[Senate Hearing 109-143]
[From the U.S. Government Publishing Office]
S. Hrg. 109-143
S. 334: AN APPROACH TO DRUG IMPORTATION
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HEARING
of the
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
ON
EXAMINING S. 334, TO AMEND THE FEDERAL FOOD, DRUG, AND COSMETIC ACT
WITH RESPECT TO THE IMPORTATION OF PRESCRIPTION DRUGS
__________
APRIL 19, 2005
__________
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
MICHAEL B. ENZI, Wyoming, Chairman
JUDD GREGG, New Hampshire EDWARD M. KENNEDY, Massachusetts
BILL FRIST, Tennessee CHRISTOPHER J. DODD, Connecticut
LAMAR ALEXANDER, Tennessee TOM HARKIN, Iowa
RICHARD BURR, North Carolina BARBARA A. MIKULSKI, Maryland
JOHNNY ISAKSON, Georgia JAMES M. JEFFORDS (I), Vermont
MIKE DeWINE, Ohio JEFF BINGAMAN, New Mexico
JOHN ENSIGN, Nevada PATTY MURRAY, Washington
ORRIN G. HATCH, Utah JACK REED, Rhode Island
JEFF SESSIONS, Alabama HILLARY RODHAM CLINTON, New York
PAT ROBERTS, Kansas
Katherine Brunett McGuire, Staff Director
J. Michael Myers, Minority Staff Director and Chief Counsel
C O N T E N T S
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STATEMENTS
APRIL 19, 2005
Page
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming,
opening statement.............................................. 1
Kennedy, Hon. Edward M., a U.S. Senator from the State of
Massachusetts, opening statement............................... 3
Dorgan, Hon. Byron L., a U.S. Senator from the State of North
Dakota......................................................... 5
Prepared statement........................................... 7
Snowe, Hon. Olympia J., a U.S. Senator from the State of Maine... 10
Stabenow, Hon. Debbie, a U.S. Senator from the State of Michigan. 13
Vitter, Hon. David, a U.S. Senator from the State of Louisiana... 15
Murray, Hon. Patty, a U.S. Senator from the State of Washington,
opening statement.............................................. 20
Gregg, Hon. Judd, a U.S. Senator from the State of New Hampshire,
opening statement.............................................. 21
Isakson, Hon. Johnny, a U.S. Senator from the State of Georgia... 26
Burr, Hon. Richard M., a U.S. Senator from the State of North
Carolina, opening statement.................................... 28
Satchwell, Graham, Managing Director, Proco Solutions, London,
United Kingdom................................................. 31
Prepared statement........................................... 33
Cecil, Todd, Vice President of Standards Development, United
States Pharmacopeia, Rockville, MD............................. 38
Prepared statement........................................... 40
Arthur, Thomas C., Dean, Emory University School of Law, Atlanta,
GA............................................................. 48
Prepared statement........................................... 50
Kessler, David A., M.D., Dean, University of California, San
Francisco School of Medicine, San Francisco, CA................ 53
Prepared statement........................................... 54
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.:
Letters of Dr. Kessler....................................... 56
Senator Gregg--S. 334: A Different FDA Standard for Imported
Drugs That Would Compromise the Safety, Effectiveness, and
Quality of the American Prescription Drug Supply........... 63
S. 334: AN APPROACH TO DRUG IMPORTATION
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TUESDAY, APRIL 19, 2005
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 10:03 a.m., in
room SD-430, Dirksen Senate Office Building, Senator Michael B.
Enzi (chairman of the committee) presiding.
Present: Senators Enzi, Hatch, Gregg, Isakson, Ensign,
Burr, Kennedy, and Murray.
Opening Statement of Senator Enzi
The Chairman. I call the hearing to order on ``An Approach
to Drug Importation.'' Welcome to today's hearing.
Let me begin by saying I believe it may be possible to
import prescription drugs from other countries and do so
safely, but we do need to answer a lot of questions before we
can open our borders to imported drugs without endangering
consumers or jeopardizing research and development of new,
lifesaving products.
Earlier in the year, I promised that we would have a
hearing within 90 days. I would like everyone to note that it
is within 90 days by a few days. This is the third hearing this
committee has held on drug importation this year in an effort
to ask and answer the important questions.
In February, I chaired two hearings on the subject. We
focused on two reports released last December by the Department
of Health and Human Services Task Force on Drug Importation. We
heard from the Surgeon General about safety and security issues
and we heard from the Department of Commerce on the global
pricing and international trade dynamics of drug importation. I
want to commend the members of the task force and the scores of
witnesses from whom the task force heard for identifying and
wrestling with the challenges that we must address if we are
serious about creating a system for safe drug importation.
Today, I am pleased to welcome Senators Dorgan and Snowe
and other colleagues of ours to discuss S. 334, the
Pharmaceutical Market Access and Drug Safety Act of 2005.
Senator Dorgan, when you introduced your bill this year,
you made the statement that, ``miracle drugs provide no
miracles for those who can't afford them.'' I couldn't agree
with you more. Most Americans who turn to imported drugs do so
because of the cost.
But I am sure that you and all of the witnesses would agree
that a counterfeit or tainted drug is unsafe at any price. As
we consider the issue of drug importation, the safety of our
citizens must be our primary concern. As chairman of the
committee charged with public health, it certainly is mine.
Each of us takes a risk every time we take a drug. But
Americans who buy prescription drugs in Canada and other
countries or purchase drugs from Internet pharmacies that
operate outside the United States are taking an even greater
risk by obtaining their prescription medicines from pharmacies
and Internet sites that don't always meet the high standards
that we require here at home, and here is where my concern
lies.
We already have a problem with counterfeit and substandard
drugs here in the United States. Last year, the Washington Post
published a week-long series about this problem. In addition,
concern about the quickly growing counterfeit market is not
just limited to the United States, as one of our witnesses
today will tell us. In Europe, dangerous counterfeit drugs are
already a problem, and the problem is growing as the European
Union expands. In addition, we have little or no knowledge of
the extent of counterfeiting in the Asian markets.
Prior to legalizing an untested drug importation program on
a large scale across our Nation, we must consider any new
vulnerabilities in our drug distribution system, especially
since those vulnerabilities could be massive in size. S. 334
would allow drug importation from more than 20 countries
worldwide. A program as envisioned by S. 334 has never been
undertaken, so a cautious approach to drug importation is
required.
We will also hear perspectives about other drug safety and
security issues, such as the importance of limiting imported
drugs only to those that have been approved by the FDA. It is
important for this committee to understand how small
differences between drugs can make differences in the health of
patients.
In addition, we will hear a perspective about the effect
that drug importation legislation might have on patent rights
and international law, and possible Constitutional limitations,
as well.
And last, but certainly not least, and actually first, we
will hear from our colleagues who support S. 334 or another
approach to drug importation. I appreciate your willingness to
take the time to be here today and I look forward to hearing
from all of you.
As we know, this committee has jurisdiction over any
legislation that would amend the Food, Drug, and Cosmetic Act
to remove the restrictions against importing prescription
drugs. As chairman of the HELP Committee, I fully intend to
work with my fellow committee members, any interested members,
and various stakeholders to develop a bill that will allow for
safe drug importation.
I know that we all share the same goals. We all want to
ensure that drugs that are imported are safe, effective, and
will not compromise the integrity of our Nation's prescription
drug supply or our world-leading pharmaceutical research.
Like many Americans, I am concerned about the high and
rising cost of prescription drugs. However, I doubt that
importation of drugs from other countries will solve this
problem all by itself. That is why I believe that if we are
going to open our borders to imported drugs, we had better be
certain about exactly what we are doing and how we are going to
do it. We should not tell companies with whom they must do
business, how they must sell, and at what price, mandates what
I strongly believe will ultimately limit consumer access to new
drugs.
So I look forward to this spirited discussion. I think it
will answer my questions about this legislation and will
hopefully inform us all of the best direction for us to take
from here.
I will now recognize Senator Kennedy for his opening
statement. As is the tradition on this committee, only the
Chairman and Ranking Member are recognized to deliver opening
statements so that we can spend more time with the witnesses
and the questions. I do ask unanimous consent that the opening
statements of all of my colleagues on the committee be entered
into the record. Without objection, so ordered.
Senator Kennedy.
Opening Statement of Senator Kennedy
Senator Kennedy. Thank you very much, Mr. Chairman, and
thank you for meeting the commitment to having this hearing. We
have had additional hearings, as well. None of us are really
surprised. Once you make a commitment, as we know on this
committee and know otherwise, you are a person of your word and
we are very grateful for your attention to the hearing that we
are having today on this issue.
