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



  EXAMINING PRESCRIPTION DRUG IMPORTATION: A REVIEW OF A PROPOSAL TO 
           ALLOW THIRD PARTIES TO REIMPORT PRESCRIPTION DRUGS

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 25, 2002

                               __________

                           Serial No. 107-135

                               __________

       Printed for the use of the Committee on Energy and Commerce


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

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                            WASHINGTON : 2002
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                    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
RICHARD BURR, North Carolina         BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
GREG GANSKE, Iowa                    BOBBY L. RUSH, Illinois
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
BARBARA CUBIN, Wyoming               BART STUPAK, Michigan
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico           TOM SAWYER, Ohio
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES ``CHIP'' PICKERING,          GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
TOM DAVIS, Virginia                  THOMAS M. BARRETT, Wisconsin
ED BRYANT, Tennessee                 BILL LUTHER, Minnesota
ROBERT L. EHRLICH, Jr., Maryland     LOIS CAPPS, California
STEVE BUYER, Indiana                 MICHAEL F. DOYLE, Pennsylvania
GEORGE RADANOVICH, California        CHRISTOPHER JOHN, Louisiana
CHARLES F. BASS, New Hampshire       JANE HARMAN, California
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
ERNIE FLETCHER, Kentucky

                  David V. Marventano, Staff Director

                   James D. Barnette, General Counsel

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

                                 ______

                         Subcommittee on Health

                  MICHAEL BILIRAKIS, Florida, Chairman

JOE BARTON, Texas                    SHERROD BROWN, Ohio
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
JAMES C. GREENWOOD, Pennsylvania     TED STRICKLAND, Ohio
NATHAN DEAL, Georgia                 THOMAS M. BARRETT, Wisconsin
RICHARD BURR, North Carolina         LOIS CAPPS, California
ED WHITFIELD, Kentucky               RALPH M. HALL, Texas
GREG GANSKE, Iowa                    EDOLPHUS TOWNS, New York
CHARLIE NORWOOD, Georgia             FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      PETER DEUTSCH, Florida
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
HEATHER WILSON, New Mexico           BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
CHARLES ``CHIP'' PICKERING,          ALBERT R. WYNN, Maryland
Mississippi                          GENE GREEN, Texas
ED BRYANT, Tennessee                 JOHN D. DINGELL, Michigan,
ROBERT L. EHRLICH, Jr., Maryland       (Ex Officio)
STEVE BUYER, Indiana
JOSEPH R. PITTS, Pennsylvania
W.J. ``BILLY'' TAUZIN, Louisiana
  (Ex Officio)

                                  (ii)


                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Copeland, Don, President and CEO, Associated Pharmacies, Inc.    80
    Hubbard, William K., Senior Associate Commissioner, Office of 
      Policy, Planning and Legislation, accompanied by John 
      Taylor, Director, Office of EnForcement; and David 
      Horowitz, Director, Office of Compliance, Food and Drug 
      Administration.............................................    19
    Hutt, Peter Barton, Covington & Burling, on behalf of PhRMA..    70
    Shepherd, Marv, College of Pharmacy, University of Texas at 
      Austin.....................................................    59
    Wennar, Elizabeth A., President, United Health Alliance......    63
Material submitted for the record by:
    Streck, Ronald J., President and CEO, Healthcare Distribution 
      Management Association, prepared statement of..............   109

                                 (iii)

  

 
  EXAMINING PRESCRIPTION DRUG IMPORTATION: A REVIEW OF A PROPOSAL TO 
           ALLOW THIRD PARTIES TO REIMPORT PRESCRIPTION DRUGS

                              ----------                              


                        THURSDAY, JULY 25, 2002

                  House of Representatives,
                  Committee on Energy and Commerce,
                                    Subcommittee on Health,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:50 p.m. , in 
room 2123, Rayburn House Office Building, Hon. Michael 
Bilirakis (chairman) presiding.
    Members present: Representatives Bilirakis, Greenwood, 
Burr, Whitfield, Norwood, Bryant, Buyer, Pitts, Tauzin (ex 
officio), Brown, Waxman, Strickland, Barrett, Capps, Towns, 
Pallone, Stupak, Wynn, and Green.
    Also present: Representatives Kingston, Gutknecht, Thune, 
and Sanders.
    Staff present: Brent Del Monte, majority counsel; Steven 
Tilton, health policy coordinator; Eugenia Edwards, legislative 
clerk; Benjamin Beaton, policy analyst; Patrick Morrisey, 
deputy staff director; Chris Knauer, minority investigator; 
David Nelson, minority investigator; and Jessica McNiece, 
minority staff assistant.
    Mr. Bilirakis. I call this hearing to order. I would like 
to start by welcoming our witnesses and all of the subcommittee 
members, though there are not many here at this point.
    The issue we will be discussing this afternoon is 
reimportation of prescription drugs. Like many issues our 
subcommittee deals with, today's topic is a complicated, 
politically charged issue that engenders strong feelings among 
members of the subcommittee and of the Congress.
    The goal of many members is to legalize reimportation of 
drug products, which in turn may provide many Americans with 
cheaper medicines. Conversely, if this practice is permitted 
without adequate safety controls, reimportation could place our 
constituents in grave danger.
    The high cost of prescription medicine is a monumental 
concern for all of us. About a month ago, our committee worked 
all night and favorably reported legislation, which passed the 
House. The House bill would provide lower-cost medicines to 
seniors. Unfortunately, the Senate has not been able to muster 
the necessary votes to pass a bill. We all hope, I like to 
think, that the Senate acts soon to pass a prescription drug 
benefit; but if they do not, our committee will act responsibly 
to find creative solutions for Americans.
    In 1988 the Democratically-controlled House of 
Representatives passed the Prescription Drug Marketing Act, 
which made reimportation of prescription drugs by anyone other 
than the original manufacturer illegal. The driver for this 
legislation was this committee's finding that reimporting drugs 
placed Americans in danger.
    Despite the illegality of personally importing prescription 
drugs, we have all heard of the bus trips to Canada to purchase 
cheaper drugs. In fact, some members of our subcommittee have 
organized these types of trips. If this practice is illegal, I 
guess one question should be: Why doesn't the FDA, the Food and 
Drug Administration, prevent these types of actions? I am very 
interested in why the FDA chooses to use its discretion and 
allow for personal import. Specifically, I would like to ask if 
the Agency has quantified the risk that is involved in this 
type of reimportation.
    I look forward to the testimony today, and hope we all keep 
an open mind and political rhetoric to a minimum, which I doubt 
is going to happen. We need to carefully examine the pros and 
cons of this major policy shift and avoid grandstanding for 
political points. Reimporting drugs is a serious issue. If we 
pursue legislation, we must be certain that in fact it will 
help to lower the cost of prescription medicines without 
compromising the health of Americans.
    Once again, I would like to offer a warm welcome to all of 
our panelists and thank them for their time and effort in 
joining us today.
    Now I am pleased to recognized the ranking member, Mr. 
Brown, for his opening statement.
    [The prepared statement of Hon. Michael Bilirakis follows:]

Prepared Statement of Hon. Michael Bilirakis, Chairman, Subcommittee on 
                                 Health

    I now call to order this hearing of the Health Subcommittee. I 
would like to start by welcoming our witnesses and all of the 
Subcommittee members.
    The issue we will be discussing this afternoon is reimportation of 
prescription drugs. Like many issues our Subcommittee deals with, 
today's topic is a complicated politically charged issue that engenders 
strong feelings among Members of the Subcommittee and the Congress. The 
goal of many Members is to legalize reimportation of drug products, 
which in turn may provide many Americans with cheaper medicines. 
Conversely, if this practice is permitted without adequate safety 
controls reimportation could place our constituents in grave danger.
    The high cost of prescription medicine is a monumental concern for 
all of us. About a month ago our Committee worked all night and 
favorably reported legislation, which passed the House, that would 
provide lower cost medicines to seniors. The Medicare Modernization and 
Prescription Drug Act of 2002 creates a voluntary prescription drug 
benefit for seniors and utilizes strong tools to ensure that seniors 
will receive the lowest prices available. Unfortunately, the Senate has 
not been able to muster the necessary votes to pass a bill. I hope that 
the Senate acts soon to pass a prescription drug benefit, but, if they 
do not, our Committee will act responsibly to find creative solutions 
for Americans.
    In 1988, the Democratic controlled House of Representatives passed 
the Prescription Drug Marketing Act, which made reimportation of 
prescription drugs by anyone other than the original manufacturer 
illegal. The driver for this legislation was this Committee's finding 
that reimporting drugs placed Americans in danger.
    Despite the illegality of personally importing prescription drugs, 
we have all heard of the bus trips to Canada to purchase cheaper drugs. 
In fact, some Members of our Subcommittee have organized these types of 
trips. If this practice is illegal, why doesn't the Food and Drug 
Administration (FDA) prevent these types of actions? I am very 
interested in why the FDA chooses to use its discretion and allow for 
personal importation. Specifically, I would like to know if the agency 
has quantified the risk that is involved in this type of reimportation.
    I look forward to the testimony today and hope that we all keep an 
open mind and political rhetoric to a minimum. We need to carefully 
examine the pros and cons of this major policy shift and avoid 
grandstanding for political points. Reimporting drugs is a serious 
issue, and if we pursue legislation we must be certain that it lowers 
the cost of prescription medicines without compromising the health of 
Americans.
    Once again, I would like to offer a warm welcome to all of our 
panelists and thank them for their time and effort in joining us today. 
I now recognize the Ranking Member, Mr. Brown, for an opening 
statement.

    Mr. Brown. I thank the chairman.
    Ruth Tubbs is an engaging and articulate 70-year-old woman 
from Bristol, Connecticut. Ruth has Medicare but no drug 
coverage. She receives Social Security, and her husband works 
part-time. In the United States, Ruth pays $1,200 every 3 
months for her prescriptions. In Canada, she pays $350. In 1 
year, by going to Canada, she saves $3,700. These savings 
amount to 6 months' worth of Social Security for her.
    Ruth should be testifying this afternoon. Instead, she was 
earlier in the audience, and then caught a train back to 
Connecticut. My Republican colleagues did not want a consumer 
witness, but a representative from the drug industry will join 
us today to testify. After all, reimportation would reduce the 
industry's revenues, and drug makers only earned $300 billion 
last year.
    It is crucial that we discuss reimportation in the context 
of its impact on the drug industry. The fact that seniors 
throughout this country are able to fill their prescriptions 
only by purchasing them from other countries, that fact is 
messy, it is emotional, and should be ignored.
    To whom do Members of Congress report? I thought we 
reported to our constituents. I thought their concerns were 
important. I thought we reported to people like Ruth Tubbs. If 
we ignore Ruth Tubbs, it becomes so easy to ignore the fact 
that the risk to a senior of forsaking their medicine may far 
outweigh the risks of reimporting those medicines.
    It becomes too easy to ignore the fact that reimportation 
is one of this Nation's only means of protecting U.S. 
consumers, U.S. companies, and U.S. tax dollars from grossly 
inflated drug prices.
    I don't know any American, as I have taken people on buses 
to Canada, who want to travel to another country solely for the 
purpose of purchasing affordable medicine, or who thinks the 
Internet and commercial reimportation are a step up from the 
way medicines typically are distributed in this country. But I 
do know Americans, as we all do, who cannot afford to fill 
their prescriptions at U.S. prices, who need to pay for food 
and shelter, so they can't afford to fill those prescriptions.
    Reimportation is a symptom, not the problem. It is a 
symptom of the fact that 12 million seniors lack drug coverage, 
and millions more are underinsured. It is a symptom of the fact 
that health care inflation, fueled by spiraling drug costs, is 
jeopardizing access to health care coverage and health care for 
every American.
    It is a symptom of the fact that Americans pay two and 
three and four times more than consumers in any other country 
for drugs manufactured by the same company, in the same 
facilities, in the same packaging, in the same dosage, the 
exact same drugs.
    It is a symptom of the fact that while this administration 
and this Congress hang on every word when multibillion-dollar 
drug companies spew their self-serving rhetoric, attacking 
reimportation or attacking any other attempt to get a fair deal 
for American consumers, while this administration and this 
Congress permit the drug industry to subject American consumers 
to what amounts to blackmail for saying to seniors on fixed 
incomes, if you want new medicine, you are going to pay your 
share of our enormous profits, plus compensate for the profits 
we can't earn in other countries around the world; while this 
administration and this Congress permit the drug industry to 
push our health care financing system into crisis, this 
administration and this Congress stall and hem and haw and 
patronize and outright ignore seniors who depend on purchasing 
their drugs in Canada.
    FDA, like the drug industry witness--and, unfortunately, 
more and more these days we simply can't tell them apart--will 
warn us that reimportation is dangerous. The Agency may even 
recommend cutting off all mail order imports into this country. 
But FDA has not conducted a study of the actual dangers to 
prove to seniors that the risks of taking imported drugs are 
greater than the risks of not taking anything at all. Somehow 
it is okay to recommend taking away the only option that many 
seniors have for affordable drugs without proving to them it is 
necessary.
    FDA has taken to stopping mail order shipments from Canada 
at the border. I have been on the phone time after time after 
time with them when they hold drugs at the border, not because 
the Agency is concerned about safety, because they know they 
are safe when they come from certain pharmacies in Canada, but 
because the Agency is concerned that these shipments may be 
commercial in nature, and we know whom that bothers.
    Is it more important to protect the drug industry from 
commercial reimportation than to make sure that seniors who 
purchased insulin or medicine to control the symptoms of 
Parkinson's, or medicines to forestall another stroke, that 
they receive that medicine? Apparently the FDA thinks so.
    I have great respect for Bill Hubbard, who is testifying on 
behalf of FDA this morning--or this afternoon--but the Agency 
he represents is falling into the same trap as this Congress. 
Their role is to ensure the safety and efficacy of prescription 
drug products. Their role is not to protect drug industry 
revenues, and not to brag about U.S. drug company market share 
in the world.
    Brand name drug companies should make a profit. They invest 
heavily in research, they take on substantial financial risks, 
they produce life-saving products. For that we are grateful. If 
commercial reimportation would jeopardize this important 
industry, we need to know that.
    But American consumers should not pay the highest price in 
the world for brand name drugs. Seniors should not have to go 
to Canada. And, with all due respect to the drug industry, the 
welfare of seniors is more important than their profit 
performance, something this Congress should understand, 
something the FDA should understand.
    Mr. Chairman, it is a proconsumer safety bill, a pro-
consumer access bill, and a bill the drug industry will no 
doubt demonize. I only hope this administration and this 
Congress can disentangle itself from the drug industry and 
consider this legislation on its merits.
    Mr. Bilirakis. The Chair recognizes the chairman of the 
full committee, Mr. Tauzin, for his statement.
    Chairman Tauzin. Thank you, Mr. Chairman.
    First of all, we all know Americans deserve access to 
affordable prescription drugs. We believe that is particularly 
true for our seniors. Just less than a month ago, this 
committee worked through the night, 30 long hours, to produce a 
drug benefit bill under Medicare. We hope, obviously, to see 
that enacted into law very soon.
    But until then, we have to continue to see what we can do 
to get safe and effective, affordable drugs in the hands of our 
seniors. Corporate America, by the way, is beginning to feel 
the crunch of rising drug costs and is asking us, too, to help 
them make sure they can keep people employed under health plans 
that cover them for prescription drugs.
    Today we consider a proposal which attempts to do this by 
legalizing the personal reimportation of drugs from other 
countries. I want to commend you, Mr. Chairman, and our friend, 
Jack Kingston, for his interest in this important subject.
    By and large, drugs do cost less in Canada and in Mexico, 
largely because of price controls. We have all heard of the bus 
trips when seniors cross into Canada to purchase these cheaper 
prescription drugs. While these trips provide seniors with 
access to cheaper drugs, they also provide seniors with access 
to drugs which may or may not be safe or as effective as drugs 
that have been approved by the FDA.
    Our Nation today has the safest drug supply in the world. 
The FDA's safety regimen is commonly referred to as the ``gold 
standard.'' I look forward to learning from FDA today precisely 
whether they have quantified the risk posed by personal 
reimportation. Is the risk posed by personal reimportation not 
so high, given that the FDA exercises its enforcement 
discretion and generally does not stop these drugs from 
entering the country? Or are there other factors preventing FDA 
from stopping the flow of reimported drugs into the United 
States?
    Does the FDA have data which shows that a percentage of 
drugs being brought into our country, which have in fact been 
adulterated or unsafe, or are subpotent? And if not, why not? 
Why don't we have that data?
    As many know, our country technically has a law on its 
books pertaining to reimportation. The law was passed in the 
106th Congress. It permits reimportation by pharmacists and 
wholesalers, but only if the Secretary of Health and Human 
Services certified that the practice would ensure cost savings 
and would provide safe drugs for Americans.
    Now, the fact, Mr. Brown, is that neither the Clinton 
Administration nor the Bush administration was able to certify 
those facts. Is the Clinton Administration in the pockets of 
the drug companies? Was Donna Shalala in the pockets of the 
drug companies?
    All Donna Shalala had to do was say, we can certify, it is 
safe to do so. She could not do it. That ought to be 
troublesome to all seniors. It ought to be troublesome to any 
one of us who is worried about this issue. We ought to get an 
answer to it. We ought to know. We ought to know facts before 
we commit anyone to damaging the safest drug regimen in the 
world.
    As a result of neither the Clinton Administration nor the 
Bush Administration apparently being able to certify that 
reimportation is safe, the practice remains illegal, as it has 
been since this committee passed the Prescription Drug 
Marketing Act under John Dingell's leadership in 1988.
    So the legislation before the committee today would change 
that act and would say that pharmacists are allowed to reimport 
drugs from anywhere in the world, as long as the drugs do not 
appear to be adulterated, counterfeited, or misbranded. There 
is no requirement that the they certify that reimportation will 
ensure safe drugs; and further, unlike any proposals which we 
have seen, this bill does not limit reimportation to any 
specific country or list of countries, and it does not require 
that reimported drugs be tested by anyone.
    The Secretary has already told us that legislation with 
these protections is not enough to protect the public health--
if you don't have these protections in it, rather. So we are 
interested in learning from the FDA what protections are 
necessary to protect the public health if we change the law and 
allow reimportation.
    I appreciate Jack Kingston's bringing this to the 
committee's attention, and we will learn whether reimportation 
could be done safely, and if so, what protections ought to be 
put into the law to get it done right.
    It is my intent, Mr. Chairman, that our committee move on 
this issue before the end of September, and the witnesses you 
assembled today are vital to helping us get it right.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. W.J. ``Billy'' Tauzin 
follows:]

 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce

    Mr. Chairman: We all agree that all Americans deserve access to 
affordable prescription drugs, particularly our seniors. Just less than 
one month ago this Committee worked through the night to make good on 
the promise of an affordable drug benefit under Medicare, and I look 
forward to seeing that a drug benefit is enacted soon. Until then, 
however, we must continue to explore what can be done to get safe, 
effective, and affordable drugs in the hands of our seniors. Today, we 
will consider a proposal which attempts to do this by legalizing the 
personal importation and reimportation of drugs from other countries. I 
commend you, Chairman Bilirakis, for calling this hearing to examine 
this issue, and I commend our colleague, Jack Kingston for his interest 
in this important subject.
    By and large, drugs cost less in both Canada and Mexico, largely 
due to price controls. We have all heard of the bus trips where seniors 
cross into Canada in order to purchase cheaper prescription drugs.
    While these trips provide seniors with access to cheaper drugs, 
they also provide seniors with access to drugs which may not be as safe 
and as effective as drugs approved by the FDA. Our nation has the 
safest drug supply in the world, and the FDA's safety regime is 
commonly referred to as the ``gold standard.'' I look forward to 
learning from FDA precisely whether they've quantified the risk posed 
by personal importation. Is the risk posed by personal importation not 
so high, given that FDA exercises its enforcement discretion and does 
not stop these drugs from entering the country? Are there other factors 
preventing FDA from stopping the flow of reimported drugs into the 
U.S.?
     Does FDA have data showing the percentage of drugs being brought 
in to our country which are adulterated, unsafe, or subpotent? If not, 
why hasn't this data been collected?
    As many of you know, our country technically has a law on the books 
pertaining to reimportation. This law, which passed in 106th Congress, 
would permit reimportation by pharmacists and wholesalers, but only if 
the Secretary of Health and Human Services certified that the practice 
would ensure cost savings and safe drugs for Americans. Neither the 
Clinton nor the Bush Administration could certify those things. As a 
result, reimportation by third parties remains illegal, as it has been 
since this Committee passed the Prescription Drug Marketing Act under 
Mr. Dingell's leadership in 1988.
    The legislation before the Committee today would change this by 
allowing pharmacists to reimport drugs from any nation in the world, as 
long as the drugs do not appear to be adulterated, misbranded or 
unapproved. There is no requirement in the bill that the Secretary of 
Health and Human Services certify that reimportation will ensure safe 
drugs for Americans. Further, unlike other proposals which I've seen, 
the bill before us today does not limit reimportation to a specific 
country or list of countries, and it doesn't require the reimported 
drugs to be tested. The Secretary has already told us that legislation 
with these protections is not enough to protect the public health. I'm 
interested in hearing from FDA what protections are necessary to 
protect the public health.
    I appreciate Jack Kingston bringing this matter to the Committee's 
attention. I want to work with him, as well as all concerned Members of 
the Committee, to learn whether reimportation can be done safely and, 
if so, what protections must be placed into the law for it to be done 
right. It is my intent to continue to examine this issue thoroughly and 
then move legislation through our Committee before the end of 
September. I look forward to hearing from the witnesses.

    Mr. Bilirakis. I thank the gentleman.
    Mr. Pallone for 3 minutes.
    Mr. Pallone. Thank you, Mr. Chairman. I have a great deal 
of respect for our full committee chairman, but I am listening 
to what he says, and of course, his emphasis has been on the 
safety aspect with regard to reimportation.
    I would venture to say that I think that is sort of 
spinning it in a direction that maybe is convenient for the 
Republican leadership but does not tell the true story about 
what is going on with reimportation. Reimportation and the need 
for it right now directly relates to price, and the issue of 
price and price discrimination is the issue that the Republican 
leadership in this committee and in the House as a whole do not 
want to address.
    That is why they didn't include it in the prescription drug 
bill that they passed. That is why they would not allow Ms. 
Tubbs, a consumer witness, to testify today, because she was 
going to testify about the issue of price. That is what seniors 
face. They face tremendous price discrimination. The price and 
the inability to access drugs because of the price is the main 
reason why we need a Medicare prescription drug benefit.
    The bill that we should pass in the House--not the 
Republican bill but the Democratic alternative that we tried to 
get up on the floor and could not because the Republicans would 
not allow it--directly addresses the issue of price by 
requiring that the Secretary of Health and Human Services 
negotiate price reductions. The Republican bill says the 
opposite: There can be no interference with price, no 
negotiations, no price structure. There is a specific clause in 
the bill that says that.
    I want to say--I was going to address it, but now they 
left--we had three of our Republican colleagues here who are 
sort of heroes on this issue: Mr. Gutknecht, who takes to the 
floor from time to time; Mr. Kingston; and Mr. Thune. I maybe 
should not talk about them because they did leave the room, but 
I am only saying good things, so I think it is okay.
    The bottom line is that this is a very--there is a 
political reason for this hearing today. That is, that there 
are members of the Republican Party--and Mr. Gutknecht is one 
of them--who were supportive of the Democratic alternative 
because it addressed the issue of price.
    Now, they were basically told, I am sure, well, you know, 
we can't get to it in the bill that passes the floor, but maybe 
we will have some hearings on it, so we can give you an 
opportunity to say that we are trying to do something about 
reimportation, we are trying to do something about price.
    You are not trying to do it after the fact. You already 
passed the bill. What is this hearing for today? Is it simply 
for show, to try to give the impression to these guys who 
wanted to be helpful that somehow we were going to address the 
issue?
    We are not addressing it today. This is a sham. The fact of 
the matter is that the Republicans do not want to address the 
issue of reimportation, other than talk about the safety 
aspect. They are not going to allow an amendment or any kind of 
legislation that would allow reimportation or expand 
reimportation. They are not going to address any issue that 
relates to price, because PhRMA and the pharmaceutical industry 
does not want the issue of price addressed. We have a PhRMA 
witness, but we don't have a consumer witness for that very 
reason.
    Mr. Bilirakis. The gentleman's time has expired.
    Mr. Burr for 3 minutes.
    Mr. Burr. Mr. Chairman, I must admit I tried desperately 
not to listen, but some of it did seep through.
    You know, on this day, Mr. Chairman, where we in a 
bipartisan way will take up homeland security for one very 
specific reason, to say to the American people that the current 
threat that we have on terrorism, we will try to eliminate as 
much of it here at home as we possibly can. And we are here 
today to debate a similar thing as it relates to the 
possibility of whether we are going to lower the gold standard 
that we have set for the American people about the safety and 
the efficacy of the pharmaceutical products that they take, 
without question of how they were made or where they were made 
or whether they work.
    I want to take this opportunity also to highlight Mr. 
Kingston and Mr. Gutknecht and Mr. Thune and Mrs. Emerson, who 
have been passionate about this issue. They are a lot of the 
reason that we are here today.
    But the fact is that I also want to make some remarks on an 
editorial I read this week. It was an editorial written by 
Anthony Daniels, and for the purpose of my colleagues on the 
other side of the aisle, he is not an industry rep, he is not a 
policymaker, he is an FBI agent, retired.
    He said, ``Legislation allowing reimportation of U.S.-made 
drugs from abroad could open the door, the floodgates, to 
adulterated and often dangerous counterfeit drugs from 
unscrupulous profiteers, deranged individuals, and even 
terrorists. Not even trained professionals can spot the 
negligible differences between many of today's counterfeit and 
real things.''
    It goes on in that editorial to quote another individual 
who is a policymaker. That quote is: ``Without our domestic 
safety net to ensure the integrity of these pharmaceuticals, 
consumers simply do not know what medicines they are buying.'' 
That quote was the observation of Senator John Breaux.
    Mr. Daniels goes on to sum up in his editorial. He says 
this: ``my advice to 100 Members of the U.S. Senate and to 435 
Members of the House of Representatives on allowing reimported 
drugs is pretty straightforward: Don't risk it. Don't risk 
it.''
    Some say they are here today because their stand is for the 
health of the senior population. I would tell you that the 
reason we are here is to ensure the safety of the 
pharmaceutical inventory for the entire American population.
    Mr. Chairman, I hope on this that we will have a healthy 
debate, and at the end of the day, the decision will be to 
protect this very valuable tool that we have in our health care 
arsenal, just like we intend today to protect this country from 
terrorists.
    Mr. Bilirakis. I thank the gentleman.
    Mrs. Capps.
    Mrs. Capps. Thank you, Mr. Chairman. I am pleased we are 
holding this hearing on the reimportation of prescription 
drugs. The issues relating to reimportation, such as safety, 
such as medication prices, are very critical to my 
constituents.
    In my time in Congress, I have been a supporter of 
proposals to bring U.S.-made prescription drugs back into this 
country. It has been the only way I could find on our agenda to 
help my constituents get access to affordable prescriptions.
    Many have raised questions about the safety of 
reimportation. As a public health nurse, I want answers to 
these questions. But frankly, it is so appalling that we even 
need to look at these issues and that we are having this 
hearing today.
    Why--and I hope this question is addressed by members of 
our panel--why are Americans feeling driven to seek their 
medications overseas or across the border? It is a cost and 
time to them to do this. Why are there not affordable 
alternatives here at home?
    Our taxes fund billions of dollars in research and 
development at the National Institutes of Health. Our taxes 
subsidize the research that our American corporations enjoy, 
but the fruits of these public investments remain far out of 
reach to so many of our citizens, especially those on fixed 
incomes, our seniors.
    Over the last decade, as new miracle drugs have come on the 
market, their prices have skyrocketed way above the cost-of-
living increases, and as a result of that, many Americans have 
no choice but to turn to foreign markets to find affordable 
medications. Everywhere I go in my district, my constituents 
tell me about the problems they face because of the high price 
of drugs, prescription drugs; not just seniors, either, but 
working men and women struggling to support their families. 
They need help as well.
    Nothing happens, however, to bring the prices down or to 
help people with their costs. We still have not enacted a 
prescription drug benefit under Medicare, and the proposal 
passed by the House will not help, particularly Ms. Tubbs who 
wanted to testify today, whose medication she pays out of 
pocket amounts to about $4,000 a year. She would have to incur 
costs of up to $2,000 additional a year before the benefit that 
was passed out of the House would come into play.
    Prescription drug companies insist that if we do anything 
to cut their exorbitant profits, it will prevent them from 
developing new drugs. When we suggest that maybe they can 
afford to do testing to make sure their products are safe and 
effective for children, they demand patent extensions. Yet they 
still have millions of dollars to pay for expensive advertising 
to induce people to buy their products, whether they need them 
or not, and to lobby against prescription drug proposals here 
in Congress.
    Some of these companies do offer discount cards, but these 
discounts are usually nothing more than an illusion. They often 
provide limited savings that are wrung out of community 
pharmacists and do nothing to reduce the overall costs of 
medications. So I think we need to seriously examine the cost 
of prescription drugs in this country.
    A debate about the safety of reimportation medications 
should be part of that evaluation, but it is not the entire 
question. It is only a symptom of a much larger crisis. I look 
forward to hearing from our witnesses.
    Mr. Bilirakis. I yield 3 minutes to Dr. Norwood.
    Mr. Norwood. Thank you, Mr. Chairman. Every time I open a 
paper, it seems like I see an article about seniors loading 
onto buses heading into Canada or Mexico to buy cheaper 
prescription drugs. While I admit I am encouraged by their 
ingenuity, I continue to have concerns about their safety as 
they try to meet their financial bottom line.
    When I am back in Georgia, I hear from scores of 
constituents concerned about their rising prescription drug 
costs. We worked hard to address this issue in passing a 
Medicare prescription drug bill for seniors. There is no 
question in my mind that implementing a comprehensive 
prescription drug bill for seniors actually will bring down 
prices, and we do need to continue to talk about the cost of 
drugs.
    We are going to talk about generic drug competition in 
September. I am very interested in some possible Hatch-Waxman 
reforms. I have also made no secret of my interest in examining 
the consequences of direct consumer advertising on drug costs.
    But Mr. Chairman, I want to commend you. This whole series 
of hearings about prescription drugs have been, in my mind, 
divided correctly. This is about safety, that is what this 
hearing is about; the next hearings will be about cost. Even 
though you would not let me have my consumer advocate here, I 
am delighted that you held Mr. Brown to the same rules where he 
could not have his consumer advocate at this hearing about 
safety, and should have them next month at the cost hearing. So 
I commend you and thank you for that.
    I will not continue on. I will put the rest of my statement 
in the record.
    It appeared to me that the chairman copied my statement, 
anyway. My remarks were very similar to his, and I don't know 
that they need to be repeated. But I want us to keep in mind 
why we are here. We are here about the safety and efficiency of 
the medications that people in this country take. We had better 
take a very close look at that, or either we don't need an FDA.
    I don't know anybody who is ready to vote the FDA out of 
business, but if you think they are important for our drug 
manufacturers in America, they have to be even twice as 
important for the drug manufacturers in China.
    I hope we will be very careful, other than just talking 
about yes, they are too high; yes, it is a concern; and yes, we 
are going to try to look at that. But let us not do something 
stupid at this point by allowing drugs to come into this 
country that actually not only do not work, but potentially 
could kill people.
    With that, Mr. Chairman, I yield back.
    Mr. Bilirakis. The Chair thanks the gentleman.
    Mr. Green for 3 minutes.
    Mr. Green. Thank you, Mr. Chairman. Thank you for holding 
this hearing on reimportation of prescription drugs.
    As a member representing Houston, Texas, I know from 
firsthand experience that many of my constituents travel south 
to Laredo, Brownsville, McAllen, and other border crossing 
sites to purchase their medicine. It is no wonder that they do. 
Prescription drugs in Mexico are significantly less expensive 
than they are in the United States. But as many critics of 
reimportation point out, there is understandable concern about 
the safety, potency, quality, and even authenticity of the 
drugs.
    Unfortunately, gaping holes in our data prevent us from 
really knowing what the true scope of the problem is. We do 
know that we do not know how many people reimport drugs, what 
percentage are adulterated, counterfeited, or tampered with, 
and what the impact is on the individuals who take them. There 
is no doubt that this problem should be addressed. In all 
honesty, I have had the honor and privilege of buying 
pharmaceuticals in Mexico myself.
    But I think the biggest problem is what drives individuals 
to cross the border in the first place: the skyrocketing prices 
of prescription drugs here in the United States. According to 
the National Institute for Health Care Management, expenditures 
for prescription drugs in the United States continue to be the 
fastest growing component of health care, increasing by an 
average of 15 percent per year over the past 5 years.
    Even more troubling, American consumers are consistently 
paying higher prices than not only our neighbors, the 
Canadians, or citizens of Mexico, but also individuals in 
Europe, Japan, and other industrialized countries.
    This huge problem for people who do not have prescription 
drug coverage, the low-income, the uninsured, and our seniors--
I don't think a single member of this panel, whether we support 
reimportation or not, believes that it is the answer to our 
prescription drug woes. We need a national health care system 
that takes care of people so they do not have to drive across 
the border to access their medicines.
    We need a meaningful and comprehensive, affordable Medicare 
prescription drug benefit. We need to expand Medicaid, S-CHIP, 
to help those individuals without health insurance get access 
to the health care system. Unfortunately, Congress continues to 
grapple with the issues year after year, and seniors must 
continue to do what they need to do, and that is including 
taking bus trips to Mexico or Canada.
    They don't want to go on the bus and drive 5 hours to the 
Rio Grande Valley; they would much rather drive 5 minutes down 
to their local drugstore. But we are not giving them any 
choice. If you live near a border, you will go get your 
pharmaceuticals if you can physically do it.
    But until we solve the problem of drug coverage in our 
country, we really do not have a solution. As long as they are 
doing that, we need to make sure of the safety of those drugs, 
and make sure that our constituents know those risks.
    Mr. Bilirakis. The Chair thanks the gentleman.
    Mr. Bryant for 3 minutes.
    Mr. Bryant. Thank you, Mr. Chairman. I will try to be 
brief. I think just about everything that can be said has 
already been said, and we are not even halfway through the 
opening statements.
    I do thank you for holding this hearing. It is an important 
issue. It is an issue today since we are discussing the 
reimportation issue and certainly the safety factors.
    I understand that it is an election year, but I really 
think this is not a Republican or Democrat issue. I think what 
we want are affordable drugs for senior citizens that are safe. 
And to blow off safety is just a political issue. I do not 
understand that.
    I know I have heard a couple of comments about that today, 
that we are just talking about safety and that is not really 
the real issue here; it is the cost of drugs, is what I am 
hearing. Mr. Green did not say that. And I would affirm what he 
said, that safety is a major, major reason. We can have all the 
drugs in the world at as cheap a price as possible, but if they 
are not safe, and we are not sure they are safe--again, we all 
know what can happen overseas. Even now, post 9/11, the 
possibilities are unimaginable what can be done.
    But we have the FDA for a purpose. We need safe drugs. 
Certainly they need to be affordable. I hope this panel can 
work and learn something today that will help us along those 
lines. But ultimately, we are going to have to be concerned 
with the safety of these drugs, and ultimately that is the 
problem out there when we start talking about reimporting 
drugs. We just cannot be sure.
    There are risks involved here, and certainly the people 
that go over there now assume those risks, and willingly do so. 
They are informed and they understand they are taking a risk. 
But certainly if they are going to bring them over here and 
sell them to unsuspecting people who are not willing to assume 
those risks, that is where I see a great problem here.
    But indeed, this is a very complicated issue. I hope we can 
keep politics out of this, because certainly the administration 
prior to this administration, I do not think they were able to 
certify the safety of reimported drugs, either.
    So it is not Republicans, and it is not Democrats. Let us 
look at this in seriousness, with the idea of trying to find 
some reasonable compromises and reasonable solutions here.
    I want to thank my three colleagues, Mr. Kingston, Mr. 
Gutknecht, and John Thune, for the great work they have done on 
this.
    I yield back my time.
    Mr. Bilirakis. The Chair thanks the gentleman.
    Mr. Strickland.
    Mr. Strickland. Mr. Chairman, I have a statement that I 
would like to put in the record.
    Mr. Bilirakis. Unanimous consent is granted that statements 
of all members of the subcommittee be made part of the record.
    Mr. Strickland. Having just said that, I will just take 30 
seconds to say that the problem that we are trying to deal with 
is this cost issue. There may be several ways to approach that, 
but I think many of us are desperately trying to find something 
that is going to work. This is one approach that I certainly am 
willing to look at, but I agree with those who have said that 
if we have a comprehensive, affordable drug program available 
within this country, this reimportation issue would go away.
    I yield back the balance of my time and I look forward to 
hearing the witnesses.
    Mr. Whitfield, 3 minutes, please.
    Mr. Whitfield. Thank you, Mr. Chairman.
    Of course, all of us do want affordable prescription drugs. 
That is why we in this committee and in the House passed a 
meaningful prescription drug benefit for our senior citizens, 
so that those at the 150 percent of poverty level and below 
would receive free prescription drugs.
    It is not the Cadillac program that all of us would like, 
but I think it is an important first step and a meaningful 
first step to provide affordable prescription drugs for 
seniors.
    I am disappointed that some of our friends on the opposite 
side of the aisle, when they realize that we do not agree with 
them on every issue, refer to our arguments as a spin, as a 
sham, as a show. I think the concerns that we have on safety 
are real concerns.
    I was reading an article in the Associated Press on August 
17 that said a man who rode a U.S. Senate candidate's Rx 
Express to Canada to buy prescription drugs says he was 
sickened by some of the medications he received. A gentleman 
from St. Cloud ``was rushed to the hospital Tuesday after his 
heart slowed and he passed out. The emergency room doctor who 
treated him blamed it on the Canadian-purchased medication. 
While he purchased the correct drug, it was not in the time 
release capsule form that he usually received in the United 
States.''
    So I think these are real concerns, and I would also point 
out that there is no effective way under some of these drug 
importation bills to prevent the transshipments of drugs, 
legitimate or not, from Third World countries into Canada and 
then into the United States, because Canadian law explicitly 
exempts pharmaceuticals intended for export from any regulatory 
oversight whatsoever.
    So I think we do have a legitimate concern here on safety, 
and I think that every senior citizen in America wants a safe 
drug; not only an inexpensive drug, but a safe drug. I think 
that is the goal of all of us to guarantee that.
    So the fact that we are raising questions about 
reimportation certainly should not reflect or indicate that we 
are not interested in providing affordable drugs, safe drugs 
for our senior citizens. So this is not a clear-cut issue, and 
I am delighted that the chairman is having this hearing and 
will have more on this subject.
    Mr. Waxman is recognized for 3 minutes.
    Mr. Waxman. Thank you very much, Mr. Chairman. The 
gentleman who preceded me says that this is not a clear-cut 
issue. There is something that is very clear-cut about this 
issue. That is the fact that the prices for drugs are too 
expensive. Seniors don't have coverage. They are being 
discriminated against. Costs are being shifted onto them, so 
our American seniors, often elderly women, are finding 
themselves gouged by the pharmaceutical industry and being 
charged the highest possible prices.
    What we need to solve this problem is a defined, 
dependable, comprehensive Medicare prescription drug benefit. 
We need to use the strength of the purchasing power of 
America's seniors to secure better prices as other countries 
do. Instead, today these seniors don't have coverage. They pay 
out of pocket for their drugs. They are the victims of 
unconscionable discriminatory pricing by the drug companies.
    We need not spend time asking why our seniors want to be 
able to buy drugs from Canada. The answer is obvious: They 
don't have Medicare coverage. They can't afford the high cost 
of drugs here, and they can buy those drugs at a cheaper price 
in Canada.
    One response to price discrimination is to legalize 
reimportation of American drugs into the United States. How can 
we say no to seniors who cross the border into Canada because 
they can't afford their medications at U.S. prices? But 
reimportation schemes are usually complex. They raise difficult 
questions about whether the reimported drugs will be safe and 
will actually save consumers money. Some of them do not help 
all seniors.
    So let us be completely clear about this. The 
pharmaceutical industry could make this problem disappear 
tomorrow without any of the legislative interference that they 
dread so much. We would not need to consider relaxing the rules 
on reimportation if they would voluntarily stop discriminatory 
pricing against American seniors.
    I am proud to be a sponsor of the Allen bill that would 
stop this discriminatory pricing and put a limit on what can be 
charged our seniors, consistent with what seniors in other 
countries are paying for the very same drugs.
    Of course I want, first and foremost, a strong prescription 
drug benefit in Medicare, but the majority of this committee 
seems to want to change the subject. They want to concentrate 
on the criticisms of reimportation bills instead of focusing on 
the reasons seniors have to go to Canada to get better prices 
in the first place.
    Let us address the problems of the high price of drugs, 
respond to the abuses of the Hatch-Waxman legislation that is 
keeping generics from the market, let us proceed with a hearing 
on that subject, and let us give seniors real coverage in 
Medicare. That is the way to address this problem.
    [The prepared statement of Hon. Henry A. Waxman follows:]

    Prepared Statement of Hon. Henry A. Waxman, a Representative in 
                 Congress from the State of California

    We are here today for one reason. That reason is price 
discrimination.
    We are here because pharmaceutical companies charge America's 
seniors far more for prescription drugs than they do any other buyers. 
They charge seniors more than they charge other Americans with market 
power, and more than they charge seniors in other countries. And they 
have singled out some of the most vulnerable members of our society, 
most of them elderly women, for this price-gouging.
    What we need to solve that problem is a defined, dependable 
comprehensive Medicare prescription drug benefit. We need to use the 
strength of the purchasing power of America's seniors to secure better 
prices, as other countries do.
    Instead, today, those seniors don't have coverage. They pay out of 
pocket for their drugs. And they are the victims of unconscionable 
discriminatory pricing by drug companies.
    Studies conducted by my staff on the Government Reform Committee 
show that, for the very same drug, our seniors pay, on average, more 
than twice what ``preferred customers''--such as HMOs and the federal 
government--pay. For some drugs, seniors are paying more than 15 times 
the price paid by other favored customers.
    Our studies also show that our seniors are charged at least twice 
and sometimes three times what seniors in Canada, France, Germany, 
Italy, Japan, and the United Kingdom pay for the same drugs.
    We needn't spend time asking why our seniors want to be able to buy 
drugs from Canada. The answer is they need Medicare coverage. And they 
need an end to price discrimination by the pharmaceutical industry.
    One response to price discrimination is to legalize reimportation 
of American drugs from Canada into the U.S. How can we say ``no'' to 
seniors who cross the border into Canada because they cannot afford 
their medications at U.S. prices? But reimportation schemes are usually 
complex, they raise difficult questions about whether the reimported 
drugs will be safe or will actually save consumers money, and some of 
them do not help all seniors.
    Let's be completely clear about this: the pharmaceutical industry 
could make this problem disappear tomorrow, without any of the 
legislative interference they dread so much. We wouldn't need to 
consider relaxing the rules on reimportation if they would voluntarily 
stop discriminatory pricing against American seniors.
    I have been proud to be a sponsor of the Allen bill which has been 
so effective in focusing attention on the practice of discriminatory 
pricing and the advantage citizens in other countries have over 
Americans in accessing more affordable drugs. It remains an effective 
response to these discriminatory pricing practices, and so long as 
these practices continue, we'll continue to pursue it.
    Of course, I want first and foremost a strong prescription drug 
benefit in Medicare. That is what seniors want too. If this 
Subcommittee had allowed our beneficiary witness to testify today, that 
is what we would have heard.
    But the majority on this Committee seems to want to change the 
subject. They want to concentrate on the criticisms of reimportation 
bills instead of focusing on the reason seniors have to go to Canada to 
get better prices in the first place.
    Let's look at the real issue. Let's end price discrimination.
    Let's address the problem of the high price of drugs, and respond 
to the abuses of the Hatch Waxman legislation that are keeping generics 
from the market. Let's proceed with a hearing on that.
    And let's give seniors real coverage in Medicare. That's the way to 
address the problem.

