night. So it is quite a daunting 
task for us to refine our sorting so that we have the best 
chance of capturing those that are at most risk to the American 
public.
    You can see the kinds of drugs that come in through the 
mail. They are not even in bottles many times, just loose in 
paper. We have counterfeit drugs. We have grey market drugs. We 
have prohibited drugs, and we have unapproved drugs, the whole 
gamut of illegal substances through our mail facility at 
Dulles. This is a situation that is pretty much replicated 
around the country.
    While many of the illegal substances are smuggled and are 
hidden on purpose, some are just in packages, in boxes. I guess 
they figure they will take their chances that we won't catch 
them. This is a daily occurrence at Dulles. Thank you.
    Mr. Chairman, I have a few examples to show you of the 
kinds of things that we find that we know could not possibly be 
for personal use. This first parcel is multiple types of 
prescription drugs in a single package. This particular package 
was imported from Thailand. We believe it's for black market 
distribution in the United States. We believe that these kinds 
of shipments then go to garage type pharmacies that may be 
operating domestically in the United States, as well as the 
ones overseas.
    These are grey market drugs which are available in the 
United States. We don't know what the strength of them is. 
There is no guarantee that the user has the correct warning 
implications, all the issues this committee brought up earlier 
today about the supervision of taking prescription drugs that's 
needed.
    This is a scheduled substance. This is actually fen-phen, 
which has been prohibited in the United States.
    This substance is gammahydroxybutyrate, which is used in 
conjunction with the date rape drug. It is used in club scenes 
known as liquid X. It is linked to date rape because of the 
confusion and unconsciousness that it causes.
    This is your seizure, Mr. Chairman. This is the amylnitrate 
labeled as Jungle Juice, that you saw when you were out at our 
Dulles facility. So you can see it is an amazing array of the 
different types of things that we're finding every day.
    Thank you, sir. I will be happy to take questions later.
    [The prepared statement of Elizabeth G. Durant follows:]
Prepared Statement of Elizabeth G. Durant, Executive Director of Trade 
                  Programs at the U.S. Customs Service
    Mr. Chairman, members of the Committee, thank you for this 
opportunity to testify. I am Elizabeth Durant, Executive Director of 
Trade Programs at the U.S. Customs Service. Today I would like to 
discuss with you U.S. Customs' efforts to address the rising trend of 
personal and bulk importations of pharmaceutical products into the 
United States.
    The Customs Service enforces over 400 regulations for more than 40 
other federal agencies at U.S. borders. These include the laws that 
prohibit the importation of illegal or unapproved pharmaceuticals that 
fall under the jurisdiction of both the FDA and DEA.
    The Customs Service is concerned with three particular aspects of 
the importation of pharmaceuticals: those that are purchased through 
the Internet and shipped through our international mail facilities; 
those carried into the United States by individuals transiting our land 
borders, and imports of bulk shipments of pharmaceuticals.
    The growth of the Internet has spawned a wave of pharmaceutical 
purchases on-line. These purchases are most commonly sent through the 
U.S. mail. We have Customs Inspectors stationed at fourteen 
international mail branches at postal facilities across the United 
States to contend with these shipments. These facilities are located at 
New York's John F. Kennedy Airport; Newark, New Jersey; Dulles Airport 
in Virginia, Chicago, Detroit, Buffalo, Miami, Dallas, Charlotte, 
Honolulu, Carson Airport in Los Angeles, Seattle, and Oakland/San 
Francisco.
    Detecting prohibited pharmaceuticals amongst the tens of millions 
of parcels passing through our mail facilities each year presents a 
massive challenge. Our limited resources require a risk management 
approach, with which we utilize advance intelligence, records of past 
seizures, and other factors to locate packages that present the most 
significant threat.
    Customs laboratories also play a critical part in our 
investigations. Their expertise in analyzing everything from textiles, 
to foreign oil, to food products to determine point of origin and 
composition is world-renowned. We maintain fully equipped labs at the 
following locations: New York; Chicago; Savannah; New Orleans; Los 
Angeles; San Francisco and San Juan. In addition, we have three mobile 
labs to deploy at any point along our borders.
    We're confident in the forensic capability of our labs to find 
discrepancies in shipments of bulk and finished pharmaceuticals. But 
where we do require assistance, specifically from the Food and Drug 
Administration, is in the establishment of effective national standards 
for the interdiction of pharmaceuticals subject to FDA laws.
    The development of such standards is critical to Customs. To that 
end, we have been working closely with FDA to develop the needed 
guidelines. We began by forming a joint task force to examine 
pharmaceutical purchases shipped by U.S. mail. The task force set up a 
pilot program in Los Angeles at the Carson mail facility. The pilot ran 
for thirty days, from January 15th through February 15th of this year. 
During that time, FDA detailed four full-time employees who observed 
first-hand the daunting volume of packages screened by Customs every 
day.
    Over a period of twenty-four work-days, the FDA detained a total of 
721 parcels. 677 parcels, or just over 93 percent of this amount, were 
denied entry and 44, or six percent, were released for delivery by the 
Postal Service. It is important to note that without the presence of 
FDA inspectors, U.S. Customs would have had to detain some 3,000 
packages per week, or about 15,000 packages over an equal time span, 
under the existing guidelines provided to our personnel.
    In light of these results, we understand that the FDA is revising 
its current policy to reflect a more practical and workable approach. 
Customs is working with the FDA to devise additional means to improve 
screening for these products, such as implementation of a pre-approval 
process and the installation of digital cameras in mail facilities to 
supplement staffing shortfalls. However, we are awaiting the FDA's 
final policy before we decide whether or not to move ahead with these 
initiatives.
    Travelers who attempt to import pharmaceuticals upon their return 
to the U.S. are also a source of concern. Again, we are seeking the 
guidance of the FDA and DEA on this front. Recently, Customs proposed a 
plan that that more sharply defines the current broad discretion given 
to Customs inspectors to decide whether or not an importation is for a 
``legitimate personal medical use''. That plan is currently under 
review by both agencies.
    While the Customs Service is currently focusing a great deal of 
effort on the interdiction of finished pharmaceuticals, we also 
recognize the threat posed by the importation of bulk pharmaceuticals. 
In meetings with the Pharmaceutical Security Institute (PSI) and other 
members of the pharmaceutical security community, the problem of 
counterfeit bulk pharmaceuticals continues to be a priority. PSI 
asserts the opinion that foreign trade zones that produce finished 
pharmaceuticals habitually import cheap counterfeit bulk 
pharmaceuticals to support their production.
    In response, Customs initiated a multi-faceted counterfeit 
pharmaceutical interdiction program called ``Operation Safeguard''. 
Operation Safeguard was carried out between September and October of 
2000 at the International Mail Branches at Dulles Airport and Oakland, 
California. The operation was intended to give Customs a snapshot of 
the types of pharmaceutical products entering the United States. That 
snapshot revealed that a vast percentage--perhaps as much as eighty to 
ninety percent--of the pharmaceuticals that enter the U.S. via the mail 
do so in a manner that violates present FDA and/or DEA requirements. 
Counterfeit pharmaceuticals enter in both wholesale and retail 
quantities. Additional problems include expired materials, products 
that have not been approved by the FDA for usage, products made in 
facilities not under proper regulation and products not having the 
proper usage instructions. To offer an example, our seizures included a 
three thousand-tab shipment of a counterfeit drug with an expiration 
date of 1980 on it.
    Additionally, it was found that many parcels contained different 
types of pharmaceuticals that, if taken simultaneously, could cause 
dangerous interactions. These products could easily be purchased by 
individuals not under the direct supervision of a physician. Thus, we 
cannot assume that they would be used properly.
    It is important to note that after three weeks of Operation 
Safeguard, the quantity of illegal and defective pharmaceutical 
shipments slowed significantly.
    Under the second stage of Operation Safeguard, scheduled to begin 
shortly, Customs will focus on bulk pharmaceuticals processed in 
various facilities around the country, including Foreign Trade Zones 
outside the United States. This will help us to determine the level of 
counterfeiting taking place.
    In addition, our Office of Investigations is continuing to work 
with the FDA and DEA to combat the sale of prohibited pharmaceuticals 
via the Internet. Customs' CyberSmuggling Center is playing a leading 
role in these cases. Our efforts to date have included a successful 
investigation with authorities in Thailand that closed down seven, on-
line pharmacy sites operating in that country. As a result, we saw a 
marked decrease in subsequent pharmaceutical seizures from Thailand. 
Just last March, Thai authorities, again using information developed by 
Customs, executed three search warrants at the headquarters of an 
illegal Internet pharmacy marketing steroids and Viagra.
    From an overall perspective, a spiraling volume of goods at our 
borders has put immense pressure on our ability to enforce the nation's 
laws while facilitating international trade. We have taken many steps 
to address anticipated challenges, including refinement of our 
targeting approach and development of a resource allocation model to 
project future staffing needs across the country. But we still face a 
daunting workload.
    I want to thank you and the members of the Committee for 
considering the Customs Service in your review of the importation of 
personal and bulk pharmaceuticals. This is an issue that speaks 
directly to our mission. We will continue to make every effort possible 
to work with the Congress and our fellow inspection agencies to address 
the health and safety concerns of the American people.

    Mr. Greenwood. We thank you very much for your testimony.
    The Chair recognizes Dr. Alan Leshner, Director of the--I 
apologize. Next we will hear from Mr. William Hubbard of the 
Food and Drug Administration.

                TESTIMONY OF WILLIAM K. HUBBARD

    Mr. Hubbard. Thank you, Mr. Chairman. I am joined by John 
Taylor and Jeffrey Shuren from FDA in case we need further 
expertise. I, too, have cluttered up your table, and I 
apologize for that. Of course I have written testimony for the 
record.
    Mr. Chairman, the committee has been examining a number of 
issues dealing with drug safety, counterfeiting, foreign 
inspections, controlled substances, and personal importation. I 
would like to focus today on the personal importation issue, if 
I may.
    When I testified here last May on Internet sales, I think 
that we and the committee agreed that the State and Federal 
authorities had the tools and the will to perhaps get some of 
the domestic sites under control with various existing laws, 
perhaps supplemented by new laws that might be necessary. But I 
think we recognized at the time that the bigger problem was 
foreign sites. We were very concerned about that. I think we 
were right, because these things that Ms. Durant and others are 
showing you and the things I have in front of me are evidence 
of that.
    We took some of the same sorts of samples and asked 
physicians at FDA to tell us about them, what they are. Of 
course, they do come in the same way that Ms. Durant stated--
this is one with four drugs in it, four packages. Inside is a 
little bag of pills. We don't know what that is. So it's a wide 
variety. We have injectibles from Spain. We have a seasonal 
allergy drug that's approved here in a form, but this one is 
not. We have an over-the-counter drug. We have an anti-
psychotic drug. We have drugs for heart conditions. We have 
oxycontin. We have an interesting one here. This is labeled as 
a seasonal allergy drug, but if you look more closely, inside 
is a controlled substance. I'm not sure the folks at the ports 
will be able to very easily make that distinction.
    So we see a wide range of these sorts of products. They 
really do pose risk. As you saw when you came to Dulles, they 
come in packages with clothing and personal effects, all kinds 
of things. They are very small packages that really overwhelm 
our ability to do much with them.
    So we have been examining this issue, Mr. Chairman. We have 
been surveying the drugs that come in. We have been consulting 
with our sister agencies, and we have been carefully 
considering what to do about this. The inescapable conclusion 
for us is that these drugs are virtually all unapproved in the 
United States. They are provided without proper manufacturing 
controls. They often lack instructions for safe use, and they 
may be counterfeit, or worse. These factors, combined with the 
rapid increase in the Internet that's caused the explosion of 
these things, leads us to believe that they pose a risk to our 
citizens that must be reduced.
    So, accordingly, we have recommended to Health and Human 
Services Secretary Thompson that he approve our recommendation 
to request that the Customs Service deny entry of all of these 
drugs, and to return them to their sender. We would create one 
exception for patients with serious diseases, such as cancer, 
who need an unapproved drug from a foreign country to save 
their life, at least to give them hope of saving their life. We 
would need to set up some sort of a compassionate use process 
to allow those drugs in. But that would be the only exception.
    I will say that if the administration agrees with us on 
this, we are going to need to come back to the Congress, 
because now the process requires us to give the recipients of 
these products notice. If you take our data from the California 
example and extrapolate it to an annual rate, it's perhaps 2 
million of these a year at current rates, and perhaps growing. 
We can't go through the process that we must now go to, which 
is to mail a letter to the recipient, receive a response back, 
and go through that 2 million times. We need to be able to make 
a blanket assessment that these things are not safe for 
American consumers and should be turned back. I believe the 
Customs Service agrees with that. So if Secretary Thompson and 
the administration agree, that will be the approach we intend 
to take.
    [The prepared statement of William K. Hubbard follows:]
Prepared Statement of William K. Hubbard, Senior Associate Commissioner 
   for Policy, Planning and Legislation, Food and Drug Administration
                              introduction
    Mr. Chairman and Members of the Committee, I am William K. Hubbard, 
Senior Associate Commissioner for Policy, Planning and Legislation, 
Food and Drug Administration (FDA or the Agency). I appreciate the 
opportunity to discuss our mutual concerns related to the importation 
of drugs into the United States (U.S.). This topic encompasses a range 
of issues, including the importation by individuals of prescription 
drugs at land borders or through the mail; the introduction into the 
U.S. of controlled substances from foreign sources under the guise of 
personal importation; the potential introduction of counterfeit bulk 
drugs into the U.S. drug supply; and the purchase of drugs from foreign 
sources over the Internet. We appreciate the leadership this Committee 
has taken in keeping these issues at the forefront. Let me begin by 
discussing one of our greatest challenges in this area.
             personal importation of drugs through the mail
    The amount of prescription drugs for personal use imported through 
the mail has increased in recent years. According to testimony by the 
U.S. Customs Service (Customs) before the Government Reform Committee 
in May of last year, seizures of parcels containing scheduled or 
controlled substances at international mail facilities increased by 450 
percent in FY 1999, primarily due to drug sales over the Internet. We 
estimate that approximately two million parcels containing FDA-
regulated products for personal use enter the U.S. each year through 
international mail facilities that Customs could set aside for FDA 
review for possible violations of the Federal Food, Drug, and Cosmetic 
(FD&C) Act. This estimate is based on an extrapolation of data obtained 
during a pilot project conducted at the international mail facility in 
Carson, California (see below).
    Under the FD&C Act, unapproved, misbranded, and adulterated drugs 
are prohibited from importation into the U.S., including foreign 
versions of U.S.-approved medications, as is reimportation of approved 
drugs made in the U.S. In general, all drugs imported by individuals 
fall into one of these prohibited categories.
    From a public health standpoint, importing prescription drugs for 
personal use is a potentially dangerous practice. FDA and the public do 
not have any assurance that unapproved products are effective or safe, 
or have been produced under U.S. good manufacturing practices. U.S.-
made drugs that are reimported may not have been stored under proper 
conditions, or may not be the real product, because the U.S. does not 
regulate foreign distributors or pharmacies. Therefore, unapproved 
drugs and reimported approved medications may be contaminated, 
subpotent, superpotent, or counterfeit. In addition, some foreign web 
sites offer to prescribe medicines without a physical examination, 
bypassing the traditional doctor-patient relationship. As a result, 
patients may receive inappropriate medications because of misdiagnoses, 
or fail to receive appropriate medications or other medical care, or 
take a product that could be harmful, or fatal, if taken in combination 
with other medicines they might be taking.
Personal Importation Policy
    Under FDA's personal importation policy, as described in guidance 
to the Agency's field personnel, FDA inspectors may exercise 
enforcement discretion to permit the importation of certain unapproved 
prescription medication for personal use.
    First adopted in 1954, the policy has been modified several times 
over the succeeding years. It was last modified in 1988, in response to 
concerns that certain potentially effective treatments for AIDS 
patients were not available in the U.S., but were available in other 
countries. The Agency expanded the guidance for humanitarian purposes 
to allow individuals suffering from serious medical conditions to 
acquire medical treatments legally available in foreign countries but 
not approved in the U.S.
    The current policy permits the exercise of enforcement discretion 
to allow entry of an unapproved prescription drug if:

 the product is for personal use (a 90-day supply or less, and 
        not for resale);
 the intended use is for a serious condition for which 
        effective treatment may not be available domestically (and, 
        therefore, the policy does not permit inspectors to allow 
        foreign versions of U.S.-approved drugs into the U.S.);
 there is no known commercialization or promotion to U.S. 
        residents by those involved in the distribution of the product;
 the product is considered not to represent an unreasonable 
        risk; and
 the individual seeking to import the product affirms in 
        writing that it is for the patient's own use and provides the 
        name and address of the U.S. licensed doctor responsible for 
        his or her treatment with the product or provides evidence that 
        the product is for the continuation of a treatment begun in a 
        foreign country.
    FDA has not officially permitted the importation of foreign 
versions of U.S.-approved medications, even if sold under the same 
name, because these products are unapproved, and the Agency has no 
assurance that these products are safe or effective, while safe and 
effective versions are already available in the U.S.
    FDA believes that the need for its personal importation policy is 
far less now than it was when the current version of the policy was 
developed in 1988. Now, due to faster review times and various 
regulatory mechanisms through which patients can obtain unapproved 
treatments for humanitarian purposes, the need to import therapies not 
available in the U.S. has diminished. According to a Tufts University 
study presented in September 2000, 80 percent of new molecular entities 
approved in the U.S. in 1996 through 1998 received that approval within 
a year of its first introduction on the world market, almost double the 
rate during the years 1991 through 1995.
Implementation of the Personal Importation Policy
    At mail facilities, Customs officials identify parcels that may be 
violative of the FD&C Act. FDA inspectors then determine if these 
products should or should not be permitted to enter the country. If 
detained, FDA must issue a notice to the addressee describing the 
potential Federal violation and provide the individual with an 
opportunity to respond. If the addressee does not respond or provides 
an inadequate response, FDA will give the parcel back to Customs to 
have it returned to the exporter. Due to the requirements for notice 
and the opportunity to respond, the process for detaining and further 
processing mail parcels consumes large amounts of FDA resources. In 
addition, much storage space would be needed to hold the large number 
of detained parcels pending replies from the addressees.
    FDA's personal importation policy, as written, is difficult to 
implement. This is due, at least in part, to the difficulty faced by 
FDA inspectors, or even health care practitioners, in identifying a 
medicine by its appearance, and labeling may falsely identify a 
product. From a practical standpoint, FDA inspectors cannot examine 
drug products contained in a mailed parcel and accurately determine the 
identity of such drugs or the degree of risk posed to the individual 
who will receive these drugs.
    FDA detains and refuses few mail imports for personal use. As a 
consequence, the tens of thousands of parcels that FDA does not review 
are eventually released by Customs and sent on to their addressees, 
even though the products contained in these parcels may appear to 
violate the FD&C Act and may pose a health risk to consumers. We do not 
believe this is an acceptable public health outcome and are working to 
develop a solution.
HHS Plan to Address Mail Imports for Personal Use
    Due to the inability of FDA to cope with the volume of medications 
imported for personal use through the mail, and because of the public 
health risks associated with these products (as discussed below), FDA 
has been working to develop a more effective personal importation 
policy. In addition, we recognize that Customs is dependent on guidance 
from FDA, and one of our goals is to provide clear and simple standards 
for assessing parcels containing drug products. We are discussing 
options for revisions to the Agency's personal importation policy with 
Secretary Thompson.
                       carson mail facility pilot
    Earlier this year, FDA and Customs conducted a survey of imported 
drug products entering the U.S. through the Carson City, California 
mail facility (the Carson pilot). The Carson pilot was proposed by 
Customs as a means to examine incoming mail shipments of pharmaceutical 
products over a specified time frame in order to identify both the 
volume and the types of drug products entering the U.S. We also hoped 
to better assess the efforts required to cover drug importations at a 
mail facility, and to gain a better understanding of the public health 
implications these importations may have for U.S. consumers.
    The Carson pilot ran for a five-week period, with FDA inspectors 
present for 40 hours per week. At the onset, Customs took a 
``baseline'' sample in the first week by setting aside all 
international packages that were suspect, or that they would have set 
aside for FDA review had FDA been able to process them. The number of 
packages set aside was approximately 3,300. Multiplying that number by 
five weeks provides an estimated total of 16,500 international packages 
(650 packages per day) that Customs could have set aside for FDA review 
during the Carson pilot, if the ability to process them was not a 
factor. After the first week, however, Customs actually set aside the 
number of packages they believed FDA would be able to examine. In 
general, during each week of the Carson pilot, more packages were set 
aside than FDA was able to handle.
    FDA was actually able to examine 1,908 packages during the five-
week pilot, an average of approximately 381 packages per week. Neither 
FDA nor Customs kept a count of the packages that were set aside but 
not examined. Unexamined packages were sent on to the addressees.
    Of the 1,908 packages examined by FDA, 721 parcels were detained 
and the addressees notified that the products appeared to be unapproved 
for use in the U.S., misbranded and/or a drug requiring a doctor's 
prescription. The parcels were shipped from a total of 19 countries, 
and overall, there was no obvious evidence of the products being 
imported for further commercial distribution. On average, the Agency 
was detaining at a rate of 144 packages per week, or about 38 percent 
of those examined.
    Clearly, the Carson pilot demonstrated that the rate of packages 
coming into the U.S. exceeds FDA's capacity to manage, thus, Customs is 
left with little choice but to forward the majority of packages to 
addressees. As we stated, we do not believe this is an acceptable 
public health outcome, and we are working to develop a solution.
Analysis of the Carson Pilot Drug Parcels
    In order to define better the nature of the risk to public health 
from the types of products coming into the U.S. through personal 
importation, FDA's Center for Drug Evaluation and Research (CDER) 
reviewed listings of the products detained during the Carson pilot. 
CDER's review demonstrates that there are serious public health risks 
associated with many of the 721 drug shipments (composed of 197 
different drugs) intercepted at Carson. In general, there are two types 
of risks that consumers of these drugs would face. The first type of 
risk is that associated with taking drugs of unknown origin or quality. 
Second are the very significant risks associated with taking many of 
these drugs without first obtaining a physician's prescription and 
without the continued oversight of the physician.
Risks Associated with Drugs of Unknown Origin or Quality
    In general, FDA has no information to establish where these drugs 
were actually manufactured and whether necessary current Good 
Manufacturing Practice requirements were followed. There is also no 
assurance that the drugs were packaged and stored under appropriate 
conditions to avoid degradation or contamination.
    Approximately eight percent of the shipments contained drugs that 
could not be identified because they contained no labeling; some of 
these contain only foreign language labeling. Most of these drug 
shipments were contained in plastic bags; one shipment contained drugs 
taped between magazine pages.
    Several drugs do not appear to correspond with any U.S.-approved 
drugs and the risks are therefore difficult to assess. One drug was 
evaluated for FDA approval but was denied approval. This drug is 
associated with cardiac abnormalities and its efficacy could not be 
successfully demonstrated. Another drug approved abroad but not in the 
U.S. is associated with medically serious gastro-intestinal 
complications. Several shipments contained three drugs that were once 
approved by FDA but have been withdrawn from the market based on 
serious safety concerns, including:

 fatal arrhythmia and dangerous drug interactions;
 loss of white blood cells (agranulocytosis) associated with 
        fatal infections; and
 hemorrhagic stroke.
Risks Associated with the Absence of Physician Oversight
    The vast majority of the shipments were identified as containing 
prescription drugs, which by definition, have serious toxicities and 
risks associated with them such that they are ``not safe for use except 
under the supervision of a practitioner licensed by law to administer 
such drug.'' (Title 21, United States Code, section 353(b)). Although 
some foreign Internet sites might offer an online questionnaire, we 
believe that very few, if any, require a prescription from a 
practitioner licensed in the U.S. before dispensing such drugs to U.S. 
residents. Moreover, after detention notices were issued to the 
intended recipients of the 721 drug shipments, fewer than four percent 
presented evidence of prescriptions to document their relationship with 
a physician in association with the drugs purchased from abroad. The 
lack of adequate English language labeling accompanying many of these 
shipments exacerbates the risks associated with the absence of 
physician oversight.
    During the Carson pilot, as in normal practice, Customs generally 
separated out controlled substances for processing by the Drug 
Enforcement Administration (DEA) before the remaining shipments were 
provided for FDA review. However, in FDA's review, six controlled 
substances were identified, including lorazepam, codeine sulfate, 
loperamide, chlordiazepoxide, chloral hydrate, and diphenoxylate. These 
drugs have the potential to cause addiction or be abused. Life-
threatening overdoses are possible. A physician's prescription and 
oversight are essential for managing these risks.
    There are numerous drugs identified on the Carson list that are 
intended to treat conditions that consumers need physicians to properly 
diagnose. As a result, consumers who bypass physician diagnosis and 
prescribing may be exposing themselves to risks and toxicities that 
cannot be justified by offsetting benefits to those patients.

 For example, almost ten percent of the shipments were for 
        antibiotics, despite the fact that consumers are generally not 
        able to diagnose whether their symptoms are caused by bacterial 
        infections. The overuse of antibiotics continues to be a 
        serious public health concern because it is linked to the 
        growth of antibiotic resistant-bacteria.
 Several drugs listed are potent steroids, which are generally 
        prescribed for conditions that are not self-diagnosable. In 
        addition, potential adverse events associated with these drugs, 
        including diabetes, hypertension, and serious infection require 
        prompt attention and careful monitoring.
    There are many drugs on the list for which it is essential that the 
proper dose be delivered into the bloodstream at the proper rate. Some 
of these drugs have a narrow range in which they can safely achieve 
their therapeutic effect. At least seven such drugs were identified on 
the Carson list. Without FDA oversight, there is the risk that these 
drugs may not have been manufactured with the necessary quality 
controls to ensure a consistently safe and effective product.

 One seizure medication on the Carson list, for which there 
        were three shipments, could be very dangerous if not 
        manufactured to these rigorous standards. Any change in potency 
        could render the drug ineffective or highly toxic.
 Another seizure drug on the list for which physician 
        monitoring is also essential has a narrow therapeutic range and 
        FDA labeling provides a black-box warning for hepatoxicity, 
        teratogenicity, and pancreatitis.
    More than 30 drugs on the list have serious contraindications and/
or drug interactions for which physician oversight is essential. For 
instance, almost 20 percent of the shipments were for various estrogen 
products for which there are multiple serious contraindications that a 
physician needs to consider before making prescribing decisions and in 
monitoring the patient.
    It is impossible to make a scientifically definitive statement on 
the public health impact of the drug shipments encountered during the 
Carson pilot without extensive chemical testing and analysis of the 
incoming pharmaceuticals, which would be prohibitively expensive. Based 
on the observations noted above, however, FDA believes that these drugs 
pose substantial risks to the public health, and we further believe 
that significant changes to the policies governing personal 
importations through the mail are warranted.
                             border surveys
    Over the last year, FDA has initiated three other surveys to gather 
data on drug products imported by individuals into the U.S. Although 
these border surveys involve land traffic rather than mail importation, 
the results of these surveys show some similarities to the findings 
from the Carson mail pilot, as well as some significant differences.
Southwest Border Survey (August 2000)
    A survey of prescription drugs being brought by pedestrians into 
the U.S. at eight ports of entry along the 2,000 mile border with 
Mexico was conducted by FDA's Southwest Import District (SWID) with the 
assistance of other agencies including Customs, the DEA, the U.S. 
Department of Agriculture, and others. The survey looked at activity 
during four hours on a Saturday (August 12, 2000) at eight border ports 
in California, Arizona, and Texas. The purpose of the survey was to 
interview individuals walking across the border into the U.S. from 
Mexico who had purchased prescription drugs in Mexico to determine 1) 
what specific types of products are being imported, and 2) who is 
importing these products.
    The data collected from over 600 interviews indicated that the most 
common importer of prescription drugs during the survey was an older 
male Caucasian with a prescription from the U.S., bringing back 
primarily antibiotics or pain relievers for his own use. Prescriptions 
were held by 63 percent of the persons interviewed (59 percent U.S. 
prescriptions and 41 percent Mexican). The most common drugs and their 
indications that were purchased in Mexico during the survey were as 
follows: Amoxicillin (antibiotic), Glucophage (diabetes),
    Premarin (estrogen), Dolo Neurobion (vitamin supplement), Vioxx 
(inflamation), Retin-A (acne), Tafil (anxiety), Celebrex (arthritis), 
Penicillin (antibiotic), Viagra (impotence), Carisoprodal (analgesic).
Canadian Border Survey
    On January 6, 2001, in cooperation with Customs, FDA conducted a 
survey to obtain a snapshot of prescription drug products being brought 
into the U.S. from Canada via passenger vehicles. During the eight-hour 
survey at three ports of entry in New York, Michigan and Washington, a 
total of 10,374 passenger vehicles and 58 buses crossed into the U.S. 
Of these, 33 passenger vehicles (35 individuals) were referred by 
Customs to be interviewed. These individuals brought in a total of 47 
containers of drug products from Canada.
    The types of products included pain medicines--primarily ``222'' (a 
combination of acetaminophen, caffeine, and codeine) or similar 
products. The indicated reason for import was that the products were 
available over the counter in Canada and cost less than in the U.S. The 
next largest group of products was herbal products, with the reason for 
importation being that the products were not available in the U.S. 
Other products included Tobradex (antibiotic/steroid opthalmic for 
individuals having laser eye surgery); Claritin and Allegra (allergies) 
purchased over-the-counter (OTC) in Canada; Sibelium capsules (calcium 
channel blocker); and a variety of OTC products sold in Canada and not 
available in the U.S.
Southwest Border Survey (April 2001)
    On April 11, 2001, FDA, Customs, and other agencies conducted a 
survey of prescription drugs being brought into the U.S. at seven ports 
of entry along the U.S./Mexican border. This survey coincided with both 
Easter vacations from many colleges and the end of the ``snowbird'' 
season, when tourists from Northern states visiting along the Southern 
border return home.
    During the four hour ``blitz'' a total of 586 persons brought in a 
total of 1,120 drugs. Approximately 56 percent had a prescription for 
the medicines (61 percent were U.S. prescriptions, 39 percent were 
Mexican). The most common drugs purchased in Mexico were: Amoxicillin 
(antibiotic), Premarin (estrogen), Claritine (allergy), Terramicinia 
(antibiotic), Ampicillin (antibiotic), Ibuprofen (analgesic), 
Penicillin (antibiotic), Vioxx (inflammation), Tafil (anxiety), Dolo 
Neuorobian (vitamin supplement), Glucophage (diabetes), Celebrex 
(arthritis), Naproxen (analgesic), Retin-A (acne), Ventolin (pulmonary 
disease), and Valium (controlled substance/nervous system depressant).
                         controlled substances
    Although we do not know, nor is it possible to clearly determine, 
the amount of controlled substances brought into the U.S. purportedly 
for personal use, it is likely that such medicines are frequently 
imported for resale and pose a public health risk. The Agency has been 
working with both Customs and DEA to streamline and clarify Federal 
import policies specifically related to the importation of controlled 
substances.
Counterfeit Bulk Drugs
    As we stated in testimony before this Committee last year, FDA 
believes that the authenticity and quality of drugs dispensed in the 
U.S. remains high. We do take very seriously, however, any allegation 
regarding the possible counterfeiting or adulteration of imported bulk 
drugs, also referred to as active pharmaceutical ingredients (APIs). 
The Agency agrees that more should be done to help ensure that imported 
bulk drugs (APIs) and finished drug products meet the requirements of 
the FD&C Act. We are actively pursuing a number of initiatives to 
better detect and prevent the importation of counterfeit or adulterated 
APIs.
    Let me provide the Committee with a brief update on the five 
initiatives that we announced at the hearings last year.
1. In February 2000, additional funds were allocated to the Forensic 
        Chemistry Center (FCC) by the Office of Regulatory Affairs 
        (ORA) for sampling, analytical work and assessments of APIs 
        gathered through targeted inspections of importers.
    During FY 2000, the FCC conducted 20 targeted inspections, 
including nine at importers of foreign APIs, ten at domestic finished 
dosage manufacturers and one at a domestic animal drug manufacturer. 
The FCC collected more than 1,000 samples of 130 APIs and related 
documents and records during the inspections. Samples of two drug 
substances have been analyzed.
    The information and results of analysis obtained during the 
investigations indicate a need for follow-up at two foreign API 
manufacturers. Provisions are being made to have ORA laboratories in 
New York and San Juan assist in the analytical evaluation, and some 
training has already been provided.
2. Make the FCC API database available electronically to all field 
        inspectors by January 2001.
    Direct electronic access to the FCC's API database was made 
available to all District offices beginning in January 2001. 
Enhancements to the system's capabilities and training for the user 
community are ongoing and we expect to complete these efforts by the 
end of the current FY. Information continues to be added to the API 
database, which currently contains 566 label images and other packaging 
information for foreign APIs. This database is one important tool that 
FDA can use to more quickly identify whether or not a product is 
authentic or counterfeit.
3. Expand the Philadelphia pilot nationwide by the end of 2000.
    A pilot program was begun in the Philadelphia District office in 
1997, to provide import inspectors with access to information on the 
approval status of drug applications, as contained in the Establishment 
Evaluation System (EES) database maintained by CDER. Access to this 
data allows inspectors to obtain relevant approval information in about 
three to four minutes on any API entry, which increases the probability 
of confirming that the API being offered for import is from a proper 
foreign source manufacturer and is intended for use by an appropriate 
end-user.
    The program has now been expanded to all of our districts. In 
December 2000, ORA provided training to field import personnel 
nationwide on the use of the EES database. Since then, District Offices 
have been actively using EES to insure that imported APIs are, when 
required, shipped from a firm identified as an approved source in the 
finished dosage manufacturer's new drug application (NDA). FDA's 
inspectors report that access to EES information has been very useful 
in helping to assure that the declared source and destinations of 
imported APIs are appropriate.
    The Operational and Administrative System for Import Support 
(OASIS) records indicate that 12 API entries have been refused 
admission since January 1, 2001, based upon the appearance that the API 
was misbranded because it was not from an approved source for use in 
the manufacture of a finished dosage drug requiring an NDA. OASIS 
records indicate that under the guidance relating to the use of EES for 
evaluation of API entries, FDA has detained 499 distinct entry lines of 
imported APIs among 437 API entries since January 1, 2001. However, all 
but the 12 refused shipments were resolved when Districts received 
evidence that the API was intended for a use other than an application 
finished dosage manufacturing process or was manufactured by an 
approved source. Consequently, the vast majority of these entries were 
released into commerce after FDA review.
4. Put all importers and customs house brokers on notice that they are 
        required to provide the name of the foreign manufacturer upon 
        entry into the U.S., and that the entry of their products into 
        the U.S. will be contingent upon it.
    Last year, the Agency placed the import and customs broker 
industries on notice regarding the existing requirement to provide FDA 
with accurate data regarding the identity and location of the 
manufacturer of imported drugs. Although these requirements were 
previously communicated to importers and brokers on a number of 
occasions, we were not satisfied with the level of compliance with this 
requirement. On July 20, 2000, the Agency posted an updated version of 
this requirement on the Internet with links to and from FDA's import 
operations pages. On July 28, 2000, a Customs Automated Broker 
Interface (ABI) system administrative message regarding this 
requirement was issued to all brokers.
    Compliance with this requirement is routinely assessed as the 
Agency carries out filer evaluations and is one of the factors 
considered in providing continued electronic filing privileges on 
OASIS. Customs has informed FDA that these types of reporting failures 
may be the basis for Customs civil actions. Since January 2001, FDA has 
initiated four separate cases with Customs requesting broker penalties 
against brokers who have failed to provide adequate or accurate data to 
FDA when they filed entries. In three of these cases, Customs has 
approved the requests, while a fourth case is pending. Since June 1, 
2000, 12 filers have been removed from paperless status and are 
required to submit paper entry documents due to their failure to 
electronically transmit accurate data for a variety of FDA products.
5. Require domestic manufacturers to provide information to FDA when 
        they discover that the bulk materials they receive are 
        substandard, ineffective, or appear not to be from the approved 
        source.
    FDA is concluding the process of drafting a proposed regulation to 
require such reports, which would apply to both domestic and foreign 
manufacturers. We appreciated the Committee's suggestion to initiate 
this requirement.
    Let me now provide you with a brief update on some other 
initiatives.
API Quality Sampling and Analytical Surveys
    ORA and CDER are planning to perform a sampling survey in FY 2002 
targeting imported APIs for quality and, where indicated, authenticity 
evaluation. This survey, which is now being designed by CDER and ORA, 
will broadly evaluate the quality of foreign manufactured APIs, and 
specifically target APIs that are potentially substandard or 
counterfeit.
Information Technology (IT) Assessment and Enhancement
    We know that one of the issues of great concern to the Committee is 
the Agency's lack of a well-integrated IT system for the regulation of 
drug imports. FDA currently relies on several independently developed 
databases of critical information that need to be integrated.
    Last July, FDA engaged the services of a private contractor to 
assess the Agency's IT needs for import operations and to recommend 
changes to provide field staff with ready access to the information 
necessary for making informed admissibility decisions. ORA has already 
implemented several IT enhancements. First, electronic access to Agency 
data sources are being provided to all FDA resident posts, either by 
wide area network (WAN) or by satellite technology. Second, ORA is 
initiating the establishment of an enterprise portal system, which will 
provide a common user interface to all of FDA's information databases. 
The statement of work containing the technical requirements for this 
project has been drafted and the Agency hopes to award a contract for 
system design by July 2001. Through these initiatives, FDA plans to 
provide more information to its field inspectors and investigators on a 
much more consistent basis through a single information access point.
Joint FDA-Customs Pilot Targeting Broker Misdeclarations
    FDA is currently piloting a joint operation with Customs in one 
U.S. port to specifically target FDA filers that have demonstrated a 
pattern of inaccurately declaring information material to FDA's 
admissibility decisions (whether in drug entries or other regulated 
commodities). Available remedies against repeat offenders include a 
possible FDA request that Customs demand physical redelivery of the 
shipments entered using inaccurate information, and an initiation of 
broker penalties, which may be substantial. FDA has seen recent success 
in initiating civil broker penalties when filers fail to provide 
correct data for FDA's evaluation upon entry. Much of this success is a 
direct result of cross training of FDA's import operations field and 
headquarters personnel in Customs law and regulations and civil 
remedies that are currently available to FDA when an importer or broker 
fails to adhere to declaration or FDA examination requirements.
                          internet drug sales
    Based on surveys conducted in early 2000 by Office of Criminal 
Investigations (OCI) and subsequently by the General Accounting Office 
(GAO), it appears that there are roughly 300 to 400 Internet sites 
selling prescription drugs, with approximately half located 
domestically and half located outside the U.S. FDA has long taken the 
position that consumers are exposed to a number of risks when they 
purchase drugs from Internet sites or other mail order outlets that 
dispense foreign drugs. These outlets may dispense expired, subpotent, 
contaminated or counterfeit product, the wrong product, a 
contraindicated product, an incorrect dose, or medication unaccompanied 
by adequate directions for use. FDA cannot provide consumers with any 
assurance that these products were manufactured under current good 
manufacturing practice standards. Taking an unsafe or inappropriate 
medication puts consumers at risk for dangerous drug interactions and 
other serious health consequences.
    Internet sites that provide prescription drugs by having consumers 
fill out a questionnaire rather than seeing a doctor pose serious 
health risks. A questionnaire generally does not provide sufficient 
information for a healthcare professional to determine if that drug is 
appropriate or safe to use, if another treatment is more appropriate, 
or if the consumer has an underlying medical condition where using that 
drug may be harmful. FDA has undertaken widespread public relations 
efforts to warn consumers about the dangers of buying drugs online, and 
we have provided extensive information on these dangers on FDA's own 
Internet site. FDA's Buying Medical Products Online web page is one of 
the most frequently requested pages on FDA's website. It consistently 
ranks among the top twenty requested pages, averaging almost 13,000 
hits per month.
    Currently, FDA has 90 sites under active review for possible 
regulatory or civil action. Warning letters have been sent to 48 
domestic online sellers. Additionally, FDA has sent 121 ``cyber 
letters'' to operators of Internet sites offering to sell online 
prescription drugs or unapproved drugs. These sites may be engaged in 
illegal activity such as offering to sell prescription drugs to U.S. 
citizens without valid (or in some cases without any) prescriptions. 
Cyber letters are sent over the Internet to the suspect websites to 
warn the operators that they may be engaged in illegal activities, and 
inform them of the laws that govern prescription drug sales in the U.S. 
While cyber letters may not be the most effective enforcement tool, 
they certainly have a deterrent effect and FDA has seen positive 
results from using them. FDA has received positive responses from 
twenty percent of the cyber letter recipients and we are continuing to 
monitor these sites.
    FDA also sends copies of its cyber letters to the home governments 
of targeted websites, when the locations can be identified. Follow-up 
depends on the ability and willingness of the foreign regulatory bodies 
to investigate and take actions against website operators who are 
illegally shipping drugs to other countries.
    In cooperation with the Department of Justice (DOJ), five 
preliminary injunctions have been imposed on the sale of a illegal 
products, including one product marketed as a weight-loss aid 
containing a potent thyroid hormone which could cause heart attacks or 
strokes, and an unapproved cancer therapy. FDA and DOJ also are 
pursuing an injunction against the sale of another unapproved cancer 
therapy over the Internet. Additionally, 15 product seizures, 11 
product recalls, and the voluntary destruction of 18 violative products 
have been achieved, generally pertaining to unapproved new drug 
products including gamma hydroxybutyric acid, gamma butyrolactone , 
Triax, 1,4 butanediol, and laetrile. Thirty-six foreign shippers have 
been placed on Detention Without Physical Examination and added to 
Import Alert 66-57 for targeting sales of unapproved new drug products 
to the U.S.
    During FY 2001, FDA's OCI initiated approximately 40 Internet-
related investigations and will continue to conduct investigations 
involving suspected criminal activity related to Internet drug sales as 
well as other Internet-facilitated criminal violations of the FD&C Act. 
Of the 133 currently open Internet-related investigations, 64 are 
Internet pharmacy cases, where the focus is on the possible dispensing 
of prescription drugs without a prescription.
    In recent years, OCI has initiated 285 Internet investigations and 
each of these investigations have involved a variable number of actual 
websites--typically ranging from one to 25 or more. OCI has effected 88 
Internet-related arrests, 70 of these in drug-related investigations. 
Of the 70 drug-related arrests, 11 have involved Internet pharmacy 
cases. These arrests have resulted, thus far, in 48 Internet-related 
convictions, 42 of these in drug-related investigations. Of the 42 
drug-related convictions, five have involved cases involving the sale 
of prescription drugs without a valid prescription.
    In addition, OCI has an ongoing initiative at the Dulles 
International Airport Mail Facility that had its genesis in their first 
Internet case, which began in 1994. The case, which involved a site 
selling steroids over the Internet, resulted in a successful 
prosecution and shutdown of the website. The partnership resulting from 
this case has continued, and in the past 18 months, OCI has been 
involved with local law enforcement in the Washington metropolitan area 
in 98 drug seizures. The seizures represent dozens of types of drugs 
coming in from 13 different countries. Of the 98 seizures, 87 of the 
drug seizures were ordered over the Internet and mailed to U.S. 
citizens; six were mailed to the U.S. by family or friends living 
abroad; four were ordered via a 1-800 telephone number from Canada and 
mailed to the U.S.; and one was transported via an airline passenger in 
two suitcases from Romania. The efforts of OCI, Customs, and local law 
enforcement have yielded the execution of eight search and seizure 
warrants and led to the arrest and prosecution of nine people.
                               conclusion
    Mr. Chairman, FDA remains concerned about any possibility that 
counterfeit or otherwise unsafe drugs may find their way into the 
American drug supply. We will remain vigilant as we refine and improve 
the programs and procedures that we use to ensure the availability of 
safe medications for consumers.
    We appreciate the continued interest of the Committee in these 
important issues, and look forward to continuing to work with you. 
Thank you again for the opportunity to participate in today's hearing. 
I will be happy to answer any questions.

