[Senate Hearing 108-684]
[From the U.S. Government Publishing Office]
S. Hrg. 108-684
BUYER BEWARE: THE DANGER OF PURCHASING PHARMACEUTICALS OVER THE
INTERNET
=======================================================================
HEARINGS
before the
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
of the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
----------
JUNE 17 AND JULY 22, 2004
----------
Printed for the use of the Committee on Governmental Affairs
BUYER BEWARE: THE DANGER OF PURCHASING PHARMACEUTICALS OVER
THE INTERNET
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
S. Hrg. 108-684
BUYER BEWARE: THE DANGER OF PURCHASING PHARMACEUTICALS OVER THE
INTERNET
=======================================================================
HEARINGS
before the
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
of the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
JUNE 17 AND JULY 22, 2004
__________
Printed for the use of the Committee on Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
95-190 WASHINGTON : 2004
____________________________________________________________________________
COMMITTEE ON GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama MARK PRYOR, Arkansas
Michael D. Bopp, Staff Director and Chief Counsel
Joyce A. Rechtschaffen, Minority Staff Director and Counsel
Amy B. Newhouse, Chief Clerk
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PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
NORM COLEMAN, Minnesota, Chairman
TED STEVENS, Alaska CARL LEVIN, Michigan
GEORGE V. VOINOVICH, Ohio DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama MARK PRYOR, Arkansas
Raymond V. Shepherd, III, Staff Director and Chief Counsel
Katherine English, Counsel
Jay Jennings, Investigator
Elise J. Bean, Minority Staff Director and Chief Counsel
Mary D. Robertson, Chief Clerk
C O N T E N T S
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Opening statements:
Page
Senator Coleman.............................................. 1, 49
Senator Levin................................................ 4, 53
Senator Collins.............................................. 8
Senator Lautenberg........................................... 9
WITNESSES
Thursday, June 17, 2004
Marcia Crosse, Director, Health Care--Public Health and Military
Health Care Issues, U.S. General Accounting Office............. 12
Robert J. Cramer, Managing Director, Office of Special
Investigations, U.S. General Accounting Office................. 14
Hon. Rudolph W. Giuliani, Chairman and Chief Executive Officer,
Giuliani Partners LLC, New York, New York...................... 26
Marvin D. Shepherd, Ph.D., Director, Center for Pharmacoeconomic
Studies, College of Pharmacy, The University of Texas at
Austin, Austin, Texas.......................................... 29
Elizabeth Carr, Sacramento, California........................... 40
Francine Hahn Haight, Organge County, California................. 42
Thursday, July 22, 2004
Richard M. Stana, Director, Homeland Security and Justice Issues,
U.S. Government Accountability Office.......................... 57
Karen P. Tandy, Administrator, Drug Enforcement Administration... 67
Lee R. Heath, Chief Inspector, U.S. Postal Inspection Service.... 68
Jayson P. Ahern, Assistant Commissioner, Office of Field
Operations, Bureau of Customs and Border Protection (CBP)...... 70
John M. Taylor, III, Associate Commissioner for Regulatory
Affairs, U.S. Food and Drug Administration, Rockville, Maryland 72
William Hubbard, Associate Commissioner for Policy and Planning,
U.S. Food and Drug Administration, Rockville, Maryland......... 74
John Scheibel, Vice President, Public Policy, Yahoo! Inc......... 88
Sheryl Sandberg, Vice President, Global Online Sales and
Operations, Google Inc., Mountain View, California............. 90
Robert A. Bryden, Vice President, Corporate Security, FedEx
Corporation, Memphis, Tennessee................................ 91
Daniel J. Silva, Corporate Security Manager for UPS, Atlanta,
Georgia........................................................ 92
Joshua L. Peirez, Senior Vice President and Assistant General
Counsel, MasterCard International Incorporated, Purchase, New
York........................................................... 96
Steve Ruwe, Executive Vice President, Operations and Risk
Management, VISA U.S.A. Inc., Foster City, California.......... 98
Alphabetical List of Witnesses
Ahern, Jayson P.:
Testimony.................................................... 70
Prepared statement........................................... 218
Bryden, Robert A.:
Testimony.................................................... 91
Prepared statement........................................... 269
Carr, Elizabeth:
Testimony.................................................... 40
Prepared statement........................................... 172
Cramer, Robert J.:
Testimony.................................................... 14
Prepared statement........................................... 130
Crosse, Marcia:
Testimony.................................................... 12
Prepared statement........................................... 109
Giuliani, Hon. Rudolph W.:
Testimony.................................................... 26
Prepared statement........................................... 136
Haight, Francine Hahn:.......................................
Testimony.................................................... 42
Prepared statement........................................... 174
Heath, Lee R.:
Testimony.................................................... 68
Prepared statement........................................... 206
Hubbard, William:
Testimony.................................................... 74
Peirez, Joshua L.:
Testimony.................................................... 96
Prepared statement with an attachment........................ 274
Ruwe, Steve:
Testimony.................................................... 98
Prepared statement........................................... 283
Sandberg, Sheryl:
Testimony.................................................... 90
Prepared statement........................................... 262
Scheibel, John:
Testimony.................................................... 88
Prepared statement........................................... 258
Shepherd, Marvin D., Ph.D.:
Testimony.................................................... 29
Prepared statement with an attachment........................ 150
Silva, Daniel J.:
Testimony.................................................... 92
Prepared statement........................................... 272
Stana, Richard M.:
Testimony.................................................... 57
Prepared statement........................................... 178
Tandy, Karen P.:
Testimony.................................................... 67
Prepared statement........................................... 202
Taylor, John M., III:
Testimony.................................................... 72
Prepared statement........................................... 227
APPENDIX
Additional FDA Enforcement Actions............................... 283
EXHIBITS
1. Photo taken at JFK International Mail Branch (IMB)--Boxes
seized by CBP from a single vendor in the Netherlands that
contained a variety of controlled substances. (Source:
Permanent Subcommittee on Investigations' trip to JFK IMB,
March 2004.)................................................... 286
2. Photo taken at JFK International Mail Branch (IMB)--Seized
Hydrocodine, Diazepam and codeine-laced products from a single
vendor in the Netherlands. (Source: Permanent Subcommittee on
Investigations' trip to JFK IMB, March 2004.).................. 287
3. Photo taken at JFK International Mail Branch (IMB)--Seized
Valium (Diazepam), Xanax and codeine-laced products from a
single vendor in the Netherlands. (Source: Permanent
Subcommittee on Investigations' trip to JFK IMB, March 2004.).. 288
4. Photo taken at JFK International Mail Branch (IMB)--three
bottles of fake Lipitor imported from Canada. The legitimate
Lipitor is the last bottle on the right. (Source: Permanent
Subcommittee on Investigations' trip to JFK IMB, March 2004.).. 289
5. Photo taken at JFK International Mail Branch (IMB)--
Sildenafil Citrate from India (Counterfeit Viagra). (Source:
Permanent Subcommittee on Investigations' trip to JFK IMB,
March 2004.)................................................... 290
6. Photo taken at JFK International Mail Branch (IMB)--
Injectable Steroids from China. (Source: Permanent Subcommittee
on Investigations' trip to JFK IMB, March 2004.)............... 291
7. Photo taken at JFK International Mail Branch (IMB)--Box of
unknown drug product. (Source: Permanent Subcommittee on
Investigations' trip to JFK IMB, March 2004.).................. 292
8. Photo taken at JFK International Mail Branch (IMB)--Packages
of drugs without any of the required inserts as well as
labeling and directions for usage in foreign languages.
(Source: Permanent Subcommittee on Investigations' trip to JFK
IMB, March 2004.).............................................. 293
9. Photo taken at JFK International Mail Branch (IMB)--Backlog
of products waiting to be screened by FDA. (Source: Permanent
Subcommittee on Investigations' trip to JFK IMB, March 2004.).. 294
10. Photo taken at JFK International Mail Branch (IMB)--Backlog
of products waiting to be screened by FDA. (Source: Permanent
Subcommittee on Investigations' trip to JFK IMB, March 2004.).. 295
11. Customs and Border Protection Countries of Interest (COI)
List........................................................... 296
12. Photo taken at JFK International Mail Branch (IMB)--Imported
pharmaceutical products being x-rayed by Customs and Border
Protection. (Source: Permanent Subcommittee on Investigations'
trip to JFK IMB, March 2004.).................................. 297
13. Photo taken at JFK International Mail Branch (IMB)--Imported
pharmaceutical products being x-rayed by Customs and Border
Protection. (Source: Permanent Subcommittee on Investigations'
trip to JFK IMB, March 2004.).................................. 298
14. Photo taken at JFK International Mail Branch (IMB)--
Approximately 20,000 boxes of suspected controlled substances,
seized by CBP, awaiting processing. (Source: Permanent
Subcommittee on Investigations' trip to JFK IMB, March 2004.).. 299
15. Photo taken at Chicago O'Hare International Mail Branch
(IMB)--Anabolic steroids seized by Customs. (Source: Permanent
Subcommittee on Investigations' trip to O'Hare IMB, April
2004.)......................................................... 300
16. Photo taken at Chicago O'Hare International Mail Branch
(IMB)--Fake Viagra from Mexico. (Source: Permanent Subcommittee
on Investigations' trip to O'Hare IMB, April 2004.)............ 301
17. Photo taken at Chicago O'Hare International Mail Branch
(IMB)--Injectable drugs being imported from Mexico. (Source:
Permanent Subcommittee on Investigations' trip to O'Hare IMB,
April 2004.)................................................... 302
18. Photo taken at Chicago O'Hare International Mail Branch
(IMB)--Illegally imported controlled substances containing
codeine. (Source: Permanent Subcommittee on Investigations'
trip to O'Hare IMB, April 2004.)............................... 302
19. Photo taken at Chicago O'Hare International Mail Branch
(IMB)--Improperly packaged Humulin. (Source: Permanent
Subcommittee on Investigations' trip to O'Hare IMB, April
2004.)......................................................... 304
20. Photo taken at Chicago O'Hare International Mail Branch
(IMB)--Bulk drugs of unknown composition from Mexico. (Source:
Permanent Subcommittee on Investigations' trip to O'Hare IMB,
April 2004.)................................................... 305
21. Photo taken at Chicago O'Hare International Mail Branch
(IMB)--Packages being x-rayed by Customs and Border Protection.
(Source: Permanent Subcommittee on Investigations' trip to
O'Hare IMB, April 2004.)....................................... 306
22. Photo of International Package Arrival Holding Area at the
FedEx Hub, Memphis, TN. (Source: Permanent Subcommittee on
Investigations' trip to Memphis, TN, July 2004.)............... 307
23. Photo of International Package Being Held for FDA Inspection
at the FedEx Hub, Memphis, TN. (Source: Permanent Subcommittee
on Investigations' trip to Memphis, TN, July 2004.)............ 308
24. Printout of Google search, ``Purchase Vicodin,'' ``Results
1-10 of about 147,000 for purchase vicodin'' (5/3/04).......... 309
25. Printout of Google search, ``Purchase Vicodin,'' ``Results
1-10 of about 126,000 for purchase vicodin'' (7/16/04)......... 310
26. Printout of Internet Website, http://hydrocodone.com-
online.us--selling Hydrocodone/APAP (generic Lortab, Vicoden)
pain medication online......................................... 311
27. Internet Prescription Drug Buys, chart prepared by the
Government Accountability Office (GAO)......................... 312
28. Photo of drugs purchased undercover by the GAO: Accutane, a
Restricted Drug That Causes Birth Defects, Illegally Imported
from Canada & Mexico. The Labels & Instructions Are in French
and Spanish.................................................... 313
29. Photo of drugs purchased undercover by the GAO: Humulin N, A
Drug That Should Be Refrigerated, Shipped From Pakistan Without
Insulation Or A Cooling Pack................................... 314
30. Photo of drugs purchased undercover by the GAO: Crixivan, A
Drug Used To treat HIV, Hidden In A Sealed Can Inside A Box
Labeled As Gold Dye and Stain Remover Wax...................... 315
31. Photo of drugs purchased undercover by the GAO: Counterfeit
OxyContin Smuggled In A CD Case From Spain..................... 316
32. U.S. General Accounting Office (GAO) Report to the Chairman,
Permanent Subcommittee on Investigations, Committee on
Governmental Affairs, U.S. Senate, INTERNET PHARMACIES, Some
Pose Safety Risks for Consumers, June 2004, GAO-04-820......... 317
33. Food and Drug Administration (FDA) Powerpoint Presentation
of July 22, 2004............................................... 351
34.a. Correspondence from Congressman John D. Dingell, Ranking
Member of the House Committee on Energy and Commerce, dated May
5, 2004, to Drug Enforcement Administrator Karen Tandy,
regarding illegal controlled substances entering the United
States through consignment carriers and international mail
branch facilities.............................................. 378
b. Correspondence from Drug Enforcement Administration
Congressional and Public Affairs Chief Christopher A.
Donesa, dated July 26, 2004, to Congressman John D.
Dingell, Ranking Member of the House Committee on Energy
and Commerce, responding to Congressman Dingell's May 5
letter regarding illegal entry of controlled substances
into the United States..................................... 383
c. Correspondence from Congressman John D. Dingell, Ranking
Member of the House Committee on Energy and Commerce, to
GAO Comptroller General David M. Walker, dated September
22,2004, requesting GAO's evaluation of the efforts of DEA
and Customs to stem the growing tide of controlled
substances entering the United States...................... 388
35. Statement for the Record of the Federation of State Medical
Boards of the United States.................................... 391
36. Statement for the Record of the National Association of
Chain Drugs Stores, Inc........................................ 394
37. Statement for the Record of James Christian, Vice President
and Head of Global Corporate Security, Novartis International
AG............................................................. 402
38. Submission for the Record of Pfizer Inc. with Powerpoint
Presentation................................................... 412
39. Submission of the U.S. Food and Drug Administration, U.S./
Canadian Price Comparisons, October 2004....................... 481
BUYER BEWARE: THE DANGER OF PURCHASING PHARMACEUTICALS OVER THE
INTERNET
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THURSDAY, JUNE 17, 2004
U.S. Senate,
Permanent Subcommittee on Investigations,
of the Committee on Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 9:02 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. Norm Coleman,
Chairman of the Subcommittee, presiding.
Present: Senators Coleman, Levin, Lautenberg, Collins,
Pryor, and Carper.
Staff Present: Raymond V. Shepherd, III, Staff Director;
Katherine English, Counsel; Mark Greenblatt, Counsel; Jay
Jennings, Investigator; Mary D. Robertson, Chief Clerk;
Katherine Russell, Detailee, FBI; Claire Diegel, Intern; Elise
J. Bean, Staff Director/Chief Counsel to Minority; Jason Hill
(Senator Levin); Priscilla Hanley (Senator Collins); Marianne
Upton (Senator Durbin); Tate Heuer and Gita Uppal (Senator
Pryor); and Demian Moore (Senator Dayton).
OPENING STATEMENT OF SENATOR COLEMAN
Senator Coleman. This hearing of the Permanent Subcommittee
on Investigations is called to order.
Americans are increasingly turning to the Internet for
access to affordable drugs. In 2003, consumer spending on drugs
purchased over the Internet exceeded $3.2 billion.
Unfortunately, rogue Internet sites have proliferated and rake
in millions of dollars by selling unproven, counterfeit,
defective or otherwise inappropriate medications to
unsuspecting consumers. Even more dangerously, these sites are
profiting by selling addictive and potentially deadly
controlled substances to consumers without a prescription or
any physician oversight.
In today's technological environment, it is essential that
we understand the forces at work here. Internet pharmacies have
the potential for bringing important and, in many cases,
lifesaving drugs to our homes in a way that we have never
before imagined. But, unless we understand the safety issues
surrounding the use of the Internet and the delivery of
prescription drugs, what should be about improving our lives
may very well end up costing lives. I believe we have an
obligation to develop coherent public policy that addresses
these safety concerns.
As Chairman of the Permanent Subcommittee on
Investigations, I endeavored to provide an objective snapshot
of what drugs are available to consumers on the Internet--the
good, the bad, and the ugly.
Our first inspection was at the JFK International Airport,
in New York, home to the largest International Mail Branch
(IMB) in the United States. Senior Customs officials at JFK
estimate that 40,000 parcels containing drugs are imported
through that airport on a daily basis. During last summer's
FDA/Customs blitz, 28 percent of the drugs tested were
controlled substances. This means that as many as 11,200 drug
parcels containing controlled substances, like the painkillers
Vicodin and OxyContin, are imported daily through JFK; 78,400
weekly; 313,600 monthly, and 3,763,200 annually.
Top countries of origin include Brazil, India, Pakistan,
the Netherlands, Spain, Portugal, Canada, Mexico, and Romania.
On March 15 and 17, 2004, PSI discovered at least 2,000
boxes from a single vendor in the Netherlands that contained
hydrocodone and generic Valium or Diazepam.\1\ In addition,
Customs regularly seizes shipments of OxyCodone, a codeine-
laced product, GHB (the date rape drug), and morphine.
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\1\ See Exhibits 1, 2, and 3 which appear in the Appendix on pages
286, 287, and 288.
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With PSI present, FDA uncovered a number of boxes of fake
Lipitor--the real Lipitor is the last bottle on the right in
this slide.\2\
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\2\ See Exhibit 4 which appears in the Appendix on page 289.
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FDA and Customs regularly seize and inspect packages
containing: Counterfeit Viagra from India,\3\ injectable
steroids from China,\4\ and boxes of unidentified drug
product.\5\
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\3\ See Exhibit 5 which appears in the Appendix on page 290.
\4\ See Exhibit 6 which appears in the Appendix on page 291.
\5\ See Exhibit 7 which appears in the Appendix on page 292.
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FDA and Customs often discover packages of drugs without
any of the required inserts that lack labeling and have
directions for usage in foreign languages. An example of this
is Lupron, an injectable hormone used to treat prostate
cancer.\6\ I will note that I was with former Mayor Giuliani
when we looked at the Lupron, and he looked at it and said, ``I
know that drug''--he has suffered from prostate cancer and was
well aware of it. He turned to me and said, ``You know, this is
something that needs close physician supervision,'' and there
it is, without any instructions, something that is clearly very
dangerous when individuals use it without physician
supervision. Unfortunately, all the labeling and directions for
usage of this product are in Spanish.
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\6\ See Exhibit 8 which appears in the Appendix on page 293.
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Unfortunately, we found similar problems at Chicago O'Hare
International Airport, which is home to the Nation's fifth-
largest International Mail Branch. Approximately 16,600 parcels
are imported through the Chicago IMB each day. Of those
parcels, 4,300 are estimated to contain drug products imported
for personal use by consumers. Customs estimates that 75
percent of the parcels that contain drug products are imported
from Canada. Other top countries of origin include Great
Britain, the Netherlands, and Mexico.
While inspecting the Chicago IMB, PSI discovered packages
of: Injectable steroids,\1\ counterfeit Viagra from Mexico,\2\
growth hormone from Mexico,\3\ codeine-laced products
injectable insulin from Canada, which was not properly
refrigerated,\4\ and a large box of unidentified and unlabeled
white pills from Mexico.\5\
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\1\ See Exhibit 15 which appears in the Appendix on page 300.
\2\ See Exhibit 16 which appears in the Appendix on page 301.
\3\ See Exhibit 17 which appears in the Appendix on page 302.
\4\ See Exhibit 18 which appears in the Appendix on page 303.
\5\ See Exhibit 19 which appears in the Appendix on page 304.
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The same dangerous conditions are present at the Miami IMB.
Senior Customs inspectors at Miami IMB estimate that as many as
30,000 parcels that contain drug products are imported through
Miami each day. This means that as many as 6 million parcels
containing drugs are imported annually through this one IMB. Of
the 30,000 daily imports, a couple thousand are dangerous
controlled substances, including Valium, Ritalin, Bromazepam,
Zolpidem, and steroids. Other types of drugs that FDA and
Customs inspectors routinely see include fake Viagra from
Belize, antibiotics including Ciprofloxin, and unknown drug
products identified as vitamins or dietary supplements. Top
countries of origin include Great Britain, Honduras, Mexico,
Canada, Costa Rica, and the Bahamas.
During the same period, at my request, the General
Accounting Office made purchases of pharmaceuticals from both
domestic and foreign Internet Websites. Their results confirmed
what we discovered at JFK, Chicago and Miami--when consumers
log onto the Internet to purchase their pharmaceuticals, it is
truly ``buyer beware.''
GAO demonstrated just how easy it is to purchase these
drugs over the Internet. GAO used the Internet to purchase
numerous prescription drugs-- including highly-addictive
narcotics and other controlled substances. Notably, GAO
purchased 66 percent of these pharmaceuticals, including
narcotics, without a prescription and without visiting a
doctor.
GAO also used the Internet to purchase from foreign
pharmacies counterfeit versions of American drugs,
pharmaceuticals that have not been approved by the FDA,
counterfeit drugs that lacked the active ingredient, damaged
products, and drugs without proper packaging, no warning
information, or instructions for use.
The GAO investigation does reveal some encouraging news for
those of us who use bona fide established domestic Internet
pharmacies and those of us who support the safe importation of
Canadian drugs to ease the cost of prescription medications.
The preponderance of problems uncovered by GAO investigators
with virtual pharmacies was associated with drugs that came
from foreign countries other than Canada. All of the drug
samples that GAO received from U.S. and Canadian Internet
pharmacies included dispensing pharmacy labels that generally
provided patient instructions for use. None displayed evidence
of mishandling, and most included warning information.
However, most disturbingly, GAO's Office of Special
Investigation found that: Anyone, including children, can
easily purchase the highly addictive painkiller hydrocodone
from the Internet without providing a prescription or being
examined by a physician; the Internet pharmacies from which GAO
purchased hydrocodone charge significantly higher prices than
walk-in pharmacies, regardless of whether a patient has health
insurance; and some Internet pharmacies focus exclusively on
selling hydrocodone. GAO has concluded that these sites are in
the business of profiting from illegal drug use rather than
providing a safe, inexpensive alternative source for consumers
lacking health insurance.
In order to put a human face on this dangerous and
potentially lethal situation, we will hear testimony from two
individuals who lost family members because of overdoses of
drugs procured through rogue Internet sites.
Francine Haight will tell us about her son, Ryan, who died
from a mix of hydrocodone, morphine, and Valium. Ryan obtained
these highly potent narcotics from Internet pharmacies. For
some of these drugs, Ryan did not have a prescription; for
others, Ryan had a prescription from a doctor that he had never
met.
Elizabeth Carr's husband, James Lewis, a tri-athlete, died
of an overdose of Darvon on April 10, 2003. He purchased the
Darvon, as well as other drugs from Internet pharmacies doing
business in South Africa, Thailand, and Spain. Some of the
websites that James used required him to fill out a short
questionnaire before he could order the medication, while
others required nothing.
I cannot tell these witnesses how appreciative I am of
their brave decision to come here and tell your story to
Congress. I promise that I will do whatever is in my power to
prevent the same tragedy from befalling other families.
I also look forward to hearing testimony concerning his
assessment of the U.S. pharmaceutical system from my friend,
former New York Mayor, Rudy Giuliani. Lastly, I am eager to
hear the results of the study performed by Dr. Marv Shepherd of
the College of Pharmacy at the University of Texas at Austin
that details the Canadian drug market.
Now that PSI has identified some serious problems in the
Internet pharmacy industry, we must start fashioning solutions.
That is why I introduced S. 2464, the Ryan Haight Act, and S.
2465, the Todd Rode Act. Taken together, these bills: Empower
Customs to immediately seize and destroy any package containing
a controlled substance that is illegally imported into the
United States; provide new disclosure standards for Internet
pharmacies; bar Internet sites from selling or dispensing
prescription drugs to consumers who are provided a prescription
solely on the basis of an on-line questionnaire; and allow
State Attorneys General to go to Federal court to shut down
rogue Internet pharmacies.
Surely, we do not want to play what some correctly call
``Rx roulette'' with the health of American consumers by
blindly ignoring real safety concerns of the drugs we allow to
be imported from the vast unregulated Internet pharmacy.
Ignoring those concerns can have tragic consequences, like the
tragic stories of Ryan Haight and James Lewis.
With that, I will turn to the Ranking Minority Member,
Senator Levin.
OPENING STATEMENT OF SENATOR LEVIN
Senator Levin. Thank you very much, Mr. Chairman, and thank
you for your focus on this very critical issue and for your
commitment to trying to see if we cannot get at the real
fundamental problem here that you have just identified.
As prescription drug prices in the United States continue
to skyrocket, American consumers have become increasingly
desperate to find the cheapest drugs available. In recent
years, consumers are turning to the Internet to comparison shop
and buy the lowest cost drugs online. The problem is that many
Internet pharmacies are dispensing medicine illegally and, in
some cases, selling counterfeit or unsafe drugs.
Because U.S. enforcement efforts are currently inadequate
to stop the illegal operators, the high cost of U.S.
prescription drugs is driving increasing numbers of Americans
to play Russian roulette with Internet pharmacies, gambling
their safety on the lure of more affordable prices.
Over the past 4 years, U.S. prescription drugs have
increased an average of nearly 20 percent annually. Today, on
average, Americans pay 60 percent more than the British or the
Swiss for the same prescription drugs, two-thirds more than
Canadians, 80 percent more than Germans, and twice as much as
Italians. For poor and middle class individuals suffering
chronic illnesses, high drug costs are forcing some to choose
between taking their medicine on any given day, paying their
bills, and even buying food.
The GAO report before us today leads me to two conclusions.
First, Internet purchases of illegal pharmaceuticals are out of
control, and we need to increase enforcement. Second, medicines
purchased from Canada are as safe or safer than those purchased
in the United States.
Now, I say that because 100 percent of the medicines
purchased by the GAO on the Internet from Canadian pharmacies
required patient prescriptions compared to only 5 out of 29, or
17 percent of U.S. pharmacies.
In addition, none of the Canadian medicines was
counterfeit. That was also true of the U.S. medicines.
Internet pharmacies are a relatively new response to the
problem of high-cost medicines. Some Internet pharmacies are
completely legal operations, set up to offer clients
convenience and cost savings. They required patient
prescriptions and deliver medications from U.S.-approved
facilities.
Other Internet pharmacies operate illegally, selling
medications without prescriptions and using unapproved
manufacturers either in the United States or offshore. Some
shadowy operations send unsolicited offers to millions of
Internet users, hawking medications like junk food bargains.
These illegal operators have begun to capture attention as a
health and safety threat requiring criminal and civil
enforcement action. And again, I commend our Chairman, Senator
Coleman, for focusing on this problem and holding this inquiry
today.
Pharmacies and pharmaceutical sales involve a complex web
of State and Federal regulation to protect the public from
unsafe or improperly prescribed drugs. In the United States,
the practice of pharmacy is regulated by State boards which
license both pharmacists and pharmacies. To legally dispense a
prescription drug, a licensed pharmacist working in a licensed
pharmacy must be presented with a valid prescription from a
licensed health care professional before delivering the drug to
the purchaser. On the Federal level, the Food and Drug
Administration (FDA) is charged with ensuring the safety,
effectiveness, and quality of domestic and imported drugs; the
Bureau of Customs and Border Protection (Customs) is supposed
to screen and stop unauthorized controlled substances at the
border; and the Drug Enforcement Agency (DEA) is responsible
for combating illegal narcotics and the abuse of controlled
substances.
To get a better sense of the enforcement problems
associated with Internet pharmacies, at the request of this
Subcommittee, the General Accounting Office (GAO) spent several
months earlier this year buying prescription drugs online,
tracking the Internet pharmacies and drugs delivered in
response to their on-line orders, and then testing the
delivered drugs to ascertain if they were actually the
medications ordered. GAO efforts focused on buying popular
medications such as Celebrex, an anti-inflammatory pain
reliever; Lipitor, a cholesterol lowering drug; Viagra, a
medication for sexual dysfunction; and Zoloft, an
antidepressant.
GAO found that buying medications from Internet pharmacies
was not difficult. GAO placed 90 on-line orders for
prescription drugs and received 68 samples, a success rate of
75 percent. Of those 68 medications, 45 were shipped illegally
because there had been no patient-provided prescription. Many
were also shipped without FDA-required precautions such as
patient instructions and temperature-controlled packaging. Of
the 68 samples, 48 were from the U.S. or Canadian-based
Internet pharmacies, 18 were from foreign or Canadian sites,
and two could not be determined. Of the 18 foreign samples,
three were found to be counterfeit, including two that
contained incorrect but not necessarily dangerous chemical
compositions, and one that had no active ingredients at all.
Again, GAO determined that none of the U.S. or Canadian samples
was counterfeit, evidence indicating that medications delivered
from other foreign countries were less safe than those
originating in the U.S. or Canada.
The Subcommittee also examined operations at three U.S.
ports of entry, in New York, Chicago, and Miami, to evaluate
how Federal agencies screen parcels containing pharmaceutical
products and originating from foreign countries. The
investigation determined that tens of thousands of dangerous
and addictive controlled substances are streaming into the
United States on a daily basis from overseas and that, at ports
of entry such as the John F. Kennedy International Airport,
Miami International Airport, Customs agents are being
overwhelmed as they attempt to prevent potentially hazardous
materials from entering our borders.
At JFK Airport, Customs officials estimated that over
40,000 parcels containing pharmaceutical products pass through
its facility every day. Miami Intentional Airport saw 30,000
packages a day. Neither facility had sufficient personnel to
screen those parcels. For example, JFK had an average of 50
Customs agents and just six FDA inspectors working at its
facilities during the course of a day, which meant that every
person was responsible for screening more than 700
pharmaceutical parcels every day--and remember, these agents
and inspectors have lots of other responsibilities, too. They
are charged, for example, with screening packages for firearms,
nuclear material, counterfeit currency, and other contraband
items.
Millions of packages containing pharmaceutical products
were imported into the United States last year and in 2003, and
an estimated $1.1 billion worth of prescription drugs were
imported into the United States solely from Canada. Internet
pharmacies have contributed to this increase and to the ongoing
strain on our enforcement resources. While some of these
Internet pharmacies are based in the United States, many others
are based in foreign countries which makes them harder to
investigate, inspect, and shut down. Recent research indicates,
for example, that the top countries of origin for imported
medications include Brazil, Canada, India, Mexico, the
Netherlands, Pakistan, Portugal, Romania, and Spain. While
Federal agencies such as FDA, Customs, DEA, and the Department
of Justice have successfully taken enforcement actions against
both domestic and foreign Internet pharmacies and associated
physicians in the past, these agencies face a host of
enforcement issues with scarce resources. In an age of global
terrorism where these same agencies are charged with protecting
the public from dirty bombs, heroin sales, and chemical and
biological weapons, it is tough to believe that stopping
Internet pharmacies will become a top priority.
There is also, again, the larger issue of drug
reimportation. The importation of prescription drugs happens
every day in this country, whether it is through private
individuals purchasing drugs through the Internet, or a busload
of seniors traveling to Canada to buy cheaper drugs from their
drug stores there.
It is the exorbitant price of prescription drugs in the
United States that is driving Americans to buy low cost
medicines from foreign countries. Folks are doing what they
have to do in order to find and buy more affordable medicine.
It is an ironic but comforting fact that the GAO study
found no counterfeit drugs among the medications imported from
Canada, since so many Americans are now shopping there,
including thousands of my constituents from Michigan. And I am
one of the Senators who favors legalizing the importation of
drugs from countries such as Canada as a way to bring down
prices here at home and stop the current practice of forcing
American taxpayers alone to bear the burden of subsidizing
research and development costs for drug companies.
While I support stronger enforcement action--and I very
strongly support enforcement action--to shut down illegal
Internet pharmacies and to confiscate unsafe medications at the
border, those actions will not cure the larger problem of
overpriced drugs here in the United States. It is my hope that
Congress will have an opportunity this year to vote on a real
proposal, such as the Dorgan-McCain Pharmaceutical Market
Access and Drug Safety Act, S. 2428, that will legalize the
importation of drugs and begin to address the real issue of
high drug prices for Americans.
Again I commend you, Chairman Coleman, for taking on this
important and complicated safety issue.
Senator Coleman. Thank you, Senator Levin.
It is my great pleasure to have with us the distinguished
Chairman of the Committee on Governmental Affairs, Senator
Collins.
OPENING STATEMENT OF CHAIRMAN COLLINS
Chairman Collins. Thank you, Mr. Chairman.
Let me start by commending you for holding these very
important hearings to highlight the safety concerns that can be
associated with the purchase of prescription drugs over the
Internet.
I also want to echo Senator Levin's comments that one of
the greatest challenges facing American consumers is the high
cost of prescription drugs. Soaring drug costs have placed a
tremendous strain on family budgets. They have also imposed a
heavy burden on employers, both public and private, who are
struggling to provide affordable health insurance coverage to
their employees.
It is therefore no wonder that American consumers
throughout our country are looking across the border and into
their computer screens in search of more affordable
prescription drugs.
It is well-documented that the average price of
prescription drugs is much lower in Canada and in Western
European countries than in the United States. The price
differential we are particularly aware of in my home State of
Maine, because consumers often do go across the border to
Canadian drug stores to get the prescription drugs that they
need.
For example, a drug commonly used to treat Type II diabetes
costs $124.65 in the United States and just $26.47 in Canada.
It simply does not seem fair that American consumers are
footing the bill for the remarkable yet costly advancements in
pharmaceutical research and development, while our neighbors
just across the border receive exactly the same medications at
substantially lower prices. And that is why I have long
supported legislation to allow American consumers to benefit
from international price competition on prescription drugs by
permitting FDA-approved medicines to be reimported into this
country.
But I am also concerned that we make certain that
reimportation is done safely and responsibly. As Senator Levin
mentioned, this is not likely to be a problem when we are
dealing with a country like Canada, but as the evidence that
Senator Coleman has outlined in his opening statement, it can
be a very serious problem in dealing with imports from other
countries.
Today's hearing focuses on a closely-related issue, and
that is the safety challenges posed by the sale of prescription
drugs over the Internet. The Internet offers many advantages
for on-line shoppers--convenience, competitive prices, privacy,
and easy access to health and medical information. Moreover,
through the Internet, individuals with disabilities, the
elderly, and patients living in remote areas can more easily
obtain the information, medicines, and services that they
previously could acquire only with great difficulty.
It is not surprising, therefore, that the number of on-line
pharmacies has increased dramatically from the 190 identified
by the General Accounting Office in October 2000 to an
estimated 1,400 sites in April of this year.
While on-line drug sales by reputable pharmacies can have
many advantages for patients, they nevertheless present unique
challenges for regulators, law enforcement, and policymakers.
Years ago, when I was in State Government, I was responsible
for the Board of Pharmacy, so I am well aware of how State
regulators inspect pharmacies, something that is very difficult
to do if you are dealing with an on-line entity.
Much more problematic, however, are rogue on-line
pharmacies that sell unsafe or counterfeit drugs that can be a
prescription for disaster for unwary consumers. I have been
particularly alarmed by recent surveys which have found that
more than 90 percent of on-line sites do not require a
prescription or even validate that there is a legitimate
patient-physician relationship behind the prescription.
The avenues for drug abuse that are provided by such
pharmacies are painfully obvious and have caused much heartache
to the family members who will be testifying before us today.