    Mr. Bilirakis. Mr. Pitts is recognized for an opening 
statement.
    Mr. Pitts. Thank you, Mr. Chairman. Thank you for holding 
the hearing. I think it is important for us all to hear from 
the witnesses and have the opportunity to ask questions about 
drug importation and reimportation.
    I personally have some concerns about the safety of 
imported or reimported drugs, which I'm sure will be discussed 
today. The Food, Drug, and Cosmetics Act requires the FDA to 
prevent the importation of any drug which appears to be 
adulterated, misbranded, or unapproved. The approval 
requirements in the act require that every new drug sold in the 
U.S. be approved in advance by the FDA based upon safety and 
effectiveness.
    Mr. Chairman, a drug made outside the United States will be 
unapproved, and therefore, illegal, if it is made in a 
different plant or through a different process than what FDA 
approved for U.S. use. This legislation allows for personal 
reimportation of prescription drugs, and also allows 
pharmacists to reimport prescription drugs, thus overriding the 
prohibition established on reimportation.
    I understand my colleagues' concerns about the costs of 
prescription drugs. However, I am interested to hear in the 
hearing today whether this legislation will indeed reduce the 
cost of prescription drugs. Would the potential savings from 
this legislation be passed on to the American consumers? Mr. 
Chairman, is it possible for us to certify that reimported 
drugs are safe?
    Opening our borders to this would increase the likelihood 
that we would expose ourselves to counterfeit drugs, cheap 
foreign copies of FDA-approved drugs, expired drugs, 
contaminated drugs, and drugs stored in unsafe conditions.
    Further, border inspectors cannot be expected to examine 
imported drugs and accurately determine the identity of such 
drugs for the risk they pose to patients who need them.
    So I will submit my entire statement for the record, but 
Mr. Chairman, I think we must be very careful on how we proceed 
on this very important issue.
    [The prepared statement of Hon. Joe Pitts follows:]

Prepared Statement of Hon. Joe Pitts, a Representative in Congress from 
                       the State of Pennsylvania

    Mr. Chairman, thank you for holding this hearing today. I think it 
is important for us all to hear from the witnesses and have the 
opportunity to ask questions about drug importation and reimportation.
    I personally have some concerns about the safety of imported or 
reimported drugs, which I am sure will be discussed today.
    The Food Drug and Cosmetic Act requires the FDA to prevent the 
importation of any drug which appears to be adulterated, misbranded or 
unapproved.
    The approval requirements in the Act require that every new drug 
sold in the United States be approved in advance by the FDA based upon 
safety and effectiveness.
    Mr. Chairman, a drug made outside of the United States will be 
unapproved, and therefore illegal if it is made in a different plant or 
through a different process than what FDA approved for US use.
    This legislation allows for personal importation of prescription 
drugs, and also allows pharmacists to reimport prescription drugs--
blatantly overriding the prohibition on reimportation established by 
the Prescription Drug Marketing Act.
    Mr. Chairman, I am concerned that this legislation has no 
requirement that the bill would not compromise health, or reduce costs, 
to become effective.
    I understand my colleagues' concern about the cost of prescription 
drugs. However, I am interested to hear in this hearing today whether 
this legislation will indeed reduce the cost of drugs. Would the 
potential savings from this legislation be passed on to American 
consumers?
    Mr. Chairman, it is impossible for us to certify that reimported 
drugs are safe. Opening our borders to this would increase the 
likelihood that we would expose ourselves to counterfeit drugs, cheap 
foreign copies of FDA-approved drugs, expired drugs, contaminated 
drugs, and drugs stored in unsafe conditions.
    Further, border inspectors cannot be expected to examine imported 
drugs and accurately determine the identity of such drugs or the risk 
they pose to patients who need them.
    The Administration as well as OMB, HHS, FDA, DEA, and CMS--all have 
released statements in opposition to reimportation. In fact, the 
Administration announced on June 27, 2001, that :
        ``The Administration would oppose any amendments . . . that 
        could result in unsafe, unapproved, or counterfeit drugs being 
        imported into the United States.''
    And Secretary Thompson has expressed his strong disapproval and 
admitted that he cannot certify that imported drugs are safe. I quote:
        ``. . . the law requires us to certify as Secretary that we 
        know that these drugs are safe. It's impossible for us to 
        certify that these drugs are safe.'' (during testimony before 
        the Senate Budget Committee on February 14, 2002.)
    Mr. Chairman, we must be very careful on how we proceed on this 
issue. The Prescription drug Marketing Act was enacted for a reason--to 
ensure US public health is protected. The ramifications of this 
legislation could be dire.
    I fear that this legislation would make it virtually impossible for 
FDA to conduct meaningful enforcement.
    I yield back.

    Mr. Bilirakis. The Chair thanks the gentleman.
    Mr. Wynn, 3 minutes.
    Mr. Wynn. Thank you, Mr. Chairman. I appreciate your 
calling this very important hearing.
    I would only comment very briefly that the fact that we are 
having this hearing and this discussion today is a terrible 
indictment of America's health care system.
    I would concur with the comments of my colleague, Mr. 
Waxman. The fact that we have to discuss reimportation of drugs 
suggests that we have failed. We have failed to provide an 
adequate prescription drug benefit under Medicare that makes 
prescription drugs, which are essential in our modern age, 
available at a reasonable price.
    This has led to the creation of this issue, where people 
are willing to take the risks--that my other colleague on the 
Republican side of the aisle just described--from a health 
standpoint in order to get access at reasonable costs to drugs 
that they believe are either life-saving, or certainly life-
enhancing.
    So the real point is we ought to have the witnesses' 
testimonies and we ought to consider ways to do this, to allow 
people to gain access to these drugs, but we really ought to 
keep in mind the fact that the business of Congress this year 
ought to be passing a viable prescription drug plan that can 
reduce costs for our seniors.
    Mr. Chairman, I yield back the balance of my time.
    [The prepared statement of Hon. Albert R. Wynn follows:]

Prepared Statement of Hon. Albert R. Wynn, a Representative in Congress 
                       from the State of Maryland

    Mr. Chairman, thank you for holding this important hearing to 
address the issue of drug reimportation. I look forward to hearing from 
our witnesses about the safety of drugs reimported from Canada, Mexico 
and all over the world.
    The increasing costs of prescription drugs in the United States has 
forced many Americans, particularly the 35 percent of seniors who are 
uninsured, to travel to Canada and Mexico for less expensive 
prescription drugs. The problem, however, is that these reimported 
drugs are not inspected by the FDA and may pose a possible risk to 
patients. I hope that today's hearing will shed some light on the 
possible risks associated with drug reimportation.
    However, while the safety of reimported drugs is important, it is 
an issue which we should not even have to address. Had Congress passed 
an adequate prescription drug benefit, the reimportation of drugs would 
not even be a salient issue. Unfortunately, the House has not yet 
passed legislation that would sufficiently provide affordable 
prescription drugs in the United States for seniors.
    While I am interested in hearing from today's witnesses about the 
safety issues surrounding the reimportation of drugs, it is unfortunate 
that the House of Representatives has not passed a prescription drug 
benefit that will help all seniors in need of assistance.

    Mr. Bilirakis. The Chair thanks the gentleman.
    I believe that completes the opening statements. We will go 
on into the hearing--the appalling hearing, as some have 
referred to it as.
    [Additional statements submitted for the record follow:]

  Prepared Statement of Hon. Joe Barton, a Representative in Congress 
                        from the State of Texas

    Thank you Mr. Chairman for holding this important hearing. The 
issue of drug pricing is one on which all Members are focused. In 
particular, much has been made regarding the difference in prices 
between the United States and other countries.
    Congress annually votes on measures to allow the reimportation of 
prescription drugs into this country. I was in Congress in 1988 when we 
passed the Prescription Drug Marketing Act. We included in this Act a 
provision which limits the reimportation of pharmaceuticals to the 
manufacturer of the product. This provision was designed to address the 
safety risks associated with drugs entering into the country which were 
sub-potent or adulterated.
    In 2000, Congress passed legislation which allows third party 
reimportation of prescription drugs; however the legislation included a 
provision that prohibits implementation until the Secretary of Health 
and Human Services certifies that there would be no adverse effects on 
health and the provision would significantly reduce costs. Both 
Secretary Shalala of the Clinton Administration and Secretary Thompson 
of the Bush Administration have concluded that they can not guarantee 
the safety and efficacy of third party reimported pharmaceuticals.
    I have supported, and voted for, allowing individuals to import 
prescription drugs for personal use. If a person knows the risk that a 
drug from another country may be adulterated, and they assume that 
risk, then that is their decision. However, if a senior from Grand 
Prairie, Texas walks into a pharmacy to pick up her heart medication, 
there should be zero risk that she will take home medication that does 
not work, or will have adverse health affects.
    I come to this hearing with two questions: Can we allow third party 
reimportation in a manner that ensures the drugs coming into this 
country will be safe and effective? Will allowing third party 
reimportation lead to a price reduction in what our seniors are paying 
for prescription drugs? If the answer to both of these questions is 
yes, then we must reexamine our policies. If the answers are no, then 
we must take care in rushing ahead to implement policies which could 
endanger the public's health.
    I look forward to learning the answers to these questions, and 
again I thank Chairman Bilirakis for holding this hearing.
                                 ______
                                 
  Prepared Statement of Hon. Fred Upton, a Representative in Congress 
                       from the State of Michigan

    Mr. Chairman, thank you for holding today's hearing on the issue of 
prescription drug reimportation. At every town meeting I hold in 
Southwest Michigan, the high cost of prescription drugs is one of the 
top issues raised. We all want to do something about this issue, and 
lifting the current-law ban on third-party reimportation of U.S. 
manufactured drugs sold in Canada, Mexico, or other countries at 
substantially lower prices than in the U.S. seems to many of our 
constituents and to many in Congress one easy, immediate way to 
accomplish this goal. But we need to move carefully and measure the 
perceived benefits of reimportation against the very real risks that 
could result.
    In the last Congress, as chairman of the Oversight and 
Investigations Subcommittee, I presided over an ongoing investigation 
of the importation of bulk chemicals used in the manufacture of 
prescription drugs. While this is not the same issue as reimportation, 
what we learned about the sophistication of counterfeiters and the 
porousness of our borders should give us great cause for concern.
    Here's a case in point. Several years ago, 89 Haitian children 
tragically died after taking cough medicine made with contaminated 
glycerin traced to China. We may think that tragic events like this 
can't happen here, with its sophisticated regulatory system. But it 
almost did. Some of that same batch of contaminated glycerin made it 
into our country. Fortunately, it was found before it could be used to 
manufacture cough medicine or other medications here. We got lucky that 
time.
    Here's another case in point. The Subcommittee's investigation 
revealed that the FDA had linked the adverse reactions of 155 American 
patients to gentamycin sulfate made by a Chinese drug company. Despite 
FDA inspections and quality control by U.S. drug companies that used 
this material, this bulk drug still infiltrated our healthcare system 
without detection.
    Let's not forget that it was this committee that wrote the 1988 
Prescription Drug Marketing Act banning third party reimportation, and 
with very good reason. The Oversight and Investigations Subcommittee--
then under the leadership of John Dingell--investigated drug 
reimportation in the 1980s and found that nearly $10 billion worth of 
drugs manufactured in the U.S. and exported were re-entering the U.S. 
marked as American Goods Returned. Some had been mishandled, become 
sub-potent, or were labeled improperly.
    Even if we were able to put in place a reimportation policy that 
would protect us against the threat of counterfeit, sub-potent, 
misbranded, or adulterated drugs from entering this country--and I 
think this would be difficult if not impossible to do--I am not 
convinced that we would see any significant lowering in the cost of 
drugs to consumers. Remember, neither Secretary Shalala nor Secretary 
Thompson could certify to this or to the fact that reimports would not 
pose a public health risk when we tried this approach in the last 
Congress.
                                 ______
                                 
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming

    Mr. Chairman, most Americans understand there is a price to be paid 
for living in a country with arguably the most advanced medicine in the 
world. The research, development, innovation and manpower does not come 
cheap.
    What concerns me is whether or not that price has become too high 
for too many. Prescription drug costs in this country are rising, and 
they affect each one of us differently--based on our stage in life, our 
walk of life, and our quality of life.
    Senior citizens especially are struggling to afford the most basic 
of medications. These same individuals are making lengthy road trips to 
Canada and Mexico to buy their medications at a lower price. That is a 
very sobering thought, and one to which we must pay attention.
    Technically, those seniors crossing the border to buy their 
prescription drugs are violating the law. Our system is very closed in 
that sense, but with good reason.
    The law ensures a built in safety mechanism for consumers in how 
drugs are packaged, labeled, and tested.
    Because of that, I have peace of mind knowing that the prescription 
medication I gave my child or my mother was proven safe. Do I want to 
compromise that? Absolutely not.
    We need to find common, reasonable ground on this issue.
    I am not about to compromise safety but, by the same token, 
prescription drugs serve no purpose if they are too expensive to 
access.
    The legislative proposal before us today, the Drug Importation Act 
of 2002, attempts to find this common ground, but I do have safety 
concerns about that provision in the bill dealing with pharmacists.
    If pharmacists can import drugs from anywhere in the world, like 
the legislation proposes, how can HHS conceivably follow the chain of 
distribution of a drug outside the United States? That seems 
problematic to me, in terms of the overall safety of the drug.
    I would like Mr. Hubbard with the FDA to follow up on that if he 
might. In fact, I would like all of our witnesses today to comment on 
that.
    Realizing we do have some work to do on this issue, I am certainly 
ready to do my part, and look forward to the discussion today.
    With that, Mr. Chairman, I yield back my time.

    Mr. Bilirakis. The first panel consists of Mr. William 
Hubbard, Senior Associate Commissioner for the Office of 
Policy, Planning, and Legislation of the Food and Drug 
Administration.
    Mr. Hubbard, obviously your written statement is part of 
the record. Hopefully you will complement and supplement it as 
you will.

STATEMENT OF WILLIAM K. HUBBARD, SENIOR ASSOCIATE COMMISSIONER, 
   OFFICE OF POLICY, PLANNING AND LEGISLATION, FOOD AND DRUG 
ADMINISTRATION; ACCOMPANIED BY JOHN TAYLOR, DIRECTOR, OFFICE OF 
ENFORCEMENT; AND DAVID HOROWITZ, DIRECTOR, OFFICE OF COMPLIANCE

    Mr. Hubbard. Thank you, Mr. Chairman. This is Mr. John 
Taylor, head of the Office of Enforcement, and Mr. David 
Horowitz from the Office of Drug Compliance in FDA.
    As you said, Mr. Chairman, I do have written testimony, but 
I will include a few things orally.
    First of all, on the drug pricing issue, personally I can 
relate to that as I have an 89-year-old mother myself who 
cannot afford her prescription medications.
    But as an FDA official, I cannot really speak to that 
issue. That is not within FDA's mandate. All I can do today is 
talk about safety. I apologize that I can't do that balancing 
act that so many of you wish to have.
    But we do have some things to say about safety, if I may. 
First of all, I will start with the concept or the problem of 
counterfeiting. We are all familiar with counterfeit handbags 
and watches and clothing and those sorts of things. That has 
been fairly commonplace. It certainly has an economic impact.
    But we believe that pharmaceuticals are a much bigger 
potential problem because consumers not only risk their 
pocketbook with a counterfeit drug; they also risk their 
health, and even their life. Consumers cannot discern the 
difference between a counterfeit drug or a good drug.
    This is a counterfeit watch. This is a counterfeit $900 
watch. It happened to cost $9. A jeweler could tell the 
difference; a consumer could even perhaps tell the difference 
if they looked closely enough and feel how much lighter it was 
than the real thing. But these are counterfeit drugs; these are 
real drugs that FDA found recently. One is counterfeit and one 
is real. They are indistinguishable. No one in FDA can tell the 
difference. Even people in the company cannot tell the 
difference without doing testing.
    I will pass these up to the table for them to be passed 
out. No pharmacist or physician could tell visually whether 
those drugs are good or not. Not only is the fact that they 
cannot be distinguished a problem, but these sorts of 
counterfeit drugs pose real health problems.
    As we have said, counterfeits can be drugs that are 
subpotent, superpotent, a sugar pill, a powder, or anything 
else. This is a counterfeit drug that was a fertility drug. It 
is indistinguishable from the real thing. The actual drug is 
about 80 percent potent. If a woman took this, she would get a 
real drug. The problem is, to make this drug, the two vials, 
you pull a liquid solution called a diluent into a syringe and 
then shoot it into the other vial where the powdered drug is, 
and shake it up to dissolve it. Then you pull the reconstituted 
drug back into the syringe and inject it into the patient's 
arm.
    The problem is, this was made in the back of a warehouse. 
It has bacteria in the diluent, in the saline solution. When 
you are injecting that into the patient, you would be injecting 
essentially blood poisoning into the patient, even though she 
would be getting some semblance of a real drug.
    So we believe that sort of thing is a real concern, 
particularly since no one can tell at the time they administer 
it--the nurse administering that would not be able to tell, nor 
could the physician.
    Since 1998, FDA has opened 55 counterfeit drug cases 
resulting in 26 arrests and convictions, but we are worried 
that this problem is growing fairly fast. We are seeing a 
gradual increase in counterfeit drug activity. In 1999, we 
opened 6 cases of counterfeiting; in 2000, 10 cases; in 2001, 
23 cases; and so far in 2002, 16 cases, for a rate of 30 for 
the year if that keeps up, which is a fivefold increase in 4 
years. That does concern us.
    We are also seeing counterfeit drugs being smuggled, which 
is a somewhat new thing. We are all familiar with narcotics 
being smuggled, and the Customs Service has been dealing with 
that for years, but we are seeing things like these. These are 
stuffed animals from an Asian company. The drugs are in here, 
the counterfeit drugs. These are not narcotic drugs but 
prescription drugs which are in this bear. Here is a little car 
which we found recently. These are prescription drugs in there. 
These are not narcotics, this is not cocaine, these are 
prescription drugs. This particular product, they took the 
motor out and put the drugs in where the motor would have been. 
Those drugs are counterfeit as well.
    Of course, American citizens are clamoring for foreign 
drugs. They are seeking relief from the high cost of 
pharmaceuticals. As I said, we can understand that, but that is 
not our job.
    As a result of the consumer demand, mail and Internet drug 
purchases are increasing steadily for these products. We and 
the Customs Service cannot adequately screen these drugs for 
authenticity or safety. Despite almost 400 investigations of 
these Internet drug sites that sell these drugs, and many, many 
convictions and arrests, we are still seeing a rapid increase 
of drugs coming in in little packages like this that we have 
shown you in the past. This is an injectable drug. It poses 
some of the same sorts of concerns we have mentioned earlier.
    Here we have Viagra and antibiotics. Someone ordered them 
over the Internet. Of course, antibiotics are particularly a 
problem to come in over the Internet because we have an 
antibiotic resistance problem in this country.
    Of course, we see these ads over the Internet that say ``No 
physician examination needed, no prescription needed, just send 
us your credit card number and check off the drug you want, and 
it will be on its way.''
    So we are very concerned that despite an effort to enforce 
against these drugs, we are actually seeing an increase in this 
Internet purchase. Also, our criminal investigators are seeing 
counterfeit drugs coming from anywhere and everywhere.
    These are just some recent ones. Here is one from Spain, 
one from France, Switzerland, Mexico, Germany. These are coming 
in every day, so we know the counterfeiters are out there. That 
is why we keep raising this issue of opening the borders up to 
these sorts of drugs. It is, from FDA's point of view--
notwithstanding the price issue that, of course, you are all 
concerned about--we are very concerned about that as a trend.
    Of course, the latest trend is to go to Canada. There has 
been legislation introduced and considered by Congress to 
legitimize that practice. Ads are running in newspapers around 
the country: ``you can get your drugs from Canada, a big price 
savings. Just fill out this form and the drugs will be on the 
way.''
    We understand the consumer demand for these products, but 
we are concerned that if a Canadian system is set up, that 
Canada, which now probably has one of the more secure systems 
for assuring the safety of pharmaceuticals, could become a 
place where the drug supply is far different than it is today, 
and that it could be a transshipment point for all of these 
folks who are making these counterfeit drugs in various parts 
of the world.
    With that, Mr. Chairman, I will end my opening remarks and 
be glad to take questions.
    [The prepared statement of William K. Hubbard follows:]

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

                              INTRODUCTION

    Mr. Chairman and Members of the Committee, I am William K. Hubbard, 
Senior Associate Commissioner for Policy, Planning and Legislation at 
the U.S. 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. This topic encompasses a 
range of issues, including the importation by individuals of 
prescription drugs through the mail or in person; the purchase of drugs 
from foreign sources over the Internet; and the potential introduction 
of counterfeit drugs into the U.S. drug supply.
    FDA is also concerned about legislative initiatives that, while 
intended to provide drug price relief to consumers, would severely 
damage the system of drug regulation that has come to be known as the 
``gold standard'' for drug safety throughout the world. Last month, 
speaking at a biotechnology summit in Canada, Secretary Thompson said 
``Opening our borders to reimported drugs potentially could increase 
the flow of counterfeit drugs, cheap foreign copies of FDA-approved 
drugs, expired and contaminated drugs, and drugs stored under 
inappropriate and unsafe conditions. In light of the anthrax attacks of 
last fall, that's a risk we simply cannot take.''

             PERSONAL IMPORTATION OF DRUGS THROUGH THE MAIL

    Under the Federal Food, Drug, and Cosmetic (FD&C) Act, unapproved, 
misbranded, and adulterated drugs are prohibited from importation into 
the United States. In general, all drugs imported by individuals fall 
into one of these prohibited categories. This includes drugs that are 
foreign versions of FDA-approved medications, and drugs that are 
dispensed without a prescription. In addition, under the Act, FDA-
approved drugs that are manufactured in the U.S. and exported may not 
be reimported by anyone other than the manufacturer.
    The volume of prescription drugs for personal use imported through 
the mail has increased dramatically in recent years. According to 
testimony by the U.S. Customs Service (Customs) before the House 
Government Reform Committee in May 2000, 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. FDA estimates that approximately two million parcels 
containing FDA-regulated products for personal use enter the U.S. each 
year through international mail facilities. This estimate is based on 
an extrapolation of data obtained during a pilot project conducted at 
the international mail facility in Carson, California, which is 
discussed in more detail below.
    At mail facilities, Customs officials identify parcels that may 
violate the FD&C Act for FDA examination. 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 and provide reasons why the drug parcel 
should be allowed entry. 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 an opportunity to respond, the detention and further processing of 
mail parcels consumes large amounts of FDA resources. In addition, 
considerable storage space is needed to hold the large number of 
detained parcels until replies are received from the addressees.
    Recent advertisements in U.S. newspapers and magazines claim that 
Congress has made the personal importation of drugs a legal practice. 
Other advertisements and certain Internet sites state that personal 
importation of up to a 90-day supply of prescription medications is 
legal. Neither of these claims is true. As we will discuss in more 
detail below, we are seeing an increasing number of Canadian pharmacies 
and U.S. intermediaries marketing prescription drug products directly 
to U.S. citizens, in violation of state pharmacy laws and the FD&C Act.
    From a public health standpoint, importing prescription drugs for 
personal use is a potentially dangerous practice. FDA and the public 
have no assurance that unapproved products are effective or safe, or 
have been produced under U.S. good manufacturing practices. FDA cannot 
assure the public that re-imported drugs made in the U.S. have been 
stored under proper conditions or that they are even the real product, 
because the Agency does not regulate foreign distributors or 
pharmacies. Therefore, unapproved drugs and re-imported approved 
medications may be contaminated, subpotent, superpotent, or 
counterfeit. In addition, some websites based outside the U.S. offer to 
dispense prescription drugs without a prescription by a licensed 
practitioner or a physical examination, bypassing the traditional 
doctor-patient relationship. As a result, patients may receive 
inappropriate medications due to misdiagnoses, they may fail to receive 
appropriate medications or other medical care, or they may 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 in limited circumstances to permit the 
importation of certain unapproved prescription medication for personal 
use.
    First adopted in 1954, the policy 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 policy is articulated in guidance to FDA field personnel and is 
not a license for individuals to import unapproved, and therefore 
illegal, drugs for personal use into the United States. Because the 
policy does not apply to medications that are already available in the 
U.S., even if sold under the same name, only a very few drug products 
available from foreign sources, especially Canada and Mexico, meet the 
personal importation criteria.
    The current personal importation policy permits the exercise of 
enforcement discretion to allow entry of an unapproved prescription 
drug only if the intended use is for a serious condition for which 
effective treatment may not be available domestically; the product is 
considered not to represent an unreasonable risk; the product is for 
personal use; there is no known commercialization or promotion to U.S. 
residents by those involved in the distribution of the product; 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's personal importation policy, as written, is difficult to 
implement with respect to mail shipments of drugs. This is due, at 
least in part, to the difficulty faced by Customs or FDA inspectors, or 
even health care practitioners, in identifying a medicine simply by its 
appearance or its labeling, which may falsely identify a product. From 
a practical standpoint, FDA inspectors cannot visually examine drug 
products contained in a mailed parcel and accurately determine their 
identity or the degree of risk posed to the individual who will receive 
these drugs. Also, largely due to the advent of Internet sites selling 
prescription drugs from all points around the globe, the volume of 
parcels containing prescription drugs has increased dramatically, 
beyond the ability of Customs and FDA staff to efficiently process.
    Due to the huge volume of drug parcels entering the U.S. through 
the international mail and courier services, the requirements for 
notice and hearing, and our limited resources, it is difficult for FDA 
to detain and refuse mail imports for personal use. As a consequence, 
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 violate the FD&C Act and pose a 
health risk to consumers. We do not believe this is an acceptable 
public health outcome.

                       CARSON MAIL FACILITY PILOT

    In early 2001, 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 purpose of the Carson pilot was to 
provide a means for examining incoming mail shipments of pharmaceutical 
products over a specified time frame to identify both the volume and 
the types of drug products entering the U.S. We also wanted to better 
assess the level of effort and human resources required to handle drug 
importations at a mail facility, and to better understand 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, a much higher staffing level than is 
normally possible. Although Customs took a baseline sample which 
indicated they could have set aside for FDA review an estimated total 
of 16,500 international packages (650 packages per day), FDA was able 
to examine only 1,908 packages during the five-week pilot, or an 
average of 381 packages per week. Unexamined packages were sent on to 
the addressees. Of the 1,908 packages examined by FDA, 721 parcels 
originating in 19 countries 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.
Analysis of the Carson Pilot Drug Parcels
    FDA's Center for Drug Evaluation and Research (CDER) reviewed 
listings of the products detained during the Carson pilot to define 
better the nature of the risk to public health from the types of 
products coming into the U.S. through personal importation. CDER's 
review demonstrates that there are serious public health risks 
associated with many of the 721 drug shipments (composed of 197 
different drugs) detained at Carson. There are primarily two types of 
risks that consumers of these drugs would face. The first risk arises 
when consumers take drugs of unknown origin or quality. Second is the 
very significant risk associated with taking many of these drugs 
without first obtaining a physician's prescription and without the 
continued oversight of the physician.
    In general, FDA has no information to establish where these drugs 
were actually manufactured and whether 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 FDA-approved 
drugs and the risks are therefore difficult to assess. One drug had 
been reviewed for FDA approval but was denied approval due to cardiac 
abnormalities and because its efficacy could not be demonstrated. 
Several shipments contained three drugs that were once approved by FDA 
but have been withdrawn from the market based on serious safety 
concerns.
    The vast majority of the shipments were identified as containing 
prescription drugs, which by definition have a degree of toxicity and/
or risk associated with them such that they are not safe for use except 
under the supervision of a licensed health care practitioner (Title 21, 
U.S.C. section 353(b)). We believe that very few foreign Internet 
sellers require a prescription from a practitioner licensed in the U.S. 
before dispensing drugs to U.S. residents. Moreover, after detention 
notices were issued to the intended recipients of the 721 drug 
shipments, fewer than four percent responded with evidence of 
prescriptions or that a physician would provide oversight of the use of 
the drugs purchased from abroad.
    A number of controlled substances were identified, including 
lorazepam, codeine sulfate, loperamide, chlordiazepoxide, chloral 
hydrate, and diphenoxylate. These drugs have the potential for abuse, 
addiction or life-threatening overdose. A physician's prescription and 
oversight are essential for managing these risks. Additionally, drugs 
having potentially serious adverse side effects including diabetes, 
hypertension and serious infection were included in the Carson 
shipments, as were many drugs with serious contraindications and/or 
possible drug or food interactions for which physician oversight is 
essential.
    Many of the drugs identified in the Carson pilot are intended to 
treat conditions that only physicians can properly diagnose. Consumers 
who bypass physician diagnosis and prescribing may be exposing 
themselves to risks and toxicities that cannot be justified by 
offsetting benefits. 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 or 
viral infections. Several drugs listed are potent steroids, which are 
generally prescribed for conditions that are not self-diagnosable.
    Based on these observations, FDA believes that the type of drugs 
that are coming into the country for personal use, as demonstrated by 
the Carson pilot, pose substantial risks to the public health.

                          INTERNET DRUG SALES

    Based on a survey conducted in early 2000 by FDA's Office of 
Criminal Investigations (OCI) and a subsequent study by the General 
Accounting Office, there appears to be roughly 300 to 400 Internet 
sites selling prescription drugs to consumers, 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 that are not operated by 
pharmacies licensed and operating within state pharmacy law or sites 
that dispense foreign drugs. These outlets may dispense expired, 
subpotent, contaminated or counterfeit product, the wrong or 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 can 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. Finally, it must be noted that in the case of 
foreign based web sites, if consumers have an adverse drug reaction or 
any other problem they have little or no recourse because the physical 
location or operator of the ``pharmacy'' often is not known or the 
seller is beyond the consumers' reach. FDA has no ability to take 
effective action against these foreign operators on behalf of U.S. 
citizens.
    Over the last twelve to eighteen months, FDA has noticed a 
proliferation of websites that offer drugs purportedly from Canada 
directly to U.S. consumers. As noted earlier, a number of these 
websites claim that drug sales from Canadian pharmacies directly to 
U.S. consumers are legal. This is false. Some websites purport to offer 
``U.S. approved'' drugs, however, it is highly unlikely that the drugs 
are in fact approved by FDA. Some web sites are actually ordering 
services that take orders from consumers that are then fulfilled by 
supposed Canadian pharmacies. However, under state law, these ordering 
services are likely participating in the practice of pharmacy without a 
license to do so.
    A number of Canadian drug websites and U.S. ordering services 
indicate that the Canadian drugs are dispensed pursuant to existing 
prescriptions that are rewritten by a Canadian doctor in order to 
comply with Canadian law. However, the dispensing of medication on a 
prescription written by a physician who has not seen the patient or 
conducted a physical exam is generally contrary to state medical 
practice standards. Additionally, Dr. Henry Haddad of the Canadian 
Medical Association has said that under the Canadian Code of Ethics, 
physicians have a responsibility to do a history, physical exam and 
discuss the risks and benefits of the medication with the patient. He 
went on to say that the approval of prescriptions for patients they 
have not seen ``Is something Canadian physicians should not be doing'' 
(Associated Press, 6/26/02).
    Some of these sellers have become so emboldened that they have 
solicited state Medicaid programs to import drugs from Canada. One 
Canadian pharmacy recently sent packages of prescription drugs to more 
than 500 U.S. consumers in a single shipment. Another boasted that 
since it added Internet sales to its local pharmacy a year ago, the 
store has gained about 100,000 U.S. customers. An ordering service 
based in Florida has announced plans to open 500 storefront shops 
nationwide within three years (Orlando Sentinel, 6/3/02).
    Some recent criminal cases indicate the seriousness of the risks to 
public health that confront regulators with regard to Internet drug 
sales, but also illustrate the progress that is beginning to be made in 
combating this problem.

                          NORFOLK MEN'S CLINIC

    On February 16, 2002, a federal jury in Alabama convicted Anton 
Pusztai and Anita Yates of charges arising out of the operation of the 
online pharmacy that illegally sold prescription drugs over the 
Internet to consumers. On June 18, Pusztai and Yates were sentenced 
respectively to over 15 years and 6.5 years of incarceration. Pusztai, 
an Australian citizen, and Yates, a resident of Clanton, Alabama, were 
convicted of conspiracy to commit violations of the FD&C Act, 
conspiracy to commit money laundering, mail fraud, dispensing 
misbranded drugs, and operating a drug repackaging facility not 
registered with FDA. From fall 1998 to the summer of 2000, the 
defendants operated a website called Viagra.au.com, also known as 
Norfolk Men's Clinic, and related sites, that sold Viagra, Xenical, 
Celebrex, Propecia, and Claritin-D to consumers.
    In September 1999, OCI received information regarding the Norfolk 
Men's Clinic and the website. Based on this information, several covert 
purchases were made via the Internet. Search warrants were executed in 
October 1999 that resulted in the seizure of prescription drugs along 
with numerous business records. Additional covert purchases were made 
from part of the Internet operation in West Virginia. Based on these 
purchases and numerous interviews, several individuals were indicted. 
In addition to defendants Pusztai and Yates, the president of a 
prescription drug wholesaler located in Miami, Florida, and the company 
itself, pled guilty to distributing midbranded drugs and to obstruction 
of justice. In conjunction with the indictment, a second search warrant 
was executed in Clanton, Alabama along with two search warrants in West 
Virginia. While most of the drugs sold in this operation were domestic 
product, some appeared to have originated in New Zealand.

                          MEDICATIONS EXPRESS

    On June 7, 2001, Gerald Bevins was convicted in U.S. District Court 
for the Southern District of California of conspiracy to defraud the 
U.S. and commit offenses against the U.S. by introducing misbranded 
drugs into interstate commerce and smuggling. On September 4, 2001, 
Bevins was sentenced to serve twenty-four months in prison. The case 
was initiated on information received from Customs concerning an 
Internet web site called Medications Express. Bevins sold Mexican 
prescription pharmaceuticals from this website and claimed that no 
doctor's prescription was necessary. He continued to sell Mexican 
prescription pharmaceuticals through the mail from Sun City, 
California, even after discontinuing the Medications Express web site. 
Bevins, his wife and daughter, would receive orders via mail, travel to 
Tijuana, Mexico to purchase the pharmaceuticals, and smuggle them back 
into the U.S. The three packaged the pharmaceuticals into commercial 
courier boxes and shipped them to customers around the U.S. The drugs 
supplied by Bevins were labeled in Spanish and included Ritalin, 
Valium, Rivotril, and steroids.

                       CANADIAN DRUG STORE, INC.

    On May 14 of this year, the Ontario College of Pharmacists, a 
Canadian government agency, filed charges under Ontario law against The 
Canadian Drug Store Inc. for unlawfully operating an unlicensed 
pharmacy and using an un-registered pharmacist in filling prescriptions 
for U.S. residents. The College also filed charges against a licensed 
pharmacist, pharmacy, and physician in Ontario for helping to 
facilitate the delivery of prescription and non-prescription drugs to 
U.S. residents. A drug wholesaler was charged with supplying 
medications to a non-licensed pharmacy.
    According to a statement released by the College, ``There are many 
websites selling prescription and non-prescription medicines that have 
not been accredited as legitimate pharmacies by pharmacy regulators in 
either Canada or the U.S. The public needs to know that some websites 
presenting themselves as online ``pharmacies'' or ``drugstores'' may be 
operating without a pharmacy license and dispensing prescriptions 
without the oversight of a licensed pharmacist.''

