[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



  SOUTH FLORIDA'S ACCESS TO AFFORDABLE PRESCRIPTION DRUGS: COSTS AND 
                   BENEFITS OF ALTERNATIVE SOLUTIONS

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

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 10, 2003

                               __________

                            Serial No. 108-9

                               __________

       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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                               __________
                    COMMITTEE ON ENERGY AND COMMERCE

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

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                      Ranking Member
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
CLIFF STEARNS, Florida               EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio                RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania     RICK BOUCHER, Virginia
CHRISTOPHER COX, California          EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina         SHERROD BROWN, Ohio
  Vice Chairman                      BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia             BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois               BART STUPAK, Michigan
HEATHER WILSON, New Mexico           ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES W. ``CHIP'' PICKERING,       GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        TOM ALLEN, Maine
MARY BONO, California                JIM DAVIS, Florida
GREG WALDEN, Oregon                  JAN SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho

                  David V. Marventano, Staff Director

                   James D. Barnette, General Counsel

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

                                 ______

              Subcommittee on Oversight and Investigations

               JAMES C. GREENWOOD, Pennsylvania, Chairman

MICHAEL BILIRAKIS, Florida           PETER DEUTSCH, Florida
CLIFF STEARNS, Florida                 Ranking Member
RICHARD BURR, North Carolina         DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire       JIM DAVIS, Florida
GREG WALDEN, Oregon                  JAN SCHAKOWSKY, Illinois
  Vice Chairman                      HENRY A. WAXMAN, California
MIKE FERGUSON, New Jersey            BOBBY L. RUSH, Illinois
MIKE ROGERS, Michigan                JOHN D. DINGELL, Michigan,
W.J. ``BILLY'' TAUZIN, Louisiana       (Ex Officio)
  (Ex Officio)

                                  (ii)


                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Coplan, Resi.................................................     8
    Hahn, Elliott, Chairman and President, Andrx Corporation.....    64
    Jackson, Michael A., Executive Vice President, Florida 
      Pharmacy Association.......................................    66
    Lipscomb, Bentley, State Director, AARP......................     4
    McEwan, Robert N., CEO, Medbank of Maryland, Inc.............    75
    Ruiz, Carlos A., Pharmacy Director, Navarro Discount 
      Pharmacies.................................................    70
    Sweed, Gene..................................................    12
    Taylor, John D., Drug Inspector, Florida Department of 
      Health, Bureau of Statewide Pharmaceutical Services........    41
    Taylor, John M., Associate Commissioner of Regulatory 
      Affairs, Food and Drug Administration......................    29

                                 (iii)

  

 
  SOUTH FLORIDA'S ACCESS TO AFFORDABLE PRESCRIPTION DRUGS: COSTS AND 
                   BENEFITS OF ALTERNATIVE SOLUTIONS

                              ----------                              


                         MONDAY, MARCH 10, 2003

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                      Aventura, FL.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
the city of Aventura, Florida's Commission Chambers, Second 
floor, 19200 Country Club Drive, Aventura, Florida, Hon. James 
C. Greenwood (chairman) presiding.
    Members present: Representatives Greenwood and Deutsch.
    Also present: Representative Engel.
    Staff present: Ray Shepherd, majority counsel; Jill Latham, 
legislative clerk; and Chris Knauer, minority investigator.
    Mr. Greenwood. This hearing of the U.S. House of 
Representatives Committee on Energy and Commerce, the 
Subcommittee on Oversight and Investigations hearing will come 
to order.
    Good morning, we welcome all of you, and thank you for 
joining us. Before we begin, I would like to ask that those of 
you who have cellular telephones if you would be so kind as to 
turn them off or put them on the vibrate setting so we are not 
interrupted. I would appreciate that. Thank you.
    Also like to thank my friend and colleague, Peter Deutsch, 
for inviting the subcommittee to his district to discuss the 
important and timely issue of drug prices and the efficacy and 
safety of some of the alternative methods by which our 
constituents are currently purchasing drugs.
    Last August, the Associated Press reported that a man who 
rode a U.S. Senate candidate's prescription express, Rx 
Express, to Canada to buy prescription drugs became sick after 
ingesting some of the medication he bought while in Canada. 
Stanley Campa, age 83, of St. Cloud, Minnesota, was rushed to 
the hospital and almost died when his heart slowed and he 
passed out after taking Cardizem, a blood pressure medication. 
According to his doctor, Mr. Campa took the correct drug but in 
the wrong formulation. Mr. Campa did not receive the correct 
time release capsule that he usually takes in Minnesota and 
instead took the pill in tablet form that acts more quickly 
than the time release capsule. This inadvertent mix-up almost 
caused his heart to stop.
    This incident illustrates two problems. First, the 
skyrocketing prices of medication and increasingly out of the 
reach for too many of our seniors and nearly all those on fixed 
incomes. Some of the seniors here with us today will testify 
that they often forego other essentials in order to purchase 
their necessary medications. In a country as wealthy as ours, 
we must do better to ensure full access to and the 
affordability of pharmaceuticals.
    I look forward not only to hearing their testimony but also 
expect that the witnesses on panel three will be able to 
provide them with instructive information on how to purchase 
some of their medications at greatly reduced prices or even 
receive their medications for free.
    Second, the incident I referred to illustrates that drugs 
procured outside the United States can be dangerous for 
numerous reasons. FDA acknowledges that it cannot monitor or 
guarantee the safety and effectiveness of drugs purchased 
outside the closed U.S. distribution system. FDA has warned the 
public that drugs purchased from foreign countries could be 
counterfeit. Cheap foreign imitations of FDA-approved drugs 
that could be sub-potent or super-potent, expired drugs, 
contaminated drugs or drugs stored under unsafe condition.
    After this subcommittee's June 2001 hearing that 
highlighted the clear and present danger that these drugs posed 
to the American people, FDA proposed to the Department of 
Health and Human Services that it allow FDA and Customs to deny 
entry of all these illegal drugs into the U.S. and return them 
to sender. To date, Secretary Thompson has not acted on the 
proposal. I look forward to hearing what actions the FDA has 
taken to protect our constituents from the dangers of 
purchasing drugs over the Internet.
    Our third panel will discuss how legitimate drugs purchased 
over the Internet and used without the supervision of a doctor 
or pharmacist can be just as deadly as counterfeits. In this 
subcommittee's June 2001 hearing, we heard testimony from 
Reverend and Mrs. Rode of Illinois who painfully described how 
their son accidentally overdosed on a mixture of drugs he 
purchased over the Internet. The drugs turned out to be 
legitimate and prescribed by a doctor, but their son died as a 
result of incorrectly mixing a combination of these drugs. This 
unfortunate incident shows that when drugs are purchased over 
the Internet, patient care can easily be compromised because 
there is no interaction with a physician or dispensing 
pharmacist who are aware of the patient's history and can 
prevent deadly drug interactions.
    In addition to discussing potential safety problems 
resulting from purchasing cross-border drugs over the Internet, 
our third panel will also discuss programs by which individuals 
can receive free or low-cost medications. Hopefully, we can 
highlight some of these plans and assist the seniors here today 
to safely purchase these medications while substantially saving 
money.
    I would like to welcome our witnesses here this morning. On 
panel one, we have private citizens Ms. Resi Coplan. Am I 
pronouncing that right?
    Ms. Coplan. Resi Coplan.
    Mr. Greenwood. Resi. Ms. Resi Coplan. Mr. Gene Sweed and 
the State Director of the American Association of Retired 
Persons, Mr. Bentley Lipscomb.
    On panel two, we will hear from Mr. John Taylor, the 
Associate Commissioner of Regulatory Affairs for the Food and 
Drug Administration and Mr. John Taylor, drug inspector for the 
Bureau of Statewide Pharmaceutical Services of the Florida 
Department of Health. Yes, you heard me correctly. By a strange 
coincidence, there are two John Taylors with us this morning. I 
apologize in advance for the inevitable confusion.
    On panel three, we have Dr. Elliott Hahn, chairman and 
president of Andrx Corporation, Mr. Michael Jackson, executive 
vice president of the Florida Pharmacy Association, Mr. Carlos 
A. Ruiz, pharmacy director for Navarro Discount Pharmacy and 
Mr. Robert N. McEwan, CEO of MEDBANK of Maryland, Incorporated.
    And with that, I would yield to our host, the gentleman 
from Florida, the ranking member of this subcommittee, Mr. 
Deutsch.
    Mr. Deutsch. Thank you, Mr. Chairman, and, again, I thank 
you very much for having this hearing in south Florida but also 
for the fact of having this hearing. And I just mentioned in 
this setting that in terms of any substantive committee or 
subcommittee in Congress, I think the two of us have worked as 
well as any members, and I think both of us are absolutely 
committed to finding a solution to what we acknowledge and I 
think what Americans acknowledge is probably as significant a 
policy concern as any domestic policy concern that America 
faces today, and that is the escalating cost and the high cost 
and access of prescription drugs for seniors. And I think today 
we will hear testimony that we have heard, in a sense, before 
but not in this type of setting with specifics. And, honestly, 
one of the things, it almost has not gotten through to all of 
our colleagues who might not serve on committees, who might not 
be concentrating in terms of senior populations, but as severe 
as the problem is on a day-to-day basis for so many people but 
also what that has led to.
    And I think one of the things we will hear testimony about 
today is this phenomenon of purchase through the Internet. As 
this committee has investigated, and hopefully we will gain 
some insight today, we are trying to get our arms around the 
extent of it. When we met with the FDA in Washington, the 
estimates that they gave us that there were 10 million 
individual purchases of prescription drugs through the Internet 
in the last year. But they really have no idea if that is an 
accurate number or not. It could be 30 million, it could be 40 
million, it could be even more. And the reality is that people 
are availing themselves of that I think in many cases because 
they have no choice. And that is the only option that they see 
for themselves in terms of their own health care on a personal 
basis.
    And as the chairman pointed out, we have some real concerns 
because there is anecdotal information, as he has mentioned, 
but there is no FDA direct regulatory authority. So when people 
are purchasing, and this is millions of people, there is 
clearly a question about what they are purchasing. And in a 
sense, people are making a choice but not a real choice in that 
activity.
    Let me just briefly introduce some of the elected officials 
who are here today. I thank the city of Aventura for their 
hospitality for both letting us use the chamber but also for 
providing my district office as well, the mayor, Jeff Perlow, 
the commissioner, Harry Housberg, and the newly elected 
commissioner, Zev Auerbach. Mayor Sampson from Sunny Isles 
Beach is here and also the vice-mayor, Norman Edecup and the 
commissioner from Broward County from the south end of the 
county, Sue Gunzberger, is here as well.
    I can go through a lot of introduction in terms of just the 
status of the Foreign Drug Act and the FDA 90-day supply 
policy, but I think I would more anxiously wait for the 
testimony of the witnesses and be responsive to some of their 
comments and questions. Thank you, Mr. Chairman.
    Mr. Greenwood. Thank the gentleman. And that brings us to 
our first panel, which I have already introduced. We welcome 
you again and thank you for being with us this morning. This is 
an investigative hearing of the Oversight and Investigations 
Subcommittee, and when we hold our hearings it is our practice 
to take testimony under oath. So I would ask if any of you have 
any objections to giving your testimony under oath? Okay. You 
also have the right to be represented by counsel. Sometimes 
people who come before us are in trouble and need counsel. You 
probably don't, but do any of you wish to be represented by 
counsel? Okay. In that case, I am going to ask if you would 
stand and raise your right hand?
    Mr. Lipscomb. I can't stand.
    Mr. Greenwood. Okay. Well, you can just raise your right 
hand. Do you swear that the testimony you are about to give is 
the truth, the whole truth and nothing but the truth?
    [Witnesses sworn.]
    Mr. Greenwood. Okay. You are under oath, and I guess maybe 
we will have Mr. Lipscomb go first.

   TESTIMONY OF BENTLEY LIPSCOMB, STATE DIRECTOR, AARP; RESI 
                     COPLAN; AND GENE SWEED

    Mr. Lipscomb. Thank you, Mr. Chairman, Congressman Deutsch. 
I am Bentley Lipscomb, Florida State Director of AARP. I want 
to thank you, the committee, for your interest in the issue of 
the high cost of prescription drugs and the difficulties that 
this poses for older Americans and in particularly older 
Floridians. AARP appreciates the opportunity to share our 
perspective on the need to create a Medicare prescription drug 
benefit for all beneficiaries this year.
    For over 30 years, Medicare has provided older and disabled 
beneficiaries with dependable, affordable, quality health 
insurance. Florida, for example, has one of the largest 
beneficiary populations in the Nation. The county where we are 
having this hearing today has more aging population in it than 
19 States. If you take the county immediately to the north and 
the one immediately to the north of it, the three-county strip 
from Palm Beach through Dade County, taken together has more 
aging population than 38 States. You are, in a word, in the 
most elder-rich section of the United States holding your 
hearing today.
    Throughout my career in the aging community, I have seen 
first hand how Medicare has made a difference in the lives of 
older Americans. Medicare has been instrumental in improving 
the health and life expectancy of beneficiaries in Florida and 
across our great Nation. Medicare's promise of affordable 
health care must extend beyond the current generation of 
retirees. Now, more than ever, Americans of all ages are 
looking to Medicare's guaranteed protections as a part of the 
foundation of their retirement planning. But there is a serious 
gap in that protection--the absence of a reliable prescription 
drug coverage.
    The practice of medicine has changed dramatically since the 
Medicare program was created in the sixties. Drug therapies 
that were not available when Medicare began are now commonly 
used to prevent and treat virtually every major illness. In 
many cases, new drugs substitute for or allow patients to avoid 
more expensive therapies such as hospitalization and surgery. 
In other cases, drugs facilitate treatment or provide treatment 
where none existed before, improving the quality and length of 
life for the patient. As a result, prudent reliance on 
prescription drugs now goes to the very core of good medical 
practice.
    Given the prominence of drug therapies in the practice of 
medicine, if Medicare were being designed today, rather than in 
1965, not including a prescription drug benefit would be as 
absurd as not covering doctor visits or hospital stays. That is 
why ensuring that all beneficiaries have a meaningful, 
affordable prescription drug program is AARP's top legislative 
priority. Our members and their families need access to a drug 
benefit that is affordable, available, dependable, and they 
need it to happen this year.
    AARP is particularly pleased that this subcommittee is 
examining the issue of the high cost of prescription drugs and 
the risk of obtaining those drugs outside the United States. 
And that the Congress has begun to develop its own prescription 
drug benefit legislation. It is our hope that today's hearing 
will help increase the visibility of the need for an affordable 
Medicare prescription drug benefit for all beneficiaries.
    As new prescription drugs are becoming available to treat 
and prevent more and more serious conditions and life-
threatening illnesses, reliance on these drugs has become 
especially significant for our older American population. 
Ninety percent of Medicare beneficiaries use a prescription 
drug every day. While older Americans comprise only 12 percent 
of the U.S. population, they account for 40 percent of 
prescription drug spending. In fact, after premium payments, 
prescription drugs account for the single largest component of 
health care out-of-pocket spending for non-institutionalized 
Medicare beneficiaries age 65 and older. On average, these 
beneficiaries spend more out-of-pocket for prescription drugs 
as for physician care, vision services and medical supplies 
combined.
    The need for a Medicare prescription drug benefit for all 
beneficiaries continues to escalate. Older and disabled 
Americans continue to face double-digit increases in their 
prescription costs. A chronic health problem necessitating new 
and expensive prescription drugs can quickly deplete a 
retiree's financial resources. Even a beneficiary who has 
planned well for his or her retirement may not be prepared for 
what they are faced with in prescription bills that exceed 
several hundred dollars to $1,000 a month.
    Medicare Plus Choice plans continue to scale back their 
drug benefits. In Florida, we have seen a major exodus as the 
plans leave the Medicare program, and many of those that 
continue to participate have made their benefit less generous, 
with some covering only generic drugs. The cost of private 
Medigap coverage is increasingly unaffordable. While Medigap 
drug coverage is quite limited, the premiums on these policies 
can exceed $1,000 a year. State prescription drug assistance 
programs provide only a limited safety net and are themselves 
at risk because of the State's current budget crises.
    Despite promises of relief, lack of a drug benefit in 
Medicare persists. Beneficiaries continue to struggle to pay 
for necessary medications. Some even take desperate and 
sometimes dangerous measures, as you indicated already, Mr. 
Chairman. In some instances, beneficiaries do not follow the 
course of treatment, do not take the prescribed full dosage or 
take their prescriptions intermittently.
    That is why AARP is calling on Congress to pass legislation 
this year, and it should be a true benefit. Our members have 
told us that this legislation should ensure all Medicare 
beneficiaries have access to affordable, meaningful 
prescription drug coverage; provide stable coverage that 
beneficiaries can rely on from year to year, and this a 
particularly poignant point; protect beneficiaries from 
extraordinary out-of-pocket costs and ensure reasonable cost-
sharing; provide lower-income beneficiaries with additional 
assistance; and not create incentives for employers to drop 
current retirees' coverages.
    AARP members are looking to Congress to fulfill the promise 
to begin to provide long overdue relief from the devastating 
costs of prescription drugs. We believe that a prescription 
drug benefit should be integrated into Medicare in a way that 
strengthens the program. We do know that a workable 
prescription drug benefit will require a sizable commitment of 
Federal dollars. AARP has urged a level of funding that will 
enable the Congress to design a Medicare drug benefit that will 
provide real value to beneficiaries. As we learned from last 
year's debate, more than $400 billion will be needed to create 
a Medicare prescription drug benefit that our members will find 
valuable.
    Now, as the chairman indicated previously, many of our 
members are going to either Canada or Mexico or using Internet 
sites to buy drugs cheaper. We are not supportive of that type 
of practice, and we find that it is very risky in many 
instances. But we have to remember why this is an issue: Our 
members want prescription drugs. In many cases, they have been 
told by their physicians that it is a matter of life and death 
in terms of whether they take them. So they either have to go 
outside the country to get them or they simply can't afford 
them. Last month, the St. Petersburg, where my office is, 
instituted passenger ship service between the Port of Tampa and 
Mexico, and I asked the mayor of St. Petersburg if he was 
instituting this service so our older citizens could take their 
cars and go to Mexico and load them up with drugs and come 
back. Because it has become increasingly prevalent practice to 
go outside the country to do it, even though those drugs are 
manufactured in the United States, shipped there and then come 
back in.
    While AARP supported the reimportation amendment that 
passed the Senate last year, we urge caution because there is 
serious concern about patient safety and whether the savings 
are really passed onto consumers. Reimportation, we believe, 
will continue to be an issue and one that will need to be 
addressed until Congress enacts a Medicare benefit for drugs 
and the President signs it into law.
    In conclusion, Mr. Chairman, we believe that creating 
prescription drug benefit for all beneficiaries is a priority 
for Floridians, for AARP and for the Nation itself. We pledge 
to work with you and other Members of Congress to ensure that a 
Medicare prescription drug bill gains broad bipartisan support 
and can be enacted into law this year. Thank you very much.
    [The prepared statement of Bentley Lipscomb follows:]
  Prepared Statement of Bentley Lipscomb, Florida State Director, AARP
    Mr. Chairman and Congressman Deutsch, I am Bentley Lipscomb, 
Florida state director of AARP. I want to thank you for your interest 
in the issue of the high cost of prescription drugs and the 
difficulties older Americans have in paying for needed medications. 
AARP appreciates this opportunity to share our perspective on the need 
to create a Medicare prescription drug benefit for all beneficiaries 
this year.
    For over thirty years, Medicare has provided older and disabled 
beneficiaries with dependable, affordable, quality health insurance. 
Florida, for example, has one of the largest beneficiary populations in 
the nation. Throughout my career in the aging community, I have seen 
first hand how Medicare has made a difference in the lives of older 
Americans. Medicare has been instrumental in improving the health and 
life expectancy of beneficiaries in Florida and across the nation. It 
has also helped to reduce the number of older persons living in 
poverty.
    Medicare's promise of affordable health care extends beyond the 
current generation of retirees. Now, more than ever, Americans of all 
ages are looking to Medicare's guaranteed protections as part of the 
foundation of their retirement planning. But there is a serious gap in 
Medicare's protection--the absence of reliable prescription drug 
coverage.
    The practice of medicine has changed dramatically since the 
Medicare program was created. We are now living in a time of amazing 
breakthroughs in medical research and technology. Among the most 
striking are the advances in the area of prescription drugs. Drug 
therapies that were not available when Medicare began are now commonly 
used to prevent and treat virtually every major illness. In many cases, 
new drugs substitute for or allow patients to avoid more expensive 
therapies such as hospitalization and surgery. In other cases, drugs 
facilitate treatment or provide treatment where none existed before, 
improving the quality and length of life for the patient. As a result, 
prudent reliance on prescription drugs now goes to the very core of 
good medical practice.
    Given the prominence of drug therapies in the practice of medicine, 
if Medicare were being designed today--rather than in 1965--not 
including a prescription drug benefit would be as absurd as not 
covering doctor visits or hospital stays. That is why ensuring that all 
beneficiaries have meaningful, affordable prescription drug coverage is 
AARP's top legislative priority. Our members and their families need 
access to a drug benefit that is affordable, available, and dependable, 
and, they need this to happen this year.
    AARP is pleased that this Subcommittee is examining the issue of 
the high cost of prescription drugs and that the Congress has begun to 
develop its own prescription drug benefit legislation. It is our hope 
that today's hearing will help increase the visibility of the need for 
an affordable Medicare prescription drug benefit for all beneficiaries.
    As new prescription drugs are becoming available to treat and even 
prevent more and more serious conditions and life-threatening 
illnesses, reliance on these drugs has become especially significant 
for older Americans. Ninety percent of Medicare beneficiaries use a 
prescription drug every day. While older Americans comprise only 12 
percent of the U.S. population, they account for forty percent of 
prescription drug spending. In fact, after premium payments, 
prescription drugs account for the single largest component of health 
care out-of-pocket spending for non-institutionalized Medicare 
beneficiaries age 65 and older. On average, these beneficiaries spend 
more out-of-pocket for prescription drugs as for physician care, vision 
services, and medical supplies combined.
    The need for a Medicare prescription drug benefit for all 
beneficiaries continues to escalate:

 Older and disabled Americans continue to face double-digit 
        increases in their prescription costs--a chronic health problem 
        necessitating new and expensive prescription drugs can quickly 
        deplete a retiree's financial resources. Even a beneficiary who 
        has planned well for his or her retirement may not be prepared 
        for drug bills that exceed several hundred dollars a month.
 Employer-based retiree health coverage continues to erode--24% 
        of employers with 200 or more employees offered health coverage 
        to their Medicare-age retirees in 2001 compared to 31% in 1997.
 Medicare+Choice plans continue to scale back their drug 
        benefits--In Florida, for example, we have seen many plans 
        leave the Medicare program and many of those that continue to 
        participate have made their benefit less generous with some 
        covering only generic drugs.
 The cost of private Medigap coverage is increasingly 
        unaffordable--while Medigap drug coverage is quite limited, the 
        premiums on these policies exceed $1000 a year.
 State prescription drug assistance programs provide only a 
        limited safety net, and are themselves at risk because of 
        current state budget crises--In Florida, for instance, there 
        are two state pharmaceutical assistance programs. The Sliver 
        Saver Drug program provides assistance of only $80 per person 
        per month and seniors must pass a strict asset test to be 
        eligible.
    Despite promises of relief, lack of a drug benefit in Medicare 
persists. Beneficiaries continue to struggle to pay for necessary 
medications. Some even take desperate--and sometimes dangerous--
measures. For instance, some beneficiaries do not follow a course of 
treatment, do not take the prescribed full dosage, or take their 
prescriptions intermittently.
    That is why AARP has called on Congress to pass legislation this 
year.
    To be considered a true benefit, our members have told us 
legislation must:

 Ensure all Medicare beneficiaries have access to affordable, 
        meaningful prescription drug coverage;
 Provide stable coverage that beneficiaries can rely on from 
        year to year;
 Protect beneficiaries from extraordinary out-of-pocket costs 
        and ensure reasonable cost-sharing;
 Provide lower-income beneficiaries with additional assistance; 
        and
 Not create incentives for employers to drop current retiree 
        coverage.
    AARP members are looking to Congress to fulfill the promise to 
begin to provide long-overdue relief from the devastating costs of 
prescription drugs. We believe that a prescription drug benefit should 
be integrated into Medicare in a way that strengthens the program.
    We know a workable prescription drug benefit will require a sizable 
commitment of federal dollars. AARP has urged a level of funding that 
will enable the Congress to design a Medicare drug benefit that will 
provide real value to beneficiaries. As we learned from last year's 
debate, more than $400 billion will be needed to create a Medicare 
prescription drug benefit that our members will find valuable.
    In conclusion, we believe that creating prescription drug benefit 
for all beneficiaries is a priority for Floridians, AARP, and the 
nation. We want to work with you and other Members of Congress to 
assure that a Medicare prescription drug bill gains broad bipartisan 
support and is enacted into law this year.

    Mr. Greenwood. Thank you, sir. And I think you summarized 
exactly why Congressman Deutsch asked me to hold this hearing 
here, because he has expressed to me repeatedly that he wants 
to make sure that his constituents have affordable 
prescriptions, and he worries that they don't, but he also has 
a worry that they make sure that what they get is safe and felt 
that this would help to underline the vital imperative that 
Congress move forward quickly to create a prescription drug 
benefit.
    I am going to turn to you, Ms. Coplan, and ask you to 
testify next, please.

                    TESTIMONY OF RESI COPLAN

    Ms. Coplan. Okay. Thank you very much. Good morning. My 
name is Resi Coplan, and I am 67 years old. I was working up 
until a year ago January when I, unfortunately, had a car 
accident which exacerbated a problem in my back, giving me a 
very painful right hip and right leg and difficulty walking. 
And the doctors had put me on a medication that was way too 
strong. It had an anesthetic type of reaction, and I 
eventually, in July, fell out of bed, fractured my left foot. 
So I had my right hip and my left foot that I was nursing.
    I ended up in the hospital from July 7 until August 20, 
which is about 6 weeks with time in ICU due to this 
complication. When I did go back home I had enormous number of 
medications that I was asked to take, and I had to start to 
make a plan because there was no way that I was going to be 
able to afford all of this.
    The treatments that I could have had for this back 
condition to try to eliminate some of these drugs--and, by the 
way, before the accident I was on one drug just for my heart, I 
have a pacemaker, that is one of my conditions--the ways that 
they could help me was by surgery or injection, but I am a 
hemophiliac and I am also allergic to blood and blood products. 
So in order for me to go through any kind of surgical 
procedure, it is a month of pre-treatment, then into the 
hospital and transfused and then the next day have the surgery 
or procedure and transfused and then transfused the next day 
also. I have an unusual hemophilia.
    All the allergies and medications are listed. I don't 
really want to go into all of those unless you want me to. But 
I did want to go through some of my physical conditions. I do 
have COPD, chronic obstructive pulminary disease. I am O2-
dependent, which I have with me, and I have breathing 
treatments that are four times a day, plus I carry the little 
buffer with me too so I can breathe. I never know when it is 
going to hit, so I am hoping I can get through this without it. 
The pacemaker I have is a dual pacer, and I have had it now 
since 1997. I have neuropathy of both my hands and feet that 
was just recently diagnosed. I have loss of feeling in all 
these areas. I am not a diabetic, which is where it usually is 
affiliated. I am not sure why this is happening. I also was 
just newly diagnosed with osteoporosis, and I am on a very 
expensive drug for that; the hemophilia, of course; my painful 
right hip, which is very difficult to treat because of my drug 
problems. I also have spondylolisthesis. That is in the back 
where it is breaking down with the osteoporosis, and I am great 
candidate for fractures. I have a very poor activity tolerance 
due to the breathing and the difficulty with my walking and so 
forth since I have had this accident. Now to compound this 
issue, I also had therapy up until mid-October this--I am 
sorry, mid-January this year. Sorry about that.
    Now, in order to control all these different things that I 
am suffering with, I have made a list of my medications. I went 
to Costco, I went to Winn Dixie, and I went to Canada Rx, which 
is right here in this area. Canada Rx does have some lower 
prices on some and higher on others or they don't have them. 
Then they added a shipping charge which negates anything that 
would be possible. I was told about Costco through Broward 
County Elderly Services, and I did go there, and they gave me a 
list of my medications and the prices on them. On their 
figures, it would be--Costco's figure for a month would be 
$303.11. At Winn Dixie, it is $406.14, and that is as of this 
week, depending on whether they are going to go up or not. 
Okay? My Social Security that I get, less the amount that I 
have to pay in, the $58, I get $945. I am on disability right 
now through work. There was supposed to be long-term disability 
but because of age and because of what is going on with the 
Social Security, they will only give it to me for one more year 
from that. So I will lose that in 1 year, which means 
everything that we are saying now is even more important. So my 
total income is $1,882 a month, my fixed outlay is $1,429.40. 
That leaves me $452.60, if all these figures are correct, to 
live on and buy my medication. Even at $303, to buy food, 
clothing, toiletries, paper products, cleaning products, 
gasoline to get here, anything, it is impossible. I have to 
make decisions. What do I take? How much of it do I use? And 
what do I buy first? I have a prescription right here waiting, 
there is two of them. There is no way. Last few weeks I have 
had a lot of changes in medication. One of them in particular 
was this Fosamax. Four pills for 1 month, $63.95 at Costco, and 
at Winn Dixie, it was $60.19 with AARP as my supplement. Either 
way that is a lot of money. I could not pay all of my rent this 
month. Thank goodness they are very kind to me, but kindness 
doesn't last forever, and I don't know what tomorrow will 
bring.
    I hope I have made this point fairly clear that this is an 
impossible situation. I have covered myself with insurance. I 
do have AARP. It is $189 a month--very expensive but very 
necessary in my case. I think this a problem that everybody 
needs to hear and know and try to do something about. And 
before I leave you, I would like to tell you just one little 
story, if you don't mind.
    It is going to be 8 years now in May that my daughter was 
killed the day before Mother's Day by a hit-and-run drunk 
driver. She had 3 children, ages 8, 10 and 15 at the time. When 
she was killed I had the boys for a short year, and I was 
trying to get them into a more normal situation, and about 
three or 4 months after her death I took them over to the 
beach, because their mother did that all the time; they loved 
the beach. And the 8-year-old was just sort of playing with the 
seaweed, and the 10-year-old at that time--he is now 18--the 
10-year-old asked me, he says, ``Grandma, did my mother really 
make a difference in this world,'' and I said, ``Of course she 
did. She made me a mother. She was my daughter, and I could 
love her, made your uncle to have a sibling, and without her I 
wouldn't have the three of you to love and watch grow up.'' And 
he says, ``Well, grandma, did you ever stop to think that if I 
threw this little pebble in the ocean, that that ocean and any 
ocean it touches would never be the same again?'' And I said, 
``How astute of you, how smart you are. No, I never did.'' He 
says, ``Okay.'' He says, ``My mother did make a difference.'' I 
said, ``She certainly did. She brightened everybody's life that 
she came near.'' He says, ``Okay,'' and he took it and he 
skipped it across the ocean surface. That is for my mother who 
made a difference. This little 10-year-old boy made a great 
difference in my life, and now I am this bolder and I am going 
into the ocean and I want you all to make a change. Thank you.
    [The prepared statement of Resi Coplan follows:]

