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



 
AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR 
                            FISCAL YEAR 2005

                              ----------                              


                        THURSDAY, APRIL 1, 2004

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 1:08 p.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Robert F. Bennett (chairman) 
presiding.
    Present: Senators Bennett, Burns, and Kohl.

                       DEPARTMENT OF AGRICULTURE

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

             OPENING STATEMENT OF SENATOR ROBERT F. BENNETT

    Senator Bennett. The subcommittee will come to order.
    And may I begin by thanking everyone for your willingness 
to rearrange your schedule and come at this slightly early hour 
and apologize for being a little late. Senator Byrd cast his 
17,000th vote today on the floor and we lingered to pay tribute 
to him and give him our congratulations.
    This is the second hearing to review the fiscal year 2005 
budget request. We had Secretary Veneman here last week and we 
appreciate how responsive she was on the various topics we 
covered. This week we have several of the Under Secretaries at 
USDA, as well as the Acting Commissioner of the Food and Drug 
Administration.
    So we look forward to hearing your testimonies. I am going 
to try to keep this fairly quick because I do have an 
unavoidable conflict at 2 o'clock and I would like to be 
through before then if we can. If we cannot, we can go over 
that time but I will be unable to participate in that.
    So I have no other further opening statement, other than to 
say welcome to all of you. Thank you for your service to the 
United States of America, your willingness to interrupt other 
careers to render public service.
    This is the last time in this administration we will have 
the opportunity to offer our thanks for what you do. And it 
goes unappreciated and unnoticed too much. So I would like to 
be sure on this occasion to do that.
    Senator Kohl.
    Senator Kohl. I thank you, Mr. Chairman, and we welcome Mr. 
Bost, Dr. Murano, Mr. Hawks and Dr. Crawford.
    For the sake of time, Mr. Chairman, I will forego my 
opening statement but look forward to testimony and to ask 
questions.
    Thank you, Mr. Chairman.

                  PREPARED STATEMENT OF SENATOR DURBIN

    Senator Bennett. The subcommittee has received a statement 
from Senator Durbin which we will insert into the record.
    [The statement follows:]

            Prepared Statement of Senator Richard J. Durbin

    Chairman Bennett, thank you for holding this important hearing 
today. I look forward to working with you and my Subcommittee 
colleagues on the fiscal year 2005 (fiscal year 2005) Agriculture 
budget. Mr. Chairman, I would like to welcome our witnesses Eric Boast, 
Under Secretary for Food, Nutrition, Consumer Services, Elsa Murano, 
Under Secretary for Food Safety, William Hawks, Under Secretary for 
Marketing and Regulatory Programs and Lester Crawford, Acting 
Commissioner for Food and Drug Administration.
    I'd like to take a few minutes this morning to talk about some very 
important issues under USDA's jurisdiction.
    An issue of great importance to me is dietary supplements. 
Obviously, I was pleased about the ban on ephedra and Dr. McClellan's 
commitment to look at citrus autantium, aristolochic acid and usnic 
acid: all supplement ingredients I believe are dangerous. I was also 
pleased to see FDA take action against anabolic steroids.
    I want to see progress toward protecting the public from dangerous 
supplements continue. However, I believe several critical changes need 
to be made to the Dietary Supplement Safety and Education Act to make 
your job easier. First, I believe we need to require that supplement 
manufacturers report to the FDA when serious adverse events occur. I'm 
not talking about someone getting a little dizzy from taking a 
supplement. I'm talking about death, incapacity and hospitalization.
    It is absolutely necessary that we know when a product is harming 
people. The Office of the Inspector General at HHS estimates that the 
FDA receives reports of less than 1 percent of all adverse event 
associated with dietary supplements. How can the FDA effectively 
protect the public if it doesn't know when a product is causing harm?
    The Institute of Medicine's report that came out today supports a 
mandatory system of adverse event reporting. It says, ``while 
spontaneous adverse event reports have recognized limitations, they 
have considerable strength as potential warning signals of problems 
requiring attention, making monitoring by the FDA worthwhile''.
    The second change I would like to see made to DSHEA is a 
requirement to pre-market safety review of supplements containing 
stimulants. I don't believe that every natural substance needs to be 
subject to pre-market safety testing, but at the very least, DSHEA 
should be changed so stimulants are tested before marketed. When a 
supplement raises people's blood pressure, increases their metabolism 
and constricts their blood vessels, it is only prudent that we test the 
product before it is marketed.
    Another issue of importance deals with childhood obesity. Under 
Secretary Bost, I know that you've been working with my staff to 
develop a school-based demonstration project in Illinois to help 
students make better food choices while they are at school.
    I've been in school cafeterias. I've watched students pass by the 
fresh vegetables and go straight for the fries. I've also seen them put 
fruit on the tray and then dump the tray after lunch, fruit untouched. 
We have to do a better job of helping our young people understand 
nutrition and why it matters.
    I want to commend you and your staff for your efforts to work with 
us to develop some innovative demonstration projects in Illinois 
schools to help students make better food choices.
    Chairman Bennett and Senator Kohl, thank you again for the 
opportunity to talk about these issues and the fiscal year 2005 Budget.

    Senator Bennett. Thank you very much. Let us go in the 
following order: Mr. Bost, who is the Under Secretary for Food, 
Nutrition, and Consumer Services of the USDA; William Hawks who 
is the Under Secretary for Marketing and Regulatory Programs; 
Elsa Murano, who is the Under Secretary for Food Safety. And 
then, with the USDA having been heard from, we will turn to the 
Acting Commissioner of the FDA, Dr. Lester Crawford.
    Mr. Bost.

                       STATEMENT OF ERIC M. BOST

    Mr. Bost. Good afternoon and thank you very much, Mr. 
Chairman. Good afternoon, Senator Kohl.
    Thank you for this opportunity to present the 
Administration's budget request for fiscal year 2005 for the 
Food, Nutrition, and Consumer Services.
    You have my written testimony so I will try to be brief.
    Since I have been Under Secretary, I have focused my 
attention and energy on these priority challenges facing the 
nutrition assistance programs: expanding access to programs so 
that all eligible persons may participate; addressing the 
epidemic of obesity that threatens the health of individual 
Americans, our economy and health care system; and improving 
the integrity with which our programs are administered at all 
levels.
    Let me just briefly review some of our accomplishments over 
the course of the last 3 years. We have reached substantially 
more participants in each of our major programs, 5.8 million 
more people in Food Stamps; 1.6 million more children receiving 
a free or reduced priced lunch; over 1.4 million more children 
receiving a school breakfast; and over 400,000 more women, 
infants and children participate in the WIC program each month 
since January of 2001.
    We have successfully implemented the provisions of the 2002 
Farm Bill that met the Administration's goals, including the 
important steps of restoring Food Stamp benefits to legal 
immigrants and increasing flexibility for the States.
    We have also expanded the Electronic Benefits Transfer, 
EBT, to all 50 States, the District of Columbia, Puerto Rico 
and the Virgin Islands. EBT now delivers over 95 percent of all 
food stamp benefits. At some point in time we are going to have 
to change the name because there will no longer be any food 
stamps.
    We reduced food stamp payment errors for the 4th year in a 
row, the lowest that it has ever been in the history of the 
Food Stamp Program, at 8.26. We also reduced food stamp 
trafficking to less than 2.5 cents for each benefit dollar 
issued, down by a third since 1996-1998.
    We also promoted healthy lifestyles as a top priority 
through the President's HealthierUS initiative, working with 
public and private partners to promote healthy eating and 
physical activity and to foster a healthy school nutrition 
environment.
    We promoted a healthy way for children and adults across 
the program to increase emphasis on nutrition education. We are 
currently working in concert with the Department of Health and 
Human Services to update the Dietary Guidelines and a revision 
of the Food Guide Pyramid.
    We achieved a clean financial statement for FNS for the 
fifth consecutive year in support of the President's initiative 
to improve financial management across the Government.
    I am very proud of these accomplishments, however much more 
work remains to be done.
    In terms of supporting the goals of the President's budget, 
the President's budget for fiscal year 2005 requests $50.1 
billion in new budget authority.

                           FOOD STAMP PROGRAM

    Food Stamps, at $33.6 billion would serve an average of 
24.9 million people each month. The Administration's budget 
continues the $3 billion reserve appropriated in fiscal year 
2004.

                        CHILD NUTRITION PROGRAM

    In terms of the Child Nutrition Programs, the request of 
$11.4 billion supports an increase in school lunch 
participation from 28 million children to over 29 million 
children. It also supports an increase in school breakfast 
participation of over 1 million children from 8 million to 9 
million children.

                              WIC PROGRAM

    In our WIC Program, the President's budget proposes $4.8 
billion for WIC Program to provide food nutrition, education 
and a linkage to health care to a record level monthly average 
of 7.86 million needy women and young children. I think this 
speaks clearly to the President's commitment to this program. 
Additionally, the $125 million contingency reserve fund is 
available if there is a need for a increase if participation or 
food cost exceeds our projection.
    One of the things that I believe is very important that we 
are spending a great deal of time on, not only in my area but 
across the country, is addressing the overweight and obesity. 
Poor dietary choices and sedentary lifestyles are having a 
serious impact on the health and well being of this entire 
country.
    The most recent figures indicate that 62 percent of all 
adults in this country are overweight. Estimated health care 
costs at $123 billion, and also 400,000 deaths are directly 
related to us being overweight.
    Senator Bennett. Excuse me. Is that an annual cost of $123 
billion?
    Mr. Bost. $123 billion, that is correct.
    Senator Bennett. Annually?
    Mr. Bost. Annually.
    Senator Bennett. That would pay for a lot of health care.
    Mr. Bost. Yes, but we are eating ourselves to death.
    $20 million for breast feeding peer counseling, $2.5 
million to expand the successful Eat Smart Play Hard campaign 
so we can integrate the nutrition assistance programs to 
promote healthy eating and physical activity. $1.65 million is 
requested to fund the updated 2005 Dietary Guidelines and the 
Food Guide Pyramid. We believe this is very important, given 
the fact that Americans are spending on average $33 billion a 
year on weight loss products, books and et cetera, to help them 
lose weight. We are spending that money even though we are 
getting heavier.

                   NUTRITION PROGRAMS ADMINISTRATION

    In addition, the President's request includes an increase 
of $7 million in our administrative budget which will be 
targeted at improving integrity in the Food Stamp Program, 
improving the accuracy of certifications for free and reduced 
price school meals and invigorating our oversight, training and 
technical assistance activities with our State and local 
partners.
    As a part of our Nutrition Programs Administration, we are 
requesting $152 million, an increase of $14.7 million.
    Our total request for Federal administrative resources, 
including those activities funded directly from the program 
accounts, represents only 0.39 percent of the program resources 
for which we are responsible.

                          PREPARED STATEMENTS

    In conclusion, the President's direction has been very 
clear. The Administration request sets priorities to ensure 
access, maintain and improve integrity and supports our efforts 
to address the public health threat of overweight and obesity 
among all Americans in this country.
    Thank you, Mr. Chairman.
    [The statements follow:]

                   Prepared Statement of Eric M. Bost

    Thank you Mr. Chairman and members of the subcommittee for this 
opportunity to present the Administration's budget request for fiscal 
year 2005 for the Food, Nutrition and Consumer Services (FNCS).
    During the past 3 years as Under Secretary for the Food, Nutrition 
and Consumer Services, I have focused my attention and my energy on 
three central challenges facing the Federal nutrition assistance 
programs: expanding access to the programs so that all eligible persons 
can make informed decisions about whether to participate; addressing 
the epidemic of obesity that threatens the health of individual 
Americans, and our economy and health care system collectively; and 
improving the integrity with which our programs are administered, at 
all levels, so that we are the best possible stewards of the public 
resources with which we are entrusted.
    Let me first review briefly some key accomplishments achieved over 
the last 3 years:
  --We are reaching substantially more participants in each of our 
        major programs: 5.8 million more people in food stamps, 1.6 
        million more children receiving a free or reduced price school 
        lunch, over 1.4 million more in school breakfast, and over 
        400,000 more women, infants and children each month in WIC 
        since January 2001.
  --We successfully implemented the provisions of the 2002 Farm Bill 
        that met the Administration's goals of simplifying policies, 
        improving access, and ensuring program integrity, including the 
        important steps of restoring benefits to legal immigrants and 
        increasing flexibility for the States.
  --We expanded electronic benefits transfer (EBT) to all 50 States, 
        the District of Columbia, Puerto Rico, and the Virgin Islands; 
        EBT now delivers over 95 percent of all food stamp benefits.
  --We have seen food stamp payment errors fall for the 4th year in a 
        row, reaching the lowest level ever--8.26 percent--in 2002.
  --We have reduced food stamp trafficking to less than 2.5 cents of 
        each benefit dollar issued, down by one-third since 1996-1998.
  --We have made healthy lifestyles a top priority through the 
        President's HealthierUS initiative. We are working with public 
        and private partners, such as the National 5 to 9 a Day 
        Partnership, to increase fruit and vegetable consumption and 
        have developed a soon to be released kit for schools entitled 
        ``Fruits and Vegetables Galore: Helping Kids Eat More.'' We are 
        also expanding school-based efforts to promote healthy eating, 
        and to foster a healthy school nutrition environment through 
        technical assistance, training and nutrition education 
        materials that help schools assess and improve the school 
        nutrition environment, including improvements in school meals 
        and overall food policies.
  --We have focused on promoting healthy weight for children and adults 
        across programs through the Eat Smart. Play Hard.TM 
        campaign, and within programs through Team Nutrition, the Fit 
        WIC obesity prevention projects, and efforts to improve Food 
        Stamp Program nutrition education.
  --We are working in concert with the Department of Health and Human 
        Services to update the Dietary Guidelines for Americans, and we 
        are revising the Food Guide Pyramid to ensure that each 
        reflects the most comprehensive, up-to-date science available 
        in order to provide clear and useful nutrition information to 
        American consumers.
  --We achieved a clean financial statement for FNS for the 5th 
        consecutive year, in support of the President's management 
        agenda initiative to improve financial management across 
        government.
    I am proud of these accomplishments, and the hard work that they 
represent from USDA staff, from the Congress, and from our State and 
local program partners. But much important work remains to be done. I'd 
like now to review the budget request and the improvements in 
performance and results that it is designed to support.
    The President's budget for fiscal year 2005 requests $50.1 billion 
in budget authority to continue this critical work. This record request 
reflects the Administration's long-standing commitment to protect our 
children and low-income households from hunger and the health risks 
associated with poor nutrition and physical inactivity through the 
Nation's nutrition safety net. The purposes to which we will put this 
substantial public commitment are clear: first, we seek to improve the 
public's awareness of our programs and ease of access for all eligible 
persons, and second, through both the Federal nutrition assistance 
programs and the Center for Nutrition Policy and Promotion (CNPP), we 
will continue to do our part to address the growing public health 
threat that overweight and obesity poses to all Americans. Finally, we 
will strive to enhance the efficiency and accuracy with which these 
programs are delivered.

                        ENSURING PROGRAM ACCESS

    This Administration has demonstrated a long-term commitment to the 
Federal nutrition assistance programs and to the Americans whom they 
assist. The most fundamental expression of this commitment is making 
certain that sufficient resources are provided for these programs so 
that all who are eligible and in need have ready access to these 
critical benefits. We have delivered to you a budget that funds 
anticipated levels of program participation, while acknowledging the 
inherent difficulties in making such projections.
    For the Food Stamp Program, the budget continues the $3 billion 
contingency reserve appropriated in fiscal year 2004 but also offers, 
as an alternative, a proposal for indefinite budget authority for 
program benefits. This authority would be an efficient way to ensure 
that benefits are funded even as economic circumstances change, a goal 
we all share. In WIC, the $125 million contingency reserve appropriated 
in fiscal year 2003 continues to be available to the program should 
participation or food costs exceed the levels anticipated in the 
budget. Should this not be sufficient, we are committed to working with 
you to ensure that WIC is properly funded.
    Adequate program funding, however, is not enough to ensure access 
to program services for those who need them. Program structure and 
delivery methods must be designed so as not to create the types of 
barriers to program participation that can result in their 
underutilization. As we move forward with the reauthorization of the 
Child Nutrition and WIC Programs, improving program delivery and 
ensuring the access of eligible people who wish to participate will 
remain fundamental principles.

                   ADDRESSING OVERWEIGHT AND OBESITY

    Poor dietary choices and sedentary lifestyles are having a serious 
impact on the health and well being of all Americans. Obesity and 
overweight are widely recognized as a public health crisis. The costs 
of these conditions are enormous--reduced productivity and increased 
health care costs estimated at over $123 billion, and, most sadly, 
unnecessarily premature deaths for over 300,000 Americans annually. The 
Federal nutrition assistance programs can play a critical role in 
combating this epidemic by promoting better diets through nutrition 
education and promotion. These program services, along with the work of 
the Center for Nutrition Policy and Promotion, are an integral part of 
the President's HealthierUS initiative, and the budget reflects our 
continuing commitment to this effort. It includes $5 million for 
ongoing demonstration projects to explore new ways for the WIC program 
to reduce and prevent unhealthy weight among our children. We are also 
seeking $2.5 million to expand our very successful Eat Smart. Play 
Hard.TM campaign, and to develop an integrated, family-
oriented approach to nutrition education that cuts across all of the 
Federal nutrition programs and complements efforts in schools and other 
program settings to encourage healthy eating and physical activity.
    Our request also supports FNCS' CNPP, which works with the 
Department of Health and Human Services and other agencies to promote 
good nutrition across all segments of the population. The budget 
includes resources that are critical to the development and promotion 
for the updated 2005 Dietary Guidelines for Americans and the 
concurrently revised food guide system, providing essential tools to 
communicate the Guidelines in ways that motivate Americans to improve 
their eating and physical activity behaviors. The requested funding for 
CNPP will enable us to capitalize on the investments we have already 
made with a new opportunity to build upon public awareness of basic 
nutrition messages with an enhanced food guide system that will target 
individual needs.

                ENHANCING PROGRAM INTEGRITY AND DELIVERY

    With this budget request, we are asking the Nation to entrust us 
with over $50 billion of public resources. We are keenly aware of the 
immense responsibility this represents. To maintain the public trust, 
we must demonstrate our ongoing commitment to be good stewards of the 
resources we manage, as an essential part of our mission to help the 
vulnerable people these programs are intended to serve.
    This is not a new commitment. As I noted earlier, in fiscal year 
2002, the most recent year for which data is available, the Food Stamp 
Program achieved a record high payment accuracy rate of 91.74 percent. 
We have also been working to develop strategies to improve the accuracy 
of eligibility determinations in our school meals programs--an issue of 
mutual concern to all those that care about these programs. The budget 
features dollar and staff year resources which will allow us to 
continue to work closely with our State and local partners on both of 
these essential integrity initiatives--continuing both our successes in 
the Food Stamp Program and our intensified efforts in school meals.
    In the WIC program, we are requesting $20 million to continue our 
initiative to assist States with the modernization of their information 
technology infrastructure. These systems are essential underpinnings 
for the improvements in program management, program integrity, and, 
most importantly, program delivery that need to be achieved. The 
Administration has worked closely with the Office of Management and 
Budget (OMB) and the WIC community to fashion a procurement strategy 
that will ultimately produce a series of core model WIC systems. States 
updating their WIC systems will be able to select from among these 
model core systems as starting points for their own implementation, 
thus reducing their costs.
    In the remainder of my remarks, I'd like to touch on several key 
issues:

                           FOOD STAMP PROGRAM

    The President's budget anticipates serving a monthly average of 
24.9 million persons in fiscal year 2005, an increase of 1.2 million 
over our projections of the current fiscal year. Our $33.6 billion 
request supports this level of service. In addition, the budget 
continues the $3 billion contingency reserve appropriated in fiscal 
year 2004. While the President's budget anticipates continuing 
improvement in the Nation's economy, Food Stamp Program participation 
traditionally continues to rise for some time after the aggregate 
employment begins to improve. Moreover, we have made a concerted effort 
over the last 3 years to raise awareness of the benefits of program 
participation and encourage those who are eligible, especially working 
families, senior citizens, and legal immigrants, to apply. The rate of 
participation among those eligible to participate increased 2 years in 
a row, after 5 years of declines, reaching 62 percent in September 
2001. However, many eligibles remain who could be participating but are 
not. We have been aggressive in promoting the message that the Food 
Stamp Program Makes America Stronger in the sense that the program puts 
healthy food on the tables of low-income families and has a positive 
impact on local economies. We have just recently embarked on a media 
campaign to carry this message and to reach those who are eligible but 
not participating. We have also paid particular attention to those 
legal immigrants who have had their eligibility restored by the Farm 
Bill by carrying messages on Hispanic radio stations across the 
country.
    These factors make this a particularly challenging period to 
forecast program participation and costs. To ensure the adequacy of 
resources available to the program, and as an alternative to the 
traditional contingency reserve, we have proposed indefinite authority 
for program benefits and payments to States and other non-Federal 
entities.

                        CHILD NUTRITION PROGRAMS

    The President's budget requests $11.4 billion to support the 
service of appealing, nutritious meals to children in public and 
private schools and child care facilities through the Child Nutrition 
Programs in fiscal year 2005. In the National School Lunch Program, we 
anticipate serving over 29 million children per day in fiscal year 
2005. Similarly, the School Breakfast Program will serve approximately 
9 million children each school day. The request for budget authority is 
a slight decrease from levels appropriated in fiscal year 2004. This is 
because the rate of program growth in fiscal year 2004, to date, has 
been slightly less than anticipated. As a result, the anticipated 
carry-over resources, in conjunction with the budget request, will 
fully fund the projected level of program activity.
    Several components of the Child Nutrition Programs expire at the 
end of March. We urge the Congress to move quickly to extend these 
provisions before they expire to ensure that all aspects of the Child 
Nutrition Programs continue to operate without interruption. We also 
want to work with the Congress to reauthorize and improve the entire 
range of Child Nutrition Programs, consistent with the principles 
outlined last year. These principles include ensuring that all eligible 
children have access to program benefits as well as streamlining the 
administration of programs to minimize burdens, supporting healthy 
school environments and strengthening program integrity.
    Reauthorization provides an opportunity to address our continuing 
concern that the certifications of children to receive free and reduced 
price meals are not performed as accurately as they reasonably could 
be. Correct certifications are a priority to ensure that school meal 
funds go to those most in need, and the many other Federal, State, and 
local resources that use this same data are properly targeted as well.
    In sum, we are committed to working with Congress to reauthorize 
the Child Nutrition Programs and to reinvesting any savings achieved in 
the process back into these important programs for program 
improvements.

                                  WIC

    In fiscal year 2005, the President's budget request of $4.79 
billion anticipates providing essential support to a monthly average of 
7.86 million women, infants and children through the Special 
Supplemental Nutrition Program for Women, Infants and Children (WIC). 
This is an increase of 60,000 participants per month from anticipated 
fiscal year 2004 participation levels. Additionally, the $125 million 
contingency reserve, appropriated in fiscal year 2003, remains 
available to the program should participation or food costs exceed our 
projections. The Administration remains steadfast in its support of WIC 
and is committed to working with Congress to ensure its proper funding. 
Finally, the request includes $20 million to continue our peer 
counseling initiative that is designed to enhance both rates of 
initiation and duration of breastfeeding among WIC participants.

             THE EMERGENCY FOOD ASSISTANCE PROGRAM (TEFAP)

    Through TEFAP, USDA plays a critical supporting role for the 
Nation's food banks. This support takes the form of both commodities 
for distribution and administrative funding for States' commodity 
storage and distribution costs. Much of this funding flows from the 
States to the faith-based organizations that are a cornerstone of the 
food bank community. The President's budget requests the fully 
authorized level of $140 million to support the purchase of commodities 
for TEFAP. Additional food resources become available through the 
donation of surplus commodities from USDA's market support activities. 
In recent years, these donations have increased the total Federal 
commodity support provided to the Nation's food banks by almost 300 
percent. State administrative costs, a critical form of support to the 
food bank community, are funded at $50 million in the President's 
request.

                   NUTRITION PROGRAMS ADMINISTRATION

    We are requesting $152 million in our Nutrition Programs 
Administration account, which reflects an increase of $14.7 million in 
our administrative funding. This increase supports the Child Nutrition 
and Food Stamp Programs integrity activities mentioned earlier, as well 
as a number of nutrition guidance initiatives under the Center for 
Nutrition Policy and Promotion. These resources are absolutely critical 
to our ability to successfully execute the mission of the Food, 
Nutrition and Consumers Services. Our total request for Federal 
administrative resources, including those activities funded directly 
from the program accounts, represents only about 0.39 percent of the 
program resources for which we have stewardship. I believe that we need 
this modest increase in funding in order to maintain accountability for 
our $50 billion portfolio and to assist our State and local partners in 
effectively managing the programs.
    Mr. Chairman, I appreciate the opportunity to share my thoughts 
with you, and would be happy to answer any questions you may have.

                                 ______
                                 

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

    Thank you, Mr. Chairman, and members of the Subcommittee for 
allowing me this opportunity to present testimony in support of the 
fiscal year 2005 budget request for the Food and Nutrition Service.
    The Food and Nutrition Service is the agency charged with managing 
the Nation's nutrition safety net and providing Federal leadership in 
America's ongoing struggle against hunger and poor nutrition. Our 
stated mission is to increase food security and reduce hunger in 
partnership with cooperating organizations by providing children and 
low-income people access to nutritious food and nutrition education in 
a manner that inspires public confidence and supports American 
agriculture.
    In fiscal year 2005, the President's budget requests a total of 
$50.1 billion in new budget authority to fulfill this mission through 
the Federal nutrition assistance programs. With this record request we 
will touch the lives of more than 1 in 5 Americans over the course of a 
year. This includes providing nutritious school lunches to an average 
of 29 million children each school day (NSLP), assisting with the 
nutrition and health care needs of 7.86 million at risk pregnant and 
postpartum women (WIC) and children each month, and ensuring access to 
a nutritious diet each month for 24.9 million people through the Food 
Stamp Program (FSP). These are just 3 of our 15 Federal nutrition 
assistance programs, which also include such important programs as the 
School Breakfast Program (SBP), The Emergency Food Assistance Program 
(TEFAP), the Summer Food Service Program (SFSP), the Child and Adult 
Care Food Program (CACFP), the Food Distribution Program on Indian 
Reservations (FDPIR), and the Commodity Supplemental Food Program 
(CSFP). Through the range of design and delivery methods these programs 
represent, FNS seeks to serve the children and low-income households of 
this Nation and address the diverse ways and circumstances in which 
hunger and nutrition-related problems present themselves.
    The resources we are here to discuss must be viewed as an 
investment--an investment in the health, self-sufficiency, and 
productivity of Americans who, from time to time, find themselves at 
the margins of our prosperous society. Under Secretary Bost, in his 
testimony, has outlined the three critical challenges which the Food, 
Nutrition and Consumer Services team has focused on under his 
leadership: expanding access to the Federal nutrition assistance 
programs, promoting healthy weight to address the problems of 
overweight and obesity; and, improving the integrity with which our 
programs are administered. In addition to these fundamental priorities 
specific to our mission, President Bush has laid out an aggressive 
agenda for management improvement across the Federal Government as a 
whole--the President's Management Agenda. This agenda seeks to protect 
the taxpayers' investment in all Federal activities by enhancing the 
accuracy and efficiency of program delivery and reducing improper 
payments, by improving decision-making through the integration of 
performance information into the budget process, by building 
partnerships with faith and community based organizations, and by 
planning carefully and systematically for the human capital challenges 
looming near for all of the Federal service.

                   THE CHALLENGE OF IMPROPER PAYMENTS

    Benefits of the Federal nutrition assistance programs must be 
carefully targeted and delivered to those who are eligible, in need, 
and wish to participate. Benefit payments made in error increase the 
cost of these programs to the taxpayers and can divert needed 
assistance from eligible participants seeking services. Today I am 
pleased to report to you, for the second year in a row, record high 
payment accuracy rates for the Food Stamp Program. In fiscal year 2002, 
the most recent year for which data is available, the Food Stamp 
Program achieved an accuracy rate of 91.74 percent, 0.4 percent higher 
than fiscal year 2001's record achievement. Despite this success, much 
remains to be done to improve the accuracy and efficiency of benefit 
delivery in all the Federal nutrition assistance programs, not just the 
Food Stamp Program. The President's budget requests additional funding 
to strengthen integrity and program management both at the Federal and 
State levels. Our request includes an increase of $7 million in our 
administrative budget which will be targeted at maintaining our 
continuing success in the Food Stamp Program, improving the accuracy of 
certifications for free and reduced price school meals, and improving 
delivery of program benefits and reinvigorating our oversight, training 
and technical assistance activities for our State and local partners.

                   BUDGET AND PERFORMANCE INTEGRATION

    The President's Management Agenda recognizes that good decision-
making depends on both the availability of relevant, high quality data 
and using that information in an analytical, business-like approach to 
problem solving. The Food and Nutrition Service has long been a leader 
in the Federal arena. Our entitlement programs are performance funded. 
This requires us to balance, through analysis and insight, an uncertain 
dynamic program demand with the constraints of a fixed appropriation. 
In this year's budget explanatory notes, you will find expanded 
performance information and analysis with clear connections linking 
USDA's strategic plan, our budget request, and program performance.
    Vital to the success of the President's vision of improved Federal 
decision-making and seamless budget and performance integration is an 
adequately funded, properly positioned agenda of performance 
measurement and program assessment. Funding proposed in the request 
would support a range of important program assessment activities: 
focused studies of program operations, development of comprehensive 
measures of program performance to inform and foster outcome-based 
planning and management; and technical assistance to States and 
communities for practical demonstrations of potential policy and 
program improvements. These activities provide a crucial foundation for 
strategic planning and program innovation. This request will allow the 
programs to respond to emerging performance management issues 
identified by the Performance Assessment Rating Tool of the National 
School Lunch Program and Food Stamp Program as well as support 
effective stewardship of the taxpayer investment in nutrition 
assistance.

 REACHING OUT TO THOSE IN NEED THROUGH FAITH-BASED AND OTHER COMMUNITY 
                             ORGANIZATIONS

    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 Federal 
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 our outreach efforts in fiscal year 
2005. The partnership of faith-based organizations and FNS programs, 
including TEFAP, WIC, NSLP, and the CSFP, is long-established. Indeed, 
the majority of organizations such as food pantries and soup kitchens 
that actually deliver TEFAP benefits are faith-based. Across the 
country, faith-based organizations have found over the years that they 
can participate in these programs without compromising their mission or 
values. They are valued partners in an effort to combat hunger in 
America.

                        HUMAN CAPITAL MANAGEMENT

    The General Accounting Office (GAO), have demonstrated that 
recruiting, developing and retaining a highly-skilled workforce is 
critical to sustaining our public service. This is especially true for 
the Food and Nutrition Service. We currently estimate that up to 80 
percent of our senior leaders are eligible to retire within five years, 
as is nearly 30 percent of our total workforce. FNS must address this 
serious challenge by improving the management of the agency's human 
capital, strengthening services provided to employees, and implementing 
programs designed to improve the efficiency, diversity, and competency 
of the work force. With just nominal increases for basic program 
administration in most years, the Food and Nutrition Service has 
reduced its Federal staffing levels significantly over time. We have 
compensated for these changes by working smarter--re-examining our 
processes, building strong partnerships with the State and local 
entities which administer our programs, and taking advantage of 
technological innovations. We are extremely proud of what we have 
accomplished, but seek additional funding in a few targeted areas to 
address specific vulnerabilities. Full funding of the nutrition 
programs administration requested in the President's budget, 
approximately 0.39 percent of our program portfolio, is vital to our 
continued success.
    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

    The President's budget requests $33.6 billion for the Food Stamp 
account including the Food Stamp Program and its associated nutrition 
assistance programs. These resources will serve an estimated 24.9 
million people each month participating in the Food Stamp Program 
alone. Included in this amount, we propose to continue the $3 billion 
contingency reserve provided for the program in fiscal year 2004. The 
importance of this reserve is especially critical in fiscal year 2005. 
While we anticipate that the improvement we are now seeing in the 
general economy will at some point begin to impact the program, 
predicting the turning point of participation is challenging. Our 
request also presents, as an alternative to the traditional contingency 
reserve, a proposal of indefinite authority for program benefits and 
payments to States and other non-Federal entities.

                        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 childcare settings every day. This level of funding will support an 
increase in daily School Lunch Program participation from the current 
28.7 million children to over 29.2 million children. This funding 
request also supports an increase in daily School Breakfast Program 
participation from the current 8.8 million to 9.0 million children. 
Requested increases in these programs also reflect rising school 
enrollment, increases in payment rates to cover inflation, and 
proportionately higher levels of meal service among children in the 
free and reduced price categories. We are proposing to extend 
provisions that would expire on March 31, 2004.

                                  WIC

    The President's budget includes $4.8 billion for the Special 
Supplemental Nutrition Program for Women, Infants and Children, the WIC 
program. The request will allow local communities to provide food, 
nutrition education, and a link to health care to a monthly average of 
7.86 million needy women, infants and children during fiscal year 2005. 
We also propose to continue our vital initiatives, begun in fiscal year 
2004, to enhance breastfeeding initiation and duration, improve State 
information technology infrastructure, and to maximize WIC's potential 
to combat childhood obesity. The $125 million contingency fund provided 
for in the fiscal year 2003 appropriation continues to be available to 
the program. These resources are available if costs exceed current 
estimates.

               COMMODITY SUPPLEMENTAL FOOD PROGRAM (CSFP)

    The Commodity Supplemental Food Program (CSFP) serves elderly 
persons and at risk low-income pregnant and post-partum and 
breastfeeding women, infants and children up to age six. The budget 
requests $98.3 million for this program, the same level appropriated in 
fiscal year 2004. This request may not support the same level of 
program services as in fiscal year 2004 due to the availability of one-
time carry-over funds from 2003. However, we will take all available 
administrative actions to minimize any program impact. We face a 
difficult challenge with regard to discretionary budget resources. CSFP 
operates in selected areas in 32 States, the District of Columbia, and 
two Indian Tribal Organizations. The populations served by CSFP are 
eligible to receive similar benefits through other Federal nutrition 
assistance programs. We believe our limited resources are best focused 
on those program available in all communities nationwide.

             THE EMERGENCY FOOD ASSISTANCE PROGRAM (TEFAP)

    As provided for in the Farm Bill, the budget requests $140 million 
for commodities in this important program. Our request for States' 
storage and distribution costs, critical support for the Nation's food 
banks, is $50 million. The Food and Nutrition Service is committed to 
ensuring the continuing flow of resources to the food bank community 
including directly purchased commodities, administrative funding, and 
surplus commodities from the USDA market support activities. Surplus 
commodity 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 $152.2 million in this account, which includes an 
increase of $7 million for the program integrity initiative described 
earlier. Included are also a number of initiatives, under the Food and 
Nutrition Service and 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 0.39 percent of the program resources for which 
we have responsibility and sustains the program management and support 
activities of our roughly 1,545 employees nationwide. I believe we need 
these modest increases in funding in order to maintain accountability 
for our $50 billion portfolio and to assist States to effectively 
manage the programs and provide access to all eligible people.
    Thank you for the opportunity to present this written testimony.

    Senator Bennett. Thank you very much. Mr. Hawks.

                     STATEMENT OF WILLIAM T. HAWKS

    Mr. Hawks. Thank you, Mr. Chairman, Senator Kohl.
    It is indeed a pleasure to be with you today to discuss the 
activities of the Marketing and Regulatory Programs.
    Senator Bennett. Would you pull the microphone a little 
closer to you?
    Mr. Hawks. Turning it on will help, as well.
    Senator Bennett. That also helps.
    Mr. Hawks. As I said, it is certainly a pleasure to be with 
you today to discuss the activities of the Marketing and 
Regulatory Programs and the 2005 budget for those agencies 
within Marketing and Regulatory Programs. Those are the Animal 
and Plant Health Inspection Service, Agricultural Marketing 
Service and the Grain Inspection, Packers and Stockyards 
Administration.
    My motto has been working together works. I am holding my 
agencies accountable to make sure that they work.
    I have five goals that I hold them accountable for. The 
first one is to build broader bridges. The second one is to 
move more product. The third goal is to invest in 
infrastructure. The fourth goal is to grow our people. The 
fifth goal is to sell agriculture as a profession.
    The Marketing and Regulatory Program activities are funded 
both by beneficiaries of the program services and by the 
taxpayers. They carry out programs costing nearly $1.8 billion 
with $418 million funded by fees paid by the beneficiaries of 
the services and $449 million collected from Customs receipts.
    On the appropriations side, the APHIS is requesting $893 
million, GIPSA is requesting $44 million, and AMS is requesting 
$87 million.
    APHIS' primary mission is to safeguard animal and plant 
health, address conflicts with wildlife, faciliate safe 
Agricultural trade, promote environmental stewardship, and 
improve animal well being. APHIS has been working to enhance an 
already vigilant animal and plant health monitoring system. 
APHIS trade issues resolution management efforts enabled us to 
negotiate fair trade in the international market. APHIS also 
regulates the movement and field release of biotechnology 
derived plants. Recent developments in biotechnology hold great 
promise as long as we are able to ensure the protection of the 
environment and the safety of the foods.
    GIPSA facilitates the marketing of livestock, meat, 
poultry, cereals, oil seeds and related agricultural products 
and promotes fair and competitive trade. GIPSA is requesting 
increased funding for strengthening efforts to resolve 
international grain trade issues and to provide improved 
technology for the evaluating the value of livestock carcasses.
    AMS activities assist U.S. agricultural industry in 
marketing their products and in finding ways to improve their 
profitability. AMS budget request seeks an increase of $10 
million of appropriated funds to begin investing in a new 
multi-agency web-based supply chain management system to manage 
purchases of $2.5 billion of commodities used in all food 
assistance programs every year. When fully implemented, this 
system will decrease the time for purchases from 24 days down 
to 5 days.

                          prepared statements

    In light of time, this is going to conclude my statement. 
You have my full written statement and I look forward to 
responding to questions.
    Senator Bennett. Thank you very much.
    For the record, without objection, the written statement of 
all of you will be included in the record. Dr. Murano.
    [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 2005 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. Peter Fernandez, Associate 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 to increase marketing 
opportunities and to protect American agriculture from damages caused 
by pests and diseases.
    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 which demonstrates that 
working together works.
    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, laboratory 
capacity 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 caliber 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 the MRP agencies carry out programs costing $1.8 billion; 
with $418 million funded by fees charged to the direct beneficiaries of 
MRP services and $449 million from Customs receipts.
    On the appropriation side, under current law, the Animal and Plant 
Health Inspection Service is requesting $828 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 $44 million, and the Agricultural Marketing Service is 
requesting $87 million.
    The budget again proposes user fees that, if enacted, would recover 
about $40 million. Legislation was submitted in 2003 which would 
authorize new license fees to recover the cost of administering the 
Packers and Stockyards (P&S) Act and authorize additional grain 
inspection fees for developing grain standards. Legislation will be 
submitted soon to enable additional license fees for facilities 
regulated under the Animal Welfare Act. I will use the remainder of my 
time to highlight the major activities and our 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. We believe that safeguarding the health of animals, plants, 
and ecosystems makes possible safe agricultural trade and reduces 
losses to agricultural and natural resources.
    APHIS builds bridges by working in concert with its stakeholders--
States, Tribes, 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 
moving more U.S. product.
    I would like to highlight some key aspects of the APHIS programs:
    Safeguarding the Agricultural Sector and Resource Base.--While 
APHIS continues to work closely with the Department of Homeland 
Security (DHS) to exclude agricultural health threats, it retains 
responsibility for promulgating regulations related to entry of 
passengers and commodities into the United States. APHIS' efforts have 
helped keep agricultural health threats away from U.S. borders through 
increased offshore threat-assessment and risk-reduction activities. 
APHIS has also increased an already vigilant animal and plant health 
monitoring and surveillance system to promptly detect outbreaks of 
foreign and endemic plant and animal pests and diseases.
    Management Programs.--Because efforts to exclude foreign pests and 
diseases are not 100 percent successful, APHIS also assists 
stakeholders in managing new and endemic agricultural health threats, 
ranging from threats to aquaculture to cotton and other crops, tree 
resources, livestock and poultry. In addition, APHIS assists 
stakeholders on issues related to conflicts with wildlife and animal 
welfare.
    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 $2.5 billion in export markets in fiscal year 2003 by 
helping resolve individual trade issues abroad.
    Biotechnology.--Recent developments in biotechnology underscore the 
need for effective regulation to ensure protection of the environment 
and food supply, reduce market uncertainties, and encourage development 
of a technology that holds great promise. APHIS' Biotechnology 
Regulatory Services unit coordinates our services and activities in 
this area and focuses on both plant-based biotechnology and transgenic 
arthropods. We also are examining issues related to transgenic animals.

                       APHIS' 2005 BUDGET REQUEST

    In a year of many pressing high-priority items for taxpayer 
dollars, the budget request proposes about $828 million for salaries 
and expenses. There are substantial increases to support the 
Administration's Food and Agriculture Defense Initiative and to protect 
the agriculture sector from bovine spongiform encephalopathy (BSE). A 
brief description of key initiatives follows.
    A total of about $173 million for Foreign Pest and Disease 
Exclusion.--Efforts will be focused on enhancing our ability to exclude 
Mediterranean fruit fly and foreign animal diseases. We also request 
funds to regulate the possession and transfer of Select Agents, toxins 
and pathogens necessary for research and other beneficial purposes 
which could be deadly in the hands of terrorists.
    A total of about $224 million for Plant and Animal Health 
Monitoring.--APHIS plays a critical role in protecting the Nation from 
deliberate or unintentional introduction of an agricultural health 
threat, and the budget requests $94 million, a $49 million increase, as 
part of the Food and Agriculture Defense Initiative. This includes 
initiatives that enhance plant and animal health threat monitoring and 
surveillance; bolster a National Animal Identification Program; ensure 
greater cooperative surveillance efforts with States; improve 
connectivity with the integration and analysis functions at DHS for 
plant and animal health threats; and boost animal vaccine availability; 
and other efforts. In addition, $50 million is requested for bovine 
spongiform encephalopathy (BSE) activities to accelerate the 
development of a National animal ID effort and to increase testing to 
detect the presence of BSE in the U.S. livestock herd.
    A total of $320 million for pest and disease management programs.--
Once pests and disease are detected, prompt eradication reduces 
longterm 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 proposes $57 million of increased funding for efforts 
against low-pathogenic avian influenza, emerging plant pests (such as 
Citrus Canker and Emerald Ash Borer), tuberculosis, scrapie, and 
chronic wasting disease.
    Other programs offer offsets to those increases. Successes in boll 
weevil eradication efforts allow a reduction in that program. Decreased 
funding is requested for Asian Long-horned Beetle based on the ongoing 
levels of State contributions. Funding is reduced for Johne's Disease 
since it is rather endemic and funds need to be rationed for other 
program needs. The budget also assumes that State cooperators will fund 
a greater share of wildlife management programs.
    A total of $17 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 2004, to collect $10.9 
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. Since these facilities 
are the direct beneficiaries of taxpayer assistance, it is appropriate 
that a portion of the costs be funded by these beneficiaries.
    A total of about $82 million for Scientific and Technical 
Services.--Within USDA, APHIS has chief regulatory oversight of 
genetically modified organisms. To help meet the needs of this rapidly 
evolving sector, the budget includes a request to, in part, enhance the 
regulatory oversight of field trials of crops derived with 
biotechnology. Also, 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 being 
marketed.
    A total of $12 million for management initiatives.--This includes 
building upon efforts started with Homeland Security Supplemental funds 
for improving physical and operational security, It also includes 
providing the State Department funds to help cover higher security 
costs for APHIS personnel abroad. A portion of the increase would also 
be used for enhanced computer security and eGov initiatives.

        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 P&SP is to 
promote a fair, open and competitive marketing environment for the 
livestock, meat, and poultry industries. Currently, with 166 employees, 
P&SP monitors the livestock, meatpacking, and poultry industries, 
estimated by the Department of Commerce to have an annual wholesale 
value of over $118 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 1,700 investigations in fiscal year 2003 to 
enforce the Packers and Stockyards Act for livestock producers and 
poultry growers, of which about 95 percent were closed in a year. 
Financial recoveries were $27.2 million.
    The Swine Contract Library began operation on December 3, 2003. 
Producers can see contract terms, including, but not limited to, the 
base price determination formula and the schedules of premiums or 
discounts, and packers' expected annual contract purchases by region. 
Since December 3, GIPSA has experienced approximately 27 ``hits'' each 
day to view the Contract Summary reports and approximately 6 ``hits'' 
per day to view the Monthly reports.
    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 and the Agricultural Marketing Act of 1946. 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 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. It also provides 
technical assistance to exporters, importers and end users of U.S. 
grains and oilseeds, as well as other USDA agencies, USDA Cooperator 
organizations, and other governments. These efforts help facilitate the 
sale of U.S. products in international markets.
    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 average 
$0.30 per metric ton, or approximately 0.23 percent of the $14 billion 
value of U.S. grain exports. In fiscal year 2003 alone, more than 1.8 
million inspections were performed on more than 222 million tons of 
grains 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 
2003, FGIS received only 13 quality complaints and no quantity 
complaints from importers on grains inspected under the U.S. Grain 
Standards Act. These involved 229,587 metric tons, or about 0.2 percent 
by weight, of the total amount of grain exported during the year.

                      GIPSA'S 2005 BUDGET REQUEST

    For 2005, the budget proposes a program level for salaries and 
expenses of $44 million. Of this amount, $20 million is devoted to 
grain inspection activities for standardization, compliance, and 
methods development and $24 million is for Packers and Stockyards 
Programs.
    The 2005 budget includes the following program increases:
  --$1 million for rapid response teams to closely examine livestock 
        marketing to ensure that producers are not unfairly 
        disadvantaged by the BSE situation. USDA will use the funds to 
        conduct market surveillance and ensure that marketing and 
        procurement contracts are honored in the aftermath of the BSE 
        finding.
  --About $5 million to significantly upgrade the agency's IT 
        functions, including the ability to securely accept, analyze, 
        and disseminate information relevant to the livestock and grain 
        trades. About $4 million is a one-time increase for investment. 
        Currently, GIPSA receives more than 2.5 million submissions 
        from stakeholders, all of which are done on paper. The request 
        also includes $150,000 to maintain the Swine Contract Library.
  --$1.2 million to monitor the various technologies that livestock and 
        meatpacking industries use to evaluate carcasses to ensure fair 
        and consistent use of those technologies. Producer compensation 
        is increasingly dependent not simply on the weight of the 
        animals they bring to slaughter, but the characteristics of the 
        carcasses as well (e.g., fat content).
  --$0.5 million to enable GIPSA to better address and resolve 
        international grain trade issues, thus precluding disruption of 
        U.S. exports. GIPSA has experienced a growing demand for 
        cooperative participation with other agencies with 
        international trade responsibilities to help expand markets for 
        U.S. agricultural products and removing barriers to trade.
    New User fees.--New user fees, similar to those proposed for fiscal 
year 2004, 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 $6 million to cover these 
costs. Also, the Packers and Stockyards program would be funded by new 
license fees of about $23 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 the AMS is focused on facilitating the marketing of 
agricultural products in the domestic and international marketplace, 
ensuring fair trading practices, and promoting a competitive and 
efficient marketplace to the benefit of producers, traders, and 
consumers of U.S. food and fiber products. The Agency accomplishes this 
mission through a wide variety of publicly and user funded activities 
that help their customers improve the marketing of their food and fiber 
products and ensure that food and fiber products remain available and 
affordable to consumers. The following are just some of the ways that 
AMS is doing its job better in serving its customers.
    Customer Service and Technology.--AMS continues to improve its 
service delivery by taking advantage of new technology to improve 
public electronic access to information and services and to increase 
operational efficiency. For example, the Livestock Mandatory price 
reporting system processes huge amounts of raw data received from 
slaughter facilities that report their transactions involving purchases 
of livestock and sales of boxed beef and lamb, lamb carcasses, and 
imported boxed lamb cuts. These data, including prices, contracts for 
purchase, and other related information, are publicly disseminated in 
over 100 daily, weekly, and monthly reports on fed cattle, swine, lamb, 
beef and lamb meat. AMS continues to make enhancements to existing 
reports and to introduce new reports in consultation with industry 
stakeholders.
    In 2003, AMS began offering automatic e-mail delivery of 
comprehensive Market News information to subscribers. This free email 
subscription service, provided in partnership with the Mann Library at 
Cornell University, provides access to nearly 1,500 daily, weekly and 
monthly market reports covering the six major AMS commodity groups. AMS 
also is developing a Market News web portal that will allow users to 
establish their own unique web pages through which they can immediately 
access preferred market news reports, have the capability to build 
specialized reports, and add customized features including nationwide 
weather reports and metric data conversions. Users will be able to 
access 5 years of data and download it in usable formats, including 
charts, spreadsheets, and graphs. The portal will be available to 
public users later this year for fruit and vegetable reports, and they 
hope to expand it to market reports for other commodities soon 
thereafter.
    Partnerships.--AMS depends on strong partnerships with cooperating 
State agencies and other Federal agencies to carry out many of our 
programs. State agency partners collect data, provide inspection, 
monitoring, and laboratory services for AMS, and otherwise maximize the 
value of both State and Federal resources through sharing and 
coordination. For instance, AMS' Market News program maintains 
cooperative agreements with 40 States to coordinate local market 
coverage with the regional and national coverage needed for AMS market 
reporting. State employees who inspect shipments of seed within a State 
provide information on potential violations in interstate shipments to 
AMS' Federal Seed program. Thirty-three States and territories 
participate with AMS in Pesticide Recordkeeping education and record 
inspection activities and are reimbursed for their services. 
Furthermore, the Pesticide Data program depends on its 10-12 State and 
three Federal partners to collect and test the product samples on which 
the program results are based. In fact, the Pesticide Data program 
directs 80 percent of its funding to its State partners in 
reimbursement for services provided. Another source of support for 
State agriculture programs is AMS' Federal-State Marketing Improvement 
Program (FSMIP), otherwise known as the Payments to States Program. In 
2003, AMS allocated FSMIP grant funds to 20 States for 28 projects of 
local and regional importance, such as marketing studies or developing 
innovative approaches to the marketing of agricultural products.
    Under the National Organic program, AMS program personnel accredit 
State, private, and foreign certifying agents who certify that organic 
production and handling operations are in compliance with the national 
organic standards. As of February 2004, AMS received 137 applications 
for accreditation. Of these, the program has thus far accredited a 
total of 90 certifying agents, including 15 States, and 37 foreign 
certifying agents. AMS also administers two cost share programs through 
agreements with the States that help to offset certification costs for 
organic producers. Additional resources provided in fiscal year 2004 
will allow us to strengthen our support of the National Organic 
Standards Board activities, including technical advisory panel 
evaluations of materials and program evaluations--or peer reviews--and 
to strengthen program enforcement.
    Market Analysis.--In 2003, AMS supported wholesale or farmers 
market facility projects in Mississippi, Georgia, Florida, Oregon, 
Arizona, New York, Texas, American Samoa, Hawaii, and Kentucky. AMS 
also supports marketing and market technology research projects which 
were presented at numerous marketing conferences and workshops. AMS 
supports farmers markets by conducting research on emerging trends in 
market operations and practices and providing research reports, 
reference material and fact sheets to farm vendors, farm market 
managers, and the general public through the AMS website and a 
telephone hotline.
    AMS' Transportation Services Program works with Federal, State, and 
local policy-makers to maintain an efficient national transportation 
system that supports the needs of farmers, agricultural shippers, and 
rural America. AMS conducts and sponsors economic studies of domestic 
and international transportation issues and provides technical 
assistance and information to producers, shippers, carriers, government 
agencies, and universities. Program experts have generated studies and 
reports on U.S. waterways, rail lines and rail car availability; rail 
and shipping rate analyses; geographically disadvantaged farmers and 
ranchers, and many others.
    AMS transportation specialists are often called upon to provide 
information and advice when agricultural transportation is disrupted. 
After September 11, 2001, AMS has increasingly been asked to provide 
more analyses on transportation security for agricultural products. In 
2003, AMS developed a Transportation Security Briefing Book using the 
information currently available. The book provides an overview of the 
agricultural transportation system, existing safety measures, and 
discusses the adverse effects of past disruptions in the system. While 
this is a good start, we have found that much more study is needed in 
this area for all modes of transport, but particularly for trucking, 
which moves 90 percent of agricultural freight for at least one segment 
of its transportation to destination.
    Commodity Purchases.--AMS works in close cooperation with both the 
Food and Nutrition Service (FNS) and the Farm Services Agency (FSA) to 
administer USDA commodity purchases that stabilize markets and support 
nutrition programs, such as the National School Lunch Program, the 
Emergency Food Assistance Program, the Commodity Supplemental Food 
Program, and the Food Distribution Program on Indian Reservations. To 
maximize the efficiency of food purchase and distribution operations, 
AMS, FNS, and FSA each provide a component of program administration 
according to their organizational structure and expertise, but the 
system is complex and requires close coordination. To better coordinate 
the operations between the three agencies and control the vast array of 
details inherent to the procurement process, the Processed Commodities 
Inventory Management System (PCIMS) was developed more than 10 years 
ago to track bids, orders, purchases, payments, inventories, and 
deliveries of approximately $2.5 billion of commodities used in all 
food assistance programs every year and another $1 billion in price 
support commodity products maintained in inventory. PCIMS is still 
being used by the three agencies with modifications having been made 
over the years, when feasible, to add capabilities such as financial 
tracking or to meet changes in program delivery.

                        AMS' 2005 BUDGET REQUEST

    For AMS, the budget proposes a program level of $732 million, of 
which over 88 percent will be funded by user fees and Section 32 funds. 
The budget requests an appropriation of $87 million for Marketing 
Services and Payments to States. The 2005 budget includes an increase 
of $10 million in appropriated funds to improve the information 
technology systems used to manage and control commodity orders, 
purchases, and delivery. Under this proposal, PCIMS would be replaced 
by the Web-based Supply Chain Management System (WBSCM). Implementation 
of WBSCM will improve the efficiency of Federal procurement of 
commodities by reducing ordering and delivery times from 24 days to 5 
days. The 2005 budget also includes an increase of $0.3 million to 
conduct studies aimed at improving the security of the U.S. 
transportation system for agricultural commodities and supplies. The 
budget includes a decrease of $2 million for FSMIP to reflect a 
reduction for a one-time increase in 2004 for creation of specialty 
markets in Wisconsin.

                               CONCLUSION

    This concludes my statement. I am looking forward to working with 
the Committee on the 2005 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, both unintentional and those caused by terrorist action, 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 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 in 
presenting our fiscal year 2005 budget proposal. To provide some 
context for our budget proposal, I would like to begin by reviewing our 
agency's mission and describing some of the customer service 
improvements we have made in delivery of our programs.

                                MISSION

    The mission of the Agricultural Marketing Service--AMS--is focused 
on marketing: 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 wide variety of publicly 
funded activities that help our customers better market their food and 
fiber products and ensure that food and fiber products remain available 
and affordable to consumers. More specifically, AMS helps to make the 
nation's agricultural markets work efficiently by providing wide and 
equal access to market information for all producers and traders; by 
developing agricultural product descriptions that provide a common 
language for commercial trade; by providing data on pesticide residues 
and microbiological pathogens that support science-based risk 
assessment; by providing ``how to'' technical expertise to growers, 
transporters, and others in the marketing chain; and by helping to 
develop alternative or improved market outlets.
    AMS also offers voluntary fee-based services such as product 
quality grading, contract certification, export verification, and 
quality control services such as plant inspections, equipment reviews, 
and production quality or process control certification. Because these 
voluntary services are available to verify the quality of agricultural 
products and the efficacy of production processes, they support private 
contractual arrangements and marketing claims that can improve 
profitability for U.S. producers in both domestic and international 
markets. In delivering these voluntary services, we remain vigilant 
about their costs, while working in partnership with our customers to 
ensure that marketplace needs are met.

                    CUSTOMER SERVICE AND TECHNOLOGY

    We continue to improve our service delivery by taking advantage of 
new technology--to improve public electronic access to information and 
services and to increase our operational efficiency. For example, the 
Livestock Mandatory price reporting system processes huge amounts of 
raw data--some 2 to 3 million data items each week--received from 112 
slaughter facilities, that report their transactions involving 
purchases of livestock and sales of boxed beef and lamb, lamb 
carcasses, and imported boxed lamb cuts. These data, including prices, 
contracts for purchase, and other related information, are publicly 
disseminated in over 100 daily, weekly, and monthly reports on fed 
cattle, swine, lamb, beef and lamb meat. AMS continues to make 
enhancements to existing reports and to introduce new reports in 
consultation with industry stakeholders.
    In 2003, AMS began offering automatic email delivery of 
comprehensive Market News information to subscribers. Market News 
reports cover prices, volume, quality, condition, and other market data 
on farm products in production areas and at specific domestic and 
international markets. This free email subscription service, provided 
in partnership with the Mann Library at Cornell University, provides 
access to nearly 1,500 daily, weekly and monthly market reports 
covering the six major AMS commodity groups--cotton, dairy, fruit and 
vegetable, livestock and seed, poultry, and tobacco. Users can search 
by keyword or browse by commodity, then subscribe to and receive 
selected reports via email whenever an update is published. This 
initiative is part of the Federal e-government effort to streamline 
government-to-citizen communications.
    AMS also is developing a Market News web portal that will allow 
users to establish their own unique web pages through which they can 
immediately access preferred market news reports, have the capability 
to build specialized reports, and add customized features including 
nationwide weather reports and metric data conversions. Users will be 
able to access 5 years of data and download it in usable formats, 
including charts, spreadsheets, and graphs. The portal will be 
available to public users later this year for fruit and vegetable 
reports, and we hope to expand it to market reports for other 
commodities soon thereafter.

                              PARTNERSHIPS

    AMS depends on strong partnerships with cooperating State agencies 
and other Federal agencies to carry out many of our programs. State 
agency partners collect data, provide inspection, monitoring, and 
laboratory services for AMS, and otherwise maximize the value of both 
State and Federal resources through sharing and coordination. For 
instance, AMS' Market News program maintains cooperative agreements 
with 40 States to coordinate local market coverage with the regional 
and national coverage needed for AMS market reporting. State employees 
who inspect shipments of seed within a State provide information on 
potential violations in interstate shipments to AMS' Federal Seed 
program. Thirty-three States and territories participate with AMS in 
Pesticide Recordkeeping education and record inspection activities and 
are reimbursed for their services. Furthermore, our Pesticide Data 
program depends on its State and Federal partners to collect and test 
the product samples on which the program results are based. In fact in 
fiscal year 2004, the Pesticide Data program will direct about 80 
percent of its funding to its eleven State partners in reimbursement 
for services provided. The resulting information generated by AMS can 
be utilized by other Federal agencies such as EPA and FDA for policy 
and regulatory actions, as well as other USDA agencies, academia, 
agricultural industry, international organizations, and global traders.
    We work with local and city agencies to improve wholesale, farmers, 
and other direct marketing opportunities. In 2003, our Wholesale, 
Farmers, and Alternative Markets program supported wholesale or farmers 
market facility projects in Mississippi, Georgia, Florida, Oregon, 
Arizona, New York, Texas, American Samoa, Hawaii, and Kentucky. The 
program also supports marketing and market technology research projects 
as well as numerous marketing conferences and workshops. In an effort 
to help link farm direct sales with school nutrition programs, for 
example, AMS organized a workshop focused on farm to school marketing 
in fiscal year 2003 at the first national ``Farm to Cafeteria 
Conference'' in Seattle, Washington.
    Farmers markets directly benefit local producers and continue to be 
an important farm product outlet for agricultural producers nationwide. 
Farmers markets have risen in popularity due to growing consumer 
interest in obtaining fresh products directly from the farm. The number 
of farmers markets has grown by 79 percent between 1994 and 2002 to 
more than 3,100 facilities nationwide. AMS supports farmers markets by 
conducting research on emerging trends in market operations and 
practices and providing research reports, reference material and fact 
sheets to farm vendors, farm market managers, and the general public 
through the AMS website and a telephone hotline. We also participate in 
industry, producer, and academic conferences and training sessions 
across the country.
    Another source of support for local agriculture programs is AMS' 
Federal-State Marketing Improvement Program, or FSMIP. These matching 
grant funds, made available to State departments of agriculture and 
other State agencies, fund 25 to 35 projects each year. In 2003, we 
allocated FSMIP grant funds to 20 States for 28 projects of local and 
regional importance, such as marketing studies or developing innovative 
approaches to the marketing of agricultural products.
    Our National Organic program, in partnership with its advisory 
committee, provides nationwide standards and a certification system for 
the U.S. organic food industry, which has over $8 billion in sales and 
has seen annual growth in excess of 22 percent. Between 1995 and 2000, 
the U.S. organic market expanded by 175 percent and is expected to more 
than double its 2000 value of $7.8 billion to approximately $16 billion 
by 2005. AMS works with the National Organic Standards Board to develop 
standards for substances used in organic production, maintain a 
National List of approved and prohibited substances for organic 
production, and convene technical advisory panels to provide scientific 
evaluation of materials considered for the National List. AMS program 
personnel accredit State, private, and foreign certifying agents who 
certify that organic production and handling operations are in 
compliance with the national organic standards. As of February 2004, 
AMS received 137 applications for accreditation. Of these, the program 
has thus far accredited a total of 90 certifying agents--53 domestic 
certifying agents, including 15 States, and 37 foreign certifying 
agents. AMS also administers two cost share programs through agreements 
with the States that help to offset certification costs for organic 
producers. Additional resources provided in fiscal year 2004 will allow 
us to strengthen our support of Board activities, including technical 
advisory panel evaluations of materials and program evaluations--or 
peer reviews--and to strengthen program enforcement.
    Our Transportation Services Program works with Federal, State, and 
local policy-makers to maintain an efficient national transportation 
system that supports the needs of farmers, agricultural shippers, and 
rural America. The program helps to support farm income, expand 
exports, and maintain the flow of food to consumers. AMS conducts and 
sponsors economic studies of domestic and international transportation 
issues and provides technical assistance and information on 
agricultural transportation, rural infrastructure and access, and food 
distribution to producers, shippers, carriers, government agencies, and 
universities. Program experts have generated studies and reports on 
U.S. waterways, rail lines and rail car availability; rail and shipping 
rate analyses; and geographically disadvantaged farmers and ranchers, 
and many others. The program also produces periodic publications that 
provide information for agricultural producers and shippers on various 
modes of transportation, such as the weekly Grain Transportation 
Report, the Refrigerated Transport Quarterly, quarterly issues of the 
Ocean Rate Bulletin and Agricultural Container Indicators, and the 
semiannual Agricultural Ocean Transportation Trends.
    Our transportation specialists are called upon to provide 
information and advice when agricultural transportation is disrupted, 
such as late in 2002, when a labor stoppage closed the West Coast ports 
and threatened millions of dollars of losses for agriculture from 
commodities spoiled in transit. After 9/11, we are increasingly asked 
to provide more analyses on transportation security for agricultural 
products. In 2003, AMS developed a Transportation Security Briefing 
Book using the information currently available. The book provides an 
overview of the agricultural transportation system, existing safety 
measures, and discusses the adverse effects of past disruptions in the 
system. While this is a good start, we have found that much more study 
is needed in this area for all modes of transport, but particularly for 
trucking, which moves 90 percent of agricultural freight for at least 
one segment of its transportation to destination.
    Finally, AMS works in close cooperation with both the Food and 
Nutrition Service (FNS) and the Farm Services Administration (FSA) to 
administer USDA's nutrition assistance and surplus commodity programs. 
AMS purchases agricultural commodities under authority of Section 32 of 
the Act of August 24, 1935, which permanently authorized an 
appropriation equal to 30 percent of customs receipts to encourage the 
exportation and domestic consumption of agricultural commodities. These 
funds, plus unused balances up to $500 million from the previous fiscal 
year, may be authorized by the Secretary to support markets by 
purchasing commodities in temporary surplus, for domestic nutrition 
assistance programs, for diversion payments and direct payments to 
producers, for export support, and disaster relief.
    AMS retains only about 13 percent of the funds appropriated under 
Section 32. In 2005, AMS expects to retain $800 million, half of 
which--$400 million--will be spent on purchases for the Child Nutrition 
Programs. Most of the rest is available to AMS' commodity purchases 
program for emergency surplus removal. Eighty-six percent of the $6.2 
billion total appropriation will be transferred to FNS to administer 
the Child Nutrition Programs and 1 percent to the Department of 
Commerce to develop fishery products.
    The commodities purchased by AMS are donated to various nutrition 
assistance programs such as the National School Lunch Program, the 
Emergency Food Assistance Program, and the Food Distribution Program on 
Indian Reservations, according to their needs and preferences. In 
fiscal year 2003, AMS purchased 1.46 billion pounds of commodities that 
were distributed by FNS through its nutrition assistance programs.
    AMS purchases the non-price supported commodities--meat, fish, 
poultry, egg, fruit and vegetable products--and FSA supplies the price-
supported commodities--flours, grains, peanut products, cheese and 
other dairy products, oils and shortenings--that supply the National 
School Lunch Program and other nutrition assistance programs 
administered by FNS.
    To maximize the efficiency of food purchase and distribution 
operations, AMS, FNS, and FSA each provide a component of program 
administration according to their organizational structure and 
expertise, but the system is complex and requires close coordination. 
AMS and FSA purchase for FNS the entitlement commodities provided to 
schools. Schools and other nutrition assistance programs can also 
receive bonus commodities that are purchased to support agricultural 
markets through AMS' surplus commodity program. AMS and FSA are 
responsible for issuing and accepting bids, and awarding and 
administering contracts. FNS is responsible for taking commodity orders 
from the States, monitoring purchases and entitlements throughout the 
year, and the overall administration of the commodity nutrition 
assistance programs. Before a purchase is announced, AMS and FSA 
specialists work with potential vendors, FNS, and food safety officials 
to develop a specification for each product purchased that details 
product formulation, manufacturing, packaging, sampling, testing, and 
quality assurance. After market conditions, availability, and 
anticipated prices are assessed, and recipient preferences determined, 
AMS and FSA invite bids for particular U.S. produced and domestic 
origin food products under a formally advertised competitive bid 
program. Bids received from responsible vendors are analyzed and 
contracts are awarded by AMS and FSA. FSA administers the payments to 
vendors, ensures the proper storage of commodities when needed, and 
assists in their distribution.
    To better coordinate the operations between the three agencies and 
control the vast array of details inherent to the procurement process, 
the Processed Commodities Inventory Management System, or PCIMS, was 
developed more than 10 years ago to track bids, orders, purchases, 
payments, inventories, and deliveries of approximately $2.5 billion of 
commodities used in all domestic and foreign food assistance programs 
every year and another $1 billion in price support commodity products 
maintained in inventory. PCIMS is still being used by the three 
agencies with modifications having been made over the years, when 
feasible, to add capabilities such as financial tracking or to meet 
changes in program delivery.

                    FISCAL YEAR 2005 BUDGET REQUEST

    This leads us to the first of our two budget requests for fiscal 
year 2005, which involves both a multi-agency partnership and an 
electronic (e-) government initiative that will significantly improve 
customer service.

                WEB-BASED SUPPLY CHAIN MANAGEMENT SYSTEM

    AMS, FNS and FSA are working together to replace PCIMS with a Web-
Based Supply Chain Management System, or WBSCM. For fiscal year 2005, 
AMS is requesting funding of $10 million in our Marketing Services 
appropriated account to begin developing the entire new system rather 
than each of the three agencies separately requesting portions of the 
funding needed.
    WBSCM has undergone extensive reviews within USDA and was approved 
as one of the Department's selected e-government ``smart choice'' 
initiatives. WBSCM is designed to greatly reduce the time required for 
processing purchases; shorten delivery times; improve USDA's ability to 
collaborate with other Departments; improve reporting capability; 
reduce transportation, inventory, and warehousing costs; and enable 
future system updates as needed. Furthermore, the system will create a 
singe point of access for customers, allow us to share information more 
quickly and conveniently, automate internal processes, and assist in 
breaking down bureaucratic divisions. Eventually, WBSCM will be able to 
support agencies that manage similar commodity distribution programs 
for export. The Foreign Agricultural Service, the Agency for 
International Development, and the Maritime Administration, have been 
included in the development phases to ensure the new system can address 
the needs of export programs.
    Over the last few years AMS, FNS, and FSA have undertaken extensive 
business practice reengineering efforts. Since PCIMS was developed and 
``hard coded'' to automate the business practices of the time, it often 
cannot be modified to accept significant changes in process without 
undue costs. As a result, agency employees frequently have to develop 
electronic entries external to PCIMS and then update the system with 
the results. In contrast, WBSCM is designed to use commercial off the 
shelf software which will speed up implementation, incorporate industry 
and commercial best business practices, and give the agencies the 
flexibility to reconfigure the system after implementation when 
processes change. We expect that increased efficiency, better 
coordination, and improved services will begin as soon as the basic 
system is in place in mid-fiscal year 2007, when WBSCM will provide 
those services being performed by PCIMS. Until then, we must continue 
to maintain the PCIMS system.

                  AGRICULTURAL TRANSPORTATION SECURITY

    Our second proposal this year is to strengthen our agricultural 
transportation security expertise within the Transportation Services 
program. We are requesting $300,000 to produce more in-depth analyses 
of agricultural transportation security. Transportation is a critical 
link in the food supply chain. Closer analysis of the sector will 
provide the information needed for critical assessments of the 
strengths and vulnerabilities of the various transportation modes used 
to move farm inputs, food, and other agricultural products from farm to 
market. These funds will strengthen USDA's Homeland Security efforts by 
helping to safeguard the U.S. food supply and supporting the Department 
of Homeland Security. We will be better able to provide the information 
requested by policy officials in planning strategies to prevent 
potential disruptions, and to provide comprehensive information more 
quickly when any emergencies occur. Our current expertise and 
established contacts with transportation providers give us a distinct 
advantage in addressing agricultural transportation security issues. 
The transportation industry also has a serious interest in protecting 
shipments. For example, the Agricultural and Food Transporters 
Conference (AFTC) recently requested help from AMS in developing 
voluntary security guidelines. AMS is supporting a cooperative effort 
between USDA and the AFTC to prepare a guidebook. With expanded 
information and analysis, we will also be better able to advise 
agricultural producers and shippers on improving their own security.