                 TOTAL REMEDY / PRESCRIPTION CENTER II

    According to news accounts, a Los Angeles pharmacy and two 
pharmacists were assessed penalties of almost $90 million in a state 
Board of Pharmacy proceeding this past May for filling more than 3,500 
illegal prescriptions over the Internet. The case was under a new law 
enacted in 2001 that creates a requirement in California to fill 
prescription pursuant to a ``good-faith medical examination.'' The 
Internet site concentrated on filling prescriptions for ``lifestyle'' 
drugs such as Viagra and Propecia (Associated Press, 5/29/02).
Pillbox Pharmacy
    In March of this year, a Texas pharmacist, three doctors, two 
corporations and an individual were charged in a federal indictment 
alleging that they conspired to illegally dispense drugs in connection 
with an Internet pharmacy operation. The indictment charged one 
pharmacist, three physicians and two corporations, the S&H Script Shop 
and the Pillbox Medical Center, with conspiring to illegally dispense 
controlled substances and commit money laundering. According to the 
indictment, between January 1, 2000, and June 12, 2001, the defendants 
grossed more than $7.7 million from the Internet sales of just two 
drugs alone. The indictment alleges the doctors would issue 
prescriptions without establishing a patient history, performing a 
mental or physical exam, using appropriate diagnostic or laboratory 
testing, or providing any means to monitor medication response. The 
charges were the result of an 18-month investigation by FDA, the DEA 
and the Internal Revenue Service, working with the U.S. attorney's 
office. In April, the pharmacist and two corporations pled guilty to 
illegally dispensing controlled substances, and agreed to forfeit $1 
million.

Other Enforcement Activity
    To date, OCI has initiated 296 Internet drug investigations with 
each case involving a variable number of websites from one to 25 or 
more. These cases originated from multiple sources including 
interception at mail facilities, web based research, consumer 
complaints, and a variety of others. OCI has effected 112 Internet-
related drug arrests and obtained 72 convictions. OCI currently has 101 
open Internet drug investigations.
    Currently, FDA has 90 sites under active review for possible 
regulatory or civil action. Warning letters have been sent to 55 
domestic online sellers. Additionally, FDA has sent 137 ``cyber 
letters'' to operators of Internet sites in many countries, including 
Canada, that offer 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. Cyber letters have a deterrent 
effect and FDA has seen positive results from using them. 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), FDA has 
obtained five preliminary injunctions against the sale of 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. 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. Forty-five 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.

                      IMPORTATION AT LAND BORDERS

    FDA is aware that a number of U.S. citizens travel to other 
countries to purchase medications at a lower cost. However, many 
prescription drugs available from foreign sources are either unapproved 
foreign versions of FDA-approved drugs or products for which there is 
no U.S. approved counterpart. In either case, these products are 
unapproved drugs prohibited from importation by section 505 of the FD&C 
Act. In FDA's experience, many drugs obtained from foreign sources that 
purport to be the same as U.S. approved prescription drugs are of 
unknown quality. FDA cannot provide adequate assurance to the American 
public that the drug products they purchase in other countries are the 
same products approved by FDA.
    FDA is developing a program to better warn U.S. citizens about 
these dangers and the potential risks to their health when purchasing 
such drugs. We have begun to provide brochures to consumers crossing 
U.S. borders to make such purchases and are installing posters at 
borders stations warning of the dangers inherent in purchasing drugs 
outside the U.S.
    Within the last two years, FDA has conducted three surveys at U.S. 
borders to gather data on drug products carried by individuals entering 
the U.S. While these border surveys involve land traffic rather than 
mail importation, the results show some similarities to the findings 
from the Carson mail pilot, but also 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. 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 
determine what specific types of products are being imported, and who 
is importing these products. The data collected from over 600 
interviews indicated that the most common importers of prescription 
drugs were older male Caucasians with prescriptions from the U.S., 
bringing back primarily antibiotics or pain relievers for their 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), and 
Carisoprodol (analgesic). While many of these products are already 
available as FDA-approved drugs in the U.S., some are unapproved for 
sale in this country.

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 A-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 (OTC) 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 OTC in 
Canada; Sibelium capsules (calcium channel blocker); and a variety of 
OTC products sold in Canada and not available in the U.S.
    Some of these drugs are unapproved foreign versions of FDA-approved 
drugs, although some approved for sale as prescription drugs in the 
U.S. are sold as over-the-counter medications in Canada.

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, college spring break and the end of the snowbird 
season, when tourists from Northern states visiting along the Southern 
border return home. During the four hour survey, 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). As in the earlier survey, many of these products are 
already available as FDA-approved drugs in the U.S., while some are 
unapproved for sale in this country.

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 DRUGS

    FDA continues to believe that the quality of drugs in this country 
is high, and that the public can continue to have confidence that the 
drugs sold in the U.S. market are authentic. The Agency, however, takes 
very seriously any allegations or information regarding the 
counterfeiting or adulteration of drug products. As the drug 
manufacturing and distribution system has become more global in nature, 
the challenge of protecting against counterfeit, adulterated or 
substandard drugs has become more difficult. We are concerned about a 
spate of drug counterfeiting and tampering cases that have occurred in 
recent months, and we believe these incidents caution against any 
weakening of the current regulatory system.
    The manner in which FDA handles these types of counterfeit and 
tampering incidents are driven by two primary goals that are often, but 
not always, complementary. First and foremost, FDA works with 
consumers, manufacturers, wholesalers, distributors, state agencies and 
others in order to determine the composition of the unsuitable product 
and the extent to which it has been introduced into the distribution 
chain, and we use this information do whatever is necessary to protect 
the public health. Second, OCI, with the support and cooperation of 
other FDA components and other law enforcement agencies, attempts to 
bring the perpetrators of criminal acts to justice. It must be noted, 
however, that the need to publicize the existence of a counterfeit or 
adulterated product in order to alert professionals and the public to 
potential dangers may compromise the successful conduct of criminal 
investigations.
    Regular FDA district field investigators often work closely with 
OCI special agents in these cases. They follow up at specific 
wholesalers, distributors, hospitals or pharmacies identified as having 
received counterfeit product to conduct tracebacks on particular lots 
and to determine sources, quantities involved and the distribution of 
product to retail outlets. The FDA's Forensic Chemistry Center (FCC) 
and/or the drug and biologic review divisions provide field personnel 
with the labeling and packaging of authentic product for comparison 
with counterfeit product. FDA also posts information to its MedWatch 
site to inform consumers and health care professionals about safety 
concerns related to counterfeited or tampered products.
    OCI opened 55 counterfeit drug cases from October 1998 through June 
2002. During that time we have made 26 arrests with 20 convictions. We 
have seen a gradual increase in the incidence of finished dosage form 
counterfeit activity over the last few years. So far this year we have 
16 cases opened, 12 arrests, and seven convictions. Eight of these 
arrests and five convictions are attributable to the latest eight 
counterfeit drug appearances.
    The current focus on drug counterfeiting and the public perception 
of a more dramatic increase in counterfeit drug activity is due to the 
fact that the latest several counterfeits have appeared in the 
wholesale market and received wider distribution than has been the case 
historically. This is due to the existence of an illicit wholesale drug 
diversion network that has grown up around tiered pricing and economic 
fraud.
    This system consists of criminal middlemen who knowingly solicit 
closed door pharmacies, such as a hospital or nursing home supplier, to 
over-order certain drugs based on fraudulent demand. The drugs are then 
sold into the wholesale drug diversion network. The diverter typically 
offers a 25 percent kickback to the closed door pharmacy and diverts 
the excess drugs into the illicit wholesale diversion system. This 
system depends on the diverter maintaining confidentiality for the 
closed door pharmacy since the pharmacy would lose its preferred 
pricing should the manufacturer discover the fraudulent arrangement. 
False pedigrees are the hallmark of the system as each wholesaler 
passing the drugs on to the next faces being ``cut out'' if the 
subsequent buyer knows the identity of his supplier's source. It is 
easy to see how this system of ``willful blindness'' facilitates the 
entry of counterfeit and otherwise unsafe drugs into the marketplace. 
Unfortunately these illegal schemes net huge profits. From October 1998 
to June 2002, OCI opened 255 Prescription Drug Marketing Act diversion 
cases, executing 464 arrests and resulting in 337 convictions, with 
fines and forfeitures totaling approximately $32 million.
    The following examples of counterfeit drug products and tampering 
incidents may help to illustrate the types of activity we have recently 
encountered.
Serostim (somatropin (rDNA origin) for injection), Serono Laboratories
    In late 2000 and early 2001, FDA became aware of consumer 
complaints about adverse effects and a recall at the distributor level 
of Serostim. FDA enforcement personnel and criminal investigators 
became involved and engaged FDA field offices nationwide, which 
included investigative follow-up at other distributors and the 
manufacturer. In January 2001, Serono issued a press release regarding 
the apparent counterfeiting of one particular lot. An additional press 
release and Dear Health Care Professional letter were issued by the 
company in May 2001, regarding a second lot.
    In May 2002, Serono became aware that counterfeit Serostim 
displaying a fake lot number had been distributed. Preliminary 
information indicates that the counterfeit product may have been 
distributed via the Internet. Laboratory analysis by FDA shows that the 
product contains no active ingredient, and it has been determined that 
the product did not originate from Serono.
    On May 16, Serono issued a letter advising Serostim handlers to be 
aware of the counterfeit lot even though it has not shown up in normal 
distribution channels.

Neupogen (filgrastim), Amgen, Inc.
    In the spring of 2001, based on observations by a distributor about 
product appearance, Amgen analyzed a suspect lot and determined that 
the vials contained only saline solution. Investigation by the company 
and FDA revealed that the lot did not display a legitimate Neupogen lot 
number, but one that had been assigned to a lot of Epogen, another 
Amgen product. The FCC performed additional analysis. In May 2001, 
Amgen issued 17,000 Dear Health Care Professional letters nationwide 
informing patients, physicians, pharmacies and wholesalers about the 
counterfeiting of Neupogen. Later that month, Amgen reported to FDA on 
product with four lot additional numbers having wrong expiration dates, 
indicating either counterfeit lot numbers or that expiration dates were 
changed to make them more saleable by extending dates. In June, Amgen 
updated its Dear Health Care Professional letter with information on 
additional confirmed and suspected counterfeit lots.

Epogen (epoetin alfa), Amgen, Inc.
    In May 2002, FDA, state regulators and Amgen became aware that 
potential counterfeit Epogen may be in commerce. Amgen analysis 
indicated that a counterfeit product labeled as Epogen 40,000 U/ml 
vials with a particular lot number contained a clear liquid having 
active ingredient approximately 20 times lower than expected. Samples 
of the authentic product as well as the counterfeit product were sent 
to FCC for analysis. On May 8, Amgen issued a letter advising health 
care professionals about the counterfeit Epogen and describing the 
differences between authentic and counterfeit packaging so that 
physicians can identify the authentic product. Further investigation 
revealed that a major wholesale distributor was holding approximately 
1,600 cartons of counterfeit product. The majority of this counterfeit 
product was tracked back to a wholesaler located in the western U.S. On 
May 24, Amgen issued a second advisory letter to warn health care 
professionals that two additional counterfeit lots of Epogen were 
discovered.

Combivir (lamivudine plus zidovudine), GlaxoSmithKline
    In the spring of 2002, GlaxoSmithKline (GSK) received four 
complaints that bottles containing 60 tablets of Combivir were being 
replaced with Ziagen tablets. In addition, the firm determined that 
counterfeit Combivir labels were placed on authentic bottles of Ziagen 
tablets. Both medicines are used as part of a combination regimen to 
treat HIV infection. A GSK health hazard evaluation of this situation 
determined that if an individual takes the wrong tablet and is 
sensitive to abacavir sulfate (Ziagen), a potentially life threatening 
hypersensitivity reaction could occur. GSK has stated that the 
incidents appear to be isolated and limited in scope, and no injuries 
or adverse reactions have been reported. However, in May, distributors 
were advised to initiate recall to their customers. GSK also issued a 
press release to alert patients, pharmacists and physicians to watch 
for third party tampering that incorrectly labels Ziagen as Combivir.

Zyprexa (olanzapine), Eli Lilly & Co.
    In the winter and spring of 2002, Eli Lilly received complaints 
from four pharmacies in four states that the product Zyprexa had been 
removed and replaced with white tablets labeled as aspirin. Zypreza is 
indicated for the treatment of schizophrenia and acute bipolar mania. 
The tampering situations occurred in two strengths and in three 
different lots. The company determined that the tablets from two of the 
complainants were non-Lilly tablets and looked the same in both 
complaints. FDA has determined the manufacturing source of the white 
tablet marked as aspirin and is continuing to investigate. On May 4, 
Lilly issued a press release and Dear Health Care Professional letter 
concerning the tampering situation. The company stated in their press 
release that these incidents appeared to be isolated and limited in 
scope.

Procrit (epoetin alfa), Amgen/Ortho Biotech
    In May 2002, based on requests from state health authorities, Amgen 
obtained and analyzed samples of 40K vials of Procrit from a certain 
wholesale distributor. The analysis indicated that a counterfeit drug 
product labeled as Procrit 40,000 U/ml vials with a certain lot number 
contains a clear liquid having active ingredients approximately 20 
times lower than expected. Samples of the authentic product as well as 
the counterfeit product were sent to FCC for further analysis. 
Investigators are continuing following up at wholesalers and 
distributors identified as receiving the counterfeit product. One major 
wholesale distributor was found to be holding approximately 339 cartons 
of counterfeit product. In June, Ortho Biotech issued a Dear Health 
Care Professional letter and press release which details the 
differences between authentic and counterfeit packaging so that 
physicians can be certain they have the authentic product.
    In addition to the above cases, OCI has made a number of recent 
arrests relating to counterfeit AIDS and cancer drugs, as described 
below.

Serostim, (somatropin (rDNA origin) for injection), Serono Laboratories
    In November 2000, Nicholas Hanson was arrested by a task force of 
OCI, U.S. Postal Inspection Service, and Iowa State Police on charges 
of conducting an ongoing criminal enterprise. Hanson was the leader of 
a small group that counterfeited Serostim. He imported the human growth 
hormone through the Internet from China, via Express Mail. At the same 
time, Jeremy Gansen was arrested by the same task force and charged 
with conducting an ongoing criminal enterprise related to the 
misbranding and distribution of human growth hormone and steroids. 
Gansen assisted Nicholas Hanson in the counterfeiting of Serostim.

Nutropin AQ (somatropin (rDNA origin) for injection), Genentech
    In July 2001, an individual was arrested in Texas by OCI and 
subsequently indicted in August 2001 by a Federal Grand Jury. He was 
charged with counterfeiting Nutropin, trafficking in counterfeit goods 
and controlled substances violations. He subsequently plead guilty to 
counterfeiting Nutropin and distributing controlled substances. In 
December 2001, a second individual was indicted by a Federal Grand Jury 
in Texas for counterfeiting the above Nutropin, conspiracy to defraud 
the FDA, aiding and abetting and controlled substances violations. He 
is a fugitive and a provisional international arrest warrant is being 
sought for his arrest. He will be extradited to the U.S. In April 2002, 
two additional individuals involved in the distribution of counterfeit 
Nutropin were arrested by OCI and DEA for selling heroin to an 
undercover agent. Finally, in May 2002, a fifth individual was arrested 
by OCI for selling counterfeit Nutropin, and he subsequently plead 
guilty to the charge.
    FDA remains strongly 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 also believe that proposals that 
have been put forth in Congress to allow either the reimportation of 
drugs by persons other than the original manufacturer, or to allow 
consumers to import drugs for their own personal use, will provide 
additional avenues for unscrupulous individuals to place counterfeit, 
substandard or otherwise dangerous drug products into U.S. commerce and 
into citizens' medicine cabinets, as discussed below.

                      DRUG IMPORTATION LEGISLATION

    Currently, new drugs marketed in the United States must be approved 
by FDA based on demonstrated safety and efficacy; they must be produced 
in manufacturing plants inspected and operated in conformance with 
FDA's current Good Manufacturing Practice (GMP) requirements; and their 
shipment and storage must be properly documented and subject to 
inspection. This ``closed'' regulatory system has been very successful 
in preventing unapproved, adulterated or misbranded drug products from 
entering the U.S. stream of commerce. Legislation that would establish 
other distribution routes for drug products, particularly where those 
routes routinely transverse a U.S. border, creates a wide inlet for 
counterfeit drugs and other dangerous products that can be injurious to 
the public health and a threat to the security of our nation's drug 
supply.
    Although a number of bills have been introduced that would 
facilitate the importation of foreign drugs, FDA has looked most 
closely at S. 2244, which has been the subject of recent activity on 
the floor of the U.S. Senate. This bill, introduced by Senator Dorgan 
and others, and its companion bill in the House, H.R. 4616, introduced 
by Rep. Sanders, would create two new pathways for drugs to enter the 
U.S. outside of the current drug regulation system that, while not 
perfect, has a remarkable record of protecting the public from 
contaminated, ineffective, or counterfeit drugs. Of particular concern 
are the provisions for allowing individuals to import drugs directly 
from Canadian pharmacies. This would greatly exacerbate the growing 
problem of the hundreds of websites purporting to sell legitimate 
medications that are in fact selling unapproved or otherwise dangerous 
drugs to Americans. These personal importation provisions are so broad 
that they will over-ride existing statutes that allow FDA to refuse 
entry to prescription drugs from Canada if they are believed to be 
unsafe, ineffective, adulterated, contaminated or counterfeit.
    Throwing the door open to drugs purchased by individuals directly 
from Canadian sellers will encourage unscrupulous individuals to devise 
schemes using Canada as a transshipment point for dangerous products 
from all points around the globe. Web sites touting the availability of 
supposedly legal drugs from Canada will spring up in large numbers, 
duping consumers that will have no way of knowing that the drugs may be 
illegal, counterfeit or contaminated.
    S. 2244 and H.R. 4616 would create a second route for transporting 
drugs into the U.S. outside of the existing regulatory system. The bill 
would allow pharmacists and wholesalers to purchase drugs from Canadian 
sellers over which U.S. authorities (FDA or others) have no 
jurisdiction or control. Because the bill requires that the drugs 
comply with sections 501, 502 and 505 of the Act, it may be found, in 
practice, that for the bill to have its intended effect, U.S. 
manufacturers would have to sell drug products manufactured, labeled 
and intended solely for the U.S. market to Canadian distributors, 
specifically for re-sale to the U.S. As a practical matter, meeting 
these requirements would be very difficult, and it is unlikely that 
Canadian sellers and U.S. importers would be willing to endure them. 
Additionally, it is not clear as to how FDA could ensure that drugs 
reimported under this proposal would in fact comply with those sections 
of the Act, because the Agency has no practical ability to regulate or 
inspect Canadian facilities.
    The bill attempts to ensure the safety of the drugs under 804(b) by 
requiring testing for authenticity. Unfortunately, authenticity can 
rarely be established solely through chemical analysis. That can only 
be assured by the multiple layers of safeguards that are built into the 
FDA's oversight system in which drug approval, regulation, inspections 
and surveillance tracks drugs over their entire life cycle. The testing 
required by the bill would not protect against the threat of 
counterfeit drugs because no random sampling plan can protect against 
such criminal conduct. The threat of counterfeits does not depend on 
the integrity of the product itself, but on the integrity of those 
handling it. Since counterfeits can easily be commingled with authentic 
product, either by the case, by the bottle, or by the pill, there is no 
sampling or testing protocol sufficient to protect against the grave 
public harm they pose.
    In addition, the bill would require drug manufacturers to 
disseminate their drug formulations and chemical fingerprints to 
potentially thousands of pharmacies and wholesalers. This information, 
currently protected as trade secret, could be worth millions of 
dollars, per drug, on the black market. Counterfeiters could obtain 
drug formulations and learn how to make their fake drugs look real and 
survive chemical analysis. Notwithstanding these very real safety 
concerns, it is questionable as to whether the bill would achieve the 
goal of bringing cheaper pharmaceutical products to U.S. consumers. Any 
cost savings that might be generated may well be absorbed by the fees 
charged by exporters, wholesalers, pharmacists and testing labs.
    We would also like to recognize that the Administration is 
continuing to review this legislation and may have further comments. 
Finally, FDA notes that we will continue to offer our expertise and 
advice to the Congress, as we have in the past, in exploring any 
additional proposals which may be offered to address the drug pricing 
issue, including those involving reimportation.

                               CONCLUSION

    Mr. Chairman, FDA remains concerned about any possibility that 
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 Committee's interest in assuring that the 
American public has access to safe and affordable medicines and we look 
forward to working with you in furtherance of this goal. Thank you 
again for the opportunity to participate in today's hearing. I will be 
happy to answer any questions.

