[Senate Hearing 108-1011]
[From the U.S. Government Publishing Office]
S. Hrg. 108-1011
PRESCRIPTION DRUG REIMPORTATION
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
NOVEMBER 20, 2003
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska ERNEST F. HOLLINGS, South
CONRAD BURNS, Montana Carolina, Ranking
TRENT LOTT, Mississippi DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas JOHN D. ROCKEFELLER IV, West
OLYMPIA J. SNOWE, Maine Virginia
SAM BROWNBACK, Kansas JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon JOHN B. BREAUX, Louisiana
PETER G. FITZGERALD, Illinois BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada RON WYDEN, Oregon
GEORGE ALLEN, Virginia BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire BILL NELSON, Florida
MARIA CANTWELL, Washington
FRANK R. LAUTENBERG, New Jersey
Jeanne Bumpus, Republican Staff Director and General Counsel
Robert W. Chamberlin, Republican Chief Counsel
Kevin D. Kayes, Democratic Staff Director and Chief Counsel
Gregg Elias, Democratic General Counsel
C O N T E N T S
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Page
Hearing held on November 20, 2003................................ 1
Statement of Senator Boxer....................................... 43
Statement of Senator Dorgan...................................... 3
Statement of Senator Lautenberg.................................. 5
Statement of Senator McCain...................................... 1
Prepared statement........................................... 2
Statement of Senator Snowe....................................... 7
Statement of Senator Wyden....................................... 4
Witnesses
Catizone, Carmen A., Executive Director, National Association of
Boards of Pharmacy............................................. 86
Prepared statement........................................... 87
Funderburk, David, Legislative Counsel, TREA Senior Citizens
League......................................................... 113
Prepared statement........................................... 114
Gutknecht, Hon. Gil, U.S. Representative from Minnesota.......... 19
Prepared statement........................................... 23
Lubka, Lewis, Senior Citizen, On Behalf of Alliance for Retired
Americans...................................................... 110
Prepared statement........................................... 112
MacArthur, Donald, Secretary General, European Association of
Euro-Pharmaceutical Companies.................................. 97
Prepared statement........................................... 99
Pawlenty, Hon. Tim, Governor, State of Minnesota................. 44
Prepared statement........................................... 46
Sanders, Hon. Bernard, U.S. Representative from Vermont.......... 33
Santorum, Hon. Rick, U.S. Senator from Pennsylvania.............. 9
Prepared statement........................................... 12
Stabenow, Hon. Debbie A., U.S. Senator from Michigan............. 15
Prepared statement........................................... 17
Taylor III, John M., Associate Commissioner, Regulatory Affairs,
U.S. Food and Drug Administration.............................. 48
Prepared statement........................................... 51
Appendix
Lemoine, Representative David, Chair; and Cheryl Rivers,
Executive Director, National Legislative Association on
Prescription Drug Prices, prepared statement................... 119
PRESCRIPTION DRUG REIMPORTATION
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THURSDAY, NOVEMBER 20, 2003
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 9:35 a.m. in room
SR-253, Russell Senate Office Building, Hon. John McCain,
Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. JOHN McCAIN,
U.S. SENATOR FROM ARIZONA
The Chairman. Good morning. Today's hearing focuses on the
debate over prescription drug importation.
This Committee held its last hearing on this issue just
over 2 years ago. As I think back to that hearing, I must say,
I'm disappointed that, to this day, our laws still do not give
American consumers the right to import prescription drugs. To
be clear, we're not talking today about just any drugs. Rather,
we're talking about prescription drugs that have had their
safety and effectiveness certified by the U.S. Food and Drug
Administration. Nevertheless, FDA-approved prescription drugs
remain an exception to the free flow of trade between the
United States and the rest of the industrialized world.
This trade problems is stoking the fire of America's
prescription-drug price crisis. The prescription drug prices
paid by our sick, elderly, and uninsured are significantly
higher than those of other industrialized countries, like
Australia, France, and Switzerland. As a result, millions of
our citizens travel across the border to Canada each year to
purchase prescription drugs. Others purchase imported
pharmaceuticals over the Internet. In all, Americans spend
hundreds of millions of dollars on imported pharmaceuticals,
not because they don't want to buy prescription drugs in the
U.S., but because they simply can't afford to.
I fully agree that demand for lower prices should not lead
us to sacrifice the health and safety of our citizens. That's
why any legislation that permits the free importation of
pharmaceuticals must contain safeguards that protect American
consumers from tainted or counterfeit prescription drugs. But
those who oppose importation must begin to engage in a dialogue
to tell us what additional or alternative safety measures they
believe will work. They must stop repeatedly telling us only
that there's nothing we can do to implement an effective
importation system that protects both the health and the
pocketbooks of American consumers.
Indeed, it seems to me that most Americans, and especially
those in need of prescription drugs to treat serious illnesses,
want us to stop listening to the naysayers and start working on
a reasonable solution to the ever-growing problem of excessive
prescription drug prices in this country. To that end, I have
sponsored S. 1781--cosponsored--the Pharmaceutical Market
Access Act of 2003, with several of my colleagues, including
Senator Dorgan and Snowe.
Though the Act is likely not the cure-all for problem of
skyrocketing prescription drug prices in this country, it's the
type of legislation that would allow our citizens greater
access to the pharmaceutical markets of other industrialized
countries, while still maintaining the safety of our
prescription drug supply. The act would do so by permitting
American consumers to import FDA-approved prescription drugs
from Canada, European countries, and other industrialized
nations, while requiring safety measures such as anti-
counterfeiting technology for prescription drug packaging that
is virtually identical to the technology used to secure U.S.
currency.
I hope our witnesses today will engage in a constructive
discussion about how best to strike a balance between
affordable prescription drug prices and a safe prescription
drug supply.
Before we proceed any further, I want to note my
disappointment, but not surprise, that the Pharmaceutical
Research and Manufacturers of America, which has repeatedly
spoken out against the liberalization of our prescription drug
importation laws, and, by the way, has a very restrictive
clause in the Medicare prescription drug benefit--they've
succeeded again--declined to appear today. What a surprise. I
find it extraordinary that an organization tasked with speaking
for several major pharmaceutical manufacturers on this issue,
and has spent roughly $8.5 million in lobbying expenses this
year, couldn't make the time to share with us the views of the
companies that it represents.
[The prepared statement of Senator McCain follows:]
Prepared Statement of Hon. John McCain, U.S. Senator from Arizona
Good morning. Today's hearing focuses on the debate over
prescription drug importation. This Committee held its last hearing on
this issue just over two years ago. As I think back to that hearing, I
must say that I am disappointed that, to this day, our laws still do
not give American consumers the right to import prescription drugs. To
be clear, we're not talking today about just any drugs. Rather, we're
talking about prescription drugs that have had their safety and
effectiveness certified by the U.S. Food and Drug Administration.
Nevertheless, FDA-approved prescription drugs remain an exception to
the free flow of trade between the United States and the rest of the
industrialized world.
This trade problem is stoking the fire of America's prescription
drug price crisis. The prescription drug prices paid by our sick,
elderly, and uninsured are significantly higher than those of other
industrialized countries like Australia, France, and Switzerland. As a
result, millions of our citizens travel across the border to Canada
each year to purchase prescription drugs. Others purchase imported
pharmaceuticals over the Internet. In all, Americans spend hundreds of
millions of dollars on imported pharmaceuticals--not because they don't
want to buy prescription drugs in the U.S., but because they simply
can't afford to.
I fully agree that demand for lower prices should not lead us to
sacrifice the health and safety of our citizens. That is why any
legislation that permits the freer importation of pharmaceuticals must
contain safeguards that protect American consumers from tainted or
counterfeit prescription drugs. But those who oppose importation must
begin to engage in a dialogue to tell us what additional or alternative
safety measures they believe will work. They must stop repeatedly
telling us only that there is nothing we can do to implement an
effective importation system that protects both the health and the
pocketbooks of American consumers.
Indeed, it seems to me that most Americans--and especially those in
need of prescription drugs to treat serious illnesses--want us to stop
listening to the naysayers and start working on a reasonable solution
to the ever-growing problem of excessive prescription drug prices in
this country. To that end, I have co-sponsored S. 1781, the
Pharmaceutical Market Access Act of 2003, with several of my colleagues
including Senators Dorgan and Snowe. Though the Act is likely not the
cure-all for the problem of skyrocketing prescription drug prices in
this country, it is this type of legislation that would allow our
citizens greater access to the pharmaceutical markets of other
industrialized countries while still maintaining the safety of our
prescription drug supply. The Act would do so by permitting American
consumers to import FDA-approved prescription drugs from Canada,
European countries, and other industrialized nations, while requiring
safety measures such as anti-counterfeiting technology for prescription
drug packaging that is virtually identical to the technology used to
secure U.S. currency.
I hope that our witnesses today will engage in a constructive
discussion about how best to strike a balance between affordable
prescription drug prices and a safe prescription drug supply. Before we
proceed any further, however, I want to note my disappointment that the
Pharmaceutical Research and Manufacturers of America, which has
repeatedly spoken out against the liberalization of our prescription
drug importation laws, has declined our invitation to appear today. I
find it extraordinary that an organization tasked with speaking for
several major pharmaceutical manufacturers on this issue, and that has
spent roughly $8.5 million in lobbying expenses this year, could not
make the time to share with us the views of the companies it
represents.
I thank the witnesses who did accept our invitation and I look
forward to hearing their testimony.
The Chairman. I thank the witnesses who did accept our
invitation, and I look forward to hearing their testimony. And
first I'd like to hear from Senator Dorgan and Senator Wyden
and Senator Lautenberg, if they have opening statements.
STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan. Mr. Chairman, first of all, I know we have
a lengthy hearing, so I will try to be brief, but I do want to
make a couple of comments that are important to this subject.
First of all, the subject is drug reimportation. The fact
is, we import a substantial amount of prescription drugs in
this country. It's done by the manufacturer of the prescription
drug. Lipitor is manufactured in Ireland and shipped to this
country. Prevacid is manufactured in Japan, Nexium in Sweden,
and sent into this country. So there's a lot of importation of
drugs going on. It is just that the pharmacists and the
licensed wholesalers are prevented from reimporting, and
consumers are allowed to reimport a personal amount for
personal use, a very small amount.
But the issue of safety has been raised, and I want to make
a couple of points with some bottles here in which the same
pill is put in the same bottle made by the same manufacturer
and sent to two countries.
And this perhaps demonstrates it better than any way I
know. This is Celebrex. And you can see, the bottle is shaped
the same, it's an identical bottle. They've reversed the
coloring on it. But the only difference--this is an FDA-
approved drug produced at an FDA-approved facility, and it is
the same pill in the same bottle made by the same company, 79
cents per tablet in Canada, $2.22 in the United States. The
only difference between these two tablets are the price. It is
identical in every other way.
Lipitor. As you can see, it is the same container, same
pill made by the same company, put in the same bottle, sent to
Canada for $1.01 per tablet, the U.S. $1.86 per tablet. Or
Vioxx, same bottle, same shape, reverse the color just a bit,
and it's the same pill, put in the same bottle, made by the
same company, FDA-approved. The U.S. consumer pays $2.20 per
tablet; the Canadian consumer, 78 cents per tablet. The only
difference is the price. The U.S. consumer pays the highest
prices in the world.
Now, the pharmaceutical industry has aggressive supporters
here on Capitol Hill, and we have an uphill battle. Let me
compliment my colleague, Congressman Sanders and Congressman
Gutknecht, for the aggressive fight they have waged in the
Senate, and my partner here in the--in the House, I should
say--and my partner in the Senate, Senator Stabenow, and
Senator McCain and so many others who have worked on this
issue. But it has proven to be a steep hill to climb.
And we're going to have testimony today about this subject.
One person who will present testimony is Lew Lubka, from Fargo,
North Dakota. He is in the audience, and he actually went to
Canada with me one Friday morning when it was snowing, and we
went to a one-room pharmacy in Emerson, Canada, five miles
north of the North Dakota border, and what we discovered is,
the same pill five miles apart, between a Pemina, North Dakota,
pharmacy and a pharmacy in Emerson, Canada. It was identical
pills, but dramatically different prices. Unfair to the
American consumer.
So let me make one final point. I, along with my
colleagues, including Senator McCain and Senator Stabenow, have
introduced legislation that has passed the House of
Representatives, and we are very disappointed by what it
appears will be included in the Medicare prescription drug bill
on the reimportation issue. It looks like the pharmaceutical
industry wins there. So we will have to then try to move the
bill that's already passed the House here in the Senate, and we
are intending to try to do that, with all the aggressiveness we
can, on behalf of the American consumer, who now pays the
highest prices in the world for prescription drugs, and it is
wrong, and it's unfair, and it has to change.
I, too, Mr. Chairman, am terribly disappointed that the
Commissioner of the FDA is not here to answer. He's been the
biggest supporter the pharmaceutical manufacturers have to try
to prevent the American consumers from accessing decent prices.
And I'm also disappointed that PHRMA is not with us this
morning.
But, nonetheless, I appreciate the Chairman calling this
hearing on this very important subject.
The Chairman. But I've never been to a fundraiser that
there isn't a PHRMA representative there. I'm sorry----
[Laughter.]
The Chairman. Senator Wyden?
STATEMENT OF HON. RON WYDEN,
U.S. SENATOR FROM OREGON
Senator Wyden. Thank you, Mr. Chairman. And I, too,
appreciate your holding the hearing.
And you and Senator Dorgan and all of our colleagues at the
table have done a lot of work in this area. And I think it's
very timely that this hearing be held now, because my
understanding is, with respect to drugs overseas now, we're
starting to see the same problems there we've seen everywhere
else, that the prices are starting to go up, the wait that
seniors face for their medicine is increasing. And it seems to
me that as we look at this issue of drug importation, and
particularly the developments in recent days, we also focus on
the fact that there really is no substitute for what's going to
help seniors contain costs, and that is bargaining power. Until
there are steps taken, either in this legislation that we're
going to vote on in the next few days, or some other piece of
legislation, to give seniors bargaining power in the
marketplace, I don't think we're going to see any real change
with respect to the price of pharmaceuticals.
My understanding about the legislation that we're looking
at now, not just in the area of drug reimportation, but with
respect to what's done in managed-care plans, what's done in
private plans, there still is not yet the bargaining power that
seniors are going to need with respect to actually holding
costs down.
I think we understand what a disgrace it is that in the
richest country in the world, with all of this talent in the
healthcare arena, we have seniors traipsing throughout the
world trying to find affordable medicine.
So put me down on record as being for any kind of cost-
containment strategy that is safe and that promotes more
affordable medicines for seniors. But I think we ought to be
looking at this issue now, because my understanding, just in
the last couple of days, from seniors is, when they are looking
to Canada and other parts of the world in the last few days
they have seen price increases in those areas, they have had to
wait longer for their drugs, and I think this reinforces the
question of doing this job right. And the way you're going to
do it right is by creating bargaining power for seniors in the
marketplace.
And I wrap up by----
The Chairman. Which is prohibited in the Medicare----
Senator Wyden. Correct.
The Chairman.--bill.
Senator Wyden. I wrap up by way of saying, almost 30 years
ago, Mr. Chairman, when I was co-director of the Oregon Gray
Panthers, I did what Senator Dorgan is eloquently doing today,
which is, I brought prescription drug bottles. And at that time
we were working for generic drug pricing. And through your
leadership and Senator Schumer's and others, we've made a
little bit of headway there.
But I think we ought to understand that we have a long,
long way to go in this fight, and I look forward to hearing
from our witnesses today.
The Chairman. Senator Lautenberg?
STATEMENT OF HON. FRANK R. LAUTENBERG,
U.S. SENATOR FROM NEW JERSEY
Senator Lautenberg. Thank you, Mr. Chairman.
I look at the material that our friend from North Dakota
produced, and it looks--the bottles look the same, and--apart
from perhaps some coloration on one package or another. The
question is exactly what's in the package. I would suggest
that, just to be sure--because one of the concerns, one of the
criticisms, is that there have been, in the past, incidents
where a drug sold under one name does not have the same content
or the same quality. And I would suggest to the Senator from
North Dakota that, just to put a total cap on this, is perhaps
to have a laboratory test these, make sure the ingredients are
identical and to make sure that we get what we see.
Senator Dorgan. If I might just say to the Senator from New
Jersey, that was part of the Senate bill that was passed, and
those protections are in the reimportation legislation.
Senator Lautenberg. Well, they are now, but what we're
looking at, at the moment, doesn't--hasn't passed the same
quality test. It's required. But what--the bill is----
The Chairman. We have witnesses, Senator Lautenberg. Would
you complete your opening statement, and then Senator Snowe is
here, so we can get to the witnesses?
Senator Lautenberg. Listen, while all Americans are
affected by the high cost of prescription drug, this burden
falls largely on the senior citizen population, and nearly 14
million seniors have no insurance that provides for them to get
the prescription drug benefits. So they're forced to pay full
freight.
Additionally, 50 million Americans under the age of 65 also
lack prescription drug coverage. With drug prices increasing 15
percent in 2001, the seventh straight year of double-digit
increases, seniors and working-class Americans are forced to
make impossible choices between the medications they need and
food and shelter.
Now, I'm concerned, as the Chairman or anybody else is,
about the fact that prices can be substantially lower in Canada
for the same prescription drugs sold here in the United States.
And we know the reason for this price. And I assume that my
colleagues, who were, to use the expression used by the Senator
from North Dakota, aggressive about this. And we should be
aggressive. Included in that framework of aggression is price
controls. Now, if that's what we're looking for here as a
substitute for the free market, where most of the development
of these new products is done, and with lots of failures along
the way, then we have to step up boldly and say so.
In Canada, the price of a newly patented prescription drug
cannot exceed the highest price of an existing drug used to
cure or treat the same disease. And drug price increases
generally cannot exceed increases in the Canadian CPI.
The system is good for Canadians, whom we are basically
subsidizing. It's our drugs that they're taking. They develop
few new drugs of their own. There's no economic incentive to do
so. American pharmaceutical manufacturers develop 45 percent of
all new drugs worldwide, and it can take up to 15 years, as
much as $500 million, to get a new drug to market.
I want to be clear here. I agree that drug prices in the
United States are too high. The products are too good, the
longevity has improved substantially. I'm one of those who's, I
hope, a shining example. I don't think that it's the same
prescription--I don't think it's right that the same
prescription drug can be found for retail prices that are 30,
40, even 50 percent less in some European countries.
What's going on here is that these countries get a free
ride. They benefit from the new drugs that are developed here,
while they leave American consumers to bear the financial
burden of developing and testing the drugs. But I don't think
that the reimportation, even if it's limited to Canada, is
necessarily the best way to reduce the burden on American
consumers. What works for a country of 30 million people isn't
necessarily the same prescription for a country of close to
300. Canada simply doesn't have a system in place to handle
large cross-border trade in pharmaceuticals and to be able to
guarantee their safety.
If we want to reduce prescription drug prices in this
country, then Congress should develop the legislation, have an
honest debate on the issue, instead of an ad hoc backdoor
policy where the risks sometimes outweigh the benefits.
As Wednesday's New York Times reported, ``Internet
pharmacies have recently sprung up that claim to be based in
Canada but do business from another country using a Canadian
domain name.'' Now, I don't know whether there's a network of
intrigue that we're looking at here, but I think we have to
make sure that we ferret it out.
Americans looking for cheaper drugs abroad should not be
gambling with their health. We had an opportunity to fix the
problem of high drug costs for seniors by expanding Medicare to
include a prescription drug benefit and then using the enormous
bargaining power of the Federal Government to negotiate volume
discounts, but we didn't do that. Instead, Congress is poised
to adopt a haphazard prescription drug plan that contains
significant gaps in coverage and doesn't do an awful lot to
bring the prices down, even though it will cost us $400
billion.
So I regret that we missed an opportunity to do something
that would have made, perhaps, this hearing unnecessary. We
must get on with the price differential, and I want to do
something about it, as well.
Thank you.
The Chairman. Senator Snowe?
STATEMENT OF HON. OLYMPIA J. SNOWE,
U.S. SENATOR FROM MAINE
Senator Snowe. Thank you, Mr. Chairman. And I appreciate
the fact that you're holding this hearing to focus on this most
critical issue that's facing so many Americans. And it's a
problem for which a solution is long overdue. And so I
appreciate your leadership, and I think that the Congress does
have a responsibility to address this issue, as I know Senator
Dorgan has done so much in the past, Senator Wyden, on this
issue, and passing this legislation for the last 3 years in two
consecutive Congresses, and yet we have not been able to
implement this legislation because it's predicated on the
Secretary of Health and Human Services safety certification
requirements. And as the prescription drug medication
conference report is pending before the Senate, it'll include
similar provisions. But we have yet to overcome the hurdles of
those--safety certification. And I think it's unconscionable, I
think it's unreasonable that we have been able to surmount
these hurdles in order to make sure that our consumers, our
seniors, have access to affordable medications.
The fact of the matter is, our America's seniors are
desperate enough to have to travel across the borders. That is
true for Maine seniors, who have taken busload after busload to
go to Canada to access affordable medications. Because,
otherwise, they have no access to prescription drugs that they
so desperately need, and otherwise would be out of reach. It's
not only a matter of quality of life, it can be a matter of
life and death.
And it was interesting, in the papers the other day, as
we're all familiar with the charts, but they showed a survey in
Maine to low-cost providers, and they compared drugstores, one
in Maine and a number in Canada, as well. For 15 drugs, it was
$804,000. The lowest price in Canada was for $355,000, 50
percent less, and that's the problem. And so albeit that we're
going to have a prescription drug benefit as part of the
Medicare program, it will do nothing to address the cost. So
it's no wonder that more than 70 percent of Americans want
reimportation, they want the ability to access those lower-
priced medications, because we now know the facts, that drugs
sold in other industrialized nations are selling for far less
than they're selling here in the United States. In fact, the
National Institutes of Health did a survey on the top 21 most
important drugs, and 15 were found to have been developed using
knowledge and techniques from federally funded research.
The fact of the matter is, America's investments in
philanthropy has been shared worldwide. The one thing that
hasn't been shared are lower-priced medications. We are paying
the highest prices in the world. Americans are bearing a
disproportionate burden for the research and the development
making these new medications and innovative medications
available to consumers worldwide, and yet they're bearing the
highest price in prescription drugs.
Now, people say importation--reimportation isn't safe. I
cannot believe, in America, we can't develop innovative
techniques to ascertain the safety standards that are necessary
to meet the requirements under the legislation and the laws
that have passed previously in the current pending legislation
in the Medicare conference report. I cannot believe that the
FDA cannot meet those standards or the challenges involved in
that legislation.
We can't develop anti-counterfeiting packaging? We
mandated, in 1992, pedigree requirements so that you can have
the bar codes to track the medication. I cannot believe that
the FDA hasn't been working diligently and vigorously within
the government, with consumers, to make sure that we could meet
those standards when Congress has passed this legislation time
and time again. Yet FDA is spending more time in Canada
convincing the government not to sell medications here in the
United States, and scaring seniors, essentially trying to shut
down the borders, and yet they're not investing the appropriate
time to meet the standards within the law and meet the intent
of Congress that has passed this legislation on two different
occasions, that has become law.
So I think we do have a responsibility. Reimportation of
drugs isn't a problem, it's one of a number of solutions, and I
think we have to address not only the issue of providing a
benefit to America's seniors, but we also have an obligation to
address the costs that are associated with prescription drugs
that can make all the difference for the life of a American
senior and American consumer.
So, Mr. Chairman, I appreciate your efforts here today, and
hopefully this will be the beginning of developing, I think--
and facilitating a process by which we can solve this problem.
Government should be helping to serve America's seniors, not
being an impediment to preventing their access to something
that they clearly depend on and need.
Thank you, Mr. Chairman.
The Chairman. Thank you very much, Senator Snowe.
We had a hearing a few weeks ago, you know, on these
dietary supplements, and it's been 9 years since the passage of
that bill, and the FDA still has not written the regulations
associated with it. So placing our trust in the FDA is, I would
say, somewhat misplaced.
I want to welcome our colleagues from the House and the
Senate here today. Senator Rick Santorum and Senator Debbie
Stabenow and Representative Gil Gutknecht and Representative
Bernie Sanders are here. We'll begin with Senator Santorum.
Welcome, Senator Santorum.
STATEMENT OF HON. RICK SANTORUM,
U.S. SENATOR FROM PENNSYLVANIA
Senator Santorum. Thank you, Mr. Chairman. I appreciate the
opportunity to be here and to share my perspectives on this
very, very important issue.
I know a lot of people here believe that the reimportation
of prescription drugs from Canada will solve what ails the
American healthcare system. I would argue that you, by doing
so, would be attempting to treat the symptoms. You will not
cure the disease. And I would argue that you will kill many
patients in the process.
Foreign drug importation may seem like a straightforward
and attractive remedy to prescription drug access. It, in fact,
will create a host of serious healthcare consequences. Number
one, it will import, potentially import, foreign price controls
into this country. Two, it will decimate the research and
development of pharmaceutical products in this country. And I
know there are a lot of people on this panel who hate the
tariffs that have been imposed on steel, and we do so much
around here to help save an industry. We have an industry here
in the pharmaceutical industry, which is one of the most
competitive industries in the world, that imports--I mean,
exports pharmaceutical products all over the world, and so the
answer here is to try to somehow knock it on its heels. I don't
think that's necessarily a good thing for this country or for
our economy.
Reimportation undermines the FDA's authority to regulate
drugs and opens up U.S. borders to diverted and counterfeit
drugs from foreign sources. That, to me, is not necessarily a
prescription for better healthcare in this country. The side
effects are all too predictable and much worse than the
perceived disease itself.
The proponents of foreign drug importation claim they have
discovered a miracle cure for American healthcare, and what
they're doing is basically selling snake oil to the American
public. While the problem of affordable access to prescription
drugs is real, particularly in the elderly, they are better and
safer ways, and effective ways, to solve this problem, more so
than simply opening up borders to cut-rate foreign drugs.
In fact, the best way to do it is something that we're
considering this week, which is to pass a Medicare drug
benefit. This will assure seniors affordable access to safe and
the best prescription drugs in the world. This means access to
drug products that FDA has stamped with their approval, and it
comes with the ironclad assurance that they're safe, authentic,
and effective, which is something that reimported drugs could
never be claimed to be.
What Congress should focus its attention on, candidly, is
the international drug price disparities that have given rise
to this debate in the first place. I agree with everybody here
that it's unfair for Americans to pay more for their medicines
than the rest of the world, but the answer is not to adopt what
the rest of the world has done, which is price controls, and
import them into this country. What we should do is insist that
other countries pay their fair share. This is a trade issue.
And we should be out there aggressively trying to work, through
our trade offices and through here in the Congress, to get the
rest of the world to pony up and to bear their cost that we
bear here in America, which has to do with the research and
development of new drugs.
While Canada is, by no means, a third-world country, many
of the drugs that are funneled through Canada come from third-
world countries with significant counterfeit problems. A recent
five-part series in the Washington Post, my favorite newspaper,
highlights the threat posed by counterfeiters. And if you've
not read this series, I urge you to do so. While America's drug
supply remains the safest in the world, it is under constant
attack from well-funded, highly organized and technologically
savvy foreign and domestic counterfeiters, some connected to
organized crime, and some connected, perhaps, to terrorist
organizations. Under current law, these counterfeiters face
significant getting their products into commerce. But if we
open up the borders to Canadian drugs, we will, in fact,
increase the risk of these counterfeit drugs coming into this
country. Not a positive thing for the health and safety of our
population.
The lesson here is that we should be focused on
strengthening protections, not opening up our borders to new
assaults on the safety and health of the American people.
We recently strengthened the protections regarding imported
food, which I know some Members of this Committee were very
strongly in favor of. It's inconceivable, while we're doing
that, that we're going weaken our borders when it comes to
something that is critically important and something that can
be counterfeited and tainted very easily, which is prescription
drugs.
The price of drugs in Canada is lower than in the United
States purely and simply because Canada has price controls. I
find this an incredible argument that this is a fair trade or
free trade issue, when what the free trade is, is to import
drugs that have price controls on them. There hasn't been an
increase in prices in Canadian drugs in 8 years. Eight years,
they've controlled prices and haven't increased those levels.
This is free trade? Allowing price-controlled drugs into this
country? Manufacturers that refuse to meet these price
controls, what happens to them? Well, they can have their
license revoked to sell their product up there. In other words,
they can have their product stolen, they can have a compulsory
license, have their patent stolen, and have it produced in
Canada. This is free trade? This is what we want to condone by
the Canadian government and other governments by taking the
drugs and having them reimported back into this country? I
don't think this is a free trade argument. This is trying to
use the bullying tactics of the Canadians to beat drug
companies up in this country to lower their prices. Importing
cheap prescription drugs from Canada means importing price
controls and all that comes with it, long lines, drug
shortages, and the decimation of research and development.
The drug industry is the most vibrant, innovative, and
productive in the world in this country, in part because the
market-based system permits it to recoup its massive costs in
research and development in spite of the subsidies that are
received by getting research done through the Federal
Government, which the gentlelady from Maine talked about. It
costs roughly $1 billion to bring a new drug to market. Someone
has to pay those costs, or those drugs are simply not going to
be produced. And the fact is, the Canadians are not paying that
cost, which is obviously one of the issues that we need to
address.
I would say two things in closing. Number one is the safety
issue. And I know people seem to dismiss this, but the fact is,
you have two Secretaries of Health and Human Services under two
different Administrations that says it not safe, DEA, U.S.
Customs--the FDA's described the present situation as ``buyer
beware,'' and we want to make this more of a common thing in
this country? I just find completely unacceptable for the
health and safety of the people in this country.
And, finally, I would just say that anyone who believes
that the pharmaceutical industry, if reimportation were put in
place to this small country of Canada--they sell drugs up to
Canada basically in sufficient numbers to meet the demand in
Canada. Now, if we're going to have reimportation, which means
Americans are now going to be able to buy drugs in Canada, do
you think the drug companies in the United States are going to
produce enough drugs to supply all the drugs through Canada,
back to the United States? Well, the answer to that is, of
course they won't. They're going to produce enough drugs in
America to sell to meet the market in Canada. Well, what will
that meant to the--what drugs, then, will become--do you think
the Canadian government is going to give these good quality
American drugs to be sold back into the United States? Of
course they won't. They'll save those for their own people. So
what are we going to get reimported? Nothing will be reimported
back to this country. We will get imported drugs from third-
world countries, because Canada simply doesn't have the ability
to manufacture them in their country. So we'll get third-world
counterfeit drugs coming through Canada with a stamp of
approval from the Canadian government, when they haven't
inspected them in the first place. This is not reform. This is
a safety boondoggle for a lot of folks who are not necessarily
looking out for the best interest of the American public, and
something that we should not countenance and support.
We should go out and aggressively go after countries who
fix prices, who don't pay their fair share. That's the answer
to the problem.
Thank you, Mr. Chairman.
The Chairman. Thank you very much, Senator Santorum. I know
you have other responsibilities, so I--I know that Senator
Dorgan would love to----
Senator Dorgan. Well, Mr. Chairman----
The Chairman.--discuss this with you. But----
Senator Dorgan. Mr. Chairman, surely Senator Santorum will
not leave now. We do have questions.
Senator Santorum. I'd be happy to stay for questions.
Senator Dorgan. Yes, I would hope he would. I think he's
talked about killing patients and so on, and I certainly want
to ask him about ``killing many patients.'' So if he has the
time, I think it would be helpful to our Committee to allow us
to ask him a few questions.
The Chairman. I would ask if it would be possible for
Senator Santorum. Look, this is an emotional issue. I think we
all realize it. But I think it would be fair to the other
Members if they could give their statements. I know your time
is limited, Senator Santorum, but I think it wouldn't be
appropriate if we engaged in a debate with Senator Santorum and
not allowed our other colleagues to make their statements.
Would that be agreeable to you, Senator Santorum, or----
Senator Santorum. If I could run, for a few minutes, while
these folks--I have something I have to do, and I'll be--I can
come back if that's----
The Chairman. Thank you.
Senator Santorum.--okay with the Chairman.
[The prepared statement of Senator Santorum follows:]
Prepared Statement of Hon. Rick Santorum, U.S. Senator from
Pennsylvania
Mr. Chairman, I appreciate the opportunity to lend my perspectives
on legislative proposals to legalize the importation of prescription
drugs from Canada. Some believe that this is the right prescription for
all that ails the American health care system. You hear it in city
hall; you hear it in the statehouses; and you even hear it by some here
on Capitol Hill. They argue that the way to fix the problems of access
to the miracle cures of the 21st century-and many of these medicines
truly are miraculous -is to open up the floodgates to cut-rate, priced-
controlled medicines from Canada.
Although the proponents of foreign drug importation have the best
of intentions, unfortunately their solutions treat the symptoms instead
of curing the disease. While foreign drug importation may seem like a
straightforward and attractive remedy to the health care issues
affecting this country, it will in fact create a host of serious
healthcare problems that could plague the country for years to come.
These include: (a) importing foreign price controls; (b) decimating the
incentives for research and development; (c) undermining the FDA's
authority to regulate drugs; and (d) opening the closed U.S. drug
distribution system to diverted and counterfeit drugs from foreign
sources. These ``side effects'' from foreign drug importation are all-
too-predictable and much worse than the original disease. The
proponents of foreign drug importation claim they have discovered a
miracle cure for the American healthcare system; in fact, they are
selling nothing more than the legislative equivalent of snake oil.
Before buying this foreign drug importation cure-all, we need to
step back and get a second opinion. We need to ask ourselves why we are
having this debate in the first place. Are we so desperate for
solutions that we're willing to wager the health and safety of the
American public on a risky, unproven foreign drug importation scheme?
The answer has to be ``Absolutely Not!'' While the problem of
affordable access to prescription medications is real, particularly for
the elderly, there are better, safer and more effective ways to solve
this problem than simply opening up our borders to cut-rate foreign
drugs. In fact, the best way to solve this problem is for Congress to
pass a Medicare drug benefit for our seniors. A Medicare drug benefit
will ensure that seniors have affordable access to the best
prescription drugs in the world, through private sector competition
working in concert with the group purchasing power of social health
insurance. This means drug products that have the FDA's stamp of
approval; that come with an ironclad assurance of safety and
effectiveness; that seniors know are authentic and will work.
In addition to passage of a meaningful Medicare prescription drug
benefit, improving affordable access to prescription drugs requires
that we work aggressively to minimize international drug price
disparities that have given rise to the idea of foreign drug
importation in the first place. We all agree that it is unfair that
Americans can pay more for their medicines than Canadians. The answer
to this very real and legitimate concern lies in working to eliminate
foreign price controls on drugs, not in importing them. We must also
more stringently defend patent holders' intellectual property rights in
our trade negotiations and other international policy initiatives. We
can and should insist that other countries pay their ``fair share'' of
the costs of developing new medicines, by working to open their markets
so as to allow competition and free trade to work across borders. For
far too long, the American public has been forced to shoulder the
financial burden of researching and developing new drugs. It is high
time that we bring to an end this ``free ride'' which directly results
from foreign price controls.
It's not good enough for Congress to say to our seniors: ``We'll
give you access to prescription drugs--but only to drugs that have been
funneled through Canada.'' While Canada is by no means a Third World
country, many of the drugs that are funneled through Canada come from
Third World countries or countries with significant counterfeiting
problems. A study conducted by Prudential Financial, for instance,
indicates that Canada recently increased its prescription drug imports
from Pakistan by 196 percent; from Argentina by 171 percent; and from
South Africa by 114 percent. In addition, studies have found that
approximately one-third of the Internet websites claiming to be from
Canada are not actually located in Canada. In many cases, the medicines
are in fact from China, India, Mexico, Nigeria or Pakistan. Yet under
the various foreign drug importation schemes now being considered,
these are some of the drug products that very likely will be dispensed
to our American seniors.
Given the increased threat to the integrity of the American drug
supply, now is not the time to open up a huge new supply channel for
the counterfeiters. A recent five-part series in the Washington Post
highlights the threat posed by counterfeiters, and if you have not read
this series, I urge you to do so. While America's drug supply remains
the safest in the world, it is under constant attack from well-funded,
highly organized, and technologically savvy foreign and domestic
counterfeiters, some connected to organized crime and some connected,
perhaps, to terrorist organizations. These counterfeiters are ruthless,
and prey upon the weakest and most vulnerable elements of society in
order to make a quick buck. Because of the protections in current law
and the unflagging efforts of the FDA and Federal and state law
enforcement officials, these counterfeiters face significant hurdles
getting their products into legitimate commerce. Yet if foreign drug
importation is authorized, these counterfeiters will have a field day,
and Canada will become a massive entry point for diverted and
counterfeit drug products of all kinds. Indeed, if the counterfeiters
had a trade organization, you can bet they would be pulling out all the
stops lobbying for foreign drug importation.
The lesson from the Washington Post series and the recent anti-
counterfeiting activities by FDA is that we should be focusing on
strengthening the protections around our borders, not opening them up
to new assaults. We recently strengthened the protections regarding
imported foods. It is inconceivable that a few months later we would
consider doing exactly the opposite with respect to imported drugs.
This is all the more true given the realities we face in a post-
September 11th world and our ongoing war against terrorism. With the
distribution of anthrax contaminated letters through the Postal Service
to the U.S. Capitol complex and several news media offices in 2001,
terrorist use of biological weapons has become a reality. It does not
take a great leap of imagination to envision the increased potential
for terrorist attacks on our pharmaceutical supply were we to let our
guard down on drug safety: attacks that could cause catastrophic harm
to patients, enormous economic damage our second-to-none health care
industry, and could threaten confidence in our Nation's public health
system.