I believe we need legislation to protect consumers from
these rogue Internet pharmacies, and that is one of the reasons
why I have joined with the Chairman in cosponsoring Senator
Gregg's Safe Import Act, which establishes Federal licensing
requirements for all Internet pharmacies. It also requires the
verification of a legitimate patient-prescriber relationship
and establishes verification procedures for all prescriptions.
No longer could a teenager go online without having a valid
prescription and be able to get powerful addictive drugs sent
through the mail via the Internet pharmacy.
Mr. Chairman, while I believe that we must do all that we
can to make prescription drugs more affordable--and that
includes passing a reimportation bill this year--we must also
ensure patient safety. These hearings are a very important part
of that process and will help ensure that we reach that goal.
Thank you for your leadership.
Senator Coleman. Thank you, Senator Collins. Senator
Lautenberg.
OPENING STATEMENT OF SENATOR LAUTENBERG
Senator Lautenberg. Thanks, Mr. Chairman, and my
compliments for the work you have done thus far. It is really
critical to focus on what the problems are that would have
people who in many cases desperately need these materials,
these drugs, these products, and often are forced to make
choices between food and medicine. That is a terrible place for
anyone to be, and we ought to do what we can. We certainly do a
lot to help people afford food in this country, with food
stamps and things of that nature; yet the pharmaceutical needs
are often unable to be met, and people resort to anything they
can do to get their hands on these products. And it is
understandable, whether you feel pain or you have other effects
of illness that can be relieved, we certainly have a
responsibility to deal with it, and I think you are doing it in
a forthright fashion, and again, I commend you for it.
I noticed a coincidence here, my three colleagues sitting
on this Subcommittee with me all have borders that touch
Canada. Accessibility to the marketplace is quite interesting,
and people are pushing very hard.
I come from the ``medicine chest State'' in the country.
New Jersey is the place where so much is manufactured. These
are responsible companies that invest huge sums in research,
and many of these research attempts turn out to be fruitless
after years and millions of dollars. But that in no way excuses
the fact that you have different pricing structures in one
place, radical differences that are avoided in another place.
And we have got to do what we can to get these prices down.
Again, I am pleased that we are examining what the problems
are with importation, or reimportation as it is called, because
when we heard Senator Levin's commentary about the safety of
products coming from Canada, it starts to question the
rationality of saying, well, the safety issue, because we have
lots of problems within our own society with mixes of drugs
that produce terrible effects, including death in many cases.
So we have to be aware of that and scrutinize it very
thoroughly.
Unfortunately, the FDA does not have the funds available to
it to provide the kind of monitoring that we need, and when we
look at what is out there in front of us, and we see that on-
line pharmacies offer advantages--lower prices, easier
accessibility, improved privacy--and many of these on-line
pharmacies are legitimate businesses that do offer safe and
convenient services and products similar to those provided by
traditional pharmacies, and other on-line pharmacies engage in
practices that are illegal, such as selling unapproved or
counterfeit drugs, or dispensing drugs without a prescription.
But the question is how can we protect consumers and regulate
rogue pharmacies that peddle counterfeit medications, sell
drugs without a doctor's prescription. There is a constant
search. I use a local pharmacist, and he tells me about the
number of times that suspicious prescriptions have come across
his counter.
So this is not a problem that is exclusively of on-line
companies or reimportation. Since 2000, the number of
counterfeit cases that the Food and Drug Administration has
investigated has quadrupled, and it is obvious to me that the
trend is going to continue. Americans looking for cheaper drugs
online, especially from pharmacies abroad, are taking some
gambles with their health, but again, if it is a choice that is
so desperately motivated, then people do take risks in those
conditions.
Last November, the New York Times reported that Internet
pharmacies have recently sprung up that claim to be based in
Canada and do business from another country, using a Canadian
domain name. We need to investigate these on-line pharmacies,
but we also need to consider, as has been said, the underlying
issue--what is driving consumers to risk their health by
purchasing drugs from sources that they are not familiar with.
The answer is obvious--the lower price that they can get
these products for is very appealing. And we have got to
protect consumers from fake drugs and unscrupulous on-line
pharmacies. But we also must recognize that consumers,
particularly the elderly on fixed incomes or modest-income
families, are flocking to the Internet because it is the only
way they can afford to buy these essential products.
Prescription drugs in this country cost much more than people
can generally afford to pay.
Today we are looking at ways to regulate on-line
pharmacies, protect consumers more effectively, but we cannot
ignore the real problem, which is that prescription drugs in
many cases are way too expensive, and ultimately, we have got
to find ways to lower prescription drug costs for all
Americans.
Here, I will say that I have invited, and I extend the
invitation again to those in the pharmaceutical industry to
come forward and offer their ideas about how we can modify
these prescription drug prices and equalize them, whether they
are purchased in Canada or purchased here. Yes, we want to
avoid price-fixing as is done in Canada, but the fact of the
matter is that when the difference can be as much as 50
percent, you are talking about sums of money that are really
very tough for people to pry.
So, Mr. Chairman, once again, my compliments for doing
this, and I look forward to hearing from our witnesses.
Senator Coleman. Thank you very much, Senator Lautenberg.
I would note that Senator Levin, before he left, and I were
also reflecting on the fact that he, Chairman Collins and
myself all represent States that border Canada, so this is a
very personal issue for the folks that we represent.
I would also note that Senator Levin is managing the
Defense Authorization Bill right now on the floor of the Senate
and could not stay, but he is deeply committed to this issue of
ensuring access to safe, affordable prescription drugs for his
constituents and for all Americans, and I applaud him for that.
I would now like to welcome our first panel to today's
hearing. I welcome Marcia Crosse, Director of the Health Care
Team at GAO, and Robert J. Cramer, Managing Director of GAO's
Office of Special Investigations.
As I mentioned in my opening statement, this morning, GAO
is here to release the report of its investigation of Internet
pharmacy website drug sales. The purpose of this hearing is to
examine the extent to which consumers can purchase
pharmaceutical and controlled substances over the Internet
without a medical prescription or medical diagnosis and whether
the pharmaceuticals that are pouring into the United States
from foreign countries are counterfeit, unsafe, or legitimate.
I appreciate your attendance at today's important hearing,
and I am anxious to hear the results of your investigations.
Before we begin, pursuant to Rule 6, all witnesses who
testify before the Subcommittee are required to be sworn in. At
this time, I will ask you to rise and please raise your right
hand.
Do you swear that the testimony you are about to give
before this Subcommittee is the truth, the whole truth, and
nothing but the truth, so help you, God?
Ms. Crosse. I do.
Mr. Cramer. I do.
Senator Coleman. We will be using a timing system today, so
when you see the amber light come on, you know it is time to
wind up. If you have full written statements, they will be
entered into the record at your request.
I understand, Ms. Crosse, that we will have you go first,
followed by Mr. Cramer. After we have heard all the testimony,
we will turn to questions.
Ms. Crosse, you may proceed.
TESTIMONY OF MARCIA CROSSE,\1\ DIRECTOR, HEALTH CARE--PUBLIC
HEALTH AND MILITARY HEALTH CARE ISSUES, U.S. GENERAL ACCOUNTING
OFFICE
Ms. Crosse. Thank you, Mr. Chairman. I am pleased to be
here today as you discuss the safety of prescription drugs sold
by Internet pharmacies. Various types of pharmacies offer
prescription drugs over the Internet, including those that
require a patient to provide a prescription, and other
pharmacies that issue a prescription based on an on-line
medical questionnaire or have no prescription requirement. My
testimony will summarize the findings of a report that we are
releasing today that examines issues surrounding the
availability and safety of prescription drugs sold over the
Internet as well as the business practices of certain Internet
pharmacies.
---------------------------------------------------------------------------
\1\ The prepared statement of Ms. Crosse with an attachment appears
in the Appendix on page 109.
---------------------------------------------------------------------------
My colleague Mr. Cramer will provide additional details on
our purchases of narcotics.
At your request, Mr. Chairman, we examined the extent to
which certain prescription drugs can be purchased over the
Internet without a prescription; whether drugs sold by Internet
pharmacies are handled properly, are FDA-approved and are
authentic; and the extent to which Internet pharmacies are
reliable in their business practices.
With respect to the availability of drugs, we were able to
obtain the majority of prescription drugs we targeted for
purchase from a wide variety of Internet pharmacies without
providing a prescription. We obtained a total of 68 drug
samples, each from a different pharmacy in the United States,
Canada, or other foreign countries, including Argentina, Costa
Rica, Fiji, India, Mexico, Pakistan, the Philippines, Spain,
Thailand, and Turkey.
The samples included drugs with special safety restrictions
that require close physician supervision. We also purchased
addictive narcotic painkillers.
Some U.S. and all Canadian pharmacies where we purchased
drugs required the patient to provide a prescription, but the
majority of U.S. and all other foreign Internet pharmacies
where we made purchases either issued prescriptions based on
their own medical questionnaires or did not require a
prescription.
With respect to the safety of the drugs, we identified
several problems with the handling, FDA approval status, and
authenticity of the drug samples we received from foreign
Internet pharmacies outside the U.S. and Canada, but fewer
problems among the samples received from U.S. and Canadian
Internet pharmacies. None of the samples from these other
foreign pharmacies included dispensing pharmacy labels that
provided instructions for use, and only about one-third
included warning information.
As you can see in this first figure,\2\ some samples
arrived with no labeling of any kind. As you can see, there is
no information as to even what drug is supposed to be contained
in the bottle much less how many pills to take or how
frequently.
---------------------------------------------------------------------------
\2\ See Figure 1 of prepared statement of Ms. Crosse which appears
in the Appendix on page 121.
---------------------------------------------------------------------------
In our second figure,\1\ you can see that we also received
products with no warnings in English. All of the information
that came in this package was printed in Spanish.
---------------------------------------------------------------------------
\1\ See Figure 2 of prepared statement of Ms. Crosse which appears
in the Appendix on page 122.
---------------------------------------------------------------------------
A majority of these samples displayed other problems
associated with the handling of the drugs, such as three
samples of a temperature-sensitive drug that were sent in
envelopes without insulation. The product shown here requires
refrigeration but was shipped from abroad in a regular envelope
without any temperature control.
We also received five samples containing tablets enclosed
in punctured blisterpacks, potentially exposing the tablets to
damaging light or moisture. You can see in this figure \2\ that
this product arrived damaged, and this is a moisture-sensitive
product.
---------------------------------------------------------------------------
\2\ See Figure 2 of prepared statement of Ms. Crosse which appears
in the Appendix on page 123.
---------------------------------------------------------------------------
Some of the samples we received from these other foreign
pharmacies arrived in unconventional packaging, in some
instances with the apparent intention of concealing the actual
contents of the package.\3\
---------------------------------------------------------------------------
\3\ See Figure 1 of prepared statement of Ms. Crosse which appears
in the Appendix on page 124.
---------------------------------------------------------------------------
These are two unique shipping containers we received--one
with the product packaged inside a CD case--as you can see, it
was wrapped just in brown tape. Another product that we
received was placed inside a sealed pop-top can and packaged in
a box with a misleading label. This, as you can see, says
``Gold Dye and Stain Remover Wax.''
Manufacturers who tested the drugs for us reported that
almost all of the drug samples from these other foreign
pharmacies were unapproved for the U.S. market because, for
example, the labeling or the facilities in which they were
manufactured had not been approved by FDA. However, they
reported that the chemical composition of all but four of the
other foreign samples was comparable to the product that we had
ordered.
Among the exceptions, two samples were found to be
counterfeit versions of the product we had ordered--Viagra--
containing a lesser amount of the active ingredient, and two
samples had a significantly different chemical composition than
that of the product that we had ordered--OxyContin and
Accutane.
In contrast, all of the drug samples that we received from
U.S. and Canadian Internet pharmacies included dispensing
pharmacy labels; almost all including warning information; and
none displayed evidence of mishandling.
Like the samples from other foreign pharmacies, most of
those from Canada were also unapproved for the U.S. market.
However, manufacturers determined that the chemical composition
of all of these samples was comparable to the product that we
had ordered.
With respect to business practices, some Internet
pharmacies, mostly other foreign pharmacies, were not reliable
in their business practices. We did not receive six of the
orders that we placed and paid for, five of which were placed
with other foreign Internet pharmacies and one of which was
placed with a pharmacy whose location we could not determine.
Also, we found that several of the drug samples were sent
from locations that raised questions, such as from private
residences.
We also observed Internet pharmacies that obscured details
about the drugs sold, such as other foreign pharmacies from
which we ordered brand name drugs but then received a generic
or foreign version of the drug.
Finally, about 21 percent of the Internet pharmacies that
sent us samples were found to be under investigation by DEA or
FDA. Reasons for the investigations included allegations of
selling adulterated, misbranded, or counterfeit drugs and
providing prescription drugs where no valid doctor-patient
relationship exists. Nine of these pharmacies were from the
United States, one from Canada, and four from other foreign
countries.
In summary, Mr. Chairman, consumers can readily obtain many
prescription drugs over the Internet without providing a
prescription, particularly from certain U.S. pharmacies and
from foreign Internet pharmacies outside of Canada. Drugs
available include those with special safety restrictions, for
which a patient should be monitored for side effects, and
narcotics, where the potential for abuse is high.
For these types of drugs in particular, a prescription and
physician supervision can help ensure patient safety.
In addition to the lack of prescription requirements, some
Internet pharmacies can pose other safety risks for consumers.
Many foreign Internet pharmacies outside of Canada dispense
drugs without instructions for patient use, rarely provide
warning information, and in four instances provided drugs that
were not the authentic product that we ordered.
Consumers who purchase drugs from foreign Internet
pharmacies that are outside of the U.S. regulatory framework
may also receive drugs that are unapproved by FDA and
manufactured in facilities that the agency has not inspected.
Other risks that consumers may face were highlighted by the
other foreign Internet pharmacies that fraudulently billed us,
provided drugs we did not order, and provided false or
questionable return addresses. It is notable that we identified
these numerous problems despite the relatively small number of
drugs we purchased, consistent with problems recently
identified by regulatory agencies.
Mr. Chairman, this concludes my prepared statement. I would
be pleased to respond to any questions that you or other
Members of the Subcommittee may have.
Senator Coleman. Thank you very much, Ms. Crosse. Mr.
Cramer.
TESTIMONY OF ROBERT J. CRAMER,\1\ MANAGING DIRECTOR, OFFICE OF
SPECIAL INVESTIGATIONS, U.S. GENERAL ACCOUNTING OFFICE
Mr. Cramer. Thank you, Mr. Chairman and Members of the
Subcommittee.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Cramer appears in the Appendix on
page 130.
---------------------------------------------------------------------------
I am pleased to be here today to report on some of the
results of our investigation of the sources of hydrocodone that
we purchased without a prescription from eight U.S. on-line
pharmacies. hydrocodone is an addictive narcotic pain
medication, and illicite use of this drug has increased
significantly in recent years.
We found that one can purchase hydrocodone from Websites on
the Internet without providing a prescription or being examined
by a physician, and the Internet pharmacies from which we made
our purchases charge prices that are 3 to 16 times the prices
charged by local retail pharmacies at which we inquired.
We concluded that those who participate in these Internet
drug operations appear to be in the business of knowingly
servicing and richly profiting from individuals who may
purchase narcotics for illicit purposes.
We ordered and obtained hydrocodone from eight domestic
Websites. Six purchases, each from different Websites, were
dispensed by a single pharmacy. The two remaining purchases
were ordered from two separate Websites and were dispensed by
two other pharmacies.
We obtained the hydrocodone by completing on-line
questionnaires in which a GAO staff member, whom I will refer
to here as ``the customer,'' claimed that he had pain.
In an attempt to determine the relationship between the
Internet site and the pharmacy that dispensed the drug, we
contacted one of the pharmacies that sent us hydrocodone. This
purchase was made from a Website that claimed that customers
had to undergo a complete physical examination in order to
receive the narcotic. However, the customer obtained the
hydrocodone without undergoing a physical examination or seeing
or even speaking to a physician.
Instead, a physician's representative telephoned the
customer and offered two options for satisfying the physical
examination requirement. For $199, the customer could visit a
physician at one of two clinics in the area where the customer
lived, or for $49, the representative said that she would send
paperwork that the customer could take to his own physician to
fill out and return to them; and if the customer chose and paid
for one of those options right then and there with a credit
card, the physician would immediately issue a 30-day
prescription.
The customer chose the $49 option and gave the
representative his credit card information and subsequently
paid an additional $190 for the hydrocodone.
After we received it, a GAO investigator posing as a
relative of the customer contacted the pharmacy listed on the
return address of the package in which it was delivered. The
pharmacist confirmed that he had sent the drug and explained
that he has a business relationship with a Website and with a
physician who had sent him a prescription for it.
The investigator then telephoned the physician, who
confirmed that he had prescribed the hydrocodone. The physician
claimed that he never writes prescriptions for new medications
for patients and that he always confirms that the patient has
been on the medication in the past. But when the investigator
asked the doctor whether he had actually spoken with his
relative, the doctor responded that one of his associates had
in fact spoken to the relative. He said that he has a staff of
several people who make such telephone calls. He repeatedly
asserted that the staff calls and speaks with the customer's
physician who previously prescribed the medication, but he
confirmed that the telephone number his staff had called with
respect to our purchase was the telephone number of the
customer himself, not that of a physician.
The physician indicated to our investigator that his
Internet drug business is run from a clinic that he operates,
but when asked the name of the clinic, it indicated that it is
part of a health care network and gave a name that does not
correspond to the name of any existing health care network we
could find or to any medical practice with which this physician
is in fact connected.
He said to our investigator, ``Ninety percent of our
business is for hydrocodone.'' He also said that he currently
provides prescriptions for five different Internet drug sites
and that he previously wrote prescriptions for two others that
have been shut down.
During our visit to the site where the physician purports
to operate a clinic, we saw no evidence of a health clinic. The
site is a one-room storefront set up with several computers and
telephones. The only individuals that we saw going to or
leaving the location appeared to be employees, and there was no
sign on the premises indicating that the business there was
health-related. When one of the employees was asked what kind
of business is operated at the location, she responded that
they do ``computer consultations.''
When asked about the possibility of children buying
narcotics through him, the physician claimed that the need for
a credit card is the ``safeguard to prevent that from
happening,'' and ``a kid should not have a credit card.''
However, he admitted that, in his own words, parents call him
``all the time, saying that their children have gotten hold of
their credit cards.''
The physician repeatedly stressed that his on-line pharmacy
offers a service for patients who do not have insurance.
However, this assertion is patently false. To the contrary--the
customer paid a total of $190 and an additional $49
consultation fee for 60 hydrocodone pills that can be purchased
for an average price of about $26 at local retail pharmacies at
which we inquired. Thus, we paid nearly 10 times the ordinary
retail price of this drug because we did not have a
prescription.
The street price, or illegal sales price, of hydrocodone
that we bought online is about $5 to $6 per pill. Thus, we paid
slightly less than the street price for this drug from this
source.
Indeed, as I mentioned earlier, the prices that we paid for
hydrocodone at all eight of the Websites from which we ordered
it were 3 to 16 times the ordinary retail price charged for it
at local pharmacies.
In sum, these Websites appear to purposely cater to
hydrocodone customers who are willing to pay a substantial
markup for the narcotic because they do not have prescriptions.
Claims that these Websites provide a safe, inexpensive,
alternative source of drugs for customers are bogus. Instead,
they appear to be in the business of profiting from illicit
drug use.
That completes my prepared statement. I will be happy to
answer any questions that you may have.
Senator Coleman. Thank you very much, Mr. Cramer.
To both Ms. Crosse and Mr. Cramer, I am very appreciative
of the work that the GAO has done. In a very short period of
time--and as Ms. Crosse noted, this is a small sample here; we
have not fleshed all the concerns or all the challenges facing
the importation of drugs from Canada or other countries--but in
a short period of time, you have done outstanding work, and
this Subcommittee and this Congress is very appreciative. So I
want to start by saying thank you.
Let me talk a little bit about the universe which we are
dealing with, and there is some good news and some bad news in
this. I am the optimist. The good news is that among those
Canadian and American pharmacies that were sampled, the
business practices were pretty solid?
Ms. Crosse. Yes, Mr. Chairman. The problems that we had
with the fraudulent billing were with other foreign pharmacies
or in one case from a pharmacy where we could never determine
the actual location of the pharmacy. We did not have that
difficulty with pharmacies in the United States or in Canada.
Of course, some of the narcotics purchases are from U.S.
pharmacies. All of our hydrocodone purchases are actually from
pharmacies that are located in the United States.
Senator Coleman. But the concern is that you can get those
narcotics by simply filling out a prescription online, at a
minimum.
Ms. Crosse. That is correct. Three of the sites also
telephoned back to the customer with some follow-up questions,
but at five of those sites, all that was required was to fill
out the questionnaire online.
Senator Coleman. Let me take you back a step. You described
in your testimony a counterfeit sample, and I believe this
purports to be OxyContin, which is a very addictive narcotic.
Ms. Crosse. That is correct.
Senator Coleman. One, do we know what country it was sent
from?
Ms. Crosse. We have been requested because of an ongoing
investigation not to reveal that publicly. I would be happy to
inform your staff.
Senator Coleman. Let me step back. From the consumer's
perspective, if I am going online, attempting to do a Google
search for ``OxyContin,'' and I get a list of Websites, is
there anything that--let us say hypothetically that this came
from Pakistan or Turkey--is there anything that requires that
Website to be identified as coming from Pakistan or Turkey?
Ms. Crosse. No. For Internet pharmacies located outside the
United States, they are totally outside any regulatory
framework that we have in place. They can identify themselves
or not identify themselves. In some instances, Websites
identify themselves. We sought to try to trace to where their
servers were located, to trace to where the payments were made;
we also used the return address information on the packages
when they arrived to help us identify where the pharmacies were
actually located--but it is not a requirement, and it was not
always there.
Senator Coleman. And weren't there some instances in the
investigation where, even looking at return address or other
information, there was an effort to disguise where the pharmacy
was actually located where the drugs came from?
Ms. Crosse. Yes. There were discrepancies between
information on the Websites and the shipping addresses for the
packages that arrived.
Senator Coleman. So for all we know, this Website could be
AllAmerica.com or it could be RoyalCanadianMountedPolice.com,
and it could come from Bangladesh or Turkey or Pakistan, and
the consumer would not know.
Ms. Crosse. Our information is that it is from abroad.
Senator Coleman. But the consumer, sitting there, as he
types in----
Ms. Crosse. The consumer cannot necessarily tell.
Senator Coleman. Thank you.
One of the suggestions that Chairman Collins and I have
supported would be having the FDA, even for extraterritorial
pharmacies, give some kind of seal of approval which would mean
they would investigate and check it out. Do you think that
would be helpful to the consumer?
Ms. Crosse. I think it would certainly be an extra layer of
protection for consumers that currently does not exist.
Senator Coleman. What is contained in here is called
Crixivan.\1\
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\1\ See Exhibit 30, which appears in the Appendix on page 315.
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Ms. Crosse. Crixivan, yes, Senator. It is a drug for HIV
and AIDS patients. Interestingly enough, it was packaged--that
can had a sealed pop-top on it. When it arrived, we opened it
and found inside an actual manufacturer's bottle of Crixivan.
The manufacturer reports to us that it is the actual, authentic
product, and that product, even though it came from abroad, was
manufactured in an FDA inspected facility and is approved for
distribution in the United States.
Senator Coleman. And in fact, it notes that it comes from
New Jersey, where it is manufactured.
Ms. Crosse. It took a long route to get here.
Senator Coleman. But what is fascinating is that the ``Gold
Dye and Stain Remover Wax free promotion sample'' does say it
is a product of Bassick Pharma and Chemicals in Istanbul,
Turkey.
Ms. Crosse. Yes, sir.
Senator Coleman. Do we know if that is where this came
from?
Ms. Crosse. We believe that this came from Turkey. The
Website and the shipping information led us to believe that the
pharmacy we ordered from was in Istanbul.
Senator Coleman. Again, I want to get back to the
consumer's perspective and what they are looking at, because we
are working backward. We get the product, and we trace as best
we can where it came from, but from the consumer's perspective,
can you help us understand how a consumer would somehow make
contact with this particular drug seller?
Ms. Crosse. They could find it by searching on the Internet
for a particular brand name drug. We checked for pharmacies
that sold Crixivan. We were specifically looking for
pharmacies--for each of the drugs we purchased, we looked for
pharmacies that sold them in the United States, in Canada, and
in other foreign countries to the extent we could identify that
from Website information. This Website, I believe, did identify
that it was located in Turkey, so it was one that met our
requirements for an ``other foreign purchase.'' But a consumer
could not always tell.
Senator Coleman. I believe you showed in one of your charts
Roaccutan, which is a foreign version of Accutane.\2\
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\2\ See Exhibit 28, which appears in the Appendix on page 313.
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Ms. Crosse. That is correct. It is a foreign version of
Accutane, which is an acne treatment.
Senator Coleman. And this is one where the instructions
came in Spanish?
Ms. Crosse. Yes, that is right. All of the information
included with this package was in Spanish. This was a product
that came from Mexico. It had no pharmacy dispensing label
information on it, and anyone who could not read Spanish would
not be able to read the warning. It is also a product that the
FDA warns against purchasing over the Internet because it has
severe side effects and requires close monitoring by a
physician.
Senator Coleman. And particularly for women who are
pregnant, this is a very dangerous drug.
Ms. Cross. That is right. It is something that causes birth
defects. It is a very dangerous drug for women of childbearing
age.
Senator Coleman. Mr. Cramer, the physician--I was stunned
as I listened to you recount the conversation with the
physician, who indicated that parents had in fact called him to
raise concerns.
Mr. Cramer. Yes. His words were: ``Parents call me all the
time, saying that their children have gotten hold of their
credit cards.''
Senator Coleman. I am amazed your investigator restrained
himself from asking about conscience.
Mr. Cramer. He did. We wanted to encourage him to keep
talking rather than turn him off, and as a result, he did give
us a lot of very good information which we have been able to
present to you today.
Senator Coleman. And it is clear that there is nothing in
place that would stop a child age 16, 17, perhaps 13 or 14, who
had dad or mom's credit card from purchasing hydrocodone?
Mr. Cramer. It seems that the key thing here is having a
credit card. Five of the sources of hydrocodone never made any
phone calls to the customer, so that all you had to do was get
on the Internet, fill out the questionnaire and have a credit
card number, and that was it for those five, and the three made
phone calls, but as I explained with respect to our
transaction, in which it appears that there actually was a
physician involved, the phone call is a window dressing rather
than any kind of true consultation.
Senator Coleman. I think you were being generous in your
testimony when you stated that the folks involved in these
particular pharmacies that were subject to your investigation--
you used the words ``appear to be'' in the business of
profiting from individuals seeking to illegally obtain drugs.
Would you go further than that, not that they ``appear to
be,'' but that your investigation demonstrated very clearly
that the individuals here were generating great profit from
providing drugs to folks whom they had no idea whether they in
fact had a prescription or who they were--they simply had a
credit card.
Mr. Cramer. Certainly based on the prices alone, it is
clear that there is big profit in this business.
Senator Coleman. I will turn it over now to Senator
Lautenberg.
Thank you, Mr. Cramer.
Senator Lautenberg. Thank you very much, Mr. Chairman, and
I apologize for not having been in the room when these very
credible witnesses were testifying.
We are looking at situations here that almost extend beyond
the fact that there is some risk in obtaining these products
outside normal channels, and the price differences are driving
much of this discussion, but if there is an addicted person in
the house, and that person is obtaining his drugs over the
Internet or across the borders, the fact of the matter is that
this person, if he is truly an addict, is going to find other
means, and it has little to do with whether they are rogue
pharmacies on the Internet or, again, cross-border
transactions.
So we are not doing a review of addiction and the problems
that follow in that kind of situation, but it is part of the
overall problem. And when we look at the results of these
investigations and we see that in many cases, these products
are delivered in the kind of packaging that we see as original
packaging right here in our own country, that in many ways, the
safety is practically assured, but the price differential is
still going to be enormously attractive to people--here is a
product where they can see the container, the packaging, often
the instructions are in there as they are if we buy the product
in an unopened container--so the problem that results is how
can we possibly monitor all of these things.
Should the FDA be more involved? They are terribly short of
funds. Which agency do you think should be taking the lead
apart from your investigatory responsibility? Should the FDA be
more involved? Should we be looking to increase their funding
in the interest of the consuming public here? What do we do
about this enormous problem?
Ms. Crosse. Well, Senator, in the United States, the FDA is
the Federal agency with the lead responsibility for ensuring
the safety of the prescription drugs that are sold to
consumers, and their jurisdiction currently does not extend to
these foreign Internet sites and the drugs sold there.
Some of the products that come in through these Internet
sites are in facilities that are inspected by FDA either
because the manufacturer has shipped U.S.-made products to
Canada for sale there, or in some instances, because the
manufacturer has a facility offshore where the manufacturer
imports to the United States, so they have a facility offshore
that the FDA already inspects.
So there is some cross-border activity that is covered by
the FDA. They could speak to you in greater detail about the
extent of that coverage. However, they are certainly currently
the most qualified to take on this issue if you want to extend
Federal oversight to pharmaceuticals coming in from other
countries.
Senator Lautenberg. The question that arises is if there is
a discount of approximately 37 percent on average by buying
drugs in other countries, can we convince people that the risks
of ordering from outside the U.S. boundary or an Internet
pharmacy outweigh the financial benefit to these consumers?
Ms. Crosse. I think it depends on the product that you are
buying and where you are buying it from. I think it is very
difficult right now for a consumer to make that determination,
however.
Senator Lautenberg. But that is not necessarily going to
curtail their search for a cheaper product.
Ms. Crosse. No, sir.
Senator Lautenberg. Thanks, Mr. Chairman.
Senator Coleman. Thanks, Senator Lautenberg. Chairman
Collins.
Chairman Collins. Thank you, Mr. Chairman.
Ms. Crosse, how did the GAO select the Internet sites from
which you purchased these drugs?
Ms. Crosse. It is not a random sample. There is no list of
Internet sites that exists from which one can make a random
selection. We had certain criteria in mind that we were looking
for. As I mentioned, we were searching to find Internet sites
in the United States, in Canada, and abroad, in other foreign
countries, for each of the drugs that we were seeking to
purchase.
We also searched to find sites that required prescriptions,
those that had on-line questionnaires, and those that had no
prescription drug requirement.
So we had certain criteria that we were trying to fill. We
began with a list of over 1,400 Internet sites that the FDA
passed along to us. This was not their list of sites under
investigation; it was a list that they had developed, and some
of the information had been provided to them from others who
have conducted such investigations.
In addition, we conducted our own Internet searches using a
variety of search engines such as Google and Yahoo! and Excite
to try to identify different Internet sites that would meet the
criteria that we set forth.
Chairman Collins. Thank you.
Mr. Cramer, it seems to me that we have two serious
problems. First, we have consumers who are looking to save
money by shopping for their drugs over the Internet who may be
at risk of receiving unsafe, contaminated, or even counterfeit
drugs; and then we have a second serious problem of consumers
with problems with addiction or teenagers who are looking to
experiment who are not particularly concerned about price but
rather are looking for a way to get drugs, narcotics, for which
they are not entitled.
I want to take you through your testimony to illustrate the
second problem.
In any of the cases, did you have to submit a prescription
in order to get access to the hydrocodone?
Mr. Cramer. No. We provided no prescription with respect to
any of the eight purchases we made.
Chairman Collins. And did a physician interview you to make
sure that it was an appropriate medication for your
investigator?
Mr. Cramer. In five instances, there was absolutely no
telephone contact with anyone. We filled out the questionnaire,
gave the credit card information, and got the drug. In three
instances, we received a return phone call. We know in the one
instance that we looked into very carefully that it was not a
physician who spoke to our customer. In another instance, the
individual identified herself as a customer sales
representative of a physician. And in the third instance, it is
unclear whether that person was a doctor or not. That was left
very ambiguous during the course of the conversation.
Chairman Collins. In none of the eight cases was there a
physical examination by a qualified health care provider?
Mr. Cramer. That is right. There was never a physical
examination.
Chairman Collins. And as I understand it, in the six
purchases from six different Websites, you were able to trace
the prescription back to a single pharmacy?
Mr. Cramer. That is right.
Chairman Collins. So a single pharmacy in a southeastern
State was supplying the drugs that were ordered on six
different Websites; is that accurate?
Mr. Cramer. That is correct.
Chairman Collins. How did you determine that? Was it
obvious when you received the drug, or did you have to do some
investigative work to determine that?
Mr. Cramer. In three instances, it was obvious from the
return address identified on the package. In three other
instances, although it came from the same pharmacy, there was
an intermediate delivery channel so that particular pharmacy
was not in fact identified, and we had to do some further
investigation to track down through the intermediary who in
fact the source was.
Chairman Collins. And I assume that southeastern State in
which this pharmacy is located has a typical law that would
require a prescription to be presented at the pharmacy before
the drugs could be dispensed. Is that a correct assumption?
Mr. Cramer. I believe that is the case here, yes.
Chairman Collins. Was there any referral by the GAO, or has
there been a referral yet by the GAO, to the State licensing
board?
Mr. Cramer. We have been in touch with both law enforcement
authorities as well as State authorities with respect to our
findings to date, to advise them of what we found and to refer
to them so they could take further action.
Chairman Collins. Thank you.
Mr. Chairman, I think this is an excellent example of how
one rogue pharmacy can use the Internet to reach so many people
and to actually be involved in six different Websites--and
there may be many more, since obviously, you did not look at
all 1,400. So I think you are really doing a valuable service
in examining this problem. Thank you.
Senator Coleman. Thank you, Senator Collins. Senator Pryor.
Senator Pryor. Thank you, Mr. Chairman.
I concur with Chairman Collins' analysis. You are doing a
great job here in getting us focused on this issue.
When I was the Attorney General of my State before I came
to the Senate, we had responsibility for the consumer
protection in Arkansas. We would always recommend to people in
Arkansas that when they purchased drugs, they do it through
their local pharmacist, because they are dealing with a
licensed professional, they are dealing with someone in their
community, and if there is a problem, they know who to go to,
they have recourse. And certainly we felt better because local
pharmacists always require a prescription, etc., so we just
felt like all the consumer safeguards and the integrity in the
system was there.
But given the high prices of prescription drugs in this
country, certainly there is a lot of incentive for people to
get online and go elsewhere, and in that industry, on-line
pharmacies are now a reality.
I would like to ask you a few questions, and either of you
can answer. First, if you know, what percentage of on-line
pharmacies that you have experience with or have dealt with are
legitimate, following all the rules, going through all the
procedures that we would hope and expect--how many of these are
really operating in a way that we would feel satisfied that the
integrity of the system is being protected?
Ms. Crosse. I think we really cannot answer that. There is
no known universe of Internet pharmacies. They change
constantly. We observed in our searches that some of the
Websites that were on the 1,400 that FDA provided to us had
already closed when we went to look there to make a purchase.
There is a very small number of pharmacies participating in
a program where they seek certification from the National Board
of Pharmacies, but I believe that is a handful of pharmacies,
fewer than 20, I understand.
