[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
SICK CRIME: COUNTERFEIT DRUGS IN THE UNITED STATES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON CRIMINAL JUSTICE,
DRUG POLICY, AND HUMAN RESOURCES
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
NOVEMBER 1, 2005
__________
Serial No. 109-194
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
______
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
JON C. PORTER, Nevada C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia ELEANOR HOLMES NORTON, District of
PATRICK T. McHENRY, North Carolina Columbia
CHARLES W. DENT, Pennsylvania ------
VIRGINIA FOXX, North Carolina BERNARD SANDERS, Vermont
JEAN SCHMIDT, Ohio (Independent)
------ ------
Melissa Wojciak, Staff Director
David Marin, Deputy Staff Director/Communications Director
Rob Borden, Parliamentarian/Senior Counsel
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Criminal Justice, Drug Policy, and Human Resources
MARK E. SOUDER, Indiana, Chairman
PATRICK T. McHenry, North Carolina ELIJAH E. CUMMINGS, Maryland
DAN BURTON, Indiana BERNARD SANDERS, Vermont
JOHN L. MICA, Florida DANNY K. DAVIS, Illinois
GIL GUTKNECHT, Minnesota DIANE E. WATSON, California
STEVEN C. LaTOURETTE, Ohio LINDA T. SANCHEZ, California
CHRIS CANNON, Utah C.A. DUTCH RUPPERSBERGER, Maryland
CANDICE S. MILLER, Michigan MAJOR R. OWENS, New York
VIRGINIA FOXX, North Carolina ELEANOR HOLMES NORTON, District of
JEAN SCHMIDT, Ohio Columbia
Ex Officio
TOM DAVIS, Virginia HENRY A. WAXMAN, California
Marc Wheat, Staff Director
Michelle Gress, Professional Staff Member
Malia Holst, Clerk
Tony Haywood, Minority Counsel
C O N T E N T S
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Page
Hearing held on November 1, 2005................................. 1
Statement of:
Eban, Katherine, author, Dangerous Doses; Kevin Fagan, father
of Timothy Fagan, counterfeit drug victim (Epogen); and Max
Butler, brother of Maxine Blount, counterfeit drug victim
(Procrit).................................................. 62
Butler, Max.............................................. 75
Eban, Katherine.......................................... 62
Fagan, Kevin............................................. 71
Lutter, Randall W., Ph.D., Acting Associate Commissioner for
Policy and Planning, Food and Drug Administration.......... 16
Pitts, Peter J., director, Center for Medicines in the Public
Interest; Carmen Catizone, executive director, National
Association of Boards of Pharmacy; James A. Dahl, former
Assistant Director of Investigations, FDA Office of
Criminal Investigations; and Donald Dekieffer, Dekieffer &
Horgan..................................................... 96
Catizone, Carmen......................................... 100
Dahl, Jim................................................ 109
Dekieffer, Donald........................................ 115
Pitts, Peter J........................................... 96
Letters, statements, etc., submitted for the record by:
Butler, Max, brother of Maxine Blount, counterfeit drug
victim (Procrit), prepared statement of.................... 77
Catizone, Carmen, executive director, National Association of
Boards of Pharmacy, prepared statement of.................. 102
Cummings, Hon. Elijah E., a Representative in Congress from
the State of Maryland, prepared statement of............... 10
Dahl, James A., former Assistant Director of Investigations,
FDA Office of Criminal Investigations, prepared statement
of......................................................... 111
Dekieffer, Donald, Dekieffer & Horgan, prepared statement of. 117
Eban, Katherine, author, Dangerous Doses, prepared statement
of......................................................... 64
Fagan, Kevin, father of Timothy Fagan, counterfeit drug
victim (Epogen), prepared statement of..................... 73
Gutknecht, Hon. Gil, a Representative in Congress from the
State of Minnesota, Pharma ad.............................. 89
Lutter, Randall W., Ph.D., Acting Associate Commissioner for
Policy and Planning, Food and Drug Administration, prepared
statement of............................................... 19
Pitts, Peter J., director, Center for Medicines in the Public
Interest, prepared statement of............................ 98
Souder, Hon. Mark E., a Representative in Congress from the
State of Indiana:
Prepared statement of.................................... 5
September 17, 2005 article............................... 92
SICK CRIME: COUNTERFEIT DRUGS IN THE UNITED STATES
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TUESDAY, NOVEMBER 1, 2005
House of Representatives,
Subcommittee on Criminal Justice, Drug Policy, and
Human Resources,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:05 p.m., in
room 2154, Rayburn House Office Building, Hon. Mark E. Souder
(chairman of the subcommittee) presiding.
Present: Representatives Souder, Burton, Gutknecht,
Schmidt, Cummings, Watson, and Norton.
Staff present: Marc Wheat, staff director and chief
counsel; Michelle Gress, professional staff member and counsel;
Malia Holst, clerk; Tony Haywood, minority counsel; and Jean
Gosa, minority assistant clerk.
Mr. Souder. The subcommittee will come to order. Good
afternoon and thank you all for being here. We're here because
selling fake prescription drugs within the United States is a
serious public threat and a growing problem.
This hearing will examine the vulnerabilities that allow
counterfeit or substandard drugs to end up in legitimate
pharmacies, how such vulnerabilities expose this Nation to
terrorist attacks through our medicines, and the anticipated
widespread counterfeiting of lifesaving avian flu treatment in
the midst of a potential pandemic, compounding the deadly toll
of an outbreak.
Just this morning the President asked Congress for $1.2
billion for vaccines to prepare for an avian flu pandemic. We
cannot risk vaccinating Americans with counterfeited therapies.
This is a very serious issue to which we are calling our
attention. According to the World Health Organization, 10
percent of global pharmaceutical commerce this year will be
counterfeit. That is expected to double by the year 2010 as
international criminal organizations become more sophisticated.
Last year within the United States the FDA's counterfeit
drug investigations rose 150 percent in only 12 months. One key
to understanding this disturbing problem is the so-called
``gray market'' which stems from the practice of drug
diversion. Drug diversion is the principal method by which
counterfeits enter the legitimate drug market. The FDA
confirmed with subcommittee staff that drug diversion was the
entry point for every case investigated by that agency
involving counterfeit drugs going into legitimate pharmacies.
For example, closed-door or own-use pharmacies are primary
sources for diversion. Own-use pharmacies such as nursing homes
or hospitals agree to provide medications solely to their own
patients. Accordingly, such pharmacies acquire medication at a
price much lower than wholesale. This opens the door to fraud,
exemplified by some own-use pharmacies overstating their
patient populations, reserving surplus drugs, then selling them
at a higher price into the gray market.
Once drugs are on the gray market they may be bought and
sold dozens of times, passed among several hands, mishandled
and relabeled. This happens easily because the pharmaceutical
supply chain is not regulated by any entity, private or
governmental. The pharmacies within a State are monitored by
State boards of pharmacy which enforce the standards of care
within each State. However, the State boards of pharmacy lack
police power and many are limited to only a handful of
inspectors.
Drug manufacturers have to comply with the FDA for safety,
effectiveness and labeling of their drugs. The drug
manufacturers typically exercise no control over their drugs
once they're shipped out of the manufacturing facility; rather,
the drugs are bought and sold by distributors and frequently
pass in and out of the secondary market. Distributors, like
retailers and physicians, are licensed by the States, which
must only meet the minimal standards set by the prescription
drug marketing act.
If you could display the first illustration.
In order to obtain a distributor's license, some States'
licensing standards provide an opportunity for unscrupulous
distributors to legitimately buy and sell pharmaceuticals. One
of the most notorious recent counterfeit drug bust cases which
we'll hear about in our second panel involved a convicted felon
who obtained a State distributor license in Florida. As you can
see on this map, 11 States, including Florida, have recently
toughened their licensing standards for distributors. However,
this leaves a patchwork of laws across the country allowing for
unscrupulous distributors to obtain legitimate State licenses
and trade drugs on the secondary market.
This situation of inconsistent standards throughout the
country has prompted the Health Care Distribution Management
Association [HDMA], to recently advocate uniform Federal
licensing standards for prescription drug distributors.
Having a private business association advocate vigorous
licensing standards is something we rarely see, but it's clear
that the gravity of this problem and the issues at stake have
prompted the HDMA to take this radical step in order to promote
the safety and security of our Nation's drug supply.
Nevertheless, the current system allows drugs to pass
through several middlemen before reaching the patient's hands.
When they resell the drugs, they sometimes relabel them to
reflect higher and more valuable doses, mishandle them to
contaminate or to degrade the drug, or substitute fake products
for the legitimate goods.
This is a photo of an alleged tablet of Lipitor, a popular
cholesterol-lowering drug, and a suspected counterfeit. They
are virtually indistinguishable. The FDA recently indicted 11
individuals, a drug repacker and 2 wholesale distributors in
cases related to the sale of Lipitor.
Go to the third illustration.
This is a closeup photo of Lipitor's registered trademark.
The measurement in the upper left-hand corner shows the scale
of 1/20th of a millimeter, which is incredibly small. While the
microscope can reveal the counterfeiting, the naked eye may
not. Counterfeit or substandard drugs like this counterfeit
Lipitor can end up on the shelves of the trusted pharmacy and
ultimately distributed to unsuspecting victims. For the
patient, there is no commercial transaction like this. The
patient has virtually zero ability to inspect the drug
packaging or compare it to other samples.
The patient who goes to a pharmacy to have his prescription
filled is helpless in determining the quality of the drug and
dependent on a system that has experienced some tragic
breaches. Moreover, it is impossible to measure the scope of
the problem, and we cannot say with any degree of certainty how
many or which counterfeit drugs make it to the pharmacy
shelves, because a health indication or ultimate death may be
attributed to the patient's underlying illness rather than the
drug.
One way to verify a drug's authenticity is through a
pedigree which would show the drug's chain of custody. Some of
the States toughened licensing standards to distributors, such
as Florida, who will soon require paper pedigrees for drugs
purchased within that State. However, the FDA delayed until
September 2006 the effective date for national regulations
requiring a pedigree in the hopes an electronic track-and-trace
program such as radio frequency identification [RFID] will be
viable.
The FDA has reported to the subcommittee staff that their
Office of Criminal Investigations [OCI], has turned out 71
indictments on their counterfeit drug cases, many of which
involve multiple counts, leading to 67 convictions so far.
Several more cases not yet in the formal judicial process are
in the pipeline. Moreover, OCI's robust investigations have
interdicted counterfeit drugs that would have made it to
pharmacy shelves.
However, significant vulnerabilities in this system still
exist. In addition to providing a way for unscrupulous
enterprises to obtain massive prices by distributing phony
high-price drugs, the vulnerabilities in the systems provide a
way for terrorists to target our citizens. One widely discussed
scenario, among dozens of possibilities of how they might
exploit our vulnerability, involves a deliberate anthrax scare
to trigger a run on Cipro, the antibiotic used for anthrax
poison. A phony and deadly version having been injected into
the pharmaceutical stream by terrorists would cause thousands
more deaths.
Baswa Hamad, a Taliban-linked terrorist recently extradited
from Afghanistan, defends a Jihad of taking Americans' money at
the same time the drugs we are paying for kill us.
Finally, the counterfeit drugs issue is well illustrated by
the immediate worldwide concern over an avian flu outbreak in
the FDA's announcement last week that anticipates an increase
in the sale of counterfeit or fraudulent treatments for such a
pandemic. Tamiflu, currently the only known treatment for this
virus strain, is expected to be widely counterfeited.
Counterfeit treatment in the midst of a pandemic would
certainly compound the deadly toll of the flu.
I do not want to wait until there are catastrophic failures
in the system to examine the problems that allow counterfeit
drugs into our pharmaceutical market. The time for examining
and acting on this problem is now.
Our first panel today is Mr. Randall Lutter, Acting
Associate Commissioner for Policy and Planning at the Food and
Drug Administration.
The second panel consists of Katherine Eban, author of
Dangerous Doses; and family members of two patients who are
victims of counterfeit drugs purchased at mainstream
pharmacies: Kevin Fagan, the father of Timothy Fagan who
received counterfeit Epogen after his liver transplant
operation; and Max Butler, the brother of Maxine Blount who
received counterfeit Procrit in the midst of her battle against
breast cancer.
The third panel consists of Mr. Peter Pitts from the Center
for Medicines in the Public Interest; Carmen Catizone,
executive director of the National Association of Boards of
Pharmacy; Jim Dahl, Former Assistant Director of
Investigations, FDA Office of Criminal Investigations; and
Donald deKieffer of deKieffer & Horgan.
Now I'd like to yield to our ranking member, Mr. Elijah
Cummings.
[The prepared statement of Hon. Mark E. Souder follows:]
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Mr. Cummings. Thank you Mr. Chairman. Counterfeit drugs
represent a threat to the safety of the drug supply globally.
The World Health Organization estimates that in poor countries
as much as 25 percent of the medicine consumed may be
counterfeit or substandard. In some developing countries the
percentage is as high as 50 percent.
In the United States consumers can be confident that the
safety and effectiveness of the drugs they obtain through the
legitimate market are extremely safe and effective in relative
terms. Nevertheless, there is ample evidence that counterfeit
drugs are an increasing challenge for Federal and State
regulatory bodies, pharmacies, and drug manufacturers and
wholesalers. The health risk to consumers that obtain drugs
that are fake, diluted, or mislabeled as to dosage, potency, or
other characteristics is potentially quite serious, depending
on the drug and the illness or condition the drug is being used
to treat. Such drugs may be simply ineffective, resulting in a
patient's condition going untreated, or they may very well be
harmful.
Charged with ensuring the safety and effectiveness of the
drugs available to consumers in the United States, the FDA is
the lead Federal agency for investigating U.S. counterfeit drug
cases. Over the past several years there has been a sharp
increase in the number of counterfeit drug investigations
undertaken by FDA's Office of Criminal Investigations. The
number of these investigations ranged from 5 and 11 annually
between 1997 and 2000.
In 2004 FDA's OCI conducted 58 investigations, up from 30
the year before, and 27 in 2002. This increase coincides with a
similar increase in the amount of counterfeit drugs seized in
the United States in recent years.
In 2000 an estimated 100,000 doses of counterfeit drugs
were seized in the United States, whereas last year an
estimated 3 million fake medications were seized in our
country. This suggests a substantial increase in the volume of
counterfeit drugs available in the United States.
Although most of the counterfeit drugs seized in the United
States are destined for the black market or illegitimate
Internet pharmacies, FDA investigations have also led to
seizures of counterfeit drugs offered for sale in legitimate
pharmacies. This raises legitimate serious concerns about the
integrity of the supply chain between manufacturer and
pharmacy.
As we will hear today, the course a drug takes from the
shipping docks to the pharmacy shelf can be convoluted, one
that offers unscrupulous distributors numerous opportunities to
exploit weaknesses in regulation and security.
In 1987 Congress enacted the Prescription Drug Marketing
Act to protect the American public from the emerging problem of
counterfeit drugs. For a variety of reasons, 18 years later,
some of the law's requirements have yet to be implemented by
regulation.
In July 2003, FDA formed the Counterfeit Drug Task Force to
develop recommendations for addressing all aspects of drug
counterfeiting. In February 2004, the task force issued a
report entitled, ``Combating Counterfeit Drugs: A Report of the
Food and Drug Administration.'' The FDA report highlights
measures that can be taken to better protect Americans from
counterfeit drugs, focusing on six areas, and they are:
securing the actual drug product and its packaging; securing
the movement of the product as it travels through the U.S. drug
distribution chain; enhancing regulatory oversight and
enforcement; increasing penalties for counterfeiters;
heightening vigilance and awareness of counterfeit drugs; and,
finally, increasing international collaboration.
Prominent among the proposed means for securing drugs
through the supply chain is new technology design to track and
trace drugs as they travel in the stream of commerce from the
manufacturer to the pharmacy. Adoption of drug authentication
technology and stricter State licensing standards for drug
distributors are other key measures recommended by the report.
State regulators and industry also have taken notice of the
counterfeit drug threat. For its part, the National Association
of Boards of Pharmacy has taken the important step of proposing
new model rules for the licensing of wholesale distributors,
and to date 11 States have adopted the tougher standards. In
addition, some major wholesalers and retailers have announced
their attention to avoid obtaining drugs from secondary
markets.
Still, there is much to be done to ensure the efforts to
protect the drug supply, to catch up to and keep pace with the
actions of bad actors who think nothing of jeopardizing the
health and safety of American consumers in order to turn a
fraudulent profit.
Today we will hear valuable testimony from the FDA, other
industry stakeholders, outside observers, and representatives
of victims of counterfeit drugs about the threat that fake,
mishandled, or mislabeled products pose to the integrity of the
U.S. drug supply and about what progress is being made to
secure the U.S. drug supply against threats like diversion and
illegal importation.
And so, Mr. Chairman, I thank you for holding this
important hearing and I look forward to the testimony.
[The prepared statement of Hon. Elijah E. Cummings
follows:]
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Mr. Souder. Mr. Burton, do you have any opening comments?
Mr. Burton. No.
Mr. Souder. Ms. Holmes Norton.
Ms. Norton. Thank you very much, Mr. Chairman, because I do
think this is a very important issue to focus upon. Frankly, I
was surprised that there was no Federal regulation here. No one
can doubt we're in interstate commerce this time, I think, and
when we have the industry saying that the hodgepodge of State
regulations and difficulty of enforcing at the State level
means we ought to have Federal regulation, I'm about to listen.
And I hope you are, Mr. Chairman, because it looks like this
problem is growing way out of proportion and anybody can
understand why.
It seems to me it coincides simultaneously with the huge
increases in pharmaceutical drug prices. The more you get of
that--and that seems to be out of control. Even seniors, when
they get access in January to our bill, will find that the
prices continue to go up because there is nothing that the bill
does about it. At least they're going to be safe, I believe, in
the safe HMOs or other organizations. But what could be more
dangerous to the general population, who do not have access to
such a bill, than fake pharmaceuticals? It is very, very
foreboding to know about this increase when we know that people
need many of these pharmaceuticals and will now have, because
there is no Federal regulation between the manufacturer and the
pharmacy, the temptation to in fact take advantage of what
looks like a cheaper version of the drug. We Americans, if you
can get it cheaper, if it's on sale, I think that's why you
have Wal-Mart, then of course people are going to go for it.
