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



 
   A SYSTEM OVERWHELMED: THE AVALANCHE OF IMPORTED, COUNTERFEIT, AND 
                     UNAPPROVED DRUGS INTO THE U.S.
=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 24, 2003

                               __________

                           Serial No. 108-29

                               __________

       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

                   Dan R. Brouillette, 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:
    Arias, Cesar, Drug Inspector Supervisor, Florida Department 
      of Health, Bureau of Statewide Pharmaceutical Services, 
      State of Florida...........................................    84
    Durant, Elizabeth G., Director of Trade Programs, Bureau of 
      Customs and Border Protection..............................    37
    Hubbard, William K., Associate Commissioner for Policy and 
      Planning, Food and Drug Administration.....................    18
    Jones, Gregg, Pharmaceutical Program Manager, Drug, Devices, 
      and Cosmetic Regulation, Bureau of Statewide Pharmaceutical 
      Services, State of Florida.................................    77
    Penezik, Robert M., Assistant Statewide Prosecutor, Office of 
      Statewide Prosecution, State of Florida....................    71
    Taylor John M., III, Associate Commissioner of Regulatory 
      Affairs, Food and Drug Administration......................    20
Additional material submitted for the record:
    Grealy, Mary R., President Healthcare Leadership Council, 
      prepared statement of......................................    97
    McClelland, Mark B., Commissioner, Food and Drugs, Department 
      of Health and Human Services, letter dated June 23, 2003, 
      to Hon. W.J. ``Billy'' Tauzin..............................    98

                                 (iii)




   A SYSTEM OVERWHELMED: THE AVALANCHE OF IMPORTED, COUNTERFEIT, AND 
                     UNAPPROVED DRUGS INTO THE U.S.

                              ----------                              


                         TUESDAY, JUNE 24, 2003

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2123, Rayburn House Office Building, James C. Greenwood 
(chairman) presiding.
    Members present: Representatives Greenwood, Stearns, Bass, 
Walden, Ferguson, Rogers, Deutsch, DeGette, Davis, Schakowsky, 
Rush, and Dingell (ex officio).
    Also present: Representatives Green and Stupak.
    Staff present: Alan Slobodin, majority counsel; Ray 
Shepherd, majority counsel; Arturo Silva, deputy communications 
director; Jill Latham, legislative clerk; David Nelson, 
minority counsel; and Chris Knauer, minority investigator.
    Mr. Greenwood. The meeting will come to order and welcome 
to our quests and our witnesses.
    The chairman recognizes himself for 5 minutes for an 
opening statement.
    More than 2 years ago, on June 7, 2001, I sat in this chair 
and heard the heartbreaking testimony from Reverend and Mrs. 
Rode of Athens, Georgia who tearfully described how their son 
accidentally overdosed on a mixture of drugs he had purchased 
over the Internet. The drugs purported to be legitimate, but 
their son died as a result of incorrectly mixing a combination 
of them.
    This terrible tragedy showed that when drugs are purchased 
over the Internet, patient care can be compromised where 
there's no interaction with a physician nor dispensing 
pharmacist aware of the patient's history who can prevent 
deadly drug interactions or unnecessary prescriptions.
    Over the last 5 years several factors, including the advent 
of Internet pharmacy and the globalization of the 
pharmaceutical market have led to a dramatic surge in drug 
imports, especially personal imports, that overwhelmed the FDA. 
These factors have made FDA's system of import controls less 
and less tenable.
    Two years ago at that same hearing FDA testified that 
approximately 2 million packages containing drugs were imported 
into the U.S. every year. The agency complained that it simply 
did not have enough staff to inspect those packages.
    In 2001, FDA could not tell the subcommittee what 
percentage of those packages contained legitimate versus 
counterfeit product. They could not determine the country of 
origin nor describe the conditions under which the drugs were 
manufactured. In short, FDA could tell us very little about the 
2 million packages of drugs that were being imported. Not much 
has changed since our hearing in 2001 other than the volume of 
drugs.
    And I'd ask the staff to please show slide number 11.
    According to a senior supervisory Customs inspector, the 
mail facility in Miami, Florida routinely receives about 30,000 
pharmaceutical shipments weekly offered from South America and 
Central America, Canada, Europe, the Bahamas and Mexico. 
Packages containing pharmaceutical products account for nearly 
one-third of the total volume of packages.
    I'd ask to please show slide 12.
    This enormous volume of drug packages on March 7, 2003 at 
the Miami International Mail Branch Facility, according to 
Customs almost all of these packages contain some form of 
pharmaceutical product.
    Given these numbers, Miami receives approximately 150,000 
packages containing pharmaceuticals weekly, 600,000 monthly and 
approximately 7 million packages containing drugs annually.
    And please show slide 13.
    According to data provided by Customs, every month 
approximately 5 million packages enter the commerce of the U.S. 
or 60 million packages annually. If the estimate from Miami is 
extrapolated nationally, 20 million packages containing 
pharmaceutical products are imported into the U.S. every year. 
This is an increase of over 1,000 percent in only 2 years.
    As this subcommittee has heard ad nauseam, drugs procured 
outside the United States regulatory system can be dangerous 
for numerous reasons. FDA acknowledges that it cannot monitor 
nor 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 subpotent or superpotent, expired drugs, 
contaminated drugs or drugs stored under unsafe conditions.
    At this subcommittee's June 7, 2001 hearing which 
highlighted the public health concerns that these drugs posed 
to the American people, the FDA proposed to the Department of 
Health and Human Services that it eliminate its personal use 
policy for mail imports allowing FDA and Customs to deny entry 
of all these illegal drugs into the U.S. and return them to 
senders. No action has been taken on this proposal. And this 
is, perhaps, understandable given the apparent split in public 
and political opinion on personal reimportation policy.
    Why are U.S. consumers playing Russian roulette with their 
medications by purchasing them over the Internet from unknown 
sources? The fact is that the skyrocketing prices of 
medications are increasingly out of the reach for too many of 
our seniors and nearly all those on fixed incomes.
    Some of the seniors who testified at our oversight hearing 
in Mr. Deutsch's district in March of this year stated that 
they often forego other essentials to purchase their necessary 
medications. In a country as wealthy as ours we have to do 
better than this.
    It is my sincere belief that the Medicare Reform bill that 
this committee passed last week will insure full access to and 
the affordability of pharmaceuticals. However, the fact remains 
that when consumers purchase drugs over the Internet for 
whatever reasons, they take a leap of faith with their health 
because there is no guarantee that the drugs they are 
purchasing are safe or effective.
    We're also concerned that FDA may be aggravating a 
deteriorating drug import problem with instances of poor 
judgment and ineffective policies. On October 21 of last year, 
FDA requested that Customs detain at least 1,233 packages of a 
knock-off Viagara imported into the U.S. through Miami, Florida 
which appeared to be violative of the Food, Drug and Cosmetic 
Act. On May 5, 2003 FDA knowingly authorized the release of the 
1,233 packages of a unapproved generic Viagara. On May 20 this 
year, FDA informed the public that it was ``taking steps to 
respond to irregularities related to its handling of a large 
shipment of unapproved Viagara.'' The committee is continuing 
to investigate that the problems identified in Miami, Florida 
represent widespread issues surrounding FDA's approach 
nationwide to preventing the dissemination of imported 
counterfeit or unapproved pharmaceuticals.
    Unfortunately, the problem of counterfeit drugs, drugs with 
no active ingredient and drugs stored in unsafe conditions 
rendering them useless is no longer restricted to the Internet. 
Counterfeit drugs and drugs of unknown origin are appearing 
with greater regularity at U.S. pharmacies and the FDA has 
shared with me an example of these counterfeit drugs.
    This is a container of Serostim. It's a drug, I think, used 
for treatment of AIDS and other cancer patients. You cannot 
tell these two packages apart. One is the legitimate product 
made by the Serono Corporation, the other is a counterfeit. And 
there is no way in God's earth you could tell these two 
products apart unless you assay them and look at the chemical 
contents. And when you do that, you find that the chemical 
contents are unreliable, at best.
    Counterfeit drugs of unknown origin are appearing with 
greater regularity at U.S. pharmacy. Recently we have seen 
counterfeit versions of Lipitor, Serostim, Procrit, Epogen and 
Combivir.
    At our second panel today we will hear that because of 
unscrupulous wholesalers, consumers in Florida cannot know if 
the pharmaceuticals they purchase are legitimate. However, with 
the vigorous law enforcement actions and new criminal penalties 
and tough regulations, the State of Florida is at the forefront 
of ensuring a safe and effective pharmaceutical supply.
    At the end of the day FDA is responsible to ensure that 
Americans have safe and effective supplies of drugs. Given the 
expediential increase in the volume of drugs being imported 
into the U.S., FDA's current approach must be substantially 
altered to address this new reality.
    First, FDA must procure real data on the type and volume of 
drugs being imported into the U.S.
    Further, FDA must also discern from where these drugs are 
being imported and whether they contain legitimate product or 
counterfeits or stored in unsafe conditions, or are subpotent 
or superpotent.
    FDA must also engage in aggressive enforcement actions 
aimed at the importers of bogus and harmful drugs.
    And last, FDA must predicate all of its current regulatory 
and enforcement action on a risk based assessment of threats to 
our drug supply. And I can think of fewer more important or 
challenging tasks.
    I would like to welcome our witnesses here this morning. 
The first panel includes Federal witnesses: Mr. William 
Hubbard, Associate Commissioner for Policy and Planning at the 
Food and Drug Administration; Mr. John Taylor, Associate 
Commissioner of Regulatory Affairs, Food and Drug 
Administration, and; Ms. Elizabeth Durant, Director of Trade 
Programs at the Bureau of Customs and Border Protection.
    Our second panel consists of witnesses from the State of 
Florida: Mr. Robert Penezik, Esquire, Assistant Statewide 
Prosecutor, State of Florida, Office of Statewide Prosecution 
South Florida Bureau; Dr. Greg Jones, Pharmaceutical Program 
Manager at the Drug, Devices, and Cosmetic Regulation, Bureau 
of Statewide Pharmaceutical Services, and; Dr. Cesar Arias, 
Drug Inspector Supervisor, Florida Department of Health, Bureau 
of Statewide Pharmaceutical Services.
    [The prepared statement of Hon. James C. Greenwood 
follows:]
 Prepared Statement of Hon. James C. Greenwood, Chairman, Subcommittee 
                    on Oversight and Investigations
    On June 7, 2001, I sat in this very chair and heard gut-wrenching 
testimony from Reverend and Mrs. Rode of Athens, Georgia, who painfully 
described how their son accidentally overdosed on a mixture of drugs he 
purchased over the Internet. The drugs purported to be legitimate, but 
their son died as a result of incorrectly mixing a combination of those 
drugs. This unfortunate tragedy shows that when drugs are purchased 
over the Internet, patient care can be compromised easily because there 
is no interaction with a physician or dispensing pharmacist who is 
aware of the patient's history and can prevent deadly drug interactions 
or unnecessary prescriptions.
    Over the last five years, several factors, including the advent of 
Internet pharmacies and the globalization of the pharmaceutical market, 
have led to a dramatic surge in drug imports (especially personal 
imports) that have overwhelmed the FDA. These factors have made FDA's 
system of import controls, more and more untenable. Two years ago, at 
the same hearing with the Rode's, FDA testified that approximately 2 
million packages containing drugs were imported into the U.S. every 
year. FDA complained that they simply did not have enough staff to 
inspect those packages. In 2001, FDA could not tell the Subcommittee 
what percentage of those packages contained legitimate vs. counterfeit 
product, determine the country of origin or describe the conditions 
under which the drugs were manufactured. In short, FDA could tell us 
very little about the 2 million packages of drugs that were being 
imported. Very little has changed since our hearing in 2001 other than 
the volume of drugs.
    According to a senior supervisory Customs inspector, the mail 
facility in Miami, Florida, routinely receives about 30,000 
pharmaceutical shipments daily, often from South and Central America, 
Canada, Europe, the Bahamas, and Mexico. Packages containing 
pharmaceutical products account for nearly one-third of the total 
volume of packages. Given these numbers, Miami receives approximately 
150,000 packages containing pharmaceuticals weekly, 600,000 monthly, 
and approximately 7 million packages containing drugs annually.
    According to data provided by Customs, every month approximately 5 
million packages enter the commerce of the U.S. or 60 million packages 
annually. If the estimate from Miami is extrapolated nationally, 20 
million packages containing pharmaceutical products are imported into 
the U.S every year. This is an increase of over 1000% in 2 only years.
    As this Subcommittee has heard ad naseum, drugs procured outside 
the United States regulatory system 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 conditions. At 
this Subcommittee's June 7, 2001, hearing, which highlighted the public 
health concerns that these drugs pose to the American people, FDA 
proposed to the Department of Health and Human Services that it 
eliminate its personal use policy for mail imports, allowing FDA and 
Customs to deny entry of all these illegal drugs into the U.S. and 
return them to sender. No action has been taken on the proposal. This 
is perhaps understandable given the apparent split in public and 
political opinion on personal reimportation policy.
    Why are U.S. consumers playing Russian roulette with their 
medications by purchasing them over the Internet from unknown sources? 
The fact is that the skyrocketing prices of medications are 
increasingly out of the reach for too many of our seniors and nearly 
all those on fixed incomes. Some of the seniors, who testified at our 
Oversight hearing in Mr. Deutsch's District in March, stated that they 
often forgo other essentials in order to purchase their necessary 
medications. In a country as wealthy as ours, we must do better. It is 
my sincere belief that the Medicare reform bill that this Committee 
passed last week will ensure full access to and the affordability of 
pharmaceuticals. However, the fact remains that when consumers purchase 
drugs over the Internet for whatever reason, they are taking a leap of 
faith with their health because there is no guarantee that the drugs 
they are purchasing are legitimate.
    We are also concerned that FDA may be aggravating a deteriorating 
drug import problem with some instances of poor judgment and 
ineffective policies. On October 21, 2002, FDA requested that Customs 
detain at least 1,233 packages of ``knock-off'' Viagra imported into 
the U.S. through Miami, Florida, which appeared to be violative of the 
Food, Drug, and Cosmetic Act. On May 5, 2003, FDA knowingly authorized 
the release of the 1,233 packages of unapproved generic Viagra. On May 
20, 2003, FDA informed the public that it was ``taking steps to respond 
to irregularities related to its handling of a large shipment of 
unapproved Viagra.'' The Committee is continuing to investigate whether 
the problems identified in Miami, Florida, represent wide-spread issues 
surrounding FDA's approach nation-wide to preventing the dissemination 
of imported counterfeit or unapproved pharmaceuticals.
    Unfortunately, the problem of counterfeit drugs, drugs with no 
active ingredient, or drugs stored in unsafe conditions rendering them 
useless, is no longer restricted to the Internet. Counterfeit drugs and 
drug of unknown origin are appearing with greater regularity at U.S. 
drug stores. Recently, we have seen counterfeit versions of Lipitor, 
Serostim, Procrit, Epogen, and Combivir. On our second panel today, you 
will hear that because of unscrupulous wholesalers, consumers in 
Florida cannot know if the pharmaceuticals they purchase are 
legitimate. However, with vigorous law enforcement actions and new 
criminal penalties and tough regulations, the State of Florida is at 
the forefront of ensuring a safe and effective pharmaceutical supply.
    At the end of the day, FDA is responsible, to the greatest extent 
possible, for ensuring that Americans have a safe and effective supply 
of drugs. Given the exponential increase in the volume of drugs being 
imported into the U.S., FDA's current approach must be substantially 
altered to address this new reality. First, FDA must procure real data 
on the type and volume of drugs being imported into the U.S. Further, 
FDA must also discern from where these drugs are being imported and 
whether they contain legitimate product, are counterfeits, are stored 
in unsafe conditions or are sub-potent or super-potent. FDA must also 
engage in aggressive enforcement actions aimed at the importers of 
bogus and harmful drugs. Lastly, FDA must predicate all of its current 
regulatory and enforcement action on a risk-based assessment of threats 
to our drug supply. I can think of fewer more important or challenging 
tasks.
    I would like to welcome our witnesses here this morning. The first 
panel includes Federal witnesses: 1) Mr. William K. Hubbard, Associate 
Commissioner for Policy and Planning, Food and Drug Administration; 2) 
Mr. John Taylor, Associate Commissioner of Regulatory Affairs, Food and 
Drug Administration; and 3) Ms. Elizabeth Durant, Director of Trade 
Programs, Bureau of Customs and Border Protection.
    The second panel consists of witnesses from the State of Florida: 
1) Mr. Robert Penezic, Esq., Assistant Statewide Prosecutor, State of 
Florida, Office of Statewide Prosecution, South Florida Bureau; 2) Dr. 
Gregg Jones, R.Ph., Pharmaceutical Program Manager, Drugs, Device, and 
Cosmetic Regulation, Bureau of Statewide Pharmaceutical Services; and 
3) Cesar Arias, Drug Inspector Supervisor, Florida Department of 
Health, Bureau of Statewide Pharmaceutical Services

    I now recognize the ranking member of the full committee, 
Mr. Dingell for his opening statement.
    Mr. Dingell. Mr. Chairman, I thank you for your courtesy 
and I thank you for holding this hearing on the threat of 
safety to our population from our prescription drug supply.
    From my count, this is the third hearing this subcommittee 
has held on this subject in the past 3 years. Other hearings 
date back to 1996. I commend you for your continuing interest 
and attention in this, which is a serious and worsening 
problem.
    I chaired 8 hearings on this issue in the 1980's. After 
these hearings we passed the Prescription Drug Marketing Act to 
deal with the threat to the drug supply at that time. But the 
Food and Drug Administration, FDA's unwillingness to enforce 
the clear language of the law, the tremendous expansion of 
direct marketing capability of the Internet, the outrageous 
prices that seniors and other Americans pay for prescription 
have all combined to undermine that statute and leave us with a 
far more serious threat to the safety of our population from 
prescription pharmaceuticals today.
    In 1985 when we began the inquiry into the problems of drug 
diversion one of the first issues that the subcommittee 
uncovered was a rather curious situation involving the Orlando 
District of the FDA. It seems that the Director of Compliance 
was uncommonly cooperative with those seeking to enter 
violative drugs into this country. According to testimony, the 
State of Florida's Department of Health was attempting to seize 
violative goods and the Orlando District Office of FDA decided 
instead to allow reexport to Canada and then into Boston.
    Seventeen years later we're back again looking at the 
Orlando Office of the FDA again. And I'm compelled to recall 
the great statement that this is deja vu all over again. And, 
again, it is because senior officials in that office have acted 
with disregard for the needs of the public and they have, in 
effect, facilitated illegal imports of prescription drugs. We 
know some 30,000 packages of drugs per day pass through the 
international mail facility in Miami, largely from the 
developing world. And FDA has told Customs not to open 
virtually any of them. Some lower level FDA employees did 
detain shipments that were subsequentially released on orders 
from their superiors. They found bold counterfeits, drugs 
clearly not manufactured in the U.S. or Canada and unapproved 
drugs tested as subpotent by the terms of their labels. These 
conscientious civil servants found exactly what this agency, 
which we had thought of as the gold standard, that public 
health internationally expected of them. Orders went from 
Orlando with the concurrence of FDA headquarters, release the 
products and tell Customs never to bother us with the likes of 
them again.
    While very troublesome by itself, this is much a part of 
the broader problem. FDA has ignored the clear language of the 
statute and has invited massive import of counterfeit, 
adulterated and misbranded drugs by means of a so-called 
enforcement discretion policy, a policy by the way which kills, 
maims or hurts American citizens. Moreover, FDA's 
interpretation of the wholesale provision of the Act has 
undermined PDMA's goal of making the buying and selling of 
pharmaceutical products transparent. We have, I think here 
then, something of a scandal at FDA.
    Legitimate manufactures must go through tough hurdles to 
get a drug approved. They spend millions to ensure that 
manufacturing facilities comply with good manufacturing 
practices. But at the same time FDA allows any fly by-night 
Internet con man to send whatever placebos, poisons, over-aged 
drugs or pharmacueticals which are contaminated and adulterated 
or unsafe he or she chooses through the mail, through UPS, 
through FedEx, through area contract carriers or to be walked 
across our southern border without so much as a warning to the 
consumer.
    Further, those drugs can be commingled with domestic 
counterfeits, stolen goods, watered-down products, other 
adulterated and misbranded drugs. These can all wind up behind 
the pharmacy counter leaving the poor consumer to believe that 
the drugs are supposed to be safe and effective as labeled 
because their local pharmacist and the FDA appear to say so. 
Other consumers buy the unsubstantiated claims found in the 
Internet or at their walk-in mail order storefront that the 
drugs are FDA approved. Again, a falsehood in which FDA appears 
to cooperate quite actively, or at least by its total disregard 
to fail to protect the American public.
    This state of affairs is a health crises waiting to happen. 
Indeed, I think it has in it the seeds of a splendid scandal, 
and I anticipate that that will follow shortly.
    It is not acceptable to this committee. It is not 
acceptable to the American people. The FDA needs to enforce the 
law, and if they can't do so, they should tell us why they 
can't or why they won't. And that is why this hearing is 
valuable.
    This Administration needs to tell the Congress as it 
promised to do 2 years ago what the added authority that it 
needs happens to be and how it should and can, and will protect 
the American public from a situation which I think we will find 
on review to be intolerable.
    Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes the gentleman from New Hampshire, Mr. Bass for an 
opening statement.
    Mr. Bass. Thank you very much, Mr. Chairman. I want to 
commend you for holding this interesting and timely hearing. 
And I also appreciate your opening statement, which I listened 
to quite carefully. And most of it I agree with heartily.
    I guess what I would like to do in opening is to make two 
points, vis-a-vis this issue. First, the issue of counterfeit 
drug importation, generic knock-offs and so on, the slide we 
saw by baskets of drugs from Florida are not going to be solved 
by adding 5,000 or 15,000 or 50,000 FDA policemen inspecting 
every package. The reason why these orders are made is because 
the prices of drugs elsewhere in the world are lower than they 
are in the United States. Whether you agree or disagree with 
that, that is what is creating the demand. And as long as there 
is a disparate or a difference between what one drug costs in 
the United States and what it costs abroad and there is a 
mechanism to make the sale, i.e., direct mail or the Internet, 
it is going to happen. And my humble opinion, there are not 
going to be Internet police, the FDA's not going to be like the 
Transportation Security Administration, and we are not going to 
be able to afford to do that.
    The issue, frankly, is what do we do over the long term 
about equalizing prices of drugs so that the demand doesn't 
exist for people who are low and middle income, for the most 
part, bearing the bulk of the responsibility for high priced 
drugs. Because poor people get essentially free drugs and 
seniors, hopefully when we pass this Medicare Prescription 
Plan, will get the same type of benefit. And, obviously, 
wealthy people under the age of 65 are not going to worry about 
going to the Internet and so forth. What it really is a 
relatively small group of low and middle income working 
Americans who are financially against the ropes and looking for 
any way they can possibly can to deal with a chronic illness or 
an expensive prescription.
    I buy the argument that foreign countries artificially 
depress drug prices. But we have a carve out, I believe, in 
NAFTA for pharmaceuticals so that we don't have a free trading 
agreement with Canada.
    Now, I represent a district of about 630,000 people. I have 
a border with Canada and a good road up there. And every day of 
the week there are bus load after bus load of people, mostly 
seniors, going up there to buy prescription drugs. I cannot 
imagine that the FDA is going to station people at the border 
to slap senior citizens up against the buses and try to throw 
them in jail and fine them. What we need to have is as a 
Congress and as an agency is a plan to solve the problem 
through the free market system. And that may not involve the 
lowering of prices in the United States necessarily or the 
raising of prices in foreign countries, but the plan has to 
result in an environment where there is no demand for these 
foreign drugs by people who are desperate for prescriptions.
    Now last, I would suggest that it is just as easy to 
manufacture a counterfeit drug domestically as it is for a 
foreign country. In fact, it is easier. Why bother. If you are 
going to break the law, you can make it in my district as 
easily as you could in Mexico or Canada. And there is, indeed, 
an issue on the sale of counterfeit drugs domestically in 
drugstores. We had a hearing on that issue. So it may be an 
import/export problem, but it is just as likely to be a 
domestic problem.
    I am also interested to note that I have not heard from 
Canadian sources that there is a more severe problem of 
domestically manufactured drugs in Canada that are counterfeit 
than in the United States.
    So these are all interesting issues, but the fundamental 
problem here is free market and capitalization. And if you have 
a price somewhere else that is lower than it is there, they are 
going to move toward one another one way or another. It is a 
fundamental law of economics and the economic equivalent of 
water running downhill, not uphill.
    So, that is the way I see the fundamental issue. I 
appreciate your holding this hearing today, Mr. Chairman. And I 
look forward to hearing from our witnesses.
    And yield back.
    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes the ranking member Mr. Deutsch for an opening 
statement.
    Mr. Deutsch. Thank you, Mr. Chairman. Thank you for holding 
this hearing.
    Mr. Chairman, today is really the same hearing we have been 
having year after year on foreign drugs entering the U.S. Each 
time we do, the problem has not only grown in scale and the 
drugs coming from more suspicious countries.
    I am particularly concerned about the residents in my 
State. We're facing a Hobsons choice. On the one hand drug 
prices have increased at an unreasonable rate. Each day I learn 
of more and more seniors who are forced to make some serious 
decisions as they try and budget for their medications. Some, 
not all have turned to the Internet. Others have turned to the 
new Canadian walk-in pharmacies throughout South Florida to 
find relief. Understandably the lower rates of pharmaceuticals 
they are able to obtain from the Canadian storefront operations 
make a sizable difference in day-to-day living for many. 
However, it concerns me greatly that we are learning of an 
overabundance of foreign drugs entering the U.S. from a variety 
of potentially dangerous sources, sources whose practice 
provide no meaningful protection to consumers.
    This need for affordable prescription drug coverage for 
many individuals advances many of the problems we will discuss 
today. From the Florida witnesses we will hear that a great 
deal of counterfeiting and other forms of pharmaceutical 
trickery are occurring in my State. This includes Medicaid 
drugs being sold and resold and how a broad array of drugs from 
abroad are being reimportated, relabeled and somehow slipped 
back into the formal distribution chains.
    I believe that many of the scams discussed today are 
happening directly as a result of the high price of 
prescription drugs. Indeed, I was hoping that the Medicare bill 
that came before this committee last week might truly provide 
some meaningful relief to those being squeezed by the high drug 
prices so that the needs to purchase drugs outside regular 
channels would lessen. However, I fear that should the bill 
marked up last week in this committee pass into law, this 
questionable practice will only continue.
    That being said, Mr. Chairman, I do want to point out that 
the FDA in someways has already made a bad situation in Miami 
facility and turned it into complete chaos. Thanks to a 
leadership by HHS to devise some meaningful guidance for field 
staff, the Miami facility has become a shocking version of FDA 
mismanagement.
    Over the past several months committee staff have visited 
this facility and noticed a staggering amount of drugs entering 
the U.S. from all over the world. Actually, the numbers that 
staff has told us at this point is 30,000 per day. 30,000 
packages per day of drugs entering through just one of 14 
facilities throughout the country, most who enter with almost 
no meaningful FDA review or scrutiny. We have photos and 
description of these drugs, and much of what staff documented 
will be contained in the memo that was written by investigators 
from both sides of the committee.
    In fact during today's hearings we will learn that the 
Miami facility has been so overwhelmed with foreign drugs that 
they accidentally released huge volumes of fake Viagara to the 
public despite knowing through formal testing that the product 
was potentially dangerous. We will also learn that entire bins 
of other counterfeit drugs such as Ciprofloxin were sent back 
to its overseas source when repeatedly we were told by the FDA 
that returning to sender was against the law.
    We will hear that in addition to the 1,233 shipments of 
potentially dangerous fake Viagara that was released, hundreds 
of other shipments were shoved out the door with no 
authorization from the headquarters. Some of these may have 
even been the subject of an FDA import alert, so were not even 
allowed to enter into the U.S. in the first place.
    Finally, we will hear that Customs Miami was not regularly 
provided import alerts from FDA on which dangerous drugs it 
should be stopping. Instead Customs was told by FDA staff they 
should log into FDA's website to find out when alerts were 
posted.
    Mr. Chairman, as the House and Senate debate the so-called 
merits of the drug bill before us this week, we will hear 
debate on the reimportation issue as a way to provide access to 
more affordable pharmaceuticals. However, it is already 
occurring and on a large scale. The volume of product now 
entering this facility is so overwhelming to both Customs and 
the FDA, neither agent can effectively do its job. We have 
learned that senior FDA officials in Florida now tell Customs 
to stop only large shipments entering the Miami facility. 
Anything small about the size of a toaster sails right through. 
I suppose that criminals smart enough to counterfeit drugs down 
to the package hologram have figured out this high tech system.
    Indeed, the fact that millions of drugs from all over the 
world are entering the U.S. with no meaningful scrutiny by the 
FDA is clearly known by FDA Commissioner McClellan and HHS 
Secretary Thompson. Yet rather than face this fact, Secretary 
Thompson continues to ignore the problem despite his 
reassurance and recommendations FDA has made almost 2 years 
before, nothing has actually changed. In fact, the problem has 
increased and it has only become more unmanageable. Because 
this problem has been allowed to develop into a lucrative 
business for criminals, it is my opinion that much of what we 
are discussing today will only be solved when we 
comprehensively address the issue of prices and access. If we 
do not, we will only continue to see this problem worsen and 
may see the entire U.S. drug supply put in jeopardy. In fact, 
one measure for whether we are effectively addressing the price 
issue might be to continue measuring the number of individuals 
who continue to go outside regulated channels to buy their 
medicines. What this says is volumes to these mail facilities 
tell us. We are doing a good job, we are solving the price 
problem. Look at the volume. In short, Mr. Chairman, I think 
that the chickens have come home to roost. As the result of not 
addressing meaningful and affordable prescription drug benefits 
for our Nation's seniors, we are rapidly putting the integrity 
and safety of the U.S. drug supply and turn our own citizens at 
grave risk.
    With that, Mr. Chairman, I yield back. And thank you for 
having this hearing.
    Mr. Greenwood. The Chair thanks the gentleman.
    The Chair notes that the chairman of the full committee, 
Mr. Tauzin, hopes to be with us but is attending a meeting 
right now. And without objection, his opening statement will be 
a part of the record, as will without objection the staff 
report covering the investigation of this matter be made a part 
of the official record.
    [The prepared statement of Hon. W.J. ``Billy'' Tauzin 
follows:]
 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce
    Thank you Chairman Greenwood. And let me also express my deep 
appreciation to Mr. Dingell and Mr. Deutsch, for their strong support 
of the Committee's continuing bipartisan investigation of this issue.
    This investigative work, with numerous visits to border checkpoints 
and international mail facilities, has provided essential information 
to help understand the risks and, indeed, has exposed what appears to 
be the failure of our regulatory safety net to protect the American 
public from counterfeit, dangerous and poor-quality drugs imported into 
this country.
    With so much attention focused on the personal importation of 
drugs--to provide cheaper medicines or alternative therapies--the 
information about the safety of imports, the ability of our system to 
ensure people get what they think they are getting, is of critical 
importance for policy makers.
    Mr. Chairman, the facts before us--some of which you just cited--
actually suggest that there really is no safety net at all. The deluge 
of imported drugs has blasted holes right through it.
    Staff estimates that, based on Customs data, something like 20 
million packages containing some kind of pharmaceutical product from 
abroad pass through our mail facilities and borders each year, with 
only a tiny percentage ever stopped for inspection.
    I understand we will hear this morning from Florida officials, who 
will describe the impact of this flood of uninspected drugs into that 
state, and the public health threats they have had to confront as a 
result. I am curious to know how sure they are that the drugs 
Floridians order through the mail are safe to use.
    Now we must remember that this troubling situation did not just pop 
up last week. Almost exactly two years ago, Customs and FDA officials 
testified to this subcommittee that they were unable to handle what was 
then estimated as 2 million packages a year. Yet in just that short 
amount of time, with the increase of Internet sales and other 
promotions, the problem has grown enormously.
    This hearing should help make clear that we are not talking about 
potential risks or hypothetical threats here. We know, from staff and 
federal inspections that dangerous substances from shady outfits are 
passing through to American consumers. There should be no doubt that 
people already have been harmed by this--and more will be as this 
deluge continues.
    It is also essential to get a grip on this issue because of the on-
going pressures to increase personal drug imports--either for 
unapproved foreign medicines or for medicines that might save patients 
money. The debate surrounding imports of cheaper drugs from abroad has 
been particularly intense because of the current Medicare legislation 
we've all been working on.
    Yet however appealing it is for us to enable people to find a 
personal supply of medicines from the cheapest sources available, we 
must not disconnect our desire to help them from the reality of our 
current border/mail controls, and the situation of drug preparations 
beyond our borders.
    Keep in mind, as much as people in this country are attracted to 
promises of cheaper drugs from abroad (and over the Internet) the 
crooks and scamsters are there to exploit this situation--and doubtless 
will increase efforts to meet any growing demand--to the detriment of 
public health and safety. And right now, it doesn't look like the 
protections Congress has erected are being put to use.
    This hearing should help clarify what is happening in the field, 
and I hope will also underscore the point that this Committee takes 
very seriously its responsibilities to protect the public health and 
the agencies of our jurisdiction should do so as well.
    Thank you again, Mr. Chairman, I look forward to the testimony and 
yield back the remainder of my time.