                   Prepared Statement of Resi Coplan

    On January 15, 2002, I was run off the road on 595 east bound by a 
car that was coming into my lane making it necessary for me to go onto 
the emergency lane and, with the car still coming at me , I then went 
into the wall. My car almost turned over as it rocked back and forth 
finding it's way to part grassy median and shoulder. My defensive 
driving was affective, since I was not hit by the uncontrolled car. Had 
I been, it would have turned my car right into two lanes of morning 
traffic and I don't like to think of what the results might have been.
    This left me with an injury that exacerbated the condition in my 
lower back. This forced me to take sick time and vacation pay until it 
was depleted. Then I was put on long term disability (which is only 
good for a 2 year period do to my age and social security status) 
supplied by my place of employment. This disability will end on April 
18th, 2004. Since that time, I have not been able to return to work and 
my health has been going downhill from there with several other 
problems.
    During my recovery period, I was told to take Neurontin 300mg. to 
control the severe pain I was in. This was much to strong for me and I 
asked the doctor to give me a much lower dose which he did (100mg 3 to 
4 times a day). One capsule kept me out of commission for 24hours. The 
doctor insisted I increase the dosage in order for it to be 
therapeutic. I did increase the dose to 300 mg. the evening of July 
6th, 2002. I was so anesthatized, I didn't know exactly where I was and 
thought I was in the middle of my bed when in fact, I was on the edge 
of my bed and thew myself out on my head while my feet did a backward 
summersalt and I broke my left foot. Now I have to nurse my right hip 
and left fractured foot. I was in the hospital from July 7th, 2002 
until August 20th, 2002. On discharge I had to have live-in nursing 
care until mid October, 2002. After tht I have been on my own and just 
trying to survive through the pain and disability ALONE.
    There are treatments available for this back condition, but I am 
not a good candidate for any of them due to the following conditions: 
1. Factor Eleven Deficiency (a bleeding disorder). 2. I am allergic to 
blood products. I would need multiple units of Fresh Frozen Plasma for 
any procedure that would cause any trauma to my body and cause bleeding 
or the potential of that happening. 3. Pacemaker (dual) since 1997. 4. 
COPD and oxygen dependent with breathing treatments four times a day. 
5. Very poor activity tolerance due to breathing problem and severe 
pain in right hip and lower back that has become much worse since the 
accident. 6. I am allergic to a large list of medications or they are 
contraindicated due to the bleeding disorder. They are as follows: A. 
penicillin; B. amicar; C. sulfa; D. novacaine; E. benadryl; F. cipro; 
G. horse serum; H. cat gut; I. Blood products; J. No asiprin or asiprin 
like products like antiinflammatory drugs that thin the blood.
    My medication bills alone have have been over $3,500 last year.
    Then comes the other necessary expenses such as: A. Rent $ 625.00/
mo; B. Electric, 80.00/mo on average for the year; C. Phone, 59.00/mo; 
D. AARP, 189.00/mo for medicare supplement in addition to medicare part 
A & B; E. Cancer/hospital 86.40 for additional insurance protection; F. 
Cable, 58.00/mo (my only entertainment); G. Long term ins.; H. Home 
health and Nursing home care 267.00/mo; I. Auto insurance, 68.00/mo.
    This amount of routine monthly expense comes to $1432.40 per month 
that must go out each and every month. This does not include any 
medication expense or over-the-counter drugs that are needed such as 
stool softeners when taking medications that cause constipation and can 
lead to bleeding which, in my case would be a stay in the hospital if 
it was left untreated. I also need tylenol for pain and/or headache due 
to some of the side effects from the drugs.
    My total income for the next year (till April 18th 2004) is 
$1882.00 = social security and disability benefits combined -1432.40 = 
bare basic outlay $ 449.60 This is what is left before I can think of 
medication, much less food, gas, or any other expense, i.e., soap, 
shampoo, cleaning supplies.
    I have an oxygen concentrator the takes electricity to run. When I 
call FP & L, they told me that it will cost me approx. $50.00/mo to run 
as the doctors have ordered. Well, now what do I do. I JUST DON'T USE 
IT UNTIL I CAN NO LONGER GET AWAY WITHOUT IT.
    As for my medications, I have either stopped taking them or have 
cut the dosage down in half and that is only if I MUST TAKE THEM.
    IF YOU TAKE $449.60 and multiple that by 12 months you get 
$5395.20. Now look at the medications $ 3500.00/yr and divide by 12 
months equals $291.66.
    $449.60 -291.66 = meds
    Total left for the month is $157.94. for all other expenses 
including any new Rx that the doctors think a what I need. This leaves 
$36.44/wk. to save for emergencies, any co payments . . . just 
everything else.
    I cannot imagine that one year from now I will only have $945.00/mo 
to continue with my life and ``survive?''
    I submit these information respectfully,

    Mr. Greenwood. Thank you. That was--I can't imagine it 
being more beautifully said. And you will make a difference, 
and you have already. Thank you.
    Mr. Sweed.

                    TESTIMONY OF GENE SWEED

    Mr. Sweed. Congressman Greenwood, Congressman Deutsch, my 
name is Gene Sweed. I am 67.5 years old, and this is what 
happened to me in only 2.5 years of Medicare.
    In the year 2000, upon turning 65, I selected an HMO, 
Avmed, as my provider. The first year they allowed me $3,000 
per quarter in prescription allowance with an average 
deductible of $10 to $20. This was more than enough to take 
care of my needs, and I felt we were secure. After my annual 
exam, it was determined I had a lot of things wrong with me, 
such diabetes, high blood pressure, an irregular heart beat, 
prostate cancer and arthritis, among others that are too 
numerous to mention.
    The HMO allowance still was sufficient for us to live the 
lifestyle we chose. Season tickets to hockey, 42 games, the 
ability to go to dinner before every game, going to the theater 
often and going out with our friends as often as possible. In 
years 2001 to 2002, the allowance dropped considerably to 
$1,250 a quarter. We felt that by tightening our belts we still 
could be close to our budget. So first we gave up the theater, 
we changed our Hockey to 13 games and of course the eating out 
dropped. And fortunately for us, Walgreen's was able to provide 
generics for most of the prescriptions to help keep the cost 
down. I also started to skip my medicine occasionally so I 
would not go over the allowance. See, the problem is when you 
are an HMO you have your allowance, but you don't know what 
they are charging the HMO with Walgreen's and them, so you 
don't know where you are into your allowance. And it is scary 
because you pay everything over that. We learned at one time I 
had one prescription that was a new item, and my co-pay was 
$80. So I can imagine what the heck they had to charge to the 
HMO.
    Now, for the year 2003, the allowance was dropped 
considerably to $250 a quarter. Two hundred and fifty dollars a 
quarter was not going to cut it. This is not acceptable with 
me, so I switched to Foundation, which has now become Vista. 
The main reason I did that again was to try to stay with the 
same doctors. Fortunately, they had the same doctors, so with 
$250 a month I am okay, and I have the same doctors again; I 
don't have to start all over again.
    We are in the process of adjusting again, though. We do not 
eat out again like we did before. If we do eat out, we make 
sure that we take home a doggy bag. I used to laugh at people 
for doing this, but we take home a doggy bag. If somebody is 
offering to show their product and is feeding us, we always go, 
even when we are not interested. Meals at home have changed to 
items that you can make more meals out of, such as soup, 
spaghetti, meatloaf, et cetera, and portions are getting 
smaller. I also have skipped taking my medication more 
frequently. Now, my wife doesn't say anything, but she is 
trying to keep me alive, and this is her goal by doing this, by 
doing that. She is an excellent budget manager. Now, I have 
also started to skip taking my medicine more frequently.
    The biggest concern for me is that if my wife should 
precede me how I would survive as it does take my wife's money 
management skills to make it work. But one thing I don't 
understand is if the manufacturers complain about their costs, 
why are they running commercials on TV for prescription 
medication when it is expensive to produce them and air time is 
very costly, especially on the main channels. You only get the 
prescription from your doctor. They take their samples in, they 
give them to the doctor, if they talk to the doctor, sometimes 
they even talk to just the office manager and they don't go 
into everything like what the side effects are. And, again, 
sometimes the side effects cause you to take another 
prescription. They may affect your stomach, they may affect 
something else. And that is a problem that we don't understand. 
So I thank you very much for your time, and if you have any 
questions, I would gladly answer them.
    [The prepared statement of Gene Sweed follows:]

                    Prepared Statement of Gene Sweed

    My name is Eugene (Gene) Sweed I'm 67\1/2\ years old and this what 
has happened in only 2\1/2\ years on medicare.
    In the year 2000 upon turning 65 I selected Avmed as my H.M.O. 
provider. The first year they allowed me $3000 per quarter in 
prescription allowance with an average deductible of $10.00 to $20.00 
this was more tan enough to take care of my needs. After my annual exam 
it was determined I had a lot of things wrong with me, such Diabetes, 
High blood pressure, an Ireggular Heart beat, Prostate Cancer and 
others to numerous to mention.
    The H.M.O. allowance was sufficient for us to live the lifestyle we 
chose. Season tickets (42 games), The ability to go to dinner before 
every game. Going to the theater often,and going out with our friends 
quite often.
    In years 2001 & 2002 the allowance dropped considerably, to $1,250 
per quarter. We felt by tightening our belt we would be close to our 
budget. First we gave up the Theater, changed our Hockey to 13 games 
and of course our eating out dropped. Fortunately Walgreens was able to 
provide generics for most of the prescriptions and keep the cost down. 
I also skipped taking my medication occasionally so I would not go over 
the allowed amount.
    One problem is we do not know what the charges are only the 
deductible. For the year 2003 the allowance was to be approximately 
$250.00 per quarter. This not being acceptable me I switched Foundation 
now Vista at $250.00 per month. We are in the process of adjusting 
again. We do not eat out before every game. If we do eat out we are 
making sure we have a doggy bag to take home, When a company offers to 
show their product and are feeding us we always go even when we are not 
interested. meals at home have changed to items that you can many meals 
out of such as soup, spaghetti, meat loaf etc. with portions getting 
smaller. I also have skipped taking my medication more frequently. The 
biggest concern is if my wife should precede me is how I will survive 
as it takes my wife's money management skills to make it work. One 
thing I don't understand if the manufacturers complain about their 
costs why are they running commercials on T.V. when it expensive to 
produce them and air time is very costly? We can only get a 
prescription from our Dr. so it is his/her choice.

    Mr. Greenwood. We thank you, Mr. Sweed. Thank you, all of 
the panelists, for coming. And the Chair is going to recognize 
himself for about 10 minutes for questions. Since there are--we 
don't have the full committee here we can be a little bit 
looser with time than we usually are in Washington, which is 
nice.
    Let me start with you, Ms. Coplan. Could you--I don't know 
that I heard in your testimony that--where were you working 
before you had your accident? What was your employment? Maybe 
you could tell us a little bit about your employment history 
over the years.
    Ms. Coplan. Certainly. I became a nurse in 1971. I have 
been nursing all during that entire period. My general 
background was ICU, emergency room, labor/delivery, newborn 
nurseries, recovery, the heavy areas.
    Mr. Greenwood. Employed by whom during this?
    Ms. Coplan. Different hospitals. I had also gone into 
California and Washington to get some varied experiences there. 
Their medicine is a little different sometimes in certain 
areas. And I had family there as well, so it was a dual 
purpose. But the last 13 years I worked for Bell Quality as a 
instructor for home health students.
    Mr. Greenwood. And did Bell Quality provide you with a 
prescription drug benefit when you were employed there?
    Ms. Coplan. I had--at the time, I had United Health Care, 
which you had a co-payment, and at the time that I got it it 
was like $5 or $15, depending on----
    Mr. Greenwood. Per script.
    Ms. Coplan. Depending on whether it was generic or brand. 
And then it went up and it continued to go up. And then I 
became eligible for Medicare Part A with United Health Care as 
backup.
    Mr. Greenwood. And United Health Care, was that----
    Ms. Coplan. My employer paid that for me.
    Mr. Greenwood. Okay.
    Ms. Coplan. Okay. So it wasn't a bad deal, and I was 
working, and there was money coming in. And when I had the 
accident, of course I couldn't afford the United Health Care at 
that time.
    Mr. Greenwood. And how much was that?
    Ms. Coplan. I don't know. I know it would have been a COBRA 
payment, and it would be close to $400 a month, I think it was. 
And of course that was out of the question, so I went to 
Medicare Part B.
    Mr. Greenwood. And that was a full health care plan. That 
was not----
    Ms. Coplan. Yes.
    Mr. Greenwood. [continuing] just prescription, that was a 
full health care plan.
    Ms. Coplan. Yes.
    Mr. Greenwood. Okay.
    Ms. Coplan. It was not a bad plan. But then I went to 
Medicare Part B and in the interim also took AARP because I was 
scared. I needed the supplement.
    Mr. Greenwood. And what does--what you purchased from AARP 
is that what we call a Medigap plan?
    Ms. Coplan. Yes. Yes, at $189 a month. And I am waiting--I 
have been notified that they are going to go up in premium, 
which is going to knock me out.
    Mr. Greenwood. Okay. And that would pay your co-pays and 
your deductibles.
    Ms. Coplan. It has a varying deductible. One drug, one of 
the most expensive ones of the four pills, there was a dollar 
off on that one with AARP. Okay. It wasn't sufficient enough to 
even warrant. And yet there would be another one where they 
would pay half. So I don't understand why the drug companies 
have this big gap so that AARP can't be more efficient.
    Mr. Greenwood. And when you left--because of your injury, 
when you left Bell Quality they did not provide you with any 
continual--there is no prescription drug benefit unless you buy 
the entire United Health Care COBRA policy; is that right?
    Ms. Coplan. No. I am still considered an employee there 
until April when my disability ends next year, April 18, to be 
exact, 2004.
    Mr. Greenwood. You are going to really be in the sauce 
then, aren't you?
    Ms. Coplan. I am going to be under a bridge somewhere with 
my oxygen and my breathing treatments and--I will be homeless, 
yes.
    Mr. Greenwood. Let us hope that doesn't happen. Mr. Sweed--
--
    Mr. Sweed. Yes, sir.
    Mr. Greenwood. [continuing] tell us a little bit about your 
employment past, if you would.
    Mr. Sweed. Okay. I had worked for a company that sold 
plating metals, had no coverage at all. It was just the owner 
and myself. He was in his seventies. I did call around to try 
to get some sort of insurance, and they were asking figures 
like close to $300 a month just for the premium, so I 
couldn't----
    Mr. Greenwood. How long had that been your employment?
    Mr. Sweed. When I came here to the Miami area in 1996 until 
I retired at age 65, which was 2.5 years ago.
    Mr. Greenwood. Okay. So you had no health insurance 
whatsoever all that time?
    Mr. Sweed. No, sir.
    Mr. Greenwood. You just paid everything out of pocket.
    Mr. Sweed. Right. Well, we weren't sure that of what was 
wrong, because I wasn't even going to the doctor. So we had no 
concept of what was going on. Now I am at a point that I take 
14 pills a day and then 3 on an as-need basis that counteract 
some of the things that the other pills do.
    Mr. Greenwood. Have either of you, Ms. Coplan and Mr. 
Sweed, ever tried to find out whether some of the plans that 
are offered by the drug companies themselves, like Together Rx, 
would benefit you? Have you ever had any contact with--a number 
of the pharmaceutical companies provide discounts or in some 
cases even free medications to people who are struggling. You 
are nodding your head, Ms. Coplan. What has been your 
experience?
    Ms. Coplan. Yes, I have checked into it. I have had doctors 
give me these pamphlets that they have left, and I have also 
been on the Internet looking around. Some are beneficial and 
some are not. I would need a secretary to keep track of where I 
would send what drug for the best benefit. And it takes some 
doing to keep that record. I think it is--there has got to be 
something else. There has got to be some way of controlling it.
    I want to ask you a--may I ask you a question?
    Mr. Greenwood. Absolutely.
    Ms. Coplan. Thank you. You know when people were smoking 
cigarettes and they raised the taxes to help defray the cost of 
the medicines and so forth and the medical care the patients 
needed that were addicts. Why can't they do the same thing? I 
was at a store the other day waiting for a friend of mine while 
they grocery shopped for me, because I don't do that anymore. 
And I was sitting in the car, and one out of every four people 
came out with one, two, three big packs of beer, wine. Why 
can't they just tax them as well to help us seniors. There are 
bottles of liquor that cost over $100. Five dollar taxes would 
sure help out a senior, and it won't hurt them, but it would 
benefit us.
    Mr. Greenwood. We will take that into consideration. I am 
sure that the State of Florida probably does impose taxes on 
its spirits, and the Federal Government has taxes, and I am 
sure all of the beer and wine lobbyists will be rushing to help 
us get that passed.
    Ms. Coplan. It was a thought.
    Mr. Greenwood. Let me--you, Mr. Sweed, have you contacted 
any of these programs that are offered by the pharmaceutical 
companies?
    Mr. Sweed. Until very recently I hadn't even been aware of 
it, but just hearing what Ms. Coplan said, needing a secretary 
would probably discourage my wife because she does most of that 
for me, not wanting to run here and there and everything else. 
Having the convenience of Walgreen's right out the back door is 
a big difference for her.
    Mr. Greenwood. Right. Well, you might want to look into it. 
I can't guarantee you that it won't be hassle-free or without 
its complications, but I would certainly hope that that would 
be a preference before you--things got so dire that you were 
actually homeless, as you predicted.
    Ms. Coplan. Unless I can go back to work, which I doubt. I 
mean you are seeing me at my best today for some reason. I am 
not usually like this. I usually have a much more difficult 
time breathing.
    But getting back to those different plans, if you don't 
categorize all these different ones and know what your 
medications are, some plans have your medications, some do not. 
Some will give you a nice discount, some won't. What I have 
become is a beggar. ``Doctor, please, do you have samples. I 
can't afford my medicine.'' I have two prescriptions right here 
that I am holding onto because I had to go to the drug store 
the other day to get over-the-counter medicines that cost me--
sorry, they had to give me a refund because they charged me too 
much--$21.98 for the month.
    Mr. Greenwood. And what is the prescription for?
    Ms. Coplan. It is not--this is not a prescription, this is 
just over the counter.
    Mr. Greenwood. Oh, I see.
    Ms. Coplan. Because the medications they give you are very 
constipating, and if I don't do something about that, I will 
bleed, and then I end up in the hospital. Costs them a whole 
lot more. So this simple little thing is a big cost to me that 
nobody takes care of. But the prescriptions that I have, 
because I cannot take pain medication, I am not sleeping. It is 
very difficult for me to get comfortable. The pain is terribly 
exaggerated at night because I guess it is the end of the day. 
And I take Zanex. Well, Zanex is not that expensive, but they 
put me on a new drug called Ultran which helps and it is very 
expensive. So which one would I get?
    Mr. Greenwood. Mr. Sweed, I understand that you have made 
some attempt to get pharmaceuticals from Canada?
    Mr. Sweed. We had talked about it, my wife and I, and the 
Internet. In fact, very recently, we have a friend of ours that 
her son had gone through the Internet, had mixed medicines and 
at 30 some odd years of age passed away, and we backed away 
from it real fast when we saw that happen, because we were 
concerned. But we had talked about it and had not acted on it 
yet.
    Mr. Greenwood. Let me ask you both, Ms. Coplan and Mr. 
Sweed, a question. If the Congress passed a prescription drug 
plan that had roughly qualities such as I am about to describe, 
you had a $250 deductible so that the first $250 was right out 
of your pocket and you would probably both spend that in the 
first month, and then if Congress paid roughly half of the cost 
of your prescriptions up to some point, let us say $3,000--
these are rough figures--$3,000, and then you were on your own 
for a while, but if it ever got up to around $6,000, that then 
everything would be covered by the Federal Government, does 
that sound roughly like that would be a significant help to 
you? I am looking at your figure of--I think you said that if 
you went to Costco, your drugs would cost about $300 a month.
    Ms. Coplan. Three hundred and three.
    Mr. Greenwood. Right.
    Ms. Coplan. That was just the latest figure, and that was 
last week.
    Mr. Greenwood. Right. So if you used that--if let us say 
your deductible was spent in the first month, if a plan could 
cover half of your prescriptions----
    Ms. Coplan. It would be a big help.
    Mr. Greenwood. [continuing] it would be a big help, at 
least for a good portion----
    Ms. Coplan. I could go buy bread.
    Mr. Greenwood. You could go buy bread.
    Ms. Coplan. Yes.
    Mr. Greenwood. Now, let us not get extravagant here.
    Mr. Sweed. I am looking, my wife has made a sheet for me of 
what the co-pays have been. Not counting some of the special 
ones that I have had, like for the arthritis I had a shot in my 
knee that cost me $175 by itself, but that is a rare thing, 
overall, I am running about $250 to $260 a month just on 
deductibles.
    Mr. Greenwood. What is your monthly income? Do you have 
anything besides Social Security?
    Mr. Sweed. I have my Social Security, that is it.
    Mr. Greenwood. And how much is that, if I may ask?
    Mr. Sweed. Net after Medicare comes out is about $720, I 
think it is.
    Mr. Greenwood. Okay. Final question. Mr. Lipscomb, let me 
turn to you. Could you describe for us what AARP generally 
offers seniors in Florida through the various plans that you 
have available?
    Mr. Lipscomb. We offer prescription drug coverage. Not 
coverage in the sense of insurance but to have the ability for 
group buying, so to speak, through one of our providers. AARP 
doesn't do any of these things per se itself, but what we do is 
we vet providers and make sure that what they are doing is in 
no way taking advantage of the people.
    Mr. Greenwood. When Ms. Coplan says that she has AARP, I 
assume----
    Mr. Lipscomb. That is what she is talking about.
    Mr. Greenwood. [continuing] she means--well, I am a little 
confused now, because I asked her if she meant a Medigap 
policy. Is that what she has?
    Mr. Lipscomb. She has both, unless I am mistaken, based on 
her description.
    Mr. Greenwood. I am sorry, she has what?
    Mr. Lipscomb. She has both----
    Ms. Coplan. Yes, I do.
    Mr. Lipscomb. [continuing] types of----
    Mr. Greenwood. So she buys a Medigap policy.
    Mr. Lipscomb. Right.
    Mr. Greenwood. And that costs her $189 a month. That does 
or does not provide prescriptions?
    Ms. Coplan. The entire package is a discount on my drugs.
    Mr. Greenwood. One hundred and eighty-nine dollars.
    Ms. Coplan. And the Medigap, if you want to call it that, 
where they take up the 20 percent that Medicare doesn't----
    Mr. Lipscomb. Right.
    Mr. Greenwood. Right. So you get the Medigap plus you get 
some prescription drug discount.
    Ms. Coplan. Discount we call it, I think.
    Mr. Lipscomb. And that is under United Health Care, which 
is who she was talking about a while ago. In other words, that 
is who our licensed provider is, United Health Care.
    Mr. Greenwood. I see. And have you been able to figure out 
what that discount is worth to you a month? I know you said it 
varies from half in some drugs to a dollar in other drugs.
    Mr. Lipscomb. It is going to vary radically, Mr. Chairman, 
depending on the particular prescription.
    Ms. Coplan. It does. I really does, because when I just got 
one of the prescriptions done through AARP at Winn Dixie there 
was a dollar discount. But on another drug at Winn Dixie, it 
was half that AARP picked up. So there is not consistency, 
which is what? And they were both generic.
    Mr. Greenwood. Mr. Lipscomb, when you buy these policies, 
$189 a month, do you have any rough calculus as to how much of 
that would be helping her with the prescription side of the 
ledger?
    Mr. Lipscomb. I really don't, Mr. Chairman. I can inquire 
for you.
    Mr. Greenwood. Would you do that?
    Mr. Lipscomb. I would be glad to.
    Mr. Greenwood. Would you provide that information to the 
committee?
    Mr. Lipscomb. Yes.
    Mr. Greenwood. Thank you.
    The Chair recognizes the gentleman from Florida.
    Mr. Deutsch. Thank you, Mr. Chairman. Mr. Lipscomb, does 
AARP have a position--you mentioned the position about the 
Internet pharmacies, but specifically about the walk-in 
entities that have shipped drugs to consumers--actually, I 
guess Ms. Coplan mentioned she had gone to the Canadian drug 
stores phenomenon that have been established in south Florida, 
I don't know--throughout the country at this point?
    Mr. Lipscomb. Congressman Deutsch, we have not taken a 
position saying that these people should be closed down or 
anything like that, because we don't have anything to offer 
these people in lieu of that option. What we have said to 
people is you should be very cautious in terms of making sure 
you understand who you are buying from and that these are of 
the quality that you anticipate that you are getting. And that 
is a very difficult thing to determine for people like our two 
witnesses here. I mean it is difficult for the Department of 
Health to determine sometimes, much less for a private citizen.
    Mr. Deutsch. This is sort of a follow-up to one of the 
things the chairman was mentioning, but in the next panel we 
will have--several witnesses will talk about a variety of 
programs that exist for seniors to access more affordable 
medicines. They include the Orange Card by Glaxo, Eli Lilly's 
Answer Card Program to the Together Drug Program. Have you 
heard of any of these prior to this hearing, either one of you?
    Mr. Sweed. The only one that I have heard from is because I 
am a diabetic, Accu-Chek stays in constant touch with me. They 
have even sent me a free monitor, they have given me a choice, 
they will make sure that the strips are free when I go to the 
drug store, et cetera. But they are the only one out of anybody 
that has made any contact and has done anything with me.
    Mr. Deutsch. And, Ms. Coplan?
    Ms. Coplan. No, I haven't had that. The only thing that I 
would like to comment on right now is the fact that my 
breathing treatment takes two different types of medication. 
There was one that I was on. It was Zoponex that did not make 
my heart race when I used it in a breathing machine.
    Mr. Deutsch. Right.
    Ms. Coplan. This drug right here, six of these boxes with 
four in it, four treatments, one a day, costs $56 every 6 days. 
What I had to do was go to the lesser one. This one is longer 
acting and has a lot less side effects for me with my heart 
condition. But I had to go back to the one that had tremendous 
side effects because I could get it for free through Medicare. 
Medicare will pay for it. So I have to now use less medication 
because of the side effect, because I can't afford this one.
    Mr. Deutsch. Ms. Coplan, let me--again, I appreciate you 
being so forthright with us, and it really has been really very 
helpful, and I think, as you mentioned, your analogy of the 
boulder and the ocean I believe is really accurate. But, again, 
just to try to really have an understanding on somewhat of a 
personal basis what you are going through, have you explored 
Medicare Plus Choice options in terms of--have you looked at 
that, HMO options for yourself at this point?
    Ms. Coplan. Having been a nurse, having dealt with HMOs for 
patients, having had four of my friends on HMOs that are 
crying, they tell me what is going on, if it wasn't for my two 
doctors, I wouldn't be sitting here today, I would have been 
dead. They saved me, pulled me through it. They are not HMO 
doctors. My friends who have been on HMOs and Foundation, or 
whatever you want to call them, are being every few months 
different doctors; doctors don't know them. If a doctor walks 
in and tries to treat me that has never seen me before, there 
is a danger there. Thank goodness I have a medical background. 
Otherwise they can do damage.
    I had 14 doctors in the hospital when I was there. Those 14 
doctors were making prescriptions all over the place--give her 
this, do this, do this--and no one was watching the other. I 
was the chief, and I made them the Indians. And I took my own 
case and I took a PDR and I started going through the 
medications, because I was very sick and I said something is 
making me ill. And I stopped all my medication and I said, 
``You are not going to give me anything more. You speak to this 
doctor and me and clear it through them before you order 
anything.'' And I had to take that initiative with the help of 
my doctor at my side to confer with in order not to be 
overdosed or drugged differently. If I go to an HMO and I have 
to go see a doctor who doesn't know me, I am facing the same 
monster again. And I would rather be without medical treatment.
    Mr. Deutsch. Let me go back, and, again, you seem like you 
have been a very aggressive consumer. I mean you mentioned 
Costco, Winn Dixie, Canada Drug.
    Ms. Coplan. And the Internet.
    Mr. Deutsch. And the Internet. First off, do you have--and 
this, Mr. Sweed as well--I mean do you have personal friends 
that are purchasing drugs through the Internet at this point in 
time? I mean do you have friends who----
    Ms. Coplan. I have had some that have talked to me that 
they might do so, and I told them I didn't think it was a wise 
decision, because you didn't know what bathtub it was made in. 
That was my feeling. I would rather go to somewhere were I 
understand the pharmaceutical company by reputation. So before 
I was ever even here, and I am glad to hear you confer that 
this is not a good idea to go just to anyone----
    Mr. Deutsch. Let me be really clear what I said. I think 
there is this--the phenomenon is that I think we are trying to 
address this issue. It is not a good idea in the sense that 
there really is no oversight.
    Ms. Coplan. Okay.
    Mr. Deutsch. And there have been some anecdotal stories of 
problems. I think for some people they are making a personal 
choice if they feel there is no choice. I mean given the choice 
between if there really is no choice, if there is no government 
program--I mean you might, once your disability ends, be 
eligible for Medicaid. I mean at $1,800 a month you are 
probably not eligible for Medicaid.
    Ms. Coplan. No, I am not.
    Mr. Deutsch. But at $900 you very well might be with 
certain of the issues involved. And that is why I am not 
familiar with the--you mentioned you had gone to Broward County 
Social Services in terms of medically needy issues, and 
basically you found nothing available in any kind of medically 
needy programs in terms of county government or State 
government at all.
    Ms. Coplan. The only thing that they said to me was that 
Costco is now allowing anyone, even without a Costco card, to 
go into their pharmacy and use it. And it was supposed to be a 
huge discount, it was something that had just been introduced 
within the last 2 weeks.
    Mr. Deutsch. And Broward County----
    Ms. Coplan. That is when I went to check--I am sorry.
    Mr. Deutsch. So you physically went to Costco or you called 
or you----
    Ms. Coplan. I went there myself with my list and they gave 
me their prices.
    Mr. Deutsch. So the next time you purchase to fill 
prescriptions you are going to fill them at Costco at this 
point? Is that your expectation?
    Ms. Coplan. I am not clear on one point yet; I haven't been 
able to clear that up. Whether AARP discount would be good at 
Costco like it is at Winn Dixie because I may be better off 
with some of the drugs going to Winn Dixie or to other one of 
the pharmacies that I am allowed to go to for the discount that 
I get with AARP on some of the drugs. But, again, here is the 
Secretary. And how much gasoline can I afford to buy at $2 a 
gallon?
    Mr. Deutsch. Right. When you checked on the Internet in 
terms of prices, were the Internet pharmacies offering prices 
that were less than you had seen at Winn Dixie or Costco--not 
the walking pharmacy you mentioned, not the counter drug 
pharmacy locally, but the actual Internet pharmacies?
    Ms. Coplan. There were some that seemed okay but it wasn't 
enough of--I didn't get enough of an interest in doing it that 
way and waiting the 2 weeks. I would rather go to Winn Dixie 
and have my medication now, because you go to the doctor and 
they give you a month's supply. You have got to go back to the 
doctor and get another month's supply. So my overlap would not 
be there, I would need the drugs on a continuous basis. So my 
thought was I will go to Winn Dixie or I will go to Wal-Mart, 
wherever it is.
    Mr. Deutsch. Mr. Sweed, you were mentioning--I saw you 
nodding when I was asking the question about friends who are 
using Internet pharmacies at this point?
    Mr. Sweed. We have some friends that I am not sure whether 
they are using the Internet or not but they are always waiting 
in the mail for something to come. And, again, they have a 
problem because in the mail they can't control when it gets 
there; sometimes it is late or whatever. See, my situation is 
different than theirs too, because in my case not every 
pharmacy will handle HMOs, so there is a pharmacy in our area 
who is a very big discount pharmacy but won't touch an HMO. 
They said by the time they get paid and what they allow them to 
make and all it is not worth it to them, it is cost 
prohibitive. So I am at a little bit of a disadvantage in that 
I don't have much of a choice other than what I have here.
    Mr. Deutsch. So you had mentioned your prescription drug 
co-pays now is about $250, $300 a month that you are paying?
    Mr. Sweed. Right. This year with Vista is $250 a month is 
what I am allowed. Now, I just started as of the 1st of the 
year so I don't know whether I have gone over yet or not. If I 
have, then they will send me a bill. Again, like she said, I 
try to----
    Mr. Deutsch. So you switched to Vista HMO. You left Avmed.
    Mr. Sweed. Right, because Avmed only wanted to give me $250 
a quarter.
    Mr. Deutsch. Two-fifty a quarter. Okay.
    Mr. Sweed. Right.
    Mr. Deutsch. And the physicians that you go to were members 
of both Avmed and Vista?
    Mr. Sweed. Right. That is exactly why I stayed with Vista--
went with Vista, I am sorry.
    Mr. Deutsch. Okay. So Vista, at this point, is $250 a month 
of coverage.
    Mr. Sweed. Right.
    Mr. Deutsch. And you are only into, what, your second month 
of Vista at this point?
    Mr. Sweed. Yes, sir. As of the 1st of the year.
    Mr. Deutsch. So you really don't know----
    Mr. Sweed. Right.
    Mr. Deutsch. [continuing] this sort of black box thing, if 
you are going to get a bill at the end of month or end of the 
quarter for additional coverage.
    Mr. Sweed. And the problem you run into, like Ms. Coplan 
said, is side effects with things that help the arthritis. The 
arthritis is the biggest problem. Okay? That is why I am in a 
chair, the legs can't handle anything.
    Mr. Deutsch. Right.
    Mr. Sweed. And Celebrex is one of the few things that 
really works, but Celebrex can hurt your live, can hurt your 
kidneys. So, therefore, I can't take it all the time. I am 
taking over the counter, we will say, not Exedrin, Tylenol or 
something like that. So you are playing a game that way to try 
to kill the pain. I mean I have had pain most of my life 
because I played football, this came early and it has been 
getting progressively worse. I have lived in pain, that doesn't 
bother me, but as it gets worse it gets tougher. Like she said, 
going to sleep at night, if I don't take something, I don't 
sleep. I must take something that is going to put me under or 
relax my system so much and help kill the pain.
    Mr. Deutsch. Mr. Lipscomb, did you want to sort of 
elaborate on anything?
    Mr. Lipscomb. I was going to say, Congressman Deutsch, that 
2 years ago we went to the Florida legislature and got them to 
pass legislation which would allow anybody on Medicare to buy 
prescription drugs at 9 percent above the average wholesale 
cost. We have never been able to put that program into 
operation because we can't establish what the average wholesale 
cost is. So when you are asking the two witnesses about numbers 
in terms of drug costs, it is a moving target, as I am sure 
both of them can tell you, because they are going to the 
pharmacy 1 day and it cost one thing, and then with no apparent 
reason it changes, and that is why it is very difficult for Mr. 
Sweed to know where he is in terms of this, because the prices 
fluctuate up and down and nobody tells them what is going on. 
So disclosure would even help in some cases so that people know 
what they are dealing with in terms of HMOs or in terms of 
insurance programs or what have you.
    Mr. Deutsch. Mr. Sweed, if you can just elaborate just so I 
understand this. The $250, because, again, especially from Mr. 
Lipscomb's follow-up, you literally have no idea where you are 
in the month in terms of the----
    Mr. Sweed. I have no idea.
    Mr. Deutsch. And there is no way to figure it out.
    Mr. Sweed. All they do is when I get my prescription it 
comes on there whether it was a $10, a $20----
    Mr. Deutsch. Just the deductible.
    Mr. Sweed. [continuing] deductible, my co-pay. That is all 
I know.
    Mr. Deutsch. You don't know the price.
    Mr. Sweed. I have no idea.
    Mr. Deutsch. If you ask them, would they tell you?
    Mr. Sweed. I would guess if they knew; yes, possibly. It 
depends on, again, whether it is the clerk or the pharmacist. 
They may know.
    Mr. Lipscomb. Many times the technician or the pharmacist 
will say, ``Until we run this through the computer and see 
which programs we are dealing with, we don't have any idea what 
it cost.''
    Mr. Deutsch. I mean the reality is it could not even be a 
large discount. I mean it could be a way that they are just 
manipulating that the $250 is really not $250.
    Mr. Lipscomb. Exactly.
    Mr. Deutsch. It could be $100, it could be--I mean it is 
just an adjustment, it is just----
    Mr. Lipscomb. One of the things that AARP has tried to do 
with our members, because our members are very responsible 
people, so we suggested to them, as these two witnesses have 
said to you, to ask your physician to prescribe generic drugs 
when it is possible, because it costs Medicare less, it costs 
the health care system less. Then we sat down and had a 
graduate student call pharmacies to check on the cost of 
generic drugs. The difference between the average wholesale 
cost on some generics goes into the thousands of percent 
markup, and it is just all over the map. And so even though 
these folks are trying their best to do it as economically as 
possible----
    Mr. Deutsch. Yes. Let me just mention, I mean I am sitting 
here thinking to myself these are two 67-year-olds. This is 
not--the reality is this is not typical seniors. You are much 
more able to do this than the 77-year-old, the 87-year-old, for 
that matter, the 97-year-old, because the reality is the 97-
year-old who doesn't have someone to help them or the 87-year-
old in south Florida is not doing what either one of you did.
    Mr. Lipscomb. But even the----
    Mr. Deutsch. No, but you know what I am saying? So I think 
we are seeing in terms of--I mean we are seeing young Medicare 
beneficiaries, very capable Medicare beneficiaries who are just 
totally stymied. I mean the two of you--and, again, I am just 
saying this from my perception--you are about as competent 
Medicare beneficiaries, and he is shaking his head, and this is 
probably the expert in Florida of seniors, so he knows what I 
am talking about, that you two are about the epitome of well-
informed, aggressive, good consumers, and you are basically 
stymied. I mean so, you know, the 87-year-old is not going on 
the Internet, most likely is not going on the Internet and is 
not doing the kind of aggressive shopping and price comparison 
that you folks are doing. Go ahead, I am sorry.
    Ms. Coplan. May I ask you something? I happen to have 
brought my Winn Dixie pharmacy slips with me, and with AARP, on 
one drug, I saved $20.01; on the other drug I saved $1. It 
tells me that the one I saved $1 on was $62.95, so add the 
dollar it was $63. But the other one I paid $10.08 for, and I 
saved $20.01. Big gap, big difference.
    Mr. Deutsch. Thank you all very, very much, and I 
appreciate it. I am sure we will do some follow-up as well. 
Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentleman from Florida. 
We have been joined by a colleague of ours from New York, 
Congressman Eliot Engel, who I will tell you has an ulterior 
for coming down to this hearing. His mother lives in 
Congressman Deustch's district, and he came down and got to 
visit his mother and do the hearing, and lobby his mother to 
vote for Congressman Deutsch all at the same time. The 
gentleman from New York is recognized for 10 minutes.
    Mr. Engel. Thank you. I thank the chairman, and it is good 
to be here, and I questioned my good friend, Congressman 
Deutsch, when my mother told me she got the notice in the mail 
about this hearing I serve on this committee, so I wanted to 
know why I didn't know anything about it. But we all--and I 
appreciate being here with my two colleagues who I want to tell 
you have really been at the forefront of fighting for 
affordable prescription drugs. One of the things that we try--
and I am not on the Oversight Subcommittee of the Commerce 
Committee, but I am on the Health Care Subcommittee, and we 
have, like everyone else, been grappling with the whole issue 
of affordable drugs.
    You know, when I was first elected to Congress 14, almost 
15 years ago, and my mother has been a resident of south 
Florida for 25 years, I said to her, ``What is the thing that 
we can do, and this is back in 1988, most to help senior 
citizens?'' And she said to me back in 1988, I will never 
forget it, ``To get us some help with prescription drugs.'' She 
is a Medicare--obviously a person on Medicare and tells me all 
these stories about seniors who cannot afford to buy food and 
have medication and have to compromise, and that is not 
something that should be.
    Mr. Lipscomb, I am wondering if--because I am interested in 
AARP's position on some of these core issues. The whole quality 
of care issues are created by the walk-in pharmacies that we 
have or by ordering drugs on the Internet. They obviously can 
potentially increase the risk for drug interactions. Tell me a 
little bit, and if you have done it already, I apologize, what 
the AARP believes that these practices do to Doctor/patient 
relationships or pharmacist/patient relationships. I mean one 
of the things that I think is disgraceful is that we in 
Washington haven't really gotten hold of this whole issue. 
There is something so terribly wrong when seniors have to go to 
the Internet or have to find other ways of getting drugs that 
they can afford, because the drugs that they are talking about 
cannot afford. So I am just wondering if you could just 
enlighten us about AARP's position because of the potentiality 
of drug interactions.
    Mr. Lipscomb. Thank you, Congressman Engel. Clearly, we do 
feel that it is detrimental to the doctor/patient relationship. 
You heard Mr. Sweed and Ms. Coplan both describe how crucial it 
was that their doctor have an understanding of the interaction 
of the particular pharmaceuticals that they were taking. And in 
Ms. Coplan's case, she said she felt like she would be at risk 
if they prescribe the wrong drugs. So if she is going to a 
computer to get her drugs, then that piece is going to be 
missing. So we are--we seriously caution our members in terms 
of taking that kind of action.
    On the other hand, I think we have to remember what causes 
the problem. They cannot afford to buy the prescription drugs 
that they are being given by the physicians or their health 
care people, and so they are forced into taking this particular 
action.
    What is the answer? Again, I feel like the answer is an 
affordable, accessible prescription drugs program under 
Medicare which would help both of these witnesses that we have 
heard from this morning.
    Mr. Engel. Would any of the other witnesses--Ms. Coplan, 
would you like to comment on that at all?
    Ms. Coplan. Definitely there is a need. I feel that, and I 
know all my friends that are still with us feel it also. I do 
have this AARP, and with AARP I have to send away for the 
drugs, and then they tack on a shipping charge. So if you start 
to add up and figure out, I can't use my AARP pharmacy, I have 
to go elsewhere. I would like to put that into a question for 
you as to how we could change that, because it becomes more 
expensive again. And you could control the drugs.
    Mr. Lipscomb. In that particular instance, I want to make 
clear for the record she is not sending outside the United 
States to get the drug. That is done in here, in the U.S., and 
we do centralized buying to run the price down. Ideally, it 
would seem to us that a program like Medicare that bought for 
35 million people would be able to leverage more economy in 
terms of drug prices than AARP even would, so maybe that is 
something that we could look at in terms of programs.
    Mr. Engel. Another thing that I get from seniors in my 
district, I also hear it from my mother here in south Florida 
is the disparity when you go to different pharmacies. I mean 
how much different? You would think it would all be within a 
few dollars, but you can pay as much as $10 or $15 or even $20 
more from one pharmacy to the next. Ms. Coplan?
    Ms. Coplan. Yes, sir. The other day there was a program on 
television--I watch rarely but I watch this one--and if you go 
into a poor neighborhood, the drug prices go down. If you are 
in a more affluent neighborhood, the prices go up. There is no 
conformity there either.
    Mr. Greenwood. If the gentleman would yield for a moment. 
And that is the global phenomena as well.
    Ms. Coplan. Yes.
    Mr. Greenwood. In other words, the reason that drugs are 
less expensive in Mexico is because they are priced based on 
what the market will bear. And that is obviously different than 
it is in southern Florida. And then of course the difference in 
Canada, this phenomena in Canada, is different entirely, 
because there the government controls the prices, and that is 
why you have this disparity. And I yield back to the gentleman 
and thank him for yielding to me.
    Mr. Engel. No. I thank the chairman. What about if we on a 
Federal level are not--this is for Mr. Lipscomb--are not doing 
what people think we should be doing, what can the States do? 
Can the State attempt to certify that these walk-in entities 
are complying with certain standards? What do you think the 
State can be doing or the FDA, for that matter, to prevent 
consumers from being sold dangerous drugs or by just being 
ripped off by unscrupulous people?
    Mr. Lipscomb. Thank you, Mr. Engel. I contacted Washington 
a couple weeks back inquiring about whose responsibility it was 
to assure the quality of the drugs, for instance, coming in 
from Canada. And, essentially, the answer I got was that they 
thought it was probably a State responsibility. And I pointed 
out that the last time I checked Florida did not have any 
offices either in New York State or Minnesota or any of the--
going all the way across to Washington State.
    Mr. Engel. Yes. I was going to say, not to cut you off, but 
it is obviously different. My home State of New York obviously 
has a border with Canada----
    Mr. Lipscomb. Right.
    Mr. Engel. [continuing] and there are a lot of drugs coming 
down through that border. But, obviously, Florida would be a 
different situation.
    Mr. Lipscomb. Governor Patacki I am sure would probably 
hasten to clarify that he doesn't have any agents checking the 
quality of those drugs either. I mean I think that in the U.S. 
we rely on the Food and Drug Administration in these kinds of 
instances, and if they can't do it, then I guess my expectation 
would be that they would be coming to you gentlemen and saying, 
``We need legislation in order to protect the public.'' I 
haven't seen that taking place yet.
    Mr. Engel. Well, how would we know that the drugs are even 
coming in from Canada? How do we know that they are not from 
China or some other place? I mean I think that seniors probably 
psychologically have some confidence in Canada, but when you 
are talking about drugs coming from the other side of the 
world, I think there is less confidence there. How do we even 
know the drugs are coming in from Canada?
    Mr. Lipscomb. Well, I think that these two witnesses could 
probably answer that, because they are facing making those kind 
of decisions on a daily basis. But I think that Congressman 
Deutsch said a while ago, people get desperate. They have to do 
something, and so therefore they take chances that you and I 
might not take when we are not faced with those same kinds of 
decisions.
    Mr. Engel. Well, unless anyone has any other comments, I 
will go back. I want to just thank my colleagues for their 
leadership in this role and hope that we can all put our heads 
together and sort it out in Washington.
    Mr. Greenwood. The Chair thanks the gentleman. Ms. Coplan, 
you look like you want to show something.
    Ms. Coplan. I am sorry. Someone just handed me a paper. It 
says, ``Cheap Drug Myths.'' Would you like to read it. I 
haven't read it.
    Mr. Greenwood. Well, what we will do is we will----
    Ms. Coplan. Somebody just handed it to me.
    Mr. Greenwood. [continuing] without objection, we will make 
it a part of the official record, and we will have one of our 
clerks collect that from you.
    Ms. Coplan. Okay.
    [The information referred to follows:]