                         BUDGET REQUEST SUMMARY

    Our total budget request includes $86 million for Marketing 
Services, which includes an increase for pay costs partially offset by 
a decrease for savings associated with information technology. We also 
include a decrease of $2 million in Federal-State Marketing Improvement 
Program grants funding under Payments to States and Possessions. These 
funds were provided in fiscal year 2004 to support Wisconsin specialty 
products. We request $11 million in Section 32 Administrative funds for 
commodity purchasing and $16 million for Marketing Agreements and 
Orders. These requests also include an increase for pay costs. Thank 
you for this opportunity to present our budget proposal.
                                 ______
                                 

Prepared Statement of Dr. Peter Fernandez, Acting 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. APHIS is an action-oriented agency 
that works with other Federal agencies, Congress, States, agricultural 
interests, and the general public to carry out its mission to protect 
the health and value of American agriculture and natural resources. 
APHIS strives to assure its customers and stakeholders that it is on 
guard against the introduction or reemergence of animal and plant pests 
and diseases that could limit production and damage export markets. At 
the same time, APHIS monitors for and responds to potential acts of 
agricultural bioterrorism, invasive species, diseases of wildlife and 
livestock, and conflicts between humans and wildlife. APHIS also 
addresses sanitary and phytosanitary trade barriers and certain issues 
relating to the humane treatment of animals. Finally, APHIS ensures 
that biotechnology-derived agricultural products are safe for release 
in the environment. We have developed a strategic plan to help us 
accomplish these objectives, and I would like to report on our fiscal 
year 2003 protection efforts and our fiscal year 2005 budget request in 
that context.




    APHIS' protection system is based on a strategic premise that 
safeguarding the health of animals, plants, and ecosystems makes 
possible safe agricultural trade and reduces losses to agricultural and 
natural resources. All nine objectives in the protection system are key 
components of this strategic premise. Failing to succeed in any one 
objective will eventually lead to overall failure, and American farmers 
will not reach their potential export markets. Additionally, the 
protection system is a key component of USDA's Homeland Security role. 
The United States has a vital stake in the health of American 
agriculture, both economically and in terms of feeding our people and 
many throughout the world. Terrorists could well recognize that vital 
stake and seek to attack it.

Five Objectives for Safeguarding Health of Animals, Plants, and 
        Ecosystems
    Objective 1.1--Conduct offshore threat assessment and risk 
reduction activities.--In this era of increasing globalization and 
advancing technologies, APHIS must constantly assess the exotic health 
threats approaching our borders, and engage in offshore pest or disease 
eradication activities when the threat is imminent and the potential 
impact severe.
    To prevent the introduction of costly foreign animal diseases into 
the United States, our Foreign Animal Diseases (FAD) and Foot-and-Mouth 
Disease (FMD) program works to detect and control outbreaks of animal 
diseases in foreign countries far from our shores. This is our first 
line of defense against foreign animal diseases and has become more 
significant as international trade and travel have increased. APHIS 
conducts operations overseas through bilateral agreements and works 
with multilateral organizations, such as the World Organization for 
Animal Health (OIE). Last year, for example, through an agreement with 
Panama and Mexico, we collected 1,260 samples of suspected vesicular 
disease throughout Central America from field investigations and tested 
the samples in Panama. Fortunately, all tested negative for FMD, while 
639 were diagnosed as vesicular stomatitis.
    Through our Fruit Fly Exclusion and Detection program, we cooperate 
with the Governments of Mexico, Guatemala, and Belize on the Moscamed 
program to eradicate and control the Mediterranean Fruity Fly (Medfly), 
which could cause $2 billion in losses if it became established in the 
United States. Moscamed's current top priorities are to eradicate the 
Medfly from Chiapas, Mexico, and move the barrier south into Guatemala 
in an effort to achieve APHIS' and its cooperators' goal of eradicating 
Medfly from Central America and thereby providing more secure 
prevention against the threat Medfly poses to the United States. A 
major component of the program is the production and release of sterile 
flies to disrupt normal reproduction. In fiscal year 2003, the Central 
America Medfly program produced 2.2 billion sterile fruit flies a week, 
exceeding its goal of producing 2 billion per week. This production 
increase allowed more flies to go to the preventive release program in 
the United States.
    Through our Tropical Bont Tick program, APHIS employees are 
preventing the introduction of heartwater and other diseases 
transmitted by tropical bont ticks into the livestock industry and 
wildlife populations of the United States from affected Caribbean 
islands. The cooperative program has eradicated ticks from six of the 
nine islands involved so far, bringing us closer to our goal of 
eradicating this pest from the Western Hemisphere.
    Objective 1.2--Regulate and monitor to reduce the risk of 
introduction of invasive species.--APHIS regulates the import of 
agricultural products, including commercial shipments and items carried 
into the United States by travelers, to prevent the entry of foreign 
pests and diseases. We work closely with the Department of Homeland 
Security (DHS) to monitor and intercept items that arrive at ports of 
entry.
    In fiscal year 2003, APHIS and DHS agricultural employees inspected 
the baggage of nearly 74 million arriving passengers. Passenger baggage 
is inspected manually, with x-ray technology, or through the use of 
detector dogs. Agricultural inspectors also cleared 54,033 ships and 
3,128,660 cargo shipments. In cooperation with DHS, we increased the 
number of cargo inspections by 43 percent over fiscal year 2002 because 
of the high entry risk of exotic wood boring and bark beetles, like 
Asian long-horned beetle and emerald ash borer. In total, agricultural 
inspectors intercepted 82,631 reportable pests at land borders, 
maritime ports, airports, and post offices. At plant inspection 
stations, our inspectors cleared 176,761 shipments containing over 1.2 
billion plants units (cuttings, whole plants, or other propagative 
materials) and intercepted 4,260 pests.
    Part of APHIS' safeguarding strategy is to prevent the intentional 
introduction of illegal products through market surveys, 
investigations, and enforcement action. In fiscal year 2003, our 
Safeguarding, Intervention, and Trade Compliance (SITC) staff and field 
personnel seized 15,706 illegal plant products and 488 illegal meat, 
poultry, and dairy products and found 112 reportable pests. When SITC 
detects a prohibited item, we identify the item's origin and the 
responsible shippers, importers, and broker. By maintaining the 
relevant information in databases, the program can target specific 
commodities and importers. This year, SITC investigations led to the 
detection of 82 violations at markets and distributors' warehouses.
    APHIS' Animal and Plant Health Regulatory Enforcement program 
conducts regulatory enforcement activities to prevent the spread of 
animal and plant pests and diseases in interstate trade. These 
activities include inspection, surveillance, animal identification, and 
prosecution. This year, APHIS continued the development of a multi-year 
project to improve a headquarters-based, on-line computer system to 
track investigations and automate the enforcement process. The database 
will help our enforcement efforts by allowing APHIS programs and other 
agencies such as the Departments of Homeland Security and Treasury to 
share critical information and identify individuals, companies, 
cargoes, carriers, or pathways posing risk.
    In fiscal year 2003, APHIS conducted 1,782 investigations involving 
plant quarantine violations resulting in 142 warnings, 682 civil 
penalty stipulations, seven Administrative Law Judge decisions, and 
approximately $1 million in fines. Regarding animal health programs, we 
conducted 1,425 investigations, resulting in 210 warnings, 39 civil 
penalty stipulations, five Administrative Law Judge decisions, and 
approximately $44,900 in fines. Also during fiscal year 2003, the 
program conducted 76 investigations of alleged Swine Health Protection 
Act violations in Puerto Rico. This was slightly less than the target 
of 80 investigations, mostly due to providing support for the exotic 
Newcastle disease outbreak in California.
    Objective 1.3--Ensure safe research, release, and movement of 
agricultural biotechnology events, veterinary biologics, and other 
organisms.--The growth of agricultural biotechnology hinges on the 
public's acceptance of this technology as safe, and APHIS' regulatory 
role is key to ensuring global acceptance. In addition to agricultural 
biotechnology, the Agency monitors and regulates to ensure safe 
agricultural research and commercialization activities involving the 
movement of non-indigenous organisms and veterinary biologics.
    APHIS' Biotechnology Regulatory Services (BRS) program, created in 
August 2002, regulates the introduction (importation, interstate 
movement, and field release) of genetically engineered organisms such 
as plants, insects, microorganisms and any other organism that is known 
to, or could be, a pest. APHIS also has determined that BRS may 
potentially regulate animals, insects, and other disease agents 
relevant to livestock health. Through a strong regulatory framework, 
BRS determines the conditions under which genetically engineered 
organisms can be introduced into the United States and allows for the 
importation, interstate movement, and field release of these materials 
only after rigorous conditions and safeguards are put into place. Under 
the authority of the Plant Protection Act of 2000, APHIS can pursue 
penalties for failure to adhere to our regulations, permit conditions, 
and requirements.
    With the creation of our new biotechnology compliance program, we 
have chosen measures that will accurately and visibly reflect the 
effectiveness of our inspection efforts for the testing of products 
that carry a higher degree of perceived risk. We believe that increased 
frequency of inspections--especially at high risk sites--coupled with 
efforts to improve the quality of inspections through expanded 
training, will translate into a high degree of stakeholder and public 
confidence that these products will be safely confined and not 
inadvertently enter the food supply. Our performance target for fiscal 
year 2004 is to inspect 10 percent of low risk sites, 40 percent of 
medium risk sites at least once during the growing season, and 100 
percent of pharmaceutical and industrial sites a total of seven times--
five times during the growing season and two times afterwards.
    Our Veterinary Biologics program continues to ensure that 
veterinary biologics products are pure, safe, potent, and effective. 
Our goal is to ensure the availability of quality veterinary biological 
products for the diagnosis, prevention, and treatment of animal 
diseases. The program will continue to respond to emerging diseases 
with expedited reviews and inspections for new veterinary biologics, 
and it will follow a risk-based approach to inspect and test other 
products.
    In fiscal year 2003, APHIS performed 78 regulatory actions 
following routine inspections and 24 investigations of possible 
regulation violations. APHIS' Center for Veterinary Biologics found the 
marketing of unlicensed veterinary biologics and false or misleading 
advertising of licensed veterinary biologics in over half of these 
investigations. Through education, cooperation, and regulatory actions, 
APHIS helped industry achieve increased compliance with the Virus-
Serum-Toxin Act.
    Objective 1.4--Manage issues related to the health of U.S. animal 
and plant resources and conflicts with wildlife. Agricultural 
stakeholders also expect APHIS to help solve many types of health-
related production issues in the United States. For example, producers 
need help in dealing with area-wide wildlife damage control problems. 
Indigenous pest problems affecting multiple States, such as boll weevil 
and grasshoppers, also require APHIS' attention. We are not alone in 
these efforts and have good relationships are with our State and Tribal 
partners in conducting these eradication and control programs. That 
cooperation, in addition to support from academia and industry, is 
essential for these types of programs to succeed.
    We continue to make progress on a number of other animal health 
programs as well. At the beginning of fiscal year 2003, there was one 
pseudorabies-quarantined premise in the United States, compared to 12 
at the beginning of fiscal year 2002. By the end of fiscal year 2003, 
there were no swine commercial production premises under quarantine for 
pseudorabies. As of September 30, 2003, there were 1,776 flocks 
participating in the Scrapie Flock Certification Program of which 105 
are certified, 1,663 are completely monitored, and 8 are selective 
monitored flocks. This is in comparison to 1,539 flocks enrolled, 78 
flocks certified, 1,452 flocks completely monitored, and 9 flocks 
selectively monitored as of September 30, 2002. To continually improve 
on the 46 States, Puerto Rico, and the Virgin Islands as accredited 
Tuberculosis-free, the program depopulated three dairy herds in 
California, four beef herds in Michigan, and one beef herd in Texas 
during fiscal year 2003.
    Among a number of protection efforts, APHIS' Wildlife Services (WS) 
Operations program works to protect agricultural crops from wildlife 
damage, to protect livestock from predation, and to protect human 
safety by preventing wildlife collisions with aircraft. In fiscal year 
2003, the Agency's beaver damage management activities in several 
States averted $25 million in impending damage to forest and 
agricultural resources, waterways and highway infrastructures. As wolf 
populations continue to increase, so do requests for assistance with 
wolf predation. As a result, APHIS responded to 179 requests for 
assistance with wolf predation on livestock or domestic dogs during 
fiscal year 2003 in Minnesota alone. In the west, APHIS responded to 41 
requests for assistance with gray wolf predation in Idaho and 87 
requests in Montana. Airports reported approximately 6,100 wildlife 
strikes to civil aircraft in 2002, with the U.S. Air Force alone 
reporting more than 3,800 strikes to military aircraft. Wildlife 
strikes cost civil aviation in the United States over $480 million in 
damages in 2002. The requests for APHIS assistance in managing wildlife 
hazards at airports and military air bases continue to increase. In 
fiscal year 2003, APHIS wildlife biologists provided wildlife hazard 
management assistance to over 500 airports nationwide for the 
protection of human safety and property, compared to only 42 airports 
in fiscal year 1990 and 409 airports in fiscal year 2002. At JFK 
International Airport, APHIS biologists have reduced gull strikes by 
over 80 percent in 2000-2003 compared to strike levels in the early 
1990s.
    APHIS' Wildlife Services (WS) Methods Development program, through 
the National Wildlife Research Center (NWRC), functions as the research 
arm of APHIS' Wildlife Services program by providing 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. The program provides technical support for 
the development of 5 drug/vaccine products through Investigational New 
Animal Drug Authorizations under the Food and Drug Administration. 
These materials are under development as wildlife immobilizing agents 
and contraceptive products. APHIS continued to develop and evaluate 
non-lethal methods for managing blackbird damage to sunflowers and rice 
by conducting extensive laboratory testing of registered chemicals for 
bird repellency characteristics. Scientists continued multi-year 
research studies at various airports in the United States to reduce 
wildlife strike hazards. These scientists researched turf management, 
non-lethal repellents, and dispersal techniques to minimize strikes by 
gulls, waterfowl, turkey vultures, hawks, and other species that 
threaten aviation safety. In fiscal year 2003, we met our performance 
target of testing and/or improving 18 wildlife damage management 
methods and will maintain this target for fiscal year 2004.
    APHIS' Animal Welfare program carries out activities designed to 
ensure the humane care and handling of animals used in research, 
exhibition, the wholesale pet trade, or transported in commerce. The 
program places primary emphasis on voluntary compliance through 
education with secondary emphasis on inspection of facilities, records, 
investigation of complaints, reinspection of problem facilities, and 
training of inspectors. However, when necessary, APHIS personnel 
investigate alleged violations of Federal animal welfare and horse 
protection laws and regulations and oversee and coordinate subsequent 
prosecution of violators through appropriate civil or criminal 
procedures. In fiscal year 2003, we conducted 365 animal welfare 
investigations resulting in 172 formal cases submitted for civil 
administrative action. We also issued 90 letters of warning and 
resolved 44 cases with civil penalty stipulations resulting in $56,373 
in fines. Administrative Law Judge Decisions resolved another 58 cases 
resulting in $668,995 in fines.
    Objective 1.5--Respond to emergencies--response planning, 
surveillance, quick detection, containment, and eradication.--Even 
though we devote many resources to pest and disease prevention and 
regulatory compliance to safeguard agricultural health, it is 
impossible to intercept every potential biological threat. APHIS must 
have the capacity to quickly respond in order to limit the spread of 
the outbreak and to eradicate it so that production losses are 
minimized and exports of affected commodities do not suffer long-term 
disruptions.
    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. The EMS program 
identifies national infrastructure needs for anticipating, preventing, 
mitigating, responding to, and recovering from such emergencies. By 
Presidential Homeland Security Directive, APHIS is restructuring its 
emergency response systems according to the National Incident 
Management System, or NIMS. APHIS implemented the incident command 
structure in response to the exotic Newcastle disease (END) outbreak in 
California, Arizona, Nevada, and Texas during fiscal year 2003. During 
the END outbreak, APHIS followed the NIMS structure and established 
five incident command posts in three States.
    This same structure was put into place when, on December 23, 2003, 
laboratory testing at the National Veterinary Services Laboratories 
indicated that a single cow, slaughtered on December 9, 2003, in 
Washington State, tested positive for BSE. The world reference 
laboratory in the United Kingdom confirmed these presumptive positive 
results on December 25 for BSE, and we immediately began a swift and 
comprehensive investigation.
    The epidemiological tracing and DNA evidence proved that the BSE 
positive cow was born on a dairy farm in Alberta, Canada in 1997. She 
was moved to the United States in September 2001 along with 80 other 
cattle from that dairy. The epidemiological investigation to find 
additional animals from the source herd led to a total of 189 trace-out 
investigations. These investigations resulted in complete herd 
inventories on 51 premises in three States: Washington, Oregon and 
Idaho.
    On February 9, 2004, APHIS announced that we had completed our 
field investigation of the BSE case in Washington. During our 
investigation, a total of 255 ``Animals of Interest''--animals that 
were or could have been from the source herd--were identified on 10 
premises in Washington, Oregon and Idaho. All 255 animals were 
depopulated and sampled for BSE testing. Results were negative on all 
samples. The carcasses from all of the euthanized animals were properly 
disposed of in accordance with all Federal, State, and local 
regulations. Consistent with international guidelines on BSE, we 
focused on tracing the 25 animals born into the birth herd of the index 
cow during a 2-year window around her birth. Based on normal culling 
practices of local dairies, we estimated that we would be able to 
locate approximately 11 of these animals. In fact, APHIS definitively 
located 14 of these animals.
    We are confident that the remaining animals represent very little 
risk. Even in countries like the United Kingdom where the prevalence of 
BSE has been very high, it has been very uncommon to find more than one 
or maybe two positive animals within a herd.
    Thus far in fiscal year 2004, USDA has transferred $80.4 million 
from the Commodity Credit Corporation (CCC) to APHIS for BSE-related 
activities. APHIS is using these funds to respond to the Washington 
State incident and to enhance BSE surveillance around the country. This 
CCC funding will supplement the funds already set aside for BSE 
surveillance in APHIS' base appropriation. This enhanced surveillance 
plan incorporates recommendations from the international scientific 
review panel and the Harvard Center for Risk Analysis; both have 
reviewed and supported the plan.
    On December 30, 2003, Secretary Veneman announced that an 
international panel of experts would be convened to review our BSE 
investigative efforts and recommend enhancements to our BSE program. 
The panel delivered their report on February 4, 2004, and commended 
USDA for conducting such a comprehensive epidemiological investigation. 
The panel also made recommendations for further enhancements to the BSE 
program. The Secretary applied all of this information in considering 
future actions with regard to BSE, and on March 15, she announced a 
plan to enhance the BSE surveillance program. Previous targeted 
surveillance efforts were designed to detect BSE in the adult cattle 
population at the level of at least one infected animal per million 
adult cattle with a 95 percent confidence level. The goal of the new 
plan is to test as many cattle in the targeted high-risk population as 
possible in 12 to 18 months, and then evaluate future actions based on 
the results of this effort.
    The plan also incorporates random sampling of apparently normal, 
aged animals at slaughter. More than 86 percent of all adult cattle 
processed annually are slaughtered in 40 plants; random sampling 
efforts will be focused on these plants.
    More intensive surveillance will allow us to refine our estimates 
of the level of disease present in the U.S. cattle population and 
provide consumers, trading partners, and industry better assurances 
about our BSE status. Testing will be conducted at USDA's National 
Veterinary Services Laboratories and at participating network contract 
laboratories. As an example, if a total of at least 268,444 samples is 
collected from the targeted population, we believe this level of 
sampling would allow USDA to detect BSE at a rate of 1 positive in 10 
million adult cattle (or 5 positives in the entire country with a 99 
percent confidence level). We also plan on testing at least 20,000 BSE 
slaughter samples from apparently healthy, aged bulls and cows. During 
this effort, we will be utilizing approved rapid screening tests, 
working with industry on disposal issues, and enhancing our BSE 
education and outreach activities.
    USDA remains confident in the safety of the U.S. beef supply. Out 
of an abundance of caution, USDA recalled all meat products processed 
in the affected slaughter plant the same day as the positive cow. 
However, the meat presents an extremely low risk to consumers, because 
all of the central nervous system related tissues--those most likely to 
contain the BSE agent--were removed from the affected animal during 
slaughter and did not enter the human food supply.
    Even with the recent detection, the United States continues to have 
a very low BSE risk. An independent assessment conducted by Harvard 
University in 2001 and again in 2003 demonstrated that even with a 
detection of BSE in this country, United States control efforts would 
minimize any possible spread of the disease and ultimately eliminate it 
from the U.S. cattle population. These controls include a long-standing 
ban on imports of live cattle, other ruminants, and most ruminant 
products from high risk countries; the Food and Drug Administration's 
1997 prohibition on the use of most mammalian protein in cattle feed; 
and an aggressive surveillance program that has been in place for more 
than a decade. In each of the past 2 years, the United States tested 
over 20,000 head of cattle for BSE, which is 47 times the recommended 
international standard.
    We opened the APHIS Emergency Operations Center (AEOC) in March 
2003. The AEOC is a state-of-the-art facility that allows a national 
management response team to communicate with field personnel and USDA 
leadership during an outbreak situation. Communications capabilities 
include video teleconferencing, advanced computer interfaces, 
geographical information system mapping, and a strong multimedia 
component.
    Through the Pest Detection program, APHIS and its State cooperators 
work to ensure the early detection of harmful or invasive plant pests 
and weeds through the Cooperative Agricultural Pests Survey (CAPS) 
program. The CAPS program provides the domestic infrastructure 
necessary to conduct national surveys for plant pests and weeds and 
document the results in a national database, the National Agricultural 
Pest Information System (NAPIS). NAPIS provides a summary of pest 
survey results and allows APHIS to track the spread of pests within the 
United States, demonstrate their presence or absence, plan their 
control, and support the export of agricultural commodities. APHIS is 
currently engaged in a multi-year effort to enhance its early detection 
program through an increased level of communication and cooperation 
with its State partners, increased staffing levels, the use of new 
technology, and a new focus on international pest risk analysis. These 
efforts will help us meet our goal of detecting significant pest 
introductions before a new pest can cause serious damage. Finding newly 
arrived exotic pests before they spread will reduce the money spent on 
costly eradication programs and prevent losses to farmers and our 
natural ecosystems.
    APHIS has completed pest risk assessments for ten of the 18 pests 
on the national CAPS list for fiscal year 2003 and 2004 and is working 
with State cooperators to develop State CAPS lists. We are also 
instituting CAPS committees at the State, regional, and national levels 
to ensure that stakeholders are involved in the process of targeting 
pests for survey. In fiscal year 2003, APHIS and 21 States conducted 
the Exotic Wood-Borer and Bark Beetle Survey, one of our new commodity-
or resource-based surveys. While the data is still not complete, this 
year's survey turned up evidence of three new forest pests previously 
not known to exist in the United States. We believe that these new 
pests provide strong evidence of the need for the nationally directed 
and risk-based detection program that we are currently implementing.
    APHIS' Animal Health Monitoring and Surveillance program continues 
to conduct activities such as: monitoring and surveillance of various 
animal disease programs, foreign animal disease surveillance and 
detection, emergency disease preparedness and response, animal health 
monitoring, and epidemilologic support and delivery for both ongoing 
disease programs and post-disease eradication programs. For example, 
APHIS completed the Scrapie Ovine Slaughter Surveillance project sample 
collection by gathering 12,508 samples from 22 slaughter plants and one 
slaughter market. Losses from affected flocks cost producers 
approximately $20 to $25 million annually.
    APHIS has been challenged with numerous emergencies over the last 
several years. However, we took quick and aggressive action to address 
the following plant and animal situations: Asian Longhorned Beetle, 
Chronic Wasting Disease, Citrus Canker, Emerald Ash Borer, Exotic 
Newcastle Disease, Karnal Bunt, Mediterranean Fruit Fly, Mexican Fruit 
Fly, Pierce's Disease/Glassy-winged Sharpshooter, Rabies, Spring 
Viremia of Carp, and Tuberculosis. The Secretary used her authority to 
transfer over $378 million to battle these pests and diseases. Without 
the quick detection and early, rapid response, the cost to control 
these outbreaks would have undoubtedly been higher.
Four Objectives for Facilitating Safe Agricultural Trade
    APHIS' two goals of safeguarding U.S. agriculture and facilitating 
international agricultural trade reinforce each other. By protecting 
and documenting the health of our agricultural products, we can retain 
existing markets and open new markets for our farmers. By facilitating 
safe trade with other countries (including activities such as 
monitoring world agricultural health and helping developing countries 
build regulatory capacity), we help ensure that imported products will 
not threaten our domestic production capability and health status.
    Objective 2.1--Verify and document the pest and disease status of 
U.S. agriculture and related ecosystems.--The World Trade 
Organization's (WTO) Sanitary and Phytosanitary (SPS) Agreement 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 has resulted in APHIS' becoming increasingly involved 
in demonstrating our pest and disease free status to allow agricultural 
exports to trading partners.
    APHIS' Pest Detection program conducted 150 surveys to document the 
pest status of our plant resources and support U.S. producers' ability 
to export their products. For example, by collecting extensive survey 
data demonstrating the limited distribution of Karnal bunt in the 
United States, APHIS provides assurance to our trading partners that 
the disease is not present in major wheat-producing areas of the United 
States, thereby ensuring annual agricultural exports of up to $5 
billion and supplying the raw ingredients for domestic and foreign 
customers of flour, pasta, and other wheat products. Plum pox is 
another case in which the collection of national data has helped to 
keep budwood markets open by demonstrating the absence of the pest from 
various areas around the United States.
    APHIS officials collaborate with State and other Federal agencies 
to conduct animal health surveillance activities through the Animal 
Health Monitoring and Surveillance (AHMS) program. These activities 
include pre- and post-entry testing of imported animals, sample 
collection at slaughter, and routine testing of animals for export and 
interstate movement. APHIS also conducts surveillance for domestic 
animal disease eradication programs, like brucellosis, tuberculosis, 
chronic wasting disease, and others. This surveillance information 
allows APHIS to make key regulatory decisions. In doing so, APHIS 
strives to preserve U.S. exports markets, protect livestock or poultry 
producers in disease-free areas, and provide the best options possible 
for those producers who are affected by our regulatory decisions.
    When foreign animal disease outbreaks occur in the United States, 
our trading partners routinely ban U.S. animal and animal product 
exports until APHIS has the opportunity to confirm the extent of the 
disease's spread and demonstrate what regulatory actions are being 
taken to contain it. Last year, the poultry breeding and hatchery 
industry lost approximately $1 million per week due to bans by various 
trading partners on U.S. poultry exports because of exotic Newcastle 
disease. Our trading partners will lift such bans in unaffected and 
unregulated areas only if we can convince them that measures are being 
taken to mitigate the risk of the disease's spread via host commodity 
exports. Providing our trading partners accurate and detailed 
information about a foreign animal disease outbreak and the subsequent 
Federal/State disease management response is critical. This information 
gives our trading partners the assurances they need without exposing 
them to undue risk. Such a regionalized approach helps minimize trade 
disruption and negative market reactions.
    Objective 2.2--Certify the health of animals and plants and related 
products for export and interstate commerce.--In carrying out this 
role, APHIS spends well over $100 million on disease diagnostics and 
epidemiology and pest detection infrastructure. This infrastructure 
makes our health certificates credible for trading partners, but it 
also is instrumental for quickly detecting and limiting the spread of 
outbreaks of new pests and diseases, part of our emergency response 
strategy (Objective 1.5).
    The Import/Export program promotes simple, science-based export 
conditions and negotiates requirements based on technical-level 
mitigation and guidelines established by OIE. The program is working 
hard to strengthen its evaluation and risk assessment capabilities to 
meet international and domestic responsibilities and respond to 
international and domestic requests for regionalization in a timely 
manner. For example, during fiscal year 2003 the Import/Export program 
increased its capacity to conduct regionalization analyses for foreign 
markets (import purposes) and domestic markets (export purposes). 
During the early stages of the exotic Newcastle disease outbreak in 
fiscal year 2003, many countries--including all members of the European 
Union--suspended poultry imports from all regions of the United States. 
APHIS, however, identified END-free regions of the country and helped 
these regions regain market access. These actions helped protect the 
entire U.S. poultry export industry, which has an estimated annual 
worth of $2.5 billion.
    APHIS' Agricultural Quarantine Inspection program facilitates the 
export of agriculture shipments through EXCERT, an electronic database 
containing plant health import requirements for over 200 countries. 
APHIS export certifications ensure that U.S. products meet the 
agricultural requirements of the country of destination. In fiscal year 
2003, APHIS issued over 400,000 Federal plant health export 
certificates for agriculture shipments, including the issuance of heat 
treatment certificates for coniferous solid wood packing materials to 
the People's Republic of China.
    Objective 2.3--Resolve trade barrier issues related to animal and 
plant health.--Because of APHIS' expertise in animal and plant health 
issues and our regulatory role (Objective 1.2), the Agency serves as a 
key resource for trade policy agencies, like the Foreign Agricultural 
Service and the U.S. Trade Representative, in resolving sanitary and 
phytosanitary issues that often become trade barriers (Objective 2.3). 
The negotiations that occur to resolve these issues often result in 
trading partners providing additional information about the pests or 
diseases in question, and this information in turn leads to more 
effective preventive regulatory strategies.
    Officials with the Trade Issue Resolution and Management program 
work to minimize trade disruptions caused by animal and plant health 
issues. In fiscal year 2003, APHIS retained poultry markets in Japan, 
Korea, and the Philippines worth over $169 million, expanded market 
access for apples in Mexico worth $88 million, and opened new markets 
for seed potatoes to Uruguay and apricots from the Pacific Northwest to 
Mexico. Additionally, APHIS expanded market access for U.S. cherries, 
canola seed, and potatoes in Mexico, and with the concerted efforts of 
APHIS, Foreign Agricultural Service, and the Office of the United 
States Trade Representative, we retained markets for wheat in Argentina 
and Peru.
    When individual agricultural shipments are held up at foreign 
ports, APHIS attaches correct problems and negotiate with host 
government officials to facilitate the shipment's acceptance. APHIS 
obtained authorization for apples at four additional ports of entry in 
Mexico resulting in the release of a $5 million apple shipment. In 
addition, APHIS facilitated $1 million worth of U.S. cotton in Chile, 
three rice shipments in Costa Rica and Guatemala, the release of $13 
million in citrus shipments held by Japanese officials, and the waiving 
of phytosanitary certification with Romanian officials for soy beans, 
allowing a shipment of 14,000 tons of soybeans valued at over $3 
million.
    Objective 2.4--Provide expertise and training in animal and plant 
health.--The WTO's SPS Agreement requires member countries to provide 
technical assistance to developing countries to enable those countries 
to participate more fully in the global trade arena. Using cooperative 
agreements, preclearance trust fund agreements, and other international 
arrangements, APHIS provides many countries with technical assistance 
to strengthen their animal and plant health infrastructure, risk 
assessment capacity, and food production capabilities (Objective 2.4). 
By doing this, APHIS not only fulfills requirements for the SPS 
Agreement but also improves offshore threat assessment and risk 
reduction capabilities (Objective 1.1).
    APHIS attaches continue to identify specific weaknesses in foreign 
regulatory systems and provide technical assistance where appropriate. 
Capacity building improves foreign countries' regulatory 
infrastructure, U.S. relationships with key foreign officials, United 
States regulatory concepts and approaches, and, ultimately, the 
agricultural health status of the foreign country.
    In fiscal year 2003, the Veterinary Biologics program continued 
working with the Committee of the Americas for the Harmonization for 
Registration and Control of Veterinary Medicines (CAMEVET). The 
objectives of this committee include coordinating technical information 
for the registration and control of veterinary medicines. The intention 
of this program is to exchange information and harmonizes technical 
procedures to improve the quality of veterinary medicines and the trade 
of products among countries in the Americas.
    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 2003, as an OIE 
reference laboratory, APHIS' National Veterinary Services Laboratories 
(NVSL) continued to use their diagnostic expertise to provide training, 
consultation, and assistance to both domestic and international 
laboratories. NVSL prioritized the evaluation/validation of new 
technologies such as the exotic Newcastle disease and Avian Influenza 
polymerase chain reaction and Chronic Wasting Disease kits to offer new 
tools for control of certain key diseases. NVSL also shipped 117,095 
vials of reagents to domestic and foreign customers to meet critical 
testing needs. And, NVSL acquired a new chemistry analyzer for blood 
screening purposes and doubled the number of fraudulent cases detected 
over those detected in fiscal year 2002. The fraudulent blood testing 
program at NSVL helps to assure confidence in the health of animals 
exported from the United States to other countries.

                             NEW DIRECTION

    After evaluating the current challenges and opportunities that 
exist today, APHIS has developed a new strategic plan of action that 
will set the Agency's course over the next 5 years. During this time, 
APHIS is committed to focusing on the following overarching goals: 
safeguarding the health of animals, plants, and ecosystems in the 
United States; facilitating safe agricultural trade; and ensuring 
effective and efficient management of programs to achieve its mission.
    As part of its new strategic plan, APHIS intends to strengthen key 
components of its protection system by focusing on the following 
objectives:
  --Ensuring the safe research, release, and movement of agricultural 
        biotechnology;
  --Strengthening the Agency's emergency preparedness and response;
  --Resolving trade barriers related to sanitary and phytosanitary 
        requirements;
  --Reducing domestic threats through increased offshore threat-
        assessment and risk-reduction activities;
  --Reducing the risk of invasive species introductions by enhancing 
        risk-analysis capabilities; and,
  --Managing issues related to the health of U.S. animal and plant 
        resources and conflicts with wildlife.

                    FISCAL YEAR 2005 BUDGET REQUEST

    APHIS has developed its fiscal year 2005 Budget Request in the 
context of the Strategic Plan, the overriding imperative of Homeland 
Security, and the need to restrain Federal spending. The fiscal year 
2005 Budget Request for Salaries and Expenses under current law totals 
$828.4 million or $112 million more than the fiscal year 2004 
Consolidated Appropriations Act. About $8.5 million is for the cost of 
the pay raise.
    The fiscal year 2005 increase, approximately 15.5 percent above the 
fiscal year 2004 appropriation, is for initiatives designed to address 
the increasing threats to the health of American agriculture and 
Homeland Security and to support the President's Food and Agriculture 
Defense Initiative. About 40 percent of the increase, approximately 
$45.4 million, is an investment to substantially reduce the over $378 
million fiscal year 2003 emergency transfers and to protect and expand 
the $53 billion annual agricultural export market by fully funding 
Federal costs up front in the budget. Other notable increases stem from 
the highest priority components of APHIS' Strategic Plan and the Food 
and Agriculture Defense Initiative. APHIS' request for fiscal year 2005 
contains $94.36 million for programs that support the Food and 
Agriculture Defense Initiative, an increase of nearly $50 million over 
fiscal year 2004.
highest priority components of the strategic plan and homeland security
    APHIS proposes to increase funding for the Biotechnology Regulatory 
Services program by $6.544 million. This will enable us to inspect all 
high risk fields five times during the growing season and two times in 
the subsequent season to provide the maximum confidence level that 
pharmaceutical and industrial developments are managed safely. Such a 
confidence level is necessary to convince skeptics and trading partners 
that these, and other biotechnologically derived products, are safe. 
That confidence is vital to the growth of the industry and American 
agriculture.
    We propose to increase the Import-Export program by $3 million and 
the Pest Detection program by $1.5 million to fulfill APHIS' 
responsibilities under the Bioterrorism Preparedness and Response Act 
of 2002. APHIS must regulate possessors and users of ``select agents,'' 
toxins and pathogens necessary for research and other beneficial 
purposes which could be deadly in the hands of terrorists.
    In light of the first BSE case in the United States, we propose 
increasing the Animal Health Monitoring and Surveillance program by an 
additional $8.641 million to support enhanced BSE surveillance to 
maintain the confidence of the American people in the safety of the 
beef supply and allow us to continue our efforts to prevent the 
introduction and spread of BSE in the U.S. cattle population. In this 
program, we also request $33.197 million to accelerate implementation 
of a National Animal Identification program. Timely tracebacks of 
animals are integral to a rapid response and recovery to incursions of 
animal illness and foreign animal disease.
    Early detection of new animal and plant pest or disease 
introductions has the potential to significantly reduce eradication 
costs and producer losses and, accordingly, is a high priority for 
APHIS. We propose to increase the funding available to our State 
cooperators through cooperative agreements for plant pest surveys and 
animal health monitoring efforts by $15.2 million (including $9.1 
million for the Pest Detection program and $6.1 million for the Animal 
Health Monitoring and Surveillance program). In addition to requesting 
increased funding to provide to our cooperators, we are proposing a 
$6.202 million increase for the Pest Detection program to enhance our 
pest detection infrastructure and national coordination efforts. By 
establishing basic capacity in all 50 States now, we will enhance our 
ability to find and contain pests and diseases like citrus canker, 
Asian longhorned beetle, emerald ash borer, Karnal bunt, exotic 
Newcastle disease, and avian influenza before they become widespread 
and require expensive emergency eradication programs. Similarly, we 
request an increase in the Wildlife Services Operations program by $5 
million to expand infrastructure to monitor and gather data on the 
disease status of free-ranging animals and integrate this data with 
existing agricultural animal health monitoring systems. APHIS will use 
this information to detect and respond to disease outbreaks in wildlife 
populations and mitigate the risk of wildlife diseases transmission to 
farmed livestock.
    The budget requests a $5 million increase for the Biosurveillance 
program to enhance several data collection systems already in use, 
allowing us to improve our surveillance capabilities and establish 
connectivity with the integration and analysis function at DHS.
    The increase of $3.149 million in the Trade Issue Resolution and 
Management program will allow APHIS to place more officials overseas to 
facilitate the entry of U.S. agricultural products and to help 
establish international standards based on sound science. Having APHIS 
attaches on site in foreign countries pays dividends weekly. They can 
intervene when foreign officials raise false barriers to the entry of 
individual American export shipments. In 2002, APHIS attaches 
successfully intervened to clear shipments worth $53 million in such 
cases.
    We propose to increases the Low Pathogenic Avian Influenza (LPAI) 
program by $11.783 million to conduct a vigorous surveillance and 
control program in the live bird markets in the Northeast--the most 
threatening continuing reservoir of LPAI in the United States. 
Eliminating LPAI in these markets would help prevent costly eradication 
programs like the one we conducted in Virginia in 2002. It also would 
remove a barrier to poultry exports--a $2.2 billion market--that many 
countries have or are threatening to invoke. OIE is likely to upgrade 
LPAI status to ``List A,'' which could result in more restrictions on 
our exports if we do not move to eradicate LPAI in the United States.
    We also propose to increase the Foot and Mouth Disease/Foreign 
Animal Disease program by $4.229 million to further our goal of 
reducing domestic threats through increased offshore threat assessment 
and risk-reduction activities by placing more officers overseas to 
monitor animal disease incidence and assist foreign countries in 
controlling outbreaks. We propose to increase the Pest Detection 
program by $3.875 million to do the same for plant pests and diseases. 
We request an increase in the Tropical Bont Tick (TBT) program by 
$2.495 million to eradicate TBT from Antigua completely and quickly 
prevent threats to other islands already free, to control and eradicate 
TBT from St. Croix, and establish surveillance on other U.S. islands 
and mainland to determine if TBT has spread.
    We propose to increase the Emergency Management Systems program by 
$10.625 million to enhance animal health emergency preparedness 
throughout the United States and to establish a vaccine bank to 
complement the North American Foot and Mouth Disease Vaccine Bank. This 
additional resource would include vaccines or preventives for other 
foreign animal disease of significance. These efforts will help protect 
our Nation's meat, poultry, and livestock exports, which are valued at 
$7.7 billion annually, and the livestock and poultry industries 
overall, which are valued at $87 billion.
    The budget proposes an increase in the Veterinary Biologics program 
by $1.861 million to increase inspections, licensing, and testing of 
biotechnology-derived veterinary biologics and to enhance tools 
available to the national animal health laboratory network that would 
fulfill international standardization requirements. United States sales 
of agricultural biotechnology products (transgenic seeds [excluding 
rice and wheat], animal growth hormones, biopesticides, and other 
products) are projected to increase from $2.4 billion in 2003 to $2.8 
billion by 2006, an increase of $144 million annually.
    The budget proposes an increase in the Veterinary Diagnostics 
program by $4.347 million to enhance the national animal health 
laboratory network and continue its diagnostic work at the Foreign 
Animal Diseases Diagnostic Laboratory on Plum Island to provide 
critical services to the animal industry and help protect the United 
States herd against potential acts of bioterrorism.
    The request increases the Agricultural Quarantine Inspection 
program by $3 million to enhance operations at the National Germplasm 
and Biotechnology Laboratory to develop technology to detect and 
identify high-risk plant pathogens as well as protocols for quarantine 
testing. These efforts support APHIS' emergency response capabilities, 
eradication programs, pest exclusion activities, biotechnology 
permitting programs, and the newly mandated Select Agents program. This 
increase is offset by a decrease of $2.771 million associated with 
inter-line inspections in Hawaii and a decrease of $1.246 million for 
fiscal year 2004 equipment investments.
    The budget increases the Import/Export program by $1.355 million to 
fully develop and begin implementing an automated system to track 
animal and animal product movements. We are developing this tool in 
response to increasing global trade and travel and demands for 
increased efficiency in tracking animals and animal products entering 
and leaving the country.

                 FUNDING TO CONTINUE EMERGENCY PROGRAMS

    APHIS has been battling several pests and diseases that have 
entered or unexpectedly spread to new areas of the United States over 
the past few years. Finishing the job is important if we are to achieve 
the goals we established when these programs began. Chief among these 
goals is maintaining export markets. Only by aggressively attacking 
pest and disease introductions can we assure trading partners that the 
problems are not endemic to the United States and thus not a reason to 
ban our products from their markets. The budget requests, and the value 
of the industries and markets at stake, follow.
  --Emerald ash borer, $12.5 million, an increase of $11.009 million. 
        This pest has emerged as a serious pest in the Northern Midwest 
        States and threatens the ash saw timber industry, with a value 
        of $25 billion. Much like the Asian Longhorned Beetle, this 
        pest probably arrived via non-agricultural imports and reflects 
        a new threat; not only do the contents of a container pose a 
        risk, so does the container itself. The budget request would 
        provide for Federal cost-sharing of 75 percent for this 
        program.
  --Glassy-winged sharpshooter (vector of Pierce's Disease), $24 
        million, an increase of $1.881 million. Without a program to 
        control Pierce's Disease, the U.S. wine industry could face 
        losses of $33 billion. The budget request would provide for 
        Federal cost-sharing of 57 percent for this program.
  --Citrus Longhorned Beetle (CLHB), $325,000. The CLHB attacks over 40 
        varieties of hardwood and fruit trees and has no natural 
        enemies. The CLHB could cause $41 billion in losses to forest 
        resources nationwide. The budget request would provide for 
        Federal cost-sharing of 100 percent for this program.
  --Citrus Canker, $52.5 million, an increase of $19.071 million. This 
        program protects the Florida citrus industry worth over $9 
        billion. The budget request would provide for Federal cost-
        sharing of 57 percent for this program.
  --Infectious Salmon Anemia, $235,000. This program protects a part of 
        the burgeoning aquaculture industry--salmon exports of over 
        $100 million annually. The budget request would provide for 
        Federal cost-sharing of 47 percent for this program.
  --Spring Viremia of Carp, $285,000. This program protects the common 
        and silver carp industries, with a value of $2.8 billion. The 
        budget request would provide for Federal cost-sharing of 77 
        percent for this program.
  --Chronic Wasting Disease, $20.1 million, an increase of $1.478 
        million. In addition to the potential spread to other species, 
        this program directly protects the elk farming and antler 
        industry (with annual gross receipts of $150 million) and 
        white-tailed deer farms (with capital investments estimated at 
        $2.5 billion). The budget request would provide for Federal 
        cost-sharing of 77 percent for this program.
  --Bovine Tuberculosis, $20.9 million, an increase of $5.998 million. 
        This program protects the entire livestock industry, which has 
        annual earnings from exports of $5.4 billion. The budget 
        request would provide for Federal cost-sharing of 57 percent 
        for this program.
  --Scrapie, $20.9 million, an increase of $5.106 million. This program 
        minimizes losses to sheep and goat producers, who currently 
        incur annual losses of $20-25 million because of scrapie. The 
        budget request would provide for Federal cost-sharing of 67 
        percent for this program.

                            OTHER INCREASES

    We recognize the need for fiscal restraint, but believe that the 
following additional investments are important if we are to meet the 
challenges facing us.
  --To support the Biotechnology priority, we request an increase of 
        $441,000 for the Animal and Plant Health Regulatory Enforcement 
        program to help ensure compliance by investigating alleged 
        violations of permit restrictions regarding pharmaceutical and 
        industrial plants.
  --To further improve our pest and disease surveillance and detection 
        capability--both to protect and gain export markets and to 
        prevent recurring, costly emergency programs--we request $6.171 
        million for the Fruit Fly Eradication and Detection Program to 
        increase detection trapping in Florida and California.
  --To provide the funding requested by the State Department in 
        providing adequate security for APHIS personnel overseas and to 
        continue security and mission critical facilities, we request 
        $7.133 million in our Physical/Operational Security program.
  --To establish and maintain liaison positions at key government 
        agencies and to investigate and evaluate disposal techniques 
        for contaminated biological materials, e.g., animal carcasses, 
        we request $932,000 for our Biosecurity program.
  --To continue to modernize our information technology infrastructure 
        to include network capacity planning and management, 
        implementation of eGov initiatives, and cyber security 
        compliance and management, we request $891,000 in our APHIS 
        Information Technology Infrastructure program.
  --To increase nematode resistant potato varieties and regulatory 
        treatments, we request $184,000 for the Golden Nematode program 
        and to maintain current efficiencies, we request $451,000 in 
        the Screwworm program.

                               DECREASES

    To allow us to fund these high priority programs, we offer key 
offsets:
    With $15.585 million in reduced funding for the Johne's program, 
APHIS would rely more on the collaborative working relationship between 
Federal and State animal health workers. For the Boll Weevil program, 
we are proposing that the Federal Government assume 15 percent of 
program costs, which in conjunction with the projections of lower 
nationwide needs, will result in a request of $17 million, a reduction 
of $33.4 million. To offset the $5 million increase for the wildlife 
surveillance system, we assume a $5.556 million increase for State 
cooperators to fund a larger share of the cost of other wildlife 
management programs such as predator, bird, and invasive species 
damage. Funding for the Asian longhorned beetle program is requested to 
be $9.3 million, or a reduction of $20.670 million. The fiscal year 
2005 request is based on an overall program level consistent with the 
$4 million traditionally provided by cooperating (non-Federal) 
agencies. This would change the program from an eradication program to 
a control program. The aim is still to protect $41 billion of U.S. 
forest resources while facilitating the $122 billion trade market with 
China, the source of the pest.
    We also propose a reduction of $10.857 million associated with 
animal welfare user fees. This will allow the industry to cover an 
estimated 66 percent of the cost of enforcing the animal welfare 
regulations.

                               CONCLUSION

    APHIS' mission of safeguarding U.S. agriculture is becoming ever 
more critical. Although the processes by which we protect America's 
healthy and diverse food supply are being increasingly challenged, 
APHIS is committed to taking the lead in building and maintaining a 
world-class system of pest exclusion, surveillance, detection, 
diagnosis, and response. Like the APHIS Strategic Plan, the APHIS 
Budget consists of interdependent components that only when taken 
together can truly protect the health and value of American agriculture 
and natural resources.
    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 Donna Reifschneider, Administrator, Grain 
           Inspection, Packers and Stockyards Administration

                              INTRODUCTION

    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 2005 
budget proposal.
    GIPSA is part of USDA's Marketing and Regulatory Programs, which 
works to support a 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 both service and regulatory capacities. 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 comprises 737 employees. Grain inspection services are 
delivered by the national inspection system, a network of Federal, 
State, and private inspection personnel that is overseen by GIPSA. The 
system includes 12 GIPSA field offices, 2 Federal/State offices, and 8 
State and 58 private agencies that are authorized by GIPSA to provide 
official services. This network insures the availability of official 
inspection and weighing services anywhere in the United States. GIPSA 
also maintains 3 Packers and Stockyards Programs regional offices that 
specialize in poultry, hogs, and cattle/lamb.

                    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 166 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 2003, 5,287 market agencies and 
dealers, and 2,067 packer buyers were registered with GIPSA. In 
addition, there were 1,429 facilities that provided stockyard services, 
with an estimated 6,000 slaughtering and processing packers, meat 
distributors, brokers and dealers, and 128 poultry firms running 202 
poultry complexes 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 1,700 investigations. As a 
result of these investigations, the Packers and Stockyards Programs 
helped restore over $27 million to the livestock, meatpacking, and 
poultry industries. While this is not the largest amount GIPSA has ever 
reported to Congress, it constitutes more than 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 $3.2 million 
being restored to custodial accounts that are established and 
maintained for the benefit of livestock sellers. Livestock sellers 
recovered over $1.5 million under the P&S Act's packer trust 
provisions. During fiscal year 2003, 55 insolvent dealers, market 
agencies and packers corrected or reduced their insolvencies by $6.6 
million. In addition, GIPSA's financial investigators analyzed more 
than 400 bond claims exceeding $7 million. However, GIPSA 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. 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 testing of every scale 
used to weigh livestock or live poultry twice a year. In addition, 
GIPSA initiated or completed 41 investigations of weight and price 
manipulation of livestock. Some of these investigations are on-going. 
GIPSA also investigated the operations of 143 live poultry dealers; 
most of these investigations examined whether live poultry dealers were 
in compliance with contracts entered into with poultry growers. With 
members of the regulated industries, we developed industry standards on 
new technologies that are entering the marketplace to evaluate and 
price livestock purchased on a carcass merit basis. We anticipate 
implementing two more voluntary standards in the next 6 months.
    GIPSA continues to develop its Competition Program. During fiscal 
year 2003, the Competition Branch began or continues evaluations of 31 
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, one firm was brought into compliance, and a second 
firm went out of business. Six of the investigations revealed that the 
concerns raised were not supported by evidence. 23 complaints were 
still pending at the end of the fiscal year. GIPSA continues to work 
closely with the CFTC, attending CFTC Commissioner briefings on the 
cattle, hog, and meat markets.
    GIPSA's Rapid Response Teams remain a powerful tool to address 
urgent industry issues that place the industries in imminent financial 
harm. Last year, GIPSA rapid response teams investigated 59 situations 
across the Nation. During fiscal year 2003, these rapid response 
investigations contributed to returning $5.9 million to livestock 
producers and poultry growers at a cost of $413,010 in salary and 
travel expenses.
    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 2003, GIPSA, with assistance from the 
Office of the General Counsel, filed 22 administrative or justice 
complaints alleging violations of the P&S Act. This number, similar to 
last year, represents more than a 50 percent increase over the number 
of complaints filed in fiscal year 2001.
    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 88 
callers. These calls were in addition to calls received in our regional 
offices. GIPSA also increased its outreach activities. GIPSA conducted 
28 orientation sessions for new auction market owners and managers and 
4 feed mill orientations to educate them about their fiduciary and 
other responsibilities under the P&S Act.
    It is important to note some of the activities that GIPSA has been 
engaged with in recent months. Following the discovery of the bovine 
spongiform encephalopathy (BSE) positive cow in December, 2003, GIPSA 
created Financial Protection, Trade Practices and Competition Task 
Forces to provide protection to livestock producers and members of the 
cattle industry commensurate with its authority under the Packers and 
Stockyards Act. These task forces are based in Denver, Colorado, 
GIPSA's cattle office, and include technical experts from each of 
GIPSA's regional offices and headquarters. The task forces have 
developed strategies to identify and respond to potentially unlawful 
practices unique to current market conditions. Daily Agency-wide 
meetings are being held to inform and share all BSE related information 
so that employees, task forces, and headquarters are all current on the 
latest issues.
    GIPSA's Financial Protection Task Force is monitoring livestock 
markets for financial failures. The Task Force has identified scheduled 
sales at auction markets that were cancelled in the days and weeks 
following the BSE announcement. It's monitoring firms likely to be more 
vulnerable to impacts of the BSE incident, identifying industry changes 
in payment practices, and standing ready to deploy rapid response teams 
to investigate financial concerns in the industry. GIPSA is currently 
conducting several investigations of particularly financially 
vulnerable firms.
    GIPSA's Trade Practices Task Force is reviewing changes in 
marketing and procurement practices implemented by packers in response 
to the BSE incident. GIPSA has been in contact with major packers and 
industry groups to stay current on packer responses. GIPSA is reviewing 
notices sent by packers to livestock producers informing producers of 
purchasing and pricing changes implemented as a result of BSE. GIPSA 
has received complaints from producers who claim that packers have 
changed the payment terms of their contracts and has deployed rapid 
response teams to investigate these complaints. GIPSA's Competition 
Task Force is analyzing, and when warranted, investigating cattle 
markets when anti-competitive practices may be occurring. Several 
investigations have been initiated. The Competition Task Force analyzes 
reported fed-cattle prices in various geographic markets to identify 
abnormal patterns that may indicate violations of the P&S Act. The task 
force assesses whether price differences are the result of normal 
market forces, or packer behavior that may violate Section 202 of the 
P&S Act. When normal market forces fail to explain abnormal prices, the 
Competition Task Force conducts a rapid response investigation to 
determine whether the P&S Act has been violated.
    GIPSA has also communicated with the Commodity Futures Trading 
Commission (CFTC), the Agricultural Marketing Service, Food Safety and 
Inspection Service, the Animal and Plant Health Inspection Service, and 
local and State governmental organizations to discuss issues and 
coordinate plans. GIPSA attends CFTC's surveillance meetings and is 
prepared to work with CFTC on any investigation that may involve a 
potential violation of the P&S Act. GIPSA is actively responding to the 
BSE incident and is prepared to continue enforcement of the Packers and 
Stockyards Act and regulations in light of this situation.
    In addition, this year GIPSA made significant progress on the 
Livestock and Meat Marketing Study for which Congress appropriated $4.5 
million in fiscal year 2003. The study will look at issues surrounding 
a ban on packer ownership. GIPSA, through APHIS, is in the process of 
contracting out the study. Since packers' use of non-spot arrangements 
is intertwined with other advance marketing arrangements throughout the 
supply chain, the study has a broad focus.
    The issues addressed by the study are complex. The research is 
expected to involve several academic disciplines, varied research 
methods, and large amounts of data that are not already available. 
Business schools, economics departments, and agricultural economics 
departments at universities have indicated an interest in bidding, as 
have consulting firms. GIPSA expects to see collaborations of 
disciplines in the bids.
    Contractors are expected to complete the study in phases over 2 
years, with the first reports due 1 year after contract award. Some 
descriptive findings will be released prior to completion of the 
analytical parts of the study. Information about the study, including 
the Federal Register notice, the public comments, and RFP notices, is 
available on GIPSA's website at: www.usda.gov/gipsa, by following the 
``marketing study'' icon.
    Also in fiscal year 2003, GIPSA completed development of the Swine 
Contract Library as an internet application that meets the requirements 
of the Livestock Mandatory Reporting Act of 1999's amendments to the 
Packers and Stockyards Act. Packers are required to file swine purchase 
contracts with GIPSA, and monthly reports about the number of swine 
expected to be delivered, under contract, to packers.
    The Swine Contract Library includes information from swine packing 
plants with a slaughter capacity of 100,000 swine or more per year. 31 
firms operating 51 plants accounting for approximately 96 percent of 
industry slaughter are subject to the SCL. GIPSA has received over 530 
contracts to date. In the first 2 months of operation, the SCL recorded 
more than 1,400 hits. Through the SCL, producers have the ability to 
see contract terms, including, but not limited to, base price 
determination formula and the schedules of premiums or discounts, and 
packers' expected annual contract purchases by region.
    The Swine Contract Library went live with information on contract 
provisions available to the public in early fiscal year 2004, and is 
available on the GIPSA web site at http://www.usda.gov/gipsa/.

                    FEDERAL GRAIN INSPECTION SERVICE

    GIPSA's Federal Grain Inspection Service (FGIS) facilitates the 
marketing of U.S. grain in domestic and international markets by 
providing the market with services and information that effectively and 
accurately communicate the quality and quantity of grain being traded. 
GIPSA administers its inspection and weighing programs under the 
authority of the U.S. Grain Standards Act, as amended, and the 
Agricultural Marketing Act of 1946 (AMA) as it relates to the 
inspection of rice, pulses, lentils, and processed grain products.
    Providing reliable, high quality inspection and weighing services 
at a reasonable price remains a key commitment of GIPSA and the State 
and private officials comprising the official inspection system. 
Federal export inspection services average $0.30 per metric ton, or 
approximately 0.23 percent of the $14 billion value of U.S. grain 
exports. In fiscal year 2003, more than 1.8 million inspections were 
performed on more than 222 million metric tons of grains and oilseeds. 
Over 84,000 weighing certificates were issued on 91.5 million metric 
tons of grain.
    There have been many changes in official inspection services over 
the past several years to respond to changing market demands. GIPSA has 
programs and services in place to facilitate the loading of shuttle 
trains; to address greater product differentiation; and to provide 
customers with inspection results electronically. These all represent 
steps in the right direction, but we recognize that the market is 
changing daily and we must change with it to remain relevant.
    GIPSA is focusing on a number of key areas to better facilitate the 
marketing of U.S. grain. We are enhancing our international outreach 
capabilities to remove obstacles to U.S. grain reaching world markets. 
We are bringing standardization to domestic and international markets. 
We are focusing on providing the market with the information it needs 
on the end-use functional quality attributes of grain that determine 
its true value in an increasingly quality-specific market. We are 
improving service delivery, and the efficiency and cost-effectiveness 
of the official system.
    International outreach is one component of our efforts to 
facilitate the marketing of U.S. grain. We will continue to expand our 
outreach efforts to support market development around the world. Our 
international customers are making great use of the wide array of 
recently produced multimedia educational materials.
    In recent years, we have significantly expanded our outreach 
efforts to ensure open markets for U.S. grain in Asia and Mexico. Last 
year, GIPSA initiated two 3-month regional assignments, one in Asia and 
one in Mexico, to address immediate and long-term grain marketing 
issues in each region. In Mexico, GIPSA has worked extensively with 
APPAMEX (an organization of Mexican grain importers), the USDA/Foreign 
Agricultural Service (FAS), and USDA cooperator organizations to 
address Mexico's concerns about U.S. grain quality. We have conducted 
in-depth grain grading seminars to educate Mexican buyers, traders, and 
end users on the U.S. grain marketing system, GIPSA's impartial grain 
quality assessment, and U.S. grain standards, sampling procedures, and 
inspection methods. In fiscal year 2003, GIPSA also helped several of 
Mexico's private sector grain elevators and processing facilities set 
up grain inspection laboratories mirrored after GIPSA's. Last fiscal 
year, we also worked with Mexican and Canadian officials to secure a 
trilateral agreement on implementation of the Biosafety Protocol.
    Our international outreach program also includes technical 
consultative services for international customers. In fiscal year 2003, 
GIPSA responded to 17 requests for technical assistance from exporters, 
importers, and end users of U.S. grains and oilseeds, as well as other 
USDA agencies, USDA Cooperator organizations, and other governments.
    Our international outreach are not the only initiatives we have 
underway to improve the standardization of, and in turn, facilitate 
marketing in, domestic and international markets. In the biotech arena, 
GIPSA is helping bring standardization, consistency, reliability, and 
accuracy to the biotech testing entities and tools used by the market. 
GIPSA's test kit evaluation program validates the performance of rapid 
tests for biotechnology-derived grains and oilseeds. Our Proficiency 
Program improves the performance and reliability of government and 
private laboratories in the United States and worldwide that test for 
biotechnology-derived grains. Under this voluntary program, 
participants are evaluated based on results of their quantitative and/
or qualitative testing of samples of all commercially available corn 
and soybean biotechnology events. More than 88 organizations 
participated in the program in fiscal year 2003, a threefold increase 
from 22 organizations in February 2002.
    In fiscal year 2002, GIPSA established formal research 
collaboration with the National Institute of Science and Technology 
(NIST) to investigate DNA-based testing for biotechnology-derived 
grains and oilseeds, and to investigate the development of reference 
materials and methods for DNA-based testing. Using information obtained 
through confidentiality agreements with life science organizations, 
GIPSA and NIST produced event-specific plasmids for evaluation as 
reference materials and potentially to be in the development of 
reference methods. In fiscal year 2003, GIPSA and NIST hosted a 
workshop entitled AStandard Reference Materials for Biotechnology 
Crops.'' Thirty-six representatives from the life science 
organizations, testing laboratories, test kit manufacturers, food 
processors, Canada, European Union, and Japan attended.
    In fiscal year 2004, GIPSA will continue to collaborate with NIST 
to investigate challenges associated with Polyermase Chain Reaction 
(PCR) technology and develop reference materials to improve the 
reliability and accuracy of DNA-based testing and to harmonize testing 
on a global basis, and will continue to work with NIST to establish 
global agreement on the development of reference materials for 
biotechnology-derived grains and oilseeds.
    Our market facilitation efforts also include bringing standardized 
information to markets. In 1999, wheat importers and exporters asked 
GIPSA to declare that the United States does not produce transgenic 
wheat. In September 1999, GIPSA began, in accordance with the authority 
provided under the U.S. Grain Standards Act (7 U.S.C. 79), issuing the 
following letterhead statement upon an applicant's request: ``There are 
no transgenic wheat varieties for sale or in commercial production in 
the United States.'' The potential deregulation of Round-Up Ready wheat 
added potential uncertainty to world markets. Wheat industry 
representatives anticipate that continued issuance of the current 
statement will be essential to ensure the continued marketing of U.S. 
wheat. To facilitate the marketing of U.S. wheat if deregulation 
occurs, GIPSA has agreed to continue issuing the non-transgenic wheat 
statement, upon request, provided that Monsanto meets several 
requirements verifying that seed has not been sold for commercial 
production.
    GIPSA also continues to ensure that the official United States 
standards are responsive to the needs of the domestic marketplace. 
Developments in plant breeding, the use of new marketing strategies 
such as identity preservation, increasingly complex processing, food 
manufacturing, and feed formulation, and other factors will 
continuously challenge GIPSA to promote current, market-relevant grades 
and standards that reflect required quality characteristics for 
specific end uses. In fiscal year 2003, GIPSA proposed creating two 
subclasses in the class Hard White wheat, which would differ based on 
seed coat color. Seed coat color can be an important quality factor 
depending on the target flour product and the miller's flour extraction 
goal. Also underway are reviews of the soybean standards with a focus 
on test weight, and the sorghum standards to clarify the various class 
definitions and to revise the definition of non-grain sorghum.
    Working closely with barley producers and the barley malting 
industry, GIPSA began developing new official criteria called 
``Injured-by-Sprout'' in malting barley. Sprouting occurred in barley 
in the U.S. Northern Plains region during 2002, which prevented malting 
barley production contracts from being honored. Barley producers' 
insurance claims also were denied because official procedures to assess 
barley sprout damage differ from those used by the malting industry. 
GIPSA's response is facilitating the marketing of malting barley by 
enabling USDA's Risk Management Agency to implement the new procedure 
for the 2004 barley crop year.
    Other standards enhancements undertaken to facilitate marketing in 
fiscal year 2003 include amendments to the U.S. Standards for Rice to 
establish and add Ahard milled ``rice as a new milling degree level and 
to eliminate the reference Alightly milled.'' These changes better 
align the GIPSA standard with current industry processing and marketing 
standards.
    GIPSA knows that customers also need more information about the 
specific end-use qualities of the products they are purchasing. We are 
focusing on providing rapid testing of end-use functionality factors to 
differentiate the functional qualities that meet specific end-use 
needs.
    GIPSA continues cooperative efforts with groups from Canada, 
Australia, and several European countries to develop and evaluate 
global artificial neural network (ANN) near-infrared transmittance 
(NIRT) calibrations for wheat and barley protein. GIPSA conducted a 
field study on current partial least squares (PLS) wheat protein 
calibrations and the global ANN calibration. GIPSA also evaluated the 
field performance of the ANN barley protein calibration. In fiscal year 
2004, GIPSA will finalize individual instrument standardization 
procedures to support implementation of an ANN calibration for wheat 
and barley protein.
    In April 2003, GIPSA convened a meeting of leading North American 
wheat researchers to generate new avenues of research that would lead 
to rapid tests for wheat end-use functional characteristics, applicable 
at the time of inspection and at other points in the value chain. 
Participants developed a list of quality factors and possible technical 
approaches for measuring them, with the overarching goal of having a 
market applicable test ready for use by May 2006. To help keep 
researchers focused on the task, GIPSA will establish a virtual 
discussion room for researchers to further collaboration on and support 
for this effort, and to help researchers find extramural grant sources.
    GIPSA is working with the United Soybean Board on their ``Better 
Bean Initiative,'' a program directed at improving the nutritional 
composition of U.S. soybean meal and oil. USDA/ARS currently is 
receiving funding to develop measurement technology for meal and oil. 
GIPSA is taking part in the Soybean Quality Trait initiative that is 
seeking to standardize soybean protein, oil, moisture, and fatty acid 
measurements. GIPSA is part of an inter-laboratory collaborative study 
to evaluate the consistency of soybean protein, oil, and moisture 
reference methods. GIPSA is also helping to assemble a soybean sample 
library suitable for use in developing and evaluating near-infrared 
(NIR) calibrations.
    GIPSA is also exploring new approaches to compliment and supplement 
our traditional array of services. In fiscal year 2003, GIPSA continued 
developing a process verification service for grains in response to 
market demand.
    Our efforts to develop new programs did not preclude us from making 
significant improvements to existing ones. During fiscal year 2003, 
GIPSA revised the regulations on reinspections and appeal inspections 
under the U.S. Grain Standards Act to better reflect market needs and 
to remove an inefficient, costly, and unnecessary regulatory 
requirement. Previously, reinspections and appeal inspections for grade 
included a review of all official factors that may determine the grade, 
are reported on the original certificate, or are required to be shown. 
The revised regulations allow interested parties to specify which 
official factor(s) should be redetermined during the reinspection or 
appeal inspection service. To safeguard against inadvertent misgrading, 
official personnel may determine other factors, when deemed necessary. 
In fiscal year 2004, GIPSA plans to propose a similar action for rice 
and pulses and other commodities that are inspected for quality factors 
under the authority of the Agricultural Marketing Act of 1946.
    Improving service delivery is essential, as is improving the 
efficiency and cost-effectiveness of the official system. This will 
include many initiatives, ranging from harnessing technology to improve 
operational efficiency and service delivery to making needed program 
policy changes.
    In addition, GIPSA has dedicated resources to homeland security 
efforts. GIPSA continues to work closely with the USDA Office of Crisis 
Planning and Management (OCPM) to refine the Department's and the 
Agency's Continuity of Operations Plan (COOP) and to support and staff 
the Department's Crisis Action Team (CAT). In fiscal year 2003, GIPSA's 
COOP and CAT representatives participated in numerous USDA and 
Marketing and Regulatory Program-sponsored disaster-related exercises 
and training sessions. They also completed the GIPSA Supplement to the 
USDA Headquarters COOP Plan, which provides guidance for the 
continuation/reestablishment of GIPSA's COOP essential functions, 
including identifying GIPSA's emergency relocation facilities where 
these functions will be performed and GIPSA personnel who will be 
required to perform them. The provisions of the GIPSA Supplement, which 
mirrors the USDA Headquarters COOP Plan, applies only to GIPSA 
headquarters offices in Washington, D.C.
    GIPSA provided technical assistance related to homeland security 
issues to a number of industry and governmental groups, including the 
National Grain and Feed Association Safety Committee, the Security 
Analysis System for U.S. Agriculture (SAS-USA) Technical Advisory 
Committee, the Interagency Food Working Group, and the USDA Homeland 
Security Working Group. The Agency is currently working with the 
National Food Laboratory Steering Committee to coordinate and integrate 
resources to support the key components of the Food Emergency Response 
Network (FERN).
    GIPSA also continued to face challenges in maintaining an 
appropriate operating cushion in its user fee account. During fiscal 
year 2003, GIPSA transferred $2 million from our appropriated account 
to preclude fiscal over-obligation in violation of the Anti-Deficiency 
Act. As of May 31, 2003, the cash balance of GIPSA's user fee account 
had fallen to $2.9 million, a dangerously low amount considering 
GIPSA's monthly obligations of about $3.0 million.
    Due to flat or decreasing exports, and marketing trends that are 
reducing revenue generated by our current fee structure, there has been 
a persistent gap between costs and revenue. GIPSA has absorbed losses 
in its reserve user fee funds. GIPSA has executed many cost-cutting 
measures to reduce obligations. The Agency has cut employment levels, 
closed field and sub-offices, streamlined support staffs, and 
introduced new technology to improve program efficiency.
    In the longer term, GIPSA is pursuing several options to preclude 
future funding difficulties, including implementing a new fee schedule. 
Program efficiencies, such as streamlining the official inspection 
processes using a web-based technology and re-engineering program 
delivery, and opening discussions with stakeholders on how and by whom 
official inspection services should be delivered to American 
agriculture were undertaken. 2005 Budget Request
    To fund important initiatives and address the Agency's 
responsibilities, GIPSA's budget request for fiscal year 2005 is $44.1 
million under current law for salaries and expenses and $42.5 million 
for our Inspection and Weighing Services. There is an increase of 
$662,000 for employee compensation. GIPSA already submitted legislation 
last fall which would collect $29.0 million in new user fees in fiscal 
year 2005, $5.8 million for the grain standardization activities and 
$23.2 million for the Packers and Stockyards Programs. A substantial 
portion of the IT increases will be one-time only requests.
    For grain inspection, the President's fiscal year 2005 budget 
proposes a current law request of $20.0 million; a total increase of 
$1.8 million.
    An increase of $1,300,000 would allow GIPSA to merge data from 
several Agency computer information systems for efficient oversight and 
management of the official grain inspection system and to provide on-
demand, Web based access to this data by our partners, customers, and 
GIPSA personnel. Management needs a single source to capture 
information about each inspection provided to track work 
accomplishment, technical analysis, and compliance verification. With 
the information reported, GIPSA will be able to automate the generation 
of billings records that will be used by the NFC FFIS to generate the 
invoice for each customer. GIPSA will also use the data system to 
automatically document and generate a statement of fees owed by each 
customer on a monthly basis.
    By implementing this application, GIPSA will be able to retire two 
Unix applications and the computer equipment that it runs on. Retiring 
these Unix applications will allow GIPSA to move towards achieving its 
goal of a common computing environment within and between FGIS and 
P&SP, free up one half of a staff year required today for support, and 
eliminate dependency for support of this application to a single 
developer.
    Also requested is $500,000 to expand GIPSA's technical outreach in 
key international markets, which is required because GIPSA has 
experienced a growing demand for cooperative participation with other 
agencies with international trade responsibilities--for example, State 
Department, U.S. Trade Representative (USTR), Foreign Agricultural 
Service (FAS), and the Animal and Plant Health Inspection Service 
(APHIS)--toward achieving our overall mutual objective of expanding 
markets for agricultural products and removing barriers to trade.
    Modern biotechnology has presented new challenges to U.S. grain 
markets as many countries develop domestic regulations regarding 
biotech grains. GIPSA has served the international grain trade 
community by developing programs to address these emerging needs, and 
working with related agencies--State, USTR, FAS, and APHIS, among 
others--to share information regarding these programs and contribute 
our expertise. For example, China announced broad biosafety regulations 
2 years ago that continue to threaten U.S. soybean exports. Partner 
agencies have sought GIPSA's active participation in negotiations 
challenging this technical barrier to trade. Such issues are likely to 
increase in number and frequency in the future.
    As another example, a new international environmental treaty, the 
Biosafety Protocol, which entered into force in September 2003, 
requires new documentation on biotech grain shipments, and many 
countries already are developing regulations that are unnecessarily 
trade-disruptive. During the years ahead, it will be essential for 
GIPSA to continue in what has been its integral role in an interagency 
process for implementation of the Protocol by contributing expertise in 
grain handling, transportation, and marketing, to prevent unnecessary 
trade disruption.
    The funding increase will enable GIPSA to provide personnel on 
overseas temporary duty to better address and resolve grain trade 
issues, precluding market disruption due to technical differences in 
analytical methods and standards; expand U.S. market share due to 
increased customer satisfaction; and continue to provide critically 
important technical support as the U.S. government seeks to ensure 
practical implementation of new regulatory requirements being developed 
by a growing number of trading partners.
    For the Packers and Stockyards Programs, the President's fiscal 
year 2005 budget proposes a current law request of $24.2 million; a 
total increase of $3.81 million.
    An increase of $1,460,000 for the development of web applications 
which is required because the current database and application 
architecture will not support the volume, security, or recovery 
requirements of GIPSA and USDA as GIPSA moves to support GPEA and OMB 
and USDA eGov initiatives. Further, the Enterprise Architecture project 
completed in 2003 identified fifteen (15) business functions that are 
not supported by any applications within the Packers & Stockyards 
Programs area, seven of those being key business functions. In 
addition, the current applications lack integration on the information 
that is common between the applications, hence requiring duplication 
(albeit minimal) information entry by program users.
    To enable the timely implementation of customer-centric 
applications within the Packers and Stockyards Program, additional 
Information Technology developmental resources are required. Currently 
the Packers and Stockyards Program does not have the web designers or 
programmers that would allow it to rapidly and accurately deploy Web-
based applications. To supplement the current information technology 
staff and to bring new technology into the program area, GIPSA is 
requesting contracting funds.
    These funds would be used to contract-out the design, development, 
implementation, and maintenance of important Web initiatives as 
identified as part of GIPSA's overall Enterprise Architecture and 
approved by USDA's OCIO. For example, with the requested funding, 
entities regulated under the Packers and Stockyards Act would be able 
to register with GIPSA via the internet, electronically file annual 
reports, and submit bond claims and complaints via the internet. GIPSA 
would be able to increase its efficiency by electronically verifying 
bond and trust accounts with banks, the integration of three stove 
piped applications, and the real-time tracking of the status and cost 
of an investigation. (The submission of annual reports alone would save 
GIPSA over 1,500 hours annually by personnel that are GS14s and 15s.) 
This would allow the Resident Agents to complete an additional 200 
investigations in the future.
    An increase of $150,000 is required to operate and maintain the 
Swine Contract Library (SCL), which is one of GIPSA's Packers and 
Stockyards Programs' (P&SP) first e-government initiatives. As such, 
GIPSA has developed an Internet web site that offers packers the 
opportunity to submit their contracts and anticipated number of hogs 
procured under contract to GIPSA via a secured connection and producers 
the opportunity to view contract information via the Internet.
    The funding increase will be used to operate and maintain the SCL 
system. This position will monitor, review, and analyze the contract 
information and monthly reports submitted by packers, ensure that 
packers are in compliance by examining submissions for completeness, 
consistency, and accuracy, conduct confidentiality analysis on 
information before release, and make the information available at the 
P&SP regional office and on the GIPSA web site. The increase will also 
fund Information Technology services and the annual renewal cost for 
computer software licenses. This IT position will provide software, 
hardware, and web site maintenance for the SCL program.
    An increase of $1,200,000 to support fair and transparent product 
differentiation and valuation which is required because packers 
significantly reduced the numbers of livestock purchased based on live 
weight in recent years. In a stated effort to better meet consumer 
demand and provide greater ``value,'' packers and producers began 
trading livestock through contract and marketing agreement or formula-
priced transactions. In conjunction with this change in marketing 
methods, packers explored and began using new means of automating the 
evaluation of live cattle and hogs, and carcasses based on new 
technologies, including among other methods, ultrasound and 
photographic imaging.
    Technologies and their applications for evaluating the quality of 
both live animals and carcasses are changing at an accelerating pace. 
Previously, carcass merit purchases were generally based on a carcass 
weight and often one or two grades assigned by USDA graders. Today, 
packers increasingly rely on internally assigned measures of carcass 
quality using modern and complex technologies.
    Live poultry dealers, as well, are exploring new technologies to 
assist in evaluating the quality of birds obtained from poultry 
growers. Implementation of new technologies in the poultry industry may 
supplement or replace the current methods used by live poultry dealers 
to determine bird quality and payment to growers, including contract 
growers.
    The technologies now being implemented by packers have a direct 
effect in determining the prices paid to producers for livestock. 
Technologies being developed by live poultry dealers will likely affect 
prices paid to poultry growers. These changes introduce new risks for 
producers and growers, because these new technologies are not 
standardized and their accuracy is inconsistent.
    This lack of standardization and inconsistent accuracy makes it 
difficult for producers and growers to detect errors and deliberate 
changes in the way the technology is used, leaving producers and 
growers vulnerable to unfair and unjustly discriminatory practices by 
members of the meat packing and poultry industries. A change that 
affects as little as one half of 1 percent of the value of livestock in 
a multi-billion dollar industry can have a huge impact on producers and 
growers over time. Therefore, P&SP needs to dramatically increase its 
monitoring and regulatory presence.
    This increase in funding will provide P&SP ongoing funding to 
obtain industrial engineering expertise in the operation of these new 
electronic evaluation technologies and the methods in which packers and 
live poultry dealers use them; to develop enforcement tools, 
investigation techniques and regulatory policies necessary to continue 
to effectively regulate the meat packing and poultry industries, and 
when appropriate, initiate enforcement action; to educate and inform 
the meat packing and poultry industries about responsibilities under 
the P&S Act with regard to these new technologies; and to educate and 
inform livestock producers and poultry growers about how the electronic 
evaluation technologies are used in the meat packing and poultry 
industries, and how the technologies are regulated by P&SP.
    An increase of $1,000,000 is required because immediately following 
the announcement that a U.S. cow tested positive for BSE, P&SP created 
task forces to provide protection to livestock producers and members of 
the cattle industry. These task forces are developing strategies to 
identify and respond to anti-competitive practices unique to current 
market conditions; monitor markets for financial failures and 
investigate any livestock sale barn or slaughtering facility that 
closes to ensure that any unpaid cattle sellers are identified and 
appropriately compensated and investigate complaints related to 
livestock marketing and procurement contracts.
    P&SP regulates 1,429 posted stockyards, 5,287 market agencies and 
dealers, 2,067 packer-buyers, and 340 bonded packers (those purchasing 
over $500,000 worth of livestock per year). An additional group of 
packers that purchase less than $500,000 are also subject to P&SP 
jurisdiction. A large number of these entities may be adversely 
impacted as the BSE situation develops, creating circumstances that 
require immediate P&SP action.
    P&SP is developing strategies to identify anti-competitive 
practices that could occur as a result of current market conditions. 
These strategies will be implemented and appropriate responses will be 
initiated where anti-competitive conduct is suspected.
    P&SP is looking closely at suspect livestock transactions to ensure 
that market participants are not taking advantage of the unique market 
conditions created by the BSE situation. P&SP will deploy rapid 
response teams to investigate BSE-related complaints. Costs for rapid 
response investigations related to BSE could easily exceed amounts 
typically expended on all other rapid response investigations. In the 
past three fiscal years, P&SP spent $1,372,210 conducting 150 rapid 
response investigations, or an average of 50 investigations per year at 
a cost of $457,403.
    An increase of $1,200,000 will allow the Agency to establish 
computer industry standard hardware, software, and facilities to 
implement the development of customer oriented electronic interfaces to 
the Federal Grain Inspection Program and the Packers and Stockyards 
Program. This will allow for a common Information Technology 
environment for the receipt and delivery of electronic data necessary 
to efficiently conduct the Agency's programs.
    These capabilities will by necessity need to be closely integrated 
with the existing Information Technology Architecture in GIPSA and 
conform to the USDA Enterprise Architecture. The computer equipment 
will be composed of multiple, high performance servers which must 
accommodate the transfer of very large amounts of data securely and 
transparently between themselves and the existing Agency information 
systems. These computer servers must be developed to have the 
capability to implement a wide range of Web based interactive 
applications.
    Finally, an increase of $1,000,000 is needed because in order to 
bring the Information Technology Systems security up to an acceptable 
level within GIPSA, the Agency's network infrastructure must be brought 
up to the standards as depicted in the USDA Enterprise Architecture. 
The Agency will need to add network switches, routers and firewalls to 
bring the network infrastructure up to an acceptable security standard. 
To insure thorough security planning, the Agency will need funding for 
additional contractor support in the development of disaster recovery 
plans, continuity of operations plans, risk analysis, and the 
certification and accreditation of existing information systems.