So I really pity the Federal Government trying to do this
in the context of no real strong Federal legislation, and I
hope that we are encouraged to move swiftly.
When I think of the of medicines that my constituents tell
me about, when I say, for example, you ought to use generics,
particularly if you're on Medicaid or Medicare, because you're
using up scarce dollars, and people then begin to tell me about
differences in medicines that I am not very familiar with. For
example, high blood pressure medicine and how they try one or
another until they get the right one. I can just imagine
somebody getting a cheaper high blood pressure medicine and
thinking, ``I guess this is it.'' This is very, very dangerous.
And of course, if I may say so, Mr. Chairman, the people
who are most likely to look for cheaper drugs are going to be
middle-class and poor people who just say, ``This is it. If
this is all I can get and costs half as much, I am going to do
this.''
We already have blocked reimportation. We could have
reimportation legislation that controls this, at least from
outside of the United States, controlled how importation took
place. You would think that at least within the United States,
we could find a way to make sure that people aren't getting
fake medicine. I think we ought to try to see what we can do
about this before we go home this session. And I thank you
again for this hearing, Mr. Chairman.
Mr. Souder. Thank you.
I would also like to recognize Ms. Schmidt from Ohio. Do
you have any opening comments you'd like to make?
Mrs. Schmidt. Just glad to be here and looking forward to a
lot of the discussion on this very serious issue.
Mr. Souder. Thank you very much.
I ask unanimous consent that all Members have 5 legislative
days to submit written statements and questions for the hearing
record. Any answers to questions provided by the witnesses must
also be included in the record. Without objection, it is so
ordered.
Also ask unanimous consent that all exhibits, documents,
and other materials referred to by Members, will be included in
the hearing record, that all Members may be permitted to revise
and extent their remarks. Without objection, it is so ordered.
Our first panel is composed of Mr. Randall W. Lutter--once
again in my head I couldn't get it out, even though they
corrected me--who is the Acting Associate Commissioner for
Policy and Planning at the Food and Drug Administration. As an
oversight committee it's our practice to ask witnesses to
testify under oath.
[Witness sworn.]
Mr. Souder. Let the record show the witness responded in
the affirmative. Thank you for joining us today. We're looking
forward to your testimony.
STATEMENT OF RANDALL W. LUTTER, PH.D., ACTING ASSOCIATE
COMMISSIONER FOR POLICY AND PLANNING, FOOD AND DRUG
ADMINISTRATION
Mr. Lutter. Thank you, Mr. Chairman and members of the
subcommittee. I'm Randall Lutter, Acting Associate Commissioner
for Policy and Planning at the U.S. Food and Drug
Administration. Thank you for the opportunity to testify about
FDA's efforts fighting counterfeit prescription drugs.
Let me emphasize, first, that the overall quality of drug
products that consumers purchase from U.S. pharmacies remains
high. The American public can be confident that these
medications are safe and effective. The FDA cannot, however,
offer the same assurance about the safety and quality of drugs
purchased from sources outside the U.S. regulatory system.
Counterfeit drugmakers operating outside the system seek profit
by peddling fake medicines to sick patients who need real
treatment, sometimes with tragic consequences.
My testimony today will focus first on the growing
counterfeit drug problem and then on FDA's effort to secure and
approve the safety of our drug supply.
U.S. law defines counterfeit drugs as those sold under a
product name, without proper authorization, where the product
is knowingly and intentionally mislabeled in a way that
suggests it's the authentic approved product. Counterfeit drugs
include products without the active ingredient, with too little
of the active ingredient, with the wrong active ingredient, or
with fake packaging. This definition reflects fraud. Consumers
wrongly believe they're buying a genuine product. Counterfeit
prescription drugs are illegal and they're inherently unsafe.
As you can see from the first slide, the number of newly
initiated counterfeit drug cases has risen in the last few
years. We believe the unusually high number of cases in fiscal
year 2004 stems in part from the increased awareness and
vigilance throughout the drug distribution chain, as a result
of FDA's 2004 Counterfeit Drug Report, increased referrals from
other law enforcement agencies, as well as improved
communications with manufacturers.
Fortunately, because of the expertise and extensive
investigative experience of the Office of Criminal
Investigations at FDA, we've been successful in stopping most
of these drugs before they could reach consumers, and we've
also detected and dismantled many counterfeit schemes.
Counterfeiters have become so sophisticated that many
counterfeit drugs are indistinguishable from genuine FDA-
approved products.
As shown in the second slide, fake Viagra appears
superficially identical to the genuine product.
As shown in slide three, fake Lipitor appears very much
like the authentic product.
As shown in slide four, even the packaging of fake Serostim
is cleverly made to look like the real thing.
Counterfeit drugs can have serious adverse health
consequences for patients. For example, counterfeit Procrit,
which is an injectable sterile drug used by cancer and AIDS
patients, contains not the active ingredient of Procrit but
nonsterile tap water which could have caused a severe infection
in the patients who received it.
The second example is counterfeiters tried to pass aspirin
tablets as Zyprexa, a drug for schizophrenia and bipolar
disorder. This could have been dangerous for patients who were
aspirin sensitive, who were aspirin allergic, or who have
bleeding disorders. In addition, patients wouldn't receive
their appropriate treatment for this potentially serious
disorder.
In 2001, in a report to Congress regarding the Prescription
Drug Marketing Act of 1987, FDA noted that in order for
secondary wholesalers to have full pedigrees for their
products, Congress would have to amend section 503(e) of the
Food, Drug and Cosmetics Act. FDA issued final regulations
implementing the Prescription Drug Marketing Act in 1999, but
it stayed on several occasions certain provisions in response
to public comments and to allow Congress to consider the 2001
report. The stay was most recently extended to December 2006 in
the expectation that electronic track-and-trace technologies
would offer a low-cost alternative to paper pedigrees.
In July 2003, FDA established an internal Counterfeit Drug
Task Force to campaign against the growing threat of
counterfeit drugs. The task force report released in February
2004 highlighted a multitiered approach to better protect
Americans from counterfeit drugs.
See slide five, please.
The multitiered approach consisted of securing the actual
drug product, securing its packaging, and securing its movement
through the U.S. distribution chain; also enhancing regulatory
oversight and enforcement, increasing penalties for
counterfeiters, heightening vigilance and awareness of
counterfeit drug; and, last, increasing international
collaboration.
For brevity I focus here on new technologies that might
help us secure more effectively the product, its packaging and
movement through the supply chain.
New technology that could electronically track and trace
the product could provide a reliable electronic drug pedigree.
Slide six shows the information that an electronic might
accumulate as a product moves through the distribution system.
Radio frequency identification, the most promising electronic
track-and-trace technology uses a radio frequency chip, an
example of which appears in slide seven.
Adoption of RFID technology will allow supply chain
stakeholders to track the chain of custody or pedigree of every
package of drugs through every step of the supply chain.
Our other initiatives include encouraging health
professionals to use the MedWatch form to report suspect
counterfeit drugs to FDA. We have created a network to provide
timely notification of verified counterfeit events to members
and constituents of a variety of groups. We're distributing
public service announcements to consumers and collaborating
with international partners.
Before I conclude, I'd like to touch on an issue of recent
interest for public health regulators. As public awareness
grows on the avian flu as a potential public health threat, FDA
anticipates an increased risk of counterfeit or fraudulent
treatments. Although the agency is not aware at this point of
any counterfeit Tamiflu cases in the United States, there are
initiatives in place to deter counterfeiters and parties who
sell fraudulent or phony products against avian flu.
In conclusion, despite recent progress, there remains a
viable and concrete threat of counterfeit drugs entering
distribution in the United States. We must all work together to
pursue the measures identified in the FDA's counterfeit report
to protect U.S. patients against counterfeit and unsafe drugs.
Thank you.
[The prepared statement of Mr. Lutter follows:]
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Mr. Souder. You said in your testimony that you asked
Congress in 2001 in the report to amend section 503(e) to make
the requirement universal. Are you maintaining that that is a
major reason you haven't gone ahead with the pedigree? I don't
understand what the point of that is.
Mr. Lutter. Since the time that recommendation was offered,
there has been no legislative action. Our current proposal is
to do the best we can given current law and the authorities we
have.
Mr. Souder. You're saying without a universal pedigree,
there's no point in----
Mr. Lutter. Our expectation is that the track-and-trace
technology exemplified by RFID would offer a way to implement
an electronic pedigree given the existing authorities.
Mr. Souder. So you wouldn't need to do the amendment.
Mr. Lutter. It would still be helpful and the
recommendation still stands. It's unclear. While we have
substantial optimism about the availability of RFID, by 2007,
after the end of 2006, there's of course uncertainty about the
schedule, that it would be adopted.
Mr. Souder. So the criticism that the State--are you
maintaining that the reason you haven't implemented any kind of
pedigree is because of the failure to amend 503?
Mr. Lutter. The decision behind the stay was in response to
a variety of public comments, including from Members of
Congress and the Small Business Administration as well as from
industry, that it would be very difficult to comply with the
regulation as drafted. It related in part to the cost of
implementing the paper pedigree, which was the best available
technology at the time, and also with respect to the
difficulties of 503.
Mr. Souder. This bill was passed 18 years ago. Have private
companies done anything to improve that, to establish a
pedigree? What have they done to move ahead?
Mr. Lutter. There are some initiatives in some States where
States have already adopted stringent regulations, Florida
being one. A variety of major pharmaceutical companies have
taken active steps recently to adopt voluntarily the RFID
track-and-trace technology. We think that the actions by those
companies, and also by Wal-Mart, which, as you know, is a
leader in retailing and in distribution, provide a way for the
industry to move forward toward a lower-cost electronic track-
and-trace technology.
Mr. Souder. Did Florida move to an electronic track and
trace or to the paper trail?
Mr. Lutter. They have not adopted the electronic RFID.
Mr. Souder. So they did in Florida what you said would be
difficult for us to do at the Federal level?
Mr. Lutter. Yes.
Mr. Souder. Are other States copying the Florida----
Mr. Lutter. There have been examples of other States.
They're in a variety of stages of implementation. FDA's policy
in general has been to facilitate and support more stringent
licensing requirements on wholesalers at a State-by-State level
where there has been evidence that the existing programs are
lax.
Mr. Souder. Why would you favor it on a State-by-State
level but not nationally?
Mr. Lutter. We at this point have no particular policy.
We're still studying the proposal by the HDMA, which you
alluded to in your earlier remarks.
Mr. Souder. For 18 years?
Mr. Lutter. Excuse me?
Mr. Souder. For 18 years you have been studying it; 1987,
1999 made more specific questions. Part of the question is how
long do you have to study something?
Mr. Lutter. We issued the regulation on the pedigrees in
1999 and we've stayed it repeatedly since then. It did take a
while following the enactment of the law.
Mr. Souder. Are you going to continue to stay this until
you figure out whether the electronic will work?
Mr. Lutter. At the time that we issued the last stay, we
received ample public comment from the industry, from
manufacturers, and from retailers that they believe that based
on available information that they had, that electronic track
and trace would be feasible and widespread by the year 2007.
Because electronic track and trace offered a lower-cost way of
satisfying pedigree requirements, we believed at that time the
track and trace would be a way of satisfying the pedigree
requirements after December 2006, and that's why we issued--
extended the stay of the rule through December 2006.
At this time, we continue to be optimistic that RFID would
be economically feasible to the industry and available at that
time, but of course there's uncertainty about how the
technology will develop.
Mr. Souder. I have been more immersed in this last stretch
trying to figure out how we regulate pseudoephedrine with meth,
and the arguments you're making are so similar as we try to
deal with this at a Federal level. The administration's
position has been why not a State-by-State level? And so we
have chaos, that people in one State go over to the next State
to get it. We've been meeting about the difficulty of the paper
trail and whether it can be done electronically, which people
hold out may be a possibility to do this electronically. Now
we're hearing that in a sense everything is somewhat in danger,
and we'll hold out hope that electronic will do it.
That's why my question is: Has anything been done in 18
years, or is it in fact the threat of a Federal regulation? I
have a family business. I grew up in a family business. And
part of the question is at what point do you start to react
proactively to avoid the Federal intervention, or how long do
we wait and stay and stay and stay? That's kind of where my
questions were driving, if you could tell us directly that the
electronics will be implemented by date certain and will work
in small business.
What we found in pseudoephedrine is Target and Wal-Mart can
agree, but small business can't really function, because the
bigger distributors will have electronic ability; the smaller
ones may not. So then you get into a situation of having
electronics, but it automatically biases toward the big
retailers unless you have a paper combined with it, which is
what we're finding in the other areas.
I just don't see--do you really think there will be
electronic availability in every little pharmacy and grocery
story in the United States in, what did you say, 2006?
Mr. Lutter. The information that was given to us from the
industry a couple of years ago as we were preparing the
Counterfeit Task Force report, and at the time we developed the
decision on the stay, was that there was substantial optimism.
A lot of that was because the RFID is not primarily for
counterfeit control in the sense of providing a pedigree, but
also it provides substantial business advantages to the
wholesalers and to the industry, the manufacturing companies,
in terms of giving them information about management of their
inventories to lower inventory control costs and to provide an
opportunity for them to better manage the distribution of their
entire product. The information that we had from them is that
this would be economically feasible by the year 2007. Clearly
these expectations depend on their judgment about the
development of the new technology. We will have to reassess the
development of that new technology as we approach the
expiration of the stay late next year.
Mr. Souder. Why wouldn't you do what States are doing in
meth and other things; that is, put a paper trail in and when
the electronics come, you replace it with electronics.
Mr. Lutter. In 2001 when we originally issued the stay,
there was substantial opposition from the industry, including
the Small Business Administration, that this would put out of
business many small secondary wholesalers. And since this is
also in response to these concerns expressed by the industry
and by the Small Business Administration and by Members of
Congress, we decided to implement the stays.
Mr. Souder. Thank you. Mr. Cummings.
Mr. Cummings. Who are these counterfeiters, do you know? Do
you have any idea who they are? Are the people in this country
or outside of the country?
Mr. Lutter. The counterfeiters are identified primarily
through the ongoing criminal investigations. In terms of who
they are, when the products are sold in this country where FDA
has jurisdiction, they're sold by American, typically American,
pharmaceutical product wholesalers, and the products are
typically intercepted at that level, but people who are
masquerading in any event as such wholesalers.
Mr. Cummings. You say in your testimony, I think you said
that we catch them usually before they get to the retail.
Mr. Lutter. We have been successful to date in catching
most of the products before they reach retail distribution.
Mr. Cummings. Why is that? How has that come about?
Mr. Lutter. I think it's largely because of the quality of
the tips and the information that we gather from the
manufacturers and from the wholesale distribution system. Most
counterfeit investigations that we initiate are not the result
of a consumer saying I got a product which isn't genuine--
because it's clearly extremely difficult for consumers to make
the distinction. Instead, they're sometimes from manufacturers
who give tips that a product has been brought to their
attention which is not one of theirs, but in fact resembles
theirs; or is from a wholesaler who also has information that
the products are being sold as if they were FDA-approved, when
in fact they're products which are not. And it's that sort of
information that is usually the impetus for the investigations
that we undertake.
Mr. Cummings. Just recently we had on the national news
this thing about the folks trying to sell some fake flu
vaccines. How did that come about? How did that information
come about?
Mr. Lutter. That was a case in Texas where the flu vaccine
was injected at a workplace. It's actually not a counterfeit
product, because apparently it was not sold as if it was a
brand-name vaccine. It was surely fake, it was fraudulent, it
was unsafe, it was potentially dangerous.
Mr. Cummings. Unapproved.
Mr. Lutter. Unapproved, surely. My understanding, the
syringes were filled with sterile water. Surely the people
received no benefit in terms of protection against the flu,
which is the primary interest that they were seeking the
vaccinations.
Mr. Cummings. So you're saying, then, that we are able to
catch most--the people that we have been able to at least
catch, they have gotten to them before they got the product to
the retailer. Who are these retailers? Is there any particular
part of the country where you see this more prevalent?
Mr. Lutter. I don't think it's easy to generalize about
what types of retailers are more inclined to be buying this. I
think many retailers are business people and are potentially
vulnerable to sales of counterfeit products when they're made
available. So I think in that sense it's a potentially
widespread problem.
Mr. Cummings. How often do we find these drugs actually get
to the retailers, from what you can see? Is that a major
problem? I know what you just said, that we see a number of
cases where they actually get to the retailer.
Mr. Lutter. Based on conversations with the senior staff in
the Office of Criminal Investigations at FDA, I don't think I'm
able to generalize about that. We just don't know.
Mr. Cummings. There seems to be an increase in FDA
counterfeiting investigations recently. How much is this
attributed to heightened vigilance or to the extent the problem
may be getting worse? Do you have any idea?
Mr. Lutter. We've had extensive discussions internally
about that question. The best professional judgment is that the
problem is indeed getting worse. There are probably more
counterfeit drugs out now than there used to be.
Notwithstanding that, we believe the overwhelming majority
of all products available in the United States are safe. As to
why there's an increase, that's a very difficult question. We
believe that the increase in initiated new investigations, the
first chart that I presented today, reflects largely two
things: One is a growing threat in terms of the number of
counterfeits that may exist; and the second one is improved
information that we get from manufacturers and from wholesalers
from the law enforcement community both at a Federal level and
at a State and local level, and those better tips are ones that
help us initiate more investigations than was the case in the
past.
Mr. Cummings. Do you feel that you have enough money to do
the things that you need to do? Here we have an increase in the
investigations, and based upon what you just said, it seems as
if people have decided that this is a business that they want
to be a part of; this counterfeiting business, that is.
Do you feel we have enough money? We're trying to
concentrate on a number of issues, as you well know, in our
country. And I'm wondering if you believe your folks have
enough money to do what you need to do, because if this
continues to increase, I can see a situation where a lot of
people can be harmed, and I was just wondering.