                          The Cheap Drugs Myth

 CANADA IS OFFERED UP AS PROOF THAT PRICE CONTROLS WOULD DRAMATICALLY 
          CUT THE COST OF MEDICINE. THE PROOF HAS SOME HOLES.

                            By Ira Carnahan

    In Canada a Three-month prescription for Merck's cholesterol 
reducer Zocor goes for $172. In the U.S., patients who pay retail fork 
over $328 for the same pills. The media are full of such shocking 
comparisons aimed at demonstrating that Canadians, thanks to price 
controls, pay far less for medicine than do Americans. Just one 
problem: It isn't so. While some high-profile brand name drugs are much 
cheaper in Canada, other lesser-known drugs and generics are not. In 
fact, 21 of 27 top-selling generics cost more in Canada than in the 
US., reports a study of lowest available prices by Palmer D'Angelo 
Consulting, an Ottawa firm that works for branded drugmakers. For all 
27 combined, the average Canadian premium is 37%. Why? Just two 
companies dominate the Canadian generics market, says study coauthor 
Neil Palmer.
    That lack of competition is, ironically, partly a side effect of 
Canadian drug-price controls. Generic makers find countries with 
controls on patented drugs less attractive. So fewer jump in when a 
branded drug goes off patent. The end result: In the U.S., generic 
drugs cost an average of 74% less than equivalent brand name drugs; in 
Canada, generics average just 38% less.
    Canada's rules can also discourage branded drugmakers from 
discounting older drugs to compete. John R. Graham of the Fraser 
Institute in Vancouver explains why: Canada's Patented Medicine Prices 
Review Board typically sets the maximum price for a new drug by 
comparing it with similar drugs already on the market. So if companies 
lowered prices on old drugs, that could cut into profits on new ones, 
too.
    How did the myth of cheap Canadian drugs gain such wide acceptance? 
It began with a 1992 study by Congress' General Accounting Office and 
was reinforced by a 1998 report from the Democratic staff of the House 
Committee on Government Reform. Both studies were flawed. They compared 
only top-selling brand-name drugs, ignoring lower-priced generics that 
now make up half of US. prescriptions. Furthermore, prices in the 
studies weren't properly weighted to reflect market share or volume 
discounts, argues Wharton School health economist Patricia Danzon. 
Correcting for such flaws, Danzon and Li-Wei Chao, also of Wharton, 
found that if Americans had paid Canadian prices for the drugs they 
bought in 1992, they would have saved, at most, 13%.
    Yes, the Wharton economists have received research funding from the 
drug industry, and yes, the price break Canadians enjoy is has likely 
widened since 1992. But it's doubtful that Canada's price controls on 
patented drugs, as opposed to economics, are the main cause of lower 
prices there.
    The truth is, notes the Fraser Institute's Graham, all kinds of 
goods cost more in the U.S. than Canada. A turbo Chrysler PT Cruiser 
retails for $23,100 in the U.S. and the equivalent of $17,800 up north. 
Yet there's no Canadian Retro Car Prices Review Board. Even bigger 
price differences are common for goods with high fixed costs but lower 
variable costs, everything from music CDs to online service. Prices are 
lower in Canada because incomes there are a fifth smaller and the 
Canadian dollar is weaker. Producers logically try to recoup most of 
their high fixed costs from wealthier consumers and charge those who 
can't pay as much a price closer to marginal cost.
    There's another reason for lower drug prices in Canada: lower 
liability costs. In Canada, judges--not juries--typically set damages, 
and awards for pain and suffering are capped at $185,000 U.S. Such 
differences account for a third to a half of the gap, a 1997 study in 
the Journal of Law and Economics concluded. Yet the politicians and do-
gooders who complain most about U.S. drug prices are often the least 
likely to favor reining in legal costs.

    Mr. Greenwood. Mr. Deutsch's staff spent some time 
yesterday at the Miami Airport looking at pharmaceutical 
products coming in, and it is a--and I have done this, Mr. 
Deutsch and I have done this at Dulles Airport in Washington. 
It bends the mind when you see the volume of drugs that come 
into this country through the airports from all over the world, 
and we see illegal substances, we see counterfeit substances, 
we see boxes of pills just loose. It is phenomenal and it is 
scary because we certainly know a couple of things. We know 
that in places like India and Thailand and China and elsewhere, 
the ability to create counterfeits that you cannot distinguish 
the container, the label, the pill itself are indistinguishable 
from the real product without any guarantee that what is in 
that pill is something other than chalk, for that matter. So it 
is a--there is a corruption out there that is being fed by 
this--being fueled by this huge unsolved problem that we have 
in the United States.
    And so it will be our objective to--I think probably the 
most significant thing that we can do is provide the 
prescription drug benefit, make it a realistic one that the 
taxpayers can afford but make it one that really goes a long 
way to meeting the unmet needs. The problem with the FDA, as 
you referred to, is that they are just overwhelmed. I mean the 
FDA and the Customs people are so overwhelmed by the volume 
here, that it would be almost a shame to take resources that we 
should be using to provide prescription drugs and using them to 
try to stem this illegal tide. You had something else you 
wanted to say, Ms. Coplan?
    Ms. Coplan. No.
    Mr. Greenwood. Okay. Well, in that case, I am going to 
thank the witnesses for coming. I would suggest that, Ms. 
Coplan and Mr. Sweed, if you want to, if you are able to, I 
think in the third panel we are going to have a witness who has 
taken a look at your specific prescriptions that you are 
needing now and your specific income situation and has done 
some calculations and looked at some of the programs to see how 
that would apply to you and hopeful that that will be helpful. 
So we are going to take about a less than 1 minute break now 
while we swap over panels.
    Mr. Sweed. Thanks, Mr. Chairman.
    Mr. Lipscomb. Thank you very much.
    Mr. Greenwood. And thank you for being with us.
    [Brief recess.]
    Mr. Greenwood. Okay. We welcome our second panel. We are 
pleased to have with us Mr. John Taylor who is the Associate 
Commissioner of Regulatory Affairs at FDA, and we have Mr. John 
Taylor also who is a drug inspector with the Florida Department 
of Health, Bureau of Statewide Pharmaceutical Services. We 
thank both of you gentlemen for being with us.
    You probably heard me say to the first panel that this is 
an investigative hearing, and it is our custom and practice to 
take testimony under oath. Do either of you have any objections 
to giving your testimony under oath? Okay. Then I should also 
advise you that pursuant to the rules of this committee and to 
the House of Representatives that you are entitled to be 
represented by counsel. Do either of you wish to be represented 
by counsel? Okay. In that case, if you would stand and raise 
your right hands.
    [Witnesses sworn.]
    Mr. Greenwood. Okay. We thank you. You are under oath, and, 
Mr. Taylor of the FDA, we will begin with you, and if you would 
summarize your testimony in about 5 minutes, we won't be strict 
with that, we would appreciate it. Thank you.

    TESTIMONY OF JOHN M. TAYLOR, ASSOCIATE COMMISSIONER OF 
 REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION; AND JOHN D. 
TAYLOR, DRUG INSPECTOR, FLORIDA DEPARTMENT OF HEALTH, BUREAU OF 
               STATEWIDE PHARMACEUTICAL SERVICES

    Mr. John M. Taylor. Thank you very much. Thank you, Mr. 
Chairman, Congressman Deutsch, Congressman Engel. I am John M. 
Taylor, Associate----
    Mr. Greenwood. Can you folks in the back of the room hear 
him? Okay. Just pull that microphone up nice and close. I think 
it is on, you just need to pull it up.
    Mr. John M. Taylor. Is that better?
    Mr. Greenwood. Yes. It is very directional.
    Mr. John M. Taylor. Thank you. I am John M. Taylor, 
Associate Commissioner for Regulatory Affairs at the United 
States Food and Drug Administration. I appreciate the 
opportunity to discuss our mutual concerns related to the 
importation of drugs into the United States. This discussion 
will focus on the importation by individuals of prescription 
drugs through the mail or in person with a specific focus on 
the purchase of drugs from foreign sources over the Internet.
    Under the Federal Food, Drug, and Cosmetic Act, unapproved, 
misbranded and adulterated drugs cannot be imported into the 
United States. This includes foreign versions of United States-
approved medications, as well as drugs that are made in the 
United States, exported to other countries and then 
subsequently reimported int the United States. For public 
health reasons, the FDA remains concerned about the importation 
of prescription drugs into the United States. In our 
experience, many drugs obtained from foreign sources that 
either purport to be or appear to be the same as U.S.-approved 
prescription drugs are, in fact, of unknown quality.
    The use of the Internet by our Nation's citizens has opened 
up vast new opportunities for the exchange of information. The 
Internet permits an increasing number of individuals to obtain 
a plethora of medical information. It also allows consumers to 
purchase drugs anonymously and for consumers who live in remote 
areas or have limited mobility, the Internet facilitates the 
purchase of products with relative ease. In some cases, the 
Internet also allows consumers to purchase drugs at cheaper 
prices. The fact that the Internet allows consumers to purchase 
drugs at cheaper prices is a trap to many consumers, including 
millions of seniors that are faced with steadily rising health 
care and prescription medication costs.
    Accordingly, consumers, including America's seniors, are 
buying more and more of their prescription medications online 
rather than from their local pharmacies. However, as beneficial 
as this technology can be, it also creates a new marketplace 
for activity that is already illegal. Furthermore, because the 
Internet is a worldwide communications system, U.S. citizens 
are now susceptible to illegal conduct from sources outside the 
United States as well as domestically. Therefore, FDA cannot 
assure the American public that the drugs imported from foreign 
countries are the same as products approved by the Food and 
Drug Administration.
    FDA has long taken the position that consumers are exposed 
to a number of risks when they purchase drugs from Internet 
sites that dispense foreign drugs or are not operated by 
pharmacies licensed and operated under State pharmacy law. 
These outlets may dispense expired, some potent, contaminated 
or counterfeit products. It could dispense the wrong or a 
contraindicated product, an incorrect dose or medication 
unaccompanied by adequate directions for use. In addition, FDA 
cannot provide consumers with any assurance that these products 
are manufactured under current good manufacturing standards or 
stored properly. Taking such unsafe or inappropriate 
medications puts consumers at a risk for dangerous drug 
interactions and other serious health consequences.
    Another potential problem involves Internet sites that 
provide prescription drugs without a prescription or by having 
consumers fill out a questionnaire rather than seeing a doctor, 
a point that I think was underscored by the members of the 
first panel. A questionnaire generally does not provide 
sufficient information for a health care 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. Over the last 12 to 18 months, there has been a 
dramatic increase in the number of foreign web sites.
    In addition, there has been a proliferation of storefront 
Internet prescription drug operations. These small stores, 
often located in busy strip malls, advertise that they can 
obtain cheaper drugs from Canada. Some Canadian web sites 
report 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. Storefront pharmacies require a prescription from a 
doctor in the U.S. and then the prescription is sent to a 
Canadian pharmacy. In either case, American consumers cannot be 
certain that the drugs they receive are Canadian or United 
States approved, and, furthermore, under State law, these 
ordering services are likely participating in the practice of 
pharmacy without a license to do so.
    A number of these web sites and storefront operations claim 
that drug sales from Canadian pharmacies to U.S. consumers for 
their personal use are legal. This is not true. The current 
personal importation policy permits the exercise of enforcement 
discretion to allow the entry of an unapproved prescription 
drug only if the product meets certain requirements. However, 
this does not mean that the importation of drugs for personal 
use is legal. Due to the huge volume of drug parcels entering 
the United States 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 
act and impose a health risk to consumers. We do not believe 
this is an acceptable public health outcome.
    FDA is taking a number of steps to address the potential 
safety concerns of illegally imported prescription medicines so 
that the public health of U.S. citizens is protected. These 
include educating the public to the possible safety issues of 
drugs purchased from foreign countries, working in conjunction 
with our Canadian government counterparts to address the issue 
of the flood of prescription medicines coming into the U.S. 
from their country and referring U.S. web sites to the Canadian 
government for investigation, increasing our enforcement and 
policing of rogue Internet sites and partnering with the 
individual U.S. States, including the State of Florida, to 
develop enforcement strategies, share cases and discuss 
important policy issues.
    Moreover, we are reevaluating, refining and improving the 
programs and procedures that we are using to ensure the 
availability of safe and effective drugs to U.S. consumers. In 
addition, we are supportive of the National Association of 
Board of Pharmacy's Verified Internet Pharmacy Site Program and 
the State of Florida's efforts to publish a revised proposed 
rule that holds pharmacists accountable for ensuring that 
prescriptions that they receive have been written only after a 
patient evaluation, including a physical examination. Under 
Florida's proposed rule, those who fill prescriptions without a 
proof of a patient/physician relationship are subject to State 
sanctions.
    Some recent civil and criminal as well as a number of 
administrative actions and enforcement correspondence 
illustrate the steps that FDA is taking to respond to Internet 
drug sales. A number of cases as well as a description of some 
of our cases is described in more detail in my written 
testimony. Needless to say, FDA, in conjunction with the 
Department of Justice, the Federal Trade Commission, Customs, 
Drug Enforcement Agency and other Federal, State, including the 
State of Florida, and international partners, have taken 
numerous civil and criminal actions against legal products and 
individuals who have used the Internet to engage illegal 
conduct.
    In closing, 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 subcommittee'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, and I will be happy to answer any questions.
    [The prepared statement of John M. Taylor follows:]

   Prepared Statement of John M. Taylor, Associate Commissioner for 
            Regulatory Affairs, Food and Drug Administration

                              INTRODUCTION

    Mr. Chairman, Ranking Member Deutsch and other Members of the 
Subcommittee, I am John M. Taylor, Associate Commissioner for 
Regulatory Affairs at the U.S. Food and Drug Administration (FDA or the 
Agency). I appreciate the opportunity to testify at today's hearing on 
``South Florida Access to Affordable Prescription Drugs: Costs and 
Benefits of Alternative Solutions'' on behalf of FDA. My testimony will 
focus on FDA's efforts to assess and respond to the importation of 
prescription drugs by individuals through the mail or in person and the 
purchase of drugs from foreign sources over the Internet.
    Under the Federal Food, Drug, and Cosmetic (FD&C) Act, it is 
unlawful to import unapproved, misbranded, and adulterated drugs into 
the United States. This includes foreign versions of U.S.-approved 
medications, as well as drugs that are made in the U.S., exported to 
other countries, and then subsequently reimported to the U.S.
    For public health reasons, FDA remains concerned about the 
importation of prescription drugs into the U.S. In our experience, many 
drugs obtained from foreign sources that either purport to be or appear 
to be the same as U.S.-approved prescription drugs are, in fact, of 
unknown quality. The rise of Internet drugs sales presents substantial 
safety questions about these products. FDA cannot assure the American 
public that drugs imported from foreign countries are the same as 
products approved by FDA.
    Some of the efforts FDA is undertaking to address the potential 
safety concerns of illegally imported prescription medicines include: 
increasing consumer awareness of the potential risks associated with 
imported drugs, working with the states to crack down on Internet 
pharmacies selling illegal products, and undertaking further analysis 
of the quality of drugs coming into the U.S. from foreign sources.
    News reports in the last few months have focused on storefront 
Internet prescription drug operations. These small stores, often 
located in busy strip malls, advertise that they can obtain cheaper 
drugs from Canada. Typically, the customer supplies the store operator 
with a prescription from an American physician and is asked to complete 
a medical questionnaire. This information is sent electronically to a 
Canadian wholesaler/supplier/contact that serves as a supplier to the 
store. A Canadian physician reviews the questionnaire and writes a 
Canadian prescription that is filled and shipped to the U.S. Usually 
the prescription drug is shipped directly to the customer's home. The 
storefront facilitates the transaction and typically does not receive 
shipments of drugs. The storefront charges a shipping and handling fee. 
The customer may purchase a product for substantially less than the 
price they would have paid otherwise.
    FDA's concerns do not apply to all Internet pharmacies, as a 
general matter. Many online pharmacies operate in keeping with 
standards of state licensing authorities. FDA acknowledges that the 
Internet can be a useful source of health information and health care 
products and services. Internet pharmacies can have various benefits, 
including reduced prices, increased access (especially in rural areas), 
and enhanced consumer convenience. Rather, this testimony highlights 
the growing practice of using mail order and Internet pharmacies to 
facilitate potentially unlawful and unsafe importation of prescription 
drugs.
    Under the FD&C Act, unapproved, misbranded, and adulterated drugs 
cannot be imported. The FD&C Act further prohibits the reimportation of 
FDA-approved drugs that are made in the U.S. and have been exported to 
other countries. Our specific activities and concerns relating to 
reimportation of drugs follows:

 EDUCATION ABOUT SAFETY: Consumers take genuine risks when they 
        purchase drugs from Internet sites that dispense foreign drugs 
        or are not operated by pharmacies licensed and operated under 
        state pharmacy law. These outlets may dispense expired, 
        subpotent, contaminated or counterfeit product, the wrong or a 
        contraindicated product, an incorrect dose, or medication 
        without adequate directions for use. Unsafe or inappropriate 
        drugs put consumers at risk for dangerous drug interactions and 
        serious health consequences.
 WORKING WITH STATES: Last month, we hosted a nationwide call 
        with 38 state boards of pharmacy, other state regulatory 
        agencies and consumer groups to discuss the current status of 
        Internet drug sale practices. Some state laws are stronger than 
        others, but we are actively engaged a number of states in 
        jointly pursuing illegal Internet sites.
 CANADIAN COOPERATION: FDA is actively working with the Health 
        Canada regarding the increasing number of U.S. pharmacies that 
        are advertising and promoting sales of prescription drugs from 
        Canada. We have asked the Minister of Health to investigate a 
        list of 45 Canadian websites that are selling drugs to U.S. 
        citizens. We agreed to designate respective Agency contacts on 
        this issue and continue our discussions about Internet sales.
 ENFORCEMENT: Recent criminal and civil cases are evidence of 
        the seriousness of the risks to public health that regulators 
        uncover when responding to Internet drug sales. These cases 
        show that we are making progress in combating this problem. 
        Examples include our actions against the Norfolk Men's Clinic, 
        Medications Express in California, Pillbox Pharmacy and 
        successful prosecutions against the operators of these and 
        other Internet sites. To date, FDA has initiated:
     372 Internet drug investigations resulting in 150 
            Internet-related drug arrests and 92 convictions.
     100 open Internet drug investigations. Also, 90 sites are 
            under active review for possible regulatory or civil 
            action.
     Nearly 200 cyber letters to domestic and foreign online 
            sellers.
     5 preliminary injunctions.
     15 product seizures.
     11 product recalls, and the voluntary destruction of 18 
            illegal products.
     Detention Without Physical Examination for the products of 
            45 foreign shippers.

