[Senate Hearing 108-]
[From the U.S. Government Publishing Office]



 
AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR 
                            FISCAL YEAR 2004

                              ----------                              


                         THURSDAY, MAY 22, 2003

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:40 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Robert F. Bennett (chairman) 
presiding.
    Present: Senators Bennett, Cochran, Craig, Kohl, Dorgan, 
and Johnson.

                       DEPARTMENT OF AGRICULTURE

STATEMENT OF ERIC M. BOST, UNDER SECRETARY FOR FOOD, 
            NUTRITION, AND CONSUMER SERVICES
ACCOMPANIED BY:
        ELSA MURANO, UNDER SECRETARY FOR FOOD SAFETY
        WILLIAM T. HAWKS, UNDER SECRETARY FOR MARKETING AND REGULATORY 
            PROGRAMS

    Senator Bennett. The subcommittee will come to order. I 
apologize to our witnesses and to those who have come to hear 
them for the fact that we are a bit late. It reminds me, very 
early in my Senate career, we were having a meeting and I said 
to my secretary, ``Unless the White House calls, we don't want 
to be interrupted.'' And a few minutes later, she came in and 
said, ``You are not going to believe this, but the White House 
is calling.''
    So this morning, we had the President of the United States 
speaking to us and that is what caused the delay, and I assure 
you, it would require something of that level to cause us not 
to be prompt and we apologize to you.
    We appreciate very much the witnesses who are coming. This 
will be our final budget hearing. We have heard from the other 
under secretaries of the Department of Agriculture as well as 
from Secretary Veneman and it has been a very interesting 
series of hearings, and for me, coming new into this 
assignment, very informative, and I am very grateful and expect 
we will have the same kind of exchange here this morning.
    We do meet against the background of considerable concern, 
and I think we ought to use the hearing as a forum for 
addressing this concern. It has been on the front page of the 
newspapers and in the lead of various television shows, talking 
about bovine spongiform encephalopathy. For those that don't 
recognize that, and I will refer to it from now on as BSE, that 
is what the press has labeled ``mad cow'' disease.
    We should understand as we hold this hearing to talk about 
the safety of food in the United States that BSE has been 
discovered in a single cow in Alberta, Canada. We should 
applaud the USDA as well as the Food and Drug Administration 
for their diligence in monitoring this situation, and it is 
critical that USDA and FDA provide the public with a clear and 
consistent message. But I believe that message is being applied 
and we need to underscore it here today.
    The disease has been detected, it is being monitored, and 
the determination of the various agencies involved is to see to 
it that the United States is protected from the disease. We 
should also understand that the way the animal who had this, 
had BSE, was disposed of guarantees that it will not get into 
human consumption. There may be some tiny, tiny risk to 
animals, but there is no risk whatsoever to human beings as a 
result of this situation. That is at least the way it has been 
explained to me. If there is any correction that needs to be 
made, I would appreciate it if our witnesses would correct it.
    But the American consumer takes for granted that her food 
is safe. Sometimes they take for granted too much and do not 
give appropriate credit to people at the USDA and at FDA who 
continually monitor the safety of food and the domestic food 
supply. Their work goes unnoticed until some kind of emergency 
like this comes along. We should take this occasion, first, to 
assure the American people that their food is safe, and second, 
to pay tribute to those who monitor the situation 24/7 so that 
the American consumer can take it for granted that the food is 
safe.
    We will spend more time on that in the hearing this 
morning. But as the hearing begins, I wanted to make that front 
statement so that those who come for the opening of the hearing 
and then rush to meet their deadlines will at least take away 
the understanding that the discovery of BSE in a single cow in 
Alberta, Canada, is not reason for everybody to panic, to give 
up hamburgers or whatever else might be on their agenda for 
their food consumption.
    With that, Senator Craig, we would be happy to have 
whatever opening statement you might have.
    Senator Craig. Mr. Chairman, I will be brief, but I do 
believe it is an opportunity to talk about the issue that you 
have opened with this morning and I think it is important that 
we visit it. I am pleased to see Dr. Murano here with Food 
Safety and that is appropriate that we talk about BSE.
    I think it is important to say several things about it 
straightaway, and that is that we have been at the business of 
monitoring and watching this very, very closely for a long 
while. As we have been able to successfully declare our country 
clean of this, there is a reason for that, and I think the 
Department of Agriculture and USDA can be proud of that fact. 
We started a surveillance program in 1990, I believe, and moved 
forward and successfully banned when other countries have found 
that their herds were infected by it.
    One animal in Canada now, destroyed, did not get into the 
food chain, and other animals apparently destroyed that were 
with or in the same herd.
    Now, having said that, it is also important to say that BSE 
agent is not found in meat. Let me repeat that. It is not found 
in meat. It is found in the central nervous system tissue, such 
as brains and spinal cord and others. Those are not 
incorporated in hamburger or in a New York strip and it is 
important that we constantly repeat that. By the way, I had a 
nice piece of filet last night and it was well prepared and I 
enjoyed it.
    It is not a time for this country to panic. It is a time 
for this country to express some concern and to review it, as 
you plan to, and for us to review our systems. I have several 
questions I want to ask as it relates to the ban that we moved 
quickly to do with Canada on products coming in until such time 
as determinations are made. That sounds to me like the action 
taken appropriately. It is not something that we have dawdled 
about. It is something we have been involved in for a long 
time.
    What I think is important for this committee and for the 
record, Mr. Chairman, is that we at least affirm that and move 
forward based on what we know so that the American people can 
have a degree of confidence in, beyond current levels, their 
meat supply. What is important is for them to have a great deal 
of confidence in the broad sense that our foods in this country 
are safer and better prepared to arrive at the consumer's shelf 
than nearly any country in the world, and for that, we ought to 
be proud. Thank you.
    Senator Bennett. Thank you very much.
    Senator Kohl.
    Senator Kohl. Thank you, Mr. Chairman, for holding this 
propitious hearing this morning. I would like to welcome our 
witnesses again to this hearing, which turns out to be of some 
considerable importance, and a hearing that the American public 
will be very much interested in hearing what you have to say.
    I don't plan on making a long opening statement, but 
considering the announcement of BSE from Canada just this past 
Tuesday, this is clearly an important moment. Three of the most 
important Federal agencies regarding this particular issue are 
all in the same room together today and each of you play a key 
role in keeping our food supply safe and preventing diseases, 
such as BSE, from entering our country.
    Therefore, I would like to request that each of you address 
this issue in your opening statements and use this hearing as a 
forum to explain to the American eating public, which, after 
all, is everybody in our country, what this announcement means. 
Questions like how serious is this issue? What precautions are 
being taken? Should we, in fact, really be afraid? I think the 
American people need some answers, and this hearing will 
provide a unique opportunity for you to address them.
    With that, I welcome you again and turn back to our 
chairman.
    Senator Bennett. Thank you, Senator Kohl.
    Senator Johnson.
    Senator Johnson. Thank you, Mr. Chairman and Senator Kohl. 
I want to welcome Under Secretary Hawks, Under Secretary Bost, 
Under Secretary Murano today, as well as FDA Commissioner 
McClellan.
    We have a lot of timely and important issues to discuss, 
including one, implementation of country of origin labeling 
with Under Secretary Hawks. Secondly, the recent case of BSE in 
Canada, which deals with food safety, Under Secretary Murano, 
and FDA's ban on animal parts in ruminant feed with FDA 
Commissioner McClellan.
    Given the development of new drugs, advanced medical 
devices, and other products, I look forward to Commissioner 
McClellan's analysis of how these products can be made 
available to the public. And finally, the authorization of 
child nutrition programs are key.
    Let me address just very briefly the country of origin 
implementation issue. I know that Under Secretary Hawks has 
personally attended a number of the USDA listening sessions and 
I hope that USDA keeps an open mind about finding a reasonable 
method to, in good faith, implement country of origin labeling, 
because as written, the law permits USDA to use a great deal of 
discretion to implement labeling and model existing programs--
school lunch, USDA grading system, certified Angus beef system, 
and so on, that have proven effective, workable, and 
inexpensive.
    Nevertheless, very frankly, there is a widely-held belief 
that is growing in rural America that the Department of 
Agriculture is not about to, in good faith, implement country 
of origin labeling and we need to disprove that and to make 
this system work, make it work effectively and inexpensively. I 
am concerned that some in USDA seem all too willing to create a 
new, unnecessary bureaucratic recordkeeping regime so that 
labeling will implode under its own weight before it is even 
implemented.
    Some hard-working public servants in the USDA, especially 
in the Ag Marketing Service, are moving ahead in good faith to 
implement a common sense country of origin labeling program and 
I commend these officials. On the other hand, I am very 
disappointed that some seem to be trying to politicize this 
effort and to cancel out the progress as we attempt to make 
implementation work. I hope these strong anti-labeling forces 
will let the real experts, our career officials at AMS, write a 
sensible and workable final rule for implementation.
    Let me say this about country of origin labeling and BSE. 
While country of origin labeling obviously does not prevent 
BSE, that is not the issue. The fact that consumers are unable 
to differentiate between U.S., Canadian, and beef from other 
nations is simply unacceptable. Country of origin labeling is 
not a food safety issue directly, but it is a consumer 
information issue and it is a consumer confidence issue. I was 
pleased that today, the Consumer Federation of America 
expressed their strong support for country of origin labeling.
    Let me just quickly touch on the FDA feed ban issue. I 
worked with Commissioner McClellan about the 1997 rule that 
feed mills in the United States prevent the commingling of 
animal proteins in ruminant feed. This has been a concern of 
mine for some time, largely because contaminated feed consumed 
by cattle is what we believe is a key causation for BSE in the 
first place.
    When I first began to examine the issue in 2001, I met with 
Dr. Steven Sundloft, Director of FDA's Center for Veterinary 
Medicine, and at our meeting, I learned at that time that 13 
percent of the feed mills regulated by FDA did not have systems 
in place to prevent the commingling of animal parts and feed. 
Furthermore, 15 to 20 percent of the feed mills failed to 
properly label feed, ``not approved for use with ruminants,'' 
as such. Moreover, 80 percent of feed mill inspections were 
handled at the State level. FDA was not even doing most of the 
inspections.
    I believe FDA and the feed industry would agree with me 
that we should have improved the compliance rate with this rule 
since 2001. In fact, we ought to get 100 percent compliance. 
Unfortunately, that goal has not been reached. Consumer groups 
indicate that, currently, FDA has only ten of its own 
inspectors and still heavily relies on States to do the 
majority of the inspections of feed mills and rendering plants.
    I hear and I have read reports that as of March 23, 
inspections revealed that 14 percent of rendering facilities 
handling material prohibited for ruminant feed still did not 
have a system to prevent commingling of prohibited and non-
prohibited material. Inspections also revealed that 33 percent 
of non-FDA-licensed feed mills had not labeled their products 
with the required caution statement about not feeding 
prohibited materials to ruminants, and that is unacceptable.
    GAO recently issued a report stating that FDA had not acted 
promptly to compel firms to comply with the feed ban rule. In 
fact, GAO identified some non-compliant companies that have not 
been reinspected for 2 or more years and instances where no 
enforcement action had been taken.
    Today, I call upon FDA to demand 100 percent compliance and 
insist that FDA explain the rationale for failing to promptly 
compel these feed mills to comply. The FDA needs to clarify how 
many feed mills and renderers are complying with the ban and 
whether firms are properly labeling prohibited material as 
such. Furthermore, FDA needs to explain how they will ensure 
universal 100 percent compliance with the ban, and if the 
States and/or FDA need further assistance from this committee 
and from Congress for that purpose.
    I look forward to discussion of the medical device and 
child nutrition issues.
    Again, I share the comments of my colleague from Idaho that 
American consumers can take great confidence in meat products 
available to them and their families in this country. We have 
the highest quality, safest food in the world, bar none. There 
is no cause for panic. There is no cause for excessive concern.
    But at the same time, we at the governmental level need to 
make sure that that confidence is strengthened and that there 
is no justification for a loss of confidence in the quality of 
American meat products won by more aggressive action, I 
believe, on the part of FDA, but secondly, also by empowering 
American consumers to be able to make knowing choices about 
whether they are consuming American meat products or not. That 
is a very simple, inexpensive, easily done effort and I think 
that we can get there.
    I look forward to this hearing today and the insights 
shared with us by this very distinguished panel, Mr. Chairman.
    Senator Bennett. Thank you. Senator Dorgan.
    Senator Dorgan. Mr. Chairman, thank you very much. I am 
going to have to go to the Commerce Committee, but I want to 
come back because I want to visit with the FDA. I believe that 
is the second panel.
    Senator Bennett. Yes, and we have asked the FDA 
Commissioner to be in the audience during the first panel 
because I think the combination of FDA and USDA in the present 
atmosphere is important. While it is an imposition on his time, 
I want him to hear the first testimony so that he can respond 
during the second panel.
    Senator Dorgan. I think that is an excellent idea and I 
regret I can't be here during all of it, but we have a hearing 
I have to be at over at Commerce, so I will be coming back.
    But I wanted to mention just one quick point on something I 
believe Senator Craig has said earlier, and I just heard my 
colleague from South Dakota say, about our food supply, about 
mad cow disease. Let me just say that what I heard in the last 
couple of days about this angers me for one reason. The head 
was cut off a slaughtered cow in January and we learn in the 
month of May that that cow had mad cow disease. Four months is 
an unforgivable amount of time.
    I don't know the consequences of all of this, but in this 
country, we have taken great steps. We made 20,000 tests, 
examinations, pathologies last year in this country to make 
sure that we have a safe supply of meat. Nine hundred such 
examinations were made in Canada last year. I am not suggesting 
the Canadian meat supply is unsafe, but I am saying that if 
there is a cow that in January is killed that has mad cow 
disease, then our country and the Canadians and consumers and 
the beef industry ought not know about it 4 months later. They 
ought to know about it 4 or 5 days later.
    There are only a couple of explanations for this. One, they 
knew about it earlier but didn't tell anybody. I doubt whether 
that is the case. I think that is not the case. It looks like 
the Canadians thought the cow had pneumonia and they either put 
the cow's head in a freezer or in some solution. Several months 
later, somebody drug it out and said, let us take a look at it, 
tested it, and then sent it off to Britain or to England for 
more testing.
    I think that is gross incompetence. We need to make certain 
that if there are ever questions about this, that there is 
testing and it is done aggressively and routinely and we get 
answers quickly and take actions immediately.
    I just got off the phone with the Agriculture Secretary, 
Ann Veneman, and I told her that yesterday I complimented her. 
She took exactly the right action. She was decisive and quick. 
We get a million head of cattle a year from Canada, a billion 
pounds of beef a year into this country from Canada. She shut 
it down right now, because at this point, we don't know all of 
the circumstances. And so I appreciate what she has done. She 
sent people to Canada immediately to be involved in this, and 
let us hope that this is one single isolated instance. Let us 
hope never again will we find that, in Canada or anywhere else, 
there is a case of mad cow disease that no one knows about for 
4 months. That is unforgivable.
    So that is another side of this issue that I don't think my 
colleague mentioned, but I certainly agree with all of his 
comments. I did not hear all of Senator Craig's comments, but I 
think I agree with what I heard he said and I think this timing 
issue is just critical.
    Senator Craig. I assure you, you always do agree with me, 
Byron.
    Senator Dorgan. Well, almost always, especially when we are 
talking about beef.
    Senator Craig. You have got it.
    Senator Dorgan. When we get too far afield of beef, it is 
not always the case.
    But Mr. Chairman, thank you very much for giving me the 
time.
    Senator Bennett. Thank you.
    We will now go to our witnesses. We will hear first from 
Eric Bost, the Under Secretary for Food, Nutrition, and 
Consumer Services, followed by Elsa Murano, Under Secretary for 
Food Safety, followed by William Hawks, Under Secretary for 
Marketing and Regulatory Programs.
    Thank you again for being here and for your service. Mr. 
Bost.

                   OPENING STATEMENT OF ERIC M. BOST

    Mr. Bost. Good morning, Mr. Chairman, members of the 
subcommittee. Thank you for this opportunity to present the 
Food, Nutrition, and Consumer Services budget request for 
fiscal year 2004. I have two of my staff members with me, 
Suzanne Biermann, who is Deputy Under Secretary, and also 
George Braley, who is the Associate Administrator for the Food 
and Nutrition Service.
    You have my written testimony, so I will try to be brief in 
terms of hitting some of the really important issues that I 
would like to talk about.
    The President's budget for fiscal year 2004 requests $44.2 
billion in new budget authority for the Department's nutrition 
programs. The budget is a clear reflection of the 
Administration's commitment to the nutrition safety net and to 
the associated activities President Bush expects us to achieve. 
The budget is constructed for results and the expectations are 
very clear. One, ensure access for eligible persons to these 
critical programs. Two, improve performance and program 
integrity. Three, address nutritional issues related to the 
problem of overweight and obesity in this country.
    Let us talk about ensuring access, more specifically, the 
Food Stamp Program. The Food Stamp Program request of $27.7 
billion will serve an average of 21.6 million persons each 
month, including restoration of eligibility to many legal 
immigrants as provided for in last year's Farm Bill. The 
Administration's budget continues the $2 billion reserve 
appropriated last year.
    The Child Nutrition Program's request of $11.4 billion 
supports an increase in school lunch participation from 28 
million children to over 29 million children and supports an 
increase in school breakfast participation of over one million 
children, from 8 million, which we are averaging this year, to 
about 9 million.
    The President's budget proposes $4.8 billion for the WIC 
Program to provide food, nutrition, and education and a link to 
health care to a monthly average of 7.8 million needy women and 
their children, a very clear sign of the President's commitment 
as he increased funding the second year in a row for this very 
critical program. The request also provides for a $150 million 
contingency fund, which we believe is unprecedented.
    One of the issues that is very important to the Secretary 
and I is to ensure program integrity in our programs. In terms 
of food stamps, funding to maintain our level of effort to 
reduce errors in the Food Stamp Program is also included in the 
President's proposal. The payment accuracy rate for the Food 
Stamp Program for fiscal year 2001 was 91.34, the best ever 
accuracy rate in the history of the Food Stamp Program. We will 
continue to work with our State partners to improve that.
    In terms of the WIC Program, the President's request 
provides for $30 million to support the enhancement and 
modernization of the WIC State Information Systems that will 
improve the management of this program, which I believe is long 
overdue. The President's request also provides for improving 
the eligibility determination system for the National School 
Lunch Program.
    One of the major issues we face in terms of nutrition in 
this country is the issue of the number of Americans who are 
overweight and obese. Sixty-two percent of all Americans in 
this country are overweight, a significant increase over the 
course of the last several years. As a part of the President's 
HealthierUS Initiative, nutrition assistance programs play a 
critical role in promoting good health and preventing diet-
related diseases.
    As a part of the President's budget, this priority is 
clear. Some of the things we are interested in doing include: 
supporting breastfeeding promotion efforts and other activities 
in WIC; providing peer counseling and demonstration projects to 
evaluate how the program can be more efficiently used to combat 
obesity among our children; expanding the successful ``Eat 
Smart and Play Hard'' campaign to other nutrition programs; 
developing an integrated family-oriented approach to nutrition 
education that allows the Department to partner with multiple 
Federal agencies; promoting nutrition to all Americans, 
including resources to update and promote the Food Guide 
Pyramid; and one of our most popular programs, funding for both 
the WIC and Senior Farmers' Market Nutrition Programs.
    In conclusion, the President's direction has been very 
clear. The Administration's request has priorities to ensure 
access, maintain and improve integrity, and support efforts to 
address a public health threat of overweight and obesity. And 
given that we have spent a lot of time this morning talking 
about it, we truly believe we have one of the safest food 
programs in the entire world in terms of the foods that we 
provide to approximately 27 million children every day, as a 
part of the National School Lunch Program. Also, I would like 
to note, too, that there is a concerted, coordinated effort 
among all three of us to ensure that occurs on a daily basis.

                          prepared statements

    Thank you for your time and attention and I would be happy 
to answer any questions that you may have.
    Senator Bennett. Thank you very much.
    Mr. Bost. Thank you, Mr. Chairman.
    [The statements follow:]

                   Prepared Statement of Eric M. Bost

    Thank you, Mr. Chairman, and members of the Subcommittee for 
allowing me this opportunity to present our budget request for fiscal 
year 2004.
    With your permission I would also like to introduce three members 
of the FNCS team accompanying me today. Suzanne Biermann, the Deputy 
Under Secretary for Food, Nutrition, and Consumer Services, Roberto 
Salazar, Administrator of the Food and Nutrition Service, and Dr. Eric 
Hentges, the Executive Director of the Center for Nutrition Policy and 
Promotion.
    The President's Budget for fiscal year 2004 requests $44.2 billion 
in new budget authority, reflecting the Administration's commitment to 
the nutrition safety net that protects the Nation's children and low-
income households from hunger and malnutrition and motivates them to 
make smart food choices and engage in physical activity to promote 
their health and well-being. The purposes to which we will put this 
substantial commitment are clearly defined and tightly focused on the 
achievement of three critical outcomes. First, we intend to do our part 
to address both within nutrition assistance programs and, through the 
Center on Nutrition and Policy Promotion, in the general population, 
the growing public health threat of obesity. Secondly, we seek not just 
to maintain, but to improve the access of eligible persons to our 
programs. Finally, we will continue our pursuit of improved performance 
and program integrity.

                           COMBATING OBESITY

    The choices that consumers make related to their diet and physical 
activity have a major impact on their health. Poor diets and sedentary 
lifestyles cost this Nation dearly in medical costs, in lost 
productivity, and most sadly, in the premature deaths of over 300,000 
citizens annually. We are committed to do our part, within the larger 
framework of President Bush's HealthierUS initiative, to combat this 
epidemic. Nutrition assistance programs play a critical role in 
fostering good health and preventing diet-related health problems by 
ensuring access to nutritious food to those who need it, and by 
promoting better diets and physical activity through nutrition 
education to program participants.
    This budget request reflects this priority. We have requested $25 
million for peer counseling to enhance our breastfeeding promotion 
efforts in the WIC Program and demonstration projects to evaluate how 
WIC can be used to combat obesity among our children. We are also 
seeking to expand our very successful Eat Smart. Play Hard. campaign to 
other FNS programs beginning with WIC and Food Stamps. Finally, we are 
seeking resources to develop an integrated, family-oriented approach to 
nutrition education that cuts across all our programs. These activities 
allow the Department to partner with other Federal agencies as we work 
across Departments to meet the President's challenges for a 
HealthierUS.
    The need to improve diets to fight overweight and obesity extends 
to the general public as well. Our request also supports USDA's Center 
for Nutrition Policy and Promotion, which works with the Department of 
Health and Human Services and other agencies to promote good nutrition 
to all Americans. Within this budget request are resources to update 
and promote the Food Guide Pyramid, one of the foremost nutrition 
education tools in the Nation, to develop the next revision of the 
Dietary Guidelines for Americans and to support obesity prevention 
efforts for the general public as part of the President's HealthierUS 
initiative.

                        ENSURING PROGRAM ACCESS

    Ensuring access to the nutrition assistance programs is a top 
priority of this Administration. Our commitment is to ensure that every 
eligible person has access to the benefits they need. The Department's 
new Strategic Plan includes strategies to improve access to a number of 
underutilized programs and to pursue education and outreach efforts to 
make eligible people aware of nutrition assistance. At the most basic 
level, we have consistently designed the budget to ensure that the 
Programs are adequately funded to meet the demand for services. This 
includes proposing record funding levels over the past 2 years for the 
WIC Program and reinforcing that funding with a contingency fund. A 
similar reserve in the Food Stamp Program prevented any disruption in 
the flow of benefits to 19.8 million food stamp recipients last 
September when program needs exceeded the base appropriation. We are 
requesting the continuation of the Food Stamp reserve in fiscal year 
2004.
    As is clear in this budget request, we are committed to access as a 
key principle in our effort to improve the design and administration of 
the nutrition assistance programs.

             STRENGTHENING INTEGRITY AND PROGRAM MANAGEMENT

    We are ever conscious of our responsibility to protect the American 
taxpayer's investment in the nutrition safety net. To maintain the 
public's trust, we are committed to the sound stewardship of those 
resources. This budget funds efforts to improve program management and 
integrity both at the Federal level and by our State partners. Also 
included is funding to maintain our level of effort to reduce errors in 
the Food Stamp Program. Our payment accuracy rate for fiscal year 2001, 
the most recent year with data available, was 91.34 percent. This is 
the best payment accuracy rate that the Food Stamp Program has ever 
experienced. We will continue our efforts and work with State partners 
to reduce errors even further.
    We are proposing targeted investment in new efforts to enhance 
program management and stewardship. For example, in the WIC Program, 
the President's request provides $30 million to support the enhancement 
and modernization of the State-level information systems that have 
become so important to proper management of the Program. This kind of 
improvement is essential to strengthening program management, 
maintaining a high level of program integrity and, to the extent 
possible, preventing errors and other problems before they occur.
    In the remainder of my remarks, I would like to highlight a few key 
components of our request.

                           FOOD STAMP PROGRAM

    The President's budget requests $27.7 billion for the Food Stamp 
Program, enough to serve an average of 21.6 million people each month. 
The request includes sufficient funds to support the changes enacted in 
last year's Farm Bill including the restoration of eligibility to many 
legal immigrants. Included in this amount, we also propose to continue 
the $2 billion benefit reserve. The importance of this reserve is 
especially critical in fiscal year 2004. While we anticipate a return 
to strong economic growth, predicting the turning point of program 
participation is challenging. The proposed contingency reserve will 
ensure the availability of benefits for eligible households should 
participation or food costs exceed current estimates.

                        CHILD NUTRITION PROGRAMS

    The budget requests $11.4 billion for the Child Nutrition Programs, 
which provide millions of nutritious meals to children in schools and 
in child care settings every day. This level of funding will support an 
increase in daily School Lunch Program participation from the current 
28 million children to over 29 million children. This funding request 
also supports an increase in daily School Breakfast Program 
participation from the current 8 million to over 9 million children. 
Requested increases in these programs also reflect rising school 
enrollment, increases in payment rates to cover inflation, and higher 
levels of meal service among children in the free and reduced price 
categories.

                                  WIC

    The President's budget includes $4.8 billion for the Special 
Supplemental Nutrition Program for Women, Infants and Children, the WIC 
Program. This year's request will allow local communities to provide 
food, nutrition education, and a link to health care to a monthly 
average of 7.8 million needy women, infants and children during fiscal 
year 2004. The request provides for a contingency fund of $150 million. 
These resources can be used as needed if food costs or participation 
exceed current estimates.

               COMMODITY SUPPLEMENTAL FOOD PROGRAM (CSFP)

    The budget requests $95.0 million for CSFP, which serves elderly 
people and women with infants and young children. The funds requested 
plus anticipated carry-over from fiscal year 2003, surplus donations 
and commodities currently in inventory will be sufficient to maintain 
this program in States that currently participate and those that join 
the program in fiscal year 2003.

             THE EMERGENCY FOOD ASSISTANCE PROGRAM (TEFAP)

    As provided for in the Farm Bill, the budget requests $140 million 
for food in this important program. Our request for States' storage and 
distribution costs, a critical form of support for our Nation's food 
banks, is $50 million. Secretary Veneman has committed to ensuring the 
continuing flow of surplus commodities to TEFAP. Such donations 
significantly increase the amount of commodities that are available to 
the food bank community from Federal sources.

                NUTRITION PROGRAMS ADMINISTRATION (NPA)

    We are requesting $144.8 million in this account, which includes an 
increase of $8 million and 13 staff years in our administrative budget. 
This increase supports the child nutrition program integrity initiative 
described earlier, as well as a number of initiatives under the Center 
for Nutrition Policy and Promotion designed to combat obesity and 
improve the dietary quality of all Americans. Our total request for 
Federal administrative resources represents only about 0.5 percent of 
the program resources for which we have responsibility and sustains the 
program management and support activities of our roughly 1,700 
employees nationwide. I believe that we need these modest increases in 
funding in order to maintain accountability for our $44 billion 
portfolio and to assist States to effectively manage the programs and 
provide access to all eligible people.

                  CHILD NUTRITION ACT REAUTHORIZATION

    As I stated in my testimony before this Committee last year, I 
personally feel very fortunate to have the opportunity to participate 
in the reauthorization of important programs such as the school 
breakfast and lunch programs, the WIC Program, and the summer feeding 
program. Congress and the Administration face a range of important 
challenges in this reauthorization cycle. Among these is combating 
obesity among our youth, ensuring access to our programs, improving the 
nutritional content of meals, and enhancing program integrity and 
administration.
    Toward meeting these challenges, the Administration has established 
a set of principles to guide the reauthorization process. Key among 
these are:
  --Ensuring that all eligible children have access to program 
        benefits--including streamlining the administration of programs 
        to minimize burdens and increase meal reimbursements to provide 
        support for quality program meals.
  --Supporting healthy school environments--providing financial 
        incentives to schools that promote good nutrition, including 
        serving meals that meet the dietary guidelines, offer healthy-
        choice alternatives, and provide nutrition education.
  --Strengthening program integrity--the budget also makes clear that 
        if there are any savings resulting from integrity initiatives 
        these funds would be reinvested into the Program to ensure the 
        best outcomes for those in need.
    In sum, our request sets the right priorities to ensure access to 
the Federal nutrition assistance programs for the children and low-
income people who need them, while maintaining and improving their 
integrity and supporting our efforts to address the growing public 
health threat of obesity. Thank you for your attention; I would be 
happy to answer any questions you may have.
                                 ______
                                 

    Prepared Statement of Roberto Salazar, Administrator, Food and 
                           Nutrition Service

    Thank you, Mr. Chairman, and members of the Subcommittee for 
allowing me this opportunity to present the budget request for the Food 
and Nutrition Service for fiscal year 2004.
    The mission of the Food and Nutrition Service is to increase food 
security and reduce hunger together with cooperating organizations by 
providing children and low-income people access to food and nutrition 
education in a manner that inspires public confidence and supports 
American agriculture. We are requesting a total of $44.2 billion to 
fulfill this mission through the Federal nutrition assistance programs.
    As the Under Secretary noted, the request for FNCS focuses on the 
accomplishment of three critical outcomes:
  --To address the emerging epidemic of obesity, especially among 
        America's youth, by improving our programs' ability to support 
        healthy eating and physical activity, including better 
        integration of nutrition education into Federal nutrition 
        assistance.
  --To improve access to these programs, to ensure that all those 
        eligible are able to participate.
  --To enhance performance and integrity in the programs, to strengthen 
        their operation and maximize their ability to serve eligible 
        children and low-income people while safeguarding the 
        taxpayer's investment in nutrition assistance. I'd like to 
        offer you some details from our request that provide the link 
        between the investments we intend to make and these important 
        goals.

                           COMBATING OBESITY

    The budget request includes funding to promote healthy eating and 
physical activity to prevent nutrition related illnesses in America. 
These are core objectives of the nutrition assistance programs, as they 
represent a unique opportunity to reach populations that experience a 
disproportionate share of diet-related problems and risk factors 
including overweight and obesity.
    FNS is working on a number of fronts to harness the power of the 
nutrition assistance programs to combat obesity, such as:
  --As part of the President's HealthierUS initiative, we are pursuing 
        a vigorous nutrition promotion campaign, Eat Smart. Play Hard. 
        The campaign is designed to motivate healthy eating and more 
        physical activity;
  --We are working to improve the nutritional content of school meals, 
        food packages and other benefits to ensure that they continue 
        to contribute to a healthful diet;
  --We are expanding and improving program-based nutrition education, 
        such as Team Nutrition, and other nutrition services to improve 
        healthy eating skills of participants;
  --We have made significant improvements in the nutritional quality of 
        school meals, lowering the percentage of calories from fat and 
        saturated fat as well as reducing levels of sodium and 
        cholesterol; and
  --We are enhancing our support of breastfeeding, a proven strategy to 
        reduce the early incidence of obesity, through peer counseling 
        and exploring other ways in which WIC can assist in the battle 
        against childhood obesity.
    In addition, FNS and the Center on Nutrition Policy and Promotion 
are working in partnership with other USDA agencies, the National 
Cancer Institute and the Centers for Disease Control and Prevention, to 
increase the consumption of fruits and vegetables to 5 to 9 servings 
per day for a healthier eating pattern.

                        ENSURING PROGRAM ACCESS

    The budget request includes funding to support initiatives to 
ensure access for low-income individuals who are eligible to 
participate in our programs. While the Food Stamp Program reaches tens 
of millions of low-income Americans every month, many others who are 
eligible for benefits, including many seniors and the working poor, do 
not participate. To better reach these eligible nonparticipants, we 
have launched a major new public information campaign, ``Food Stamps 
Make America Stronger'', awarded grants to 33 local and state 
organizations over the last 2 years to assist the working poor, 
elderly, legal immigrants, and other low-income families and 
individuals, and are prepared to award another $5 million in grants 
this year to help States improve the food stamp application process as 
authorized by the Farm Bill.
    To meet our commitment to improve access for all who are eligible, 
we must work closely with our program partners--individuals and 
organizations in communities across America who deliver the nutrition 
assistance programs, and work to make them accessible and effective. 
Faith-based organizations have long played an important role in raising 
community awareness about program services, assisting individuals who 
apply for benefits, and delivering benefits. President Bush has made 
working with the faith-based community an Administration priority, and 
we intend to continue efforts to reach out to that community in fiscal 
year 2004.

             STRENGTHENING INTEGRITY AND PROGRAM MANAGEMENT

    We are requesting additional funding in the President's budget to 
strengthen integrity and program management both at the Federal and 
State levels. In the Food Stamp Program, FNS administers a quality 
control system that encourages payment accuracy by establishing fiscal 
liabilities and incentives based on State performance in benefit 
determinations. In fiscal year 2001, the rate of overissuance was 6.47 
percent ($1 billion) and the rate of underissuance was 2.19 percent 
($340 million) for a combined payment error rate of 8.66 percent, the 
lowest in the history of the program. We expect performance to have 
improved in fiscal year 2002. But continued vigilance will be needed to 
sustain and to continue to improve on this record. One factor as we 
continue our commitment to performance is that food stamp caseloads in 
virtually every State are rising, while at the same time many States 
face significant budget deficits.
    Another focus of our integrity efforts is improving the accuracy of 
certifications for free and reduced price school meals. As you know, 
FNS has been analyzing this problem for a number of years; while we do 
not have a measure of its full extent, the indications are clear that 
the problem is real, and may have worsened in recent years.
    Inaccurate certifications represent a risk that free and reduced 
price meals could be provided to ineligible participants. Furthermore, 
certifications are used to distribute billions in Federal, State, and 
local education aid; errors can undermine targeting of aid to those 
most in need.
    USDA has been working for a number of years to collect additional 
information to learn more about the problem, and to identify potential 
solutions. Current efforts include pilot-tests of alternative free and 
reduced-price eligibility determination systems, administrative reviews 
of the current verification process in a number of school districts, 
and a study to assess the eligibility status of families selected for 
income verification.
    The President's Budget proposes to improve the accuracy of 
eligibility decisions and to reinvest any savings from improved payment 
accuracy in ways that strengthen the program, ensure the access of all 
eligible children and improve the nutritional quality of meals. We have 
had a continuing dialogue with the Congress, the school food service 
community and program advocates trying to find a solution to this 
problem that does not deter eligible children from participation in the 
program and does not impose undue burdens on local program 
administrations. This will be an issue in the upcoming reauthorization 
of the Child Nutrition Programs. In the meantime, we will soon be 
issuing a final regulation that will require local agencies to report 
certification verification results to State agencies. The States, in 
turn, will use this information and meal data to target technical 
assistance activities to school food authorities with the highest 
levels of verification errors.
    FNS is addressing Child and Adult Care Food Program (CACFP) 
management weaknesses identified by Federal and State reviews and in 
OIG audits. A regulatory proposal published in September 2000, proposed 
changes to State and local monitoring and training requirements. An 
interim rule that implemented statutory changes to the CACFP was 
published in June 2002, and training on the rule was provided to State 
and Federal CACFP staff during the fall of 2002. A second interim rule 
will be published during the summer of 2003 to implement the remaining 
provisions.
    Now, I would like to review some of the components of our request 
that relate to these outcomes under each program area.

                           FOOD STAMP PROGRAM

    We are requesting $27.7 billion for the Food Stamp Program, 
including a $2 billion benefit reserve as appropriated in fiscal year 
2003. This proposed reserve would be available for eligible households 
in case participation exceeds current estimates. Participation is 
estimated to increase by 871,000 to a level of 21.6 million 
participants in fiscal year 2004. This level of funding will also 
support approximately 200,000 new recipients covered under the 2002 
Farm Bill changes to eligibility requirements for legal immigrants and 
other individuals.

                        CHILD NUTRITION PROGRAMS

    For these programs, we are requesting a total of $11.4 billion. The 
budget request will support the daily participation of over 29 million 
children in the School Lunch Program and over 9 million children a day 
in the School Breakfast Program. The cost of snacks served under the 
after school National School Lunch Program is also included in this 
request. We estimated 41 million meals above the fiscal year 2003 
estimate in the Child and Adult Care Food Program. The request also 
includes additional funding to support increases in school enrollment, 
increases in payment rates to cover inflation, a higher proportion of 
meals served to children in the free and reduced price categories and 
to support efforts to improve integrity.

SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS AND CHILDREN 
                                 (WIC)

    The President's request of $4.8 billion will enable us to provide 
benefits to a monthly average of 7.8 million needy women, infants and 
children during fiscal year 2004. This is a record-level request that 
shows the Administration's commitment to this effective and critical 
program for mothers and their young children. We believe this funding 
will provide benefits and services to all who are eligible and wish to 
participate. In October of 2002, WIC participation reached a record 
high of over 7.66 million participants. Since then, participation has 
fallen, consistent with historical trends toward lower participation in 
the winter months than during the rest of the year. We expect program 
demand to grow throughout the spring and summer. This request supports 
a $150 million contingency fund to allow WIC to serve all eligible 
persons seeking benefits should funding be insufficient for any reason.

             THE EMERGENCY FOOD ASSISTANCE PROGRAM (TEFAP)

    We are requesting $140 million, as provided for in the Farm Bill, 
to purchase commodities for this program. Our funding of States and 
local agencies costs associated with the distribution of commodities is 
a vitally important part of our support of the TEFAP community and we 
are requesting $50 million for this purpose. As Under Secretary Bost 
has noted in his testimony, Secretary Veneman has committed the 
Department to a continuing flow of surplus commodities to TEFAP at 
levels comparable to recent years. These surplus commodities are an 
essential resource to the food banks and significantly enhance their 
ability to serve the needy in their communities.

                   NUTRITION PROGRAMS ADMINISTRATION

    Our Nutrition Programs Administration (NPA) request for fiscal year 
2004 is $144.8 million, an increase of approximately $8 million over 
the fiscal year 2003 enacted level. We are requesting approximately 
$2.9 million for pay cost increases and $1 million to fund 13 
additional staff years to enhance program integrity in the Child 
Nutrition Programs. The request also includes an increase of $4.0 
million to enable us to expand our initiatives to combat obesity, 
reduce diet-related disease among all Americans, and support the 
President's HealthierUS intiative. The Center for Nutrition Policy and 
Promotion, also included in this budget request, will continue the 
process of updating the Food Guide Pyramid, one of the Nation's most 
important nutrition education tools; updating the Interactive Healthy 
Eating Index; working jointly with the Department of Health and Human 
Services on the updated Dietary Guidelines for Americans; and begin 
development of an obesity prevention campaign. As noted by Under 
Secretary Bost, FNS will be expanding its very effective Eat Smart. 
Play Hard. campaign to WIC, Food Stamp and possibly other nutrition 
assistance programs. The agency will also initiate development of 
family-oriented, nutrition education messages that are useful and 
relevant across the full range of our programs.
    Thank you for the opportunity to present this written testimony.

    Senator Bennett. Dr. Murano.

                        STATEMENT OF ELSA MURANO

    Dr. Murano. Good morning, Mr. Chairman, members of the 
subcommittee. We have the safest food supply in the world, and 
I say that with all confidence because I know when one looks at 
the rates of illness per 100,000 people in a population in any 
country, we do have the lowest. So I am very proud to say that 
unequivocally here.
    The safety of our food supply, as you have all stated, is 
one of the most important issues that we face. The public 
expects its food to be safe, and as a public health official, I 
take very seriously my job to meet that expectation. I came to 
Washington to do that job.
    Providing consumers with a safe food supply is an ongoing 
challenge, however. On the one hand, we must rapidly respond to 
day-to-day events, such as product recalls, outbreaks of 
foodborne illness, and reports of potential food safety 
hazards, like we have this week. On the other hand, we must 
have a solid food safety infrastructure, strong policies in 
place, and the appropriate expertise available to handle these 
day-to-day events. These cannot be developed in days, weeks, or 
even months. They require long-term efforts and resources. In 
other words, it is not enough to say that we are doing 
everything we can to protect the public health. We must be able 
to back up such statements with concrete actions.
    So let me use BSE as an example. Our efforts to guard 
against BSE in the United States began in 1989, as you know, 
when FSIS, in cooperation with other government agencies that 
are appearing before you today, APHIS and FDA, took a series of 
preventive actions to protect against this animal disease, 
which can potentially have human health implications. Mr. 
Hawks, I am sure, will mention some of these, and certainly Mr. 
Johnson has mentioned the ban on the use of ruminant materials 
in animal feed, and also the ban on the import of animals from 
countries that are known to have BSE.
    In addition, FSIS is finalizing a rule to ban the use of 
air-injected stunning and has also implemented a rigorous 
process verification program of beef that is produced by 
advanced meat recovery systems to ensure that high-risk 
materials are absent from our beef supply.
    So in the same manner, while outbreaks of foodborne illness 
continue to occur, we have made significant improvements to our 
food safety programs to minimize their occurrence and their 
effects. For example, we are now using epidemiological evidence 
to link cases of foodborne illness to specific products that we 
regulate. This means that an outbreak can be traced to its 
source more quickly, potentially reducing the number of 
illnesses.
    In March of 2003, the Centers for Disease Control and 
Prevention reported that the rate of foodborne illness across 
the board is down 16 percent over the last few years, and this 
is good news, indeed.
    The behind-the-scenes work that FSIS carries out is 
detailed in my statement for the record, but let me just point 
out a few highlights of our accomplishments this last year and 
a half. We have introduced more highly skilled scientific 
experts into our workforce, including consumer safety officers 
and Public Health Service commissioned officers, and we have 
taken the first steps towards revitalizing our training and 
education programs to better prepare our inspectors, and our 
employees, to function in a public health agency, which is what 
FSIS is.
    Recognizing that E. coli O157:H7 is more prevalent than 
previously thought, we directed establishments to reassess 
their HACCP plans for this pathogen, and we are verifying that 
these reassessments have taken place.
    We completed our risk assessment on Listeria monocytogenes 
and issued a directive stating that FSIS would intensify its 
testing program for this pathogen in instances where plants 
either don't have adequate controls or have these controls but 
don't share their data with us.
    To improve the security of the food supply, we hired 20 new 
import surveillance officers. We assessed vulnerabilities from 
farm to table, developed and distributed guidelines to industry 
on plant security, and have done many, many other functions 
that I will be happy to visit with you about.
    We are carrying out our reorganization of the Food Safety 
and Inspection Service to better prepare the agency to meet its 
public health goals. This includes a new internal review 
office. It is our own quality control office, if you will, so 
that we don't wait for OIG reports or GAO reports to tell us 
where our vulnerabilities or weaknesses may be.
    And last but not least, to take our food safety message 
directly to the people who need it, we are sending our new USDA 
Food Safety Mobile to strategic locations throughout the 
country.

                          PREPARED STATEMENTS

    Mr. Chairman, in the interest of time, I will not go on and 
tell you the specifics of our budget request. I think you have 
them before you. So I will close my comments and pledge to you 
that we continue to do everything that we can to show the 
public that they do have a safe food supply and that they can 
rely on that fact, and so with that, I will yield to Mr. Hawks.
    Senator Bennett. Thank you very much.
    [The statements follow:]

                 Prepared Statement of Dr. Elsa Murano

    Mr. Chairman and Members of the Subcommittee, I am pleased to 
appear before you today to discuss the fiscal year 2004 budget for food 
safety within the Department of Agriculture (USDA). I am Dr. Elsa 
Murano, Under Secretary for Food Safety. With me today are Dr. Merle D. 
Pierson, Deputy Under Secretary for Food Safety; Dr. Garry McKee, 
Administrator of the Food Safety and Inspection Service (FSIS); and Ms. 
Linda Swacina, Associate Administrator.
    The safety of our food supply is one of the most important issues 
we face not only at USDA, but as a nation: there is nothing more 
personal or vital to all of us than the food we provide to our 
families. President Bush's budget for fiscal year 2004 includes record-
level support for USDA's food safety programs and their basic mission 
of providing continuous food safety inspection in each meat, poultry, 
and egg products establishment in the country. The additional $42 
million requested for FSIS will be used to fund several important 
initiatives that I would like to review with you in a moment.
    Before I cover those initiatives that will be implemented from the 
additional $42 million requested for FSIS, I want to discuss what has 
happened in the past year, our progress on the five goals to improve 
food safety, our efforts to improve international food safety, and our 
plans for the future.

What Has Happened During the Past Year
    We have the best food production and processing systems in the 
world, providing consumers with the most abundant and safest food 
supply. However, last year was a testament that maintaining the safety 
of our food is an ongoing challenge. We faced two major recalls, one 
caused by Listeria monocytogenes, another caused by E. coli O157:H7.
    We take our public health mission very seriously, and we will do 
what is necessary to accomplish that mission. According to the Centers 
for Disease Control and Prevention (CDC), over the past decade, there 
has been a major Listeriosis outbreak associated with ready-to-eat 
products in the United States every 2 to 4 years. In addition, E. coli 
O157:H7 outbreaks due to consumption of undercooked hamburgers are 
almost an annual occurrence.
    Despite these challenges, we have made significant improvements to 
our food safety program. We believe that the Pathogen Reduction/Hazard 
Analysis and Critical Control Point (PR/HACCP) rule in 1996 has made 
food safer. In May 2002, the CDC reported that the rate of foodborne 
illnesses, across the board, is down 21 percent.
    We have also made great strides in improving the technical and 
scientific knowledge of our inspection force. With the introduction of 
the Consumer Safety Officer corps we have introduced highly-skilled, 
scientific experts into the field to reinforce our veterinarians and 
front-line inspectors. We are driven by the fact that the enormity of 
our responsibility cries out for a science-based system and we continue 
to incorporate state-of-the-art science into the inspection process at 
every opportunity.
    Those strides are great, but we need to address how we are going to 
protect public health further. Throughout my career as a researcher, I 
have become keenly aware of the importance of sound scientific studies 
and how these can help provide us with the critical information and 
practical application of science we need to make decisions that will 
truly reduce the risk of foodborne illness. I have also observed the 
need for a proactive approach, one that does not simply react to food 
safety crises, but rather anticipates risks and prepares to mitigate 
their potential for harm. We need to improve across the board in 
everything we do including our public education campaigns; laboratory 
testing; inspector training; and in-plant inspection.

The Five Goals To Improve Food Safety
    I want to review some of the achievements we have made in improving 
food safety. Last year when I testified before this Committee, I 
outlined to you five goals that I intended to pursue in the coming year 
to ensure that we are proactive in protecting public health. We have 
pursued these goals with vigor, and we continue to do so. I am proud to 
report that much has been accomplished over the last year in our 
pursuit of these goals to ensure the safety of the nation's food 
supply.
    Before I cover our accomplishments under each of the five goals, I 
would like to review them quickly. They are:
  --Ensure that policy decisions are based on science;
  --Improve the management and effectiveness of FSIS programs;
  --Improve coordination of food safety activities with other public 
        health agencies;
  --Protect meat, poultry, and egg products against intentional harm; 
        and
  --Enhance public education efforts.

Goal #1: Ensure that Policy Decisions are Based on Science
    My first goal is to ensure that policy decisions are based on 
science. As I mentioned earlier, employing science is the only way we 
are going to break the cycle of foodborne illness. My background as a 
researcher in food safety has shown me the importance of utilizing 
science in formulating regulatory policy.
    If we take a look at two of the pathogens that have recently been 
on our radar screen--E. coli O157:H7 and Listeria monocytogenes--then 
we see that these organisms are representative of the universe of 
microbial hazards that pose the biggest threat to the safety of our 
food supply.
    The first one, E. coli O157:H7, comes to us through live animals 
that may have the organism on their bodies or in their intestinal 
tracts. Thus, its control hinges on minimizing its presence in the 
intestinal tract of food animals and in preventing its contents from 
reaching raw products derived from these animals.
    The second pathogen, Listeria monocytogenes, is an environmental 
pathogen carried by personnel, equipment and water, which can spread 
the pathogen when they contact food. Thus, its control hinges on 
finding where it might be harbored in the environment of the food 
processing plant and eliminating it so as to prevent contamination of 
food-contact surfaces.
    Risk assessments help give us a picture of the pervasiveness of 
these organisms. Risk assessments are scientifically-based processes of 
estimating the likelihood of exposure to a hazard and the resulting 
public health impact. They provide a solid foundation from which we 
base policies on science.
    The benefits of using them can be seen in our initiatives on E. 
coli O157:H7 and Listeria monocytogenes last year. We learned from our 
risk assessment on E. coli O157:H7 that the pathogen was not the 
proverbial needle in a haystack we once believed. On the contrary, it 
was much more prevalent than previously thought, which meant that we 
had to take a hard, new look at our strategies to address its 
occurrence. Not all establishments were implementing HACCP systems that 
were effective for controlling E. coli O157:H7. Others were not 
correctly validating the interventions used to control the pathogen. We 
realized that simply focusing on grinding operations was not effective; 
therefore, in order to be efficient, we also needed to focus on the 
production process, the slaughter process, and trimmings as 
contributors to the problem.
    In November, we issued a directive to our inspectors to make sure 
that establishments producing ready-to-eat meat and poultry products 
are preventing Listeria monocytogenes contamination. This directive was 
absolutely necessary given the gravity of the Northeastern Listeriosis 
outbreak in the fall. Furthermore, we recently completed a draft risk 
assessment on Listeria, which evaluates the factors that may contribute 
to the overall risk to public health. The information developed during 
the risk assessment process is critical to exploring a variety of risk 
management scenarios and we plan to examine different combinations of 
testing and intervention that present possibilities for future policy 
making. We used the risk assessment as we worked on a final rule to 
reduce Listeria in processing plants producing ready-to-eat meat and 
poultry products. We have moved as rapidly as we can to develop this 
final rule while using sound science as the basis and expect to publish 
it in the Federal Register soon.
    In a perfect world, risk assessments would be completed before risk 
management strategies are developed. But in the real world, we may not 
have this luxury. We must design risk management strategies based on 
what we know today and improve them as more information becomes 
available.
    Another way we have based policy decisions on science has been 
through a series of scientific symposia we hosted on specific issues 
ranging from applied epidemiology, pathogen reduction, and Listeria. 
These symposia offer an opportunity to hear from experts in academia 
and government and allow for a dialogue on how we can improve the 
scientific basis for our food safety programs and policies.
    Most recently, on April 29, FSIS sponsored the Second Scientific 
Symposium on Applied Epidemiology. This meeting was the second in a 
series of meetings aimed at aiding FSIS in developing a framework for 
how the agency will conduct public health investigations and integrate 
the scientific principles of applied epidemiology into its food safety 
activities. The successful meeting served as an open forum to discuss 
the agency's approach to investigations of foodborne illnesses 
associated with meat, poultry, and egg products and the progress the 
agency has made using epidemiology as a basis for regulatory decision 
making.

Goal #2: Improve the Management and Effectiveness of FSIS Programs
    The second goal I'd like to discuss is improving the management and 
effectiveness of FSIS programs. In order to fulfill this goal, we 
needed to select a leader to head FSIS through one of its most profound 
transformations toward a public health mission.
    I was looking for certain traits in this individual. These included 
a scientific background, strong management skills, a sense of 
accountability to everybody in the organization, and most important, a 
proven track record of public health service and commitment. This 
person would also have to be a motivator.
    I am truly proud to say that I have found all these traits in the 
selection of Dr. Garry McKee, who started with FSIS on September 1, 
2002. In this very short time he has made a very positive impression on 
agency employees and constituents alike. Dr. McKee is a committed 
public health professional with over 30 years of public health 
experience and a proven leader in managing public health programs and 
personnel. He brings unparalleled enthusiasm, determination, and 
commitment toward public health to the helm of FSIS and I certainly 
believe that his tenure will be regarded in the future as a significant 
turning point in FSIS' long history.
    The selection of an Administrator was critical, but so too was the 
reorganization of the agency that began last year. This reorganization 
will prepare the agency to better meet its public health and food 
safety goals. The purpose for this reorganization is to increase 
accountability, enhance communication, and improve overall efficiency.
    This reorganization will also ensure that the principles of public 
health and food safety cut across the entire spectrum of FSIS' work. We 
have added four assistant administrators for Food Security; Program 
Evaluation, Enforcement, and Review; Communications, Outreach and 
External Review; and International Coordination to strengthen the 
working relationship between our various offices.
    With Dr. McKee's leadership, we are already seeing increased 
accountability for all FSIS employees; improved communication and 
cooperation that flows smoothly and quickly throughout the 
organization, as well as laterally across all divisions and to outside 
agencies; and increased efficiency in the agency's programs. As a 
public health agency, lives depend on our programs and operations to 
work as a well-oiled machine.
    Another key to enhancing the consistency and effectiveness of FSIS 
inspection entails a revitalization of training and education programs 
conducted by the agency to instruct our workforce on HACCP sanitation 
procedures and other regulatory measures. The agency is in the process 
of redesigning current training programs to enhance distance learning 
opportunities and improve hands-on training methods. We realize that 
our workforce is the backbone of FSIS. We rely on our field employees 
to be in every meat, poultry, and egg products plant, ensuring that the 
plants are producing products that are safe, wholesome, and accurately 
labeled. Our frontline employees are responsible for making the 
critical determination that products are not adulterated and are safe 
to eat. They are also responsible for identifying and preventing 
intentional threats to the food supply. As a result, we believe that it 
is absolutely necessary to have a scientifically- and technically-
trained workforce that is dedicated to ensuring a safe supply of meat, 
poultry, and egg products. FSIS is refocusing and retooling its 
training efforts because a well-trained and competent workforce is a 
key element to the success of our critical food safety and public 
health mission.
    We have also strengthened our workforce's ability to enforce the 
HMSA. All of the over 7,600 FSIS inspection personnel are expected to 
enforce the Humane Methods of Slaughter Act (HMSA) and take enforcement 
action for humane handling and slaughter violations. FSIS has 
inspection personnel trained in humane methods of handling and 
slaughter in all of the nearly 900 federally inspected U.S. livestock 
slaughter establishments. In addition to their food safety-related 
inspection responsibilities, these veterinarians and inspectors are 
charged with observing the methods by which livestock are slaughtered. 
FSIS inspectors and veterinarians, who provide continuous inspection in 
every slaughter facility, are required to take immediate enforcement 
action when a violation is observed. FSIS personnel who fail to enforce 
the HMSA are considered negligent in their duties and are subject to 
disciplinary action. FSIS has taken, and will continue to take, 
enforcement actions against plants that do not follow humane handling 
requirements.
    In addition, FSIS used funding allocated in the fiscal year 2001 
Supplemental bill to hire 17 veterinarians to serve as District 
Veterinary Medical Specialists (DVMS) in each of the agency's 
districts. The DVMS reported for duty on December 30, 2001. The DVMS 
have been trained in all aspects related to humane handling and 
slaughter, including antemortem inspection, humane handling 
regulations, the HMSA, stunning methodologies, assessing consciousness, 
enforcement procedures related to humane handling, and workplace 
violence. They also serve as the program coordinators for all humane 
handling issues within their districts and are providing training to 
newly hired in-plant Veterinary Medical Officers on the agency's humane 
handling and slaughter responsibilities.
    In addition to our reorganization and training efforts, FSIS is 
continuing the pilot inspection system, known as the HACCP-based 
Inspection Models Project, or HIMP, to address the online slaughter 
process. I view HIMP as a means of increasing the effectiveness of our 
inspection force and the efficiency of our food safety systems, while 
in no way compromising food safety or our process control system.
    Under HIMP, one FSIS inspector inspects each carcass at the end of 
the line, while other FSIS inspectors are given the freedom to move 
throughout the facility and the slaughter line to ensure that the 
plant's critical control points in its food safety system are 
effectively preventing and stopping pathogens and other food safety 
hazards, resulting in more intense and effective inspection and 
verification activities. In June 2002, FSIS made data from the National 
Alliance for Food Safety (NAFS) available comparing HIMP and 
traditional inspection, which indicate that HIMP is at least equal to 
the traditional inspection system. In September 2002, an independent 
review of the HIMP data concluded that ``the HIMP system compared 
favorably to the traditional system of inspection.'' FSIS is encouraged 
by this data and we intend to use these results to further modernize 
our inspection system to most effectively prevent and control food 
safety hazards.

Goal #3: Improve Coordination of Food Safety Activities with Other 
        Public Health Agencies
    We have also made progress with the third goal to improve 
coordination of food safety activities with other public health 
agencies. I am a strong believer that by working together, all the 
agencies with public health responsibilities can best utilize our 
resources to ensure a safe food supply.
    An example of our progress in this area was an unprecedented 
investigation that we coordinated with the CDC and other State and 
local public health agencies on the Northeastern listeriosis outbreak 
last year. FSIS dispatched seven teams beginning in early September to 
affected Northeastern States and used information provided by CDC to 
test products and visit plants that were suspected of being linked to 
the outbreak. More than 400 tests were taken in the course of the 
investigation. When we first suspected that a turkey product caused the 
outbreak, we took the necessary steps to identify the plant. When the 
plant was identified, FSIS immediately conducted a recall and sent a 
team of specialists to the establishment to identify and help correct 
any problems in the plant. We spent an enormous amount of time and 
resources investigating this outbreak including creating a team of more 
than 50 laboratory scientists, regional epidemiologists, consumer 
safety officers, compliance officers, field personnel and headquarters 
management to work closely with CDC and State and local public health 
officials to locate the source.
    This effort was enhanced by our cadre of FSIS epidemiologists, many 
of which are Public Health Service (PHS) Commissioned Officers. We 
believe so strongly in the significant role the PHS can play in helping 
FSIS carry out its food safety mission that on April 17, 2003, we 
signed a Memorandum of Agreement (MOA) with the U.S. Department of 
Health and Human Services' PHS Commissioned Corps, to expand the role 
and number of PHS Officers detailed to FSIS. The addition of these PHS 
Commissioned Officers will enhance FSIS' capabilities for rapid 
response during heightened security alerts or an actual threat to food 
security.
    Another example is our very close working relationship with the 
Food and Drug Administration Commissioner, Dr. Mark McClellan. We have 
established regular meetings with Dr. McClellan's office to increase 
our interaction on issues of mutual concern and to discuss policy 
positions of common interest.
    States are also an integral part of the U.S. food safety system. We 
are working to update and strengthen the Federal State review process 
through a number of means. FSIS is working diligently to address the 
congressional mandate in the 2002 Farm Bill requiring us to carry out a 
comprehensive review of State Meat and Poultry Inspection programs. The 
agency has also published voluntary security guidelines to help State-
inspected plants that produce meat, poultry, and egg products in 
identifying ways to strengthen their security plans to protect against 
acts of bioterrorism.
    Another area in which we are making major strides is our 
cooperation with States through the sharing of recall information. In 
July 2002, FSIS published a final rule allowing the agency to share a 
firm's distribution list with State and Federal agencies in the event 
of a meat or poultry recall through a Memorandum of Understanding. This 
change allows for better communication and coordination between FSIS 
and the numerous State and Federal agencies that are involved in 
product recalls.

Goal #4: Protect Meat, Poultry, and Egg Products Against Intentional 
        Harm
    Close coordination with other public health agencies is also very 
important in protecting the food supply against intentional harm, which 
leads me to the fourth goal. Since the attacks on September 11, 2001, 
FSIS has strengthened coordination and preparation efforts to prevent, 
detect, and respond to food-related emergencies resulting from acts of 
terrorism, and ensure the safety of meat, poultry, and egg products 
that come to us from other countries. With a strong food safety 
infrastructure already in place, FSIS has been able to focus on 
strengthening existing programs and improving lines of communication, 
both internally and externally.
    We have implemented several measures to protect the public from 
contaminated product entering the United States from abroad. In 
addition to reinspecting imported product, FSIS continually assesses 
foreign establishments to make sure their sanitation and inspection 
procedures are equivalent to those in the United States.
    To augment the efforts of traditional FSIS import inspectors, FSIS 
has also added 20 new import surveillance liaison inspectors who are on 
duty at ports-of-entry. Where traditional USDA import inspectors 
examine each shipment and conduct reinspection activities, these new 
import surveillance liaison inspectors conduct a broader range of 
surveillance activities at each import facility and serve as liaisons 
to improve coordination with other agencies concerned with the safety 
of imported food products, such as the Department of Homeland Security.
    Furthermore, FSIS introduced the new Automated Import Information 
System (AIIS), which focuses on a foreign country's inspection system 
as a whole, rather than on individual plants. This system, using 
statistics, chooses imports for reinspection based on the annual volume 
of shipments from the exporting country. Previously, for all countries 
except Canada, reinspection was randomly assigned based on an 
establishment's compliance history. The new system is user-friendly and 
allows inspectors at all ports-of-entry to share data. It also allows 
managers to have easier access to inspection reports. The new AIIS also 
provides better tracking of shipments once they enter the United 
States, and FSIS' next step is to integrate the system with USDA's 
Animal and Plant Health Inspection Service (APHIS) and the U.S. Customs 
systems to further strengthen the food safety system against 
intentional attacks.
    Besides our initiatives to screen imported products, we have 
conducted a vulnerability assessment to be used as a tool for 
determining the most vulnerable products, likely agents, and potential 
sites for deliberate adulteration of domestically produced meat, 
poultry, and egg products. The assessment was conducted using a farm-
to-table approach based on current knowledge of the industrial 
processes used in the production of these products and the potential 
biological and chemical agents that could be introduced. The assessment 
was concluded in June 2002 and the information obtained is being used 
to develop risk management strategies, including ensuring that our 
laboratories are equipped with the methods and personnel necessary for 
detecting agents of concern.
    We are also developing a vulnerability assessment of the import 
system to identify points in the production of imported products where 
biological, chemical, and radiological contaminants could be 
intentionally added to foods being brought into the United States. FSIS 
used the risk analysis framework to conduct a relative risk ranking to 
be used to allocate resources to monitor U.S. ports-of-entry for those 
food commodities that pose the greatest risk, examine different 
intervention strategies for preventing or reducing risks, develop 
biohazard identification protocols, and target training of personnel 
and develop educational campaigns to increase awareness. This 
assessment is expected to be completed in September 2003.
    We have taken preparation for food safety emergencies to a higher 
level with simulation exercises. Earlier this year, we conducted an 
exercise known as ``Crimson Winter'' to familiarize our managers and 
staff with the operating environment that would exist during an 
outbreak of foodborne disease--the cause being intentional or 
unintentional. This exercise was very constructive for our senior 
management, emergency response team, our partners in the Food Threat 
Preparedness Network, and other relevant Federal and State agencies.