Some may argue that the critical difference between food and drugs
is price, and that the lower prices charged in countries like Canada
simply are too attractive to pass up. And if price really is the
driver, we need to understand why the price of drugs in Canada is lower
and what the ramifications of that are. And if we take a critical look
at that, it becomes clear, I think, that the price of those low
Canadian drug prices simply is too high for American patients to pay.
The price of drugs in Canada is lower than in the United States
because-pure and simply--Canada imposes price controls. Unlike the
United States, Canada does not permit market-based pricing. Instead,
Canadian authorities set a maximum price for each drug. Manufacturers
that refuse to abide by the set maximum price face the threat of having
their patent rights revoked. Thus, manufacturers have little or no
recourse to fight Canadian price controls.
But while Canadian patients may pay a marginally lower price for
their prescription drugs than Americans, they pay a much higher
societal cost. Price controls on prescription drugs have decimated the
Canadian drug industry. Just a few years ago, Canada had a vibrant and
innovative research-based prescription drug industry. Today, that
industry is mostly gone and the research and development activities
have dried up. The meager Canadian drug industry that remains mostly
churns out generic copies of existing drugs.
In addition, the Canadian health care system keeps a lid on costs
by rationing goods and services. Long lines at the doctor's office are
routine. Patients may wait months to see a specialist or for needed
medical procedures. Many drug products that are available in the United
States simply are not available in Canada.
Consequently, when the foreign drug importation proponents talk
about importing cheap prescription drugs from Canada, we must remember
that that is not all we will be importing. We also will be importing
Canadian price controls and all that comes with it, including long
lines, drug shortages, and the decimation of research and development.
The U.S. drug industry is the most vibrant, innovative and productive
in the world, in part because market-based pricing permits it to recoup
the massive costs of research and development. If we turn our back on
the free market and instead seek to import Canadian price controls, we
also undoubtedly will be importing not only the fate of the Canadian
drug industry, but also the ``price'' that Canadian citizens pay in
terms of diminished access to the newest and most effective medicines.
Given these economic realities, it is curious that some proponents
of foreign drug importation have characterized this as an issue of
``free trade.'' In fact, foreign drug importation from countries with
price controls is the antithesis of free trade.
Finally, foreign drug importation is the wrong medicine for America
because, plain and simply, it just is not safe. This is not just merely
one opinion, but the consistent view of the FDA, two Secretaries of
Health and Human Services from both Democratic and Republican
administrations, the U.S. Customs Service, and the Drug Enforcement
Administration. Moreover, the Canadian authorities have stated for the
record that they cannot or will not ensure the safety of drug products
exported to the United States. That, they claim, is not their job. And
the FDA does not have the resources or manpower to police every
shipment offered for import. Thus, drug importation presents a
situation where nobody is minding the store. Or, as the FDA has
described it, it presents a situation of ``Buyer Beware.'' While this
may be an acceptable way to buy other goods and services, it is not an
acceptable way to purchase prescription drugs. And it certainly should
not be an acceptable policy for providing greater access to
prescription drugs for American citizens.
The most sensible, direct and safe method of ensuring that
Americans have a fair deal on prescription drug prices is to pursue
trade and other international policy initiatives aimed at tearing down
foreign price controls. Clearly, it cannot be maintained that importing
the price controls of other countries and removing the tools and
authority that currently exist for the FDA to protect our medicine
supply is a viable, long-term solution to achieving international drug
price ``parity.''
Some may have forgotten the fact that just over 20 years ago, a
series of Tylenol cyanide murders in the Chicago area had consumers,
pharmaceutical manufacturers and regulatory agencies in a state of
national panic about the safety of over-the-counter drugs. Since then
we have made great strides in strengthening the Federal drug safety
standards that protect the American public from counterfeit and/or
adulterated drugs. All Americans have come to depend on our current
controls that assure the safety, strength, quality, and purity of
medicines. We cannot afford to turn back the clock; now more than ever,
we must stand strong and uphold the regulatory standards that have made
our drug supply the safest in the world.
As responsible elected officials, we have an obligation to focus on
the real issues at hand, and resist the temptation to foist upon the
American public short sighted, seemingly ``free lunch'' solutions to
prescription drug access. Despite its noble purported intentions,
foreign drug importation is, in the final analysis, a snake oil
approach that raises more questions than it answers. We need a real
cure for the problem of affordable access to prescription drugs. It
should start with passing a meaningful Medicare drug benefit. And it
should continue with a dogged resolve to eliminate foreign drug price
controls, so that Americans do not continue to shoulder the burden of
researching, developing, and bringing to market new, innovative and
life-saving medicines.
Thank you again for this opportunity.
The Chairman. Obviously, we'd appreciate it.
And I also would remind my colleagues, we have two other
panels following this one.
Senator Stabenow?
STATEMENT OF HON. DEBBIE A. STABENOW,
U.S. SENATOR FROM MICHIGAN
Senator Stabenow. Well, thank you, Mr. Chairman. I very
much appreciate the opportunity to be here, and I, too, would
love the opportunity to debate Senator Santorum line by line,
in terms of his testimony. And I realize that there are many
opportunities for the Committee to ask questions today.
I want to first thank you for your leadership as it relates
to the issue of closing patents and putting more generic drugs
onto the marketplace. I'm pleased to be a cosponsor of the
legislation, that we originally passed in the Senate, that
actually, on a bipartisan basis, would make a real difference.
I'm very concerned about what appears to be watering down of
that legislation in the final Medicare bill. But I thank you
for your leadership and for all of my colleagues on the
Committee who have been involved in the issue of reimportation,
particularly Senator Dorgan, who has, I know, been a leader,
far beyond my time in the Senate, and Senator Snowe. And I
would only say that my first legislation, my first bill I
introduced in coming to the Senate in 2001 was on this issue.
I believe we have two important challenges in front of us.
One is a real Medicare prescription drug benefit, and the other
is lowering prices for everyone. And if we were to pick the one
that would make the difference the quickest, it would be this
issue. Even the bill in front of us on Medicare does not take
effect til 2006, has a very large price tag, although I would
argue it is nowhere near what our seniors deserve or need. But
if we, frankly, instead of that, simply today pass the
legislation that has already passed the House, we would be
doing a major service for the people of this country. It would
cost very little. It could help beef up the FDA to address the
issues that Senator Snowe talked about, in terms of bringing
the safety issues together. Certainly, in the United States of
America, we have the capacity to design a system that, frankly,
is already designed for the pharmaceutical industry, who brings
back drugs every single day across the border. We just want
others to have the same benefit from this.
But if we simply took away this prohibition, we would not
only help seniors in this country, we would help every
business, large and small, every worker. When I sit down with
those in my state who manufacture automobiles and look at their
numbers, at least half the cost of their explosion in
healthcare premiums is as a result of the explosion in
prescription drug prices.
So this is a real issue for business. It is a real issue
for every senior and every consumer. And, in fact, this year,
the Medco Health 2003 Drug Trend Report found that prescription
prices will rise, this year, anywhere between 14 and 17
percent. They predict next they will rise another 18 percent,
and the next year another 18 percent. We are talking about an
explosion in prices that businesses and seniors and any
consumer cannot sustain. That's why I believe this issue is so
critical.
We know that if we simply pass the House bill that has
already been passed by my colleagues on a bipartisan basis,
that all taxpayers and consumers would save some $40 billion by
doing that. I am very concerned that, not only in the
legislation in front of us now coming to the floor on Medicare
do we not see these provisions, but it's even worse, because
they are prohibited from doing what Senator Wyden has talked
about, which I totally agree with, which is the leverage, the
group purchase, to be able to bring the price down. The bill in
front of us doesn't allow that, has specific language to
prohibit that kind of group leverage. So we have the worst of
the worst in the bill coming before us, a poor benefit, and a
new group of consumers, a new group of customers for the
industry, locked into the highest prices possibly in the world.
There is only one group that benefits by that, Mr. Chairman,
and it's certainly not the seniors of this country.
I've taken many bus trips. From Michigan to Canada, it's
only 5 minutes across a bridge. It's astounding to see the
differences. We all know the differences in prices. Senator
Dorgan has already spoken about the differences. I would just
share one thing. Last month, in the town of Howell, Michigan,
which is about 60 miles away from Detroit in the border, the
Senior Center took a group to Canada, and it was interesting to
note that one couple flew up from South Carolina to visit their
daughter, who lives in Howell, Michigan. And the savings from
just one of the drugs that they purchased in Canada paid for
their trip, their flight, to come up and be able to join their
daughter and go to Canada.
You know, there's a lot of talk about the free marketplace,
and I want to mention just one of the price differences and why
I don't think this holds water, when we talk about some of the
comments of our colleague, Senator Santorum. Let me give an
example of Tamoxifen. We've all heard this before. But right
now Tamoxifen is one of the drugs to battle breast cancer. It's
about $340.77 in the United States. When we took the seniors to
Canada, they received it for $39.19. Now, eight times more
expensive. Does the marketplace work for this? Can a breast
cancer patient who's diagnosed today say, ``You know, I think
I'll wait. I don't think I'll take Tamoxifen, which I need to
possibly save my life. I think I'll wait and take it another
time when the price is better''? Of course, they can't do that.
This is not like buying an automobile or a pair of tennis shoes
or a new shirt. You can't just say, ``I can't afford it today.
I'll do it tomorrow.'' These are life-saving medicines, and the
marketplace works differently. When someone says, ``You're got
to pay $340.77 for your Tamoxifen, because you have breast
cancer,'' you're going to do everything in your power to find
that $340 a month, because it is critical for your health and
possibly your life. So this is different, and I believe we need
to look at it differently and have a sense of urgency about
what it is we're talking about.
I would simply add one more thing, and that relates to what
we're really talking about here. And, Mr. Chairman, I will
submit my full testimony for the record. I know we have other
colleagues here. But let me say that this is not an issue about
the Internet or about mail order. And I do think we have some
issues with Internet and mail order that need to be address, in
terms of where drugs are coming from.
Reimportation is about allowing the local pharmacists at
the local pharmacy to be able to do the same thing that the
pharmaceutical companies do every single day, to bring back
drugs, to have a business relationship with the pharmacist or
the wholesaler in Canada. Right now, every single day, every
single day, there are prescription drugs coming across the
border from Canada into Michigan. The only difference is,
they're being brought across by the industry and not by the
licensed pharmacist. The FDA sends inspectors to the countries
where these product lines are made. They inspect them, they
make sure there's a closed supply chain, and they make sure
it's safe. They can do exactly the same thing if we choose to
give our seniors lower prices and licensed pharmacists the same
ability to do that.
We also know that there is ample technology available, both
in the Senate bills that we have talked about, as well as the
House, to address the issues of safety.
Mr. Chairman, I would just say, in closing, this is not an
issue of safety. This is an issue of competition and the fact
that the prescription drug industry does not want to be in a
position to have to lower their prices to American consumers.
And shame on us if we can't get this right. We help subsidize
making the drugs, we give tax credits and tax deductions for
the development of the drugs, we give up to a 20-year patent in
order to protect them so they can recover their costs, and what
do we get at the end of that? The highest prices in the world.
That is not a good deal for us, Mr. Chairman. And I hope, with
your leadership and the leadership of the Committee, that we
will change that.
[The prepared statement of Senator Stabenow follows:]
Prepared Statement of Hon. Debbie A. Stabenow,
U.S. Senator from Michigan
Chairman McCain, thank you for convening today's hearing on the
rising cost of prescription drugs. I also want to thank my colleague
and committee member, Senator Dorgan, for his work. You both have been
leaders in trying to reign in the high cost of medication through
generics reform and market access.
The timing of this hearing is obviously fortuitous because Congress
is considering whether to add a prescription drug benefit--a flawed
benefit in my opinion--to Medicare.
I am sure that we all agree that prescription drugs need to be more
affordable and accessible--not just for Medicare beneficiaries but for
all Americans. The Medco Health 2003 Drug Trend Report found that
prescription drug costs will rise somewhere between 14 to 17 percent
this year for health plans. And the report estimated that these costs
will rise 18 percent in 2004 and again in 2005.
Unfortunately, the Medicare conferees missed a great opportunity to
bring prescription drug relief to American families. The nonpartisan
Congressional Budget Office estimated that a reimportation provision
similar to the House Bill HR 2427 would save all payers some $40
billion.
This failure is just one of the reasons why I oppose the present
Medicare bill, and I urge the members of this Committee to do the same.
If we defeat this conference report, we can start over and get a good
Medicare RX benefit, more competition and lower prices for all
Americans and continue our successful Medicare system.
I know what a difference a reimportation provision would have on
people's lives. For years, I organized several bus trips to Canada. As
you know, Canada is just a short trip over a bridge or through a tunnel
for many residents of Michigan. What I discovered on my bus trips was
almost unbelievable.
With just a short drive across the border, U.S. citizens can
substantially reduce the cost of their medications by purchasing them
in Canadian pharmacies. The difference in price for medications was
absolutely shocking. A price study I conducted, comparing the price of
several drugs purchased in the U.S. to the Canadian prices, confirmed
what we saw happening on our bus trips--the price of the same drug
purchased in Canada is substantially lower than the average U.S. price.
Just last month, the City of Howell organized a bus trip to Canada,
a trip that made national news. From Howell to Windsor is a distance of
about 60 miles. Sixty miles for affordable FDA-approved prescription
drugs.
How much did people save? One couple from South Carolina had
planned a visit to their daughter in Howell around this bus trip! They
saved enough money on one of their prescriptions to pay for their
airfare.
How much are people saving? Here are a few price comparisons that
the Alliance for Retired Americans put together in August of this year:
Zocor: a drug to reduce cholesterol is $129.99 in the U.S.
and $67.72 in Canada. That is nearly a 50 percent savings.
Prozac: a drug to treat depression $302.97 in the U.S. and
$140.60 in Canada, that's over 50 percent savings.
Celebrex: a drug for arthritis pain is $85.99 in the U.S.
and only $44.76 in Canada. Vioxx: another arthritis drug is
$90.99 in the U.S. and only $44.16 in Canada. In both cases,
the arthritis drug is about half the price in Canada.
Finally, Tamoxifen: an important drug in the battle against
breast cancer, is a $340.77 in the U.S. and only $39.19 in
Canada. Tamoxifen in the United States is eight times more
expensive than the same drug sold in Canada.
People are desperate for affordable medications because they are
rising two-and-a-half to three times the rate of inflation. There is no
way that our health system, our citizens, and our Nation can continue
to endure these double digit increases year after year.
As many of the witnesses will agree, these cost escalations are a
huge financial burden on all Americans: from our senior citizens on
fixed incomes, to working families without insurance, to small
businesses with high health plan costs, to hospitals struggling to stay
afloat, to cities and states.
States and cities are already leading the way in developing
policies and strategies to safely reimport drugs: from New York City to
Springfield, Massachusetts, from Maine to Minnesota. I am very excited
by the work that Minnesota Governor Pawlenty (PAUL-lent-e) has done at
looking at lowering prescription drugs, and I look forward to working
with him in the future.
It is unfortunate that the Federal Government has done little to
help Americans with this growing problem. The Food and Drug
Administration's recent about-face decision to consider legal action
against states and localities that are trying to reduce their drug
costs is mind-boggling. The FDA should be working toward affordability
and accessibility, not bullying our citizens and our states.
Opponents will tell you that Americans have to swallow the bitter
pill of high prices if they want safety and innovation. This is a false
choice for our Nation and our world--we can achieve both.
Accomplishing our shared goal of affordability and accessibility is
no easy task. Health care defies traditional economics of supply and
demand. Unlike other economic goods, we do not choose when we need to
purchase prescription medicine. Access to prescription drugs are very
often a matter of life and death.
Giving Americans access to FDA-approved prescription drugs--often
American-made--that are sold for lower prices in other countries will
reduce the price of drugs in the U.S.
Note that pharmaceutical manufacturers are the only groups legally
allowed to bring drugs from other countries into the U.S. Presently,
the FDA sends out inspectors to countries all over the world to inspect
and approve production lines that produce drugs that will be brought
into the U.S.
Such reimportation occurs now when either the drugs are
manufactured only outside our Nation or the manufacturer cannot meet
existing demand due to a domestic shortage. The drug manufacturers have
a complete monopoly on the reimportation of prescription drugs.
Doctors, pharmacists, patients, and employers should have the same
opportunity to purchase FDA-approved drugs from other countries at
lower prices just as pharmaceutical manufacturers do.
We need to set up a system that allows pharmacists, patients, and
providers to use the global marketplace to find the lowest priced
drugs. Such a system should include only countries that have safety
standards that are as strong as those set by the FDA as appropriate for
reimportation. And there should be mechanisms in place to ensure the
supply chain is closed and the authenticity of reimported drugs.
Harnessing existing technology can help us address safety concerns
and create such a system. In fact, there is technology already being
implemented that tracks shipments, and this same technology can be used
by the pharmaceutical industry. Anti-counterfeiting protection can be
used on the seals and labels of drugs to guarantee authenticity.
As aforementioned, pharmaceutical manufacturers are reimporting
drugs now and able to ensure their safety and security through a closed
supply chain. Surely, we can do the same by using existing--
technologies to protect drug shipments and help make prescription drugs
available to everyone at lower prices.
Thank you for your time and consideration. By working together, we
can improve our Nation's health.
The Chairman. Thank you very much, Senator Stabenow.
Thank you, Congressman Gutknecht, and thank you for all of
your hard work on this issue.
STATEMENT OF HON. GIL GUTKNECHT,
U.S. REPRESENTATIVE FROM MINNESOTA
Mr. Gutknecht. Well, thank you, Mr. Chairman. I am so happy
to be here today, and I am so happy that you're having this
hearing.
One of my mentors in this subject is a gentleman by the
name of Dr. Steve Schondelmeier, and he is a professor of
pharmacology at the University of Minnesota, and he teachers
pharmacology, he is a pharmacist, he has studied this issue for
more than 15 years. And one of my favorite quotes from Dr.
Schondelmeier is this, ``A drug that you cannot afford is
neither safe nor effective.'' And what we have in America today
is really the worst of all worlds for consumers. As my
colleague from Michigan just said, literally what we do is we
grant these long-term exclusive franchises, and then we hold
American consumers captive, and the results are absolutely
predictable.
And I'm one who doesn't necessarily say shame on the
pharmaceutical industry. It really is shame on us. Because
ultimately the FDA works for us, and we have a responsibility
and an obligation and, more importantly, an opportunity to do
something about it.
And I'm so glad that you have co-sponsored this bill. We
hope that it will move through the Senate. Now, we are
considering legislation, as has been mentioned, in the House
and Senate that would essentially just transfer the
responsibility of paying for most of these drugs from the
consumers of the drugs to the taxpayers, and some say that
that's the answer. Well, I'm not convinced it is, because I
think we've asked the wrong question.
I think from the very beginning on this debate about
prescription drugs for seniors, we have framed the issue around
coverage. Ladies and gentlemen, if you go out and meet with
real seniors, and many of you have, you know that the issue
isn't so much coverage, it's affordability.
And Senator Stabenow pointed out Tamoxifen. I want to come
back to that. But I also want to mention that I happen to
believe that markets are more powerful than armies, and, at the
end of the day, markets work. And the reason we have the
situation today is because we don't allow markets to work.
Now, it's interesting, because Representative Sanders and I
agree on very few issues, but we agree on this. And what I have
always said is that this is not a matter of right versus left,
because we have some of the most conservative Members of the
House and some of the more liberal Members of the House who
both agree on this issue. So it's a matter of right versus
left. It really is a matter of right versus wrong. And it is
wrong to hold American consumers captive so that they have to
pay, by far and away, the highest prices in the industrialized
world.
Now, the issue that's continuously raised by the FDA and
the other critics is safety, but I hope you'll take an
objective look at this basic issue of safety, because when you
do, you will find out that it really is a bogus issue.
Now, we know, for example, that the CDC and other
government agencies keep incredibly good records. We know how
many people have died from taking drugs from other countries.
We also know from studies that at least a million Americans--in
fact, that number may well exceed five million Americans--are
currently buying their drugs from other countries. In some
respects, that's a tragedy in and of itself. I represent
Rochester, Minnesota, home of the Mayo Clinic. Every day,
thousands of people come from all over the world to get their
healthcare here in the United States. But, tragically,
Americans must go to other countries to get affordable
prescription drugs.
When we talk about safety, though, we keep records. We know
how many people have died from taking drugs from other
countries. It's a nice round number. It's easy to remember.
It's zero. We know that you are more likely to become seriously
ill from eating raspberries from Guatemala, by the government's
own statistics, than you are from taking prescription drugs
from Canada. We know today that five people in Western
Pennsylvania have died from green onions from Mexico. And yet
we know of no one who has died from taking prescription drugs
from Canada or Mexico. And so the safety argument, I think, is
widely and wildly exaggerated.
But the important part about the bill that you are
cosponsoring is, it will make the safety even safer, because
we're, for the first time, going to require counterfeit-proof,
tamper-proof packaging. That technology exists today. And we
have, and we can show you, some of that technology. And you've
got some great witnesses that can talk about that, as well.
One of the other arguments is about counterfeiting. But
remember this, Members, no one counterfeits one dollar bills.
The reason we have counterfeiting is because of the expense of
the drug. And, interestingly enough, I think the FDA would
admit that most of the counterfeiting that we see happening
today is happening inside the United States. It's not happening
somewhere else and being brought in.
The other argument that was raised is about free trade, and
these countries might steal patents. Well, Members, you need to
understand that every country has to sign, before they're
permitted into the WTO, what is called the TRIPS agreement,
where they literally pledge that they will not steal
intellectual property rights. And I'm one who believes in
intellectual property rights.
Finally, I want to talk a little bit about how we subsidize
this industry. And I'm not here to bash the pharmaceutical
industry. As I said earlier, it's not shame on them, it's shame
on us. But do understand that we subsidize this industry in
three separate ways. First of all, we subsidize them through
the research that we do with taxpayers' dollars. This year, we
will fund the NIH, the CDC, and other groups that do research
in the United States, to the tune of about $27 billion. Much of
that information is available to the pharmaceutical companies
free of charge.
The second way we subsidize them is in the tax code. The
pharmaceutical companies who talk about how much they spend on
research neglect to mention that they deduct every penny of
that research from their Federal taxes. More importantly, they
also quality, in many cases, for research and development tax
credits. Over the last 10 years, they've taken advantage of $28
billion in those tax credits.
But, finally, we subsidize the pharmaceutical industry in a
very important third way, and that is the price that we pay for
prescription drugs. I have, and I think we've made available to
you, and you've got all the charts, you can see this chart--
this is a chart of ten of the most commonly prescribed
prescription drugs. And when I was in Germany, in May--in fact,
we stopped at the Landstuhl Hospital there--but on our way
home, we stopped at the Munich Airport pharmacy. And most of
you travel quite a bit, and you probably realize that if you
want a bargain, you don't go to the airport to buy things. But
on our way out of town, we bought ten of the most commonly
prescribed drugs. And I would invite you to look at that chart.
And the total for those ten drugs bought in Germany was
$373.30. We came back to the United States and priced those
same ten drugs at a pharmacy here in Washington, D.C. The total
was $1,039.65.
[The chart referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Gutknecht. The one that really sticks out is the drug
that Senator Stabenow mentioned, Tamoxifen, one of the most
amazing drugs ever developed in the United States. But here's
the interesting thing. That drug was developed at the expense
of the American taxpayers. We literally took the development of
that drug through Phase II trials, and the reward for the
American consumer? Well, we pay about $360 for that drug. It's
available in Germany for about $60.
Now, I'm not saying that we shouldn't pay our fair share
for the cost of research and development. Clearly, America is a
blessed country. We ought to pay our fair share. We ought to
pay more, for example, than the people in sub-Saharan Africa.
But I don't think American consumers and taxpayers ought to
have to subsidize the starving Swiss, and that is what is
happening today.
And one of the ways you can change the arithmetic and the
entire pricing structure of these pharmaceuticals is to open
markets. Now, let me say, it is not my vision that American
consumers will go to Canada or Germany or wherever to buy their
drugs. Because, ultimately, once you open markets, they will be
forced to adjust their prices here in the United States
downward.
You're going to hear later from someone who's called a
``parallel trader.'' And ultimately that's what we're looking
for, is so that pharmacists, whether it be in Arizona or
Montana or wherever, will be able to buy their prescription
drugs wherever they can get them the cheapest. If they can buy
them from a pharmaceutical supply house in Munich, Germany,
cheaper, then they ought to have that right. That's called
parallel trading. It happens every day in Europe. And let me
just say something to you, Members. The Europeans are not
intrinsically smarter than we are.
So, again, this is not about shame on them, it's about
shame on us, it's about basic fairness. It's not right versus
left, it's right versus wrong. We have an opportunity to change
it.
I thank you very much for this hearing. I look forward to
the hearing, and I will do everything in my power to help you
get this bill passed through the Senate.
Thank you very much.
[The prepared statement of Mr. Gutknecht follows:]
Prepared Statement of Hon. Gil Gutknecht,
U.S. Representative from Minnesota
Chairman McCain, committee members, thank you for the opportunity
to speak this morning about what may become the greatest reform of
healthcare in America. I believe in markets, Mr. Chairman, and the
value of markets is what this committee will weigh throughout this
hearing.
I am the author of the Pharmaceutical Market Access Act, HR. 2427
which passed the House of Representatives by a vote of 243-186. I am
delighted at the introduction of S. 1781, the Senate companion bill. It
is a pleasure to be with so many supporters today.
In this testimony I want make a couple clear points about the
legislation. First, and most fundamentally, Mr. Chairman, this bill is
not about importation and it's not about re importation. This is about
permitting free enterprise to function. This is about allowing
Americans their basic right to access markets. Secondly, I will
describe how this legislation is the greatest enhancement in
pharmaceutical marketing safety in nearly a decade.
Perhaps it is a surprise to many that I do not associate with the
words importation or re importation. When I use the words,
``pharmaceutical market access'', it is in order to best articulate the
intent and affect of the proposal. If America's pharmaceutical supply
were manufactured only within our national borders, I might use the
term ``re-importation''. The nation's pharmaceuticals are not
manufactured only within our borders. If the ultimate benefit from this
bill would be greater opportunity for consumers to fill their scripts
in foreign pharmacies, I might use the word ``importation''. That is
not the ultimate benefit of the proposal.
American pharmacists, wholesalers and individuals should be allowed
to access pharmaceuticals markets. They should be allowed to seek the
best price available. That is elemental to the practice of free
enterprise. Yet such access is illegal for retailers, wholesalers and
individual consumers of pharmaceuticals. That's right, the United
States Congress explicitly prohibits Americans from seeking a product
anywhere outside our borders. In other words, pharmaceutical
manufacturers are saddled with absolutely no incentive to price their
product competitively to American consumers. What incentive would any
manufacturer have to competitively price their product if they existed
in a government-sanctioned captive market? None. Indeed, such an
environment exists for no other product in the American market. In a
recent memo, the American Law Division of the Congressional Research
Service confirms, no other statute exists restricting the importation
of a product. Heavy chemicals? Americans may import them. Munitions?
Americans may import them.
Ironically, such market restrictions exist for all consumers of
pharmaceuticals, but not manufacturers. Pharmaceutical manufacturers
import billions and billions of dollars worth of their product every
year. A senior can fill their scripts in an American pharmacy and
receive drugs manufactured in China, India, Brazil, Turkey or at least
61 other countries. Naturally, this fact nullifies the myth that
Americans consume a medicinal product made within our borders--leading
to the myth of ``reimportation''. These manufacturing facilities,
approved by Food and Drug Administration (FDA) inspectors, allow
manufacturers to reap the benefits of the global market place. In the
form of cheap labor, technological specialization and other commercial
concentrations, pharmaceutical manufacturers exercise their rights to
free enterprise.
Americans deserve access to markets. America deserves a government
that is willing to deal with the complexities of permitting the
practice of free enterprise. American consumers deserve the right to go
to their local pharmacist for the best price. Consumers should not be
driven to shopping in Canada or other countries. The Pharmaceutical
Market Access Act makes way for a new era where consumers can find the
best deal at the local pharmacist they trust.
In creating a system of commerce, both interstate and global,
governments must guard the safety of their citizens. Our country
participates in global commerce on a scale and in a volume never
imagined by any other society in history. The sheer tonnage of products
imported into this country would defy the credulity of this committee.
Nonetheless, we import everything from tomatoes to nuclear fuel rods
and we do it safely.
Many opponents of the Pharmaceutical Market Access Act, claim that
it is a dangerous measure that will plunge America into a
pharmaceutical safety crisis. The FDA Commissioner himself has often
expressed concerns about the safety of the Act. He and other opponents
observe that counterfeiting problems are on the rise. They recognize a
problem but they offer no other solution than the status quo.
Maintaining a status quo does not resolve the problems that plague a
status quo. Irresistibly, such a response falls short of the fiduciary
responsibility vested in opponents like Commissioner McClellan.
In fact, the growing counterfeit problem has only been met by the
FDA with, what I call ``malignant neglect''. Not since 1994 has the FDA
implemented any rules or regulations for the marketing of prescription
drugs. Rules issued in 1999 have been postponed every year since and
are currently postponed until April of 2004. Moreover, to my knowledge,
the FDA has not come to the Congress to request any change in statute.
The Internet sales of pharmaceuticals, for instance, are completely
unregulated. It is the wild west.
FDA officers often site great cases of pharmaceutical fraud over
the Internet. I am certain we will hear again from the FDA official
here today. But the FDA has not regulated Internet pharmaceutical
sales, nor has FDA requested any congressional action. Such actions
illustrate why I view their stewardship of our pharmaceutical marketing
regulations as ``malignant neglect.''
Mr. Chairman, the Pharmaceutical Market Access Act sets forth a
stout framework for allowing pharmacists, wholesalers and individuals
to access 25 pharmaceutical markets abroad. Pharmacists and wholesalers
must provide thorough paperwork to the Secretary of Health and Human
Services for the imported product. The chain-of-custody is paramount to
the security of all imported goods. The documentation of that chain is
primary to this program for importing prescription drugs. According to
the Act, the FDA may suspend the importation of any drug if it is
suspected of violating requirements. Furthermore, anyone knowingly
frauding the system may be criminally punished with 10 years in prison
or fined $250,000. I recognize the problems in the pharmaceutical
markets, and this legislation is packed with solutions.
Perhaps the legislation's greatest addition to pharmaceutical
marketing safety provisions is a requirement for anti-counterfeit
packaging. Long used throughout the world and voluntarily used
domestically by pharmaceutical manufacturers, such secure packaging
acts at the core of safety concerns. The technology described in the
bill must meet standards used by the U.S. Treasury for currency. And
the Secretary of HHS may approve additional packaging technologies.
This packaging provision again sets this legislation apart from the
FDA's neglect. Though Congress has been working on pharmaceutical
market access legislation for over five years, only last month, October
of 2003, did the FDA hold a public meeting for packaging technology.
The FDA can attain pharmaceutical marketing safety beginning with
this legislation.
Mr. Chairman, this proposal stands ready for the American people
now. I pray that the Senate will debate this bill and help put it on
the President's desk as soon as possible.
The American people deserve their right to a market. All Americans
deserve relief to sky-rocketing pharmaceutical costs. Access to markets
works, Mr. Chairman. As Ronald Reagan said, ``Markets are more powerful
than armies.''
______
News from U.S. Congressman Gil Gutknecht, First District, Minnesota
FOR IMMEDIATE RELEASE: November 5, 2003
CRS confirms Rx market concerns
Gutknecht says industry needs incentives to keep Rx pricing competitive
Washington, DC--First District Congressman Gil Gutknecht today
released a memorandum from the Congressional Research Service (CRS)
confirming that pharmaceuticals are not subject to the same market
standards as all other products.
``I must ask my colleagues why Congress has eliminated market
incentives to keep pharmaceuticals affordable,'' Gutknecht said. ``In
1988, Congress granted the pharmaceutical industry the right to price
pharmaceuticals without the force of markets. Nobody wins when
pharmacists are charged whatever manufacturers demand. And they have no
choice but to pass the cost onto the consumer. American consumers and
businesses are suffering the sad results of government-sanctioned
monopoly pricing.''
The CRS memorandum concludes that, ``Even other heavily regulated
industries, such as chemicals, pollutants, and munitions are not
apparently subject to statutory provisions. . .'' like those for
pharmaceuticals which exclude the industry from international
competition.
``Congressional lawyers have confirmed that this statutory
favoritism is unprecedented in American law,'' Gutknecht concluded ``It
is time for the Senate to pass H.R. 2427, the Pharmaceutical Market
Access Act. Americans deserve access to world market pharmaceutical
prices.''
Gutknecht is Chairman of the House Agriculture Committee's
Subcommittee on Department Operations, Oversight, Nutrition and
Forestry, Vice Chair of the House Science Committee, and a Member of
the House Budget Committee.
______
Memorandum October 30, 2003
TO: Honorable Gil Gutknecht
Attention: Brandon Lerch
FROM: Todd Tatelman
Legislative Attorney
American Law Division
SUBJECT: Re-importation of Products
This memorandum is in response to your request regarding statutory
language that expressly limits there-importation of products to the
manufacturer of the product, as is the case with respect to
pharmaceutical importation.\1\ We have been unable to locate any
statutory provisions similar in language and structure to the one in
the Food, Drug and Cosmetic Act. However, there does appear to be a
trademark statute as well as a military firearms statute that have a
similar effect on certain imported goods.
---------------------------------------------------------------------------
\1\ 21 U.S.C. Sec. 381(d) (2000).
---------------------------------------------------------------------------
Statutory Language
The Food, Drug and Cosmetic Act. Section 3 of the Prescription Drug
Marketing Act, amended the Food, Drug and Cosmetic Act to expressly
prohibit the importation of prescription drugs ``which [are]
manufactured in a State and exported. . .'' unless the ``drug is
imported by the manufacturer of the drug.'' \2\ The only exception to
this rule provides that the Secretary of Health and Human Services may
``authorize the importation of a drug. . .if the drug is required for
emergency medical care'' \3\ This language was added to the Food, Drug
and Cosmetic Act by Congress in 1987 to address two specifically
articulated threats to American public health. The first concern was
the emergence of ``foreign counterfeits, falsely described as re[-
]imported U.S.-produced products'' entering the drug distribution
system.\4\ The second expressed concern was that the ``proper storage
and handling of legitimate pharmaceuticals cannot be guaranteed by U.S.
law once the drugs have left the boundaries of the United States.'' \5\
A general exception was given to drug manufacturers to protect existing
business practices as they related to obtaining the return of their
products for reasons such as recalls, damages, or general
unsuitability.\6\ In addition, the Congress provided the limited
emergency exception to be decided on a case-by-case basis.\7\
---------------------------------------------------------------------------
\2\ Id.
\3\ Id. at (d)(2).
\4\ H.R. Rep. No. 100-76, at 2-3 (1988), reprinted in 1988
U.S.C.C.A.N. 58.
\5\ Id.
\6\ Id. at 58.
\7\ Id.
---------------------------------------------------------------------------
Other Statutes. As indicated above, our research has uncovered no
other statues that contain language similar to that of section 38l(d).
Even other heavily regulated industries, such as chemicals, pollutants,
and munitions are not apparently subject to statutory provisions
limiting re-importation of the product to the original manufacturer.
The only statute that even appears to produce the same result is found
in section 42 of the Trademarks Registration and Protection Act, which
prohibits the importation of merchandise that ``shall copy or simulate
the name of [ ] any domestic manufacturer . . . or which shall copy or
simulate a trademark registered . . . or shall bear a mark calculated
to induce the public to believe that the article is manufactured in the
United States. . . .'' \8\ The law is similar to section 3 of the
Prescription Drug Marketing Act in the sense that it restricts the re
importation of goods initially manufactured in the United States,
however, unlike the re importation restriction on prescription drugs,
the trademark statute does not contain an exception for the original
manufacturer of the product. In addition, where the prescription drug
statute was motivated by specific safety concerns, the trademark
statute was designed in part to protect the investment of time, money
and labor on the part of the trademark owner.\9\ In other words, the
concerns of Congress in enacting the trademark statute were economic
rather than rooted in public safety. Furthermore, the statutory
language receives much of its force from judicial interpretations and
the development of trademark case law.\10\
---------------------------------------------------------------------------
\8\ 15 U.S.C. Sec. 1124 (2000).
\9\ S. Rep. No. 1333 at 1 (1946), reprinted in 1946 U.S.C.C.A.N.
1274.
\10\ See, e.g., Summit Tech. Inc. v. High-Line Medical Instruments
Co. Inc., 922 F.Supp. 299 (C.D. C.A. 1996) (citing in reference to 15
U.S.C. Sec. 1124 Lever Bros. Co. v. United States, 877 F.2d 101 (D.C.
Cir. 1989) and Societe Des Produits Nestle v. Casa Helvetia, 982 F.2d
633 (1st Cir. 1992)).
---------------------------------------------------------------------------
The other relevant statute is contained in the Arms Export Control
Act. Section 38 of the Arms Export Control Act requires regulations to
be promulgated that ``prohibit the return to the United States for sale
in the United States of any military firearms or ammunition of United
States manufacture furnished to foreign governments. . . .'' \11\ This
provision is limited to military firearms and specifically does not
apply to firearms that ``have been so substantially transformed as to
become, in effect, articles of foreign manufacture.'' \12\ This
statute, unlike the prescription drug statute, makes no mention of
``re-importation,'' nor does it distinguish between re-importation by
the product's original manufacturer and re importation by other
citizens.
---------------------------------------------------------------------------
\11\ 22 U.S.C. Sec. 2278(b)(l)(A) (2000).
\12\ Id.
---------------------------------------------------------------------------
Conclusion
Based on our research, it appears that there are no other statutory
provisions that are similar in language, structure or intent to Section
3 of the Prescription Drug Marketing Act. The closest are provisions in
the Trademarks Registration and Protection Act and the Arms Export
Control Act. Both these statutes, however, are substantively different
from the strict prohibition against re-importation of prescription
drugs and are similar only in the sense that they restrict the overall
importation of trademarked goods and military firearms.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, sir.