    Mr. Greenwood. The Chair thanks the gentleman for his 
testimony, and calls upon Dr. Alan Leshner, Director of 
National Institute on Drug Abuse.

                  TESTIMONY OF ALAN I. LESHNER

    Mr. Leshner. Good morning, Mr. Chairman, members of the 
committee. Thank you for the opportunity to join this 
distinguished panel and comment on some of the scientific 
aspects of prescription drug abuse. Like my colleagues, I would 
like to extend our sympathy to the Rode family for their 
terrible loss.
    Let me start by emphasizing that from a public health point 
of view, many substances can be two things at once. On the one 
hand, medications like morphine and methylphenidate are 
extremely effective when used properly as prescribed. They can 
save lives, and they certainly improve the quality of life for 
millions of Americans.
    However, when these same substances are misused, they can 
be highly addictive, dangerous, and even fatal drugs. Right 
now, we are seeing the prescription drug misuse or abuse as 
posing a major public health threat.
    A variety of indicators that I have gone through in my 
written statement in much greater detail suggests that 
prescription drug misuse is increasing. For example, according 
to SAMHSA's National Household Survey on Drug Abuse, more than 
9 million Americans reported that they used prescription drugs 
for non-medical reasons at least once in 1999. One-quarter of 
them, over 2 million people, acknowledged that they had begun 
their prescription drug abuse in that 1 year.
    Now prescription drug abuse, of course, is not a new 
problem. It has been around for a long time. What is 
particularly alarming right now is the significant increase in 
misuse and the increase in young, first-time users of these 
drugs. The most dramatic increases are found in 12- to 17-year-
olds, and 18- to 25-year-olds. Depending on the specific drug, 
between 60 and 90 percent of the abusers are in these age 
groups. These adolescents and young adults of course are at 
tremendous risk of wasting the potential of their lives.
    Now we don't know for certain why people are abusing 
increasing amounts of prescription drugs, but we believe that 
the ready availability and all of the glorification of these 
drugs are contributing to the problem. It has long been known 
that changes in the perception of risk or changes in the 
perception of harm always drive drug use rates. For that 
reason, we and a variety of partners in April launched a major 
prescription drug abuse education and research initiative to 
try to get ahead of the increasing rates in prescription drug 
misuse.
    We also believe that people are developing their addictions 
through different pathways. There is one group who are 
intentionally abusing these drugs, just as one might abuse so-
called street drugs, like heroin or crack cocaine. But there 
also appears to be another group who may initially begin to use 
these medications appropriately as prescribed, but over time 
they slowly begin to deviate from their prescription regimen 
for some reason. Then they may find that they have become 
addicted, without ever planning or attempting to abuse the drug 
in the first place.
    It is important to mention here, however, that it is 
extremely rare for people to become addicted when medications 
are taken as prescribed. As just one example, the combined data 
from three clinical studies showed that in patients with no 
prior history of drug abuse, using opiates for the treatment of 
pain was associated with only seven cases of addiction out of a 
total sample of 25,000 people. This tells us that pain can be 
addressed safely using opiate medications without over-concern 
about addiction, but only so long as patients are well educated 
about their use.
    The stimulate methylphenidate, known commonly as Ritalin, 
is another example of a drug that's extremely beneficial when 
used as prescribed, but can be very dangerous when abused.
    I will stop here. I would be pleased to answer any 
questions that you may have. I do want to thank you for 
bringing added attention to this very important issue, and for 
asking that biomedical science be a part of this hearing. Thank 
you very much.
    [The prepared statement of Alan I. Leshner follows:]
Prepared Statement of Alan I. Leshner, Director, National Institute on 
  Drug Abuse, National Institutes of Health, Department of Health and 
                             Human Services
    Mr. Chairman, and Members of the Subcommittee, I am pleased to be 
here to present what science has taught us about psychoactive 
prescription drugs and their potential for abuse. This discussion is 
particularly timely given that the National Institute on Drug Abuse 
(NIDA) has recently launched a major initiative on prescription drug 
abuse and misuse. NIDA's renewed efforts to encourage more research 
into this area and to educate the public about the consequences of 
abusing prescription drugs is a preemptive strike on our part to 
curtail what our surveillance systems suggest is a growing problem in 
this country.
    At the outset, I would like to emphasize that many substances can 
be two things at once. They can be very effective medications when used 
properly; and highly addictive, dangerous, substances when misused. 
When used for legitimate medical purposes, controlled substances such 
as morphine and diazepam (Valium'), improve the quality of 
life for millions of Americans with debilitating diseases and 
conditions. It is only when these medications are used improperly that 
they begin to pose a serious public health threat. It is the increasing 
use of these medications for purposes other than how they were intended 
that is of growing concern to us.
    Several indicators suggest that prescription drug misuse and abuse 
are increasing in the U.S. population. We know that in 1999 more than 9 
million Americans aged 12-and-older reported that they used 
prescription drugs at least once in the past year for non-medical 
reasons. One quarter or more of those 9 million people misused 
prescription drugs for the first time in the year prior to the survey. 
And 4 million reported that they used prescribed medications for non-
medical reasons in the past month. These data come from the National 
Household Survey on Drug Abuse, supported by the Substance Abuse Mental 
Health Services Administration.
    NIDA's own Community Epidemiology Work Group, a network of 
epidemiologists and researchers from 21 major U.S. metropolitan areas 
who monitor and report on community-level trends in drug use and abuse, 
are also seeing increases in abused prescription drugs. The latest CEWG 
report, for example, reports that the opioid hydrocodone (e.g. Lorcet, 
Lortab, Vicodin) appears to be one of the mostly widely abused 
prescribed medications. The number of emergency room mentions of 
hydrocodone has grown by 139 percent, or from 6,115 mentions in 1993 to 
14,639 in 1999. Other prescribed drugs that are emerging on the scene 
and are causing increases in emergency room visits, according to CEWG, 
are oxycodone and clonazepam.
    Prescription drug abuse is not a new problem. The significant 
increase in the numbers of people misusing these prescription drugs is 
what is new. From 1990 to 1998, for example, the number of individuals 
initiating misuse or abuse of pain relievers increased by 181%, new 
initiates to stimulants have increased by 165%; tranquilizers by 132%; 
and initiates into sedative use have increased by 90%. The most 
dramatic increases are found in 12-17 year-olds and 18 to 25 year-olds. 
Females in this younger age bracket appear to be particularly 
vulnerable to prescription drug abuse.
    Determining one's vulnerability to addiction is an important part 
of NIDA's research portfolio. The fact that we do not fully understand 
what makes some individuals more vulnerable to addiction than others 
makes our concern about prescription drugs even more compelling. There 
are major differences among individuals in sensitivity to various drugs 
of abuse. Using advanced technologies, we recently found that 
differences in brain chemistry may be one of the factors that 
predisposes people to respond differently to abusable drugs. Other 
determinants of drug use preferences and patterns include genetic and 
environmental factors, a possible underlying medical illness, as well 
as factors such as the availability of drugs.
    What is significant about the brain chemistry finding that I just 
mentioned is that all abusable drugs--from alcohol and nicotine, to 
cocaine, methamphetamine, and morphine--share some common mechanisms of 
action. They all activate the neurotransmitter dopamine, which is part 
of the reward pathway or pleasure center for the body. It is this 
pleasurable effect that is likely the reason that 26.2 million 
Americans used an abusable drug in the past year in 1999.
    Although dopamine is a common factor among all drugs of abuse, each 
class of drug acts at different sites in the brain to produce its 
intended effect. For example opiates, such as morphine, codeine, and 
oxycocodone, work predominantly at the mu opioid receptors found in the 
brain and spinal cord, to block the transmission of pain messages to 
the brain.
    Another commonly abused class of drugs is the Central Nervous 
System (CNS) depressants. CNS depressants modulate actions of gamma-
aminobutyric acid (GABA) to slow down normal brain function. This 
resulting calming effect is what makes CNS depressants so useful in the 
treatment of anxiety and sleep disorders. Barbiturates such as 
mephobarbital and pentobarbital; and benzodiazepines such as diazepam 
and alprazolam, are two categories of CNS depressant medications that 
are commonly prescribed for anxiety and sleep disorders.
    The final class of commonly abused prescription drugs that I will 
briefly mention today is stimulants. As the name suggests, stimulants 
are a class of drug that enhance brain activity. They cause an increase 
in alertness, attention, and energy by displacing two of the brain's 
key neurotransmitters, norepinephrine and dopamine, which in turn 
increases blood pressure, heart rate, respiration, and blood glucose. 
Stimulants such as dextroamphetamine, methylphenidate, and sibutramine 
are generally prescribed for narcolepsy, attention-deficit 
hyperactivity disorder, obesity, as well as depression, and asthma.
    When taken properly all of these prescription drugs that I have 
just mentioned can be extremely helpful in relieving a wide variety of 
medical problems. It is when they are used non-medically, that 
prescription drugs can be dangerous, addicting and even deadly.
    Research has not yet completely revealed all the reasons why people 
would abuse a prescribed medication. Some may just intentionally abuse 
these drugs to receive the pleasurable effects, in the same way that 
people abuse and become addicted to heroin or crack cocaine. Others 
seem to begin to use them appropriately as prescribed, but then over 
time they slowly begin to deviate from the prescription regimen and may 
become addicted without ever intentionally setting out to abuse the 
drug in the first place. It is important to note that physical 
dependence does not equal addiction. Physical dependence can be 
relatively easily managed, whereas addiction--the compulsion to use 
drugs--is a chronic reoccurring illness that requires long-term 
treatment.
    As I mentioned earlier, the same substance can be both a very 
effective medicine and a dangerous addictive drug. Morphine, is the 
perfect example. Morphine is a powerfully addictive drug. However, when 
it is used to treat pain it is an extremely beneficial medicine. The 
medical use of prescribed opiates effectively relieves both chronic and 
acute pain, and allows millions of individuals to function normally. 
Addiction under these circumstances is very rare. In fact, the combined 
data from three clinical studies found that in patients with no prior 
history of abuse, opiates used for the treatment of pain was associated 
with only 7 cases of addiction in a sample of about 25,000 people.
    Another example of how beneficial medications can be when used as 
prescribed can be seen with the stimulant methylphenidate, known 
commonly as Ritalin'. Data accumulated over 30 years shows 
that methylphenidate is a safe medication when appropriately used for 
the treatment of attention-deficit hyperactivity disorder (ADHD). ADHD 
affects about 3 to 5 percent of the general population and is now one 
of the most visible childhood mental disorders. A number of studies 
indicate that ADHD youth that are appropriately treated with stimulant 
medications have a reduction in the risk of later substance abuse.
    In conclusion, I would like to thank you for allowing me to be here 
to have science be a part of your discussion on this topic. NIDA is 
increasing its research efforts into this area and will be pleased to 
keep you abreast of any new findings that emerge that may help guide 
your policy decisions.

    Mr. Greenwood. Thank you for your testimony.
    The Chair recognizes for his testimony, Sergeant Gibbs.

                  TESTIMONY OF LANDON S. GIBBS

    Mr. Gibbs. Good morning. My name is Landon Gibbs. I am an 
Assistant Special Agent in charge of the Drug Enforcement 
Division within the Virginia State Police. I supervise a unit 
that concentrates solely on pharmaceutical drug diversion and 
abuse.
    I want to speak to you about three things basically this 
morning. The first is a drug that's causing tremendous problems 
within Virginia. It's called Oxycontin. I want to talk to you 
about what that drug is, how it is abused, and more 
importantly, I want to talk to you about how it is impacting 
the communities in Virginia by the rapid onset of abuse. Then I 
would like to address some of the personal importation that we 
have made cases on in Virginia.
    Oxycontin is a very effective pain drug.
    Mr. Greenwood. Pull your microphone just a tad closer, 
please, Sergeant. Thank you.
    Mr. Gibbs. Oxycontin is manufactured to relieve from severe 
to moderate pain, terminal pain, a very effective good drug 
when used as prescribed. The problem comes in when it is used 
otherwise.
    The drug abuser in Virginia will take the drug and crush 
it, and either chew it and swallow it, inject it, or snort it. 
When the drug is crushed, it bypasses its time release 
formulation, which gives the abuser the full impact of pure 
Oxycodone in a rush. It creates a high similar to heroin.
    When it is used in this fashion it becomes extremely 
addictive, and the person gets hooked on it very, very quickly. 
They develop a mindset that all they want is more and more of 
the drug. They will do whatever it takes to obtain that drug.
    This is how it is affecting the communities in certain 
parts of Virginia. The crime rates, particularly property 
crime, have skyrocketed in some of the rural areas where these 
people are burglarizing homes to find anything they can to 
sell, to buy the drug. There are increased armed robberies of 
pharmacies, where they actually go in at gun point, bypass the 
cash register, and go straight to the drug stock or ask the 
pharmacy techs to give me the Oxys. That's all they are after.
    The drug is extremely profitable if they can steal it, even 
if they are not an addict, because it sells for about a dollar 
a milligram on the streets. This drug is now available in 10, 
20, 40, and 80 milligram strengths. So if I can steal a bottle 
of 100 40-milligram pills, I have got $4,000 that I can sell 
very, very quickly.
    The abuse problem increases to the point that women will 
become prostitutes to obtain money to buy the drug. They will 
steal from their families. They don't work any more. It has 
created a tremendous financial impact on those communities. 
Unfortunately, the experiences that Mr. and Mrs. Rode told you 
about today is not uncommon. Virginia has experienced about 50 
overdose deaths related to this one drug within the last year.
    It is not just one drug that causes the problem. As they 
have mentioned today, there is significant number of drugs, but 
the Schedule IIs are the ones that appear to be causing the 
deaths of the people that abuse it.
    Going back to the personal importation of the drug, we have 
experienced that in Virginia. For a number of years, we heard 
rumors about people bringing Oxycontin and other drugs in from 
Mexico. With the system of allowing 50 dosage units per person, 
again, we'll go back to the 40 or the 80-milligram pill. As you 
can see, the financial incentive for a person to go across, 
obtaining a drug such as Oxycontin in Mexico and bring it back.
    We recently were working cases in cooperation with the DEA 
and made several arrests of individuals who would go into 
Mexico, and each person would bring 5,000 dosage units of 
Oxycontin back. The pharmacists at the little border towns 
would actually help them conceal the drugs on their body 
because they knew that the Customs Service would x-ray packages 
or bags, purses, and things like that. So they would tape or 
hide the medication on their bodies themselves.
    After they were arrested, this group of six submitted three 
separate trips of obtaining 5,000 dosage units each to bring 
back into Virginia to sell. They were arrested when they were 
selling it back in the State.
    In April of this year, I went to the border crossing at 
Tijuana personally. Quite frankly, I was overwhelmed at what I 
saw. It is hard to imagine the volume of vehicles and 
individuals coming into the United States from Mexico. On this 
particular day, I made a mistake and drove across the border. I 
missed the exit. You are not supposed to do that with a rental 
car, but I did. There was so much traffic coming back, I waited 
in line for about an hour to get through the border crossing, 
and was simply waved through, as were hundreds of cars. I 
parked the car on the U.S. side and walked back into Mexico and 
spoke with Customs officers working there. There were only 
three that day, trying to handle the bus and foot traffic 
across. I spoke to him about the problems that we are having 
with people importing the drugs. He said if you look at the 
volume of traffic that we have, you will understand why we are 
so overwhelmed, that there is very little enforcement effort 
that can be done.
    They were doing as much as they could such as x-raying 
purses and suitcases and things like that. But for the 
individuals that were not carrying this baggage, they just 
simply came across.
    I watched a child of about 14 on roller blades make two 
trips. He would go across the border into Mexico, roller blade 
back across and meet some people in a parking lot on the U.S. 
side, and then go back. I was quite certain of what that young 
man was doing.
    The importation is a serious problem. Most of the problems 
that we are having with pharmaceutical drug abuse in Virginia 
is through over-prescribing by physicians. They are just 
prescribing, for example for Oxycontin, more than is truly 
medically needed. That makes it available for sale on the 
street. Then once the person that is abusing it becomes 
addicted, then if the supply from the physician is cutoff, we 
have arrested several doctors for this, then they will go to 
Mexico or wherever they can to get it to bring it back in.
    I have heard testimony today concerning having a valid 
prescription to obtain the stuff and import it. The validity of 
a prescription comes into play if you go on the Internet, fill 
out a form, and supposedly a physician will look at it in 
another State, perhaps, and issue a prescription.
    Virginia passed a law last year that causes a prescription 
to be issued by a physician only when a true doctor-patient 
relationship exists. That code defines what that doctor-patient 
relationship is. It says there must be some type of an 
examination of the patient by the prescriber. That way, we are 
hoping to try to stop some of this Internet stuff from even 
getting a foothold in Virginia that way. So far, that has 
worked very, very well.
    I will be glad to answer any questions that you have.
    [The prepared statement of Landon S. Gibbs follows:]
   Prepared Statement of Landon S. Gibbs, Assistant Special Agent in 
 Charge, Bureau of Criminal Investigation, Drug Enforcement Division, 
                         Virginia State Police
    Good morning Mr. Chairman and members of the Committee. My name is 
Landon Gibbs. I am an Assistant Special Agent in Charge within the Drug 
Enforcement Division of the Virginia State Police. I thank you for the 
invitation to speak with you today concerning the impact of 
prescription drug abuse and the personal importation of one of the most 
abused drugs.
    My testimony will focus on three areas:

A brief description of the drug Oxycontin, it's intended use and how it 
        is abused
The impact on individuals and the community of Oxycontin abuse
Personal importation of prescription drugs
Oxycontin, its use and abuse
    Oxycontin is a very effective analgesic, designed for moderate to 
severe pain relief, chronic pain control and terminal cancer pain 
relief. It is a time-released form of the narcotic analgesic Oxycodone. 
Oxycodone has a high abuse potential and is similar to Morphine in 
dependence liability.
    Oxycontin is currently available in 10, 20, 40 and 80 mg tablets, 
as the manufacturer has ceased shipment of the 160-mg tablet. Oxycontin 
is pure Oxycodone, with no other active ingredients, as compared to 
other analgesics such as Percocet, Tylox and Percodan. The time release 
formulation allows patients 8 to 12 hours of pain relief from a single 
dose.
    There are relatively few known incidents of addiction, or physical 
dependence, to Oxycontin when the drug is taken as prescribed by a 
physician. It becomes highly addictive when the time release 
formulation is bypassed by crushing the drug, then either inhaling the 
powder or mixing the powder with water and injecting the solution. This 
allows the abuser to receive the full effect of the pure Oxycodone 
almost immediately. This creates an effect similar to illicit opioid 
narcotics, such has heroin.
    In Virginia, most of the Oxycontin sold on the street and abused 
comes from legitimate prescriptions written by physicians. It is quite 
obviously being over prescribed and prescribed to individuals who do 
not need it for pain relief.
Impact of abuse on individuals and communities
    Individuals who abuse Oxycontin by inhaling or injecting the 
crushed tablets quickly become addicted. This creates a mindset in 
which the only goal of the individual is to obtain more of the drug. 
Interest in work, family and personal well being simply disappears. The 
individual often develops a drug-seeking behavior in which jobs, 
family, friends will all be sacrificed in an effort to obtain money to 
buy more Oxycontin. Thefts of money or items to sell from family 
members are all too common. Some result to prostitution or other 
criminal acts to fund their habit. Oxycontin has a street sale value of 
one dollar per milligram.
    The community also suffers when Oxycontin, or other drugs, are 
abused by a significant number of the population. Virginia has had over 
50 deaths related to Oxycontin abuse, through overdosing or combining 
the drug with other substances, such as alcohol or other prescription 
drugs. In addition to the emotional tragedy of these deaths, the 
financial impact on families, the community and welfare programs is 
quite significant. In southwest Virginia, local police are overwhelmed 
with the increase in property crime related to Oxycontin addicts. Armed 
robberies and burglaries of pharmacies are becoming a very real 
problem. Thefts from homes and business, writing bad checks, car 
jacking and other crimes are increasing as the drug addicted 
individuals seek anything they can sell for money to buy the drug.
    In northern Virginia, a woman was arrested for illegal possession 
of Oxycontin and teaching her 15-year-old son how to crush and inhale 
the drug. In another case, an undercover buy of Oxycontin was made in a 
home where a 10-year-old was crushing the drug and preparing to inhale 
it, in the presence of his father. The drug is reportedly being widely 
abused by college students.
Personal importation of prescription drugs
    Over the last two years, rumors have been heard concerning the 
street sale of Oxycontin that was obtained in Mexico. The price of the 
drug is Mexico is approximately ten cents per milligram. The street 
resale value in Virginia is one dollar per milligram. Under current 
federal guidelines, an individual is permitted to bring in up to 50 
dosage units of a prescription drug. If that individual purchases 50 
Oxycontin tablets of 80 mg each, he or she would pay approximately $400 
in Mexico. That same amount would be worth $4,000 on the street in 
Virginia. I believe that what is taking place is that groups of people 
are making multiple border crossings in a short period of time to 
import this drug. The profit margin is very high. There is no risk of 
being detained at the border as no laws have been violated at this 
point.
    The State Police, working with the Drug Enforcement Administration, 
have made several arrests of individuals selling Oxycontin that was 
obtained in Mexico. These individuals were traveling to Mexico and 
obtaining 5,000 dosage units each per trip. In statements made after 
their arrest, they said they purchased the Oxycontin for 10 cents per 
milligram and the Mexican pharmacists helped them conceal the drugs on 
their body. These individuals made at least three trips to Mexico and 
none were ever checked entering the United States. They remarked that 
as long as a person did not carry any bags or a large purse, the 
Customs officers would not do any serious checking or questioning.
    In April of this year I visited the border crossing at Tijuana. The 
volume of vehicle and foot traffic entering the United States 
overwhelms the efforts of both the Immigration Service and the Customs 
Service. On this particular day there were only three Customs officers 
at this border crossing. One was assigned to deal with bus traffic and 
the other two dealt with foot traffic. I spoke with one Customs officer 
who stated that it is impossible for them to really check what is being 
imported. Hundreds of vehicles were streaming into the United States. 
On this day I did not see any being searched.
    The importation of prescription drugs is a serious problem. If the 
importation is for a true medical need, then the issue of why such a 
significant price discrepancy between the United States and other 
countries is a matter of concern. And if the 50 dosage unit regulations 
stay in place, should the returning U. S. citizen be required to 
produce a copy of a U. S. issued prescription? If the importation is 
not based on medical necessity, then no amount should be permitted into 
this country.
    Finally, all the importation regulations are, in reality, useless 
unless there is an effective system in place at the border to enforce 
them.
    I thank you for the opportunity to speak with you today and will be 
glad to answer any questions.