We live in the period of the life sciences. This is the
life science century. And the breakthroughs that we are seeing
across the world are breathtaking and the possibilities are
unlimited. I think the Congress has recognized that with the
doubling of the NIH budget. We are having challenges at the
present time, and that is another issue for another time. But
when we see the sequencing of the gene, the mapping of the
human genome, the potential in terms of stem cell research, it
is virtually unlimited.
I think the great challenge that we have is to try to make
sure that those miracles which are out there are going to
actually reach and benefit the families in this country, and
really families around the world. To a great extent, this
debate and discussion is very much a part of that public policy
issue, and I thank my colleagues for their interest, Senator
Stabenow, Senator Dorgan, Senator Snowe, Senator Vitter, and
all those who are strongly committed to trying to meet this
particular challenge.
Often, these drugs can prevent diseases from spiraling out
of control and from causing enormous suffering. Yet for
millions of Americans, the breakthroughs are far out of reach.
Today, the respected medical journal, Health Affairs, published
a major study showing that over a quarter of American seniors
went without needed prescriptions or split pills due to the
high cost of medicine. One in 20 illegally imported drugs from
Canada.
This issue is as relevant as today's Washington Post
article, ``Drug Benefit Disparities Cited.'' The first
paragraph states,
``The Medicare prescription drug benefit available next year
will cost senior citizens an average of $722 annually. But
retirees with chronic conditions such as diabetes and heart
disease can expect to pay about double that amount and will
face gaps in their coverage for as long as 5 months, according
to projections being published today.''
So we have a real crisis for real people and real families.
Drug importation isn't going to mean the end of the crisis, but
it does provide an enormous opportunity to make progress.
Sadly, the administration feels that it is more important
to protect drug company profits than to help Americans to
afford the medical miracles that their tax dollars helped to
discover, and it is tragic that the only way for millions of
our fellow citizens to afford the prescription that their taxes
pay to develop is to attempt to purchase them from Canada or
other nations where their prices are more reasonable. It is
legal for drug companies to bring their products into America
from overseas and should be legal for patients to do so, too,
and it is the responsibility of Congress to see that it can be
done safely, just as it is the responsibility of Congress to
see that U.S. drug manufacturers do so safely when their
products are manufactured overseas.
So Americans, as we know, Mr. Chairman, now pay almost
double the price charged for identical drugs in other developed
countries. Year after year, the costs of drugs in the United
States continues to skyrocket in a way that is unfair and
unsustainable, and year after year, the pharmaceutical industry
is among the most highly profitable industries in America. And
with the enormous difference in price between the drug sold in
the United States and the same drug sold across the border in
Canada, it is no surprise that innovative senior citizens
discovered the opportunity for instant relief that was
available in Canada and began organizing the bus trips to
Canada that we have heard about before.
In Massachusetts, the City of Springfield began using
Canadian pharmacies to provide prescription drugs for its city
employees and retirees, and Springfield's example led the way
for other cities, such as Boston, to do the same. Whole States
are now involved, as well. And the legislation that Senators
Dorgan, Snowe, Grassley, McCain, Stabenow, Jeffords, Clinton,
Bingaman, many others, and I have introduced will allow the
importation of safe FDA-approved drugs manufactured in plants
inspected by FDA. It would allow American patients to buy safe
drugs at the fair prices that Canadians and Europeans pay, not
the exorbitant prices that seniors and the uninsured are forced
to pay in the United States.
The place of manufacture and the name of the importer will
also appear on the label of imported drugs, as will differences
in inactive ingredients, if any, that may affect patients, such
as a person with particular allergies.
In short, under our bill, a large number of Americans who
cannot afford their medicines today will have safe access to
less expensive drugs.
So I welcome our colleagues here this morning. I also
welcome former FDA head David Kessler, who is an old friend of
this committee, and other witnesses today, and I look forward
to their testimony. I thank you again for this hearing.
The Chairman. Thank you. I would like to welcome this first
panel of distinguished colleagues to the committee today. We
have Senator Byron Dorgan of North Dakota and Senator Olympia
Snowe of Maine, who have spent a great deal of time putting
together the bill that we are having the hearing on today. We
have Senator Debbie Stabenow of Michigan, who has been working
on drug reimportation since before she got to the Senate. And
we have Senator David Vitter of Louisiana, who has another
version of drug reimportation that he has been working on
diligently with a number of people.
I welcome you all, and Senator Dorgan.
Statement of Senator Dorgan
Senator Dorgan. Mr. Chairman, thank you very much, and
indeed, you have kept your word and this hearing is on time and
we deeply appreciate it.
Mr. Chairman, the reason I and my colleagues feel so
strongly about this issue is probably best described by just a
short story. I was on a North Dakota farmstead a while back and
there was a fellow there in his 80s. His wife was with him. She
was in her 80s. We were sitting around talking and he said,
``Well, you know, it has been a tough several years. We have
spent most of the time driving to the doctors and driving to
Canada.'' I said, ``Why is that?'' He said, ``Well, my wife has
suffered from breast cancer and,'' he said, ``We spend a lot of
time driving to the doctors.'' This is in a rather remote area,
so they had a long drive to the doctors. Then he said, ``We had
to drive to Canada in order to afford the medicine she needed,
to buy the Tamoxifen, and we bought it at an 80 percent
discount in Canada, and so over the years that she has been
treated, we have had to continue to make that drive in order to
be able to afford her treatment.''
It is not surprising. We all know this story. Here is the
story told in a pill bottle. This is Lipitor. We all know that
Lipitor is one of the most popular drugs for controlling
cholesterol. As you can see, this is an identical bottle, same
coloring, same size, same cap. This is a bottle that contains
tablets made by the same company, the same pill made by the
same company, put in the same bottle. The difference? This one
was sold in Canada. This one was sold in the United States. The
difference? Price, $1.81 per tablet in the United States, $1.01
per tablet in Canada.
Now, why are the U.S. consumers charged nearly double? What
is the justification for that, that they are charged nearly
double for this prescription drug, incidentally, which is made
in Ireland. A prescription drug made in Ireland, imported by
both Canada and the United States, except the U.S. consumer is
charged nearly double.
Well, the answer is in the drug price controls that exist
in the United States. As you know, we do have price controls in
the United States on pharmaceutical drugs. Those controls are
handled by the pharmaceutical industry themselves and they have
decided to charge the highest prices in the world to the U.S.
consumer. I and my colleagues think that is patently unfair and
we believe the U.S. consumer ought to have access to the world
trade market, with proper safety precautions, and use that
approach to drive down prices and force a repricing here in the
United States.
I am very proud to be a part of a group of 31 Senators that
have put together a broad bipartisan piece of legislation that
is very carefully constructed. This legislation can hardly be
called speeding. The first bill that I and some others
introduced in the Senate was in 1999. That is 6 years ago.
Seldom has the U.S. Senate been accused of speeding, and that
is not the case here. We are talking about an issue that is
getting worse, not better, one that cries out for Senate
action, and I think we are finally at the precipice where such
action will be taken and this hearing is an important first
step.
Let me just say that the Dorgan-Snowe bill that we are all
talking about here today creates a closed system of commercial
drug importation that ensures the safety of imported drugs from
the point of manufacture to the drug stores shelf. And S. 334
includes a wide range of safety features. Mr. Chairman, you
talked about safety and counterfeiting and so on. This bill is
the solution to that.
First of all, only FDA-approved drugs made in FDA-inspected
facilities can be imported under this bill. Moreover,
commercial importation by pharmacists and wholesalers could
only occur from a limited number of countries--Canada, some
European countries--and they have drug regulatory systems
comparable to our own. That is why these countries are eligible
under this bill. Only U.S.-licensed pharmacies and drug
wholesalers that register with the FDA can import these
prescription drugs. Registered pharmacies and wholesalers would
be required to maintain the pedigree of imported medicines all
the way back to the FDA-inspected manufacturing plant. Finally,
registered importers would be subject to frequent random FDA
inspection and could have their registration suspended or
terminated if they don't comply with the bill's requirements.
Most importantly, I think, this bipartisan bill will allow
safe reimportation and enable American consumers to stay at
home and use their local pharmacy, who can then access these
lower-priced FDA-approved medicines, and they will still
benefit from lower drug prices, but also from the involvement
of their local pharmacist in their health care, which I think
is so important. Pharmacists then can coordinate their
patients' pharmaceutical care and help prevent adverse drug
reactions.