Congressman Sanders?
STATEMENT OF HON. BERNARD SANDERS,
U.S. REPRESENTATIVE FROM VERMONT
Mr. Sanders. Mr. Chairman, thank you very much for holding
this important hearing, and for your work and Senator Dorgan
and Senator Snowe and Senator Stabenow. Thank you very, very
much for all that you have done fighting for consumers in this
country.
Mr. Chairman, as the first Member of Congress to take
American citizens over the Canadian border, this is an issue
that has obviously concerned me for a very long time. Because
the state of Vermont borders on Canada, many of our people, for
years, have purchased safe, affordable medicine in Canada. And
like many of my friends here, I will never forget the first
trip that I took, where women who were fighting for their lives
against the killer disease of breast cancer, women who do not
have a lot of money, were able to purchase safe Tamoxifen at
one-tenth the price that they were paying here in the United
States of America.
And I'm glad Senator Santorum is back. He used the word
``killing people.'' Well, Senator, we have a study that we have
asked the CRS to ask how many thousands of Americans have died
because they cannot afford the outrageously high prices that
the pharmaceutical industry is shoving down our throats. How
many millions of Americans have seen a deterioration in their
health? There are studies done by the Kaiser Foundation which
suggest that 25 percent of senior citizens in the United States
of America are either skipping doses or not taking the medicine
that their doctors prescribed because of the outrageously high
prices. You talk, Senator, about people dying. Well, I want to
know, how many thousands of people are dying because they're
being ripped off by the greediest industry in the United States
of America?
Now, one of the exciting aspects of this whole issue is, we
have brought together a very strong tripartisan coalition in
the House of Representatives, Gil Gutknecht, Dan Burton, Jo Ann
Emerson, some of the Republicans who have played a great role,
we have Democrats, I am in Independent. And we have stood up to
the pharmaceutical industry. We have stood up to the hundreds
of millions of dollars that this industry has thrown into
Congress. We have stood up to the 650 paid lobbyists. We have
stood up to their campaign contributions. And what we and the
American people are asking the U.S. Senate, will you also have
the courage to stand up to the most profitable, the most
powerful lobby in the United States of America?
Senator, I know that you have been concerned, in your years
in the Senate, about the power that money has over the public
process, and I applaud you for your efforts. I would like to
introduce to the record some information by the Center for
American Progress, which was prepared by the Center for
Responsive Politics, talking about millions and millions and
millions of dollars in campaign contributions that have gone
into the people who are sitting in the conference committee
right now on this Medicare conference, the people who have done
the most outrageous act by putting language into a bill which
says that the U.S. Government cannot negotiate lower prices on
prescription drugs. Beyond belief.
The question that we are dealing with, therefore, today,
Senator, is not just a healthcare issue, and I agree with what
these people have said. The issue even goes deeper than that.
The issue is whether the U.S. Congress is any longer capable of
standing up for ordinary people or whether it will continue to
succumb to the power of big money.
Now, let's deal with the two issues that the pharmaceutical
industry so aptly represented by Senator Santorum today. You
don't need the pharmaceutical industry here. Senator Santorum
has given their line. Let's talk about the two issues.
The issue of safety. We had, in our Subcommittee, William
Hubbard, who is a senior official at the FDA and one of the
leading critics of reimportation, working with the drug
industry. And we asked Mr. Hubbard--we said, ``Well over one
million Americans, over one million Americans, are purchasing
their prescription drugs from Canada.'' That number is--you
know, it is growing every day. ``How many of those people have
they made sick or have died?'' And the answer was, to the best
of his knowledge, he did not know of any.
Senator Santorum and others, the industry, has said,
``Price controls. We don't want to import price controls.''
Well, this is an amazing remark. As everybody in this room
knows, we have lost millions of decent-paying manufacturing
jobs in this country because China is selling us every product
in the world. Now, we can't get safe, affordable, FDA-approved
medicine from our neighbors in Canada because we're importing
price controls, but we can import slave labor from China, we
can import 20 cents-an-hour labor from China, we can import the
fact that anybody who tries to form a union in China goes to
jail, we can import billions and billions of dollars of those
products, but somehow, as Senator Snowe indicated, we just
cannot, through the United States of America, our government,
the FDA, regulate a handful of factories and plants through the
kinds of efforts that we have put into this legislation to make
sure that that product is safe. I think anyone who looks at
that for one moment understands that that is absurd.
Senator Santorum said, ``Gee, those terrible Canadians. In
8 years, they have not had to experience an increase in the
cost of prescription drugs. What an awful country. How terrible
can they be to their consumers?'' Well, I would suggest that if
the American people would know that we had the courage to stand
up to the industry--and, by the way, let's talk about this
industry--this is the most profitable industry in the United
States of America. This is an industry struggling, no doubt,
that was able to pay $150 million in compensation to the CEO, I
believe it was, of Bristol-Myers. This is an industry so
struggling that it could spend hundreds of millions of dollars
trying not only to bribe this institution, but legislatures all
over the country.
Senator we have an opportunity to do something important.
Let's do it.
Thank you.
[The information referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. I mentioned to my colleagues, I've been on
this Committee for 17 years, and very rarely do we have opening
statements that generate so much interest.
[Laughter.]
The Chairman. It's usually sort of a pro forma affair.
[Laughter.]
The Chairman. Could I--but not in this case. We do have two
other panels waiting. We've already been in for an hour. All
members of this first panel do have other things to do, but I
know that there is a desire here for a back and forth. So could
we compromise and say we could use 10 minutes for Q&A back and
forth?
We have--the Governor of Minnesota is waiting to testify,
and I think it would be a bit discourteous for us to extend
this too much longer. So if you'd set it for 10 minutes, and
I'll ask Senator--first ask Senator Santorum if he's like to
respond to any of the comments that were made, and then perhaps
Senator Dorgan, Senator Wyden, and Senator Snowe would like to
have an exchange with members of the panel.
Senator Santorum?
Senator Santorum. Well, Mr. Chairman, I know you're short
on time. I would just say, in response to the Senator from
Vermont, the point I was making is that--and to all the
Senators and Congressmen--that I agree that we're paying too
much for drugs here and that we are underwriting the world's
cost of research and development. I admit that freely. The
question is, what do we do about it? And I would suggest that
what we need to do is to not import what the other countries
have done, which is price fixing and price controls, which I
can't imagine that--most Members here would recognize that we
shouldn't go out and set price controls artificially low, below
the reimbursement, to make these drugs, you know, profitable
for any company to want to produce. In fact, the information I
received, when it came to the question of all this underwriting
that the Federal Government does for these pharmaceutical
products, that, ``Scholars at Tufts examine 284 new medicine
approved in the U.S. in the 1990s. They found that 93 percent
originated from the pharmaceutical industry with no government
support, 7 percent split between government, academic, and
nonprofit sources.''
So the idea that the government is funding all this
research and that all we should be doing is recouping our
money, I mean, it's just--the facts don't bear that out.
There is an enormous amount of risk in producing new drugs.
Most of them fail. Most of them don't come to market. And the
question is, do we want to have a vibrant drug industry? I
don't think a drug industry that's profitable is a bad thing. I
think it's a good thing. It produces more drugs.
I think we're all here for the same reason. We all want to
have lower-cost drugs here, and we want the other people around
the world to be able to, sort of, pay their fair share. The
question is, how do we get there? I would argue this doesn't
get us there.
The Chairman. I would just make one comment, very quickly.
We all know that the Veterans Administration and DOD currently
use their market share to negotiate lower prices for drugs. Why
in the world, if we're interested in lower prices for
prescription drugs, would we put a prohibition in that Medicare
can't use its market share to negotiate better prices for drug
companies? I mean, it makes no sense. It authenticates
Congressman Sanders' argument of the power of the
pharmaceutical companies. There's no reason--if we're going to
prohibit Medicare from doing it, then let's prohibit Department
of Defense and the Veterans Administration from doing it. Why
in the world would we do such a thing if we're interested in
lower prices? Now, this has nothing to do with reimportation,
it has to do with giving government the power to negotiate
lower prices.
Senator Santorum. Well, since I don't represent the
pharmaceutical industry, contrary to what everybody says--I
just what I think----
Mr. Sanders. You could have fooled me, Senator.
Senator Santorum.--is in the best interest of American
consumers and an industry that I think is a very important
industry in this country. I agree with you, I don't know why we
did--I wasn't on the conference, so I can't speak for the
conferees and why they did that.
The Chairman. Thank you.
Senator Dorgan, real quick?
Senator Dorgan. Mr. Chairman, I'll just--I want to ask
Senator Santorum a question, because as is usually the case, he
has sparked my interest with his language. Two points, and both
in the form of questions. I'll be very quick.
One of the inconveniences of globalization is that when you
trade with other countries, you inherit whatever those other
countries are doing. In this case, with Canada price controls.
And I won't ask the Senator from Pennsylvania to demonstrate
today, but I will be that on his person, his shoes, his shirt,
his necktie, his cuff links, or his handkerchief, somewhere he
has something that he's purchased from China, and is,
therefore, giving comfort in importing the retirement pay for
Jung Ju Min, a noted communist leader. Does that make him
uncomfortable? No. Part of globalization is, you inherit and
import all that which other countries are involved in.
So let me, finally, make this point. The Senator from
Pennsylvania said that this will kill many patients. Quote/
unquote, ``kill many patients.'' We have millions of Americans
who are now importing drugs. Name one patient that it has
killed. Just one.
Senator Santorum. When I say will ``kill many patients,'' I
mean in the future, because new drugs will simply not be
developed, and those cures that will save lives in the future
simply won't be available for people to take. You list all
these wonderful miracle drugs. Companies don't produce miracle
drugs to lose money. I mean, let's just be honest about this. I
mean, you make it sound like all we're going to is, we're going
to beat back these horrible drug companies that produce life-
saving therapies, and we're going to make sure that they don't
make any money, and they're going to go and continue to make
drugs. I mean, this is just--I mean, it doesn't make any sense.
Let's be honest about this.
Senator Dorgan. Well, Mr. Chairman, if I--your support for
the pricing strategy of the drug industry is eloquent, but
wrong. The fact is, those manufacturers are not selling drugs
at a loss in Canada. Would you agree with that? They're not
selling drugs at a loss in Canada, because if it were a loss,
they wouldn't sell in Canada. Because they're selling drugs in
Canada at a fraction of the price here, but still making money
in Canada, suggests to me they are overpricing prescription
drugs in this country, and that's the issue.
Senator Santorum. And I would be happy to respond to that.
I would say that, first off, as you know, to sell a drug in
Canada, you have to get approval to sell a drug in Canada. And
you do know that. You have to get approval by the government.
And, of course, if the government doesn't--if you don't accept
the price the government is willing to pay, you can't sell your
drug there. If you don't accept the price the government's
going to pay, and you don't sell your drug there, the
government has the ability to steal your patent and have that
drug manufactured in that country. So it does provide a little
incentive for you to cooperate when it comes to selling your
drug.
So I would agree with you that, no, they do not sell it at
the price they do here, because they have certain extraordinary
circumstances to deal with. But they probably do make a profit,
in that they sell it for more than what it costs for them to
manufacture it, and, therefore, it adds somewhat to the
profitability. But it doesn't underwrite the billion dollar
cost that it takes to research and develop this drug.
And I agree with the Senator from--I mean, I--we're in
agreement that we need to do something about that. Canadians
should pay more, Germans should pay more, for underwriting the
cost of research and development of new drugs. That's the
issue. It's not that--they're not paying their fair share, and
we are paying too much. I agree with you.
The Chairman. Senator Snowe?
Senator Stabenow. Mr. Chairman, I'd like to just add one
comment.
The Chairman. Could we just go to Senator Snowe and then
Senator Wyden, and then we'll have responses--and Senator
Boxer----
Senator Snowe. I'll let Senator Stabenow----
The Chairman.--who's short of stature, evaded my gaze.
[Laughter.]
The Chairman. And then we'll respond, real quick, if we
could, because we really are--we're doing what we usually do on
the floor, although perhaps not very well.
Senator Snowe, real quick.
Senator Snowe. I'll let Senator Stabenow respond.
The Chairman. Senator Stabenow?
Senator Stabelow. I just wanted to throw in one comment. We
keep talking about research costs. According to the latest
numbers, the industry is spending two and a half times more on
advertising, marketing, and administration than research, and
so it's very important to look at where they put their dollars.
We can do this and not affect research in this country, I'm
absolutely convinced.
The Chairman. Congressman Sanders?
Mr. Sanders. Senator----
The Chairman. Briefly.
Mr. Sanders. Senator Santorum, you said you just don't
know, you can't understand how that language ended up in the
bill which prohibits the government from negotiating. So I hope
that you will----
The Chairman. Congressman Sanders----
Mr. Sanders. My question is, I hope that you will tell us
now that you want to get that language out so the government
can negotiate with the pharmaceutical industry.
Senator?
Senator Santorum. I haven't seen the language. I'll take a
look at it, and if it's not--comports with what I think are
best practices, then I would be for removing the language. But
I haven't looked at it yet. I haven't seen the bill.
The Chairman. Congressman Gutknecht, did you want to say
anything? Real quick.
Mr. Gutknecht. Well, just real quickly, Mr. Chairman. We
have actually asked PHRMA, and we've asked all the experts at
FDA, how many countries have ever expropriated a patent from a
company for refusing to deal with their regimen of working on
controlling prices. And the answer is zero. Its never happened.
The Chairman. Senator Snowe?
Senator Snowe. Thank you, Mr. Chairman.
I want to thank all of the testimony from the witnesses
here today. I think they made some excellent points. Senator
Santorum was the one exception.
[Laughter.]
Senator Santorum. I thought you were complimenting me.
Senator Snowe. I know.
The Chairman. Aren't you glad you came this morning,
Senator Santorum?
Senator Snowe. Exactly. When you were referring to the
counterfeiting, I mean, primarily that was focused here in this
country in domestic distribution, I might add, with respect to
the issues in a series that focused on that particular issue.
There's no question, if we can do it with 20 dollar bills in
preventing counterfeiting, I think we certainly can do it when
it comes to life-saving medications.
I think one of the issues here today--and Senator Stabenow
raised the point about the rising prices of prescription drugs,
16 to 18 percent a year. That's seven, eight times the rate of
inflation. I mean, the cost of prescription drugs are not
declining over time, which you expect would. But not. And
that's the issue. Because they don't have any competition. And
we would have competition by bringing those drugs across the
border. There is competition, as we'll hear later from--about
parallel trading and opening markets. But that's what we're
facing in this country, 16 to 18 percent a year. And it's not
just been 1 year. That's not an exception. It is the norm. That
is the pattern. And what accounts for such skyrocketing
increases when it comes to the cost of prescription drugs? I
mean, how long can you recover your investments? So these
prices normally should be declining over time, and are not.
And I'd like to have you or other members of the panel to
speak to that issue.
Senator Santorum. Well, I would just say, with respect to
competition, as you know the competition is--once the patent
expires, you have generics who go in and compete, and that is
one way. But the patent protection is----
Senator Snowe. Making that more difficult, too.
Senator Santorum. Actually, we've made it easier under this
bill that--for generics to be able to compete. At least that's
what I've been told is in the underlying Medicare bill. And I
agree with that. I think that we should have competition. At
the same time, patents are there for a reason. They're there
for companies to be able to protect their intellectual property
so they can get reimbursement and recoup the expense. I mean,
generic manufacturers aren't inventing Tamoxifen. I mean,
they're basically waiting til the patent expires, and then
they're going to produce it and sell it a lot less. Why? Well,
they can sell it a lot less, because they don't have any
research and development costs into it, other than the fact of
what it takes to make it, but not invent it.
And so the question is, are we going to reward companies
for doing what we want them to do, which is to invest in
research and technology and develop new life-saving, quality-
enhancing drugs? And I would argue that we need to. At the same
time, that cost should be borne, not just by Americans, but by
the rest of the world, and that's the issue that I think we
need to focus on, not trying to take the pricing structure,
which is artificially low around the world, and impose it here
in America. By doing so, I mean, just let me assure you, the
number of drugs in this country that are going to be produced
are going to dramatically decline. And that may be OK. I mean,
that's a tradeoff, and it's a tradeoff that I know some people
are willing to accept. And if you advocate for that, I have no
problem advocating for that, if that's what you want to do, but
understand the cost and the benefit that's going to be incurred
when you do that.
The Chairman. Senator Wyden?
Senator Wyden. Thank you, Mr. Chairman.
As you all heard me say, I think this ball game's about
bargaining power for seniors, and that's what Senator Snowe and
I had in our bill 4 years ago, to basically give seniors
bargaining power, like Members of Congress have. And I want all
of you, because you've been very eloquent, to kind of give me
your response to an example of how the Canadian situation is
going to affect bargaining power. And I want to be very
specific.
Somebody that I've used for a lot of years for counsel on
prescription drugs told me yesterday that he ordered Lipitor,
in the United States, from Canada on August 31. It arrived on
October 17. He got a 90-day supply for $255, or about 2.83 a
pill. But because the order took so long, he had to go out and
buy a 60-day supply in the United States, at $259. So, in
effect, he got a third more from Canada for roughly the same
price.
And my question for all of you is, Canada's got a pretty
small population. If we have millions of people in the United
States ordering their drugs from Canada, the Canadians are
going to serve their citizens first. What is this going to do
for our joint goal of trying to get more bargaining power for
the consumer? That's what we've always felt this was about.
That's what Senator Snowe and I have been trying to do for 4
years. And because you all are the experts in it, just walk me
through what the Canadian situation will do with respect to the
key issue----
The Chairman. And walk him through----
Senator Wyden.--of bargaining power.
The Chairman.--walk him through briefly, please, beginning
with you, Congressman Sanders.
Mr. Sanders. We understand--and Senator Santorum referred
to it, in a different context--that the industry will do
everything it can to sabotage our ability to lower prices in
this country. And one way that they are doing it is trying to
limit supplies to Canada. In our legislation, we are very clear
that it is against the law for them to do that, that, in fact,
they will have to not discriminate against American citizens.
And if people in Canada, the pharmacists in Canada, want the
medicine, they will get the medicine they need. So it would be
against the law for them to sabotage the effort.
The Chairman. Congressman Gutknecht?
Mr. Gutknecht. Part of the reason that the bill we passed
in the House and the bill before the Committee here includes 26
countries--which, incidentally, we didn't make up; those were
26 countries that was given to us by the FDA saying they had
similar regimens to ours relative to the safety of drugs. And
you will later hear, in this hearing, from a parallel trader.
Ultimately, we're not--I don't believe we're talking just about
Canada. And, more important long term, we're not talking about
mail order. We want to open up markets so that your local
pharmacist can get the same price.
Can I come just briefly back to a point that Senator Snowe
made, because I think it's very intuitive. Because you were
really talking about intellectual property rights. And the
argument that's made is, that if we open up markets and force
competition here in the United States, they'll lose
intellectual property rights, people won't do research. If you
step back just for a moment and compare that to the technology
industries, I mean, Intel lives and breathes on intellectual
property rights, just like the pharmaceutical companies. We
don't give them the same protections. They understand that if
they don't invest in new technologies and new innovations,
they're going to be out of business. But they don't get the
same kind of protections that the pharmaceutical industry.
Incidentally, and we've got the CRS report, no other
industry gets the protections that the pharmaceutical industry
does.
The Chairman. Senator Stabenow?
Senator Stabenow. Thank you, Mr. Chairman.
I think that's a very important point. No one else gets the
same protections that we're talking about here.
Senator Wyden, I think that as we look at this, and
particularly if it's beyond just Canada, as Representative
Gutknecht was indicating, what we're going to see is a shift in
the markets. I mean, if the pharmaceutical industry isn't just
able to stop it by manipulating supply, what you will see is a
shifting and a changing in all of this, in terms of prices. And
the competition can't help but bring prices down in the United
States.
Again, we're not talking about mail order Internet, we're
talking about going to the local pharmacy, having the
pharmacist there be able to do business with pharmacists in
other places for safe, FDA-approved drugs.
One other quick point, and that is, we keep talking about,
well, there's competition when the patent runs out and--from
generic drugs. In the last 5 years, the FDA has approved
patents, and over 65 percent of them have not been for new
life-saving drugs. They have been for what's called a standard
drug or often called a ``me-too drug,'' meaning the packaging
is changed, the daily dose becomes a weekly dose, or some other
change is made to keep the patent going to stop competition. So
we have the industry--the most highly subsidized, most highly
profitable in the world--doing everything they can to stop
competition--by continuing patents, by stopping competition,
and putting more than two and a half times more into aggressive
marketing and advertising now for on purchasing rather than on
life-saving research. I'm all for investing in research, doing
everything we can to partner with the industry to do that, but
we've seen an industry dramatically shift to a marketing and
sales industry----
The Chairman. Senator Santorum?
Senator Stabenow.--as opposed to research.
Senator Santorum. And I'd be happy to enter into the record
for the Committee the numbers with respect to how much the
industry spends on, quote, ``marketing and advertising'' versus
research. Senator Stabenow and I have had a battle of charts on
the floor many times on this, and----
The Chairman. Without objection.
Senator Santorum.--I would be happy to submit it to the
record.
[The information referred to follows:]
November 25, 2003
Hon. John McCain,
Chairman,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Dear Senator McCain:
Thank you again for the opportunity to offer testimony at your
Committee's hearing on prescription drug importation on November 20,
2003.
During the question and answer segment of the hearing, one issue
that was raised by Senator Debbie Stabenow with respect to the
advertising of the pharmaceutical industry requires clarification.
Senator Stabenow asserted that the annual promotional spending of
pharmaceutical manufacturers in the United States exceeded that which
it spends on research and development.
In fact, pharmaceutical manufacturers spend significantly more on
research and development than on all promotional activities combined.
According to a 2002 General Accounting Office report,
pharmaceutical manufacturers spent an estimated $19 billion on all
promotional activities in 2001, including $2.7 billion on direct-to-
consumer (DTC) advertising. This remains considerably less than the
estimated $30 billion it spent on research and development. (U.S.
General Accounting Office, Prescription Drugs, FDA Oversight of Direct-
to-Consumer Advertising Has Limitations, GA0-03-177 [Washington, DC:
GAO, October 2002])
I hope this clarification is helpful to you and the Committee as
you continue to examine improvements to our health care delivery
system.
Sincerely,
Rick Santorum,
United States Senate.
RJS/ps
Attachment
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Santorum. And just suffice it to say the vast
majority of the advertising and marketing are free drug samples
given to doctors that end up in the pockets of poor people who
can't afford drugs. So that's number one.
Number two, with respect to what's going to happen, in
response to the Senator from Oregon's question, I do agree that
I--as I said before, I think they will attempt, as I would
think any industry would, to say, ``Look, we're only going to
send as many drugs up to Canada as the Canadian market needs.''
If that is against the law, which I don't know how they do
that, but if it's against the law, then my guess is, you'll see
a lot of pharmaceutical companies pull out of Canada and simply
not make those available, particularly if they're not getting
very high reimbursements for their drugs and they're not making
any money. If, in fact, it's going to be--they're going to sell
basically all their drugs through Canada at this point at that
low price, they simply won't sell the drug in Canada, and sell
it here.
If, as others have suggested, that if we broaden it beyond
Canada, so they--to the rest of the world, then the ultimate
consequence will be, you'll see a lot less drug research and a
lot less new drugs.
The Chairman. Senator Boxer?
STATEMENT OF HON. BARBARA BOXER,
U.S. SENATOR FROM CALIFORNIA
Senator Boxer. Thanks. I'm not going to ask a question. I'm
going to sum up what I think is happening here, in a minute and
a half.
Drug companies get the benefits of research paid for by
American taxpayers. Don't forget it. Taxpayers pay a lot of
money. And, by the way, I support that research, and I want to
spend more on that research.
Second, they get the R&D tax credits for what they do--or
R&E, however you define it--and I support that. As a matter of
fact, I want to make it permanent.
They get patent protection. And if that isn't abused, I'm
all for patent protection.
They get to write off their advertising budget. There are
some people that don't want that to be a writeoff. I think that
would be a violation of free speech. I support them being able
to write off their advertising budget.
What I don't support is their turning their backs on the
American people and using their clout to stop any kind of
reform here. And this latest one--and the timing of this
hearing is exquisite--you've got the conferees sitting over
there--I trust they're all there--right now, and they're
imposing, basically, a gag rule on Medicare, saying, ``You are
prevented from bargaining for good prices, but the private
sector, you can go out and bargain.'' What is that? That is
outrageous. It's, on its face, beyond outrageous.
We've also got a generic provision, that, although I
haven't read the fine print, it looks to be weakened, from what
I hear. And you have a importation situation where that will
never happen.
So what you've got is the pharmaceuticals, with a lot of
help from around here, which I'm embarrassed to say is
happening, just walking away with everything, and it's to the
point where I think our people are going to be hurt eventually
on this. And I'm just glad you have this hearing.
Thank you.
The Chairman. I thank the panel, and I thank you for being
here, and this has been a very interesting and enlightening
discussion, and I appreciate it very much.
Thank you.
The Chairman. Governor Pawlenty, we are not usually this
rude to our visiting Governors. We appreciate your patience,
and we thank you for your very significant involvement in this
issue. I know it was a major issue when you campaigned for your
present office, and I would like to say you are highly
respected and regarded on this issue, and we thank you for
being here.
We'll begin with you, Governor.
STATEMENT HON. TIM PAWLENTY, GOVERNOR,
STATE OF MINNESOTA
Governor Pawlenty. Mr. Chairman and Senators, thank you for
the honor to be here today and present some thoughts about this
important issue facing our country. And actually the panel
before us was a great pleasure to listen to that testimony. We
appreciate that. My formal testimony has been submitted. I know
time is short, Mr. Chair, and you want to move things along, so
I will cut to the chase.
We have a healthcare crisis in America, as this Committee
well knows. The crisis, in part, is a cost crisis. We have
healthcare costs in the United States going up between 10 and
25 percent a year. We can't keep up. Families can't keep up.
Employers can't keep up. Employees can't keep up. Governments
can't keep up. It is going to consume us, Mr. Chair, if we
don't get our arms around this crisis. And it's about to get
worse, as we experience the demographic shifts that we all know
are coming with the graying of America.
One component of that crisis is the prescription drug
crisis and the costs associated with that. It's been eloquently
discussed in your previous panel. One element of that crisis is
that prescription medicines for too many Americans are out of
reach because of cost. The Medicare bill that you may well pass
in the coming days will help with respect to coverage, but as
Senator Snowe so eloquently said earlier, extending coverage to
more Americans, while helpful and is good progress, does not
address the cost issue. And so we are going to continue to
have--as governments, as families, and as individuals--cost
pressures that are unacceptable that we're not going to be able
to keep up with.
Americans pay 20 to 80 percent more for their prescription
medicines. The main justification for that, as you heard this
morning, was that we need innovation. We need research and
development. I will concede, Mr. Chair, that we should pay a
premium for that world-leading innovation, but there's a
difference between paying a premium and being a chump, and
we're being played.
[Laughter.]
Governor Pawlenty. The American consumers are being played
by this industry, and we're being chumps. And so I don't think
that's a good thing for our country. I don't think it's a good
thing for American consumers. And we need to take action.
Franklin Delano Roosevelt said, ``We need to try things in
the face of crisis. We need to try things.'' And so as we sit
here--and it is ironic that not far from here they're perhaps
closing up the Medicare conference report. But, as an aside, if
they prohibit Medicare from using group purchasing power, I
would be stunned and alarmed. That is an alarming development.
I hope that's not the case.
The Chairman. It would be a commentary on the way the
system works here, as well as the specifics of the legislation,
wouldn't you think, Governor?
Governor Pawlenty. It would seem that way, Mr. Chair. It
would seem that way.
Importation from Canada and perhaps other developed
countries is not the ideal solution. It is probably not the
long-term solution, but it is in the spirit of trying
something, it's in the spirit of trying to break the logjam and
bringing awareness and pressure for change.
I'll tell you briefly what our plan in Minnesota is. We
hope that you make a Federal law change that allows importation
to go forward. If you don't, we understand the current FDA's
position to be that individuals can make purchases for personal
use for up to 90-day prescriptions. We would like to facilitate
those kinds of purchases by Minnesota, and we're actively
developing this as we speak. We hope to have it up and running
in a matter of a couple of months, a website that will list and
feature those pharmacies in Canada that we've identified as
established and credible and reputable and safe and accredited
that are willing to provide prescription medicines to Minnesota
consumers at a hopefully discounted price savings. That website
will also feature generic alternatives and information
regarding that. The individual who accesses the website will be
able to download instructions, an order form, and a health
questionnaire. They, the consumers, then will make the
purchase. They will send the information to a Canadian
pharmacy, the prescription as well as the health questionnaire.
The Canadian pharmacy will then have that prescription reviewed
by a doctor, a Canadian doctor, which is a step we don't even
require, by the way, in the United States. These pharmacies--
we're not talking, Mr. Chair--and the press coverage gets
lumped together and confused--we're not talking about rogue
Internet sites or pharmacies, virtual pharmacies in the United
States or elsewhere. We're talking about established, credible,
reputable pharmacies in Canada that the State of Minnesota--
ideally, the Federal Government, but at least the State of
Minnesota--has reviewed, has deemed appropriate for this
purpose, and they have very substantial protocols that they
follow.
We were in Canada recently and received that information.
We're in the process of verifying it. But there is no reason to
believe that those types of pharmacies--established, credible,
reputable, accredited pharmacies in Canada--present a safety
threat at all to the American consumer. There is no evidence of
that. In fact, the FDA was recently in Canada, meeting with
Health Canada, and they made certain suggestions or claims
previously about the safety of the distribution or pharmacy
system in Canada. The day after the FDA left, the folks from
Health Canada issued a clarifying press release saying, ``The
FDA's concerns have been reviewed, they've been investigated,
and they are, quote/unquote, `not substantiated.' '' Not
substantiated.
So we're asking, Mr. Chair, that the FDA, if they would be
willing--the ideal would be to help us. You know, they're the
organization that has the expertise, they're the organization
that has the ability to help a system like this go forward.
We'd love to have their help. In fact, we'll cut them in on the
action. You know, we'll take some of our savings and we'll give
it to the FDA. If they want to send up some staff and sit in
these pharmacies and help us review and do the due diligence,
we will help them.
But we're going to go forward under the guise that current
law allows individual purchases for personal use. The
protocols, I'll be happy to talk to you about it in more
detail. It's in my testimony. But they--we can be confident in
the safety of these pharmacies that we will select.
And I also want to just address quickly, if I could, Mr.
Chair, this notion that, you know, the retaliation by the
pharmaceutical companies, because that's a growing concern in
Canada, in terms of the government and their consumers. I think
the threat, on national television, by the CEOs and leaders of
our pharmaceutical companies, that they are going to cutoff
supply to their Canadian pharmacies, is reprehensible. And it
may be, it may be, a violation of antitrust and trade laws, and
I hope this Committee or other Federal authorities or state
authorities will pursue that.
In closing, Mr. Chair, let us try it. Let us try it. Even
if you don't change Federal law, we just ask the Federal--the
FDA to maintain their current posture, allow these personal
purchases to go forward. Let us try it, we'll see if it works.
If it doesn't work, we'll come back, we'll admit it frankly,
and move on. But we need to try something different.
Thank you for the time and chance to present a few thoughts
this morning.
[The prepared statement of Governor Pawlenty follows:]
Prepared Statement of Hon. Tim Pawlenty, Governor, State of Minnesota
Chairman McCain, Senator Hollings, and members of the Senate
Commerce Committee, it is an honor to be with you today.
Not far from here, along the banks of the Potomac, is our national
memorial to President Franklin D. Roosevelt. During an earlier time of
crisis, President Roosevelt pushed for innovation. He said, ``It is
common sense to take a method and try it; if it fails, admit it frankly
and try another. But above all, try something.''
It's time to try something different in America's prescription drug
crisis. This isn't about politics or ideology. It isn't about the New
Deal. It's about getting a ``Better Deal'' for our people.
Individuals, families, job providers, and units of government
across the Nation are facing a health care crisis. Simply put, the cost
of health care is rising faster than our ability to keep up. The
current rate of cost increase is unsustainable. If we do not find
effective ways to address this crisis, it will seriously undermine our
economy, our ability to provide health care, and our ability to enhance
our quality of life.
It is one of the fundamental challenges of our time.
Health care costs are escalating rapidly for a variety of reasons--
not just because of the costs of prescription medicines. However,
prescription medicine prices are an increasingly significant
contributor to the cost crisis.
The tentative agreement regarding a Medicare prescription drug
benefit is good progress, and I applaud the Congress for it. However,
giving more people coverage addresses only part of the challenge. With
or without coverage, costs simply cannot keep increasing at the current
rate.
We've all heard the arguments about why Americans pay more for
prescription drugs than other countries. But the bottom line is
Americans pay more than the rest of the world and the price
differential puts prescription medicines out of reach for too many
Americans. The current situation is unfair and untenable.
That's why we're doing what we are in Minnesota. We're taking a
method and trying it.
Minnesota's Plan
The Minnesota Plan for Prescription Drugs has a very simple goal--
to get a better deal for Minnesotans. We are establishing a program to
facilitate the purchase of prescription drugs from Canada by
individuals.
Through a website, all Minnesotans will be able to determine if
their prescription is available at a lower cost from a Canadian
pharmacy, and if so, how to order it. The site will focus on only
maintenance drugs that can be shipped and are known to be cheaper in
Canada. Only reputable Canadian pharmacies licensed by a Canadian
province, willing to negotiate a discounted price and have their safety
protocols reviewed by the Minnesota Department of Human Services will
be used. The site will also let consumers know if there is a lower cost
generic alternative about which they should see their doctor.
Those individuals wishing to take advantage of the program will
need to obtain a prescription from their own physician and send a copy
of the prescription, an order form and a medical history questionnaire
to the Canadian pharmacy. To comply with Canadian law, the prescription
will be reviewed and countersigned by a Canadian physician. Assuming
that all is in order, the pharmacy will ship the medication to the
patient by mail and in the manufacturer's original, sealed container.
The next step is to provide incentives, such as waiving co-payments
or sharing savings, to our state employees so they also take advantage
of this lower cost alternative.
We recognize that these measures are not the ideal or long-term
solution. They are, however, designed to provide short-term relief and
to build pressure for long-term reform.
Ensuring Safety
I'm pleased to be here today with Deputy Commissioner Taylor from
the Food and Drug Administration, which is charged with ensuring the
safety of the prescription drugs Americans use.
Those who oppose reimportation often talk of great problems with
safety. On this point, it is important to keep straight what we are
proposing and what we are not proposing.
We are proposing to reference services available from established,
reputable, credible, accredited Canadian pharmacies. There is no
evidence to suggest such pharmacies are unsafe. Canadians are not dying
or at risk because of their system. Assertions that a plan like
Minnesota's is unsafe suggests either the pharmacies we would choose
are unsafe or they are too inept to properly mail or deliver medicines
safely. Neither is true. Moreover many reputable, established
pharmacies in the U.S. already use a mail order, Internet or phone
order system. The FDA apparently thinks it works well for them. For
example, the Veterans Hospital in Minneapolis mails out a large number
of prescriptions to patients each week.
Our proposal should not be confused with the questionable Internet
pharmacy or ``storefront'' marketing entities that are currently
offering their services to U.S. citizens with little or no oversight.
We agree that such operations present an unreasonable safety risk to
consumers.
Our Department of Human Services conducted a review of Canadian
practices, similar but independent of that done by the State of
Illinois. We came to the same conclusion that they did: the Canadian
system is comparable to ours in safety standards.
There is a misperception that reimportation from Canada is some
risky endeavor in which we give up safety to use a Third World
apothecary just to save a dime. Canada's pharmaceutical regulatory
system is strong and effective. At the state level, we're prepared to
monitor and ensure that those pharmacies serving our citizens are held
to the highest standards of safety.
Let me briefly explain to you some of the safety and security
protocols we will be using as part of our reimportation plan:
1. Any pharmacy associated with our website must be accredited by an
organization such as the Internet Mail order Pharmacy
Accreditation Commission, which uses 92 standards in their
process;
2. The pharmacy must agree to allow inspection of their facilities
and wholesalers that supply these pharmacies will also be
inspected;
3. Medications will only be dispensed in the manufacturer's
unopened, safety-sealed containers in dose-appropriate amounts;
4. Those medications shipped must be produced in an FDA-approved
manufacturing facility;
5. Medicines will be for maintenance drugs only and the patient will
likely be required to have been taking the medicine for at
least thirty days before the prescription is filled.
The Industry's Threats
In recent weeks, as the prospects of reimportation facilitated by
units of government gets closer to a reality, executives of the
pharmaceutical industry have publicly threatened to withhold supplies
of prescription drugs to those Canadian pharmacies who supply
Americans.
Their threats are reprehensible. I also believe these threats may
be a violation of Federal and state antitrust laws and urge this
committee to review the comments and actions of the companies involved.
Minnesota is Ready to Lead the Way
The states are often called the ``laboratories of democracy.'' The
State of Minnesota is proving that again by moving ahead in
implementing this reimportation plan.
As President Roosevelt advised, we have to try something.
Let us be the experiment. Let us try it. Let us put the arguments
to the test. If it doesn't work, we'll admit it. The current system is
not ``safe'' because too many people can't afford their medicine.
Thank you very much.
The Chairman. Thank you, Governor.
Mr. Taylor, welcome back.
STATEMENT OF JOHN M. TAYLOR III,
ASSOCIATE COMMISSIONER FOR REGULATORY AFFAIRS,
U.S. FOOD AND DRUG ADMINISTRATION
Mr. Taylor. Thank you very much.