Goal #5: Enhance Public Education Efforts
    Finally, goal number five is to engage in proactive education 
programs. Food safety education is a critical element of the risk 
analysis framework, which includes risk assessment, risk management, 
and risk communication. It is a risk management strategy because 
educating food preparers is an important way to reduce the risk of 
foodborne illness. Education is also a risk communication function 
because it serves to alert the public about a hazard that exists and 
can be addressed by safe food handling and food selection.
    As we continue to examine emerging and existing food safety 
problems, it is important that we remember that reducing foodborne 
illness requires numerous interventions all along the farm-to-table 
chain. We must consider all the strategies available to us--and 
education is one of them--to make the food supply safer. That is why we 
continually look for the most cost-effective ways to get the food 
safety message out to all food handlers from coast to coast.
    I have been busy travelling around the Nation conducting media 
interviews and delivering food safety education messages through an 
aggressive campaign. This is why we have pursued an even greater amount 
of coordination among government, industry, and consumer groups to 
deliver food safety messages to all food handlers and preparers.
    One of FSIS' key public health missions is to educate the public 
about the hazards of foodborne illness, as well as to teach safe food 
handling techniques to ensure the safety of meat, poultry, and egg 
products. Since we are trying to share our food safety message with all 
segments of the population, such as consumers, food preparers, 
educators, children, physicians, public health officials, and industry, 
this is a formidable task.
    Because we are tasked with spreading our food safety message to so 
many people with a limited amount of resources, FSIS is developing a 
comprehensive and sustainable mass media campaign that leverages 
traditional and non-traditional media outlets throughout the country to 
get this important message out. To carry out this function, FSIS has 
requested $1.5 million in the fiscal year 2004 budget for the 
development of this food safety education campaign. Some of the funds 
will be used to consult expert assistance on the design of a mass media 
food safety campaign. The agency intends to combine the expertise of 
the consultant with that of its traditional food safety education 
partners, as well as others with expertise in the delivery of public 
health and food safety messages.
    The development of this food safety campaign is the next step in 
the agency's efforts to continuously enhance the delivery of important 
and life-saving food safety messages to the public. Currently, FSIS 
Food Safety Education staff is working with traditional media sources, 
food handlers and preparers, as well as other ``food safety education 
audiences'' to refine food safety messages and lay the groundwork for 
future development of a wider mass media education campaign.
    To this end, the agency is sending the USDA Food Safety Mobile to 
strategic locations throughout the country to research and develop this 
important food safety education campaign. While delivering important 
food safety messages to the public, the Mobile is providing valuable 
first hand insight on how future mass media messages and education 
campaigns should be constructed and delivered. FSIS will combine this 
research with the expert consultation it will seek in fiscal year 2004 
from food safety education professionals and develop a much broader and 
sustainable mass media campaign.
    Also last year, FSIS partnered with the Food and Nutrition Service 
to provide new educational materials to schools and child care 
facilities. We are also actively engaged in the Partnership for Food 
Safety Education, which is a public-private coalition dedicated to 
educating the public about safe food handling preparation to help 
reduce foodborne illness.
    We all have to realize as well that education is not just about the 
basics of food handling. There are many new effective products and 
technologies in the marketplace that can be used to reduce pathogens 
and food preparers need to be educated about them. Basic and thorough 
education is needed to inform and change possible misconceptions about 
their applications.
    Irradiation is a good example of a technology that is misunderstood 
by the public. We were charged by Congress in the recent Farm Bill to 
conduct an education program on the availability and safety of new 
technologies, including irradiation, that eliminate or substantially 
reduce the levels of pathogens in meat and poultry products. Last year 
we convened a meeting with a group of the foremost experts on 
pasteurization/irradiation to start developing an education program. We 
expect much to come out of this group as we continue to develop and 
deliver an effective education program for pasteurization/irradiation.

Efforts to Improve International Safety
    The U.S. food safety system is the gold standard for the world. 
Because we have the same safety requirements for the U.S. meat and 
poultry produced for export and for products entering the United 
States, our efforts to continually improve our food safety system have 
a global impact.
    We are fully committed to working with our international partners 
in ensuring a safe global food supply. Under my direction, the Office 
of Food Safety leads the U.S. office of the Codex Alimentarius 
Commission, which is an international standard-setting body for food 
safety. Our active leadership in Codex contributes to decisions that 
have profound effects on national economies and the health and well 
being of citizens around the world. That is why FSIS strives to educate 
the public, our U.S. partners, and interested partners around the world 
about the important role Codex plays in developing science-based global 
food safety standards. It is in our national interest to maintain our 
leadership role in Codex in order to ensure food safety regulations 
around the world are reasonable, equitable, and achievable.
    Another example of our commitment to international food safety is 
through education. Last year, we cosponsored with the U.S. Department 
of Health and Human Services the ``Thinking Globally--Working Locally: 
A Conference on Food Safety Education.'' The conference included 
breakout sessions, workshops, and tours focusing on the food safety 
education implications of the global food supply. Over 600 participants 
from the United States and abroad attended.
    We also reached out to rural women worldwide through participation 
in the Third International Congress on Women in Agriculture held in 
Spain last year. We delivered our food safety education message at this 
conference to help strengthen our message throughout the world.

Risk Assessment
    While FSIS has been able to use risk assessments to better shape 
our policy, we also need to make sure that the risk assessments that we 
carry out address the agency's needs. Our talented and dedicated 
leadership team has made it clear to the FSIS workforce and to industry 
that science will dictate our food safety programs. At the moment, 
there is no formal infrastructure for science-based policy making. We 
are working hard to rectify this. You cannot craft a solution in this 
highly complex food production world if you have not specifically 
identified the problem.
    We need a central, state-of-the-art source for the development of 
risk assessment models. We are working now on designing such a plan. It 
is getting increasingly difficult to manage a threat when we are unsure 
of its pervasiveness. Risk assessment provides this vital data. The 
benefits of using risk assessments can be seen in our recent 
initiatives on E. coli O157:H7 and Listeria monocytogenes that I 
discussed earlier. This process needs to be strengthened, formalized, 
and continually supported in order to be used to its full potential. By 
strengthening the agency's reliance on risk assessments to shape future 
policy, we will be better prepared to fight the war on pathogens.
    To be effective, we need to both analyze current threats to the 
food supply and anticipate problems that may arise. There are times 
when we work in a completely reactive mode and I do not think this 
serves us well when we try to anticipate new challenges.
    I am well aware that there are gaps in our current universe of food 
safety research and until we close the gaps we will not be able to 
fully understand, or control, the farm-to-table continuum. We need to 
bring the brightest food safety minds from throughout the country 
together in a way that will help the Federal government, industry, 
foodservice and the American people.

Validated Decontamination Methods
    We need to focus on the application of validated decontamination 
methods in order to reduce pathogens. A conscious effort has been made 
when drafting FSIS' Notices and Directives to encourage industry to 
utilize new decontamination technologies. Scientific and technical 
innovation that keeps our food safer should be encouraged. Therefore, 
we intend to consider further ways to validate these technologies in 
order to ensure their ability to reduce foodborne pathogens.
    We believe that new technology provides a great opportunity to 
enhance the safety of meat, poultry, and egg products. Thus, the agency 
continues steps to encourage and provide opportunities for 
technological advances and innovation under the PR/HACCP rules. We 
recently announced new procedures for new technology intended for use 
in establishments. These procedures were designed to encourage 
innovation by eliminating undue delays in the development, testing, and 
use of new technology. This will allow FSIS to respond efficiently and 
expeditiously when technological innovations become available and help, 
not hinder, in the implementation of these food safety tools.

Initiatives from the fiscal year 2004 Budget Request
    At this time, I would like to focus on the initiatives of the 
fiscal year 2004 food safety budget request and indicate how this 
additional funding will help us reach our goals. I firmly believe these 
resources will help us make the necessary improvements aimed at 
protecting the health and safety of the public we serve.
    The fiscal year 2004 budget request supports FSIS' basic mission of 
ensuring continuous inspection in each meat, poultry, and egg products 
establishment in our country and reinspection of imported product. It 
also reflects President Bush's deep concern about ensuring a strong 
food safety system. His record level budget request for food safety 
programs will allow FSIS to continue working to fully implement the 
goals we have laid out, but will also allow us to pursue new 
initiatives.
    USDA's food safety budget requests a program level of $899 million, 
an increase of $42 million over the enacted level for fiscal year 2003. 
This funding represents a $148 million, or 23 percent, increase for 
USDA food safety activities since fiscal year 2000. The $42 million 
increase in the fiscal year 2004 budget to strengthen FSIS' food safety 
program encompasses $23.6 million in increases to cover raises in 
employees' salaries and benefits, the costs of inflation, and FSIS' 
support of State-inspection programs.
    The other part of the budget increase covers $19.3 million in 
initiatives to fund the hiring of more food safety inspectors, provide 
specialized scientific and technical training for the inspection 
workforce, increase microbiological testing and sampling, strengthen 
foreign surveillance programs, and increase our public education 
efforts.
    As I mentioned, it is absolutely necessary that we use science to 
improve food safety. One of the ways the President's budget helps us do 
that is through the $1.7 million to do baseline studies on a variety of 
pathogens, including E. coli O157:H7. This funding will strengthen the 
backbone of effective policy making by allowing us to collect data on 
the presence of microbial hazards, which is a crucial component used in 
developing risk assessment models.
    Another means of employing science is the strategy of equipping our 
frontline workforce with scientific and technical expertise. The $5.7 
million requested in the President's budget will help us expand our in-
depth HACCP and Sanitation Standard Operating Procedure (SSOP) training 
to all of our veterinarians and inspectors. With these resources, we 
will be able to increase consistency, effectiveness and accuracy of 
food inspection, thus making our food safer.
    Along with this notion of a well-trained inspection workforce, is 
the fact that FSIS needs to have a full complement of inspectors. For 
this purpose, the President's budget requested $4.3 million in funding 
to increase our workforce to 7,680 in-plant staff by adding 80 new 
positions. These 80 positions are necessary to ensure continuous 
inspection of all meat, poultry, and egg products plants.
    When a foodborne outbreak occurs, it is essential to identify the 
source of the outbreak so that the agency can take swift action to 
prevent further illnesses and warn the public of the adulterated 
product. Therefore, the fiscal year 2004 budget request includes $4.5 
million to provide additional microbiologists, chemists, laboratory 
technicians, and other personnel to increase the agency's ability to 
identify adulterants in meat, poultry, and egg products. This funding 
will help the agency develop analytical methods to test food products 
for chemical, biological, and radiological contamination. This 
initiative will also increase sampling of ready-to-eat products for the 
presence of bacteria such as Listeria monocytogenes and Salmonella. 
With this funding, FSIS will increase sampling of these products from 
10,000 to 15,000 annually and will add the capability to conduct 5,000 
Listeria monocytogenes environmental samples annually. The agency also 
plans to increase sampling of raw ground beef and raw ground beef 
ingredients for E. coli O157:H7 from 7,000 to 15,000 samples annually.
    Additionally, the President's budget includes $1.8 million to 
increase the number of foreign program auditors, thereby strengthening 
our oversight at the location where the food is actually produced or 
manufactured for export to the United States. This augments our 
existing strong system of ensuring that imported food is safe.
    Our public education effort, which I discussed earlier in our five 
goals, is one avenue we are aggressively taking to make sure that all 
food handlers and preparers follow safe food handling practices to 
reduce foodborne illness. The President's budget request for an 
additional $1.5 million for food safety education will allow the agency 
to continue to research and develop a sustainable and comprehensive 
mass media campaign across the country.
    Finally, the fiscal year 2004 budget request includes a proposal to 
recover the costs of providing inspection services beyond an approved 
eight-hour primary shift. FSIS already collects $102 million in 
reimbursable fees to recover the costs associated with overtime, 
holiday, and voluntary inspection services. FSIS has submitted 
legislation to Congress to allow the agency to collect user fees for 
inspection services beyond one approved eight-hour shift per day. If 
approved by Congress, it will enable the agency to collect 
approximately $122 million in user fees and reduce our appropriated 
request from $797 million to $675 million. This will result in a 
savings for the American taxpayer.

Closing
    In closing, I want to emphasize that we already have a strong food 
safety infrastructure in place. We have made great progress in 
achieving the goals we have set for ourselves. We have a strong 
leadership team to direct us toward improving our ultimate goal of 
protecting public health.
    The President's budget for fiscal year 2004 provides us with a 
historic opportunity to--not only do what is right--but to do what is 
needed, which is to employ science to its fullest potential to make 
food in the United States as safe as possible. With the support and 
assistance of this Administration and Congress, I am confident we can 
do just that.
    This concludes my written statement. I want to thank the Chairman 
and Members of the Subcommittee for the opportunity to testify on 
behalf of USDA's Office of Food Safety. I welcome your questions.
                                 ______
                                 

 Prepared Statement of Garry L. McKee, Administrator, Food Safety and 
                           Inspection Service

    Mr. Chairman and Members of the Subcommittee, I am pleased to have 
the opportunity to provide a statement on the current status of Food 
Safety and Inspection Service (FSIS) programs and on the fiscal year 
2004 budget request for food safety within the U.S. Department of 
Agriculture (USDA).
    Before I move into the details of my statement, I'd like to take 
this opportunity to introduce myself, since this is my first time 
before the Subcommittee. I've been with FSIS for a short period of 
time. Although I came to FSIS from the Wyoming Department of Health, I 
am a proud Oklahoman at heart. I graduated from Southwestern Oklahoma 
State University and the University of Oklahoma, concentrating on 
microbiology and public health. Having been in the public health field 
for more than 30 years, I am very comfortable with the public health 
mission of FSIS.
    Today I would like share with you the steps FSIS is taking to 
become a world-class public health agency. These will include:
  --FSIS' Year in Review;
  --Three Functions of a Successful Public Health Model;
  --FSIS Accomplishments Towards Becoming a World-Class Public Health 
        Agency;
  --FSIS Partnerships; and
  --The proposed fiscal year 2004 FSIS Budget.

                          FSIS' YEAR IN REVIEW

    If you would allow me a moment, I would like to share some of FSIS' 
accomplishments over the past year so you can gain a better 
understanding of the way our budget is structured. As you know, under 
the Federal Meat Inspection Act, the Poultry Products Inspection Act, 
and the Egg Products Inspection Act, FSIS inspects meat, poultry, and 
egg products sold in interstate commerce and reinspects imported 
products, to ensure that they meet U.S. food safety standards.
    It is FSIS' mission to ensure that all meat, poultry, and egg 
products for use as human food are safe, secure, wholesome, and 
accurately labeled. More than 7,600 inspection personnel verify that 
regulations regarding food safety, and other consumer protection 
concerns, such as labeling, are met in over 6,300 Federal meat, 
poultry, and egg processing plants, each and every day they are in 
operation. FSIS has jurisdiction over products that generate more than 
$120 billion in sales, which represents one-third of all consumer 
spending on food. In addition, since September 11th, our workforce has 
been on heightened alert and is diligently monitoring all of these 
plants to ensure that there is no intentional biosecurity breach that 
could harm our Nation's food supply.
    Throughout 2002, FSIS was hard at work, protecting the safety of 
meat, poultry, and egg products. In fiscal year 2002, FSIS inspectors 
monitored the processing of 92.6 billion pounds of meat and poultry and 
inspected 3.7 billion pounds of liquid egg products. Inspectors at our 
110 import inspection stations monitored the importation of 3.9 billion 
pounds of meat and poultry products from 27 of 33 foreign countries 
meeting U.S. equivalency requirements and choosing to import to the 
United States last year. FSIS also facilitated the exportation of over 
11 billion pounds of meat and poultry products worth $7.5 billion to 
over 100 countries. In addition, FSIS spread the food safety message to 
approximately 90 million people through the media, the FSIS web site, 
and the USDA Meat and Poultry Hotline. FSIS also diligently continued 
its duty of protecting the public health, by overseeing the voluntary 
recall of any meat, poultry, and egg products that may have been 
potentially contaminated. As you can see, we have had quite a busy 
year.

                        IMPROVING PUBLIC HEALTH

    I have spent my entire career in this field and am devoted to 
administering under its protocols and scientific foundations. Public 
health is my number one priority. Thus, we are building FSIS into a 
recognized, credible, world-class public health agency that is a model 
for all other public health institutions.
    What does a ``world-class'' public health agency mean? Frankly, it 
means that we need to be the experts in improving the safety of meat, 
poultry, and egg products for the American people. We must also ensure 
that our food supply is safe and secure from bioterrorist attacks, 
intentional tampering, or other forms of adulteration. While I believe 
that FSIS has made considerable progress towards these goals, more can 
be done to make this agency the top-notch public health regulatory 
agency we envision it can be. All of the nearly 10,000 employees at 
FSIS are committed to achieving this vision.

Three Functions of a Successful Public Health Model
    In order to make FSIS a world-class public health agency, there are 
three parts of a successful public health model that FSIS must 
implement. First, FSIS must assess public health problems using 
science, such as surveillance, data collection, monitoring, risk 
assessment, and forecasting trends. Dr. Murano and I believe that 
science is the absolute best and most reliable tool we have to address 
the public health issue of food safety. In order to accomplish our 
goals, we must continue to make significant, science-based policy 
improvements that can measurably improve public health. By relying on 
science in our decision-making, we take the guesswork out of our 
policy-making process. Science is the weapon that will lead our 
workforce to victory in our declared war on pathogens.
    Our assessment activities will help FSIS carry out the second part 
of a successful public health model, which is policy development. FSIS 
must continue to develop and implement policies to reduce the risk of 
foodborne illnesses using science-based knowledge. Once we identify a 
problem or hazard, we need to craft an effective solution. As a public 
health agency, we are equipped for this problem-solving role with our 
technical knowledge and expertise. Policy development activities 
include planning and priority-setting, the development of regulations, 
directives, and other policy vehicles, mobilizing resources, training, 
constituency building, distribution of public information, and 
encouragement of public and private sector cooperation.
    Finally, FSIS must assure the American public that we are carrying 
out our jobs effectively through enforcement of established statutory 
and regulatory responsibilities. We will hold industry, as well as 
ourselves, responsible for ensuring that meat, poultry, and egg 
products are safe, wholesome, and accurately labeled. By successfully 
carrying out our food safety mission, we are assuring the public that 
the USDA mark of inspection found on meat, poultry, and egg products 
means what it says.
    By carrying out these functions, FSIS is protecting the public from 
foodborne illnesses. But, protecting public health also means ensuring 
the security of our food, which is a vital component of Homeland 
Security--a growing source of concern. The tragic events of September 
11th, as well as current threat assessments, have made Americans more 
aware that the unthinkable could become a reality. Biological, 
chemical, and radiological threats to our Nation's food supply are 
plausible from those intent on harming our Nation through any possible 
means. Since the terrorist attacks on America, food security has been 
the highest priority at FSIS and we continue to take steps to ensure 
that we are prepared to prevent and respond to any potential or actual 
threats to our Nation.
    Now I'd like to share with you some specific examples of how FSIS 
is ensuring the safety of our meat, poultry, and egg products.

                      BETTER ADDRESSING PATHOGENS

E. coli O157:H7
    The issue of E. coli O157:H7 in ground beef emerged in the 1990s 
and FSIS' microbiological testing program to detect E. coli O157:H7 in 
raw ground beef began in October 1994. Since then, over 57,000 raw 
ground beef samples have been analyzed. Each month, a random sample 
from the approximately 1,700 establishments that produce ground beef 
under FSIS inspection and the 100,000 retail stores that grind beef on 
a regular basis, are selected for sample collection. In 2002, over 
7,000 samples were analyzed for E. coli O157:H7. Since FSIS' E. coli 
O157:H7 testing program began, it has been continuously amended to 
incorporate the most up-to-date data and technologies.
    Data from the Agricultural Research Service (ARS) and the Centers 
for Disease Control and Prevention (CDC), as well as FSIS' draft risk 
assessment of E. coli O157:H7, indicated that E. coli O157:H7 was more 
prevalent than previously believed. The data led FSIS to further 
strengthen its E. coli O157:H7 policies and implement additional 
safeguards to increase food safety. In an October 2002 Federal Register 
Notice, FSIS published a series of new measures designed to reduce the 
incidence of E. coli O157:H7 contamination in raw ground beef. For 
instance, all facilities handling raw ground beef must reassess their 
Hazard Analysis and Critical Control Point (HACCP) plans and decide 
whether E. coli O157:H7 is a pathogen reasonably likely to occur in 
their products. In addition, establishments that receive product for 
grinding may determine that no additional steps are necessary at 
grinding facilities to address E. coli O157:H7, but only if appropriate 
purchase specifications are built into their food safety system. 
However, these specifications require that all suppliers must have one 
or more validated critical control points to eliminate or reduce E. 
coli O157:H7 below detectable levels and some means to ensure that 
these specifications are met.
    FSIS has set deadlines for completion of the reassessments, in 
order to ensure that all plants have reassessed their HACCP plans to 
account for E. coli O157:H7. Large plants, those with 500 or more 
employees, were required to comply by December 6, 2002; small plants, 
or those with less than 500, by February 4, 2003; and very small 
plants, those having fewer than 10 employees or annual sales of less 
than $2.5 million, were required to comply by April 7, 2003. FSIS 
Consumer Safety Officers (CSO) are completing extensive scientific 
reviews of plant HACCP plans and Sanitation Standard Operating 
Procedures (SSOPs) to ensure the reassessments are successfully 
addressing E. coli O157:H7 concerns, as well as all other aspects of 
HACCP regulations.
    FSIS is also modifying its current E. coli O157:H7 sampling and 
testing program to include all plants. In the past, FSIS did not 
typically collect raw ground beef samples at establishments that 
conducted their own E. coli O157:H7 testing. However, FSIS has found 
that, in spite of this private-sector testing, some of these 
establishments have had problems with E. coli O157:H7 contamination. In 
response, FSIS issued a notice on April 18, 2003, to revise its current 
directive to discontinue all exemptions from FSIS sampling and testing 
for E. coli O157:H7.
    FSIS is also developing a risk-based verification program that 
takes into account factors such as volume of production and 
effectiveness of interventions in determining testing frequencies. In 
addition to continuing to test for E. coli O157:H7 in ground beef, FSIS 
is considering testing for E. coli O157:H7 in trimmings and other 
intact materials used in non-intact product and beef carcasses and 
parts that will be processed into non-intact product. We believe that 
controls to reduce the risk of E. coli O157:H7 on intact product may be 
among the most effective ways to control the hazard overall and that 
these changes are critical to protecting public health.

Listeria Monocytogenes
    Following a recent voluntary recall of ready-to-eat poultry 
products due to potential contamination with Listeria monocytogenes, 
FSIS implemented a new policy to improve testing programs for Listeria 
monocytogenes in the environment of plants producing ready-to-eat 
products, such as deli meats and hot dogs. In November 2002, the agency 
released a directive announcing that plants producing high- and medium-
risk, ready-to-eat products that do not have a scientifically-based, 
validated program in place for the control of Listeria monocytogenes, 
will be subject to an intensified FSIS testing program. In December 
2002, the agency completed a survey to identify plants that will be 
considered for intensified testing. This new risk-based policy will 
allow FSIS to confirm an establishment's commitment to zero tolerance 
for Listeria monocytogenes on product and product contact surfaces.
    On February 14, 2003, FSIS released its draft risk assessment that 
provides a vital tool to estimate the public health impacts of various 
control measures for reducing the risk of Listeria monocytogenes. This 
draft risk assessment suggests that a combination of testing, 
sanitation, and other interventions exhibited greater benefits than 
when each step was used alone. It also suggests that product contact 
testing, used in conjunction with enhanced sanitation procedures, can 
lead to a reduction in Listeria-related illness. In addition, the risk 
assessment demonstrated that the use of intervention steps, such as 
post-packaging pasteurization or the introduction of growth inhibitors, 
showed dramatic public health benefits.
    FSIS utilized information gained from the risk assessment to 
proceed on an effective regulatory approach to reduce Listeria 
monocytogenes in processing plants producing ready-to-eat meat and 
poultry products. FSIS is working to publish a final rule for Listeria 
monocytogenes in ready-to-eat products and hopes to have it ready as 
quickly as possible.

Scientific Symposia
    We have also greatly increased our efforts to incorporate a broad 
range of scientific thinking on food safety issues in order to 
effectively combat harmful pathogens. In 2002, FSIS initiated a series 
of nine scientific symposia aimed at generating dialogue on important 
issues among public health experts, industry, advocacy groups, 
consumers, academia, and the public. These meetings allowed the agency 
to gather input on what scientific solutions would best address public 
health concerns. For example, FSIS held a scientific symposium on 
pathogen reduction in May 2002, to discuss the appropriate role of 
microbial testing in food safety and other food safety concerns. In 
November 2002, the agency held a Listeria summit to discuss the public 
health impact of Listeria monocytogenes. In February, the agency held a 
meeting to discuss the results of the draft risk assessment on Listeria 
monocytogenes. And just last month, we held a public meeting to discuss 
the agency's use of epidemiology as a basis for regulatory decision 
making. We believe the symposia allowed us to be as inclusive as 
possible, as well as gain valuable information and insight. Therefore, 
the agency has planned additional symposia in fiscal year 2003 on such 
topics as risk analysis, and HACCP and poultry processing.

                        PUBLIC HEALTH MANAGEMENT

    A world-class public health agency must run like clockwork in order 
to quickly and successfully prevent or respond to food safety 
emergencies. This requires a common dedication and focus at all levels, 
from headquarters management to the frontline employees in plants in 
the most rural parts of America. Therefore, FSIS has implemented an 
array of measures over the past year to enhance accountability, build 
professionalism, and ensure a coordinated public health approach to 
food safety.

FSIS Reorganization
    On our way to becoming a world-class public health agency, it 
became apparent that the structure of FSIS needed to be reorganized to 
efficiently and effectively meet our goals, carry out our critical 
functions, and protect public health. I have made it a top priority to 
restructure the agency in a way that prepares FSIS to meet its public 
health and food safety goals in a logical and streamlined fashion. This 
reorganization will increase accountability for all FSIS employees and 
refocus the duties of many employees.
    The reorganization will ensure that the principles of public health 
and food safety cut across the entire spectrum of FSIS' critical public 
health mission. We have added four assistant administrators in key 
areas--for Food Security; Program Evaluation, Enforcement, and Review; 
Communication, Outreach, and External Affairs; and International 
Coordination. These additions will strengthen the bonds between our 
various offices and make our operational models more coherent and 
responsive. For example, the assistant administrator of Food Security 
will tie together all Homeland Security activities within the agency, 
so that our policy makers, our scientists, our field staff, and our 
management are all working together to ensure that we are prepared to 
prevent and respond to any bioterrorist attack.

Program Evaluation, Enforcement and Review
    In fiscal year 2002, FSIS created the Program Evaluation, 
Enforcement and Review (PEER) office to serve as the agency's quality 
control team. This office's mission is to ensure that effectiveness, 
efficiency, consistency, and accountability become the rule at FSIS. 
This new office will ensure that FSIS functions such as reviews of 
plants for compliance and food safety investigations are carried out in 
a way most conducive to protecting the public health. This office also 
conducts program audits, reviews, assessments, and evaluations in an 
effort to ensure that they are performing as needed or uncover 
difficulties early on, before they reach the problem stage. Lastly, 
this office also helps ensure that the agency has an effective, 
efficient, timely, and aggressive program for dealing with those who 
violate the meat and poultry laws.

Improved Communications
    Our food safety message is most effective when every person along 
the farm-to-table continuum is aware of its importance and, just as 
importantly, understands it. As part of the FSIS reorganization, we 
created the Office of Communication, Outreach, and External Affairs. 
This office is tasked with spreading the food safety message to our 
many constituents whether in Congress, industry, advocacy groups, the 
public, or the media. We devote a great deal of energy and resources 
into translating highly technical food safety information and making it 
accessible and understandable at many different levels. But 
communication is a two-way street and we make every effort to receive 
and process input from our constituents so that we are aware of, and 
sensitive to, their range of viewpoints. We are always looking to 
improve our public health mission and communication is one of our most 
critical tools.

Automated Import Inspection System
    FSIS is also improving its management effectiveness on the 
international level. All imported meat and poultry is inspected in its 
country of origin, as well as visually reinspected by FSIS before being 
released in the United States. Additionally, FSIS tests imported 
products for residues, microbiology, and food chemistry. In fiscal year 
2002, FSIS introduced the new Automated Import Information System 
(AIIS). This system focuses on a foreign country's inspection system as 
a whole, rather than on individual plants, to statistically choose 
imports for reinspection based on the annual volume of shipments from 
the exporting country. Previously, for all countries except Canada, 
reinspection was randomly assigned based on an establishment's 
compliance history. The new system is user-friendly and allows 
inspectors at all ports-of-entry to share data. It also allows managers 
to have instant access to inspection reports. The new AIIS system also 
provides better tracking of shipments once they enter the United 
States. The next step is for FSIS to integrate our system with USDA's 
Animal and Plant Health Inspection Service (APHIS) and the U.S. Customs 
systems to further strengthen the food safety system against 
intentional attacks.

                   WORKFORCE AND TRAINING INITIATIVES

    Our workforce is the backbone of FSIS. We rely on our field 
employees to be in every meat, poultry, and egg products plant, 
ensuring that the plants are producing products that are safe, 
wholesome, and accurately labeled. Our frontline employees are the ones 
we rely on to make the critical determination that products are not 
adulterated and are safe to eat. They are also responsible for 
identifying and preventing intentional threats to the food supply. For 
this reason, I have made training my top priority as FSIS 
Administrator. I am personally overseeing the changes the agency is 
implementing in our training programs and believe it is absolutely 
critical that we have a scientifically- and technically-trained 
workforce that is dedicated to ensuring a safe supply of meat, poultry, 
and egg products. A well-trained and competent workforce is a key 
element to making any institution successful. I am committed to 
achieving the aggressive public health goals we have set at FSIS 
through improving our employees' skill level, which will in turn, make 
us better guardians of the public health and safety.

Consumer Safety Officers
    Let me give you an example. To achieve our public health goals, 
FSIS recognized the need for frontline employees to have a scientific 
and technical background. Therefore, the agency created the Consumer 
Safety Officer (CSO) series to reflect our increasing reliance on 
science and technology. CSOs have a scientific and technical background 
and receive additional agency training that enables them to assess and 
verify the design of food safety systems. FSIS trained 104 employees as 
CSOs in fiscal year 2002, and plans to train an additional 105 in 
fiscal year 2003. The agency is extending CSO training to its 
Veterinary Medical Officers (VMOs) to raise scientific and technical 
knowledge within the agency.

Humane Handling and Slaughter Initiatives
    We have also strengthened our workforce's ability to enforce the 
HMSA. All of the over 7,600 FSIS inspection personnel are expected to 
enforce the Humane Methods of Slaughter Act (HMSA) and take enforcement 
action for humane handling and slaughter violations. FSIS has 
inspection personnel trained in humane methods of handling and 
slaughter in all of the nearly 900 federally inspected U.S. livestock 
slaughter establishments. In addition to their food safety-related 
inspection responsibilities, these veterinarians and inspectors are 
charged with observing the methods by which livestock are slaughtered. 
FSIS inspectors and veterinarians, who provide continuous inspection in 
every slaughter facility, are required to take immediate enforcement 
action when a violation is observed. FSIS personnel who fail to enforce 
the HMSA are considered negligent in their duties and are subject to 
disciplinary action. FSIS has taken, and will continue to take, 
enforcement actions against plants that do not follow humane handling 
requirements.
    In addition, FSIS used funding allocated in the fiscal year 2001 
Supplemental bill to hire 17 veterinarians to serve as District 
Veterinary Medical Specialists (DVMS) in each of the agency's 
districts. The DVMS reported for duty on December 30, 2001. The DVMS 
have been trained in all aspects related to humane handling and 
slaughter, including antemortem inspection, humane handling 
regulations, the HMSA, stunning methodologies, assessing consciousness, 
enforcement procedures related to humane handling, and workplace 
violence. They also serve as the program coordinators for all humane 
handling issues within their districts and are providing training to 
newly hired in-plant VMOs on the agency's humane handling and slaughter 
responsibilities.

Chief Veterinarian
    In fiscal year 2002, FSIS established a Chief Veterinary Medical 
Officer position to promote the education, training, and professional 
development of the agency's approximately 1,100 veterinarians. In 
addition, FSIS veterinarians have completed a survey to determine what 
skills they possess and to help the agency assess how it can harness 
their skills to help meet its ever-evolving goals.

Inspection Coordinator Training
    Becoming a world-class public health agency requires that FSIS 
increase technical training and the scientific expertise of our 
workforce. Inspection Coordinators (ICs) in each District were trained 
to increase their HACCP expertise, particularly with respect to HACCP 
plan design and scientific support for HACCP plans. The ICs often 
participate in, or lead, in-depth verification reviews (IDVs) to assess 
whether an establishment is carrying out activities that meet 
requirements of the FSIS Pathogen Reduction (PR)/HACCP rule. This 
training will enhance their ability to do a more effective job and will 
also provide Districts with an additional resource capable of 
conducting comprehensive food safety assessments. In response to a 
Government Accounting Office recommendation that FSIS strengthen basic 
training for its inspectors, the agency has begun to reinforce HACCP, 
SSOPs, and Sanitation Performance Standards knowledge, through training 
of its entire in-plant workforce. In April 2003, the agency's Consumer 
Safety Inspectors began this food safety regulatory essentials 
training. I will discuss in greater detail this key aspect of our 
fiscal year 2004 budget request in a moment.

Compliance Officer Training
    In fiscal year 2002, FSIS conducted a Compliance Officers (COs) 
training program at the Federal Law Enforcement Training Center in New 
Mexico. Nineteen Federal and three State COs completed the three-week 
course on basic safety training. In addition, sixty-one COs and three 
CSOs completed three specialized one-week safety courses, especially 
designed for FSIS. Also, twelve COs completed a one-week Instructor 
Verbal Judo Course designed to instruct them how to teach other 
employees how to better handle stressful situations they may encounter 
as part of their jobs. All of these training programs are the building 
blocks to the model public health agency I envision for FSIS.
    In-Plant Performance System In October 2002, FSIS implemented the 
In-Plant Performance System (IPPS), which puts in place a formal 
process so frontline supervisors can be sure that inspection personnel 
carry out their assigned job responsibilities. All field supervisors 
have been trained to use this system. Performance reviews have resulted 
in several letters of caution and instruction to employees who were not 
performing at the expected level. More importantly, the reviews have 
highlighted what we are doing right, as well as steps we can take to 
make even more improvements.

HIMP
    As you know, in 1997, FSIS initiated the HACCP-based Inspection 
Models Project (HIMP) pilot program. The goal of HIMP is to improve 
public health by enabling FSIS to maintain the same level of consumer 
protection with fewer inspectors tied to the slaughter line, thus 
resulting in more intense and effective inspection and verification 
activities. In June 2002, FSIS made data from the National Alliance for 
Food Safety (NAFS) available comparing HIMP and traditional inspection, 
which indicate that HIMP is at least equal to the traditional 
inspection system. In September 2002, an independent review of the HIMP 
data concluded that ``the HIMP system compared favorably to the 
traditional system of inspection.'' FSIS is encouraged by this data and 
we intend to use these results to further modernize our inspection 
system to most effectively prevent and control food safety hazards. 
Homeland Security Training FSIS has also initiated a comprehensive 2-
year training and education effort designed to ensure that every FSIS 
employee fully understands his or her role and responsibility in 
preventing or responding to an attack on the food supply. In addition, 
FSIS has developed multimedia tools covering food security initiatives, 
emergency response procedures, and guidelines for food processors for 
use in training all frontline supervisors. These have been shared with 
our State and local partners, as well as industry, to address their 
biosecurity awareness and training needs.
    In addition, FSIS personnel have been trained in the application of 
the agency's voluntary food security guidelines. This guidance promotes 
an exchange of information between FSIS, industry, and other agencies 
such as the Food and Drug Administration (FDA), on the subject of food 
security, as well as heightens industry's awareness of food security 
practices. FSIS is also working in cooperation with other Federal and 
State agencies such as APHIS, CDC, the Environmental Protection Agency, 
and the Department of Defense to develop biosecurity plans and training 
programs to identify and minimize food security risks.

                       HOMELAND SECURITY EFFORTS

    The events of September 11th and subsequent vulnerability 
assessments revealed the need for a more integrated and coordinated 
plan to protect meat, poultry, and egg products. Immediately following 
September 11th, FSIS established the Food Biosecurity Action Team (F-
BAT), charged with coordinating all activities pertaining to 
biosecurity, countering terrorism, and emergency preparedness within 
the agency. These activities are coordinated with USDA's Homeland 
Security Council, other government agencies and industry.

Office of Food Security and Emergency Preparedness
    The creation of the Office of Food Security and Emergency 
Preparedness took over F-BAT's role as the centralized office within 
the agency that serves as an interface with USDA's Homeland Security 
Council and represents the agency on all food security matters 
throughout the Federal government as well as State and local 
activities. The Office's mission is to prepare for, prevent, and 
coordinate a response to intentional acts and other major events 
threatening the U.S. food supply. It is comprised of two staffs, an 
External Relations and Emergency Preparedness Staff, in addition to a 
Scientific and Technical Support Staff. The External Relations staff's 
primary responsibility is to develop and maintain the extensive network 
of Federal and State relationships necessary to mobilize for a food-
related emergency. The Scientific staff provides science-based support 
for emergency response and prepares contingency plans for minimizing 
risk to the safety and security of the food supply, as well as to first 
responders.

Tabletop Exercises
    FSIS has conducted a number of simulation exercises at the Federal, 
State, and local levels to test its preparedness and response to an 
attack on the food supply. These exercises give agency employees the 
opportunity to simulate their actions in response to a threat on the 
food supply. One exercise earlier this year, ``Crimson Winter,'' proved 
very successful because it allowed the agency to recognize and correct 
vulnerabilities in its Homeland Security response plans.

Bioterrorism Vulnerability Assessment for Domestic and Imported 
        Products
    FSIS has conducted a food security vulnerability assessment to be 
used for determining the most vulnerable products, likely agents, and 
potential sites for deliberate adulteration of domestically produced 
meat, poultry, and egg products. The assessment was conducted using a 
farm-to-table approach based on current knowledge of the industrial 
processes used in the production of these products and the potential 
biological and chemical agents that could be introduced. The assessment 
was concluded in June 2002, and the information obtained is being used 
to develop risk management strategies, including ensuring that our 
laboratories are equipped with methods and personnel for detecting 
agents of concern.
    A vulnerability assessment of the import system is also being 
developed to identify points in the production of imported products 
where biological, chemical, and radiological contaminants could be 
intentionally added to foods being brought into the United States. FSIS 
used the risk analysis framework to conduct a relative risk ranking to 
be used to allocate resources to monitor U.S. ports of entry for those 
food commodities that pose the greatest risk, examine different 
intervention strategies for preventing or reducing risks, develop 
biohazard identification protocols, and target training of personnel 
and develop educational campaigns to increase awareness. This 
assessment is expected to be completed in September 2003.

Import Surveillance Liaison Inspector
    Soon after the terrorist attacks on the United States, FSIS 
inspectors nationwide were placed on heightened alert, a condition that 
remains in effect today. Using funds provided by the fiscal year 2001 
Homeland Security Supplemental Appropriations bill, FSIS created a new 
position, that of the import surveillance liaison inspector. As of 
March 1, 20 new import inspectors are on duty at ports of entry to 
augment the efforts of traditional FSIS import inspectors assigned to 
the 146 import establishments in the country. Where traditional USDA 
import inspectors examine each shipment and conduct reinspection 
activities, these new import surveillance liaison inspectors conduct a 
broader range of surveillance activities at each import facility, as 
well as extensive records review. These inspectors not only improve the 
agency's ability to ensure the safety of imported meat, poultry, and 
egg products, but as liaisons, they also improve our coordination with 
other agencies (e.g., U.S. Customs, APHIS) concerned with the safety of 
imported food products. We are looking at ways, in the future, to both 
increase the number of liaison officers and to expand and enhance their 
roles.

FSIS Food Security Initiatives
    In early February 2003, FSIS released a report titled, Protecting 
America's Meat, Poultry and Egg Products. The report, prepared by the 
Office of Food Security and Emergency Preparedness, outlines FSIS' food 
security initiatives. Some of the initiatives included in the report 
are assessing potential vulnerabilities along the farm-to-table 
continuum, enhancing security features at all FSIS laboratories, and 
strengthening FSIS coordination and cooperation with law enforcement 
agencies.

                           FSIS PARTNERSHIPS

    FSIS plays an essential role in ensuring that the meat, poultry, 
and egg products that we eat are safe. While we mainly focus on the 
processing of these products, we have a responsibility to the American 
people to make sure that the entire food chain is strong. Food safety 
is a team effort and we are always working to strengthen all the links 
in this food chain. However, it requires that everyone involved in the 
process, from the farmer to the consumer, carries out his or her 
responsibility in ensuring that the food we eat is safe and safely 
prepared. FSIS works with industry, consumers, and our sister agencies 
on a daily basis in this effort to reduce to the greatest extent 
possible foodborne contamination.

Industry Outreach
    FSIS strives to maintain a healthy and direct relationship with the 
meat, poultry, and egg products industries. We work with industry to 
prevent harmful pathogens from entering the food supply. FSIS was there 
to provide guidance when the HACCP program was first implemented, and 
we continue to provide guidance to help plants correctly implement the 
program through our veterinarians, on-line inspectors, and consumer 
safety officers. But now that HACCP has been introduced and 
implemented, we are in the next phase, which is enforcement. We will 
hold industry, and ourselves, responsible for successfully operating 
under the PR/HACCP model.
    In fiscal year 2002, FSIS made significant achievements in its 
Small and Very Small Plant Outreach Program. This program, introduced 
in 1998, was designed to develop and provide technical guidance and 
assistance to meet the specific needs of small plants, with ten or more 
employees, but fewer than 500, and very small plants with fewer than 10 
employees, or annual sales of less than $2.5 million. FSIS held more 
than 30 courses targeting these segments of the industry across the 
country. The courses focused on HACCP food safety systems and were 
provided through cooperative agreements with nine universities.
    Part of the agency's outreach effort also includes keeping the 
meat, poultry, and egg products industry informed of changes and 
innovations in food safety, as well as the standards and requirements 
they must meet to operate a safe food production facility. In fiscal 
year 2002, FSIS made improvements to the agency's labeling and 
standards policy web site, which was introduced in 2002 as a new, 
business-friendly web site providing essential information to small and 
very small plants. The site is geared towards helping small businesses 
understand the fundamentals of labeling and standards and to provide a 
key contact on our staff to answer related questions. FSIS also 
provides a staff liaison charged with facilitating resolution of small 
business issues on a one-on-one basis. The Labeling Policy Staff 
receive over 400 inquiries a month for labeling guidance.
    In May 2002, FSIS published voluntary security guidelines to assist 
Federal- and State-inspected meat, poultry, and egg products plants in 
identifying ways to strengthen their security plans to protect against 
acts of bioterrorism. FSIS provided these guidelines to field employees 
who will assist plants that seek further clarification or advice. They 
were designed for plants that may not have access to specialized 
security planning advice. These voluntary guidelines are available in 
English, Spanish, Vietnamese, Korean, and Mandarin Chinese, both in 
print and on the FSIS web site.

Food Safety Education
    While a meat processing plant might produce a perfectly safe 
hamburger, innocent mistakes made by a food preparer could taint a 
product with harmful bacteria and create a potentially unsafe meal. 
Food can become contaminated at any step in the food chain. Thus, FSIS 
is committed to spreading the food safety message in order to further 
reduce the incidence of foodborne illness. Food safety education is 
certainly not a substitute for, but rather a complement to, science-
based food safety policies. I would like nothing better than to tell 
people that they do not need to worry about how they handle and prepare 
their food because the government has taken care of the problem. But, 
as I said before, food safety is a team effort and must be carried out 
at all stages of the food production and preparation chain.
    We will continue to strive for greater reductions in harmful 
pathogens in meat, poultry, and egg products production facilities. But 
regardless of what we can accomplish, food preparers always will have 
an important role in keeping food safe. Because of this, we have 
designed our FSIS food safety education programs to increase consumer 
knowledge and change behaviors in order to prevent foodborne illness. 
The agency develops educational materials based on up-to-date 
scientific and consumer research. Our programs target the general 
public, as well as those groups who face increased risks from foodborne 
illness--the very young, the elderly, pregnant women, people with 
chronic diseases, and people with compromised immune systems.
    One of FSIS' key public health missions is to educate the public 
about the hazards of foodborne illness, as well as to teach safe food 
handling techniques to ensure the safety of meat, poultry, and egg 
products. Since we are trying to share our food safety message with all 
consumers, food preparers, educators, children, physicians, public 
health officials, and industry, this is a formidable task.
    Because we are tasked with spreading our food safety message to so 
many with only a limited amount of resources, FSIS is developing a 
comprehensive and sustainable mass media campaign to most effectively 
utilize the agency's scarce resources. FSIS has requested $1.5 million 
in its fiscal year 2004 budget to seek expert assistance from an 
outside professional public relations firm to further develop and carry 
out this campaign.
    FSIS has already started to develop this campaign with the new USDA 
Food Safety Mobile. The Food Safety Mobile is traveling the country to 
educate the public about the importance of food safety, but at the same 
time, we are learning important lessons about the best way to get our 
message across in order to reach the most people through events and the 
media. We will use the information that we learn from this new campaign 
to determine how to best utilize our resources and best meet our food 
safety education goals in the future.
    FSIS also carried out a number of other food safety education 
campaigns in fiscal year 2002. In September, the agency held the 
``Thinking Globally--Working Locally: A Conference on Food Safety 
Education.'' The conference included breakout sessions, workshops, and 
tours focusing on the food safety education implications of the global 
food supply. Over 600 participants from the United States and abroad 
attended.
    During its 18th year in existence, the USDA Meat and Poultry 
Hotline handled nearly 86,000 calls concerning safe food handling 
practices in the home. Last year, the Hotline expanded its service to 
include recorded messages and live assistance in Spanish. In addition, 
the agency's two main e-mail addresses received over 5,200 inquiries 
and comments about food safety.

Coordination on International Activities
    As one of several key U.S. agencies responsible for food safety, 
FSIS actively participates in developing international food safety 
standards through the Codex Alimentarius Commission. The U.S. Codex 
Office, under the leadership of the Office of Food Safety, is located 
within FSIS. The agency served as the head of U.S. Delegations to the 
Executive Committee of the Codex Alimentarius Commission meeting and to 
the Codex Committee on General Principles. In 2002, FSIS announced 17 
public meetings on Codex standard setting activities and hosted foreign 
government officials at various workshops about important Codex issues.
    Our leadership at Codex is instrumental in realizing global food 
safety standards are reasonable, equitable, and achievable. America is 
the gold standard for food safety programs. Successful participation in 
the Codex leadership is a vital national interest and will raise food 
safety standards around the world. FSIS remains committed to working 
through Codex to continue to stress the role of science in 
international standard setting.

Other Public Health Agencies
    Because food safety is important at each stage in the entire farm-
to-table continuum, FSIS works with other government agencies to make 
sure the U.S. produces safe meat, poultry, and egg products. We have 
partnerships with other Federal public health agencies, regulatory 
agencies, State governments, and research institutions, in order to 
share ideas and concerns, and maintain an open dialogue concerning food 
safety. By doing so, we are helping each agency achieve its respective 
vision, which ultimately helps us paint the big picture--improving 
public health.
    Ensuring public health depends on scientific research. Food safety 
research carried out by ARS plays a critical role in assisting FSIS to 
evolve into a model public health agency. This is especially true 
because our environment is certainly not static. We constantly need to 
study the factors that change the prevalence rate of pathogens. These 
factors could be on the farm, around the farm, in transportation, at 
the plant, or en route to the consumer. ARS and FSIS work cooperatively 
to ensure that food safety research is appropriately addressed in 
USDA's research agenda.
    An integral part of the fight against foodborne illness is early 
detection. In fiscal year 2002, FSIS completed its seventh full year of 
a partnership with the Department of Health and Human Service's CDC and 
FDA to track and respond to foodborne diseases in five States and parts 
of four more. This effort, called FoodNet, serves as an early warning 
system for foodborne illnesses. FoodNet, for the first time, identified 
a downward trend in the incidence of foodborne disease from 1996-2001. 
We look forward to continuing this partnership and learning more about 
foodborne illnesses in order to strengthen our efforts against them.
    On April 17, 2003, FSIS signed a Memorandum of Agreement (MOA) with 
the U.S. Department of Health and Human Services' Public Health Service 
(PHS) Commissioned Corps, to expand the role and number of PHS Officers 
detailed to FSIS. PHS Officers are highly-trained health experts who 
bring diverse backgrounds and experience in support of the FSIS public 
health mission. Flexible deployment rules allow the PHS Officers to 
instantly respond to emergencies, such as a foodborne illness outbreak, 
and shifting priorities within the agency. This enhances FSIS 
capabilities for rapid response during heightened security alerts or an 
actual threat to food security. The new agreement will incorporate 
approximately 30 additional PHS Officers nationwide across all program 
areas in the agency where there is a greater demand for scientific 
knowledge and judgment. The PHS Officers will work as permanent staff 
members alongside their agency counterparts as veterinarians, 
scientists, dietitians, environmental health officers, physicians and 
nurses.
    In fiscal year 2002, FSIS initiated eight cooperative agreements 
with States to raise awareness and understanding of the risks of 
handling meat, poultry, and egg products by retail stores and food 
service establishments. These agreements benefit those State and local 
agencies responsible for inspecting these establishments, as well as 
managers and owners. Additionally, FSIS field epidemiologists assisted 
local and State health departments with over 30 outbreak or emergency-
related investigations due to such causes as E. coli O157:H7, Listeria, 
and Salmonella. Many of these investigations involved multiple States 
and localities.
    In addition, as of July 31, 2002, FSIS can now share product 
distribution lists of establishments conducting recalls with State and 
Federal agencies with which the agency has negotiated memoranda of 
understanding. This new policy will allow FSIS to better work with its 
partners throughout the Nation to more quickly and effectively carry 
out recalls of potentially contaminated product.

                    FISCAL YEAR 2004 BUDGET REQUEST

    Now that I have provided a synopsis of FSIS' progress, I would like 
to present an overview of the fiscal year 2004 budget request for FSIS. 
The budget request for fiscal year 2004 would fund those programs 
previously discussed and will help FSIS reach the goal of becoming a 
world-class public health agency. By incorporating the principles of 
public health into all of our operations, we will be modernizing our 
inspection system to meet the goals and challenges of food safety in 
the 21st century. Implementation of these budget initiatives is 
imperative to helping us attain the public health vision we have set 
for FSIS. In fiscal year 2004, FSIS is requesting a program level of 
$899 million, a net increase of about $42 million over the enacted 
level for fiscal year 2003. Under current law, we are requesting an 
appropriation of $797 million and $102 million in existing user fees.

Supporting FSIS' Basic Mission
    The FSIS budget request for fiscal year 2004 supports the agency's 
basic mission of providing continuous food safety inspection in each 
meat, poultry, and egg products establishment in the United States. The 
fiscal year 2004 budget includes $23.6 million in increases to cover 
pay and employee benefit costs, inflation, and the agency's support of 
State-inspection programs. The budget reflects the proposed fiscal year 
2004 pay raise of 2.0 percent for Federal and State program personnel 
and the annualized cost of the 4.1 percent pay increase for 2003. These 
costs also include a total net increase of approximately $853,000 for 
state food safety and inspection. This includes Federal control of the 
Commonwealth of Virginia's inspection program beginning in July 2003, 
as well as the initiation of Maine's State inspection program.

New Initiatives
    The fiscal year 2004 request includes a $19.3 million increase for 
new initiatives that support the Department's goals for FSIS. While the 
implementation of the HACCP system has provided a solid base for FSIS 
to carry out its goal of protecting the Nation's food supply, more can 
be done to strengthen this foundation. Thus, the fiscal year 2004 
budget requests an increase of $5.7 million to enhance the agency's 
ability to train its workforce, which I mentioned earlier is my top 
priority. This will allow FSIS to re-tool and expand its existing 
training programs by incorporating a public health focus and 
integrating scientific and technical principles, including HACCP 
validation, with training on technical and regulatory approaches to 
inspection. In addition to increasing the technical skills of our 
employees, the agency intends to use training opportunities to 
strengthen the management capabilities of our workforce as well. 
Additionally, the agency plans to enhance training by taking the 
training opportunities we offer into the field. Employees would have a 
variety of training options, including the ability to take courses 
taught by university professors near their work sites.
    The fiscal year 2004 budget includes an increase of $4.3 million to 
cover costs associated with funding 7,680 in-plant personnel in meat, 
poultry, and egg products plants. This is an increase of 80 slaughter 
inspectors and is necessary due to industry growth. The increase will 
allow the agency to ensure continuous inspection in each meat, poultry, 
and egg products establishment.
    To achieve the agency's goal of applying science to all policy 
decisions, the fiscal year 2004 budget includes a new $1.7 million 
initiative to establish a continuous baseline program for risk 
assessments and performance measurement. While the agency has 
previously conducted baseline studies using its internal laboratory 
resources, this new initiative would include laboratory analyses using 
outside laboratories, would repeat each baseline study every 3 years to 
provide longitudinal data to track performance, and would provide 
scientific data needed for ongoing risk assessments. The use of 
nationwide microbiological baseline studies will improve data quality 
and help us further incorporate risk management into all regulatory and 
policy actions.
    When a foodborne outbreak occurs, it is essential to identify the 
source of the outbreak so that the agency can take swift action to 
prevent further illnesses and warn the public of the product 
adulteration. Therefore, the fiscal year 2004 budget request includes 
$4.5 million to provide additional microbiologists, chemists, 
laboratory technicians, and other personnel to increase the agency's 
ability to identify adulterants in meat, poultry, and egg products. 
This funding will help the agency develop analytical methods to test 
food products for chemical, biological, and radiological contamination. 
This initiative will also increase sampling of ready-to-eat products 
for the presence of bacteria such as Listeria monocytogenes and 
Salmonella. FSIS will increase sampling of these products from 10,000 
to 15,000 annually and will add the capability to conduct 5,000 
Listeria monocytogenes environmental samples annually. The agency also 
plans to increase sampling of raw ground beef and raw ground beef 
ingredients for E. coli O157:H7 from 7,000 to 15,000 samples annually.
    As I mentioned earlier, education and outreach have always been 
important aspects of FSIS' mission and this is again reflected in the 
fiscal year 2004 budget request. The agency is requesting a $1.5 
million increase to design a mass media campaign aimed at improving 
safe food handling practices of consumers at home. Emphasis will be 
placed on a program that communicates with under-served groups and uses 
mass media outlets to leverage limited education funding. Performance 
measures will be incorporated to evaluate the effectiveness of the 
campaign at spreading the food safety message.
    It is important that foreign products meet U.S. standards. 
Therefore, the fiscal year 2004 budget request includes $1.8 million to 
increase FSIS equivalence reviews in exporting countries. In recent 
years, FSIS has experienced a rise in applications from foreign 
countries to export meat and poultry products to the United States. 
This funding is necessary for the agency to hire additional foreign 
auditors to meet the demands of increased foreign inspection system 
audits. This will help ensure that foreign meat, poultry, and egg 
products establishments are shipping product to the United States that 
meets the same standard of safety required in U.S. establishments.

User Fee Proposal
    FSIS' fiscal year 2004 budget also includes a legislative proposal 
to recover the costs of providing inspection services beyond an 
approved 8-hour primary shift. FSIS collects $102 million in user fees 
annually to recover the costs of overtime, holiday, and voluntary 
inspection. If enacted, the level of appropriated funds needed would be 
reduced from $797 million to $675 million to reflect an increase in 
user fee funding of $122 million. This will result in savings for the 
American taxpayer.

                                CLOSING

    Let me restate that we all have a role to play in improving public 
health. We will continue to hold ourselves and industry to a higher 
standard. This is not a pain-free process, but there will be tangible, 
and measurable, benefits for the American people. Our workforce has 
been reinvigorated by this challenge and we will deliver.
    Mr. Chairman, this concludes my prepared statement. Thank you for 
the opportunity to submit testimony to the Subcommittee on how FSIS is 
working with Congress and other partners to become a first class public 
health agency. It is my hope that we can work together to make further 
improvements to our food safety system and continue to have the safest 
food supply in the world. I look forward to working with you to ensure 
that the vision of FSIS as a world-class public health agency is 
realized.

    Senator Bennett. Mr. Hawks
    Mr. Hawks. Thank you, Mr. Chairman, members of the 
Committee. It is a pleasure to be with you today to present the 
Marketing and Regulatory Programs' budget for 2004 [sic]. That 
budget represents the Animal and Plant Health Inspection 
Service, Agriculture Marketing Service, and Grain Inspection, 
Packers and Stockyards Administration. I am pleased to have 
with me today my deputy, Dr. Chuck Lambert. I have Kevin Shea 
representing the Administrator's Office from APHIS; Donna 
Reifschneider, the Administrator of Grain Inspection, Packers 
and Stockyards; and A.J. Yates, the Administrator of AMS.
    We have a motto in MRP and that is ``Working together 
works.'' In doing that, we have set several goals. The number 
one goal is to build broader bridges. When we say build broader 
bridges, we mean to help the outreach with the members of this 
committee, members of Congress, and our constituents to work 
through the issues that we have to deal with.
    The next goal is to move more product. That one is pretty 
self-evident. And the next one is, invest in infrastructure. We 
feel that a healthy agriculture is an exportable and a saleable 
agriculture.
    The next one is to grow our people. We feel that we must 
recruit, retain, and reward well-qualified people for our 
mission area within USDA as well as all of USDA.
    The last goal is to sell agriculture as a profession. So we 
feel that that is very important, and I personally feel that 
agriculture is a great profession.
    The budget that we have presented to you is approximately 
$1.2 billion. Three-hundred-and-eighty-two million dollars of 
that is funded by user fees. I will, in light of your request, 
this morning, deviate from my prepared remarks and address some 
of the issues that you had raised.
    The actions that we have taken, the reaction to the finding 
of the BSE case in Canada, were immediate. I had an opportunity 
to do an opening session for the Office of International 
Epizootics in Paris on Sunday afternoon. We were there with the 
chief veterinary officers from around the world. We, I think, 
took appropriate action, immediate action. As you know, the 
borders were closed at 1:30 Eastern Daylight Time on Tuesday. 
We found out about the BSE case, the confirmed BSE case, 
earlier that morning.
    We in APHIS are doing an extensive surveillance program. We 
had started that surveillance program last year. We tested 
20,000 samples of the most likely candidates for BSE. That is 
actually over four times what the Office of International 
Epizootics recognizes as the standard.
    So we feel that within APHIS, within USDA, we have a well-
coordinated effort and are moving forward to address this 
situation, and I would concur with my colleagues and all of you 
here. We do have the safest food supply anywhere in the world 
and beef is what is for dinner tonight.
    With the Grain Inspection, Packers and Stockyards, it is 
our intent to have fair and competitive trade in grain and 
poultry and meat. For Agriculture Marketing Service, it is our 
goal to help market more products and to find ways to improve 
the profitability of farmers.

                          PREPARED STATEMENTS

    Mr. Chairman, in light of our time, I would like to close 
with that and say I would be happy to respond to any questions 
that this Committee has. Thank you, sir.
    Senator Bennett. Thank you.
    [The statements follow:]

                 Prepared Statement of William T. Hawks

    Mr. Chairman and members of the Committee, I am pleased to appear 
before you to discuss the activities of the Marketing and Regulatory 
Programs of the U.S. Department of Agriculture and to present our 
fiscal year 2004 budget proposals for the Animal and Plant Health 
Inspection Service (APHIS), the Grain Inspection, Packers and 
Stockyards Administration (GIPSA), and the Agricultural Marketing 
Service (AMS).
    With me today are Dr. Charles Lambert, Deputy Under Secretary for 
MRP; Mr. Bobby Acord, Administrator of APHIS; Mrs. Donna Reifschneider, 
Administrator of GIPSA, and Mr. A. J. Yates, Administrator of AMS. They 
have statements for the record and will answer questions regarding 
specific budget proposals.
    Under my leadership, the Marketing and Regulatory Programs have 
addressed several broad goals and objectives which demonstrate that 
working together works.
    Building Broader Bridges.--We strengthened cooperation and 
strategic partnerships with farmers and ranchers, States, foreign 
governments, congressional offices, agricultural commodity and industry 
associations, agricultural scientific groups, and other interested 
parties. We want to ensure that our policies and programs provide the 
most benefits they can to the affected people.
    Moving More Product.--We expanded domestic and international market 
opportunities for U.S. agriculture products including value enhanced 
products and products of biotechnology. We have worked closely with the 
Foreign Agricultural Service and the U.S. Trade Representative to 
aggressively and creatively resolve sanitary, phytosanitary, 
biotechnology, grain inspection, commodity grading and other trading 
issues that limit our potential for growth in international trade.
    Investing in Infrastructure.--We invested in stronger border 
security, pest and disease surveillance and monitoring, bricks and 
mortar such as the National Veterinary Science Lab in Ames, Iowa. We 
increased market news on export markets, made improvements in e-
Government, enhanced investigations of anti-competitive market 
practices and provided greater support for biotechnology. Agriculture 
that is healthy, both biologically and economically, is a marketable 
agriculture.
    Growing Our People.--We made a concerted effort to recruit, 
recognize and reward accomplishment and inspire current and future 
leaders within MRP. We are making MRP a place where the best and 
brightest want to be, including promising men and women in diverse 
fields such as journalism, accounting, and economics.
    Selling Agriculture as a Profession.--We are creatively marketing 
the vital role that agriculture plays in every American's life to 
assist our efforts to recruit and retain the highest calibre workforce 
for MRP and USDA.