However, I do not think that alone is the signal of whether
or not they are dealing honestly and meeting requirements. I am
sure there are other pharmacies out there who just have not
sought certification who could meet those requirements.
Senator Pryor. All right. Let me ask that, because this is
something that Chairman Coleman mentioned a few moments ago. It
seems to me that maybe there should be some kind of seal of
approval or some process that these companies go through, and
when they meet certain criteria, they get a seal of approval or
whatever you want to call it that they can display on their
Website so the consumer knows that they have met all of these
thresholds.
What you are saying is that only a very small percentage of
the on-line pharmacies are participating in such a program?
Ms. Crosse. That is right. This is a voluntary program from
their national association. As you may be aware, pharmacies are
regulated at the State level, so each State has its own
controlling statutes and regulations. There is currently no
Federal regulation of pharmacies, and there is no Federal body
that would be empowered to provide such certification of a
pharmacy. This is something that is regulated by the States.
Senator Pryor. Personally, I think that the industry or
some independent nonprofit group could provide a seal of
approval to give the consumers the comfort level and assurances
that they need to go online.
Let me ask about some of your findings. As I understand
it--and I do not want to put words in your mouth--but as I
understand it, you found repeatedly that prescriptions were not
required, a visit to a physician was not required. Were some of
these drugs out-of-date as well?
Ms. Crosse. Of the samples that we received from the
manufacturer testing, none of those that we had could be
determined to be out-of-date by the manufacturer. That
certainly is true for some of the products that the FDA has
investigated, but in our small number of samples, we did not
find any that were out-of-date.
Senator Pryor. OK. But there were other problems?
Ms. Crosse. There were a number of other problems.
Senator Pryor. I am about to run out of time, but I do want
to ask you about the testing and the cost of the testing,
because I think that is an important factor for us to consider.
First, on the testing, let me ask a two-part question,
because I am almost out of time. Who did the testing, who paid
for it, and also, could you give us a sense of the cost that is
required in testing these products?
Ms. Crosse. For each of the products that we purchased, we
sought initially to buy brand name drugs. We made a decision
midcourse to accept generic products for the hydrocodone
because of the difficulty of finding enough sites where we
could place orders of the brand name narcotics. The generics
were much more readily available. However, for the other
drugs--Lipitor, Celebrex, Crixivan--all of those drugs, each
was tested by its manufacturer. We entered into an agreement
with each manufacturer to conduct the testing for us, because
they have the specs on their products, they could make the
determination of what the chemical composition was, what it was
supposed to be. They have the lot number information to know if
it was a valid lot number, to know if it was outdated, to know
if it was fully potent. So they conducted the testing for us.
I cannot speak to the price. They did it at their own
expense for us and in service to us and to the Subcommittee and
this investigation.
Senator Pryor. Did we have anyone present there when they
were doing it?
Ms. Crosse. No, sir, we did not have anyone present in the
laboratories. However, as part of this process, one of the
reasons we were seeking to make purchases from what we call
control pharmacies, these on-line pharmacies that are
associated with big-name retail pharmacies such as Walgreen's
or CVS, was to have a control sample. These were blinded to the
manufacturers. They did not know which sample came from which
country, which type of on-line pharmacy, which on-line pharmacy
the product came from. So they had no knowledge; they only had
a code number for each product when they did the testing.
Senator Pryor. Thank you.
Senator Coleman. Thank you, Senator Pryor.
I have three very brief follow-up questions. One, Senator
Collins in her line of questioning spoke about a single
pharmacy that supplied multiple Websites. Do we know where this
pharmacy got its drugs?
Mr. Cramer. No. We do not have that information. This
particular pharmacy has now been shut down, and we are unable
at this point to probe any further with respect to that
particular one.
Senator Coleman. Is there anything that prevents the
principals involved in that pharmacy from getting back in the
business?
[Pause.]
Senator Coleman. Ms. Crosse.
Ms. Crosse. Not to my knowledge, unless they were
prosecuted and perhaps jailed.
Mr. Cramer. It is my understanding that there are pending
proceedings with respect to that pharmacy and the principals.
Senator Coleman. That was my other question. I presume the
results of your investigation have been turned over to the
appropriate authorities for further criminal or any other type
of enforcement actions?
Mr. Cramer. Yes, and we will see what happens. But it is
now being handled by law enforcement authorities who have taken
action.
Senator Coleman. Thank you very much. Do any of my
colleagues have questions?
[No response.]
Senator Coleman. If not, I will thank the witnesses again
for outstanding work in a short period of time. We are very
appreciative. Thank you very much.
Mr. Cramer. Thank you.
Senator Coleman. I would now like to welcome our second
panel to today's important hearing.
I welcome the distinguished former Mayor of New York City,
the Honorable Rudy Giuliani, currently Chairman and CEO of
Giuliani Partners. Mr. Giuliani brings with him his expertise
in border security and public safety issues.
We appreciate you lending your expertise in security and
international terrorism to assist us in developing
recommendations to control the illegal flow of these
unregulated rugs.
And finally, I would like to welcome Dr. Marvin D.
Shepherd, Director of the Center for Pharmacoeconomic Studies
at the University of Texas at Austin. Dr. Shepherd will discuss
his study concerning the Canadian drug supply.
As previously mentioned, the purpose of this hearing is to
examine the extent to which consumers can purchase
pharmaceuticals and controlled substances over the Internet
without a medical prescription or medical diagnosis; what role
FDA, the Bureau of Customs and Border Protection, the U.S.
Postal Service, and DEA play in preventing the illegal
importation of scheduled pharmaceuticals or pharmaceuticals
that are violative of the Food, Drug, and Cosmetics Act, and
whether the pharmaceuticals that are pouring into the United
States from foreign sources are counterfeit, unsafe, or
legitimate.
I appreciate your attendance at today's hearing and am
anxious to hear your observations on the current state of
affairs.
Before we begin, pursuant to Rule 6, all witnesses before
this Subcommittee are required to be sworn in. I would ask you
to please raise your right hand and repeat after me: I swear
that the testimony I am about to give is the truth, the whole
truth and nothing but the truth, so help me, God.
Mr. Giuliani. I swear that the testimony that I am about to
give will be the truth, the whole truth and nothing but the
truth, so help me, God.
Mr. Shepherd. I do.
Senator Coleman. Thank you.
You understand the timing--when the yellow light goes on,
if you can sum up your testimony. Your full testimony will be
entered into the record.
Senator Lautenberg. Mr. Chairman, just a side comment. The
Mayor knows that when you see a red light, it does not mean
stop--it means speed up.
Senator Coleman. I thought it ought to be a suggestion.
Mr. Giuliani, we will have you go first, followed by Dr.
Shepherd, and after we have heard all the testimony, we will
turn to questions.
Mr. Giuliani, you may proceed.
TESTIMONY OF HON. RUDOLPH W. GIULIANI,\1\ CHAIRMAN AND CHIEF
EXECUTIVE OFFICER, GIULIANI PARTNERS, LLC, NEW YORK, NEW YORK
Mr. Giuliani. Mr. Chairman and Members of the Subcommittee,
good morning, and thank you very much for the opportunity to
present the results of the report that we are in the process of
doing.
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\1\ The prepared statement of Mr. Giuliani appears in the Appendix
on page 136.
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The availability of safe, effective, and reasonably priced
medications for all Americans is without doubt, as you have all
noted, a very important and very crucial issue for us.
Individuals and even State and local governments have sought
many different alternatives to see if they can find access to
medicines for everyone at reasonable cost, and this is
something that has to be pursued, and I commend you, the
Members of the Senate and the House, who are trying to do that
and to accomplish that.
But pricing, which is the principal driver and motivation
for this, although extremely important, can overshadow the
dangers that are created or could be created and actually exist
now for the integrity of our medicine supply in the United
States. So whatever solution we find has to be one that does
not pollute the supply of drugs in the United States, or
further pollute it, because there is already a pretty serious
issue.
Under the current system, from what we have seen so far,
there are already significant risks given the importation that
takes place with regard to the dangers that are created for
Americans, and based on what we have learned so far, there are
serious concerns about the present quality of the medicines
that people are buying and using. The FDA has warned repeatedly
that if people continue to order prescriptions over the
Internet or from foreign sources, it will create the danger not
only for them but for the entire drug supply in this country
that it will be polluted and not properly regulated.
In this regard, my firm, Giuliani Partners, has been
retained by the Pharmaceutical Research and Manufacturers of
America to conduct a study, of which we are about one-third
completed, and we presented our preliminary views to you in a
report which I hope you all have and have a chance to look at,
and also to the Department of Health and Human Services' Task
Force on Drug Importation which has been charged with the
responsibility of determining how safe is the present system
and what kinds of safeguards would be necessary if there were
to be any expansion of the current system.
Let me very briefly state some of the things that we found
and some of our preliminary observations--and I emphasize they
are preliminary because we are about one-third of the way
through the process of investigating this.
It is evident that the existing pharmaceutical system right
now, as it presently exists, before you consider any further
expansion of it, is open to significant exploitation for
counterfeit medication and diluted, adulterated drugs. The
limitations on the system that we presently have are
significant.
The U.S. Surgeon General and the Health and Human Services
Task Force are considering all of these issues, and the task
force really has to complete its analysis before we have a
basis on which we can figure out what to do about the present
system realistically to make it safe, as safe as the American
people deserve, which is a lot safer than it is right now, and
then, what would be needed to expand that system and the
safeguards that would have to be put in place.
It really is important--and I commend the Chairman and the
Members of this Subcommittee for conducting this hearing--
because part of the process also has to be putting the public
on notice so that we deal with people honestly about the risks
they are taking if they use the Internet or if they go to the
alternative of seeking drugs from a foreign source. If people
make that choice, they should at least be armed with the
information that it is significantly different than, as Senator
Pryor pointed out before, buying medicines at your local
pharmacy. You are taking a risk. It may be a calculated one,
but it is only a calculated one if you are on notice and you
know the risk that you are taking.
The system has many problems. There is a lack of
standardization, a lack of oversight of wholesalers; there is
no chain of custody, no pedigree. The volume almost cannot be
described. The testimony that you just heard from GAO was very
instructive, very valuable, very important, but it talked about
68 samples, I believe. That is a minuscule percentage of what
is coming into this country. It is something like 10 million
packages a year. At the John F. Kennedy International Airport,
where Senator Coleman and I had a chance to inspect the mail
facility--which I believe is the largest or second-largest in
the country for the receipt of any parcels as well as
medications--they receive 40,000 packages a day allegedly
containing medicines--40,000 a day. Their capacity--and again,
this is one of the largest facilities in the country--allows
them to inspect at best between 400 and 600 of those packages
each day. So 99 percent are moving through totally uninspected,
no one looking at them, no one having any idea of what is in
them, and then they are able to inspect, in a fairly cursory
way because of the lack of resources, only 500 a day. And that
inspection has to be a very quick one and a very brief one.
When we visited there, which happened to be on March 17 of
this year, they described it as a ``fairly slow'' period
because there had been some delay in the obtaining of
medicines, yet the facility was overwhelmed with medicines of
all different kinds. We saw Xanax, Valium, and Vicodin. As
Senator Coleman pointed out, we saw Lupron that had been sent
in from a foreign country--I have forgotten which country now,
but not the United States, not Canada--it had been sent in from
a foreign country. Lupron is a hormone that is administered to
people with prostate cancer, and it has to be, should be,
administered by a doctor, by injection. This packaging was
adulterated. It had apparently been tampered with. There was
Lupron, and there were the facilities and the devices for
people to self-inject it, which would be extremely dangerous.
We also saw medicines that were expired--you could see it
right on the label--I believe it was antibiotics--that were
expired by 2 and 3 years, and all you had to do was examine it,
and in many cases, antibiotics that are expired by a year or 2
years or 3 years are useless.
We saw what appeared to be adulterated medicines--the
coloration appeared suspicious and strange; the packaging was
unusual--and medicines from 14 or 15 different countries,
including Pakistan, Spain, Greece, Italy, and some from Canada.
So the sheer volume that comes in--40,000 a day in one
facility, 10 million a year in the United States--makes the
ability to inspect under the present system, without any
further increase in methods of foreign importation or Internet
use--the present system is overwhelmed at this point, and it
presents a threat. It presents a significant threat to the
individual who is ordering by that method, because the
percentage chance that they are going to receive the wrong
medication or adulterated medication is significant. But it
also presents a broader threat to this country. It presents the
threat of polluting our drug supply because these medicines can
also find their way into what appear to be more legitimate
sources of medications. It offers an opportunity for organized
criminals and for drug traffickers to take advantage, and for
terrorists to take advantage.
Here we are going through a period of time in which we are
trying the best way can to deal with our borders in a more
orderly and a more secure way, consistent with being a country
that is open to people coming here, people feeling that they
can come here, and also open to doing commerce correctly. But
we are trying as best we can to secure our borders. The whole
idea of the Department of Homeland Security is to do that, have
the Customs Service and the Immigration Service work together
more effectively. And this is an area in which our borders are
right now, I think it would not be unfair to say, wide open. If
you have 1 percent or less of what is coming in inspected, the
odds are that if you are operating in Pakistan, or you are
operating in Spain, or you are operating in Greece, or you are
operating in Turkey, you can calculate that there is a much
better than 9 out of 10 chance, and maybe greater than that,
that what you are sending into this country is not going to be
inspected by anyone even if it purports to be a dangerous
medication.
So from our analysis, our summary of our findings at this
point, there is already a situation that needs further
regulation, further technology, a lot more investment of
resources so that significantly more inspection can be done at
the vital, crucial point. Things are all going to go through
mail facilities whether they are ordered by phone or by mail or
over the Internet. They are all going to end up in these mail
facilities to be distributed to different parts of the United
States in most cases. And at that crucial point, a great deal
more has to be invested in inspecting properly, inspecting with
modern technology, and creating a lot more safety for people in
the United States.
The results of our preliminary study and the work that we
are continuing to do are really no different than studies that
have been done in the last 2 or 3 years by the FDA, U.S.
Customs, and Border Protection. We have reviewed blitzes that
they have done back in the fall and early winter of 2003. In
the first one they did, 88 percent of the medicines they had a
chance to inspect--that the FDA got a chance to inspect--were
not approved by the FDA, and the drugs came from countries such
as India, Thailand, and the Philippines. In the second
examination, it was 87 percent that were coming in that were
not approved, 16 percent of those shipments coming from Mexico.
And a recent review of the Miami facility, which is very
similar to the one at JFK, showed roughly the same
percentages--no better than 1 percent being inspected, and the
ones that were inspected, the overwhelming majority being
unapproved either for technical reasons or for very serious and
dangerous reasons.
So, given that, it seems to me that the focus of the
Congress should be on how do we take the present system that we
have and make it much more effective in terms of affording
safety to anyone who is seeking to buy drugs from a foreign
source or an Internet source. And then, after we have
accomplished that, and we have accomplished that for some
appreciable period of time--2 years, 3 years--then to take a
look at how we would open things up to further foreign sources
of medicines coming into the United States, because the present
situation, without being an alarmist, is probably, even if you
understate it, very dangerous and an area in which there can
be, if there is not already, significant exploitation.
We would be happy to answer any questions about what we
have found or any suggestions about how you would accomplish
that.
Again we commend the Chairman and the Members of the
Subcommittee for looking at this, because this is a very
complex issue, and it has very big implications for individual
Americans who are seeking medicines and access to them, but for
all of us. Thank you.
Senator Coleman. Thank you very much, Mr. Giuliani. Dr.
Shepherd.
TESTIMONY OF MARVIN D. SHEPHERD, Ph.D.,\1\ DIRECTOR, CENTER FOR
PHARMACOECONOMIC STUDIES, COLLEGE OF PHARMACY, THE UNIVERSITY
OF TEXAS AT AUSTIN, AUSTIN, TEXAS
Mr. Shepherd. How are you all doing? Mr. Chairman, Members
of the Subcommittee, I want to thank you very much for the
invitation to come here today.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Shepherd with an attachment
appears in the Appendix on page 150.
---------------------------------------------------------------------------
I have been studying drug importation mainly out of Mexico
since 1994, and recently, in the last 3 years, have been
looking at it coming out of Canada. I have been pretty active
in the area and nationally, trying to figure out what is a
sound way of doing this thing on drug importation or
reimportation, and how can we best go about figuring out how to
do it.
There have been several congressional bills--and by the
way, I have a written statement, and my report is also part of
the record, on the Canadian market, but I am going to vary from
my written statement because I do not want to be redundant of
what has already been said, and I have inserted some new
things.
We have had three bills, I believe--maybe four now--that
have been introduced to make drug importation a safe practice
and to make drug importation, most importantly, a safe and
cost-effective alternative for Americans.
In addition, the legislative efforts of the Medication
Prescription Drug Improvement and Modernization Act of 2003 has
charged HHS to make a thorough examination of drug importation.
And as stated, as we stand right now in this country, I am
absolutely opposed to any type of methodology to figure out how
the drug importation is unless we change and get safety back
into the issue. It is a huge risk for the American public.
There are no doublechecks in the system. There are no
prescription drug accuracy checks from pharmacists. There are
no drug interaction checks from pharmacists. There are no drug-
disease checks from physicians or pharmacists. There is
virtually no counseling on the drug therapies coming in. You
have lost total access to health care professionals.
To Senator Collins, who mentioned the two classes of people
who are using the Internet, I will say there are three classes
of people. You have the drug abusers; you have the people
shopping for price; and you have the people who have the money,
but they do not want to see a physician, and they want simple
access. They want access because I can get anything I want
without a prescription, and they can go out and buy whatever
they want. I have seen that in Mexico--because in Mexico, they
do not require prescriptions unless it is a controlled
substance--so you see thousands of people cross that border
every day, bringing controlled substances back, but they also
bring back all kinds of other medications. It is straight
access. Plus it is price there. It is cheaper in Mexico than it
is in Canada, a lot cheaper. But it is both issues. So you have
three types of people going down there to get pharmaceuticals.
The potential problems are very serious for those who
obtain prescription drugs via the Internet--very serious, as
already pointed out--and I am not so sure on the Canadian
market, as some people have already purported in this room.
Right now, we have one Canadian Internet site forwarding
prescriptions to England. They are being filled there, and
Americans are getting their prescriptions out of England and
not out of Canada.
I am also aware that a Scrip article reported that one
Canadian Internet pharmacy provider is shipping pharmaceuticals
which are made in Mexico to U.S. residents. The article goes on
to say that the products of Mexico coming in through Canada as
a drug diverter have not been approved by Health Canada and
have not been approved by FDA.
Furthermore, my research--and in this report, I point out
to you that in 2003, Canada imported pharmaceuticals from over
80 different countries. Now, Canada has good manufacturing
agreements with 18 different countries, mainly Western Europe,
and you would expect Canada to import from Ireland, Scotland,
France and Germany. You would expect that because they have
mutual recognition agreements. But I did not expect to find
Canada importing drugs from Ecuador, Chile, Brazil, and all the
other countries that make up the 80.
From 2002 to 2003, Canadian imports from India increased by
109 percent, or have doubled; Singapore, they are up 72
percent; Mexico, they are up 50 percent; and Italy, they are up
283 percent.
Even U.S. pharmaceutical exports to Canada have increased.
From 1999 to 2003, our exports to Canada have gone up $1
billion. I think that is a significant amount of drugs going
into Canada. But what is interesting is that our portion of the
total imports that Canada gets is shrinking. In the year 2000,
U.S. drugs comprised 55 percent of all Canadian imports for
drugs. In the year 2003, it is down to 43 percent of all
imports to Canada. So the Canadian market is decreasing for
U.S. drugs in the source chain, and other countries are taking
hold of that source of pharmaceuticals.
I understand the plight of individuals having a 91-year-old
mother-in-law or an 80-year-old father or mother struggling
with prescription drug prices. I understand that completely.
However, I am not too sure that the anticipated savings
from importation will justify all the procedures that goes
along with importation to make it safe. I am not convinced of
that. And some one has to do some studies--either GAO or the
FDA has got to look at this very seriously and ask what would
it take to import drugs and how cost-effective that would be.
There are 250,000 drugs manufacturers worldwide. You have
1,400 just in Bombay. You have 6,500 in China. To bring all
those products in and inspect from what country they are coming
from and make sure they are safe is a tremendous task. You have
got to do some modeling, hire some people to do some kind of
statistical modeling, to figure out what would be the cost
impact. If we are only talking about a 30 percent savings, I
have a feeling that the intermediaries in the process will take
it all away, and the consumer will have nothing in the end.
That is not what we want. We want to get prescription prices
lower. We do not want the wholesalers and the intermediaries to
take off the cotton, and we are left with the stem at the end.
That is not fair to the American public. But before we embark
on that, we need to seriously look at that and go after it in
some kind of modeling.
One potential negative consequence of the program that
permits pharmacies and wholesalers to import pharmaceuticals is
that it may develop a two-tier pricing system in the United
States. I am speaking now as a pharmacist--a two-tier system
where you have some pharmaceuticals imported in a store, and
you have some pharmaceuticals that are U.S.-made. That has me
scared, because a lot of third-party pay plans, including
Medicaid reimbursements programs or whatever it is, will
gradually shift to the imported product because it is going to
be less. I do not know how a pharmacist is going to deal with
these two-tier programs if you have a differential in the price
of U.S.-made products and imported products in a store. I do
not think that has been mentioned. I raised it with the HHS
Task Force on Drug Importation that it needs to be looked at
seriously.
The last point I want to raise is that it will definitely
hurt the generic drug industry. I cannot see the generic drug
industry developing new drugs when the imported drug is
probably 20 or 30 percent below the brand name drug. I am not
so sure they will invest the money for that generic drug
industry product when it comes down to that end. I do not know
the answer to that, but it just raises that question--how can
you foster the generic drug industry and at the same time bring
imported drugs that are cheaper than the generics?
I want to close in the last 38 seconds and say I really
believe that more data are needed. The likely impact of
importation and the cost of drugs needs to be looked at in a
really sophisticated manner. I am opposed to proposals that
would allow importation of prescription drugs that leave the
safety issue out.
I really urge you and others to let the professionals at
the FDA do what you charged them to do in the Medicare bill--
let them look at the issue thoroughly, run the numbers, answer
some questions, and come up with a proposal for everybody to
look at.
I thank you very much.
Senator Coleman. Thank you, Dr. Shepherd.
Dr. Shepherd, let me start with you. You mentioned Health
Canada. Does Health Canada have any regulatory authority or
power over Internet drug sites?
Mr. Shepherd. Each province has regulatory authority over
each Internet site, and you will see differences from Ontario
all the way to Manitoba. Ontario is pretty strict with them and
basically does not allow them, versus Manitoba, where it is a
free-for-all with 60 to 80 Internet sites out there.
What is really important is that the Canadian rules and
regulations do not require approval by Health Canada for drugs
exported out of Canada. That is the clincher. If we can get
Canada to say we will approve those drugs that are exported,
that would be all right.
Coming from the Detroit area originally, I had no problem
going across to Windsor to buy a drug at a store, but I do have
some serious concerns with going to the Internet in Canada to
buy a drug.
Senator Coleman. And just on that last point, these
Canadian providers are not your neighborhood Canadian pharmacy.
In fact, would it be fair to say that for many of them, their
sole business is exporting to the United States rather than
meeting any Canadian needs?
Mr. Shepherd. Yes. There are a half a dozen where that is
their main business.
Senator Coleman. And you did not testify, but it is in your
written report, that clearly, the Canadian market does not have
the capacity in itself to supply American drug needs, so is the
conclusion from that that they will have to turn to other
countries and in effect be a flow-through to satisfy U.S.
market needs?
Mr. Shepherd. Yes. Can I explain that in just 2 minutes?
Senator Coleman. How about 30 seconds?
Mr. Shepherd. Thirty seconds, OK.
The Canadian market right now as it stands would only take
care of U.S. needs for 38 days. That means that if the United
States wanted to buy all its drugs out of Canada, it would last
38 days, and that would be the total annual consumption by
Canadians. They only have 300 million prescriptions. We
dispense 3 billion. They could not handle it.
So now, with a shortage of supply of drugs coming into
Canada--and you get conflicting reports on that--they are going
to other countries and other sources to buy their product, and
the numbers seem to point that out. They have gone to other
sources for their product.
Senator Coleman. Mr. Giuliani, I want to get right to the
issue of terrorism, and you touched upon it. Just an
observation--we see one cow infected with BSE, mad cow disease,
from Canada, and we literally shut off the importation of any
Canadian beef. We have in this hearing seen drugs coming in
from other countries, foreign countries, but nothing to prevent
a pass-through, yet we are talking about expanding the
importation of drugs, and some of us have been very emphatic
about the safety issues.
I will say it publicly--is there anything to stop a
terrorist from setting up an Internet site, giving it a red,
white, and blue label, providing prices that are so low that
consumers concerned about price would think they were getting
the best buy ever, and somehow adulterating those medicines
with some substance that could have a disastrous impact on the
lives of citizens in this country--is there anything today to
prevent that?
Mr. Giuliani. Well, I hate to answer that question,
because----
Senator Coleman. I hate to ask that question.
Mr. Giuliani [continuing]. You do not want to suggest
anything to anyone--but the reality is that I do not think we
are suggesting anything that they could not figure out
themselves.
It is pretty much right now a wide-open system with, as I
said, 10 million packages a year coming in. The ability to
inspect--I am not even sure what the overall percentage is; the
percentage at Kennedy is about 1 percent, and I suspect the
percentage nationwide is even less than that. So for 99 percent
or more of what is coming in, you can rely on the fact that it
is not going to be inspected.
There is no really good field test. My experience in my
early life before I was mayor was as a U.S. Attorney, an
assistant U.S. Attorney and Justice Department official, where
we often dealt with the problem of heroin, cocaine, and the
traditional narcotics. And at least for those, there is a field
test so that if you suspect that there is heroin or cocaine,
you can open the package, and you have a fairly reliable field
test that will tell you whether it is or it is not.
For most of these, as GAO demonstrated, there is no really
good field test. It requires extensive and very expensive
analysis by the pharmaceutical company to determine whether or
not this is in fact the medication that is ordered, whether it
is safe, whether it is the right dosage. So this is a system
that is open for exploitation.
Global Options, Incorporated did a study that is now at
least a year old--it may be 2 years old--in which they looked
specifically at the potential threats to America in its medical
supply and concluded that the threats were very significant and
demonstrated what they think they are. I really recommend that.
They actually looked at three possibilities--the ability of
terrorists, of organized criminals, and of drug traffickers to
take advantage of this system.
And then there is one general concept that is enormously
important. If the borders of this country are porous in any
way, that is the area in which people can take advantage. If
you are going to secure our borders, you have to secure them.
We have to be more secure in determining the people who are
coming into this country, but if we are more secure in
determining the people who are coming into this country but not
the things that are coming in, we have not accomplished
anything, because then, people do not have to come in--all they
have to do is send things in. And in an era in which we are
trying to figure out a better way to regulate our borders, it
would be counterproductive--we would be moving in the opposite
direction--if we were to say, well, let us open our borders
even more to foreign importation of medicines, which is a way,
frankly, as you are asking me, Senator, of attacking us.
Senator Coleman. Thank you. I am going to turn to Senator
Lautenberg, since he has been here since the beginning. Senator
Lautenberg.
Senator Lautenberg. Thanks very much, Mr. Chairman.
Mayor, welcome. We have had a lot of contact over the
years, and I am glad to see you at work on this project. Your
concern about the lives and well-being of our citizens is well-
known, and that is also something that is considered here as
you pursue this research.
I have enormous respect for the pharmaceutical industry. As
a matter of fact, at my stage in life, rather than turn to the
sports pages, I turn to the Federal pages and see what is
coming along and urge them to hurry up. So we want this
research to go on, and we want to make sure that the products
that our people buy are safe.
But the cost factor is an enormous difficulty for lots and
lots of people. There are people, as I said earlier, who would
do without food at times so they can continue to have the drugs
they need, whether it is to get rid of the tremors or preserve
memory or have their hearts continue to function as they
should--all of these things. It is a desperate search for
relief. And, unless we understand that, we are kind of fooling
ourselves. That is an overriding consideration.
So, why do you think, Mayor, given all the risks that you
have highlighted, people continue to buy their drugs over the
Internet or from unreliable sources as they seem to be?
Mr. Giuliani. I think, Senator, you have hit on one of the
reasons. Obviously, it is the pressure of lack of access and
high cost. There is no question that your efforts, those of
Senator Coleman, all of you on this Subcommittee and in the
Congress, to try to find ways to reduce the cost will also ease
some of this pressure. That is a very important component of
this.
But you said something in your opening statement that
occurred to me. You said that we do a lot in this country to
create access to food for people who are hungry and starving;
there are all kinds of programs that we have to feed people--I
am very aware of them in New York City, but they are all over
the country. But when we do that, we do not look for programs
that are going to make the supply of food more dangerous. We do
not look for programs that will pollute the food supply in this
country. And the pressure of accomplishing this cannot lead to
creating even more danger for the American people. That is why
taking a realistic look at the way this system operates now and
what can be done--some of the approaches--and I think it is for
absolutely the right motivation, which is how do we lower the
cost of medicines--some of the approaches are very unrealistic
about the dangers, because there is such a desire to produce
the result of low cost.
Dr. Shepherd raised the issue whether we will actually even
produce that result, but that is the motivation. And you just
cannot wave a wand and create the safety. It is going to need
significantly more resources. It is going to need a period of
time in which we can take the system that we presently have and
make it work better before you can figure out how to expand it.
And from Canada, the experience we had, which I neglected
to mention earlier in my statement--which I would have liked to
ask GAO, but I imagine you can ask them this--we found that the
Internet pharmacies in Canada required a waiver signed by an
American. I find that extraordinary.
Senator Lautenberg. I would like to ask Dr. Shepherd, how
is your research being funded?
Mr. Shepherd. By me.
Senator Lautenberg. By you, personally?
Mr. Shepherd. Personally, yes with the help of the
University of Texas. My group of graduate studies--I have 38
graduate students, and I chose four of them, and we did this
study in 3 months.
Senator Lautenberg. You indicated that you were concerned
about the supply of drugs that would be left in Canada if we
just opened up this importation process of ours. We could ship
more, we could export more. You talked about the exports
growing, and then you talked about the percentage of
reimportation shrinking. I do not know what that signifies
except that maybe there is arithmetic ratio here that we are
not looking at. If the export supply is growing, then perhaps
it is faster than the reimportation factor.
So I do not think that is really the key issue here. I
would ask you this. If we could bolster--you are concerned
about safety, and you have a professional background that
indicates that you have been in the field--if we could deal
with the safety factor, would you say open the doors to
reimportation?
Mr. Shepherd. Yes. I would say you could probably do it if
you could assure the quality of the product and assure that
people understand how to take the product.
There are two safety issues. You have the commodity, the
product, and then you have the safety issue--do people
understand how to use the product properly. You have to
incorporate both of them together.
Senator Lautenberg. I will close, Mr. Chairman, with an
observation and a question. That is, with the flow of illegal
drugs into this country that kills people, that disrupts our
society totally, and we have devoted enormous amounts of
resources to stopping that flow, but we cannot do it. And here,
with this, we are not spending anywhere near enough time
looking at these products to really determine what the efficacy
of the product is. I thank you, Mr. Chairman.
Senator Coleman. Thank you, Senator Lautenberg. Senator
Pryor.
Senator Pryor. Thank you, Mr. Chairman.
Mr. Giuliani, let me say at the outset that sometimes the
industry may perceive that here in Congress, we are just
beating up on the industry all the time, but certainly I
recognize--and Senator Lautenberg just mentioned as well--the
advances that the pharmaceutical industry has made, and some of
the things they have done are just absolutely amazing. But I
assume you would agree with me that some of the prices for
pharmaceutical products in this country are too high?
Mr. Giuliani. There is no question about that, and that is
one of the driving forces in what is going on here.
Senator Pryor. Yes. And I am glad to know that--I am sorry,
I did not quite catch who funded your research----
Mr. Giuliani. PhRMA.
Senator Pryor. I am glad to know that PhRMA is doing this,
because it indicates to me that they are starting to get
serious about this issue. Can you tell the Subcommittee how
much PhRMA is investing in your study?
Mr. Giuliani. I do not know how much they are investing in
my study. The cost of it is insignificant in comparison to the
amount of money they are investing in trying to figure out a
safe way of doing this and the amount they invest in research.
Some companies put $4 and $5 billion into that.
Senator Pryor. One thing I would encourage you to do as a
representative of the pharmaceutical industry is to just
encourage the industry to get very proactive on this issue. It
is something that is of very grave concern to me and I know to
the Subcommittee and to the country. We need to try to get a
handle on this.
One thing you mentioned in your testimony is you talked
about inspections--repeatedly, you talked about inspections. Is
it your view that government inspections are essential to
protect Americans, or can we follow more of a market model
where the industry kind of regulates itself--in other words,
can the industry inspect itself--and put market conditions in
there that give them the incentive to do that.
Mr. Giuliani. I think you need both, Senator. I do not
think you could ever have a system where there would not be
some degree of inspections. Think of it as how do you create
safety with regard to the cargo coming into the United States,
where we have great concerns about packages or shipments coming
in. There has to be a combination of market conditions and some
degree of analysis and intelligence, but then you also have to
have a certain basic number of inspections so you have a fail-
safe point.
And when you are dealing with dangerous medications--one
way that we can get to a better stage is to develop better
technology and better pedigrees so that you know where it is
coming from, who the manufacturer is, and all of that can be
done--the problem is that it costs enormous amounts of money,
and we are not doing it effectively--I think we have to be
honest about it--we are not doing it effectively right now.
So it seems to me the best approach is how do we improve
the current system, how do we get better control over it, and
then, once we have done that, how do we open it up even more,
rather than just opening it up and creating a totally
unrealistic situation.
Senator Pryor. We talked a few minutes ago about this
concept of a seal of approval--Chairman Coleman was the first
to mention it--and someone said that the National Pharmacy
Association----
Mr. Shepherd. The National Association of Boards of
Pharmacy.
Senator Pryor. [continuing] Has something in place right
now that is voluntary. Are they the proper group to do this, or
should we somehow broaden that and really force more
participation somehow?
Mr. Shepherd. It is called the VIPP Program, the Verify
Internet Pharmacy Provider, and it is a very strict inspection
and certification program.
Senator Pryor. Is that why a lot of firms will not comply
and will not go through the process?
Mr. Shepherd. I believe that last week, only 14 pharmacies
had VIPP certifications. I was talking to Carmen Cattezone--
they have offered the VIPP certification to Canadian Internet
pharmacy providers, but none of them has taken them up on the
offer.
Senator Pryor. Do you know how long that offer has been
outstanding?
Mr. Shepherd. It has been out there for at least 3 months.
Senator Pryor. Let me ask you, Dr. Shepherd, while we are
talking about it--a few moments ago, in your testimony, I got
the impression that if it were up to you today, just under the
current conditions which exist today, you would ban all on-line
pharmacies.
Mr. Shepherd. Right. As of today, I would. Without any
regulation and what is going on right now, I would stop it from
coming in.
Senator Pryor. Because the safety protection is not there?
Mr. Shepherd. Safety.