Before I start my oral testimony, I'd--we would be----
The Chairman. You might want to move the microphone a
little closer.
Mr. Taylor. I'm sorry, sir.
We'd be more than happy to meet with the Governor, either
before or after the introduction of your plan, and we can
discuss that.
The Chairman. Thank you.
Mr. Taylor. Mr. Chairman, I appreciate the opportunity to
discuss the Food and Drug Administration's concerns related to
the importation of drugs into the United States. FDA shares
with Congress its great concern for senior citizens and other
patients who have difficulty paying for prescription drugs.
That is why the Administration has been working so closely with
Congress to enact landmark legislation to provide millions of
American seniors with coverage for prescription drugs under
Medicare. As part of that legislation, the Administration
supports provisions that build on FDA action earlier this year
to expand access to more affordable generic drugs.
FDA has also taken a number of other significant steps to
provide greater access to affordable prescription medications
without compromising safety, including unprecedented steps to
lower drug costs by helping to speed the development and
approval of low-cost generic drugs after legitimate patents
have expired on branded products. This includes the biggest
expansion in history of our generic drug program in a series of
regulatory changes to make it easier for generic manufacturers
to compete.
However, FDA continues to have serious public-health
concerns regarding legislation that will allow the importation
of drugs from outside the current safety system established by
Congress under the Federal Food, Drug, and Cosmetic Act. When
it comes to buying drugs outside our existing regulatory
protections, FDA has consistently concluded that the agency is
unable to endorse a buyer-beware approach.
Currently, new drugs marketed in the United States,
regardless of whether they are manufactured in the United
States or a foreign country, must be approved by FDA based on
demonstrated safety and efficacy. They must be produced in FDA-
inspected manufacturing plants that meet FDA's good
manufacturing practice regulations. Also, the shipment and
storage of these drugs must be properly documented and, where
necessary, inspected. Under the Food, Drug, and Cosmetic Act,
unapproved, misbranded, and adulterated drugs cannot be
imported into the United States. This includes foreign versions
of U.S. approved medications, as well as drugs that are made in
the United States, exported to other countries, and the
subsequently reimported to the United States.
Our safety concerns are heightened by the proliferation of
websites, both domestic and foreign, that sell prescription
drugs to consumers. The Internet has opened up vast new
opportunities for commerce and exchange of information.
However, as beneficial as this technology can be, it also
creates a new marketplace place for activity that is already
illegal. FDA is doing its best to stop the increasing flow of
violative drugs in this country, but the task is daunting.
While Regulatory Affairs has inspectors who work in the field,
who perform investigational work pertaining to imported
prescription drugs, a job that's not limited to inspections at
ports of entry, but while the volume of imported drugs has
increased enormously, FDA has not received additional resources
or authorities to address these thousands of shipments, in
contrast to the case for food security, where Congress, 2 years
ago, approved substantial new funds and authorities for border
protections.
FDA has long taken the position that consumers are exposed
to a number of risks when they purchase foreign drugs from
Internet sites or from pharmacies that are not licensed and
operated under state pharmacy law. These outlets may dispense
expired, subpotent, contaminated, or counterfeit products, or
medications unaccompanied by adequate directions for use. In
addition, FDA cannot provide consumers with any assurance that
these products or their active ingredients were manufactured
under current good manufacturing practice standards or stored
properly.
Taking such unsafe or inappropriate medications put
consumers at risk for dangerous drug interactions and other
serious health consequences. Moreover, patients are at a
greater potential risk, because there's far less certainty
about what they are getting when they purchase drugs over the
Internet.
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 that have been diverted to unscrupulous
resalers, or dangerous subpotent or superpotent products that
are improperly manufactured. Also, 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 is
unknown or because the operator of the pharmacy often is not
known or that seller is beyond the consumer's reach. FDA has
only limited ability to take action against these foreign
operators.
To help assess the extent of the problems posed by imported
drugs, FDA and the United States Customs and Border Protection
conducted import blitzes at four mail facilities this summer.
The purpose of these blitzes was to obtain a representative
picture of the type of drugs that were entering the United
States through the mail, and to identify and stop counterfeit
and potential unsafe products from entering the United States.
Although many drugs obtained from foreign sources purport and/
or may appear to be the same as FDA-approved medications, in
fact they are of unknown quality or origin, have not been
approved in the U.S., and may pose potential serious safety
concerns.
Eighty percent of the drug products that were examined
during the blitz were violative because they were unapproved
drugs. The potentially hazardous products encountered during
the blitz included drugs that FDA has never approved, drugs
that require careful dosing, drugs with inadequate labeling,
drugs inappropriately packaged, drugs withdrawn from the
market, drugs with clinically significant drug interactions,
drugs requiring initial screenings and/or periodic monitoring,
and controlled substances. Clearly, many of these imported drug
products may pose safety problems.
Sixty-five years ago, Congress responded to widespread
fears of unsafe, ineffective domestic drugs by directing FDA to
create a system for assuring that Americans have a drug supply
that they can trust. Fifteen years ago, Congress responded to
serious safety problems created by imported drugs that were not
tightly regulated by passing the Prescription Drug Marketing
Act. Congress limited access to these foreign drugs because of
safety concerns it identified with the importation of
significant volumes of adulterated and counterfeit drugs.
History has shown that this closed regulatory system has
worked well. FDA, however, cannot offer the same assurance to
the public about the safety and quality of drugs purchased from
foreign sources that are outside our U.S. regulatory system.
Unfortunately, the drug supply is under unprecedented
attack from a variety of increasingly sophisticated threats.
FDA has seen its number of counterfeit drug investigations
increase fourfold since the late 1990s. Although counterfeiting
was once a rare event, we are increasingly seeing large
supplies of counterfeit versions of finished drugs being
manufactured and distributed by well-funded and elaborately
organized networks. At the same time, inadequately regulated
foreign Internet sites have also become portals for unsafe and
illegal drugs. Evidence strongly suggests that the volume of
these drug--of these foreign drug importations is increasing
steadily and presents a substantial challenge for the agency to
adequately assess and process these parcels, resulting in a
increased workload for agency field personnel, ports of entry,
mail facilities, and international courier hubs. With the
available resources and competing priority space in the agency,
experience shows that we are unable to visually examine the
large volume of parcels containing prescription drugs that
arrive each day. The agency responded to this challenge by
employing a risk-based enforcement strategy to target our
existing enforcement resources effectively in the face of
multiple priorities, including homeland security, food safety,
and other important tasks. However, this system is already
overwhelmed by the number of incoming mail packages that must
be evaluated, and this state of affairs presents a significant
on-going challenge for the agency.
At a time when FDA faces more challenges than ever in
keeping America's supply of prescription drugs safe and secure,
legislation to liberalize drug importation could cause
additional drug safety concerns. The volume of importation that
could result from enactment of these bills could easily
overwhelm our already heavily burdened regulatory system.
In general, these bills fail to provide FDA with the
adequate authority or resources to establish and regulate the
distribution system for incoming foreign drugs. Some of these
proposals would take away our existing authorities, creating
unprecedented prohibitions on FDA's ability to inspect and test
drugs, and FDA's authority to block the distribution of drugs
that we think are unsafe. Perhaps most importantly, in addition
to allowing in some drugs that might be safe, these bills
create wide and poorly regulated channels through which
counterfeit drugs, criminally diverted controlled substances,
and other unsafe drugs could enter our drug supply.
In closing, Mr. Chairman, FDA remains concerned about any
possibility that unsafe drugs may find their way into the
American drug supply. We appreciate the Committee's interest in
assuring that the American public has access to safe and
affordable medicines. We believe that this is an important goal
to attain, but affordability must not come at the expense of
safety.
Thank you, again, for this opportunity to participate in
today's hearing. I'll be happy to answer any questions.
[The prepared statement of Mr. Taylor follows:]
Prepared Statement of John M. Taylor III, Associate Commissioner,
Regulatory Affairs, Food and Drug Administration
Introduction
Mr. Chairman and Members of the Committee, I am John M. Taylor,
Associate Commissioner for Regulatory Affairs at the U.S. Food and Drug
Administration (FDA or the Agency).
I appreciate the opportunity to testify regarding the importation
of prescription drugs into the United States. Let me begin by saying
that 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 that are outside the regulatory system.
My testimony will focus on FDA's efforts to assess and respond to
the public health threats posed by the importation of unapproved,
adulterated and misbranded drugs, as well as counterfeit drugs from
foreign and domestic sources that pose a threat to the health and
safety of U.S. consumers. I will also discuss the law governing drug
imports, and the enforcement strategies used to prevent potentially
unsafe drugs from reaching the American consumer.
Summary
The Food and Drug Administration (FDA) shares with Congress its
great concern for senior citizens and other patients who have
difficulty paying for prescription drugs. That is why the
Administration has been working so closely with Congress to enact
landmark legislation to provide millions of America's seniors with
coverage for prescription drugs under Medicare. As part of that
legislation, the Administration supports provisions that build on FDA
action earlier this year to expand access to more affordable generic
drugs. FDA has also taken a number of other significant steps to
provide greater access to affordable prescription medications without
compromising safety, including unprecedented steps to lower drug costs
by helping to speed the development and approval of low-cost generic
drugs after legitimate patents have expired on branded drugs. This
includes the biggest expansion in history of our generic drug program,
and a series of regulatory changes to make it easier for generic
manufacturers to compete.
The Agency has also taken steps to help improve the development
process to help lower the high cost of developing new drugs. And the
Agency has taken steps to improve the process by which drugs are
manufactured. FDA is also working to prevent adverse events through new
rules that would require bar coding for drugs and better ways to track
adverse events automatically--with the goal of preventing billions of
dollars in unnecessary health care costs each year. In addition, FDA is
striving to promote electronic prescribing, to improve quality and
reduce prescription costs as well. And the Agency is taking additional
steps to provide better information to health care professionals and
patients alike, including new and better electronic product labels and
Internet-based information, about the risks and benefits of medication
choices available to treat a particular health problem.
However, FDA continues to have serious public health concerns
regarding legislation that would allow the importation of drugs from
outside the current safety system established by Congress under the
Federal Food Drug and Cosmetic Act. When it comes to buying drugs
internationally, outside our existing regulatory protections, FDA has
consistently concluded that the Agency is unable to endorse a ``buyer
beware'' approach.
All imported drugs are required to meet the same standards as
domestic drugs, and thus must not be unapproved, misbranded, or
adulterated. Drugs imported by individuals that are unapproved,
misbranded, or adulterated, are prohibited by law. This includes drugs
that are foreign versions of FDA-approved medications, and drugs that
are dispensed without a prescription, because there is no assurance of
their safety and effectiveness. FDA is doing its best to stop the
increasing flow of violative drugs into this country but the task is
daunting. Each day thousands of packages containing prescription drugs
are imported illegally into the United States. Our Office of Regulatory
Affairs has inspectors who work in the field who perform
investigational work pertaining to imported prescription drugs, a job
that is not limited to inspections at ports of entry. But while the
volume of imported drugs has increased enormously, FDA has not received
additional resources or authorities to address these shipments, in
contrast to the case for food security at the border.
Under the FD&C Act, a drug is subject to refusal of admission into
the United States 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. In
some instances, a product may be detained as soon as it is offered for
entry into the U.S. This procedure--detaining a product without
physical examination--is based on past history and/or other information
indicating the product may violate the FD&C Act. At mail facilities,
Bureau of Customs and Border Patrol (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 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. 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.
The recent rise Internet purchasing of drugs has significantly
compounded this problem. During a recent drug importation survey at
several mail facilities in the United States, FDA found that the vast
majority of parcels (88 percent) contained unapproved drugs that could
pose significant safety problems. These packages included drugs that
have been withdrawn from the U.S. market for safety reasons; animal
drugs sold illegally for human use; drugs improperly packaged in
sandwich bags or tissue paper; drugs without English labeling or proper
instructions for use; and drugs requiring precise dosing and monitoring
by a physician.
The Agency has responded to the challenge of importation by
employing a risk-based enforcement strategy to target our existing
enforcement resources effectively 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,
e.g., drugs that require careful risk management and products from
shippers known to present significant safety problems. However, this
system is already overwhelmed by the number of incoming mail packages
that must be evaluated and this state of affairs presents a significant
ongoing challenge for the Agency.
Sixty-five years ago, Congress responded to widespread fears of
unsafe and ineffective domestic drugs by directing FDA to create a
system for assuring that Americans have a drug supply they can trust.
Fifteen years ago, Congress responded to serious safety problems
created by imported drugs that were not tightly regulated by passing
the Prescription Drug Marketing Act. Congress limited access to these
foreign drugs because of safety concerns it identified with the
importation of significant volumes of adulterated and counterfeit
drugs.
Unfortunately, the drug supply is under unprecedented attack from a
variety of increasingly sophisticated threats. This is evident in the
recent significant increase in efforts to introduce counterfeit drugs
into the U.S. market. FDA has seen its number of counterfeit drug
investigations increase four-fold since the late 1990s. Although
counterfeiting was once a rare event, we are increasingly seeing large
supplies of counterfeit versions of finished drugs being manufactured
and distributed by well-funded and elaborately organized networks. At
the same time, inadequately regulated foreign Internet sites have also
become portals for unsafe and illegal drugs. Evidence strongly suggests
that the volume of these foreign drug importations is increasing
steadily and 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. The Agency 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 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.
Patients 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.
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 consumer's reach. FDA has only limited
ability to take action against these foreign operators.
In recent weeks, several governors and mayors around the country
have proposed to create systems whereby their employees and/or
constituents could be directed to Canadian pharmacies for purchasing
Canadian drugs. FDA has spoken with a number of such officials about
our legal and safety concerns, and many have declined to proceed and,
at this time, no state has put in place such an approach. In general,
it is premature for FDA to predict any potential enforcement actions
against cities and states. However, it is foreseeable that some
jurisdictions may decide to implement such a program, despite the
Agency's concerns. FDA has not threatened legal action against specific
jurisdictions, but has signaled its safety concern about these
proposals and about their potential illegality. FDA laid out these
views in a letter to the Attorney General of the State of California in
the summer. Under current law, it is fairly clear that states or cities
would be encouraging the importation of unapproved (and thus illegal)
prescription drugs if they created such programs.
At a time when FDA faces more challenges than ever in keeping
America's supply of prescription drugs safe and secure, legislation to
liberalize drug importation could cause additional drug safety
concerns. The volume of importation that could result from enactment of
these bills could easily overwhelm our already heavily burdened
regulatory system. In general, these bills fail to provide FDA with
adequate authority or resources to establish and regulate the
distribution system for incoming foreign drugs--manufactured,
distributed, labeled, and handled outside of our regulatory system--or
even to ensure their safety. Some of these proposals would take away
our existing authorities, which are already being stretched. They would
create unprecedented prohibitions on FDA's ability to inspect and test
drugs, and FDA's authority to block the distribution of drugs we think
are unsafe. The proposals offer no added resources to handle the flow
of imported drugs into the United States; a flow that would likely
become far larger than it is today. Perhaps most importantly, in
addition to allowing in some drugs that might be safe, these bills
create wide and poorly regulated channels through which counterfeit
drugs, criminally diverted controlled narcotics, and otherwise unsafe
drugs could enter our drug supply. By choosing affordability over
safety rather than taking new steps to address both, such legislation
is a dangerous solution to the twin challenges of safety and
affordability.
Today, FDA drug approvals are manufacturer-specific, product-
specific, and include many requirements relating to the product, such
as manufacturing location, formulation, source and specifications of
active ingredients, processing methods, manufacturing controls,
container/closure system, and appearance. Under section 801 of the FD&C
Act, only manufacturers may import drugs into the U.S. The drugs must
be produced in FDA inspected facilities. These facilities and the drugs
produced in them are currently covered by the U.S. regulatory system,
and it is legal to import these drugs. But legislation allowing
pharmacies or consumers to import drugs directly from foreign sources
would bypass the protections provided by FDA's drug approval process
and by state regulation of firms that dispense drugs within their
jurisdictions.
Some drug importation legislation would limit imports to only those
drugs that are FDA-approved and made in FDA-inspected facilities,
simply because the legislation states that it is limited to drugs that
comply with sections 501 (adulteration), 502 (misbranding) and 505
(marketing approval) of the FD&C Act. However, this approach fails to
provide resources, authorities, or the procedural framework necessary
for FDA to assure such compliance. As a practical consequence, the
Agency would be forced in many instances to rely on visual examinations
of incoming drug packages to determine whether a drug is FDA-approved
and in compliance with the FD&C Act. A visual inspection, however, is
not nearly sufficient to verify whether these drugs are FDA-approved,
manufactured in FDA-inspected facilities or in compliance with the
adulteration and misbranding provisions of the FD&C Act. This is no
substitute for the existing FDA regulatory process, which tracks
prescription from the acquisition of active and inactive ingredients to
on-site inspection of manufacturing and distribution facilities, with
documentation of appropriate product testing and handling.
Even if a manufacturer has FDA approval for a drug, a version
produced for foreign markets usually does not meet all of the
requirements of the FDA approval, and is thus considered to be
unapproved. Even if a drug bound for a foreign market is produced in
the same plant as a similar drug approved for the U.S. market, FDA is
not ability to track that drug in foreign commerce before it enters the
U.S. Consequently, it is difficult for the Agency to determine that a
drug appearing at a U.S. border is in fact the one produced in the FDA-
inspected plant, pursuant to FDA approval. Taken together, these
practical problems create an unworkable system that may appear to
provide consumers with safety protections, but in fact is hollowed by
the inadequacy of resources and authorities needed for effective
implementation to protect the U.S. drug supply.
FDA firmly believes that we can and should do a much better job of
making safe and innovative drugs more affordable in the United States,
but to succeed we need to find safe and affordable solutions that, when
implemented, do not put consumers at risk. We appreciate and support
the commitment to making drugs more affordable for seniors and other
consumers and are working hard to achieve this goal. However, the
Agency continues to believe that we must focus on solutions that do not
put at risk safety in an effort to achieve increased affordability.
Reducing Drug Costs
The Administration believes that Americans should have access to
safe, effective and affordable prescription drugs. The Administration
is currently engaged in a number of actions to reduce the costs of
prescription medications. These initiatives will result in more
affordable prescription drugs and will reduce the incentive to look to
foreign sources for cheaper medications.
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.
The President's 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 program's 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.
The Agency has also taken steps to help improve the development
process to help lower the high cost of developing new drugs. And the
Agency has taken steps to improve the process by which drugs are
manufactured. FDA is also working to prevent adverse events through new
rules that would require bar coding for drugs and better ways to track
adverse events automatically--with the goal of preventing billions of
dollars in unnecessary health care costs each year. In addition, FDA is
striving to promote electronic prescribing, to improve quality and
reduce prescription costs as well. And the Agency is taking additional
steps to provide better information to health care professionals and
patients alike, including new and better electronic product labels and
Internet-based information, about the risks and benefits of medication
choices available to treat a particular health problem.
FDA is also taking steps to reduce the cost and regulatory
uncertainties of developing and manufacturing drugs, especially generic
drug alternatives. FDA initiatives in the Commissioner's 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.
FDA is continuing to improve the methods by which advice is
provided to sponsors regarding what we believe are the best approaches
to develop new therapies. These ongoing efforts are designed to provide
sponsors with the best possible information, and thus increase the
efficiency of the development process. 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.
Another important step the Federal Government can take to respond
to the need for affordable drugs is beyond FDA's reach. It requires
legislation that the President and Congress on a bipartisan basis are
close to achieving. The Administration believes that it is time for
Congress to pass Medicare legislation that will make safe and effective
drugs more affordable for seniors. The legislation would provide
immediate discounts through Medicare-endorsed prescription drug cards.
Beginning in 2006, Medicare beneficiaries would have access to a drug
benefit, through which they would be able to take advantage of lower
prices negotiated by private health plans.
The Medicare legislation also contains two other provisions
designed to lower prescription drug costs: generic drug reform and
legislation approved by the House or Representatives that would open
our borders to non-FDA approved drugs. One holds great promise, the
other raises serious safety concerns.
Gregg-Schumer Generic Drug Provisions
The Medicare legislation contains a bipartisan proposal sponsored
by Senators Gregg and Schumer that would complement FDA rulemaking by
providing greater access to more affordable generic drugs. The Senate
bill would codify elements of FDA's June 18, 2003, final rule and add a
provision limiting 180-day exclusivity to accelerate generic
competition in the marketplace. These changes will enable consumers to
save billions of dollars each year by making it easier for generic drug
manufacturers to get safe and effective products on the market. The
increased availability of lower-cost generic drugs will benefit all
Americans, especially seniors.
Foreign Drug Imports
Efforts in Congress to enact legislation to restructure the current
drug import standard are inconsistent with the realities of drug
safety. As any of our dedicated field investigators will attest, and as
pharmacy regulators and major health professional organizations have
warned, just because legislation declares drugs safe doesn't make them
so.
At a time when FDA faces more challenges than ever in keeping
America's supply of prescription drugs safe and secure, legislation to
liberalize drug importation could cause additional drug safety
concerns. The volume of importation that could result from enactment of
these bills could easily overwhelm our already heavily burdened
regulatory system. In general, these bills fail to provide FDA with
adequate authority or resources to establish and regulate the
distribution system for incoming foreign drugs--manufactured,
distributed, labeled, and handled outside of our regulatory system--or
even to ensure their safety. Some of these proposals would take away
our existing authorities, which are already being stretched. They would
create unprecedented prohibitions on FDA's ability to inspect and test
drugs, and FDA's authority to block the distribution of drugs we think
are unsafe. The proposals offer no added resources to handle the flow
of imported drugs into the United States; a flow that would likely
become far larger than it is today. Perhaps most importantly, in
addition to allowing in some drugs that might be safe, these bills
create wide and poorly regulated channels through which counterfeit
drugs, criminally diverted controlled narcotics, and otherwise unsafe
drugs could enter our drug supply. By choosing affordability over
safety rather than taking new steps to address both, such legislation
is a dangerous solution to the twin challenges of safety and
affordability.
Today, FDA drug approvals are manufacturer-specific, product-
specific, and include many requirements relating to the product, such
as manufacturing location, formulation, source and specifications of
active ingredients, processing methods, manufacturing controls,
container/closure system, and appearance. Under section 801 of the FD&C
Act, only manufacturers may import drugs into the U.S. The drugs must
be produced in FDA inspected facilities. These facilities and the drugs
produced in them are currently covered by the U.S. regulatory system,
and it is legal to import these drugs. But legislation allowing
pharmacies or consumers to import drugs directly from foreign sources
would bypass the protections provided by FDA's drug approval process
and by state regulation of firms that dispense drugs within their
jurisdictions.
Some drug importation legislation would limit imports to only those
drugs that are FDA-approved and made in FDA-inspected facilities,
simply because the legislation states that it is limited to drugs that
comply with sections 501 (adulteration), 502 (misbranding) and 505
(marketing approval) of the FD&C Act. However, this approach fails to
provide resources, authorities, or the procedural framework necessary
for FDA to assure such compliance. As a practical consequence, the
Agency would be forced in many instances to rely on visual examinations
of incoming drug packages to determine whether a drug is FDA-approved
and in compliance with the FD&C Act. A visual inspection, however, is
not nearly sufficient to verify whether these drugs are FDA-approved,
manufactured in FDA-inspected facilities or in compliance with the
adulteration and misbranding provisions of the FD&C Act. This is no
substitute for the existing FDA regulatory process, which tracks
prescription from the acquisition of active and inactive ingredients to
on-site inspection of manufacturing and distribution facilities, with
documentation of appropriate product testing and handling.
It is difficult for the Agency to reconcile the movement to allow
consumers to purchase drugs from foreign sources with widespread
understanding that the world has changed, that we now face more
security concerns than ever, and that our vigilance over imports
entering this country must reflect this reality. Just last year,
Congress enacted legislation giving FDA an additional new authority to
help protect imported food from deliberate or accidental contamination.
As a result of this legislation, FDA has substantially boosted its food
safety and security activities at the border, adding hundreds of new
inspectors and support staff. For example, for the first time, FDA must
be notified of essentially all commercial food shipments before they
arrive. This will allow FDA to target our efforts to the riskiest
products, before they enter the country. So thanks to Congress, we have
new abilities to help us prevent the entry of foods that may be unsafe.
Yet in the area of drugs, some in Congress want to move in the
opposite direction. The evidence in my testimony today strongly
suggests that it simply is not safe to throw open our borders and
declare broad new classes of drugs to be ``legal.'' Despite well-
intentioned efforts to design safeguards for this proposed drug import
regime, many unsafe drugs will enter if Congress establishes a new,
wide ``legal'' avenue for imports.
This approach would encourage the individuals who are currently
trying hard to exploit weaknesses in our drug security system to make
the most of any new paths that are opened into America's drug supply.
The problems we are witnessing now will only multiply if current
safeguards are weakened. The evidence that this will occur becomes
stronger each day.
For example, an 81-year-old U.S. consumer recently purchased
Neurontin, an FDA-approved anti-seizure medication after watching a TV
commercial that claimed consumers could save up to 70 percent on
prescriptions by calling a 1-800 number. A brochure that was
subsequently sent to the consumer after he called the toll free number
led him to believe that any drugs he ordered would be FDA-approved,
brand name drugs from Canada. The consumer subsequently purchased the
Neurontin, along with two other pharmaceuticals. However, the Neurontin
the consumer actually received was made in India and unapproved for any
use in the United States. This is just one of many examples where
consumers thought that they were getting FDA-approved products from
Canada, only to find out that their products were coming from countries
in Asia and Africa.
International pharmaceutical peddlers are taking advantage of
regulatory gaps to move millions of prescription drugs, including
controlled substances, into the United States from Mexico, Canada, and
elsewhere. Rogue medical merchants who have dubious or no medical
background are selling potentially dangerous drugs to people who never
see the prescribing doctor in person or undergo necessary tests. At
best, these drugs are of unclear origins and safety. At worst, they are
poorly manufactured, improperly repackaged, stored, and labeled, or
out-and-out fakes. Weakening import restrictions will only compound
these problems.
The resources and authorities to assure drug safety that are
available to FDA and our state partners must be commensurate with the
scope and volume of the drug products that may legally be imported. It
is important to remember why Congress made many drug imports illegal in
the first place: FDA did not have the resources or authorities to
assure their safety. Moreover, in recent years we have seen many more
drugs that require ``risk management'' programs and regular monitoring
to be sure they are used safely and effectively. We have also approved
biologic and injectable drugs that have especially complex
manufacturing and storage requirements. In both cases, the public
health safeguards that FDA has imposed are being undermined by the
illegal importation of these products. In addition, regulating
controlled substances at our borders is an enduring challenge. These
factors strongly argue for maintaining, not loosening, the current
standards.
Promising Anti-Counterfeiting Technology
Over time, it may be possible to assure drug safety through a
multilayered strategy of modern anti-counterfeiting technologies.
Promising developments such as ``track and trace'' technologies that
cannot be faked like a paper drug pedigree, and verification
technologies built not only into tamper-resistant drug packaging but
also into the drugs themselves will make our job of verifying the
legitimacy of drug products much easier. FDA is working to speed the
availability of these anti-counterfeiting technologies, but they are
months or years away.
In the meantime, FDA needs all of the authorities it has now to
assure the safety and effectiveness of legal prescription drugs. This
includes the ability to require or conduct tests of product
authenticity and potency, the ability to identify and, when necessary,
inspect firms involved in the distribution of pharmaceuticals, and the
authority to issue regulations and take decisive action to block the
distribution of potentially unsafe drugs. Now is not the time to weaken
these authorities, or to allow products into this country that
circumvent these important public health protections.
Drug Imports: Health and Safety Concerns
Sixty-five years ago, Congress responded to widespread fears of
unsafe and ineffective drugs by directing FDA to create a system for
assuring that Americans have a drug supply they can trust. FDA
responded to this challenge by establishing a system that has become
the gold standard that others strive to emulate. The FD&C Act prohibits
the importation of unapproved, misbranded, or adulterated drugs into
the U.S. Drugs imported by individuals generally fall into one of these
prohibited categories. This includes foreign versions of U.S.-approved
medications.
More recently, in 1988, Congress enacted the Prescription Drug
Marketing Act (PDMA) to establish additional safeguards to prevent
substandard, ineffective, or counterfeit drugs from entering the U.S.
Under PDMA, it is illegal for anyone other than the drug's original
manufacturer to re-import a prescription drug into the U.S. that was
manufactured in the U.S.
At least two high-profile cases prompted the passage of PDMA. In
one instance, over 2 million unapproved and potentially unsafe and
ineffective Ovulen-21 ``birth control'' tablets from Panama were
distributed throughout the U.S. They were falsely imported as
``American goods returned.'' In another case, a counterfeit version of
Ceclor, a widely used antibiotic at the time, found its way into the
U.S. drug distribution from a foreign source. Over the years, our
professional staff has employed PDMA and other pre-existing authorities
to build a drug safety infrastructure to ensure that Americans enjoy
the highest-quality drug supply in the world.
Unfortunately, the drug supply that we work so hard to safeguard is
under unprecedented attack from a variety of increasingly sophisticated
threats. Today everything from product packaging to labeling and
product containers can be readily purchased created or counterfeited
and counterfeiters and diverters take advantage of this opportunity.
Moreover, the skill and ingenuity demonstrated by counterfeiters and
diverters have improved significantly. As a result, more than ever
before, well-organized criminals have the ability to exploit our
regulatory system and profit at the expense of public health.
A large and growing volume of parcels containing foreign
prescription drugs ordered by individuals from foreign sources is
entering American commerce through U.S. Postal Service international
mail facilities. Evidence strongly suggests that the volume of foreign
drug imports 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
foreign prescription drugs imported by consumers and counterfeit drugs
introduced 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
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 expired
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 the operator of the pharmacy is unknown the seller is
beyond the consumer's 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 since they operate outside if the United States.
Due to the huge volume of drug parcels entering the U.S. through
the international mail and courier services and the requirements under
current law for notice and hearing if we detain an import, it is
difficult for FDA to detain and refuse mail imports for personal use.
The advent of the Internet and the proliferation of ``storefront
pharmacies'' has significantly compounded this problem. As a
consequence, tens of thousands of parcels that FDA is unable to review
given the Agency's multiple competing enforcement priorities are
released by the 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
certain unapproved drugs arriving at mail facilities throughout the
country, the Agency has issued Import Alerts to instruct field
personnel to work with BCBP to detain all such shipments from specific
manufacturers, distributors and countries of origin.
FDA Response To Illegal Imports
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 about
the 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) enforcement activity
directed at 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 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 has also 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 information regarding the potential
risks of imported drugs and another brochure entitled, ``Looks Can be
Deceiving,'' which describes the dangers of purchasing drugs directly
at cross-border pharmacies. This information is also 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 has 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 web pages on FDA's
website.
Another central piece of our campaign is a brochure entitled,
``Buying Prescription Medicines Online: A Consumer Safety Guide,'' a
brochure 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 FDA receives 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: It's 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.
Recall of Asthma Drug Sold in Canada
On November 14, 2003, FDA issued a precautionary press release to
alert the public to the recent recall of GlaxoSmithKline ``Diskus''
medicines sold in Canada to treat asthma and chronic obstructive
pulmonary disease (COPD). In cases such as these, our ability to warn
U.S. consumers about defective products may be compromised when
patients purchase drugs from outlets in foreign countries.
Asthma, COPD and related diseases can be serious and life
threatening. The three asthma products--Ventolin Diskus, Flovent
Diskus, and Serevent Diskus--were recalled in Canada on November 12,
2003, because the products' drug delivery system may not function
properly and may deliver too little of the drug, or none at all.
FDA emphasized that FDA-approved Diskus products (Advair and
Serevent) sold in the U.S. through legitimate marketing channels are
not subject to this recall. But because some Americans are buying
prescription drugs from Canada and elsewhere through on-line or
storefront operations, U.S. patients may be using these potentially
substandard and ineffective products.
FDA urges any patients who bought these Diskus products from a
foreign source to review the recall information on the manufacturer's
website and check the lot numbers of Diskus products they have
purchased. FDA advised U.S. patients with questions or concerns about
these products to call their physician, pharmacist, or other
knowledgeable care provider.
Partnering With Professional Organizations
FDA continues to meet with organizations representing state
regulatory and law enforcement bodies, consumers, health care
practitioners and industry to address our concerns. The purpose of
these meetings is to discuss and coordinate efforts to respond to
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
In addition, we have Memoranda of Understanding (MOUs) with the
National Association of Boards of Pharmacy (NABP) and the Federation of
State Medical Boards (FSMB) that enhance our collaborative working
relationship. 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 and the growth of storefront pharmacies. 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. In some cases, the states have acted
unilaterally. 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.
State-Federal Enforcement: 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 obtained
drugs from Canada for U.S. consumers, exposing the public to the
significant potential risks associated with imported prescription
medications. Rx Depot and similar companies have often incorrectly
stated to consumers that FDA condones their activities and even that
their prescription medications are ``FDA approved.'' This could lead
consumers to the mistaken conclusion that the prescription drugs sold
by the companies have the same assurance of safety as drugs actually
regulated by FDA.
While Rx Depot responded to FDA's ``warning letter,'' the response
was inadequate. Therefore the U.S. Department of Justice and FDA filed
an injunction on September 11, 2003, to stop Rx Depot Inc. from
importing prescription drugs from Canada in violation of U.S. law. The
Agency brought the suit because the storefront chain posed a risk to
public health by importing unapproved prescription drugs and drugs that
may only be imported by the U.S. manufacturer. These drugs posed a
public health risk because they do not have the same assurance of
safety and efficacy as drugs regulated by FDA
On November 6, 2003, U.S. District Judge Claire Eagen granted the
government's motion for a preliminary injunction and ordered Rx Depot
to stop importing drugs and stop advertising and promoting any service
that causes or facilitates drug imports. Judge Eagen also ruled that
the firm had ten days to send a letter to its customers informing them
that the company's business violated the law and that the safety and
efficacy of drug products obtained through the firm could not be
assured.
FDA, and the District Court Judge, concluded that operations such
as Rx Depot expose the public to significant potential risks associated
with unregulated imported prescription medicines. FDA's decision to
bring this action and the court's subsequent ruling sends a clear
signal that FDA is committed to protecting the public health and
challenging those who put profit before safety. This case also
demonstrates FDA's commitment to protect the American public from
illegal drugs that may be unsafe, ineffective, or substandard.
As of November 10, 2003, twenty-two states have taken, or are
prepared to take, regulatory actions against storefront pharmacies that
facilitate illegal imports of prescription drugs from Canada. .
Federal Enforcement Actions
Although the Rx Depot case is a recent prominent action, we have
also taken action in other similar cases, discussed in more detail
below.
CanaRx
On September 16, 2003, FDA issued a ``warning letter'' to CanaRx
notifying the firm of our concerns about supplying prescription drugs
from unregulated sources and making unwarranted claims about these
products. Specifically, FDA's ``warning letter'' stated that CanaRx
runs an Internet website and mail operation that illegally causes the
shipment of prescription drugs from a Canadian pharmacy into the U.S.,
thereby subjecting Americans to risky imported drug products. This
potential risk is compounded by the fact that CanaRx makes misleading
assurances to consumers about the safety of its drugs.
An FDA investigation of this firm showed that CanaRx operates a
drug purchasing arrangement that channels drugs through companies that
are not licensed pharmacies and does not consistently use shipping
practices necessary to ensure its drugs are safe and effective. For
example, FDA has evidence demonstrating that CanaRx shipped insulin, a
product that should be stored under refrigerated conditions, in a
manner that did not satisfy the storage conditions specified in FDA
approved labeling. This failure could genuinely compromise the safety
and effectiveness of the insulin. CanaRx's response to the Agency's
``warning letter'' was inadequate. Therefore, on November 6, 2003, FDA
sent a second letter reiterating our concerns about the potential
safety of the product, and the firm's business practices, which could
expose the firm's customers to unnecessary risk.
Alliance Wholesale Distributors
On September 15, 2003, FDA announced the seizure of all drug
products labeled in a foreign language and/or labeled as repacked by
Phil and Kathy's, Inc., dba Alliance Wholesale Distributor and/or Local
Repack, Inc. (``Local Repack'') of Richton Park, Ill.
FDA acted to prevent these drug products from entering the U.S.
drug distribution system because there is no assurance that they are
safe or effective. Many of the products received and repackaged at
Local Repack are of unknown origin, and their storage and handling is
unverifiable. Local Repack has repeatedly failed to comply with cGMP
requirements. In addition, many drugs at Local Repack's facility are
misbranded. These drugs may also pose a serious or even life-
threatening risk to patients who use them.
FDA inspections conducted after an August 1999 ``warning letter''
to Local Repack revealed significant and continuing violations. A
series of inspections and other recent evidence revealed numerous
deficiencies including the failure to properly handle customer
complaints, discrepancies surrounding the signatures of quality control
employees, records indicating the review and approval of repackaging
operations before the operations were completed, incomplete or missing
repackaging records, duplicate and inconsistent repackaging records for
the same batch, and unreliable receiving and distribution records for
drugs.
This September seizure follows the July 9, 2003, seizure of more
than 4,500 bottles of prescription drugs that were being repackaged by
Local Repack stemming from an investigation of counterfeit Lipitor.
Many of the products seized in July were marked with expiration dates
to permit them to be sold after similar U.S.-approved drugs would have
expired. For example, Portuguese-labeled product that Local Repack
labeled as Lipitor had expiration dates well beyond the two-year limit
that is based on stability studies performed under the new drug
application (NDA) approved in the U.S. for Lipitor. Furthermore, none
of these products were shipped to Local Repack in authentic, original
manufacturer's packaging with appropriate labeling. This case
demonstrates the Agency's continued commitments to protect consumers
from potentially dangerous drugs and the litigation is ongoing.