                               CONCLUSION

    Mr. Chairman, Members of the Committee, I would like to conclude my 
testimony on the fiscal year 2005 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.
    Thank you.

                      STATEMENT OF ELSA A. MURANO

    Dr. Murano. Thank you, Mr. Chairman, Senator Kohl.
    I am glad to have the opportunity to speak to you this 
afternoon regarding the status of the Food Safety and 
Inspection Service programs and on our fiscal year 2005 budget 
request for food safety within the U.S. Department of 
Agriculture.
    As we begin the new year at USDA, I am proud to highlight 
several areas in which we have used science to improve public 
health during the past year.

                                  BSE

    First, though, I want to briefly touch on the Bovine 
Spongiform Encephalopathy or BSE issue. Since December 23rd of 
last year, BSE has been front and center with us, as it has 
with everyone who has concerns about public health and food 
safety. Upon learning of the BSE find, we immediately took 
action to protect the public's health. New regulations were 
published on January 12th, a mere 2 weeks after the BSE case 
was announced, truly a remarkable example of how quickly the 
Bush Administration responded to this threat.
    The removal of specified risk material from the food 
supply, which was the hallmark of these new regulations, was 
indeed the single most significant step we could have taken to 
protect the public's health.

              SIGNIFICANT FOOD SAFETY ADVANCEMENT OF 2003

    The American public remains confident in the safety of the 
U.S. meat supply, and with good reason. The confidence is due 
in part to the significant advancements that we have made 
during 2003. For example, we have seen a dramatic decline in 
pathogen levels and regulatory samples for Listeria 
monocytogenes, E. coli O157:H7, and Salmonella. In addition, we 
had a striking decline in the number of meat and poultry 
product recalls last year. In fact, the number of class one 
recalls has nearly been cut in half from the total during 2002. 
These are dramatic indicators that our scientifically-based 
policies and programs are working to ensure that the American 
public receives the safest food possible.

                          CHALLENGES FOR 2004

    Despite these advancements, there is always room for 
improvement and FSIS has identified challenges for 2004. 
Through reflection and refinement we have outlined specific 
initiatives to ensure that we continue to improve health 
outcomes for American families. These include improving 
training through the Food Safety Regulatory Essentials program, 
using the recently established New Technologies Office to 
promote and accelerate the use of innovative food safety 
technologies, improving risk assessment coordination to ensure 
the best available information and science is used in policy 
development, continuing to conduct baseline studies to 
determine the nationwide prevalence and levels of various 
pathogenic organisms in raw meat and poultry, and coordinating 
with other Federal agencies to strengthen existing efforts to 
prevent, detect and respond to food related emergencies 
resulting from acts of terrorism.

                    FISCAL YEAR 2005 BUDGET REQUEST

    I will now turn to the fiscal year 2005 budget request for 
FSIS. FSIS is requesting a program level of $951.9 million, a 
net increase of about $61 million from the levels for fiscal 
year 2004. Under current law, we are requesting an 
appropriation of $838.7 million with an additional $113 million 
in existing user fees.
    The budget request will fund increased BSE surveillance 
programs as well as additional training for inspection 
personnel and numerous programs that will continue to keep us 
among the leading public health agencies in the world.
    The budget request includes a $15.5 million increase for 
pay raises in Federal and State programs. The budget request 
includes a $17.3 million increase for humane slaughter 
enforcement and the full cost of in-plant inspection. Included 
in this request is $5 million to continue the humane slaughter 
enforcement work funded in fiscal year 2003.
    The remaining $12.3 million of the $17.3 million is for 
staff support costs that are critically important to 
maintaining front-line inspection.
    The fiscal year 2005 request includes a $33.6 million 
increase for new initiatives that support our goals at FSIS. 
First, we include an increase of $3 million for BSE 
surveillance. The BSE inspection program will add permanent BSE 
control measures in 2005.
    Second, our budget requests $23.5 million to increase 
support for our Food and Agriculture Defense Initiative. Food 
contamination and animal and plant diseases and infestations 
can have catastrophic effects on human health and the economy. 
So, our portion of the Food and Agriculture Defense Initiative 
has five components: the Food Emergency Response Network or 
FERN; data systems to support the Food Emergency Response 
Network; enhancing FSIS laboratory capabilities; 
biosurveillance; and follow-up biosecurity training.
    To improve the infrastructure under FERN, the budget 
request calls for a $10 million expansion. Of that funding, 
$6.1 million would be spent on contracts with state and local 
laboratories and $2.6 million would be used to establish five 
regional hubs and a national operating center to coordinate 
FERN's efforts and conduct training.
    The budget request also includes initiatives to support 
FERN. The Electronic Laboratory Exchange Network, eLEXNET, is a 
national web-based system that allows laboratories to rapidly 
report and exchange standardized data. So the budget request of 
$4 million will be used to make eLEXNET available to additional 
FERN and other food testing laboratories nationwide.
    The budget request includes $2.5 million to enhance our 
laboratory capabilities for detecting new bioterror-associated 
agents and to ensure that our capability and capacity to 
perform toxin and chemical testing is maintained.
    The final new initiative is training, which is a very 
important issue for us. FSIS has been criticized in the past 
for having insufficiently trained field employees. So, we are 
working very, very hard to address these concerns and need 
additional resources in order to significantly improve our 
training. We are requesting $7.1 million, over a 50 percent 
increase in the FSIS training budget for fiscal year 2005. 
Included in the requested training budget is $3.1 million for 
our Food Safety Regulatory Essentials training to supplement 
training for current on and off-line field employees to improve 
enforcement of HACCP and food safety sampling.

                          PREPARED STATEMENTS

    Thank you again, Mr. Chairman and Senator Kohl, for your 
attention. And we certainly look forward to responding to your 
questions.
    [The statements follow:]

                Prepared Statement of Dr. Elsa A. Murano

    Mr. Chairman and Members of the Subcommittee, I am glad to have the 
opportunity to speak with you regarding the status of the Food Safety 
and Inspection Service (FSIS) programs and on the fiscal year 2005 
budget request for food safety within the U.S. Department of 
Agriculture (USDA).
    In Washington, people talk about their inspiring view of the 
Capitol or the monuments, and the sights that inspire them to work 
harder and better. The view in my office is quite awesome--at once 
humbling and challenging. I am referring to a famous portrait on my 
wall of Louis Pasteur, examining a spinal cord sample. Pasteur 
disagreed with the popular attitude of the day, ``science for science's 
sake;'' he felt that science as a purely academic exercise did not 
properly serve the people of the 19th century. Instead, he believed 
that science should have practical applications that could be used to 
improve the lives of others. As we begin the new year at USDA, I am 
proud to highlight several areas in which we have used science to 
improve public health during the past year. I also will share with you 
our goals for this year, and will conclude with a discussion of the 
fiscal year 2005 budget request.
    First though, I want to briefly touch on the Bovine Spongiform 
Encephalopathy (BSE) issue. Since December 23, 2003, BSE has been 
``front and center'' with us, as it has with everyone who has concerns 
about public health and food safety. Upon learning of the BSE find, we 
immediately took action to protect the public's health. New regulations 
were published on January 12th, a mere 2 weeks after the BSE case was 
announced--truly a remarkable example of how quickly the Bush 
Administration responded to this threat. The removal of specified risk 
material (SRM) (brain, spinal cord, etc.) from the food supply, which 
was the hallmark of these new regulations, was indeed the single most 
significant step we could have taken to protect the public's health. To 
ensure that these measures are implemented effectively, part of the 
fiscal year 2005 budget request that I will discuss later consists of 
$3 million for the agency to conduct surveillance of SRM and advanced 
meat recovery (AMR). We are confident that the aggressive BSE measures 
we have developed will continue to protect the U.S. food supply.

              SIGNIFICANT FOOD SAFETY ADVANCEMENTS OF 2003

    The American public remains confident in the safety of the U.S. 
meat supply--and with good reason. The confidence is due, in part, to 
the significant advancements that we made during 2003. One such 
advancement has been the dramatic decline in pathogen levels in 
regulatory samples. Late last year, we released data that showed a 25 
percent drop in the percentage of positive Listeria monocytogenes 
samples from the previous year, and a 70 percent decline compared with 
years prior to the implementation of the Hazard Analysis and Critical 
Control Point (HACCP) program. In June 2003, to further reduce the 
incidence of Listeria monocytogenes, we issued regulations for 
establishments producing ready-to-eat products.
    Our measures to prevent E. coli O157:H7 contamination of ground 
beef have yielded similar results. In September 2002, based on evidence 
that E. coli O157:H7 is a hazard reasonably likely to occur at all 
stages of handling raw beef products, FSIS issued a directive requiring 
all establishments that produce raw beef products to reassess their 
HACCP plans. Last year, FSIS' scientifically trained personnel 
conducted the first-ever comprehensive audits of more than 1,000 beef 
establishments' HACCP plans. A majority of those plants made major 
improvements based on their reassessments, and, as a result, we are 
seeing a substantial drop in the percentage of ground beef samples that 
are positive for E. coli O157:H7. In 2003, of the ground beef samples 
collected and analyzed for E. coli O157:H7, only 0.30 percent tested 
positive, compared to 0.78 percent in 2002--a 62 percent reduction. 
This is a definite improvement, and the strongest signal that science 
can drive down the threat from pathogens.
    In 2002, we issued new enforcement procedures for the Salmonella 
performance standard that are paying off. Instead of waiting for three 
cycles of tests for Salmonella, the failure of the first set now 
triggers an FSIS review of an establishment's HAACP plan. Due to this 
process and other science-based initiatives, the percentage of ``A'' 
samples (a sample from a randomly scheduled initial set) positive for 
Salmonella in raw meat and poultry has dropped by 65 percent over the 
past 6 years. Out of the number of random ``A'' samples collected and 
analyzed by FSIS during 2003, only 3.8 percent of the samples were 
positive for Salmonella, as compared with 10.6 percent in 1998. Again, 
this is very good news. The data for these three pathogens validate our 
scientific approach to improving public health through safer food.
    We also had a striking decline in the number of meat and poultry 
product recalls last year. In fact, the number of Class I recalls has 
nearly been cut in half from the total during 2002. This is a dramatic 
indicator that our scientifically-based policies and programs are 
working to ensure that the American public receives the safest food 
possible.
    FSIS has also had great success with its food safety education 
programs. Through new and innovative methods, FSIS is sharing its food 
safety message with the general public, including culturally diverse 
and underserved populations and those at highest risk for foodborne 
illnesses. From March to November 2003, the USDA Food Safety Mobile 
traveled over 24,000 miles and participated in 87 events in 64 cities 
across the country, providing information and publications on food 
safety to approximately 179,000 people face-to-face and making an 
estimated 64.4 million media impressions. Another success story is a 
public service announcement (PSA) featuring former Miss America Heather 
Whitestone McCallum, which has aired 14,448 times since September 2003. 
This PSA ranked in the top 3 percent of all PSA's shown during the 
month of January 2004 along with PSA's by the American Red Cross, the 
Federal Emergency Management Agency (FEMA), and the Department of 
Homeland Security (DHS). We are very proud of these far-reaching FSIS 
food safety education campaigns.

                          CHALLENGES FOR 2004

    Despite the advancements we made last year, there is always room 
for improvement, and FSIS has identified challenges for 2004. Louis 
Pasteur said, ``In the realm of science, luck is only granted to those 
who are prepared.'' Food safety is too important to be left to guess 
work or luck; we must be prepared to identify and meet challenges head-
on.
    When I joined USDA over 2 years ago, I established five goals--a 
roadmap of improvements for our food safety mission:
  --To improve the management and effectiveness of our regulatory 
        programs;
  --To ensure that policy decisions are based on science;
  --To improve coordination of food safety activities with other public 
        health agencies;
  --To enhance public education; and
  --To protect FSIS regulated products from intentional contamination.
    Through reflection and refinement, we have outlined specific 
initiatives to make sure we fulfill those goals, thereby improving 
health outcomes for American families. These initiatives were outlined 
in our food safety vision document, Enhancing Public Health: Strategies 
for the Future. This detailed plan will continue to drive our policies 
and actions during this calendar year.

Initiative One: Training
    In April 2003, FSIS inaugurated new Food Safety Regulatory 
Essentials (FSRE) training, which is designed to better equip 
inspection personnel in verifying an establishment's HACCP food safety 
system. All trainees received training in the fundamentals of 
inspection, covering the Rules of Practice, Sanitation Performance 
Standards, and Sanitation Standard Operating Procedures. FSIS also 
provides food safety training based on the types of products being 
produced at the establishments where inspectors are assigned. As of the 
end of last year, more than 1,000 individuals had completed this 
training regime.
    During 2004, FSIS will continue to train all new entry level 
slaughter establishment inspectors and veterinary medical officers in 
technical, regulatory and public health methods. We are also looking at 
expanding the types of training in the future to meet evolving agency 
needs and challenges.

Initiative Two: Furthering the Use of Innovative Food Safety 
        Technologies
    I believe that we must encourage the use of safe and effective 
interventions. One way we can encourage such intervention is by hosting 
public meetings. In January, in Omaha, Nebraska, FSIS held a public 
meeting to discuss the development and use of new food safety 
technologies to enhance public health. The meeting generated useful 
ideas regarding how plants can best utilize new technologies in their 
operations.
    FSIS established a New Technology Office in August 2003. This group 
is tasked with reviewing new technologies and, where appropriate, 
expediting the use of new technologies at meat and poultry official 
establishments and egg products plants. Our New Technology staff is an 
experienced team of 9 veteran FSIS employees who serve as the single 
portal for all new technology submissions. We designed this group to 
better manage the new technology process and allow for implementation 
as quickly as possible. They also ensure that FSIS personnel are aware 
of new technologies and where they are being used.
    To increase the pool of new technology submissions to the agency, 
we have established an e-mail address, [email protected], 
through which parties may submit their information. I am happy to 
report that we have received over 30 Notifications and Protocols for 
new food safety technologies since we have streamlined the submission 
process. Of the 27 Notifications received, 19 have been issued letters 
indicating that FSIS has no objections, and 4 are still pending. Once 
the agency issues a no objection letter, the firm that submitted the 
proposal may use the new technology.

Initiative Three: Risk Assessment Coordination
    In order to better focus its resources on food safety risk 
assessment activities, FSIS established a risk assessment coordination 
team with USDA-wide membership. As risk assessment becomes increasingly 
important as a means of providing the science behind policy decisions, 
the need for such a group within USDA is clear. This group will promote 
scientifically sound risk assessments and foster research to support 
risk assessments.
    Microbial risk assessment is still in its infancy compared to 
chemical risk assessments, so the need to share ideas and resources is 
critical. In November 2003, we started this interactive process by 
holding a public meeting to discuss how the government uses the three 
components of the risk analysis framework--risk assessment, risk 
management, and risk communication--to inform and implement risk 
management decisions. In particular, we examined several crucial 
elements for FSIS to consider in its risk assessments, including how:
  --FSIS can improve the transparency of the risk analysis process;
  --FSIS can balance the need for transparency, stakeholder involvement 
        and peer review with the need for timely scientific guidance; 
        and
  --Risk assessments can better inform policy development and decision-
        making.

Initiative Four: Developing a Research Agenda
    In November 2003, FSIS and the Research, Education and Economics 
mission area, announced a unified research agenda to coordinate USDA 
food safety research priorities and needs. For FSIS, research is 
critical to achieving its public health vision. Although FSIS does not 
conduct research itself, the agency must identify its research needs 
based on its public health goals so that the research community can 
meet them. The unified agenda includes research to:
  --Investigate the ecology, epidemiology, virulence and genetic 
        characteristics related to pathogenicity for E. coli O157:H7, 
        Salmonella, Listeria monocytogenes, and other foodborne 
        pathogens to identify targeted control measures;
  --Develop effective on-farm, feedlot, transportation, handling, and 
        other pre-processing intervention strategies for reducing the 
        incidence and levels of antibiotic resistant microorganisms and 
        key foodborne pathogens in meat, poultry, eggs and fresh 
        produce;
  --Develop, validate, and transfer technology of new and improved 
        processing methods to reduce or eliminate key foodborne 
        pathogens in meat, poultry, fresh produce, seafood, and ready-
        to-eat foods; and
  --Develop rapid and sensitive detection methods for abnormal prions 
        to prevent the possible spread of transmissible spongiform 
        encephalopathies.
Initiative Five: To Develop Best Practices for Animal Production
    In consultation with producers, researchers, and other 
stakeholders, FSIS is developing a list of best management practices 
for animal production in order to provide guidance for reducing 
pathogen loads before slaughter.
    Last September, FSIS arranged a symposium with USDA partners to 
discuss ways to significantly reduce the levels of E. coli O157:H7 in 
live animals before slaughter. We understand that preventing the spread 
of E. coli and other pathogens on the farm is vital to increasing food 
safety and protecting public health. The dialogue generated at the 
meeting helped us develop guidelines outlining the best management 
practices at the pre-harvest stage, which we expect to publish this 
year. Once these guidelines are published, FSIS will initiate an 
aggressive outreach effort to distribute them to producers.

Initiative Six: Baseline Studies
    It is imperative that FSIS develops baseline studies. FSIS is 
developing protocols to conduct continuous baseline studies to 
determine the nationwide prevalence and levels of various pathogenic 
microorganisms in raw meat and poultry. The studies will help the 
agency and the industry to better understand what interventions are 
working or how they could be improved. To achieve the agency's goal of 
applying science to all policy decisions, the fiscal year 2004 budget 
included a new $1.7 million initiative to establish a continuous 
baseline program for risk assessments and performance measurement.
    In the past, baseline studies have been used to establish pathogen 
reduction performance standards, which are an important part of 
verifying the sanitary operation of meat and poultry establishments. 
The new baseline studies will take into account regional variation, 
seasonality and other critical factors.
    The continuing nature of the baseline studies will provide 
information on national trends and a tool to assess performance of 
initiatives designed to reduce the prevalence of pathogens in meat and 
poultry products. These baseline studies will also yield important 
information for conducting risk assessments that can outline steps we 
can take to reduce foodborne illness.
    These surveys will also be important in establishing the link 
between foodborne disease and ecological niches, as well as levels and 
incidence of pathogens in meat and poultry. The net result will be more 
targeted interventions and the effective elimination of sources of 
foodborne microorganisms.

Initiative Seven: Food Biosecurity
    While the events of September 11, 2001, brought the issue of the 
vulnerability of our food supply to the forefront, FSIS' food 
biosecurity efforts did not start on September 12, 2001. FSIS' 100 plus 
years worth of experience in dealing with food emergencies have allowed 
the agency to develop the expertise to protect the U.S. meat, poultry, 
and egg products supply wherever and whenever emergencies or new 
threats arise.
    It is imperative that FSIS coordinates with other public health 
agencies to protect the food supply against intentional harm. The 
agency has improved such coordination, as well as strengthened existing 
efforts to prevent, detect, and respond to food-related emergencies 
resulting from acts of terrorism. 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. Later, when I discuss the fiscal year 
2005 budget request, I will describe the components of our food and 
agriculture defense initiative.

                ACHIEVING THE NEXT LEVEL OF FOOD SAFETY

    The emergence of previously unrecognized pathogens, as well as new 
trends in food distribution and consumption, highlights our need for 
new strategies to reduce the health risks associated with pathogenic 
microorganisms in meat, poultry and egg products. Through analysis and 
discussions with stakeholders, we have identified three issues that 
need to be addressed to attain the next level of public health 
protection.
Issue One: To anticipate/predict risk through enhanced data integration
    To better anticipate risks involving meat and poultry products, we 
must have the best available data to clearly identify the extent and 
nature of these risks, so that we may determine an effective response. 
These data consist of regulatory samples, as well as samples collected 
by food processing establishments. Thus, we must improve data analysis 
while encouraging data sharing from all reliable sources.
    With regard to food biosecurity, FSIS works closely with the White 
House Homeland Security Council, DHS, the Food and Drug Administration 
(FDA) and the USDA Homeland Security Staff to develop strategies to 
protect the food supply from an intentional attack. For example, FSIS, 
along with FDA and industry partners, is working with DHS to establish 
new food information sharing and analysis activity for the food sector. 
This public/private partnership will aid in the protection of the 
critical food infrastructure by centralizing the information about 
threats, incidents, and vulnerabilities.

Issue Two: To improve the application of risk analysis to regulatory 
        and enforcement activities
    Food safety problems need to be documented as they occur, so that 
conditions may be analyzed and, if need be, corrected. A better 
understanding of the prevalence and causes of food safety failures 
could allow better assessment of how to best address them. Data 
regarding the causes of food safety violations, either within a 
specific establishment, or within a class of establishments, can be 
utilized in order to better focus prevention and regulatory enforcement 
strategies.
    FSIS is exploring the development of a real-time measure of how 
well an establishment controls the biological, chemical, and physical 
hazards inherent in its operations. Such a predictive model would help 
the agency make resource allocation decisions across the country's more 
than 6,000 meat and poultry establishments to maximize food safety and 
public health protection.

Issue Three: To better associate program outcomes with public health 
        surveillance data
    We have seen notable advances in preventing foodborne illness, 
which the Centers for Disease Control and Prevention (CDC) have 
attributed, in part, to the implementation of HACCP. However, there 
still is a need to determine how specific policies affect public 
health. In order to accomplish this, we need to obtain and document 
data that links foodborne illness outbreaks with specific foods. It may 
then be linked with prevalence data of specific pathogens in specific 
foods. However, to complete the linkage with public health outcomes, we 
need accurate and timely human health surveillance data.
    We have already taken steps to secure such surveillance data, and 
we continue to update our systems. In 1995, FSIS worked with CDC, FDA, 
and public health laboratories in several States to establish FoodNet, 
the Foodborne Diseases Active Surveillance Network, as part of CDC's 
Emerging Infections Program.
    FoodNet includes active surveillance of foodborne diseases, case-
control studies to identify risk factors for acquiring foodborne 
illness, and surveys to assess medical and laboratory practices related 
to foodborne illness diagnosis. FoodNet provides estimates of foodborne 
illness and sources of specific diseases that are usually found in the 
United States, and interprets these trends over time. Data are used to 
help analyze the effectiveness of the Pathogen Reduction/Hazard 
Analysis and Critical Control Point rule and other regulatory actions, 
as well as public education aimed at decreasing foodborne disease in 
the United States. We are also considering establishing a joint task 
force with CDC to determine ways to improve FoodNet.
    In addition to data collected through FoodNet, FSIS is a partner 
with CDC and State agencies in PulseNet, a national computer network of 
public health laboratories that helps to rapidly identify outbreaks of 
foodborne illness. Laboratories perform DNA ``fingerprinting'' on 
bacteria that may be foodborne, then the network permits rapid 
comparison of the ``fingerprint'' patterns through a CDC database. 
PulseNet is an early warning system that links seemingly sporadic 
illnesses, and enables public health officials to more quickly identify 
and react to the emergence of multi-State illness outbreaks.
    FSIS is also working with CDC's National Center for Infectious 
Diseases to design and support studies that enable definite connections 
to be made between occurrence of specific pathogens in specific foods 
and the occurrence of human foodborne illness.
    FoodNet, PulseNet and other similar programs are excellent examples 
of Federal and State agencies working together to accomplish public 
health goals. These programs will help FSIS and other regulatory 
agencies to focus inspection and enforcement on those practices where 
risk is deemed to be highest, resulting in a more efficient use of 
government resources.

                    FISCAL YEAR 2005 BUDGET REQUEST

    I will now turn to the fiscal year 2005 budget request for FSIS. In 
fiscal year 2005, FSIS is requesting a program level of $951.7 million, 
a net increase of about $61 million from the enacted level for fiscal 
year 2004. Under current law, we are requesting an appropriation of 
$838.7 million, with an additional $113 million in existing user fees. 
The budget request will fund the increased BSE surveillance programs I 
mentioned earlier, as well as additional training for inspection 
personnel and numerous programs that will continue to keep FSIS among 
the leading public health agencies in the world. By continuing the 
principle of making policy based on sound science, we will modernize 
our inspection system to handle the challenges of food safety in this 
century. Implementation of these budget initiatives is imperative to 
help us attain the public health vision we have set for FSIS.
Supporting FSIS' Basic Mission
    The FSIS budget request for fiscal year 2005 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 
budget request includes a $15.5 million increase for pay raises in 
Federal and State programs. In addition, the budget supports an agency-
wide staff-year ceiling of 9,641, an 84 staff year increase from the 
2004 appropriation level. The budget reflects the proposed calendar 
year 2005 pay raise of 1.5 percent for Federal and State personnel, a 
0.2 percent increase for employee rewards, and the annualized cost of 
the 4.1 percent pay increase for calendar year 2004. The costs also 
include a total net increase of approximately $721,000 for state food 
safety and inspection.
    Two critical elements of FSIS' mission are to continue the 
enforcement of humane slaughter regulations and to provide for the full 
cost of front-line inspection. FSIS will continue strict enforcement of 
its regulations for the humane handling and slaughter of livestock. In 
fiscal year 2003, over 7,600 inspection personnel stationed in over 
6,000 federally inspected meat, poultry, and egg products plants 
verified that the processing of 43.6 billion pounds of red meat, 49.2 
billion pounds of poultry, and 3.7 billion pounds of liquid egg 
products complied with statutory requirements. The fiscal year 2005 
budget request includes a $17.3 million increase for humane slaughter 
enforcement and the full cost of in-plant inspection. Included in the 
request is $5.0 million to continue the work funded in fiscal year 2003 
for fiscal year 2003 through fiscal year 2004.
    The remaining $12.3 million of the $17.3 million is for staff 
support costs that are critically important to maintaining front line 
inspection. Over 80 percent of FSIS costs are for salaries, benefits, 
and travel costs for inspectors to travel between plants. Increases in 
benefit and travel costs cannot be deferred to another year. The 
agency's share of employee benefits costs has been rising in recent 
years by over $4 million annually. The agency has also experienced 
large increases in retirement costs, hiring incentives, and employee 
allowances for the purchase of safety equipment and related items. The 
increase is needed to avoid employment restrictions in the inspection 
program, which would result if unavoidable cost increases are not fully 
funded and must be absorbed.
New Initiatives
    The fiscal year 2005 request includes a $33.6 million increase for 
new initiatives that support the Department's goals for FSIS.
    First, as I discussed in my opening, the fiscal year 2005 budget 
request includes an increase of $3 million for BSE surveillance. FSIS' 
BSE inspection program will add permanent BSE control measures in 
fiscal year 2005. These control measures will include increased in-
plant verification of slaughter plant designs for controlling SRMs, 
overtime inspection, and travel for Veterinary Medical Officers to test 
non-ambulatory disabled livestock when they arrive at small slaughter 
plants that do not have a resident veterinarian. In fiscal year 2005, 
FSIS will also perform about 60,000 screening tests at processing 
plants that use AMR equipment, to ensure that SRMs do not enter the 
food supply.
    The fiscal year 2005 budget also requests a $23.5 million increase 
to support our food and agriculture defense initiative. Food 
contamination and animal and plant diseases and infestations can have 
catastrophic effects on human health and the economy. USDA, the 
Department of Health and Human Services and DHS are working together to 
create a comprehensive food and agriculture policy that will improve 
the government's ability to respond to the dangers of disease, pests 
and poisons, whether natural or intentionally introduced. FSIS' portion 
of the food and agriculture defense initiative has five components:
  --Biosurveillance;
  --The Food Emergency Response Network;
  --Data systems to support the Food Emergency Response Network;
  --Enhancing FSIS laboratory capabilities; and
  --Follow-up biosecurity training.
    To finance the biosurveillance component of the food and 
agriculture defense initiative, the fiscal year 2005 budget requests $5 
million. The Homeland Security Council (HSC) Biodefense End-to-End 
Assessment, in cooperation with all relevant U.S. Government agencies, 
identified early attack warning and surveillance as a top priority to 
prepare against a potential bioterrorist attack. The HSC supports an 
interagency biosurveillance initiative to improve the Federal 
Government's ability to rapidly identify and characterize such an 
attack. This initiative will improve Federal surveillance capabilities 
in human health, food, agriculture, and environmental monitoring. It 
will also allow Federal agencies to establish integration capability at 
DHS so that DHS may rapidly compile these streams of data and integrate 
them with threat information.
    FSIS has conducted its own vulnerability assessments of regulated 
domestic and imported products. The assessments identify potentially 
vulnerable products and processes, likely threat agents, and points 
along the production/consumption continuum where attack is most likely 
to occur. The agency will focus its resources on the points of greatest 
vulnerability.
    The second component of the food and agriculture defense initiative 
is the Food Emergency Response Network (FERN). A nationwide laboratory 
system with sufficient capacity to meet the needs of anticipated 
emergences is integral to any bioterror surveillance and monitoring 
system. FERN consists of Federal and State governmental laboratories 
which are responsible for protecting citizens and the food supply from 
intentional acts of biological, chemical, and radiological terrorism. 
Currently, over 60 laboratories, including public health and veterinary 
diagnostic laboratories, representing 27 States and five Federal 
agencies, have agreed to participate in FERN. The goal is to establish 
100 FERN laboratories, creating a network of Federal, State and local 
laboratories that FSIS could call upon to handle the numerous samples 
that would be required to be tested in the event of a terrorist attack 
on the meat, poultry or egg supply.
    To improve the infrastructure under FERN, the budget request calls 
for a $10 million expansion. Of that funding, $6.1 million would be 
spent on contracts with State and local laboratories, and $2.6 million 
would be used to establish five Regional Hubs and a National Operating 
Center to coordinate FERN's efforts and conduct training. In addition, 
during fiscal year 2005, FSIS would also use $1.3 million to establish 
five to seven State laboratories for screening of microbiological 
agents, with more laboratories in the future, based on the availability 
of funds. The staff of these laboratories will receive training, 
perform methods validation, and analyze surveillance and check samples.
    The third and fourth components of the food and agriculture defense 
initiative support FERN. The electronic laboratory exchange network 
(eLEXNET) is a national, web-based system that allows laboratories to 
rapidly report and exchange standardized data. The fiscal year 2005 
budget request of $4 million will be used to make eLEXNET available to 
additional FERN and other food-testing laboratories nationwide. Access 
to properly validated methods used for screening, confirmation, and 
forensic analysis is critical to all laboratories, and laboratories 
need rapid access to new or improved methods that use emerging 
technologies, have greater sensitivity, or are more efficient. FSIS is 
working with FDA to develop a web-based repository of analytical 
methods that is compatible with eLEXNET. The budget request also 
includes $2.5 million to enhance FSIS' laboratory capabilities for 
detecting new bioterror-associated agents, and to ensure FSIS' 
capability and capacity to perform the toxin and chemical testing that 
will be standardized across all FERN laboratories.
    The final component of the food and agriculture defense initiative 
is follow-up biosecurity training for the workforce. Follow-up training 
is essential as part of the ongoing effort to protect the public by 
educating the workforce regarding the latest threat agents and 
countermeasures to those agents. The budget request includes $2 million 
for follow-up training for fiscal year 2005.
    The final new initiative I will discuss is training. FSIS has been 
criticized over the years by the General Accounting Office and the 
Office of the Inspector General for having poorly trained field 
employees. We have been addressing these concerns over the last year, 
but need additional resources in order to significantly improve our 
training. We are requesting $7.1 million--over a 50 percent increase--
in the FSIS training budget for fiscal year 2005. Of the requested 
training budget, $4.0 million would be used to increase the number of 
entry level inspectors receiving formal classroom training from 20 
percent to 100 percent. Under this proposal, all new inspectors will 
receive formal training on how to identify and respond to food safety 
problems. New employees will be required to demonstrate mastery of 
training in order to be certified to assume inspection duties.
    The requested training budget also includes $3.1 million for Food 
Safety Regulatory Essentials training, to supplement training for 
current on- and off-line field employees to improve enforcement of 
Pathogen Reduction/Hazard Analysis and Critical Control Point 
regulations and food safety sampling. These frontline employees are 
responsible for making the critical decisions to ensure that products 
are safe to eat, so it is essential to have a scientifically and 
technically trained workforce.

User Fee Proposal
    FSIS' fiscal year 2005 budget also includes a legislative proposal 
to recover the costs of providing inspection services beyond an 
approved 8-hour primary shift. The proposal was submitted to Congress 
last August. If the proposal is enacted, the level of appropriated 
funds needed would be reduced by an estimated $124 million, making the 
FSIS budget request $714.7 million. Under current law in 2005, FSIS 
estimates it will collect $113 million in annual user fees to recover 
the costs of overtime, holiday, and voluntary inspection.

                                CLOSING

    We intend to continue to engage the scientific community, public 
health experts and all interested parties in an effort to identify 
science-based solutions to public health issues to ensure positive 
public health outcomes. It is our intention to pursue such a course of 
action this year in as transparent and inclusive a manner as is 
possible. The strategies I discussed today will help FSIS continue to 
pursue its goals and achieve its mission of reducing foodborne illness.
    Mr. Chairman, thank you again for providing me with the opportunity 
to speak with the Subcommittee and submit testimony regarding the steps 
that FSIS is taking to remain the world leader in public health. I look 
forward to working with you to improve our food safety system, ensuring 
that we continue to have the safest food supply in the world.



                                 ______
                                 

  Prepared Statement of Dr. Barbara J. Masters, Acting Administrator, 
                   Food Safety and Inspection Service

    Mr. Chairman and distinguished members of the Subcommittee, I am 
pleased to be here today as we discuss public health and the U.S. 
Department of Agriculture's (USDA) fiscal year 2005 budget request for 
the Food Safety and Inspection Service (FSIS).

Infrastructure
    FSIS has a long, proud history of protecting public health. 
Although the Agency under its current name was established by the 
Secretary of Agriculture on June 17, 1981, its history dates back to 
1906. FSIS' mission is to ensure that meat, poultry, and egg products 
prepared for use as human food are safe, secure, wholesome, and 
accurately labeled. FSIS is charged with administering and enforcing 
the Federal Meat Inspection Act (FMIA), the Poultry Products Inspection 
Act (PPIA), the Egg Products Inspection Act (EPIA), and the regulations 
that implement these laws.
    Ensuring the safety of meat, poultry, and egg products requires a 
strong infrastructure. To accomplish this task, FSIS has a large 
workforce of approximately 10,000 employees, most of who are stationed 
in the field, dedicated to inspection. In fiscal year 2003, over 7,600 
inspection personnel stationed in over 6,000 federally inspected meat, 
poultry, and egg products plants verified that the processing of 43.6 
billion pounds of red meat, 49.2 billion pounds of poultry, and 3.7 
billion pounds of liquid egg products complied with statutory 
requirements. In addition, we re-inspected 3.8 billion pounds of 
imported meat, poultry and processed egg products from 28 of 33 
countries that we determined have inspection systems equivalent to our 
own. Assuring that these products are safe and wholesome is a serious 
responsibility.
    As you are well aware, these are compelling times in food safety, 
and it is because of your support that we are making real progress in 
improving the safety of the U.S. food supply. I would like to thank you 
for the past support you have given us in our budget requests. Now, I 
would like to tell you how we are fulfilling our responsibilities 
through FSIS' food safety vision and about our initiatives for better 
ensuring the safety of meat, poultry, and egg products.

Fulfilling the Vision
    The continued mission of FSIS is to ensure that consumers have the 
safest possible food supply. To fulfill this vision, we have set out to 
continuously modernize FSIS' ability to improve the safety of meat, 
poultry, and egg products. Our efforts are paying off, as seen by the 
16 percent decline in foodborne illness over the last 6 years. The 
Centers for Disease Control and Prevention (CDC) attributes these 
results in part to the implementation of the Hazard Analysis Critical 
Control Point (HACCP) system in all meat and poultry plants in the 
United States. However, in spite of these positive trends towards a 
safer food supply, FSIS recognizes that intensified efforts are needed 
to reach the next level of food safety. That is why the agency has 
diligently worked to carry out Dr. Murano's five core goals:
  --To improve the management and effectiveness of our regulatory 
        programs;
  --To ensure that policy decisions are based on science;
  --To improve coordination of food safety activities with other public 
        health agencies;
  --To enhance public education; and
  --To protect FSIS regulated products from intentional contamination.

Improving the Management and Effectiveness of Regulatory Programs
    In order for policies and programs to be successful, they must be 
uniformly and correctly applied. Thus, proper training of the workforce 
is essential. In addition, communication to field personnel needs to be 
timely and accurate, with proper supervision from the district and from 
headquarters in order to foster accountability in the system.

Training and Education
    The key to improving the management and effectiveness of FSIS' 
considerable infrastructure is to ensure that the agency is well 
prepared with the tools necessary to protect the food supply. Training 
is a top priority of the agency. FSIS can only achieve its public 
health, food safety, and food security mission with adequate 
preparation of its workforce through scientific and technical training.
    In April 2003, FSIS began the Food Safety Regulatory Essentials 
(FSRE). The goal of the training is to teach inspection personnel how 
to do their jobs properly, and emphasizes the regulatory decision-
making thought process both through lecture and workshop examples. In 
fiscal year 2003, FSIS exceeded its goal to train 800 inspectors under 
FSRE. A comparison between pre-test and post-test scores has shown that 
the knowledge improvement of our inspectors has increased by an average 
of 20 percent. Feedback from our inspectors has been extremely 
positive, and industry representatives have noted the positive 
difference that these courses are having on how inspection procedures 
are performed.
    FSIS has also initiated a comprehensive 2-year training and 
education effort designed to ensure that every FSIS employee fully 
understands their role in preventing or responding to an attack on the 
food supply. Last year, over 1,600 employees received food security 
training. By the end of fiscal year 2004, over half of our workforce 
will have received this training. The Law Enforcement Academic Research 
Network (LEARN), which is carrying out the training, has stated that 
this training effort is unparalleled in the Federal sector since it is 
being provided to such a broad base of our employees.
    Another initiative the agency has undertaken to enhance FSIS' 
training effort is taking training opportunities closer to our 
employees. In August 2003, the agency announced new regional training 
centers designed to bring comprehensive workforce training programs to 
FSIS field employees throughout the country. FSIS has established the 
regional training centers in five field locations: Atlanta, GA; Dallas, 
TX; Philadelphia, PA; Des Moines, IA; and Boulder, CO. FSIS has hired 
three of the regional trainers to head the new centers, and expects to 
hire the remaining two trainers by April. In addition, FSIS will be 
providing distance learning that will be easily accessible to our field 
employees. These approaches will allow FSIS to train more inspectors 
each year in various skills to enhance their technical and regulatory 
abilities.
    Another step we've taken is to increase our cadre of scientifically 
trained personnel, known as Consumer Safety Officers (CSOs). CSOs have 
a scientific and technical background and receive additional FSIS 
training that enables them to use a disciplined methodology to assess 
and verify the design of food safety systems. FSIS has trained every 
entering CSO--150 of them--in a cooperative agreement through the Texas 
Agricultural Experiment Station. In fiscal year 2004, the agency plans 
to train 200 additional employees in this program, including employees 
who have been promoted to CSOs, Veterinary Medical Officers, Program 
Investigators, and others.

Accountability
    FSIS inspection personnel are held accountable for ensuring that 
public health is protected. To emphasize the importance of 
accountability, FSIS created the Office of Program Evaluation, 
Enforcement and Review (PEER) during the agency's recent 
reorganization. PEER serves as a quality control team by ensuring 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. PEER retains the role of ensuring prompt 
and appropriate enforcement of the inspection laws. The work of the 
field Program Investigators in PEER places them on a daily basis in 
close proximity to performance and compliance problems and concerns at 
the in-plant level, which affords the agency the ability to deal with 
necessary adjustments and problems in a much more immediate and direct 
fashion than in the past. PEER was formed because a strong quality 
assurance program that uses reviews, evaluations, and audits as its 
tools can have a significant impact on management effectiveness, 
efficiency and policy development.
    Because accountability is crucial in delivering programs in a 
consistent and effective manner, FSIS implemented the Humane Activities 
Tracking (HAT) program in February 2004. This new electronic tracking 
system will document inspection activities to ensure that livestock are 
humanely handled and slaughtered in federally inspected facilities. The 
HAT program will provide FSIS with more accurate and complete data on 
the time spent by FSIS personnel performing nine specific humane 
handling related tasks to ensure humane handling and slaughter 
requirements are met.
    In addition, in November of 2003, FSIS issued an updated directive 
to all inspection personnel and district offices providing specific, 
detailed information about requirements of the Humane Methods of 
Slaughter Act to ensure that verification and enforcement requirements 
are clearly and uniformly understood. In May of 2003, FSIS also issued 
a directive to provide guidance and direction to inspection personnel 
to ensure consistent use of enforcement actions.

           ENSURE THAT POLICY DECISIONS ARE BASED ON SCIENCE

    FSIS continuously reviews its existing authorities and regulations 
to ensure that emerging food safety challenges are adequately 
addressed. In addition, FSIS is committed to continuing its emphasis on 
the use of science, research, and technology in the development of 
improved food safety policies, focused on prevention whenever possible.
Risk Assessment
    Risk assessment is one tool that can provide FSIS with the solid 
scientific foundation on which to base regulatory and policy decisions. 
In fact, the Agency has used risk assessment to estimate the likelihood 
of exposure to various hazards, and to estimate the resulting public 
health impact. For example, in February 2003, FSIS released a draft of 
a quantitative risk assessment conducted on Listeria in ready-to-eat 
(RTE) meat and poultry products. On February 26, 2003, FSIS held a 
public meeting to discuss the design of the risk assessment, the 
results, and conclusions that could be drawn from it regarding the risk 
of contamination of RTE products with this pathogen during processing.
    The Listeria risk assessment, in conjunction with a previously 
released Food and Drug Administration (FDA)/FSIS risk ranking, peer 
review, and public comment, provided important data enabling FSIS on 
June 6 to publish a final Listeria rule originally proposed in early 
2001. This risk-based regulation will serve as the cornerstone of the 
FSIS efforts to prevent listeriosis from RTE meat and poultry products. 
The rule requires all establishments that produce RTE products that are 
exposed to the environment after cooking to develop written programs to 
control Listeria monocytogenes and to verify the effectiveness of those 
programs through testing. Establishments must share testing data and 
plant-generated information relevant to their controls with FSIS. The 
rule also encourages all establishments to employ additional and more 
effective Listeria monocytogenes control measures.

Innovative Testing Methods
    In October 2003, FSIS announced the adoption of the BAX system to 
screen for Salmonella in raw meat and poultry products. The Microbial 
Outbreak and Special Projects Laboratory, in collaboration with three 
FSIS field service laboratories, evaluated the BAX system to determine 
whether it would be beneficial to the agency and to determine its 
validity and reliability. FSIS determined that the BAX system was as 
sensitive as the existing method of detecting Salmonella in raw meat 
and poultry products, but also reduced the reporting time for negative 
samples by one to 2 days. FSIS has been using the BAX screening system 
for Salmonella in ready-to-eat meat, poultry and pasteurized egg 
products since February 2003, and for Listeria monocytogenes since 
April 2002. This new measure increases efficiency in detecting 
pathogens and saves valuable agency time and resources.

Reducing E. coli O157:H7
    FSIS has instituted major changes in its E. coli O157:H7 policy to 
further ensure that beef plants address and reduce the presence of E. 
coli O157:H7. In October 2002, the agency took strong steps to address 
E. coli O157:H7 contamination based on USDA's Agricultural Research 
Service's data and FSIS' draft risk assessment. Those measures are 
starting to pay dividends to the American consumer. Our scientifically 
trained personnel have examined prevention mechanisms at more than 
1,000 beef establishments and a majority of those plants have made 
major improvements based on reassessments of their HACCP plans. As a 
result, we are seeing a drop in the number of E. coli O157:H7 positive 
samples in ground beef. For instance, in E. coli O157:H7 samples 
collected and analyzed during 2003, 0.30 percent tested positive, 
compared to 0.78 in 2002--or a 62 percent reduction.

IMPROVE COORDINATION OF FOOD SAFETY ACTIVITIES WITH OTHER PUBLIC HEALTH 
                                AGENCIES

    With primary authority over meat, poultry, and egg products, FSIS 
plays an integral role in ensuring the safety of America's food supply. 
As one partner in the U.S. food safety effort, FSIS strives to maintain 
a strong working relationship with its sister public health agencies. 
Cooperation, communication, and coordination are absolutely essential 
if we are to be effective in addressing public health issues.

BSE Coordination
    The December 2003 discovery of a single case of Bovine Spongiform 
Encephalopathy (BSE) in Washington State provides an excellent example 
of the strong communication ties and the cooperation between USDA and 
its Federal and State food safety partners. The Federal Government's 
swift and substantial reaction to the BSE diagnosis played a vital role 
in maintaining high consumer confidence. FSIS and its sister agencies 
moved effectively and forcefully upon the discovery of a BSE case in 
this country, further strengthening already formidable BSE preventive 
measures. Being a part of the continuous briefings, planning meetings, 
international trade discussions, and all the other events surrounding 
this situation has been both challenging and rewarding. FSIS has worked 
closely with USDA's Animal and Plant Health Inspection Service (APHIS) 
and other mission areas in USDA, FDA, state governments, industry and 
consumers to ensure our BSE prevention and response measures are fully 
effective in the United States.

MOU with FDA
    Since 1999, FSIS and the Food and Drug Administration (FDA) have 
had a Memorandum of Understanding (MOU) to exchange information on an 
on-going basis about establishments that fall under both jurisdictions. 
FSIS will continue engaging in substantive discussions with FDA and 
other agencies who share public health and food safety 
responsibilities. The Bioterrorism Act of 2001 (Public Law 107-188) 
further enhanced this cooperation by authorizing FDA to commission FSIS 
employees to conduct inspection at dual jurisdiction facilities.

Public Health Service Commissioned Corps Officers
    In addition to its partnerships with the White House and Federal 
agencies, FSIS has entered into a working relationship with the U.S. 
Public Health Service (PHS) and the Office of the Surgeon General. In 
April 2003, FSIS signed a Memorandum of Agreement with the Surgeon 
General and the PHS that allows expanded numbers of PHS Commissioned 
Corps Officers to be detailed to the agency. FSIS currently has 19 PHS 
Commissioned Corps Officers detailed to the agency and will incorporate 
additional PHS Officers nationwide across all program areas under the 
agreement. Not only will these officers help FSIS respond to foodborne 
disease outbreaks and assist in preventing foodborne illness, but they 
will assist in the agency's homeland security efforts as well. Since 
the Commissioned Corps Officers are available 24 hours a day, 7 days a 
week, this affords a greater flexibility to respond immediately during 
heightened security alerts or an actual threat to the food supply.

USDA's Unified Food Safety Research Agenda
    Another example of FSIS' commitment to communication, cooperation, 
and coordination was the November 2003 announcement of a unified food 
safety research agenda to improve the efficiency and effectiveness of 
food safety programs. USDA also released a list of additional research 
needs specific to meat, poultry and egg products that FSIS will 
encourage non-governmental entities to address. The government research 
agenda will complement these efforts by industry and academia. USDA's 
Research, Education, and Economics (REE) mission area worked with 
USDA's Office of Food Safety, other government food safety agencies, 
and stakeholders to develop the unified research agenda. The unified 
agenda prioritizes research needs and maximizes use of available 
resources.

                    ENHANCE PUBLIC EDUCATION EFFORTS

    Because everyone has a responsibility for food safety, educating 
the public about this responsibility is a crucial element in FSIS' food 
safety mission. All food preparers, from consumers to food service 
employees, must know and understand basic safe food-handling practices. 
These efforts must be broad enough to ensure that no segment of the 
public is uninformed about safe food handling practices, yet at the 
same time, target various segments of the population to positively 
influence those behaviors that pose the greatest potential risk. 
Communicating with the public about food safety must be accomplished in 
a manner that is easily understandable so that it is useful to every 
segment of the population. Thus, FSIS has considered innovative and 
collaborative methods for delivering the food safety message.

The Food Safety Mobile
    One such innovative way of spreading the food safety message is 
USDA's Food Safety Mobile, which was introduced in March 2003. This 
eye-catching ``food safety educator-on-wheels'' brings food safety 
information to consumers and builds on our partnerships in communities 
across the country. Through the Food Safety Mobile, FSIS is sharing its 
food safety message with the general public as well as culturally 
diverse and underserved populations and those with the highest risk 
from foodborne illnesses. From March to November 2003, the Mobile 
traveled over 24,000 miles and participated in 87 events in 64 cities 
across the country. These events ranged from county fairs and grocery 
store demonstrations, to the Taste of Minnesota and the Philadelphia 
Thanksgiving Day Parade. FSIS used these opportunities to provide 
information and publications on food safety to approximately 179,000 
people face-to-face at Mobile events. FSIS estimates 64.4 million media 
impressions from the Mobile, and that does not include internet 
exposure.

Educational Campaign
    FSIS has also been conducting an educational campaign through 
public events and media interviews with national and regional media 
organizations in order to reach more of the population with important 
public health messages. Recent events were held in Houston, 
Philadelphia, Portland, San Francisco, Miami, and the Flathead 
Reservation in Montana. National television interviews have been 
conducted with major television networks, including Fox News, Telemundo 
and Univision. National celebrities, such as former Miss America 
Heather Whitestone McCallum, pop music legend Olivia Newton-John, and 
country singer Wynonna Judd, have also been recruited to help FSIS 
reach even larger audiences with food safety messages through special 
events and the filming of Public Service Announcements (PSA). The 
results have been impressive. The Heather Whitestone McCallum PSA has 
aired 14,448 times since September 2003. This PSA ranked in the top 3 
percent of all PSA's shown during the month of January 2004 along with 
PSA's by the American Red Cross, the Federal Emergency Management 
Agency (FEMA), and the Department of Homeland Security (DHS).

USDA's Meat and Poultry Hotline
    USDA's Meat and Poultry Hotline is an additional tool that FSIS 
uses to share its food safety message. The Hotline handled over 98,000 
calls and 80 media and information multiplier calls during fiscal year 
2003. Calls included requests from newspapers, magazines, radio, 
television, and book authors, and included live interviews with radio 
and television stations. The Hotline also provides recorded information 
and live assistance for our Spanish-speaking callers. Additionally, the 
Hotline was a key resource for keeping the public informed about the 
BSE situation in Washington and has handled approximately 4,000 calls 
and 1,000 emails concerning BSE since December 23, 2003.

      PROTECT MEAT, POULTRY, AND EGG PRODUCTS AGAINST INTENTIONAL 
                             CONTAMINATION

    In the aftermath of September 11, 2001, there is recognition that 
threats to the well being of the Nation's citizens can come in the form 
of terrorist attacks, including the intentional contamination of food. 
With a strong food safety infrastructure already in place, FSIS has 
been focusing on fortifying existing programs and improving internal 
and external lines of communication. By partnering with other agencies, 
including CDC, FDA, USDA's Agricultural Research Service (ARS), DHS, 
APHIS, the Environmental Protection Agency (EPA), as well as 
international partners such as the Canadian and Mexican governments' 
food inspection agencies, and State and local health agencies, FSIS is 
in a pivotal position to share information and to strengthen critical 
infrastructure protection activities concerning food from farm to 
table.

FSIS Office of Food Security and Emergency Preparedness
    To date, FSIS has undertaken a number of initiatives to protect 
meat, poultry, and egg products from the potential of a terrorist 
attack. Immediately following September 11, 2001, FSIS established the 
Food Biosecurity Action Team (F-BAT). The charge of F-BAT was to 
coordinate all activities related to biosecurity, counter-terrorism, 
and emergency preparedness within FSIS. These activities are 
coordinated with USDA's Homeland Security Council, other government 
agencies, and industry. Currently, FSIS' newly created Office of Food 
Security and Emergency Preparedness (OFSEP) has assumed the 
responsibilities of F-BAT and serves as the centralized office within 
FSIS for food security issues.
    OFSEP interacts closely with USDA's Homeland Security Council and 
represents the agency on all food security matters throughout the 
Federal Government, as well as in State and local activities. The 
Office's mission is to lead in the development of the agency's 
infrastructure and capacity to prepare for, prevent, and respond to, 
deliberate attacks or other threats to the U.S. food supply. As the 
lead coordinator and primary point of contact on all food security and 
emergency preparedness activities within FSIS, OFSEP focuses primarily 
on:
  --Emergency preparedness and response;
  --Federal/State/Industry Relations;
  --Continuity of operations (COOP);
  --Scientific expertise in chemical, biological, and radiological 
        terrorism; and,
  --Security clearance and safeguarding classified information.
    To ensure coordination of these activities involves all program 
areas of the agency, OFSEP established a new standing advisory group, 
the Food Security Advisory Team (FSAT), comprised of representatives of 
the major program areas within FSIS, to provide program-specific 
technical support.

Expanding Coordination with Federal, State, and Local Agencies
    FSIS collaborates and coordinates closely with its State partners 
to ensure an effective prevention and response program. Some of the 
many state organizations FSIS works with include the Association of 
Food and Drug Officials (AFDO); the Association of State and 
Territorial Health Officials (ASTHO); and the National Association of 
State Departments of Agriculture (NASDA). Most recently, FSIS teamed 
with FDA in cosponsoring a joint meeting between ASTHO and NASDA, 
entitled ``Homeland Security: Protecting Agriculture, the Food Supply, 
and Public Health--The Role of the States.'' The purpose of this 
meeting was to enhance collaboration between State public health and 
agriculture agencies and the Federal Government. Both the Secretary of 
Agriculture and the Secretary of Health and Human Services (HHS) were 
on hand for this joint meeting.
    FSIS also works closely with the White House Homeland Security 
Council, DHS, FDA, and the USDA Homeland Security Staff to develop 
strategies to protect the food supply from an intentional attack. For 
example, FSIS, along with FDA and industry partners, is working with 
DHS to establish a new food information sharing and analysis activity 
for the food sector. This public/private partnership will aid in the 
protection of the critical food infrastructure by centralizing the 
information about threats, incidents, and vulnerabilities.

Consumer Homeland Security Education
    Because everyone has a stake in a safe and secure food supply, FSIS 
published Food Safety and Food Security: What Consumers Need to Know in 
November 2003, as part of the agency's continuing effort to protect 
public health by preventing and responding to contamination of the food 
supply throughout the farm-to-table continuum. The brochure, developed 
by FSIS, is available in both English and Spanish. In a concise and 
easy-to-follow format, Food Safety and Food Security: What Consumers 
Need to Know, lays out comprehensive and practical information about 
safe food handling practices, foodborne illness, product recalls, 
keeping foods safe during an emergency and reporting suspected 
instances of food tampering. This publication is the latest in a series 
of food security guidelines issued by FSIS that includes FSIS Security 
Guidelines for Food Processors and FSIS Safety and Security Guidelines 
for the Transportation and Distribution of Meat, Poultry and Egg 
Products.

Ensuring the Safety of Imports
    To further strengthen our import inspection program, we established 
a new position called the import surveillance liaison inspector, using 
funds provided in the fiscal year 2001 Homeland Security Supplemental 
Appropriations Act. These inspectors augment the current activities of 
traditional import inspectors at locations across the country. The 
import surveillance liaison inspectors conduct a broader range of 
surveillance activities, and they coordinate with other agencies, such 
as the APHIS, FDA, and the U.S. Customs and Border Protection within 
the DHS. Currently, 20 of these new inspectors are on board, and we 
anticipate more will be added.

Laboratories
    Laboratories play a key role in our ability to quickly detect 
contamination of the food supply. FSIS has four ISO accredited 
laboratories--three regulatory laboratories that conduct testing on 
samples of meat, poultry and egg products, and a fourth laboratory that 
focuses on microbial outbreaks. FSIS has increased security at all of 
our laboratories. This includes instituting procedures to ensure proper 
chain of custody and other controls on all samples and materials 
received by the labs. The labs participate in the Electronic Laboratory 
Exchange Network (eLEXNET), which is a system designed to provide a 
secure network in which food safety labs at various levels of 
government can share test data on food samples.
    Furthermore, FSIS laboratories have enhanced analytical capability 
for compounds of concern and developed surge capacity. Our four labs 
have expanded capability to test for non-traditional microbial, 
chemical and radiological threat agents. In addition, the Agency has 
also begun construction of a Bio Security Level 3 facility that will be 
able to conduct analyses on a larger range of potential bioterrorism 
agents.
    FSIS is also represented on the interagency Laboratory Response 
Network and has worked to develop the Food Emergency Response Network 
(FERN) for potential foodborne contamination incidents. FERN was formed 
in 2002 and currently has about 61 members, including FSIS, FDA, and 
state labs. Participation is open to Federal, State, and local 
government labs that are capable of conducting food testing and 
forensic analysis for a wide variety of chemical, biological and 
radiological agents. FERN can help respond to national emergencies, 
including terrorist threats that might affect the food supply. In 
fiscal year 2005, FSIS plans to significantly expand its participation 
in FERN.

                    FISCAL YEAR 2005 BUDGET REQUEST

    I appreciate having the opportunity to discuss a number of FSIS' 
accomplishments with you. Now I would like to present an overview of 
the fiscal year 2005 budget request for FSIS. Implementation of these 
budget initiatives is imperative to helping us attain FSIS' public 
health mission. In fiscal year 2005, FSIS is requesting a program level 
of $951.7 million, a net increase of about $61 million from the enacted 
level for fiscal year 2004. Under current law, we are requesting an 
appropriation of $838.7 million, with an additional $113 million in 
existing user fees.

Supporting FSIS' Basic Mission
    The FSIS budget request for fiscal year 2005 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 2005 budget includes $15.5 million in increases for 
mandatory pay raises in Federal and State programs. This includes 
annualization of the calendar year 2004 pay raise, as well as the 
anticipated calendar year 2005 pay raise.
    The fiscal year 2005 budget request includes a $17.3 million 
increase for the full cost of in-plant inspection and enforcement of 
humane handling and slaughter. FSIS employee salary, benefits, and 
inspector travel between plants make up a large portion of the FSIS 
budget and have a serious affect on our ability to staff plants if not 
fully funded. Thus, FSIS requires a $12.3 million increase to avoid 
detrimental employment restrictions within the agency, which would 
result if unavoidable cost increases are not fully funded and must be 
absorbed. An additional $5 million is requested so that FSIS' 
inspection workforce can continue its strict enforcement of regulations 
for humane slaughter and handling of livestock, a top priority at FSIS.

New Initiatives
    The fiscal year 2005 request includes a $33.6 million increase for 
new initiatives that support the Department's goals for FSIS.
BSE Surveillance
    First, the fiscal year 2005 budget request includes an increase of 
$3 million for BSE surveillance. FSIS' BSE inspection program will add 
permanent BSE control measures in fiscal year 2005, which include: 
increased in-plant verification of slaughter plant designs for 
controlling specified risk materials (SRMs), overtime inspection, and 
travel for Veterinary Medical Officers to test non-ambulatory disabled 
livestock when they arrive at small slaughter plants that do not have a 
resident veterinarian. FSIS will also perform about 60,000 screening 
tests in fiscal year 2005 at processing plants that use advanced meat 
recovery (AMR) equipment, to ensure that SRMs do not enter the food 
supply.