Senator Pryor. You also talked about importation. But here
in the Congress oftentimes we talk about reimportation, and we
use the word ``reimportation,'' the way we usually mean it is
drugs that are made in this country or made in FDA-approved
facilities that may go to Canada or another country and be
reimported back in.
Is that one of the safeguards that you would like to see if
you were able to set up your own system here that we should
only be able to reimport, or import, however you want to look
at it, drugs that are made in FDA-approved facilities?
Mr. Shepherd. That is one approach that you could use. I
have problems with the reimportation unless I have the pedigree
paperwork that the mayor talked about, figuring out where that
drug has been, how many times it has been sold, and how it has
been stored, because it may have passed through six different
countries before it comes back in.
Senator Pryor. In other words, in the prosecutor's terms,
you need a chain of custody.
Mr. Shepherd. You need a chain of custody.
Senator Pryor. You need to know where it comes from. One
last clarification--you mentioned that you pay for your
research out of your pocket?
Mr. Shepherd. My group does, yes.
Senator Pryor. What do you mean, your ``group''? Tell us
about that.
Mr. Shepherd. My group--the Center for Pharmacoeconomic
Studies is comprised of 12 faculty members and 32 some-odd
graduate students.
Senator Pryor. So this is part of the University of Texas.
Mr. Shepherd. Part of the University of Texas, right.
Senator Pryor. Do you know where that funding comes from?
Mr. Shepherd. The Center's funding comes from the
University of Texas primarily, and then it also comes from
grants or contracts that we get from pharmaceutical firms,
foundations, grants, and contracts from State Government. The
State of Texas provides us a lot of money, the Health
Department.
Senator Pryor. Thank you.
Senator Coleman. Thank you, Senator Pryor. Senator Carper.
Senator Carper. Gentlemen, welcome. Mayor, it is good to
see you. Dr. Shepherd, thank you for your testimony.
You know how this place works--we have multiple hearings
going on at the same time, and I have been off at another one
of those, and I apologize for missing your testimony.
Let me ask both of you, if you were in our shoes, how would
you approach this issue?
Mr. Giuliani. I would approach it from the point of view of
first addressing the current needs that the FDA and some of the
other agencies have for more resources, more of an ability to
inspect, create better pedigrees, work on developing
technology. I would look at the current situation that exists
and say it is a dangerous situation. Ninety nine percent of the
medicines that are coming into this country, no one is
inspecting, and no one has any idea what is in them. Any time
anyone has had a chance to look--FDA, Customs, anyone else--at
least FDA, when they do these ``blitz'' analyses, and our own
analyses--shows that somewhere between 70 and 90 percent of
those medicines are unapproved, some for serious reasons, like
they are expired or they are the wrong medications, some for
technical reasons, but for whatever reason, they are
unapproved.
So I would say let us see if you can create legislation,
give FDA and the other agencies the help that they need to make
that a better system, a safer system, and then take a look at
it over a year or two or three and see if it has actually
accomplished that--have some of those percentages gone down; is
it safer.
I think it is unrealistic to think you will ever have a
perfectly safe system, but it has to be a lot better than this.
And once that is accomplished, then take a look at are there
ways that you can expand importation--but now that you have a
better system in place. That is the way in which I would do it.
Senator Carper. Dr. Shepherd.
Mr. Shepherd. You could work with qualified pharmacies,
Internet providers; inspect them, come up with a list of
products, drugs, that could be reimported or imported, and work
with a small pilot project to see how it flies, and make sure
that provider provides it.
You could do it a couple of ways. You could do it not only
for personal importation, but you could also do it with a U.S.
wholesaler. That U.S. wholesaler works with another wholesaler
in another country, gets the U.S.-approved products, comes in
and distributes to pharmacies. But they would have to be FDA-
approved in quality products.
That is one approach. And I think a pilot project on that
would probably be worth looking at to be sure the standards are
upheld.
Senator Carper. Thank you.
Do you have any idea how the purchase of drugs from Canada
via the Internet compares with, say, Internet purchasing from
countries in the EU?
Mr. Shepherd. No.
Mr. Giuliani. We could find out for you, Senator. We could
take a look and find out.
The question that I raised before, which I really would
suggesting finding out from GAO--because I am sure this is part
of their material, but I have not had a chance to look at the
report clearly enough--is the pharmacies in Canada that we have
had a chance to look at so far all require waivers. So if you
want to buy medicines from them, you have to sign a waiver that
if they send you the wrong medication, you have no resources.
To me, that is extraordinary.
If I went into my pharmacy to buy the medicine that my
doctor prescribed for me, and my pharmacist handed me a
document that I had to sign in which I waived any recourse if
he gave me dangerous medicine, or he gave my children dangerous
medicine, I would not deal with that pharmacist.
So I wonder if the pharmacies that they looked at in Canada
have those disclaimers or waivers. And part of this process
would have to be that you really should only deal with
pharmacies that do not require that, pharmacies that are
willing to stand behind the product that they are selling you--
if you are ordering Lipitor that it is actually Lipitor,
whatever it is. This idea of having recourse is part of the way
in which we assure that pharmacists are acting legitimately.
Senator Carper. Why do you suppose people are willing to
take that extraordinary step of signing that kind of waiver?
Mr. Giuliani. For all the reasons that Dr. Shepherd
mentioned, some of them just purely because they are desperate,
because medicines are too expensive, and they are seeking--even
though it may not be less expensive--they are hoping that they
will find a source that is less expensive; some of them because
they are drug abusers; some of them because they may actually
be drug dealers, and this is an easy method of getting
significant quantities of medicines that they can then resell
on the black market. I think that would be particularly true
with some of the medicines that are painkillers.
Senator Carper. Thanks to both of you.
Senator Coleman. There is so much more that we could
explore here, but we do have a very important third panel that
we do want to hear from. We have not even touched the issue of
wholesale and that system, which you touch on, Mayor, in your
report and some of the challenges that we face there and the
opportunities for fraud that has been unearthed in some of the
reports that have been done.
So I think we have just touched the surface here, but as I
said, we do have a third panel that I want to get to, so I want
to thank you, Mayor, and thank you, Dr. Shepherd, for your very
important testimony.
Mr. Giuliani. Thank you, Mr. Chairman and Members of the
Subcommittee.
Mr. Shepherd. Thank you.
Senator Coleman. I would now like to welcome our final
panel for today's important hearing--Elizabeth Carr, whose
husband died from taking illegal prescription drugs he
purchased over the Internet, and Francine Haight, whose son
died as a result of taking illegal prescription drugs he
purchased over the Internet.
Ms. Carr and Ms. Haight, I want to thank you for your
courage in coming forward to testify about what I know are very
difficult circumstances to talk about in public. I offer my
personal condolences for your loss.
As I mentioned in my opening statement this morning, we are
here to address problems that are facing American consumers,
the individuals who have been most directly, and unfortunately,
affected by this growing phenomenon. So again, I appreciate
your willingness to tell your personal stories.
Before we begin, pursuant to Rule 6, in this Subcommittee,
we do require the witnesses to be sworn.
I would ask you to please stand and raise your right hand.
Do you swear that the testimony you are about to give before
this Subcommittee is the truth, the whole truth, and nothing
but the truth, so help you, God?
Ms. Haight. I do.
Ms. Carr. Yes, sir.
Senator Coleman. Thank you.
As you have seen, we are using a timing system, so when the
yellow light comes on, it is time to conclude your testimony.
If you have written statements, they will be entered into the
record in their entirety.
Ms. Carr, we will have you go first and then proceed to Ms.
Haight, and after that, we will go to questions. Ms. Carr, you
may proceed.
TESTIMONY OF ELIZABETH CARR,\1\ SACRAMENTO, CALIFORNIA
Ms. Carr. Thank you. Good morning, Chairman Coleman and
Subcommittee members. Thank you for the opportunity to speak
today.
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\1\ The prepared statement of Ms. Carr appears in the Appendix on
page 172.
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My name is Elizabeth Carr, and on April 10, 2003, I lost my
husband to an overdose of Darvon, a controlled substance. My
husband Jim purchased this drug and others over the Internet
from rogue pharmacies located in India, South Africa, Thailand,
Spain, and other foreign countries.
Jim and I were married in 1996. He moved from Los Angeles
to accept a job in Sacramento, California. This was a
significant climate change for him, as he was used to the mild
temperatures of Los Angeles. He was a former tri-athlete and a
marathon runner, and he loved to mountain bike. Through these
activities, he had dislocated a hip and had to have operations
on both knees.
By 2002, it was painful for him to even take a brisk walk,
and he said it was always worse during the winter. In January
2003, Jim told me he was going to purchase codeine over the
Internet for his pain. I did not think much about it at the
time, because when I was growing up, codeine was in cough
syrup. He never told me how much he was taking, and because he
was working from home, I never saw the packages arriving.
However, by the end of March, I grew concerned about a change
in his demeanor, and I confronted him about it and asked him to
stop, which he agreed to do.
On the day before he died, he was behaving very disoriented
when I got home from work. When I quizzed him about it, he
explained that he had turned to Darvon to wean himself off the
codeine. This was the first time that I knew he had taken the
Darvon. He went to sleep that night, and he never woke up.
The autopsy showed that Jim had eight times the recommended
dosage of Darvon in his system. After he died, I received five
packages in the mail that Jim had purchased in the weeks before
he died. By looking at his credit card statements and the dates
posted on the packages and when the packages arrived, I could
tell that the time from order to receipt from these pharmacies
took several weeks. In fact, all packages were from overseas,
and none had a pharmacy label. Some had instructions, but most
of the instructions were not in English. One of the packages
even had a little green tag attached on the outside that looked
to me like it said ``Sweets.''
As I continued to go through his things, I found all kinds
of empty pill containers. I also looked at his computer
activities and discovered that he had done research into the
different drugs and how to get them. Some Websites required him
to fill out a short questionnaire before he could get the
medication, while others did not require anything. All the
overseas pharmacies required payment in credit card form and
were shipped via U.S. mail.
After his death, I worked with the California Medical Board
to try to hold someone accountable for the delivery of these
substances to my husband. However, there was nothing that the
California Medical Board could do because the only documents I
could provide them did not implicate doctors that were licensed
in California. They told me something needed to be done at the
Federal level.
So that is why I am here today, Senator Coleman. I am here
to tell you what is happening to real people--not just numbers
or statistics on a piece of paper. This problem affects
everyone in one way or another in our society, and something
needs to be done to stop these companies from making money off
of people's trust, their need, or their lack of awareness.
Thank you.
Senator Coleman. Thank you, Ms. Carr. Ms. Haight.
TESTIMONY OF FRANCINE HAHN HAIGHT,\1\ SACRAMENTO, CALIFORNIA
Ms. Haight. Good morning. My name is Francine Hahn Haight.
My daughter Natalie and my son Jeremy are present and sitting
behind me. I am very grateful for this opportunity to speak
before this Subcommittee and share what has happened to our
family.
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\1\ The prepared statement of Ms. Haight appears in the Appendix on
page 174.
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I am the mother of three beautiful children. I am extremely
sorry to say that one of them died. I am here to tell you about
my son, Ryan Thomas Haight.
Ryan was born on December 28, 1982 and died on February 12,
2001. Ryan died of an overdose of narcotics he had easily
purchased on the Internet. A medical doctor, Dr. Robert Ogle,
that he never saw, prescribed them to him over the Internet. An
Internet pharmacy, Clayton Fuchs of Mainstreet Pharmacy, mailed
them to our home. He was only 17 when he purchased the
narcotics, and he was only 18 when he died.
Ryan was an incredible boy. From the time he was little, I
always believed that he would make a difference in our world.
He was very intelligent and excelled in school. He loved math
and science. He was always at the top of his class, was a Gate
student in the elementary years, and then went on to take
honors classes. He was an A student, maintaining a 4.0 or above
during his years in high school. He was looking forward to
going to college. He loved his family, and we did many things
together.
Ryan loved to travel. He loved to hike. He loved the
National Parks. He always looked forward to the holidays and
gatherings of the family.
He was athletic. In elementary school, he played little
league baseball, starting with T-ball, and ended up being a top
player in the majors and making the all-star team. He also
played open junior tennis tournaments, and went on to play
varsity tennis for 3 years in high school. Had he not died in
his senior year, he would have been a 4-year varsity letterman
in tennis.
He loved to snow ski, snowboard, water ski, kneeboard, and
attempted all sports with great enthusiasm. He loved to play
billiards, go bowling, and play ping pong. He was competitive
and competed on a swim team when he was young and loved to play
Nintendo and other video games.
Ryan loved to use the computer. He used the computer to
play games against his friends, to compete in fantasy baseball,
where you pick your teams, and he loved to chat with his
friends online. He loved to trade baseball cards on E-Bay.
Ryan was taking a computer graphics class in high school.
He was considering a possible career designing software or
doing something with computers. But all of his hopes and dreams
died when he discovered that he could buy drugs on the
Internet.
He was curious about the party scene, went to Rave parties
with friends, and started to experiment with drugs. He was
encouraged to experiment with drugs from an Internet chat room.
Someone in this chat room told him where you could buy drugs
and how to buy them on the Internet. He found that you could
buy powerful narcotics on the Internet very easily, right out
of his own house. It was like buying candy in a grocery store.
On February 11, 2001, Ryan had worked a full day at a
retail store. He came home at around 8 p.m. and said he was
hungry. I made him his favorite chicken soup in the crockpot.
He told me his back was hurting because he had been moving
plants at the nursery.
It was cold and raining outside. He asked if he could use
my spa. He used my bath at around 10 p.m. for about 30 minutes,
got out, and we chatted. We talked for a few minutes, and then
he said he wanted to relax in his sister's room and play video
games. His sister Natalie was away at college. He missed her,
and he felt comfortable using her room for the television and
video games.
About an hour later, just after midnight, I went to say
goodnight to him in his room. He was just getting into bed and
said he was going to listen to some music. Ryan loved all kinds
of music--rap, techno. We share a common interest in our love
for classic rock. I loved it that he loved listening to the
Eagles and the Beatles with me. I told him I loved him, as I do
every night, hugged him, and he said, ``I love you, too, Mom.''
The next morning was a holiday, President's Day, so it was
not unusual for Ryan to sleep in. I had 12 women showing up for
dinner that night, so I had to go out and shop. My housekeeper
was there, and I told her to call me if there was anything she
needed, and that Ryan would be sleeping in.
I got home about 3 o'clock that day and noticed Ryan's car
still in the driveway. It had not moved, and I immediately felt
something was wrong. I ran into his room and found that Ryan
was not breathing.
I could not believe what I saw. I knew he was dead. I
called 911 and tried to do CPR. I screamed and I cried, and I
screamed and I cried, and I prayed for him to come back to
life. I remember a paramedic pulling me off of him and looking
into my eyes and saying, ``Oh, my God, I am so sorry. There is
nothing we can do.''
I thought how, how, how, could this happen? What happened?
The next thing I know, a sheriff is showing me a bottle, a
bottle of hydrocodone, Vicodin. On the bottle, it says
``Mainstreet Pharmacy.'' He also shows me a bottle of morphine.
I thought, no way. These are controlled prescription drugs. He
said he found the drugs after searching his room. These are
drugs under lock and key in hospitals. How did he get them--
how?
We parents often worry about our children. When they are
little, we worry they will fall and get hurt. But as they
become teenagers, we worry even more. We worry that they will
drink alcohol and drive and get into a car accident. We worry
that they will smoke cigarettes and marijuana. We worry that
they will try illegal street drugs such as cocaine, LSD,
heroin, and others. We worry about porn and strangers that
might hurt them on the Internet. But never did I worry about
buying prescription drugs on the Internet.
After Ryan died, a friend of Ryan's called and told us that
he got drugs off the Internet. Never did I think you could
easily get prescription drugs on the Internet. I was in shock.
Being an RN, I always thought that controlled substances were
under lock and key.
Ryan was encouraged to obtain these powerful narcotics that
required nothing but filling out a simple questionnaire on the
Internet.
That week, Ryan's dad gave Ryan's computer to the DEA, and
the investigation started. I have assisted in helping with the
prosecution of these Internet drug dealers. They are just as
bad if not worse than the drug dealers on the street.
Since then, from the evidence they got from the Internet,
Clayton Fuchs and Dr. Robert Ogle were found guilty and pleaded
guilty of selling drugs illegally on the Internet. They said
they did it just for the money.
An autopsy report showed that Ryan died from a drug
overdose of hydrocodone, Vicodin, which was prescribed by Dr.
Ogle and sent to him from Mainstreet Pharmacy. Why did they
sell these drugs to my son? They both said they did it for the
money.
Dr. Ogle had been to prison twice. Once, he served 3 years
in a Federal penitentiary for illegally prescribing Quaaludes,
a hypnotic sedative. Another time, for theft. But he still got
his medical license back. He should have never gotten his
medical license back.
I think Ryan, as most kids would, thought that since a
doctor was prescribing the drug, it is a legal drug obtained
with a prescription, then it must be safe. The drug was
delivered to our home with no instructions, no safety
precautions, no adverse reactions attached. Ryan received these
drugs without ever seeing the doctor, and never had any follow-
up.
The pharmacy delivered these controlled substances with no
instructions and no questions asked. These money-hungry drug
pushers of doctors and pharmacies have got to be stopped. They
are making millions of dollars and are only concerned about the
money. They do not care about the person ordering them.
There are over 500 rogue pharmacies on the Internet as I
speak. Tighter regulations on our Internet need to be enforced
with high penalties. I continue to receive emails from these
pharmacies on a daily basis.
What our public do not know is that just because it says
``United States pharmacy'' does not mean it is coming from the
United States. In fact, when you click on the site, it goes to
other countries. They can buy from Canadian pharmacies and save
money. But what they do not know is the risks that they are
taking. Drugs are being distributed daily, like candy, and it
is very dangerous.
RyansCause is an organization I have started--Reaching
Youths Abusing Narcotics. Saying no to drugs is not enough. We
are losing this war against drugs. President Bush in his State
of the Union Address a few months back mentioned that drug use
in our youth is down. He might be right about street drugs, but
he did not mention the increased usage of prescription drugs.
Prescription drug usage is up.
My hope is that with tighter restrictions on the Internet
and more public awareness, we can save lives. I want to get
RyansCause brochures into every high school classroom. I want
to talk and educate our youth and parents. This tragic death
could have happened to anyone. Ryan was the boy nextdoor. We
need to fight this war against drugs and save others.
With tighter regulations on the sale of prescription drugs
on the Internet, it will make our increasingly technological
world more safe.
I want to thank Senator Feinstein and Senator Coleman for
introducing legislation to improve the safety of buying
prescription drugs on the Internet. Internet pharmacies should
be required to identify their business.
Our grief continues and extends beyond the immediate
family. Ryan's grandparents, aunts and uncles, cousins and
friends feel Ryan's death very deeply. Ryan will never see
Jeremy play his clarinet, or take him out for ice cream. Ryan
will never be able to sit for long hours and talk to his sister
about what happened during his day. I will not see him graduate
from college, attend his wedding, or be a grandmother to his
children.
But we continue to water our white roses and drink our
sprite with no ice in his memory. Ryan will be forever missed
and will remain in our hearts forever.
Thank you for honoring my son Ryan by naming the important
legislation you introduced after him.
Thank you for allowing me to tell my story in front of the
Subcommittee.
Senator Coleman. Thank you, Ms. Haight and Ms. Carr. Again,
my deepest personal condolences for your loss.
As the dad of an 18-year-old who loves the computer, your
pain is more than an abstract story; it is very personal for a
lot of people. So I do want to thank you for coming forward.
And Ms. Haight, I think in a very tragic way, but Ryan will
make a difference in our world, and certainly I am committed to
that, Senator Feinstein is, and many of my colleagues. So I
hope that provides a little glow of warmth in what is a
difficult situation.
Ms. Carr, I think you have with you some of the drugs that
were received after your husband's death. Let me back up--did
he have prescriptions for Darvon to be taken through a local
pharmacy? Do you know what kind of prescriptions he had for
painkillers?
Ms. Carr. At the time, I do not think he had any. He had
not, as far as I know, been to a doctor for that. As a tri-
athlete and a mountain biker, he had had painkillers all his
life, because he was always hurting himself--but not at the
time that I know of.
Senator Coleman. Can you show us what you received?
Ms. Carr. OK. This is one of the packages that came after
he died. I could tell immediately it was not a normal U.S.
package. It has a little label on it from New Delhi, and it has
all the weird stamps with the different kind of writing on it.
Do you want me to open this?
Senator Coleman. You can take it out.
Ms. Carr. And it was kind of strange when I first opened
it. It comes in this wrapping, with scarves or something
underneath it, and then you pull it out--professionally
wrapped, you see--and it has a newspaper that is probably an
Indian newspaper, and then more of that professional look, the
cardboard, and then there is the pills.
Senator Coleman. No description of dosage or what it is?
Ms. Carr. No. This one did not even have--well, it has some
label or something on there. But as far as----
Senator Coleman. But no instruction booklets or anything
like that.
Ms. Carr. No instructions.
Senator Coleman. Did you have a chance to look at the
Websites? I think you indicate that you saw some of them.
Ms. Carr. I did, because he not only used it on his
computer, but he used it on mine, so I was able to go to a
couple of the Websites--although by the time I got around to
doing it, some of the Websites, you could not get to anymore,
and you got the screen that says they are no longer available.
But yes, I did look at some of them to see what was required to
get something through them.
Senator Coleman. And there was another package you
received, you said, or a series of some others?
Ms. Carr. Yes. This one was from Bangkok, just a small,
little package. I did not even think it was prescription drugs,
but it was one of the five packages that came. I opened it up,
and it was really scary, because it looks like that was done in
a garage somewhere--no labeling on it at all, nothing. I do not
know why anyone would even put this stuff into their body. And
it has some word on it, and I could not even quite read it,
except it looks like it has a ``D'' and maybe a ``V'', and I am
thinking maybe that was the Darvon; I do not know. But it was
very scary.
Senator Coleman. Do you know if, on the Websites that you
had a chance to look at, there was a discussion about
prescription or anything of that nature?
Ms. Carr. No. The ones that I looked at did not mention
anything about a prescription, and I am sure that--I mean, he
had done a lot of research, and he was probably looking for
places where he did not have to fill out a prescription.
Senator Coleman. And law enforcement's response in terms of
your desire to deal with this, to shut it down, to impact it in
some way--what kind of response did you get from law
enforcement?
Ms. Carr. The only law enforcement I dealt with--I talked
to the California Medical Board, and they had an investigator
who was really good with the computer stuff. I gave him my
husband's laptop, and he looked into it as much as he could. I
gave him what documents I could. He wanted to find something,
but he could only deal with doctors who were licensed in
California. That was the extent of what he could do.
Senator Coleman. They had no other jurisdiction or control
over anything.
Ms. Carr. No other jurisdiction. That is why he told me--he
said something has to be done at the Federal level.
Senator Coleman. Thank you.
Ms. Haight, how was Ryan able to pay for the Vicodin and
the morphine from this Internet pharmacy? Did you ever trace
that back?
Ms. Haight. I believe he purchased it with a money order.
Senator Coleman. Money orders. Do you know if any credit
cards were used at all?
Ms. Haight. I was told that there is a possibility that he
bought it with a credit card, but I have not seen that. I
believe it was a money order.
Senator Coleman. Did you ever talk to Dr. Ogle?
Ms. Haight. No.
Senator Coleman. Do you know whether he was subject to any
criminal proceedings or any actions after your son's death?
Ms. Haight. Yes. He is actually in prison right now as we
speak, awaiting sentencing.
Senator Coleman. What about the folks who own Mainstreet
Pharmacy--did you ever identify them?
Ms. Haight. The pharmacy has been shut down, and Clayton
Fuchs is also in prison at this time.
Senator Coleman. And Clayton Fuchs is the principal in
Mainstreet Pharmacy.
Ms. Haight. Mainstreet Pharmacy, yes.
Senator Coleman. Do you know anything about his background?
Ms. Haight. I do not know anything about his background.
Senator Coleman. You are reaching out with RyansCause. You
are trying to reach youth that way. What do you recommend we
do? If you had a list of one, two, or three things that we
could do, both in dealing with the plague of predators that
allow young people and others to buy quantities of narcotics
that have deadly impact, without any conscience, but beyond
that, are there other things that we can do to assist in your
cause and the cause that you have dedicated yourself to?
Ms. Haight. I think by passing this bill, having tighter
regulations, would definitely help, and being able to go in and
make sure that these are legitimate pharmacies, legitimate
doctors, that they have actually been seen by the doctor. I do
not think any controlled substance or any mind-altering drug
should ever be sold on the Internet--I do not care if you have
seen your doctor or not--I think it should be done within a
doctor's office.
Senator Coleman. Thank you.
Senator Pryor. Thank you, Mr. Chairman. I really just had
one question for Ms. Haight, and that is a clarification.
Mainstreet Pharmacy was a U.S. company. Was that in
California--where was that?
Ms. Haight. Texas.
Senator Pryor. And it was just a rogue pharmacy that was
giving out drugs to whomever could pay for them?
Ms. Haight. They had actually made millions of dollars
selling drugs throughout the United States and other countries.
Senator Pryor. That is all I have, Mr. Chairman. Thank you.
Senator Coleman. Thank you.
Again I want to thank both of the witnesses--Ms. Carr?
Ms. Carr. Could I just say that if you go ahead with
setting up the safe pharmaceutical sites, I know that the way
the Internet is, there will be other sites that are going to
pop up out there, and people like my husband would have gone to
those--they would have bypassed the safe ones. So on these safe
ones, if you have some way of recognizing when the packages are
coming in, because they are just coming in through the U.S.
mail, so you have some special package that comes in, and all
the other packages that come in, if you can detect drugs in
them, they just do not get shipped, they do not get to their
destination.
Senator Coleman. You raise an issue that we are struggling
with here. There will be a second hearing. I will have a
hearing on July 22, and we will have representatives of the
Postal Services, United Parcel Service, and FedEx there, to try
to figure out how to deal with this.
The problem that we face, as you heard from the other
witnesses, is the extraordinary volume. We have heard about
millions of packages coming through--in single mail production
operations in New York, 40,000 a day. And I have been there,
and what they do at the post office is actually have a list of
identified countries that they know are most problematic, so
they are going to prioritize what they try to pull. But I just
have a sense that we are trying to find needles in haystacks
here. So it is extraordinarily challenging.
But at a minimum, we should do what we are doing in the
Ryan Haight Act, which is requiring pharmacies that ship to be
FDA-approved, require them to be subject to inspection, require
that individuals have a patient-physician relationship and
ensure that you cannot get prescriptions by filling out a form
online. That is a joke. It is a sad joke. It is a terrible
joke. It is a tragedy.
So we can do some of those things, but we are struggling
with this, Ms. Carr. This is not something for which there is
an easy answer.
You should know that I will be speaking with DEA
Administrator Tandy next week, and I am going to follow up on
what the DEA can do in dealing with your case, and Ms. Haight,
we are certainly committed to the act named in memory of your
son.
So I want to thank the witnesses, I want to thank my
colleagues.
The record of this hearing will be kept open for 10 days.
Again, I want to thank the witnesses, and this hearing is
now adjourned.
[Whereupon, at 11:38 a.m., the Subcommittee was adjourned.]
BUYER BEWARE: THE DANGER OF PURCHASING PHARMACEUTICALS OVER THE
INTERNET--FEDERAL AND PRIVATE SECTOR RESPONSES
----------
THURSDAY, JULY 22, 2004
U.S. Senate,
Permanent Subcommittee on Investigations,
of the Committee on Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 9:05 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. Norm Coleman,
Chairman of the Subcommittee, presiding.
Present: Senators Coleman and Levin.
Staff Present: Raymond V. Shepherd, III, Staff Director and
Chief Counsel; Katherine English, Counsel; Jay Jennings,
Investigator; Mary D. Robertson, Chief Clerk; Elise J. Bean,
Staff Director/Chief Counsel to the Minority; and Clare Diegel,
Intern.
OPENING STATEMENT OF SENATOR COLEMAN
Senator Coleman. This hearing of the Permanent Subcommittee
on Investigations is called to order.
Good morning and welcome to the Subcommittee's second day
of hearings into the dangers associated with purchasing
pharmaceuticals over the Internet.
According to a 2003 University of Michigan study, the
painkiller Vicodin was second only to marijuana in illicit use
by 12th graders. Federal statistics estimated that 6.2 million
Americans misuse prescription drugs in 2002, compared with 2
million who use cocaine and 700,000 who use Ecstasy.
It is all too easy. Go online with your favorite search
engine and type in ``purchase Vicodin,'' \1\ click onto a
Website and you can purchase your Vicodin or the generic
equivalent, hydrocodone, with a variety of credit cards
including MasterCard, Visa, or American Express.\1\ No
prescription is necessary. All you need to do is have an on-
line consultation and your medication will be FedExed to you.
---------------------------------------------------------------------------
\1\ See Exhibit No. 24 which appears in the Appendix on page 309.
\2\ See Exhibit No. 26 which appears in the Appendix on page 311.
---------------------------------------------------------------------------
The first Internet pharmacies began on-line services in
early 1999, and FDA estimated that 104 businesses were selling
prescription drugs on the Internet by July of that year. In
1999, Americans spent an estimated $160 million on prescription
drugs purchased over the Internet. By 2003, spending on
Internet prescription drugs had grown to $3.2 billion.
By November 2000, the FDA had identified between 200 and
400 Internet pharmacies, as well as other Websites, where drugs
were accessible with the click of a mouse. A new study by the
National Center on Addiction and Substance Abuse at Columbia
University identified 495 Websites advertising controlled
prescription drugs during a one-week analysis. Of these, 157
sites that sold opioid-based drugs such as OxyContin, Percocet,
and Darvon. Only 6 percent of the sites selling drugs required
a prescription, and none took steps to prevent the sale of
drugs to children.
Other evidence suggests the number of Internet pharmacies
is much larger. The firm Cyveillance has identified 1,009
Internet pharmacies that purport to be Canadian pharmacies.
Earlier this year, the FedEx brand appeared on 12,200 unique
websites selling at least one of the 22 top-selling
pharmaceuticals in a search by Nameprotect of its 400 million
web page database estimated at one-tenth the size of Google's
database.
At our first hearing on June 17, we heard the tragic story
of two men who died from taking drugs they had purchased over
the Internet. Seventeen-year-old Ryan Haight of La Mesa,
California was an honor roll student and avid baseball card
collector about to enter college. How did a healthy 17-year-old
obtain prescriptions for painkillers without a medical exam? He
got them from Dr. Robert Ogle, an on-line physician based out
of Texas. With the bogus prescriptions from Dr. Ogle, Ryan was
able to order hydrocodone, morphine, and Valium and have then
shipped via U.S. mail to his front door. In February 2001, Ryan
overdosed on a combination of these prescription drugs. His
mother found him dead on his bedroom floor.
James Lewis, a tri-athlete, died of an overdose of Darvon
on April 10, 2003. He purchased Darvon, as well as other
controlled substances, from Internet pharmacies doing business
in South Africa, Thailand, and Spain. Some Websites required
James to fill out a short questionnaire before he could order
the medication. Others required nothing.
Our investigation found that these are not isolated events.
At my request, the General Accounting Office made purchases of
pharmaceuticals from both domestic and foreign Internet
Websites. With disturbing ease, GAO used the Internet to
purchase numerous prescription drugs, including highly
addictive narcotics and other controlled substances. Notably,
GAO purchased 66 percent of these pharmaceuticals, including
narcotics, without a prescription and without visiting a
doctor.
GAO also used the Internet to purchase from foreign
pharmacies counterfeit versions of American drugs,
pharmaceuticals that have not been approved by the FDA,
counterfeit drugs, damaged products, and drugs without proper
packaging, no warning information, or instructions for use.
As Chairman of the Permanent Subcommittee on
Investigations, I endeavor to provide an objective snapshot of
what drugs are available to consumers on the Internet by
inspecting the operations at the JFK International Airport in
New York, home to the largest international mail branch, IMB,
in the United States.
Senior Customs officials at JFK estimated that 40,000
parcels containing drugs are imported through the airport each
day. During last summer's FDA-Customs blitz, 28 percent of the
drugs tested were controlled substances.
This means that as many as 11,200 drug parcels containing
controlled substances, like the painkillers Vicodin and
OxyContin are imported through JFK daily, 78,400 weekly,
313,600 monthly, and 3,763,200 annually. Top countries of
origin include Brazil, India, Pakistan, Spain, Portugal,
Canada, Mexico, and Romania.
FDA and Customs officials also regularly seize and inspect
packages containing controlled substances like hydrocodone and
generic Valium or Diazepam;\1\ counterfeit Viagra from
India;\2\ injectable steroids from China;\3\ boxes of
unidentified drug products;\4\ and drug packages without any of
the required inserts that lack labeling and have directions for
usage in foreign languages.
---------------------------------------------------------------------------
\1\ See Exhibit No. 3 which appears in the Appendix on page 288.
\2\ See Exhibit No. 5 which appears in the Appendix on page 290.
\3\ See Exhibit No. 6 which appears in the Appendix on page 291.
\4\ See Exhibit No. 7 which appears in the Appendix on page 292.
---------------------------------------------------------------------------
PSI staff made similar findings at the IMBs in Chicago and
Miami.
Simply put, we are drowning in a flood of imported drugs of
unknown composition and origin, as well as potentially lethal
controlled substances.
Given the overwhelming volume of drug products imported
daily, FDA cannot fully process all the packages containing
drugs. For example, at JFK, FDA inspectors can only inspect 200
packages daily. As a result, there is a significant backlog of
product waiting to be screened by FDA.\5\ Because of the sheer
volume of drug product, the FDA acknowledges the vast majority
of prescription drugs that are illegally imported into the U.S.
through JFK are not screened or regulated in any manner.
---------------------------------------------------------------------------
\5\ See Exhibit No. 10 which appears in the Appendix on page 295.
---------------------------------------------------------------------------
Unfortunately, the same is true for Customs. Despite yeoman
efforts, because of the sheer number of controlled substances
being imported, Customs can screen only a de minimis number of
the packages that contain controlled substances.
In conjunction with Senator Levin and John Dingell, the
dean of the U.S. House of Representatives, who was the author
of the Prescription Drug Marketing Act, I asked the GAO to
assess the steps taken by the Federal Government to address
this problem. This effort is emblematic of the fact that this
issue is not only bipartisan, it is bicameral. GAO confirmed
what the Subcommittee has documented at five other sites:
There is no uniform approach to screening and processing
imported pharmaceuticals, the quality and health risks
associated with imported prescription drugs is unknown, there
is no reliable estimate of the quantity of drugs being
imported, and most disturbingly, more prescription drugs are
released without ever being inspected.
The Federal Government has been on notice about this issue
for at least 5 years. On July 30, 1999, representatives from
FDA, Customs, and the Department of Justice testified at a
hearing entitled, ``Drugstores on the Net: The Benefits and
Risks of Online Pharmacies,'' before the House Oversight and
Investigation Subcommittee. At that hearing, FDA announced that
along with DEA and Customs they had formed an interagency
working group to address the problem of on-line pharmacies. In
addition, FDA testified that they had purchased a web crawler
so they could have ``surveillance over the Internet.'' We will
be able to refer controlled substances illegally offered for
sale to the appropriate enforcement people.