There are so many other provisions of this bill, and I
think I will have my colleague, or my colleagues, I should say,
respond to some of them, as well, but I want to just make this
point. You all know, because we have had testimony before the
Congress--I don't know that that testimony has been before this
committee, but in the Commerce Committee, it has--you know that
Europe has done this routinely. If you are in Germany and want
to buy a prescription drug from Spain, no problem. If you are
in Italy and you want to buy a prescription drug from France,
no problem.
There is something called parallel trading. It has been
going on for over 2 decades and parallel trading that the
Europeans do, by which the European consumers can access a
lower-price drug by importing it from another country, has
worked, worked very successfully. There are no safety issues. I
would encourage, if there are still questions about that, I
would encourage you to invite the people involved in the
parallel trading system in Europe to testify.
But clearly, we can do this. There are some who say we
can't do what Europe does. Nonsense. This is not a safety issue
any longer. The issue is, who are we going to stand with? Are
we going to stand with the American consumers, who are the
victims of unfair pricing strategies, or with the
pharmaceutical industry, who hides behind this current law that
prohibits reimportation by anyone except themselves and then
imposes their own set of price controls in this country in our
marketplace in a manner that is patently unfair in my judgment?
Mr. Chairman, there are other features of the bill. I will
allow my colleague, Senator Snowe, to deal with some of those,
as well. This is a broad-based bipartisan coalition of nearly
one-third of the United States Senate. I hope and expect that
we will be able to make progress to get a bill to the
President's desk this year. America is waiting, and this
Congress ought to take action.
Mr. Chairman, thank you very much for allowing us to hold
this hearing.
The Chairman. Thank you.
[The prepared statement of Senator Dorgan follows:]
Prepared Statement of Senator Dorgan
Chairman Enzi, Ranking Member Kennedy, and other Members of
the HELP Committee, I want to thank you for having this
legislative hearing on S. 334, the bipartisan prescription drug
importation bill that I have sponsored along with Senators
Snowe, Grassley, Kennedy, McCain, Stabenow, and many others. I
especially want to express my appreciation to Majority Leader
Frist and Chairman Enzi for meeting the commitment they made to
Senator Snowe and me to hold this hearing specifically on our
bill.
As my colleagues know, this is an issue that I have been
working on for quite some time. In fact, I introduced the very
first prescription drug re-importation legislation in the
Senate back in 1999, and the first Senate vote on this issue
was way back in 2000 on an amendment Senator Jeffords and I
offered to an Agriculture Appropriations bill.
Most recently, I have introduced S. 334, the Pharmaceutical
Market Access and Drug Safety Act. This bill currently has 31
cosponsors from across the political spectrum, including, I'm
pleased to note, a number of members of this committee.
In short, my bipartisan bill would allow American
consumers, pharmacies and drug wholesalers to import FDA-
approved prescription drugs at the substantially lower prices
available on the world market. Many studies have confirmed what
millions of Americans already know--the same prescription drugs
cost significantly less in Canada, Europe, and other developed
countries than they do here in the United States. And in fact,
the Congressional Budget Office has confirmed that brand-name
drugs cost, on average, 35 to 55 percent less in other
industrialized nations than they do in the United States.
Unfortunately, the price discrepancy for prescription drugs
between the United States only continues to get worse, even
despite the weakening of the American dollar. Drug prices
continue to rise at a rate much higher than inflation--a study
released just last week by AARP has found that brand-name
prescription drug prices went up an average of 7 percent just
in the last year. Clearly, Congress must act to inject some
competition into the pharmaceutical marketplace in order to put
downward pressure on drug prices.
CONFRONTING THE SAFETY ISSUES
I have worked very hard with Senators Snowe, Kennedy,
Grassley, McCain and others to assure the safety of drugs
imported under our legislation.
Unfortunately, there exists in the United States a
situation today whereby American citizens are resorting to
potentially unsafe measures in order to afford their
medicines--including cutting pills in half, skipping doses, and
ordering drugs from possibly rogue foreign and domestic
Internet pharmacies. In fact, the amount of potentially unsafe
drugs coming into the country has exploded because people who
can't afford high U.S. prices have been buying their
medications over the Internet under a system that is virtually
unregulated by the Food and Drug Administration (FDA).
Mr. Chairman, not acting on drug importation legislation is
a far greater safety hazard than acting on this bill would be.
S. 334 will empower consumers to purchase safe, approved
prescription medicines from Canadian pharmacies via mail-order
or the Internet under a regulated program. Consumers who choose
this option will be assured that they are dealing with a
legitimate, licensed Canadian pharmacy that is registered and
inspected by the FDA. The FDA will post the list of approved
Canadian pharmacies on its Web site and through a toll-free
number, so Americans can readily check to see if they are
dealing with a legitimate pharmacy and not a rogue Web site.
The Dorgan-Snowe bill also creates a closed system of
commercial drug importation that ensures the safety of imported
drugs from the point of manufacture to the drugstore shelf.
Again, S. 334 includes a range of safety features. First of
all, only FDA-approved drugs made in FDA-inspected facilities
can be imported under the Dorgan-Snowe bill. Moreover,
commercial importation by pharmacists and wholesalers could
only occur from a limited number of countries--Canada, some
European countries, Japan, Australia, New Zealand, and
Switzerland--that have drug regulatory systems comparable to
our own. And only U.S.-licensed pharmacies and drug wholesalers
that register with the FDA can import prescription drugs.
Registered pharmacies and drug wholesalers would be required to
maintain the pedigree of imported medicines all the way back to
the FDA-inspected manufacturing plant. Finally, registered
importers would be subject to frequent, random FDA inspection
and could have their registration suspended or terminated if
they don't comply with the bill's requirements.
Perhaps most importantly, the bipartisan bill enables
American consumers to stay at home and use their local
pharmacy, while still benefiting from lower drug prices. This
would ensure that pharmacists could coordinate their patients'
pharmaceutical care and help to prevent adverse drug
interactions.
Let me make one final point about safety: Some have
suggested that we should rely on a requirement that the Health
and Human Services Secretary should certify to the safety of
imported medicines before importation legislation be
implemented. As I mentioned earlier, we currently have an
unsafe system whereby as many as 5 million packages containing
drugs come into the United States with virtually no regulation.
We cannot allow this unsafe situation to continue, and that is
what a Secretarial certification requirement would cause.
CLOSING LOOPHOLES
It is also very important that drug importation legislation
include provisions that would prevent drug companies from
exploiting loopholes to shut down drug importation and prevent
consumers from saving money. The Dorgan-Snowe bill includes a
number of necessary provisions to close these loopholes.
The situation in Canada is evidence that the provisions in
the bipartisan bill are vitally needed to ensure real savings
for American consumers. The drug companies have already
demonstrated in Canada that, if they cannot shut down
importation by lobbying Congress, they will take steps to do so
by backdoor methods.
More specifically, our bill:
Prevents drug companies from taking actions, such
as discriminating against a foreign pharmacy or wholesaler that
exports drugs to the United States by shutting off their drug
supply, that would thwart drug importation. Such an action
would be an unfair and discriminatory practice, subject to
treble economic damages.
Prevents a drug manufacturer from blocking
importation of drugs in more subtle ways, such as by changing
the color, an inactive ingredient, or place of manufacture of
the drug so that it is no longer FDA-approved. Drug
manufacturers that make these kinds of changes would be
required to notify the FDA, and the FDA would be given the
authority to approve these changes, if approval is warranted.
In other words, our bill ensures that all imported drugs will
be FDA-approved, while also ensuring there will be drugs to
import.
Protects pharmacies, wholesalers, and individuals
from patent damages arising from the importation of drugs.
Opponents of drug importation have alleged that some of the
provisions in the Dorgan-Snowe bill may be unconstitutional.
Most of these claims seem to be based on a notion that our non-
discrimination provisions would somehow force a drug company to
sell a drug for a price that it doesn't want to accept in a
country where it doesn't want to sell it. Our bill language
specifically makes clear, on page 78, that nothing ``shall be
construed to compel the manufacturer of a drug to distribute or
sell the drug in a country.'' Moreover, our bill only allows
importation from other major industrialized nations, and I
don't think any of us believe the drug industry is actually
selling its products for a loss in these countries. In other
words, the drug companies have already voluntarily sold their
medicines for a profit once, so importing them for the benefit
of American consumers does not in any way violate the drug
industry's Constitutional rights.
Regrettably, it is not terribly surprising that the drug
industry would make this claim--the drug industry always argues
that legislation to reduce the cost of medicines for consumers
violates the Constitution. However, objective legal authorities
tell me the bipartisan bill is constitutional.