Food and Agriculture Defense Initiative
    The fiscal year 2005 budget also requests a $23.5 million increase 
to support a food and agriculture defense initiative in partnership 
with USDA, HHS, and DHS. Food contamination and animal and plant 
diseases and infestations can have catastrophic effects on human health 
and the economy. The three Federal Departments involved are working 
together to create a comprehensive food and agriculture policy that 
will improve the government's ability to respond to the dangers of 
disease, pests and poisons, whether natural or intentionally 
introduced. Our food and agriculture defense initiative has five 
components:
  --Biosurveillance;
  --The Food Emergency Response Network;
  --Data systems to support the Food Emergency Response Network;
  --Enhancing FSIS laboratory capabilities; and
  --Follow-up bio-security training.
    First, the food and agriculture defense initiative will allow FSIS 
to participate in an interagency biosurveillance initiative that would 
improve the Federal Government's ability to rapidly identify and 
characterize a potential bioterrorist attack. Funding this initiative 
will improve Federal surveillance capabilities and enable FSIS to 
integrate with DHS to compile FSIS surveillance information rapidly 
with threat information. This funding would also allow FSIS to focus 
its resources on the vulnerable products and processes identified 
during the agency's vulnerability assessments of imported and domestic 
products; increase regulatory sampling for three additional threat 
agents; add five Import Surveillance Liaison Inspectors, 30 program 
investigators for transportation, distribution, and retail 
surveillance, and two Public Health and Epidemiology Liaison Officers 
to our workforce; and establish a Foodborne Disease Surveillance 
Communication system to coordinate with DHS systems.
    The second component of the food and agriculture defense initiative 
is the Food Emergency Response Network (FERN), which I discussed 
earlier. A nationwide laboratory system with sufficient capacity to 
meet the needs of anticipated emergences is integral to any 
bioterrorism surveillance and monitoring system. The goal is to 
establish 100 FERN laboratories, creating a network of Federal, State 
and local laboratories that FSIS could call upon to handle the numerous 
samples that would be required to be tested in the event of a terrorist 
attack on the meat, poultry or egg products supply. The fiscal year 
2005 budget request would expand FERN to contract with State and local 
laboratories, and to establish five regional hubs and a National 
Operating Center to coordinate FERN's efforts and conduct training. In 
addition, FSIS would also fund the establishment of five to seven State 
laboratories for screening of microbiological agents, with more 
laboratories in the future, based on the availability of funds.
    The third and fourth components of the food and agriculture defense 
initiative provide further support to FERN. The electronic laboratory 
exchange network (eLEXNET), which I mentioned previously, is a 
national, web-based, electronic data reporting system that allows 
analytical laboratories to rapidly report and exchange standardized 
data. The fiscal year 2005 budget request would provide funding needed 
to make eLEXNET available to additional FERN and other food-testing 
laboratories nationwide. In turn, the budget request would enhance 
FSIS' laboratory capabilities in order to detect new bioterror-
associated agents, and to ensure FSIS' capability and capacity to 
perform the toxin and chemical testing that will be standardized across 
all FERN laboratories.
    Because the realm of biosecurity is ever changing, FSIS must 
provide its workforce with the most up-to-date information necessary to 
ensure that meat, poultry, and egg products are protected from 
intentional contamination. Therefore, the final component of the food 
and agriculture defense initiative is follow-up biosecurity training of 
the workforce. This additional training is essential as part of the 
ongoing effort to protect the public by educating the workforce 
regarding the latest threat agents and countermeasures to those agents.

Training and Education
    Training is a top priority at FSIS. Our inspection workforce is our 
greatest asset, and this is why FSIS is dedicated to establishing and 
maintaining a comprehensive and fully integrated training program. The 
agency is continuing its extensive training effort by requesting 
approximately $7.1 million, or an increase of 50 percent over fiscal 
year 2004, to train all new inspection personnel and to expand existing 
training programs in fiscal year 2005.
    To ensure that newly hired inspection personnel receive the proper 
orientation and training to perform their jobs when they report to 
duty, FSIS is requesting approximately $4 million in fiscal year 2005. 
The agency has been criticized in the past for not immediately training 
all new employees. This initiative will provide the formal training 
needed to ensure that inspection procedures are performed consistently 
and appropriately under agency policies. This initiative will also 
enable FSIS to place 10 district trainers, in addition to five already 
funded in the agency's baseline, throughout the Nation, to orient and 
train FSIS employees.
    Last year, FSIS began retooling and expanding its existing training 
programs by incorporating a public health focus and integrating 
scientific and technical principles with training on technical and 
regulatory approaches to inspection. Through the $3.1 million requested 
by FSIS in fiscal year 2005, the agency would continue to provide Food 
Safety Regulatory Essentials (FSRE) training to field employees, 
including food inspectors, CSOs, Inspectors-in-Charge, and Compliance 
Officers. The agency will offer the training regionally to accommodate 
inspection staff. Additional computer-based-training will be provided 
to implement the training, and will be catered to the inspection 
personnel's specific food safety responsibilities.

User Fee Proposal
    Under current law, in 2005 FSIS estimates it will collect $113 
million in annual user fees to recover the costs of overtime, holiday, 
and voluntary inspection. FSIS' fiscal year 2005 budget includes a 
legislative proposal to recover the costs of providing inspection 
services beyond an approved 8-hour primary shift. The proposal was 
submitted to Congress last August. If enacted, the level of 
appropriated funds needed would be reduced by an estimated $124 
million, making the FSIS budget request $714.7 million. This will 
result in significant savings for the American taxpayer.

                                CLOSING

    The goals and initiatives that FSIS has laid out as its vision 
represent a monumental task. But let me assure you; this is a task that 
we are ready and willing to take on. I believe that with the 
appropriate support, FSIS will be able to achieve its public health 
vision and strengthen the safety of meat, poultry, and egg products.
    Mr. Chairman, this concludes my prepared statement. Thank you for 
your continued support. Thank you also for the opportunity to submit 
testimony to the Subcommittee on how FSIS is working with Congress and 
other partners to achieve its public health vision.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Bennett. Thank you very much for your testimony.
    [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

                                  BSE

    Question. On March 15, 2004, the Department of Agriculture 
announced details for an expanded surveillance effort for BSE. The 
release also stated that $70 million is being transferred from the 
Commodity Credit Corporation (CCC) to test cattle in the high risk 
population. According to the announcement, the $70 million will allow 
testing of 268,000 animals. Using the Department estimate, testing all 
animals destined for export could cost at or near $1 billion.
    In your opinion, do you believe testing 100 percent of the export 
market is possible? Also, any additional comments or updates in regard 
to the cost of animal testing would be appreciated.
    Answer. Although it is logistically possible to test 100 percent of 
the cattle slaughtered in the United States every year, USDA does not 
recommend following this course of action. Testing predominantly young, 
healthy animals beyond the bounds of a scientific surveillance plan 
would create a false sense of security for consumers and could lead to 
either a tiered system (testing for exports but not for domestic 
consumption) or, more probably, testing all cattle slaughtered.
    USDA's targeted surveillance program is designed to identify the 
presence of BSE in the U.S. cattle population if it exists. We 
understand that some in industry have suggested blanket-testing all 
animals presented at slaughter as a means of providing ``BSE-screened 
products'' and easing trade barriers. However, it is our contention 
that current barriers against U.S. beef are scientifically unwarranted, 
and we continue working at the highest levels to reopen foreign markets 
for U.S. producers.
    We must clarify that surveillance testing for BSE--especially if it 
is performed on clinically normal animals at slaughter--is not an 
efficient risk mitigation measure for protecting public health. USDA is 
confident that the removal of specified risk materials, along with 
other measures such as feed practices regulated by the Food and Drug 
Administration address the potential health risk of BSE.
    USDA's BSE surveillance program has always focused testing efforts 
on those animals that fall into the highest-risk category for the 
disease. These include cattle exhibiting signs of neurologic disease; 
condemned at slaughter for neurologic reasons; testing negative for 
rabies and submitted to public health laboratories and teaching 
hospitals; and appearing non-ambulatory (including those exhibiting 
general weakness severe enough to make it difficult but not impossible 
to stand), also known as ``downer cattle.'' We also sample adult cattle 
that have died for unexplained reasons.
    We estimate that approximately 35 million cattle are slaughtered in 
the United States annually. If each one of these animals were to be 
tested, and we included the cost of the test kit, sample collection, 
shipping and handling, laboratory processing and support, training, 
equipment, and other associated fees, USDA estimates that the total 
cost would be between $175 and $200 per animal. Thus, the total cost 
for testing every animal slaughtered could reach as high as $6 to $7 
billion per year.
    Question. The livestock industry and Department of Agriculture are 
working toward reopening export markets in Japan, Mexico, and other 
exporting countries. The controversy arises over testing each animal 
and whether or not animals under the age of 30 months should be tested.
    Do you believe each animal, including those under 30 months of age, 
should be tested prior to export?
    Answer. USDA's targeted surveillance program is designed to 
identify the presence of BSE in the U.S. cattle population if it 
exists. We do not agree that blanket-testing all animals prior to 
export, including those under 30 months of age, is a scientifically 
sound approach to disease surveillance.
    USDA's BSE surveillance program has always focused testing efforts 
on those animals that fall into the highest-risk category for the 
disease. These include cattle exhibiting signs of neurologic disease; 
condemned at slaughter for neurologic reasons; testing negative for 
rabies and submitted to public health laboratories and teaching 
hospitals; and appearing non-ambulatory (including those exhibiting 
general weakness severe enough to make it difficult but not impossible 
to stand), also known as ``downer cattle.'' We also sample adult cattle 
that have died for unexplained reasons.

                            AVIAN INFLUENZA

    Question. The Administration's fiscal year 2005 Budget request 
includes an increase in funding of $11.783 million to address Low 
Pathogenic Avian Influenza (LPAI) in live bird markets.
    Can you update the Committee in regard to ongoing action related to 
avian influenza and explain how the Department would utilize the 
additional funding?
    Answer. APHIS has been working to establish a national LPAI program 
and incorporate it into the National Poultry Improvement Plan (NPIP). 
The national LPAI program will be discussed and hopefully adopted at 
the NPIP meeting in July 2004. The program has drafted a Uniform 
Methods and Rules (UM&R) for the live bird marketing portion of the 
program and the subcommittee of the U.S. Animal Health Association is 
currently reviewing the draft to obtain their recommendations for 
program improvement.
    APHIS would utilize the additional funding for cooperative 
agreements with states that will support the LPAI prevention and 
control program; for indemnities; for additional field personnel, 
equipment, and other resources necessary to assist states with long-
term prevention and control; for educational materials and training for 
recognition of avian influenza and for biosecurity practices to protect 
against the disease; for development and administration of vaccine to 
support industry when infected with LPAI; and for reagents and other 
laboratory support to incorporate the commercial program through the 
National Poultry Improvement Program (NPIP). This program is currently 
testing poultry breeder flocks and will continue to expand its 
activities until all segments of the commercial industry are monitored 
and certified as avian influenza clean.
    Question. With the discovery of avian influenza, a number of 
countries have banned poultry imports from the United States.
    Can you provide the Committee with an update on poultry export 
markets and exactly what actions USDA is taking to reopen these 
markets?
    Answer. The USDA is currently working with countries that have 
imposed bans on taking the necessary actions to remove the bans on 
exports and reopen all poultry markets. Our actions include: 
depopulating positive testing flocks, cleaning and disinfecting those 
flocks, providing additional surveillance activities to ensure that all 
positive have been removed, and responding to inquiries and 
questionnaires to prove that areas are free of avian influenza and 
trade bans can be removed.
    On April 6, the Canadian Food Inspection Agency (CFIA) recognized 
the United States as free of highly pathogenic avian influenza (HPAI) 
and lifted all HPAI-related importation bans on U.S.-origin birds, 
poultry, and poultry products. Other countries including Armenia, 
Macedonia, and Serbia have removed their bans and have allowed exports 
to enter their country. Several other countries including: Chile, Czech 
Republic, Hungary, Israel, Poland, and Taiwan have reduced their 
restrictions to allow poultry exports from all states except for Texas.

                           CHILDHOOD OBESITY

    Question. Childhood obesity is a growing health concern for many 
Americans. The Department of Agriculture has and continues to conduct 
research to further understand the factors that contribute to obesity.
    Can you update the Committee in regard to actions that the 
Department is taking to inform consumers and to combat obesity?
    Answer. The Department is making a substantial commitment to 
promoting healthy weight through nutrition education and promotion. In 
the Food, Nutrition, and Consumer Services (FNCS) mission area, the 
Food and Nutrition Service (FNS) nutrition education efforts are 
targeted primarily to participants or potential participants in the 
nutrition assistance programs it administers, while the Center for 
Nutrition Policy and Promotion (CNPP) provides nutrition education and 
information for the general public. In addition, the Cooperative State 
Research, Education and Extension Service (CSREES) has a significant 
commitment to nutrition education, as well as the Agricultural Research 
Service and the Economic Research Service, who perform basic and 
applied research supporting this effort.
    FNCS undertakes a range of ongoing activities each year to deliver 
nutrition education and promotion to program recipients; all of these 
include maintenance of proper weight as one component of a healthy 
lifestyle, including:
  --Integrating nutrition and physical activity promotion within and 
        across the programs.--The Eat Smart. Play Hard.TM 
        campaign for children and their caregivers stresses the need to 
        balance what you eat with how active you are, and Team 
        Nutrition provides nutrition education for the Nation's 
        schoolchildren. Materials such as brochures, activity sheets 
        and posters, coordinated with nutrition curricula, are used to 
        help children, their parents, and caregivers learn healthy 
        eating and active living behaviors.
  --Reshaping nutrition education in the Food Stamp Program.--To target 
        activities that promote healthy weight. For example, we are 
        developing new nutrition education materials that program staff 
        can use to motivate low-income elderly people and women with 
        children to improve their eating behaviors.
  --Developing new ways to support healthy weight through the WIC 
        program.--The Fit WIC project developed five intervention 
        programs that WIC and other community agencies can implement to 
        prevent overweight in young children. Educational packages such 
        as Fathers Supporting Breastfeeding are used in WIC clinics to 
        support breastfeeding. Breastfed babies are less likely to 
        become overweight as they grow, and mothers who breastfeed may 
        return to pre-pregnancy weight more easily.
  --Promoting healthy school nutrition environments.--Unhealthful 
        beverage and food choices at school can undermine children's 
        ability to learn and practice healthy eating. We developed and 
        are distributing the Changing the Scene action kit to help 
        local schools and communities to support healthier eating and 
        active living behaviors.
  --Promoting increased fruit and vegetable intake.--Through 
        partnerships with other Federal Agencies and the National 5-A-
        Day Program. For example, we worked together to develop the 
        Fruits and Vegetables Galore-Helping Kids Eat More tool kit, 
        which helps foodservice professionals with planning, 
        preparation, and promotion strategies to encourage the children 
        they serve to consume more fruit and vegetables. For fiscal 
        year 2005, the President's Budget proposes several initiatives 
        to enhance these efforts to better address obesity and promote 
        healthy weight. These include:
  --The budget requests $20 million, a $5 million increase, to enhance 
        WIC breastfeeding promotion efforts through peer counseling. 
        The use of breastfeeding peer counselors has proven to be an 
        effective method of increasing initiation and duration of 
        breastfeeding, and breastfed babies are more likely to maintain 
        a healthy weight as they grow.
  --The budget requests $5 million to initiate a new series of WIC 
        Childhood Obesity Prevention Projects, which build on the 
        success of the Fit WIC projects to work in partnership with 
        States on innovative strategies to use WIC to prevent and 
        reduce childhood obesity through enhanced nutrition and 
        education, physical activity promotion, and environmental 
        efforts. Ongoing funding for such projects is critical to 
        ensuring continuous improvement in this area.
  --It requests $2.5 million to expand the Eat Smart. Play 
        Hard.TM Campaign and establish a cross-program 
        nutrition framework to help ensure a comprehensive, integrated 
        approach to nutrition education in all FNS nutrition assistance 
        programs.
  --The budget includes $1 million for the Center for Nutrition Policy 
        and Promotion (CNPP) plans to build on previous work to 
        implement the consumer messages developed and pilot tested with 
        20- to 40- year-old women, especially low-income women, to help 
        consumers aim for a healthy weight.
  --The budget requests as additional $655,000 to complete the 
        development of the 6th edition of the Dietary Guidelines for 
        Americans, as well as an additional $1 million to update and 
        promote the new food guidance system which will update the Food 
        Guide Pyramid. CNPP also plans to develop obesity prevention 
        materials based on the Dietary Guidelines and the new food 
        guidance system, as well as promote the consumption of fresh 
        fruit and vegetables. Plans include the development of print 
        materials and interactive tools, such as the Interactive 
        Healthy Eating Index, that direct dietary guidance to the 
        individual to facilitate healthful behavior change.

                INDEFINITE FUNDING IN THE FOOD STAMP ACT

    Question. The Administration's fiscal year 2005 Budget includes a 
request for new legislative language to allow for indefinite funding 
authority for the Food Stamp Act.
    Can you provide the Committee with an explanation of why this 
legislative language has been requested?
    Answer. The indefinite authority proposal in this year's Food Stamp 
Program budget would provide such sums as necessary to fund program 
benefits and payments to States, in the last 4 months of the fiscal 
year if program needs exceed the anticipated level. It would ensure 
that sufficient resources will always be available to provide access to 
the program for all eligible persons who wish to participate. It can be 
difficult to estimate program needs or the size of an adequate 
contingency reserve, particularly when there are changes in the 
economy. With indefinite authority, if program costs should 
significantly exceed budget estimates, it would never be necessary to 
seek a supplementary appropriation or implement a benefit reduction. 
This proposal would bring the structure of this critical program in 
line with other major social welfare programs that already have 
indefinite authority.
                                 ______
                                 

           Questions Submitted by Senator Christopher S. Bond

                     GUIDELINES ON FAT CONSUMPTION

    Question. There is a linear relationship between high transfatty 
acid and high saturated fat intake and chronic disease. We also know 
that the consumption of foods high in these two elements likely 
contribute to the statistics on obesity.
    Does USDA intend to draft guidelines or standards for the 
consumption of these fats?
    Answer. The 2005 Dietary Guidelines Advisory Committee (DGAC) is in 
the process of evaluating the most recent scientific evidence on fatty 
acids and health and is preparing to make science-based recommendations 
specifically for saturated and trans fatty acids consumption. At its 
most recent public meeting held on March 30 and 31, 2004, members of 
the Committee discussed the possibility of setting intake goals for 
both types of these fatty acids--saturated and trans--and also 
discussed the implications these proposed recommendations would have 
for the general public. It is expected that the dietary fat 
recommendations will emphasize the reduction of current intake for 
saturated and trans fatty acids. The Committee is also expected to 
address the need for encouraging product reformulations by food 
manufacturers to reduce unhealthy fats in food products. It should be 
noted that on July 11, 2003, the Food and Drug Administration published 
a final rule requiring food manufacturers to list the amount of trans 
fatty acids on product nutrition labels by January 1, 2006. Some 
manufacturers have already responded to the rule by implementing the 
labeling requirement or by eliminating trans fatty acids from their 
products.
    The Committee is continuing its deliberations on specific fatty 
acid recommendations. However, the final advisory report is expected to 
be submitted to USDA and HHS by June 30, 2004. The final science-based 
recommendations on saturated and trans fatty acids will be incorporated 
in the agency's education and communication efforts after completion of 
the DGAC report.
    In an effort to help Americans reduce their risk of cardiovascular 
disease and improve their health, USDA's proposed new Food Guidance 
System, to be released in 2005, emphasizes consumption of oils instead 
of solid fats in the diet and differentiates between saturated and 
unsaturated fats. The guidance recommends that Americans choose fats 
mostly from foods higher in polyunsaturated or monounsaturated fat, and 
particularly Omega-3 fats such as those found in fish.
    Question. Since not all oils are equally healthy, will USDA provide 
guidelines and or regulations to restaurants and other food 
manufacturers and--more importantly--provide them a roadmap to 
increasing the nutritional content and decrease trans and saturated fat 
levels of their products?
    Answer. The 2005 Dietary Guidelines Advisory Committee (DGAC) is in 
the process of evaluating the most recent scientific evidence on fatty 
acids and health and is preparing to make science-based recommendations 
specifically for saturated and trans fatty acids consumption. The 
Committee is also expected to address the need for encouraging product 
reformulations by food manufacturers to reduce unhealthy fats in food 
products.
    Additionally, researchers from the Agricultural Research Service 
are working with agricultural producers and the fats and oils industry 
to find alternative ingredients and develop oils such as canola and 
sunflower oils with higher levels of the fatty acids that may help 
reduce levels of low-density lipoproteins--or bad cholesterol--without 
reducing the high-density lipoproteins--or good cholesterol. Through 
Federal research and education efforts, these ``heart-friendlier'' oil 
products are expected to be utilized by the food industry, offering 
trans fatty acid-free products in the marketplace.
    Question. Does USDA intend to provide specific guidelines and or 
regulations on the characteristics of healthy oils highlighting those 
oils that have low saturated fat and transfat profiles that can be used 
in most food manufacturing to improve overall health and nutrition of 
those foods?
    Answer. The 2005 Dietary Guidelines Advisory Committee (DGAC) is in 
the process of evaluating the most recent scientific evidence on fatty 
acids and health and is preparing to make science-based recommendations 
specifically for saturated and trans fatty acids consumption. At its 
most recent public meeting held on March 30 and 31, 2004, members of 
the Committee discussed the possibility of setting intake goals for 
both types of these fatty acids and also discussed the implications 
these proposed recommendations would have for the general public. It is 
expected that the dietary fat recommendations will emphasize reduction 
in saturated fatty acids and trans fatty acids. The Committee is also 
expected to address healthy fats and provide intake recommendations on 
how consumers can incorporate ``healthy'' oils in their diets. The USDA 
will incorporate the recommendations from the DGAC into its education 
and communication efforts after completion of the DGAC report. The USDA 
will provide consumers with information on the most common sources for 
``healthy'' oils to offer them healthy choices in selecting a balanced 
diet.
    Question. Does USDA have this authority?
    Answer. USDA has authority to provide consumers with information on 
the nutritional content of foods, including oils and common sources for 
``healthy'' oils. USDA attempts to help consumers, producers and 
industry by offering information regarding healthy choices when 
selecting a balanced diet.
    Question. How does USDA intend to incorporate the information it 
hopes to disseminate through the campaigns mentioned in Mr. Bost's 
testimony into USDA run food programs?
    Answer. Nutrition promotion efforts such as the Eat Smart.Play 
Hard.TM campaign and Team Nutrition are designed 
specifically to be delivered through the Federal nutrition assistance 
programs. Materials are developed by the Food and Nutrition Service 
(FNS) and disseminated to State and local program partners through the 
web and direct delivery. Program cooperators also order campaign 
materials through the Department of Commerce's National Technical 
Information Service (NTIS).
    Most of the materials developed to date are designed for use in 
specific programs. Part of the requested $2.5 million increase for 
cross-program nutrition activities will support development of 
nutrition promotion materials that can be integrated into more than one 
program, maximizing the impact of limited nutrition education funding.
    FNS and the Center on Nutrition Policy and Promotion (CNPP) also 
work closely together to ensure that program-based nutrition education 
activities are fully consistent with the Dietary Guidelines for 
Americans and the food guidance system intended to deliver the 
Guidelines to the general population. These agencies confer directly, 
and participate together in the Dietary Guidance Working Group, which 
reviews nutrition education materials to ensure their consistency with 
Federal nutrition policy and guidance. When the new Guidelines and food 
guidance system are finalized, FNS will review all of its nutrition 
education interventions to ensure that they are consistent with the 
updated guidance, and make any needed changes.

                              SOYBEAN RUST

    Question. In part due to a short U.S. soybean crop in 2003, the 
U.S. livestock industry is expected to import a larger amount of 
soybean meal this year than in the recent past. The usual source for 
U.S. soymeal imports is Brazil, which experienced the arrival of Asian 
soybean rust a few years ago. Since Asian soybean rust has not yet 
arrived in the United States, it is important that we do everything we 
can to delay that arrival as long as possible.
    When will APHIS make a decision about any additional quarantine 
steps for imported soybeans or soybean meal that it will impose, and 
will APHIS consult with the relevant stakeholder groups, such as the 
American Soybean Association and livestock groups, before making a 
final decision?
    Answer. APHIS officials are looking closely at our country's 
importation of soybean seed, meal, and grain. Our analysis to date has 
shown that clean soybean seed and soybean meal--which is a heat-
treated, processed product--is unlikely to pose any risk of introducing 
this disease. Historically, there has never been a documented instance 
of soybean rust spread through trade. Rather, it is spread naturally 
through airborne spore dispersal. We are currently conducting a risk 
assessment to study the viability of the pathogen. The preliminary 
results of the assessment indicate a very low risk, if any, of 
introducing this disease through imports. We posted our initial risk 
document on the APHIS' Web site and requested public comments. The 
comment period closed April 12, 2004.
    We have been working very closely with the American Soybean 
Association and other stakeholders throughout our efforts to prevent 
and prepare for the introduction of soybean rust. Most recently, USDA 
officials participated in a soybean rust conference that was 
cooperatively organized by USDA, five pesticide companies, and the 
American Soybean Association. The primary goal of the conference was to 
disseminate to soybean farmers the knowledge, information, and 
techniques they will need to manage this pathogen when it reaches the 
continental United States. We are committed to continuing and expanding 
this outreach, including working with the livestock industry, in our 
efforts develop policies for preventing the human-assisted entry of the 
disease. We will ensure that any new regulations regarding soybean 
imports are based on the best available scientific information.
                                 ______
                                 

                Questions Submitted by Senator Herb Kohl

                      COMBATING CHILDHOOD OBESITY

    Question. Mr. Bost, both USDA and FDA have recently announced new 
efforts to combat the increasing problem of obesity. FDA announced the 
``Calories Count'' program, and USDA has money in several programs, 
including WIC, to help battle this problem. However, for all of the 
government's efforts, all of the money being put into this effort pales 
in comparison to the food industry's billions of dollars worth of 
advertising.
    How can the government successfully get its message out when, at 
first glance, its efforts appear to be dwarfed by the food industry? 
How do your agencies compete with that?
    Answer. USDA has a strong partnership with the Department of Health 
and Human Services, including CDC and FDA, which helps ensure that the 
Federal investment to combat obesity is a collaborative effort with 
consistent messages to the public. USDA plans to capitalize on the 
Federal infrastructure working with the vast network of State, county, 
and other local government agencies and groups to extend the reach of 
their messages and materials. USDA is participating in the creation of 
a new Food Guidance System which would be the cornerstone of other 
Federal nutrition assistance programs. USDA is also actively exploring 
options for partnerships and seeking opportunities to collaborate with 
other health organizations, advocacy and industry groups to help carry 
the Federal Government messages.
    Question. Mr. Bost, the Senate report of the fiscal year 2004 
Agriculture Appropriations bill encouraged the USDA to work with Share 
Our Strength and its Operation Frontline (as well as other innovative 
organizations) to improve eating habits and food budgeting skills of 
program participants. In view of growing concern about obesity and 
health, those objectives seem as valid as ever.
    What progress can the Department report in response to this 
encouragement?
    Answer. Share Our Strength SOS provided my office with a proposal 
for Operation Frontline to provide nutrition education to nutrition 
assistance program participants. I also met with Bill Shore, the 
Executive Director of SOS, to discuss it with him personally before it 
was sent to the Food and Nutrition Service for a more thorough review. 
In our discussion, I learned that the project shares many of the same 
goals as USDA's nutrition education efforts, and uses a model similar 
to that used by State agencies in providing nutrition education and 
promotion to Food Stamp recipients.
    As you know, nearly all of the nutrition education funding provided 
to FNS must be used for grants to State agencies that operate the 
programs, often for specifically earmarked purposes. The Department's 
ability to provide direct funding for organizations such as SOS is thus 
highly constrained, and we were unable to offer a grant to support 
Operation Frontline in response to their proposal. However, I was 
pleased to learn more about their efforts, and value SOS as a non-
profit sector partner in our shared effort to promote healthy eating 
and wise use of food resources among low-income people.

      COMMODITY SUPPLEMENTAL FOOD PROGRAM FISCAL YEAR 2004 FUNDING

    Question. The Commodity Supplemental Food Program was forced to cut 
nearly 30,000 participants in fiscal year 2004. The current budget flat 
lines program funding, but the carryover funding from the previous 
years is no longer available. It has been estimated that this will 
cause another 30,000 people taken off the roles--all senior citizens.
    How do you propose people at the state level, who actually carry 
out these programs, deal with a cut this deep?
    Answer. About 29,500 fewer caseload slots were assigned in 2004 
than in 2003. However, the caseload of 536,196 allocated in 2004 
exceeds actual participation in any month to date, including the peak 
participation of 526,955 achieved in September 2003. Thus, the caseload 
available in 2004 covered actual nationwide program participation.
    In reference to the President's fiscal year 2005 budget request, 
the $98.335 million requested for the Commodity Supplemental Food 
Program (CSFP) equals Congress' fiscal year 2004 program appropriation, 
and is higher than the $94.991 million requested in the budgets for 
fiscal years 2002 through 2004. However, variables beyond the 
Administration's control have yielded significantly fluctuating levels 
of total program resources over the same period. These variables are 
the amounts that Congress appropriates and cash carryover from the 
previous year, which is determined primarily by the extent to which 
States utilize their assigned caseloads. Even though the fiscal year 
2005 budget request includes an increase over the prior year's request, 
the anticipated lack of cash carryover would result in a projected 
participation decrease of 60,700 nationally.
    The Department will pursue all means to minimize the impact of 
straight-line funding for the program. We also wish to point out that 
we are implementing major initiatives, including more extensive and 
varied Food Stamp Program outreach efforts, which address the 
nutritional needs of the population served by the CSFP. People eligible 
for the program should also be eligible to receive benefits under the 
Emergency Food Assistance Program and the Nutrition Services Incentive 
Program now administered by the Department of Health and Human 
Services. The Food and Nutrition Service will work closely with State 
agencies to help affected individuals meet their nutritional needs 
through these other Federal nutrition assistance programs.

                           FOOD GUIDE PYRAMID

    Question. Mr. Bost, you mentioned in your statement that the FNS is 
currently working on updating the food guide pyramid. I understand that 
you have received a significant number of comments so far on your 
efforts.
    How many comments has FNS received on the proposed food guide 
pyramid?
    Answer. Last September, a Notice was published in the Federal 
Register requesting comments from all stakeholders on the proposed 
technical revisions to the current Food Guide Pyramid. USDA is using an 
open and transparent process to revise the science base and 
communications elements for the current Food Guidance System, the Food 
Guide Pyramid. This process resulted in 255 response letters with 1,101 
separate comments from a broad array of nutrition professionals, health 
organizations, academic faculty, food industry organizations and the 
general public. To continue this transparent process, we have made 
these comments available for anyone to view on our website at http://
www.usda.gov/cnpp/pyramid-update/index.html.
    Question. Do you believe you will be able to make the June deadline 
for publication?
    Answer. The report to the Secretaries of Agriculture and Health and 
Human Services from the Dietary Guidelines Advisory Committee is 
expected to be finalized by June 30, 2004. The scientific advisory 
report will be published in electronic format on the USDA and HHS 
websites. The two Departments will then jointly review and publish the 
revised Dietary Guidelines, which is anticipated to be released in 
January 2005. The revised Food Guidance System is scheduled to be 
released approximately a month later, in February 2005.

                         LOW-CARBOHYDRATE DIETS

    Question. How is USDA working to take into consideration the 
various low-carbohydrate diets that have become so popular in this 
country?
    Answer. USDA continues to rely on consensus science from 
authoritative bodies and reports such as the report from the Dietary 
Guidelines Advisory Committee, the National Academy of Sciences, and 
USDA's food consumption surveys. USDA's Agricultural Research Service 
has six nutrition research centers that continually explore timely 
nutrition issues. As new weight-loss diet trends emerge, USDA works in 
collaboration with HHS as well as reputable organizations such as the 
American Dietetic Association and the Society for Nutrition Education, 
to plan communications strategies to help guide the American public to 
make healthy food choices.
    Question. Is USDA, NIH or CDC doing any research on the safety and 
validity of these diets?
    Answer. USDA's research is focused on energy balance and nutrient 
adequacy to effect long-term health. For optimal nutrient adequacy, the 
research continues to look at the nutrition requirements that ensure a 
healthy life, maximum vigor and well being and reduced risk of chronic 
disease, not to study the comparative effects of weight-loss diets. 
Where many new diet programs capture the interest of the public and 
come and go, nutritional requirements remain constant regardless of any 
particular diet. Much of our Federal research includes the role of 
carbohydrates, proteins, and fats and other nutrients play in a healthy 
diet.

                    NATIONAL ORGANIC STANDARDS BOARD

    Question. Mr. Hawks, the Organic Foods Production Act is very clear 
that the NOSB should be able to hire their own Executive Director, and 
that that person should report to the NOSB directly. Is the job 
announcement published by USDA intended to meet the requirements of the 
statute in this regard?
    Answer. AMS intends to meet the requirements of the Organic Foods 
Production Act (OFPA) which provides that the Board shall have a staff 
director.
    The General Provisions of the Consolidated Appropriations Act, 
2004, (Title VII) limit the Department's spending authority to ``not 
more than $1.8 million for all advisory committees within USDA. Of this 
total, AMS has been allotted $90,000 for the National Organic Standards 
Board. This means that AMS can spend up to $90,000 of the funds 
appropriated for Organic Standards on the expenses of the NOSB. The 
Organic Foods Production Act requires that Board members be reimbursed 
for their travel expenses, including per diem. AMS cannot transfer 
appropriated funds to the Board to hire its own staff, nor do we have 
the authority to hire or contract for an employee who is not 
responsible to AMS.
    Consequently, AMS recently filled an Advisory Board Specialist 
position. All of the specialist's time is dedicated to NOSB support 
under the direction of the National Organic Program (NOP) Manager. A 
complete description of the Advisory Board Specialist's duties will be 
provided for the record.
    The increased funding provided by Congress in fiscal year 2004 will 
enable the Department to hire additional staff which will further 
increase the program's quantity and timeliness of service.
    [The information follows:]
    Advisory Board Specialist Responsibilities:
  --Bi-annual re-establishment of the NOSB Charter
  --Development and publication of news releases and Federal Register 
        notices seeking nominees for NOSB membership
  --Preparation of nominations packages and supporting documents for 
        NOSB appointments
  --Development and publication of news releases and Federal Register 
        notices alerting the public to NOSB meetings
  --Arranging public meetings; travel, hotel and meeting 
        accommodations, and contracting for Court Reporters and Audio 
        Visual Equipment
  --Arranging guest speakers at NOSB meetings
  --Reimbursing NOSB members for travel expenses in accordance with 
        Federal travel regulations
  --Development, maintenance, and administration of an NOSB website
  --Reporting on Board activities
  --Arranging and participating in NOSB committee conference call 
        meetings
  --Developing and publishing rulemaking actions to implement NOSB 
        recommendations
  --Contracting with vendors for Technical Advisory Panel (TAP) review 
        of petitioned materials
  --Reviewing petitions for compliance with OFPA, its implementing 
        regulations, and the petition procedures
  --Communicating with petitioners and the TAP vendors
  --Identifying program needs for which the NOSB can provide advice
  --Reviewing the work of the NOSB for completeness, accuracy, and 
        compliance with OFPA, its implementing regulations, and the 
        requirements of other Federal entities
  --Performing all activities required for compliance with FACA
  --Representing USDA at all meetings of the NOSB and its committees
    Question. I understand that AMS has contracted with the American 
National Standards Institute to review the National Organic Program. 
Will the ANSI effort be a one-time audit or ongoing oversight panel, 
which is what was envisioned by the statute and the organic community. 
If the ANSI effort is a one-time review, what steps, if any, are being 
taken to create an ongoing Peer Review Panel, to oversee the 
accreditation activities of the National Organic Program?
    Answer. We are in the process of completing an initial peer review 
of the NOP and hope to complete that review later this fiscal year. 
After this review is completed, we will make the results public and 
invite members of industry and the Board to work with us to develop a 
process for ongoing Peer Reviews of the NOP.
    Question. Could you please provide the Committee with a list of the 
policy recommendations made by the NOSB since passage of the final 
organic rule, and what action has been taken by the Department in 
response to those recommendations?
    Answer. The information is submitted for the record.

           NOSB NON-MATERIALS RECOMMENDATIONS SINCE MARCH 2000
------------------------------------------------------------------------
           NOSB Recommendations                     AMS Response
------------------------------------------------------------------------
June 2001:
    Recommended regulations pertaining to   The recommendation is
     labels with principal display panel,    covered by existing
     ingredient deck and information panel   standards. Should AMS
     all on a single labeling panel.         determine that there are
                                             problems with application
                                             of the standards; AMS will
                                             engage in rulemaking to
                                             clarify the requirements.
June 2001:
    Recommended Peer Review Panel           Review of AMS' accreditation
     procedures for review of                program could not begin
     accreditation program.                  until after certifying
                                             agents were accredited. AMS
                                             has contracted with the
                                             American National Standards
                                             Institute for review of
                                             AMS' accreditation program.
                                             The review is underway.
June 2001:
    Recommended technical corrections to    AMS has acted on several of
     the final rule.                         the recommended corrections
                                             and AMS is still working
                                             with the NOSB on others AMS
                                             will soon take action on
                                             the remainder.
September 2001:
    Recommended Apiculture Standards......  The recommendation is
                                             covered by existing
                                             standards. Should AMS
                                             determine that there are
                                             problems with application
                                             of the standards; AMS will
                                             engage in rulemaking to
                                             clarify the requirements.
September 2001:
    Recommended guidance for preservatives  The recommendation did not
     used in vaccines.                       need AMS action beyond
                                             acceptance and posting on
                                             the Web. The recommendation
                                             is posted on the Web.\1\
October 2001:
    Recommendations on Aquatic Animals....  AMS accepted the
                                             recommendations. The
                                             recommendations are posted
                                             on the Web.\1\
October 2001:
    Recommendations on Pasture............  The recommendation is
                                             covered by existing
                                             standards. Should AMS
                                             determine that there are
                                             problems with application
                                             of the standards; AMS will
                                             engage in rulemaking to
                                             clarify the requirements.
October 2001:
    Recommendation, Principles of Organic   The recommendation did not
     Production and Handling.                need AMS action beyond
                                             acceptance posting on the
                                             Web. The recommendation is
                                             posted on the Web.\1\
October 2001:
    Recommended procedures for amending     AMS follows the Federal
     the National List.                      Rulemaking procedures for
                                             amending regulations.
October 2001:
    Recommended Greenhouse Standards......  The recommendation is
                                             covered by existing
                                             standards. Should AMS
                                             determine that there are
                                             problems with application
                                             of the standards; AMS will
                                             engage in rulemaking to
                                             clarify the requirements.
October 2001:
    Recommended Mushroom Standards........  The recommendation is
                                             covered by existing
                                             standards. Should AMS
                                             determine that there are
                                             problems with application
                                             of the standards; AMS will
                                             engage in rulemaking to
                                             clarify the requirements.
October 2001:
    Recommended removing handlers from the  AMS has not accepted the
     $5,000 exemption.                       recommendation because it
                                             would violate the Organic
                                             Foods Production Act.
October 2001:
    Recommended adding ``certified'' in     AMS has not accepted the
     front of ``distributor'' in 3 places.   recommendation because
                                             distributors are not
                                             required to be certified.
May 2002:
    Recommended guidelines for determining  The recommendation is posted
     whether a processing technology shall   on the Web.\1\ When AMS
     be reviewed by the NOSB.                further defines what
                                             materials are subject to
                                             NOSB review, it may take
                                             further action on the
                                             technology recommendation.
May 2002:
    Recommended guidelines for US/EU        AMS has considered all
     equivalency.                            points within this
                                             recommendation. USDA and
                                             USTR are in equivalency
                                             negotiations with the EU.
May 2002:
    Recommended that certifying agents use  AMS fully supports the
     the Organic Farm Plan documents         recommendation. The
     developed under an AMS cooperative      recommendation did not need
     agreement.                              AMS action beyond
                                             acceptance and posting on
                                             the Web. The recommendation
                                             is posted on the Web.\1\
May 2002:
    Recommended that certifying agents use  AMS fully supports the
     the Organic Handling Plan documents     recommendation. The
     developed under an AMS cooperative      recommendation did not need
     agreement.                              AMS action beyond
                                             acceptance and posting on
                                             the Web. The recommendation
                                             is posted on the Web.\1\
May 2002:
    Recommended clarification on ``access   AMS accepted the
     to the outdoors'' for poultry.          recommendation and used it
                                             to develop an ``access to
                                             the outdoors'' policy
                                             statement for livestock
                                             which is posted on the
                                             Web.\1\
May 2002:
    Recommended a handling operation        The recommendation did not
     ingredient affidavit as guidance to     need AMS action beyond
     handlers and certifying agents.         acceptance and posting on
                                             the Web. The recommendation
                                             is posted on the Web.\1\
May 2002:
    Recommended clarification for section   AMS is working with the NOSB
     205.606 relative to commercially        on this issue. The NOSB is
     available.                              scheduled to provide a new
                                             recommendation on section
                                             205.606 at its April 2004
                                             meeting.
May 2002:
    Recommended clarification regarding     The recommendation did not
     planting stock for perennial crops      need AMS action beyond
     grown as annual crops.                  acceptance and posting on
                                             the Web. The recommendation
                                             is posted on the Web.\1\
May 2002:
    Recommended guidance on transitional    The recommendation is
     products.                               outside the National
                                             Organic Standards. AMS will
                                             take no action beyond
                                             posting the recommendation
                                             on the Web.\1\
May 2002:
    Recommended compost production methods  AMS is working with the
     beyond those specifically addressed     chair of the NOSB Compost
     in the NOP. The recommendation is       Task Force on this issue.
     intended as guidance.                   Specifically, AMS has
                                             requested scientific
                                             justification for the
                                             recommendations. AMS is
                                             concerned about the
                                             potential for human
                                             pathogens in the compost.
October 2002:
    Recommended regulation changes for      The Organic Trade
     origin of livestock; dairy animals.     Association (OTA) filed its
                                             own recommendations
                                             relative to dairy animal
                                             replacement at the October
                                             2002 NOSB meeting. The OTA
                                             and NOSB recommendations
                                             differ substantially. AMS
                                             is reviewing this issue.
May 2003:
    Approved a new recommendation on        The Organic Trade
     origin of dairy animals.                Association (OTA) filed its
                                             own recommendations
                                             relative to dairy animal
                                             replacement at the October
                                             2002 NOSB meeting. The OTA
                                             and NOSB recommendations
                                             differ substantially. AMS
                                             is reviewing this issue.
October 2002:
    Recommended criteria for certification  AMS is reviewing this issue.
     of grower groups.
May 2003:
    Recommended publication of              AMS is reviewing this issue.
     clarification management of breeder
     stock.
May 2003:
    Recommended regulation change on        AMS is working on a
     chlorine contacting organic food.       rulemaking docket that will
                                             address this
                                             recommendation.
------------------------------------------------------------------------
\1\ Website: http://www.ams.usda.gov/nop/indexIE.htm.

                             BEAVER CONTROL

    Question. How does APHIS/Wildlife Services plan to uphold their 
cooperative responsibility with the Wisconsin Department of Natural 
Resources to provide beaver damage management activities that are being 
requested of them to restore trout streams that have been damaged by 
beavers?
    Answer. APHIS/Wildlife Services (WS) cooperates with the Wisconsin 
Department of Natural Resources (WDNR) to conduct beaver damage 
management on high quality trout streams in Wisconsin. Beaver dam 
building activities can greatly alter the natural flow of a trout 
stream, destroying its ability to support trout. Beaver dams and the 
impoundments they create cause decreased water flow, water warming, and 
increased siltation. They also pose a barrier to trout, interfering 
with spawning. One component of the WS trout habitat protection program 
is to maintain select trout streams in free flowing, natural condition 
in order to improve or restore trout habitat and protect habitat 
improvement structures. The fiscal year 2005 budget will continue to 
fund these programs at current levels.
    Question. Beaver damage to roads, bridges, crops, forests and 
property are also increasing in Wisconsin resulting in an increasing 
number of requests to Wildlife Services for assistance. The State of 
Wisconsin, some counties and some townships provide cooperative funding 
to Wildlife Services for their assistance with beaver damage problems.
    How does Wildlife Services plan to fulfill their cooperative 
responsibilities in responding to Wisconsin citizens' requests for 
beaver damage assistance?
    Answer. APHIS/Wildlife Services (WS) cooperates with a number of 
northern Wisconsin county highway and forestry departments, and 
numerous local township road departments, to provide beaver damage 
management services for the protection of roads and road structures, 
and forestry resources. The fiscal year 2005 budget will continue to 
fund these programs at current levels.

                BOVINE SPONGIFORM ENCEPHALOPATHY RECALL

    Question. Dr. Murano, during the BSE scare, USDA announced that 
approximately 38,000 pounds of beef were recalled, after originally 
stating that the recall was only 10,400 pounds. Over the course of the 
following few weeks, we read stories about consumers who feared that 
they ate the contaminated meat because they were never informed that 
they purchased a part of the recalled amount, because proprietary 
information, including sales and distribution records, is kept secret 
during a voluntary recall. Further, there was a 3 week delay between 
the time the recall was announced and the time retailers found out 
about it.
    How much of the recalled beef was actually found?
    Answer. FSIS field personnel worked cooperatively with other 
Federal and State partners to conduct recall effectiveness checks on 
100 percent of the establishments that sold or distributed the product 
associated with the recall. FSIS is confident that the product was 
quickly removed from the marketplace. FSIS determined that the 
recalling firm and its customers made extensive efforts to retrieve and 
dispose of the recalled product.
    FSIS announced the recall at 1:00 a.m. on December 24, 2003. Less 
than 18 hours later, over 325 locations--primarily grocery stores--had 
received notifications from their suppliers.
    On February 9, 2004, FSIS issued an update to the recall stating 
that approximately 21,000 pounds of product had been returned. This 
estimate was developed in late January 2004 using information from the 
FSIS investigation, including recall effectiveness checks.
    Question. How long did it take between the time USDA announced the 
recall and the time individual grocery stores found out they had part 
of the contaminated beef? Was the responsibility on the grocers to find 
out for themselves, or were they all informed by either their state 
governments or USDA?
    Answer. FSIS announced the recall at 1:00 a.m. on December 24, 
2003. FSIS issued a press release that was distributed nationally. 
Simultaneously, its recall management division began collecting 
distribution information from the establishments that slaughtered and 
processed meat from the affected animal. Less than 18 hours later, over 
325 locations--primarily grocery stores--had received notifications 
from their suppliers. It is the responsibility of the recalling company 
to notify its customers, including grocers, that they had received 
recalled product. FSIS then conducted effectiveness checks on the 
recall to confirm that the responsibilities of the recalling firm were 
met.
    Question. If USDA had the authority to initiate mandatory recalls, 
do you think consumers would have found out more quickly? Why or why 
not?
    Answer. No establishment has refused to comply with a recall 
requested by FSIS. Should they refuse, then FSIS has the legal 
authority to detain and/or seize meat, poultry and egg products in 
commerce. The current recall process is the quickest way to determine 
where the affected product has been distributed because companies are 
familiar with who their customers are and can notify them much more 
quickly than the Federal Government could. Public health would not 
likely be enhanced by the addition of mandatory recall authority 
because the Agency already has the means to remove product quickly from 
commerce.
    Question. After all of the dust has settled, is USDA looking again 
at its policy of not wanting the authority for mandatory recalls?
    Answer. Through effectiveness checks, public meetings and other 
means, FSIS is constantly reviewing and looking for ways to improve the 
recall process. In December 2002, FSIS held a public meeting to discuss 
improving the process for recalls of meat, poultry and egg products and 
to gather useful input on related topics. FSIS expects to issue a 
revised recall directive in fiscal year 2004 taking into account the 
comments it received at the public meeting. The directive will discuss 
how public notification of recalls is to take place and will provide 
information on the new risk-based system the agency will use for 
determining the scope of effectiveness checks.

                             SOUND SCIENCE

    Question. Dr. Murano, in your testimony you stated that there was a 
significant drop in E.coli 157:H7 between 2002 and 2003, and credited 
this drop to reassessment of plants' HACCP plans and increased audits.
    Were the same plants that were sampled in 2002 sampled in 2003? If 
not, how can you make a comparison between the two years? Unless the 
exact same plants were sampled, how can you be statistically certain 
that the plants sampled in 2002, but not sampled in 2003 have shown any 
improvement?
    Answer. There are valid methods for analyzing a time series of data 
even though, as in this dataset, there are changes in the 
establishments being sampled from year to year. The analysis conducted 
by FSIS compares over 6,000 scheduled samples of ground beef production 
from fiscal year 2002 with over 6,000 samples of ground beef production 
from fiscal year 2003 and tests whether the populations are the same 
from year to year with respect to the presence of E. coli O157:H7. 
Statistical analysis was done using the Chi-square test to show the 
association between positive E. coli O157:H7 samples and laboratory 
method, season and year. A Poisson regression model was used to 
demonstrate the significant decline in percent positive samples from 
2002 to 2003, after controlling for season and laboratory method. The 
conclusion is that the reduction in E. coli O157:H7 in raw ground beef 
from fiscal year 2002 to fiscal year 2003 was statistically 
significant.
    On April 29, 2004, the Centers for Disease Control and Prevention, 
in its annual report on the incidence of infections from foodborne 
pathogens, noted a decline of 42 percent of illness caused by E.coli 
O157:H7 from 1996 to 2003. Most significantly, between 2002 and 2003, 
illnesses caused by E.coli O157:H7, typically associated with ground 
beef, dropped by 36 percent.
    Question. Further, I have been informed that of the 58,000 samples 
collected for Salmonella in 2002, nearly 40,000 were collected from 
beef products, which have a lower rate of Salmonella than poultry 
products. It would appear that due to the high percentage of beef 
products sampled relative to other products, FSIS would be more likely 
to find a lower rate of positive Salmonella samples than if the 
percentages were weighted for equal comparison. Can you comment on 
this?
    Answer. The agency has seven Salmonella performance standards for 
classes of raw product, and the highest number of samples is for raw 
ground beef because more establishments are subject to this standard 
than other standards.
    On April 29, 2004, the Centers for Disease Control and Prevention, 
in its annual report on the incidence of infections from foodborne 
pathogens, noted that from 1996 to 2003, illnesses caused by Salmonella 
decreased 17 percent and Salmonella Typhimurium (typically associated 
with meat and poultry) decreased 38 percent.
    Question. You mention the new need for new baseline studies in your 
statement. In fiscal year 2004 FSIS received funding for these 
activities.
    What will you do, or are you currently doing, to ensure that these 
studies do not have some of the same problems as the previous studies, 
as outlined by the National Academy of Science? Will FSIS be using any 
of its fiscal year 2005 funding to continue conducting new baseline 
studies?
    Answer. For the current baseline project, using the funds provided 
for fiscal year 2004, the agency developed a study protocol that was 
reviewed by the National Advisory Committee on Microbiological Criteria 
for Foods (NACMCF). FSIS modified the current plans based on NACMCF 
recommendations and will continue to seek comments from the National 
Advisory Committee on Microbiological Criteria for Foods on future 
baseline projects.
    FSIS considers the fiscal year 2004 $1.65 million baseline 
initiative to be an addition to its base program and will continue to 
review funding needs for fiscal year 2005.

                            INSPECTOR TRAVEL

    Question. Dr. Murano, it has been suggested that FSIS inspection 
personnel would benefit greatly from exposure and visits to slaughter 
facilities in different parts of the country, in order to compare 
differing methods of animal handling and slaughter practices to help 
them better enforce HMSA.
    Would you consider making changes to your travel policy to provide 
an employee per diem for time spent visiting slaughter facilities, if 
done as part of an unrelated personal or business trip?
    Answer. USDA is committed to strong enforcement of the HMSA. FSIS 
continually assesses its HMSA oversight and enforcement, primarily 
through the activities of the District Veterinary Medical Specialists 
(DVMSs). As methods are available to improve our HMSA efforts, the 
DVMSs develop strategies for incorporating them into the overall roles 
and responsibilities of the agency. Currently, DVMSs have authority and 
opportunity to travel across district boundaries for humane activities 
when necessary.

                            SAUSAGE CASINGS

    Question. Dr. Murano, this question involves a very specific issue 
related to food safety and sausage production in this time of concern 
about BSE. FSIS interim final regulations issued January 12 identify 
the distal ileum section of beef cattle small intestine as Specified 
Risk Material (SRM) in U.S. animals. In practice FSIS requires that the 
entire small intestine be removed and disposed of as inedible--
presumably to ensure that the distal ileum is removed--even though I am 
told that the distal ileum can be definitively identified and removed 
without destroying the entire small intestine. This situation has the 
potential to cause harm to that segment of the sausage industry that 
relies on beef rounds as casing for their products.
    Is there a way to ensure that the distal ileum SRM is completely 
removed, while still ensuring the safety and availability of beef 
rounds used as sausage casings?
    Answer. FSIS is aware of the various methods for ensuring that the 
distal ileum is properly removed. FSIS specifically asked for comment 
in a Federal Register notice (January 12, 2004, Docket #03-025IF) on 
this issue and will be analyzing the comments. Meanwhile, FSIS also is 
aware that more than the distal ileum of the small intestine may 
demonstrate infectivity based on preliminary studies from the United 
Kingdom. FSIS is interested in gaining more information about this new 
development as FSIS analyzes the comments.
    Question. I am told that current inventories for sausage casings 
could be exhausted within 2 months. Is it possible to provide further 
regulatory refinements to address this issue within that time frame?
    Answer. Casings made from the small intestine of cattle slaughtered 
after January 12, 2004, are not currently allowed for human 
consumption. FSIS is aware of the demand for sausage casings made from 
the small intestine of cattle. However, in the interest of public 
health, FSIS will be analyzing the comments received on the interim 
final rule published on January 12, 2004, and further considering the 
potential ramifications of new findings that additional sections of the 
small intestine may demonstrate infectivity. FSIS will not change the 
restriction on the use of the small intestine in human food until after 
review of comments received.

                DEPARTMENT OF HEALTH AND HUMAN SERVICES


                      Food and Drug Administration

STATEMENT OF LESTER M. CRAWFORD, D.V.M., Ph.D.
    Senator Bennett. Dr. Crawford, we welcome you. I think this 
is your first time in this particular assignment and we look 
forward to hearing from you.
    Mr. Crawford. Thank you, Mr. Chairman and Senator Kohl. It 
is a pleasure for me to be here with my colleagues from USDA.
    I want to thank you for the opportunity to discuss the 
Administration's fiscal year 2005 budget for the Food and Drug 
Administration.
    As we approach our 100th birthday in 2006, our mission of 
promoting and protecting the public health has never been more 
vital. Likewise, the challenges and opportunities we face have 
never been greater.
    This committee's generous support of FDA's mission over the 
past few years testifies to your recognition of the essential 
role our agency plays in the well being of all Americans.
    The President's budget for proposal for fiscal year 2005 
asks you to continue that support. It seeks $1.85 billion, $1.5 
billion in budget authority and $350 million in user fees.
    The budget authority increases total $138.9 and savings 
from administrative efficiencies and deferred facilities 
repairs and improvements of $30.1 million for a net increase of 
$108.8 million.
    The President's budget request also asks you to build on 
your past support by increasing FDA funding in several priority 
areas. For Food Defense and Counterterrorism, we are seeking an 
increase of $65 million. Working with the White House Homeland 
Security Council, FDA and USDA have created a Joint Food 
Defense Budget that will strengthen our ability to protect the 
Nation's food and agriculture supply from threats whether 
deliberate or accidental.
    $35 million is requested to establish a national laboratory 
network to test food samples. $15 million is requested for 
research to protect the food supply by such measures as better 
and faster tests to detect toxic agents in food. $7 million to 
increase FDA's food import examinations to nearly 100,000, six 
times the number we did in 2001. $3 million to increase our 
crisis management capabilities and $5 million to support the 
Administration's biosurveillance initiative.
    For BSE, or mad cow disease, we are requesting an increase 
of $8.3 million.
    Mr. Chairman, FDA is proud, and I think justifiably so, 
that we were able to trace and control all of the meat and bone 
meal associated with the BSE-infected cow discovered late last 
year in the Pacific Northwest. All of the rendering facilities 
we inspected as part of this one BSE case were in full 
compliance with our rules designed to create firewalls against 
BSE in this country. Nevertheless, we can and should do more.
    We have already announced several measures to make those 
firewalls even stronger. With this increased funding, which if 
you approve it would bring our total BSE resources to $30 
million, we will do three things. We will increase our State-
funded BSE inspections by 2,500, we will add more than 900 
risk-based BSE inspections and 600 targeted animal feed 
inspections, and we will conduct a total of 10,000 BSE 
inspections, 52 percent more than planned for the current year.
    For our Medical Device Program, we are asking for an 
increase of $25 million. We are committed to ensuring that the 
Medical Device User Fee and Modernization Act is implemented in 
a manner that meets its performance goals and that ensure the 
strongest and most effective medical device review program 
possible under the law with available resources. We need this 
increase to meet the appropriations triggers required for the 
Agency to collect medical device user fees. With these 
resources, FDA will meet all of the performance goals by fiscal 
year 2008.
    For the Center for Drug Evaluation and Research move to 
White Oak in Maryland, we are requesting an increase of $20.6 
million in new budgetary authority and $10 million in user 
fees. We will use these resources to relocate the 1,700 review 
staff in the Center for Drug Evaluation and Research to the 
White Oak Campus.
    For medical countermeasures, we seek an increase of $5 
million. We are seeking this amount to bolster FDA's ability to 
help companies develop new medical countermeasures against 
terrorist attacks and to review those products quickly. FDA 
will use this increase to expedite the review of new drug 
applications, biologics license applications, generic drugs and 
over-the-counter medical product countermeasures.
    For the pay increase we request an increase of $14.4 
million. Fully 60 percent of our budget pays the salaries of 
FDA's dedicated expert employees. I need not emphasize here how 
important this money is for our ability to carry out our public 
health mission.
    For administrative efficiencies, this budget request 
includes a reduction of $30 million. These funds will be used 
to partially fund the high priority initiatives I just 
mentioned as well as to support the goals of the President's 
Management Agenda.
    Mr. Chairman, by focusing on the President's highest 
priorities for FDA, in some respects I have only scratched the 
surface of all that we do every day to protect the health of 
Americans.
    An additional agency priority of particular interest to the 
Subcommittee, is lowering the rate of obesity, one of the most 
serious public health issues facing America today. We have just 
finished an FDA obesity working group which prescribes a number 
of recommendations and public input to reforming the food label 
to make it more amenable to the control of obesity, and also 
for demystifying some of the myths that now occur with respect 
to our food supply, not the least of which is confusion about 
carbohydrates and various classifications of carbohydrates.

                           PREPARED STATEMENT

    I can list other additional program priorities, but in the 
interest of time I will submit my statement for the record and 
I appreciate very much the time accorded me.
    Thank you.
    [The statement follows:]

                Prepared Statement of Lester M. Crawford

Introduction
    Good morning. Mr. Chairman and distinguished members of the 
Subcommittee, I'm pleased to have the opportunity to speak with you 
today and present to you the Food and Drug Administration's fiscal year 
2005 budget request. I am Dr. Lester M. Crawford, DVM, Ph.D. Acting 
Commissioner, Food and Drug Administration.
    The FDA is responsible for protecting the public health by assuring 
the safety, efficacy, and security of human and veterinary drugs, 
biological products, medical devices, our Nation's food supply, 
cosmetics, and products that emit radiation. The FDA is also 
responsible for advancing the public health by helping to speed 
innovations that make medicines and foods more effective, safer, and 
more affordable; and helping the public get the accurate, science-based 
information they need to use medicines and foods to improve their 
health.
    I'd like to begin by conveying my appreciation to the Subcommittee 
members and their staffs for providing FDA with several key increases 
in the fiscal year 2004 appropriation such as those funds for generic 
drugs, food defense, and medical device review. In a moment, I will 
elaborate on how we have spent or plan to spend those funds in the 
current year. I can assure you that funds appropriated in the current 
year and additional increases appropriated in fiscal year 2005 will 
continue to be spent wisely. The American people would be impressed if 
they really knew how much bang for their buck they get out of FDA.
    I am fully aware of the difficult funding decisions all of you must 
face in the current session, but I want to remind you that marginal 
investments in FDA's programs can have such a positive ripple effect 
across all of your constituencies--from the consumer to the farmer to 
the manufacturer and beyond. FDA is working diligently to reduce 
administrative and IT costs in fiscal year 2004 and 2005. In fiscal 
year 2004, we offered $57 million in IT and administrative savings and 
we have again proposed another $23 million in administrative savings in 
fiscal year 2005, which we are realizing through efficient 
administrative resource management. We will continue to seek 
administrative resource savings in order to support our critical 
mission requirements.

Executive Summary
    FDA makes substantial and meaningful differences in the lives of 
over 290 million Americans. I am extremely thankful for the 
professional dedication, creativity, and expertise of our staff. 
Through a combination of dedicated and skilled staff, new authorities 
of recently passed legislation, and the resources this Subcommittee 
provides us to carry out our mission, we will be in a better position 
to meet our challenges than ever before.
    The Administration and Congress have an obligation to the American 
public to ensure that adequate and properly targeted resources are 
available for the continued success of the Agency and the success of 
the Federal Government's efforts to promote quality health care. The 
importance and complexity of FDA's work will only increase in the years 
to come as FDA continues to carry out its primary mission of protecting 
and promoting the public health. This means that while more medical 
products and therapies will be available to save and improve lives, FDA 
also must think critically and carefully about how it uses its 
resources to improve the public wellbeing. In guiding us through our 
new Strategic Action Plan that attempts to balance demands with limited 
resources, we will constantly follow the practice of ``efficient risk 
management.''

FDA's Strategic Plan
    On August 20, 2003, FDA released a 5-Part Strategic Action Plan 
entitled ``Protecting and Advancing America's Health: A Strategic 
Action Plan for the 21st Century.'' This is a dynamic and evolving 
document that outlines how the Agency is taking new steps to protect 
and advance America's public health. In response to various public 
health threats, the Agency developed a core set of consumer-focused 
goals that includes the following: helping consumers get truthful and 
non-misleading information about FDA regulated products; promoting 
quick access to new medical technologies that are safe and effective; 
improving patient and consumer safety; responding to the new challenges 
of bioterrorism and food defense, and building a stronger, science-
based FDA. These goals were developed and refined in conjunction with a 
number of key healthcare stakeholders, and were based on important 
feedback from the consumer and patient communities. These are among the 
many critical challenges the Agency faces as it moves forward into the 
21st century. I will first discuss these challenges and progress within 
our strategic planning effort, and then will discuss the specifics of 
FDA's 2005 budget request.

Efficient, Science-Based Risk Management
    In fiscal year 2005, FDA will be charged with regulating over 
150,000 drugs and devices, overseeing the development of almost 3,000 
investigational new drugs, monitoring 125,000 domestic product 
establishments including over 10,000 firms involved in the animal drugs 
and feed process, reviewing and acting upon an estimated 13 million 
import line entries, and the list goes on and on. On top of this 
workload, we cover the full life cycle of nearly all food and medical 
products, and also interact on a daily basis with all facets of Federal 
and State governments, consumers, public and private institutions, and 
foreign entities. Our proposed budget includes the equivalent of 10,844 
full-time employees, including reimbursables. The numbers speak for 
themselves and they explain why we must practice efficient, science 
based risk management in fulfilling our increasingly complex mission.
    FDA's approach entails the use of the best scientific data, the 
development of quality standards, and the use of efficient systems and 
practices that provide clear and consistent decisions and 
communications to the American public and the regulated industries. 
This is achieved by employing principles and technologies that can 
reduce avoidable delays and cost in product approvals, overhauling and 
updating the way medical products are manufactured, implementing more 
effective strategies for food imports and food safety, and by 
implementing an enforcement strategy that combines clear communications 
to industry backed up by effective civil and criminal enforcement, FDA 
will achieve quicker access to safe and effective new products, and 
reduce public health risks without unnecessary costs. Over the past 
year, our work resulted in a wealth of success stories related to 
enforcement, new medical product development, imports and the safety of 
our food supply.
    Our science based enforcement strategy is one based on clarity, 
science, leveraging resources with our enforcement partners in Justice, 
Homeland Security, and the states, and most importantly, deterrence. In 
fiscal year 2003, our efforts led to 341 arrests, 199 convictions, 
fines and restitutions of more than $800 million submitted to the U.S. 
Treasury (including a multimillion dollar settlement for health care 
fraud), 17 injunctions of firms/individuals, nearly 400 criminal cases 
opened, 25 seizures of violative products, and more than 500 Warning 
Letters. Additionally, we took action against drug counterfeiters, 
unscrupulous parties in the dietary supplement industry, and those who 
spread misinformation or commit fraud via false labeling and 
advertising. We remain vigilant when necessary but hold the belief that 
our regulations and the enforcement of the regulations should be no 
more burdensome than necessary. In addition, FDA remains concerned 
about the public health implications of unapproved prescription drugs 
from entities seeking to profit by getting around U.S. legal standards 
for drug safety and effectiveness. Many drugs obtained from foreign 
sources that either purport to be or appear to be the same as U.S.-
approved prescription drugs are, in fact, of unknown quality. Consumers 
are exposed to a number of potential risks when they purchase drugs 
from foreign sources or from sources that are not operated by 
pharmacies properly licensed under state pharmacy laws. Although some 
purchasers of drugs from foreign sources may receive genuine product, 
others may unknowingly buy counterfeit copies that contain only inert 
ingredients, legitimate drugs that are outdated and have been diverted 
to unscrupulous resellers, or dangerous sub-potent or super-potent 
products that were improperly manufactured. The Agency has responded to 
the challenge of importation by employing a risk-based enforcement 
strategy to target our existing enforcement resources effectively in 
the face of multiple priorities, including homeland security, food 
safety and counterfeit drugs. However, the number of incoming packages, 
as it works today, already overwhelms the system, and this presents a 
significant ongoing challenge for the Agency. The Agency understands 
Congress' desire to address importation of drugs and appreciates their 
understanding of FDA's responsibility to uphold he current law.
    New drug development is an extremely costly process. Today, we see 
cases where the cost of developing a novel drug may reach $800 million 
and take a decade to get from discovery to the marketplace. According 
to a Tufts University study, only 21.5 percent of new drugs 
successfully pass through the clinical phase and gain FDA approval. FDA 
must foster and encourage new product development by ensuring that its 
review and approval processes are efficient, transparent, consistent, 
and predictable. We need to ensure that biomedical innovation leads to 
the quick development of safe and effective medical products. As 
recently discussed in our report entitled ``Innovation or Stagnation?--
Challenge and Opportunity on the Critical Path to New Medical 
Products,'' FDA, together with academia, patient groups, industry, and 
other government agencies, must embark on an aggressive, collaborative 
research effort to create a new generation of performance standards and 
predictive tools that will provide better answers about the safety and 
effectiveness of investigational products, faster and with more 
certainty. This action promises not only to bring medical breakthroughs 
to patients more quickly, but to do so in ways that ensure greater 
understanding about how to maximize patient benefits and minimize their 
risks. This can be accomplished by developing quality systems for the 
Agency's review procedures, developing guidances in new areas of 
technology development, and continuing encouragement of quality 
improvement in the manufacturing sector.
    We want to build on the past success of industry-supported programs 
such as the drug review process, which is funded by a combination of 
appropriated dollars and user fees defined by the Prescription Drug 
User Fee Act that will allow FDA to collect up to $284 million in 
fiscal year 2005. This program's support helped bring median approval 
times for standard new drug applications from 26.9 months in 1993 to 
15.4 months in 2003. Increased funding for the past several years in 
the generic drugs program has allowed median approval times to drop 
from 39.7 months in 1993 to 17.3 in 2003, and an estimated time under 
17 months with the fiscal year 2004 appropriation. We plan on this kind 
of support translating into similar success for the medical device 
review program with the help of budget authority and user fee dollars 
in fiscal year 2004 and beyond. Increased funding in fiscal year 2005 
will allow the Agency to expedite the speed and quality of the medical 
device review process.
    In the past year, highlights of our medical product review process 
include:
  --in total, approved 483 new and generic drugs and biological 
        products, including 21 New Molecular Entities with active 
        ingredients never before marketed in the United States;
    --approved 85 new drug applications;
    --approved 373 generic drug applications;
    --approved 25 biologic license applications;
  --generic approvals included drugs for the treatment of hypertension 
        and heart failure, the treatment and prevention of 
        Cytomegalovirus Retinitis in AIDS and transplant patients; a 
        treatment for major depressive disorder; and another for 
        impetigo, an infection of the skin;
  --accelerated approvals of a drug used for the treatment of pediatric 
        patients with a type of myeloid leukemia--a rare, life-
        threatening form of cancer that accounts for approximately 2 
        percent of all leukemias in children, and another for use in 
        combination therapy for chronic Hepatitis C;
  --over-the-counter drug approvals including Claritin for allergies 
        and Prilosec for frequent heartburn;
  --device approvals included the first drug-eluting stent for 
        angioplasty procedures to open clogged coronary arteries, 
        clearance of the first device for diabetics which integrates a 
        glucose meter and an insulin pump with a dose calculator into 
        one device, and an innovative rapid HIV diagnostic test kit 
        that provides results with 99.6 percent accuracy in as little 
        as 20 minutes.
    Lastly, FDA continues to pursue the most cost effective allocation 
of resources to identify food safety hazards and reduce injury and 
illness associated with food products. In 2003, building on an HHS 
strategic goal, FDA implemented new food security regulations that 
amount to the most substantial expansion of FDA's food safety 
activities in three decades. The Agency also instituted various new 
risk communications to improve upon more routine food safety for 
consumers. Additionally, the Agency continues to practice a cost 
effective allocation of resources through the targeting of field 
resources to imports that present the most significant risk. With no 
sign of import entries decreasing, FDA will intensify these efforts by 
implementing preventative food safety measures through collaborative 
arrangements with domestic and foreign governmental bodies.