    Mr. Greenwood. The Chair recognizes the vice chairman of 
the committee, the gentleman from Oregon, Mr. Walden for an 
opening statement.
    Mr. Walden. Thank you, Mr. Chairman. I am going to waive 
the opening statement in lieu of additional time for Q&A.
    Mr. Greenwood. The Chair intends to give everyone the same 
amount of time for this hearing. It is an important hearing. So 
if the gentleman would like to make an opening statement, he 
will get the same amount of time, but The Chair appreciates his 
decision.
    The Chair also notes the presence of the gentleman from 
Texas, Mr. Green, who is not a member of this subcommittee, but 
is joining us because of his interest and his constituents have 
in this issue. And he will be entitled to ask questions but 
not, pursuant to our rules, to make an opening statement.
    So the Chair recognizes the gentleman from New Jersey, Mr. 
Ferguson for his opening statement.
    Mr. Ferguson. Thank you, Mr. Chairman.
    I would like to thank you for the opportunity to 
participate in this hearing, and also thank you as well as the 
committee staff for your diligence in pursuing this matter 
that's really vital to the public health of our Nation and our 
people.
    Our Nation is facing a crises due to the tidal wave of 
counterfeit and improperly dosed drugs that are illegally 
imported from all over the world into our country and sold to 
unsuspecting consumers. These so-called pharmaceuticals can 
range from simply being fakes that contain primarily sugar or 
starch to drugs containing deadly doses of controlled 
substances. The scary thing is that we have no mechanism in 
place to properly test and monitor the safety of these drugs 
shipped to our country from all points throughout the world. It 
is the FDA's job to protect American consumers from problems 
stemming from drugs manufactured in our country. The FDA has 
repeatedly said that they cannot guarantee the safety of drugs 
shipped to the U.S. from other countries.
    Quoting a recent FDA letter, ``Prescription drugs purchased 
from foreign countries generally are not FDA approved, do not 
meet FDA standards, they are not the same as drugs purchased in 
the United States. Drugs from foreign countries do not have the 
same assurance of safety as drugs actually regulated by the 
FDA. They could be outdated, contaminated, counterfeit or 
contain too much or too little of the active ingredient.''
    Also today we will hear about how dramatically overburdened 
our Customs officials are to the influx of dangerous foreign 
drugs. Based on the estimates of senior Customs inspectors in 
Miami, the facility there faces approximately 7 million 
pharmaceutical shipments annually. This is just one facility, 
thereby making the national number of imported pharmaceuticals 
absolutely frightening.
    The increase in imported unregulated pharmaceuticals has 
simply overwhelmed our current system that was designed to 
insure the safety and effectiveness of drug products. If our 
public health officials cannot guarantee the safety and 
efficacy of these drugs, how can we in good conscience let our 
children, our seniors and our other consumers of this Nation 
gain access to these drugs?
    I look forward to hearing the testimony of the panels. I 
appreciate this hearing.
    And I will just close, because I have a couple of more 
minutes, just addressing a point that my friend Mr. Bass was 
making in terms of the problems that we face with drug price 
disparities around the world. And I would only suggest that, 
you know, we do face a problem of high cost of prescription 
drugs in our country today, and we are addressing that problem. 
We have spent countless hours marking up a bill in this 
committee last week. We are going to have that bill on the 
floor this week. That bill is going to go a long way toward 
helping seniors in our country afford the prescription drug 
medication that they need for the quality of their life, for 
their very lives in some instances.
    We will not solve that problem by imposing price controls 
on drugs in this country. We hear a lot about free markets and 
free trade and how free markets and free trade will help us 
solve the drug pricing problem that many of our seniors face 
and others face in our country today. Well, I would suggest 
that it is precisely anti-capitalistic, anti-free market, anti-
free trade to suggest that importing other country's price 
controls into our country will somehow help us over the long 
term to solve this problem. We are taking the right steps with 
the bill that we passed out of this committee and that we are 
going to pass out of this House this week in using the market 
and using the capitalist system by offering choices to seniors. 
We are taking the right steps to try and bring prices under 
control and to make these products more available to those who 
need them.
    I would suggest that precisely the wrong approach is to 
look at countries like Canada and others which essentially use 
a kind of a socialist price control structure to make these 
products more affordable to their own people and by importing 
these socialist tendencies and price controls and other 
mechanisms into our country is precisely the wrong way to go.
    I would simply suggest that looking at the way we are doing 
it in our bill is the way that we are actually going to be able 
in a positive and a proactive way to address the problem of 
rising prescription drug costs. And by looking at countries; I 
mean look at a country like France or Canada. You do not see 
people going to France or Canada to get their health care. Why? 
Because they have a system which do not encourage innovation, 
it does not encourage the best health care in the world.
    Where is the best health in the world? It is in the United 
States. We have people all over the world coming to the United 
States to get their health care. Why? Because we have the best 
system in the world. And why do we have that system? Because we 
have the best doctors, the best researchers, the best research 
and development anywhere in the world. We need to maintain 
that.
    We should not be importing these socialist tendencies and 
price controls, and socialized medicine of other countries in 
the U.S. to try and control our costs. What we should do is 
find out ways that we can use the market, use more choices for 
seniors to achieve that goal.
    I yield back. Thank you.
    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes the gentle lady from Colorado.
    Ms. DeGette. Thank you, Mr. Chairman.
    I would ask unanimous consent to submit my full written 
statement for the record.
    Mr. Greenwood. Without objection.
    Ms. DeGette. I am eager to hear the witnesses today. So let 
me just make a couple of points in addition to my written 
statement.
    Like everyone, I am very concerned about high prescription 
drug costs for my seniors. And, in fact, just last week I was 
stopped in a parking lot in Denver by one of my constituents 
who said to me ``I am very concerned about your position on 
drug reimportation because I get my drugs from Canada.'' And 
she has a legitimate concern.
    Her concern is she wants to be able to afford her 
prescription drugs every month. But upon last year's hearings, 
which I thank the chairman for holding, and all of the research 
we have done, it is clear to me that opening the borders to 
unlimited importation of drugs from other countries is not only 
a poor idea, but it threatens the health of our constituents.
    And so I think if we are going to try to think about how to 
control the price of drugs, we need to do that without finding 
other ways to reimport drugs at lower prices which may, in 
fact, be dangerous to our constituents' health.
    I remember last year in the hearing seeing the packages of 
yellow pills that contained not medical products, but yellow 
highway paint. I remember standing on the floor last year with 
two packages of what was called Viagara; one was real, one was 
not and they looked identical.
    So I think that the issues that we are dealing with are 
very serious issues. They are not just serious in terms of drug 
prices. They are serious in terms of our constituents' health 
and well-being. And, frankly, I cannot think of anything that 
we are elected to do in the U.S. Congress if it is not to 
protect the health and well-being of our constituents.
    As I understand it, the problems with drug reimportation 
and counterfeit drugs are getting much more serious. And I am 
eager to hear the witnesses today talk about this. And I am 
also eager to work with my colleagues on both sides of the 
aisle so that we can try to find some solutions both to the 
drug reimportation issues, but most importantly to the 
underlying issue, the issue which will not be mentioned, right? 
And that is the issue of how do we give our seniors the same 
kinds of low and appropriate prescription drug prices that are 
available in many other countries, including Canada.
    And with that, Mr. Chairman, I yield back.
    Mr. Greenwood. The Chair recognizes the gentleman from 
Florida, Mr. Stearns, for his opening statement.
    Mr. Stearns. And good morning. And thank you, Mr. Chairman, 
again for holding this hearing, the latest I guess in a series 
over the past few years on the influx of counterfeit drugs and 
unapproved drugs.
    I am especially troubled, as my colleague who is the 
ranking member, that most of these drugs appear to be coming 
from our State down in Miami, Dade County.
    And, of course, the ramifications of this problem are far 
reaching: huge lucrative criminal profits, danger to public 
health, disruption to commerce and the fair profits that the 
manufacturers themselves should be earning for all their 
research and their efforts.
    In 2001 South Florida criminals counterfeited Procrit, a 
drug used to boost the immune systems of cancer and HIV 
patients by relabeling, hiding drugs in Texas and North 
Carolina and then slipping it into the supply so that seriously 
ill patients could have, and probably did receive, weakened 
dosages. This amounted to about $46 million in criminal 
activity.
    So what is the solution? There does not seem to be enough 
manpower to sift through the packages. And looking at the 
photos, that I guess came from the Miami hearing, we just are a 
little puzzled what to do. Is it new bar coding or tagging?
    At a reception last month one of my staff was given in 
identifying consumer goods use of little vials. I have one of 
these little vials, Mr. Chairman. You cannot see it, but within 
this liquid is 150 nanoblock ICs. It's just barely perceptible, 
these tiny flecks that are supposedly the next revolution in 
tagging products. But the question is who is going to pay for 
these tiny computerized flecks that are going to be used for 
labeling? The wholesalers? The manufacturers? No. Ultimately 
the consumers.
    I look forward to examining these issues at this hearing, 
and I especially look forward to the testimony of the three 
Florida officials that have come here, Mr. Robert Penezik, Dr. 
Gregg Jones and Dr. Cesar Arias, and thank them for their 
kindness in coming here.
    As we know, through strong and collective leadership 
efforts in Florida through the legislature, the Attorney 
General and Governor Jeb Bush, the Governor signed a new law 
just 2 weeks ago ``The Prescription Drug Protection Act.'' 
Among other things, it tightens up the wholesale activity and 
improves the chain of custody documentation. And, Mr. Chairman, 
I just thought that I would just touch on some of the things 
that this act incorporates, which I think is very helpful.
    The new legislation requires or provides for:
    (1) Vastly improved documentation of vital pharmaceuticals 
in order to prevent their counterfeiting; (2) Full pedigree 
papers on all prescription drugs by July 1, 2006; (3) Due 
diligence by those receiving these pedigree papers; (4) Full 
authority by the Florida Department of Health to destroy 
medication that has been adulterated or improperly stored; (5) 
Full authority by the Florida Department of Health to shutdown 
licensed wholesalers in violation of State statute until the 
deficiencies are corrected; (6) Increased criminal penalties 
for pedigree papers as well as other violations involving 
adulterated drugs, and; (7) Increase permitting requirements 
for drug wholesalers in Florida, including raising bonding 
requirements and stricter background checks.
    So, Mr. Chairman, I think the State of Florida is to be 
commended for this new Prescription Drug Protection Act, 
implementation. Between the cup and the lip is the hard 
problem. And we just hope it can be done. And perhaps we can 
hear some more from the three individuals from Florida.
    So I look forward, again, to this testimony and I commend 
you for this hearing.
    Thank you.
    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes the gentleman Mr. Rogers for an opening statement.
    Mr. Rogers. Thank you, Mr. Chairman.
    I am going to waive in lieu of time for questions. Thank 
you.
    Mr. Greenwood. I am sorry. I did not notice the reemergence 
of the gentleman from Florida, Mr. Davis is recognized for his 
opening statement.
    Mr. Davis. Thank you, Mr. Chairman.
    As another Floridian on the committee, I am keenly 
interested in what we are about to hear. And I just wanted to 
briefly say that there are 3 issues that I believe we are all 
focused on.
    One is the increasing desperation of seniors not just in 
Florida, but around the country as well as their family and 
friends in finding affordable prescription drugs. And the 
increasing desperation in the level of risk that people are 
willing to undertake to simply have some drug versus nothing at 
all.
    The market is a cruel thing and until Congress acts to 
provide some relief to seniors, I think we are going to 
continue to see some of the steps you are about to describe it.
    Second, we have an obligation as elected officials to make 
sure that seniors are in a position to make informed choices 
about quality and about exactly what they think they are 
purchasing, and that being accurate. And ultimately to make 
sure that they are safe. Because in some cases the mistakes 
that are made in terms of what people take are unforgivable or 
fatal mistakes.
    And finally, the law should be enforced. And I recognize 
that what I have just described are competing and perhaps in 
some cases irreconcilable forces and everybody, Congress, the 
FDA has chosen to avoid some of the painful choices. But one 
thing we do owe the public here today is to have a very open 
and honest discussion. And if none of us likes the choices we 
are forced to confront here, we ought to at least be honest 
with the public as to what those choices are and they can 
participate with us in making some of the hard decisions about 
how we stop this growing problem from getting worse. So I look 
forward to your testimony.
    And, Mr. Chairman, once again commend you on calling this 
hearing and the manner in which I know you will conduct this 
hearing.
    Mr. Greenwood. The Chair thanks the gentleman.
    [Additional statement submitted for the record follows:]
  Prepared Statement of Hon. Gene Green, a Representative in Congress 
                        from the State of Texas
    Thank you, Mr. Chairman, for allowing me to join you here this 
morning to discuss the reimportation of prescription drugs.
    Prescription drug costs are increasing at an alarming rate. Drug 
spending is currently the fastest growing segment of national health 
care spending, increasing by 15.1 percent in 1998, 19.2 percent in 
1999, and 17.3 percent in 2000.
    Spending on prescription drugs currently accounts for more than 11 
percent of total personal health spending, and that number is expected 
to increase to more than 17 percent of personal health expenditures by 
2011.
    Millions of Americans cannot afford to keep up with these ever 
escalating drug costs.
    In absence of a Medicare prescription drug benefit, seniors 
especially are struggling to pay for their medications. They are forced 
to ration their prescriptions, cut their pills in half, or go without 
them, because they cannot afford these lifesaving medicines.
    More troubling, citizens of the United States pay the highest 
prices in the world for prescription drugs. Canada, France, Italy, 
Germany, Japan, and the United Kingdom all negotiate on behalf of their 
citizens to obtain lower prices for brand name drugs.
    As a result, purchasers in these countries pay significantly less 
for prescription drugs than uninsured senior citizens in the United 
States.
    Seniors don't mind paying a fair price for their prescription 
drugs, but they don't think they should have to pay more than seniors 
in these industrialized countries. As a result, many of them are taking 
advantage of the internet to buy cheaper reimported drugs.
    Like my colleagues, I have many concerns about the safety of 
reimported drugs. Affordability cannot come at the cost of safety when 
we're talking about potentially life-saving medications.
    That is why I support proposals which would subject reimported 
drugs to the exact same safety mechanisms already in place for drug 
manufacturers.
    Dr. David A. Kessler, former FDA Commissioner under Presidents Bush 
and Clinton, stated that the importation of these products can be done 
without causing a greater health risk to American consumers than 
currently exists.
    Unfortunately, the FDA seems to have given up on its obligation to 
ensure that drugs entering the stream of commerce are safe and 
effective.
    A staff visit to the Miami International Mail-Branch Facility 
revealed that the system for processing imported foreign prescription 
drugs and controlled substances in the facility has broken down, 
allowing these products to enter the country with little or not review 
or testing.
    This poses a serious public health problem that could put the lives 
of many Americans, especially our seniors, at risk.
    The system's failure can certainly be attributed to the fact that 
the volume of incoming drugs is simply too great to allow for any real 
investigation into their quality.
    But the larger problem seems to be FDA's interpretation of the law, 
which has turned this into an overly burdensome and resource intensive 
process.
    This hearing is an excellent opportunity to assess the extent of 
this problem, and what we can provide to the FDA, both in terms of 
resources and regulatory reform, to help ensure that the drugs entering 
the marketplace are safe.
    I look forward to hearing from our witnesses on this issue, and 
once again thank the Chairman for allowing me to sit in on this 
hearing.

    Mr. Greenwood. The Chair formally welcomes our first panel: 
Mr. William Hubbard, Mr. John Taylor both from the FDA, Ms. 
Elizabeth Durant, Director of Trade Programs at the Bureau of 
Customs and Border Protection.
    Pursuant to the rules of our committee and the House, I 
should advise you that you are entitled to be represented by 
counsel. Do any of you wish to be represented by counsel. All 
right, seeing no such desire, do any of you object to giving 
your testimony under oath? In that case, I would ask you to 
stand and raise your right hands, please.
    [Witnesses sworn.]
    Mr. Greenwood. You are under oath, and we'll begin, Mr. 
Hubbard, with you and you are recognized for 5 minutes for your 
opening statement.

  TESTIMONY OF WILLIAM K. HUBBARD, ASSOCIATE COMMISSIONER FOR 
  POLICY AND PLANNING, FOOD AND DRUG ADMINISTRATION; JOHN M. 
TAYLOR III, ASSOCIATE COMMISSIONER OF REGULATORY AFFAIRS, FOOD 
 AND DRUG ADMINISTRATION; AND ELIZABETH G. DURANT, DIRECTOR OF 
    TRADE PROGRAMS, BUREAU OF CUSTOMS AND BORDER PROTECTION

    Mr. Hubbard. Thank you, Mr. Chairman. As you noted, I'm 
accompanied by John Taylor our chief enforcement official at 
FDA.
    I have a written statement, but I will not read that, but 
will make a few brief oral remarks, if I may.
    I would like to thank the committee for its longstanding 
interest in these issues of counterfeit and imported drugs. 
Counterfeiting is much in the news now, and FDA, Mark McClellan 
is very concerned that we make sure that this problem doesn't 
get worse. And FDA is clearly committed to work on that.
    Let me just start with one quick illustration of the recent 
Miami case with Procrit. This is some of the actual product 
that was seized in the Procrit example. There is a real Procrit 
and a counterfeit Procrit. And I would like to have it brought 
up to the chairman, if I may, to share with the committee.
    This is a drug that is used to deal with anemia and kidney 
failure in cancer and AIDS patients. Three suspects have been 
arrested in this case and have now pled guilty. But, you know, 
this is a dangerous product. It was basically replaced with 
Miami tap water. And so that clearly points out the problem we 
see with counterfeiting.
    With counterfeiting in Miami we are concerned that 
consumers are going to the Internet to buy drugs increasingly. 
Let me show you a couple of examples, if I may. If we could 
show the eDrugnet example.
    This is a website that promises to sell FDA approved drugs 
to patients. Our investigators have sought out the source of 
this site, and it is in Thailand, although it appears to be 
domestic and promises FDA approved drugs.
    The next site has a Miami Beach address and suggests that 
it is an American business purchasing and selling American 
drugs. It is in Israel.
    The next one says ``It is the most trusted pharmacy in 
Canada.'' This site is registered in Barbados, which I believe 
is an island off of Venezuela, not in Canada.
    So these raise very serious questions about what people are 
buying. But let me show you what people are actually getting 
when they go to these sites.
    Here is a muscle relaxant that raises real concerns about 
things that come like this. No labeling, no information about 
what it is.
    Here is a drug someone thought they bought from Holland. 
And, unfortunately, the actual drug that they got has Cyrillic 
script, which is unintelligible to me, certainly. We do not 
even know the name of it. But being Cyrillic means it either 
came from Russia or one of the former Soviet Republics since 
Cyrillic only is used in those countries. And, of course, it 
has no information to even determine what the drug is.
    This is an antibiotic, it is an antibiotic of last resort, 
a very serious drug. You only use it when other antibiotics do 
not work. The person that purchased it over the Internet 
claimed they were going to treat their cryptococcal meningitis. 
You should not be treating cryptococcal meningitis with drugs 
purchased from the Internet.
    Here is Lipitor. Now, this is an interesting example. This 
drug was made in Germany, then distributed to Ireland, then 
sold to Thailand, then sold to an American. So this drug has 
been all around the world and where it has exactly been, who 
has held it, what they have done with it, how it could have 
been affected.
    Here is a controlled substance, a scheduled opiate that 
clearly is totally against the law and it should not be 
purchased in any way.
    Here is one that someone purchased, one would suspect that 
they know that they should not have been buying it because it 
is a travel book and inside it is carved out and there are 
pills. And we see these things all the time.
    So these are not carefully selected examples just to show 
you horror stories. These are typical of what we are seeing in 
the mail facilities everyday. I think some of the committee's 
members have been out there to see that.
    Now, some say Canadian drugs are different, that this stuff 
from the Third World should not be let in, but the Canadian 
drugs are okay. So we have been screening Canadian drugs. And 
let me show you a few examples of those.
    This is a high blood pressure drug. Looks like a perfectly 
legitimate product. The problem is it has no information for 
the patient. We are all used to going in the drug store and 
getting antibiotic. It gives a doctor's name, our pharmacist's 
name and whether to take it with food or what time to take it, 
or whatever. This has none of that. So it's just a bottle of 
pills, as far as the patient is concerned.
    And here are three other examples that patients bought for 
osteoporosis, for diabetes and for glaucoma. These drugs need 
to be refrigerated. If these drugs are not refrigerated, they 
are very complex proteins that breakdown. They become 
ineffective, maybe unsafe. These arrived in the mail just like 
this. So these are totally useless drugs in terms of 
effectiveness. They may, indeed, be dangerous.
    Another example is a Canadian drug called Lipivir, which 
appears to be some sort of knock off Lipitor, but we do not 
really know. And the patient probably thought they were buying 
Lipitor.
    Yet another example is a drug for depression. This is a 
drug that should only be prescribed in 3 month intervals 
because it is for a high risk population. This person was given 
a 10 month supply of this. So, clearly, it's a danger to that 
patient.
    Another patient apparently that had seizures ordered a drug 
called gabapentin. And this is what he got.
    Mr. Greenwood. This looks like one of those cereal 
commercials.
    Mr. Hubbard. Yes. This patient should have been given 1 
month's drugs. This is about 4 years supply. Now, you can say, 
well okay, he needs it for a long time. The problem is they 
start expiring in August. So in 6 weeks these drugs are going 
to be useless. And this patient paid $1500 to a Canadian 
pharmacy for those drugs.
    Yet another drug, this is a drug for high blood pressure 
called Idopamide. It is a generic drug. The interesting thing 
about it is that he paid $30 for it. You can get it in the 
United States for $20. Because, in fact, generic drugs are 
cheaper in the United States than they are in Canada. And many 
seniors and other patients can take generic drugs.
    And then I will go to one last example from a website that 
we'll show to the members, to the committee, please. Now, this 
is a site that promises to sell FDA approved drugs to American 
citizens from Canada. The businessman that owned this was 
living in Arizona, apparently. And we got an example of this 
from an 82 year old gentlemen in Michigan who ordered drugs off 
of this site for his seizures and his enlarged prostate. And 
this is what he got. He got a Tupperware container with some 
drugs made in India. These are fake knock offs of Proscar and 
Neurontin. We have no idea whether these are real drugs or not. 
But he was led to believe that this site would give him good, 
cheap Canadian drugs. In my view he wasted his money.
    So these are actually what's coming in from Canada. And I 
will also mention that the particular individual running this 
site, we happened to find, had been arrested in Arizona and 
jailed for an unrelated fraud charge.
    So in summary, Mr. Chairman, we find that very few if any 
of these drugs purchased by our citizens from foreign sources 
meet contemporary standards for pharmaceutical prescribing, 
dispensing, labeling and handling.
    And with that, Mr. Chairman, I will end my remarks.
    Mr. Greenwood. The Chair thanks the gentleman.
    Mr. Taylor, did you wish to make a statement of your own. 
You are recognized for 5 minutes for that purpose.

                TESTIMONY OF JOHN M. TAYLOR III

    Mr. Taylor. Thank you, Mr. Chairman.
    I appreciate the opportunity to discuss our mutual concerns 
related to the importation of drugs into the United States. My 
testimony will dovetail Mr. Hubbard's, but it will also focus 
on the irregularities related to FDA's handling of a large 
shipment of unapproved Viagara, apparently from Belize.
    For public health reasons, FDA remains concerned about the 
importation of prescription drugs into the United States. In 
our experience, as Mr. Hubbard has explained, 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.
    FDA believes that the overall quality of drug products in 
this country is very high. And FDA continues to safeguard the 
drug supply in this country as evidenced by our recent success 
in the counterfeit Procrit criminal case, the AstraZeneca 
criminal case and our ongoing investigation regarding 
counterfeit Lipitor. FDA, however, cannot offer the same 
assurance to the public about the safety and quality of drugs 
purchased from foreign sources.
    With the available resources and competing priorities 
facing the agency, experience shows that we are unable to 
visually examine the large volume of parcels containing 
prescription drugs that arrive in the mailing services each 
day. As a consequence, FDA must employ a risk-based enforcement 
strategy to deploy our existing enforcement resources in the 
face of multiple priorities including homeland security, food 
safety and other tasks.
    FDA shares the committee's concern about the volume of 
drugs that are entering the United States. And as a result, we 
are reevaluating, refining and improving the programs and 
procedures that we are employing to ensure that we are 
developing priorities for import detentions, employing our 
resources to high volume field locations, training employees to 
identify high risk products and utilizing import alerts to 
target products based on potential risks. So these are the 
things that we are going to be working on now and in the future 
so that we can better allocate our limited resources.
    FDA's import groups have a major role to play in 
implementing these strategies, and this turns me to Florida 
District's Miami import group. During its history Florida has 
prided itself in having an excellent working relationship with 
Customs and other Federal, State and local agencies as well as 
the import community. This close working relationship with 
Customs has led to many innovations and improvements in how we 
handle imported products and its lead to many awards for the 
Florida District Office, including Vice President Gore's Hammer 
Award for reinventing government.
    Recently, however, FDA advised the committee and the 
American public of irregularities related to its handling of a 
large shipment of unapproved Viagara. Through a series of 
procedural irregularities foreign versions of Viagara were 
detained and subsequently released by FDA to consumers. After 
the products were released by FDA, the agency sent a letter to 
each consumer who received these unapproved foreign versions of 
Viagara alerting them to the fact that such products were 
unapproved drugs under the Act and that the agency cannot 
provide any assurance of quality, safety or effectiveness for 
these products. Because of the discovery of these 
irregularities, FDA's conducting an ongoing internal review of 
these events thoroughly assessing the matter and taking steps 
to ensure that these mistakes do not occur in the future.
    In the wake of the discovery of these irregularities, FDA 
has undertaken or will undertake several steps to ensure that 
import detentions are handled properly in the future, as well 
as taking steps to ensure that our risk-based strategies are 
applied properly.
    First, Florida district managers held an all hands meeting 
with the personnel at the Miami import group where they 
discussed the detention of the unapproved Viagara and at this 
all hands meeting district managers also conducted training on 
Section 801 of the Act and the regulation and internal 
procedures that govern the proper handling of import 
detentions. The managers also reemphasized the importance of 
reviewing records carefully and making regulatory decisions in 
accordance with agency policy.
    Two. The District implemented new requirements regarding 
the initialing and dating of mail entry reports so that Miami 
import group can more easily determine what records have been 
reviewed and whether they have been reviewed property.
    Third. The District is drafting new standard operating 
procedures for the handling of mail entries.
    Fourth. The District apologized to Customs supervisor at 
the Miami mail facility for the improper handling of the 
detained unapproved Viagara.
    Fifth. The District will have biweekly meetings with the 
Assistant Port Director of Miami or her representative in order 
to strengthen the Miami import group's relationship with its 
partners.
    Sixth. The District will meet with Customs supervisors at 
the Miami facility on a monthly basis in order to enhance our 
working relationship with Customs.
    Seven. The District will provide Customs with hard copies 
of all import alerts that the agency issues.
    Eight. The District will review its import operations, 
quality assurance audit plan and determine whether it is 
sufficient. If it is not sufficient, then that plan will be 
amended to ensure that it provides the proper guidance to the 
import staff.
    And Nine. The regional and District management will review 
several proposals that are focused on improving the management 
structure and the supervisory ratio in the Miami import group 
so that there is greater management oversight within that 
operation.
    In addition to these steps, today Howard Lewis, an FDA 
employee, begins serving on an indefinite basis as Florida's 
District Import Program Manager. Mr. Lewis is from FDA's New 
Orleans' district and has a strong management and compliance 
background and a wealth of knowledge of domestic and import 
compliance issues. These strengths will allow him to identify 
additional improvements that will strength the Miami import 
group's role in protecting the public health.
    Once we are satisfied that we have taken steps to ensure 
that the above mentioned irregularities will not occur in the 
future, we are also prepared to conduct a case study in Miami 
that helps us better identify the type of pharmaceutical 
products that are being imported through the Miami facility and 
the type of health impacts that they might cause.
    In closing, Mr. Chairman, FDA remains concerned about any 
possibility that unsafe drugs may find their way into the 
American drug supply. We'll remain vigilant as we refine and 
improve the programs that we use to ensure the availability of 
safe medicines for consumers.
    We appreciate the committee's interest in this matter and 
we look forward to continuing to work with you in furtherance 
of this goal.
    Thank you again for the opportunity to participate in 
today's hearing. I'll be happy to answer any questions.
    [The prepared statement of William K. Hubbard and John M. 
Taylor III follows.]
 Prepared Statement of William K. Hubbard, Associate Commissioner for 
         Policy and Planning, U.S. Food and Drug Administration
                              introduction
    Mr. Chairman, Ranking Member Deutsch and Members of the 
Subcommittee, I am William K. Hubbard, Associate Commissioner for 
Policy and Planning at the U.S. Food and Drug Administration (FDA or 
the Agency). With me today is John M. Taylor, Associate Commissioner 
for Regulatory Affairs at FDA.
    We appreciate the opportunity to testify on the continuing problem 
of unapproved imported prescription drugs. Our testimony will focus on 
FDA's efforts to assess and respond to the public health threats posed 
by the importation of unapproved drugs, as well as the introduction of 
counterfeit drugs from foreign and domestic sources that also poses a 
threat to the health and safety of United States consumers. We will 
discuss FDA's importation policies and procedures, the enforcement 
strategies regarding imported, unapproved, and counterfeit 
pharmaceutical products, and plans to strengthen management oversight 
at FDA's Miami Import Office and the Miami International Mail Facility.
    As FDA has previously stated to this Subcommittee, the overall 
quality of drug products that consumers purchase from U.S. pharmacies 
remains high. The American public can be confident that these 
medications are safe and effective. FDA cannot, however, offer the same 
assurance to the public about the safety and quality of drugs purchased 
from foreign sources.
    FDA is working on a number of fronts to address the influx of 
unapproved and counterfeit prescription drugs coming into the U.S. from 
foreign sources. These efforts include: 1) educating the public to the 
significant potential safety issues presented by the purchase of drugs 
from foreign countries, 2) working with professional groups to 
disseminate FDA's message on the potential dangers of Internet drug 
sales, 3) partnering with state governments and other Federal agencies 
to develop more effective enforcement strategies, and 4) undertaking 
monitoring of and enforcement against Internet pharmacy outlets that 
present the most significant concerns. Recent high-profile regulatory 
actions send a strong message that FDA is actively working to take 
strong steps to protect the public from conduct that threatens the U.S. 
drug supply.
                   public health and safety concerns
    The Federal Food, Drug, and Cosmetic (FD&C) Act prohibits the 
importation of unapproved, misbranded, or adulterated drugs into the 
U.S. In general, drugs imported by individuals fall into one of these 
prohibited categories. This includes foreign versions of U.S.-approved 
medications. In addition, under provisions enacted as part of the 
Prescription Drug Marketing Act (PDMA), it is illegal for anyone other 
than the drugs original manufacturer to re-import a prescription drug 
that was manufactured in the U.S.
    A large and growing volume of parcels containing prescription drugs 
ordered by individuals from foreign sources is entering American 
commerce through U.S. Postal Service international mail facilities. 
Members of this Subcommittee have witnessed these large volumes at 
locations such as the Dulles, Virginia, mail facility. Evidence 
strongly suggests that the volume of these foreign drug importations is 
increasing steadily. The volume presents a substantial challenge for 
the Agency to adequately assess and process these parcels, resulting in 
an increased workload for Agency field personnel at ports-of-entry, 
mail facilities, and international courier hubs.
    FDA remains concerned about the public health implications of 
personally imported prescription drugs and the introduction of 
counterfeit drugs into the stream of commerce. 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. FDA cannot assure the American public that drugs 
imported from foreign countries are the same as products approved by 
FDA.
    FDA has long taken the position that consumers are exposed to a 
number of potential risks when they purchase drugs from foreign sources 
or from sources that are not operated by pharmacies properly licensed 
under state pharmacy laws. 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. 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. The drugs may not have 
been packaged and stored under appropriate conditions to prevent 
against degradation, and there is no assurance that these products were 
manufactured under current good manufacturing practice (cGMP) 
standards. When consumers take such medications, they face risks of 
dangerous drug interactions and/or of suffering adverse events, some of 
which can be life threatening. These risks could include potential side 
effects from inappropriately prescribed medications or side effects due 
to drug contamination.
    Patients also potentially are at greater risk because there is no 
certainty about what they are getting when they purchase some of these 
drugs. Although some purchasers of drugs from foreign sources may 
receive genuine product, others may unknowingly buy counterfeit copies 
that contain only inert ingredients, legitimate drugs that are outdated 
and have been diverted to unscrupulous resellers, or dangerous sub-
potent or super-potent products that were improperly manufactured. 
Moreover, consumers who are desperately seeking a cure for a serious 
medical problem may be more willing to accept a product of unknown 
origin.
    Furthermore, in the case of foreign-based sources, if a consumer 
has an adverse drug reaction or any other problem, the consumer may 
have little or no recourse either because the physical location of the 
manufacturer or because the operator of the pharmacy often is not known 
or the seller is beyond the consumers reach. In addition, as a 
condition of doing business, many of these foreign operators require 
the U.S. consumer to sign a document releasing the operator from all 
potential liability. FDA has only limited ability to take action 
against these foreign operators.
    Due to the huge volume of drug parcels entering the U.S. through 
the international mail and courier services, the requirements for 
notice and hearing, and our limited resources, it is difficult for FDA 
to detain and refuse mail imports for personal use. The advent of the 
Internet has significantly compounded this problem. As a consequence, 
tens of thousands of parcels that FDA is unable to review as a result 
of the Agency's limited resources and multiple competing enforcement 
priorities are released by the Bureau of Customs and Border Patrol 
(BCBP), even though the products contained in these parcels may violate 
the FD&C Act and may pose a health risk to consumers. We acknowledge 
that this is not an optimal public health outcome and are working on 
strategies to better utilize our available resources to minimize 
potential public health risks.
    The Agency has responded to this challenge by employing a risk-
based enforcement strategy to deploy our existing enforcement resources 
in the face of multiple priorities, including homeland security, food 
safety and counterfeit drugs. As an example, the Agency utilizes Import 
Alerts to identify particular shipments that may pose significant 
potential risk to public health. In the case of the increased volume of 
unapproved sildenafil (generic Viagra), arriving at the Miami facility, 
the Agency has issued an Import Alert to instruct field personnel to 
work with the BCBP to detain all such shipments from specific 
manufacturers, distributors and countries of origin.
                     public outreach and education
    Public outreach is an important tool that the Agency uses to inform 
consumers about potentially dangerous or ineffective drugs. FDA is 
expanding its public outreach to further educate consumers about 
potentially dangerous practices associated with some Internet drug 
sales. We also are conducting outreach to explain the nature of 
compliance and enforcement actions we already have taken. This effort 
includes FDA Talk Papers, articles in FDA Consumer magazine, and 
information on FDA's website to help educate consumers about safely 
purchasing drugs online. FDA's website also provides consumers with an 
opportunity to submit information to the Agency about sites that may 
violate the FD&C Act.
    FDA is committed to developing more effective education strategies. 
With this goal in mind, FDA has created public education 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. Cross-border travelers at certain 
land border stations are provided with another brochure entitled, 
``Looks Can be Deceiving,'' which describes the dangers of purchasing 
drugs directly at cross-border pharmacies. This also is available on 
FDA's website.
    In October 2000, FDA's Center for Drug Evaluation and Research 
(CDER) launched an education campaign on the subject of buying 
prescription medicines online entitled, ``Shop Smart.'' This effort is 
part of FDA's ``Buying Rx Drugs Online'' education program. The 
centerpiece of this multi-media campaign is FDA's website: http://
www.fda.gov/oc/buyonline/default.htm that includes information for 
consumers, including tips and warnings, how to spot health fraud, 
frequently asked questions and how to report suspect pharmacy sites. 
The website is one of the most frequently visited webpages on FDA's 
website.
    Another central piece of our campaign is a brochure entitled, 
``Buying Prescription Medicines Online: A Consumer Safety Guide.'' The 
brochure was produced by the CybeRx-Smart Safety Coalition, a 
partnership of Internet companies, trade associations, health and 
consumer organizations and other government agencies. The brochure is 
available in hard copy from FDA, the Federal Consumer Information 
Center and the National Council for Patient Information and Education 
(member of CybeRx-Smart). It also is posted on FDA's website. The 
number of consumer inquiries received by FDA has grown steadily with 
the circulation of the brochure. In addition, a 30-second radio public 
service announcement was produced and distributed to stations 
throughout the U.S. The release has been broadcast on 233 radio 
stations in 46 different states with an audience of almost 6 million. 
Two print public service announcements (one for medical devices and one 
for prescription medicines) were produced and sent to over 100 national 
magazines.
    The January/February 2001 issue of the FDA Consumer magazine 
included an article entitled, ``Buying Drugs Online: Its Convenient and 
Private, But Beware of `Rogue Sites.' '' The article is available 
online and thousands of reprints have been distributed at conferences 
and exhibits around the country.
           partnering with health professional organizations
    FDA continues to meet with organizations representing state 
regulatory and law enforcement bodies, consumers, health care 
practitioners and industry. The purpose of these meetings is to discuss 
and coordinate efforts to address issues relating to online drug sales, 
including who should regulate and how they should regulate; whether and 
what policy changes should be considered; and when to develop 
partnering arrangements. The organizations we regularly meet with 
include:

 The National Association of Boards of Pharmacy
 The Federation of State Medical Boards
 The National Association of Attorneys General
 The American Medical Association
 The American Pharmacists Association
 The National Consumers League AARP (formerly the American 
        Association of Retired Persons)
 The American Society of Health-Systems Pharmacists
 The National Association of Chain Drug Stores
 The National Community Pharmacists Association
 The Pharmaceutical Research and Manufacturers Association
 Pharmaceutical Security Institute
 Healthcare Distribution Management Association
                     working with state regulators
    State pharmacy boards have primary responsibility for the licensing 
of pharmacies and regulating the dispensing of drugs. FDA has been 
working with the states to address concerns regarding importation of 
foreign prescription drugs. In February 2003, FDA hosted a nationwide 
call with 38 state boards of pharmacy, other state regulatory agencies 
and consumer groups to discuss current Internet drug sale practices. 
While some state laws are stronger than others, FDA has actively 
engaged with a number of states in jointly pursuing Internet sites that 
are engaged in illegal prescription drug sales. FDA is continuing to 
expand its cooperative activities with states in order to address 
effectively the many challenges in this area of electronic commerce. 
FDA also is continuing to work closely with our partners in the states 
in support of their efforts to curtail illegal and potentially 
dangerous operations, especially when they involve misleading claims 
about drug safety.
Discount Prescription Center
    A recent example of the effective application of state pharmacy law 
to a drug importation case is seen in the May 13, 2003, warning letter 
issued by the West Virginia Pharmacy Board (the Board) to Discount 
Prescription Center of Fairmont, West Virginia, telling that firm to 
cease its violation of state law. Discount Prescription Center 
solicited patients and arranged for a Canadian pharmacy to dispense and 
ship prescription drugs to the patients. FDA considers the firms 
operations to be illegal and a potential risk to public health. FDA 
expressed support for the Boards effort to stop this firm from 
violating the law in a letter to the Executive Director and General 
Counsel of the West Virginia Board of Pharmacy. FDA stated in the 
letter that we believe that operations such as Discount Prescription 
Center expose the public to the significant potential risks associated 
with imported prescription medications that are not FDA-approved. In 
addition, FDA has offered assistance in any future efforts by the Board 
to stop similar firms.
Rx Depot
    On March 21, 2003, FDA issued a warning letter to a storefront 
operation known as Rx Depot. We commenced this action in conjunction 
with the Arkansas State Board of Pharmacy. Rx Depot generally obtains 
unapproved drugs from Canada for U.S. consumers, exposing the public to 
the significant potential risks associated with unregulated imported 
prescription medications. Rx Depot and similar companies have often 
stated incorrectly to consumers that FDA condones their activities and 
even that their prescription medications are ``FDA approved.'' This 
could lead consumers to conclude mistakenly that the prescription drugs 
sold by the companies have the same assurance of safety as drugs 
actually regulated by FDA.
    FDA believes that operations such as Rx Depot expose the public to 
significant potential risks associated with unregulated imported 
prescription medicines. FDA's warning letter notified the firm that the 
Agency considers the firms operations to be a risk to the public 
health, and in clear violation of the drug safety laws that protect 
Americans from unsafe drugs. Although FDA addressed its warning letter 
to the Rx Depot in Arkansas, FDA also sent a letter to the president of 
Rx Depot, in Tulsa, Oklahoma. The warning letter applies to all 
locations of Rx Depot and its affiliates. While Rx Depot responded to 
FDA's warning letter, that response was inadequate and FDA is 
developing an effective response.
    We issued our warning letter in conjunction with action by the 
Arkansas State Board of Pharmacy. The Arkansas State Board of Pharmacy 
issued its own letter to the firm on the same day as our warning letter 
instructing the firm to cease violating state law immediately.
                     federal enforcement activityfd
    As Office of Regulatory Affairs (ORA), including the Office of 
Criminal Investigations (OCI), works with state and Federal 
investigative agencies and prosecutors to uncover violations of the 
FD&C Act and other laws with respect to unapproved, misbranded, 
illegally imported, or otherwise unsafe or substandard drug products.
    Recent criminal and civil cases provide insight into the 
seriousness of the risks these products pose to the public health. With 
respect to Internet drug sales, FDA to date has initiated the following 
actions:

 150 Internet-related drug arrests, 60 involving Internet 
        pharmacies;
 102 convictions, 34 convictions involve Internet pharmacy 
        cases;
 95 open Internet drug criminal investigations;
 90 sites are under active review for possible regulatory or 
        civil action;
 Nearly 200 cyber warning letters sent to domestic and foreign 
        online sellers;
 5 preliminary injunctions;
 15 product seizures; and
 11 product recalls.
                          drug counterfeiting
    FDA takes very seriously any allegations or information regarding 
the counterfeiting or adulteration of drug products. As the drug 
manufacturing and distribution system has become more global in nature, 
the challenge of protecting against counterfeit, adulterated or 
substandard drugs has become more difficult. The Agency is concerned 
about a spate of drug counterfeiting and tampering cases that have 
occurred in recent months, and is aggressively pursuing these types of 
enforcement cases.
    FDA's OCI has opened 73 counterfeit drug cases since October 1996. 
Investigations have so far netted 44 arrests and 27 convictions. Fines 
and/or restitution have been imposed in excess of $250,000. FDA has 
seen a gradual, but troubling, increase in the incidence of finished 
dosage form counterfeit activity. Much of this activity has targeted 
high volume, high cost drugs where counterfeiters attempt to obtain the 
highest return possible in a short time period. Many of these drugs are 
used for treating cancer and AIDS patients. The public perception of a 
more dramatic increase in counterfeit drug activity stems from the fact 
that the latest several counterfeits have appeared in the wholesale 
market and received wider distribution than has been the case 
historically.
Reporting of Information on Counterfeit Drugs by Manufacturers
    On April 22, 2003, the Pharmaceutical Research and Manufacturers of 
America (PhRMA), which represents the countrys major research-based 
pharmaceutical and biotechnology companies, announced the adoption of a 
voluntary program to report suspected instances of drug counterfeiting 
to FDA. The information provided by PhRMA members under this program 
will be helpful to the Agency because it will assist FDA in carrying 
out its responsibilities to protect the safety and integrity of the 
nation's drug supply by enhancing the Agency's ability to detect 
quickly and remove counterfeit drugs from the marketplace.
    Under this program, PhRMA member companies have agreed to notify 
FDA's OCI within five working days of determining that there is a 
reasonable basis to believe that a product has been counterfeited. The 
program also applies to counterfeits discovered in foreign countries if 
there is clear evidence that the counterfeits are intended for 
distribution in the U.S. Drug manufacturers already conduct their own 
investigations of suspected distribution of counterfeit drugs. This 
formal collaborative agreement will strengthen FDA's ability to assure 
the safety and effectiveness of drugs used by U.S. Consumers. The 
reporting program went into effect on May 1, 2003. The two most recent 
cases of counterfeit prescription drugs in which FDA has played a 
significant role are those involving the drugs Procrit and Lipitor.
Procrit
    On May 21, 2003, the U.S. Attorneys Office for the Southern 
District of Florida filed charges against Eddy Gorrin, William Chavez 
and Duviel Gonzalez for unlawful sale and wholesale distribution of 
counterfeit versions of Amgen, Inc.'s, prescription drug Procrit, a 
medication indicated mainly to help cancer, anemia and HIV patients 
increase their red blood cell count.
    Between January and February 2003, Gorrin intentionally engaged in 
the sale of counterfeit versions of Procrit. During that same time 
period, Chavez and Gonzalez also were engaged in unlawful wholesale 
distribution of counterfeit Procrit without a state license. The 
undercover operation and tests conducted by FDA's Forensic Chemistry 
Center revealed that the vials being distributed by all three men 
labelled as ``Procrit'' did not contain any active ingredient for 
Procrit, but instead, contained only bacteria-tainted water. In early 
June 2003 all three defendants plead guilty to criminal charges in the 
Southern District of Florida. The defendants face up to 10 years in 
prison and a $250,000 fine.
Lipitor Investigation
    On May 23, 2003, FDA issued an alert on a counterfeit version of 
Pfizer, Inc.'s, prescription drug, Lipitor. The alert warned health 
care providers and others that three lots of counterfeit Lipitor 
represent a potentially significant risk to consumers. One in five 
people have high cholesterol that may lead to cardiovascular disease, 
such as heart disease and stroke. According to the American Heart 
Association (AHA), every 33 seconds, someone in the U.S. dies from 
cardiovascular disease. (Source: AHA 2002 Heart and Stroke Statistical 
Update) Lipitor is the number one prescribed cholesterol-lowering 
medication, and is currently used by more than 18 million people. 
Lipitor is proven to lower total cholesterol and decrease the risk of 
developing cardiovascular disease. FDA investigators have aggressively 
pursued a variety of leads all along the supply and distribution chain 
in an effort to identify the source of this counterfeit activity.
    In conjunction with the manufacturer of this product, FDA published 
a list of lot numbers to identify the counterfeit product. We urged 
health care providers and patients alike to check the packaging very 
carefully before using this product. Patients who have any of the 
product (labeled as ``Repackaged by MED-PRO, Inc.'') with the specified 
lot numbers were told not to consume it, and to return the product to 
their pharmacies. On June 3, 2003, FDA announced that its continuing 
investigation of counterfeit Lipitor identified additional counterfeit 
quantities of the cholesterol-lowering product. The investigation is 
ongoing.
    FDA's advice to health care providers and consumers remained the 
same as when the Agency issued its original alert on counterfeit 
Lipitor. They should check the packaging very carefully before using 
Lipitor. Patients who have any of the product with any of the lot 
numbers we identified should not take it, and they should return the 
product to their pharmacies. We want to reemphasize this warning today.
    As part of the FDA's ongoing efforts to investigate and respond to 
unscrupulous counterfeiting activities, FDA's OCI is investigating this 
case of counterfeit Lipitor in carrying out its public health mission. 
FDA regularly conducts investigations and testing to identify and 
remove from the market products that are counterfeit, have been 
tampered with, or are otherwise unsuitable.
    FDA is working closely with the individual states and with health 
professionals, particularly pharmacists and pharmacy associations, to 
alert them to this counterfeit product. Many patients taking Lipitor do 
not receive it in the 90-tablet bottles, but pharmacists provide it in 
smaller quantities, which do not contain the identifying lot numbers. 
Patients who are not sure whether they have the tainted product were 
instructed to check with their pharmacist.
    FDA will continue to work closely with Pfizer, Inc., on this 
counterfeiting problem. FDA supports the activities of legitimate 
manufacturers to inform the public about counterfeit products and how 
to identify them. In addition Pfizer, issued its own press release 
supporting the vigorous enforcement of the law to protect patient 
safety. The company continues to work closely with FDA and other 
regulatory authorities to help prevent the importation of counterfeit 
medicines.
    Other counterfeit prescription drug cases in which FDA has had a 
central role include:

 Serostim (somatropin (rDNA origin)) for injection--In late 
        2000 and early 2001, FDA became aware of consumer complaints 
        about adverse effects and a recall was initiated at the 
        distributor level for Serostim, a growth hormone often used to 
        treat AIDS wasting. After further investigation by the 
        manufacturer, Serono, Inc., and FDA, Serono issued press 
        releases regarding the apparent counterfeiting of two lots of 
        the product. In May 2002, Serono became aware that counterfeit 
        Serostim displaying a fake lot number again had been 
        distributed. Laboratory analysis by FDA showed that the product 
        contained no active ingredient, and that the product did not 
        originate from Serono.
 Neupogen (filgrastim) for injection--In the spring of 2001, 
        based on observations by a distributor about the appearance of 
        Neupogen, a colony stimulating factor used mostly in cancer 
        patients, the manufacturer, Amgen Inc., analyzed a suspect lot 
        and determined that the vials contained only saline solution. 
        Amgen issued Dear Health Care Professional letters nationwide 
        informing patients, physicians, pharmacies and wholesalers 
        about the counterfeiting of Neupogen. The counterfeit product 
        was labeled with fake lot numbers and/or wrong expiration 
        dates.
 Epogen (epoetin alfa) for injection--In May 2002, FDA, state 
        regulators and the manufacturer, Amgen Inc., became aware that 
        a potential counterfeit of Epogen was in commerce. The product, 
        Epogen, is used to stimulate red blood cell production in 
        cancer and AIDS patients. Amgen analysis indicated that certain 
        vials of a counterfeit product labeled as Epogen contained 
        active ingredient approximately 20 times lower than expected. 
        Further investigation revealed that a major wholesale 
        distributor was holding approximately 1,600 cartons of 
        counterfeit product. Later that month, Amgen warned health care 
        professionals that two additional counterfeit lots of Epogen 
        had been discovered.
 Combivir (lamivudine plus zidovudine) tablets--In the spring 
        of 2002, the manufacturer, GlaxoSmithKline (GSK) received four 
        complaints that bottles containing 60 tablets of Combivir had 
        been replaced with Ziagen tablets. In addition, the firm 
        determined that counterfeit Combivir labels had been placed on 
        authentic bottles of Ziagen tablets, a different GSK product 
        with a label containing a black box warning about the dangers 
        of possible fatal hypersensitive reactions to Ziagen. A black 
        box warning placed at the beginning of an FDA-approved lable is 
        the strongest warning to prescribing physicians, health care 
        professionals and consumers, that severe adverse reactions have 
        been experienced from use of the product. Both Combivir and 
        Ziagen can be used as part of a combination regimen to treat 
        HIV infection. The concern in this case was that if an 
        individual were to take the wrong tablet and is sensitive to 
        Ziagen, a potentially life-threatening hypersensitivity 
        reaction could occur. In May 2002 distributors were advised to 
        initiate a recall to their customers.
 Zyprexa (olanzapine) tablets--In the winter and spring of 
        2002, bottles of Zyprexa, an Eli Lilly and Company product, 
        indicated for the treatment of schizophrenia and acute bipolar 
        mania, had been emptied and replaced with white tablets labeled 
        as aspirin. The tampering situations occurred in two strengths 
        and in three different lots. In May 2002 Lilly issued a press 
        release and Dear Health Care Professional letter concerning the 
        tampering situation.
                    overview of fda's import program
FDA Import Regulations
    Pursuant to the FD&C Act, FDA is responsible for the safety and 
effectiveness of domestic and imported pharmaceuticals. Section 801 of 
the FD&C Act gives FDA, in conjunction with BCBP, authority for 
regulating the importation of drugs and certain other products. This 
includes the authority to refuse admission of any article that appears 
to be in violation of the FD&C Act.
    Under Section 801(a) of the FD&C Act, a drug is subject to refusal 
of admission into the U.S. if it appears that it: 1) has been 
manufactured, processed or packed under unsanitary conditions, 2) is 
forbidden or restricted for sale in the country in which it was 
produced or from which it was exported, or 3) is adulterated, 
misbranded or in violation of section 505 of the FD&C Act, which 
relates to new drugs. To determine whether a product is in compliance, 
FDA may collect an analytical or documentary sample from the shipment 
for evaluation, and the shipment is held until the results of the 
examination are known. If it appears that the article may be subject to 
refusal, FDA gives the importer a written notice and an opportunity to 
present testimony, either verbally or in writing, to overcome the 
appearance of the violation. Alternately, the importer may request 
permission to bring the article into compliance. If FDA denies the 
request to recondition the article and the article is refused 
admission, it must either be re-exported or destroyed.
Import Alerts
    FDA's ORA, Division of Import Operations issues import alerts to 
inform staff about problems, such as with specific commodities or 
shippers. Because they are disseminated Agency-wide and are shared with 
other agencies, import alerts help ensure that FDA's regulation of 
imports is uniform and effective. As with all regulatory guidance, they 
are subject to the Agency's good guidance practices regulation and must 
have management concurrence before they are implemented.
Detention Without Physical Examination
    In some instances, a product may be detained as soon as it is 
offered for entry into the U.S. This procedure is the administrative 
act of detaining a product without physical examination and is based on 
past history and/or other information indicating the product may 
violate the FD&C Act. A product may be subject to an import alert 
recommending detention without physical examination until FDA has new 
information indicating such action is no longer warranted.
Guidance to ORA Field Staff
    FDA's ORA provides guidance to FDA field personnel giving them 
detailed policies and procedures for processing imported products, 
including imported prescription drugs. In addition to import alerts, 
the principal guidance documents are the Investigations Operations 
Manual, Chapter 6, and the FDA Regulatory Procedures Manual (RPM), 
Chapter 9.
    Because the volume and types of imported products varies by FDA 
district--one district may receive a large percentage of drugs, while 
another may receive mostly food products--many districts also have 
standard operation procedures tailored to their unique workload. All of 
FDA's import organizations, however, are required to handle and process 
all FDA-regulated products offered for import. The Agency's field work, 
therefore, is quite varied and does not focus solely on drugs.
Importation of Prescription Drugs
    All imported drugs are required to meet the same standards as 
domestic drugs, and thus must not be unapproved, misbranded, or 
adulterated. All imported drugs are required to meet the same standards 
as domestic drugs. Drugs imported by individuals that are unapproved, 
misbranded, or adulterated, are prohibited. This includes drugs that 
are foreign versions of FDA-approved medications, and drugs that are 
dispensed without a prescription. As stated previously, under the FD&C 
Act, FDA-approved drugs that are manufactured in the U.S. and exported 
may not be imported by anyone other than the manufacturer.
    At mail facilities, BCBP officials identify parcels that should be 
brought to FDA's attention. BCBP places these packages in a secure 
location that they maintain for FDA and other agencies. As with all 
imports, if it appears that the product may be subject to refusal, FDA 
will issue a notice to detain the product and provide the owner or 
consignee an opportunity to respond. Due to these requirements and the 
volume of regulated products imported by mail, the detention and 
further processing of mail parcels consumes large amounts of FDA 
resources. In addition, considerable storage space is needed to hold 
the large number of detained parcels while a notice, opportunity to 
respond, and Agency decision are pending.
FDA Personal Importation Policy
    Under FDA's personal importation policy, as described in guidance 
to the Agency's field personnel, FDA staff may exercise enforcement 
discretion in limited circumstances to permit the importation of 
certain unapproved prescription medication for personal use.
    First adopted in 1954, the policy was last modified in 1988 in 
response to concerns that certain potentially effective treatments for 
AIDS patients were not available in the U.S., but were available in 
other countries. The Agency expanded the guidance for humanitarian 
purposes to allow individuals suffering from serious medical conditions 
to acquire medical treatments legally available in foreign countries 
but not approved in the U.S. The policy is articulated in guidance to 
FDA field personnel and is not a license for individuals to import 
unapproved, and therefore illegal, drugs for personal use into the U.S.
    The current personal importation policy permits the exercise of 
FDA's enforcement discretion to allow entry of an unapproved 
prescription drug if:

 The intended use is for a serious condition for which 
        effective treatment may not be available domestically.
 The product is considered not to represent an unreasonable 
        risk to the patient.
 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.
 The individual seeking to import the product affirms in 
        writing that it is for the patients 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 BCBP and FDA inspectors, and 
even health care practitioners, in identifying a medicine simply by its 
appearance or its labeling, which may nonetheless falsely identify a 
product. From a practical standpoint, FDA inspectors cannot always 
visually examine drug products contained in a mailed parcel and 
accurately determine their content, identity or the degree of risk 
posed to the individual who will receive these drugs. Also, largely 
because of the advent of Internet sites selling prescription drugs from 
all points around the globe, the volume of parcels containing 
prescription drugs has increased dramatically. This increase in volume 
presents a significant challenge for BCBP and FDA. However, in order to 
respond to this growing concern, utilizing a risk-based approach, the 
Agency has deployed its limited enforcement resources across competing 
priorities, across field offices, and across regulatory product 
categories to protect the public health from unapproved products that 
pose the most significant potential public health concern. These 
enforcement activities are described in more detail below.
        fda import enforcement efforts to protect public health
    FDA has conducted numerous investigations and enforcement 
activities of imported products. The Agency has taken action when it 
believes imported products, including prescription drugs, pose a 
significant public health risk. FDA takes regulatory action in the 
import arena, which covers a wide range of products including foods, 
drugs, medical devices, human and animal drugs and biological products. 
If a situation appears to involve criminal activity, FDA's ORA has the 
option of referring the information to the Agency's OCI.
    FDA has a number of enforcement tools that can be used to regulate 
imported products. These include: 1) warning letters, 2) recalls, 3) 
seizures, 4) injunctions, or 5) prosecution. FDA may issue a warning 
letter in a number of scenarios including when: 1) a party fails to 
hold its entry intact before FDA releases it, 2) a party consistently 
imports in violation of the FD&C Act, or 3) an importer presents 
misleading information, or 4) FDA informs an importer that the Agency 
has requested that BCBP deny immediate delivery privileges.
    FDA also may ask a firm to voluntarily recall an imported product 
if FDA deems it a potential health hazard or if there is some evidence 
of distribution of detained or refused merchandise. FDA may opt to 
seize a product if it: 1) represents a health hazard and has been or is 
likely to be distributed following detention or refusal, 2) has been 
previously refused, or 3) has been identified fraudulently in documents 
submitted to FDA.
    Injunction may become the action of choice when FDA sees a pattern 
of violations with some recognizable danger of reoccurrence. This is a 
judicial action that may result in quicker corrective action than a 
prosecution, and, if successful, it legally enjoins the defendants from 
continuing to violate the law. Prosecution may be used when 
conventional import enforcement approaches are determined inadequate to 
correct violations or the violation is sufficiently egregious to 
warrant punishment. Prosecution may be warranted when there is: 1) 
continued illegal distribution after receipt of a notification of 
detention, 2) submission of false or misleading entry documents, 3) 
repeated entry of previously refused products, or 4) evidence of fraud.
    None of the potential actions described above are mutually 
exclusive. In some cases, FDA may take complementary steps that involve 
a combination of these actions in order to protect the public health 
from drugs that violate the FD&C Act. Evidence of this type of mix of 
regulatory actions can be seen in FDA's ongoing work on the counterfeit 
Lipitor matter.
    Many imported prescription drugs that are arriving at mail 
facilities are ordered over the Internet. FDA has increased its 
capability to monitor the Internet and identify sites that potentially 
violate the FD&C Act, through the use of various search tools and by 
upgrading its data handling capabilities. In some cases the Agency will 
conduct exercises to better understand the products that are coming in 
through specific ports-of-entry. The Agency is currently conducting 
such exercises at two FDA import locations. These actions help the 
Agency to better understand the type and extent of unlawful conduct on 
the Internet and to more accurately assess whether its enforcement 
efforts have had an impact on illegal behavior.
Miami Enforcement Successes
    FDA has had numerous enforcement successes on prescription drug 
import cases. One such example that is worth noting is a Miami broker, 
Eagle Global Logistics that continued to improperly import FDA 
regulated medical device, pharmaceutical, and radiation emitting 
products after being advised of reporting errors. The broker had a 22 
percent error rate, and working with BCBP, the broker was assessed 
penalties of $30,000 for failing to exercise responsible supervision 
and control.
    Florida District's Miami Import Office recommended penalties to be 
assessed against Catalysis Corporation, an importer and broker that 
continued to declare over-the-counter drugs as cosmetics despite FDA 
efforts to counsel the company. BCBP approved a $46,000 penalty against 
the importer for aiding illegal importation under Title 19, United 
States Code 1595a(b). Actions seeking additional penalties are pending.
Other ORA Enforcement Successes
AstraZeneca
    On June 20, 2003, officials from FDA's OCI joined with 
representatives of the U.S. Attorney's Office for the District of 
Delaware, the Department of Health and Human Services (DHHS), and the 
Defense Criminal Investigative Service (DCIS) to announce that 
AstraZeneca Pharmaceuticals LP had pleaded guilty to a large-scale 
health care crime. The firm agreed to pay $355 million to resolve the 
associated criminal charges and civil liabilities. The massive 
conspiracy involved illegitimate pricing and marketing of Zoladex, an 
AstraZeneca drug for the treatment of prostate cancer. The various 
schemes used by the firm caused multimillion-dollar losses to Federally 
and state-funded insurance programs and individual patients.
    FDA's OCI began investigating AstraZenecas pricing and marketing 
practices after a private individual filed a civil False Claims Act 
suit. The broadly-based investigation, which also involved the Office 
of the Inspector General for the DHHS, the DCIS and the Federal Bureau 
of Investigation, discovered that AstraZeneca employees were using 
several illegal methods to stimulate the demand for Zoladex by enabling 
prescribers to reap illicit profits.
    The agreement included the following provisions:
    AstraZeneca pleaded guilty to criminal conspiracy to violate the 
Prescription Drug Marketing Act by causing Medicare, Medicaid and other 
Federal providers to be overcharged for Zoladex that had been provided 
as free samples to urologists. As part of the plea agreement, the 
company agreed to pay a $63,872,156 criminal fine.

 AstraZeneca also agreed to settle its civil liabilities and to 
        resolve allegations that its fraudulent drug pricing schemes, 
        and sales and marketing misconduct had caused false and 
        fraudulent claims to be filed with Federal and state health 
        care programs.
 AstraZeneca agreed to payments of $266,127,844 to the U.S. 
        government for claims filed with the Medicare, TriCare, 
        Department of Defense and Railroad Retirement Board Medicare 
        programs, and $24,900,000 to the U.S. and state governments for 
        claims involving state Medicaid programs.
    The investigation, which is continuing, also resulted in charges 
against three physicians for conspiring with AstraZeneca to bill 
patients and third party payers for free Zoladex samples. Two of the 
prescribers have pleaded guilty.
Procrit
    As previously stated, on May 21, 2003, the U.S. Attorney's Office 
for the Southern District of Florida filed charges against Eddy Gorrin, 
William Chavez and Duviel Gonzalez for unlawful sale and wholesale 
distribution of counterfeit versions of the prescription drug Procrit. 
In early June 2003 all three defendants plead guilty to criminal 
charges in the Southern District of Florida. The defendants face up to 
10 years in prison and a $250,000 fine for these actions.
Lipitor
    FDA's ORA is conducting a significant investigation to respond to 
unscrupulous counterfeiting activities involving Lipitor. FDA is 
conducting this activity in close cooperation with health 
professionals, particularly pharmacists and pharmacy associations and 
has issued statements to alert the public about this counterfeit 
product.
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 that in the overwhelming majority 
of applications, no medical reviews, consultations, or physical 
examinations by a physician took place before drugs were shipped to 
customers. Defendants repackaged drugs obtained from a drug wholesaler, 
even though defendants were not a registered manufacturer or a licensed 
pharmacy and there was never a licensed pharmacist involved. 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.
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 an 
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 Mens Clinic, and related 
sites, that sold a variety of prescription medications.
    In September 1999, OCI received information regarding the Norfolk 
Mens 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. Based on these purchases and information gathered 
through 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 also 
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 been manufactured in New Zealand for distribution in Australia.
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 2 years in prison. The case was initiated 
on information received from BCBP concerning an Internet website called 
Medications Express. Bevins sold Mexican prescription pharmaceuticals 
from this website and claimed that a doctor's prescription was not 
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.
Dagoberto Paz-Tamez diet drug case
    This case involved the sale of unlabeled/adulterated diet drugs in 
Pasadena, Texas by an alleged medical doctor from Mexico. The alleged 
doctor, Dagoberto Paz-Tamez, is not licensed to practice medicine in 
the state of Texas or anywhere else within the U.S. This case was 
assembled in conjunction with the Harris County Precinct 6 Constable's 
Office, the Texas Department of Public Safety (DPS), and the U.S. 
Postal Inspection Service.
    Investigation revealed that Paz-Tamez had been selling unlabeled 
diet pills to patients for several years in the Pasadena, Texas area. A 
sample of the diet pills was submitted to the Harris County Precinct 6 
Constable's Office by a confidential informant. These samples were 
later submitted to FDA's Forensic Chemistry Center and were found to 
contain amphetamines and other dangerous substances.
    On August 22, 2002, Paz-Tamez was arrested in Pasadena, Texas. Diet 
drugs and U.S. currency were seized consisting of the following: 
$10,236 in U.S. currency, 4,350 tablets, 30,488 gelatin capsules, and 
44.5 pounds total weight of unlabeled diet drugs. The diet pills and 
tablets seized were found to contain mazindol (an amphetamine 
discontinued in the U.S.), diethylpropion (an amphetamine), diazepam 
(generic for Valium), and hydrochlorothiazide (a diuretic).
    On March 16, 2002, Paz-Tamez was convicted of Possession of a 
Controlled Substance and Delivery of a Dangerous Drug. He was later 
sentenced to ten years of deferred probation.
                 florida districts miami import office
    FDA's Florida District Office (FLA-DO) import operations are 
strategically located throughout the district with the largest 
operation in Miami, Florida. Their work assignments encompass all of 
FDA's regulated products and are not limited to pharmaceutical 
products. Miami is the largest port-of-entry for fresh seafood in the 
U.S. It is also one of the main ports in the U.S. for fresh produce. 
Moreover, Miami is the major distribution point for Latin American 
electronics, device, and drug products.
    Consequently, the Miami Import Office is responsible for a very 
dynamic and busy port that handles a large volume and variety of 
imported products.
    One of the busiest locations for the Miami Import Office is the 
Miami International Mail Facility. The import activities at the mail 
facility that focus on imported pharmaceutical products are a top 
priority for the district office. They do this by examining products at 
the Miami International Mail Facility including commercial drug 
shipments, large parcels shipped to individual consignees and parcels 
that are suspected to contain counterfeit or unapproved drugs. The FLA-
DO and the Miami Import Office work in collaboration with the BCBP, and 
use a team approach to work on commercial entries and the review of 
import-export documents. This collaboration has a history of regulatory 
and enforcement success against problematic importers and brokers, and 
during 2002 this collaboration led to the collection of ten fines, the 
conducting of ten seizures and the initiation of 268 penalty cases. 
Most of the seizures were related to medical devices, and drugs.
Organizational Structure of the Florida Districts Miami Import Office
    Florida District's Import Operations oversees all import activities 
and import personnel throughout the Florida District. An Import Program 
Manager (IPM) reports to the Director of Investigations in the FLA-DO, 
who reports to the Florida District Director. The District's Compliance 
Branch also provides some assistance to Florida District's Import 
Operations. The import operation has 38 field employees, 33 of whom are 
in Miami. These 38 employees include the IPM, 2 supervisory consumer 
safety officers, 4 compliance officers, 1 consumer safety technician, 2 
students, 2 legal instruments examiners, 9 consumer safety inspectors, 
and 17 consumer safety officers.
Joint FDA Import Group/BCBP Initiatives
    For many years, the FLA-DO has had an excellent working 
relationship with BCBP. This working relationship has led to many 
innovations and improvements in how FDA and BCBP handle imported FDA-
regulated products.
    The Miami Import Office has worked with BCBP to develop a joint 
FDA/BCBP team called ``Team 488.'' This team has created a Work 
Agreement and Standard Operating Procedures for processing joint 
regulatory and enforcement actions. Its purpose is to increase 
cooperation and enhance compliance of imported products. As a result of 
the work of this team, the Agency has achieved increased detection of 
substituted products and reduced erroneous declarations.
    In addition, the Miami Import Office is in the process of 
implementing a new data system to store and review electronic data from 
private laboratories for products detained without physical examination 
and to store information regarding the inspection of private 
laboratories. Private laboratory analytical package review has 
customarily been conducted by transmitting hard copy reports and 
certificates from the private laboratory to FDA import groups 
responsible for detentions without physical examination. This pilot 
program is designed to expedite the import process, promote a paperless 
system, and better protect the public health.
    In addition, there has been an increase in FDA/BCBP cooperation 
regarding:

 The collection and handling of liquidated damages claims.
 The detection of substituted products at the time of sampling 
        and at the time of destruction.
 The collection of civil money penalties for the substitution 
        and destruction of refused goods.
 The ability to ensure compliance among importers for exporting 
        and destroying refused goods.
    This working relationship also has led to many awards for the FLA-
DO including the Hammer Award for reinventing government. Despite the 
strong role that FLA-DO has played and continues to play in protecting 
the public health, recent events have caused the Agency to conduct an 
internal review of the Florida District's Import Operations.
Recent Developments Regarding FDA's Miami Import Office
    As discussed above, the Miami Import Office is responsible for 
conducting a large percentage of the Florida Districts varied import 
assignments. Recently, FDA advised the Energy and Commerce Committee 
and the American public of irregularities related to its handling of a 
large shipment of unapproved Viagra apparently from Belize. Through a 
series of procedural irregularities, foreign versions of Viagra were 
detained and subsequently released by FDA to consumers. FDA is 
conducting an ongoing internal review of these events and is taking 
steps to ensure that these mistakes do not occur in the future.
The Circumstances Surrounding the Discovered Irregularities
    As we discussed earlier in this testimony, under the FD&C Act, 
unapproved, misbranded, and adulterated drugs are prohibited from 
importation into the U.S. and may be subject to detention. If the 
Agency detains a drug that is in violation of section 801 of the FD&C 
Act, its implementing regulations require the Agency to issue a notice 
of detention to the products owner or consignee and offer an 
opportunity for a hearing before it can refuse admission of the product 
into U.S. commerce. In the case of the 1,233 packages of unapproved 
``generic Viagra'', the Agency issued a single notice of detention to 
BCBP, and BCBP was incorrectly designated as the consignee for the 
products. This was done despite the fact that the products were 
destined to multiple owners. After detaining the product in this 
manner, FDA directed BCBP to release the unapproved ``generic Viagra.'' 
After the products were released by FDA, the Agency sent a letter to 
each consumer who received these unapproved foreign versions of Viagra, 
alerting them to the fact that such products are unapproved drugs under 
the FD&C Act and that the Agency cannot provide any assurance of 
quality, safety, or effectiveness for these products. The details 
regarding this detention and the subsequent release of the unapproved 
Viagra were provided to the Committee in our response to Chairman 
Tauzins June 5, 2003, letter.
The Agency's Internal Review
    These irregularities in the Agency's administration of the Act, its 
regulations and FDA internal procedures led the Agency to initiate an 
internal review into how Miamis Import Office handles the detention of 
pharmaceutical shipments at the Miami International Mail Facility. The 
internal review is continuing. Nonetheless, the Agency acknowledges 
that administrative mistakes were made. As of this date, the Agency has 
taken several actions to rectify the situation and we expect to make 
additional improvements in the future. We believe that these FDA short-
term and mid-term steps will strengthen our Miami Import Office 
operations.
Next Steps Based on the Agency's Ongoing Internal Review
    In the wake of the discovery of these administrative mistakes, 
Florida District managers have undertaken several steps to ensure that 
import detentions are handled properly in the future. First, Florida 
District (the District) managers held an all-hands meeting with the 
personnel at the Miami Import Office where they discussed the 
circumstances surrounding the detention of the unapproved ``generic 
Viagra.'' At this all-hands meeting, the District managers also 
conducted training on section 801 of the FD&C Act and the regulation 
and procedures that govern the proper handling of an import detention. 
The managers reemphasized the importance of properly reviewing records 
and making regulatory decisions in accordance with Agency policy. 
Second, in addition to reminding compliance personnel that documents 
must be reviewed carefully before making regulatory decisions, the 
District implemented new requirements regarding the initialing and 
dating of mail entry reports so that District personnel can more easily 
determine what records have been reviewed and whether they have been 
reviewed properly. Third, the District is drafting new standard 
operating procedures for the handling of mail entries. Fourth, the 
District acknowledged its mistake to the BCBP supervisor at the Miami 
mail facility regarding the improper handling of the detention of the 
unapproved Viagra shipment. Fifth, the District is going to be 
conducting bi-weekly meetings with the BCBP Assistant Port Director for 
Miami or her representative in order to strengthen the Miami Import 
office's relationship with its partners. Sixth, the District will meet 
with the BCBP supervisor at the Miami mail facility on a monthly basis 
in order to enhance our working relationship with BCBP. Seventh, the 
District will provide BCBP with hard copies of all of the Import Alerts 
that the Agency issues. Eighth, the District will review its Import 
Operations Quality Assurance Audit plan and determine the type of 
specific changes that are in order. Ninth, the Regioal and District 
management will review several proposals that focus on improving the 
management structure and the supervisory ratio in the Miami Import 
office so that there is greater management oversight.
    In addition to these measures, Howard Lewis has been assigned, on 
an indefinite basis, as the Florida District's IPM. Mr. Lewis is from 
FDA's New Orleans District and he has a strong compliance background 
and a wealth of knowledge on domestic and import compliance issues. 
These strengths will allow him to identify additional improvements that 
will strengthen the Miami Import Offices role in protecting the public 
health. The steps noted above are designed to ensure that the Miami 
Import Office is working at an optimal level and that product will be 
detained properly in the future. In addition to the continuing 
improvements in Miami, FDA is focused on making improvements to all of 
its import operations that will enhance the Agency's management of its 
import operations and its ability to protect the public despite the 
increasing volume of imported products.
Strategic Planning
    In order to target its limited import resources more efficiently as 
part of a risk-based import surveillance system, the Agency also is 
developing Agency-wide strategies and action items that are meant to 
protect the public health by decreasing the risk that unsafe, 
ineffective, or violative products will enter U.S. commerce through our 
borders, ports and other import hubs. To achieve the most cost-
effective approach to managing import risks, theses strategies and 
action items focus on building a foundation that will allow the Agency 
to engage in a more rigorous analysis of risks and apply this approach 
to all phases of the full import life cycle.
    In the Risk Management Goal contained within the Commissioners 
Strategic Action Plan there are several action items that will help FDA 
achieve this goal. These action items include:

 The development of procedures for implementing Center policies 
        to reduce import examination rates for articles imported from 
        foreign facilities where inspections demonstrate substantial 
        compliance with manufacturing, processing, or sanitation 
        quality and safety principles.
 The development of an information-sharing Memorandum of 
        Understanding with at least one other country concerning 
        product safety, quality and/or security issues.
 The development of a strategic integrated WorkPlan for field 
        import activities that is uniformly managed, planned, 
        evaluated, and supported/resourced by all of FDA's Centers.
 The revision of Compliance Program Guidance Manuals (CPGMs) 
        and the Regulatory Procedures Manual (RPM) to incorporate 
        import policies and guidance to improve efficiency and 
        effectiveness of FDA's use of Import Alerts and Detention 
        Without Physical Examination.
 The modification of CPGMs, the RPM, Compliance Policy Guides 
        (CPGs), the Investigations Operations Manual (IOM), and 
        Establishment Inspection Report formats so that during domestic 
        inspections inspectors examine, report, and track counterfeit 
        imported products, returned imported products, rejected 
        imported products, and compliance files concerning imported 
        products.
 The exploration of the development of Risk Assessment 
        Predictive Approaches that capture and repurpose risk 
        information for use in import entry screening and enhanced 
        targeting of import operations and resources.
 The creation of a closed docket to gather information on 
        technologies being implemented by industry to ensure proper 
        shipping conditions (time-temperature indicators) and the 
        integrity (anti-counterfeiting and anti-tampering) of human 
        drug products and shipments while in international distribution 
        and shipping routes.
    FDA believes that as each of these strategies and action items is 
completed, it will have an impact on the Agency's import operations and 
they will improve the Agency's ability to protect the public health by 
decreasing the risk that unsafe or ineffective FDA-regulated products 
will enter U.S. commerce through our borders and ports.
Improvements to FDA's Import Compliance Program
    FDA is reevaluating, refining, and improving the programs and 
procedures that it is using to ensure the availability of safe and 
effective drugs to U.S. consumers. As part of our efforts to improve 
the programs and procedures that are used to ensure the availability of 
safe and effective drugs to U.S. consumers, FDA is considering several 
concepts that will improve the Agency's ability to target resources 
applied to regulation of imported drug products. As with all of FDA's 
activities, priorities are established based on benefit/risk to public 
health. In terms of prioritizing the Agency's domestic and import 
compliance workload, products that present a direct health hazard to 
the user are FDA's highest priority. Such products include those that 
have a reasonable potential for causing direct serious adverse effects, 
or where there is documentation of injury or death. Examples of such 
products include counterfeit Procrit and counterfeit Serostim. Products 
that are not themselves hazardous can still present an indirect health 
hazard in that the consumer may delay or forgo proven medical treatment 
and the use of approved therapies. These are also a top priority for 
the Agency. Examples include unapproved products that are promoted for 
the treatment of cancer, Alzheimers disease, arthritis, heart disease, 
high cholesterol and high blood pressure.
                         drug cost initiatives
    The Administration also currently is engaged in a number of 
initiatives to reduce the costs of prescription medications. These 
actions will result in more affordable prescription drugs and will 
reduce the incentive to look to foreign sources for cheaper 
medications.
New Medicare Drug Benefit
    The President is working with Congress on legislation this year to 
bring more choices and better benefits to the Medicare system. The 
President has committed up to $400 billion over the next ten years to 
pay for modernizing and improving the Medicare system. An essential 
component of this legislation is a prescription drug benefit, which 
will make medicines more affordable for senior citizens.
New Rule on Generic Drugs
    On June 18, 2003, FDA published its final rule to lower 
prescription drug costs for millions of Americans by improving access 
to generic drugs. These changes are expected to save Americans over $35 
billion in drug costs over the next 10 years. FDA's final rule provides 
the generic industry with enhanced predictability and certainty, while 
avoiding unnecessary and lengthy litigation, preserving intellectual 
property protections and protecting the process of developing new 
breakthrough drugs. Specifically, the proposed rule would allow only 
one 30-month stay for each generic drug application, clarify that 
certain patents cannot be listed, and improve the declaration that 
innovators must make about patents they submit to FDA for listing in 
the Agency's Orange Book publication that lists all drug products 
approved under section 505 of the FD&C Act.
New Funding
    The Presidents 2004 budget proposes an unprecedented increase of 
$13 million in spending for FDA's generic drug program. This will be 
the largest infusion of resources into the generic drug program in 
history, increasing the programs size by about one-third. The proposed 
increase in FDA's generic drug budget will allow FDA to hire 40 experts 
to review generic drug applications more quickly and initiate targeted 
research to expand the range of generic drugs available to consumers. 
The improvements in the efficiency of review procedures are expected to 
save consumers billions more by generally reducing the time for 
approving new generic drugs.
New Education Outreach and Scientific Study
    FDA will expand its educational programs and partnerships involving 
generic drugs to help health care practitioners and consumers get 
accurate information about the availability of generic drugs for their 
health care needs. Further, FDA will undertake additional scientific 
studies of certain types of generic drugs to improve the approval 
process.
Bipartisan Approach on Affordable Prescription Drugs
    Last week, the Senate voted in favor of bipartisan legislation 
sponsored by Senators Gregg and Schumer that would complement FDA's 
rule by providing greater access to more affordable generic drugs. The 
Senate bill would codify elements of FDA's final rule and adds a 
provision limiting 180-day exclusivity to accelerate generic 
competition in the marketplace.
New Drug Development
    FDA is taking steps to support market competition as a means of 
addressing the cost of developing and manufacturing drugs, and the 
availability of generic drug alternatives. Two new FDA initiatives in 
the Commissioners Strategic Action Plan address important factors 
affecting the cost of new drug development and the cost of drug 
manufacturing.
    New drug development presents uncertainties that increase the 
business risk and costs to the innovator. Higher costs can create 
barriers to competition for new drugs and new innovators--those 
companies that don't have access to the capital available to more 
established drug companies. Although some scientific and technical 
uncertainties are inherent and unavoidable in drug innovation, others 
can be reduced or eliminated. Such reductions will help speed patient 
access to new drugs and reduce the cost of drug development. FDA has 
begun major initiatives to reduce some of those sources of uncertainty. 
For example, sponsors may be uncertain about what specific evidence is 
required to demonstrate safety and effectiveness for a given disease. 
As a result, they may continue research with a drug that will not lead 
to the required evidence.
    FDA has identified several priority disease areas and new 
technologies that the Agency believes are good candidates for new work 
to clarify regulatory pathways and clinical endpoints. The targeted 
disease areas include cancer, diabetes and obesity. The targeted 
technologies include cell and gene therapy, pharmacogenomics and novel 
drug delivery systems.
    A planned formal guidance for industry will help to minimize 
guesswork and improve the design of clinical trials. This will benefit 
participating patients and allow more cost-effective use of Research 
and Development funds. FDA also is taking steps to identify and address 
the root causes of avoidable delays in new drug review through 
retrospective analysis, better review management and prospective 
evaluation of our review process from the perspective of both FDA and 
drug innovators.
                               conclusion
    The standards for drug review and approval in the U.S. are the best 
in the world, and the safety of our drug supply mirrors these high 
standards. The employees of FDA constantly strive to maintain these 
high standards. However, a growing number of Americans are obtaining 
prescription medications from foreign sources. U.S. consumers often 
seek out Canadian suppliers, sources that purport to be Canadian, or 
other foreign sources that they believe to be reliable. While some 
foreign drug manufacturers submit their products to FDA for approval, 
the imported drugs arriving through the mail, through private express 
couriers, or by passengers arriving at ports of entry are often 
unapproved new drugs that may not be subject to any reliable regulatory 
oversight. FDA cannot assure the safety of drugs purchased from such 
sources.
    The vigilance of FDA and BCBP inspectors is an important tool in 
detecting imported products that violate the FD&C Act. Given the 
available resources and competing priorities facing these agencies, 
however, experience shows that inspectors are unable to visually 
examine many of the parcels containing prescription drug products that 
arrive through the mail and private courier services each day. Many of 
the packages that the Agency is able to examine appear to contain 
foreign versions of U.S.-approved products. The growing volume of 
unapproved imported drugs, which often are generated from sales via the 
Internet, presents a formidable enforcement challenge. As a 
consequence, the Agency must employ a risk-based enforcement strategy 
to deploy our existing enforcement resources in the face of multiple 
priorities, including homeland security, food safety and counterfeit 
drugs. In sum, at this time the Agency cannot assure the American 
public that drugs purchased from foreign sources are the same as 
products approved by FDA, or that they are safe and effective. The 
Agency acknowledges the concerns raised by the Committee regarding 
recent problems with enforcement in the Miami field operations and has 
already undertaken several actions designed to address the specific 
issues that were cited. The Agency looks forward to continuing to work 
with the Committee to identify additional solutions to address these 
pressing concerns. We appreciate and share the Committees interest in 
assuring that the American public has access to safe and affordable 
medicines and we look forward to working further with Congress and 
other concerned parties on this important public health goal.
    We would be happy to answer any questions you may have.

    Mr. Greenwood. Thank you, Mr. Taylor.
    Ms. Durant.

                TESTIMONY OF ELIZABETH G. DURANT

    Ms. Durant. Mr. Chairman, members of the committee, thank 
you for this opportunity to testify. Today I would like to 
discuss with you the Bureau of Customs and Border Protection 
efforts to address the ever-increasing trend of personal and 
bulk importations of pharmaceutical products into the United 
States.
    Although the main focus of the Bureau of Customs and Border 
Protection is to protect the United States from terrorist 
attacks, BCBP also enforces over 400 requirements for more than 
40 other Federal agencies at U.S. borders. These include the 
laws that prohibit the importation of illegal or unapproved 
pharmaceuticals that fall under the jurisdiction of the Food 
and Drug Administration.
    The BCBP is concerned with three ways that pharmaceuticals 
are imported: those that are purchased through the Internet and 
shipped through our international mail or express courier 
facilities; those carried into the United States by individuals 
transiting our land borders; and bulk shipments of adulterated 
or counterfeit pharmaceuticals. Millions of packages come 
through mail and express courier facilities every year. 
Thousands of packages, particularly in the mail, are found to 
contain illegal and unapproved pharmaceuticals. We also 
estimate that 10 million people cross the land border annually 
carrying the same unapproved products. A disturbing trend is 
the increase in bulk shipments through the mail indicating that 
these products could be making their way to pharmacy shelves.
    Detecting prohibited pharmaceuticals among the tens of 
millions of parcels passing through our facilities each year 
presents a massive challenge. Our limited resources require a 
risk management approach, with which we utilize advance 
intelligence, records of past seizures, and other factors to 
locate packages that present the most significant threat.
    We work in cooperation with the FDA on this important 
function. Our laboratories help us find discrepancies in 
shipments of bulk and finished pharmaceuticals. FDA establishes 
effective national standards for the interdiction of 
pharmaceuticals subject to FDA laws.
    Based on an operation nicknamed ``Operation Safeguard'' 
that we have carried out over the last couple of years, we have 
found the volume of pharmaceuticals shipped through 
international mail to be enormous. We have also found that a 
significant number of these do not contain an active 
pharmaceutical ingredient, but merely contain substances such 
as starch or sugar. Other problems include expired materials, 
unapproved products, improper usage instructions, and products 
made in facilities not under proper regulation. The vast 
majority of the pharmaceuticals that enter the U.S. via the 
mail do so in a manner that violates present FDA or other 
requirements.
    Additionally, we have found that many parcels contained 
different types of pharmaceuticals that, if taken 
simultaneously, could cause dangerous interactions. Individuals 
not under the direct supervision of a physician could easily 
purchase these products. Thus, we cannot assume that these 
products would be used properly. It is important to note that 
after 3 weeks of one phase of Operation Safeguard, the quantity 
of illegal and defective pharmaceutical shipments slowed 
significantly.
    During a phase of Operation Safeguard that took place at 
two international mail branches, 31 parcels containing 52 
different types of questionable pharmaceuticals underwent 
intensive chemical analysis. The analyses of these products 
showed that 8 of the so-called pharmaceuticals or 14 percent 
contained no identifiable active ingredient and 40 percent 
contained a substance that is regulated under the Federal 
Controlled Substance Act. Additionally, during this phase of 
the operation it was found that large parcels of fake or gray 
market pharmaceuticals are being split into different mail 
shipments but arrive at the same address. Accordingly, there is 
a possibility that State side pharmaceutical distributors could 
be using these products as a source of supply.
    This summer, the Bureau of Customs and Border Protection 
intends to conduct ``blitz'' operations at four international 
mail branches. Our scientists will work with inspectors to 
target, examine, and test packages containing pharmaceuticals. 
This operation will enable us to evaluate the type, volume and 
quality of imported medication.
    It is clear that this remains an overwhelming problem and 
we are working cooperatively with the FDA to improve our 
enforcement efforts in this area including efforts to address 
the immediate return of imported pharmaceuticals and travelers 
who attempt to import pharmaceuticals upon their return to the 
U.S.
    From an overall perspective, a spiraling volume of goods at 
our borders has put immense pressure on our ability to enforce 
the Nation's laws while facilitating international trade and 
protecting the borders against the threat of terrorism. 
Although we have taken some positive steps, successfully 
identifying and handling imported pharmaceuticals presents a 
daunting challenge for us.
    I want to thank you and the members of the committee for 
considering us in your review of the importation of personal 
and bulk pharmaceuticals. This is an issue that speaks directly 
to our mission. We will continue to make every effort possible 
to work with the Congress and our fellow agencies to address 
the health and safety concerns of the American people.
    Thank you, Mr. Chairman.
    [The prepared statement of Elizabeth G. Durant follows:]
 Prepared Statement of Elizabeth G. Durant, Executive Director, Trade 
  Compliance and Facilitation, Bureau of Customs and Border Protection
    Mr. Chairman, members of the Committee, thank you for this 
opportunity to testify. I am Elizabeth Durant, Executive Director of 
Trade Compliance and Facilitation at the Bureau of Customs and Border 
Protection (BCBP). Today I would like to discuss with you BCBP efforts 
to address the ever-increasing trend of personal and bulk importation 
of pharmaceutical products into the United States.
    Although the main focus of the BCBP is to protect the United States 
from terrorist attacks, BCBP also enforces over 400 requirements for 
more than 40 other federal agencies at U.S. borders. These include the 
laws that prohibit the importation of illegal or unapproved 
pharmaceuticals that fall under the jurisdiction of the Food and Drug 
Administration, or FDA.
    The BCBP is concerned with three particular ways that 
pharmaceuticals are imported: those that are purchased through the 
Internet and shipped through our international mail or express courier 
facilities; those carried into the United States by individuals 
transiting our land borders; and bulk shipments of adulterated or 
counterfeit pharmaceuticals.
    Millions of packages come through mail and express courier 
facilities every year. Thousands of packages, particularly in the mail, 
are found to contain illegal and unapproved pharmaceuticals. We also 
estimate that 10 million people cross the land border annually carrying 
the same unapproved products. A disturbing trend is the increase in 
bulk shipments through the mail indicating that these products could be 
making their way to pharmacy shelves.
    Detecting prohibited pharmaceuticals among the tens of millions of 
parcels passing through our facilities each year presents a massive 
challenge. Our limited resources require a risk management approach, 
with which we utilize advance intelligence, records of past seizures, 
and other factors to locate packages that present the most significant 
threat.
    We work in cooperation with the FDA on this important function. 
BCBP laboratories help us find discrepancies in shipments of bulk and 
finished pharmaceuticals. FDA establishes effective national standards 
for the interdiction of pharmaceuticals subject to FDA laws.
    Based on an operation nicknamed ``Operation Safeguard'' that we 
have carried out over the last couple of years, we have found the 
volume of pharmaceuticals shipped through international mail to be 
enormous. We have also found that a significant number of these do not 
contain an active pharmaceutical ingredient, but merely contain 
substances such as starch or sugar. Other problems include expired 
materials, unapproved products, improper usage instructions, and 
products made in facilities not under proper regulation. The vast 
majority of the pharmaceuticals that enter the U.S. via the mail do so 
in a manner that violates present FDA or other requirements.
    Additionally, we have found that many parcels contained different 
types of pharmaceuticals that, if taken simultaneously, could cause 
dangerous interactions. Individuals not under the direct supervision of 
a physician could easily purchase these products. Thus, we cannot 
assume that these products would be used properly. It is important to 
note that after three weeks of one phase of Operation Safeguard, the 
quantity of illegal and defective pharmaceutical shipments slowed 
significantly.
    During a phase of Operation Safeguard that took place at two 
International Mail Branches, 31 parcels containing 52 different types 
of questionable pharmaceuticals underwent intensive chemical analysis. 
The analyses of these products showed that 8 of the so-called 
pharmaceuticals or 14 percent contained no identifiable active 
ingredient and 23 (or 40 percent) contained a substance that is 
regulated under the Federal Controlled Substance Act. Additionally, 
during this phase of the operation it was found that large parcels of 
fake or gray market pharmaceuticals are being split into different mail 
shipments but arrive at the same address. Accordingly, there is a 
possibility that state side pharmaceutical distributors could be using 
these products as a source of supply.
    This summer, BCBP intends to conduct ``blitz'' operations at four 
International Mail Branches. BCBP scientists will work with inspectors 
to target, examine, and test packages containing pharmaceuticals. This 
operation will enable BCBP to evaluate the type, volume and quality of 
imported medication.
    It is clear that this remains an overwhelming problem and BCBP is 
working cooperatively with the FDA to improve our enforcement efforts 
in this area including efforts to address the immediate return of 
imported pharmaceuticals and travelers who attempt to import 
pharmaceuticals upon their return to the U.S.
    From an overall perspective, a spiraling volume of goods at our 
borders has put immense pressure on our ability to enforce the nation's 
laws while facilitating international trade and protecting the borders 
against the threat of terrorism. Although we have taken some positive 
steps, successfully identifying and handling imported pharmaceuticals 
presents a daunting task for BCBP.
    I want to thank you and the members of the committee for 
considering the BCBP in your review of the importation of personal and 
bulk pharmaceuticals. This is an issue that speaks directly to our 
mission. We will continue to make every effort possible to work with 
the Congress and our fellow agencies to address the health and safety 
concerns of the American people.