Mr. Lutter. Let me say, first, that most recent available
data on the number of investigations is somewhat reassuring. A
very high number in fiscal year 2004, 58, fell the following
year to 32. And that suggests that the very high number in that
1 year was somewhat unusual. The decline may be due in part to
successful deterrents, may be due in part to the fact that when
we initiated new investigations in the most recent year, we
discovered that some of those were in fact linked to
investigations initiated in the earlier year and therefore were
not independent. And when accounting for these investigations,
taking in a manner that attempted to count merely the number of
independent ones, the independent investigations initiated in
the last year was lower.
With respect to your question of whether or not we need
more money, we have a variety of priorities at the FDA in the
Office of Regulatory Affairs and with respect to criminal
investigations in particular. The Office of Criminal
Investigations is responsible for medical devices, also foods
as well as drugs. It also investigates cases of fraud regarding
new drug applications. Given those competing priorities, we do
the best we can with the resources that we have.
Mr. Cummings. Well, what does that mean, though?
Mr. Chairman, I have to finish this. Give me 1 second. We
are here talking about the drug counterfeiting, and I need to
know where that falls in all the things that you just stated;
that's the one question.
The other question is, help me understand, isn't it
possible that we still may have a very significant problem in
the mere case, the mere fact that there have been, maybe, as
you just testified, less investigations may not necessarily
mean that there are less problems? I mean, can you answer those
two? And then I'm finished.
Mr. Lutter. Well, there's a very tenuous relationship
between the number of investigations and the extent of the
problems. We believe that there's more problems associated with
counterfeit drugs in recent years, call it the last 2 or 3,
than there were 5 or 6 years ago. In that sense the trend is
disturbing.
I'm sorry; your other question?
Mr. Cummings. I was trying to figure out exactly where in
the line of priorities--I asked the question, first of all, do
you have enough money? Then you gave me a whole list, a laundry
list, and rightfully so, of the things that are priorities for
you. And I'm just trying to figure out where this falls in the
list. Is this something that's at the top of the list, is this
at the bottom? Where is it?
Mr. Lutter. The way the OCI is managed is that the
investigators are generalists. They are assigned to different
topics according to where the opportunities are and where the
information lies so that they can be most effective. And in
that sense, I think it's very difficult to come up with a
single ranking of where the priorities are, because it depends
on the particular circumstances available in any particular
investigations.
Mr. Cummings. Thank you.
Mr. Souder. I understand your testimony to say that the
FDA, that you systematically random test drugs at pharmacies
and grocery stories, that you systematically random test things
on the Internet or at, say, flea markets or other selling
points to see if there's fraud.
Mr. Lutter. No.
Mr. Souder. Then how in the world can you say under oath
that you know what the level of the problem is? In other words,
all you can testify to us is how many----
Ms. Norton. Mr. Chairman, can you speak up?
Mr. Souder. I'm questioning how he can testify under oath
that he knows the extent of the problem if you're not doing any
testing other than from a tip.
Mr. Lutter. Mr. Chairman, I mentioned earlier that it was
based on the best professional judgment of----
Mr. Souder. In other words, tips.
Mr. Lutter. The staff of the Criminal Investigations that
the trend is increasing.
Mr. Souder. You said earlier that you believe it's
generally been an increasing trend, but I was responding really
to Mr. Cummings' first question. You downplayed, you said the
overwhelming numbers and all this kind of stuff. The fact is
you don't know. Based on the tip, which is one indicator, but
if you're not doing random testing, particularly in high-risk
areas, you don't know. We do that all the time in all other
kinds of narcotics, and you can't make that statement, because
you don't have a border check that systematically--or do you?
Are you basing this solely on how many criminal investigations
are initiated from tips?
Mr. Lutter. We lack the resources to conduct the sort of
randomized testing of products sold in the market that I think
you're describing. We have not contemplated that. We've never
done it.
Mr. Souder. That is a very fair statement and we may all
have to decide that the risk isn't there, but then we can't
make sweeping statements about safety if we haven't random
tested.
Mr. Lutter. The statement about safety is based on many
years of experience of the FDA professional staff who are
responsible for ensuring the safety of and effectiveness of
drugs sold in America, and their collective judgment is that
the vast majority of these products are safe.
Mr. Souder. Thank you. Mr. Burton.
Mr. Burton. We're all against counterfeit drugs. You
probably don't know this, but we had Mr. Hubbard before my
committee when I was chairman of the full committee, about five
times, and we were talking about the reimportation of
pharmaceutical products. He said that they couldn't guarantee
the safety of them, and I asked him how many people died from
aspirin or Tylenol last year, and he didn't know. I said, do
you have any records about that? And he says, well, no. I said,
how many people were injured last year from pharmaceutical
products imported from Canada, where they have a pretty rigid
pharmaceutical policing system? And he says he didn't know.
And I have all the testimony here from two or three
hearings if you would like. I'd be glad to give you all of it.
The fact is you don't know. You just don't know. And policing
it is very, very difficult. The reason that people import
pharmaceutical products is because the cost disparity is so
great. The pharmaceutical pharmacy charges 8, 9, 10, 20 times
more in the United States for the very same product sold in
Germany, France, England, Canada and elsewhere. And you've got
people on fixed incomes who have to split their pills. You talk
about being safe: They split their pills, split their
medication, because they can't afford to buy the pills because
they cost so much here, when they can go across the border in
Canada and get the same thing, 10 times as many pills for the
same price. That's the problem.
And we never heard about this kind of a problem before we
started talking about reimportation, the counterfeits. We had
hearings for 4 years, we never talked about counterfeit drugs
until we started talking about reimportation. And all of a
sudden, the pharmaceutical industry and HHS said we've got a
problem with counterfeit drugs and it's going to create a
terrible problem for the American people. Never heard about it
until then because of the profit margins that we were talking
about.
I'm a free enterprise advocate. I believe in the companies
making a big profit, I want them to, but I don't want Americans
to pay 10 times for Taxol. My wife died of cancer a few years
ago. I don't want them paying 10 times for Taxol what they do
in Canada, France or Germany, or someplace else. And hiding
behind the counterfeit things bothers me; we want the purity to
be there. But to keep saying, my gosh, we can't have
reimportation, we can't import drugs from Canada and France and
Germany, because of--that is just an argument that's being
fostered by those who want to make a lot more money here in the
United States and saddle the profits on the back of the
Americans while the rest of the world gets off scot free. You
can give me all the stuff you want to about the FDA being
concerned. That really bothers me.
I want to talk to you just a little bit about the
wholesalers, and I'm disappointed we don't have any wholesalers
here today on the panel, and I don't blame the staff or the
chairman for that. I just wish they were here so they could
defend themselves when you talk about the problems that they
face. Can you detail for us any significant counterfeit drug
cases since late 2003?
Mr. Lutter. I'm not prepared to do that.
Mr. Burton. Give me one. OK, you can't. When the Health
Distributor Management Association published their recommended
guidelines for pharmaceutical wholesaler operations that track
counterfeit stolen products, specifically back through licensed
secondary market wholesalers, that was in 2003. I don't think
FDA can give us any counterfeit evidence since then. I'm not so
sure you can go back any further than that. What's been done by
the industry, the wholesale industry, particularly wholesalers
in reaction to the counterfeit problems that we heard about?
Can you give us any idea what they've done to protect the
buying public?
Mr. Lutter. I'm sorry. What's been done by the wholesalers?
Mr. Burton. What has been done by the wholesale industry,
particularly wholesalers, in reaction to the counterfeit
problems that you have been talking about?
Mr. Lutter. I think one might, sir, ask that question of
the wholesale industry.
Mr. Burton. Well, you guys are at the FDA, and you've been
talking to the wholesale industry about a problem that has been
created by these counterfeit drugs going through the process.
Have you talked to anybody in the wholesale industry about what
they've done?
Mr. Lutter. We have talked to them about the----
Mr. Burton. What have they done?
Mr. Lutter. They came to present to us recently their
proposal with respect to uniform national licensing standards.
Mr. Burton. Have you heard of the Health Distributors
Management Association [HDMA]?
Mr. Lutter. Yes, sir.
Mr. Burton. OK. What have they done to help protect the
buying public from the products that are going to the wholesale
operation? You don't know?
Mr. Lutter. I'm not prepared to answer that, sir.
Mr. Burton. Well, why is it fair to cast a blanket across
the entire secondary market when in fact many legitimate
businesses are providing a valuable service? And you don't have
any answer for me today.
You know, I can see I'm out of time, but I just want to
say, obviously we want to protect the buying public from
counterfeit drugs because they're not safe in many cases, but
at the same time there is a responsibility on the part of the
pharmaceutical industry in this country to make sure that
Americans buy a product at a fair price, that we don't saddle
the American people with a product like Paxil where they may
have to pay 8 or 10 times as much as they do right across the
border or in Canada. That's the reason why people import. And
with the Internet being the way it is today, you have a
herculean problem because if you stop the importation of
products from Canada, they'll get on the Internet and buy it
from Germany and if you stop it from Germany they'll get on the
Internet and buy it from France, or they will buy it from
Spain. And it's very difficult for you to regulate everything
that's going through the U.S. mail. And you're talking about
little old ladies and little old men who can't afford to buy
this product because it's so much more expensive here than
abroad, and so you've got really a herculean problem in
controlling this. And I want you to control it because we don't
want counterfeit products in the marketplace, but we want to
make sure that Americans don't pay an exorbitant price for the
same life-saving drugs that right across the Canadian border
are costing a Canadian woman with breast cancer one-tenth of
what it costs here in the United States.
Mr. Souder. Ms. Norton.
Ms. Norton. Thank you very much. And I think the gentleman
has a point.
Dr. Lutter, this subcommittee has had a lot of hearings,
and one of the things--one of our major frustrations is with
the problem law enforcement has in getting control of any
valuable drugs, and many of our hearings are, of course, about
drugs which are very valuable to addicts and to people who sell
to them. So I was taken aback by your statement on page 2, that
most of the counterfeit drugs at issue did not reach consumers.
How do you know that most counterfeit drugs do not reach
consumers?
Mr. Lutter. The statement is intended to apply to the
counterfeit drugs found during the course of the
investigations. So with respect to other counterfeit drugs, we
just don't know, and that's----
Ms. Norton. That is like saying that the drugs we
confiscate, the heroin we confiscate does not reach the streets
of New York and D.C. So, I mean, you really have to watch out
for these blanket statements. Sure, anything that you are
investigating, if it turns out to be legitimate it may not
reach it for that matter, but that is an unqualified statement,
that most of the counterfeit drugs at issue do not reach
consumers.
Mr. Lutter. The counterfeit drugs that we find in the
course of our investigations as a generalization don't reach
consumers. I'm trying to clarify that here.
Ms. Norton. I very much appreciate the clarification,
because later on in your testimony you talk about how
cleverly--in fact, in your oral testimony right after you
indicated that you were catching everything, you then went on
to show us a set of slides about just how cleverly these drugs
are packaged so that you would have to have a trained eye to
even know they were counterfeit. So I take it that there may be
many consumers out here without an FDA's trained sense of what
is counterfeit and what is not, since even your people have to
look closely at it, who may be passing these counterfeit drugs
off.
Would that be a true statement?
Mr. Lutter. It is absolutely true that there may be some.
First of all, it's very difficult for people to distinguish
these counterfeit drugs from the genuine. That was the key
point of the slides that I tried to show earlier.
With respect to the comment about whether or not consumers
may be exposed to counterfeit drugs, absolutely, our system is
not foolproof. We do the best we can with----
Ms. Norton. But those are only law enforcement folks, and
no. I mean, no prosecutor will tell you that he catches all the
criminals. You know, he catches a tiny number and he hopes that
has an effect on the rest who might be inclined toward
criminality.
I understand that about 50 percent of the drugs on sale in
some countries are counterfeit. What percentage of the drugs on
sale in this country would you believe are counterfeit? Because
surely you can interpolate, once you know how much you have,
you're a Ph.D., you know then how to calculate how many go on
sale that may be counterfeit or at least are offered for sale
that may be counterfeit. What would be your estimate?
Mr. Lutter. Let me begin by saying we don't have a
scientific basis for coming up with an accurate estimate of
that----
Ms. Norton. Do you have any statisticians in your
department?
Mr. Lutter. We do have statisticians.
Ms. Norton. Do you agree, you have a Ph.D, that you could
extrapolate, once you know how many you catch, and then try to
at least estimate, even if you truthfully said of course, as
you must, this is only an estimation of how many counterfeit
drugs are out there?
Mr. Lutter. Our best estimate is it is significantly less
than 1 percent.
Ms. Norton. And you have just now told me you couldn't, and
now you're telling me that less than 1 percent in the United
States are counterfeit.
Mr. Lutter. Significantly less than 1 percent.
Ms. Norton. How do you know that, sir?
Mr. Lutter. That's based only on the professional judgment
of the staff at FDA.
Ms. Norton. But not based on the kind of extrapolation that
I have asked for, the statistical----
Mr. Lutter. It is not based on a statistical calculation.
Ms. Norton. Let me tell you something, Dr. Lutter, to the
extent that you are truthful to people by saying these things
are out here, we have only our own professional judgment, but
they're out here in larger and larger numbers, to the extent
that you say that you make people more and more leery about
purchasing drugs that may be counterfeits. I don't find it very
helpful that you are operating without, that the FDA is
operating without doing the necessary statistical work so as to
warn consumers of the statistical probability of in fact having
counterfeit drugs to reach them. Wouldn't that help people,
including pharmacists and others, to help you in the law
enforcement challenge you reach?
Mr. Lutter. Undertaking that sort of statistical analysis
is something that we haven't previously contemplated. It would
take significantly more resources than are available to date.
Ms. Norton. Oh, my God, I'm sure I could--come on. I'll put
you in touch with some Ph.D math students in statistics who
could help you out, Dr. Lutter. I do not think that this is a
complicated statistical problem.
And Mr. Chairman, I ask that the agency be requested, using
its existing resources, to try to find out what the statistical
probability is. I really don't believe that is a complicated
problem. And I do believe at the very least the public, if it
knew that, might be more inclined to be careful.
Dr. Lutter, one more question. You say on page 7, in order
for secondary wholesalers to fully comply with pedigree
requirements by which we mean understanding throughout the
chain whether drugs are legitimate, Congress would have to
amend Section 503(e), and you say later in questions that
you're just doing the best you can and you indicated what some
of the problems were when questioned. Does the agency recommend
that we in fact amend 503(e)?
Mr. Lutter. That was the recommendation we issued in 2001,
and we still stand by it, yes, ma'am.
Ms. Norton. Thank you very much, Mr. Chairman.
Mr. Souder. Ms. Schmidt, do you have any questions?
Mrs. Schmidt. Not at this time.
Mr. Souder. Ms. Watson.
Ms. Watson. Thank you, Mr. Chairman. I was listening very
closely to the questions that my colleague was asking and the
response, and it occurs to me that maybe this hearing is
premature, and my good friend, Dan Burton, has the same concern
I have. And you know, a lot of it goes to the price of
manufacturing, and of course there should be concern about
these fake drugs, but I'd like to know the magnitude of the
problem. I tell you what I'm more concerned about, and you can
respond if you heard these rumors, that there seems to be a
consistent rumor that terrorist organizations are planning to
spike up drugs and things, and that's one way of killing off
Americans.
And Mr. Chairman, I'd like to hold a hearing maybe on that
kind of threat to us because they're getting very clever in the
way they plan to attack us. But I think to make the kind of
assertion that we've got these counterfeit drugs running
rampant and we need to be cautious, we need to base it on a
little more statistical data than I'm hearing. Of course I came
in late. I don't know how much transpired before I came in, but
hearing on counterfeit drugs within the United States takes,
for me, more statistical evidence that there is a real serious
problem with the counterfeit drugs. That's the excuse you use
for being opposed to reimportation. And what I would like to do
is, and this goes to the Chair and our committee, is to really
look into the rumors that I'm hearing because the addiction
level in the United States of America, because of the marketing
of drugs the way we do, could be the beginning of something
that could have an impact on our society, which I'm on Homeland
Security. Well, we better start looking at these rumors.
So I just want to say that I'd like to kind of back up what
Eleanor Holmes Norton was saying, that we really need more
evidence that this is a problem that should take priority right
now. I think the threat to us, as rumored, is more of a
priority.
So thank you for the time. I yield back, Mr. Chairman.
Mr. Souder. Thank you.
Mr. Gutknecht.
Mr. Gutknecht. Thank you, Mr. Chairman.
And Dr. Lutter, I don't know if we've met before, but I
have been involved and interested in this issue for a long
time. And since you couldn't answer the question that Ms.
Norton had, let me answer at least according to the FDA's open
counterfeit drug cases report, the report done by the Task
Force on Importation, in 1997 there were 6 cases, in 1998 there
were 4 cases, in 1999 there were 6 cases, Representative
Norton, in 2001 there were 20 cases, in 2002 there were 22
cases, and the last year we have numbers for is 22.
Just out of curiosity, do you know how many people died in
hospitals last year due to getting the wrong drug?
Mr. Lutter. There are estimates by the Institute of
Medicine a few years back where up to high tens of thousands of
deaths per year are attributed to medication errors.
Mr. Gutknecht. It generally is over 5,000 a year, and here
we're talking about 22 cases.
Now, the other thing I just want to call your attention to,
we have been trying to get the FDA to get involved in anti-
counterfeiting packaging for at least 4 years. And I remember
the first time we had a meeting on this with one of the
directors, who is no longer with FDA, and we talked about this.
He said, well, this can't be done. And then I reached in my
pocket and I showed him a $20 bill and I said well, you know,
the U.S. Treasury now has come up with a pretty good anti-
counterfeiting technology for our $20 bills, and he said that
can't be done in drugs. I thought that's kind of an interesting
attitude, but that technology exists today; it is being used in
Europe. At least five of the major pharmaceutical companies are
using it. This is a problem; I mean, counterfeiting is a
problem. But it just strikes me that the FDA is not really
serious about that, because if they were they would be focusing
on really helping us solve the problem.