Many of the initiatives that we will hear about today sound
eerily familiar. I am concerned by the apparent lack of
progress in getting our arms around this glaring problem. Those
charged with the responsibility to protect the American
consumers from the illegal importation of controlled substances
and counterfeit or unsafe drugs cannot allow themselves to fall
victim to rapidly advancing technology.
Interestingly, in comparison to the Federal Government's
response, the response of much of the private sector has been
swift and proactive. For example, in response to news reports
about the availability of controlled substances on the
Internet, in November 2003 Yahoo! blocked all search terms
related to prescription drugs for approximately 2 months while
it determined what action to initiate. Yahoo! then contracted
with a private company to ensure that Internet pharmacies which
buy ad space on Yahoo! are legitimate and properly licensed.
Likewise, of its own accord, MasterCard initiated a
campaign to identify sellers of OxyContin and Vicodin.
MasterCard identified Internet sites that were offering these
drugs and made dummy transactions. These transactions allowed
MasterCard officials to identify the member bank where the
merchant maintains an account. MasterCard then contacted the
appropriate member bank and advised the bank of the need to,
one, exercise due diligence to identify illegal activity; two,
deny the use of MasterCard services if an Internet site was
engaged in illegal activity; and three, to require the Internet
site/merchant to demonstrate that its sales are legal.
Last, UPS is proactively identifying Websites that offer
prescription drugs without a written prescription and that
advertise the services of UPS. UPS provided PSI with a list of
105 such Websites. The same information was provided to DEA and
FDA on February 20, 2004, with a request that they identify and
address the sites that are offering illegal pharmaceuticals. Of
these 105 Websites, 89 are still selling pharmaceuticals. I
look forward to hearing what measures DEA and FDA undertook
with this information.
The potential problems associated with the importation of
controlled substances and drugs of unknown origin and
composition are far-reaching. Teenagers are getting unfettered
access to controlled substances. Patients are self-medicating
and receiving medication that could be sub-potent, super-
potent, stored in unsafe conditions, or even counterfeit. And
unscrupulous drug dealers are getting rich preying on
unsuspecting consumers in dire need of affordable medication.
We as a government must do all we can to ensure access to a
safe and affordable drug supply. DEA Administrator Tandy will
testify that for consumers buying drugs over the Internet
without a legitimate prescription are no safer than taking
drugs offered to you by a street corner hustler. We have
developed multiple strategies for controlling and shutting down
the street corner hustler. We must approach Internet drug sales
with the same vigor.
With that, I would look forward to a statement by my
Ranking Member and distinguished colleague, Senator Levin.
OPENING STATEMENT OF SENATOR LEVIN
Senator Levin. Mr. Chairman, thank you, first and foremost,
for not just convening a second day of hearings into a very
important subject, but also for your dogged determination to
determine the extent of a real problem, which is the purchase
of pharmaceuticals and prescription drugs over the Internet, as
you have outlined, and to pursue solutions to this real
problem. You are taking a leadership role here in the Senate.
As you point out, it is both bipartisan and bicameral. There is
strong support in the House for action, as well, for the
reasons that you have given.
Last year alone, U.S. consumers purchased over $3 billion
in prescription drugs from Internet pharmacies. Now, there are
many reasons that consumers do this. Some of them are improper
reasons, kids trying to get drugs they otherwise aren't going
to be able to get and other inappropriate efforts to obtain
pharmaceuticals and prescription drugs over the Internet in
ways that can accomplish those goals for the people who are
seeking those drugs.
But there are also appropriate efforts being made to obtain
prescription drugs over the Internet. One of those appropriate
reasons is the high cost of prescription drugs that drive
Americans to take drastic measures to pursue lower-cost
medications, including buying medicines from unfamiliar and
sometimes shady Internet pharmacies.
Right now, on average, Americans pay 60 percent more than
the British or the Swiss for the same prescription drugs, two-
thirds more than Canadians, 80 percent more than the Germans,
and twice as much as Italians. For average Americans suffering
chronic illness, high drug costs are forcing some to choose
between taking their medicine on any given day, paying their
bills, or even buying food.
At the last hearing, the Subcommittee released a report by
the GAO describing key problems that are created when people
buy medicine from Internet pharmacies. The highlights of that
report have already been reviewed by our Chairman, and I will
leave my statement for the record to give some of the specifics
of the GAO study.
But the picture that was painted raises a host of concerns
and today's hearing examines what the Federal and the private
sector are doing to protect the American public from unsafe and
illegal prescription drugs purchased over the Internet. In its
testimony, GAO is going to state that it concludes that very
scarce resources in our agencies that are supposed to enforce
our laws only selectively target packages by country of origin
and other means, and they state that FDA officials acknowledge
that tens of thousands of packages are allowed to reach U.S.
consumers that violate current laws and pose public health
risks.
Our agencies have a key role in overseeing pharmaceuticals
which are shipped into the United States. Under one law, the
FDA is responsible for ensuring the safety, effectiveness, and
quality of domestic and imported drugs. Under another law, the
Drug Enforcement Agency is responsible for combatting illegal
narcotics and the abuse of controlled substances. And under a
third law, the Bureau of Customs and Border Protection is
supposed to screen and stop unauthorized controlled substances
at the border along with a wide range of other contraband. And
the Postal Inspection Service is also charged with
investigating the distribution of narcotics through the mail.
So we have got a number of Federal agencies that have a
responsibility to protect Americans from unsafe and illegal
pharmaceuticals, but as a matter of fact, we know that they are
overwhelmed. They are flooded. They are unable to do the job
which they must do to protect our people.
The Subcommittee staff that did this field work did not see
a single FDA inspector during a 6-hour shift, even though the
FDA is charged with helping Customs to look for unsafe and
illegal pharmaceuticals. Customs agents interviewed by the
staff indicated they had never met their FDA counterparts, even
though the two agencies are tasked with coordinating their
efforts to identify incoming drug shipments that could be
seized and inspected more closely.
Mr. Chairman, because of the number of witnesses that we
have, I am going to ask that the balance of my statement be
inserted in the record, but I want to just reinforce one point
that our Chairman made about the risk to our children.
Right now, a 12-year-old juvenile can use a parent's
computer to log onto an Internet search engine, as the Chairman
has outlined, type in the parent's credit card number, and
direct illegal controlled substances to be shipped to an
address via commercial carrier the next day.
We have private organizations and businesses that are here
today to help us understand what efforts they are making--and
many of them are making great efforts to combat Internet sales
of unsafe and illegal prescription drugs--and they will inform
us as to how together we can more aggressively work to protect
the public.
These responsibilities are vast. We are falling down in
terms of carrying out these responsibilities. Our Chairman is
taking a leadership role in trying to get us back on track, but
more importantly to address a new kind of a problem and a
challenge which is represented by the Internet. So Congress has
some responsibility, and I congratulate you, Mr. Chairman, in
helping us to understand where we are falling short and how we
can carry out those responsibilities.
Senator Coleman. Thank you, Senator Levin, your entire
statement will be entered into the record, without objection.
[The prepared statement of Senator Levin follows:]
PREPARED STATEMENT OF SENATOR LEVIN
Unapproved, misbranded, counterfeit, and adulterated prescription
drugs are making their way into the United States, and I commend you,
Mr. Chairman, for holding a second day of hearings to examine what we
can do to reduce the various threats to the health and welfare of
people buying pharmaceuticals over the Internet. Last year alone, U.S.
consumers buying prescription drugs from Internet pharmacies spent more
than $3 billion.
The high cost of prescription drugs continues to drive Americans to
take drastic measures to find lower-cost medications, including buying
medicines from unfamiliar and sometimes shady Internet pharmacies.
Right now, on average, Americans pay 60 percent more than the British
or the Swiss for the same prescription drugs, two-thirds more than
Canadians, 80 percent more than Germans and twice as much as Italians.
For average Americans suffering chronic illness, high drug costs are
forcing some to choose between taking their medicine on any given day,
paying the bills, or even buying food.
At the last hearing, the Subcommittee released a report by the
Government Accountability Office (GAO) describing key problems created
when people buy medicine from Internet pharmacies, and I'd like to
recap a few of the highlights. GAO found that buying medications over
the Internet was not difficult. GAO placed 90 on-line orders for
prescription drugs and received 68 shipments, a success rate of 75
percent. Of those 68 medications, 45 were shipped illegally, because
there had been no patient-provided prescription. Of those Internet
pharmacies based in the United States, only 5 out of 29, or 17 percent,
had required GAO to provide a patient prescription. Many of the shipped
medications also arrived without Food and Drug Administration (FDA)
required precautions such as patient instructions and temperature-
controlled packaging.
Of the 68 shipments received by GAO, 48 were from U.S. or Canadian
based Internet pharmacies, 18 were from foreign sites, and 2 could not
be determined. Of the 18 foreign shipments, 3 were found to contain
counterfeit medications, including 2 with incorrect but not necessarily
dangerous chemical compositions, and one with no active ingredients at
all.
Today's hearing examines what the federal and private sector are
doing to protect the American public from unsafe and illegal
prescription drugs purchased over the Internet. In its prepared
testimony for today, GAO concludes that scarce resources have forced
our enforcement personnel to ``selectively target'' pharmaceutical
packages for inspection, and that most shipments reach the public
without any federal oversight at all. GAO also states that federal
officials acknowledge that tens of thousands of pharmaceutical packages
that are allowed to reach U.S. consumers may violate current laws and
pose public health risks.
Three federal agencies have key roles in overseeing pharmaceuticals
shipped into the United States. Under the Federal Food, Drug and
Cometic Act, the FDA is responsible for ensuring the safety,
effectiveness and quality of domestic and imported drugs. Under the
Controlled Substances Import and Export Act, the Drug Enforcement
Agency (DEA) is responsible for combating illegal narcotics and the
abuse of controlled substances. And under the Homeland Security Act,
the Bureau of Customs and Border Protection (Customs) is supposed to
screen and stop unauthorized controlled substances at the border--along
with a wide range of other contraband. In addition to the FDA, DEA and
Customs, the U.S. Postal Inspection Service is charged, among other
tasks, with investigating the distribution of narcotics through the
mail.
Each of these federal agencies has a responsibility to protect
Americans from unsafe and illegal pharmaceuticals, but it is clear that
they are being overwhelmed by an increasing flood of pharmaceutical
imports. Earlier this month, for example, the Subcommittee staff
visited the Memphis International Airport in Tennessee to get a first-
hand view of incoming shipments of pharmaceuticals. This visit follows
earlier ones described at the last hearing to international airports in
New York City, Miami, and Chicago. The Memphis airport is the primary
commercial hub for Federal Express (Fed Ex), a commercial company that
operates a major shipping business, including shipments from over 200
foreign countries. The Subcommittee staff observed the key 6-hour shift
for incoming Fed Ex packages, from 9:30 p.m. to 3 a.m.
The Subcommittee learned that, at this commercial hub at the
Memphis airport, approximately 740,000 packages arrive during a single
night shift. Only 24 Customs agents were present at the hub to view
these incoming packages. That meant each Customs agent had 6 hours to
review about 30,000 packages. Those numbers made it impossible for the
agents to give more than a cursory glance to pharmaceutical shipments,
while also searching for such high priority contraband as narcotics,
weapons, and terrorism-related materials.
The Subcommittee staff did not see a single FDA inspector during
the 6-hour shift, even though the FDA is charged with helping Customs
to look for unsafe and illegal pharmaceuticals. Customs agents
interviewed by the staff indicated that they had never met their FDA
counterparts, even though the two agencies are tasked with coordinating
their efforts to identify incoming drug shipments that should be seized
and inspected more closely. One Customs agent stated that he got his
seizure directives from the FDA website, instead of communicating
directly with an FDA agent. The FDA later told the Subcommittee that
develops these directives by reviewing manifests for incoming
shipments, and identifying about 25-30 packages per day to be held by
Customs at the hub. The FDA indicated that it inspects these packages
at a later time and determines how each should be handled. The FDA also
indicated that, beginning in the fall, new funding would enable it to
assign 2 FDA inspectors to help with incoming shipments at the Fed Ex
hub.
It is also unclear whether federal agencies are working as
effectively as they could with the private sector such as the Internet
search engines that direct Internet users to particular on-line
pharmacies, the credit card companies that approve payments to these
pharmacies, and the shipping companies that move pharmaceuticals from
Internet pharmacies to American consumers.
Right now, a 12-year-old juvenile can use a parent's computer to
log onto an Internet search engine, type in the parent's credit card
number, and direct an illegal controlled substance to be shipped to an
address via commercial carrier next day air. We need to learn from the
private entities represented here today what steps they are taking to
combat Internet sales of unsafe and illegal prescription drugs and how
they can engage in more aggressive efforts with federal agencies to
protect the public.
The agencies here today have vast responsibilities to protect
Americans from illegal narcotics, weapons, human trafficking and
terrorism. They are also charged with protecting the public from unsafe
and illegal prescription drugs. That's a tall order, and Congress needs
to exercise our oversight responsibility to determine what is being
done, what can be improved upon, and how we can enable these agencies
to do their jobs more effectively, including leveraging help from the
private sector.
Congress also needs to bring down the escalating cost of
prescription drugs in the United States. Chairman Coleman and I both
represent northern border States, in which thousands of our
constituents are already crossing the border to get their prescription
medications from Canada--either in person or over the Internet. Folks
are going to continue that conduct until prices become reasonable here
at home.
Legislation has been introduced by Senator Dorgan and others to
tackle this problem, but there is no sign that the Senate Health,
Education, Labor and Pensions Committee plans to take up this
legislation in the near future. The latest setback came yesterday, when
that Committee postponed action on a more modest drug importation bill
that had been scheduled for consideration. While weaker than the Dorgan
bill, that legislation included some useful provisions, inspired in
part by this investigation, authorizing the FDA to regulate the
licensing of Internet pharmacies.
I look forward to the testimony today.
Senator Coleman. I would now like to welcome our first
witness for today's hearing. I welcome Richard M. Stana,
Director of the Homeland Security and Justice Team at the
Government Accountability Office. Welcome, Mr. Stana.
Mr. Stana. Thank you.
Senator Coleman. As I mentioned in my opening statement
this morning, in conjunction with the Subcommittee's June 17
hearing on this matter, GAO recently released a report on GAO's
investigation of Internet pharmacy drug sales. The purpose of
these hearings is to continue our examination of the extent to
which consumers can purchase pharmaceuticals and controlled
substances over the Internet without a medical prescription, a
medical diagnosis, and whether the pharmaceuticals that are
pouring into the United States from foreign countries are
counterfeit, unsafe, or illegitimate.
My distinguished Ranking Member talked about the issue of
children. It is almost as if there is a candy roll out there
for kids who want to get this, and not only is no parent not
around, but if you have got Mom and Dad's credit card, you have
access to it. Can we do something about that? We need to.
The purpose of today's hearing is to examine the Federal
response and the private response to the problems highlighted
at our June 17 hearing and to learn what Internet search firms,
credit card companies, and package delivery services, whose
participation is needed to complete these transactions, are
doing to address the problem.
I appreciate everyone's attendance at today's important
hearing and am anxious to hear the testimony this morning.
Before we begin, pursuant to Rule 6, all witnesses before
this Subcommittee are required to be sworn. At this time, Mr.
Stana, I ask you to stand and please raise your right hand.
Do you swear that the testimony you give before this
Subcommittee is the truth, the whole truth, and nothing but the
truth, so help you, God?
Mr. Stana. I do.
Senator Coleman. Thank you, Mr. Stana. We will have a
timing system today. When you see the light change from green
to yellow, you have about a minute left. We will enter your
complete statement for the record. So at that point, please
summarize your testimony and then we will go to questioning
after that. You have 5 minutes. You may proceed.
TESTIMONY OF RICHARD M. STANA,\1\ DIRECTOR, HOMELAND SECURITY
AND JUSTICE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Stana. Mr. Chairman, Mr. Levin, I am pleased to be here
today to participate in this hearing on prescription drug
importation.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Stana appears in the Appendix on
page 178.
---------------------------------------------------------------------------
As you know, American consumers are increasingly drawn to
the convenience, privacy, and cost advantages of purchasing
drugs over the Internet. But at the same time, there is growing
concern that prescription drugs from Internet pharmacies are
risky because they may be compromised or not the authentic
product that you think you are going to get.
Further, consumers may also be violating the law
unknowingly or intentionally by having these drugs shipped to
the United States through international mail and private
carriers. It is primarily the responsibility of U.S. Customs
and Border Protection and the Food and Drug Administration to
inspect and interdict prescription drugs and controlled
substances that might be illegally imported into the United
States via the mail or private carriers.
My prepared statement discusses these issues in detail and
I would just like to summarize four main points.
First, as you mentioned in your opening statements, the
amount of unapproved drugs illegally entering the country is
said to be large and increasing. Owing to the popularity of
Internet drug sales, large numbers of parcels arrive each day
at the 13 international mail branches and 29 express
consignment carrier facilities operated by private carriers
like DHL or FedEx. Even though they are purchased from some
sites that might be considered safe, the overall safety and
quality of imported drugs, particularly those purchased from
foreign-based sites, is not assured.
CBP did an analysis which demonstrates this, and Mr.
Chairman, you also mentioned our previous work which showed
that about 45 of 68 purchases we received were made without a
prescription and 29 had labeling, packaging, and handling or
other chemical composition problems. Some who feel they are
getting reliable drugs at bargain prices might unknowingly be
putting themselves at risk.
My second point is that many packages known to contain
prescription drugs are released to the addressees with or
without inspection. CBP officials told us that certain packages
were targeted for inspection, but packages not targeted
typically bypass inspection and are released to addressees.
Many packages that were targeted by FDA and subsequently
inspected were also later released to addressees. FDA officials
acknowledge that they release tens of thousands of packages
that contain drug products that may violate current laws and
pose health and safety risks to consumers. This is because
available staff are not able to process the volume of packages
turned over to them for inspection.
For example, at one IMB, CBP targeted its efforts on
packages arriving from 78 countries and forwarded to the FDA
packages arriving from the eight countries it targeted for
inspection. Packages coming from countries not targeted by CBP
or FDA were not routinely inspected, and most continued in the
mail. Further, FDA released to addressees some packages
containing drugs that were not considered a priority and
packages with drug amounts deemed for personal use.
At another IMB, if CBP's x-ray inspection revealed
prescription drugs, FDA's instructions to CBP were to fill
eight bins of packages twice each week, which would total about
3,000 packages. Once the capacity of the 16 bins per week was
filled, other packages would continue on without inspection. At
this site, FDA had the capacity to inspect about 140 of the
3,000 packages set aside each week and the remaining packages,
2,800 or so, were released without inspection, as were some of
the 140 which were deemed not suitable for holding.
At another IMB, CBP officials told us that they usually
released packages containing prescription drugs that appeared
to be a 90-day supply or less, which they felt was in line with
FDA's personal importation policy. At this facility, FDA
officials told us that each week, CBP turned over to them
hundreds of packages for inspection, but FDA had the capacity
to inspect about 100 of them. They returned many of the other
packages without inspection and CBP, in turn, released them to
the addressees.
At the express consignment facilities, CBP and FDA relied
mainly on reviews of manifests of incoming packages to
determine which to inspect. Packages could avoid inspection if
manifest information was not accurate. Further, as you
mentioned, FDA officials are not on site to coordinate with CBP
on targeting activities or random inspections.
My third point is that processing requirements are time
consuming and can hamper enforcement efforts. CBP and FDA
typically have about two to three staff each to perform the
inspections and prepare the paperwork at each location.
Processing for these packages can strain available staff, and
staff are tied up processing as opposed to inspecting. An
average inspection can take anywhere from about 10 to 15
minutes if there is not much to inspect or it is a known
product, to 2 or more hours to fully investigate what is in the
package. Similarly, CBP's seizure processes are time consuming,
and because I need to sum up, I will not go into much detail on
those.
I do want to mention one other thing here which I think is
very important. At one IMB, as an alternative to seizure, CBP
headquarters approved returning 123 bins containing roughly
40,000 packages of Schedule IV controlled substances, including
Valium, pain killers, and antidepressants, to the sender. The
123 bins amounted to a processing backlog of a year or more.
According to CBP officials, most of these packages were sent by
two companies located in two countries. This stop-gap action
avoided the need to fully process the packages and store them
for possible forfeiture and destruction, but it is not
consistent with policy. We plan to pursue this further in the
coming weeks and to see how widespread this action might be.
The last point is that, and I think you made this point,
Mr. Chairman, purchasing prescription drugs from Internet
pharmacies isn't new and concerns about importation have
existed for many years. Action to mitigate this issue are still
evolving.
There have been task forces created in the last year in
response to Congressional mandates. CBP created a task force
which looks very similar to the task forces created in the late
1990's that you have mentioned in your opening statement. It is
too soon to tell whether these new task forces will have any
better success than the old task forces in addressing this
problem.
In closing, CBP and FDA are charged with the responsibility
of inspecting and interdicting these drugs and they both have
many dedicated staff that try their hardest to do what they can
with limited resources. Although initiatives are underway to
help either interdict the drugs or prevent their importation,
it is too soon to tell whether these are going to have any
better success than those that were started in the late 1990's.
This completes my oral statement. I would be happy to
address any questions you or other Members of the Subcommittee
may have.
Senator Coleman. Thank you very much, Director Stana.
As I read the report and listen to the testimony, it is
somewhat mind boggling that we have a system of substances
coming into this country, many of which we know are legal. We
know from spot checks and searches that there is a substantial
volume of material that is counterfeit, dosages not correct,
and instructions not there, particularly as we deal with
foreign countries, certainly countries outside the U.S. and
Canada. The information is a crap shoot. You don't know what
you are getting. And yet we really don't have an effective
system for monitoring and controlling that, do we?
Mr. Stana. The system that we have in place has simply been
overrun by the volume of drugs coming in due to Internet
purchases. There is a system in place as you are well aware.
You have seen it at the mail branches and at the carrier
facilities. But there just aren't enough people to manage it
properly.
Senator Coleman. And I am not directly criticizing our
folks who are out there making an effort. Now, I am going to
talk about some areas where I do have concern a little later
this morning, but I sense it is kind of like sand castles
against the tide. It can be as pretty as--I have seen some
pretty nice sand castles on the beach, but the tide keeps
coming in and just overwhelms it and overwhelms it. Is that a
fair assessment?
Mr. Stana. Well, one of the frustrating things is that this
is a problem that has been known for many years, and as I
pointed out and you mentioned, we started in the late 1990's to
focus on the issue, but for too long we have been discussing
what needs to be done and not taking appropriate action. Now
the problem is much larger and much more difficult to----
Senator Coleman. That is where I want to go next. Help me
understand the period from 1999 to today. In 1999, there was
testimony before a House Subcommittee, Dr. Janet Woodcock
discussing FDA actions dealing with the sale of illegal drugs
over the Internet. There are discussions of something called
the web crawler. Let me back up. What is a web crawler?
Mr. Stana. I believe, and I am not a technical expert, but
what a web crawler does is it identifies certain sites that
shouldn't be used for illegal purchases.
Senator Coleman. Are you familiar with FDA's results from
using the web crawler?
Mr. Stana. No, I am not. I think you might better address
that to FDA.
Senator Coleman. Do you even know if a web crawler was
actually accessed?
Mr. Stana. My understanding is they tried to use it, but it
didn't meet with the success that they anticipated.
Senator Coleman. And clearly, we go from 1999, when we
raised this issue, to today, in which certainly the volumes has
increased exponentially, the volumes of access to illegal
drugs. I am trying to understand what happened. I am trying to
understand whether we started fast out of the gate and just
slowed up, or whether we turned our attention elsewhere. Can
you give me a kind of overview or summary of what happened in
the efforts from 1999 and at what point it slowed up and what
happened? Why aren't we in a better place today?
Mr. Stana. In 1999, FDA started with two task forces that
looked similar to what was created just in the past few months.
One had a working group on legal and regulatory issues. One had
a working group on legal issues. Another had one on public
education. And these are very similar to the kinds of working
groups we have now.
On the positive side, what they did is they brought
affected agencies together and they talked and to some extent
coordinated, but there really was very little action taken
there. It was more of a talking exercise, a coordination
exercise. So not much has happened. And those efforts, while
may be well intentioned, really didn't have much impact at the
incoming facilities.
The more recent task forces have so far had maybe a little
bit more impact in that there were a couple of blitzes done at
three IMBs. They also did one at the border for incoming
travelers. They posted Public Service Announcements. I was at a
Giant a few days ago. There is a notice posted near the
pharmacy there about the dangers of using Internet pharmacies.
So it is having some impact. But the fact remains that if you
need to stop this importation of dangerous and risky drugs,
these approaches, while useful, aren't having the kind of
impact that is needed to really mitigate the problem.
Senator Coleman. My question or comment is probably better
directed to the agency heads, but as a policy maker, I have to
reflect upon the question of why I should have confidence today
on the formation of a new task force and efforts when we walked
down that path 5 years ago and the problem is worse today than
it was then.
Mr. Stana. Well, there is so much that we just don't know
about the size and nature of this problem. We knew that we
didn't know it 5 years ago. We still don't know it today. We
don't know how many packages are coming into the country. We
don't know how many are getting by without inspection. We don't
know how many resources it is going to take to mitigate the
problem. One estimate I saw, although I didn't get behind the
numbers so I can't vouch for its accuracy, stated there are
about two million packages a year of illegal drugs coming into
the country. That is a sizeable amount.
There is another estimate that each IMB site where FDA has
its resources, instead of having three staff on each shift,
needs ten staff on each shift. We haven't examined the basis
for that figure, but it demonstrates that, clearly, there is a
resource problem here.
Senator Coleman. Even if we were to increase the resources
from three to ten, would it be fair to say that we would not
have the capacity to investigate or review each and every
parcel that came into the country, are the numbers simply too
vast?
Mr. Stana. I don't know how many resources it would take to
do that. Clearly, the law states that these packages are not to
come into the country unless there are certain very careful
prescribed exceptions that are met. But I don't have the
number, whether 10 is the right number, 15 is the right number,
or if it is a problem that 100 people couldn't solve.
Senator Coleman. I am just trying to look at the system we
have, which is not unsystematic. Countries are highlighted that
are known to be of greater risk, so it is targeted.
Mr. Stana. Right. It is a risk management issue.
Senator Coleman. You have got a risk targeted approach. But
unfortunately, if a country is not a targeted country----
Mr. Stana. Right.
Senator Coleman [continuing]. You could be the worst
business operator, the worst crook in the world, but if you are
operating out of a country that is not targeted, you are
essentially free from review at this time. Is that a fair
statement?
Mr. Stana. That is correct at some mail branches, at some
IMBs. It is totally targeted initially by country. That is the
first cut. You might get picked up on a random search.
Senator Coleman. Talk to me about the random search. Are we
talking needles in haystacks?
Mr. Stana. Yes, you are.
Senator Coleman. What are the chances of getting----
Mr. Stana. You are talking about gut feelings----
Senator Coleman. What is the mathematical chance of getting
picked up in a random search?
Mr. Stana. Very small. I don't have the exact number, but
very small.
Senator Coleman. Infinitesimal. Microscopic.
Mr. Stana. It would be very small, certainly less than 3
percent.
Senator Coleman. I would think less than perhaps----
Mr. Stana. One percent, perhaps.
Senator Coleman. Maybe a percentage of 1 percent.
Mr. Stana. But to amplify your underlying point, even in
areas where CBP and FDA target countries, just because you are
in one of the 70-some countries that CBP targets at one
facility, that doesn't mean your package is going to be fully
inspected because there are limits to the capacity. At the
other IMB where inspection is a function of volume, if your
package is in the 16 bins, it might be inspected, but the fact
of the matter is, on average, of those 16 bins, your package in
one of the bins is going to be inspected. The other ones are
going to be returned without inspection.
Senator Coleman. What is your response to, or your analysis
of, the different approaches per IMB? Would you suggest that it
would make better sense to have a more uniform approach for the
agency?
Mr. Stana. Yes. I think it would be beneficial to use a
more consistent and uniform risk management approach from IMB
to IMB that focuses in inspections, based on inspection
statistics and experience--what are the more important packages
to look at. Right now, we have an inconsistent policy.
FDA has just come up with an SOP which is intended to
provide a uniform inspection process. The problem is, without
more resources, all you are doing is creating a uniform process
which in the end returns packages to the mail without
inspection.
Senator Coleman. At one point, you talked about a
situation, I forget the company, with a number of bins that
were returned to sender.
Mr. Stana. Yes. That was that one IMB where there was about
a year or more backlog of controlled substances. These were
Schedule IV controlled substances. The staff at the facility
felt that in the interest of the government they would not
spend time processing these packages. As an alternative to
seizure, they sent them back to the originating pharmacy.
Clearly, a controlled substance is supposed to be seized. It is
not supposed to be returned to sender without proper
processing. They phoned headquarters and headquarters approved
the return of the packages to the senders.
Now, by doing this, they missed a couple of opportunities.
One, they missed opportunity to gather further intelligence on
exactly who the sender, receiver, and shippers were. And
second, when they do seize a package, they are supposed to tell
the person who ordered it--the addressee--that he or she was
performing an illegal act and the next time they do this the
CBP will take action on it. That could act as a deterrent for
future purchases. So they missed that opportunity, too.
Senator Coleman. When you talk about missed opportunity,
was there anything they did in returning it to the sender that
would have precluded that sender from reselling it, from
reintroducing those drugs back into the marketplace?
Mr. Stana. Not that I am aware of.
Senator Coleman. So the sender sold it and made their
money, I presume. There is no COD here. You are paying up
front. So they made their money and then they received back the
goods with the complete freedom to resell them again.
Mr. Stana. There is a possibility, unless there is
something that happened that I am not aware of, there is a
possibility they could be reintroduced to the market.
Senator Coleman. When you say something happening, was
there any coordinated enforcement action against these sellers?
Was there anything that identified this list of sellers and
then asked folks to go back and to proceed with some action
against them?
Mr. Stana. I am not aware of any. Records were not kept on
these 123 bins and the 40,000 packages in them. What I know is
they were predominately from two countries and they were from
two companies within those two countries.
Senator Coleman. I find that of concern. It is like busting
a drug dealer and giving him back his drugs without any follow-
up. And I understand administratively we are faced with what to
do with these things. But on the other hand, giving it back to
somebody who is already breaking the law----
Mr. Stana. As you know--you visited the New York facility--
there are seizure rooms with dozens and dozens of seized goods
waiting for some sort of disposition. These were over and above
that. But I didn't want to leave the impression that all
controlled substances were returned to sender.
Senator Coleman. But there were. We are looking at a
picture \1\ taken at JFK. Approximately 20,000 boxes of
suspected controlled substances seized by Customs are awaiting
processing.
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\1\ See Exhibit 14, which appears in the Appendix on page 299.
---------------------------------------------------------------------------
Mr. Stana. Right. It would look like that. There were 123
bins in an open area with bags in them that looked similar to
those.
Senator Coleman. And we clearly don't have the resources to
do those inspections, to process that.
Mr. Stana. Well, they said that it was a year, maybe 2
year's worth of processing backlog given the current required
procedures and available staff.
Senator Coleman. Let me ask you a question. You talked
about express facilities at one time. Are you talking about
private operators?
Mr. Stana. Right, FedEx, DHL, UPS, those facilities.
Senator Coleman. And their representatives will be here and
I appreciate that. They have manifests. Now, manifests means
that somebody is declaring that this is a controlled
substance----
Mr. Stana. Someone is to declare what good is inside, and
certain characteristics like weight, volume, and so on.
Senator Coleman. So the sender, the wholesale, whoever is
selling the drugs, would typically have to declare.
Mr. Stana. Yes.
Senator Coleman. But if they don't declare, then we are
stuck with the same situation we see with Postal. There is no
way to readily identify.
Mr. Stana. Well, again, they may be picked up in a random
search, but it is not likely. The other thing is, because FDA
is not on site at the same time CBP is--they work different
shifts, FDA works primarily during the day and CBP works at
night--they can't be there side-by-side to coordinate what
these random searches might focus on.
Senator Coleman. But you are depending upon the
credibility, the good word, the willingness of somebody to
subject themselves to review and investigation by the nature of
declaration, knowing that if they don't declare, then all they
have got to do is gamble, and the odds are substantially in
their favor because the odds of getting picked up in a random
search are so small.
Mr. Stana. Any kind of cargo, whether it is ocean-going
cargo, air freight, whatever, is subject to the same risk here.
The veracity of manifests is a longstanding problem.
Senator Coleman. And particularly in an area where it would
be different if there are manifests where you are not dealing
with substances that are subject to seizure, that are
potentially illegal. In fact, in the kind of spot searches that
we have done, we have seen significant percentages of drugs
which are controlled substances which are not in this country
legally. So it is almost as if going across the border, you are
telling the drug dealer, tell us what drugs you have.
Mr. Stana. Well, that is true, but in reviewing the
manifests, the FDA people are also looking for other things,
like certain structured shipments or a certain address they
received a tip on. CBP inspectors might also have a gut feeling
about a shipment where the weight doesn't match the description
of the goods. So it is not strictly on the declared item, but
that is a big part of the targeting.
Senator Coleman. I am looking, just trying to figure out if
there are solutions here, trying to sort out the purpose of
what we are doing here. One of the thoughts is to give Customs
the ability to seize and destroy. So in other words, instead of
sending back these 123 bins, if they could be identified as
controlled substances which are, per se, illegal, they could
have the ability for on-site destruction. Your reaction to that
proposal?
Mr. Stana. Obviously, it would require a change in law. But
at the same time, if that were enacted, it would certainly
reduce the backlog and make the whole process more manageable.
We haven't really examined all the pros and cons to it, but on
the face of it, it would solve one problem. I don't know if it
would create another.
Senator Coleman. I would, at some point, like you to be
able to do that. Again, I am looking for solutions.
If there were a few other obvious things based on your
study and your review, changes in the law that would improve
our ability to provide a greater measure of safety for American
consumers in this area?
Mr. Stana. Well, I think some of the initiatives that are
underway are going to help, like consumer education, alerting
people to the fact that this is just not getting the same drug
at a bargain price, that there are health risks. Having looked
at the table at the John F. Kennedy International Airport and
saw what was on it, I would never put that stuff in my body. I
think just getting that kind of word out is very important.
On the enforcement side, we talked about several options,
including more people and maybe a summary destruction of
illegal shipments. Another option is a summary return to
sender; that wouldn't take the drugs out of the commerce chain,
but it does make it more expensive for an Internet pharmacy to
operate. There are other options that have been proposed that
we are trying to get more information on, like working with the
credit card companies, as you mentioned, to stop purchases from
seemingly illegal sites, and identifying those sites that
appear to be in safe countries but are actually located
elsewhere and are selling dangerous drugs.
Senator Coleman. Aren't we also faced with the problem
today of sites that are located in safe countries, located in
Canada----
Mr. Stana. Or in the United States.
Senator Coleman [continuing]. Or the United States, but are
getting their drugs from unsafe countries.
Mr. Stana. I don't know if U.S. pharmacy outlets are
getting from third countries, but when we made our purchases of
drugs from U.S.-based Internet pharmacies, we also found
problems with the drugs. But your point is correct. There are
Internet drug sites that mask their actual locations. I read
about one site that posed as a Canadian site with Canadian
flags on the web page but the orders were filled by a pharmacy
in China.