Patient and Consumer Safety
    As beneficiaries of the world's premiere heath care system, 
Americans should not have to endure preventable medical errors and 
adverse events related to medical products, dietary supplements, and 
foods that are responsible for thousands of deaths, millions of 
hospitalizations, and tens of billions in added health care costs. 
Americans deserve better than settling for serious health consequences 
that can't be spotted until many years after a product has been on the 
market. And Americans and their physicians deserve better than having 
to rely on limited and often outdated information about risks, 
benefits, and costs of medical treatments when they are making medical 
decisions--which, these days, are among the costliest and most 
important decisions in their lives. So we are taking new steps to make 
our systems and processes for assuring the safety of food and medical 
products work better than ever, and to build new ways to assure better 
patient safety by taking advantage of modern information technology 
tools. We are thankful for the appropriated increases for patient, 
medical product safety and our various adverse event systems in the 
food and medical product centers that we have received in past years.
    Preventing medical errors is a top priority at the Department of 
Health and Human Services and at FDA, and over the past year, FDA has 
introduced a number of solutions that are enabling a more sophisticated 
and effective 21st century patient safety system, thus helping lower 
healthcare costs and ensure longer, healthier lives for Americans. As a 
result of these new strategic initiatives, more programs are now in 
place to improve consumer safety than at any time in the Agency's 
history. In fiscal year 2003, FDA issued a new proposed requirement for 
bar codes on nearly all prescription drugs and some over-the-counter 
drugs, as well as machine-readable information on blood and blood 
components intended for transfusion, that will result in an estimated 
413,000 fewer adverse events over the next 20 years. FDA has initiated 
partnerships that will allow use of external medical databases to 
investigate specific product safety issues. We continue to encourage 
the development of ``active'' reporting systems that use fast, easy 
web-based reports and systems to get more extensive and timely 
information on new drugs, important complications, and adverse events 
that are not well understood. In fiscal year 2003, we also proposed new 
safety standards to further reduce the incidence of adverse events, 
such as proposed amendments to radiation-safety standards for 
diagnostic x-ray equipment and new antibiotic labeling to prevent drug-
resistant bacterial strains.
    Through enhanced testing and other improvements in blood safety, 
the risk of transmission of viruses such as HIV, hepatitis B and C has 
been dramatically reduced. While a blood supply with zero risk of 
transmitting infectious disease may not be possible, the blood supply 
is safer than it has ever been. The agency's Center for Biologics 
Evaluation and Research, worked closely with other FDA Centers, the 
Center for Disease Control and Prevention, the National Institutes of 
Health, academic scientists, and the blood and diagnostic industries, 
in an unprecedented team effort that resulted in the development and 
implementation of investigational blood donor screening for West Nile 
Virus within 8 months of when the threat was first recognized. As a 
result, over 1,000 units of potentially WNV infected blood were 
identified and removed this past year before they could be transfused.
    Lastly, the Agency's Center for Food Safety and Applied Nutrition 
launched the CFSAN Adverse Event Reporting System covering all food, 
dietary supplement, and cosmetic products. Consumers submitted and FDA 
reviewed more than 6,000 adverse events and consumer complaints in an 
attempt to ensure consumers are alerted quickly to any potential new 
dangers. Recently, the CFSAN Adverse Event Reporting System provided 
information on the dangers of ephedra, which has been banned by FDA.
    Better Informed Consumers So many of our stakeholders focus their 
attention on our mission to protect public health, and ensure the 
safety of the food supply and the safety and effectiveness of medical 
products or therapies. However, at the beginning of my testimony I 
restated FDA's mission which includes mention of our duty to promote 
public health and ``[help] the public get the accurate, science-based 
information they need to use medicines and foods to improve their 
health.'' The public entrusts our subject matter experts and public 
affairs specialists in Congressional districts across the country at 
the state and local level to provide consumers with the tools they need 
to make better-informed choices. These choices range from diet to 
medical practice recommendations to disease management on the part of 
the individual. Our role as an educator or informer of the public will 
become evermore important as patients make more independent decisions 
about their health and medical care. We must continue to assist the 
public in how to use their health care dollars as we have done with our 
generic drug campaigns, and at times protect them from misleading 
information that could endanger the public's health.
    Providing information on diabetes care and prevention is a top 
priority of FDA and the Administration. In recent years, diabetes rates 
among people ages 30 to 39 rose by 70 percent. Research shows that good 
nutrition lowers people's risk for many chronic diseases, including 
obesity, heart disease, stroke, some types of cancer, diabetes, and 
osteoporosis. For at least 10 million Americans at risk for type 2 
diabetes, proper nutrition along with physical activity can sharply 
lower their chances of getting the disease.
    FDA is also attempting to enhance the consumer understanding of the 
relationship between diet/obesity and chronic disease. A recently 
released report by FDA's Obesity Working Group includes recommendations 
to strengthen food labeling, to educate consumers about maintaining a 
healthy diet and weight and to encourage restaurants to provide calorie 
and nutrition information. It also recommends increasing enforcement to 
ensure food labels accurately portray serving size, revising and 
reissuing guidance on developing obesity drugs and strengthening 
coordinated scientific research to reduce obesity and to develop foods 
that are healthier and low in calories. This effort is important, as a 
new study from Centers for Disease Control and Prevention (CDC) shows 
poor diet and inactivity are poised to become the leading preventable 
cause of death among Americans--causing an estimated 400,000 deaths in 
2000. CDC estimates that 64 percent of all Americans are overweight, 
including more than 30 percent who are considered obese. In addition, 
about 15 percent of children and adolescents, aged 6 to 19, are 
overweight--almost double the rate of two decades ago. FDA must promote 
good nutrition by allowing consumers access to credible, science-based 
information, and fostering competition based on the real nutritional 
value of foods rather than on portion size or spurious and unreliable 
claims. Such labeling can promote better public health by empowering 
consumers to make smart, healthy choices about the foods that they buy 
and consume. This is a high priority for the Administration to ensure 
that health claims are supported by scientific information. President 
Bush continues to emphasize the improvement of health through better 
diets and lifestyles.
    FDA is undertaking major new efforts to ensure consumers have the 
most up-to-date, truthful information on the benefits and risks of FDA 
regulated products. In this arena, FDA fulfills two complementary 
roles: ensuring that the information sponsors provide about products is 
accurate and allows for their safe use; and, communicating directly 
with the public concerning benefits and risks of products FDA 
regulates.
    FDA's strategic plan calls for the Agency to learn how to more 
effectively communicate the risks and benefits of FDA regulated 
products to consumers, as well as those in the health and medical 
professions. The goal is a well-informed public, empowered to make 
better choices to improve their health. Just this past year, FDA has 
been involved in a number of consumer education campaigns related to 
the prudent use of antibiotics, the misuse of pain relievers, the 
parity between generic and name brand drugs, buying medicines and 
medical products online, and several other campaigns aimed at 
addressing a number of areas where the consumer needs to minimize the 
risks and maximize the benefits of medicine use. FDA also teamed up 
with women's health organizations to raise awareness about hormone 
replacement therapy (HRT). The previous year, we conducted a similar 
campaign to raise awareness about diabetes. We spread the word widely 
about these efforts and we almost always try to provide these messages 
in Spanish to reach as much of the public as possible.
Counterterrorism
    FDA is improving its capability to assess and respond effectively 
to its mission of protecting the security of the Nation's food supply, 
and ensuring the safety and effectiveness of medical products used to 
prepare and respond to biological, chemical, or radiological attacks. 
As Secretary Thompson reported in the July 2003 report entitled, 
``Ensuring the Safety and Security of the Nation's Food Supply,'' the 
Agency is working with other government agencies and the private sector 
to develop and implement a comprehensive strategy to protect the food 
supply from attack. These include additional staff for food safety 
field activities, greater import presence at our Nation's borders, 
threat assessments, and additional money for food security research. 
FDA's medical product centers are also working harder and more 
creatively than ever to speed the availability of the next generation 
of safer, more effective countermeasures to protect Americans against 
biological, chemical, nuclear, and radiological agents of terrorism.
    In fiscal year 2003, FDA implemented a number of fundamental 
enhancements on both the food defense and medical countermeasures 
fronts, in meeting the objectives of this strategic goal. In direct 
response to this heightened threat, and in conjunction with the 
Department of Health and Human Service's larger counterterrorism 
initiatives, FDA has implemented new steps in food defense that 
represent the most fundamental enhancements in the Agency's food safety 
activities in many years. FDA's implementation of four new food 
security regulations prompted by the Public Health Security and 
Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act), 
will be fundamental and long lasting. Two additional regulations are 
expected to be finalized in the near future. The Bioterrorism Act gave 
the Agency some potentially effective tools in identifying, preparing 
for or responding to terrorist attacks on the food supply. The design 
and implementation of these four regulations has also spawned a closer 
working relationship with the U.S. Customs and Border Protection Agency 
(CBP). Our close relationship led to a recent Memorandum of 
Understanding (MOU) between FDA and CBP in December 2003 that allows 
FDA to commission thousands of CBP officers to conduct, on FDA's 
behalf, investigations and examinations of imported foods in accordance 
with the prior notice requirements. This cooperative arrangement with 
FDA's sister enforcement agency was in addition to a more than six-fold 
increase in the number of field examinations of imported foods from 
fiscal year 2001 to fiscal year 2003 (78,000) conducted by FDA 
inspectors and our state partners. Much more needs to be done in this 
area as we note in our Congressional budget request for an increase of 
$65 million.
    Protecting consumers against terrorism also requires that Americans 
have access to safe and effective medical countermeasures. This year, 
FDA has worked closely with scientists and product developers and has 
taken new steps to speed the development of these safe, effective 
treatments and preventive vaccines. FDA works closely with NIH, CDC, 
DHHS, DOD and industry to develop new and improved treatments and 
vaccines to counter smallpox, anthrax, and other potential emerging 
biowarfare and public health threats.
    FDA has had to become more proactive in identifying possible 
products for approval for medical countermeasures due to the fact that 
no known group of patients are currently affected by many of the 
conditions linked to biological, chemical, or radiological agents. So, 
in fiscal year 2003, the Agency issued new guidance on the development 
of Radiogardase (``Prussian Blue'') for treatment of internal 
contamination with thallium or radioactive cesium. Several months 
later, a firm submitted an application and FDA approved Radiogardase to 
treat people exposed to radiation contamination from harmful levels of 
cesium-137 or thallium after identifying existing safety and efficacy 
data. FDA has worked with other government agencies to facilitate the 
development of counter-terrorism products, such as vaccines and immune 
globulins against anthrax, smallpox, and botulism, by resolving 
regulatory issues and developing assays for potency testing. FDA also 
took various steps to make sure that manufacturers of medical 
countermeasures are following Current Good Manufacturing Practices 
(CGMPs). In 2003, FDA determined that CGMP inspections were lacking for 
27 manufacturers of identified medical countermeasures, and the Agency 
took action to address this. Even without the legislation creating 
Project BioShield, an act designed in part to provide incentives for 
developing safer, more effective countermeasures, FDA will remain the 
only governmental Agency involved with the approval of products 
necessary to prevent or treat human exposure to these terrorist agents. 
We hope this Subcommittee supports our $5 million request in fiscal 
year 2005.

A Strong FDA
    The final goal of our Strategic Plan revolves around our world-
class, professional workforce that is highly dedicated and committed to 
making a difference. FDA is aware of the need to maintain the highest 
level of public trust in its activities. I believe this component of 
our plan is the bedrock and the most critical component for the success 
of the Agency. For that reason, the Agency must adequately develop and 
support its cadre of experienced physicians, toxicologists, chemists, 
biologists, statisticians, mathematicians, and other highly qualified 
professions. Since 2001 and into the foreseeable future, we have 
continually sought new opportunities to improve our management, and 
efficiencies in our organization, infrastructure and information 
technology. The practice of efficient risk management certainly applies 
here as we must strive to adopt management practices that make the 
Agency's core programs most efficient. The fiscal year 2005 request 
fully funds the $33.1 million ($20.6 million of which is budget 
authority) to complete a part of the work force consolidation at White 
Oak, Maryland.
    FDA's adherences to the strategies and goals of the President's 
Management Agenda have brought about real and positive change toward 
improving the management of the Agency. These five goals are Strategic 
Management of Human Capital, Competitive Sourcing, Improved Financial 
Performance, Expanded E-government, and Budget and Performance 
Integration. Over the past year, FDA management achieved a number of 
milestones in the area of ``Strategic Management of Human Capital,'' 
including the development and phased stand-up implementation of the new 
shared service organization (SSO). Consolidation into the SSO, combined 
with improved business processes, will allow FDA to maintain 
administrative service levels with substantially fewer staff. Another 
area of continued progress is towards the goal of ``improved financial 
performance.'' Due to this Subcommittee's continued support, the Agency 
is making progress towards the eventual replacement of its obsolete 
legacy accounting systems. The Department-wide Unified Financial 
Management System will integrate financial management to provide more 
timely and consistent information, and promote the consolidation of 
accounting operations that will substantially reduce the cost of 
accounting services. In addition, FDA has continued its progress 
towards the consolidation of its IT infrastructure by collaborating 
with HHS toward achieving its ``One HHS'' goals and objectives. FDA 
also competed six agency support functions in fiscal year 2003 to 
determine the most efficient organization for running and managing each 
function. The agency determined that the in-house operations for all 
six functions were the most efficient organizations for providing their 
respective services. We estimate savings of $16.3 million over a 5 year 
performance period from just these six organizations. These are just a 
few examples of FDA's outstanding progress in making efficient use out 
of limited resources, and practicing efficient risk management.

Fiscal year 2005 Budget Request
    As I noted earlier, adequate funding of the Agency's highest 
priorities is vital to our success. Our fiscal year 2005 President's 
budget request totals $1.845 billion, including $1.495 billion in 
budget authority and $350 million in user fees. The Administration 
proposes both increases and savings related to the President's 
initiatives for a net budget authority increase of $108.8 million above 
the fiscal year 2004 Appropriation. Requested increases cover: Cost of 
Living, Food Defense, Medical Device Review, Medical Countermeasures, 
Bovine Spongiform Encephalopathy prevention, and the Agency's 
relocation of the Center for Drugs to the consolidated campus. 
Additionally, the budget includes management savings achieved through 
administrative efficiencies and savings achieved by using carryover 
funds from our Buildings and Facilities account. The user fee increases 
total more than $40 million. This proposed budget will support a total 
of nearly 10,800 full time employees.

Cost of Living
    Adequate annual pay increases are essential to allow FDA to fully 
utilize programmatic increases. More than 60 percent of FDA's budget 
goes toward paying our highly skilled scientific workforce, far more 
than some Agencies. FDA's labor percentage is higher due to a number of 
reasons, but most importantly because the Agency's diverse workload 
requires numerous interdependent specialists in each of the Agency's 
product areas, the inspectional responsibilities require great 
geographic diversity to perform duties across the country and around 
the world, and the number of personnel necessary to monitor the entire 
life-cycle of all products under the Agency's purview (e.g., clinical 
drug trials to drug application review to advertising of approved 
product to actual effect of drug on patient's health). The lack of cost 
of living increases has the potential to limit or nullify other 
targeted increases towards high priority Administration, Congressional 
and/or mission critical initiatives.
    FDA is thankful for this Subcommittee's involvement in providing 
the Agency with additional funding to cover the cost of inflationary 
pay increases between fiscal year 2002 and fiscal year 2004. We 
approach you once again and request that you provide a $14.4 million 
increase representing a congressionally approved 4.1 percent cost of 
living increase for calendar year 2004 as well as a 1.5 percent 
increase for calendar year 2005 as proposed by the President.

Food Defense
    As I noted earlier, Food Defense is a major component of FDA's 
strategic goal to protect America from terrorism as it relates to foods 
and medical products under our purview. I am also pleased to report 
that this Subcommittee's support in the hiring of 655 new field staff 
through the fiscal year 2002 supplemental appropriation as well as the 
increases provided in fiscal year 2003 is beginning to produce positive 
results.
    Despite some significant progress over the past year with the rapid 
implementation of the food registration and prior notice regulations 
and systems, increased training and outreach, record amounts of import 
examinations, expanded research programs, daily intelligence briefings 
of FDA officials, etc., additional steps need to be taken to fully 
prepare our Nation to handle various types of intentional attacks on 
the food supply.
    FDA has spent an extensive amount of time over the past year 
coordinating this multifaceted plan with the White House Homeland 
Security Council, the Department of Homeland Security, and the USDA. 
The result is a joint budget developed with USDA and DHS for food 
defense to protect the agriculture and food sectors. Based upon the 
Administration's current knowledge, ability to respond, and capacity to 
handle an actual attack, FDA requests $65 million in increased funding 
to shore up five key areas--$35 million for the Food Emergency Response 
Network [FERN], $15 million for research, $7 million for inspections, 
$3 million for incident management, and $5 million for biosurveillance. 
The investments in these particular areas will help develop awareness 
amongst the various components of the food sector, build upon existing 
surveillance tools, institute prevention techniques to shield against 
an attack, prepare for an attack, and provide the capacity to respond 
if such an event should occur.
    It is also vital that the Agency has the capability to coordinate 
and handle a food defense response with state and local governments and 
other Federal agencies. We are seeking to build a food defense 
laboratory network among states, part of a system called FERN. FERN is 
comprised of labs specializing in food testing for biological, chemical 
and radiological threat agents and these laboratories will have the 
capacity to rapidly test a large number of food products. We need to 
make a distinction here between a corresponding network of labs handled 
by the Centers for Disease Control and Prevention. CDC is in charge of 
the Laboratory Response Network that primarily handles clinical testing 
of human specimens such as blood or urine.
    Another system we will build upon with our fiscal year 2005 request 
is the Electronic Laboratory Exchange Network or eLEXNET. This network 
is the Nation's first seamless, integrated, secure, web-based data 
exchange system for food testing information. eLEXNET allows health 
officials at multiple government agencies engaged in food safety 
activities to compare, share, and coordinate laboratory analysis 
findings on food products. Whereas FERN laboratories are involved in 
the actual analysis of food samples, eLEXNET provides a forum for the 
exchange of laboratory data. FDA is continuing efforts to expand 
eLEXNET to provide better nationwide data on food product analyses by 
regulatory agencies.
    Between fiscal year 2001-2005, FDA will increase the number of 
import food inspections from approximately 12,000 to 97,000. Along with 
increased inspectional needs, FDA must take the lead in conducting or 
overseeing research projects that help us understand the effects of 
contaminated food supplies on people. There are some hostile agents 
capable of entering our food supply that we don't know how they will 
react in humans. This is a complex challenge and we must conduct 
calculated risk assessments and then use limited resources to study 
human food consumption contaminated with these agents. Our food defense 
task is challenging and we will make a concerted effort to gain a 
greater understanding of these threats to the food supply. We currently 
have over 90 research projects devoted to identifying food adulteration 
and we hope to improve testing and identification with these projects.

Bovine Spongiform Encephalopathy (BSE)
    Although 150 deaths in Europe from variant Creutzfeldt-Jakob 
disease (vCJD) are linked to consumption of beef from cows with BSE, 
the economic impact to the farming communities was also devastating. 
The European Union estimated the cost of BSE contamination in affected 
countries to reach $107 billion and Canada's recent discovery was 
costing an average of $11 million a day in lost exports. The 
Administration is acting vigorously to limit the distribution or spread 
of any products suspected of carrying BSE following the December 23, 
2003 discovery of a Holstein cow with BSE in the state of Washington. 
On January 26 of this year, FDA announced several new public health 
measures to strengthen the five existing firewalls that protect 
Americans from exposure to the agent thought to cause BSE. FDA intends 
to ban from human food, dietary supplements, and cosmetics a wide range 
of bovine-derived material so that the same safeguards that USDA 
implemented for meat products, also apply to food products that FDA 
regulates. FDA will also prohibit certain feeding and manufacturing 
practices involving feed for cattle and other ruminant animals. The 
Agency will strengthen its current controls and implement these new 
protections by publishing two interim final rules.
    In fiscal year 2004, the base budget is $21.5 million for BSE 
activities across all FDA programs. In fiscal year 2005, we request 
$8.3 million for a total of $29.8 million in total funding for this 
initiative. With the increased funding, we will undertake a trilateral 
approach of increased inspections, enforcement activities, and 
education. The requested resources will enable the Agency to increase 
field BSE inspections, sample collections and analyses; increase 
targeted sample collections and analyses of both domestic and imported 
animal feed or feed components; fund 2,500 more state inspections of 
animal feed firms; conduct industry outreach to better inform industry 
of responsibilities and opportunities to prevent BSE from contaminating 
animal feed; and strengthen the states' infrastructures to monitor, and 
respond to, potential feed contamination with prohibited materials. The 
Administration believes that an $8.3 million request is a relatively 
modest increase in light of the potential health benefits and cost 
savings that can be achieved with these resources.

Medical Device
    Review FDA is committed to ensuring that the Medical Device User 
Fee and Modernization Act (MDUFMA) performance goals are met and that 
the strongest and most effective medical device review program possible 
is available. The Administration requests a budget authority increase 
of $25.5 million for a total of $217 million, the amount needed to 
match the original levels specified by law for fiscal year 2005. On 
October 29, 2003, OMB Director Josh Bolten wrote to Congress describing 
the Administration's commitment to support this program at the level 
intended by MDUFMA in fiscal year 2005 and beyond. Within the approach 
outlined by Mr. Bolten, the Agency is committed to meeting the original 
MDUFMA performance goals.
    As you know, MDUFMA requires that $205.7 million be appropriated in 
budget authority each year for FDA's Center for Devices and 
Radiological Health and related field activities, adjusted for 
inflation (CPI). The President's fiscal year 2005 budget meets the 
MDUFMA threshold for fiscal year 2005 appropriations requirements. We 
look forward to working with Congress to modify MDUFMA to preclude the 
requirement to appropriate the entire ``shortfall'' from fiscal year 
2003 and fiscal year 2004, in order to continue the user fee program 
beyond fiscal year 2005. FDA is committed to achieving the performance 
goals of MDUFMA.
    In fiscal year 2005, FDA will utilize the appropriated increases to 
build upon the success in fiscal year 2003 and fiscal year 2004. In 
fiscal year 2003, FDA invested user fee and appropriated dollars in a 
number of ways that will contribute to the ultimate improvement in the 
review process in later years, including the hiring of more than 50 new 
scientific, medical, engineering, and other review staff and the 
development of process improvements to speed review from beginning to 
end.

Medical Countermeasures
    Counterterrorism is a major priority for the FDA and the Department 
of Health and Human Services. Speeding the development of safe medical 
countermeasures to improve protection against terrorism and emerging 
diseases requires that Americans have access to safe and effective 
medical treatments. Prior to September 11th, FDA had been engaged in 
coordinated efforts with other Departments to develop and make 
available better countermeasures for biological, chemical and 
radiological attacks. The urgency is far greater now and so in fiscal 
year 2005, FDA will continue to work closely with scientists and 
product developers and take new steps to speed the development of these 
safe, effective treatments. FDA requests $5 million to expedite the 
review of new drug applications, biologics license applications, 
generic drugs and over-the-counter medical product countermeasures. The 
Agency must get involved in each facet of the process from animal 
studies to dosing requirements to the development of postmarket systems 
that will be in place to ensure rapid reaction to adverse events. These 
initiatives are all necessary to ensure that adequate treatments are 
available for a wide assortment of threats. One of these initiatives is 
Project BioShield, a program designed to help ensure that medical 
products are reviewed and approved for safety and effectiveness in the 
event of war or catastrophic events. The first request for proposals 
for procurement of a new generation anthrax vaccine through Project 
BioShield will be initiated shortly.

Center for Drugs Relocation
    I can only imagine that it is difficult for members of this 
Subcommittee to write home about the funding you helped secure for 
FDA's consolidation of its Washington, D.C. metro area Headquarters 
Offices from 16 locations to three. However, I think they would be 
happy to hear that the eventual settling into the three new sites in 
White Oak, Laurel, and College Park, MD, create greater economies of 
scale and operational efficiencies. The bottom line is that you will 
save the American taxpayers money when this project is complete. 
Although substantial facility needs at White Oak are mostly addressed 
through the GSA appropriation, FDA must continue to seek your support 
for relocation costs. In accordance with the President's Management 
Agenda, the FDA plans to modernize document handling, use shared 
library and conference facilities, reduce redundancies in a wide range 
of administrative management tasks, convert to a single computer 
network, and reduce management layers. Without the requested funds, 
these management improvements and efficiency gains would be 
jeopardized.
    This current plan calls for the relocation of 1,700 drug review 
personnel in April of 2005. The budget funds the total need for this 
move, $33.1 million, and the request includes an increase of $20.6 
million in new budget authority. The remainder would come from $2.4 
million in the base budget, and $10 million in PDUFA user fees. The 
General Services Administration has requested $89 million in their 
fiscal year 2005 budget request to continue construction on the campus. 
If GSA's subcommittee approves the full request, the building 
construction would proceed as schedule. However, if GSA does not 
receive its full request for White Oak, it would have severe financial 
consequences for FDA. In a 2003 GAO report entitled ``Federal Real 
Property: Executive and Legislative Actions Needed to Address Long-
Standing and Complex Problems,'' the report spells out the Federal 
Government's problems in managing property, including the inefficient 
use of space. FDA would be faced with paying unnecessary rental 
payments for multiple properties unless the funding of construction and 
relocation costs are synchronized as is currently the plan.

User Fees
    In fiscal year 2005, the Agency expects to collect $350 million in 
user fees, primarily from PDUFA, MDUFMA, and ADUFA fee programs. These 
user fee programs provide substantial funding that compliment budget 
authority resources and allow FDA to meet agreed upon performance 
measures that allow for more rapid reviews of human drugs, medical 
devices and animal drugs. Additionally, the Agency collects modest fee 
amounts for the Mammography Quality Standards Act program as well as 
export certification and color certification programs.
President's Management Agenda & Administrative Consolidation
    FDA has been very proactive in streamlining its operations and 
reducing its administrative expenses. Since November 2001, the Agency 
has worked with the Department of Health and Human Services to do its 
part to comply with the President's goal to improve the Strategic 
Management of Human Capital across the Federal Government. We have 
demonstrated tremendous success in efforts to delayer our 
organizational structure, consolidate FDA's decentralized Human 
Resources (HR) services to a single FDA HR office which has 
consolidated into the HHS Rockville HR Center; implement a shared 
services organization that makes best use of administrative resources; 
plan for consolidated facilities at White Oak Maryland, consolidation 
of IT activities, and, find efficiencies via competitive sourcing or A-
76 studies. Thanks to your support, we also continue to improve 
financial management at FDA through the planned implementation of a new 
financial system. In fiscal year 2005, FDA proposes its second straight 
year of reductions by way of $23.1 million in savings achieved through 
a seven and a half percent reduction in administrative staff, or a 
combined reduction of 15 percent between fiscal year 2004 and fiscal 
year 2005. In addition, no request is being made this year in the 
Buildings and Facilities appropriation. This represents a savings of $7 
million that was devoted to higher priority programs. Approximately 
$4.6 million in carryover funds will sustain the program through fiscal 
year 2005.

Conclusion
    I thank you for your commitment and continued support of FDA. I am 
confident that the information I provide to you today, and any 
additional information provided to the Subcommittee following this 
hearing, will give you further evidence of the Agency's needs in fiscal 
year 2005, and justify the requested increases these priorities. Thank 
you for the opportunity to testify today. I look forward to working 
with all of you and your staffs in the months ahead.

    Senator Bennett. Thank you, sir.
    We appreciate all of you.

                          PROPOSED LEGISLATION

    Mr. Bost, there are several requests in the budget for 
legislative language. One, you have requested a legislative 
proposal to exclude special pay for military personnel deployed 
in a designated combat zone if that pay was not received 
immediately prior to deployment. And second, a request for new 
legislative language to allow for indefinite funding authority 
for the Food Stamp Act.
    Could you furnish the committee with a written explanation 
in both of these cases? Senator Kohl and I have determined that 
we are not going to legislate on an Appropriations Bill without 
the complete cooperation of the members of the authorizing 
committee. You have asked us to do this when it is within the 
purview of the authorizing committee. So I think a clear 
written statement on those two things would be helpful to us as 
we make our decision as to whether or not we are going to 
proceed on that.
    Mr. Bost. Certainly Mr. Chairman. I would be more than 
happy to do so.
    [The information follows:]

    The President's fiscal year 2005 budget includes a provision to 
exclude ``special'' military pay when determining food stamp benefits 
for deployed members of the armed services. Current rules count all 
military pay received by the household as earned income in determining 
household eligibility and benefits. Military personnel receive 
supplements, such as combat or hazardous duty pay, to their basic pay 
when they serve in combat, which could reduce a family's benefits or 
make them ineligible.
    The proposal excludes this income as long as it was not received 
immediately prior to deployment. It supports the families of servicemen 
and servicewomen fighting overseas by ensuring that they do not lose 
food stamps as a result of the additional income resulting from their 
deployment.
    This change is being sought in appropriations language for fiscal 
year 2005 when it is most needed. The cost in fiscal year 2005 is $3 
million. Total cost for fiscal year 2005 to 2009 is $12 million if it 
is needed and enacted in all those years. In fiscal year 2005, we 
expect to help 2,900 military families.
    The indefinite authority proposal in the fiscal year 2005 budget 
request for the Food Stamp Program would provide such sums as necessary 
to fund program benefits and payments to States. It would ensure that 
sufficient resources were always available to provide access to the 
program for all eligible persons who wish to participate. Unlike the 
contingency reserve funds, if program costs should significantly exceed 
budget estimates, it would never be necessary to seek a supplementary 
appropriation or implement a benefit reduction. This proposal would 
bring the structure of this critical program in line with other major 
entitlement programs that already have indefinite authority.

    Senator Bennett. Thank you.

                           FOOD GUIDE PYRAMID

    We have talked to you about the pyramid. I seemed to get a 
lot of publicity the last time I did that. You say it is 
currently undertaking a reassessment. Should we just leave it 
at that and say that it is still being reassessed or do you 
have any progress reports you want to share with us?
    Mr. Bost. We do not really have any progress to report at 
this point but I think it is real important to know that the 
first aspect of that is a review of the Dietary Guidelines. 
Secretary Veneman and Secretary Thompson appointed a group of 
leading scientists and they are in the midst--I think they have 
had two meetings and one is upcoming to review the Dietary 
Guidelines. A review of the Dietary Guidelines will fold into a 
review of the Pyramid itself.
    It is going to come as a result of the challenges we are 
facing concerning obesity and it continues to come under a 
great deal of scrutiny.
    I think the challenge is trying to be everything to 
everyone and that is the biggest challenge. Essentially, we eat 
too much and exercise too little. We are trying to move 
everybody in this country toward a healthy lifestyle.
    Senator Bennett. Thank you.

                 LIVE BIRD MARKETS AND AVIAN INFLUENZA

    Mr. Hawks, the Washington Post has run some stories on live 
bird markets and the fact that these markets may be a breeding 
ground for bird flu or avian influenza. Do you have any 
information you could provide to us here about that issue? 
Should we expect the Department to be taking any action with 
respect to the live bird markets?
    Mr. Hawks. Yes, sir, you sure should. As a matter of fact, 
there is almost $13 million in our 2005 budget request to 
address avian influenza. That encompasses the live bird 
markets.
    We are actually, as we speak, moving forward with plans to 
do more surveillance in those live bird markets, and to do more 
surveillance in general with respect to low path avian 
influenza. We are engaged with the States involved and 
certainly recognize the significance of the live bird markets 
and the need to address them.
    We have already, in the past, actually closed those live 
bird markets. We have what we call a holiday in those bird 
markets. We close them for 3 days. We clean, disinfect and 
depopulate those birds that are there.
    It certainly is an area that is of concern to us.
    Senator Bennett. What about those countries that have 
banned poultry exports from the United States because the bird 
flu? Are we doing anything to try to get those markets 
reopened?
    Mr. Hawks. Yes sir, we sure are. We are very much engaged 
in that.
    We have submitted a significant amount of information to 
our trading partners about what we are doing about the 
epidemiological investigations that are ongoing.
    The one that is the most significant is the high path avian 
influenza in Gonzalez, Texas. We have completed our 
surveillance programs there and have found no additional avian 
influenza.
    I will personally be in Mexico City on April 13th, the week 
after next, to engage in continued discussions with my Mexican 
counterparts to try to reinforce our desire for them to open 
the market and follow the appropriate path.

                    BOVINE SPONGIFORM ENCEPHALOPATHY

    Senator Bennett. While we are on the subject of markets, 
that brings us now to BSE, and the request on the part of some 
countries that there be a 100-percent testing of the export 
market. I understand you are working, as you say, with Mexico, 
also Japan. Is 100-percent testing of the export market 
physically possible? Is that a feasible thing?
    Mr. Hawks. Mr. Chairman, we do not think that is the 
prudent thing to do, to test 100 percent for BSE. As a matter 
of fact, Mexico has opened parts of its market to us. We 
continue to move there. But the Japanese market is the one that 
seems to be the most insistent on an increased level of 
testing. We have communicated earlier this week with the 
Japanese our desire to go to the OIE, the Office of 
International Epizootics, with a panel there to look at our 
proposals and their proposals to make sure that we are taking 
the appropriate scientific measures. But we do not believe that 
100-percent testing is the appropriate path.
    Senator Bennett. Thank you.

              RECALL REPORT BY OFFICE OF INSPECTOR GENERAL

    Dr. Murano, I was pleased to hear you talk about the 
dramatic decline in recall, but the Office of Inspector General 
has recently released a report--not that recently, but 
September of 2003--a report critical of several aspects of a 
specific recall in Colorado. Is that a one-of-a-kind situation 
that has been dealt with, or do you feel that the OIG has 
raised some issues that should be examined Department-wide?
    Dr. Murano. Thank you, Mr. Chairman. As you know, that 
particular recall took place in the summer of 2002, and as that 
recall was taking place, we identified right away things that 
we needed to correct to improve our effectiveness at overseeing 
how recalls are conducted by companies.
    We identified a lot of the things that ended up in the OIG 
report, many months later. We certainly did not wait for the 
OIG report to start doing something about it, and I think that 
is what has made a big difference in the results that we see 
now.
    Of course, the OIG takes quite a while to put out their 
reports. I think the report came out, as you said, last fall. 
We obviously had been working very, very diligently to address 
a lot of the issues. We have revised a lot of our directives. 
We have put in place new policies, and instituted new training 
modules for our inspectors. I think the proof of it is the 
recent BSE-related recall that we oversaw, because I think in 
that particular case, we were able to conduct effectiveness 
checks in a way that was certainly an improvement over what was 
done back in 2002.

             MEDICAL DEVICE USER FEE AND MODERNIZATION ACT

    Senator Bennett. Thank you.
    Dr. Crawford, you and I have visited about MDUFMA--I am 
learning the acronyms and how to pronounce them--and as you 
know, I was very supportive of that program, got a commitment 
from OMB. I am pleased to note--and you mention it in your 
testimony--how that is being followed through on.
    There is speculation that we here on Capitol Hill may have 
to go to a year-long continuing resolution if we cannot get the 
appropriations bill through. If they left it to Senator Kohl 
and me, we would get them all through. But people above our pay 
grade seem to have some problem.
    If there is a year-long continuing resolution, what would 
be the impact on MDUFMA?
    Dr. Crawford. Well, Mr. Chairman, we believe that under the 
law we would be required and obligated to continue with the 
user fee program. The problem would be--within the scope of my 
testimony, I mentioned that we will increase the funding for 
the medical device program. The President has asked for the 
increase of funding to $25 million to fully fund this 
particular program.
    Also, within the context of the Administration's budget 
request, we would seek relief from the shortfalls in fiscal 
year 2003 and fiscal year 2004. That probably would not be met 
under a continuing resolution, and so we would have to have 
another plan in place. If the continuing resolution did not 
last too long, I think it would be all right in correcting 
that.
    However, we would be working with OMB to try to get an 
exception under the continuing resolution for this. And I can 
commit to doing that. Working with them is something we always 
do, but we would be particularly interested in getting this 
accomplished.
    I was Acting Commissioner before when we got MDUFMA passed, 
and even though I was here then, I never did learn about the 
acronym. And I appreciate being educated on it.
    I have a real commitment to making this thing work before 
this administration year is up, and I would feel pretty good 
about that.

                           GENERIC BIOLOGICS

    Senator Bennett. A final question. Let's talk about both 
generic versions of biotech drugs and counterfeit drugs. The 
Wall Street Journal ran an article a month or so ago: ``FDA 
Takes Step Towards Allowing Generic Versions of Biotech 
Drugs.'' Are you familiar with that?
    Dr. Crawford. Yes, I am.
    Senator Bennett. Okay. Well, it is clear from reading the 
article that there is much to be learned, and it seems unusual 
to me that FDA is developing scientific guidance on how to do 
something when there is no legal structure by which to do it. 
There are some serious intellectual property and patient safety 
questions.
    First, wouldn't everybody be better off if there was an 
open, transparent, and science-driven process before the FDA 
announces its conclusions?
    Dr. Crawford. Yes, I agree. And I also agree that we will 
need to pay special attention to the regulatory and legal 
framework that will enable this or not enable it to take place.
    When I first testified on this subject some time ago, FDA 
had been in the mode of saying that generic biologics were not 
possible for a number of reasons. Some of them were 
pharmacological, that is, characterizing what is actually in 
the biologic so that it can be transferred from one 
manufacturer to another one, that is, from the pioneer to the 
generic manufacturer. And the second thing was the very legal 
and regulatory constraints that you mentioned.
    But as the science improves, we have no recourse, Mr. 
Chairman, but to be open-minded about it and to receive input 
from the public and from experts in the field, as well as the 
manufacturers. And although we do not know what the path is at 
this point to achieve that or even if it is achievable, we are 
open to suggestions.
    We announced just last week a new initiative at FDA called 
the Critical Path Initiative, in which we are trying to take 
basic research developments and get them from the laboratory to 
the bedside quicker. So we intend a large investment, as much 
as we can afford, in trying to get that kind of thing done. It 
used to be called technology transfer. It is now much more 
complex than that and the tools are better.
    I do not know what the outcome will be. All I can say to 
you is that we are open to suggestions from this committee, of 
course, but from all others.

                           COUNTERFEIT DRUGS

    Senator Bennett. Thank you. And, very quickly, the FDA 
earlier this year issued a report on the issue of counterfeit 
drugs, the efforts of a counterfeit task force. Is that task 
force report now available?
    Dr. Crawford. Yes, it is, and we can make one available to 
the committee. And if we haven't already done that, I 
apologize, Mr. Chairman. But it will be done before very much 
more time passes by, I assure you.
    Senator Bennett. All right. I was going to ask you to list 
the recommendations and so on, but that can be done with the 
submission.
    Dr. Crawford. We will submit that for the record, 
separately if we may.
    [The information follows:]

      Combating Counterfeit Drugs: A Report of the Food and Drug 
                             Administration

                           EXECUTIVE SUMMARY

    The counterfeiting of currency and consumer products are common 
problems that plague governments and manufacturers around the world, 
but the counterfeiting of medications is a particularly insidious 
practice. Drug counterfeiters not only defraud consumers, they also 
deny ill patients the therapies that can alleviate suffering and save 
lives. In some countries the counterfeiting of drugs is endemic--with 
some patients having a better chance of getting a fake medicine than a 
real one. In many more countries, counterfeit drugs are common. In the 
United States, a relatively comprehensive system of laws, regulations, 
and enforcement by Federal and State authorities has kept drug 
counterfeiting rare, so that Americans can have a high degree of 
confidence in the drugs they obtain through legal channels. In recent 
years, however, the FDA has seen growing evidence of efforts by 
increasingly well-organized counterfeiters backed by increasingly 
sophisticated technologies and criminal operations to profit from drug 
counterfeiting at the expense of American patients.
    To respond to this emerging threat, Commissioner of Food and Drugs 
Mark McClellan formed a Counterfeit Drug Task Force in July 2003. That 
group received extensive comment from security experts, Federal and 
State law enforcement officials, technology developers, manufacturers, 
wholesalers, retailers, consumer groups, and the general public on a 
very broad range of ideas for deterring counterfeiters. Those comments 
reinforced the need for FDA and others to take action in multiple areas 
to create a comprehensive system of modern protections against 
counterfeit drugs. FDA discussed those ideas, and considered 
alternatives and criticisms at its public meetings, to develop a 
comprehensive framework for a pharmaceutical supply chain that will be 
secure against modern counterfeit threats. The specific approach to 
assuring that Americans are protected from counterfeit drugs includes 
the following critical elements:

1. Implementation of new technologies to better protect our drug supply
    Because the capabilities of counterfeiters continue to evolve 
rapidly, there is no single ``magic bullet'' technology that provides 
any long-term assurance of drug security. However, a combination of 
rapidly improving ``track and trace'' technologies and product 
authentication technologies should provide a much greater level of 
security for drug products in the years ahead. Similar anti-
counterfeiting technologies are being used in other industries, and FDA 
intends to facilitate their rapid development and use to keep drugs 
secure against counterfeits.
    a. The adoption and common use of reliable track and trace 
technology is feasible by 2007, and would help secure the integrity of 
the drug supply chain by providing an accurate drug ``pedigree,'' which 
is a secure record documenting the drug was manufactured and 
distributed under safe and secure conditions.
    Modern electronic technology is rapidly approaching the State at 
which it can reliably and affordably provide much greater assurances 
that a drug product was manufactured safely and distributed under 
conditions that did not compromise its potency. FDA has concluded that 
this approach is a much more reliable direction for assuring the 
legitimacy of a drug than paper recordkeeping requirements, which are 
more likely to be incomplete or falsified, and that it is feasible for 
use by 2007. Radiofrequency Identification (RFID) tagging of products 
by manufacturers, wholesalers, and retailers appears to be the most 
promising approach to reliable product tracking and tracing. 
Significant feasibility studies and technology improvements are 
underway to confirm that RFID will provide cost-reducing benefits in 
areas such as inventory control, while also providing the ability to 
track and trace the movement of every package of drugs from production 
to dispensing. Most importantly, reliable RFID technology will make the 
copying of medications either extremely difficult or unprofitable. FDA 
is working with RFID product developers, sponsors, and participants of 
RFID feasibility studies to ensure that FDA's regulations facilitate 
the development and safe and secure use of this technology. FDA is also 
working with other governmental agencies to coordinate activities in 
this area.
    b. Authentication technologies for pharmaceuticals have been 
sufficiently perfected that they can now serve as a critical component 
of any strategy to protect products against counterfeiting.
    Authentication technologies include measures such as color shifting 
inks, holograms, fingerprints, taggants, or chemical markers embedded 
in a drug or its label. The use of one or more of these measures on 
drugs, starting with those considered most likely to be counterfeited, 
is an important part of an effective anti-counterfeiting strategy. 
Because counterfeiters will adapt rapidly to any particular measure and 
because the most effective measures differ by product, the most 
effective use of authentication technology will vary by drug product 
over time. FDA intends to clarify its policies and procedures to help 
manufacturers employ and update these technologies safely and 
effectively. In particular, FDA plans to publish a draft guidance on 
notification procedures for making changes to products (e.g., addition 
of taggants), their packaging, or their labeling, for the purpose of 
encouraging timely adoption and adaptation of effective technologies 
for detecting counterfeit drugs. FDA also intends to continue to 
evaluate and provide information to stakeholders on forensic 
technologies (e.g., use of product fingerprinting, addition of markers) 
and other analytical methods that allow for rapid authentication of 
drug products. FDA also plans to support the development of criteria 
that contribute to counterfeiting risk, and/or the development of a 
national list of drugs most likely to be counterfeited based on these 
criteria, to assist stakeholders in focusing their use of anti-
counterfeiting technologies as effectively as possible.

2. Adoption of electronic track and trace technology to accomplish and 
        surpass the goals of the Prescription Drug Marketing Act
    At the time PDMA was enacted the only way to pass on a pedigree for 
drugs was to use paper, which has posed practical and administrative 
challenges. RFID technology, which would provide a de facto electronic 
pedigree, could surpass the intent of PDMA and do so at a lower cost. 
In light of the rapid progress toward much more effective electronic 
pedigrees that can be implemented within several years, FDA intends to 
continue to stay its regulations regarding certain existing pedigree 
requirements to allow suppliers to focus on implementing modern 
effective pedigrees as quickly as possible.

3. Adoption and enforcement of strong, proven anti-counterfeiting laws 
        and regulations by the States
    Because States license and regulate wholesale drug distributors 
they have an important role in regulating the drug distribution supply 
chain. The FDA is working with the National Association of Boards of 
Pharmacy on its effort to develop and implement revised state model 
rules for licensure of wholesale drug distributors. Such rules will 
make it difficult for illegitimate wholesalers to become licensed and 
transact business, thus making it easier to deter and detect channels 
for counterfeit drugs. Some states have already reduced counterfeit 
threats by adopting such measures. FDA will continue working with NABP 
and states to facilitate adoption of the Model Rules.

4. Increased criminal penalties to deter counterfeiting and more 
        adequately punish those convicted
    Although increased criminal penalties would not affect FDA's 
regulatory framework for overseeing the U.S. drug supply, they would 
provide an added deterrent to criminals who work to counterfeit our 
citizens' medications. FDA has requested that the United States 
Sentencing Commission amend the sentencing guidelines to increase 
substantially the criminal penalties for manufacturing and distributing 
counterfeit drugs and to provide for enhanced penalties based on the 
level of risk to the public health involved in the offense.

5. Adoption of secure business practices by all participants in the 
        drug supply chain
    Effective protection against counterfeit drugs includes actions by 
drug producers, distributors, and dispensers to secure their business 
practices such as ensuring the legitimacy of business partners and 
refusing to do business with persons of unknown or dubious background, 
taking steps to ensure physical security, and identifying an individual 
or team in the organization with primary responsibility for ensuring 
that effective security practices are implemented. The wholesalers have 
already drafted a set of secure business practices and FDA will 
continue to work with other major participants of the drug supply chain 
to develop, implement, and disseminate such business practices, through 
such steps as issuing guidance and supporting the development of 
industry best practices. To help ensure secure business practices, FDA 
intends to increase its inspection efforts of re-packagers whose 
operating procedures place them at increased risk for the introduction 
of counterfeit drugs.

6. Development of a system that helps ensure effective reporting of 
        counterfeit drugs to the agency and that strengthens FDA's 
        rapid response to such reports
    If counterfeit drugs do enter the American marketplace, procedures 
should be in place to recognize the hazard and alert the public quickly 
and effectively. FDA plans to take new steps to encourage health 
professionals to report suspected counterfeit drugs to FDA's MedWatch 
system. FDA also intends to create a Counterfeit Alert Network to 
provide timely and effective notification to affected health 
professionals and the public whenever a counterfeit drug is identified.

7. Education of consumers and health professionals about the risks of 
        counterfeit drugs and how to protect against these risks
    FDA will develop educational materials, including new tools on the 
FDA website at www.fda.gov, new public service announcements, and new 
educational partnerships with consumer and health professional 
organizations, to help consumers avoid counterfeits. FDA will enhance 
its educational programs for pharmacists and other health professionals 
about their role in minimizing exposure to, identifying, and reporting 
counterfeits.

8. Collaboration with foreign stakeholders to develop strategies to 
        deter and detect counterfeit drugs globally
    Counterfeit drugs are a global challenge to all nations, and 
criminal counterfeiting operations are increasingly operating across 
national borders. FDA intends to work with the World Health 
Organization, Interpol, and other international public health and law 
enforcement organizations to develop and implement worldwide strategies 
to combat counterfeit drugs.
    The steps described in this report are intended to secure the 
safety and of the U.S. drug supply, which the FDA regulates. The FDA 
does not have the legal authority or resources to assure the safety and 
efficacy of drugs purchased from other countries outside our domestic 
drug distribution system, or from unregulated Internet sites that are 
not run by pharmacies licensed and regulated by U.S. States.

A. Purpose of the Anti-Counterfeiting Initiative
    The actions described in this report are based on the work of an 
internal FDA Counterfeit Drug Task Force \1\, which was formed in July 
2003 by Commissioner of Food and Drugs Mark McClellan, M.D., Ph.D., 
with the goals of:
---------------------------------------------------------------------------
    \1\ The Task Force consists of senior agency staff from the Office 
of the Commissioner (Office of Policy and Planning, Office of External 
Affairs, and Office of the Chief Counsel), Office of Regulatory 
Affairs, the Center for Drug Evaluation and Research, and the Center 
for Biologics Evaluation and Research.
---------------------------------------------------------------------------
  --Preventing the introduction of counterfeit drugs and biologics into 
        the U.S. drug distribution chain;
  --Facilitating the identification of counterfeit drugs and biologics;
  --Minimizing the risk and exposure of consumers to counterfeit drugs 
        and biologics; and
  --Avoiding the addition of unnecessary costs to the prescription drug 
        distribution system, or unnecessary restrictions on lower-cost 
        sources of drugs.

B. Scope of the Problem
    FDA believes that counterfeiting is not widespread within the 
system of manufacturing and distributing pharmaceuticals legally in the 
United States, as a result of an extensive system of Federal and State 
regulatory oversight and steps to prevent counterfeiting undertaken by 
drug manufacturers, distributors, and pharmacies. However, the agency 
has recently seen an increase in counterfeiting activities as well as 
increased sophistication in the methods used to introduce finished 
dosage form counterfeits into the otherwise legitimate U.S. drug 
distribution system. FDA counterfeit drug investigations have increased 
to over 20 per year since 2000, after averaging only 5 per year through 
the late 1990's. (See Figure 1--Chart of FDA investigations) 
Increasingly, these investigations have involved well-organized 
criminal operations that seek to introduce finished drug products that 
may closely resemble legitimate drugs yet may contain only inactive 
ingredients, incorrect ingredients, improper dosages, sub-potent or 
super-potent ingredients, or be contaminated. Thus, drug counterfeiting 
poses real public health and safety concerns today, and may pose an 
even greater threat in the future if we fail to take preventative 
measures now. As counterfeiters continue to seek out new technologies 
to make deceptive products and introduce them into legitimate commerce, 
our systems for protecting patients must respond effectively. 



    Although exact prevalence rates in the United States are not known, 
outside the U.S. drug counterfeiting is known to be widespread and 
affect both developing and developed countries. In some countries more 
than half of the drug supply may consist of counterfeit drugs. For 
example, recent reports have detailed that more than 50 percent of 
anti-malarials in Africa are believed to be counterfeit. In virtually 
all countries, counterfeit drug operations have been uncovered in 
recent years.

C. What is in this Report
    The body of this report contains a range of findings that have 
broad support from industry stakeholders and the public to identify and 
address the vulnerabilities in the U.S. drug distribution system to 
counterfeit drugs.
    This report is based on the potential options discussed in the Task 
Force's Interim Report, the comments FDA received in response to that 
report, our internal discussions, and on information gathered and 
reviewed by the Task Force including:
  --Meetings with government agencies, manufacturers, wholesalers, 
        retailers, professional and trade associations, standard-
        setting organizations, consumer groups, and manufacturers of 
        anti-counterfeiting measures;
  --Reviewing reports prepared by, or on behalf of, Federal and State 
        governments;
  --Sponsoring a public meeting where 72 presentations were made
  --Sponsoring a technology forum which included 54 exhibits
  --Reviewing public comments to the anti-counterfeiting initiative 
        docket
  --Site visits to manufacturing facilities, wholesale distribution 
        centers, retailers, radio-frequency identification (RFID) 
        laboratories and pilot facilities;
  --Attendance at stakeholder task force meetings and industry RFID 
        feasibility study meetings
  --Meetings with academic and industry experts
    Appendix A contains the Counterfeit Alert Network Co-sponsorship 
agreement. See www.fda.gov/oc/initiatives/counterfeit/ for background 
information that was included in the Task Force's Interim Report 
(released on October 2, 2003) as well as a detailed discussion of the 
comments FDA received. Appendix B contains a more detailed discussion 
of the comments FDA received and considered in developing the final 
report.
    The FDA is grateful for the input and universal support, not only 
with regard to the creation of the task force, but also with regard to 
the need for securing the Nation's drug supply.

D. Securing our Nation's Drug Supply
    To secure the U.S. drug supply chain, there are several areas that 
deserve attention, including the areas of technology, business 
practices, legislation, regulation, public awareness and education, 
creation of an alert network, and international cooperation.

                             1. TECHNOLOGY

a. Unit of Use Packaging
            (1) What FDA sought comment on:
    Whether to package all finished dosage form drugs in unit of use 
packaging as appropriate for the particular product (e.g., tablet, 
multi-dose vial) at the point of manufacture?
            (2) What the comments said:
    Comments cited a large number of benefits, including eliminating 
the need for re-packaging and improved patient compliance, as well as a 
large number of costs, including those associated with shifting 
production from bulk packaging. The cost hurdle to counterfeiters, 
created by unit of use packaging, was said not to be high enough for it 
to be effective as a stand-alone anti-counterfeiting measure. A 
detailed discussion of the comments is in Appendix B.
            (3) Discussion:
    Although single unit containers (e.g., blister packs) usually come 
to mind, unit of use packaging is any container closure system designed 
to hold a specific quantity of drug product for a specific use and 
dispensed to a patient without any modification except for the addition 
of appropriate labeling.
    Unit of use packaging does not create a sufficiently high level of 
security to justify its use as a stand-alone anti-counterfeiting 
measure. However, because of its many other benefits, which may vary on 
a product specific basis (e.g., tablets, liquid forms), manufacturer 
initiated cost-benefit analyses of particular products, starting with 
newly approved products and products that are likely to be 
counterfeited, are likely to show that unit of use packaging could be 
effective as one layer in a multi-layered anti-counterfeiting strategy.
            (4) FDA Conclusions:
    Unit of use packaging can be beneficial in fighting counterfeit 
drugs.
  --It would be beneficial for all manufacturers and re-packagers to 
        analyze the costs and benefits of using unit of use packaging 
        for each product, starting with newly approved products and 
        products that are likely to be counterfeited, and to consider 
        implementing unit of use packaging for products where the 
        benefits are equal to or outweigh the costs;
  --Unit of use packaging can be helpful, but only as one layer in a 
        multi-layered anti-counterfeiting strategy;
  --FDA intends to encourage adoption of unit of use packaging by: 
        inviting stakeholders and other interested individuals and 
        organizations to submit research on the relative costs and 
        benefits of unit of use packaging to assist FDA in developing 
        future policy; and encouraging standard setting bodies to 
        develop standards for unit of use packaging with the goal of 
        reducing its costs (e.g., in areas such as size, shape, and 
        pill organization).
b. Tamper Evident Packaging
            (1) What FDA sought comment on:
    Whether to use tamper evident packaging from the point of 
manufacture, for all dosage forms, active pharmaceutical ingredients 
(APIs), and bulk chemicals?
            (2) What the comments said:
    The comments on tamper evident packaging mirrored the comments on 
unit of use packaging.
            (3) Discussion:
    Decisions to employ tamper evident packaging on prescription drug 
containers as an anti-counterfeiting measure require a product specific 
cost-benefit analysis. As with unit of use packaging, FDA does not 
believe that tamper evident packaging presents a high enough hurdle for 
counterfeiters to make it effective as a stand-alone anti-
counterfeiting measure.
            (4) FDA Conclusions:
    Tamper evident packaging may be beneficial in fighting 
counterfeiting of prescription drugs.
  --It would be beneficial for manufacturers and re-packagers to 
        consider using tamper evident packaging for prescription 
        product containers, starting with products likely to be 
        counterfeited or newly approved products, where the benefits 
        are equal to or outweigh the costs;
  --Tamper evident packing can be helpful, but only as one layer in a 
        multi-layered anti-counterfeiting strategy.
c. Authentication Technology
            (1) What FDA sought comment on:
    Whether to incorporate at least two types of anti-counterfeiting 
technologies into the packaging and labeling of all drugs, at the point 
of manufacture, with at least one of those technologies being covert 
(i.e., not made public, and requiring special equipment or knowledge 
for detection) starting with those products at high risk of being 
counterfeited and where the introduction of counterfeit product poses a 
serious health risk;
    Whether to incorporate a taggant, chemical marker, or other unique 
characteristics into the manufacturing process of all drugs that is 
only identifiable with the use of sophisticated analytic techniques 
starting with those products at high risk of being counterfeited and 
where the introduction of counterfeit product poses a serious health 
risk; and
    Whether to issue FDA guidances concerning the appropriate use of 
anti-counterfeiting technologies and the application and review process 
for labeling and packaging changes or product changes such as 
incorporation of taggants, chemical markers, or other unique 
characteristics into the product for the purpose of product 
authentication.
            (2) What the comments said:
    The comments stressed that there was no ``silver bullet'' anti-
counterfeiting technology because sophisticated, well-financed 
counterfeiters can defeat any anti-counterfeiting measure. Therefore, 
the best strategy is to use multiple, periodically changing, 
authentication measures on a product specific basis after doing a risk 
analysis that takes into account the risk that the product will be 
counterfeited and the public health risk if the product is 
counterfeited.
    Given the rapid developments in anti-counterfeiting technology and 
the dangers of aiding counterfeiters by locking in or requiring certain 
technologies, most comments stressed that the FDA should not mandate 
the use of specific anti-counterfeiting technologies.
    FDA issuance of guidance concerning the agency's application and 
notification policies and procedures related to incorporating anti-
counterfeiting measures into products (e.g., taggants), or labeling and 
packaging (e.g., inks, holograms) was universally supported.
    A detailed discussion of the comments is in Appendix B.
            (3) Discussion:
    FDA agrees that the danger of unwittingly assisting counterfeiters 
and stifling technologic development outweigh the benefits that would 
accrue if it were to mandate the use of a specific authentication 
technology at this time. Furthermore, the decision to deploy 
authentication technologies is best made by the manufacturer, based on 
a product specific risk-benefit analysis that, in the future, should 
take into account whether mass serialization and radio-frequency 
identification technology (see below) is being used for tracking and 
tracing the drug.
    However, due to the high costs and technical barriers that 
authentication technologies create for counterfeiters, their use is a 
critical component of any effective multi-layered anti-counterfeiting 
strategy, especially for products that are likely to be counterfeited. 
Therefore, FDA believes that an appropriate role for it is to 
facilitate the use of authentication technologies by reducing any 
regulatory hurdles that may exist relating to their use.
            (4) FDA Conclusions:
    Existing authentication technologies have been sufficiently 
perfected they can now serve as a critical component of any strategy to 
protect products against counterfeiting.
  --The use by manufacturers and re-packagers of one or more 
        authentication technologies on their products, particularly 
        those likely to be counterfeited, would protect the public 
        health and diminish counterfeiting;
  --To facilitate the use of authentication technologies on existing 
        products, FDA plans to publish a draft guidance on notification 
        procedures for making changes to products (e.g., addition of 
        taggants) their packaging, or their labeling for the purpose of 
        deterring and detecting counterfeit drugs;
  --FDA plans to continue to evaluate and disseminate information to 
        stakeholders on developing forensic technologies (e.g., use of 
        product fingerprinting, addition of markers) and other 
        analytical methods that allow for rapid authentication of drug 
        products.
d. Identification of Products likely to be counterfeited
            (1) What FDA sought comment on:
    Are all products at high risk for being counterfeited?
    How can products at high risk for being counterfeited be 
identified?
    What criteria should be used to determine if a product is at high 
risk for being counterfeited?
            (2) What the comments said:
    Although a few comments suggested that all products were at high 
risk for being counterfeited, most of the comments FDA received 
supported the idea of developing criteria by which stakeholders could 
determine which products are likely to be counterfeited and/or 
developing a national list of products likely to be counterfeited based 
on these criteria. There was general agreement that the existence of 
state specific lists, each with its own regulatory requirements, could 
inhibit commerce and adversely affect the availability of drugs. FDA 
notes that the State of Florida has already published a list of 
``specified products'' (i.e., a list of drugs most likely to be 
counterfeited) that is being used to implement state pedigree 
requirements. A detailed discussion of the comments is in Appendix B.
            (3) Discussion:
    Due to the large number of drugs with the potential to be 
counterfeited, FDA does not believe it is possible to create a 
comprehensive list of all such drugs. However, FDA does believe that a 
national list of those drugs most likely to be counterfeited and/or a 
set of criteria to use for determining those drugs would be useful for 
stakeholders to use at their discretion. Uses could include:
  --Assisting manufacturers and re-packagers in making decisions 
        whether to use authentication technologies and unit of use 
        packaging;
  --Assisting wholesalers in developing purchasing policies and 
        allocating resources for detecting counterfeits;
  --Assisting retailers in targeting certain drugs for authentication 
        and patient education prior to dispensing;
  --Assisting states in implementing regulatory requirements;
  --Assisting stakeholders in developing migratory paths to adoption of 
        mass serialization and electronic track and trace technology.
    FDA strongly supports the development of such a set of criteria, or 
a list based on these criteria, that has the support and participation 
of all stakeholders. Regular input from interested parties as well as 
the ability to add or delete drugs from the list on short notice are 
important parts of the process.
    FDA believes that members of regulated industry are better 
positioned at this time than FDA to develop a process for creating, 
maintaining, and updating such a list (and/or set of criteria).
            (4) FDA Conclusions:
    FDA has concluded that there would be great value in the creation 
of a national list of drugs most likely to be counterfeited based on 
factors that are likely to contribute to counterfeiting risk.
  --FDA intends to encourage stakeholders and standards setting 
        organizations to work together to create a national list of 
        drugs most likely to be counterfeited, based on an assessment 
        of criteria for determining counterfeit risk;
  --The best result would be achieved if all stakeholders, including 
        FDA, and other interested parties participate in developing a 
        list, or criteria for determining, drugs most likely to be 
        counterfeited;
  --Any such list, and/or criteria, would be most effective if made 
        publicly available to all stakeholders.
    FDA is aware of only one national list of drugs most likely to be 
counterfeited. The list was developed by the National Association of 
Boards of Pharmacy and is available at www.nabp.org.
e. Radio-frequency Identification (RFID) Technology
            (1) What FDA sought comment on:
    Whether a pedigree for all drug products can be achieved by phasing 
in track and trace technology (i.e., electronic pedigree) starting at a 
case and pallet level for products likely to be counterfeited and 
progressively including all products at the case, pallet, and package 
level; and
    Whether, as an interim measure, prior to widespread adoption of 
track and trace technology all drugs and biologics likely to be 
counterfeited should be tracked and traced either by limiting the 
number of transactions of the product or by using available track and 
trace technology, identifying the drug at the case and pallet level, 
and preferably at the product level, throughout the distribution 
system.
            (2) What the comments said:
    There was universal support for the adoption of electronic track 
and trace technology. RFID was cited as being the technology with the 
strongest potential for securing the supply chain but that it was not 
ready for widespread commercial use with pharmaceutical products. Many 
costs, potential benefits, and unresolved issues related to RFID were 
cited. The potential benefits included the ability to control inventory 
and conduct rapid, efficient recalls, while costs that could hinder the 
adoption of RFID included purchase of tags and other hardware, 
integration into existing information systems, and compliance with 
regulatory requirements (e.g., labeling, electronic records). Important 
unresolved issues included the need to develop standards and business 
rules for RFID, the need to address database management issues, and the 
need to determine the effect of RFID on product quality.
    FDA was also informed that some companies are planning feasibility 
studies concerning business uses of RFID for early this year and that 
other activities related to creating standards, business rules, and 
migratory pathways for RFID are also ongoing. A detailed discussion of 
these activities and other comments concerning RFID is in Appendix B.
            (3) Discussion
    Use of mass serialization to uniquely identify all drug products 
intended for use in the United States is the single most powerful tool 
available to secure the U.S. drug supply. Mass serialization involves 
assigning a unique number (the electronic product code or EPC) to each 
pallet, case, and package of drugs and then using that number to record 
information about all transactions involving the product, thus 
providing an electronic pedigree from the point of manufacture to the 
point of dispensing. This unique number would allow each drug purchaser 
to immediately determine a drug's authenticity, where it was intended 
for sale, and whether it was previously dispensed.
    Although there is general agreement that widespread use of mass 
serialization is inevitable, several important issues remain 
unresolved, including the migratory paths that participants in the drug 
distribution system will follow as they begin to serialize their 
products, and the most likely timeline for widespread commercial use.
    It currently appears that the technology most likely to bring mass 
serialization into widespread commercial use by the pharmaceutical 
industry is RFID, although two-dimensional bar codes may be used for 
some products. RFID technology includes not only the silicon tags 
containing the EPC, but also antennas, tag readers, and information 
systems that allow all users to identify each package of drugs and its 
associated data. This data can be used not only to authenticate drugs 
but also to manage inventory, conduct rapid, targeted recalls, prevent 
diversion, and ensure correct dispensing of prescriptions.
    Acquiring and integrating RFID technology into current 
manufacturing, distribution, and retailing processes will require 
considerable planning, experience, and investment of resources. 
Currently, some manufacturers, wholesalers, and retailers are 
developing business plans and testing mass serialization using RFID 
while others are taking a wait and see approach. Due to rapid 
technologic advancements, the lack of significant market place 
experience with it in the pharmaceutical supply chain, each participant 
is best situated to determine his optimal paths to adopting it.
    Therefore, FDA has identified near term actions, described below, 
for it to take in order to facilitate the performance of mass 
serialization feasibility studies using RFID, and to assist 
stakeholders as they migrate towards the use of RFID technology.
    In the long term, after there is significant market place 
experience with RFID, FDA plans to propose or clarify, as necessary and 
appropriate, policies and regulatory requirements relating to the use 
of RFID. Labeling, electronic records, product quality, and Current 
Good Manufacturing Practices (cGMP) requirements are issues that have 
arisen in connection with RFID. However, regulatory or policy 
determinations regarding these, or other, issues should not be made 
until they can be informed by sufficient data and significant 
marketplace experience with RFID. FDA has also identified a series of 
actions, discussed below, that would help industry stakeholders and 
standard-setting organizations achieve this goal.
    Lastly, stakeholders will need to ensure that they comply with the 
patient privacy protections provided by the Health Insurance 
Portability and Accountability Act as they implement use of RFID 
technology.
            (4) FDA Conclusions:
    The adoption and common use of RFID as the standard track and trace 
technology, which is feasible in 2007, would provide better protection.
  --Due to industry's current initiatives, mass serialization and RFID 
        technology is likely to be adopted according to the following 
        timeline:
    January--December 2004
  --Performance of mass serialization feasibility studies using RFID on 
        pallets, cases, and packages of pharmaceuticals;
    January--December 2005
  --Mass serialization of some pallets and cases of pharmaceuticals 
        likely to be counterfeited;
  --Mass serialization of some packages of pharmaceuticals likely to be 
        counterfeited; and
  --Acquisition and use of RFID technology (i.e., ability to read and 
        use the information contained in RFID tags and the associated 
        database) by some manufacturers, large wholesalers, some large 
        chain drug stores, and some hospitals.
    January--December 2006
  --Mass serialization of most pallets and cases of pharmaceuticals 
        likely to be counterfeited and some pallets and cases of other 
        pharmaceuticals;
  --Mass serialization of most packages of pharmaceuticals likely to be 
        counterfeited; and
  --Acquisition and use of RFID technology (i.e., ability to read and 
        use the information contained in RFID tags and the associated 
        database) by most manufacturers, most wholesalers, most chain 
        drug stores, most hospitals, and some small retailers.
    January--December 2007
  --Mass serialization of all pallets and cases of pharmaceuticals;
  --Mass serialization of most packages of pharmaceuticals; and
  --Acquisition and use of RFID technology (i.e., ability to read and 
        use the information contained in RFID tags and the associated 
        database) by all manufacturers, all wholesalers, all chain drug 
        stores, all hospitals, and most small retailers.
  --FDA plans to assist, to the extent necessary and appropriate, in 
        facilitating the rapid, widespread adoption of RFID in the drug 
        distribution system by working with stakeholders in the 
        following areas:
    --Addressing any regulatory and policy issues related to the 
            performance of feasibility studies;
    --Addressing any regulatory and policy issues relating to the 
            notification requirements associated with implementation of 
            RFID;
    --Addressing any product quality concerns and data issues related 
            to the performance of feasibility studies;
    --Reviewing protocols for feasibility studies;
    --Working with other governmental agencies to coordinate 
            activities;
    --Encouraging stakeholders to convene meetings of supply chain 
            participants to identify, discuss, and propose solutions to 
            technical, business, and policy issues related to the use 
            of RFID technology in the pharmaceutical distribution 
            system; and
    --Exploring the need for any other processes and venues that might 
            be needed to assist stakeholders as they migrate towards 
            the use of RFID technology.
  --FDA intends to regularly review the pace at which RFID is being 
        adopted in the U.S. drug distribution system;
  --FDA plans to publish or clarify, as appropriate, regulatory 
        requirements, policy guidance, and product quality testing 
        requirements related to the use of RFID after sufficient data 
        and marketplace experience with RFID are available to 
        adequately inform our decision-making; and
  --FDA intends to consider taking further steps to facilitate the 
        adoption of mass serialization.
            1. Business steps for industry
    Each industry stakeholder interested in implementing RFID would 
benefit from the following steps:
  --Create an internal team focused on the adoption of mass 
        serialization and use of RFID technology;
  --Perform internal feasibility studies to gain experience with mass 
        serialization and RFID technology and to identify internal 
        business issues requiring resolution;
  --Perform external pilot studies with stakeholders across the supply 
        chain to gain experience using mass serialization and RFID and 
        to identify opportunities, barriers and external business 
        issues associated with them;
  --Develop policy and a business case for the use of mass 
        serialization and RFID;
  --Cooperate and work with other stakeholders and government agencies 
        to develop infrastructure and information systems to use with 
        mass serialization of pallets, cases, and packages of drugs;
  --Participate on standard setting groups developing technical 
        standards and business rules for use of mass serialization and 
        RFID;
  --Work with government agencies and other members of the supply chain 
        to identify and address regulatory and economic issues that 
        could delay the adoption of mass serialization and RFID; and
  --Educate other members of the supply chain and government agencies 
        about mass serialization and RFID.
    To the extent possible, it would be most useful for interested 
firms to perform these actions concurrently. For example, standards 
development requires knowledge gained from feasibility studies in order 
to move forward, and vice versa.
            2. Standards Setting Issues
    Any effort to develop standards for mass serialization of pallets, 
cases, and packages would be most effective if it addressed the 
following issues:
  --Minimum Information Requirements for the serial number--in the case 
        of RFID tags this means containing a mass serialization code 
        that uniquely identifies the object to which it is attached 
        (e.g., minimum of 96 bits of information);
  --Communication protocol standards--in the case of RFID this means 
        standard protocols for interrogating and reading tags;
  --Reader Requirements--Readers of mass serialization codes should be 
        interoperable (e.g., readers must use protocols that allow them 
        to read multiple classes of tags or bar codes, as applicable) 
        and should be able to automatically upgrade software over an 
        information network;
  --Pedigree requirements--this means that databases containing 
        transaction information should be compatible (e.g., format, 
        mark-up language);
  --Information Network Requirements
    --1. Database Structure (e.g., centralized vs. distributive)
    --2. Data ownership
    --3. Data access (to meet business, track and trace, and recall 
            needs)
    --4. Data Access controls to assure information security;
  --Software Requirements--all applications should be compatible and 
        compliant to assure global interoperability; and
  --Best use of Frequencies--(e.g., 13.56 megahertz on packages and 915 
        megahertz on cases and pallets due to interference and read 
        range issues).