CONCLUSION
Let me make one final point: Within the Europe Union, they
have had a thriving trade in prescription drugs called
``parallel trade'' for the past 2 decades. We have heard
testimony previously before other hearings that this trade
occurs routinely with no safety problems whatsoever and with
substantial savings to European governments and consumers. As
Dr. Peter Rost, a pharmaceutical company executive who has
endorsed S. 334 has pointed out: ``During my time responsible
for a region in northern Europe, I never once--not once--heard
the drug industry, regulatory agencies, the government, or
anyone else saying that this practice was unsafe. And
personally, I think it is outright derogatory to claim that
Americans would not be able to handle reimportation of drugs,
when the rest of the educated world can do this.''
In closing, the Senate must--and I hope will--act promptly
to pass the bipartisan Dorgan-Snowe bill. This hearing is an
important step toward Senate passage of strong, beneficial drug
importation legislation, and I thank the Chairman once again
for holding it. I have no doubt that we have the votes in the
Senate to pass my bill, and I intend to push aggressively for a
vote on it soon.
I'd be pleased to answer any questions the committee
members may have.
The Chairman. Senator Snowe.
Statement of Senator Snowe
Senator Snowe. Thank you, Mr. Chairman. First, I do want to
thank you for your prompt and timely response to this hearing.
Hopefully, we can reach a resolution as a result of your
leadership in this committee. To all members of the committee
and to Senator Kennedy as Ranking Member of this committee, as
well, we truly thank you.
I am very pleased to be with my colleagues. Senator Dorgan
has been a longstanding champion and advocate, as he indicated,
introducing the first bill back in 1999, along with Senator
Stabenow, who has been a leader, and Senator Vitter. So I am
very pleased to be here today. As Senator Dorgan indicated, we
have a broad bipartisan coalition in support of our
legislation, echoing those 7 out of 10 Americans who favor safe
importation.
I don't think anybody needs to be told here in this
committee that Americans are paying the highest prices in the
world for prescription drugs that are available in other
industrialized countries at a fraction of the price. As the
Government Accountability Office recently reported to Senator
Wyden and myself in a report regarding the cost, prescription
drugs most commonly used by seniors are increasing two to three
times the rate of inflation, as indicated here in this chart,
the degree to which the prices are rising, just on those used
by seniors.
The outcome of those relentless price increases make access
to life-saving drugs, as we know, more and more difficult for
consumers, and we all know that a drug that is not affordable
is one that is neither safe nor effective.
There are two key issues that our legislation attempts to
address. One, of course, is the issue, first and foremost, is
it safe? Second, will it be effective in delivering real
savings to consumers, and I believe and we believe that our
legislation will accomplish both of those goals.
Opponents claim importation will cause harm, but they fail
to observe that the greatest threat to the security of
Americans and to their health and well-being is the fact that
they are not able to fill a prescription. That exacts a toll on
thousands and thousands of American lives every year.
Thanks to the attentive reporting of health professionals,
we are seeing more evidence of the cost of unaffordability. In
my own State of Maine, for example, one physician recently
reported that two of his patients had to be hospitalized for
dangerous conditions, such as heart rhythm, simply because they
could not afford to refill a prescription.
Our constituents, and certainly that has been true in
Maine, have taken busloads and busloads of seniors to Canada
repeatedly over the years to access affordable medications, and
they have demonstrated that importation can be safe. In fact,
the former Secretary General of the European Trade Organization
indicated in 2003, 12 million prescriptions were brought in
from Canada and there was no evidence of harm. In Europe, as
Senator Dorgan indicated, where over 30 years of parallel
trading of pharmaceuticals, no death or injury has ever been
documented. They have known it to be safe.
Dr. Rost, in fact, who is the Vice President of Marketing
at Pfizer, said this,
``During my time responsible for a region in northern Europe,
I never once, not once heard the drug industry, regulatory
agencies, the government, or anyone else saying that this
practice was unsafe.''
And personally, I think it is outright derogatory to claim
that Americans would not be able to handle reimportation of
drugs when the rest of the educated world can do this.
Under our legislation, Mr. Chairman, Americans will receive
imported drugs from over 30 countries. In most cases, Americans
will purchase an imported prescription drug from their local
pharmacist. Pharmacists will receive these drugs from U.S.
wholesalers which import them. These wholesalers will be
registered, they will be inspected, they will be monitored by
the FDA. The highest level of safety is a first step in
establishing the highest standards possible for handling of
prescription drugs in the United States. This bill will be a
model for domestic drug safety in America.
Our legislation also allows individuals to directly order
medications from outside the United States when using an FDA-
registered and approved Canadian pharmacy. It will be
restricted to Canadian pharmacists. And again, just as with
wholesalers handling prescription drugs, the FDA will examine
these pharmacies, register them, inspect them on a frequent
basis.
FDA will assure the highest standards for such essential
functions as recording medical history, verifying the
prescriptions, tracking shipments. But regardless of whether
one purchases these drugs from your local pharmacies that are
imported or uses a Canadian pharmacy--the bottom line in this
legislation is that we assure that a legitimate prescription
and a qualified pharmacist will be vital ingredients in
assuring safety.
The bottom line is, we are importing drugs from countries
that have comparable regulatory regimes to that of the United
States. That is the bottom line.
Now, for those who say that consumers could unwittingly
purchase an unapproved or suspect drug, our legislation once
again assures that the drug received will always be FDA
approved. If any difference exists in a foreign drug, even a
trivial one, our legislation assures the FDA will evaluate the
product and determine the acceptability.
For those who say that counterfeiting is a threat, our
legislation requires the use of anti-counterfeiting
technologies, exactly the type that is used today for the new
$20 bills. In fact, our legislation requires the development of
future anti-counterfeiting and track-and-trace technologies,
which we hope will protect our drugs. The fact is, the serious
incidents of counterfeiting that are occurring within our
borders and it is a problem that needs to be addressed and our
legislation does just that.
Now, for those who say that consumers won't know who has
handled an imported prescription drug, our bill requires a
pedigree, a chain of custody be maintained and inspected to
help ensure the integrity of imported drugs. A pedigree, by the
way, for prescription drugs was required in legislation that
was passed in Congress back in 1988 and the FDA has yet to
implement it. The fact is, today, consumers in America do not
know where their drugs are coming from, Mr. Chairman, but they
will under this legislation. They will not only know where they
are coming from, they will know who has handled these
medications.
Now, some have even attempted to alarm Americans about the
countries from which we import drugs, citing Latvia, Estonia,
and Slovakia, members of the European Union. So, too, is
Ireland, as Senator Dorgan indicated, where Lipitor is made,
what we use here in America. Now in this chart here, Mr.
Chairman, it indicates the European Union and other countries
from which we import appear in blue. We import drugs from there
today, used here in America. These countries meet our
standards. That is what our legislation would do.
In contrast, the chart shows those countries in red. Well,
here again, we have many additional countries in which FDA
inspects pharmaceutical plants manufacturing the medications.
These include China, India, Bulgaria, Jordan, and others with
lower standards, Mr. Chairman. I think what this demonstrates
is that we are importing medications from all around the world
for use. That is the point. So many manufacturing plants that
FDA has to inspect.
Now, unfortunately, over the years, manufacturing
inspections have declined by the FDA over the last 20 years.
But the fact is, they are required to do it. We have seen
charges made, well, you know, Canadian drugs come from foreign
countries. Well, I think the point is, so do ours, and that is
the point. It says, take a wild guess where your Canadian
medicine is actually coming from, and demonstrating that it
comes from foreign countries. Well, so do our medicines. They
are manufactured from all over the world.
So I think the point is, for those who say importation is
safe, we show a way to make it safe absolutely. We share that
concern. We have set a standard in this legislation. We create
a high level of monitoring. Consumers can achieve significant
savings and we create a comparative analysis in our
legislation, because the drugs will be labeled imported drugs
so they will be able to make a side-by-side comparison.
Some say that we won't have the resources. We impose a fee
of 1 percent of the value of imported drugs so FDA has the
resources. Because of this high-deficit climate, Mr. Chairman,
we have to do something, and this is the option that we have
determined in the final analysis to finance this legislation,
and it is fiscally responsible, it is doable and provides the
adequate resources.
Finally, one other issue. Some say importation will
threaten research and development. Well, as we know, the
taxpayer has been a partner. It has been a public-private
partnership in research and development in America and
taxpayers provided more than $30 billion to basic science and
applied research at the National Institutes of Health on an
annual basis. Well, it is interesting to note that Americans
pay 35 to 55 percent more for their drugs than their
counterparts around the globe, 35 to 55 percent. That means
Americans are spending $87 billion more than people in other
countries because they are paying the highest prices in the
world.