There is also a technology, and I don't know if it's been
talked about here in this hearing yet today, using these little
computer chips. Frankly, I don't know if my staff stuck them in
here, but we can show them to you. We brought the cost down now
to about 10 cents per chip, and they are incredibly amazing
little chips; you can literally tell where the drug was made
and the day it came off the line, simply through a relatively
simple reader.
Now the drug companies themselves are interested in this
because they have a keen interest. I would have a question,
though, in the studies that you've done in counterfeit drug
cases, is most of the counterfeiting being done in the United
States or is it coming in from other countries?
Mr. Lutter. The products themselves are often manufactured
overseas and smuggled into the United States.
Mr. Gutknecht. I didn't say often. No, no, no. Where is
most of the counterfeiting actually being done for the drugs
being sold in the United States?
Mr. Lutter. You mean the manufacturing of the products or
their distribution for sale?
Mr. Gutknecht. Where are they actually making these
counterfeit drugs? Because the studies I've seen, most of them
are actually made here in the United States.
Mr. Lutter. The information that we have from the Office of
Criminal Investigation suggests that the manufacturing itself
is often overseas.
Mr. Gutknecht. I'm sorry, that doesn't square with what
we've been told.
And the real issue, and this is where the FDA continues to
miss the point, people don't counterfeit $1 bills do they? They
counterfeit $20 bills, but mostly they counterfeit $100 bills.
The reason that there is an industry developing, both illegal
importation and counterfeiting, is because we have done nothing
to help level the prices that Americans pay for prescription
drugs, and that's the real issue here that nobody wants to talk
about. That's why more and more people say, you know, ``I can
make more money in getting into the business of selling
Celebrex or Tamoxifen,'' which it used to sell for about $500
in the United States, this is one of the examples, Mr.
Chairman, it used to sell for about $500 a month in the United
States. You can buy it in Canada for less than $100 a month.
You can buy it in almost every European country for less than
$100 a month.
The reason that people are starting to look at doing these
kinds of things is because we have done nothing to help level
the prices that Americans have to pay for these drugs. So it
seems to me that if the FDA ever wants to get serious about
addressing these kinds of issues, you ought to go to where the
big problems are. The big problem is that Americans are being
held hostage; they pay way too much for their prescription
drugs. They know it and everybody else knows it, and yet the
FDA says, well, we have to go after these 22 cases, right; 22
cases. When thousands of people are dying every year from
prescriptions given in hospitals, and the FDA is doing nothing
about it; there is no plan to deal with that. And yet we can
use bar coding technology, we can use all kinds of things that
are available today to change those numbers.
So I'm sorry, I'm a little, I get a little emotional about
it because we've been in this battle now for 4 years and for 4
years the FDA has said ``you know what, we want to work with
you,'' and for 4 years there has been absolutely no help
whatsoever. I'm sorry that you're the one on the hot seat today
and I happen to be in this seat today, but we're not going to
give up on this. And trying to scare people because you have 22
cases of counterfeit drug cases when we have literally millions
of other problems dealing with prescription drugs--and let me
add one last point, Mr. Chairman. I know my time has expired,
but the FDA is the Food and Drug Administration. Do you know
what percentage of the food coming, the fruits and vegetables
coming into the United States, are contaminated with foodborne
pathogens, including things that can kill you? Do you know what
percentage it is?
Mr. Lutter. I'm not----
Mr. Gutknecht. The answer is the FDA has actually got a
report on that. It's roughly 2 percent. Now that is a much
higher percentage than the numbers, and with all due respect,
your guess I think is way high in terms of the counterfeit drug
problem, but I think we have a lot bigger problems. And they're
largely--the problems with drugs today are all centered around
one fact, and that is Americans pay way too much for what they
get. We're doing almost nothing to stop importing fruits and
vegetables, even though we know by our own studies that 2
percent of the fruits and vegetables coming into the United
States are contaminated with foodborne pathogens that can kill
you.
I yield back my time.
Mr. Souder. Before we move to our second panel, I just want
to clarify that you've informed the committee, the OCI did,
that there are 58 cases in 2004 and not 22, and that is a jump;
is that correct?
Mr. Lutter. Fifty-eight cases in 2004?
Mr. Souder. Yes.
Mr. Gutknecht. Mr. Chairman, there were 22 cases in 2003.
Mr. Souder. And it jumped to 58 in 2004?
Mr. Gutknecht. But it wasn't 10,000.
Mr. Souder. Yes. And when you have a case, is that 58
people got one pill, or are these cases that could in fact
affect thousands of people in each case?
Mr. Lutter. Sir, these are independent criminal
investigations, so in that sense, yes, they vary in terms of
their scope. Some may be very small, others may be quite large
and potentially infecting large numbers of people, including
thousands.
Mr. Souder. Thank you. I thank you for your testimony
today. If Members have additional questions we will send those
to you in writing. Thank you for participating.
If the second panel could come forward. Before I swear the
second panel in, we've been joined today by Congressman Israel
from New York, and he would like to introduce one of the
witnesses.
Mr. Israel. Thank you very much, Mr. Chairman. I want to
express my appreciation for the courtesy that you and the
ranking member have extended in allowing me to sit in on this
subcommittee, although I'm not a member, and allowing me to
introduce one of my constituents, Kevin Fagan, who will be
sharing his family story with you today.
Kevin Fagan is a long time resident of Deer Park, NY. He
works as a second line supervisor at Con Edison, a company that
he has proudly served for 22 years. He is married to Jean and
is the father of three children, Timothy Lauren, and Caitlyn.
I first met Mr. Fagan in 2003 when he informed me that his
older child, Tim, had been injecting himself with counterfeit
Epogen, a drug he picked up from a national pharmacy to help
him recover from a liver transplant, a drug that somehow found
its way to the Playpen South Strip Club in Miami, where it had
been tampered with.
This ordeal changed Mr. Fagan into a public advocate
determined to do what he could to ensure that more families
don't suffer from loved ones receiving counterfeit medicines.
He has dedicated himself to teaching elected officials and the
public about the dangers of our prescription drug supply chain.
Since prescription drugs can change hands up to a dozen times
between the manufacturer and the pharmacy, these drugs, as
we've learned today, can be tainted, diluted, relabeled and
counterfeited.
As a result of my association with the Fagans I have
introduced Tim Fagan's Law, H.R. 2345, which gives the FDA the
authority to recall drugs, implements harsher penalties for
criminals of counterfeit drugs, and requires pedigrees of a
drug's origin.
Kevin Fagan has been a remarkable champion of this
legislation named in his son's honor, an outspoken advocate for
the need to clean up our Nation's drug supply, and I am pleased
to introduce him as he shares his story, and to again thank the
chairman and the ranking member for holding this vitally
important hearing.
Mr. Souder. Thank you very much for being here. This panel
consists of Katherine Eban, author of Dangerous Doses, Mr.
Fagan, who you've just heard described by his Congressman, and
Max Butler, brother of Maxine Blount, counterfeit drug victim.
So if you would each stand. It is the guidelines of this
oversight committee to swear the witnesses in.
[Witnesses sworn.]
Mr. Souder. Let the record show that each of the witnesses
responded in the affirmative.
We thank you for being here today and we're going to start
with Katherine.
STATEMENTS OF KATHERINE EBAN, AUTHOR, DANGEROUS DOSES; KEVIN
FAGAN, FATHER OF TIMOTHY FAGAN, COUNTERFEIT DRUG VICTIM
(EPOGEN); AND MAX BUTLER, BROTHER OF MAXINE BLOUNT, COUNTERFEIT
DRUG VICTIM (PROCRIT)
STATEMENT OF KATHERINE EBAN
Ms. Eban. Mr. Chairman and members of the committee, thank
you for having me here.
Mr. Souder. You need to tap your mic. There should be a
button.
Ms. Eban. Mr. Chairman and members of the committee, my
name is Katherine Eban. Thank you for having me here.
As an investigative journalist and book author, I've spent
the last 3 years documenting a rising tide of counterfeit
medicine in our pharmacies and hospitals. My book, Dangerous
Doses: How Counterfeiters Are Contaminating America's Drug
Supply, was published this May. It is based on more than 160
interviews, over 13,000 pages of documents and several years of
firsthand reporting.
Adulterated medicine routinely lands on our pharmacy
shelves in part because major wholesalers seek out discounted
medicine from smaller ones. This extremely dangerous trading
has degraded our medicine and endangered patients.
A few numbers: 97,000 vials of counterfeit Epogen and
Procrit, enough to treat 30,000 cancer patients for a month,
are believed to have entered the supply chain and reached
patients in 2002. In 2003, 600,000 patients may have received
counterfeit Lipitor, according to Pfizer's own estimate. One
percent of the Nation's drug supply is 35 million
prescriptions, the FDA estimates less than 1 percent of the
Nation's drug supply is counterfeit.
Some States and other players have made significant efforts
to restrict the flow of counterfeit medicine, yet recently
1,000 Exxon Mobil employees in Texas were injected with
counterfeit flu vaccine.
In our poorest supply chain, medicine may move through a
dozen hands on its way to the pharmacy. The wholesalers who buy
and sell it may be narcotics traffickers, mafia members or high
level diverters, some with legitimate State licenses. Though
wholesaler in name, many never buy directly from manufacturers
or sell directly to pharmacies. They are traders who buy and
sell to one another in an all-hours auction. Every single
counterfeit to reach American patients has moved through their
hands with scant proof of its origin.
Who in their right mind would buy this medicine? Everyone
unfortunately. Even the Nation's major wholesalers set up
trading divisions to scout for bargains from these middlemen,
purchases that allow substandard and even counterfeit medicine
to reach patients.
Among recent reforms, major wholesalers, Cardinal Health
and AmerisourceBergen, announced they would limit or cease
their pharmaceutical purchases from secondary wholesalers, but
gaping holes remain. Because our distribution system is
national and medicine that is in California 1 day winds up in
New York the next, our drug supply is only as clean as its
dirtiest link.
Tim Fagan, a 16-year-old liver transplant patient, learned
this the hard way when life-saving Epogen from his CVS pharmacy
proved counterfeit. His medicine required constant
refrigeration and stable handling, yet it was uplabeled by a
counterfeiter, transported in used paint cans, and allegedly
stored in the beer cooler of a Miami strip club. Its journey
took me several years to reconstruct.
If we could please show the slide. Thank you.
His medicine began as low dose, or 2000 U/mL Epogen.
Cardinal Health and AmerisourceBergen, near at the top, sold
110,000 vials of it to a small Miami pharmacy, which never
dispensed it to a single patient, but instead sold it all to an
accomplice of an alleged counterfeiter, Jose Grillo. Grillo
packed the low dose medicine into paint cans and carried them
to a south Miami trailer where a friend soaked the vials
overnight, and rubbed off the low dose labels and glued on fake
high dose ones for 40,000 U/mL. Grillo, awaiting trial,
allegedly transformed each $25 vial into a $470 vial, a scheme
worth $46 million. Investigators were only able to recover
13,000 of his vials, which means that 97,000 remained in the
supply chain and is presumed to have reached patients.
Once he had uplabled the vials, Grillo allegedly brought
them to his customers, including the Miami strip club, where
investigators believe he sold the medicine for one-sixth the
average wholesale cost. The medicine then moved through a
network of shell companies, as represented by the dark gray in
the middle of the chart, each one raising the price. An Arizona
wholesaler, which ultimately bought the medicine, then offered
AmerisourceBergen a deal, high dose Epogen for a price lower
than the manufacturer's. Amerisource bought back the very low
dose Epogen it had originally sold, counterfeited in the
interim.
Despite recent reforms, numerous diverters with wholesale
licenses still peddle substandard medicine for all those
seeking a discount and willing to take the risk. Consumers need
to know where their medicine has been. The most important
reform would be comprehensive pedigree records for every drug.
Those who say ``impossible'' are likely committed to a
Byzantine and opaque drug supply. Only Federal regulations that
mandate pedigree records will shed light on and eliminate the
hidden paths that our medicine may take.
I urge the committee to look at Tim Fagan's Law, introduced
by Representative Steve Israel of Long Island, which requires
paper pedigree records, strict regulation of wholesalers,
severe criminal penalties for counterfeiting, and stronger
enforcement powers for the FDA's Office of Criminal
Investigation.
Thank you for your commitment to protecting America's drug
supply.
[The prepared statement of Ms. Eban follows:]
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Mr. Souder. Thank you for your testimony. Mr. Fagan.
STATEMENT OF KEVIN FAGAN
Mr. Fagan. Good afternoon. My name is Tim Fagan, and in
2002 my son Timothy received counterfeit Epogen after a life-
saving liver transplant. While I am thankful for your time
today, I wish I had never heard of this topic.
Tim was very sick for a long time, and our trek to find a
cause and a cure for his disease took us as far as the Mayo
Clinic in Rochester, MN. No answers could be found. Upon
returning back from the Mayo Clinic, Tim's health took a severe
turn for the worse, and he required a liver transplant.
After surviving a 9-hour operation and a hospital stay, Tim
returned home to further recuperate. Our family thought our
prayers had been answered when my son came home. Shortly after
returning home, Tim became severely anemic and his transplant
team prescribed Epogen, which is an anti-anemia injectable drug
to combat his anemic condition and bolster his already weakened
health. We received the Epogen from a nationally known
pharmacy, Brightwaters Pharmacy. There was nothing over the
Internet. Upon receiving the Epogen injections once a week,
several hours after each injection my son woke up screaming in
pain. Through everything my son has been through, I have never
heard him scream like this before.
Several hours after the first injection the pain caused him
to wake out of a sound sleep. My wife and I ran into his
bedroom. I fully anticipated finding a robber or burglar from
his blood curdling screams; I had never heard him scream like
this before in my life. We found his whole body wrapped in
pain. Tim was doubled over crying, screaming, ``help me,'' and
I didn't know what to do to help my son.
We immediately called his doctors. They were dumbfounded by
the reaction, having never seen anything like this to this drug
that they've prescribed to numerous patients. And this same
episode proceeded for 8 more weeks.
Finally, my wife receives a call from our local pharmacy
informing her that the FDA notified them that counterfeit
Epogen was on the market and to check the vials in our
possession. My wife checked the vials and found that they were
indeed counterfeit based upon the information supplied to her;
they were missing a degree symbol and they had a certain lot
number.
We were understandably frantic with worry as to what this
might have done to my son in the short term and the long term.
I asked the pharmacy how this happened. They said, ``We get all
our drugs, all our Epogen, exclusively from
AmerisourceBergen.'' I had never heard of AmerisourceBergen
before. I looked up their number. I called them in Pennsylvania
and asked them how it happened. They rushed me off the phone,
to say the least, and ended the call saying it's not their
problem. As it turns out, it is their problem.
AmerisourceBergen is the number 22 company on the Fortune 500
list. AmerisourceBergen is one of the three largest drug
distributors in the United States, and AmerisourceBergen has
revenues approaching $50 billion a year. Yet instead of
purchasing drugs directly from the manufacturer, they chose to
purchase these drugs from the second or gray market where
elected officials and law enforcement agencies have identified
as the source of counterfeit drugs into the supply chain.
This was a domestic issue; it was no international trading
of drugs. It started in Florida, went through several hands
throughout the country and wound up in my son on Long Island.
Fortunately for us, we have a Congressman who is very much,
like you, interested in protecting their constituents, the
regular people, and I contacted Representative Israel for help.
And his law, H.R. 2345, Tim Fagan's Law, calls for tougher
criminal penalties for those engaging or distributing
counterfeit drugs. It calls for increased funding for the FDA
to perform the very inspections that the committee called on
earlier today at random. It calls for increased funding for law
enforcement investigations. It calls for public education and
track and trace technology. And I ask each and every one of you
if you would please co-sponsor this legislation which would
protect all the Tim Fagans and potentially every American
citizen from counterfeit drugs.
I thank you for your time. And again, I ask you to co-
sponsor, I plead with you to please co-sponsor this legislation
and make it a reality. Thank you very much.
[The prepared statement of Mr. Fagan follows:]
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Mr. Souder. Thank you for coming today.
Mr. Butler.
STATEMENT OF MAX BUTLER
Mr. Butler. Good afternoon, Mr. Chairman, and members of
the committee. My name is Max Butler, brother of the late
Maxine Blount of Holister, MO, a victim of counterfeit drugs.
I'm honored that the committee has provided me with the
opportunity to testify. I hope to illustrate the impact that
this crime has had on our family and friends.
This crime undermines the trust that society has in its
doctors and pharmacies. It targets victims that are already
fighting for their lives and one that often results in
suffering and sometimes an early death.
In 1998 Maxine Blount was diagnosed with breast cancer. Her
doctor explained that her cancer was very serious and promised
to provide Maxine with every opportunity to beat the cancer.
Treatments began; she received chemo and radiation treatments
to reduce the size of the tumors in her breast so that the
doctors could safely do a mastectomy. After the mastectomy
Maxine continued to receive regular treatments until she began
to take the counterfeit Procrit. The counterfeit Procrit made
it impossible for her to rebuild her strength between chemo
treatments.
At the time that Maxine was diagnosed she owned and
operated a Mailboxes Etc, a business that she loved and worked
long hours at. The business did well and resulted in many
clients that depended on Maxine to help them succeed. She was
an active member and officer of the Chamber of Commerce, taking
great pride in her civic responsibilities and caring about the
community and businesses. After 2 years of fighting cancer,
Maxine sold her business so that she could concentrate her
efforts on surviving.
Maxine had 5 children and 11 grandchildren. She loved her
family, and as her condition worsened, she noted that she would
be unable to enjoy the future with her family. At age 61,
Maxine should have had many years left to enjoy life.
As her cancer advanced, the doctor would change her
medication. Most changes were successful in slowing or
arresting the cancer for some period of time, forever giving
Maxine and the family hope. Several months before Maxine's
death she noted that the Procrit was no longer working. Procrit
is a drug that helps cancer patients to rebuild blood cells and
strength between chemo treatments. As a result of the
counterfeit drugs, Maxine had to lengthen the time between
treatments. This allowed the cancer to advance much more
rapidly.