            2. REGULATORY INITIATIVES AND STATE MODEL RULES

    All levels of government, in addition to the private sector, should 
take responsibility for ensuring the safety and security of the U.S. 
drug distribution system. Each level has a role in deterring and 
preventing the introduction of counterfeit drugs into the Nation's drug 
supply chain. To complement and build on the technology measures 
described above, regulatory and legislative steps at all levels of 
government may be necessary. At the Federal level, FDA is taking steps 
to meet the objectives of the Prescription Drug Marketing Act (PDMA), 
which is intended to address vulnerabilities in the U.S. drug 
distribution system. At the State level, it would be beneficial for 
states to strengthen their provisions governing wholesale distribution, 
as described below in the revised Model Rules for Licensure of 
Wholesale Distributors. And, FDA plans to pursue increased criminal 
penalties for counterfeiting in the United States Sentencing 
Commission's sentencing guidelines.
A. Prescription Drug Marketing Act (PDMA)
            (1) What FDA sought comment on:
    What are the most effective ways to achieve the goals of PDMA and, 
given recent or impending advances in technology discuss the 
feasibility of using an electronic pedigree in lieu of a paper 
pedigree?
            (2) What the Comments Said:
    Many of the comments that discussed PDMA acknowledged the 
limitations and concerns of full implementation of PDMA. However, many 
comments also supported the use of paper pedigrees for their deterrent 
value and as a means to verify prior sales through due diligence. A 
risk-based approach to implementing PDMA, which focuses on those drugs 
that are at high risk of being counterfeited, was suggested, as well as 
maintaining a full pedigree that documents all sales and transactions 
back to the manufacturer for drugs and high risk. One comment suggested 
an interim solution of ``one forward, one back'' pedigree for high-risk 
drugs. However, a number of the comments noted the high cost and 
incomplete protection provided by such paper requirements, especially 
as a general interim measure; by the time these costly requirements 
were phased in, they could be replaced by a more modern system. A 
majority of the comments supported the eventual use of an electronic 
pedigree for all drug products in the supply chain and indicated that 
an electronic pedigree should be considered as a modern solution to 
fulfilling and exceeding the PDMA goals, and urged FDA to take steps to 
help achieve a reliable pedigree solution as quickly as possible. As 
noted above, FDA believes that substantial progress toward a more cost-
effective solution than incomplete and costly paper pedigrees is 
possible within the next several years. A detailed discussion of the 
comments is in Appendix B.
            (3) Discussion:
    FDA has worked closely with affected parties to identify and 
resolve concerns related to the implementation of the pedigree 
requirements of the PDMA. Through the various public comment 
opportunities over the years, the agency has heard mixed reviews about 
the value, utility, and difficulty of implementing a paper pedigree 
that identifies each prior sale, purchase, or trade of such drug. The 
comments received in response to questions raised in the Interim Report 
confirm that these concerns continue.
    FDA is encouraged by the enthusiasm and interest that stakeholders 
in the U.S. drug supply chain have expressed toward the adoption of 
sophisticated track and trace technologies that are more reliable than 
paper pedigrees. As discussed above, there appears to be movement by 
industry toward implementation of electronic track and trace capability 
in 2007. When this is in place, RFID should be able to function as a de 
facto electronic pedigree that follows the product from the place of 
manufacturer through the U.S. drug supply chain to the final dispenser. 
If developed properly, this electronic pedigree could be used to meet 
the statutory requirement in 21 U.S.C.  353(e)(1)(A) to provide a 
pedigree under certain circumstances.
    In the interim, until the electronic pedigree is in widespread use, 
voluntary adoption of multi-layer strategies and measures discussed in 
this report would reduce the likelihood that counterfeit drugs will be 
introduced into the U.S. drug distribution system. These measures, 
combined with RFID technology, can help provide effective long-term 
protections that will minimize the number of counterfeit drug products 
in the United States distribution system.
    As discussed in a notice published in the Federal Register in 
conjunction with the publication of this report, FDA plans to continue 
to stay the implementation of 21 CFR  203.3(u) and 203.50. However, 
the agency intends to continue to reassess the stay of implementation 
on an annual basis. The agency will monitor closely whether progress 
toward the implementation of electronic pedigrees continues at the 
rapid pace evident in this task force analysis. Our plan to reassess 
the stay annually is part of the agency's strong commitment to see that 
effective product tracing is implemented as quickly as possible. The 
agency also encourages wholesalers to provide pedigree information that 
documents the prior history of a drug product, particularly for drugs 
most likely to be counterfeited, even when the passing of such a 
pedigree is not required by the Act. The suggestion from the comments 
that there be a one-forward, one-back pedigree for high-risk drugs in 
the interim, until an electronic pedigree is uniformly adopted, may 
have merit. However, FDA believes that Congress would have to amend 
section 503(e) of the Act if such a system is to become a requirement.
            (4) FDA Conclusion:
    Adoption of electronic track and trace technology would help 
stakeholders meet and surpass the goals of PDMA. Therefore, FDA intends 
to focus its efforts on facilitating industry adoption of this 
technology within the next few years.
  --To allow stakeholders to continue to move toward the goal of an 
        electronic pedigree, FDA intends to delay the effective date of 
        21 CFR  203.3(u) (definition of ADR criterion) and 203.50 
        (specific requirements regarding pedigree) until December 2006;
  --By December 2006, FDA intends to determine whether to further stay 
        the regulations or take other appropriate regulatory action.
B. Model Rules for Wholesale Distributor Licensing Strengthened
            (1) What FDA sought comment on:
    How should the NABP Model Rules for Licensure of Wholesale 
Distributors (Model Rules) be updated?
    Whether FDA regulations at 21 CFR Part 205, should be updated, as 
appropriate, to make it consistent with updates to the NABP Model 
Rules?
            (2) What the Comments Said:
    The comments overwhelmingly supported strengthening state 
requirements governing the licensure and oversight of wholesale 
distributors. Many comments cited the systemic weaknesses in the 
oversight of the wholesale drug industry and that existing inspection 
and due diligence processes are often insufficient to detect criminal 
activity. Some comments noted the positive steps already taken by some 
states, such as Florida, toward more effective regulation of wholesale 
distributors. For example, Florida has implemented more stringent 
requirements for licensure, stronger penalties, and due diligence 
requirements. Most comments stated that the full adoption of revised 
NABP model rules would improve security nationwide, and that stricter 
uniform standards were desirable across all 50 states so as not to 
create 50 different sets of criteria and rules for licensing. FDA was 
encouraged to revisit the current minimum standards requirements 
described in 21 CFR Part 205 to assess whether a ``Federal floor'' for 
states would enhance or diminish state efforts to meet the NABP 
recommendations. A detailed discussion of the comments is in Appendix 
B.
            (3) Discussion
    FDA is pleased to recognize the recent efforts by NABP in revising 
the Model Rules. The revised Model Rules significantly strengthen the 
requirements for licensure, as well as put in place or fortify 
requirements that will ensure and protect the integrity of drug 
products as they travel through the U.S. drug supply chain from the 
manufacturer to the consumer.
    NABP sought comment from FDA, as well as interested stakeholders, 
in developing the revised Model Rules. The comments that FDA received 
as part of the anti-counterfeiting initiative have been discussed with 
NABP.
    The revision of the Model Rules sought to enhance the protections 
included in the original version of the Model Rules and close existing 
gaps. The table below contains highlights of the revised Model Rules: 


    NABP is taking steps to facilitate implementation of the revised 
Model Rules, including: (1) publishing a list of susceptible products 
and calling for a coalition of national organizations to develop a 
process to maintain and update the list; (2) serving as bondholder for 
wholesalers in order to consolidate the need to hold a bond in all 
states where a wholesaler may do business; and (3) establishing a 
clearinghouse that will list wholesalers who receive accreditation by 
NABP and who have passed an inspection by their newly created 
inspection service, which NABP will conduct in partnership with the 
states. FDA supports NABP's efforts to facilitate adoption and 
implementation of the enhanced Model Rules.
    Counterfeiting is a problem that is not isolated to one state. If a 
state strengthens its licensing requirements while a bordering state 
does not, the counterfeiters and illegitimate wholesalers will likely 
move into the bordering state. Widespread state adoption, 
implementation, and enforcement of the Model Rules would help combat 
counterfeiting.
            (4) FDA Conclusion:
    Because States have an important role in regulating drug 
distributors, adopting and enforcing stronger state anti-counterfeiting 
requirements would help in our collective effort to detect and deter 
counterfeiting.
  --FDA strongly supports the efforts taken by NABP to enhance the 
        Model Rules and other actions taken to facilitate 
        implementation;
  --FDA supports all efforts by the States to adopt these Model Rules. 
        Adoption of the model rules by all States would have a 
        significant impact on protecting the Nation's drug supply by 
        ensuring that all persons and entities involved in wholesale 
        distribution of drug products meet stringent licensing criteria 
        and maintained high ethical and business standards;
  --FDA encourages these state actions and the agency intends to 
        explore whether and to what extent to revise the current 
        minimum standards for state licensing of wholesale prescription 
        drug distributors in 21 CFR Part 205.
C. Higher Penalties for Drug Counterfeiting
            (1) What FDA sought comment on:
    Discuss the advantages and disadvantages of increased penalties for 
counterfeiting drugs
            (2) What the Comments Said:
    There was overwhelming support and unanimous agreement that higher 
penalties for counterfeiting are needed.
            (3) Discussion:
    FDA agrees with comments suggesting that higher penalties deter 
drug counterfeiters.
    Current sentencing guidelines for counterfeit drug distribution are 
not commensurate with the public health threat posed by this criminal 
activity and strengthening the guidelines should help deter such 
conduct in the first instance. Despite the significant threat to public 
health posed by counterfeit drug products, current law provides 
penalties far below the level of some purely economic crimes. For 
example, counterfeiting a prescription drug label (bearing a registered 
trademark) is punishable by up to 10 years in prison, while 
counterfeiting the drug itself is punishable by a maximum of only 3 
years in prison. Therefore, FDA plans to continue to pursue its request 
that the United States Sentencing Commission consider amending the 
sentencing guidelines to substantially increase criminal penalties for 
manufacturing and distributing counterfeit drug products and to 
specifically provide for enhanced penalties based on the level of risk 
to the public health involved in the offense.
            (4) FDA Conclusion
    FDA intends to pursue its request that the United States Sentencing 
Commission consider amending the sentencing guidelines to increase 
substantially criminal penalties for manufacturing and distributing 
counterfeit drugs and to provide specifically for enhanced penalties 
based on the level of risk to the public health involved in the 
offense.
3. Creation of a Counterfeit Alert Network for Information 
        Dissemination and Education
            (1) What FDA sought comment on:
    Whether a counterfeit alert network should be created through use 
of existing, or newly developed, communication tools, that allow 
reception, dissemination, and sharing of information about counterfeit 
drugs in a timely manner;
    What are the capabilities of current communication network, what a 
communication network should have in order to part of a counterfeit 
alert network, and costs associated with developing or adapting current 
systems.
            (2) What the Comments Said:
    The agency received many comments supporting the creation of a 
counterfeit alert network. Most of the comments suggested that the 
agency take steps to build on existing networks and several comments 
offered their organizations' distribution lists or network as a conduit 
for the counterfeit alert network. The agency was advised that the 
counterfeit alert network should not be overused in order to avoid 
alert ``fatigue,'' which could create indifference or doubt regarding 
the importance of the messages. The agency was encouraged to consider 
cost-effective public/private partnerships to design communication 
strategies and facilitate efforts to standardize anti-counterfeit 
communications and to augment and coordinate communication systems. A 
detailed discussion of the comments is in Appendix B.
            (3) Discussion:
    The FDA is committed to informing the public, particularly 
consumers, pharmacists, other health professionals, wholesalers, and 
others involved in the U.S. drug distribution system, about counterfeit 
drug incidents in a timely manner. FDA is also committed to educating 
them about ways to identify and prevent counterfeits from entering into 
this system. To increase awareness of counterfeit drugs and safeguard 
the Nations drug supply, FDA is creating a network of national 
organizations, consumer groups, and industry representatives to deliver 
time-sensitive messages and information about specific counterfeit 
incidents and educational messages about counterfeits in general. The 
network is called the ``Counterfeit Alert Network.''
    Partners in the Counterfeit Alert Network will be required to enter 
into a co-sponsorship agreement with FDA that lays out roles and 
responsibilities. Partners agree to disseminate the FDA time-sensitive 
messages to their members/subscribers/readers in the manner outlined in 
the co-sponsorship agreement, to partner in delivering educational 
messages, and in the case of health professionals, provide a link to 
the MedWatch website to report suspect counterfeits. A copy of the co-
sponsorship agreement can be found in Appendix C.
    The agency plans to maintain a list (as it does now) of additional 
health professional, consumer, and industry organizations, and media 
outlets to notify when an actual counterfeit incident is confirmed and 
what steps to take to minimize risks and remove the product from the 
U.S. distribution system. This will help ensure the widest possible 
distribution to the appropriate audience's.
    FDA met with consumer groups, pharmacy groups, and physician groups 
to determine the type of information that would be most useful to 
receive from FDA in the event of a counterfeiting incident. FDA intends 
to create templates for standardizing the format and content of health 
professional and consumer information in the event of a counterfeit 
incident that can guide outreach efforts in an efficient manner, while 
assuring the flexibility FDA needs to formulate the messages.
            (4) FDA Conclusions:
    FDA will create a Counterfeit Alert Network that links together and 
enhances existing counterfeit notification systems, to provide for 
timely and effective notification to health professionals and consumers 
of a counterfeit event.
  --FDA is creating a counterfeit alert network to partner with 
        national healthcare organizations, consumer groups, and 
        industry representatives to deliver time-sensitive messages 
        about specific counterfeit incidents and educational messages 
        about counterfeits in general, and information about how and 
        when to report suspect counterfeit drug products;
  --FDA plans to develop and execute multi-media informational 
        strategies for specific audiences to ensure that the messages 
        reach the largest number of interested people possible through 
        the network;
  --FDA plans to develop internal guidelines for the informational 
        contents of outgoing FDA messages that will bemost useful to 
        communicate a counterfeiting incident to individual stakeholder 
        groups.
4. Health Professional Reporting Encouraged via MedWatch
            (1) What FDA sought comment on:
    Whether FDA's MedWatch system should be used as a tool to receive 
and disseminate timely information about counterfeit drug products, 
especially identification of suspect drug product?
            (2) What the Comments Said:
    Most of the comments supported the use of MedWatch for reporting 
suspect counterfeit drugs. These comments stated that health 
professionals are familiar with MedWatch and it would be too cumbersome 
and expensive to develop a new system, which people would have to be 
educated to use. One comment believed that reports of possible 
counterfeiting should be separate from MedWatch because it is not 
designed for criminal activity reporting and oversight. Another comment 
stated that because MedWatch is a voluntary reporting system, there 
could be significant under-reporting.
            (3) Discussion:
    For nearly 10 years, MedWatch has been FDA's reporting portal for 
adverse drug reactions and ``product problems.'' These include problems 
with product quality that may occur during manufacturing, shipping, or 
storage, such as product contamination, defective components, poor 
packaging or product mix-up, questionable stability, and labeling 
concerns. If a pharmacist or consumer notices an unexplained change in 
size, shape, color, or taste of their dosage form, or notices that the 
coating is chipped or tablets are cracked, or that the drug is not 
working like it usually does, they may consider that to be a problem 
with their product. These are also characteristics that could occur if 
the product was a counterfeit drug. In fact, in the past, FDA has 
received some reports of suspect counterfeit drugs through MedWatch.
    If a consumer suspects that his or her medicine is counterfeit, 
they are encouraged to contact the pharmacist who dispensed the drug, 
rather than report directly to MedWatch. The pharmacist may have 
information from the manufacturer that the shape, color, or taste of 
the product may have changed, or other information that may be helpful 
in determining if the product may be counterfeit or if the suspicious 
characteristic of the product or its packaging is expected.
    The use of MedWatch is for health professional reporting. This 
would not affect the agreement with the Pharmaceutical Research and 
Manufacturers of America (PhRMA), whereby manufacturers have agreed to 
report counterfeits of their products to FDA's Office of Criminal 
Investigations, within 5 days of becoming aware of the counterfeit.
    FDA has streamlined procedures for processing reports of suspect 
counterfeit drugs. The MedWatch Central Triage Unit (CTU) standard 
operating procedures (SOPs) have been amended to include ``suspect 
counterfeit product'' as a category of reports, so the CTU will know 
where to send the report for expedited processing.
    It is easy and convenient to file a report with MedWatch. All 
reports are confidential and the identity of the reporter is not 
disclosed. FDA encourages reporting using the online reporting form 
that can be found at www.fda.gov/medwatch.
            (4) FDA Conclusion:
    FDA plans to encourage and educate health professionals to report 
suspect counterfeit drugs to MedWatch.
  --FDA plans to encourage and educate health professionals to report 
        suspect counterfeit drugs to MedWatch as an overarching 
        mechanism to report such information;
  --FDA plans to change the instructions for the MedWatch reporting 
        form, both paper and online versions, so reporters will know 
        how and when to report suspect counterfeits. Additionally, FDA 
        plans to amend the MedWatch website description of product 
        problems to include suspect counterfeits. 
        
        
5. Secure Business Practices
            (1) What FDA sought comment on:
    Whether to develop sets of ``secure business practices'' which 
would be voluntarily adopted by manufacturers, wholesalers, re-
packagers, and pharmacies?
    Whether stakeholders should designate an individual or team to 
coordinate security and anti-counterfeiting activities?
    Issuance of an FDA guidance document concerning physical site 
security and supply chain integrity?
    There was no proposal specific to re-packagers. However, FDA 
identified independent re-packaging operations, through several ongoing 
investigations, as a point of entry for counterfeit drugs into the 
distribution system, and some of the proposed options would have had 
the effect of limiting those re-packaging operations.
            (2) What the comments said:
    The comments supported the need for development of secure business 
practices by all stakeholders in the drug distribution chain because 
each stakeholder has a responsibility to ensure that pharmaceutical 
products are authentic. The comments suggested that such practices 
include ensuring the legitimacy of business partners and refusing to do 
business with persons of unknown or dubious background, taking steps to 
ensure physical security, and identifying an individual or team in the 
organization with primary responsibility for ensuring that effective 
security practices are implemented.
    It is critically important that the physical facilities involved in 
the production, distribution, or dispensing of pharmaceuticals are 
secure against counterfeit drugs. In the area of food safety, our 
Center for Food Safety and Nutrition (CFSAN) has issued guidance for 
the food industry on preventive measures that establishments may take 
to minimize the risk that products under their control will be subject 
to tampering or other malicious, criminal, or terrorist actions.
    Although it was acknowledged that re-packagers were required to 
comply with Current Good Manufacturing Practices as set forth in 21 CFR 
210 and 21 CFR 211, due to the involvement of re-packaging operations 
in some recent counterfeiting schemes, FDA was asked to provide more 
oversight and to conduct more frequent inspections of re-packagers.
    See Appendix B for a detailed discussion of actions taken by 
manufacturers, wholesalers, and pharmacists to develop secure business 
practices.
            (3) Discussion:
    Recent counterfeiting cases demonstrate that the current business 
practices of participants in the U.S. drug distribution system are in 
some cases inadequate to prevent the introduction of counterfeit drugs. 
Implementation of secure business practices by participants in the U.S. 
drug supply chain is critical for deterring and detecting counterfeit 
drugs. Therefore, FDA commends and strongly supports efforts to develop 
and implement secure business practices for these participants. FDA 
plans to facilitate and encourage the development of innovative 
approaches to securing business transactions in the drug supply chain. 
The number of stakeholders who have told FDA they are already 
implementing the business practices discussed above is very 
encouraging. In addition to identifying effective security measures, 
the designation of an individual or team to have primary responsibility 
for coordinating security activities helps ensure effective 
implementation.
    FDA agrees that re-packaging operations can be a significant 
vulnerability in the drug supply chain. Although current statutory and 
regulatory requirements allow for appropriate oversight of re-
packagers, FDA agrees that enforcement of those requirements could be 
strengthened.
            (4) FDA Conclusions:
    For government efforts against counterfeit drugs to be successful, 
drug producers, distributors, and dispensers will have to take 
effective actions to secure their business practices.
  --Efforts by stakeholders to develop the secure business practices 
        listed above would help protect the public health and diminish 
        counterfeiting;
  --FDA plans to work with individual stakeholders and groups 
        representing stakeholders, as necessary and appropriate, to 
        continue to develop, make publicly available, and widely 
        disseminate secure business practices;
  --Good security practices include designation of an individual or 
        team, reporting directly to the organization's senior 
        management, to coordinate the security and anti-counterfeiting 
        activities for the organization;
  --FDA supports efforts by pharmaceutical manufacturers, wholesalers, 
        and retailers to secure their physical facilities against 
        counterfeit drugs. FDA plans to issue guidance on physical site 
        security that applies to participants in the U.S. drug 
        distribution system.
  --FDA plans to make its oversight over re-packagers of drugs a higher 
        priority. FDA expects to increase the frequency with which it 
        inspects re-packagers whose operations are found to be at 
        increased risk for the introduction of counterfeit drugs. The 
        increase in frequency will be based on the degree of risk, as 
        determined by applying to re-packaging operations the risk 
        based model FDA is developing for prioritizing inspections of 
        drug manufacturing sites.
6. FDA'S Rapid Response to Reports of Suspect Counterfeit Drugs 
        Streamlined
            (1) What FDA sought comment on:
    Enhancing FDA's internal processes for responding to and 
investigating reports of suspected counterfeit products
            (2) What the Comments Said:
    The comments unanimously supported any efforts by the agency to 
rapidly respond to reports of suspect counterfeit drugs.
            (3) Discussion:
    FDA takes reports of suspect counterfeit products very seriously. 
The agency is proud of its investigative tools and talents and its 
quick response to the public health needs when a counterfeit has been 
reported and has been confirmed. To improve this process, the agency 
evaluated its policies and procedures for responding to reports of 
counterfeit drugs to determine if FDA's response could be more 
efficient. Although FDA has had many positive experiences in responding 
and working with manufacturers and the public, FDA identified several 
ways to further enhance coordination and communication among all 
initial responders within the agency.
    Because different parts of the agency throughout the country may 
receive the potential counterfeiting report, in some instances, it may 
take time for the information to flow to the appropriate people who 
need it to respond efficiently. Therefore, FDA has established an FDA-
wide rapid response protocol for suspect counterfeit drugs that will 
ensure that specified persons/offices/divisions within the agency are 
notified and engaged as soon as possible after the report is made to 
the agency. Policies and procedures have been or will be amended to 
reflect this streamlined information flow and coordination of agency 
response. Increased coordination and communication will help FDA to 
initiate rapidly any criminal or civil investigation, as well as to 
assess the health hazard of the counterfeit situation so the public 
health response can be launched.
            (4) FDA Conclusion:
    To respond rapidly to a report of a suspect counterfeit, FDA is 
further streamlining its internal processes to respond quickly to 
reports of suspect counterfeit drugs by improving coordination and 
communication among all initial responders in the agency.
  --FDA intends to amend its internal SOPs, where appropriate, to 
        provide for more rapid response when a suspect counterfeit is 
        reported;
  --FDA intends to build on lessons learned from working with 
        manufacturers in past counterfeiting experiences to determine 
        how industry/agency collaboration can and should be 
        strengthened.
7. Educating the Public and Health Professionals
            a. Consumers
            (1) What FDA sought comment on:
    As the sophistication of the ``final product'' drug counterfeiting 
operations has increased, the public needs to be more aware of ways to 
identify the risk of counterfeit drugs, receive instructions on ways to 
minimize the chance of receiving fake products and to identify 
potential counterfeits.
            (2) What comments said:
    The comments stated that it is imperative that consumers be 
encouraged to be more proactive in managing their health and be given 
useful tools to be vigilant to help avoid potential counterfeit drugs. 
Consumers should be educated to be aware of noticeable differences in 
their medication, the packaging, or any adverse events. In addition, 
consumers should understand the important role that their pharmacist 
and healthcare providers can play in identifying, reporting, and 
responding to counterfeit drug events. However, the comments warned 
that care should be taken in any education campaign to not 
unnecessarily alarm the public.
            (3) Discussion:
    Despite the growing sophistication of counterfeit drug threats, 
many consumers are not fully aware of these risks. The Agency, in 
conjunction with consumer and patient advocates, as well as industry 
representatives is eager to find additional creative ways to educate 
the public of the potential threat of counterfeit drugs. The messages 
should alert consumers to the risk, offer ways consumers can recognize 
the signs of a potentially counterfeit product, teach them how to 
reduce the risk of exposure and tell them what to do if they suspect 
they have encountered one. Of course, FDA wants to strike an 
appropriate balance in the need to proactively educate consumers 
without causing unnecessary alarm that could interfere with their use 
of prescribed drug regimes. Most important, it is critical to focus 
awareness, and education programs should focus on issues that consumers 
can control.
    FDA has an ongoing educational campaign that is intended to educate 
consumers about the risks of buying medicines online. FDA intends to 
reaffirm this message and focus the educational campaign on teaching 
safe purchasing methods. Particular focus will be placed on encouraging 
the public to seek out the Verified Internet Pharmacy Practice Site 
(VIPPS) seal when purchasing from an online pharmacy.
    In addition, stakeholders indicated that there is a need for 
better, timelier, accurate information about specific counterfeit 
situations. FDA plans to create a counterfeit drug resource page on our 
website. The objective of this webpage is to concentrate customized 
education tools into a resource library that can empower individual 
stakeholder groups.
            (4) FDA Conclusions:
    Educating the consumers about the risks of counterfeits is a 
critical piece in the effort to stop counterfeits from entering the 
stream of commerce.
  --FDA plans to develop additional, multi-layer, consumer-oriented 
        educational materials that will help them learn about 
        counterfeits, what to watch for, and where to turn for useful 
        information if they think they have encountered a suspected 
        counterfeit;
  --FDA plans to re-launch the FDA public service announcement (PSA) 
        campaign for best online buying practices to educate consumers 
        about how to buy drugs online safely, and risks to avoid in 
        online purchasing;
  --FDA plans to house on its www.fda.gov website a comprehensive, 
        consumer-friendly online library that will contain both general 
        and specific counterfeit drug information. It will also contain 
        targeted educational materials for various interest groups that 
        discuss counterfeit issues generally. In addition, the agency 
        intends to develop a new FDA anti-counterfeiting resources icon 
        to increase familiarity with the issue.
            b. Pharmacists and Other Health Care Professionals
            (1) What FDA sought comment on:
    Pharmacists need improved tools to receive information and to 
educate themselves about how to handle these situations and to keep 
abreast of current counterfeit events. They need to know how to 
identify and counsel consumers who might have received counterfeit 
products.
    Physicians, nurses and other health professionals also have contact 
with consumers taking pharmaceuticals and can help identify and counsel 
patients that could have accessed a counterfeit. This will require 
these groups keep up to date on current counterfeit events and know 
steps to take to report situations if a counterfeit is suspected.
            (2) What the comments said:
    Groups representing pharmacists and pharmacies recognize the need 
for pharmacists to take a leadership role in the identification of 
counterfeits, prevention of their introduction into the distribution 
chain, and education of consumers about counterfeits.
    The healthcare community indicated that awareness and education 
campaigns are important if its health professionals are to be active 
participants in the fight against counterfeit drugs.
            (3) Discussion:
    Pharmacists and health professionals can play a major role in 
helping identify counterfeits and preventing their introduction into 
the distribution chain. FDA has been working with pharmacy and medical 
professional groups to develop educational materials for pharmacists 
and other healthcare professionals, including doctors, nurses, and 
physician assistants.
            (4) FDA Conclusion:
    FDA plans to enhance its educational programs for pharmacists and 
other health professionals about their role in minimizing exposure to, 
identifying, and reporting counterfeits.
  --FDA intends to work with pharmacy and health care professional 
        groups to develop materials to help educate their profession on 
        the risk of counterfeits, what to do in case a counterfeit is 
        suspected and ways to aid in educating consumers. This will 
        include development of clear, concise messages and protocols, 
        as well as the establishment of a delivery mechanisms that will 
        help them learn about the threat of counterfeits, what to watch 
        for, and where to turn for useful information in the case of a 
        suspected counterfeit;
  --FDA intends to encourage pharmacy and health care professionals to 
        become partners in the agency's newly established Counterfeit 
        Alert Network;
  --FDA intends to expand its outreach efforts by presenting at or 
        participating in conferences and by publishing articles in 
        professional journals and periodicals that target audiences of 
        doctors, nurses, pharmacist and hospital administrators to 
        educate them about counterfeits and raise awareness of the 
        risks;
  --FDA intends to work with health professional trade groups to 
        identify or improve data collection/reporting systems that 
        could help identify counterfeits as they enter the stream of 
        commerce (i.e, include appropriate questions on the ER patient 
        admission questionnaire that might help diagnose usage of a 
        counterfeit drug.)
8. International Approach
            (1) What FDA sought comment on:
    Strengthening international cooperation in law enforcement efforts, 
identifying counterfeit products, using anti-counterfeiting 
technologies, and educating stakeholders and consumers
    Whether there should be global standards for packaging of 
pharmaceuticals and the use of anti-counterfeiting technologies
            (2) What the comments said:
    The comments supported FDA involvement in global efforts to deter 
and detect counterfeit drugs.
            (3) Discussion:
    The growing global prevalence of counterfeit drugs must be 
curtailed. The steps described in this report are intended to secure 
the U.S. domestic drug supply. However, as long as counterfeit drugs 
exist worldwide, opportunities could arise for counterfeit drugs to 
find their way into the United States. Many countries have taken steps 
to secure their Nation's drugs supply, while others struggle because of 
limited resources, inadequate regulatory infrastructure, or competing 
national health priorities. The World Health Organization (WHO) has 
taken the lead to increase worldwide collaboration and to develop 
strategies to deter and detect counterfeit drugs. There are several 
international criminal enforcement collaborations, such as the 
Permanent Forum on International Pharmaceutical Crime and the Interpol 
Intellectual Property Crimes Action Group. FDA intends to work with WHO 
and other international organizations to develop and implement 
worldwide strategies to combat counterfeit drugs.
            (4) FDA Conclusions:
    FDA will collaborate with foreign stakeholders to develop 
strategies to deter and detect counterfeit drugs globally.
    Below is a table showing when certain anti-counterfeiting measures 
will be available: 



                               APPENDICES

    Appendix A: Counterfeit Alert Network Co-sponsorship Agreement
     Appendix B: More detailed description of the comments received for 
certain issues (where the comments were diverse or lengthy)

                               APPENDIX A
           COUNTERFEIT ALERT NETWORK CO-SPONSORSHIP AGREEMENT

Background
    The U.S. Food and Drug Administration (FDA) is committed to 
informing the public, particularly consumers, pharmacists, other health 
care professionals, wholesalers, and others involved in the U.S. drug 
distribution system, about counterfeit drug incidents in a timely 
manner and educating these parties on ways to identify and prevent 
counterfeits from entering into this system. To increase awareness of 
counterfeit drugs and safeguard the Nations drug supply, FDA will 
create a network of national organizations, consumer groups, and 
industry representatives to deliver time-sensitive messages and 
information about specific counterfeit incidents and educational 
messages about counterfeits in general. FDA also will develop and 
execute informational strategies for specific audiences to ensure that 
the messages reach the largest number of interested people possible 
through the network. The network will be called the ``Counterfeit Alert 
Network.''
    The goals of the Counterfeit Alert Network include, but are not 
limited to:
  --disseminating alert messages to a wide audience about specific 
        counterfeit drug incidents in the United States and measures to 
        take to minimize exposure (e.g., recall information);
  --outlining the roles and responsibilities of consumers, pharmacists, 
        other health professionals, and wholesalers must play to 
        identify counterfeit drugs, report suspect counterfeit drugs, 
        and prevent them from entering the U.S. distribution system; 
        and
  --developing a network of national organizations, consumer groups, 
        and industry representatives to help disseminate the 
        information.

    [INSERT CO-SPONSIOR ORGANIZATION INFORMATION]

Importance of the Partnership to FDA and [Organization]
    This partnership will increase the potential audience of FDA's 
important notifications about specific counterfeit drug incidents and 
messages about how and when to report suspect counterfeit drugs. By 
distributing FDA developed messages through the [ORGANIZATION] 
information system, these messages can reach more than [#] people.

Responsibilities of FDA and [Organization]
    FDA will develop targeted messages, with a particular focus on 
consumers, pharmacists, and other health care professionals when a 
counterfeit drug is found in the U.S. distribution system. FDA will 
also develop educational and informational materials about how to 
detect a counterfeit drug, what to do if a drug is believed to be 
counterfeit, how to report the suspect counterfeit to the FDA, and ways 
to minimize the risk of receiving a counterfeit drug. These materials 
may include: web-based documents, print ads, posters, prepared 
newspaper articles, fact sheets, consumer brochures/pamphlets, and 
informational packets. FDA will provide any logistical and technical 
support, such as writing, layout, designing, and preparing 
illustrations for the products.
    FDA will ensure that all materials are cleared through the Agency 
and the U.S. Department of Health and Human Services before releasing 
material to the [ORGANIZATION] for public distribution FDA will provide 
these materials in a format (hard copy, digital, or electronic) that 
[ORGANIZATION] can use, as appropriate, to create, manufacture, and/or 
have printed in enough quantities to distribute to various audiences. 
FDA will not be responsible for any costs outside of the materials 
already produced by FDA.
    [ORGANIZATION] will distribute in a timely manner FDA's 
notifications about specific counterfeit incidents as an alert through 
an active messaging system (separate email or fax alert 
correspondence). [ORGANIZATION] will facilitate the ability of their 
members/subscribers/website visitors to report suspect counterfeit drug 
products to FDA, e.g., via a link to the FDA Counterfeit Drugs webpage 
or FDA's MedWatch webpage. [ORGANIZATION] will distribute relevant FDA-
educational messages about counterfeits, covering such issues as 
awareness, recognition, prevention, tracking, and authentication of 
drug products.
    The [ORGANIZATION] will pay for the cost, if any, of printing 
materials, posting materials on its website, email distribution, 
renting ad space, and securing print placement in magazines and 
newspapers, as appropriate. [ORGANIZATION] will make clear, in any 
solicitation for funds to cover its share of the distribution costs 
that it, not FDA, is asking for the funds. [ORGANIZATION] will not 
imply that FDA endorses any fundraising activities in connection with 
the event. [ORGANIZATION] will make clear to donors that any gift will 
go solely toward defraying the expenses of [ORGANIZATION], not FDA.
    FDA and the [ORGANIZATION] I will develop a dissemination plan that 
outlines where and how the educational materials and alert messages 
about specific counterfeit incidents will be distributed to various 
audiences.
    FDA and the [ORGANIZATION] will review this agreement in 2 years 
from the original date of this agreement, but either party to this 
agreement can terminate its participation at any time by notifying the 
other party of its intent to do so in writing.

Charges
    The [ORGANIZATION] will not sell any educational materials related 
to this joint effort. [ORGANIZATION] will not impose an enrollment or 
registration fee for subscribers to receive this information.
Independently Sponsored Portions and Endorsements
    All materials and efforts related to the Counterfeit Alert Network 
will be jointly sponsored. FDA staff will not be used to develop, 
promote, or otherwise support any event that is independently sponsored 
by the co-sponsor, although official announcements and brochures may 
contain factual references to the available materials and Counterfeit 
Alert Network messages.
    The [ORGANIZATION] will not use the name or logo of FDA except in 
factual publicity. Factual publicity includes materials provided to 
[ORGANIZATION] on FDA's program and Counterfeit Alert Network 
materials. Such factual publicity shall not imply that the involvement 
of FDA serves as an endorsement of the general policies, activities, or 
products of the [ORGANIZATION]. Where confusion could result, a 
disclaimer should accompany publicity to the effect that no endorsement 
is intended. The [ORGANIZATION] will clear all publicity materials with 
FDA to ensure compliance.

Records
    Records concerning this partnership shall account fully and 
accurately for any financial commitments and expenditures of FDA and 
[ORGANIZATION]. Such records shall reflect, at a minimum, the amounts, 
sources, and uses of all funds.

Public Availability
    This co-sponsorship agreement, as well as any financial records for 
this partnership, shall be publicly available.
Co-Sponsorship Guidance
    FDA and the [ORGANIZATION] will abide by the memorandum of August 
8, 2002, ``Co-sponsorship Guidance,'' issued by the Associate General 
Counsel for Ethics.  DATE FDA Signee DATE NIZAI Director, 
Ethics and Integrity Staff Office of Management and Programs Office of 
Management Food and Drug Administration DATE  deg.

                               APPENDIX B
               EXPANDED DESCRIPTION OF COMMENTS RECEIVED

Technology
            Unit of Use Packaging
    Comments supporting widespread utilization of unit of use 
technology cited:
  --The decreased need for repackaging which is a point of entry for 
        counterfeit drugs;
  --Authentication technologies applied by the manufacturer would reach 
        the dispensing pharmacy and the patient;
  --The lower cost for utilizing unit of use packaging on newly 
        approved drugs;
  --The deterrent value to counterfeiters of the higher costs of 
        duplicating unit of use packages;
  --Improvement in patient safety due to reduction in dispensing errors 
        and better patient compliance; and
  --Increased pharmacist availability for patient counseling (due to 
        reduction in time needed to fill prescriptions).
    Some comments cautioned the FDA against mandating unit of use 
packaging for all drugs citing:
  --The high cost, and length of time, it would take to change 
        production lines from bulk to unit of use packaging;
  --The investment made by many pharmacies in re-packaging and pill 
        counting equipment;
  --The difficulty of packaging certain products (e. g. vaccines, 
        multi-dose liquid formulations) in unit of use form;
  --The need to differentiate repackaging performed under contract to a 
        manufacturer or by a pharmacy (which may achieve market 
        efficiencies) from repackaging by other entities;
  --The need to perform a careful product-by-product cost-benefit 
        analysis on unit of use packaging before creating any 
        requirements;
  --The minimal hurdle that unit of use packaging creates for 
        sophisticated drug counterfeiters;
  --The need to comply with the Consumer Product Safety Commission 
        (CPSC) regulatory requirements for child resistant unit of use 
        packaging;
  --The difficulty some consumers (e.g., arthritic patients) may have 
        in opening unit of use packaging such as some blister packs;
  --The need for pharmacists to modify prescribed quantities to 
        correspond with available unit of use packages which could 
        require changes in state law; and
  --The need to establish standards for such things as size and shape 
        of unit of use packaging in order to minimize patient confusion 
        and address shelf space issues.
Authentication Technologies
    They supported use of authentication technologies as part of an 
overall anti-counterfeiting strategy and stated that authentication 
technologies serve two purposes:
    They make it more difficult and expensive to produce a copy of the 
drug or its packaging and labeling, and
    They provide a means for determining if a specific drug, package, 
or label is authentic.
    Manufacturers of specific anti-counterfeiting technologies provided 
us with descriptions of their products that were extremely valuable in 
helping us understand how they work, their cost, and how they might be 
incorporated into pharmaceutical products, packaging, and labeling or 
used to detect counterfeit products through forensic and other 
analytical methods, including rapid methods.
    Many comments supported the issuance of an FDA guidance document on 
the use of authentication technologies. They stated that there was no 
clear FDA policy specifically targeted to this important subject. They 
suggested that current FDA policies and practices for New Drug 
Applications (NDAs), Abbreviated New Drug Applications (ANDAs), and 
Biologics License Applications (BLAs), supplements, and other 
notification procedures should be clarified so the policies and 
procedures applicable to use of anti-counterfeiting technologies are 
clearly articulated and available in a single document.
    The following points were made regarding the use of authentication 
technologies on drug products, their packaging and labeling:
  --There is no ``silver bullet'' solution--all anti-counterfeiting 
        technologies can be defeated;
  --Because all anti-counterfeiting technologies can be defeated, a 
        more extensive approach utilizing layered overt and covert 
        technologies that are changed on a regular basis is frequently 
        required;
  --Authentication technologies are expensive;
  --Manufacturers should determine which authentication technologies to 
        use, on a product specific basis. The FDA should not require 
        the use of any specific anti-counterfeiting technology. For 
        example: the number and type (e.g., overt, covert) of 
        technologies utilized for a given product need to take into 
        account the type of product (e.g., solid, liquid), use, cost, 
        history of counterfeiting etc.;
  --Repackaging destroys anti-counterfeiting technologies employed by 
        the manufacturer;
  --Incorporation of anti-counterfeiting measures into the product, 
        packaging, and labeling may be subject to application and 
        notification requirements which means that initiating or 
        changing such technology could require a significant time and 
        expense;
  --Although all products are at risk for being counterfeited there is 
        a need to develop criteria or a classification system to help 
        identify those products at highest risk for being counterfeited 
        and thereby assist stakeholders in identifying products that 
        might derive a greater benefit from the incorporation of 
        authentication technologies;
  --The large number of available technologies coupled with the number 
        of different products stocked in pharmacies and the need to 
        change anti-counterfeiting measures make it difficult for 
        pharmacists to be knowledgeable about the technologies used for 
        a product at any given time;
  --Technologies that do not allow for ``real time'' or consumer 
        authentication (e.g., covert technologies known only to the 
        manufacturer and/or the FDA) may have an uncertain benefit in 
        rapid identification of counterfeit drugs.

List of Drugs Likely to be Counterfeited
    Many comments stated that it was important for stakeholders to 
allocate financial resources to protect those products that are most 
likely to be counterfeited. There was agreement that the criteria we 
suggested to identify drugs that were likely to be counterfeited were 
correct. These included:
  --Impact on public health if the drug were counterfeited;
  --Drugs history of counterfeiting;
  --Drugs price;
  --Drugs volume;
  --Drugs dosage form;
  --Drugs clinical uses; and
  --Whether similar products had a history of being counterfeited.
    However, there was no consensus on how to apply these, or other, 
criteria in creating a list of such products.
    As stated above, some comments suggested that instead of developing 
a list of drugs likely to be counterfeited, a set of criteria for 
determining whether a drug was at likely to be counterfeited should be 
created. One proposal for such criteria was:
    A drug has been subjected to a seizure or stop sale notice because 
of counterfeiting, or
    There is documentation that a drug was counterfeited and is the 
subject of an investigation by Federal or State authorities AND
    The product is high cost (e.g., over $200 per dose) or high volume 
(e.g., top fifty drugs), or
    The product is used extensively for treatment of HIV/AIDS or 
cancer, or
    The product is injectable, or
    The product distributed in a special or limited way, or
    There are multiple documented instances of pedigrees not being 
passed with the product
Radiofrequency Identification Technology
    We received a large amount of information on the benefits, costs, 
and unresolved issues relating to RFID. These include:
    Benefits
  --Ability to deter and detect counterfeit drugs;
  --Ability to conduct efficient targeted recalls;
  --Ability to manage inventory;
  --Ability to identify theft;
  --Ability to identify diverted drugs; and
  --Improvement in patient safety by assuring correct dispensing of 
        drugs.
    Costs
  --Purchasing hardware (e.g., tags, readers) and software;
  --Integration into legacy information systems;
  --Database creation, security, and maintenance;
  --Integration of RFID technology into existing manufacturing 
        processes, distribution procedures;
  --Compliance with regulatory requirements (e.g., cGMP, notification, 
        product integrity); and
  --Feasibility studies.
    Unresolved Issues
  --Need for all stakeholders to embrace the technology in similar 
        timeframes in order to realize the full potential of RFID 
        technology including provision of a universal electronic 
        pedigree;
  --Need to develop standards and business rules;
  --Need to address database issues such as structure (e.g., central 
        vs. distributive), ownership, access, and security;
  --Clarification of regulatory requirements pertaining to use of RFID 
        (e.g., cGMP, electronic records, notification); and
  --Need for a flexible migration path to the use of RFID in order to 
        meet the needs of different stakeholders.
    Stakeholder Activities
    We have been informed of several feasibility studies, starting in 
early 2004, that should give members of the supply chain experience 
using RFID as well as provide them with an opportunity to test its 
business uses and identify potential barriers to its acceptance. These 
studies include:
  --Wal-Mart.--Drug manufacturers and wholesalers will attach RFID tags 
        to all bottles of controlled substances;
  --Accenture.--Coordinating a study of RFID involving manufacturers, 
        wholesalers, and retailers that will explore the use of RFID 
        for tracking, tracing, recalls and theft of selected 
        pharmaceuticals;
  --CVS.--Is studying the potential benefits that tagging and tracing 
        pharmaceuticals and prescriptions in a retail pharmacy would 
        have on operating efficiency, quality of patient care, and 
        customer service; and
  --Other feasibility studies using RFID are being planned in Europe to 
        study the use of serialization for authentication at the point 
        of dispensing.
    In addition to feasibility studies, we understand that several 
groups representing many supply chain participants have been meeting to 
discuss ways to facilitate the adoption of RFID. For example the 
Product Safety Task Force (PSTF) convened under the auspices of the 
Healthcare Distribution Management Association (HDMA) is developing 
business requirements and identifying business issues relating to RFID 
technology.
    The PSTF and other stakeholders have informed us that the migratory 
path (or phase in) to widespread use of RFID at a package level could 
vary by stakeholder based on the place of that stakeholder in the 
supply chain (e.g., manufacturer vs. retailer) and on specific costs 
and benefits accruing to that stakeholder (e.g., types of products 
manufactured, number of distribution centers, technology cost per 
product).
    Several migratory paths were mentioned, including:
  --Phasing in use of RFID technology with use at the case and pallet 
        preceding use at the package level;
  --Phasing in use of RFID technology starting with use on pallets, 
        cases, and packages of ``high risk'' products with gradual 
        inclusion of other products at all levels; and
  --Use of RFID technology at the pallet and case level coupled with 
        use of 2-D Bar Codes at the package level with gradual phase in 
        of RFID technology at the package level.
    According to stakeholders, these paths are not mutually exclusive 
and it is likely all of these, and other, paths will be utilized as 
RFID technology becomes more widely adopted.

Secure Business Practices
    Below are some of the secure business practices that have been 
developed by participants in the U.S. drug distribution system.

Manufacturers
    Several manufacturers have announced policies intended to secure 
the supply chain. These policies include:
  --Limiting sales to authorized wholesalers. Authorized wholesalers 
        are defined either as wholesalers who purchase a manufacturers 
        products exclusively from that manufacturer or as wholesalers 
        who purchase a manufacturers product directly from the 
        manufacturer or from other authorized wholesalers;
  --Making the list of authorized distributors publicly available;
  --Ability to audit the sales records of wholesale distributors;
  --Working with dispensing pharmacies to ensure they are aware of the 
        identities of authorized distributors; and
  --Designation of an individual or team to coordinate security and 
        anti-counterfeiting activities.

Wholesalers
    The Healthcare Distribution Management Association (HDMA) released 
a document entitled ``Recommended Guidelines for Pharmaceutical 
Distribution System Integrity'' which set forth a series of recommended 
actions for wholesalers to take prior to and while conducting business 
transactions with other wholesalers. In essence they comprise a ``due 
diligence'' checklist which includes items such as:
  --Obtaining detailed information about the wholesalers licensure, 
        inspection results, history of disciplinary actions, corporate 
        officers, owners, and management personnel;
  --Performing a criminal background check on the wholesaler, its 
        officers, owners, and other key personnel;
  --Obtaining a credit history and information about its business 
        activities, financial status, and liability insurance;
  --Performing a detailed physical site inspection; and
  --Ensure that the wholesaler is in compliance with Federal and State 
        requirements, verifies that the wholesaler is an authorized 
        distributor for the products being transferred or has a process 
        in place for verifying pedigrees.
    Individual wholesalers supported the HDMA guidelines and provided 
FDA with ideas for additional secure business practices including:
  --Not selling pharmaceuticals to other wholesalers at all; and
  --Completely separating the functions of quality assurance and 
        compliance from sales and marketing and requiring quality 
        assurance and compliance staff to perform due diligence on 
        potential business partners.

Pharmacies and Pharmacists
    We have been informed that several organizations representing 
pharmacies and pharmacists are developing secure business practices as 
a guide for pharmacies and pharmacists. One pharmacy group notified us 
that they have already published a list of strategies to use for 
assuring the integrity of pharmaceuticals. This list includes:
  --Staying informed about reports of counterfeit drugs;
  --Contacting wholesalers to get information about the status of their 
        licensure, whether they are authorized distributors, and where 
        they source their drugs;
  --Evaluate pharmacy security;
  --Educate hospital staff;
  --Follow up on patient complaints; and
  --Report suspect products.

Prescription Drug Marketing Act (PDMA)
    A majority of the comments that discussed PDMA noted the 
limitations and concerns of full implementation of PDMA. Such 
limitations include:
  --Paper pedigrees can be forged and counterfeited;
  --Paper pedigrees are logistically difficult to accommodate in the 
        drug distribution system;
  --ADRs are not required to pass pedigree information on to the next 
        purchaser, so subsequent wholesalers are unable to obtain the 
        pedigrees needed to sell their products;
  --The pedigree for a product that circulates several times through 
        the supply chain loses all prior sales history if the drug 
        product is sold to an ADR;
  --The net effect is that secondary wholesalers who cannot obtain 
        pedigrees necessary to legally market drugs could be driven out 
        of business; reducing the number of legitimate distributors in 
        the system, decreasing competition and increasing prices;
  --Manufacturers do not update their lists of ADRs so it is difficult 
        for a wholesaler to obtain ADR status; and
  --Costs of paper pedigrees outweigh the benefits.
    A number of other comments, however, supported the use of paper 
pedigrees for their deterrent value and as a means to verify prior 
sales through due diligence. Comments noted that even forged pedigree 
papers provide an additional opportunity to identify counterfeiters and 
block introduction of counterfeit drugs into the drug supply if 
wholesalers exercise due diligence by tracing the sales through the 
pedigree and identifying the place where the forgery occurred. A few 
comments suggested that FDA should exercise enforcement discretion and 
not take enforcement action against a wholesaler who fails to provide 
pedigree information back to the manufacturer as long as the wholesaler 
provides pedigree information back to the first ADR who received the 
drug from the manufacturer.
    Several comments suggested a risk-based approach to implementation 
of the PDMA, which focuses on those drugs that are at high-risk of 
being counterfeited. Many of these comments suggested that high-risk 
drugs maintain a full pedigree that documents all sales and 
transactions back to the manufacturer. One comment suggested an interim 
solution of ``one forward, one back'' pedigree for high risk drugs. 
This system would be analogous to recent bioterrorism legislation for 
food distributors, whereby participants in the food distribution system 
maintain only those records necessary to identify immediate previous 
sources and immediate subsequent recipients of food. However, comments 
on FDA's food regulations have suggested it will take at least several 
years to phase in the paper recordkeeping requirements. Moreover, in 
contrast to drugs, there are no major steps in development now to 
provide widespread electronic pedigrees for drug products. Finally, as 
noted throughout the riskiest drug products are the ones for which 
modern anti-counterfeiting and track-and-trace methods should be 
implemented soonest.
    Most comments supported the development of an electronic pedigree 
for all drug products in the supply chain and that an electronic 
pedigree should be considered as a long-term solution to fulfilling the 
PDMA requirements codified at 21 CFR 203.50. Given the costs of 
implementing the partial anti-counterfeiting measures included in the 
PDMA, and the expectation of continued significant progress toward 
implementation of modern pedigree systems for drugs, more effective 
modern pedigree systems are likely to be available before it would be 
possible to phase in and achieve compliance with paper pedigree 
requirements.
Model Rules for Wholesale Distributor Licensing
    The comments overwhelmingly supported strengthening requirements 
governing the licensure and oversight of wholesale distributors. Many 
comments cited the systemic weaknesses in the oversight of the 
wholesale drug industry, prior to Florida's implementation of licensing 
reform, that were described in the Florida Grand Jury Report, such as 
issuing licenses without proper background checks and granting licenses 
despite one or more felony convictions. The comments also stated that 
existing inspection and due diligence processes are often insufficient 
to detect criminal activity. As mentioned above, there was uniform 
agreement that the penalties for counterfeiting drugs are insufficient 
to serve as an adequate deterrent.
    Many comments supported the concept of tighter requirements 
generally, while others gave specific suggestions for improvement. Some 
of the specific suggestions included:
  --Detailed and robust applications that provide greater disclosure of 
        information about the applicant and their prior history;
  --Criminal background checks for applicant and company principals;
  --List of prescription drug-related or fraud-related activities that 
        are ``not in the public interest'' such that states should deny 
        licenses to persons with criminal records for these activities;
  --Pre-license inspection of wholesale distribution facilities;
  --Periodic and unannounced inspections;
  --National clearinghouse for information on wholesale licensure 
        status, debarments, exclusions, and/or results of criminal 
        background checks;
  --Bonds of up to $100,000;
  --Requiring all wholesalers to transmit pedigree tracing transactions 
        back to the manufacturer for susceptible products;
  --Non-ADRs must pass pedigree with all drugs with transaction 
        information back to an authorized distributor;
  --Amending the definition of ADR to include those on the 
        manufacturers list, have a written agreement currently in 
        effect with the manufacturer, or has a verifiable account with 
        the manufacturer and minimal transactional or volume 
        requirement thresholds from the manufacturer of 5,000 sales 
        units within 12 months or 12 purchases (invoices) within 12 
        months;
  --Requiring authentication of pedigree if there is reason to suspect 
        that the product may be counterfeit, as well as on a random 
        basis;
  --Migrating to electronic pedigree;
  --More aggressive penalties and enforcement on state and national 
        level;
  --Quickly suspending and/or revoking licenses of violators; and
  --Including due diligence requirements for wholesalers to conduct on 
        its suppliers.
    Most comments stated that the stricter standards should be uniform 
across all 50 states so as not to create 50 different sets of criteria 
and rules for licensing.
    Concerns about several provisions in the new Florida and Nevada 
laws regarding licensing of wholesale distributors were expressed. Some 
of the comments described implementation and logistical problems that 
wholesalers have experienced in these states as a result of the new 
law.
    Some comments encouraged FDA to revsit the minimum standards 
requirements described in 21 CFR Part 205 to create a ``Federal floor'' 
for States to meet. The comments were not uniform, however, on whether 
such a Federal floor might enhance or deter state efforts to implement 
the complete set of NABP recommendations.
Counterfeit Alert Network for Information Dissemination and Education
    The agency received many supportive comments about the counterfeit 
alert network concept. Most of the comments suggested that the agency 
use existing networks and several comments offered their organizations 
distribution list or network as a conduit for the counterfeit alert 
network.
    Some comments offered strategic approaches for the development of 
such a network, including suggested concepts for message delivery. 
Suggestions include using active notification via ``push'' e-mail 
technology, validated and secure systems, easily understood language 
with clear and unambiguous messages, multiple notification systems, 
accessible to all stakeholders, no cost for users, timely, visual alert 
to flag importance, redundant delivery vehicles such as email, fax, 
direct mail, and phone, and have an embedded link to take user back to 
FDA or MedWatch website. The comments also suggested that consistency 
is an important element so there is familiarity in times of emergency 
situations. The agency was warned not to overuse the counterfeit alert 
network in order to avoid alert ``fatigue,'' which could create 
indifference or doubt regarding the importance of the messages.
    The agency was encouraged to consider public/private partnerships 
to design communication strategies and facilitate efforts to 
standardize anti-counterfeit communications and to augment and 
coordinate communication systems. The comments also said that costs to 
FDA and private partners should be kept to a minimum.

    Senator Bennett. Thank you. I appreciate the opportunity to 
ask questions of all four of you, and, again, thank you for 
your service.
    Senator Kohl.

                          WIC CONTINGENCY FUND

    Senator Kohl. Thank you, Mr. Chairman.
    Mr. Bost, last week, when Secretary Veneman was here, I 
noted that States are already starting to take action to 
conserve WIC dollars because they are afraid they do not have 
enough money to finish out this year. I said we have a 
contingency fund to prevent things like this from happening and 
States need to be given as much advance notice as possible if 
contingency fund money will be made available.
    At that time the Secretary said that USDA was aware of the 
problem and was looking into it. It has been a week now and we 
have not heard anything, so I would like to ask you the 
question that we asked her: Do you anticipate using any of the 
contingency fund this year? And when will an announcement be 
made with respect to this issue?
    Mr. Bost. Well, Senator Kohl, it is interesting that you 
ask the question because the money was released to several 
States last night.
    Senator Kohl. Last night.
    Mr. Bost. Last night.
    Senator Kohl. That is great. You know, I cannot imagine----
    Senator Bennett. He knew you were going to ask the 
question.
    Senator Kohl. You cannot respond any more quickly than 
that.
    Mr. Bost. Beg your pardon?
    Senator Kohl. That is terrific.
    Mr. Bost. Well, I think to be perfectly----
    Senator Kohl. So the contingency funding is being made 
available.
    Mr. Bost. Well, actually the States should have it in their 
letter of credit as we speak. They probably received it at 
midnight last night.
    Senator Kohl, I think it is really important to note, too, 
that the issue of tracking that information from the States in 
terms of looking at participation and looking at the food cost 
is it is not an exact science. And we have been following it 
for some time. And we were trying to look at being as judicious 
as we possibly could with those contingency funds, but we did 
release them last night to those States that were in need, and 
they will not have to stop serving any clients that are 
eligible.

                             WIC FOOD COSTS

    Senator Kohl. A follow-up on that. Can you confirm that WIC 
food costs have been higher than anticipated and that the food 
cost assumptions upon which the fiscal year 2005 funding 
request was based are now outdated?
    Mr. Bost. Well, I don't know if I would say that they were 
outdated, but I think the preliminary information that we 
currently have available to us and that we have been reviewing 
would lead us to believe that the overall food costs are a 
little bit higher than estimated.
    The other point I would like to make is that it is not only 
an issue of food cost, but it is also participation rates. In 
some States, the food costs are a little bit higher; in some 
States, it is not. We are watching and tracking it very, very 
closely. It is something that we are very concerned about.
    Senator Kohl. And do you anticipate that this updated data 
and increased participation rate will make it likely that we 
will have to provide some additional resources in fiscal year 
2005 for WIC?
    Mr. Bost. I don't think I have drawn those conclusions at 
this point. It is something we are watching very closely. If we 
see that is indeed the case, we will come and work with you and 
Congress to ensure that the needs of these persons are met.
    Senator Kohl. Good.

                        NATIONAL ORGANIC PROGRAM

    Mr. Hawks, in fiscal year 2004, we provided a significant 
increase in funding to the National Organic Program and 
required that part of the funding be used to meet several 
statutory requirements of the Organic Foods Production Act of 
1990 that have not yet been met. These include directives to 
hire an executive director for the National Organic Standards 
Board, to create an ongoing peer review panel, and to improve 
scientific technical support for the Organic National Standards 
Board.
    Could you comment on the progress of the agency with 
respect to each of these three funding directives?
    Mr. Hawks. Yes, sir. We are making extremely good progress 
toward hiring. I think the executive director is very close to 
being hired. My staff tells me that we are moving judiciously 
in all of these areas with regard to organic.
    Senator Kohl. The peer review panel, do you know if that is 
ongoing or are you moving in that direction? Have you created 
an ongoing peer review panel?
    Mr. Hawks. We are in the process of completing initial peer 
review as we speak.
    Senator Kohl. And, finally, to improve scientific technical 
support for the National Organic Standards Board, any comment?
    Mr. Hawks. Yes, sir. We are doing that. The funds that were 
provided in our 2004 budget are helping us on the technical 
scientific review as well.
    Senator Kohl. That is great.
    Mr. Hawks. We appreciate those funds.

                        ANIMAL FEED INSPECTIONS

    Senator Kohl. Yes, thank you.
    Dr. Crawford, FDA recently announced that they would be 
implementing new rules regarding animal feed as a result of 
BSE, including increasing inspections of rendering plants and 
feed mills. An increase of over $8 million is provided in the 
budget for this purpose. How many rendering plants and feed 
mills are in the United States? Of those, how many handle 
ruminant material prohibited from being used in animal feed? 
And will these inspections, specifically of plants that handle 
ruminant material be physical inspections or paper audits? And 
what about plants that do not handle ruminant material?
    Dr. Crawford. With respect to the number of plants and what 
they handle, if it is agreeable, I would like to submit that 
for the record.
    The second thing is the inspections will be doubled next 
year. We are asking for that in this budget. The kinds of 
inspections will be both physical and also audit types. We 
expect for the plants to know where the material came from and 
where it is going, and we have records access for that. And we 
will be evaluating that.
    The other thing is that we want to know what kinds of 
materials went in there and what the feed was used for and 
whether or not we can trace that in order to be sure that it 
isn't going to the wrong species.
    So it is a fairly complex inspection process that is 
reflected in that $8.3 million more that we want for BSE. One 
of the major things we are trying to do is to control BSE 
because the most likely source of infection is animal feed, as 
you know.
    [The information follows:]


                              Animal Feed

    As of February 6, 2004, there are 235 rendering plants, 1,085 FDA 
licensed feed mills, and 5,071 non-FDA licensed feed mills in the 
United States. Of these, 157 rendering plants, 310 FDA licensed feed 
mills, and 759 non-FDA licenses feed mills handle materials prohibited 
from being used in animal feed.

    Senator Kohl. All right. Dr. Murano, your budget requests 
an additional $23,500,000 for the Food and Agriculture Defense 
Initiative. Funding is also requested in FDA and other agencies 
for this. It sounds like the increases are going for computer 
system upgrades, increased surveillance, bio-surveillance and 
training.
    For those of us who are not steeped in the language of 
homeland security, can you explain in laymen's terms what this 
money will be used for?
    Dr. Murano. Certainly. As you said very well, this is a 
coordinated effort between ourselves and FDA and other agencies 
as well, because we understand that we must do several things 
to maintain the safety of our food supply from intentional 
attack. One is surveillance, so both we and FDA need funds to 
survey the food supply for specific agents that we do not 
normally test for, for what we deem to be normal contamination 
of food. These are threat agents for which both of these 
agencies have conducted vulnerability assessments to see where 
we are the most vulnerable. We have determined where we are the 
most vulnerable, and are trying to close those gaps and then 
test for the threat agents that we believe are most likely to 
be used.
    Secondly, the Food Emergency Response Network that I 
described very briefly in my opening remarks, is also a joint 
effort with FDA. It is a network of laboratories throughout the 
entire country that have to work together and be well 
coordinated to respond to an event. More importantly, it must 
do the important surveillance work that needs to be done even 
before an event takes place. All of these labs have to be 
coordinated in terms of using the same methods and the 
information has to be shared among all the laboratories. That 
is why part of the funds are being asked for eLEXNET, which is 
a web-based information sharing platform.
    For all of these reasons, we have our budget request and 
FDA has their budget request, but funds are to be used jointly 
to establish a very robust network of 100 labs in this coming 
year.

                            WIC-ONLY STORES

    Senator Kohl. All right. Mr. Bost, I have recently been 
informed about a growing problem that is costing the WIC 
program several million dollars a year. The WIC-only stores 
that, as you know, serve only WIC clients and accept only WIC 
certificates, are increasing in numbers very rapidly. In 
California alone, there were 82 WIC-only stores in 1996, and 
now there are more than 600 across that State.
    The problem with these stores is that they do not have to 
compete in the normal market, and so they are able to charge 
extremely high prices for their products. In California, the 
estimates are that the WIC-only stores charge 15 percent or 
more in addition to normal price for WIC food packages than 
other stores. This is a growing problem, and the WIC program 
obviously is suffering additional, unnecessary, and 
unprogrammed costs because of it.
    With money so tight, obviously, Mr. Bost, we need to do as 
much as we can to control this problem. Can you comment on the 
problem? And to what extent are you aware and consider it 
serious and what you may be doing about it?
    Mr. Bost. Well, interestingly enough, Senator Kohl, I think 
it is important to note that only 2 percent of all the 
authorized WIC vendors are essentially WIC-only. Right now we 
have the WIC-only stores only in California and in the 
Commonwealth of Puerto Rico. So, one, it is not widespread.
    The second point is the fact that we have heard anecdotally 
that the cost to the Federal Government is more. However, the 
service is better than our clients are receiving other places. 
So we are in the process of reviewing that data to make a 
determination, if it is accurate information, generally 
speaking, is the cost more. So we have just started that 
review. I think we actually have two of my senior staff that 
are going to go into some of the stores in California over the 
course of the next couple of months and ascertain exactly what 
the situation is. We are concerned given the fact that we are 
seeing an increase in our overall WIC costs.

                        CRITICAL PATH INITIATIVE

    Senator Kohl. Yes.
    Dr. Crawford, FDA recently announced that they are going to 
use new technologies to help reduce the cost of developing new 
drugs. While the goal of this announcement is definitely 
worthy, announcements such as these raise a question of how 
closely the FDA should be working with the industry that it 
regulates.
    What considerations are being taken before FDA makes a 
decision on something that will cause them to work in close 
collaboration with the industry that you are regulating?
    Dr. Crawford. Thank you, Senator Kohl. As you know, we are 
bound by very strict ethical guidelines to keep us from acting 
and colluding with the industry that we regulate. We have to be 
very careful about that.
    Our record has been good over the years, but we want to 
keep it good and even better. So we are separated from working 
directly with the industry, either in a consulting capacity or 
in any other kind of capacity to improve their bottom line, 
their profitability, and even the approval of these drugs.
    The genesis of this program, which we are very pleased 
with, is some years ago, as you know, there was a move to 
double the National Institutes of Health budget. And so that 
budget went from between $13 and $14 billion, to $27 billion. 
This is expected with some concomitant increases in industrial 
research and development to produce a large number of new 
technologies and scientific developments that could and I 
believe will lead to the capability of this country and its 
pharmaceutical industry producing more useful products, not 
just in the human drug category but probably in other 
categories.
    The bottleneck for these breakthroughs periodically in 
terms of getting the technology from the laboratory to the 
patient and, therefore, saving lives and improving the well-
being of people in this country and in other countries has 
sometimes been the Food and Drug Administration. Obviously, if 
a large number of new products are developed as a result of the 
NIH research and the research that is taking place in the 
pharmaceutical world, we have to be ready for them. We have to 
know what kinds of categories of products are coming. We have 
to have the personnel that can rapidly, accurately review these 
products so that we are sure they are safe and effective, but 
also to get them to the market as quickly as we possibly can, 
consistent with their safety and efficacy. That needs a new 
mind-set, a new model at FDA, and we call it the Critical Path 
from the laboratory to the patient. It is a modest program to 
begin with, but it does require us to rethink how we do this.
    Now, in saying that, although we will not be divorced from 
cooperating with NIH, we will be distanced from the 
pharmaceutical industry that we regulate as we try to get 
together a new system. So thank you for the question, and I 
assure you we will be separated to the maximum ethical extent.

                        BIOTERRORISM REGULATIONS

    Senator Kohl. Thank you.
    Dr. Crawford, it was recently announced that FDA would 
delay publishing a final rule on contaminated food tracking by 
2 months. The purpose of this rule, as you know, is to help FDA 
track down contaminated food and food ingredients as quickly as 
possible, and it has been lauded by consumer groups.
    Why did the FDA postpone publishing the rule? Can you give 
us a date certain by which the rule will be published?
    Dr. Crawford. Thank you for the question. When the 
Bioterrorism Act was passed in June of 2002, we did get the 
authority to do this kind of thing, the recordkeeping authority 
that you are talking about, as well as three other new 
authorities which enable us to police the food supply better 
than ever before, thanks to the wisdom of the Congress. This is 
something that had been developing for a long time, but the 
advent of the terrorist threats that we are all aware of moved 
the Congress and also moved the agency to work together to try 
to get this passed.
    We are delayed a bit from what we projected in December 
with publishing this final regulation. Exactly when it will 
come out we are not sure at this point. It shouldn't be very 
much longer. We are putting the finishing touches on it, and we 
are working with the administration to get it forward.
    But I wanted you to know and I wanted to say for the record 
that the authority to take these kinds of action exists. We 
just have not implemented the regulations which set out how we 
will do it. But we are acting already and we are protecting the 
food supply through the authorities that were vested in us by 
the Bioterrorism Act.

                                  BSE

    Senator Kohl. Finally, Mr. Hawks, the Secretary announced 
on March 15th that USDA would greatly enhance BSE testing over 
a year to a year and a half period, 12 to 18 months. Do we 
understand that this enhanced testing is scheduled only for 
this limited length of time? And if test results show any 
additional BSE-positive cases in the United States, will USDA 
further enhance testing and continue it for an indefinite 
amount of time? And if so, will CCC funds be used for that 
purpose, or how will these costs be covered?
    Mr. Hawks. Thank you, Senator Kohl. You are exactly right, 
we did announce on March the 15th our enhanced surveillance 
package. We also announced that $70 million would be 
transferred from CCC to implement this enhanced surveillance 
plan. This is in keeping with the international review team 
report, which recommended that we conduct very intensive 
surveillance of the targeted population for a period of 1 year. 
So that is what we have to do. Determinations will be made 
about where we move from here when we see what we find with 
this surveillance plan.
    Our objective is to try to get as many of these samples as 
we possibly can. If we collect approximately 268,000, we 
believe this sampling will show one BSE positive animal in 10 
million adult cattle a 99-percent confidence level. We are very 
committed to this. We are also testing a random sampling of 
normal animals in this process. We are working with the 
industry to make sure that we are able to get these samples as 
well.
    So I think the answer is we will have to see where we are, 
see what the surveillance turns up, and then it would be 
appropriate to make determinations about how to proceed after 
that.
    Senator Kohl. What happens in the public eye, Mr. Hawks? We 
tested one animal for BSE, and there was a panic across our 
country. Suppose you find one other animal or two other animals 
out of--how many do you intend to test?
    Mr. Hawks. We are going to test as many of the target 
population as we possibly can. We have been testing roughly 
20,000 per year for the last 2 years. This year, we had 
intended to test 40,000. Now our goal is to test as many as we 
possibly can for the next 12 to 18 months.
    Senator Kohl. Well, suppose you test 5 million and you find 
five and you announce that. I suppose you would announce that, 
right?
    Mr. Hawks. Well, I think statistically speaking, if we test 
268,000 from the target population, it is almost as good as 
testing----
    Senator Kohl. All right. Suppose you do and you find three 
more or four more.
    Mr. Hawks. The measures that we have already taken to 
protect food safety, including the removal of specified risk 
materials, those measures have been taken to ensure that the 
food supply is safe. And I think whether we find one more, or 
whether we find three more, or if we don't find any more, the 
measures that are in place are there to adequately protect our 
public.
    The U.S. case is totally unlike what happened in Asia. In 
Japan, there was a total loss of consumer confidence. As we 
have seen in this country and in Canada as well, our consumers 
believe that we are doing a good job in protecting food safety. 
I will eat beef quite often. So I think it is very important to 
understand that I have total confidence, Dr. Murano has total 
confidence, because that is her responsibility as well. We 
share those responsibilities.
    Senator Kohl. I thank you so much, Mr. Hawks.
    Senator Burns.
    Senator Burns [presiding]. Senator Kohl, how are you this 
afternoon? I noticed that the chairman here asked me to come 
down here and to really mess up this whole hearing. He sent the 
right guy. And he has already covered a lot of these things: 
obesity, as if he had a problem.
    Senator Burns. And I am glad he took care of that before I 
got here. So let's go down the line.
    By the way, first of all, since I have got you here, Mr. 
Hawks, and most of you, we all know that we probably dodged a 
humongous bullet last December the 23rd and again May the 4th 
up in Canada. We didn't have to go through the situation the 
Canadians went through up there.
    I appreciate your actions, and I know it was the cow that 
stole Christmas, but, nonetheless, it was one of those things. 
And I don't know what my telephone log looks like, but it was 
pretty full.
    I talked to the Secretary yesterday, and I expressed my 
gratitude, and I think it was done as well as it could be done 
for a bureaucracy. So I am happy about that. However, we still 
come under some criticism, but, nonetheless, it is usually 
criticism that probably does not quite understand how the 
system works and what we did.
    If we tested 100 percent--I don't know. You might have 
already been asked this question, and I apologize if you have 
been. If we started testing tomorrow 100 percent of our 
production in the beef market right now, do you think that 
export market would just snap back overnight?
    Mr. Hawks. No, sir, I do not. We did discuss this earlier. 
I think 100 percent testing has absolutely no scientific 
justification. I believe that the path that we are on with the 
aggressive surveillance, with the measures that we have taken 
to remove SRMs and the measures that FDA is announcing to put 
additional firewalls in place are more than adequate to prevent 
the spread of BSE if it is here and also to protect food 
safety.