    Mr. Greenwood. Thank you for your testimony.
    The Chair recognizes himself for 5 minutes for inquiry.
    When we went out to Dulles Airport, we saw the overwhelming 
number of packages that were coming in. We saw how many of them 
contained pharmaceuticals, but we also saw that not only is 
Customs completely overwhelmed by the flow of illegal drugs 
into this country, but FDA completely overwhelmed given its 
current regime.
    It seems to me we have two choices. We can throw up our 
hands and say it's an overwhelming volume coming in through the 
mail, an overwhelming volume coming across the border in 
Mexico. We don't have the manpower. We don't have the resources 
to do anything about this. Then we can continue to bury kids in 
this country. We can bury kids as the Rodes did, 50 overdoses 
from one drug alone in Virginia. Or we can get serious about 
this and get down to a tolerance level that puts an end to 
this.
    Now I am very pleased to hear the testimony from the Food 
and Drug Administration today that the recommendation has been 
made to the Secretary of Health and Human Services that in fact 
we don't throw our hands up. In fact, we get down to 
essentially zero tolerance. This is, to me, good news.
    Now the question will be it is one thing to say that. It is 
one thing to say every single package that comes into the 
United States that has a drug in it, pharmaceutical product, 
legal in this country, not legal in this country, with a 
prescription, without a prescription it is going to be turned 
down except for a very minute percentage that might be for 
compassionate use. The question is, can that be implemented?
    I want to address that question first to Customs, because 
you are first online. Then to the FDA. We are delighted that 
you come here to this hearing and tell us that this is going to 
be essentially a zero tolerance. The question is, can that be 
implemented? Are we likely to hear from the Health and Human 
Services Secretary that this will be the policy, go to work, 
shut this stream of dangerous drugs down, and feel that we have 
solved this problem? Or are we likely to hear that it is a nice 
idea, but it is impossible to enforce and we can't do it.
    Ms. Durant?
    Ms. Durant. The Customs Service was also very pleased to 
hear this. We believe that this will, while we might miss one 
in the x-ray once and a while, our inspectors are very astute 
using the x-ray and other factors, packaging and some 
intelligence on occasion in the sort. For us administratively, 
this is a giant leap forward because we can then simply 
redeliver the mail to the Post Office and say return it. We do 
not today have the authority to refuse admission. So this would 
give us that ability. I think it would make a very big 
difference.
    Mr. Greenwood. Do we need, either for Customs or for the 
FDA, do you need a change in the law to do this or just a 
change in the policy within the Food and Drug Administration?
    Mr. Hubbard. Well we have examined that, Mr. Chairman. We 
believe we might be able to do this by regulation. We actually 
have the authority now to stop this material. But as I said 
earlier, we have to go through these notice requirements that 
are so burdensome with the numbers and small staff we have, 
that it makes it, as a practical matter, impossible.
    We think the better thing to do though would be to come to 
the Congress and get explicit authority to eliminate that 
notice, obviously just for these sorts of things, not for all 
shipments of things. Obviously commercial shipments of drugs 
and that sort of thing would continue under the existing 
regime.
    Mr. Greenwood. Well, it seems to me that--and you and I 
have had this conversation informally--but it seems to me that 
what we have here is we have this firehose of drugs coming 
across the border and coming in through the mail. In part, we 
have it because the policies that have been in place, and the 
border policies that have been in place at the airports has 
been relatively permissive. It has been it's too much to handle 
kind of an approach.
    It seems to me that if we take a zero, essentially zero 
tolerance, that what is going to happen is the people who are 
ordering these drugs are going to find that they never show up. 
Just as they found out through word of mouth, through the 
Internet, through Internet chatrooms that we have looked at 
some of the conversation that goes on in Internet chatrooms 
about how to get these drugs, just as they learned how to get 
them illicitly, they will begin to learn that the party is 
over, that they are not going to come in any more, and that 
they are going to waste their money.
    When somebody uses a credit card or other means to pay for 
a drug that never arrives, one would assume that they would 
stop doing that, that their friends would stop doing that, that 
their associates would stop doing that. Eventually, these 
illicit facilities, both in Mexico, physical facilities and the 
cyber facilities, the websites that access drugs in other 
continents, would eventually go out of business for lack of 
demand.
    So I am delighted to hear that this is going to be the 
recommendation. You can be assured that this Member of 
Congress, and I think the others on the panel, will support 
that recommendation to the Secretary, and that we will be more 
than happy to pass the legislation that is necessary in case 
there is any question with regard to your authority in this 
matter.
    The Chair yields back the balance of his time, and 
recognizes Mr. Dingell for 5 minutes for inquiry.
    Mr. Dingell. Mr. Chairman, thank you for your courtesy.
    Ms. Durant, two questions. A simple yes or no answer I 
think will suffice. In your Carson City project, in 4 or 5 
weeks Custom inspectors could have stopped approximately 16,000 
parcels containing pharmaceuticals or something that appeared 
to be a pharmaceutical. Is that correct?
    Ms. Durant. That is correct.
    Mr. Dingell. It is also true that FDA could process only a 
tiny fraction of these, approximately 30 a day? Is that right?
    Ms. Durant. That is also correct.
    Mr. Dingell. So they could only then have reviewed a minute 
portion of this?
    Ms. Durant. That is correct.
    Mr. Dingell. Now this to Food and Drug: That was because of 
lack of attention, lack of personnel, lack of money, or why?
    Mr. Hubbard. It is clearly lack of staff. We have 150 
inspectors around the country to do import work, Mr. Chairman. 
We do not have the resources to look at these small packages.
    Mr. Dingell. Thank you.
    Now, Ms. Durant, FDA could not handle this volume and 
Customs was forced to release about 14,000 parcels to customers 
without any formal FDA review. Is that right?
    Ms. Durant. Yes, sir.
    Mr. Dingell. That could have been controlled substances, 
Category 1 substances, which are absolutely forbidden either to 
manufacture, possess, or sell. Is that right?
    Ms. Durant. We have authority to make some seizures on our 
own authority.
    Mr. Dingell. But I am talking about the 14,000 that you 
released. That could have been anything?
    Ms. Durant. They were not all reviewed, then it could have 
been anything, yes, sir.
    Mr. Dingell. It could have been almost anything.
    Now, Ms. Durant, FDA has written guidance to Customs that 
says as follows, ``It is expected that a Customs Officer from 
the Customs Mail Division will examine a parcel and will set it 
aside if it appears to contain a drug, biological or device. 
Reality in the field: A small number of pharmaceuticals are 
referred to FDA by Customs and by the two IMBs. For the most 
part, if the parcel doesn't contain a scheduled substance, it 
is released back to the Postal Service for delivery.'' Is that 
right?
    Ms. Durant. Yes, sir.
    Mr. Dingell. That is a major contributor, if it not, to the 
situation that we confront?
    Ms. Durant. Yes.
    Mr. Dingell. Because Customs has to do the work, gets no 
examination or scrutiny by FDA, and almost anything can get by 
this rather curious kind of net. Is that right?
    Ms. Durant. It is an overwhelming challenge, yes.
    Mr. Dingell. Now, is it my understanding that currently we 
have 13 mail facilities across the country that process 
international mail? Is that correct?
    Ms. Durant. Yes, sir.
    Mr. Dingell. Now I would note that most major cities have 
such facilities in it, New York, Dallas, Miami, Washington, 
D.C.
    Now, Ms. Durant, isn't it the case that similar to what we 
are experiencing in the Los Angeles facility, these other mail 
branch facilities are being overwhelmed?
    Ms. Durant. It is generally correct. The degree of being 
overwhelmed depends on the source country of the packages to 
those facilities, but that is generally correct.
    Mr. Dingell. And we must infer that this overwhelming is 
leading to a substantial risk of unsafe, counterfeit, or 
prohibited substances that should not be permitted in under the 
law. Is that right?
    Ms. Durant. Yes, sir.
    Mr. Dingell. Does Food and Drug deny this?
    Mr. Hubbard. Yes, Mr. Chairman. We see a huge diversity of 
every sort of drug you can imagine that's coming in these 
packages.
    Mr. Dingell. Thank you.
    Now, Ms. Durant, isn't it the case that before the recent 
visit to the Dulles mail facility 2 weeks ago, in just 4 hours 
your inspectors found 160 parcels containing pharmaceuticals?
    Ms. Durant. Yes, sir.
    Mr. Dingell. Now isn't it true also that your agency is 
finding on a regular basis pharmaceutical products that are 
being shipped into this country that are expired, shipped in 
plastic bags with no labels or instructions as to their use, or 
pharmaceuticals that your agents can't even identify as FDA-
approved products? Is that right?
    Ms. Durant. That is correct.
    Mr. Dingell. So this question to FDA. On these matters, you 
have no way of knowing whether these substances coming in meet 
the requirements that the United States has with regard to 
safety or efficacy of prescription pharmaceuticals. Indeed, you 
have no way of knowing whether they have been manufactured 
using good manufacturing practices?
    Mr. Hubbard. I would go even further, Mr. Dingell, and say 
they probably do not. Here is one particular package from 
Thailand. We spent a week with some of the best drug data in 
the world trying to find out what that is. There are three 
types of pills in here that we cannot determine what these 
pills are.
    Mr. Dingell. Was it addressed to a drug cartel member?
    Mr. Hubbard. No. It was addressed to a citizen in Northern 
Virginia, to the best of my knowledge.
    Mr. Dingell. Now, Ms. Durant, it is also the case your 
agency are seeing schedule I drugs, such as Ecstacy being 
blister wrapped and being sent into the United States through 
the mail. Is that not true?
    Ms. Durant. That is true.
    Mr. Dingell. Let me go over some of the findings you made 
regarding Operation Safeguard, and see if I understand them. 
There's one point that I want to address particularly. Not even 
a single parcel that you received in this met all of FDA's 
criteria for importation of prescription drugs. Is that so?
    Ms. Durant. That is so.
    Mr. Dingell. Not a single one?
    Ms. Durant. Not a single one.
    Mr. Dingell. Isn't it the case, Mr. Hubbard, that many of 
the thousands of the products being shipped into the United 
States are from unknown origins, that they pose considerable 
risks to consumers because they may be counterfeit, expired, 
super-potent, sub-potent, simply tainted, or mislabeled so as 
to constitute something other than what appears to be, possibly 
even including Schedule I substances?
    Mr. Hubbard. I think it is highly likely that is correct. 
Perhaps certainly correct.
    Mr. Dingell. Now, Ms. Durant, in the Los Angeles project, 
your agents had to send thousands of parcels to consumers 
because the system that the FDA and Customs relied on cannot 
handle the volume that you were now seeing. Is that right?
    Ms. Durant. That is correct.
    Mr. Dingell. Ms. Durant, has the United States Customs 
asked for guidance from FDA?
    Ms. Durant. Yes, sir. We have.
    Mr. Dingell. What has happened as a result? Have you 
received guidance?
    Ms. Durant. We have not received all of the guidance that 
we need to be effective in this area. However, we have been 
working together to come to practical guidance. This 
announcement today is very good news for us.
    Mr. Dingell. It is very clear, however, that the guidance 
that you have up until now is not adequate to address the 
problem. Is that not so?
    Ms. Durant. That is so.
    Mr. Dingell. Mr. Hubbard, isn't it the case that a U.S. 
citizen cannot walk into a pharmacy and purchase a controlled 
substance such as Darvon, Percocet, or Valium without a 
prescription, because these drugs pose inherent risks of 
addiction?
    Mr. Hubbard. That is correct.
    Mr. Dingell. All right. But, however, they can do the same 
thing in Mexico, purchase these very same drugs legally and 
bring them back into the United States as long as they are 
declared to U.S. Customs and have less than 50 tablets per 
drug. Is that right?
    Mr. Hubbard. I understand that is correct, that they can 
purchase it in Mexico. I will defer to DEA on the bringing back 
part.
    Mr. Dingell. Does anybody wish to deny that statement? 
Well, then we will let that stand for the record.
    Now to all witnesses, do any of you have evidence that 
Oxycontin is available in Mexico? Is it being brought into the 
United States under the 50 dosage unit policy?
    Do any of you have evidence that Oxycontin is available in 
Mexico and is being brought into the U.S. under the 50 dosage 
unit policy? That question to all members of the panel.
    Ms. Nagel. If I could try to address it. We have received 
information that Oxycontin is being smuggled.
    Mr. Greenwood. Ms. Nagel, will you flip on your microphone?
    Ms. Nagel. Thank you. Excuse me. We have information 
specifically from Virginia that Oxycontin is smuggled in large 
quantities. We have no specific information about the 50-
dosage-unit exemption being used to specifically bring in 
Oxycontin in any kind of organized manner.
    Mr. Dingell. Can you deny that Oxycontin is coming in 
through the 50-dosage exemption?
    Ms. Nagel. I have no specific information other than that 
individual, sir.
    Mr. Dingell. Now you are with DEA, are you not?
    Ms. Nagel. Yes, sir. I am.
    Mr. Dingell. And DEA doesn't know then whether Oxycontin is 
coming in or not. Is that right?
    Ms. Nagel. I said it is coming in, but whether it is coming 
in in any organized group, we have one case that we are aware 
of.
    Mr. Dingell. But you don't know whether it is coming in 
under the 50-unit exemption?
    Ms. Nagel. If it is, sir, it is coming in individual-by-
individual case.
    Mr. Dingell. Okay. Can you deny that it is coming in?
    Ms. Nagel. No, sir.
    Mr. Dingell. Is there any reason to believe that it could 
not come in under this 50-unit exemption?
    Ms. Nagel. It would come in under the 50-unit exemption if 
the individual met all the requirements of the exemption.
    Mr. Dingell. If the exemption is not enforced, he comes in 
and shows 50 units, and walks through the Customs checkpoint. 
Is that right?
    Ms. Nagel. It is my understanding that can happen.
    Mr. Dingell. You say it could happen.
    Ms. Nagel. Yes, sir.
    Mr. Dingell. Is there any reason to believe that it has not 
happened?
    Ms. Nagel. No, sir.
    Mr. Dingell. Does the Customs have any evidence or comments 
on this particular point?
    Ms. Durant. We do have evidence that it is coming in under 
the 50 dosage units.
    Mr. Dingell. Under the 50 dosage unit?
    Ms. Durant. Yes.
    Mr. Dingell. Have you communicated that to DEA?
    Ms. Durant. We are gathering the data now.
    Mr. Dingell. You are gathering the data now.
    Just quickly, perhaps the DEA can inform us. What is this 
Oxycontin? It is a very, very powerful substance, is it not?
    Ms. Nagel. Yes, sir. It is.
    Mr. Dingell. It is absolutely banned for sale or marketing 
in the United States. It is Schedule I, is it not?
    Ms. Nagel. No, sir. It is not. It is a Schedule II.
    Mr. Dingell. It's a Schedule II?
    Ms. Nagel. It is a legitimately manufactured pain 
medication. It is Oxycodone. It is a long-term release 
formulation that allows you to take it every 12 hours instead 
of having to take your pain medication every 4 or 3 hours. It 
is a Schedule II, sir, and it is legitimately manufactured and 
prescribed in this country.
    Mr. Dingell. And it is highly addictive, is it not?
    Ms. Nagel. Yes, sir. It can be highly addictive if misused.
    Mr. Dingell. I think my time has expired, Mr. Chairman. I 
thank you for your courtesy to me.
    Mr. Greenwood. The Chair thanks the gentleman.
    The Chair would note, Mr. Hubbard, that those of us who 
have served on this committee for more than 6 years still 
affectionately refer to Mr. Dingell as the Chairman, but we do 
not encourage our witnesses to do so.
    Mr. Dingell. Mr. Chairman, I would like to just make a 
brief observation. I don't care how the witnesses refer to me, 
as long as they answer the questions.
    Mr. Hubbard. I do apologize to the current chairman. Former 
Chairman Dingell was with us for so many years that it is 
difficult to--you know, habits do grow.
    Mr. Greenwood. After I am here for 20 more years, you will 
get used to it.
    The Chair recognizes the gentleman, Mr. Whitfield, for 
questioning.
    Mr. Whitfield. Thank you, Mr. Chairman. I also would like 
to say that I was delighted to hear Mr. Hubbard outline his 
proposal to Secretary Thompson. With Mr. Greenwood, I certainly 
think that would be the most effective way to deal with this 
problem, because obviously the authorities do not have the 
manpower or the money to be very effective in preventing these 
drugs from coming in. So I am delighted that you all are going 
to recommend that, have already recommended it, and would like 
to reiterate what Mr. Greenwood said, that I know most of the 
people on this committee I am sure would look forward to 
working with you in implementing that.
    On the drug Oxycontin, obviously it is an effective drug, 
pain killer, and it is legal when it is manufactured in the 
U.S., it is prescribed. I guess from my understanding, most of 
the problem relating to Oxycontin appears to be by theft, 
robbery, whatever. I mean is it a gigantic problem that it is 
coming into the country illegally?
    Ms. Nagel. If I could answer your question, sir. Our best 
information is that we have illegal prescribing, improper 
prescribing, pharmacy thefts, fraudulent prescriptions, doctor 
shopping. We do believe that Mexico could in fact be 
contributing to our problem.
    When we received this information, we took some pretty 
aggressive steps. There is a single manufacturer of this 
narcotic. We have met with the company. We explained that we 
had information. We specifically had one case where people were 
smuggling it. As a result of our request, they have agreed to 
change the indicia of the drug. The drug that is now going to 
be exported to Mexico will appear different. If we then 
encounter it on the U.S. territories, I will then have the 
evidence and data I need to determine that it is being 
reimported.
    Additionally, the company stopped shipping the 40 
milligrams to Mexico. The 40 milligrams that were in-country in 
Mexico were moved from the border pharmacies. They were moved 
inland. So at this time, you can get the 10 milligrams and 20 
milligrams.
    If I am given the evidence and the data to demonstrate that 
in fact it is coming back in, I am prepared to meet with the 
company and look at some drastic measures. But what I need is 
the evidence. So we are hopeful, as everyone is gathering 
evidence, we have a national action plan that we have put 
forward where we are trying to gather the data and get our arms 
around the problem domestically and internationally. As we get 
the data and we can support the actions, we are more than 
prepared to move forward and take whatever action we can to 
limit the diversion and abuse in this country.
    Mr. Whitfield. Now is Oxycontin exported to other countries 
as well?
    Ms. Nagel. Yes, sir. It is.
    Mr. Whitfield. Okay. So that is being done legally. 
Basically what's happening, once it gets to these other 
countries, then it is illegally smuggled back into the U.S. to 
be used for purposes other than medicinal purposes?
    Ms. Nagel. At this point, we have information about Mexico. 
My concern was also that we could in fact experience the same 
thing from Canada. So at the same time, I asked the company to 
change the indicia of what goes to Canada. Fearing that my land 
borders would make me the most susceptible to having it come 
back. They are going to do that for me also. So that if I start 
to see it on the street, I will be able to identify the source.
    I have no information of it coming back from any of the 
European countries or anywhere else.
    Mr. Burr. Would the gentleman yield?
    Mr. Whitfield. Yes, I would yield.
    Mr. Burr. For one question. From what you have said, is 
Oxycontin only manufactured here?
    Ms. Nagel. There is one manufacturer, sir. They have plants 
in other places. But it is manufactured by one company.
    Mr. Burr. But is the product that you speak of in Canada 
actually manufactured in the U.S., sold to Canada?
    Ms. Nagel. It used to be manufactured in the U.S. It is now 
manufactured in the U.K. It is exported from the U.K. to 
Canada. But the company has agreed to change the indicia as it 
is made in the U.K. so I can identify it if it comes back from 
Canada.
    Mr. Burr. Thank you for that clarification.
    Mr. Whitfield. Well, I appreciate you going into that 
explanation. Of course this is an important drug to a lot of 
cancer patients and others. So we certainly don't want to do 
anything to make it unavailable to them when it is prescribed 
legally in the U.S. But we also want to make sure that we 
minimize the illegal use of it. So it sounds like you all are 
making progress in that area.
    Mr. Chairman, I will yield back the balance of my time.
    Mr. Greenwood. The Chair thanks the gentleman, and 
recognizes the gentleman from Florida for 5 minutes for 
purposes of inquiry.
    Mr. Deutsch. Thank you, Mr. Chairman. I want to take a 
little bit of a different tack to focus in terms of what we 
actually find, because again, having gone out to the Dulles 
facility, what is clear is that not everything that is coming 
in is a controlled II substance, controlled I substance. In 
fact, what appears, when we were there, is the vast majority of 
stuff that is coming in is either potentially supplements of 
some kind, foreign type supplements, or just homeopathic type 
things, or for that matter, prescription drugs, antibiotics, 
hypertension medication.
    I think that is something that I think in the testimony and 
the questions up to this point has not been clear. I mean for 
all of us, and we can say it again and again, the volume of 
substances coming in is astronomical. I mean we are talking 
literally tens, hundreds of thousands, literally millions of 
substances coming in.
    First, I mean if specifically I guess to Ms. Durant, would 
you sort of contradict or would you confirm what I just said in 
terms of the volume of the stuff coming in?
    Ms. Durant. The volume is astronomical.
    Mr. Deutsch. Right. But the types, if you would categorize.
    Ms. Durant. The types are--I have looked at the lists of 
things in these various operations. The types are mixed. You 
are correct. There are some herbal drugs. There are some 
cardiovascular medications. But there are also a lot of 
steroids and narcotics and painkillers, and those sorts of 
things.
    Mr. Deutsch. Right. Again, we were only out there for 1 
day, although they did prepare for our visit by doing a sort 
beforehand. But I think what is important to note is that 
again, we are talking about the millions. We really literally 
are talking about millions of substances coming in.
    I think what was clear from Chairman Dingell's comments and 
from the questioning, and I think what really from the 
perspective, and again I know this is on C-SPAN as well, and 
hopefully they will get some coverage about this, is I don't 
think on the prescription drug side if it is an antibiotic or 
if it is a hypertension medicine, that someone really is 
legitimately looking for the least expensive pharmaceutical. No 
one wants to buy something that is going to kill them in that 
type of situation.
    But I think one of the issues that again, you know it is 
hard for you to address, but I will tell you that one of the 
perspectives I have is that there are many Americans, millions 
of Americans, maybe even tens of millions of Americans who can 
not afford prescription drugs, who don't have prescription drug 
coverage, and for that matter, don't have medical coverage.
    Mr. Hubbard, you made a great comment of your 
recommendation to the Secretary in terms of not allowing 
anything for anyone unless they have a medical doctor's direct 
supervision. Great theory if we have universal coverage. I mean 
I hope that you add in your recommendation, obviously I am 
being a little bit facetious in this, but that you add that the 
administration also support universal healthcare coverage for 
all Americans so that all Americans will have the opportunity 
to have physicians prescribe them drugs, and then have the 
supervision of those physicians for those drugs.
    But until we get to that point in time, that is not 
America. I mean that is not America. I mean America is a 
country with literally tens of millions of Americans, working 
Americans, who get up in the morning every morning and go to 
work and work hard and support their families, do not have let 
alone doctor coverage, let alone prescription drug coverage.
    So in the real world, and one of the things that we haven't 
done enough of, and again looking at the prescriptions and 
looking at what is coming in in the tens of thousands, and the 
hundreds of thousands of prescription drugs, not Schedule II, 
and again I am not discounting the Oxycontin phenomenon, which 
is a very, very serious issue. But I would assume that the 
percentage of the drugs coming in at that is a relatively small 
percentage. Yes, we found steroids. Yes, we found Ecstacy. But 
in terms of the volume, if you were there with us, if you spent 
time looking at it, it is a small percentage. It might be 5 
percent. It might be less of the overall volume. So these are 
normal prescriptions.
    I guess that is the question that I am saying to you, is 
maybe we are looking at this the wrong way. Maybe what we are 
really looking at is absolutely that 5 percent is really 
significant. All right? But the 95 percent very well might be 
hardworking, legitimate Americans who can not afford to go to a 
doctor to get a prescription, but are self-medicating. The 
answer that you gave is a simple answer, it would stop this 
completely. But what do you say to those people that can not 
afford going to the doctor, let alone paying a normal 
prescription? I mean I am asking you as a question because you 
are making that recommendation to the Secretary.
    Mr. Hubbard. First, I am sure the Secretary shares your 
concern about the availability of prescription drugs to all 
Americans. It is virtually impossible to differentiate here, 
the diversity is so great. There is every sort of drug coming 
in.
    The problem is many of them allege to be a perfectly fine, 
an allergy drug, in this case. But we don't know that. We do 
not know anything about it. All we know is it has a name on it. 
We don't know what is in it. You can not test a box of ten 
drugs. It costs between $6,000 and $15,000 to do what we call 
authenticity testing of drugs. So to have the taxpayer pay to 
test that little package would be obviously absurd.
    So our fear is that it is an all or nothing thing, that you 
can not distinguish between all of these millions of little 
packages. There is just no way that we know of. I assure you, 
we have spent considerable effort in the last couple of years 
trying to assess what these things are and what we might be 
able to do to parse out the most dangerous, the less dangerous, 
whatever. We just do not know a way.
    Mr. Deutsch. Again, I guess, and this is a final question 
because I know we are in a vote and my time is up as well. I 
mean there is no one who is in that legitimate category that 
wants to purchase a drug that does not have the right dosage, 
that is a counterfeit drug, that is a misdiagnosed drug, that 
is impure in terms of facility. Obviously none of this stuff is 
really safe. I mean I think we can all acknowledge that. We 
have no oversight of the facility in Thailand. We have no 
oversight of the gray market stuff. We have nothing.
    One of the things about our system in America is when you 
go to a pharmacy you have it. FDA does a great job in terms of 
its oversight, in terms of that. There is a safety level 
unparalleled in the world, unparalleled in world history in 
terms of drugs in the U.S. No one wants to do that.
    But I guess one of the things that I think of when I am 
looking at this is what is driving people to put themselves at 
risk, to put their families at risk, to put their children at 
risk. They are not doing it for fun. I mean they are doing it 
because they want to save money. There are people out there who 
are using the Internet to purchase prescription drugs which 
again, the sites are nice looking sites and the description of 
my colleague from Michigan very well might be that in Thailand 
it is a beautiful website, but it is a rat-infested hellhole 
that is producing this stuff in Thailand.
    I mean we saw literally dozens of boxes that were clearly 
from the same location in Thailand. I mean it was clear that it 
just so happened we got a batch of drugs being sent from a 
facility in Thailand. We opened them with the Customs 
officials, and they were different drugs. They were 
prescriptions, prescription drugs that people were clearly 
self-medicating.
    I guess I mean we would think that a meaningful drug 
benefit would deal with this. But I mean that is why I do not 
think it is as simple as you are saying. I think that you will 
find a lot of opposition in Congress just to ban this across 
the board, because in fact there are a great deal of legitimate 
people using this avenue, not out of choice, but almost out of 
desperation.
    Mr. Greenwood. The Chair thanks the gentleman. We could 
also solve the universal healthcare problem by allowing auto 
body shops to set up surgical centers, but that would be pretty 
dangerous too.
    We are going to recess now for this vote until 1. We will 
reconvene then. We thank the witnesses for their patience.
    [Brief recess.]
    Mr. Greenwood. The subcommittee will reconvene again. We 
thank the witnesses for their forbearance.
    The Chair recognizes for 5 minutes for purposes of inquiry 
the gentleman, Mr. Burr.
    Mr. Burr. I thank the chairman.
    Mr. Hubbard, let me say to the FDA I was shocked at what 
you told us. I was pleasantly pleased though that the FDA had 
taken a very strong position on this, and I want to commend you 
and commend the agency because I think the problem is severe. I 
think it needed a drastic recommendation.
    Let me ask you what the Secretary's response to the 
proposal has been so far.
    Mr. Hubbard. Well, we talked to him on Monday. I think he 
certainly understands the issue. But he wanted to have more 
opportunity to talk to us, to understand the risks, to 
understand the procedure. I think he feels he needs a little 
more information. We will be giving him that, I think very 
soon. Of course he will probably want to consult further within 
the administration as well.
    Mr. Burr. How long will it take us to get some indication 
from the Secretary as to whether the agency will adopt this 
proposal?
    Mr. Hubbard. I can't tell you, Mr. Burr. That is his 
prerogative.
    Mr. Burr. How urgent on behalf of the FDA does the FDA 
think this problem is?
    Mr. Hubbard. Well I think by the very fact that we have 
characterized the risk here as so great, we would call it 
pretty important. The Secretary and his staff, we have already 
had discussions with them. They are very attentive to this. 
This is not something where they can't find time to think 
about.
    They do want to have information.
    Mr. Burr. Ms. Durant, is the mail that is received at JFK 
higher in the number than it is received at Dulles?
    Ms. Durant. Yes, sir.
    Mr. Burr. How many packages discussed in x-ray at JFK?
    Ms. Durant. Twenty to 30 times Dulles.
    Mr. Burr. Do you x-ray all the packages at JFK?
    Ms. Durant. Not all of them at JFK.
    Mr. Burr. What percentage?
    Ms. Durant. Ten to 15 percent.
    Mr. Burr. Ten to 15 percent?
    Ms. Durant. About. I could get a better number for the 
record.
    Mr. Burr. Let me state that we understand the constraints 
that Customs is under. We understand how difficult it is to 
operate in a policy that today is so loosely written whether 
you are any of the agencies that are up here. But if the 
Secretary needs a nudge on the urgency, we have seen the degree 
of the problem with just the 10 or 15 percent that we check. 
Think about the 85 percent that we are not.
    The burden that is placed on Customs today is huge. My hope 
is that in that proposal they have got the ability when there 
is a drug shipment that comes in, to stamp ``return to 
sender,'' and it is over with. It is out of their hands. It 
does not need the FDA to send somebody in. It does not need a 
letter to go to somebody. We need to eliminate that from the 
process so Customs can get to the next piece of the puzzle in 
their job responsibility.
    Is this proposal, does it include all prescription drugs?
    Mr. Hubbard. Yes, it would, Mr. Burr, except for the 
exception I mentioned of the compassionate use.
    Mr. Burr. Compassionate use.
    Mr. Hubbard. Now it would not include at this point the so-
called walk-across folks that go to Canada or Mexico. There, we 
would like to think about that some more. There, you have a 
face-to-face interaction. The patient actually stands in front 
of a pharmacy and purchases a drug, say in Canada. There is an 
opportunity because of that to go back if there is a problem 
and find the source of the drug. There is an opportunity for 
FDA or Customs or others as the patient is coming back across 
the border, say the Canadian border, to be warned, to be given 
perhaps a slip of paper saying if you have bought drugs, you 
need to be----
    Mr. Burr. Are they required when they cross in person to 
show a prescription for what they----
    Mr. Hubbard. I believe they are required to declare, but I 
will ask Ms. Durant to answer that.
    Ms. Durant. For the 50 dosage units, they are not.
    Mr. Burr. They are not, are they?
    Ms. Durant. No.
    Mr. Burr. In the next panel, panel three, Marvin Shepherd, 
the College of Pharmacy, University of Texas, will testify that 
he has just been to the border. He has seen Oxycontin packaged 
in blister packs, 50 pills, so that it meets the requirements 
not to be scrutinized as you cross the border. They are just 
sending it across day-in and day-out. I hope that the DEA will 
in fact listen to his testimony because it is happening. It 
will continue to happen. We won't stop it with that exception 
to the proposal that you have in fact made to the Secretary. So 
I would ask you to really go back and look at that. We do not 
want to just narrow the problem to two borders that we already 
have significant problems with.
    Let me ask you, would it include over-the-counter products?
    Mr. Hubbard. Generally, over-the-counter products like this 
are also unapproved. We have given them less attention because 
they are viewed generally as safe, but yes, it would.
    The theory is that any drug bought in another country that 
is unapproved can not be safe.
    Mr. Burr. Customs would not have to make a determination?
    Mr. Hubbard. That is correct, Mr. Burr.
    Mr. Burr. Let me ask you on one other subsection, animal 
drugs.
    Mr. Hubbard. Animal drugs?
    Mr. Burr. Yes, sir. Currently in this country for animals, 
we access quite a few drugs from Europe and from Canada. Do you 
see animal drugs included under this or do you look at an 
exception for that?
    Mr. Hubbard. To be honest, we have not had any discussion 
about that. I am not aware that that is a problem, but I will 
be glad to check that out and get back to you.
    Mr. Burr. Granted, animal drugs are not in the volume of 
human drugs. But I think when you look at the access that they 
need from international markets, it is much greater than the 
access that we need for human drugs. But I would ask you to 
look at that.
    Does Mexico have an equivalent to the FDA?
    Mr. Hubbard. Yes, they do. But obviously different 
countries have different levels of regulation.
    Mr. Burr. Do we have a harmonization agreement with the 
approval process with the Mexican agency that is the 
equivalent?
    Mr. Hubbard. No, we do not.
    Mr. Burr. Have we been able to harmonize the standards on 
drug approvals with the EU yet?
    Mr. Hubbard. We made great progress in a number of areas of 
drug testing and development, yes. We are not 100 percent 
there, but that is certainly the goal, to make them the same in 
both EU and here. The Canadians are involved in that as well.
    Mr. Burr. But the reality is that we don't even have the 
confidence in their systems that we can interchange the 
standards that we use even in the European Union. That is 
correct, isn't it?
    Mr. Hubbard. That is correct. Although perhaps some day 
under the constructs that are being envisioned, that may be 
possible.
    Mr. Burr. I would like to read just a piece out of your 
testimony. I will comment on it and let you comment as well.
    ``The FDA has not officially permitted the importation of 
foreign versions of U.S. approved medications, even if sold 
under the same name.'' ``The FDA has not officially permitted 
the importation of foreign versions of U.S. approved 
medications.'' That one statement right there would say that 
the only products that could the under even today's standard 
come back in are products that were manufactured in the United 
States.
    Mr. Hubbard. Or in a foreign plant that was approved and 
inspected by the FDA.
    Mr. Burr. Well, this says, ``The FDA has not officially 
permitted the importation of foreign versions of U.S. approved 
medications even if sold under the same name.'' That would be 
products manufactured.
    Mr. Hubbard. No. I think what that refers to, let's say 
Viagra might be made in Pfizer's Irish plant, which is approved 
by FDA and it might be made in Pfizer's--I am making up this 
example, of course--Spanish plant that is the drug that's sold 
in Europe and Asia. We might not have inspected and approved 
that plant. So the Irish plant could bring the drug to the 
United States and the Spanish plant could not.
    Mr. Burr. Let me read one other piece. ``Therefore, 
unapproved drugs and reimported approved medications may be 
contaminated, sub-potent, super-potent, or counterfeit.'' Given 
that that is part of the FDA's testimony today, let me just ask 
you one question. How could the FDA sit silent over the past 2 
years when the debate of reimportation took place in the 
Congress of the United States? When today that is a great 
threat in your testimony, reimportation of approved medications 
contaminated, sub-potent, super-potent, and counterfeit. How 
could the FDA sit silent during that debate?
    Mr. Hubbard. I think we have been consistent in expressing 
our concern about the safety of these products during the 
debate last year about the bill that passed Congress to allow 
large shipments, commercial shipments to come in. I do believe, 
Mr. Burr, we have been fairly consistent in saying that the 
system that Congress created in 1938 serves the public very 
well. It is a fairly rigid system. These sorts of drugs from 
other countries, whether they are large commercial shipments or 
these personal amounts, can not be as easily assured of safety.
    Mr. Burr. Given your proposal to the Secretary relevant to 
this issue that we are here talking about today, what would the 
FDA's position be to this committee if the Congress were 
considering reimportation legislation like we saw last year?
    Mr. Hubbard. I think we would be saying the same thing to 
the committee that we said last year to the various Members of 
Congress, which is we are very concerned that a system, if 
designed to be a different system than the current system, 
poses risks and we can not be assured that we could 
successfully implement such a system and bring in safe drugs 
because we do not have the same level of confidence about where 
it was manufactured, and how it was manufactured, and by whom 
it was manufactured, that we have under the current system.
    Mr. Burr. Let me suggest if you get asked the question 
again, that you give the response of the recommendation that 
you made to the Secretary as boldly and forcefully as you said 
it. Today we have an unwritten policy for products coming in, 
if they meet a certain dose--and you have said there is no way 
for us to do this. We need to shut it down. There is no way you 
can look at this and say we have got to shut it down, the 