                 HIGH COST OF PRESCRIPTION MEDICATIONS

    It is estimated that Americans spend about $192 billion a year on 
prescription drugs, about twice as much as what they spent a decade 
ago. As new drugs are developed, Americans also are taking more drugs. 
Based on IMS Health and Department of Commerce data, the National 
Association of Chain Drug Stores (NACDS) states sales of retail 
prescription drugs grew by about 15 percent in 2002, 13 percent in 2001 
and 16 percent in 2000. Mail order sales rose six-fold in the ten years 
from 1992 to 2001 and are positioned to pass independent pharmacies as 
the second largest provider of retail prescriptions by the end of 2003. 
Many consumers, including millions of senior citizens, are faced with 
steadily rising health care and prescription medication costs. It is 
estimated that about 80 percent of seniors take at least one 
prescription drug.
    FDA is aware that developing and manufacturing medicines is 
expensive. Drug development is also time consuming and it may take as 
many as 10 years or more for a drug to transition from test tube to FDA 
approval. Drug companies estimate that it costs an average of $800 
million to develop a new drug.

               NEW WAYS TO BUY CHEAPER PRESCRIPTION DRUGS

    The Internet is a major avenue of commerce and the volume of 
Internet sales, including prescription drugs, is growing dramatically. 
Consumers, including America's seniors, are buying more and more of 
their prescription medications online rather than from their local 
pharmacies. This practice is growing at an exponential rate and will 
likely continue.
    Seniors who do not have access to a computer may nonetheless 
purchase drugs on line. In some areas of the country they simply visit 
a fee-for-service ``storefront'' location that will facilitate their 
Internet purchase and have their prescription medication mailed 
directly to their home.
    Many of the drugs purchased over the Internet are being ordered 
from Canada. Drugs are cheaper in Canada; they often sell for as little 
as half of U.S. price of a given drug. In Canada drug prices are fixed, 
allowing the government to offer them to Canadian citizens at much 
lower rates than what U.S. citizens pay at pharmacies. Americans are 
taking advantage of the lower priced drugs available in Canada without 
having to travel there to get their prescriptions

                        LEGAL AND SAFETY ISSUES

Patients Face Genuine Risks
    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 dispense foreign drugs or 
are not operated by pharmacies licensed under state pharmacy law. 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 (cGMP) 
standards. Taking such unsafe or inappropriate medications put 
consumers at risk for dangerous drug interactions and other serious 
health consequences.
    Another potential problem involves Internet sites that provide 
prescription drugs by having consumers fill out a questionnaire rather 
than seeing a doctor. In some cases, a questionnaire generally may not 
provide sufficient information for a health care 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, in the 
case of foreign-based websites, if a consumer has 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 consumer's reach. FDA has little or no ability 
to take effective action against these foreign operators on behalf of 
U.S. citizens.
    Over the last twelve to eighteen months, FDA identified a 
proliferation of websites that sell drugs purportedly from Canada 
directly to U.S. consumers. A number of these websites claim that drug 
sales from Canadian pharmacies to U.S. consumers are legal. This is 
false. Some websites are actually ordering services that take orders 
from consumers that are then filled by other pharmacies. In some cases, 
American consumers cannot be certain that the drugs they receive are 
being dispensed by the person from whom they are received.
    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 contrary to state medical practice 
standards. In addition, Dr. Henry Haddad of the Canadian Medical 
Association has said that under the Canadian Code of Ethics, physicians 
have a responsibility to do a patient history, conduct a physical exam 
and discuss the risks and benefits of the medication with the patient.
    In general, FDA has no information to establish where these drugs 
were actually manufactured and whether cGMP requirements were followed. 
The labeling of the drug may not be in English and therefore important 
information regarding dosage and side effects may not be available to 
the consumer. There is no assurance that the drugs are not counterfeit, 
contaminated or misbranded. There is also no assurance that the drugs 
were packaged and stored under appropriate conditions to avoid 
degradation or contamination.

Serious legal issues
    In a February 12, 2003, letter to The Kullman Firm, New Orleans, 
Louisiana, FDA clearly stated the Agency's safety and legal concerns 
about the importation of prescription drugs from Canada, stating that 
many of these drugs are of unknown quality. From a legal standpoint, 
businesses and individuals involved in shipping prescription drugs from 
Canada or other foreign countries to consumers must take many steps to 
ensure compliance with the FD&C Act. In most cases, it is unlikely that 
these legal requirements have been met.
    The FD&C Act establishes a legal framework applicable to imports of 
prescription drugs from Canada. As a result, virtually all drugs 
imported from Canada by or for individual U.S. consumers violate U.S. 
law. Such drugs are unapproved (21 U.S. C. Sec. 355), misbranded, 
labeled incorrectly (21 U.S.C. Sec. 353(b)(2)), and /or dispensed 
without a valid prescription (21 U.S.C. Sec. 353 (b)(1)). Thus, their 
shipment into the U.S. from Canada violates the FD&C Act See e.g. 21 
U.S.C. 331(a), (d), (t). In addition, it is a violation of the FD&C Act 
for anyone other than the U.S. manufacturer of a drug to import into 
the U. S. (21 U.S.C. Sec. 381 (d)(1)), even if the drug was approved 
and manufactured in the U.S.
    Canadian or other foreign versions of U.S.-approved drugs are 
generally considered unapproved in the U.S. because FDA approvals are 
manufacturer-specific, product-specific and include many requirements 
relating to the product, such as the location of the manufacturing 
site, formulation, source, specifications of the active ingredients, 
processing methods, manufacturing controls, container/closure system, 
and appearance. Title 21, Code of Federal Regulations (21 CFR) 
Sec. 314.50. Drugs sold outside of the U.S. are frequently not 
manufactured by a firm that has received FDA approval for that 
particular drug. In addition, even if the manufacturer has FDA approval 
for a drug, the version produced for foreign markets usually does not 
meet all the requirements for U.S. approval, and FDA considers it to be 
unapproved. 21 U.S.C. Sec. 355.
    In order to ensure compliance with the Act when shipping 
prescription drugs to consumers in the U.S., businesses and individuals 
must ensure, among other things, that they only sell FDA-approved drugs 
that are made outside of the U.S. and that comply with the FDA approval 
in all respects including manufacturing location, formulation, source 
and specifications of active ingredients, processing methods, 
manufacturing controls, container/closure system, and appearance. 21 
CFR 314.50. They must ensure that each drug meets all U.S. 
labeling requirements, including that it bears the FDA-approved 
labeling. 21 CFR Sec. 201.100 (c)(2). The drug must also be dispensed 
by a pharmacist pursuant to a valid prescription. 21 U.S.C. 
Sec. 353(b)(1).

              STEPS FDA IS TAKING TO PROTECT PUBLIC HEALTH

    FDA cannot assure U.S. citizens that the prescription medications 
they are buying over the Internet from foreign countries such as Canada 
are safe. Many drugs obtained from foreign sources that either purport 
to be or appear to be the same as U.S. approved prescription drugs are, 
in fact, of unknown quality. The rise of Internet drugs sales presents 
substantial safety questions about these products.
    FDA is taking a number of steps to protect the public health of 
U.S. citizens including: (1) educating the public to the possible 
safety issues of drugs purchased from foreign countries, (2) working in 
conjunction with our Canadian government counterparts to address the 
issue of the flood of prescription medicines coming into the U.S. from 
their country, (3) increasing enforcement and policing of rogue 
Internet sites, and (4) partnering with the individual U.S. states to 
develop enforcement strategies, share cases and discuss important 
policy issues.

Consumer education
    FDA remains committed to developing more effective education and 
enforcement strategies. With this goal in mind, FDA has created 
brochures and posters entitled: Things you should know about purchasing 
medications outside the United States to alert consumers to the health 
risks of buying medications outside the U.S. Outreach to consumers and 
the press continues and new public material will be added to FDA's 
website.
    In December 2000 FDA created the ``Buying Medicines Online'' 
webpage; http://www.fda.gov/oc/buyonline/default.htm. The webpage 
provides tips, warnings and other information for consumers about 
purchasing over the Internet. In addition, it provides an opportunity 
for consumers to report unlawful sales of medical products on the 
Internet. Since its inception, the number of complaints received has 
grown steadily. FDA receives over 300 reports a day through this 
webpage that are evaluated by members of an FDA Internet enforcement 
work group.
    A voluntary certification program administered by the National 
Association of Boards of Pharmacy called the Verified Internet Pharmacy 
Practice Sites (VIPPS) program provides a basis for identifying online 
pharmacies that are appropriately licensed and prepared to practice 
pharmacy via the Internet. Today 13 Internet sites representing over 
10,000 pharmacies carry the VIPPS seal, and NABP has many pending 
applications.

Canadian cooperation
    On February 21, 2003, FDA representatives participated in a Forum 
on International Sale of Prescription Drugs from Canada in Ottawa, 
Canada. The forum was sponsored by the National Association of Pharmacy 
Regulatory Authorities (NAPRA), the voluntary umbrella association of 
Canada's provincial and territorial pharmacy licensing bodies.
    FDA's purpose in attending was to present our view on the sale of 
Canadian prescription drugs in the U.S. Some of the topics that related 
to FDA enforcement included: the need for clarification of legal status 
of international practice in the U.S., the legality of the sale of 
Canadian drugs to U.S. citizens, risks of the activity for U.S. and 
Canadian citizens, the legal recourse for any harm caused, the legal 
issues within the U.S. (at the Federal and state level) and the need to 
investigate and shut down non-pharmacy operations selling prescription 
drugs.
    In February 2003, FDA Commissioner McClellan participated in a call 
with Health Canada to discuss his concerns regarding the increasing 
number of U.S. pharmacies that are advertising and promoting 
prescription drugs from Canada. FDA shared a list of 45 active websites 
based in Canada that are selling drugs to U.S. citizens for additional 
investigation.

FDA work with states
    The states have primary jurisdiction over the practice of pharmacy. 
FDA is partnering with the states in pursuing cases. State pharmacy 
laws vary in all 50 states. FDA notes that some state laws are stronger 
than others and some states have been more willing to pursue these 
cases than others.
    In February 2003 the ORA Division of Federal State Relations hosted 
a nationwide call with state boards of pharmacy, other state regulatory 
agencies and consumer groups to discuss the current status of 
information on Internet drug sale practices. Representatives from 38 
states participated in the discussion. FDA was interested in hearing 
about state policy issues and regulatory actions. In addition, FDA had 
the opportunity to share information with the states on current 
regulatory policy and consumer education efforts on this issue.
Increased Federal and International enforcement activities
    FDA remains concerned about the potential for introduction of 
substandard drug products into the U.S. through foreign Internet 
purchases. As such, FDA has been participating in quarterly strategy 
meetings with other Federal counterparts including Federal Trade 
Commission (FTC), Department of Justice (DOJ), National Association of 
Attorneys General (NAAG) and Drug Enforcement Administration (DEA). In 
these meetings FDA discusses policy matters, public information issues 
and Agency priorities. This quarterly monthly meeting dates back to 
1998. FDA and FTC continue to work together on false and deceptive 
claims about treating or curing a wide variety of diseases. FDA and 
other Federal and state agencies have investigated many illegal 
pharmaceutical websites and have attempted to use existing laws and 
available technologies to bring action against rogue Internet 
pharmacies.
    In June 1999, FDA established a case assessment, or ``triage'' team 
with representatives from the Office of Enforcement and the Office of 
Criminal Investigation (OCI) within the Office of Regulatory Affairs 
(ORA), the Center for Drug Evaluation and Research (CDER), the Office 
of the Chief Counsel (OCC) and the Office of Policy. Under the 
``triage'' process, FDA obtains leads on potentially violative sites 
from a variety of sources including Internet monitoring activity, 
state, other Federal or foreign law enforcement agencies, consumers, 
and the press. The ``triage'' team evaluates the leads and decides 
whether they should initially be pursued through a civil or criminal 
investigation. Priority is given to cases involving unapproved new 
drugs, health fraud, prescription drugs sold without a valid 
prescription and products with the potential for causing serious or 
life-threatening reactions. The ``triage'' team makes referrals, when 
appropriate, to FDA's civil and criminal enforcement units for follow-
up.
    FDA receives over 300 messages per day in its Reporting Unlawful 
Sales of Medical Products on the Internet system. In 2002, FDA linked 
to the FTC Consumer Sentinel database to help cope with the large 
number of complaints it receives. The Consumer Sentinel database, 
maintained by FTC, contains more than one million consumer fraud 
complaints that have been filed with Federal, state, and local law 
enforcement agencies and private organizations. Through this law 
enforcement data base system, FDA is able to mine the data in this 
system and obtain useful information on Internet pharmacy sites of 
particular interest.

FDA Office of Criminal Investigations activities
    Because FDA and the other Federal agencies possess limited 
investigatory jurisdiction over sellers in foreign countries, we must 
work with foreign governments to bring action against such individuals. 
Internet crime and the practice of online pharmacy are a growing 
concern throughout the international law enforcement community. FDA's 
OCI maintains ongoing liaison with numerous government agencies in 
Canada, the United Kingdom, Spain, Australia, Germany, Belgium, the 
Netherlands, Ireland, Brazil, Singapore and others. OCI recently 
assigned a Special Agent to Interpol in Washington, D.C.
    An example of this cooperation involved OCI contact with 
authorities in a Pacific Rim country where a website operator alleged 
that he used the services of two legitimate doctors to review his 
online questionnaire. Through our foreign counterparts, we were able to 
have the doctors interviewed. Both denied any involvement in the 
scheme, thus exposing the operator to possible mail and wire fraud or 
other charges.
    OCI routinely works on joint investigations with numerous law 
enforcement agencies throughout the Federal community including: the 
Federal Bureau of Investigations, U.S. Customs, DEA, U.S. Postal 
Service, Internal Revenue Service, Health and Human Service-OIG, EPA 
and the U.S. Army. In addition, OCI has worked on joint cases involving 
Internet pharmacies with several state entities including state health 
departments, state pharmacy boards, and state medical boards. OCI has 
established collegial working relationships with state entities 
nationwide.
    Some recent cases indicate the seriousness of the risks to public 
health that regulators uncover when responding to Internet drug sales. 
They 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 more than 15 and 6.5 years. 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 a variety of prescription medications.
    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 and 
business records. Additional covert purchases were made. 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 misbranded drugs. The company plead 
guilty 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.

Dr. Mario Alvarez-Valentin
    On January 11, 2002, Dr. Mario Alvarez-Valentin was sentenced to 26 
months imprisonment after pleading guilty to wire fraud in connection 
with the unlawful sale of Viagra over the Internet. Alvarez was a 
physician contracted with Internet websites for the purpose of 
authorizing prescriptions for Viagra to persons throughout the U.S. 
From April 2000 to January 2001, Alvarez, who was only licensed to 
practice in Puerto Rico, prescribed and caused to be prescribed more 
than 4,000 prescriptions for Viagra. In doing so, he violated the 
licensing laws of at least 20 states. United States v. Alvarez-
Valentin, D.P.R.

Kwikmed
    On October 1, 2002, a Federal Grand Jury in Arizona returned a 198 
count indictment against Kwikmed, Inc., Cymedic Health Group, Inc., 
four owners of these corporations, and two physicians associated with 
the corporations. The indictment alleges that defendants operated 
Internet websites, two of which include kwikmed.com and cymedic.com, 
through which they sold prescription drugs, including Viagra, Celebrex, 
Xenial, and Propecia. The websites did not require a consumer to have a 
prescription before receiving the drugs, instead the customers were 
required to complete a questionnaire, which the website told customers 
would be reviewed by a physician. Customers were charged a fee for this 
purported medical consultation. The indictment alleges, however, that 
for the overwhelming majority of applications, no medical reviews, 
consultations, or physical examinations by a physician took place 
before drugs were shipped to customers. The indictment also alleges 
that defendants repackaged drugs obtained from a drug wholesaler, even 
though defendants were not a registered manufacturer or a licensed 
pharmacy, and that there was never a licensed pharmacist in any way 
involved. The indictment also alleges that the drugs dispensed were 
adulterated because of the defendants' failure to follow cGMP in 
packaging, holding, and labeling of the drugs. The indictment alleges 
that during the course of the conspiracy the defendants and others 
generated sales in excess of $28 million, which was billed to consumers 
as charges for prescription drugs, doctor consultations, and shipping. 
These sales resulted from the defendants' distribution of at least 
48,816 new orders for prescription drugs and 41,817 refills of those 
orders. The indictment charges defendants with several violations of 
the FD&C Act, as well as conspiracy, mail fraud, and money laundering. 
The charges were the result of an investigation by FDA and the U.S. 
Postal Inspection Service.
United States v. Carl David Roberts, (E.D. Tenn.).
    On January 15, 2003, Roberts was sentenced to a prison term of 57 
months. Roberts was chief administrator of an Internet business that 
used sophisticated technology to sell prescription drugs, including 
Schedule II narcotics, without any medical supervision. He had directed 
an organization that sold drugs from within the U.S., and from abroad. 
His organization included drug suppliers from Mexico, the Netherlands, 
and Ecuador. In September 2002, he pled guilty to distribution of 
controlled substances and conspiracy to violate the FD&C Act.
United States v. Kimball, (11th Circuit).
    On May 14, 2002, the Eleventh Circuit affirmed the district court's 
sentence. Kimball received a 13-year sentence for violating the FD&C 
Act. Kimball was found guilty after trial of putting prescription drugs 
into commerce without a prescription. His marketing efforts included 
use of the Internet.

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 website 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 website. 
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.

Canadian Drug Store, Inc.
    On May 14, 2002, 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. 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 
California Board of Pharmacy proceeding in May 2002 for filling more 
than 3,500 illegal prescriptions over the Internet. The case was 
brought under a state law that creates a requirement to fill a 
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, 2002, 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, DEA and 
IRS, 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 OCI Enforcement Activity
    To date, OCI has initiated 372 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 other sources. OCI has affected 150 
Internet-related drug arrests and obtained 92 convictions. Sixty of the 
Internet drug arrests and 26 of the convictions are Internet pharmacy 
related.
    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 on-line 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. FDA also sends copies of its cyber 
letters to the home governments of targeted websites when the locations 
can be identified. However, 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 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 that 
could cause heart attacks or strokes, and an unapproved cancer therapy. 
Also, 15 product seizures, 11 product recalls, and the voluntary 
destruction of 18 illegal products have been achieved, generally 
pertaining to unapproved new drug products. Forty-five foreign shippers 
have been placed on Detention Without Physical Examination and added to 
an FDA Import Alert for targeting sales of unapproved new drug products 
to the U.S.

FDA's personal importation policy
    FDA's personal importation policy is often misunderstood. Under 
FDA's personal importation policy, 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 not a license for individuals to import unapproved, 
and therefore illegal, drugs for personal use into the U.S. 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 Canada and Mexico and other foreign sources 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 product meets the following requirements: 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.

Carson mail study
    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 
examine 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 (38 
percent of the total) 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 GMP 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 therefore the risks associated with the products are 
difficult to assess. One drug had been reviewed for FDA approval but 
was rejected 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.
    The vast majority of the shipments were identified as containing 
prescription drugs. A number of controlled substances were also 
identified. Importation of these drugs containing controlled substances 
violates criminal provisions of the Controlled Substances Import and 
Export Act, including 21 U.S.C. 960 (unregistered importer/declared 
importation). These drugs have the potential for abuse, addiction or 
risk of life-threatening overdose. A physician's prescription and 
oversight are essential for managing these risks. Additionally, drugs 
to treat diseases 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.
    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.

Enforcement at the border
    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 were bringing back 
primarily antibiotics or pain relievers. Prescriptions were held by 63 
percent of the persons interviewed (59 percent U.S. prescriptions while 
41 percent were Mexican). 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 largest group of products 
was pain medicines. 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. 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. During the four hour 
survey, a total of 586 persons imported 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). 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.

Newly revised import alert
    On December 9, 2002, FDA reissued import alert 66-41 to include 
certain drugs approved for restricted use (due to safety concerns) in 
the U.S. This import alert allows FDA district field investigators to 
automatically detain without examination the listing of drugs. The 
Agency has posted this special alert on its home page warning consumers 
that certain restricted distribution drugs should not be purchased over 
the Internet. FDA has also put these restricted distribution drugs on 
Import Alert, informing the Agency's import inspectors that shipments 
of these drug are not appropriate for admission into this country under 
FDA's personal importation policy. FDA has also specifically informed 
Customs about the fact that these dangerous drugs should not be 
admitted. Imported drugs subject to this import alert are not 
admissible under FDA's personal importation policy.
    The FDA field guidance for this Import Alert provides that release 
of an unapproved drug for personal use may be appropriate if, among 
other considerations, the drug is intended for a serious condition for 
which effective treatment may not be available domestically either 
through commercial or clinical means, and it is not considered to 
represent an unreasonable risk. The guidance is intended to apply only 
to: (1) persons who have received treatment in a foreign country with 
an unapproved drug that is not available in the U.S., and who, upon 
returning to the U.S., have imported the drug for their personal use in 
an effort to continue the treatment started abroad; and (2) persons who 
have made their own arrangements for obtaining an unapproved drug from 
foreign sources, when the drug has not been promoted in the U.S.

                               CONCLUSION

    Mr. Chairman, FDA remains concerned about Americans purchasing 
prescription medicines over the Internet and whether this practice 
results in products being unlawfully imported into the U.S. We 
appreciate the subcommittee'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. Greenwood. We thank you for being here.
    Mr. Taylor of the Florida Department of Health.

                   STATEMENT OF JOHN D. TAYLOR

    Mr. John D. Taylor. Thank you, Mr. Chairman, Congressman 
Deutsch, Congressman Engel. My name is John D. Taylor. I 
recently accepted a position as a drug inspector with the 
Florida Department of Health's Bureau of Statewide 
Pharmaceutical Services. For the previous 13 years, I was the 
executive director of the department's Board of Pharmacy. Thank 
you for the opportunity to discuss affordable prescription 
drugs. Availability of affordable prescription drugs is a 
priority for the department and our State's residents. However, 
there are several emergent issues involving Internet 
prescription drugs that are causing increasing concern.
    The primary mission of the department is to promote and 
protect the health and safety of all people in Florida through 
the delivery of quality public health services and the 
promotion of health care standards. Pursuant to this mission, 
the department is concerned about the efficacy and safety of 
Internet prescription drugs.
    The Division of Medical Quality Assurance is charged with 
the investigation of civil complaints involving illicit 
storefront activities. Although consumers to date have filed no 
complaints, several licensed pharmacies began filing complaints 
last year. The Department has begun aggressively pursuing these 
allegations of unlicensed pharmacy behavior and alleged illicit 
distribution of prescription drugs. Several investigations are 
currently underway. Disposition of these cases and possible 
referral to law enforcement for criminal complaint 
investigation are pending. As these are active investigations, 
I am not in a position to provide specific details at this 
time.
    The Board of Pharmacy is composed of individuals licensed 
in the profession, as well as consumer members. The board is 
responsible for creating professional standards as well as 
determining probable cause in disciplinary actions involving 
the misconduct of pharmacy licensees. Currently, the Board of 
Pharmacy has proposed administrative rule in the area of 
Internet prescriptions. This proposed rule is now in the public 
comment period. Previous versions of this proposal have been 
delayed by challenges, and the current version addresses issues 
raised by an administrative judge. The revised rule may become 
effective in the next 2 to 3 months.
    I will now focus on the first of two specific areas of 
concern: The practice of prescribing and dispensing 
prescription drugs via the Internet. As you know, Internet web 
sites are available that let consumers select and order 
prescription drugs. This international process is complex and 
difficult to investigate. First, the consumer submits a brief, 
online medical questionnaire, which seeks to determine 
suitability of the consumer for the medication. Then, if the 
consumer's request has not been disqualified based on their 
answers to the questionnaire, a prescription is issued by a 
prescriber associated with the web site. The issued 
prescription is then transmitted to a pharmacy associated with 
either the site or the prescriber.
    The concerns with this process are numerous. There is no 
guarantee that the consumer has been truthful in completing the 
questionnaire. Likewise, there may be no quality oversight for 
the prescriber, the pharmacist that completes the prescription, 
the pharmacy itself or the product delivered to the consumer. 
If these drugs originate from a foreign country, there is a 
strong likelihood that the drugs themselves may not have been 
approved by the Food and Drug Administration. The department 
has investigated pharmacies that received over 300 
prescriptions from a sole contracted physician in a single 
day--physicians that see regular patients during their workday. 
Clearly, this is a serious issue. The position of the 
Department and various licensure boards, including the Boards 
of Medicine, the Board of Osteopathic Medicine, Dentistry, 
Podiatry and Nursing, is that prescribing based solely on an 
Internet questionnaire is below the standard of practice. Such 
a rule of the Board of Osteopathic Medicine has been challenged 
and upheld before a Florida administrative law judge. The 
department and the Board of Pharmacy believe that prescriptions 
issued in this manner are invalid. Pharmacies and pharmacists 
knowingly dispensing prescription drugs prescribed in this 
manner should be subject to discipline.
    The licensure boards are in the process of promulgating 
rules to specifically preclude these activities. In some cases 
disciplinary action has been taken based on existing statutes 
and rules with varying levels of success. Department Secretary 
Dr. John Agwunobi has created a task force of representatives 
of the various licensure boards to study areas where there may 
be synergies for collective board actions with respect to 
Internet prescriptions.
    The second issue I would like to discuss is the use of 
unlicensed facilities, so-called storefronts, that serve as 
middlemen for foreign prescription drug distribution. Foreign 
pharmacies are dispensing prescription drugs by mail to Florida 
residents. Existing operations usually include Canadian 
pharmacies, but recent calls to our office indicate that a site 
or facility using Mexican pharmacies may also be involved. 
Florida residents are drawn via advertising to locations where 
prescriptions issued by licensed Florida prescribers are 
solicited and accepted for transmission to these foreign 
pharmacies. These storefront locations are not licensed as 
pharmacies and do not meet minimum requirements for licensure 
under their current method of operation.
    A consumer with a licensed prescriber's prescription visits 
the storefront and provides the prescription and credit card 
information to the storefront operator. The prescription is 
then faxed to a Canadian physician who rewrites the original 
prescription and then submits the new prescription to a 
Canadian pharmacy. The pharmacy prepares the drugs, which are 
then dispensed and mailed to the consumer's home in Florida. 
Similar to the concerns with Internet prescription dispensing, 
there are no guarantees that these drugs are FDA approved and 
there is no way to be certain of the drug's origin or history. 
The importation of prescription drugs in this manner is a 
violation of State and Federal laws.
    Additionally, Florida statutes require licensure of non-
resident pharmacies shipping prescription drugs to consumers in 
Florida. This Florida law provides for the licensure of non-
resident pharmacies licensed in another State, but does not 
reference foreign pharmacies. In addition, Florida 
administrative code sections require a pharmacy permit for 
locations maintained from, ``from which to solicit, accept or 
dispense prescriptions.'' Florida statutes also designate the 
unlicensed practice of pharmacy as a misdemeanor of the first 
degree. Since unlicensed activity carries the potential for 
criminal sanctions, it is outside the jurisdiction of the 
department's Board of Pharmacy to investigate or prosecute. In 
cases where an investigation shows evidence of unlicensed 
activity, referral for criminal prosecution or civil action 
will be considered by the department. Closure of existing 
storefront operations will depend on the result of those 
investigations.
    We know that the cost of vital prescription drugs is more 
than a significant issue for many of our residents. The 
department shares their concerns on this issue. However, many, 
if not all, of the products ordered from foreign sources 
require a liability waiver prior to delivery. This particular 
system, while less expensive for the consumer, bypasses 
regulatory safeguards and places them at greater health risks.
    Again, this is a complex and evolving problem that crosses 
many jurisdictional boundaries with both national and 
international implications. The department is committed to 
addressing this safety issue and look forward to partnering 
with our Federal counterparts to ensure continued safe and 
effective prescription drugs for our residents. We are 
dedicated to ensuring secure access to prescription drugs and 
applaud Federal efforts along these lines. Undertaking an 
educational campaign to explain the safety concerns associated 
with this practice is a good first step in highlighting this 
issue for our residents and to allow for informed 
decisionmaking.
    Thank you for the opportunity to speak, Mr. Chairman.
    [The prepared statement of John D. Taylor follows:]

   Prepared Statement of John D. Taylor, Florida Department of Health

    Mr. Chairman and Members of the Committee, my name is John D. 
Taylor. I recently accepted a position as a Drug Inspector with the 
Florida Department of Health's (FDOH) Bureau of Statewide 
Pharmaceutical Services. For the previous thirteen years, I was the 
Executive Director of FDOH's Board of Pharmacy.
    Thank you for the opportunity to discuss affordable prescription 
drugs. Availability of affordable prescription drugs is a priority for 
FDOH and our state's residents. However, there are several emergent 
issues involving internet prescription drugs that are causing 
increasing concern.