                     NATIONAL ANIMAL IDENTIFICATION

    Senator Burns. Let me ask you another question. How are you 
moving on the national ID system?
    Mr. Hawks. We are moving very well. As you know, we have 
been developing a plan over a period of years. USAIP has been 
working for over 2 years. They have done a tremendous amount of 
work. The Secretary asked our Chief Informational Officer, 
Scott Charbo, as well as Nancy Bryson, and our Chief Economist, 
Keith Collins to look at this, with each one of them looking 
from their respective viewpoints, the legal, the technological 
and the economic.
    We have put together a plan drawing heavily upon what USAIP 
is doing. It is certainly our intent later this year to be able 
to issue premises identifications, and early next year to do 
individual identifications. We have a few principles that we 
are working on, such as being technology neutral. We want to 
make sure that any system that we put in place does not add 
burden to our producers, as you and I both know and appreciate 
those concerns. We protect confidentiality of information. So 
those are some of the things we are addressing.
    Senator Burns. When can we expect to see that plan?
    Mr. Hawks. You should be able to see that plan real soon. 
It is going through final review at the Department now, and so 
we hope to have that plan to you in the very near future.

                              BSE TESTING

    Senator Burns. Give me an idea of those packing facilities 
that want 100 percent test in order to maybe get into the 
international market or see what they could do. We have seen a 
reluctance from the USDA for that. Can you give me an update on 
that situation and the position that you have taken?
    Mr. Hawks. Yes, sir. Certainly that is continually under 
review. We do not believe there is, as I have said, a 
scientific justification for doing 100 percent testing. We have 
recently approved some rapid-test test kits for use in our 
surveillance plan. We will continue to review those requests 
that are before us now in the Department of Agriculture, but we 
certainly do not believe there is scientific justification for 
doing 100 percent testing.
    Senator Burns. Tell me, on the test itself, have you 
settled on a particular test?
    Mr. Hawks. No, sir. We have recently approved two rapid 
tests for the surveillance plan. We are continuing to review 
other tests as we speak and hope to have, in the very near 
future, additional test kits approved for use.
    Senator Burns. When will we see those?
    Mr. Hawks. I would hope to see those, as I said, in the 
very near future. I am like you, coming into Government out of 
the private sector. It is very difficult to nail down those 
exact dates as we could when you and I are out there on the 
farm.

                               DENTICIAN

    Senator Burns. We look at those things. I am not an expert 
on that and I would have none, but I can tell you that I know 
some people that do know the difference. I think false 
positives are always out there, those kinds of situations in 
that respect. Now, age. You have first come out with a system 
to mouth the cattle. That has not been the most accurate 
procedure sometimes. In other words, it all depends on a little 
bit of heredity and genetic makeup of the animal. Also, whether 
it calved and where they are raised. And so, Dr. Murano, you 
want to----
    Mr. Hawks. She is our dentician expert.
    Senator Burns. Are you pretty good on horses?
    Dr. Murano. Sir, I will tell you that we have had to come 
up with a system that would help us determine the age of these 
cattle, and you are correct in that the dentician method is not 
perfect. We all know that. We have instructed our inspectors 
that what they do first and foremost is look, at the records 
that come with the animals, and use that as their main gauge of 
the age of the animal. If those records are complete, that is 
what we go by because that is the most accurate. When those 
records are not accurate or not available--and I presume that 
will be corrected once this animal ID system is all in place--
the only other method that we have available to us that we know 
is the dentician.
    However, having said that, the regulations that we 
published January 12th are still under an open comment period, 
and we have actively sought the input of the industry, any 
stakeholders, and anyone who may have information and evidence 
on what might be a better method than dentician. We are surely 
open to whatever other suggestions the experts in the field 
have for us, and we will move to do the best job we can and be 
as accurate as possible.

                     NATIONAL ANIMAL IDENTIFICATION

    Senator Burns. With a national ID system and a producer 
that keeps records--and most do now and especially in 
performance herds; we are doing it more with range cattle more 
every day to identify those animals who excel in their 
production and this type thing, I would say--and if we go to 
some sort of a digital ear tag, that at least the week the 
animal was born, it would also be part of that record on that 
ear tag. That is the only thing that I think the ear tag has an 
advantage over a hot iron brand, but that is a westerner 
talking and not the general run of the cattle business.
    So I think we have to approach that because I will tell 
you, being in that business, I sat up there the other day, and 
just to see if I had any talent left at the auction when they 
were selling cattle the other day at the auction. I sat up 
there and I still got the touch, I want you to know, right now.
    Mr. Hawks. Are you looking for a job, Senator?
    Senator Burns. No.
    I tell you how it can go. A farmer came in and set down 
beside me, and there was a little package of calves come in, 
and they probably weigh, I do not know, pretty close to 6 and 
pretty green. And he just leaned over and he said, ``Conrad, 
what do you think those things will weigh?'' And I said, ``Do 
not ask me. I missed the weight of a chicken by 7 pounds one 
time.''
    But I really believe that the national ID system, I think 
you have a working group out there right now that is headed by 
Gary Wilson out of Ohio, and I have talked with him--he was in 
town about a week, week and a half ago--on the national ID 
system, and also on the age, because I will tell you, that age 
is critical. It is critical because we know of people that some 
feed calves, some feed yearlings, and then there is a little 
thing called a heiferette, and we know about those kind of 
stock, but it is critical as far as the return to the producer, 
and also critical to the man who sends them to market for 
slaughter, and how they are graded and this type of thing. 
Right now it is a pretty rapid market out there right now, 
especially on that class of cattle and livestock.
    We would like to see what you have proposed. We would like 
to work with you on that, especially that working group on 
national ID and on age. I also talked to some people that want 
to do some work as far as verification of the animal from birth 
to the grocery store, tests along the way. Because there are 
some plans and programs in the private sector that are being 
developed, but they will depend on--they want to work with the 
Department of Agriculture, because we know when we go into the 
export market, it is the Department of Agriculture who really 
carries the message into the international market. So we want 
to do that if we possibly can.

                     ADDITIONAL COMMITTEE QUESTIONS

    As far as the chickens, I know there are probably some 
people in this room that think chickens is awfully important. I 
am not one of them.
    Only on Sunday every now and again. But I am really 
concerned about the cattle business.
    I do not have any more questions. Senator, are you all 
done?
    Senator Kohl. Yes.
    Senator Burns. I would just be like any other chairman. The 
record will be kept open for a couple of weeks. We may have 
some questions from other committee members that will be 
directed your way. We would appreciate if you would respond to 
those questions both to the committee and to the individual 
member of the committee. We appreciate that very much.
    [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

                       DRUG INFORMATION WEB SITE

    Question. I noted that the FDA recently launched a web site to 
allow both consumers and the medical community to find comprehensive 
information about FDA-approved drugs quickly and easily. Since the web 
site was launched on March 3, how many ``visitors'' has it had?
    Answer. Drugs@FDA has had 154,065 visitors for the period March 3 
through April 12, 2004.
    Question. Has the FDA received any feed-back from consumers and 
health care professionals about the ease of access, and whether the 
information is comprehensive and useful?
    Answer. Since March 1, 2004 we have received 70 comments on 
Drugs@FDA, version 1. It's important to note that there were two 
previous beta versions of Drugs@FDA on the Internet: beta 1 in June 
2003, and beta 2 from September 2003-March 2004. We received a 
significant volume of very helpful feedback which was incorporated into 
Drugs@FDA, version 1.
    The nature of the comments Drugs@FDA, version 1, ranged from the 
general (5) we liked it or didn't like it to questions about specific 
drug products (25) that were referred to CDER's Division of Drug 
Information for response. Most comments pertinent to Drugs@FDA (40) 
fall in the category of requesting new features. For example, users 
requested the ability to search by indication or drug class, wanted 
more labels added, to obtain NDC numbers and imprint information, to 
have more regulatory terms added to the glossary, links to the Orange 
Book, and even the ability to download the database for analysis.

                         MEDICAL DEVICE REVIEW

    Question. According to the 2003 Annual Report of the Office of 
Device Evaluation, the Center for Devices and Radiological Health was 
meeting or exceeding most of its MDUFMA-prescribed performance goals in 
2002. As previously noted, the fiscal year 2005 budget request includes 
$25.555 million for this user fee program. What will the FDA actually 
do with this increased funding?
    Answer. The FDA commitment letter defines the performance 
objectives FDA is pursuing under MDUFMA. It requires FDA to meet 
challenging objectives for both cycle and decision goals and to pursue 
a variety of other goals that do not involve quantifiable measures of 
progress, such as maintaining current performance in areas where 
specific performance goals are not identified, working with its 
stakeholders to develop appropriate performance goals for modular 
review of PMAs, and working to improve the scheduling and timeliness of 
pre-approval inspections.
    The appropriation requested by the President's fiscal year 2005 
Budget will provide FDA the resources needed to move forward to 
effectively implement MDUFMA. Substantial improvement will be required 
to meet both the fiscal year 2005 performance goals and to lay the 
foundation for the increasingly challenging performance goals of fiscal 
year 2006 through fiscal year 2007.
    The additional funding will be used to:
  --Cover the cost of living increases so that FDA can maintain 
        staffing levels and scientific capabilities to meet the demands 
        of an increasing workload and new challenges;
  --Enhance the IT systems that support the current review process and 
        develop system capabilities to facilitate the submission and 
        acceptance of electronic premarket applications;
  --Enhance reviewer training and skill maintenance so that FDA 
        reviewers are able to keep pace with rapidly developing and 
        increasingly complex device technologies;
  --Employ research and science based activities that provide support 
        critical to the device product approval process;
  --Invest in office and laboratory infrastructure to keep pace with 
        rapid technological and scientific change in diverse fields of 
        expertise;
  --Work with outside experts to develop guidance and standards to help 
        industry understand and meet FDA requirements, and to help 
        support FDA's role in international harmonization on emerging 
        technologies.
  --Expand FDA's small business assistance program as required by the 
        FD&C Act. Approximately 35 percent of the PMAs approved last 
        year were from first time submitters who needed FDA's 
        assistance;
  --Conduct pre-approval inspections of device manufacturers;
  --Enhance policy guidance document development, emergency response, 
        review management and risk communication for products developed 
        and used to respond to terrorist threats and national security 
        crisis; and
  --Contract with professional societies and agencies to address the 
        agency's needs, including the need for adequate laboratory 
        facilities, to plan bio-effects research, and to develop 
        requirements for the safe use of devices.
    Question. Since the agency has already reached most of its MDUFMA 
performance goals, should the FDA be working toward more aggressive 
goals?
    Answer. Although FDA is making satisfactory progress towards 
achieving the ambitious performance goals established under MDUFMA, the 
fiscal year 2003 Office of Device Evaluation/Office of In Vitro 
Diagnostic Device Evaluation and Safety (ODE/OIVD) Annual Report does 
not claim or imply that we ``have already reached most'' of MDUFMA's 
performance goals. MDUFMA's goals are based on receipt cohorts; for 
example, the fiscal year 2003 receipt cohort includes applications 
received from October 1, 2002 through September 30, 2003. For PMAs and 
PMA supplements, the receipt cohort performance data shown for fiscal 
year 2003 in the ODE/OIVD Annual Report represents only receipts 
through March 31, 2003 (6 months of data); for 510(k)s, the receipt 
cohort performance data shown for fiscal year 2003 represents only 
receipts through June 30, 2003 (9 months of data). See the footnotes on 
pages 48, 53, 56, and 68 of the fiscal year 2003 report. Furthermore, 
the results applicable to our MDUFMA performance goals will change over 
time as FDA completes work on pending applications. As of March 31, 
2004, the following fiscal year 2003 applications were still pending 
(the numbers were substantially higher when the fiscal year 2003 report 
was prepared):
  --PMAs--21
  --Expedited PMAs--1
  --180-day PMA Supplements--2
  --510(k)s--316
    Also, the goals become more stringent beginning in fiscal year 
2005.
    The ODE/OIVD Annual Report shows promising progress towards 
achieving MDUFMA's objectives, but those results represent only 
preliminary indicators of performance. FDA will provide quarterly 
reports updating our progress towards achieving MDUFMA's performance 
goals on our MDUFMA web site (www.fda.gov/cdrh/mdufma).

                     MEDICAL DEVICE/DRUG MARKETING

    Question. We have all heard that a particular DC laser surgeon 
fixed Tiger Woods' eyesight, and that former Senator Bob Dole has 
benefited from a particular prescription drug. Now we learn that golfer 
Jack Nicklaus has a new hip made by a particular company. The 
implications here are if it is good enough for Tiger/Bob/Jack, its good 
enough for me. What role does the FDA play in monitoring these types of 
advertisements?
    Answer. FDA regulates drugs and medical devices in the United 
States under the authority of the Federal Food, Drug, and Cosmetic Act 
(FDCA). This authority extends to promotional labeling for all drugs 
and devices and advertising for prescription drugs and so-called 
``restricted'' devices. (21 U.S.C. 342(a); 352(a), (n), (q), (r); 
362(a).) The Federal Trade Commission (FTC) also has legal authority to 
regulate advertising (15 U.S.C. 52), and takes the lead in regulating 
the advertising of OTC drugs and non-restricted devices. FDA takes the 
lead in regulating the labeling of over-the-counter (OTC) and 
prescription drugs and non-restricted and restricted devices, and the 
advertising of prescription drugs and restricted devices.
    Advertisements for prescription drugs must include, among other 
things, ``information in brief summary relating to side effects, 
contraindications, and effectiveness,'' as specified in FDA 
regulations. (21 U.S.C. 352(n); see also 21 CFR 202.1.) Advertisements 
for restricted devices must include ``a brief statement of the intended 
uses of the device and relevant warnings, precautions, side effects, 
and contraindications. . . .'' (21 U.S.C. 352(r).) Both prescription 
drug and restricted device advertisements also must not be false or 
misleading, meaning they must disclose material risk information. (21 
U.S.C. 352(q)(1) & 321(n); 21 CFR 202.1(e)(5).) FDA's rules for 
prescription drug and restricted device advertising are the same, 
whether the advertising is aimed at a consumer audience or at health 
care professionals.
    The FDCA contains no special rules for celebrity endorsements in 
advertising. In general, an endorsement could be subject to the general 
rules for advertising set forth above. Thus, if a celebrity 
spokesperson were to make a statement in an advertisement for a 
prescription drug or restricted device that is false or misleading, or 
if an advertisement contained a celebrity testimonial but lacked the 
risk information required under the above provisions, FDA likely would 
have authority to initiate enforcement action under the FDCA. 
Statements by independent individuals not speaking on behalf of a drug 
firm are not subject to FDA's advertising jurisdiction. Oral 
representations by paid representatives of drug firms concerning the 
safety or effectiveness of a product might also within FDA's regulatory 
authority if they create a new intended use for a product, for which 
adequate directions would be required in labeling and for which 
premarket approval might be required. (See 21 U.S.C. 352(f)(1), 355.)
    FDA believes consumer-directed advertisements play an important 
role in advancing the public health by encouraging consumers to seek 
treatment. Since 1997, consumer-directed advertisements have been aired 
(on television or radio) for about 98 prescription drugs. Of those, 14 
are intended for under-treated conditions, such as high cholesterol, 
heart disease, and mental health problems like depression. Others are 
for serious conditions such as asthma, Alzheimer's disease, arthritis, 
chronic obstructive pulmonary disease, diabetes, insomnia, migraine, 
obesity, osteoporosis, overactive bladder, serious heartburn, smoking 
cessation, and sexually transmitted diseases.
    FDA held a public meeting to discuss the results of FDA surveys and 
other research on consumer-directed advertising on September 22-23, 
2003. Based in part on discussion at that meeting, FDA has developed 
guidance to encourage advertising that provides risk and benefit 
information appropriate to support conversations between consumers and 
their health care providers. On February 4, 2004, the agency issued 
three draft guidance documents, addressing (1) options for presenting 
risk information in consumer-directed print advertisements for 
prescription drugs, to encourage use of consumer-friendly language and 
formats (2) criteria FDA uses to distinguish between disease awareness 
communications and promotional materials, to encourage manufacturers to 
disseminate disease educational messages to the public, and (3) a 
manner in which restricted device firms can comply with the rules for 
disclosure of risk information in consumer-directed broadcast 
advertising for their products, to help encourage compliance in this 
emerging area of medical product promotion.
    FDA has adopted a comprehensive, multi-faceted, and risk-based 
strategy for regulating consumer-directed advertising of medical 
products. This strategy includes legally sustainable letters, guidance 
development, frequent informal communications with industry and 
advertisers, and research on the public health effects of consumer-
directed promotional materials. We continue to monitor the impact of 
consumer-directed promotion on the public health.

                   METHYLMERCURY ADVISORY FOR SEAFOOD

    Question. As you will recall, Dr. Crawford, in the Statement of the 
Managers to accompany the fiscal year 2004 Omnibus Appropriations bill, 
the conferees encouraged coordination between the FDA and the EPA on 
what is considered a safe level of methylmercury exposure. I was 
pleased to note that an updated consumer advisory regarding fish 
consumption and methylmercury was released in mid-March. How does this 
new advisory differ from that which was released by the FDA in July of 
2002?
    Answer. The FDA issued an advisory for mercury in fish in March of 
2001; this advisory was then reviewed by the FDA's Food Advisory 
Committee (FAC) in July 2002. There was no new advisory issued in July 
2002. The FAC made six recommendations at their meeting in July 2002 as 
follows:
  --Better define what is meant by ``eat a variety of fish'' so that 
        consumers can follow this recommendation effectively;
  --Work with other Federal and State agencies to bring commercial and 
        recreational fish under the same umbrella;
  --Publish a quantitative exposure assessment used to develop the 
        advisory recommendations;
  --Develop specific recommendations for canned tuna, based on a 
        detailed analysis of what contribution canned tuna makes to 
        overall methylmercury levels in women;
  --Address children more comprehensively in the advisory to relate 
        dietary recommendations in the advisory to the age/size of the 
        child; and,
  --Increase monitoring of methylmercury to include levels in fish and 
        the use of human biomarkers.
    Based on these recommendations, meetings with stakeholders, focus 
group testing as well as further input from the FACs in December 2003, 
the FDA issued a revised advisory on March 19th 2004. The revised 
advisory differed from the 2001 advisory in a number of ways as 
follows:
  --The 2004 Advisory is a joint advisory by FDA and EPA that addresses 
        both commercial caught and locally caught fish and shellfish;
  --The 2004 Advisory more strongly emphasizes the positive benefits of 
        eating fish;
  --The 2004 Advisory provides examples of commonly eaten fish that are 
        low in mercury;
  --The 2004 Advisory and the Question and Answers section specifically 
        addresses canned light tuna and canned albacore (``white'') 
        tuna, as well as tuna steaks;
  --The 2004 Advisory recommends not eating any other fish in the same 
        week as locally caught fish are consumed (the Advice on the 
        amount of locally caught fish to eat is the same as in the 2001 
        EPA advisory); and,
  --The 2004 Advisory contains a section that addresses the frequently 
        asked questions about mercury in fish.
    The 2004 advisory was revised to provide useful information for 
keeping fish as part of a healthy diet and at the same time reduce the 
exposure to mercury. The 2004 Revised Advisory more accurately reflects 
the purpose of the information.

                       NEW DRUG APPROVAL PROCESS

    Question. The FDA recently issued a report which described the 
decrease in the number of new innovative drug application, and 
recommends reform to the existing regulatory process. I would 
appreciate it if you could explain just exactly what the FDA plans to 
do in this regard.
    Answer. The ``critical path'' is best described as the crucial 
steps that determine whether and how quickly a medical discovery 
becomes a reliable medical treatment for patients. There are certain 
points on this path where difficulties are occurring. FDA believes that 
a major problem in today's drug development process is that the new 
science and scientific tools being used in the discovery process are 
not being harnessed to guide the development process that brings 
products to market. FDA has called for a new focus on modernizing the 
tools that applied biomedical researchers and product developers use to 
assess the safety and effectiveness of potential new products, and the 
manufacturing tools necessary for high-quality mass production of 
cutting-edge therapies. FDA is in a unique position to identify 
scientific challenges that cause delays and failures in product testing 
and manufacturing because of its experience overseeing medical product 
development, assessment, and manufacturing/marketing; its vast clinical 
and animal databases; and its close interactions with all the major 
players in the critical path process.
    FDA, through collaboration with academia, patient groups, industry, 
and other government agencies, will play a major role in identifying 
systemic medical product development problems via development of a 
Critical Path Opportunities List, and in conducting or collaborating on 
research to create a new generation of performance standards and 
predictive tools that will provide better answers about the safety and 
effectiveness of investigational products, faster, with more certainty, 
and at lower costs. Specific examples of critical path efforts include: 
developing guidances and scientific workshops on ``best practices'', 
developing new animal or computer-based predictive models, developing 
new biochemical and genomic assays as biomarkers for safety and 
effectiveness, collaboration on the design of new clinical evaluation 
techniques, and facilitating multi-company studies of technologies 
which no one company could mount. FDA will identify and prioritize the 
most pressing product development problems and the areas that provide 
the greatest opportunities for rapid improvement and public health 
benefits across the three dimensions of the ``critical path''--safety 
assessment, evaluation of medical utility, and product 
industrialization and will facilitate collaborative research in these 
areas.
    Question. A consumer group has expressed the opinion that the FDA 
should approve only drugs which show concrete advantages to drugs 
currently on the market. What is your response to that suggestion?
    Answer. Our present and future mission remains constant: to ensure 
that drug products available to the public are safe and effective. If 
the drug is effective and we are convinced its health benefits outweigh 
its risks, we approve it for sale. Statutory requirements dictate that 
we review products submitted to us requesting approval. From a medical 
perspective, it is desirable for physicians and consumers to have a 
variety of drug treatment choices. Not all people can tolerate a 
specific drug. Not all drugs have the intended affect in every person. 
From an economic perspective, it is also useful to have a market 
featuring a variety of products so that prices are competitive.

                     SEAFOOD INSPECTION/GAO REPORT

    Question. The General Accounting Office recently issued a report on 
the FDA's imported seafood safety program. Basically, GAO found that 
although the FDA has made some progress in the number of foreign firms 
being inspected and the number of seafood products being tested at U.S. 
ports of entry, there is more work to be done. Among other things, GAO 
recommends that the FDA work with NOAA to have NOAA employees provide 
various services under their Seafood Inspection Program. Have you 
reviewed this GAO report? Do you agree with their observations? What 
steps has the FDA taken to work with NOAA in this regard?
    Answer. FDA reviewed the GAO report and provided a lengthy comment 
to the GAO on this particular recommendation. The comment was published 
in the Appendices to the report. In summary, FDA noted that it has a 
long and collegial working relationship with the seafood inspection 
program within the National Marine Fisheries Service (NMFS) and that 
the two agencies will be working together to find better ways of 
integrating their programs. Potential areas of integration were 
described, including the use of NOAA laboratory capacity to carry out 
analyses of seafood samples that FDA takes during the normal course of 
work; the commissioning of NMFS inspectors; the use of NMFS inspectors 
who might already be on site in distant locations; and the issuance by 
NMFS of European Health Certificates for a fee to U.S. industry that 
ships fish and fishery products to Europe. The latter would free up FDA 
resources that are now devoted to that activity.
    We have recently worked with NOAA Fisheries' National Seafood 
Inspection Laboratory (NSIL) located in Pascagoula, MS and the NOAA 
Fisheries' Northwest Fisheries Science Center in Seattle, WA to assess 
the use of NOAA laboratory capacity to carry out analyses of seafood 
samples that FDA takes during the normal course of our work, or during 
``crisis'' situations. Specifically for chloramphenicol analysis, our 
discussions have resulted in FDA's provisional approval (pending on 
site review) of these laboratory's methods for sample submission, 
custody, routing, and accounting and documentation procedures necessary 
to maintain the regulatory chain of custody and tracking required for 
import collections. While FDA is not able to fund this initiative this 
fiscal year, we hope that we will be able to implement this proposal in 
the future.

                         AGRICULTURAL PRODUCTS

    Question. The White House Office of Science and Technology Policy, 
(OSTP) had recommended approximately 2 years ago (August 2, 2002) that 
various agencies--including the FDA--complete guidelines regarding the 
early safety assessment of agricultural products developed through 
biotechnology for food and feed use. To date, there is no evidence that 
the FDA has acknowledged this mandate nor made any progress towards 
finalizing a policy. The U.S. regulatory system currently imposes a 
zero tolerance on the presence of unapproved biotech-enhanced events in 
food and feed, regardless of the risk level. It does not recognize the 
realities of a biological system. This zero-tolerance' policy exposes 
grain handlers, food processors and feed manufacturers to the risk that 
any trace amounts of biotech-enhanced events in general commodity crops 
that have not been approved for food and feed under the U.S. regulatory 
process could render such crops adulterated and subject to seizure 
under Federal law. Such a policy is inconsistent with other food purity 
standards which have established thresholds for trace amounts of 
unexpected materials. Without having a policy in place, the United 
States risks significant disruptions in global agricultural trade. What 
is the FDA doing to meet their obligations and will they be able to 
complete their work by year's end?
    Answer. On August 2, 2002, OSTP announced proposed Federal actions 
to update field tests requirements for biotechnology derived plants and 
to establish early food safety assessments for new proteins produced by 
such plants. As part of this proposal, FDA announced that it would 
publish for comment draft guidance to address the possible 
intermittent, low level presence in food and feed of new non-pesticidal 
proteins from biotechnology-derived crops under development for food or 
feed use, but that have not gone through FDA's pre-market consultation 
process. FDA is preparing draft guidance and expects to publish the 
draft guidance for comment this year.

                       TRANSGENIC ANIMALS IN CVM

    Question. The FDA has resources in place for regulation of 
transgenic animals in CVM. However, the agency has to date not provided 
any guidance to industry for the regulation of transgenic animals. What 
is the FDA doing to refine and clarify the regulatory process for 
transgenic animals, and when can we expect to see specific regulatory 
guidance published?
    Answer. It is true that CVM has not issued any general guidance to 
industry for the regulation of transgenic animals. Instead, CVM has 
worked with investigators one-on-one to ensure safe and efficient 
development of animal biotechnology products while an interagency group 
led by the White House Office of Science and Technology Policy (OSTP) 
develops a coordinated framework that is appropriate to animal 
biotechnology.
    In 1984, the Federal Government embarked on project to develop a 
Coordinated Framework for regulation of biotechnology products. The 
early efforts focused on plant biotechnology for agricultural purposes. 
The effort has resumed at various times as new categories of products 
became feasible. For example, in May 2000, the White House directed its 
Council on Environmental Quality, ``CEQ'', and Office of Science and 
Technology Policy to conduct an interagency assessment of Federal 
environmental regulations pertaining to agricultural which includes 
both plants and animals, biotechnology and, if appropriate, make 
recommendations to improve them. Information is available on the 
internet at http://www.ostp.gov/html/ceq_ostp_study1.pdf.
    The White House-directed interagency process continues with respect 
to animal biotechnology products. The OSTP has convened over the last 
year an interagency group--which was similar to the group convened in 
May 2000--with FDA, APHIS, EPA, and OMB, represented. The group is 
focusing on the application of the Coordinated Framework to the wide 
range of animal biotechnology products that have been developed since 
the framework was created in the 1980's. There were very few examples 
of animal biotechnology products available to consider in the 1980's 
and only a limited number in 2000. The discussions are continuing, 
using various product examples, and including listening sessions with 
various stakeholders. Ultimately, a seamless Federal oversight system 
for animal biotechnology products is expected.
    Both as part of this interagency process and separately, FDA has 
examined--and continues actively to consider--the many complex legal, 
scientific, and policy issues related to animal biotechnology. FDA has 
a variety of authorities potentially applicable to transgenic animals, 
including FDCA authorities over foods, food additives, and new animal 
drugs. In 2000, FDA commissioned the National Academy of Sciences/
National Research Council Committee on Agricultural Biotechnology, 
Health, and Environment, (NAS) to identify and rank, where possible, 
potential risks associated with the introduction of animal 
biotechnology into commerce. FDA is using the resulting report 
recommendations, issued in the fall of 2002, as guidance in developing 
an action plan for the future. FDA is also preparing a risk assessment 
on animal clones and considering risk management measures that might be 
appropriate as a condition for marketing animal clones for use in the 
human food chain.
    FDA is also involved in considering issues relating to particular 
applications of animal biotechnology. In March 2003, FDA began 
investigating and contacting universities engaged in genetic 
engineering research to ensure that genetically engineered animals do 
not enter the food or animal feed--as rendered animals--supply. In May, 
FDA issued a letter to the Presidents of the Land Grant Universities 
and posted the letter for more general access on its website. 
Information on the ``Letter from FDA to Land Grant University'', from 
May 13, 2003, may be found on the internet at http://www.fda.gov/cvm/
biotechnology/LandGrantLtr.htm. Roughly 2 dozen organizations have 
responded to FDA's outreach and identified multiple projects with 
transgenic animals. FDA is monitoring these and other projects as 
appropriate.

                              FOOD SAFETY

    Question. The Chicago Tribune recently published an article 
regarding the rising threat to the U.S. food supply. Many of the quoted 
experts used the word ``scary'' in describing our vulnerability. What 
strategy, if any, has the FDA adopted to counter intentional tampering 
with the U.S. food supply. An additional $65 million was requested in 
the fiscal year 2005 budget request for food defense. What exactly does 
the FDA plan to do with these funds? What outputs will these funds 
provide?
    Answer. FDA employs five food defense strategies:
  --Development of increased food security awareness among Federal, 
        State, local, and tribal governments and the private sector by 
        collecting, analyzing, and disseminating information and 
        knowledge (awareness);
  --Development of capacity for identification of a specific threat or 
        attack on the food supply (prevention);
  --Developing effective protection strategies to ``shield'' the food 
        supply from terrorist threats (preparedness);
  --Developing a rapid, coordinated response capability to a terrorist 
        attack (response); and,
  --Development of capacity for a rapid, coordinated recovery from a 
        terrorist attack (recovery).
    FDA's plan to protect the food supply will be executed on both the 
import and domestic fronts.
    The fiscal year 2005 requested increase of $65,000,000 for 
Counterterrorism food defense includes $35,000,000 (including eLEXNET) 
to establish the Food Emergency Response Network (FERN) for increasing 
lab testing capacity in the event of a threat to the food supply. 
Roughly $23,000,000 of FERN funds will be available to States for 
establishing food lab emergency response capabilities and $5,500,000 
for infrastructure costs. The request also includes $15,000,000 to 
address a significant research need for ensuring that we have the 
capability of detecting or inactivating a broad range of agents that 
could pose serious threats to the food supply; $7,000,000 to increase 
import and domestic inspections activities; $5,000,000 to coordinate 
with and establish connectivity of our existing food surveillance 
efforts to the Department of Homeland Security as part of the 
Administration's bio-surveillance initiative; and $3,000,000 for the 
Emergency Operations Network project to upgrade our crisis/incident 
management capabilities in the event of a potential threat to the food 
supply.
    Funds requested for FERN would establish 15 State food emergency 
response labs, and will also provide an additional 25 labs connected to 
the eLEXNET, plus necessary infrastructure such as a national 
operations center to support participating labs. Research funds would 
ensure that we have the capability of detecting or inactivating a broad 
range of agents that could pose serious threats to the food supply. The 
funds for inspections would result in an additional 37,000 import field 
exams over the projected 60,000 projected level in fiscal year 2004 for 
a total of 97,000 import field exams. It would also allow for increased 
surveillance of our food supply by funding an additional 750 domestic 
establishment inspections. Funds would also upgrade our Emergency 
Operations Center by investing in the Emergency Operations Network, and 
would increase coordination of our food surveillance efforts with the 
Department of Homeland Security.
    Question. Last year, the FDA joined with the U.S. Bureau of Customs 
and Border Protection to develop a program to protect the American 
public from food bioterrorist attacks. There were high hopes that as 
many as 420,000 manufacturing, processing, packing, and holding 
facilities, both in the United States and abroad, would quickly 
register under this program and provide advance notice of imports in 
order to expedite the entry process. According to press reports, only 
about half of those facilities have registered, and food shipments are 
still arriving without prior notice. Why haven't all covered facilities 
complied with these requirements? What efforts have the FDA and the 
Customs Bureau undertaken to make sure that covered facilities 
register? It is estimated that 25,000 shipments of imported food arrive 
at U.S. ports of entry every day. Does the FDA have sufficient 
resources to adequately inspect these shipments?
    Answer. In the Registration Interim Final Rule (IFR), FDA estimated 
that about 420,000 facilities would be covered by the requirements of 
the rule. In the Prior Notice IFR, FDA estimated that it would handle 
25,000 prior notice submissions per day. To clarify the above question, 
FDA has not estimated that the approximately 420,000 facilities 
estimated in the Registration IFR would necessarily provide prior 
notice to FDA.
    FDA is unsure why it has only received approximately 200,000 of the 
expected registrations to date. Because registration is a completely 
new requirement and covers so many food facilities, FDA believes many 
small facilities may still be unaware of the registration requirement. 
FDA continues to place a high emphasis on notifying as many affected 
entities as possible of the registration requirements through outreach. 
On April 1, 2004, FDA completed nine city domestic outreach meetings 
for small businesses and other stakeholders on the registration and 
prior notice IFRs. FDA's international component of Phase II outreach 
has been conducted through the collaboration and cooperation of the 
Department of State through a foreign press conference, Voice of 
America video teleconference, and USDA's Foreign Agricultural Service. 
Worldwide attaches disseminated the Registration and Prior Notice 
interim final rules, compliance policy guidance, and Questions and 
Answers. FDA, with Customs and Border Protection participation, is also 
conducting a series of four outreach meetings in Asia from April 21-29, 
2004. FDA will continue to conduct outreach in order to notify affected 
entities of the registration requirement.
    In response to the question regarding whether FDA has sufficient 
resources to adequately inspect the estimated 25,000 daily shipments of 
imported food arriving at U.S. ports, FDA would like to clarify that 
the goal is not to physically inspect each shipment associated with a 
prior notice submission. However, it is important to note that these 
shipments are reviewed electronically to determine if the shipment 
meets identified criteria for physical examination or sampling and 
analysis or warrants other reviews by FDA personnel. This electronic 
screening allows FDA to concentrate its limited inspection resources on 
high-risk shipments while allowing low-risk shipments to proceed into 
commerce.
    Prior to receiving our prior notice authority, FDA already was 
receiving much of the entry information contained in the prior notice 
submission. However, FDA was not receiving the entry information in 
advance of the shipment arriving in the United States. With the new 
prior notice authority, FDA is receiving the entry information in 
advance of the shipment arriving in the United States (timeframe 
depends on mode of transportation), and thus, the Agency is better able 
to focus inspection resources on those shipments for which there is 
reason to believe they may pose a danger to the food supply.

                     MONOGRAPH DRUG APPROVAL SYSTEM

    Question. The Senate Committee Report to accompany the fiscal year 
2004 Agriculture appropriations bill discussed the interest in the 
establishment of a monograph system for prescription drug products. The 
FDA was asked to provide a report regarding the feasibility and cost of 
such a new monograph system for prescription drug products. What is the 
status of the FDA review of this proposal? If a monograph system is not 
the appropriate way to go, what efforts has the FDA undertaken to find 
a way to preserve health and safety while at the same time encourage 
competition, keep prescription drug prices low, and keep small 
businesses open?
    Answer. In 2003, the Senate Committee on Appropriations asked FDA 
to prepare a report regarding the feasibility and cost of a new 
monograph system for prescription drugs that have been marketed to a 
material extent or for a material time without pre-market approval. The 
agency is currently preparing that report. The report will analyze 
critical issues that would need to be addressed if FDA were to develop 
monographs for the approval of marketed prescription drugs. The report 
will evaluate the cost and feasibility of developing such a system.
    Question. The FDA just extended the comment period for 
consideration of a guidance document regarding enforcement priorities 
for older prescription drugs marketed outside of the current new drug 
approval system. In examining comments, will the FDA examine 
alternative approaches to the enforcement policy, such as a 
prescription drug monograph for these older prescription drugs?
    Answer. In October 2003, the Agency issued a draft Compliance 
Policy Guide (CPG) outlining FDA policies to encourage companies to 
sponsor unapproved drugs through the agency's drug approval process. 
The draft CPG requests public comment and sets forth the agency's 
enforcement approach, explaining that FDA will continue to give 
priority to enforcement actions involving three categories of 
unapproved drugs: Those that pose safety risks; those that lack 
evidence of effectiveness; and those that constitute health fraud. It 
also explains how the agency intends to address those situations in 
which a firm obtains FDA approval to sell a drug that other firms have 
long been selling without FDA approval.
    FDA received requests to reopen the comment period and has reopened 
the comment period until April 27, 2004. The Agency will carefully 
examine all comments, including comments relating to alternative 
approaches that are submitted on the matter.

                        PRESCRIPTION DRUG ABUSE

    Question. Mr. Crawford, last month the FDA joined with the Office 
of National Drug Control Policy, the DEA, and the Surgeon General in 
releasing the President's National Drug Control Strategy. As noted in 
the ONDCP press release, this marks the first time that any 
Administration has included the issue of prescription drug abuse in 
this Strategy. What, exactly, is the FDA's role in this effort? Will 
the FDA be able to fulfill this mission with existing funds and 
authorities? If not, were additional resources requested in the fiscal 
year 2005 budget? Does the FDA need additional statutory authorities?
    Answer. The strategy for reducing prescription drug abuse focuses 
on three core tactics:
    First, Business Outreach and Consumer Protection: FDA will work to 
ensure product labeling that clearly articulates conditions for safe 
and effective use of controlled substances so that commercial 
advertising fully discloses safety issues associated with the drug's 
use. A specific example of this is labeling that properly identifies 
patients for whom these products are appropriate and that recommend a 
``stepped care'' approach to the treatment of chronic pain, in 
accordance with treatment guidelines.
    FDA will consider Risk Management Programs (RMPs). The Agency will 
evaluate the need for a RMP during the approval process for Schedule II 
opiate drug products. RMPs help ensure the safe prescribing and use of 
these drugs through identification of appropriate patients and 
monitoring for adverse outcomes.
    FDA in conjunction with the DEA and the White House Office of 
National Drug Control Policy (ONDCP) will work with physician 
organizations to encourage comprehensive patient assessment prior to 
prescription of opiate therapy.
    FDA and other Federal agencies are enlisting the support of 
responsible businesses affiliated with online commercial transactions. 
These legitimate businesses will be asked to alert law enforcement 
officials to suspicious or inappropriate activities related to these 
products.
    Second, Investigation and Enforcement: The Internet is one of the 
most popular sources of diverted prescription drugs. An increasing 
number of rogue pharmacies offer controlled substances and other 
prescriptions direct to consumers online.
    FDA's Office of Criminal Investigation (OCI) and DEA work together 
on criminal investigations involving the illegal sale, use, and 
diversion of controlled substances, including illegal sales over the 
Internet. Both FDA and DEA have utilized the full range of regulatory, 
administrative, and criminal investigative tools available, as well as 
engaged in extensive cooperative efforts with local law enforcement 
groups, to pursue cases involving controlled substances.
    FDA and U.S. Customs and Border Protection (CBP), with assistance 
from DEA, continue to conduct spot examinations of mail and courier 
shipments for foreign drugs to U.S. consumers to help FDA and CBP 
target, identify, and stop illegal and potentially unsafe drug from 
entering the United States from foreign countries via mail and common 
carriers.
    Finally, Protecting Safe and Effective Use of Medications: FDA will 
support DEA's efforts with medical associations to identify existing 
best practices in physician training in the field of pain management. 
DEA and FDA plan to develop a mechanism to support the wider 
dissemination and completion of approved Continuing Medical Education 
(CME) courses for use of opioids that include information on the risk 
of abuse and addiction.
    FDA in conjunction with ONDCP and DEA will develop public service 
announcements that appear automatically during Internet drug searching 
to alert consumers to the potential danger and illegality of making 
direct purchases of controlled substances online. Currently, FDA, along 
with its sister agency, the Substance Abuse and Mental Health Services 
(SAMHSA), have jointly developed a public service announcement campaign 
to better educate consumers on the abuse of prescription pain killers.
    FDA did not request additional resources in the fiscal year 2005 
budget in order to participate in the activities stated above. This 
initiative does not require additional regulatory authority.

                                OBESITY

    Question. In your prepared remarks you discuss the FDA Obesity 
Working Group whose recommendations were recently released as part of 
HHS Secretary Thompson's overarching new national education campaign 
for combating obesity. What is the FDA role in these anti-obesity 
efforts? Which of your Centers is responsible for these efforts? What, 
specifically, is the FDA doing to make sure labels on food is correct, 
and that claims made about food are factual and science-based? What, if 
any, additional plans will be implemented in fiscal year 2005?
    Answer. In support of the President's Healthier U.S. initiative, 
the DHHS established a complementary initiative, Steps to a Healthier 
United States, which emphasizes personal responsibility for the choices 
Americans make for healthy behaviors. One aspect of this initiative 
focuses on reducing the major health burden created by obesity and 
other chronic diseases. Following DHHS' July 2003 Roundtable on Obesity 
and Nutrition, on August 11, 2003, FDA established an Obesity Working 
Group, or OWG, to prepare a report that outlines an action plan to 
cover critical dimensions of the obesity problem from FDA's perspective 
and authorities. This report was released on March 12, 2004.
    There is no simple answer to the problem of obesity. Achieving 
success in reducing and avoiding obesity will occur only as a result of 
efforts over time by individuals as well as various sectors of our 
society. It should be noted, however, that most associations, agencies, 
and organizations believe that diet and physical activity should be 
addressed together in the fight against overweight and obesity.
    The OWG report provides a range of short and long-term 
recommendations to address the obesity epidemic with a focus on a 
``calories count'' emphasis for FDA actions. These recommendations are 
based on sound science and address multiple facets of the obesity 
problem under FDA's purview, including developing appropriate and 
effective consumer messages to aid consumers in making wiser dietary 
choices; establishing educational strategies and partnerships to 
support appropriate messages and teach people, particularly children, 
how to lead healthier lives through better nutrition; developing 
initiatives to improve the labeling of packaged foods with respect to 
caloric and other nutrition information; encouraging and enlisting 
restaurants in efforts to combat obesity and provide nutrition 
information to consumers, including information on calories, at the 
point-of-sale; developing new therapeutics for the treatment of 
obesity; designing and conducting effective research in the fight 
against obesity; and continuing to involve stakeholders in the process.
    Regarding food labeling, the OWG report contains several 
recommendations based on sound science. I will provide these 
recommendations for the record.
    [The information follows:]
    Publish an advance notice of proposed rulemaking, or ANPRM, to seek 
comment on the following:
  --How to give more prominence to calories on the food label, for 
        example, increasing the font size for calories, including a 
        column in the Nutrition Facts panel of food labels for percent 
        Daily Value for total calories, and eliminating the listing for 
        calories from fat;
  --Whether to authorize health claims on certain foods that meet FDA's 
        definition of ``reduced'' or ``low'' calorie. An example of a 
        health claim for a ``reduced'' or ``low'' calorie food might 
        be: ``Diets low in calories may reduce the risk of obesity, 
        which is associated with type 2 diabetes, heart disease, and 
        certain cancers.''
  --Whether to require additional columns on the Nutrition Facts panel 
        to list quantitative amounts and percent Daily Value of an 
        entire package on those products and package sizes that can 
        reasonably be consumed at one eating occasion--or declare 
        quantitative amounts and percent Daily Value of the whole 
        package as a single serving if it can reasonably be consumed at 
        a single eating occasion; and,
  --Which, if any, reference amounts customarily consumed of food 
        categories appear to have changed the most over the past decade 
        and hence require updating.
    File and respond in a timely way to petitions the agency has 
received that ask FDA to define terms such as ``low,'' ``reduced,'' and 
``free'' carbohydrate; and provide guidance for the use of the term 
``net'' in relation to carbohydrate content of food--these petitions 
were filed on March 11, 2004. Encourage manufacturers to use dietary 
guidance statements, an example of which would be, ``To manage your 
weight, balance the calories you eat with your physical activity.''
    Encourage manufacturers to take advantage of the flexibility in 
current regulations on serving sizes to label as a single-serving those 
food packages where the entire contents of the package can reasonably 
be consumed at a single eating occasion. Encourage manufacturers to use 
appropriate comparative labeling statements that make it easier for 
consumers to make healthy substitutions.
    We believe that if the report's recommendations are implemented 
they will make a worthy contribution to confronting our Nation's 
obesity epidemic and helping consumers' lead healthier lives through 
better nutrition.
    We also believe that the regulatory scheme for claims in food 
labeling, whether health claims, nutrient content claims, or other 
types of claims, are science based, and we continue to consider 
modifications to our regulations to keep up with recent scientific 
developments. Some of the modifications FDA is currently considering 
are described above in the list of topics to be covered by the ANPRM 
the agency intends to issue.

                    ALBUTEROL METERED-DOSE INHALERS

    Question. As noted in the Senate Report last year, there are a 
number of organizations which support the removal of ozone-destroying 
CFC albuterol metered-dose inhalers from the market. The FDA has 
indicated in its regulatory plan that it intends to issue a rule on 
this matter. Proponents of this rule had expected a proposed rule by 
now. When can this Committee expect the FDA to issue a proposed rule to 
remove albuterol metered-dose inhalers from the U.S. market? Can you 
tell us at this time what you expect the effective date would be for 
that rule? When do you expect the FDA will issue a final rule?
    Answer. FDA is currently working on the CFC albuterol proposed rule 
and expects it to publish shortly. The rulemaking process prohibits FDA 
from describing the contents of the proposed rule, so the Agency cannot 
state the effective date of the rule at this time. FDA expects the 
final rule to publish in March 2005.

                BIOTECH-ENHANCED EVENTS IN FOOD AND FEED

    Question. The U.S. regulatory system currently imposes a zero 
tolerance on the presence of unapproved biotech-enhanced events in food 
and feed, regardless of the risk level. It does not recognize the 
realities of a biological system. This zero-tolerance' policy exposes 
grain handlers, food processors and feed manufacturers to the risk that 
any trace amounts of biotech-enhanced events in general commodity crops 
that have not been approved for food and feed under the U.S. regulatory 
process could render such crops adulterated and subject to seizure 
under Federal law. Such a policy is inconsistent with other food purity 
standards which have established thresholds for trace amounts of 
unexpected materials. Without having a policy in place, the United 
States risks significant disruptions in global agricultural trade. What 
is the FDA doing to meet their obligations and will they be able to 
complete their work by year's end?
    Answer. On August 2, 2002, OSTP announced proposed Federal actions 
to update field tests requirements for biotechnology derived plants and 
to establish early food safety assessments for new proteins produced by 
such plants. As part of this proposal, FDA announced that it would 
publish for comment draft guidance to address the possible 
intermittent, low level presence in food and feed of new non-pesticidal 
proteins from biotechnology-derived crops under development for food or 
feed use, but that have not gone through FDA's pre-market consultation 
process. FDA is preparing draft guidance and expects to publish the 
draft guidance for comment this calendar year.

                          GENERIC BIOLOGICALS

    Question. In your testimony you stressed the importance of being 
``open-minded'' about the science ``as the science improves.'' Can you 
assure the Subcommittee that the Agency will not adopt an approach that 
resurrects old science, and that the Agency intends to remain open 
minded as it evaluates application of the vast innovation in analytical 
tools to the development and evaluation of follow-on biologicals?
    Answer. We can assure the subcommittee that the Agency will not 
adopt an approach that resurrects or relies on outdated scientific 
techniques in the development and evaluation of follow-on biologics. 
Indeed, the Agency has been very proactive in striving to understand 
and embrace the latest technology used in the characterization of 
biotechnological products. For example, the Agency supports active 
research programs that utilize current technologies in addressing 
mission related research and in developing technologies that help 
address regulatory and scientific issues. These efforts are important 
to ensure that FDA scientists remain current with the latest advances 
in analytical techniques. Scientific staff also participates in 
scientific symposia and extensively interact with colleagues. Indeed, 
many of our scientific staff involved in the regulation of biotech 
products, are located on the NIH campus, which provides an enriched 
research environment utilizing advanced technology that is second to 
none.
    In June 2003, the Agency cosponsored, along with the International 
Association of Biologicals and the National Institute for Biological 
Standards and Control, a conference on the ``State of the Art 
Analytical Methods for the Characterization of Biological Products and 
Assessment of Comparability''. This meeting focused on what current 
analytical technologies can and cannot tell us about the 
physicochemical structure and function of biological therapeutics;
    The Agency's scientists participate yearly in the annual Symposium 
on ``Well Characterized Biotechnological Products'' cosponsored by FDA 
and the California Separation Sciences Society. This symposium includes 
highly technical seminars, workshops, and poster sessions that 
introduce the latest analytical technologies for the evaluation of 
biotechnological products. These technologies are presented by the 
leading academic, Industrial (pharmaceutical and equipment vendors), 
and government scientists;
    The Agency's scientists actively participate in many International 
conferences sponsored by biotech and pharmaceutical organizations (Bio, 
Pharma, and DIA) and other organizations that provide scientific, 
technological and regulatory information to the pharmaceutical 
industry. These conferences frequently present the application of the 
latest analytical methods for the characterization of protein and 
glycoproten therapeutics;
    The Agency also invites innovative scientists from academia and 
industry to present and discuss with FDA scientists the latest advances 
in analytical technology and the development of animal models that 
address some of the current limitations of physicochemical 
characterization of protein products.
    Regarding immune responses to biological therapeutics 
(immunogenicity), which can cause serious adverse events and limit 
product effectiveness, the agency co-sponsored a meeting entitled 
``Immunogenicity of Therapeutic Biological Products'' in October 2001, 
and has participated in numerous symposia on this topic in national 
meetings. Agency research scientists work with industry and academia in 
bringing to bear, on biological product development, informative animal 
models (transgenic, knockout, and knock-in) to more accurately predict 
the human immune response to various biotech products.
    Question. In your testimony you highlighted the extraordinary 
strides made over the past few years in developing instrumentation and 
other analytical tools that have vastly improved the ability to 
evaluate follow-on biologicals. Please identify for the Subcommittee 
the type of new analytical tools now available to industry and the 
Agency to conduct rigorous evaluations of follow-on biologics.
    Answer. Over the last several years there have been many advances 
in analytical tools that have improved the ability to evaluate follow-
on Biologicals.
    Electrospray, matrix assisted laser desorption (ES-MS), and fast 
atom bombardment mass spectrometry (MALDI-TOF) have been use in 
conjunction with advances in separation technologies (Reverse Phase-
High Performance Liquid Chromatography (RP-HPLC), Ion Exchange 
Chromatography, Hydrophobic Interaction Chromatography, Affinity 
Chromatography, and Size Exclusion Chromatography) to identify protein 
and carbohydrate heterogeneities and are very powerful tools for 
characterizing variations in a protein that are typically present in a 
single product.
    Recent advances in mass spectrometry (time of flight, fourier 
transform) have greatly improved the resolving powers of the technology 
and now provide the capability to resolve to within a 1 Da mass 
accuracy, the mass of a protein. In conjunction with powerful 
deconvulution software, this technology allows for very accurate mass 
data and a more comprehensive assessment of the carbohydrate profiles. 
This technology has resulted in a new approach called ``top down'' that 
allows for the analysis of intact proteins. In contrast, the 
traditional approach analyzes protein fragments generated by digestion 
with proteases, making it difficult to provide assurance that minor 
modifications to the protein have been identified.
    Protein aggregates can compromise the quality of a product as it 
relates to its safety and efficacy and are thought to be the most 
important product characteristic in generating immune responses. Such 
aggregates have typically been analyzed by size exclusion 
chromatography (SEC), an analytical method with limitations that result 
in the detection of only a very narrow spectrum of aggregates that can 
form in a protein product. Technological advances in a number of other 
analytical methods such as sedimentation velocity obtained by 
analytical ultracentrifugation and field flow fractionation can detect 
a much wider spectrum of aggregates, many of which are not detected by 
SEC.
    Advances in gel electrophoresis primarily various forms of 
capillary electrophoresis, now provide excellent resolution between 
protein species which differ slightly in net charge and can be coupled 
to various detention methods (UV, fluorescence, MS) for enhanced 
product characterization.
    Surface plasmon resonance technology monitors molecular interaction 
in real time and allows for the accurate detection and quantification 
of the on and off rates (kinetic rate constants) of protein-to-protein 
interactions. This technology has been applied to the design of 
immunoassays used for the detection of host antibodies formed against 
biotechnology products and to the characterization of mAB product 
interactions with their therapeutic target.
    Advances in the understanding of signal transduction mechanisms for 
many protein products have provided for the development of more precise 
in vitro bioassays that monitor an early event in the biological 
function of a protein rather then a cellular response, such as cell 
growth, that is subject to greater variability in outcomes.
    Protein products are not rigid structures and frequently the 
ability to flex and change conformations is critical to a protein's 
function. This property is difficult to detect by convention 
physicochemical techniques. However, advances in scanning probe 
microscopy particularly Atomic Force Microscopy (AFM), facilitate the 
mapping of biological samples to three-dimensional images and are 
capable of detecting multiple conformations. AFM-generated surface 
topology maps can portray in explicit detail the surface features of 
proteins and DNA. The application of this technology is broad and 
includes the study of protein and DNA structure, protein folding/
unfolding, protein-to-protein interactions, protein-to-DNA 
interactions, enzyme catalysis and protein crystal growth.
    Dynamic light scattering and multi-angle light scattering (LS) are 
beginning to be used in conjunction with advances in separation systems 
such as field flow fractionation and size exclusion chromatography. LS 
can provide absolute molecular weight, root-mean square radius and 
hydrodynamic radius of individual species of product.
    Microcalorimetry allows one to assess the thermodynamic profile of 
a protein, which provides a measurement of the structural stability of 
the protein product or interactions with other proteins. The method can 
determine affinity constants, enthalpy, entropy, heat capacity, Gibbes 
free energy and the number of binding sites, parameters that help 
characterize proteins but have not been routinely employed in the 
biotech industry.
    Fluorescence spectroscopy has been useful in monitoring flexibility 
of proteins and conformational stability.
    Nuclear Magnetic Resonance Spectroscopy (NMR) has traditionally 
been used to identify small molecules and their structures are now 
being applied to solving the structure of much larger and more complex 
biological macromolecules.
    Question. Please outline for the Subcommittee the history of FDA's 
regulation of biologicals, the range and volume of biological approvals 
issued by the Agency over the course of that history, and any other 
factors you consider relevant to FDA's vast scientific expertise that 
is being applied to development of the draft Guidance and that 
ultimately would be brought to bear in evaluating follow-on 
biologicals.
    Answer. The regulation of biologics began in the United States in 
1902, when Congress passed the Virus, Serum and Antitoxin Act (also 
known as the Biologics Control Act of 1902 and as the Virus Toxin Law). 
This law was enacted following the deaths of ten children who had 
received injections of diphtheria antitoxin contaminated with tetanus. 
In 1901, there was a serious epidemic of diphtheria resulting in a 
great demand for the diphtheria antitoxin. At the time, there was no 
requirement for safety testing and none was performed, and the 
manufacturing process was not controlled properly. The tetanus 
contamination was traced to an infected horse whose serum was used in 
producing the antitoxin.
    The 1902 Act required biologics to be manufactured in a manner that 
assured safety, purity, and potency. Provisions of the Act included:
  --Establishment license requirements;
  --Product license requirements;
  --Labeling requirements;
  --Inspection requirements;
  --Suspension/revocation of licenses; and,
  --Penalties for violations.
    The responsibility for implementing this new law was given to the 
Hygienic Laboratory of the Public Heath Service (PHS). In 1903, PHS 
issued regulations that included requirements that inspections would be 
unannounced and licenses were to be issued and re-issued on the basis 
of an annual inspection. The 1902 Act was amended in 1944. One change 
included a requirement that a biological license could be issued only 
upon demonstration that the product and the establishment met standards 
to ensure the continued safety, purity and potency of such products. 
This evaluation was to be made during pre-licensure inspections. These 
provisions are codified in section 351 of the PHS Act (42 U.S.C. 262). 
Another change that occurred at this time was the focal point for 
administering the Act. This responsibility was given to the National 
Institute of Health's National Microbiological Institute. Changes in 
responsibility for regulating biological products under the PHS Act 
occurred in the mid-1950 with the advent of polio vaccines. From 1955 
to 1972, biologics were regulated within the National Institutes of 
Health (NIH), in the Division of Biologics Standards (DBS). In 1972, 
biologic regulation was transferred to the FDA's Bureau of Biologics.
    After this transfer to the FDA began a merger of the regulatory 
requirements of the PHS Act and the Federal Food, Drug and Cosmetic 
(FD&C) Act (21 U.S.C.). Biologics were viewed as biological products 
under the PHS Act, and as drugs under the FD&C Act, subject to 
inspection under the Good Manufacturing Practices (GMP) regulations for 
drugs. The reagent manufacturers were also inspected under drug GMPs 
because there were no device regulations until 1976. Among the several 
changes that occurred, blood banks were required to register with the 
FDA and GMPs for blood and blood products were promulgated. Today one 
of the major responsibilities of FDA is to ensure the safety of the 
Nation's blood supply.
    In 1982, the FDA merged the Bureau of Biologics and the Bureau of 
Drugs into the Center for Drugs and Biologics. After a subsequent 
reorganization the responsibility for biologics regulation was placed 
under the Center for Biologics Evaluation and Research (CBER). The 
responsibilities for regulating biological products has grown and 
become more complex from its beginning in 1902, when technologies for 
producing biological products were in their infancy and the primary 
role was vaccine regulation. Today the regulation of a wide variety of 
novel biological products and their use as therapeutics requires 
knowledge of new scientific developments and concepts of research in 
the relevant biological disciplines. The therapeutic biological 
products that the FDA regulates are on the leading edge of technology. 
Rapid scientific advances in biochemistry, molecular biology, cell 
biology, immunology, genetics, and information technology are 
transforming drug discovery and development, paving the way for 
unprecedented progress in developing new medicines to conquer disease.
    As a representative sample of the range and volume of biological 
products approved, we offer below the fiscal year 2003 approvals. 
CBER's fiscal year 2003 major approvals include all approvals for 
original new BLAs (except those for blood banking), and other approvals 
for original biologic, drug, or device applications or supplements 
(e.g., for new/expanded indications, new routes of administration, new/
improved tests, new dosage formulations and regimens). Although most of 
the Office of Therapeutics Research and Review's applications were 
transferred to the Center for Drug Evaluation and Research on June 30, 
2003, all major BLA approvals are included in this list for both 
centers.
    [The information follows:]

                     BIOLOGICS LICENSE APPLICATIONS
------------------------------------------------------------------------
      Tradename/Proper Name       Indication for Use     Manufacturer
------------------------------------------------------------------------
Pegasys
    Peginterferon alfa-2a.......  Treatment of        Hoffmann-La Roche
                                   adults with         Inc. Nutley, NJ
                                   chronic hepatitis
                                   C who have
                                   compensated liver
                                   disease and who
                                   have not been
                                   previously
                                   treated with
                                   interferon alfa.
COBAS Ampliscreen HCV
    Hepatitis C Virus (Hepatitis  For the detection   Roche Molecular
     C Virus/Polymerase Chain      of HCV RNA, in      Systems, Inc.
     Reaction/Blood Cell           human plasma.       Pleasanton, CA
     Derived).
Pediarix
    DTaP & Hepatitis B            Combination         GlaxoSmithKline
     (Recombinant) & Inactivated   vaccine for         Biologicals
     Polio Virus Vaccine.          childhood           Rixensart,
                                   immunization.       Belgium
COBAS Ampliscreen HIV-1
    Human Immunodeficiency Virus  For detection of    Roche Molecular
     Type 1 (HIV-1/Polymerase      Human               Systems, Inc.
     Chain Reaction).              Immunodeficiency    Pleasanton, CA
                                   Virus (HIV-1) in
                                   human plasma
                                   using Polymerase
                                   Chain Reaction.
Aralast
    Alpha-Proteinase Inhibitor    Chronic             Alpha Therapeutic
     (Human).                      replacement         Corporation Los
                                   therapy             Angeles, CA
                                   (augmentation) in
                                   patients having
                                   congenital
                                   deficiency of
                                   Alpha-1-
                                   Proteinase
                                   Inhibitors with
                                   clinically
                                   evident emphysema.
HUMIRA
    Adalimumab..................  Reducing signs and  Abbott
                                   symptoms and        Laboratories
                                   inhibiting the      Abbott Park, IL
                                   progression of
                                   structural damage
                                   in adult patients
                                   with moderately
                                   to severely
                                   active rheumatoid
                                   arthritis who
                                   have had an
                                   inadequate
                                   response to one
                                   or more disease
                                   modifying
                                   antirheumatic
                                   drugs (DMARDs).
Amevive
    Alefacept...................  Treatment of adult  Biogen, Inc.
                                   patients with       Cambridge, MA
                                   moderate to
                                   severe chronic
                                   plaque psoriasis
                                   who are
                                   candidates for
                                   systemic therapy
                                   or phototherapy.
Crosseal
    Fibrin Sealant (Human)......  Adjunct to          OMRIX
                                   hemostasis during   Biopharmaceutical
                                   liver surgery.      s, Ltd. Fairfax,
                                                       VA
Peroxidase Conjugate ORTHO
 Antibody to HBsAG ELISA Test
 System 3
    Antibody to Hepatitis B       Detection of        Ortho-Clinical
     Surface Antigen (Mouse        hepatitis B         Diagnostics, Inc.
     Monoclonal) Enzyme-Linked     surface antigen     Raritan, NJ
     Immunosorbent Assay (ELISA)   in human serum or
     (Antibody to HBsAg/Enzyme     plasma as a
     Immuno Assay (EIA), Version   screening test
     3.0/Monoclonal).              and an aid in the
                                   diagnosis of
                                   potential
                                   hepatitis B
                                   infection.
Fabrazyme
    agalsidase beta.............  For use in          Genzyme
                                   patients with       Corporation
                                   Fabry disease to    Cambridge, MA
                                   reduce
                                   globotriasylceram
                                   ide (GL-3)
                                   deposition in
                                   capillary
                                   endothelium of
                                   the kidney and
                                   certain other
                                   cell types.
Aldurazyme
    Laronidase..................  For treatment of    Biomarin
                                   patients with       Pharmaceutical,
                                   Hurler and Hurler-  Inc. Novato, CA
                                   Scheie forms of
                                   Mucopolysaccharid
                                   osis I (MPS I)
                                   and for patients
                                   with the Scheie
                                   form who have
                                   moderate to
                                   severe symptoms.
FluMist
    Influenza Virus Vaccine       For active          MedImmune
     Live, Intranasal.             immunization for    Vaccines, Inc.
                                   the prevention of   Mountain View, CA
                                   disease caused by
                                   influenza A and B
                                   viruses in
                                   healthy children
                                   and adolescents,
                                   5-17 years of
                                   age, and healthy
                                   adults, 18-49
                                   years of age.
XOLAIR
    Omalizumab..................  For adults and      Genentech, Inc.
                                   adolescents (12     South San
                                   years of age and    Francisco, CA
                                   above) with
                                   moderate to
                                   severe persistent
                                   asthma who have a
                                   positive skin
                                   test or in vitro
                                   reactivity to a
                                   perennial
                                   aeroallergen and
                                   whose symptoms
                                   are inadequately
                                   controlled with
                                   inhaled
                                   corticosteroids.
BEXXAR
    Tositumomab and Iodine I 131  Treatment of        Corixa Corporation
     Tositumomab.                  patients with       Seattle, WA
                                   CD20 positive,
                                   follicular, non-
                                   Hodgkin's
                                   lymphoma, with
                                   and without
                                   transformation,
                                   whose disease is
                                   refractory to
                                   Rituximab and has
                                   relapsed
                                   following
                                   chemotherapy.
Zemaira
    Alpha-1-Proteinase Inhibitor  To use as chronic   Aventis Behring
     (Human).                      augmentation and    L.L.C. King of
                                   maintenance         Prussia, PA
                                   therapy in
                                   individuals with
                                   Alpha-1-
                                   Antitrypsin
                                   Deficiency and
                                   evidence of
                                   emphysema.
Advate
    Antihemophilic Factor         Indicated in        Baxter Healthcare
     (Recombinant), Plasma/        hemophilia A        Corporation
     Albumin Free Method.          (classical          Westlake Village,
                                   hemophilia) for     CA
                                   the prevention
                                   and control of
                                   bleeding
                                   episodes, and in
                                   the perioperative
                                   management of
                                   patients with
                                   hemophilia A.
Genetic Systems HIV-1/HIV-2 Plus
 O EIA
    Human Immunodeficiency Virus  For detection of    Bio-Rad
     Types 1 and 2 (HIV-1 and      antibodies to       Laboratories,
     HIV-2/Enzyme Immunoassay      human               Inc. Hercules, CA
     (EIA)/Recombinant and         immunodeficiency
     Synthetic).                   types 1 and 2.
GAMUNEX
    Immune Globulin Intravenous   Indicated in        Bayer Corporation
     (Human), 10 percent by        primary humoral     Berkeley, CA
     Chromatography Process.       immunodeficiency
                                   and idiopathic
                                   thrombocytopenic
                                   purpura.
------------------------------------------------------------------------


    BIOLOGICS LICENSE SUPPLEMENTS (FOR NEW INDICATIONS, NEW ROUTES OF
           ADMINISTRATION, NEW DOSAGE FORMS, IMPROVED SAFETY)
------------------------------------------------------------------------
      Tradename/Proper Name       Indication for Use     Manufacturer
------------------------------------------------------------------------
Prevnar
    Pneumococcal 7-valent         New indication for  Lederle
     Conjugate Vaccine             the prevention of   Laboratories
     (Diphtheria CRM197 Protein).  otitis media.       Division Pearl
                                                       River, NY
Avonex
    Interferon beta-1a..........  Package insert      Biogen, Inc.
                                   revised to          Cambridge, MA
                                   include updated
                                   information
                                   regarding serum
                                   neutralizing
                                   antibodies.
Pegasus
    Peginterferon alfa-2a.......  Combination         Hoffmann-La Roche
                                   therapy with        Inc. Nutley, NJ
                                   Ribavirin, USP
                                   (COPEGUS), for
                                   the treatment of
                                   chronic Hepatitis
                                   C Virus infection
                                   in adults.
Aranesp
    Darbepoetin alfa............  Darbepoetin alfa    Amgen, Inc.
                                   Albumin (human)     Thousand Oaks, CA
                                   formulation in
                                   single dose
                                   prefilled
                                   syringes for six
                                   dosage strengths
                                   (60, 100, 150,
                                   200, 300 and 500
                                   micrograms).
Simulect
    Basiliximab.................  Addition of new     Novartis
                                   single dose 10 mg   Pharmaceuticals
                                   strength of drug    Corporation East
                                   product.            Hanover, NJ
Avonex
    Interferon beta-1a..........  Package insert      Biogen, Inc.
                                   revised to          Cambridge, MA
                                   include safety
                                   and efficacy data
                                   from a study of
                                   patients who
                                   experienced a
                                   single clinical
                                   exacerbation of
                                   multiple
                                   sclerosis and to
                                   provide a
                                   Medication Guide.
Betaseron
    Interferon beta-1b..........  To revise the       Chiron Corporation
                                   Clinical Studies    Emeryville, CA
                                   section to
                                   include data from
                                   two studies
                                   conducted in
                                   patients with
                                   secondary
                                   progressive
                                   multiple
                                   sclerosis (MS),
                                   also to update
                                   the Adverse
                                   Reactions and
                                   Warnings sections
                                   to include new
                                   safety
                                   information, and
                                   to provide a
                                   Medication Guide.
Remicade
    Infliximab..................  For reducing the    Centocor, Inc.
                                   number of           Malvern, PA
                                   draining
                                   enterocutaneous
                                   and rectovaginal
                                   fistulas and
                                   maintaining
                                   fistula closure
                                   in patients with
                                   fistulizing
                                   Crohn's disease.
Rebif
    Interferon beta-1a..........  Final pivotal       Serono, Inc.
                                   study report that   Rockland, MA
                                   confirms the
                                   results of 48
                                   week data.
Avonex
    Interferon beta-1a..........  HAS-free liquid     Biogen, Inc.
                                   formulation in a    Cambridge, MA
                                   prefilled syringe
                                   as an alternate
                                   dosage form and
                                   to provide for a
                                   Medication Guide.
Dryvax
    Smallpox Vaccine, Dried,      Active              Wyeth
     Calf Lymph Type.              immunization        Laboratories,
                                   against smallpox    Inc. Marietta, PA
                                   disease.
Dryvax
    Smallpox Vaccine, Dried,      Include new safety  Wyeth
     Calf Lymph Type.              information for     Laboratories,
                                   the recent          Inc. Marietta, PA
                                   reports of
                                   cardiac events
                                   and updated
                                   storage period
                                   for the vaccine
                                   after
                                   reconstitution
                                   from 15 days to
                                   90 days.
Infanrix
    Diphtheria & Tetanus Toxoids  To include in the   GlaxoSmithKline
     & Acellular Pertussis         indication a        Biologicals
     Vaccine Adsorbed.             fifth dose at 4-6   Rixensart,
                                   years of age        Belgium
                                   after 4 prior
                                   doses of Infanrix.
Enbrel \1\
    Etanercept..................  To expand the       Immunex
                                   rheumatoid          Corporation
                                   arthritis           Seattle, WA
                                   indication to
                                   include improving
                                   physical function.
Enbrel \1\
    Etanercept..................  For reducing signs  Immunex
                                   and symptoms in     Corporation
                                   patients with       Seattle, WA
                                   active ankylosing
                                   spondylitis.
Enbrel \1\
    Etanercept..................  To expand the       Immunex
                                   indication to       Corporation
                                   include             Seattle, WA
                                   inhibiting the
                                   progression of
                                   structural damage
                                   of active
                                   arthritis in
                                   patients with
                                   psoriatic
                                   arthritis.
Kineret \1\
    Anakinra....................  To expand the       Amgen, Inc.
                                   indication to       Thousand Oaks, CA
                                   include slowing
                                   the progression
                                   of structural
                                   damage in
                                   moderately to
                                   severely active
                                   rheumatoid
                                   arthritis, in
                                   patients 18 years
                                   of age or older
                                   who have failed
                                   one or more
                                   DMARDs.
Synagis \1\
    Palivizumab.................  To expand the       MedImmune,Inc
                                   indication to       Gaithersburg, MD
                                   include children
                                   with
                                   hemodynamically
                                   significant
                                   congenital heart
                                   disease.
------------------------------------------------------------------------
\1\ OTRR product applications transferred to CDER on 6-30-03.