problem is so great, and look over here and try to make an 
issue of reimportation work.
    We can not ask Customs to determine where it was made, 
where it came from, how it was stored, whether it is 
counterfeit, whether it is adulterated. You know, I said to 
some of my colleagues I hoped everybody read the New York Times 
article this week about three fake drugs are found in U.S. 
pharmacies, hormone drugs, well-known manufactured companies 
that their product had been contaminated on the shelf with 
counterfeit product. Because of the great work of the FDA and 
their ability to track from wholesaler to wholesaler to 
wholesaler, I think they have got a pretty good handle on how 
this happened. Does it eliminate it again? No.
    But the reality is that even the shelves of the pharmacies 
that we go to in this country are susceptible to having 
contaminated products with the absolute gold standard in the 
world as far as drug approval and review.
    My hope is that we will not open that system up to the 
ability for it to deteriorate with something that sounds good 
like reimportation or something that sounds good like personal 
use. We ought to always be the compassionate country that has a 
compassionate use exception to the standard. But for God's 
sake, let us have a standard. I think that is the only hope of 
this committee.
    Mr. Chairman, I thank you. I yield back.
    Mr. Greenwood. The Chair thanks the gentleman, and 
recognizes Mr. Stupak. Before doing so, I understand Dr. 
Leshner has a pressing need to leave and excuses him from 
further testimony.
    Mr. Stupak?
    Mr. Stupak. Thank you, Mr. Chairman.
    In response to Mr. Burr's question, Mr. Hubbard, you 
indicated that the FDA is consistently concerned. With all due 
respect, consistently you have been doing nothing about this 
problem. I'm going back to 1996 when Dr. Shepherd gave you a 
copy of his report about these drugs coming across the Mexican 
border, and nothing has happened.
    We hear from the Rodes today that you go there and you got 
their information in July of last year. Again, they have heard 
nothing back from the FDA. At least the Customs has agreed to 
at least meet with them. Can you make a commitment to the Rodes 
you are at least going to meet with them and tell them what is 
going on? They lost their son. It is a year later, and you 
don't even respond to them?
    Mr. Hubbard. I spoke to Reverend Rode before the hearing, 
Mr. Stupak, and expressed my condolences, and assured him that 
the most vigorous investigation was underway. The question of 
feedback to him is not one that I can answer well. These 
investigations are kept, for obvious reasons, pretty quiet 
because we have to do that.
    Mr. Stupak. I am not here asking for an answer. I am saying 
at least show the people some respect and get back with them. 
You met with their daughter. You took the drugs. They don't 
even know what it is. You have done basically nothing. They had 
to come here to Washington, D.C. to figure out what you are 
doing, if you are doing anything.
    Mr. Hubbard. I told, Mr. Stupak, that we have talked to 
them and given them some feedback. But I will be glad to 
confirm that.
    Mr. Stupak. That is not what they are telling us.
    Mr. Hubbard. Yes. I understand.
    Mr. Greenwood. Would the gentleman yield?
    Mr. Stupak. Yes, I would, Mr. Chairman.
    Mr. Greenwood. Very briefly. We would appreciate it if FDA 
and Customs would arrange--we will arrange for the staff if you 
would brief interested members of this subcommittee on the 
status of that investigation in a confidential matter. I think 
that would be useful. I would like you to take that back to 
your offices.
    I yield back to the gentleman.
    Mr. Stupak. Thank you.
    This recommendation you made to Secretary Thompson on 
Monday, is that in writing?
    Mr. Hubbard. Well, yes. As well as we have met with him and 
with his staff more than once. There will be further 
discussions.
    Mr. Stupak. Will you submit that for this committee?
    Mr. Hubbard. I will certainly determine if we can do that, 
yes.
    Mr. Stupak. How long will it take to make this 
recommendation become a reality?
    Mr. Hubbard. Well, as I said, if we----
    Mr. Stupak. No, no. I want some answers.
    Mr. Hubbard. Okay. I hate to say it, but have to throw it 
back to Congress because we can't do this.
    Mr. Stupak. Throw it back to Congress? You need us to do 
it?
    Mr. Hubbard. I'm sorry.
    Mr. Stupak. Do you need us to do it? Was it quicker for us 
to do it or to wait for the Secretary?
    Mr. Hubbard. We explained two avenues, Mr. Stupak, to 
implement this. One is to write a regulation.
    Mr. Stupak. Write a regulation, get it approved, you have 
got to publish it in the Register, 180 days comment period. We 
are at least a year away, are we not?
    Mr. Hubbard. If we do a regulation, that is correct.
    Mr. Stupak. And if Congress moves, good grief, it could be 
5 years away. Right?
    Mr. Hubbard. The only alternative is for us to try to 
accept these things now, and I do not think we can do that.
    Mr. Stupak. My impatience not only goes back to 1996 Dr. 
Shepherd, but I will start here with January 6, 2000, letters 
from Commissioner of Customs, letters back and forth not only 
from this committee, but from Customs and others, asking you to 
address this issue. We get back a lot of nice letters saying we 
are concerned, we are consistently going to do something, but 
nothing ever happens. I am trying to pin you down to a 
timeframe because this can not go on.
    In the recommendation you made to the Secretary, the same 
recommendation the chairman and the rest of us made to you at 
Dulles, the same recommendation we made to you before we went 
to Dulles when we had a briefing. We are getting tired of 
making recommendations to you. You are the agency, lead agency 
who has to take the bull by the horns here, and you are not.
    So when I say, with all due respect, consistently doing 
nothing, for some of us it is getting a little frustrating.
    Mr. Chairman, I move that these letters from Customs and 
others back and forth to the FDA on this matter be made part of 
the record.
    Mr. Greenwood. Without objection, they will.
    Mr. Stupak. I also move that Dr. Shepherd's 1996 study to 
the FDA and Customs, the rest of it, also be made a part of the 
record.
    Mr. Greenwood. Without objection.
    [The information referred to follows:]6602
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    Mr. Stupak. Thank you, Mr. Chairman.
    So in this recommendation, you have guidelines, do you not, 
that says--important guidelines on all prescription drugs--all 
of the following criteria need to be met before legal 
importation is allowed in this country. Written declaration 
affirming personal use, 90-day supply or less of medication, 
evidence of medical supervision or prescription, and product 
unavailable in the United States. Correct?
    Mr. Hubbard. That guidance is limited to unapproved drugs 
for serious and life-threatening diseases. It is a tiny number 
of drugs.
    Mr. Stupak. What percentage of what we are seeing coming 
into this country would be taken care of just with the 
enforcement of this guideline?
    Mr. Hubbard. Enforcement of that guideline would presumably 
exclude 99.9 percent.
    Mr. Stupak. So why don't we just enforce the guideline that 
is on the books?
    Mr. Hubbard. Because we have to physically receive the drug 
from Customs. I am sorry, Mr. Stupak, but we have to do that. 
It is required by the statute.
    Mr. Stupak. Mr. Hubbard, we have seen the video. We have 
been there. When that parcel comes through the mail and you 
look at it, either the Custom agent or yourself or me, if it 
doesn't have the written declaration affirming personal use, if 
it is more than 90 days, if there is no evidence of medical 
supervision or prescription, if the product is available in the 
United States, you could automatically reject it without having 
to go through all these hurdles that you gave us.
    Mr. Hubbard. But understand, Mr. Stupak, we open this 
package. It doesn't have those things in it. So the idea is you 
send a note to the person and say do you meet the requirements? 
Can you demonstrate to us that this is a legal product or you 
meet the requirements? Then that person has an opportunity to 
come back and explain to the FDA.
    Mr. Stupak. Why is the burden on the person who is supposed 
to be receiving it, and not on the shipper? If you put the 
burden on the shipper, and if 99.9 of them don't meet these 
four criteria, why can't you just ship it back?
    Mr. Hubbard. Again, I have to fall back on the wording of 
our law, which requires us to give notice to the recipient that 
we have held the drug and not allowed it to move on to the 
recipient.
    Mr. Stupak. Same question, just a little different, Ms. 
Durant.
    You have 13 mail sites. One mail site being Oakland. When 
they get this stuff through the mail, they just send it back, 
don't they?
    Ms. Durant. Yes, sir.
    Mr. Stupak. So if one out of 13 sends it back, why can't 
all 13 send it back?
    Ms. Durant. One of the problems that we have faced is non-
uniformity, which is one of the reasons we have gone to the FDA 
for a uniform national standard. We should not be sending it 
back, according to the FDA.
    Mr. Stupak. But if Oakland is sending it back, is Oakland 
doing it right then?
    Ms. Durant. No.
    Mr. Hubbard. No.
    Mr. Stupak. So the other 12 are doing it right, Oakland is 
doing it wrong?
    Ms. Durant. According to FDA guidelines.
    Mr. Stupak. According to their guidelines.
    Ms. Durant. To their guidelines.
    Mr. Stupak. Has FDA told Oakland that they have got to keep 
it all there for them? Have you told them that?
    Mr. Hubbard. We have now.
    Mr. Stupak. You have now. Since when? This morning or 
Monday?
    Mr. Hubbard. Just recently we learned of this. There has 
been a fair amount of discretion among the districts for this.
    Let me explain it. Historically, Mr. Stupak, this was a 
small amount of mail. An investigator could look at it and make 
some judgments about safety.
    Mr. Stupak. Two years ago, we told you this was a small 
problem that was growing. Two years ago you did nothing. Last 
year we got up to 455 websites. Today we are over a thousand. 
We keep telling you, and we keep getting nothing in return.
    You are right. It was a small problem with myself, Mr. 
Waxman, Mr. Dingell, some of us pointed out 2 years ago. So 
see, your small problem has become a big problem. I just for 
the love of me can't figure out why your guidelines are not 
enforced. If one facility is sending it back, why aren't all 13 
sending it back? Then we wouldn't be here. We would not be 
having this hearing, and maybe the Rode's young man would still 
be with us.
    Mr. Hubbard. The Oakland process was not sanctioned by our 
folks in headquarters.
    Mr. Greenwood. The time of the gentleman has expired.
    The Chair recognizes the gentlelady from Colorado for 5 
minutes.
    Ms. DeGette. Mr. Hubbard, you just told Congressman Stupak 
that you had asked Secretary Thompson verbally and in writing 
to do this new policy which we are all hopeful could happen, 
this policy. Then when Mr. Stupak said can you submit it to 
this committee, you said ``I will determine if I can do that.'' 
What would be the barrier?
    Mr. Hubbard. If there is some need for discussion with the 
committee about whether this is----
    Ms. DeGette. Let me be clear. We would like a copy of the 
written request you made to Secretary Thompson for this new 
policy. Would that be----
    Mr. Hubbard. I will certainly ask Secretary Thompson today 
to give it to you, absolutely.
    Ms. DeGette. Well you sent it to him, I assume. Didn't you 
say you made a request of the Secretary?
    Mr. Hubbard. Generally I think we would want the recipient 
to concur with that. But we will.
    Ms. DeGette. Yes, we would like to have it, if possible. 
Thank you.
    Now I am glad about this policy about the importation, or 
just stopping all of the drugs. I think that is what you are 
going to have to do. Unfortunately, I could not go out to 
Dulles with my colleagues. I had to go to Denver that day. But 
just watching this video and listening to the testimony, I mean 
it is a problem that you can't even get your arms around. It 
seems to be worsening every day.
    So I really think this is an important policy. I agree with 
my colleagues, it should be implemented right away. I mean the 
agency should work on it. Congress should work on it. We should 
all work on it.
    Here is the concern I have. I am wondering if you can tell 
me how this will work, Mr. Hubbard. You said that you would 
stop all of these drugs except for drugs needed for 
compassionate care. I am concerned about compassionate care 
just like everybody else. But listening to that, I was very 
concerned that that could be the exception that overwhelms the 
rule.
    I will give you an example. How do you know that those 
yellow pills you had up there that you can't identify won't be 
considered by someone to be for compassionate care? What 
standard? I mean it seems to me to be one of those bureaucratic 
loopholes through which you are going to let all the drugs come 
in.
    Mr. Hubbard. I think Mr. Stupak read some of the 
requirements of the current policy which would be applicable, 
such as that the person have a serious and life-threatening 
disease.
    Ms. DeGette. Okay. When all of these drugs come in from 
overseas, how are you going to apply that policy to them? Won't 
you be back in the same box you are in right now?
    Mr. Hubbard. We will have to work out a system. Perhaps, 
for instance, we could request that any such drugs come in via 
the Federal Express process or one of the common carriers, and 
have some sort of indicia on it so that Customs knows that this 
one has pre-clearance by the FDA. These things can be worked 
out.
    Ms. DeGette. Well, I am concerned that we are supposed to 
have a policy right now, and it seems like that is not working 
out. Wouldn't all of the people sending the drugs simply start 
putting a statement on there saying ``for compassionate use,'' 
a declaration.
    Mr. Hubbard. What we would do is we would ask the patient 
to go to our physicians at our drug center and say I want to go 
get this drug from a foreign country. It is unapproved. I have 
this condition. May I do so? It is what we call an IND.
    Ms. DeGette. How are you going to separate that out from 
all of the rest of the drugs coming in?
    Mr. Hubbard. Then a thing that had that permission could 
have some sort of a note from FDA or indicia or something. We 
can work that out and make sure that that doesn't get 
intercepted.
    Ms. DeGette. My recommendation would be that that would be 
as narrowly drawn and easily identifiable by the Customs agents 
as possible.
    Mr. Hubbard. Of course.
    Ms. DeGette. Ms. Nagel, I am wondering if you can comment 
on whether you think a policy like that could be practicably 
enforced as all of these drugs are coming in.
    Ms. Nagel. I think that if we have something in advance, 
something that is easily recognizable, there will be attempts 
to evade it. There are always attempts to evade whatever 
enforcement sort of action we have. But I do believe that 
having the ability to free up our resources on the ones where 
we are supposed to hold them but we can't----
    Ms. DeGette. Right. So you think it could actually help 
improve your job.
    Ms. Nagel. I think it will help, absolutely.
    Ms. DeGette. Okay. Now, Sergeant Gibbs, I wanted to ask you 
about something. I want to ask Ms. Nagel as well. A lot of 
folks have talked about these pharmacies in Mexico. You can 
just walk in and buy anything. I have a constituent who just 
came in to see me. He has this horror story that none of us 
ever want to live through as a parent. His kid went down to 
Mexico. The roommate said just go into a pharmacy and buy this 
controlled substance for me, and it is legal in Mexico, so no 
problem.
    So the kid walked into the pharmacy, bought the controlled 
substance, no problem. Walked out of the pharmacy, and was 
immediately arrested by the Mexican authorities in a sting 
operation, and to this day is still sitting in a Mexican jail.
    My question to you, I mean there are a whole lot of 
disturbing ramifications to this story. One is these poor 
American college students who don't seem to understand the 
repercussions. We keep hearing though that these are basically 
sources for free flow of drugs across the border. I am 
wondering what the enforcement efforts of the Mexican 
government have been, and if there is some way we can enter 
into some kind of international agreement to get these 
pharmacies shut down, or at least to have improved enforcement?
    Mr. Gibbs. When I was in Tijuana in April, the 
proliferation of the pharmacies are all over the border. There 
were policemen, uniformed officers outside these pharmacies. I 
saw no one questioned. I saw no one apprehended by these 
officers. I really don't know what undercover operations are 
taking place.
    I went into one pharmacy and said, ``Could I have some 
Oxycontin, please?'' He hesitated. He looked me up and down for 
a minute and said, ``No.'' I guess I looked like a cop. But 
there was a guy behind me, walked into a little shop that was 
selling handbags. He asked the proprietor for MS Contin. That 
man said, ``It is in the back.'' So he went in the back.
    Ms. DeGette. So the story that my constituent tells me 
would be an anomaly in your experience?
    Mr. Gibbs. I couldn't answer that question. I don't know.
    Ms. DeGette. Ms. Nagel, maybe you can.
    Ms. Nagel. The Mexican government, like our government, is 
taking under the new president, some very affirmative actions. 
We are actually fairly optimistic that we can see more 
cooperation in this area. There are circumstances where they 
have specifically targeted the pharmacies that they believe are 
just giving out controlled substances without any legitimate 
need. They are also, as we are, trying to stem the flow of 
illegal drugs.
    The one point that I would like to make, if I could address 
something Mr. Burr made, the information that we have received 
about the Oxy coming over in the recent surveys are specific to 
three different people. My best recollection was each one was 
listed as having had a prescription.
    So under those circumstances, they would not have been 
brought in under the 50-dosage unit exemption. They would have 
in fact then come in under a prescription. So there is a lot of 
confusion as to when something comes in, when it is in a policy 
and not in a policy. I think that is where we and the Customs 
Service are working diligently to provide clear guidance to the 
inspectors for someone who has a valid prescription can obtain 
it, and in fact come back. Those that do not will be 
scrutinized, so that they don't believe they can go over and 
get anything they want on a day trip and come back with it.
    Mr. Greenwood. The time of the gentlelady has expired.
    I just would ask one question of Ms. Nagel about Oxycontin 
also. Just as an illustration of how addictive this drug is and 
what a problem it is, we had Sergeant Gibbs talk about 50 
deaths in Virginia. In my district, Bucks County, Pennsylvania, 
outside of Philadelphia, we had a physician arrested. He had 
written 1,200 prescriptions for Oxycontin and Xanax in a 4-
month period. He was writing them for children as young as 15 
years of age. I am reading from the Philadelphia Inquirer.
    Investigators said they visited his office at such-and-such 
an address several times, observing male and female patients 
crowding a waiting room for hours to get prescriptions for the 
medications, paying $59, $66 in cash for office visits that 
usually involve no examinations. Most of the patients were 
gaunt. Their eyes were dilated, and their faces were sunken, 
like they were on drugs, and irritable as if they were going 
through withdrawal. So imagine one physician's office in my 
little neck of the woods. This is a gigantic problem.
    You mentioned in one of your statements that if you had 
evidence of this stuff coming across the border in significant 
measures from Mexico, that the DEA was prepared to take drastic 
action. Can you tell us what you mean by that?
    Ms. Nagel. I have spoken to the company. I have discussed 
with them if we get the evidence that in fact it is coming 
back, it is being reimported, I can request that they stop 
shipping it to Mexico. To do that, I need the evidence. I also 
think it is important, sir, that I address with you I share 
your concerns.
    Before taking this job, I had the State of West Virginia as 
one of my areas of responsibility. It is one of the States that 
is seeing the most wide abuse of Oxycontin. As a result, DEA 
has done something we have never done before. We have created 
an action plan on a specific narcotic drug. It is not on a 
class of drugs. It is not on Oxycodone. It is on Oxycontin, the 
drug itself.
    DEA Chief of Operations has signed it. We are actively 
engaged in trying to determine, through enforcement and 
intelligence, regulatory administration, industry cooperation, 
awareness and outreach, we are literally trying to find out 
exactly what the extent of the problem is. It is huge, because 
the information we are getting from the narcotic treatment 
programs is frightening. It is absolutely frightening that they 
are being overwhelmed with their patients being addicted to 
Oxycontin.
    So please do not ever think that I tried to belittle or 
minimize the dangers from Oxycontin, because that was not my 
intention. But what I need is evidence. I need to take steps 
based on facts and evidence. The agency is more than ready to 
do that.
    Mr. Greenwood. If I may, I had no intentions of minimizing 
your concern about this, but what I do want to know is what do 
you mean by needing evidence? What evidence do you need? It 
seems like it wouldn't be very difficult to find. Sergeant 
Gibbs walks down informally and found a lot of evidence. A lot 
of staff have gone down and seen plenty of evidence of 
Oxycontin coming across the border. What do you need?
    Ms. Nagel. Well, so far I have the one case that I am aware 
of from Virginia that caused us to ask the company to change 
the indicia, to stop shipping the 40's, to move the 40's in. I 
think that was a reasonable action as a result of one 
investigation.
    We have also gotten anecdotal information from the Customs 
Service and other people that they are seeing it come over. 
Short of Dr. Shepherd's recent study that showed me three 
instances of it coming over, that is what I have. I need to 
know exactly how much is coming over. The Customs Service has 
assured me they are going to provide that kind of information.
    I have gone to my country attache in Mexico. I have asked 
him for specific information on abuse and diversion within the 
country. I have gone to my diversion investigators, and to my 
intelligence people in the agency. I have asked them to get me 
comprehensive information on the abuse and diversion within 
country, and what they perceive is coming back.
    As a result of that, if I get something that candidly is 
reasonable, I can then go to the company and first ask them. I 
believe they will voluntarily do so.
    Mr. Greenwood. This is some language that we picked up on a 
chat center from someone who says, hydrocodone, Oxycodone, 
morphine are all available in Mexico. It says the key here is 
to make a project out of it. Look around. Ask questions of the 
pharmacist. What doctor would he recommend for chronic back 
pain, headache, tooth pain, et cetera. It says I am looking 
right now at three boxes of 40-milligram Oxycontin I obtained 
from a medium-sized pharmacy after getting the ``in'' with a 
local doctor. So a lot of other stuff in the backroom, morphine 
being one of them.
    So it seems like the evidence is overwhelming. I am not 
going to press you any further on it. But it wouldn't seem to 
us that it would take very long to get the evidence that you 
need to take the drastic actions that you have taken. It is not 
dramatic to say that lives are in the balance on a daily basis 
over this one drug.
    Let me just ask you this question. If you have an action 
plan for this one drug, and that is impressive and that is 
appropriate, can that action plan not include zero tolerance 
for Oxycontin coming across the border in any number at all?
    Ms. Nagel. To do zero tolerance, sir, again, there are 
people who have a legitimate medical need to have this drug.
    To say that everybody coming over the border does not have 
a legitimate medical need is not appropriate. What we need to 
do is take the laws as written and enforce them, and to ask 
people why you need it, why you're coming over and what is the 
legitimate need for the drug. Once that's done people that are 
trying to subvert it or someone on their roller skates isn't 
going to be permitted to bring in 50 dosage units and that's 
what we're working with the Customs Service on is trying to say 
here's the law, here's the policy, here's the guidance, ask the 
questions----
    Mr. Greenwood. Let me ask this. Do you have any evidence of 
Americans who have legitimate prescription for Oxycontin going 
to Mexico, buying 50 doses or fewer of Oxycontin and coming 
back and taking that medication as per their doctor's orders?
    Ms. Nagel. I have no specific information, no sir.
    Mr. Greenwood. Okay, so in a perfect world we might behave 
in one way, but in the real world we've got, it seems to me, 
tons of evidence of Oxycontin killing people, being abused on a 
daily basis all over this country and coming across the Mexican 
border by the truckload and no evidence of legitimate use of 
Oxycontin and a decision has to be made using good judgment. I 
hope and expected that you'll do that and you'll do that very 
soon.
    We would also like you to submit a copy of that action plan 
to the committee for our record. I thank the witnesses for this 
Panel again.
    Mr. Burr. Mr. Chairman?
    Mr. Greenwood. Oh, Mr. Burr has another question.
    Mr. Burr. If I can be recognized for 1 minute.
    Mr. Greenwood. Without objection.
    Mr. Burr. Ms. Nagel, you said that what you wanted to do 
was follow the law. The scenario that you described to us of 
product manufactured here, sent to Mexico was brought back into 
the country. You do understand that that is against U.S. law 
today?
    Ms. Nagel. If it is smuggled back into this country, sir, 
it absolutely is against the law.
    Mr. Burr. The reimportation of any drug manufactured in 
this country, based upon U.S. code is against the law.
    Ms. Nagel. Sir, if the individual is bringing it back into 
this country for legitimate personal use, my understanding is, 
sir, that is legal.
    Mr. Burr. And I would ask you to meet with Justice, get 
them to interpret the patent protection that exists in U.S. 
Code that does not permit the reimportation of pharmaceuticals.
    Ms. Nagel. Yes sir, I'd be happy to.
    Mr. Burr. Because I think that if we look at that, the 
patent protection laws trump everything right now until we 
change that. We had this discussion with Customs officials last 
year. It is impossible to expect that Customs can sit at the 
border and determine whether that product was manufactured here 
or manufactured anywhere. Members of this committee have looked 
at the pills that have come out of China, that it is impossible 
without the expertise of an FDA official to test something and 
know whether there's actually an active ingredient in it or 
not, but there's one thing that I rest assured have researched 
and that is that U.S. code today makes it illegal to reimport 
products manufactured in this country. If it happens today, 
then we have flatly turned our backs on it and I would ask you 
to research that just for your own purposes.
    I want to say one precaution to my colleagues and to 
everybody here. Oxycontin is used in this country by many 
individuals with cancer as a pain relief pharmaceutical. My 
understanding is when taken as it's supposed to it is certainly 
not as addictive as the crushing and the inhaling that the 
sergeant described to us and it is a vital therapy for those 
cancer patients. So I don't want everybody to rush out and 
demonize this one product because there is a need for it.
    Let me also remind you that sometimes just the surroundings 
suggest what the problem is. In Tijuana today, it's believed 
there are 1,000 pharmacies. Now with a population of 1.3 
million, that's one pharmacy for every 1300 people.
    In San Diego, California there are 125 drug stores. That's 
one drug store per 10,800 residents. Just on the surface, I 
think we can see that in fact there's every attempt to 
circumvent the process and to make sure that the supply exists 
to come back into this country.
    I thank the Chairman for the time. I yield back.
    Mr. Greenwood. The Chair recognizes the gentleman from 
Florida ready to inquire. If not, this gentleman from Florida 
would be happy to give you some preparatory time.
    Mr. Stearns. Yes.
    Mr. Greenwood. Okay.
    Mr. Stearns. I ask for unanimous consent just for a minute, 
just one follow up question.
    Ms. Durant, you mentioned, I guess Mr. Hubbard did as well 
that the open facility has a different procedure than the other 
11 facilities. They're just sending everything back right now, 
is that accurate?
    Ms. Durant. They're not today. They were sending everything 
back.
    Mr. Deutsch. For how long was that going on?
    Ms. Durant. Over a year.
    Mr. Deutsch. We're talking about tens of thousands of 
packages that were just going back. I'm just trying to get a 
sense.
    Ms. Durant. It would be many packages, yes.
    Mr. Deutsch. How did they distinguish between supplements 
and prescription drugs? What was going on at that facility?
    Ms. Durant. There was no distinction. It all went back, 
unless it was approved by FDA.
    Mr. Deutsch. It's just for 12 months it's going on, were 
you getting complaints, was anyone getting complaints that 
they're receiving their supplements or anything?
    Ms. Durant. No.
    Mr. Deutsch. And tens of thousands of packages, no 
complaints. Okay, all right, thank you.
    Mr. Greenwood. The Chair recognizes the gentleman from 
Florida, Mr. Stearns, for 5 minutes.
    Mr. Stearns. Thank you, Mr. Chairman. This is a question 
that is directed to Ms. Nagel. The DEA personal importation 
regulations are important--are, let's see--an importation of 
controlled substance for personal use cannot be admitted unless 
it is authorized or permitted by the Federal laws and State 
laws. Is that true?
    Ms. Nagel. Yes sir.
    Mr. Stearns. The Food and Drug and Cosmetic Act is a 
Federal law that prohibits importation of drugs that are 
misbranded, adulterated or unapproved. Controlled substances 
from Mexico are misbranded because they have labeling in 
Spanish. Controlled substances made in Mexico are unapproved 
because they have not been cleared by the FDA. I understand 
that both Texas and California laws prohibit importation of 
controlled substances. Given the requirement that importation 
must be authorized or permitted under Federal and State laws 
and the fact that by definition these controlled substances 
would not be authorized under either FDA or State law, doesn't 
the DEA's current regulation prohibit the personal importation 
of controlled substances regardless of the amount?
    Ms. Nagel. No sir, when it comes to the personal 
importation of controlled substances, both laws apply. There's 
no conflict between the Food, Drug and Cosmetic Act and the 
CSA. They're both designed to protect the public health and 
safety.
    In the Controlled Substance Act, Congress explicitly 
addressed the personal importation exemption. DEA's regulation 
implements that statute. It's only when FDA advised Customs 
that the importation of the drug should be disallowed under the 
FDCA would the importation be disallowed.
    Going to something that Mr. Barr said and I will go back to 
the lawyers, it's my understanding----
    Mr. Burr. Burr.
    Ms. Nagel. Don't tell me I need glasses already. I 
apologize. I will have to find out on this specific instance, 
but from talking to the lawyers because Congress explicitly 
addressed the importation in the Controlled Substance Act and 
permitted up to 50 dosage units for legitimate travel with a 
variety of things that need to be met, it's my understanding 
that the Controlled Substance Act applies. I don't know about 
the patent law, sir. I don't know.
    Mr. Stearns. Well, staff seems to indicate that this is not 
true, that more than a certain amount is under your authority. 
Let me just hold for a second because there seems to be a 
conflict what staff understands and what you're saying.
    [Pause.]
    More than 50 doses under the current regulations are 
prohibited.
    [Pause.]
    It does not speak to less than 50 doses. Does that make 
sense to you?
    Ms. Nagel. If I could try? This is one of the few times in 
my life I wish I had a lawyer with me.
    Mr. Stearns. Me, too.
    Ms. Nagel. If I could try to do this. The way the law is 
written to permit international travelers who have a legitimate 
need to have medication with them, the law permits you to bring 
up to 50 dosage units.
    Mr. Stearns. Without any kind of check or anything?
    Ms. Nagel. Correct. Without a prescription, without----
    Mr. Stearns. Where does it say that? Because a person could 
go 50 times with under 50 doses and be able to get these drugs.
    Ms. Nagel. The problem is with the implementation of the 
policy to enforce the law. The law does not say you can go 10 
times a day. That absolutely is not in the spirit of the law. 
The spirit of the law is to allow an international traveler 
with a bona fide need to bring something back that will get 
them home until they can get medical attention. That's not the 
way it's been interpreted and it's not being enforced and 
that's what we're working with the Customs Service so we don't 
have someone coming back on roller skates. But if someone comes 
back in without a prescription, they're asked the legitimate 
questions and if they don't have the right answers, it does not 
come in.
    Mr. Stearns. Well, I'm reading from the Controlled 
Substances Import and Export Act. Section 1007 and it mentions 
the statute in accordance with applicable Federal and State law 
they may not import the controlled substance into the United 
States in an amount that exceeds 50 dosage units of the 
controlled substance.
    Now just what that says, it's not saying that it can come 
in with less than 50, so you're making a policy decision.
    Ms. Nagel. It's not a policy decision, sir. In the law, the 
way again I understand it is, it says if I can--a U.S. resident 
who enters the United States who does not possess a valid 
prescription may not import exceeding 50 dosage units.
    Mr. Stearns. And then you assume that somebody could come 
in with less than 50, 40?
    Ms. Nagel. If, in fact, they can demonstrate the personal 
medical necessity, it's in the original container, the trade 
and chemical name appears on it, they can demonstrate the valid 
need for it, yes. It doesn't mean no questions asked. Anything 
comes in, it means if you have a need, you can bring in what 
you need to get home.
    Mr. Stearns. But in my first question to you I was giving 
you the State laws in California and Texas that prohibit 
importation of controlled substances, so what you're doing is 
preempting State, California and Texas laws?
    Ms. Nagel. I wouldn't want to say that, sir, without 
talking to my lawyer.
    Mr. Stearns. But that's what you're saying by saying that 
you interpret this to mean that they can come in with less than 
50 doses.
    Ms. Nagel. If they meet the requirements of the statute and 
the requirements of the regulation and they can demonstrate the 
personal necessity, the Controlled Substance Act permits the 
entry.
    Mr. Stearns. And I think you would agree though that Texas 
and California is interpreting this different.
    Ms. Nagel. I don't know, sir, and I would be more than 
happy to come back with more information, being the only one 
who didn't come with a lawyer, once again, that was a major 
mistake in judgment.
    Mr. Stearns. What staff is contending is that under State 
law there is a requirement and it's not interpreted that people 
can come in with under 50 doses. So what you're doing by 
interpreting that, you're opening it up and a person can come 
in 50 times with under 50 doses and do that. What is the number 
that the person can do before they are against the law, in your 
opinion, 5 times, 10 times, 100 times----
    Ms. Nagel. Sir, this is not for someone to be making day 
trips. It never was implied----
    Mr. Stearns. But you and I both know people make day trips.
    Ms. Nagel. That's why we're working with the Customs 
Service so that they understand exactly what the policy is, 
exactly what the law is, the questions to ask to ensure it's 
implemented appropriately and people are not waived into the 
country because you have 49 or 50 of 10 different substances. 
That's exactly what we're working actively on now.
    Mr. Burr. Will the gentleman yield?
    Mr. Stearns. Just 1 second. Would you admit that the person 
would take more than one trip in a day?
    Ms. Nagel. Can a person? Absolutely.
    Mr. Stearns. Could they take more than two trips?
    Ms. Nagel. Sir, anything is possible.
    Mr. Stearns. They could then skirt the law that you just 
interpreted this way.
    Ms. Nagel. If they were--if they declare it, which is part 
of it, they declare it, they talk to the Customs Inspector, 
they explain what their personal need is, I don't believe that 
drug would be permitted to come into the country.
    Mr. Stearns. See, no one keeps track of it. For example, if 
I get a prescription under Blue Cross or with my doctor, if I 
try to get a prescription for more than let's say, let's say I 
get a prescription for 60 days and at the end of 30 days I try 
to get another prescription for 60 days, I can't do it because 
you can't have too much of this drug. Now in some cases if I 
pay for it myself, I can. So the pill instead of being 50 cents 
becomes $5, so my point is that the way you've outlined this is 
it's sort of a loophole and I think in Texas and California 
that they have laws that prohibit the importation of controlled 
substances and so I think that's an area that Mr. Chairman, I 
think they should clarify and if they don't, Mr. Chairman, they 
probably should come back in writing to us.
    Ms. Nagel. I'd be happy to, sir.
    Mr. Stearns. That would be helpful for us and I yield my 
time.
    Mr. Burr. I was only going to point out to everybody who's 
on the panel. I know each one of you individually thinks you're 
very specific on what you've asked Customs to do. In many 
cases, there are other laws on the books in the State of 
California and in Texas that sort of run opposite, but one of 
the things that I've heard from Customs last time they were in, 
this time, is that they don't understand what they're supposed 
to be doing. Today, you brought specificity to it. My only hope 
is that when you leave, we will all push the Secretary to adopt 
this. If it needs legislation, legislation; if it needs 
regulation, regulation. Let's ram it through as fast as we can. 
Let's prove that we can address a problem just like the FDA 
approved a leukemia drug in 2\1/2\ months and let's close this 
up so we don't have this worry any more. That's the specifics 
that we need so that Customs knows how to do their job, so DEA 
can confidently address the legal side of it that is so rampant 
in every community.
    I'd yield back.
    Mr. Stearns. Mr. Chairman, I thank you for your courtesy 
and I yield back.
    Mr. Greenwood. The Chair thanks the gentleman and thanks 
the witnesses and would care to remind Mr. Hubbard that 
pursuant to Ms. DeGette's request, the committee asks for a 
written copy of the recommendation to the Secretary and these 
witnesses are excused. Thank you.
    The Chair then calls Panel 3, our final Panel to come 
forward: Mr. James Christian, Vice President and Head of Global 
Corporate Security at Novartis International AG; Dr. Marvin 
Shepherd, Professor, College of Pharmacy, University of Texas; 
Dr. John Glover, Vice President, Corporate Security, Bristol-
Myers Squibb Company; Mr. Gene Haislip of Leesburg, Virginia; 
Mr. Donald deKieffer of deKieffer & Horgan and Mr. William 
Trundley, Vice President, Corporate Security and Investigations 
at GlaxoSmithKline.
    The Chair welcomes the witnesses and thanks them for their 
patience for the past 4 hours. You are all aware that this 
committee is holding an investigative hearing and when doing so 
has had the practice of taking testimony under oath.
    Do any of you have objections to taking, giving your 
testimony under oath? Seeing no objections, the Chair then 
advises that under the rules of the House and the rules of the 
committee you are entitled to be advised by counsel. Do you 
desire to be advised by counsel during your testimony? In that 
case, will you please rise and raise your right hands and I'll 
swear you in?
    [Witnesses sworn.]
    Thank you, you may be seated. You are under oath and we 
will begin with Dr. Shepherd. You are recognized, sir, for 5 
minutes for your testimony.