FDA/Customs' Import Blitz Exams
This past summer, FDA and BCBP conducted a series of blitz
examinations on mail shipments of foreign drugs destined for U.S.
consumers. This joint operation was carried out to help FDA and BCBP
target, identify, and stop counterfeit and potentially unsafe drugs
from entering the U.S. from foreign countries via mail and common
carriers. It was also designed to help FDA and BCBP assess the extent
of this problem posed by imported drugs.
These ``blitz'' exams were conducted in the Miami and New York
(JFK) mail facilities from July 29-31, 2003, and the San Francisco, and
Carson, California, mail facilities from August 5-7, 2003, and one of
the goals was to obtain a representative picture of drug products
entering the United States. In each location, the agencies examined
packages shipped by international mail through U.S. Postal Service
facilities over a 3-day time span.
Approximately 100 parcels per day, per facility, were selected
based upon their country of origin and historical experience. In some
cases, packages contained multiple drug products.
Although many drugs obtained from these foreign sources purport,
and may even appear to be, the same as FDA-approved medications, these
examinations showed that many foreign drug products are of unknown
quality or origin; have not been approved in the U.S., and may pose
potentially serious safety concerns. For example, potentially hazardous
products encountered during the blitz exams included:
Unapproved drugs such as Roaccutane, an unapproved version
of Accutane.
The unapproved drug Taro-warfarin, an unapproved version of
Warfarin used to prevent blood clotting. This drug requires
careful blood monitoring during administration.
Drugs such as Dilantin, Synthroid and Glucophage that
require individual titration and very careful dosing in order
to avoid serious and potentially life-threatening side effects.
Drugs with missing dosage information and whose labeling was
not in English.
Inappropriately packaged drugs that were shipped loose in
baggies, tissue paper or envelopes.
Drugs that had been withdrawn from the U.S. market for
safety reasons such as Buscapina, which appears to be the drug
Dipyrone. This drug was removed from the market in 1977 because
of several reports of cases of agranulocytosis, some of which
were fatal.
Animal drugs not approved for human use such as Clenbuterol,
a drug approved for the treatment of airway disease in horses
but which is also known as a substance of abuse in the ``body
building'' community and is banned by the International Olympic
Committee.
Drugs that have the potential for clinically significant
interactions with other drugs a consumer may be taking.
Drugs such as Lipitor and Pravachol that require initial
screening and/or periodic monitoring to assure safety.
Controlled substances that are sedating, associated with
respiratory depression, or have abuse potential for abuse.
These drugs arrived from many countries. For example, 15.8 percent
(161) entered the U.S. from Canada; 14.3 percent (146) from India; 13.8
percent (141) from Thailand, and 8.0 percent (82) from the Philippines.
The remaining entries came from other countries. Overall, of the 1,153
imported drug products examined, the overwhelming majority, 1,019 (88
percent), contained unapproved drugs.
The blitz results will assist the Agency in its efforts to:
Employ its resources more strategically to focus on the
foreign sources of illegal, unsafe imported drugs.
Identify shipping patterns so that it can target future
shipments and sources of such drugs.
Seek out partnerships with other Federal and state agencies
to combat this problem. To continue to refine its efforts at
identifying and stopping potentially unsafe, imported drugs,
FDA will continue to conduct additional blitzes.
Import Entry Studies
In addition to the import blitz exams described above, FDA
conducted an informal study to screen and examine mail-entry drug
samples from foreign countries, including Canada, during a six-week
period in early summer, 2003. FDA's Buffalo and Detroit FDA import
offices conducted the import entry studies. The study confirmed FDA's
belief that an increasing number of U.S. citizens are choosing to fill
their prescriptions through mail-order purchases from pharmacies
located in Canada. During the course of this study, FDA reviewed 154
entries from Canada representing 350 drug items. In terms of safety
concerns, this study affirmed what FDA has learned to expect from
imported pharmaceuticals. For example, it was not possible to verify
where, or under what conditions, the drugs were manufactured for any of
the pharmaceutical products that were offered for import. For those
drugs that were apparently ordered from websites, the need for a valid
prescription was not always specified, and if the sites identified a
prescription requirement, it did not disqualify prescriptions coming
from other countries. Moreover, some websites specifically solicited
U.S. business by stating that their drug products' quality and
manufacturing requirements were ``equivalent'' to those in the U.S.
The following examples of imported drugs, although not specifically
restricted to Canada, further illustrate the types of products and
situations FDA has encountered since it started examining this issue.
For example:
Apo-Metformin, a drug used as a daily treatment for diabetic
patients to prevent high glucose levels, arrived with no
pharmacy label, no warnings of potential serious and life
threatening side effects, no specific directions for use or
instructions for proper storage, and no contact information
(such as phone number) in the event that the patient needed a
pharmacy or physician in the case of an emergency.
Apo-Gabapentin, a drug used as a daily treatment for
seizures. 1,200 tablets were mailed to the patient, a
dangerously large volume. While the quantity could last for
years for a typical patient, the product began expiring within
one month of receipt.
Lipitor, a drug used to treat elevated cholesterol, was
shipped to a U.S. consumer. The product was manufactured in
Germany for export to Ireland, but had been exported to
Thailand and forwarded to the consumer.
The results of the July-August blitz and our import entry study
concern FDA because the products we encountered move through many
channels of commerce in many countries, and fall well outside
established safety controls. Consequently, these products are
especially vulnerable to abuses such as counterfeiting, diversion and
degradation. These conditions represent safety threats to the American
consumers who purchase them.
Summary Of Federal Enforcement Activity
FDA's 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.
This includes violations associated with drugs sold over the Internet.
Recent criminal and civil cases involving drugs sold over the
Internet 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:
372 Internet-related drug criminal investigations;
142 Internet-related drug prosecutions resulting to date, in
106 convictions;
90 open Internet-related drug investigations;
Nearly 200 cyber ``warning letters'' sent to domestic and
foreign online sellers;
9 preliminary injunctions;
19 product seizures;
16 product recalls and the voluntary destruction of 19
illegal products; and
1 Contempt Action.
Controlled Substances Cases
As a part of its larger efforts to address the illegal sale of
pharmaceuticals, the Agency has committed substantial resources to
controlled substances cases, including controlled substances sold over
the Internet. The Drug Enforcement Administration (DEA) is the lead
Federal Agency responsible for regulating controlled substances and
enforcing the Controlled Substances Act (CSA). FDA has also worked with
the FBI on criminal investigations involving the illegal sale, use, and
diversion of controlled substances, including illegal sales over the
Internet. FDA's Office of Criminal Investigations (OCI), however, is
responsible for managing and conducting the Agency's criminal
investigations. OCI conducts these investigations with support from
other Agency components. In some cases, illegal activity may involve
both imported and domestic controlled and non-controlled prescription
drugs, and thereby violate the FD&C Act and the CSA. Even though FDA
does not initiate investigations where the sole violation is thought to
be a CSA offense, OCI works closely with DEA on criminal investigations
involving the illegal sale, use, and diversion of controlled
substances, including illegal sales over the Internet. This close
working relationship with DEA, as well as with local law enforcement
agencies, has led to the successful prosecution of many criminal cases
involving controlled substances. These cases show the extent to which
criminal investigations involving controlled substances can quickly
encumber the resources and finances of local and Federal law
enforcement agencies in their attempts to combat the growing problem
these drugs present.
FDA has investigated drug diversion schemes and hundreds of illicit
Internet sites by reassigning its criminal investigative staff from
other priority efforts. Our goal is to reduce the illegal promotion,
sale, and distribution of unlawful prescription drugs via the Internet
and other channels and this can include controlled substances. These
efforts have protected consumers from unsafe, ineffective, and
fraudulent products that present a danger to the public health. Here
are some of our most recent cases involving controlled substances:
In August 2003, a doctor pled guilty and was sentenced to 30
months' imprisonment for conspiring to dispense Schedule III
and IV controlled substances. The conspiracy transpired via a
web-based pharmacy with an Internet address of
www.thepillbox.com and a physician referral service with the
Internet address of www.physicianreferral2000.com. From 1999
through early June 2001, customers in the U.S. and abroad who
accessed Pill Box's website would be referred to the physician
referral website to obtain prescriptions prior to placing their
orders. The doctor would prescribe drugs such as hydrocodone
and diazepam (Valium) to customers without establishing a
patient history or performing a mental/physical exam, and
despite the fact that he had no means to monitor the
medications' response. Moreover, whenever a prescription was
issued, the doctor and Pill Box would subsequently split a
``fee'' for the service. Over the course of the conspiracy, the
doctor illegally prescribed, and Pill Box dispensed, over
4,214,945 dosage units of hydrocodone and 537,080 dosage units
of diazepam. This enterprise grossed more than $7.7 million
from Internet sales of these two drugs alone. This case was the
product of an 18-month investigation by the DEA, FDA, IRS and
the U.S. Attorney's Office.
In August, 2003, an individual pled guilty to charges
relating to various counts of conspiracy, distribution, and
importation of controlled substances as a result of a case
initiated by OCI in July 2000 after the individual was
identified as the principal for Vinci-online and CFF Pharma
Consult. The website domain used by the defendant, Vinci-
online.com, was found to be registered to CFF Pharma Consult at
an address in Germany. Vinci-online.com offered golf training
services and investments, along with pharmaceutical drug
products including controlled prescription drugs, antibiotics,
anti-allergenics, weight loss medications, steroids, and
hormones for sale via its website. Agents made several
undercover purchases of prescription drugs from the website
without providing prescriptions. Following the e-mail purchase
request, an invoice was generated instructing the purchaser to
send a money order or cashier's check to Vinci American Ltd. in
Las Vegas, NV. The products received as a result of these on-
line purchases were sent from Germany and contained German
labeling.
Drug Counterfeiting Cases
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 85 counterfeit drug cases since October 1996.
Investigations have so far netted 44 arrests and 29 convictions. Fines
and/or restitution have been imposed in excess of $250,000.
Over this timeframe, however, FDA has witnessed 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. However, Viagra and Lipitor have
also been counterfeited. 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.
FDA Counterfeit Drug Initiative
In July 2003, Commissioner McClellan announced a major new
initiative to more protect American consumers from drugs that have been
counterfeited. The initiative includes creating an internal task force
to explore modern technologies and other measures to make it more
difficult for counterfeit drugs to be distributed with--or deliberately
substituted for--safe and effective drugs.
The task force submitted its initial findings in an interim report
presented to the Commissioner in October 2003, and will issue a final
report in early 2004, after opportunities to hear from the public. In
addition, FDA plans to coordinate more closely with other Federal
agencies and state and local governments that share the
responsibilities with FDA for ensuring the safety of the U.S. drug
supply and distribution system as well as with members of Congress who
have worked closely with FDA in the past on these important public
health issues.
Counterfeit prescription drugs are not only illegal but also are
also inherently unsafe. Many counterfeit drugs are visually
indistinguishable from the authentic versions, and thus pose a
potentially serious health threat to Americans.
Although FDA believes domestic counterfeiting is not widespread,
the Agency has recently seen an increase in counterfeiting activities
as well as a more sophisticated ability to introduce finished dosage
counterfeits into the otherwise legitimate drug distribution channels.
FDA has likewise seen its counterfeit drug investigations increase to
over 20 per year since 2000, after averaging only about 5 per year
through the late 1990s.
At the same time, worldwide counterfeiting of drugs is believed to
be more commonplace. The World Health Organization has estimated that
perhaps seven or eight percent of drugs worldwide are counterfeit, and
reports from some countries suggest that as much as one-half of those
countries' drugs are counterfeit.
FDA's initiative is designed to better identify the risks and
threats from counterfeit drugs, to coordinate public and private
efforts to fight drug counterfeiting and distribution, and to develop
new tools to aid in identifying, deterring and combating
counterfeiting. Specifically, the FDA task force will:
Develop a strategic action plan to decrease the risk of
counterfeit drugs entering the U.S. marketplace and to protect
consumers from potentially harmful effects of using these
products.
Continue to strengthen FDA's collaborative relationships
with other Federal agencies, including the Bureau of
Immigration and Customs Enforcement (BICE), BCBP, and the U.S.
Secret Service in the Department of Homeland Security and
entities within the Department of Justice, as well as with
health professionals, industry, consumer, and other
stakeholders to gather information regarding the best practices
for dealing with drug counterfeiting.
Identify mechanisms for strengthening the Nation's
protections against counterfeiting, including such
possibilities as developing state model practice acts, best
practices for those who sell and distribute prescription drugs,
and better education for patients, pharmacies, and others about
how to identify counterfeit drugs and alert others to their
existence.
Assess the extent to which new technologies, e.g.,
counterfeit-resistant packaging, product identifiers such as
chemical taggants, and implanted radio-frequency chips in
packaging can help assure the authenticity of drugs. Although
some of this technology is not currently mature enough to
adequately protect the drug supply, it may have great promise
as an added counter-measure against counterfeit pharmaceutical
products.
FDA believes the increase and shift in this illicit activity has
occurred for a number of reasons. These include:
Better counterfeiting technology, including improved
technology to make labeling, packaging and products that appear
real.
Better organized, more effective criminal groups attracted
by financial opportunities.
The use of the Internet as a sales tool by unlicensed
pharmacies and/or foreign websites.
Opportunities for introducing foreign-made counterfeit and
unapproved drugs into large and rapidly growing import flows.
Weak spots in the domestic wholesale drug distribution
chain, including some wholesalers who acquire most of their
inventory from secondary sources, do not maintain effective due
diligence efforts on these sources and ignore warning signs
indicative of illegal or unethical behavior.
The details of what we have cataloged so far in this initiative
were released in an interim report dated October 2, 2003.
Reporting of Information on Counterfeit Drugs by Manufacturers
In another move to respond to the increase in counterfeit drug
cases and to strengthen the Agency's and industry's collaboration in
those situations where counterfeit drugs are suspected, on April 22,
2003, the Pharmaceutical Research and Manufacturers of America (PhRMA),
which represents the country's 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 assist
FDA in carrying out its responsibilities to protect the safety and
integrity of the Nation's drug supply. It will enhance 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. The reporting
program went into effect on May 1, 2003 and has already led to some
useful tips. 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. 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 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. Gorrin was sentenced to a 3-year, 1-month
Federal prison term; Chavez was sentenced to 3 months in prison, and
Gonzalez was sentenced to 6 months house arrest for their respective
roles in this counterfeit operation.
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 and to
facilitate the recall of any counterfeit products.
In conjunction with the manufacturer of this product, FDA also
issued several press releases warning consumers and pharmacists about
the counterfeit Lipitor and providing guidance to identify of any
suspect product. For example, FDA published a list of lot numbers to
identify the counterfeit product. We also urged health care providers
and patients alike to check the packaging very carefully before using
this product. Patients who had 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. Because of
the breadth of the distribution of counterfeit products, FDA issued
several warnings.
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.
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.
The investigation is ongoing but it appears that some of the
counterfeit product originated from overseas.
Other Counterfeit Cases
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. 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 label 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.
FDA Import Enforcement Efforts
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 counterfeit
Lipitor.
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. As discussed above, the Agency is
conducting import exercises to 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. However, due to the ever increasing volume of
imported drugs and multiple competing enforcement priorities, the
Agency is working on focusing its resources more efficiently.
Improvements to FDA's Import Compliance Program
FDA is re-evaluating, 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, Alzheimer's disease, arthritis, heart disease,
high cholesterol and high blood pressure.
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 AstraZeneca's 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. Subsequently, the
defendants received sentences of 3 years, 1 month in prison; 3 months
in prison; and 6 months' house arrest, respectively.
Lipitor
As described in detail above, 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. In October 2003, one of
the physicians entered a guilty plea. Legal proceedings against the
other defendants are ongoing.
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 Men's Clinic, and related
sites, that sold a variety of prescription medications.
In September 1999, OCI received information regarding the Norfolk
Men's Clinic and the website. Based on this information, several covert
purchases were made via the Internet. Search warrants were executed in
October 1999 that resulted in the seizure of prescription drugs and
business records. 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, plead guilty to
five misdemeanor counts of dispensing drugs without a valid
prescription (21 USC 331[k]). 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 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. Law
enforcement officials seized diet drugs and U.S. currency 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.
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.
The Agency has responded to the challenge of importation by
employing a risk-based enforcement strategy to target our existing
enforcement resources effectively 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,
e.g., drugs that require careful risk management and products from
shippers known to present significant safety problems. However, this
system is already overwhelmed by the number of incoming mail packages
that must be evaluated and this state of affairs presents a significant
ongoing challenge for the Agency. 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.
FDA firmly believes that we can and should do a much better job of
making safe and innovative drugs more affordable in the United States,
but to succeed we need to find safe and affordable solutions that, when
implemented, do not put consumers at risk. We appreciate and support
the commitment to making drugs more affordable for seniors and other
consumers and are working hard to achieve this goal. However, the
Agency continues to believe that we must focus on solutions that do not
put at risk safety in an effort to achieve increased affordability.
The Chairman. Thank you, sir.
I think it might be important to enter in the record a
Congressional resource memorandum that was given to Congressman
Gutknecht, which is very interesting. It says, ``This
memorandum is in response to your request regarding statutory
language that expressly limits the reimportation of products to
the manufacturer of the product, as is the case with respect to
pharmaceutical importation.'' They go on to say, ``We've been
unable to locate any statutory provisions similar in language
and structure to the one in the Food, Drug, and Cosmetic Act.''
In other words, anything else can be reimported--chemicals,
pollutants, munitions--anything else, except for drugs. And
it's remarkable testimony to the power of the pharmaceutical
industry in the legislative body.
Governor, your Minnesota plan, now, has it been adopted by
the legislature?
Governor Pawlenty. Mr. Chairman, we don't believe we need
legislative authority for it. We're pursuing it
administratively, and we believe we can implement it without
legislative approval.
The Chairman. If you went to the legislature, could you get
it?
Governor Pawlenty. I believe so, yes.
The Chairman. Let me suggest that you do, just so that you
get that stamp of approval. What do you see as an impediment to
the implementation? What do you foresee roadblocks are going to
be in your way here?
Governor Pawlenty. Mr. Chairman, it's mostly the
allegations from the pharmaceutical industry, and, candidly,
from the FDA, that this could raise safety concerns. And my
first response to that is, show me the dead Canadians. You
know, where are the dead Canadians? And we're not talking about
rogue Internet sites in Malaysia or, you know, some third-world
country. We're talking about established, credible, reputable,
accredited pharmacies that we have identified.
The Chairman. Do you think legal action will be taken to
try to prevent you from implementing this plan?
Governor Pawlenty. We hope not. Candidly, we've gotten some
mixed signals. In a Boston newspaper, an FDA official was
reported as saying they would unlikely go after a state or a
government entity that tried an approach like ours. But, more
recently, their comments have been more ambiguous, and they
have said they are reserving their options. Now, if they sue
me, I'm willing to be sued. If they want to throw me in prison,
that's something I at least have to give some pause to.
[Laughter.]
Governor Pawlenty. And I'm hopeful that--it might not deter
us, but I at least need to think about that. So I'd like to get
some signals from them before they prosecute me.
The Chairman. Well, Governor, given the threat that this
really poses to the pharmaceutical industry, if I were you I'd
be prepared for most anything, and that's why I suggest that
you go to the legislature. These people will stop at nothing.
Because if this works in Minnesota, it's going to work in every
northern state, and sooner or later it's going to work in every
other state. So stand by, sir, because I wouldn't be surprised
at whatever they would do, including what's already been rolled
out, and that is, of course, the needless deaths of so many
citizens.
Governor Pawlenty. I appreciate it. Mr. Chair, could I add
one other quick thing?
The Chairman. Sure.
Governor Pawlenty. You've visited our Veterans Hospital in
Minneapolis--and thank you for your leadership on that issue,
as well--but at the Veterans Hospital in Minneapolis, it's
federally regulated, federally funded, federally administered.
They have a pharmacy there. Guess what? They mail out lots of
prescriptions every day. And if you assume the pharmacies that
we would contract with and identify in Canada are credible, we
know--we already have in place the distribution mechanisms,
because our Vets Hospital does it. So do lots of other
approved, established pharmacies in Minnesota and elsewhere. It
can be done, Mr. Chair. We're just asking for a chance to try.
The Chairman. I have visited that facility. And another
point about the pharmacy there, the drugs that they acquire are
much less expensive than drugs that are acquired outside of the
VA or DOD because they bargain the prices.
Governor Pawlenty. Thank you, Mr. Chair.
The Chairman. Thank you.
Senator Dorgan?
Senator Dorgan. Mr. Chairman, thank you very much.
First of all, Governor Pawlenty, thank you for a refreshing
approach to this issue. I have written you a letter, about 2
weeks ago, actually a joint letter to you and the Governor of
North Dakota, suggesting that we create an alliance and that
both states move together on this. I think what you're doing is
innovative and interesting, and I encourage you and am pleased
that you're here to present testimony today.
Mr. Taylor, I know that you are here on behalf of
Commissioner McClellan, and I deeply regret that he is not
here. I don't know the reason for that. But I must tell you
that your testimony is extraordinarily disappointing to me. The
behavior and the actions of the FDA have been very
disappointing to me. They are not in the character, in my
judgment, of an agency that is really interested in the safety
and well-being of the American people. They seem almost too
anxious to find a way not to help the American people on this
issue of pricing.
And I want to ask you a question. Do you know anything
about meat inspection, Mr. Taylor?
Mr. Taylor. A little bit, sir.
Senator Dorgan. Do you know how we handle meat inspection
with Canada?
Mr. Taylor. My understand is that USDA actually has people
stationed overseas and help----
Senator Dorgan. I'm talking about Canada.
Mr. Taylor. I mean, or Canada or----
Senator Dorgan. There's no body of water in North Dakota.
Mr. Taylor. In other countries. And they help ensure that
before the product is imported, that the product meets
standards here in the United States.
Senator Dorgan. You know what we do? Let me tell you what
we do, because if you were at Pemina, North Dakota, today at
the border, you'd discover that there's a truckload of meat
that comes from Canada into our marketplace. That meat has been
inspected by the Canadians in a Canadian meat plant, and we say
that we will allow reciprocal treatment with respect to
inspections. We accept their inspections, and they accept our
inspections as having represented the issue of safety for both
people. And so we have decided that reciprocal treatment across
the border with respect, for example, to inspecting meat--and
so that meat comes across in a truck, we say, ``Inspected in a
Canadian plant? Good enough for us,'' because we've taken a
look at that.
OK. So if that's the question with respect to meat, you're
saying that drugs are different. And so let me ask this
question. A pharmacist from Grand Forks, North Dakota, licensed
by our state, studied in pharmacy, running a drugstore and
practicing pharmacy in Grand Forks, goes to Winnipeg, Manitoba,
and goes to a pharmacist in Winnipeg, Manitoba, licensed by
that country, which I think you will admit has a nearly
identical chain of supply and custody for their drugs. Would
you tell me that in that circumstance there is any danger at
all to the consumers in this country, when that Grand Forks,
North Dakota, pharmacist acquires that Tamoxifen at the
Winnipeg pharmacist and brings it back and passes the savings
along to the consumers? Describe to me the danger to the
consumer in that transaction.
Mr. Taylor. Sure. And let me take a step back. We think
that the--we think that the Canadian regulatory system is a
good one, and we are by no means suggesting that Canadian drugs
are not bad. The problem, though, is that the Canadian system,
like the U.S. system, is essentially designed to afford
protection to its citizens. And so the potential harm here--and
the Canadian authorities have said this--is that their
authorities are not really set up to ensure that products that
are exported from Canada to the United States are safe and
effective. And so there's a little bit of a regulatory gap
between the Canadian regulatory system and the U.S. regulatory
system. So when we are talking about our concern regarding
products that are imported to the United States, it's because
those products are being imported outside the U.S. regulatory
system, and they also are being exported outside the Canadian
regulatory system, which allows this gap and the potential for
abuse and the introduction of products of unknown origin or
quality.
Senator Dorgan. Mr. Taylor----
Mr. Taylor. So that's the concern.
Senator Dorgan. Mr. Taylor, that is just not true. It's
just--I mean, you can say it, but it is just not true that--if,
in the circumstance that a U.S. pharmacist, who is licensed, or
a U.S. distributor, licensed, accesses a supply of prescription
drugs from a licensed pharmacist or distributor from Canada, it
is not true that somehow that is outside of the established
regulatory framework. You can say it, but it is not true.
Mr. Taylor. With all due respect, Senator, it is true.
Because at the end of the day, that--that example does not
necessarily get to the quality or origin of the product that is
being discussed and being passed between the two pharmacists.
That is one of the potential risks. And we have tangible
examples of that.
Senator Dorgan. Mr. Taylor----
Mr. Taylor. Yes.
Senator Dorgan.--Vioxx. If you are a licensed pharmacist in
this country and you drive to Canada today to buy Vioxx from a
licensed pharmacist in Canada, and you pay not the $2.20 a
tablet that you would pay as a U.S. consumer, but $.78 a
tablet, because the same drug in the same bottle made by the
same FDA-approved company is marketed in Canada for less than a
third, there is no circumstance under which that is leaving the
regulatory framework of the U.S. and Canada. The person that
sold it to you in Canada is licensed and part of the chain of
custody. And you, as a licensed pharmacist in this country, are
part of the chain of custody. You're simply wrong when you say
that somehow this is outside of the regulatory framework.
Mr. Taylor. Sir, as I noted in my written testimony, there
are certainly circumstances where an overseas manufacturing
facility will manufacture a product for the American market,
but they will also manufacture a product for other markets. For
example, they might manufacture a product for Asian, Canadian,
European market. In some cases, those products are very
identical, but they do not have to undergo the same
requirements as a product that is introduced here in the United
States. So there still is a difference in those two products,
albeit in some cases smaller than if the product was completely
unapproved and had not undergone any type of testing for safety
or efficacy.
Senator Dorgan. Mr. Taylor, you know, look, I'm not trying
to browbeat you here, but it is just too labored for you to get
to that point and then find out you're wrong. I mean, you say
``very identical.'' It's either identical or it isn't. And the
fact is, Lipitor, which is sent to this country and to Canada
from Ireland, and I assume produced in Ireland as a result of
materials that are gathered from Asia and other parts of the
world, producing a pill in Ireland, put in this bottle, and
sent in identical form to a pharmacist in Canada and the U.S.,
the only thing that is not identical is the price. The U.S.
consumer pays triple. And the Governor says that there is a way
to access that supply without at all injuring his constituents,
because it would still be within the chain of custody,
especially with respect to pharmacists and licensed
distributors.
But let me make one other point, if I might. Mr. Taylor,
you've heard testimony today that we have one-million-plus
people who go across to Canada to buy those prescription drugs.
Lewis Lubka is going to testify. Lewis is right over there.
Lewis, would you wave? Lewis actually went to Canada with me to
the one-room pharmacy in Emerson, Canada, and bought some
prescription drugs. He knows what he bought. He bought the
identical drug in the identical container made by the same
company with exactly the same safety standards.
Now, can you cite one instance--not a bunch--one instance
in which a U.S. consumer has been harmed by accessing a
prescription drug from Canada?
Mr. Taylor. I do not have--I do not have any reports of
death. However, based on the information, the blitzes that
we've done, and the information that we've seen from products
coming from Canada--for example, as part of our blitzes this
summer, we noticed controlled substances coming from Canada,
which are, per se, potentially harmful, we noticed products
that did not have the requisite labeling, which is potentially
harmful, we certainly know that there is a potential for harm
that could befall some citizens who are----
Senator Dorgan. Well----
Mr. Taylor. And, if I may, Senator, going back to your
Lipitor example--and you might not find this compelling, but
it's illustrative of our concerns--in the context of Lipitor,
this summer we had one of the biggest drug recalls ever in
regards to a counterfeit product, and it involved Lipitor. One
of the challenges for the FDA, and one of the challenges in
terms of educating consumers, is that many of the bottles
contained FDA-approved Lipitor for--Lipitor that was
manufactured and approved for foreign countries, as well as
purely counterfeit Lipitor. One of the difficulties that we had
in protecting the public health was getting out a public-health
message that explained to consumers why they need to be
careful. And the reason that was so difficult was, when we did
the testing there was very little difference, at times, between
the foreign version, the FDA- approved version, and the
counterfeit version. But that difference was enough so that it
could negatively impact the benefits that patients were
deriving.
And so I'm just saying that that's a situation where
ostensibly it looks somewhat innocuous, but, in this case, the
counterfeiters used and introduced FDA-approved product,
foreign-version product, and counterfeit product in the same
bottles, which had a confounding effect. And so those are some
of the situations that are of concern to us.
Senator Dorgan. Mr. Taylor, I might just conclude by saying
that that's not exclusive to prescription drugs. That could be
Similac, baby food, couldn't it?
Mr. Taylor. You're absolutely correct.
Senator Dorgan. I've seen two cans of baby food--one
counterfeit, one not.
Mr. Taylor. You're absolutely correct.
Senator Dorgan. So why don't we have a law banning the
reimportation of baby food? I can think of a thousand items
that we might want to do this to we start down that road.
Our point is this. A piece of legislation that is
protective of the interests, with respect to safety, and
against counterfeiting, that allows a chain of custody in
Canada to represent a connection to the chain of custody in
this country, and, therefore, afford American consumers lower
prices for prescription drugs, is something that I would hope
the FDA would find a way to help us implement, instead of going
out of his way--Mr. McClellan goes out of his way to see if he
can't find a way to stop this stuff. It's almost as if he
represents the prescription drug industry rather than has some
interest in American consumers. I regret he's not here today,
because I think he is creating a terrible record on behalf of
the FDA.
I don't mean to--you're here, I know, at his request, and
your job is to represent what the FDA's current views are,
according to Mr. McClellan.
One final point. You know that the FDA even communicated
with an insurance company in North Dakota to say, ``We demand
that you not cover prescription drugs, even if you have a
prescription drug piece in your insurance policy. We demand
that you not cover it if they get it from Canada.'' I mean,
that's the sort of nonsense that's going on with the FDA, and I
regret it.
Mr. Taylor. Sir, can I--and in regards to the insurance
company, I remember your exchange with Dr. McClellan on that at
the appropriations----
Senator Dorgan. I was no happier that day, was I?
[Laughter.]
Mr. Taylor. No, sir, you were not. We, indeed, are going to
address that concern, and then we are going to send you a
letter by the end of the day. And what the letter is going to
state is that for insurance companies that are merely
reimbursing, it's not a concern for us.
Senator Dorgan. But that exchange took place, I think,
probably 8 months ago.
Mr. Taylor. Fair point.
The Chairman. Senator Snowe?
Senator Snowe. I think I want to yield to Senator Wyden.
The Chairman. Senator Wyden?
Senator Wyden. I want to thank you my colleague, and I'll
be real brief.
I just have one question, Mr. Taylor. Dr. McClellan has
been quoted in the financial press several times in the last
couple of months, the last 60 days, talking about how the
agency is going to put a new focus on trying to make medicine
more affordable. And the interviews essentially say, ``Look,
our obligation is safety and efficacy, but we also have a new
focus on affordability.'' I cannot, however, find any
initiatives that actually translate into something specific
that the agency is doing to make medicine more affordable, and
I wanted to give you a chance, on the record, to tell us what
the agency specifically is doing to make medicine more
affordable.
Mr. Taylor. Sure. I will take a shot at it. As I stated in
my oral testimony, one of our main focuses is to ensure that
there is greater access to generic drugs, both in terms of the
work with the Hill and the work on our own. We want to make
sure that there is less legislation in regards to the
introduction of generics so that more generics get on the
market faster, and so people have greater access to it. We want
to do more outreach and education of the American public
regarding the benefits of generics.
One of the things that's been discussed today was
Tamoxifen. Well, the generic version of Tamoxifen was
introduced in February of this year, and actually only cost
$47, which is even cheaper--which is cheaper than any branded
version either in Canada or the United States.
We're also taking steps as part of--we have what is called
a--it's called the Good Manufacturing Practice Initiative. What
it really is, is an initiative to look at innovations in
manufacturing to try and find a way to help industry reduce
manufacturing costs without easing up on the oversight, the
regulatory oversight, that we currently maintain over industry.
We're also trying to improve our education outreach, in
terms of making sure that--whether it be generic sponsors or
sponsors of innovator products--that they have a better
understanding of the agency's expectations in regards to the
approval process--once again, to ensure that there are fewer
delays that, again, will lead to more products being available
to Americans.
So I think those are some of the initiatives that form the
basis of his statement.
Senator Wyden. I'd like to hold the record open on this
point, because, again, you know, it seems to me what the agency
has always said is that they're going to try to delay red tape
and bureaucracy, in terms of getting drugs out. I think that's
good, but that hasn't translated into making medicine more
affordable. And I can't see anything, other than these sort of
outreach programs, and I was going--when I was director of the
Gray Panthers, I was going to FDA outreach programs to tell
people about medicine.
And I don't want to take Senator Snowe's time, but I'd like
to hold the record open and have you tell us exactly what these
new initiatives are to make medicine more affordable that is
being pursued at the agency.
Senator Wyden. Because I will tell you, I cannot find
anything specific that really is different.
Thank you, Mr. Chairman.
The Chairman. Senator Snowe?
Senator Snowe. Thank you, Mr. Chairman.
Governor Pawlenty, I want to commend you for your assertive
and bold leadership. The people in Minnesota are being well
served. And it's just regrettable that we haven't reached a
point here in the Congress and with FDA to remove those hurdles
and obstacles to give you a clear path toward doing what you
need to do on behalf of the citizens of Minnesota.
And, Mr. Taylor, I would like to ask you a particular
question about what is preventing the FDA from seeking to ``do
no harm'' when it comes to helping consumers? Because the point
here is the safety certification under current law, and that is
what's preventing us from implementing, because the Secretary
of Health and Human Services has not implemented, hasn't made
the safety certification a requirement under law. So it is that
you need a new law without those safety certification
requirements? Are there things that you could do now to assist
in this process, like listing, you know, licensed websites of
pharmacies, establishing a pedigree, because it would get to
the point that you raised earlier about some of the problems in
tracking medications coming across the border? That obviously
would help. We obviously have FDA-approved labs in Canada. We
have not discerned any problems with those medications, because
they've been certified through the FDA-approved standards. They
have the comparable safety requirements.
So what is the issue here? Is it because we don't have the
right law in place at this point to remove the safety
certification, which we had hoped that Senator Dorgan's
legislation would accomplish--what is it that will help you to
do your job now?
Mr. Taylor. Well, Senator, I--for the agency, I mean, our
overarching concern is that the legislative proposals that have
been brought to us so far, we feel, create loops in the FDA
safety net and the states' safety net, and we have not--in
light of the increasing number of products coming overseas, we
just think that that is problematic, from a public-health
standpoint.
As I noted earlier, it's also in stark contrast to the
situation that we're involved with in food, which is where we
are actually taking steps to strengthen our ability to protect
the food supply.
So our overarching concern is that, so far, the proposals
that have been forth are proposals that actually undermine a
system. And, you know, I, right now, have people--I will
acknowledge that my investigators are overwhelmed. I mean,
you'll hear that there are various estimates as to the number
of packages that are coming overseas. In some cases, it's as
little as two million; in some cases, five, ten, or 20. But it
doesn't really matter, the number, because we are completely
overwhelmed. And even if, in the legislation, you set up a
system that, you know, purports to introduce a product that is
introduced in accordance with certain provisions of the Act, at
the end of the day, we're the ones--my people are the ones who
are going to have to make sure that those products do no harm
to the American consumer. So our----
Senator Snowe. What we've heard so far, according to
William Hubbard, Senior Associate Commissioner of the FDA, in
his testimony last June before a House Subcommittee is that
there is no evidence that any Americans died from taking a
legal drug from another country. While, at the same time,
according to data tracked by the National Institutes of Health,
it is reported that 5,000 Americans die year of foodborne
illnesses, food imported from other countries that are
monitored and inspected by the FDA. So I'm confused. I think
we've got a problem. We want a solution.
Mr. Taylor. Sure.
Senator Snowe. Now, I'm not hearing any solutions from the
FDA. You've had plenty of opportunities to develop solutions.
OK? For example, in the pedigrees. That was mandated for
prescriptions back in 1992 by Congress.
Mr. Taylor. That's correct.
Senator Snowe. I mean, that would take care of that
problem, because you could easily monitor and track any
medications coming across the border. Now, the FDA Commissioner
acknowledged there's little risk in walking into a licensed
Canadian pharmacy and filling a prescription.
So what is the issue here that we need to solve
immediately? We're not talking about something down the road 10
years. It's already been 10 years since the pedigree tracking.
What can we do right now, rather than threatening consumers?
Why aren't we trying to solve the problem?
Mr. Taylor. The problem, Senator--you just read the
Commissioner's statement--it's as I described earlier. We think
that the Canadian system obviously is a strong system that
ensures that its citizens get safe and effective products.
However, the Canadian government does not assure that the
products that are coming to the United States are safe and
effective. And so there's a gap between----
Senator Snowe. But couldn't you not do it? I mean,
seriously.
Mr. Taylor. We currently----
Senator Snowe. OK----
Mr. Taylor. We currently----
Senator Snowe.--let's go through a list of suggestions.
Publish lists of licensed pharmacies and associated websites.
Could you not do that now?
Mr. Taylor. No, we can--I mean, no, we cannot--I mean,
right now----
Senator Snowe. Could you do that right now to help Governor
Pawlenty in his job? I mean, could you do that?
Mr. Taylor. List----
Senator Snowe. What is difficult about doing that?
Mr. Taylor. List pharmacies that--no.
Senator Snowe. List pharmacies. You couldn't do that?
Mr. Taylor. Well, to the extent that we have taken action
against pharmacies or against manufacturers, we do post that on
our website so that the American consumers can know what
products to stay away from and what websites to stay away from.