And yet, what is the differential in research and
development? Research and development spent in Europe by
companies is $26 billion. In America, it is $32 billion. So
they are only paying $5.6 billion more in research and
development here than in Europe, and yet we are spending $87
billion more because of higher prices than people around the
world.
So, Mr. Chairman, I appreciate this opportunity to be here
today to share with you our thoughts. I hope that we can work
it out. I think that there is a way. Our legislation at least
demonstrates it. And obviously, we are open to suggestions on
this part, but I think that we are addressing the major issues
that we think are important to overcome the hurdles to
achieving this ultimate goal. Thank you.
The Chairman. Thank you.
Senator Stabenow.
Statement of Senator Stabenow
Senator Stabenow. Thank you, Mr. Chairman. I want to thank
you for convening this hearing today. I want to thank my
colleagues, Senator Dorgan and Senator Snowe, for their
eloquent statements. Senator Vitter, we will welcome him to
this bipartisan effort that shows that there is strong support
in the United States Senate, and that is also reflected in the
U.S. House of Representatives, to finally do something about
prices in a safe way to be able to address one of the largest
concerns that not only individuals have, but businesses have.
Every business that I know in Michigan is concerned about
health insurance costs, the explosion in health costs for them,
and we know that prescription drug price increases are a major
part of that. So this is important for business, for
individuals, for seniors, for families.
I also want to, first, before talking about S. 334, though,
Mr. Chairman, thank you for joining me when we offered a
successful amendment to the Senate budget resolution which laid
the foundation for our discussion today and the groundwork for
passing drug reimportation. Last year, my amendment passed 13
to 8. This year, it passed unanimously. That shows the power of
your cosponsorship, so I want to thank you for your being a
part of that important effort.
You are right, Mr. Chairman, I go back a long way on this
issue. When I was in the U.S. House, I played a major role
there in bringing this to the forefront, and also, this was the
first issue that I brought to the Senate in the form of a bill
as a United States Senator, so I very much appreciate
everyone's involvement in this issue.
We all agree that prescription drugs need to be more
affordable and accessible. I know that we all agree with that,
not just for Medicare, but for everybody.
AARP reported last week that wholesale price drug costs
rose an average of 7.1 percent last year. We can't sustain
that. When we look at the inflation for prescription drugs,
costs going up 3 times the average rate of inflation--for the
top brand-name drugs it is as much as 10 times the rate of
inflation--businesses can't sustain that in their costs and
certainly our seniors who are without help can't sustain that.
Rising drug costs place a huge financial burden on all
Americans, and there is no way that our health system, our
citizens and our Nation can continue to endure these kinds of
increases every year. So there is a great sense of urgency
about getting this bill passed.
The rising costs have enormous health consequences for us.
Prescription drugs aren't like other products. They can do
wonderful and amazing things, but only if you can afford them,
and we might be able to make do and not buy a new pair of shoes
or a new automobile--although I would hope everyone would buy a
new one every year made in Michigan--
[Laughter.]
But the reality is that we can't afford, without
consequences to ourselves and our families, putting off the
purchase of needed medicine.
Opponents tell us that Americans have to swallow the bitter
pill of high prices if they want safety and innovation. This is
a false choice for our Nation and for the world. We can achieve
both. Drug makers are already bringing in drugs from other
countries into the United States, as has already been stated.
FDA inspectors go all over the world to inspect manufacturing
lines that will produce drugs that ultimately will be brought
to the United States. I think many Americans would be surprised
to learn that their drugs might be from China, India, or
Slovakia right now.
Drug makers have a complete monopoly on those prescription
drugs. No one else--doctors, pharmacists, patients, employers--
has the same opportunity to purchase those FDA-approved drugs
at low prices. Again, only the drug makers.
Mr. Chairman, in my State, you can go to Detroit or Port
Huron or Sault St. Marie and literally look across the river or
look across a bridge, 5 minutes across a bridge or tunnel, and
you can see where your prescription drug prices can be dropped
as much as 50 percent, or in the case of drugs like Tamoxifen,
70 or 80 percent. My pharmacists say, why is it the drug makers
can bring those drugs back and forth safely but I can't do
business? My business is prohibited from doing business with
businesses, pharmacies in Canada. It makes no sense.
We can create a safe, fair system that allows our
pharmacists, patients, and providers to use the global
marketplace to find the lowest-price drugs. Our bill does
provide the framework to allow our government to help our
citizens and businesses lower their health costs and our bill
will only allow reimportation from nations that have strong
safety standards, as Senator Snowe spoke about so eloquently.
Again, I don't believe that Americans need to make a
tradeoff between innovation and affordability. We make a
commitment to research in this Nation through tax subsidies for
R&D costs and funding for the National Institutes of Health.
Last year, Congress appropriated nearly $29 billion to NIH,
money that is used to develop the basic building blocks that
lead to the next generation of medical breakthroughs.
We are also losing out on great opportunities to keep our
Nation as a leader in scientific innovation. According to PhRMA
trade association Web site, PhRMA companies in 2003 invested an
estimated $33.2 billion on research to develop new treatments
for diseases. I might add that we helped to support that
through tax deductions and tax credits, as American taxpayers.
For the same period, the European Federation of
Pharmaceutical Industries and Associations invested about $28
billion, not far behind. The number of biotech companies in
Europe increased dramatically in recent years. In 2001, there
were more companies in the E.U. than in the United States--more
companies in the E.U. than in the United States. Those are jobs
and opportunities we are losing here in the United States.
When drug makers spend more than two-and-a-half times as
much on advertising and marketing as R&D, it makes you wonder
what cures, what breakthroughs we have missed.
I think the bottom line, Mr. Chairman, is that we can work
together to make a major difference, to lower prices, to do so
safely, to address what I believe is one of the great moral
issues of our time, the explosion in the prices of medicine in
our country that are affecting businesses large and small and
our families and our seniors, and I look forward to working
with you on this important issue. Thank you.
The Chairman. Thank you.
Senator Vitter.
Statement of Senator Vitter
Senator Vitter. Mr. Chairman, Senator Kennedy, members of
the committee, thank you for the opportunity to discuss this
vitally important issue, and I am certainly pleased to be
testifying today with my colleagues, leaders on this issue,
Senators Dorgan, Snowe, and Stabenow.
It is an issue I feel very strongly about. My first
legislative action as a U.S. Senator was to introduce the
Pharmaceutical Market Access Act of 2005, S. 109, with Senator
Salazar and others, and that bill has an identical companion in
the U.S. House of Representatives by Congressman Gill Gutknecht
and a bipartisan roster of cosponsors, 80 in total so far. A
prior version of that House bill passed that chamber 2 years
ago, and is the only bill on the subject to pass either body.
I want to make clear at the beginning, while I have a
slightly different bill with a slightly different approach in
some ways, I stand shoulder to shoulder on the broad issue with
all of my colleagues here and my other colleagues in the Senate
who care passionately about this issue, and certainly want to
say up front if their bill was on the Senate floor for final
passage right now, I would enthusiastically speak for it, vote
for it, and I believe vice-versa.
Why is this so important? Well, two fundamental reasons,
one of which is obvious, one of which is perhaps less obvious,
maybe even counterintuitive, but very important.
The first obvious reason prescription drug prices are much
higher in the United States than in all other countries, and we
have talked about this, but let me make a few points about it.
As I traveled Louisiana particularly last year, I heard
countless seniors tell similar stories about the outrageous
costs of their prescription drugs and how it burdens their
lives. They noted correctly that the United States is the
world's largest market for pharmaceuticals, and yet we pay the
world's highest prices.
Senator Dorgan had a great example with Lipitor, a very
common drug. As he noted, a 90-day supply costs about $320 in
the United States, but only $180 in Canada. As noted by the
Congressional Research Service, the price discrepancy for this
one drug is not unique. A general CRS comparison of United
States and Canadian prices revealed that, on average, brand
name drug prices in the United States were 70 percent higher,
and this is not limited to Canada. This is a much broader
problem and a much broader issue. Citizens in virtually every
other industrialized country pay significantly lower prices for
patented drugs than Americans, lower by 30 percent or more, and
this figure includes many countries that are not dominated by
old-fashioned status price control regimes.