 TESTIMONY OF MARVIN SHEPHERD, PROFESSOR, COLLEGE OF PHARMACY, 
UNIVERSITY OF TEXAS; JOHN D. GLOVER, VICE PRESIDENT, CORPORATE 
 SECURITY, BRISTOL-MYERS SQUIBB COMPANY; JAMES CHRISTIAN, VICE 
   PRESIDENT AND HEAD OF GLOBAL CORPORATE SECURITY, NOVARTIS 
 INTERNATIONAL; WILLIAM TRUNDLEY, VICE PRESIDENT OF CORPORATE 
              SECURITY INVESTIGATIONS, GLAXOSMITH
   KLINE; GENE R. HAISLIP, CONSULTANT; AND DONALD deKIEFFER, 
                       deKIEFFER & HORGAN

    Mr. Shepherd. Thank you, Mr. Chairman. I hope to give a 
pretty clear testimony and I hope to also clear up some what I 
consider false statements being made earlier today. Well, maybe 
not false statements, statements that are not true in the State 
of Texas or in Mexico, the way I understand it. I hope we can 
get some clear air here on what's a prescription and what's 
required in Mexico and what's not, get that done.
    Let me begin. My name is Marvin Shepherd. I'm from the 
University of Texas. I've been interested in this problem of 
importation of pharmaceuticals into this country for about 8 to 
10 years now. It all came about because of some problems with 
U.S. pharmacists when people from Mexico or U.S. residents 
would go to Mexico and buy a bag load of drugs and then bring 
them in or cross the border and land on to the U.S. pharmacists 
and say tell me how to take these and what are they for? And 
that's when I first got notice of the wind of the problem 
because they didn't have any instructions, everything was 
written in Spanish and it was a real problem.
    So it's a pleasure to be here and I find it striking that 
before the Internet pharmacy operations really no one cared and 
everyone seemed to blame the importation of pharmaceuticals a 
border problem. Well, I'll tell you right now, it is not a 
border problem and the Internet really emphasized that. It was 
nota border problem before because in my study in 1995, 40 
percent of the drugs purchased out of Nuevo Laredo were going 
outside of Texas. They went as far away as Maine, Michigan and 
Washington, Virginia, you name it. They went there and that's 
41 percent of all males who went down there out of State and 20 
percent of all females who went down there and bought drugs in 
Mexico our out of the State of Texas. They were not part of the 
community. Now admittedly, 60 percent of all the other 
purchases down there were from the State of Texas. Sixty 
percent of all the purchasers were from the State of Texas down 
there. So we faced this problem for a long time and we've been 
struggling with the controlled substance incidents and the 
problem and we've even prosecuted a lot of people coming across 
the border with Ritalin, Valium and Neopercodan and the whole 
works.
    We've been turned down by Federal courts too, on that.
    But I want to reemphasize that I invite any and all of you 
to come down to a border town. You won't believe it. Farmacias 
are a major tourist attraction in any border town. They're on 
every corner, every other street and the major purchaser of the 
drugs are U.S. residents. You walk in any of them and you talk 
to the owner, the owner will say 95 percent of the people who 
purchase drugs here are U.S. residents and that's what they're 
made for. It's a huge economy and if we look at the 15 drugs 
that I found, the top 15 drugs coming across the border in 1995 
were all controlled substances. The volume of those 15 drugs is 
$135 million just in 1997. It was 6 percent of the total 
Mexican drug distribution right there. Six percent coming out 
of a little town called Nuevo Laredo. I don't even want to 
think about what's coming out of Juarez or Metamoras or Tijuana 
because those have got huge volumes. In Nuevo Laredo, they have 
maybe 25,000 to 30,00 walkovers on a Saturday afternoon and 
about an estimated anywhere from 25 to 40 percent of those 
walkovers are coming back with a pharmaceutical product. So 
it's a big business and I feel sorry for U.S. Customs when 
they've got two people scanning people who come across and the 
line is from here to the parking lot getting back into the 
check point. It's impossible to check them all. They're just 
lined up and it takes more than an hour sometimes to get 
through the border at 5 o'clock on a Saturday afternoon 
standing in the hot sun trying to across. It's a huge problem 
and it's a big business. Huge business for the Mexican economy.
    There are three major reasons and I'll give my opinion as 
to why they do this and it's not price is the No. 1. The No. 1 
reason why U.S. residents go to Mexico is easy access. Very 
easy access to prescription drug products. Mexico has two drug 
products, basically, an over-the-counter drug product which 
includes antibiotics, all your cardiac medications, all your 
cholesterol drugs, all your GI tract drugs, birth control, 
estrogen compounds and some steroids. They're over the counter. 
As recorded earlier, they sell those like candy and gum. So if 
you want tetracycline, erythromycin, ampicillin, Claritin, 
Claritin-D, Allegra, you name it, you can get it over there 
without a prescription, without anything, just ask for it. Many 
of the pharmacies over there will have an American PDR, 
Physicians Desk Reference on the counter, along with the 
Spanish or Mexican references. Oh, I don't remember the name of 
my drug and he'll say well, go over there and find it and I'll 
see if I can find the equivalent drug here. Sometimes they're 
lucky to find equivalent drug, sometimes they cannot find the 
equivalent drug, but they'll find the next best one they can 
for that product and they'll say well, by the way, while I'm 
here, Aunt So and So needs this and my neighbor or here needs 
this and my other friends over there need this and I also need 
some tetracycline, hopefully not for their children, but I also 
need erythromycin or ampicillin for colds that pop up in my 
family. And they purchase it all. That's not talking about the 
controlled substance. That's just talking about prescription 
drugs.
    I want to emphasize one other point for you. I'll bet you 
98 percent of those prescription drugs are not FDA approved. 
I've got a list of the FDA-approved drugs coming out of Mexico 
right now and there's about 12 and most of those are in bulk 
form. I don't know if it's the finished product or not. They're 
not FDA approved, so what FDA was saying earlier about what's 
the quality of these drugs, they don't know. I don't know. No 
one knows because they haven't fit the quality standards of 
what those prescription drugs look like. So easy access.
    If you want to buy a controlled substance and let's clarify 
the law for the Congresswoman, if you want to buy a controlled 
substance in Mexico, you have to have a prescription from 
Mexico. It's got to be written by a doctor in Mexico. The law 
in Mexico says and the prescription has to be in duplicate form 
because they will keep one copy in the pharmacy. That's the 
only thing they really have a record of. They log it into a log 
book and there's only three groups of compounds. The No. 1 
group are injectables, primarily; the No. 2 group of controlled 
substance are most of what we consider IIIs and IVs in this 
country, the Valiums, that kind of product, some of the 
narcotics, Tylenol 3. The third group are some steroids, 
testosterone and some--I've got a list of them here if you want 
a list, but those are the three groups. The No. 1, it's pretty 
difficult to get a prescription from a community pharmacy, but 
it is possible.
    Just recently I saw Demerol come across in 50 ampoules last 
month and a box of ampoules. Now I don't know if it hits the 50 
dosage units or not, but it was a box of Demerol, 50 ampoules 
and a box of syringes come across the border.
    Now the other drugs, as I said, you need a prescription for 
them. Now when you come across you need two prescriptions, a 
U.S. doctor, and a Mexican doctor to do it. Now let's get this 
clear, and I'll be quite frank and I'll probably get shot 
outside this building, but there's a heck of a lot of collusion 
going on between the Mexican docs and the pharmacies, a lot of 
collusion. You go into them and you won't even see the doc, 
you'll see a clerk who writes the prescriptions. I've been 
there. I've seen it. Somebody is at the front desk says what do 
you need? I said I need Rohypnol, Valium, Asylex, you name it 
and they'll write it for you. As a matter of fact, the last 
time I was in there he wrote all three of them out on one 
prescription and gave it to me. He said I recommend you go to 
the international pharmacy two blocks up on the right.
    The next Sunday I went in with CNN News. I went to the 
pharmacy. I knew the prescription writer was closed. I went 
into the pharmacy and I said I'll need Valium. I can't remember 
the other three drugs, I needed. I wrote them on a piece of 
scrap paper, gave them to a 12-year-old kid. The kid went 
upstairs and down the street somewhere, came back with a 
prescription written on one prescription form for three drugs. 
Then the pharmacist, and it wasn't a pharmacist either, just a 
clerk, gave me the prescription and says write your name at the 
top of this prescription. $300 later you walk out with them. 
But they want documentation? Ritalin was the other drug because 
Ritalin is a popular product coming across.
    It's easy and you can see the collusion between the docs 
are getting their $30 to $50 for the controlled substance and 
the pharmacist getting his money up front on the controlled 
substance. No directions, no labels, everything is written in 
Spanish and no one knows how to take it whether it's a 
controlled substance or a non-controlled substance and it's a 
huge mill, economic mill for Mexico right now. Huge.
    The lower prices. Everybody has talked about the lower 
prices. Let's----
    Mr. Greenwood. I'm sorry, we are all fascinated and as a 
result of that I've been extraordinarily indulgent with the 
time.
    Mr. Shepherd. I'll close.
    Mr. Greenwood. We'll ask you lots of questions, but we need 
to go on to the other witnesses.
    Mr. Shepherd. Sure. That's fine. Do you want me to close it 
or----
    Mr. Greenwood. Do you have a concluding paragraph, why 
don't you go there and then we'll get back to you with 
questions.
    Mr. Shepherd. Concluding paragraph. You can enforce 
existing law. I tend to agree with a couple of Congressmen 
here, the existing law could do the job. I think you need to 
harmonize. You need to get a group together with the Mexicans 
and the U.S., harmonize the business. Some kind of panel has 
got to be put together to look at the problem. No. 3, to stop 
the diversion, you could ban controlled substances completely. 
We already talked about that one. No. 4, the public education 
needs to be done. Most Americans think that if it's made by Eli 
Lilly or Squibb or Pfizer, whoever it is, it's FDA approved. 
They think anything with that kind of a label is FDA approved. 
Even if it was made by Eli Lilly of Mexico City, it's not the 
truth. That's a false. It's not true at all. And I think we 
need to teach Customs and FDA people the realities of the real 
world out there and what's going on.
    Customs people cannot make the determination whether it's 
medical necessary or not or it's compassion. They can't do 
that. They don't have the training for that. I don't know how 
they're going to do that and I'll close with that. I'll wish 
you the best.
    [The prepared statement of Marvin Shepherd follows:]
       Prepared Statement of Marv Shepherd, Director, Center for 
   Pharmacoeconomic Studies, College of Pharmacy, University of Texas
                              introduction
    It is pleasure being here today to discuss the issue of the 
importation of pharmaceutical products. I have been involved with this 
area for close to a decade, but my involvement has been on the issue of 
Mexican prescription drugs entering the U.S. I find it striking that 
before internet pharmacy operations, it was difficult to get anyone's 
interest and attention with the problems of importation of 
pharmaceuticals from Mexico, but now with the growing international 
pharmaceutical market via the internet concern for all methods of 
pharmaceutical importation has risen. I applaud you for taking on the 
task and looking in depth at the issues and problems created by the 
importation of pharmaceutical products. There are many social, legal 
and medical issues to address, but the main concerns I have involve 
patient safety and lack of control. People have been hurt and some have 
died due to the importation of pharmaceuticals. Unless we can find a 
better method of controlling the problem, more people will suffer.
    As mentioned, Texas has faced the problem of drug importation from 
Mexico for decades but in the last five to ten years the practice has 
escalated. It is estimated that from 25 to 40 percent of all U.S. 
residents who enter Mexico bring back prescription pharmaceutical 
products. Many people repeatedly visit Mexico to obtain drug products 
for themselves, family and friends. It has also been documented that 
from one El Paso, Texas clinic serving US residents, over 80 percent of 
the patients go to Mexico to obtain their prescription drugs. If you 
want a full perspective of the size of this importation industry, I 
invite you to visit anyone of the Mexican border towns of Texas. Rows 
of farmacias line the streets of Nuevo Laredo, Juarez, Reynosa and 
Metamoras. Farmacias are a major tourist draw for the Mexican economy, 
especially border town economies.
    The customer base for this industry is U.S. residents and it is 
huge; it is so huge that U.S. Customs struggles with just handling the 
volume of people. How do check 25,000 to 30,000 people who walk across 
one bridge and returning the same afternoon? And what about the 
vehicular traffic? Over a million vehicles cross and return from Nuevo 
Laredo each month. In 1997, over 7 million U.S. residents used the 
Laredo border crossing between Mexico and U.S.
    The size of the retail pharmacy business enterprise in border 
communities is huge. For example, the estimated 1997 annual dollar 
volume for just the top 15 pharmaceutical products entering the U.S. 
from Nuevo Laredo was $134 million. This is a conservative estimated 
because it only assumed 25% of the U.S. residents entering Nuevo Laredo 
purchased pharmaceuticals. To get a better perspective, this $134 
million makes up nearly 6 percent of the total Mexican pharmaceutical 
market and this was just for 15 products from one border city. Another 
view is to look at the volume of drugs. Our research documented a 
conservative estimated of over 11,000 Valium' tablets were 
coming across from Nuevo Laredo per day by U.S. residents in 1995. I 
have do not believe this number has decreased, in fact I tend to think 
that it has increased.
    Don't be thinking that this is a Texas problem or a California, 
Arizona or New Mexico state problem, because my research documents that 
41 percent of males and 27 percent of the females who purchased 
prescription drugs in Nuevo Laredo were NOT from Texas; we found that 
these U.S. residents were from 37 states; some were as far away as 
Washington, Maine, Minnesota and Massachusetts. The Mexican 
pharmaceutical importation practice has been an ongoing problem and 
affects more than just border states and communities.
               reasons why people visit mexico for drugs
    There are many reasons why U.S. residents visit Mexico to purchase 
pharmaceuticals. The main reasons why U.S. residents obtain their 
pharmaceuticals from Mexico are:

1.) Easy access to pharmaceuticals,
2.) Lower prices for selected drug products; and
3.) The drug product is not available in the U.S.
    Also, farmacias have done well marketing their products to 
tourists. They have internet sites, they have put ads in newspapers 
papers and there have been many magazine and newspaper articles which 
describe the process and document the cost savings. Few of these 
articles describe the legal problems nor do they describe the drug 
safety problems and risks. Let me take a minute to talk about each of 
these reasons.
                              easy access
    Most prescription drug products in Mexico are sold as over-the-
counter products. You can purchase antibiotics, high blood pressure 
medications, heart medications, gastrointestinal medications, 
antihistamines, birth control pills, plus many other pharmaceutical 
products without needing a prescription. These products are sold like 
candy bars and gum are sold in the U.S. In fact, if you do not know the 
name of the product you want, many of the farmacias will have a U.S. 
Physician Desk Reference on the counter for reference. This compendium 
list all drugs available in the US. So you can look up the drug you 
want and the farmacia clerk will try to find the Mexican drug 
equivalent or a similar product. Many times there is no Mexican 
equivalent available. Also, please note there are no prescription drug 
labels as we have in the U.S. No drug directions for use are given, all 
the products are labeled with the manufacturer's label in Spanish.
    Controlled drug substances in Mexico do need a prescription written 
by a physician practicing in Mexico. However, this requirement is no 
barrier to purchasers of controlled substances. Some Mexican physicians 
in border towns have established their practice just to provide 
prescription for U.S. customers. In fact, they have developed business 
relationships with neighboring farmacias.
                              lower prices
    Some Mexican prescription pharmaceuticals do have a lower price 
with many have a substantial lower price. However, not all Mexican drug 
products have a lower price and for many products the U.S. prices are 
very competitive, especially when you compare prices of antibiotic 
therapies or generic drug prices. For example, the price of 
Dimetapp' 12 capsules in Juarez Mexico is $16.15 while the 
price in the U.S is $6.85. Claritin D', 12 capsules in 
Juarez is $16.38, in the U.S. it is $19.75. An example, of a major 
difference in price of Vasotec' 10mg in Juarez is $16.24 and 
the price in Austin Texas is $47.88. Overall, prices are cheaper in 
Mexico, but it is product dependent. The perceived major differences in 
prices do draw many people to Mexico to purchase pharmaceutical 
products, especially for those people who do not have limited funds 
such as those on a fixed income, retired or lack prescription drug 
insurance coverage.
                   products not available in the u.s.
    As mentioned, some Mexican pharmaceutical products are NOT 
available in the U.S. Either the manufacturer decided not to market the 
product or in some cases the product does not have FDA approval. 
Examples of Mexican products not available in the U.S. are 
Asenlix' (clobenzorex a stimulant 
product),Chloromycetin' (Chloramphenicol', 
antibiotic), Ponderex' (fenfluramine, weight reduction), and 
Rohypnol' (flunitrazepam, sedative hypnotic). Also, some 
Mexican products are combination products which are not available in 
the U.S. For example, the product Qual' contains 
acetaminophen 200mg, Valium' 2mg, and Darvon' 
50mg. Except for products banned from the U.S., Customs officials do 
allow people to bring into the U.S. pharmaceutical products which are 
not available in the U.S. as long as the patient has proper 
documentation for using the product. In addition, if people begin a 
drug therapy in Mexico, they are allowed to import the continuation of 
such therapies to the U.S.
                        patient safety concerns
    As mentioned earlier, I have some grave concerns about patient 
safety and the use of Mexican pharmaceuticals. My concerns revolve the 
lack of medical supervision of the patient's therapy, the patient's 
lack of understanding on how to use the product correctly and the 
indiscriminate use of products. Finally, I have a concern about the 
assurance of product quality. To me, all of these have a potential to 
harm, severely injure or kill people.
    First, the vast majority of Mexican drug products are NOT FDA 
approved. There are only a handful of products made in Mexico which 
have an FDA approval and most of these are bulk products and not 
finished goods. Based on this fact alone, the vast majority of people 
who enter the U.S. from Mexico with a prescription pharmaceutical 
product are in violation of U.S. law. The key point I want to make 
here, is that U.S. customers of Mexican pharmaceuticals need to be 
informed that foreign made versions of U.S. approved drugs may not have 
been manufactured in accordance and pursuant to FDA. In other words, 
the products may not be the same.
    The health concern I have is when a U.S. resident, who is 
successfully being treated and is stabilized on a U.S. manufactured 
drug product, goes to Mexico obtains what he/she considers to be the 
identical product, but it is not. The potential harm is great depending 
on the therapeutic agent and the clinical outcome. Switching back and 
forth from U.S. made product to Mexican product may be dangerous, 
especially for those products which have a narrow therapeutic index.
    My second concern is the indiscriminate use of prescription 
products, especially antibiotic products, but other therapeutic agents 
are also affected. The indiscriminate and self-medication use of 
antibiotics increase the problem of antibiotic resistance. This has 
already been documented with the high antibiotic resistance rates for 
tuberculosis in Mexican border cities. Some U.S. residents visiting 
Mexico purchase tetracycline, penicillin and erythromycin like candy 
bars. They save the products and self-treat themselves, family members 
and friends. Also, with self-treatment, medication compliance is 
usually lower which contributes to the antibiotic resistance problem. 
The lack of understanding and the poor use of pharmaceutical products 
has the potential of seriously affecting the health of many.
    As mentioned earlier, when U.S. customers purchase Mexican drugs 
little if any information is given to the customer as to how to use the 
product. There are no drug labels giving directions for use and the 
labels are written in Spanish which may be of no value to some. Thus, 
the opportunity to learn about the Mexican product is limited. This can 
be very dangerous for those who want to ``try-out'' a new product. 
Final note, few farmacias have a college educated pharmacists on there 
staff. In fact, farmacias which do not sell controlled substances are 
not required to have a college educated pharmacists on their staffs. 
Most farmacias are staffed with clerks, thus limiting the customer's 
opportunity to get competent help and information about the medication. 
Even if the farmacias does provide controlled drugs, there is no 
requirement that a college educated pharmacist must be present. As a 
side note, upon returning to the U.S., many Mexican drug purchasers 
visit U.S. pharmacists and inquire as to how to use the products 
purchased in Mexico.
                            recommendations
Enforce Existing Law
    The recommendation I want to make is to ban the import of all non-
FDA approved pharmaceuticals from foreign countries. Basically, this 
recommendation is asking for the enforcement of the current written law 
(Federal Food Drug and Cosmetic, 21U.S.C. Section 331). I realize that 
this is a difficult political decision, especially with the elderly 
contingent and those who do not have the financial resources to 
purchase therapeutic remedies. It would also cause international 
political problems, especially with Mexico and the NAFTA agreement.
Develop a Strategic Plan to Harmonize Pharmaceutical Business Between 
        U.S. and Mexico
    I believe the major problem between Mexico and U.S. on the 
pharmaceutical trade is the vast differences in regulation, education 
and professional pharmacy practice. Efforts need to be made to bring 
health care practitioners and officials together from both countries 
and develop a plan to try to harmonize the medical and pharmaceutical 
industries. U.S. residents have been using the Mexican health care 
system for decades. However, currently, more U.S. residents are taking 
advantage of and abusing the Mexican health care system for personal 
gain. Medical and pharmaceutical regulations and practice behaviors 
within the border communities need to be examined and perhaps modified 
on both sides to better provide patient care. This is a long term 
approach and will take a lot of effort, but it is a positive step 
forward.
Ban Controlled Substances from Entering the U.S., especially from 
        Mexico
    While waiting for the long term approach in addressing the 
professional and regulatory climate between the two countries, my 
recommendation would be to try to control the personal import of 
controlled substances from Mexico. In my research, it was found that 
the most popular drugs coming across the border from Mexico at the 
Laredo border crossing were controlled substances. All of the15 most 
frequently declared products entering the U.S. were controlled 
substances. These included narcotic analgesics (Neopercodan, Nuban 
Tylex), tranquilizers (Valium), sedative/hypnotics (Rohypnol, Qual, 
Halcion), stimulants (Ritalin, Tenuate Dospan, Diminix, Aselix) 
antipsychotic/antianxiety (Antivan), and muscle relaxant (Somalgesic). 
What alarmed me the most was that the vast majority of these products 
were imported by people under 35 years of age. If you are worried about 
the impact such a recommendation would have on the elderly, I can say 
that few elderly purchase controlled substances in Mexico. My study 
found that only 0.6 percent of all controlled substances entering the 
U.S. were carried by someone over 65 years of age.
    Although I have not compared the prices of controlled substances 
between the U.S. and Mexico, it is my belief that the cost differences 
are small, mainly because most controlled substances in the U.S. are 
available in generic form. My personal feeling is that much of the 
controlled substances entering the U.S. are for recreational use and 
sold on the streets, but I have no data to support the belief. I just 
question why so many youths travel to Mexico and bring back so many 
stimulants, tranquilizers and narcotics. Basically, this recommendation 
calls for a cost-benefit analysis. Does the benefit of allowing the 
legitimate use of controlled substances from Mexico outweigh the black 
market and detrimental and addiction effects of recreational drug use? 
Personally, I do not think so.
    Last month I spent a Saturday in Laredo assisting the FDA in 
collecting data on the type and amount of pharmaceuticals coming across 
from Nuevo Laredo. I really did not see many changes, of course I saw 
no Rohypnol', but I did see tranquilizers 
(Valium') and narcotic analgesics( Neopercodan' 
and Oxycotin') and most of these were being carried by males 
in their 20s or 30s.
Develop a Public Educational Program on the Risks Associated with 
        Foreign Medications
    My second recommendation is for the development of a major public 
educational program informing the public about the potential problems 
which may result with the use of Mexican pharmaceuticals or foreign 
made non-approved drug products. Currently, the public believes that 
just because a well-known U.S. based pharmaceutical manufacturers label 
is on the product the product is FDA approved. Nothing can be further 
from the truth. Drug labels in Mexico are similar in size, type, color 
and style with the U.S. and when the consumer sees Eli Lilly, Pfizer, 
or any other manufacturer's label they assume it is a FDA approved 
product. I recommend that a public education program needs to be 
developed warning them that this is not always the case.
    In this recommended educational program, the threat of counterfeit 
medications from Mexico needs to be highlighted. Recent reports have 
documented the increasing risk and threat of counterfeit medications 
coming into the U.S. from Mexico. The public needs to be aware of the 
problem and the potential risk. In my opinion, I think the threat of 
counterfeit medications will continue to increase with the high prices 
of pharmaceuticals. We need to develop better and cost-effective 
surveillance techniques.
Give U.S. Customs and FDA Technological Support
    My last recommendation is to provide assistance to US Customs and 
the FDA in developing programs to monitor the importation of foreign 
drug products. Data are lacking on the extent of pharmaceutical 
products are entering the U.S. from Mexico. I have worked with Customs 
agents in Laredo and they are overburdened with this problem. The 
number of people crossing the border is tremendous. In fact, in my 
opinion they are begging for assistance. They lack the pharmaceutical 
training, and expertise to identify potentially hazardous prescription 
drug products. In addition, they lack sophisticated computer technology 
to collect the needed data to properly monitor the extent of drug 
importation. They are still using the handwritten form method. New 
computerized methods need to developed to improve the efficiency and 
effectiveness of their enforcement for prescription drug products.
                                closing
    Thanks for asking my input. I'll be glad to work with you and other 
governmental officials to explore our opportunities to assure quality 
care and patient safety on the procuring and use of pharmaceutical 
products. Thanks for this opportunity.

    Mr. Greenwood. Thank you very much.
    Dr. Glover for 5 minutes, please.

                  TESTIMONY OF JOHN D. GLOVER

    Mr. Glover. Thank you very much, Mr. Chairman and committee 
members. My name is John Glover. I'm Vice President for 
Corporate Security for Bristol-Myers Squibb Company, a 
worldwide medical and health care pharmaceutical company doing 
business in over 100 countries. I have submitted a written 
report for the record, but I'll just make a few brief remarks 
at this time.
    Before I became Vice President for Corporate Security with 
Bristol-Myers Squibb Company, I had a 24 year career in the 
FBI, an investigative, administrative and executive positions. 
My last position in the FBI, I was Executive Assistant 
Director, one of three positions reporting to the Director. 
Also, while I was in the FBI I was assigned to the Atlanta FBI 
Office. During the early 1980's we conducted an investigation 
of pharmaceutical sample abuse. That particular case we called 
in Atlanta at the time our farmity case, among other factors, 
led to hearings on the Hill and the enactment of the 
Prescription Drug Marketing Act. I have always believed in the 
strict controls and the flow of prescription drugs are 
essential to protecting the health and safety of Americans. 
Concerns about the risk to public safety from adulterated and 
counterfeit imported medicines, I can tell you, were paramount 
in the minds of the legislators at the time of the enactment of 
the PDMA. In my opinion, concerns for the public health and 
safety of American citizens should continue to be paramount in 
the minds of this legislature and in any legislation passed by 
any Congress. I will only make a few points.
    Point number 1 that counterfeiting of prescription drugs is 
a global and growing problem; that pharmacies, distributors and 
criminal enterprises in Mexico and I agree with Dr. Shepherd 
are significant sources of the counterfeit and diverted 
medicines that we find on U.S. shelves and in U.S. medicine 
cabinets; that factories in India and China are the sources of 
most of the bulk actives used in counterfeit pharmaceuticals 
worldwide; that improved technology and the Internet have 
contributed to the expansion of this trade in counterfeit 
pharmaceuticals and I also agree that from my experiences that 
the FDA, the DEA and the Customs Service lacked the resources 
necessary to police effectively for counterfeit and diverted 
pharmaceuticals.
    As a Security Vice President with Bristol-Myers Squibb 
Company we formed a group several years ago called the 
Pharmaceutical Security Institute. The Pharmaceutical Security 
Institute is an industry body whose primary purpose it is to 
conduct investigations worldwide primarily addressing the 
international counterfeiting problem in pharmaceuticals and 
we've conducted numerous studies and investigations. We've 
conducted studies in China, studies or investigations in China 
and India and the Philippines, in Indonesia and South Africa, 
Europe, South America, Mexico. Each of our studies or 
investigations have resulted in the findings of the existence 
of counterfeit and diverted problems in those locations.
    So I want to say that there's a major problem of 
counterfeited and diverted problems out there. What can we and 
should we be doing to ensure that the problem of worldwide 
counterfeit and diverted problems did not become a significant 
U.S. problem. First, we must recognize that the U.S. is the 
largest and most lucrative market in the world, is the ultimate 
target, the ultimate target for many counterfeiters and 
diverters. We must do what we can to make sure that we don't 
make it easier for these counterfeiting operations than we 
already have. Therefore, we should continue to maintain our 
political will and not allow the desire for low cost medicines 
to undermine our commitment to protecting the health of U.S. 
citizens. Second, we must ensure that maintain comprehensive 
legislation to protect our pharmaceutical industry and 
encourage innovation. Third, we must aggressively enforce the 
laws to combat the trade of spurious medicines. And then last, 
we must maintain strong penal sanctions against individuals 
convicted of violating the various drugs laws.
    That's the end of my brief remarks, Mr. Chairman and 
committee members. Thank you for the opportunity to express my 
view on this important subject.
    [The prepared statement of John D. Glover follows:]
    Prepared Statement of John D. Glover, Vice President, Corporate 
                 Security, Bristol-Myers Squibb Company
    Good morning Mr. Chairman and committee members. My name is John 
Glover. I am the Vice President for Corporate Security at the Bristol-
Myers Squibb Company. Bristol-Myers Squibb Company is a pharmaceutical 
and related healthcare products company who's mission is to extend and 
enhance human life. The company does business in more than 100 
countries around the world. I have been in this position for over 12 
years. Before coming to Bristol-Myers Squibb, I spent 24 years in the 
FBI investigating federal crimes.
    I was in charge of the FBI's Atlanta office when it conducted a 
major investigation into pharmaceutical sample abuse. The findings from 
this investigation were among the factors that led to the Congressional 
hearings that resulted in the enactment of the Prescription Drug 
Marketing Act. I have always believed that strict controls on the flow 
of prescription drugs are essential to protecting the health and safety 
of Americans. Concerns about the risk to public safety from adulterated 
and counterfeit imported medicines were paramount in the minds of 
legislators when they enacted the PDMA. In my opinion, concerns for the 
public health and safety of American citizens should continue to be 
paramount in the minds of this legislature, and should inform any 
legislation passed by this or any Congress.
    The key points to my brief remarks today are as follows:

Counterfeiting of prescription drugs is a global problem.
Pharmacies, distributors, and criminal enterprise in Mexico are a 
        significant source of the counterfeit and diverted medicines on 
        U.S. shelves and in U.S. medicine cabinets.
Factories in India and China are the sources of most of the bulk active 
        used in counterfeit pharmaceuticals worldwide.
Improved technology and the internet have contributed to the expansion 
        of trade in counterfeit pharmaceuticals.
FDA, DEA, and U.S. Customs Service lack the resources to police 
        effectively for counterfeit and diverted pharmaceuticals.
Counterfeiting of prescription drugs is a global problem.
    Counterfeit pharmaceuticals are a global problem. The World Health 
Organization (W.H.O.) has estimated that between 5 and 8 percent of the 
worldwide trade in pharmaceuticals is counterfeit, and that the problem 
is worse in developing nations than in developed nations such as the 
United States. the W.H.O. acknowledges that 5 to 8 percent is only an 
estimate, since no one has conducted a systematic worldwide study of 
the counterfeit medicines problem. Nevertheless, based on my 24 years 
of experience with the FBI and my 12 years with Bristol-Myers Squibb, I 
am confidant that ``5 to 8 percent'' is, if anything, an underestimate.
    Increasingly, the illicit pharmaceutical trade resembles the 
worldwide narcotics trade, where product is sourced in one country, 
formulated into tablets or capsules in another country, packaged in yet 
another country, and then transshipped through other countries to its 
final destination.
    Numerous dramatic stories of deaths and illness caused by 
counterfeits and diverted medicines in various countries such as south 
and subSahara Africa, Asia, Europe, and Latin America have been 
reported in the media.
    A recent example of this nefarious trade was described in Scrip--
World Pharmaceutical News in July 2000. The article reported that 
Italian authorities had seized 240,000 packs of counterfeit drug 
products in Genoa and Milan, and that the products were worth more than 
$1 million. The counterfeit products were from India and China, and 
were intended for human and animal use. Italian authorities arrested 
ten individuals involved in this organized criminal enterprise.
    Separate and apart from news reports, over the past several years, 
the pharmaceutical industry has been involved in various studies and 
investigations regarding counterfeit medicines.
    A pharmaceutical security industry group conducted a 15-month study 
in the Philippines during 1994 and 1995. During this period, we 
collected 1,359 samples from 473 drugstores. we determined that 8 
percent of the samples were counterfeit and that 11 percent of the 
drugstores visited were dealing in counterfeit medicines. Fully 17 
percent of the medicines obtained were illegally imported or illegally 
diverted into the Philippines. The counterfeit medicines included 
cardiovascular, rheumatoid arthritis, osteoarthritis, asthma, anti-
infective and anti-inflammatory drugs.
    In a similar study in Indonesia, we collected 1,309 drug samples. 
While the results were not as conclusive as the Philippines study, one 
company reported a significant counterfeit problem with one of their 
best selling drugs and a lesser problem with another.
    The pharmaceutical security group subsequently conducted a study in 
China. We collected 842 drug samples from 262 outlets in 11 cities. 
Five different counterfeits of the same products were found. During 
this same period, we encountered one state-owned pharmaceutical company 
that counterfeited three best-selling drugs from three different 
manufacturers and shipped these products to the Philippines and to 
Europe. Counterfeiting in china has expanded in scope and 
sophistication since that time.
Pharmacies and distributors in Mexico are a significant source of 
        dangerous counterfeit and diverted medicines on U.S. shelves 
        and in U.S. medicine cabinets.
    The pharmaceutical security institute is a security group 
representing the pharmaceutical industry whose primary focus is 
addressing the trade in counterfeit medicines. In a 1998 trip to 
Tijuana, a Pharmaceutical Security Institute representative visiting a 
pharmacy was steered to products which were said to be as ``good as the 
originals but at lower prices.'' The packaging would have looked 
familiar to a U.S. customer--the labels were in English and the bottles 
appeared to be American. Nevertheless, there were significant 
differences between these Mexican knock-offs and legitimate U.S. 
products. First, there was no guarantee of the quality of the Mexican 
knock-offs. There was no way to know whether they had been manufactured 
in accordance with good manufacturing principles, or to know the 
conditions under which they had been packaged, stored, handled, or 
shipped. Indeed, there would have been no way for a consumer to know 
the true contents of the bottles. Mexican knock-offs could contain the 
proper active ingredient in the wrong amount, or they could contain a 
totally different active ingredient than the one listed on the label. 
The pills could be superpotent, subpotent, or even toxic. Second, it is 
often impossible for a consumer suffering from an adverse reaction to 
identify and contact the manufacturer of one of these Mexican knock-off 
drugs. The investigator in question was unable to locate one 
manufacturer, even when he described an emergency situation. 
Unfortunately, there was no company address or phone number on the 
label. After several calls, the distributor of the product was located, 
but on three successive days, he refused to provide a location of the 
manufacturer even when it was mentioned that someone was injured by 
their product.
    In August of last year, investigators made another visit to 
Tijuana. Again the store clerk--who was not the pharmacist--directed 
the investigators away from name-brand products to what he called 
``generics.'' These products should not be confused with ``generic 
drugs'' in the sense that you and I understand the phrase. In the 
United States, when a drug loses its patent protection, the Federal 
Food, Drug, and Cosmetic Act permits generic manufacturers to market 
``generic'' versions of the drug, subject to certain conditions. These 
U.S. generic pharmaceuticals must be identical to the name brand 
products on which they are based. Also, the manufacturers are subject 
to good manufacturing practice regulations. So-called Mexican generics 
are not approved in the U.S. and may not be manufactured in compliance 
with U.S. good manufacturing practices. They are not true 
``generics''--they are fake products designed to fool U.S. citizens. in 
Tijuana last year, we found products with familiar-looking packaging, 
English labels, and U.S. bottles. some of the labels on these medicines 
identified listed a non-existent U.S. company as the manufacturer.
Factories in India and China are the sources of most of the bulk active 
        used in counterfeit pharmaceuticals.
    With the increase in international trade, it has become 
increasingly difficult to trace the pedigree or lineage of any 
particular counterfeit drug product. As I stated earlier, a product may 
be sourced in one country, formulated into tablets or capsules in 
another, packaged in yet another, and then transshipped through other 
countries to its final destination.
    Recently we have found that companies in India and China are 
heavily involved in manufacturing the counterfeit drugs that eventually 
make their way to the Mexican border and into the hands of U.S. 
consumers. In fact, we currently believe that some products are sourced 
in India, fraudulently labeled in the San Diego area, and then shipped 
into Mexico for sale to unsuspecting Americans. A 1997 customs seizure 
of more than $60 million worth of misbranded and counterfeit 
pharmaceuticals that were destined for Tijuana drugstores tends to 
support this theory. The active ingredients appear to have originated 
from India.
    Also, in numerous instances we have found bulk active that was 
sourced in India, shipped to various European countries, and then 
shipped to Mexico. The documentation provided with these products 
indicated fraudulently that the product was sourced in Europe rather 
than India.
    Finally, there is substantial consolidation in the border trade. 
During the PSI visit to Tijuana in September 1998, it was estimated 
that there were approximately 800 pharmacies operating in the Tijuana 
area alone. In august of last year, the number of pharmacies operating 
in the border area around Tijuana had been reduced to less than 100. 
Information has been received from reliable confidential sources that 
Mexican organized criminal elements are involved in the distribution 
and sale of counterfeit medicines in Mexico.
    China is another significant source of the bulk active used in 
counterfeit pharmaceuticals. We have found counterfeit pharmaceuticals 
sourced from China all over the world.
Improved technology and the Internet have contributed to the expansion 
        of trade in counterfeit pharmaceuticals.
    As web-based pharmacies proliferate on the Internet, so does web-
based counterfeiting. This is borne out by increased U.S. Customs 
seizures over the past few years.
    One dramatic example of web-based counterfeit was described by the 
New York Times in March 2000. The U.S. Customs Service, along with Thai 
authorities, conducted searches of online pharmacies based in Thailand. 
Several arrests were subsequently made in Thailand along with six 
individuals in Albany, New York. Officials seized 20 computers, 245 
packages ready to be shipped, and over 2.5 million doses of drugs. 
These counterfeit medicines are manufactured in unclean, nonsterile 
sites, which certainly would not meet FDA approval.
    FDA, DEA, and U.S. Customs Service lack the resources to police 
effectively for counterfeit and diverted pharmaceuticals.
    Improved packaging technology makes it difficult for even the 
expert eye to differentiate between manufactured labeled product and 
counterfeit labeled product. Certainly it is expecting too much to 
expect a U.S. Customs inspector to make this judgment. Further, limited 
resources affect the number of shipments that can be inspected at our 
ports and borders by U.S. Customs inspectors. FDA and DEA have similar 
resource constraints.
Conclusion
    What can we and should we be doing to ensure that the world problem 
in counterfeit and diverted pharmaceuticals does not become a 
significant U.S. problem?
    We must recognize that the U.S., as the largest and most lucrative 
market in the world, is the ultimate target of many counterfeiters and 
diverters. We must not make it any easier for criminal counterfeit 
operations than we already have.
    Therefore, we must continue to:

1. Maintain our political will and not allow the desire for low cost 
        medicines to undermine our commitment to protecting the public 
        health of U.S. citizens.
2. Ensure that we maintain comprehensive legislation to protect our 
        pharmaceutical industry and encourage innovation.
3. Aggressively enforce the laws designed to combat trade in spurious 
        medicines.
4. Maintain strong penal sanctions against individuals convicted of 
        violating the various drug laws.
    Mr. Chairman and committee members, thank you for the opportunity 
to express my views on this important subject.

    Mr. Greenwood. Thank you very much, Dr. Glover, for that 
testimony.
    The Chair at this time would recognize James Christian, 
Vice President and Head of Global Corporate Security, Novartis 
International. You're recognized for 5 minutes.