                            FUNDING SOURCES

    The Marketing and Regulatory Program activities are funded by both 
the taxpayers and beneficiaries of program services. The budget 
proposes that they carry out programs costing $1.2 billion; with $382 
million funded by user fees paid by the beneficiaries of the services.
    On the appropriation side, under current law, the Animal and Plant 
Health Inspection Service is requesting $694.9 million for salaries and 
expenses and $5 million for repair and maintenance of buildings and 
facilities; the Grain Inspection, Packers and Stockyards Administration 
is requesting $41.7 million, and the Agricultural Marketing Service is 
requesting $102.9 million.
    Legislation will be submitted, which if enacted would recover $36.5 
million more in user fees. This legislation would authorize new license 
fees to recover the cost of administering the Packers and Stockyards 
(P&S) Act, additional license fees for facilities regulated under the 
Animal Welfare Act and additional grain inspection fees for developing 
grain standards. I will use the remainder of my time to highlight the 
major activities and their budget requests for the Marketing and 
Regulatory Programs.

               ANIMAL AND PLANT HEALTH INSPECTION SERVICE

    The fundamental mission of APHIS is to anticipate and respond to 
issues involving animal and plant health, conflicts with wildlife, 
environmental stewardship, and animal well-being. Together with their 
customers and stakeholders, APHIS promotes the health of animal and 
plant resources to facilitate their movement in the global marketplace 
and to ensure abundant agricultural products and services for U.S. 
customers. The APHIS mission satisfies five strategic goals. They 
include:
  --Safeguarding plant and animal resources from foreign pests and 
        diseases;
  --Minimizing production losses and export market disruptions by 
        quickly detecting and responding to outbreaks of agricultural 
        pests and diseases;
  --Minimizing risks to agricultural production, natural resources, and 
        human health and safety by effectively managing pests and 
        diseases and wildlife damages;
  --Ensuring the humane care and treatment of animals; and
  --Developing safe and effective scientific pest and disease control 
        methods.
    APHIS builds bridges by working in concert with its stakeholders--
States, industry, and the public--to maintain and expand export market 
opportunities and to prevent the introduction and/or to respond to new 
threats of plant and animal pests and diseases. APHIS invests in the 
agricultural marketing infrastructure that helps protect the 
agricultural sector from pests and diseases while at the same time 
helping move more U.S. product.
    APHIS' charge is a difficult one to meet and their excellence has 
been recognized. Progressive Farmer, one of America's best known 
agricultural publications, has always selected an individual as its 
``Person of the Year.'' This year, however, Progressive Farmer selected 
8,700 of them--all the men and women of APHIS--to receive the 2003 
People of the Year award. I am proud of their efforts, and appreciate 
the recognition bestowed upon them.
    I would like to highlight some key aspects of the APHIS programs:
    Homeland Security and Agricultural Border Protection.--
Traditionally, APHIS' Agricultural Quarantine Inspection (AQI) program 
has had responsibility for excluding agricultural health threats. 
Annually, thousands of inspectors have inspected hundreds of thousands 
of cargo shipments and tens of millions of passengers' baggage arriving 
in the United States. They have intercepted tons of materials whose 
entry could jeopardize the agricultural sector. They have successfully 
excluded such threats as foot-and-mouth disease (FMD) and bovine 
spongiform encephalopathy (BSE), which could have devastated not only 
the agricultural sector, but other sectors of the economy as well.
    That responsibility is now shared with the Department of Homeland 
Security (DHS). While most AQI staff are reassigned to the new 
Department, USDA retains the responsibility for promulgating 
regulations related to entry of passengers and commodities into the 
United States. We intend to work closely with our counterparts in DHS. 
USDA retains the direct role of ensuring that passengers and cargoes 
traveling from Hawaii and Puerto Rico comply with specified regulations 
to protect the health of the agricultural sector on the Mainland, 
including necessary quarantines. We retain responsibility for 
collecting the user fees and will be periodically reimbursing DHS for 
their inspection services.
    Emergency Pest and Disease Programs.--The Administration is 
concerned about rising Federal costs of emergency pest and disease 
control activities, and the budget request assumes cost-sharing for 
such outbreaks. Cost-sharing levels are set by consideration of several 
factors applied to specific outbreaks. A proposed rule is expected to 
be published which will improve the Federal/cooperator partnership by 
establishing consistent criteria for determining Federal and non-
Federal responsibilities, providing a more equitable and justifiable 
allocation of responsibility among all parties, and permitting State 
and local governments to better anticipate and plan for future needs. 
Without additional support on the part of cooperators in some programs, 
however, program operations could be reduced.
    Moving More Product.--The Trade Issues Resolution and Management 
efforts are key to ensuring fair trade of all agricultural products. 
APHIS' staff negotiates sanitary and phytosanitary (SPS) standards, 
resolves SPS issues, and provides clarity on regulating imports and 
certifying exports which improves the infrastructure for a smoothly 
functioning market in international trade. Ensuring that the rules of 
trade are based on science helps open markets that have been closed by 
unsubstantiated SPS concerns. APHIS' efforts contributed to the opening 
or retention of $1.1 billion in export markets in fiscal year 2001 by 
helping resolve individual trade issues abroad. In 2002, APHIS resolved 
problems facing shipments of about $52 million of U.S. agricultural 
products held at ports of entry in foreign countries. This included 
about $16 million for fruit; $10 million for grain; $10 million for 
oilseeds and oilseed products; $5 million for animals and animal 
products; $4 million for cotton; $2 million for vegetables; and $5 
million in other products.
    Biotechnology.--Recent developments in biotechnology underscore the 
need for effective regulation to ensure protection of the environment 
and food supply, reduce market uncertainties, and to encourage 
development of a technology that holds great promise. APHIS has 
recently established a new Biotechnology Regulatory Services unit to 
consolidate and better coordinate our services and activities in this 
area. The new unit focuses on both plant-based biotechnology and 
transgenic arthropods. We also will be examining ways to regulate 
transgenic animals. By consolidating these activities into one unit, we 
will bring greater focus to our domestic and international policy 
coordination and development as well as our risk assessment, 
permitting, and compliance programs.

                       APHIS' 2004 BUDGET REQUEST

    In a year of many pressing high-priority items for taxpayer 
dollars, the budget request proposes about $695 million for salaries 
and expenses. Notable shifts in budget priorities include:
    A total of about $156 million for Foreign Pest and Disease 
Exclusion.--Efforts will be enhanced to exclude Classical Swine Fever 
from the United States and to improve our means of tracking animal and 
animal products entering and leaving the country. Decreases include 
those in Agricultural Quarantine Inspection activities and, in keeping 
with cost-sharing provisions, reductions in fruit fly exclusion and 
detection activities.
    A total of about $142 million for Plant and Animal Health 
Monitoring.--Experience gained from abroad about FMD and BSE highlights 
the need for rapid detection and response to agricultural health 
threats. Long-standing efforts have kept those diseases and others out 
of the United States, and vigilant surveillance and monitoring will 
still be done by APHIS. Increases would boost the availability of FMD 
vaccines from 19.5 million doses to 20.75 million doses, and support 
efforts to address increased incidence of smuggling and other threats 
from regulatory violations.
    A total of $302 million for Pest and Disease Management Programs.--
Once pests and disease are detected, prompt eradication reduces overall 
damages. In cases where eradication is not feasible (e.g., European 
gypsy moth), attempts are made to slow the advance, and damages, of the 
pest or disease. APHIS provides technical and financial support to help 
control or eradicate a variety of agricultural threats.
    The budget includes a doubling of funding for efforts against 
chronic wasting disease, and other increases for low-pathogenic avian 
influenza and golden nematode activities. The budget also proposes a 
slight increase for wildlife services operations to enhance control 
over hazardous materials used in wildlife control activities.
    Successes in boll weevil eradication and plum pox efforts allow 
some program reductions. The decrease stems from greater cost-sharing 
expected to be provided by cooperators and a 35 percent reduction in 
the estimate of planned program acres. Such cost-sharing would reduce 
Federal funding by about $32 million for efforts against Asian 
Longhorned Beetle, citrus canker, Mediterranean fruit fly (as mentioned 
above), plum pox virus, scrapie, and tuberculosis. However, the Federal 
Government would still pay over 50 percent of the cost of these 
programs.
    A total of $15 million for the Animal Care Programs-- APHIS will 
maintain its animal welfare and horse protection programs. The budget 
includes a proposal, similar to fiscal year 2003, to collect $7.8 
million in additional fees charged to facilities and establishments 
required to be registered under the Animal Welfare Act but not 
currently subject to a fee. This includes research facilities, 
carriers, and in-transit handlers of animals.
    A total of about $69 million for Scientific and Technical 
Services.--APHIS develops methods and provides diagnostic support to 
prevent, detect, control, and eradicate agricultural health threats, 
and to reduce wildlife damages (e.g., coyote predation). It also works 
to prevent worthless or harmful animal biologics from reaching 
consumers. The request would enhance biosecurity activities, the 
national animal health laboratory network, and physical security at 
select facilities.
    Increased funds of $6.6 million for Biotechnology.--The budget 
includes a crosscutting trade-related and biotechnology proposal in the 
Office of the Secretary. The Department anticipates a growing demand 
for trade negotiating efforts and biotechnology activities, including 
regulatory, market access and removal of trade barriers. Increased 
APHIS efforts related to biotechnology may be funded from these 
appropriations.

        GRAIN INSPECTION, PACKERS AND STOCKYARDS ADMINISTRATION

    GIPSA's mission is to facilitate the marketing of livestock, meat, 
poultry, cereals, oilseeds, and related agricultural products and to 
promote fair and competitive trade for the benefit of consumers and 
American agriculture. It helps move more U.S. product both domestically 
and abroad by investing in domestic infrastructure that supports 
marketing within the grain and livestock industry. GIPSA fulfills this 
through both service and regulatory functions in two programs: the 
Packers and Stockyards Programs (P&SP) and the Federal Grain Inspection 
Service (FGIS).
    Packers and Stockyards Programs. The strategic goal for the Packers 
and Stockyards Programs (P&SP) is to promote a fair, open and 
competitive marketing environment for the livestock, meat, and poultry 
industries. Currently, with 169 employees, P&SP monitors the livestock, 
meatpacking, and poultry industries, estimated by the Department of 
Commerce to have an annual wholesale value of over $115 billion. Legal 
specialists and economic, financial, marketing, and weighing experts 
work together to monitor emerging technology, evolving industry and 
market structural changes, and other issues affecting the livestock, 
meatpacking, and poultry industries that the Agency regulates.
    We conducted over 1,400 investigations in fiscal year 2002 to 
enforce the Packers and Stockyards Act for livestock producers and 
poultry growers. More than 90 percent of identified violations were 
corrected (or issues resolved) within one year of the investigation's 
starting date.
    The Swine Contract Library, mandated in the 2000 Appropriations 
Act, is in the final testing stage. The web-based computer system will 
be capable of receiving contracts, extracting unique contract 
provisions and posting summary information. GIPSA is making the 
necessary revisions to the final rule which would implement the Swine 
Contract Library. It is a sizable and complex undertaking to assure 
that the confidentiality requirements of the Act are maintained. For 
example, a single type of contract, received from less than 10 packers, 
can include more than 300 unique contract provisions to capture all of 
the ledger contracts priced off swine or pork market prices.
    Federal Grain Inspection Service.--GIPSA(s Federal Grain Inspection 
Service (FGIS) facilitates the marketing of U.S. grain and related 
commodities under the authority of the U.S. Grain Standards Act (USGSA) 
and the Agricultural Marketing Act of 1946 (AMA). As an impartial, 
third-party in the market, we advance the orderly and efficient 
marketing and effective distribution of U.S. grain and other assigned 
commodities from the Nation's farms to domestic and international 
buyers. We are part of the infrastructure that undergirds the 
agricultural sector.
    GIPSA created a long-term temporary assignment in Malaysia to 
assist the Southeast Asian agricultural attaches and cooperator 
organizations by providing technical assistance and education to 
customers of U.S. grain which would maintain and expand U.S. grain 
markets. This and other technical trade assistance, such as that 
provided to Mexico, facilitate the marketing of U.S. grain exports.
    GIPSA works with government and scientific organizations to 
establish internationally recognized methods and performance criteria 
and standards to reduce the uncertainty associated with testing for the 
presence of biotechnology grains and oil seeds.
    GIPSA received almost 3,000 comments on the advance notice of 
proposed rulemaking regarding how USDA can best facilitate the 
marketing of grains, oilseeds, fruits, vegetables, and nuts in today's 
evolving marketplace. A Process Verification Program is being 
considered for applying internationally-recognized quality management 
standards to verify that a biotech related quality control process has 
been used to produce a product rather than relying on end product 
testing. This would allow producers, marketers, suppliers, and 
processors to assure customers of their processes to provide consistent 
quality products.
    Our efforts to improve and streamline our programs and services are 
paying off for our customers, both in terms of their bottom lines and 
in greater customer satisfaction. FGIS' service delivery costs 
(adjusted for inflation), decreased from $0.29 per metric ton in fiscal 
year 1998 to $0.26 per metric ton in fiscal year 2002. With the USDA 
export certificates that grain exporters received at this cost, 
exporters marketed over $15 billion worth of cereals and oilseeds. 
Likewise, here at home, buyers and handlers requested over 1.8 million 
domestic inspections that facilitated the trading of more than 131 
million metric tons of cereals and oilseeds.
    One indicator of the success of our outreach and educational 
initiatives is the number of foreign complaints lodged with FGIS 
regarding the quality or quantity of U.S. grain exports. In fiscal year 
2002, FGIS received only 9 quality complaints and no quantity 
complaints from importers on grains inspected under the U.S. Grain 
Standards Act. These involved 197,423 metric tons, or about 0.2 percent 
by weight, of the total amount of grain exported during the year.

                      GIPSA'S 2004 BUDGET REQUEST

    For 2004, the budget proposes a program level for salaries and 
expenses of $41.7 million. Of this amount, about $18.1 million is 
devoted to grain inspection activities for standardization, compliance, 
and methods development and approximately $23.5 million is for Packers 
and Stockyards Programs. The 2004 budget includes:
    An increase of about $1 million to implement a new Pilot Audit 
Program.--The P&SP has never audited a large packer. As a pilot, this 
initiative would audit the top four steer and heifer meatpackers who 
handle 80 percent of the slaughter. The audits are anticipated to 
result in substantially better understanding of their financial 
operations to the regulated industry and lead to better financial 
protection of producers.
    An increase of $500,000 to enhance compliance and review the 
Packers and Stockyards Act.--Efforts will respond to a GAO 
recommendation to provide industry participants with clarification of 
GIPSA's views on competitive activities. Further, given changes in the 
livestock sector, the P&SP is preparing to undertake a complete review 
of the Packers and Stockyards Act and its regulations. These activities 
may result in a future increase in the number of investigations 
conducted and monies recovered or returned to the regulated industries. 
Biotechnology Funds. Some of the $6.6 million requested to support 
crosscutting trade and biotechnology activities in the Office of the 
Secretary may be applied to GIPSA's trade and biotechnology efforts.
    New User fees.--New user fees, similar to those proposed for fiscal 
year 2003, would be charged to recover the costs of developing, 
reviewing, and maintaining official U.S. grain standards used by the 
grain industry. Those who receive, ship, store, or process grain would 
be charged fees estimated to total about $5 million to cover these 
costs. Also, the Packers and Stockyards program would be funded by new 
license fees of about $24 million that would be required of packers, 
live poultry dealers, stockyard owners, market agencies and dealers, as 
defined under the Packers and Stockyards Act.

                     AGRICULTURAL MARKETING SERVICE

    The mission of AMS is to facilitate the marketing of agricultural 
products in the domestic and international marketplace, ensure fair 
trading practices, and promote a competitive and efficient marketplace 
to the benefit of producers, traders, and consumers of U.S. food and 
fiber products. We accomplish this mission through a variety of 
voluntary fee-based services and publicly funded activities that help 
our customers find ways to better market food and fiber products and 
improve their profitability.
    AMS continually monitors the needs of the agricultural industry, 
develops strong partnerships with cooperating State agencies, and 
identifies new technology that can be used to improve their 
effectiveness. AMS depends on strong cooperative partnerships with 
State programs and other Federal agencies to facilitate the collection 
and dissemination of information, provide inspections, and otherwise 
maximize the value of State and Federal programs by sharing and 
coordinating the use of available resources. Through increased 
cooperation, AMS has been able to achieve a number of programmatic 
goals.
    Global Agricultural Marketing.--AMS offers a range of services that 
give sellers of agricultural products a competitive advantage in the 
global marketplace. In 2002, AMS initiated the Global Market Expansion 
program to strengthen the support of export marketing for U.S. 
agricultural products. Under this activity, AMS experts served on, and 
in several cases headed, U.S. delegations to meetings of international 
food and fiber standards-setting organizations. AMS also provided 
technical expertise to the U.S. trade officials in negotiations on 
international standards. As an example of the critical role AMS plays 
in the development of international standards, AMS provided the 
technical support necessary to dissuade China from adopting cotton 
standards that lack recognized measurement technologies and could have 
posed a barrier to U.S. cotton exports. AMS also led the development of 
lamb and poultry quality standards that will serve as models for 
government and industry throughout Europe. Through such participation, 
AMS is able to influence the design of food quality standards and model 
inspection protocols so that they are fair to U.S. shippers and they do 
not become barriers to U.S. agricultural trade. In 2004, AMS will 
continue to do its part in helping to reduce trade barriers relating to 
commodity standards and product testing by serving as delegates and by 
leading international committees and organizations.
    Science and Technology Programs.--Through cooperative relationships 
with the States, AMS is in a unique position to effectively and 
efficiently develop scientific data that is needed to support domestic 
and export marketing of U.S. food products. The Pesticide Data Program 
(PDP) is a unique and valuable source of statistically valid data on 
pesticide residues in food and water. The program provides information 
to the Environmental Protection Agency that is vital for realistic 
assessments of dietary risk from pesticides on food commodities 
available in the marketplace. PDP is instrumental in providing data 
that addresses domestic and international public concerns about the 
effects of agricultural pesticides on human health and environmental 
quality. Exporters use PDP data to verify for foreign governments and 
buyers that U.S. agricultural commodities are safe for consumption. 
Importantly, PDP is built on Federal-State partnerships with 10 
States--California, Colorado, Florida, Maryland, Michigan, New York, 
Ohio, Texas, Washington and Wisconsin. These States collect and test 
commodities for pesticide residues.
    AMS' experience with PDP provided the foundation for initiating the 
Microbiological Data Program. MDP is designed to gather baseline data 
to assess the risks of microbial contamination of fruits and 
vegetables, if any. Using the PDP programmatic framework, AMS collects 
information regarding the incidence, number and species of foodborne 
pathogens and indicator organisms on domestic and imported fresh fruits 
and vegetables. In fiscal year 2002, AMS worked with cooperating States 
and interested industry parties to initiate microbiological data 
collection and testing. AMS developed operating procedures with FDA, 
the Centers for Disease Control and Prevention, and State laboratories. 
During 10 months of sample testing, approximately 19,000 analyses were 
performed on 9,400 samples. The first report will be published this 
year with calendar year 2002 data. The data will be provided to public 
health agencies and the food industry for decision-making and 
evaluation of procedures intended to reduce or eliminate harmful 
microorganisms from foods.
    National Organic Certification Program.--On October 21, 2002, the 
Secretary launched the implementation of AMS' National Organic 
Standards Program, which for the first time provides consistent 
labeling of agricultural products coast to coast. The organic standards 
were developed with extensive industry input and hundreds of thousands 
of public comments. Thanks to this effort, any organic agricultural 
product must meet USDA standards in order to be sold as ``organic.'' 
Today, consumers know the exact organic content of the food they buy. 
Consumers can tell organically produced food from conventionally 
produced food by looking at package labels and watching for signs in 
the supermarket.
    On August 23, 2002, AMS announced that Federal funds appropriated 
in the Agriculture Risk Protection Act of 2000 and those made available 
by the Farm Bill were available to defray the cost of organic 
certification. AMS has entered into cooperative agreements with 45 
States to distribute the funds. The remaining 5 States do not charge 
fees for organic certification and are not eligible for cost-sharing 
funds.
    As directed by the Farm Bill, AMS is drafting a report to Congress 
on the availability of key inputs into organic production, including 
the availability of organically produced feedstuffs for the organic 
production of livestock. AMS has contracted with Iowa State University 
to survey grain producers and dealers in Midwestern States to ascertain 
planting and harvesting intentions for the years 2002-2004. This report 
should be completed this spring.
    Country of Origin Labeling.--The 2002 Farm Bill requires USDA to 
issue country of origin labeling guidelines for use by retailers who 
wish to voluntarily notify their customers of the country of origin of 
beef, lamb, pork, fish, perishable agricultural commodities, and 
peanuts. AMS published the guidelines for voluntary country of origin 
labeling in October 2002 and is collecting comments on their utility 
through April of this year. We have already conducted six of the twelve 
listening sessions held throughout the country regarding the 
implementation of these guidelines. After these comments are evaluated, 
the program will begin developing the mandatory requirements, which are 
to be published by September 30, 2004.

                        AMS' 2004 BUDGET REQUEST

    For AMS, the budget proposes a program level of $297 million, of 
which over 65 percent will be funded through user fees. The budget 
requests an appropriation of $76 million for Marketing Services and 
Payments to States, including increased funding for paycosts, in order 
to maintain existing program operations. The budget includes a request 
for $26.4 million in Section 32, including increases for paycosts, 
associated with administering marketing agreements and orders and 
commodity procurement programs.

                               CONCLUSION

    This concludes my statement. I am looking forward to working with 
the Committee on the 2004 budget for the Marketing and Regulatory 
Programs. We believe the proposed funding amounts and sources of 
funding are vital to protecting American agriculture from pests and 
diseases and for moving more product to foreign markets. It will 
provide the level of service expected by our customers--the farmers and 
ranchers, the agricultural marketing industry, and consumers. We are 
happy to answer any questions.
                                 ______
                                 

 Prepared Statement of Bobby R. Acord, Administrator, Animal and Plant 
                       Health Inspection Service

    Mr. Chairman and members of the Subcommittee, it is indeed a 
pleasure for me to represent the Animal and Plant Health Inspection 
Service (APHIS) before you today. Since appearing before you last year, 
APHIS continued its vigilant effort to prevent foreign agricultural 
pests and diseases from entering the United States. We also heightened 
our efforts to keep American agricultural products moving overseas. It 
is in the context of these two broad objectives that I want to report 
on our fiscal year 2002 highlights, and our fiscal year 2004 budget 
request.
    APHIS' mission has been constantly evolving--right along with the 
evolution of food production and marketing practices of the past 100 
plus years and the Federal government's involvement in protecting and 
serving U.S. agriculture. APHIS currently relies on a set of 
interlocking protection strategies to meet the expectations of its 
traditional agricultural stakeholders and to ensure that it has the 
capacity to address the needs of non-agricultural stakeholders. These 
strategies enable us to achieve our two main goals--to safeguard the 
health of animals, plants, and ecosystems in the United States and to 
facilitate safe agricultural trade. Hence our mission--To protect the 
health and value of America's agricultural and natural resources.
safeguarding the health of america's agricultural and natural resources
    American Agriculture can produce abundantly and export food and 
fiber to the rest of the world only if it is healthy and free of the 
many pests and diseases that plague most of the world. Other countries 
will accept our exports only if the products are believed to be free of 
pests and diseases. It is APHIS' responsibility to provide leadership 
in agricultural health. There are five components in this first goal of 
our mission. The first component is to keep foreign pests and diseases 
far away from the U.S. border.
    Conduct Offshore Threat Assessment and Risk Reduction. APHIS is 
building bridges with foreign countries to prevent the import of pests 
and diseases by allowing only healthy plants and animals and related 
products to the United States. APHIS' staff is a vital link between 
U.S. markets and foreign businesses that want to trade in these 
commodities.
    Our Foreign Animal Diseases (FAD) and Foot-and-Mouth Disease (FMD) 
program works to detect and control outbreaks of animal diseases in 
foreign countries, again far from our shores. APHIS' key strategy to 
prevent the movement of FMD northward from South America is to maintain 
an FMD-free area along the Colombia-Panama border. Our efforts have 
effectively prevented a reintroduction of FMD into Mexico and the 
United States. That Central America has never had an outbreak of FMD 
demonstrates the effectiveness of the prevention activities throughout 
the region. Also, the FAD program has been expanding to address 
additional geographical areas and diseases. For example, animal health 
experts have been stationed in China and southern Africa to address 
potential threats from those regions.
    Our Fruit Fly Exclusion and Detection program is working towards 
establishing and maintaining a fly-free barrier in Central America to 
prevent the spread of Medfly into the United States. In 1999, program 
personnel quickly and effectively responded to an emergency situation 
in Mexico that could have resulted in the establishment of Medfly in 
the United States by 2005. Since then, APHIS has been working in 
cooperation with Mexico and Guatemala to carry out Medfly eradication 
and control activities in those countries to prevent the spread of 
Medfly through Mexico into the United States. The economic significance 
of keeping this foreign pest at bay is apparent from the costs that 
could result from the establishment of Medfly into the United States. 
For example, the total cost to Florida's agricultural producers if 
Medfly were to become established in that state could total $33 million 
annually.
    We continue significant progress towards protecting the United 
States from overland transmission of screwworm, a parasite that 
produces flesh-eating larvae. Screwworm infestations decrease the value 
of and can eventually even kill livestock. The Screwworm program 
consists of cooperative programs with Mexico, countries of Central 
America, and Panama. The goal of eradicating the pest to the Darien Gap 
in Panama is nearly complete, and the time has come to establish a 
permanent barrier against the pest. Once the barrier is in place, U.S. 
livestock producers will be securely protected against this costly 
pest.
    APHIS works closely with foreign countries to set up preclearance 
programs. These preclearance programs facilitate the smooth trade of 
agricultural products to U.S. markets and ensure that the products are 
pest- and disease-free before they touch U.S. shores. One of the most 
successful of these preclearance programs is in Holland, where APHIS 
officials have been inspecting tulips, daffodils, and other flower 
bulbs since 1951. In Chile, APHIS has been inspecting all fruits and 
vegetables destined for U.S. consumers since 1981.
    APHIS is participating in the first passenger pre-departure 
inspection program with a foreign government in the Dominican Republic 
to mitigate the risk of Classical Swine Fever. Working with the 
government of the Dominican Republic, APHIS inspects air and ferry 
passengers destined for the United States mainland and Puerto Rico to 
ensure they are not carrying prohibited plant and animal products or 
animal byproducts. So far, the program has been an effective means of 
protecting the multi-billion dollar U.S. pork industry. By performing 
inspections off shore, we reduce the chance of the disease being 
brought to the United States mainland.
    In our Tropical Bont Tick program, APHIS employees are preventing 
the introduction of heartwater and increased levels of dermatophilosis 
into the livestock industry and wildlife populations of the United 
States from Caribbean islands infested with tropical bont ticks. The 
cooperative program has eradicated ticks from 6 of the 9 islands 
involved so far, towards a goal of eradicating this pest from the 
Western Hemisphere.
    Regulate and monitor to reduce the risk of introduction of exotic 
invasive species While our first component includes offshore 
activities, the second component requires vigilant monitoring efforts 
at first points of entry into the United States. We must have intensive 
searches and aggressively enforce our regulations.
    To reduce the threat of agricultural pests and diseases reaching 
the mainland United States, APHIS screens passengers and passenger 
baggage in Hawaii and Puerto Rico prior to departure. In fiscal year 
2002, APHIS inspected over 1.5 million passengers before their 
departures from Hawaii and Puerto Rico. Again, by inspecting passengers 
offshore, we reduce the chance of them bringing pests or disease from 
those areas. In addition, passenger preclearance programs exist in 
Canada, the Bahamas, Bermuda, and Aruba. Program activities include 
inspecting aircraft and passenger baggage for prohibited agricultural 
products and ensuring passengers and crew departing from these foreign 
locations are in compliance with our regulatory requirements. APHIS 
works in coordination with the other U.S. Federal Inspection Service 
(FIS) Agencies--Customs and Immigration--to insure all passengers are 
in compliance with the U.S., FIS laws and regulations at these 
locations. Because these passengers go through the thorough FIS 
inspection, they arrive in the United States at a domestic terminal; 
they are not subject to FIS inspectional activities upon arrival. 
Operations of these programs were transferred to the Department of 
Homeland Security, along with other FIS components. APHIS also 
cooperates with the U.S. Department of Defense in inspecting military 
passengers and equipment prior to their returning from overseas. During 
fiscal year 2002, the military preclearance program expanded to include 
personnel stationed overseas in Afghanistan and Uzbekistan as part of 
Operation Enduring Freedom. In total, APHIS inspectors cleared over 9 
million passengers en route to the United States.
    Part of APHIS' strategy is to respond to threats of intentional 
introduction of illegal products. We have increased the capacity of the 
Smuggling Interdiction and Trade Compliance (SITC) staff and field 
personnel. The staff analyzes pathways, prosecutes smugglers, and 
provides outreach to increase industry compliance with our regulatory 
requirements. APHIS personnel have worked closely with other Federal 
agencies and local cooperators, focusing specifically on the illegal 
movement of agricultural plant and animal products into the United 
States. SITC began expanding their activities in fiscal year 2001 to 
respond to the spread of foot-and-mouth disease worldwide.
    The program used supplemental funding in fiscal year 2002 to 
further increase staffing and apply new methods towards smuggling 
reduction. APHIS seized nearly 2.7 million prohibited plant and animal 
products, at markets, warehouses, and ports of entry. When we detect a 
prohibited item, we identify the item's origin and the responsible 
shippers, importers, and broker. By maintaining relevant information in 
databases, the program can target specific commodities and importers. 
SITC also worked with private industry on five national recalls of 
prohibited commodities, including South African and Argentine lemons 
and Mexican lemon grass and mangoes.
    APHIS, through its Animal and Plant Health Regulatory Enforcement 
program ensures uniform compliance with Federal laws and regulations 
through a combination of sound enforcement and strong educational 
efforts. We investigate violations, collect evidence, issue and collect 
civil penalties, and develop alleged violation cases for formal 
prosecution.
    APHIS continues to work to improve the timeliness and quality of 
investigations despite a continuing increase in the number and scope of 
violations. APHIS personnel conducted 927 investigations involving 
plant quarantine violations in fiscal year 2002 resulting in 139 
warnings, 363 civil penalty stipulations, 21 Administrative Law Judge 
decisions, and approximately $508,000 in fines. APHIS also conducted 
widespread market surveillance activity to intercept prohibited foreign 
fruits and vegetables illegally smuggled into the United States. 
Significant cases involved the illegal importation of Mexican avocados 
into the United States and tracing the distribution of Spanish 
Clementine oranges infested with Mediterranean fruit fly.
    We conducted 413 investigations involving animal health programs in 
fiscal year 2002, resulting in 114 warnings, 34 civil penalty 
stipulations, 9 Administrative Law Judge decisions, and approximately 
$46,000 in fines. In addition, APHIS took several hundred 
administrative actions on animal health program violations disclosed at 
the border ports by agricultural quarantine inspectors. The alleged 
violations were concentrated in veterinary accreditation, animal 
identification, brucellosis, pseudorabies, and import/export programs. 
We provided significant enforcement support during the Avian Influenza 
eradication effort in Virginia poultry and at New York live bird 
markets.
    Using supplemental funds, APHIS hired additional investigators to 
address the growing threats to our nation's agriculture and food supply 
from bioterrorism threats, illegal activities such as smuggling, and 
violations of the Swine Health Protection Act, principally in Puerto 
Rico, Arkansas, Hawaii, and Florida. Violations of the Act can have 
huge ramifications--foreign officials identified illegal practices 
associated with prohibited feeding of garbage to swine as the source of 
the devastating Foot-and-Mouth Disease outbreak in the United Kingdom 
in fiscal year 2001.
    Ensure safe research, release, and movement of agricultural 
biotechnology events, veterinary biologics, and other organisms The 
third component of our safeguarding goal addresses the rapidly moving 
advances in laboratory practices and biotechnology. The United States 
leads the world in the safe development and commercialization of 
biotechnology-derived crops. Along with the Environmental Protection 
Agency and the Food and Drug Administration, APHIS works to ensure that 
these products will not harm agriculture, the environment, or human 
health. Specifically, APHIS regulates the movement, importation, and 
field testing of bioengineered plants and microorganisms through 
permitting to ensure that field testing of transgenic plants does not 
lead to unwanted environmental effects.
    APHIS has recently established a new biotechnology unit and is 
proposing a shift in the program line item structure to consolidate and 
better coordinate our services and activities in this area. The new 
unit and program line item, Biotechnology Regulatory Services, is 
responsible for programs focusing on both plant-based biotechnology and 
transgenic arthropods. We also will be examining ways to regulate 
transgenic animals. By consolidating these activities into one unit, we 
will bring greater focus to our domestic and international policy 
coordination and development and our risk assessment, permitting, and 
compliance programs.
    Our Veterinary Biologics program works to provide pure, safe, 
potent, and effective veterinary biological products in the United 
States. Program activities include licensing veterinary biological 
products, inspecting licensed manufacturing facilities, testing 
statistically based samplings of licensed products, and issuing permits 
for product importation. In fiscal year 2002, APHIS issued 106 product 
licenses. Veterinarians and animal owners now have 19 new products for 
the diagnosis, prevention, or treatment of animal diseases. The Agency 
also terminated 76 product licenses for obsolete products.
    APHIS provided oversight to over 2,512 active licensed or permitted 
products for the control of 196 animal diseases in fiscal year 2002. 
APHIS approved 16,796 serials of veterinary biologics in fiscal year 
2002, while rejecting 28 serials for failing to meet Agency 
requirements. The Agency conducted 831 tests on 228 of the 12,059 
serials eligible for testing. APHIS performed 58 regulatory actions and 
28 investigations of possible regulation violations. APHIS shipped 
4,272 vials of reagents to facilitate testing consistency and quality 
by biologics manufacturers and other regulatory authorities. In 
addition, APHIS developed 4 new reagents.
    In APHIS' Plant Methods Development Laboratories program, the 
Center for Plant Health Science and Technology provides advanced 
scientific and technological capabilities to protect and improve our 
nation's agriculture and public health. Methods development supports 
APHIS programs by optimizing existing pest management practices and by 
developing new technologies for pest exclusion, detection, survey, and 
management. We accomplish this by evaluating biocontrol organisms, 
evaluating new biological and chemical materials, adapting or inventing 
equipment, providing technical consultation and training, collecting 
and disseminating pertinent information, participating in strategic and 
tactical planning, serving as a liaison with the research community, 
and integrating technological advancements into integrated pest 
management systems. This system maintains both rapid response and long 
range capabilities for serving APHIS and stakeholders.
    Manage issues related to the health of U.S. animal and plant 
resources and conflicts with wildlife. The fourth safeguarding 
component involves diligent control and eradication efforts relating to 
pest, disease, and wildlife conflicts that already exist in the United 
States. In cooperation with the States, APHIS works to improve the 
general health of our Nation's multi-billion dollar agriculture 
industry through management techniques designed to eradicate harmful 
pests and diseases, or, if eradication is not feasible, minimize their 
economic impact. We monitor endemic diseases and pests through surveys 
to detect their location and through inspections aimed at preventing 
their spread into noninfested parts of the country. We also monitor and 
enforce compliance with requirements of the Animal Welfare Act and the 
Horse Protection Act.
    The Boll Weevil Eradication Program (BWEP)--which has been a model 
of cooperation between Federal and State regulatory officials, 
extension and research personnel, and cotton producers--continued 
reducing and ultimately eliminating losses caused by the boll weevil. 
This program's fiscal year 2002 performance target was 7 million 
cumulative weevil-free acres of the 16 million acres of U.S. cotton 
produced. The actual number of weevil-free acres in fiscal year 2002 
was 6.5 million. This result was attributable to a slight reduction in 
acres planted and interruptions in aerial treatments resulting from the 
events of September 11, 2001. The 6.5 million acres are in the 
program's post-eradication phase, while 9.2 million acres are in the 
active phase, and the remaining 300,000 acres are expected to join the 
BWEP by fiscal year 2005.
    The cooperative pink bollworm exclusion program continued 
protecting 700,000 cotton acres in the San Joaquin Valley of California 
through extensive surveys and preventative sterile moth releases. As a 
result of the efforts of local growers and APHIS personnel, no new 
infestations have been found outside the regulated area since fiscal 
year 2000. APHIS is continuing to work with collaborators in 
universities, industry, and the Agricultural Research Service to refine 
a biologically based pink bollworm eradication system. In addition, 
APHIS began a cooperative area-wide Pink Bollworm/Boll Weevil 
Eradication Program with growers, State, and Federal cooperators in 
parts of New Mexico, Texas, and northern Mexico, where the pests are 
still present.
    The State-Federal Cooperative Brucellosis Program works to 
eradicate Brucella abortus from the bovine population and Brucella suis 
from the swine population of the United States. This program protects 
the cattle and swine industries. In fiscal year 2002, the National 
Brucellosis Eradication Program continued to center around finding and 
eliminating the last vestiges of brucellosis in the United States. The 
program increased emphasis on surveillance and the testing of adjacent, 
contact, and community herds. There were 9 affected cattle herds 
disclosed in fiscal year 2002, compared to 6 in fiscal year 2001, and 
14 in fiscal year 2000. The nine affected herds were in Texas, 
Missouri, South Dakota, Oklahoma, and Idaho.
    We also continued the Accelerated Pseudorabies Eradication Program, 
Scrapie Flock Certification Program, and Bovine Tuberculosis 
Eradication Program, among other animal health programs.
    Before I move on to describe our Wildlife Services program, let me 
emphasize how important APHIS' relationships are with our State and 
Tribal partners in conducting these eradication and control programs. 
Federal-State-Tribal cooperation is essential for these types of 
programs to succeed, in addition to the support we receive from 
academia and industry.
    APHIS' Wildlife Services (WS) operation provides Federal leadership 
in managing wildlife conflict. Part of the program's mainstay is 
protecting American agricultural resources. In fiscal year 2002, APHIS 
carried out various activities related to Bovine Tuberculosis (TB) in 
wildlife populations. We began a pilot project providing fencing around 
feed storage areas on farms to prevent the transmission of bovine TB 
between cattle and deer. The goal of the pilot project is to determine 
fencing designs that are both effective and practical. Additionally we 
recorded observations of wildlife patterns on many of the bovine TB 
positive farms to determine what activities may contribute to 
transmission.
    Protecting human health and safety also is a part of APHIS/WS 
operations. APHIS assisted the Colorado Division of Wildlife and the 
Wisconsin Department of Natural Resources with surveillance and disease 
management strategies to reduce the prevalence of Chronic Wasting 
Disease (CWD) in wild cervid populations. APHIS worked closely with 
State wildlife agencies, the U.S. Fish and Wildlife Service, and local 
governments in addressing increased problems with non-migratory, 
resident Canada geese in fiscal year 2002. With the current population 
exceeding 2 million geese and increasing exponentially, this growing 
bird population is a primary concern in the eastern and the central 
United States and increasing in the west. Problems include threats to 
public safety at airports and air bases, contamination of water 
supplies and recreational beaches, and damage to lawns, turf areas, and 
agricultural resources such as seed production.
    To protect both humans and livestock, APHIS/WS also continued an 
oral rabies vaccination (ORV) program. The goal of this program is to 
establish and maintain immunization barriers to contain specific 
strains of rabies in wildlife populations. To stop the spread of 
raccoon rabies westward, APHIS extended an older ORV barrier in the 
northeastern States and Ohio into West Virginia, through western 
Virginia, and into eastern Tennessee. Program officials also continued 
to distribute ORV baits in the Northeast. To stop the disease's spread 
in coyotes and gray foxes in Texas, program officials also continued 
the ORV program in that state.
    APHIS also works to protect natural resources and property. In 
Maryland, APHIS is cooperating with several governmental and private 
partners in managing nutria. Nutria are non-native to North America and 
are impacting sensitive marshes of the Chesapeake Bay. APHIS continues 
to cooperate with various State and Federal agencies to protect 
reintroduced black-footed ferrets from predators and to monitor for 
diseases that may impact ferrets in Montana, Wyoming, Colorado, and 
other States where they have been reintroduced. The Agency's beaver 
damage management activities in Alabama, Florida, Georgia, Kentucky, 
Louisiana, Maine, Mississippi, North Carolina, South Carolina, 
Tennessee, Wisconsin, and Virginia throughout fiscal year 2002 averted 
impending beaver damage to forest and agricultural resources, 
waterways, and highway infrastructures. Humans and wildlife continue to 
compete for habitat as both populations increase. In fiscal year 2002, 
APHIS provided technical assistance to approximately 60,000 individuals 
in urban and suburban areas concerned with wildlife damage to property; 
we now have a 1-800 Nuisance Wildlife Hotline services in cooperation 
with State Agencies in four States.
    APHIS' Wildlife Services (WS) Methods Development program conducts 
programs to develop new or improved methods for reducing wildlife/
agriculture conflicts. The National Wildlife Research Center (NWRC) of 
APHIS' Wildlife Services program provides scientific information for 
the development and implementation of effective, practical, and 
socially acceptable methods for wildlife damage management. This helps 
ensure that high-quality technical and scientific information on 
wildlife damage management is available for the protection of crops, 
livestock, natural resources, property, and public health and safety.
    WS methods development activities include methods to manage and 
resolve wildlife disease impacts on agriculture and methods to reduce 
invasive species damage to agriculture and natural resources. For 
example, the program has developed methods to mitigate blackbird damage 
to sunflowers and rice, methods to reduce bird hazards to aviation, 
techniques to control mountain beaver and bear damage to western 
forests, methods to reduce rat damage to sugarcane and macadamia nuts, 
methods for reducing cormorant depredation at aquaculture facilities; 
and approaches to reduce coyote damage to livestock. APHIS develops 
analytical chemistry methodology to support the registration and re-
registration of chemicals for small mammals, for bird and predator 
control, and for the identification of potential repellents to support 
non-lethal wildlife damage management control strategies. During fiscal 
year 2002, approximately 75 percent of WS methods development resources 
went toward non-lethal approaches to wildlife damage management.
    APHIS' Animal Welfare program continues to focus its resources on 
conducting quality inspections under the Animal Welfare Act at USDA 
licensed and registered facilities. The use of the program's risk-based 
inspection system concentrates activities on facilities where animal 
welfare concerns are the greatest. With the funding increase in fiscal 
year 2002, APHIS hired 16 new animal care inspectors who, by the end of 
the fiscal year, were being trained and had started to conduct 
inspections. As a result, the number of inspections increased by 1 
percent, continuing the upward trend in inspections that began in 
fiscal year 2001, following a sustained period of decline throughout 
the 1990s. By the end of fiscal year 2002, the number of animal care 
inspectors stood at 98, an increase of 53 percent from the low of 64 at 
the end of fiscal year 1998.
    In the Horse Protection program, APHIS has been working for nearly 
a decade with Horse Industry Organizations (HIOs) certified under the 
Horse Protection Act to develop a partnership whereby the HIOs can 
assume greater responsibility for self-regulation. The current plan 
began with the 2001 horse show season and ends in December 2003. APHIS 
plans to continue offering the plan in fiscal year 2003, possibly with 
some modifications, for those HIOs wishing to use it.
    Respond to emergencies and emerging issues--surveillance, quick 
detection, containment, and eradication. The fifth component of APHIS' 
safeguarding system requires that we move quickly when an outbreak or 
other emergency situation does occur. Quick action will help safeguard 
other resources and will reduce adverse trade implications for our 
products. APHIS' Emergency Management System (EMS) is a joint Federal-
State-industry effort to improve the ability of the United States to 
deal successfully with animal health emergencies, ranging from natural 
disasters to introductions of foreign animal diseases. In addition to 
unintentional introductions of foreign animal diseases, the EMS 
addresses intentional introductions and emerging diseases that could 
pose a threat to animal agriculture. With full readiness to deal with 
animal health outbreaks, we can reduce the threat of the outbreak on 
the Nation's food supply and economic well-being. While APHIS conducts 
the majority of its work related to animal emergency management within 
this program, activities such as foreign animal disease investigations 
and training are funded within the animal health monitoring and 
surveillance program.
    In fiscal year 2002, APHIS developed and participated in many 
State-level test exercises to increase the confidence and capability of 
the first responders to an animal health emergency in the United 
States. APHIS also participated in the development and implementation 
of an international animal health test exercise in Australia.
    In addition, APHIS initiated the distribution of $18.5 million in 
Homeland Security Supplemental funds to States and Tribal Nations to 
help bolster their emergency preparedness and surveillance efforts. Of 
this, $11 million went to States and Tribal Nations to enhance 
emergency preparedness efforts, $4.5 million went to States to enhance 
animal health surveillance, and $3 million is going toward the purchase 
of carcass disposal systems for three States: California, Wisconsin, 
and Texas.
    Through the Pest Detection program, APHIS and the States 
participate in the Cooperative Agricultural Pests Survey (CAPS) 
program, which provides the domestic infrastructure necessary for early 
detection of plant pests and weeds that enter into the United States or 
expand into new areas. Survey targets include weeds, plant diseases, 
insects, nematodes, and other invertebrate organisms. Program 
activities include evaluating pest risks, conducting detection surveys, 
responding to detections in a timely manner, collecting and reporting 
data, developing State Pest Lists, assessing risk and analyzing 
pathways, and communicating with the public.
    Using funds provided in the fiscal year 2002 Homeland Security 
Supplemental appropriation, APHIS has begun efforts to significantly 
strengthen our pest detection capabilities. We are in the process of 
hiring 26 personnel trained in pest detection technologies at key U.S. 
locations to coordinate and oversee early detection surveys in 
cooperation with the States. In addition, we obligated $4 million in 
fiscal year 2002 to expand cooperative agreements for implementation of 
the CAPS surveys within all the States. We have also begun to train 
identifiers and procure up-to-date surveillance equipment to ensure 
that data are of high quality and standardized across the country. This 
equipment will also allow us to conduct research to develop better 
survey tools and techniques and undertake pathway analyses to 
facilitate interception. We obligated an additional $4.5 million from 
the Homeland Security supplemental appropriation for fiscal year 2003 
CAPS agreements to sustain these efforts. The States are using this 
money to build survey infrastructure. These activities include hiring 
survey coordinators and purchasing equipment.
    APHIS' Animal Health Monitoring and Surveillance program maintains 
a cadre of trained professionals to quickly detect potential animal 
health emergencies. APHIS continually evaluates its means and methods 
for safeguarding American agriculture from foreign animal disease, such 
as bovine spongiform encephalopathy (BSE). To date, no case of BSE has 
ever been detected in the United States although more than 46,475 
samples have been tested. This program also surveys for poultry, 
miscellaneous equine, and other animal diseases.
    Through early detection and rapid response programs, APHIS is 
prepared to respond immediately to potential animal and plant health 
emergencies. In fiscal year 2002, APHIS took quick action on the 
following plant and animal situations: Asian Longhorned Beetle, Low 
Pathogenic Avian Influenza, Chronic Wasting Disease, Citrus Canker, 
Classical Swine Fever, Infectious Salmon Anemia, Karnal Bunt, 
Mediterranean Fruit Fly, Pierce's Disease/Glassy-winged Sharpshooter, 
Rabies, and Scrapie. The Secretary used her authority to transfer in 
2002 over $200 million to battle these pests and diseases. Without the 
quick detection and early, rapid response, the cost to control the 
outbreak would have undoubtedly been higher. As of May 2, 2003, the 
Secretary has transferred over $276.67 million to quickly detect, 
control the spread of, and eliminate pests and diseases such as 
tuberculosis, exotic Newcastle disease, Mediterranean fruit fly, 
chronic wasting disease, and Glassy-winged Sharpshooter, Spring Viremia 
of Carp, and Emerald Ash Borer.

Facilitate Safe Agricultural Trade
    The second goal in our mission is to facilitate agricultural trade. 
The key to assuring trading partners of the health of our products is a 
credible system to assess American agriculture and document that it is 
healthy and that other countries have nothing to fear from our exports. 
This is the first component in facilitating trade. We must also certify 
the health of our agricultural exports, resolve trade barriers, and 
provide expertise and training in animal and plant health.
    Document the health status of U.S. agriculture and related 
ecosystems. The World Trade Organization and the North American Free 
Trade Agreement commit countries to recognizing disease- and pest-free 
areas within a country even if a particular pest or disease exists 
elsewhere in the nation. This concept of regionalization is founded on 
the long-standing idea that import requirements should be based on 
geography and science rather than on politics.
    APHIS' Pest Detection program provides documentation of our pest 
status in plant resources. Examples of observations include taking 
grain samples for Karnal bunt, setting traps for fruit flies, or 
checking trees for citrus canker and plum pox. A ``negative'' 
observation is registered when we do not find the plant pest; a 
``positive'' observation is recorded when we do. Both positive and 
negative results yield valuable and useful information for trade 
discussions, as can be seen with Leek moth, which affects onions and 
garlic. We continue to show that the United States does not have this 
pest based on continuing negative survey results.
    We also conduct delimiting surveys for plant pests that have 
invaded the United States and may be expanding their range. These 
include apple ermine moth, cereal leaf beetle, citrus leaf miner, pine 
shoot beetle, and several other bark beetles. The program manages data 
for other species including gypsy moth, imported fire ant, 
Mediterranean fruit fly, pink bollworm, giant Salvinia, golden 
nematode, and other regulated, cooperative program pests. Surveys for 
these pests also assist in the export of U.S. agricultural commodities.
    APHIS continued using the CAPS network to conduct the Karnal Bunt 
(KB) National Survey in response to the 1996 detection of the disease 
in Arizona and the 2000 detection in northern Texas. By collecting 
extensive survey data demonstrating the limited distribution of KB in 
the United States, APHIS provides assurance to all trade partners that 
KB is not present in major wheat-producing areas of the United States, 
thereby insuring annual agricultural exports of up to $3.5 billion. 
Plum pox is another project in which the collection of national data 
has helped to keep budwood markets open by showing the absence of the 
pest from various areas around the United States.
    The Agency's proactive National Animal Health Monitoring and 
Surveillance (NAHMS) program produced and interpreted scientifically 
valid information for policy makers, producers, and consumers. NAHMS 
delivered objective information addressing animal health as it pertains 
to U.S. trade, agricultural productivity, public health, and on-farm 
quality assurance. Collaborative information sharing and producer 
confidentiality are cornerstones of the program. Through effective 
partnerships with animal commodity producer groups, State governments, 
university researchers, and other Federal agencies, the program met 
producers' and the U.S. public's information demands in a cost-
effective, collaborative manner while minimizing duplication of effort.
    Certify the health of animals and plants and related products for 
export and interstate commerce APHIS' Import/Export program regulates 
the importation of animals and animal products and promotes markets 
abroad by ensuring that U.S. origin animals and animal products meet 
health and welfare requirements of recipient countries. The program 
issued point of origin certificates for the export of approximately 909 
thousand head of livestock, 30.2 million live poultry, 74.8 million 
eggs, 30 million day-old chicks, 9.3 million live fish, 103.2 million 
aquatic embryos and eggs, 10.3 million doses of semen, and 11,908 non-
aquatic embryos.
    Because international standards are science-based, several 
countries--including Argentina, Brazil, the Dominican Republic, 
Ecuador, Mexico, and Peru--placed restrictions on U.S. horses and birds 
in fiscal year 2002 due the presence of West Nile Virus in the United 
States. Other disease events, such as the diagnosis of Low Pathogenic 
Avian Influenza in several Eastern states in fiscal year 2002 and 
Exotic Newcastle Disease in California, Nevada, and Arizona in late 
2002 and early 2003, also resulted in restrictions, significantly 
impacting live animal exports.
    Through the Agricultural Quarantine Inspection program's EXCERT 
(export certification) system, APHIS facilitates the export of 
agriculture shipments. Over 4,000 certifying officials can access the 
information on certification requirements online. In fiscal year 2002, 
APHIS issued over 380,000 certificates for agriculture shipments. APHIS 
export certifications ensure that U.S. products meet the agricultural 
requirements of the country of destination. In fiscal year 2002, APHIS 
began the pilot phase of the Phytosanitary Certificate Issuance and 
Tracking database. This database captures export application 
information, documents inspection and certification information, and 
prints an original phytosanitary certificate on secure paper. The pilot 
phase involves 10 field locations, representing several State and 
County cooperators. APHIS will retain this certification responsibility 
while inspection operations are transferred to the Department of 
Homeland Security.
    In fiscal year 2002, APHIS' Veterinary Biologics program issued 
4,385 official certificates that indicate licensed production and 
testing facilities and products have met or exceeded marketing 
requirements. The regulated industry used these certificates to 
register their products for sale in foreign countries. The confidence 
that foreign regulators have in the U.S. veterinary biologics 
licensing, testing, and inspection system is reflected in their 
readiness to accept our products. Center for Veterinary Biologics (CVB) 
officials provided informational presentations at international 
conferences to bolster foreign regulators' confidence.
    Resolve trade barrier issues related to animal and plant health. As 
modern trade agreements prohibit onerous tariffs and similar trade 
barriers, some countries may resort to ``sanitary and phytosanitary'' 
concerns--that is, claims that American agricultural exports carry 
pests and diseases not present in their countries. Those claims may not 
be science-based. APHIS fills the crucial role of gathering and 
analyzing the scientific evidence to refute such claims or recommend 
measures to reduce the impact of other country's SPS concerns.
    Officials with the Trade Issue Resolution and Management program 
work to minimize trade disruptions caused by animal and plant health 
issues. Personnel overseas participate in negotiations, work with 
standard-setting organizations, and facilitate the capacity of 
countries to recognize and respond to agriculture health issues that 
restrict trade. They coordinate these activities with domestic staff 
who resolve issues that trading partners may have with U.S. products or 
handle negotiations on bilateral or multilateral issues. APHIS' efforts 
contributed to the opening or retention of $1.1 billion in export 
markets in fiscal year 2001, the latest data available. These 
accomplishments related to products as diverse as cherries, tobacco, 
and poultry.
    The job of ensuring that animal and plant health issues are not 
used unfairly as barriers to trade gets more complicated as trade 
increases. Recent agreements and the efforts of the World Trade 
Organization have reduced the traditional barriers to trade in 
agricultural products. Countries wishing to protect their markets from 
competition may turn to sanitary and phyosanitary (SPS) barriers. To 
retain or open markets, APHIS technical experts must be ready to 
respond to challenges involving new animal and plant health issues.
    Even though USDA, with APHIS assistance, persuades other countries 
to accept American exports in principle, the importing country may 
attempt to stop the entry on actual shipments. Attaches are uniquely 
positioned to respond to day-to-day problems with individual shipments 
that are detained in ports overseas. Sometimes the problems arise from 
a misunderstanding of a regulation, or the problem may be as simple as 
an incorrect notation on a phytosanitary certificate. Having these 
shipments detained could be costly for the exporter, whose product may 
spoil while the importing country is deciding on what to do with it. In 
fiscal year 2002, attaches' actions saved more than $53.2 million worth 
of products for agricultural exporters. For example, in May 2002, an 
APHIS attache resolved an issue causing the detention of a $3 million 
shipment of rice to Costa Rica.
    During fiscal year 2002, APHIS negotiated 44 new or revised export 
protocols for exporting poultry, livestock, and germplasm to numerous 
countries in the Americas, including Argentina, Bolivia, Brazil, Chile, 
the Dominican Republic, Ecuador, Guatemala, Mexico, Panama, and Peru. 
In addition, APHIS negotiated protocols with the Czech Republic for 
bovine semen and embryos, and with Lithuania, Hungary, and Estonia, for 
bovine embryos. Currently, APHIS is negotiating protocols with Peru and 
Nicaragua.
    Increased trade in and concerns over genetically engineered 
products--particularly crops--have heightened international initiatives 
to harmonize and address assessments of products from both 
environmental and food safety perspectives. This has also led to 
discussion of mechanisms to address trade in these products, both 
bilaterally and multilaterally. A primary objective of APHIS' 
harmonization efforts is to maintain and enhance the use of science-
based decision making, and to promote the credibility of U.S. 
regulatory bodies as independent, objective evaluators of product 
safety. APHIS has participated in the development of guidance and 
technical approaches in the Codex Alimentarius, the International Plant 
Protection Organization (IPPC), the North American Plant Protection 
Organization (NAPPO), the Cartagena Protocol on Biosafety, and the 
Organization for Economic Cooperation and Development (OECD). APHIS 
continued a joint project under the Transatlantic Economic Partnership 
(TEP) aimed at European Union and U.S. regulatory authorities accepting 
common data requirements as the basis for approval of biotechnology 
products. Success in the TEP process will facilitate a harmonized 
approval process for genetically modified organisms between North 
America and Europe.
    Provide expertise and training in animal and plant health To 
facilitate agricultural trade, APHIS must provide technical services 
and information about animal and plant health to USDA's Foreign 
Agricultural Service and the U.S. Trade Representative, who have 
primary responsibility to negotiate trade agreements with other 
countries. We also need to help developing countries meet SPS Agreement 
requirements--which include having regulatory mechanisms in place to 
ensure the safe release and movement of agricultural products--and we 
need to help these countries build better animal and plant surveillance 
capacity. Only through actively helping build health infrastructures 
can we be assured that other countries are sending healthy agricultural 
products to the United States. With the increasing volume of trade and 
movement of passengers, APHIS will likely have to rely more on the 
sanitary and phytosanitary export certificates of our trading partners. 
Trade is a two-way street; we cannot increase exports and 
simultaneously engage in protectionist practices. APHIS must protect 
U.S. agriculture from incursions of foreign pests and diseases without 
restricting trade. Trade agreements and the World Trade Organization 
oblige us to move quickly on foreign countries' requests to import into 
the United States. We also put together or participate in technical 
assistance projects with trading partners and potential trading 
partners. These technical assistance projects serve two roles. First, 
they assure trading partners that U.S. products are safe because they 
clearly explain U.S. sanitary and phytosanitary procedures. Secondly, 
they help other countries develop a regulatory infrastructure that will 
make it possible to safely take part in trade. Particularly aimed at 
developing countries, these projects aim to build new markets for U.S 
products while helping those countries build their own agricultural 
industries.
    The technical assistance projects we administer vary worldwide in 
terms of the means of information dispersal. Examples include 
epidemiology training for visitors from overseas or distance learning 
modules on SPS principles. The modules, which are available in a 
variety of media, are administered via attaches worldwide. APHIS also 
participates in the Foreign Agricultural Service's Cochran Fellowship 
program, which funds training programs for senior- and mid-level 
agriculturists from middle income countries and emerging democracies. 
In recent years, the Cochran program has funded numerous training 
programs related to the SPS issues of food safety, animal health, and 
plant quarantine.
    The Veterinary Biologics program continued efforts to reduce trade 
measures limiting the sale of veterinary biological products overseas. 
Program officials continued technical and harmonization discussions 
with representatives of the American, Asian, European and U.S. 
biologics industries and regulatory officials. APHIS held individual 
meetings with regulatory officials from Australia and New Zealand to 
facilitate exchange of information and encourage discussions of 
regulatory issues.
    A part of APHIS' Veterinary Diagnostics program assists foreign 
governments in the diagnosis of animal diseases by maintaining national 
and international laboratory recognition with the highest quality 
reference assistance and by conducting developmental projects for 
rapidly advancing technologies.
    In fiscal year 2002, the Agency's National Veterinary Services 
Laboratories (NVSL) continued efforts in the veterinary diagnostics 
program to safeguard the United States from adverse animal health 
events. APHIS, along with the Cooperative State Research, Education, 
and Extension Service, the American Association of Veterinary 
Laboratory Diagnosticians Executive Board, and State laboratory 
directors, developed a pilot program of the National Animal Health 
Laboratory Network. The network is a national strategy to meld the 
nation's Federal, State, and local resources in order to respond to any 
type of animal health emergency, including bioterrorist events, newly 
emerging diseases, and foreign animal disease agents that threaten the 
nation's food supply and public health. During fiscal year 2002, USDA 
provided a total of $15.25 million in Homeland Security funding to 12 
State diagnostic laboratories to use for improving biosecurity of 
facilities, communicating results, buying equipment, standardizing 
methods, and quality assurance.
    During fiscal year 2002, NVSL provided training to 798 State, 
Federal, private, and foreign participants for a total of approximately 
303 training days. This included 13 formal APHIS training courses 
focusing on scrapie, tuberculosis, equine infectious anemia, blue 
tongue, bovine leukosis virus, brucellosis, leptospirosis, and lab 
biosafety. Six foreign animal disease training schools were also 
conducted at the Foreign Animal Disease Diagnostic Laboratory on Plum 
Island for a total of 197 participants. In addition to the formal 
courses, NVSL also provided bench training in EIA, brucellosis, 
Johne's, Salmonella, pseudorabies, scrapie, avian influenza (AI), West 
Nile virus, and contagious equine metritis.