Senator Snowe. How about enforcing the requirement for all
drug pedigree sales?
Mr. Taylor. Right now, the pedigree----
Senator Snowe. Could you do that?
Mr. Taylor.--the pedigree requirement has been stayed,
Senator. And what we did is, we sent a report to our house
Appropriations Committee explaining the reason why it's been
stayed and asking for their advice on that issue.
Senator Snowe. What about require counterfeit-resistant
packaging? How difficult is that? We do that with foreign
currency and numerous other instances, so what is the
difficulty there?
Mr. Taylor. We currently, as part of our counterfeit
initiative, we are looking at the different types of
counterfeit technologies that are available. I think, however,
we need to be cautious about relying on any one technology. One
of the things that we've discovered as part of this initiative,
one of the things we're exploring, is that there are going to
need to be the use of multiple strategies to prevent
counterfeiters from overriding the technology, but that's
something that we are currently----
Senator Snowe. You don't believe----
Mr. Taylor.--looking at.
Senator Snowe.--that 21st century America could develop
that technology?
Mr. Taylor. Well, Senator, just like the challenges of the
Secret Service with the currency, over time there's enough of
an incentive for people to try and override the technology,
Senator, no matter how good they are. So there needs to be
constant steps to develop new and stronger technologies. I
mean----
Senator Snowe. Many of the drugs sold, as I understand, in
Canadian pharmacies were manufactured in the very same plants
as those sold in the U.S. pharmacies. In fact, Dr. McClellan
was quoted as saying, ``With regard to the safety of
prescription drugs in Canada, they keep drugs safe within
Canada, and I think they do a very good job of that.''
So, again, it's getting back to the issue of, what can we
do that's proactive? I mean, what I'm hearing from you, if we
passed a different law without any safety certification
requirements, you still wouldn't do the job.
Mr. Taylor. Well----
Senator Snowe. That's what I'm concerned about. That's what
I'm hearing.
Mr. Taylor. Well, let me try and answer the question to the
best of my ability. Obviously, once again, our overarching
concern is that we realize that affordability is important, but
we want citizens to have products that are safe, effective, and
affordable. And we understand that--that produce drugs that, as
part of our steps--we've looked at generics and other ways to
try and ensure that affordability. And as the head of my--as
the Office of Regulatory Affairs, it's my job to ensure that to
the extent that these products are coming across, that they're
safe and effective.
The decision really rests at the feet of Congress, in terms
of how best to change the Act. Because it was Congress that
decided that these safeguards needed to be in place. We
recognize that whatever that change will be, if there's a
change in place that's going to be used to facilitate the
importation of drugs, we realize that change will be a
fundamental change from the way that we've done things before.
And what we need are steps that will help us, despite that
fundamental change, still provide the American citizens with
the same requisite level of safety and effectiveness, and that
includes the need for the American citizens and my agency to go
out and work together to inspect facilities to make sure that
there's the requisite level of controls that are in place now
that allow the system that we have in place to ensure that
people are not being injured----
Senator Snowe. And we know----
Mr. Taylor.--and not being harmed.
Senator Snowe.--they do, because they have FDA-approved
facilities in Canada. We know that to the be case. And the
reason why--and so the Secretary of Health and Human Services
under the existing law is not meeting that safety
certification. So is your agency charged with developing safety
stance? Could you not do that?
Mr. Taylor. Well, we----
Senator Snowe. Would that not be possible?
Mr. Taylor. Well, Senator, certainly every day we try and
take steps to try and build on that safety. But, right now, we
still have--we still are unable to say, based on that
certification--this is a certification that was made by
Secretary Shalala and Secretary Thompson--that that plan will
ensure that American citizens are getting products that are
safe and effective. We just cannot make that determination.
Senator Snowe. That was several years ago. Now we're in
2003, going into 2004.
Mr. Taylor. That's correct.
Senator Snowe. That's the point. I mean, this wouldn't be
difficult, Mr. Taylor. And I realize, you know, you're not the
Commissioner, but--you know, this would not be difficult. I
mean, we're just, you know, complicating what could be a very
simple situation. I mean, the counterfeiting that was referred
to earlier was basically a domestic problem.
Mr. Taylor. That's not exactly true. Some of the
counterfeit cases that we've handled this year, including the
Procrit case, which involved cancer and AIDS medications,
indeed was domestic in nature, originated from the state of
Florida. However, the Lipitor counterfeiting case, those
products were introduced from overseas.
Senator Snowe. But if you had the pedigree in place, that--
you would have been able to identify it, would you not?
Mr. Taylor. I----
The Chairman. Senator?
Senator Snowe. OK.
Mr. Taylor. Senator Snowe, I can't say--in light of the
scheme, in light of that particular counterfeit scheme, it's
not clear that the pedigree would have definitively stopped the
spread of the product.
The Chairman. Senator Boxer?
Senator Boxer. Thank you.
I want to thank you my colleagues for their questioning.
This has been very enlightening.
I want to say to Mr. Taylor, I've been in Congress for 21
years, and I know a phoney trade barrier when I see it, and
that's what's going on here. I mean, you could tell, from
Senator Snowe's questioning--not you, personally--this
Administration--and I might say, the one before--didn't want to
do this, period. And it seems to me that you're saying you're
overworked and understaffed, and I understand--then tell us
what you need in order to identify a couple of places where the
good Governor can go that you think would be safe. What would
it take? I don't think much.
I think, you know, you're reading a line that I've heard
over the years, and the only people, I believe, who are hurting
are the senior citizens who can't afford the medicine. It is a
moral issue.
Governor, I want to tell you something. I think you're
terrific. I want to tell you that everything in this bill that
I know of--this Medicare bill--and I withhold judgment, because
it hasn't come out. I haven't read every line of it, but
everything I've read so far, unless they change it----
The Chairman. Not before we vote on it.
Senator Boxer. We have to read it before we vote on it. But
everything I know about it says to me, ``They're doing
everything they can to stop our people from getting cheaper
drugs,'' period, end of quote. They took a generic provision
that was written by Schumer and some others, and weakened it.
They took the importation measures that have been worked on for
so long by folks in the House and Senate, including Senator
Dorgan, who really brought this to my attention, and what they
have done to that is essentially emasculated it, because you've
got people like Mr. Taylor, sitting over there, who don't want
to do anything, even if it didn't have a certification in it.
So, you know, it's kind of a hopeless deal. They put a gag rule
on Medicare, in terms of their ability to negotiate cheaper
drug prices. The only thing they haven't done is stop you. They
haven't stopped you yet.
So my hope is that you'll listen to what Senator McCain is
offering you as a suggestion. Get the broadest support you can
back home, hold these open hearings, get your senators and your
assembly people, or whatever they're called there, to go with
you on this thing, and let's have you be a model for the rest
of us. I mean, I know they're doing it in some other states,
but I think you, it seems to me, are going to go forward. And
in these days of the Internet, you'll be able to ID for the
rest of the country Internet sites for our senior citizens so
they can get a 90-day supply of drugs, so they won't have to
make these horrible choices they are making, awful choices they
are making, between living and eating and helping your kids and
the rest of it.
This is really a life-and-death type of deal, and to have a
trade barrier, artificial one, put in place that is going to--
that's leading to people becoming impoverished--every penny
they get in Social Security increase is gone before they even
turn around. It's just awful.
And so I guess that's all I wanted to say, Mr. Chairman.
I'd like to hear from the Governor one more time, because I
hope you'll make news all--I hope my Governor is listening,
because I think that he, you know, should make a move on this
situation. We have folks going to Mexico, day in and day out,
to get cheaper drugs.
The Chairman. So do we.
Senator Boxer. You do, too, from Arizona. Day in and day
out.
I just don't believe it, that you can't, in the FDA, pick
out four places in Canada, pick out two places in Mexico, pick
out one place in Canada, pick out one place in Mexico, and say,
``We have done due diligence on this,'' and help our Governors.
Because, right now, our people are hurting, and it's our job to
make life easier for people, not harder for people. The health
and safety of our people, that's our number-one responsibility,
whether it's military protection or whether--but this is our
number-one. And, you know, we need to do it.
So, Governor, tell us one more time, have you given a
little thought to what Senator McCain said about making this,
sort of, a whole united--Republicans, Democrats, Independents,
farm labor, whatever you've got out there--kind of a move?
Governor Pawlenty. Senator, thank you. And thank you for
the chance to add a few closing thoughts.
First of all, I think this is the prescription drug
equivalent of the Boston Tea Party. People are fed up, they've
had it, and whether it's this year in Congress, or next year in
another state, or this year in Minnesota, the rebellion is
underway, and we hope you join us, because the current
structure cannot be sustained.
The generalized concerns that you hear from the FDA and
others always gets fogged up--you now, we've got our fingers in
the dike from all over the world, we've got all these problems.
That's not what I'm talking about. We're talking about
establishing a relationship with experienced, credentialed,
accredited, established, reputable pharmacies in Canada and
maybe a few other countries as a second step.
And as applied to those institutions and as applied to the
mail mechanisms we know already exist, the system does not have
the problems that are being suggested by the FDA. So please
don't let the voices confuse the debate. Please narrow it to
what we're actually talking about.
And I would hope that the FDA, instead of finding a hundred
reasons to say no and a hundred reasons why this can't work,
would pull up alongside and say, ``We'll help you.'' I'll even
pay them for it. You don't even have to do it. I'll find the
money to get some people to come out and help us, if they'll do
that. If they won't, the concerns about health, safety, and
welfare are precisely what government is supposed to do. We
can, in our own little Minnesota way, bring a Good Housekeeping
seal of approval to these entities on our website and give
people more assurance than they're getting now on these rogue
sites that these are credible places.
And then, last, it probably is fair to say that if
everybody in the whole country moved to this all at once, we
would overwhelm the FDA, we would overwhelm the Canadian
pharmaceutical industry and infrastructure and their regulatory
authorities. And so I have a suggestion for you. I hope we've
demonstrated that this debate has crossed a threshold of
credibility and it's at least worth a try. So, as a compromise,
could the Senate say, ``We're going to authorize a certain
number of pilot projects. We'll road test these theories, for
or against, and in a year and a half, we'll evaluate it, or 2
years we'll evaluate it.'' We're not afraid of the results. I
hope the industry and the FDA isn't either. And then we can
see.
And then, last, to Senator McCain's point and your point, I
would be delighted to lead the charge in Minnesota to not only
have us do this administratively and unilaterally, but to get
the legislature, on a bipartisan/tripartisan basis, to endorse
it and come along with us. Please know, as you do know, that,
you know, once you put it into the broader political arena of
the legislature, all the forces, namely the industry, you know,
comes down hard. And so we'll have a fight on our hands, and
it's a fight I'm willing to fight. I mean, I'm happy to do it.
I'll add some extra security, Senator, and away we'll go.
[Laughter.]
The Chairman. Well, there are some of us who would love to
come up and help you, and I mean that. I mean that very
sincerely. As you mentioned, this has passed a certain
threshold, which is--the Secretary of Health and Human Services
doesn't testify on this issue, the pharmaceutical industry
doesn't show up. Mr. Taylor, you do, and I want to thank you
for that. And your reward, I'm sure, will be in heaven, but I
do appreciate it.
[Laughter.]
Mr. Taylor. I hope so.
The Chairman. I do appreciate the fact that you have had
the willingness to appear before this Committee.
Your suggestion, Governor, we'll try it. We'll try it. But
I've got to tell you, when they have the kind of power that's
on this prescription drug bill, which is supposed to be saving
not only individuals, but the government money, and they put in
a provision that you can't--the government is not allowed to
negotiate in a fashion to keep those cost of drugs the lowest,
and they're able to get that as a provision in the bill, I'm
sorry to tell you, I'm not optimistic. I will not deter us from
fighting for it, but there's ever ample evidence of the
incredible power of the pharmaceutical. And you know what
you're going to see when they pass this bill, even though it'll
have huge costs associated with it and it'll put a $600 billion
cost on a collapsing Medicare system, which it cannot stand
more than six or seven more years? Thank your Senator or
Congressman for voting for this bill and prescription drugs
paid for by--guess who?--the pharmaceutical association, who
have been able to prevent--been able to prevent the cost of
drugs from being lowered, by allowing the government to do what
the Department of Defense and the VA----
I'm sorry to make you cynical about the way we try to do
the Lord's work in the City of Satan, Governor, but I did want
to respond to----
[Laughter.]
Governor Pawlenty. Mr. Chair, I tell people in Minnesota
that big change comes in one of three circumstances--war,
crisis, and particularly gifted leadership. And we--in
Minnesota--and we have a war, of course, internationally, but
we have a war, we have a crisis, and--I don't know about the
leadership, but we--the circumstances are such that change will
come, and now it's just a matter of when and where and how.
The Chairman. Well, it is an issue of--if I go to any town-
hall meeting with seniors in my state, and I'll tell you, it's
a huge issue.
Governor Pawlenty. Most of the seniors in your state are
from my state.
The Chairman. Yes, sir.
[Laughter.]
The Chairman. Yes, indeed. Many of them that I attend the
town-hall meetings in Arizona are from your state, yes, indeed.
Mr. Taylor. Mr. Chairman, for fear of continuing this, I
just want to make a point, that we obviously--we, you know,
respect the government's goals and wishes, and we do look
forward to sitting down and talking to you and not putting you
in jail and hoping that we can at least express and articulate
our concerns. I mean, we obviously want to make sure that you
know the source of your products, because we know that there--
at least in the press, there was some question about whether
the pharmacies were getting--and just provide you other--you
know, we can even provide you information on what we've seen
today, and that, we think, will help you inform your decision
and engage--allow us to engage in good give and take.
So, as I said before, I just want to extend the offer to
meet with you, before you introduce your plan, or afterwards,
but, I mean, we're happy to do so.
The Chairman. Thank you very much. Thank you.
Our last panel is Mr. Carmen Catizone, who's the Executive
Director of the National Association of Boards of Pharmacy; Mr.
David Funderburk, who's the Legislative Counsel of TREA Senior
Citizens League; Mr. Lewis Lubka, who's a Senior Citizen from
Fargo, North Dakota, and Mr. Donald MacArthur, Secretary
General, European Association of Euro-Pharmaceutical Companies.
Welcome.
Mr. Catizone--is that the proper pronunciation?
Mr. Catizone. Yes, sir.
The Chairman. Welcome. Please proceed.
STATEMENT OF CARMEN A. CATIZONE, EXECUTIVE DIRECTOR, NATIONAL
ASSOCIATION OF BOARDS OF PHARMACY
Mr. Catizone. Thank you. It's an honor to appear before the
Committee today and share our thoughts on this very important
issue.
I am the Executive Director of the National Association of
Boards of Pharmacy, which was founded in 1904 and consists of
all the pharmacy regulatory and licensing jurisdictions in the
United States, Guam, Puerto Rico, the Virgin Islands, eight
provinces of Canada, the Australian states, New Zealand, and
South Africa. Our association also maintains a list of
pharmacies that operate on the Internet that are legal and
safe, in response to questions from Senator Dorgan and also the
Governor of Minnesota.
The purchase and import of drugs from other countries
places access to affordable medications squarely in opposition
to preserving the safeguards of our drug approval process and
state regulation. If allowed to proceed along the present
course, it will remove the Food and Drug Administration's
approval process in the dispensing of medications for chronic
diseases from the U.S. to the country, territory, or back room
with the lowest prescription drug prices, regardless of the
standards or safeguards in place in those other countries or
territories.
NABP also understands that the pricing of pharmaceuticals
in the U.S. differs from Canada and other parts of the world.
We believe that the U.S. pharmaceutical industry must address
this situation and propose meaningful changes to the pricing
policies in place in the U.S. and the world. NABP has no
affiliation with the pharmaceutical industry, nor do we receive
any appreciable funding from the pharmaceutical industry.
NABP acknowledges that appropriate safeguards exist within
Canada's Federal and provincial regulatory systems to ensure
that the dispensing of medications in Canada to Canadian
patients is safe. Important to note, from information obtained
directly from Canadian regulatory authorities, is that Health
Canada prohibits the import of drugs for dispensing to Canadian
patients, but it does not prohibit or regulate the distribution
of drugs for import--imported for export to U.S. patients. This
regulatory void and breach of the safety net for U.S. patients
is significant and unknown to the overwhelming majority of
patients ordering drugs from Canadian pharmacies.
Shockingly, Internet operations in Canada are already
providing U.S. patients with drugs unapproved in Canada or the
U.S. Several newspapers have documented interviews with
Canadian Internet pharmacists, who admit to freely purchasing
and exporting to the U.S. medications from Pakistan, Bulgaria,
and Latin America, that were not approved or regulated by
Health Canada. The example given by Senator Dorgan of two
licensed pharmacies and pharmacists interacting and exchanging
medications would provide a safety net between the two
countries. However, that system is not in place in all
instances. And, in fact, the later situation is predominantly
in place for those Internet operations.
NABP and its counterpart in Canada, the National
Association of Pharmacy Regulatory Authorities, will be
launching a VIPPS program in Canada, which is a Verified
Internet Pharmacy Practice Site program, to accredit, identify,
and alert to Canadian patients which pharmacies are legal and
safe to practice pharmacy and conduct business on the Internet.
We are also working with NAPRA to discuss a regulatory
framework for the inter-border regulation of the practice of
pharmacy and dispensing of medications to patients in the U.S.
and Canada. The framework will coordinate the regulatory
efforts and resources of the Canadian provinces and the U.S.
state boards of pharmacy, and look to the FDA for guidance and
assistance.
However, even if NABP and NAPRA successfully formulate the
appropriate regulatory framework, neither NABP nor NAPRA can
make any representations for safety when drugs are shipped to
U.S. patients and originate outside of the U.S. and Canadian
approval processes.
In closing, NABP respectfully requests your support for a
careful and thoughtful approach to resolving this complex
issue, and a rejection of reactionary proposals fueled by
populist rhetoric that irresponsibly casts aside valid concerns
about patient safety.
NABP requests further the Committee's assistance in
preserving the sanctity of current laws and regulations so as
to prevent any patient from being seriously injured by the
illegal importation of medications from another country. NABP
believes that no patient should suffer or be harmed as a
consequence of disregarding Federal and state laws that assure
the dispensing of safe and effective medications to U.S.
patients.
Thank you.
[The prepared statement of Mr. Catizone follows:]
Prepared Statement of Carmen A. Catizone, MS, RPh, DPh, Executive
Director/Secretary, National Association of Boards of Pharmacy
Mr. Chairman and Members of the Committee:
I am honored to be here today and discuss with you how the purchase
and import of drugs from other countries affects the health and safety
of U.S. patients. The purchase and import of drugs from other countries
places access to affordable medications squarely in opposition to
preserving the safeguards of our medication approval and state
regulatory processes. NABP respectfully requests your support for a
careful and thoughtful approach to resolving this complex issue and a
rebuff of reactionary proposals fueled by populist rhetoric that
irresponsibly cast aside valid concerns about patient safety.
The National Association of Boards of Pharmacy (NABP), which I
represent, was founded in 1904. Our members are the pharmacy regulatory
and licensing jurisdictions in the United States, District of Columbia,
Guam, Puerto Rico, and the Virgin Islands, eight provinces of Canada,
three Australian States, New Zealand, and South Africa. Our purpose is
to serve as the independent, international, and impartial Association
that assists states and provinces in developing, implementing, and
enforcing uniform standards for the purpose of protecting the public
health. We have no affiliation with the pharmaceutical industry nor do
we receive any appreciable funding from the pharmaceutical industry.
As a charitable and educational organization, we do accept
unrestricted, educational grants of no larger than $4,000 for
educational programs at our Annual Meeting and Fall Conference. Among
the sponsors for our educational sessions are some pharmaceutical
manufacturers. NABP's primary revenue sources are examination fees from
the development and administration of the national licensure
examination (NAPLEX) and application fees for the licensure transfer
and clearinghouse system (NABP Licensure Transfer and Clearinghouse
Program), NABP maintains for the states. These fees are paid by the
applicants for licensure and licensure transfer and not the states. The
only fees paid to NABP by the states and provincial jurisdictions are
annual membership fees of $250.
Collapse of the U.S. Drug Approval and Patient Dispensing Systems
NABP's involvement with the distribution and dispensing of
medications from pharmacies utilizing the Internet began in 1997. At
that time NABP introduced our Verified Internet Pharmacy Practice Sites
(VIPPS) program, to inform consumers of legal and safe Internet
pharmacies. From the first awarding of a VIPPS certificate in 1999 to
the present time, NABP has monitored the activities of Internet sites
distributing medications. We have observed firsthand the birth,
evolution, and revolution of an industry that holds promise for select
populations of patients but, if allowed to proceed along the present
course, will remove the Food and Drug Administration's (FDA) drug
approval system and dispensing of maintenance medications for chronic
diseases from the U.S. to the country, territory, or back room with the
lowest prescription drug prices, regardless of the standards or
safeguards in place in those other countries or territories.
The facts of the situation are indisputably clear; the importation
of prescription medications is illegal. This fact has been explicitly
stated by the FDA and state boards of pharmacy. On November 6, the
United States District Court for the Northern District of Oklahoma
affirmed this fact by noting in its decision in the United States of
America versus RX Depot, Inc. and RX of Canada that prescription
medications imported into the U.S. violate Federal law. The Court noted
further that individuals involved in this activity violated the law
openly and notoriously.
It is also a fact that the pricing of pharmaceuticals in the U.S.
differs from Canada and other parts of the world. The difference in
price is a primary incentive for individuals abandoning the safe and
legal U.S. system to purchase and import drugs from other countries.
NABP believes that the U.S. pharmaceutical industry must address this
situation and propose meaningful changes to the pricing policies in
place in the U.S. and the world.
Patient Harm and Compromise of the U.S. Regulatory System
Critics of the regulatory actions of the state boards of pharmacy
against entities distributing or assisting in the distribution of
medications from other countries contend that there have been only a
few reports of patient harm and injury. Although the number of reports
may be low, the actual harm to patients is immeasurable and could be
significant. NABP maintains that the number of reported patient
injuries is low and immeasurable because patients may not be able to
discern whether the drugs received from other countries are authentic
or appropriate, injuries resulting from patients receiving wrong or
counterfeit drugs may not manifest in the health care system until
sometime later when the patient's condition worsens and requires
emergency treatment or hospitalization, and consumers purchasing drugs
from other countries are reluctant to report any adverse consequences
because of the fear of prosecution for violating Federal and state
laws. In recent correspondence to the State of Illinois,\1\ the FDA
documented instances where patients suffered harm from the purchase and
import of drugs from other countries. The letter also identified drugs
purportedly shipped from Canada that were actually distributed from
India and drugs being shipped that were unapproved generic versions or
sub or super potent. NABP and its member boards are collecting data on
incidences of patient harm caused by the purchase and import of drugs
from other countries and will submit any information accumulated
through this process to the Committee.
---------------------------------------------------------------------------
\1\ November 6 letter to the State of Illinois' Special Advocates
for Prescription Drugs.
---------------------------------------------------------------------------
NABP is alarmed by the data collected by the FDA and recent reports
of additional incidents of patient harm:
A patient in Illinois ordered an inhaler to treat her
child's asthmatic condition from a Canadian pharmacy. After
using the inhaler, the child told her mother that the medicine
``seemed different.'' Shortly after using the inhaler, the
child suffered an asthmatic episode, the first in a
considerable time. The mother only learned that the drug sent
to her by the Canadian pharmacy was wrong when she asked the
pharmacist at her local pharmacy to identify the medication.
An Oregon patient being treated for breast cancer received
the wrong medication from a Canadian pharmacy. She continued to
take the wrong drug for three months as her condition worsened.
NABP has also learned that the purchase and import of drugs from
other countries is gravely compromising state laws and regulations by
granting the authority to practice medicine and prescribe medications
to unqualified, unlicensed individuals. Public officials who openly
endorse violating Federal and state laws in order to obtain lower
priced pharmaceuticals are supporting these transgressions and further
damaging the regulatory system in the U.S.
A U.S. entity affiliated with a Canadian pharmacy operation
is paying paramedics in the U.S. to conduct the physical
examination and diagnosis of patients. The paramedics'
examinations and diagnosis are then forwarded to a Canadian
pharmacy where prescriptions are issued by a Canadian doctor
and drugs shipped to U.S. patients. This activity contravenes
U.S. laws by allowing paramedics to practice medicine without
appropriate education, training, and licensure.
A certification/purchasing program is providing the means
for psychologists to illegally order psychotropic drugs (e.g.,
barbiturates, clozapine, haloperidol, etc.) for their patients
through a Canadian pharmacy. Again, the opportunity to obtain
prescription medications through foreign sources is directly
abrogating the U.S. regulatory system and allowing individuals
to practice medicine without the appropriate education,
training, and licensure.
Within the last four months, a staggering number of websites
brazenly offering controlled substances without a valid
prescription (as required by Federal and state laws) and a
never before witnessed preponderance of spam e-mails offering
unrestricted and illegal access to controlled substances have
flooded the computers of U.S. citizens. Prior to the advocacy
for the purchase and import of drugs from other countries by
public officials in certain cities and states, such sites and
offerings did not exist.
Importation from Other Countries Places Patients Outside of Regulatory
Safeguards
NABP acknowledges that appropriate safeguards exist within Canada's
Federal and provincial regulatory systems to ensure that the dispensing
of medications in Canada to Canadian patients is safe. Similarly, NABP
attests that the dispensing of medications to U.S. patients within the
U.S. regulated system is safe. In fact, the safety and regulatory
standards in place in the U.S. are often regarded as the best in the
world.
Unfortunately, the same safeguards do not exist for patients
purchasing and importing drugs from other countries. Although Health
Canada prohibits the import of drugs for dispensing to Canadian
patients, it does not prohibit or regulate the import of drugs for
export to U.S. patients. The regulatory void and breach of the safety
net for U.S. patients is significant and unknown to the overwhelming
majority of patients ordering drugs from Canadian pharmacies. NABP
learned first-hand from the president of an Internet pharmacy
corporation based in Canada that drugs shipped to U.S. patients may not
be approved by the Canadian drug approval process and may originate in
New Zealand, Vietnam, or any country in the world where prescription
drug prices are lower than those in the U.S. or Canada. In fact, there
are no limitations as to where drugs will originate from for delivery
to U.S. patients. Shockingly, Internet operations in Canada are already
providing U.S. patients with drugs from other countries unapproved in
Canada or the U.S.! A recent advertisement brought to NABP's attention
offers to match the price of any medication from Canada by shipping
drugs from Israel. Several newspapers have interviewed Canadian
Internet pharmacies who admit to freely purchasing and exporting to the
U.S. medications from Pakistan, Bulgaria, and Latin America.
Allowing for the purchase and import of drugs from other countries
essentially abolishes the FDA's drug approval process and circumvents
state regulation. Advocating that it is acceptable to violate Federal
and state laws because the price of pharmaceuticals is high, creates
the opportunity for unscrupulous and dangerous individuals to operate
Websites or distribution enterprises that will ship drugs to U.S.
patients that may be nothing more than placebos, wrong, inappropriate,
or even counterfeit. If the safeguards in place for drug approval and
the regulation of pharmacies and wholesale distributors are
deliberately compromised, U.S. patients will be placed in a ``buyers
beware'' environment and left unprotected to gamble with their health
and safety when purchasing and importing drugs from other countries.
Inter-border Regulatory Proposal
NABP requests the Committee's support for the enforcement of
current Federal and state laws concerning the illegal importation of
medication from other countries and prosecution of individuals involved
in these activities, whether they are private citizens or mayors or
governors. In the interim, NABP and its counterpart in Canada, the
National Association of Pharmacy Regulatory Authorities (NAPRA),
recognize that a solution resolving the conflict of access versus
safety must be developed to address the needs of U.S. patients and
prevent irreparable damage to, if not the elimination of, the
regulatory systems in the U.S. and Canada. To this end, NABP and NAPRA
are in discussions to develop a regulatory framework that regulates the
inter-border practice of pharmacy and dispensing of medications to
patients in the U.S. and Canada and provides similar protections as
those afforded U.S. patients who utilize pharmacies engaged in the
interstate practice of pharmacy and dispensing of medications. The
framework will coordinate the regulatory efforts and resources of
Canadian provinces and U.S. state boards of pharmacy.
NABP and NAPRA will also be launching the VIPPS program in Canada
to identify for Canadian patients legal and safe Internet pharmacies.
The combination of the VIPPS Canada program and inter-border regulatory
framework between the U.S. and Canada will ensure for U.S. patients
that the purchase and importation of medications from licensed Canadian
pharmacies will be safe and legal.
However, even if NABP and NAPRA successfully formulate the
appropriate regulatory framework for the inter-border dispensing of
prescription medications, neither NABP nor NAPRA can make any
representations for safety when drugs are shipped to U.S. patients and
originate outside of the U.S. and Canadian approval processes. NABP's
concern with patients purchasing and importing medications from
countries other than Canada will not be resolved unless this problem is
addressed. In fact, NABP and NAPRA cannot move forward with the
implementation of an inter-border regulatory framework until Health
Canada takes decisive action to prohibit the importing of medications
from other countries, outside of Canada's drug approval process, by
Canadian pharmacies for dispensing or distribution to U.S. patients.
NABP also believes it essential before the implementation of an inter-
border regulatory framework for the FDA and Health Canada to establish
a means for mutual recognition of drug products.
In closing, NABP respectfully requests that the Committee recognize
that allowing and encouraging the purchase and importation of
medications from other countries is a serious threat to our regulatory
foundation and patient safety and may thrust the U.S. back in time to
the days when snake oil salesmen and quack tonics threatened the well-
being of unknowing and unsuspecting patients. NABP requests further the
Committee's assistance in preserving the sanctity of current
regulations so as to prevent any patient from being seriously injured
by the illegal importation of medications from other countries. NABP
believes that no patient should suffer or be harmed as a consequence of
disregarding Federal and state laws that ensure the dispensing of safe
and effective medications to U.S. patients.
Thank you for the opportunity to address this important issue.
______
Prepared Statement of the American Pharmacists Association
The American Pharmacists Association (APhA) appreciates this
opportunity to provide our perspective to the Committee on the issue of
expanding prescription drug importation. APhA, founded in 1852 as the
American Pharmaceutical Association, represents more than 50,000
practicing pharmacists, pharmaceutical scientists, student pharmacists,
and pharmacy technicians. APhA, dedicated to improving medication use
and advancing patient care, is the first-established and largest
national association of pharmacists in the United States.
Access to Prescription Medications
As you know, prescription medications have proven to be a valuable
tool in our health care system. That value doesn't materialize,
however, if patients do not have access to the medications they need.
Clearly, as members of the profession which makes improving medication
use and advancing patient care its priority on a daily basis,
pharmacists are supportive of efforts to enhance patients' access to
prescription medications. As pharmacists, we share the Committee's
concerns that many patients--especially seniors--face challenges in
accessing valuable, but sometimes unaffordable medications.
Any pharmacist that has ever worked in a community pharmacy can
vividly recount the dismay they feel when having to tell one of their
patients--especially seniors on a fixed income--the cost of their
medication, knowing that cost may be more than the patient can afford.
Some pharmacists work with patients to solve that access problem by
recommending lower-cost generic alternatives or even over-the-counter
medications, providing the medication to the patient at no charge, or
establishing a payment plan. Pharmacists also work with patients to
assure that patients know how to make the best use of that medication--
to maximize their investment in the technology we call medication.
While those stories illustrate pharmacists' first-hand experience with
access problems and their compassion for their patients, patients need
a Medicare drug benefit.
Another so-called solution that has received a lot of attention
from Congress and is now the subject of the hearing before this
Committee is prescription drug importation. While APhA appreciates the
Committee's commitment to exploring methods to increase access to
valuable medications, we have significant concerns with expanding
importation. Expanding importation would circumvent the United States
regulatory structure--a system intended to help patients receive safe
and effective medications. Undercutting the regulatory system that
tries to assure patients receive safe and effective medications is not
the way to address the access problem. Importation may offer short-term
savings, but it creates the potential for long-term costs in patient
harm. While pharmacists are supportive of efforts to enhance patients'
access to prescription medications, expanding importation without
sufficient oversight and involvement of regulators, pharmacists, and
physicians is not the answer.
Patient Safety
Patient safety is the one overriding reason for the many laws and
regulations that help assure Americans receive safe and effective
medications--medications that are ``what the doctor ordered.'' These
controls not only guide what medications are available in the U.S.
market and how those medications are manufactured, but also how they
are labeled, packaged, shipped, stored, and dispensed. The current U.S.
regulations were put in place after several critical incidents resulted
in patient harm. When patients were harmed by contaminated or
ineffective medications, Congress took action to protect patients, to
provide patients with medications that do what's expected and nothing
that's unexpected. By their very nature, medications are highly
susceptible to counterfeiting: the products are expensive, necessary
for our health, and difficult, if not impossible, to detect a fake
product through visual inspection. Because of these challenges,
Congress and state regulators established a closed system for
pharmaceutical product approval and distribution. The current closed
system protects American consumers from unsafe products.
Our concern extends to the packaging and labeling of products as
well. Prescription medications are powerful; that's why they work. But
they ``work'' when patients understand how to use them, and how to use
them appropriately. U.S. prescription labeling language and
presentation goes through an intensive review process by manufacturers
and the Food and Drug Administration (FDA). Different nations have
different standards. Simply put, a medication is not just a tablet;
it's the tablet, the labeling, and the packaging.
Purchasing prescription medications outside of the U.S. means
leaving our closed system. And efforts to facilitate this activity
punch holes in our regulatory safety net. Those holes yield risks for
patients, risks that they may receive a contaminated product, an
inactive product, a product not recognizable by American pharmacists or
doctors (possibly different strengths or name), a product that is not
manufactured, packaged, labeled, distributed, or regulated in the
country where they are purchasing the drug, or simply, the wrong
product.
Other regulatory systems are different, and that difference can
create problems. For example, bisoprolol is a beta blocker used to
treat hypertension (high blood pressure)--something we know better by
its brand name is Zebeta in the United States. In Canada, however,
bisoprolol goes by the brand name Monocor. Simply having a different
name doesn't immediately create a problem, but in the U.S., the name
Monocor sounds like the medication name Mevacor (a statin drug used
to treat high cholesterol). The potential for error, then, appears when
patients or health care providers confuse the U.S. product Mevacor
with the international product Monocor.
Additionally, when products are recalled in the U.S. because of
manufacturing difficulties, or in rare instances when counterfeit
products appear in the U.S. system, the FDA, pharmacists and physicians
work in conjunction with each other to identify and notify patients who
may have received such medications. Patients who go outside of the U.S.
regulatory system risk not knowing if a prescription has been recalled
in another country. We have seen this risk materialize. On November 12,
2003, Canada recalled certain medications to treat asthma and chronic
obstructive pulmonary disease (COPD) because the drug's delivery system
may fail to provide patients with an adequate dose of the medication.
Canadian patients were advised to return the product to the pharmacy or
physician's office where it was obtained--but what happens to U.S.
patients that ordered the medication over the Internet? Will they be
informed about the recall? The outreach from Canadian regulators was
not directed to patients in the U.S. And although the FDA re-issued the
Canadian alert, the alert places U.S. pharmacists and physicians in a
quandary--they know they did not prescribe or dispense the faulty
product, but cannot be sure that their patients are not using it. Who
should U.S. patients see? Because the medications were obtained outside
the U.S. system, there is little that U.S. pharmacists and physicians
can do to alert patients. And it raises the question: who is
responsible for alerting the patients in those circumstances?
Opening the Closed System Means Opening the System beyond Canada
The idea of opening our current closed system is critical to this
discussion. It is true that some countries, such as Canada, may have a
system to regulate medications that appears comparable to our system.
However, ``opening the door'' to Canada opens the door--period. Our
closed system is then open to products from other countries--countries
without strong regulatory systems. Even if attempts are made to limit
access to one country or just a few, opening the system creates
incentives for unscrupulous providers to pretend that they operate in
Canada. By adding a Canadian flag to their website, they purport to
provide quality products and ``hide under the maple leaf.''
By opening the door--and substituting a porous system for our
closed system--we risk the introduction of counterfeit medications. The
World Health Organization estimates that 5 percent to 8 percent of all
pharmaceuticals are counterfeit. With our current system, few consumers
perceive a threat from counterfeit medications, but that changes when
the safety structure is damaged. And even with the comprehensive U.S.
system, counterfeit products have penetrated our system. In February,
2003, 11,000 boxes of counterfeit Epogen and Procrit (anemia drugs
often given to cancer, AIDS and kidney failure patients) were found on
pharmacy shelves and even in patients' homes. And earlier this year,
the FDA announced the discovery of three lots of counterfeit Lipitor
(cholesterol lowering medication). The FDA's continuing investigation
found two additional lots of the same drug. These situations support
the need for review and refinement of our existing safety net, not the
expansion of efforts to circumvent or relax that system.
Impact on Patient Care
Not only do imported medications directly impact patient health,
but the circumvention of U.S. health care providers creates a situation
that is best described as ``working in the dark.'' Because of the
questions involved in importing medications, many patients do not tell
their pharmacist about medications they're securing over the borders.
This is understandable, but dangerous. Unless the patient provides this
information, physicians and pharmacists have no way of knowing what a
patient is taking. And it is important to recognize that products
available in other countries may not be identical to the FDA-approved
version available in the U.S. products available in other countries may
differ in brand name, strength, form of release, or in a number of
other ways. Because of these differences in foreign drugs, even
providing the name of a product may not be enough. Pharmacists' ability
to identify drug-to-drug interactions is hindered to the point of
nonexistence without knowing about a patient's entire medication
regimen or the content and strength of a particular drug. Consider the
scenario where a patient is in need of a prescription medication in a
hurry--such as an antibiotic for an infection or a pain medication to
treat an injury. If that patient has been getting his or her
medications from a different source, the pharmacist is unable to
determine whether the new prescription will conflict with any other
medications the patient takes, has ingredients that duplicate a current
prescription, or whether its mere presence suggests other medical
problems for the patient that should be followed-up with the patient's
physicians. This virtual blindness compromises the ability of
physicians to care for their patients and the ability of pharmacists to
partner with patients to improve medication use and advance patient
care.