                  TESTIMONY OF JAMES CHRISTIAN

    Mr. Christian. Mr. Chairman and members of the committee, 
my name is James Christian and as has been indicated I am Vice 
President of Global Corporate Security for Novartis. Prior to 
joining Novartis I spent 20 years with the United States Secret 
Service, the last 5 years as a Special Agent in Charge.
    At Novartis, one of my responsibilities is to oversee the 
company's worldwide anti-counterfeiting operations. In the past 
5 years, Novartis has participated with law enforcement and 
health authorities in over 100 counterfeiting investigations in 
33 countries and involving hundreds of drug products. I have 
witnessed a considerable ingenuity and resourcefulness that 
unlawful enterprises utilize to manufacture and distribute 
ineffective and often unsafe counterfeit products. Drug 
counterfeiters present a severe and growing threat to the 
health and safety of U.S. citizens. Now is not the time to 
weaken the country's defenses against such criminal activities. 
Novartis has a compelling interest in protecting the medicines 
that it currently markets as well as those under development. 
This year alone, Novartis will spend more than $2.4 billion on 
research and development. More importantly, patients using 
Norvartis' products must have every confidence that the drugs 
are safe and effective.
    Counterfeit drugs are fake medicines, produced and packaged 
to look like the genuine article. They include products 
containing correct ingredients, incorrect ingredients, no 
active ingredient, an insufficient quantity of active 
ingredient or too great a quantity of active ingredient and 
usually have phony packaging and labeling. Counterfeiters are 
able to produce labels that are virtually indistinguishable 
from the true labels. They can also make and stamp tablets with 
company logos and put them in blister packs. We have scores of 
examples of counterfeit expired and adulterated medicines. One 
quick example that I'll show now is a product that is developed 
and we've seized in Colombia. This is the raw material used to 
make the tablets. This raw material is made up of boric acid, 
floor wax and leaded highway yellow paint. From this they go to 
the tablets and from the tablets they go to the blister pack 
and the labeling. I have a number of other examples on the 
table and a bagful of examples if committee members are 
interested later in the program.
    Production of counterfeit medicines is pervasive outside 
the United States and is growing at an alarming rate. My 
written testimony contains detailed information about the 
extent of counterfeit activity in Latin America and Asia. As a 
result of a fairly recent investigation in Argentina, for 
example, 72 individuals were arrested, 7 tons of counterfeit 
pharmaceuticals were seized, 49 different counterfeit drugs 
were identified and 13 clandestine labs were dismantled and 5 
print shops seized. In Colombia last year, more than 400 
expired, adulterated or diverted or counterfeit products from 
80 different pharmaceutical companies were seized by INVIMA, 
the Colombian food and drug authority. Pharmaceutical companies 
and law enforcement authorities have a difficult time 
controlling international counterfeiting practices. Many 
counterfeit pharmaceuticals are manufactured so cleverly that 
it is virtually impossible for consumers, government officials, 
law enforcement agencies, Customs officials to identify them as 
counterfeit. Detection is made more difficult by the practice 
now of mingling counterfeit, adulterated, expired, stolen and 
genuine product. When this occurs random or sampling testing is 
totally ineffective. Counterfeiters do not care about the 
quality and safety of the product. The goal is to sell a fake 
drug to an unsuspecting patient.
    The United States cannot rely on foreign countries to 
enforce their counterfeiting laws and regulations. Many 
governments lack the interest, resources and technological 
sophistication needed to address the problem. Counterfeit 
products present a severe safety risk to patients. They are 
deliberately fraudulently mislabeled with respect to their 
identity and source. Active ingredients, if present, are often 
in an incorrect amount. Frequently, there is no active 
ingredient at all, but a completely different ingredient. They 
might be manufactured in garages, basements or warehouses under 
horrific conditions. I now have a videotape from Colombia that 
is very short, but it will give you an idea of what these 
clandestine labs that manufacture counterfeit money, 
counterfeit products look like.
    [Video shown.]
    Now as bad as that looks, the final product, the quality is 
almost impossible to tell from the genuine and certainly now by 
a Customs Inspector.
    Criminal counterfeiting operations have become more 
aggressive, more sophisticated. The resulting danger to U.S. 
consumer is greater than ever before. Now is not the time to 
diminish the capacity of the United States to prevent 
counterfeiting drugs from reaching our shores. it is time to 
strengthen our commitment to keeping our medicines the best and 
safest in the world. To do this, additional resources and a 
much stronger mandate are necessary for organizations such as 
U.S. Customs and the Criminal Investigative Unit of the FDA. 
Their approach must be international in scope if we are to 
maintain the present level of integrity in the U.S. 
pharmaceutical system. If you go to Bogota, if you go to 
Bangkok, you will find the presence of the FBI, the Secret 
Service, the DEA. You will not find a Criminal Investigative 
Unit of the FDA and yet this has the potential to be a much 
bigger problem than the problems those agencies were 
addressing.
    Thank you.
    [The prepared statement of James Christian follows:]
   Prepared Statement of James Christian, Vice President and Head of 
          Global Corporate Security, Novartis International AG
    My name is James Christian and I am Vice President and Head of 
Global Corporate Security for Novartis International AG. Prior to 
joining Novartis, I was a Special Agent in Charge with the United 
States Secret Service where my responsibilities included suppression of 
counterfeiting of U.S. currency in Latin America. At Novartis, I 
oversee operations to protect the assets and reputation of Novartis in 
the 140 countries in which the company markets its products or in which 
the products or their raw ingredients are manufactured, packaged, 
stored, or shipped. In this capacity, I have witnessed firsthand the 
considerable ingenuity and resourcefulness that unlawful enterprises in 
foreign countries utilize to manufacture and distribute ineffective and 
often unsafe counterfeit products. There can be no question that 
foreign drug counterfeiters take full advantage of offshore mail-order 
pharmacies, the Internet, and visitors from other countries to market 
their goods. Furthermore, if the United States permits the 
reimportation of drugs as provided in legislation enacted last year, 
the financial rewards for drug counterfeiters will ensure that they 
make every effort to penetrate deeply the U.S. marketplace causing 
considerable harm to the health and safety of U.S. citizens.
                             i. background
    Novartis Group is a multinational research-based healthcare 
business headquartered in Basel, Switzerland, with U.S. headquarters in 
New Jersey. We have more than 67,000 employees worldwide with over 
15,000 in the United States. The company's product line includes 126 
prescription drugs to treat or prevent conditions as varied as 
rheumatoid arthritis, schiozophrenia, hypertension, Alzheimer's 
disease, high cholesterol, migraine headaches, epilepsy, cancer, and 
organ rejection in kidney, liver, and heart transplants. Several weeks 
ago the FDA approved our new orphan drug, Gleevec TM, for 
chronic myeloid leukemia, which represents one of the most significant 
cancer treatment breakthroughs in many years. Novartis has a compelling 
interest in protecting the assets represented by the drugs that it 
currently has in the market as well as those now under development. In 
this year alone, Novartis will spend more than $2.4 billion on drug 
research and development. More importantly, it is critical that 
patients using Novartis products have every confidence that the drugs 
are safe and effective. For these reasons, Novartis dedicates 
considerable manpower and financial resources to addressing drug 
counterfeiting on a global scale. Accordingly, Novartis works closely 
with law enforcement and health authorities in numerous countries to 
investigate and suppress the counterfeiting of its products.
                           ii. counterfeiting
    Counterfeit drugs are ``fake'' drugs, produced and packaged to look 
like the genuine article. Counterfeit drugs may include products 
containing correct ingredients, incorrect ingredients, no active 
ingredient, an insufficient quantity of active ingredient, and have 
phony packaging and labeling. Illicit operations may combine 
counterfeit product with adulterated or expired product, or on 
occasion, with some genuine product to make detection more difficult. 
Counterfeiters employ state-of-the-art technologies such as desktop 
publishing to produce counterfeit labels that are indistinguishable 
from the true original labels. These labels put false ``new'' 
expiration dates on expired products and make adulterated or 
ineffective drugs look like the real thing. Counterfeiters have the 
ability to make and stamp tablets with company logos and even to 
package them in blister packs.
    While we have scores of examples of such activities, there are some 
that demonstrate the deceit and danger inherent in drug counterfeiting:

(1) A raid on a counterfeiter's facility uncovered tens of thousands of 
        vials of a drug whose expiration date had long-since passed. 
        The vials were soaked in hot water to remove the old labels, 
        and counterfeit labels bearing a new expiration date were 
        affixed. In similar circumstances, drugs in vials and ampules 
        have lost their efficacy because their temperatures were raised 
        to unacceptable levels during the label-removing process.
(2) Our efforts also interdicted millions of yellow tablets that were 
        virtually indistinguishable from the genuine product--including 
        the company logo. These tablets were made of boric acid, floor 
        wax, and lead-based yellow paint used for road markings. Sacks 
        of these ``raw materials'' were stacked throughout the 
        counterfeiter's site.
    Counterfeiting is prevalent outside the United States and is 
growing at an alarming pace. A joint workshop of the World Health 
Organization and the International Federation of Pharmaceutical 
Manufacturers Associations concluded in 1992 that in some countries as 
much as 60 percent of all drugs may be counterfeit. Since then, every 
major pharmaceutical company has seen an increase in the volume of 
counterfeit medicines. Over the last five years, Novartis has assisted 
or otherwise been involved in over 100 investigations of counterfeiting 
operations, in over 33 countries, involving more than 11 Novartis 
products and more than 200 products manufactured by other companies.
    A survey of the international media demonstrates that the problem 
of counterfeit, substandard, contaminated, and poisoned drugs is 
worldwide--fake Xenical in Hong Kong, phony ampicillin and AZT in 
Vietnam, counterfeit Mefloquine in Cambodia. Recently in the United 
States, counterfeit fertility drugs have been found in New York and 
phony Propecia and Viagra discovered in Boston. Counterfeiting and 
diversion are particularly prevalent and dangerous in Latin America and 
Asia.
    Mexico and Central America. Counterfeit products are a major 
concern in Mexico, Central America, and the Dominican Republic. 
Counterfeiting in Mexico is particularly dangerous for American 
consumers because of the shared border between Mexico and the United 
States. U.S. consumers traveling over the border to Mexico to buy 
products off pharmacy shelves may purchase dangerous counterfeit or 
adulterated products. A recent article in the New York Times reported 
that a chemical analysis had found several sampled Mexican drugs to be 
counterfeit--including an anti-depressant, an ulcer treatment, and a 
diabetes medication. American law enforcement officials opined that the 
amount of counterfeit and substandard medications in Mexico could be as 
high as 25 percent. Based on our knowledge, the problem could be much 
larger. Moreover, in my experience, U.S. Customs and FDA lack the 
resources and infrastructure to police the border adequately to prevent 
criminal smuggling of bulk counterfeits from Mexico to the U.S.
    Argentina. From May 1999 until June 2000, Novartis worked with 
authorities in Argentina to combat the counterfeiting of four Novartis 
products--Voltaren (an anti-inflammatory), Tegretol (an anti-
epileptic), Hydergine (dementia), and Reliveran (arthritis). As a 
result of that investigation, 72 individuals were arrested, 7 tons of 
counterfeit pharmaceuticals were seized, 49 different counterfeit 
pharmaceuticals were identified, 13 clandestine labs were dismantled, 
and 5 print shops were seized.
    Brazil. In early 1999, it became apparent to the pharmaceutical 
industry that there was a major counterfeit pharmaceutical problem in 
Brazil. At that time, 132 counterfeit products--from most major 
companies--were identified as being distributed in Brazil. The 
Pharmaceutical Security Institute (an industry organization formed to 
support anti-counterfeiting efforts) working with the Brazilian 
Minister of Health trained a team of 25 investigators to attack the 
counterfeit medicine problem. Approximately 20 clandestine labs were 
seized and numerous arrests were made.
    Colombia. Counterfeit drugs are manufactured in Colombia for 
international distribution. In 2000 alone, more than 400 products from 
80 companies, either expired, adulterated, diverted or counterfeit, 
were seized by INVIMA (the Colombian food and drug authority) working 
with Novartis and other multinational pharmaceutical companies. 
Investigations, raids, and seizures are continuing with extraordinary 
results. So far, approximately 6 million ampules of counterfeit 
Voltaren have been seized. Tens of millions of counterfeit tablets of 
another pharmaceutical company's non-steroidal anti-inflammatory drug 
have been seized. Dr. Miguel Rueda, Director of INVIMA, believes that 
the counterfeit, expired, and altered drugs were to be distributed not 
only in Colombia but also in Ecuador, Peru, Venezuela, and Central 
America. While INVIMA is working hard to combat the problem in 
Colombia, the necessary resources are not always available.
    Asia. The counterfeiting of pharmaceuticals is a burgeoning problem 
in China. For example, in March 2001, Novartis and other pharmaceutical 
companies participated in a raid with authorities in Shantou that 
resulted in the seizure of over 1800 cartons of counterfeit 
pharmaceutical products from 14 multinational companies.
    India. Another threat to U.S. consumers relates to the distribution 
of bulk pharmaceutical products from India. India refuses to recognize 
intellectual property rights and as a result, through process patents, 
Indian companies manufacture and ship patent-protected bulk 
pharmaceutical products around the world. Technically, the Indian 
products should only be shipped to countries that recognize process 
patents, but in fact much of this bulk product shows up in countries 
that recognize product patents. In fact, there is reason to believe 
that some of this material is shipped to the United States for 
manufacturing and packaging, and then exported to other places such as 
Mexico. Often the product ends up back in the United States when 
American citizens go to Mexico to purchase pharmaceuticals. Health 
authorities in a number of Latin American countries believe that India 
and Cuba use the region as a dumping ground for batches of 
pharmaceuticals that are substandard. For example, health authorities 
have discovered products without sufficient active ingredient and 
contaminated with foreign materials including pieces of glass. Those 
products can be sold to U.S. consumers in Mexico or may be smuggled 
into the U.S. and placed on U.S. pharmacy shelves.
                 iii. lack of control of counterfeiting
    Novartis, like other drug companies, and, unfortunately, law 
enforcement authorities are hampered in the effort to control 
international counterfeiting practices by several factors including: 
(1) the difficulty of detecting counterfeits; (2) the lack of dedicated 
resources in local jurisdictions and the failure to give appropriate 
priority to anti-counterfeiting activity; (3) the ingenuity of 
counterfeiters and the ease with which criminal elements can resume 
operations at new sites; and (4) the lack of applicable criminal 
statutes and the prevalence traditionally light sentences.
    Inability to detect. Many counterfeit pharmaceuticals are 
manufactured so cleverly that it is virtually impossible for consumers, 
government officials, and law enforcement agencies to identify them as 
counterfeit. Counterfeiters do not care about the quality and safety of 
the product. They concentrate their resources on the appearance of the 
product and its packaging. The goal is to sell a cheap, fake product to 
an unsuspecting consumer, not to provide a safe and effective medicine 
to a patient. It can be virtually impossible for consumers to tell the 
difference between a counterfeit and a genuine product. Even 
pharmacists, doctors, and government regulators can be fooled. Field 
tests can determine whether the active ingredient is present, but not 
whether the active ingredient is present in the appropriate amount, 
whether there are any impurities or foreign substances in the product, 
or whether the product is expired.
    The ability to detect counterfeit products is made more difficult 
by the practice of combining counterfeit product, adulterated product, 
expired product, and genuine product. Distributors supply the resulting 
intermingled combination to physicians, hospitals, pharmacies, and 
health agencies. Such shipment might be 50 percent ``bad.'' If a test 
is performed on a genuine pill from the intermingled shipment, the 
counterfeit shipment passes undetected.
    Lack of enforcement. Many countries fail to enforce their 
counterfeiting laws vigorously. Local jurisdictions frequently lack the 
resources and technological sophistication needed to address the 
problem. Some countries spend their resources on other national 
priorities and not anti-counterfeiting activities. In other countries, 
criminal operations have infiltrated the law enforcement and regulatory 
community, precluding effective enforcement of the law.
    Professional criminal element. Drug counterfeiters may be extremely 
large, sophisticated and well financed operations or, at the other 
extreme, they may be small opportunistic enterprises. In Mexico, for 
example, it is believed that most, if not all, of the pharmacies 
located along the border, are owned and operated by Mexican organized 
crime groups. In Latin America, crime syndicates bring together 
manufacturing and printing skills and often link them with existing 
pharmaceutical distributors. By the time a counterfeiting operation is 
identified by a pharmaceutical company, it has generally been in 
operation for some time. The subsequent investigation to develop facts, 
identify suspects, and determine the locations of clandestine labs and 
print shops can take years. During that time counterfeit drugs continue 
to be produced. Oftentimes the company's investigation must be fully 
developed before the local government will take any official interest 
in the problem. Clandestine labs are usually crude and can be easily 
shut down and reopened elsewhere by counterfeiters who suspect that 
they or the location have been compromised. In my experience, the 
professional criminals who engage in counterfeiting of pharmaceuticals 
are able to elude arrest and prosecution by shifting their operations 
from location to location and by taking advantage of delays in the 
investigation process.
                    iv. the threat to u.s. consumers
    There is ample opportunity for counterfeit products to enter the 
United States across the Mexican border. A recent survey by the Drug 
Enforcement Administration and U.S. Customs at the border between 
Tijuana and San Diego revealed that a sample group of 200 travelers 
returned to the United States with 28,409 dosage units. Assuming that 
25 percent of Mexican pharmaceuticals are counterfeit or adulterated, 
those 200 patients alone may have brought 7000 counterfeit or 
adulterated doses into the United States.
    Counterfeit products present a severe safety risk to consumers. 
Counterfeit products are deliberately and fraudulently mislabeled with 
respect to their identity and their source. They might be manufactured 
in garages, basements, and warehouses. The manufacturers do not adhere 
to good manufacturing practices. There is no guarantee the products 
were manufactured in a sterile environment, and no information about 
how the products were packaged, stored, handled, or shipped. Active 
ingredients, when present, are often in an incorrect amount. Often 
there is no active ingredient at all, or a completely different 
ingredient. If the medication is intended for a serious condition, an 
unexpected change in the dosage, the substitution of an illegal 
ingredient, or the lack of an active ingredient could well be life 
threatening. If the medication is intended for a serious and chronic 
condition, a month's supply of counterfeit drugs could place the 
consumer's long-term health in jeopardy.
    Additional problems arise with expired and adulterated medicines. 
Parallel trade and diversion of medicines often results in labels being 
changed so that they are in the local language. There are instances 
where the products lose efficacy during the label change process. 
Labels are often added to outdated products, giving the appearance that 
the shelf life is much longer.
                             v. conclusion
    In 1987, the House Energy and Commerce Committee concluded that 
permitting re-importation of American drugs ``prevents effective 
control or even routine knowledge of the true sources of merchandise in 
a significant number of cases.'' As a result, ``pharmaceuticals which 
have been mislabeled, misbranded, improperly stored or shipped, have 
exceeded their expiration dates, or are bald counterfeits, are injected 
into the national distribution system for ultimate sale to consumers.'' 
Indeed, ``the very existence of the market for reimported goods 
provides the perfect cover for foreign counterfeits.'' Since 1986, 
criminal counterfeiting operations have become more numerous, more 
sophisticated, and more aggressive. The resulting danger to U.S. 
consumers is greater than ever before. Now is not the time to weaken 
the ability of the United States to prevent counterfeit drugs from 
reaching U.S. citizens. If reimportation of prescription drugs resumes, 
Congress will soon be holding hearings to determine how to stop the 
flow of dangerous counterfeit medicines into the United States.

    Mr. Greenwood. Thank you, Mr. Christian.
    At this time, the Chair would recognize William Trundley, 
the Vice President of Corporate Security Investigations, 
GlaxoSmith
Kline.

                 TESTIMONY OF WILLIAM TRUNDLEY

    Mr. Trundley. Mr. Chairman, members of the committee, thank 
you for inviting me to testify today. My name is Bill Trundley, 
I'm the Vice President of Global Corporate Security and 
Investigations for GlaxoSmithKline and I'm based in London. I 
have responsibility for investigating counterfeit crime against 
the company and its customers worldwide. Prior to joining 
GlaxoSmithKline I was the head of Security for the Bank of 
England with additional responsibility for the secure 
production, storage and distribution of the Euro banknote 
including introducing anticounterfeiting measures. Prior to 
that, Mr. Chairman and members, I was in the British Army for 
24 years with the Special Investigation Branch with 
responsibility for the conduct of some anti-terrorist and 
intelligence operations.
    I intend now to make a short presentation to demonstrate 
the widespread incidents of counterfeit product within the 
global marketplace. As you can see, it's almost impossible for 
the consumer to tell the difference between genuine and 
counterfeit products. Look at the silver foils and the blister 
packs to see just how far the counterfeiters will go to copy 
the real thing. This particular counterfeit product was 
manufactured in Taiwan in sufficient quantity to supply the 
local market for 3 months. It's easy for the counterfeiters to 
copy batch codes or make their own packaging. Furthermore, 
there is simply no guarantee that reimported medicines are 
genuine or if they are genuine while out of the country they 
have been stored under the appropriate conditions.
    This particular product is an antibiotic and was found on 
the market in South America. The product is designed to be used 
intravenously as well as in suspension in tablet form. This 
counterfeit version has no active ingredient.
    This product is used exclusively for the treatment of HIV. 
The product was found to be totally ineffective. It was on the 
marketplace in Hong Kong. Criminals will exploit loose controls 
to introduce similar counterfeit medicines into the U.S. 
marketplace. The net result will be to put the lives of 
patients at risk. The taxpayer or the purchaser of the 
medicines becomes the victims of wholesale fraud if they're 
duped into using products that have been switched for the 
counterfeits.
    Dermavaid creme is used to treat skin complaints. this 
product found its way on to the U.K. market from India, despite 
strict EU importation laws. On analysis, it was found to be 
dangerous for use on the human skin. And I have to say that by 
relaxing its import conditions, the U.S. is making itself more 
vulnerable to this sort of practice.
    The package on the right is counterfeit, but can anybody 
here tell the difference easily? This slide relates to a case 
that is only 3 months old, so please don't think it's an old 
problem that no longer exists. This product is used for 
reducing pain and was found on the market in the Far East and 
in Sub-Saharan Africa. One other point, I should make is that 
if a product is potentially harmful, it may be impossible to 
conduct proper recall as the audit trail will be all but lost 
once the product has been sent abroad. One example of a fatally 
harmful product is the case in 1994 which members may be aware 
of when over 200 children in French Niger died as a result of 
being vaccinated with what later transpired to be contaminated 
river water. This was during a government-sponsored vaccination 
program.
    This particular product is used to treat acne. Personally, 
I would not allow my teenage children to rub this counterfeit 
product into their face. This was discovered in the Philippines 
and you can see from the quality of the packaging the lengths 
to which the counterfeiters will go to.
    This product is used for the treatment of asthma in 
children and as you can see it was discovered in Brazil 23 
years ago. The counterfeit version has no active ingredient.
    Now please compare and contrast this appalling trade with 
the companies that each invest billions of dollars every year 
in research and development to ensure the safety and efficacy 
of the product where the products are manufactured in sterile 
conditions and to high standards of GMP and GLP. And the 
ethical producers are subjected to continual testing and 
quality control to ensure the safety and efficacy by both in-
house and the Federal authorities.
    This is in marked contrast to criminal operations. This 
slide shows how the counterfeit Zantac was manufactured in 
Taiwan. The conditions are quite appalling.
    This is a slide that shows how the counterfeit Panidol was 
made. As you can see, the product was made in sweatshop 
conditions and the circumstances that are wholly unacceptable.
    This final slide shows the dreadful conditions in which 
counterfeit medicines are mass produced and stored. The 
photograph was taken during a raid on premises in Manilla that 
resulted in the discovery of the counterfeit acne cream. I 
would like to emphasize, Mr. Chairman and members of the 
committee that despite having strong controls in the European 
market, counterfeit products still find their way on to the 
marketplace. The United States represents 40 percent of the 
global pharmaceutical market. It is therefore the most 
attractive and lucrative market and one which the 
counterfeiters would naturally turn to.
    Counterfeit product is made in primitive, dirty and 
dangerous conditions, often exploiting cheap, unskilled, local 
labor. At best, counterfeits do not contain active ingredients. 
At worst, they can be positively harmful and fatal.
    Finally, more often now, medicines are sold direct to the 
customers through the Internet or mail order. This makes it 
even more difficult for them and the authorities to know 
whether or not the product they're using is safe.
    Mr. Chairman, members of the committee, thank you very 
much.
    [The prepared statement of William Trundley follows:]
   Prepared Statement of William Trundley, Vice President, Corporate 
              Security and Investigations, GlaxoSmithKline
    Mr. Chairman, members of the Committee, I am Bill Trundley, Vice 
President of Corporate Security and Investigations, at GlaxoSmithKline 
which is a research-based pharmaceutical firm. The company has US 
headquarters, research and development, and manufacturing facilities in 
both North Carolina and Pennsylvania. GlaxoSmithKline employs over 
20,000 personnel in the United States and 90,000 elsewhere around the 
world.
    The purpose of this testimony to your subcommittee is to briefly 
discuss some of the Company's experience with those who produce 
counterfeits of our medicines, and to give you some perspective on the 
scope of this problem. The issues are with public safety because: there 
can be no guarantee that re-imported medicines have been stored under 
the correct conditions to ensure their efficacy; the audit trail will 
be all but lost once the product has left the country, making it almost 
impossible to guarantee a successful recall of the product if this 
becomes necessary; and criminals will exploit any perceived loosening 
of controls to place counterfeit product into the US legitimate market.
    First, as to scale, the World Customs Organization has estimated 
that ``around 5% of all world trade may be falsified, and in view of 
the relative ease with which pharmaceutical products can be 
counterfeited and transported, there is little reason to expect a lower 
figure for such products.'' Current estimates of the cost of 
counterfeit medicines range from 6 to 12 billion dollars each year.
    Counterfeiting is most prevalent in developing countries, but there 
is always the risk that these products could find their way into almost 
any country. Former FDA Commissioner Jane E. Henney has said that she 
and her Canadian counterpart are concerned that, if imports were 
allowed, the U.S. demand for drugs from Canada could cause Canada, and 
I quote, ``to somehow be used as a front for counterfeit or 
contaminated products . . . one has to be concerned about safety issues 
here.'' End quote.
    While the size of counterfeiting operations can vary from a small 
back-room unit to a larger factory-like facility, the one common thread 
is the complete lack of regard the counterfeiters have for the 
regulatory and quality control framework that exists for the 
manufacture of ethical pharmaceuticals.
    Their formulations and raw materials have not been tested in 
clinical trials, monitored for adverse reactions nor proven to meet the 
label claims of efficacy or stability throughout the claimed shelf 
life. They may use cheap substitutes for active ingredients, the wrong 
active, or even no active at all. Their processes and equipment are not 
validated, and they probably operate without any monitoring of product 
specifications. False documentation is used to help introduce the sub-
standard goods into the legitimate distribution chain.
    Unfortunately, however, it is relatively simple to produce a 
counterfeit that, on the surface, looks remarkably similar to the 
genuine article.
    Counterfeit medicines are also a cynical exploitation of the trust 
patients place in pharmacists and other health care providers. The 
counterfeiters rely on the reputation and good name of prescribers, 
manufacturers and their products in order to defraud, and possibly 
harm, an unsuspecting and vulnerable public. The most troubling aspect 
of this crime is its negative impact on the lives and well being of 
patients. The net result is to put the lives of patients at risk, as 
they may unwittingly be sold counterfeit or sub-standard medicines as 
part of life-saving treatment or for pain relief. Patients may then 
lose confidence in the product and in the medical profession as a 
whole, causing them to stop their particular course of treatment. The 
taxpayer will become the victims of fraud if they are sold products 
that have been switched for counterfeits or for sub-standard medicines. 
This will result in serious harm to legitimate business such as the 
manufacturers, the distributors and the retail pharmacies.
    Let me quote a few examples:

 In Ghana, ten percent of all hospital deaths are due to fake 
        or subpotent medicines.
 In 1996, hundreds of Nigerians either died or suffered 
        permanent brain damage from a counterfeit version of a 
        meningitis vaccine.
 In 1997, fake medicine killed 88 children in Haiti.
 223 children died in Bangladesh over a two-year period after 
        taking fake anti-malarial pills.
 One study showed that only one quarter of all medicines bought 
        from street vendors in Nigeria were genuine.
    Let me leave you with the thought that, while the counterfeit 
productslook similar to real medicines, the operations that produce 
counterfeit medicines bear little or no relation to the facilities 
required to produce genuine medicines. I believe the scale will 
increase in a very short period of time, particularly when internet and 
mail order selling becomes more widespread as there will be even less 
opportunity for the customer to be sure that it has been purchased from 
a trustworthy source.
    Our manufacturing facilities and standards are complex and 
rigorous. Our whole operation is subject to rigorous control and 
inspection both inhouse and by the Federal Authorities to ensure the 
safety and efficacy of the product. The counterfeit operations, on the 
other hand, are not. This is indeed a case where one cannot judge a 
book (or a medicine) by its cover.
    Thank you for allowing me to testify on this important topic. I 
will be happy to answer any questions you may have relating to our 
interest in this issue.

    Mr. Greenwood. Thank you, Mr. Trundley for your testimony. 
We appreciate it.
    Mr. Haislip for 5 minutes.