                      FLORIDA DEPARTMENT OF HEALTH

    The primary mission of FDOH is to promote and protect the health 
and safety of all people in Florida through the delivery of quality 
public health services and the promotion of health care standards. 
Pursuant to this mission, FDOH is concerned about the efficacy and 
safety of internet prescription drugs.

Division of Medical Quality Assurance
    The Division of Medical Quality Assurance is charged with the 
investigation of civil complaints involving illicit storefront 
activities. Although consumers to date have filed no complaints, 
several licensed pharmacies began filing complaints last year. The 
Bureau of Statewide Pharmaceutical Services and the Division of Medical 
Quality Assurance (both within FDOH) have aggressively begun pursuing 
these allegations of unlicensed pharmacy behavior and alleged illicit 
distribution of prescription drugs. Several investigations are 
currently underway. Disposition of these cases and possible referral to 
law enforcement agencies for criminal complaint investigation are 
pending. As these are active investigations, I am not in a position to 
provide specific details at this time.

Board of Pharmacy
    The Board of Pharmacy is composed of individuals licensed in that 
profession, as well as consumer members. The board is responsible for 
creating professional standards as well as determining probable cause 
in disciplinary actions involving the misconduct of pharmacy licensees.
    Currently, the Board of Pharmacy has proposed ``Standards of 
Practice for Filling Prescriptions Authorized by Practitioners Licensed 
in Jurisdictions Other than Florida or Procured Through the Internet'' 
(64B16-27.833--attached). These standards are now in the public comment 
period. Previous versions of these standards have been delayed by 
challenges, and the current version addresses issues raised by an 
administrative judge. The revised standards may become effective in two 
to three months.

                  INTERNET PRESCRIBING AND DISPENSING

    I will now focus on the first of two specific areas of concern: the 
actual practice of prescribing and dispensing prescription drugs via 
the Internet. As you know, Internet websites are available that let 
consumers select and order prescription drugs. This international 
process is complex and difficult to investigate.
    First, the consumer submits a brief, online medical questionnaire, 
which seeks to determine suitability of the consumer for the 
medication. Then, if the consumer's request has not been disqualified 
based on their answers to the questionnaire, a prescription is issued 
by a prescriber associated with the website. The issued prescription is 
then transmitted to a pharmacy associated with either the site and/or 
the prescriber. The concerns with this process are numerous.
    There is no guarantee that the consumer has been truthful in 
completing the questionnaire. Likewise, there may be no quality 
oversight for the presciber; the pharmacist that completes the 
prescription; the pharmacy itself; or the product delivered to the 
consumer. If these drugs originate from a foreign country, there is a 
strong likelihood that the drugs themselves may not have been approved 
by the Food and Drug Administration (FDA). FDOH has investigated 
pharmacies that received over 300 prescriptions from a sole contracted 
physician in a single day--physicians that also see regular patients 
during the workday. Clearly, this is a serious issue.

FDOH Position
    The position of FDOH and various licensure boards, including the 
Boards of Medicine, Osteopathic Medicine, Dentistry, Podiatry, and 
Nursing, is that prescribing based solely on an Internet questionnaire 
is below the standard of practice. Such a rule of the Board of 
Osteopathic Medicine has been challenged and upheld before a Florida 
administrative law judge. FDOH and the Board of Pharmacy believe that 
prescriptions issued in this manner are invalid. Pharmacies and 
pharmacists knowingly dispensing prescription drugs prescribed in this 
manner should be subject to discipline. Pharmacies or sites dispensing 
without a prescription are also in violation of state law.
    The licensure boards are in the process of promulgating rules to 
specifically preclude these activities. In some cases disciplinary 
action has been taken based on existing statutes and rules with varying 
levels of success. FDOH Secretary Dr. John Agwunobi has created a Task 
Force of representatives of the various licensure boards to study areas 
where there may be synergies for collective board actions with respect 
to Internet prescriptions.
    Dr. Agwunobi's recent letter to the Board of Pharmacy stated:
        ``The Department of Health has been working on a strategy for 
        addressing the Internet prescribing and dispensing issue. We 
        are developing both an investigative team and a litigation team 
        to deal with the disciplinary actions; and, we are coordinating 
        our efforts with law enforcement at all levels, and across 
        state lines. Since the Department also regulates wholesalers 
        and distributors, we are working together on cases that involve 
        these areas as well.''

             ILLICIT STOREFRONT PRESCRIPTION DRUG SERVICES

    The second issue I would like to discuss is the use of unlicensed 
facilities--so-called storefronts that serve as middlemen for foreign 
prescription drug distribution. Foreign pharmacies are dispensing 
prescription drugs by mail to residents of Florida. Existing operations 
usually include Canadian pharmacies, but recent calls to our office 
indicate that a site or facility using Mexican pharmacies may also be 
involved.
    Florida residents are drawn via advertising media to locations 
where prescriptions issued by licensed Florida prescribers are 
solicited and accepted for transmission to these foreign pharmacies. 
These ``storefront'' locations are not licensed as pharmacies and do 
not meet minimum requirements for licensure under their current method 
of operation.
    A consumer with a licensed prescriber's prescription visits the 
storefront and provides the prescription and credit card information to 
the storefront operator. The prescription is then faxed to a Canadian 
physician who rewrites the original and then submits the new 
prescription to a Canadian pharmacy. The pharmacy prepares the drugs, 
which are then dispensed and mailed to the consumer's home in Florida. 
Similar to the concerns with Internet prescription filling, there are 
no guarantees that these drugs are FDA approved and there is no way to 
be certain of the drug's origin or history.

FDOH Position
    The importation of prescription drugs in this manner is a violation 
of state and federal laws. Additionally, Florida Statutes (Section 
465.0156) require licensure of non-resident pharmacies shipping 
prescription drugs to consumers in Florida. Florida law provides for 
the licensure of non-resident pharmacies licensed in another state, but 
does not reference foreign pharmacies. As a result, FDOH and the Board 
of Pharmacy have determined that the ``storefronts'' where 
prescriptions are solicited and accepted for dispensing by foreign 
pharmacies are engaged in the unlicensed practice of pharmacy.
    In addition, Florida Administrative Code (Section 64B16-27.104 (2)) 
requires a pharmacy permit for locations maintained ``from which to 
solicit, accept or dispense prescriptions.'' Florida Statutes (Sections 
465.015 (3) and (4)) designate the unlicensed practice of pharmacy as a 
misdemeanor of the first degree.
    Since unlicensed activity carries the potential for criminal 
sanctions, it is outside the jurisdiction of the department's Board of 
Pharmacy to investigate or prosecute. In cases where an investigation 
shows evidence of unlicensed activity, referral for criminal 
prosecution or civil action by the department will be considered. 
Closure of existing storefront operations will depend upon the results 
of those investigations.
    We know that the cost of vital prescription drugs is more than a 
significant issue for many of our residents. FDOH shares their concerns 
with this issue. However, many, if not all, of the products ordered 
from foreign sources require a liability waiver prior to delivery. This 
particular system, while less expensive for the consumer, bypasses 
regulatory safeguards and places them at greater health risks.

Closing Statement
    Again, this is a complex and evolving problem that crosses many 
jurisdictional boundaries with both national and international 
implications. I have addressed Florida's actions to date, but I think 
you will find similar safety concerns from my peers throughout the 
country.
    FDOH is committed to addressing this safety issue and look forward 
to partnering with our federal counterparts to ensure continued safe 
and effective drugs for our residents. We are dedicated to ensuring 
secure access to prescription drugs, and applaud federal efforts along 
these lines. Undertaking an education campaign to explain the safety 
concerns associated with this practice, is a good first step in 
highlighting this issue for our residents, and to allow for informed 
decision-making.
    We are also working within the state to study the extent of the 
problem, alternative solutions, enforcement options and legislative and 
regulatory actions, and look forward to sharing those lessons learned 
with other states, and the federal government.
    Thank you for the opportunity to share Florida's experiences with 
you today on these important issues.