After Maxine informed the nurse at the doctor's office that
Procrit was not working, it was determined that her medication
was counterfeit. She was receiving 5 percent of the dosage
needed.
As earlier noted, the counterfeit Procrit prevented Maxine
from taking chemo treatments as needed. In addition, she had no
strength, more pain, problems concentrating, and felt much
worse than she ever had. The mistreatments, combined with her
loss of confidence in the pharmacy system, resulted in the
quality of Maxine's life taking a nose dive. It took her hours
just to shower and dress. As she dressed, she would have to
take a break between each garment. Sometimes she would have to
take a nap between garments.
Maxine had dedicated all effort to trying to get well or
survive until a drug could be developed that would be a cure
for her. She had total confidence in her doctor and pharmacy
until this happened. She had purchased her drugs at one of the
largest and most reliable pharmacies in St. Louis. At first she
blamed the pharmacy, then she learned that the controls in
prescription drugs were not effective and that counterfeit
drugs were not all that uncommon. She was spending thousands of
dollars each month on counterfeit drugs, and the pharmacy even
refused to return her money when they found they were
counterfeit. Maxine's confidence was gone, and at this point
she pretty much resigned herself that the end was near.
I don't pretend to know that Maxine would be alive today if
she had not received counterfeit drugs. What I do know is that
she would have lived longer, would have experienced much less
pain and suffering, and she would have been able to spend more
time with her family. Maxine died on October 24, 2002.
The criminals that deal in counterfeit drugs are murderers.
They steal people's dignity, cause unbelievable pain and often
early death for their victims. When they distribute counterfeit
drugs, they have no way to know who the victims will be. Anyone
in our families or the counterfeiter's families could be a
victim of this crime. I don't understand how these criminals
can look at themselves in the mirror.
In closing, I would like to reiterate that stronger
controls would have delayed Maxine's death, reduced her
suffering, and allowed her to die with more dignity. Thank you.
[The prepared statement of Mr. Butler follows:]
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Mr. Souder. I want to thank each one of you for your
testimony, and our sympathy goes out to your families. I
appreciate your willingness to speak out and share your
personal sorrows so we can try to figure out how best to deal
legislatively with this and put as much oversight on this as
possible.
Mr. Butler, in your testimony you said that they determined
that the Procrit was counterfeit. How did that process work?
Mr. Butler. The nurse took the Procrit that my sister had
with her and she sent it to the laboratory. The laboratory
analyzed it, and it came back that it was counterfeit.
Counterfeit meaning a reduced amounts, it was 5 percent of the
volume she should have been getting.
Mr. Souder. So the nurse initiated the process and the
hospital paid for the process, is that how----
Mr. Butler. Yes, that is correct. My sister didn't realize
that the reason the drugs had stopped working was because it
was counterfeit; she thought it was because the cancer had
advanced to a point where it just wasn't doing any good.
Mr. Souder. Do you know in that case, did the hospital then
go to the pharmacy, or what happened from there?
Mr. Butler. The hospital notified the pharmacy and my
sister notified the pharmacy. They did an investigation from
there in terms of where they got the counterfeits from or where
they got the medication from. I don't know the whole story of
what the pedigree said at the time. The Procrit had been
acquired from the cheapest vendor, and they had purchased the
drugs from a number--that same type of drug from a number of
different vendors. There are specific lot numbers involved, and
I'm not that familiar with exactly what happened on that side.
Mr. Souder. Mr. Fagan, have you met other people who have
been through your problem in the course of exploring this?
Mr. Fagan. No, I haven't, outside of today. But the unique
thing is that I believe I haven't because we were in a very
unique situation in that we were in possession of vials. We
would receive a month's worth of vials at a time from our
pharmacy for Tim's weekly injections. Think of how many senior
citizens go to the doctor for a shot, the injection is
administered, the vial goes in a garbage, or the same thing in
a hospital. So the proof is destroyed, the patient doesn't get
better and the underlying disease is blamed for what happened.
And what the scent of it is is that companies like
AmerisourceBergen, large Fortune 500 companies, choose to put
profit before patient safety, and it is absolutely criminal.
What happened to my son is unconscionable. I sit here before
you and it's just surreal that this thing is even happening,
but it is, and that's the disturbing truth of it is that this
problem potentially affects every American citizen. If it could
happen to me, if it could happen to my son, it could happen to
anyone.
Mr. Souder. Mrs. Eban, could you describe a little bit
about what you have learned about the gray market? You talked
about that in Mr. Fagan's case. How exactly is this working? Is
that the main source of the problem? Clearly we've heard about
the pedigrees; that's a big problem with it. In your feeling
about, you heard of someone on the first panel going back and
forth about how kind of random and rare this is. Is it only
when we get a very dramatic case that we actually learn of any
kind of problem?
Ms. Eban. If I can answer the second part of your question
first. We don't know how big a problem this is. The FDA put out
a report and said that less than 1 percent of the Nation's drug
supply is counterfeit. In my reporting, I went down to
Washington and met with the authors of the report and asked
them, how did you come to that number, and they said to me
basically, well, we don't know, we guessed but we don't imagine
it's any worse. So there haven't been any studies done on this
problem.
I tend to say, all right, less than 1 percent, they're
making what I think is a conservative estimate. If we say 1
percent of the Nation's drug supply is counterfeit, and even
that sounds conservative and relatively reassuringly small, 1
percent is 35 million prescriptions a year. And it's likely
that number is concentrated among the high cost brand name
pharmaceuticals for the sickest patients who need it the most,
the reason being, as committee members have noted, that
counterfeiters favor the most expensive drugs as an excellent
return on investment. So I think you are looking at a fairly
big problem.
I'd like to add that when the FDA mentioned cases, 32 a
year, 58 a year, those cases often represent thousands or
hundreds of thousands of counterfeit doses that have
potentially reached patients. One of those cases in 2003 was
counterfeit Lipitor, and by Pfizer's own estimate 600,000
tablets of counterfeit Lipitor reached patients. Again, in 2002
Jose Grillo's counterfeiting of 110,000 vials of Epogen and
Procrit, taking very weak doses and making them look like
strong doses, only 13,000 of those vials are recovered, which
means that 97,000 vials are estimated to have reached patients.
I think from these examples we can gather that the problem
is fairly big, and the numbers demonstrate that it's growing,
but because no definitive studies have been done we don't know
for sure the size of it.
In my reporting I identified over a dozen patients, but we
know that the FDA's Med Watch system has received reports from
dozens and dozens and dozens of patients who believe they have
received counterfeit medicine.
Mr. Souder. In those dozen patients, when they went into
the pharmacy, did you find a consistent pattern that here Mr.
Fagan said that actually he was notified indirectly through the
pharmacy to check whether it was counterfeit, Mr. Butler is
saying that the nurse sent it out for testing? Is that a pretty
typical pattern of what you have been seeing, or do some of
them get nonresponsiveness?
Ms. Eban. The way that it is detected is entirely random.
And sadly I have to say that Tim Fagan and Maxine Blount are
the lucky ones only in the sense that they learned that they
had taken counterfeit medicine, whereas many patients never
know, they simply don't get better, and because they have
serious diseases of course they don't know why they're not
improving.
So in my reporting I began to realize that we all know
someone whose medicine suddenly stopped working, and once you
immerse yourself in this problem you really do begin to ask
yourself why, and you begin to think of a whole new set of
reasons why that might have happened.
Mr. Souder. Thank you.
Mr. Cummings.
Mr. Cummings. First of all, I want to thank all of you for
your testimony. To Mr. Fagan and to Mr. Butler, I want to thank
you for taking your pain and what you have gone through and
using it as a passport to hopefully help other people in the
future.
I'm going to start with you, Ms. Eban, and I'm just
curious. Today I note that--well, yesterday the USA Today said
effective immediately that the CVS chain said it would purchase
pharmaceuticals only directly from manufacturers or from
wholesalers who certify they are not buying from what has been
dubbed the secondary market. How significant is that?
Ms. Eban. It is very important, and it's the right step; if
every pharmacy chain in the United States insisted upon that, I
think you would find that the gray market, the wholesalers who
simply trade sideways among themselves, would shrink
considerably. The problem is that the reforms that have been
taken, the steps that have been announced by players in the
supply chain, are random, individual, and have many loopholes.
Many doors still remain open.
Mr. Cummings. You know, I remember a while back when we had
the Tylenol contamination and how it just sent a rippling
effect, and now we have these containers that have seals and
whatever. And when I think about say, manufacturers, are they--
it seems as if they had--if there was any idea, if the word got
out that maybe their drug had been contaminated in any way.
When I say contaminated, I don't mean--I know these are
counterfeits, I understand that, but it has their label, it has
something that is supposed to be their label. It seems like
that would cause them to really be major players in this. Do
you find that to be the case, in other words, trying to help to
make sure the problem is solved? Because if it gets out there,
say, for example, that Lipitor, if there is lot of counterfeit
Lipitor out there, then I think that sends a terrible message
from an economic standpoint, and sadly sometimes economics, as
what Mr. Fagan said, is what drives things.
Ms. Eban. I think that manufacturers have changed their
stance about the problem. Earlier on, as I found, they were not
really willing or likely to raise their hands to say our
medicine is being counterfeited for fear that patients would
then go to possibly a rival's medicine in order to try to get
safe medicine. But I think that the problem has grown enough
that they have become quite concerned about it. They have
ramped up significantly tamper-proof packaging, holograms,
chemical taggants and markers that are embedded in the
packaging or even in the product themselves. But many security
directors of drug companies I've spoken to have said, given 12
to 18 months, counterfeiters can pretty much copy anything. So
the approach has to be on many levels to solve the problem.
Mr. Cummings. You know, one of the things that you said
that kind of stuck in the DNA of every cell in my brain is you
said that 1 percent may be as many as 35 million prescriptions?
Ms. Eban. Yes, that is right.
Mr. Cummings. Now, did you hear the testimony of the
gentleman, Mr. Lutter, from FDA?
Ms. Eban. Yes, I did.
Mr. Cummings. Do you think he is underestimating the
problem, or overestimating, or you don't have a clue?
Ms. Eban. I think that the FDA has always wanted to
reassure the public that they should take their medicine and
that their medicine is safe, but I don't think they really know
the size of the problem because they have not done any studies.
They are guessing as to the size of the problem, and I do think
that historically they probably have played down problems
because they don't want to panic consumers.
Mr. Cummings. And let me say this to you, Mr. Fagan and Mr.
Butler, if this Congress wanted to do this it could be done
overnight, period. It has to be the will of the Congress to do
it, but it can be done. I've seen things much harder than this
done. And it was suggested to keep fighting. I, for one, will
make sure my name is on that bill.
Mr. Fagan. Thank you.
Mr. Cummings. And last, but not least, I think one of the
things that should not be lost in all of this is something that
you emphasized, Mr. Fagan, and you, Ms. Eban, I think you, too,
Mr. Butler, to a degree. As you were sitting here talking I was
thinking about all the people in my district, and I represent a
lot of poor people and lower middle class people, and I'm sure
that in some of those instances--and I have a lot of seniors--
so they get the medication, and like you all said, they may die
or may be harmed because they're not getting the right dosage
or they may be getting just completely fake medication with
none of the ingredients it's supposed to have in it, but yet
still when the autopsy is performed or when the final report is
done they died because of cancer or whatever it might have
been. So we really don't know, we don't know how many of these
people are being affected by all of this. I just, I'll tell
you, one of the things I think we must do, and I think all of
us, and the reason why this is so significant, this hearing is
so significant, and I do compliment you, Mr. Chairman, for
putting together a balance here of witnesses, is because this
affects, it can affect every single one of us, all of us. We do
have to have trust in the medicine we take and the food we eat,
so I really thank you, and I'm hoping that we will be able to
move this along, but thank you all so very, very much.
Mr. Souder. Thank you.
Mr. Burton.
Mr. Burton. First of all, let me just say you have my
sympathy. My wife died of liver cancer, and she had breast
cancer prior to that, and she took Tamoxifen, and when we were
going through her chemotherapy and her other treatments, we had
ladies that were sitting next to her taking chemotherapy that
were talking about Tamoxifen and talking about how they
couldn't afford it. I presume the same thing was true with
Procrit. That's when I started checking with my colleagues
about the costs in other countries. In Canada the things that
she was taking was one-fifth, one-sixth what it cost here. One
of the reasons that we have this counterfeit problem, I
believe, is because of the price disparity. Somebody is going
to testify that Willie Sutton said the reason he robbed banks
was because that's where the money was. I mean, if it costs six
times as much for a product in Canada as it does here, and you
can get it or counterfeit it, you're going to make a lot of
money just by doing it here in the United States.
But we really do have to do something about the counterfeit
problem. I'm not downplaying that.
As I understand it, in the case of your sister, the
druggist took the pill and cut the amount by one-fifth or one-
sixth or one-tenth or whatever it was. I don't know how you
deal with that kind of a guy. I mean, he needs to be in the
slammer, no question about that. I think the same thing is true
when somebody's taking a product that deals with people who
suffer from a liver transplant and they start watering it down
or anything. And the price disparities, I think, have a lot to
do with that as well.
I've got a list here that my colleague, Mr. Gutknecht, has
compiled on the differences in prices. One of the Gordian knots
that we have to deal with in dealing with this problem, in my
opinion, is that we're in a global marketplace right now. Let's
say that we're able to come up with a mechanism to make
absolutely sure that every product, that every pharmaceutical
product, is pure and packaged properly in the United States. If
it costs so much more, like Tamoxifen does, here than it does
in France or Germany, the people who have to rely on that are
going to try to get it through the Internet, and then you have
to police everything coming through the mail from a foreign
country because people are going to buy it where they can
afford it, if they can't, whether it's drugs or almost
anything. So what we've got to do is we've got to, and I've sat
down with the leaders of the various pharmaceutical companies
Lilly and Merck and others, and I said what we need to do is
sit down and talk about some way of coming up with a pricing
structure that is fair for the people of this country, as it is
elsewhere. If you do that, you're going to minimize this kind
of a problem.
There's always going to be people that are going to cut
somebody to make more money, and as long as the money is there
to be made they're going to do it. So I just say that you have
my sympathy for what you've gone through, but this is a problem
that is not going to be easily solved, as one of my colleagues
just said, because you can get these products from other parts
of the world and you can get them at much lower prices.
So the root cause of it, in my opinion, is trying to come
up with some kind of, not a government imposed price index, but
some way that we can make sure that the American people are
paying a price that's not completely out of line with what
they're paying in other parts of the world. I think that's the
reason this whole issue has arisen, not because we don't have
counterfeit products, we've had those for a long, long time,
but because the importation of products has become such a big
issue that I think the pharmaceutical companies and our health
agencies have said hey, we've got to do something to stop this,
and one of the main ways to stop it is to start raising cane
about counterfeit drugs and put the fear of God into everybody
that's taking it.
That's not to say that there aren't counterfeit drugs,
that's not to say that there is unscrupulous pharmacists that
are going to cut something to one-fifth of its strength in
order to make a buck. You're always going to have people like
that, but the main issue, in my opinion, is to try to make sure
that Americans pay a fair price, just like the rest of the
world does, for pharmaceutical products, and that is one of the
things that Mr. Gutknecht and I have and others have been
working on for a long time.
The unfortunate thing is the pharmaceutical industry has
over 600 lobbyists in Washington, DC, over 600. There are only
535 Members of Congress, so they have a tremendous amount of
impact on what we do around here. Plus, they give out millions
and millions and millions of dollars in contributions for
campaigns, so they have a tremendous amount of influence.
So this problem is very important, Mr. Chairman, in dealing
with counterfeit pharmaceutical products, but I think of equal
import or as much import is dealing with the disparity in
prices, which I think is one of the most--is the genesis of
this problem.
And I yield back the balance of my time.
Mr. Souder. Ms. Watson.
Ms. Watson. These questions go to the author. In listening
to the testimony, it seems that the drug--let me address this
to Mr. Butler first, and then to the author. The drug that your
sister was using was a counterfeit prescribed or obtained
through what process?
Mr. Butler. My sister obtained it by going to the local
pharmacy, a very large pharmacy chain, a reputable chain in St.
Louis, one of the largest. That's where she got it from. They
had purchased it from a wholesaler. Where the wholesaler got
it, I'm not sure. I think Ms. Eban's book indicated it may have
come through a strip club in Miami, I'm not sure.
Ms. Watson. Was it prescribed by her doctor?
Ms. Butler. Yes, it was.
Mr. Burton. Will the gentlelady yield?
Ms. Watson. I certainly will.
Mr. Burton. I think it's very important. When the
pharmacist got the drug, it was at normal strength, was it not?
Mr. Butler. It was not at normal strength.
Mr. Burton. Who did the cutting of it; who cut the volume
of it down?
Mr. Butler. That was prior to--I'm not sure who did the
cutting. Katherine did the investigation and she may know, I
think she probably does.
Mr. Burton. All right. Thank you.
Ms. Watson. I have been reading the bill and what I'm
trying to ferret out is how and what is the procedure that
would be used to stop this, because apparently your sister
initiated it on her own or the doctor said you need this kind
of drug. I'm trying to figure out how we can get to that point
where we could prohibit or stop or cease the sale of this
counterfeit drug. I don't know where in the system we could go,
and I'm looking at the bill to see that it addresses this.
There is an investigation; they do ask for additional money in
the bill to investigate. But how does the process get started.
And I see that the sponsor of the bill is not here, and I know
there's an order to recall drugs. And certainly if drugs are
not--here's the author.
In listening to Mr. Butler, his sister went to a pharmacist
and got a particular drug. Where in your bill, what provision
in the bill would address that, initiated by--and I didn't know
whether it was a doctor's prescription or what, but I think she
initiated it herself.
Mr. Butler. The doctor prescribed the Procrit. It's
necessary to help build the blood and strength back up between
chemo treatments.
Ms. Watson. When she went to purchase it, she learned
afterwards that it was a fake or they were cutting--whatever. I
just wanted to know from the author, is there a provision that
would address that process?
Mr. Israel. Mr. Chairman, you're very kind to allow me. Do
I have permission to answer?
Mr. Souder. Of course.