    Mr. Bilirakis. Thank you very much, Mr. Hubbard. There 
certainly will be many questions.
    Mr. Hubbard, how long have you been with the FDA?
    Mr. Hubbard. I will have 30 years in September with the 
Department of Health and Human Services, 26 of those with the 
FDA.
    Mr. Bilirakis. So you are certainly far from a political 
appointment, are you not?
    Mr. Hubbard. One could say that, yes.
    Mr. Bilirakis. Were you faced with this problem--for how 
long, now? Is this a new problem? Is this a very recent 
problem?
    Mr. Hubbard. We have seen isolated examples of 
counterfeiting going back at least 15 or 20 years, and probably 
further than that, but they were very isolated. Our concern is 
that, as with some of the statistics I gave you, we are seeing 
a ramping up of that right now. It does concern us that the 
counterfeiters are increasingly anxious to get their products 
into this country.
    Mr. Bilirakis. How about the reimportation?
    Mr. Hubbard. On the reimportation via the mail, the growth 
of the Internet has been a big cause of a spurt there. There 
were always catalogs around that people could order drugs from 
Germany or wherever, but that was a very low-level activity. 
Now, with the growth of the World Wide Web, it is fairly easy 
to go buy these drugs, and we are seeing--we don't have any 
firm data, but it is probably an exponential increase in the 
last 4 or 5 years.
    Mr. Bilirakis. Mr. Hubbard, under present law, the FDA can 
prevent the reimportation of a drug which appears to be 
unapproved, adulterated, or misbranded. The Kingston 
legislation prohibits the FDA, as I understand it, from 
preventing importation if the drug appears to be approved.
    I wonder if you could address the ``appears to be 
approved,'' if you will. What does that mean, really? Can a 
drug appear to be approved and still be unsafe?
    Mr. Hubbard. Well, this is one of the drugs that we found 
in the mail. This appears to be approved. It says ``Viagra,'' 
and gives the name of the manufacturer. We have no idea where 
it was made.
    Mr. Bilirakis. What do you mean, it appears to be approved?
    Mr. Hubbard. It has the brand name of an approved drug, and 
it has the name of a manufacturer, and it has labeling that 
looks like the approved labeling. I have no idea whether this 
is a safe and effective drug or not, but it appears to be 
approved.
    Mr. Bilirakis. So by changing the current standard whereby 
under the legislation it would meet the ``appears to be 
approved'' standard, if you will----
    Mr. Hubbard. I believe that is correct, Mr. Chairman. I 
believe this drug, if it arrived under Mr. Kingston's bill, 
would in fact be allowed in because it appears to be approved.
    Mr. Bilirakis. You couldn't stop it?
    Mr. Hubbard. It appears to be approved. If that is what the 
standard would be, then we would not be able to stop it. I 
suppose if we had some--I believe the bill would allow--if we 
had evidence that a drug was unsafe, we could then stop it, but 
in most cases we would not know that.
    Mr. Bilirakis. Under the legislation, could you stop it if 
you had concrete evidence that----
    Mr. Hubbard. My understanding--and I would want to consult 
with counsel--but I believe if we had concrete evidence that it 
was not approved or was somehow unsafe, that would indeed allow 
us to say it is misbranded or otherwise illegal.
    Mr. Bilirakis. The FDA has analyzed a number of 
reimportation proposals and consistently told Congress that 
they would jeopardize public health. All of these proposals 
have contained various protections intended to safeguard the 
American consumer, and yet the FDA has said that they are all--
they do not do enough to ensure safety.
    Do you have any recommendations in terms of protections 
that might be necessary to allow reimportation to work?
    We have all acknowledged the high cost of drugs, and many 
here have already harped on that, and the rhetoric, the 
political rhetoric, and all that. We all acknowledge that it is 
the high cost of drugs that is resulting in this reimportation. 
Mr. Brown indicated reimportation is due to the system of high 
drug costs. I don't think anybody would disagree with that. But 
until or unless something is done toward that end, we are faced 
with reimportation.
    Do you have any suggestions on the part of the FDA, sir?
    Mr. Hubbard. We could give the Congress a list of things 
that might ameliorate the safety issues; things like assuring 
the pedigree of the product, testing the product, licensing the 
importer, limiting the people and places it can come into, and 
many other things.
    You could tick off a lot of things that would be expensive 
for the FDA or the taxpayer to do that would hopefully make 
things better, but I don't believe that anything that we have 
been able to think of could create a system that duplicates the 
current safe system.
    The current system is fairly closed. It is difficult for 
unsafe and ineffective drugs to get into the market in this 
country, so our fear is that anything that opens that up, even 
with some protections built in, would not be adequate for us to 
be able to say that the drugs are as safe as they are now.
    Mr. Bilirakis. Thank you, Mr. Hubbard.
    Mr. Brown.
    Mr. Brown. Thank you, Mr. Hubbard. If prices were lower in 
the United States, would there be as many prescription drugs 
smuggled in and toy trucks and fluffy bears from China, or 
whatever you held up? Would we see as much of that?
    Mr. Hubbard. I actually think we might still see a fair 
amount, because many of the drugs, they are so-called lifestyle 
drugs: Viagra for sexual potency and propecia for hair growth. 
There are certainly consumers and patients out there who would 
still be seeking drugs, we believe, because it would be the 
kind of situation where they would not want to consult with a 
physician, or they might think they are doing something not 
totally legal.
    But certainly for those who are seeking drugs because they 
cannot afford their current prescription, then that could be 
the case.
    Mr. Brown. So you had talked about drugs being smuggled in, 
and you mentioned three countries. You mentioned others, but 
three jumped out at me: Switzerland, Spain, and France.
    It is curious that drugs in those three countries, all 
three, particularly Switzerland and France, wealthy countries 
but countries where drug prices--and Tamoxifen is one--it is 
one-fifth or one-eighth the cost as it is in the United States.
    If we were to do some of the things that other countries 
did, compulsory licensing, bringing in competition into the 
marketplace, some sort of negotiations like Canada does with 
the drug companies, something direct like that, you would not--
you would see very few drugs that seniors now can't afford that 
you mentioned, you would see very few of those smuggled in from 
Switzerland and France and Spain, presumably. Correct?
    Mr. Hubbard. I would defer to your judgment as to whether 
those sorts of controls had that effect. I would note that 
these are not real drugs, they are counterfeit, so you would be 
buying a fake drug. You would be wasting your money. You would 
be getting a worse deal than you get by paying a high price in 
this country.
    Mr. Brown. I would submit that the number of counterfeit 
drugs is directly proportionate to the demand for them, and the 
demand for them is higher because prices are so high.
    Let me go a different direction. Has FDA looked closely at 
Canada's drug regulatory system?
    Mr. Hubbard. I talked to the Canadian FDA the week before 
last, at some length, and asked them a lot of questions about 
their system. We obviously know some things about their system, 
because they are a neighboring country, and sometimes the two 
FDAs collaborate on things. But they have their own separate 
system.
    They make two important points to us. One is that they have 
a law, just as we do, that exempts them from being concerned 
about the safety of a product for export. So just as a drug 
that can be brought in this country and sent to another country 
is not one that FDA looks at, they do the same thing.
    So if an importer from Canada brings a drug in strictly to 
export to the United States, the Canadian FDA could care less. 
That is not even under their jurisdiction.
    Mr. Brown. You would assume, if they imported it from the 
United States, it would be safe, though?
    Mr. Hubbard. One would hope so.
    Mr. Brown. And most of these drugs that my constituents 
bring back and that the lady, Mrs. Tubbs, that refused to sit 
at the table on the next panel, a consumer representative, a 
consumer herself, that the drugs she buys are from the United 
States, sold to Canada and at a much lower price.
    Is there evidence that the Canadian system is less rigorous 
than the U.S. system? Do you have any evidence of that?
    Mr. Hubbard. They did explain a concern that they didn't 
have as many inspectors as we did. They have about 90 to 100 
inspectors for a very large country.
    Mr. Brown. Well, for a very small country.
    Mr. Hubbard. A very large country in size, I think.
    Mr. Brown. Well, I don't think drugs are bought by acres; 
they are bought by human beings. I mean, we are talking--the 
number of people is a lot more important than, you know, the 
size of Siberia.
    Is the FDA--okay, this is through a couple of conversations 
you have had recently with----
    Mr. Hubbard. Right.
    Mr. Brown. Has the FDA looked at how Canadian provinces 
license their pharmacies?
    Mr. Hubbard. We have asked; it is similar to our system. 
The Canadian system is similar in that there is a Federal 
authority that oversees the safety and efficacy of drugs; and 
then the practice of medicine and the practice of pharmacy are 
regulated at the provincial level, which is analogous to the 
State level of the United States.
    Mr. Brown. Are the standards, in your view, more lax than 
those applying to U.S. pharmacies--to your knowledge, Canadian 
pharmacies?
    Mr. Hubbard. I couldn't qualitatively judge their 
standards. They appear to be analogous, at least in the way 
they are described. But I don't know the specific standards, I 
don't know the frequency of inspection, and I don't know the 
rigor of the regulatory authority.
    I can only describe what they say, which is similar to 
ours.
    Mr. Brown. Okay. So you don't know their standards. You 
don't have evidence that they might be lax, more lax, less lax, 
the same. You don't know about the--if there is evidence, you 
don't have evidence that they are less rigorous than the U.S. 
regulatory system.
    You have had a couple of conversations--almost the way you 
relate them, they sound kind of informal--fairly recently. Yet 
you make decisions to hold drugs at the border that American 
seniors have wanted to buy. You are making decisions where some 
of those seniors may not get their prescriptions at all because 
they can't afford them. So you have made the choice, it sounds 
like, at the FDA, based on no real evidence except a few 
conversations that you are admitting, you are saying, don't 
tell you a lot of information--you are making decisions that 
really do deny access to prescriptions, that a lot of American 
seniors and others want, based on no real evidence.
    I mean, shouldn't the FDA be looking and really making and 
learning more about this and understanding what this is about, 
so you can make a decision on whether or not those drugs should 
be held at the border, whether we should be allowed to have--
they should have access to them.
    Mr. Hubbard. Well, if I may respond, the law says they 
should not come in, none of them. We should be letting none of 
these products in.
    But we tend to prioritize because of resource limitations 
and have been focusing on larger, so-called ``commercial 
shipments.'' So, you know, Canadian pharmacies that send in 
hundreds of prescriptions, large, large bulk packages, Customs 
sees those. They call us, and we say, don't let them in.
    The individual little packages that citizens mail tend not 
to be caught. It is not that we wouldn't like to turn them 
back, but we can't. We have to, as you know, go through a 
notice system to turn those back, so they do tend to come in.
    Mr. Norwood. Thank you very much, Mr. Hubbard.
    Mr. Brown. I have one more question.
    Mr. Norwood. The chairman is next. You are considerably 
over, Mr. Brown.
    Mr. Chairman, you are now recognized for whatever time you 
would like.
    Chairman Tauzin. Thank you, Mr. Chairman.
    Let me ask you a couple of questions directly from your 
testimony, sir. You pointed out in the testimony that the FDA 
does not have the ability to reach into another country, even 
Canada, to protect U.S. citizens from drugs that may have been 
sent to them that are harmful or dangerous, adulterated, or 
possibly just they were cheated because they were noneffective 
drugs; is that correct?
    Mr. Hubbard. That is correct, Mr. Chairman.
    Chairman Tauzin. You can take action here in the United 
States, though, against people who do that to our citizens, 
right?
    Mr. Hubbard. That is correct, Mr. Chairman.
    Chairman Tauzin. In the United States you don't authorize--
as I understand it, the FDA has never authorized a drug until 
it is properly tested, until you know it is safe and effective; 
is that right?
    Mr. Hubbard. That is correct, Mr. Chairman.
    Chairman Tauzin. If we passed a law that said FDA from now 
on could authorize drugs for American seniors that simply 
appear to be safe and effective, would that destroy the gold 
standard?
    Mr. Hubbard. Well, it would certainly undermine it very 
substantially. I suppose the word ``destroy'' would be a good 
word for that.
    Chairman Tauzin. Yeah. I mean, if I were a drug 
manufacturer and I brought you a drug and I said, you know, 
look at it, does it appear to be safe and effective; and that 
is all you had to do--you didn't have to go through protocols 
and test it thoroughly to make sure it didn't have side 
effects; that it was the right potency; it was properly 
designed so that it didn't have damaging effects on citizens; 
that it really did what it was intended to and did it well; if 
you didn't go through that rigorous testing procedure, if all 
you were required to do was say, it appears to be safe and 
effective, that would destroy the safest drug system this world 
has ever seen, would it not?
    Mr. Hubbard. I think you make a strong case for that, Mr. 
Chairman.
    Chairman Tauzin. I am certain it would.
    In your testimony you do talk about Canada. You give us 
some pretty good information. You tell us FDA has noticed a 
proliferation of Web sites that offer drugs purportedly from 
Canada directly to U.S. customers; is that right?
    Mr. Hubbard. Yes, Mr. Chairman.
    Chairman Tauzin. You make it clear that those Web sites are 
illegal, that ordering shops like that today take orders from 
consumers and probably violate the laws against practicing 
pharmacy without a license; is that right?
    Mr. Hubbard. Yes, Mr. Chairman.
    Chairman Tauzin. Are you shutting down those Web sites?
    Mr. Hubbard. Well, no. We have no authority to. We do write 
them and ask them to cease doing this.
    Chairman Tauzin. You don't have authority to shut them down 
even?
    Mr. Hubbard. And only a few have even bothered to write us 
back.
    Chairman Tauzin. Yeah, but I mean, they don't even get back 
in touch with you; We have got a real problem.
    You also point out that in Canada, the Canadian code of 
ethics requires physicians to do a history, physical exam, and 
discuss the risk and benefits of medication with the patient; 
is that correct?
    Mr. Hubbard. I understand there is such a----
    Chairman Tauzin. And yet these shops are getting Canadian 
physicians to simply rewrite the prescriptions in order to 
comply with Canadian law; is that right?
    Mr. Hubbard. Yes.
    Chairman Tauzin. Without ever seeing a patient, without 
ever doing a history, without ever doing an examination to make 
sure this patient can take the drugs in the quantity or the way 
in which they are being presented to them from these shops; is 
that right?
    Mr. Hubbard. That appears to be the fact pattern.
    Chairman Tauzin. Is that not a risk to American seniors and 
people taking drugs in this country?
    Mr. Hubbard. And that is true not only with Canada, but 
with all Internet sales.
    Chairman Tauzin. I would think it would be.
    I asked some questions when I gave you the opening 
statement, and I am going to ask you perhaps to do something 
you feel uncomfortable doing, but I am going to ask you to do 
it anyhow.
    There is an awful lot of pressure on the Congress just to 
say, go ahead, let people buy drugs from anywhere they want to 
buy them, because drugs do cost an awful lot; and until drugs 
are faced with real competition, with generic varieties, you 
know, a patent protects drugs, and they are very expensive when 
they have to be tested. The rigorous testing standards we have 
in this country are pretty expensive to go through, all that 
testing and research and development, and they end up costing 
us a lot.
    But that is part of our gold standard. We need to remember 
that.
    But if this Congress were pressured to pass a bill that 
allowed importation, we could do several things. We could say, 
look, we are not worried about safety. We are not worried about 
whether physicians really see patients or whether drugs just 
appear to be safe. We are not worried about it anymore. It is 
okay. Send it in, if it appears to be safe, doctors, go ahead 
and sign prescriptions even though you don't know the patients, 
never saw them, never did a history, don't know whether they 
should be taking these drugs, go ahead and send it on in.
    We could take that view. We are not worried about safety; 
we are just worried about costs, so send it on in. But if we 
took that view, and we were worried about making sure that 
people who bought drugs from another country were as protected 
as they are when they buy drugs under our gold standard here in 
America, from cheaters and people that might hurt them with 
adulterated and unsafe drugs, what reasonable, cost-effective 
measures would you recommend to us to ensure to the best 
practical extent, recognizing that we could not have as good a 
gold standard on imported drugs as we have on protecting 
citizens with drugs manufactured in this country and sold in 
this country, what would that list be?
    Now, I am not asking for it today. But we are going to be 
back here in September having more hearings. We are going to be 
asked to report something to the House so the House can look at 
a bill. And I want to do the best job I can, and I know Mr. 
Bilirakis wants to do the best job he can.
    And if we have to include protections, I really want you to 
work hard at this and send us your best recommendations on what 
the most cost-effective, most reasonable protections would be 
and still tell us what the--at that point, even what risk we 
have to accept, because if we in Congress really want to do 
this, we ought to know the risk we are taking not just for 
ourselves, but for the folks who sent us up here to try to make 
sure we had a good, safe drug system.
    One final question, Mr. Chairman, and I will yield.
    We just got through passing a bioterrorism bill in the face 
of this war against terrorism we are engaged in. We were 
appalled to know how little we inspect food and drugs at the 
border. And I have read your importation policy, where you do 
allow people to come in with some drugs under certain 
circumstances.
    And I read about your complaints, about your inability to 
do a real good job because of mail orders and inspections at 
the border and how weak that can be. We just went through an 
effort of trying to beef that up, because we were deeply 
concerned about people sending things in, like guys who mail 
anthrax letters to people around this city, deeply concerned 
about them using an importation policy we might pass to 
suddenly begin hurting citizens of this country by sending in 
drugs that may be laced with products like that that would harm 
them.
    Can you give us any assurance that after having passed this 
bioterrorism bill, if we pass a drug importation bill, we will 
not have complicated the efforts of those at the border whom we 
are trying to energize into protecting Americans against people 
who intentionally would adulterate drugs not just to make us 
sick, but to kill us.
    Mr. Hubbard. It would certainly undermine the effort that 
Congress just passed in instructing us to be more careful at 
the border, because it would have more of these products coming 
in, more likely to have problems. And then we would be 
diverting resources, to look at these away, from sort of the 
terrorist thing that Congress ordered us to do; and the whole 
system would presumably get weaker.
    Chairman Tauzin. Thank you, Mr. Chairman.
    Mr. Norwood [presiding]. Thank you, Mr. Chairman.
    Mr. Stupak, you are now recognized for 5 minutes.
    Mr. Stupak. Thank you, Mr. Chairman. And let me thank Mr. 
Pallone. I have a 3 hearing that I have to get up to, and he 
let me go before him; so I appreciate his willingness to do 
that.
    Mr. Hubbard, you know, the chairman talked about the gold 
standard our FDA has, and all that, and what reasonable 
protections can we have and what is the risk; and I thought 
those were good questions. But these are questions we asked you 
back in June of 2001, and I think we are still waiting for some 
answers. If people really knew that the drugs are, flowing into 
this country, whether it is Carson City--that is a Los Angeles 
mail facility--or the one right here in Washington, DC, you 
would have millions and millions of this stuff coming in every 
year.
    And we had a hearing last year where people have died 
because they had taken drugs that--they thought it was 
something that they needed, and in fact, it was something that 
they did not need, and actually it was counterproductive to 
their health.
    So I guess my question is that it has been more than a year 
ago when we had this hearing on the issue of reimportation--it 
was June of last year--and you testified that because these 
drugs represent a serious threat to public health that the FDA 
was recommending to the Secretary of HHS that FDA stop allowing 
the importation of such drugs through the mail. Is that 
correct?
    Mr. Hubbard. That is correct.
    Mr. Stupak. So what have you done on that to make sure that 
we stop this importation of drugs through the mail?
    Mr. Hubbard. Well, we have met with HHS Secretary Tommy 
Thompson and gained his understanding of the issue and, I 
think, his concurrence that we have a problem and it needs to 
be addressed along the lines of what we recommended. And I 
believe Secretary Thompson discussed that with this committee 
at his March 13 hearing.
    And so we stand by that recommendation and believe that we 
should work with the Congress to develop legislation that would 
indeed give FDA the ability to screen these drugs and turn them 
back.
    Mr. Stupak. All right. Mr. Hubbard you have met. You made 
the Secretary understand. You recognize there is a problem.
    But my question is, what have you done? It has been 13 
months. What have you done?
    Mr. Hubbard. Well, I believe--I understand we have given 
some draft language to the staff, but there has not been a 
formal administration position on that coming forward.
    But I think we still stand by our position, and I think the 
Secretary still stands by what he said in March.
    Mr. Stupak. Well, it sounds like--if you are standing by 
your position, it sounds like your position is nothing because 
nothing has been done in over 13 months. And you promised us 
last time that there would be legislative language.
    We haven't seen anything, and the frustration we are seeing 
up here, whether it is a little teddy bear or whatever they are 
coming in through--it is really obscene, if you go down to the 
mail house down here and see this stuff coming in here.
    Mr. Hubbard. Well, as I said, we will be very happy to sit 
down with the committee right away and----
    Mr. Stupak. Can you tell us when?
    Mr. Hubbard. Tomorrow. And present language and work with 
you to get it enacted.
    Mr. Stupak. You will have language ready tomorrow?
    Mr. Hubbard. Absolutely.
    Mr. Stupak. Why don't we have any formal language now 
signed off by the Secretary or else the acting Commissioner?
    Mr. Hubbard. Well, I think the process is just a cumbersome 
one.
    I believe he has concurred, as he said on March 13, but he 
is going to have to go through a larger administration process, 
and it is a slow cumbersome process.
    Mr. Stupak. Slow. Okay. It really is slow and cumbersome. I 
mean, 13 months. You know, this stuff that comes in here 
through the mail, there are five requirements that have to be 
on that package before it can be accepted in the United States 
through the Postal Service, isn't it?
    Five requirements? That is what you testified to 13 months 
ago. Certain requirements on the package had to have the 
prescription--the doctors script on it, return address, 
forwarding address, a number of things; had to indicate what it 
was, what the drug was--all that had to be on the package, 
right?
    Mr. Hubbard. Well, no. Actually none of these drugs should 
be coming in. There is no requirement to let them in, because 
they are all illegal.
    Mr. Stupak. Right. So if they are coming in, they don't 
meet the requirements, they are all illegal, why doesn't the 
FDA say, Postal Service, turn them around?
    Mr. Hubbard. Well, again, that gets back to the problem. 
Under the current law, the Postal Service and Customs Service 
says to FDA, give us the authority to turn them around. And for 
us to do that, we have to have the authority. But our law was 
written to----
    Mr. Stupak. And they have been asking you now for well over 
13 months, correct?
    Mr. Hubbard. And they are correct to ask. And our law says, 
we have to first send a letter to the intended recipient, give 
them notice of an opportunity for a hearing before the FDA to 
explain whether the drug is legal or not; and that is what we 
would like to dispense with is that notice and opportunity for 
a hearing.
    Mr. Stupak. Why won't the FDA just say, Postal Service, you 
have certain requirements a package has to meet before it comes 
into this country; if it doesn't meet that requirement, send it 
back?
    Mr. Hubbard. I understand. We do not have the authority to 
ask them to do that.
    Mr. Stupak. Why don't you have that authority? Did you ever 
ask for that authority? Have you ever come to Congress and 
asked for the authority?
    This is the same question I asked you 13 months ago.
    Mr. Hubbard. That is what we would like to work with the 
committee and draft the language on.
    Mr. Stupak. It is going take you 13 more months to draft 
the language to ask this committee to give you the authority to 
tell the Postal Service to send it back because it hasn't met 
the requirements of the U.S. Postal Service and it could be 
illegal drugs.
    I don't think it should take another 13 months. That would 
be 26 months and, you know, our patience up here isn't probably 
going to wait that long.
    Mr. Hubbard. I understand. As I said, Mr. Stupak, we will 
be glad to sit with you tomorrow on that, if that would be 
helpful, on such language.
    Mr. Stupak. Well, I think maybe at least Chris Knauer on 
the minority staff will probably help you with that language, 
since it has taken 13 months to draft.
    I am sure we could get that to you, right, Chris? Thank 
you.
    Mr. Norwood. Thank you very much, Mr. Stupak. And I believe 
it is my turn for questioning, but let me get the chairman back 
in the chair.
    Thank you very much, Mr. Chairman. And I did think of 
staying in that chair where I could take all the time I needed, 
but believe it or not I think I am going to be fairly brief.
    Mr. Hubbard, how many employees at the FDA?
    Mr. Hubbard. I believe there are around 9,500.
    Mr. Norwood. How many of them are devoted in their daily 
work to stopping counterfeit prescription drugs coming into 
this country?
    Mr. Hubbard. Well, we have an Office of Criminal 
Investigations, and they spend about 65 percent of their time 
on drug safety issues, a substantial part of that on 
counterfeit drugs, so a rough estimate would be 40 or 50 people 
per year.
    Mr. Norwood. Forty or 50 people. Is the counterfeit drug 
problem larger than that?
    Mr. Hubbard. I certainly think, if you asked them if they 
could use more resources to catch more counterfeiters and track 
down more, the answer would be yes.
    Mr. Norwood. How many would it take to stop the business of 
counterfeit drugs, which I think is horrendous, but coming into 
this country. How many folks would it take?
    Mr. Hubbard. Well, that is sort of like asking how many it 
would take to stop narcotic drugs. We don't know. But it would 
certainly be more than we have.
    Mr. Norwood. Give me a little better answer.
    Mr. Hubbard. I am sorry, Mr. Norwood. I think we will just 
have to get that for the record, if I may. I would be hard-
pressed for a guess. Perhaps one of my colleagues would make a 
guess.
    Mr. Taylor. I mean, part of the problem in answering that 
question is that we are still trying to quantify, quite 
frankly, the size of the problem. There are wide-ranging----
    Mr. Bilirakis. The mike, please.
    Mr. Norwood. Oky. Look, because of time limitations you 
don't know the answer, and I don't fault you for that. We do 
know that they have to be at every airline terminal in the 
country and every port in the country, and et cetera, et 
cetera. What we do know is that to stop counterfeit drugs it 
would take a tremendous increase in personnel to do so.
    Mr. Taylor. That is correct.
    Mr. Norwood. Now, that is--one part of our problem is not 
the counterfeit drugs that are coming in. The other part of our 
problem is perhaps legitimate drugs that are being sold through 
the Web sites. They may actually not be counterfeit, or I guess 
they would be counterfeit, but they may actually work is what I 
am saying.
    Mr. Hubbard. That is correct, Mr. Norwood.
    Mr. Norwood. And that is illegal to do that.
    Mr. Hubbard. Absolutely.
    Mr. Norwood. And that would take how many people to bring 
that to an end if it were humanly possible?
    Mr. Hubbard. Well, that is an even tougher question because 
not only would we have to have the resources but we would have 
to have more authority. Many of these Web sites are in other 
countries and we can't reach them anyway.
    Mr. Norwood. Well let's presume the authorities--I am 
trying to--we have a bill before us that says besides 
counterfeit drugs, besides the Web site, let's make it legal 
for the importation of drugs from around the world to come into 
America, and I am trying to--and let's say Congress says, yeah, 
we need to do this. Let's say we pass this bill, but we add a 
little amendment to it saying we will agree to this as long as 
the FDA can assure us that these drugs are safe and effective. 
Now, if we don't add the ``safe and effective,'' what we are 
basically doing is telling all of our constituents, ``Good 
luck, do the best you can. We hope to hell it doesn't kill 
you.''
    Mr. Hubbard. That is right, Mr. Norwood.
    Mr. Norwood. And so I can't really imagine a reimportation 
bill that doesn't include some ``safe and effective.'' So if it 
does that now, how many more people do we have to hire at the 
FDA to make sure now that reimportation of drugs coming from 
everywhere in the globe, which this is a pretty neat market, 
you know, folks are going to let it rip. How big will this 
agency have to be to--for us to assure our constituents that 
when they go buy a prescription drug, it will be exactly what 
they think they are buying and what their doctor ordered. How 
big must you become?
    Mr. Hubbard. Again, we will have to get back to you. But we 
will do that if you like, Mr. Norwood.
    Mr. Norwood. It might be cheaper for us to just give 
everybody money to buy their drugs.
    Mr. Taylor. I mean, there would obviously still need to be 
an increase in our resources because the very nature or the 
very--probably the amount of imports would go up, and so there 
would have to be a corresponding need once again to ensure that 
the products that are coming over are safe and effective, so 
there will be a corresponding need for additional resources on 
the borders as well as probably a corresponding need for 
resources domestically. In those instances where we find out 
that a product that was claimed to be safe and effective is 
not, we will need to figure out domestically where that 
products has gone. We will need to do a recall. We need to 
ensure that if that product is in the domestic marketplace that 
we can get it back. So the answer is that indeed even in the 
scenario that you just painted, there would still be a 
significant need for increased resources to ensure that the----
    Mr. Norwood. Well, some of us have visited Dulles and we 
have seen some of the stuff that is coming in. And bless your 
heart, you can't even stop what is coming in now, much less us 
passing a law making it legal for it to come in from everywhere 
in the globe.
    Mr. Chairman, I submit that we are going to have to do one 
of two things. If we want to reimport drugs, we are going to 
have to be prepared to either make sure that the FDA can assure 
us that they are safe, or we are going to have to tell our 
constituents, oky. If the only thing here that matters is what 
they cost, you are on your own, and when you take it you can do 
a little prayer and hope first that it works, that it is 
efficient, or is it efficient enough; second, hopefully it is 
actually anything; and third, hope it doesn't kill you.
    I mean, we are all concerned with the cost. But a fast, 
quick answer like this is very, very dangerous. And many of the 
team who want to solve the cost problem are good friends of 
mine and they are good people, but we need to be very concerned 
on the safety part of this, and that is what has held me up on 
this all along.
    Probably that visit, Mr. Chairman, to Dulles Airport did as 
much to get my attention as anything I know. I mean, I would 
like to let's start, and you assure me, or Congress help you 
make sure we just stop the counterfeit stuff. Let's just start 
with that.
    Time is up. Thank you, Mr. Chairman.
    Mr. Bilirakis. Mr. Pallone, to inquire.
    Mr. Pallone. Thank you, Mr. Chairman. You know, I have 
listened to you, Mr. Hubbard, and I understand where--you know, 
your concern. But I guess you know you started off by saying 
that you can't talk about price, and it seems to me that that 
is the whole problem here. I am sort of following up on what 
Mr. Norwood said. I mean we have desperate people. We have 
people who are going to Canada, for example, because they don't 
have--they can't afford to buy the drugs.
    And so for me, price is the issue. And I mean, the bottom 
line is that these people that are going on these buses to 
Canada are basically--I am sure that to some extent they may 
think in their minds that there is some risk, because they are 
going, you know, across the border, but they don't really have 
a choice. It is a question of their--you know, they are either 
going to buy the drugs and they are going to use it and hope 
that it works--and most of the time it probably does--or they 
are going to have no drugs and die or have other consequences 
from it.
    So I guess I am very much in favor of what Mr. Kingston and 
Mr. Gutknecht are doing, because I think they--and I realize 
there may be some risk. But it is probably worth the risk, and 
that is what I wanted to discuss with you. In other words, 
let's assume, you know, I am a senior with a life-threatening 
disease that requires certain prescription drugs for treatment. 
You know, I can't afford to buy in the United States and so, 
you know, I go over to Canada. And maybe there is a slight risk 
but. If you were such a person and you were taking--had the 
option of taking a bus over to some pharmacy in Canada as 
opposed to not getting the prescription drug that you need to 
be alive, what would you do?
    Mr. Hubbard. Well, let me first apologize to you and Mr. 
Pallone and Mr. Kingston and Mr. Gutknecht, that we understand 
your motivation about the price issue. What we are saying is 
that we can't make those value judgments.
    Mr. Pallone. Oky. Well, if you can't make it, let me move 
on.
    Mr. Hubbard. I mean, it is just not what we do.
    Mr. Pallone. I understand that. But this is what it is all 
about. I mean, I don't see bodies piling up in the streets from 
taking drugs from Mexico or these bus trips to Canada. You 
know, millions of people are using prescription drugs that come 
from Canada, Mexico, the Internet. Wouldn't we begin to see 
thousands and thousands of adverse effects, particularly given 
the volumes of drugs now entering from these sources, if there 
was a serious risk and there was a widespread problem? It seems 
to me the problem is not that severe, given your alternative.
    Answer it that way. Why aren't we seeing all these adverse 
effects if it is such a huge problem?
    Mr. Hubbard. That is a good question. I will answer it in 
two ways:
    First, our concern is that if you institutionalize this 
process and open up the system that way, that the bad guys will 
have a better entree to the U.S. market and you could increase 
risk that way.
    The other possibility is--and we have seen some evidence of 
this--people that buy these drugs this way when they have a 
problem tend not to tell anyone, particularly those who buy 
drugs over the Internet. We have actually gone around to some 
of the folks who have bought these, because we have their 
addresses on these packages. And while we don't threaten any 
sort of enforcement action, we ask them why are you doing this? 
And they all say, well, I knew I shouldn't be doing this, and 
then they--the feeling is if they are injured by it, they won't 
tell anyone.
    Mr. Pallone. Oky, but let me ask you this. A lot of these 
bus trips go specifically to a pharmacy. You know, they set up 
something to go to Pharmacy X outside of Montreal or whatever. 
I mean, if you know you are going to a particular pharmacy, 
which is what is usually the case, is there any risk at all 
really of doing that. Going from Maine to, you know, Sherbrooke 
at the Quebec--you know, I love Quebec pharmacy--what is the 
danger?
    Mr. Hubbard. I have said that if I were in Canada as a 
tourist and fell ill and went to a Canadian doctor and got a 
prescription and went to a Canadian pharmacist and got it 
filled, I would have a relatively high confidence level that I 
should take that drug, especially if I had a serious illness. 
But the FDA still can't assure any safety of that product. And 
then, again, once you open the system up----
    Mr. Pallone. No, I understand that. But you know, maybe 
then the answer is to tailor the bill so it is more specific as 
to where you are going and how you are going there. But I mean, 
these guys, my colleagues on the other side, are making an 
honest effort to try to come up with something that is 
necessary, because frankly the Republican leadership won't pass 
a bill that addresses price. So I mean, it seems to me that 
rather than--and I am not trying to be difficult with you. I 
mean, rather than just holding on and saying we have got these 
counterfeit products, let's try to figure out a way that they 
can do the reimportation in a relatively safe way, because 
frankly it is not much of a risk if you know where you are 
going and it is a particular pharmacy on the other side of the 
border. That is what most of the cases are now, at least with 
the bus trips.
    And maybe you have some suggestions about how to change the 
bill to provide that kind of protection. If you know where you 
are going and you are going to a specific place, I mean, give 
us some ideas to help us, rather than just say we have got all 
these counterfeit things and we have a huge problem. If you can 
either today or in writing, I don't know.
    Mr. Hubbard. Well, as I said to Mr. Bilirakis, we will be 
glad to provide whatever help we can to the community. But in 
the end, we are not going to be able to say that the drugs will 
be safe as they are now.
    Mr. Pallone. I know it is not foolproof, but nothing is. 
That is not what we are doing.
    Mr. Bilirakis. Right. And Mr. Stupak went into that 
particular area, that promises were made, what, 13 months ago 
or whatever it was, and, you know, we are opening up the door 
to ask for your help in trying to do what is right here from 
the standpoint of safety, and you have got to do your share, 
though, and certainly you are.
    Mr. Hubbard. Well, we will help any way we can, Mr. 
Chairman and Mr. Pallone.
    Mr. Bilirakis. Mr. Pitts, to inquire.
    Mr. Pitts. Thank you Mr. Chairman.
    Commissioner Hubbard, plasma therapies are life-saving 
medicines used to treat serious diseases such as bleeding 
disorders, immune deficiencies, alpha one burns, and shock. The 
safety and advocacy of these important therapies depend on 
assuring an appropriate chain of custody and proper storage and 
handling conditions, unlike traditional pharmaceuticals. These 
therapies must be treated carefully and maintained in tightly 
controlled environmental conditions.
    Does reimportation, either personal reimportation or 
commercial reimportation, present any special threats to the 
safety and efficacy of these products? Put another way, is 
there any way to guarantee to the patients who rely on these 
medicines for their lives that plasma therapies imported from 
foreign countries are safe and effective?
    Mr. Hubbard. Without question, Mr. Pitts, some products are 
much more susceptible to risk depending on how they are 
handled, the length that they have moved around, the places 
they have been, the temperature extremes they have been under, 
the ways they have been stored, and many many other factors. 
And so the type of property that you are talking about would be 
exceptionally vulnerable to that. And so absolutely, that sort 
of chain of custody would be a critical issue for a product 
like that, and there are many other drugs for which that same 
issue would exist.
    Mr. Pitts. I understand the FDA is presently considering 
requiring FDA-approved drugs to be labeled with bar codes. If 
reimportation were allowed, could this technology be used to 
prevent counterfeit drugs from entering the country?
    Mr. Hubbard. It might be a technology that could be 
helpful. We are having a public meeting tomorrow on bar coding. 
It is some years away from effectuation, but clearly there 
would be opportunities for greater inventory control. But 
having said that, if you can counterfeit a label, you can 
counterfeit a bar code.
    Mr. Pitts. Is it possible for an Internet site to act as an 
ordering service and still comply with U.S. law; that is, is 
there any way a service can call a Canadian pharmacy to have 
scrips filled for U.S. patients?
    Mr. Hubbard. Well, theoretically a domestic site that only 
dealt within the United States could serve as an intermediary 
like that to link a patient with the physician and the 
pharmacy. But you would still have the State requirements of 
valid prescription and a valid doctor-patient relationship and 
then, of course, a licensed pharmacy, and these Internet sites 
tend not to have that in many cases.
    Mr. Pitts. Can you definitely state that allowing for 
reimportation will increase the likelihood of counterfeit drugs 
making their way into the country? Would limiting reimportation 
to foreign pharmacies which, for instance, register with FDA, 
address these concerns? And how would you expect those drugs to 
be relabeled?
    Mr. Hubbard. Well, registration might be helpful, and you 
know who is there. But you don't really know what is behind 
that registration. The ultimate goal of any system is to assure 
that the registrant and/or the manufacturer is properly 
manufacturing and storing and holding a product, and 
registration alone would not get you that. It would only get 
you some information about who the person is. Then, of course, 
lying about a registration would be fairly easy for a foreign 
firm.
    Mr. Pitts. I understand Europe allows for parallel trade of 
pharmaceuticals wherein drugs freely proceed from country to 
country. Are you aware of whether this activity has increased 
counterfeiting in Europe?
    Mr. Hubbard. I don't know whether that particular activity 
has. We know that Europe is--that counterfeits are seen in 
Europe with some frequency.
    Mr. Pitts. Thank you, Mr. Chairman.
    Mr. Bilirakis. Mr. Green, to inquire.
    Mr. Green. Thank you, Mr. Chairman. And Mr. Hubbard, again, 
after you heard all of our opening statements--how could you 
not, they were so long. But my concern is our southern border 
and the residents, because we don't go to Canada. We do go to 
Mexico. And can you assure us that for an individual has a 
life-threatening disease and required certain pharmaceuticals 
for that treatment, probability-wise is it a greater risk that 
they can't afford their pharmaceuticals here because of the 
high cost, would they be better going across the border and 
being able to purchase whatever that pharmaceutical may be 
called there? Oftentimes I am not familiar with the quality of 
what may be in all the pharmacies in Mexico, and I have been to 
a number of them, in fact, taking physicians with me, and said, 
okay, look at the array that they have. If you were to evaluate 
that risk, would it be better not to take the medication for a 
life-threatening disease here if you can't afford it or to go 
to Mexico?
    Mr. Hubbard. Well, I think Mr. Pallone asked a similar 
question. So if you go to Mexico and get the real thing and it 
is cheaper, then, that is a good thing. If you go to Mexico and 
get a fake drug and it doesn't do anything, whatever you spend 
is a bad deal not only for your pocketbook but for your health. 
But ultimately Congress has to decide what level of safety it 
wants for drugs. FDA can only say we do safety, and we are 
telling you that sort of thing is not safe.
    Mr. Green. Well--and I have some other questions. But I 
know we have--we import lots of foodstuffs, and I know FDA--and 
I don't know if this has been touched on--but we bring in lots 
of cattle, lots of vegetables, lots of everything from Latin 
America, for example. Does the FDA inspect or have requirements 
on those various ranches or farms that ship into the United 
States?
    Mr. Hubbard. Well, for meat, the Department of Agriculture 
has very strict requirements that the meat be slaughtered in 
the other country under strict U.S. standards and then----
    Mr. Green. And they inspect----
    Mr. Hubbard. And then often reinspect. They are inspected 
in the foreign country and then they reinspect when the product 
arrives at the border. Now, for the non-meat products, the 
fruits and vegetables, FDA has certain standards. For instance, 
you can't use an illegal pesticide. And we do random sampling 
to determine that, and if we find a particular grower, importer 
from a foreign country is using an illegal pesticide, we will 
prevent them from bringing that product in in the future.
    Mr. Green. What if there was a pharmaceutical company in 
Renoso or Matamoros? Could the FDA, if we gave the authority 
and the funding, inspect that particular pharmaceutical 
specifically for reimportation, not unlike maybe what the 
Department of Ag does for meat?
    Mr. Hubbard. Well, if you gave us that authority and the 
Mexican Government gave us that authority, sure. But then, of 
course, we would want to be inspecting against an approval, so 
we would want it to be an FDA-approved drug that we would go 
there to inspect.
    Mr. Green. Oh, sure. It would be something that would be 
approved in the United States because I know, in fact, our next 
panel has a witness from Texas who talks about you can go to 
Mexico and buy lots of things that you can't buy off the shelf 
or you can't even get in the United States. But I am talking 
about seniors who need the medications and could utilize that 
and, again, with some cost savings; we hope, in fact, a great 
deal.
    Let me talk about the domestic actions that the FDA has 
done. In the Carson City Pilot, you found a high number of 
illegal or unsafe medications. How did this compare to domestic 
mail orders, because it seems like today so many of our 
pharmaceutical plans, you know, we get all our pharmaceuticals 
or so much of our pharmaceuticals by mail. And how does the FDA 
regulate domestic mail order services, and why can't these 
mechanisms work with selected international mail order 
services?
    Mr. Hubbard. I will ask Mr. Horowitz to answer that if he 
has an answer.
    Mr. Horowitz. I am not aware of any data that compares the 
domestic mail order operations to the international operations. 
We did see a pretty high number of antibiotics that were coming 
into the country through the Carson mail facility. We saw a 
number of hormone products and potent steroid products. But I 
am not aware of the comparison to how domestic mail order drugs 
would relate.
    Mr. Green. Okay. In your testimony--and I share the concern 
about the problems guaranteeing that drugs are packaged and 
stored correctly. What would the FDA need to guarantee this, 
and how do we guarantee this for domestic packages? Again, I 
think I receive my pharmaceuticals by mail because of our--how 
do we do that on domestic, and how could we set up a procedure 
to do it internationally?
    Mr. Hubbard. Well, we certainly have pervasive authority 
over domestic manufacture of drugs. The drug must be approved 
after adequate testing, and then it must be packaged properly, 
manufactured properly, have proper labeling and other things. 
And we inspect those facilities that do that. And then at the 
dispensing level, the States license pharmacies who actually 
dispense the drug, so you have another layer of regulation at 
the State level to ensure the drug is properly held and 
dispensed by a licensed pharmacist, for to do similar things in 
a foreign country would require a very substantial reach of 
FDA's regulatory authority across the foreign border, which 
is--would be an unusual thing, I believe.
    Mr. Taylor. Just to follow up on that point, I mean the key 
here is domestically we obviously have a jurisdictional 
strength that we don't possess in terms of dealing with foreign 
manufacturers or foreign purveyors of these products. I mean, 
domestically we can go into the district court and we can take 
certain actions. We can avail ourselves of certain 
investigatory tools that allow us to follow up on those 
instances where we realize that a product is crossing 
interstate borders domestically.
    Those same tools don't apply in the context, for example, 
of a foreign Web site, which is often why we need to work with 
the foreign government and solicit their help and solicit their 
assistance in dealing with the site, because our jurisdictional 
reach does not extend that far.
    Mr. Green. Mr. Chairman, I know my time is up but sometime 
along the way, how do you regulate foreign Internet which is 
concerned? Because I have constituents who drive to Mexico. No 
telling how many we have who buy their pharmaceuticals through 
the Internet, and that might be something that the committee--
--
    Mr. Bilirakis. Do you have a brief answer to that? We are 
well over time, but I think it is worthwhile.
    Mr. Hubbard. We don't regulate Internet sales. We would 
like to. And the way we would deal with Internet sales is to 
try to stop these mail shipments, because people order over the 
Internet but it arrives by mail, and so our proposal to you is 
to help us find legislation to stop the mail importation which 
deals with the Internet.
    Mr. Taylor. Right. But in those instances where we do 
suspect that a product is coming from a certain country, what 
we will often do is we will try and stop the product at the 
border but, in addition, will notify the foreign government and 
seek their assistance in dealing with the product within their 
borders. And we have had some good cooperation with several 
countries including Germany, England, The Netherlands and some 
other countries.
    Mr. Green. Well, Mr. Chairman, just briefly, it seems like 
you have become postal inspectors, instead of FDA making sure 
the pharmaceutical is correct, that it is legal, and that is 
the concern.
    Mr. Bilirakis. Certainly. That is a good point.
    Mr. Green. Thank you.
    Mr. Bilirakis. Mr. Buyer, to inquire.
    Mr. Buyer. Thank you. I would just like to pick up a little 
bit from where Mr. Green left off. Which countries are the 
largest importer of the counterfeit drugs? Do you know?
    Mr. Taylor. No, I don't think I can answer that question.
    Mr. Buyer. Would you answer that for the record, then, 
please?
    Mr. Taylor. Sure. Yes, indeed we will get it.
    Mr. Buyer. All right. With regard to our pharmacists, how 
would a pharmacist know whether the drug that he is dispensing 
to the customer is safe, whether it is FDA--or if that 
pharmacist somehow is going to get a reimported drug? How does 
he know?
    Mr. Hubbard. He wouldn't. Earlier we passed around a sample 
of a counterfeit and real drug that no patient, physician, or 
pharmacist could tell by visual examination that one was 
counterfeit and one was the real thing. In fact, companies have 
told us that even when they see the counterfeits it takes 
substantial analysis by the company to determine the 
counterfeit from the real one. And these are the people that 
actually make the drug. They ought to know that--if they don't 
know what their drug is, no one would know.
    Mr. Buyer. I am challenged on this issue even from a 
philosophical standpoint. Having defended the quasi-private 
health system that we have in our society--quasi, because we 
have got Medicaid, Medicare, VA and the military health 
delivery system, and then we have got the uninsured that we end 
up dealing with through our Medicaid and other types of State 
systems, and the rest we do private pay, and then we use 
private pay to push the bounds of science. And then the same 
advocates, some of my own colleagues within the advocates of 
the private pay system are going, well, I tell you what; why 
don't you run off to a couple of those social systems and then 
you can get a cut-rate deal?
    I don't understand. So I guess going back to philosophy, 
you guys are in charge of a closed system, because the closed 
system is what we recognize and have endorsed that provides 
great assurances, security assurances and safety into the 
American people. When it gets your stamp of approval, it gets a 
lot of comfort by the consumer, right? So I am challenged. So 
even though we have had these ideas about--I am a lawyer, chain 
of custody, chain of distribution, if we can counterfeit the 
bottle and counterfeit the label, can they counterfeit even 
chains of distribution? Or how would we know?
    Mr. Hubbard. Well, they can counterfeit the documentation 
that would show the chain of distribution. So in fact, yes, 
they would be counterfeiting that as well. In fact, they do. We 
see it all the time.
    Mr. Buyer. Give me some examples.
    Mr. Hubbard. Well, if you go to a firm and ask them to show 
us, let's say, a counterfeit drug or where it has been, they 
can pull out records: Oh, we get it from this guy who got it 
from the manufacturer. It is all legal. And, of course, if we 
trace it back to the manufacturer and he checks lot numbers or 
something and he says, oh, I didn't sell that, it is obviously 
fake paperwork and we see that.
    Mr. Bilirakis. Would the gentleman yield?
    So what you are saying is in a corner drugstore, at a 
corner drugstore, a chain drug or whatever it might be, that 
there would be counterfeit drugs.
    Mr. Hubbard. Well, currently, very rarely, Mr. Bilirakis. 
And that is one of our points, is we don't see a lot of 
counterfeiting in this country because the system is so 
relatively closed. But when we have seen counterfeiting, we see 
related counterfeit documents because the counterfeiter wants 
to try to show a total picture of a good drug to the best he 
can.
    Mr. Bilirakis. But is it conceivable that a drugstore might 
find in its supply of drugs a counterfeit drug that has been 
reimported from another country?
    Mr. Hubbard. Absolutely. As a matter of fact, the----
    Mr. Bilirakis. It is not conceivable, it is definite. Is 
that what you are saying?
    Mr. Hubbard. The counterfeiting that this committee 
discovered in the late eighties that led to the Prescription 
Drug Marketing Act was a counterfeit birth control pill, and a 
pharmacist happened to notice, if I recall, zero was slightly 
different on the label than on the real thing. And this 
incredibly sharp-eyed pharmacist, I believe in Indiana, found 
that and called the company and read the lot number and the 
company said there is no such lot number.
    Mr. Buyer. So the challenge you are going to have if we 
open up the system to reimportation is even in the chain of 
distribution because you are finding that occurring along with 
the bottle.
    Mr. Hubbard. Yes, that would be what we would expect to 
find. A good counterfeiter is going to do it all. He is going 
to know how to fake it all.
    Mr. Buyer. I yield back, Mr. Chairman.
    Mr. Bilirakis. All right. Thank you.
    Mr. Strickland.
    Mr. Strickland. Thank you, Mr. Chairman. I am sitting here 
listening to this, and I am feeling like Mr. Hubbard in his 
operation is just completely overrun and out of control, and I 
am wondering if anybody can guarantee any of us safety. You 
know, the mail order, the Internet operation, it seems to me 
like there is no effective way to deal with that, or that you 
can tell us that, in answer to Doctor Norwood's question. You 
seem to be unable--and I understand the difficulty in telling 
us how many personnel you are going to need if you are going to 
deal with this. Do you need more money?
    Mr. Hubbard. I think regulatory agencies would always like 
to increase their funding. But let me say that today if you go 
to an American physician and go down to your corner drugstore 
to get the prescription filled, you have an incredibly high 
likelihood that you are getting a safe and effective drug. 
Almost certainty. But if do you buy it over the Internet or go 
to another country and buy it, that certainty is not there, and 
I couldn't give you a percentage, but it is a much less 
reliable source of a drug.
    Mr. Strickland. Okay. That leads me to a question that last 
year Doctor Shepherd, who is with us today, testified before 
the Oversight Subcommittee that perhaps as many as 30 to 40 
percent of the travelers that enter Mexico return to the U.S. 
with a pharmaceutical product. Do you have any idea how many 
people visit Mexico from our country a year?
    Mr. Hubbard. No.
    Mr. Strickland. It could be millions.
    Mr. Hubbard. Could be.
    Mr. Strickland. Let's assume it is millions. I think it 
probably is. Doesn't that mean that it is likely that millions 
are bringing into the U.S. prescription drugs for personal use 
consumption?
    Mr. Hubbard. I will say--and you can certainly ask Dr. 
Shepherd--I believe that data shows, though, that many of the 
drugs people are bringing in from Mexico are things like 
narcotics and, you know, painkillers and antibiotics and not 
the sort of things that censors are so much worried about. And 
we also belief that drugs purchased in Canada tend to be 
different; that it tends to be more of these sorts of things.
    Mr. Strickland. You think Canadian drugs would likely be 
likely to be more safe than drugs purchased in Mexico?
    Mr. Hubbard. Well, I would rather not put--you know.
    Mr. Strickland. I am just asking for your opinion.
    Mr. Hubbard. Well, I think given that the Mexican system 
doesn't require a prescription for many of their drugs would, 
for instance, give me more hesitancy, because many drugs in 
Mexico are sold over the counter, such as antibiotics, and you 
don't need a prescription there. And so that would be a less 
strict regulatory system, and therefore, sure, I would probably 
have a little bit less assurance there.
    Mr. Strickland. Okay. Since FDA is allowing many of these 
drugs to enter the U.S. in rather massive quantities under the 
so-called personal use policies, has your Agency done any 
systematic studies to analyze the contents of these many drugs 
that you are allowing seniors and others to bring into the 
U.S.? And if not, why not?
    Mr. Hubbard. Let me say that while we argue that a lot of 
these drugs are coming in, that there are 4 billion 
prescriptions written in the United States each year for 
prescription drugs, and if there are 2 million of these 
Internet boxes coming in, that is a lot; but it is still 
nowhere near the number of total prescriptions being written.
    Mr. Strickland. Do you not agree with me that it would be 
helpful, if not obligatory, for the FDA to carry out the 
studies so that we can have some more accurate data to work 
with in terms of what the situation is?
    Mr. Hubbard. I think Mr. Bilirakis asked us that last week, 
and I believe we said that this better data will help us. We 
would be glad to work with the subcommittee on a study. We feel 
that we have enough information to know that there are 
problematic drugs out there that make us raise these alarms we 
are raising today.
    Mr. Strickland. Do you have any idea what such a study may 
cost?
    Mr. Hubbard. I asked our economists that after Mr. 
Bilirakis asked us, and we think between $500,000 and $1 
million would probably get you a reasonable data set that the 
Congress could use to make some policy decisions.
    Mr. Strickland. In your judgment, would that be a rather 
wise expenditure of funds?
    Mr. Hubbard. Well, as we told Mr. Bilirakis, sure, if 
Congress wants that data we would be glad to help them do that.
    Mr. Strickland. And I would encourage, if we can get such 
data, Mr. Chairman, I would suggest that we get it for both 
Canada and Mexico.
    Mr. Chairman, I have one further question.
    Mr. Bilirakis. Well, why don't you ask the question very 
briefly and we will request a brief answer?
    Mr. Strickland. Okay. We have all these drugs coming in but 
we don't have bodies piling up in the streets from taking 
Mexican or Canadian drugs, do we? If millions are using these 
drugs that come from these countries and from the Internet, 
wouldn't we begin to see thousands and thousands of diverse 
events, particularly given the volume? Does it surprise you 
that apparently we aren't seeing these adverse consequences?
    Mr. Hubbard. Well, one answer is that we believe that 
people that purchase these products in such surreptitious ways 
tend not to want to report them if they do have a problem. And 
to be quite honest, there could be lots of people out there 
whose blood pressure is not being controlled or whose 
infections are not being adequately treated or otherwise are 
not getting adequate treatment, and they are slowly--their 
health is slowly deteriorating. But we wouldn't know that, 
because they were unhealthy to begin with.
    Mr. Strickland. Okay. Thank you, sir. Thank you, Mr. 
Chairman.
    Mr. Bilirakis. I thank the gentleman. The Chair would 
recognize Messrs. Kingston and Gutknecht for 3 minutes each to 
inquire. Please stay within that 3 minutes.
    Mr. Kingston. Thank you very much, Mr. Chairman. We 
certainly appreciate all the hard work this committee is doing. 
And Mr. Hubbard, I am going to make a deal with you. I get 90 
seconds and I am going to give you 90 seconds. And my first 
question to you is--I am a member of the Agriculture 
Appropriations FDA Committee. You had actually 2 years since we 
had a bill in our appropriations committee in which we gave $25 
million. In all fairness, I think it was to HHS; I am not sure. 
But this committee has given you 13 months to come up with 
recommendations, and in our hearings we never have heard from 
FDA that, hey, we need more money because this is a growing 
issue.
    The reason why that is important is because you have said 
you don't really care about price, which is fair. Your issue is 
safety. Well, doggone it, people are doing it now, and you are 
not coming to my appropriations committee and saying, you know, 
``We need money because we have got 45 to 50 people doing this 
now. We have made some commitments to the Energy and Commerce 
Committee, and we need to address this.'' And so if safety is 
your only concern, why aren't you addressing that?
    Mr. Hubbard. Well, when the bill that you are talking about 
was enacted, we certainly did put together a cost estimate of 
implementation. And you are right. The committee did 
appropriate that $25 million, and we were prepared to go 
implement that. And, of course, it ramped up over several 
years. But Secretary Shalala then sort of refused to certify 
that it could be done safely, so we never got the money because 
the way that the law was written, we didn't get the money 
unless Secretary Shalala certified it could be done and then 
instructed us to do it. And then Secretary Thompson further 
certified when he came in that this couldn't be done. So we 
have gotten most of that funding.
    Mr. Kingston. Okay. Let me ask you this now. Actually we do 
have reimportation now. The U.S. pharmaceutical companies can 
reimport, correct?
    Mr. Hubbard. That is correct. The company can bring back 
their own products.
    Mr. Kingston. And I am just going to infer that you are 
saying that that is okay because it is a better chain of 
custody.
    Mr. Hubbard. Well, the way Congress set it up in 1988, it 
said American goods could not come back in if they had left the 
custody of the manufacturer, but if they had stayed in the 
custody of the manufacturer they could come back.
    Mr. Kingston. And is that the way it happens?
    Mr. Hubbard. Well, I assume----
    Mr. Kingston. I mean, I assume you guard those pretty 
closely. Armored cars, maybe?
    Mr. Hubbard. Well, the company is the one that is 
maintaining custody, not--FDA doesn't hold the drug.
    Mr. Kingston. It is okay for the pharmaceutical companies 
who have the high price to reimport it, but it is not okay for 
Ruth Tubbs to do it, because she is at risk; but the companies 
can do it? I mean, I want you to think about that policy as a 
government that--what we have.
    Mr. Hubbard. You understand, this was an explicit policy of 
the Congress, adopted in 1988, and the feeling was if a company 
sold more of its product, say, in England than could really be 
sold, they should be able to bring that back.
    Mr. Kingston. Well, I just want to make sure for the record 
we are reimporting now, it is just that we are only allowing 
the drug companies to do it, not the Ruth Tubbses to do it. And 
they are the people who need it.
    Now, in the case of Ruth Tubbs--nd getting back to Mr. 
Pallone's question--if she knows the Canadian pharmacist she is 
dealing with, and if she feels comfortable about that, she is 
buying drugs from them now, what are we doing to make sure that 
that is a safe relationship because, of course, that is going 
on with hundreds of people, thousands?
    Mr. Bilirakis. The gentleman's time has expired. You will 
respond in a brief manner.
    Mr. Hubbard. What we are doing--and we will pass it to the 
committee--you will see on these easels brochures that we are 
going to be passing out at the border, beginning this month, 
that advise people such as Ruth Tubbs what they are doing, that 
they may be taking some risk. And it says things like, make 
sure you tell your doctor you are doing this so he can monitor 
you, or your pharmacist in the United States. This is not a, 
quote, regulatory warning. It is not saying you are doing 
anything wrong. It simply says, be careful and talk to your 
doctor.
    Mr. Bilirakis. So as these buses arrive at the border 
coming going north, someone will be handing these out?
    Mr. Hubbard. Right. These brochures will be given to the 
patients who purchase drugs, correct.
    Mr. Bilirakis. All right. Thank you.
    Mr. Gutknecht for 3 minutes.
    Mr. Gutknecht. Well, I thank the chairman. I thank you for 
this hearing. I think it is historic. We are finally--Congress 
is taking seriously the matter of importation and 
reimportation. The fact that we are having a hearing, I think, 
is very refreshing and I hope that the FDA will work with us. I 
have attempted in the past not to beat up on the pharmaceutical 
industry because they do some wonderful things. It is not their 
fault that we have given them this market opportunity; and it 
is not shame on them, it is shame on us. And frankly, we need 
to do some things on the price side of the equation, because no 
one has refuted the charge that I use in terms of the 
difference between what Americans pay and consumers around the 
rest of the industrialized world pay for the same drugs.
    But my question is for you, Mr. Hubbard, and I think the 
real ultimate question is how safe is safer? You know, I have a 
professor, Doctor Steve Shandelmeir, who is head of the 
pharmacology department at the University of Minnesota, and he 
has a great quote. He said that a drug that you cannot afford 
is neither safe nor effective. And so if people can't take the 
drugs they need, all of the safety barrage that we put in front 
of them makes no sense.
    And I think that I would hope that you would work with us 
to come up with some kind of a program using bar coding 
technology. I think my colleague asked the question; it is a 
good one. You know, what do the pharmaceutical companies do? 
How do drugs--how are they delivered to a local pharmacy? Is it 
by armored car? No, it is by regular truck. When they bring it 
into the country, it is by Evergreen containers. The idea that 
they have some kind of super-safe system that will guarantee 
that nothing can happen is really not true, and you know that, 
don't you?
    And let me come back to the other issue about safety. Well, 
no, I want to change subjects slightly. It is the Food and Drug 
Administration, isn't it?
    Mr. Hubbard. Correct.
    Mr. Gutknecht. Do you know how much pork comes into this 
country every year?
    Mr. Hubbard. Pork?
    Mr. Gutknecht. Pork.
    Mr. Hubbard. I have no idea. We don't regulate pork.
    Mr. Gutknecht. Well. You do regulate food, and it 
ultimately comes in as a food item.
    Mr. Hubbard. No, we don't regulate meat, unfortunately. The 
Department of Agriculture does.
    Mr. Gutknecht. All right. But the point is, we bring into 
this country 500,000 tons of pork. And you can get salmonella, 
you can get trichinosis. As a matter of fact, a lot of people 
get sick from eating bad pork. The same is true with fruit and 
vegetables. By your own studies, the FDA's own studies, 2 
percent of the fruit and vegetables that come into this country 
are contaminated with some kind of food-borne pathogen.
    I guess the point, and Mr. Pallone asked it, you know, how 
safe is safe? It seems to me we ought to be able to come up 
with a regimen that would work to guarantee as much safety from 
Geneva Pharmaceutical Supply as we get from our local 
pharmacies, because we know one of the worst examples where 
drugs were actually contaminated occurred with a local 
pharmacist in New York City. Is that true?
    Mr. Hubbard. That is true. That was a pharmacist basically 
diluting a drug.
    Mr. Gutknecht. Most of the counterfeit drugs you showed us 
today originated here in the United States?
    Mr. Hubbard. Many do, yes.
    Mr. Gutknecht. The other point I want to make is that every 
month approximately $21 million worth of cocaine is imported 
into the United States through Miami alone. Yet the whole idea 
that somehow we can stop this and make it completely safe I 
think really tests credulity.
    I think we have to come up with a system and regimen, 
because my sense is this is going to happen regardless of 
whether this bill passes. We are going to have importation. We 
are going to have reimportation. It is just a matter of whether 
or not people--my 85-year-old father--is going to be treated 
like a common criminal. I don't think he should be.
    Mr. Bilirakis. The gentleman's time has expired.
    The Chair would yield, as soon as he gets settled, 3 
minutes to inquire of Mr. Sanders.
    Mr. Sanders. Mr. Speaker, I thank the chairman very much 
for allowing me to barge right in here and ask a few questions.
    As somebody who lives near the Canadian border and was one 
of the first persons to take people over the border to get 
Canadian drugs, needless to say, all of this concerns me very, 
very much.
    A brief history: We took a number of women over the 
Canadian border. They purchased the widely prescribed breast 
cancer drug, Tamoxifen. Do you know what the differential was, 
sir?
    Mr. Hubbard. Probably substantial.
    Mr. Sanders. It was like one-tenth. Women in the United 
States of America who are fighting for their lives are paying 
10 times more for the exact same drug as they are an hour away 
from where I live. If I may be allowed to editorialize, I think 
that is an outrage, and I think that is a disgrace.
    Let me ask you this question. The pharmaceutical industry, 
I am sure they are probably headed here in droves, has 600 
lobbyists on Capitol Hill, and has spent $200 million in the 
last few years on campaign contributions, on lobbying, and on 
advertising.
    Do you think that it is any coincidence that the most 
powerful lobby in this country, which spends such a huge amount 
of money influencing public opinion, that as a result of that--
do you think it is any coincidence that our people pay, by far, 
the highest prices in the world for prescription drugs?
    Mr. Hubbard. I really can't answer your specific question. 
I think that to some extent American patients do pay higher 
prices because other countries do put price controls on, so 
Americans have--you know, in some sense we are subsidizing 
other countries' patients.
    Mr. Sanders. I don't think we are subsidizing. The 
pharmaceutical industry, based on my knowledge, makes money in 
Canada, they make money in Europe. Yet maybe you can tell us, 
help me out on this one: Year after year, the pharmaceutical 
industry earns higher profits than any other industry in 
America. Yet millions and millions of Americans are unable to 
afford the prescription drugs they need.
    Can you tell me why the administration is not moving 
forward vigorously in terms of reimportation or other 
approaches to substantially lower the prescription drug costs 
in America?
    Let me pick up on the point Mr. Gutknecht made, because it 
has to be made over and over again. You could have the best 
drug in the world, but if a person cannot afford it, it does 
not exist. It is no good.
    Why are we the only country in the world that does not, in 
any substantial way, fight to lower the cost of prescription 
drugs? Why are our people forced to pay in some cases 10 times 
more for the same exact medicine?
    Mr. Hubbard. You are getting into questions that are beyond 
my scope. I have simply said that if the drug is--if the drug 
purchased overseas is not the real drug, it does not matter if 
it only costs you $1. If you are getting nothing from it, you 
are not getting treatment and you are still wasting that 
dollar.
    Mr. Bilirakis. The gentleman's time has expired. He can 
make his point.
    Mr. Sanders. Explain to me and the American people how we 
can----
    Mr. Bilirakis. That is not your point, with all due 
respect.
    Mr. Sanders. How do we import lettuce, tomatoes, beef, 
poultry, pork, you name it, from all over the world, how are we 
able to do that and yet we cannot regulate a few warehouses and 
a few companies to make sure, with FDA supervision, the product 
coming back into this country is not safe?
    Mr. Hubbard. We regulate food in a much different way; and 
second, there is no such thing as a counterfeit head of 
lettuce. It is really sort of a, no pun intended, an apples and 
oranges issue.
    Mr. Sanders. Thank you, Mr. Chairman, very much.
    Mr. Bilirakis. You are welcome.
    Mr. Burr, to inquire.
    Mr. Burr. Thank you, Mr. Chairman. I will be brief.
    Having heard some of the things that were covered and 
knowing some of the items in Mr. Kingston's bill that empower 
pharmacists to make some determination about the possible 
adulteration or counterfeit status of a product that might be 
reimported, given what you know and what the agency's position 
is on pharmaceuticals, and the degree of sophistication now 
with counterfeiting that we find, is there any possible way for 
a pharmacist to truly determine, if they are not 100 percent 
confident of the source from which they purchased the drugs, 
that that drug is not counterfeit or adulterated?
    Mr. Hubbard. We don't believe so, Mr. Burr. I could slip 
this package into a drugstore without notice, and the 
pharmacist would not know it. I even could ask a pharmacist, I 
could say, this is counterfeit. Tell me the difference. He 
could not tell me, nor could a physician. These counterfeits 
are perfect copies. A drug is a molecule. You only know if it 
is real if you put it in your body and if it treats a disease 
or does not.
    Mr. Burr. Is it not therefore important that the chain of 
custody of that product be something that is impeccable as it 
relates to the FDA's records?
    Mr. Hubbard. That is correct.
    Mr. Burr. Thank you. I thank the Chair.
    Mr. Bilirakis. I thank the gentleman. I believe that 
completes, finally, the inquiry.
    Mr. Hubbard, you have always been available every time we 
have called upon you. We appreciate it. We have learned a lot. 
That is what these hearings should be all about, and that is a 
learning process. If we come in here and basically know it all, 
then what is the sense? We are wasting time. Then it would be 
appalling, I think.
    There will be questions submitted to you, as per usual, but 
also there have been requests for some of the language that has 
been promised quite some time ago. Do yourselves a favor, help 
us to help you, so to speak, to be able to do a better job with 
the concerns of Mr. Sanders and those so many others have 
raised.
    Thank you very much.
    Mr. Hubbard. Thank you for having me, Mr. Chairman.
    Mr. Bilirakis. The next panel consists of Dr. Marv 
Shepherd, with the University of Texas in Austin, College of 
Pharmacy; Dr. Elizabeth Wennar, President of the United Health 
Alliance, from Bennington, Vermont; Mr. Peter Barton Hutt, 
Covington & Burling, on behalf of PhRMA here in Washington; and 
Mr. Don Copeland, President and CEO of Associated Pharmacies, 
from Scottsboro, Alabama.
    Before I open up your testimony, I just wanted to make a 
comment regarding the panel and the comments made by Mr. Brown 
and others when we started.
    The staff has worked to put together a balanced panel that 
will present expert testimony from both sides of this issue. 
Two witnesses will outline the pros of reimportation, as I 
understand it, and how we may be able to set up a system to 
allow this practice in a safe manner, and the other two 
witnesses will outline some of the potential dangers of 
reimportation. This balanced panel will afford us the 
opportunity to gain valuable insight that we can use as we 
develop any legislation in this arena.
    Again, this hearing was put together to help us come to 
some solutions on reimportation. I think we have already 
realized that even if we solve the problem of high cost of 
drugs, which would lower the need, if you will, for so many 
people, particularly senior citizens, to go over the border, 
there are still many instances of drugs being reimported, 
counterfeit drugs being reimported into this country that find 
their way into the corner drugstore. So the concern of 
reimportation is there and will continue to be there even if we 
ever get to the point of solving the other problem that people 
on the other side of the aisle have mentioned.
    I did not want to have a hearing on drug prices, even 
though we know, as I said before, reimportation is a system of 
high drug costs. That is going to be at another time. I have 
already told the ranking member that we are going to have 
hearings in September.
    At any rate, I would like to reiterate that I wanted this 
hearing to help us gather expert testimony on reimportation, 
and not focus on scoring political points in relation to high 
drug prices, which we all already realize exist. For that 
reason, we have worked up this particular panel.
    Mr. Brown did ask for that additional witness late Tuesday 
afternoon; it might have been Tuesday evening even. The staff 
brought it up for the first time late Tuesday afternoon, so we 
are not talking about a request having been made on a real 
timely basis here insofar as a consumer advocate.
    In any case, having said that, Dr. Shepherd, again, your 
written testimony is part of the record. We would ask you to 
sort of complement that, supplement it orally.