                    FISCAL YEAR 2004 BUDGET REQUEST

    American agriculture is a tremendous resource. To protect this 
resource, we must safeguard the health of our animals, plants, and 
ecosystems. The value of this resource is increased when you consider 
the economic benefits of trading our agricultural products overseas for 
other goods and services. Safeguarding our agricultural wealth and 
facilitating safe agricultural trade go hand in hand and require 
several activities. To carry out these activities, we request $694.9 
million for the salaries and expenses account. We request a pay 
increase of $9.3 million and a decrease of slightly more than $1 
million because of information technology procurement efficiencies. Our 
requested program level changes are outlined below. In our building and 
facilities account, we request $5 million, a decrease of $5 million for 
a one-time project from fiscal year 2003 level, to carry out basic 
maintenance and repair activities.
    The proposed funding for the Agricultural Quarantine Inspection 
(AQI) appropriated program reflects funding of future activities for 
the Automated Targeting System through mandatory, rather than 
discretionary funding. In addition, the $21.3 million request for AQI 
excludes the border inspection programs that have been transferred to 
the Department of Homeland Security (DHS). The fiscal year 2004 budget 
also recognizes the transfer of the Plum Island Animal Disease Center 
to DHS, which will receive some program funds and necessary funding to 
operate the facility. Both USDA and DHS will share program funds to 
reflect their needs, working closely to keep agricultural pests and 
diseases out of the United States.
    Funding for ongoing programs to combat pests and disease is based 
on the recognition that the Federal Government, and affected States and 
localities, as well as producers and other private cooperators benefit 
from eradication. Therefore, we will be proposing a rule in the Federal 
Register to solicit public comment prior to finalizing before October 
1, 2003 which establishes criteria to share program responsibilities in 
a reasonable manner. For that reason, the fiscal year 2004 budget 
allocates funding among the Federal Government and cooperators based on 
consistent program criteria which recognizes a significant Federal 
responsibility, and takes into account cooperator ability to pay as 
well as other risk based factors. Federal funding for these ongoing 
programs would still range from 57 percent to 70 percent, and could in 
other circumstances be as great as 100 percent.
    The budget includes a total of $26.7 million for the boll weevil 
program, based on a 20 percent Federal cost share and a reduction of 35 
percent in program acres based on long-term program goals.
    To successfully safeguard the health of agricultural animals, 
plants, and ecosystems in the United States, we must begin overseas 
where those pests and diseases currently exist. To enhance our offshore 
threat assessment and risk reduction activities, APHIS requests a total 
of $1 million for classical swine fever eradication in the Dominican 
Republic and Haiti and $2.9 million to eradicate tropical bont tick 
from Antigua and prevent its spread to other islands.
    To reduce the risk of introduction of exotic invasive species, we 
must enhance our regulatory enforcement and monitoring activities. We 
request $881,000 for an aerial sterile Medfly preventive release 
program in California and Florida. A total of $9.6 million is proposed 
for the animal and plant health regulatory enforcement program 
including funds to continue Homeland Security Supplemental funded 
investigations of alleged violations, search garbage feeding 
operations, and document enforcement actions. An import/export program 
increase of $2.8 million will allow us to complete and maintain an 
animal tracking system and place database managers to identify pathways 
of exotic animal disease. We request $2.9 million to make a number of 
improvements associated with biosecurity. These include connecting 
field activities electronically to our Emergency Management Operations 
Center, enhancing identification protocols and analytical capabilities, 
developing a network of Foreign Animal disease diagnosticians, and 
conducting biosecurity awareness campaigns. We are proposing a total of 
$6.3 million to continue increased security at mission critical 
facilities.
    To address the threat of biological terrorism directed at the 
nation's animal food supply, the Agency proposes an increase of $1.4 
million in the veterinary biologics program and an increase of $3.3 
million in the veterinary diagnostics program for enhanced laboratory 
network activities, anthrax diagnostics, and security clearances.
    To prepare for the unlikely event of foot-and-mouth (FMD) entering 
the United States, we request $560,000 to increase the North American 
FMD vaccine bank doses by 1.25 million to 20.75 million.
    The continued existence of pests and diseases in the United States 
hurts the American producer in several ways. First, their existence 
reduces yields and increases costs. Second, other countries will cite 
them as reasons to prohibit or place restrictions on our exports. APHIS 
has requests to address some of the most devastating pests and 
diseases. We propose $15 million in our chronic wasting disease program 
to increase grants to States and to assist in surveillance, disease 
management, diagnostic testing, communications, and information 
management. We need an additional $329,000 in the golden nematode 
program for increased surveillance, equipment, and cooperative 
agreement funding. We request $2 million to assist States in a long-
range low pathogenic avian influenza control and prevention program. To 
ensure we can account for all hazardous materials used in our wildlife 
services operations program, we request $1 million to create a 
hazardous materials database. We request a total of $3.5 million in the 
plum pox virus program to continue recent program success in 
eliminating and not finding any more disease.
    The APHIS request does not contain an increase in the trade issues 
resolution and management program to enhance our ability to resolve 
trade barrier issues related to animal and plant health or in the 
biotechnology regulatory services program to improve existing products 
and spawn new technologies. The Office of the Secretary requests $6.6 
million to be allocated among USDA Agencies for negotiating and 
monitoring trade agreements and for technical trade support in the 
areas of biotechnology regulatory services and sanitary and phyto-
sanitary issues.
    We also propose a reduction of $7.7 million associated with animal 
welfare user fees. This will allow the industry to cover an estimated 
50 percent of the cost of enforcing the animal welfare regulations.

                               CONCLUSION

    Simply stated, APHIS' mission is to protect the health and value of 
America's agricultural and natural resources. This mission carries two 
goals--to safeguard the health of animals, plants, and ecosystems in 
the United States and to facilitate safe agricultural trade. Our 
safeguarding goal requires us to: (1) conduct offshore threat 
assessment and risk reduction, (2) regulate and monitor to reduce the 
risk of introduction of exotic invasive species, (3) ensure safe 
research, release, and movement of agricultural biotechnology events, 
veterinary biologics, and other organisms, (4) manage issues related to 
the health of U.S. animal and plant resources and conflicts with 
wildlife, and (5) respond to emergencies and emerging issues--
surveillance, quick detection, containment, and eradication. Our 
facilitating trade goal requires that we: (1) document the health 
status of U.S. agriculture and related ecosystems, (2) certify the 
health of animals and plants and related products for export and 
interstate commerce, (3) resolve trade barrier issues related to animal 
and plant health, and (4) provide expertise and training in animal and 
plant health. There is a continuum between the goals and a connected, 
inseparable relationship among the objectives. We cannot improve, or 
strengthen one goal without improving or strengthening the other.
    I am proud of the APHIS mission, its goals, and its objectives. I 
also am proud of all of the men and women of APHIS who have dedicated 
their careers to improving the health and profitability of America's 
animal and plant resources. Their dedicated efforts, coupled with the 
Committee's unwavering support, have truly helped American agricultural 
producers overcome pests, diseases, and economic uncertainty. I will 
close by saying that Progressive Farmer, one of America's oldest and 
most widely circulated agricultural publications selected ``The People 
of APHIS'' as winners of the 2003 People of the Year recognition. Since 
1937, this is the first time the award has gone to a group of people. 
This indeed is quite an honor and recognizes the character and 
dedication of everyone at APHIS.
    On behalf of APHIS, I appreciate all of your past support and look 
forward to even closer working relationships in the future. We are 
prepared to answer any questions you may have.
                                 ______
                                 

Prepared Statement of A.J. Yates, Administrator, Agricultural Marketing 
                                Service

    Mr. Chairman and Members of the Committee, I am pleased to have 
this opportunity to represent the Agricultural Marketing Service--AMS--
in presenting our fiscal year 2004 budget proposal.

                                MISSION

    AMS activities support agricultural marketing. Formally stated, the 
Agency's mission is to facilitate the marketing of agricultural 
products in the domestic and international marketplace, ensure fair 
trading practices, and promote a competitive and efficient marketplace 
to the benefit of producers, traders, and consumers of U.S. food and 
fiber products. We accomplish this mission through a variety of 
voluntary fee-based services and publicly funded activities that help 
our customers find ways to better market food and fiber products and 
improve their profitability. AMS helps to make the Nation's 
agricultural markets work efficiently by making sure that all producers 
and traders have equal access to market information; by assuring them 
that quality and other product representations are accurately 
described; by providing pesticide residue and microbiological data that 
support science-based risk assessment; by providing ``how to'' 
technical expertise to growers, shippers, and market facilities; by 
helping to develop improved or alternative market outlets; and by 
helping producers adjust to consumer trends.
    To be successful, we continually monitor the needs of our customers 
in the agricultural industry, develop strong partnerships with 
cooperating State agencies, and adopt new technology to improve our 
effectiveness. Since most of our user-funded services are voluntary, we 
always remain conscious of cost while being responsive to customer 
needs.
    AMS depends on strong cooperative partnerships with States and 
other Federal agencies. Our Market News, Shell Egg Surveillance, 
Pesticide Data, Microbiological Data, Pesticide Recordkeeping, and 
Federal Seed programs all depend on their State partners to help 
collect and disseminate information, provide inspections, and otherwise 
maximize the value of State and Federal programs by sharing and 
coordinating the use of available resources.
    One of the ways we continue to improve our service is through 
public electronic access to information and services. AMS offers online 
application for services, filing for protection under the Perishable 
Agricultural Commodities Act, public comment on rulemaking, and bidding 
on Federal commodity purchases. Market news users can now access all 
current market news reports through the AMS Internet home page 
(www.ams.usda.gov), use search engines to retrieve recent historical 
data from an 18-month archive, and link to other Internet sites that 
carry related information.
    For fiscal year 2004, AMS will maintain a high level of program 
delivery while continuing to implement program enhancements without an 
increase in funding. Therefore, I would like to describe some of AMS' 
significant accomplishments during fiscal year 2002 and our activities 
in 2003.

                     GLOBAL AGRICULTURAL MARKETING

    AMS offers a range of services that give sellers of agricultural 
products a competitive advantage in the global marketplace. For 
example, our Transportation Services and Pesticide Data Programs 
provide information to facilitate agricultural commodity exports. Our 
AMS grading and laboratory testing programs offer product, production 
process, and equipment certifications to support compliance with export 
specifications.
    We initiated our Global Market Expansion program in fiscal year 
2002 to strengthen our support of export marketing for agricultural 
products. Under this activity, AMS participates in international 
standards organizations such as United Nations Codex Alimentarius 
Commission committees, International Dairy Federation Standing 
Committees, U.N. Economic Commission for Europe, Organization for 
Economic Cooperation and Development Seed Scheme, International 
Standards Organization, International Seed Testing Association, North 
American Free Trade Agreement Working Groups, World Meat Congress, 
International Calibration Cotton Standards Committee, International 
Textile Manufacturers Federation, U.S. National Committee for the 
International Institute of Refrigeration Working Committees, and 
several bilateral Consultative Committees on Agriculture. AMS experts 
served on, and in several cases headed, U.S. delegations to meetings of 
these international food and fiber standards-setting organizations.
    AMS also provides technical expertise in negotiations on 
international standards. In 2002, we worked with U.S. trade officials 
to delay China's adoption of cotton standards that lack recognized 
measurement technologies and could have posed a barrier to U.S. cotton 
exports. AMS led the development of lamb and poultry quality standards 
that will serve as models for government and industry throughout 
Europe. We actively participated in developing a model export 
certificate for milk and milk products, international dairy standards 
and a code of hygienic practices for milk and milk products. We 
provided expertise on finalizing the technical requirements for testing 
meat products for hormones and veterinary drugs destined for export to 
the European Union and helped develop the U.S./Chile free trade 
agreement that will make U.S. beef eligible for export to Chile.
    Through such participation, AMS is able to influence the design of 
food quality standards and model inspection protocols so that they are 
fair to U.S. shippers and they do not become barriers to U.S. 
agricultural trade. The Agency will continue to do its part in helping 
to reduce trade barriers relating to commodity standards and product 
testing by serving as delegates and by leading international committees 
and organizations.
    For fiscal year 2003, AMS is expanding Market News reporting on 
international markets so that U.S. growers and traders have the 
information they need to make informed production and sales decisions. 
Market news reports provide access to a centralized, consistent, public 
source of timely information on international prices and trade volume. 
The foundation for enhanced reporting from Western Hemisphere countries 
has already been laid through AMS' initiation of the Market Information 
Organization of the Americas (MIOA). The MIOA brings together market 
reporting services from 18 countries in North, South, and Central 
America to harmonize product definitions, reporting formats, and 
information exchange.

                             PESTICIDE DATA

    AMS supports domestic and export marketing of U.S. food products 
through its Pesticide Data Program (PDP). PDP is a unique and valuable 
source of statistically valid data on pesticide residues in food and 
water. The program provides information to the Environmental Protection 
Agency that is vital for realistic assessments of dietary risk from 
pesticides on food commodities available in the marketplace. The data 
collected benefits growers by enabling regulators to make better-
informed decisions on pesticides. Furthermore, PDP is instrumental in 
providing data that addresses domestic and international public 
concerns about the effects of agricultural pesticides on human health 
and environmental quality. Exporters use PDP data to verify for foreign 
governments and buyers that U.S. agricultural commodities are safe for 
consumption.
    Over the past 11 years, the program has tested 57 commodities, 
including fruit and vegetables, grains, milk, peanut butter, poultry, 
beef, juices, and drinking water. The results from PDP testing provide 
comparative pesticide residue data between fresh versus processed 
commodities, and an in-depth comparison for selected domestic versus 
imported commodities. Of the more than 12,000 samples tested in 
calendar year 2001, 82 percent were domestically produced and 18 
percent were imported. PDP procedures are designed to detect, verify, 
and report low-level pesticide concentrations. Pesticide residues only 
exceeded established tolerance levels in three-tenths of 1 percent of 
the samples, although residues were detected on 56 percent of all 
samples. In fiscal year 2002, the program performed over 100,000 
analyses on 13,000 samples.
    In March 2001, the program began testing finished drinking water 
samples. During fiscal year 2002, the drinking water survey was 
expanded to include sampling in Colorado, Kansas and Texas, while 
continuing sampling of municipal water systems in California and New 
York.
    Importantly, PDP is built on Federal-State partnerships with 10 
States--California, Colorado, Florida, Maryland, Michigan, New York, 
Ohio, Texas, Washington and Wisconsin. These States collect and test 
commodities for pesticide residues. In 2003, AMS received additional 
funding for PDP. Most of the increase will be used to offset rising 
operational costs at the State level. These funds will support 
infrastructure improvements and allow the Pesticide Data Program to add 
data on new commodities and residues. We also plan to complete the 
effort to achieve International Standards Organization accreditation 
for our PDP laboratories.

                          MICROBIOLOGICAL DATA

    Our experience in establishing a successful data collection program 
was of enormous assistance in initiating our Microbiological Data 
Program. MDP is designed to gather baseline data to assess the risks of 
microbial contamination of fruits and vegetables, if any. The program 
collects information regarding the incidence, number and species of 
foodborne pathogens and indicator organisms on domestic and imported 
fresh fruits and vegetables.
    In fiscal year 2002, AMS worked with cooperating States and 
interested industry parties to initiate microbiological data collection 
and testing. AMS developed operating procedures with FDA, the Centers 
for Disease Control and Prevention (CDC), and State laboratories. 
Samples of five commodities were collected in the ten cooperating 
States and were tested in State and Federal laboratories. During 10 
months of sample testing, approximately 19,000 analyses were performed 
on 9,400 samples. The first report will be published during 2003 with 
calendar year 2002 data. The data will be provided to public health 
agencies and the food industry for decision-making and evaluation of 
procedures intended to reduce or eliminate harmful microorganisms from 
foods.

                 NATIONAL ORGANIC CERTIFICATION PROGRAM

    The purpose of AMS' National Organic Certification program is to 
facilitate trading of organic products by verifying for buyers and 
consumers across the United States and internationally that U.S. 
organic food labeling is accurate and consistent. The program 
established national standards for organic production and handling, and 
is accrediting certification agents who can now conduct annual on-site 
inspections to verify that organic products meet these standards. The 
program has received 134 applications for accreditation. Fifty-three of 
the applicants were private domestic certification agents; 20 were 
State certification agents; and 61 were foreign. Through March 14, 
2003, AMS has accredited 84 applicants, 37 of whom have been site-
evaluated for compliance with the program. AMS has also implemented a 
program to approve State organic programs for production and handling 
operations within that State. State organic programs will administer a 
compliance program for enforcement of the National Organic Program and 
any more restrictive requirements approved by the Secretary. Six States 
have applied and are under review or are providing more information.
    AMS entered into cooperative agreements with 14 States to 
distribute to organic producers the cost share funds authorized under 
the Federal Crop Insurance Act. The National Organic Certification 
Cost-Share Program, authorized by the Farm Security and Rural 
Investment Act of 2002, made funds available to assist certified 
organic producers and handlers in all States. To date, we have 
agreements with 44 States to distribute these cost share funds.
    As of October 21, 2002, use of the official USDA organic seal is 
permitted for certified organic fresh and processed products. Also, 
during 2002, AMS developed procedures for enforcement, appeals, 
international recognitions, and authorization to issue export 
certificates. Consequently, the organic seal can be used as a marketing 
tool for exported products. AMS has recognized the conformity 
assessment programs of four foreign governments, worked with the 
Foreign Agricultural Service to negotiate recognition of the U.S. 
organic program by the Japanese Ministry of Agriculture and begun 
equivalency negotiations with the European Union.

                    MANDATORY PRICE REPORTING SYSTEM

    AMS' Livestock Mandatory Price Reporting (LMPR) program addresses 
concerns about market concentration in the livestock industry and 
resulting price discovery problems in the marketplace. On April 2, 
2001, AMS implemented the LMPR system to meet the requirements of the 
Livestock Mandatory Reporting Act.
    Mandatory reporting provides marketing information on 80 to 95 
percent of the volume of all cattle, boxed beef, slaughter hogs, sheep, 
lamb meat and imported lamb meat traded. Large volume packers and 
importers report the details of their transactions to AMS. Mandatory 
reports include information on pricing, contracting for purchase, and 
other market transaction data for livestock and livestock products. 
Specifically, mandatory market news covers the prior day swine market; 
forward contract and formula marketing arrangement cattle purchases; 
packer-owned cattle and sheep information; and sales of imported boxed 
lamb cuts.
    LMPR is an ambitious effort to provide livestock market information 
on a near real-time basis over the Internet. Packers submit data by 
lot, several times a day to AMS via a secure Internet connection. AMS' 
automated system processes thousands of pieces of market information 
from the livestock industry and generates market news reports within 
one hour after receipt of the data. During 2002, AMS was able to 
release data through the electronic system within an hour of receipt 95 
percent of the time.
    The system is designed to protect the confidentiality of packers. 
No data has been released that compromised the identity of source 
packers. The confidentiality provisions were modified in August 2002, 
which resulted in the release of 95 percent, or 86 of the originally 
anticipated 91 mandatory reports. The remaining reports represent 
thinly traded items and we continue to search for ways to report the 
data while maintaining confidentiality. In addition to the original set 
of reports, AMS has developed and begun releasing 16 new reports that 
improve the marketing information available on the cattle and boxed 
beef markets. In November 2002, the program began releasing cattle 
reports utilizing new formats to provide the industry with more 
regional information and volume accumulation data. AMS developed the 
new formats based on incoming data and feedback from the industry 
concerning the data most important in assessing market conditions. AMS 
continues to work to improve security and expand or improve on existing 
reports. Authorization for mandatory reporting expires at the end of 
fiscal year 2004.

                       COUNTRY OF ORIGIN LABELING

    The 2002 Farm Bill (Farm Security and Rural Investment Act of 2002) 
required USDA to issue voluntary country of origin labeling guidelines 
for use by retailers who wish to notify their customers of the country 
of origin of beef, lamb, pork, fish, perishable agricultural 
commodities, and peanuts. The voluntary country of origin labeling 
guidelines were published in October 2002 and comments on their utility 
were received until April 2003. Over 1000 comments were received.
    The country of origin labeling provisions of the 2002 Farm Bill 
also require USDA to publish regulations implementing a mandatory 
country of origin labeling program by September 30, 2004. AMS has begun 
the process of developing the mandatory regulations. To assist in this 
process, USDA has scheduled a series of 12 listening and education 
sessions across the United States to receive input from interested 
parties. USDA plans to publish the regulations implementing the 
mandatory program as a proposed rule and will provide a 90-day comment 
period for interested parties.

               WHOLESALE, FARMERS AND ALTERNATIVE MARKETS

    AMS supports direct marketing to help growers sell their farm 
products directly to consumers, enhancing the farmers' ability to 
thrive in their businesses. Direct marketing includes farmers markets, 
pick-your-own farms, roadside stands, subscription farming, community-
supported agriculture, and catalog sales. Direct marketing has been 
gaining in popularity and especially benefits small and medium-sized 
farm operators. Farmers markets, for example, are an integral part of 
the urban/farm marketing chain. In 2002, the National Farmers Market 
Directory listed over 3,100 farmers markets in the U.S. AMS has been 
working with FNS to coordinate AMS' farmers market development 
activities with FNS' nutrition programs. A report on this effort is 
nearing completion and will be forwarded to Congress upon final 
approval.

                          SECURITY INITIATIVES

    In cooperation with Departmental planners, AMS has developed a 
comprehensive strategy to address homeland security issues. AMS has a 
fully-developed and tested Continuity of Operations Plan and two fully 
equipped emergency relocation sites. We have identified our mission 
critical facilities and have strengthened the security of those 
facilities by installing emergency power generators, access control 
systems, intrusion detectors, and additional exterior lighting. The 
Agency has expanded its written instructions and is developing a 
training program for inspectors, auditors, and graders on monitoring 
for and reporting contamination or tampering of food products. AMS is 
currently establishing a small office of safety and security to focus 
on these issues and to coordinate improvements in security measures.

                         ELECTRONIC GOVERNMENT

    AMS has taken a leadership role in the transition to electronic 
government. We are working closely with USDA partners to establish 
electronic access to core services. AMS led the business case for the 
Department's web portal project and is conducting an Agency portal 
pilot for market news information. We have also worked to create real-
time interaction with our customers. A system known as e-Work allows 
customers to electronically submit information forms to AMS. The system 
then processes the forms and generates messages to the customer 
advising them of the status of their request. In other initiatives, AMS 
was one of the first agencies in USDA to use electronic authentication 
in its Livestock Mandatory Price Reporting system. Our Food Quality 
Assurance program is creating a website for use by institutional food 
service professionals to learn about sources of new products or find 
locations approved to further process USDA-purchased commodities. In 
addition, AMS is working with FNS and FSA to modernize the current 
commodity purchase management system to a web-based supply chain 
management system. We will continue to look for ways to provide our 
customers with better access to our services.

                         BUDGET REQUEST SUMMARY

    AMS has proposed no funding increases for program activities for 
fiscal year 2004. Instead, we will continue our efforts to improve our 
efficiency and customer service with the funding currently available. 
Our total budget request includes $75 million for Marketing Services, 
which includes an increase for pay costs, partially offset by a 
decrease for savings associated with information technology 
centralization and improvement. We also include a decrease of $1 
million for the Pesticide Data Program. This funding was provided in 
fiscal year 2003 for increased testing of drinking water.
    We are requesting the current funding level of $1.3 million for 
Federal-State Marketing Improvement Program grants under Payments to 
States and Possessions. Our request for $26.4 million in Section 32 
Administrative funds includes an increase for pay costs.
    AMS will continue its mission to assist the agricultural industry 
by facilitating domestic and international marketing. Thank you for 
this opportunity to present our budget proposal.
                                 ______
                                 

    Prepared Statement of Donna Reifschneider, Administrator, Grain 
           Inspection, Packers and Stockyards Administration

    Mr. Chairman and Members of the Committee, I am pleased to 
highlight the accomplishments of the Grain Inspection, Packers and 
Stockyards Administration (GIPSA), and to discuss the fiscal year 2004 
budget proposal.
    GIPSA is part of USDA's Marketing and Regulatory Programs, which 
works to ensure a productive and competitive global marketplace for 
U.S. agricultural products. GIPSA's mission is to facilitate the 
marketing of livestock, poultry, meat, cereals, oilseeds, and related 
agricultural products, and to promote fair and competitive trading 
practices for the overall benefit of consumers and American 
agriculture.
    GIPSA serves in a regulatory capacity, with an emphasis on service 
to the regulated industries. The Packers and Stockyards Programs 
promote a fair, open, and competitive marketing environment for the 
livestock, meat, and poultry industries. The Federal Grain Inspection 
Service provides the U.S. grain market with Federal quality standards, 
a uniform system for applying these standards, and impartial, accurate 
grain quality measurements that promote an equitable and efficient 
grain marketing system. Overall, GIPSA helps promote and ensure fair 
and competitive marketing systems for all involved in the merchandising 
of livestock, meat, poultry, and grain and related products.

                              ORGANIZATION

    GIPSA supervises 14 State and 43 designated private agencies for 
grain inspection and weighing services at domestic locations; provides 
supervision and other services from 20 field offices; and handles 
appeals of grain inspection services in Kansas City, Missouri. GIPSA 
also maintains 3 Packers and Stockyards Programs regional offices that 
specialize in poultry, hogs, and cattle/sheep.
    For fiscal year 2004, the budget proposes a program level for 
salaries and expenses of about $42 million. Of this amount, $18 million 
is devoted to grain inspection activities for standardization, 
compliance, and methods development, and $24 million is for Packers and 
Stockyards Programs.
    The 2004 budget includes two program increases. I will mention 
these now, but expand on these increases when I discuss the budget in 
more detail.
    About $1 million of the increase is to implement a new pilot 
program to audit the steer and heifer meatpackers. The Packers and 
Stockyards Programs have never audited a large packer. We anticipate 
that an audit of large meatpackers will result in substantially better 
protection to the regulated industries. $0.5 million of the increase is 
to conduct a comprehensive, industry-wide review of the Packers and 
Stockyards Act and regulations. Given dramatic structural changes in 
the industries covered under the P&S Act, the Packers and Stockyards 
Programs are preparing to undertake a complete review of the Packers 
and Stockyards Act and its regulations, something that has not been 
done to date.
    In addition to these increases, the Administration proposes an 
increase in the budget of the Office of the Secretary to support 
crosscutting trade and biotechnology activities of the Department, 
including regulatory, market access and trade barrier removal 
activities. Increased GIPSA efforts related to biotechnology may be 
funded from the proposed Office of the Secretary funds.
    The Administration also proposes that GIPSA implement two new user 
fee proposals. New user fees would be charged to recover the costs of 
developing, reviewing, and maintaining official U.S. grain standards 
used the by the grain industry. Those who receive, ship, store, or 
process grain would be charged fees estimated to total about $5 million 
to cover these costs. Also, the Administration proposes that the 
Packers and Stockyards Programs be funded by new license fees of about 
$24 million that would be required of packers, live poultry dealers, 
poultry processors, stockyard owners, market agencies, and dealers, as 
defined under the Packers and Stockyards Act.
    I would like to discuss the activities of the Packers and 
Stockyards Programs and Federal Grain Inspection Service relative to 
the fiscal year 2004 budget.

                    PACKERS AND STOCKYARDS PROGRAMS

    GIPSA's Packers and Stockyards Programs (P&SP) administers the 
Packers and Stockyards Act (P&S Act) to promote fair and open 
competition, fair trade practices, and financial protection in the 
livestock, meat packing, meat marketing, and poultry industries. The 
objective of the P&S Act is to protect producers, growers, market 
competitors, and consumers against unfair, unjustly discriminatory, or 
deceptive practices that might be carried out by those subject to the 
P&S Act. To meet this objective, GIPSA seeks to deter individuals and 
firms subject to the P&S Act from engaging in anti-competitive 
behavior, engaging in unfair, deceptive, or unjustly discriminatory 
trade practices, and failing to pay livestock producers and poultry 
growers. GIPSA initiates appropriate corrective action when there is 
evidence that firms or individuals have engaged in anti-competitive, 
trade, payment or financial practices that violate the P&S Act.
    The livestock, meatpacking, and poultry industries are important to 
American agriculture and the Nation's economy. With only 169 employees, 
GIPSA regulates these industries, estimated by the Department of 
Commerce in fiscal year 2002 to have an annual wholesale value of $118 
billion. At the close of fiscal year 2002, 6,024 market agencies and 
dealers, and 2,064 packer buyers were registered with GIPSA. In 
addition, there were 1,510 facilities that provided stockyard services, 
with an estimated 6,000 slaughtering and processing packers, meat 
distributors, brokers and dealers, and 205 poultry firms operating 
subject to the P&S Act.
    Our regulatory responsibilities are the heart of our mission to 
administer the P&S Act. To this end, GIPSA closely monitors practices 
that may violate the P&S Act. Our top priority continues to be 
investigating complaints alleging anti-competitive, unjustly 
discriminatory, or unfair practices in the livestock, meat, and poultry 
industries. Last year, GIPSA conducted over 1,400 investigations. As a 
result of these investigations, the Packers and Stockyards Programs 
helped restore over $37 million to the livestock, meatpacking, and 
poultry industries. This is the largest amount GIPSA has ever reported 
to Congress and constitutes more than double the amount that P&SP 
received in appropriated funding.
    GIPSA divides its regulatory responsibilities into three areas: 
financial protection, trade practices, and competition. In the area of 
financial protection, GIPSA continued to provide payment protection to 
livestock producers and poultry growers in a year where the livestock, 
meatpacking, and poultry industries faced tremendous financial 
pressures. Financial investigations last year resulted in $4.3 million 
being restored to custodial accounts that are established and 
maintained for the benefit of livestock sellers. Livestock sellers 
recovered over $3.2 million under the P&S Act's packer trust 
provisions. During fiscal year 2002, 81 insolvent dealers, market 
agencies and packers corrected or reduced their insolvencies by $26.6 
million. In addition, GIPSA's financial investigator's analyzed eight 
complex packer trusts and one poultry trust in which filed claims 
exceeded $15 million; GIPSA also analyzed more than 800 bond claims 
exceeding $30 million. I would note that GIPSA provides its analysis as 
a courtesy to the industry; it has no statutory authority to compel 
payment by the trustee or bond surety.
    In its Trade Practices Programs, GIPSA continued to promote fair 
trading between industry participants and, in fiscal year 2002, 
targeted its resources at working with industry members to secure 
appropriate bonding levels. While the overall numbers of individuals 
required to be bonded under the P&S Act dropped, the total value of 
bonds available to unpaid sellers increased by $13 million. Much of 
GIPSA's work in the Trade Practices Program focuses on insuring 
accurate weights and prices. GIPSA continued to work with local States 
weights and measures programs to provide scale training and to secure 
State assistance in testing every scale used to weight livestock or 
live poultry twice a year. In addition, GIPSA initiated or completed 63 
investigations of weight and price manipulation of livestock. Some of 
these investigations are on-going. GIPSA also investigated the 
operations of 53 live poultry dealers; most of these investigations 
examined whether live poultry dealers were in compliance with contracts 
entered into with poultry growers. We are continuing to work with 
members of the regulated industries to develop industry standards on 
new technologies that are entering the marketplace to evaluate and 
price livestock purchased on a carcass merit basis.
    GIPSA continues to develop its Competition Program, and GIPSA's 
Competition Program is starting to yield results. Last year, GIPSA 
hired a new Competition Branch Chief who works very closely with the 
Deputy Administrator, the Office of the General Counsel, and the 
competition units in the field office to fully implement the 
recommendations contained in the September 2000 General Accounting 
Office report. During fiscal year 2002, the Competition Branch 
evaluated complaints regarding attempted restriction of competition, 
failure to compete, buyers acting in concert to purchase livestock, 
apportionment of territory, unlawful price discrimination, and 
predatory pricing. Of these complaints, two resulted in a letter of 
notice that brought the firm into compliance with the P&S Act; the 
remaining complaints were not supported by evidence. In addition to 
these investigations, the Competition Program, with the Commodities 
Futures Trading Commission (CFTC), investigated the sharp decline of 
livestock prices that followed the events of September 11, 2001 to 
determine if packers were taking advantage of the situation in 
violation of the P&S Act. GIPSA and the CFTC also conducted a joint 
review of the cash and futures markets based on rumors of foot and 
mouth disease in Kansas. GIPSA continues to work closely with the CFTC, 
attending CFTC Commissioner briefings on the cattle, hog, and meat 
markets.
    Competition investigations are complex, and the results are not 
immediately visible. P&SP often attempts to resolve competitive issues 
informally, rather than go through the litigation process because of 
the resources, cost, and time involved. For example, the USDA's 
Judicial Officer just issued a decision in which he found that a major 
packer violated the P&S Act as we alleged in a complaint filed in 1999. 
While this may seem like a long time to resolve a complaint, it is 
comparable to private litigation. The competition program currently has 
several major investigations on-going. In addition to these 
investigations, the Competition Program is working more closely with 
the regulated industries, especially packers, to address the 
competitive implications of new practices prior to their 
implementation.
    GIPSA's Rapid Response Teams remain a powerful tool to address 
urgent industry issues that place the industries in imminent financial 
harm. For example, after one of the major meatpackers declared 
bankruptcy on a Friday afternoon, we had rapid response teams in place 
at each of its plants and in its corporate offices on Monday morning to 
ascertain the financial condition of its slaughter operations. Last 
year, GIPSA rapid response teams investigated 40 situations across the 
Nation. During fiscal year 2002, these rapid response investigations 
contributed to returning $4.2 million to livestock producers and 
poultry growers.
    GIPSA continues to work with violating firms to achieve voluntary 
compliance, and GIPSA continues to initiate appropriate corrective 
action when we discover evidence that the P&S Act has been willfully 
violated. During fiscal year 2002, GIPSA, with assistance from the 
Office of the General Counsel, filed 23 administrative or justice 
complaints alleging violations of the P&S Act. This represents more 
than a 50 percent increase over the number of complaints filed in 
fiscal year 2001.
    GIPSA also has cooperative agreements with qualified researchers 
and research institutions that contribute valuable information to 
GIPSA's economic understanding of the livestock, meatpacking, and 
poultry industries. Two reports were completed in fiscal year 2002. 
Four cooperative agreements remain on-going.
    GIPSA completed three additional reports that were submitted to 
Congress: ``Assessment Report of the Cattle and Hog Industries, 
Calendar Year 2001,'' ``Captive Supply of Cattle and GIPSA's Reporting 
of Captive Supply,'' and ``Packers and Stockyards Programs Statistical 
Report 2000.'' Each of these reports is available on the GIPSA website.
    To ensure that producers and growers are aware of the protections 
the P&S Act provides, the Agency provides a hotline (1-800-998-3447) by 
which stakeholders and others may anonymously voice their concerns. 
Last year GIPSA responded to and investigated issues raised by 118 
callers. These calls were in addition to calls received in our regional 
offices. GIPSA also increased its outreach activities. GIPSA conducted 
32 orientation sessions for new auction market owners and managers and 
12 feed mill orientations to educate them about their fiduciary and 
other responsibilities under the P&S Act. GIPSA's Deputy Administrator 
met with top officials from the largest six steer and heifer packers to 
discuss issues of concern to the Agency and to the packers. These 
visits protect livestock producers and poultry growers who rely on P&SP 
to promote a fair, competitive, and financially sound marketplace. 
GIPSA personnel regularly participate in meetings with industry 
associations at the local, State, and national levels. During these 
meetings, GIPSA officials share our concerns, and listen to the 
concerns expressed by industry participants to ensure that we continue 
to remain abreast of problems and concerns in the livestock, meat, and 
poultry industries, and to better understand the marketing options and 
constraints these industries face. On the front lines, GIPSA's resident 
agents, situated at 28 locations across the Nation, maintain open 
communications with State officials to discuss areas of overlapping 
jurisdiction.
    GIPSA is now in the process of updating memoranda of understanding 
with all 50 States to ensure that we maintain solid working 
relationships with our State partners. GIPSA recognizes that it is 
essential to stay in touch with growers, producers, and Federal and 
State representatives to understand, stay abreast of, and anticipate 
issues confronting the industries it regulates. To this end, GIPSA 
officials participated in several committees, including a commission 
established by the Governor of Missouri to address marketing issues on 
livestock and a task force established by the National Pork Producers 
Council to address hog marketing issues. GIPSA's outreach efforts have 
fostered a broader base of understanding with those we regulate and 
those intended to benefit from the protections of the P&S Act. We will 
continue and expand this effort.

                    FEDERAL GRAIN INSPECTION SERVICE

    The Federal Grain Inspection Service (FGIS), provides the U.S. 
grain market with Federal quality standards and a uniform system for 
applying these standards. FGIS has both service and regulatory roles, 
and was founded to provide impartial, accurate quality and quantity 
measurements to create an environment that promotes fairness and 
efficiency. GIPSA administers uniform, national grain inspection and 
weighing programs established by the U.S. Grain Standards Act, as 
amended.
    Under provisions of the Grain Standards Act, most grain exported 
from the United States must be officially weighed. A similar 
requirement exists for inspection, except for grain which is not sold 
or described by grade. Inter-company barge grain received at export 
port locations also must be officially weighed. And, the Act requires 
that all corn exported from the United States be tested for aflatoxin 
prior to shipment, unless the contract stipulates that testing is not 
required.
    Mandatory inspection and weighing services are provided by GIPSA on 
a fee basis at 38 export elevators, including 5 floating elevators. 
Under a cooperative agreement with GIPSA, the Canadian Grain Commission 
provides official services, with GIPSA oversight, at seven locations in 
Canada exporting U.S. grain. Eight delegated States provide official 
services at an additional 19 export elevators under GIPSA oversight.
    Grain exporters shipping less than 15,000 metric tons of grain 
abroad annually are exempt from mandatory official inspection and 
weighing requirements. Grain exported by train or truck to Canada or 
Mexico also is exempt from official inspection and weighing 
requirements.
    Official inspection and weighing of U.S. grain in domestic commerce 
are performed upon request and require payment of a fee by the 
applicant for services. Domestic inspection and weighing services are 
provided by 58 designated agencies that employ personnel licensed by 
GIPSA to provide such services in accordance with regulations and 
instructions.
    Under the Agricultural Marketing Act of 1946, GIPSA administers and 
enforces certain inspection and standardization activities related to 
rice, pulses, lentils, and processed grain products such as flour and 
corn meal, as well as other agricultural commodities. Services under 
the Agricultural Marketing Act are performed upon request on a fee 
basis for both domestic and export shipments by either GIPSA employees 
or individual contractors, or through cooperative agreements with 
States.
    GIPSA knows that customers also want more information about the 
products they are purchasing and consuming. Some of the attributes that 
they want are impossible, impractical, or expensive to be determined by 
traditional testing. That is why GIPSA is developing a process 
verification program that should help us mirror some of the identity 
preservation and marketing systems currently used in the private 
sector.
    Field dried corn would be one example of a quality attribute that 
can't be determined by testing. Process verification is one way that 
GIPSA could meet the demand for this kind of information. That does not 
eliminate the need for our traditional testing, but adds important 
information to the marketing of the product.
    In a recent customer survey, 20 percent of industry folks consider 
the need to handle identity preserved grain important today. But more 
than two-thirds of the same folks think this will be important in five 
years. The message here is clear. The changing market demands a way to 
document and validate product differentiation in the very near future.
    We have received inquiries from a wide range of agri-businesses. We 
have been contacted by individual producers, national and State 
producer associations, feed manufacturers, coop and multi-national 
grain companies and others. The underlying theme is that they're 
seeking to preserve their differences in the marketplace by getting 
third-party verification of their quality management systems.
    Today, protecting the identity of a specialty corn or other process 
has some value. In the future, this ability will be very important to a 
growing part of the marketplace.
    The change in customer wants and needs leads us to continually 
examine how we support and facilitate the grain markets. As the grain 
markets evolve in response global trade, increased consumer demands, 
and technological advances, GIPSA is working with market participants 
to ensure that the inspection system and grain standards best reflect 
the overall market needs.
    To achieve this, we will introduce new internet-based services to 
improve the internal efficiencies of our operations and to deliver our 
customers with high speed, quality grain inspection results. At the 
touch of a button, buyer and seller will have the necessary quality 
information to process sales transactions effectively and efficiently. 
Our aim is to be able to provide internet-based service that connects 
us, the official system, and our customers in an electronic business 
environment where we can interact with greater speed and efficiency.
    We are also working with market participants to determine how best 
the grain standards can reflect the market value of future products. 
Breeders are working with end users to tailor corn for specific end 
uses. These advances have already created value-added markets, such as 
nutritionally dense corn and high extractable starch corn. Further 
developments could lead to the subdivision of traditional commodity 
corn into multiple end-use types, such as poultry, swine or cattle feed 
corn. The standards will help the market assess the value of the 
commodity in light of specific end uses.
    And most of all, our aim is to be flexible, so that we can serve a 
larger portion of the grain markets. Reacting to market conditions that 
we face today is insufficient. Anticipating what the market will need 
tomorrow is necessary. Our efforts are focused on the future as we work 
to anticipate marketing needs in a rapidly changing environment.
    Further, from the almost 3,000 comments received on our advance 
notice of proposed rulemaking that sought public comment on how USDA 
can best facilitate the marketing of grains, oilseeds, fruits, 
vegetables, and nuts in today's evolving marketplace, GIPSA is 
considering proposing a Process Verification Program to apply 
internationally-recognized quality management standards to verify the 
quality process, whether related to biotechnology or not, used to 
supply a product rather than testing the actual grain itself (e.g., 
non-genetically-modified corn). This would allow producers, marketers, 
suppliers, and processors to assure customers of their processes to 
provide consistent quality products.

                          2004 BUDGET REQUEST

    To fund these initiatives, GIPSA's budget request for fiscal year 
2004 is $41.7 million under current law for salaries and expenses and 
$42.5 million for our Inspection and Weighing Services. There is an 
increase of $612,000 for pay costs contained in the budget. GIPSA will 
also be submitting legislation to collect $28.8 million in new user 
fees in fiscal year 2004, $5.2 million for the grain standardization 
activities and $23.5 million for the Packers and Stockyards Programs.
    The President's fiscal year 2004 budget proposes a current law 
request for grain inspection of $18.1 million. The only changes from 
fiscal year 2003 budget levels are an increase of $282,000 for pay 
costs and a decrease of $56,000 for Information Technology savings.
    The President's fiscal year 2004 budget proposes a current law 
request for Packers and Stockyards Programs of $23.5 million. As I 
mentioned before, there are proposed increases of $994,000 to implement 
a pilot program to audit the steer and heifer meatpackers to be offset 
by proposed user fees, and $500,000 to enhance compliance and review 
the Packers and Stockyards Act. Additional changes from fiscal year 
2003 budget levels are an increase of $330,000 for pay costs and a 
decrease of $67,000 for Information Technology savings.
    A credible auditing program is an essential and cost-effective tool 
that P&SP needs to successfully administer the Packers and Stockyards 
Act. A credible auditing program is one that audits submitted financial 
information to determine whether: (1) the information is supported by 
the firm's records, (2) the firm is in compliance with the P&S Act's 
reporting and financial requirements, and (3) the financial information 
raises any concerns under the P&S Act's competition provisions. This is 
why P&SP proposes to do this by establishing a more formal ``Task Force 
to Audit the Annual Reports of the Steer and Heifer Meatpackers,'' as a 
pilot program.
    Although P&SP's monitoring program results in correcting many 
bonding and solvency problems, it is critically important to note that 
P&SP has never audited a large packer. Since the four largest packers 
account for more than 80 percent of the steers and heifers purchased 
for slaughter annually, this represents a significant vulnerability in 
the program's resident expertise. As a result of this, the industry is 
vulnerable to repercussions that can follow from any incorrect 
reporting submitted by a large packer, whether or not intentional, that 
P&SP does not have the ability to address.
    To fill this void, P&SP proposes to hire a specialized group of 
eight staff, consisting of seven accountants and one economist, which 
will develop a program to conduct these audits within two fiscal years. 
During the first fiscal year, P&SP will focus on identifying, hiring, 
and training individuals with the necessary expertise. The training 
will be obtained from a credible accounting firm with expertise in the 
meatpacking industry.
    Through our increasingly frequent and substantive conversations 
with industry, we have been able to build relationships that allow us 
the opportunity to help firms steer clear of difficulties they may 
encounter with the P&S Act. Too often, our intervention in a firm's 
financial difficulties comes at a stage too late for us to protect the 
interests of the producers. Through a credible audit program, GIPSA can 
help industry avoid larger problems later on, as well as better protect 
producers.
    P&SP does anticipate that this pilot program will result in a small 
increase in the number of investigations and an increase in the monies 
recovered or returned to the regulated industries. But that is not the 
goal of this proposal. It is not our intent to engage in these audits 
just to see what we can find. Even if P&SP is unable to show actual 
monies returned to the industry, the audits are anticipated to result 
in substantially better financial protection to the regulated 
industries through heightened scrutiny of the financial instruments 
that these meatpackers have in place to protect producers in the event 
of financial failures.
    The second increase is for $500,000 to allow GIPSA to engage in a 
comprehensive internal and external review of the Packers and 
Stockyards Act and regulations.
    The Packers and Stockyards Act of 1921 has not undergone any 
significant reviews since its enactment, despite substantial and 
controversial structural changes experienced by the regulated 
industries during the same time period. To conduct a comprehensive 
review of the P&S Act, P&SP must incorporate individual industry 
members and industry groups in the process. P&SP will sponsor industry-
wide meetings to hear more about the challenges, concerns, and problems 
facing those directly involved in the livestock, meat, and poultry 
industries within the context of the Packers and Stockyards Act.
    Packers and Stockyards Programs anticipates that building bridges 
and reviewing the Packers and Stockyards Act with market participants 
will result in a better understanding of the P&S Act and regulations by 
industry, as well as offer the Agency a better understanding of the 
industry's needs in the changing marketplace. By working with all 
segments of the regulated industry, P&SP feels it can be better 
positioned to meet the current and future needs of market participants, 
and help the Agency become more relevant to current and future industry 
operations.
    In a September 2000 report to Congress by the General Accounting 
Office titled ``Actions Needed to Improve Investigation of Competitive 
Practices'' (GAO/RCED-00-242), a recommendation was included that GIPSA 
provide industry participants with clarification and views on 
competitive activities. P&SP responded rapidly to that recommendation, 
dramatically increasing its presence and participation at industry 
events and meetings. The requested funds will further allow P&SP to 
meet this demand for clear, concise information that can be shared with 
industry stakeholders.

                               CONCLUSION

    Mr. Chairman, Members of the Committee, I would like to conclude my 
testimony on the fiscal year 2004 budget proposal for the Grain 
Inspection, Packers and Stockyards Administration with an observation.
    Technological advances in new products and in business practices 
create remarkable opportunities and challenges for producers, 
marketers, and consumers. GIPSA is uniquely situated to facilitate the 
marketing of products at a time when assurances of product content or 
production processes are in demand. Further, GIPSA helps ensure that 
market power by some is not abused. Responding effectively to the needs 
of our stakeholders requires dynamic activity.
    We continue to adapt our efforts, look toward our capabilities, 
work to understand and accommodate the changes, and serve American 
agriculture through our efforts to ensure a productive and competitive 
global marketplace for U.S. agricultural products.
    I would be pleased to address any issues or answer any questions 
that you may have at this time.
    Thank you.

    Senator Bennett. Senator Cochran
    Senator Cochran. Mr. Chairman, I simply wanted to join you 
in welcoming this panel of witnesses and congratulating them 
for the fine work they are doing to help assure that we do 
maintain the safest food supply in the world. I am convinced 
they are doing a good job and I am here to find out if the 
budget request is adequate to enable them to continue their 
fine work. Thank you.
    Senator Bennett. Thank you very much.

                           OBESITY IN AMERICA

    Mr. Bost, you told us that combatting obesity was one of 
the three main issues you were addressing and gave a statistic 
that I had not heard before, that 62 percent of Americans are 
obese. Now, I hesitate to do this, but I am going to do it 
anyway because I think there is a great deal of confusion, and 
frankly, it includes some members of this subcommittee. I have 
mentioned that I am going to do this to some members of the 
subcommittee and they said, good.
    The pyramid that you and--I say ``you,'' I mean the USDA--
has been pushing among school children, it is on display 
everywhere. It is on just about every cereal box that gets 
sold. It is, if I can mix metaphors a little, the Good 
Housekeeping Seal of Approval for the way to eat, and it calls 
for a substantial consumption of carbohydrates.
    We have got the Atkins diet that has millions of people 
believing that carbohydrates make you fat. Recently, the Zone 
came out. That got introduced in my family and there are 
members of my family who follow the Zone and have lost 
substantial amounts of weight as they have cut down on their 
consumption of carbohydrates.
    I have brought along, perhaps as the most provocative one, 
a recent one that has come to my attention called the 
Schwartzbein Principle. Not to tout this particular one, but to 
outline the claims that are being made, lose body fat and 
transform body composition. Improve metabolism. Prevent and 
correct chronic conditions and diseases. Reverse accelerated 
metabolic aging. Quit addictions and food cravings and cure 
depression and mood swings.
    The doctor who started out, as she says in her opening 
chapters, urging people to follow the food pyramid and 
discovered that her patients were getting sicker, and then went 
in a different direction and now attacks the food pyramid as 
the problem, gives case studies here, admittedly anecdotal, of 
how cutting back on carbohydrates and increasing consumption of 
the right kinds of fat and protein did, indeed, all of the 
things that are listed on the front of this book.
    Now, I am not going to in any sense suggest that this is, 
indeed, the patent medicine to solve all those problems. But 
coming again and again from a wide variety of folks who look at 
our eating habits, the assertion that Americans consume too 
many carbohydrates and that too many carbohydrates are, in 
fact, responsible for Americans' obesity is something that I 
think needs to be examined.
    Now, you are talking about sending out the pyramid for 
comment, and I think that is a salutary thing because it 
implies that you are open-minded about the pyramid and open to 
further evidence with respect to it. Dr. Murano, you talked 
about getting the best science possible to deal with food 
safety, and what I am raising with you here this morning is can 
we get the best science to deal with this issue of how we eat.
    If, in fact, we as Americans have been moving in the 
direction of the food pyramid starting in the very early years 
of grade school, and it is included in all of the literature 
around and Americans do, indeed, go in this direction, and if, 
in fact, 62 percent of us are obese, I think there is at least 
an indication that we ought to look for the possibility of a 
cause-and-effect relationship here.
    As I say, there is a member of this subcommittee, and I 
will let him speak for himself when he returns if he decides to 
get into this, who has accepted the notion that carbohydrates 
make you fat and has himself lost 20 to 30 pounds as he has 
gone in that direction and says he feels better than he has 
felt for a long time.
    I don't think this is a trivial issue and I don't think it 
is an issue of fad diets, because there is empirical evidence 
in the millions of people who have abandoned a high-
carbohydrate diet in favor of more protein and more fat in 
their diet who have, in fact, conquered the obesity situation. 
Are they endangering their lives? I know there are some 
physicians who say they are by moving in this other direction.
    This is the bottom line of what I am saying. The place 
where I would like to be able to go to get a definitive answer 
to this question based on the soundest science, the most 
comprehensive tests over the widest range of people, so that it 
is not anecdotal, it is not a doctor saying, ``I treated 12 
people and produced this kind of result,'' but a test that 
stands or passes the challenge of being scientifically sound 
says, this is the way to eat in order to avoid obesity.
    Now, do you have enough budget flexibility to address this 
kind of challenge and do you have access to the kinds of 
scientists who would do these sorts of tests, or are these 
sorts of tests out there so that we can, in fact, turn to USDA 
and say, you are the final word and if you eat the way USDA 
says to eat, you won't get fat and you won't get sick. You will 
improve your metabolism. You will quit addictions and food 
cravings and whatever and you don't need to buy a fad diet 
book.
    Mr. Bost. Mr. Chairman, this is a highly complex and a 
significantly difficult issue, but let me respond to some of 
the things that you talked about. First and foremost, the 
statistics would indicate that 62 percent of all Americans are 
overweight. That means over their ideal body weight. Thirty 
percent are obese. The troubling thing about the 30 percent 
figure is that it took us almost 15 years to go from 20 to 30 
percent. We are anticipating that it is only going to take us 
about 5 or 6 years to go from 30 to 40 percent which is 
essentially 30 pounds over our ideal body weight.
    Senator Bennett. Thank you for correcting me on that. I got 
the wrong statistic.

               FOOD GUIDE PYRAMID AND DIETARY GUIDELINES

    Mr. Bost. Right. In terms of the Food Guide Pyramid itself, 
it is a guide along with the Dietary Guidelines--they go hand-
in-hand. The Dietary Guidelines are summarized in a book, that 
has as many as 20 or 30 pages and is currently in the review 
process. The request to nominations to the Review Board just 
went to the Federal Register. The Secretary of Health and Human 
Services and Secretary Veneman will essentially appoint 
scientists, the leading experts in the field, to start the 
process now of reviewing the Dietary Guidelines. That process 
will flow into a review of the Food Guide Pyramid itself, which 
essentially will come under review the latter part of 2004 and 
2005.
    With that said, I think it is really important to note that 
you made reference to three or four different diets. If we go 
into a bookstore today, you will see hundreds of books in terms 
of diets, and the thing that it says to me is the fact that one 
specific diet does not work for everyone. There are some people 
that talk about the Atkins diet, and that works for some 
people. That diet doesn't work for everyone.
    If you decrease what you eat, increase your level of 
physical activity, increase your consumption of fresh fruits 
and vegetables, you will lose weight and you will move toward a 
healthy lifestyle.
    The problem with us as Americans is this. We love to eat. 
We love a good deal--super-size it. We don't like for people to 
tell us what to do, and we don't exercise enough. Instead of 
walking up one flight of stairs, we will catch the elevator. 
Instead of parking at the farthest parking lot when we go to 
the mall, we will drive around for 30 minutes to try to get the 
closest one.
    All of those things contribute to the types of health 
problems that we are experiencing. Last year alone, we spent 
$117 billion in terms of obesity-related health problems 
because we are overweight in this country.
    There are some steps that we are taking, but it comes down 
to essentially this. We need to look at doing some things that 
will result in a behavioral change among all of us, especially 
among adults who essentially make purchases for our children, 
so they can provide healthier alternatives in the National 
School Lunch Program.
    In terms of the Dietary Guidelines, they are currently 
under review. We will bring the best scientists the world has 
to offer to come to the table to have this discussion and to 
provide us with recommendations.
    But the problem is this, and I use this example all the 
time when I go around the country and talk about it. We could 
do a survey this morning in this room and I would guarantee you 
that at least 95 percent of all the people in this room could 
answer this question. What has more calories and fat, a 
doughnut or an apple? But, what are you going to eat?
    The issue is us making informed decisions, striking that 
balance in terms of what we can do to start this issue. It has 
to be a behavior change. All of the diets that you have, all of 
the guidebooks, all of the information that USDA provides, all 
of the information experts provide, is not going to do any good 
unless we follow it, and that is what it comes down to.

                          OVERWEIGHT CHILDREN

    One final point, and specifically regarding our children. 
When we look at the statistics in terms of what has 
significantly contributed to the issues of our children being 
overweight, it comes down to a couple of things, increased TV 
watching and increased computer use. There is only one State in 
the country right now that has mandated physical education in 
schools K through 12, Illinois. Our kids don't go outside and 
play and there is a limited level of physical activity among 
them. They don't walk to school anymore and they eat all the 
wrong things. As parents, we have to take some responsibility 
for that because we buy the food that our children eat at home. 
All of those factors contribute to the types of health problems 
that we are experiencing.
    I don't want to paint the picture that we are not doing 
some things and that we are not taking some steps to address 
this issue because in the National School Lunch Program and the 
reauthorization of the Child Nutrition Programs, we put some 
recommendations forward to Chairman Cochran's committee that I 
know they are considering. But it starts with adults taking 
some personal responsibility for addressing this issue, and 
that is what we are trying to achieve in terms of having that 
behavioral change.
    A personal example, 3 years ago, I lost 70 pounds. I could 
not do the Atkins diet. It did not work for me. I went to a 
low-calorie diet where I decreased the amount of calories that 
I took, and increased my physical activity. Not everything 
works for everyone, and that is why it is called Dietary 
Guidelines.
    In the Food Guide Pyramid itself, it says serving size. 
There was an article just this week alone talking about the 
average serving size for some things is less than 2 or 3 
ounces, but as an American--the perfect example, and I promise 
I will be quiet on this, is people say, well, I have stopped 
eating that doughnut for breakfast. I eat a bagel now. Have you 
seen the size of bagels in this country?
    Five hundred, 600 calories. You are not going to lose any 
weight by eating a 700-calorie bagel in the morning as opposed 
to a doughnut. In some instances, it would be better for you to 
eat the one doughnut.
    Senator Bennett. I can see that----
    Mr. Bost. I know more about this subject than I want to 
know.
    Senator Bennett. I can see that I touched a hot button.
    I want to observe the time limit more strictly than I did 
in my previous hearing, so I will wait for a later chance to 
follow up, but thank you for your attention to this issue and 
for your personal passion to see to it that we address it. 
Again, my only closing comment is I want to be able to look to 
USDA as the real expert rather than the bookshelf, where there 
are dozens of experts shouting for my attention. I would hope 
that the pyramid and the guidelines would be based on the very 
best information and that people would be open-minded to some 
of the suggestions that we take a look at how many 
carbohydrates we do have recommended.
    Senator Kohl.

                        CHRONIC WASTING DISEASE

    Senator Kohl. Thank you very much, Senator Bennett.
    Mr. Hawks, in February of 2002, chronic wasting disease was 
discovered, as you know, in Wisconsin deer, and today, we have 
more than 200 positive cases identified. Last year, this 
subcommittee provided nearly $15 million in APHIS funding to 
respond to this disease all across the country, and Wisconsin's 
share of it was a little bit more than $800,000 out of the $15 
million.
    Wisconsin officials are in constant contact with us here 
and they have informed us that they need over $5 million in 
fiscal year 2004 for continued chronic wasting disease testing 
and monitoring. Do you intend to respond to their needs? 
Particularly now with the outbreak of something like mad cow, 
we understand how important it is to ensure the safety of our 
animals in this country, and testing, diagnosis, and research, 
as you know, are the most critical factors here. Money is what 
it takes to get that done. How do you respond?
    Mr. Hawks. Senator Kohl, I certainly enjoyed being in 
Wisconsin with you last year and doing a press conference with 
you there in Madison as this became high on all of our radar 
screens. As you are aware, we worked with you and other members 
of the delegation from Wisconsin, with Wisconsin being a high 
prevalent State, a State that causes great concern to all of 
us.
    We will take the appropriate action, but the amount of 
funds that we have, the resources, Wisconsin will certainly--we 
will respond to your needs.
    Senator Kohl. I know it is hard for you to be specific and 
I know how tight money is, but you can expect, and I am sure 
you can appreciate, how I will be on you and at you with a 
sense of urgency to try and find some way to increase the 
amount of funding that we can get in Wisconsin.
    Mr. Hawks. I certainly understand and certainly appreciate 
that, Senator, and I look forward to working with you. As this 
Committee goes through the appropriation process, we will make 
sure that it is appropriately addressed.
    Senator Kohl. Thank you, Mr. Hawks.

                                  BSE

    Mr. Hawks. Thank you.
    Senator Kohl. To get back to BSE, exporting beef from 
Canada into the United States is a huge industry up there. In 
fact, almost 80 percent of the beef that they raise winds up 
getting exported to the United States for our consumption. So 
their testing procedures, of course, are critical, and now we 
have found out that a test that was administered in January 
finally evidenced a result in May, that there is at least one 
case up there of mad cow disease. But how they test and how 
frequently they test, how accurately they test is of enormous 
importance to us. It is at the same level of importance to us 
as how we test here in the United States.
    So Mr. Hawks, you must have some great concerns about that, 
and perhaps you do also, Dr. Murano, and I think we would like 
to hear about your thoughts and what your intentions are with 
respect to ensuring the American eating public that the beef 
that is imported here from Canada, which is, as I said, an 
enormous quantity, is safe. Mr. Hawks?
    Mr. Hawks. Yes, sure, Senator Kohl. We do have concerns 
which obviously show in the actions that we took just the day 
before yesterday. From USDA, we have five veterinarians that 
are in Canada or that will be there today. Four of them is from 
APHIS. One of them is from FSIS to try to work with our 
counterparts in Canada to look at their testing protocols and 
to make sure that we are doing everything we can to assist in 
this situation.
    So we do have those concerns, but the fact of the matter 
is, here in this country, we feel extremely confident of our 
testing regimens, our protocols that we have in place. As I 
stated in my opening comments, last year, we did a little over 
20,000 tests on the most likely candidates for BSE, and they 
were all negative. We are on track to do a few more tests than 
that this year. Compared to standards recognized by the Office 
of International Epizootics, we are testing four times the 
amount.
    So we feel real confident, but also recognize that we must 
work with our Canadian counterparts to make sure that their 
testing is appropriate, as well. I will ask Dr. Murano to 
address the food safety issue because I deal with the animal 
disease component, so I will get Dr. Murano to answer that.
    Senator Kohl. Dr. Murano.