Mr. Israel. One of the most important things that the bill
does is provide a very significant disincentive to criminals
who are counterfeiting drugs by increasing penalties from
current Federal law of 3 years in prison to life in prison.
That would be a very significant penalty.
With respect to what immediate action can be taken to
prevent, to deal with the purchase or the acquisition of
counterfeit medication, the most important thing we can do is
make sure we have pedigrees, that we know every single step
that medication has gone through so that you know the integrity
of that medication has been maintained. And the final point I
would make is that, right now, the FDA has no ability, no true
ability to recall counterfeit medicines from the pharmacy
shelves. It's easier to recall a defective toaster oven than
counterfeit medications. This would give the FDA the ability to
recall counterfeit drugs immediately when there is a report of
such drugs.
Ms. Watson. Mr. Butler, did your sister have a
prescription?
Mr. Butler. Yes, she did.
Ms. Watson. From the doctor? And when she purchased it, she
found that it wasn't having the desired effect, and then she
found out later it was counterfeit?
Mr. Butler. Yes. She had taken the Procrit for some time
and it had worked very well. She had gotten that from the same
pharmacist. When it stopped working, she made an assumption
that it was because her cancer had worsened, and that was the
reason it wasn't working. So she didn't immediately tell her
doctor, but she started delaying. It got so she had to delay
the process before she could go back for chemo. Then when she
told the doctor or told the nurse, the nurse sent it in and had
it analyzed. The pharmacist did not know the medication was
counterfeit. They had purchased it from a wholesaler.
Ms. Watson. I see. I want to be sure that, in the bill,
which I'm very sympathetic to, that there is a provision that
would require the pharmacists some way to check out those drugs
when they get them from a probably unauthorized manufacturer. I
don't know, but I'm hoping that this bill would address how we
attempt to try to save your sister's life through this bill,
and I think that something has to be in here to indicate--the
pharmacy didn't know, but they purchased it somewhere, and
probably whoever was marketing this sold them a bill of goods.
Mr. Butler. Actually, they purchased it from a legitimate
wholesaler.
Ms. Watson. I'd like to yield back to the author because
it's your bill, and you might want to kind of elaborate on
that.
Mr. Israel. Thank you. The simple answer is that the
pedigree requirement would have notified the pharmacy
immediately that this particular medication did not go through
the appropriate transactions; that it may have gone elsewhere,
may have been tampered with. That's what's really at the heart
of this bill, requiring the FDA to require the paper pedigree
that was supposed to be implemented 17 years ago.
Ms. Watson. Another question, Mr. Chairman, if I still have
time, who would have the authority in that process to carry
this out? You see, apparently the pharmacy purchased a bad
batch of this prescription drug. Somewhere we've got to stop
that kind of thing from happening, if it is a bad batch.
Mr. Israel. The enforcement would be by the FDA. It
provides an additional $325 million for the FDA for spot
checking, additional enforcement and training pharmacies to be
able to recognize potentially counterfeit drugs.
Ms. Watson. Thank you.
I yield back my time.
Mr. Souder. Thank you.
Ms. Schmidt, do you have any questions?
Mrs. Schmidt. Yes, I do. Thank you very much. First off, my
heart goes out to you, Mr. Fagan, and to you, Mr. Butler, on
the situations that you had to deal with.
Drugs are very important to all of us. They allow us to
live a lot longer, a lot more comfortably, and so we want to
make sure that the drugs we are receiving are the drugs we
expect to receive. I think there are two issues that are going
on here. The first is the affordability of drugs in the United
States versus the affordability of drugs in Germany and Canada
and other places. But I think, the second is the kind of drugs
that we're receiving, and are they pure? Have they been
tampered with? What I'm hearing from Ms. Eban is that the drugs
she discovered were not tampered with in Germany or in Ireland
or in Canada; they were tampered with in the United States. So
we have two issues: One is price and an unfairness of the price
here in the United States, and the second is the purity of the
drugs.
I think the second part is easily remedied by putting some
sort of a tracking system on those drugs, something like what
is in Germany, putting them in the little individual tablets,
putting blister packs or putting something like this on them to
make sure the drug is pure because when we worry about
something coming through from the mail, the insurance policy
that my husband and I have, our health insurance policy
requires that if we're taking drugs for a long period of time,
that we get them through the mail. So worrying about whether
you get it through the mail and if it's been tampered with,
that's something that's already here.
The second thing is trying to make the drug prices more
fair to our U.S. customers. I worry that any legislation that
we pass that tries to correct the first part of it by making
sure that our drugs are pure but doesn't address the price of
the drug will not correct the purity or the lack of purity of
the drug. So that is my concern, and I know that Mr. Butler and
Mr. Fagan probably don't have a solid answer for that, but, Ms.
Eban, do you?
Ms. Eban. Thank you very much. First of all, I think many
American consumers assume that when they go to a pharmacy and
pay top dollar for their drugs, that their drugs are guaranteed
to be safe, but in fact, the soaring prices of our drugs
actually puts their safety at risk because America has become a
go-to market for counterfeiters. We offer the best return on
investment for counterfeiters who want to move their products
into our market. My book deals exclusively with counterfeit
medicine that has reached consumers through pharmacies and
through hospitals and through legitimate mail order, so that is
our legitimate drug supply, and counterfeits have infiltrated
that. I just want to say that in the case of Maxine Blount and
Tim Fagan, this was not a case in either situation of a rogue
pharmacist diluting drugs or tampering with drugs. This was
about systemic corruption of our drug supply in which major
wholesalers, who are responsible, legitimate wholesalers, look
for bargains or discounts in the secondary market. They buy
even from licensed wholesalers, but that medicine still proves
to be counterfeit because it doesn't have a proven origin,
which is what a pedigree paper would correct.
They are looking for discounts in the secondary market
because they want to be able to buy low and then sell high. As
we all know, they can sell very high. So these are players
whose sole profit is coming from arbitrating the price of the
drug. That whole gray bandwidth in the middle of that chart,
every single box is a different wholesaler and the drugs moved
through. Every wholesaler bought low and sold high, and it
finally got to a regional wholesaler and then a national
wholesaler once it approached the market rate. Once the price
came up, then it could be sold to a pharmacy and ultimately to
a consumer, but it is the buying from unknown sources from that
gray market that is driving this problem. That's what needs to
be corrected.
In order to have a record that follows each drug, whoever
buys or sells it would need to commit to its origin, and that's
extremely important. I hope that answers, in part, your
question.
Mrs. Schmidt. Thank you, it does.
Mr. Souder. Mr. Gutknecht.
Mr. Gutknecht. Thank you, Mr. Chairman, and I want to thank
all the panelists, and I would extend my condolences as well.
Finally, I think I understand. Mr. Butler, are you familiar
with a case in the Kansas City area of the pharmacist who was
intentionally doctoring? They were principally cancer drugs as
well.
Mr. Butler. Yes.
Mr. Gutknecht. This is not that case. Second, I want to
come back, Ms. Eban; there was a story, and I will submit for
the record, Mr. Chairman, an article that appeared within the
last 2 weeks I believe in the Wall Street Journal about the
pharmaceutical marketing association hiring writers to write a
novel.
Are you familiar with that story?
Ms. Eban. I am familiar with that story, and in fact, I
even heard that the editor at the publishing house who was
going to be editing it was none other than Jayson Blair, who
was a former colleague of mine from the New York Times.
Mr. Gutknecht. That's correct. Just for the record, you are
not now or never have been under contract from any of the
pharmaceutical companies or marketing associations?
Ms. Eban. Absolutely not.
Mr. Gutknecht. Let me point out, I didn't know I had this
with me, but I would share this with any of the people here and
certainly other members of the committee. I talked earlier
about the new computer chips. In this little vial, there are 50
computer chips. They sell now, I believe, for like 10 cents
apiece. They have the ability to do exactly what we're talking
about. The FDA has known about these for at least 2 years
because I told them about them, and they have consistently
refused to do exactly what we're talking about. The reason I
say that, and I'm certainly empathetic to what we're talking
about, and I would certainly like to work with the author and
you to come up with a safer way to protect our drug supply.
That has never been my intention. What I want to make certain
is that Americans have access to world class drugs at world
market prices.
But I'm also going to submit for the record, I believe this
may be from today's, one of today's Hill newspapers, and this
is a scare ad, and it's done by Pharma. Let me just read what
it says: ``Real or counterfeit, the answer could be a click
away.''
[The information referred to follows:]
[GRAPHIC] [TIFF OMITTED] T0672.049
Mr. Gutknecht. Well, this is all part of an orchestrated
effort to make people believe that, gee whiz, if I buy my drugs
from that pharmacy in Winnipeg, it may be a counterfeit. The
truth of the matter is with the technology we use in the United
States today, you are more likely to get a counterfeit drug if
you buy your drug from the local drug store. Unfortunately,
that is a fact.
In terms of the bill, I certainly want to work with the
author, but giving the FDA an army of new inspectors to go out
and chase little old ladies trying to save $200 on the
Tamoxifin by buying it from Manitoba is not my idea of really
making America safer. So I will work with you and provide you
with information on this technology, and incidentally, we have
the next generation of technology already being developed. They
are little digital taggants, and they can be put in every
single drug so that we can know exactly what that drug is made
of, where it came from, when it came off the production line,
right down to the components of that drug. So there are a lot
of things we can use today, technology right off of the shelf.
We don't have to give the FDA an army of new people, and we
don't have to make it even harder for folks in my district to
try and save a few hundred bucks a month on their prescription
drugs by buying them from a pharmacy in Canada.
We want to be careful, and I think our new colleague from
the State of Ohio, I think, has really stated it right. There
are really several issues at play here, and we want to make
certain that people who break the law are held fully
accountable. I will say this, though, in all fairness to the
life sentence concept, if we're going to start making mandatory
life sentences, I would go first after sex offenders, because
every day there are stories in the papers both here and
throughout the United States of sex offenders who are turned
back on the streets after a couple of years, and they have the
highest rate of recidivism of anybody.
Finally, Ms. Eban, I want to come back to another point
that you made. There is, going back to the scare tactics of
Pharma, the truth of the matter is, I know that there is a
certain amount of counterfeiting going on. But some of it is so
good that it is virtually impossible to tell the real from the
imposter. And the bottom line is, if you are getting a
counterfeit that is an exact copy of the name brand drug,
ultimately, what is the harm to the consumer? I have a very
good example that I have been told, and the example is of one
of the male enhancement drugs, you can buy them in India for 10
cents a tablet. Here they're $10. You may call them
counterfeiters; I would call them entrepreneurs that are
selling them for $5. The net result to the consumer is exactly
the same.
Ms. Eban. Unfortunately, though, counterfeiters don't
provide a guarantee that the effect on the consumer will be the
same, and so it's a crap shoot. Of course, if it is exactly the
same and it's less money, the consumer benefits, but there is
no guarantee of that. I also want to say that there has been
testimony, I believe it was before Congress, in the last year
which said that the terrorist organization of Hezbollah was
counterfeiting Viagra and selling it within the United States.
So we certainly do know that terrorists do look at
counterfeiting as an activity that can build profits for
whatever work that they are doing, and they also do not provide
any guarantees, of course.
Mr. Gutknecht. If you're in the crime business, clearly,
you look at this, and the potential is hundreds of millions if
not billions of dollars. So I would not be surprised that there
are all kinds of organizations out there who have looked at
this business and said, you know, if you can buy something for
a dime and sell it for $5, you can make a lot of money at that
50 percent markup. I yield back my time.
Mr. Souder. Mr. Burton.
Mr. Burton. I have one real quick question. First of all,
you can see the computer chips in this vial, and so there is
technology, as Mr. Gutknecht said, that can be utilized to
track these things. The one thing I'd like to reemphasize is
what you just said a minute ago, and I hope it's not lost on
the rest of the audience tonight and everybody else who's
paying attention to this, and that is the huge price disparity
is an encouragement for counterfeiters. I'd like for you just
to elaborate on that one more time. Because of this huge price
disparity between a U.S. product sold here and somewhere else
in the world, that is an encouragement for counterfeiters,
right?
Ms. Eban. I would agree with that statement. I will say
that, traditionally, counterfeiting in the legitimate drug
supply, even in Canada for example, has been lower because
their prices are regulated and counterfeiters breed when there
is a differential in the prices because that leads to a growing
gray market where drugs are diverted and then obtained by
counterfeiters. So low prices and regulated prices do decrease
the instances of counterfeiting, but the more that we have a
global market with differentials in different markets,
different prices in differing markets, and you have more
parallel trade, then you will see an increase in
counterfeiting. We've seen this recently in the European Union
where now England has had counterfeiting incidents and other
countries because the drugs are cheaper in Portugal and Spain.
That increases the number of middlemen, increases the number of
counterfeiters. So the more that we can reduce prices and
regulate the discrepancies or decrease the discrepancies in
prices, you will see, I believe, a reduction in counterfeits.
Mr. Burton. Thank you.
Thank you, Mr. Chairman.
Mr. Souder. Before going to the third panel, I have
listened to two panels of two of my good friends and colleagues
in effect trying to take this subject, in my opinion, off
hearing. So I'm going to ask to insert in the record, ``Fake
Drugs Nightmare Comes to Haunt Canada,'' into the record.
[The information referred to follows:]
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Mr. Souder. I want to point out, Mexico is shipping
incredible amounts of drugs into the United States where we do
not have the assurances that we have from Canada. I have been
back and forth on that legislation myself. We don't even know
the Canadian pharmacies in the Internet are in Canada; all they
have to have is an address shipping through Canada. This
hearing was not to talk about what I would say is ``let the
buyer beware'' type situations. In other words, if you want to
buy on the Internet, you know you're taking a certain amount of
risk; you cannot verify anything other than the shipping
address. If you buy it in the flea markets, you have less
protection. If you buy it from somebody selling out of the back
end of a station wagon, you have different risks. You may save
money, but you know you're taking somewhat ``the buyer beware''
if you want to do that.
What we're talking about in this hearing is going through
legitimate structures where, in fact, the question is, if you
believe in an FDA, if you believe in a Food and Drug
Administration, do you then, if you're going to pay the price
at the drug store, if you're going to pay the market price, are
you then guaranteed? What reasonable guarantee do you have that
it's safe?
Now everybody agrees that the bigger the price gap, the
more people are going to cheat. But in this subcommittee, we
have heard in all different types of testimony, for example,
people in confiscated products will do this at a $4 gap if they
can get enough quantity or even in a small time operator.
Furthermore, copyright law does in fact matter in the United
States, and the record should show that my good friend from
Minnesota is incorrect in mildly encouraging industries,
saying, look, as long as it's the same CD, as long as it's the
same, quite frankly, Spam, it does in fact matter whether
somebody stole the Spam label and sells the same quality spam,
which is made in my colleague's district, sells that for the
same thing. Yes, it's not a safety question then. Yes, it's not
a question of whether or not somebody is going to die from it.
But it is a question of copyright law.
Mr. Gutknecht. Mr. Chairman, I agree with that, and I
believe in intellectual property rights, but this is a special
class of products. Intel, for example, does not get the same
protection for its intellectual property that the drug
companies get. The drug companies are the only companies in the
United States of America that get to control the product after
the first customer. And if Intel decides to sell its chips in
Japan for one-fifth of what they're selling them in the United
States, distributors in the United States could buy them from
the Japanese.
Mr. Souder. Reclaiming my time. That does not give nor
should we encourage anybody to violate the national
intellectual property rights or claim that those things
aren't--in other words, the criteria isn't, look, as long as
it's a good counterfeit, it's OK, and that we don't like this
particular law, so it's OK. I mean, if you want to change the
law, fine.
Mr. Gutknecht. Mr. Chairman, that was not my point. I do
not encourage people to break the law or take illegal drugs,
OK. All I'm saying is that when we talk about counterfeit
drugs, we're not always talking about people being actually
harmed, but the price differential is encouraging more and more
arbitrage and more and more illegal activity.
Mr. Souder. People aren't harmed on counterfeit dollar
bills.
Mr. Gutknecht. We have an FDA that has turned the other way
on the technology that exists today. Instead of doing what
their job is of coming up with technologies, they have gone out
chasing little old ladies who are trying to save money on
Tamoxifin.
Mr. Souder. I'm sorry, that is not the evidence that we
heard today. That is a claim that is not the evidence we heard
of the 56 cases of the people we're hearing in this that
they're chasing, trying to figure out how to make the American
supply safe. Also, as I raised in my opening testimony, which
we'll get into more in the third panel, the fact is that as we
look at the flu shots that are about to come up, we have a huge
problem if that starts to go into counterfeiting and trying to
vaccinate on Asian flu virus or Anthrax, where we have
terrorism questions and other types of questions in the United
States. Do we believe in the Food and Drug Administration or
not? That is the legitimate question. The international
question, buying on the Internet, the internationalization of
this is a separate question and a difficult part of this. The
pricing question and the pharmaceutical companies is also a
difficult part of this. The fact is, our focus is on
counterfeiting in the United States and how this relates not
only to the terrible tragedies that have happened to your
families but what in fact could really become a huge question
as we deal with terrorism, borders and other types of
questions. As I have pointed out earlier, as we're trying to do
the regulations that we're trying to do here, they are very
similar to the types of controls that we're having on how we
address pseudoephedrine and methamphetamine. I have been
immersed up to my head, but it's a question whether it comes
across the border, India and China producing it, paper tracking
or computer tracking, is it going to be in pill form? We deal
with this type of thing all the time in this subcommittee and
other places. What we haven't dealt with is this particular
type, and I appreciate your willingness to come forward today
and to speak out, and hopefully, we can if not move some
legislation at least get FDA to get the initial steps in that
they should have, in my opinion, done some time ago.
Thank you very much for coming, and we'll now move to the
third panel. The third panel consists of Mr. Peter Pitts,
Center for Medicines in the Public Interest; Mr. Carmen
Catizone, executive director of the National Association of
Boards of Pharmacy; Jim Dahl, former Assistant Director of
Investigations, FDA Office of Criminal Investigations; and Mr.
Donald DeKieffer, DeKieffer & Horgan. I thank you all for
coming and if you will stand, I can swear you in.