STATEMENTS OF MARV SHEPHERD, COLLEGE OF PHARMACY, UNIVERSITY OF 
TEXAS AT AUSTIN; ELIZABETH A. WENNAR, PRESIDENT, UNITED HEALTH 
ALLIANCE; PETER BARTON HUTT, COVINGTON & BURLING, ON BEHALF OF 
    PhRMA; AND DON COPELAND, PRESIDENT AND CEO, ASSOCIATED 
                        PHARMACIES, INC.

    Mr. Shepherd. Thank you. My name is Marv Shepherd. I am the 
Director of the Center for Pharmacoeconomic Studies. For the 
last decade I have been involved in doing research on the Rio 
Grande border looking at personal reimportation of 
pharmaceuticals from Mexico.
    Mexico obviously is a little bit different than--or the Rio 
Grande Valley is quite a bit different from the Canadian 
border, but coming from Michigan, my home State, I am pretty 
well aware of the problems on both borders. But I have been 
concentrating in the last decade on the Mexican border 
problems.
    I want to thank you for inviting me, and I will make my 
comments brief, but I want to touch on a few things. You do 
have my statements there in writing for you.
    I am not convinced that reimportation will solve our 
problem. It may add costs to us, the costs of controlling the 
safety or trying to bring in the safety aspect of it. I am not 
convinced that reimportation would stop people from going to 
Mexico at all. I will explain that in a little bit. I still 
think we would still have a tremendous amount of American 
residents going down to Mexico to buy drugs. There are a couple 
of good reasons.
    No. 1, Texas has faced a problem of Mexican drugs for 
decades, along with New Mexico, Arizona, and California. But in 
my work, it is just not Texas, I want to emphasize this. Forty 
percent of the people who go to Mexico are not Texans, and they 
come back with drugs. Forty percent of the people who are going 
to Mexico come back with drugs, but the people who go to 
Mexico, they represent other States. They represent Maine and 
Washington, all the way down to New England. So they are not 
just Texans or Arizonans, they are from everywhere in the 
States. We found 37 States represented in a sample of 5,000, to 
give you an example.
    As I said, 25 to 40 percent of the people go to Mexico and 
bring back a pharmaceutical product one way or another. There 
are three reasons why they do it. We have heard price, price, 
price, but I will tell you, there is a big one in Mexico and 
that is called access, because you don't need a darn 
prescription. You can go down there and you can buy 
Erythromycin, tetracycline, Premarin; you name it and you can 
buy it, except for controlled substances, over the counter. If 
you have a dollar bill in your pocket, you can buy it, so you 
don't need the prescription. That way, you have got a lot of 
money you save. You don't have to go to a doctor's office. You 
can buy your hypertensive medication, you can buy anything you 
need in any quantities and bring it across the border.
    Customs now is allowing 90 days' supply, but I have seen a 
180 days' supply coming back from Customs. I have seen people 
walk across that border six times a day with 90 days' supply. I 
have seen people in the stores with lists: Uncle Fred needs 
this, and Aunt Jeanne needs this, my neighbor needs this. They 
will pull out $2,000 or $3,000 and buy everything in these 90-
day supply lots and come back across the border.
    I have seen Oxycontin come across the border multiple times 
on one person. Three times I saw one young lady go across the 
border and get it and come back. I watched her come back and 
declare it, no questions asked. She would come right back and 
go across and get another one. Next time she would come back 
with a different drug, with three or four controlled 
substances, 50 units each.
    In Laredo I think it is a little different than the McAllen 
area and the Brownsville area. But in the Nuevo Laredo area, 
the senior citizens are not the frequent purchasers of drugs. 
The purchasers of drugs there are young people, 20 to 35. Fifty 
percent of the group is under 36 years of age. Only 10 percent 
of the group was over 55 when we did the work, so it wasn't 
seniors. If you go to McAllen and Brownsville it may be a 
different percentage, but there is still a lot of youth going 
down there and buying pharmaceuticals.
    The pharmaceutical business in Mexico is big business on 
the borders, big business. There are more pharmacies than any 
other store in the streets. It is a huge profit-making 
business. There are 300 or 400 pharmacies in a five-block area 
of Tijuana, and there have to be 20 pharmacies in a two-block 
area of Nuevo Laredo.
    They are open pharmacies, dusty and dirty, and there is no 
pharmacist working in them. There is no law that says a 
pharmacist has to work in them. They are clerks and merchants 
selling drugs. They don't even use packaging.
    When I see people buy drugs across the border and bring 
them across, the first thing I notice, and this is terrible to 
say, they lie. The agent will ask them, did you buy any 
pharmaceuticals over there? And they will say no. If they have 
a shopping bag, a plastic shopping bag and they can see the 
pharmaceutical in it, they will say yes.
    The honest people say yes, I bought drugs. That is where I 
get my data from for my research. The not honest people who got 
some probably controlled substances or other stuff in their bag 
say no, and Customs really just lets them walk on through, 
unless they are really suspicious looking characters. Then they 
will pull them aside.
    But anybody in this room in our age group can walk down 
there and buy anything, come back, and you can say, I didn't 
buy anything, and you can walk on through. So there is really 
no big control over it.
    They do control narcotics, they do control controlled 
substances to some degree. They will get you if you bring back 
more in any one of those, if they believe you fit that profile. 
We have seen them tear cars apart. They will do that.
    But they lie. People lie because it is cheaper and no 
doctor's appointment. ``I can get any hypertensive medication 
they want. This does not work for me, I will try this one. So 
and so is using this one, so I will try this one here.'' They 
don't have to go to the doctor to get that changed, so the 
access really drives a lot of it; not only the price, but the 
access of trying something that may work better.
    I have seen the same person, as I said before, cross many 
times. I don't mean to bash the U.S. Customs. They have a tough 
job, they have limited resources, and it is very difficult. 
There are better ways of doing what they do, especially 
collecting data. They are doing everything by hand, pencil and 
paper. I don't understand that. Nothing is coded. There are no 
computers. It is just all by hand work. It is just archaic, as 
far as I am concerned.
    I will summarize on two things. First, counterfeiting. We 
cannot tell the difference, as we saw, whether it proves to be 
FDA-approved or are counterfeits. I have seen some good 
counterfeits coming out of Mexico. I have seen some other 
counterfeits and I could tell by the packaging. There is a 
little error in the packaging.
    The documenting, we need data and we need it fast. We don't 
know what proportion of imported products are counterfeit or 
substandard. We do not know what the ill effects are, and to 
what extent do people mix U.S. drugs and Mexican drugs.
    I have raised a lot of questions, but we just don't have 
the data to make up any kind of good determination or open up 
the border to any more than we already had. It is a very 
difficult situation.
    Thank you, Mr. Chairman.
    [The prepared statement of Marv Shepherd follows:]
       Prepared Statement of Marv Shepherd, Director, Center for 
   Pharmacoeconomic Studies, College of Pharmacy, University of Texas
    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 mainly on the 
issue of Mexican prescription drugs entering the U.S. I applaud you for 
taking on the task of searching for ways to provide affordable and 
effective pharmaceuticals to the American public. However, there with 
the importation of pharmaceuticals it is my belief that the costs may 
not be worth the risk. There are many social, legal and medical issues 
to address, but my main concerns involve patient safety and lack of 
control.
    This nation is facing a health care crisis. The health care crisis 
revolves around 1.) limited or no access to health care for some 
population groups, 2.) high cost of health care services and products 
especially pharmaceutical products, and 3.) lack of quality in services 
as exemplified by the high degree of medical and medication errors 
being documented. All three areas are not limited to but do involve 
some aspect of pharmaceutical products. But, I am here today to tell 
you that in my opinion the re-importation of pharmaceuticals will most 
likely add to the problem list. It will most likely increase the 
overall costs and most likely contribute to poorer quality of care due 
to lack of monitoring and management of products and patient care. Let 
me explain my reasoning.
    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 
travel to Mexico bring back prescription pharmaceutical products. With 
the present bill, I can imagine that a higher proportion of U.S. 
residents will return with Mexican pharmaceuticals. Some will return 
with products that are safe and effective and others will not.
    Personally I do not think the bill will curtail the number of 
people going to Mexico, because the pharmaceutical product will most 
likely still be cheaper in Mexico than if the Mexican drug is shipped 
to the U.S. for sale. The reason is the costs associated with assuring 
quality, if done prudently and correctly, re-labeling and the profit 
taking by members of the U.S. distribution system. Remember, the U.S. 
distributors of foreign acquired drug products only have to offer the 
product at a lower price than what is currently being offered. The 
profit takers will be the wholesalers, retail pharmacies, managed care 
and pharmacy benefit managers not to mention other health care 
providers who would use the product. In essence, I am not convinced 
that the savings will be passed on to the consumer.
    Studies have shown that many people repeatedly visit Mexico to 
obtain drug products for themselves, family and friends. There are many 
social, legal and medical issues to address, but the main concerns I 
have involve patient safety, lack of control and lack of data to 
address the practice.
    The main reasons why U.S. residents go to Mexico to obtain their 
prescription drug products are: 1.) Easy Access, most products do not 
require a prescription in Mexico, 2.) Lower Prices, some products do 
have substantial price savings, but not all and 3.) drug products are 
not available in the U.S. Of course under this proposed bill the latter 
category could be ignored.
    The pharmaceutical business in Mexican border towns is a huge 
tourist attraction and generates hundreds of millions of U.S. dollars 
to the Mexican economy. There are over 1,400 Farmacias in Tijuana while 
in near by San Diego are there are just over a hundred. The number of 
Mexican Farmacias and mail order drug houses will grow even more with 
this legislation making access easier and more difficult to control.
    My major concerns are the lack of medical supervision, the 
patient's lack of understanding on how to use the product correctly, 
the indiscriminate use of products. Finally, I have a concern about the 
assurance of product quality and safety. To me, all of these have a 
potential to harm, severely injure or kill people. The wording of the 
present bill states the drug ``appears to be approved by the 
Secretary'' . . . appears to be manufactured, prepared, propagated, 
compounded or processed in an establishment registered pursuant to 
section 510.'' I can assure you that many of the counterfeit products I 
have seen all ``appear'' to be the ``real thing.'' Making this 
determination from world-wide distribution systems of drug 
manufacturers distributors, shippers, wholesalers and sellers will not 
be an easy task. Plus it will be an expensive task.
    The question you have to answer is ``do we sacrifice safety for 
economic savings?'' It is a difficult question mainly because we are 
unsure of the safety profile. Data are lacking on the safety profile of 
drugs currently being brought into this country through personal 
importation. We need studies on imported product quality and the extent 
counterfeit products reach the U.S. public. FDA has done some quick, 
preliminary work and I have worked with them on collecting these data, 
but more comprehensive research needs to be conducted. In my opinion, 
the FDA data are weak and it is very difficult to make generalizations 
based on the limitations of their studies. More comprehensive research 
is drastically needed; there are too many risks for the American public 
just to open up the borders and expect the FDA and Customs to monitor 
the situation.
    Obviously, the more we open the borders the more we give up safety 
and the assurance of high quality drug products. Currently, I believe 
we have an extremely safe pharmaceutical distribution system. Sure it 
can be improved; we do have some problems that need to be addressed 
such as improve the access to pharmaceuticals for seniors, and develop 
some strategies to address drug price increases without the sacrificing 
of research and development within the industry. But when you open up 
the borders to importation, it is my contention that you will sacrifice 
safety. Pharmaceutical products become more difficult to monitor and 
control. The U.S. could turn into a ``dumping ground'' for substandard 
drug products because this is where the money is. To do this function 
of monitoring and assuring drug quality will require a huge investment 
in resources for the FDA and Customs. For example how do you monitor 
millions of drug products coming through the mail each month? How do 
you monitor hundreds of thousands of people returning from Mexico on a 
Saturday afternoon? How do you monitor the millions of dosage forms and 
drug units being purchased by a drug chain in one week from foreign 
drug distributors? Most likely we will not be able to find the 
necessary resources to do the monitoring and checking and in the end, 
someone will get hurt, you can count on it.
    To put this task in a better perspective, let me give you my 
experiences in watching people come across the border from Mexico after 
they purchase pharmaceuticals. Many times people do lie when asked by 
the Custom's agent ``did you purchase any drug products while in 
Mexico?'' I have seen the same people buy drug products, cross the 
border and lie when asked by the agent. They just put the product in 
their pocket, purse, bag or under their shirt/blouse. So when you 
collect data at these points you only get data from the honest people. 
When you have a long line of people or cars coming back from Mexico, 
you do not have the time to question the importer. I have seen the same 
person cross the border multiple times a day bringing their 50 units 
per drug of controlled substances every time. (No prescription is needs 
if you bring 50 tablets per controlled substance). I have seen 
confusion on the part of Custom's agent as to how much and what is 
allowed to cross the border for a controlled substance. I have seen a 
90-day supply and at times even more for controlled substances with and 
without a prescription come into the U.S. I do not mean to ``bash'' 
U.S. Customs; they have a huge complex task and they lack proper 
resources to get the job done correctly.
    When I ask people how the product works for them I have heard 
answers such as it works great I just need to take two tablets instead 
of one to get the same effect. I have talked to people in Farmacias who 
have had long lists of drugs not for themselves but for their family, 
relatives, and friends. One time I asked the customers do you drink the 
water while you are here in Mexico and she said ``no way.'' I asked, 
``will you eat while you are here?'' Her response was, ``No, No, too 
risky.'' I said. ``you will not drink the water or even eat while you 
are here but you would buy your drug products here, why?'' Her answer 
was ``because they are the same as U.S. products look at the label.'' I 
showed here that the product was not made in the U.S. but in Mexico. It 
still did not register with here. Just because it has the name of a 
U.S. manufacturer most people believe it is manufactured in U.S. For 
your information, the vast majority of drug products sold in Mexico are 
manufactured in Mexico and very, very few have an FDA approval.
    In conclusion, it is my belief that some safety will be sacrificed 
if you open the borders to the American public for pharmaceuticals. I 
am not convinced that the cost saving will be present, there are many 
profit takers in the drug distribution system. The cost of monitoring 
the program and assuring high quality products will be tremendous. 
Finally, data are lacking on the safety profile of drugs currently 
being brought into this country through personal importation. I really 
think we need to examine what products are coming into the U.S.? What 
proportion of imported products is counterfeit or substandard? What are 
the ill effects of imported products? To what extent do people mix U.S. 
made products with imported products? I know I raised many questions 
and concerns, but I do hope I added some insight into the problems 
associated with Mexican drugs coming into the U.S. I will be happy to 
entertain any questions.Thank you so much.

    Mr. Bilirakis. Thank you very much, Dr. Shepherd.
    Dr. Wennar. Is that correct, Wennar?

                STATEMENT OF ELIZABETH A. WENNAR

    Ms. Wennar. Correct. Wennar.
    My position is, I am the President and CEO of United Health 
Alliance, which is a physician health organization located in 
southwestern Vermont. That organization is made up of about 115 
physicians, a rural hospital, a nursing home, and a home health 
agency.
    By way of just--I wanted to give you that information so I 
could help you understand what MedicineAssist is. That is the 
initiative that we sponsor. We started that initiative about 3 
years ago. We started it in response to bus trips that were 
being made by patients that we were serving going up to Canada 
to access their medications.
    One of the things that I want to point out here, I have 
heard a lot of talk here about safety and about quality. Now, 
let me just tell you from the perspective of a provider what 
that means.
    That word is ``compliance,'' in our minds. In our minds, if 
a patient cannot comply with the treatment plan as prescribed, 
and that means being able to take the medications, then we have 
very little chance of them being able to have a good outcome. 
That is a physician's major concern, compliance.
    They make an assumption when the patient comes in and they 
write a prescription that they are going to be able to get 
them, and that they are going to be safe. They also make the 
same assumption about those samples that are in their offices, 
that they are safe.
    So one of the things that we began to realize is that our 
patients weren't complying with their treatment plans. Guess 
where they end up when they don't comply? In the emergency 
room, back in the physician's office, and being admitted to the 
hospital.
    So our physicians decided to step up to the plate on this 
issue. I heard a lot of talk today about the pharmacists being 
involved, which is certainly true, the pharmacists have to be 
involved. We want them engaged in this conversation. But we do 
want the physicians engaged in the conversations, too, for two 
reasons: one, quality; and two, because they need to be at the 
tables when we are having these discussions.
    With the kinds of discussions you are having right now, you 
can't just talk to the pharmaceutical industry, you must have 
the physicians engaged in this, because they write those 
orders.
    Having said that, we decided that we could not ask or 
expect people to get on a bus. Not everybody can. One, they 
cannot afford to, maybe physically or monetarily, so we decided 
that there must be a way that we could step up to the plate at 
a grassroots level and develop some type of initiative that 
would help facilitate the process.
    I say ``facilitate'' because, remember, physicians in this 
country may not write prescriptions to be filled in another 
country, in most instances, unless they are licensed in that 
country.
    In this country right now, we know there are some 300-plus 
physicians that are duly licensed in Canada and in the United 
States.
    Having said that, we decided that we were going to figure 
out a way for our patients to be able to comply with their 
treatment plans. Now, we designed the program so that there 
would be layers of quality in place. I can certainly go into 
much detail about MedicineAssist, but I would like to sort of 
quickly skip to something, since I only have 5 minutes. I have 
outlined quite a bit of this in my written testimony that you 
have before you.
    I would like to talk about something we recently did in the 
process. We are involved with three pharmacies in Canada in 
three different provinces, and have been for 3 years. We have 
facilitated the process. We feel quite good about this now, 
because we feel like we have put things in place, that extra 
quality parameters do exist, and people are taking their 
medications and complying with their treatment plans.
    One of the things we did recently was we took it upon 
ourselves to poll pharmacies in Canada, even those that are not 
participating through our program, to try to get some sort of 
idea about the numbers of people who are actually using this in 
the United States. We wanted some demographic information. We 
wanted to see what we could identify there.
    We finally had to stop counting because we do not have the 
resources, to tell you the honest truth, to do all the 
counting. We stopped at 1.1 million U.S. citizens currently 
bringing in their medications and using this mechanism to 
access safe, affordable prescriptions.
    They are with pharmacies, those pharmacies who are working 
with physicians there and physicians here. The physicians there 
act as consultants to the physicians here. The physicians here 
are the prescribing physicians. They may not have their written 
prescription up there, but they complete the medical profile 
information, they work with the Canadian physician, they work 
with the Canadian pharmacist.
    I would challenge anybody to show me a program that 
completely works so well here in the United States for senior 
citizens right now. We are very proud of it.
    Now, let me tell you, from the standpoint of things, what 
we have identified here is, one, I have heard discussions today 
about antibiotics and about a whole litany of other 
medications: Viagra and whatever. Let me tell you, that is not 
what our senior citizens and our elders are looking for. They 
go for maintenance drugs. Those maintenance drugs are drugs 
that are life-sustaining drugs. They are going to have to take 
them for chronic conditions probably for the rest of their 
lives. There is probably a list of maybe 25 medications that 
they pretty much take.
    Now, Mr. Brown, I have heard Mr. Brown say that his 
constituent could not be here today. I am telling him, his 
constituent is sitting here today, because we serve these 
individuals every day. We feel very comfortable. We do believe 
that there has to be structure in place.
    Having said that, and I am using Canada as a case study, we 
feel very comfortable with what goes on in Canada. The 
pharmacists there are working very well with the physicians 
here. The physicians here are working very well with physicians 
there. Now, there is a Federal level there, there is a 
provincial level. We have a Federal level here and we have a 
State level here. We are mimicking things.
    I am here to tell you, maybe Mr. Hubbard could not tell you 
that it is as good in Canada, but we feel from the provider's 
side it is as good there.
    I have heard a lot of talk today about the Medicare 
coverage. We would love that, but we don't have it. We don't 
have it. From a grassroots level, let me tell you what it is 
like to look into the eyes of people who are just trying to 
survive. They want to live, and they have taken this upon 
themselves.
    Would they like the medications down the block? Absolutely. 
But do you know how it feels when you know they are there and 
you can't get them? You want to talk about living in terror, 
that is living in terror, because all you want to do is live.
    So I am here to tell you that if you really want to do 
this, we will be glad to sit down with Mr. Hubbard and to tell 
him how to put the safety things in, and we will tell you how 
it can save costs for the American taxpayer. We are willing to 
take it on.
    Mr. Bilirakis. Your time has expired, but this committee 
would welcome any suggestions you or any others would have. You 
don't have to go to Mr. Hubbard, if you don't choose to, if he 
does not inquire. We are inquiring.
    Ms. Wennar. We would welcome the opportunity.
    [The prepared statement of Elizabeth A. Wennar follows:]
 Prepared Statement of Elizabeth A. Wennar, President and CEO, United 
                            Health Alliance
    Mr. Chairman, and Members of the Committee: Thank you for inviting 
me to discuss re-importation of prescription drugs as a means of 
accessing safe, affordable prescription drugs for US consumers and 
particularly our elders not currently covered under Medicare.
    As you are aware today's healthcare market presents many challenges 
for consumers, purchasers and our political leaders. None is more 
controversial than that of technology in the form of a ``pill''. 
Pharmaceutical spending has almost doubled in less than a decade. More 
often than ever, our policymakers and physician providers are being 
queried as to why it is that Americans, particularly the elderly, must 
pay many times more than their Canadian [and Mexican and European] 
counterparts for the same drug.
        background on united health alliance and medicineassist
    United Health Alliance is a nonprofit physician health system 
organization located in Southwestern Vermont. Our partners include a 
rural hospital, nursing home, home health agency and just over one 
hundred (115) community physicians. We serve residents of Vermont, New 
York and Massachusetts. Our mission is to promote a physician-driven 
organization whose principle services are to provide advocacy and 
leadership in the areas of care management, contracting, performance 
improvement and educational programs to maximize value for our 
physician-hospital membership and customers [patients]. Although we 
have committed to ten (10) guiding principles, none is more important 
to us than assisting the communities we serve at becoming the 
healthiest in the nation. Approximately one year ago we found that 
although admirable, this objective was going to be very difficult to 
achieve given the circumstances that existed for some of our elderly. 
Very simply, they did not have access to affordable prescription drugs, 
therefore they were not able to comply with the treatment plans 
prescribed by their physicians. Although we had individuals that were 
seeking affordable medications via bus trips to Canada, we knew that 
this was not an option for the majority of the elderly in the 
communities we serve by virtue of their medical condition and/or their 
limited resources. One of our physicians came to us and requested our 
assistance at investigating how we could help a patient of his with 
breast cancer access her medications from Canada without having to get 
on a bus. Today that patient takes her medication because she can 
afford them. It cost her ninety (90) percent less in Canada. We 
compared the costs for 145 seniors for the first six months to see if 
what we had heard about the differences in pricing was in fact true. 
While these individuals would have had to pay just over $81,000 in the 
U.S., they paid approximately $22,000 for their medications in Canada 
(see Exhibit A). Our understanding is that there were no substitutions 
for the medications they were currently on. All medications accessed 
were for the treatment of chronic diseases such diabetes, heart disease 
and cancer. A price comparison of some of the more commonly prescribed 
medications for the treatment of these diseases has been provided along 
with this testimony. Although there is minor variation with some 
pricing in Canada, the savings are still significant and have been 
reported anywhere from thirty (30%) to (95%) percent (see Exhibit B). 
Although the majority of the individuals using MedicineAssist are the 
elderly on fixed incomes, with no prescription coverage, we are 
beginning to see individuals that have depleted their pharmacy benefits 
also attempting to access their medications from Canada. As we have 
conversations with employers located in the communities we serve about 
benefits and coverage for their employees we find many are concerned 
about how to continue the level of coverage they currently provide, 
particularly with the growth in their expenditures for prescription 
drugs. The implications are frightening for all of us.
    Brief of M:
    MedicineAssist: See website (unitedhealthalliance.com) and click on 
icon medcineassist for instructions and information on use. Maintenance 
drugs only and your personal physician must be involved. No membership 
fees. A Canadian licensed physician will review medical information and 
consult with your physician.
    Notation:

1. Personal Re-importation: A recent poll identified over 1 million 
        U.S. consumers using this as a means to access affordable 
        prescription medications from Canadian pharmacies. Individuals 
        from every State in the U.S. are currently using this 
        mechanism. Means: mail-order and direct.
2. Compliance: Physicians assume that when they prescribe a medication 
        (write a script) that the patient will take their medication as 
        prescribed. They don't have any interest in where you get it 
        filled. This is not to say that they would not be concerned if 
        they thought there was a safety or cost issue. They are 
        concerned about compliance with regard to a prescribed 
        treatment plan.
                      quality/oversight and safety
    Clearly as a provider network, our major concern is the ability of 
patients to comply with a given treatment plan. When a patient cannot 
afford their medications it is costly for all of us. Are we concerned 
about quality? Absolutely. And there is a quality issue and exist on 
this side of the border. When a patient cannot take their medications, 
they most definitely will consume services elsewhere in our system, 
such as the emergency room or by being admitted to the hospital. That 
simply is not rational. This is not about people that won't comply with 
a treatment plan, this about individuals that can't afford to purchase 
prescription drugs in the country they live in. Also, let's keep in 
mind that we are talking about Canada not some third world country. 
Having said this, these individuals are willing to take the risk to 
access their medications across the border. Many of them have told us 
that there is certainly no more risk in doing this than they are at by 
not taking their medications as prescribed or not at all.
    From the perspective of safety and oversight clearly the FDA [and 
other agencies] must be concerned as to how any initiative that would 
involve re-importation of prescription drugs would be maintained under 
their current charge. Although challenging, it can be done. With regard 
to Canada it would not be that difficult to do (see Conclusions/
Recommendations). Other countries may be more difficult to monitor and 
manage.

         REASONS FOR PRICE DIFFERENTIAL IN CANADA AND THE U.S.

    To put it in the simplest of terms: the Canadian government is the 
purchaser, therefore they have implemented controls over the costs. 
Next, they do not allow direct-to consumer advertising. My 
understanding is that this type of marketing is only allowed in the 
United States and New Zealand. Essentially our major mode of control is 
through the approval process by the FDA that essentially controls entry 
into the market, not pricing. In the U.S. with its non-universal 
coverage structure, cost containment is undertaken by a myriad of 
public and private decision-makers, each with their own agenda and 
objectives. The price differential is of course going to appear even 
greater when you compare a group that has no coverage and pays out of 
pocket. They have no purchasing power, because they have no coverage. 
This is particularly true for about one-third (30 million) of the 
Medicare population.
    I recently visited with health care providers in France and in 
Canada and they seemed quite perplexed by how we could rationalize the 
cost/benefit of allowing the prescription drugs to be advertised in the 
manner that they were on television. Their point was well taken on two 
fronts: (1) someone has to pay for the costs associated with this 
advertising and (2) when I proposed that it was intended to educate 
consumers so that they could be more informed about what was available 
for their treatment: they asked where's the data to support that this 
was anything more than ``marketing'' the drugs the industry wants to 
sell or promote. They used the example of a drug for chronic 
indigestion allowing you to continue to eat foods that are clearly not 
good for you.

                 REIMPORTATION/IMPORTATION FROM CANADA

    Clearly, there is no simple answer with regard to the issues we are 
discussing. Barring any type of regulation of the pharmaceutical 
industry on this side of the border, personal reimportation from Canada 
under controlled circumstances can provide an interim solution for 
those in need of access to affordable prescription drugs. I do believe 
that with the cooperation of the industry, the FDA, the Canadian 
regulators and U. S. physicians that under a controlled demonstration 
project we could achieve a policy that would prove beneficial for all 
the stakeholders until we can produce a better solution.

                       CONCLUSION/RECOMMENDATIONS

    Personal re-importation has for all intensive purposes, been 
implemented by the American consumer. It may or may not be a long-term 
solution, but it does provide an option, particularly for the elderly, 
until we can provide appropriate levels of coverage under Medicare 
without compromising current medical benefits. Long-term viability will 
depend on the development of a program that can be implemented not just 
signed into law [as evidence by MEDSA 2000].
    Notation:

1. Canada (as does other countries) has the equivalent of the FDA with 
        regard to oversight.
2. The literature does not support fears about counterfeit drugs being 
        dispensed (at least in Canada).
3. Customer satisfaction and compliance for those currently using re-
        importation (Canada) appears high.
4. Physicians are engaged in the process. Compliance results in better 
        outcomes and potential lower costs.
    The following could/should be considered:

In order to maintain and provide an efficient means of oversight by the 
        FDA, all participating pharmacies would be registered with the 
        FDA. In order to do so, they would have to be accredited, much 
        the same as the Joint Commission (JCAHO) accredits hospitals 
        and other health institutions here in the US. A set of 
        standards would have to be met and pharmacies would be awarded 
        conditional accreditation during their first year of 
        participation. Full accreditation in year two. They would also 
        have to provide data/information to the FDA. Once all 
        requirements were met, FDA would issue unique bar codes for 
        these pharmacies to use when shipping into the US (through 
        Custom).
2. With regard to monitoring of the quality of drugs being shipped, a 
        proxy with the country (Canada) could be established. There is 
        no reason that we can not accept the standards that are equal 
        or higher established by another country. No country should be 
        allowed to participate that does not have at the very least a 
        set of standards equal to ours.
3. The role of US and Canadian physicians can be worked through the 
        development of a cross-border association (licensure and 
        protocol development).
4. Private/Public partnerships should be developed in order to reduce 
        the costs at the Federal level [while maintaining the oversight 
        (FDA)].
5. In reality the economic model regarding sales for the pharmaceutical 
        industry actually improves 1) they now get inconsistent sales 
        (unstable purchasing currently exist). Although the new sales 
        would be a lower price, it would result in stability of 
        purchasing and consistent compliance would result, which 
        according to their own mission is their objective. 2) the data 
        that would be reported to the FDA could be very beneficial to 
        research and development efforts.
    This concludes my prepared remarks. Thank you again for this 
opportunity and I would be happy to try to address your questions

                           Sample Drug Pricing
           [All dollar figures are reflected in U.S. Currency]
------------------------------------------------------------------------
                                Number
            Drug               of Tabs     Canada      U.S.     Savings
------------------------------------------------------------------------
Tamoxifen 10 mg.............         60      $7.05    $142.44        95%
Lipitor 10 mg...............         90    $106.33    $230.58        54%
Plaxil 10 mg................         30     $33.01     $94.57        60%
Prozac 10 mg................        100    $115.93    $361.28        68%
Coumadin 5 mg...............        100     $25.52     $90.07        72%
Glucophage 500mg............        100     $15.70     $86.26        82%
Prilosec 10 mg..............         30     $33.88    $144.62        77%
Fosamax 10 mg...............         30     $36.40     $85.99        58%
------------------------------------------------------------------------
Note: U.S. prices are based on AWP plus 30%. The actual cost of U.S.
  prescriptions will vary based on geographic area and by individual
  pharmacies.