                          IMPORT REINSPECTION

    Dr. Murano. Senator Kohl, certainly, you know that import 
inspection, or reinspection, as we call it, of meat and poultry 
that is imported into the United States is an extremely high 
priority with us at FSIS.
    When this incident happened this week, I will tell you that 
I was on the phone with our counterparts in the Canadian Food 
Inspection Agency telling them, first of all, to explain to us 
what took so long to get that test result, and the basic answer 
for them is that it was in the pipeline for them to get the 
sample analyzed. So it wasn't that they held onto it or 
anything to that effect, but that is not good enough. If they 
have a backlog with their testing, they have got to do 
something about it, and if we need to help them, then that is 
what we need to do. That is on the animal testing.
    On testing that we do to ensure that there is no central 
nervous system tissue in products, they are also responsible 
for doing that and this is something that I have personally 
spoken to them about to say, this is something you must do. You 
must be on top of it. We will lend you all the assistance that 
we can. If you need us to help you with the training of your 
laboratory people so that you have more people to do this, 
whatever it takes is what we will do.
    Senator Kohl, in our budget request, for example, for this 
year, we have requested $1.8 million to increase the number of 
foreign program auditors from FSIS. It is because of that 
commitment that we have to ensure that it shouldn't matter 
where your food came from that is at your table at dinnertime. 
It is the USDA's responsibility to make sure that the food 
supply is as safe as possible, and that includes, obviously, 
making sure that what is imported undergoes the same rigorous 
oversight and scrutiny as the food that we make for ourselves 
right here in the United States.

                      FOREIGN FOOD SAFETY SYSTEMS

    Senator Kohl. I would agree, no question as a matter of 
principle. Would you say, based on all the information you 
have, that the beef that is imported from Canada undergoes the 
same safety inspection as the beef that we raise here?
    Dr. Murano. It does, and I can tell you that because we 
audit their program on at least annual basis, not only in 
Canada but other countries. We are in Mexico this week, for 
example, as part of our regular auditing function.
    So that is our responsibility, to make sure that these 
countries that export meat and poultry to the United States 
have equivalent systems. That means they have to have an 
inspector in every plant, every day. They have to have a HACCP-
based system, which is a preventative system that our meat and 
poultry plants here in the United States have to have, with our 
verification being conducted through microbiological testing 
and so forth. They have to have all of that the same as we have 
here in the United States, and they do in Canada.
    Senator Kohl. Well, not to pursue it unduly, but we have a 
testing system that gives us a result in how many days? Mr. 
Hawks.
    Mr. Hawks. Yes, sir, Senator Kohl. I probably should have 
responded to that one. Eight days, and we have no backlog, so 
when----
    Senator Kohl. That is great.
    Mr. Hawks [continuing]. We take a sample here, we get the 
result within 8 days.

                              BSE TESTING

    Senator Kohl. But they apparently have a testing procedure 
that yields a result in several months? Or is there something 
here that we are not tracking?
    Dr. Murano. No, as I was explaining, and Mr. Hawks can tell 
you more, the test that you are referring to is on the animal. 
It is not something we do at FSIS. It is akin to the APHIS 
surveillance that they do on animals.
    So my understanding from the Canadians is that they had a 
backlog of samples to analyze. It is not that their test is any 
different than ours. It is the same test. But their backlog 
caused their delay in having that sample collected in January, 
not analyzed until now.
    Senator Kohl. But that kind of a backlog would not be 
tolerated by you here.
    Dr. Murano. No.
    Senator Kohl. So that the fact that they have it up there 
is as intolerable as it would be if it were true here in the 
United States, because as I said, 80 percent of the cattle that 
they raise winds up being exported to us. So whatever problems 
they have are our problems, isn't that true?
    Dr. Murano. I think you are absolutely right. The testing 
of the products, of the meat and poultry that I referred to, 
they have the same systems that we have, with no backlog. This 
is a testing of the animal, and I will defer to Mr. Hawks to 
get his comments as to what he believes in terms of their 
programs in animal health, what should be the equivalence that 
is expected of other countries.
    Mr. Hawks. Yes, sir. I think they have adequate testing in 
place, but obviously, this cow was actually slaughtered on the 
31st of January. The conditions of the cow--it was not 
suspected, it was not showing neurological signs--so it was a 
routine surveillance method.
    Having said that, I will back up and say again that we do 
our routine surveillance within 8 days of the sample being 
taken. So it is something that obviously we should be 
addressing with our counterparts in Canada.
    Senator Kohl. Thank you. Thank you, Mr. Chairman.
    Senator Bennett. Thank you. Senator Cochran?

                          FSIS BUDGET REQUEST

    Senator Cochran. Mr. Chairman, I am impressed with what we 
have heard this morning, particularly with respect to food 
safety issues. I am interested to know, however, whether or not 
the budget request is going to be sufficient for us to continue 
to maintain the high-quality procedures and processes that we 
now have in place and are using to ensure that our food supply 
is safe and wholesome and fit for human consumption. Mr. Bost, 
I guess we should ask you that, or Dr. Murano.
    Dr. Murano. Certainly, Mr. Chairman, you know that this 
2004 budget request is really a record-level increase in our 
budget that the President is requesting. It is $42 million over 
what we had before, and so in these times of budgetary 
constraints and fiscal conservatism, if you will, it shows a 
commitment of this Administration that we are putting so much 
importance in food safety that we are asking for record level 
funding for the Food Safety and Inspection Service.
    It has to do not only with adequately being able to pay the 
salaries of our inspectors, who do the work of food safety out 
in the field and are the ones who deserve all the credit for 
our accomplishments.
    But also, we are requesting money to conduct baseline 
studies, to continue the science-based policy making that we 
have been undertaking over the last couple of years and money 
to really overhaul the training of our inspectors, which is 
very much needed. That is money that is so crucial to have 
because it will ensure that our inspectors continue to be the 
best trained and that they continue to avail themselves of the 
state-of-the-art knowledge in food safety implementation so 
that they can continue to do a good job. We are also requesting 
money for additional microbiologists and laboratory personnel 
so that we can continue to do all the work that needs to be 
done in laboratory sample analysis and so forth.
    So, we are very confident that these requests are certainly 
what we need to meet the challenges that I mentioned in my 
opening remarks.
    Senator Cochran. Thank you.

                              FOOD SAFETY

    Mr. Bost. And Senator Cochran, let me add to that. We all 
have a very important part of the food safety picture in this 
country and we want to ensure that all the food, that is 
supplied to our school children is safe. For my piece of it, by 
the time we get it, most of the issues are directly related to 
the handling of the food itself.
    As I testified in front of you, I guess about a month or so 
ago, what we want to do is to ensure that staff who work in the 
National School Lunch Program receive a high level of training 
so that they can ensure that the food that they receive remains 
safe. And so our request is to ensure that we do that. We 
believe that we have the resources to do that. We can always--I 
am not going to say that you ever have enough, but we could 
always use more, but we think we have adequate funding to start 
that process for food safety persons.
    Senator Cochran. Mr. Hawks.
    Mr. Hawks. Yes, sir, Senator Cochran. It is certainly a 
pleasure to be here and to respond to questions from a friend 
from Mississippi. We feel like this Committee and this Congress 
have been extremely generous with us over the past 2 years. 
Since coming here for the supplemental defense appropriation, 
we were able to take those funds to improve our laboratory 
conditions, to improve our surveillance methods. We were able 
to work with the States. So we think that we have adequate 
funding. The President's budget is adequate to continue this 
process.
    I would like to, if I may, take the time to go back just a 
little bit to the BSE and say that, for the record----
    Senator Cochran. Can you tell us how to pronounce what that 
stands for?
    Mr. Hawks. Bovine spongiform encephalopathy, you have got 
it, Senator. I pronounced that in Paris on Sunday and my staff 
that was with me told me that I need to practice, so I have 
been practicing before coming here today.
    But that particular animal did not go into the food chain. 
While there was a delay in testing, that animal did not go in 
the food chain, so I think that is important for me to point 
out. It's just an oversight on my part earlier.
    Senator Cochran. Thank you very much. I appreciate the good 
job you continue to do, as well.
    Senator Bennett. Senator Johnson?

                     CANADIAN LIVESTOCK PROHIBITION

    Senator Johnson. Thank you, Mr. Chairman.
    Would it not make sense to maintain the prohibition on 
Canadian livestock and meat exports into the United States 
until the United States can be comfortable that they have 
eliminated their backlog and that their inspection regime is 
essentially on a par with that in the United States?
    Dr. Murano. Well, Senator, let me make sure that everybody 
understands. Their inspection of products, beef and poultry 
products, is the same as the United States. The issue at hand 
here is on the live animal, and the animal disease surveillance 
program that they have. And certainly, we need to make sure 
that there is no question in anybody's mind as to whether all 
the facts have been ascertained in terms of any cases of BSE 
anywhere in the world, Canada, or any other countries.
    And so I will venture to say that the Secretary of 
Agriculture will certainly be very cautious in lifting that 
ban. She will take all the information that is available as it 
comes in terms of the samples that are still in the backlog and 
other information that is appropriate and will not do anything 
until she is confident that it is safe to lift that ban, and I 
will guarantee you that that is exactly what she is thinking.
    Senator Johnson. Well, it concerns me that they may use the 
same science ultimately as we use in the United States, but if 
there is a 4-month backlog in this particular instance, that 
gives rise to great concern that what would have happened if 
that animal had been exported into the United States during 
that interim period.
    Dr. Murano. Well, that animal would not have, because 
remember, it was an animal that had pneumonia and when the 
animal was put down, the normal thing that happens, just like 
we do here in the United States, those animals are condemned. 
Any animal that is diseased is not allowed in the food supply, 
whether it is BSE, pneumonia, or anything. So that animal would 
not have entered the food supply anyway. It just so happens 
that as they tested it, it came out positive for BSE.
    Senator Johnson. When we say the animal is not in the food 
supply, just so I understand this, it is my understanding that 
the carcass of this animal was, in fact, ground up and used as 
animal feed. Is that correct or not correct?
    Dr. Murano. I understand, that it did not enter the human 
food supply. So let me allow Mr. Hawks to tell you more about 
that.
    Mr. Hawks. Senator, I am under the impression that that 
animal, as we said, did not go into the food chain. I would 
have to clarify what actually happened, in the rendering 
process. So I apologize for not having that answer.
    Dr. Murano. But it certainly did not----
    Senator Johnson. One of my concerns would be if that did, 
in fact, wind up as animal feed, that, in turn, then, was--
whether there are animals that could have fed on that.
    Dr. Murano. I follow you, and that would not happen because 
Canada has a feed ban, just like we do.
    Senator Johnson. All right. I appreciate your response 
here. It would appear to me that because of the 4-month 
backlog, however, our Canadian friends have some work to do----
    Dr. Murano. Yes, they do.
    Senator Johnson [continuing]. In order to allow our 
consumers to have the confidence they deserve to have, and I 
would hope that our USDA will be very aggressive in working 
with Canada in that regard.

                       COUNTRY OF ORIGIN LABELING

    Mr. Hawks, on the country of origin labeling issue, in 
general terms, the United States only imports around 2 million 
head of live cattle but slaughters 28 million head. Obviously, 
most of the cattle we slaughter are of U.S. origin. Doesn't it 
make sense to USDA that tracking of 2 million imported cattle 
would be less costly than keeping track of the 28 million 
within the United States?
    Mr. Hawks. Senator, I certainly understand your question, 
and having been through several of these country of origin 
listening sessions, I will say to you that I am committed. I 
will personally be at those sessions, or my Administrator of 
AMS will be at every one of those to listen and to hear the 
comments.
    But to be very candid with you, it is the assessment of our 
attorneys that we could not do that as the law is written 
simply because it requires all products to be labeled with 
country of origin. So the law does not allow us to do that, as 
written.
    Senator Johnson. It would seem--many of my constituents 
have suggested if you label imported animal, then it is obvious 
that the other animals are, in fact, United States animals.
    Mr. Hawks. That is understood, but as we have had numerous 
sessions with our attorneys to help us interpret the law as 
written, it requires every product in the retail market to be 
labeled. And then it is the specificity of the law--born, 
raised, and slaughtered. It is giving us great difficulty to 
look at it from that perspective.
    Senator Johnson. The country of origin labeling law gave 
USDA discretion to create an audit verification system, but not 
a mandatory system, to help verify the origin of livestock. We 
included many existing industry practices and USDA programs to 
model in order to achieve voluntary audits. Some of these 
models include the USDA grade stamp program, that is to say, 
``choice,'' ``select,'' et cetera, ``certified Angus beef'' and 
other breed programs, beef quality assurance, Hazard Analysis 
Critical Control Points, HACCP, the National School Lunch 
Program, the Market Access Program, and the voluntary born and 
raised in the USA label used by Carolyn Kerry of California.
    To what extent is USDA looking at using these existing 
models rather than reinventing the wheel to implement country 
of origin labeling?
    Mr. Hawks. Senator, as I said, as we go around the country, 
we are listening to all of the concerns, the issues that are 
being raised. So we are evaluating everything that is out 
there. However, the requirement is a retail labeling law, so it 
is controlled more from the retail, and the law also goes on to 
say that everyone that is supplying product into that retail 
market is required to provide the verifiable information as to 
the country of origin.
    So we will be continuing to look at all of these and try to 
come up with something that is reasonable, but it is actually 
the retail market that is going to drive that.

                         ANIMAL IDENTIFICATION

    Senator Johnson. Would you agree that the law prohibits on-
farm mandatory animal identification and does not permit third-
party mandates by packers?
    Mr. Hawks. I will agree that it absolute prohibits 
mandatory identification for the purpose of country of origin 
labeling. As to the third-party audits, I would say that that 
is a proven practice. It is something that is not unreasonable 
and I would say the retailer would have the right to require 
that in that case.
    Senator Bennett. The time is expired----
    Senator Johnson. My time is expired. I will continue with 
some other questions and we may submit at a later time, as 
well. Thank you, Mr. Chairman.
    Senator Bennett. We can come back to this. I want to pursue 
this same question on a quick second round because I think 
Senator Johnson is focusing on one of the most contentious 
problems we deal with. A number of producers are in favor of a 
system that would allow farmers to self-certify. In your 
opinion, is self-certification legal?
    Mr. Hawks. In my opinion, self-certification in and of 
itself would not fulfill the requirement.
    Senator Bennett. Congress made the law. Congress can unmake 
the law. If we should amend the law to allow self-
certification, do you think that would be adequate to achieve 
the goals that we are looking for here?
    Mr. Hawks. Senator, as you say, Congress makes the law. It 
is my job to implement it. So as you move forward, any 
decisions that you make, I would be happy to work with you to 
help implement those provisions that you put in.
    Senator Bennett. You are beginning to sound a little bit 
like Mr. Greenspan who testified before us yesterday at the 
Joint Economic Committee.
    But let us assume that Congress changes the law and allows 
self-certification. Do you have any idea of how farmers' would 
handle animals that are commingled?
    Mr. Hawks. The animals that are commingled would cause a 
real serious problem as I see it. If you have animals coming in 
from Canada, if you have animals coming in from Mexico and then 
you have a self-certification, I think it would be very 
difficult because it is ultimately the farmers responsibility 
to provide that chain of custody, that information up through 
the system to the retailer. So it could potentially be 
problematic.
    Senator Bennett. And the $10,000 fine per violation, it is 
the retailer, not the----
    Mr. Hawks. The fine would hit the retailer, that is 
correct, but that fine would also fall back on the supply chain 
as you go up, as well, because the law also requires those in 
the chain to provide information to that retailer--it actually 
mandates that they provide that information to the retailer. So 
then they would be subject to fines, as well. So it is sort of 
like a domino effect.
    Senator Bennett. I see. So the retailers probably would not 
accept self-certification?
    Mr. Hawks. It would be probably difficult. If I was a 
retailer, I would be very cautious in accepting that.
    Senator Bennett. Okay. Thank you.
    Does anyone else want a second round on this panel?

                FRESH FRUIT AND VEGETABLE PILOT PROJECTS

    Senator Kohl. I would just like to ask Mr. Bost one quick 
question, Mr. Chairman. Mr. Bost, the 2002 farm bill provided 
$6 million for a fresh fruit and vegetable pilot program for 
the 2002-2003 year. The program provided fresh fruits and 
vegetables free to children in 107 elementary and secondary 
schools across four States. Preliminary evaluation of the 
program by USDA indicated that it was a very successful program 
and that, overwhelmingly, the schools hope that it could be 
continued as well as expanded to other schools. Do you have 
plans to do that?
    Mr. Bost. The formula, as you noted, essentially provided 
us with the authority to do it this year and it was supposed to 
end. I believe that both the House and the Senate have approved 
an extension of the $6 million that was appropriated, so the 
program will go on until it is complete.
    As a part of the Child Nutrition reauthorization, as I 
testified in front of Chairman Cochran about a month or so ago, 
we are looking at the possibility of extending these pilot 
projects in those existing States and also adding two or three 
additional States. The question is going to be where we get the 
money from. It was very well received by administrators, 
educators and teachers. The children loved it. It has been one 
of the most successful nutrition programs that we have 
implemented since I have been Under Secretary in terms of the 
positive feedback that we have received.
    In addition the program is also being implemented and 
carried out on one of our Indian reservations, and very well 
received there, too.
    Senator Kohl. If you are as enthusiastic as you say you 
are, and I believe that is true, I would like to work with you 
to see that we get some additional funding, not only to 
continue with the program but to expand it and grow it.
    Mr. Bost. We are always happy to work with you.
    Senator Kohl. Thank you.
    Mr. Bost. Thank you.
    Senator Bennett. Senator Johnson, do you want to----
    Senator Johnson. No.
    Senator Bennett. Thank you all. We appreciate, again, your 
testimony and we appreciate your willingness to render public 
service to the citizens of the country.
    Mr. Bost. Thank you, Mr. Chairman.
    Dr. Murano. Thank you.
    Mr. Hawks. Thank you.
                DEPARTMENT OF HEALTH AND HUMAN SERVICES

                      Food and Drug Administration

STATEMENT OF HON. MARK B. McCLELLAN, COMMISSIONER
ACCOMPANIED BY JEFFREY WEBER, ASSOCIATE COMMISSIONER FOR MANAGEMENT AND 
            SYSTEMS

    Senator Bennett. We will now proceed to hear from the 
Commissioner of the Food and Drug Administration, who has been 
very patient with us listening this morning.
    We are happy to welcome the Honorable Mark McClellan, who 
is the Commissioner of Food and Drugs, accompanied by Jeffrey 
Weber, the Associate Commissioner for Management and Systems at 
the Food and Drug Administration.
    Mr. McClellan, thank you very much for your willingness to 
sit through the earlier conversation. I am grateful to you for 
your willingness to do that. I think given the concern about 
food and safety that is currently highlighted in the news, it 
is important that we demonstrate that FDA and USDA are both on 
the same page. We need to have something of a calming effect, 
if we can, on some of the hysteria that seems to arise whenever 
the media gets something of this kind.
    Thank you for being with us and we look forward now to your 
testimony.
    Dr. McClellan. Thank you, Mr. Chairman. I am happy to be 
here. I enjoyed the opportunity to sit with very capable staff 
from USDA that we work with very closely.
    It is a pleasure to be here with you today, Mr. Chairman, 
Senator Kohl, Senator Johnson, for my first Senate 
Appropriations hearing on FDA's budget, and I understand it is 
your first as Chairman of the subcommittee, as well. Hopefully, 
this is the start of a great new tradition. I am sure that you 
are enjoying your new responsibilities as much as I am enjoying 
mine. We are all making a very real difference in people's 
lives.
    FDA is a vitally important public health agency. All 
Americans have long depended on us to have confidence and the 
safety and security of many products they use every day and 
many that they depend on for improving or even saving their 
lives.
    Mr. Chairman, you have a detailed statement for the record. 
This morning, I would just like to highlight some of my top 
priorities for the agency. These priorities are from the FDA's 
new strategic action plan, which reflects the ideas of our own 
staff, the public health priorities of the Secretary and the 
President, and special concerns that I have heard about from 
many of you and your very capable staffs.
    First, to do the most effective job possible, FDA must base 
its regulatory work on the principle of efficient risk 
management. That is kind of a mouthful for a principle, but the 
idea is to use the latest biomedical science and risk 
management science to find the best ways to reduce the risk 
facing the public and to do it as efficiently as possible. 
Since our challenges and the new opportunities we face are 
greater than ever, this use of up-to-date science is essential 
in enabling the agency to fulfill its mission.
    We are regulating more and more complex food products than 
ever before. Over the past decade, the number of food import 
shipments has increased more than four-fold. We are expecting 
over six million shipments in 2004. Americans are eating more 
diverse fresh, uncooked products than ever, and we have got to 
focus not just on the safety of our food supply, but on its 
security against deliberate attack.
    We are facing a broader array of more complex medical 
products than ever before. The traditional distinctions between 
drugs and devices are breaking down as we see more products 
that include both. The traditional methods of bringing 
blockbuster drugs to market are in the process of being 
replaced with more sophisticated methods based on new 
breakthroughs in genomics and proteomics that will lead to more 
individualized patient treatments in the years ahead. The 
doubling of the NIH budget over the past 5 years promises the 
development of even more valuable treatments going forward.
    The products that we regulate, including foods and medical 
treatments, are increasingly important in international trade 
negotiations and in steps to make the global markets for 
medical products more efficient. This is all potentially very 
good news for Americans. More diverse and innovative products 
hold the promise of better, longer, more fulfilling lives, but 
that promise will only be fulfilled if the agency continues to 
fulfill its responsibilities to help make sure that all of 
these products are safe and can do what they are supposed to 
do.
    As we face these increasing responsibilities, it is 
critical for the agency to get the most out of our limited 
resources through regulatory processes that do as much as 
possible to reduce the risk facing the public and to get the 
most bang for our regulatory buck. Recent legislation supported 
by your appropriations in the 2003 budget provide new 
opportunities for us to do this through our expanded food 
security authorities and personnel, through newly implemented 
legislation on pharmaceutical and medical device user fees, and 
through other new initiatives on such critical topics as 
patient safety. We owe it to the American public to make the 
most of these new opportunities.
    We are seeking to improve the quality and efficiency of the 
process of developing new medical technologies. We are also 
conducting a major overhaul of our oversight of the processes 
that medical manufacturers rely on to help ensure that medical 
products are safe and effective and of high quality. We are 
implementing a new risk-based import security strategy. We are 
taking new steps on many other pressing issues, ranging from 
bioengineered products, to dietary supplements including 
ephedra, to generic drugs, to veterinary medicines, in all 
cases using the best science and our statutory authorities to 
make sure the agency is having the maximum impact on the public 
health that is possible under the law.
    At your request this morning, I want to add some remarks 
about bovine spongiform encephalopathy, BSE. It is a good 
example of our use of risk management techniques quickly and 
effectively to be prepared for new public threats. Since the 
early days of this disease, FDA and USDA have worked 
aggressively to protect Americans from BSE and to develop and 
evaluate contingency plans for further developments in the 
course of the disease. With the most recent news of a single 
BSE-positive cow in Northern Alberta, we are responding 
immediately with additional steps for the protection of the 
American public.
    These include, first, adding Canada to the list of 
countries in FDA's import alerts related to BSE. Under these 
alerts, FDA stops a wide variety of products, such as animal 
feed and human food with bovine-derived materials from being 
imported into the United States from BSE countries.
    Second, we are using the FDA's BSE response plan, which has 
already been developed, for guidance on responding to this 
threat quickly and effectively.
    Third, we are communicating closely with Canadian 
officials. We have offered to send FDA experts to Canada, as 
well, to assist them in their investigation and to learn from 
this case. As we learn more of the facts of this incident in 
Canada, we will continue to act promptly to assure that 
scientifically-appropriate safeguards in place in the United 
States will protect the public health as effectively as 
possible.
    As you know, BSE does not spread naturally from cow to cow. 
Instead, the infectious agent is passed only when a BSE prion-
infected protein from a rendered BSE-infected animal is added 
to animal feed and subsequently fed to cows. So fourth, and 
most importantly in our response, our animal feed rule 
prohibits the use of most mammalian protein in feeds for use in 
ruminant animals, such as cow. This rule has become one of the 
essential firewalls against the spread of BSE in the United 
States, as Senator Johnson noted. Even if an infected animal 
were ever to be found in the United States, and none have been, 
this rule would prevent the spread of the disease.
    In the past several years since the data was collected that 
the GAO report relied on, the report that Senator Johnson 
mentioned from 2002, we have taken a number of steps to respond 
to the concerns raised there. I agree with you, Senator 
Johnson, that we need to be extremely vigilant on this issue.
    So we have ramped up our inspections of animal feed 
manufacturers, feed mills, all other firms responsible for 
keeping--that use ruminant protein to make sure that it stays 
out of cattle feed, and at this point this morning, I can 
report to you that we have 99.3 percent compliance. That is 0.7 
percent of the inspections of all of these firms, this entire 
universe of firms handling the bovine material related to feed, 
that may be out of compliance, and for those small fraction 
that are out of compliance, we are following up very quickly. 
We have had follow-up visits within 30 days to these firms. We 
have issued 59 warning letters involving 42 product recalls 
involving 241 products.
    So we are very much concerned with making sure this program 
works effectively. We are spending $22 million on this program 
this year. Our inspectors are working with the States closely. 
We have conducted a number of training sessions. We have 
developed a standardized form. We are implementing checks to 
make sure that all of the inspectors doing these activities, 
the Federal inspectors from FDA as well as our State partners, 
are following consistent and appropriate procedures in their 
inspectional activities.
    And just to be clear, these inspections cover all of the 
issues that you raise. There can be no commingling of 
materials, no mislabeling of foods containing prohibited 
materials in order for a firm to be in compliance, and we 
expect 100 percent compliance. We are pushing and aiming for 
full compliance. We are inspecting every plant every year to 
make sure they are in compliance and we are doing rapid follow-
ups on the small number of plants that are not.
    Our work on BSE underscores the fact that FDA is, above 
all, a public health agency. So let me mention again a few of 
the other top priorities here at FDA.
    One of these areas is patient safety, preventing adverse 
events. Improper use of pharmaceuticals alone accounts for 
thousands of deaths, millions of hospitalizations, and many 
billions of costs and avoidable medical complications each 
year. FDA has recently announced a set of new programs to 
reduce preventable adverse events involving the products that 
we regulate, and that includes preventable food illnesses and 
reactions as well as medical adverse events.
    A third priority for us is getting better information to 
consumers about how they can improve their own health, and you 
all have already touched on that in the previous panel this 
morning. We all know that informed consumers are our greatest 
public health asset. By making the right decisions, individual 
Americans can do more to improve their health and their quality 
of life than the newest medical technology can do for them 
overall from a public health standpoint, as powerful as those 
new technologies may be. And we are taking many new steps to 
help the public get the best science-based information about 
the health consequences of the products that we regulate.
    The fourth priority involves protecting the country against 
terrorism. There is no challenge more urgent in this post-
September 11 world than to engage in the steps needed to 
protect our citizens from deliberate attacks that may involve 
the food supply and to provide good medical countermeasures for 
the agents of terrorism. We are putting in extra hours in many 
of our medical products centers to make available safer, more 
effective treatments and prevention methods for biological, 
chemical, and radiological attacks. We are also an integral 
part of the President's proposal for Project BioShield to 
create the next generation of better, safer medical 
countermeasures as quickly as possible.
    Of course, our largest anti-terrorism program involves the 
security of our food supply. Through new statutory authorities 
and new regulations that we are in the process of issuing right 
now, as quickly as possible, and new personnel as well as new 
strategies to make our food supply not only safer, but more 
secure, we are trying to provide a new level of security for 
the American food supply against deliberate kinds of attacks on 
it.
    Finally, the most important resource our agency possesses 
is its talented and dedicated professional staff. Some of our 
most important dedicated professionals are with me here this 
morning a couple rows behind me. There are some new faces in 
our program. There is Jeff Weber's face, which is not new but 
is a very effective one in working with us and working with 
your Committee. We are working hard to attract support and 
retain highly qualified professionals in order for the agency 
to be able to adapt and carry out all of the activities that I 
have outlined. We need to provide the most public health 
protection for every public health dollar invested and our 
staff is the first and the most important part of fulfilling 
that mission.
    So I appreciate your attention this morning to FDA. I can 
assure you that the priorities that we discuss are going to 
guide our agency's actions during my tenure as Commissioner. We 
have a budget request of $1.7 billion to support these top 
priorities as well as our other safety and security mission 
activities. It includes a set of proposals, new initiatives 
that I won't go through in any more detail now. You have got 
them in front of you.
    But I want to conclude by saying that I very much look 
forward to continuing to work with this subcommittee to achieve 
our mutual goal of moving FDA forward, because that is so 
important for protecting and promoting the health of Americans. 
Thank you for your time this morning.

                           PREPARED STATEMENT

    Senator Bennett. Thank you very much and for your response 
to the issue that we discussed in such detail with the first 
panel. That is very helpful.
    [The statement follows:]

                Prepared Statement of Mark B. McClellan

    Mr. Chairman and distinguished members of the Subcommittee, I am 
honored to be with you today as we discuss FDA's 2004 budget request. I 
want to thank you for your interest in the Food and Drug Administration 
and to reaffirm the importance of the FDA and its enormous contribution 
to our nation's health.
    As a practicing internist and a former professor of both economics 
and medicine I was well aware of the importance of the FDA and its 
enormous contribution to our nation's health. Now, as the Commissioner 
of FDA, I have quickly come to understand that ensuring adequate and 
properly targeted resources is vital to the continued success of the 
agency and the success of the President's efforts to promote quality 
health.
    I find it a rewarding and exciting time to be at the FDA. The 
challenges we face in promoting and protecting the public health are 
greater than ever. The agency is charged with regulating activities 
which have increased in volume and complexity, a trend likely to 
continue. There are additional drugs and medical devices available to 
save and improve lives, and even more to come. There are increasingly 
diverse food products--giving consumers more food options to meet their 
needs more productively than ever. And we are adding to these choices 
by importing a larger volume and greater diversity of foods than ever 
before. There are also broader choices in cosmetics.
    The result is, Americans have more opportunities to improve and 
enjoy their lives--and these are good things for Americans. At the same 
time, however, they present unprecedented challenges for FDA in meeting 
our regulatory responsibilities. Even as the complexity of these 
products increases, we must continue our commitment to making sure safe 
and effective new food and drug products reach consumers in a timely 
fashion. We have responsibilities over 20 percent of the consumer 
economy--an amount that's growing every year. All of this has immensely 
complicated FDA's mission. The FDA also must think critically and 
carefully about how it uses its resources to improve the public health. 
Mastering this great responsibility in the 21st Century requires FDA to 
meet some unprecedented challenges.
    I believe there are five major steps we need to take to conquer the 
challenges we face. A strong FDA that attracts and retains the most 
talented scientists; dynamic and responsive regulation utilizing new 
and better ways to reduce risks to the public health; promoting quick 
access to new medical technologies that are safe and effective thus 
helping to reduce adverse events involving FDA-regulated products; 
helping consumers get truthful and non-misleading information about the 
products they use; and, quick responses to the more pressing challenges 
of bioterrorism and food security. These are among the many critical 
steps the agency must take as it looks forward into the 21st century. I 
would like to first cover the challenges and our strategic planning 
effort, which include these steps, and then will discuss the specifics 
of FDA's budget request.

Strategic Planning
    To meld it all together--the new challenges, the new opportunities 
and the steps to be taken, we have undertaken a major strategic action 
plan within the agency utilizing creative thinking from inside and 
around the agency we have undertaken a major strategic action planning 
effort. Under the leadership of FDA's Executive Council we established 
five broad strategic goals to frame the Agency's future. FDA's 
leadership is now finalizing a strategic framework to identify 
objectives and strategies within each of these goals. Cross-cutting 
work groups, led by members of the senior management team, were 
established for each goal area. Each group initiated its work based on 
the Secretary's and my priorities, proposed initiatives, and a broad 
range of objectives and strategies that are already underway or 
proposed in recent planning initiatives. Our steps have included 
leadership development of agency strategic objectives; development of 
the long-range strategic plan based on the framework; and translation 
of the strategic plan into a specific action plan for the remainder of 
fiscal year 2003 and 2004. This effort encompasses the 5 critical 
challenges and lays the foundation for our action plan. I look forward 
to discussing this with you as this effort matures. Now lets review the 
steps we are taking to address the challenges ahead.

Strong FDA
    The critical challenge for a strong FDA remains. Essential to the 
success of the agency is its professional workforce and their ability 
to maintain a high level of public trust in FDA's activities. Two-
thirds of the money we're appropriated each year is spent on our 
highly-skilled workforce to carry out FDA's complicated mission. Our 
contributions are primarily a reflection of our professional services.
    An organization that can keep up with the rapid changes in the 
industries it regulates, and one capable of developing and implementing 
effective and innovative public health measures, requires a very 
special workforce. So our mission depends more than ever on a solid 
cadre of experienced physicians, toxicologists, chemists, 
statisticians, mathematicians and other highly qualified and dedicated 
professionals. Their expertise is essential for making our regulatory 
decisions balanced and fair, and for keeping us on the cutting edge of 
the technology and sciences used by industry. A clear sense of mission 
is not enough to attract and keep the best and brightest, highly 
motivated employees who are essential to meeting the challenges that 
the FDA faces in the 21st century. As FDA Commissioner, it is one of my 
foremost goals to make sure that the FDA's working environment 
encourages creativity, efficiency, and superior performance--an 
environment which attracts and retains top-quality scientists, and 
enables them to do top-quality work as part of an effective team.
    To attract and keep high-caliber employees who are responsive to 
the changing needs of the agency, we need to be responsive to their 
diverse needs. FDA is already leading the way with many such workforce 
initiatives already. Our employees can take advantage of flexible work 
schedules, including an ``any-80'' program that can fit the difficult 
schedules of two working parents, sick kids and sick parents, and other 
outside commitments. About one-fifth of our employees take advantage of 
our flexi-placing program, which permits telecommuting. And we support 
employees with child care, elder care, and other distinctive needs.
    In a recent survey conducted by OPM to gauge how Federal employees 
feel about their jobs, FDA did very well compared to other government 
agencies and the private sector, especially in how our employees feel 
that their individual work here relates to Agency's core mission. About 
73 percent said that they found FDA a friendly place to work, 82 
percent said their supervisor supports their need to balance work and 
family issues, and 65 percent said they would recommend the FDA as a 
place to work. We're doing well. We want to do better.
    We must reward employees who distinguish themselves and who remain 
committed to our agency despite attractive outside job offers. On the 
one hand, I'm glad that so many of our employees have other good 
options. That tells me that we are attracting very talented people. On 
the other hand, I don't want to lose them. We therefore offer a range 
of programs to help recruit and retain talented staff, including 
expansions of retention bonuses for employees in fields with a 
particularly high turnover. In collaboration with the National Treasury 
Employees Union, we are also working to provide additional financial 
rewards for high performing workers
    FDA must encourage fresh perspectives and plan for transitions as 
well. For some of our workers, spending time here as well as in 
academics or industry is the most rewarding career path, because it is 
the best way to keep up with rapid scientific change. And more than 30 
percent of our workforce will be eligible for retirement in less than 5 
years. So we are working to develop succession plans and career 
development plans. And we are expanding career options, such as new 
fellowships and part-time appointments at our devices center, to 
support combining work at FDA with work in an academic agency.
    We will continue to find better ways to support our work 
environment. The enormity of our task also compels us to seek new ways 
to augment our available resources. One such opportunity is to use the 
accumulated experience of FDA alumni. I'm very pleased that scores of 
alumni from around the country have come together to establish the FDA 
Alumni Association. The FDAAA can offer much to help us meet our 
challenges.

Risk Management
    Second, to strengthen our agency's ability to meet the challenges 
of food and drug regulation in the 21st century, we must rely on the 
best science available. Risk management is one of the many areas of 
regulatory science FDA has long used in addressing risks to public 
health and finding the best science for managing them. We must use 
creative thinking and science-based risk management to increase public 
health benefits while minimizing the public health risks. We must work 
to ensure that our regulations and our decisions are firmly anchored in 
the latest science; that they are fair; that they are dynamic; that 
they are focused on public health risks; that they are cost-effective; 
and above all, that they are responsive to the changing circumstances 
we face.
    We must do all we can to ease the regulatory burden. We need to 
adjust our policies, methods and practices to the increasing volume, 
variety and complexity of products under our purview, as well as to 
increased threats--such as bioterrorism. We have to broaden the 
application of the science of risk management through a committed, 
constant and consistent effort to find ways to reduce health risks and 
increase health benefits to the public as efficiently as possible.
    Earlier this year as part of our response to this challenge--to 
make sure we have regulatory processes that are as efficient and up-to-
date as possible--we announced a major new medical technology 
development initiative with three main elements. The new initiative 
includes a detailed plan for an overhaul of the practices on which the 
FDA as well as manufacturers rely on to ensure that pharmaceutical 
products are safe. The new initiative will encourage manufacturing 
innovation while continuing to assure the highest drug quality.
    First, we are conducting a ``root cause analysis'' of recent 
``multiple cycle'' product approvals--products that required two or 
more ``rounds'' of review before they could be approved. An extra round 
means at least an extra 10 months or more, which can add many millions 
to the cost of new products. It also delays availability to patients 
who might benefit from the product. Second, we are developing ``quality 
systems'' for our review procedures. The idea is to apply best 
management practices internally to our review processes, such as using 
peer review programs for reviewers to exchange ideas and use each 
others' experience to learn about best practices. Third we will work to 
publish new guidance documents. These new guidances will be in areas we 
think the regulatory pathways could be improved or better defined. We 
expect to learn something from outside experts in the open process of 
developing guidances. The new guidances will include product guidances 
for treating obesity, diabetes, and cancer. We think that new 
regulatory standards can reduce the time and cost of product 
development.
    We are already advancing changes that will help us achieve these 
three new goals. For example, we have developed a detailed plan for an 
overhaul of the practices on which the FDA as well as manufacturers 
rely on to ensure that pharmaceutical products are safe. GMP policies 
haven't been updated in 25 years. Meanwhile, best practices in 
manufacturing technologies and methods have undergone significant 
progress over that time. We are developing new GMPs based on the latest 
science of risk management and quality assurance. The new standards are 
being designed to encourage innovation in manufacturing and technology; 
coordinate submission review and inspection programs; and ensure their 
consistent application by all three FDA centers that regulate 
pharmaceutical products. This includes new guidance from CBER on the 
manufacturing requirements for novel technologies such as cell 
processing and gene therapy operations. The medical device user fee act 
also significantly expands FDA's informal policy of allowing third 
parties to conduct facility inspections under more closely supervised 
conditions, to give some manufacturers the flexibility to have their 
inspections carried out more quickly without sacrificing stringent 
safety standards.
    For food, there are several issues that are very much at the center 
of our attention. One of them is ensuring the safety of genetically 
modified feed and foods, and strengthening the public's confidence in 
these new products. Genetically engineered crops are increasingly 
common Field tests of new plants in the United States have increased 
more than eight-fold in the last 8 years, and bioengineered crops are 
now grown on 130 million acres world-wide. The public's concern about 
these food products is also strong, as was recently illustrated by the 
media coverage of the commingling of small amounts of bioengineered 
corn with soybeans that had been intended for consumption.
    In the last 10 years, the FDA has evaluated more than 50 new 
varieties of bioengineered plants submitted to our agency. The basis of 
this cooperation was an FDA policy, supported by the industry, of 
voluntary consultation before the bio-rengineered products are 
marketed. To help expand similar protections beyond the U.S. borders, 
FDA's scientists have worked with the Codex Alimentarius Commission of 
the World Health Organization/Food and Agriculture Organization, WHO/
FAO to draft guidelines for the assessment of safety of foods derived 
from rDNA plants. And to get the best outside advice on food 
biotechnology issues, the FDA has established a new Food Biotechnology 
Subcommittee of its Food Advisory Committee.
    Currently, as part of a project organized by the White House Office 
of Science and Technology Policy, we are preparing draft guidance for 
industry to provide early food safety evaluations for new proteins in 
bioengineered crops for food or feed. If developers establish that 
these new proteins are safe for consumption--meaning, that they do not 
raise questions about their allergenicity and toxicity--then the foods 
containing low levels of these innovative plants could be marketed 
without comprehensive review. We will remain vigilant in addressing 
concerns about genetically modified food and feed.
    Next, I want to bring you up-to-date on the FDA's progress in 
addressing an issue that has stirred great interest among food 
scientists. I am referring to the studies released that show that 
baked, fried or roasted foods rich in carbohydrates--including such 
dietary staples as bread--contain acrylamide, which, at high doses, is 
a known animal carcinogen. In soft bread, the reported levels of 
acrylamide range from 30 micrograms to 162 micrograms per kilogram, and 
in potato chips, to mention another example, the range is from 1.4 
micrograms to 100 micrograms per ounce.
    Acrylamide is well known to manufacturers who use it for water 
treatment and production of dies and plastics, but it is largely a 
terra incognita for food scientists. Given the key role of 
carbohydrates in our diet, it's been incumbent on our scientific 
community to subject acrylamide to a close scrutiny. Some of the 
questions that need to be answered are, for example, is it genotoxic? 
How is it formed? What is its level of exposure in the general 
population? What is its bioavailability in food? And what are the 
biomarkers of acrylamide exposure? And, what steps can be taken to 
reduce the levels of acrylamide in food?
    FDA is making a significant contribution to this research. Our 
agency has developed a method for measuring levels of acrylamide in 
foods, and used it so far on about 300 types of products, including 
cereals, breads, and chips. We're developing an understanding how 
acrylamide is formed, which is very important for finding ways how to 
keep it out of food; and we are probing the chemical's toxicity. 
Recently, we reported these and other findings to our Food Advisory 
Committee.
    With regard to chronic wasting disease, CWD, it has now been found 
in farmed or wild deer and elk in 12 states and two provinces in 
Canada. CWD belongs to a group of transmissible spongiform 
encephalopathies, or prion diseases, which also includes BSE in cattle, 
scrapie in sheep and goats, and classical and variant Creutzfeldt-Jacob 
diseases in humans. There are currently no vaccines or treatments 
available for these diseases which are invariably fatal. Compared to 
other TSEs, CWD spreads readily between susceptible species. However, 
because CWD's route of transmission is poorly understood, there is 
considerable uncertainty whether CWD poses a threat to humans or 
livestock is high, also not be used in animal feed.
    In order to minimize any risk to public health, FDA publicly 
announced last November that material from CWD-positive animals should 
not be rendered for use in feed for any animal species. FDA further 
recommended that animals from positive captive herds and animals from 
high risk areas, such as those parts of Colorado, Wyoming and Wisconsin 
where the prevalence of CW is high, also not be used in animal food. 
FDA is also collaborating with other Federal agencies in studies of the 
risk of CWD in the food supply, and the transmissibility of CWD to 
humans.
    These are but a few of the initiatives that are on our agenda, as 
you will here there are several more projects such as, preparing good 
manufacturing practices for dietary supplements; trying to improve the 
food labeling with respect to allergens; doubling our food inspections 
at the ports of entry; and we are stepping up our enforcement against 
potentially harmful nutritional supplements. We even test typical home-
cooked meals for residues of pesticides and other contaminants.

Medical Errors/Patient Safety
    A third critical step of our agency is to reduce adverse health 
events involving the products we regulate. Health problems associated 
with adverse events are far too common, carry a staggering economic tab 
and a large number of them are preventable. The statistics on the 
prevalence of avoidable health complications that often involve the use 
of FDA-regulated products presents a huge challenge for our agency and 
for all of us.
    One type of an often preventable adverse events results from 
foodborne disease. According to a 1999 survey by the Centers for 
Disease Control and Prevention,CDC, foodborne diseases cause annually 
76 million cases of illness, 325,000 hospitalizations, 5,000 deaths, 
and an economic damage of up to $23 billion. In addition, inadvertently 
consumed food allergens result in thousands of avoidable emergency room 
visits.
    Another often preventable adverse event is the misuse of 
pharmaceuticals which is associated with thousands of deaths and about 
3 million hospital admissions a year. It is estimated that our 
pharmacists will fill 3.1 billion prescriptions by the end of this 
year, 60 percent more than 10 years ago. Manufacturers worldwide are 
increasingly presenting their new pharmaceuticals for FDA's review and 
approval: 60 percent of the world's drugs are introduced first in the 
United States. In 2000, the economic cost of drug-associated errors 
alone was estimated to reach over $75 billion a year. Finding creative 
ways to prevent even a fraction of the preventable medical errors, will 
improve the lives of hundreds of thousands of Americans, and greatly 
reduce the burden on our health care systems.
    The FDA's MedWatch program is a system of voluntary reporting of 
adverse events associated with the use of agency-approved products. The 
agency's MedWatch program receives about 250,000 voluntary adverse 
event and medical product problem reports each year, mostly from health 
care professionals and consumers. Our Vaccine Adverse Event Reporting 
System, VAERS is shared with CDC and includes participation by large 
health plans. The Centers for Education and Research on Therapeutics, 
CERTs, which was authorized by the FDA Modernization Act and is 
administered through grants from AHRQ, is helping collect information 
on safe and effective use of FDA-approved medications. And we see the 
most promising emergence of increasingly sophisticated electronic 
databases that make possible public-private collaboration in learning 
more about the ways to improve the safety of medical treatments. 
Another bright spot is MedSun, FDA's pilot program for devices that 
requires rapid adverse event reporting on medical devices by a group of 
hospitals and nursing homes. The system advances the public's health by 
giving FDA quicker and more detailed information, without identifying 
involved individuals, on potential problems with health care products 
in actual medical practice. FDA's VAERS received more than 14,000 
reports of adverse reactions in fiscal year 2002, most of which were 
volunteered by health care providers, patients and their parents. I am 
looking forward to the debut in June of the newest adverse event 
reporting system in FDA, the Center for Food Safety and Applied 
Nutrition Adverse Events Reporting System, CAERS will track voluntary 
submitted food and cosmetic adverse reports and incorporates some of 
the latest technology.
    But that's not all FDA is doing. Recently, FDA made some additional 
major patient safety announcements. These included a proposed rule to 
require a universal barcoding system for prescription medications, to 
support the development of better systems to support health 
professionals. The proposed barcode rule would apply to all 
prescription drug products, including biological products and vaccines, 
except for physician samples, as well as over-the-counter drugs that 
are commonly used in hospitals. The proposed rule, if finalized, could 
reduce by half or more the large number of medication errors that occur 
at the dispensing and administration stage, by helping to make sure 
that the right patient gets the right drug at the right time.
    A second proposed action the FDA recently announced--revamping of 
our manufacturer reporting requirements for adverse events--aims to 
enhance the agency's ability to effectively monitor and improve the 
safe use of medications including drugs and biologics. Among other 
things, the proposed rule would improve the quality and usefulness of 
safety reports submitted to the agency, by giving us more detailed 
information on serious actual and potential adverse events, especially 
those involving new products where toxicities are not yet thoroughly 
understood. It also uses standards that we have developed with 
regulatory agencies around the world to develop, so that manufacturers 
can submit one accurate and complete report to agencies rather than 
many. The proposal will require the submission of all suspected serious 
reactions for blood and blood products, not just deaths. These 
provisions would provide FDA with more useful, timely, and extensive 
information to support quicker, more effective actions by the agency to 
prevent adverse events.
    FDA is also working to reduce adverse events associated with 
dietary supplements. With new evidence in the medical literature and in 
adverse event reports there are reasons for the heightened concern that 
dietary supplements containing ephedra, consequently FDA and HHS 
announced a series of steps recently to protect Americans from the 
potentially serious risks of these dietary supplements. The law 
governing dietary supplement requires us to prove, scientifically and 
legally, that a supplement presents an unreasonable risk in order for 
us to take regulatory action. Thus, we are seeking rapid public comment 
on the new evidence on health risks associated with ephedra to 
establish an up-to-date record as quickly as possible, to support 
restrictions on ephedra-containing products and the need for a strong 
new warning label on any ephedra products that continue to be marketed. 
We are also executing a series of actions against ephedra products 
making unsubstantiated claims, for example about sports performance 
enhancement, and against manufacturers that are marketing street drugs 
not dietary supplements.
    To help consumers continue to get unadulterated dietary 
supplements, we also proposed a major new regulation to require good 
manufacturing processes in their production, packing, and holding. The 
proposed rule would, for the first time, establish standards to help 
ensure that dietary supplements and dietary ingredients are produced 
without contaminants or impurities.
    I intend to expand the use of new information technology, IT, to 
improve our understanding of what causes preventable adverse events. In 
medical care, it is conceivable to develop of an electronic network 
that would provide automatic updates on adverse events and the 
circumstances that may have contributed to their occurrence. Such 
information network could also enable the FDA to disseminate 
automatically updated, relevant information on medical labels and 
warnings, and thereby help prevent the adverse events from happening 
again. Our agency is already conducting pilot IT programs in our 
centers for medical devices, drugs, and biologics.
    Potential health benefits can result from an effective use of 
today's IT. For example, IT can help professionals monitor the 
patient's progress and deliver a health care that ``gets it right.'' 
Many of the new, complex treatments have an inherently higher potential 
for toxicity, and their use requires careful monitoring for liver, 
kidney and other toxicities, as well as for interactions with the 
patient's conditions and other medical treatments. The technology can 
also aid in the sophisticated monitoring and support required by many 
seriously ill patients who have undergone complex and sometimes 
lifesaving surgical procedures. Used comprehensively IT would form the 
backbone of a National Health Information Infrastructure, a system 
capable of rapidly and securely transmitting significant health-related 
data to institutions and public health professionals who need them to 
ensure better care for patients. My vision is for the FDA to support 
and use these new tools of health information technology and their 
incorporation in this system, and pen new opportunities for advancing 
our mission of promoting the public health. The Administration's 
Consolidated Health Information E-Government initiative, to which FDA 
is contributing, is working to establish broad health data information 
standards that will apply to all agencies.
    These and other advancements are part of a vision of what can be 
accomplished if all of us in government, the health professions, 
academia and industry continue to work toward better health information 
systems--and more generally, toward a health care system that helps 
patients and health professionals make better decisions supported by 
safer and more effective medical treatments.
    We have a major opportunity to help people improve their health by 
providing them with the up-to-date information they need to choose a 
healthy way to live. As the Secretary pointed out this is a human 
tragedy and a shocking result of a failure to realize many of the 
potential benefits of modern medical treatments. In my new post, I look 
forward to supporting FDA's efforts to fulfill its important role in 
this process, and to help secure the benefits of a robust 21st century 
health care system.

Consumer Information
    A fourth step to address FDA priorities is to help consumers get 
reliable, accurate, and relevant information about the FDA-regulated 
products. For all that the new medical technologies in the review 
pipeline can accomplish, they cannot match the public health benefits 
of sound lifestyle and dietary choices that individuals can make 
themselves. It is also vitally important for consumers to have accurate 
and truthful information about the risks and benefits of the medical 
products they use. Americans increasingly want to learn more about what 
they can do personally to maintain or improve their health. That's why 
I am placing such a high priority on clearly communicating that 
information--not only to consumers, but to health care providers and 
others who can help ensure that consumers make important decisions 
about their own health on the basis of reliable information.
    To mention a couple of familiar examples, our agency is introducing 
more and better information about the foods and dietary supplements to 
help American consumers prevent diseases and improve their health by 
making sound dietary decisions. One effort is nutrition labeling, which 
encourages shoppers to select foods low in cholesterol and saturated 
fats, and high in fiber. We will soon be adding a requirement to 
include ``transfat'' on the nutrition label.
    But consumers today expect us to do still more, and we must not 
disappoint them. We must disseminate up-to-date and reliable scientific 
information on the health effects of foods and nutritional supplements; 
and we must make sure that the ads and claims for medical products, 
foods, and dietary supplements are truthful and not misleading. 
Moreover, we must make use of all means to get this information to 
consumers in a way that would most benefit their health.
    There is no example more persuasive of the need for innovative 
approaches than the national epidemic of obesity. This is a very 
serious, and growing, public health problem. According to a CDC survey, 
in 1985 fewer than 14 percent of Americans were overweight.
    Today, more than a third of our adult population is obese, 64 
percent of U.S. adults are obese or overweight, and 15 percent of 12-19 
year-olds are overweight. The health consequences include greater 
incidence of diabetes, stroke, coronary artery disease, cardiovascular 
disease, and high blood pressure--and that's not the complete list. The 
economic costs of diseases linked with excess weight run into hundreds 
of billions of dollars each year.
    Although the FDA has approved drugs for curbing appetite and 
breaking down dietary fat, their use usually does not result in a 
weight loss greater than 10 percent. There is no better remedy for 
excessive weight than healthy lifestyle choices--and to make these 
choices, consumers need better information on how their diet affects 
their health. Our agency has been helping to provide such information 
through educational articles, guidelines and press releases.
    But FDA cannot achieve the goal of a well-informed public through 
labeling requirements and agency educational campaigns alone. We also 
need to find better ways to encourage food producers to compete on the 
basis of scientifically sound nutritional claims. As a recent study by 
the Federal Trade Commission noted, ads with scientifically-based 
health claims can have substantial positive effects on the choices of 
consumers. Here is one area where we may be able to get more useful 
nutritional information to consumers.
    By putting credible, science-based information in the hands of 
consumers, we hope to foster competition based on the real nutritional 
value of foods rather than on portion size or spurious and unreliable 
claims. Such labeling can help empower consumers to make smart, healthy 
choices about the foods that they buy and consume.
    Our consumer health information initiative includes three related 
actions. First, we will issue guidance on qualified health claims for 
conventional foods and dietary supplements. Any such claims must be 
pre-approved by FDA and meet the ``weight of the scientific evidence'' 
standard, including support by a credible body of scientific evidence; 
Second we will strengthen enforcement of dietary supplement rules. 
Today, FDA is emphasizing its commitment to carrying out the intent of 
Congress in the Dietary Supplement Health and Education Act of 1994 by 
outlining its enforcement strategy against false or misleading claims 
about dietary supplements. As an example of its commitment to strong 
enforcement, FDA has seized dietary supplements making unapproved drug 
claims. Third, we have established a Task Force on Consumer Health 
Information for Better Nutrition. This task force will develop a 
framework to help consumers obtain accurate, up-to-date, and science-
based information about conventional food and dietary supplements. This 
includes the development of additional scientific guidance on how the 
``weight of the evidence'' standard will be applied, as well as the 
development of regulations. Our mission at FDA is to improve health 
outcomes for the nation, and some of the best opportunities for 
improving health involve informed choices by consumers. Through the 
Better Health Better Information initiative, we are committed to 
improving opportunities for consumers to get scientifically accurate 
information about the health consequences of the foods they consume, 
and to enhancing our enforcement efforts against those who would make 
false or misleading claims for their products.

Counterterrorism
    A fifth step in meeting our challenges is to address the critical 
additional responsibilities--the nation's front lines against 
terrorism. Helping protect our homeland is a privilege and our 
paramount public health job, and we are doing all we can to deserve the 
trust placed in our agency. Our product centers responsible for 
pharmaceutical products are working to adapt their approval processes 
to the unique challenges of developing safer and more effective 
treatments for anthrax, smallpox, plague and other potential agents of 
bioterrorism. Our center for medical devices is supporting the 
development of methods for detecting biological agents with 
bioterrorism potential, and for radiological decontamination. These new 
tools are needed now, and we are doing our best to help bring them to 
the nation's defense as quickly as possible.
    A new initiative recently announced by the President Bush is 
Project BioShield--a comprehensive effort to develop and make available 
modern, effective countermeasures against biological and other 
dangerous agents. This major cooperative effort will be a joint 
activity of the new Department of Homeland Security and the Department 
of Health and Human Services. The BioShield program which Congress is 
currently considering will ensure resources to develop next-generation 
countermeasures for smallpox, anthrax, and botulinum toxin; expand 
research and development at NIH so that it in order to speed research 
and development on medical countermeasures based on the most promising 
recent scientific discoveries and make promising treatments available 
quickly for emergencies. The BioShield program would provide FDA with 
the ability to make new and promising treatments under development 
available quickly in emergency situations--potentially saving many more 
lives than treatments otherwise available today.
    The President believes, by bringing researchers, medical experts, 
and the biomedical industry together in a new and focused way, our 
Nation can achieve the same kind of treatment breakthroughs for bio-
terrorism and other terrorism threats that have been achieved to the 
threat of heart disease, cancer, and many other serious illnesses.
    We have no responsibility more important and challenging than to 
protect the safety and security of the United States food supply. This 
is especially true as 80 percent of food products are within the FDA's 
purview. We are also involved in ensuring the safety of many new types 
of food. We all know the problem of food safety did not originate in 
September of last year. During the last decade, rising incidence of 
food contamination with Listeria, Salmonella and other pathogens--
combined with our more diverse and aging population, greater preference 
for prepared foods, and rapidly growing food imports--have sharply 
increased foodborne outbreaks that produced the CDC statistics I 
mentioned.
    This past year the CDC reported a 21-percent decline in illnesses 
from four more common serious foodborne pathogens, and a food safety 
survey conducted in 2001 reported substantial improvement in the way 
our consumers handle food. But the terrorist attacks last year 
highlighted new potential risks of deliberate food contamination. To 
counter this unprecedented menace requires new thinking on how to 
better safeguard our food.
    Much work toward this goal has already been done. In the fall of 
last year, for example, our agency initiated a scientific assessment of 
the vulnerability of various categories of food to intentional 
contamination. The appraisal utilized an analytical framework called 
operational risk management that considers both the severity of the 
public health and economic impact of a potential bioterrorist attack on 
our food supply, and the likelihood of such an event taking place. The 
FDA has developed two guidance documents--one each for domestic food 
producers and for food importers--on how to protect their products 
against intentional contamination. And, we are developing additional 
guidance directed at the retail and cosmetic sectors.
    One special emphasis is on the security of our food imports, the 
volume of which is increasing by as much as 21 percent a year. In 
particular, the FDA is taking part in two multi-agency efforts to give 
our bioterrorism counter-measures greater scientific depth and 
geographic distribution. Thanks to the leadership of the Undersecretary 
of the Food Safety and Inspection Service, (FSIS), we have joined with 
FSIS and several other Federal agencies in laying the groundwork for 
PrepNet, a network focused on the prevention of--and response to--the 
introduction of microbial, chemical, radiological or physical 
contaminants into the food supply. And we are developing plans for 
cooperative work with and expansion of CDC's cooperative Laboratory 
Response Network that will upgrade our ability to quickly recognize and 
identify a terrorist attack on food.
    Our efforts to improve food security have received strong support 
from the President, the Secretary of Health and Human Services, and 
you--the Congress. Thanks to a supplemental appropriation of $151 
million received in fiscal year 2002, we have been able to hire several 
hundred new employees whose job will be to keep watch on imports and 
whatever other avenues our enemies might try to use to contaminate our 
food or tamper with other regulated products. But it is important to 
keep in mind that reducing risks to food security requires more than 
hiring inspectors. Even with the great expansion of FDA's presence in 
the nation's ports of entry, we will be able to inspect only a fraction 
of the 5.6 million food shipments that will be imported this year.
    We need to find innovative ways to make our foods more secure 
without adding unnecessary costs. Thus additional efforts are in the 
works. One is the implementation of the Public Health Security and 
Bioterrorism Preparedness and Response Act of 2002, which gives the FDA 
greater control over food in general, and imported food in particular. 
Secondly, several weeks ago we announced a set of new food security 
measures as part of Operation Liberty Shield. Operation Liberty Shield 
is a comprehensive, multi-agency national plan designed to increase 
protections for America's citizens and infrastructure while maintaining 
the free flow of goods and people across our border with minimal 
disruption to our economy and way of life.
    The Bioterrorism Act contains a number of food provisions which 
require new regulations. We have now published four proposed 
regulations, three of which are mandated to be in effect by December 
12, 2003. This project is on the fast track, and I am committed to 
issuing the final rules by their statutory deadline. The registration 
of will require all facilities that manufacture, process, pack or hold 
food for consumption in the United States to register with the FDA by 
mid-December, 2003. A second regulation will require importers to 
provide the FDA with a prior notice of food shipments that includes 
information about the shipment's contents and origin, as well as the 
anticipated port of entry. A third regulation will obligate food 
businesses to maintain records to enable us to determine where the food 
came from and who was its subsequent recipient, so that we can quickly 
trace any food contamination back to the source. The fourth regulation 
authorizes the FDA to order the detention of food on the basis of 
credible evidence or information that it poses a serious health threat 
to humans or animals.
    Liberty Shield, our newest undertaking, focuses on published 
common-sense food guidance documents on food security relevant to just 
about all firms involved in food production, ranging from the smallest 
mom-and-pop operations and county fairs to the largest food producers. 
The guidances cover all major sectors of food production, distribution, 
and use.
    Another focus of Operation Liberty Shield, is increased food 
inspections and sampling for important agents of terrorism. We have 
recently invested over $1 million in emergency funds to purchase test 
kits that enable us to sample for these agents, and we are starting to 
use these kits more widely in our inspections and testing of both 
domestically produced and imported foods.
    We'll be undertaking further efforts to work with the food industry 
as we carry out investigations and import audits, and as we implement 
new procedures, to make sure the measures lead to the greatest benefits 
for food security without imposing unnecessary costs or regulatory 
burdens on food production, processing, and distribution. And we want 
to make sure firms remain aware of potential terrorist activities, 
especially as they relate to raw material shipments, inventory 
quarantine procedures, sourcing of foreign products or ingredients, and 
vulnerable operations
    Over the coming years, I believe the best solution will be the 
adoption of a risk-based import surveillance system to replace our 
current import program, which is fully linked with U.S. Customs entry 
processes--processes that have historically been designed to address 
revenue and trade issues, not public health issues. We're moving in the 
direction of a modern, risk-based system for food imports already. This 
includes shifting toward a ``life cycle'' approach. I am confident of 
our agency's ability to rise to the many new challenges we face and I 
look forward to working with you. Now for the budget request

Fiscal Year 2004 Budget Request
    As I have mentioned, pivotal to the continued success of the FDA 
and the success of the President's efforts to promote health care 
quality is the FDA budget Our fiscal year 2004 President's budget 
request totals $1.7 billion, including $1.4 billion in budget authority 
and $307 million in user fees. Budget authority increases above the 
fiscal year 2003 Appropriation total $82.6 million and savings related 
to the President's initiatives total $58.2 million. The agency's 
reductions include transferring funding to the new Department of 
Homeland Security, management savings due to de-layering, and 
information technology consolidations. The user fee increases total $37 
million. The full time employee total equals 10,753, which includes the 
adjustment for management savings.
    We believe our budget request will allow FDA to fund ongoing 
operations at the current level and also support more than 1,000 
recently hired investigators and analytical staff to fight 
counterrorism. In the near future, FDA will be challenged to resolve 
complex issues connected with emerging technological and demographic 
developments that include the human genome project, breakthrough device 
technology, and biotechnology medicines and development. Our specific 
budget initiatives as compared with our fiscal year 2003 President's 
request parallels our top priorities.
    The President's 2004 Budget was developed within a framework that 
set a proposed total for discretionary spending in 2004, and each 
agency and program request reflects the Administration's relative 
priority for that operation, activity or Program. Thus, the fiscal year 
2004 budget has not changed based on the program or agency levels 
included in the 2003 Omnibus bill the Congress approved in mid-
February. We recognize that you may believe there is a need to reorder 
and adjust some of these priorities and the Administration intends to 
work with you to remain within the 2004 top line amount.