    Mr. Greenwood. Well, thank you very much. The Chair 
recognizes himself for 10 minutes for questions. Let us walk 
through a hypothetical situation where a resident of Florida, 
first off, walks into a storefront, one of these storefront 
Canadian pharmacies that we have described in order to get a 
lower price product on a legitimate prescription from a 
legitimate local Florida doctor. First question I have is at 
what point, if at any point, does the senior citizen break 
State or Federal law in handing over a prescription to someone 
in that pharmacy and/or in making payment, receiving a drug 
knowingly from Canada? Has the senior citizen broken State or 
Federal law?
    Mr. John M. Taylor. I mean I will go first. Obviously, our 
focus isn't really on the senior.
    Mr. Greenwood. I understand that.
    Mr. John M. Taylor. In that context----
    Mr. Greenwood. And I am not suggesting you go and arrest 
them. I am just----
    Mr. John M. Taylor. Right. But in that context, at least 
based on the scenarios that I am familiar with, the senior has 
fulfilled--I mean they have met with their health care 
practitioner and have received, presumably, a valid 
prescription, which then facilitates the rest of the conduct. 
So our focus is really on the--so just from a FDA standpoint, 
we don't see any liability there. I am not sure what the 
State----
    Mr. Greenwood. Well, I am not asking you where you focus or 
if there is any liability, I am asking you is a law violated by 
the senior who takes a legitimate prescription from her 
physician, goes into a storefront and says, ``I understand that 
if I give you this prescription, you can have--you will arrange 
to have this medicine shipped to my home from Canada at a less 
price--at a lower price than I can get at Costco,'' if that is 
the case. Is that a violation of State or Federal law?
    Mr. John M. Taylor. From a Federal standpoint, the answer 
is no.
    Mr. John D. Taylor. Mr. Chairman, I am not absolutely 
certain from a State standpoint. I am not aware of a State law 
that would be violated by the citizen, but obviously my 
understanding of the law deals with the pharmacists and 
pharmacies and so I am not sure.
    Mr. Greenwood. Okay. Now, let us take the next actor here 
who is the fellow, the person behind the counter at that 
storefront, who takes that legitimate prescription and then 
faxes it or e-mails it to Canada and basically procures on this 
person's behalf a drug that would then be imported back from 
Canada. Has he or she broken a State or Federal law?
    Mr. John M. Taylor. Yes. Keeping in mind that some of these 
scenarios are fact-specific, we do believe that the owner of 
the pharmacy or the person who is facilitating the importation 
of products from Canada does indeed violate the act because of 
their acts to facilitate the illegal importation of these 
pharmaceutical products if indeed these products are not in 
compliance with the manufacturing, the storage, the labeling 
requirements that we deem are important and crucial to ensuring 
one's compliance.
    Mr. Greenwood. And is that your understanding, sir, as 
well?
    Mr. John D. Taylor. Yes, sir. The Board of Pharmacy spent a 
great deal of time on this issue at a recent meeting, and the 
board's counsel, who is an assistant attorney general for the 
State of Florida, gave the opinion that this would be a 
violation; in fact, it would be the unlicensed practice. As I 
mentioned a couple of moments ago, there are three main 
elements here that can be a judge of that: Whether you solicit 
prescriptions, whether you accept prescriptions, and then 
dispensing. And all three of these elements essentially occur 
once someone walks into this unlicensed facility.
    Mr. Greenwood. Okay. Now, let us walk through again what--
and those are State laws or Federal laws?
    Mr. John D. Taylor. State laws.
    Mr. Greenwood. State laws, okay. And you, sir, said that it 
is also a violation of Federal law.
    Mr. John M. Taylor. Correct.
    Mr. Greenwood. Okay. Now, have either of your agencies 
prosecuted anyone in Florida or anywhere else, in the case of 
the FDA, for these violations of law?
    Mr. John M. Taylor. In the context of a storefront 
pharmacy, the answer is no.
    Mr. Greenwood. And why is that?
    Mr. John M. Taylor. Well, quite frankly, at the time that 
we learned or became aware of the proliferation of these 
storefronts specifically here in Florida, we contacted the 
State of Florida and we have had negotiations with the very 
attorney that Mr. Taylor recognized. The reason we haven't done 
anything yet is it is still new to us, we are looking at the 
fact pattern. One of the important factors, Mr. Chairman, is 
the fact that FDA, for example, one of the charges that we 
would use is that this product is misbranded because it is 
dispensed, that it is not a valid prescription pursuant to 
State law.
    During Mr. Taylor's testimony, he noted the fact that the 
State of Florida was proposing a rule that may be filed in a 
few months that articulates clearly that the use of an online 
questionnaire or the use or dispensing of a prescription 
without patient/physician interaction is not in accordance with 
State law. And if it is not in accordance with State law, then 
it automatically makes it a Federal charge that we can utilize. 
We are also, quite frankly, focusing on the Internet sites that 
many of these storefronts are utilizing across the board. So 
the bottom line is we are looking into the situation, but we 
have not taken any action as of today.
    Mr. Greenwood. Anything to add to that?
    Mr. John D. Taylor. Just to say, Mr. Chairman, that 
complaints have been received, and they are under 
investigation.
    Mr. Greenwood. Okay. If you went down to the Miami Airport, 
you would see, and I don't know if either of you have ever done 
that, but you would see truckloads, airplane cargo loads of 
cardboard boxes and other containers coming in with drugs, with 
postage stamps from places like the Bahamas, the United 
Kingdom, all over the place. And I am keenly aware of the 
limited resources, but I wonder to what extent the FDA, working 
with Customs, is saying, ``We know that the flow is so 
gargantuan that is it's virtually impossible to stop it.'' But 
when you see particularly high volumes from a particular place, 
for instance, at the Miami Airport, as we sit here, there are 
probably a dozen garbage bags full of envelopes, manila 
envelopes containing Viagra, probably fake viagra, that has 
come in, much of it from one particular location in the 
Bahamas. Is the FDA at work with Customs to say, ``We are going 
to turn all that stuff around and send it back or we are going 
to, it is not that much of a hop from here to the Bahamas, go 
in and find this location and shut it down''?
    Mr. John M. Taylor. Well, one of the positives that has 
occurred in the last year is that FDA strengthened its 
relationship with its international counterparts. One of the 
difficulties, aside from the resources, but just a logistical 
challenge, is working with our foreign counterparts not only to 
deal with a products at the point of origin but also obviously 
to deal with the product once it enters United States borders. 
And we have worked--we have had numerous discussions with the 
Canadian government. We are working with a couple States that 
are looking at the influx of products from India and Israel, 
two countries in particular who seem to be poised to augment 
the shortage of products that are--because the math doesn't add 
up and there is such proliferation of sites from Canada, it is 
obvious that not all these products could be coming from 
Canadian pharmacies, from the United States or from Canada 
itself. And so there are other countries that seem poised to 
fill the gap by providing their product.
    So we are working with the States, we are working with a 
larger number of foreign governments, we have gone to Geneva 2 
years in a row to work with the Canadians--I mean, I am sorry, 
to work with our European counterparts and to meet with our 
Asian counterparts to do a better job of identifying the 
products at the time that they leave the foreign country so 
that we are able to more readily identify those products when 
they hit our shores.
    One of the challenges is that there are so many packages 
unless we sort of have a heads up from a foreign country that 
these packages contain a specific drug, some of those packages 
can still evade our net.
    Mr. Greenwood. Well, I understand all that, but what I just 
heard you say, in all due respect, is we are talking to these 
people, we are talking with those people, we are interacting 
with these people. What I haven't heard you say, we kicked down 
this door, we kicked down that door, we shut down this 
operation, we arrested people over here. Have there been----
    Mr. John M. Taylor. Sure. Let me walk you through some of 
the tangible cases. I mean we currently have several cases--
actually several sites being investigated right now with 
several States, and those are specifically States that have 
taken a very tough position regarding what constitutes a valid 
prescription. And, obviously, that makes it easier for us to 
build a Federal case. But in the written testimony, for 
example, there is a case that we took where recognized that the 
product was actually coming in from Australia, and so we took 
action against the actual distributors here in the United 
States. There is another situation, which is really 
illustrative, of a case that is in the----
    Mr. Greenwood. Can you let me interrupt you for a second?
    Mr. John M. Taylor. Sure.
    Mr. Greenwood. What are some of the States that have taken 
such a hard line?
    Mr. John M. Taylor. The State of Arizona in particular has 
very strong and explicit language regarding what does not 
constitute a valid prescription. So you will notice we have a 
criminal case there. The State of Missouri traditionally has 
been very tough, the State of Texas, the State of Washington. 
So these are States where we have a tendency to build stronger 
Internet cases.
    One case that is particularly illustrative is a criminal 
case that we brought in Nevada, and it involved a Germany 
company that essentially owned the German distributor and also 
owned the company that received the products from German. The 
company--the facility in Las Vegas not only imported the 
products but repackaged them and then facilitated the 
distribution in the United States. That is a situation where, 
again, we worked with our European counterparts to help 
understand the German operation, and then in light of the fact 
that they also had a United States operation, we criminally 
prosecuted them for conspiracy, for repackaging the products.
    Mr. Greenwood. So people have gone to jail over this.
    Mr. John M. Taylor. Yes. We do have arrests in that case 
and several of these cases.
    Mr. Greenwood. Okay. After this subcommittee had a hearing 
in June of 2001, nearly 2 years ago, the FDA proposed to the 
Department of Health and Human Services that it allow FDA and 
Customs to deny entry of all these illegal drugs into the U.S. 
and return them to the sender.
    Mr. John M. Taylor. That is correct.
    Mr. Greenwood. What is the status of that proposed 
regulation?
    Mr. John M. Taylor. The status of the regulation is that 
the Secretary and the Commissioner are engaged in discussions 
regarding the proposal that we made 2 years ago.
    Mr. Greenwood. I am sorry, say that again.
    Mr. John M. Taylor. I am sorry. The Secretary and 
Commissioner have been meeting regarding the proposal that we 
made 2 years ago.
    Mr. Greenwood. Okay. What seems to be the holdup?
    Mr. John M. Taylor. Quite frankly, I am not sure. I know 
that they recognize that there are a complex number of issues 
here, but I think there is also recognition or a concern that 
using some of these short-term solutions, for example, the 
solution we proposed 2 years ago, really will not get to the 
crux of the issue, Mr. Chairman. I think the administration's 
feeling is that there is a need for a more comprehensive long-
term solution, and they feel that that solution is Medicare 
prescription drug coverage. So it is something that is under 
active review. But as you know, over the last couple years 
there have been many thoughtful approaches, some put forth by 
the Hill, some put forth by FDA, and we have been unable to 
find one that addresses the safety and integrity concerns for 
the product, as well as providing some evidence that the costs 
of drugs would actually decrease. The Jeffords bill is an 
example where both Secretary Shalala and Secretary Thompson, as 
thoughtful as that was, it contained a requirement, a pedigree 
requirement that allowed the tracing of the product, a 
requirement that would have allowed for analytical testing as 
well as some other steps. But even in that context, we just 
could not certify that it was going to assure that the American 
public was going to be exposed to safe and effective products.
    Mr. Greenwood. Well, I guess my own view is that the fact 
you can't solve the entire problem in one fell swoop shouldn't 
be an impediment to saying if we just took a significant size 
group of packages that are coming from another country and just 
sent them all back and did that even if it is a drop in the 
bucket, it begins to have an impact. People don't get what they 
are ordering, the company who is expecting to profit from this 
is finding all of this stuff back at its doorstep, and it just 
doesn't seem to me a lot of that is happening.
    Let me finish with this question. In my opening, I 
mentioned Reverend and Mrs. Rode. Their son died of drugs he 
purchased over the Internet. The drugs came from South Africa. 
This committee knows the company and its location. We have 
shared that, I believe, with the FDA, and the question is what 
has the FDA done in this specific question for the Rodes and 
has OCI done anything at all?
    Mr. John M. Taylor. Before I answer that question, could I 
answer the question you posed before?
    Mr. Greenwood. Sure.
    Mr. John M. Taylor. FDA still feels that that proposal is a 
good, viable proposal, the one we made in 2001, so I take your 
words to heart. We still think despite the fact that there 
might be a more comprehensive solution down the road, we still 
think that is a good proposal, and we look forward to having--
--
    Mr. Greenwood. Well, when the 2-year anniversary occurs and 
nothing has happened, you can expect this committee to dance on 
the FDA's head.
    Mr. John M. Taylor. Fair enough.
    Mr. Greenwood. The gentleman from Florida.
    Mr. Deutsch. Thank you, Mr. Chairman.
    Mr. Greenwood. Oh, I am sorry.
    Mr. John M. Taylor. Yes. And let me answer the second one. 
I don't have the current status of the case but I remember, and 
OCI now reports to me at the time of that hearing they did not, 
but at the conclusion of that hearing they were told to go back 
and investigate that Internet site. My understanding is that 
they have done so. I will certainly get you a progress report.
    Mr. Greenwood. Okay. We will expect then from you a full 
accounting of that----
    Mr. John M. Taylor. Fair enough.
    Mr. Greenwood. [continuing] in letter form as soon as you 
can. Thank you.
    The gentleman from Florida.
    Mr. Deutsch. Thank you, Mr. Chairman. And, actually, not to 
be outdone of mothers who visit, my mom's actually in the 
audience. Mom, why don't you wave.
    Mr. Greenwood. And a fine looking woman she is, Mr. 
Deutsch.
    Mr. Deutsch. Thank you. Mr. Taylor--actually, let me--I 
want to take you, actually--this is an ad that appeared 
actually in this week's Broward Jewish Journal, and in fact 
this week's Broward Jewish Journal actually had seven ads for 
seven different locations of seven different Canadian 
pharmacies. It is not too hard to find them. And I guess the 
question is they are there. I mean tomorrow there are going to 
be more there. This one ad lists three different locations, I 
guess all of which are in Broward County. People are going, 
they are growing. I mean seven ads this week. Are they legal, 
are they not legal?
    Mr. John M. Taylor. Well, first of all, you are absolutely 
right. The number of sites are proliferating, and each week we 
see more and more. We think that the conduct--first of all, let 
me point out that the FDA approved--there are several things 
that strike me about that advertisement. One is, as I said in 
my oral testimony, despite the fact that many of these sites 
advertise that they are FDA-approved, we find that very hard to 
believe. In most cases, the products are not FDA-approved. And 
there are two reasons why we think that is the case. One is 
because under the Federal Food and Drug Cosmetic Act, the only 
party that legally can reimport a drug that is manufactured in 
the United States is the actual manufacturer. So for those 
products to be FDA approved and legal, they would have to be 
manufactured outside the United States in a FDA-approved 
facility, imported to Canada and then imported to the United 
States, and we just don't see that type of widespread activity.
    But going to your more global question, we think that ads 
like this facilitate illegal conduct, we think it facilitates 
the introduction of misbranded, adulterated and in some cases 
products that are dispensed without a valid prescription. So we 
do think that these ads facilitate--realizing that each of 
these fact patterns might have certain nuances, but we think 
that globally most of these fact patterns facilitate 
importation of products in violation of the act.
    Mr. Deutsch. Do you have any idea how many of these 
pharmacies exist presently in the United States of America?
    Mr. John M. Taylor. No, we do not.
    Mr. Deutsch. Are you aware if they exist anywhere outside 
of Florida at this point?
    Mr. John M. Taylor. Absolutely.
    Mr. Deutsch. They do?
    Mr. John M. Taylor. Absolutely.
    Mr. Deutsch. In a number of other States?
    Mr. John M. Taylor. Yes. Especially in addition to the 
State of Florida we are seeing them along the northern border, 
and one of the complaints that the northern border States have 
been making is that their own pharmacies are being harmed--the 
pharmacies along the northern border of the United States 
because many of their customers are using these Internet sites.
    Mr. Deutsch. Has anyone from the FDA actually visited any 
of these locations?
    Mr. John M. Taylor. Any of the storefront locations?
    Mr. Deutsch. That is correct.
    Mr. John M. Taylor. Not in the State of Florida. We have 
gone to a couple in the--I guess we went to one possibly in the 
State of New Jersey, but traditionally we have left it up to 
the States to visit the storefront pharmacy.
    Mr. Deutsch. So are you aware--did the FDA visit one 
pharmacy of this type in New Jersey?
    Mr. John M. Taylor. I think we might have. I will have to 
double check on that. We have not been to any of the storefront 
sites.
    Mr. Deutsch. So do we even know what these storefronts do?
    Mr. John M. Taylor. Yes, we do.
    Mr. Deutsch. How do we know if we have never visited them?
    Mr. John M. Taylor. We know because we contact the States 
when we get word of these sites. We had a call at the beginning 
of February with 38 State Board of Pharmacies in the context of 
the storefront site that I guess in Delray Beach. After we saw 
that in the press, we called the State of Florida to learn 
generally how the operation was being conducted. We talked to 
the States about whether or not the site is operating in 
conformance with the practice of pharmacy. And then what the 
agency does is we focus on the Internet sites that are being 
utilized----
    Mr. Deutsch. Let me just switch----
    Mr. John M. Taylor. Sure.
    Mr. Deutsch. [continuing] to the other Mr. Taylor. I mean 
he has said it is your responsibility. Is it your 
responsibility?
    Mr. John D. Taylor. Well, we have received complaints of 
this type of thing, and those complaints are being 
investigated. Obviously they are confidential and so I don't 
know the details of those investigations, but I do know that 
they have been received and that the Secretary has asked the 
folks in his office to see what can be done. One of the 
problems----
    Mr. Deutsch. Can I ask again this simple question: Are they 
legal or are they not legal?
    Mr. John D. Taylor. In the opinion of counsel for the Board 
of Pharmacy, no.
    Mr. Deutsch. They are not legal.
    Mr. John D. Taylor. That is correct.
    Mr. Deutsch. All right. So they are proliferating. This 
week there were seven advertisements at different locations; 
next week there could be 10. I mean if they are not legal, why 
are they existing? Have you visited them? I mean are you 
shutting them down? Do you plan to shut them down?
    Mr. John D. Taylor. They have been visited. One of the 
problems, without giving too much away of the strategy, in 
looking at this is one of the things that States that is is 
illegal is a Florida administrative code rule which doesn't 
have as much strength, obviously, as a statute. And so the 
folks that are pursuing this are being very careful that they 
do this right as they pursue it, sir.
    Mr. Deutsch. Go ahead.
    Mr. John M. Taylor. Congressman Deutsch, I just want to 
clarify. I am not saying it is the States' responsibility. I am 
saying, actually, that the responsibility is complementary. It 
is the Federal Government and the States' responsibility. I 
noted that Mr. Lipscomb in the first panel said that he called 
FDA and FDA said it was the States' responsibility. In our 
relationships with the States, the States have the primary 
jurisdiction over the pharmacies, we often work sort of along 
these lines. The States will deal with the pharmacy issues, we 
will deal with the product issues. But it is----
    Mr. Deutsch. Let me focus still on these pharmacies for a 
second. Why are they dangerous, in your opinion? I mean what is 
going on that is dangerous in these--why should we want to shut 
them down?
    Mr. John M. Taylor. I feel and FDA feels that they are 
dangerous because we do not know anything about the products 
that are being dispensed from these pharmacies. More 
specifically, we don't know how they are manufactured.
    Mr. Deutsch. Let me ask you the question now. If you are 
ready to shut these down, are you ready to shut down Internet 
purchases from Canada, because how is this really different 
than the Internet purchases from Canada?
    Mr. John M. Taylor. It is indistinguishable.
    Mr. Deutsch. So is the position of the FDA that you want to 
shut down Internet purchases from Canada?
    Mr. John M. Taylor. It is our position that the Internet 
sites from Canada are illegal and facilitating illegal conduct.
    Mr. Deutsch. That is not the question I asked you. Is it 
the position of FDA that you want to shut down those sites?
    Mr. John M. Taylor. Yes. To the extent that we----
    Mr. Deutsch. Yes.
    Mr. John M. Taylor. To the extent that we have researched 
this, we think it is important to take action against those 
sites.
    Mr. Deutsch. Let me just follow-up which is just mind 
blowing to me at this point. How many scripts or how many 
packages of Internet purchases have been made for Canada in the 
last 12 months in the United States of America?
    Mr. John M. Taylor. Some of the estimates that we have 
received 3 to 4 million packages or more in the last 12 months.
    Mr. Deutsch. Okay. In my office last week, who specifically 
came to us to present those numbers? The commissioner? Which 
commissioner? Commissioner McCullum was in our office last 
week. The number he used was 10 million. I mean where is the 3 
million--was it 7 million less than last week?
    Mr. John M. Taylor. No. I mean the 10 million has been, 
quite frankly, one number; 3 or 4 million has been another 
number.
    Mr. Deutsch. Maybe 100 million is another number, maybe 50 
million is another number, maybe 250 million is another number.
    Mr. John M. Taylor. No. We cannot actually----
    Mr. Deutsch. So the facts are you have no idea.
    Mr. John M. Taylor. Right. We cannot accurately quantify 
it.
    Mr. Deutsch. You have no idea, really no idea.
    Mr. John M. Taylor. We cannot accurately quantify the 
number of packages that come into the United States.
    Mr. Deutsch. You have absolutely no idea.
    Mr. John M. Taylor. To the extent we have any information 
it is anecdotal about the number.
    Mr. Deutsch. And we are talking about millions, tens of 
millions.
    Mr. John M. Taylor. Absolutely.
    Mr. Deutsch. And anecdotal.
    Mr. John M. Taylor. And increasing, increasing with each 
week.
    Mr. Deutsch. I mean tens of million, potentially. Three 
million, 10 million. I mean we are not talking about thousands 
or hundreds.
    Mr. John M. Taylor. No, we are not; we are talking about 
millions of packages.
    Mr. Deutsch. Millions of packages. And what you have 
testified now is that FDA wants to shut that down. I mean is 
that--I mean that is what I heard you say.
    Mr. John M. Taylor. Yes. FDA would like--absolutely. We 
would like to find a way to stem this tide and deal with this 
situation. One of the struggles, however, is having the 
resources to be able to check each package as it comes in and 
pursue the investigations that are necessary to deal with 
packages and lots of this size.
    Mr. Deutsch. Let me just mention that our staff at the 
Miami facility, according to the officials there, said it takes 
about a half hour per package? FDA takes 2 hours per package. I 
mean, you know, we could basically get rid of the 5.8 percent 
unemployment in America tomorrow, we could hire everyone to go 
through the packages. They could probably speed it up a little 
bit. I mean, obviously, we are not going through 10 million 
packages a year. I mean it is just impossible.
    Mr. John M. Taylor. Well, correct, Congressman. I mean that 
is one of the reasons why we made the proposal 2 years ago is 
because it does take a long time to process each package, 
because when a package comes into the United States, pursuant 
to the act----
    Mr. Deutsch. Right.
    Mr. John M. Taylor. [continuing] we need to provide notice. 
I mean there are due process requirements that we have to 
comply with, and so it takes an inordinate amount of time to 
process each package. So you are absolutely right.
    Mr. Deutsch. Let me ask you a question. Is there any 
attempt by FDA, I mean there is an acknowledgement, I think, by 
you and the Commissioner that we really don't know what is 
going on. I mean there is no question, we have no real idea 
what is going on. Is there any systematic program in place at 
FDA trying to get our arms somewhat around what is going on?
    Mr. John M. Taylor. Congressman, we are actively 
discussing--if you note in the written testimony, a couple 
years ago we did what was called a Carson study, which is now 
dated, but at that time we did that study to get a better 
understanding of not only the quantity but more importantly the 
type of packages that were coming into the United States. 
Because what we learned from that pilot was that a lot of the 
products were not--I mean were antibiotics, pain killers, 
things that worked as well as other products that if they were 
not used properly were affirmatively dangerous.
    But we think there is a better way or maybe a better 
approach to taking our knowledge base one step further. So we 
are actively looking at additional pilots that we think would 
help us understand better the problem we are dealing with. 
However, as you noted quite well, the scope issue is one that 
is readily apparently and hitting us in the face. It would just 
be a matter of getting more quantification about the pace and 
quite frankly the type of products that are coming here.
    Mr. Deutsch. Let me kind of turn back a little. You are 
talking about what you are doing now and just brainstorming. I 
mean, obviously, our staff has been looking at this extensively 
as well, and one of the things I have asked the staff to look 
at is maybe think a little bit outside the box and basically 
say, okay, we have this phenomenon which is literally in the 
millions. Millions of people have availed themselves of this 
option. And I think the concern, truthfully, is that it really 
a two-tier system. I mean I think anyone who looks at it 
objectively understands that there is a certain amount of risk. 
We don't know how much that risk is, it is anecdotal at this 
point in time, but I don't think it is fair to say that there 
is no risk, I mean to go into one of these facilities. I would 
absolutely say that. And the FDA itself does an incredibly 
effective job in America in terms of the safety and efficacy of 
drugs in the United States.
    Has anyone looked at, and I have asked from the FDA side, I 
have asked our staff to really try to think outside the box a 
little and basically say, okay, can we do something to deal 
with that risk from the Canadian side in particular? Because it 
does seem to, at this point, really be a Canadian phenomenon. 
It is not a Mexican phenomenon yet, it is not an Israeli 
phenomenon yet, although that is the potential, and we have 
seen some indication that that is at the cutting edge, because 
I have actually seen ads now that people are now advertising 
you can better price through Israeli drugs or Mexican drugs, 
Bohemian drugs.
    So have we looked at it to really say, okay, let us 
interact with our--or interface with our Canadian counterparts 
and try to have the efficacy and safety through the Canadian 
system that we can give the FDA seal of approval? Again, it is 
totally different than every way we are looking at it now, but 
maybe that is an approach as opposed to an approach which I 
think politically, honestly, you and I both know politically no 
one--the Secretary is not ordering the stopping of this 
importation at this point in time, I mean it is not happening. 
Congress is not legislating that it is going to stop happening. 
I mean this is the 800-pound elephant inside the tent, and 
maybe if we are not--I mean hopefully, I think all of our hope 
is that we are going to have a prescription drug benefit that 
we are going to pass in this Congress that is going to address 
this issue that tens of millions of people forcing themselves 
into effectively a second tier pharmaceutical system in 
America. If we can avoid that. I mean are you looking at all at 
that option?
    Mr. John M. Taylor. Yes. We have been working with the 
Canadians closely, and, quite frankly, we have not limited our 
options. The Commissioner met with the Deputy Minister of 
Health last month. We now have a--we had a meeting where 
industry, the Canadian government, the United States government 
met a couple weeks ago to look at the problem more globally and 
to look for some solutions. We are not--at this juncture, 
because of the breadth of the problem, we are not limiting 
ourself to any options or choices. We are looking at it all 
globally, including the question of whether or not there is 
some type of equivalency.
    In addition, I am meeting with the Canadian officials next 
week to, again, continue discussions regarding this issue. We 
have shared with them web sites that are of concern to us, and 
we have talked to them about having actual contact points in 
the United States that can help them address these regulatory 
issues, not only in the context of these individual shipments 
but also in the context of looking at how this practice affects 
health care for the United States and Canada. So the 
equivalency that is something that has been put on the table as 
a possible idea.
    Mr. Deutsch. Let me just follow up with two final 
questions. One is we just talked a little bit about this whole 
idea of Canada versus other countries.
    Mr. John M. Taylor. Right.
    Mr. Deutsch. At the Miami facility, the staff going through 
these drugs noticed the drugs coming in from Mexico, the 
Bahamas, Central American countries, Europe and elsewhere. When 
seniors are ordering Internet drugs through Canada and they are 
working through one of these entities and they are sending 
faxes or Internet e-mail, what assurance do they have that they 
are actually coming from Canada?
    Mr. John M. Taylor. None at all, no assurance at all. And, 
quite frankly, as we begin to dig deeper, we are obviously 
finding tangible evidence that products indeed are not coming 
from Canada, they are coming from other countries.
    Mr. Deutsch. The final question, which is really, I guess, 
related to this, and we have been looking. I mean we have met 
with pharmaceutical companies, our staff has been looking. At 
this point, we hear, and the chairman and others have 
mentioned, some anecdotal information of misuse. The truth is 
there is misuse of drugs absolutely correct, prescription drugs 
at the local pharmacy in south Florida. And I don't know if it 
is more, I don't know if it is less than purchase on the 
Internet. I mean there is misuse, there is drug interactions, 
people die really anecdotally all the time in terms of this 
type of thing.
    The question really is what evidence do we have beyond 
almost what we have heard--I mean the U.S. Congress Oversight 
and Investigation Committee sitting here even though it is 
Florida this is the people. We should know. I mean we literally 
should know and you should know, and we have been looking. I 
mean maybe the problem isn't as bad, and that is really--this 
is an investigation here. Maybe the problem isn't as bad. What 
evidence do we have sort of what the adverse effects have been? 
I mean we can talk anecdotal, we can talk theoretically about 
the problems, but do we have any handle at all that maybe this 
is a good thing, maybe it is a system that is working, maybe 
tens of millions of Americans are living longer because they 
can afford the drugs, that they are not self-medicating and 
cutting their prescriptions in half and missing prescriptions. 
Maybe we should be encouraging, maybe the Federal Government 
ought to be offering the web sites.
    I mean I am being very serious and sincere in what I am 
saying, because we are really--I think we are being open and 
honest in our investigation. What evidence do we have of there 
actually being a problem that is not anecdotal, that is not 
theoretical?
    Mr. John M. Taylor. Let me answer it in two parts. In 
regards to the adverse events, we get this question a lot. Our 
adverse event system does not discern between whether or not an 
adverse event is from a product that is purchased pursuant to 
an Internet site or not. So you are right, it is difficult to 
quantify. And as we know, adverse events occur whether it is 
purchased from a brick-and-mortar pharmacy or from an Internet 
pharmacy.
    Mr. Greenwood. Would the gentleman yield for a second?
    Mr. Deutsch. I would be happy to.
    Mr. Greenwood. Let me just interrupt you there because that 
is a very important point. Why doesn't your system, your 
adverse event system, take that into consideration? I mean if 
you have a system for reporting adverse events, it would seem 
that in this day and age, given what we have been talking about 
today, that you would want to add a question to your adverse 
event investigation system that says where did it come from.
    Mr. John M. Taylor. Well, one of the Commissioner's five 
priorities is looking at our whole adverse event system, and it 
is one of the issues that is part of that discussion that we 
are going to take on. So you are absolutely right, Mr. 
Chairman.
    Mr. Greenwood. Here is how long it would take me to do 
that. Good idea; yes, do it. Done.
    Mr. John M. Taylor. I agree. I agree.
    Mr. Greenwood. Yield back.
    Mr. Deutsch. Okay.
    Mr. John M. Taylor. So you are right. But one of the things 
we have done is we have talked at our State phone call about 
adverse events. We realized that the States through some of 
their poison control centers do have some evidence of adverse 
events that potentially resulted from products that they 
purchase over Internet sites. And we are getting that 
information from them and trying to quantify whether or not 
there indeed are tangible examples of people who have been 
harmed because of products purchased over the Internet.
    The other part of my answer, though, is this: We see our 
job as trying to ensure that to the extent that adverse events 
can be mitigated, that this occurs. And part of that process is 
ensuring that products that have, quite frankly, not been 
manufactured properly do not make it here. I can give you some 
tangible examples of some products that we have noted as part 
of our Carson pilot or as part of some other investigations 
that we have done, and these are products that have what are 
called narrow therapeutic indexes.
    I think the--I forgot, maybe, Mr. Chairman, it was you that 
raised the example of the Cardizem. Cardizem products that are 
used for seizures, products that are used for heart disease 
they have such a narrow therapeutic index, which means that if 
they are not manufactured exactly right or if the granule size 
of the active ingredient is not manufactured exactly right, 
then the health care of the person who is taking the product 
will be profoundly impacted. And we actually had a criminal 
case at FDA regarding a seizure product that was counterfeited 
overseas, and what happened is that the particulate--the 
granules, the particulate matter, was off just a little bit and 
what happened is that the product did not dissolve at the same 
rate in the blood and people who had never had--had no had 
epileptic seizures for 10 years began to have them. And I was 
one of the attorneys prosecuting that case, and that is, I 
think, a tangible example of where not knowing----
    Mr. Deutsch. If I can just interject.
    Mr. John M. Taylor. Sure.
    Mr. Deutsch. I mean I think we make a distinction, and this 
subcommittee has really spent a lot of time investigating, I 
mean there is a difference between the phenomenon of 
counterfeit drugs coming in and this phenomenon as well. I mean 
counterfeit drugs can still exist outside of Internet 
pharmacies, entering the country through wholesalers and that 
becomes a criminal enterprise, different than if there is a 
criminal enterprise versus this phenomenon. I think they can 
interrelate, but I don't think a counterfeit enterprise is 
proof of an adverse--I mean that counterfeit enterprise can 
still enter the United States without the Internet, and it 
probably did, because we have examples and extensive examples 
of counterfeited drugs entering the United States before there 
was any Internet pharmacies. Do you understand what I am 
saying?
    Mr. John M. Taylor. That is correct. I understand.
    Mr. Deutsch. So counterfeit drugs does not equal Internet 
pharmacies.
    Mr. John M. Taylor. No, you are absolutely right, but the 
reason I use that example is because that example is 
illustrative of an actual situation where a product that was 
not manufactured in accordance with FDA statute and FDA regs 
led to actual harm.
    Mr. Deutsch. Right. But let me ask you--again, I mean this 
is--wouldn't we see more injuries, I mean if this was an 
incredible abuse, 10 million minimum maybe, maybe more? I mean 
10 million, wouldn't we see more stuff?
    Mr. John M. Taylor. It is difficult to say. I mean one of 
the things we have also learned in FDA, and this is in regard 
to adverse events, whether it be a drug or food, is that a lot 
of people don't even know that they are having an adverse 
event. If you are heavily medicated and you are taking 
different medications or, for example, in the context of food, 
you don't feel well, people often attribute to other factors 
other than the product that they took. So it is hard to tell.
    Mr. Deutsch. Right. I know it is hard. If it was easy, we 
probably wouldn't be here. I mean how do we measure it? I mean 
what are we trying to do to measure it? Because one of the 
things out there, they are real people. I mean the first panel 
were real people who are literally making choices with their 
lives. Millions of American seniors are making choices with 
their lives today, okay? And I think one of the things we can 
do, if nothing else, is be helpful in providing some 
information to them about what the factors of that choice are. 
And you can do now, and we can do as well--I mean how do you 
measure what the problem is?
    Mr. John M. Taylor. Well, measuring the problem--aside from 
keeping track of the proliferation, measuring the problem is 
very difficult. What we have tried to do, and you just 
highlighted it a second ago, is we have tried to increase our 
consumer outreach and working with AARP and others and 
providing brochures that help people understand better, knowing 
that for some the choice, in light of the difference in costs, 
some are going to make the choice no matter what. But we have 
tried to--not only does FDA have a separate web site that 
instructs people how to purchase products online safely and 
gives some tips for doing so, we have also in the context 
specifically of foreign Internet sites put out brochures again 
trying to instruct people, trying to get people to interact 
with their health care practitioner before they purchase 
products over the Internet. And, in addition, the National 
Association Board of Pharmacy, their verified Internet practice 
sites, it is a seal, and that seal essentially indicates that 
the products that are purchased over that Internet site are 
manufactured in compliance with FDA and are in compliance with 
State law. So we try to encourage consumer awareness as one 
means of trying to alleviate the problem.
    Mr. Deutsch. Thank you very much.
    Mr. Greenwood. The Chair thanks the gentleman from Florida. 
The gentleman from New York is recognized for 10 minutes.
    Mr. Engel. Thank you, Mr. Chairman. Listening to the 
testimony it just again hits me, something I said before and 
something we all know is, we are not doing what we should be 
doing in Washington. And because these things are happening, 
these Internet sites and also the franchises and other things 
that are happening, we have to now catch up to them, because it 
is a phenomenon that is relatively new.
    Mr. Taylor of FDA--first of all, let me say that in 
hundreds and hundreds of hearings I have been to I have never 
been to one where both gentlemen have the same name. And then I 
noticed in the next panel, Mr. Chairman, we have a Michael 
Jackson, so I think this is certainly a unique hearing. It was 
worth it coming to Florida for this.
    Mr. Taylor from the FDA, you alluded in some of your 
answers to both Mr. Greenwood and Mr. Deutsch about resources 
for the FDA. I am wondering if you can expand on that funding. 
Obviously, this is something that is a fairly new phenomenon. 
Does the FDA feel that more funds are necessary from Congress 
to enable you to do what you have to do? Mr. Deutsch, I think 
pointed out, or was it Mr. Greenwood, about how--I think it was 
Mr. Greenwood, that there were two per hour, or whatever it is. 
Obviously, at that pace, there is no way we are going to be 
able to get to it. It was Mr. Deutsch because he talked about 
unemployment. But is funding a problem?
    Mr. John M. Taylor. Yes. We did receive some funding last 
year from Congress to hire additional investigators to work at 
our ports as part of the counterterrorism initiative. However, 
the proliferation of sites and the number of packages obviously 
has far eclipsed our ability to handle that. And the resource 
issues comes into play in two ways. One, pursuant to the act, 
as I noted before, when a package comes in, we need to provide 
notice to the consignee that their package has been seized, and 
then they have an opportunity to challenge the seizure. That in 
and of itself is time consuming, so that is one aspect of it. 
But the other resource aspect of it is that quite frankly we 
just do not have enough people at this time to cover all the 
ports. And so at some ports we will have people there Monday, 
Tuesday and Wednesday, and then the next 2 days of the week 
they will go to another port, so our coverage is incomplete. 
That is the two ways.
    Mr. Engel. Could we really--since this problem is obviously 
tremendous and getting deeper or worse by the day, can we ever 
really have enough resources? I mean wouldn't it take literally 
to be at every port and to cover it the way we need to cover 
it, I mean wouldn't you have to put on tens of thousands of 
additional employees? So, therefore, since that is obviously 
not feasible, what can be done with the resources we have to at 
least make a dent in this? Obviously, we are not making a dent 
in it now.
    Mr. John M. Taylor. Sure. You are absolutely right. 
Additional resources would help us stem the flow somewhat, but, 
obviously, the number of resources that are required to stop 
this I can't even begin to quantify them. I am not sure there 
is actually a figure that would allow us to look at every 
single package that is coming into the United States. So 
instead what we have tried to do is, first of all, we have 
tried to emphasize the use of various tools that allow the 
public to understand some of the concerns that we have when one 
uses one of these sites to purchase their products. We have, as 
I said before, drafted several brochures that we have issued 
that we have actually given to storefront pharmacies to help 
people understand not only the risk but also to help them 
understand some of the factors that they should engage in when 
they are making a decision whether or not to purchase products 
over these sites. We also have worked with the States and, as I 
said before, increasing our working relationship with many of 
our foreign counterparts to do the best we can to leverage the 
limited resources that we have to address this problem.
    Mr. Engel. In working with the States, Mr. Taylor of 
Florida, have you worked with other States, have you put your 
heads together and tried to talk about things that may have 
come up or is each State sort of on its own?
    Mr. John D. Taylor. Well, the National Association of 
Boards of Pharmacy obviously has helped in that regard. And we 
were on the 38-State teleconference that Mr. Taylor mentioned 
earlier, which was a time for interaction between the States as 
well. But it has been fairly limited, I think.
    Mr. Engel. Okay. Mr. Taylor of the FDA, I am told that the 
committee staff have just visited the Miami International Mail 
facility to examine what kind of drugs are coming to the United 
States. Have you been to that facility?
    Mr. John M. Taylor. No, I have not. I have not been there 
since this proliferation of mail. I have been to the Miami 
facility about 5 years ago, but obviously the conditions today 
are much different than they were then.
    Mr. Engel. Well, we are told that FDA and U.S. Customs 
staff are virtually swimming in thousands of shipments of 
controlled substances and counterfeit drugs and others, and 
some might be legitimate and some not. Are you aware that they 
are literally swimming in thousands of shipments?
    Mr. John M. Taylor. Yes, I am.
    Mr. Engel. And while some of these shipments are 
legitimate, obviously many are highly suspect?
    Mr. John M. Taylor. That is correct.
    Mr. Engel. You mentioned about the two inspector hours to 
process a single shipment through the Oasis System. Are we 
increasing those numbers of inspectors above two?
    Mr. John M. Taylor. Quite frankly, I couldn't answer today 
as to what our staffing plans are for the Miami facility. 
However, as I said earlier, in light of last year's funding 
request, we were able to hire additional investigators to work 
at the ports, and we have increased our port coverage across 
the United States. One of our priorities has been boosting the 
level of--or boosting the number of people, for example, in our 
UPS hub in Louisville, because, as large as--or as steep as the 
increase is in the context of the mail, it is even steeper in 
the context of UPS. So we have been focusing on increasing our 
staffing at Federal Express and UPS, and to the extent that we 
can bring more people into Miami, it is something I am 
certainly willing to look into.
    Mr. Engel. In order to deal with this, do we really need to 
change the laws to deal with this? Is that correct?
    Mr. John M. Taylor. Well, in order to finalize the proposal 
that the chairman was referring to, the proposal--specifically, 
the proposal that would allow us to send the packages back or 
to unilaterally destroy them, we would need a statutory change, 
because, as I said before, as of right now, we cannot send the 
packages back or destroy them; we have to provide some notice 
to the recipient that the package has been detained by FDA and 
give them an opportunity to respond. So, yes, it would require 
a legislative change, specifically to section 801 of the act.
    Mr. Engel. Let me ask Mr. Taylor of Florida, is it true 
that these walk-in pharmacies--we are told that these walk-in 
pharmacies may soon be showing up here in Florida malls, in 
kiosk operations. Have they been? Have you heard that they will 
be? Is that something that the State of Florida has learned 
about?
    Mr. John D. Taylor. I have heard about that type of 
situation. I think that many of the first facilities often were 
insurance company offices and things like that, but I have 
heard that there could be plans for offices in malls as well, 
sir.
    Mr. Engel. Do we know anything about the operators of these 
walk-in pharmacies? Are any of them trained in the practice of 
pharmacy?
    Mr. John D. Taylor. I would expect that they are completely 
not. They are certainly not licensed pharmacies or pharmacists 
at the facility, sir.
    Mr. Engel. The other Mr. Taylor, do we know anything about 
the operators?
    Mr. John M. Taylor. Of the storefront pharmacies?
    Mr. Engel. Yes.
    Mr. John M. Taylor. Yes. I mean we feel that we have a good 
understanding of how they work based on our discussions with 
the State of Florida and the other States who house these 
pharmacies.
    Mr. Engel. I want to ask Mr. Taylor, Federal, about Glaxo. 
They are, as you know, embarking on a policy not to export to 
Canadian wholesalers if these Canadian wholesalers send their 
drugs to the United States. Does the FDA support that move by 
Glaxo, and, if so, why?
    Mr. John M. Taylor. Without limiting it to Glaxo, we, quite 
frankly, are supportive of any steps to ensure that the act is 
being complied with.
    Mr. Engel. Doesn't this, though, if Glaxo feels that it has 
got to take matters into its own hands, does it show that the 
FDA is not doing what it should be doing if Glaxo is trying to 
do it this way?
    Mr. John M. Taylor. Sir, I don't know. I guess you would 
have to ask Glaxo. I mean, obviously, it is indicative of the 
fact that there appears to be such a flow of product from 
Canada that others are looking at alternatives to the current 
system.
    Mr. Engel. So what we are saying, in essence, is that these 
pharmacies are not regulated at all. I mean there is really--it 
is just an impossibility to regulate them.
    Mr. John M. Taylor. I guess I would phrase it differently. 
I believe that they are subject to both State and Federal law, 
or at least some State laws and certainly Federal law. I think 
the challenge comes in doing the investigatory work and taking 
the law enforcement steps that are necessary to completely shut 
off the supply of these products or even stem the supply of 
products to a point where we feel comfortable that the American 
public can be guaranteed that the products that they receive 
once they order from these sites are products that are safe and 
effective, in compliance with Federal law and are safe from a 
public health standpoint.
    Mr. Engel. Thank you. Let me ask the other Mr. Taylor, I 
have two final questions. We have here--we have received a copy 
of the recent report issued by the Florida Grand Jury on drug 
diversion and the State's drug counterfeit problems. This seems 
to be an increasingly serious problem here in Florida, probably 
in other States as well, but certainly in Florida, obviously 
many senior citizens, would you agree?
    Mr. John D. Taylor. The grand jury report that dealt with 
counterfeit drugs and diversion through wholesaling?
    Mr. Engel. Yes.
    Mr. John D. Taylor. Okay. Well, I have only been in that 
office 2 weeks, but certainly in talking to my colleagues it is 
seen as a very serious issue; yes, sir.
    Mr. Engel. Well, in this report, it is described that a 
number of wholesalers here in Florida are now dealing in 
counterfeit drugs, perhaps with their knowledge, without their 
knowledge, we really don't know. Are these drugs coming from 
Internet operations? If not, where? And what are the theories 
that you have about where these drugs might be coming from?
    Mr. John D. Taylor. I am not confident to answer that 
question today. I certainly could try to get that information 
for you, but I haven't been in that office long enough to be 
competent in that area, sir.
    Mr. Engel. Okay. Thank you both, gentlemen. Mr. Chairman, 
thank you.
    Mr. Greenwood. The Chair thanks the gentleman and we thank 
Messieurs Taylor for being with us very much. Thank you for 
your testimony. You are excused, and we will take a brief break 
while we bring on the next panel. Thank you, gentlemen.
    [Brief recess.]
    Mr. Greenwood. Okay. We welcome our third and final panel. 
We thank you, gentlemen. We have with us Dr. Elliott Hahn, who 
is the chairman and president of Andrx Corporation; Mr. Michael 
Jackson, the executive vice president of Florida Pharmacy 
Association in Tallahassee; Mr. Carl A. Ruiz, who is the 
pharmacy director for Navarro Discount Pharmacies in Miami; and 
Mr. Robert N. McEwan, who is the CEO of MEDBANK of Maryland in 
Towson, Maryland. Gentlemen, thank you all for being with us.
    You probably heard me say to the other witnesses in the 
other panels that this is an investigative hearing and it is 
our practice to take testimony under oath at these hearings. Do 
any of you have objections to giving your testimony under oath? 
Okay. Seeing no such objection, I should advise you that you 
are entitled to be represented by counsel at this hearing. Do 
any of you wish to be represented by counsel? Okay. In that 
case, if you would each stand and raise your right hand.
    [Witnesses sworn.]
    Mr. Greenwood. Okay. You are under oath, and we look 
forward to your testimony. We ask you to try to hold your 
testimony to about 5 minutes. We have about 45 minutes left for 
the entire hearing, and we want to spend as much time as 
possible with questions. We are going to start with Dr. Hahn.

   TESTIMONY OF ELLIOTT HAHN, CHAIRMAN AND PRESIDENT, ANDRX 
  CORPORATION; MICHAEL A. JACKSON, EXECUTIVE VICE PRESIDENT, 
    FLORIDA PHARMACY ASSOCIATION; CARLOS A. RUIZ, PHARMACY 
 DIRECTOR, NAVARRO DISCOUNT PHARMACIES; AND ROBERT N. McEWAN, 
                 CEO, MEDBANK OF MARYLAND, INC.

    Mr. Hahn. Thank you, Mr. Chairman, for the introduction and 
especially for the invitation to give testimony today on the 
important issue of access to pharmaceuticals that are 
affordable and specifically prescription drugs. A key indicator 
of the seriousness of this problem is the alarming number of 
senior citizens who are purchasing their medications illegally 
over the internet.
    As a member of the pharmaceutical industry, Andrx strongly 
opposes the unauthorized sale or distribution of products 
procured via the Internet. Seniors on fixed incomes, as well as 
the millions of others that are uninsured or under insured 
Americans who purchase their prescription drugs illegally over 
the Internet, cannot be certain of the purity of their 
medications or the accuracy of the dosage. In addition, they 
might be subject to potentially harmful drug-drug interactions 
without the intervention of a licensed pharmacist who has a 
complete patient history. Furthermore, patients' privacy can be 
at risk when purchasing drugs on the web. But the dramatic rise 
in Internet importation is not the underlying problem. It is 
only a reaction to the real issue of access to affordable 
medication for those who lack or have limited prescription drug 
coverage.
    The importance of this issue is underscored by the number 
of Americans having to pay the full freight for expensive 
pharmaceuticals. This number is rising rapidly and 
dramatically. The uninsured in this country already exceeds 41 
million people and is growing. In the coming year, every 2 
hours or roughly the length of time that we are sitting in this 
room, another 465 Americans will lose their health insurance. 
Add to that the millions of Americans who are under insured and 
the scope of the problem becomes clear.
    Andrx recognizes our responsibility as a member of the 
health provider community to provide affordable medications for 
uninsured or under insured patients. At Andrx, our mission is 
to provide safe and efficacious pharmaceuticals at prices that 
everyone can afford, including seniors, the uninsured and the 
under insured.
    Since its inception, Andrx has been involved with 
developing generic versions of difficult to replicate 
blockbuster drugs or brand name products. The pharmaceuticals 
products that we prepare are those at cost-effective prices. 
Recently, we have leveraged our technology base to develop what 
we refer to as value-branded products, and the first one is a 
cholesterol fighter called Altocor.
    Altocor is a highly effective extended-release version of 
the first statin, known as lovastatin, which was introduced 16 
years ago and has been used safely ever since. Altocor employs 
patented technology developed by Andrx to reduce LDL, or the 
bad cholesterol, by as much as 41 percent. And what is more, 
Altocor is the most affordable option among currently promoted 
statins for the millions of Americans who are at risk for 
cardiovascular disease.
    Altocor's high level of efficacy and safety, combined with 
its value pricing, makes it a prime example of industry 
innovation. A measure of its success is shown by the fact that 
Altocor is already covered by almost all State Medicaid 
programs and is on the Medicaid preferred drug list in a number 
of States that have implemented managed-care like formularies.
    In April, Andrx will implement a new program designed to 
meet the needs of those who lack or who have limited 
prescription drug coverage. This initiative is called the SAVE 
Program. There is no enrollment or paperwork required for the 
program; instead patients simply receive a SAVE card and an 
Altocor prescription from their doctor and present the card 
when they pay for their Altocor prescriptions. Unlike other 
pharmacy card programs, access to the SAVE program is not 
limited by a patient's age or their income. Andrx is very 
excited about the SAVE Program. We believe it will help 
thousands of patients who lack or have limited prescription 
drug coverage by offering access to a highly effective drug in 
one of the most important therapeutic categories.
    But that's not all. Andrx is readying a pipeline of other 
products that will adopt the same approach. These products will 
be designed to treat widespread illnesses effectively, safely 
and affordably. That, in fact, will be the hallmark of the 
Andrx product line. And, as I said earlier, we can see this as 
a new form of innovation that can serve as a model for the 
pharmaceutical industry as a whole.
    The pharmaceutical industry continues to make great strides 
in applying innovative therapeutic technologies to new drug 
development, but if it is to rise to the challenges of our 
times, the industry must also use its resources to create drugs 
that couple efficacy and safety with value. I thank you.
    [The prepared statement of Elliott Hahn follows:]

   Prepared Statement of Elliot Hahn, Chairman and President, Andrx 
                              Corporation

    Thank you, Congressman, for your introduction and especially for 
the invitation to give testimony today on the important issue of access 
to affordable prescription drugs.
    A key indicator of the seriousness of this problem is the alarming 
number of senior citizens who are purchasing their medications 
illegally over the Internet.
    As a member of the pharmaceutical industry, Andrx strongly opposes 
the unauthorized sale or distribution of products procured via the 
Internet. Seniors on fixed incomes, as well as the millions of other 
uninsured and under insured americans who purchase prescription drugs 
illegally over the Internet, cannot be certain of the purity of their 
medications or the accuracy of the dosage. In addition, they might be 
subject to potentially harmful drug-drug interactions without the 
intervention of a licensed pharmacist who has a complete patient 
history. Furthermore, patients' privacy can be at risk when purchasing 
drugs on the web.
    But this dramatic rise in internet importation is not the 
underlying problem. it is only a reaction to the real issue of access 
to affordable medication for those who lack or have limited 
prescription drug coverage.
    The importance of this issue is underscored by the number of 
Americans having to pay the full freight for expensive pharmaceuticals. 
This number is rising rapidly and dramatically. The uninsured in this 
country already exceeds 41 million people and is growing. In the coming 
year, every two hours or roughly the length of time we are sitting in 
this room, another 465 Americans will lose their health insurance. Add 
to that the millions of Americans who are under insured and the scope 
of the problem becomes clear.
    Andrx recognizes our responsibility--as a member of the health 
provider community--to provide affordable medications for uninsured or 
under insured patients. At Andrx, our mission is to provide safe and 
efficacious pharmaceuticals at prices that everyone can afford--
including seniors, the uninsured and the under insured.
    Since its inception, Andrx has been involved with developing 
generic versions of difficult to replicate blockbuster brand name 
pharmaceutical products at cost-effective prices. Recently, we have 
leveraged our technology base to develop ``value'' branded products. 
Our first branded product is a cholesterol-fighter called Altocor 
TM.
    Altocor is a highly effective extended-release version of the first 
statin, lovastatin, which was introduced sixteen years ago and has been 
used safely ever since. Altocor employs patented technology to reduce 
LDL (bad cholesterol) by as much as 41%.
    And what's more, Altocor is the most affordable option among 
currently promoted statins for the millions of Americans who are at 
risk for cardiovascular disease.
    Altocor's high level of efficacy and safety, combined with its 
``value'' pricing, makes it a prime example of inDustry innovation. A 
measure of its success is shown by the fact that Altocor is already 
covered by almost all state medicaid programs and is on the medicaid 
preferred drug list in a number of states that have implemented 
managed-care like formularies.
    In April, Andrx will implement a new program designed to meet the 
need of those who lack or have limited prescription drug coverage.
    This initiative is called the SAVESM program. There is no 
enrollment or paperwork required for the program; instead patients 
simply receive a save card and an altocor prescription from their 
doctor and present the card when they pay for their Altocor 
prescriptions. Unlike other pharmacy card programs, access to the save 
program is not limited by a patient's age or income.
    Andrx is very excited about the save program. We believe that it 
will help thousands of patients who lack or have limited prescription 
drug coverage by offering access to a highly effective drug in one of 
the most important therapeutic categories.
    But that's not all. Andrx is readying a pipeline of other products 
that will adopt this same approach. These products will all be designed 
to treat widespread illnesses effectively, safely and affordably. That, 
in fact, will be the hallmark of the Andrx product line. And, as I said 
earlier, we see this as a new form of innovation that can serve as a 
model for the pharmaceutical industry as a whole.
    The pharmaceutical industry continues to make great strides in 
applying innovative therapeutic technologies to new drug development. 
But if it is to rise to the challenges of our times, the industry must 
also use its resources to create drugs that couple efficacy and safety 
with value.
    Thank you.