                  TESTIMONY OF GENE R. HAISLIP

    Mr. Haislip. Good afternoon, Mr. Chairman, distinguished 
members of the committee, my name is Gene R. Haislip and I'm a 
consultant to the pharmaceutical and chemical industry.
    Mr. Greenwood. Mr. Haislip, let me interrupt you. Is your 
microphone turned on? Just pull it a little closer and speak 
into the silver one, not the black one.
    Mr. Haislip. Sorry. Thank you. I'll start again. Good 
afternoon, Mr. Chairman, distinguished members of the 
committee, my name is Gene R. Haislip and I'm a consultant to 
the pharmaceutical and chemical industry in the area of 
controlled substances and chemicals which, as you've heard this 
morning, are frequently diverted from legitimate channels into 
the illicit drug traffic. Prior to that I served most of my 
career in the Drug Enforcement Administration and during the 
last 17 years of my service I was the head of the Office of 
Diversion Control which is the office in DEA that has 
responsibility for all the programs, investigations and 
activities dealing with that subject and I'm very pleased to 
have this opportunity to address you on I think what we all see 
as an extremely important and sensitive area and a growing 
problem and that is the problem of counterfeit pharmaceuticals.
    I have submitted a lengthy statement for the record and 
with your permission I'll just proceed to summarize some of the 
main points and then answer such questions as you may have.
    Well, counterfeiting controlled substances is not new. It's 
been going on for quite some time. And it's a very interesting 
and important problem and I have detailed some of the 
extraordinary experiences we have with that in my testimony. 
One of the situations that I mention is very unique, I think, 
because it was a case in which at its height really most of the 
factories that produced this particular drug it was called 
quaaludes in those days, most of the factories in the world 
producing that particular drug were really just producing it 
for the illicit drug traffickers. They were virtually the only 
real customers for that commodity. Very little of it was being 
sold to any legitimate enterprise. And in addition to that, of 
course, they were counterfeiting a product that was available 
in the United States, but at that time the legitimate product 
had only become about 5 percent of the total quantity of that 
drug which was available in the United States. In other words, 
about 95 percent of it was the counterfeit product that had 
been smuggled into the country from Colombia where it had been 
counterfeited. And so I think that that case is interesting to 
me because it shows just how far things can go.
    Well now we see that in addition to this historical 
counterfeiting of controlled substances, there's a growing 
problem of counterfeiting of general pharmaceuticals of all 
varieties and for virtually all medical purposes and like the 
counterfeiting of controlled substances, it too is almost 
exclusively an international problem. That is to say, it's a 
problem that probably could not exist in the serious dimensions 
that we're experiencing without the benefit of global commerce 
and what it can provide to criminal organizations and I'd like 
to just emphasize a few points about that, if I may.
    Well, the first thing I'd like to point out is this is not 
really something that's very difficult to do. It's quite easy 
to obtain all the raw materials and all of the technology that 
you need to produce the products that you have seen in the 
various demonstrations this morning and a lot of times, I mean 
if you wish to, you can do this indirectly and retain your 
anonymity by simply using brokers in some of the major 
commercial cities of the world. It's the broker that finds the 
source of these materials and the source, the manufacturer, 
supplier, never knows who the customer is. The source is 
dealing with the broker and the broker is dealing with the 
customer and by the way for whatever reasons, depending upon 
what you're trying to do, if you need for those goods or that 
you've purchased to change identity or to change their source, 
this can be done for you too and it's customarily done in some 
of the great free trade zones of the world. These are special 
zones that you find particularly in the Caribbean and in Europe 
and also in parts of Asia. We don't really have that 
institution in the United States. Sometimes it's called that, 
but it's not really the same. Well, in those free trade zones, 
the goods that are being purchased in this case by criminal 
organizations come into the free trade zone. There is very 
little record keeping required and no inspection of these 
commodities because they're regarded by the country that 
they're entering as being just in transit. So it cannot 
possibly be a problem for them, whatever it is. They're simply 
there in transit.
    But they're there in transit, you can take them into your 
own warehouse. You can rent space within a free trade zone 
because it's not something like this room here. It's more like 
a small city, usually behind a fence and there, you can do 
whatever you need to do. You can even do your counterfeiting 
there, but if you need to change the identity of those goods, 
or if you need to repackage them or relabel them you can do 
that there and they leave the free trade zone as something that 
did not--they were not, when they arrived. So as I've often 
said, things come into that free trade zone and they just 
disappear because they never come out the other end. Something 
else comes out the other end. So I think that's important to 
remember in terms of any idea of trying to control the source 
of much of this international commerce. And as far as 
production, well, I think you've seen some of the examples of 
some of the incredibly crude production that really dominates 
most of this activity, but sometimes it's quite sophisticated 
because we have cases in which criminal organizations have gone 
to parts of the world where for political and economic reasons, 
there's a lot of desperation and they can corrupt the factory 
management. In one case, in this particular case in Eastern 
Europe, a secret facility was established within the factory, 
just known to a few employees just to fill the orders of this 
particular criminal organization for the particular commodity 
they wanted and even went so far as to purchase one of the top 
of the line brand new German tableting machines that could 
produce 400,000 tablets an hour to install in this secret 
facility and if that's not something that's convenient, can't 
find the right factory to try to corrupt, then you can--some 
countries, you can rent a factory. You can go to India and 
places like that, you can rent a factory for the weekend or 
maybe just for night time or a couple of weeks or whatever you 
want to do. All of the equipment is there, they really don't 
inquire as to what you're doing if you can pay the rent. So 
that's another option. And then we've seen in a number of cases 
an incredible thing of criminal organizations really 
establishing what amounted to their own little miniature 
pharmaceutical factory, buying brand new reaction vessels, the 
vats, drying apparatus, all the piping, ductwork, everything 
they needed in a secret facility, usually somewhere in the 
suburbs. This particular one was in a large European capital 
city.
    Well, the second point that I'd like to make is that many 
of the examples I've given in my testimony concern controlled 
substances, but I want to make the point that in dealing with 
these problems in regard to controlled substances, difficult as 
it is, DEA and others do have some advantages. There is an 
international infrastructure which exists. There are three----
    Mr. Greenwood. Mr. Haislip, I don't want to be rude, but we 
need you to summarize and we'll get back to you in questions.
    Mr. Haislip. Thank you. I'll try to do that quickly. So 
there are some advantages in some of these cases, but in the 
case of general pharmaceuticals there is no international 
infrastructure that we can take advantage of. I'll just close 
by mentioning three points that I'd like for you to give some 
consideration to. The first is I think this problem has to grow 
and so we do really need to increase our law enforcement 
capability to deal with it. The second is I think there's a 
need to simplify our laws and make them more practical and 
workable because really in many cases now they're too baroque 
and they probably will not really work and last is, it's time 
to consider some kind of major diplomatic effort to create the 
kind of international infrastructure we do not have. I 
apologize for going over time. Thank you very much.
    [The prepared statement of Gene R. Haislip follows:]
Prepared Statement of Gene R. Haislip, Consultant, Controlled Drugs and 
         Chemicals, Law, Policy, Administration and Enforcement
    Mr. Chairman and distinguished members of the Committee, my name is 
Gene R. Haislip and I am presently a consultant to the pharmaceutical 
and chemical industry on issues involving controlled drugs and 
chemicals. I served for 29 years of my government career in the US Drug 
Enforcement Administration and, for the last 17 years, was the head of 
the agency's Office of Diversion Control from which I retired as a 
Deputy Assistant Administrator of DEA in March of 1997. This is the 
office responsible for all of the control and enforcement programs 
dealing with legitimate drugs and chemicals that are diverted into the 
illicit drug traffic. I am also now assisting the United Nations Drug 
Control Program in the design and implementation of a chemical control 
program in the Central Asian Republics bordering Afghanistan.
    I am very pleased to have this opportunity to testify before you 
today on a subject of great importance to our fellow citizens and one 
that has occupied so much of my professional effort. It is my sincere 
hope that I will be able to make some small contribution to your 
deliberations.
    Drugs and pharmaceuticals have become a major and pervasive social 
concern both because of their life-giving benefits and, in many cases 
their debilitating abuse. It is crucial that we take measures to 
minimize these abuses and at the same time, seek to insure that our 
citizens can rely upon the efficacy, and purity of their medications. 
The extraordinary availability of technology, the speed and ease of 
global commerce and the ingenuity of the criminal mind have resulted in 
the massive diversion and illicit manufacture of drugs of abuse and 
have also begun to undermine the integrity of vital medicines by the 
trafficking in bogus, counterfeit products which may cause the death or 
injury of innocent, unsuspecting persons.
    Much of what I will relate in my testimony deals with the problems 
of the diversion, clandestine manufacture and counterfeiting of that 
smaller group of pharmaceuticals known as controlled substances. 
However, the lessons of this experience are absolutely critical to 
understand the challenges that we face in dealing with all classes of 
pharmaceuticals. In most cases, the criminal technique employed for 
one, are essentially the same for the other, except that in the case of 
non-controlled products, we lack many of the basic tools with which to 
attack these problems. Hereafter, I will attempt to develop this in 
greater detail, but first, some basic statement of the situation is 
necessary to establish a context.
                        i. nature of the problem
    The demand created by addicts and drug abusers is obviously of 
quite a different nature than that of legitimate consumers for the 
medicines they require. Yet there is a certain similarity which in both 
cases may result in stimulating the traffic in counterfeit 
pharmaceuticals. Although most people commonly think of the illicit 
drug traffic in terms of such drugs as heroin, marihuana or illicit 
cocaine, in fact, many important legitimate drugs are also powerful 
narcotics, stimulants or depressants that are frequently sought by drug 
abusers.
    Just like other consumers, drug abusers and addicts have learned 
the various brand names and appearance of the drug products they are 
seeking. Consequently, drug traffickers employ every criminal means 
they can to obtain these legitimate products to sell to their customers 
at tremendously inflated prices. But because of controls, it often 
happens that these products cannot be obtained in sufficient quantity 
from legitimate sources and drug traffickers undertake to counterfeit 
their own dosage forms to meet the demand.
    In a similar fashion, criminal organizations sometimes seek to meet 
the legitimate demand for brand name pharmaceuticals by counterfeiting 
inexpensive, perhaps entirely bogus dosage forms in order to defraud 
both legitimate patients and manufacturers. If the legal and law 
enforcement situation is inadequate to prevent such schemes, cheap, 
impure, ineffective and perhaps highly toxic counterfeits can drive out 
the legitimate product. This is the subject with which we are concerned 
in this hearing.
            ii. methaqualone diversion: a prototypic example
    I know of no finer example of the capabilities of international 
criminal groups to corrupt global commerce than the massive illicit 
traffic in counterfeit Methaqualone tablets known as ``Quaaludes'' 
which occurred in the early 1980s. It is for me, largely a personal 
story, but briefly worth the telling because it illustrates how far 
such a problem can develop. All of these same conditions continue to 
exist and generally characterize the traffic in all diverted and 
counterfeit pharmaceuticals.
    During the late seventies, a strong depressant drug known as 
``Quaalude'' became a major drug of abuse, especially among 
adolescents. This resulted in increasing addictions, overdose deaths, 
and an extraordinary rate of automobile fatalities. At the time, a US 
company was manufacturing about seven metric tons of the drug a year 
for legitimate medical use and much of it was being diverted. Suddenly, 
it had become a drug which was producing as many deaths and injuries as 
either heroin or cocaine.
    By 1980, we had determined that the country was being inundated by 
these Quaalude pills in such extraordinary quantities as to far exceed 
national production. By reviewing the DEA daily enforcement reports, it 
soon came to my attention that shipments containing one and two tons of 
these pills were being seized almost weekly from small aircraft that 
had originated in Colombia. The tablets turned out to be counterfeits 
but were equally potent and usually contained the 300 milligrams of the 
drug just like the legitimate US product.
    A quick check revealed that this synthetic drug was not 
manufactured in Colombia and I set off for Colombia, and particularly 
the port of Barranquilla, with the task of discovering the original 
source of this material. As a result, the Colombian Customs and 
National Police were soon making the seizures which permitted us to 
gradually piece together the entire story of this traffic and put an 
end to it. It is one of the very few complete victories of our 
enforcement efforts, in that this huge billion-dollar traffic was 
eliminated. Here is what we found.
    The Colombian drug traffickers had identified every known source of 
the legitimate manufacture of this drug, which involved countries in 
Western Europe, Eastern Europe and Asia and brokers and free trade 
zones in many others. Through one technique or another, they were 
purchasing virtually the entire global production of bulk Methaqualone 
powder for eventual shipment to Colombia where it was rendered into 
counterfeit Quaalude tablets exactly like the popular legitimate 
product produced in the US. As a result of establishing the production 
capacities of these foreign facilities and the large seizures which we 
began to make, I estimated that approximately 150 metric tons of the 
bulk drug was being diverted and counterfeited each year. This was more 
than twenty times the quantity of the legitimate pills then being 
manufactured. In other words, the world's factories were mostly 
supplying only the drug traffic, and the legitimate product represented 
only about 5% of the total availability. Congress finally eliminated 
all manufacture of this drug in the US and it has also ceased to be 
manufactured globally.
                       iii. diversion techniques
    What is most instructive is the manner in which all of this was 
accomplished. There were essentially two ways in which the material was 
obtained from source manufacturers. The most common method was to place 
orders through brokers, usually operating in the great free trade zones 
such as Rotterdam or Hamburg, or in Switzerland. In this way, neither 
party knows the identity of the other and the shipment is protected 
from scrutiny by Customs authorities that routinely make no examination 
of goods in transit. These are considered harmless because they are not 
staying in the country and can do no harm to their temporary host! 
Moreover, if special labeling and shipping arrangements are desired in 
order to evade attention while in transit or upon arrival, it is easy 
to find a broker who will oblige. Essentially, the drugs enter the free 
trade zone and disappear from the face of the earth. The manufacturer 
may wonder who is ordering such quantities of drugs but has no legal 
responsibility to inquire.
    The other method of obtaining the drug was to deal directly with 
the manufacturer. In one case, traffickers sent representatives to a 
foreign factory with suitcases full of US dollars to negotiate for 
multi-ton shipments. Their attempt to corrupt the management at this 
factory--which was partly owned by the foreign national government--was 
successful. As will be seen, similar, and even more blatant situations 
of the absolute corruption of factory management have arisen.
             iv. clandestine production and counterfeiting
    In the case of Methaqualone, all of the active pharmaceutical 
ingredients (APIs) were purchased from legitimate sources and the 
actual counterfeiting occurred in Colombia. This is perhaps the easiest 
part of any clandestine operation. Used multi-stage tableting machines 
are readily available on the international market or they may be 
purchased new without arousing suspicion. It is also probably easy to 
substitute candy machines, which perform essentially the same functions 
as tableting machines. Counterfeiters are also quite capable of 
manufacturing capsules, ampoules, and blister packs. This is often seen 
on the Mexican border in the traffic in counterfeit steroids, while 
capsules have been used for counterfeit amphetamines (Black Beauties) 
beginning in the early seventies.
    In the course of investigations of this type, it is quite common to 
find that persons with professional experience in the legitimate 
chemical and pharmaceutical industry have been recruited to perform the 
technical functions for which they were trained. On occasion, these 
individuals will in fact contact former colleagues still employed in 
legitimate enterprises and who are usually innocent of the purpose, to 
obtain sources or supplies.
    If the desired bulk material (APIs) can not be purchased, 
arrangements can be made for its production. This is more likely to 
occur in those situations where legitimate facilities are experiencing 
financial difficulties, such as in Eastern Europe or in developing 
countries. In one such case, arrangements were made with the director 
and chief chemist of a struggling East European factory to establish a 
secret production facility within the company's 17-acre campus. It was 
easy to obtain the necessary chemicals without arousing suspicion and 
to relocate production equipment. To complete the arrangement, a new, 
top-of-the-line tableting machine which could produce 400,000 tablets 
per hour was purchased from a German firm. In another case, in a 
neighboring country, it happened that this factory was a producer of an 
important precursor material and some of the management and personnel 
decided to use it to establish an illicit production facility within 
the company. Unfortunately, as a result of political upheavals and 
marginal economies, there are many such situations like these, which 
are often ripe for corruption.
    If it is not possible to corrupt the management of a suitable 
facility, in some countries a criminal organization may rent an 
existing facility during evenings or for weeks or weekends. But it may 
be more expedient to build your own facility. There are examples in 
both Western and Eastern Europe in which this has been done for drugs 
such as MDMA and Methamphetamine. In these cases, very knowledgeable, 
well-funded criminal organizations acquired a suitable site in the city 
or the suburbs and proceeded to purchase brand new, top-of-the-line 
reaction vessels, tableting machines and vats and piping and dryers. 
These were small but modern, up-to-date, elegant production facilities 
costing more than a million dollars. In one of the more fascinating 
cases, a group of traffickers purchased large lots of cocaine in 
Colombia for distribution in Europe to finance their secret factory in 
a European capital. This factory was intended to supply illicit markets 
in both Europe and the US.
                     v. packaging and distribution
    Counterfeit packaging is generally no more difficult than 
counterfeiting tablets. In most cases, only the original legal 
manufacturer of the real product can tell the difference, and then only 
on close examination and search of records.
    Distribution is probably the most difficult and risky activity of 
pharmaceutical counterfeiters. If the product is destined for the 
illicit drug traffic, it involves all of the risk attendant to the 
smuggling of heroin or cocaine. If the product were intended for 
legitimate consumption, the task would be much easier. The product 
itself appears to be legitimate and would cross Customs barriers with 
less notice and suspicion, especially since the services are focused on 
illicit drugs and commodities which require so much of their effort. 
Certainly, it is easy to establish a ``front company'' with four or 
five employees to receive and market the goods to legitimate 
distributors. Such ``companies'' have been routinely used in the US to 
import precursor chemicals for distribution to illicit manufacturers of 
Methamphetamine. Of course, the ease with which this can be 
accomplished will depend on the strength and enforcement of national 
legislation.
              vi. diversity of counterfeit pharmaceuticals
A. Drugs of Abuse
    In the examples above, I have dealt primarily with the controlled 
pharmaceuticals that concern DEA. Before turning to other areas, I 
should like to complete this picture with a very brief summary, as the 
example given is only remarkable because of its scope and effect upon 
the US.
    In the early 1970s, large quantities of secobarbital and 
amphetamine were imported into Mexico for the clandestine production of 
counterfeit capsules for illicit distribution in the US. These capsules 
closely resembled the products that had been previously obtained by 
traffickers from the Mexican subsidiary of a US firm. When their source 
of supply was cut off, they simply continued their illicit business 
with counterfeits. The same situation appears to have developed as a 
result of the control of steroids. When the diversion of these drugs 
was virtually eliminated by act of Congress in 1990, sophisticated 
counterfeit products immediately increased along the Mexican border.
    In recent years, Europe, Africa, Asia, and the Middle East have all 
experienced similar large-scale diversion and counterfeiting of drugs 
of abuse. These include a variety of stimulant drugs ranging from 
amphetamine to Fenetylline, pemoline, amfepramone, and phentermine. It 
appears that both legitimate and clandestine manufacturing sources of 
bulk material have been used at various times. Clandestine laboratory 
and counterfeiting facilities producing such materials have frequently 
been seized in the Balkans and major points of sale and distribution 
are focused on Africa and the Middle East. Other commonly counterfeited 
products include Mandrax (the European form of methaqualone), Diazepam 
(Valium), Flunitrazepam (Rohypnol) and other benzodiazepines.
B. General Pharmaceuticals
    The evidence suggests that the counterfeiting of other classes of 
pharmaceuticals is equally widespread. The first international effort 
to define the problem was a workshop organized by the World Health 
Organization (WHO) together with the International Federation of 
Pharmaceutical Manufacturers Associations (IFPMA) in Geneva in April of 
1992. It found that the counterfeiting of medicines had greatly 
increased and involved billions of dollars annually. A recent list of 
actual case reports from various countries included the following types 
of counterfeit medications: antibiotics, diuretics, antimigraines, 
antiparkinsonians, analgesics, antispasmodics, muscle relaxants, 
antianaemics, antihistamines, corticosteroids, anitfungals, 
vasodilators, tranquillizers, vaccines, antimalarials, birth control 
pills and more. We may say that most of the classes of drugs that can 
be marketed to consumers were involved.
    The WHO Department of Essential Drugs has continued this work and 
in 1999, issued a very commendable set of guidelines for the 
development of measures to combat the problem. This report took note of 
some of the increasingly common ``horror stories'' of the carnage 
caused by defective counterfeit products such as deaths of children 
resulting from liver damage caused by the inclusion of toxic substances 
and unplanned pregnancies resulting from birth control pills containing 
no active ingredient.
    The reason for their growing availability and popular acceptance, 
as noted by WHO executive Dr. Suzuki at the World Health Assembly in 
May 2000, is the combination of ``profit and price'', the usually 
dynamic of any drug traffic. Pharmaceutical counterfeiters, who do not 
have to trouble themselves with producing a quality product, or paying 
for any of the expensive research that originally created it, can 
concentrate on the authenticity of appearance and still offer a bargain 
price. A speaker from the Health Ministry in Benin observed that people 
were dying from counterfeit drugs daily, but continued to buy them 
because of their relatively cheap price. While visiting Nigeria some 
years ago, I found that the usual ``pharmacy'' services were offered on 
the street from the trunk of beat-up vehicles where, according to 
experts, most of the modern medicines were counterfeits.
    WHO reports that although counterfeit pharmaceuticals are extremely 
common in developing countries, they have also been found in developed 
countries as well. Indeed, the principal consumer interest driving much 
of the counterfeit pharmaceutical market along the Mexican border is 
also the desire for cheaper medications. Who wants to pay more when you 
can pay less? Who wants to pay for another office visit to the doctor 
when you can buy the drug that you have been using at a cheaper price 
on the other side of the border, and without a prescription!
              vii. deficiencies in control and enforcement
    Perhaps the greatest service that WHO has rendered is to enumerate 
the current massive deficiencies in national and international efforts 
to deal with the problem. I think that those of us who work in the area 
of controlled drugs are particularly aware of this because of the total 
lack of most of the tools, institutions and practices that we regularly 
use. I am perhaps especially sensitive to this, having so often 
experienced the frustrations of laboring to organize international 
enforcement cooperation in the absence of clear and specific legal 
authority. This proved to be an excruciating problem in dealing with 
the example I gave of Methaqualone which, although the subject of an 
extraordinary illicit traffic was not under legal control in most of 
the countries that were feeding it. The first attitude is always the 
same; ``We don't have an obligation, we don't have the authority, and 
we don't have the time.'' Let's look at some of the specifics.
    The counterfeiting of pharmaceuticals is a thoroughly international 
problem. Production and distribution seldom occurs within a single 
country and often involves global commerce. Yet there is no specific 
multilateral treaty imposing obligations to criminalize, report, or 
cooperate in the suppression of this traffic, nor any international 
staff to collect, analyze and disseminate information. This contrasts 
sharply with our work in the area of drugs of abuse where we have had 
treaties since 1911 and a Board and staff, which monitors their 
compliance.
    Perhaps of most importance is the fact that, as a result of efforts 
that DEA and others have made, a functioning, effective informal 
international law enforcement effort has been constructed around these 
agreements. The staff of the International Narcotics Control Board is 
daily working with the law enforcement agencies of dozens of countries 
which all communicate and cooperate together in operations to suppress 
illicit diversion of both controlled drugs and chemicals. I assure you 
that the results are quite impressive and have had significant impact 
on the traffic in a long list of narcotics, stimulants, and depressants 
that are often diverted into the illicit traffic, as well as chemicals 
for the manufacture of methamphetamine, amphetamine, MDMA, cocaine, and 
heroin. This structure does not exist in the area of counterfeit 
pharmaceuticals.
    Since there is no treaty, there are also no legal obligations to 
penalize certain actions, or designated agencies to systematically 
collect intelligence or assist each other in investigations. I would 
defer to the FDA for an account of the situation in the US, but in most 
cases, I doubt that there is specific assignment of clear enforcement 
responsibilities and mandate, together with dedicated personnel and 
resources. Usually, such laws as exit are of a regulatory nature and 
are generally the responsibility of the Health Ministries. The national 
law enforcement agency may help out on a selective, ad hoc basis. This 
approach is lacking in the advantages that we possess in the area of 
controlled drugs and chemicals. In short, on a global level:

 National laws are often inadequate,
 International shipments are not searched or verified in free 
        trade zones,
 There is a lack of dedicated enforcement personnel and 
        resources,
 There is no systematic data base and no requirement for one,
 There is no specific treaty or set of uniform international 
        obligations,
 There is no dedicated staff to monitor compliance, and
 There is no functioning, systematic international law 
        enforcement effort.
              viii. future challenge of the global economy
    The pharmaceutical industry has become an increasingly important 
part of health care and is deserving of specific attention, regulation 
and protection from crime and corruption. It is clear that there are 
strong financial incentives to engage in pharmaceutical counterfeiting. 
The level of criminal activity can be expected to increase rapidly with 
the globalization of commerce and the emphases on speeding this 
commerce through Customs barriers. Moreover, the increasing variety, 
effectiveness and elegance of pharmaceutical remedies will also 
increase these financial incentives.
    The potential damage from this criminal activity is enormous and 
includes:

 Injury to patients whose maladies go untreated because of 
        reliance upon substandard or entirely bogus counterfeit 
        preparations,
 Injury to patients who unwittingly consume counterfeit 
        preparations containing poisonous ingredients,
 Damage to the entire public health system by undermining 
        public confidence in medications and the pharmaceutical 
        delivery system,
 Damage to the pharmaceutical industry in terms of lawful 
        revenues and public confidence, and
 Provision of additional financial support for crime, violence 
        and corruption.
    I think that in so far as the United States is concerned, we have 
thus far been spared most of the consequences of this problem, although 
there is ample warning on our southern border of what it will look 
like, if unattended. But to protect our people in the future, and to 
establish an enforcement regime that will protect all people, we must 
invent some things that do not now exist.
    Thank you very much for your attention and for this opportunity to 
contribute to your valuable work.

    Mr. Greenwood. We appreciate your testimony.
    Mr. deKieffer.

                 TESTIMONY OF DONALD deKIEFFER

    Mr. deKieffer. Thank you very much, Mr. Chairman. Good 
afternoon to the committee. My name is Donald deKieffer and I'm 
an attorney here in Washington, DC. I've been practicing 
international trade law for around 30 years now. Previously, I 
was the General Counsel to the U.S. Trade Representative. In 
the last 15 years we've concentrated part of our practice on 
international antidiversion and anticounterfeiting. In that 
period, we've identified thousands of international 
counterfeiters and diverters, including hundreds of individuals 
and companies who are selling counterfeit and diverted drugs 
right now in the United States.
    Today I considered dozens of different issues that are 
relevant to these hearings: intellectual property rights, R & D 
funding for the next generation of drugs, improvements in 
cooperation between various law enforcement agencies in the 
effective delivery of drugs to impoverished nations. But rather 
than address all those, each one of which might be the subject 
of a separate committee hearing, I'd like to talk about three 
things. The first is that permitting diverted drugs into the 
United States market will destroy the current regulatory 
regime. Second, the safety and efficacy of the U.S. drug supply 
will be placed in jeopardy. And third, permitting uncontrolled 
imports of prescription drugs will not significantly reduce 
costs to most consumers, but will enrich unscrupulous, cynical 
and even criminal elements.
    The purpose of this testimony, I'll define diversion as the 
unauthorized transfer of prescription drugs from its intended 
recipient to other unauthorized destinations.
    Getting back to my first point for a moment, permitting 
diverted drugs into the United States market will destroy the 
current regulatory system. The U.S. regulatory scheme is built 
upon almost a century of solid science and experience designed 
to protect Americans from unsafe and unproven drugs. But if 
anybody can buy anything from anyone without a prescription, 
the entire regulatory regime collapses. Congress may as well 
just abolish the FDA.
    The second issue is linked to the first. Those who suggest 
that the FDA merely become advisory or gold standard agency in 
other words, just setting advice with regard to what the 
standard should be without any enforcement at all ignore the 
clear danger of counterfeits. Well, counterfeits continue to be 
a minor problem. They're fast growing in the United States and 
they will overwhelm legitimate markets if current regulations 
are abolished. There is simply no way for consumers to 
distinguish between legitimate and counterfeit goods unlike 
going down to K Street and buying a $30 Rolex. There is no way 
a consumer can tell a legitimate pharmaceutical from a 
counterfeit.
    In countries where diverted pharmaceuticals are available, 
counterfeits have soon followed, displacing the legitimate 
products. Diversion is merely a Trojan horse for counterfeits.
    This is not a free trade issue and I really want to 
emphasize this. Any foreign manufacturer who meets U.S. 
standards can sell legitimate goods in the United States right 
now and I don't think anybody wants to change that. But without 
regulation counterfeits can wreck even the legitimate import 
market.
    The third point is that cost of drugs will not 
significantly decline for consumers if diverted prescription 
drugs are permitted into the United States.
    In other areas where diversion is permitted, for example, 
in over-the-counter pharmaceuticals and other consumer 
products, the prices to consumers are only slightly below 
normal retail. It's the middle men who pocket enormous profits. 
In South Africa, for example, half of all the pharmaceuticals 
dispensed by the South African government itself are stolen. 
These goods that are stolen never entered the bloodstreams of 
indigent Africans, but rather are sold for huge profits abroad 
and in South Africa. The stolen and diverted goods are replaced 
in South Africa with counterfeits.
    There is no cheap or easy solution to these problems we've 
discussed today, but we cannot jeopardize the safety or health 
of U.S. consumers by artificial and dangerous gray market 
import schemes. We need to have prescription drug coverage for 
all those who really need it, rather than jeopardizing the 
safety and health of all of us.
    We need more effective enforcement, not the abolition of 
enforcement. In short, any proposal to permit the unregulated 
imports to prescription drugs will destroy the U.S. regulatory 
scheme, jeopardize the safety and health of millions of 
Americans, and not result in significant cost savings to 
American consumers and I thank you and would look forward to 
your questions.
    [The prepared statement of Donald DeKeiffer follows:]
       Prepared Statement of Donald deKieffer, deKieffer & Horgan
                              introduction
    Mr. Chairman and members of the Subcommittee: I appreciate the 
opportunity to appear before you. I am Donald deKieffer, attorney at 
deKieffer & Horgan in Washington D.C. My firm specializes in the 
practice of international regulatory law. I have over thirty years of 
experience in trade law and policy development and have worked for more 
than a decade in tracking and investigating international diverters. 
Today I will testify regarding the diversion and global counterfeiting 
of pharmaceutical products. Although many of the clients I represent 
are pharmaceutical companies, I am neither speaking on their behalf nor 
on behalf of the pharmaceutical industry in general.
    The objective of my testimony is to inform this committee of the 
existence of an active pharmaceutical diversion trade and to 
demonstrate how failure to control this practice opens the door for the 
entry of counterfeit drugs into the United States. I will first present 
a foundational background on the law regarding drug imports. Secondly, 
I will discuss the nature of the diversion problem and its influence on 
criminal activity, the pharmaceutical market, and governmental 
regulatory agencies, in particular the FDA. Thirdly, I will propose 
possible avenues to pursue in the development of solutions to these 
problems.
                                overview
Drug Classifications
    Controlled substances are classified into five different schedules. 
The schedules are distinguished from each other based on the potential 
for drug abuse. Schedule I identifies substances with a high potential 
for abuse that do not currently have an accepted medical treatment use 
in the United States, such as heroin and marijuana. Schedules II 
through V are controlled substances with legitimate medical purposes, 
such as Ritalin and Valium. Schedules II through V also include 
``lifestyle drugs.'' These substances, such as Viagra, target disorders 
affecting the quality of life rather than specific diseases. Lifestyle 
drugs are commonly abused prescription substances. Additional 
controlled substances, such as OxyContin, which are not lifestyle 
drugs, are also abused.
Diversion
    International diversion is the importation of products originally 
intended for distribution in another country. Pharmaceutical diversion 
involves substances classified in schedules II through V. A classic 
diversion scheme begins when drugs that are produced in the United 
States are either sold at low prices or are given philanthropically to 
other countries. Corruption and fraud in the countries of destination 
permits third parties to obtain large quantities of U.S. produced drugs 
at low costs. These drugs then make their way back into the U.S. market 
for resale at going market rates, thus generating large profits for the 
diverters.
    Closely related to diversion is the practice of parallel importing, 
which is the importation of patented drugs by third parties without the 
authorization of the patent owner. Drugs produced by U.S. 
pharmaceutical companies are available for a lower cost in other 
countries where the foreign governments fix pharmaceutical prices. 
Diverters purchase these drugs abroad and redistribute them in the U.S. 
market, thus undercutting the U.S. market price and making a tremendous 
profit.
    Another subcategory of diversion is smuggling. While diverted 
products re-enter the country under the guise of legal imports, 
smuggled drugs are routed into the country through illegal means. 
Smuggling is the preferred means of re-importing diverted drugs. These 
pharmaceuticals mainly come across customs borders or through the mail 
system with fraudulent documentation. The sheer volume of diverted 
drugs entering the country prevents customs officials from detecting or 
seizing more than a mere fraction of them.
Counterfeiting
    Many foreign countries permit the cross border exchange of 
imitation patented drugs manufactured in countries other than the 
United States. Counterfeit drugs are a tremendous problem in countries 
with lax import regulations. Counterfeit pharmaceuticals are often 
purchased to replenish the dwindling drug supplies that result from 
diversion. These counterfeits are not subject to any form of production 
regulation, and once they get mixed into the system they are 
essentially indistinguishable from the legitimate product. While 
counterfeit drugs are not yet rampant in the United States, the 
loosening of import regulations leads to a climate that increases the 
potential for counterfeit distribution.
    Diversion is a Trojan Horse for counterfeits. Drugs are no longer 
part of a regulatory infrastructure once they leave the control of the 
originally intended recipient and enter the channels of diversion. Many 
of these drugs pass through countries where there is rampant corruption 
and fraud in the drug industry, and counterfeits are in abundance. 
Because there is no way to monitor where the diverted products have 
been or how they have been handled, it is highly likely that 
counterfeits will unknowingly be mixed with diverted drugs. Counterfeit 
products then enter the U.S. system mixed with legitimately produced 
U.S. drugs.
    Counterfeiting in the U.S. is already existent to a certain extent. 
For example, between 1991 and 1995 the FDA and U.S. Customs officials 
seized enough evidence to incriminate Flavine International Inc., a New 
Jersey based company, in a counterfeit drug scandal. Flavine bought 
bulk amounts of veterinary antibiotic ingredient base and other human 
antibiotics from an unapproved source in China for considerably less 
than the price of the legitimate products. Flavine then resold the 
material to unsuspecting U.S. drug companies at an inflated rate. The 
scheme posed a risk to animals and humans because the counterfeit drugs 
were of unknown potency and quality. Six patients in Denver suffered 
toxic reactions.
    More recently, the FDA has been investigating cases of counterfeit 
injectable drugs. Instances of counterfeit Serostim, a growth hormone 
used by AIDS patients, Nutropin, also a growth hormone, and Neupogen, a 
cancer drug, have been detected in the past month.1 FDA 
investigations are ongoing and it is not yet clear whether the drugs 
were produced in the United States or overseas. At least some of these 
products ended up in U.S. pharmacies and were actually distributed to 
customers who experienced adverse reactions.2
---------------------------------------------------------------------------
    \1\ Melody Petersen, 3 Fake Drugs Are Found in Pharmacies, N.Y. 
Times, June 5, 2001 at http://nytimes.com/2001/06/05/business/
05DRUG.html.
    \2\ Douglas Pasternak, Knockoffs on the Pharmacy Shelf: Counterfeit 
Drugs are Coming to America, U.S. News, June 6, 2001 at http://
www.usnews.com/usnews/issue/010611/usnews/counter.htm.
---------------------------------------------------------------------------
        current regulations and laws regarding drug importation
    The federal government has jurisdiction to control pharmaceutical 
importation into the United States. The FDA, DEA and U.S. Customs are 
the federal agencies primarily responsible for overseeing drug import 
regulation.
    The law effectively prohibits the importation of any drugs, 
including foreign made versions of U.S. approved drugs, that have not 
received FDA approval to demonstrate they meet the federal requirements 
for safety and effectiveness.3 FDA approved drugs can only 
re-enter the country if they are being shipped directly back to the 
manufacturer. When customs officials receive a shipment that contains 
non-approved pharmaceuticals intended for commercial distribution they 
notify the local FDA district, and the FDA assumes responsibility for 
deciding whether or not to seize the goods. FDA personnel are also 
responsible for monitoring mail importation. Customs officers from the 
customs mail division will examine a parcel and set it aside if it 
appears to contain a drug that the FDA has specifically requested be 
held or an FDA-regulated article that appears to represent a health 
fraud or an unknown risk to health.
---------------------------------------------------------------------------
    \3\ 21 U.S.C. Sec. 331(d) (2000).
---------------------------------------------------------------------------
    The rules governing personal importation of approved drugs from 
foreign countries vary slightly. Congress recently stipulated that a 
United States resident may import up to fifty dosage units of a 
controlled medication without a valid prescription at an international 
land border.4 Medications must be declared on arrival, be 
for own personal use, and be in their original container. The FDA has 
the ability to exercise discretion in the enforcement of this law and 
may permit the entry of unapproved drugs under extenuating 
circumstances, such as the continued treatment by a foreign doctor. 
However, this policy does not apply to foreign-made chemical versions 
of drugs available in the U.S. The FDA cannot assure that such products 
have been properly manufactured and are effective. Their use would 
present an unreasonable risk. Additionally, the FDA reserves the right 
to refuse entry or seize any drug it considers unapproved and, 
therefore, illegal.5
---------------------------------------------------------------------------
    \4\ 21 U.S.C. Sec. 956 (a) (2000).
    \5\ U.S. Customs, Importation of Prescription Medication/Drugs 
Consumer Alert, available at http:// www.customs.ustreas.gov/travel/
med.htm.
---------------------------------------------------------------------------
    The DEA has recently contributed additional regulations designed to 
help control pharmaceutical imports from foreign markets. According to 
the DEA, consumers must have valid prescriptions to legally obtain 
controlled substances. Consumers cannot legally purchase controlled 
substances from foreign Internet sites and have them shipped to the 
U.S. unless the consumer is registered with DEA as a controlled 
substance importer and acts in compliance with DEA 
requirements.6
---------------------------------------------------------------------------
    \6\ Notice, Dispensing and Purchasing Controlled Substances over 
the Internet, 66 Fed. Reg. 21,181 (April 27, 2001) available at http://
www.deadiversion.usdoj.gov/fed__regs/notices/2001/fr0427.htm.
---------------------------------------------------------------------------
          nature and consequences of pharmaceutical diversion
Promotion of Criminal Conduct
    Failure on the part of the U.S. government to control 
pharmaceutical diversion encourages criminal behavior both domestically 
and internationally. The ease with which pharmaceutical drugs are 
smuggled across the border makes diversion enticing as a low-risk 
criminal activity with high economic returns. Diverters and 
counterfeiters are able to exploit the American public because of 
increasing frustration surrounding the high cost of medications and a 
market that has been traditionally free from unapproved or dangerous 
products. The proliferation of an American gray market, therefore, 
invites the theft of American drug products in foreign countries, thus 
completing the vicious circle of criminal conduct.
    The diversion trade also facilitates the abuse of prescription 
drugs in the U.S. An estimated four million citizens in the United 
States are addicted to prescription drugs.7 Many of these 
products are lifestyle drugs, such as Viagra, weight control products, 
or tranquilizers. There is also a serious problem with the misuse of 
other legitimate medications. For example, the pharmacological effects 
of OxyContin, a central nervous system depressant designed principally 
as a pain medication for cancer victims, make it a substitute for 
heroin.8 OxyContin overdoses have been the cause of over 
forty deaths on the East Coast in the last year.9 Much of 
the illegal OxyContin supply comes from diverted sources. Diversion 
increases the ability of individuals to receive drugs through improper 
channels without a prescription, thus fostering the opportunity for 
misuse of these products.
---------------------------------------------------------------------------
    \7\ John Smith, A Prescription for Drug Abuse, Wash. Herald, May 
20, 2001.
    \8\ National Drug Intelligence Center, OxyContin Diversion and 
Abuse, (January, 2001), available at http://usdoj.gov/ndic/pubs/651/
overview.htm.
    \9\ Id.
---------------------------------------------------------------------------
Destruction of the Pharmaceutical Market
    Diverters regularly import undetected pharmaceuticals into the 
United States. Since 1997, more than 4,600 foreign drug manufacturers 
have shipped to the United States without being inspected by the 
FDA.10 Additionally, Congress has relaxed the regulations on 
the importation of controlled substances by allowing U.S. citizens to 
legally import limited amounts of price-controlled drugs from Mexico 
and Canada for personal consumption.11 Slackening of import 
standards increases the likelihood of diverted drugs devastating the 
U.S. pharmaceutical market.
---------------------------------------------------------------------------
    \10\ FDA Admits to Lacking Control Over Counterfeit Drug Imports 
American Society of Health-System Pharmacists available at http://
www.ashp.com/public/news/breaking/counterfeit.htm.
    \11\ 21 U.S.C. Sec. 956 (a) (2000).
---------------------------------------------------------------------------
    Diversion, in the form of parallel importing, is a violation of 
intellectual property rights. Included in most patents is the exclusive 
right to the use, including importation and exportation, of the 
patented good. Intellectual property rights are the financial basis of 
the pharmaceutical industry. The more diverted and counterfeit drugs 
permitted to enter the country, the less control the patent holders 
maintain. Taking away the intellectual property rights of the 
pharmaceutical industry will render patents meaningless and will create 
major financial set backs for the market. Pharmaceutical companies may 
have to freeze research and development and may not be able to 
financially justify pouring resources into the creation of new and 
improved medications.
    Diverted drugs destroy the predictability of supply and demand in 
the pharmaceutical industry. The U.S. government does not artificially 
control drug prices. The U.S. pharmaceutical producers have not 
traditionally competed with international drug distributors, 
principally for regulatory reasons. The result has been that 
pharmaceutical companies have freedom to incidentally set prices for 
the products they develop. Consequently, as happens in many different 
markets, drug prices are disproportionate to actual production cost. 
However, inflated prices are necessary to offset the marketing cost of 
the specific product, to finance research and development of new 
products, and to subsidize medical assistance to struggling nations. In 
a regulated system such as this, the pharmaceutical industry bases 
production on predicted market needs. Diverters destroy the market 
balance when they enter unknown and unregulated surpluses of any 
product into the country through the channels of diversion. Companies 
are unable to maintain any sort of meaningful records regarding the 
distribution and consumption of drugs and cannot react proportionately 
to the market need.
    Diverters exploit the price disparities between U.S and foreign 
pharmaceutical prices. Pharmaceutical companies provide drugs to other 
countries either philanthropically or at much lower prices than they 
are sold domestically. Diverters capitalize on this price differential 
by obtaining low priced drugs in other countries. They are then able to 
undercut the market price when re-selling drugs back in the U.S. This 
practice generates a surplus in the American market and prevents 
pharmaceutical companies from meeting their projected sales quotas. 
Ironically, customers are not the ones financially benefiting from 
diverted drug sales. Diverted drug products often barely undercut the 
normal retail prices. However, because diverters obtain the drugs at a 
fraction of U.S. resale prices, the diverters assume a tremendous 
profit while the customers reap only a fractional benefit.
    The entrance of diverted drugs and counterfeit products into the 
market creates a financial liability for the pharmaceutical industry. 
Prescription drugs carry a strict liability for the producers. Strict 
liability means that drug companies are completely accountable for 
their products and must bear the cost of lawsuits and fines, regardless 
of any question of negligence. Counterfeit drugs may easily be mixed 
with diverted products. Counterfeit drugs are dangerous because they 
are entirely foreign substances masquerading as the genuine product, 
and they may not even consist of the same ingredients that they profess 
to contain. There is a high likelihood that customers who 
unsuspectingly ingest these products may be adversely affected. It is 
difficult, even for a professional, to distinguish between 
counterfeited and legitimate drugs. Since these counterfeit products 
are difficult to distinguish, companies may find themselves liable for 
situations that were not of their own causing. The potential financial 
hit that the pharmaceutical industry will bear, as a result of 
liability, will adversely affect the financial stability of U.S. drug 
companies.
    Diversion also affects world pharmaceutical markets and finances 
criminal conspiracies. Many countries, such as South Africa, Israel, 
Russia and the Philippines have open borders with respect to the 
importation and exportation of pharmaceutical products. Open border 
countries have lost strict regulatory control of their drug markets. 
For example, in South Africa over fifty percent of the medication 
supplied to the government ends up stolen. Open border countries have 
also experienced a corresponding surge in counterfeit medicine entering 
under the guise of parallel imports. Frequently, the counterfeits enter 
the country as a means of replenishing the drug supply depleted due to 
the diversion of the legitimate drugs to more lucrative markets in 
Europe and America. Consequently, the medicines intended for a 
particular population are not getting to the people that need them; in 
their place, false and dangerous counterfeits are being provided, and 
criminals reap the financial benefit.
Undermining the FDA
    The American public is currently frustrated with high priced 
pharmaceuticals. There is an outcry for access to pharmaceutical 
products that are cheap, readily available, efficacious, and safe. 
However, permitting diversion and parallel imports is not a viable 
solution. Safe and efficacious products come at a cost. The entrance of 
diverted and counterfeit drugs into the U.S. will destroy drug control 
regimes currently in place and the FDA will lose its ability to monitor 
and control drug production and distribution in this country.
    Increased diversion traffic through inefficient monitoring at the 
border will prevent the FDA from controlling drug entry and 
distribution. Unchecked pharmaceuticals currently enter the country 
through the mail system and across the Mexican border. Due to the sheer 
volume, this influx of drugs basically goes unmonitored by federal 
regulatory groups such as the FDA. As a result, drugs in this country 
are being distributed and sold without proper authorization. This 
diminishes the ability of the FDA to control the distribution of drugs. 
Citizens are able to access ``lifestyle'' drugs and potentially 
addictive substances without prescriptions or the direction of a 
physician. Consequently, the FDA is losing its ability to manage 
prescription drug use.
    Counterfeit drugs present a danger to citizens because the FDA is 
unable to monitor the products for quality and safety. Counterfeit 
drugs, principally produced in countries such as India, are imitations 
of U.S. made products. However, it is impossible to know for certain 
what these medications contain, how they were produced, where they were 
stored, or the potential side effects of ingestion. By allowing the 
diversion trade to persist, the likelihood of distribution of these 
potentially lethal medications increases, and the FDA loses the ability 
to regulate the quality and safety of products being distributed to the 
unsuspecting U.S. public.
    Diverted drugs that leave the control of the original distributor 
place consumers in jeopardy because the means of shipment and storage 
are unregulated. Diverted drugs enter and exit the hands of multiple 
unknown parties before they eventually reach a consumer. These drugs 
are commonly stolen in bulk from government agencies in foreign 
countries and are routed through countries such as Mexico before they 
reach consumers in the United States. Most drug products have specific 
instructions regarding storage temperature and expiration date. With 
diverted drugs, there is no guarantee that the products were properly 
handled during shipping and storage. The FDA has always exerted strict 
controls on the production and distribution of drugs in the United 
States. Consumers have learned to expect pharmacies and drug 
distributors to provide safe medications. Allowing diverted drugs into 
the country will destroy the FDA's ability to guarantee safety and will 
increase the danger to consumers who may unknowingly purchase and 
ingest these products.
    Counterfeit drugs that enter under the guise of parallel imports 
likely come from unapproved locations. Both counterfeit drugs and 
diverted drugs are huge risks to the citizens of this country. The FDA 
has traditionally been able to approve the production location of drugs 
and foreign products. When drugs are smuggled into the country, there 
is no way of knowing where they have traveled. Additionally, 
counterfeit drugs entering the country through diversion may have been 
produced anywhere. The FDA is, therefore, losing its ability to control 
and monitor the production sites for pharmaceuticals being imported 
into this country.
    Diverted drugs may contain incorrect informational material and 
directions or may be mislabeled entirely. Medications are, of course, 
dangerous when misused and require specific instructions as per their 
usage. Divergence from these requirements may prove extremely harmful 
and potentially lethal. Diverted goods are often taken from their 
original packaging and distributed to many different importers. The 
potential is high that drugs may be mislabeled or put into packages 
that lack the appropriate informational material. As the diversion 
trade increases, the FDA will in turn lose control over the packaging 
and instructions accompanying large quantities of drugs in this 
country.
    Additionally, the diversion trade destroys systems of record 
keeping for the U.S. drug industry. With products being illegally 
mailed into the country and smuggled across the borders, it is 
impossible for the FDA or the drug industry to keep track of what is 
currently on the market. This makes it easier for people to obtain 
drugs illegally and promotes the abuse of prescription products.
                          potential solutions
    There needs to be better cooperation between the government 
agencies in charge of enforcing laws relating to diversion and 
counterfeit trade. According to a report issued by the U.S. General 
Accounting Office, the efforts of the FDA, DOJ, DEA and Customs do not 
always support each other.12 For example, sometimes the FDA 
releases packages of drugs detained by Customs in an effort to conserve 
resources. These kinds of actions are counterproductive, undermine the 
law, and send mixed signals to the individuals involved.13 
Laws have been put in place to control diversion; however, it needs to 
be clear who is in charge of enforcement. Efficacious systems of 
detection and seizure as well as substantial penalties for abusers must 
be implemented and enforced.
---------------------------------------------------------------------------
    \12\ U.S. Gen. Accounting Office, Rep. to Cong. Requesters GAO-01-
69, Internet Pharmacies 17 (2000).
    \13\ Id.
---------------------------------------------------------------------------
    Foreign Internet pharmacies dealing in illegal imports need to be 
eliminated. An abundance of Internet pharmacies situated in foreign 
countries advertise prescription drugs. These sites do not require 
individuals to have a prescription from their doctor in order to obtain 
drugs. Although DEA regulations and the Controlled Substances Act allow 
individuals to bring limited quantities of controlled substances into 
the U.S for personal use, these regulations do not apply to shipments 
into the U.S. from foreign Internet pharmacies. It is illegal to 
purchase drugs from such sites. These pharmacies are aware that they 
are engaging in illegal activity. Many sites explicitly justify their 
practice and include instructions on how to avoid having the packages 
seized by U.S. Customs. This problem needs to be attacked at the 
source. There must be a crack down on foreign Internet pharmacies 
dealing in illegal importation.
    The government should look for solutions to help support/subsidize 
providing affordable prescription drugs for the elderly and others who 
are unable to afford necessary medications. The diversion trade seems 
to be supported in part by frustrated Americans seeking cheaper drugs. 
It is contended that many of these individuals are seniors who are on 
tight budgets and cannot afford the medications they require. The 
government should consider providing a means-tested subsidization for 
U.S. citizens unable to afford the medications they require. Providing 
medication to those who are feeding the diversion market will reduce 
the demand for smuggled drugs.
    Penalties for prescription drug abuse must be increased. It is 
currently very difficult to detect prescription drug abuse, and many 
people fail to even recognize it as a crime. Harsher penalties may 
decrease the demand for diverted pharmaceuticals and naturally cause 
that market need to decrease.
    Finally, there needs to be cooperation between government agencies 
and the pharmaceutical industry in creating better systems for 
overseeing philanthropic drug distribution in other countries. Much of 
the aid that is sent to struggling countries is well intended. However, 
it has been proven time and time again that these countries lack the 
infrastructure and integrity to properly distribute the products to the 
intended recipients. It is counterproductive to provide mass quantities 
of free or low-priced medication to countries that cannot properly 
handle or distribute it. Until a more reasonable infrastructure can be 
put in place, bulk deliveries of U.S. pharmaceuticals to 
underprivileged countries should be severely restricted.
    There likewise needs to be a better system of tracking drugs 
destined for distressed markets where there is a possibility of 
corruption or diversion. There are FDA approved means of marking both 
drugs and packaging that would allow customs officials to quickly and 
efficiently monitor what crosses the border. Such a system would help 
catch diverted products before they entered the market.
                               conclusion
    In summary, drug diversion is a crime. Its occurrence is 
increasing. By permitting this practice to continue, the government 
will open the way for counterfeit drugs to enter the U.S., foster 
criminal conduct both internationally and domestically, harm the 
pharmaceutical market, and undermine the regulatory structure of the 
FDA. Measures should be taken to recognize and address these issues.