Senator Coleman. And the consumer has no way to distinguish
between an all-American Drugs-dot-com coming from Fiji or
Thailand----
Mr. Stana. Not without a lot of sophisticated research.
They can be pretty well masked. Of course, there are two
dimensions to this problem and you mentioned them both. One is
the well-intentioned consumer like you or me that just wants a
bargain drug. The other involves, for example, the kid who
wants to get high and sees ordering from the Internet
pharmacies as an easy way to do it. Too often, we focus on the
former, and that is part of a great national debate about
trying to lower drug prices. But the latter is also very
important and plays right into this issue.
Senator Coleman. In 1999, this issue was reviewed. Folks
came before a House Committee, talked about task forces, talked
about reviews, talked about web crawlers. We had a series of
hearings. I believe Judiciary had a hearing just a couple weeks
ago. What advice or direction would you give to some of the
other witnesses who are coming before us from the FDA and
Customs and Postal and the private folks? What advice do you
give them to help raise the prospect of not coming back in
another 5 years, because if we come back in another 5 or 6
years and I am still here, I am going to be very angry.
Mr. Stana. Well, I think that this problem grows
exponentially. It doesn't grow on a straight line. With the
growth on the Internet, I think you would not see anything but
a tremendous growth in the future.
I think really that the core solution is getting a
consensus and a commitment to address this problem and do what
it takes to get on top of it. I don't know if FDA and Customs
and now CBP have asked for more resources or if they haven't,
whether any requests for more resources have been denied either
by the past couple of administrations or by appropriators. But
clearly, there has to be a demonstrated commitment to address
the problem. There are a lot of really hard-working people that
are trying to do the best that they can with the resources they
have. We don't want to create a cynacism because they are being
put on the line with an impossible task that they are never
going to have the resources to adequately addrss the problem.
Senator Coleman. I appreciate that, Director Stana. Thank
you. Your testimony has been very helpful.
Mr. Stana. Thank you very much.
Senator Coleman. I would now like to welcome our second
panel to today's hearing. Our second panel is comprised of
representatives of the law enforcement and regulatory
community, the Drug Enforcement Administration, the Bureau of
Customs and Border Protection, the U.S. Postal Service, and the
Food and Drug Administration.
I would like to welcome the Hon. Karen P. Tandy, the
Administrator of the Drug Enforcement Administration; Lee R.
Heath, Chief Postal Inspector for the U.S. Postal Service;
Jayson P. Ahern, Assistant Commissioner at the Office of Field
Operations at the Bureau of Customs and Border Protection; John
M. Taylor III, the Associate Commissioner for Regulatory
Affairs at the Food and Drug Administration; and finally
William Hubbard, Associate Commissioner for Policy and Planning
at the FDA.
As previously mentioned, the purpose of this hearing is to
examine what role the FDA, the Bureau of Customs and Border
Protection, the U.S. Postal Service, and DEA play in preventing
the illegal importation of scheduled pharmaceuticals and
pharmaceuticals that violate the Food, Drug, and Cosmetics Act,
and whether the pharmaceuticals that are pouring into the
United States from foreign sources are counterfeit, expired,
unsafe, or illegitimate. Again, I appreciate all of your
attendance at today's important hearing and am anxious to hear
your observations on the current state of affairs.
But before we begin, pursuant to Rule 6, all witnesses that
testify before the Subcommittee are required to be sworn. At
this time, I would ask you all to please stand and raise your
right hand.
Do you swear that the testimony you are about to give
before this Subcommittee is the truth, the whole truth, and
nothing but the truth, so help you, God?
Ms. Tandy. I do.
Mr. Heath. I do.
Mr. Ahern. I do.
Mr. Taylor. I do.
Mr. Hubbard. I do.
Senator Coleman. I think all the witnesses here are aware
of the timing system. When the lights go from green to yellow,
you have about a minute left to conclude. Your complete written
statements will be entered into the record.
Administrator Tandy, we will have you go first, followed by
Mr. Heath, Mr. Ahern, and finish up with Mr. Taylor and Mr.
Hubbard. After we have heard all your testimony, we will
proceed to questions. With that, Administrator Tandy, you may
proceed.
TESTIMONY OF KAREN P. TANDY,\1\ ADMINISTRATOR, DRUG ENFORCEMENT
ADMINISTRATION
Ms. Tandy. Thank you, Chairman Coleman. The DEA appreciates
your leadership on this issue, Mr. Chairman, as well as the
other Members of the Subcommittee, and I thank you for the
opportunity to discuss what is clearly a growing threat of on-
line purchases of pharmaceuticals.
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\1\ The prepared statement of Ms. Tandy appears in the Appendix on
page 202.
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In the 21st Century, the Internet is becoming the cyber
street corner where dangerous and addictive drugs are bought
and sold. Pharmaceutical drugs are peddled by multi-million
dollar organizations, albeit the same as Internet drug lords,
who are as sophisticated as traditional drug cartels.
Prescription drugs are not the only drugs being peddled by
criminals on the web. I want to share with you an operation
that just concluded. It was conducted yesterday, and
successfully so, by DEA along with my colleagues at this table
from Homeland Security, Immigration and Customs Enforcement,
FDA, U.S. Postal and Inspection Service. Together, we targeted
on-line sellers of illegal designer drugs in Operation Web
Trip. We arrested ten Website operators who were distributing
highly dangerous designer drug analogs. DEA issued one
restraining order, executed one search warrant, and obtained
three voluntary terminations of five targeted Internet domains.
Users refer to these analog drugs, designer drugs, as Foxy,
Methoxy, or DIPT, and too many young people tragically believe
that these designer drugs are legal substitutes for Ecstasy or
LSD.
In reality, these drugs are research chemicals with no
medical use, and when consumed, they produce hallucinogenic
effects and users often exhibit violent behavior. These are
volatile, powerful drugs that are not meant for human
consumption. If users ingest as little as five milligrams too
much, fatality can result.
The Websites that were targeted in Operation Web Trip sold
substances that led to the fatal overdose of at least two
people and many more non-fatal overdoses. This operation
demonstrates that we together will shut down these Websites and
arrest those behind them.
Rogue Internet pharmacies have also claimed too many
unsuspecting victims. DEA's investigations have discovered 14
deaths or overdoses and 15 people who have entered treatment or
sustained injuries from drugs obtained over the Internet. With
the click of a mouse, consumers are buying controlled
substances over the Internet without a legitimate prescription.
Physicians associated with these Websites almost never
establish a proper diagnosis through the use of accepted
medical practice. In short, there is no authentic doctor-
patient relationship. Visitors to these pharmaceutical Websites
are, in essence, helping themselves to controlled substances.
Consumers are subject to habit-forming drugs, dangerous drug
interactions, and counterfeit or tainted products.
The Bush Administration has implemented a coordinated
strategy announced this past spring to deal with the abuse of
prescription drugs. For our part, DEA is targeting the
diversion of drugs using the Internet by utilizing additional
tools that Congress has given to us. Appropriations for this
fiscal year included 63 additional positions dedicated to our
Internet initiative, which targets rogue pharmacies and
affiliated doctors and has resulted in 91 active investigations
involving the diversion of pharmaceutical controlled substances
using the Internet, and those investigations cover some 537
Websites currently.
This fiscal year, we have shut down 25 Internet pharmacy
organizations. Over $3.3 million has been forfeited, and 3.2
million dosage units have been seized. Eleven million dollars
in assets are pending forfeiture currently.
In addition, Congress provided $6.3 million to DEA to put
into place sophisticated technology to track down these rogue
Internet pharmacy Websites. We are also using the Internet
itself as a tool. DEA is working with major search engines and
Internet service providers to warn consumers searching for
controlled substances of the dangers, and we have recently
established a link to DEA's home page that allows citizens in
this country and others who access that home page to report
suspicious Internet pharmacies, which is an initiative that has
also brought us investigative leads.
The scope of this problem is too broad for DEA or any one
of the single agencies before you to tackle alone. We are
enlisting the support of the private sector, the legitimate
businesses essential to the on-line trade in diverting
pharmaceutical drugs through the Internet.
For example, we are working with FedEx and UPS, who are
acutely aware that their businesses are being exploited and
alert us with any unusual patterns. Similarly, consistent with
my emphasis and this administration's emphasis on taking away
the proceeds of the illicit drug trade, both Visa and
MasterCard are assisting us in investigations and with
financial leads. Both shippers and credit card companies have
agreed to shut down sites determined to be conducting illegal
activities.
And as this Subcommittee has noted, a significant aspect of
the pharmacy problem is located abroad. The DEA is cooperating
with our Federal and foreign counterparts and we have assumed a
leadership role in the international forum on Internet
diversion.
We look forward to working closely with you, Mr. Chairman,
and with the Congress to ensure that the Controlled Substances
Act addresses illegal Internet pharmacies as vigorously as we
intend to address them through our enforcement efforts, and I
would be happy to answer questions at the appropriate time.
Thank you.
Senator Coleman. Thank you very much, Administrator Tandy.
Mr. Heath.
TESTIMONY OF LEE R. HEATH,\1\ CHIEF INSPECTOR, U.S. POSTAL
INSPECTION SERVICE
Mr. Heath. Good morning. As Chief Postal Inspector, I
appreciate you giving me the opportunity to present the views
of the U.S. Postal Service regarding this growing concern and
the role the Postal Inspectors play in combatting it.
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\1\ The prepared statement of Mr. Heath appears in the Appendix on
page 206.
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The responsibility for safeguarding approximately 200
billion pieces of mail a year and ensuring America's trust in
the Postal system falls on the shoulders of the U.S. Postal
Inspectors. I have submitted a written statement which
highlights what we have done and continue to do with regards to
illegal narcotics, child pornography, and other dangerous
mailings. It outlines what we are doing and will do to better
address today's issue.
There are numerous items prohibited from being sent through
the mail under various sections of Title 18 of the U.S. Code.
For instance, it forbids the mailing of lottery tickets or
other gambling instruments. Customs agents open suspected
foreign lottery mailings upon entry into the United States and
then refer the mailing to us, since we have the primary
enforcement jurisdiction. Using our existing authority, Postal
Inspectors obtain destruction orders for this lottery mail to
disrupt the operation.
We have met with the Postal Service General Counsel to
explore applying our existing statutory authority to declare
illegally mailed drugs in violation of the prohibition against
dangerous mail. This strategy would enable us, working with FDA
and Customs, to handle these items in a manner similar to what
we do with lottery mailings.
To be successful, we must rely on the cooperative efforts
of Customs and the FDA. Controlled substances may be mailed if
they are not otherwise banned by Title 21 of the U.S. Code and
are packaged in accordance with the Controlled Substance Act.
Prescription drugs may be sent through the mail as long as the
inner packaging is labeled to show the name and address of the
dispenser and the label conforms to the other requirements. The
outer wrapper has to be free of content markings.
This requirement creates an enforcement difficulty for
Postal Inspectors acting alone. However, I am confident that we
can overcome such challenges with the assistance of Customs and
FDA using their existing authorities. Without these agencies,
it is difficult, if not impossible, for us to articulate the
probable cause necessary to secure a Federal search warrant
based solely on the exterior appearance of the package or the
mailing or the country of origin.
Since meeting with the Subcommittee on June 18, Postal
Inspectors have met with our law enforcement and regulatory
partners. We asked to be included in the standing working
groups focusing on on-line drug sales.
We also conducted an assessment of the extent of the
problem at the Miami, New York, Los Angeles, San Francisco, and
Chicago International Mail Service Centers to develop
strategies to address this problem with the interagency task
forces. We proposed to the task force our intent to host a
conference of the interested agencies from each of the
International Service Centers to develop a strategy to combat
this problem.
Finally, as the Chief Postal Inspector, I also serve as the
Chairman of the Postal Security Action Group of the Universal
Postal Union. The Universal Postal Union is the regulatory
organization for all postal administrations, and the Postal
Security Action Group is made up of approximately 75
international postal administrations. One of our major efforts
since September 11 has been to promote and adopt measures which
are designed to keep the mails of the world free from dangerous
goods. I will obtain the necessary information from Customs and
the FDA with regards to target countries and raise this issue
with the other foreign postal administrations.
The Postal Inspection Service will do whatever it can to
better address the problem of illegal drugs and illegally
imported drugs in the mail. We remain greatly dependent on
those agencies which have the primary jurisdiction in these
matters and I am confident that we can work with them to
overcome any obstacles.
I appreciate your recognition of the importance of this
issue and the support shown by all of you. Thank you.
Senator Coleman. Thank you very much, Inspector Heath. Mr.
Ahern.
TESTIMONY OF JAYSON P. AHERN,\1\ ASSISTANT COMMISSIONER, OFFICE
OF FIELD OPERATIONS, BUREAU OF CUSTOMS AND BORDER PROTECTION
Mr. Ahern. Good morning, Mr. Chairman, and thank you very
much for the opportunity to testify here today. I would like to
discuss with you CBP's ongoing efforts to address the ever-
increasing trend of personal and bulk importation of
pharmaceutical products and controlled substance into the
United States.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Ahern appears in the Appendix on
page 218.
---------------------------------------------------------------------------
Although the main focus of CBP has shifted to protecting
the United States from terrorist attacks, CBP also enforces
over 400 requirements from more than 40 agencies at our U.S.
borders. These include the laws that prohibit the importation
of illegal and unapproved pharmaceuticals that fall under the
jurisdiction of the FDA, as well as those controlled substances
that are under the jurisdiction of the Drug Enforcement
Administration.
The issue of U.S. consumers buying prescription drugs from
foreign sources have become a significant concern to CBP, and a
growing number of Americans obtain their medications from
foreign locations, often seeking out suppliers in Mexico and
Canada, as well. However, the safety of the drugs purchased
from these sources cannot be ensured.
CBP is concerned with several ways that pharmaceuticals are
imported, including those that are purchased through the
Internet and shipped through our international mail or express
courier facilities, those carried by individuals across the
U.S. borders, and also bulk shipments of adulterated or
counterfeit pharmaceuticals. During the course of the past
year, we have taken some steps to address each of these areas
of concern.
Millions of packages, though, come through our mail and
express courier facilities each year and thousands of these
packages, particularly in the mail, are found to contain
illegal and unapproved pharmaceuticals. Additionally, we have
found bulk pharmaceutical shipments that were attempted to be
imported through the mail, potentially indicating that these
products could be making their way to pharmacy shelves.
The volume of the imported material brought into the United
States via the mail is overwhelming. The international mail
poses also several unique challenges to CBP, since it is not
accompanied by any electronic manifest information.
While we do not have statistics on the total number of
imports of controlled substances or pharmaceuticals that enter
the country each year, the U.S. Postal Service estimates that
over 400 million pieces of mail enter the United States through
our international mail branches each year. It is also
significant to note that during fiscal year 2003, Customs and
Border Protection made over 24,000 seizures of mail, and during
this period, of those 24,000, 12,353 were pharmaceutical and
controlled substances.
At the express consignment facilities that we staff, there
are over 46 million packages arrive, with Customs and Border
Protection making over 4,900 seizures, of which 1,543 were
related to pharmaceuticals or controlled substances.
In order to address some of these challenges, we recognize
certainly there is a significant threat growing to the public's
health and CBP has been working very cooperatively with the
DEA, the FDA, the U.S. Immigration and Customs Enforcement,
ICE, and the U.S. Postal Inspection Service, and now the
offices of the National Drug Control Policies have become
involved, as well. We have directed these issues related to the
importation of prescription drugs and miscellaneous
pharmaceuticals. The goals of this interagency working group
are to create a strategy for enforcement, interdiction, and
disposition of unlawful pharmaceuticals entering the United
States and to develop proposals for joint enforcement
operations at our ports of entry and mutually agreed upon
policies to unauthorized importations.
Since a large percentage of pharmaceuticals and controlled
substances arrive through the mail and by express consignment,
a separate working group has also been created to address these
areas. The working group was charged with reviewing and
revising procedures used at international mail and express
consignment operator facilities in addition to assessing
resources used at these locations. CBP is currently working
with the FDA to develop standard operating procedure for mail
operations.
On the concrete results of the mail and express task force
is the coordination of the effort that is being conducted at
all of our international mail branches this year. The
operation's goals, called Operation Safeguard, is to identify
the type and the volume and the quality of the pharmaceuticals
imported into the United States. This enforcement effort found
the volume of pharmaceuticals shipped through the international
mail to be enormous. We have also found that a significant
number of these do not contain any active pharmaceutical
ingredient but merely contain substances such as starch and
sugar.
The latest blitz that was conducted in June uncovered a
substantial volume of controlled substances, and of the
packages that were examined, 46 percent are suspected to
contain controlled substances and these products were seized.
The working group has also conducted regular meetings since
January 2004 and several key accomplishments have also been
created through the reimplementation of Operation Safety Cap,
which is designed to look at passenger importations of
pharmaceuticals from Mexico. Safety Cap was an agency-wide plan
to enforce laws related to the importation of prescription
drugs at the border. Both FDA and ICE also participated in this
enforcement operation and this plan continues to develop for
further locations along the Southwest border, which we have
done four to date. We will also turn to the North and look at
crossings coming across the Northern border from Canada.
In conclusion, it is clear that the importation of the
pharmaceuticals and controlled substances remains an
overwhelming problem for Customs and Border Protection. We are
committed to continue to work with the FDA, the DEA, ICE, and
other regulatory agencies to develop a more practical and
workable approach to solving this problem.
I want to thank you and the Members of this Subcommittee
for including Customs and Border Protection in your review of
importation of pharmaceuticals and I will be happy to take any
questions later.
Senator Coleman. Thank you, Commissioner. Mr. Taylor.
TESTIMONY OF JOHN M. TAYLOR, III,\1\ ASSOCIATE COMMISSIONER FOR
REGULATORY AFFAIRS, U.S. FOOD AND DRUG ADMINISTRATION,
ROCKVILLE, MARYLAND
Mr. Taylor. Mr. Chairman, before I begin, I would like to
ask that some additional and updated enforcement cases be
included in the record along with my written statement.\2\
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\1\ The prepared statement of Mr. Taylor appears in the Appendix on
page 227.
\2\ Additional FDA Enforcement Actions appears in the Appendix on
page 283.
---------------------------------------------------------------------------
Senator Coleman. Without objection.
Mr. Taylor. Thank you, sir. Mr. Chairman, I appreciate
having this opportunity to discuss with you issues related to
on-line pharmacies and importation of prescription drugs to the
United States. Despite the many proposals that would legalize
the importation of prescription drugs, FDA continues to have
serious public health concerns about the importation of drugs
outside the current safety system established by Congress under
the Food, Drug, and Cosmetic Act.
When it comes to buying drugs absent our existing
regulatory protections, FDA has consistently concluded that it
is unable to endorse a ``buyer beware'' approach. Currently,
new drugs marketed in the United States, regardless of whether
they are manufactured here or in a foreign country, must be
approved by FDA based on demonstrated safety and efficacy. They
must be produced in inspected manufacturing plants that comply
with good manufacturing practices, and the shipment and storage
of these drugs must be properly documented and, where
necessary, inspected.
Unfortunately, the drug supply is under unprecedented
attack from a variety of progressively more sophisticated
threats. For example, FDA's counterfeit drug investigations
have risen fourfold since the late 1990's. At the same time,
inadequately regulated foreign Internet sites have also become
portals for unsafe and illegal drugs.
For example, FDA recently worked with domestic and
international authorities to shut down a Website advertising
FDA approved and safe European birth control pills and other
drugs, but they were actually importing ineffective counterfeit
products. FDA believes this Website and the four Websites that
FDA knocked out in February 2004 that were selling
contraceptive patches are indicative of the dangers consumers
face when they purchase drugs over the Internet.
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. When consumers take such medications, they face
the risk of subpotent, contaminated, counterfeit product,
dangerous drug interactions, and/or suffering adverse events,
some of which can be life threatening. More commonly, if the
drugs are subpotent or ineffective, patients may suffer
complications from the illnesses that their prescriptions were
intended to treat without ever knowing the true cause.
Due to the huge volume of drug parcels entering the United
States through international mail facilities and courier
services, the requirements for notice and hearing, and FDA's
limited resources, it is difficult for FDA to obtain and refuse
the many mail imports consisting of individual small quantity
shipments. As a consequence, tens of thousands of parcels that
FDA is not able to review as a result of its limited
enforcement resources and competing priorities are eventually
released by FDA and the Bureau of Customs and Border
Protection, even though the products contained in the parcels
may violate FDA statute.
While we do not believe that this is an acceptable public
health outcome, it is one which presents a significant
challenge to the agency. We have responded to this challenge by
employing a risk-based enforcement strategy, the refinement of
which is ongoing, to target our existing resources effectively
in the face of multiple import priorities, including homeland
security and food safety.
To enhance our ability to effectively carry out this task
and to assess the extent of the problems posed by imported
drugs, CBP and FDA conducted import blitzes at four
international mail facilities last summer. We found that 88
percent of the drug products we examined were unapproved or
otherwise illegal. Examples of the potentially hazardous
products encountered during the blitz included drugs never
approved by FDA, drugs requiring careful dosing, drugs
withdrawn from the market, drugs with clinically significant
drug interactions, drugs with inadequate labeling, drugs
inappropriately packaged, drugs requiring initial screening
and/or close physician monitoring, and controlled substances.
CBP and FDA performed another round of blitzes at four
international mail facilities and at several courier hubs in
November 2003, resulting in similar findings. CBP and FDA
continue to perform blitzes which help quantify the type of
drugs coming into this country, identify the public health
issues surrounding these products, and identify trends in
illegal importation of unsafe drugs. The results enable us to
strategically focus our investigatory and regulatory resources
and drive our efforts to reevaluate, refine, and improve the
programs and procedures used to ensure the availability of safe
and effective drugs to U.S. consumers.
As a result of these efforts, the agency has finished
drafting procedures that encompass the best and most effective
practices identified from our operations around the country.
These procedures will be used by all FDA personnel responsible
for handling mail at the international mail facilities and at
the air courier hubs. We have implemented these new mail
procedures in a staggered approach, starting with the
international mail facilities located at JFK Airport and
Carson, California. The air courier procedures will be
implemented in a similar manner next month starting with the
air courier hubs in Memphis and Louisville.
The completion of these procedures is significant because
it represents a strengthening in the programs and procedures
that are used to ensure the availability of safe and effective
drugs to U.S. consumers. The procedures increase efficiency and
consistency by providing well-defined steps for targeting
packages for inspection and detention, and they also help CBP,
DEA, Postal, and our other partners because they provide a
better understanding of what products are of greatest concern
to the agency, and they also make the process more transparent.
In closing, a large and growing volume of parcels
containing foreign prescription drugs ordered by individuals
from foreign sources are entering the United States. This
volume represents a substantial challenge for the agency to
adequately assess and process these parcels, resulting in an
increased workload for agency field personnel. The new
procedures, however, will help the agency target its limited
resources in a manner that will best protect the public health
from unsafe, illegal imported drugs, and drugs purchased from
overseas Internet sites.
Thank you for this opportunity to testify. I look forward
to responding to any questions that you may have.
Senator Coleman. Thank you, Mr. Taylor.
For all the witnesses, there is a lot of information in
your prepared statements and 5 minutes doesn't do justice to
the range of concerns that you have identified and some of your
suggestions for addressing those. So I just want you to know I
appreciate that. I don't know if the audience, listening to 5
minutes, knows the extent to which you have been looking into
these problems and trying to figure out a way to deal with
them. But I do appreciate that.
Commissioner Hubbard.
TESTIMONY OF WILLIAM HUBBARD, ASSOCIATE COMMISSIONER FOR POLICY
AND PLANNING, U.S. FOOD AND DRUG ADMINISTRATION, ROCKVILLE,
MARYLAND
Mr. Hubbard. Thank you, Mr. Chairman, and on that note, I
am going to race through some exhibits that FDA has that I
believe complement the very findings that you and GAO have made
and also give you some results of some recent investigations
that we have done.\1\
---------------------------------------------------------------------------
\1\ See Exhibit No. 33 which appears in the Appendix on page 351.
---------------------------------------------------------------------------
As you saw in New York, Customs is the initial screening
organization for these drugs that turns it over to the FDA. We
get presented with these huge bins----
Senator Coleman. Mr. Hubbard, I will let you take your time
a little bit, too. I will extend your time.
Mr. Hubbard. Great. Thank you. [Laughter.]
Senator Coleman. I grew up in Brooklyn, New York, spending
my last 4 years in Minnesota, but the good news about growing
up in Brooklyn is that you can talk fast. The bad news is,
nobody understands you. [Laughter.]
Mr. Hubbard. Thank you very much, Mr. Chairman. So FDA is
presented with these huge bins of packages, and I have got some
here before me. These are actual orders that patients have
made, and let me just make up a scenario here.
They send me to New York and become one of these
inspectors, and I have an M.D. degree and a pharmacy degree and
a law degree, and I begin to open these packages, and maybe I
can get through one bin in a day, but I can't make any
reasonable judgments about these drugs. I can look at the name.
I can look at the pill. But it doesn't tell me very much.
So I think to answer the question that you raised about
more resources--a visual inspection with more resources will
not actually solve this problem, we fear. And we are also very
concerned that controlled substances are finding their way
through with the prescription medications because of the
difficulty of finding those, and as you saw in New York, there
is a mountain of those sitting there waiting to be dealt with,
as well.
Now, one of the things that we have recently done is ask a
local computer security firm named Cyveillance to look at some
of the sites that purported to be Canadian, which are generally
believed to be the best of these pharmacies. So they use a web
crawler, as you asked about, to examine sites and found 1,000
sites--1,009--that appeared to be Canadian. And then we did a
random deeper analysis of 10 percent of those and found that
almost half are offering controlled substances. Two-thirds or
more are selling prescription distribution drugs. These are
drugs like Accutane or something that FDA would only approve
under very restricted use by certain doctors and pharmacists.
They also lie and they say the drugs are FDA approved when, in
fact, they are not, and they have liability disclaimers that
say to the patient, we are not responsible if you are injured.
As an example, here is one, Discount Drugs of Canada. It
appears to be very legitimate. We asked, where is it? They say
they are in Manitoba. Who is the registrant of it? It is a Mr.
Thuy. Where is he? He is in Vietnam. That concerns us. Why is
the registrant of this site in Asia? They are selling not only
drugs from Canada, they are offering drugs from Australia and
Britain. So we see this almost inexorable dimunition of the
source, and there are reports now of drugs coming from Chile,
from Israel, from South Africa, and so the whole system, we
fear, is degrading. And, of course, they are offering
controlled substances like Meridia and restricted distribution
drugs like the Somatropin that you see here.
And then lastly, these sites are essentially saying to the
patient, sign away any right to sue us and attest to the fact
that if you are injured, it is your responsibility, patient. No
American drug store would ever do that.
We are also worried about an even slippery slope. As you
see, this is a communication from a Pakistani drug manufacturer
who is saying essentially to Canadian pharmacies, when you
start running short of your supply of the good Canadian or
American drugs, let us know. We will fill your pipeline with
drugs that we make here in Pakistan.
One site that we and the DEA have been investigating is
this one that offers to sell generic versions of Canadian
drugs, and we have actually made some buys there and explored
where they are. They are actually registered in China. But the
postmark was Dallas, Texas. The return address was Miami,
Florida. The credit card was billed to a business on the Island
of St. Kitts. And the listed phone number for this site when we
began to investigate where it really is was the South American
country of Belize. Again, why if this is legitimate are these
things all over the place?
And, of course, it is not legitimate. We actually bought
drugs and tested them, Lipitor, Viagra, and Ambien, Ambien
being a powerful sleep aid. We tested for potency. They failed.
We tested them for so-called dissolution, to see if they would
dissolve in the body and go into the bloodstream. Two failed.
And they had impurities in most cases. In fact, in some cases,
their potency was half-potent or double-potent. So, for
instance, a senior citizen could take this Ambien thinking one
pill was what he was supposed to take. It is double-potent. It
could sedate him to the point of death, a very serious public
health concern.
Now, as you know, part of the problem, Senator, is that the
public officials are telling people to go buy these drugs
because they are cheaper, and this is the Wisconsin site that
Governor Doyle has put up. They use three Canadian pharmacies
in British Columbia, in Alberta, and in Manitoba, as you see,
Canada drugs, Granville Pharmacy, and Total Care. So recently,
the Pharmacy Society of Wisconsin has been examining the actual
purchases from those sites and they are finding that a third of
the prescriptions from that site, and this is supposedly the
site has been checked out by the State. It is supposed to be
one of the better ones. A third of the prescriptions are not
meeting the State's agreement. Two-hundred-and-thirty-seven
impermissible drugs have been dispensed. Many of them were non-
FDA approved drugs. And they had a specific requirement not to
ship refrigerated drugs because that had been a problem.
So FDA then did its own examination to determine if, in
fact, the Pharmacy Society results were accurate, and in fact,
we found even worse, that in the case of Total Care Pharmacy,
two-thirds of their prescriptions violated the State agreement.
But unfortunately, Mayor Thomas Menino of Boston just yesterday
announced a program to give employees of Boston drugs from
Total Care Pharmacy, the very pharmacy that has been found to
be violating the standards that had been established.
And even worse, in many cases, they are selling Americans
generic drugs that they could have gotten here in the United
States at a corner drug store cheaper than in Canada. So they
could have gotten the regulated, FDA-approved drug here, and
they are being sent to Canada to buy a drug that is actually
more expensive and less regulated.
Last, I will just close with a couple of mentions of
counterfeiting. These are two counterfeit drugs that are
virtually identical in appearance and very difficult for the
patient to distinguish between.
This is a Viagra die that a counterfeiter had been using.
As you can see, it is quite filthy. You can see the Pfizer name
upside down on the reverse side of the pill, the Viagra
imprint.
This is a tableting machine. This is not what you would see
in a licensed manufacturing organization.
This is how they dry the pills using light bulbs, as you
see.
Now, this is the Viagra--this is their sophisticated
packaging process. The blue pills on the bed are the Viagra and
the bottles in the large plastic bags are to be inserted. I am
not sure what the microwave oven is for.
This is again a packaging machine.
And then lastly, I will point out that a toilet is an
effective porcelain vessel to make drugs. As you can see, that
toilet is filled with them. But I don't think any of us believe
that is the way to make good drugs, and so we are very worried
that the counterfeiters will be able to use this mechanism, as
you have pointed out, Mr. Chairman, to get these unsafe drugs
into our system.
With that, I will end my presentation. Thank you.
Senator Coleman. Thank you very much, Commissioner Hubbard.
Let me start, and I am going to have questions for the
panel, but just a statement about the work that the line folks
have done. I have had a chance to be out at JFK, Customs and
the FDA--I do have great respect for the work that your folks
are doing out there. They are faced with a challenge of
overwhelming proportion. I do have concerns about our ability
to get our hands around this, whether in the 5 years from 1999
to today, did we move quickly enough in that period of time.
But I just want to say thank you to the folks on the front
line. We have some issues that we have to deal with in terms of
resources, whether this Congress is providing enough resources
and whether we have worked in a coordinated enough approach.
But I do want to let the folks on the front line know that we
appreciate what they do.
How do you deal with the comments out there? And by the
way, let me back it up and say I note you looked at Wisconsin's
site. Minnesota has a similar site, and perhaps you are being
kind to the Chairman and my governor by not commenting on the
Minnesota site. I do recall in my review for this hearing that
even the Minnesota site was one where one of the issues there
was that site was providing drugs that were actually from
another country. Now, apparently they provide notice to the
customer that they are not getting Canadian drugs, but can
somebody comment on that phenomena, that even those
``legitimate'' Canadian operations are at this point in the
process of going elsewhere for their drugs? They are not
American and they are not Canadian. They could be produced
anywhere in the world. Any reflections on that?
Mr. Hubbard. I think you are right. We pointed that out
substantially because the sites often promise FDA-approved,
U.S.-made drugs sold through Canada, and this trend of going to
other countries is a slippery slope that we are very concerned
about. And, in fact, it is happening. And while some do say
that, others don't even say that. They just send the drug.
We had a case recently of a gentleman from Michigan who had
ordered a drug from a Canadian pharmacy and was told he was
going to get the U.S.-made, FDA-approved, Canadian-sold drug
and it came from India. So he was lied to, and that is a
concern, that in this case a senior citizen was duped into
believing he was going to get the good drug and he didn't.
Mr. Taylor. It is directly attributable to supply and
demand. One of the reasons why we conducted the blitzes is
because there often is a lot of conjecture about what is out
there and there is also a lot of conjecture about all the
products being perfectly safe or all the products being
harmful. And one of the things we have noticed is that,
obviously, as the American consumers purchase more and more
products over the Internet or through storefront pharmacies,
the supply is dropping, and so these suppliers are having to
look to other countries to backfill that supply. Our concern is
that as they look at these other suppliers, that additional
quality issues will arise, we will know even less about the
origin of the products and how the products are manufactured.
Senator Coleman. How do you respond to the quip, ``Where
are the dead Canadians?''
Mr. Taylor. I am sorry, the----
Senator Coleman. How do you respond to the quip saying,
``Where are--''
Mr. Hubbard. Well, first of all, there are----
Senator Coleman. ``Where are the dead Canadians?'' With all
of the concerns that we are raising here, we are not seeing
lives being lost.
Mr. Hubbard. There are injuries that have occurred from
drugs bought by Americans from Canada. It is not a long list.
But part of the problem, Mr. Chairman, is that there is no
system in place to track injuries from these drugs. These drugs
shouldn't even be here. So the health care system doesn't track
them. And we have learned from patients, they tend not to tell
anyone they are buying these drugs. They feel that maybe they
have done something a little wrong and they don't admit it.
So let us say a patient gets a drug for his high blood
pressure, it doesn't work, he has a stroke. They ask his doctor
later and he said, ``Well, my patient had the high blood
pressure and he was stroke-prone,'' but maybe didn't know that
the patient was getting not the legitimate drug but the foreign
drug that wasn't working and caused his stroke.
Mr. Taylor. I think that is right. I mean, I think there is
an additional facet to it, which is we don't always expect,
quite frankly, to see gross negative health outcomes. However,
our overarching concern is that a person is purchasing a drug
with the expectation that it will treat or control the
condition that they have, and if a drug is without any active
ingredients, like the products that CBP tested, or like the
counterfeit Lipitor that we dealt with last year, or like the
contraceptive patches that were in my oral testimony, then the
person's condition is not going to be treated or their
depression is not going to be controlled. So that might not
lead to mortality, but it certainly has a negative health
impact that is not desirable.
Senator Coleman. I would also note at our last hearing
where we dealt with the instance of dead Americans, a young
man's family was involved in the testimony, and a tri-athlete
whose wife didn't know that he was getting these drugs until he
died. Perhaps she might not have known if certain information
hadn't shown up. So I hear that quip again and again.
A question I would like you all perhaps to respond to.
Knowing the extent of the problem or the extent of the
challenge, was it 200 billion pieces, right, billion pieces of
mail coming through this country? The percentage of stuff
coming in from other countries, what was the figure there? Was
it 400 million? Does anyone here envision, if you had access to
whatever resources you needed, within reason, a system whereby
we truly get our hands around this problem? Ms. Tandy.