    Mr. Greenwood. Thank you.
    And the Chair recognizes himself for 8 minutes for 
questioning.
    Let me start with you, Mr. Hubbard. We have heard of 
limiting these importations and we heard from Mr. Bass a 
question about well where is the harm? We see all of the 
counterfeit drugs, we hear the horror stories about them having 
no potency. We hear the horror stories about them being tainted 
and so forth. But where are the deaths, where are the injuries?
    It strikes me that, for instance, if you are a cancer 
patient and you order your drugs over the Internet and those 
drugs do not have in them the molecules that you need to treat 
your cancer and you die from cancer, you are not going to die 
from necessarily the counterfeit drug, but you may very well 
die prematurely from the disease or you may not get a cure for 
a disease and the medical examiner will diagnose the death, 
attribute the death to the disease not to the drug. Am I right 
about that? Is that the assumption that you folks at FDA make?
    Mr. Hubbard. You are absolutely right, Mr. Chairman. You 
would not expect to take these drugs and have an immediate 
adverse reaction that would cause injury or death. What really 
is happening, as you say is, patients are not being treated. So 
the example you gave is correct. And the example of, say, of a 
person with hypertension whose blood pressure should be lowered 
40 points, maybe it is not lowered at all, maybe it is lowered 
10 points. And he is not going to know that, but yet he is 
being injured by taking that subpotent or ineffective drug.
    Mr. Greenwood. And I would think that that would be the 
same for a cholesterol control drug?
    Mr. Hubbard. Absolutely.
    Mr. Greenwood. If you were taking Lipitor, whether it is 
counterfeit Lipitor or real Lipitor, you probably figure you 
have got the problem under control. You are not necessarily 
rushing back to have cholesterol counts taken unless you are 
very conscientious. And, in fact, your cholesterol may rise, 
may be doing all kinds of damage to your cardiovascular system 
and you have no way of knowing it.
    Mr. Hubbard. That is absolutely true. And, of course, in 
the case of a diabetic or someone with a very serious acute 
illness, missing a dose or taking an ineffective drug could be, 
frankly, hazardous in the shorter run.
    Mr. Greenwood. Now, the intention of this hearing is to 
reexamine the problem, and we hope to hold and intend to hold 
another hearing in July to really go at the solutions. But I 
just want to press you little bit about that. Because we have 
talked, and I have talked to Mr. McClellan about a risk-based 
approach.
    We know that given 30,000 parcels a day coming into the 
United States that there are a variety of sources. Some of them 
are big commercial websites and the product may be coming from 
Thailand and then through Canada down into the United States. 
Another possibility may be Aunt Myna sending Aunt Betsy some 
drugs that she forgot to take with her when she was visiting 
and so forth. And so there is a whole range of sources and 
volumes of these drugs.
    And so if we do not return every package to sender, 
including Aunt Myna's package, what do we do, where do we start 
to look for the highest risk and places where we could clamp 
down that would have the greatest impact in protecting safety?
    Mr. Hubbard. As you say, we obviously have to focus on the 
large commercial shipments and the ones that can pose an 
expanded risk to patients. I will ask Mr. Taylor to expand upon 
that.
    Mr. Taylor. Yes. Sure.
    Mr. Greenwood. Please do.
    Mr. Taylor. Mr. Chairman, I mean just as a general rule, 
the two type of products that we would give the highest 
priority to are those products that lead to affirmative harm to 
a consumer or in the alternative, there are in some cases, and 
again as we have alluded to today, there are some products that 
are marketed in a way that might cause a person to decide not 
to use the unapproved version instead of the approved version 
this product. So, generally across all our programs, those are 
the highest priority products that we focus on.
    But taking that and actually implementing that requires 
some additional steps. In the context of imports, we need to 
take and evaluate information better so that we develop 
priorities for import detentions. Obviously, as we have 
discussed today the numbers are so overwhelming that we cannot 
necessarily detain every product that is violative, but in 
terms of focusing on those products that pose the greatest harm 
to the public, I think we need to take steps to develop 
priorities that really help us decide when we should go ahead 
and do a detention.
    I think we also need to make sure that we are employing 
resources at the busiest import facilities, whether they be 
mail facilities, whether they are handling drugs, foods or the 
other competing priorities that we have to deal with. But I 
think we need to go back and make sure we are utilizing our 
limited resources most efficiently.
    I think we also need to go back and take stock of where we 
are and retrain our people regarding those products that we 
deem compose the greatest risk. And then, obviously, that 
training needs to be updated as additional information comes to 
us regarding potential risk.
    Mr. Greenwood. Let us assume, excuse me for interrupting 
but time is short. But let us assume that there is a website 
that purports to be a Canadian source and, in fact, it is 
established through investigation that the real source may be 
in India or Thailand or some combination of places, and that 
the drugs that are coming through there are really consistently 
substandard or counterfeit, dangerous. Walk me through what we 
could do about that. How do you go shutdown a facility in 
another continent and prohibit its materials from coming in? 
And even if you said this company is called the YXZ company and 
when we see their packages come in, we will put them off? What 
seems a pretty simple matter to change your company's name to 
the ABC company and continue to send the product in.
    Mr. Taylor. Well, your question certainly underscores some 
of the challenges in dealing with some of these Internet sites. 
But walking through the process, what we would do is we would 
triage the site and try to determine the nature of the 
products, how many times we have seen these products in the 
past. We would try to get as much information as we can that we 
could share with the foreign government where the site resides 
so that we could try and work with that government to identify 
those instances where products have been sent from the company 
so that we have better information that would allow us to 
interdict those products when they reach our borders.
    Obviously, it is challenging because of the volume of 
products coming from overseas. And the reason why we employ 
this strategy is because, as you know, from a jurisdictional 
standpoint we cannot necessarily if the site is, indeed, 
overseas, it is difficult to hold the site owner culpable. So 
what we need to focus on is ensuring that we can try and stop 
the product at the border. In addition, if the product somehow 
has made its way into domestic commerce, we would make it a 
high priority to do recalls, talk papers, physician letters if 
it is appropriate as well as using seizures and criminal 
prosecutions to try and assure that the product is not spread 
through the domestic market.
    Mr. Greenwood. We have talked about resources and Mr. Bass 
in his opening statement said something about even if we had 
12,000 drug police, it would not be enough. And I tend to 
concur with that. The volume if you use this current system 
that you have in place, the number of personnel that you would 
need to really have a pretty foolproof system would be 
unrealistic. We could not do it. So is it not the case that we 
really need to change the system that we use to approach this 
problem rather than simply call for more resources?
    Mr. Taylor. I think that is correct. I mean, currently I 
have 537 investigational personnel devoted to this task. And 
those bodies do not just handle pharmaceutical products. They 
handle foods, biologics, they are involved in preventing the 
spread of BSE to this country. They are involved in taking 
steps to prevent the monkey pox outbreak from growing. They are 
involved in homeland security and food safety. So those 500 
some odd people are vested with a large job, and it is simply 
not true that increasing the resources will not really cause a 
big dent. We really need to change the system.
    Mr. Greenwood. My time has expired.
    The Chair recognizes the ranking member, Mr. Deutsch, for 8 
minutes.
    Mr. Deutsch. Mr. Chairman, I would like to see if we can 
have Mr. Dingell ask the first series of questions.
    Mr. Greenwood. All right. Mr. Dingell is recognized for 8 
minutes.
    Mr. Dingell. This is quick, just yes or no. We have no 
exact inventory for what the various bags of products were in 
the Miami facility during the time that the staff visited in 
March. Is that correct?
    Mr. Taylor. That is correct.
    Mr. Dingell. All right. Thank you.
    Mr. Taylor. If the product is not detained, we do not 
have----
    Mr. Dingell. Thank you. My time is limited.
    It is known, however, that a large shipment of 
approximately 1,233 shipments of purported fake Viagara were 
detained during the October/November timeframe. Is that not 
correct?
    Mr. Taylor. That is correct.
    Mr. Dingell. What happened to those shipments?
    Mr. Taylor. They were released, sir.
    Mr. Dingell. The staff inquired into whether those were 
detained, why they were detained and FDA immediately released 
it. Is that right?
    Mr. Taylor. We did not immediately release it. We released 
it several--the product was released several months after the 
detention. But, yes, it was released.
    Mr. Dingell. A curious set of events.
    Mr. Taylor. Yes.
    Mr. Dingell. The staff inquires as to why these are being 
detained and you release them. The staff was concerned about 
the safety. You released them. A very curious arrangement.
    Can you tell us why these were released? What was the 
grounds on which they were released?
    Mr. Taylor. Sure. When the information surrounding this 
detention first came to me, my inclination was to have the 
staff go back and detain the products properly.
    Mr. Dingell. Did you establish that these were safe? Did 
you establish that these were, in fact, Viagara? Did you 
establish that this shipment was, in fact, Viagara which was 
generic or not? On what grounds was it released?
    Mr. Taylor. Sir, I did know that the product was indeed 
unapproved Viagara. Those were the facts that were provided to 
me.
    Mr. Dingell. So, that's curious. Is this a regular practice 
of releasing shipments of prescription pharmaceuticals with so 
little attention and care?
    Mr. Taylor. Well, actually if you may, in this particular 
case, as I said before, my inclination was to detain these 
products properly. However, when provided with information 
regarding----
    Mr. Dingell. You are supposed to keep illegal shipments. 
You are supposed to keep out shipments of prescription 
pharmaceuticals that do not meet good manufacturing practices, 
that do not comply with our patent laws. You are supposed to 
see to it that you have a careful coordination with the Customs 
Service and that they have clear understandings of your 
policies.
    Mr. Taylor. Absolutely.
    Mr. Dingell. Is that not so?
    Mr. Taylor. That's absolutely correct.
    Mr. Dingell. Do you have agreements in written form of 
cooperative management agreements with Customs Service on 
matters of this kind? Yes or no.
    Mr. Taylor. I do not know if we have a cooperative 
agreement, but we----
    Mr. Dingell. You do not.
    Mr. Taylor. Okay.
    Mr. Dingell. I happen to know you do not.
    Now, can you tell us whether you contacted Pfizer, which is 
the patent holder on this matter to find out what was going on 
there or did you not?
    Mr. Taylor. We have spoken to Pfizer about this matter.
    Mr. Dingell. Did you call them in connection with this 
release?
    Mr. Taylor. No. I did not personally, no.
    Mr. Dingell. Did anybody at Food and Drug?
    Mr. Taylor. I am not sure. I know that we have had 
discussions with them regarding this particular shipment in 
this matter.
    Mr. Dingell. Now Food and Drug has had many warnings that 
the Miami facilities had problems. They have a huge backlog of 
shipments. FDA has made reference to 1,233 shipments of fake 
Viagara in response to the June 5 request for information sent 
by this committee. Is that not so?
    Mr. Taylor. Correct.
    Mr. Dingell. In your June 19 response to the committee you 
explain how 1,233 shipments of fake Viagara were released. In 
response in mentions that there is a discussion and a resulting 
decision by Mr. Taylor to release these shipments of Viagara, 
that is at page 4 Exhibit 20. Do you know what all this other 
product in the photo is?
    Mr. Taylor. I'm sorry, sir, which photo? What number?
    Mr. Dingell. The staff will show you the photo. Page 4, 
Exhibit 20.
    And I ask unanimous consent that that be inserted in the 
record.
    Take it down and show it to him.
    Mr. Greenwood. Without objection it will be.
    Mr. Dingell. Exhibit 20.
    Staff reported at the time of their March 2003 visit there 
was a fake product being stored in a cage, but also huge 
quantities were stored outside the cage, and you will see that 
in Exhibits 15 and 16. Who authorized the release of the 
product outside the cage of at least 928 additional packages?
    Mr. Taylor. Well, first, sir, clearly it appears that the 
product is unapproved. I am not sure if it is fake or not.
    In the case of those situations where we do not detain the 
product, the product is set aside and therefore it is released 
if indeed we do not decide to detain the product. And the 
release would be based on our discussions with Customs.
    Looking at this product again, it looks like the product is 
indeed unapproved. I cannot say that it is necessarily fake, 
which seems to connote counterfeit, but it definitely is 
unapproved product here.
    Mr. Dingell. Do you know whether it was approved or not 
approved?
    Mr. Taylor. It says Viagara, and based on the indications 
here and the note that is on top of this bag, at the very least 
it looks like it is unapproved product.
    Mr. Dingell. It is unapproved product?
    Mr. Taylor. Correct.
    Mr. Dingell. All right. So FDA is busily releasing 
unapproved product.
    Now, Customs provided a Xerox copy of some fake Viagara 
from a company by the name of DurusPharma. That is in the 
Committee Memo in Exhibit 17. I assume you are familiar with 
that product?
    Mr. Taylor. I am familiar with that product, and we have an 
import alert that was put----
    Mr. Dingell. Now, I would note that an import alert for 
Dureas Pharma was issued by Food and Drug before April 4, 2003. 
Why was this import then permitted after you had had an import 
alert for a product coming in from these people?
    Mr. Taylor. The import alert does not prevent the product 
from entering. What the import alert does is it sensitizes the 
staff of FDA and Customs for the need to make it a priority in 
terms of detaining the product.
    Mr. Dingell. Apparently it did not have much effect because 
not much happened, their product was released, is that not so? 
What purpose did this import alert serve then?
    Mr. Taylor. I mean in regards to the DurusPharma product, I 
am not familiar with the specific shipment you were talking 
about. But I----
    Mr. Dingell. Well, my time is limited to 5 minutes, but I 
find this to be a very curious situation.
    Can you tell me what the distinction between FDA's 
definition of a counterfeit drug and the Belize drug that was 
found during this inquiry by the committee staff?
    Mr. Taylor. Sure. In Section 201(g) of the Act there are 
several components to the definition of a counterfeit drug. 
One, just to paraphrase, one part of the definition focuses on 
sort of the trademark or property right, the use of a trademark 
or some symbol as an initial signal as to whether a product is 
counterfeit. However, the second part of the definition focuses 
on the product marketed in lieu of the authentic. So, for 
example----
    Mr. Dingell. Well now you would note that the patent on 
Viagara is still in place, is it not?
    Mr. Taylor. Indeed. But I also----
    Mr. Dingell. There is no proper admission, there is no 
proper marketing of Viagara as a generic at this time?
    Mr. Taylor. That is right. But that does not mean that the 
product----
    Mr. Dingell. And so you still went ahead and released it. 
Can you explain that to us?
    Mr. Taylor. Sure. We released based on the fact that I had 
to weigh competing priorities, the need to deal with homeland 
security and pending BSE issue, versus the resources that would 
be needed to--which at that time looked to be 4 to 8 weeks of 
moving personnel over to solely and properly detain this 
product. Given that very difficult decision----
    Mr. Dingell. In other words, you were busy doing other 
things?
    Mr. Chairman, is my time up?
    Mr. Greenwood. Your time is up, sir.
    Mr. Dingell. Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair advises the gentleman----
    Mr. Dingell. I ask unanimous consent that I be permitted to 
submit a list of questions to the Commissioner of Food and Drug 
and ask to have a place kept in the record so that those can be 
inserted. Because this is a most curious behavior by this 
agency.
    And I thank you.
    Mr. Greenwood. We are continuing to investigate it. And 
without objection the gentleman's request will be in order.
    The gentleman from New Hampshire, Mr. Bass is recognized 
for 8 minutes.
    Mr. Bass. Thank you very much, Mr. Chairman.
    Before I begin, I just want to make sure that my position 
relevant to the substance of this hearing is clear. Counterfeit 
drugs are bad and they are illegal and they violate all kinds 
of law besides the issue of importation. In fact, counterfeit 
drugs are just as likely to be manufactured domestically as 
they are abroad.
    Second, the artificial price controls that are imposed by 
foreign governments with socialized medicine systems are also 
not right. And they create an inequity in the marketplace. 
However, for better or for worse and for one reason or another, 
the manufacturers of these drugs have accepted this system and 
are playing by the rules of that foreign government, which is 
unfortunate. And in my opinion we ought to be vigorously 
pursuing trade negotiations with these countries so that they 
terminate these artificial barriers or creation of price 
controls that result in the inequities.
    Mr. Hubbard, I did not hear you when you passed around this 
counterfeit Procrit package and the authentic one. Very 
briefly, where were these made?
    Mr. Hubbard. I am not sure.
    Mr. Bass. Are they as likely to have been made in the 
United States or not?
    Mr. Hubbard. Well, certainly American citizens were engaged 
in the manufacturing. Where they got some of the material is 
not known.
    Mr. Bass. So this is not necessarily a reimportation issue. 
These could have been in Washington, DC as likely as India, 
right?
    Mr. Hubbard. Yes.
    Mr. Bass. Okay. Fine. So this is a counterfeit drug issue, 
not an importation issue.
    Why do you think that the guy who purchased the drugs, why 
would anybody purchase drugs over the Internet? What is the No. 
1 reason, in your opinion, to do it?
    Mr. Hubbard. Well, there are two things. Obviously, is the 
price differential, as you have pointed out. Second, there is 
quite a bit of purchasing of what we call life style drugs, 
like Propecia for hair growth, Zenecal for weight loss, and 
Viagara. And those individuals when, we have asked them, say 
they do not want to go to their doctor and admit they have got 
that problem, and so they just go straight to the Internet and 
buy the drug.
    Mr. Bass. If the FDA had some mechanism whereby they could 
establish FDA approved drug purchasing program over the 
Internet, would that solve the problem?
    Mr. Hubbard. Well, we certainly could point consumers to a 
program run by the State Boards of Pharmacy called VIPS, which 
does authenticate Internet sites that sell drugs. In fact, 
there are legitimate sites like merckmedco.com, and those are 
perfectly legitimate. But many of these sites, of course, are 
not legitimate and they aren't even in the United States.
    Mr. Bass. Well, let us say for example it was legal drugs 
that were manufactured in facilities that were approved by the 
FDA, no matter where they were. In your opinion would that 
eliminate at least part of the problem that you face with this 
avalanche of drugs coming across a border?
    Mr. Hubbard. Obviously, such assurance would ameliorate our 
concerns. The problem there, of course, is you still have drugs 
moving around in ways that are outside normal licensing 
procedures.
    Mr. Bass. Well, if drugs sold within the United States were 
the cheapest in the world, what would your situation look like 
versus in some instances, the most expensive in the world?
    Mr. Hubbard. We would certainly hope that that might cause 
fewer counterfeit drugs and therefore they would be buying 
safer drugs. As I pointed out, generic drugs are cheaper in 
this country. We hope patients would certainly buy those in 
this country before they went to an Internet site or overseas.
    Mr. Bass. Clearly one of the issues is moving to more 
generics. But I guess my point is that if the underlying 
problem here is that many drugs sold in the United States are 
more expensive than they are anywhere else in the world, for 
one reason or another which those issues need to be addressed, 
and therefore by the natural movement of a free market we are a 
beacon of profitability for both legal and illegal 
manufacturers of these drugs. And is it not true that the issue 
here is ultimately if prices were the same or competitive 
between the U.S. and any other country, then the only issue you 
would be facing would be the issue of counterfeiting; and 
illegal, people who are violating patent laws, people who are 
violating FDA regulations that require that drugs be 
manufactured, you know, be licensed properly by the Food and 
Drug Administration?
    Mr. Hubbard. That may be true. You know, again, the price 
issue is not one FDA can do much about except for the things 
that we are trying to do such as get more generics on the 
market and get more new drugs on the market. But we can't 
directly regulate prices, obviously.
    Mr. Bass. Right. Okay.
    I will yield back to the chairman.
    Mr. Greenwood. I thank the gentleman and recognize the 
gentleman from Florida, Mr. Deutsch.
    Mr. Deutsch. Thank you, Mr. Chairman.
    Actually even before, even with the limitation on time, I 
also want to respond to some of the comments actually Mr. 
Ferguson made in the opening comments. And I think this is part 
of sort of debate. I am glad he is still here and maybe he will 
take his time.
    You know, saying that America has the best health care 
system in the world, I just do not agree. We have 40 million 
Americans who woke up this morning, went to work and do not 
have health care insurance. I mean, that is not the best health 
care system in the world.
    We have, literally, by any objective standard in terms of 
first world country, western industrialized countries, we spend 
more on health care per capita than any other country. Yet on 
objective standards life expectancy, instances of cancer, the 
instances of hypertension, other issues we are the worst.
    So, again, I can agree that at the high end of the scale we 
have the best innovations. But to say we have the best health 
care system in the world, unfortunately I think is an absolute 
mistake and a misnomer of the facts that exist in America 
today.
    Mr. Hubbard, let me respond to something, and this is a 
series of questions and it is getting somewhat frustrating, in 
fact incredibly frustrating. We had a field hearing, I believe 
it is 4 months ago in South Florida. We asked the FDA to get 
their arms around the amount or the number of people, the 
amount of scripts being written or the number of people who are 
availing themselves of purchasing drugs through the Internet or 
specifically through Canada. Do you have any sense of what that 
number is today?
    Mr. Hubbard. Mr. Deutsch, we made an attempt to extrapolate 
from a study 3 years ago and we have said since then we believe 
the number has increased.
    You know, whether we could do a survey----
    Mr. Deutsch. Let me just respond. Again, this goes pretty 
fast. Your answer is no? Your answer is no. Four months, your 
answer is no. Let me tell you, there are some people who do 
know. I mean, Glaxo knows. I mean the pharmaceutical companies 
know.
    Mr. Chairman, one of the suggestions I think we might have 
to do is pull some of the companies in here who seem to know.
    How could I have any trust, how could any American 
watching, listening, reading about this tomorrow, you have no 
idea, you have no concept how many--you do not know if the 
millions or tens of millions. Is that accurate?
    Mr. Hubbard. We think it is in the single digit millions 
based on what----
    Mr. Deutsch. Answer my question. You do not know if it is 
in the millions or 10 million, is that accurate?
    Mr. Hubbard. We do not have an accurate figure.
    Mr. Deutsch. You do not have a clue. You do not have a 
clue.
    Mr. Hubbard. I would dispute that. I think we do have a 
clue.
    Mr. Deutsch. You do not know if it is 5 million, 10 
million, 15 million?
    Mr. Hubbard. I am not sure those numbers matter that much.
    Mr. Deutsch. You do not think it matters?
    Mr. Hubbard. It is too much and it should not be coming in 
at all.
    Mr. Deutsch. Well, you said that it does not matter much, 
because you just testified under oath that people are doing it 
for lifestyle reasons. Have you talked to any seniors?
    Mr. Hubbard. I said some people, Mr. Deutsch.
    Mr. Deutsch. Well, I am asking you a question. Have you 
talked to any seniors? Have you ever talked to a senior that 
has purchased drugs through the Internet?
    Mr. Hubbard. Mr. Deutsch, I----
    Mr. Deutsch. I am asking you a question.
    Mr. Hubbard. Yes, I can----
    Mr. Deutsch. Have you personally talked to a senior?
    Mr. Hubbard. I get hundreds of letters----
    Mr. Deutsch. Have you personally--answer the question, sir?
    Mr. Hubbard. Yes. Yes.
    Mr. Deutsch. Who have you talked to?
    Mr. Hubbard. Individuals who have called to complain that 
we----
    Mr. Deutsch. Do you have a record of that? Can you supply 
the committee the name of any senior?
    Mr. Hubbard. I have----
    Mr. Deutsch. Can you describe a particular senior that you 
have talked to?
    Mr. Hubbard. I certainly know that seniors contact----
    Mr. Deutsch. That is not my question. That is not my 
question. My question is have you talked to a senior?
    Mr. Hubbard. Yes.
    Mr. Deutsch. And who is it? Can you describe that person?
    Mr. Hubbard. I would be glad to get you----
    Mr. Deutsch. Please do. Describe the person? Who is it? 
Where do they live?
    Mr. Hubbard. Generally we are talking----
    Mr. Deutsch. Generally? I just asked you a question. You 
are under oath. Have you talked to a senior?
    Mr. Hubbard. Yes, Mr. Deutsch, I----
    Mr. Deutsch. And who have you talked to? And describe the 
person. I do not need the name of the person.
    Mr. Hubbard. Okay. We have talked--I would rather not go 
into details, but----
    Mr. Deutsch. Do generalizations. I am asking you a 
question. Have you talked to a senior in the United States, one 
of the 10, 15 million seniors who woke up this morning who did 
not want to purchase their drugs through the Internet but did 
because they had to? Have you talked to one?
    Mr. Hubbard. Mr. Deutsch, we try to----
    Mr. Deutsch. Answer my question.
    Mr. Hubbard. Yes, Mr. Deutsch.
    Mr. Deutsch. Describe in a general way who that person is, 
where are they from, what is their age, what drugs are they 
purchasing? What person? What person, Mr. Hubbard? One person?
    Mr. Greenwood. Will the gentleman yield?
    Mr. Deutsch. No, I do not want to yield. I want him to 
answer the question. He has already lied under oath that he has 
talked to seniors that he cannot describe----
    Mr. Greenwood. The Chair will intervene. The gentleman does 
not know that the witness has lied. The gentleman----
    Mr. Deutsch. Well, I have given him every opportunity to 
describe in a general way. He has testified under oath.
    Mr. Greenwood. I suggest to the gentleman give him the 
opportunity to provide that information to the committee.
    Mr. Hubbard. I will be happy to.
    Mr. Deutsch. No. And I want you, you are here right now, 
describe in a general way a senior who you have told me now you 
have talked to seniors.
    Mr. Hubbard. Okay. But just briefly an email exchange----
    Mr. Deutsch. Is that talking?
    Mr. Hubbard. Well, certainly I was at a meeting in----
    Mr. Deutsch. You can tell me yes or no have you talked to a 
senior who has actually purchased a drug through the Internet?
    Mr. Hubbard. I----
    Mr. Deutsch. Yes or no?
    Mr. Hubbard. Yes, Mr. Deutsch.
    Mr. Deutsch. And when? Describe in a general way. And are 
you telling the truth?
    Mr. Hubbard. In Philadelphia 1 month ago after I gave a 
talk, several seniors came up to me and we had a discussion. I 
can't describe for you what they look like and who they were--
--
    Mr. Deutsch. What did they describe to you? What did they 
tell you they did?
    Mr. Hubbard. They basically said we are very concerned that 
you are attempting to keep us from buying drugs from Canada. 
And I said we are concerned about the safety.
    Mr. Deutsch. And would they tell you that they were doing 
it?
    Mr. Hubbard. Certainly one of the lady--a 76 year old lady 
said ``Yes, I am doing that. Will you take away my drugs?'' And 
I said no.
    Mr. Deutsch. Okay. And what you are describing is is 
exactly that. Let me talk very specifically. Okay. Because 
first of all, again, I mean it is an offense to the 10 million 
seniors that woke up in America today that did not have a 
choice that had to purchase their drugs, not because they want 
to. You know, my mother-in-law does it? There are tens of 
thousands of seniors in South Florida who are doing it every 
day. There are a dozen prescription Canada pharmacies that have 
opened up. I do not like it. I wish it did not occur, because I 
agree with you that it definitely is a risk factor.
    In fact, the most interesting thing that you said today was 
providing those websites. Because I tell you, you look at those 
websites and it looks like they are coming from Canada. I mean, 
you know, the names of the website. And what are we doing to 
let seniors know that those are bogus websites?
    Mr. Hubbard. We certainly are trying to alert seniors.
    Mr. Deutsch. What are we doing? What are we doing?
    Mr. Hubbard. We have got information on websites. We hand 
out brochures at the border. We do a lot of press----
    Mr. Deutsch. What are we doing? I mean, let me tell you, 
that is something that really concerns me. Because there is no 
question that there are seniors who are going to those 
websites.
    You know, can we shut them down? You had a Miami Beach 
address. Has someone gone to that address?
    Mr. Hubbard. Not as----
    Mr. Deutsch. Have you gone to the U.S. Attorney in the 
Southern District of Florida and told them about that website 
and that address?
    Mr. Hubbard. I understand that's a bogus address and the 
site is not really in Miami Beach. But we can get more 
information on the site.
    Mr. Deutsch. I mean, is there an investigation? Has someone 
gone to that location? I mean, because that is fraud. This is 
law enforcement issues. I mean, I think what you have said and 
what you have testified to is that the Canadian system, and we 
know it is going through the Canadian system, that there is a 
certain amount of efficacy that exists there. All right. And, 
again, there are issues we have gone in, there are 
counterfeiting issues in the United States. There are both 
these issues which we are going to get testified in the second 
half, whether you go to the local Eckerd or CVS. And the same 
way if you go to a Canadian pharmacy in Canada.
    But you know what? One of the things, again, that really 
concerns me is exactly what you are describing, that if people 
are going on the Internet and thinking they are buying 
Canadian, because obviously people know. I mean, these are 
people who ought to be put in jail forever who are doing this, 
because the reality is I agree with you a 100 percent that 
those type of situations there is no control.
    I mean, Mr. Taylor, did you want to respond particularly on 
those investigations?
    Mr. Taylor. Well, I wanted to respond more broadly. I think 
your point is absolutely right. When we started doing our 
Internet investigations, there were a lot of different factors 
that were causing people to purchase products over the 
Internet, but one of the biggest factors lately, indeed, 
appears to have been price. And so what we have done is we have 
adjusted our public health message to make sure that we are 
reaching, doing a better job of reaching just those very people 
in the elderly community and other communities where their 
conditions are comprised to make sure they understand the 
competing interest. And a lot of that refinement came at the 
wake of the March hearing where we, indeed, did try and take 
stock of people's perceptions of purchasing products through 
the website. And one of the things we recognized is that 
people--we need to do a better job of letting people know of 
the balance that they----
    Mr. Deutsch. Could I just follow up with one very short 
question.
    Mr. Taylor. Yes.
    Mr. Deutsch. Okay. You guys have come up with something 
that is real, that is significant, that can help people today. 
Okay. That we got bogus sites up there. You know, got Canadian 
flags that are called Canada Drug, whatever. I mean, how do we 
let people know that besides people who are listening to this 
hearing and what can we do tomorrow to let that happen? Because 
that is very problematic, I mean, for real people today who 
want to avail themselves of an alternative system?
    Mr. Taylor. FDA has a website regarding online drug sales. 
And one of the things that we have done is we have sent warning 
letters that we brought significant cases. IF there are sites 
that are a particular public health concern, what we have tried 
to do is post that material so that people can use that 
material to help inform them regarding their purchasing 
choices. And this website is accessed almost more than I think 
any other part of the FDA website. And we found it very useful 
in getting the word out.
    But also in regards to each case that we have brought, we 
have tried to do a better job of including a talk paper or 
something so that people who do not have access to the website 
can learn more about the sites or products that we feel are 
problematic because of the reasons that Mr. Hubbard stated 
earlier.
    Mr. Greenwood. The time of the gentleman has expired.
    The Chair would note that this is obviously an important 
issue, lives are at stake in this issue. The charge of lying 
under oath is a serious issue as well, one that this committee 
would almost be compelled to pursue.
    The Chair would note for the record that there is no 
evidence that the gentleman, Mr. Hubbard, said anything but the 
truth under oath. He cited a particular case of a woman in 
Philadelphia for instance, and the Chair would want the record 
to show that.
    The Chair recognizes the gentleman from New Jersey, Mr. 
Ferguson, for 8 minutes.
    Mr. Ferguson. Thank you, Mr. Chairman.
    At the risk of bearing the wrath of my friend from Florida, 
I just want to address a point that he was making about a point 
that I was making earlier regarding the health care system in 
our country.
    I still contend, and I do not know too many people who know 
anything about health care who would not agree with the fact 
that we have the best health care system in the world. There is 
no question that not everyone has access to that system, and 
that is a problem and that is something that all of us are 
concerned about that we are trying to address just about 
everyday that we go to work here in Washington and providers 
and others around the country. That is one of our main 
challenges is making this great health care system available to 
everyone, not just to some or most Americans.
    But anyone who would question that we do not have the best 
doctors, the best nurses, the best medical facilities, the best 
researchers, scientists, pharmaceutical companies; those who do 
enormous work, do enormous research, invest untold hours of 
time and energy and billions and billions of dollars in 
research to find new medicines and cures for tomorrow and 
procedures and devices, and everything else that simply is not 
the case.
    We clearly have the best health care system in the world. 
That is why not only patients from all around the world want to 
come to the United States to be treated, but it is also why the 
best and brightest minds in the world want to come to the 
United States to be trained to go to school, to become a part 
of this system. Because it is the best in the world.
    So we may have a disagreement or we may acknowledge that 
today there is a problem. Not everyone has access to it. We 
have a pool of uninsured Americans today, that is a problem 
that we are trying to address. But I don't think anybody who 
knows anything about health care would disagree with the fact 
that we have the best health care system in the world. It is 
something we should be proud of. It is something that we need 
to continue to work very hard and be diligent to maintain. And 
the work of the FDA and our oversight, and work with the FDA to 
make sure that they are continuing to be a part of that great 
health care system is, of course, a part of what we are doing 
here today.
    I do have a couple of questions which I am going to get to 
in a second. A couple of my colleagues, including my friend Mr. 
Bass from New Hampshire, have used the term reimportation. And 
I have a problem with that term because it is a misnomer, it is 
an inaccurate term because it suggests that reimportation means 
taking drugs that were manufactured here in the United States 
and shipped to other countries, are then reimported into the 
United States. And that is simply inaccurate.
    What people mean when they are talking about reimportation 
today is taking drugs that were manufactured in other 
countries, not under the strict guidelines of the FDA, not in 
facilities that have the strict oversight of the FDA, these are 
not subject to our high standards of efficacy and safety here 
in the United States. We have some of the very best standards 
in the world. That's one of the reasons our health care system 
is the best in the world. So to suggest that reimportation is 
simply bringing drugs back in here to the United States that 
were made here and subject to our very high standards is 
inaccurate, and that's one of the reasons I don't like or use 
the word reimportation. It is simply the importation of illegal 
drugs into the United States.
    That kind of law in our country allows for bringing drugs 
into the United States that are made in other countries as long 
as the Secretary of Health and Human Services can certify that 
those drugs are safe. That hasn't happened. President Clinton's 
Secretary of HHS couldn't do it, President Bush's Secretary of 
HSS couldn't do it. We simply do not have the ability to say 
with a high level of certainty that drugs manufactured and made 
in other countries, not subject to our standards, not subject 
to our FDA are safe for American consumers. If they were, they 
would be allowed into this country today.
    So, for those who use the word reimportation and suggest 
that we should be liberalizing these laws or relaxing these 
regulations are actually suggesting and recommending that we 
relax our safety standards to let more of these cheap drugs 
into the United States without regard to the safety of the 
American people. I have a problem with that.
    Now, I would agree with my friend Mr. Bass that we need to 
be working with our trade partners to encourage them not to 
impose price controls or other completely anti-market, 
completely anti-capitalistic, anti-freedom and free market 
policies in their own countries. But it also means we should 
certainly not be importing their price controls, their 
socialist tendencies into the United States.
    That was my second opening statement, I guess. Let me get 
to my questions.
    Mr. Hubbard, let me ask you a very basic question. Is it 
safe for you as a consumer today to import pharmaceuticals from 
foreign countries outside of the U.S. distribution chain and 
outside the oversight of the FDA?
    Mr. Hubbard. We do not believe it is.
    Mr. Ferguson. Why?
    Mr. Hubbard. Because we have seen so many instances of 
drugs that don't meet specifications. In fact, none of them 
meet specifications. There are these sorts of examples we have 
today of drugs that simply should not be dispensed or sold to 
Americans.
    Mr. Ferguson. And there is no way right now at HHS or at 
the FDA that anyone with any certainty can say that drugs made 
outside of the U.S. are safe for U.S. consumers?
    Mr. Hubbard. We don't see how to do that. We have said you 
can think of ways to ameliorate the risk, but you can't 
eliminate it and you would lower safety if you allowed those 
sorts of foreign drugs to be imported, in our view.
    Mr. Ferguson. But there are lots of folks who go to Canada 
or bring drugs in from other places in the country? Some of 
these Internet sites or mail-order Canadian operations are 
saying that Congress made the personal importation of a 3 month 
supply of drugs legal and allowable. Are they correct or is 
this a violation of law?
    Mr. Hubbard. No, they are not. There is a personal 
importation policy that is limited to experimental drugs for 
people with serious diseases. These websites often misquote 
that statement and say that it is okay to bring in 3 months' 
supply when in fact that is only for experimental drugs.
    Mr. Ferguson. After this subcommittee's June 2001 hearing, 
the FDA proposed to the Department of Health and Human Services 
that it allow FDA and customs to deny the entry of all of these 
illegal drugs into the U.S. and return them to sender. What is 
the current status of that proposed regulation?
    Mr. Hubbard. Well, we still believe that was a good 
recommendation. We have not heard back from the department. But 
there is a procedural problem that Mr. Dingell and others have 
pointed out that FDA cannot deal with this huge influx of these 
products and we either must let them in or go to the very 
expensive process of notifying people, and the latter is not 
feasible.
    Mr. Ferguson. Well, that was 2 years ago when you were 
talking about that proposed regulation. Has that been 
implemented?
    Mr. Hubbard. No, it has not. But, you know, I think we 
would still believe that that is a procedural change that 
Congress should look at.
    Mr. Ferguson. But that is not something that you feel you 
can do at FDA without some sort of congressional approval?
    Mr. Hubbard. I believe we have concluded in consultation 
with our lawyers that we need a statutory change to effectuate 
that recommendation.
    Mr. Ferguson. Okay. I yield back and my time is up.
    Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes the gentleman from Florida, Mr. Davis, for 8 
minutes.
    Mr. Davis. Thank you, Mr. Chairman. I would like to ask a 
few questions to try to develop the record a little further, 
and I will be brief and ask you to please be brief. And I have 
got some general questions to ask you. These will probably be 
best answered by Mr. Hubbard or Mr. Taylor.
    Is it correct that a large shipment of approximately 1200 
shipments of purportedly fake Viagara were detained in the 
October/November timeframe?
    Mr. Taylor. That is correct.
    Mr. Davis. Okay. And it is true that the Office of Criminal 
Investigation took an interest in this product as a possible 
case to investigate as reflected in Exhibit 3?
    Mr. Taylor. I believe that is correct.
    Mr. Davis. Okay. And you are aware that as far back as 
January of this year OCI sent samples of the fake Viagara to 
your research lab in Ohio for chemical analysis?
    Mr. Taylor. Yes. The Forensic Chemistry Center.
    Mr. Davis. And you are further aware that when the staff of 
this committee interviewed senior management from your Office 
of Regulatory Affairs in the Florida District office they were 
unaware that this product was being tested by the FDA?
    Mr. Taylor. That is my understanding.
    Mr. Davis. Okay. All right. Would you agree that when the 
OCI is sending product for testing as they did in this case, 
that information should have been shared with the Office of 
Regulatory Affairs?
    Mr. Taylor. My understanding, sir, is that even though it 
was not shared with the managers of the Florida District, that 
there were some employees at ORA that were aware of that. But 
indeed, the staff is correct, it was not shared with the 
District Director who was interviewed by the staff and the head 
of the inspections branch.
    Mr. Davis. So you would agree that it should have been 
shared and in the future it ought to be shared?
    Mr. Taylor. Absolutely.
    Mr. Davis. Okay. You are also aware that the test results 
came back and showed a sizable difference in the active 
ingredient from what was advertised, what actually was in the 
product?
    Mr. Taylor. The test results showed that in some cases even 
though the product contained the same active ingredient, 
solidenafil, which is the active ingredient for Viagara, that 
in some cases it was possibly subpotent and in one case it 
might have been superpotent.
    Mr. Davis. So as far as your word ``some case,'' could you 
give me some general sense of proportion here?
    Mr. Taylor. I do not have it in front of me, sir, the 
analytical results. The information on the analytical worksheet 
defines those parameters. I do not have it in front of me. But 
that is the general finding of the analytical laboratory.
    Mr. Davis. Is it in the record? Okay. What exhibit is it? 
Okay. I have got Exhibit 3 that has been handed to me. And you 
can, perhaps, look at this and come back and comment in a later 
question that reflects what appears to be the level of 
proportions, and they appear to be significant. So, if you want 
to refer to this during a break in the questioning, my question 
to you now and then again is going to be after you reviewed the 
exhibit, did a significant proportion of this product represent 
a significant health risk to consumers.
    Mr. Taylor. Based on the analysis, it certainly shows that 
there was variance in the level of active ingredient in the 
product. I cannot say definitively that the subpotent product 
presents a risk to the public, but certainly in the context of 
being superpotent, in some populations that could indeed 
present a risk.
    Mr. Davis. Okay. Was this information you have just 
referred to shared with other parts of the FDA in order to 
prevent the release of the product?
    Mr. Taylor. It was not shared with me at the time of the 
release of the product.
    Mr. Davis. And why not?
    Mr. Taylor. Sir, I do not know. That is part of what we are 
trying to determine as part of our ongoing internal review. I 
became aware of these analytical results as part of our ongoing 
review to determine why these mistakes occurred.
    Mr. Davis. So you are taking steps to understand why the 
mistake occurred----
    Mr. Taylor. Absolutely. Absolutely. We have an ongoing 
internal review. Based on what we know up to this point, we 
have several steps that we are going to take and they are 
outlined in the written testimony. But if indeed there need to 
be additional steps that need to be taken based on the 
continuation of this internal review, we will do so.
    Mr. Davis. And this product was ultimately released to the 
public?
    Mr. Taylor. Yes, sir, it was.
    Mr. Davis. Do we have any idea about accidents, injuries, 
deaths or problems?
    Mr. Taylor. No, we do not have any adverse reports at all. 
Subsequent to its release we sent a letter to the consumers 
that ordered the product and we have heard back from some of 
them. We have no reports of adverse events.
    Mr. Davis. Is this investigation still continuing with 
respect to possible injury of the public?
    Mr. Taylor. Well, we are continuing to monitor our adverse 
events site, in our Medwatch System, and to this date we have 
not seen anything that suggests that this product has harmed 
anyone.
    Mr. Davis. What other products were released at the same 
time as well as the product we have just been describing?
    Mr. Taylor. I do not have it in front of me, but indeed 
there were other products released around----
    Mr. Davis. I am told slide 2 reflects some of those 
additional products. Would you agree with that?
    Mr. Taylor. Yes, sir. Yes, sir.
    Mr. Davis. What is that product and what are the 
quantities?
    Mr. Taylor. It appears to be 928 packages of what appears 
to be possibly additional Viagara from Belize.
    Mr. Davis. And who authorized the release of that and has 
there been any investigation as to any injury of the public as 
a result of that release?
    Mr. Taylor. I do not know who authorized the release of it. 
I presumed that it was released as part of our general process 
for handling these products. But it was not released as part of 
the same discussion that led to the release of the 1,233 
packages that you----
    Mr. Davis. You say you do not know what was released that 
day? Are you going to be able to figure out what was released 
on that day?
    Mr. Taylor. That is what we are trying to do. I cannot 
guarantee it, but that is something we are trying to determine 
as part of our ongoing review.
    Mr. Davis. Perhaps one of the few things we can agree upon 
here today is what the rate of growth has been in this problem. 
Can you give me some numbers as to the fact, including 
projections about what the growth of the problem is going to 
continue to be if nothing changes in terms of government 
policy?
    Mr. Taylor. Well, as Mr. Hubbard said, I do not have the 
exact number but obviously over the last 2 years we have seen a 
growth in the number of mail packages based on proliferation of 
foreign websites and the proliferation of storefront 
pharmacies.
    Mr. Davis. Can you give me some sense of proportion or 
quantity here, even if it is general or speculative?
    Mr. Taylor. Millions. I mean, we are talking millions of 
packages coming through. And there is nothing to suggest that 
trend will not continue.
    Mr. Davis. So what has been the rate of growth in these 
packets from last year or the last 2 years, would you say?
    Mr. Taylor. I do not have the exact number, sir. Based on 
the type of data that others have collected and based on our 
own extrapolation from 2 years ago----
    Mr. Davis. You fear in the face of explosive rate of growth 
it's just going to compound immensely in the absence of any 
change in official policy?
    Mr. Taylor. Yes. It certainly has been explosive growth and 
there is no reason to suggest it will not stop.
    Mr. Davis. Has there been any prosecution undertaken by any 
law enforcement authorities with respect to these websites 
providing the bogus information that were discussed earlier?
    Mr. Taylor. You mean in regards to the----
    Mr. Davis. Viagara or any product?
    Mr. Taylor. In regards to this particular Viagara shipment, 
there were some discussions initially with the Department of 
Justice. However, a case was not initiated on the Viagara.
    In regards to some of the other products that we have 
talked about, the answer is yes.
    Mr. Davis. There are prosecutions that have been 
undertaken?
    Mr. Taylor. Ongoing investigations into some of these 
products.
    Mr. Davis. What exactly would you suggest that Congress 
needs to do to be a part of the solution here? We are spending 
our day talking about the problems so far. And it is easy to 
sit here and criticize you, but what we are entitled to, and 
what the public is entitled to, for you to be painfully direct 
with us as to exactly what Congress needs to do to be part of 
the solution here? Because if you are not part of the solution 
on this, you are part of the problem.
    Mr. Taylor. I quite frankly, as a starting point, looking 
at some comprehensive solution that just does not focus at 
providing additional resources. Because as I stated earlier, 
providing us with additional investigators does not seem to be 
the answer. And no matter how many investigators you provide 
us, it seems that based on the numbers we still struggle to 
look at these packages and prevent their entry into the United 
States.
    Mr. Davis. So what else besides resources?
    Mr. Walden [presiding]. The gentleman's time is----
    Mr. Davis. Mr. Chairman, if I could just finish this last 
question, then I will stop there.
    What else besides resources?
    Mr. Taylor. Well, I guess what I am saying is that 
resources are not the answer, that some type of comprehensive 
solution that focuses on why people are purchasing these 
products and importing them into the United States seems to be 
the answer.
    Mr. Hubbard. Perhaps I could add, Mr. Davis, that several 
suggestions have been ones that have come up over the years. 
One would be some sort of disclosure to know whether these are 
legitimate or illegitimate websites.
    And, of course, there is the return to sender, a policy 
that we proposed to Congress. So there are some ideas that have 
been out there that Congress could certainly discuss.
    Mr. Davis. Thank you. Thank you, Mr. Chairman.
    Mr. Walden. You're welcome.
    Ms. Durant, in your testimony you state that Customs found 
that large parcels of fake or gray market pharmaceuticals are 
being split into different mail shipments but arrive at the 
same address. Can you expand on that?
    Ms. Durant. It is just a growing trend. Bulk 
pharmaceuticals are of particular concern because we believe 
those are the most likely to go to distributors that might end 
up in pharmacies that people consider to be legitimate in the 
United States.
    We are going to, this summer, conduct an operation at four 
of our major mail sites to try and get a better handle on 
whether we have growth in that area. Our last operation 
indicated that as much as 14 percent could be phoney or 
counterfeit or just contain starch, etcetera. So we do plan to 
redo that operation this summer so that we can see if the 14 
percent is stable or whether we should have----
    Mr. Walden. Fourteen percent are drugs that are not pure?
    Ms. Durant. Of all the packages we detained and analyzed, 
because it does take a chemical analysis, 14 percent were 
counterfeit or had inactive ingredients that were not what 
people thought they were, imported.
    Mr. Walden. Okay. I want to pursue this issue of perhaps 
those counterfeit drugs getting into our pharmaceutical chains. 
Is that happening to those that get broken up and then end up 
at the same address; are you seeing a flow of imported drugs 
going into existing pharmacies, if I went down here to CVS or 
somewhere?
    Ms. Durant. We do not trace that. The FDA----
    Mr. Walden. Who does? FDA does? Are you seeing that? Is 
anybody checking that?
    Mr. Taylor. We work with the States to look at what is 
going into the wholesale market. And based on the recent 
counterfeit cases that we have worked on, we think that the 
wider distribution patterns of those counterfeit products is 
based on a wider introduction into the whole sale market.
    Mr. Walden. What do you mean by that? What is happening?
    Mr. Taylor. Okay. I am sorry.
    Mr. Walden. If my constituents go to a pharmacy in any town 
in America?
    Mr. Taylor. Sure.
    Mr. Walden. Are they certain those drugs have not come in 
through a reimportation system that is not being regulated and 
inspected?
    Mr. Taylor. Well, obviously, as part of working with the 
States, we have dual jurisdiction or complimentary jurisdiction 
with the States regarding pharmacy issues. And so if the 
States, for example in the context of these storefront 
pharmacies that have proliferated or in the context of some 
other situation where a pharmacy believes that the product that 
they are getting is what it purports to be, we would work with 
them to try and determine that source.
    I think that----
    Mr. Walden. But that is if the pharmacy thinks that. What 
if the pharmacy is part of the game here?
    Mr. Taylor. Well, that is exactly right, and that is why I 
was going to go on. But that is just one part of the chain.
    What we really are relying upon is a closed regulatory 
system that has worked very well to ensure that the American 
public is getting good quality products. And I still think that 
the American public should feel confident that the products 
that they----
    Mr. Walden. But I have heard from some of my colleagues 
that there are storefront pharmaceutical pharmacies being set 
up that are, you know, Rx Canada, I do not know the names but 
that are being set up that are apparently importing directly 
from other countries. They would have no reason to come to you 
to say hey check us out, right?
    Mr. Taylor. Right. They would not come to us to say check 
us out. However, it is occurring.
    We have sent a warning letter to a storefront pharmacy, 
actually two warning letters. One, and the entity is Rx Depot. 
We sent one in conjunction with the State of Arkansas, and then 
we sent another warning letter to the President of the company 
who is in Oklahoma. So we essentially made sure we were sending 
it to two locations.
    In that context it was a storefront pharmacy that was 
facilitating the purchase of products from Canada and 
specifically as part of its marketing scheme it was claiming 
that the products were U.S. approved products.
    We have received a response to our warning letter that we 
deem inadequate, and we will respond accordingly. At the same 
time the States are taking action against that storefront 
pharmacy and we are also working with the States very closely 
to identify other storefront pharmacies that might require some 
type of follow up action.
    Mr. Walden. Okay. Back to Ms. Durant. Customs has the 
responsibility to detain all imported controlled substances. 
Are you seeing a similar increase in the importation of 
controlled substances? Can you give the committee a better 
understanding of the procedures and resources that must be 
expended to seize and destroy a controlled substance?
    I understand perhaps Valium and some of these other 
controlled substances are making their way into----
    Ms. Durant. We have seen an increase. Although we do not 
have hard numbers, we have seen an exponential increase in all 
areas including controlled substances like Valium.
    We are required for every detention and seizure to give the 
victim of that seizure, if you would, or the importer, due 
process which requires us to detain. Even if it is under our 
own authority to seize, we do have to give a notice of seizure. 
There is a petition period and a forfeiture. And during the 
time that we have those drugs, we have quite considerable care 
and custody requirements.
    Mr. Walden. But are you seeing an uptick, though, in the 
number?
    Ms. Durant. Yes.
    Mr. Walden. Okay. Now, I want to move on to another topic, 
which is the safety of our food supply. Does FDA have 
jurisdiction over imported foods?
    Mr. Taylor. We have jurisdiction over some imported foods. 
We regulate about 80 percent of the food supply and USDA 
regulates the other 20 percent.
    Mr. Walden. And of the 80 percent that you regulate, how 
much of that is inspected, what percent that comes across the 
border?
    Mr. Taylor. For imported foods, I think the latest figure 
that I saw was probably about 1.7 percent of imported food.
    Mr. Walden. Because the issue that I get is we get all this 
food imported and we do very little inspection. Why can we not 
get our pharmaceutical drugs imported? I mean, what is the 
difference? They could be poisoning our food supply or using 
different chemicals to raise food to compete with our farmers 
and you do not inspect it to see if it meets the U.S. standards 
because you can only inspect 1 percent? Do we not also have an 
issue on that front as well?
    Mr. Taylor. Well, I mean, I think sir, in order to protect 
the public health we are trying to balance our resources across 
all the programs. As I noted earlier in my testimony, the 
investigational bodies that we devote to import functions work 
on import related issues that effect all our products. So with 
our limited resources, whether it be foods, pharmaceuticals, 
medical devices what we are trying to do is a better job of 
assessing risk, and then using that to determine our priorities 
and then directing our resources in a manner that best protects 
the public health.
    Mr. Walden. Do you see a difference in threat assessment 
between imported food and imported drugs?
    Mr. Taylor. As of right now our work on foods is directly 
directed to threat assessments and intelligence that we have 
regarding specific food commodities. And as part of our risk-
based strategy we use that intelligence information, 
information that we get from several sources, to determine what 
foods we give greater targeting to.
    Mr. Walden. Do you have a risk threat assessment for 
imported drugs?
    Mr. Taylor. For imported drugs, no we do not. We do not 
have the same type of risk assessment that we have for food. 
However, to the extent that we are privy to intelligence that 
relates to drugs, we obviously would take those steps in 
accordance with whatever information we receive.
    Mr. Walden. All right. My time is up.
    Mr. Taylor. And one of the reasons why, is in the context 
of the bio-terrorism legislation, one of the requirements is 
that we do a threat assessment regarding food. So we have 
contracted one out, but we have also done one on our own.
    Mr. Walden. Is there not the same sort of requirement for 
threat assessment for importation of drugs?
    Mr. Taylor. No, sir, not as part of that Act. Not that I 
know of, sir.
    Mr. Walden. All right. Thank you.
    My time has expired.
    Ms. Schakowsky is next.
    Ms. Schakowsky. I thank you, Mr. Chairman.
    As one who has worked on health care issues, prescription 
drugs and particularly with the elderly for a long time, I feel 
like those people are the largest consumers, as other consumers 
of prescription drugs in this country kind of get it at both 
ends by this administration and actually every one leading up 
to this: That is that we have done nothing to control the price 
of drugs and they keep escalating And while they have certainly 
added to the longevity and quality of life, they are 
inaccessible to many seniors. So it is no wonder that they are 
going to, and others, that they are going to do whatever they 
can to get the prescription drugs that they need. And it seems 
to me, as long as we keep resisting doing anything about the 
cost of pharmaceuticals, the resource for which a lot of it has 
been done with taxpayer dollars so let us not get too carried 
away with R&D, because a lot of that is already provided by the 
taxpayers of this country. And then so they look for other 
solutions and then we fail to protect them from unsafe and 
dangerous, in some cases, drugs or ineffective drugs.
    I was looking at the upcoming testimony of Robert Penezik, 
I do not want to say it wrong, the Assistant Statewide 
Prosecutor for the State of Florida, who listed the most 
commonly--let me use his words so I do not say it wrong, 
characterize these wrong. Hold on.
    ``The most commonly found drug to either have been 
counterfeited or otherwise adulterated drugs,'' and when I 
compare that to the list of drugs and the price in the United 
States as compared to the price in Canada, here is what I find. 
Celebrex is on that list. It is 63.5 percent discounted in 
Canada. Or Flonase Nasal, 64 percent less in Canada. Lipitor, 
38 percent less. As interested as all of us are in Viagara. Let 
me just point out that Tomaxafin for breast cancer is 91.3 
percent less in Canada than in the United States. So is it any 
wonder that consumers are turning to other places to get it?
    But the problem, he also says this and this is where anyone 
is free to answer. Maybe this is mostly a question for Customs, 
I am not sure. But what he says is as prosecutors we are now 
seeing a trend of prior illegal narcotic traffickers entering 
into the prescription drug business.
    I mean, imagine. Now it is not going to be cocaine, it is 
going to be Lipitor or Celebrex that are going to be blackmail 
that if you think about, is not any surprise. Because people 
want, need, demand these. And so we get kind of back to the 
demand side, are we not going to make these available to people 
at a reasonable price, but at the very least then what are we 
going to do about this growing criminal element that is now 
involved in the trafficking of prescription drugs? I would like 
to ask Customs.
    Ms. Durant. Customs has no specific information regarding 
that. I can check back and see if perhaps our sister agency has 
any indication and provide it for the record. I do not have any 
specific information that would indicate that that is true 
today.
    Mr. Taylor. Sure, I can comment on this.
    We have seen a wide array of people starting to get 
involved in counterfeiting products. And our response to these 
type of defendants is the same response that we would have in 
other counterfeit cases, which is really to respond to the 
counterfeit situation in two complimentary ways. Our first 
priority is to protect the public health by, first of all, in 
trying to figure out how far the counterfeit products have been 
dispersed, initiating recalls, educating the public to the 
potential harm from taking the products, working with the 
States, the pharmacies and the manufacturer of the invented 
product to learn more about the product so that we can find 
more information about what the product contains. And then as a 
sort of a complimentary role but not a mutually exclusive role, 
we would also conduct a criminal investigation to try and 
determine who is responsible for the introduction of these 
counterfeit products. And in some cases we have seen people who 
have been involved in other illegal activities involved in 
possibly the counterfeiting of pharmaceuticals.
    Mr. Schakowsky. It was stated in your testimony, Ms. 
Durant, and I think we have hit on it somewhat that people who 
go to their local pharmacy may now be finding that these 
products are on the pharmacy shelves. Let me say the serving 
trend is the increase involved shipments through the mail 
indicating that these products could be making their way to 
pharmacy shelves. There is a possibility that stateside 
pharmaceutical distributors could be using these products as a 
source of supply.
    So what is it that will assure people that when they go to 
their Walgreens or CVS they are not going to find that these 
products are on the shelves?
    Mr. Taylor. Well, let me just give you a concrete example 
of some of the steps that we take to protect the public. I 
think the ongoing Lipitor investigation is a good example of 
where were fearful that the product had made its way to 
pharmacies.
    When we first learned of this information, we did one 
recall that based on the information that we had before us that 
was focused on, quite frankly, the size of containers that are 
commonly sent to pharmacists. So as part of our initial recall 
and outreach to the community we focused on getting the message 
to pharmacies to be on the lookout for identifying information 
that would have helped them determine whether or not the 
product they had was indeed counterfeit as opposed to the 
authentic Lipitor.
    In addition, we informed the public to the potential risk 
of taking the product. And at the same time, as part of both 
our regulatory and criminal investigation, we tried to 
determine, and we are still looking at how widely the product 
was dispersed.
    So these are some of the steps that we take once we 
discover that a product might be counterfeit to try and protect 
the public.
    Mr. Schakowsky. Let me say this last sentence. I think the 
best thing you could do for yourselves is to encourage this 
administration to establish a program that helps to lower the 
cost of drugs to the American public instead of in the Medicare 
bill that just came out of this committee, there is a 
prohibition on the Department of HHS to actually negotiate for 
lower drug prices under a Medicare prescription drug program. 
This will only make your job harder. And as long as those drug 
prices are sky high, we are going to see that there is going to 
be efforts on the part of consumers and therefore on the parts 
of the criminal elements to bring these drugs into the United 
States.
    Thank you, Mr. Chairman.
    Mr. Walden. The gentle woman's time has expired.
    The Chair recognizes Mr. Rush.
    Mr. Rush. Thank you very much, Mr. Chairman.
    This question may have been asked and answered already, 
however I want to see if I can get an answer for myself.
    Much of today's hearing has spoken to the fact that 
reimported drugs are unsafe and even lethal in some cases. Can 
you remind the committee of the death rates of consumers when 
they have taken these drugs? In other words, how many American 
citizens have died because of imported and unsafe drugs?
    Mr. Taylor, can you answer that for me?
    Mr. Taylor. Sir, I do not have those specific figures. As 
part of----
    Mr. Rush. Does any of the panel have those figures?
    Mr. Hubbard. We believe that is an unknowable thing, Mr. 
Rush, because there is no system that tracks such injuries. And 
people that buy these drugs will tend to be not the sort of 
people that would report. They recognize that they bought them 
outside of the normal practice to buy them.
    But as we discussed before you came in, the more likely 
injury from these drugs is that someone would not have their 
disease treated. You do not take a fake drug and have an 
adverse effect because it just does nothing. What happens is 
your illness is not treated, and that effect can occur over 
many months or even years.
    Mr. Rush. So these drugs are not lethal in themselves? They 
do not cause death or injury?
    Mr. Hubbard. Yes. Generally many of these drugs themselves 
are not going to immediately hurt you. They are just not going 
to help you. And the purpose of taking a drug, of course, is to 
treat an illness, not to just take a placebo or a sugar pill. 
And many of these drugs in fact are just that, they are 
subpoent or they are lacking in any active ingredient. You 
would not expect an injury from that, but you also would not 
get the medicinal treatment that the drug was intended for.
    Mr. Rush. I want to switch my line of questioning here. The 
FDA, is it not the case that because it is Customs and not FDA 
that typically works--Customs typically works mail facilities. 
And Customs inspectors would be the ones to intercept those 
products for which FDA has an import alert. What is the 
coordination nexus between the FDA and Customs, and how can you 
better provide better coordination between the FDA and Customs?
    Mr. Taylor. I can start.
    In the context of the mail facilities, you are absolutely 
correct. Customs sets aside packages that they think are of 
concern. FDA, who does not traditionally have a presence at the 
mail facility, will then come by and take a look at the 
packages that Customs has set aside. And pursuant to our own 
statute, we will make a decision whether or not to detain a 
product. And if we do decide to detain a product, then we need 
to issue a notice of detention, a notice of hearing and notice 
of refusal, thereby giving the right of the owner of the 
product to oppose or argue that the product is indeed not in 
violation of the Act and should be imported to the United 
States.
    Mr. Rush. Well, are you aware that when staff interviewed 
Customs officials in Miami they were told that they do not 
regularly receive import alerts from the FDA?
    Mr. Taylor. I am aware, and that is why in my oral 
testimony and my written testimony I cited one of our 
improvements is going to be the fact that we are going to 
provide written or hard copies to Customs of all import alerts 
so that we can insure that communication problem does not occur 
in the future.
    Mr. Rush. Thank you, Mr. Chairman.
    Mr. Walden. The gentleman yields back his time.
    The Chair recognizes the gentleman from Michigan, Mr. 
Stupak, I believe, is next.
    Mr. Stupak. Thank you, Mr. Chairman.
    Many of us have been here for the last 4 or 5 years going 
through this, and nothing seems to change here. I guess the 
only thing that changed is the volume is getting greater. Is 
that fair to say, Ms. Durant?
    Ms. Durant. Yes, it is.
    Mr. Stupak. I know you have testified a couple of times 
here.
    Ms. Durant. Yes, it is.
    Mr. Stupak. There is no due diligence here and follow up a 
policy or any kind of procedure to handle this drug situation, 
is there? There is no due diligence on behalf of the FDA? We 
just keep going around circles here for the last 4 or 5 years, 
right?
    Ms. Durant. FDA continues to work with us, but I think we 
are jointly overwhelmed by this problem in terms of the 
volumes.
    Mr. Stupak. Ms. Durant, before you detain a drug--could we 
put slide 9 up there?
    When you get a drug in, you have it detain it, correct?
    Ms. Durant. That is correct.
    Mr. Stupak. Okay. And the drug on the packaging must have 
on their written declaration affirming personal use, it must 
have a 90 day supply or less, right? The evidence of medical 
supervisor or prescription on the package and product that has 
to be unavailable in the U.S. Those are the four criteria we 
look at, right?
    Ms. Durant. Those are among the criteria that we look at.
    Mr. Stupak. Okay.
    Ms. Durant. We detain other types of pharmaceuticals 
besides those.
    Mr. Stupak. But from the FDA's import guidance, those are 
the four things you basically look at?
    Ms. Durant. Those are among the things we look at. We look 
at source countries, we look at packaging for potential 
counterfeit.
    Mr. Stupak. And if it does not have those four things, can 
you not just send the package back?
    Ms. Durant. No, we cannot under our own authority. We can 
seize controlled substances under our own authority. But the 
FDA actually has the jurisdiction. So we detain it. We put it 
aside for the FDA to----
    Mr. Stupak. If the FDA told you, and I am looking at this 
is our October 2000 hearing. The FDA import guidelines, this is 
from the Department of Customs, those four factors that I 
listed for you: Written declaration affirming personal use, 90 
day supply or less, evidence of medical supervision or 
prescription and product unavailable in the U.S. If the FDA 
told you if it does not have these four criteria, our import 
guidance, could you just ship that package back?
    Ms. Durant. If the FDA told us, we could ship it back.
    Mr. Stupak. Has that not been what we have been saying, at 
least myself and some of the others saying since 2000 just the 
FDA give them the guidance so you can just ship it back, right?
    Ms. Durant. We would like that guidance from the FDA.
    Mr. Stupak. Sure. So the FDA has to give Customs, tell you 
to ship it back if it does not have those guidance, right?
    Ms. Durant. That would be correct.
    Mr. Stupak. So slide number 9 there with all those 
packages, how many of those would you anticipate had the 
guidance, those four criteria on the package?
    Ms. Durant. Well, that is not the only criteria that we----
    Mr. Stupak. Sure. Sure. But how many would just have these 
four?
    Ms. Durant. Probably not----
    Mr. Stupak. None of them, right?
    Ms. Durant. Probably not.
    Mr. Stupak. In fact in October when we did the Dulles and 
Oakland facilities, none of them had that four criteria on. Of 
the 513 packages we seized off the line, none of them had that 
criteria?
    Ms. Durant. That would probably be correct.
    Mr. Stupak. So all 513 could have been shipped back, they 
would not have been sitting in some bins like we have right 
here, correct?
    Ms. Durant. I'm sorry?
    Mr. Stupak. All 513 could have been shipped back, they 
would not have been sitting in bins like that? We would not 
have this big huge supply, you would not be holding detaining 
drugs, correct?
    Ms. Durant. If the FDA----
    Mr. Stupak. Would just provide you to do that?
    Ms. Durant. [continuing] provided that guidance. Correct.
    Mr. Stupak. Correct? FDA, why do you not do it?
    Mr. Hubbard. I think, as we have explained, our law would 
require that each of those packages be put into our system and 
address----
    Mr. Stupak. No, no, no. These are your FDA import 
guidelines I have read. It does not say to detain. It said it 
had to have four specific things. That is your guideline. You 
even reiterate it in your testimony. Why do you not just tell 
Customs if it does not have these four factors, ship it back?
    Mr. Hubbard. Personally I wish we could.
    Mr. Stupak. Why do you not? You do not need congressional 
oversight on that.
    Mr. Hubbard. No. Unfortunately, our attorneys tell us we 
cannot do that.
    Mr. Stupak. Your attorneys? All right. In your testimony 
today you said large commercial shipments is what you look for, 
correct? Mr. Taylor, you said that, too, right?
    Mr. Hubbard. That was referring to trying to prevent 
commercialization. Because we cannot deal with these small 
packages, we have got to deal with the big ones.
    Mr. Stupak. What is large? What is large? A gentleman there 
has a package in his hand, is that large? It is right behind 
you there. It is on the screen. It is on over here. Are those 
large? Quantify large for me.
    Mr. Taylor. I personally did not mention large package.
    Mr. Stupak. Oh, yes. Mr. Dingell you said large commercial 
shipments, additional steps we prioritize, we cannot detain 
everything, the greatest public harm, the business facility, 
train and retrain people.
    Let us just start large. Quantify large for us.
    Mr. Taylor. You cannot quantify large. I guess----
    Mr. Stupak. And why do you not use your four guidelines and 
ship them back so we do not have thousands of packages sitting 
here?
    Mr. Taylor. My point is that merely saying something large, 
that is just one factor. Obviously, at the end of the day the 
most important factor is the harm that a product could cause 
or----
    Mr. Stupak. Well, wait a minute. You do not know what harm 
it is causing. You only inspect, what? About 1 percent, if you 
do that?
    Mr. Taylor. Well, to the extent that we do look at the 
products, we do apply this risk-based approach----
    Mr. Stupak. Well, we know that the facilities tell us you 
guys do not even come by. They detain it and you do not even 
come by.
    Mr. Taylor. Obviously the resources prevent us from----
    Mr. Stupak. No, no, that is not a resource issue. It is a 
policy issue. Now you are either going to come by or not. If 
you do not have the people to do it, why do you not just send 
it back? It does not have these four criteria. You do not have 
to worry about resources then.
    Mr. Taylor. Because, as Mr. Hubbard explained, we still are 
bound under the Act to follow the----
    Mr. Stupak. Now wait now. Wait now. Now, you do not get to 
Section 801 until Customs accepts it. If you tell Customs not 
to accept it, it doesn't trigger Section 801. Your attorneys 
are right on 801 once you accept it. But you do not have to 
accept it if you just enforce your own policy and guidelines 
that you refuse to do.
    Mr. Taylor. Sir, those policies and guidelines that you are 
talking about, they are what we call our personal importation 
policy. They do not make--as part of that policy----
    Mr. Stupak. Excuse me. Slide number 9. Are those not for 
personal use right there? That is your personal importation 
guidelines?
    Mr. Taylor. I'm sorry, sir.
    Mr. Stupak. Well let me go to another one. You guys put out 
these alerts, right? Import alerts, that is authority to detain 
products. Last time we had testimony last fall on the drug 
Acutane, we talked about that, about the dangers of Acutane and 
FDA was going to put out an import alert on that. Has FDA ever 
done that?
    Mr. Taylor. Yes, they have.
    Mr. Stupak. When did they do it?
    Mr. Taylor. Sir, I do not have the exact date, but it was I 
believe the middle of December.
    Mr. Stupak. Middle of December?
    Mr. Taylor. Yes.
    Mr. Stupak. Did you provide that to Customs?
    Mr. Taylor. I do not know if--obviously, in the context of 
Miami, it looks like there is some miscommunication issues. But 
I know that Customs was involved in the discussions surrounding 
that import alert.
    Mr. Stupak. So if they did not have it, you only send it to 
certain facilities or what on Acutane?
    Mr. Taylor. No. In terms of Acutane, we worked with Customs 
not only at the policy--at the time that we were putting the 
import alert together. And I know we communicated to Customs. 
The only reason I am hesitating is in light of the information 
that we have determined as part of our ongoing review that 
there were communication issues in Miami that do not allow me 
to say definitively that was shared all throughout Customs.
    Mr. Stupak. Right. And you have those same communication 
problems in Dullas and Oakland and the rest of the places.
    How do you know if it's Acutane in a box if you have never 
opened it?
    Mr. Taylor. Obviously, that is one of the challenges.
    Mr. Stupak. Well, if you would just follow your four 
guidelines, you would not even have to open a package, would 
you?
    Why cannot FDA just tell Customs not to accept it, because 
if you accept it you go into Section 801? Why cannot the FDA 
just put forth a policy that says if it does not follow these 
guidelines for importation of use, we reject it? Why do you not 
just do that?
    One more question while you are at it so I have an answer 
for me, since the 106th Congress we have talked a lot about the 
importation of drugs through the web, the Internet, we have had 
the bill--I have had the bill to ban it. Okay. Certain criteria 
had to be followed. FDA has never taken a position on my bill. 
I have reintroduced it again this year. Would the FDA finally 
take a position on our bill, either support it or not support 
it? When you talk about needing insight and supervision from 
Congress, I have been around since the 106th Congress trying to 
give you that input and the FDA refuses to even take a position 
on our legislation. Would you promise this committee that to at 
least look at our bill and tell us whether or not you will 
support it or not to cut down on these Internet purchases of 
drugs? Yes or no. You going to take a position on it or not 
this year? It has been 4 years we have been waiting?
    Mr. Taylor. Sir, I do not know if the administration has a 
position on your bill. This is simply information I do not 
possess.
    Mr. Stupak. Could you ask them to do that? It has been 4 
years and we are still waiting for an answer.
    Mr. Greenwood. The time of the gentleman has expired.
    Mr. Stupak. Thank you.
    Mr. Greenwood. The gentleman from Texas, Mr. Green is 
recognized for 8 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    And to follow up my colleague from Michigan, I think the 
concern I have is that the commercial quantities that we see on 
the slide as compared to the individual quantities. And if you 
could leave that slide back up, I want to talk about that a 
little bit.
    Our seniors, in fact when I went home last Friday, I had 
seniors at a group in Houston, one of the couples asked me, 
said we get our pharmaceuticals from Canada because we cannot 
afford them if we got them here in Houston, Texas. And I said 
well the concern I have is that you buy from those places, 
although they had a reputable pharmaceutical and what have you. 
What I am seeing up there is does not look like it is for 
personal use, it looks like it is for commercial use. It is not 
my seniors from Houston, Texas or from Chicago buying 
individual 90 day supplies, or even 6 month supplies. I know 
the law is 90 days. But I have seniors who drive to Mexico from 
Houston, 6\1/2\ to 7 hours, just like people go across to 
Canada. And I have actually bought pharmaceuticals in Latin 
America.
    And so I can understand the concern from the FDA, but I am 
also concerned that we are seeing commercial importation of 
drugs that have no quality control on them.
    Like my colleague from Chicago, if we had an affordable 
system, we would not have this problem. That people would not 
have to if they could not get them for half the price in Canada 
or Mexico, or even off the web it somebody says they are from 
Europe.
    I understand there is significant risk associated with 
taking imported pharmaceuticals, and the product impose 
significant risk. For example, it seems that drugs manufactured 
in the United Kingdom, Canada, France, Japan and other 
industrialized countries would probably be far safer than drugs 
manufactured in some lesser developed countries. When we heard 
about Belize or the Bahamas, or someone else that maybe does 
not have these infrastructure like these.
    Does the FDA have a system of gauging the potential risk 
based on where the drugs are imported from?
    Mr. Hubbard. No, we do not. We have no statutory direction 
to do such a thing. There is no such thing as reciprocity or 
equalization along those lines that you are suggesting, Mr. 
Green.
    Mr. Green. So we would have to actually give the FDA the 
statutory authority to look at pharmaceutical manufacturers, 
say, in France or western Europe that want to import into the 
United States or export into the United States? There is no FDA 
authority now if someone is exporting in the United States that 
their factories or their plants have to be meet some quality?
    Mr. Hubbard. Well, if a facility in another country wants 
to sell a drug in the United States, that's perfectly 
acceptable if that facility is making an FDA approved drug and 
that facility has been inspected and improved by the FDA to 
make that drug.
    Mr. Green. Okay. And that happens, I assume? We import 
pharmaceuticals on a commercial basis?
    Mr. Hubbard. Yes, that is correct.
    Mr. Green. Do these same plants----
    Mr. Hubbard. They also make finished pharmaceuticals. Some 
finished pharmaceuticals. The actual pill that you purchase 
come from foreign plants that are inspected by FDA.
    Mr. Green. Okay. Is there any of this information available 
to the customers or is it just to the businesses or the people, 
you know, the pharmacists or we call them PPMs that may import 
these?
    Mr. Hubbard. Well, generally if you the patient get a drug 
from any licensed pharmacy, you are almost certain to get an 
FDA approved that from an FDA inspected facility.
    Mr. Green. Okay. What about a senior citizen that is not 
going to a licensed pharmacy in the United States, but using a 
website that says they are in Canada, that may or may not be 
true, but is there any security that we could give this group 
saying, you know, these are the places that you can buy your 
own individual prescriptions from?
    Mr. Hubbard. Not for foreign sites. There certainly is a 
system to identify the legitimate domestic sites called VIPS, 
run by the National Association of Boards of Pharmacy. But for 
the foreign sites, there is no assurance that a patient is 
getting a drug from a legitimate site or that it is a truthful 
site. In many cases we see sites that are not truthful.
    Mr. Green. Well, and it seems like that there should be, 
like my colleague from Michigan talked about his legislation to 
give the FDA that authority to do that. Because again the 
frustration is, is that I cannot sit here and say I am going to 
tell that couple that I just talked to last Friday that we are 
going to shutdown your only way you can afford your 
pharmaceuticals that your doctor tells you to. Or shutdown my 
constituents who will drive to Mexico and go over and buy their 
pharmaceuticals. And, again, it is in their own individual 
quantities because they know they can be stopped by Customs if 
they have anything larger than that. However, at one time 
before the increase in I guess surveillance at the border, I 
had people paying for their trip and buying it for other 
neighbors. And they had the prescriptions, but it was not in 
their names. But I do not encourage them and tell them, you 
know, you are going to seized. However, I do not know how many 
people that are 65 or over that the Customs detains in bringing 
back medication.
    Mr. Hubbard. May I just say, Mr. Green, it is important the 
constituents know we do not threaten or search or otherwise 
intimidate citizens bringing drugs back for their own use.
    Mr. Green. Well, if it is not the FDA, it would be Customs, 
I would assume that would be doing it.
    Ms. Durant. That is correct. That is correct.
    Mr. Green. Because I know FDA does not have the manpower to 
do it at the borders, but Customs has agents there. And they 
will ask if you are bringing back pharmaceuticals.
    Ms. Durant. They do ask. They do ask and they do check. And 
we do take it away. I hope we do not intimidate them too much. 
But if it does not meet that criteria, we do, we take them.
    Mr. Green. Okay. But an individual could bring back a 90 
day supply if they have a written prescription from their own 
doctor?
    Ms. Durant. I believe that is the case, 50 dosage units 
comes to mind.
    Mr. Hubbard. That is for controlled substances, I believe. 
For prescription drugs the 90 day supply issue is for 
experimental drugs for which there is no therapy in the United 
States. Legally they should not be bringing back any other 
prescription drug. However, FDA does not attempt to take those 
drugs away from patients who have gone to buy them.
    Mr. Green. Well, I can tell you the pharmaceuticals that 
they are purchasing and bringing back, it is probably a rarity, 
and the only reason they're doing it is because of cost. They 
just can't afford them in the United States, so they'll go to 
Mexico or Canada.
    Thank you for your testimony. Obviously we need to empower 
the FDA and hopefully this hearing will also allow Customs and 
FDA to have a working relationship. Because, again, those look 
like commercial quantities that should not be accepted in the 
United States.
    Thank you, Mr. Chairman, for allowing me to sit in.
    Mr. Greenwood. The Chair thanks the gentleman.
    As everyone can tell, we have a series of votes that start 
now. So I think probably the prudent thing rather than to 
squeeze the testimony from the next panel, is to dismiss this 
panel. We thank you kindly for your patience and your testimony 
today.
    And we will recess. I am going to guess it will be at least 
1:15 until we finish this series of four votes and get back and 
bring on the second panel.
    So the hearing is now recessed.
    [Brief recess.]
    Mr. Greenwood. The committee will come to order.
    The Chair thanks the witnesses for our patience. We should 
be able to sail right through now.
    The chairman officialy calls for Mr. Robert Penezik, 
Assistant Statewide Prosecutor for the State of Florida, Office 
of Statewide Prosecution and Dr. Greg Jones, Pharmaceutical 
Program Manager at the Drug, Devices, and Cosmetic Regulation, 
Bureau of Statewide Pharmaceutical Services, and Dr. Cesar 
Arias, Drug Inspector Supervisor for the Florida Department of 
Health, Bureau of Statewide Pharmaceutical Services.
    Thank you all for coming here. I think that you are aware 
that the Oversight Investigation subcommittee takes it 
testimony under oath and I need to ask if any of your gentlemen 
have objection to giving your testimony under oath this 
afternoon? Good.
    I should also advise you that you have the right to be 
represented by counsel. Did any of you want to be represented 
by counsel? I didn't think so. Okay.
    If you would stand and raise your right hand then?
    [Witnesses sworn.]
    Mr. Greenwood. Okay. You are under oath. And, Mr. Penezik, 
we will start with you and you are recognized for 5 minutes for 
your opening statement.