So why is that? In my opinion, the reason is simple. This
country does not have a global free market for prescription
drugs. We have a closed market, and that leads to disparate
pricing, including the highest prices worldwide in this
country, and we deliberately block American consumers' access
to the same drugs at much cheaper costs from other sources.
Now, this price issue is very important to real seniors,
real people, real families, but it also has very important and
broad social and government program implications. According to
the Congressional Budget Office, spending on prescription drugs
grew at a real average annual rate--that is adjusted for
inflation--of 14.5 percent from 1997 to 2002, reaching $162
billion in 2002. That explosive growth raised prescription drug
spending's share of the total health expenditure to 10.5
percent in 2002, compared to just 5.8 percent a decade earlier.
As noted by CBO, in 1999, prescription drugs surpassed
nursing homes as the third-largest category of personal health
care expenditures after hospitals and physicians' services.
Now, this has enormous implications for programs and challenges
we worry about and try to face every day, particularly Medicaid
and Medicare.
Let me now move on to the second big reason I, along with
my colleagues, believe we need to take action in this area of
prescription drug importation. It is because prescription drug
importation is already occurring right now by American
consumers without the proper safeguards. And so, in fact, I
would argue strongly that safety is a huge reason we must pass
legislation like this. It is not a reason we should fail to
act.
Two scenarios, very simple. The first scenario is getting
more and more common every day. Millions of Americans are
refusing to shoulder the increasingly heavy burden of prices
and they are defying law and they are purchasing their
prescription drugs elsewhere. By one estimate, over 6 million
Americans have purchased their medication from online Canadian
pharmacies. According to CRS, in 2003 alone, Americans bought
over $1 billion of prescription drugs that way, twice as much
as the year before. When American consumers buy unapproved
prescription drugs from other countries without equivalent
regulatory safeguards, they run a real risk that those drugs
could be of poor quality. So unless we act on this sort of
legislation, we are allowing a major safety problem to grow and
grow and grow.
The other scenario is just as concerning to me. Take the
Americans who do live by the law, and they are on a limited
budget, so they choose the alternative, to comply with the law,
buy their prescription drugs here. What happens? We all know
what happens. They may be forced to choose between medication
and other necessities. We have all heard accounts where they
cut pills in half or take their medication every other day
instead of daily because they cannot afford the cost of their
prescription drugs. To quote my friend and House colleague,
Congressman Gil Gutknecht, an unaffordable drug is neither safe
nor effective.
So those are the two real scenarios that I believe make
action in this area imperative, specifically for safety
reasons. Safety is not a reason not to act. It is the most
compelling reason to act with clarity and with care.
We can, I certainly agree with my colleagues, we can
address these safety concerns, and in doing so, we can make
present circumstances much more secure and safer. There are a
lot of provisions in both of our bills. Let me mention some of
the most important specific provisions.
First, the requirement of tamper-resistant packaging. That
is spelled out in a lot of detail in the Vitter-Salazar bill.
It requires a new requirement that drugs be either packaged and
shipped using state-of-the-art tamper-resistant anti-
counterfeit technologies, or if that doesn't happen, be
carefully tested for authenticity when entering the market in
this country. And by the way, at least under the Vitter-Salazar
bill, that requirement applies to most drugs in this country,
as well, so it could, with new technology, help address the
growing problem in this country that you noted in your opening
remarks.
Second, limitation on participating countries. My
colleagues have spoken directly to that.
Third, limitation on the types of drugs covered. At least
in the Vitter-Salazar bill, we are not talking about drugs
requiring refrigeration. We are not talking about drugs
requiring biotechnology processes or photoreactive drugs or
intravenously injected drugs or inhaled drugs during surgery or
bioequivalents.
Fourth, major safeguards against adulteration and
misbranding. As my colleagues have said, we are talking about
asking, or requiring these importers to meet the very same FDA
safety and efficacy standards as drugs currently sold in this
country.
Fifth, unannounced inspections of foreign sellers,
completely unannounced and random.
Sixth, registration requirements for importers so that
domestic entities that will distribute drugs directly to
American consumers would have to provide information to the FDA
to ensure safety.
Seventh, registration requirements for foreign sellers.
And eighth, a catch-all safety provision in the Vitter-
Salazar bill to give the FDA significant very broad authority
to do whatever it determines is necessary to protect all of
these safety concerns.
Let me end on one final topic, and that is something I feel
strongly about. Drug importation should not be limited to
Canada. Canada's methods of ensuring the safety of prescription
drugs are comparable to those of the United States, and so we
clearly should allow that importation from Canada. Our own GAO
in June 2004 found very few problems with prescription drugs
obtained from Canadian Web sites. But I do feel it would be a
mistake to completely limit the importation program to just one
country.
Not long ago, a team of specialists appointed by the
Governor of Illinois researched the question of whether
Americans can safely and effectively purchase prescription
drugs from industrialized countries other than Canada and their
findings are described in a significant report issued last
summer entitled, ``Can Illinois Residents and Businesses Safely
and Effectively Purchase Prescription Drugs From Europe?'' The
authors of this major report concluded that it is both possible
and desirable to allow these purchases from approved facilities
in Europe. Again, as my colleagues have pointed out, we are
talking about industrialized countries with a pharmaceutical
infrastructure comparable in every way to that of the United
States.
In closing, Mr. Chairman and members, let me say that this
issue is not a conservative or liberal issue. It is not a
Democratic or Republican issue. It is a universal issue, a
challenge to provide our Nation's consumers access to safe and
affordable drugs. That is why I have worked to assemble a
coalition of Senators and Representatives from across the
political spectrum in support of this, and that is why I also
strongly support the efforts of my colleagues on the Dorgan-
Snowe approach.
I look forward to working with all of my new Senate
colleagues to advance this very important cause, and, of
course, my door is always open to those who want to join our
effort or who have any other ideas of how we can do this safe
and effectively and bring prices down for all American
consumers.
Thank you very much, Mr. Chairman.
The Chairman. Thank you.
I want to thank all of you for your testimony. I share your
concern, and I am sure everyone does, for the high cost of
health care in this country. I appreciate how much work all of
you have put in on this issue and even did some research on
prior work that you have done on this issue.
In one of the previous hearings, on the reports that we
received, one of the concerns was that, yes, it will save
money, but the cost of providing the protection will cost as
much money as what will be saved. Now, it is a cost shifting
because it would be the United States picking up the cost of
doing the checking as opposed to the people buying the imported
drugs.
But a number of States have started outlining some pilot
projects where they would take the responsibility on the
importation of the drugs, and in fact, I want to commend you,
Senator Dorgan, for a thoughtful proposal that you made to
Secretary Thompson just last year, the Prairie Prescriptions
Pilot Project. Your idea was a 2-year importation project that
would allow pharmacists and wholesalers in North Dakota to
purchase FDA-approved prescription drugs from licensed Canadian
pharmacies and wholesalers.
Now, I know some other States have also petitioned HHS to
do similar projects. I think Vermont, Oregon, and Illinois have
done so, though your proposal was the most detailed of any that
I read. I like the idea of having States work together with the
FDA on a limited basis at first. Then we can see what kind of
problems there would be, kind of as a local laboratory as
opposed to a national laboratory. I would ask if you would be
willing to work with me to create a proposal that would permit
your Prairie Prescriptions Project and others like it.
Senator Dorgan. Mr. Chairman, I proposed that only because
we were unable to make any progress with the Administration on
a broader approach. In fact, I believe I am still waiting for a
response from Secretary Thompson down at HHS. He is, of course,
long gone. But I went down and made a presentation to the
Secretary and to the Surgeon General and they indicated they
would be making a formal response. I have yet to receive that
formal response.
My goal would be to have an action by the Congress that
broadly allows, with proper safeguards, and I think those
safeguards are described in our legislation, allows the
American people to reimport prescription drugs.
Now, if, for example, the Congress, if there are votes in
the Congress and the President would veto a bill and we are
stymied and stopped dead in our tracks, would I then agree to
some pilot project or pilot program? Yes. Yes, I would. But
that is not the case. I believe we have the votes to pass this
legislation in the House and in the Senate. I believe when
presented to the President--he has not yet been presented with
legislation of this type--I think he would be hard-pressed to
veto it.
So my feeling is that we ought to proceed. This hearing is
an important first step. Let us proceed to move these kinds of
plans or some derivation of these plans to the floor of the
Senate, get a vote, do the same in the House, and get a bill to
the President, and I believe the consumers would be advantaged
by that all across America.
The Chairman. I just wanted to comment that your Prairie
Prescriptions Project is even more detailed than what you have
in your bill and, I think, provides some safeguards that aren't
in the bill.