    Mr. Greenwood. We thank you. All of you gave excellent 
testimony.
    The Chair recognizes himself for 5 minutes for questioning. 
Let me address a question to Dr. Shepherd. The law of 
unintended consequences tells us that when we try to fix 
something we usually cause another set of problems. Even though 
we will try to minimize that as much as we can, one of the 
concerns that will undoubtedly be raised as we try to tighten 
the Mexican-U.S. border will be--what about the poor senior 
citizen who doesn't have access to prescription drugs in the 
United States and goes over to get the legitimate drug for 
legitimate purpose and are we going to foreclose that 
opportunity?
    Can you give a little information on to what extent you 
know, obviously, you know a lot about it, who it is that's 
going back and forth. Is there, in fact, (a) much in the way of 
legitimate seniors going over for legitimate drugs and 
acquiring safe products as a result of that, and is there 
actually much of a savings when they do that?
    Mr. Shepherd. There is a legitimate market for seniors 
especially in the Presidio or McCallum, Texas area where they 
go across over to Presidio and get it because there's a lot of 
snowbirds that come down from the Midwest and New England, 
spend their winters down there and they purchase a year's 
supply of Mexican drugs and take them back with them, where 
they're going. Laredo, we didn't see a lot of seniors in that 
market area and Juarez, I'm not quite sure. El Paso area. But 
you're right, there is a legitimate market where a lot of 
seniors do take advantage of it and do get them.
    The question about whether the drugs they buy over there is 
safe, I don't know. I don't know if they're buying----
    Mr. Greenwood. How about the cost? Is the savings as 
significant as we've heard?
    Mr. Shepherd. The savings are significant, but it's 
product-dependent. It very much varies by each individual 
product. Some products in Mexico are more expensive than here. 
Some products may be a dime or more or $2 less in Mexico. But 
there are some products where it could be 4 or 5 fold 
difference in price.
    Mr. Greenwood. How do you recommend then that we deal with 
that issue, because it's a legitimate one and I am hopeful that 
we will be able to provide a prescription drug benefit under 
Medicare, but even that won't necessarily solve the problem 
because there will still be some----
    Mr. Shepherd. That would be my recommendation, if we had a 
prescription drug benefit I think that would dry up a lot of 
the market. There's another market over there that presents a 
bigger issue and that is families who reside on this side of 
the border who visit physicians on the other side of the border 
where the family is split between both countries. That's a huge 
problem. And I was at a conference not too long ago where the 
Mexican Blue Cross and Blue Shield was lobbying Texas to 
establish health care system that U.S. residents could sign up 
for their health care insurance in Mexico and therefore use 
Mexican providers and Mexican pharmaceutical products. That 
just opens up all kinds of other problems when you think about 
it. Obviously, the best way to go would be some kind of 
prescription drug benefit for the elderly or the poor or 
indigent poor so that you could bring them back and forth, but 
it is a problem. Both those populations.
    Mr. Greenwood. Let me just question Mr. Trundley if I may 
on the counterfeit problem which is a rather different, but 
important aspect of this hearing as well. I'm not sure I heard 
a lot in the way of recommendations from you. I saw a lot of 
parade of horribles that is very worrisome, but what are your 
thoughts about how we get a handle on this. How do we prevent 
the flooding of the U.S. market with these counterfeit 
products?
    Mr. Trundley. Well, first of all, Mr. Chairman, you need 
strong legislation in place. Robust legislation to deter and 
help prevent the incident.
    Second point I'd like to make is----
    Mr. Greenwood. By that do you mean tough criminal 
penalties?
    Mr. Trundley. Tough criminal penalties which prevents and 
also legislation to prevent the reimportation of goods as well 
into the United States. Tough criminal penalties and also to 
support the law enforcement effort.
    I would like to echo the point made by Jim Christian, my 
colleague, it is becoming now more and more essential to have 
field operatives in the countries where the problem lies. For 
instance, the British government doesn't employ the FDA 
equivalent agents abroad. That means, Mr. Chairman and members, 
that the only people who are combatting this counterfeit crime 
at the point of manufacture are the pharmaceutical companies' 
security representatives. That means that we are conducting 
inquiries by remote control 12,000 miles away and the sheer 
volume and scale of it means that it's becoming more and more 
difficult and we're acting on our own with little or no support 
from the British or the U.S. governments.
    Mr. Greenwood. Mr. deKieffer, the thought that occurred to 
me as you were testifying about this situation in Africa, as 
the pharmaceutical companies in this country who have I think 
rather generously and compassionately decided to provide very 
low cost AIDS drugs to the African continent where they're 
gravely needed, what's going to happen in terms of diversion? 
Are there procedures in place to prevent bad guys from getting 
their hands on these drugs, sending them back, reimporting them 
to the U.S. at a tremendous profit and then providing bogus 
drugs to AIDS people that AIDS patients who will then obviously 
get no benefit at best?
    Mr. deKieffer. That's a significant danger. In fact, the 
security measures that have been taken to date have to be taken 
by the companies themselves because of the demonstrated 
ineffectiveness of the security measures that have failed 
already all over Africa. Some of the philanthropies that have 
distributed goods there have also been able to document the 
fact that massive amounts of goods that were intended for good 
and philanthropic purposes have not wound up where they're 
supposed to be, so yes, there's a very great danger that a lot 
of the products that are being distributed in Africa will not 
remain in Africa and where they will all end up is anybody's 
guess, but we do know that substantial amounts of goods that 
are currently being distributed in Africa, including probably 
the most advanced country in sub-Saharan Africa, South Africa, 
never wind up or don't stay there. They wind up in third 
markets. And because South Africa is awash in counterfeit drugs 
as well, there's a significant chance that some of those 
products could wind up in this country as well, perhaps via 
Mexico.
    Mr. Greenwood. Thank you. The Chair recognizes the 
gentleman from Florida for 5 minute.
    Mr. Deutsch. Thank you, Mr. Chairman. I think most of you 
sat through the testimony prior to this, the other panels. And 
I guess one of the questions I have in terms of the issue of 
the counterfeit prescription drugs, I don't know the exact 
number, no one knows the exact number, but just from our 
oversight visit, a large percentage, maybe even up to 90 
percent of the literally millions of products being sent by 
mail into the United States are prescription drugs, very well 
might be from your companies. Now or at least labeled as if 
they were from your companies. I guess my question is we're 
talking about literally tens of thousands of drugs and we've 
seen the labels and again from our perspective, from a naked 
eye perspective, we can't tell the difference. Obviously, the 
labeling is very effective. Where are those drugs coming from? 
The tens of thousands of ones on a daily basis or the thousands 
on a daily basis that are coming into the United States via the 
mails, who's producing them? Are a majority of them 
counterfeit? Are they being produced overseas in facilities of 
your companies? Are they gray market overseas? I mean anyone 
want to attempt to answer?
    Mr. Glover. I'll try to answer that. It's difficult to 
answer that question directly. What we have seen is what we do 
know is that in March of 2000 and January of about 2000, just 
recently as well, there have been substantial actions in Taiwan 
of these kinds of factories that we have seen so we know that 
that is a location there, so we know that there's a problem 
there based on the actions that we've seen so far. The problem 
that we have is that it is an international problem and it 
takes many forms. It starts out perhaps even as legitimate 
product. It's just bulk active. It then maybe moves as was said 
to a free trade zone. It's maybe tabletized. It's not really 
counterfeit maybe until somebody slaps a label on it that says 
it's from Company X when it indeed is not Company X. And then, 
of course, there's an enforcement problem for the same reason. 
We have the same enforcement problem here that you have say in 
the narcotics traffic.
    Mr. Deutsch. Let me just interject, we're going to try to 
get through 5 minutes of questions, and the Chairman has been 
very liberal and I appreciate that on this issue, but what I'm 
trying to really get a sense of is that there's no question and 
you've shown it by your testimony that there's absolutely, 
there are people who are counterfeiting your products. And 
illegal enterprises that are doing it. Obviously, they're 
making money from it and we're not getting all the enforcement. 
But I guess what I'm saying at least this is a component of 
this hearing, but the issue what this subcommittee is really 
looking at is literally this phenomenon of millions of product 
coming into the United States via the mail and some of that 
product is at least labeled as your product and I find it not 
easy to believe that all of that's counterfeit because if it 
was I think you folks would a lot more concerned about it, that 
it really is a product of your companies and whether it's 
produced overseas, I mean a lot of the product that Novartis 
sells in Hong Kong or in Taiwan or in South Africa is 
legitimate Novartis product. I would assume the vast majority 
of it is Novartis product. I mean Mr. Christian, do you want to 
respond to that?
    Mr. Christian. Yes, I'd like to make a quick comment. This 
is a counterfeit Voltaran ampoule. Last year in Colombia 
working with the authorities we seized 6 million of these. That 
is 7 or 8 times what is sold in Colombia in a year. We see 6 
million. That's not what was made in Colombia. This is what we 
caught, 6 million. To answer another part of your question 
because we're concerned about counterfeit product. We're 
concerned about expired product. I have here a genuine 
antibiotic with an expired label. We seized millions of these. 
I have here what they did with them. They put them in hot soapy 
water and they took the labels off and I have here the labels 
that we seized with the product and these go right around, look 
just like genuine and they have a new expiration date. So when 
those products come in, you have to be concerned yes, about 
counterfeit products, but you also have to be concerned about 
expired products, adulterated products. We don't have time, but 
I have overheads that show pieces of glass and other foreign 
material in vials and ampoules.
    Mr. Deutsch. Let me try to follow up specifically on that 
though, so again, we're really talking about millions of 
product coming to the United States and your assessment is that 
most of that is effectively fake or inappropriate?
    Mr. Christian. No, our assessment is that the potential is 
there for in that grouping that you call those millions of 
packages coming in at Dulles and JFK and Oakland, that they 
will contain a representative sample that is growing of 
counterfeit, of expired, of mislabeled, of adulterated product. 
There is no doubt.
    Now what you're probably looking for is it 5 percent, is it 
50 percent? We don't have that number, but we are very, very 
confident that the percentage is growing.
    Mr. Deutsch. Let me, go ahead, I'm sorry.
    Mr. Trundley. I would just like to add to what Mr. 
Christian has said that even though the product might be 
genuine, even though it might not have met its expire date, we 
cannot be certain that it's been stored in the appropriate 
conditions. If a particular life saving drug has to be stored 
at 5 degrees Centigrade, how do we know unless it's gone 
through the legitimate distribution and supply chain that it's 
been stored in those conditions and hasn't been left on the 
dockside somewhere in Central and South America in baking hot 
conditions? And it's then shipped into the United States. It 
might be perfectly legitimate and bonafide a product.
    Mr. Deutsch. I guess just one final question about this. 
It's probably the most visible website sale is for Viagara and 
we don't have a representative from Pfizer here today, but is--
what would your assessment be that most of the stuff that is 
being sold on the Internet today for Viagara, is that Viagara 
or is that something beyond Viagara.
    Mr. Christian. I can comment on that. I think that there 
are more than 20 pharmaceutical companies making Viagara in 
India. Now one of them and because they honor the process 
patent, they are allowed to ship to other countries that honor 
the process patent which takes in some Middle East, African, 
Argentina, Brazil, Uruguay, limited number of countries that 
honor the process patent. One of the 20 plus companies that 
manufacture Viagara shipped 40 tons in the year 2000 of 
Viagara, 40 tons bulk material. Now I can tell you that the 
Middle East and sections of Africa and Argentina, Brazil and 
Uruguay are not using 40 tons of Viagara and that's only one of 
more than 20 companies that shipped in 2000.
    Mr. Deutsch. Thank you. Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes the gentleman from Michigan, Mr. Stupak for 5 
minutes.
    Mr. Stupak. Thank you, Mr. Chairman. What happens to your 
expired products, Mr. Christian or anyone on the panel? If a 
product expires, how are they falling in the hands of these 
counterfeiters then who are soaking off the label and putting a 
new label on there?
    Mr. Trundley. Most companies, in fact, I'm sure that all 
companies have a policy of returning the expired product to the 
companies by the distributors and the companies then destroy 
them. The problem lies when the distributors sell them on the 
more unscrupulous wholesalers and dealers who may be just using 
it as a front to copy the product, to copy the packaging and 
design and putting in the counterfeit rubbish inside the 
blisters.
    Mr. Glover. I'd like to comment on that for a minute.
    Mr. Stupak. Sure.
    Mr. Glover. A lot of the times you have a situation 
internationally. We've had one particular experience 
internationally where a company was to destroy product when it 
expired. We found out that the product--we ultimately found the 
product on the market. We conducted an investigation, 
surveillance and what we found was that in this particular 
instance, there were two trucks. The truck would take the 
product to the dump to be destroyed and it would instead of 
going into the dump would be passed on to another company that 
brought it out, so there are unscrupulous people out there. We 
have processes in place, but sometimes they're avoided.
    Mr. Stupak. Dr. Shepherd, could you go back to the 
Oxycontin issue we were talking about earlier.
    Mr. Shepherd. Right.
    Mr. Stupak. Customs seems to know that these vials are 
coming in or packages of 50, they're packaged in Mexico and 
they're coming across, but DEA did not seem to understand that 
today.
    Can you elaborate a little bit more on that whole issue 
there?
    Mr. Shepherd. I really can't talk for why DEA wouldn't know 
because I don't work for DEA----
    Mr. Stupak. Right.
    Mr. Shepherd. But as a researcher in Laredo, I spent 3 
months down there collecting data, the only agents I saw down 
there were U.S. Customs Agents. I don't know, ever recall 
seeing DEA Agents present, but they may have been present.
    Mr. Stupak. But it's your testimony is that it really comes 
across already packaged in these 50 or less or packages of 50?
    Mr. Shepherd. Oxycontin was coming across in a vial of 50. 
We saw it.
    Mr. Stupak. Were they stopped at the border by Customs 
Agents or anything like that?
    Mr. Shepherd. When we were collecting the data last month, 
they went to the Customs Agent up front who screened the amount 
of drugs coming across. Basically, he just asked the person did 
you buy any prescription drugs. If the person said no, and this 
was the extent of it, the person said no, they were passed on 
through. If the person was honest and said yes, they were 
referred back over to us where we asked them to fill out a 
little questionnaire of the types of drugs and what you 
purchased. If the person said yes and the participant, the 
Agent indicated they had purchased more than the 50, then we 
never saw them. They went back to another room with a Customs 
Agent. And at that time the drug was either confiscated by the 
Customs or the person was asked to go back across the border 
and sell the drug back to the pharmacy which was--it's been a 
common practice.
    Mr. Stupak. But if I come up to the border I can have 50 
pills of just about anything I want, right, as long as I don't 
go over that magic number of 50?
    Mr. Shepherd. That's right.
    Mr. Stupak. Without a prescription? And I can just pass 
through.
    Mr. Shepherd. Right, but I warn you, you better have a 
prescription from a Mexican doc why you're over there because 
you'll end up----
    Mr. Stupak. But that's not hard to obtain at all, is it?
    Mr. Shepherd. No, that's not hard to obtain at all.
    Mr. Stupak. Part of the process.
    Mr. Shepherd. That's very easy to obtain.
    Mr. Stupak. Okay.
    Mr. Shepherd. We saw many people bring Valium and Oxycontin 
in 50 units at one time.
    Mr. Stupak. You indicated earlier that when you did your 
research in 1996 most of the things that came across the border 
were controlled substances and that the population buying it 
were not the senior citizens that we all hear about and we all 
want to help out. So what are the implications of these two 
findings? Do you have any reason to believe that the situation 
has significantly changed from what you found 5 years ago?
    Mr. Shepherd. No.
    Mr. Stupak. Well, what are you seeing today, same type 
situation?
    Mr. Shepherd. No. I have no reason to believe the situation 
has changed at all. I do--it's because it's so difficult to 
check when they come back into the border. The best way to 
check it is to stand in a pharmacy in Nuevo Laredo and watch 
the people enter and what they're buying. Stand next to a 
shopper and you can see the drugs being purchased, but when 
they come across, it's so easy to put them in your purse, put 
them in your back pocket and say I didn't buy anything and U.S. 
Customs will just let you walk on through.
    Mr. Stupak. If I may, Mr. Chairman, a couple more questions 
here.
    To representatives of the drug companies, Ms. Durant of 
Customs, I think she was Customs, right, Customs, testified 
that Customs' Cyber Smuggler Center is playing a leading role 
in trying to crack down on these websites and they talked about 
the successful investigation in Thailand and how they closed 
down seven on-line pharmacy sites. I really wanted to ask her 
seven of how many of the hundreds that are out there from 
Thailand.
    My question is with all the expertise we have on this 
Panel, has the FDA or the DEA ever contacted any of your 
companies in saying man, we've got a problem here with drugs 
coming through the Internet, mail orders, how would you 
approach it, do you have any--have they ever asked for any 
assistance or help or requested your input into this issue? 
Someone has been banging on them for 2 years to do something.
    Mr. Christian. We sometimes work with the Criminal 
Investigative Unit of the FDA, but it's a small unit. It was 
only founded 8 years ago approximately. To my knowledge, it has 
about 125 agents and they're domestically focused. I'm sure all 
over the issue that was in the New York Times on Tuesday. It's 
a domestic issue. It's internally. However, the threat to the 
United States lies internationally and that's why I mentioned 
that we need an international focus on this. It's a little late 
to throw investigative resources into the issue once the 
products are through Customs and within country. We need to be 
out there the way DEA is and the other agencies. Fighting to 
keep it up, not investigating it after it came in. But of 
course, we're talking limited resources, very limited resources 
when it comes to and that's one of the agencies that's divided 
between regulatory and law enforcement and in that particular 
case the regulatory people are the dominant part of that 
agency.
    Mr. Stupak. But I take it from your answer they never 
contacted you and said look, we're having problems with mail 
orders through the Internet and we have to do some work here. 
Do you have any suggestions, ideas on how we can best combat 
this?
    I take it the answer is no.
    Mr. Christian. In fairness to them they have appeared at 
what John Glover referred to the prescription Pharmaceutical 
Security Institute, PSI. They have appeared at our meetings. 
They have given presentations. We have discussed issues. There 
is not daily, weekly or even monthly contact, but that's 
because we're concentrating our efforts in Latin America, in 
Asia, Eastern Europe, India. They're concentrating their 
efforts internally in the United States as far as I can tell.
    Mr. Stupak. Right, I agree, but all these websites, if you 
look at them, they're not U.S. websites. They may have a Post 
Office Box in some city, but when you really look it through, 
they're Thailand, Asia, Latin America.
    Mr. Christian. Exactly. We're missing that international 
focus on this particular criminal problem.
    Mr. Stupak. Good. Thank you.
    Mr. Greenwood. The Chair recognizes the gentlelady from 
Colorado for 5 minutes for questioning.
    Ms. DeGette. Thank you, Mr. Chairman. Following up, Dr. 
Shepherd, on Congressman Stupak's question, I'm sure you heard 
Ms. Nagel's testimony that she was aware of one instance of 
this--of the importation of less than 50 units of the Oxycontin 
and she knew about, she had heard about three instances that 
you talked about in your study. Now you just said here your 
researchers found numerous examples. I'm wondering if you can 
give me some sense of how much of the Oxycontin you saw being 
brought across the border?
    Mr. Shepherd. No, I can't give you a sense of it. All I'm 
saying is that the way the study was done, the FDA study, when 
you ask the person if they purchased a prescription drug, they 
say yes or no. If they said no----
    Ms. DeGette. They just went across.
    Mr. Shepherd. They just went across. I mean if they had 
lied and said----
    Ms. DeGette. I understand that. But----
    Mr. Shepherd. If you go to the stores, you go to the 
farmacias and as a consumer over there and you watch the 
business, you know darn well and sure that there's more than 
that one person buying Oxycontin because you can see it coming 
across the counter.
    Ms. DeGette. You can see based on what you're seeing sold 
in the farmacias on the Mexican side of the border.
    Mr. Shepherd. Correct.
    Ms. DeGette. Thank you. Let me talk about for a minute 
about a drug we talked about quite a bit in this committee last 
year and haven't so much lately and that's Rohypnol which, of 
course, is the date rape drug. It's my understanding that this 
drug is still made in Mexico by Roche. Do you know, is this 
drug still available in Mexico?
    Mr. Shepherd. It's still available in Mexico by Roche.
    Ms. DeGette. Do you have any sense as a researcher how much 
of the drug is consumed in Mexico?
    Mr. Shepherd. No, I have no idea.
    Ms. DeGette. Do you know if it's still coming across the 
U.S. border?
    Mr. Shepherd. I have no evidence it's coming across the 
border.
    Ms. DeGette. Have you talked to any of the farmacias down 
in Mexico about how much Rohypnol they're selling?
    Mr. Shepherd. No, I've never asked.
    Ms. DeGette. It might be a good question to ask next time 
you go down.
    Last question for you, and that is the Texas Commission on 
Alcohol and Drug Abuse has found that the practice of allowing 
persons to buy controlled substances in Mexico and bring them 
back to the U.S. has contributed to Texas' drug abuse problem. 
Have you researched that and do you support the Agency's 
finding?
    Mr. Shepherd. I've never researched that, but I really 
support the Agency's finding. Just from following the zip codes 
of people declaring the drugs and find out where they're going, 
we see, on our campus, we see a resurgence of Ritalin, 
especially during exam time when the youngsters want a 
stimulant. That's a common source.
    Ms. DeGette. Do you know what the implications are of the 
Commission's findings?
    Mr. Shepherd. No, I do not.
    Ms. DeGette. Mr. Chairman, I'd ask unanimous consent to put 
the Texas Commission on Alcohol and Drug Abuse Report into the 
record.
    Mr. Greenwood. Without objection.
    Ms. DeGette. Thank you. I'd like to ask a question of our 
three pharmacy representatives here, that is, I'm sure, I think 
you were all in the audience when Mr. Hubbard of the FDA 
testified that they had made a recommendation to Secretary 
Thompson that the importation of all drugs should simply be 
halted with a very small exception for severe illnesses like 
cancer with very, very narrow guidelines. I'm wondering if you 
could each tell me whether you support that recommendation.
    Dr. Glover?
    Mr. Glover. Speaking from a health and safety perspective 
only, yes, I support it.
    Ms. DeGette. Mr. Christian?
    Mr. Christian. Yes. I support it as well. I see the 
dangerous that are out there. It's a public health issue.
    Ms. DeGette. Mr. Trundley?
    Mr. Trundley. I concur. I also support it, but I would like 
to go one stage further and say that if you're going to go and 
introduce, if you're going to allow companies to import their 
products into the United States technology these days does 
provide for more advanced counter measures to protect the 
product in transit to make sure that it hasn't been tampered 
with, the computer chips, satellite tracking, radio frequency, 
identification tags affixed to the packaging in the cartons. 
These can be put on at the source of manufacture and tracked 
throughout their journey into the United States.
    Ms. DeGette. Well, I think that that's an interesting point 
and would be an important precaution, for example, for the many 
legitimate pharmaceuticals that are imported company to 
company, but looking at the videotape of the Dulles facility, I 
think that it's going to be quite some long time before we can 
have safeguards like that for small amounts that are imported 
from individuals to individuals and I'm sure you would agree 
with me that the public safety would really say we just need to 
stop that right now.
    Mr. Trundley. I do agree with you, yes. For the 
humanitarian cases, then we have to have something, a process 
in place.
    Ms. DeGette. But it can be very narrowly drawn.
    Mr. Trundley. Yes.
    Ms. DeGette. Thank you very much, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentlelady. One final 
question from myself that I would address to Mr. deKieffer, Mr. 
Haislip and Dr. Glover, anyone else who wants to comment, 
specifically on the counterfeit problem.
    I think it's clear that we have a sense of what we need to 
do about the question of drugs being, coming into this country 
by the mail. I think we have a notion of what we need to do on 
the Mexican border, but the counterfeit drug problem which is 
perhaps the most insidious of all is probably the most 
difficult to solve and looking for specific recommendations, 
Mr. Trundley has said what we need to do is pass robust 
legislation that makes for very severe criminal penalties for 
those who are caught and I don't know how often they're caught 
and I don't know whether--maybe you could shed some light on 
whether these counterfeiters in other countries that are found 
as a result of these investigations ever go to jail, but I'd 
like to know about that and I'd also like to know about 
specific recommendations for legislation.
    Mr. deKieffer. I believe as far as legislation or 
regulation, as was mentioned just a moment ago there is 
certainly now available to the pharmaceutical companies some 
rather high tech technology for at least being able to identify 
what are legitimate and not legitimate goods. These include all 
the way from the microchips that were mentioned a moment ago to 
even DNA markers inside actual pills so you can at least 
authenticate or track goods. This is a very practical thing 
that can be done and it could be done, I think, without 
legislation. It could be done by legislation. There are certain 
things that all of these companies do right now covertly, in 
other words, covert labeling, covert markings and things like 
that, but very often those get replicated very quickly, 
particular things like holograms. It takes 6 weeks now to have 
a hologram counterfeited or less. So as fast as they're able to 
put on new security measures, the bad guys figure out how to 
replicate them. But that's one of the answers to the 
counterfeiting issue. As has been mentioned today, since a lot 
of the counterfeiting goes on outside our borders, the thing 
that we need to do is be able to identify the counterfeit goods 
as they're coming into the country and whether that takes place 
offshore or at the border, by the time it gets into the country 
and whether that takes place offshore or at the border, by the 
time it gets into the country and gets into the distribution 
system, it is very, very difficult to do anything about it 
because it's going to go through six or seven hands. We saw 
this week one company that was mentioned, it's Quality King, 
was mentioned in the New York Times article. Quality King was 
identified by this very committee in 1978 as one of the largest 
drug diverters in the country and now they're handling 
counterfeit products.
    Here we have a company that's been in business for 25 years 
and identified repeatedly by this committee as still doing it 
and basically denying that they ever knew that they were 
dealing in counterfeit products. It's surprising.
    Mr. Haislip. Well, Mr. Chairman, I think we have several 
problems and I'll try to be very quick with them. First of all, 
generally speaking, there aren't any--there is not any criminal 
law enforcement agency in most countries that's targeting that 
issue specifically. Therefore, there is not an international 
cooperating group that's targeting that activity specifically. 
I mean there may be exceptions to that now and then, but by and 
large that's the case. The third thing is that we do lack the 
international instruments and agreements to attack an 
international problem and the last thing I'd mention is that 
there's a danger of looking at this recent legislation on 
allowing reimportation that we really don't have the apparatus 
to detect this kind of counterfeit problem when it's going to 
be presented to our front door. I think there's a serious 
question there. So those are quick, very quickly some points 
that I would make.
    Mr. Glover. Yes, I heard a word today a little earlier I 
think in the previous panel that I think kind of explains it. 
The word holistic. And that pretty much, this is an insidious 
international problem and I think from looking at the 
legislature, harmonizing, maybe agreements, conventions, those 
kids of things, because again, if you look at what happens, we 
said the bulk starts say in China and India and when the bulk 
starts there, there's no problem with it. When it moves to 
other places, then it's not a violation. It only gets to be a 
violation as it starts to move in the stream and I say it goes 
from legal to civil violations to criminal violations once you 
slap a label on it. So that's--this thing is being constantly 
transforming, but I say enforcement, strong enforcement. I also 
say I think the political will, I talk about that. It's not 
this activity is generally not high on everybody's radar 
screen, it's not murder, it's not mayhem, it's usually a 
resource issue. They just don't have the issues because they're 
dealing with more serious problems so I think that's important. 
I think also awareness is a part of the problem. Some of the 
stuff that I see, I realize it won't deter everybody, but I 
think if somebody sees the stuff that we see and some of these 
labs that we see and they realize that that's actually the kind 
of stuff they're ingesting, I think it may have an impact on a 
few people so I just think a broad approach.
    Mr. Greenwood. Thank you. Does the gentleman from Florida 
wish to----
    Mr. Deutsch. Actually, just a housekeeping thing that if we 
can leave the record open just to submit some additional 
material.
    Mr. Greenwood. The record will be kept open. We are blessed 
in this country by pharmaceutical products and medicine that 
save lives, extend lives, reduce pain and we're very fortunate 
indeed. But it's clear from this hearing that the United States 
is also awash in drugs that are misused and mislabeled and 
adulterated and counterfeited and unprescribed and people are 
dying. People are dying in every State of this country as a 
result. This committee is going to act. We're going to act 
decisively and swiftly with legislation. We're going to expect 
a response from the Secretary of Health and Human Services. I 
will publicly ask for his responses in the next 60 days on this 
matter and you can be sure that the time that you have spent 
here with us today will not be wasted. We will not allow the 
time that has expired between 1978 to continue. We will act and 
we will act decisively. So thank you very much for your 
testimony. The hearing is adjourned.
    [Whereupon, at 3:23 p.m., the hearing was adjourned.]
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