  [GRAPHIC] [TIFF OMITTED] T1494.001
  
    Mr. Bilirakis. Furnish it to us, whatever suggestions you 
may have.
    Mr. Hutt.

                 STATEMENT OF PETER BARTON HUTT

    Mr. Hutt. Mr. Chairman and members of the committee, I am 
Peter Barton Hutt, a partner from the Washington, DC law firm 
of Covington & Burling, where I specialize in food and drug 
law.
    From 1971 to 1975, I served as Chief Counsel for the Food 
and Drug Administration, and I am the coauthor of the casebook 
used to teach food and drug law in law schools throughout the 
country. Each year I personally teach a full course on food and 
drug law at Harvard Law School.
    I am testifying today on behalf of the Pharmaceutical 
Research and Manufacturers of America.
    H.R. 5186, introduced by Representatives Kingston and 
Gutknecht, would substantially curtail FDA's authority to keep 
unapproved, adulterated, and misbranded drugs out of the United 
States. It would radically change the drug approval process 
that has existed in this country for the last 40 years, and it 
would seriously undermine the ability of FDA to assure that 
only safe, effective, and high quality drugs are available to 
our citizens.
    The bill has two sections, one that applies to individuals 
and the other that applies to pharmacists. The first section of 
the bill would broadly authorize individuals to import 
prescription drugs, even though those drugs are or may be 
unapproved, adulterated, or misbranded.
    Under this provision, FDA may not prevent an individual 
from importing a prescription drug if it appears to be 
approved. This provision would eviscerate FDA's current 
authority. Today, FDA can keep a domestic drug off the market 
and keep a foreign drug out of this country unless it is 
affirmatively approved by the agency. Any person attempting to 
bring a drug into the United States today has the burden to 
prove to FDA that the product complies with United States law.
    Under H.R. 5186, that burden would be switched to FDA to 
prove the product does not comply with United States law. Any 
product that merely appears to be approved by FDA would be 
permitted entry, and FDA would have no authority to ask for 
proof that it in fact meets our requirements.
    The bill also completely prevents FDA from keeping drugs 
out that are adulterated or misbranded. FDA's hands are tied as 
long as the drug appears to be approved. There is no 
prohibition at all for adulteration or misbranding.
    Now, H.R. 5186 may be intended to apply only to individuals 
importing drugs in very small quantities for their own personal 
use, but the language in fact contains no such limitation. It 
refers only to individuals who are not in the business of 
importing prescription drugs. This would hamstring FDA 
enforcement.
    The second section of the bill would permit pharmacists to 
reimport prescription drugs. When Congress passed a 
reimportation amendment into law 2 years ago, it provided that 
the amendment would not go into effect until the Secretary of 
HHS demonstrated it would not pose new health and safety risks. 
Both Secretary Shalala then and Secretary Thompson now have 
each concluded that they could not make that demonstration.
    H.R. 5186 would therefore go into effect, despite the risks 
that both Secretaries concluded a reimportation provision would 
present.
    The simple fact is that FDA already is overwhelmed by the 
volume of drug imports coming into this country. The 
reimportation prohibition is an important tool to help FDA stem 
the tide of violative products.
    Just 2 months ago, Congress added another tool in the 
Bioterrorism Act to give FDA increased power to enforce the 
current standards for drug imports. But H.R. 5186 would reduce 
FDA authority over imports and invite unscrupulous parties to 
bring counterfeit, substandard, and inappropriately labeled and 
stored products into this country from all over the world, with 
substantial risks to the American public.
    [The prepared statement of Peter Barton Hutt follows:]

    Prepared Statement of Peter Barton Hutt, Partner, Covington and 
Burling, on Behalf of The Pharmaceutical Research and Manufacturers of 
                                America

    Mr. Chairman and Members of the Subcommittee: Thank you for the 
opportunity to testify today on the important issue of the importation 
of pharmaceuticals. I am Peter Barton Hutt, a partner in the law firm 
of Covington & Burling, where I specialize in food and drug law. From 
1971 to 1975, I was privileged to serve as Chief Counsel for the Food 
and Drug Administration. I have co-authored a leading law school 
textbook on federal food and drug law and have authored numerous 
articles and reviews of developments in the area. I am here today on 
behalf of the Pharmaceutical Research and Manufacturers of America 
(PhRMA) to present the industry's views. PhRMA represents the nation's 
leading research-based pharmaceutical and biotechnology companies that 
are devoted to inventing new life-saving, cost-effective medicines.

      I. IMPORTATION UNDER THE FEDERAL FOOD, DRUG AND COSMETIC ACT

    Section 801(a) of the Federal Food, Drug, and Cosmetic Act (FD&C 
Act) requires FDA, working with Customs, to prevent the importation of 
any drug that ``appears'' to be ``adulterated,'' ``misbranded,'' or 
``unapproved.'' See 21 U.S.C. Sec. 381(a).
    The adulteration provisions in section 501 of the FD&C Act apply 
where, for example, a drug has been manufactured under unsanitary 
conditions; it has not been manufactured in accordance with ``current 
good manufacturing practice'' (the standard used to ensure drug 
quality); it contains an unsafe color additive; it fails to meet 
requirements for purity and strength; or its container is made from a 
poisonous or deleterious substance. See 21 U.S.C. Sec. 351.
    The misbranding provisions in section 502 of the FD&C Act apply 
where, for example, a drug has labeling that is false or misleading; 
that fails to contain adequate warnings against dangerous use in 
pathological conditions or by children or against unsafe dosages or 
methods of administration; that lacks adequate directions for its 
intended use; that is an imitation of another drug; etc. See 21 U.S.C. 
352.
    The approval requirements in section 505 of the FD&C Act require 
that every new drug sold in the United States be approved in advance by 
FDA based on proof of safety and effectiveness. It is unlawful under 
the FD&C Act for anyone to introduce into interstate commerce a new 
drug that is not covered by an approved new drug application (NDA) or 
abbreviated new drug application (ANDA).1 Approval must be 
sought on a manufacturer-by-manufacturer and product-by-product basis. 
Approval of an application applies only to the specific drug product 
identified in the application and manufactured in the facilities and 
according to the specifications and procedures that are described in 
the application. When a product is introduced into interstate commerce 
that does not comply with an approved application, it is considered an 
unapproved new drug in violation of section 505 of the FD&C Act. It is 
also misbranded under section 502.
---------------------------------------------------------------------------
    \1\ FDA Sec. Sec. 301(d) & 505(a).
---------------------------------------------------------------------------
    These basic rules cover importation, since importing is a form of 
introducing a drug into interstate commerce. Thus, a drug that has not 
been approved by FDA for marketing in the U.S. may not be imported, 
even if another country has approved it for sale in that country. There 
is no exemption from the requirements of the FD&C Act for importations 
of a foreign version of a U.S.-approved drug.2
---------------------------------------------------------------------------
    \2\ See, e.g. FDCA Sec. 801(a).
---------------------------------------------------------------------------

                  II. THE DRUG IMPORTATION ACT OF 2002

Summary of Legislation
    The ``Drug Importation Act of 2002,'' introduced by Representative 
Kingston, would substantially curtail FDA's authority to keep 
unapproved, adulterated, and misbranded drugs out of the United States. 
The bill has two sections, one that applies to individuals and the 
other to pharmacists. Each would devastate the legal protections 
currently in place for the American public against unapproved, 
substandard, counterfeit, and potentially unsafe or ineffective 
medicines.
    Section 2(a) of the bill would add a new subsection (p) to section 
801 of the FD&C Act broadly authorizing individuals to import 
prescription drugs even though those drugs are or may be unapproved, 
adulterated, or misbranded.
    Under this new section 801(p), FDA ``may not prevent an 
individual'' from importing a prescription drug that ``appears to be 
approved.'' This reverses and overrides the burden of proof under 
existing section 801(a). Under existing law, FDA can keep a drug out if 
it appears to be unapproved; under the Kingston bill, FDA must let the 
drug in if it appears to be approved--even if it turns out not to be 
approved. For example, unscrupulous overseas sellers can make 
unapproved copies and counterfeits and sell them to unsuspecting 
Americans. FDA would be powerless to keep those drugs out of the 
country as long as they ``appear'' to be approved. By analogy, imagine 
a similar provision that prevented the Treasury Department from keeping 
counterfeit $100 bills out of the United States as long as they 
``appear'' to be genuine.
    The bill also completely prevents FDA from keeping drugs out that 
are adulterated or misbranded. FDA's hands are tied as long as the drug 
``appears to be approved''--there is no reference at all to 
adulteration or misbranding. A drug could easily appear to be approved 
and yet be adulterated or misbranded (for example, it could be 
manufactured in violation of current good manufacturing practice or its 
labeling could fail to meet FDA requirements). FDA has made clear that 
even approved drugs can be adulterated or misbranded (see 21 C.F.R. 
Sec. 314.170), so an approval standard alone is completely inadequate 
to allow FDA to enforce the law.
    The bill provides that it only covers a prescription drug that 
``does not appear to be a narcotic'' and that ``appears to be 
manufactured'' in a registered establishment. However, these 
limitations are illusory because of the reversed burden of proof. Just 
as with the approval requirement, it would be a simple matter to evade 
these requirements through counterfeits and false paperwork so that 
drugs ``appear'' not to be a narcotic and ``appears'' to be made in 
registered plants. FDA would be powerless to act as long as the drugs 
meet these appearance standards.
    Furthermore, the bill may be intended to apply only to individuals 
importing drugs for their personal use, but the language in fact 
contains no such limitation. It refers only to individuals who are 
``not in the business of importing prescription drugs,'' and cites 
section 801(g) of existing law. Section 801(g), which was added by the 
reimportation law in 2002 and has never been implemented, merely 
repeats the same language, without any definition or guidance. FDA 
would be hamstrung by the need to prove whether an individual is or is 
not in the ``business'' of drug importation before the agency could 
detain violative drugs.
    Section 2(b) of the bill would add a new subsection (q) to section 
801 of the FD&C Act requiring FDA to establish a program allowing 
pharmacists to reimport prescription drugs--thereby overriding the 
prohibition on reimportation established under the PDMA. When Congress 
passed a reimportation amendment in to law two years ago (the Medicine 
Equity and Drug Safety Act), it provided that the amendment would not 
go into effect unless the Secretary of Health and Human Services 
demonstrated that it would not pose new health and safety risks. See 21 
U.S.C. Sec. 384(l). Secretary Shalala and Secretary Thompson each 
concluded that they could not make that demonstration.3 The 
current bill contains far fewer safeguards than the previous law, yet 
it omits the demonstration requirement--hence, it would go into effect 
despite the risks it would present.
---------------------------------------------------------------------------
    \3\ See .
---------------------------------------------------------------------------
    The bill also would weaken existing labeling requirements by 
authorizing the use of ``alternative labeling'' to avoid the 
intellectual property rights of pharmaceutical companies (new section 
801(q)(4). Such alternative labeling may or may not adequately provide 
for the safe and effective use of the products in question; it also may 
or may not comply with FDA approval requirements, yet the bill would 
allow it.
    The simple fact is that FDA already is overwhelmed by the volume of 
drug imports coming into the United States. The reimportation 
prohibition is one of the few tools at the Agency's disposal to help 
stem the tide of violative products. This bill would eliminate that 
important tool and invite unscrupulous parties to bring counterfeit, 
substandard, and improperly labeled and stored products into this 
country from all over the world, with substantial risks to the American 
public.

Modifications or Improvements Won't Make Reimportation Proposals 
        ``Safe''
    Having outlined the above concerns, proponents of reimportation 
believe that, with certain modifications, reimportation can be made 
``safe.'' Such modifications have included the incorporation of drug 
testing or end-product testing requirements, chain of custody 
provisions and/or limitations to imports from Canada only. Even with 
these modifications, as explained below, the Kingston proposal, or any 
other proposal, could not guarantee safety.
Drug Testing and Chain of Custody Requirements
    The inclusion of end product testing is not adequate to demonstrate 
that a drug was manufactured in accordance with U.S. approval standards 
and quality requirements. Testing at the moment of import also does not 
ensure the integrity of the drug throughout its shelf life. Drugs are 
highly sensitive and can become adulterated and dangerous during 
shipping if not properly controlled and monitored. Some medicines must 
be stored at very precise temperatures at every point in time from 
production to use. Gel capsules may melt, and liquid products can 
become contaminated. Any of these things could cause a drug to have a 
shortened shelf life, even if it passed testing at the moment of 
arrival into the U.S.
    The inclusion of a chain of custody provision, otherwise known as a 
drug pedigree requirement, also does not guarantee safety. According to 
the FDA in testimony on July 9, 2002 before the Senate Special 
Committee on Aging, the agency stated:
          ``Because we could not go certify and look in the other 
        countries, the bill that they refuse to implement or decline to 
        implement would have replaced the normal quality control system 
        with a testing process with a paper or so-called pedigree 
        process that attempted to follow the trail of the drugs, but 
        both Secretaries found that the paper process could be 
        forwarded by faking documents and that you really couldn't 
        adequately test these products, either economically or 
        feasibly.''
    FDA's position on end-product testing and drug pedigree can be 
better understood with the following explanation of the way U.S. drugs 
must be produced in accordance with exacting standards and detailed 
specifications outlined in a New Drug Application (NDA) that are 
extensively reviewed by the Food and Drug Administration (FDA).
    The individual steps and controls in U.S. pharmaceutical production 
are set out in the chemistry and manufacturing controls section (CMC) 
of the NDA. In addition, the FDA inspects the manufacturing facility 
prior to NDA approval to assure that the product can be manufactured in 
full compliance with the procedures described in the NDA. Each lot of 
manufactured pharmaceutical product is tested by very specific 
procedures using high standards to insure the product meets all quality 
specifications. This testing occurs prior to release into the 
marketplace so that the American patient receives a safe and 
efficacious product that will treat the underlying medical condition 
that he or she suffers from. Pharmaceutical companies face a myriad of 
complex issues as manufacturing processes are designed.
    All of the following areas must be carefully addressed by the 
company and monitored by the FDA to assure that only drug product of 
the highest quality reaches consumers.
    Personnel--People are the most important single element in assuring 
that the highest quality products are produced. Employees must be 
competent in their specialties by reason of academic training, 
experience and continuing job training, which include meeting all 
aspects of Good Manufacturing Practices (GMP) regulations. A 
comprehensive awareness of how to insure drug quality and an 
understanding of their personal contribution is essential for a company 
to have a total quality system.
    Product Design--The quality attributes of products must be 
``designed-in'' during research and development, confirmed during 
clinical evaluations, and controlled using well-defined systems 
throughout manufacturing and distribution. Effective quality control 
programs include continuing evaluation of marketed product directed 
toward product improvement programs.
    Facilities, Systems and Equipment--Facilities, systems and 
equipment must be designed, selected, installed and maintained to be 
efficient and reliable to help assure that finished product meets the 
defined quality characteristics. Automation may be used where it 
contributes to the maintenance and uniformity of quality in both 
manufacturing and testing operations.
    Specifications--Detailed specifications for obtaining and assuring 
the quality of raw materials, intermediates, packaging components, 
labeling and finished products must be described in great detail in the 
NDA. Even something as simple as the water used during manufacturing 
must meet exacting specifications. Companies must work closely with 
vendors who certify their products. This gives added assurance of the 
acceptability of purchased materials as received.
    Procedures--Written procedures are prepared and followed that 
describe in extensive detail all steps required to control 
manufacturing, to monitor support systems and for the evaluation of 
processes, intermediates and finished products. A procedure is 
available that describes the requirement to monitor (audit) all systems 
and operations as a further method of assuring total control and safety 
of the product. FDA inspections of manufacturing plants every few years 
confirm these activities are up to their high standards.
    Processes--The establishment of consistently effective production 
processes is critical to assuring finished product quality. These 
processes must be supported by in-process control monitoring and/or 
process validation.
    Lot Control--A key element in maintaining administrative control of 
information on a drug throughout its production is the lot control 
number system and related documentation. This lot identification system 
provides the means for establishing a historical record of the entire 
production, testing and approval procedure. This numbering system 
provides a necessary method for tracing product distribution and its 
retrieval if required (e.g., a recall is ordered).
    Packaging and Stability Testing--Pharmaceuticals are carefully 
packaged to insure optimal stability. Products are frequently evaluated 
for stability so that, as they are distributed to the thousands of 
pharmacies, doctor's offices, and hospitals, their potency is not lost. 
Storage conditions are specified in the NDA. Each lot is given an 
expiration date that, if the appropriate storage conditions are met, 
assures that the product (in its original container) will have full 
potency. The labeling on these packages is reviewed and approved by the 
FDA and contains critical safety and use information for medical 
practitioners.

Canada-only Limitations
    On its face, limiting commercial importation to drugs imported from 
Canada appears to be safe. In practice, a drug could be imported from 
anywhere in the world, as long as it entered into the U.S. through 
Canada. There is no effective way to prevent the transshipment of drugs 
from third world countries into Canada and then into the U.S. The FDA 
has already warned that if importation from Canada were enacted into 
law, Canada could become a gateway for counterfeit drugs.
    At a September 5, 2001, hearing before the Senate Consumer Affairs, 
Foreign Commerce and Tourism subcommittee, William Hubbard, FDA's 
Senior Associate Commissioner for Policy, Planning & Legislation, 
warned,
          ``Even if the Canadian system is every bit as good as ours, 
        and I don't know whether it is or not . . . the Canadian system 
        is open to vulnerabilities by people who will try to enter the 
        U.S. market because again that's where the money is.''
    During a July 9, 2002 hearing before the Senate Special Committee 
on Aging, Hubbard further warned,
          ``I talked to a dozen health Canada officials and I said if 
        [importation of drugs from Canada] would have happened, would 
        you take responsibility for the safety of these drugs coming 
        into America, and they said absolutely not. Why would they? 
        They are not going to their citizens.''
    Furthermore, Canadian law explicitly exempts pharmaceuticals 
intended for export from any regulatory oversight whatsoever. Section 
37 of the Canadian Food and Drugs Act provides:
          ``This Act does not apply to any packaged food, drug, 
        cosmetic or device, not manufactured for consumption in Canada 
        and not sold for consumption in Canada . . .''
    Even if Canada had the authority to regulate exports, its 
regulatory system would be quickly overwhelmed. Currently, the Canadian 
drug market is less than 10% of the U.S. drug market. Even creating a 
modest U.S. demand for drugs transshipped through Canada by lifting the 
current importation ban would pose an enormous challenge to that 
distribution and regulatory system.

Reimportation by Pharmacies Breaks Drug Distribution Chain Protecting 
        Drug's Integrity
    The cornerstone of pharmaceutical development in the United States 
is the total control of the process from the selection of raw 
materials, design of the manufacturing process, packaging of the final 
product, evaluation of the conditions for storage (including the 
establishment of an expiration date after which the medication should 
be discarded), and careful selection of the distribution pathway. The 
risk that patients will receive sub-potent or even counterfeit 
medicines will occur if the law that restricts the distribution pathway 
to that chosen by the manufacturer is relaxed, to allow pharmacists or 
wholesalers to import pharmaceuticals from other countries.
    Regulations established by the FDA set forth the licensing 
requirements for wholesalers, set forth minimum requirements for the 
storage and handling of prescription drugs and for the establishment 
and maintenance of records of drug distribution by wholesale 
distributors. These record keeping requirements also provide for the 
speedy recall of specific lots of product if necessary. Even in cases 
where drug product may have originated at the original manufacturer, 
there is no guarantee that the exacting storage conditions identified 
in the NDA have been maintained to assure product quality.
    The following cases are representative of the unforeseen problems 
that could arise if pharmaceutical manufacturers lose control of the 
drug distribution system:
    Drug Distribution to Foreign Countries--Pharmaceuticals destined 
for export routinely have different packaging requirements and even may 
be manufactured in different dosage forms, shape, size, and color than 
according to the parameters set forth in the FDA-approved NDA since the 
country of destination often will have different regulatory 
requirements. Clearly in the latter case, such product should not be 
permitted back in the US since it does not meet the criteria set forth 
in the approved FDA license and would lead to patient confusion. If the 
product does meet US specifications it must be repackaged prior to any 
distribution to pharmacies so that the packaging meets FDA labeling 
requirements.
    Product Recall--It is important to note that even if such 
repackaging efforts are successful, American patients are at risk in 
the event of a product recall. Although rare, such recalls need to be 
handled in a rapid and sometimes urgent manner. If a lot were 
manufactured for export, there are no provisions or obligations on the 
part of the foreign country to notify those American consumers who 
receive the reimported products. Our FDA would not be able to enforce a 
recall without receiving extensive shipping documentation prior to 
importation that identified the lot number, the country that the 
product came from, and every wholesaler and pharmacist that imported 
the product back into the US. Such an information infrastructure at the 
FDA would cost tens of millions of dollars to establish and maintain 
and would clearly be incomplete, increasing the risk to patients who 
could not be contacted.
    Repackaging of Pharmaceuticals--Many pharmaceuticals that are 
imported or reimported into the US will have to be repackaged to meet 
the standards set forth in the NDA. There are several difficulties 
associated in assuring product purity and potency as well as conveying 
important information to health care providers. The repackager 
traditionally uses materials that are not specified in the NDA. There 
is the well-documented case of bleached cotton from a supplier that 
contained trace amounts of chlorine in the cotton. This resulted in 
accelerated degradation of the active drug substance, and inactive 
product. A manufacturer might specify an amber or opaque bottle because 
of light sensitivity; the use of other materials might accelerate 
degradation. If the correct materials are not used the patient is at 
risk of receiving sub-potent pharmaceuticals. Use of non-specified 
container-closures or repackaging may occur in a facility without 
appropriate environmental controls and could lead to accelerated 
degradation because of increased exposure of the pharmaceutical to 
excessive water vapor. New safety information is often being added to 
the drug label by the manufacturer following FDA approval. There is no 
provision for repackagers or importers to keep up with critical label 
changes that are mandated by the FDA, so that many repackaged goods 
would be incorrectly labeled.
    Unknown Storage Conditions--Not all pharmaceuticals come in pill or 
tablet form. There are capsule formulations, liquid formulations for 
oral administration, freeze-dried powders that must be reconstituted, 
transdermal patches, powders, creams, and lotions for external use, 
drops for ocular administration, and liquid concentrates for 
intravenous formulation. Some timed-release pills are designed to 
carefully control the release of drug following administration. Every 
product that is approved by the FDA is individually evaluated for 
stability and potency over the period from time of release from the 
manufacturer to the expiration date. Conditions for storage in the 
manufacturers' original container are specified in the NDA in detail so 
that the product that the consumer receives will be both safe and 
efficacious when taken as prescribed. As noted above, the PDMA 
specifies minimal conditions for storage and handling by distributors. 
There is no ready way for the consumer or the FDA to know whether the 
product that is imported into this country has been stored 
appropriately. Extremes in temperature, humidity, or the repackaging 
process are likely to result in a product that deviates markedly from 
the original specifications. Testing may reveal the current potency of 
a product but would not be predictive of future potency if the 
pharmaceutical has been inappropriately handled or stored.
    Paper Trail and Authenticity Testing--Reimportation proposals rely 
on importers to provide the FDA with documentation regarding the source 
of the pharmaceutical being brought into the US. As discussed above, it 
is inappropriate and dangerous to rely solely on such documents, which 
can be easily forged. Several years ago a company was victimized in the 
United Kingdom by a large counterfeit operation that utilized two 
separate sets of accounts to hide the illegal transactions. The 
addition of ``authenticity'' and degradation testing will not provide 
American consumers with assurance that products are safe and effective. 
There is no regulatory definition for ``authenticity.'' Simple 
appearance or even presence of the active ingredient is false comfort 
that the drug is identical with that made by the ethical pharmaceutical 
company. A simple degradation test will not reveal whether the product 
was properly stored. All drugs marketed in the US must be required to 
adhere to the same standards of safety, efficacy, and quality in order 
to insure the safety of American patients.
    Safety Issues--Counterfeit preparations are not manufactured in 
accordance with the original NDA. Counterfeiters may use different 
starting materials, intermediates or additives that are not acceptable. 
The counterfeit products are not manufactured in accordance with GMPs. 
It is extremely difficult to document any of these violations. As the 
result of a tragic incident of distribution of contaminated cough syrup 
to Haiti in the mid-1990s, the World Health Organization (WHO) has made 
the need to test all starting materials and the importance of GMP 
compliance a priority. The sophisticated counterfeiter is not concerned 
with the letter of the law or public health. The quality of a medicine 
is a measure of numerous factors including reproducibility of the 
physical state in terms of particle size, crystal structure, color, 
density, and other characteristics. The ability of the active 
ingredient to be manufactured into the final dosage form with all the 
other materials (usually 5 to 30 other substances called excipients) as 
well as the amount of impurities present is the measures of its 
quality. Pharmaceutical companies have large numbers of personnel and 
many departments to insure that the necessary procedures are carried 
out and the standards of drug quality are met. There is no tolerance 
for impurities or deviation from specifications for injected medicines 
that must be sterile and pure, as the injection into the blood stream 
of preparations with small amounts of glass or other contaminants could 
cause significant medical harm. Sophisticated counterfeiters can and 
have manufactured pharmaceuticals that look every bit like the ones 
made by the ethical pharmaceutical company. However, even if the pill 
or other pharmaceutical preparation has the same active ingredient, 
there is no guarantee that there won't be dangerous impurities present 
or that the medicine will have the same clinical activity. Even 
differences in particle size are critical to the drug's safety and 
effectiveness. Such differences caused, for example, the lack of 
activity in a number of aspirin products manufactured and marketed 
during the 1960s and 1970s.
    Hopefully all of these examples illustrate that legalizing 
importation by pharmacists or other parties other than the manufacturer 
opens up an avenue for unscrupulous counterfeiters that does not 
presently exist. Such products may have no active drug ingredient, sub-
potent amounts of active ingredient, or potentially toxic additives any 
of which will place American patient's lives in danger. Even drugs 
produced by the original manufacturer pose risks if they have not been 
appropriately stored prior to reimportation. Extremes in temperature 
and humidity accelerate the deterioration of the pharmaceutical 
substance. In addition, it is difficult to conceive how a recall could 
be mounted if the imported products were subject to a safety recall in 
a foreign country. The manufacturer would not have any knowledge of the 
distribution system for these imported products.
    In order to continue assuring American patients medicines are safe, 
effective, and meet the highest quality standards, the current controls 
on manufacturing and distribution must be maintained. Only the full 
battery of quality testing conducted by the manufacturer coupled with 
complete knowledge of the domestic distribution process can assure the 
margin of safety Americans expect.

          III. THE MEDICINE EQUITY AND DRUG SAFETY ACT OF 2000

    In October 2000, Congress passed legislation to permit the 
reimportation of prescription drugs by commercial importers. The law 
did not take effect, due to concerns about whether it could be 
implemented safely.
    The Medicine Equity and Drug Safety Act of 2000 (MEDSA) amended 
section 801(d)(1) of the FDCA and added a new section 804 to the Act. 
Under the new section 804, an importer or wholesaler--in addition to 
the original manufacturer--may reimport U.S.-manufactured drugs into 
the United States.
    The MEDSA went further than the Kingston bill in an attempt to 
address safety issues and included the following provisions:

 Section 804(b) states that FDA's reimportation regulations 
        must contain safeguards to ensure that imported products comply 
        with section 505 of the FD&C Act (e.g., they must be approved, 
        and they must be safe and effective for their intended uses), 
        as well as sections 501 and 502 (which prohibit adulteration 
        and misbranding);
 Section 804(d) requires importing pharmacists and wholesalers 
        to provide information and records to FDA, including the 
        results of testing necessary to assure compliance with 
        specifications;
 Section 804(e) states that testing required by section 804(d) 
        must be performed by the importer or the manufacturer, and--if 
        the testing is performed by the importer--requires the 
        manufacturer to provide information needed to authenticate the 
        product and to confirm that the labeling complies with the FD&C 
        Act;
 Section 804(g) requires FDA to suspend the importation of 
        specific products or importation by specific importers if the 
        agency discovers a pattern of importation of counterfeit 
        products or products that violate section 804,
    Even with these explicit so-called safeguards in place--safeguards 
that went far beyond those contained in the Drug Importation Act of 
2002--two HHS Secretaries refused to implement MEDSA because they could 
not demonstrate that its implementation would impose no additional risk 
to the public's health and safety or that it would result in a 
significant reduction in the cost of covered products to the American 
consumer.
    Specifically, in December 2000, Secretary Shalala declined to 
implement MEDSA, citing flaws in the legislation that could ``undermine 
the potential for cost savings associated with'' prescription drug 
reimportation and ``could pose unnecessary public health risks.'' In 
July 2001, Secretary Thompson also declined to implement MEDSA on the 
ground that the safety of prescription drugs could not be adequately 
guaranteed if reimportation were permitted under its provisions. 
``Opening our borders as required under this program would increase the 
likelihood that the shelves of pharmacies in towns and communities 
across the nation would include counterfeit drugs, cheap foreign copies 
of FDA-approved drugs, expired drugs, contaminated drugs, and drugs 
stored under inappropriate and unsafe conditions,'' he wrote. 
Accordingly, section 804 of the FD& C Act, added by MEDSA, is not in 
force.

                            IV. PERSONAL USE

    Notwithstanding the preceding, FDA has had a ``personal 
importation'' policy since the mid 1980s. This policy advises FDA 
inspectors that they may exercise enforcement discretion to permit the 
importation of an unapproved new drug for personal use in certain 
situations. In particular, enforcement discretion may be applied if the 
drug is intended for the treatment of a serious condition for which 
effective treatment is not available in the U.S., provided the 
individual seeking to import the product affirms in writing that a 
U.S.-licensed doctor has assumed responsibility for the individual's 
treatment with that product. Further, there can be no known 
commercialization or promotion of the product to U.S. residents by 
those involved in its distribution. Finally, the product must be 
imported for personal use, meaning the individual may import no more 
than a 90-day-supply. The personal importation policy does not permit 
the exercise of enforcement discretion to permit the importation of 
cheaper versions of FDA-approved drugs. It was intended solely to allow 
unapproved medications into the U.S. for compassionate use. In 
explaining the origins of this policy, FDA's Deputy Commissioner Bill 
Hubbard emphasized in testimony before the Senate Special Committee on 
Aging on July 9, 2002:
          ``. . . the FDA at that time attempted to carve out an 
        exception to allow patients to bring in a 90-day supply of a 
        drug that is unapproved for which there is no therapy in this 
        country . . . so if you had a treatment for a given disease 
        already here, you couldn't bring it in, but if you had a 
        disease like a cancer or AIDS that had no treatment, FDA would 
        use its enforcement discretion to allow that in. It's not in 
        the law. It is just enforcement discretion on the agency's 
        part, and that compassionate exception has been misinterpreted 
        . . .''
    To that end, FDA has taken the position that the personal 
importation policy has outgrown its usefulness and now presents a 
threat to public health. In testimony before the Subcommittee on 
Oversight and Investigations of the House Committee on Energy and 
Commerce in June 2001, Hubbard reported that ``importing prescription 
drugs for personal use is a potentially dangerous practice,--and 
explained that ``FDA and the public do not have any assurance that 
unapproved products are effective or safe, or have been made under U.S. 
good manufacturing practices.'' Drugs that are manufactured in the 
U.S., exported, and then reimported by a third party ``may not have 
been stored under the proper conditions, or may not be the real 
product, because the U.S. does not regulate foreign distributors or 
pharmacies.'' Therefore, he explained, ``Unapproved drugs and 
reimported approved medications may be contaminated, subpotent, 
superpotent, or counterfeit.'' Patients might take a product ``that 
could be harmful, or fatal.'' He added that FDA has concluded there is 
less need for the personal importation policy now than when it was 
adopted in 1988.
    The agency therefore proposed to the Department of Health and Human 
Services that it eliminate its personal use policy for mail imports:
          ``And 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 has caused this 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 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 lives or at least to give them hope of saving their 
        lives. ``We need to be able to make a blanket assessment that 
        these things are not safe for American consumers and should be 
        turned back, and I believe the Customs Service agrees with 
        that. And so, if Secretary Thompson and the Administration 
        agree, that will be the approach we intend to take.'' 
        4
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    \4\ See, e.g., ``Continuing Concerns Over Imported 
Pharmaceuticals,'' hearings before the Subcommittee on Oversight and 
Investigations, House Energy and Commerce Committee, June 7, 2001 
(Cmte. Print No. 107-30).
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                V. FEDERAL AGENCIES OPPOSE REIMPORTATION

    After enactment of MEDSA in 2000, federal agencies charged with law 
enforcement and protecting the public health made clear their 
opposition to reimportation. For example, in 2001 U.S. Customs and DEA 
officials testified before the House Energy and Commerce Committee that 
thousands of counterfeit and illegal drugs are already coming across 
the borders and through the mail from other countries. These agency 
officials recommended tightening our current regulation of 
reimportation of pharmaceuticals. In a follow-up letter to the Energy 
and Commerce Chairman and Ranking Member, a DEA official wrote that the 
DEA opposes reimportation because it ``would hinder the ability of 
federal law enforcement officials to ensure that drugs are imported 
into the United States in compliance with long-standing federal laws 
designed to protect the public health and safety.'' In March 2002, the 
Administrator of the Centers for Medicare and Medicaid Services (CMS) 
told the Senate Finance Committee that CMS opposes the reimportation of 
prescription drugs into the U.S. ``We have opposed it,'' he stated. 
``There is no way for FDA to monitor and regulate drugs coming in from 
Canada, Mexico, or other countries.''
    As recently noted by the FDA, the current ``closed'' regulatory 
system has been very successful in preventing unapproved, adulterated 
or misbranded drug products from entering the U.S. stream of commerce. 
Legislation that would establish other distribution routes for drug 
products, particularly where those routes routinely traverse a U.S. 
border, creates a wide inlet for counterfeit drugs and other dangerous 
products that are potentially injurious to the public health and a 
threat to the security of our nation's drug supply.'' 5
---------------------------------------------------------------------------
    \5\ Letter of Lester M. Crawford to The Honorable Thad Cochran, 
July 17, 2002.
---------------------------------------------------------------------------
    The Kingston bill would recreate the public health risk of 
counterfeit, unsafe, and adulterated drugs that Congress sought to 
eliminate in the late 1980s with the Prescription Drug Marketing Act. 
Reestablishing a system where wholesalers and pharmacists may import 
prescription pharmaceuticals in to the U.S., and codifying an expanded 
personal importation policy, would recreate the very public health risk 
that the PDMA was designed to eliminate.

             VI. THE PRESCRIPTION DRUG MARKETING ACT (PDMA)

    In closing Mr. Chairman, while legislative efforts to eliminate the 
current reimportation restrictions under the FD&C Act may be new, the 
health and safety problems posed by counterfeit, subpotent, superpotent 
or contaminated reimported pharmaceuticals are not. The perils of lax 
oversight of reimportation from abroad had been examined in a series of 
groundbreaking Congressional oversight hearings in the mid 1980s by the 
House Energy and Commerce Committee's Oversight and Investigations 
Subcommittee, chaired by Mr. Dingell. One well-publicized example 
uncovered by Subcommittee investigators involved importation and sale 
to consumers of more than one million counterfeit, ineffective birth 
control pills, complete with counterfeit packaging and 
labeling.6 The Subcommittee also uncovered numerous 
instances of reimported products having exceeded their expiration dates 
or having been improperly stored being sold into the U.S. 
market.7
---------------------------------------------------------------------------
    \6\ Dangerous Medicine: The Risk to American Consumers From 
Prescription Drug Diversion and Counterfeiting, 99th Cong., 2nd Sess. 
22 (Comm. Print 99-2 1986).
    \7\ See, e.g., Prescription Drug Diversion and Counterfeiting, Part 
1, Hearings before the Subcomm. on Oversight and Investigations of the 
House Energy and Commerce Comm., July 10, Aug. 7, Sept. 19, Oct. 31, 
Dec. 6, 1985 (Cmte. Print No. 99-61).
---------------------------------------------------------------------------
    In calling for legislation to ban the reimportation of FDA-approved 
drugs sent abroad, the Subcommittee described the public health and 
safety concerns of allowing ``American goods returned'' policies as 
follows: ``[T]he clear and present danger to the public health from 
reimported pharmaceuticals is the threat that subpotent, superpotent, 
impotent or even toxic substances labeled as U.S.-produced legend drugs 
will enter the distribution system.'' 8 The House Energy and 
Commerce Committee concluded that permitting reimportation of American 
drugs ``prevents effective control or even routine knowledge of the 
true sources of merchandise in a significant number of cases.'' 
9 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.'' 
10 Indeed, ``the very existence of the market for reimported 
goods provides the perfect cover for foreign counterfeits.'' 
11
---------------------------------------------------------------------------
    \8\ Uncertain Returns: The Multimillion Dollar Market in Reimported 
Pharmaceuticals, 99th Cong., 2nd Sess. 23 (Comm. Print 99-GG 1986).
    \9\ H.R. Rep. No. 76, 100th Cong. 6-7 (1987).
    \10\ Id.
    \11\ Dangerous Medicines: The Risk to American Consumers from 
Prescription Drug Diversion and Counterfeiting, 99th Cong., 2d Sess. 22 
(Comm. Print 99-2 1986).
---------------------------------------------------------------------------
    Investigators also were not persuaded that allowing greater 
reimportation would lead to lower priced prescription drugs available 
to U.S. consumers.
          Pharmaceuticals reimported by diverters displace full price 
        sales in the wholesale market. Moreover, prices to ultimate 
        consumers are generally not lowered as a result of diversion. 
        Rather, the profits go to the various middlemen, here and 
        abroad, while consumers bear the risk.12
---------------------------------------------------------------------------
    \12\ Uncertain Returns: The Multimillion Dollar Market in 
Reimported Pharmaceuticals, 99th Cong. 2nd Sess. 32. See also, 
Dangerous Medicine: The risk to American Consumers From Prescription 
Drug Diversion and Counterfeiting, 99th Cong. 2nd Sess. 25-26 (``there 
is little or no significant benefit to consumers from pharmaceutical 
reimportation, and there are obvious costs in terms of health and 
safety risks and the utilization of scarce FDA resources.'').
---------------------------------------------------------------------------
    In response to the abuses uncovered, the Energy and Commerce 
Committee reported, and Congress passed, the Prescription Drug 
Marketing Act (PDMA), which added section 801(d)(1) to the FD&C Act, in 
order to protect U.S. consumers from the ``wholesale market'' and the 
``diversion market'' that were bringing in drugs that had been 
improperly stored, handled, and shipped, and from counterfeit and 
unapproved products.
    Under section 801(d)(1) of the FD&C Act, a drug that is 
manufactured in the U.S. pursuant to an approved NDA and shipped to 
another country may not be reimported into the U.S. by anyone other 
than the original manufacturer.13 This prohibition on 
reimportation applies even if the product fully complies with a U.S. 
new drug application or abbreviated new drug application. The provision 
restricting the right to reimport U.S.-drugs to the original 
manufacturer was designed to ensure that only the party that can truly 
vouch for the pedigree of a drug is allowed to bring that medicine back 
into the country. This gives FDA an important tool to prevent 
substandard and counterfeit medicines from coming into the United 
States under the guise of American goods returned.
---------------------------------------------------------------------------
    \13\ FDCA Sec. 801(d)(1).
---------------------------------------------------------------------------
    The ``closed'' U.S. drug regulatory system is undoubtedly the most 
protective in the world. But even this system has not kept unscrupulous 
criminals from successfully importing unapproved, adulterated or 
misbranded drug products into the medicine cabinets of American 
consumers. Easing restrictions on the importation of drugs will make 
the current situation worse and offers consumers nothing more than a 
more dangerous drug supply in exchange for the false hope that prices 
will be lowered. I urge this Subcommittee to reject efforts to erode 
the ability of the FDA to ensure the safety and efficacy of the drugs 
sold in the U.S. by easing the current restrictions on the importation 
of pharmaceutical products.
    Thank you for the opportunity to testify. I would be happy to 
answer any questions you may have.