Cost of Living $31.4 million
    Essential to FDA's success is its dedicated professional staff. FDA 
is a people-intensive Agency where payroll accounts for over 60 percent 
of the budget. Forty-five percent of that workforce is dedicated to 
``front line'' efforts such as foreign and domestic inspections and 
coordination with States and cooperative education programs. The budget 
request includes $23.283 million in inflationary cost-of-living 
adjustments which will be used to support the level of existing 
programs and also provide a minimum level of support to the hundreds of 
investigators and analytical staff hired in fiscal year 2002 for 
Counterterrorism activities. And, the request includes an additional 
$8.108 million that will be used, in part, to defray other pay costs, 
making up the difference between a 3.1 percent versus a 4.1 percent pay 
increase.
    As I have said, the importance and complexity of the FDA's work 
will only increase in the years to come. Thus the continued success of 
our mission depends on the experienced and highly dedicated 
professionals who can make our regulatory decisions balanced and fair 
keeping us on the cutting edge of the technology and sciences used by 
industry. Making sure FDA's working environment encourages creativity, 
efficiency and performance is one of my goals.

Secretarial Initiative: Protecting Our Homeland: Food Safety--
        Counterterrorism $20.5 million
    FDA has limited capacity to monitor or control the flow of imported 
foods, inspect domestic manufacturers, and detect foodborne pathogens 
before they cause human illness. When these limitations are combined 
with the possibility of deliberate attempts to contaminate the food 
supply at any point along the food production, processing and 
distribution chain, the risks are greatly increased. We believe that a 
coordinated approach with state, Federal and local partners, offers a 
better means of identifying and containing outbreaks associated with 
deliberate attempts to contaminate the food supply.
    One key food provision of the Bioterrorism Act is the requirement 
for registration of domestic and foreign food facilities that 
manufacture, process, pack, or hold food for human or animal 
consumption in the United States to register with the agency by 
December 12, 2003. FDA also plans to have its registration system 
operational by October 12, 2003, to accept early registrations.
    Improving the FDA's food safety inspection, detection and 
monitoring capabilities is and has been a top priority of the 
Department and the agency before the events of September 11. This FDA 
effort is the latest in a series of measures to build stronger 
safeguards for the American people.
    We believe these measures will bolster our ability to regulate 
effectively the more than 400,000 domestic and foreign facilities that 
deal with food within our country. Our ability to efficiently and 
effectively help protect the nation's food supply is a critical part in 
our agency's counterterrorism mission. Thanks to the leadership of 
Senators Gregg and Kennedy, and Representatives Tauzin and Dingell, the 
Bioterrorism Act gives FDA this important new authority.
    FDA will also provide grants to states for inspections under 
section 311 of the Bioterrorism Act, conduct direct Federal food 
inspections, and improve Center and Field laboratory preparedness. By 
increasing the number of state contracts, grants and partnerships, we 
believe it will ensure application of appropriate preventative controls 
to ensure a safe, wholesome, and nutritious food supply. We expect the 
initial grants to be used by the states to build their infrastructure 
so that they may become part of the Laboratory Response Network. With 
better assessment capabilities of the risks to FDA regulated products 
we will focus efforts by directing the grants toward risk based 
inspectional activities or additional laboratory capability.
    The infrastructure needed to support the Laboratory Response 
Network, LRN for counterterrorism coordinated by the CDC, provide 
integrated laboratory solutions and disseminated testing capacity to 
support public health preparedness and response to an act of 
counterrorism involving the food supply, FDA will develop scientific 
practices, expand Federal, State and local involvement in our eLEXNET 
system by having 79 laboratories around the country participate in a 
common shared microbial agent electronic data system, while assuring 
coordination with other members of the Public health Information 
Network. The total effect is the creation of a safety net that 
significantly reduces the probability that terrorists will ever achieve 
their aims, and minimizes the impact of these threats if they do occur.

Secretarial Initiative: Realizing the Possibilities of 21st Century 
        Health Care: Patient Safety $4 million
    FDA's public health and safety role requires a rigorous and 
effective postmarket surveillance activity. When FDA approves drugs and 
other medical products such as devices, it has completed a thorough 
review to determine that these products are safe when they are 
marketed. That is not always the end of the story. New safety findings 
may emerge after approval, when a wider patient population uses 
products. In some cases, products may not be used safely to prevent 
harm. It is important for FDA to continually monitor these products and 
track trends associated with them. A critical task of the agency is to 
reduce adverse health events, a large number of which are preventable. 
Medical errors are estimated to account for 40,000 to 100,000 deaths 
per year in hospitals alone.
    The requested increase of $4 million, coupled with the $3 million 
from our Generics Drug request will allow FDA to expand the use of new 
information technology to improve our understanding of what causes 
preventable adverse events. FDA will continue to conduct pilot IT 
programs for medical devices, drugs, generic drugs and biologics as 
well as continue the implementation of Phase III to include drug 
products into the Medical Device Surveillance Network, MedSun. FDA's 
new safety initiative, using modern health information systems, will 
provide faster and more complete information on safety problems 
associated with drugs and devices so adverse events involving these 
products can be avoided. Additionally, FDA will place greater emphasis 
on preventing adverse events involving generic drugs.

Generic Drugs Program $13 million
    According to the Congressional Budget Office, generic drugs save 
consumers an estimated $8 to $10 billion a year at retail pharmacies. 
Billions more are saved when hospitals use generic drugs. A generic 
drug is identical, or bioequivalent to a brand name drug in dosage 
form, safety, strength, route of administration, quality, performance 
characteristics and intended use. Although generic drugs are 
therapeutically identical to their branded counterparts, they are 
typically sold at substantial discounts from the branded price.
    Brand-name drug innovation requires great investment of scientific 
effort and other resources, with an uncertain return. We all therefore 
recognize that innovators must be able to receive adequate compensation 
through our patent system. Otherwise, pharmaceutical research and the 
development of better medical treatments could come to a halt.
    But it is also clear that the high prices of many innovative drugs 
in the United States, where they are not restricted by government 
controls, are sustaining pharmaceutical research and development 
worldwide. This is good for pharmaceutical innovation, but it also 
creates a serious challenge for many of our patients, who are having 
difficulty paying the high and rising costs of up-to-date drug 
treatment.
    This is where the generic drug industry plays an essential role in 
promoting the health of Americans. Generic drug manufacturers produce 
medications that are just as safe and effective as their brand 
counterparts, and part of the FDA's mission is to make sure that's the 
case. Yet the prices of generics are much lower: a generic version of a 
$72 average brand-name prescription costs about $17. And thanks to more 
brand-name medications coming off patent--over 200 of them in the next 
few years--as well as to the ever-improving scientific knowledge and 
public awareness about the benefits of generic drugs, the health and 
economic benefits of using generic drugs are constantly growing.
    Encouraging rapid and fair access to generic medications after the 
expiration of appropriate patent protection is, therefore, one of my 
major priorities as FDA Commissioner. Americans need more generic drugs 
more than ever, and the FDA has to do its part to make these products 
available. There are many steps involved in achieving this goal, and I 
want to walk through some of them
    One part of achieving this goal--reducing the net review time--is 
largely under the control of the FDA. It's a function of the efficiency 
of our review process and our available resources. Our Office of 
Generic Drugs (OGD), has been making progress in this area. Despite the 
growth in the submissions of original abbreviated new drug applications 
(ANDAs) from 309 in 1999 to 361 in 2002, our generics program during 
the same time increased the proportion of applications reviewed within 
180 days from about 28 percent to 80 percent. The average time required 
for a first review of an ANDA is down to 100 days, from 135-140 days in 
the late 1990s.
    These substantial improvements were made possible by rising 
efficiency in the generics office, as well as by increased resources. 
The appropriations for this office increased by $1.4 million in 2001, 
by $2.5 million in 2002, and another $5.3 million in 2003. I thank you 
for your continued support of this vital program. We can and will do 
more to improve the efficiency of our reviews, and acting quickly on 
generic drug applications is well worth even greater FDA resources. 
Moreover, we hope and expect that the number of generic applications 
will continue to grow above this year's record level of almost 400 
ANDAs. We will use the $13 million requested in 2004 to improve our 
reviews and to handle the growing workload. It will increase the size 
of the generics programs by about 30 percent.
    With this funding request, we will be able to hire about 40 
additional staff in generic drugs, and add to OGD an additional 
division for the review of chemistry. This expansion should help reduce 
the average review time by at least 2 months, move up the proportion of 
180-day reviews still closer to the 100 percent goal, and further 
reduce the waiting time in the ANDA queue. What we need is actual 
improvement in generic drug availability. And to get more generics in 
the pharmacies and to our patients' bedsides, we have to meet two 
additional requirements.
    First, the products we review must be safe and effective--meaning, 
they must demonstrate therapeutic equivalence to the brand drug, and 
they must be appropriately labeled and safely manufactured. And second, 
there must be the minimum of legal challenges to the marketing of 
generic drugs. And in considering both of these very important factors, 
we see some positive developments--as well as some concerns.
    On the positive side, the number of full and tentative generic 
applications approved has gone up significantly, from 242 in 1999 to 
384 last year--an all-time record. On the other hand, median time to 
the issuance of an approval or ``tentative approval'' letter--which 
used to be longer than 2 years--is yet to drop below 18 months. That 
means, even as we are making large strides in reducing our review time, 
there is still substantial room for improvement in total time to 
approval. And although many generic applications have been approved 
within 1 year, this timeframe is still the exception rather than the 
rule. Moreover, even after the FDA issued a tentative approval, some 
potentially important generic drugs have remained unavailable because 
of legal challenges.
    The reason that total time to approval or tentative approval is not 
declining as much as we might hope is that, very often, multiple review 
cycles are required. Unfortunately, a large share of the initial 
generic applications are not up to the FDA's requirements. And this 
critical obstacle to increasing generic drug availability cannot be 
removed by the FDA alone
    The second main obstacle to effective communications has been FDA's 
internal policies that discouraged early consultations between OGD 
reviewers and sponsors of ANDAs. In part, these policies were necessary 
because the generic drugs staff has been--and is--overwhelmed with 
review work, and could not take on additional tasks.
    We are considering modifications to our policies on communications 
involving generic applications during the review process. I have 
therefore asked the Director of our Center for Drug Evaluation and 
Research (CDER), and the Director of the Office of Generic Drugs to 
lead an effort to identify steps, such as improving the clarity, 
consistency, and timeliness of our guidance and communications for 
generic drug applicants, to help improve the level of understanding and 
quality of applications by generic manufacturers.
    A third key factor affecting the availability of safe and effective 
generic drugs is manufacturing processes. To ensure safety and prevent 
adulteration, generic manufacturers must comply with Good Manufacturing 
Practices. Pharmaceutical GMPs, and the system that enforces them, 
still get the job done. But they have not been updated in many years, 
and it's time for reform to make sure that we have a GMP system that 
achieves its critical goals as efficiently as possible.
    I will now turn to another critical factor affecting generic drug 
availability: uncertainties in the legal landscape that generic 
manufacturers face. Recently, as you well know, there has been 
tremendous interest in whether reforms are needed in FDA's regulations 
to implement the Hatch-Waxman law that governs generic drug 
competition, or whether there need to be reforms in the law itself.
    While hundreds of generic drugs enter the market each year without 
substantial legal obstacles, some aspects of FDA's current 
interpretation of the law have been associated with disruptions, 
delays, uncertainty, and added costs for some generic manufacturers who 
are trying to compete fairly against some of the most important brand-
name drugs in the country. On occasion, generic manufacturers who have 
geared up to compete following the expiration of what they thought were 
the relevant brand-name patents, only to learn that they had new 
patents to contend with. This practice lead to the repeated use of the 
so-called ``30-month stays'' of full approval of ANDAs and 505(b)(2) 
applications.
    To address this problem, the FDA proposed a new regulation last 
fall. The proposed rule would allow only a single 30-month stay per 
generic drug application. The proposed rule would clarify that certain 
types of patents are not allowed to be submitted for listing in the 
Orange Book, while others for method of use, formulation process, 
product by process, and different forms of the pending or approved drug 
substance must be submitted for listing. Further, the proposal would 
substantially strengthen the signed declaration accompanying the patent 
submission. These measures should reduce the submission of patents for 
Orange Book listing that do not represent true innovation.

Secretarial Initiative: Accelerating the Availability of Lower Cost 
        Drugs--Improving Health Sciences: Over-the-Counter Drugs (OTC) 
        $1 million
    OTC drugs play an increasingly vital role in America's health care 
system, and provide an effective means to significantly reduce consumer 
prescription costs for specified ailments. The trend to self-medication 
has increased significantly in recent years as health care costs have 
risen and consumers want to be empowered to treat minor ailments with 
safe and effective OTC drug products.
    The increase will support the hiring and training of seven FTE to 
improve the OTC drug review process so that FDA is better equipped to 
provide the consumer faster access to OTC drug products without 
compromising safety issues; expedite the review of Rx-to-OTC switches; 
and, develop and work toward finalizing standards--monographs--for 
analgesic, antiseptic, laxative, and sunscreen drug products for OTC 
use. All of these efforts help produce significant consumer benefits 
such as significantly reducing and/or eliminating all unsafe and 
ineffective products from the OTC market; providing greater and broader 
access to OTC drug products; reducing some health care costs; and 
increasing competition.

Best Pharmaceuticals for Children Act $5 million
    Pediatric provisions included in the FDA Modernization Act of 1997 
have had a profound impact on the study of drugs used for children. On 
January 4, 2002, Congress enacted the Best Pharmaceuticals for Children 
Act (BPCA), to continue providing incentives for the effective 
development and dissemination of information on how to properly use 
therapies in children.
    Currently there is still not enough information regarding the 
pediatric use of about 75 percent of prescription medicines. Prior to 
implementation of the pediatric provision, 80 percent of medications 
had not been tested on children, forcing pediatricians to guess at 
dosage for children, subjecting our children to dangerous health risk 
in terms of under dosing or over dosing. This is a particularly serious 
and dangerous situation for the newborn and those infants born 
prematurely. We know the bodily functions of infants are different than 
adults and in particular their response to various therapies. We 
believe this provision will continue to result in pediatric patients 
being given medicines that have been properly evaluated for their use 
in the intended populations.
    With the increase, FDA seeks to expand availability of drugs for 
children. We will strengthen our coordination with NIH on ensuring the 
safety and efficiency of pediatric drugs. FDA and the NIH will develop, 
prioritize, and publish an annual list of approved drugs for which 
there is a referral, an approved or pending new drug application, or no 
patent or market exclusivity protection and for when additional 
pediatric safety and effectiveness studies are needed, establish a 
research fund for the study of drugs that no longer have exclusivity or 
patent protection and specifies the process for obtaining contracts; 
provide a public summary of all studies. In fiscal year 2003 NIH 
received $25 million to expand the availability of drugs for children, 
in fiscal year 2004 NIH is requesting an additional $25 million for a 
total of $50 million was to support this effort.
    FDA will hire new staff for our Center for Drug Evaluation and 
Research, CDER to continue to define, develop, issue, and track written 
requests for pediatric studies; publish the final study reports on the 
docket; review submitted results from these pediatric studies within 6 
months; oversee ethical issues related to studies; and disseminate 
appropriate information to the public. The increase will also support 
the hiring of 4 FTE in the Office of Pediatric Therapeutics, under the 
heading of Other Activities, to address all activities related to the 
increasing number of new pediatric studies submitted by the 
pharmaceutical sponsors.

Secretarial Initiative: Improving Departmental Management
    FDA is also supporting various administration and department 
initiatives associated with the President's Management Agenda by 
consolidating human and IT resources to achieve greater efficiencies 
and economies of scale; consolidating the biologic therapeutic review 
function into the similar drug review function to achieve greater 
consistency and less duplication of effort, conducting outsourcing 
studies and improving management to achieve cost savings and maximum 
efficiencies; organizational de-layering for faster decision-making and 
better communications; and, implementing a new financial management 
system to provide agency managers with timely and consistent financial 
information.
    FDA plans a major consolidation of its Headquarters Offices in the 
Washington D.C. metro area going from 16 locations to two--White Oak 
and College Park, Maryland. These locations were selected to create 
greater economies of scale and scope with the co-locating, 
standardizing and modernizing document handling; sharing facilities 
such as libraries and conference areas; reducing redundancies in a wide 
range of administrative management tasks; allowing the conversion to a 
single computer network; and significantly reducing management layers. 
College Park has been completed.

Center for Drug Evalutation and Research Move $6 million
    FDA headquarters currently occupies approximately 40 buildings in 
16 locations. A long term goal has been for these facilities to be 
consolidated into two locations which will result in considerable 
annual operating savings. Receipt of the request will complete the 
second phase of the CDER relocation. This portion of the second phase 
will consolidate the offices and laboratories of CDER into one office 
and laboratory complex, enhancing communication, primarily by 
supporting cabling and relocation services.
Arkansas Regional Lab $3.5 million
    FDA is also strengthening its analytical capabilities in the field 
by completing Phase III of the Arkansas Regional Laboratory multi-
purpose facility to support the increased need for domestic and import 
inspections efforts.
    FDA's field laboratories provide critical laboratory and analytical 
support to domestic and import inspection efforts and are a key element 
to the FDA science base. These laboratories provide a cost-effective 
critical mass of scientific expertise in the fields of chemistry, 
microbiology, pesticide chemistry, animal drug research, and total diet 
research. ARL, located in the middle of the United States, will provide 
critical laboratory analysis for FDA-regulated products in a seventeen-
state radius.
    Completion of Phase III of the ARL will enable FDA to fully utilize 
Building 50 and effectively collaborate with the National Center for 
Toxicological Research on scientific issues critical to the Agency and 
the American public. One of the issues addresses FDA's preparedness for 
counterterrorism events. The Jefferson Laboratories are developing DNA-
based or mass spectrometry based technologies to permit the analyses of 
products for chemical and microbiological hazards. These methods will 
assist public health officials in identifying the type of hazard and 
its appropriate counter-measure.
    Without these funds, Phase III will not be completed in a timely 
manner and that delay may adversely impact FDA efforts to finalize 
development of methods, which could be used for chemical and 
microbiological hazards.

Unified Financial Management System $2.3 million
    FDA's management needs timely, reliable, and current information. 
The DHHS Unified Financial Management System, UFMS, is designed to 
provide financial information in a manner that will enable FDA to 
maintain its clean audit opinion and meet all other financial 
information management requirements.
    FDA is performing various preparatory activities such as 
consolidating fifteen agency location codes to one; standardizing 
computer financial systems by implementing web-based versions; and, 
preparing its financial community for changes. Additional funding in 
fiscal year 2004 will enable the FDA to implement its portion of UFMS 
titled, Financial Enterprise Solution by beginning to design and test 
the General Ledger with payroll interface, which will account for over 
60 percent of FDA's transactions; and purchase software licenses, 
hardware, training and program support and meet increased contractor 
costs for site implementation.

Rent Redistribution $10 million
    FDA is working with GSA to obtain space around the country to 
accommodate the more than 800 counterterrorism personnel hired with 
fiscal year 2002 Emergency Supplemental Appropriation. FDA anticipates 
redistributing some funds in fiscal year 2003 for GSA rent costs, and 
we are working to determine the exact amount of this redistribution. 
FDA expects its GSA rent costs to increase by at least $10 million in 
fiscal year 2004. In an effort to achieve additional management 
efficiencies, FDA intends to redirect funds from the programs, 
including field activities, to cover cost increases. Similar 
redistribution of increased GSA rent costs may all take place in fiscal 
year 2003.

Reorganizations and Improving Management
    To meet my priorities of a strong and effective organization, risk 
reduction, counterterrorism and food security, and reducing medical 
errors and consumer communications, FDA has reorganized and several 
functions within the Office of the Commissioner. These include the 
Office of the Senior Associate Commissioner, the Office of Crisis 
Management, the Office of Legislation and the Office of Combination 
Products. In addition, the therapeutic biologics review function is 
being transferred from CBER to CDER to consolidate the similar drug 
review functions. Organizational de-layering to achieve a flat, 
streamlined Agency where decision-making and better communications 
exists is being aggressively pursued. FDA is also consolidating its 
administrative functions into a Shared Services Organization, SSO. The 
SSO concept will allow FDA to provide administrative support functions 
to Agency components to meet critical mission needs in the most 
efficient and effective manner possible. Similarly, FDA actively 
participated in leadership with the Department in the 40 to 4 Human 
Resource, (HR) consolidation effort. FDA's HR Director chaired the 
Department's workgroup of Operating Division representatives to design 
the new 40 to 4 HR consolidation initiative. FDA also conducted the 
pilot of a web-based application process called ``quickhire'' which is 
the system to be used supporting operations at the four HR centers. In 
preparation for the 40 to 4 consolidation, FDA consolidated its six 
personnel offices into one in 2002.
    As we prepare to transition FDA's HR staff to the Department's 
Rockville Service Center, scheduled to begin operation on October, 1, 
2003, I will continue to support the Department's consolidation 
initiative. These efforts will place the Agency in a position to more 
effectively and efficiently meet the challenges of providing better 
protection to consumers and promoting better health.

Management Savings $25.7 million
    Management savings in fiscal year 2004 will contribute to an 
environment in which the FDA functions effectively as a single agency 
that consistently supports top-quality work by all of its employees.
    The challenges facing FDA cannot be confronted adequately without 
adequate resources in the right places. By rightsizing the Agency is 
thinking critically and carefully about how it uses its resources to 
improve the public health. Innovation and change is the norm in the 
American health care system, and programs must be designed with the 
future in mind.
    To accomplish this, FDA is conducting sourcing studies and 
improving management to achieve cost savings and maximum efficiencies 
for a fiscal year 2004 savings of $25.698 million and 199 FTE.

IT Consolidation $29.6 million
    Information technology infrastructure functions are also being 
consolidated. This consolidation effort will reduce IT infrastructure 
and development expenditures in fiscal year 2004 by $29.587 million. 
Similar systems will be combined, IT processes reviewed and there will 
be reduced efforts on lower priority projects. Standardization of 
management processes will be fostered to increase the effectiveness of 
IT even as overall costs are reduced.

User Fees--Current Law User Fees $31.7 million
    The budget request includes $249.825 million in PDUFA III user fees 
for the drug and biological product review process, an increase of 
$26.925 million over fiscal year 2003. This consists of pay and 
inflationary increases and new initiatives included in the PDUFA III 
legislation.
    In addition, the request includes $29.190 million for MDUFMA to 
significantly improve the medical device review process. This is a 
$4.065 million increase over fiscal year 2003. Our Medical Device and 
Radiological Health program has re-engineered itself over the last 
decade to accomplish more and has changed its strategic direction by 
consciously shifting its focus to high-risk, high-impact products to 
optimize the effect on public health. Other innovations brought by the 
FDA Modernization Act have streamlined the processing of premarket 
notifications (510(k)s) by using accredited third parties. The results 
were improvements in the review times and review processes. MDUFMA 
builds on these successes by providing medical device user fees 
beginning with fiscal year 2003 submissions, authorizing the use of 
accredited third parties to conduct quality systems/GMP inspections 
under very rigorous conditions, providing for effective FDA oversight 
of reprocessed single-use devices, improving the focus on devices 
intended for pediatric populations, improving the coordination of 
reviews that involve combination products, and more.
    MDUFMA commits FDA to a comprehensive set of challenging 
performance goals that will lead to substantial improvements in the 
timeliness of device reviews. MDUFMA user fees, and the additional 
appropriations you provide for this important program, will ensure 
FDA's ability to bring new medical technologies to health care 
professionals and patients more ability to bring new medical 
technologies to health care professionals and patients more rapidly, 
through a strengthened program that can meet the public's expectation 
that the medical devices they use are safe and effective. These 
resources will also help us meet the challenges now facing us from the 
medical device industry that include increasingly cutting edge and 
complex technologies that are being applied to current medical device 
products being developed and a shortage of the right scientific 
expertise needed to review these products. We must ensure that our 
science base is up to date, that our reviewers receive appropriate 
training, improve our outreach to industry and other stakeholders, and 
improve our review information system. We believe the increase will 
work to enhance our infrastructure, respond to the expected growth in 
the number of PMA applications the Agency receives, and improve our 
performance.
    The request also includes $23.225 million in other user fees for 
mammography inspections, export certifications and color 
certifications, an increase of $.735 million over fiscal year 2003.
Proposed User Fees--Animal Drug Review User Fees $5 million
    A new user fee is proposed for the review of animal drug products. 
This proposal is patterned after the successful Prescription Drug User 
Fee Act, PDUFA that has enabled FDA to add over 1,000 employees to the 
drug review process over the last 10 years. With this $5 million 
request, FDA would improve and expedite the review of animal drug 
preapprovals.

Closing
    I thank you for your commitment and continued support of FDA. We 
all have a shared responsibility of bringing to American homes safe, 
varied and plentiful food, and products devoted to providing the public 
with a healthy lifestye and healthy choices. I look forward to a long 
and harmonious working relationship with you, the Congress and other 
interested parties as we collaborate to promote and protect the health 
of our people.

                        MEDICAL DEVICE USER FEES

    Senator Bennett. I am sure it will come as no surprise to 
you that since assuming this position, I have heard from a lot 
of folks about MDUFMA, the Medical Device User Fee. I have 
tried to understand this. Let me see if I have got it right.
    The medical device people agreed some time ago that they 
would start to pay a user fee if in response they would get 
faster turnaround times, the argument being, well, we just 
don't have the resources within FDA to give you the turnaround 
times on approvals that you say you need and they say it is so 
important. Their reaction was, it is so important to us to get 
rapid turnaround times for our applications that we will pay 
for it.
    And so a deal was struck whereby they would pay, and let me 
see if I have the numbers right, $150 million in user fees over 
the next 5 years and the government would match these funds 
with a $15 million increase for the Center for Devices and 
Radiological Health in each of the fiscal years 2003, 2004, and 
2005. In other words, the user fees, if I can add it correctly, 
add up to $150 million and the Feds say, we will put in another 
$45 million, so we approach an additional $200 million to try 
to get faster service out of the government.
    This was enacted into law in October of 2002, after the 
2003 budget request was received. Now, my predecessor as 
chairman of the subcommittee, Senator Cochran, was unable to 
get more than $4 million in 2003 as a start on this, but that 
was a good start and a significant downpayment of the $15 
million that was envisioned.
    So now we get your budget and you are increasing it by $1 
million and we are going the other direction. I understand, 
having been in the executive branch, the kinds of pressures 
that you are under from OMB and the kinds of things that 
happen, and I am not going to ask you, did you recommend that 
we were going to the $15 million and then did the people at OMB 
cut you back. That is the kind of internal negotiations that go 
on and I am not going to go there.
    But one of the things I learned as a businessman is that a 
deal is a deal, and we are in a situation where the industry is 
coming up with an additional $150 million in user fees and 
someone in the budgetary process is saying, that is wonderful. 
Let us take that $150 million and spend it someplace else. In 
other words, money is fungible and if we have got an extra $150 
million coming in from another source, we will use that to 
offset money that we would otherwise have spent to try to get 
this up here. As you can understand, these folks feel somewhat 
badly used.
    So my question to you is what your suggestions are as to 
how we get out of this and if this subcommittee were to earmark 
some additional money to get close to the $15 million that was 
agreed to, can you help us find the offsets as to where it 
might come from?
    Dr. McClellan. Mr. Chairman, MDUFMA is one of those terms 
that, probably like you, I hadn't heard much before coming into 
government work and starting to work on important issues 
related to the development and use of new medical technologies. 
But I think your understanding of the program is extremely good 
and I think your awareness and attention to this issue is 
extremely important.
    There are many breakthroughs occurring in medical devices 
today. We recently approved a new drug-eluding stint that will 
significantly reduce the rate of complications after many heart 
procedures for the millions of Americans suffering from heart 
disease. We need to make those newer, safer, more effective 
treatments available to the public as quickly as possible.
    The FDA has long supported user fee programs like MDUFMA in 
other areas of medical technology. We have got a prescription 
drug user fee program that works for drugs and biologics 
extremely well in helping us reduce approval times and getting 
safe and effective products out there to the public more 
quickly, and we support it and we still support an effective 
medical device program. We are trying to get the Senate to act 
very soon on an animal drug user fee program, as well.
    This is an issue where from--I know you are experienced in 
the executive branch and in the Senate--you are right, a deal 
is a deal, but sometimes new programs take a little bit of 
extra effort to get off the ground effectively, and I want to 
tell you right now that I at FDA, Secretary Thompson at the 
Department, and everyone in this administration who cares about 
this issue is fully committed to the goals of the Medical 
Device User Fee Program.
    At FDA, what we have done is we have already started to 
hire some of the new people under the user fees that the 
companies are paying now. We are doing this with the full 
expectation that this is going to be a long-term program, that 
it is going to lead to some significant improvements in our 
approval times, which are too long today for priority medical 
devices. So we have got about 40 hires that we are in the 
process of making now for medical reviewers and other experts 
to help us improve the job that we are doing on medical devices 
and we are making some longer-term plans to help make sure that 
this program works.
    This is a matter that, as you know, has been under 
considerable discussion recently with the industry, with many 
people in the administration and many members on the Hill, and 
I want to thank you and I want to thank Senator Cochran for 
their efforts in helping to get this program off the ground.
    I appreciate your telling me you don't have to hear from me 
about discussions internally with OMB, but I think I can tell 
you that I have had a lot of discussions with senior officials 
in OMB and I think I can tell you that the entire 
administration is committed to making sure this program works, 
that it is made permanent, that we do get the significant kinds 
of improvements in device review performance that the program 
envisions, and we have got a little bit more work to do to get 
there.
    So we intend, OMB intends, the entire administration 
intends to work closely with this committee and with other key 
appropriations and authorizing committees in Congress to make 
this program work.
    With respect to earmarks, that is obviously something that 
is going to continue to come up in these appropriations 
discussions and I know and trust that we are going to have 
ample opportunity to talk with you about ways to make this 
program happen without getting in the way of other key 
priorities for the FDA. As you well know, we have got a 
tremendous amount of responsibilities at the agency. We have 
got a budget that we are trying to do the most with in order to 
meet those responsibilities and so we need to be very careful 
about any kind of earmarks that would take funds away from 
other key priorities.
    So I can't tell you right now that we are going to have 
that $15 million right now in the budget for this year. I can 
tell you that we, that OMB, that everyone in the administration 
is committed to finding a way to make this program work, to 
make it sustainable, make it permanent, make it have triggers 
that won't need to kick in because we are meeting our 
performance goals, and it is going to take a little bit of work 
in the weeks and months ahead to do that, but we are going to 
do that.
    Senator Bennett. Well, thank you. Talk about imposing new 
user fees in new areas will impact how well those user fees are 
responded to, because if, indeed, you have the reputation of 
inducing, if you will, people to agree to a user fee by saying, 
and we will raise ours on this side if you raise yours on 
yours, and then when that user fee turns into really nothing 
more than a tax that goes into the general fund and gets used 
fungibly for something else, it is going to be very difficult--
--
    Dr. McClellan. The companies that are paying the user fees 
have an expectation that they are going to get significant 
performance improvements in response to that and we have got to 
fulfill those expectations.
    Senator Bennett. You have got to fulfill that, and I will 
do what I can to try to help----
    Dr. McClellan. I appreciate that, and I will look forward 
to working with you on this in the weeks ahead.

                           DRUG REIMPORTATION

    Senator Bennett. My time is going down, but very quickly, 
this isn't ``beat up on Canada'' day, but could you talk about 
the reimportation of drugs and the safety of drugs, that people 
go to Canada to buy drugs and then bring them back into the 
United States.
    Dr. McClellan. We are working hard on that issue, as well. 
As you probably know from our--as I am sure you know from our 
previous discussions, one of my top priorities at the agency is 
to do all we can to do our job more efficiently, because in 
many ways, in reducing the costs of the drug development 
process, making generic drugs more quickly available, helping 
to prevent medical errors, getting consumers better information 
about how to use pharmaceuticals, are many things that FDA can 
do to help drive down the costs that people are paying. The 
problems with affordability of medical care today are very much 
in front on my mind and the mind of millions of Americans, so 
many things that we are doing to help people reduce costs of 
drugs while still making sure they have safe and effective 
drugs.
    Where I have concerns is when people have to cut corners, 
when, because of affordability concerns, they take risks that 
involve the use of products that may not be as safe or as 
effective. And the problem with reimported drugs that come into 
this country outside our regulatory system is that we can't 
provide assurances about the safety or effectiveness of those 
drugs. Because I care a lot about this, we have had a lot of 
discussions with the Canadian authorities in recent months 
about steps that might be possible to take to provide more of 
those kinds of assurances.
    Canada recently issued a guidance about the safety and 
effectiveness of drugs that come through Canada. But in putting 
that out, they also clarified in a letter to the Washington 
Post just yesterday that they can't assure the safety of 
imported drugs coming illegally into the United States, that 
is, coming in outside of our regulatory system. We can't, 
either, because they are outside of our regulatory scheme.
    And so there is a real concern there. We have got to find 
better ways to make affordable treatments available. 
Reimportation of illegal drugs, or importation of illegal 
drugs, since you often can't tell the difference, is not a safe 
and effective solution.
    Senator Bennett. Thank you. Senator Kohl.

                        CHRONIC WASTING DISEASE

    Senator Kohl. Thank you, Mr. Chairman.
    Dr. McClellan, yesterday in the Washington Post, it was 
reported that in Canada, there was a large elk herd living near 
the area where the infected cow was found and that chronic 
wasting disease was common among that elk herd. When asked 
whether or not chronic wasting disease could have jumped from 
the elk to this particular cow and turned into mad cow disease, 
Dr. Lester Crawford, your Deputy Commissioner, stated that 
there are no known cases of this happening, but, and I quote 
him, ``you really can't entirely predict what a prion-related 
disease will do.''
    Obviously, this statement is alarming because in States 
like Wisconsin, where CWD has been found, we also have a large 
cattle/cow presence. So do you have some clarification or some 
words of comfort that you can offer in addition or in 
correction, to some extent, to what was said by your Deputy 
Commissioner yesterday?
    Dr. McClellan. Senator, it is a good question, and let me 
just be very clear that what I can say is based on the best and 
latest available science, and what the science tells us is 
there is no evidence that chronic wasting disease, which is 
another prion disease, has any association with BSE, has jumped 
species or in any way could cause BSE in ruminant animals.
    As you know, the elk and game animals in which CWD is 
present are different from the ruminant animals that are 
carriers and that are subject to BSE. They are different 
illnesses and there is no evidence of transfer between species. 
Moreover, as I understand the facts, that elk herd that you 
mentioned in Alberta was something like 100 miles away from 
where the affected cow was, so no opportunity there physically 
for any kind of transmission to occur even if there was some 
evidence that transmission could occur, and as I said, there is 
no scientific evidence that it does occur. So at this point, I 
don't see any evidence that CWD has any association or 
connection to this BSE case.
    Just an added word about my Deputy Commissioner. He is one 
of the foremost experts on animal health in public policy today 
and I think the country can be very confident that FDA is 
taking effective action on these important issues related to 
BSE and CWD in Wisconsin as a result of his contributions and 
hard work at the agency, and his views on this issue are 
exactly the same as mine.
    Senator Kohl. I do appreciate that and the clarification is 
very helpful. Thank you very much, Mr. Chairman.
    Senator Bennett. Thank you. Senator Cochran.
    Senator Cochran. Mr. Chairman, thank you very much for the 
good job you are doing, Mr. McClellan.
    Dr. McClellan. Thank you, Senator.

         RELATIONSHIP WITH THE DEPARTMENT OF HOMELAND SECURITY

    Senator Cochran. You are off to a good start and we 
appreciate that good effort.
    The Department of Homeland Security has been created and 
with it has come some new responsibilities. One example is 
transfer of some authority from the Animal and Plant Health and 
Inspection Service to Homeland Security and Plum Island, the 
facilities there.
    The question is, though, since FDA, your agency, and the 
Department of Agriculture continue to be responsible for food 
safety, however, to what extent are you working with the 
Department of Homeland Security to ensure that you have 
whatever information you need that they may be able to share 
with you so that your agency and the Department of Agriculture 
can continue to carry out your responsibilities to quickly 
identify and respond to outbreaks of foodborne diseases?
    Dr. McClellan. Senator, we are working extensively now with 
the new Department of Homeland Security. This is actually a big 
boom for food security efforts in this country. The Department 
has a strong commitment and some important expertise. One of 
their under secretaries comes from doing security work for a 
major soft drink company, for example, so they have got some 
important expertise to contribute in food and drink security, 
as well, in this country.
    I want to thank you for your efforts now on homeland 
security. We certainly miss you here. No disrespect to the new 
chairman, but it is very useful from my standpoint to have 
somebody in your position who understands the complexity of 
food security issues and all of the resources that we have 
available and where we need to improve them to keep the 
country's food supply secure.
    So far, I think we are off to a good start. The Department 
of Homeland Security is staffing up now. We have regular 
interagency meetings with them on food security issues and also 
agriculture security issues that involve USDA, as well. We are 
also supported in this effort by the White House's Homeland 
Security Council, which has a number of specific directorates 
that work on issues like developing countermeasures and 
protecting the infrastructure that bear, as well as public 
health, that bear on supporting our activities.
    Some of the specific issues that you mentioned, such as 
making sure that intelligence information is shared 
effectively, making sure that the USDA and FDA are using the 
same kinds of simulation models and expert input in developing 
our strategies for our respective roles in protecting and 
securing the food supply, in these and many other areas, the 
Department is very helpful and I will look forward to continue 
working with you to make sure that whole process of 
coordination and support works well.
    Senator Cochran. In this budget that is before us for 
review, is there funding requested to support these 
interactions?
    Dr. McClellan. There is substantial new funding requested 
in this budget for our food security efforts, over $20 million 
in new funding in the 2004 budget. That includes funding that 
is going to go to States to help them improve their inspections 
related to food security issues, help improve our nationwide 
food laboratory network. We have recently announced some other 
programs with CDC and the like to do that, as well. We are 
implementing new information systems. We are taking a lot of 
steps.
    In all of these areas, homeland security coordination is 
built in. Our methods of implementing all these steps involves 
some important input from Homeland Security. So, for example, 
in the work that we are doing with the States, the overall 
guidance for that work comes out of interagency working groups 
that the Department of Homeland Security participates in and 
the White House Homeland Security Council chairs in many cases.

                          DRUG COUNTERFEITING

    Senator Cochran. The chairman asked you about the 
reimportation of drugs from Canada and what your views were 
about that. We also had brought to our attention last year, 
your predecessor came to a meeting with Senator Kohl and me 
about the dangers associated with counterfeiting of drugs and 
the dangers in policing that, that over-the-counter drugs in 
many instances had been counterfeited in countries outside the 
United States and that customers were now buying drugs off the 
Internet from overseas sources.
    What are the dangers associated with that and do you have 
in your budget any funding requests that would help you get the 
word out or publicize the danger so that consumers would be 
aware of the dangers in connection with these practices?
    Dr. McClellan. The dangers are serious, and I just want to 
give you a ``for example.'' Yesterday, we were involved in a 
criminal investigation and operation in the State of Florida 
that took action against some individuals who are involved in 
manufacturing a counterfeit drug and trying to sell a 
counterfeit version of a drug called Procrit. It is one that is 
potentially life-saving for people who have low blood counts 
and this counterfeit version was not an effective drug. It was 
actually non-sterile water which could have caused infections 
as well as not providing the intended treatment.
    I am worried about this. We are seeing more of it as the 
technologies available to people who don't have the best 
interests of the American public at heart get better and get 
used more widely, and as people worry more about the costs of 
prescription drugs, we are seeing more efforts to introduce 
counterfeit drugs into the system as well as more efforts by 
illicit Internet groups. For example, we announced an action 
recently involving a company in Belize that was offering 
products over the Internet. They didn't obviously identify on 
their site that they are in Belize. We had to trace back the 
site's address and so forth. Obviously, we can't provide any 
assurances about the safety or effectiveness of these products.
    We are devoting some additional time and effort and 
attention inside the agency to find better ways, working with 
everyone involved in the drug distribution system, to protect 
Americans from these growing threats, and I think we are going 
to be able to do that in the months ahead.
    But part of the effort here is also publicizing 
information. We put out a number of brochures and educational 
materials that can provide guidance to people about how they 
can buy drugs safely over the Internet. There are some 
perfectly legitimate providers there and they can provide 
access to treatments that may be hard for people to get if they 
live in rural areas and the like. But they need to follow the 
advice that we give to avoid some of these kinds of illicit 
drugs that come outside of the system of drug regulation that 
the FDA provides, and outside that system that we are very 
determined to protect the integrity of, outside that system, we 
can't assure safety and effectiveness.
    We are working with pharmacies. We are working with various 
public health organizations to try to get this message out, and 
I think we need to do more of it. It is a growing concern at 
the agency.
    Senator Cochran. Thank you. Mr. Chairman, my time has 
expired. I do want to submit a few questions for the record, 
particularly one related to the Center for Food Safety and 
Applied Nutrition at FDA and its collaboration with the 
National Center for Natural Products Research at the University 
of Mississippi.
    Dr. McClellan. That has been a very effective collaboration 
for us, learning more about dietary supplements, which is a big 
concern of mine. Thank you.
    Senator Bennett. The questions will be included in the 
record.

                      ANIMAL FEED RULE COMPLIANCE

    Senator Johnson. Thank you, Mr. McClellan, for joining us 
this morning. The references to reports as of March 23 relative 
to 14 percent of rendering facilities handling material, 
prohibited ruminant feed, not having a system to prevent 
commingling, and 33 percent of non-FDA-licensed feed mills 
having not labeled their products came from a letter from a 
group of consumer organizations sent to USDA Secretary Veneman 
and HHS Secretary Thompson just yesterday. It is my 
understanding that your assertion is that their numbers are 
simply incorrect.
    Dr. McClellan. Well, they are outdated. My understanding is 
that their statements were based on a GAO report from 2002, 
which, in turn, was based on data and information collected in 
2000. I think the GAO report highlighted the need for us to be 
particularly vigilant in this area because the food ban is 
absolutely one of the critical firewalls of protecting 
Americans and protecting our cattle if there were ever a case 
of BSE discovered in this country. Remember, because of the 
way, as you well know, because of the way that BSE is 
transmitted, it has to go through the food supply, through the 
feed that cows eat. And so you have to have an infected cow 
being rendered into animal feed for this ban to have a 
protective effect.
    Right now, we don't have any infected cows in the United 
States, despite an awful lot of testing by USDA of at-risk 
animals, and so this ban is an additional firewall of 
protection for the country and we need to make sure that it 
works. And that is why, over the past year since that GAO 
report, we have really stepped up our efforts and we would be 
happy to provide your staff with the full set of information, 
the latest numbers. But we are at over 99 percent substantial 
compliance with the feed ban and we are aiming for total 
compliance and we are going to do everything we can to get 
there.

                        ANIMAL FEED INSPECTIONS

    Senator Johnson. It is my understanding that 80 percent of 
the feed mill inspections are handled at the State level and 
you only really have about ten personnel involved. Are you 
comfortable with that----
    Dr. McClellan. Well, we have more than----
    Senator Johnson [continuing]. The State-FDA partnership?
    Dr. McClellan. We have more than ten personnel involved in 
this inspection activity. As I mentioned earlier, we spend over 
$22 million of our budget on these BSE-related activities and 
close to $11 million of that is for field inspection activities 
by our personnel.
    We do rely a lot on our State partners in this effort and 
that is why we put a lot of work into training and monitoring 
programs to make sure they are doing the job. We have conducted 
a massive training program to ensure that State inspectors are 
every bit as informed as our FDA inspectors and we also have 
held training programs at several locations throughout the 
United States to give them an opportunity to participate 
actively in these education activities.
    In addition, we have standardized and computerized the 
inspection forms to minimize inconsistencies and minimize human 
errors and we have implemented computerized checks in case we 
see something that shouldn't be there. We have improved our 
whole computer information support system for this very 
important activity.
    All of these activities were implemented in response to the 
kinds of concerns that you raised. I want to thank you for 
that, and that were raised by the GAO report, and I want to 
continue to work closely with you and your staff to make sure 
we are taking all necessary steps to make sure that this feed 
ban works effectively.
    Our staffing levels are at a much higher level than ten for 
this effort. For example, in the 2002 budget where we started 
establishing this $22 million line item, I think we had close 
to 200 staff in activities related to this BSE program. But 
like I said, we will be happy to follow up with you and your 
staff to make sure we are doing everything appropriate on this 
very important issue.
    Senator Johnson. Very good. Senator Dorgan is here, and he 
may have some questions about the Canadian reimportation of 
prescription drugs issues, but I do want to just very quickly 
allude to the fact that I have a great number of my 
constituents who rely on a regular basis on purchasing 
prescription drugs from Canada and they are FDA-approved, 
branded, and very effective drugs.
    It seems to me that it should not be rocket science to 
figure out a monitoring system. Granted, this is a very 
roundabout way of dealing with America's prescription drug 
pricing issues, but it seems to me that in the meantime, the 
alternative, although you talk about risk of drugs from Canada, 
the alternative is an even larger risk that people simply are 
not going to take prescription drugs because they can't afford 
them. My constituents literally are choosing between groceries 
and staying on their prescriptions. This is not only a crisis, 
it is an urgent crisis.
    In a more perfect world, we would do a number of things 
legislatively to address the problem. America remains the only 
major industrialized society in the world that does not 
negotiate on behalf of its citizens a better price. And so my 
constituents are buying these drugs at less than half the 
price. Not only that, they are going to Mexico, which I would 
caution my citizens about. But I have my constituents telling 
me that they snowbird to Texas to pay for their entire stay on 
the prescriptions they buy in Mexico. It has become, as you 
know, a bit of an industry in both those countries.
    I have had people tell me that at one time it used to be 
the border towns were various kinds of tourist attractions, now 
it is pharmacia, pharmacia, pharmacia as they go across the 
border. And even in Mexico, although I would urge caution 
there, a lot of people are staying alive literally because they 
are buying their drugs in Canada and Mexico and not paying the 
prices that they have to pay in the United States.
    I just simply want to tell you what you already know, but 
also urge you to work with us constructively to devise a system 
whereby we can provide whatever additional assurances, 
particularly relative to Canada, that reimportation would allow 
us to do. It is a band-aid in a way because we need to address 
this in the context of Medicare and other kinds of things, but 
we will need the FDA's cooperation for that legislation which I 
am convinced will pass once again to make that work.
    Let me just ask you very quickly, because my time is 
expiring, make sure that I understand on the user fees for 
medical devices. You are using 100 percent of the user fees 
towards the purpose of expediting that program? You are not 
pocketing the money and using it, as Senator Bennett caused me 
some concern, talking about the money being fungible and 
heavens knows what the money is being used for, as simply 
another tax. While we are not fully matching it, you are at 
least using this new revenue flow, revenue stream, for the 
purpose it was designed, do I understand you correctly on that?

                        MEDICAL DEVICE USER FEES

    Dr. McClellan. You understand us correctly. The budget was 
passed late this year for 2003. As soon as it was approved back 
in February, we started the process of hiring the new reviewers 
and other medical experts who will make this program work 
better. We have got a process ongoing now. It is going to get 
40 more expert staff into the program as soon as possible to 
improve the way that we are handling device reviews.
    Like I said before, we are going to build on that effort. 
We want to make this program permanent and successful.
    Senator Johnson. My time is expired. I do have a couple 
other questions that, with Mr. McClellan's agreement, I would 
like to submit to the FDA.
    Senator Bennett. They will be submitted. We will have a 
second round, if you desire.
    Senator Johnson. I am going to have to excuse myself, 
unfortunately, fairly soon here for, as usual, other 
conflicting, overlapping investigations, but thank you, Mr. 
Chairman.
    Senator Bennett. Senator Dorgan.

                           DRUG REIMPORTATION

    Senator Dorgan. Mr. Chairman, thank you. Let me follow up 
on the questions that my colleague has asked with respect to 
reimportation.
    I want to talk to you about a February 12 letter from the 
FDA. First, let me tell you about a woman named Sylvia Miller 
who I accompanied, along with other senior citizens, to a one-
room drug store in Emerson, Canada, five miles north of the 
North Dakota-Canadian border. This drug store in Emerson, 
Canada, was visited by a group of senior citizens accompanied 
by myself. Sylvia Miller was among them. She purchased 
Coumadin, Zestril, Glucophage, and Serevent, among other 
things, and saved about $150 by buying her medications in a 
small one-room pharmacy.
    I didn't think and don't think, and she didn't think, and I 
expect you don't think there was any concern about tainted 
medicine or counterfeit medicine. This is a chain of supply 
that is almost identical to ours and she was purchasing at a 
licensed pharmacist in Emerson, Canada.
    February 12, your agency sent out a letter that was signed 
by----
    Dr. McClellan. Mr. Bill Hubbard, probably.
    Senator Dorgan [continuing]. By Dr. Bill Hubbard, and let 
me just read what it says. It talks about reimportation. It 
says, those who can be found civilly and criminally liable 
include all those who cause a prohibited act, those who aid and 
abet a criminal violation of the act or conspire to violate the 
act can be found criminally liable.
    The result of this letter is that Blue Cross-Blue Shield of 
North Dakota then put out a missive in North Dakota saying, we 
can no longer cover with our insurance policies the purchase of 
prescription drugs in Canada by citizens who have our policies. 
So North Dakotans are now told because of your February 12 
letter that prescription drugs purchased in Canada will not be 
covered by Blue Cross-Blue Shield.
    Was that the intent of this letter? Would you really have 
intended, for example, to tell a Sylvia Miller, if she had Blue 
Cross-Blue Shield, if you drive to Emerson, Canada, and buy a 
prescription drug from a licensed pharmacist, it is FDA's 
judgment that an insurance company could be held criminally 
liable for aiding and abetting that and, therefore, they should 
cut off insurance coverage for those prescription drugs?
    Dr. McClellan. That is a question that several insurance 
companies have asked following the letter. My understanding 
from our discussions with a number of insurance companies, the 
American Association of Health Plans, and others is that there 
are no companies out there actively encouraging people to go to 
Canada to buy drugs.
    Senator Dorgan. That is not the question. You are not 
answering the question I have asked.
    Dr. McClellan. Well, you know, what we did there was 
restate what has long been FDA policy, and the FDA policy is, 
as you know, Senator, that personal importation of drugs is 
allowed. We have got a lot of good medical treatments out there 
and they are not affordable because Medicare does not have 
decent prescription drug coverage and it needs it now, so I 
have got a lot of sympathy for your constituent. But FDA has a 
policy on personal importation. If people go across the border 
and bring back a personal supply, even though that is 
technically illegal, we are not enforcing the law against those 
individual persons.
    So when they go over and they go to a Canadian pharmacy 
that provides drugs to Canadians, and they are not FDA-approved 
but they are approved by the Canadian agency, I can understand 
how she would, in the circumstances she is in, because Medicare 
doesn't cover drugs, would feel like that is what she has to 
do.
    That is very different than an insurance company going out 
and actively encouraging people to buy drugs illegally over the 
Internet.
    Senator Dorgan. Mr. McClellan, I am sorry. I have limited 
time. You are answering a question I haven't asked you. There 
is no evidence that any insurance company in the history of 
America has encouraged people to go across some country's 
border to buy prescription drugs. I have never even heard of 
that. I am asking you----
    Dr. McClellan. That is what I am saying. That is the 
relevant issue.
    Senator Dorgan. So what is the deal? Why are you talking 
about that? I am asking you a very specific question. I would 
like an answer, if you could.
    Dr. McClellan. Because what the companies wanted to know 
from us, and what we clarified since that letter, is we are not 
actively encouraging any Americans to go anywhere to buy 
prescription drugs illegally outside the system. We are taking 
all reasonable steps to make sure that people are getting legal 
treatments, FDA approved, safe and effective treatments. Do we 
need to do anything else? And the answer is no. They should 
just continue following the policies that they have been 
following.
    Senator Dorgan. Let me re-ask the question, then.
    Dr. McClellan. And I will re-answer the question.
    Senator Dorgan. You have not answered it. You have not 
answered it, with all due respect. The question is this. If 
Sylvia Miller is able to go to Canada and bring a personal 
supply of drugs back, a 30-day supply of drugs, for example, or 
a 90-day supply of drugs, whatever that might be, is it your 
intention to threaten insurance companies who might cover that 
because they have a policy that covers prescription drugs for 
that particular policy holder? Is it your intention to say to 
insurance companies with the February 12 letter, don't you dare 
reimburse your members, because if so, you may be abetting this 
and you may be liable for criminal prosecution? Is that really 
your intent?
    Dr. McClellan. Our intent, and our discussions with the 
industry, and our understanding of the way that the industry 
has responded to this----
    Senator Dorgan. Let us talk about your discussions with the 
industry, then, because----
    Dr. McClellan [continuing]. Is that no companies are 
changing their policies--no companies have had to change their 
policies about coverage because none of them are actively 
encouraging people to go get prescriptions. Is it possible that 
under a policy someone goes across the border and gets a 
prescription and gets it covered? Certainly, it is possible, 
but that is different from a company actively encouraging 
people to use potentially unsafe drugs.
    Senator Dorgan. Do you believe an insurance company should 
prohibit coverage when an American senior citizen, for example, 
goes over and brings a prescription drug back and is allowed to 
bring it back by your own testimony? Do you believe the 
insurance company should prohibit payment for that, because 
that is what is happening. Blue Cross and Blue Shield of North 
Dakota has put out an announcement, ``We will now no longer 
cover these.''
    The fact is, we are not talking about a lot of money. We 
are not talking about a lot of consumers. But the fact is, they 
have cut this off because of your letter and I am asking 
whether the FDA letter intends that to be the case.
    Dr. McClellan. I am happy to talk with any company in this 
country to clarify what FDA's policies are and are not. This is 
not something that is aimed at your constituent going across 
the border to go to a reputable Canadian drug store and 
personally buy prescriptions that she thinks are safe.
    There are some real concerns, and I am sure you wouldn't 
want insurance companies or anyone else to encourage Americans 
to buy drugs over the Internet where the drugs may not be safe 
or they are not approved by us or the Canadians have explicitly 
said they can't assure the safety and where the consumer may 
not even know where the drug is coming from. I am sure that is 
not what you would want us to encourage.
    Senator Dorgan. Different subject, but thanks for raising 
it. My question remains, do you want the FDA to be on record, 
which it is, telling an insurance company that they may be 
criminally liable, so be sure and tell your policy holders they 
will not cover prescription drugs that they now purchase in a 
trip to Canada, because that is where we are and I am asking 
whether that is what your intent is and you have not yet 
answered what----
    Dr. McClellan. I will tell you what my intent is. What I 
hope people are telling their policy holders is the same thing 
that we are telling the public, which is that drugs that are 
not approved by the FDA, that are not legally obtainable in the 
United States cannot have safety assurances that we would vouch 
for. We cannot assure that they are safe and effective.
    We have had a lot of discussions with the Canadian 
government about this, Senator, in recent months because I am 
very concerned about the safety of drugs that all Americans are 
doing, and the upshot of those discussions is reflected in what 
the Canadian government said yesterday in the Washington Post, 
is that they can't assure the safety of drugs coming to 
Americans from outside the United States. We obviously can't 
assure it because it is outside of our regulatory sphere. So 
this is a real area of concern.
    I think what this also highlights for your constituent is 
that it would be very important for the Senate to act as 
quickly as possible to pass a real Medicare prescription drug 
benefit so that she can get affordable medications. There are 
too many Americans like her who are facing a choice between 
buying drugs that they can afford and buying drugs that they 
can be sure are safe and effective and do what the drugs need 
to do. That is not a good position for health policy to be in 
and I am sure we share the goal of getting this addressed as 
soon as possible.
    Reimportation of illegal drugs is not a cornerstone for a 
safe and effective public health policy in this country. It 
shouldn't be. We can do better and we should do better.
    Senator Dorgan. Well, the great part about this country is 
you and I have the right to disagree about that. I profoundly 
disagree about what you have just said. When Sylvia Miller goes 
to a pharmacy in Emerson, Canada, if you know anything about 
the chain of supply in Canada, and you do, you understand that 
the purchase of Coumadin in that drug store is as safe as 
purchasing Coumadin at a drug store in downtown Washington, 
D.C. You know that and there isn't any way you would try to 
refute that. But that is not what I am asking about----
    Dr. McClellan. And I am not----
    Senator Dorgan. I am asking a very simple question of you. 
Is it----
    Dr. McClellan. And just to be clear, I am not refuting that 
a drug that Sylvia Miller goes and buys in a Canadian pharmacy 
is very likely to be safe and that the Canadian government does 
a very good job of assuring the safety and effectiveness of 
medications for their own citizens purchased in their own 
pharmacies.
    The problem today is that the vast majority of Americans 
who are buying drugs from outside our regulatory system are not 
doing what Sylvia Miller does. They are buying over the 
Internet from sites that may be in Canada, that may not. We 
have seen a lot of the products coming into the country. In 
many cases, they are not labeled properly. They are the wrong 
amounts. They don't come with the risk management and warning 
information that a doctor and pharmacist in this country would 
provide. This is not a safe and effective medical system for 
providing prescription drugs and we need to do better.
    Senator Dorgan. Well, the pharmaceutical industry spends a 
great amount of money advertising your position, but frankly, I 
am talking to you about a narrower issue here this morning and 
I have not yet received an answer.
    Dr. McClellan. Maybe the best thing.
    Senator Dorgan. Wait a minute. Let me finish the question. 
Do you believe that Blue Cross and Blue Shield of North Dakota 
should cover a prescription drug that is an FDA-approved drug 
purchased at a drug store in Emerson, Canada, brought back for 
personal use by a senior citizen in North Dakota? Should Blue 
Cross and Blue Shield cover that if that person has a policy 
that provides prescription drug coverage, or should Blue Cross-
Blue Shield be potentially liable for criminal sanctions, 
according to your letter? Which do you believe?
    Dr. McClellan. I don't think that there is anything in our 
letter that expressly and in general prohibits Blue Cross-Blue 
Shield of North Dakota from covering a prescription that one of 
their members may have purchased in Canada on a personal use 
basis. That is consistent with our policy of personal 
importation.
    That is very different from Blue Cross-Blue Shield of 
anywhere encouraging or advocating or taking steps to promote 
the use of illegal pharmaceuticals in this country, and I would 
be happy, again, just to make sure--I am sorry we are not quite 
connecting on this because it is an important public health 
issue--I would be happy to talk with representatives from this 
company and get them in touch with our staff to clarify exactly 
what the letter means.
    We have had these discussions with insurance companies and 
I am very confident that most insurance companies in this 
country are interested in paying for drugs that are safe and 
effective and that promote the public health as a result. And 
so I don't think there is any conflict between their policies 
and what our letter says and I am happy to get our staff to 
verify that Blue Cross of your State is not an exception to 
that rule.
    Senator Dorgan. Mr. Chairman, thanks for your patience. If 
you are saying that there is nothing that prohibits this 
insurance company from covering a prescription drug purchased 
from a pharmacy in Canada, then we need to resolve it with this 
insurance company. We have got some folks out there who would 
expect to have their prescription drugs covered and they are 
now not covered because of your February 12 letter and because 
of its interpretation. I just read part of it. If I were the 
insurance company, I would interpret it the same way.
    But if you say that is not what you intend, you don't 
intend to prohibit this company from covering that circumstance 
I described, if that is the case, then let us do a U-turn on 
this letter, or at least redescribe what you intend in the 
letter so that Blue Cross-Blue Shield of my State knows that.
    Look, I don't know you from a cord of wood. I mean, we 
don't exchange Christmas cards and you are probably 
extraordinarily competent. In fact, a colleague of mine was 
just telling me that they have very high regard for you. What 
angers me is that people who can't afford to get knocked around 
in this system all the time, just all the time. The woman I 
discussed here is just one, but she is trying to live on a very 
small amount of money, trying to buy prescription drugs. She 
has to take ten of them. And so in this circumstance, she was 
trying to access a less expensive prescription drug that she 
knows and I know is safe because the chain of custody in Canada 
is identical to ours.
    Frankly, I just get angry when I see this letter, which is 
parroting the pharmaceutical industry's advertisements about 
why we shouldn't have the ability to go to Canada. Why 
shouldn't there be free trade in prescription drugs, as long as 
we can guarantee safety? I don't think there is any question 
that we can.
    Do you know that almost every day, a semi-truckload will 
come to the U.S. border with Canadian meat. Do you know what 
they do? They say, well, if it was inspected in the Canadian 
plant, it is good enough for us. They run it right through the 
border. But we can't do that with prescription drugs that go 
from a manufacturer that is inspected by the FDA, a drug that 
is approved by the FDA, goes into a chain of custody from the 
manufacturer to a wholesaler to the drug store that is 
licensed. We can't do that? Of course, we can. You know that.
    Look, I think I have made my point. I think you have told 
me some new information here finally. I don't intend to be 
rude, Dr. McClellan. I want you to do your job and do it well. 
I want the FDA to be on the side of consumers, and Mr. 
Chairman, thank you for giving me the opportunity.
    Dr. McClellan. Mr. Chairman, if I could have just a 
minute----
    Senator Bennett. Surely. There is no one waiting for a 
third round.
    Dr. McClellan [continuing]. And I do want to thank you, 
Senator. I mean, look, we are both frustrated about this issue. 
Drugs should be more affordable in this country. I am trying to 
do everything I can at FDA for our part of getting the costs of 
drugs and other medical treatments down.
    But as FDA Commissioner, I have to pay a lot of attention, 
for the reasons that you just mentioned, to making sure that 
the treatments are safe and effective and to protect the 
integrity of the assurances that we give to the public about 
the safety and effectiveness of drugs.
    I am not a cord of wood. I am a doctor and I am a health 
policy person, but I am not a lawyer. So we probably need to 
get our lawyers to talk to the company lawyers and just make 
sure we get the clarification here. I think everybody has got 
the same goal of getting safe and effective treatments to 
people at the lowest possible cost, and I will get you on our 
Christmas card list.
    Senator Dorgan. Well, Commissioner, I am not a lawyer, 
either, so we have something in common. Let me make sure you 
are on my list, as well, and we will exchange this coming year 
and begin to visit. Thank you for answering the question.
    Senator Bennett. I am not a lawyer, either, so that brings 
us all around.
    Thank you very much for your testimony this morning. One or 
two quick things in conclusion.
    I think one of the values of this hearing is that we have 
seen a greater degree of coordination about BSE statements 
coming out of the government than has been the case in the 
past, and I would hope you and the folks at USDA and anyone 
else who is involved could talk to each other as well as talk 
to the press with the responses that are being demanded because 
it is very helpful to get the total picture.
    The additional information you have given about what 
happens to a slaughtered animal whose carcass is then rendered 
and that is avoided getting it into feed that would go to a 
ruminant animal is something that was not in the USDA 
statement, not that they avoided it, but it was simply they 
dealt with their side of it, you dealt with your side of it, 
and putting the two together should have a much greater calming 
effect than taking either one by itself.
    So I would hope, to the degree you can, there could be some 
coordination there in the public statements on this.
    Dr. McClellan. Absolutely.