Many have asked for the evidence of harm caused by circumventing
our safety net. One of the reasons we don't have more bodies in the
streets is because of the way medications work. Consider a patient
working with their local physician to take a medication to lower their
blood pressure. This patient imports a faulty medication that has no,
or little, active ingredient. It is unlikely that the patient will
actually feel anything different, unlikely they would actually notice
any difference in the product. When the patient visits their physician
for a check-up, the blood-pressure reading will show that the
medication isn't working--that the patients' blood pressure was not
decreased by the medication. Because of our trust in the medication
supply, it's highly unlikely that the physician would consider that
there was a problem with the medication. Rather, the physician will
likely assume that the medication just didn't work and consequently
will either increase the dose or choose another medication. This sets
the stage for using a stronger medication, one that they patient may
not have needed if they had actually gotten what their doctor ordered.
Modern medication management is already complex enough without plunging
the process into darkness.
Concerned Allies
The American Pharmacists Association is not alone in raising
concerns about this practice. The export of medications from other
countries is far from universally supported. Health care providers and
regulators--including regulators in other countries--have similar
concerns with prescription drug importation. In May 2003, the U.S.
National Association of Boards of Pharmacy (NABP) and the Canadian
National Association of Pharmacy Regulatory Authorities (NAPRA)
announced an agreement documenting their commitment to ``work together
to protect the citizens each are mandated to serve, and to promote
compliance with the federal, state, and provincial laws and standards
of Canada and the United States, to ensure the integrity of the
prescription drug supply in their respective jurisdictions''
(Attachment A). APhA joined with the Canadian Pharmacists Association
and 45 other pharmacist groups to support that agreement, and to pledge
our commitment to protecting the integrity of the medication supply
(Attachment B). NAPRA voiced its concern with importation last week,
calling on the Canadian government to ban exports by Canadian
pharmacies until governments can implement systems that will ensure the
effective regulation of these practices to protect patient safety. And
within the U.S., FDA and state boards of pharmacy have issued
statements of concern or have taken action against entities that are
facilitating importation and practicing pharmacy without a license.\1\
---------------------------------------------------------------------------
\1\ The Boards of Pharmacy in Alabama, Arizona, Arkansas, Montana,
North Carolina, Oregon, Oklahoma and Vermont, for example, have been
involved in such activity.
---------------------------------------------------------------------------
Other members of the health care team have expressed concern with
illegal importation. The Canadian Medical Protective Association
(CMPA), a mutual defense organization for Canadian physicians, has
cautioned Canadian physicians about co-signing foreign prescriptions
and warned of the potential for liability in the foreign jurisdiction
resulting from an alleged doctor-patient relationship that could result
from such an action. In the event of an American or other foreign
lawsuit a physician may not be eligible for help from the CMPA. The
Association advises its members not to participate in such activities.
The CMPA's actions were recently amplified by the Coalition for
Manitoba Pharmacy, a group of practicing pharmacists in Manitoba, who
announced their opposition to exporting prescription drugs from Canada
to the U.S.
Medications have become a critical aspect of patient care. But
prescription medications are only safe and effective when patients
understand how to use them appropriately, and for what side effects
they should watch. Direct interaction between the prescribers,
pharmacists and patients is critical to ensuring appropriate medication
use. Effective patient care is about real relationships--physician-
patient, pharmacist-physician, and pharmacist-patient relationships.
Patients are not mechanisms into which you input ``pills'' and achieve
uniform results. The practice of healthcare is both an art and a
science. Direct observation and conversation with the patient tells
healthcare providers much, as do diagnostic tests. But these are not
effective alone. To remove such a basic protection of our health care
delivery system's safety net seems diametrically opposed to the ``pro
patient safety'' environment we are all working to achieve.
There is an underlying fallacy that often is not raised in this
debate. Patients are not mechanisms we adjust for better health--we are
human beings. Medications are not inert objects that patients ingest,
inhale, or inject. They are powerful compounds that affect the
patient's body and being--that's why they work. Medications are subject
to degradation due to contamination or even due to temperature
fluctuations during shipping. And medications can be counterfeited. If
your mother or father or child were consuming questionable food, you'd
snatch it away as soon as you detected an unusual odor or color. Faulty
medications can be many times more harmful to health than a rancid
sandwich--but without the odor, who can identify the legitimate
product? We are so careful of what we ingest when we call it food.
Should we not be equally careful when we call it medicine?
Conclusion
Importation can create safety hazards by circumventing the current
medication safety net. We should allow the FDA to continue its work to
keep patients safe by critically reviewing manufacturing and
distribution practices that assure medications that American patients
receive are safe, effective, and exactly ``what the doctor ordered.''
It is time for Medicare to meet the standard of other health benefit
programs and help beneficiaries get the medications they need.
APhA recommends direct, immediate action to help patients access
medication through the U.S. healthcare system. Our country needs a
pharmacy benefit in Medicare that provides access to the critical
medications and pharmacist services patients need every day. We applaud
Congressional action in this area and hope that a quality Medicare
pharmacy benefit becomes law in the very near future. In the interim,
consumers should work with their pharmacist and prescriber before
making any changes in their drug therapy regimen. Generic medications
are cost-effective alternatives to brand-name products--even brand-name
products imported from other countries--and pharmacists can provide
guidance on using generic medications as well as accessing patient
assistance programs. The most expensive medication is the one that
doesn't work--or worse, causes harm. Patients should use pharmacists as
a valuable resource to make the best use of their medications and to
get the most value from their money.
APhA thanks you for the opportunity to provide comments on this
important issue. We look forward to working with the Committee to
develop a safe and effective system of providing prescription
medications to all Americans.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
Attachment B
45 U.S. Pharmacist Groups Endorse Cross-Border Communique On Illegal
Importation of Prescription Drugs
(as of May 13, 2003)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Alabama Pharmacy Association
Alaska Pharmacist's Association
Arizona Pharmacy Association
Arkansas Pharmacists Association
American Pharmacists Association (APhA)
American Society of Health-System Pharmacists (ASHP)
American Society of Consultant Pharmacists (ASCP)
California Pharmacists Association
Colorado Pharmacists Society
The University of Connecticut School of Pharmacy
Duquesne University Mylan School of Pharmacy
Florida Pharmacy Association
Georgia Pharmacy Association
Hawaii Pharmacists Association
Illinois Pharmacists Association
Iowa Pharmacy Association
Kansas Pharmacists Association
Kentucky Pharmacists Association
Maryland Pharmacists Association
Michigan Pharmacists Association
Minnesota Pharmacists Association
University of Missouri-Kansas City School of Pharmacy
Missouri Pharmacy Association
Montana Pharmacy Association
Nebraska Pharmacists Association
New Jersey Pharmacists Association
Pharmacists Society of the State of New York
North Carolina Association of Pharmacists
North Dakota Pharmaceutical Association
Ohio Pharmacists Association
Oklahoma Pharmacists Association
Oregon State Pharmacists Association
Pennsylvania Pharmacists Association
Rhode Island Pharmacists Association
University of Rhode Island College of Pharmacy
College of Pharmacy, Medical University of South Carolina
Tennessee Pharmacists Association
Texas Pharmacy Association
Utah Pharmaceutical Association
Vermont Pharmacists Association
Virginia Pharmacists Association
Washington DC Pharmaceutical Association
West Virginia Pharmacists Association
Pharmacy Society of Wisconsin
University of Wisconsin School of Pharmacy
Wyoming Pharmacy Association
Total: 45
The Chairman. Thank you.
Mr. MacArthur, welcome. Thank you for joining us, and would
you take the microphone?
Mr. MacArthur. Surely.
STATEMENT OF DONALD MacARTHUR, SECRETARY GENERAL,
EUROPEAN ASSOCIATION OF EURO-PHARMACEUTICAL COMPANIES
Mr. MacArthur. Mr. Chairman, Senators, the European
Association of Euro-Pharmaceutical Companies, which represents
around 70 parallel traders in medicines across 15 European
countries, is very grateful for the opportunity to contribute
to this important debate.
I think we can best do this by summarizing the experience
gained over the past 25 years and more of parallel trade in
medicines in Europe. Ours is an industry that, last year alone,
moved 140 million packs of prescription drugs safely and
efficiently across national borders within Europe. Given the
opportunity, some of our members would undoubtedly also like to
bring the benefits of parallel trade to the U.S.
Listening to some of the remarks made today and to those
I've read in the U.S. press provokes a feeling of deja vu.
Fears of unsafe, substandard, or counterfeit products flooding
the market, and that any savings from parallel trade would only
pass to the middlemen, were made by drug manufacturers in
Europe in the early 1980s. Both allegations are still made
today. But the mere fact that they're repeated so often doesn't
make them true. They are not.
Our biggest battle has been with misinformation. The facts
clearly show that parallel trade is safe. There have been no
adverse consequences for public health. Parallel trade is
thoroughly regulated. All of our importing members hold
manufacturing authorizations. All of our importing members hold
wholesale dealing authorizations. All of our members trade only
in drugs which have European marketing approval in Europe to
common standards.
Every country, except one, in the EU has abbreviated
procedures for double-checking parallel imports. The one
country that doesn't have procedures for allowing incoming
parallel trade is France. So it's interesting that, at least in
one case, France and the U.S. have one thing in common, they
don't allow parallel imports.
[Laughter.]
Mr. MacArthur. But parallel trade can be strictly regulated
with relatively light touch legislation, and it allows only
genuine products that have been approved for marketing
elsewhere to common standards and produced by the same original
brand manufacturers, often in the very same plants.
Parallel trade is totally free of counterfeits, pirated,
and substandard products. During the 25 years plus, 30 years,
there has been not one confirmed case of a counterfeit drug
ever reaching a patient in Europe as a parallel import.
Furthermore, on no occasion has the substantial product
liability insurance that parallel importers are required to
maintain ever been needed.
Parallel trade is the only form of price competition with
patented drugs, the part of the market that generics can't
reach. Its presence, or even just the threat of this, is
sufficient to moderate launch prices by manufacturers and to
curtail subsequent price increases.
Parallel trade brings significant savings to payers and
patients. A recent independent study from one of the world's
leading academic centers for health economics, the University
of York, shows that parallel trade in medicines directly saved
payers and patients the equivalent of almost $750 million in
2002--that's at current exchange rates--in just five EU
countries--U.K., Germany, Netherlands, Denmark, and Sweden.
Parallel trade fits in with the free-market principle. It's
only when I come to the U.S. do I hear about drug prices being
fixed. In Europe, they're not. We have controls through the
reimbursement system, which I gather is the main method here.
The minority of countries allow--have price fixing. The
majority don't.
Two of the countries that have total free markets for
prescription drugs, U.K. and Germany, are able to allow free
pricing because they allow and indeed incentivize parallel
imports.
Parallel trade has absolutely no impact on the ability of
the pharmaceutical industry to invest in R&D. We're fully aware
that the discussion in the U.S. is focused on personal
importation by the Internet and other means, and that Canada is
seen as the main source opportunity. However, parallel trade,
unlike the Internet, can be effectively regulated. It's capable
of handling high volumes of all types of products, benefiting
all patients, rather than the favored few, and supports, rather
than destroys, the local pharmacy and wholesaler
infrastructure.
While the quality of Canadian products is not in doubt, the
same is true of products from the EU, with the EU having the
advantage of much larger scale. At ex-factory prices, the U.S.
drug market in 2002 was worth $196 billion, while Canada was
only $8 billion, one-twenty-fifth of this amount. To achieve
just 10 percent penetration of the U.S. retail drug market
would require an impossible 262 percent of Canadian domestic
sales. In contrast, next year the EU will expand to 25 member
states, the population of almost 500 million, and a drug market
of in excess of $100 billion. But, even more important than
adequate volume and attractive prices, Europe is where proven
expertise in all aspects of parallel trade lies, in sourcing,
quality assurance, regulatory, legal, labeling, transport, and
distribution.
We believe that dialogue with the FDA should be started. We
are already in regular dialogue with the European Medicines
Evaluation Agency. In fact, we have a regular meeting with them
next week. The EMEA, of course, is in dialogue with the FDA.
Let's pool our expertise. We would welcome both members of the
U.S. Congress and the FDA to visit our plants, to look them
over and check our procedures.
In closing, though, I believe that I should say that Europe
has a lot to learn from the U.S., and not least from your
democratic processes and openness. Never once in its existence
has EAPC's views ever been sought out by a European policymaker
in a forum like today. So I thank you for that.
Thank you.
[The prepared statement of Mr. MacArthur follows:]
Prepared Statement of Donald MacArthur, Secretary General, European
Association of Euro-Pharmaceutical Companies
Concern over rising prescription drug prices in the U.S. and in
particular the heavy out-of-pocket financial demands placed on seniors
to maintain regular drug treatment has led to a surge in cross-border
purchases by patients via the Internet and other means. This in turn
has triggered a debate as to whether parallel importation of
prescription drugs from foreign countries should be legalised. The
European Association of Euro-Pharmaceutical Companies (EAEPC) is
delighted to be given this opportunity to contribute to this important
debate. It can best do this by summarising the European experience of
parallel trade with prescription drugs. This experience--gained over
20+ years--clearly shows that parallel trade is
safe,
uses only genuine, regulatory-approved products from
original brand manufacturers,
totally free of counterfeit, pirated and substandard
products,
able to stimulate price competition among otherwise
monopolistic manufacturers,
brings significant savings to payers and patients, and
has no impact on the ability of the pharmaceutical industry
to invest in R&D
It should be emphasised that parallel trade is very different from
personal importation by individual patients, the main cross-border
activity in the U.S. so far. Parallel trade is a large-scale industry,
a highly-regulated and thoroughly professional business-to-business
activity that requires considerable investment in qualified staff,
state-of-the-art facilities and equipment, and rigorous quality
assurance procedures. In 2002 alone, an estimated 140 million packs of
medicines were traded across Europe's internal national borders.
EAEPC member companies have more experience of parallel trade in
prescription drugs than any in the world. They enjoy excellent
relationships with national and EU regulatory authorities in Europe,
and would welcome dialogue with the FDA, other U.S. authorities, as
well as U.S. politicians, payer and consumer groups. Visits to EAEPC
member company facilities across Europe can also be arranged.
EAEPC
Established in 1998 with its registered office in Brussels,
Belgium, EAEPC (www.eaepc.org) is the representative voice of
pharmaceutical parallel trade in Europe. Through national association
or individual company membership it encompasses over 70 firms from 15
of the 18 countries in the European Economic Area (EEA*).
Together these firms account for well over 90 percent of medicines
parallel-traded in the region.
---------------------------------------------------------------------------
\*\ The EEA consists of the current 15 EU member states (i.e.,
Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland,
Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the
United Kingdom) plus Iceland, Liechtenstein and Norway.
---------------------------------------------------------------------------
All products handled by EAEPC members have either national or pan-
European regulatory approval, and are exclusively sourced from and sold
to EEA countries using authorised trade channels. Some EAEPC member
companies have been in business for 20 years and are amongst the top-10
pharmaceutical suppliers to their national markets.
EAEPC's primary aims are to safeguard the free movement of
medicines within the EEA's Internal Market--a principle first laid down
in Article 28 (formerly Article 30) of the European Community's
founding Treaty of Rome and reaffirmed in subsequent Treaties--and to
counteract any attempts to restrict the freedom of choice for the
consumer through trading patterns in breach of EU competition rules
(Articles 81 EC & 82 EC).
The Association believes that free trade will lead to improvements
in health standards through the provision of innovative medicines at
lower cost, benefiting statutory healthcare systems, other third-party
payers, and the public as both patients and taxpayers, as well as
assisting the EU to achieve its objective of a single market.
Parallel Trade: The Basics
What is Parallel Trade?
Parallel trade occurs when products are purchased in a country
where they are cheaper and transported for resale to other countries
where they are more expensive, in competition with the same product
sold by the manufacturer or its local licensee. Parallel trade
increases the effectiveness of the market and consumers enjoy lower
prices as a result. It helps to restrain costs in markets that are not
very price sensitive.
Parallel trade will exist wherever there are price differentials.
It has been ongoing worldwide since goods were first traded and is
found across Europe today with a wide range of branded products,
including such diverse items as motor cars/motor cycles, computers,
cameras, pianos, compact disks, clothing, food and ski equipment (table
1).
Table 1.--Extent of parallel trade within the EU
------------------------------------------------------------------------
------------------------------------------------------------------------
footwear and leather goods <5%
------------------------------------------------------------------------
musical recordings overall 5-10%, some releases up to
20%
------------------------------------------------------------------------
motor cars estimates up to 5%
------------------------------------------------------------------------
consumer electronics around 5%
------------------------------------------------------------------------
domestic appliances <5%
------------------------------------------------------------------------
cosmetics and perfumes around 13% for upper end of market
------------------------------------------------------------------------
Clothing 5-10%
------------------------------------------------------------------------
soft drinks 0-15%
------------------------------------------------------------------------
Confectionery <10%
------------------------------------------------------------------------
alcoholic drinks <5%
------------------------------------------------------------------------
Source: NERA & SJ Berwin, 1999\1\
For parallel trade to be possible, four preconditions must be met:
there must be unrestricted free trade between the countries
involved;
there must be substantial differences between the prices of
identical goods in these countries;
the costs of transport in relation to the cost of goods must
be low;
the distribution of goods must be entirely separate from
their manufacture.
All these conditions are found in the case of prescription
medicines in the EEA. Yet, in the context of the penetration by
parallel trade with other goods, the overall level with medicines is
unremarkable. Various estimates by independent economic
consultants2,3 on the share of the prescription
pharmaceutical market in the EU taken by parallel-traded products from
1990 through to 2000 have consistently arrived at a figure of 2
percent. EFPIA estimates put the 2002 penetration at 4 percent.
Why Do Price Differences with Medicines Occur?
Pricing of prescription medicines and controlling access to
reimbursement via social health insurance schemes are purely national
responsibilities throughout Europe. Today and for the foreseeable
future, these tasks remain in the hands of individual member states,
subject only to the condition that the methods they employ are
transparent and to do not discriminate by country of origin.
Willingness and ability to pay, medical and prescribing practices,
the balance of supply-side versus demand-side cost containment
interventions, and even value judgements in healthcare differ between
countries, and therefore so do prices. Further important factors are
inflation differences and currency fluctuations outside the euro-zone.
An exacerbating issue is a proactive policy of price
differentiation undertaken by many international pharmaceutical
manufacturers. As commercial enterprises, companies naturally aim to
obtain the highest price each national market will bear, and so
discriminate between countries to reflect differences in the ability to
pay. Price differentiation is known to yield higher profits than
uniform pricing. Companies also control the sequence of launches across
Europe so as to limit the opportunities for the authorities to depress
these prices in major markets through application of international
price referencing.
A number of surveys, some repeated year-on-year, have shown
considerable inter-state price differences for the same or very similar
product. Such differences are found regardless whether comparisons are
made at the price the manufacturer sells the medicine to wholesalers,
or at the cost that social health insurance has to meet, which includes
margins for the wholesaler and the pharmacy, plus, in most countries,
value-added tax.
Is it Legal?
Yes, parallel trade is completely legal. A core objective of the
Treaty of Rome is the creation of a single, Internal Market through
which goods, services, people and capital--the ``four freedoms''--can
freely pass. Article 28 of the EC Treaty provides that:
`Quantitative restrictions on imports and all measures having
equivalent effect shall be prohibited between member states.'
A direct consequence of free movement is the classic Cassis de
Dijon doctrine of the European Court of Justice (ECJ),\4\ that a
product lawfully placed on the market of one member state must be
allowed to circulate freely throughout the EU. This principle was later
extended to the three European Free Trade Area countries--Iceland,
Liechtenstein and Norway--that together with the present 15 EU member
states makes up the EEA.
Pharmaceutical parallel trade in Europe is strictly limited--in
terms both of where the products are sourced and where they are finally
sold--to within the EEA. Therefore the term ``parallel import'', in a
European context anyway, is now redundant. Trade between EEA member
states is no longer classified as imports or exports, rather it merely
represents the free movement of goods within a single European
marketplace having no internal borders.
The products that are traded may be patented, or marked with the
originator's trade mark or brand name. Such intellectual property
rights attached to goods are regarded as having been exhausted. The
principle of exhaustion of rights (sometimes referred to as `the first
sale doctrine') is that once a product is legally placed on the market
in a country within the EEA by the owner of the rights, or with the
owner's consent, the owner cannot use these rights to hinder the
further sale of the product elsewhere within the EEA, except in very
exceptional circumstances.
Pharmaceutical parallel trade has been supported by the European
Commission since its outset and by an unbroken series of almost 30 ECJ
judgements.\5\
How Does it Work?
Parallel traders buy medicines from well-established, authorised
pharmaceutical wholesalers in countries where the products are cheaper.
If the parallel trader has obtained a specific authorisation from the
government in the country of destination for the product concerned, it
can be resold there to wholesalers or direct to pharmacies, in parallel
with the same medicine sold by the manufacturer's subsidiary or its
licensee.
Parallel traders do not manufacture any medicines themselves, but
merely adapt the labelling--and perhaps the packaging--to meet local
requirements under government supervision according to national law.
This adaptation process includes removing the original patient package
inserts and replacing them with others giving the same information in
the local language.
Parallel traders do not deal directly with the public. All
transactions are done through authorised trade channels, and the
pharmacist--who effectively is in the position to buy the same product
at two different prices--dispenses it to the patient in the normal way.
Parallel traders take pride in being reliable, responsible and
professional business partners for wholesalers and for pharmacists in
community and hospital practice. Great importance is attached to
consistently making available a broad range of products, in all package
sizes and strengths, and to ensure that only the most up-to-date
product information is supplied. In some cases, additional features
beneficial to patients, such as Braille labelling, is added by parallel
traders.
The products that enter into parallel trade are surplus to local
needs. Wholesalers in the supplying states are naturally obliged to
meet domestic demand first; if they didn't, given the level of
competition between wholesalers for pharmacy customers, they would not
remain in business long. Most countries also impose, through national
law or a voluntary code of conduct, a so-called `public service
obligation'. This requires wholesalers to guarantee to keep an adequate
range of medicines in stock and to deliver over the whole of their
normal area of operation all supplies requested within a very short
time period.
What are the Economics?
It is impossible to generalise as to the level of price
differential between member states sufficient to trigger parallel
trade. To a trader, a small margin on a best-selling product may be
equally acceptable to a larger margin on a low volume product. There
are also other important considerations, especially availability and
maintenance of supply. Parallel trade is constrained much more by
supply than by demand.
The gross margin for the parallel trader does not, of course,
represent profit. He has first to meet costs associated with regulatory
compliance, purchasing, transport, warehousing, insurance, repackaging,
quality assurance, distribution and promotion.
As with any other supplier, the parallel trader also has to cover
the costs of the distribution chain and provide it with an appropriate
level of profit. The margin structure of pharmacists in many member
states is based on a linear scale. This provides a perverse financial
disincentive to dispensing lower-cost products, and the impact of this
has to be taken into account by parallel traders when negotiating terms
with the trade.
Patients throughout Europe expect to take a doctor's prescription
for any one (or more) of literally thousands of products into their
local community pharmacy and receive it (or them) with minimal delay.
Modern medicines can be very costly and no pharmacy could either afford
the funds or find the space to keep in stock the entire range. The
wholesale network or the parallel trader's own distribution system acts
as the vital intermediary, but maintaining multiple daily deliveries
all year round to tens of thousands of pharmacies is itself associated
with high costs.
Finally, a large part of the price advantage that the parallel
trader has achieved through prudent purchasing must be passed on to
whosoever pays the bill--normally, the social health insurance system
or national health service. The price charged for a parallel-traded
product is always less than that for the domestic version. If this were
not the case, the entire raison d'etre of parallel trade would cease to
exist, as would the trade itself.
Just What the Physician Ordered
It is accepted that a part of the medicines market in every member
state--a part that makes a disproportionately large and growing
contribution to overall costs--consists of branded preparations under
patent, where there is either no therapeutic alternative at all or only
limited interchangeability in respect of particular patients. Different
active ingredients within the same therapeutic category often affect
individuals in different ways. Moreover, doctors, if persuaded by the
merits of a branded product, are reluctant to switch on cost grounds
alone to even a closely similar variant because of the risk of lower
efficacy, poorer tolerability or allergy. Patients, too, prefer the
familiarity of their usual brand.
A patent confers a monopoly and, by definition, a monopoly denies
the right for the forces of competition to effectively work for the
benefit of consumers. Parallel trade is the only form of competition to
any specific medicine during the life of its patent.
Parallel trade offers a real solution to the funding problem that
all European healthcare systems increasingly face. It provides, along
with guaranteed cost savings, the original products from innovative
research-driven manufacturers, not substitutes or copies. It also
minimises the implementation of other, more interventionist or market-
distorting cost-containment measures.
Which Countries are Involved?
There are many decades of experience with incoming parallel trade
in the Netherlands, the United Kingdom and Germany. Since the early
1990s, Denmark followed by most of the other Nordic countries and
Ireland have been added to the list, with a small number of parallel-
traded products appearing most recently on the markets of Austria,
Belgium, Italy, Spain and Greece. As regards supplying states, no one
source is dominant, either as a whole or where any individual product
is concerned.
No official figures on the trade are gathered and conjectures about
its size in different member states vary widely. Estimates of the
extent that parallel trade has penetrated national pharmaceutical
markets, obtained from mainly manufacturer sources, are shown in table
2.
Table 2.--Approximate parallel trade retail pharmaceutical market
penetration by value, 2002
------------------------------------------------------------------------
Country % share source
------------------------------------------------------------------------
Denmark 10.2 LIF \6\
------------------------------------------------------------------------
Germany 7.1 IMS
------------------------------------------------------------------------
Netherlands 13.3 SFK \7\
------------------------------------------------------------------------
Norway 6.3 LMI \8\
------------------------------------------------------------------------
Sweden 9.3 (2001 figure) LIF \9\
------------------------------------------------------------------------
United Kingdom 16.5 IMS
------------------------------------------------------------------------
Some of the tougher recent cost-containment measures have been
imposed in the traditional free markets of Denmark, Germany, the
Netherlands and the UK. At the same time, some former low-price
countries, like France, Italy and Spain, are now awarding higher prices
than previously, due to the authorities referencing against prices in
other countries and because of ``European price corridor'' strategies
by multinational companies.
The result is that some prices in a ``low-price'' country are
higher than those for the same product in a ``high-price'' country.
Prices are also relatively fluid, being affected by exchange rate
variations and by subsequent price movements.
What is certain is that parallel trade with medicines is no longer
a simple south-north process, or even one-way. Almost all EEA countries
are involved, as the product source or the product destination; indeed,
many countries simultaneously act, with different products, as both
source and destination. Attempts by some manufacturers to stifle the
trade by applying supply quotas to wholesalers have, paradoxically,
lead to its spread across Europe. Whereas five years ago a parallel
trader in Germany, for example, might have sourced a particular brand
from a single country, today the figure can be eight or more source
countries.
Parallel trade consequently boosts intra-Community trade. Indeed,
the European Commission views it as decisive vehicle for the completion
of the EU Internal Market in medicines:\10\
`Parallel trade acts an important driving force for market
integration where there are important differences in prices
between Member States.'
Parallel Trade: The Safeguards
As befits their special position with the maintenance of human
health, all medicines--including parallel-traded ones--are strictly
regulated in Europe by either national authorities or by the European
Agency for the Evaluation of Medicinal Products (EMEA).
A number of EU Directives and Regulations have been adopted over
the years with the aim of removing barriers to trade in medicines while
ensuring that public health was not endangered. None has dealt
specifically with parallel trade. It was left instead to the European
Court to play a key role in establishing and regulating this sector.
De Peijper Judgement
The most important test case to establish the regulatory position
arose in the Netherlands in the early 1970s. A Dutch parallel trader,
Adriaan de Peijper of Centrafarm, was prosecuted for importing a
medicinal product from a wholesaler in the UK without the approval of
the Dutch authorities, and without possessing either the product
marketing approval documents or the batch records. De Peijper argued
that he was unable to adduce such evidence because the manufacturer
would not give him access to the necessary data. The product was
authorised in both the Netherlands and the UK, and the Dutch court
referred the matter to the ECJ.
The Court found in favour of the plaintiff; asking him to produce
the records demanded by the Dutch authorities was held restrictive:\11\
``National rules or practices which make it possible for a
manufacturer of the pharmaceutical product in question and his
duly appointed representative, simply by refusing to produce
the documents relating to the medicinal preparation in general
or to a specific batch of that preparation, to enjoy a monopoly
of the importing and marketing of that product, must be
regarded as being unnecessarily restrictive.''
The Court felt that as the relevant documentation was already held
by one set of authorities, they should co-operate in making these
available on a reciprocal basis, and that member states should develop
a presumption of conformity. If the parallel-traded and the domestic
versions were slightly different it was up to the authorities to
investigate whether this was therapeutically significant.
The only measures which a national regulatory authority were
justified in taking as regards parallel trade, the Court said, were
those intended to verify that such products were identical with the
version already marketed in that country by the domestic trade mark
owner, or that the difference had no therapeutic effect.
``Public health authorities should be encouraged `not' to place
parallel imports at a disadvantage, since the effective
protection of health and the like of humans also demands that
medicinal preparations should be sold at reasonable prices.''
\11\
This was to guard against unnecessary over-regulation as the
products had all been previously approved by the regulatory
authorities. Parallel trade makes modern, innovative medicines more
affordable, while an unaffordable medicine is neither safe nor
efficacious.
Commission Communication
Following the de Peijper judgement, the European Commission
produced a Communication outlining the basic principles for an
abbreviated form of marketing authorisation for parallel-traded
medicines.\12\
The Commission recommended that the information supplied to the
national authorities by the parallel trader should just be sufficient
to ensure that the product concerned is effectively covered by an
existing authorisation in the member state of destination.
In relation to the product sold by the domestic holder of the full
marketing authorisation, the parallel-traded version must therefore:
contain the same active ingredient(s);
be administered to patients through the same route;
have the same therapeutic effects; and
have a common origin (i.e., made by, or under licence to,
the same company, or a member of the same group of companies)
Detailed information is obtained from the authorising authority in
the country of origin to allow full comparison with the domestic
version. The parallel trader is required to provide as a minimum:
the product name and where it is sourced;
the name and address of the holder of the full marketing
authorisation, both in the member state of origin and in the
member state of destination;
the name and address of the parallel trader;
the product's marketing authorisation number in the source
country;
the product's summary of product characteristics;
specimens or mock-ups of the product in the form in which it
will be sold in the member state of destination; and
the appropriate fee.
A ``reasonable period'' (a maximum of 45 days was suggested) after
receipt of such information should be adequate to assess it, the
Commission said. In practice, the assessment period facing parallel
traders in several countries is often very much longer. All EEA
countries--with the notable exception of France--that are actual or
potential destinations for parallel trade now have national rules based
on the Commission Communication in place. Every parallel-traded product
is required to have its abbreviated marketing authorisation number
issued by the national authority and the name of the owner of that
authorisation clearly labelled on the pack. If the manufacturer makes
any change to the product or its labelling, parallel traders have to
quarantine any stock they hold until they obtain regulatory approval
for the necessary variation. Pharmacists who supply unauthorised
products are open to disciplinary action.
EMEA Approvals
A compliance check is used by the EMEA on the request of a parallel
trader for high-tech or biotech medicines that have already received
centralised, pan-European marketing approval by the Agency.\13\ Such
products are, by definition, identical in every respect across the EU,
with the Community marketing authorisation covering all linguistic
versions of the label and package insert. As a result no further
regulatory approval is necessary before parallel distribution takes
place.
What Other Regulations Apply?
As one of the conditions for their abbreviated marketing
authorisations, parallel traders are required to keep records of the
origin, quantity and batch numbers of all products they sell, as well
as to retain a sample from every issued lot. An authentic reference
sample is also kept for every presentation against which every incoming
batch is checked.
If as is usual they are involved in modifying the outer packaging
to enable the product to enter the local supply chain parallel
importers need a manufacturing authorisation, with all the usual
obligations this entails (e.g., employment of an EU Qualified Person,
maintenance of Good Manufacturing Practice standards, periodic
government inspection). Under manufacturer liability provisions,
parallel traders in several countries are required to maintain
substantial insurance cover, yet this has never once been needed.
In most countries, it is also a requirement for parallel traders to
hold a wholesale dealing authorisation, as well as a manufacturing
authorisation, if pharmacies are supplied direct. Granting of such an
authorisation is conditional upon compliance with a number of EU-set
requirements and Good Distribution Practice guidelines, including:
maintaining suitable premises for the storage of medicines;
employment of an EU Responsible Person;
restrictions upon the sources and supply of such products;
maintenance of the cold chain for temperature-sensitive
products;
establishment of approved product recall procedures;
record keeping requirements, in addition to maintaining
measures to ensure an audit trail for product traceability
Parallel Trade: The Savings
Parallel trade can only be realised in case of demand and demand
would not exist if the parallel trader did not pass on a large part of
the price differential to the payer. Across Europe, payers for
prescription drugs are primarily national social health insurance
schemes/national health services, though, except with the very young,
the elderly, the unemployed and the chronically-ill, there is also
usually an element of patient co-payment.
Direct savings accrue in every member state with incoming parallel
trade. The European Commission, in its 2003 Communication following the
G10 process, described these savings as ``significant''. This is
because national governments and/or their national health providers
have introduced measures to incentivise the use of and guarantee
savings from parallel trade. How these measures apply and how the
savings are split between the statutory healthcare system and patient
vary by country.
``The UK reimbursement system with fixed reimbursement fees and
its clawback system de facto provides an incentive for
intermediaries and pharmacies to purchase cheaper parallel-
traded drugs. It has also been shown that other Member States
give more specific incentives to parallel trade, in order to
achieve cost savings for the healthcare budget. Denmark,
Germany and Sweden serve as an example.'' \14\
An independent study by health economists at the UK's University of
York estimated that direct savings accruing to payers and patients from
pharmaceutical parallel trade in 2002 in the UK, Germany, Sweden,
Netherlands and Denmark totalled the equivalent of $734 million (at
current exchange rates).\15\ This figure does not include hospitals,
the private sector, or other countries with incoming parallel trade
like Norway, Finland, Ireland and Austria.
In addition to direct savings in all countries that realise
incoming parallel trade, there is also general price erosion,
benefiting all buyers. This is because parallel trade brings an
important competitive element to bear, especially in the notoriously
price uncompetitive patent-protected segment, the part of the market
that generics cannot reach.
``. . . parallel trade. . .that is the nearest to price
competition in drugs that Europe gets.'' Kenneth Clarke (former
UK Health Secretary), UniChem conference, Mauritius, 2002
``For a manufacturer to enjoy a monopoly of the importing and
marketing of the product must be regarded as unnecessarily
restrictive.''\12\
``Patented medicines enjoy patent protection for at least 20
years. In cases where only a few alternatives are available,
parallel trade will offer the only source of competition.''\15\
The availability of parallel-traded products, or even just the
threat of this, can result in lower prices for domestic equivalents
than would otherwise be the case. Market prices are reduced and/or
price rises forgone, and greater discounts or improved terms are
offered to distributors in an attempt to buy their loyalty.
``Parallel trade also generates indirect savings by creating
competition, whereas otherwise there is none, and thus forcing
pharmaceutical manufacturers to reduce the prices of
domestically sourced products. These indirect savings are
difficult to quantify but they could be larger than direct
savings.''
Governments which cap reimbursement for multisource products are
also able to set lower reimbursement ceilings when parallel-traded
versions are available.
What are the Benefits to the Patient?
Patients as taxpayers or as members of health insurance funds have
a clear interest in seeing their hard-earned contributions well spent
by the statutory healthcare system.
``Ultimately, all patients pay for the national health system.
Public health systems are financed by contributions or by
general taxes. Any savings made by these schemes via the
purchase of cheaper parallel-traded drugs indirectly benefit
the schemes' members.''\15\
In many European countries (e.g., Belgium, Denmark, Finland,
France, Greece, Luxembourg, Norway, Portugal, Spain, Sweden), the
majority of patients pay a share of the cost of prescribed medicines
they consume, so use of cheaper parallel-traded products will mean
lower out-of-pocket demands.
``Patients benefit directly from parallel trade either when
they have to pay the full amount of the purchase price
themselves or when reimbursement is only partial and is
expressed as a percentage of the actual purchase price (in
contrast with a flat fee).''\15\
Some member states employ forms of reference pricing (similar to
`maximum allowable cost' in the US), in which interchangeable products
are grouped with the amount reimbursed by the statutory healthcare
system capped at some predetermined amount per group. If a parallel-
traded product is dispensed the patient may avoid paying any excess
payment that would otherwise be due.
With the growing use of so-called ``lifestyle drugs'' (e.g.,
treatments for erectile dysfunction, smoking cessation aids, hair
restoratives, slimming agents) as well as oral contraceptives--products
that are not widely if at all reimbursed--the consumer makes a direct
saving from the cash purchase of a parallel-traded medicine on private
prescription.