But my question for the panel, when commercial importation
is legalized, who would bear the legal liability if the patient
was injured by imported drugs? Would it be the manufacturers or
the wholesalers or the pharmacies or the pharmacists, Internet
providers, or does no one bear the liability? If it is a
foreign wholesaler, pharmacy, or pharmacist, how would that
liability be enforced for patients in the United States?
Senator Dorgan. Well, the premise of that question, the
premise of the allegations by some that there would be
prescription drugs imported that were less safe and less
effective than prescription drugs now taken by the American
people is just a false premise, in my judgment. The drugs under
the bipartisan bill that we have described will have to meet
exactly the same standards of safety and effectiveness because
importers will have to document the chain of custody from the
point of manufacture to the drug store itself. That, in fact,
is a requirement that drugs sold domestically in the United
States do not even now meet. So I think the proposition that
there is some liability issue that is extraordinary or above
that which now exists is not accurate.
Senator Stabenow. Mr. Chairman, if I might just say, one
question I would have is who is responsible now? Lipitor is
made in Ireland. We send FDA inspectors there to inspect the
plant. There is a closed supply chain. It comes back to this
country. Who is responsible in terms of liability now for a
product, as for example, made in Ireland?
From my perspective, the legislation that we have does more
to protect people than current law because I am concerned about
Internet pharmacies. There is a lot of attempt to confuse
Internet pharmacies with what we are talking about, the
pharmacy being able to do business with another pharmacy. Right
now, I think it is possible for someone to go to the Internet,
not to know where the drugs are coming from.
And, in fact, we need to fix that and this legislation
would go a long way to address really what is happening for
people right now out of desperation. I mean, I know people that
are doing things that are not as safe as they should be out of
desperation because we can't--we aren't acting. We aren't
giving them a safe alternative, and that is what this
legislation would do.
The Chairman. Of course, with the legislation we are
actually opening it up considerably. I know we had the chart
that showed the importation from other countries, but that is
the manufacture, manufacturing it in the other country, sending
it to the United States to their own entity and then having a
distribution system from here in the United States, which more
clearly defines the liability situation.
My time has expired.
Senator Murray.
Opening Statement of Senator Murray
Senator Murray. Mr. Chairman, thank you very much. Thank
you for the hearing and thank all of you for testifying today.
I think all of us recognize that the cost of drugs in this
country is a real challenge and I think you are looking at one
way to deal with that. I would hope at some point we look at
how we lower costs here in the United States with the drugs
that are made and sold here in the United States.
I do have a couple of questions. I think that all of us are
really concerned about safety. We all want prices reduced. We
all want safety to be a consideration. It seems to me that part
of what we have to recognize with reimportation is the new
burdens on FDA to make sure that we have safety as a strong
consideration. None of us want a point where we can't trust our
own systems.
Is there anything within the bill that if we are unable to
realize the costs for FDA, if the new user fees are not
sufficient or not allocated by Congress, that there will be any
suspending of the reimportation, or will it just be a cost to
FDA that they will have to find from somewhere else if the real
costs don't become realized?
Senator Snowe. Based on our estimates and everything that
we have gotten for information, we think that it will. I don't
think that--obviously, we would want to adjust that if that was
not the case with the 1 percent of the value of imported drugs
wasn't sufficient to accommodate the resources. But from what
we expect--even like Canadian pharmacies, I mean, the
appropriate based on that alone would be $200,000 per Canadian
pharmacist for inspections, monitoring, and everything else. We
think that it is pretty generous in that sense in covering the
cost of this legislation, but obviously, that can be adjusted
based on the estimates. But we think it is pretty well covered.
Senator Murray. I think it is an important consideration,
because as we have seen with the medical device user fee, if
the funds aren't appropriated or allocated or sufficient, it
does create problems, so I just want to make sure that we are
aware of that and hopefully----
Senator Snowe. Hopefully, the former Commissioner, David
Kessler, will be testifying to these points, as well, and he
has indicated that it is, but we would certainly welcome any
additional input if someone suggested it wouldn't be the case.
I mean, we would be raising $1 billion from importers and $1
billion from exporters in 2006 alone under this legislation.
Senator Murray. Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Gregg.
Opening Statement of Senator Gregg
Senator Gregg. Thank you, Mr. Chairman. This is a
complicated issue. Although it has been postured in political
terms, the practical implications are whether or not people
will be benefitted by it through purchasing drugs which will
help them. If you buy a pill, you want it to cure you, not kill
you. The essence of our system in this country has been that
the FDA has protected Americans. You walk into a pharmacy. You
expect to get a drug that is going to be good. And we have a
system that works, and when you open it up to the world for
people to purchase from, you want to make sure that people
buying from wherever, whether it is Canada or Greece or
Portugal or Luxembourg, that the pill they purchase will cure
them and not kill them.
And thus, to step into this area requires that we make sure
that we do it correctly, and that is why I have some very
serious reservations about the bill that is sponsored by
Senator Dorgan and Senator Snowe, especially. The problem I
have, I guess, with your bill is--well, there are a variety of
issues. I will submit for the record about 20 pages of specific
representations as to how the bill specifically changes the
present FDA regime.
Senator Dorgan has represented that the safety issues will
be the same standards of safe and effectiveness that presently
the FDA pursues, which is not, in my opinion, accurate. In
fact, under the bill, you essentially replace Section 501,
which deals with adulteration, Section 502, which deals with
labeling, Section 506, which deals with manufacturing
standards, and Section 505, which deals with clinical
examinations, with a brand new regime. You have got about 40
pages. The essence of that regime that you set up is something
called manufacturing changes. It is a new term, new
definitional term. It is what the FDA is to look to relative to
its standards.
So I would ask you, Senator Snowe, what does manufacturing
changes mean in Section 506, as it applies to Section 506?
Senator Snowe. I think the point is I would expect, first
of all, that there would be a change in regimes because
obviously the current system isn't working. I mean, even with
respect to----
Senator Gregg. So you don't subscribe to Senator Dorgan's
view that your safety and efficacy standards are the same as
the FDA presently has for American drugs?
Senator Snowe. Well, yes, but yes, but we are also talking
about creating a higher standard in this legislation.
Senator Gregg. And is that defined by manufacturing
changes?
Senator Snowe. Obviously, we wouldn't expect----
Senator Gregg. Is there any chance you are going to answer
the question, Senator? What is the definition of manufacturing
changes? What is its implication?
Senator Snowe. The implication is to make sure that we have
the highest standard.
Senator Gregg. What is manufacturing changes, Senator?
Senator Snowe. What?
Senator Gregg. What are manufacturing changes? This is your
new standard. This is the standard which changes Section 501,
Section 505. These are critical issues for the consumers of
America. You are setting up a new standard. What is
manufacturing changes? What does the FDA mean?
Senator Snowe [continuing]. Have an inspection and FDA-
approved and FDA-inspected medications. Frankly, Senator Gregg,
we send men and women to space every day. We cannot figure this
out? I mean, seriously.
Senator Gregg. Senator----
Senator Snowe. FDA-approved and----
Senator Gregg. Senator, I am reclaiming my time.
Senator Snowe. Well, what----
Senator Gregg. You are obviously not going to answer the
question.
Senator Snowe. I am answering the question, but you don't
like the answer.
Senator Gregg. No, you are not.
Senator Snowe. I mean, the point----
Senator Gregg. Senator, manufacturing changes, just explain
to us what the FDA is looking to under this new standard.
Senator Snowe. Manufacturing changes is establishing a new
standard, because it is a new regime. It is a new process----
Senator Gregg. And what is the standard?
Senator Snowe [continuing]. Because we are not importing,
which is to be approved and inspected, registered, and
monitored. That is what it is all about. And so----
Senator Gregg. Actually, Senator, it is inspected, not
approved.
Senator Snowe. Let me just say one other point here,
because I think that we need to understand what we are dealing
with in terms of reality----
Senator Gregg. All I want to understand is how you are
going to change the FDA rules.
Senator Snowe. Well, I am. I am trying to explain the
realities, because in explaining the rules, because they
obviously do need to be changed. I mean, we are creating a new
regime to begin with because it isn't allowed. We do----
Senator Gregg. I am going to reclaim my time, Senator,
because----
Senator Snowe. Well, can I just make one point?
Senator Gregg. No, Senator. Let me reclaim my time. It is
my time, Senator. I only have 5 minutes. You had your 5
minutes. Let me point out the problem here. There is a
manufacturing facility in India, hypothetically. That
manufacturing facility under your proposal ships a product to
Portugal, ships a product to Luxembourg, ships a product to
Italy. That product is then transshipped to the United States.