Ms. Tandy. Mr. Chairman, if you liken this flow of
pharmaceuticals coming into the United States as water through
a faucet, my panel colleagues are at that downstream of the
faucet trying to catch it all. What we are doing with DEA with
the resources that were committed to us in the 2004
appropriation, we are focusing on turning the spigot off, which
is attacking the organizations that are responsible for that
flow.
It requires very sophisticated technology which we have in
place now and are refining to identify these hundreds of rogue
pharmacy Websites, many of which are outside this country. It
is critical in order to truly get our hands around this to stop
the spigot at the top and put those Websites out of business
and those organizations that are responsible for that, put them
in American jails for sending those drugs here.
Senator Coleman. Let me, before others respond, just to
follow up on that. It has been highlighted here that you have
sites that purport to have FDA approval, that have seals of
approval. There have been some proposals to, in fact, require
FDA approval in order for folks to operate. But assuming, do we
have the authority today? Do we have the laws on the books
today? If we were to put in place a system whereby there was
bona fide FDA approval but you had folks who were
counterfeiting that approval, who were fraudulently stating
that they had FDA approval, do we have in place the legal
mechanisms to go after and shut down these rogue operations?
Mr. Taylor. So far, a lot of our discussion has surrounded
the issue of resources, but for FDA, it is not just resources.
It is a question of adequate authorities. As Mr. Hubbard said,
mere visual inspection of the product at the border is not
going to--it is just not that useful in determining in a
dispositive way whether a product is safe or not or whether it
is approved or not. An important part of knowing the content of
a product is knowing where it comes from and knowing its
origins.
And yet when people ask, well, why doesn't FDA go and do a
foreign inspection of some of these overseas pharmacies or
overseas sites, what people don't understand is we don't have
the jurisdiction to do those inspections. In order for us to do
our foreign inspections, even the foreign inspections we do now
as part of a new drug approval, we need the company to invite
us in, and the incentive is that they invite us in and we do
the inspection and their product will get approved, and we need
the country to allow us to come in, and there have been
instances where we have been on a plane on our way to a
facility and either the country or the company has decided they
are not ready and we have had to turn around--so it is a
question of resources and authorities that are necessary to
really do a better job of controlling this problem.
Senator Coleman. Do you currently have the authority to, if
you have a site that is fraudulently proclaiming that it has
FDA approval, to shut down that site and to prosecute those for
some sort of false representation?
Mr. Taylor. We do not have that authority. Sometimes we
will--what we will do is sometimes we will talk to the Internet
service provider and they will do it for us, depending on the
evidence that we have in hand. Other times, we work with our
partners at DEA or at ICE and they might have the
administrative authority to shut down a site. But FDA does not
have the authority to shut down a site. What we often do is we
will either enjoin an operation, which will lead to the site
shutting down, or we will indict or convict the people who are
behind the site. But we don't have express authority to shut
down the site.
Senator Coleman. Talking about authority, Commissioner
Ahern, do you have the ability at this point to seize
controlled substances? We have seen boxes of this stuff, there
was one discussion of those being sent back, literally sent
back to the illegal purveyor of this. What kind of increased
authority do you need to immediately seize and destroy, and
would you want that kind of authority?
Mr. Ahern. Thank you, Chairman. I would also like to answer
the previous question, too, about the resource impact of this
and is resource an acceptable solution to this problem.
I think, certainly, I am not certain you can throw enough
resources given the volumes that we are dealing with, and I am
not sure a resource response is the appropriate response for
the government agencies. I think we need to take a very layered
approach. I think it certainly is very appropriate to look at
taking out the Websites, taking out the profiteers of this, and
also I think a very layered approach with interdiction,
investigation, intelligence, and public outreach. I think those
are very key components that certainly is part of the task
force, and by adding ONDCP recently onto the task force, we are
getting that outreach part along with FDA.
But certainly to the question of authorities and to the
referenced parcels that were returned to sender at JFK, I would
like to respond to that directly. That is true, that there was
the shipments up in JFK that were returned to sender. Most of
those were Schedule IV as well as a lot of pharmaceuticals, as
well. That was a 5- to 6-month backlog of detentions and
seizures that were made at that point in time.
The people at JFK did not respond to policy of this
organization and we have made the corrections with them to make
sure that they know that they do not send return to sender on
seizures. It should be affected at the borders.
However, I would like to state that for each one of those
seizures that does occur, it requires about one hour of front-
end processing at the mail facility to process those seizures,
and that is why when you had your opportunity to go up and take
a look at the JFK mail facility, and what has been depicted
here today in the hearing shows the volume actually of what is
being stored and detained in our storage facilities there for
processing, not all for FDA determination, or for Customs and
Border Protection processing.
We have to do the same level of processing of that seizure
because of the due process the individual importer is afforded
under current law and procedure. We have to do the same long-
form enforcement report as we would for if it was ten pounds of
heroin or cocaine. We need to find a way to do consolidated
seizure reports that could take the time involved with this
processing down significantly, as well as move to a very
efficient and effective summary forfeiture proceeding where we
don't need to send the notice out but we can destroy these
things on site and continue with the interdiction mission as
part of that layered strategy.
Senator Coleman. In order to find that way, is that
something that requires administrative changes or does it
require legislature changes?
Mr. Ahern. For the summary forfeiture authority, we
certainly need to have the legislative change to support that.
Senator Coleman. I look forward to working with you on
those proposals.
Also in your testimony, you talked about interagency
working groups. I reflected earlier in my opening statement,
there were working groups formed in 1999. What is the
difference between the working groups we have today and those
that we had 5 years ago?
Mr. Ahern. I can't reflect back to 1999 and what might have
not occurred under the group that was put in place at that
point in time. I was not directly involved with that. I will
tell you, looking back in history, shortly after this group was
created, there were some operations that were conducted, not
many. We also then had the 9/11 tragedy which certainly took
the focus of the Border agency, certainly the agency that I am
part of, and redirected our focus to preventing terrorists or
implements of terrorism from coming into this country, and I
think that was a very appropriate response from us for us at
that time.
However, within the last several months, we have created
these additional task forces to try to rejuvenate the
collaboration that is necessary to achieve the layered approach
with stopping this problem. It is not just a border
interdiction problem. It is not just an investigative problem
or a regulatory problem. We need to tackle this on all fronts.
I believe that the five working groups that are part of
this have some comprehensive plans, and I would also submit
that with the actions that have come out through the task
force, special operations and blitzes that have been conducted
as well as the laboratory and scientific services sampling
reports, have shown the level of concern and I believe we will
take these and continue to move forward with our action.
Senator Coleman. I would hope there would be some objective
ways to measure progress here so we are not coming back in 5
years and asking the same question.
Mr. Taylor. Mr. Chairman, one objective measure is the work
that we have done on procedures. One of the subgroups is just
devoted to mail procedures and targeting. As part of our
staggered approach, we have shared the procedures with DEA,
Postal, and CBP. We welcome their comments. But more
importantly, the information that was used to provide the
framework for those procedures is part of our collaborative
working relationship.
I agree with Jay. I think that the working group, and I
wasn't around in 1994 either, but I think the working group has
proven to be a springboard, if for no other reason we have a--
it has made our working relationship here in Washington closer.
If I need something, I can call Mr. Ahern or I can call Ms.
Tandy's people inside or outside those meetings. It has been
easier to involve more headquarters people as part of the
subgroups.
And so one objective measure is the fact that after
realizing the need for these mail procedures, we have
introduced them. We will continue to refine them with the help
of our partners. And then we will introduce the air courier
procedures, again, in conjunction with our partners. So those
are two small hallmarks that signify the robustness of what we
are doing now.
Senator Coleman. And I would, Mr. Ahern, suggest a
terrorist threat to what we are dealing with here, and we
talked about this at the last hearing with Mayor Giuliani. You
don't want to give anybody ideas, but it doesn't take rocket
science to figure out that we are using extraordinary measures
to protect our borders, to protect particularly people coming
in, and we are doing things with cargo and other areas,
understanding some of the challenges, to take a look at what is
coming in. We are concerned about radioactive devices.
But the reality is that any terrorist network could set up
an American A-Plus Number One Internet Drugs at bargain
basement prices and flood this country with materials and drugs
that could have a devastating impact and raise the level of
fear. We shut off access to Canadian meat with the
identification of one cow with BSE, and yet clearly we have a
system here that is without controls, without the ability to,
at this point, sufficiently prevent something like this from
happening. So I would maintain there is a national security
aspect to the availability of or the ease of getting these
types of substances into the hands of American consumers.
Mr. Ahern. My comment to that is certainly I don't disagree
with you. However, we certainly have to take a very risk-based
approach and we know that there are concerns with people
crossing our borders, coming into this country, as well as the
threat posed by sea containers, as well as other cargoes coming
into this country. So we do take a very risk-based,
intelligence or information driven approach in our response
with our resources.
To this point, there has been no active intelligence that
indicates that this would present itself as a threat.
Certainly, all the 400 million mail shipments coming into this
country, as well as the half-a-billion people that cross our
borders legitimately, as well as the sea containers and cargo
opportunities, we look at as windows of opportunity and we take
a very risk-based approach with addressing those threats. But
certainly we haven't disregarded this as a potential at this
point in time. There is no active intelligence that indicates
that threat is present.
Senator Coleman. There is a system, is it VIPPS? There is a
system that the pharmacy organizations have set up to provide
some measure of bona fide, legitimate. Can someone talk a
little bit about that?
Mr. Hubbard. It is established by the National Association
of Boards of Pharmacy and it has very high standards, and it
basically says, if you want to sell drugs over the Internet and
you meet all the requirements that a brick-and-mortar pharmacy
would meet, you can receive this Good Housekeeping seal called
a VIPPS seal. We believe it is a good idea.
There are two, of course, flaws in it. One is that the bad
guys can fake the seal. And second, VIPPS cannot reach out into
other countries. It is really for domestic Internet sites.
Senator Coleman. Is there anything that would preclude
Canadian pharmacies from voluntarily adhering to the VIPPS
standards?
Mr. Hubbard. No. In fact, the National Association of
Boards of Pharmacy has proposed to Minnesota that they work
with them on inspecting Canadian pharmacies and making that
very consideration. I don't believe we have heard back from the
Minnesota officials on that recently, but FDA has expressed a
willingness to be helpful in any way we can in that process.
Senator Coleman. Mr. Taylor.
Mr. Taylor. It is a good consumer outreach and education
tool. A consumer can look at the site and know that the product
is being dispensed pursuant to a legitimate State pharmacy
license and that the products are FDA approved.
Senator Coleman. Help me understand this issue again. We
have talked about how you can fake the seal. What are the
consequences of falsely advertising FDA approval? Or what is
the level----
Mr. Hubbard. If you are a foreign Website, there is not
much that can be done because your server is in another
country. The business is in another country. I don't think any
of us can reach to that country in any effective way. We try to
work with other governments, but our actual legal authority
doesn't reach there.
Mr. Taylor. Yes. If--I am sorry, Bill.
Mr. Hubbard. There have been proposals in the past,
bipartisan proposals, to at least require Websites to disclose
who they are and where they are by both Republicans and
Democrats in the House and Senate, and we have felt that
concept has generally been a good one.
Mr. Taylor. That is because even though the overseas site
might fall outside our jurisdiction, if there is a U.S. agent
or a U.S. entity that is part of the business, then we can take
action against them.
For example, we brought an injunction last year against RX
Depot, which was a storefront pharmacy that was advertising
FDA-approved products. In that case, we enjoined the American
operation, which was essentially roughly about 80 other
storefront pharmacies, and enjoined them from doing business.
So even though we couldn't necessarily bring an action against
the Canadian entities, we did deal with the domestic entity.
Senator Coleman. I would hope we would look at some way to
substantially enhance the penalty and the ability to get
compliance, even those who are operating extraterritorially,
that some action could be taken. I would anticipate that we are
going to reach a point, I would hope, and certainly a proposal
that Senator Gregg has offered and Senator Smith and I
cosponsored that would require those who want to sell, Canadian
and other pharmacies, to, in fact, be subject to FDA review and
authorization and the same standards and that there be very
strong penalties for those who fraudulently claim to have that
kind of approval.
Let me ask, I just want to focus a little bit on some
individual cases, and this goes to the enforcement actions for
Mr. Taylor and Mr. Hubbard. Can you tell me who Eric Kaiser is?
Does that name ring a bell?
Mr. Taylor. No, it does not, sir.
Senator Coleman. I am told that he is a registered owner of
numerous Internet pharmacy Websites that offer Accutane,
Prozac, Zocor without a prescription. Do you have any
information on his actions and his response or lack of response
to cease and desist letters, E-mails, etc.?
Mr. Taylor. Actually, it does--I know him in the context of
some things that JFK has recently discovered and is looking
into. It wasn't specifically with those products, but it was in
another context.
Senator Coleman. I raise the question, using him as an
example, and I may have one or two others for some of the other
witnesses here, but again, it goes back to this ability to
track down, to have some sort of effective control over folks
who are operating illegally. If you identify somebody as the
owner of an Internet pharmacy but they don't respond to
letters, E-mails, etc., then you check down as you have shown
here. You show them a Website registration that says it is
registered in one place, but it doesn't correspond to a
particular name. How do you follow up on this stuff? What are
you doing to track down those people that you get a clear sense
that they are abusing this process?
Mr. Taylor. Let me use the two examples in my oral
testimony. For the contraceptive patches, that Website first
appeared to be a U.S. Website. And by the way, this is a
product that was brought to our attention by a consumer who
received the contraceptive patches in a clear plastic bag,
which caused warning bells to go off in her head. So she
contacted the manufacturer who contacted us. There were tests
and there is no active ingredient.
From there, we looked at the Website that she purchased the
product from and had to, with the help of Immigration and
Customs Enforcement and use of administrative subpoenas, and by
working also with the Internet service provider, track the fact
that there were actually five or six different levels--five or
six additional Websites between the one that she was using and
the one that was registered in India, where the products came
from.
So to answer your question, there is a lot of interim
investigatory work that is time consuming and requires not only
good web crawling, but also good analytical skills to figure
out the various links.
Once we realized that--and this case is still ongoing, so I
don't want to go into a lot of detail--but once we realized
where it was registered, we contacted the Customs officials
overseas and the local authorities to enlist their aid. In some
cases, the local governments have been helpful in helping us
figure out where the person we are seeking is. In other cases,
people have been less cooperative. We also utilize the in-
country expertise of either Customs or DEA.
Now, I don't want to suggest this is easy. It is not. It is
actually very difficult. And in some cases, we have people who
are in countries where there is no extradition. But that is the
general steps that we use to try and determine the location of
someone who is operating outside the country.
Senator Coleman. I appreciate that.
Administrator Tandy, if I can just turn to one or two
examples, and I think we have Exhibits 1 and 3,\1\ over a 2-day
period at JFK, our staff and I observed a shipment of 3,000
parcels of controlled substance from Amert, a single vendor in
the Netherlands. That is one of the things that I noticed, that
there were a number of parcels from single vendors containing
illegal prescription drugs. When you see something like that,
when you see massive quantities coming from single vendors, and
I think that is Exhibit 1? I think there is another exhibit
there which shows the same thing, single vendor, massive
quantities.
---------------------------------------------------------------------------
\1\ See Exhibits 1 and 3 which appear in the Appendix on pages 286
and 288.
---------------------------------------------------------------------------
What can you do to stop that company from continuing with
these illegal drug transactions? What is your authority and
what kind of action do you take?
Ms. Tandy. The process that we follow, once these vendors
are identified, is to work with our foreign counterparts in law
enforcement in the Netherlands or wherever the country is from
whence these drugs have been shipped and to have our foreign
counterparts assist us in the foreign-based piece of that
investigation.
We do have long-armed jurisdiction under Title 21 as to
Schedule I and Schedule II controlled substances. Schedules
III, IV, and V, which often are what you see over the Internet,
are not included under that long-armed jurisdictional statute.
Senator Coleman. And could you, for the record, describe
the difference between Schedules I and II versus III, IV, and
V.
Ms. Tandy. I say Schedule I, because under the statute it
is covered, but Schedule I, of course, these are not medically
accepted drugs. So you can set aside Schedule I.
Schedule II, there is a high risk of abuse of drugs in
Schedule II. These are typically opioids.
Schedule III, which is where you have seen some of the
deaths, would be Vicodin, which is not pure hydrocodone but is
a mix of hydrocodone and acetaminophen.
So those schedules, the penalties are tiered by those
schedules. Our authorities are cabined by the statute under the
schedules.
Essentially, we have to rely on our foreign counterparts to
assist us in further identification of these Websites because
these are not brick-and-mortar locations and require
sophisticated investigation in order to identify where they are
really operating from. And then our foreign counterparts, we
rely on to shut down those sites that are outside of our long-
armed jurisdiction. We can always bring charges against these
institutions, these Website companies, even though they are
outside the country, for what they send into our country under
the standard Title 21 process.
Senator Coleman. I believe that hydrocodone is pictured in
this photo. Do you know if there was any follow-up with this,
what are they, a Dutch operation, Amert, a Netherlands
operation? Do you know if there was any follow-up on----
Ms. Tandy. I can tell you that we have a number of foreign-
based Website investigations underway now, but I wouldn't be in
a position to tell you any specifics about those investigations
at the risk of compromising them.
Senator Coleman. Let me just introduce a last area of
inquiry for you, and that is we talked about the web crawler.
My understanding was in 1999, FDA purchased a web crawler. We
are talking about it today. Help me understand why you believe
the web crawler today will be more successful than the web
crawler in 1999.
Ms. Tandy. I can't speak to FDA's web crawler. DEA just
received funding in 2004 for what has been colloquially
referred to as a web crawler. It is to conduct these on-line
investigations. We have worked very diligently to put into
place an on-line investigative tool that, as it is refined, is
going to be the equivalent of essentially six Google search
engines together that will go through these on-line pharmacies
using specific information to try to connect the links to the
various Websites to specific targets. So I don't know how this
differs from what FDA attempted to do in 1999----
Senator Coleman. You have your own web crawler then?
Ms. Tandy. We have our own web crawler, which after today I
won't refer to as a web crawler anymore. It will be the on-line
investigations tool.
Senator Coleman. Mr. Heath, you talked about rogue
pharmacies getting increased legal private scrutiny, and I
believe some of the private operations, Google and Yahoo!, have
been doing some things in regard to that. Does the Postal
Service work with the private sector to address this issue of
illegal sale of pharmaceuticals over the Internet? What kind?
Because our next panel is going to be the private sector and I
want to segue into that. Can you talk a little bit about that
relationship?
Mr. Heath. Absolutely. I think we have an excellent working
relationship, especially with FedEx and UPS, not only to work
on the illegal pharmaceuticals, but we share our intelligence
and our methodologies with them, whether it is in the mail or
in the private courier system, to target illegal narcotics, to
target child pornography, and we certainly will do the same
things with them with regard to this issue.
There is one other point I would offer up when we look
here. Administrator Tandy has talked a lot about the highlights
of the investigative effort they put in to addressing the
problem. When we look at mailings or shipments, as would be
reflected in this, if they are fresh, that is pretty good for
an investigative and evidentiary purposes. I know at Miami and
at JFK, there is a significant dated backlog of materials that
were seized months and months ago.
I would suggest that along with Customs and Border
Protection, FDA, that we take a look at using our enforcement
authority with the destruction methodology to attack that
backlog. If we can, in fact, demonstrate that there are
multiple mailings from the same supplier, due to the dated
nature, it is probably not going to be of much benefit from an
investigative nature, but I think we should try out our
methodologies to try to destroy that.
As you mentioned, it does not make good sense to return it
to the sender because it is only going to be sent back either
to this country or to another country again.
Senator Coleman. Let me talk a little bit about your
authority. Does the Postal authority have the ability to open
packages without a warrant?
Mr. Heath. No, sir.
Senator Coleman. So you have to turn to who in order to----
Mr. Heath. We rely, especially on the international, the
ones coming in from the foreign countries, we rely very heavily
on Customs and Border Protection. They open the materials at
the point of entry, and then for an enforcement process, once
they have determined that it is an illegal product, then we can
seek the destruction order.
Senator Coleman. What about the possibility of cross-
designation to make it a little easier for you?
Mr. Heath. Yes, sir, it definitely would.
Senator Coleman. I think it is something worth exploring.
I want to thank the members of the panel. We could go on
and on. I do appreciate your efforts and your understanding of
the nature of a growing problem and the importance of working
together to address it. So again, I want to thank you for
appearing before the Subcommittee.
I would now like to welcome our final panel to today's
hearing. This panel is composed of representatives of the
private sector.
I would like to welcome John Scheibel, Vice President for
Public Policy at Yahoo!; Sheryl Sandberg, Vice President for
Global Online Sales and Operations at Google; Joshua Peirez,
Senior Vice President and Assistant General Counsel at
MasterCard International; Steve Ruwe, Executive Vice President
of Operations and Risk Management at Visa U.S.A.; Robert
Bryden, Vice President of Corporate Security at Federal Express
Corporation; and finally, Daniel Silva, Vice President and
Director of Security at United Parcel Service.
The purpose of this panel is to examine the extent to which
consumers can purchase dangerous and often addictive controlled
substances from both domestic and international Internet sites
and the role that Internet search firms, credit card companies,
and package delivery firms can play in identifying rogue sites
and preventing them from utilizing their services. I do
appreciate everyone's testimony at this important hearing and
am anxious to hear your testimony.
Pursuant to Rule 6, all witnesses before the Subcommittee
are required to be sworn. At this time, I would ask you all to
rise, raise your right hand.
Do you swear that the testimony you are about to give
before this Subcommittee is the truth, the whole truth, and
nothing but the truth, so help you, God?
Mr. Scheibel. I do.
Ms. Sandberg. I do.
Mr. Peirez. I do.
Mr. Ruwe. I do.
Mr. Bryden. I do.
Mr. Silva. I do.
Senator Coleman. As I am sure you are aware by now, we do
try to have a timing system here, and for such a large panel, I
would like to hold people to that. I will ask that folks limit
their oral testimony to no more than 5 minutes, but I will make
sure that your entire written testimony is entered into the
record. When the light turns from green to amber, it gives you
about a minute to sum up, so please follow that.
We will begin with Mr. Scheibel--we will have you go first
this morning--followed by Ms. Sandberg, then Mr. Peirez, Mr.
Ruwe, Mr. Bryden, and finish up with Mr. Silva, and after we
have heard all the testimony, we will turn to questions. So
with that, Mr. Scheibel, you may proceed.
TESTIMONY OF JOHN SCHEIBEL,\1\ VICE PRESIDENT, PUBLIC POLICY,
YAHOO! INC
Mr. Scheibel. Chairman Coleman, thank you for the
opportunity to testify on an extremely serious issue,
prescription drug sales over the Internet.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Scheibel appears in the Appendix
on page 255.
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Yahoo! is a leading provider of comprehensive on-line
products and services to consumers and businesses worldwide.
Yahoo! is the number one Internet brand globally and the most
trafficked Internet destination worldwide.
Mr. Chairman, we appreciate your leadership in this
critical area and we share your concern with protecting
consumers. That is why, beginning in 2002, Overture, which
later became a wholly owned subsidiary of Yahoo!, took its
first preliminary steps to address this issue. At that time,
Overture prohibited on-line pharmacies from advertising that
prescription drugs could be purchased without a prescription.
Then in November 2003, we took industry-leading actions to
better ensure that our sponsored search listings of on-line
pharmacies meet high standards of integrity and accountability.
Sponsored search is a program under which advertisers bid on
search terms in order to get placement in search results. Only
those listings relevant to a search term are permitted to enter
or remain in the active database. These listings are clearly
labeled ``Sponsor Results'' throughout the Yahoo! site.
As you mentioned, in November 2003, Yahoo! took the
unprecedented action of removing all sponsored search pharmacy
listings for prescription drugs as an interim step to
developing a more comprehensive program that would maintain our
commitment to providing consumers, advertisers, and partners
with the best on-line experience possible. Our message was
clear. Until we could create a safer environment for such on-
line advertising, there would be no sponsored search listings
for prescription drugs on Yahoo!.
Beginning in February 2004, we launched our more
comprehensive program, which was the first of its kind. Our
goal is to enable a more trusted marketplace for legitimate on-
line pharmacies to competitively offer consumers access to
prescription drugs. The on-line pharmacy qualification program
employs a five-facet approach to enhance consumer trust in
participating on-line pharmacies.
First, we determine whether an advertiser is participating
in the sale of prescription drugs. If it is, Yahoo! requires
the advertiser to join the program and comply with its terms in
order to participate in the sponsored search marketplace.
Second, the advertiser is directed to Square Trade, a
leading on-line trust infrastructure company, which verifies
whether the appropriate governmental body where the company is
located has licensed both the pharmacy itself and its
associated pharmacists. Unless Square Trade determines that the
advertiser and its associated pharmacists are currently
licensed, Yahoo! will not allow the pharmacy to advertise.
Third, the advertiser is required to certify that it
engages in a set of industry best practices that have been
approved by the National Community Pharmacists Association, the
NCPA, including certification that it will not provide
prescription drugs without verifying the existence of a valid
prescription from the person's health care practitioner and
such prescription was not obtained solely by means of an online
or telephone consultation.
Fourth, Square Trade, in a program administered in
conjunction with the NCPA, regularly monitors the licensure
status of participating pharmacies as well as responds to any
complaints it receives regarding these pharmacies. Any negative
action taken by the licensing entity or any complaints that are
substantiated by Square Trade are reported to Yahoo! and the
advertiser will be removed, as appropriate. Complaints will
also be forwarded by Square Trade to the appropriate government
licensing authority.
Finally, Yahoo! prohibits on-line pharmacies from
advertising the most dangerous and abused prescription drugs,
FDA Schedule II prescription drugs, in the Yahoo! marketplace.
Yahoo! believes that this five-pronged on-line pharmacy
qualification program complements our mission of aligning the
interests of consumers, advertisers, and Internet destination
sites.
Prior to finalizing the terms of our program, we briefed
officials at the Food and Drug Administration on its terms.
They warmly received our program and were very encouraged by
the fact that we were taking a leadership role in this area.
Mr. Chairman, you have also asked for our comments on
pending applicable legislation. S. 2464, introduced by Senators
Coleman and Feinstein, precludes the sale of prescription drugs
over the Internet absent disclosure by the site of identities
and licensing information of the seller, pharmacist, or medical
consultants. It also prohibits the sale of prescription drugs
over the Internet absent a valid prescription, as that is
described. This is a very thoughtful piece of legislation.
The bill would follow the lead of the Communications
Decency Act by providing that an interactive computer service
provider would not be liable under this bill on account of
another person selling or dispensing prescription drugs,
provided that the interactive computer service does not
exercise corporate control over such person.
Senator Coleman, we applaud you for including this critical
provision. It recognizes that telephone companies, Internet
service providers, and Internet portals should not be liable
for what others place on their sites or send over their lines.
Mr. Chairman, we at Yahoo! are proud of the steps that we
have taken to create a safer environment for the on-line
advertising of prescription drugs. Thank you for the
opportunity to appear before you today.
Senator Coleman. Thank you, Mr. Scheibel.
Ms. Sandberg, I will take your testimony, and then I am
going to have to recess. We have three stacked votes. So we
will do Ms. Sandberg, recess for 45 minutes--I think that is
what it will take--and be back here at noon, so if you can just
plan your schedules accordingly. Ms. Sandberg.
TESTIMONY OF SHERYL SANDBERG,\1\ VICE PRESIDENT, GLOBAL ONLINE
SALES AND OPERATIONS, GOOGLE, MOUNTAIN VIEW, CALIFORNIA
Ms. Sandberg. Good morning, Chairman Coleman. Thank you for
inviting me to testify on this very important issue.
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\1\ The prepared statement of Ms. Sandberg appears in the Appendix
on page 259.
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Google shares your concerns about the risks of on-line
pharmacies and some of the unsafe products they sell. In my
written testimony, I provided a detailed account of our
policies and programs on this matter, so in view of the vote,
will keep my oral comments very short.
Senator Coleman. Your testimony will be entered into the
record as a whole, without objection.
Ms. Sandberg. Thank you very much. Google's mission is to
organize the world's information and make it universally
accessible and useful. When a user, defined as someone who
visits our site, goes to Google-dot-com or one of our 95 other
domains, the user is able to search for information on over
four billion web pages and over 880 million images.
We are dedicated to preserving the trust our users have
placed in us. We always place the interests of our users first
and their search for information, and that is the core value on
which our company is built.
Like our search results, the goal of our advertising
program is to provide users with useful information. Our users
want information about pharmaceuticals and we know that
providing relevant information from trusted sources can be
critically important. We have received numerous E-mails from
Google users who have found life-saving information through our
Website.
We believe that advertising by licensed pharmacies,
treatment and detox centers, and pharmaceutical manufacturers
helps consumers locate services, compare options, and make
cost-effective informed choices about their health. Our belief
is supported by research showing that pharmaceutical-related
advertising is strongly positive for consumers. However, we
share your concerns that there are disreputable Internet sites,
some of which are on-line pharmacies.
In response to the increasingly complex on-line
pharmaceuticals market, we have taken proactive and aggressive
steps to make sure that our advertising program provides users
with relevant and safe information. In order for on-line
pharmacies to advertise with Google, they must be certified by
Square Trade, a leading third-party trust infrastructure
company. Square Trade's licensed pharmacy program has been
approved by the National Community Pharmacists Association.
By working with Square Trade, we require pharmacies that
advertise on Google to be licensed, to maintain licensed
pharmacists, to obey all applicable laws, rules, and
regulations, to not provide prescription drugs unless they
receive and verify a valid prescription, to make sure that
prescription is not obtained online and not obtained over the
phone, and also guarantee that they are only delivering
medications through a provider that requires an adult signature
for delivery.
Square Trade regularly monitors the licensure status of
these pharmacies and we require that advertisers have a valid
and current Square Trade ID before participating in our
program. Through this process, we strive to permit only
licensed pharmacies and pharmacists to advertise with Google.
We are pleased to provide a means of connecting individuals
with valid prescriptions to licensed pharmacies that can
provide them cost-effective and convenient service. We are also
proud that our Website helps people find information they need,
information on education, rehabilitation, or other medical
needs.
Thank you again for this opportunity to share our views. We
are grateful for your leadership on this important issue.
Senator Coleman. Thank you very much, Ms. Sandberg.
Again, because of the three stacked votes, I will have to
recess the hearing until approximately 12 o'clock. We may get
started a little bit before that. This hearing is now recessed.
[Recess from 11:13 a.m. to 11:32 a.m.]
Senator Coleman. I am going to reconvene the hearing at
this time. I apologize for the confusion but we have a series
of three stacked votes and I probably have another 15 minutes
in between this vote and the next vote. We do not have the
entire panel in front of us but we have two of the witnesses,
the carriers, here and I think it would be very helpful to get
their testimony on the record. I am just not sure what time we
are going to have for questioning but I think it is important
to get the testimony on the record.
So with that, why don't we begin. Mr. Bryden, please begin
your testimony.
STATEMENT OF ROBERT A. BRYDEN,\1\ VICE PRESIDENT, CORPORATE
SECURITY, FEDERAL EXPRESS CORPORATION, MEMPHIS, TENNESSEE
Mr. Bryden. Thank you, Mr. Chairman. Pleasure to be here
with you today to talk about this important topic. I have
submitted a statement and I would ask that you accept that for
the record and I will make some short summary comments.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Bryden appears in the Appendix on
page 266.
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Senator Coleman. Without objection.
Mr. Bryden. Thank you, sir.
FedEx has been working with members of your staff and
members of another committee in the House on this issue for
almost 2 years now. We have met many times with the staff, and
met with many of the Federal agencies numerous times. I feel
like the research that we have done and the meetings that we
have had have given us a good understanding of the scope of the
problem and where our company fits within that problem.
I also think we have identified ways that we can assist the
law enforcement agencies in doing, as you heard in earlier
testimony, the virtually impossible task that they face in
keeping these illegal drugs out of our country and out of the
hands of children and people that should not have them. I think
that we have discovered ways in this 2-year journey that we
have been on that we can enhance our cooperation with law
enforcement organizations. We have made those offers to law
enforcement. We think we have something to offer to their
investigations.
At the end of the day, we believe it is a law enforcement
issue and that the technical issues involved in getting to the
bottom of who is doing this shipping does require law
enforcement power authority and through the use of subpoenas
and so forth. But we are happy to cooperate in any way we can.
We appreciate you having us here today and I look forward to
answering questions that you may have.
Senator Coleman. Thank you Mr. Bryden. Mr. Silva.
STATEMENT OF DANIEL J. SILVA,\1\ VICE PRESIDENT, DIRECTOR OF
SECURITY, UNITED PARCEL SERVICE, ATLANTA, GEORGIA
Mr. Silva. Chairman Coleman, my name is Dan Silva. I am the
corporate security manager for UPS, and in that capacity I am
responsible for security activities worldwide for the
organization. I would like to thank you for the opportunity to
participate here today.
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\1\ The prepared statement of Mr. Silva appears in the Appendix on
page 269.
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You asked us to comment on three questions and I will do
those in order. First, you asked about efforts that we have
undertaken to preclude the delivery by UPS of illegal
controlled substances and other pharmaceuticals purchased over
the Internet. Let me first state that it is the clear policy of
UPS as stated in our tariff that illegal products of any type
are prohibited from being transported through our system. We
have a long history of working with law enforcement agencies at
all levels to enforce legal requirements. While our company
privacy policy prohibits us from disclosing customer
information in general, we regularly provide law enforcement
agencies with information required by lawful subpoena.
Additionally, since 2001 we have conducted an on-line
pharmacy monitoring program. Through our outside counsel we
conduct weekly searches of the Internet to identify on-line
pharmacies that use the term UPS. We send cease and desist
letters and are prepared to follow up with appropriate legal
remedies to on-line pharmacies that offer UPS services and
offer to sell pharmaceuticals without a prescription, and
second, that display a UPS trademark or logo, so to avoid any
appearance of sponsorship or endorsement.
We have shared information about Internet pharmacy sites
that we have gathered through our monitoring program with the
FDA and DEA. Since much of the concern in this area arises from
imported pharmaceuticals I would like to mention efforts we
have undertaken with the Customs Service and FDA. First of all,
UPS identifies to Customs and FDA all packages it delivers into
the United States that are declared to be pharmaceuticals.
Customs and FDA have the ability to pull any of these packages
for further examination and enforcement action.
Additionally, in conjunction with our new automated
international air hub in Louisville, Kentucky, we developed a
computer program called Target Search for the use of Customs.
This is a sophisticated and flexible tool that enables Customs
to search manifest information for all imported packages
passing through that facility. Customs can use this system to
help identify illicit shipments by screening for a wide variety
of data.
Your second question relates to current efforts with the
DEA and FDA to address the issue of illegal purchases of
controlled substances. On an ongoing basis we respond to many
subpoenas with information requested in support of ongoing
investigations by these agencies.
Additionally, we have met twice this year with officials of
FDA and DEA here in Washington to discuss ways in which we
might further our cooperation concerning illegal pharmaceutical
shipments. As I have already indicated, we have shared
information about Internet pharmacies that we have identified
through on-line pharmacy monitoring program with these
agencies. These meetings with FDA and DEA officials have been
productive and we will continue to meet as needed in the
future.