                               NUTRITION

    Senator Bennett. And finally, you heard my conversation 
with Under Secretary Bost, which, as I say, I touched one of 
his hot buttons. You have a role in the question of nutrition 
and, of course, as we get into the whole issue of obesity, we 
get into the area of drugs because a lot of people are treated 
with drugs, either in an attempt to deal with conditions that 
trigger overeating--insulin is a very, very major player in the 
whole question of weight management.
    Indeed, that is the thing that was driving this book. The 
woman was an endocrinologist who was dealing with diabetics and 
with insulin. That led her into her conclusion that too high an 
intake of carbohydrates was part of the problem and her 
subsequent examination of the pyramid, and the same thing is 
true with Dr. Sears and the writing that he has done in his 
book ``The Zone'' and the people who are following that diet.
    Can there be some greater coordination, a greater breakdown 
of silos, if you will, between FDA and USDA on some of these 
nutrition issues so that we can come to the Federal Government 
as the final arbiter that says, this is the way Americans 
should eat. These are the manifestations. USDA, as they 
construct the pyramid, at least from my perception, probably is 
a little isolated from the endocrinologists, the study of 
insulin, the study of impact on blood sugars and drugs that are 
created to deal with that, and a little cross-fertilization in 
this area could be very helpful.
    Also, do USDA scientists--you say you are a doctor. There 
is a whole series of studies that are done in NIH that could 
impact our whole approach to nutrition. One of the things that 
is frustrating to me as I come into government is the discovery 
that we do live in a world of silos and stovepipes and 
particularly in the budgetary process. We appropriate money for 
this and they are studying something. Then we appropriate money 
for this and they may be studying the same thing from a 
slightly different point of view. Then we appropriate money for 
this and they are studying the same thing from a slightly 
different point of view.
    We could not only save some money, but more importantly, we 
could get much better results if the stovepipes kind of 
disappeared and people began to coordinate and cooperate and 
just talk to each other across agency lines.
    So I would leave you with that admonition at the close of 
the hearing here. Any response? No response is necessary, but 
if you have any, of course, I would be happy to receive it.
    Dr. McClellan. I would be glad to, at the risk of taking up 
a couple more minutes of your time. This issue of coordination 
and the importance of good diets and promoting the public 
health is a top priority of Secretary Thompson's. He has made 
many of the same points that you have.
    Public health is a very complex topic, public health and 
diet, and there are some good reasons to have some specialized 
expertise focus in different places. But I particularly 
appreciate your emphasis on making sure that each of these 
silos of expertise is working together effectively towards the 
overall public health goals that we need to support, and I 
agree with you, as well, that there are few more urgent than 
trying to do more to help people find safe and effective ways 
of watching their diet in a way that reduces obesity.
    Right now, we are clearly doing badly. We have already gone 
over the statistics. Under Secretary Bost cited some of them. 
We need better treatments. Many people today are turning to 
smoking cigarettes or using unproven dietary supplements in an 
effort to lose weight and that is just not a safe way to go 
about this.
    The main public health message that we have learned from 
the various types of research is pretty simple at a basic 
level, which, as Under Secretary Bost said, it is what you take 
in and what goes out--in terms of calories and what goes out in 
terms of energy expenditures that contribute to whether you are 
gaining or losing weight or not, and while we at FDA don't 
regulate those kinds of books that you put up there, that is 
not a medical product, I would also add the admonishment that 
if it sounds too good to be true, it probably is.
    For some of these diets, even though they have been shown 
to have some short-term effects on weight, what you really need 
is a sustained long-term weight loss program and a sustained 
long-term balanced diet, with calories in equaling calories 
out, and most of those diets don't do so well from a long-term 
standpoint, which is what you really need to improve health.
    And to do that, we need to find some better approaches. We 
are working on new medications at FDA. One of our priority 
areas for new guidance to industry is in obesity, is in better 
obesity treatments, and that is an effort that NIH is working 
closely with us in. We are trying to encourage industry to do 
more to compete about the health consequences of their foods 
and the health consequences of eating those foods as part of a 
good diet so that we don't see competition just around taste 
and product price and whether it is super-sized or not and 
whether it springs ready-to-eat out of a box, but also around 
what it does for your health.
    FDA hasn't done as much in the past, I think, as it should 
to encourage that kind of competition, and we are working with 
experts from many government agencies on the right way to go 
about that. We have got a task force right now that includes 
NIH, the Federal Trade Commission, and we have been in 
consultation with the USDA experts, as well.
    So I think with your leadership on encouraging more of this 
kind of interaction and more focused effort against these 
important and urgent public health problems related to obesity 
and good nutrition, we can make more progress, and I look 
forward to working with you on that and all the many other 
issues that no doubt we will have interactions about going 
forward.
    Senator Bennett. Thank you very much. Again, completely 
anecdotal, but I am aware of a woman who had very serious 
obesity problems and she dieted very strictly and she was on 
the treadmill every day and she continued to gain weight. It 
was very frustrating to her and she had a number of other 
problems.
    She finally went to a doctor who said, you have got an 
endocrine imbalance here, prescribed some prescription drugs, 
and she could eat more than she had been eating before, trying 
just to cut down on everything and exercise and all the rest of 
it. She could satisfy her cravings for more nourishment and, in 
fact, lose weight in the process because there were changes in 
her metabolism that were stimulated by the prescription drugs 
that she took. Her husband commented to me, ``I am glad to have 
her back. This is the woman that I married,'' whereas 
psychologically and emotionally, the woman he had married had 
disappeared in the process.
    So there is, in addition to all of the things that Under 
Secretary Bost appropriately said about quit being a couch 
potato and quit sitting in front of the computer, walk to 
school instead of ride the bus and so on, there is clear 
evidence that many of the things you deal with and the things 
that USDA deals with are interrelated in these complicated 
mechanisms we call our bodies.

                     ADDITIONAL COMMITTEE QUESTIONS

    The more we can get the Federal Government to spend its 
research dollars intelligently on this and then communicate 
intelligently so that ordinary people can say, well, this is 
the final word, rather than I have to go to the bookstore and 
rifle through 50 books and hope I find the one book that 
applies to me, is what I am hoping for eventually.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

            Questions Submitted by Senator Robert F. Bennett

                         ANIMAL DRUG USER FEES

    Question. Dr. McClellan, I noted that your budget request assumes 
the enactment of a new animal drug user fee to expedite the review of 
applications for animal drugs. As you know, this falls under the 
jurisdiction of the House and Senate authorizing committees. What is 
the status of approval of this new user fee?
    Answer. You are correct; the first step in making this important 
FDA program enhancement a reality in fiscal year 2004 is obtaining 
authorization. The bill, S. 313, ``The Animal Drug User Fee Act of 
2003'' passed by unanimous consent in the Senate on June 3, 2003. A 
companion bill, H.R. 1260, was introduced with bipartisan support in 
the House. The measure, as passed by the Senate, requires an 
appropriations action before FDA has the full legislative authority it 
needs to collect and spend these fees.
    Question. What would be the impact on the center for veterinary 
medicine if this fee proposal is not enacted?
    Answer. Congressional authorization of this user fee proposal to 
support significant improvements in CVM's new animal drug evaluation 
process is critical to achieving the Center's initiatives for a 
sustainable and predictable animal drug review process.
    Without the additional resources the user fees are designed to 
provide, review performance will not improve. Existing delays in review 
times are already close to exceeding the timeframe within which a new 
animal drug sponsor can recoup its investment in drug development for 
most animal drugs. Failure to promote safe and effective new animal 
drug development may also result in increasing compliance problems 
associated with illegal drug use, illegal compounding of unapproved 
animal drugs, use of unapproved chemicals and drugs in food-producing 
animals, and a resulting increase in tissue residue violations both 
detected and undetected.
    Alternatively, if ADUFA is enacted, the general public as well as 
industry will benefit from faster animal drug approvals. This will 
provide greater public health protection by helping ensure that animal 
drug products that are shown to be safe and effective are readily 
available; speed public access to new and more cost efficient animal 
drug products; promote animal health by increasing the availability and 
diversity of safe and effective drug products that relieve animal pain 
and suffering without compromising public health; provide the animal 
health industry significant benefits from earlier marketing of products 
and more predictable review processes; and, decrease incentives for 
marketing unapproved animal drug products that have not been shown to 
be safe and effective through the animal drug approval process.

                             GENERIC DRUGS

    Question. I noted in your budget justification the emphasis you 
have placed on approving new generic drug applications--$13 million and 
40 new staff have been requested for fiscal year 2004. How long does it 
currently take the FDA to complete the review of a generic drug 
application?
    Answer. During fiscal year 2002, the Office of Generic Drugs 
approved 295 applications with a median approval time of 18.3 months 
and an average approval time of 21.4 months. Currently the Agency is 
reviewing the vast majority, over 80 percent, of applications within 
180 days.
    Question. Why does it take so long?
    Answer. Studies of the FDA processes for new drugs have shown that 
early communications and guidance can improve drug applications and 
allow deficiencies to be corrected during the initial review, rather 
than having to wait for additional review cycles to fix problems. In 
addition, generic manufacturers have expressed interest in finding ways 
to improve the quality of their applications, so that more applications 
can be approved on the first round of review. Therefore, FDA is 
implementing a new system of early communications with generic drug 
manufacturers who submit applications. FDA also will provide additional 
guidance for generic manufacturers preparing and submitting quality, 
complete applications.
    Various interested parties also raise numerous scientific issues 
when generic products are anticipated. The discussion of these issues 
is critical as it ensures full consideration of all possible scientific 
aspects of the product. However, the full examination of these 
questions can delay the action on generic drug applications. In 
addition, with the advancement of science, new and more challenging 
issues are being raised. There are products for which efficient, 
reliable methods for the demonstration of bioequivalence have not been 
successfully developed.
    Question. What do you plan to do with this funding and staff to 
shorten that length of time?
    Answer. FDA generally can approve generic drugs for the marketplace 
as soon as the patent protection on brand-name drugs expires or when a 
court determines that the generic product will not infringe on the 
innovator's patent or that the patent is invalid. The generics' 
manufacturers must demonstrate to the FDA that their products are 
therapeutically equivalent to an approved brand-name drug in terms of 
safety, strength, quality, purity, performance, intended use and other 
characteristics.
    The proposed increase in the FDA's generics budget will allow FDA 
to hire 40 experts in its generic drugs program to review generic drug 
applications more quickly and initiate targeted research to expand the 
range of generic drugs available to consumers. FDA also has begun 
internal reforms to improve the efficiency of its review process for 
generic drugs. In particular, FDA is implementing a new system of early 
communications with generic drug manufacturers who submit applications. 
FDA also will provide additional guidance for generic manufacturers 
preparing and submitting quality, complete applications.
    Studies of the FDA processes for new drugs indicate that such 
communications and guidance can improve drug applications and allow 
deficiencies to be corrected during the initial review, rather than 
having to wait for additional review cycles to fix problems. In 
addition, generic manufacturers have expressed interest in finding ways 
to improve the quality of their applications, so that more applications 
can be approved on the first round of review.
    The new resources and other reforms are expected to reduce the 
total time to approval for most new generic drugs by 3 months or more 
over the next 3 to 5 years. Because these changes will generally 
accelerate the approval for all generic drugs, most Americans who take 
generic drugs will benefit.
    The FDA also will expand its educational programs and partnerships 
involving generic drugs, to help consumers get accurate information 
about the availability of generic drugs for their health needs and to 
help ensure that consumers are aware that FDA-approved generic drugs 
are as safe and effective as their brand-name counterparts. FDA will 
also undertake more scientific studies of generic drug 
``bioequivalence'' to expedite the determination of whether the generic 
copy of a drug works in the same way as the original product, and will 
enhance monitoring of the safety of generic drugs on the market.

                    RX TO OVER-THE-COUNTER SWITCHES

    Question. During our recent conversation, Dr. McClellan, you 
mentioned to me your efforts to move more and more medications from 
requiring a prescription to being available over the counter. One of 
your reasons, as I recall, was to reduce out-of-pocket costs to 
consumers by not requiring them to pay for a doctor visit as well as a 
prescription. This would be especially beneficial to those who do not 
have health insurance.
    There is another side to that coin--the very real danger of self-
medicating. There are some products that should not be used in 
conjunction with others. While these dangers might be listed on the 
package, many times the print is very small. How do you decide which 
drugs no longer require a prescription?
    Answer. Two of the options available to FDA to switch a drug 
subject to an approved new drug application from prescription, Rx, to 
over-the-counter status are voluntary submission and rulemaking.
    The simplest, voluntary submission, is when a sponsor voluntarily 
submits a supplemental NDA to make the switch. The second option, 
rulemaking, is permitted under section 503(b)(3) of the Federal Food, 
Drug, and Cosmetic Act. That provision allows the Agency to remove the 
Rx restriction from a drug such restriction is not necessary for the 
protection of the public health. In both instances, FDA must determine 
that the legal and safety standards for OTC marketing are satisfied 
prior to allowing the switch. Some factor the Agency considers when 
determining Rx-to-OTC switch candidates are: an acceptable margin of 
safety based on prior prescription marketing experience; low misuse and 
abuse potential; a reasonable therapeutic index of safety; and, self 
treatment and self monitoring with minimal physician intervention.
    Question. Does the manufacturer request this switch?
    Answer. Historically, the majority of drugs that have been switched 
from prescription only to over-the-counter, OTC, status have been at 
the initiation of the sponsor. However, FDA's regulations allow for any 
interested party to petition the agency to request to switch a product 
from prescription to OTC status.
    Question. What steps do you take to make sure that these drugs are 
being used appropriately once they are so widely available?
    Answer. Sponsors of approved NDAs are required to file periodic 
safety reports and these are monitored for adverse events. The Agency 
also maintains a voluntary reporting system, Medwatch, that is 
available to all consumers and health care professionals to report 
adverse events for both prescription and over-the-counter products. In 
some cases, use studies are conducted prior to switching a drug from 
prescription to OTC as one way to help ensure that the consumer can 
appropriately use a product in an OTC setting.
    Also, a regulation that will be fully implemented by May 2005 
standardizes the labeling format that will improve the labeling on 
drugs Americans use most, OTC drugs. By clearly showing a drug's 
ingredients, dose and warnings, the new labeling will make it easier 
for consumers to understand information about a drug's benefits and 
risks as well as its proper use.

                        MEDICAL DEVICE USER FEES

    Question. Dr. McClellan, the FDA budget assumes that at least 
$29,190,000 will become available from the medical device user fees 
authorized under current law. These funds are to be used to decrease 
the time necessary for medical device reviews conducted by the Center 
for Devices and Radiological Health (CDRH). Prior to the enactment of 
the medical device user fee and modernization act of 2002, how much 
money was spent for this review responsibility?
    Answer. We are currently developing the base line data on how much 
we spent on the process for the review of medical devices, as recently 
defined in the Medical Device User Fee and Modernization Act, MDUFMA, 
in fiscal year 2002--the year before MDUFMA was enacted. We do not have 
these data yet in large part because the new statutory definition cuts 
across our traditional accounting categories. The results, when we have 
them, will be published in the MDUFMA Financial Report that is due to 
Congress at the end of January 2004.
    Question. Of the amounts specifically appropriated to the FDA, not 
including MDUFMA funds, how much is expected to be spent for this 
activity in fiscal year 2004?
    Answer. Because the new statutory definition cuts across our 
traditional accounting categories, we do not currently have an accurate 
estimate on fiscal year 2004 funding. We estimate that it will be at 
least what was spent on the process in fiscal year 2002, but will have 
more accurate data when we complete data gathering for the MDUFMA 
Financial Report.
    Question. How many full-time employees were assigned to these 
reviews prior to the enactment of MDUFMA?
    Answer. Approximately 730 FTEs were spent on the process in fiscal 
year 2002. However, we will have more accurate information when we 
complete some data gathering that is currently underway. We expect this 
information to be published in the MDUFMA Financial Report that is due 
to Congress at the end of January 2004.
    Question. Not including MDUFMA funds, how many full-time employees 
will be assigned to these reviews in fiscal year 2004?
    Answer. We anticipate that the agency will assign at least the same 
amount of FTE on the process in fiscal year 2004 as in fiscal year 
2002. However, we will be able to provide better data once we have 
completed data gathering for the MDUFMA Financial Report.
    Question. I noted that of the amount available from MDUFMA, 
$15,808,000 will be provided to CDRH. Of the remainder, $7,026,000 
would be transferred to the Center for Biologics Evaluation and 
Research, $642,000 would be transferred to the Office of the 
Commissioner, $2,501,000 would be utilized by the Office of Management 
and Systems, $350,000 would go to the Office of Planning, Policy and 
Legislation, and a total of $2,863,000 would be applied to rent-related 
costs.
    What contributions are made to the review of medical device 
applications by each of the entities listed above?
    Answer. Device application review is done both in the Center for 
Devices and Radiological Health, CDRH, and in the Center for Biologics 
Evaluation and Research, CBER. Most of the review work is done in CDRH, 
but a significant amount is done in CBER--especially review of 
diagnostic devices and test kits that incorporate biologics or are used 
in blood testing work. Resources are allocated between those components 
in proportion to the amount of device review work that is done by each 
center, and keeping in mind that all of the appropriated increases, in 
the devices and radiological health line of the appropriation, are 
provided to CDRH and the field.
    Increases are included in the rent line because additional space 
will have to be acquired to house the additional staff the agency 
expects to hire over each year--from an additional 120 FTE in fiscal 
year 2004 to 265 additional FTE dedicated to this process by 2007.
    Increases are also included in funds for the Office of Management 
and Systems, which collects and manages the fee revenue, hires 
additional staff, coordinates the acquisition and management of the 
additional space, provides IT support, and reports to Congress on the 
financial aspects of the program each year.
    The Office of Policy and Planning is responsible for the annual 
MDUFMA performance report to Congress and for assisting with other 
management responsibilities for the program, such as the annual 
stakeholders meetings.
    FDA has also allocated funds to the Office of Combination Products, 
which was mandated by the Medical Device User Fee Act to streamline the 
processing of complex drug-device, drug-biologic, and device-biologic 
combination products that play an increasingly significant role in 
health care.
    Question. Before enactment of the medical device user fee 
authority, how were these responsibilities funded and in what amounts?
    Answer. All of the items previously mentioned are related to the 
implementation of MDUFMA. These activities are over and above any 
previous resources available to the agency. As a result of MDUFMA, FDA 
has expanded work related to the review of medical devices by the 
Center for Devices and Radiological Health as well as the Center for 
Biologics Evaluation and Research. The additional responsibilities that 
are being funded by MDUFMA in the Other Activities line of the budget 
by the Office of Management and Systems, the Office of Policy and 
Planning, and the Office of Combination Products were not necessary 
prior to the enactment of MDUFMA. Under MDUFMA, FDA must collect and 
manage the fee revenue, hire additional staff, coordinate the 
acquisition and management of the additional space for staff, provide 
IT support, report to Congress on the financial and performance aspects 
of the program each year, assist with management responsibilities for 
the program such as the annual stakeholders meetings, and assist in the 
streamlining of the processing of complex combination products.
    Question. Has there been any reduction in these amounts since the 
enactment of MDUFMA?
    Answer. We will have more accurate information when we complete 
some data gathering that is currently underway. However, the reductions 
related to the Devices and Radiological Health program in the fiscal 
year 2004 request reflect management savings and IT consolidation and 
should not impact the resources directly devoted to the review process. 
User fee collections under MDUFMA are not considered an offset for this 
program. They are used exclusively for the review of new devices and 
related costs. FDA supports the goals of MDUFMA, and is committed to 
making the medical device user fee program a success.

             DRUG EFFICACY STUDY IMPLEMENTATION MONOGRAPHS

    Question. Dr. McClellan, FDA's recent enforcement activity with 
regard to single entity extended release guaifenesin has focused 
attention on many prescription products that have apparently been 
marketed for decades without significant safety or effectiveness 
concerns, but at the same time are outside of the current FDA drug 
approval process. I understand that the FDA has given careful 
consideration to many competing concerns, including upholding the 
integrity of the new drug approval process, ensuring the availability 
of affordable medicines, and not unnecessarily disrupting patients and 
physicians, as well and manufacturers and distributors and the people 
they employ. Would the FDA consider establishing a monograph system 
similar to the over-the-counter (OTC) monograph system to deal with 
these older products?
    Answer. FDA believes it would not be feasible to establish a 
monograph system for certain older prescription drug products. Such a 
system would have to be developed through notice and comment 
rulemaking, based on publicly available data, and would be limited to 
products that have been marketed to a material extent and for a 
material time and that can be established as generally recognized as 
safe and effective. It would take many years to develop and implement 
such a system and would require substantial additional resources. 
Because of its complexity, we anticipate that developing a monograph 
system and individual monographs for prescription drugs would be 
extremely resource intensive and time-consuming.
    Furthermore, many prescription drugs are associated with serious 
toxicity or potential harmful effects and are often for serious 
indications. Therefore, the types of prescription drugs that would be 
appropriate for consideration as generally recognized as safe and 
effective under a monograph system could be very limited. In addition, 
some categories of drugs would not be appropriate for monographs in any 
case because they have unique performance characteristics that require 
review under an application instead of under the general criteria found 
in monographs. For example, the safety and effectiveness of controlled 
release dosage forms are highly dependent on the specific formulation, 
and it would be difficult to ensure the safety and effectiveness of 
these drugs using a categorical approach such as a monograph system.
    Question. Does the FDA have the authority under existing law to 
establish a monograph system for older prescription products?
    Answer. FDA believes that it would be theoretically possible, but 
infeasible, to establish a monograph system for certain older 
prescription drug products. Such a system would have to be developed 
through notice and comment rulemaking, based on publicly available 
data, and would be limited to products that have been marketed to a 
material extent and for a material time and that can be established as 
generally recognized as safe and effective. It would take many years to 
develop and implement such a system and would require substantial 
additional resources. Because of its complexity, we anticipate that 
developing a monograph system and individual monographs for 
prescription drugs would be extremely resource intensive and time-
consuming.
    Furthermore, many prescription drugs are associated with serious 
toxicity or potential for harmful effects and are often for serious 
indications. Therefore, the types of prescription drugs that would be 
appropriate for consideration as generally recognized as safe and 
effective under a monograph system could be very limited. In addition, 
some categories of drugs would not be appropriate for monographs in any 
case because they have unique performance characteristics that require 
review under an application instead of under the general criteria found 
in monographs. For example, the safety and effectiveness of controlled 
release dosage forms are highly dependent on the specific formulation, 
and it would be difficult to ensure the safety and effectiveness of 
these drugs using a categorical approach such as a monograph system.
    Question. Under the monograph system for OTC drugs, does the FDA 
have the authority to take action against products when there are 
substantial questions regarding safety and efficacy even if the 
monograph has not been finalized?
    Answer. FDA has the authority to take action against an OTC drug 
subject to a pending monograph when substantial questions regarding 
safety and efficacy are evidenced. If the drug contains an ingredient 
that is explicitly prohibited by regulation, 21 CFR 310.545, has label 
deficiencies that constitute a potential hazard to health, or is 
adulterated, FDA Compliance Policy Guide 450.200.

                              GUAIFENESIN

    Question. With regard to single entity extended release 
guaifenesin, I understand that in February of this year, manufacturers 
and distributors were granted a grace period until November 2003 to 
obtain new drug approvals for their products. Affected companies 
obviously would need time to develop the information necessary for a 
new drug application (NDA) submission.
    In light of the fact that FDA's own figures indicate that the 
median time to approval for standard NDAs has steadied at 12 to 14 
months, was that a realistic grace period?
    Answer. FDA exercised its enforcement discretion and granted a 
grace period to prevent undue hardship to the consuming public and the 
industry that could result from an abrupt cessation of such products' 
supply. Among other things, this grace period had to be limited in 
order to preserve the incentives for companies to develop and submit 
new drug applications, as required by law. The new drug approval 
process plays an essential role in assuring that all drugs are both 
safe and effective. In addition, because FDA had determined that the 
single-ingredient, extended release guaifenesin drug products were on 
the market illegally, a decision to leave them on the market 
indefinitely could have run afoul of the Court's ruling in Hoffmann-
LaRoche v. Weinberger, 425 F.Supp. 890 (D.D.C. 1975).
    Finally, single-ingredient, extended release guaifenesin 
manufacturers actually had much more than the 2 years notice provided 
to manufacturers of products subject to the cough/cold monograph. The 
Agency, by regulation, has identified certain drugs as requiring new 
drug applications for marketing, including all extended release dosage 
form drug products [21 CFR 310.502(a)(14)]. The Agency's interpretation 
of that regulation has not changed since it was publicly announced in 
1959. It appears that the Warning Letter recipients all began 
manufacturing their products after that public announcement. When 
guaifenesin was considered for OTC marketing by the Agency in 
rulemaking proceedings, the Agency repeatedly reaffirmed, in the 
Federal Register, the existence of the longstanding Agency policy 
requiring new drug application approval prior to marketing extended 
release drug products. FDA Compliance Policy Guide section 440.100 (CPG 
7132c.02) has also clearly stated for many years that any drug on the 
market without FDA approval is subject to regulatory action ``if it is 
identical or related to a post-1962 NDA approved for safety and 
effectiveness.'' Thus, the manufacturers of single ingredient extended 
release guaifenesin products had ample notice that they faced immediate 
removal from the market.
    Question. I note that on December 23 of last year, the FDA 
finalized the OTC monograph for cough and cold products with more than 
one active ingredient, so-called ``combination cough/cold products.'' 
Manufacturers and distributors are not required to come into full 
compliance with the monograph until December 2004. Why were these OTC 
products given 2 years to conform to the monograph or come off the 
market when single entry extended release guaifenesin prescribed by 
physicians has to come off the market at the end of a 9-month grace 
period?
    Answer. The final monograph for cough/cold combination drug 
products that issued in December 2002, was developed under the OTC Drug 
Review process. The monograph set forth the criteria for such drugs to 
be generally recognized as safe and effective, i.e. not unapproved new 
drugs. The rulemaking process, established in 1972, provided that OTC 
drug products would not be deemed to be unapproved new drugs until 
after the effective date of the final monograph. In other words, the 
OTC Review process itself provided for a period of time during which a 
firm could bring its product into compliance with a final monograph and 
permitted continued marketing during such time period. In the case of 
the cough/cold drug products, the 2-year time period was determined to 
be reasonable and necessary to enable affected drug manufacturers to 
reformulate and print new labels to comply with the final rule.
    The recent action taken by FDA with regard to single-ingredient, 
extended release guaifenesin drug products involved the issuance of 
Warning Letters in October 2002 to manufacturers and distributors of 
such drug products, advising those firms that their drugs were 
unapproved new drugs. In that case, FDA exercised its enforcement 
discretion and granted a grace period to prevent undue hardship to the 
consuming public and the industry that could result from an abrupt 
cessation of such products' supply. Among other things, this grace 
period had to be limited in order to preserve the incentives for 
companies to develop and submit new drug applications, as required by 
law. The new drug approval process plays an essential role in assuring 
that all drugs are both safe and effective. In addition, because FDA 
had determined that the single-ingredient, extended release guaifenesin 
drug products were on the market illegally, a decision to leave them on 
the market indefinitely could have run afoul of the Court's ruling in 
Hoffmann-LaRoche v. Weinberger, 425 F.Supp. 890 (D.D.C. 1975).
    Finally, single-ingredient, extended release guaifenesin 
manufacturers actually had much more than the 2 years notice provided 
to manufacturers of products subject to the cough/cold monograph. The 
Agency, by regulation, has identified certain drugs as requiring new 
drug applications for marketing, including all extended release dosage 
form drug products [21 CFR 310.502(a)(14)]. The Agency's interpretation 
of that regulation has not changed since it was publicly announced in 
1959. It appears that the Warning Letter recipients all began 
manufacturing their products after that public announcement. When 
guaifenesin was considered for OTC marketing by the Agency in 
rulemaking proceedings, the Agency repeatedly reaffirmed, in the 
Federal Register, the existence of the longstanding Agency policy 
requiring new drug application approval prior to marketing extended 
release drug products. FDA Compliance Policy Guide section 440.100 (CPG 
7132c.02) has also clearly stated for many years that any drug on the 
market without FDA approval is subject to regulatory action ``if it is 
identical or related to a post-1962 NDA approved for safety and 
effectiveness.'' Thus, the manufacturers of single ingredient extended 
release guaifenesin products had ample notice that they faced immediate 
removal from the market.

                          DIETARY SUPPLEMENTS

    Question. Dietary supplements are products that are regulated as a 
food product. These are products made from herbs or certain ingredients 
and these products are not permitted to make claims that they ``cure 
diseases.'' Rather, they are permitted to make ``structure and 
function'' claims, as long as there is scientific information 
supporting these claims.
    The law is clear. If there is a safety concern about a product and 
the product causes a substantial risk of harm, then FDA may withdraw 
the product from the marketplace. However, if the scientific evidence 
is not clear, the Dietary Supplement law permits the agency to take 
other actions.
    The FDA is the administrative body that we have authorized to make 
sound scientific judgments within, let me repeat, within the parameters 
of the law.
    Let's talk about what has occurred to date. Dr. McClellan I 
understand that you have taken very swift action on the issue of 
ephedra and have proposed rules to require very strong warning labels 
on dietary supplement products that contain ephedra. In addition, I 
understand you propose that these products not be used by children or 
by athletes as an athletic performance enhancer.
    Dr. McClellan, I also understand that you have reviewed various 
scientific studies, including one commissioned by the FDA that looked 
at the adverse event reports. It is my understanding that the Rand 
Institute, an independent think tank, conducted a study and reviewed 
these reports on ephedra leading up to this regulatory process. They 
stopped short of saying that ephedra caused the adverse events.
    Do you intend to finalize these rules in the near future? Will you 
commission additional studies on this matter or do you feel you are 
getting additional information through rulemaking?
    I believe that the Agency is taking the correct approach: they are 
evaluating the law; they are looking at the scientific evidence; they 
are taking strong administrative action; and I believe that it is 
consistent with their mission in overseeing products under their 
authority.
    Answer. The agency remains very much concerned about the safety of 
dietary supplements containing ephedrine alkaloids. The agency is 
currently examining all comments to its March Federal Register notice. 
Upon consideration of all the comments, the agency will take the most 
appropriate action consistent with the law to best protect public 
health. The actions may or may not necessitate rulemaking. If the 
agency issues a rule, it may include labeling, as well as marketing 
restrictions. We do not anticipate commissioning any further studies at 
this time.
                                 ______
                                 

              Questions Submitted by Senator Thad Cochran

                          DIETARY SUPPLEMENTS

    Question. The FDA has the primary role in regulating as well as 
assuring the safety of dietary supplements, like Ephedra. Scientific 
data are critical for developing policies regarding dietary supplements 
and for demonstrating safety. I understand that a number of scientific 
studies have yielded questionable results due to a lack of quality of 
the supplements being tested. Would a source of standardized products 
improve the scientific testing of these products as well as the safety 
of these products for consumers?
    Answer. Scientific data establishing the botanical and chemical 
profiles of authenticated botanical ingredients, such as ephedra, 
provide the essential basis for developing standards that can be used 
in a variety of ways to enhance scientific research and regulatory 
decisions. Such standards can provide a basis for evaluating Good 
Manufacturing Practices, GMP, in order to confirm that the ingredient 
used in a product is the ingredient intended for use. Adulterations or 
mis-identifications can more easily become apparent. This use has value 
for FDA in enforcement actions, for industry in establishing and 
monitoring GMP provisions, and for researchers in characterizing the 
test substance used in their own studies and for comparing results 
across studies performed by different laboratories.
    Validated analytical methods for detecting contaminants in 
botanical and other dietary supplement ingredients are valuable to 
regulators, researchers, and manufacturers. If such methods were widely 
available, they would help ensure that supplement ingredients do not 
contain unsafe levels of contaminants such as heavy metals, pesticides, 
and drugs.
    Sound scientific information on the botanical and chemical profiles 
of authenticated botanical ingredients and validated analytical methods 
for contaminants and adulterants would help assure the standardization 
of test products for research and the purity of marketed products.

             NATIONAL CENTER FOR NATURAL PRODUCTS RESEARCH

    Question. I have followed with interest the collaboration between 
the FDA's Center for Food Safety and Applied Nutrition, and the 
National Center for Natural Products Research at the University of 
Mississippi. The FDA has indicated it has plans to expand this 
relationship. Can you comment on the value of this collaboration? Does 
the Center for Drug Evaluation and Research also plan to undertake 
similar collaborations in order to deal with dietary supplements that 
may be submitted for approval as drug products?
    Answer. Under the Dietary Supplement Health and Education Act of 
1994, DSHEA, FDA has primary responsibility for ensuring that 
appropriate regulatory actions are taken against marketed dietary 
supplement products that present significant health risks or bear false 
or misleading label claims. Policy decisions that require the 
evaluation of risks and claims need to have a sound scientific base. 
For botanical dietary supplements, development of such a science base 
is especially problematic because of several unique features, including 
the complexity of the constituents, variability of sourcing, lack of 
availability of reference materials, lack of manufacturing controls, 
and new and rapidly expanding uses in the marketplace. The existing 
cooperative agreement between the University of Mississippi, National 
Center for Natural Products Research, NCNPR, and FDA was established to 
address these critical research issues.
    In September 2001, FDA implemented a cooperative agreement with the 
National Center for Natural Products Research, NCNPR. This agreement 
was amended in September 2002, to increase overall funding of the 
project. The agreement between FDA and NCNPR creates a partnership that 
allows for more efficient use of resources to identify and analyze 
specific components in botanical dietary ingredients, thereby enhancing 
overall public health by ensuring that dietary supplements are safe and 
their labeling is not misleading.
    Accomplishments to date have included collection and chemical 
profiling of a number of botanicals, e.g., a variety of ephedra 
species, aristolochia and asarum species. Scientific workshops have 
either been held such as the ``Authentication of Botanicals'' in August 
2002, or are planned--such as ``Use of Hepatoxicity Methods to Evaluate 
Safety of Botanicals'' in September 2003. In addition, collaborations 
have occurred between NCNPR staff and FDA's National Center for 
Toxicological Research, with the methods validation project co-funded 
by FDA and NIH with the Association of Official Analytical Chemists, 
AOAC, with NIH's Office of Dietary Supplements, NIH/ODS and their 
Clinical Research Program for Dietary Supplements, and with the 
National Toxicology Program NIEHS/NIH-sponsored research in botanical 
safety.
    Future plans include the continuation of the basic efforts on 
collection and chemical profiling of authenticated botanical materials 
noted above with the inclusion of additional botanicals as current 
efforts are completed, holding additional scientific conferences and 
workshops, and continuation of collaborations between individual 
scientists at FDA's Center for Food Safety and Applied Nutrition, 
CFSAN, and NCNPR including the sharing of samples and research data. 
This expansion will greatly enhance the already useful chemical 
profiling information that FDA is receiving from the NCNPR/University 
of Mississippi collaborative agreement in that it will provide a more 
complete body of evidence on which to evaluate safety. Activities 
carried out under the Cooperative Agreement contribute significantly to 
the Center's dietary supplement program and expand the capabilities of 
researchers at both Centers.
    A dietary supplement submitted for approval as a drug product and 
intended for use in the diagnosis, cure, mitigation, treatment, or 
prevention of disease would undergo our new drug application, NDA, 
review process. We would seek expert advice through Advisory Committees 
when necessary.

            CITIZENS' PETITION--CFC GAS AND ASTHMA PRODUCTS

    Question. Please provide us the status, within the FDA, of the 
citizens' petition that calls for the removal of certain asthma 
products, called metered-dose inhalers, from the list of essential uses 
for CFC gas.
    Answer. The American Lung Association's, ALA, citizen petition 
requesting the elimination of the essential use designation for 
albuterol presents serious and complex policy issues.
    Section 2.125(f) specifies the 4 criteria for determining that a 
use of an ozone-depleting substance is no longer essential. A citizen 
petition must present ``compelling evidence'' that all criteria are 
met. The second criterion is that ``supplies and production capacity 
for the non-ODS product's exist or will exist at levels sufficient to 
meet patient need.'' ALA states that information that will support 
their desired finding on this criterion is proprietary, but it can be 
developed in the course of rulemaking. We have not received any 
comments providing information on supplies and production capacity of 
alternatives.

                    RX TO OVER-THE-COUNTER SWITCHES

    Question. As you point out in your statement, nonprescription drugs 
are becoming more important in our health care system as more products 
switch from prescription to over-the-counter status. The Administration 
has requested an additional $1 million to ``improve the OTC drug review 
process'' through hiring and training personnel. In your opinion, what 
impact do these products have on the health of Americans? Will the 
additional funds be used to complete the switch applications that are 
currently pending or initiate new switches?
    Answer. Over-the-counter, OTC, drugs play an increasingly vital 
role in America's health care system. With reports of rapidly 
increasing spending on prescription drugs, interest in finding ways to 
curb those costs is also intensifying. The trend to patient directed-
medication has increased greatly in recent years as health care costs 
have risen and consumers want to be empowered to treat minor ailments 
with safe and effective OTC drug products. The mission of OTC drug 
review at FDA is to protect and promote the health of Americans by 
providing access to important safe and effective OTC drug products.
    The requested increase in funding will be used to hire and train 
seven additional FTEs to improve the OTC drug review process, develop 
and work toward finalizing OTC drug monographs, and conduct consumer 
behavior research that would be used to identify and manage potential 
risks of OTC drugs. Additional staff will assist in expediting all 
processes within the review division, making available OTC products in 
a timely manner.
                                 ______
                                 

           Questions Submitted by Senator Christopher S. Bond

                        MEDICAL DEVICE USER FEES

    Question. Dr. McClellan, you're to be congratulated for your role 
in reaching a deal with the medical device industry that requires them 
to pay $150 million in user fees over the next 5 years. This deal also 
requires the government to match industry funds with a relatively 
modest $45 million increase to be attained over the years 2003-05. I'm 
disappointed that the Administration's budget for fiscal year 2004 
fails to provide the funds required under this agreement in fiscal year 
2004. Yet, you've proposed new increases in other areas of FDA 
activity. Can you assure me that, notwithstanding your proposed new 
initiatives in non-device areas, you will meet your obligations under 
the device user fee agreement?
    Answer. FDA assures you that it looks forward to working with 
Congress and industry to ensure the device user fee program is 
successful. FDA is committed to meeting the performance goals, as 
stated in the goals letter. We have already begun discussions within 
the Administration to find ways to fund this program appropriately in 
fiscal year 2005 and beyond to ensure that this important program does 
not sunset.
    Question. The user fee agreement only requires you to meet current 
performance for the first 3 years of the program, even as you collect 
fees from industry. Yet I understand the agency's position is that you 
can't meet these modest goals without the additional funds that are to 
come from appropriations.
    With the $15 million increase we appropriated to CDRH for fiscal 
year 2003 plus the $27 million in user fees industry will pay, the CDRH 
budget is substantially larger in fiscal year 2003 than it was in the 
previous fiscal year. I've noticed that you propose a number of 
management efficiencies at the agency. In addition, you announced new 
initiatives to help speed multi-cycle reviews of promising new medical 
technologies through FDA. Why can't you meet the modest performance 
goals required by the device user fee agreement using these 
efficiencies combined with the increased funds that Congress and the 
device industry are already giving you?
    Answer. The appropriations for devices and radiological health in 
fiscal year 2003 provided an increase of $12.5 million over the fiscal 
year 2002 appropriation. Of this amount, $5.2 million was to fund the 
costs of the Federal pay increase for existing employees, $3.4 million 
was to enhance the counterterrorism capabilities of FDA's field 
operations. The increase of $1.5 million and 1 FTE for patient safety/
medical errors and the additional $4.0 million added by Congress gave 
us some additional device review capabilities--as will the management 
efficiencies that we expect to achieve in fiscal year 2004. These 
amounts were offset by the $1.7 million rescission of 0.65 percent.
    We fully expect to meet the only performance goal that applies for 
fiscal year 2003 and fiscal year 2004--complete action on 90 percent of 
the amendments containing complete responses to an ``approvable'' 
within 30 days. The more challenging MDUFMA goals take effect in fiscal 
year 2005, and become increasingly more challenging each subsequent 
year through fiscal year 2007. We allowed more time before these goals 
take effect because we will have to hire and train additional staff to 
be able to meet these goals.
    Question. Passage of the device user fee agreement was the 
culmination of a 10-year effort to win over the strong resistance to 
user fees of many in the device sector and in Congress. I understand 
that if FDA does not receive a $45 million increase for the device 
program by fiscal year 2005, the user fee agreement terminates and the 
agency loses the ability to collect fees from industry in the remaining 
2 years of the program. Given the history of the user fee issue in the 
device sector, I suspect you'll lose this program and any chance of 
collecting fees from the industry again if you don't find a way to meet 
the performance goals. What is your plan to avoid losing this program 
and this funding source that I suspect you need and want?
    Answer. The agency looks forward to working with Congress and 
industry to ensure the device user fee program is successful. FDA is 
committed to meeting the performance goals, as stated in the goals 
letter. We have already begun discussions within the Administration to 
find ways to fund this program appropriately in fiscal year 2005 and 
beyond to ensure that this important program does not sunset.
                                 ______
                                 

                Questions Submitted by Senator Herb Kohl

                    BOVINE SPONGIFORM ENCEPHALOPATHY

    Question. Dr. McClellan, as you know, in the 1990s, during the BSE 
crisis in Britain, millions of cattle were slaughtered and burned, and 
significant amounts of feed were removed from the market. In 1997, FDA 
banned the use of certain contents in animal feed in order to try and 
stop the spread of BSE. What has FDA done to make sure that none of the 
feed removed from the market in Europe, or any of the remains of the 
destroyed cattle, have entered the United States on the black market in 
our animal feed?
    Answer. FDA has prioritized the review of our import entries to 
make sure that all of the possible commodities that might be or contain 
the mammalian proteins prohibited from use in ruminant feed are 
reviewed before entry into the United States. In addition, we have an 
Import Alert in place which instructs the FDA import personnel to 
detain without physical examination any product that is or contains any 
animal protein product from the countries identified by USDA/APHIS as 
``restricted'' either because they have identified a case of BSE in 
that country or they are at risk for BSE because they have open 
commerce with those countries. That includes all of the European 
countries, Japan, and Israel, as well as Canada.
    We also have an ongoing assignment to collect samples and analyze 
animal feed products using feed microscopy from the BSE positive or 
suspect countries in which the documents indicate no processed animal 
protein is present to be assured that products are not being entered 
through intentional or inadvertent mislabeling. To date none of these 
samples have found the presence of processed animal protein.
    On an ongoing basis, FDA meets with USDA and Customs to coordinate 
the U.S. review and response to products offered for entry into the 
United States.
    Question. How is the FDA involved in the investigation of the 
Canadian case, especially in regard to tracing the feed that this herd 
consumed?
    Answer. FDA is working cooperatively with Canada in the 
investigation of this incident. Technical counterparts are 
communicating on a regular basis as the investigation unfolds. A 
representative from FDA's Center for Veterinary Medicine spent a week 
in Canada working with CFIA officials. FDA was notified by CFIA about 
pet foods that were potentially contaminated with rendered material 
from the BSE positive cow in Canada and shipped to the United States. 
The firm has asked for return of all suspect products and FDA has 
issued notices to alert consumers about this information. FDA is 
currently part of a daily interagency conference call that shares 
information on the investigation of this incident. The call includes 
representatives from USDA/FSIS and APHIS, as well as CDC. Each of those 
agencies is working with their respective Canadian counterparts.

                       REGULATION OF ANIMAL FEED

    Question. Please explain specifically how FDA regulates animal 
feed. Specifically, are there inspectors in all plants? Is there 
testing at the borders? How does FDA actually enforce its feeding ban?
    Answer. FDA regulates animal feed through the administration of the 
Federal Food, Drug, and Cosmetic Act, the Act. Animal feed is food 
under the Act. In general, food must be truthfully labeled and may not 
be adulterated. The Act, among other things, prohibits the interstate 
shipment of adulterated or misbranded food, and the adulteration or 
misbranding of food after receipt in interstate commerce. What 
constitutes adulteration or misbranding is defined in the Act. Food 
additives must be shown to be safe prior to their use in food. In 
addition, drugs are often administered to animals through feed and 
therefore, many animal feeds contain drug products and are called 
medicated feeds. The drugs go through a pre-approval process, and the 
medicated feeds must be manufactured in conformance with Current Good 
Manufacturing Practices regulations to assure appropriate controls are 
in place for the manufacture, processing, and distribution of the 
medicated feeds. Generally, feed mills that use potent drugs that 
require pre-slaughter withdrawal must be licensed by FDA to receive and 
manufacture feed containing those drugs.
    The regulation of animal feed, as with most FDA regulated 
commodities, begins with inspection of the manufacturing and 
distributing operations for feed and feed ingredients. The inspections 
are physical and include discussion with management and employees; 
plant walk through and observation of the processing; examination of 
equipment, plant premises, and grounds; and, review of records. 
Inspections are generally conducted biennially if certain potent drugs 
are used, and on an as needed basis for other firms. FDA is not in the 
plant at all times. However, we may conduct inspections multiple times 
during the year if there is a need; for example, to follow-up on an 
inspection that found violations of the law, to confirm that 
commitments to compliance were implemented, or when new information 
arises that indicates a possible violation of the law. We also work 
cooperatively with our state counterparts who may also be conducting 
inspections of a plant at various times throughout the year. We may 
also collect samples for analysis during the inspection or at sales or 
use locations.
    FDA is notified of shipments of imported products. We may review 
the incoming documents for the shipment, physically examine the 
shipment, and collect samples for analysis. Products that are not 
acceptable for distribution in the United States are refused entry. In 
some circumstances, the owner may be able to recondition the product so 
that it would be acceptable such as by making labeling changes where 
the basis for refusal is improper labeling. FDA would monitor the 
reconditioning and examine the shipment before permitting entry.
    Under the BSE feed ban, certain mammalian proteins are deemed food 
additives when used in ruminant feed; these are referred to as 
prohibited material. They have not been shown safe for use in those 
feeds and are therefore not permitted. Any ruminant feed containing 
these proteins would be adulterated. For non-ruminant feeds that do 
contain these proteins, the feed ban requires measures to prevent 
commingling and cross contamination, record keeping, and caution 
statement labeling.
    FDA has taken a multipronged approach to enforcement of the feed 
ban. FDA, in conjunction with the states and trade associations, has 
done extensive education of the regulated industries. We also conduct 
100 percent inspections of all renderers, protein blenders, and feed 
mills, as well as a percentage of other firms such as distributors and 
ruminant feeders. We have pursued enforcement action for firms that 
have failed to bring their operation into compliance. As of May 2, 
2003, 59 Warning Letters have been issued, and 42 firms have recalled 
over 241 products. The Act provides additional enforcement tools 
including seizure of violative product, injunction, and prosecution. 
Currently, we are conducting inspections of all firms that handle 
prohibited material annually. We also give priority for inspection to 
any firm that was found out of compliance on the previous inspection 
and any firm that we have information indicating possible violations 
are occurring.
    Additional enforcement activities include the development of a new 
BSE Compliance Program with input from a wide range of FDA and state 
officials, and two national meetings to introduce the Program. The 
purpose of the Program is to provide complete instructions to FDA and 
State investigators in conducting domestic BSE inspections and 
evaluating imported animal feed products from BSE-at-risk countries. 
FDA has also worked with a contractor to incorporate the BSE feed ban 
inspection information into the FDA FACTS System providing increased 
data integrity, increased ability to obtain information on the 
inspection obligations and their status, and enhanced ability to 
monitor compliance activities. Part of this database enhancement 
included a new BSE inspection checklist to improve data reporting for 
inspection. We have also trained field employees in the use of this new 
checklist and on the present BSE regulatory strategy. FDA also 
initiated training and installation of the Harvard BSE Risk Assessment 
simulation to enable FDA to test proposed risk management strategies in 
terms of the effects on the spread and the rate of disappearance of BSE 
should BSE be accidentally introduced into the country. In addition, 
FDA conducted a series of interagency tests of the FDA BSE Response 
Plan, and a satellite-training course on the BSE Contingency Plan. FDA 
revised the BSE Response Plan and published it on FDA's web site. FDA 
presented a national satellite broadcast, entitled ``BSE Import Safety 
Net'', to FDA, U.S. Customs Service and USDA inspection and compliance 
personnel. FDA is still physically collecting and analyzing import 
samples from known BSE countries identified as at-risk for BSE, for the 
presence of mammalian protein; no processed protein should be coming in 
from at-risk countries. This assignment to date has not found any 
violations.

                         ADMINISTRATIVE SAVINGS

    Question. FDA's fiscal year 2004 budget request is approximately 
$24.5 million above the fiscal year 2003 appropriated level, not 
including user fees. When looking at the budget, I was pleased to see 
that the request includes increases for food safety, patient safety, 
over-the-counter and generic drugs, and other increases totaling 
approximately $79.5 million. However, in order to pay for these 
increases, the budget proposes cuts of approximately $58 million. The 
explanations for these cuts in the budget is very brief, and I would 
like more information on them. The budget includes a cut of $28 million 
for ``management savings'', and states that it will be accomplished by, 
and I quote, ``reallocating resources, realigning and reorganizing 
functions.'' What specifically does this mean, and how was this savings 
amount formulated? What effect will this have on FDA employees?
    Answer. FDA is supporting various administration and department 
initiatives associated with the President's Management Agenda by 
consolidating human and IT resources to achieve greater efficiencies 
and economies of scale; consolidating the biologic therapeutic review 
function into the similar drug review function to achieve greater 
consistency and less duplication of effort, conducting outsourcing 
studies and rightsizing to achieve cost savings and maximum 
efficiencies; organizational de-layering for faster decision-making and 
better communications; and, implementing a new financial management 
system to provide agency managers with timely and consistent financial 
information.
    Organizational de-layering to achieve a flat, streamlined Agency 
where decision-making and better communications exists is being 
aggressively pursued. FDA is also consolidating its administrative 
functions into a Shared Services Organization, SSO. The SSO concept 
will allow FDA to provide administrative support functions to Agency 
components to meet critical mission needs in the most efficient and 
effective manner possible. These efforts will place the Agency in a 
position to more effectively and efficiently meet the challenges of 
providing better protection to consumers and promoting better health.
    As a result of the planned efficiencies expected from the migrating 
to shared services and results of our competitive sourcing initiatives, 
we expect to realize the savings as depicted in the budget.
    Question. The budget also states that IT infrastructure functions 
are being consolidated, and the budget supports DHHS efforts to 
``improve the HHS Information Technology Enterprise Structure.'' These 
activities are resulting in a $29.5 million cut in FDA's budget. How 
was this savings amount formulated, and how much of it is actually 
showing up in the Department's fiscal year 2004 budget? Specifically, 
what is not being done or funded in order to come up with this money? 
Will we be seeing further ``IT savings'' in order to improve the DHHS 
IT system?
    Answer. IT consolidations will result in improved processes that 
will ensure that the Agency commits to the right projects for the right 
cost. FDA's budget request includes savings of $29.6 million in the IT 
budget from both ongoing infrastructure consolidation efforts as well 
as reduced expenditures through the consolidation, streamlining, 
postponement or elimination of specific lower priority projects.
    The Agency will fully implement its IT infrastructure consolidation 
by October 2003, thereby reducing infrastructure expenditures in fiscal 
year 2004 by $15.0 million. These reductions will be achieved, in part, 
by the ability of the Agency's Chief Information Officer, CIO, to 
exercise better control over IT decision making, including the 
identification of inefficiencies as targets for reduction. The CIO will 
also look for opportunities that, based on a sound business approach 
using a rigorous cost-benefit analysis, would benefit from the 
integration of new technology. As a further by-product of 
consolidation, the Agency will also foster standardization of 
management processes, thereby increasing the effectiveness of IT even 
as FDA reduces overall costs. These improved processes will ensure that 
the Agency commits to the right projects for the right cost.
    Additionally, FDA will reduce spending on development of specific 
IT systems across the entire Agency by $14.6 million. Managers of 
information technology organizations allocated reductions to the 
development of IT systems based upon one of three rationales for 
increased efficiencies. First, consolidation of similar systems either 
within FDA or the Department will provide savings in the cost of 
contracts and government personnel while reducing unnecessary 
duplication. Second, streamlining work processes and underlying IT 
processes will provide additional savings. Some of the improvements to 
IT processes will include better project management, more reliable 
tools to estimate costs and schedules for use in improved contract 
performance management, and consistent development practices. Third, 
lower priority projects will be scaled back or eliminated where 
reasonable to do so. The impact of reducing efforts on lower priority 
projects will be mitigated by improvement in work processes achieved 
through consolidation and streamlining efforts.

                        MEDICAL DEVICE USER FEES

    Question. Dr. McClellan, as you're aware, last year the Congress 
passed the Medical Device User Fee and Modernization Act, which 
requires the medical device industry to pay a portion of the cost for 
FDA to approve their products. Although I am not on the authorizing 
committee that put this bill together, I understand that there are 
requirements for certain levels of appropriated funding, and if this 
funding isn't provided, the program sunsets after 5 years. I also 
understand that FDA was consulted regularly when this bill was being 
developed--and was supportive of it. However, I don't see any increase 
in FDA's budget to help meet these appropriations targets. Further, I 
have been told that FDA now needs an increase of $22 million in 
appropriated funds this year, strictly for medical device review 
activities, in order to meet its targets set by law. Why did FDA agree 
to these appropriations targets if it had no intention of requesting 
funding to meet them?
    Answer. The Administration has to balance the many competing 
demands of each component within the Federal government with the total 
resources available. As a result, the fiscal year 2004 President's 
budget request for the Food and Drug Administration fell below the 
levels specified in MDUFMA. We support the goals of MDUFMA, and are 
committed to making the medical device user fee program a success.
    Question. If Congress provides FDA with the President's budget 
request this year, please explain what effect that will have on the 
implementation of MDUFMA--will FDA still be able to meet its 
performance goals for this year?
    Answer. The agency is committed to meeting the MDUFMA goals to the 
maximum extent possible with the resources that are available. We want 
the program to be as successful as the prescription drug user fee 
program. We fully expect to meet the performance goals that apply for 
fiscal year 2003 and fiscal year 2004--complete action on 90 percent of 
the amendments containing complete responses to an ``approvable'' 
within 30 days. The more challenging MDUFMA goals do not take effect 
until fiscal year 2005, and become increasingly more challenging each 
subsequent year through fiscal year 2007. We have allowed more time 
before these goals take effect because we will have to hire and train 
additional staff to be able to meet these goals.
    Question. Does FDA plan to request the necessary funding in the 
future to meet the MDUFMA appropriations requirements in order to both 
help FDA meet its performance goals, and to prevent the program from 
expiring?
    Answer. The agency looks forward to working with Congress and 
industry to ensure the device user fee program is successful. FDA is 
committed to meeting the performance goals, as stated in the goals 
letter. Agency leadership has already begun discussions within the 
Administration to find ways to fund this program to ensure its success.
    Question. The President's fiscal year 2004 CDRH appropriations 
request is $185 million, is a decrease of $9 million from the fiscal 
year 2003 appropriated level of $193 million. At the same time, CDRH is 
proposing to collect $16 million in collecting user fees in fiscal year 
2004. One could assume from these facts alone that these user fees, 
which were meant to be additive in nature, and not to replace 
appropriated funds, are doing just that. Please explain.
    Answer. One of the provisions of MDUFMA requires that the funds 
from fees must be in addition to an appropriation amount that is as 
great as the amount FDA spent on the device review process from 
appropriations in fiscal year 2002--the year before MDUFMA went into 
effect--adjusted for inflation. This provision is meant to assure that 
appropriated resources available for device review are increased for 
inflation each year, and that the funding from fees is over and above a 
set level of appropriations, after adjustment for inflation. We are 
committed to working with Congress and the Administration to ensure 
that this intent of MDUFMA is realized. The reductions for the Device 
and Radiological Health program reflect management savings and IT 
consolidation, as discussed previously, and should not impact the 
resources directly devoted to the review process.

                   SEVERE ACUTE RESPIRATORY SYNDROME

    Question. We have all been reading the news stories and following 
the development of SARS. So far, we in this country have been very 
lucky, but just this week Secretary Thompson said that he believes we 
will see SARS deaths here. Hopefully, though, the efforts of the FDA, 
CDC, and other governmental and private entities will make us as 
prepared as we can be in the event of an outbreak in the United States. 
I read the statement that Dr. Lumpkin, the FDA Principal Associate 
Commissioner, gave to a House Committee a few weeks ago, outlining 
several steps FDA is taking in regard to SARS. This included working to 
identify the virus, working on drugs to treat and vaccines to prevent 
the virus, ensuring there are enough medical products available to deal 
with SARS, and protecting our blood supply. Often, when emergencies 
such as this arise, there is a need for supplemental funding beyond 
what is in the budget. Please briefly describe for us the activities 
FDA is undertaking in regard to SARS. Is there, or do you anticipate a 
need for additional funding to help fully fund all of FDA's SARS-
related activities?
    Answer. FDA is carefully tracking the scientific progress in 
defining, treating and, ultimately, defeating SARS to ensure that all 
FDA resources are aggressively and effectively deployed in the battle 
against this new virus.
    FDA's Center for Biologics Evaluation and Research--CBER--is 
working with other government agencies and the private sector to 
address many of the most difficult early issues in vaccine development. 
As this program is in its infancy, much painstaking work must be 
accomplished to assure that the development and manufacturing processes 
meet the standards required to produce safe and effective vaccines
    On April 17, 2003, FDA issued guidance to the Nation's blood 
establishments on measures for further safeguarding the blood supply 
against SARS including recommendations for deferral of certain donors. 
FDA took this interim measure to assure the safety of the blood supply 
while more is learned about the disease. At this time, it is unknown 
whether SARS can be transmitted through blood. If tests are developed 
that can detect SARS in blood, adaptation of those tests to screen 
blood donations is likely and would be helpful. FDA will work with 
manufacturers to facilitate the development of those tests. In 
addition, manufacturers of products made from blood, for example 
plasma-derived therapeutics, may need to evaluate their need for viral 
inactivation methods to be sure that their processes are capable of 
removing the virus. FDA will work with these manufactures to validate 
and implement any new necessary processes as rapidly as possible.
    FDA will continue to monitor this evolving situation and intends to 
make any revisions or additions as needed to preserve the safety and 
availability of the blood supply, based on the best available 
information. For example, FDA's guidance may be modified based on 
further scientific research on whether the causal agent of SARS may be 
present in the blood of persons subject to this interim deferral. As in 
any deferral decision, the need to evaluate the effect on supply also 
must be considered.
    FDA's Center for Devices and Radiological Health--CDRH--is working 
with CDC, who along with others in the SARS Laboratory Network 
organized by World Health Organization--WHO--is helping further the 
scientific understanding of the virus. A diagnostic test for SARS, 
based on the detection of RNA sequences in the novel coronavirus, is 
currently under development along with an enzyme-linked immunosorbent 
assay--ELISA--test for antibodies to the SARS-related virus. The first 
of these tests, using polymerase chain reaction--PCR--technology, will 
help with acute diagnoses of patients, while the ELISA test will be 
used to confirm a case during or after convalescence. CDC developed 
these prototype experimental reagents over the past 2 months in an 
effort to address this unmet public health need. FDA rapidly reviewed 
information for the investigational use of this test, and is working 
closely with CDC to develop appropriate information for patients and 
health professionals, and an approach for further evaluation of this 
new test. This test methodology will be distributed to approximately 
100 specialized laboratories around the country. Under the terms of 
this test's wider distribution, patients and practitioners will receive 
clear information about the test when it is used to assist in 
diagnosing SARS. Hopefully, this information will facilitate the 
development and evaluation of an approved diagnostic test as quickly as 
possible.
    CDRH is reaching out to industry to ensure that any development 
plans for new tests are well designed and that premarketing 
applications submitted to the Agency are of such quality that a 
priority review can swiftly proceed. In addition, FDA has already 
cleared or approved dozens of tests for use in differential diagnosis 
of acute respiratory syndromes and has put in place a postmarket 
surveillance program to measure how well these tests are working. These 
tests do not diagnose SARS; rather they help to diagnose other 
conditions that may have symptoms similar to SARS. In this way SARS can 
be ruled out as the diagnosis in these patients. CDRH is also 
monitoring the Internet to see if products are being sold with false 
claims of detecting the SARS virus. If such products are found FDA will 
take action to protect consumers from being harmed by them.
    FDA's Center for Drug Evaluation and Research--CDER--is currently 
working with the private sector and other governmental agencies to 
identify drugs that may have utility in the treatment of SARS. CDER has 
contacted pharmaceutical companies in order to help identify candidate 
drugs with potential utility for the treatment of SARS. CDER has also 
helped to facilitate communications between companies and other 
governmental agencies--NIH and the U.S. Army Medical Research Institute 
for Infectious Diseases, USAMARID--involved with the preliminary 
evaluation of these drugs in screening tests. Sixteen drugs from nine 
companies were identified as candidate drugs for preliminary testing to 
evaluate whether the compounds have activity in vitro against the SARS 
coronavirus.
    CDER has worked closely with CDC on the development of an 
investigational protocol for the treatment of patients with SARS. This 
protocol provides a mechanism for patients with suspected SARS that 
meet certain medical criteria to be treated with intravenous 
ribavarin--an investigational antiviral drug not otherwise available. 
The study provides a means for patients to receive intravenous 
ribavarin, an agent that may have therapeutic utility for SARS.
    CDER is working with NIH and CDC regarding the possible development 
of a controlled clinical trial to critically evaluate the utility of 
therapeutic agents for the treatment of SARS. Similar to CDER's 
interactions to interactions with the CDC on CDC's protocol, CDER has 
been in contact with members of the Collaborative Antiviral Study Group 
and NIH in order to facilitate and expedite the review of any protocol 
under development for the treatment of SARS.
    CDER is involved in ongoing monitoring of the supplies of the drug 
ribavarin, which is available in several formulations. This work allows 
CDER to keep abreast of the current levels of ribavarin supplies in 
order to be able to forecast how much drug may be available to meet 
potential future clinical needs.
    SARS was first detected after the budget was submitted to Congress, 
and as a result, was not addressed in the request.
    Question. Has funding been diverted from other activities because 
of the SARS effort? If so, which activities?
    Answer. In fiscal year 2003, the Center for Biologics Evaluation 
and Research, CBER, is redirecting an estimated $1.3 million of its 
resources to SARS-related activities. Many of the CBER staff who 
currently perform regulatory policy, review and research are the same 
staff who also focus on other areas such as West Nile virus, and 
counterterrorism.
    In fiscal year 2003, the Center for Devices and Radiological 
Health, CDRH, is redirecting an estimated $200,000 of their resources 
to SARS-related activities. CDRH redirected some of their efforts away 
from routine premarket application review to address SARS-related 
concerns and applications.
    The Center for Drug Evaluation and Research, CDER, has not diverted 
any funds from other activities for SARS efforts since this is part of 
the CDER's Emergency Preparedness readiness efforts. The Center will 
continue to promote and protect public health by assuring that safe and 
effective drugs, including all SARS-related drug products, are 
available.