TESTIMONY OF ROBERT M. PENEZIK, ASSISTANT STATEWIDE PROSECUTOR, 
OFFICE OF STATEWIDE PROSECUTION, STATE OF FLORIDA; GREGG JONES, 
  PHARMACEUTICAL PROGRAM MANAGER, DRUG, DEVICES, AND COSMETIC 
 REGULATION, BUREAU OF STATEWIDE PHARMACEUTICAL SERVICES; AND 
 CESAR ARIAS, DRUG INSPECTOR SUPERVISOR, FLORIDA DEPARTMENT OF 
      HEALTH, BUREAU OF STATEWIDE PHARMACEUTICAL SERVICES

    Mr. Penezik. Thank you for the honor, privilege and 
opportunity to speak to this subcommittee. Mr. Chairman and 
members of the committee, I am Robert Penezik, Assistant 
Statewide Prosecutor for the State of Florida. Today, I will 
talk about the issues and problems raised in the Interim Grand 
Jury Report, which served as the conduit of the legislation, 
and ultimately the law signed by the Governor on June 13, 2003.
    The citizens of the State of Florida and the United States 
are safer today due to the collective efforts of a broad 
spectrum of representatives in the State including: Governor 
Jeb Bush, Attorney General Charlie Crist, State Senators Durell 
Peaden and Walter ``Skip'' Campbell, State Representative Ed 
Homan, Department of Law Enforcement Commissioner Tim Moore, 
Secretary of Health Dr. John Agwunobi, Statewide Prosecutor 
Pete Williams, and last but not least the members of the 
Seventeenth Statewide Grand Jury.
    The overall process that led to the new State law, was 
truly government at its best, because all parties recognized 
the problem and worked diligently and tirelessly to solve it. I 
think it is especially important to recognize the contributions 
of Governor Bush and Attorney General Crist for their 
leadership and vision.
    This morning, millions of people took a prescription drug. 
Most consumers probably gave little or no thought to where 
their prescription drugs came from or who handled them before 
they received them from their pharmacist. We all know that 
significant precautions are taken in the preparation and 
manufacture of our prescription drugs. However, most of us are 
unaware of the current lack of controls on prescription drugs 
once they leave the custody of the manufacturer.
    To put it in the simplest of terms, before the new 
legislation in Florida, when you walked into any pharmacy that 
I'm aware of, you had no idea who handled your prescription 
drug, how it was handled, or if anyone had done anything 
inappropriate to it. Further, the pharmacists who dispensed 
your medication might themselves not even know the trail your 
prescription drug had traveled. Unless the drug store bought 
all of the prescription drugs it dispensed directly from the 
manufacturer, the risk is present. This is the problem that I 
would like to address and to discuss with you today.
    I personally before I got involved in this investigation 
never gave a pause or a moment's thought when I ingested or 
took my own prescription. After this investigation I cannot 
tell you that there is not a single prescription that I would 
fill for myself or my family that would not cause me to at 
least give thought about the safety and prior whereabouts of 
that prescription drug.
    Some background about the Interim Grand Jury Report. At the 
end of last year, Governor Bush was briefed on the adulterated 
and counterfeit prescription drug problem in Florida caused by, 
among other things, the secondary pharmaceutical drug wholesale 
market. Governor Bush immediately petitioned the Florida 
Supreme Court to convene a Statewide Grand Jury. The 
Seventeenth Statewide Grand Jury was impaneled in early 2003 
and, after weeks of testimony, the Grand Jury issued the 
``First Interim Report of The Seventeenth Statewide Grand 
Jury'' in February 2003.
    In the Interim Report, the Grand Jury made a number of 
significant findings and proposed a comprehensive series of 
recommendations. The Grand Jury expressed its concern for the 
high risk of adulterated and counterfeited drugs entering the 
prescription drug supply of the State of Florida. It heard 
testimony of the many ways by which these adulterated drugs 
enter the stream of commerce and eventually end up on the 
shelves of our pharmacies, clinics and hospitals. They heard 
about prescription drugs that were sometimes sold three, four, 
five times without any apparent legitimate economic reason, 
before reaching the ultimate dispenser.
    The Grand Jury also found that the ``pedigree papers,'' or 
paper audit trails that track the drugs from the manufacturer 
to the point they are dispensed, are the most effective way to 
prevent diverted, adulterated or counterfeit drugs from 
entering the marketplace. Such pedigree papers would allow each 
purchaser of prescription drugs to determine who previously 
handled the drugs, and would thus serve to greatly minimize the 
introduction of adulterated drugs into the marketplace. 
However, the Grand Jury found that the pedigree paper standing 
alone was not enough. It stated, ``we believe that Florida 
should require pedigree papers to be delivered all the way from 
the manufacturers to dispensers and that all buyers be required 
to verify pedigree papers through the exercise of due 
diligence.''
    The Interim Report of Florida's Seventeenth Statewide Grand 
Jury Report illustrates the potential danger to the citizens of 
Florida as well as the citizens of this Nation. The Grand Jury 
found that the wholesale pharmaceutical industry in Florida has 
been corrupted by the infiltration of a criminal element that 
is potentially reaping enormous illicit gains while tainting 
the prescription drug supply. The Grand Jury made several 
recommendations to address these problems The Grand Jury made 
several recommendations to address these problems, including:
    1. Creating a standardized form of pedigree paper; 2. 
Require pedigree papers in every transaction from the 
manufacturer to the end-user; 3. Create new crimes for offenses 
involving pedigree papers; 4. Increase the penalties for anyone 
who introduces adulterated or counterfeit prescription drugs 
into the stream of commerce; 5. Clarify the definition of an 
authorized distributor of record; 6. Give the Florida 
Department of Health clear authority to shut down wholesalers 
in violation of State statutes; 7. Give the Florida 
Department--I have been asked to stop. May I continue or do you 
want me to----
    Mr. Greenwood. No, you may finish your statement, sir.
    Mr. Penezik. Thank you, sir.
    Give the Florida Department of Health clear authority to 
seize and destroy drugs that pose a threat to the public 
health, and; 8. Increase the requirements to become a licensed 
pharmaceutical wholesaler in Florida.
    Based on this compelling report from the Seventeenth 
Statewide Grand Jury, Florida Attorney General Charlie Crist 
immediately crafted legislation to address the problem and 
enact the Grand Jury's recommendations. The Florida Legislature 
responded quickly, and many of the Grand Jury's recommendations 
were proposed in bills sponsored by various legislators. That 
bill was signed by Governor Jeb Bush on Friday, June 13, 2003.
    Among other things, Florida's new legislation requires or 
provides for:
    1. Vastly improved documentation of vital pharmaceuticals 
in order to prevent their adulteration or counterfeiting; 2. 
Full pedigree papers on all prescription drugs by July 1, 2006; 
3. Due diligence by those receiving pedigree papers; 4. Full 
authority by the Florida Department of Health to destroy 
medication that has been adulterated or improperly stored; 5. 
Full authority by the Florida Department of Health to shut down 
licensed wholesalers in violation of State statutes until the 
deficiencies are corrected; 6. Increased criminal penalties for 
pedigree paper violations, as well as other violations 
involving adulterated drugs; 7. Increased permitting 
requirements for drug wholesalers in Florida, including raising 
bonding requirements and stricter background checks.
    It is extremely important to note that the legislation was 
a product of cooperation between the Attorney General, law 
enforcement, the Florida Legislature, the regulators at the 
Florida Department of Health, and representatives of the 
legitimate prescription drug whole industry. This bill and law 
is an important first step in identifying and solving this 
problem. The legislation imposes an immediate requirement of 
pedigree papers on a select list of approximately 35 
prescription drugs that have been shown by law enforcement to 
have been counterfeited or mislabeled. And the opportunity 
exists later to add to those drugs if necessary.
    As you know, prescription drugs are wholesaled and 
dispensed in every State and often travel through many States 
before they arrive at their ultimate destination. Therefore, an 
action or lack of an action in one State can easily affect the 
citizens of another State. That is why we believe it so 
important to have a uniformed law applied and enforced 
nationwide.
    By now you have probably heard the horror stories involving 
counterfeit prescription drugs. For example, the doctor who 
thought his son was being injected with a growth hormone, when 
in reality he was getting insulin. The young boy who thought he 
was receiving medicine to increase his red blood cell count, 
but was actually receiving counterfeit medication. More 
recently you may have heard of the individuals placing tap 
water in vials of medication and then labeling those vials with 
the name of a cancer medication. These despicable 
counterfeiters are preying upon people who already have 
suffered a great misfortune.
    Much of the illegal activity is centered on very expensive 
so called high-end drugs. However, it should be noted that 
fraudulent activity has been detected in lesser priced drugs as 
well.
    In conclusion, the business of selling counterfeited and 
adulterated drugs is booming. As with almost all criminal 
activity, the motive is money. In the case of buying and 
reselling adulterated prescription drugs, the money that can be 
made from illegal activity is staggering. As prosecutors, we 
are now seeing a trend of prior illegal narcotic traffickers 
entering into the prescription drug business. Unfortunately for 
consumers, the drug traffickers have not had a moral 
enlightenment. Rather, they now apply the tools of their 
illegal trade to the prescription drug business.
    Most of us probably know someone that takes one or more 
prescriptions drugs daily. I do have a 17 month old child, 2 
parents and an 83 year old grandmother who takes prescriptions 
drugs. I have a goal that someday when I walk into a pharmacy 
there will be a sign at that pharmacy saying we trace every 
drug that we have in our possession and we know the origin, who 
has handled it and how it was handled. I also have a goal that 
I do not want to ever have to give pause when I take another 
prescription drug or administer one to my child.
    Thank you, Mr. Chairman.
    [The prepared statement of Robert M. Penezik follows:]
     Prepared Statement of Robert M. Penezic, Assistant Statewide 
                      Prosecutor, State of Florida
    Thank you for the honor, privilege and opportunity to speak to this 
sub-committee. Mr. Chairman and Members of the Subcommittee, I am 
Robert Penezic, Assistant Statewide Prosecutor for the State of 
Florida. Today, I will talk about the issues and problems raised in the 
Interim Grand Jury Report, which served as the conduit of the 
legislation, and ultimately the law signed by the Governor on June 13, 
2003.
    The citizens of the State of Florida and the United States are 
safer today due to the collective efforts of a broad spectrum of 
representatives in the State including: Governor Jeb Bush, Attorney 
General Charlie Crist, State Senators Durell Peaden and Walter ``Skip'' 
Campbell, State Representative Ed Homan, Department of Law Enforcement 
Commissioner Tim Moore, Secretary of Health Dr. John Agwunobi, 
Statewide Prosecutor Pete Williams, and the members of the Seventeenth 
Statewide Grand Jury. This overall process that led to the new State 
law, was truly government at its best, because all parties recognized 
the problem and worked diligently and tirelessly to solve it. I think 
it is especially important to recognize the contributions of Governor 
Bush and Attorney General Crist for their leadership and vision.
    This morning, millions of people took a prescription drug. Most 
consumers probably give little or no thought to where their 
prescription drugs came from or who handled them before they received 
them from their pharmacist. We all know that significant precautions 
are taken in the preparation and manufacture of our prescription drugs. 
However, most of us are unaware of the current lack of controls on 
prescription drugs once they leave the custody of the manufacturer.
    To put it in the simplest of terms, before the new legislation in 
Florida, when you walked into a pharmacy, you had no idea who handled 
your prescription drug, how it was handled, or if anyone had done 
anything inappropriate to it. Further, the pharmacists who dispensed 
your medication might themselves not even know the trail your 
prescription drug had traveled. Unless the drug store bought all of the 
prescription drugs it dispensed directly from the manufacturer, the 
risk is present. This is the problem that I would like to discuss with 
you today.
    First, I believe it would be helpful to define a few terms included 
in the testimony.
    Drug Diversion--is the movement of legal drugs into the illicit 
marketplace.
    Adulterated drugs--are counterfeit, mislabeled, diluted, improperly 
stored and/or improperly handled prescription drugs are all considered 
to be adulterated drugs under Florida Statutes. Any of these acts make 
the drugs unfit for human consumption.
                 background & interim grand jury report
    At the end of last year, Governor Bush was briefed on the 
adulterated and counterfeit prescription drug problem in Florida caused 
by, among other things, the secondary pharmaceutical drug wholesale 
market. Governor Bush immediately petitioned the Florida Supreme Court 
to convene a Statewide Grand Jury. The Seventeenth Statewide Grand Jury 
was impaneled in early 2003 and, after weeks of testimony, the Grand 
Jury issued the ``First Interim Report of The Seventeenth Statewide 
Grand Jury'' in February 2003 (the ``Interim Report''). Copies have 
been provided to the Members of the Subcommittee.
    In the Interim Report, the Grand Jury made a number of significant 
findings and proposed a comprehensive series of recommendations. The 
Grand Jury expressed its concern for the high risk of adulterated and 
counterfeited drugs entering the prescription drug supply of the State 
of Florida. It heard testimony of the many ways by which these 
adulterated drugs enter the stream of commerce and eventually end up on 
the shelves of our pharmacies, clinics and hospitals. Some prescription 
drugs were sold and resold 4 and 5 times, without any apparent 
legitimate economic reason, before reaching the ultimate dispenser.
    The Grand Jury also found that the ``pedigree papers,'' or paper 
audit trails that track the drugs from manufacture to the point they 
are dispensed, are the most effective way to prevent diverted, 
adulterated or counterfeit drugs from entering the marketplace. Such 
pedigree papers would allow each purchaser of prescription drugs to 
determine who previously handled the drugs, and would thus serve to 
greatly minimize the introduction of adulterated drugs into the 
marketplace.
    However, the Grand Jury found that the pedigree paper standing 
alone was not enough. It stated, ``[w]e believe that Florida should 
require pedigree papers to be delivered all the way from the 
manufactures to dispensers and that all buyers be required to verify 
pedigree papers through the exercise of due diligence.''
    The Interim Report of Florida's Seventeenth Statewide Grand Jury 
Report illustrates the potential danger to the citizens of Florida as 
well as the citizens of this nation. The Grand Jury found that the 
wholesale pharmaceutical industry in Florida has been corrupted by the 
infiltration of a criminal element that is potentially reaping enormous 
illicit gains while tainting the prescription drug supply. It is 
important to note that we are not referring to the major prescription 
drug wholesalers. Rather, Florida's concern arose with some of the 
other 400 wholesalers licensed in the Florida and another 900 
wholesalers licensed to ship prescription drugs into Florida. As the 
Grand Jury noted, Florida's licensing requirements for prescription 
drug wholesalers was inadequate.
    The Grand Jury made several recommendations to address these 
problems, including:

1. Create a standardized form of pedigree paper.
2. Require pedigree papers in every transaction from the manufacturer 
        to the end-user.
3. Create new crimes for offenses involving pedigree papers.
4. Increase the penalties for anyone who introduces adulterated or 
        counterfeit prescription drugs into the stream of commerce.
5. Clarify the definition of an authorized distributor of record.
6. Give the Florida Department of Health clear authority to shut down 
        wholesalers in violation of state statutes.
7. Give the Florida Department of Health clear authority to seize and 
        destroy drugs that pose a threat to the public health.
8. Increase the requirements to become a licensed pharmaceutical 
        wholesaler in Florida.
                          florida legislature
    Based on this compelling report from the Seventeenth Statewide 
Grand Jury, Florida Attorney General Charlie Crist immediately crafted 
legislation to address the problem and enact the Grand Jury's 
recommendations. The Florida Legislature responded quickly as well, and 
many of the Grand Jury's recommendations were proposed in bills 
sponsored by Florida Senators Durell Peaden and Walter ``Skip'' 
Campbell, together with Florida Representative Ed Homan. This led to 
the passage of Senate Bill S 2312, the ``Prescription Drug Protection 
Act,'' which was signed into law by Governor Bush on Friday, June 13, 
2003. A copy of this bill may be found at MyFlorida.com. Further 
information regarding the adulterated drug problem is addressed in a 
report issued by the Office of Program Policy Analysis and Government 
Accountability (OPPAGA). A copy of the OPPAGA report can be found at 
www.oppaga.state.fl.us.
    Among other things, Florida's new legislation requires or provides 
for:

1. Vastly improved documentation of vital pharmaceuticals in order to 
        prevent their adulteration or counterfeiting.
2. Full pedigree papers on all prescription drugs by July 1, 2006.
3. Due diligence by those receiving pedigree papers.
4. Full authority by the Florida Department of Health to destroy 
        medication that has been adulterated or improperly stored.
5. Full authority by the Florida Department of Health to shut down 
        licensed wholesalers in violation of state statutes until the 
        deficiencies are corrected.
6. Increased criminal penalties for pedigree paper violations, as well 
        as other violations involving adulterated drugs.
7. Increased permitting requirements for drug wholesalers in Florida, 
        including raising bonding requirements and stricter background 
        checks.
    In describing the new legislation, Florida Attorney General Charlie 
Crist said, ``We now have new tools to combat this type of health care 
fraud. Our most vulnerable citizens now have a place to go when money 
overwhelms compassion.''
    It is extremely important to note that this legislation was a 
product of the cooperation between the Attorney General, law 
enforcement, the Florida Legislature, the regulators at the Florida 
Department of Health, and representatives of the legitimate 
prescription drug wholesalers. The legislation imposes an immediate 
requirement of pedigree papers on a select list of approximately 35 
prescription drugs that have been shown by law enforcement to have been 
counterfeited or mislabeled. (Should law enforcement detect criminal 
activity in additional drugs, the legislation also provides for the 
emergency listing of such new drugs on the full pedigree paper list by 
the Florida Attorney General.) The pedigree paper requirement on the 
remainder of all prescription drugs, regardless of whether they are 
sold by authorized distributors of record, takes effect on July 1, 
2006, in order to allow the pharmaceutical drug industry to develop 
cost effective technology for the tracking of every prescription drug 
shipment.
    Attorney General Crist is proud of this accomplishment and is 
hopeful that other states and the nation will consider taking similar 
action. Prescription drugs are wholesaled and dispensed in every state 
and often travel through many states before they arrive at their 
ultimate destination. Therefore, an action or lack of action in one 
state can easily affect the citizens of another state. That is why we 
believe it so important to have uniform laws applied and enforced 
nationwide.
    By now you have probably heard the horror stories involving 
counterfeit prescription drugs. The doctor who thought his son was 
being injected with a growth hormone, when in reality he was getting 
insulin. The young boy who thought he was receiving medicine to 
increase his red blood cell count, but was actually receiving 
counterfeit medication. More recently you may have heard of the 
individuals placing tap water in vials of medication and then labeling 
those vials with the name of a cancer medication. These despicable 
counterfeiters are preying on people who already have suffered a great 
misfortune.
    Much of the illegal activity is centered on very expensive drugs 
such as Epogen, Neupogen and Procrit, which are used in the treatment 
of cancer or HIV. However, it should be noted that fraudulent activity 
has also been detected in such lesser priced drugs like Lipitor and 
Viagra. In our opinion, the list of prescription drugs that could 
potentially be adulterated or counterfeited is quite large.
    Below are the prescription drugs most commonly found to have been 
either counterfeited or otherwise adulterated: Neupogen; Gammagard; 
Epogen; Gammimune; Procrit; Oxycontin; Serostim; Viagra; Nutropin AQ; 
Viramune; Panglobulin; Sustiva; Venoglobulin; Prevacid; Zyprexa; 
Risperdal; Trizivir; Rocephin; Combivir; Avandia; Epivir; Lamisil; 
Viracept; Cipro; Megace; Lipitor; Crixivan; Celebrex; Serostim; Mepron; 
Diflucan; Aricept; Norvir; Zoloft; Zocor; Ziagen; Vioxx; Zithromax; 
Albuterol; Ipatropium; Flonase; and Nizoral.
                               conclusion
    The business of selling counterfeited and adulterated drugs is 
booming. As with almost all criminal activity, the motive is money. In 
the case of buying and reselling adulterated prescription drugs, the 
money that can be made from illegal activity is staggering. For 
example, a 2001 investigation discovered that South Florida criminals 
had counterfeited Procrit, a drug used to boost the immune systems of 
cancer and HIV/AIDS patients. The criminals re-labeled approximately 
110,000 bottles of low strength Epogen to make the bottles appear to 
contain high strength Procrit, a drug 20 times the strength of the 
Epogen in the bottles. The criminals resold the re-labeled drugs into 
the wholesale market with forged pedigree papers, passing the drugs 
through four states. Investigators located 800 boxes of the counterfeit 
Procrit at a large Texas wholesaler, which had unknowingly purchased 
the counterfeit Procrit. In addition, investigators found some of the 
product in Kentucky. In all, investigators recovered less that 10% of 
the counterfeit Procrit. It is estimated that the criminals in the 
chain may have made an illicit profit of approximately $46 million. As 
prosecutors, we are now seeing a trend of prior illegal narcotic 
traffickers entering into the prescription drug business. Unfortunately 
for consumers, the drug traffickers have not had a moral enlightenment. 
Rather, they now apply the tools of their illegal trade to the 
prescription drug business.
    Most of us probably know someone that takes one of the above-
mentioned prescription drugs. This, more than anything, illustrates the 
need for Congressional action. Thank you for the opportunity to speak 
to this sub-committee. I am happy to respond to any questions you might 
have.
    Additional reports filed by the State of Florida are available at:
http://www.oppaga.state.fl.us/reports/pdf/0318rpt.pdf
http://myfloridalegal.com/grandjury17.pdf
http://www.muflorida.com/includes/directoryshtml

    Mr. Greenwood. Thank you, sir. Appreciate your testimony.
    Mr. Jones, you are recognized for your testimony.

                    TESTIMONY OF GREGG JONES

    Mr. Jones. Thank you Mr. Chairman and members of the 
subcommittee for the chance to raise the awareness of problems 
effecting the safety and the integrity of our Nation's drug 
supply. Mr. Arias on my left and I gained much of our early 
investigative experience working the cases that came before you 
in 1986 to 1990.
    I have submitted a written statement and will try to keep 
my verbal statements brief.
    Despite the shocking stories you will find our testimony, I 
am confident that the United States drug supply remains 
unequalled in safety and efficacy. A Florida task force has 
been intensely and tirelessly investigating criminal 
prescription drug diversion since late 2001. Local, State, and 
Federal criminal law enforcement involvement has been essential 
in unraveling and revealing a nationwide secondary wholesale 
market that is riddled with corruption. The FDA's Office of 
Criminal Investigation plays a vital role in our investigation.
    This corruption is allowing the entry and counterfeit of 
adulterated drugs into our drug supply and is damaging the 
legitimate wholesale industry.
    Our citizens and health care professionals have complete 
confidence that their prescription drugs are safe and 
effective. Unlike other countries around the world, our 
citizens have never had to worry whether their drugs are 
counterfeit or adulterated in anyway. Physicians place a blind 
faith in ordering a drug for a patient and assume the potency 
and the identity that they ordered. They have never had to 
worry or, as you have indicated earlier, suspect that a cancer 
patient who failed to respond to a treatment and it was the 
result of the drug being counterfeit or subpotent.
    When I tell pharmacists and physicians that increasingly 
the numbers of drugs that they use don't travel in the 
traditional route from manufacturer to wholesaler to pharmacy, 
they are shocked. Prescription drug laws strive to maintain our 
drugs in a closed distribution system that is licensed and 
tightly regulated from manufacturer to drug wholesaler to 
pharmacy to patient. In reality, major holes exist in the 
integrity of our prescription drug delivery system allowing 
large quantities of questionable drugs to enter our drug 
supply. These include stolen and hijacked drugs including a 
case we had from last year where HIV and transplant drugs 
requiring refrigeration were hijacked. One Miami wholesaler was 
offered the same drug stolen from their own warehouse.
    Drugs bought off the street of Miami from victimized 
Medicaid patients enter the drug supply. The pharmacy labels 
are peeled off and removed with lighter fluid and heat guns.
    Special low priced drugs sold to closed pharmacy and other 
health care entities are still prevalent in the secondary 
market. A good case of this are the doctors recently buying 
excessively large amounts of the drug Lupon for office use at 
reduced prices and selling these into the wholesale market.
    Counterfeit drugs, both subpotent and even contaminated 
with dangerous bacteria that is life threatening to immuno 
compromised patients taking these drugs to save their life is 
prevalent in our drug distribution system today. In the past 2 
years 10 counterfeit drugs have moved through Florida valued at 
tens of millions of dollars. It is gut wrenching to think about 
the poor father, a physician no less, that injected his son 
with counterfeit growth hormone 3 times before giving in to his 
son's complaints about the inflammation and the burning from 
the contaminated drug.
    Some day many of us, if you have not already, will have to 
sit in an oncologist's office and receive a devastating 
diagnoses, maybe even for those you hold dearest; your spouse, 
your parents, worst of all a child. Millions of questions will 
flood your mind. The last one you need to worry about is 
whether the drug that you are going to get to save your life, 
such as the drugs that we have here, are counterfeit or 
subpotent.
    We also see drugs that are sold for export at reduced 
prices and never exported. Last summer Mr. Arias stopped sales 
in Miami of 50 pallets of Gammagard, Baxter's immune globulin 
that was found stored in an unlicensed Miami food warehouse.
    We are seeing ever increasingly drugs that have been 
repackaged as in the case of the recent counterfeit Lipitor. 
Every major wholesaler distributes large numbers of commonly 
used repackaged drugs to pharmacies. This is an alarming new 
avenue for counterfeit or smuggled foreign drugs to easily make 
their way to the pharmacy shelf.
    We have found the pedigree paper to be a valuable tool for 
regulators and law enforcement. There is very little use of the 
pedigree paper outside of our State and I have situations where 
drugs are offered to customers with papers or without papers. 
Drugs with pedigree papers costing more.
    The PDMA became law in 1988 and today 15 years later, the 
final rule on pedigree set to take effect in 1999 has been 
stayed a fourth time. This subcommittee recognized the 
importance of knowing a drug's origin 15 years ago as a tool 
for wholesalers in the industry to identify where a drug has 
been before they buy it. Your vision of the pedigree revealing 
the true source of a drug has never been implemented 
nationwide.
    Florida's legislators recognized the value of the pedigree, 
and in 2006 if a Florida wholesaler did not buy a bottle of a 
drug directly from the manufacturer, they will need a pedigree 
back to the manufacturer and must pass it all the way to the 
pharmacy.
    In September of this year a full pedigree will be required 
for a list of 30 drugs that are commonly counterfeited and 
adulterated.
    Only when State laws and Federal laws alike are 
strengthened will we have the tools necessary to fight this 
problem. Regulators cannot convince law enforcement to 
investigate or prosecutors to prosecute when violations are 
only misdemeanors. We have worked with many States over the 
past 2 years, and I am convinced that most States have these 
problems and do not know it. Our counterparts are learning the 
corrupt wholesaler is changing.
    It is mindboggling to think about all the issues effecting 
prescription drugs today. Patients that buy drugs from foreign 
countries with or without a prescription, lifestyle drugs 
purchased with a questionnaire over the Internet or just buying 
drugs off of the street. These patients are taking a conscious 
risk.
    The laws that we are addressing today effect the mainstream 
drug supply of our country and are designed to work behind the 
scenes preventing problems so that physicians, pharmacists and 
citizens will have complete trust that the drugs used to treat 
our sickest from cancer patients to our children with ear 
infections can have complete confidence.
    Thank you for the opportunity to discuss these important 
issues effecting the safety and the integrity of not only 
Florida, but our Nation's drug supply.
    [The prepared statement of Gregg Jones follows:]
  Prepared Statement of Gregg Jones, Pharmaceutical Program Manager, 
                            State of Florida
    Mr. Chairman and Members of the Subcommittee, I am Gregg Jones, 
Pharmaceutical Program Manager for the Bureau of Statewide 
Pharmaceutical Services, Florida Department of Health (FLDOH) and 
registered pharmacist. I have 18 years of drug regulatory experience 
with Florida's Department of Health. Also present representing 
Florida's Department of Health is Mr. Cesar Arias, Drug Inspector 
Supervisor in South Florida. Together Mr. Arias and I represent 34 
years drug diversion investigative experience with the FLDOH. We both 
gained much of our early investigative experience working in Miami on 
many of the cases and issues that came before this committee from 1986 
to 1990.
    Thank you for the opportunity to discuss the issues affecting the 
safety and integrity of our nation's prescription drug supply. Despite 
the concerns that we are raising today, I am confident that the United 
States drug supply remains unequaled in safety and efficacy. We will 
share problems being faced in Florida with counterfeit and adulterated 
drugs entering the wholesale drug market, the schemes, the magnitude of 
the problem, and efforts to fight the problem.
    The Bureau of Statewide Pharmaceutical Services is a part of the 
Florida Department of Health, a public health agency, whose mission is 
to promote and protect the health and safety of all people in Florida 
through the delivery of quality public health services and promotion of 
health care standards. The Bureau is responsible for enforcing 
Florida's Drug and Cosmetic Act that is modeled after the federal Food, 
Drug and Cosmetic Act. We license over 4500 companies, approximately 
1000 out of state. We have a broad range of regulatory responsibilities 
that include the licensure and inspection of Drug, Device, and Cosmetic 
manufacturers, including compressed medical gas manufacturers, 
dispensers of medical oxygen for home use, veterinary drug 
distributors, drug return companies, and drug destruction companies. We 
have a small administrative staff and a total of nine drug inspectors 
all of whom are registered pharmacists. Our inspectors are not sworn 
law enforcement officers. All actions taken by the Bureau are done 
under Florida's Administrative Procedures Act, although we are 
increasingly making referrals of violations to law enforcement agencies 
and work very closely with these agencies in the investigation and 
prosecution process.
    Florida currently has approximately 435 licensed drug wholesalers, 
including brokers that do not take possession of drugs. We also license 
approximately 975 out-of-state drug wholesalers that sell prescription 
drugs into the State of Florida. The 975 out-of-state drug wholesalers 
are made up of many drug manufacturers and multiple locations of major 
wholesalers.
                           wholesale industry
    The number of small secondary drug wholesalers who typically sell 
drugs among themselves is increasing. The drugs they sell appear to 
travel from secondary wholesaler to secondary wholesaler to secondary 
wholesaler, until ultimately they are sold to a primary wholesaler, or 
directly to a pharmacy. Many of the small secondary drug wholesalers 
never handle products and only generate elaborate paper trails, their 
existence only serving to hide the original source of the drugs. State 
laws vary widely as do enforcement actions, and minimal penalties allow 
the entry of counterfeit and adulterated drugs into our drug supply. We 
are working closely with other states and we know that our counterparts 
are also concerned about the increase in small drug wholesalers 
entering tainted drugs into the national drug supply through their 
states.
    A Florida task force has been intensely and tirelessly 
investigating the criminal side of Florida prescription drug diversion 
since late 2001. The task force includes members from the Miami-Dade 
Police Department, the Attorney General's Offices of Statewide 
Prosecution and Medicaid Fraud, and the Florida Departments of Law 
Enforcement and Health. Criminal law enforcement involvement has been 
essential in unraveling and revealing a nationwide secondary drug 
wholesale market riddled with corruption drugs of questionable 
integrity.
    The prescription drug distribution system in this country is 
complex. Ideally the prescription drug distribution system of the 
United States would be a closed system of distribution from 
manufacturer to wholesaler to dispenser to the patient. The most 
recognized closed distribution system for drugs is found with 
controlled substances. Every unit of a controlled substance is tracked 
from the manufacturer to the distributor and to the dispenser through a 
uniform federal system administered by the Drug Enforcement 
Administration. Many states expand on this tracking and some monitor 
information on the flow the actual prescriptions of the most abused 
controlled substance. This system has been continually strengthened for 
many decades.
    The U.S. prescription drug industry is one of the most tightly 
regulated and monitored industries in the world. Oversight and 
licensing is extensive from drug development, approval, manufacturing, 
and distribution, to medical prescribing, administering, and pharmacy 
dispensing. Unlike controlled substances, however, the history of drug 
wholesale regulation is very short. When the 1987 Prescription Drug 
Marketing Act was being drafted, a little over 30 states licensed their 
wholesalers. It has only been 11 years since all states were required 
to license their drug wholesalers in accordance with federal guidelines 
established by the Food and Drug Administration. A huge gap existed in 
drug protection between the time a drug left the manufacturer and 
arrived at the pharmacy, hospital, or doctor's office. These same 
concerns remain today, fifteen years after the passage of the 
Prescription Drug Marketing Act. A crime is committed every time a 
diverted drug enters the system through an unscrupulous wholesaler, yet 
little threat of punishment, and the lure of millions of dollars in 
profits, continues to fuel the problem nationwide. A diverted drug is 
one that has left the regulatory channels of licensed wholesalers, 
thereby bypassing health authority oversight.
                               chronology
    Events leading to the present situation in Florida:
    1992--Florida's Legislature as part of complying with FDA 
guidelines on licensure of drug wholesalers required the pedigree 
paper, once created to go back to the manufacturer and be passed on, 
even by an authorized distributor of record once it was created. The 
intent was to prevent an authorized distributor of record from not 
passing a pedigree paper when it purchased a drug from a non-authorized 
distributor of record.
    Mid 90's--FLDOH began warning and educating drug wholesalers that 
did not provide pedigrees of drugs that were purchased from non-
authorized distributors of record.
    Late 90's--FLDOH began seeing increases in the number of small 
wholesalers whose primary function was dealing in expensive brand name 
medications that were purchased from licensed wholesalers and resold to 
licensed wholesalers. In conjunction with the City of Miami Police 
Department, the Attorney General's office of Medicaid Fraud, and FDA's 
Office of Criminal Investigation among other local, state, and federal 
law enforcement agencies FLDOH investigated the proliferation of drugs 
dispensed to Medicaid patients being sold to ``Street Brokers'' and 
then sold back to pharmacies.
    2001--FLDOH began verifying pedigree papers finding large numbers 
to be falsified. Counterfeit drugs began to proliferate. With the 
assistance of FDA's South Florida Office of Criminal Investigation, 
FLDOH sought the assistance of Florida's Attorney General's Office of 
Statewide Prosecution in the case of a small secondary wholesaler 
dealing in a counterfeit of the drug Serostim.
    Late 2001--FLDOH began working with the Florida Department of Law 
Enforcement investigating the sources of drugs in both licensed and 
unlicensed drug wholesale operations. This investigation rapidly 
developed into a task force composed of the Miami-Dade Police 
Department, the Attorney General's Offices of Statewide Prosecution and 
Medicaid Fraud, the Florida Departments of Law Enforcement and Health.
    In November of 2001 the FLDOH sent a letter to every licensed drug 
wholesaler in the format of Q and A regarding the pedigree paper due to 
the increase in counterfeit and adulterated drugs entering the market 
with false pedigree papers or no pedigree papers at all. The industry 
was informed that the FLDOH had begun to initiate action where 
pedigrees were at issue. In short it said that Florida's pedigree 
requirement was stricter than the federal law requiring:
    1. PEDIGREES TO GO BACK TO THE MANUFACTURER
    2. PEDIGREES MUST BE PASSED ON EVEN BY AN AUTHORIZED DISTRIBUTOR 
ONCE CREATED.
    3. AUTHORIZED DISTRIBUTOR STATUS IS TRANSACTION (BOTTLE) SPECIFIC 
(If you purchased a bottle of a Rx Drug from any one other than direct 
from the Manufacturer, you must pass on a Pedigree showing every prior 
sale of that bottle.)
    The drug wholesale industry responded with serious concerns about 
FLDOH's interpretation of the state law and requested a delay in the 
implementation of FLDOH's interpretation of the pedigree from the 
Secretary of Florida's Department of Health, John Agwunobi, M.D. After 
meeting with industry, Dr. Agwunobi, announced the formation of an Ad 
Hoc committee composed of representatives from industry and government. 
This committee met monthly for 7 months. Dr. Agwunobi charged the 
committee with presenting recommendations to resolve the pedigree paper 
dilemma that satisfy the department's public health mission to protect 
the public from misbranded and adulterated drugs, while attempting to 
lessen the regulatory cost of compliance on the regulated industry. 
This charge included empowering the department by providing 
investigative tools to trace the source of drugs that are counterfeit 
or that have been diverted from regulated distribution channels so as 
to identify and prosecute the person or persons putting these drugs 
into the marketplace. This committee recommended that licensing 
requirements be strengthened, penalties be increased, and a full 
pedigree be enforced for certain high cost drugs.
    In December of 2002, due to increasing concerns over the safety and 
security of Florida's prescription drugs, Governor Jeb Bush petitioned 
Florida's Supreme Court to impanel a Grand Jury to investigate 
counterfeit and adulterated drugs entering Florida's drug supply.
    In February of 2003 the Seventeenth Statewide Grand Jury of Florida 
issued its First Interim Report. It is an understatement to say that 
the findings were shocking. The report speaks for itself and can found 
at http://myfloridalegal.com/grandjury17.pdf.
    Also in late February of 2003, Florida's Office of Program Policy 
Analysis and Government Accountability (an office of the Florida 
Legislature) released a report on its investigation of counterfeit and 
diverted drugs within the prescription drug wholesale market. 
Essentially both entities made the following recommendations.
    1. Clarify state law related to pedigree papers and direct the 
department to enforce the state law.
    ``Requiring pedigree papers to accurately trace drug sales 
histories back to the manufacturer is vital to ensuring the integrity 
of Florida's prescription drug market.'' ``pedigree papers are 
necessary for investigators to trace counterfeit and diverted drugs 
back to their source.''
    2. Authorize the department to strengthen the permitting process.
    3. Authorize the department to levy increased administrative 
penalties and fines.
    4. Consider increasing criminal penalties for prohibited acts 
involving prescription drugs.
    In May of 2003, the Florida Legislature passed the Prescription 
Drug Protection Act, a comprehensive rewrite of Florida's prescription 
drug laws aimed at protecting Florida's citizens from counterfeit drugs 
and drugs adulterated by diversion. Governor Bush signed this law into 
effect on June 13, 2003, less than two weeks ago. At the signing 
Governor Bush stated, ``The bill I am signing today supports our 
efforts to ensure that when our citizens fill their prescriptions, they 
get what their doctor ordered.'' Florida Attorney General Charlie Crist 
said ``It is hard to imagine a more heinous individual than one who is 
willing to profit from the suffering of others.''
    The new law raises the standard for wholesalers by adopting new and 
more strict requirements for permitting wholesalers including the 
following provisions:

 Raises bond requirements to $100,000
 Requires stricter background checks
 Requires every wholesaler to designate a contact person 
        responsible for all transactions enhancing accountability for 
        the drugs wholesalers distribute.
 It strengthens criminal laws by creating new felony crimes 
        penalizing anyone who tries to obtain or sell drugs without 
        proven history or ``pedigree papers.'' It also creates more 
        serious felonies for forging drug labels, prescription drug 
        trafficking of more than $25,000 worth of prescription drugs 
        and the sale of prescription drugs that result in injury or 
        death to a person.
 It requires wholesalers to authenticate prior transactions on 
        the pedigree papers.
 The law requires that by 2006, all drugs (each bottle) not 
        purchased from a manufacturer, must have a pedigree that goes 
        back to the manufacturer, and is passed all the way to the 
        retailer by anyone that receives a pedigree. It eliminates the 
        ambiguity of the industry's current interpretation of 
        Authorized Distributor of Record. In the interim, it allows the 
        FLDOH to create a list of specified drugs for which full 
        pedigree requirements must be met. The full pedigree 
        requirement will go into effect for a list of 30 drugs in 
        September of this year.
 Increases regulatory authority of the Department of Health by 
        allowing the department to shut down wholesalers operating in 
        violation of Department of Health rules and to seize and 
        destroy adulterated drugs posing an imminent danger to the 
        public.
              problems observed in the wholesale industry
    I am sure there are legitimate drugs in the secondary market but 
many of the drugs we see moving among small wholesalers are of 
questionable origin. These drugs all enter at some weak point in the 
system, usually a small drug wholesaler.
Special priced drugs from Health Care Entities
    Drugs sold at reduced price to closed-door pharmacies, nursing home 
pharmacies, and physicians represent a large amount of drugs in the 
secondary market. These drugs are often looked on as not presenting a 
public health threat because the drugs are good, only being diverted 
from their intended channel of trade. However, a fraud is being 
committed against the manufacturer, and both state a federal drug 
distribution laws are being violated. The pathways these drugs take 
into the mainstream wholesale market punch holes in the integrity of 
our closed drug distribution system and allow the entry of drugs from 
every conceivable scheme of diversion.
    The drug Lupron is a good example. It is sold to physicians cheaper 
than to drug wholesalers. Physicians all over the country have been 
buying excessive amounts of the drug, in some cases obtaining drug 
wholesale licenses to sell these products back into the market. Others 
simply sell the drugs with no license to drug wholesalers or unlicensed 
individuals willing to violate both state and federal law.
Stolen Drugs
    Within the last 2 years we have seen the same drugs stolen from one 
wholesaler sold back to them. A trailer containing $3,000,000 worth of 
drugs was hijacked in route to South Florida from the wholesaler 
Cardinal and the entire contents removed. A trailer hijacked in Miami 
last fall contained HIV and Transplant drugs requiring refrigeration.
Drugs Intended for Export
    Drugs are often sent to Miami freight forwarders for shipment 
overseas. These are most often drugs shipped form the manufacturer to a 
location of their customer who has represented themselves to be a 
charitable group or agent of a foreign account. A couple of years ago a 
generic drug sold to a South American hospital at 10% of the domestic 
price was shipped to Miami for export but within a week the drug showed 
up in a large Southeastern U.S. wholesaler. Last summer 50 pallets of 
Gammagard, Baxter's immune globulin was shipped to a freight forwarder 
in Miami for export. The drug was transferred to an unlicensed food 
storage warehouse where it stayed for several months while small 
quantities were diverted to Miami wholesalers. One of the wholesalers 
was actually an authorized distributor of Baxter, thus was not 
producing a pedigree when selling the product.
Repackaged Adulterated/Counterfeit/Foreign Unapproved Drugs
    The recent case of counterfeit Lipitor being repackaged by MED-PRO, 
Inc., of Lexington, NE illustrates this alarming new avenue for 
substandard drugs to enter the market and easily make their way to 
pharmacies, nursing homes and other institutions. It is a common 
practice for drugs to be repackaged from large containers into units 
convenient for dispensing such as 30's 60's and 90's for sale to 
pharmacies by all levels of the wholesale market. Some drugs are 
repackaged in unit dose packages for sale to nursing homes or other 
institutions. A recent case in Florida involved a smuggled a foreign 
drug being repackaged into unit dose. In our case, the drug was 
purchased from a licensed wholesaler, however no pedigree was issued. 
The paperwork, which is the only thing left behind after a sale, did 
not identify the foreign drug. This scheme has a huge potential for 
entering tainted drugs into the market because the original packaging 
is lost. (Florida's new law will require repackagers to provide 
pedigree papers.)
Medicaid Drugs diverted from patients into the wholesale market
    Sophisticated operations buy drugs from patients and the drugs are 
resold into the wholesale market. We are certain that this form of 
diversion is not unique to Florida and is happening in other states. 
The obvious public health threat is the lack of proper handling, 
especially for refrigerated items.
Counterfeit Drugs
    Between 1985 and 2001 only 5 counterfeit drug cases were 
investigated by Florida's Department of Health. During the past 2 
years, ten counterfeit drugs have moved through Florida drug 
wholesalers valued in tens of millions of dollars. With every new case 
we are shocked at the level of sophistication in the reproduction of 
labels, seals, and containers. The Serono product Serostim has been 
counterfeited to the point that the company has abandoned the drug 
wholesale system to deliver its product and now ships only directly to 
certain pharmacies authorized to dispense their product. In several of 
our cases the pedigree paper played a critical role.
    The number of smaller wholesalers selling directly to pharmacies 
and hospitals is increasing. They send emails, faxes, and sell online 
with daily specials. They are finding a new outlet for diverted drugs 
without having to sell them into the mainstream wholesale market. No 
pedigree is provided and the pharmacist or physician has no clue where 
the drugs have been. This is why the pedigree should go to the retail 
level, as required by the Florida legislation, effective 2006.
    We have found that the pedigree paper is a useful tool in 
uncovering counterfeit drugs for regulators, law enforcement, and 
equally if not more important in terms of prevention, the drug 
wholesalers themselves. Both Federal and Florida law requires that the 
pedigree be passed prior to the sale. Wholesalers could use the 
pedigree to insure the quality of the drugs they purchase. Our findings 
however, are more consistent with the Florida Grand Jury when they 
reported ``It's not surprising to us that no one checks the pedigree 
papers because they simply don't want to know the true background of 
what they're buying. This is nothing less than a blatant example of 
willful blindness.'' There is very little use of the pedigree paper 
outside our state, and we have seen situations where drugs are offered 
to customers ``with papers'' or ``without papers'' drugs with pedigree 
papers costing more.
                               conclusion
    Florida will begin enforcing pedigree requirements that are bottle 
specific (must go back to the manufacturer), be passed on by everyone, 
regardless of authorized distributor status once a pedigree is created, 
for a list of 30 drugs, beginning in September of 2003. In 2006 all 
pedigrees will be furnished to the pharmacy. While the future is bright 
for technological advances like computer chips the size of grains of 
sand storing information on a label as complete as the serial number of 
the bottle, this technology is years away and we can not delay the 
protection of our drug supply any longer. The PDMA became law in 1988 
and today, 15 years later, the final rule on pedigrees, set to take 
effect in 1999, has been stayed for a fourth time. This is a valuable 
tool that the Florida legislature recognized should be utilized with 
it's original intent, to simply reveal the true source of a drug.
    In 1987 this committee found that ``American consumers cannot 
purchase prescription drugs with the certainty that the products are 
safe and effective'' and ``the integrity of the distribution system for 
prescription drugs is insufficient to prevent the introduction and 
eventual retail sale of substandard, ineffective, or even counterfeit 
drugs.'' As evidenced by the problems we have shared here, these same 
concerns still remain today, fifteen years after the passage of the 
Prescription Drug Marketing Act. Only when State laws and federal laws 
alike are strengthened will we have the tools necessary to fight this 
problem. Tougher licensing requirements and penalties are needed for 
perpetrators of the unconscionable crime of counterfeiting drugs used 
by the sickest and most vulnerable patients.
    The environment for corrupt prescription drug wholesalers is 
changing in Florida. A tremendous effort is being made by our Governor, 
legislature, health officials, law enforcement, and the regulated 
wholesale drug industry, working together to identify and remedy the 
problems in our drug delivery system and restore trust to our 
healthcare professionals and our citizens. We have a responsibility to 
do a better job of insuring the safety and efficacy of the drugs on 
which we depend to improve the quality, extend, and even save the lives 
of our citizens.
    Thank you for this opportunity to discuss these important issues 
affecting not only Florida's, but also our nation's prescription drug 
supply. I would be happy to answer any questions.

    Mr. Greenwood. Thank you, Mr. Jones.
    Mr. Arias?