                          NEW DRUG APPLICATIONS
------------------------------------------------------------------------
      Tradename/Proper Name       Indication for Use       Applicant
------------------------------------------------------------------------
TriCitrasol Anticoagulant Sodium
 Citrate Conc. 46.7 percent
 Trisodium Citrate, 30 mL
    Anticoagulant Sodium Citrate  triCitrasol, after  Cytosol
     Solution.                     dilution of a       Laboratories,
                                   rouleaux agent,     Inc. Braintree,
                                   is an               MA
                                   anticoagulant
                                   used in
                                   granulocytapheres
                                   is procedures.
Anticoagulant Citrate Dextrose
 Solution, Solution A, U.S.P.,
 (ACD-A). 50 mL, PN 6053
    Anticoagulant Citrate         To provide for the  Cytosol
     Dextrose Solution (ACD).      use of              Laboratories,
                                   Anticoagulant       Inc. Braintree,
                                   Citrate Dextrose    MA
                                   Solution,
                                   Solution A,
                                   U.S.P., (ACD-A)
                                   50 mL for the
                                   extracorporeal
                                   processing of
                                   blood with
                                   Autologous PRP
                                   systems in
                                   production of
                                   platelet rich
                                   plasma (PRP) for
                                   in vitro use.
------------------------------------------------------------------------


                   SUPPLEMENTAL NEW DRUG APPLICATIONS
------------------------------------------------------------------------
      Tradename/Proper Name       Indication for Use       Applicant
------------------------------------------------------------------------
Abbokinase
    Urokinase...................  Improvements in     Abbott
                                   the manufacture     Laboratories
                                   and testing of      Abbott Park, IL
                                   the bulk drug
                                   substance and
                                   drug product, and
                                   withdrawal of the
                                   indication for
                                   coronary artery
                                   thrombosis
                                   indication (CAT)
                                   and the Open-Cath
                                   dosage strengths.
------------------------------------------------------------------------


                           DEVICE APPLICATIONS
------------------------------------------------------------------------
                                    Description and
            Tradename               Indication for         Applicant
                                        Device
------------------------------------------------------------------------
OraSure OraQuick Rapid HIV-1      For the detection   OraSure
 Antibody Test                     of antibodies to    Technologies
                                   HIV-1 in human      Bethlehem, PA
                                   finger-stick
                                   whole blood
                                   specimens.
MedMira Rapid HIV Test            For detection of    MedMira labs
                                   HIV-1 and HIV-2     Bayers Lake
                                   Antibodies.         Halifax, Canada
Ortho ProVue, Software Version:   Modular,            Micro Typing
 2.10                              Microprocessor-     Systems Inc.
                                   controlled          Pompano Beach, FL
                                   instrument
                                   designed to
                                   automate in vitro
                                   immunohematologic
                                   al testing to
                                   human blood
                                   utilizing the ID
                                   MTS/Gel
                                   Technology.
Vironostika HIV-1 Plus O          For the             BioMerieux, Inc.
 Microelisa System                 qualitative         Durham, NC
                                   detection of
                                   antibodies to
                                   Human
                                   Immunodeficiency
                                   Virus Type 1 (HIV-
                                   1), including
                                   Group O, in human
                                   specimens
                                   collected as
                                   serum, plasma, or
                                   dried blood spots.
------------------------------------------------------------------------


        DEVICE SUPPLEMENTS (FOR NEW INDICATIONS, IMPROVED SAFETY)
------------------------------------------------------------------------
                                    Description and
            Tradename               Indication for         Applicant
                                        Device
------------------------------------------------------------------------
Calypte HIV-1 Urine EIA           HIV-1 Urine EIA to  Calypte Biomedical
                                   include changes     Corporation
                                   to the black box    Alameda, CA
                                   warning statement.
------------------------------------------------------------------------

                                 ______
                                 

           Questions Submitted by Senator Christopher S. Bond

                         nutritional guidelines
    Question. There is a linear relationship between high transfatty 
acid and high saturated fat intake and chronic disease. We also know 
that the consumption of foods high in these two elements likely 
contribute to the statistics on obesity. Does FDA intend to draft 
guidelines or standards for the consumption of these fats?
    Answer. FDA issued on July 11, 2003 final rules to require that 
trans fatty acids be listed in mandatory nutrition labeling. 
Manufacturers must have this information in Nutrition Facts panels on 
all food packages entering interstate commence by January 1, 2006. On 
July 11, 2003, FDA also published an advance notice of proposed 
rulemaking (ANPRM) to solicit data and information that could be used 
to establish new nutrient content claims about trans fatty acids; to 
establish qualifying criteria for trans fat in current nutrient content 
and health claims; and to consider statements about trans fat, either 
alone or in combination with saturated fat and cholesterol to enhance 
consumers' understanding about such cholesterol-raising lipids and how 
to use the information to make healthy food choices. The agency has 
reopened the comment period to this ANPRM to receive comment on the 
Institute of Medicine's (IOM) December 2003 report on Dietary Reference 
Intakes in which the IOM included a suggested approach for establishing 
a daily value for trans fat. In addition, FDA has scheduled a Food 
Advisory Committee Nutrition Subcommittee meeting at the end of April 
2004 to consider scientific questions related to saturated fat and 
trans fat that may help determine the agency's course for food labeling 
of these fats.
    Question. Will FDA provide guidelines and or regulations to 
restaurants and other food manufacturers and--more importantly--provide 
them a roadmap to increasing the nutritional content and decrease 
saturated fat levels of their products?
    Answer. An important goal of the Nutrition Labeling and Education 
Act of 1990 was to provide incentives to manufacturers to improve the 
nutritional composition of food products. Studies have shown that the 
implementing regulations, which required nutrition labeling on most 
packaged foods, resulted in a significant increase in the number of 
low- and reduced-fat products in the marketplace. We anticipate that 
the new labeling regulations requiring that trans fat be listed will 
have a similar effect, reducing total intake of trans fat. In fact, 
since publication of the final rule requiring the listing of trans fat, 
several food manufacturers and at least one major fast food restaurant 
chain have announced that they are changing the type of fats used in 
order to reduce levels of trans fats.
    Question. Does FDA intend to provide guidelines and or regulations 
on the characteristics of healthy oils' that can be used in most food 
manufacturing to improve overall health and nutrition of those foods?
    Answer. By requiring the saturated and trans fat content to be 
declared in Nutrition Facts panels on most packaged foods, FDA is 
providing an incentive for manufacturers to reduce the levels of those 
fats whose consumption is associated with increased levels of LDL-
cholesterol.
    Question. Does FDA have this authority?
    Answer. Manufacturers may choose between different food ingredients 
to use in their food products, provided that such ingredients are safe 
for such use under the Federal Food, Drug, and Cosmetic Act (the Act). 
FDA has authority, under section 403(q) of the Act, to require 
nutrition labeling on packaged food products. Restaurant foods are 
exempt unless they make a nutrition claim.
    Question. How will FDA ensure that as they move forward with trans-
fat labeling that saturated fats will not come back into the diet?
    Answer. Nutrition labeling will indicate the levels of both 
saturated fat and trans fat in most packaged foods. Consumer education 
programs will encourage consumers to look at both types of fats and to 
consider the combined total amount in making purchasing decisions.
                                 ______
                                 

                Questions Submitted by Senator Herb Kohl

                                OBESITY

    Question. Dr. Crawford, both USDA and FDA have recently announced 
new efforts to combat the increasing problem of obesity. FDA announced 
the ``Calories Count'' program, and USDA has money in several programs, 
including WIC, to help battle this problem. However, for all of the 
government's efforts, all of the money being put into this effort pales 
in comparison to the food industry's billions of dollars worth of 
advertising. How can the government successfully get its message out 
when, at first glance, its efforts appear to be dwarfed by the food 
industry? How do your agencies compete with that?
    Answer. In support of the President's Healthier U.S. initiative, 
the DHHS established a complementary initiative, Steps to a Healthier 
U.S., which emphasizes personal responsibility for the choices 
Americans make for healthy behaviors. One aspect of this initiative 
focuses on reducing the major health burden created by obesity and 
other chronic diseases. Following DHHS' July 2003 Roundtable on Obesity 
and Nutrition, on August 11, 2003, FDA established an Obesity Working 
Group, or OWG, to prepare a report that outlines an action plan to 
cover critical dimensions of the obesity problem from FDA's perspective 
and authorities. This report was released on March 12, 2004.
    There is no simple answer to the problem of obesity. Achieving 
success in reducing and avoiding obesity will occur only as a result of 
efforts over time by individuals as well as various sectors of our 
society. It should be noted, however, that most associations, agencies, 
and organizations believe that diet and physical activity should be 
addressed together in the fight against overweight and obesity.
    The OWG report provides a range of short and long-term 
recommendations to address the obesity epidemic with a focus on a 
``calories count'' emphasis for FDA actions. These recommendations are 
based on sound science and address multiple facets of the obesity 
problem under FDA's purview, including developing appropriate and 
effective consumer messages to aid consumers in making wiser dietary 
choices; establishing educational strategies and partnerships to 
support appropriate messages and teach people, particularly children, 
how to lead healthier lives through better nutrition; developing 
initiatives to improve the labeling of packaged foods with respect to 
caloric and other nutrition information; encouraging and enlisting 
restaurants in efforts to combat obesity and provide nutrition 
information to consumers, including information on calories, at the 
point-of-sale; developing new therapeutics for the treatment of 
obesity; designing and conducting effective research in the fight 
against obesity; and continuing to involve stakeholders in the process.
    Regarding food labeling, the OWG report contains several 
recommendations based on sound science. I will provide these 
recommendations for the record.
    [The information follows:]
    Publish an advance notice of proposed rulemaking, or ANPRM, to seek 
comment on the following:
  --How to give more prominence to calories on the food label, for 
        example, increasing the font size for calories, including a 
        column in the Nutrition Facts panel of food labels for percent 
        Daily Value for total calories, and eliminating the listing for 
        calories from fat;
  --Whether to authorize health claims on certain foods that meet FDA's 
        definition of ``reduced'' or ``low'' calorie. An example of a 
        health claim for a ``reduced'' or ``low'' calorie food might 
        be: ``Diets low in calories may reduce the risk of obesity, 
        which is associated with type 2 diabetes, heart disease, and 
        certain cancers.''
  --Whether to require additional columns on the Nutrition Facts panel 
        to list quantitative amounts and percent Daily Value of an 
        entire package on those products and package sizes that can 
        reasonably be consumed at one eating occasion--or declare 
        quantitative amounts and percent Daily Value of the whole 
        package as a single serving if it can reasonably be consumed at 
        a single eating occasion; and,
  --Which, if any, reference amounts customarily consumed of food 
        categories appear to have changed the most over the past decade 
        and hence require updating.
    In addition, FDA will file and respond in a timely way to petitions 
the agency has received that ask FDA to define terms such as ``low,'' 
``reduced,'' and ``free'' carbohydrate; and provide guidance for the 
use of the term ``net'' in relation to carbohydrate content of food--
these petitions were filed on March 11, 2004.
    FDA will also encourage manufacturers to use dietary guidance 
statements, an example of which would be, ``To manage your weight, 
balance the calories you eat with your physical activity.'' In 
addition, the Agency will encourage manufacturers to take advantage of 
the flexibility in current regulations on serving sizes to label as a 
single-serving those food packages where the entire contents of the 
package can reasonably be consumed at a single eating occasion and 
encourage manufacturers to use appropriate comparative labeling 
statements that make it easier for consumers to make healthy 
substitutions.
    FDA believes that if the report's recommendations are implemented 
they will make a worthy contribution to confronting the Nation's 
obesity epidemic and helping consumers' lead healthier lives through 
better nutrition.
    FDA also believes that the regulatory scheme for claims in food 
labeling, whether health claims, nutrient content claims, or other 
types of claims, are science based, and we continue to consider 
modifications to our regulations to keep up with recent scientific 
developments. A benefit of standardized, science-based terminology, as 
with other terms that FDA has defined that consumers may use to make 
health-based dietary choices--e.g., terminology concerning fat content-
, is that it allows consumers to compare across products and it 
encourages manufacturers to compete based on the nutritional value of 
the food. However, FDA does not regulate television and other media 
marketing of food products. Some of the modifications FDA is currently 
considering are described above in the list of topics to be covered by 
the ANPRM the agency intends to issue.
    With respect to conveying the report's messages to the public, FDA 
believes that all parties, including the packaged food industry, 
restaurants, academia, and other private and public sector 
organizations in addition to government agencies at all levels, have an 
essential role to play. On April 22, 2004, FDA's Science Board focused 
on specific recommendations from the OWG report. These recommendations 
call on FDA to work through a third-party facilitator to engage all 
involved stakeholders in a dialogue on how best to construct and convey 
obesity messages in the restaurant setting and in the area of pediatric 
obesity education.
    This approach is one example of how the Agency intends, by means of 
public and private partnerships, to leverage its ability to convey 
appropriate messages on obesity to the public with the goal of changing 
behavior and ultimately reversing obesity trends in the United States.

                           IMPORT INSPECTIONS

    Question. Dr. Crawford, the FDA budget this year includes a $7 
million increase to fund 97,000 food import examinations. This is a big 
increase in inspections over any previous year--still, however, less 
than one percent of all of the food imported into this country will be 
inspected. How would you respond to charges that you still aren't 
inspecting nearly enough imported food, especially in light of events 
during the past year where bad food has gotten in and people have died? 
How do we ensure consumers that their food is indeed safe?
    Answer. FDA is appreciative of the additional funding we have 
received for the inspection of domestic firms and for inspections of 
imported foods. FDA believes it is more effective to focus our 
resources in a risk-based manner than to focus simply on increasing the 
percentage of imported food shipments that are physically inspected. It 
is important to note that every shipment of FDA-regulated food which is 
entered through Customs and Border Protection as a consumption entry is 
electronically reviewed by FDA's Operational and Administrative System 
for Import Support to determine if it meets identified criteria for 
further evaluation by FDA reviewers and physical examination and/or 
sampling and analysis or refusal. This electronic screening allows FDA 
to concentrate its limited inspection resources on high-risk shipments 
while allowing low-risk shipments to proceed into commerce.
    Due to constantly changing environments of operation, e.g., 
counterterrorism and BSE, our domestic inspection and import strategy 
cannot be defined in terms of a percentage of coverage through 
inspections, physical examinations and sample analyses. It needs to be 
a flexible blend of the use of people, technology, information and 
partnerships to help protect Americans from unsafe imported products. 
Accordingly, the Agency is developing and using strategies for 
mitigating risks prior to importation through partnerships and 
initiatives based on best practices and other science based factors 
relevant to the import life cycle, i.e., from foreign manufacturer to 
the U.S. consumer. Recently this principle has been applied in the 
``Canadian Facility Voluntary Best Management Practices for Expediting 
Shipments of Canadian Grains, Oilseeds and Products to the United 
States'' implemented February 24, 2004, and designed to mitigate the 
potential of mammalian protein prohibited from being fed to cattle or 
other ruminants under BSE-prevention regulations promulgated by CFIA 
and FDA.
    Another piece of the long term solution to a higher level of 
confidence in the security and safety of food products lies in 
information technology that will merge information on products and 
producers with intelligence on anticipated risks to target products for 
physical and laboratory examination or refusal. This strategy would 
rely on data integrity activities that reduce the opportunity for 
products to be incorrectly identified at ports. It would also rely on 
cooperation from producers so that FDA can identify sources that are 
unlikely to need physical testing. However, even with such targeting, 
improvements are limited by the available methodologies for assessing 
threat agents and our ability to predict which tests ought to be used.
    We are ramping up our food inspections, but we recognize that we 
also need to inspect smarter, not just inspect more. That is why FDA is 
making significant investments in technology and information resources 
such as the development of the Mission Accomplishment and Regulatory 
Compliance Services System, MARCS. MARCS is a comprehensive redesign 
and reengineering of two core mission critical systems at FDA: FACTS 
and the Operational and Administrative System for Import Support, 
OASIS. OASIS supports the review and decision making process of 
products for which entry is sought into the United States. We are using 
funds to work to further improve targeting and using force multipliers 
such as IT.
    FDA also has a proof of concept project, called ``Predict,'' with 
New Mexico State University under a Department of Defense contract 
which is being designed to enhance agency capability to rapidly assess 
and identify import entries based on risk using relevant information 
from various sources including regulated industry, trade, other 
Federal, State, and local entities, and foreign industry and 
governments. This project, if successful, will greatly enhance FDA's 
capability to be smarter in directing field activities on products of 
greater risk to public health and safety. The proof of concept project 
is projected to be completed in the Fall of 2004. The relentless growth 
in the volume of domestic as well as imported food products, which are 
increasingly in ``ready for consumer sale packaging.'' Food imports are 
now growing at 19 percent per year. FDA needs to use all the potential 
tools available to improve its efficiency in food security and safety 
coverage.
    In addition, FDA has several strategic initiatives to enhance 
safety. One of these is ``Agency Initiatives to Improve Coverage,'' 
which includes the creation of the Southwest Import District to better 
coordinate import activities on the southern border. Another is 
reciprocal FDA and U.S. Customs and Border Protection training to 
improve product integrity of goods offered for import and increase 
enforcement actions by Customs to deter willful violations of U.S. laws 
and regulations. While foreign inspections and border operations 
provide some assurance that imported foods are safe, the agency 
continues to work to foster international agreements and harmonize 
regulatory systems. For instance, we actively participate in the 
Canada/U.S./Mexico Compliance Information Group, which shares 
information on regulatory systems and the regulatory compliance status 
of international firms to protect and promote human health.
    It is very important that American consumers trust the safety of 
the food supply. FDA has made fundamental changes in how we implement 
our mission of protecting the food supply, so that all Americans can 
have confidence that their food has been handled under secure 
conditions that provide assurance of its safety.

                           FDA FOIA POLICIES

    Question. Dr. Crawford, my office has been working with a non-
profit patient advocacy group, the TMJ Association, in their efforts to 
have two FOIA requests that are well over a year old responded to. 
Their original FOIA request was made on November 1, 2002 (request 
number 02017071), more than 17 months ago, and the subsequent request 
was made on March 25, 2003 (request number 03004361). They have not yet 
received the information requested, and have been unable to get a date 
commitment by FDA as to when the information will be provided. It is my 
understanding that they have been informed that FOIA requests are 
severely backlogged, and the FDA has no idea when they will be able to 
process their request. What is the current backlog for FOIA requests?
    Answer. As of April 28, 2004, FDA has 19,369 pending FOIA 
requests--17,555 have been pending more than 20 days and 1,814 have 
been pending 20 days or less. The Denver District Office is responsible 
for responding to the two requests from the TMJ Association. As of 
April 28, 2004, Denver District Office has 369 pending FOIA requests--
357 requests have been pending more than 20 days, and 12 requests have 
been pending 20 days or less.
    Question. How many FDA staff are responsible for handling these 
requests? Is this their sole responsibility, or do they have other 
responsibilities as well?
    Answer. For fiscal year 2003 the total number of personnel 
responsible for processing FOIA requests was 91 FTE, 75 full time 
employees, and 16 FTE work years representing personnel with part-time 
FOIA duties in addition to other responsibilities.
    Question. Does FDA need additional staff or resources in order to 
process these requests on a timely basis?
    Answer. In some agency components FOIA is a collateral duty. For 
example, in most FDA field offices, Compliance Officers whose primary 
responsibilities are related to the Agency's regulatory enforcement 
activities also perform FOIA duties as permitted by time and regulatory 
workload. Additional staff devoted to FOIA could shorten the amount of 
time for processing requests.
    Question. What do you believe is a reasonable length of time for a 
group to wait for an information request to be processed and responded 
to?
    Answer. Requests are processed by the agency component that 
maintains the requested records. There are a number of factors that 
must be considered in order to predict a reasonable amount of time for 
a request to be processed. Those factors include the volume of requests 
received by the component, the complexity of requests received, the 
amount of time required to search for records, the amount of time 
require to review the records to determine whether information is 
releasable under FOIA, and the resources available to process requests.
    Question. What is the average length of time it takes to process a 
FOIA request? Can you please explain the severe delay in processing 
this specific one, which has taken over 2 years and apparently has no 
end in sight? Can you please provide me a timeframe within which the 
FDA will respond to these two particular FOIA requests?
    Answer. Under the Electronic Freedom of Act Amendments of 1996, 
agencies are permitted to establish multiple tracks for processing FOIA 
requests based on the complexity of the requests and the amount of work 
and time required to process requests. Some FDA components have 
established multiple processing tracks. Requests are processed on a 
first in, first out basis within each track. The median number of days 
to process requests in the simple processing track is 19 days. The 
median number of days to process requests in the complex processing 
track, for more complicated requests, is 363 days. For requests that 
are not processed in multiple processing tracks, the median number of 
days to process is 44 days.
    Due to a heavy load of regulatory cases in the Denver District 
Office that must be handled by the Compliance Officers in addition to 
staff shortages, FOIA work in the Denver District is being performed by 
one individual on a part-time basis. This has resulted in a significant 
backlog of FOIA requests. The Denver District Office expects to fill 
request 02-17071 from the TMJ Association in six months, and request 
03-4361 in one month.
    Question. What additional efforts can this group undertake in order 
to speed up their request?
    Answer. The Denver District Office expects to fill request 02-17071 
from the TMJ Association in 6 months, and request 03-4361 in one month.
    In addition, the Denver District is reviewing and evaluating its 
FOIA workload and will develop a strategy aimed at reducing the backlog 
of FOIA requests.
    Question. What is the FDA's policy on charging for FOIA requests 
made by non-profit patient advocacy groups?
    Answer. The FOIA sets forth criteria that agencies must follow with 
respect to charging for processing FOIA requests. Non-profit 
organizations are considered Category III requesters. Such requesters 
receive 100 pages of duplication and 2 hours of search at no charge. If 
the number of pages exceed 100 and/or if the amount of search time 
exceeds 2 hours, Category III requesters are charged based on the FOIA 
fee schedule of the Department of Health and Human Services. The fee 
for duplication is $.10 per page, and the fee for search is based on 
the grade level of the individual who processes the request. I will be 
happy to provide the current grade rates for the record.
    [The information follows:]
Current Grade Rates
    GS-1 through 8--$18.00 per hour
    GS-9 through 14--$36.00 per hour
    GS-15 and above--$64.00 per hour
    In addition, requesters may make a request for waiver or reduction 
of fees if their request meets the following criteria: disclosure of 
the information is in the public interest because it is likely to 
contribute significantly to public understanding of the operations or 
activities of the Government; and, disclosure is not primarily in the 
commercial interest of the requester.

                          IMPLICIT PRE-EMPTION

    Question. Adverse reactions to prescription drugs and other 
medicines take the lives of more than 100,000 Americans each year, and 
millions more are seriously injured. For many years, state tort laws 
have enabled some victims to receive compensation for their injuries. 
It has been brought to my attention that the Food and Drug 
Administration (FDA) has stepped in to protect drug companies from 
liability in some of these lawsuits, potentially robbing individuals of 
their only means of compensation. FDA's actions are even more troubling 
when you consider that these lawsuits have other important purposes, 
such as deterring future bad behavior and providing the American public 
with access to important health and safety information. How many times 
has the FDA interfered in lawsuits, arguing that implicit pre-emption 
prohibits a plaintiff from receiving compensation for their injuries? 
In how many of these cases has a court held that the plaintiff's tort 
claim was implicitly pre-empted by Federal law?
    Answer. In the past several years, the Department of Justice (DOJ) 
has represented the United States in four cases involving state-law 
challenges to the adequacy of FDA-approved risk information 
disseminated for FDA-approved new drugs.\1\ In each case, DOJ contended 
that the state-law claim was preempted by Federal law. In addition, in 
some cases, DOJ argued that the state-law claim was not properly before 
the court by operation of the doctrine of primary jurisdiction.\2\
---------------------------------------------------------------------------
    \1\ FDA also periodically becomes involved, through the Department 
of Justice, in cases involving preemption of state-law requirements 
under the medical device provisions of the FDCA, which include an 
express preemption provision, 21 U.S.C. 360k(a).
    \2\ Primary jurisdiction allows a court to refer a matter to an 
administrative agency for an initial determination where the matter 
involves technical questions of fact and policy within the agency's 
jurisdiction. See, e.g., Israel v. Baxter Labs., Inc., 466 F.2d 272, 
283 (D.C. Cir. 1972); see also 21 CFR 10.60.
---------------------------------------------------------------------------
    The legal basis for preemption in these cases is FDA's careful 
control over drug safety, effectiveness, and labeling according to the 
agency's comprehensive authority under the FDCA and FDA implementing 
regulations. If state authorities, including judges and juries applying 
state law, were permitted to reach conclusions about the safety and 
effectiveness information disseminated with respect to drugs for which 
FDA has already made a series of regulatory determinations based on its 
considerable institutional expertise and statutory mandate, the Federal 
system for regulation of drugs would be disrupted. I will be happy to 
include information on the four cases for the record.
    [The information follows:]
Bernhardt
    In 2000, two individual plaintiffs filed product liability actions 
in a New York court against Pfizer, Inc., seeking a court order 
requiring the company to send emergency notices to users of the 
prescription antihypertensive drug CARDURA (doxazosin mesylate) and 
their physicians. The notices would have described the results of a 
study by a component of the National Institutes of Health (NIH) that, 
the plaintiffs alleged, demonstrated that Cardura was less effective in 
preventing heart failure than a widely used diuretic. FDA had not 
invoked its authority to send ``Dear Doctor'' letters or otherwise 
disseminate information regarding a drug that the agency has determined 
creates an ``imminent danger to health or gross deception of the 
consumer.'' (21 U.S.C. 375(b).) The plaintiffs, nevertheless, filed a 
lawsuit under state common law seeking relief that, if awarded, would 
have pressured the sponsor to disseminate risk information that FDA 
itself had not disseminated pursuant to its statutory authority.
    FDA's views were submitted to the Federal district court in the 
form of a Statement of Interest.\3\ The Statement relied on the 
doctrine of primary jurisdiction. The Statement also took the position 
that the plaintiffs' request for a court order requiring the 
dissemination of information about NIH study results to users and 
prescribers of CARDURA was impliedly preempted. According to the 
Statement, the court order ``would frustrate the FDA's ability 
effectively to regulate prescription drugs by having the Court 
substitute its judgment for the FDA's scientific expertise.'' The 
Statement also noted that, if the court granted the requested order, a 
direct conflict would be created between the information required to be 
disseminated by the court and the information required to be 
disseminated by FDA under the FDCA (in the form of the FDA-approved 
labeling).
---------------------------------------------------------------------------
    \3\ Statement of Interest of the United States; Preliminary 
Statement, Bernhardt v. Pfizer, Inc., Case No. 00 Civ. 4042 (LMM) 
(S.D.N.Y. filed Nov. 13, 2000).
---------------------------------------------------------------------------
    The Statement contended that state law could not provide a basis 
for requiring a drug manufacturer to issue drug information that FDA 
had authority to, but did not, require. Importantly, the submission did 
not argue that the state-law claim was preempted because FDA had 
reached a determination that directly conflicted with the plaintiff's 
view. Nor did it assert that FDA had specifically determined that the 
information on the NIH study requested by the plaintiffs was 
unsubstantiated, false, or misleading. In this sense, the Statement of 
Interest in Bernhardt was the most aggressive, from a legal 
perspective, than the three subsequent DOJ submissions on FDA's behalf 
in preemption cases made during the present Administration.
    The United States District Court for the Southern District of New 
York accepted the primary jurisdiction argument made on FDA's behalf. 
(Bernhardt v. Pfizer, Inc., 2000 U.S. Dist. LEXIS 16963, *9 (whether 
the additional warnings sought by the plaintiffs were appropriate ``is 
a decision that has been squarely placed within the FDA's informed 
expert discretion'').) It did not address the preemption issue. The 
case was voluntarily dismissed on April 22, 2003.
Dowhal
    In 1998, an individual plaintiff in California asked that State's 
attorney general to initiate an enforcement action against SmithKline 
Beecham and other firms marketing OTC nicotine replacement therapy 
products in California. (These products are marketed pursuant to an 
approved new drug application.) The plaintiff contended that the FDA-
approved warnings for the defendants' products did not meet the 
requirements of a state statute called the Safe Drinking Water and 
Toxic Enforcement Act (Cal. Health & Safety Code  25249.5 et seq.), 
also known as Proposition 65. From 1996 through 2001, FDA had 
repeatedly advised the defendants that they could be liable under the 
FDCA for selling misbranded products if they deviated from the FDA-
approved warning labeling for their products. FDA also advised the 
state attorney general in writing in 1998 that the defendants' warning 
in the labeling clearly and accurately identified the risks associated 
with the products and, therefore, met FDA requirements under the FDCA. 
After receiving the letter, the attorney general declined to initiate 
enforcement action.
    Nevertheless, in 1999, the individual plaintiff initiated a lawsuit 
of his own in California state court under Proposition 65's ``bounty-
hunter'' provision, which empowers individuals to file enforcement 
actions under that statute on behalf of the people of the State of 
California. The lawsuit asked the court to award civil money penalties 
and restitution, and to issue an injunction requiring the defendants to 
disseminate warnings for their products that differed from the warnings 
required by FDA. In 2000, the plaintiff filed a citizen petition with 
FDA requesting that the agency require the defendants to change their 
warnings to reflect the language sought by the plaintiff in the 
lawsuit. FDA rejected the proposed language, determining that it lacked 
sufficient support in scientific evidence and presented a risk of 
mischaracterizing the risk-benefit profile of the products in a way 
that threatened the public health. Although the trial court found for 
the defendant, the California Court of Appeal rejected the defendant's 
contention that the plaintiff's claim was preempted under the FDCA, and 
allowed the lawsuit to proceed. (Dowhal v. SmithKline Beecham Consumer 
Healthcare, 2002 Cal. App. LEXIS 4384 (Cal. Ct. App. 2002), argued, 
Case No. S-109306 (Cal. Feb. 9, 2004).)
    FDA's views were presented to the Court of Appeal of California in 
an amicus curiae (``friend of the court'') brief and to the Supreme 
Court of California in a letter brief and an amicus brief.\4\ All three 
documents explained that the warning language sought by the plaintiffs 
had been specifically considered and rejected by FDA as scientifically 
unsubstantiated and misleading. Including the language would, 
therefore, misbrand those products and cause the defendants to violate 
the FDCA. The documents explained, further, that principles of conflict 
preemption applied to the plaintiffs' claim because it was impossible 
for defendants to comply with both Federal and State law and because 
the state law posed an obstacle to the accomplishment of the full 
purposes and objectives of the FDCA.
---------------------------------------------------------------------------
    \4\ Letter from Robert D. McCallum, Jr., Ass't Attorney General, et 
al., to Frederick K. Ohlrich, Supreme Court Clerk/Administrator, Dowhal 
v. SmithKline Beecham Consumer Healthcare LP, et al., Case No. S-109306 
(Cal. filed Sept. 12, 2002); Amicus Curiae Brief of the United States 
of America in Support of Defendants/Respondents SmithKline Beecham 
Consumer Healthcare LP, et al., Dowhal v. SmithKline Beecham, Case No. 
A094460 (Cal. Ct. App. filed Mar. 22, 2002); Amicus Curiae Brief of the 
United States of America in Support of Defendants/Appellants SmithKline 
Beecham Consumer Healthcare LP, et al., Dowhal v. SmithKline Beecham, 
Case No. S109306 (Cal. filed July 31, 2003).
---------------------------------------------------------------------------
    The California Court of Appeal rejected the preemption argument. 
(Dowhal v. SmithKline Beecham Consumer Healthcare, 2002 Cal. App. LEXIS 
4384, . . . 16-17 (Cal. Ct. App. 2002) (reversing trial court decision 
granting summary judgment for defendants on preemption grounds).) On 
April 15, 2004, the California Supreme Court reversed the appeals court 
decision, finding a direct conflict between FDA requirements and the 
state-law warning requirement advocated by the plaintiff. (Dowhal v. 
SmithKline Beecham Consumer Healthcare, 2004 Cal. LEXIS 3040.)
Motus
    Also in 2000, an individual plaintiff sued Pfizer in a California 
court alleging, among other things, that the company had failed to 
fulfill its state common law duty to warn against the risk of suicide 
the plaintiff alleged was presented by ZOLOFT (sertraline HCl), an FDA-
approved drug in the selective serotonin reuptake inhibitor (SSRI) 
class indicated to treat depression (among other things). On numerous 
occasions, FDA had specifically considered and rejected such language 
for SSRIs as scientifically unsupportable and inconsistent with FDA 
determinations as to the safety and effectiveness of the products.
    The United States District Court for the Central District of 
California (to which the case had been removed on the ground of 
diversity) rejected the defendant's preemption argument, allowing the 
lawsuit to proceed. (Motus v. Pfizer Inc., 127 F. Supp. 2d 1085 (C.D. 
Cal. 2000).) The court later granted the defendant's motion for summary 
judgment on non-preemption grounds (196 F. Supp. 2d 984, 986 (C.D. Cal. 
2001)), and the plaintiff appealed. DOJ submitted an amicus curiae 
brief to the United States Court of Appeals for the Ninth Circuit on 
FDA's behalf.\5\ The brief's arguments were essentially the same as the 
arguments advanced in Bernhardt. In contrast to the situation in 
Bernhardt, however, in Motus, FDA had specifically considered, and 
rejected, the language requested by the plaintiff under state law. The 
appeals court affirmed the trial court's decision earlier this year 
(2004 U.S. App. LEXIS 1944 (9th Cir. February 9, 2004)).
---------------------------------------------------------------------------
    \5\ Amicus Brief for the United States in Support of the Defendant-
Appellee and Cross-Appellant, and in Favor of Reversal of the District 
Court's Order Denying Partial Summary Judgment to Defendant-Appellee 
and Cross-Appellant, Motus v. Pfizer, Case Nos. 02-55372 & 02-55498 
(9th Cir. filed Sept. 3, 2002).
---------------------------------------------------------------------------
In re PAXIL
    In 2001, individuals filed suit in a California court on behalf of 
past or current users of PAXIL (paroxetine HCl) against the drug's 
manufacturer, GlaxoSmithKline (GSK), alleging that the company's 
direct-to-consumer (DTC) broadcast advertisements for the drug failed 
adequately to warn about the consequences of discontinuing the drug. In 
reviewing the new drug application for the drug, FDA had found no 
evidence that it was habit-forming and did not require GSK to address 
that risk in FDA-approved labeling. FDA did, however, require GSK to 
include in labeling statements regarding discontinuation syndrome, and 
the labeling consequently recommends that doctors gradually reduce 
dosages and monitor patients for syndrome symptoms. FDA reviewed 
proposed DTC advertisements GSK had submitted for Paxil that said that 
the drug was not habit-forming. The agency at no time determined that 
this statement was misleading. In August 2002, notwithstanding FDA's 
determination, the court issued a preliminary injunction prohibiting 
GSK from running DTC advertisements stating that Paxil is not habit-
forming. (In re Paxil Litigation, 2002 U.S. Dist. LEXIS 16221 (C.D. 
Cal. Aug. 16, 2002).)
    On reconsideration, the court declared that the preliminary 
injunction challenged only ``FDA's . . .  determination that the public 
is not likely to equate the words `not habit forming' as used in 
direct[-]to[-]consumer advertisements with no withdrawal symptoms.'' 
According to the court, ``The question of how members of the general 
public are likely to interpret (or misinterpret) a statement is within 
one of the courts' core competencies.'' Declaring itself ``unwilling to 
blindly accept FDA's ultimate determination here,'' the court rejected 
the defendants' preemption and primary jurisdiction arguments. It 
nevertheless denied the injunction on the ground that the plaintiff was 
not likely to succeed in demonstrating that ``non-habit forming'' 
statement in the advertisement is misleading. Thus, although the court 
ultimately declined to award the injunctive relief sought by the 
plaintiff, it continued to distinguish between FDA's determinations as 
to the adequacy of drug warnings under Federal law, and its own view of 
warnings adequacy under state common law. (In re Paxil Litigation, 2002 
U.S. Dist. LEXIS 24621 (C.D. Cal. Oct. 16, 2002).)
    DOJ submitted to the court a Statement of Interest and a brief 
asserting preemption.\6\ The Statement of Interest contended that a 
court order requiring GSK to remove the ``non-habit-forming'' claim 
from its advertisements for Paxil would be inconsistent with FDA's 
determination that the company's advertisements were proper and that 
Paxil is not, in fact, ``habit-forming.'' The brief contended that the 
court should find the plaintiff's state-law request for a court order 
preempted because it poses an obstacle to achievement of the full 
objectives of Congress ``by attempting to substitute th[e] Court's 
judgment for FDA's scientific expertise.'' As the brief pointed out, 
FDA had specifically reviewed the advertisements, made suggestions 
concerning the proper manner of presenting information relating to 
whether Paxil is ``habit-forming,'' and, in the exercise of its 
scientific and medical expertise, found the advertisements acceptable. 
The brief also included a primary jurisdiction argument. The court 
reversed its earlier award of an injunction prohibiting the 
manufacturer from running advertisements that had been reviewed and 
approved by FDA, but the reversal was based on a ground other than 
preemption. (In re Paxil Litigation, 2002 U.S. Dist. LEXIS 24621 (C.D. 
Cal. 2002).) \7\
---------------------------------------------------------------------------
    \6\ Statement of Interest of the United States of America, In re 
PAXIL Litigation, Case No. CV 01-07937 MRP (CWx) (C.D. Cal. filed 
August 20, 2002); Brief of the United States of America, In re PAXIL 
Litigation, Case No. CV 01-07937 MRP (CWx) (C.D. Cal. filed Sept. 4, 
2002).
    \7\ In December 2003 (296 F. Supp. 2d 1374), the litigation, 
consisting of twelve action in eleven Federal judicial districts, was 
centralized for pretrial proceedings in the United States District 
Court for the Central District of California.
---------------------------------------------------------------------------
Conclusion
    As these cases illustrate, courts entertaining lawsuits filed under 
state law do not always defer to FDA on matters that Congress has 
placed squarely within the agency's authority. In FDA regulatory areas 
characterized by comprehensive regulation and requiring a careful and 
expert evaluation of scientific data and public health issues, state 
coregulation can stand as an obstacle to or directly conflict with the 
agency's administration of its statutory mandate. Preemption is the 
constitutionally prescribed mechanism for resolving these conflicts.
    The practice of citing preemption and primary jurisdiction under 
the FDCA in litigation in which the United States is not a party is 
well-established and substantially predates the current Administration. 
DOJ and FDA participation in these cases is unusual. In the current 
Administration, DOJ has participated in private state-law actions on 
FDA's behalf only following a judicial finding that the action should 
proceed, and only to address a state-law finding that, left 
undisturbed, would undermine FDA's execution of its statutory mission 
or directly conflict with Federal law. Responsibility for making final 
decisions whether to make submissions in private lawsuits, on 
preemption, primary jurisdiction, or any other issue, rests with the 
Department of Justice--not FDA itself.

    Question. These arguments conflict with long-standing FDA policy. 
The law appears to contradict what the FDA has argued. What motivated 
FDA to change its policy?
    Answer. The Government's participation in cases arising under 
state-law and presenting preemption issues is consistent with past FDA 
practice and with the pertinent law.
    The principal enabling statute of the Food and Drug Administration 
is the Federal Food, Drug, and Cosmetic Act, FDCA. Under this statute, 
FDA has broad authority to protect the public health by ensuring that 
foods are safe, wholesome, sanitary, and properly labeled, and that 
drugs and medical products are safe and effective. (See 21 U.S.C.  
393(b)(2)(A)-(C).) By operation of the Supremacy Clause of the United 
States Constitution (U.S. Const. Art. VI, clause 2), the FDCA nullifies 
conflicting requirements established by the States in legislation, 
regulations, or common law. (See Gibbons v. Ogden, 22 U.S. (9 Wheat.) 
1, 211 (1824) (Marshall, C.J.).)
    In the past, FDA has addressed conflicting state requirements in 
the context of rulemaking. In 1982, for example, FDA promulgated 
regulations requiring tamper-resistant packaging for over-the-counter 
drugs. In the preamble accompanying the regulations, FDA stated its 
intention that the regulations preempt any state or local requirements 
that were ``not identical to . . .  [the rule] in all respects.'' (47 
FR 50442, 50447; Nov. 5, 1982.) Similarly, in 1986, FDA issued 
regulations requiring aspirin manufacturers to include in labeling a 
warning against use in treating chicken pox or flu symptoms in children 
due to the risk of Reye's Syndrome. In the accompanying preamble, FDA 
said the regulations preempted ``State and local packaging requirements 
that are not identical to it with respect to OTC aspirin-containing 
products for human use.'' (51 FR 8180, 8181; Mar. 7, 1986.) In 1994, 
FDA amended 21 CFR 20.63 to preempt state requirements for the 
disclosure of adverse event-related information treated as confidential 
under FDA regulations. (59 FR 3944; Jan. 27, 1994.)
    In addition, for many years, conflicting state requirements have 
been addressed by FDA through case-by-case participation in selected 
lawsuits to which the
    United States has not been a party. Because FDA lacks independent 
litigating authority, this participation has been by the Department of 
Justice (DOJ) on FDA's behalf. The practice of addressing conflicting 
state requirements through participation in litigation dates back many 
years. For example, DOJ participated on FDA's behalf in favor of 
preemption in both Jones v. Rath Packing Company, 430 U.S. 519 (1977), 
and Grocery Manufacturers of America, Inc. v. Gerace, 755 F.2d 993 (2d 
Cir. 1985). In addition, as discussed in our response to the previous 
question on preemption, FDA has recently participated in several cases 
involving state-law requirements for the communication of risk 
information for prescription drugs. Of note, the first--and most 
aggressive, from a legal perspective--of these submissions occurred 
during the previous Administration--Bernhardt case included in 
materials for the record.

                                 NARMS

    Question. What is the total amount of funding for NARMS, and from 
what account does it come?
    Answer. The total amount of funding for NARMS in fiscal year 2004 
is $7.634 million. This funding is located in the Salaries and 
Expenses, or S&E, account.
    Question. How much is FDA giving to USDA and CDC in fiscal year 
2005? How does that compare to fiscal year 2004? Please describe what 
factors are used to determine the division of funds.
    Answer. At this time, FDA has not determined the exact funding for 
CDC and USDA for NARMS for fiscal year 2005 but plans to make decisions 
by Fall 2004. In fiscal year 2004, FDA funding on NARMS will be reduced 
due to government-wide rescissions. In fiscal year 2004, FDA provided 
funds of approximately $1.6 million to USDA and $2 million to CDC. It 
is important to point out that a large portion of the funds provided to 
CDC is given to the states for the collection, isolation and 
identification of bacterial isolates, which are then shipped to CDC and 
the Food and Drug Administration's Center for Veterinary Medicine--
NARMS retail arm--for susceptibility testing. In determining the funds 
provided to CDC and USDA, we analyze the entire NARMS program, 
including the retail food arm of NARMS, and strive to fill in data gaps 
and avoid duplication of organisms to be tested.
    Question. How much NARMS money is currently being spent in foreign 
countries, specifically Mexico? How is this money being used?
    Answer. FDA is not spending any current year NARMS funding in 
Mexico or other foreign countries.
    Question. Does USDA or CDC spend any of their NARMS money in 
foreign countries?
    Answer. In fiscal year 2004 FDA is providing USDA and CDC, $1.6 
million and $2 million respectively. FDA does not keep detailed records 
of USDA and CDC funding for NARMS.

                           COUNTERFEIT DRUGS

    Question. In February, FDA released a report on combating 
counterfeit drugs. Several new technologies were mentioned that could 
be used to this effect, including Radiofrequency Identification 
tagging, color shifting inks, and holograms. Specifically regarding 
color shifting inks, which I understand are currently available, has 
FDA taken any action, or do you have any plans to pursue this option?
    Answer. It is true that color shifting ink technology is currently 
available for use on drug packaging and labeling. However, we heard 
uniformly from all stakeholders that this technology is expensive and 
requires significant investment of resources and time prior to 
implementation. Due to the wide variety of products, packaging, and 
labeling on the market, we heard from manufacturers, wholesalers, and 
retailers that the decision to use color shifting inks, or any other 
authentication technology, should be made by the manufacturer after a 
manufacturer initiated product risk assessment. Without such an 
analysis, use of color-shifting ink, or other authentication 
technology, could lead to an unnecessary increase in the cost of drugs 
to consumers. For example, we heard that color-shifting ink could be 
appropriate for use on a very expensive, high volume brand name drug 
product that is likely to be counterfeited, but not on a generic or low 
volume drug product that is less likely to be counterfeited.
    Based on our discussions with manufacturers, we estimate that it 
would take a minimum of six to twelve months to implement a technology 
such as color shifting ink from the time a decision is made to use the 
authentication technology on the packaging and/or labeling of a drug 
product. It could take longer if the technology, e.g., color-shifting 
ink, is used on the product itself because safety studies might have to 
be performed to ensure that the technology, e.g., the ink, does not 
affect the safety or stability of the product.

                        ANIMAL DRUG COMPOUNDING

    Question. Dr. Crawford, on February 10, I submitted a letter to Dr. 
McClellan regarding FDA's new Compliance Policy Guidelines, issued July 
14, 2003, regarding animal drug compounding. I received a response from 
FDA on March 31st, and I thank you for that. However, I do have a few 
more questions in light of the response.
    First, the letter stated that FDA issued the CPG for immediate 
implementation because of the ``urgent need to explain how it intended 
to exercise its enforcement discretion regarding compounded drugs for 
animal use in light of Thompson v. Western States Medical Center.'' 
However, this case dealt only with compounding in human drugs, not 
animal drugs. How does this create an urgent need to deal with animal 
drugs?
    Answer. After the Western States decision, FDA revised its 
enforcement policy on pharmacy compounding of human drugs. FDA was 
concerned that without updated guidance regarding compounding of animal 
drugs, the public would remain uncertain about whether and how FDA 
would change its enforcement policy with respect to compounded animal 
drugs. In addition, agency staff would lack clear guidance on 
enforcement matters.
    As FDA stated in its letter, although prior public comment was not 
sought in this case, pursuant to the good guidance practices 
regulations the public was invited to comment on the CPG when it was 
issued and may comment on it at any time (68 FR 41591 (July 14, 2003)). 
FDA has been reviewing those comments and will revise the guidance as 
appropriate upon completion of our review.
    Question. Second, the response states that two Federal appeals 
court decisions have held that ``the Federal Drug & Cosmetic Act does 
not permit veterinarians to compound unapproved finished drugs from 
bulk substances, unless the finished drug is not a new animal drug. 
These cases support FDA's position that new animal drugs that are 
compounded from bulk substances are adulterated under the FD&C Act and 
may be subject to regulatory action.'' I have been informed that the 
cases cited deal only with veterinarians compounding drugs, not 
pharmacists. Why do you limit pharmacists as well as veterinarians? Is 
this supported by any congressionally-enacted statutory authority, 
legislative history or case law?
    Answer. The principle established by the courts applies equally to 
compounding by pharmacists and veterinarians.
    Veterinary medicine has not traditionally utilized the services of 
compounding pharmacies to the extent that they have been utilized 
within human medicine. The increasing activities and presence of 
compounding pharmacies in veterinary medicine is a relatively recent 
development.
    The Federal Food Drug and Cosmetic Act, or ``the Act'', and its 
implementing regulations do not exempt veterinarians or pharmacists 
from the approval requirements in the new animal drug provisions of the 
Act, 21 U.S.C. Section 360b. In the absence of an approved new animal 
drug application, the compounding of a new animal drug from any 
unapproved drug or from bulk drug substances results in an adulterated 
new animal drug within the meaning of section 21 U.S.C. Section 
351(a)(5). The compounding of a new animal drug from an approved human 
or animal drug also results in an adulterated new animal drug within 
the meaning of 21 U.S.C. Section 351(a)(5), unless the conditions set 
forth in 21 CFR 530.13(b) relating to extralable use are met.
    FDA is concerned about veterinarians and pharmacists that are 
engaged in manufacturing and distributing unapproved new animal drugs 
in a manner that is clearly outside the bounds of traditional pharmacy 
practice and that violates the Act--such as compounding that is 
intended to circumvent the drug approval process and provide for the 
mass marketing of products that have been produced with little or no 
quality control or manufacturing standards to ensure the purity, 
potency, and stability of the product.
    Pharmacists and veterinarians who engage in activities analogous to 
manufacturing and distributing drugs for use in animals may be held to 
the same provisions of the Act as manufacturers.
    Question. Finally, the final paragraph of the FDA response states 
``Accordingly, the regulations that implement AMDUCA provide that 
extralabel use by compounding applies only to compounding of a product 
from approved drugs, and that nothing in the regulations is to be 
construed as permitting compounding from bulk drugs.'' Is there in the 
agency's view anything in AMDUCA's regulations or the Act that is to be 
construed as not permitting compounding from bulk substances?
    Answer. As previously noted, under the Federal Food, Drug and 
Cosmetic Act, in the absence of an approved new animal drug 
application, the compounding of a new animal drug from a bulk substance 
results in a new animal drug that is adulterated as a matter of law. 
This has been FDA's longstanding position, which is supported by two 
Federal appeals court decisions, United States v. Algon Chemical Inc., 
879 F.2d 1154 (3d Cir. 1989) and United States v. 9/1 Kg. Containers, 
854 F.2d 173 (7th Cir. 1988).
                                 ______
                                 

             Questions Submitted by Senator Byron L. Dorgan

                           DRUG REIMPORTATION

    Question. In Canada and the European Union, all drugs sold in those 
countries must meet the safety requirements of those countries. Given 
that, why is the FDA opposed to legalizing the importation of drugs 
that stayed within their systems? In what areas does the FDA believe 
that the Canadian or European drug regulatory systems are inferior to 
its own? Please provide specific examples.
    Answer. We have concerns about medicines purchased outside of the 
United States because they are typically not FDA-approved and they have 
been manufactured, processed, shipped, and/or held outside the reach of 
the domestic Federal and State oversight systems intended to ensure 
that all drugs are safe and effective for their intended uses. The 
Medicare Prescription Drug, Improvement and Modernization Act of 2003, 
directed the Secretary of Health and Human Services to conduct a study 
on the importation of drugs. The Conference Report detailed the 
information to be included in the study. The information you have 
requested as to assurances of the safety of imported drugs from Canada 
and the European Union is information requested as part of the study. 
We have been actively involved in collecting, analyzing and assessing 
information, including the safety of such products, the economic 
implications, the cost of implementation, and expect to provide a 
comprehensive study to Congress before or by the due date.
    Question. How much funding and new personnel do you estimate that 
the FDA needs in order to implement a safe system of drug importation? 
[In 2000, FDA estimated that it would need $23 million for the first 
year of implementation.] What specific additional authorities does the 
FDA feel it needs to ``police imports''?
    Answer. FDA made several cost estimates during consideration of the 
MEDS Act in 2000 and during consideration of other importation 
legislation. In 2000, FDA estimated that implementation of the MEDS Act 
would cost $21 million in each of the first 2 years following passage 
of the legislation, as the agency drafted implementing regulations. 
Other figures were provided in direct response to particular inquiries. 
It should be noted that the figures previously calculated were specific 
to the different legislation and programs reviewed and include 
limitations on the types of importations. For the MEDS Act, if the 
program was fully implemented, the cost estimates rose to more than 
$100 million per year. The information you have requested as to what 
additional authorities FDA needs to ``police imports'' is information 
that is being assessed as part of the Medicare Section 1122 study.
    Question. The drug importation provision in the new Medicare law 
(Section 1121) gives the HHS Secretary the authority to write 
regulations that ``contain any additional provisions determined by the 
Secretary to be appropriate as a safeguard to protect the public health 
or as a means to facilitate the importation of prescription drugs.'' Is 
this not enough additional authority to allow FDA to police imports?
    Answer. This information will also be assessed as part of the 
Medicare study, as noted above.
    Question. Recently, edible bean shipments were stopped by at the 
U.S. border from Canada because the beans were contaminated with the 
chemical ``Ronilan,'' which is banned from use on edible beans in the 
United States. I come to find out that according to the Food and Drug 
Administration, less than one-half of 1 percent of the edible beans 
imported into the United States are inspected. North Dakota is the 
number one State in dry edible bean production in the country. My 
farmers have a vested interest in seeing that their industry is 
protected the importation of contaminated edible beans. What will the 
FDA do to increase inspections to insure that our edible bean industry 
is protected?
    Answer. Based on sampling conducted and residues found, FDA does 
not believe that additional testing/sampling beyond what is currently 
planned is warranted. The common violations involve a pesticide use on 
a food for which no United States tolerance has been established for 
that particular food although that pesticide has been registered with 
EPA and has a tolerance established on other foods. If new information 
becomes available indicating a compliance problem, whether from FDA 
sampling or other valid sampling, the FDA will consider increasing the 
priority for pesticide testing for dried edible beans.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

                          LARIUM (MEFLOQUINE)

    Question. Mefloquine is an anti-malarial product that is approved 
and prescribed in the United States but is used by consumers overseas 
to prevent or treat malaria infections. There have been many reports in 
the press about mefloquine's potentially dangerous side effects and FDA 
issued a press release describing these side effects. With most of the 
consumers of mefloquine using the product abroad how can we be certain 
that the reporting of adverse events experienced overseas is occurring 
sufficient for adequate assessments of risk and benefit during the 
post-marketing period?
    Answer. Adverse event reporting is voluntary for consumers and 
health care providers. Health care providers or consumers may report to 
the drug manufacturer (who is required to forward the report to FDA 
under 21CFR 314.80) or directly to FDA. The reports received are then 
entered into the AERS database, which is used to evaluate the adverse 
events associated with a particular drug in the aggregate. This data is 
used to identify potential drug safety concerns, on which FDA can 
either take immediate action, or study further in some way. In the case 
of mefloquine hydrochloride, the response to your next question 
demonstrates that we are receiving reports of serious adverse events, 
even though the drug is primarily used while patients are overseas.
    Question. How many and what types of adverse events are being 
reported? Who is submitting the reports, the consumer experiencing the 
adverse event or the practitioner? Given the serious nature and 
potential for long term side effects is there a registry or follow-up 
of consumers of this product, either during use or after finishing use 
of the product?
    Answer. As of April 13, 2004, the FDA's Adverse Event Reporting 
System (AERS) post marketing database contains 2,786 cases with Lariam 
(mefloquine hydrochloride) as a suspect drug. Case reports have been 
received since Lariam was approved in 1989 and continue to come to the 
Agency at a rate of more than 100 per year. For example, AERS has 
received 139 posts marketing adverse event cases1 associated with 
Lariam since April 1, 2003. As with most drugs, many types of adverse 
events are reported for Lariam. However, the largest number of reports 
is for neuropsychiatric events; of the 2,786 Lariam cases in AERS, 
1,821 contain at least one event categorized as neurological and/or 
psychiatric in nature. Seven of the ten events most frequently reported 
for Lariam (see below) are neuropsychiatric in nature:
    Dizziness 381 cases; \1\ Headache 235; Anxiety 360; Fever 196; 
Depression 303; Hallucination 179; Insomnia 268; Diarrhea 169; Nausea 
238; Abnormal dreams 148.
---------------------------------------------------------------------------
    \1\ This raw count from AERS probably contains some duplicate 
cases, as well as cases resulting from literature articles and studies.
---------------------------------------------------------------------------
    The Lariam labeling (package insert) was recently updated to 
include stronger warnings about neuropsychiatric events. In addition, 
an official Medication Guide discussing neuropsychiatric and other 
adverse events, and describing malaria chemoprevention, is required by 
law to be given to every patient to whom Lariam is dispensed.
    Lariam reports are being submitted from multiple sources. 
According to AERS, of the 2,786 reported cases, 512 cases were reported 
by consumers and 1,540 by health professionals.\2\
---------------------------------------------------------------------------
    \2\ The categorization by source includes a large number of cases 
with null values. In addition, more than one source can be indicated 
for a given case (for example, both ``health professional'' and 
``literature'').
---------------------------------------------------------------------------
    Although most Lariam adverse events occur while the users are 
traveling, more than 1,500 of the 2,786 Lariam cases were reported 
from the United States. This indicates that travelers are notifying 
their health practitioners, Roche Pharmaceuticals, and/or the FDA 
directly of adverse events associated with Lariam upon their return to 
this country.
    There is no registry for follow-up of Lariam adverse events. It 
should be noted that post-market reporting is only one component of 
FDA's adverse event monitoring. Controlled comparative trials give us 
the most reliable data, and there are many such trials in the published 
literature. In addition, there are publications describing active 
surveys, which provide information on very large numbers of patients in 
a relatively controlled manner.
    Question. DOD has begun an investigation into psychiatric adverse 
events in soldiers and plans a study of mefloquine. DOD has stated that 
it has not included in its assessments several incidents in soldiers 
who have taken mefloquine or soldiers who do not demonstrate blood 
levels of the drug. FDA's News Release of July 9, 2003 states that 
``Sometimes these psychiatric adverse events may persist even after 
stopping the medication.'' What is being done by FDA to investigate the 
incidents of suicides in soldiers while on or returning from 
deployment?
    Answer. As a general matter, FDA takes numerous steps to improve 
product and patient safety and reduce medical errors. Suicides in the 
military are not investigated by FDA and would fall presumably within 
the purview of DOD. Frequent discussion between DOD and FDA has 
occurred related to antimalarial prophylaxis, and DOD has not 
communicated concerns regarding soldier suicides and the use of 
Lariam. Since Lariam was approved in 1989, AERS has identified 17 
cases of suicide worldwide, associated with Lariam use. These cases 
are reviewed on an ongoing basis. Many of the cases lack sufficient 
evidence to conclude that the suicide was related to Lariam. The 
relationship between suicide and Lariam is not conclusive since many 
of the cases involve previous psychiatric disease or other confounding 
factors. Only five of the reported cases occurred in U.S. residents, 
and none of them were soldiers. One, however, was a former Marine who 
had taken Lariam while serving in Somalia, more than 6 years before 
his eventual suicide. Suicides have also been reported with other 
antimalarial agents including chloroquine and malarone.
    Current labeling of Lariam includes the following warning: 
Mefloquine may cause psychiatric symptoms in a number of patients, 
ranging from anxiety, paranoia, and depression to hallucinations and 
psychotic behavior. On occasions, these symptoms have been reported to 
continue long after mefloquine has been stopped. Rare cases of suicidal 
ideation and suicide have been reported though no relationship to drug 
administration has been confirmed. To minimize the chances of these 
adverse events, mefloquine should not be taken for prophylaxis in 
patients with active depression or with a recent history of depression, 
generalized anxiety disorder, psychosis, or schizophrenia or other 
major psychiatric disorders. Lariam should be used with caution in 
patients with a previous history of depression. During prophylactic 
use, if psychiatric symptoms such as acute anxiety, depression, 
restlessness or confusion occur, these may be considered prodromal to a 
more serious event. In these cases, the drug must be discontinued and 
an alternative medication should be substituted.
    A Medication Guide was developed that communicates these issues to 
the patient.

                        EMERGENCY CONTRACEPTION

    Question. There are reports in the press that decisions about OTC 
approval of Plan B contraception are being made differently than 
decisions about other products, made outside the Center, at the 
Commissioner level or above. Could you explain if this is true, if FDA 
is politicizing the approval process and why this is the case? Why is 
the Plan B OTC approval being handled differently from other products?
    Answer. The review and decision-making for the Plan B application 
is not being made differently than other applications. The review is 
occurring within the FDA's Center for Drug Evaluation and Research. FDA 
will have signatory authority of the application. The Center commonly 
involves the Office of the Commissioner in prominent regulatory 
decisions.
    Question. Given that advisory committee members voted unanimously 
that Plan B Emergency contraception was safe under OTC conditions of 
use and that studies investigating the OTC instructions, including 
contraindications, side effects and precautions were well understood by 
users of the product and that there was low abuse and misuse potential, 
why has the decision to approve OTC use of Plan B emergency 
contraception been delayed? When does FDA plan to make a decision on 
OTC use of Plan B emergency contraception?
    Answer. Since the December 2003 joint meeting of two FDA advisory 
committees, the sponsors of the supplemental new drug application (NDA) 
submitted additional information to FDA in support of their application 
to change Plan B from a prescription to an over-the-counter product. 
This additional information was extensive enough to qualify as a major 
amendment to the NDA. Under the terms of the PDUFA, major amendments 
such as this automatically trigger a 90-day extension of the original 
PDUFA deadline. The PDUFA extension will permit the FDA to complete its 
review of the application, including additional data on adolescent use 
that was submitted by Barr and WCC in support of the application. The 
new PDUFA deadline is May 21st. Such extensions are required so that 
FDA staff has adequate time to review the additional medical and 
scientific evidence. FDA's final decision will be based on sound 
science and in full compliance with the applicable laws and 
regulations, while taking into consideration the recommendations of 
these advisory committees.
    Question. Plan B, levonorgestrel, has been proven most effective 
when taken within 24 hours of coitus. Retaining prescription status of 
this drug impedes the ability of consumers to use the product when it 
is most effective. If FDA does not anticipate approving Plan B 
emergency contraception for OTC status, please explain the rationale, 
when the product has been identified as safe and effective and eligible 
for transfer to OTC status under the 1951 Durham-Humphrey Amendment to 
the Food Drug and Cosmetic Act, that this change in status was not 
approved?
    Answer. FDA is still reviewing the application, so therefore we are 
unable to answer this question until the review is complete and a 
decision has been made based on this review.
    Question. Some questions were raised by groups against the approval 
of Plan B as an OTC product, that use of an OTC emergency contraceptive 
may promote promiscuity in teens. Studies indicated that this was not 
the case. Is this still an issue for the FDA?
    Answer. FDA is still reviewing the application, so therefore we are 
unable to answer this question until the review is complete and a 
decision has been made that is based on the safety and efficacy in an 
OTC setting, which includes comprehension of the label and usage of the 
product.
                                 ______
                                 

            Questions Submitted by Senator Richard J. Durbin

                          DIETARY SUPPLEMENTS

    Question. Do you agree it would be easier for the FDA to remove 
unsafe dietary supplements from the market if supplement manufacturers 
were required to submit serious adverse event reports your agency?
    Answer. Adverse event reports are one way that FDA may become aware 
of a potential safety problem.
    In evaluating the safety of dietary supplements containing a 
particular dietary ingredient, we consider evidence from a variety of 
sources, including: (1) the well-known, scientifically established 
pharmacology of the ingredient or its constituents; (2) peer-reviewed 
scientific literature on the effects of the dietary ingredient or its 
constituents; and (3) adverse events reported to have occurred 
following consumption of dietary supplements containing the dietary 
ingredient or its constituents. Therefore, a conclusion that a 
particular dietary supplement or dietary ingredient should be removed 
from the market will still rest upon a determination that the available 
scientific information supports a finding that is adulterated.
    Question. How do you respond to the IOM's conclusion in their 
recent dietary supplement report that ``a core issue that constrains 
the development and utility of a scientifically based framework for 
evaluating the safety of dietary supplements is the lack of data 
readily available for evaluation? Without amendment to DSHEA by 
Congress, the FDA is not empowered to require the submission to the 
agency of such key information as adverse events.''
    Answer. In evaluating the safety of dietary supplements, FDA relies 
on all available information including, the well-known, scientifically 
established pharmacology of an ingredient or its constituents, peer-
reviewed scientific literature on the effects of the dietary ingredient 
or its constituents, and adverse events reports. Certainly, FDA 
welcomes the submission of any safety-related information that a firm 
may have, and such information may facilitate FDA's evaluation of the 
potential hazards of a dietary ingredient.
    Such information often does not resolve the safety questions about 
an ingredient, however, that is because the major limitation to 
establishing that a particular dietary ingredient or dietary supplement 
presents a significant or unreasonable risk is the relatively 
incomplete scientific information about the pharmacology and effects of 
many dietary ingredients rather than lack of FDA access to the 
information a firm may have assembled.
    Amending DSHEA to provide FDA access to a firm's safety information 
would not resolve the basic issue that in many cases there is 
inadequate information to understand the risk, if any, that a 
particular dietary ingredient may present to consumers. FDA believes 
that actions to facilitate the conduce of scientific studies of the 
composition, pharmacology, and effects of dietary ingredients would be 
useful in generating the data that the IOM believes is necessary to 
develop a scientifically based framework for evaluating the safety of 
dietary supplements.
    Question. The definitions of ``unreasonable risk'' used by FDA in 
the ephedra rule and the IOM in their report require that only a 
likelihood of future risk be shown, which would allow the FDA to take 
supplements that are harmful off the market faster. Do you agree?
    Answer. Yes. As FDA stated in the ephedra rule, ``unreasonable 
risk'' does not require a showing that a dietary supplement has caused 
actual harm to specific individuals, only that scientific evidence 
supports the existence of risk.
    Question. I am concerned that the FDA does not have the proper 
tools, systems, and resources to promptly implement the new 
``unreasonable risk'' standard for dietary supplements in future 
situations. For example, the agency's interpretation of the 
``unreasonable risk'' standard relies in part on an evaluation of the 
benefits (or lack of benefits) of a particular supplement. What 
mechanisms, if any, does FDA have in place to evaluate the benefits of 
dietary supplements?
    Answer. In evaluating the benefits of dietary supplements, FDA 
reviews published studies and other relevant sources of scientific 
information. Collaboration with academic centers such as the National 
Center for Natural Products Research (NCNPR), Federal partners such as 
the National Institutes of Health and the National Center for 
Toxicological Research, and our consumer and industry stakeholders is 
important in developing a comprehensive risk-benefit evaluation of 
dietary supplement products. We believe that efforts to strengthen our 
relationship with scientific centers that emphasize primarily efficacy 
research is the best approach to ensure that such information is 
available, when needed, for safety evaluations under the ``unreasonable 
risk'' standard. Further, it is important to recognize that in 
circumstances in which there is clear and persuasive evidence of a 
substance's risks but information on its benefits is incomplete or 
absent there is no barrier to FDA action. Under the risk-benefit 
analysis that FDA described in the ephedra rulemaking, having efficacy 
data is not a prerequisite for acting against unsafe dietary 
supplements; that is, if there is adequate evidence that a product 
presents a known or reasonably known or reasonably likely risk but 
there is no data sufficient to show that the product has known or 
reasonably likely benefits, FDA can take action against the product 
based on unreasonable risk.
    Question. Commissioner McClellan promised enforcement action 
against bitter orange and usnic acid in the wake of the ephedra 
decision. Yet, all the agency has done so far is to reiterate its 
warnings to the public that these supplements pose hazards. Is the lack 
of efficacy information for these substances hindering prompt FDA 
regulatory action?
    Answer. In a speech at the University of Mississippi in January, 
Dr. McClellan indicated that FDA might ``take a closer look'' at the 
safety of other dietary supplements, specifically naming some ephedra 
substitutes, such as bitter orange (citrus aurantium) as well as usnic 
acid. FDA is actively engaged in coordinating research on bitter 
orange.
    At the present time, FDA is examining the available scientific 
information to determine what safety concerns, if any, may be 
associated with the use of dietary supplements containing bitter orange 
and usnic acid. Although FDA cannot predict ahead of time what the 
findings of this review will be, FDA can assure you that if the 
evidence establishes that the use of these ingredients in dietary 
supplements presents an unreasonable risk of injury or illness, FDA 
will take action to address those risks. In the interim, the Agency 
feels it is important to keep consumers informed of safety concerns 
about these substances so that they may make informed decisions about 
whether or not to use dietary supplements containing them.
    Question. The May 2004 edition of Consumer Reports Magazine 
contains a list of 12 dietary supplement ingredients they recommend 
consumers stay away from. One of the ingredients is andostenedione, and 
anabolic steroid, which has already been banned. Will you commit to a 
full scientific safety review of eleven remaining substances listed by 
Consumer Reports?
    Answer. We continually monitor the marketplace and the scientific 
literature to identify dietary supplements and dietary ingredients that 
may present safety concerns. The potential risks presented by different 
dietary ingredients vary widely. Depending on the specific facts 
surrounding the characteristics and use of each substance and the risks 
it may present, FDA will make every attempt to allocate resources to 
address those that present the most significant public health concerns. 
As part of on-going dietary supplement marketplace monitoring efforts, 
FDA will critically examine the list of substances identified by 
Consumer Reports Magazine and consider the safety risks that they 
present and what action by FDA may be warranted.

                          SUBCOMMITTEE RECESS

    Senator Burns. Dr. Crawford, I did not have a question for 
you. We can get together offline, sir.
    Mr. Bost, nice to see all of you here today, and again, 
thanks for your good work. I think you all are to be commended. 
That is not to say that we should let our guard down because we 
know that we still have--any time that you deal in this area of 
food and food safety and especially for our consumers. They 
come first. I think the industry is of a mindset they want to 
do the right thing but make sure it is the right thing to do, 
that we just do not give some cosmetic look at it and not 
address the real problems.
    Thank you for coming. These hearings are closed.
    [Whereupon, at 2:21 p.m., Thursday, April 1, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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