    Mr. Greenwood. Thank you.
    And let us next turn to Mr. Jackson.

                TESTIMONY OF MICHAEL A. JACKSON

    Mr. Jackson. Thank you, Mr. Chairman, members of the 
committee. I thank you for allowing me the opportunity to 
present to you today. I am Michael Jackson, I am executive vice 
president of the Florida Pharmacy Association.
    A business industry is being developed here in Florida that 
has no governmental oversight. This industry is inserting 
itself into the professional practice of pharmacy by serving as 
a drop-off point for prescriptions. The Florida Pharmacy 
Association has learned through its members and in the media 
that these storefront centers are opening for business with the 
intent on accepting prescriptions written by licensed 
prescribers. These prescriptions are then transmitted to a 
foreign source for processing and shipping directly to Florida 
residents. As a pharmacist, I see this as a significant public 
health and safety risk. Patients who seek pharmacy services in 
this manner are presenting themselves to untrained, unqualified 
and unlicensed individuals.
    Not all prescriptions needed by patients are available 
through foreign sources. In those cases, we see patients will 
have to seek services from their local pharmacy provider. It is 
not uncommon for patients to forget to disclose to their health 
care provider all of the prescription medications that they are 
taking. Knowing that many of these drugs are obtained through 
questionable sources there is a tendency to withhold critical 
medical information from the pharmacist. The dispensing 
pharmacist may be unable to recognize why dispensed medications 
are not working or, worse, may be unable to detect a possible 
life threatening drug interaction. The consumer could be 
subject to increased health risks resulting in illness, 
inability to work, impairment or a possible hospital admission. 
This business industry is not only unregulated but could be in 
violation of State law as evidenced in Florida Statutes 
465.003, paren 13 and 465.015.
    There is an economic impact of the foreign alternative 
solution. Allowing the continued importation of prescription 
drugs from foreign countries places Florida pharmacy providers 
at an unfair disadvantage. Florida pharmacies are clearly 
unable to purchase prescription drugs at the prices listed in 
the media ads for foreign outlets. Many of you often receive 
mail from constituents asking the simple question, why do my 
drugs costs so much? I cannot explain why prescription drugs 
are available at such reduced prices from other countries. The 
committee needs to know that 80 percent of the cost of the 
average domestic retail prescription price represents costs to 
the pharmacy over which we have absolutely no control. The 
remaining 20 percent of the prescription price represents 
operating costs, such as heat, light, rent, salaries, 
computers, professional counseling and other overhead expenses.
    Florida pharmacies pay in excess of $1.3 billion in taxes 
to the State of Florida and perhaps a significant amount to the 
Federal Government in taxes and fees. Many of our members are 
reporting a flattening of their business that can only be 
explained by suggesting a relationship between these unlicensed 
business entities serving foreign mail order facilities and a 
decline in patient encounters. We are concerned that if this 
trend continues then our State's pharmacy providers will have 
no choice but to begin limiting services or laying off staff. 
Staff reductions is not something that our economy can 
withstand during these difficult times. State and Federal 
budgets can ill afford to be faced with having to service the 
unemployed.
    There is evidence that consumers who choose to obtain 
medications from foreign sources could be waiving their rights 
to seek relief from bad health care providers or ineffective 
drugs. Many of the waivers signed by patients are very long and 
written in very fine print. Some of the worst, and most common, 
terms include requiring patients to agree to waive all damages 
for any reason, no liability if the drugs cause patient harm, 
no liability if the drugs seized at the border, no returns or 
refunds--ever, that the patient is seeking alternative advice 
from a physician and is not relying on the importer for health 
care consultations, waiving privacy and allowing the company to 
use patient health information, relieves the company of any 
duty to ask questions about patient's health, including other 
drugs being taken or other drug utilization review issues, 
gives company open-ended power of attorney to act on patient's 
behalf, that any claims against company must be filed only in 
the foreign country, and patient waives application of U.S. 
law, allow generic substitution at the company's choice, that 
drugs will not be delivered in child-protective packages, will 
waive all warranties about quality, legality, et cetera.
    Consumers, particularly our elderly here in Florida, may be 
making choices without understanding that they could be giving 
up significant rights in the event that something may go wrong. 
They would have nowhere to go and no one to turn to.
    There is no system in place that assures that product from 
foreign sources are manufactured, stored or shipped properly. 
Prescriptions shipped to Florida residents may be subject to 
extreme heat or cold. These temperature extremes may result in 
an ineffective or unusable product. The Food and Drug 
Administration has strict guidelines on the manufacturing of 
prescription drugs here in the United States. Pharmacists have 
come to rely on the integrity of the product that they 
purchase. There is evidence even within our own safety system 
of counterfeit or adulterated product finding their way into 
the domestic drug distribution system.
    Florida plans to implement programs that are designed to 
get tighter controls on drug product. Unfortunately, such 
programs will do little to slow the flow of possibly tainted 
drugs crossing our State line from foreign sources. At risk are 
our citizens taking life-maintaining prescription drugs that 
may or may not work. Patients taking ineffective prescription 
medication may find their conditions worsening and return to 
see their physician. Physicians might make a medical decision 
to increase a patient's dosage to dangerous levels thinking 
that the patient is not responding when it was the product that 
was not working. There is something that our society could not 
realize that something was wrong until after a catastrophic 
medical event were to occur. With so much discussion on 
homeland security could there be some risk to our citizens from 
prescription medications process through foreign sources and 
arriving here in Florida?
    In summary, pharmacists across Florida clearly understand 
the problems faced when citizens struggle to find ways to 
obtain their prescription medication. In a number of cases, 
these health care providers can work with patients to help them 
to find more cost-effective choices by working with their 
physicians. Studies have shown that the services provided by 
pharmacists significantly help to lower total health care costs 
and reduce hospitalizations. There are a number of suggested 
proposals that Congress could consider to assist the uninsured 
obtain pharmacy services here in the United States without 
having to rely on unlicensed activity.
    I would like to thank again the members for allowing me the 
opportunity to present today.
    [The prepared statement of Michael A. Jackson follows:]

  Prepared Statement of Michael A. Jackson, Executive Vice President, 
                      Florida Pharmacy Association

    UNEGULATED HEALTH CAE ACTIVITIES COULD COMPROMISE PATIENT SAFETY

    A business industry is being developed here in Florida that has no 
governmental oversight. This industry is inserting itself into the 
professional practice of pharmacy by serving as a drop off point for 
prescriptions. The Florida Pharmacy Association has learned through its 
members and in the media that storefront centers are opening for 
business with the intent on accepting prescriptions written by licensed 
prescribers. These prescriptions are then transmitted to a foreign 
source for processing and shipping directly to Florida residents.
    As a pharmacist, I see this as a significant public, health and 
safety risk. Patients who seek pharmacy services in this manner are 
presenting themselves to untrained, unqualified and unlicensed 
individuals.
    Not all prescriptions needed by patients are available through 
foreign sources. In those cases patients will have to seek services 
from their local pharmacy provider. It is not uncommon for patients to 
forget to disclose to their health care provider all of the 
prescriptions that they are taking. Knowing that many of these drugs 
are obtained through questionable sources there is a tendency to 
withhold critical medical information from the pharmacist. The 
dispensing pharmacist may be unable to recognize why dispensed 
medications are not working or worse may be unable to detect a possible 
life threatening drug interaction. The consumer could be subject to 
increased health risks resulting in illness, inability to work, 
impairment or a possible hospital admission.
    This business industry is not only unregulated but could be in 
violation of state law as evidenced in Florida Statutes 465.003 (13) 
and 465.015.

          ECONOMIC IMPACT OF THE FOREIGN ALTERNATIVE SOLUTION

    Allowing the continued importation of prescription drugs from 
foreign countries places Florida pharmacy providers at an unfair 
disadvantage. Florida pharmacies are clearly unable to purchase 
prescription drugs at the prices listed in media ads for foreign 
outlets. Many of you often receive mail from constituents asking the 
simple question: ``Why do my drugs costs so much? I cannot explain why 
prescription drugs are available at such a reduced price from other 
countries. The committee needs to know that 80 percent of the cost of 
the average domestic retail prescription price represents costs to the 
pharmacy over which we have absolutely no control. The remaining 20% of 
the prescription price represents operating costs, such as heat, light, 
rent, salaries, computers, professional counseling and other overhead 
expenses.
    Florida pharmacies pay in excess of $1.3 billion in taxes to the 
state of Florida and perhaps a significant amount to the Federal 
government in taxes and fees. Many of our members are reporting a 
flattening of their business that can only be explained by suggesting a 
relationship between these unlicensed business entities serving foreign 
mail order facilities and a decline in patient encounters. We are 
concerned that if this trend continues then our state's pharmacy 
providers will have no choice but to begin limiting services or laying 
off staff. Staff reductions is not something that our economy can 
withstand during these difficult times. State and federal budgets can 
ill afford to be faced with having to service the unemployed.

              CONSUMERS COULD BE SIGNING AWAY THEIR RIGHTS

    There is evidence that consumers who choose to obtain medications 
from foreign sources could be waiving their rights to seek relief from 
bad health care providers or ineffective drugs. Many of the waivers 
signed by patients are very long and written in very fine print. Some 
of the worst (and most common) terms include requiring patients to 
agree to:

 Waive all damages for any reason
 No liability if the drugs cause patient harm
 No liability if the drugs seized at the border
 No returns or refunds, ever
 That the patient is seeking alternative advice from a 
        physician and is not relying on the importer for health care 
        consultations
 Waive privacy--allow company to use patient health information
 Relieves company of any duty to ask questions about patient's 
        health (e.g., other drugs being taken or other DUR)
 Gives company open-ended power of attorney to act on patient's 
        behalf
 That any claims against company must be filed only in the 
        foreign country, and patient waives application of US law.
 Allow generic substitution at the company's choice
 That drugs will not be delivered in child-protective packages
 Waive all warranties about quality, legality, etc.
    Consumers particularly our elderly here in Florida may be making 
choices without understanding that they could be giving up significant 
rights in the event that something may go wrong. They would have 
nowhere to go and no one to turn to.

  COUNTERFEIT PRODUCT COULD FIND THEIR WAY INTO FLORIDA'S HEALTH CARE 
                                 SYSTEM

    There is no system in place that assures that product from foreign 
sources are manufactured, stored or shipped properly. Prescriptions 
shipped to Florida residents may be subject to extreme heat or cold. 
These temperature extremes may result in an ineffective or unusable 
product.
    The Food and Drug Administration has strict guidelines on the 
manufacturing of prescription drugs here in the United States. 
Pharmacists have come to rely on the integrity of the product that they 
purchase. There is evidence even within our own safety system of 
counterfeit or adulterated product finding their way into the domestic 
drug distribution system. Florida plans to implement programs that are 
designed to get tighter controls on drug product. Unfortunately such 
programs will do little to slow the flow of possibly tainted drugs 
crossing our state line from foreign sources. At risk are our citizens 
taking life maintaining prescription drugs that may or may not work. 
Patients taking ineffective prescription medication may find their 
conditions worsening and return to see their physician. Physicians 
might make a medical decision to increase a patient's dosage to 
dangerous levels thinking that the patient is not responding when it 
was the product that was not working. This is something that our 
society could not realize that something was wrong until after a 
catastrophic medical event was to occur.
    With so much discussion on homeland security could there be some 
risk to our citizens from prescription medications process through 
foreign sources arriving here in Florida?

                                SUMMARY

    Pharmacists across Florida understand the problems faced when 
citizens struggle to find ways to afford their prescription medication. 
In a number of cases these health care providers can work with patients 
to help them to find more cost effect choices by working with their 
physicians. Studies have shown that the services provided by 
pharmacists significantly help to lower total health care costs and 
reduce hospitalizations. There are a number of suggested proposals that 
congress could consider to assist the uninsured obtain pharmacy 
services here in the United States without having to rely on unlicensed 
activity.

    Mr. Greenwood. I thank you very much, sir, for your 
testimony.
    Mr. Ruiz.

                  TESTIMONY OF CARLOS A. RUIZ

    Mr. Ruiz. Mr. Chairman and members of the subcommittee, let 
me welcome you to Miami. I am Carlos A. Ruiz, director of 
Pharmacy for Navarro Discount Pharmacies based here in Miami. 
We operate 16 pharmacies throughout the Miami-Dade and Broward 
County areas. Last year, we filled over 1.7 million 
prescriptions and employed over 1,300 Floridians. We very much 
appreciate you holding this hearing on issues relating to 
imported prescription pharmaceuticals. In my statement today, I 
want to talk about the importance of patients having access to 
the local pharmacy and why reimportation can be dangerous for 
consumers. I also want to talk about programs that already 
exist in this country that help seniors with their medication 
purchases that do not require them to look across the border 
for help.
    When a patient arrives at their local community pharmacy, 
be it a chain pharmacy or an independent, they come into 
contact with one of the most accessible and trusted providers 
in the entire health care system. It is estimated that 95 
percent of Americans live within 5 miles of a retail community 
pharmacy. For almost 20 years, surveys show that pharmacists 
are among the most trusted health care professionals. Thus, the 
vast majority of Americans are never far from a highly trained 
health professional who can provide medications or advice on a 
wide range of health care issues. Convenient access to 
community pharmacies makes us a critical part of society's 
health care safety net.
    Prescription medications are the most widely used and cost-
effective health care interventions used by patients today. 
Modern prescription drugs have extended and improved the lives 
of millions of Americans and saved millions of dollars through 
shortened length of illnesses, increased productivity and 
reductions in hospitalization and medical procedures. Community 
pharmacy is proud of the role we have in assuring the safe and 
effective use of these therapies.
    Every day, our pharmacists see seniors struggling to afford 
their prescription medications. We get many questions from 
seniors about how they can buy their drugs from Canada and 
other countries where prescription drugs might be less 
expensive. It is true that the prices for drugs in Canada and 
other countries are less expensive than those in the United 
States. The comparisons are inevitable. We have also seen a 
drop off in business in some of our pharmacies because of the 
growing illegal reimportation trade going on, especially in the 
State of Florida where there is a large senior population. 
However, we discourage seniors from obtaining their drugs 
through these methods, because the drugs they receive might be 
counterfeit, of impure quality or simply not the drugs that 
they are supposed to be.
    Moreover, foreign-imported drugs do not have the important 
safety and quality checks that are built into the current U.S. 
community pharmacy-based distribution system. Seniors also do 
not receive face-to-face counseling or medication management 
from pharmacists by purchasing drugs from these international 
schemes, potentially jeopardizing their life and health.
    There are other legitimate ways for seniors to obtain 
medications without having to subject themselves to these 
potential safety and quality problems, and I am here today to 
discuss these approaches. I can offer many anecdotes to the 
committee of patients that come into our pharmacies who cannot 
afford their medications. Some of these stories are 
heartbreaking. What can pharmacies do to help these seniors 
obtain their prescription drugs?
    First of all, our pharmacists work with patients and their 
doctors to try to maximize the use of lower-cost generics when 
they are available on the market. The savings from using 
generics are unmistakable. At Navarro, the average brand name 
prescription is about $65, while the average generic 
prescription is $16. That is a difference of close to 400 
percent. Obviously, if a generic substitute is not available, 
we will try and work with the doctor to see if the patient can, 
in fact, take a generic version of another drug or a less 
expensive therapeutically equivalent branded drug.
    With billions of dollars in brand name drugs coming off 
patent over the next few years, we believe that it is critical 
that seniors have incentives to use generics. We will also try 
to help patients use a less expensive over the counter 
medication if they cannot afford their prescription drugs. 
These OTC medications may not work as well as the prescription 
versions, but the choice for patients sometimes comes down to 
taking that--it comes down to taking something that may not 
work as well or not taking anything at all.
    Second, many of Navarro's pharmacies also offer discounts 
to senior citizens on their prescription drug purchases. 
Navarro is a deep discount pharmacy. Most pharmacies in general 
offer discounts of about 10 percent, but each pharmacy has its 
own policy on discounting their prices to seniors. Some 
pharmacies have their own arrangements with other groups and 
entities to offer prescription discounts. For example, we work 
with a group called Liga Contra el Cancer to offer prescription 
discounts to cancer patients who cannot afford their 
medications. We also work with church organizations, such as 
St. Vincent de Paul, to assist them in providing low-income or 
indigent patients with needed medications they cannot buy.
    Consumers already reap the benefits of the highly 
competitive retail pharmacy marketplace. We are a fiercely 
competitive industry, as evidenced by our 2 percent net profit 
margins. If you do not like the price at one pharmacy, you can 
go to another. Many pharmacies will match their competitors' 
prices. And, yes, retail pharmacy prices do vary store to 
store, reflecting differences in the cost of doing business, 
loss leaders, and other factors. The fact is consumers can and 
should shop around for the most favorable prices for their 
prescriptions. You should know that pharmacies do not have 
much, if any, margin on prescription drug business. Yes, costs 
of drugs are high, but that is primarily due to the high costs 
of buying prescription drug products from the manufacturers.
    Third, we can help the poorest seniors access the Patient 
Assistance Programs that pharmaceutical manufacturers have 
established. Clearly, these programs provide a short-term 
benefit to some low-income seniors, but they are not an 
adequate solution or appropriate substitute for meaningful, 
long-term prescription drug coverage. Almost all pharmaceutical 
manufacturers have established assistance programs that provide 
free prescription drugs to patients, including senior citizens, 
who do not have the resources to obtain their medications.
    These programs usually require that the patients' 
physicians certify to the manufacturer that the patient does 
not have the resources to obtain their prescriptions. Many low-
income seniors forgo their medications because they do not have 
the resources to purchase them but remain unaware that such 
programs exist. The Pharmaceutical Research and Manufacturers 
Association, also known as PhRMA, has a web site describing 
these manufacturer-based programs, which can be found at 
www.phrma.org. Eligibility standards and benefits vary among 
manufacturers. Also, the complex enrollment forms can make 
accessing these programs challenging. Several States, however, 
recognizing the positive impact that these programs might have 
on helping seniors obtain prescriptions, have taken action to 
educate them about these programs and simplify the enrollment 
process.
    A relatively new program, called Together Rx, offers 
significant discounts to low-income seniors on the purchase of 
their medications. Under this program, manufacturers and 
pharmacies have joined forces to offer seniors discounts of up 
to 40 percent on almost 150 popular brand name prescription 
medications. At Navarro, we have gone a step further and offer 
discounts on generic medications as well. These prices are as 
good in many cases as the prices that seniors would pay for 
drugs from Canadian sources. These discounts are passed along 
to seniors at the pharmacy counter at the time of purchase. 
Over half a million seniors have enrolled in the Together Rx 
program since its inception, saving $3.2 million for seniors 
each week, or about $32 million to date.
    Other manufacturers have developed programs for low-income 
seniors that only require that they pay a flat fee for their 
prescription drugs. For example, under the Lilly Answers 
program, low-income seniors only pay $15 for a 30-day supply of 
most of the Lilly outpatient brand name drugs. Pfizer has a 
similar program, charging $12 for a 1-month supply of many of 
their outpatient medications. Seniors can find more information 
by clicking on www.togetherrx.com. Navarro participates in this 
program, and we view this as a model for a potential Medicare 
drug benefit for seniors.
    Some States have developed programs that help seniors 
better access these programs as a partial solution to helping 
them obtain their needed medications. Here in Florida we have 
the Silver Saver Program, which provides $160 a month in 
prescription drug benefits to about 58,000 elderly Floridians 
who are Medicare eligible and have family incomes between 88 to 
120 percent of the Federal poverty levels. Silver Saver does 
not have an enrollment fee, membership fees or any other 
monthly fees. There is only a small co-payment system: $2 for 
generic drugs, $5 for drugs on the State's preferred drug list 
and $15 for those drugs not on the preferred list. The Silver 
Saver benefits could cover the cost for up to as many as nine 
prescription drugs a month.
    In summary, let me once again say that Navarro Discount 
Pharmacies and its pharmacists are sympathetic to the plight of 
seniors who are trying to afford their medications. We do not 
think that obtaining drugs from international sources is safe 
or reliable, and we caution our seniors against it. Moreover, 
there are already a number of programs available to seniors 
that will help them obtain their prescription drugs at more 
affordable prices. We again thank you for holding this hearing, 
and I look forward to any questions you have.
    [The prepared statement of Carlos A. Ruiz follows:]

  Prepared Statement of Carlos A. Ruiz, Director of Pharmacy, Navarro 
                          Discount Pharmacies

    Mr. Chairman and Members of the Subcommittee. Let me welcome you to 
Miami. I am Carlos A. Ruiz, Director of Pharmacy for Navarro Discount 
Pharmacies, based here in Miami. We operate 16 pharmacies throughout 
the Miami-Dade and Broward county areas. Last year, we filled over 1.7 
million prescriptions and we employ over 1,300 Floridians.
    We very much appreciate you holding this hearing on issues relating 
to imported prescription pharmaceuticals. In my statement today, I want 
to talk about the importance of patients having access to the local 
pharmacy, and why reimportation can be dangerous for consumers. I also 
want to talk about programs that already exist in this country that 
help seniors with their medication purchases that do not require them 
to look across the border for help.
    When a patient arrives at their local community pharmacy, be it a 
chain pharmacy or an independent, they come into contact with one of 
the most accessible and trusted providers in the entire health care 
system. It is estimated that 95 percent of Americans live within five 
miles of a retail community pharmacy. For almost 20 years, surveys show 
that pharmacists are among the most trusted health care professionals.
    Thus, the vast majority of Americans are never far from a highly 
trained health professional who can provide medications or advice on a 
wide range of health care issues. Convenient access to community 
pharmacies makes us a critical part of society's health care safety 
net.
    Prescription medications are the most widely used and cost-
effective health care interventions used by patients today. Modern 
prescription drugs have extended and improved the lives of millions of 
Americans and saved millions of dollars through shortened length of 
illnesses, increased productivity, and reductions in hospitalization 
and medical procedures. Community pharmacy is proud of the role we have 
in assuring the safe and effective use of these therapies.
    Every day, our pharmacists see seniors struggling to afford their 
prescription medications. We get many questions from seniors about how 
they can buy their drugs from Canada and other countries where 
prescription drugs might be less expensive. It is true that the prices 
for drugs in Canada and other countries are less expensive than those 
in the United States. These comparisons are inevitable. We have also 
seen a drop off in business in some of our pharmacies because of the 
growing illegal reimportation trade going on, especially in the state 
of Florida where there is a large senior population. However, we 
discourage seniors from obtaining their drugs through these methods 
because the drugs they receive might be counterfeit, of impure quality, 
or simply not the drugs that they are supposed to be.
    Moreover, foreign-imported drugs do not have the important safety 
and quality checks that are built into the current U.S. community-
pharmacy based distribution system. Seniors also do not receive face to 
face counseling or medication management from pharmacists by purchasing 
drugs from these international schemes, potentially jeopardizing their 
life and health.
    There are other legitimate ways for seniors to obtain medications 
without having to subject themselves to these potential safety and 
quality problems, and I am here today to discuss these approaches. I 
can offer many anecdotes to the Committee of patients that come into 
our pharmacies who cannot afford their medications. Some of these 
stories are heartbreaking. What can pharmacies do to help these seniors 
obtain their prescription drugs?
    Encourage Generic Use: First, our pharmacists work with patients 
and their doctors to try to maximize the use of lower-cost generics 
when they are available on the market. The savings from using generics 
are unmistakable. At Navarro, the average brand name prescription price 
is about $65, while the average generic prescription price is about 
$16, a difference of close to 400 percent.
    Obviously, if a generic substitute is not available, we will try 
and work with the doctor to see if the patient can, in fact, take a 
generic version of another drug or a less expensive therapeutically 
equivalent branded drug. With billions of dollars in brand name drugs 
coming off patent over the next few years, we believe that it is 
critical that seniors have incentives to use generics. We will also try 
to help patients use a less expensive over the counter medication if 
they cannot afford their prescription drugs. These OTCs may not work as 
well as the prescription versions, but the choice for patients 
sometimes comes down to taking something that may not work as well, or 
nothing at all.
    Senior Citizen Discounts: Second, many of Navarro's pharmacies also 
offer discounts to senior citizens on their prescription drug 
purchases. Navarro is a deep discount pharmacy. Most pharmacies in 
general offer discounts of about 10 percent, but each pharmacy has its 
own policy on discounting their prices for seniors. Some pharmacies 
have their own arrangements with other groups and entities to offer 
prescription discounts. For example, we work with a group called ``Liga 
Contra el Cancer'' to offer prescription discounts to cancer patients 
who cannot afford their medications. We also work with church 
organizations, such as St. Vincent de Paul, to assist them in providing 
low-income or indigent patients with needed medications they cannot 
buy.
    Consumers already reap the benefits of the highly-competitive 
retail pharmacy marketplace. We are a fiercely competitive industry, as 
evidenced by our 2 percent net profit margins. If you do not like the 
price at one pharmacy, you can go to another. Many pharmacies will 
match their competitors' prices. And yes, retail pharmacy prices do 
vary store to store, reflecting differences in the cost of doing 
business, loss leaders, and other factors. The fact is, consumers can 
and should shop around for the most favorable prices for their 
prescriptions. You should know that pharmacies do not have much, if 
any, margin in the prescription drug business. Yes, the costs of drugs 
are high, but that is primarily due to the high costs of buying 
prescription drug products from the manufacturers.
    Manufacturer Patient Assistance Programs: Third, we can help the 
poorest seniors access the patient assistance programs that 
pharmaceutical manufacturers have established. Clearly, these programs 
provide a short-term benefit to some low-income seniors, but they are 
not an adequate solution or appropriate substitute for meaningful, 
long-term prescription drug coverage. Almost all pharmaceutical 
manufacturers have established assistance programs that provide free 
prescription drugs to patients, including senior citizens, who do not 
have the resources to obtain their medications.
    These programs usually require that the patient's physician certify 
to the manufacturer that the patient does not have the resources to 
obtain their prescriptions. Many low-income seniors forgo taking their 
medications because they do not have the resources to purchase them, 
but remain unaware that such programs exist. The Pharmaceutical 
Research and Manufacturers Association (PhRMA) has a website, 
describing these manufacturer-based programs, which can be found at 
www.
phrma.org. Eligibility standards and benefits vary among manufacturers. 
Also, the complex enrollment forms can make accessing these programs 
challenging. Several states, however, recognizing the positive impact 
that these programs might have on helping seniors obtain prescriptions, 
have taken action to educate them about these programs and simplify the 
enrollment process.
    Manufacturer-Pharmacy Discount Programs: A relatively new program, 
called Together Rx, offers significant discounts to low-income seniors 
on the purchase of their medications. Under this program, manufacturers 
and pharmacies have joined forces to offer seniors discounts of up to 
40 percent on almost 150 popular brand name prescription medications. 
At Navarro, we have gone a step further and offer discounts on generic 
medications as well. These prices are as good in many cases as the 
prices that seniors would pay for drugs from Canadian sources. These 
discounts are passed along to seniors at the pharmacy counter. Over 
half million seniors have enrolled in the Together Rx program since its 
inception, saving $3.2 million for seniors each week, or about $32 
million to date.
    Other manufacturers have developed programs for low-income seniors 
that only require that they pay a flat fee for their prescription 
drugs. For example, under the Lilly Answers program, low-income seniors 
only pay $15 for a 30-day supply of most Lilly outpatient brand name 
drugs. Pfizer has a similar program, charging $12 for a one-month 
supply of many of their outpatient medications. Seniors can find more 
information by clicking on www.togetherrx.com. Navarro participates in 
this program and we view this as a model for a potential Medicare drug 
benefit for seniors.
    State-Based Assistance Programs: Some states have developed 
programs that help seniors better access these programs as a partial 
solution to helping them obtain their needed medications. Here in 
Florida we have the ``Silver Saver Program,'' which provides $160 a 
month in prescription drug benefits to about 58,000 elderly Floridians 
who are Medicare eligible and have family incomes between 88-120 
percent of the federal poverty level (between $7,797-$10,632). Silver 
Saver does not have an enrollment fee, membership fees or any other 
monthly fees. There is only a small co-payment system: $2 for generic 
drugs, $5 for drugs on the state's preferred drug list and $15 for 
those drugs not on the preferred list. The Silver Saver benefits could 
cover the cost for up to as many as nine prescription drugs a month.

                               CONCLUSION

    In summary, let me once again say that Navarro Discount Pharmacies 
and its pharmacists are sympathetic to the plight of seniors who are 
trying to afford their medications. We do not think that obtaining 
drugs from international sources is safe or reliable, and we caution 
seniors against it. Moreover, there are already a number of programs 
available to seniors that will help them obtain their prescription 
drugs at more affordable prices. We again thank you for holding this 
hearing, and I look forward to your questions.