[Witnesses sworn.]
Mr. Souder. Let the record show that each of the witnesses
responded in the affirmative.
Thank you for your patience during this hearing, and we'll
start with Mr. Pitts.
STATEMENTS OF PETER J. PITTS, DIRECTOR, CENTER FOR MEDICINES IN
THE PUBLIC INTEREST; CARMEN CATIZONE, EXECUTIVE DIRECTOR,
NATIONAL ASSOCIATION OF BOARDS OF PHARMACY; JIM DAHL, FORMER
ASSISTANT DIRECTOR OF INVESTIGATIONS, FDA OFFICE OF CRIMINAL
INVESTIGATIONS; AND DONALD DEKIEFFER, DEKIEFFER & HORGAN
STATEMENT OF PETER J. PITTS
Mr. Pitts. Good afternoon. My name is Peter Pitts, and I'm
the senior fellow for healthcare at Pacific Research Institute
and director of the Center for Medicines in the Public
Interest. I'm also former Associate Commissioner of the Food
and Drug Administration, also a 10-year resident of
Indianapolis. Nice being on a Hoosier-based committee.
I'd like to thank the committee and Mr. Chairman for giving
me an opportunity to testify on the urgent and national problem
of prescription drug counterfeiting. The business of creating,
distributing and selling counterfeit pharmaceutical products is
a criminal and growing part of the global economy. When asked
why he robbed banks, Willie Sutton replied, because that's
where the money is. If Sutton were alive today, he'd be selling
counterfeit prescription drugs.
The bad news is that international prescription drug
counterfeit is on the rise. I estimate, by 2010, counterfeit
pharmaceutical commerce will become 16 percent of the total
size of the legitimate global pharmaceutical industry, a 6
percentage-point increase from 2004. This illegal business will
generate $75 billion in revenue for its owners in 2010, a 92
percent increase from today.
Consider this, the growth in counterfeit drugs is out
pacing the sale of legitimate pharmaceuticals, and the Internet
has become the 21st century's virtual drug cartel. The World
Health Organization estimates between 8 and 10 percent of the
global medicine supply chain is counterfeit, rising to 25
percent or higher in some countries, as already mentioned. The
largest counterfeit market with close proximity to the EU, the
European Union Free Trade Zone, is Russia, with a generally
accepted estimate at 12 percent of drugs are counterfeit.
Now that the Baltic nations of Latvia, Lithuania and
Estonia have joined the European Union, WHO has warned an
increase in the risk of counterfeits entering the supply chain
is ``obvious.'' Two news items recently crossed the wires that
illustrate this problem and its truly global nature. The first
story from China tells of 11 Chinese nationals and 1 American
invested in a counterfeit medicine scheme that spanned 11
countries, 440,000 bogus pills and $4.3 million U.S. dollars.
The drugs were Lipitor, Viagra, Cealis and Levitra. The nations
involved were the United States, Great Britain, Switzerland and
Israel. The second frightening news item comes from Hamilton,
Ontario, where a registered pharmacist was charged by Canadian
Federal authorities with selling counterfeit Norvasc heart
medication after five customers who bought it died of heart
attacks and strokes. The Royal Canadian Mounted Police
announced multiple investigations remain open in other parts of
the country.
Attention must be paid to this very serious global problem
because it is nothing short of international healthcare
terrorism. I just returned from Europe, and they've got a lot
of problems over there. One of them is that profiteers
masquerading as pharmacists are selling unsafe, unregulated,
mislabeled, repacked and commingled drugs to unsuspecting
consumers. In Europe, the cause of this is known as parallel
trade, and it's bad medicine. According to the Treaty of Rome,
parallel trade is completely legal, and articles 30 and 36
prohibit manufacturers from managing their European supply
chains in their own patients' interests. Counterfeiters are
taking advantage of this opportunity. For example, in 2002, the
wholesaler in the Basel region of Switzerland was caught
selling repackaged drugs to Germany worth about 23 million
Swiss francs, about $18 million U.S. dollars, and 2 years
later, Swiss customs seized HIV medications stolen from a batch
sent to Africa by the World Health Organization.
Swiss Medic, which is Switzerland's FDA, is also concerned
about the quantity of fake drugs available on the Internet.
According to the Swiss authorities, there are 15 big cases in
Europe right now, and, ``there is big money involved.'' Last
year, 140 million individual drug packages were parallel
imported throughout the European Union, and a wholesaler
repackaged each and every one of those 140 million packages.
This means that literally parallel traders open 140 million
packets of drugs, remove the contents and repackage them.
But these parallel profiteers are not in the--they are
strictly in the money-making business, not in the safety
business, and mistakes happen. For example, new labels
incorrectly state the dosage strength. The new label says the
box contains tablets, but inside are capsules. The expiration
dates and batch numbers on the medicine box don't match the
medicines inside, and patient information is often in the wrong
language or out of date. Drugs purchased from a British
pharmacy and sent to an unknowing American consumer could come
from the European Union from nations such as Greece, Latvia,
Poland, Estonia. In fact, parallel traded medicines account for
about 20 percent, one in five, of all prescriptions filled by
British pharmacies. In the EU, there is no requirement to
record the batch numbers of parallel imported medicine, so if a
batch of medicine originally intended for sale in Greece is
recalled, tracing where the entire batch has gone for example
from Athens to London through Canada and Indianapolis is
impossible.
``Buyer beware'' is bad health care practice and even worse
health care policy. Safety cannot be compromised, even if the
truth is inconvenient. Facts are stubborn things, and false
profits result in deadly consequences. Thank you.
[The prepared statement of Mr. Pitts follows:]
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Mr. Souder. Our second witness is Carmen Catizone.
Thank you for coming today.
STATEMENT OF CARMEN CATIZONE
Mr. Catizone. Thank you, Mr. Chairman.
Thank you, Mr. Chairman, and members of the subcommittee.
We've submitted written comments, and I'd like to vary from
that testimony to address some of the issues that have been
raised earlier by Representatives. First of all, as the
association represents State agencies, we are not opposed to
Federal legislation. We're willing to work with the industry in
developing effective Federal legislation. Even though Federal
preemption concerns the State agencies, we believe there's
probably a compromise that can be worked.
I want to point out the State of Indiana recently enacted
legislation and regulation that addresses many of the concerns
that the Representatives raise today. It provides for
accountability of the wholesalers. It provides for
accreditation of those wholesalers to verify they are
legitimate, engaging in legitimate business operations.
Contrary to the criticism of the State regulations that are
being enacted and passed, I would say there is more similarity
than dissimilarity among the State regulations.
What I would ask the subcommittee to consider, though, is
in enacting any Federal legislation to not be lulled by the
promise that Federal legislation will cure everything. We've
been waiting 17 years not for the FDA to implement the pedigree
standards but for the industry to agree to those standards
which they fought and stayed for the past 17 years. If the
industry does not want to put forth an earnest effort to enact
effective legislation that's been enacted in Florida,
California and most notably Indiana, we ask you not to support
that legislation but support what the States are doing one by
one to try to create uniform legislation across the country.
In regard to pedigrees, the issue of counterfeit drugs can
be resolved quickly by tracing that product from the
manufacturer, through the wholesaler, through the pharmacy.
Again, the industry has fought the pedigree requirements tooth
and nail. In the States, where we've enacted requirements to
say, ``Let us use pedigree requirements,'' the industry has
said, ``It's too costly.'' When the States have said, ``We'll
rely on RFID policy and trace and track technology and
implement that as technologies develop,'' industry has said,
``Technology will be available until 2011 and we can't wait
that long.'' When we've said, ``Let's implement this process
through a paper and electronic transition,'' the industry
fought that also. We've tried to work with the industry in
implementing what is normal distribution, what restricts the
product from secondary markets, what tracks that product from
the wholesalers, manufacturers to the pharmacy, and we have not
received the cooperation that we think is needed from the
industry. So the chip which Representative Gutknecht says is
available, we know it's available, all you have to do is talk
to people in Florida and California about the resistance the
industry is giving them to implementing these programs, and
you'll see that unless the industry is forthright in Federal
legislation, all we're going to do is stop the momentum that
the States have created and put another staying process in
place that could last another 17 years.
At MEP, the association that represents State agencies has
revised final rules for the licensure of wholesale distributors
to assist States in State licensure and regulation of wholesale
distributors. We've created and maintained a national specified
list of susceptible drug products to identify products that
have been counterfeited or are likely to be counterfeited.
We've made operational the Verified Accredited Wholesale
Distributor Program, which is now required by Indiana and by
default has set a national standard for the licensure and
accreditation of wholesale distributors because very few
wholesalers operate only in Indiana. Wholesalers that are
licensed in Indiana, which number 600, are doing business
interstate, and those wholesalers that have applied for our
accreditation to date have been very happy with the process and
very complimentary of the State of Indiana and the process put
in place.
In fact, we will probably conclude some investigations and
inspections this week of wholesalers who applied for
accreditation, and that accreditation includes criminal
background checks, authentication, due process, pedigree
requirements, everything that people this afternoon discussed
that's being necessary to protect the Nation's drug supply. We
consider the problem of counterfeit drugs a significant concern
that must be addressed.
The present regulatory safeguards which have been changed
in response to FDA's report on counterfeit drugs require
additional resources and support from State and Federal
legislatures to ensure that the U.S. medication distribution
system is not compromised. The cooperation among the States and
the FDA is critical for the success of any effort to maintain
the integrity and security of the U.S. medication distribution
system. The collaboration between the FDA and ABP and the State
boards of pharmacy to combat the threat of counterfeit drugs
has been growing and increasing and needs to continue to grow
and increase as new challenges are faced and new strategies are
developed. If we do not have that support and that cooperation
and the U.S. medication distribution system is compromised by
counterfeit drugs, then Federal and State agencies will be
powerless to create a situation where citizens will be
protected. If that situation occurs, no one will be protected
and no one will be safe. Thank you.
[The prepared statement of Mr. Catizone follows:]
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Mr. Souder. Thank you.
Mr. Dahl.
STATEMENT OF JAMES A. DAHL
Mr. Dahl. Mr. Chairman and members of the committee, thank
you for the opportunity to testify today on this important
issue.
I appear before you as a private citizen but one with
considerable knowledge on this topic. I retired from the FDA
Office of Criminal Investigations just 1 month ago today. In my
brief remarks today and in my more thorough submission for the
record, I hope to represent the interests and opinions of the
185 special agents of FDA's Office of Criminal Investigations
who are the true experts on counterfeit drugs and related
pharmaceutical crimes.
The wholesale drug distribution system in this country is
easily corrupted through the introduction of diverted, stolen,
misbranded, illegally repackaged, expired, previously
dispensed, counterfeit or otherwise suspect drugs. Substandard,
dangerous or unapproved and sometimes counterfeit drugs are
frequently sold via largely anonymous and unregulated Web
sites. Small parcels containing unknown, misbranded, unapproved
and counterfeit drugs are flooding our borders. Couple all that
with the possibility for terrorist exploitation of our
vulnerabilities, and one can easily see we have an enormous
problem on our hands.
So what should we do? First, fully implement the PDMA
regulations requiring a pedigree on wholesale distribution of
prescription drugs. Although the underlying law has some
loopholes, the pedigree regulations as currently written would
help control unscrupulous wholesalers and provide evidence and
information useful to OCI in its criminal investigations. OCI
has recommended to the greater FDA the full implementation of
the pedigree rules since it was originally proposed in 1999,
and it is now time for Congress and the American public to
demand that the stay on those regulations be lifted.
Second, call for new legislation that would help OCI and
others in their criminal investigations. I'd like to highlight
just a few needs. Administrative subpoena authority for use by
OCI agents in their felony investigations should be authorized.
This is a very effective tool commonly used by a number of
other agencies, including the IRS and the Bureau of Immigration
and Customs Enforcement and every inspector general in the
Government. If a HUD agent can use an administrative subpoena
to collect documentary evidence concerning false statements on
a mortgage application, I'm sure the American public would
agree that an OCI special agent should be able to use a similar
tool to gather evidence concerning criminal organizations that
would deliver substandard or counterfeit drugs to an
unsuspecting patient in a hospital.
Title 18 of the United States Code needs to be amended to
make the Food, Drug and Cosmetic Act felonies predicate
offenses under the racketeering statutes and specified unlawful
activities for money laundering. Most offenses are committed
for economic gain. OCI needs these tools to effectively attack
the criminal enterprises that put public health at risk. In
addition, Title 18 needs to be amended to allow upon conviction
the direct forfeiture of the gross proceeds from felony
violations of the Food, Drug and Cosmetic Act. This not only
helps punish the defendant for his illegal actions but is
effective in dismantling the criminal enterprise that could
otherwise continue to prey upon the public.
Title 21 of the U.S. Code needs to be amended to provide
for higher maximum penalties for felony violations of the act.
I would suggest that the penalties be linked to the actual or
potential harm caused by the illegal conduct in a manner
similar to that provided under the Federal Anti-Tampering Act.
It does not make sense that a person risks up to a 10-year
maximum sentence for counterfeiting a registered trademark but
only up to 3 years for counterfeiting a drug.
Title 21 of the U.S. Code also needs to be amended to
modernize and improve enforcement generally. For instance, the
definition of what constitutes a counterfeit drug should be
broadened. A provision making the attempted commission of a
FD&C Act felony needs to be enacted. A sting provision needs to
be included to improve on the effectiveness of undercover
operations, and seizure laws at ports of entry need to be
streamlined to allow efficient and effective seizures and
disposition of violative products.
My third suggestion for dealing with counterfeit drugs and
related pharmaceutical crime is one of resources. OCI's
operational budget for fiscal year 2005 was only $3.96 million,
yet at any given time during that year, OCI had an inventory of
800 to 900 open and active investigations, many addressing the
priority issue spoken of today along with others involving such
diverse and important matters as consumer product tampering,
medical device crimes, false statements to the agencies,
illegal trade in human tissue for transplant, adulterated
biologics, etc. Yet it appears to me that OCI has become a
victim of its own success. I believe OCI provides the agency
with its biggest bang for buck yet it is being asked again to
do more with less. OCI simply needs more operational funding
and more people to adequately address the increasingly complex
criminal cases that appear on the horizon each day.
Resources are always a sensitive issue, but the time has
come that we must confront this crime problem with real
solutions. As a start, a mere million dollars in operational
funding, along with a couple dozen of fully funded FTE's would
go a long way to addressing these issues. In conclusion, I
would like to compliment the men and women of OCI and the U.S.
attorneys offices around the country for their continued
dedication and resourcefulness in investigating and prosecuting
pharma crime. Every day, they are out there doing interviews,
conducting surveillance, testifying in courts and making
arrests and much, much more. Without their continued good work,
this country would be facing even greater problems.
I also believe that we need to remember that FDA's overall
mission is extremely important and complex, but the problem of
criminal attacks against the pharmaceuticals we all rely on
cannot be solved with a status quo Office of Criminal
Investigations. The FDA must confront drug counterfeiting as a
law enforcement problem. It must continue to seek and seriously
consider advice from the true experts within and outside the
agency and adopt a political will to provide law enforcement
with the tools and resources it needs.
[The prepared statement of Mr. Dahl follows:]
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Mr. Souder. Thank you.
Mr. DeKieffer.
STATEMENT OF DONALD DEKIEFFER
Mr. DeKieffer. Mr. Chairman, I'm going to depart from my
prepared testimony to address some of the issues that have been
raised in the hearing today.
As we've all heard, the counterfeit drug problem in the
United States is very severe, and it's getting worse, but it's
not as severe as it is in many other countries, including
countries all over Europe. The European market right now has
approximately five times the number of counterfeits that we do,
so the mere fact that a country has lower drug prices does not
mean it will have axiomatically lower counterfeits.
There are three major sources of counterfeit drug supplies
in the United States though: cross border imports, the Internet
and diversion. I really don't want to spend too much time on
talking about the import question today. As you mentioned, Mr.
Chairman, that's maybe a topic for another day. The Internet
itself could take up hearings all by itself. The fact is,
though, the diversion has been the source of all of the
counterfeit drugs that have entered the legitimate drug supply
chain in this country in the last 5 years. I'm not talking
about drugs that are purchased over the Internet. I'm not
talking about drugs that are purchased by people that are going
to Mexico and bringing back drugs across the border, people
that are buying in back alleys. I'm talking about people going
to legitimate pharmacies expecting to get legitimate drugs. In
every case that we've seen in the last 5 years that we've seen
counterfeits, it's because of diversion.
Now in the case of the sources of diverted drugs and where
do these come from, well, there are about seven major sources:
samples, stolen products, re-imports, own-use pharmacy fraud,
Medicare and Medicaid fraud, complicity and conspiracy with
pharmaceutical representatives, and so-called surplus
medications. Now the problem is the supply chain is not
controlled by the manufacturers, and it's not supervised by any
regulator nationally.
Now when we talked today, we used the words ``the
industry'' in kind of an umbrella here. The drug supply going
from the manufacturer to the retailer is not one industry; it's
three and arguably up to five different industries. So each of
these industries, if you will, has slightly different
interests. So when we heard today that the industry opposes
this particular proposal or the industry supports this
particular approach, we have to be very careful in what
industry specifically we're talking about.
The diversion pipeline itself, once you open that diversion
pipeline, from one of the sources I mentioned, stolen products,
re-imports, own-use pharmacy fraud, whatever, once the pipeline
is opened to get into the legitimate supply chain, that is
where all of the counterfeits that have entered that chain have
gotten in. That's the way they get into the stores, the shelves
of CVS and Rite Aid and that sort of thing. So if you attack
diversion and cut that out, you reduce the likelihood to near
zero of counterfeit drugs getting on legitimate pharmacy
shelves.
Consumers themselves really are defenseless. They can't
tell what legitimate packaging is or what it isn't because, as
we know in this country anyway, we don't get drugs in packages;
we get them in little amber bottles. Maybe there's an amber
bottle producers association out there making sure they don't
have packaging in anything else aside from an amber bottle. In
Europe, as you pointed out, unit dose is ubiquitous and has
been for the past 10 years. That creates some of its own
problems, but by and large, they have had far fewer instances
because of that packaging than we have. And that certainly is
one of the things that can be done. Because the kinds of
marketing that you're talking about, Congressman, RFID among
others, as RFID is only one of the solutions, is much easier to
do if you have packaging that actually reaches the pharmacist
and ultimately the consumer. Right now, that entire process is
in the middle of the supply chain.