           BIOTERRORISM PREPAREDNESS AND RESPONSE ACT OF 2002

    Question. The Bioterrorism Preparedness and Response Act of 2002, 
the Bioterrorism Act, required FDA to implement several changes to 
strengthen its' food safety regulations, including the development of a 
system to register products manufactured abroad, by December 12 of this 
year. Four major proposed rules have been published since January, and 
I understand that approximately $12 million from fiscal year 2002 
supplemental funding has already been spent on the registration system. 
Further, the budget requests an increase of $20.5 million for food 
safety, in part to fund the implementation of the new food safety 
requirements and registration system. Specifically, what has the $12 
million in funding been spent for, and what remains to be done on the 
registration system?
    Answer. FDA has allocated approximately $12.3 million from base 
resources for the registration and prior notice systems in fiscal year 
2003. Approximately $4.3 million of this funding is from the fiscal 
year 2002 counterterrorism supplemental. Funds for the registration 
system include hardware, software, and contractor services for the 
design, development, testing, and implementation of the web-based 
electronic registration system. The registration system funding also 
includes funding for office space, hardware, software, and contractor 
services for the design, development, and initial staffing for the 
paper registration process, as well as the Help Desk for electronic and 
paper registration. The Help Desk will also handle calls about use of 
the prior notice electronic system also required by the Bioterrorism 
Act.
    The electronic registration system is currently being developed and 
tested. A prototype has been successfully demonstrated to food industry 
and foreign embassy representatives at four public meetings. The 
project is on time, and the goal is to have the electronic registration 
system operational by October 12, 2003 allowing 2 months for facilities 
to register before the December 12, 2003 deadline. The paper 
registration process has been designed. The design of the Help Desk and 
the implementation of the paper process are in the final stages of 
contract award. The Help Desk implementation will be awarded once the 
design is completed.
    The prior notice system has been allocated funds for infrastructure 
design, procurement, setup, operations and maintenance of computer 
system hardware, system/database software and licensing, and contractor 
services for the design, development, testing, and implementation of 
the web-based electronic prior notice system. Funding will also be 
utilized for extensive enhancements required to the Operational and 
Administrative System for Import Support, OASIS, system to support 
prior notice.
    The Bureau of Customs and Border Protection, CBP, is cooperating 
with FDA to permit current filers to use the existing Automated 
Commercial System, ACS, software to submit prior notice. FDA will 
develop and maintain two separate interfaces. The first expands the 
current Automated Commercial System--OASIS interface to incorporate the 
requirements for prior notice. The second is the web interface to 
capture prior notice for types of entries that have traditionally been 
exempt from Customs entry--i.e. mail, low dollar value entries, etc.
    FDA is integrating the prior notice requirements into the OASIS 
import entry processing system and making modifications to FDA's OASIS 
and Automated Commercial System interface. Additional modifications to 
the data warehouse decision support system will support the matching, 
standardization and validation of registration and prior notice 
information, ensuring high quality, consistent data. Enhancements to 
the automated import screening process to validate registration and 
prior notice will support inputs from both the web-based system and 
ACS. The existing entry review process in OASIS will be modified to 
support manual review of food articles that do not pass the automated 
screening processes. Prior Notice requirements will be met through 
enhancements to the import reporting database.
    The web-based electronic prior notice system prototype is on 
schedule for completion the last week in July. The goal is to have the 
web-based electronic Prior Notice system and the new ACS-OASIS 
interfaces operational by the December 12, 2003 deadline.
    In fiscal year 2004, FDA has requested $10.5 million of the $20.5 
million for operations and maintenance costs of the registration and 
prior notice systems, for hardware and software maintenance, 
telecommunications, facility lease, and contract labor. The request 
also includes funding for operations and maintenance of the labor-
intensive paper registration system and combined Help Desk.
    Question. How has FDA been working with industry and consumer 
groups to make sure that these rules are as stringent as necessary 
while not excessively burdensome?
    Answer. President Bush signed the Public Health Security and 
Bioterrorism Preparedness and Response Act of 2002--the Bioterrorism 
Act--Public Law 107-188, into law on June 12, 2002. The Bioterrorism 
Act requires the Secretary of Health and Human Services, acting through 
the Food and Drug Administration FDA, to develop regulations by 
December 12, 2003, to implement Section 305--Registration of Food and 
Animal Feed Facilities--and Section 307--Prior Notice of Imported Food 
Shipments. If FDA fails to issue final regulations by December 12, 
2003, the Bioterrorism Act still requires domestic and foreign 
facilities to register with FDA by this date, and requires FDA to 
receive prior notice of imported food shipments of not less than 8 
hours or more than 5 days beginning December 12, 2003. The Bioterrorism 
Act further specifies that imported food from unregistered facilities, 
or food offered for import without adequate prior notice, must be held 
at the U.S. port of entry until the facility is registered and/or FDA 
has received adequate prior notice. The Bioterrorism Act requires FDA 
to develop and issue final regulations by December 12, 2003, to 
implement section 306--Establishment and Maintenance of Records. FDA is 
developing a regulation to implement the expedited enforcement 
procedures for perishable foods required by Section 303--Administrative 
Detention. Both HHS and FDA are committed to meeting the statutory 
deadlines in the Bioterrorism Act, and FDA has been devoting extensive 
resources to this effort.
    By typical rulemaking standards, the statutory timeframes for 
having final rules in effect within 18 months of enactment is an 
expedited one. To ensure the registration and prior notice rules can 
take effect by December 12, 2003, FDA is required to propose rules, 
take comment, and publish final rules within 16 months of enactment. 
Notwithstanding this ambitious time frame, FDA recognized the 
significant impact these regulations could have on its stakeholders, 
both domestic and foreign. Accordingly, FDA began its outreach 
activities for developing these regulations by issuing a ``Dear 
Colleague'' letter to stakeholders, including states, foreign 
embassies, trade associations, industry, sister agencies, and consumer 
groups. The letter explained the new regulatory requirements in the Act 
and FDA's timeline for implementing them. The letter also invited 
stakeholders to submit comments to FDA by August 30, 2002, that FDA 
committed to considering as we developed the proposed rules. We 
requested comments on stakeholders' areas of concern and suggestions 
for addressing them while meeting the statutory requirements.
    In July and August, FDA also held six constituent briefings with 
stakeholders that approximately 88 organizations, 36 embassies, 52 
organizations attended. During these public meetings, FDA explained the 
provisions in the Bioterrorism Act, and again solicited comments by 
August 30, 2002. In addition, FDA opened a public docket for each 
regulation to receive these comments. FDA received over 150 comments 
during this early comment period that we considered as we developed the 
proposed regulations. Comments were submitted by 24 trade associations, 
8 foreign embassies, 7 foreign countries, 17 individual companies, 8 
consumers and consumer groups, and 2 other agencies or state 
associations. FDA also met with officials at HHS and the Office of 
Management and Budget, OMB.
    Beginning in September 2002, FDA senior staff with responsibility 
for developing the regulations began weekly meetings with their 
counterparts within the Department of Treasury, U.S. Customs Service, 
to discuss implementation of the Bioterrorism Act's provisions, 
particularly with respect to the registration and prior notice 
rulemakings. The input we received from Customs is reflected in the 
proposals that FDA developed.
    In September and October 2002, FDA briefed HHS and OMB officials, 
respectively, on FDA's concepts for the proposed regulations and 
obtained early feedback before we began drafting the proposed rules. In 
mid-November 2002, FDA then briefed the other Federal agencies who had 
stakeholders potentially affected by the proposed rules and/or who had 
an interest in the safety and security of the U.S. food supply to 
explain the proposed rules, prior to sending the draft proposed rules 
to DHHS and OMB. As part of its review under Executive Order 12866, OMB 
sent both draft rules to other Federal agencies for review and comment, 
and forwarded all the comments it received from those agencies, as well 
as its own comments, to FDA for consideration. FDA made changes to the 
draft proposed rules to address the comments we received.
    FDA sent the proposed registration and prior notice rules to the 
Office of Federal Register on January 29, 2002, where they were placed 
on immediate display. We also posted the proposed rules on our website 
on this date. The rules were officially published jointly by FDA and 
the Department of Treasury on February 3, 2003, 68 FR 5378 and 68 FR 
5428, respectively with a 60-day comment period. The comment period 
closed on April 4, 2003. FDA currently is reviewing the comments and 
determining what changes should be made to the rules before finalizing 
them. HHS' and FDA's goal is to publish the final rules by October 10, 
2003, which will allow them to take effect under the Congressional 
Review Act by the statutory deadline of December 12, 2003. FDA can 
begin accepting registrations from facilities upon OMB approval and the 
publication of the final regulation so that if FDA publishes the rule 
as planned, facilities will have 2 months to register before the 
statutory deadline.
    FDA also published notices of proposed rulemaking in the Federal 
Register to implement sections 303 and 306 on May 9, 2003, see 68 FR 
25241 and 68 FR 25187, respectively. The deadline for comment on these 
proposed rules is July 8, 2003. During the public comment period, 
members of the public--both domestic and foreign--can submit comments 
and supporting data for the Agency to consider as we develop the final 
rules. FDA is committed to working with our stakeholders as we develop 
all four of these regulations, and we will comply fully with our 
international trade obligations, including the applicable World Trade 
Organization agreements and the North America Free Trade Agreement.
    FDA has taken extraordinary steps to reach out to both our domestic 
stakeholders and our international partners to advise everyone about 
the proposed rules. To date, FDA senior officials and staff have 
participated in over 80 meetings, both domestic and abroad. In 
addition, the Foreign Agricultural Service at the United States 
Department of Agriculture has held multiple meetings in the countries 
in which they are located to explain the new requirements. Other 
international organizations, such as the Inter-American Institute for 
Cooperation on Agriculture in Costa Rica, also have held meetings using 
FDA's documents and other outreach materials. We have received numerous 
compliments from all affected parties on our efforts to reach out to 
affected stakeholders, explain the new requirements in the Bioterrorism 
Act and FDA's proposed rules implementing them, and to solicit their 
comments.
    FDA began by holding a public meeting, via satellite downlink, to 
discuss the registration and prior notice proposed regulations on 
January 29, 2003, 1:00-3:00 p.m. EST. Nearly 1,000 participants in 
North and South America, and the Caribbean viewed the live broadcast. 
The meeting was later re-broadcast to Europe to Asia, Africa, and the 
Pacific. FDA held a similar public meeting, via satellite downlink, to 
discuss the recordkeeping and administrative detention proposed 
regulations on May 7, 2003, 1:00-3:00 p.m. eastern standard time. 
Participants in North and South America, and the Caribbean viewed the 
broadcast live. The meeting was re-broadcast to Europe to Asia, Africa, 
and the Pacific. Transcripts of both broadcasts, as well as copies of 
the videotape itself, are available on FDA's website in English, 
French, and Spanish.
    FDA has developed fact sheets, talking points, and a Powerpoint 
presentation presenting an overview of the proposed rules in English, 
French, and Spanish that others may use to help communicate the 
requirements of the proposed rules. These materials also are posted on 
FDA's website. In addition, as stakeholders translate these materials 
into additional languages, FDA posts the additional translations on our 
website. Currently, there are approximately ten different language 
versions available for some of these materials, including Ukrainian, 
Slovene, Serbian, Russian, Romanian, Polish, Hungarian, Czech, 
Croatian, and Bulgarian.
    FDA also has been working with several sister agencies to ensure a 
broad dissemination of information and outreach materials, specifically 
those addressing international outreach. These agencies include the 
United States Trade Representative, USTR, the United States Department 
of Agriculture, Foreign Agricultural Service, FAS, the Animal, Plant 
Health Inspection Service APHIS, and the Grain Inspection, Packers and 
Stockyards Administration, GIPSA, the Department of State, the 
Department of Commerce, and the Bureau of Alcohol, Tobacco, and 
Firearms, within the Department of Treasury. This collaboration led to 
the development of the fact sheets on the legislation and a flyer on 
registration that were circulated to FAS officers abroad, an 
informational email and cable to the posts, fact sheets on the two new 
proposed rules, press releases, transcripts, and a computer disk that 
FDA will include in packets sent to FAS officers. These materials will 
be used by embassy staff to actively and aggressively disseminate 
information on the legislation and the proposed rules at trade shows, 
industry meetings, and as a regular part of their interaction with our 
trading partners.
    In addition to the above outreach activities, FDA has attended 
numerous meetings both domestically and abroad during the public 
comment periods on the rules to ensure both that affected parties are 
aware of the proposed requirements and can provide meaningful comments 
to FDA for the agency to consider as we develop the final rules. These 
interactions have been invaluable for both stakeholders and for the 
agency to hear firsthand the suggestions from affected parties.
    FDA is taking steps to implement the statute with provisions that 
are as stringent as necessary while not excessively burdensome. During 
our development efforts at both the proposed and final rule stages, we 
estimate the costs and benefits for several regulatory options of 
varying degrees of stringency. These options vary both the number of 
regulatory requirements and the coverage of the regulation, and provide 
varying benefits. We published our cost-benefit analyses for many of 
these options in the proposed rule and solicited comment on them. In 
response to comments we received during the public comment period that 
ended on April 4, 2003, we are revising the cost-benefit analysis of 
some of the options we presented in the proposal and adding some new 
options. This presentation of options allows FDA and HHS to see the 
trade-offs between costs and benefits of various regulatory options, 
which in turn allows them to choose the regulatory option that most 
completely supports the statutory requirements with provisions that are 
as stringent as necessary while not excessively burdensome. We also 
fully consider our obligations under international treaties and 
agreements to ensure that we implement the statute in a way that is not 
more burdensome than necessary.
    Also, since the beginning of our regulatory development efforts, 
FDA has collaborated with U.S. Customs on the implementation of this 
rule. Both the registration and prior notice proposed rules were co-
signed by the Department of Treasury and the Department of Health and 
Human Services. During our discussions preceding issuance of the 
proposed rule and as stated therein, Customs had informed FDA that it 
could not modify its existing Automated Commercial System, ACS, by the 
statutory deadline to receive the mandatory prior notifications. As a 
result, FDA began development of a stand-alone system that would 
receive the prior notices. The two agencies have continued our 
collaboration, and recently issued a joint press release in which we 
announced that importers, in most circumstances, will be able to 
provide the required information to FDA using ACS, making it easier for 
them to comply with the new law. As we continue our work to finalize 
the rule, we continue to meet weekly with Customs to streamline the 
requirements and implementation to the fullest extent feasible in a 
continued effort to make the rule no more burdensome than necessary.
    Question. Are further increases anticipated in future years as 
these rules go into effect?
    Answer. Out-year budget plans have not been developed, and we will 
continue to balance competing priorities when requesting funding.
    During fiscal year 2005, FDA will be implementing its Import 
Strategic Plan which will mesh with the Prior Notice and Registration 
Systems. As the Agency gains experience with the Import Strategic Plan, 
the experience will inform our budget recommendation.

                             GENERIC DRUGS

    Question. Dr. McClellan, last year, the Senate included a $750,000 
increase above the President's request in order to decrease the FDA 
review time for generic drugs, and requested a report on what types of 
information should and should not be in the FDA ``Orange Book.'' This 
year, the FDA budget request includes an increase of $13 million to 
hire additional employees to reduce review times and support the 
implementation of improved regulations governing generic drug 
competition. What is the status of the ``orange book'' report?
    Answer. The ``orange book'' report to Congress is currently in the 
clearance process. However, on October 24, 2002, the Agency published 
its proposed rule, ``Applications for FDA Approval to Market a New 
Drug: Patent Listing Requirements and Application of 30-Month Stays on 
Approval of Abbreviated New Drug Applications Certifying That a Patent 
Claiming a Drug is Invalid or Will Not be Infringed.'' The comment 
period has closed and the final rule is expected to publish soon.
    In this proposed rule, the Agency proposed to amend its patent 
submission and listing requirements for NDAs. The proposed rule 
clarified the types of patents that must and must not be submitted for 
listing and revised the declaration that NDA applicants must provide 
when submitting their patents for listing to help ensure that NDA 
applicants only submit appropriate patents and therefore make the 
patent listing process more efficient.
    The proposal also would revise the regulations regarding the 
effective date of approval for ANDAs and certain applications submitted 
under section 505(b)(2) of the Federal Food, Drug and Cosmetic Act. If 
the ANDA or 505(b)(2) application contains a certification that a 
listed patent is invalid or will not be infringed and the patent owner 
or NDA holder brings a suit for patent infringement, the approval of 
that application is delayed up to 30 months while the litigation is on 
going. Currently there is the opportunity for multiple 30-month stays 
of approval. The proposal would permit only one opportunity for a 30-
month stay per application that will streamline the ANDA and 505(b)(2) 
application approval process.
    Question. What are the specific goals for review times, if this 
increased funding is provided?
    Answer. The proposed increase in the FDA's generics budget will 
allow FDA to hire 40 experts in its generic drugs program to review 
generic drug applications more quickly and initiate targeted research 
to expand the range of generic drugs available to consumers. It is our 
goal to complete review and action upon original generic drug 
applications, accepted for filing, within 6 months after the submission 
date 85 percent of the time for fiscal year 2004.
    FDA also has begun internal reforms to improve the efficiency of 
its review process for generic drugs. In particular, FDA is 
implementing a new system of early communications with generic drug 
manufacturers who submit applications. FDA also will provide additional 
guidance for generic manufacturers preparing and submitting quality, 
complete applications.
    Studies of the FDA processes for new drugs indicate that such 
communications and guidance can improve drug applications and allow 
deficiencies to be corrected during the initial review, rather than 
having to wait for additional review cycles to fix problems. In 
addition, generic manufacturers have expressed interest in finding ways 
to improve the quality of their applications, so that more applications 
can be approved on the first round of review. The new resources and 
other reforms are expected to reduce the total time to approval for 
most new generic drugs by 3 months or more over the next 3 to 5 years. 
Because these changes will generally accelerate the approval for all 
generic drugs, most Americans who take generic drugs will benefit.
    The FDA also will expand its educational programs and partnerships 
involving generic drugs, to help consumers get accurate information 
about the availability of generic drugs for their health needs and to 
help ensure that consumers are aware that FDA-approved generic drugs 
are as safe and effective as their brand-name counterparts. FDA will 
also undertake more scientific studies of generic drug 
``bioequivalence'' to expedite the determination of whether the generic 
copy of a drug works in the same way as the original product, and will 
enhance monitoring of the safety of generic drugs on the market.

                              DRUG PRICES

    Question. Dr. McClellan, you mentioned several times during your 
exchange with Senator Dorgan the need for this country to find a way to 
provide safe, effective, FDA-approved drugs to the American people at a 
low cost, both through the Medicaid and Medicare programs. Recently, 
the Supreme Court ruled that the state of Maine could use their power 
as a bulk purchaser of drugs for Medicaid patients to bargain with drug 
companies to make cheaper drugs available to the state's non-Medicaid 
population. Currently, there is some controversy around this decision, 
and Secretary Thompson has apparently not yet decided what course of 
action to take. It seems that Maine has perhaps found a way to do just 
what you suggested in your testimony--providing safe, effective, FDA-
approved drugs at a lower cost to its' population. If the Secretary 
asked for your opinion on whether or not he should allow Maine to do 
what they have proposed, how would you respond?
    Answer. If Secretary Thompson were to ask my opinion on this issue, 
I would tell him that if he concludes that the Maine proposal is 
appropriate and legal under the Medicaid and Medicare programs, there 
is nothing to suggest that the safety and effectiveness of the FDA-
approved drugs purchased under the program would be compromised.

                            PRODUCT RECALLS

    Question. Recently, several lots of the popular drug Lipitor were 
recalled. I have been contacted by constituents, who, upon hearing of 
the recall, called their pharmacists to determine whether or not their 
product was included in it, and whose pharmacists were not aware that 
any product had been recalled. When a product is recalled, what 
responsibility is held by the FDA, the drug manufacturer, the 
pharmacists, and others who may be involved in the production or 
delivery of the drug, in order to make sure that the message gets to 
consumers quickly?
    Answer. FDA assesses each recall situation on an individual basis 
to determine what type of public notification is necessary, taking into 
account factors such as the degree of health hazard, the type and scope 
of distribution, and the likelihood that product remains on the market. 
At a minimum, FDA publishes a Weekly Enforcement Report that includes a 
listing of each new recall after it has been classified, which can take 
some time. This weekly report is made available to the media and is 
posted on FDA's public web site, www.fda.gov, under the heading 
``Safety Alerts and Recalls.''
    When FDA determines that a product being recalled presents a 
serious hazard to health that requires a public warning, FDA ordinarily 
gives the recalling firm an opportunity to issue such a public notice, 
requesting that FDA be given the opportunity prior to its issuance to 
review and comment on its adequacy. If the recalling firm cannot or 
does not issue a public warning when deemed necessary by FDA, then FDA 
issues such a public notice itself. The Federal Food, Drug, and 
Cosmetic Act does not give FDA the authority to order a drug firm to 
recall a product or to issue a public warning, so such actions are 
voluntary on the part of the firm. The nature of the public notice will 
vary depending on the circumstances. For example, it might be a general 
public warning through the general news media, either national or local 
as appropriate, or it might be through specialized news media such as 
professional or trade press, or to specific segments of the 
distribution chain such as pharmacists, doctors, or hospitals. For 
Class I recalls, which represent the most serious degree of health 
hazard and usually involve a public warning, the warning notices are 
also promptly posted on FDA's web site under ``Safety Alerts and 
Recalls.''
    Recalling firms are usually the company responsible for the 
distribution of the violative product in interstate commerce. In most 
cases the recalling firm is also the manufacturer, but it may be a 
distributor, especially if the product has been imported or distributed 
by someone other than the manufacturer. The recalling firm has the 
primary responsibility to issue any necessary public warning as well as 
issuing the recall notification to their direct accounts, to whom it 
shipped the product. Direct accounts, generally wholesale distributors, 
are usually requested to notify their customers--e.g., chain stores--
down to the retail level--e.g., pharmacies. Recalls of products that 
have the potential to present a serious health risk, such as 
counterfeit drug products, are normally extended to the user or 
consumer level. In such a case, because recalling firms do not have 
information on the identity of the consumer, the recalling firm is 
usually expected to issue an appropriate press release, as described 
above, to alert the public so that it is aware of the hazard and can 
take the necessary steps to remedy the situation.
    FDA works closely with the recalling firm to ensure that it 
conducts an effective recall. To this end, FDA may issue a statement on 
the recall, especially on a prescription counterfeit drug, to warn 
physicians, pharmacists, nurses, and all other health care 
professionals, trade groups, and consumers that a counterfeit drug may 
be on the market. In this situation with counterfeit Lipitor, the 
distributor Albers Medical Distributors, Inc. issued a recall notice on 
May 22, 2003, and FDA issued two talk papers on May 23, 2003, and June 
3, 2003, to alert the public. In addition, Pfizer, Inc. issued a news 
release on June 3, 2003, to further notify U.S. pharmacists of the 
counterfeit Lipitor.
    Question. Are there different procedures in place for different 
types of recalls (i.e. different types of products or the danger posed 
by the recalled product)?
    Answer. Although the basic recall procedures are the same, the 
specific details on how a recall is handled vary with the 
circumstances. For each recall, a specific recall strategy is developed 
by FDA, or by the recalling firm with FDA's review of the adequacy of 
the strategy. The strategy takes into account factors such as FDA's 
evaluation of the health hazard, the type of the product and how it is 
used, the distribution pattern, the degree to which product is expected 
to remain on the market, the degree to which the product and the 
deficiency is easily identifiable, and the possible need for continued 
availability of essential products. For each recall, the strategy 
addresses the depth of the recall--e.g., wholesale, retail, or consumer 
level-the possible need for a public warning and what form it needs to 
take, what method and level of effectiveness checks the recalling firm 
will conduct at consignees, what audit checks FDA will conduct, and any 
other recall implementation factors.
    The specific strategy and the urgency of a specific recall vary 
considerably depending on FDA's assessment of the health hazard 
involved. FDA assigns a numerical recall classification--i.e., I, II, 
or III-to each particular product recall to indicate the relative 
degree of health hazard presented by the product being recalled. Class 
I is a situation in which there is a reasonable probability that the 
use of, or exposure to, a violative product will cause serious adverse 
health consequences or death. Class II is a situation in which use of, 
or exposure to, a violative product may cause temporary or medically 
reversible adverse health consequences or where the probability of 
serious adverse health consequences is remote. Class III is a situation 
in which use of, or exposure to, a violative product is not likely to 
cause adverse health consequences.
    Although the recall health hazard classification heavily influences 
the recall strategy, the recall classification does not automatically 
trigger a public warning or a particular depth of recall. For example, 
although in practice most Class I recalls are determined to warrant a 
public warning, such a warning may not be appropriate or necessary if 
the distribution of the article was quite limited, easily identified, 
and all units can be quickly and effectively retrieved. Some Class II 
recalls may be found to require a public warning, whereas others may 
not. FDA would not usually expect Class III recalls to require public 
warnings, but it is possible a recalling firm might voluntarily issue 
such a notice on its own volition. Each recall has to be evaluated on a 
case-by-case basis and decisions on the recall strategy must be 
appropriate to the particular situation.

                             MEDICAL GASSES
 
   Question. Dr. McClellan, as I understand it, FDA has now issued one 
draft guidance that addresses the general good manufacturing practices 
(GMPs) that apply to the medical gas industry, and is still working on 
another draft guidance that will be specific to the validation of air 
separation units (ASUs). Can you tell me the status of your efforts?
    Answer. The Agency has issued the medical gas cGMP guidance 
document and is currently in the process of developing draft guidance 
on the validation of ASU requirements. The guidance development process 
will be consistent with the Agency's good guidance practices and will 
allow for extensive industry input and interaction. In fact, the Agency 
has already met with the Compressed Gas Association, CGA, on March 7; 
April 18; June 18; July 11; August 29; November 6, 2002, and on 
February 12, 2003, to discuss technical ASU validation issues including 
risk-models. We will continue to meet and solicit the industry's input 
on technical issues as we develop the ASU guidance document. Once draft 
guidance is issued, there will be a comment period, and the Agency will 
review and seriously consider all comments received during the comment 
period before finalizing the guidance.
    Question. Is the FDA utilizing a risk-based approach with respect 
to both guidances?
    Answer. These guidances are based on extensive input and comments 
received from industry over several years, and includes risk-based 
thinking on these issues. There will be ample opportunity for comment 
and meetings with stakeholders before final guidances are developed to 
ensure that the available scientific evidence is fully considered in 
our efforts to develop a risk-based approach on this topic.
    Question. It is also my understanding that the medical gas industry 
has developed a consensus risk-based model for ASU validation that will 
be the basis for a new industry standard. Can you tell me whether FDA 
plans to use the industry model or perform an independent risk 
assessment as the basis for the ASU guidance recommendations?
    Answer. The Agency has met extensively with the Compressed Gas 
Association, CGA, and discussed the industry's proposed risk-based 
model for ASU validation. The agency found those meetings to be very 
valuable and productive, and a shared understanding was achieved on 
many issues that will be reflected in the draft guidance that the 
Agency intends to develop on the subject. The draft guidance will 
reflect a risk-based approach, including important aspects of the model 
that was discussed. There will be further opportunities to discuss this 
matter to ensure that any unresolved issues can be fully considered 
before the conclusion of the guidance development process.

                          COLOR CERTIFICATION

    Question. I understand that, under the FFDCA, the FDA certified 
color regulatory program is paid for by an industry user fee. I have 
been contacted by a company located in Wisconsin that participates in 
this user fee program. They state that the FDA has moved this program 
into significantly larger and more expensive space, even though there 
has been no increase in programmatic responsibilities or staff. 
Specifically, they claim that while the color certification program 
used to run out of 10,000 square feet of space at a cost of $20 per 
square foot, they have moved to a new, 35,000 square foot space at a 
cost of $52 per square foot. Also, security costs have increased from 
$10,000 in previous years to over $300,000 this year. Further, it is my 
understanding that in previous years these companies have received a 
rebate from the FDA for unused funds, and that these rebates, which 
some companies had come to depend on, will no longer be given.
    What is the justification for moving to this larger, significantly 
more expensive, space? What is the justification for the increase in 
the security costs?
    Answer. The General Services Administration, GSA, required FDA to 
vacate Federal Building 8 by December 31, 2002, and to prepare that 
building for other uses. FDA was forced to set up a temporary location 
for the color certification function while new space is being made 
available in College Park, Maryland. GSA had only one facility 
available for FDA for this purpose in Chantilly, Virginia. The color 
certification staff moved from Federal Building 8 to the interim space 
in Chantilly, Virginia in October 2002. While the Federal Building 8 
space housed a majority of CFSAN staff including color certification, 
the Chantilly space is solely for work done by the color certification 
staff. The interim space provided by GSA is larger than FDA requested; 
unfortunately, there is not an easy way to divide the space so that FDA 
could use less. FDA's Associate Commissioner for Management and Systems 
visited the space to review the situation. In fiscal year 2003, FDA 
will have to use funding in the color certification account to pay for 
approximately $1.8 million in rent and related costs for the Chantilly 
location and about $1.5 million for buildout for College Park. The 
first phase of the move of the color certification operation from 
Federal Building 8 to interim space in Chantilly, Virginia took place 
November 2002 and the second and final phase was completed in December 
2002. FDA senior management has met with industry staff more than once 
to review these costs.
    When the color certification program was housed at Federal Building 
8, a proportionate share of security services at Federal Building 8 was 
applied to the color certification program. In contrast, the interim 
office in Chantilly is used only for the color certification program. 
In fiscal year 2003, after the events of September 11, all Federal 
facilities have new security requirements. For both of these reasons 
the security costs applicable to the certification function have risen 
significantly.
    The fees for certification of colors have not been raised since 
1993. Consequently, FDA's fee income for this function has been 
relatively steady. Naturally, as the employees receive pay raises, and 
as general inflation affects other costs, FDA's costs tend to rise 
gradually over time. During fiscal year 2002, FDA made a refund to the 
industry of $1 million in fees that had been collected over a period of 
years but were not needed by the agency at that time. This was in part 
due to the fact that FDA's rent costs related to this function were 
reduced in fiscal year 2001 due to GSA reducing the overall rent cost 
for Federal Building 8; the costs to this fund were reduced further in 
fiscal year 2002 because GSA did not charge FDA rent for the building, 
but only utilities costs and other costs of operating the building. 
Combined, this Fund saved about $800,000 in space costs during fiscal 
years 2001 and 2002 due to these cost reductions.
    In fiscal year 2003, however, FDA has had to incur significantly 
higher rent costs for a temporary laboratory for this function in 
Chantilly, VA, and has also had to provide funding to GSA for the 
buildout costs of a building in College Park, Maryland, near the 
present Harvey Wiley building occupied by FDA. This additional building 
is being prepared to house the color certification function on a 
permanent basis.
    While FDA currently expects to have sufficient funds in this 
account to be able to absorb these costs during fiscal year 2003, the 
agency will not have any funds with which to make any refund to the 
industry. It should also be noted that refunds of fees are not a 
regular event--before the refund made during fiscal year 2002, the last 
prior refund was in 1990.
    Question. What effect is this going to have on the amount of the 
user fees that the color certification industry is required to pay?
    Answer. For fiscal year 2002, the fee income in this fund was about 
$5 million, and expenses were only about $4 million because the fund 
had very low costs for space since the agency was not being charged 
rent for Federal Building 8. However, in fiscal year 2003, we expect 
total expenses to be about $7.5 million, while income remains around $5 
million. Therefore, most of the surplus money in this fund will be 
depleted. For fiscal year 2004, projected expenses for this activity 
are estimated at about $6 million. The agency expects to need to raise 
the fees for color certification, because the current level of income 
is not enough to meet the costs of the function on a continuing basis.
    Question. As the sole provider of funding for this new space, was 
the industry consulted prior to the move?
    Answer. Yes. FDA senior management has met with industry staff more 
than once to review these costs. In fact, when FDA staff met with 
industry representatives prior to the refund that was made to industry 
during fiscal year 2002, we explained that there would be some 
substantial costs due to this necessary relocation of the program. At 
the meeting industry representatives were notified that we would be 
moving to interim space and funds to cover buildout costs for the 
permanent facility would also be required.
    Question. Do you believe the sole responsibility for paying for 
what, at first glance, appears to be unnecessary increases in space and 
security costs, should lie with the color certification industry?
    Answer. The law requires that the fees support all costs of the 
color certification function, and the agency is using fees that have 
been built up in this account to meet the increased facilities costs 
being incurred in fiscal year 2003. The agency did make a refund to the 
industry of $1 million during fiscal year 2002, but it is not possible 
to make another refund now during fiscal year 2003 without jeopardizing 
FDA's ability to keep a reasonable amount of funds in this account to 
assure continued service to the color industry. The agency expects to 
have a balance in this account on September 30, 2003, of only about $1 
million in total.
    Question. How has the FDA responded to the concerns of the color 
certification industry?
    Answer. FDA senior management has met with industry staff more than 
once to review these costs. In fact, when FDA staff met with industry 
representatives prior to the refund that was made to industry during 
fiscal year 2002, we explained that there would be some substantial 
costs due to this necessary relocation of the program. Also, it is 
likely that the fees will need to be raised at some point during fiscal 
year 2004, and the agency has informed the industry's representatives 
of that likelihood. During a meeting with industry representatives in 
December 2002, all costs for the program were explained.
    Question. What is the FDA's plans regarding a rebate for this 
industry, and if one is not going to be provided, why?
    Answer. During fiscal year 2002, FDA made a refund to the industry 
of $1 million in fees that had been collected over a period of years 
but were not needed by agency at that time. This was in part due to the 
fact that FDA's rent costs related to this function were reduced in 
fiscal year 2001 due to GSA reducing the overall rent cost for Federal 
Building 8; the costs to this fund were reduced further in fiscal year 
2002 because GSA did not charge FDA rent for the building, but only 
utilities costs and other costs of operating the building. Combined, 
this Fund saved about $800,000 in space costs during fiscal years 2001 
and 2002 due to these cost reductions.
    In fiscal year 2003, however, FDA has incurred significantly higher 
rent costs for a temporary laboratory for this function in Chantilly, 
VA, the only facility GSA had available for this purpose. FDA has also 
had to provide funding to GSA for the buildout costs of a building in 
College Park, Maryland, near the present Harvey Wiley building occupied 
by FDA. This additional building is being prepared to house the color 
certification function on a permanent basis.
    While FDA currently expects to have sufficient funds in this 
account to be able to absorb these costs during fiscal year 2003, the 
agency will not have any funds with which to make any refund to the 
industry. It should also be noted that refunds of fees are not a 
regular event--before the refund made during fiscal year 2002, the last 
prior refund was in 1990. Also, it is likely that the fees will need to 
be raised at some point during fiscal year 2004, and the agency has 
informed the industry's representatives of that likelihood.

                              BLOOD SAFETY

    Question. Dr. McClellan, according to a December 2002 Associated 
Press report, FDA found more than 200 safety violations by the blood-
collecting unit of the Red Cross, and has asked a court to hold the Red 
Cross in contempt for several years of safety violations. It is my 
understanding that FDA and the Red Cross are now working to improve the 
safety standards of the Red Cross. Can you please provide me with 
information on how FDA is working with the Red Cross to improve their 
safety standards?
    Answer. Since May of 1993, the American Red Cross-ARC-has been 
under a Consent Decree of Permanent Injunction that required ARC to 
establish clear lines of managerial control over a newly established 
comprehensive quality assurance system in all regions; to enhance 
training programs; and to improve computer systems, records management, 
and policies for investigating and reporting problems, including 
adverse reactions. In August 2000, concerns arising from an inspection 
of ARC's national headquarters for blood services revealing that ARC 
had not adequately corrected serious violations of blood supply rules 
recurring over the past 17 years prompted FDA to begin negotiations 
with ARC to revise the 1993 Decree.
    After extensive discussions and mediation efforts, ARC agreed to 
sign an Amended Consent Decree of Permanent Injunction, containing 
substantial revisions to the original Consent Decree designed to 
improve safety standards at ARC. The Amended Consent Decree, which the 
United States District Judge signed on April 15, 2003, is the 
culmination of these negotiations.
    The Amended Consent Decree includes the important substantive 
provisions from the original Decree, and updates them to provide a 
series of clear deadlines for completing specific requirements of the 
Decree. Importantly, the provisions were also revised to address 
additional types of violations observed since the original Decree was 
signed in 1993. The Amended Decree also includes a comprehensive 
financial penalty scheme that requires ARC to pay substantial financial 
penalties if, in the future, ARC fails to comply with FDA laws and 
regulations aimed at ensuring the safety of the Nation's blood supply.
    FDA expects that ARC will concentrate fully on responding to the 
Agency's concerns about blood safety, and to its responsibilities as a 
major supplier of the Nation's blood, by implementing the systems 
required by the Amended Consent Decree. By doing so, ARC will avoid the 
need for FDA to use financial penalties to force ARC to improve its 
operations, to promptly correct problems when they are discovered, and 
to take action proactively to prevent further violations from 
occurring.

                           HOMELAND SECURITY

    Question. How many FTEs are currently on detail to the Department 
of Homeland Security?
    Answer. No FDA staff are on detail to the Department of Homeland 
Security. However, FDA is working extensively with the Department of 
Homeland Security. We participate in regular interagency meetings with 
DHS on food security issues and also agriculture security issues that 
involve the Department of Agriculture.
    Question. How long is the average detail to DHS?
    Answer. Currently, FDA does not have any employees detailed to the 
Department of Homeland Security.
    Question. What effect, if any, is this having on the workload of 
employees at FDA? Are there effects on performance?
    Answer. The workload of FDA employees and Agency performance levels 
will not be affected by work being conducted in collaboration with the 
Department of Homeland Security.
                                 ______
                                 

               Questions Submitted by Senator Tom Harkin


                               SHELLFISH

    Question. Two years ago the GAO reported to Senator Lugar and me 
about the failure of FDA and the Interstate Shellfish Sanitation 
Conference to adequately protect consumers from unsafe shellfish. The 
FDA continues to fund campaigns to educate vulnerable consumers about 
avoiding raw Gulf Coast shellfish that may be contaminated by deadly 
Vibrio vulnificus bacteria. Those efforts have failed, in part because 
they failed to inform consumers which shellfish were safer to eat, such 
as those harvested from colder waters or even Gulf Coast shellfish that 
were processed to eliminate deadly bacteria. Will you work with the 
ISSC to ensure that future campaigns will inform all consumers that raw 
shellfish harvested from cold waters and processed Gulf Coast shellfish 
are safer than raw, unprocessed Gulf shellfish harvested during warmer 
months?
    Answer. We continue to believe that immuno-compromised individuals 
should avoid raw animal protein generally, including raw molluscan 
shellfish. Immuno-compromised persons should only eat molluscan 
shellfish that are fully cooked because there can be viruses or other 
pathogens in raw seafood that are potential risks to immuno-compromised 
persons in addition to Vibrio vulnificus. Consequently, FDA education 
efforts and the current Interstate Shellfish Sanitation Conference, 
ISSC, education efforts advise immuno-compromised individuals to avoid 
raw molluscan shellfish.
    Moreover, the issue of differentiating some oysters from others is 
complicated. For example, we have been working with ISSC to increase 
the number of oysters that have been processed to kill Vibrio 
vulnificus. However, we have been advised by the ISSC that doctors in 
Texas declined to dispense ISSC education materials that suggested that 
their immuno-compromised patients could safely eat oysters that had 
been processed to kill Vibrio vulnificus. These doctors insisted that 
their patients completely avoid raw shellfish. We continue to consider 
the question of how to be supportive of new technologies, such as post 
harvest treatments, that kill Vibrio vulnificus while at the same time 
fully protecting immuno-compromised individuals.

                             METHYLMERCURY

    Question. Eight percent of U.S. women of childbearing age have 
mercury levels in their blood that are high enough to raise concerns. 
Although the FDA is responsible for ensuring the safety of commercial 
seafood, it currently conducts little monitoring of mercury levels in 
seafood and does not focus on the species, like tuna (canned and 
fresh), that are most popular with consumers. When will FDA establish a 
comprehensive plan to monitor mercury levels in a wide variety of fish, 
especially popular species? Does the agency have the resources to test 
mercury levels in a statistically significant number of tuna and other 
popular species?
    Answer. FDA is conducting a study to measure mercury levels in a 
variety of 12 different domestic and imported commercial fish. This 
study is designed to augment the current data set FDA has on mercury 
levels in fish. Most of FDA's monitoring of methylmercury in commercial 
seafood has been undertaken as part of the Total Diet Study. The Total 
Diet Study, sometimes called the Market Basket Study, is an on-going 
FDA program that determines levels of various pesticide residues, 
contaminants, including methylmercury, and nutrients in foods. The 
purpose of the study is to estimate the intake of these substances in 
representative diets of specific age-sex groups in the United States to 
determine potentially unsafe dietary conditions. To accomplish this 
goal, FDA purchases foods from supermarkets or grocery stores four 
times per year, one from each of four geographic regions of the 
country. The most frequently consumed foods are collected based on food 
consumption data. Therefore, those fish most frequently consumed are 
those that are tested.

                         LISTERIA MONOCYTOGENES

    Question. Listeria monocytogenes causes 2,500 illnesses and 500 
deaths each year, according to the Centers for Disease Control and 
Prevention. More than 3 years ago, FDA committed to amend its 
regulations to better protect consumers from Listeria in smoked 
seafood, fresh cheeses, and other FDA-regulated ready-to-eat foods. 
When will you issue a proposed rule to require Listeria testing in 
facilities that produce ready-to-eat foods? Do you have the resources 
to expedite this rulemaking?
    Answer. Listeria monocytogenes, LM, a harmful bacterium that can be 
found in a variety of foods, causes an estimated 2,500 illnesses and 
500 deaths in the United States each year. In pregnant women, LM-caused 
illness can result in miscarriage, fetal death, or severe illness in or 
death of a newborn infant.
    The Department of Health and Human Services and the U.S. Department 
of Agriculture have reviewed ongoing LM prevention and control 
activities and developed a joint action plan in 2001, which includes 
immediate, short-term, and long-term activities targeted at the serious 
problem of LM-caused illness. The Plan can be found at the following 
internet address, http://www.foodsafety.gov/dms/lmriplan.html.
    The action plan is a multi-pronged collaborative effort to decrease 
the number of cases of human listeriosis. The plan takes into 
consideration the results of the DHHS and USDA draft risk assessment of 
foodborne LM in ready-to-eat foods, which was published in January 2001 
along with the draft LM action plan.
    FDA plans to issue the final risk assessment and model during the 
summer of 2003, and the draft LM action plan will be updated 
accordingly based on this new information. Some of the on-going items 
include expanding PulseNet to enhance consumer and health care provider 
information and enhance disease surveillance and outbreak response. 
Some of the items being considered for the future include continuing 
education efforts, issuing draft FDA guidance for food processors, 
redirecting regulatory strategies, working with other Federal agencies 
on safety-based date labeling and coordinating research activities on 
the development of better methods of detection and quantification of 
LM.
    Following the publication of the final LM Risk Assessment, we will 
determine where we need to focus our efforts to protect the public 
health.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

                           TISSUE REGULATIONS

    Question. I understand that FDA has delayed regulation of the human 
tissue transplant market for more than 6 years, even though the agency 
acknowledges that the use of infected tissues poses a serious threat to 
public health. During a recent Governmental Affairs hearing, the FDA 
Director of the Center for Biologics Evaluation and Research said that 
FDA will adopt new rules for tissue banks, but did not indicate when. 
While the implementation of such regulations continues to be delayed, 
people are dying as a result of receiving contaminated tissues 
Commissioner. What I would like to know is, what exactly is your time 
line for rolling out regulations for the tissue transplant industry?
    Answer. FDA has had regulations in place for some human tissues 
since 1993. These regulations require tissue establishments to test 
human tissue donors for HIV-1, HIV-2, hepatitis B, and hepatitis C; 
prepare and follow written procedures for disease testing, assessing 
relevant medical records, and identifying quarantined tissue; prepare, 
validate and follow written procedures for prevention of infectious 
disease contamination or cross-contamination by tissue during 
processing; and, maintain records. The regulations also authorize FDA 
to inspect tissue establishments, to quarantine imported human tissue, 
and to require retention, recall, and/or destruction of violative 
tissue. FDA considers these rules to be an interim measure, until FDA 
finalizes the more comprehensive regulatory scheme developed in FDA's 
tissue action plan.
    Implementation of the tissue action plan is a top priority for the 
Agency at this time. We are in the process of finalizing a proposal for 
review and clearance by the Administration. Though we do not have a 
precise target date for publication of the final rules, you can be sure 
that it is a top priority for Dr. McClellan and Dr. Goodman.

                        MEDICAL DEVICE USER FEES

    Question. The MDUFMA user fee agreement was designed to create a 
stable and sufficient funding base for the rapidly expanding portfolio 
of increasingly complex devices that CDRH must regulate and approve. As 
Chairman Bennett pointed out at the hearing, substituting user fee 
money for budget money essentially amounts to a tax increase on 
innovation. If you combine $15,150,000 in user fees to a $6,000,000 
drop in the fiscal year 2004 base funding for CDRH proposed by the 
Administration, doesn't the overall CDRH budget increase by a total of 
only $9,150,000 in the Administration's proposed fiscal year 2004 
budget? Isn't this the type of budget gimmick that the user fee trigger 
was designed to avoid? Why does your budget request prioritize millions 
of dollars of discretionary spending over the requirements of the 
MDUFMA law?
    Answer. One of the provisions of MDUFMA requires that the funds 
from fees must be in addition to an appropriation amount that is as 
great as the amount FDA spent on the device review process from 
appropriations in fiscal year 2002--the year before MDUFMA went into 
effect--adjusted for inflation. This provision is meant to ensure that 
appropriated resources available for device review are increased for 
inflation each year, and that the funding from fees is over and above a 
set level of appropriations, after adjustment for inflation. We are 
committed to working within the Administration and with Congress to 
ensure that the intent of MDUFMA is realized. The reductions for the 
Device and Radiological Health program reflect management savings and 
IT consolidation and should not impact the resources directly devoted 
to the review process. User fee collections under MDUFMA are not 
considered an offset for this program. They are used exclusively for 
the review of new devices and related costs. FDA supports the goals of 
MDUFMA, and is committed to making the medical device user fee program 
a success.
    Question. If Congress does not appropriate the remainder of the $45 
million MDUFMA target for CDRH budget, the user fee program will end 
and FDA will face the loss of up to $35 million per year in user fee 
money. This would create a dramatic revenue loss for CDRH and FDA, and 
cause patients to wait longer for the approval of new devices. What 
mechanisms does FDA have in place to assure that this will not happen?
    Answer. The agency looks forward to working with Congress and 
industry to ensure the device user fee program is successful. FDA is 
committed to meeting the performance goals, as stated in the goals 
letter. We have already begun discussions within the Administration to 
find ways to fund this program appropriately in fiscal year 2005 and 
beyond to ensure that this important program does not sunset. FDA is 
committed to the goals of the Medical Device User Fee program and we 
are committed to finding a way to make the MDUFMA program work, to make 
it sustainable, make it permanent, and avoid having the trigger kick in 
because we are meeting our performance goals.

                        GENERIC DRUGS EDUCATION

    Question. In fiscal year 2002, this committee appropriated $250,000 
for the Office of Generic Drugs to do outreach and education on the 
safety and efficacy of generic drugs. What is the status of these 
activities at this point and where do you hope to go in the future in 
this regard?
    Answer. FDA has embarked on a multimedia educational program to 
build consumer and health-care professionals' confidence in the safety 
and effectiveness of generic drugs. The primary audience for the 
educational program has been consumers. The messages being conveyed are 
that generic drugs are reviewed and approved by the FDA, and that they 
are safe, effective and manufactured under FDA's quality standards. FDA 
has developed and distributed three print public service announcements, 
brochures, newspaper articles, and an FDA Consumer Magazine article.
    Congress recommended an additional $150,000 for this program in the 
fiscal year 2003 appropriation and FDA expects to spend this amount by 
the end of the fiscal year. With these funds FDA has also pursued the 
possibility of expanding the audience for this campaign by conducting 
focus groups for pharmacists and physicians.
    In fiscal year 2004, $400,000 has been proposed to support the 
generic drug education program for its third year. The work for fiscal 
year 2004 is building upon plans previously established to further 
communicate a standard message for the public. These funds will be used 
to continue support for FDA's multimedia educational program to build 
consumer and health-care professionals' confidence in the safety and 
effectiveness of generic drugs. FDA will continue to convey the message 
that generic drugs are reviewed and approved by the Agency, and they 
are safe, effective and manufactured under the Agency's quality 
standards. The campaigns will continue to include the distribution of 
print public service announcements, brochures, newspaper articles, and 
FDA Consumer Magazine articles. In addition, funds will be used to take 
information from focus groups for pharmacists and physicians to develop 
educational programs for those professionals.

                          DRUG COUNTERFEITING

    Question. I know that you are concerned about the quality and 
safety of prescription drugs re-imported from Canada, yet as you know, 
we are learning more and more about the problem of drug counterfeiting 
inside U.S. borders. Pharmacists are worried because some of the fakes 
are so good it is hard to tell what is counterfeit and what is real. 
Part of the problem appears to stem from the quick expansion of the 
secondary wholesaler industry. I was shocked to hear in a recent 
article on this issue that a drug might be bought and sold up to 6 or 
more times before reaching the consumer. Most wholesalers are doing a 
good job, but counterfeiting by a few bad eggs is becoming an 
increasing problem, which really concerns me. What is FDA doing to 
better monitor drug counterfeiting and diversion within the United 
States? What specific plans does FDA have to increase regulation of the 
secondary drug wholesaler market?
    Answer. 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 by consumers from foreign sources.
    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 is working on a number of fronts to address the influx of 
unapproved and counterfeit prescription drugs coming into the United 
States from foreign sources. These efforts include: educating the 
public to the significant potential safety issues presented by the 
purchase of drugs from foreign countries; working with professional 
groups to disseminate FDA's message on the potential dangers of 
Internet drug sales; partnering with state governments and other 
Federal agencies to develop more effective enforcement strategies; and, 
undertaking monitoring of and enforcement against Internet pharmacy 
outlets that present the most significant concerns. Recent high-profile 
regulatory actions send a strong message that FDA is actively working 
to take strong steps to protect the public from conduct that threatens 
the U.S. drug supply.
    The Agency has responded to the challenge of counterfeit drugs and 
diversion in the secondary market by employing a risk-based enforcement 
strategy to deploy our existing enforcement resources in the face of 
multiple priorities, including homeland security, food safety and 
counterfeit drugs. As an example, the Agency utilizes Import Alerts to 
identify particular shipments that may pose significant potential risk 
to public health. In the case of the increased volume of unapproved 
sildenafil, also known as generic Viagra, arriving at the Miami 
facility, the Agency has issued an Import Alert to instruct field 
personnel to work with the BCBP to detain all such shipments from 
specific manufacturers, distributors and countries of origin.
    FDA is also developing an new initiative on counterfeit drugs which 
includes creating an internal task force to explore the use of modern 
technologies and other measures such as partnering with State and 
Federal law enforcement agencies for stronger enforcement that will 
make it more difficult for counterfeit drugs to get distributed with--
or deliberately substituted for--safe and effective drugs.
    FDA's Office of Criminal Investigations, or OCI, works with state 
and other 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.
    OCI has opened 73 counterfeit drug cases since October 1996. 
Investigations have so far netted 44 arrests and 27 convictions. Fines 
and/or restitution have been imposed in excess of $250,000. FDA has 
seen a gradual, but troubling, increase in the incidence of finished 
dosage form counterfeit activity. Much of this activity has targeted 
high volume, high cost drugs where counterfeiters attempt to obtain the 
highest return possible in a short time period. Many of these drugs are 
used for treating cancer and AIDS patients. The public perception of a 
more dramatic increase in counterfeit drug activity stems from the fact 
that the latest several counterfeits have appeared in the wholesale 
market and received wider distribution than has been the case 
historically.
    On April 22, 2003, the Pharmaceutical Research and Manufacturers of 
America, or 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 be helpful to the Agency because it will assist FDA in carrying 
out its responsibilities to protect the safety and integrity of the 
Nation's drug supply by enhancing the Agency's ability to detect 
quickly and remove counterfeit drugs from the marketplace.
    Under this program, PhRMA member companies have agreed to notify 
FDA's OCI within 5 working days of determining that there is a 
reasonable basis to believe that a product has been counterfeited. The 
program also applies to counterfeits discovered in foreign countries if 
there is clear evidence that the counterfeits are intended for 
distribution in the U.S. Drug manufacturers already conduct their own 
investigations of suspected distribution of counterfeit drugs. This 
formal collaborative agreement will strengthen FDA's ability to assure 
the safety and effectiveness of drugs used by U.S. Consumers. The 
reporting program went into effect on May 1, 2003.

                     ADDITIONAL SUBMITTED STATEMENT

    Clerk's Note.--The Subcommittee has received a statement 
from the Medical Device Manufacturers Association which will be 
inserted in the record at this point.]

   Prepared Statement of the Medical Device Manufacturers Association

    We would like to thank the Subcommittee for the opportunity to 
submit comments on the subject of medical device user fees. The Medical 
Device Manufacturers Association (MDMA) is a national trade association 
based in Washington, D.C. that represents and serves the innovators and 
entrepreneurs in the medical device industry. The thousands of 
innovative companies that MDMA represents, including over 160 dues 
paying members, consist of manufacturers of medical devices, diagnostic 
products, and health care information systems. MDMA seeks to improve 
the quality of patient care by encouraging the development of new 
medical technology and fostering the availability of innovative 
products in the marketplace.
    The device user fee program has been an area deep concern for our 
members since the Medical Device User Fee and Modernization Act 
(MDUFMA, Public Law 107-250) was signed into law in October 2002. As 
you know, we are philosophically opposed to the idea of device user 
fees; however, we intend to meet our obligations under the agreement 
negotiated in MDUFMA.
    MDUFMA was designed to provide an enhanced and expeditious review 
process for medical devices by imposing fees on premarket approval 
applications, supplements, and 510(k) submissions reviewed by the 
Center for Devices and Radiological Health (CDRH) at the Food and Drug 
Administration (FDA). The law provides for shared responsibility 
between manufacturers and the government to fund the program. Over 5 
years, the manufacturers' fees and Congressional appropriations would 
provide CDRH with $225 million in additional resources in exchange for 
strong new review performance goals for the agency. The performance 
goals set out in the letter accompanying the bill are conditioned on 
FDA receiving money from both industry and Congress. Thus, without 
adequate Congressional support, manufacturers will not see the benefits 
from their user fee payments.
    While MDUFMA ensures industry funding of $81 million over 3 years, 
with additional industry funds in later years if the program continues, 
the performance goals agreed to in MDUFMA are conditioned on FDA 
receiving an additional $45 million in federal appropriations during 
the first 3 years of the program (fiscal years 2003-2005). If Congress 
fails to appropriate these funds, the program will sunset in fiscal 
year 2006, without industry receiving the improved review times agreed 
to in MDUFMA. Without the additional Congressional appropriations, 
device manufacturers fear that their user fee contributions over the 
next 3 years will not have the desired effect of more expeditious 
reviews.
    To fully fund the FDA and allow them to meet the performance goals 
included in MDUFMA, Congress would need to appropriate $205,720,000 for 
CDRH for each of fiscal years 2003-2005, with inflationary adjustments. 
So far, Congress has not provided the needed support. In fiscal year 
2003, the appropriation for CDRH was $194,720,000, which represents 
only a $4 million increase from the fiscal year 2002 figure--not even 
enough to cover salary increases--and leaves CDRH $11 million short of 
the fiscal year 2003 target of $205,720,000. This shortfall needs to be 
made up in the next 2 years to avoid the program's sunset. If Congress 
maintains the fiscal year 2003 level in fiscal year 2004, the funding 
level will be $22 million in deficit.
    Potentially making matters even worse, the President's fiscal year 
2004 budget request for CDRH is $184,543,000, more than a $10 million 
cut from the actual fiscal year 2003 appropriation. Cutting the budget 
by this much would result in a $32 million shortfall leading up to 
fiscal year 2005, not including inflationary adjustments. Potentially 
there would be a need for a $50 million plus appropriation in fiscal 
year 2005 in order to maintain the user fee program.
    Recent statistics show that the FDA device reviews are still taking 
far too long. The average approval time for premarket applications is 
364 days--more than twice the statutory target of 180 days. In 
addition, approval times for 510(k)s are on the rise, up to a 96-day 
average. MDUFMA performance goals would require FDA to approve 90 
percent of PMAs within 320 days by 2007. This will not be attainable 
unless FDA receives the additional Congressional appropriations 
authorized in MDUFMA. Furthermore, a massive third year appropriation 
would not be a reasonable solution. FDA needs this money this year so 
that it will have the ability to hire the staff needed to meet the 
performance goals.
    We recognize that Congress must make difficult decisions among many 
competing spending priorities. However, we encourage Members to 
consider the importance of supporting faster FDA reviews of innovative 
devices. Many of these devices present significant scientific 
advancements that need to be brought to the health care market as 
quickly as possible. Diagnostic products and other innovative 
technologies for use by public health workers are especially timely, 
though these technological breakthroughs are of little use if the FDA 
cannot review them in a timely fashion. Bottling up new devices in the 
FDA review pipeline only serves to harm patients who could benefit from 
access to the latest treatments and devices.
    Congress should be committed to appropriating adequate resources to 
ensure that new products can get to the market as quickly as possible. 
MDMA is working to ensure that Congress appropriates the money now so 
that patients will have access to innovative products faster through 
improved review times. We strongly encourage the Subcommittee to 
appropriate the funding amounts established in MDUFMA so that the FDA 
will be able to achieve the performance targets that device 
manufacturers are currently paying for.
    Without adequate Congressional support, the intent of MDUFMA will 
fail completely. Now that industry is ``paying in'' in the form of a 
user fee, manufacturers should receive something in return. The 
industry's $81 million contribution in fees over the next 3 years 
should result in receiving the benefit of improved performance goals. 
However, if Congress does not meet its obligations as agreed to in 
MDUFMA, MDMA will not support future user fee proposals.
    MDMA thanks the Subcommittee for the opportunity to present our 
views on this matter, and we look forward to working with you in the 
future to continue to improve the FDA to ensure that patients have 
access to the latest in medical technology.

                         CONCLUSION OF HEARINGS

    Dr. McClellan. I agree with that.
    Senator Bennett. Thank you very much.
    Dr. McClellan. Thank you, Mr. Chairman.
    Senator Bennett. The subcommittee is recessed.
    [Whereupon, at 12:13 p.m., Thursday, May 22, the hearings 
were concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]
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