    Mr. Greenwood. Thank you, Mr. Ruiz.
    Mr. McEwan.

                 TESTIMONY OF ROBERT N. McEWAN

    Mr. McEwan. Thank you, Mr. Chairman, and thank you for 
inviting me today to speak before your committee. I would step 
back from the written testimony that I provided because much of 
it has been covered by today's discussions and talk to you 
about the programs that are there for the asking provided that 
you have someone that is called a patient advocate. I think 
that for the examples of the patients that were here today, if 
they had had an active patient advocate, all but one of the 
drugs in the programs of the ones they described are available 
through pharmaceutical Patient Assistance Programs.
    Let me step back just a little bit to tell you that from 
the beginning I have been working in science and medicine and 
health care for my entire career now. And the one thing that 
flows through that entire career path is the one thing they 
teach in medical school, and that is first do no harm. And I 
think that it is always put the patient first, and it is shared 
by physicians, it is shared by pharmaceutical industry, it is 
shared by pharmacists and it is shared by health care advocates 
throughout the country. And the one thing that happens as a 
consequence of not being able to get help is just like water 
here in Florida can do a lot of damage in a short period of 
time, it finds the path of least resistance. And the solutions 
for these patients that cannot afford their medications by the 
things that you are hearing about today--Internet sales and 
black markets and so forth--are all finding the path of least 
resistance.
    But truly there are solutions out there that are broad in 
scope that will cover just about every example of every 
patient. And I say that because I started out from the 
situation in a transplant center here in the United States that 
basically recognized that there was a black market going on 
between patients. I mean here we had patients who were changed 
from drug A to drug B and they basically had drugs that were 
not expired, that were still seemingly active, passed from 
patient to patient as a means of trying to help those patients 
that couldn't afford their drugs. And I said even though on the 
face of it that might have seemed like a safe practice, it 
wasn't. Somebody had to take ownership of the situation and 
say, ``Enough. We have to do this legally, we need to do this 
right.''
    I mean when a patient's drugs were passed from patient to 
patient, for example, there was never any discussion of whether 
they were in the trunk of your car when you drove through the 
desert and the heat in your trunk reached 1000 degrees and 
inactivated all your drugs, and that is the reason why they 
didn't work for you, and that is why your doctor was now 
switching you to something else. You may have just passed the 
problem off to someone else. So by owning the problem and 
becoming an advocate for patients, I have actually left the 
transplant center scenario right now and now represent an 
entire State who is taking a centralized approach to advocacy 
for its patients.
    Basically, what you have heard described all day today is a 
patchwork quilt, if you will, of the solutions for 
pharmaceuticals to patients nationwide, and they all work at 
various levels. At the highest level, there is obviously 
Medicaid and pharmacy assistance programs that are available in 
some States. The need, though, for a more specific and 
generalized pharmaceutical assistance support nationally is 
clearly what is needed, because if the patients had a choice 
between going through the Internet, between going through a 
black market or any other mechanism which required paperwork, 
which asked questions that were very personal to them, they 
would obviously take them through a prescription plan that 
offered coverage like a Medicare prescription plan would.
    But they don't have that now, and so in its place we create 
this matrix. And the matrix starts at the highest level and 
says do you qualify here? No, you don't? Okay. Then you come to 
this level. Do you qualify here? Well, here, you are only on a 
few drugs, so maybe we can get you help for the drugs here best 
through just having you get a prescription card, like Together 
Rx or Lilly's Answer or something like that. But each step of 
the process is carefully triaged by someone called a patient 
advocate, and we decide with the patient whether that is going 
to be their solution.
    Now, if you take our State, for example, we have gone from 
having only 2,000 patients helped by our program to over 20,000 
in 2 years, and we are enrolling patients at a rate of just 
under 1,000 a month. And, basically, these patients when they 
come in are getting help going through this triage. We work on 
behalf of the physicians, because we want them to get the 
medicine to the patients. And in fact after 2 years of 
operation, we did a little study on our patients, and we said 
of these patients who have received their drugs from the 
pharmaceutical Patient Assistance Programs for at least 180 
days, what was the effect on their health care, their 
subsequent health care? And we found that 52 percent of the 
patients had had decreased hospitalizations; 62 percent of the 
patients had had decreased emergency room visits. And we then 
were able to document improvement in blood pressure, 
improvement in blood sugar and a lot of the diagnostic 
parameters or clinical parameters that a physician would do to 
say, yes, these medications are working.
    And exactly what we would have predicted is what we got, 
that in fact where we are bringing in $1 million a month to our 
program for our patients, which they receive free without any 
dispense fee or anything else, the actual translation to our 
State is roughly--well, we are bringing in $1 million a month, 
it is roughly 6 to 7 times that amount in savings to the health 
care system through uncompensated care, through patients that 
don't show up with--aren't admitted with unscheduled 
hospitalizations. Emergency rooms in urban areas, for example, 
are used as primary care centers, and the emergency rooms are 
flooded with these patients that basically are in there for 
their primary care because they are not properly medicated. We 
can keep them out of those emergency rooms, we can keep them 
out of those hospitals, all much more expensive options if they 
don't get their medications.
    So what I would tell you about is the fact that in the 
pharmaceutical industry they provide----
    Mr. Greenwood. I am going to ask you to sum up in 1 minute, 
please, if you would.
    Mr. McEwan. Basically, $2.3 billion worth of drugs reached 
5.5 million patients, by their own statistics. And the take-
home message is this: That to the people who told me not to 
start MEDBANK because the minute you were successful the 
pharmaceutical industry would pull the cord on it and do away 
with it because they would see it eroding their profits, I 
don't see that happening. I see companies staying on board, I 
see companies facilitating my success every day at reaching 
patients. And I think central to the whole idea of being 
successful in the patient environment is having a patient 
advocate that can help anybody of any age through any 
circumstance triage the system.
    [The prepared statement of Robert N. McEwan follows:]

   Prepared Statement of Robert N. McEwan, Chief Executive Officer, 
                       MEDBANK of Maryland, Inc.

    For eighteen years I worked as a scientist at the bench in labs in 
government, in academia, and in the pharmaceutical industry at the 
Upjohn Company. The years I spent at Upjohn were in a state-of-the-art 
biotechnology research division that did cutting-edge research in 
molecular and cellular biology. One of the things that was gratifying 
to me as I worked at the bench was knowing that the company, indeed the 
whole industry, did its best to make medications available to those who 
could not afford them. They did so through what they called Patient 
Assistance Programs (PAP). What I did not know back then was that at 
some point in the future, I would become very intimately engaged with 
these programs.
    I left research and went into marketing and sales in Upjohn and it 
was there that I saw these Patient Assistance Programs in action, 
first-hand. I emphasized to all the community physicians I called upon 
that free prescription medicines were available to patients who could 
not afford them. I would often see the stock bottles sent by various 
pharmaceutical companies including my own, on the physicians' shelves, 
just waiting to be given to the patients who needed those medicines. 
Today, the pharmaceutical industry's Patient Assistance Programs are 
more sophisticated, and continue to be there for patients in need. The 
programs are designed for patients without prescription drug coverage 
and annual incomes below 200% of the Federal Poverty Level or roughly 
$18,000.
    As my career in health care continued I found myself at one of our 
country's leading hospitals running its transplant center. Again I 
learned first hand what it meant for individuals to go without valuable 
medicines when I saw patients die. Some of the patients were ashamed 
that they couldn't afford the medicines they were prescribed, but today 
I am here in Florida to let Florida residents know that help is 
available for those in need.
    Patient Assistance Programs are running strong. In the last year 
alone, the research-based pharmaceutical industry gave out over $2.3 
Billion worth of medicines to patients who could not afford them, 
helping over 5.5 million patients. This translated to an estimated 
223,000 Floridians receiving free medicines in just 2002. By anyone's 
standards that is great charity.
    So why are the pharmaceutical companies continually attacked when 
they are doing so much good for American patients and providing so much 
to Americans with little means? Because the crowd of people who need 
assistance is growing faster. The need is being driven by the huge 
number of ``baby boomers'' that are approaching or are in their 60's 
and simply due to the incredible advances new medicines deliver. There 
was a time when patients who were sick were relegated to missing time 
from work, or being hospitalized, or maybe even worse. Today new 
medicines have the ability to keep people of all ages active at work, 
at home and out of the hospital. So clearly, demand for medicine has 
grown over the last twenty years because many new prescription 
medicines have delivered marked improvements to patient health.
    For Florida residents in need of medicines, there are 136 Patient 
Assistance Programs and over 10 discount drug cards alone sponsored by 
the research-based pharmaceutical industry today. And, we are 
constantly looking for new and better ways to get medicines to 
patients. A Patient Assistance Program sponsored by the generic 
companies could provide additional medicines to patients. Currently, 
these programs are only available from the brand name companies.
    For Florida residents without drug coverage at roughly an annual 
income of $18,000 or less, PAP programs are a solution to obtaining the 
medicines they need. In fact, there is now a new on-line database that 
Florida residents can take advantage of to access user friendly 
information about more than 1,400 medicines offered free through 
patient assistance programs. The on-line database is sponsored by the 
Pharmaceutical Research and Manufacturers of America (PhRMA). Florida 
residents who need help in obtaining medicines can log on to 
www.helpingpatients.org, fill out an online form and receive a list of 
programs for which they may qualify. For those without access to the 
Internet, they can call 1-800-762-4636 to obtain a copy of the 
directory of patient assistance programs.
    Additionally, for Medicare beneficiaries living in Florida of 
slightly more means say $30,000 for an individual or $40,000 for a 
married couple, a solution can be found once again within the research-
based pharmaceutical industry in the form of Seniors Savings Card 
programs like Together Rx. Together Rx is available free of charge with 
an easy sign-up process and makes more that 150 medicines available to 
an enrollee at discounts from 25 to 40 percent. This program has 
already resulted in $36.7 million in savings for cardholders, and now 
is providing discounts to over 600,000 beneficiaries across the 
country. Similar programs, such as the Pfizer Share Card and the 
LillyAnswers Card provide 30-day supplies of medication for a $12 or 
$15 fee for individuals with an annual income below $18,000, or $24,000 
for a couple.
    The options don't end there for those who that cannot afford 
medications. A skillful shopper can find within the same city the most 
expensive place to buy their medications and the cheapest. In fact, a 
study conducted by the Florida Council on Aging found that retail 
prescription drug prices vary as much as 683 percent for certain 
medicines from pharmacy to pharmacy across the State of Florida. The 
difference in shopping around for the best price for a particular 
medicine can save consumers real money. Buying medicines isn't really 
any different than buying groceries so it is important to remember that 
sometimes it helps to shop around a bit.
    In Florida specifically, there are helpful statewide programs like 
the Florida MEDS-AD program and the Silver Saver program which provide 
savings and safety nets directed at the elderly and the disabled in 
Florida. Florida's Silver Saver program, named after retiring Senator 
Ron Silver of North Miami, serves about 58,000 elderly Floridians who 
are Medicare eligible and have family incomes between 88 and 120 
percent of the Federal poverty level ($7,797-$10,362 a year). It does 
not have an enrollment fee, membership fee, or any other monthly fee 
and has only a small co-payment, between $2 and $15 per prescription 
and provides $160 a month in prescription drug benefits for those 
eligible.
    Mr. Chairman, Florida residents are looking for solutions to their 
medical problems. Many of those solutions can be found in the programs 
established by the research-based pharmaceutical industry. These 
solutions are very cost-effective when compared to other options such 
as hospitalization or surgery. And, these solutions are also much more 
preferable for Florida residents than subjecting themselves to 
medicines of questionable origin when looking for the ``quick fix'' on 
the Internet or on trips to Canada or Mexico.
    All of these programs will help Florida residents; but, the most 
significant help will come in the form of a meaningful Medicare 
Prescription Drug Benefit passed by Congress. And, one that keeps 
investment in research & development robust and protects the hope for 
future cures. I understand that the President has pledged 400 billion 
dollars to provide this benefit. Now is the time for Congress to act on 
this and do right by Florida's seniors.
    Florida patients have been very outspoken about the life-saving 
value of the Patient Assistance Programs. Patients like Terence Stevens 
in Lakeland, or Steve Kersker in Tampa, who are just two of the more 
than 232,000 Floridians who are grateful to the pharmaceutical industry 
for these programs. But these numbers don't reflect the human side of 
these programs. Just the other day, a woman called to tell me that her 
husband had been averaging 2-3 trips per month in an ambulance to save 
his life because of an untreated heart condition--untreated because 
they could not afford his medications. Today that same man has not been 
near a hospital in months, and it is all because of the drugs he takes 
(not generic by the way) but new, cutting edge medicines given to him 
free of charge by the companies that discovered them.
    I'll end this testimony by saying that my father, who died at 54, 
would have been here today if he had today's advanced medicines. My 
mother who died of emphysema would have known relief longer into her 
years if she had benefited from today's medications.
    I thank Chairman Greenwood and Congressman Deutsch for the 
opportunity to speak before the subcommittee.

    Mr. Greenwood. Thank you very much. We have precisely 15 
minutes left for this hearing, so each of us will take 5 
minutes, and we will keep it to a tight schedule here. And I 
thank each of you. I thank each of you for your testimony.
    Mr. McEwan, let me understand since you departed from your 
written testimony, just give us a quick and dirty on what 
MEDBANK is, who pays for it and how it came to be.
    Mr. McEwan. Right. We started out 3 years ago with a small 
grant from the Maryland Health Care Foundation to cover a city 
and a county.
    Mr. Greenwood. That is a private foundation?
    Mr. McEwan. Yes. And MEDBANK of Maryland is a 501(c)(3), as 
is our MEDBANK Pharmacy now is a non-profit pharmacy. And, 
basically, in its second year of existence we were able to 
convince our legislature that we were going to be able to do a 
significant good within our State if they wold fund the 
infrastructure for these patient advocates Statewide. We have 
satellites all over the State of Maryland as well as a 
centralized data base that----
    Mr. Greenwood. So the State of Maryland is now covering 
your costs?
    Mr. McEwan. That is right.
    Mr. Greenwood. And what are those costs?
    Mr. McEwan. The cost of the infrastructure for the entire 
State is $2 million a year.
    Mr. Greenwood. And what do you figure per client benefit or 
for senior benefit or some per capita or per prescription 
assistance? How does the cost break out that way?
    Mr. McEwan. The cost is somewhere between $75 and $80 per 
patient.
    Mr. Greenwood. Per patient, okay. And that compares with 
how much money that you are saving the patient directly versus 
some of the indirect costs you talked about.
    Mr. McEwan. Right. The savings to the patient--our average 
patient is 60 years old, our average patient is on 7 
medications, and our average patient is of an income of $1,300 
a month. So you take all these things together and you are 
basically saving the patient thousands of dollars per year. And 
this is a per year cost.
    Mr. Greenwood. Let me describe the current situation of two 
south Florida seniors. I would like you to tell me whether 
these individuals qualify for any of the plans that the 
pharmaceutical companies sponsor and whether they can get their 
medications free or at a greatly reduced cost.
    The first senior receives under $10,000 a year in Social 
Security. He is taking the following medications: Accu-Chek, 
Urabid, Glucotrol, Allopurinol, Warfarin, Dytoxin, Toprol, 
Glucophage, Zocor, Quinine Sulfate, Oxycodeine and Flonase. And 
I assume that that represents Mr. Sweed's circumstances.
    The second I believe describes Ms. Coplan's situation. She 
has an annual income of approximately $23,000. She is taking 
the following medications: Singulair, Fosamax, Verapamil, 
Zanax, Atrian and Tramadol. And I believe you have done a bit 
of an analysis of how you think they could benefit from a 
patient advocate, if you will, and gaining access to these 
other programs.
    Mr. McEwan. Okay. In my program, if I were looking at the 
first patient that you mentioned, essentially that patient 
would qualify immediately.
    Mr. Greenwood. Make sure you pull your microphone up close 
to you and speak directly into it, because there is particular 
interest in what you have to say now.
    Mr. McEwan. From the first patient you asked about, Accu-
Chek is the monitor that he uses, and the question there is 
whether strips are available I think is usually the question. 
We haven't found any organization or company yet that provides 
these strips free, so the dollar a day for those strips to be 
monitored is probably an out-of-pocket cost that we can't get 
around. Of all the remaining drugs that that patient, Mr. 
Sweed, is taking, the only one that I could not find a program 
for was Aloprinol, and I am sure that if I were to get with a 
physician, I could probably find a substitute. And this is an 
important thing to realize. Through web sites like 
helpingpatients.org, the new PhRMA web site, the patient can 
put this information in themselves. They can put in their 
income, their age and so forth, and it will tell them if there 
is a program for them.
    The other thing is is that we use--obviously, we use 
technology as well, and Volunteers in Health Care has a web 
site called Rx Assist that I can go in there and I say, okay, 
the patient doesn't have one of these drugs available through a 
PAP, so the class of drugs that that drug is in are there any 
other programs? So you pull up the class of drugs, and you will 
get 5 or 6 alternatives. So now you call this doctor and you 
say, ``Would any of these others work, and if so, would you 
give the prescription and dosage so that we can continue to get 
their medications free?'' This is very important because these 
drugs do come and go, and as the go, we need to find 
replacements for them. As sometimes they become in short 
supply, we need to find replacements for them. So we use 
technology, basically, to stay on top of this.
    We have within our web site, of our data base that we 
market to other States right now, Rx Bridge, a separate link to 
something called Brave Pages, which we update. It contains all 
the information in this book, for example, that tells you about 
every single company, what the requirements are, what the 
income limits are and so forth so that as a patient advocate is 
working they can get ready access to information. So that would 
take care of the first patient. The one drug would be singled 
out that would need further investigation.
    The second one, at a little bit higher income level, still 
qualifies for most PAP programs, I feel confident, although I 
have no way of saying that it qualifies for all of them just as 
a blanket statement. Every one of these programs' income limits 
are kept within that companies' rights, and, essentially, where 
it is advertised, we know immediately, where it is not, we 
don't. Of the drugs that that patient is taking, the only one 
which does not have a program currently is Zanex, and for that 
we could substitute, if the physician agrees, valium, which is 
available through a PAP with the Roche Laboratories.
    So there are choices and opportunities. It takes advocates 
that are smart about the whole process and understand the drugs 
well enough to be able to make these informed counsels.
    Mr. Greenwood. Okay. Thank you. I think you know Ms. 
Coplan, she is in the back, and she has been cupping her hand 
and listening intently, so if you could chat with her before 
you leave, I would appreciate it. And it seems to me that the 
service that you provide we in the Congress would do a heck of 
a lot of good if we could figure out how to make that kind of 
service available to everyone in this country, because no 
matter what we do with prescription drugs in terms of a benefit 
for Medicare, we are not going to cover first dollar for 
everybody, there just isn't that much money in the world. 
Patients are still going to need to be able to find assistance 
outside of the Medicare program to get the best value for their 
dollar.
    Mr. McEwan. That is an excellent point because in our 
program alone 56 percent of our patients are not Medicare.
    Mr. Greenwood. Right.
    Mr. McEwan. And they all get benefit.
    Mr. Greenwood. The gentleman from Florida for 5 minutes.
    Mr. Deutsch. Thank you, Mr. Chairman. And I would actually 
just follow up and completely agree with the last point you 
made. In a perfect scenario, which obviously most of us know in 
the human condition there are very few perfect scenarios, we 
will not--the bill we pass hopefully this session won't be 
implemented for 2 or 3 years at the absolute earliest; there 
will be a phase-in period. So real people are faced with these 
real problems today. And I think this panel's purpose really is 
to try to attempt to deal with some practical solutions that 
people have.
    One follow-up question, though, for Mr. McEwan. Could you 
mention that web site again and who the sponsor of the web site 
was?
    Mr. McEwan. There is a PhRMA web site now called 
helpingpatients.org., and that new web site allows you to put 
in the actual drug you are asking about, it allows you to put 
in your patient circumstance, and it will say, yes, there is a 
program for you, here is where you get more information.
    Mr. Deutsch. And as your experience been based upon your 
sort of expertise versus the web site, how good are they 
compared to you, the web site?
    Mr. McEwan. Their web site just started up, and what we 
provide beyond what they provide is that all of the forms for 
all of the pharmaceutical industry PAP applications are linked 
online on our data base so that they will be printed out with 
all the patient information and passed over to the physician 
for signature. This is what we recognized was the problem, that 
you are not just applying for one or two drugs on behalf of the 
patient, you are applying for 7 or 8 and so----
    Mr. Deutsch. I am going to move along because actually we 
are going to try to keep this 5-minute timeframe, because I 
know the chairman actually has a flight he is trying to catch.
    Mr. Hahn, in Mr. McEwan's written testimony, he made a 
remark, and I am quoting, ``A Patient Assistance Program 
sponsored by the generic companies could provide additional 
medicines to patients.'' You talked a little bit about it but 
if you could elaborate in terms of generic companies, do they 
have the resources to build these assistant programs or the 
benefits of assistant programs already reflected in generic 
drugs' cheaper prices?
    Mr. Hahn. Well, I know that at Andrx we have offered drugs 
to indigent patients free of charge. With respect to overall 
program, I don't think we have a specific program in place, but 
it is done as patients contact us in particular for specific 
drugs, and cardiovascular drugs would be one I am very familiar 
with. With respect to Altocor, I am not sure that we have 
implemented it yet, because we have only launched Altocor in 
August/September of last year. However, we have been in contact 
with an organization that represents, I believe, at least 60 
physicians in the New York area where we are talking about 
giving them Altocor free of charge to indigent patients.
    Mr. Deutsch. The public seems comfortable using generic 
drugs as a less expensive alternative to high-price branded 
pharmaceuticals. Can you explain how your technology gives the 
consumers the added value you mentioned in your testimony?
    Mr. Hahn. Yes. Administering a drug once a day, which is 
what our technology is designed to do, as opposed to giving a 
drug two, three or potentially four or more times a day, allows 
for enhanced compliance by the patient. And, obviously, 
compliance will lead to the end point you want, that you treat 
the disease state or achieve the required therapeutic end 
point, especially with the aging in the population where it has 
been mentioned by others patients are on multiple drug 
therapies. They have to remember do I take my pink in the 
morning and evening, my blue pill in the morning and afternoon 
or my yellow pill in the afternoon and evening? Once a day 
makes that a lot easier for them to do.
    Second, we potentially can enhance the efficacy and safety 
of the drug with our drug delivery technologies. The benefits 
are obvious there. And, third, as a result of our dealing with 
known and safe drugs, we can utilize a process within the new 
drug applications within the FDA that allows us to develop 
these products in a more timely and cost-effective manner, and 
therefore we can provide these savings that we achieve in the 
cost of developing these drugs and pass them on to the 
consumers.
    Mr. Deutsch. Let me jump to both people representing the 
actual pharmacies in Florida today, and I think you elaborated 
very well what you can do for individual patients coming up to 
you. If you can give us some--any additional insight in terms 
of the proliferation of the foreign pharmacies, for lack of a 
better word. I assume you have gone to the State--you heard 
testimony by Mr. Taylor earlier. In terms of your interaction 
with the State, I mean your position, I think you have stated, 
is that they are illegal at the present time. Are you trying to 
do something to force enforcement of action that the State 
could in fact take at the present time?
    Mr. Jackson. Yes, Congressman Deutsch. We have as an 
association visited with our State's regulatory board and have 
discussed this issue intently. Members of the board are pretty 
much in agreement that there is unlicensed, unregulated 
activity out there. If you ever had an opportunity to review 
and take a look at the regulations affecting the practice of 
professional pharmacy----
    Mr. Deutsch. Right.
    Mr. Jackson. [continuing] you will find that it is fairly 
extensive, and these entities are operating really in a void, 
in a vacuum.
    Mr. Deutsch. But, again, they are operating publicly, they 
are advertising publicly, I mean they are extensively 
advertising at the present time. I mean why they are existing?
    Mr. Jackson. Well, I think they are trying to serve a need.
    Mr. Deutsch. No, no. But I mean in terms of the regulatory 
side. If you are saying that from the regulatory side they 
should be shut down, why have they not been shut down?
    Mr. Jackson. Well, Congressman, I really don't know. That 
is something our State regulatory initiatives are looking at 
right now. And they are communicating with us, letting us know 
what it is they are doing.
    Mr. Deutsch. Can I just follow up again, I mean both with 
you or Mr. Ruiz if you can. Is the sort of market price--
because, obviously, there are some consumers who are 
aggressively shopping. They are either calling you and going to 
you, going to Costco, looking at cards, really trying to get 
the best price, especially if it is a drug they are going to be 
taking continuously. I mean is the floor price now the Internet 
pharmacy price, the foreign pharmacy or your price? I mean 
where is the floor price? I mean is your competition literally 
now those entities in terms of the price that you have to 
charge or, as you said, in some cases you might be a better 
price?
    Mr. Ruiz. In all honestly, I don't think that we in retail 
pharmacy can provide the floor price. We cannot buy 
prescription drugs at the prices that either international site 
are selling at or Internet sites. Again, our primary concern is 
for our patients. I am going to talk as a pharmacist, I am not 
going to talk as an administrator. Patients come in every 
single day, 10 prescriptions, they have to take multiple drugs 
at different times. Sometimes they can't even afford the co-
payments. I mean we are not talking about actually the paying 
the out of pocket, I am talking about being able to pay----
    Mr. Deutsch. The $5 co-pay.
    Mr. Ruiz. [continuing] 10 drugs, $15, that is a $150 a 
month----
    Mr. Deutsch. Right.
    Mr. Ruiz. [continuing] for somebody who probably lives on a 
fixed income. Are we opposed to them getting low-cost 
medications? Absolutely not.
    Mr. Deutsch. Right.
    Mr. Ruiz. I mean what is the point to--and I would prefer 
that they get their medications even if it is somewhere instead 
of them not taking it at all. And, of course, the main concern 
is, well, if you are going to an international site, if you are 
going to the Internet, who is looking out for your best 
interest in terms of drug interactions----
    Mr. Deutsch. Let me try to jump in one last question. Back 
to Mr. McEwan. I think all of us are very impressed with the 
program that you have set up and I am going to at least check 
the site and play around with it a little bit. If that is an 
ancillary use, maybe even we will do some further oversight at 
your actual agency. Because at a practical level, it seems 
people can avail themselves of something today. But even if it 
exists, why--I mean is it just people aren't aware of it? I 
mean the access point in terms of so many people using Canadian 
drug--I mean how would you explain the phenomenon if this is 
all available. If the cards are available and the discount 
plans are available and all these options are available, why 
are--you had 20,000 people, great. We have got 10 million 
people doing it another way. I mean just the scale--I mean very 
few--I mean relatively very few people are accessing your 
system.
    Mr. McEwan. None of Florida's patients, for example, are 
able to access the Maryland system, because being paid for by 
Maryland it has to only have Maryland patients, but every State 
could have a MEDBANK, and some States do have MEDBANK 
equivalents. There are other States that have centralized 
patient advocate organizations that do what we do, and we do it 
to the extent of creating field guides for how to set it up, we 
have a data base that we market to other States, and we go over 
backwards to basically try to teach people how simple it is. 
But it does take some infrastructure, it does take some 
investment.
    Mr. Greenwood. The Chair thanks the gentleman. The 
gentleman from New York for 5 minutes.
    Mr. Engel. Thank you, Mr. Chairman, and I will be brief 
because I know time is of the essence. I just really have one 
question to sort of tie this together. Perhaps Mr. Jackson or 
Mr Ruiz or both could answer it.
    My concern, we have heard the other panels and obviously it 
is a very bad choice for consumers, for senior citizens who are 
finding it increasingly difficult to pay for skyrocketing 
prices of drugs. What about the pharmacies, though, that are 
playing by the rules? You know, you are playing by the rules, 
you are getting medications that are safe, and in essence you 
are being undercut by people buying these drugs from dubious 
places around the world. We don't know how safe they are and so 
on. What is happening from an economic perspective to 
pharmacies? Since you don't buy your drugs from foreign 
sources, at some point might there not be a point where you are 
not competitive, you may be forced down the line to go out and 
buy your drugs from foreign sources? Mr. Jackson, you said that 
pharmacists and pharmacies in Florida are being harmed by the 
walk-in international pharmacies. Perhaps we can start with 
you, and then perhaps Mr. Ruiz can tell us as well.
    Mr. Jackson. Okay. Thank you, Congressman Engel. Our 
members have reported to us that for some strange reason that 
their businesses are starting to flatten out, and they can't 
really point a finger as to what could be causing that. 
Usually, when a pharmacy loses business or has a flattening of 
business, they can get a feel for what is happening, and it 
could be a situation where a patient, for whatever reason, 
chooses to use another pharmacy provider because they have 
changed an insurance plan or it could be because of competitive 
pricing they elect to go to a different competitor. But you can 
track that because records from the dispensing pharmacy has 
transmitted to the new pharmacy, and so you can see where your 
business is going when those types of events occur.
    But under this type of scenario patients are just exiting 
or not coming back to the pharmacy because they have chosen an 
alternate provider, and that is difficult for a pharmacy to 
track. When a pharmacy begins to lose business in this way, 
then just like any business, they have to do things internally 
to try to compensate for that, such as reduction in services, 
lowering office hour times, cutting out prescription delivery 
services to patients that are unable to ambulate and many other 
things that they would have to do internally to try to meet 
their own operating expenses.
    Mr. Engel. Mr. Ruiz, anything to add?
    Mr. Ruiz. Yes. One of the things--certainly, any time that 
business decreases, and, again, you can track it by checking 
whether it is going to your competitors or not, pharmacists are 
in short supply. Pharmacists salaries are very competitive. It 
is difficult to retain pharmacists and be able to provide these 
services to our patients if we are not able to at least 
continue to make those minimal margins that we are making. It 
makes it pretty difficult to continue to operate. Obviously, 
the larger chains and possibly some of the independents that 
have been around for quite some time are not going to be 
impacted as much immediately, but at least as far as the 
independents, they cannot withstand those drops in businesses.
    Mr. Engel. You know, if you have an airline, for instance, 
that doesn't maintain its planes, of course it would be able to 
sell its tickets at a cheaper rate, and obviously that is what 
is happening from these walk-in international pharmacies, so it 
is certainly a major concern.
    In the interest of brevity, Mr. Chairman, I am going to 
stop here, and I thank you for giving me the opportunity to 
participate.
    Mr. Greenwood. The Chair thanks the gentleman. Thank yo to 
all of our witnesses. Thank you to all of the witnesses 
throughout the hearing. We thank the city of Aventura for its 
hospitality, thanks to the stenographer, to the staff on both 
sides of the aisle here, to all of you for coming, and thanks 
mostly to Congressman Deustch for his leadership in this issue, 
as well as in so many others. This hearing is adjourned.
    [Whereupon, at 1:40 p.m., the subcommittee was adjourned.]

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