    Mr. Bilirakis. Thank you very much, Mr. Hutt.
    Mr. Copeland.

                    STATEMENT OF DON COPELAND

    Mr. Copeland. Mr. Chairman, my name is Don Copeland. I have 
been a pharmacist in Scottsboro, Alabama, for over 30 years; 
since 1987, the President of Associated Pharmacies, 
Incorporated, a buying cooperative of some 750 pharmacies in 43 
States. I will provide an oral summary to my written statement, 
which I ask to be placed in the record.
    Either because they cannot afford the cost of prescription 
drugs in the United States or simply that they like to save 
money, a number a growing number of Americans are purchasing 
drugs from foreign sources.
    Through previous hearings, this committee is well aware of 
the dangers of drugs obtained through shadowy Internet 
companies whose true country of origin may be unknown, and the 
quality of drugs obtained from Mexico has also been shown to be 
uneven.
    That is why my board and I have been looking into drugs 
supplied from pharmacists in Canada, where the integrity of the 
drugs and the regulatory system is beyond question. We have 
studied this subject, and we support legislation that would 
allow U.S. consumers to have their prescriptions filled by 
pharmacists in Canada, with the assistance of their local 
pharmacy here.
    Only non-narcotic U.S.-approved drugs for the consumer's 
own use would be allowed to be imported. We believe this 
proposal, which would involve State or provincially licensed 
physicians and pharmacists, both here and in Canada, is a 
simple and straightforward way to assure that the patient 
receives a drug that is safe, effective, and dispensed with 
care regarding the drug-to-drug or other patient specific 
conditions.
    Here is how our system would work. The local pharmacist 
would respond to the customer inquiries or bring to the 
attention of the customer the potential to fill a prescription 
in Canada for a savings usually averaging between 30 and 50 
percent off U.S. prices.
    If the customer wished to order from a Canadian pharmacy 
and gave permission, the pharmacist would notify the patient's 
doctor and discuss this desire. The pharmacist would assist the 
customer in providing the information required by Canada, 
including the prescription, the name, and contact information 
of the prescriber, the customer's current health condition, and 
all medications being taken and, with the customer's consent, 
transmit this information to the Canadian pharmacy.
    The U.S. pharmacist would provide drug utilization review 
for the patient, to make sure that the prescription is 
compatible with other drugs the patient is taking, and counsel 
the customer as to the use of the drug, the proper dosage, and 
any other information that is usually provided for by the 
pharmacist.
    The pharmacist would notify the customer to return to the 
pharmacy to receive the drug if it was sent directly to the 
U.S. pharmacy, or to visit the pharmacy to have the drug 
checked if the customer chooses to receive it at home. The 
pharmacist would receive payment for these services from the 
customer, which would be fully disclosed.
    The Canadian pharmacy would provide the valid U.S. 
prescription and the medical history form to a Canadian doctor 
who would review the information, and, after calling the U.S. 
physician, if necessary, write a Canadian prescription. The 
Canadian pharmacy would fill this prescription and send it to 
the U.S. consumer or to their local pharmacist.
    We presented our model to the Mississippi State Board of 
Pharmacy and sent a copy to the FDA. Even though many Americans 
are importing drugs from Canada and elsewhere, the FDA told us 
that such imports are illegal. So we as pharmacists cannot 
lawfully assist consumers in the importation, and no State 
board would approve such a plan.
    The FDA's own enforcement policy provides for a 
compassionate use import exemption which allows individuals to 
bring in drugs from foreign countries if these drugs are not 
approved for sale in the United States and there is no 
comparable drug here.
    In practice, the FDA is not enforcing the law or the 
exemption, as written, and allows individuals to import foreign 
source drugs. If the FDA did not allow this, the bus trips to 
Canada would stop.
    In closing, we believe that neither the law as currently 
drafted nor the FDA policymakes sense, and in fact, exposes 
Americans to a significant risk from drugs whose origins are 
unknown or which are not obtained through or from a licensed 
pharmacist.
    By allowing individuals, with local pharmacists' 
assistance, if they wish, to import drugs that are approved in 
the United States from licensed pharmacists in Canada, and 
enforcing the law against other drug imports, the FDA can 
fulfill its role of protecting American consumers while 
licensed pharmacists here do what they are trained to do, which 
is to provide expert advice on drug labeling, dosage, 
interaction, and other safety and efficacy-related matters to 
their customers.
    Finally, State and provincial pharmacy boards, all of which 
are associated with the National Association of Boards of 
Pharmacy, can, if they wish, regulate the practice as 
necessary.
    Thank you. I will be glad to answer any questions.
    [The prepared statement of Don Copeland follows:]

Prepared Statement of Don Copeland, Chief Executive Officer, Associated 
                            Pharmacies, Inc.

    Mr. Chairman, members of the Committee. My name is Don Copeland. I 
am a licensed pharmacist in the state of Alabama and I am the Chief 
Executive Officer of Associated Pharmacies, Inc., a buying cooperative 
of over 750 pharmacies in 43 states. Sitting behind me here is one of 
our owner members, Fred Sharpe, the pharmacist owner and operator of U-
Sav-It Drugs with ten stores in Georgia.
    We support legislation that would allow consumers to have their 
prescriptions filled by pharmacists in Canada with the assistance of 
their local pharmacy, if they wish. Such legislation should be limited 
to non-scheduled (i.e., non-narcotic or habit-forming) pharmaceuticals 
approved for marketing in the United States. We believe the benefit of 
our proposal is it involves a physician and a pharmacist, both in the 
United States and in Canada. This assures that the patient-customer is 
prescribed the correct drug and dispensed the correct drug.
    Our members and customers became interested in the importation of 
prescription drugs from Canada as they became aware through the media 
that a growing number of consumers in the United States are now 
accessing prescription drugs by mail or by visits across the U.S. 
border--primarily Canada and Mexico. We believe no one would question 
the integrity of the Canadian drug system and so that is where we 
focused our attention. And we all know that many prescription drugs are 
available from Canada at prices that are 30-50% lower than the lowest 
available prices in the United States from local, chain or mail order 
pharmacies. These savings are so substantial that it is folly to argue 
with consumers who want to buy from Canada, many of whom are forced to 
so for economic reasons.
    The cost of prescription drugs, especially for the uninsured, has 
become a serious health problem. As this Committee may be aware, 
patients often leave prescriptions with their pharmacists and then fail 
to pick up the filled prescription. It is the experience of our member 
pharmacists that over 75 percent of these prescriptions are from cash 
paying patients. Their inability to afford these drugs obviously puts 
their health at risk, and may end up costing taxpayer funded programs, 
like Medicare, much more in hospitalizations than the cost of the 
prescriptions.
    The question my Board of Directors asked is how can our pharmacies 
and pharmacists help consumers who choose to purchase drugs from 
Canada. We see a void in pharmaceutical care because Canadian mail 
order pharmacies do not have access to the patient profiles that are 
now routinely kept by pharmacists in the United States. Additionally it 
is left to the patient to verify that the medication they receive from 
Canada is the same drug and dosage that their physician prescribed. And 
while most pharmacists will answer a phoned-in question from their 
customers, even about a drug they did not buy from that pharmacist, 
consumers who buy from Canada may be inhibited from calling. Finally, 
my Board members have seen advertisements from companies in Washington 
State and Kansas City offering to obtain drugs from Canada for 
consumers. We were informed that it is presently illegal to have this 
kind of commercial operation in the United States and we have notified 
the Food and Drug Administration and urged that they take enforcement 
action.
    To be responsive to the financial situation faced by patients who 
must pay for their own drugs (usually those who are retired, unemployed 
or underinsured), API pharmacies in the Southeast developed a 
professional service model intended to bring Canadian-priced drugs to 
their customers along with local pharmacy services. We presented that 
model to the Mississippi Board of Pharmacy and we sent a copy to the 
Food and Drug Administration. Mississippi cannot approve it because FDA 
says it is not lawful. And FDA cannot approve it because they say their 
``compassionate'' importation rule only applies if individuals are 
seeking to bring in a drug not approved or available in the United 
States, a policy that is, thank goodness, not enforced. And, since even 
personal importation of a prescription drug from Canada may be a crime 
under the Federal Food, Drug, and Cosmetic Act, a pharmacist assisting 
a customer in doing so could be considered by FDA to be in a conspiracy 
to violate the law. I and my members would rather be legal and so would 
most people.
    We are therefore here to recommend legislation that would simply 
allow consumers to order prescription drugs from Canada and for them to 
do so through their local pharmacy if they wish.
    While we are in favor of wholesale re-importation of drugs from 
Canada, we are not here to argue that point. We are here in support of 
a much more modest proposal--that individuals be allowed to do so for 
their own benefit and that their pharmacist be allowed to help them, if 
they wish, and to charge them a fee for service, if they wish. Here is 
how we see this system working with respect to pharmacists and their 
customers.

                         LOCAL PHARMACIST ROLE

 The pharmacist would respond to customer inquiries or bring to 
        the attention of customers prescriptions that would result in 
        significant savings to the uninsured--usually 30-50%, but in 
        some cases even more.
 The pharmacist would educate the customer on the availability 
        of such savings by ordering through a pharmacy in Canada and 
        would, if permitted by the customer, notify and discuss with 
        the patient's physician that this is being done.
 The pharmacist would assist the customer in filling out the 
        information required for Canada including the name of the 
        prescribing physician, the customer's health conditions and the 
        medications the customer is taking, and, with the customer's 
        written consent, transmit this information and the customer's 
        prescription to the Canadian mail order pharmacy.
 The pharmacist would provide drug utilization review for the 
        customer to make sure the prescription sent to Canada is 
        compatible with other drug regimens.
 The pharmacist would counsel the customer as to use of the 
        drug, the proper dosage and other information that is provided 
        for that drug in the usual course of that pharmacist's 
        practice.
 The pharmacist would notify the customer to return to the 
        pharmacy to receive the prescribed drug which could be sent 
        from Canada to the pharmacy, or in the alternative, to visit 
        the pharmacy to have the drug checked if the consumer chooses 
        to receive it at home.
 The pharmacist would receive payment from the customer on 
        behalf of the Canadian pharmacy, along with a service fee that 
        is fully disclosed to the customer. It is possible that 
        Canadian mail order pharmacies would absorb that fee into their 
        charge for the drug and pay it to the pharmacist.
                         canadian pharmacy role
    It is our understanding that the scenario described below is lawful 
in Canada and that this mirrors the methodology followed by Canadian 
pharmacies today. Here is what the Canadian pharmacy would do:
 Receive the customer prescription and customer information 
        from the customer or the customer's local pharmacy.
 Provide the customer information and prescription to a 
        Canadian physician who reviews the patient information, the 
        United States' prescription (and the Canadian physician calls 
        the United States' physician where appropriate), and writes a 
        Canadian prescription for the patient and sends it back to the 
        Canadian pharmacy.
 Fill the prescription and mail the prescription back to the 
        local pharmacy or directly to the customer accompanied by the 
        patient's physician's prescription.
    In Canada this model is controversial but, as we understand it, 
lawful. For example, the Ontario College of Physicians and Surgeons 
questions whether physicians should rewrite prescriptions without 
examining the patient and the Ontario College of Pharmacy has expressed 
concern about the filling of such prescriptions. And there are 
different degrees of concern in the various Canadian provinces. But the 
bottom line as we understand it is that a Canadian pharmacy may fill a 
prescription written by a Canadian licensed physician for a United 
States patient. In light of this, and in light of the demand from 
United States consumers, there are many Canadian physicians and 
pharmacies engaged in this practice.
    Our pharmacists want lawfully to be a part of this scenario--to 
provide professional services to their patients and to communicate with 
the physicians who treat those patients--and to address any patient 
protection and professional care issues.

           TO WHAT PRESCRIPTION DRUGS SHOULD THIS LAW APPLY?

    This program should apply only to prescription ``drugs'' approved 
for use by the Food and Drug Administration. It is often the case that 
the ``drug product'' (pharmaceutical, label and package insert) found 
in Canada is not identical to the drug product approved for use in the 
United States. The differences are almost exclusively in the label and 
package insert, rather than in the ``drug'' or pharmaceutical itself. 
Technically, the ``drug product'', i.e., the ``drug,'' its label and 
package insert, is not the ``drug product'' approved in the United 
States for this reason. The important fact that the ``drugs'' are 
identical can be checked by comparing the description of the 
pharmaceutical in the labels for each product, something that every 
licensed pharmacist in this country is trained to evaluate. And if FDA 
wants to argue this point, ask them to tell you exactly how any 
differences are material to the safety and effectiveness of the drug.
    It is not intended that this program would extend to any ``drugs'' 
that are not the same as those available here in the United States. 
Thus, Canadian-approved generic versions of United States-approved 
prescription drugs would not be available under this program if such 
versions were not also approved in the United States.
    Canadian pharmacies buy pharmaceuticals directly from manufacturers 
and from prescription drug wholesalers, the same sources that are used 
by pharmacies in this country. Canada has a first class drug regulatory 
scheme and no questions have been raised with respect to the integrity 
of the Canadian drug supply.
    We believe the legislation should not apply to any pharmaceuticals 
that are controlled substances.

                               CONCLUSION

    We now live in a global environment. Citizens of Detroit and 
Buffalo can cross a bridge and obtain drugs at prices radically lower 
than available anywhere in United States. Consumers can order such low 
priced drugs through the internet or by fax or by mail. Pharmacists and 
pharmacies want to provide their patients with these opportunities and 
with the added protection of the professional services they provide 
their patients every day. Pharmacists are trained, licensed and in the 
patient's community. They should be allowed to bring their skills to 
the table and to be part of any personal importation program.
    The program outlined above is meant to address legitimate treatment 
and patient safety concerns. There is a valid prescription that is seen 
by the local pharmacist. The patient and the patient's physician are 
fully informed as to the nature of the program. The prescription is 
entered into the patient's profile. The prescription is reviewed by a 
Canadian physician (who may call the local prescribing physician) and 
written in Canada. The prescription is filled by a pharmacy licensed in 
Canada. And the filled prescription is received or can be reviewed by 
the local pharmacy. At the end of this process, United States' 
consumers can save 30-50 percent on the cost of their prescriptions.
    Thank you very much for your consideration of this presentation.

    Mr. Bilirakis. Thank you very much, Mr. Copeland.
    Dr. Wennar, on your website you offer patients the options 
of ordering drugs from pharmacy A, pharmacy B, pharmacy C. Why 
don't you inform your patients of the names and addresses of 
the pharmacies?
    Ms. Wennar. We intentionally did that because we did not 
want to do any direct marketing for any particular one 
pharmacy. There are toll-free numbers there. This is really a 
facilitation process. This is the patient, their physician, the 
pharmacist in Canada, the consulting physician in Canada that 
actually--this whole transaction takes place, but the consumer 
is given the option to be able to shop without having those 
names. When they make the phone call, it is answered in terms 
of the names of the pharmacies, but we would not on our Web 
site promote them. We would not promote them by name.
    Mr. Bilirakis. They are given the names of the pharmacies? 
When?
    Ms. Wennar. Yes. The first time they make contact they are 
given the name of the pharmacy.
    Mr. Bilirakis. You give them the telephone calls----
    Ms. Wennar. Toll-free numbers. There is a number where they 
may reach the pharmacist, there is a number for the customer 
service unit, and there is a number for physician-to-physician 
discussion.
    Mr. Bilirakis. Your definition of ``safety'' appears to be 
rather narrow. Do you mean to say that from a provider medical 
perspective that safety is equivalent to compliance, and not 
adverse health outcomes?
    Ms. Wennar. No, I am talking about quality here. I think we 
are mixing words a little bit from the perspective of quality.
    Physicians make an assumption. Remember, they write a 
prescription. They do not usually try and direct you to any 
particular pharmacy. They make the assumption that you are 
going to have access to safe, affordable prescription drugs, 
and that you are going to take them when they write the 
prescription.
    Mr. Bilirakis. Well, in the cases where you are helpful to 
people in terms of getting their drugs, prescription drugs, 
from Canada--is it limited to Canada, by the way?
    Ms. Wennar. Yes, it is.
    Mr. Bilirakis. Might any of those drugs be counterfeit?
    Ms. Wennar. Well, I guess I would ask you the same question 
from the standpoint of--I think we just heard earlier that 
local pharmacists in our own area could not identify a 
counterfeit drug. Might any of those drugs be counterfeit?
    To tell you the truth, I guess what I am having a problem 
here with is that none of the literature supports anything in 
Canada that I can find that they have had these major issues 
with counterfeit drugs.
    These drugs are coming out of the same bottles that are 
being prescribed for Canadian citizens. Are we to imply that 
Canadian citizens are being sold counterfeit drugs? Are we to 
imply that the drugs that are being sold to American citizens 
are coming out of a different bottle?
    I would tell you no. The reason I will tell you no is 
because I have been to those pharmacies. We do site visits.
    Mr. Bilirakis. We have heard from the FDA, and they are 
there to protect us. The testimony was from a person who was 
not a political appointee, he has been there for many, many 
years. He did tell us that those problems do exist.
    Ms. Wennar. But what I am having a problem with here is 
that there is just a huge amount of what I can only classify as 
propaganda, and this propaganda is intended to scare people.
    I have to tell you, I have traveled the roads in Canada. 
The people in Canada are not afraid to take their medications. 
We have the equivalent in Canada. If we want to get smart and 
we want to do this, we have some very brilliant people here in 
this country and in Canada, and pharmacists in Canada. All the 
ones we work with have told us they would welcome an 
opportunity to register with the FDA. They would welcome an 
opportunity to register on a State-by-State level.
    They are more than willing to be held accountable. They are 
willing to let you do site visits. They are willing to be held 
to the highest standard. I don't know what more you could ask.
    Mr. Bilirakis. You are a good witness.
    Mr. Sanders. She comes from Vermont. What else?
    Mr. Bilirakis. Dr. Shepherd, you have described for us the 
drugs that come in from Mexico, and based on your personal 
observation--it is not statistics, it is your personal 
experience--you have indicated that many people who--that the 
prescriptions are not required in Mexico. They do not require 
registration or licensing or whatever of pharmacists, et 
cetera. Anybody can dispense these drugs. Is that right?
    Mr. Shepherd. That is correct. The only prescriptions 
required in Mexico for a drug is for a controlled substance 
drug, and you have to have a pharmacist on your payroll within 
the pharmacy to dispense controlled substances. He does not 
have to be present at the pharmacy.
    Mr. Bilirakis. You have told us that many of the people, 
Americans who come across the border to pick up drugs, do so 
mainly for convenience, that they do not need a prescription?
    Mr. Shepherd. That is right. It is more economical. They 
don't have to go to the doctor.
    Mr. Bilirakis. Just very quickly, do you expect 
reimportation to decrease substantially if the high cost of 
prescription drugs is addressed satisfactorily in the eyes of 
the beholder? But in any case, if we are able to do something 
about that particular problem, and it is a problem, do you 
expect that reimportation will substantially decrease?
    Mr. Shepherd. Definitely, I think it would. Except for 
seniors--with the seniors, but not for the youth.
    Mr. Bilirakis. Among the seniors, it would decrease 
substantially, in your opinion, but not among the youth?
    Mr. Shepherd. That is right.
    Mr. Bilirakis. We are concerned about the youth as well as 
we are the seniors.
    Mr. Brown to inquire.
    Mr. Brown. Thank you, Mr. Chairman.
    Mr. Hutt, the drug industry--actually, the Secretary's 
Planning Office in the Department of HHS issued a report in 
late June, early July, saying that if prices come down in the 
U.S. that research and development by the drug industry will 
begin to dry up. That report was not too dissimilar from the 
PhRMA Web site, which claims, amazingly enough, if prices come 
down in the U.S. then R&D will dry up.
    We did a little research and found, and this was even more 
amazing, that the Deputy Secretary--the Secretary in the 
Secretary's Planning Office is a woman named Ann Marie Lynch, 
who used to work in PhRMA. I did some more looking around and 
found there were many people from your organization in the 
White House, in the President's transition staff at HHS.
    So sometimes in this committee we have begun to--rather 
than having to look at HHS reports, we just look at PhRMA Web 
sites. But that is more editorial comment than anything else.
    What struck me is that you claim that if prices come down 
in the U.S., R&D will dry up. I guess you are saying that 
prices are too low in other countries because of so-called 
price controls, or for whatever reason.
    If that is the case, why do your member companies, why do 
Medicare and Pfizer and all these companies, why do they sell 
in markets where there are so-called price controls?
    Mr. Hutt. Mr. Brown, let me begin by pointing out that my 
area of expertise is food and drug law. I have spent my entire 
career both implementing and advising clients on how to comply 
with the Federal Food, Drug, and Cosmetic Act. I am not an 
expert on foreign drug pricing or, indeed, on domestic drug 
pricing.
    I will be happy to take your questions back to PhRMA and 
ask them to respond to that particular question, but I am not 
an employee of the association. I am not familiar with the 
report you just cited, but I will be happy to answer any 
question you have about the Federal Food, Drug, and Cosmetic 
Act.
    Mr. Brown. I was afraid that would be your answer. We don't 
get very many chances--PhRMA never comes to my office and talks 
to me. I am not sure why that is. I don't get much chance to 
talk to PhRMA. I just saw that this guy from PhRMA was here. I 
see your television ads, usually under a different name. I see 
the information that you send out on the Hill. I see your Web 
site.
    But I was kind of excited--we could not get a chance to see 
a consumer on the panel, and I was excited about PhRMA. I will 
ask a couple of questions. You could pass them on to the people 
in the second or third row.
    Mr. Hutt. I would be more than happy to do that. I am sure 
they are listening very closely.
    But let me emphasize, I would have welcomed any number of 
consumer advocates here today, because I don't think these are 
issues that ought to be hidden. They ought to be brought right 
out, as this committee is doing today.
    If you would like to arrange it, I would be happy to meet 
personally with Ms. Tubbs.
    Mr. Brown. I am glad that you would welcome consumer 
advocates, because my Republican friends apparently did not, 
and I know the kind of influence that PhRMA has on my 
Republican friends, so perhaps you could talk to them prior to 
the hearing next time and convince them to have some consumer 
advocates.
    My questions really do detail this. Why do drug companies 
sell in markets where there are price controls, although their 
definition of price controls is different from mine? I don't 
think it is price controls when you have compulsory licensing, 
which brings in competition and lowers prices. I don't think it 
is price controls when Canada negotiates with the drug 
companies and gets lower prices. I don't call those price 
controls.
    Price controls might be, in fact, what we do in the medical 
device industry in this country, where Medicare, HCFA, CMS, 
says to the wheelchair manufacturers, the stent manufacturers, 
here is what we are going to charge, here is what we are going 
to pay, here is what you are going to get. I call that price 
controls, I wouldn't call the other.
    What puzzles me, on drugs--they say they can't make a 
profit in these other countries, but they are selling lots of 
prescription drugs in other countries, to their credit, and I 
imagine they are making money. They have earned $40 billion 
worldwide in profits. I can't believe they are all off U.S. 
sales.
    So my question really is if you would ask the PhRMA people 
to give me some answers on those issues: Why are they selling 
abroad if they can't make money? Can they make money? Of the 
$40 million, is it all U.S. sales?
    Let me ask one question of all four of you, since that one 
didn't work right. Let's assume an individual has a life-
threatening disease and requires a prescription drug but cannot 
afford it in this country.
    If you were in that situation where you could not afford 
the drug and you had to make a choice, you either didn't get 
the drug in a life-threatening situation or you bought it in 
Canada, where some people have said that Canadian drugs might 
not be as safe as the drugs that you could get in Lorraine, 
Ohio, what would your response to that be, if each of you--
which would you do?
    I really want, quickly----
    Mr. Bilirakis. You used all of your time editorializing 
that.
    Mr. Brown. I did. I often do that, Mr. Chairman. I just 
want a 4- or 5-word answer from each.
    Mr. Bilirakis. I will allow it.
    Mr. Brown. Get a drug in Canada, or not get it.
    Mr. Shepherd. I get that question a dozen times a week. I 
will answer and say if your probability of dying is higher if 
you stay here, you are better off going to Mexico.
    Mr. Brown. Canada or not get the drug?
    Ms. Wennar. What do you think?
    Mr. Brown. I am asking the questions.
    Ms. Wennar. I am there already.
    Mr. Brown. That is the way Bernie always answers it, he 
answers a question with a question. I am tired of it, so give 
me an answer.
    Ms. Wennar. Canada with a big C.
    Mr. Brown. Mr. Hutt.
    Mr. Hutt. I might answer it in a different way. Everyone in 
this room, including PhRMA, agrees that there should be a 
direct approach to improving access for all Americans to the 
prescription drugs they need. People should not be forced to 
that kind of choice.
    But, Mr. Brown, where you and I disagree is we should not 
try to solve that problem indirectly by destroying the American 
drug regulatory system. We shouldn't try to solve that problem 
by setting up a two-tier system of drugs, those that meet the 
FDA gold standard and those that are substandard. We shouldn't 
put up a big sign on the United States ``all drugs welcome.'' 
We ought to keep our current regulatory system, and we ought to 
set up a system so no one has to make that choice you are 
talking about.
    Mr. Brown. For a guy who did not have any opinions, Mr. 
Hutt----
    Mr. Bilirakis. Four or five words.
    Mr. Hutt. You asked for my area of expertise.
    Mr. Copeland. I think the gold standard aptly describes the 
situation in the United States, because it takes a lot of gold 
to buy it. I have absolutely no qualms whatsoever about getting 
my medication from Canada.
    Mr. Bilirakis. Okay. You got your answers.
    Mr. Burr.
    Mr. Burr. Thank you, Mr. Chairman.
    Mr. Copeland, I know you did not mean it the way it sounded 
to me. Because I think if we degrade in any way, shape, or form 
the benchmark that we set in this country you put far more 
American lives at risk.
    I only hope, and I have worked pretty diligently in the 8 
years that I have been here, to make sure that there is a drug 
benefit. I am sorry that some up here want to make it 
political. Every hearing is political. The reality is that if 
they would spend as much time trying to come up with solutions 
and work on the process--they had an opportunity to vote for a 
drug bill. They decided not to because it was not theirs. It 
was not perfect. It did not provide everything.
    Do you know who loses? The seniors that are waiting for 
drug coverage.
    Let me ask you, Mr. Hutt, you are an expert on food and 
drug law. Do we currently, under U.S. Code, protect the patents 
of pharmaceutical companies for products that they apply for 
that patent protection?
    Mr. Hutt. We grant patents, and the Food and Drug 
Administration, under very specific conditions, will not 
approve a competitive product until the patent expires.
    Mr. Burr. And if, because reimportation in fact breaks the 
patent protection, we allow under some new law reimportation to 
happen, what type of protection exists for that manufacturer?
    Mr. Hutt. The current law would clearly be overridden by 
the legislation under consideration here.
    Mr. Burr. Therefore, what incentive would exist in the 
marketplace for the pharmaceutical companies, to the degree 
that they do, to enter the U.S. market earlier than any other 
market in the world with cutting edge technology and 
pharmaceuticals and biologics? Is there any incentive left?
    Mr. Hutt. It certainly reduces that incentive.
    Mr. Burr. Dr. Wennar, are you an advocate of the plan that 
we passed in the House of Representatives for drug coverage?
    Ms. Wennar. I am an advocate of anything that is going to 
get access to safe, affordable prescription drugs. So if you 
can come up with an answer, I am an advocate for it.
    Mr. Burr. Are you an advocate for price controls in the 
United States, Federal price controls?
    Ms. Wennar. I haven't been.
    Mr. Burr. I am glad to hear that. Do you believe U.S. 
pharmacists, pharmacies, should be able to import drugs from 
anywhere in the world?
    Ms. Wennar. Anywhere in the world?
    Mr. Burr. Yes, ma'am.
    Ms. Wennar. I think if you have the appropriate standards 
in place and you hold people to those standards, I don't care 
where it is in the world, as long as those standards are equal 
or better than ours.
    And let me just finish. Let me finish. There are places, 
believe it or not, that do do things that we would learn from.
    Mr. Burr. Oh, I agree with you totally. As we worked on the 
Fedoma legislation in 1997 we looked extensively at some of the 
European marketplaces and what they did, and some do certain 
things better than we do here.
    The EU, when it came into existence, one the universal 
standards that they follow is that they harmonized the EU 
partners process for drug approval which meant that the German 
process, even though it was more stringent than the Italian 
process to harmonize, they said we will accept whatever the 
Italian standard is; and Italian product flows into Germany.
    Now, all of a sudden, we realize, and certainly there are 
tremendous case studies on the problems that certainly 
countries have, many of them, as part of this EU harmonization.
    Under the legislation that we are talking about in the 
House, where it is basically open to anywhere in the world, all 
of a sudden we bring into the mix manufacturing in China, we 
bring into the mix facilities that aren't inspected by the Food 
and Drug Administration, we bring into the mix sources for raw 
materials that don't go through any process of verification as 
to the integrity of the product or whether in fact it is an 
active ingredient.
    I would only ask you this, in concluding, wouldn't that 
alarm you if we didn't have controls enough to assure that 
whatever product came in for our patients, in fact, didn't have 
contaminants from the raw materials, in fact, had the degree of 
active ingredient that, in fact, doctors were prescribing for 
their patients?
    Ms. Wennar. I couldn't agree with you more. But what I 
would say again is that I am going to assume that, in the 
process of doing this, that you would put those kinds of 
requirements in place. You would have that expectation.
    I do not believe that anybody is suggesting here that we 
should open the doors to the world with no restrictions at all 
in terms of standards being met. I mean, we pointed out here 
that there is to be a gold medal standard of approval. If we 
are using that standard, then we should hold everybody else to 
that standard that wants to participate in this process.
    Mr. Burr. I assure that you that would be the intent of 
this committee, I think; and that certainly is the standard 
that we set when we passed reimportation language. We required 
the Secretary to verify that all of the things you just talked 
about could, in fact, be substantiated. In that particular case 
she said she couldn't, and now we are criticized because of 
that.
    Ms. Wennar I am very much aware----
    Mr. Burr. Not by you.
    Mr. Bilirakis. The gentleman's time has expired.
    Dr. Wennar, I am just trying to be considerate here. I 
understand you have a 5:30 flight out of National.
    Ms. Wennar. I have to tell you this is an important enough 
subject that I will stay over tonight. I will miss my flight.
    Mr. Bilirakis. We appreciate that.
    Let's see. Mr. Pallone.
    Mr. Pallone. Thank you. I am glad you are not leaving. 
Really, I am serious.
    When we had Mr. Hubbard up before and I asked him 
specifically--I mean, on the one hand, he was saying, you know, 
we are getting all of these counterfeit drugs. But, on the 
other hand, when I said to him, is there any problem, with, you 
know, a bus load of seniors going to a specific pharmacy in 
Canada that they know and he said, no, there really isn't a 
problem there--so I sort of suggested, well, you know, you seem 
to be critical of the Kingston-Gutknecht legislation, but on 
the other hand you say that, you know, if people go to 
pharmacies in Canada, there is not a problem. So why don't you 
give us some ideas about how to maybe change or amend the 
Kingston legislation so we can get something that would allow 
people to go to places where they don't have any real risk?
    Now, you seem to be suggesting in your written testimony at 
the end some kind of quality parameters, I think you described 
them. But I wasn't clear how we could do that legislatively. I 
mean, do you have suggestions about how we could legislate a 
program that would be--that would be not pose too many risks?
    Ms. Wennar. Well, let me use an example here, okay? I think 
that you have a wealth of opportunity around this. I mean, 
first of all, historically, you have to remember CMMS, AKA, 
HCFA has historically been able to do demonstration projects to 
demonstrate that something actually can work. Unfortunately, 
the FDA doesn't have the authorization to do demonstration 
projects. But, by proxy, personal reimportation has been a 
demonstration project for the last years.
    Mr. Pallone. Right. But let's say we want to legislate 
that.
    Ms. Wennar. Now, having said that, this is a perfect 
opportunity for a public-private partnership to occur here.
    Right now, the United States--I am sure you are all 
familiar with the Joint Commission on Accreditation for Health 
Care organization who, under the AMA and the American Hospital 
Association, sponsors that. They accredit health care systems, 
and you must meet a certain level of standards to be 
accredited. In the process of being accredited, you, if you are 
not accredited you can't receive certain type of reimbursement 
from the Federal level or the State level, Medicaid or 
Medicare.
    I think that there is a clear opportunity here for a 
similar organization to exist that would create standards that 
would actually do the accreditation of any entity that wanted 
to participate in something like this. Once they meet those 
standards, in concert you could work with the FDA. The 
difference is the FDA wouldn't have to fund it, nor would the 
American taxpayer. It could be done in the private sector.
    Mr. Pallone. So we could essentially take the Kingston 
legislation and put in that type of accreditation program and 
then anything that was imported from some pharmacy or group 
that had the accreditation we wouldn't have the problem.
    Ms. Wennar. You need the accreditation process. It could be 
set at the bar. You can place the bar anywhere you want. You 
can have the FDA involved in helping to set those standards. 
But the fact is that they could say you will register with the 
FDA but you could not register unless you had met those 
standards and had been accredited. That would mean----
    Mr. Pallone. We simply authorize that.
    Ms. Wennar. It would mean site visits. It would mean a 
variety of things, anything they wanted to put into it. You can 
develop standards for it. But they don't need--I heard 
something about how many more people do you need. You don't 
need a single more person to be working at the FDA to do this.
    Mr. Pallone. Now that is kind of what Mr. Copeland was 
suggesting.
    Ms. Wennar. Correct.
    Mr. Pallone. You want to elaborate a little? You had a 
similar suggestion about doing this with the pharmacies.
    Mr. Copeland. Actually, we were concerned because we are 
not just talking about seniors. In other words, I have heard 
the committee talking about passing the Medicare bill; and I 
support that.
    Mr. Pallone. Yes, but at the end of your----
    Mr. Copeland. And it needs to go beyond that. It needs to 
go to the other 20 percent or 15 percent of the people that are 
paying cash out of their pocket that aren't seniors.
    Mr. Pallone. Mr. Copeland, you said at the end--I think it 
was in your written statement--that you had proposed 
legislation that would accredit the pharmacies. It seemed like 
similar to what Dr. Wennar was talking about. I wanted you to 
explain that.
    Mr. Copeland. In other words, in the United States--and I 
am a registered pharmacist. My store is going to be licensed 
and approved. The wholesalers I buy from are licensed and 
approved. In Canada, it is the same thing. Now if we go to 
reimportation, then I still don't have a problem with 
reimportations just basically from Canada because that is what 
we really studied. But it would need to be from a regulated, 
licensed wholesaler that is approved to maybe our wholesalers 
in the United States.
    But also, as a quicker thing, our pharmacies--we have met 
with the Canadians, and we have met with the pharmacies up 
there. So it could be established our computer system goes to 
their computer system. In other words, it----
    Mr. Pallone. Well, I know we are running out of time, but I 
just want to suggest to my Republican colleagues, you know, 
your bill has gotten a lot of criticism here today from Mr. 
Hubbard directly and indirectly and some of your colleagues, 
too, on the Republican side indirectly. But, I mean, it is very 
easy to adopt what these--what Dr. Wennar and Mr. Copeland are 
suggesting and then the criticisms go away. I mean, it is not 
magic from what I can see.
    Mr. Bilirakis. The gentleman's time has expired.
    Mr. Buyer.
    Mr. Buyer. I have a question for Mr. Copeland. You said 
that almost with a smile that you would have no problem getting 
drugs from Canada.
    Mr. Copeland. My personal drug.
    Mr. Buyer. I think it was the smile that bothered me more 
than the statement. Let me tell you why.
    Mr. Copeland. Okay.
    Mr. Buyer. Because I am not so certain if I were a 
pharmacist I would be comfortable with the liability question, 
and we are going to have to deal with this one. Now we have 
testimony here from the FDA, and the FDA--I wrote down this 
quote: Pharmacists can't tell the difference in drugs. Now, if 
a pharmacist can't tell the difference in the drug, and you 
like going to Canada to get that drug because you can get it at 
a lesser price and you get a higher markup on it so, therefore, 
you make greater profit--I tell you what. As a lawyer going 
into the courtroom, I am now smiling.
    Mr. Copeland. I understand liability.
    Mr. Buyer. Are you with me?
    Mr. Copeland. I understand liability.
    Mr. Buyer. So, help me, how do we work through the 
liability thing here?
    One last statement. I am going to let you speak.
    Mr. Copeland. Okay.
    Mr. Buyer. Because if the manufacturer--at some point, if 
we do this, then do we then sever the liability to the 
manufacturer and we say to the pharmacist, if you want to do 
this, then you accept the responsibility and the liability to 
do that to your consumer?
    Mr. Copeland. I am sorry, Mr. Buyer. I guess I don't----
    Mr. Buyer. It is pronounced Buyer. It is French.
    Mr. Copeland. Okay. In other words, we are dealing with a 
pharmacist in Canada; and I am--first of all, I am with Dr. 
Wennar. I am talking about a very limited number of drugs. In 
other words, I only want to deal with the drugs that Pfizer and 
Merck and whatever make. I don't want to open this up to any 
drug. It needs to be a very limited formulary of life-saving, 
necessary drugs. So I would only want to deal with those drugs 
that came direct from that manufacturer, direct to that 
supplier up there, direct to that patient; and that limits your 
liability.
    Mr. Buyer. So you believe if you have limited pathways of 
distribution that we could keep the liability all on the 
manufacturer and somehow absolve the pharmacist.
    Mr. Copeland. Well, no, we are always going to have some 
liability. I understand that. I have liability in my store in 
case something gets screwed up out of place. But at least that 
liability, if you keep it within this regulatory process, it is 
a minimal liability; and I would be very much concerned with 
maintaining that regulation.
    Mr. Buyer. All right. Thank you for your answer.
    In the Kingston language in the bill, there is a quote: 
Individuals not in the business of importing drugs to 
personally import such drugs.
    How would anybody here define what that means? Let me start 
with you, Mr. Hutt.
    Mr. Hutt. I personally am unable to define that. It is used 
in the prior legislation of 2 years ago, but it is not defined 
in that legislation either. It has no known source of 
definition in any other statute that I am aware of; and, 
therefore, it has an added element of ambiguity and 
uncertainty.
    Mr. Buyer. Do you know how you would define it?
    Mr. Hutt. Well, it appears to me that someone who, say, is 
in the business of importing food but hides drugs in hollowed-
out food products would not be in the business of importing 
drugs, which does not make sense to me.
    Mr. Buyer. Mr. Hutt, how about Mr. Copeland here? Mr. 
Copeland's pharmacy--if he wants to work out a deal with 
somebody up in Canada, is he now an individual in the business 
of importing drugs?
    Mr. Hutt. Well, if that were his source of income, outward 
source of income, presumably, yes. But a counterfeiter, 
presumably, it would not apply to. It is very confusing to me. 
I regret I can give you no answer.
    Mr. Buyer. You know, sometimes when I look back to my years 
as a prosecutor, defense lawyer on the Judiciary Committee here 
in Congress, we always have to be careful. Not every one is 
honorable, Mr. Copeland, you know.
    Mr. Copeland. I guess I deal from my own----
    Mr. Buyer. You know, and I like your testimony when you 
said, hey, I have specific people that I deal with that I 
trust. And because of your care, because you know your people 
that you serve, that is why we love pharmacists in our 
communities. We are all completely tied to you. But, you know, 
we are all--we end up making laws not because of the 90 
percent, generally. Sometimes it is because of that 10 percent, 
too.
    I just wanted to throw that out there. I yield.
    Mr. Bilirakis. Thank you.
    Mr. Green.
    Mr. Green. Thank you, Mr. Chairman.
    I want to welcome Dr. Shepherd, and I enjoyed your 
testimony.
    I guess the concern I have is--the only reason we are 
considering this bill is because of the price problems we have 
in our own country and in--you are right. This is really not a 
substitute. But, right now, my constituents are voting with 
their feet or their bus ticket or however to go to Mexico.
    In your testimony, you said that the limit of what could be 
brought back with prescription--explain to me what the DEA's 50 
dosage rule regarding controlled substances is. And you said 
the enforcement of that is spotty at best.
    Mr. Shepherd. That is correct. Currently, the way it was 
amended, I think it was 1\1/2\, 2 years ago, that a person may 
go and bring back 50 units of a controlled substance without a 
prescription and no questions will be asked at the border.
    Mr. Green. Okay.
    Mr. Shepherd. And it is not 50 units of multiple drugs. It 
is 50 units of each drug. However, I haven't found uniformity 
amongst Customs agents in the interpretation of that.
    Mr. Green. Does that require a written prescription----
    Mr. Shepherd. Yes, it does.
    Mr. Green. [continuing] for the 50 units, the controlled 
substance?
    Mr. Shepherd. Right. A written prescription.
    Mr. Green. Okay. Are you seeing dangerous, potentially 
highly addictive drugs such as Oxycontin or something like 
that?
    Mr. Shepherd. I see a lot of Oxycontin. There is a lot of 
Oxycontin coming across. The top 15 drugs--when we did the 
study in 1997, the top 15 drugs coming across from Mexico were 
controlled substances.
    Mr. Green. So it is not just me getting my----
    Mr. Shepherd. No, it is not your hypertension or your 
cholesterol----
    Mr. Green. [continuing] antibiotic to take care of my sinus 
infection.
    Mr. Shepherd. But they are a part of the group, but it is 
not just those. Correct.
    Mr. Green. Let me talk about drugs from Mexico 
particularly. Do you think--who owns those pharmaceuticals? 
Because when I have been to those pharmacies and actually taken 
my daughter, who is now in her residency, and her husband, they 
are amazed that the trademarks are from U.S. companies. They 
are PhRMA members.
    Mr. Shepherd. Yeah. There are about 60 international 
pharmaceutical firms in Mexico and about 120 national firms in 
Mexico working. The international firms are subsidiaries of 
many home companies here in the United States, but they are 
also subsidiaries of European companies.
    But let's be clear that these companies are really owned 
and operated by themselves. They are subsidiaries and under the 
license of the Pfizers or the Mercks and stuff, but they are 
whole entities of themselves.
    Mr. Green. Okay. Is there any--seeing all these U.S. name-
brand drugs in these hundreds of pharmacies, who is behind the 
drugs and are making them? Are they companies in Mexico? And 
have you had any evidence that maybe there is organized crime 
behind some of those pharmacies?
    Mr. Shepherd. The companies themselves?
    Mr. Green. The companies themselves that may be 
incorporated in Mexico, but they are a subsidiary of----
    Mr. Shepherd. No, I don't have any evidence of any 
subsidiaries. I have had evidence and seen and worked with some 
pretty shaky national companies in Mexico, and I have been in--
quite frankly, I have visited a couple of counterfeit 
operations and seen how they work in Mexico.
    Mr. Green. Do you believe any of the drugs, particularly 
those--and we have seen drugs that have Pfizer drugs or Glaxo 
drugs--are they, in fact, Pfizer pharmaceuticals and Glaxo, or 
do you think they are counterfeit or something else?
    Mr. Shepherd. Well, we have found Pfizer products to be 
counterfeited in Mexico, but we don't believe that Pfizer made 
them. We think that another firm makes them. The counterfeit 
trade is globally right now--by the World Health Organization's 
estimate, between 8 to 10 percent of the whole world 
pharmaceutical market is counterfeit.
    Mr. Green. But there are subsidiaries of Pfizer and Glaxo 
in Mexico licensed?
    Mr. Shepherd. Yes. They are legitimate national companies, 
and normally they produce--I would say I don't have many 
problems with their products. I mean, I think they are good 
companies.
    Mr. Green. Do they export from those facilities to the 
United States?
    Mr. Shepherd. No. I don't think--personally, I don't--there 
are very few products that are FDA approved and manufactured in 
Mexico. There is a handful. There are not very many products, 
even if they are manufactured by that company in Mexico City. 
Pfizer is probably manufactured in the United States, but very 
few products are FDA approved in Mexico. I had a list of them. 
I think there were 17 or 18 2 years ago. There was very few. 
But more and more companies are going that way.
    Mr. Green. Should FDA and others attempts to analyze the 
quality of these drugs, particularly since they are presenting 
in large quantities in the U.S. market, particularly with 
border residents or people who are close enough to the border?
    Mr. Shepherd. That is my recommendation, that they should, 
but I haven't seen the data on it.
    Mr. Bilirakis. The gentleman's time has expired.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Bilirakis. Mr. Strickland.
    Mr. Strickland. Thank you, Mr. Chairman.
    This has been an interesting, interesting day; and I 
appreciate all of your testimonies. And Dr. Wennar----
    Ms. Wennar. Wennar.
    Mr. Strickland. Wennar.
    Ms. Wennar. That is close enough.
    Mr. Strickland. You are a very effective witness, I must 
say.
    I am sitting here thinking that the problem is the price, 
and if--and I want to ask your personal opinions. If this 
Congress were to pass the Allen bill, which basically would 
take the average price of any particular drug, the average 
price at which it is sold across five markets that are similar 
to ours, industrialized national markets, and required that 
those drugs or that particular drug be available in this 
country at the average price, that is cost control, I would 
admit. But, in your judgment, would that go a significant way 
toward solving this dilemma that we are trying to discuss or 
find a solution to today?
    Dr. Shepherd would you give us your opinion? And then each 
of you, as briefly as you could.
    Mr. Shepherd. I think this would solve the problem. If you 
can make the medicines affordable, I think it would solve a lot 
of your problems right off of the top.
    Mr. Strickland. Dr. Wennar.
    Ms. Wennar. You know, I wish it were just a simple yes-or-
no answer. I have to tell you honestly I think it is more 
complicated than that. I have to tell you I am not completely 
convinced that that will address the issue completely.
    Mr. Strickland. Would it be a significant part of the 
solution, in your judgment?
    Ms. Wennar. It could be a beginning.
    I have to tell you the reason I am hedging on this is 
because I think that the issue here is that, as you have all 
mentioned today very eloquently, that the real objective here 
is to have a comprehensive benefit under Medicare for the 
elderly. We clearly have another population that needs access 
to safe, affordable drugs.
    Mr. Strickland. Absolutely. But what I am trying to get at 
is the cost issue, and even if we have a comprehensive benefit 
for the elderly that does not address the cost issue.
    Ms. Wennar. The point I was going to make is take a lesson 
from the commercial insurance population from the standpoint of 
what has gone on there. What they have had to do is they have 
had to cut medical benefits in order to be able to continue to 
do the things that they are doing under their prescription drug 
benefits or they have had to cut back on their prescription 
drug benefits. Because, even for them, with their large group 
purchasing power, their prices, their cost is still going up. 
So----
    Mr. Strickland. But is their--excuse me for interrupting 
you, but is their purchasing power cost as low as it would be 
if we were to implement the Allen bill?
    Ms. Wennar. I guess I would have to say no. I guess if I--
you know, if I have to give you an absolute yes-or-no answer, I 
am not--I have not historically been a proponent of price 
controls and regulations. But, to answer your question, I guess 
I would have to say yes. It would go toward something.
    Mr. Strickland. Yes. And I am not asking for your, you 
know, your personal feelings regarding price controls. I am 
just asking for your opinion regarding the possible effect if 
we were to have this approach to price controls.
    Dr. Hutt.
    Mr. Hutt. In my judgment, that is not the right way to go, 
because it does not approach the basic issue of comprehensive 
coverage; and I agree with Dr. Wennar.
    Mr. Strickland. Please excuse me for interrupting, but I 
understand that that may be the case, and that is really not my 
question. Because you may think that it is totally the wrong 
thing to do. But what I want to know from you is if you think 
it would have a certain effect even if that effect may have 
negative consequences associated with it.
    Mr. Hutt. Mr. Strickland, the first question one would need 
to answer, before I could give you a good clear opinion on 
that, would be, would drug companies withdraw from foreign 
markets where they have price control in order to then make the 
average price higher.
    Mr. Strickland. Should that be the major consideration of 
American legislators?
    Mr. Hutt. Yes, it should be struck.
    Mr. Strickland. Should not the first concern of American 
legislators be what is right for the American citizens?
    Mr. Hutt. My point is that by imposing this average price, 
that average price is going to go up dramatically if American 
manufacturers drop out of these foreign markets.
    Mr. Strickland. Are these companies making money in these 
other countries?
    Mr. Hutt. I have no idea whether they are making money or 
not.
    Mr. Strickland. Well, then if you don't know that, you 
would have no way of knowing that the companies would withdraw 
from these markets.
    Mr. Hutt. I didn't say that they would. I said the first 
question you would have to answer would be that question. I 
cannot answer that question.
    Mr. Bilirakis. The gentleman's time has expired.
    Mr. Strickland. I didn't get my last response, but thank 
you, Mr. Chairman. You have been wonderful in your treatment of 
me, and I appreciate it.
    Mr. Bilirakis. Thank you. Thank you for that.
    Mr. Greenwood to inquire.
    Mr. Greenwood. Thank you, Mr. Chairman.
    Dr. Wennar, I believe in your testimony--I think this is a 
quote from your testimony. You said, with regard to monitoring, 
that the quality of drugs being shipped to proxy when the 
country (Canada) could be established. There is no reason that 
we cannot accept the standards that are equal or higher 
established by another country. No country should be allowed to 
participate that does not have at the very least a set of 
standards equal to ours. That is your view.
    Ms. Wennar. Correct.
    Mr. Greenwood. Well, how, then, do we prevent substandard, 
dangerous, nonpotent drugs from China, Vietnam, some other 
country coming into Canada being relabeled and then coming 
across the border into the U.S.? How would we know? How would 
we protect against that?
    Ms. Wennar. I guess I am having a hard time--do you not 
think Canada does that?
    Mr. Greenwood. Pardon me?
    Ms. Wennar. You don't think Canada does that----
    Mr. Greenwood. Canada does what?
    Ms. Wennar. --in terms of the way that they regulate things 
coming into Canada? We would be working with them. I mean, as I 
said, the fact of the matter is the standard should be equal to 
or higher, so you would be working with an entity that you are 
absolutely convinced has a standard that is equal to or higher. 
And in this regulated country I can tell you they have more 
layers than we do.
    Mr. Greenwood. Okay. Mr. Hutt, you are shaking your head 
``no.'' Why is that?
    Mr. Hutt. Any drug that is made in Canada for export is 
exempt from Canadian law. Any drug.
    Mr. Greenwood. Miss Wennar is shaking her head.
    Mr. Hutt. Any drug that is brought into Canada for 
transshipment to another country under section 37 of the 
Canadian Food and Drug Act is exempt from Canadian law.
    Ms. Wennar. Do you honestly believe that--and we are 
talking pharmacies, okay, here. We are talking pharmacist to 
pharmacist. Do you believe that they are going to put bottles 
in a pharmacy in Canada and say, aha, that goes to the U.S.; 
let's open those and send them. We are not going to use those 
for Canadian citizens because there may be adulterated products 
there. So the risk for U.S. citizens we don't care about.
    This is a totally ridiculous conversation to be having. You 
are talking about----
    Mr. Greenwood. Whoa, whoa--wait. Excuse me. Excuse me. I 
will give you all the time in the world you want, okay?
    Ms. Wennar. Okay.
    Mr. Greenwood. Okay. There is nothing ridiculous about me 
trying to learn something from you, all right? I am asking a 
question.
    Ms. Wennar. Okay. But what I am trying to say----
    Mr. Greenwood. I would like it if you just help me out to 
understand the question.
    Ms. Wennar. Okay, I will help you out. I will help you out 
from the provider's side. A licensed pharmacist takes pride in 
what they do, and they are licensed, and we are talking about 
meeting those standards. If they are a licensed pharmacist, do 
you believe that they differentiate? They don't have ask you 
where you are from. They are trying to provide access to safe 
medications. That is their objective. They are trying to help 
you comply with the treatment plan. For us to make any kind of 
assumptions around Canadian pharmacists as being different than 
pharmacists in our own country----
    Mr. Greenwood. I don't think that my question was about 
that.
    Ms. Wennar. I understand that. But what I am saying, if you 
are talking about--you are talking about things that sometimes, 
from a provider perspective, they don't--they are sitting here 
saying, what is the problem here? What we want to do is help 
the people that we serve.
    Now, the fact of the matter is that if what we are talking 
about here, as I have heard people say earlier, that a 
pharmacist couldn't differentiate from something that was 
adulterated or not, that nobody could just by looking at it. 
The fact of the matter, in terms of putting that bottle on the 
shelf, when they pull it off, they are pouring from the same 
bottle for the Canadian citizen and the U.S. citizen.
    Now, if we think that this has been occurring, why isn't it 
substantiated in the literature out of Canada to show us that 
there are counterfeit medications being dispensed to Canadian 
citizens?
    Now, on the other side I guess I would say, be careful how 
we cast stones. Because in our very country here we have 
already identified that people have been doing this. There are 
entities that have intentionally adulterated things. And I find 
that offensive, and other countries do, too. They find it 
offensive.
    In Canada, when I talk to pharmacists, they can't believe 
that a pharmacist would do that to somebody with cancer.
    Mr. Greenwood. I am just about out of time. That is very 
instructive. Thank you. There was nothing ridiculous about it 
at all.
    Mr. Hutt, do you have a different point of view on this or 
do you----
    Mr. Hutt. I do indeed. Because I think focusing on the 
pharmacist or, as Mr. Pallone said, the pharmacist and the 
wholesaler is the wrong focus. The focus has to be on the drug 
and the standards required under United States law currently 
for drug manufacture and distribution in this country.
    There is only one way that we can keep up our standards for 
imported drugs. If people want to bring them into this country, 
they ought to meet the requirements of the Federal Food and 
Drug and Cosmetic Act that exists today. They--if it is 
adulterated, it ought to be illegal, if it is misbranded, not 
as it appears to be. But there ought to be the burden of proof 
on an importer to make certain that there is a new drug 
application that FDA has approved for the product. It is in 
compliance with that, it is in compliance with the adulteration 
provisions under section 501, the misbranding provisions under 
502 and the NDA provisions under section 505. That is where the 
focus should be.
    I don't in any way deny the good faith of the pharmacist, 
but that is not the right place to look.
    Mr. Bilirakis. Dr. Wennar is shaking her head and 
apparently agrees with your statement.
    The gentleman's time has expired.
    All right, we have three guests here; and I have been 
trying to be courteous. We are--you know, we are about three 
and a half--well, we have been at this all afternoon; and we do 
want our good people to be able to leave relatively soon. So I 
am going to give Messrs. Kingston, Gutknecht and Sanders 2 
minutes each to inquire of you and then excuse you as a panel.
    Mr. Kingston.
    Mr. Kingston. Let me just go down the line.
    Dr. Shepherd, if right now you could legally import drugs 
from Canada over Mexico, would you be--what would your comport 
level be on a scale of 1 to 10?
    Mr. Shepherd. Seven or 8.
    Mr. Kingston. Seven or 8. Dr. Wennar,just a number.
    Ms. Wennar. Ten.
    Mr. Kingston. Mr. Hutt, I am going to respectfully skip you 
because we know where you--I mean, you know, it is fine, but 
you are----
    Mr. Hutt. I do not feel insulted.
    Mr. Kingston. No. That is okay. I have another question for 
you.
    Mr. Copeland.
    Mr. Copeland. If handled by a wholesaler, a reputable 
wholesaler similar to ours, a 10.
    Mr. Kingston. Okay. So now do the three of you think that 
this can happen, that it can be done safely? I mean, you know 
what really worries me in America today we have this, oh, God, 
we are going to be sued; oh, gosh, someone is going to be hurt.
    I think about the great story about the Panama Canal where, 
doggone it, we said, we are Americans; we can do anything we 
want to.
    Mr. Hutt, the problem is with your vocation, noble 
vocation, I hope--and I married into a family of lawyers 
myself. I am not one. But the problem is you can get a lawyer 
to take any position you want. And you know, we are Americans, 
by golly. We can make this work for the safety of the people, 
for the Mrs. Tubbs of the world, for the Ms. Burrows. I mean, 
am I wrong on that, Dr. Wennar?
    I wanted to start--let me start easy. I don't know if I 
want to go to Mr. Hutt yet or not.
    Mr. Bilirakis. You only have a couple of minutes.
    Mr. Kingston. Yes. I have got 2 minutes, so make it quick.
    Ms. Wennar. I honestly believe that we have the 
intelligence and the no--I mean, we know how to do this. We 
have just got to step up to the plate and do it.
    As I mentioned to you, you have already had the 
demonstration project done for you. You have--in every one of 
those dots right now there are individuals that are bringing 
medications into the United States for personal use, in every 
one of those dots. These people are testing it for you. They 
have taken the risk. They have tested it for you. You just need 
to give them a little bit more help.
    Mr. Kingston. Mr. Copeland, you feel it can be done?
    Mr. Bilirakis. Very briefly.
    Mr. Copeland. Yes.
    Mr. Kingston. Okay.
    Mr. Bilirakis. Thank you.
    Mr. Gutknecht.
    Mr. Gutknecht. Well, again, thank you, Mr. Chairman, for 
having this historic hearing. I think this is an important 
hearing, and it is an important first start.
    Dr. Wennar, I want you to talk a little bit, because you 
never came back to this chart at the top of the differences 
between what our consumers can pay for the same drugs in Canada 
versus the United States.
    Ms. Wennar. The reason I didn't go to that chart is because 
I heard that we weren't talking about cost.
    Mr. Gutknecht. Well, we are.
    Ms. Wennar. Okay. This actually represents something that 
we did in the first 6 months when we started this. Because we 
had quite a few physicians that were saying it couldn't be 
possible, that the cost was that much lower in Canada. So what 
we did was tracked the first 145, 146 individuals in terms of 
accessing their medications from Canada. There were no 
substitutions. In other words, nothing was substituted. If the 
actual medication that was ordered was Lipitor, it was Lipitor 
that they got.
    We tracked it for the first 6 months, and the reality is 
represented here. You can see what they would have paid on the 
local market versus the savings that were represented in 
accessing from Canada. They would have paid probably a little--
I think it was a little over $81,000 they would have paid. They 
ended up paying about $22,000.
    Mr. Gutknecht. For about a 70 percent savings.
    Ms. Wennar. Well, that was the average, yes. Our physicians 
took a look at that and basically said, you are joking, not 
really. After that we had requests from all over the country 
for this one-pager.
    Mr. Gutknecht. Which really brings us back to the question 
of this hearing and that is how safe is safe. How much will we 
pay for that little tiny increment of safety? I think that is a 
question that consumers are answering every day.
    Mr. Chairman, I just want to say that, according to our own 
Congressional Budget Office, over the next 10 years seniors in 
America will spend $1.8 trillion on prescription drugs. Now if 
we could save 35 percent, we could save $630 billion. Now I 
think that people are willing, and consumers are making that 
decision every single day, that they are willing to take an 
incrementally minor, tiny, little additional amount of risk to 
make those kinds of savings.
    I would just say, Mr. Chairman, that it is not the Statue 
of Safety that sits in New York harbor. It is the Statue of 
Liberty. We are a tough people. We have taken risk, and it is 
high time that we allow Americans to have access to world-class 
drugs at world-market prices.
    I yield back the balance of my time.
    Mr. Bilirakis. Thank you.
    Mr. Sanders, 2 minutes.
    Mr. Sanders. Thank you very much, Mr. Chairman; and I do 
appreciate your allowing me to be here.
    Mr. Hutt, you are with Covington and Burling, and I know 
that the pharmaceutical industry has spent a few hundred 
million dollars in the last couple of years making sure that 
our people pay the highest prices in the world. How much do 
they pay your law firm?
    Mr. Hutt. I have no idea.
    Mr. Sanders. Okay. Dr. Wennar, the bottom line is, I think, 
in terms of the wonderful work that you do in Bennington, is 
how many people, roughly speaking, do you think purchase their 
drugs in Canada and can you tell us how many safety problems 
that you are aware of? In other words, after all is said and 
done, what is going on? Are you hearing a whole lot of people 
saying that the drugs that they are getting from Canada are 
adulterated or counterfeit? What is the reality?
    Ms. Wennar. No, I am getting calls from physicians across 
the country saying that their patients are now taking their 
medications as they were prescribed and complying with their 
treatment plans.
    Mr. Sanders. How many folks do you figure you deal with?
    Ms. Wennar. Well, as I mentioned earlier, we did the recent 
poll in Canada province by province, even with pharmacies that 
we don't deal with; and, needless to say, they were a little 
bit skeptical and concerned as to why we were trying to count 
numbers. But the reality was, by the time--we don't have a lot 
of resources. We spent about a week doing this, and we stopped 
counting at 1.1 million elderly people.
    Mr. Sanders. 1.1 million elderly people and how many 
instances have you heard of counterfeit or adulterated drugs?
    Ms. Wennar. Well, we have had no reports from individuals.
    Mr. Sanders. 1.1 million people and you haven't heard any 
instances? Oh, my goodness. And how many millions and millions 
of dollars do you think people have saved and have been----
    You and I were in Bennington and we have talked to 
physicians who say, I am a physician, and I write out 
prescription drugs, but I am wasting the paper that I am 
writing on because my patient can't fill it. I am wondering how 
many senior citizens in this country die so that Mr. Heimbold, 
the former chairman and CEO of Bristol Myers, can receive $74 
million in compensation in 2001. I know it is very funny for 
our lobbyists from the drug industry. There is $76 million in 
stock options, but they have to charge our people the highest 
prices in the world.
    Thank you for your time.
    Mr. Bilirakis. The gentleman's time has expired. All time 
has expired.
    Mr. Brown, I will give you an additional couple of minutes.
    Mr. Brown. Mr. Chairman, I really just have one brief 
question for Dr. Shepherd. Do you believe that the 50 dosage 
policy should be radically changed, such as lowering the amount 
of controlled substances that are allowed in the United States? 
And if so, what effect might lowering the amount have on 
seniors and are seniors purchasing controlled substances?
    Mr. Shepherd. Seniors aren't big purchasers of the 
controlled substances. There may be some instances of it, but 
they are very small. I think I recommended last year at this 
hearing that we ban controlled substances coming across from 
Mexico, and I will stand on that one. My personal 
recommendation is to stop them altogether.
    Mr. Brown. Okay.
    Mr. Bilirakis. Any opinion? Mr. Hutt, do you have an 
opinion on that?
    Mr. Hutt. I think it is extremely dangerous to allow our 
youth to go into--whether it is Canada or Mexico or any other 
place and bring back controlled substances.
    Mr. Bilirakis. So they should be banned. You agree with Dr. 
Shepherd.
    Mr. Hutt. I agree with him completely. Of course, I would 
go further than that, but I certainly agree with that.
    Mr. Bilirakis. Dr. Wennar, you don't agree.
    Ms. Wennar. No, I am saying you couldn't get them even if 
you wanted to, because they would not ship them.
    Mr. Bilirakis. We can get them from Mexico.
    Ms. Wennar. Okay, well, you are not going to get them from 
Canada. Even if you authorized it, it wouldn't be sent.
    Mr. Bilirakis. Okay, all right. Well, listen, there will be 
a number of questions, as you might imagine, in writing that 
will be submitted to all four of you; and we would appreciate 
this, you know, a timely response to them.
    And our gratitude. The hearing has turned out the way I had 
intended it to turn out, where we concentrate on reimportation 
and the advantages, the pluses and the minuses and what not. I 
think that that has been satisfied and no small thanks to you 
all. Thank you very much.
    Dr. Wennar, sorry you have to spend the night. The hearing 
is not over, however. Just you are excused.
    Unanimous consent to submit a statement by Congressman John 
Thune into the record dated July 25, 2002. Without objection, 
that will be the case.
    [The prepared statement of Hon. John Thune follows:]
  Prepared Statement of Hon. John Thune, a Representative in Congress 
                     from the State of South Dakota
    Thank you, Mr. Chairman for the opportunity to join you today and 
provide an opening statement at this important hearing on importation 
of prescription drugs.
    I am an original cosponsor of H.R.5186 with my friend and colleague 
Congressman Kingston because constituents in South Dakota are demanding 
that Congress address not just access to prescription drugs but also 
the price of prescription drugs.
    I have supported reimportation for years and strongly believe this 
legislation will lower prescription drug costs for all Americans by 
increasing competition. It's simply not fair that the same prescription 
drugs are less expensive in Canada, Europe and other countries than 
they are here in the US.
    H.R. 5186, the Drug Importation Act of 2002 will simply allow 
individuals and pharmacies to import prescription drugs manufactured in 
Food and Drug Administration (FDA) approved facilities. As we all know, 
people in South Dakota and across our nation already travel to Canada 
to purchase low cost prescription drugs and bring them back into the 
U.S. This bill would make that practice legal and expand it to allow 
community pharmacies as well. Both of these pieces are critical to my 
state where too few people have health insurance, too many people can't 
afford needed medications and too many small town pharmacies are going 
out of business.
    Congress has already acted to improve access to prescription drugs 
by providing a generous prescription drug benefit for all seniors.
    Now, it is time for Congress to address the price of prescription 
drugs. By enacting this legislation and allowing the reimportation of 
prescription drugs we can provide immediate help to seniors. As we all 
know prescription drugs are essential to the health of millions of 
Americans and reimportation will improve access to lifesaving drugs. 
Congress should do what it can to help seniors afford the drugs they 
need to stay healthy.
    Thank you again, Mr. Chairman for this opportunity. I appreciate 
your consideration and I hope that we can work together to ensure that 
people in South Dakota and across the nation can have access to 
prescription drugs at an affordable price.