                    TESTIMONY OF CESAR ARIAS

    Mr. Arias. Good afternoon, Mr. Chairman. I want to thank 
the committee for the honor to speak to you about prescription 
drug diversion activities and counterfeit drugs, which have 
recently been uncovered in Florida.
    I'm a registered pharmacist employed by the State of 
Florida Department of Health as a Drug Inspector Supervisor in 
the Miami area for 16 years. Our inspector and I in South 
Florida have witnessed the growth of pharmaceutical drug 
diversion over the span of my career, and increased drug 
counterfeiting over the last 2 years.
    When I started the job, the primary force behind 
pharmaceutical drug diversion was the different prices charged 
for the same drug by the pharmaceutical manufacturers to the 
different classes of trade. That is still a major cause for 
diversion, but today there are many other sources for diverted 
drugs including foreign drugs, stolen drugs, drugs purchased 
from unlicensed street brokers, and this includes counterfeit 
drugs.
    The street broker is an individual who is unregulated and 
has no clue how to handle or store these pharmaceuticals which 
are temperature-sensitive products. The integrity of the drugs 
acquired through these channels is clearly a public health 
concern because there is no guarantee as to the drug's quality 
or stability. There is no way to know under what conditions 
these products have been stored or handled.
    These brokers or illegal distributors funnel huge amounts 
of diverted drugs from the streets of South Florida back into 
the drug distribution system. Not just in Florida, but also 
throughout the Nation.
    Our office was involved in one investigation involving 
drugs purchased off the street where a wholesaler in Ft. 
Lauderdale sold over $1 million in very expensive drugs to 
treat HIV and cancer. And these were sold through some of the 
largest wholesalers in the Nation in a 6 month period. All of 
the drugs had come from the streets of Miami via 2 unlicensed 
street brokers who would store these temperature sensitive 
injectable drugs requiring refrigeration at above 90 degrees, 
for hours at a time, in the trunks of their vehicles.
    Our office is currently working cases as part of a task 
force, which is overseen by the Attorney General's Office of 
Statewide Prosecution, for which Mr. Penezik works. The task 
force includes the Florida Department of Law Enforcement, the 
Medicaid Fraud Control Unit of the Attorney General's Office, 
the Miami-Dade Police Department and the Florida Department of 
Health. During the last year and a half, the task force's 
efforts have resulted in identifying 11 different 
organizations, which the task force is currently investigating. 
These organizations, or cells, are responsible for the 
diversion of an estimated $250 million a year in 
pharmaceuticals that are obtained from the streets of Florida. 
These cases involved numerous types of prescription drug 
diversion including cargo thefts, burglaries, smuggling of 
foreign made drugs and the diversion of specially priced drugs 
sold to specialty physicians.
    Some of these cells have perfected schemes, which involve 
the opening of shell corporations in other States. These 
companies obtain wholesale licenses for the sole purpose of 
creating false pedigree papers. The shell companies allow these 
folks to fool other States' officials and the ultimate 
customers to believe that the drugs have been obtained from 
legitimate wholesalers when in fact the drugs come from the 
streets of South Florida.
    It was through the efforts of the task force that the 
presence of counterfeit Epogen and Procrit, was detected in the 
Nation's drug supply. This was the direct result of an 
undercover purchase of 100 boxes of counterfeit Epogen by a 
Florida Department of Law Enforcement agent. The importance of 
the pedigree was made evident in this case. When the purchase 
of the Epogen was made, the investigators had no clue, even 
after examining the boxes, that the injectable drugs or 
products were counterfeit. What we knew was that the pedigree 
was false and therefore we had diverted product. Only after we 
submitted some of the boxes to the manufacturer and to the FDA 
did we learn that they were counterfeit. Up until that moment 
in April 2002 neither the FDA nor Amgen, the manufacturer, were 
aware that there was a problem of this sort with their product.
    Subsequently our investigation discovered that up to 
110,000 doses of Epogen 2000 unit product strength had been 
relabeled and converted to Epogen and/or Procrit 40,000 units 
strength. In effect, roughly about 25,000 patients received a 1 
month supply of diluted drugs, about \1/20\th of the required 
strength or the actual labeled strength.
    Due to Florida's intervention and the information sharing 
with the FDA's Office of Criminal Investigations and the Texas 
authorities seized large amounts of counterfeit Epogen at a 
national wholesaler in Kentucky, and counterfeit Procrit at a 
second national wholesaler in Texas, respectively.
    Through the efforts of the task force, we have been able to 
shut down about a dozen wholesalers in Florida and have alerted 
various other States to assist them in shutting down others in 
their respective States. The task force, through the efforts of 
FDLE, has shared information with FDA's Office of Criminal 
Investigation, which have followed up in other States and 
conducted search warrants, collected evidence to make criminal 
cases. It was through the evidence collected by the task force 
and shared with the Office of Criminal Investigation for FDA 
that led to the recent seizures and recalls made of the 
counterfeit Lipitor found in a Nebraska re-packer and a Kansas 
City wholesaler.
    In each instance in which counterfeits or diverted drugs 
have made their way into the mainstream distribution system it 
has been through a dishonest wholesaler. Once the drugs enter 
the system they can end up in any pharmacy in the Nation. That 
is why there is no patient in the Nation that can know with 100 
percent certainty that the drugs they are getting are what they 
are purported to be or if they are, that they have not been in 
the trunk of someone's car, or sitting in a hot warehouse or a 
crackhouse in South Florida.
    The work of the task force has exposed the tremendous 
problem that we are experiencing in Florida with drug diversion 
and counterfeiting. The law recently signed by Governor Jeb 
Bush, Florida's Prescription Drug Protection Act increases 
penalties, requires a new standard for wholesale licensing, and 
strengthens the pedigree paper requirement. People throughout 
Florida rely on the safety of our pharmaceutical supplies, and 
our efforts to protect them. Hopefully, Florida's new law and 
the work of our task force will be a model for the rest of the 
Nation.
    Thank you for allowing me to bring this matter to your 
attention.
    [The prepared statement of Cesar Arias follows:]
    Prepared Statement of Cesar Arias, Florida Department of Health
    Good morning my name is Cesar Arias. I want to thank the committee 
for the honor to speak about prescription drug diversion activities and 
counterfeit drugs, which were recently uncovered in Florida. As a 
registered pharmacist employed by the State of Florida Department of 
Health as a Drug Inspector Supervisor in the Miami area for 16 years, I 
have witnessed the growth of pharmaceutical drug diversion over the 
span of my career, and increased drug counterfeiting over the last two 
years.
    This is not the same job I had 16 years ago. When I started on the 
job, the primary force behind pharmaceutical drug diversion was the 
different prices charged for the same drug by the pharmaceutical 
manufacturers to the different classes of trade. That is still a major 
cause for diversion, but today there are many other sources for 
diverted drugs including foreign drugs, stolen drugs, drugs purchased 
from street brokers, and even counterfeit drugs.
    The street broker is an unregulated individual, who has no clue how 
to handle or store these temperature-sensitive products. The integrity 
of the drugs acquired through these channels is clearly a public health 
concern because there is no guarantee as to the drug's quality or 
stability. There is no way to know under what conditions they have been 
stored or handled.
    These brokers funnel huge amounts of diverted drugs from the 
streets of South Florida back into the drug distribution system(not 
just in Florida, but also throughout the nation. I was involved in one 
investigation involving drugs purchased off the streets where a 
wholesaler in Ft. Lauderdale sold over $1 million in Neupogen for 
treating HIV to one of the largest wholesaler in the nation in a six-
month period. All of the Neupogen had come from the streets of Miami 
via two unlicensed street brokers who would store this temperature 
sensitive injectable drug(requiring refrigeration(at above 90 degrees, 
for hours at a time, in the trunks of their cars.
    Our office is currently working cases as part of a Task Force, 
which is overseen by the Attorney General's Office of Statewide 
Prosecution. The Task Force includes the Florida Department of Law 
Enforcement (FDLE), Medicaid Fraud Control Unit of the Attorney 
General's Office and the Miami-Dade Police Department. During the last 
year and a half, the task forces joint efforts have resulted in 
identifying 11 different organizations, which the Task Force is 
currently investigating. These organizations, or cells, are responsible 
for the diversion of an estimated $250 million a year in 
pharmaceuticals just in Florida. These cases involved numerous types of 
prescription drug diversion including cargo thefts, burglaries, 
smuggling of foreign made drugs and the diversion of specially priced 
drugs sold to specialty physicians.
    Some of these cells have perfected schemes, which involve the 
opening of shell corporations in other states (about 20). These 
companies obtain wholesale licenses for the sole purpose of creating 
false pedigree papers. The shell companies allow these folks to fool 
other states' officials and the ultimate customers to believe that the 
drugs have been obtained from legitimate wholesalers when in fact the 
drugs come from the streets of South Florida.
    It was through the efforts of the Task Force that the presence of 
counterfeit Epogen and Procrit, was detected in the nations drug 
supply. This was the direct result of an undercover purchase of 100 
boxes of counterfeit Epogen by a Florida Department of Law Enforcement 
agent. The importance of the pedigree was made evident in this case. 
When the purchase of the Epogen was made, the investigators had no 
clue, even after examining the boxes, that the injectable products were 
counterfeit. What we knew was that the pedigree was false and therefore 
we had diverted product. Only after we submitted some of the boxes to 
the manufacturer and FDA did we learn that they were counterfeit. Up 
until that moment in April of 2002 neither the FDA nor Amgen, the 
manufacturer were aware that there was a problem with counterfeit 
Epogen.
    Subsequently our investigation discovered that up to 110,000 doses 
of Epogen 2000 Units strength had been relabeled and converted to 
Epogen and Procrit 40,000 Units strength. In effect, 25,000 patients 
received a one-month supply of diluted drugs(1/20th of the required 
strength. Due to Florida's intervention and information sharing, the 
FDA's Office of Criminal Investigations (OCI) and the Texas authorities 
seized large amounts of counterfeit Epogen at a national wholesaler in 
Kentucky, and Procrit at a second national wholesaler respectively.
    Through the efforts of the Task Force, we have been able to shut 
down about a dozen wholesalers in Florida and have alerted various 
other states to assist them in shutting down others. The Task 
Force(through the efforts of FDLE(has shared information with FDA's 
OCI, which have followed up in other states and conducted search 
warrants, collecting evidence to make criminal cases. It was through 
the evidence collected by the Task Force and shared with OCI that led 
to the recent seizures and recalls made of the counterfeit Lipitor 
found in a Nebraska re-packer (Med-Pro) and a Kansas City wholesaler 
(Albers Medical).
    In each instance in which counterfeits or diverted drugs have made 
their way into the mainstream distribution system it has been through a 
dishonest wholesaler. Once the drugs enter the system they can end up 
in any pharmacy in the nation. That is why there is no patient in the 
nation that can know with 100% certainty that the drugs they are 
getting are what they are purported to be(or if they are(that they have 
not been in the trunk of someone's car, or sitting in a hot warehouse 
or a crackhouse in South Florida.
    The work of the Task Force has exposed the tremendous problem that 
we are experiencing in Florida with drug diversion and counterfeiting. 
The law recently signed by Governor Jeb Bush, Florida's Prescription 
Drug Protection Act increases penalties, requires a new standard for 
wholesale licensing, strengthens the pedigree paper requirement. People 
throughout Florida rely on the safety of our pharmaceutical supplies, 
and our efforts to protect them. Hopefully, Florida's efforts will be a 
model for the rest of the nation.
    Thank you for allowing me to bring this matter to your attention.

    Mr. Greenwood. Thank you, Mr. Arias.
    And the Chair recognizes himself for 8 minutes for inquiry.
    Let me get right back to you, Mr. Arias. You have described 
in some detail how law enforcement officials have found the 
counterfeit products at the user end and even at the wholesale 
end. Have you been able to get to the manufacturing sources? 
Have you been able to find where these counterfeit drugs are 
actually being produced?
    Mr. Arias. We are actively investigating a case right now, 
Mr. Chairman.
    Mr. Greenwood. Okay. And as we look at some of these 
counterfeit products, the packaging, I mean it is so skillfully 
done. It sort of raises a question in my mind as to how this 
can be done by criminal elements. For instance, it seems to me 
that most products have a fairly unique plastic bottle, or a 
tube or a box. And so they either reproduced or purchased from 
the same producer, I would think. And I am wondering what you 
have learned about that and has anybody gone to the people who 
produce the packaging, the raw plastic bottles and so forth and 
said are you selling this to anybody besides the actual 
legitimate manufacturer?
    Mr. Arias. Well, we have alerted FDA about that issue as 
well as the recent case in which they made the three arrests in 
Miami, and the people have pled guilty. The individual 
purchased the stoppers and the crimps, this metal crimp around 
here. They bought that on the Internet. So FDA has been made 
aware of that situation.
    Mr. Greenwood. So you can buy stoppers and crimps like that 
on the Internet?
    Mr. Arias. That is what we learned from this individual.
    Mr. Greenwood. Do any legitimate manufacturers acquire 
their stoppers and crimps on the Internet? It would seem to me 
there would probably be more conventional paths for those 
things to go in, that it seems to be suspect automatically if 
it is being sold on the Internet?
    Mr. Arias. I am not the expert on that issue. But I imagine 
there are more conventional ways of ordering these.
    Mr. Greenwood. It would seem to be a potentially very 
fruitful way to investigate these entities if you went to the 
sources of the packaging materials. Because I have a hard time 
imagining, although it may be possible, that these guys are 
actually not only remanufacturing or manufacturing the drug 
from scratch, but they are also remanufacturing the containers 
and the packaging from scratch.
    Mr. Arias. Well, the individuals that were arrested and 
have pled guilty were putting the whole thing together. They 
were buying the empty vials, cleaning them out and then putting 
tap water and, you know, ordering like I said the crimps and 
the stoppers from the Internet and putting it together with 
some crude machinery that they created.
    There is other individuals that are more ingenious in that 
they are converting a 2,000 unit strength, which is the weakest 
strength of these products, removing the little labels from the 
vials and putting a 40,000 unit label. In essence they are 
converting a $250 product into $4500. And if they were to test 
for this protein, qualitatively it would be there. 
Quantitatively it won't be there, but qualitatively it would be 
there. So it was a much more devious effort, and that is why a 
large amount of that product never was detected.
    Mr. Greenwood. Either under your new law or existing State 
and Federal laws, what kind of penalties are you able to exact 
for that kind of offense?
    Mr. Penezik. Under the new law for counterfeiting a 
prescription drug it will be a first degree felony.
    Mr. Greenwood. And that would----
    Mr. Penezik. In the State of Florida that is punishable by 
30 years in prison.
    Mr. Greenwood. Okay. Now, who has gone to jail so far in 
Florida as a result of this? The new law is too brand new, you 
haven't completed any prosecutions under the new law?
    Mr. Penezik. Mr. Chairman, it does not go into effect until 
July 1.
    Mr. Greenwood. Okay.
    Mr. Penezik. We have prosecuted people under our old law 
and people have gone to court and have pled guilty and are 
being punishing for----
    Mr. Greenwood. Are we getting jail or they getting 
probation for that?
    Mr. Penezik. Some parts of that I would respectfully wish 
not to discuss because it is part of an ongoing investigation. 
But people, they are being punished. There are individuals that 
will be to prison because of their conduct.
    Mr. Greenwood. Okay. Very well.
    Ms. Arias, could you expand a little bit more about the 
case of, is it Nuepogen?
    Mr. Arias. Correct.
    Mr. Greenwood. That is not the one you were just holding up 
or is it?
    Mr. Arias. The Nuepogen was the case in, I believe it was 
in 2000.
    Mr. Greenwood. That is the HIV drug?
    Mr. Arias. It is used to elevate the white blood cell 
count. And so when you are immune comprised, they treat you 
with this product to build your defenses.
    Mr. Greenwood. Now, you said that the wholesaler was able 
to get this from street brokers and then sell it to one of the 
largest wholesalers in the Nation, is that right?
    Mr. Arias. Mr. Chairman, all it takes it one dirty 
wholesaler to close their eyes or be willfully negligent, and 
that is all it takes. Once that happens, these people have a 
license and the next guy up the line, he is buying from a 
licensed entity. So unless the pedigree is confirmed, and 
that's why the pedigree is such an important tool for 
discovering diverted and counterfeited products.
    Mr. Greenwood. And what is a street wholesaler? What does 
that mean to you?
    Mr. Arias. When I refer to the street brokers----
    Mr. Greenwood. Street brokers.
    Mr. Arias. [continuing] these are people that are in the 
business of buying pharmaceuticals that are either stolen from 
hospitals or pharmacies, or they are paid for by third party 
insurance. And those products make their way back into the 
system.
    Mr. Greenwood. Have you discovered any evidence, any of 
you, that products are being diverted from the actual 
manufacturer? IT would seem to be one relatively easy way to do 
this would be if you work in some warehouse or some 
manufacturing facility for a totally legitimate manufacturer 
that where you are moving fork lifts or moving pallets with 
great quantities of drugs to throw some of that in the trunk of 
your car and then go ahead and alter the labeling or do 
whatever you want to maximize the profit? Are you finding that 
to be the case?
    Mr. Arias. Well, Florida does not have that many 
manufacturers, although just the other day I had a conversation 
with a Miami-Dade police officer who called me that they had 
gotten a complaint or an allegation that a truck was going to 
get hijacked. And so nothing happened. They were monitoring it. 
But in Florida we do not have that many manufactures. So the 
thefts would be from a wholesale establishment or a pharmacy, 
or that type of thing. We do not have that many manufacturers, 
per se.
    Mr. Greenwood. Final question. I have been a legislator now 
for 22 years or something like that. And I know full well from 
all of that experience that what ends up on the President's 
desk or the Governor's desk is not necessarily what I started 
out asking for and compromises are made along the way. Were 
there stronger tools for law enforcement that you sought from 
the State legislature in Florida that you did not quite get?
    Mr. Penezik. Yes.
    Mr. Greenwood. What did you have to peel off in the 
negotiation process? What do you wish you had?
    Mr. Penezik. Well, I would just qualify the answer with 
saying I was not in Tallahassee when those decisions were being 
made and I was not when the compromises came about. So there 
may be very good reasons why they took place.
    I understand that there is an industry argument that a full 
pedigree on all drugs just cannot happen now. So that part that 
was phased in, I would like to see it not take so long to be 
phased in.
    The authorized distributor of record, which really has not 
been discussed much and I do not want to get the committee into 
the weeds with my long protracted definition and problems with 
that, but basically under the current scheme federally and in 
our State, an authorized distributor of record does not have to 
pass on the pedigree when they purchase a prescription drug, 
even if they do not purchase that prescription drug directly 
from the manufacturer.
    So, in other words, anytime an authorized distributor of 
record buys any prescription drug whatsoever regardless of who 
they buy it from, as long as they are an authorized distributor 
from the manufacturer, they wash in my eyes the pedigree. It 
stops and starts all over again.
    So if you can get your drugs to an unscrupulous 
authorized--excuse me. An unscrupulous authorized distributor 
of record, your pedigree washes.
    And it is also very important to note manufacturers do not 
make the decision who the authorized distributor of record is. 
It is a very low threshold. I believe it is 2 to 3 shipments a 
year from the manufacturer of any of the manufacturer's drugs 
and you become an authorized distributor of record for all the 
drugs, regardless of whether you purchase them from the 
manufacturer or not.
    Mr. Greenwood. Okay. Thank you, sir.
    My time has expired.
    The gentleman from Florida, Mr. Deutsch is recognized.
    Mr. Deutsch. Thank you, Mr. Chairman.
    I guess I have a series of questions with some charts. But 
before I do that, I am just trying to get a general sense. I 
mean, you sat through our first panel which really dealt with 
importation from overseas, I mean that was the main issue in 
terms of the Customs step that this committee has done. I mean, 
how would you relate that problem to the problems you folks 
discover?
    Mr. Penezik. I would say that, and I know that the 
committee flushed out that not all these drugs are headed to 
just your average citizen who orders them over the Internet. 
These drugs are also finding their way into the wholesale 
secondary market. In other words, they are being imported or 
reimported and then find themselves distributed into----
    Mr. Deutsch. I guess what I am trying to get a sense of, I 
mean and I have actually read the Grand Jury Report and I am 
aware of what you folks have done. And you have done a fabulous 
job, a very significant job for the people of Florida. And I 
appreciate it. I know the people in Florida appreciate it. But 
I guess what I am trying to get a feel for is to me it almost 
seems like there are really two issues.
    You know, the reimportation issue and this issue of the 
wholesale distribution issue and really fraud and criminal 
activity that is going on that is not directly related to the 
whole phenomenon of overseas purchases of prescription drugs. 
Is that an accurate perspective that I am sharing?
    Mr. Penezik. Well, from my point of view that is accurate. 
They are two different issues or problems. They do interact 
with one another, but they are definitely two separate issues.
    Mr. Deutsch. I want to thank all three of you for being 
here. We have a selection of slides called from a PowerPoint 
presentation that Mr. Jones, that unfortunately we cannot go 
through the entirety as each of these 12 slides are shown. 
Could one or both of you please describe the point that they 
were designated to illustrate? If you can look at the first 
one.
    Mr. Jones. This slide represents a portion of a spreadsheet 
that shows over $17 million worth of pharmaceuticals that were 
sold from a small wholesaler in Tennessee to--that were bought 
from a small company in Florida sold to a small wholesaler in 
Tennessee. And all of the products that were involved, all of 
these were drugs that came off the streets, HIV drugs and some 
counterfeits.
    Mr. Deutsch. It is a huge amount, obviously.
    Mr. Jones. I think the significance of this number----
    Mr. Deutsch. Over a relatively short period of time? You 
are looking at, just got a month and a half.
    Mr. Jones. But also as Mr. Arias mentioned earlier, there 
are over 11 groups that this Task Force is looking at, and this 
is just one of the groups. If you extrapolate at this point, 
this is where the drugs left the street and went to and entered 
the wholesale market, it is $17 million for this group. If you 
extrapolate that, you are looking at hundreds of millions of 
dollars.
    Mr. Deutsch. If we can go to the next slide, because I want 
to try to get through as many as we can. If you comment what 
that is attempting to describe?
    Mr. Jones. This is just a series of the counterfeits that 
we have move through Florida in the past 15 years, between 1985 
and 2000. Counterfeit Cecior, back in the mid 1980's. There was 
also another antibiotic, Pipericil. Some counterfeit birth 
control pills Demulen. An arthritis drug, Feldene. And the 
anti-viral drug Retrovir.
    Mr. Deutsch. The next slide.
    Mr. Jones. These are the drugs that have moved through 
Florida, counterfeit drugs in the past 2 years in comparison to 
the previous slide.
    Mr. Deutsch. Actually, if you could go back to that other 
slide for a second. I have actually looked closely at these, 
and I will tell you, I mean you have to really be an expert to 
distinguish between the counterfeit. I mean, there is no way a 
lay person could ever figure this out. These are, obviously, 
very sophisticated operations.
    Mr. Jones. In the Procrit, this Procrit that was 
counterfeited, we alerted Texas officials that they needed to 
look at this project. And the first call I had from the Texas 
people is that the product looks good to us, it does not look 
bad. And we asked them to have it analyzed anyway. And it turns 
out that a large volume of it was counterfeit.
    Mr. Deutsch. I'm sorry. The next slide.
    Mr. Jones. I will let Cesar talk about this when he 
addressed it in his testimony. This is the----
    Mr. Arias. Okay. This is the product that was relabeled 
from the 2000 unit product to 40,000 unit product. And the only 
thing this gentleman or these people did was remove this little 
label on the actual vial. He left the--or these people left the 
rest of the product intact. They did counterfeit the boxes. And 
they did save the original inserts, as well. For the most part 
as far as we could tell, the inserts were good. So they were 
asking their source to save these inserts.
    Mr. Deutsch. The next slide.
    Mr. Jones. I think if you can hit the--there is another 
part of this slide. This was created just to demonstrate, this 
is a new Amgen product, which is a more sophisticated version 
of Procrit and Epogen used to stimulate red blood cells.
    This vial, which as you can see, hold 1 milliliter, one-
fifth of a teaspoon full, cost $800 for the pharmacy. And the 
point that we are trying to make here is that this is an 
ongoing problem and there are many strengths of that drug with 
the same colored vial, all the strengths have the same color, 
same size vial. And this product could be easily counterfeited 
the same as the Procrit and the Epogen.
    Mr. Deutsch. That is amazing, $800 just in terms of the 
ability to put colored water in there if you could pass it off.
    Mr. Jones. Tremendous amounts of profit can be made in 
this.
    Mr. Deutsch. May we get the next slide.
    Mr. Jones. This slide demonstrates the diversion of special 
priced pharmaceuticals. This is the Lupron case. This is the 
trail that we saw where TAP Pharmaceuticals sold this Lupron 
injectable used to treat prostate cancer to oncologists and 
urologists at reduced price, lower than they would sell to a 
wholesaler. And the trail this drug took was to a small drug 
wholesaler in Miami that brought it in illegally. The corrupt 
wholesaler. IT went to a drug wholesaler in Texas. It came back 
to Central Florida. It went to a midsized wholesaler in Ohio. 
And from there that midsized wholesaler sold it to major 
wholesalers nationwide.
    The same thing has been happening with the AstraZeneca 
product Zoladex, which is a similar type of product.
    Mr. Deutsch. You know, there are a number of other slides. 
And, again, they will be in the record and I appreciate that.
    I just as a closing sort of comment, I mean I listened to 
all three of your testimonies. What do we tell people in 
Florida today, the people in the whole country, particularly I 
mean you folks are the experts in Florida right now, what do we 
tell people in Florida?
    Mr. Penezik. You will be safer than you were. It was a 
great first step. But there is a lot of work that needs to be 
done. And they also need to understand that a wholesaler 
anywhere in this country can effect what happens in the State 
of Florida. And there needs to be national guidelines, a 
national law, and it needs to be uniformly enforced.
    Mr. Deutsch. Thank you.
    Mr. Greenwood. The Chair thanks the gentleman.
    The gentleman, Mr. Stupak is recognized for 8 minutes.
    Mr. Stupak. Thank you, Mr. Chairman.
    When you do your investigations you have subpoena power?
    Mr. Penezik. Yes, sir.
    Mr. Stupak. What do you use your subpoena power for?
    Mr. Penezik. Congressman, what I would like to let you know 
is that when I issue a subpoena one of the down sides to it is 
anybody brought in under my subpoena is granted a form of 
immunity. So typically I will issue a subpoena for a 
cooperating witness, or a subpoena for testimony from people 
that I do not anticipate are going to be charged.
    Mr. Stupak. You use that as an investigative tool?
    Mr. Penezik. Yes, sir.
    Mr. Stupak. And you can get documents and everything else 
with the subpoena, right?
    Mr. Penezik. Not only can I get documents, I can require 
that someone attend or be held in contempt of court if they 
don't.
    Mr. Stupak. Yes. Yes. One of the crazy things, the FDA does 
not have subpoena power. Probably the only regulatory agency in 
the Federal Government that does not have subpoena power. Some 
of us tried to give them subpoena power in the last bill and 
they did not want it. So I just wanted to ask that.
    When the FDA has done these import alerts, do they provide 
you with the import alerts?
    Mr. Penezik. Not to my office of Statewide Prosecution, but 
the Department of Health would be better suited.
    Mr. Jones. I think we do receive those import alerts from 
the Office of State Federal Relations.
    Mr. Stupak. Okay. And then what do you do with them?
    Mr. Jones. We circulate them to our inspectors. They look 
for these products. If they see them, unfortunately the trails 
of these products do not take us back to the point where they 
are imported.
    Mr. Stupak. So we had some testimony earlier today, 
especially on the drug Acutane there, if Miami never got it, 
you never would have received it in Florida then, right? If 
Customs does not receive it, you would not have necessarily 
received it?
    Mr. Jones. That is true.
    Mr. Stupak. Okay. In Florida you had a case there where, 
and there was some testimony about it today, recent recalls of 
the counterfeit Lipitor. And I understand that this was 
originally with a buy by your Task Force. I further understand 
that not only Lipitor but also counterfeit Celebrex was 
involved in that buy. But without you going into the specifics, 
could you describe how that buy came about, the pattern of 
movement of volume of these illegal drugs and did you notify 
the FDA that it would involve Lipitor and Celebrex?
    Mr. Arias. To answer the lat part of your question, yes, we 
communicate very well with them. We have a pretty good 
relationship.
    Mr. Stupak. As to Lipitor and Celebrex?
    Mr. Arias. Yes.
    Mr. Stupak. Did they do anything with the Celebrex? We know 
they did with Lipitor.
    Mr. Arias. We seized the product in Florida and we notified 
them, and they were aware of it.
    Mr. Stupak. But with the Celebrex, did they do the recall 
and all that like they testified they did with Lipitor, do you 
know.
    Mr. Arias. I have not seen that, but that doesn't mean it 
has not happened. I am not aware of it.
    Mr. Stupak. Yes. Our information says they did one but not 
the other. They did recall the Lipitor but not the Celebrex.
    Mr. Arias. Right. I do not know.
    Mr. Stupak. Okay. But could you tell me a little bit more 
about your buy without getting too much into jeopardizing 
anything?
    Mr. Arias. Well, usually the way this works is we get 
complaints by different owner of pharmacies or wholesalers that 
are trying to do the right thing.
    Mr. Stupak. The complaint is that this drug is being sold 
other places?
    Mr. Arias. It is being offered. It is being offered at 
acutely discounted prices.
    Mr. Stupak. Is that usually the best indication?
    Mr. Arias. That is their best indication, yes sir. And then 
what happens is we ask the company that is making the complaint 
to ask for a pedigree from their source.
    Mr. Stupak. Sure.
    Mr. Arias. And if they get that pedigree, then we verify 
the pedigree. And that is why the pedigree is such an important 
tool in ferreting out the counterfeit and the diverted 
products.
    Mr. Stupak. And the pedigree comes from the pharmaceutical 
companies?
    Mr. Arias. Correct. It goes all the way to the 
manufacturer.
    Mr. Stupak. Do they have to notify like the State of 
Florida regulatory system that they have issued a pedigree to 
an individual or a company? I mean, is it in duplicate? Like if 
I send you one, do I then as the drug company have to forward 
it to Tallahassee to some agency, regulatory agency?
    Mr. Arias. No. The pedigree goes with the product.
    Mr. Stupak. Okay.
    Mr. Arias. So that the seller is obligated to furnish it to 
the buyer.
    Mr. Stupak. Sure.
    Mr. Arias. Until it gets to the last wholesaler before it 
goes to the end user. By the end user, I mean the pharmacy or 
the hospital or the physician.
    Mr. Stupak. Okay.
    Mr. Arias. They do not get a pedigree, unfortunately.
    Mr. Stupak. Okay. Would it help if they did?
    Mr. Arias. I would say yes, but the law does not require 
that.
    Mr. Stupak. Sure. And this pedigree, it accompanies the 
invoices, is that it?
    Mr. Arias. It has to either accompany the product or 
precede the sale.
    Mr. Stupak. Sure. Go ahead. Anything else you want to add 
on that one, on that question, my question?
    Mr. Arias. No. I just want to emphasize the importance of 
the pedigree.
    Mr. Stupak. Sure.
    Mr. Arias. Without it a lot of these counterfeits that we 
have identified in Florida, we did not know they were 
counterfeit when we were looking at them.
    Mr. Stupak. Sure. But without the pedigree?
    Mr. Arias. The pedigree was the tool that allowed us to 
know that there was a problem with that product, that it was--
it did not come through the proper channels.
    Mr. Stupak. Is this a pedigree unique to Florida or do 
other States use it?
    Mr. Arias. I will let my boss answer that one.
    Mr. Jones. We have not seen it used in very many instances. 
I believe Nevada may be a State that is looking to use it. But 
we very rarely see the pedigree.
    Mr. Stupak. Sure. You mentioned Texas, and they said no it 
looked like the real thing. Do they use a pedigree?
    Mr. Jones. I do not think they are enforcing a pedigree 
requirement in Texas either. The problem has been with the 
delay of the implementation of the final rule on the pedigree 
at the Federal level.
    Mr. Stupak. The counterfeits there, the drug counterfeits 
there, did those originate in Florida?
    Mr. Arias. I believe that there is still some doubt as to 
the Neupogen IQ.
    Mr. Stupak. Okay.
    Mr. Arias. But we are pretty certain that the Epogen, 
Procrit and Serostim came through--was originated in Florida.
    Mr. Stupak. You have that slide up there, slide No. 1, 
which came out of Tennessee. It went from Tennessee to Florida. 
That was legitimate. And then from there it got counterfeited? 
In Florida?
    Mr. Arias. No, no. That graph just states the monies that 
were transacted between a Florida wholesaler, a very small 
wholesaler, to a Tennessee wholesaler.
    Mr. Stupak. Okay. Mr. Penezik, am I saying that right?
    Mr. Penezik. Yes, sir.
    Mr. Stupak. In your testimony you stated that one 
counterfeit shipment may have yielded as much as $46 million in 
profit.
    Mr. Penezik. Yes, sir.
    Mr. Stupak. This sounds the word street brokers like street 
drug money. Can you tell us about the involvement of 
individuals that specialize in like large sales of street drugs 
moving into counterfeit pharmaceutical products?
    Mr. Penezik. There are instances of people from a variety 
of criminal backgrounds that are moving into this business, 
several of our targets, prior people convicted or people 
convicted in prior instances of racketeering, drug trafficking, 
a variety of offenses. This is just more streamlined and from 
their point of view more safe. It also has got a high, high 
profit with very little risk for them.
    There is not a whole lot of effort that they put behind 
this business. There is no special qualifications that are 
needed to be a prescription drug wholesaler in our State. You 
do not have to have any special training. There is a 
questionnaire.
    Mr. Arias. The new law some provisions.
    Mr. Penezik. The new law will require that, but my 
understanding is in most States there is no special criteria 
needed. Therefore, the criminal element just moves itself in. 
They set up a small office. They need a fax machine and a 
computer. They comply with the licensing requirements and they 
are in business.
    Mr. Greenwood. The time of the gentleman has expired.
    Does Mr. Dingell care to inquire?
    Mr. Dingell. No.
    Mr. Greenwood. That being the case, we want to thank the 
witnesses for your presence. Thank you for being on the cutting 
edge of this important issue.
    We congratulate you for the fine work that you do.
    You are excused.
    And this hearing is adjourned.
    Before I do adjourn, without objection we will hold the 
record of this hearing open for 30 days so that the questions 
that have been put by members to the FDA can be inserted into 
the record and for those members who wish to add their opening 
statements to the record.
    The committee is adjourned.
    [Whereupon, at 2:25 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
Prepared Statement of Mary R. Grealy, President, Healthcare Leadership 
                                Council
    The Healthcare Leadership Council (HLC) appreciates the interest of 
the subcommittee on the issue of reimportation. It is critically 
important that Congress examine and understand the threats that 
reimportation of medicine poses for patients, including threats from 
counterfeit, adulterated, or substandard medicines coming into the 
United States. We believe that other approaches, such as a 
comprehensive Medicare prescription drug benefit, will provide more 
choice, quality and lower costs without stifling innovation and 
research, and without endangering the safety of beneficiaries.
    American consumers have been led to believe that, if prescription 
drugs are reimported from Canada, their out-of-pocket costs will be the 
same as for patients in Toronto or Montreal, and that they will be 
assured of a safe product that is readily available. That is simply not 
the case. Consider the following facts:

 Accessibility. The Canadian market is less than 10 percent of 
        the American market. Currently the number of Americans securing 
        reimported drugs ``under the table'' is relatively small and 
        the Canadian market can handle the demand. If reimportation 
        were made legal, the amount of drugs available for the U.S., 
        with its much larger population, would be minimal and 
        inconsistent.
 Safety. Even with current safeguards in place, the World 
        Health Organization estimates that eight percent of the drugs 
        currently entering the U.S. market are counterfeit. Consider 
        the potential harm if reimportation were made legal. Ten former 
        FDA commissioners have consistently expressed their views that 
        drug reimportation is dangerous for consumers and patients, 
        including the current FDA commissioner who stated that the FDA 
        could not assure the safety of reimported drugs at this time.
 Cost. Canadian price controls only apply to drugs sold in 
        Canada. Price controls do not apply to exported products, 
        meaning if drug reimportation were made legal, there would be 
        no guarantee of the Canadian price. In addition, inspections, 
        testing, storage, repackaging and liability insurance will 
        significantly raise the price of reimported drugs. An 
        unintended consequence of reimportation should not be to place 
        an additional large cost burden on those in the drug supply 
        chain.
    HLC's top priority is to promote the highest quality health care 
possible. We believe that the best way to achieve this goal is through 
competition, innovation, research and continuous quality improvement in 
the private marketplace. Federal policy should support such innovation, 
not stifle it. HLC continues to urge that Congress reject price 
controls, such as reimportation, and instead focus on coverage for more 
Americans.
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