Evidence is destroyed during the process of consumption,
too, so there's no way that a consumer or even OCI can tell
whether the incident of counterfeiting is increasing or not.
There are a number of solutions that I have recommended in
my written statement. Let me just mention a couple more. One, I
would like to underscore what Mr. Dahl said: We have fewer than
200 agents in FDA OCI as our defense against counterfeit drugs
in the entire United States, with an operating budget of less
than $3 million. Some gas stations have bigger operating
budgets than that. It's a scandal and a disgrace. It is
something not brought before this committee or I dare say any
other committee before because the FDA budgetary process
doesn't permit it.
The other recommendations that I have, though, are in my
written testimony. I'd be more than happy to answer questions
about them in the question and answer session, and I thank you
again for the opportunity to testify.
[The prepared statement of Mr. DeKieffer follows:]
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Mr. Souder. Thank you all for your testimony.
One thing I have been confused about today is the
multiplicity of possible conspiracies here. It's unclear to me
who favors what. On the one hand, a couple of my colleagues are
suggesting that this whole idea of counterfeit drugs is
something that the pharmaceutical companies are proposing.
What I thought I heard Mr. Catizone imply was that there's
a danger that--I thought you were saying that the
pharmaceutical companies or others were opposing regulation. Is
that what you were in effect saying?
Mr. Catizone. I need to clarify that. There's been
opposition to different aspects of regulation. In regard to
title control over the wholesale distributors, the
pharmaceutical industry and particularly Pfizer has taken a
lead role in this regard. But in regard to the chips and the
RFID technology, there's some confusion as to which, in
industry, support that and which don't. I think overall, in
this instance, the manufacturers are very supportive because
they want to protect their products and make sure the right
products are reaching consumers. The wholesale industry is the
one opposing the regulation that we've been pushing at the
State level.
Mr. Souder. You're concerned that if Congress passes a
bill, that the wholesale industry would weaken it so that it
wouldn't be implemented and undermine strict State laws?
Mr. Catizone. That's one of our concerns. We've had recent
discussion with the industry that's assured us this won't
occur. But if you look at some of the facts and some of those
that were in Katherine's books, the wholesale industry says
this represents less than 1 percent of their business. They're
going to stop doing business with the secondary markets. If
that's the case, why is there so much resistance to any
regulation?
Second, now that the States have gained momentum and are
passing regulations and creating uniformity, why aren't they
coming forth for Federal legislation? We've also not heard the
wholesalers support Representative Israel's bill at the Federal
level but want to introduce their own bill.
We have over 100 field investigators that are ready to
inspect and soon will have over 200 ready to move in to any
State at a moment's notice. We think that the industry realizes
that the States have taken this seriously, and the States are
not going to back down, and so now there's an attempt to say,
let's try something federally to weaken what the States have
done.
Mr. Souder. Mr. Dahl, how would you characterize the types
of investigations you are doing? Would you say CSI? That's a TV
show.
Mr. Dahl. OCI. We don't have a TV show yet.
Mr. Souder. If we give you that much money, you'll maybe
have a TV show.
At OCI, were these--let me ask you two questions. Do you
believe that the investigations were driven by the
pharmaceutical companies' desire on the import question or do
you believe that they're driven more by how we've had a rise in
counterfeiting and the types of threats of counterfeiting? In
other words, did you chase down people buying pills on the
Internet because of the cost, or were you focusing on broader
investigations that might have been more threats to safety or a
little bit of both, protecting international patents and so on
and some of its safety questions? And then the second question
I wanted you to take that one; it's a pretty big question.
Mr. Dahl. It's a little bit of both. Certainly, we had
criminal investigations involving illegal Internet sales. There
is no crime of selling drugs by the Internet, but if you sell a
defective product, illegal product, you commit certain crimes.
So certainly we have had criminal investigations there. We
certainly have had some criminal investigations with small
parcels and large parcels being smuggled in from foreign
countries, and we certainly have had criminal investigations
involving wholesale distribution of counterfeit or misbranded
or stolen or illegally repackaged drugs. We have not had any
criminal investigations on little old ladies crossing into
Canada buying drugs. We are not focusing on that. We are not
bringing cases like that.
Mr. Souder. Do you sense, and is there any peremptory type
of looking at or should this be part of the variable of--I
don't know how to say this. In other words, how would you
prioritize investigations? One would suggest, if there's a big
price gap, smuggling operations are going to occur, as well as
high-risk terrorist type actions. Are we doing sampling on
vaccinations or things that are vulnerable, a little bit more
proactive rather than reactive? Are there some drugs where they
become essential to life where an adulterated drug has a
different threat than an aspirin, although any drug totally
tampered with can be a threat? How would you address that, Mr.
Dahl, and then Mr. DeKieffer?
Mr. Dahl. OCI prioritizes its investigations based on harm
to individuals. The economic fraud that may be present is
always secondary. We will always compromise a criminal
investigation in favor of public health, and we certainly have
announced recalls and recoveries of products and given public
warnings that would have in another agency not been done
because the investigation was still underway. But we can't
afford to risk the public health. So whether it's a counterfeit
drug, a medical device that could have a serious impact on an
individual, tissue for transplant, whatever it might be, the
blood supply, we're always going to prioritize the public
health, and I don't think that will ever change.
Mr. Catizone. Mr. Chairman, if I can respond. The risk of
drug products we've prepared is based on criteria that address
the high price pharmaceuticals, so they will counterfeit Epogen
and Procrit versus an Amoxicillin. They're also based on
limited distribution, specialized patient care like HIV/AIDS
patients. That list has been compiled based on the facts and
based upon some of the concerns which other Representatives
have raised today.
Mr. DeKieffer. One of the major issues is, I think, a
misunderstanding about what is likely to be counterfeited. The
higher-priced item will be counterfeited first; that's almost
never the case. The product will be counterfeited first whether
it's drugs or almost anything else where the margin is the
greatest. In other words, the opportunity to make the greatest
markup, No. 1, and No. 2, the likelihood of being caught is the
lowest. In other words, the ease with which you can pass the
product off and the margin you can make will be the magnets for
counterfeiting in almost any circumstance, and it's
particularly true with drugs. When certain States, for example,
Florida made up lists of drugs a few years ago with a little
bit more than 30 drugs they wanted to look at most carefully.
They really didn't pick drugs that were most likely to be
counterfeited. They picked drugs that were the most likely to
have some effect on people. I think a combination of those two
approaches, one, the most likely to be counterfeited, and
second, the drugs most likely to cause harm if they are, is the
correct way to go about it.
Mr. Pitts. Mr. Chairman, to that point as well, the drugs
that are most likely not to be counterfeited are drugs that are
going to do extreme damage to the consumer because that's
basically killing off the business. When you see drugs such as
Viagra or antidepressants pills, they're the least likely to be
reported, for obvious reasons. So I think you're looking for
counterfeiters who are looking to make as big a margin as
possible for as long as possible. This is not a one-shot
operation; it's big business, and they want to be in business
for a long time.
Mr. Souder. Mr. Burton.
Mr. Burton. Do any of you represent the pharmaceutical
industry?
Mr. DeKieffer. My law firm provides data to about 50
different companies, and among them some are in the
pharmaceutical industry. We provide data on diverters and
counterfeiters internationally, and among some of our clients
are pharmaceutical companies. About a third of our clients are
pharmaceutical companies.
Mr. Pitts. Pacific Research accepts funding from
pharmaceutical companies, but I'm funded from general funding.
Mr. Dahl. I'm unemployed.
Mr. Burton. You know, let's say we pass the legislation to
which you referred, and it sounds like to me that there is some
real merit in a number of the things that you brought up today.
I think I've already asked for a copy of the Indiana statute,
so we may look at that as a model for Federal legislation if
necessary. But what I wanted to find out is let's say we pass
everything that you say we ought to pass and it becomes law.
How do you deal with the people that buy pharmaceutical
products from Canada or Mexico or France or Germany and buy
them through the Internet?
Mr. Dahl. If I could speak to maybe the 185 OCI agents,
we're not dealing with them at all. We're not worried about
somebody buying a small parcel from a brick and mortar
pharmacy, Winnepeg, we're worried about the 10,000 pills that
come in a 75-pound package from Thailand with no labels on it
at all that get put in other boxes and resold.
Mr. Burton. OK. That's good. So then you really don't have
opposition to individuals getting pharmaceutical products from
Canada or----
Mr. Dahl. Let's face it, we have importation. There is
probably 10,000 parcels that came in while we've been sitting
in this room this afternoon, so we have it. If you want to pass
a law to better regulate it, I think you should. If you don't,
it doesn't matter, we're still going to have it. And the FDA
knows that, and so does everyone else.
Mr. Pitts. Although, Mr. Burton, to your point, I think
it's important not to send the wrong signals. Clearly when you
tell people that drugs from other countries are safe, and it's
OK to get them from the Internet, with all the best intentions,
some people aren't necessarily listening quite as carefully,
and what they hear is it's OK to get drugs from nonregulated
entities.
Mr. Burton. We've had legislation in both the House and the
Senate that got a lot of support, although we've never gotten
them both together, and we continue to work on that. dThe
legislation deals primarily with Canada, because they have
pretty strict regulations on pharmaceutical products up there.
And we keep getting opposition. Yet when Mr. Hubbard appeared
before our committee, we asked him to give us a case where
someone was damaged by pharmaceuticals imported from Canada,
for instance, and he couldn't give us any.
Mr. Pitts. Well, there are five deceased Canadians in
Hamilton, Ontario, from counterfeit drugs, so----
Mr. Burton. There are five deceased Canadians?
Mr. Pitts. Yes, sir.
Mr. Burton. From counterfeit drugs.
Mr. Pitts. Yes, sir. Norvasc.
Mr. Burton. Well, what does it have to do with the
importation into the United States from pharmacists up there?
Mr. Pitts. Well, you said that, you know, bringing in drugs
from Canada, which is a safe and secure drug supply system,
which they do----
Mr. Burton. No, I understand. If there is counterfeit,
regardless of where they come from, they can be contaminated
and can kill people. But the problem is that the people that
were importing, little old ladies and people like that,
pharmaceutical products from Canada, they couldn't find any
cases where there was any harm that had happened. We asked
about that.
Mr. Pitts. A lot of times when you're taking medicine like
for cholesterol or high blood pressure medication, as the
earlier panel has mentioned, it isn't a question of taking the
drug and keeling over, it's a question of not getting the
therapeutic benefit from the drugs that you're taking.
Mr. Burton. I understand.
How many people died from aspirin last year, or from
Tylenol?
Mr. Pitts. How many?
Mr. Burton. Do you know how many?
Mr. Pitts. No, sir.
Mr. Burton. Well, it was in the thousands, from what I've
been told, and other medications like that. But anyhow, that's
another issue.
I guess the main question I had was how do you police
importation of pharmaceutical products? And I don't know--no
matter how many laws we pass that deal with the problem here in
the United States, as long as people can buy those products
over the Internet from outside the country, you still have a
real policing problem.
Mr. Pitts. Oh, absolutely, no question about it. But I
guess the point is not to exacerbate the problem by telling
people that they should do it, because it allows people that
are trying to take advantage of these people to sell more bad
product.
Mr. Burton. OK. I guess my last question would be, then, do
you think that one of the inducements for people to go outside
the country to buy these products is because things like
tamoxifen cost four or five times as much as it does here than
it does in Canada, and people who are dying from cancer want to
be able to buy their product, and they can't afford it, and so
they say, in desperation, ``If I'm going to survive, I've got
to get the product, I've got to split my pill?'' Sometimes you
have people that go to the pharmacy here in the United States
that say, ``I have to split my pill,'' and so the reason they
do it is because of economics.
Mr. Pitts. Sure, people in this country do that; people in
Europe do it as well. It is common practice that people want to
get something less expensive, and especially something they
need for their life. It simply becomes a question of what are
the tradeoffs. If you want to have drugs, you need to have them
available, and if you want to get a drug cheaper and you want
to go outside the regulatory system that your government
provides, then you take risks.
Mr. Chairman, to your point, it goes back to the whole
issue of what is the job of the FDA, and to my former colleague
at OCI, how can they be better funded to make sure that people
can get the drugs that they need and that they're safe.
Mr. Burton. Thank you, Mr. Chairman.
Mr. Souder. Thanks.
Mr. Gutknecht.
Mr. Gutknecht. Thank you. And just for the record, then,
Mr. DeKieffer, your company does do work with the
pharmaceutical industry, and, Mr. Pitts, your organization does
receive significant funds from the pharmaceutical industry?
Mr. Pitts. I don't know what significant means, but they
definitely do receive funding, yes. I wish it was significant.
Mr. Gutknecht. Would you submit for us a record of how much
money you got from pharmaceuticals last year?
Mr. Pitts. It's a 501(c)(3), so those records are publicly
available.
Mr. Gutknecht. All right, thank you.
Mr. Catizone, I just want to say that I agree with
everything that you've said. I've been studying this issue now
for 5 years. I often tell people I feel like the little boy who
comes in and asks his mother a question. His mother is busy,
and she says go ask your dad, and the little boy said, well, I
didn't want to know that much about it. I sometimes feel that
way. I think you've really hit the nail on the head. And my
concern about whether it's this bill or this whole issue of
counterfeiting, there are different motives by different
groups. My real concern--and I do agree with you, that the
pharmaceutical industry really doesn't want to solve this
problem because the technology exists, too--in terms of
solving, that's not really the right word, we can never solve
any problem completely. We live in an imperfect world, and
there are always going to be people who will take advantage of
it.
But the truth of the matter is neither FDA nor the
pharmaceutical industry has taken a particularly keen interest
in solving this problem, and I believe--and I will just say
this for the record--I believe the real reason is they know if
they really solve this problem, all of a sudden, and somebody
said the Internet has changed everything, and it is true,
because until the Internet we didn't know how much more we paid
for prescription drugs than people in Germany or Italy or
France or Canada. In the information age you can't keep those
things secret anymore, and it has changed everything. Yet in
the information age we still want to pretend that we can hire
enough policemen, and with all due respect, I'm not sure you
can hire enough enforcement people to ultimately change
consumer behavior on this. You are correct, probably 10,000
packages arrived in Minnesota today, and some of them through
the State-sponsored Web site so that people can buy their
prescription drugs from Canada.
But I would love to work with people who are really sincere
about resolving this, because I think if you go to the RFID
tags, like these, or, as I say, the latest technology, which
are microscopic taggants, all of a sudden, you know, then it
becomes a world market. And we can track this product wherever
it is, wherever it comes from, where it was produced, when it
was produced.
But, Mr. Catizone, I think you're exactly right. I'm not
sure the FDA or the pharmaceutical industry really wants to
solve the problem because then it becomes a world market, and
then they can't play the game where they sell some of these
drugs for literally thousands of dollars more. You mentioned--I
don't know who mentioned the AIDS drugs. It's almost shameless
what they sell some of those drugs for, especially when you
consider that most of the research was paid for by the American
taxpayers. But those are all policy questions that we have to
resolve, and I want to thank you all for coming because I think
this has been a very interesting hearing.
And, Mr. Catizone, I really do want to thank you because I
think you nailed exactly what the problem is.
I yield back.
Mr. Souder. I thank the gentleman.
And the other question I meant to ask that I didn't get
done because it's something that's kind of confused me all day
long here, and that is, if we get the pedigree, we solve the
question of the grayness, the gray market and all that. But if
we get a pedigree, does, in fact--if the pedigree includes
black marketers, that just enables us, from law enforcement
purposes, to go back and figure out how it got bad, right? Does
it put--is another advantage to this that it puts pressure on
individuals to have a shorter pedigree, that announcements like
CVS did, or we heard Wal-Mart, bigger companies can figure out
how to do this, they can buy directly from the manufacturer? In
fact, they can probably hammer the price down at the
manufacturing level.
What is a practical impact of a pedigree to an independent
pharmacist in a small town who's buying wholesale?
Mr. Catizone. With a pedigree you track that product from a
manufacturer throughout the distribution chain, and if you
alert people to not accept any products where that pedigree
doesn't exist, where the pedigree has been altered, where the
pedigree has gone outside of that normal distribution, you have
placed a major dent in the counterfeit drug market.
Mr. Souder. So first off, one would be the mere existence
of a pedigree.
Mr. Catizone. Exactly.
Mr. Souder. The second thing is how would you know if
you're a small pharmacist what is outside the chain?
Mr. Catizone. That's what the normal distribution has been
from the manufacturer directly to the pharmacy, or from the
manufacturer through one wholesaler that's been authorized or
that's been accredited to the pharmacy. Anything outside of
that is outside of normal distribution.
Mr. Souder. So what we're really looking for are very short
pedigrees.
Mr. Catizone. Exactly.
Mr. Souder. And very tight. Otherwise this looks like an
analysis of figuring out; after somebody's dead, you can go
back and figure out how it got there, as opposed to how I was
trying to sort through the prevention side.
Mr. DeKieffer, in fairness, you said you provided data to
other companies as well. What other companies besides
pharmaceutical companies do you provide----
Mr. DeKieffer. Yes. We provide data to footwear industries,
to apparel, to food industries, to high-tech electronics,
because the same kinds of people who are diverting drugs are
also involved in all kinds of other illicit black market and
gray market activities. So we work with a number of clients in
a number of different industries to try to identify leaks in
the supply chain. And very often we find that the bad guys
don't divide their industry the same way that legitimate
companies do, and they will steal anything.
So, yes, we do have pharmaceutical clients. We also have
clients that sell sunglasses.
Mr. Souder. I thank you all for your testimony today. Thank
you for your patience. It was a long hearing. With that, the
subcommittee stands adjourned.
[Whereupon, at 5:08 p.m., the subcommittee was adjourned.]
[Additional information submitted for the hearing record
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