Parallel Trade Myths & Reality
Against an obvious background of commercial interests, it is the
aim of some international pharmaceutical manufacturers to keep the
market share of parallel-traded products as low as possible by
obstructing inter-state movement. Initiatives taken include:
supply quota-fixing measures
price corridor strategies
dual pricing strategies
market segmentation practices
variable pack size
variable brand name
variable form of administration
different packaging
selective distribution
targeting with legal actions
Such attempts are invariably in vain, for, as the Competition
Directorate-General of the European Commission has said:\16\
``On several occasions the Court of Justice has ruled that
parallel imports should not be blocked, irrespective of the
factors that determine price differences. Hence, in the
pharmaceutical sector, the Commission has correctly applied the
competition rules to agreement or conduct which restrict
parallel trade in drugs.''
The EAEPC believes that criticism and resistance from some quarters
is based on a misunderstanding of the actual facts. This section aims
to dispel some of the erroneous folklore that has developed around the
topic.
Myth: ``The dogma of free movement within the internal market is
incompatible with price-fixing by national governments''
Fact: The ECJ has stated quite clearly that existing inter-state
price differences with medicines cannot justify a derogation from the
principle of free movement, even if such differences result from price
controls imposed by member states.\17\
Despite this ruling, manufacturers continue to argue that a
correctly working market entails not just the free movement of
products, but also the freedom to set prices. This viewpoint ignores
today's reality:
Only a minority of member states still exert direct price
control on new prescription medicines at the level of the
factory gate. Instead, the preferred approach, adopted across
the entire EEA in various country-specific ways, is to limit
access to the public reimbursement system or curtail payments
made under it.
Even where actual price control still exists, the
authorities no longer price by inflexible formulae, and allow
instead a true negotiation, by which a company's asking price
for its key brands is increasingly accepted, sometimes in
return for offsets elsewhere.
``. . . given the fact that companies actually negotiate the
prices with the Spanish government and manage to achieve price
increases by invoking one or more of the justifications set
forth in the relevant Royal Decree, it is too simplistic to
regard pharmaceutical companies as price takers because the
national competent authorities set maximum prices.'' \14\
Payers are primarily concerned with keeping the growth in the total
cost of the drugs bill under control and give considerable commercial
freedom to companies to set individual product prices as long as
overall budgetary limits are respected. Various types of `deals'
concluded by multinational firms so as to achieve comparable prices for
their new potential blockbusters with those in other countries have
resulted. These may include, for example, provision of the results of a
cost-effectiveness study, volume sales caps, prescribing or advertising
restrictions, delayed price cuts, or immediate price cuts and/or
reimbursement delistings with other, unrelated but ageing products in
its portfolio.
Other arrangements, agreed by national associations on behalf of
their members, make provision for cash paybacks by industry as a whole
if the growth in the drugs budget exceeds pre-set limits. These allow
prices higher than otherwise on individual products to be agreed in an
environment of cost containment. Such schemes are in place in Belgium,
France, Portugal and Spain, and formerly applied in Italy.
Myth: ``Patients will be frightened and confused by foreign
language packs''
Fact: Labelling of parallel-traded medicines is fully in accordance
with EU and country-specific legislation. This includes provision of a
label and a patient package insert in the local language, whose texts
have been approved by the national regulatory authority.
In some cases, one or more self-adhesive over-labels will be
applied to the original cartons, though in other circumstances the
parallel trader will totally replace the carton by a new one giving the
required information only in the local language. This latter situation
might occur, for example, when the manufacturer markets the product
with different pack sizes in different countries, where the amount of
information to be provided on the label is extensive, or to enhance
patient compliance.
Any repackaging done by the parallel trader is performed under
strict GMP conditions and affects only the outer container; the actual
dosage form is entirely untouched. Almost all solid dosage forms in
Europe are blister or foil wrapped before inclusion by their
manufacturer in patient packs; dispensing from bulk is very rare.
The ECJ has laid down the circumstances under which repackaging can
be undertaken:\18\
the product inside the packaging must not be affected;
the new packaging must clearly state who repackaged the
product and the name of the manufacturer;
the reputation of the trade mark or its owner must not be
damaged; and
the trade mark owner must be given adequate prior notice
before the repackaged product is put on sale and, on demand, be
supplied with a specimen of the repackaged product.
Many parallel-traded dosage forms are identical in appearance with
the domestic version. In other cases, as also happens quite frequently
with generic medicines, the shape and colour may vary. In a very few
cases the additives are different. This may require explanation by the
pharmacist to the patient and checks for intolerance. Some patients may
not be suitable to receive parallel-traded products. As the expert on
medicines, the pharmacist is well qualified to conduct screening, and
to give the necessary advice and reassurance.
The considerable market shares, of well over 50 percent, achieved
and maintained by certain individual parallel-traded products in
certain countries, provide clear proof of their high level of
acceptance by patients.
Myth: ``Doctors would prefer their patients to receive locally-made
rather than foreign products''
Fact: Today, in the majority of EU member states, the source of
production of most medicines is in other member states. To save costs,
companies have consolidated manufacturing into a handful of sites to
serve the entire continent. Several are situated outside the EU. Most
specialise as ``centres of excellence'' for particular types of dosage
forms. In such cases, ``parallel imports'' compete with `direct
imports' The motivation for the manufacturer is the same as for the
parallel trader--to exploit lower costs.
Myth: ``Manufacturers will withhold new introductions from
countries that supply parallel trade''
Fact: There is no evidence of this. It seems unlikely, as the main
supplying countries are typically high-volume users of medicines and
hence attractive markets for industry.
Myth: ``Parallel trade will deter the search for new cures''
Fact: There is no link between parallel trade and investment in R&D
European patients are best served not only by having access to the
lowest possible prices for today's first-choice treatments but also by
assuring that a stream of new innovations continues to emerge from
research and development pipelines to tackle unmet medical needs.
Diversion of sales from one European country to another with parallel
trade has not, however, led to the research-based industry cutting back
on R&D. In fact, just the opposite; spend on pharmaceutical R&D in
Europe grew more than three-fold from 1985 to 1999.\19\
With the market share of parallel trade in its peak year of 2002
amounting to only 4 percent EU-wide, this cannot influence investment
in R&D.
`There does not appear to be any causal link between the losses
due to parallel trade and GlaxoWellcome's R&D investments.
Moreover, these losses are too insignificant to affect these
investments to a considerable extent. Finally, it must be
stressed that the R&D budget of pharmaceutical companies, while
important, only represents around 15 percent of their total
budget. Losses stemming from parallel trade could just as well
be deducted from the companies other budget items, such as
marketing costs.
. . . Any savings they might hypothetically make by preventing
parallel trade would therefore not automatically lead to higher
R&D investments. It is conceivable that these savings might
merely be added to the companies' profits.'\14\
An independent consultant \20\ has put total direct losses to
manufacturers from parallel trade across Europe at about Euro 500
million per year, roughly the same as one company's costs in
discovering, developing and launching a single new active ingredient,
he noted. Manufacturers also incur considerable self-inflicted costs
(e.g., lower sales volume, loss of customer goodwill, legal costs) in
their attempts to prevent parallel trade.
There is no evidence that capital investment or competitiveness is
affected either. Europe's pharmaceutical trade surplus with the rest of
the world increased fourfold between 1985 and 1999.\19\
Myth: ``It acts as a channel for counterfeit, pirated or
substandard products''.
Fact: Parallel traded medicines are the products of the original
manufacturers, often from the very same plant that produces the
domestic versions. They are either exactly identical, or with very
small differences in colour or inert excipients, differences which the
regulatory authorities verify have no therapeutic consequences. If a
manufacturer criticises a parallel-traded product it amounts to
criticism of its own product.
Handling, transportation and storage of medicines by parallel
traders are strictly in accordance with the conditions given in the
product's marketing authorisation, and this includes adhering to any
cold chain or narcotic requirements.
Counterfeiting is a totally different subject to parallel trade.
There is, in fact, very little evidence that counterfeit medicines are
traded by any means in Europe. A 1999 survey published by the European
Commission found the proportion actually on the market was, after the
U.S., the lowest in the world.\21\ In 2001, the Medicines Control
Agency described the level of pharmaceutical counterfeiting in the UK
as ``virtually undetectable''.\22\ One of the main reasons is that the
system works effectively in a closed loop: Authorised manufacturers
sell only authorised product to authorised wholesalers, who sell only
to authorised pharmacies, hospitals and dispensing doctors. Parallel
traders use the same distribution channels used by domestic products.
As far as can be ascertained there has never been a single, proven
case of a counterfeit medicine leaving the parallel trade supply chain
in Europe. Certainly, none has been reported in the two largest markets
for incoming parallel trade--the UK and Germany; in the case of the
latter, the government has recently verified this fact.\23\
Parallel traders take the strictest precautions. For a start, they
source only from authorised, reputable wholesalers/traders in other EEA
countries with whom they have had business dealings for many years. All
incoming batches are compared against authentic reference samples, and
multiple checks against photos of authentic products, package texts and
leaflets are made at different stages of the process. In addition to
the quality assurance procedures agreed between the trader's local
medicines inspectorate and its Qualified Person, voluntary ones are
often instigated, e.g., UV detection of holograms on some packs from
Greece, and re-assay of vaccines in Germany by the Paul Erlich
Institute.
It is not unknown for parallel traders during their routine checks
to detect defects in products and to report these to the manufacturer
and regulatory authority concerned. As the only checks made in practice
on a medicine after it leaves the manufacturer are those conducted by
parallel traders, the likelihood of a patient receiving a counterfeit
product is actually less not more with parallel trade.
Myth: ``Parallel trade will damage Europe's industrial base''
Fact: For many years, leading manufacturers have predicted they
will be damaged or even eliminated, not only by parallel trade, but by
the likes of price controls, heavy-handed regulation and by generic
competition, but the sector has not merely survived it has flourished.
``Conclusive information on the economic effect of this
(parallel) trade on the British pharmaceutical industry is not
available, given the uncertainty surrounding such factors as
the profits made on sales to the country which is the source of
imports and other discounts offered by manufacturers in the
United Kingdom.''\24\
As well as offering competition to the domestic trade mark owner,
the parallel trade sector is itself highly competitive, with up to 30
active players per country, each offering different terms. Together
they provide employment to thousands of staff. Management is highly
qualified, with extensive experience often gained in large
pharmaceutical companies or in community pharmacy.
Many firms also have a strong platform to participate in the
development of generic medicines, a sector that--with the active
encouragement of several national governments--is forecast to grow
strongly over the next decade, enhancing price competition with patent-
expired molecules to the benefit of payers and patients. To further
extend the continuum, some parallel traders have evolved into fully-
fledged pharmaceutical companies, with a portfolio that includes
original products and investment in R&D.
References
1. NERA and SJ Berwin & Co: The Economic Consequences of the Choice
of Regime of Exhaustion in the Area of Trademarks, Report for DG XV of
European Commission, London, 1999
2. Burstall M and Senior I: Undermining Innovation: Parallel Trade
in Prescription Medicines, IEA Health and Welfare Unit, London, 1992
3. Senior I: Parallel Importance, Pharmaceutical Marketing,
September 2000, pp 44-46
4. Cassis de Dijon ECJ case, 1979, ECR 649
5. Macarthur D, Drawing the lines in parallel trade, Scrip
Magazine, July/August 2002, pp 20-22
6. Laegemiddel Industri Foreningen (LIF), the Danish Association of
the Pharmaceutical Industry
7. Stichting Farmaceutische Kengetallen (SFK): Facts and Figures
2002
8. Legemiddelindustriforeningen (LMI), the Norwegian Association of
Pharmaceutical Manufacturers: Farmastat
9. Lakemedelsindustriforeningen (LIF), the Swedish Association of
the Pharmaceutical Industry
10. Commission Communication on the Single Market in
Pharmaceuticals, 25 November 1998
11. Officer van Justite vs de Peijper, ECJ case C-104/75, 20 May
1976, ECR 613
12. Commission Communication on Parallel Imports of Proprietary
Medicinal Products for which Marketing Authorisations have already been
granted, C115/5, Official Journal of 6 May 1982
13. Procedure for Notifications of Parallel Distribution of
Centrally-authorised Medicinal Products, March 1999, EMEA, London
14. Commission Decision of 8 May 2001 relating to a proceeding
pursuant to Article 81 of the EC Treaty, IV/36.957/F3 Glaxo Wellcome
(notification); IV/36.997/F3 Aseprofar & Fedifar (complaint); IV/
37.121/F3 Spain Pharma (complaint); IV/37.138/F3 BAI (complaint); IV/
37.380/F3 EAEPC (complaint)
15. West P & Mahon J, Benefits to Payers and Patients from Parallel
Trade, York Health Economics Consortium, May 2003 (www.yhec.co.uk).
16. XXVth Report on Competition Policy, European Commission, COM
[96]126 final
17. Merck vs Primecrown, joined ECJ cases C-267/95 & C-268/95
18. Joined ECJ cases C-427/93 (Bristol-Myers Squibb vs Paranova),
C-429/93 (Boehringer Ingelheim vs Paranova) and C-436/93 (Bayer vs
Paranova)
19. The Pharmaceutical Industry in Figures, EFPIA, Brussels, 2001
Edition
20. Senior I, speaking at an open forum `Parallel Trade in European
Pharmaceuticals', 6 September 2000, Vision in Business Conferences,
London
21. Communication on Counterfeiting and Piracy in the Single
Market, 30 November 2000, European Commission, Brussels
22. Dr Gordon Munro of Medicines Control Agency, quoted in
`Inspection and Enforcement under the Medicines Act,' Pharmaceutical
Journal, 20 January 2001, pp 85-88
23. Deutsche Apotheker Zeitung, 6 November 2003, p 20
24. Written reply to UK Parliament by Under Secretary for Health,
David Lammy, 4 November 2002
Glossary of Abbreviations
EAEPC--European Association of Euro-Pharmaceutical Companies
EC--European Community
ECJ--European Court of Justice
EEA--European Economic Area
EMEA--European Agency for the Evaluation of Medicinal Products
EU--European Union
GMP--good manufacturing practice
R&D--research and development
The Chairman. Thank you for coming, Mr. MacArthur. I think
you've contributed a great deal and given us perhaps some
avenues that we might pursue, and we thank you.
And, from Fargo, North Dakota, Mr. Lubka. How cold is it in
Fargo today?
Mr. Lubka. It's like early spring.
The Chairman. Oh, good.
[Laughter.]
Mr. Lubka. Global warming.
[Laughter.]
The Chairman. We're happy to see you here, sir. I think you
have known Senator Dorgan in the past, so there are several
things you don't want to reveal about him to the Committee.
[Laughter.]
Senator Dorgan. Mr. Chairman, if I might just say, again,
that I went to Canada on a trip, and Mr. Lubka accompanied me
and understands firsthand the differences in pricing between
the U.S. and Canada on the identical prescription drug.
The Chairman. Thank you.
Mr. Lubka, you're welcome here, and we appreciate the input
of people like yourself, who face these challenges on a day-to-
day basis. Please proceed.
STATEMENT OF LEWIS LUBKA, SENIOR CITIZEN, ON BEHALF OF ALLIANCE
FOR RETIRED AMERICANS
Mr. Lubka. Chairman McCain and Members of the Commerce,
Science, and Transportation Committee, thank you for holding
this hearing today on the impact of prescription drug
importation on consumers.
My name is Lewis Lubka. I live in Fargo, North Dakota. I am
here today representing the Alliance for Retired Americans. The
Alliance is a national organization of over three million
members that works to create an America that protects the
health and economic security of seniors, rewards work,
strengthens families, and builds thriving communities. It was
launched in January 2001, by a national coalition of labor
unions and community-based organizations dedicated to improving
the quality of life for retirees and older Americans.
I'm 77 years of age, and take at least three prescriptions
at any given time. Between Myocalcin and Fosamax for
osteoporosis, and Synthroid for my thyroid, I spend well over
2,000 a year on my prescriptions. I have purchased my drugs in
Canada to help defray these costs. This was a trip that was
organized by Senator Dorgan.
I saw my doctor, in Fargo, who wrote out my prescriptions,
brought them to a doctor in the City of Emerson, which is a
little ways over the border. After I saw the Canadian doctor, I
took the prescriptions to a Canadian pharmacy located in the
same building. I brought $300 in cash. I wished I'd a brought a
lot more. I came back with about $800 worth of prescriptions.
And I never got sick or--I mean, it was just like what I had
been taking right along.
I feel completely safe in taking medications from Canada.
The Alliance for Retired Americans has made more than 20 trips
to Canada, from states stretching from coast to coast, serving
hundreds of riders. No one has ever reported getting sick or
had any adverse effects from taking these medications.
I'm a veteran of World War II. I was a paratrooper in the
82nd Airborne Division. As a former welder and then a
professor, I am an ex-shipyard worker, ex-assembly line worker,
and ex-steelworker, as well as retired member of the NEA,
National Education Association. I have lived all over this
country, seen many people, and witnessed a lot in my lifetime.
I worked in a Hoboken, New Jersey, shipyards at Bethlehem Steel
repairing the Stockholm after it collided with the Andrea
Doria. I worked for General Electric, in Kentucky, before
becoming a professor at North Dakota State University. I have
always been a human rights activist, and was a part of Martin
Luther King's civil rights movement. I'm still working for
human rights.
Senators, I know right from wrong. The bill that is coming
out of the conference committee is not good for retirees. It
does nothing to contain the skyrocketing prices of prescription
drugs. In fact, it forbids Medicare from using the purchasing
power of 40 million beneficiaries to negotiate the best drug
prices.
The Federal Government currently bargains for the best
prices for the Department of Veteran Affairs, the Department of
Defense, and the Indian Health Service Systems. There is no
logic on why Congress would forbid Medicare from doing the
same. Seniors and all taxpayers are the losers.
This bill caters to the pharmaceutical industry by
unnecessarily preventing American citizens from getting their
drugs in Canada, where they are safe and affordable. I have
never seen anyone get sick from taking a drug imported from
Canada, but I have seen many people suffering from high drug
prices that they cannot afford. Drugs from Canada are just as
safe as American drugs. In fact, many of the drugs from Canada
were made in the USA.
Members of the Committee, I'm here today to ask that you
enact a drug benefit that allows drugs to be imported from
Canada, without loopholes that permit the Department of Health
and Human Services to stop safe reimportation. To do anything
else will make millions of seniors worse off.
Thank you for inviting me here.
[The prepared statement of Mr. Lubka follows:]
Prepared Statement of Lewis Lubka, Senior Citizen, On behalf of the
Alliance for Retired Americans
Chairman McCain and Members of the Commerce, Science, and
Transportation Committee, thank you for holding this hearing today on
the impact of prescription drug importation on consumers.
My name is Lewis Lubka and I live in Fargo, North Dakota. I am here
today representing the Alliance for Retired Americans. The Alliance is
a national organization of over three million members that works to
create an America that protects the health and economic security of
seniors, rewards work, strengthens families and builds thriving
communities. It was launched in January 2001 by a national coalition of
labor unions and community-based organizations dedicated to improving
the quality of life for retirees and older Americans.
I am seventy-seven years old and take at least three prescriptions
at any given time. Between Myocalcin and Fosamax for osteoporosis, and
Synthroid for my thyroid, I spend well over $2,000 a year on my
prescriptions.
I have purchased my drugs in Canada to help defray these costs. I
saw an American doctor, filled a prescription in the United States, and
brought it to a doctor in the City of Emerson, right over the border in
Canada. After I saw the Canadian doctor, I took the new prescription to
a Canadian pharmacy that was located in the same building. I brought
$300 in cash with me and purchased $800 worth of medications with the
money.
I feel completely safe in taking Canadian medications. The Alliance
for Retired Americans has made more than twenty trips to Canada from
states stretching from coast to coast, serving hundreds of riders. No
one has ever reported getting sick or had any adverse effects from
taking those medications.
I am a veteran of World War II. I was a paratrooper in the 82nd
Airborne Division. As a former welder and then a professor, I am an ex-
shipyard worker, an ex-assembly-line worker, and an ex-steelworker, as
well as a retired member of the National Education Association.
I have lived all over this country, seen many people, and witnessed
a lot in my lifetime. I worked in the Hoboken, New Jersey shipyards of
Bethlehem Steel repairing the Stockholm after it collided with the
Andrea Doria. I worked for General Electric in Kentucky before becoming
a professor at North Dakota State University.
I have always been a human rights activist and was a part of Martin
Luther King's civil rights movement. I am still working for human
rights.
Senators, I know right from wrong. The bill that is coming out of
the Conference Committee is not good for retirees. It does nothing to
contain the skyrocketing prices of prescription drugs. In fact, it
forbids Medicare from using the purchasing power of 40 million
beneficiaries to negotiate the best drug prices.
The Federal Government currently bargains for the best prices in
the Department of Veterans Affairs, the Department of Defense, and the
Indian Health Service systems. There is no logic on why Congress would
forbid Medicare from doing the same. Seniors and all taxpayers are the
losers.
This bill caters to the pharmaceutical industry by unnecessarily
preventing American citizens from getting their drugs in Canada where
they are safe and affordable. I have never seen anyone get sick from
taking a drug imported from Canada, but I have seen many people
suffering from high drug prices that they cannot afford. Drugs from
Canada are just as safe as American drugs--in fact many of the drugs
from Canada were made in the U.S.A.!
Members of the Committee, I am here today to ask that you enact a
drug benefit that allows drugs to be imported from Canada without
loopholes that permit the Department of Health and Human Services to
stop safe re-importation. To do anything else will make millions of
seniors worse off. Thank you for inviting me here.
Senator Dorgan [presiding]. Mr. Lubka, thank you very much.
And, finally, Dr. Funderburk, thank you for joining us. Why
don't you proceed.
STATEMENT OF DAVID FUNDERBURK, LEGISLATIVE COUNSEL, TREA SENIOR
CITIZENS LEAGUE
Dr. Funderburk. Mr. Chairman, I want to thank you for the
opportunity to testify on behalf of S. 1781.
I serve as legislative counsel for the TREA Senior Citizens
League, known as TSCL. It is a nationwide nonprofit education
and lobbying organization with approximately 1.2 million
members, which will be celebrating its 10th anniversary in a
few months. TSCL's board of trustees is an all-volunteer group
of retired military, headed up by its Chairman, George A.
Smith. It sends out informative newsletters, stays in touch
with its members via e-mail, publishes informational booklets,
and it has an information-packed website, www.tscl.org.
TSCL has nearly 23,700 members and supporters in the state
of Arizona, and, in your state of North Dakota, several
thousand members, Mr. Chairman.
On the House side, TSCL has been working diligently in
behalf of H.R. 2427, introduced by Congressman Gil Gutknecht,
and is happy today to announce its support for S. 1781, your
bill, the companion measure here in the Senate.
In TSCL's annual survey, in February 2003, fully 87 percent
of the membership responding voiced their support for drug
importation. The current high cost of prescriptions is
crippling our seniors. One of our members, Lillian F., told us,
``I don't get enough Social Security for my medication, and I
had to quit taking a couple of them. I have Parkinson's. I take
medication for that. It's very expensive. Now my husband had a
heart attack, and he has to take a lot of medications, too, so
I might have to quit taking more of my medicine.''
Unfortunately, since Lillian F. wrote that e-mail to us in
April of this year, her husband has passed away, and she has
had to cut back further on her medications.
It is on behalf of individuals such as Lillian that we
support more affordable prescription drugs, and we believe S.
1781 is a good place to start. TSCL is absolutely committed to
this drug reimportation legislation.
Prior to the vote in the House on H.R. 2427, TSCL ran a
half-page ad in the Washington Times, urging Members of
Congress to support passage of the bill. We also sent out e-
mail alerts to thousands of our supporters urging them to
contact their elected representatives. And we continue our
efforts through similar grassroots activities.
As has been mentioned by many of those speaking previously,
a drug that a senior or any American cannot afford and,
therefore, cannot take is not a safe drug. TSCL Chairman,
George Smith, wanted me to tell you that seniors especially ask
to be treated like responsible men and women, and seniors
should have the right to assume the minuscule risk of using a
drug obtained from Canada, rather than suffer the risk of not
having the prescription drug at all.
William Hubbard, Associate Commissioner of the FDA, was
quoted as saying, ``It's not OK for an individual to bring in
drugs,'' referring to these bus trips of individuals going to
Canada, ``but so much of the stuff is coming in, and it's so
uncompassionate to go after patients.'' Well, should we then
have compassion for Minnesotans who are able to make the trip,
or North Dakotans, to Canada, but not for Mississippians and
others who are not able to make such trips?
I want to thank the distinguished Chairman for holding a
hearing on this critical legislation. And on behalf of TSCL and
its members, I urge the Senate to join the House and approve
this important legislation.
And, in closing, let me say, TSCL wants to work with you
and the Committee on this issue and other issues of importance
to seniors in the future, and I thank you for the opportunity
to testify here today on behalf of TSCL and its members and
supporters.
Thank you, Mr. Chairman.
[The prepared statement of Dr. Funderburk follows:]
Prepared Statement of David Funderburk, Legislative Counsel,
TREA Senior Citizens League
Mr. Chairman, Members of the Commerce Committee, I want to thank
you for the opportunity to testify today on behalf of S.1781, which
would allow Americans to have increased access to prescription drugs at
reasonable prices. I would ask permission that my entire statement be
included in the record.
My name is David Funderburk, and I serve as Legislative Counsel for
the TREA Senior Citizens League, known as TSCL. TSCL is a nationwide
non-profit education and lobbying organization with approximately 1.2
million members and supporters, which will be celebrating its Tenth
Anniversary in a few months. TSCL's Board of Trustees is an all-
volunteer group of retired military headed up by its Chairman, George
A. Smith. TSCL sends out an informative newsletter by mail and by e-
mail to hundreds of thousands of seniors 10 times per year. It stays in
touch with its members via e-mail alerts. TSCL publishes informational
booklets such as those that help seniors better understand Social
Security and Medicare, and other issues. And, TSCL has an information-
packed website, www.tscl.org, with information on the drug re-import
bill, and many other policy issues affecting seniors.
TSCL has nearly 23,700 members and supporters in your state of
Arizona, Mr. Chairman. (I remember the Chairman coming to my hometown
not too many years ago to campaign for me when I was in Congress. It's
always nice to be with you, Mr. Chairman.)
On the House side, TSCL has been working diligently on behalf of
H.R. 2427, introduced by Congressmen Gil Gutknecht (R-MN) and Rahm
Emanuel (D-IL), and is happy to today announce its support for S.1781,
the companion measure here in the Senate.
In TSCL's annual survey in February 2003, fully 87 percent of the
TSCL membership responding voiced their support for drug importation.
The current high cost of prescriptions is crippling our seniors.
One of our members, ``Lillian F,'' told us ``I don't get enough
Social Security for my medication and had to quit taking a couple of
them. . . . I have Parkinson's and I take medication for that and it is
expensive. . . . Now my husband had a heart attack, and he has to take
a lot of medications too, so I might have to quit taking more of my
medicine.'' Unfortunately, since ``Lillian F.'' wrote that e-mail to us
in April of this year, her husband has passed away and she has had to
cut back further on her medicines. It is on behalf of individuals such
as ``Lillian F'' that we support more affordable prescription drugs,
and we believe that S.1781 is a good place to start.
The disparity of drug costs in the United States, Canada and Europe
is striking. In Canada, someone can purchase Zocor for $45.49; here in
the U.S., the same prescription is $123.43. Pravachol purchased in
Canada, 40.00; in the United States, $85.60. No wonder seniors like
``Lillian F'' aren't able to afford the medicine they need!
TSCL is absolutely committed to this drug re-import legislation.
Prior to the vote in the House of Representatives on H.R. 2427, TSCL
ran a half-page ad in the Washington Times, urging Members of Congress
to support passage of the bill. We also sent out e-alerts to thousands
of our supporters urging them to contact their elected Representatives.
We continue our efforts through similar grassroots activities.
We may not have the visibility and presence of the pharmaceutical
industry, but there are fully 1.2 million seniors represented by TSCL.
TSCL is funded with small contributions from its supporters and members
and today I want to share with you the views of those members and
supporters.
Some who oppose S.1781 use the argument that measures such as
S.1781 or H.R. 2427 will open the floodgates for unsafe drugs coming
into the United States. But right now, some 1 million Americans buy
medicines from Canada either through bus trips or via the Internet,
according to the Manitoba International Pharmacists Association. There
have been no reported deaths from those drugs, according to testimony
provided from the U.S. Food and Drug Administration (``FDA'') at a
House hearing.
And as Katherine Greider wrote in her book, ``The Big Fix: How the
Pharmaceutical Industry is Ripping Off American Consumers,'' some 29
percent of seniors don't fill their prescriptions because they can't
afford to. We see that in our own membership, as mentioned above. A
drug that a senior--or any American--can't afford, and therefore can't
take--is not a safe drug.
Please don't accept the nonsense that if this law is passed seniors
might make the wrong choice in buying prescription drugs. Seniors do
not need such protection from government. TSCL Chairman George Smith
wanted me to tell you that seniors especially ask to be treated like
the responsible men and women they are. And seniors should have the
right to assume the miniscule risk of using a drug obtained from
Canada, rather than suffer the risk of not having the prescription drug
to take at all. Everything we do, including getting out of bed in the
morning entails risk, and it is not the business of the Federal
Government to take away our freedom to make decisions like these for
ourselves.
Of course, the proposed legislation allows the importation of only
FDA-approved drugs from FDA-approved facilities. Many drugs that
Americans buy from Canada are actually made in New Jersey or Puerto
Rico.
There is no guarantee of safety in any drug that you take. However,
S.1781 provides for state of the art technology to protect imported
medicines--the same anti-counterfeiting measures used to protect our
new currency. Right now, an American has a greater risk of getting sick
by eating imported food than he or she does getting sick from a drug
purchased in Canada or Germany.
Americans over the age of 65 will spend some $1.8 trillion on
prescriptions during the next 10 years, according to the Congressional
Budget Office. Importing prescriptions could save them 35 percent,
again according to CBO.
States and localities, too, want to save dollars in these tight
economic times. Minnesota, Iowa, Illinois, all are looking at drug
importation. Closer to home, Montgomery County, Maryland is beginning
to study the issue. Governor Blagojevich released a study that
concluded imports from Canada were safe and could save his state of
Illinois tens of millions of dollars a year.
A study by Families USA found that marketing, advertising and
administrative costs are much higher than what is currently spent on
research and development, often twice as much. The pharmaceutical
industry will still make a profit if S.1781 or H.R. 2427 were to pass,
and pharmaceutical companies would still be able to devote sufficient
funds to R&D if they chose to do so.
According to a statement by Senator Chuck Grassley, as cited in the
Washington Post, ``Imports create competition and keep domestic
industry more responsive to consumers.'' (Washington Post, November 8,
2003)
The FDA has, in the past, looked the other way on Americans taking
the bus to buy small personal supplies of medicines from Canada. This
is changing. We have also recently seen a district judge grant an FDA
request to shut down RxDepots in Oklahoma. The time to act is now.
William Hubbard, Associate Commissioner of the FDA, was quoted in a
September 16, 2003 article from the New York Times as saying, ``It's
not O.K. for the individual to bring in drugs'' (referring to bus trips
of individuals going to Canada), ``but so much of the stuff is coming
in and it's so uncompassionate to go after patients.'' Should we then
have compassion for Minnesotans who are able to make the trip to
Canada, but not Mississippians who are not?
I want to thank the distinguished Chairman for holding a hearing on
this critical legislation, and on behalf of TSCL and its members, I
urge the Senate to join the House and approve this important
legislation.
And in closing, let me say that TSCL wants to work with you and the
Committee on this issue, and on other matters of importance to seniors
in the future, and I thank you for the opportunity to testify here
today on behalf of TSCL and its members and supporters.
Senator Dorgan. Mr. Funderburk, thank you very much.
Let me indicate, on behalf of Senator McCain, who had to
leave for another engagement, that we very much appreciate the
testimony of this panel. And I regret that the hearing took
some long while this morning. As a result of that, my
colleagues had other hearings to go to and other places to go.
And so let me make a couple of comments, if I might, about
your testimony. I'm not going to ask questions, because we need
to adjourn the hearing.
Mr. Catizone, I happen to feel very strongly that its very
important to keep our Main Street pharmacists in the middle of
patient healthcare, especially with respect to how prescription
drugs act and interact. We have so many senior citizens who
take multiple prescription drugs--four, six, sometimes 10 or 12
different prescriptions drugs every day. And if there's not a
pharmacist somewhere watching all of these drugs to find out
how they interact--and they might say to the senior citizen,
``These two are dangerous if you take them together. These two,
if you take together, nullify each other, so you're wasting
your money.'' It's important that that be the case. There is so
much now--so many circumstances in which there's not a
pharmacist involved, and someone's seeing four different
specialists, and they're ordering medicine from four different
directions.
Our ultimate goal, my goal, is not to ask Americans to go
elsewhere to buy prescription drugs. It is to force a repricing
of prescription drugs in our country. But I value the role of
the pharmacist. I feel very strongly about the viability and
the need for Main Street pharmacists.
Mr. MacArthur, you described the issue of parallel trading
in Europe, and it is identical to that which, in my judgment,
we should be doing. We have taken a slightly different
approach. But your description of parallel trading describes to
us that all of the nonsense we are hearing about safety issues
is just that, nonsense. It is, apparently, by your testimony,
and I have heard this previously, it is easy for the countries
in Europe to engage in a regime in which you are able to
certify the prescription drugs in each other's countries, and
also to monitor the drugs that are moving country to country.
And so all of these safety issues here, I think, are just
raised on behalf of those who don't want to do anything to
interrupt the pricing strategy in the U.S. But I think you have
raised, as Senator McCain has said, some important issues for
us to consider with respect to parallel trading, itself, which
is slightly different than that which we've been proposing.
And, Mr. Lubka, I've known you for some long while, and, as
I indicated, on a snowy day in North Dakota, we rode in a van
to Emerson, Canada. And, in a one-room pharmacy, you discovered
what all of us know, and that is, five miles north of a U.S.
pharmacy you can buy exactly the same prescription drugs, FDA-
approved, in the same bottle, the same pill, manufactured by
the same company, for a dramatically lower price, and it
describes what's wrong with this system and why we have these
hearings. The U.S. consumer is paying the highest prices in the
world for prescription drugs, and it's unfair.
Mr. Lubka. Maybe I ought to make another run up to Canada.
You think?
Senator Dorgan. Well, we maybe ought to do that, Mr. Lubka.
And Dr. Funderburk, I appreciate your organization's
interest in this. I know that you make the case it ought not
just be those who live contiguous to the border that have
access to these lower-priced prescription drugs, and you're
absolutely correct about that. Again, you heard me say, our
ultimate goal is to force a repricing of prescription drugs in
our country. There are no miracles from miracle drugs that
people can't afford.
And let me finish by telling you of one evening in a little
town in northern North Dakota, at the end of a meeting, a woman
close to 80 years of age came up to me when the meeting broke
up, and she grabbed me by the elbow, and she said, ``Mr.
Senator, can you help me?'' I said, ``I'll sure try. What's
wrong?'' And she began to describe to me, as her eyes welled
with tears and her chin began to quiver, she said, ``I have
heart disease and diabetes, and my doctor says I have to take
medicine to stay alive, and I can't afford it. I don't have any
money. Can you help me?''
And she, at near 80, a widow with very little income,
understood the dilemma. She didn't have the money, but she
needed to take these prescription drugs to control her diabetes
and her heart disease. And that's why we have to do something
about this. And, you know, we have to do it in a way that makes
sense for the consumers of this country.
Let me make one final point. This is not a search for
villains. Our pharmaceutical industry is big, strong, and
healthy. I want our pharmaceutical industry to do well. I want
them to discover new medicines, and I want them to do research,
but I also want from them fair pricing for the American
consumers, and that is not the case today. And that's why we
are pushing for legislation.
Let me thank this panel for being here. This hearing is
adjourned.
[Whereupon, at 12:15 p.m., the hearing was adjourned.]
A P P E N D I X
Prepared Statement of Representative David Lemoine, Chair and Cheryl
Rivers, Executive Director, National Legislative Association on
Prescription Drug Prices
Mr. Chairman:
The National Legislative Association on Prescription Drug Prices is
a nonprofit bipartisan Legislative Association, which was formed in
1999,s Our mission is to win fair prices and comprehensive prescription
drug coverage for all Americans. Though several of our member states,
including our own states of Maine and Vermont have made valiant efforts
and passed innovative and creative pieces of legislation, the situation
with prescription drug prices in America remains a National disgrace.
Americans are asked to pay the highest prices in the world for drugs,
which were often developed with taxpayer dollars through government-
funded research.
The Medicare Prescription drug conference report is the latest
evidence of the failure of Congress to act to bring some balance and
basic fairness to drug prices in America. It is clear that neither the
current administration nor a majority in Congress have the political
will to stand up to the pharmaceutical industry on behalf of ordinary
Americans. Not only will the legislation fail to improve on the status
quo for states, and seniors, but also it will severely curtail state
efforts to use our clout in the market to negotiate for fair prices for
states, seniors, and the uninsured. We understand that the Medicare
Prescription Drug Conference Report contains industry-favored language
that means it will never be implemented. Without a strong instructive
statute this administration will continue to do everything in its power
to protect the pharmaceutical industry at the expense of ordinary
Americans.
Across America states, cities, businesses and individuals need your
help. We need Legislation that allows businesses and individuals to
freely acquire the prescription drugs they need in both the Canadian
and European markets. This would allow a sufficient supply to thwart
industry anticompetitive tactics currently being employed to try and
limit the supply in Canada. Once before in American history there was a
piece of legislation passed by the Congress known as the fugitive slave
law. It was a bad law that Americans of conscience could not respect or
follow. Thankfully it is a relic of history. A prohibition against
letting people buy their medications in Canada and abroad endangers the
life, liberty, and pursuit of happiness in the 21sr century just as
that unjust and backward statute did in the 19th century. You have the
power to eliminate this injustice and improve the health of millions of
Americans in the process. It is past time to act.
Thank you for the opportunity to submit testimony.
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