    Mr. Bilirakis. By agreement with the minority, Mr. Kingston 
is afforded 5 minutes to use as he pleases to make statements 
or whatever the case may be regarding, apparently, his 
legislation. That will be the case.
    Mr. Kingston. Thank you very much, Mr. Chairman; and let me 
say to you and to Mr. Brown and all the members of the panel, 
this hearing was great. We really appreciate the opportunity 
for some good, honest dialog. I think that I was just truly 
impressed with the members' interest in this issue and so thank 
you very much.
    I wanted to say this issue a couple of years ago was one 
about price. I think today it is actually one about safety. The 
reason why I say that, the market has already decided the price 
issue. We are the market.
    Our constituents in the United States of America have said, 
Canada has cheaper drug costs; therefore, I am going to go 
through Canada. Man, I am going to go through other groups. I 
am going to mail orders. I am going to get on a bus. I am going 
to find a way to get to those drug costs, those cheaper drug 
costs.
    In fact, Canada Med, which is available on the Internet, 
picks up 300 new American customers each and every day. So the 
price issue is resolved. The only issue that is left is, how 
are we going to do it safely?
    It seems to me that the drug companies--and I have respect 
for drug companies, but they spend a lot of time, Mr. Chairman, 
doing things like this advertisement that went out on the radio 
today: Imported prescription drugs may be dangerous to your 
health. This went out on radio shows coast to coast. They have 
somebody who--I am sure they hired an ex-FBI agent. They have 
somebody else, and they are kind of really broadly quoting and 
misquoting the FDA and other government agencies, and they are 
saying that reimportation will increase the potential for 
terrorists targeting America.
    Now, is that productive at this time? I mean, is that 
really--does anybody really think that drug companies are 
concerned suddenly about terrorism in America? I mean, drug 
companies are great citizens, but I do think that is probably 
not the motivation for this going out and the money that went 
behind it.
    I would like to submit this for the record.
    Mr. Bilirakis. Without objection, that will be the case.
    Mr. Kingston. I appreciate it.
    [The material referred to follows:]
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    Mr. Kingston. I guess the only question to me remains--and 
I think there have been some valid criticism and concerns about 
the language in the bill as introduced. I think this committee 
in its wisdom can perfect that language and find a way to move 
the reimportation issue safely forward.
    I think the Senate actually has not lived up to it. They 
passed the bill, as you know, but they put a wink in there that 
would eventually make sure that it never became reality. I 
think the House can do a better job; and I am confident that, 
working together on a bipartisan basis, we can do that.
    So, again, let me just close with, to me, this is a safety 
issue. The market has already decided the price issue. The Ruth 
Tubbs, the Ruth Burrows, the Merlene Frees and all of our 
seniors and the good folks in Florida and Ohio and everywhere 
else are already doing this. It is our duty to find a way to 
protect them.
    So thank you very much.
    Mr. Bilirakis. And you are yielding the balance of your 
time to whom?
    Mr. Kingston. To Mr. Gutknecht.
    Mr. Gutknecht. Mr. Chairman, yield back.
    Mr. Bilirakis. Yield back.
    Mr. Sanders, anything you would like to add?
    Mr. Sanders. Thank you very much for allowing me to 
participate today.
    Mr. Bilirakis. You are welcome.
    All right, I guess this hearing is adjourned.
    [Whereupon, at 5:30 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
 Prepared Statement of Ronald J. Streck, President and CEO, Healthcare 
                  Distribution Management Association
    My name is Ronald J. Streck and I am President and CEO of the 
Healthcare Distribution Management Association (HDMA). I want to 
commend the chairman and the members of the subcommittee for holding 
this important hearing, ``Examining Prescription Drug Reimportation: A 
Review of a Proposal To Allow Third Parties To Reimport Prescription 
Drugs.''
    HDMA is the national trade association representing pharmaceutical 
and healthcare product distribution. HDMA's active member companies 
operate over 240 distribution centers throughout the country that serve 
every state, the District of Columbia and U.S. territories. HDMA's 
distributor members provide services to approximately 129,100 pharmacy 
settings, including: 19,400 independent pharmacies; 18,500 chain 
pharmacies; 9,300 food stores; 10,600 hospital pharmacies; 6,400 mass 
merchandisers; 5,200 long-term care and home health facilities; 58,300 
clinics; 1,100 HMOs; and 300 mail-order pharmacies. By concentrating 
healthcare products, dispensing them in economic quantities and then 
transporting them to thousands of pharmacies, hospitals, clinics and 
other healthcare delivery sites, distributors reduce the overall number 
of transactions required and save the healthcare system an estimated 
$146 billion annually.
    In the United States today, the great majority of all 
pharmaceuticals are distributed through healthcare distributors. 
Pharmaceutical distributors are a vital part of the system that is 
charged with ensuring product integrity and this is a responsibility 
that HDMA members take very seriously. If these drugs are not properly 
stored, handled and accounted for throughout the healthcare 
distribution system, the results can be troublesome at best, 
devastating at worst.
    It is with these thoughts in mind, that HDMA is opposed to 
permitting the reimportation of pharmaceuticals. Reimportation, whether 
restricted to just Canada or not, significantly increases the 
likelihood of counterfeit or adulterated drugs entering the U.S. market 
and reaching our medicine cabinets. And we do not believe it will 
result in the level of savings for the American consumer assumed by 
many reimportation supporters because of the many ``hidden'' costs that 
have not been factored in.
Prescription Drug Marketing Act
    Congress recognized the dangers of reimportation when it enacted 
the Prescription Drug Marketing Act (PDMA) in 1988 (P.L. 100-293). PDMA 
was the result of congressional investigations, led by the House Energy 
and Commerce Committee, that found that, ``A significant volume of 
pharmaceuticals are being reimported . . . These goods present a health 
and safety risk to American consumers because they may have become 
subpotent or adulterated during foreign handling and shipping.'' PDMA's 
overall purpose is to ``decrease the risk of counterfeit, adulterated, 
misbranded, subpotent or expired prescription drugs reaching the 
American public.''
    As a result of PDMA, national standards for the storage and 
distribution of pharmaceuticals in the United States have been 
established. All distributors are required to meet numerous federal and 
state regulations to ensure the integrity and security of 
pharmaceutical products that reach the American public. Every 
distributor must be licensed in every state in which they have a 
warehouse facility. Additionally, 42 states have further licensure 
requirements for distributors doing business in their state, even if 
their warehouse(s) is located in another state. Every distribution 
center is subject to inspection by the Food and Drug Administration, 
Drug Enforcement Administration, Environmental Protection Agency, 
Department of Transportation, Occupational Safety and Health 
Administration and the state agency counterparts.
    Under PDMA, all licensed distributors must have in place detailed 
storage and handling procedures that address:

 Temperature and humidity control and documentation
 Inspection of incoming and outgoing product shipments
 Rotation of product to prevent expiration
 Employee training in storage and handling of pharmaceuticals
 Extensive background checks on employees
 Facility and product security
 Procedures for handling recalls and returned goods
 Sanitation of facility
 Disaster plans for both inside and outside the facility
 Comprehensive written policies
    PDMA has worked. The extensive handling and storage standards, 
backed up with strong oversight, have resulted in the ``gold standard'' 
when it comes to ensuring product integrity. Overall, the closed method 
of distribution from manufacturer to distributor to pharmacy to patient 
has resulted in a system in which Americans do not question the 
authenticity of the prescription drug they are about to take.
    As of this writing, two major reimportation initiatives have been 
introduced in this Congress and below are HDMA's comments:
Prescription Drug Price Parity for Americans Act (H.R. 4614/S. 2244)
    The ``Prescription Drug Price Parity for Americans Act'' (H.R. 
4614/S. 2244) would allow pharmacists and pharmaceutical wholesale-
distributors to reimport prescription drugs from Canada into the United 
States for resale. Proponents of this legislation, who laud potential 
cost savings, believe that reimportation will not threaten the safety 
or health of Americans. They are wrong on both counts.
    Canada's prescription drug regulatory system appears to have served 
its 30 million citizens well. However, what will happen when Canada's 
market expands to serve an additional 287.4 million Americans? Last 
year, the number of prescriptions filled in the United States was more 
than ten times the number filled in Canada ( 3.3 billion vs. 320 
million. Where will the drugs come from to meet the new demand?
    If reimportation becomes the law of our land, Americans would 
expect unlimited access to cheaper drugs. In an environment of over-
demand and under-supply, criminals will be given a new opportunity to 
make a quick buck by infiltrating the U.S. market with counterfeit, 
subpotent, diverted and/or adulterated drugs through Canada. For 
example, in light of recent changes in U.S. law, Canada has become the 
leading supply route for the raw ingredients needed to make the illegal 
drug methamphetamine. American and Canadian law enforcement officials 
agree that criminals are taking advantage of the lax Canadian 
regulations and a vast border. (``U.S. Moves to Close Canadian Drug 
Route For Illegal Stimulant,'' The New York Times, 3/5/02)
    Proponents of this legislation contend that they have addressed 
these concerns by including a provision in the legislation that 
requires the importer to test the product for ``authenticity and 
degradation.'' Commenting specifically on this provision, the FDA 
stated in a July 17, 2002 letter to Senator Thad Cochran, ``As a 
practical matter, meeting these requirements would be an enormous 
undertaking, and the testing required under the bill would be costly 
and time consuming, both for the government and importers. Moreover, 
some of the testing requirements cannot even be met, as there is no 
testing that can ensure that a shipment of drugs does not contain 
counterfeits . . . For most drugs there is no simple laboratory test 
that can verify the authenticity of the product . . .''
    Putting aside the very serious questions about the validity of 
testing for ``authenticity and degradation,'' there are significant 
costs that need to be considered to meet this requirement. The importer 
would be required to provide capitalization for constructing, equipping 
and staffing certified testing facilities or contracting with approved 
laboratories for the testing.
    Another additional cost(liability insurance(must also be 
considered. Currently, most domestic wholesalers are indemnified by the 
drug manufacturers they do business with due to the controlled nature 
of the U.S. supply system. However, if reimportation becomes a reality, 
this indemnification would disappear. Manufacturers understand that 
reimportation, even if it is limited to Canada, will diminish the 
oversight and protections that characterize the U.S. prescription drug 
supply system. U.S. manufacturers would not, nor should they be 
expected to, indemnify distributors dealing with products that may or 
may not have been manufactured by them.
    The additional costs do not stop there. Other potential costs are 
associated with establishing systems and means for relabeling, 
repackaging, product tracking, documentation, recordkeeping, customs' 
fees, insuring compliance with patent and trademark regulations and 
implementation of processes to deal with returns, recalls and 
withdrawals.
    Since the mid-1990's, the industry's net profit margin has been 
less than one percent. Our most recent data indicates that it was 0.72% 
last year. Operating in a highly competitive marketplace, distributors 
pass on their savings from lower operating costs through to their 
customers. The costs of the additional responsibilities, regulatory 
burdens and liability exposure that would result from implementation of 
H.R. 4614 would ultimately have to be passed along--distributors simply 
do not have the margins to absorb these types of additional 
expenditures.
    Limiting reimportation to Canada does not eliminate the threat to 
health and safety to Americans. Indeed, Canada would become the gateway 
for those looking to introduce counterfeit drugs into our country. 
Therefore, this legislation should be vigorously opposed.
Drug Importation Act of 2002 (H. R.5186)
    The ``Drug Importation Act of 2002'' (H.R. 5186) would allow 
pharmacists to reimport FDA-approved drugs for resale in the United 
States. As it was just introduced on July 23, 2002, HDMA has not had 
time to conduct an in-depth analysis. However, our initial review 
indicates that it does nothing to address our overriding health and 
safety concerns as it relates to how reimported product was stored and 
handled outside of this country or counterfeit product being able to 
work its way into the U.S. marketplace. Furthermore, while the ability 
to do actual reimportation would be limited to pharmacists, there are 
still practical, operational issues that would have a very direct 
impact on distributors.
    For example, how are returns, recalls and withdrawals to be 
handled? Certainly, a distributor should not be expected to process 
product and issue credits for drugs it did not distribute. The issue of 
liability exposure is another factor that would be of concern to HDMA 
members. Regretfully, experience has taught us that distributors would 
be among those cited in lawsuits filed due to injuries resulting from 
``bad'' product. New and potentially expensive inventory control 
systems would have to be put in place, both at the pharmacy and 
distributor level, to differentiate pharmacist-imported product from 
those that passed through a domestic distributor. These are just two 
concerns we would have regarding this legislation.
    While HDMA cannot support this bill, we do agree with its 
supporters who have cited the central role that pharmacists can have in 
helping a patient with their medication therapy management. HDMA has 
been a longtime advocate for recognition of the important role 
pharmacists have in the healthcare system and that there should be fair 
and appropriate reimbursement for the pharmaceutical therapy management 
services they provide.
Conclusion
    As the committee knows, legislation was passed by the last Congress 
that would have allowed for reimportation by pharmacists and 
wholesaler-distributors. That legislation required the Secretary of 
Health and Human Services to certify that reimportation would not 
result in an increased threat to the health and safety of Americans and 
that there would be cost savings for the patient before it could be 
implemented. After an extensive review, then-Secretary Shalala 
announced that she could not certify these two factors. Her successor, 
Secretary Thompson, undertook his own investigation and reached the 
same conclusion.
    Limiting reimportation to Canada or ``pharmacist-only'' would not 
change these findings. HDMA concurs with the FDA when it states that, 
``Legislation that would establish other distribution routes for drug 
products, particularly where those routes transverse a U.S. border, 
creates a wide inlet for counterfeit drugs and other products that are 
potentially injurious to the public health and a threat to the security 
of our nation's drug supply.'' In a time when we are working to tighten 
our border security due to terrorist threats, now is not the time to 
loosen them to reimported drugs.
    On June 11, 2002, Health and Human Services Secretary Thompson 
stated, ``Opening our borders to reimported drugs potentially could 
increase the flow of counterfeit drugs, cheap foreign copies of FDA 
approved drugs, expired and contaminated drugs and drugs stored under 
inappropriate and unsafe conditions. That is a risk we simply cannot 
take.''
    The stated intent of prescription drug reimportation measures 
introduced in Congress is to increase consumer access to medications 
through lower costs. Not only will this not happen to the extent hoped 
for, but it will in actuality greatly endanger the health and safety of 
the American public.
    The issue is coverage, not price. The reason some seniors are 
paying higher prices is that they are not in a program that negotiates 
on their behalf. HDMA supports comprehensive reform of the Medicare 
program to include an appropriate pharmaceutical care benefit and wants 
to work with Congress to achieve this end. Thank you.