The third question seeks our views on pending legislation
regarding Internet pharmacies. We support legislation that
would establish clear requirements for Internet pharmacies. In
particular, we like provisions of the Coleman bill, S. 2464,
that would require Internet pharmacies to be licensed. The
requirements of S. 2464 are appropriate for ensuring that
requirements for the safety and efficacy of drugs are met when
U.S. consumers make purchases in this new marketplace. From the
standpoint of a package delivery company, these requirements
would provide more certainty that the products we are carrying
meet the requirements of law and therefore meet our own tariff
requirements.
We also support the goal of S. 2465. The criminal use of
the Postal Service and carriers like UPS to unwittingly deliver
fraudulently declared prescription drugs into the United States
is an enforcement problem for Customs, FDA and DEA. UPS alone
ships more than 3 billion packages a year, about 15 million of
which are imported into the United States. We and other
carriers have a limited ability to look behind the declarations
supplied by the shipper in the manifest. S. 2465 would direct
the attention of Federal agencies to this problem and we would
gladly work with them, as we are already doing under the
current law.
Thank you for the opportunity to share the views of UPS and
I look forward to any questions that you may have.
Senator Coleman. Thank you, Mr. Silva.
For both you gentlemen, do Websites selling pharmaceuticals
advertise the service of either Federal Express or UPS without
authorization?
Mr. Bryden. They do.
Mr. Silva. Yes, they do.
Senator Coleman. Help me get a better understanding of what
you do to combat those situations where you have Websites
selling. For instance, is there a way not to accept packages
from these groups? What kind of ability do you have to react to
or respond to folks that advertise selling pharmaceuticals with
authorization?
Mr. Bryden. We have a group of attorneys who spend their
full time every day looking for those types of infringements
and then trying to find the right person to send cease-and-
desist letters to. As you well know from this investigation,
the problem of Internet pharmacies presents a particular
problem because, in the main, people that are selling illegal
drugs illegally into this country are not going to put their
right name and address on the E-mail, on the Website. We have
found Websites, as you saw testimony this morning where you
would have a pharmacy pretending to be located in Canada and it
would be linked to servers in several different countries, so
there is no way for us to send cease-and-desist letters to
that.
At the same time, it is very difficult to list shipping
information with our customers because those Websites are not
the ones that are shipping the drugs. They are putting in an
order at another location, in the main, and then we are picking
up at a completely different location not associated with a
Website. So it is a difficult problem for us and, frankly,
without subpoena power it is one that we are not finding we can
make much headway into.
Senator Coleman. I believe Slide 26 \1\ is that one that
had FedEx?
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\1\ See Exhibit 26, which appears in the Appendix on page 311.
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Mr. Bryden. Yes, sir, that is FedEx.
Senator Coleman. I believe this is one that was done
without authorization. Do you have any knowledge----
Mr. Bryden. My written testimony which I submitted will
substantiate for you, there are no Internet pharmacies that
have the authority to use the FedEx logo.
Senator Coleman. Mr. Silva.
Mr. Silva. The same is true for us. We have had some
success with cease-and-desist letters. Eric Kaiser, a gentleman
that you mentioned earlier, had somewhere in the vicinity of 30
sites. We have sent cease-and-desist letters. We have done that
electronically. We have done that through certified mail. The
mail got returned to us as undeliverable. But at the end of the
day, all but one of his sites no longer mentions UPS.
Senator Coleman. What kind of assistance do you get from
law enforcement? Use the Kaiser case as an example. What kind
of assistance did you get?
Mr. Silva. We provided the information to FDA and DEA. They
were aware of Mr. Kaiser's existence through other sources. In
that particular case they were already investigating it.
Senator Coleman. Mr. Bryden, you have had experience with
the DEA; is that correct?
Mr. Bryden. Yes, sir, I spent 24 years with DEA.
Senator Coleman. Could you give an honest assessment from
this side, now looking from the private sector, DEA's response
to these matters, these issues?
Mr. Bryden. I can honestly say I am glad I was not a member
of the law enforcement panel today. I just think they have a
real uphill battle to climb.
I will say this, when I listened to all of the testimony
from the law enforcement agencies today it struck me that we
may be looking at the forest and not seeing the trees. What I
mean by that is, on every one of these shipments that has been
destroyed in New York and other locations, and the ones that
are seized and are let into the country, there is data point
that we are not doing much with. That is the recipient of the
package. Anyone who ordered that drug over that Internet site
committed an illegal act. I chagrin the fact that in this
country we seem to have drifted away from holding people
responsible for their actions. That may be an opportunity for
the law enforcement agencies.
I am not suggesting, sir, that we put everybody in jail
that bought drugs over the Internet. I am suggesting that they
should perhaps get a letter from one of the law enforcement
agencies saying, we have a package here. It has been seized.
You violated the law when you did it. You are on notice. Then
you can have a stair-step ladder of increasing penalties
including fines. Because I just cannot--the testimony I heard
today, I do not know how much resources it would take to get a
handle on this, whether it is DEA or FDA, but if we start
holding people accountable, that changes behavior. I have
always believed as a law enforcement officer and I believe it
now. That may be an opportunity.
Senator Coleman. We will get the credit card companies
here, but it would occur to me, if somebody has got a series of
credit card transactions, single individuals with multiple
Internet pharmacies, there should be some way to deal with
that.
Can you talk to me a little bit in the couple minutes I
have left here, talk about the tracking systems. I raised the
question about you are asking people to be honest. Maybe I have
become cynical in my almost 2 years here, that if folks are
sending illegal pharmaceuticals I doubt there is any incentive
for them to honestly list on a manifest. Help me understand why
you believe the manifest provides some way to control the
system. You both use manifests; is that correct? Mr. Silva, why
don't you start.
Mr. Silva. Yes. When we are referring to Target Search, it
is a targeting tool that enables Customs to use a number of
data fields off of the manifest to search for any packages that
travel into our facility. The value of it is intelligence. You
heard some of the earlier testimony revolve around intelligence
and that there seems to be a lot of intelligence out there. I
do not know how much of it is actionable. I do not know how
effective we are in fully utilizing the tools that have been
deployed in some of the private courier companies to the
maximum. The Target Search tool and the second brokerage
operation support system tool afford these law enforcement
agencies some tremendous resources. We do, believe it or not,
get shipments that come in that have either the generic name of
the drug or are identified, and they do get picked off.
Mr. Bryden. Let me also say that the tracking and tracing
capabilities that both UPS and FedEx have in order to help law
enforcement can be used in other ways as well. For instance, if
law enforcement comes to us with a name or an address, we can
research that name and address and tell them how many previous
times shipments have occurred. That helps them build conspiracy
investigations.
The other thing that we use the manifest information for is
if we get something that is manifested and it is supposed to
weigh--let us say, it is a VCR. It is supposed to weigh 10
pounds, and it weighs one pound. That is a potential targeted
package, we probably would open that package and take a look at
it. We heard people refer to random searches. In FedEx, we do
not like to do random searches. It is largely a waste of time.
We like to do targeted searches, and I think my counterpart
here at UPS feels the same way from a security standpoint. That
is not to say we do not do random searches from time to time,
but we teach our employees to look for suspicious packages.
Weights that are different to the manifest, something that
rattles when it should not rattle, quickly filled out shipping
data on a bill of lading. Things like that enable us to catch
more drugs and illegal things than a random search does.
Senator Coleman. I appreciate that.
Gentlemen, I will now recess till 12 o'clock. I do
appreciate fitting your testimony in. It has been very helpful
to me.
So this hearing is now recessed till 12 o'clock.
[Recess.]
Senator Coleman. This hearing of the Permanent Subcommittee
on Investigations is called back to order.
I would note that during the recess, I actually got back
between votes, reconvened the hearing for a brief period of
time, had Mr. Bryden and Mr. Silva give their testimony, so we
will now turn to Mr. Peirez for your testimony. You may begin.
TESTIMONY OF JOSHUA L. PEIREZ,\1\ SENIOR VICE PRESIDENT AND
ASSISTANT GENERAL COUNSEL, MASTERCARD INTERNATIONAL, PURCHASE,
NEW YORK
Mr. Peirez. Thank you, Chairman Coleman. My name is Joshua
Peirez and I am Senior Vice President and Assistant General
Counsel at MasterCard in Purchase, New York. It is my pleasure
to appear before you today to discuss the important issue of
the sale of pharmaceuticals over the Internet.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Peirez with an attachment appears
in the Appendix on page 271.
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MasterCard is a global organization that has licensed more
than 23,000 financial institutions to use the MasterCard marks
in connection with the issuance and acceptance of MasterCard
cards. MasterCard requires that all licensees conduct business
in accordance with all applicable laws. Any failure to comply
with the law empowers MasterCard to assess stiff financial
penalties and ultimately to suspend or terminate the licensee.
MasterCard deplores the use of its systems for any illegal
purposes, including for the illegal sale of pharmaceuticals. As
you highlighted in your opening statement, Mr. Chairman,
MasterCard has recently taken a number of steps to help prevent
Internet pharmacies from accepting MasterCard cards for illegal
pharmaceutical sales.
These steps include, first, issuing a global bulletin to
all our licensees around the world, reminding them of their
obligation to comply with all applicable laws and specifically
highlighting Internet drug sales as risky transactions.
Second, working with our licensees to shut off more than
370 Websites from accepting MasterCard cards for the illegal
sale of pharmaceuticals over the Internet.
Third, exploring new ways to protect the MasterCard system
against use for any illegal activity.
And fourth, working with the DEA and the FDA in a
collaborative fashion, as we always do with law enforcement.
The efforts we have undertaken to date represent important
steps in demonstrating MasterCard's commitment to play an
appropriate role in addressing this issue. These steps began
about 8 months ago when we met with staff of this Subcommittee,
as well as with staff of the House Energy and Commerce
Committee. The meeting with your staff, Mr. Chairman, was
particularly helpful in highlighting the scope of this problem
and in clarifying some of the legal issues surrounding the
Internet sale of pharmaceuticals, particularly the issues as
they relate to controlled substances. We also met with staff of
the DEA and the FDA at that time to exchange information and to
explore ways in which MasterCard could be helpful to them in
their efforts to enforce the law.
Since the time of our initial meeting with the Subcommittee
staff, MasterCard's Merchant Security Team has been searching
the Internet for Internet pharmacies that purport to accept
MasterCard cards for illegal sales of controlled substances. We
are pleased to report that, to date, these efforts have been
successful in shutting off the acceptance of MasterCard cards
at over 370 Websites.
Despite our success, the task has been made more difficult
because it is not entirely clear that all these transactions
are illegal, although the vast majority likely are. The lack of
a clear prohibition has made it more difficult to educate our
licensees around the world on this issue.
Additionally, because the DEA informed us that MasterCard
and its employees are prohibited by law from knowingly making
illegal buys, it has been difficult to identify the true nature
of sales on a Website in some circumstances.
If Congress adopts a legislative solution to this issue, it
would be helpful to reduce the confusion regarding a number of
legal issues surrounding the sale of pharmaceuticals over the
Internet. In particular, requiring pharmacies to be licensed or
approved to sell over the Internet would be helpful in
providing a clear understanding of whether particular pharmacy
merchants are engaged in legal or illegal activities.
MasterCard requests that any statutory obligations on
payment systems be carefully crafted to ensure they function
appropriately without creating undue liability on the payment
systems for simply meeting their obligations under the law.
Mr. Chairman, thank you again for the opportunity to
discuss these important issues and for the help your staff has
provided to us. I would be glad to answer any questions you may
have.
Senator Coleman. Thank you, Mr. Peirez. Mr. Ruwe.
TESTIMONY OF STEVE RUWE,\1\ EXECUTIVE VICE PRESIDENT,
OPERATIONS AND RISK MANAGEMENT, VISA U.S.A., INC., FOSTER CITY,
CALIFORNIA
Mr. Ruwe. Chairman Coleman, my name is Steve Ruwe. I am
Executive Vice President of Operations and Risk Management for
Visa U.S.A., Inc. Thank you for the invitation to participate
in this hearing. Visa fully supports the Subcommittee's efforts
to prevent illicit sales of prescription pharmaceuticals over
the Internet.
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\1\ The prepared statement of Mr. Ruwe appears in the Appendix on
page 280.
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The Visa payment system consists of Visa, which performs
communication and settlement services for its member banks, and
Visa's member banks that issue Visa payments cards or that
acquire transactions from merchants that have accepted Visa
payment cards. Visa and the Visa member banks that only issue
credit cards do not have direct relationships with Internet
pharmacies or other merchants that accept Visa payment cards.
On the other hand, Visa member banks that acquire transactions
from merchants do have a direct relationship with the merchants
and the Visa rules require that these acquiring banks assume
responsibility for certain aspects of their relationship with
the merchants.
Because Visa cards are accepted worldwide, many of these
banks, like the merchants that they service, are located in
foreign countries.
Visa believes that the Visa payment system has responded
effectively to the challenges posed by Internet transactions.
Visa rules prohibit the use of Visa cards for illegal
transactions. Visa has a long history of working with law
enforcement, including the Secret Service, the Federal Bureau
of Investigation, the Federal Trade Commission, and State and
local law enforcement.
In the specific area of illicit sales of prescription
pharmaceuticals over the Internet, Visa has met with
representatives of the DEA and the FDA to discuss approaches to
the problem of illicit transactions with Internet pharmacies.
In March 2004, Visa reminded its member banks of their
responsibilities to ensure that only legal transactions enter
the Visa payment system and directed their attention to the
list of controlled substances and problematic drugs maintained
at the FDA and DEA Websites. Visa advised its member banks to
consider relying on a reputable seal program, such as the VIPPS
operated by the National Association of Boards of Pharmacy, as
a means of identifying reputable Internet pharmacies.
In June 2004, Visa used the services of an outside firm to
search the Internet for Websites selling controlled substances
and accepting Visa payment cards. As a result of this
monitoring effort, we have had discussions with some of our
member banks regarding their merchants who appear to be
involved in selling controlled substances. These member banks
have conducted their own investigations and have terminated or
restricted the activity of merchants found to be selling
controlled substances.
In May 2004, Visa updated its consumer Website to provide
safety messages regarding the dangers of purchasing
pharmaceuticals over the Internet and to provide links to the
Websites of the DEA and the National Association of Boards of
Pharmacy and to remind consumers that they should only use
their Visa cards for legal purposes.
We understand that S. 2493 would place additional
responsibilities on the operators of payment card systems to
prevent the use of payment cards in illicit Internet pharmacy
transactions. Visa believes that, in many cases, the only
parties that can actually determine the legality of the
transactions are the parties in the transactions themselves.
Accordingly, telephone companies, payment systems, and
delivery services typically are not required to know whether
transactions that are effected using their facilities or
services are legal. Historically, it has been only in those
circumstances where the use is so unusual as to suggest
illegality in its own right, such as transactions that trigger
suspicious activity reports or currency transaction report
requirements, or where the illegality is so overt and
egregious, such as child pornography, that Congress and law
enforcement have enlisted the aid of third-party intermediaries
to monitor the use of their facilities or services for policing
illegal transactions.
In this regard, I note that imposing the cost of acting as
law enforcement on financial institutions, communication
channels, or other intermediaries for public purposes is
effectively a tax on all the members of the public who use
those services. In choosing alternatives, that tax must be
measured against alternate expenditures that might accomplish
the same purpose, such as hiring more law enforcement
personnel.
With respect to S. 2493, we have reviewed this legislation
and suggested technical changes. If these provisions are
adopted, Visa will move aggressively to see that the Visa
payment system compiles with any and all applicable
requirements. Visa will continue to work with law enforcement
to fight against illegal activity, including those involving
Internet pharmaceutical sales. We will also continue to monitor
the Internet for Internet pharmacies selling controlled
substances.
We appreciate the opportunity to appear before you today
and would be happy to answer any questions you may have.
Senator Coleman. Thank you, Mr. Ruwe.
I do want to compliment the folks here. You have clearly
made an effort to try to deal with this situation.
Unfortunately, as you listened to the prior testimony, it is
simply not enough. We continue to be overwhelmed, and it is the
nature of technology, nature of the ease of use of technology,
and so we are presented with a challenge.
But Mr. Ruwe, you made the comment that it is helpful--let
me step back. You made the comment that it is companies like
Visa, MasterCard, the search engines, the folks that provide
the transport, they are not required to know something is
illegal. With all the commerce that you do, it may be difficult
to do.
But what if, in fact, you knew that certain activities were
not legal? So, for instance, if there were to be a requirement
that pharmacists be licensed or approved to sell over the
Internet and you have a list of those that you could easily
enter. If you knew then that others were operating illegally,
how would you respond to that and do you have any other
examples of that kind of situation, where you know something is
illegal but they are still using Visa, MasterCard? And I turn
to our friends at Google and Yahoo! with the same question.
The question is, let us assume we had a situation where it
would be illegal to sell drugs over the Internet unless you
were licensed by the FDA, and we can get you a list of those
groups that are licensed by the FDA. How would you respond to
transactions from companies that are not licensed by the FDA
which then are, per se, illegal operations?
Mr. Ruwe. I believe if we had a list of the pharmacies that
you believe to be legal and be registered and be approved, that
we could manage that within our system, to make sure that they
were the only ones that would be permitted to operate.
Senator Coleman. I am just trying to think, is there
anology to something else you do today where you do those kind
of runs, you have a list of these legal organizations and
anything outside that is something that you wouldn't accept the
transaction?
Mr. Ruwe. I cannot think of an example that parallels that
exact situation today. I mean, we do deal with the continual
search for illegal activities, but nothing of the nature that
is being proposed here.
Senator Coleman. Mr. Peirez.
Mr. Peirez. I am also not aware of such a list. However, we
think that such a list could be highly effective and would be
useful to us. I think it is the nature of the Internet that
causes the problem in that activities may be perfectly legal in
one jurisdiction and not in another. So by having a list like
that we could provide to the banks located outside of the
United States and tell them, look, if someone is not on this
list, you cannot provide them the service to sell
pharmaceuticals over the Internet to persons in the United
States with a MasterCard card, we believe that is a very clear
guideline and something that could be very effective in our
system.
Senator Coleman. Another area, and again, I am trying to
find analogies to things that you do already that would then be
applicable to these kinds of situations. I know you have the
capacity if a series of purchases are made, that generate some
sort of suspicion that I have gotten a call about, was your
card used so and so, and if the answer was no, you would take
action. That has been proactive on your part. I didn't inquire,
but you have gotten those kind of calls. So you have the
ability in some way to monitor. I don't want to inquire into
your security operations, but I presume you have that capacity.
On this issue of buying prescriptions over the Internet, in
the instances where we had the tragedies or folks have died,
often what you see is multiple sales over the Internet,
multiple pharmacies within a short period of time of a range of
prescription drugs, clearly something that would raise an
eyebrow. Do you have the capacity to kind of spot that kind of
stuff and would that raise any red flags?
Mr. Ruwe. I think the example you are referencing,
Chairman, has to do with fraud. When I say fraud, I mean not
fraud in the sense that the Internet pharmacy is doing
something illegal or selling an illegal substance, but where
these are unauthorized transactions where the true card holder
did not initiate the transaction. In those cases, we have been
successful at trying to identify those patterns, but those
things are based on other factors, such as the amount of the
transaction, where the transaction is taking place, and factors
that would indicate patterns of unauthorized use as opposed to
authorized use where they were buying something illegal.
Senator Coleman. And I understand the difference, but what
I am trying to understand or to see if I can envision is where
you could use the same process. You are looking at the activity
of an individual card, and from whatever signals you have,
things that raise a red flag, you are all of a sudden saying,
hey, this may be fraud.
If we are dealing with the purchase of controlled
substances in massive quantities from a range of different
sites which then, if one checks back, are illegal sites, would
you have the capacity to do the same thing, to raise a question
about that and then perhaps deal with it?
Mr. Peirez. Mr. Chairman, you are asking a question about
something we have thought quite a bit about. There are a couple
of things I think that are important to understand. The
examples you are raising are activities that are undertaken by
the bank that has issued you your card in looking at your
purchasing patterns, not an activity undertaken by MasterCard
because we have no relationship with you. We don't even know
who you are when your transactions run through our system.
Typically, the information that is contained in a
transaction record does not include information on what is
being purchased. It is simply where it is being purchased,
which is not necessarily the name that you would see on a
Website or on a URL. Typically, it would not be that type of a
name through the system.
So it is something that we would like to explore a little
more, but we think that it would not be nearly as effective as
the list of registered pharmacies that we have spoken about
previously.
Senator Coleman. Can I go back to the previous slide \1\
that showed the Internet drug site that had the FedEx label and
I believe had Visa or MasterCard.
---------------------------------------------------------------------------
\1\ See Exhibit 26, which appears in the Appendix on page 311.
---------------------------------------------------------------------------
This is a site, hydrocordone-dot-com, etc. What do you do
here? They have got major credit cards accepted. This is one
which we have concern about selling drugs illegally. And you
have got masses of these. If something like this is brought to
your attention, what can you do? Mr. Peirez, then Mr. Ruwe?
Mr. Peirez. Sure. Mr. Chairman, the first thing I will say
is obviously we did see this exhibit earlier and we have
already contacted our Merchant Security Team and asked them to
begin an investigation into whether this site is still live and
whether, in fact, it accepts MasterCard cards. Our experience
has been sometimes the logo is there but the card cannot be
used. What we can try to do is identify the bank that has
contracted with this type of a merchant and if we can find that
bank, we then follow up swiftly with the bank and have them
either confirm that this is only legal activity, which in this
case they will be highly pressed to do, or to shut off this
merchant from accepting MasterCard cards, and that is the
process we have used that has resulted in the successes I
highlighted earlier in my testimony.
Senator Coleman. Mr. Ruwe.
Mr. Ruwe. I think the process Mr. Peirez describes would be
very similar to the one we would follow, as well. It would be
necessary to reach out through the Visa member who signed that
merchant to initiate the remediation.
Senator Coleman. Mr. Scheibel and Ms. Sandberg, I would
like to inquire a little bit about Square Trade. That is your
process for certifying vendors who are meeting certain
standards. First, have you had a problem with unauthorized use
of the Square Trade logo?
Mr. Scheibel. Not to date.
Ms. Sandberg. No, not to my knowledge, not to date.
Senator Coleman. You have a system in place if there is
unauthorized use to then deal with that?
Mr. Scheibel. Yes. In fact, it is a live seal, so it is
harder for somebody to steal that seal than others.
Senator Coleman. If we can go to Slide 24,\1\ please. On
Slide 24, it is a Google site, no offense to Yahoo!. What you
see is on the right hand side, that is your sponsored links.
Those are the ones in which you have some controls, is that
correct, Ms. Sandberg?
---------------------------------------------------------------------------
\1\ See Exhibit 24, which appears in the Appendix on page 309.
---------------------------------------------------------------------------
Ms. Sandberg. That is correct.
Senator Coleman. And again, explain that to me the nature
of what makes this sponsored link versus--I think in this
search there were, if I can recall----
Ms. Sandberg. A search listing.
Senator Coleman. Yes. If you look at a Google search for
Vicodin, for instance, you will get 147,000 results. But then
you have a listing of sponsored sites. Explain the difference.
Ms. Sandberg. Sure, and everyone can see it on here. If you
look on the left side, those are search results. Those are the
result of our computers crawling the web, looking for
information on over four billion web pages. On the right, noted
as ``Sponsored Links,'' and when you look at it online, they
are colored, so you can tell that they are sponsored links,
those are the results from our advertising program.
Senator Coleman. Just so I understand kind of how your
system works, if somebody goes to a sponsored site, do you get
something out of that? Is there a payment simply for visiting
the sponsored site?
Ms. Sandberg. Yes. It is an advertising relationship with
the partner. The partner is signing up, registering as a Google
advertiser. In the case of pharmaceuticals, they would need to
be Square Trade verified. And then we are in a business
relationship with them. They pay us for clicks to their site.
Senator Coleman. There are, I think, 147,000 results for
Vicodin. If one visits any of the unsponsored sites, does
Google get anything there?
Ms. Sandberg. No.
Senator Coleman. So the control you have is just over that
limited number of sponsored sites, but there is nothing you can
do to channel customers to go to the sponsored sites in which
you have then some basis for checking credibility, whether they
are using a process that would meet with concerns of law
enforcement?
Ms. Sandberg. We don't have any control. You are correct,
Chairman, that we don't have any control over the search
results. However, we do take proactive steps to let people know
that we have the Square Trade program in place and let
consumers know that these are verified, licensed pharmacies. We
display that information on our Website and you can read about
the program by clicking on those links.
Mr. Scheibel. Mr. Chairman, in addition, on Yahoo!, the
first links that a user will come to will be the sponsored
links. So in this case, the most trusted parties, the people
who we have worked with to try to create a safer environment
for consumers will be the first links that a consumer comes to.
Senator Coleman. But for the massive number, the 140,000 or
149,000, what are those, alogarithmic searches?
Ms. Sandberg. Yes.
Senator Coleman. In other words, if you have a word in
there, this is the universe and Yahoo! and Google lets people
access the universe.
Ms. Sandberg. That is exactly right.
Senator Coleman. The known universe. That is it.
Ms. Sandberg. That is right.
Senator Coleman. Do you have, just hypothetically, do you
have the ability to block portions of alogarithmic searches?
Ms. Sandberg. We do have the technical capability to remove
things from the index, but given that we are an information
company trying to provide all information to the world that is
universally useful and accessible, that is done in only very
limited circumstances.
Senator Coleman. What about child pornography?
Ms. Sandberg. That is one example where it is done. The
content there is illegal and it is removed from the index when
we find it.
Senator Coleman. But is the issue of the illegality of the
content or is illegal content here, too? I am trying to
understand how you draw that line. I know these are tough
questions. Can you help me understand how you draw that line?
Clearly, you have illegal content, but there is something else.
There is almost a moral equation that you are putting in here
that says, this goes so far beyond the standards of what we can
accept that you are willing to do that. Help me figure out how
you draw that line.
Mr. Scheibel. Two points, Mr. Chairman. The first is that
when it comes to child pornography, the simple display of that
information is illegal per se, as opposed to what we are
dealing with here, which is commercial.
The second point is that when you type in a search term for
many of these drugs, you will get as part of your results
treatment centers, antidotes, information about the drug,
problems with use and abuse of the drug, much of which is
obviously very useful to consumers. So as to both Yahoo! and
Google, we are search engines. We are in the business of
facilitating access to information, and that is part of the
information that we provide access to.
Senator Coleman. Let me go to Slide 25.\1\ This shows the
results from a research, again on Google, to purchase Vicodin
last month. I think there were 129,000 hits on this. If you
look at the sponsored links, you have, ``Order Vicodin Online,
$44.94 shipped, you save, 100 percent legal purchase.'' We
don't know if this is a legal purchase, do we?
---------------------------------------------------------------------------
\1\ See Exhibit 25, which appears in the Appendix on page 310.
---------------------------------------------------------------------------
Ms. Sandberg. Well, this advertiser that you are pointing
to, the first one on the right, was verified by Square Trade as
a licensed pharmacy and meets all of the requirements of Square
Trade.
Senator Coleman. So from a Square Trade perspective, it is
like whether--we get back to that basic question. Let me back
it up. Does Square Trade then screen out those folks, for
instance, who try to use--who fill out prescription on line?
Ms. Sandberg. Square Trade----
Senator Coleman. Do they filter out----
Ms. Sandberg. They make sure that you do not accept
prescriptions obtained solely online or through the phone. That
is part of their verification process.
Senator Coleman. Are there legal products that Google or
Yahoo! refuses to accept advertising for?
Mr. Scheibel. Yes. The Schedule II drugs, FDA Schedule II.
Those search terms are not available, nor are the generic
equivalent of those search terms.
Senator Coleman. Anything else?
Ms. Sandberg. Yes. There are several legal products that we
don't accept advertising for. We don't accept advertising for
tobacco, as an example.
Senator Coleman. Can you tell me a little bit about your
relationship with law enforcement? Have they approached you
with guidance or assistance in this area? One of the challenges
we have is technology is moving faster than the law, and
obviously you are on the cutting edge of that. Can you help us
understand a little bit about the relationship with law
enforcement, what kind of assistance they have been seeking
from both of you?
Mr. Scheibel. Generally, Mr. Chairman, we work closely with
law enforcement. We try to be responsive to their requests and
it is a relationship that is evolving.
Senator Coleman. Ms. Sandberg.
Ms. Sandberg. As well, we have worked closely with law
enforcement on a number of issues. This is one of them. We were
in conversations with the FDA as we were thinking through what
to do in this area.
Senator Coleman. How does Square Trade deal with foreign
Internet sites, for instance, Canadian Internet sites? Can you
talk a little bit about what they do with them?
Mr. Scheibel. Well, there is a distinction here. One is if
you are other than a U.S. or Canadian company, you are not
eligible for the sponsored search program on pharmaceuticals.
With respect to Canadian companies, the requirements are just
the same as in the United States. They have to be licensed by
the regulatory body that would license them. And then there are
several self-certification measures which we also require as
part of the Square Trade program.
In addition, Canadian sites are not allowed to target U.S.
consumers, and there is also a requisite statement, and I can
read it to you, Mr. Chairman. ``The FDA, due to the current
state of their regulations, has taken the position that
virtually all shipments of prescription drugs imported from a
Canadian pharmacy by a U.S. consumer will violate the law.''
Senator Coleman. Let me just back up one question. You
talked about, I thought you said, Mr. Scheibel, about Schedule
II drugs. Is hydrocodone a Schedule II?
Mr. Scheibel. I believe it is.
Senator Coleman. And does either Google or Yahoo! block out
or accept ads from Internet pharmacies selling hydrocordone?
Mr. Scheibel. I don't believe we do. Now, let us draw a
distinction. We do not allow pharmacies to bid on the search
term. If they bid on another search term and that same pharmacy
is selling the Schedule II, then we would go to DEA and verify
that pharmacy is licensed to sell that drug.
Senator Coleman. Ms. Sandberg.
Ms. Sandberg. We do allow licensed pharmacies to advertise
on the majority of Schedule II terms. These are legal to be
prescribed with a valid prescription and we make sure that they
are done in accordance with the law.
Senator Coleman. One of the problems we confronted in our
last hearing was young people using mom and dad's credit card
and getting these drugs with a devastating impact. What are the
type of things you can do to deal with that, if anything? Mr.
Peirez, Mr. Ruwe, is that a problem that you see?
What I am trying to figure out is if there is--I keep
coming back to whether you have the capacity to somehow look at
the use of credit cards in dealing with on-line pharmacies that
we know aren't legal or where they have the capacity to deal
with large numbers of purchases of prescription drugs using
your credit cards from operations that you know are
questionable that have to raise a red flag. Just as you have
the capacity to question large numbers of purchases for the
sake of checking fraud, that seem to be suspicious, I am just
trying to kind of hone in from a technical perspective. Are
there ways in which you can work with us more effectively to
stop some of the abuses of sale of drugs over the Internet to
either young kids or to addicts?
Mr. Peirez. Mr. Chairman, we heard earlier the analogy to a
running faucet and people talking about how difficult it is to
try to control. I think the administrator from the DEA was
discussing how difficult it is to try to deal with the water
once it is coming out of the faucet, and MasterCard's focus on
this particular issue has been on turning the faucet off. We
are focused on the suppliers. We are not looking at
individuals.
Frankly, there is no way for us to tell when a particular
card is being used, if it is being used by the person who the
card is issued to, their spouse, their child. We certainly
would hope that parents don't make their cards available to
their children. That is certainly something that they are
educated on on a regular basis.
But in general, on this particular issue, we believe where
we can be most effective is trying to control the suppliers
from getting into the commerce stream using our cards.
Obviously, there are other payment means that they will then
turn to and can turn to, but we draw a very clear line on the
legal and illegal activities. If it is illegal, we don't want
it and that is where we are focused.
Senator Coleman. Mr. Ruwe.
Mr. Ruwe. I think it does go back to the basic question of
whether the transaction is legal or not. In terms of the
individuals, I mean, there are now products in the market where
a teenager could legitimately have a credit card in their
possession, whether it might be a gift card, or in the case of
Visa we have a ``Bucks'' card program. So it would be very
difficult to manage it from that perspective, I believe.
But I would totally agree that there are further things
that we could explore in terms of technology and working
together with law enforcement to do our part and we would be
most happy to entertain any of those things going forward.
Senator Coleman. How do you deal with gambling, for
instance? Gambling sites present similar problems--not legal,
overseas operations. For all of you, Mr. Ruwe, Mr. Peirez, do
you accept transactions or do you screen any of those out?
Mr. Ruwe. Gambling is a little easier, Chairman, because it
is just illegal. So in our system, if they are coded as a
gambling institution and they are coded as an Internet gambling
institution, those transactions can be blocked, period. There
is no distinction between a legal gambling institution and an
illegal gambling institution, such as we are dealing with in
the pharmacy example.
Senator Coleman. Mr. Peirez.
Mr. Peirez. It is pretty much the same answer as Mr. Ruwe.
In that scenario, U.S.-based banks are able to recognize those
codes for the Internet form of transaction and the gambling
transaction and then block it. If they were to do that in this
scenario, they would be blocking perfectly legal transactions,
like if somebody is buying drugs on the Internet from Merck,
Medco, or from Duane Reade or some other big pharmacy that does
sell on the Internet. So you would be blocking legal
transactions, which nobody wants in that scenario.
Senator Coleman. So if the FDA again were to have the
capacity to distinguish between specifically approved legal
versus illegal, you would have the capacity to block out the
illegal?
Mr. Peirez. If we were provided with that list, frankly, it
wouldn't have to be blocking transactionally. We would be
blocking them from getting into the system in the first place.
Senator Coleman. I would be interested with FedEx and UPS.
The problem there may be a little different in that your source
of pickup may be different from the Website. But would that
make a difference, if you had a list of places that are legal
and anything outside of that, any sites or anything that are
illegal, would you have the ability to somehow on your system
figure that out or filter that out?
Mr. Bryden. Mr. Chairman, I think a list would be useful if
it was a list of the distribution sites offshore. If it were a
list of the Internet sites without some linkage to the place
that we would pick up a package, it would be less useful to us,
but I think it would be useful to solving the overall problem.
Senator Coleman. Mr. Silva.
Mr. Silva. I would agree with Mr. Bryden, but I would also
say that might be valuable information for targeting.
Senator Coleman. I want to thank the witnesses here. This
is a difficult area. It is a universe that is growing and
expanding. I have a great respect for technology. I think it is
the key to America's economic future. I respect what Yahoo! and
Google do overall, but I am still troubled by the ability of
folks to access clearly illegal operations with such ease.
Perhaps the more that we can do to help consumers distinguish
between the legitimate and the illegitimate, between the bona
fide and the false, I think we would all be well served.
So I would encourage you to continue working with law
enforcement, looking at your systems and seeing what we can do
to ensure that we are not facilitating a process here that
really has the potential and the reality of inflicting great
harm on consumers in this country.
So again, I want to thank you for appearing. We will keep
the record open for a period of 2 weeks for any additional
questions.
With that, this hearing is now adjourned.
[Whereupon, at 12:37 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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