There is no requirement in your bill--in fact, it is
basically replaced that that product be subject to clinical
review in one or more clinical investigations. All that is
required in your bill is that that facility had been inspected
in India. It doesn't even require in your bill that that
facility be approved, just inspected. In fact, the FDA could go
into that facility under your new standard, look at that
facility and determine that the vats weren't at the right
temperature, that the binding agents were different and might
cause problems, that the labeling process was inaccurate, and
the approval process would not be conditioned--the inspection
process would not be conditioned on an approval which would be
effective against that facility. In other words, the FDA would
have no enforcement capability against that facility compared
to present law.
In addition, if the product came to the United States and
created harm, the question has been asked by the Chairman, who
would be liable? That Indian facility would not necessarily be
liable under your bill. Your bill has taken 100 years of law
under 501, 100 years of law under 502, and a significant amount
of history under 506 and 505 and essentially replaced it with
40 pages of new regulation which you won't explain because you
don't have an explanation for it. ``Manufacturing changes'' is
not a standard of health care in this country which the FDA
understands or recognizes.
And the simple fact is that if you want to create a brand
new regime, you say you want to create a brand new regime, you
are going to put a lot of people at risk in this country. You
are creating a Russian roulette regime for the American
consumer in the name of politics, and that is the difference we
have on this issue.
Senator Dorgan. Mr. Chairman, would you let me respond to
his questions?
The Chairman. The Senator's time has expired.
Senator Dorgan. Mr. Chairman, does he want a response to
the questions that he has asked?
Senator Gregg. I will be happy to take response, and then I
would like to respond to your response, but I don't suspect
this panel wants to pursue that in that framework. But we are
going to have plenty of time to discuss this in significant
depth.
Senator Dorgan. Well, this would be a good time to have
plenty of time, wouldn't it?
Senator Gregg. It certainly would be. I would be happy to
pursue it right now.
Senator Dorgan. Mr. Chairman, if this is the time, then let
us go ahead and discuss this.
The Chairman. I will hear your response and then the
Senator's response.
Senator Dorgan. Mr. Chairman, first of all, let me commend
the Senator for 20 pages of questions. That is some amount of
homework for a Senator. But I appreciate----
Senator Gregg. I didn't say I had 20 pages of questions. I
have 20 pages of points as to the problems----
Senator Dorgan. It is still a great deal of homework----
Senator Gregg [continuing]. As to the difference with your
bill----
Senator Dorgan. It is still a great deal of homework and I
admire that.
Senator Gregg. You represent that your bill is exactly the
same as the standards of safety and effectiveness.
Senator Dorgan. Mr. Chairman, did you recognize me at this
point?
Senator Gregg. No, he is not recognized to--he is
recognized to respond to my questions.
The Chairman. It is part of his time, the Senator from
North Dakota.
Senator Dorgan. Mr. Chairman, I will wait until it is
appropriate for the responses to the questions that have been
posed by Senator Gregg.
The Chairman. The Senator from North Dakota.
Senator Dorgan. Well, first of all, I was attempting to
compliment the Senator for the amount of work that he has done
here. I must say that the description of the Senator misses a
couple of key points.
Number one, we are talking about a closed system and only
FDA-approved drugs approved in an FDA-approved facility. So
that is not any different than what now exists with respect to
prescription drugs that the Senator from New Hampshire may take
this evening or tomorrow morning, if he takes prescription
drugs. He purchased them at a pharmacy and they may come from
anyplace in the world and they will be FDA-approved drugs made
in an FDA-approved facility. So this is a closed system. We
don't propose to change any of that.
But with respect to the standards issues, if a manufacturer
decides, for example, well, there is a way around all of this.
What we will simply do is we will change the color of the
prescription drug. We will make some slight difference, slight
change in the drug in a way to claim that it is a different
drug. If we simply give the FDA the authority to take a look at
that and decide whether that difference is germane and
important or whether it is an irrelevant difference and that
drug still should be able to be sold to a consumer. If a
difference in a drug causes a difference in the bioequivalence,
the FDA would apply the exact same standards for approval as it
already applies to drug manufacturers that want to make a
change to a previously approved prescription drug.
That is what this is about. Look, I respect differences of
opinion. I understand the Senator feels very strongly about
this. But I must say, this is a circumstance where we are
talking about a closed system of FDA-approved drugs produced
from FDA-approved facilities, sold to an American consumer in a
closed system, and that is all it is.
Senator Gregg. Mr. Chairman, let me respond to the
incomplete response by the Senator, because the point I was
making was that it is not the same system. You have replaced
the system that the FDA presently uses for approving drugs in
this country with a brand new set of standards, a brand new set
of standards. You have replaced 501. You have replaced 502. And
you have replaced the requirements under 505, and 506, for that
matter.
And these new standards appear to be linchpinned off
something called ``manufacturing change,'' which the FDA is
supposed to look at, and I don't know what that means and the
FDA doesn't know what it means. I was hoping you would know
what it means, because it is going to have a huge impact on the
safety of drugs coming into this country.
The simple fact is that you cannot create a new set of
standards for drugs coming into this country simply because
they are reimported versus drugs which are traditionally sold
in this country under a--through a closed system, which is what
you are doing.
Why do you have 20 pages of new legislation replacing the
501 section and the 502 section? Why do we have a new standard
which replaces the ability of the FDA to review these drugs
before they reach the market? Under your bill, a drug could be
on the market in the United States through reimportation and
the FDA would still be investigating whether or not the
labeling is correct, the binding is correct, and the coloring
is correct.
Senator Snowe. That is not----
Senator Dorgan. That is not accurate, Senator.
Senator Gregg. That is correct.
Senator Snowe. Mr. Chairman.
Senator Gregg. In addition, why do you say to the facility,
it has to be inspected and not approved in the foreign country?
So if we are going to continue this discussion, explain to
me the definition of manufacturing change, and if I am
inaccurate on this issue of whether or not a drug can be on the
market here in the United States and have received a complaint
about labeling, coloring, and binding agencies prior to the FDA
having made the decision as to whether or not labeling,
coloring, and binding is correct, it can be sold here, and that
could happen under your reimportation. And second and third,
whether or not the facility in the foreign country has to be
not only inspected, but actually approved by the FDA.
The Chairman. The Senator's time has expired----
Senator Snowe. But can I just answer?
The Chairman. The purpose of a hearing is to gather as much
information as possible. It doesn't all have to be said in the
meeting. So all of you will be allowed to expand on your
comments. Full testimony will be in the record as well as the
oral comments that you made----
Senator Snowe. Mr. Chairman----
The Chairman [continuing]. But I have other people that
have been here quite a while that deserve a chance to ask their
questions, so Senator Isakson.
Senator Isakson. Thank you, Mr. Chairman.
Senator Dorgan, in your first part of your remarks, you
made a comment, and I was making notes here, so if I missed it,
you can correct me, but you said in the United States, the
pharmaceutical companies set the U.S. price. Forgetting about--
assuming your--I don't want to get into what we just got out
of, but assuming that your inspection procedure and approval
procedure is identically the same as it is today, isn't all you
are doing here is turning over the control of the price of U.S.
pharmaceuticals to another country, in particular, Canada? And
if that is the case, why don't you just set up price controls
in the United States?
If you assume your inspection, safety, and security are
equivalent to what they are today, and that is not an argument
which I am not saying is or isn't true, I just don't want to
get him stirred up again--[Laughter.]--then isn't it true--then
why not just establish price controls in the United States
rather than, in effect, abdicating them to Canada?
Senator Dorgan. Senator Isakson, in the global economy,
when you import anything, you import all of these circumstances
of that production in the country from which it is imported. If
you happen to be wearing a Chinese silk tie, you may well be
paying this morning for the retirement costs of Zung Zu Minh
and the Communist government of China, but that is the way the
global system works.
So if you are asking the question, if we import a
prescription drug from Canada, are we importing price controls?
No. We are importing a prescription drug from Canada.
Senator Isakson. That has price controls.
Senator Dorgan. Canada does have price controls,
absolutely. If we import a prescription drug from Germany or
Italy or Spain or England, we will import whatever the
circumstances exist there. It is the case, I am sure, however,
that the pharmaceutical industry sells in all of these
countries because they make a profit under whatever pricing
scheme they develop in those countries, at least relative to
the laws that exist in that country.
Senator Isakson. My only point on that is this, that a
necktie won't kill you unless you tie it awfully tight--
[Laughter.]--but a bad pharmaceutical will, and there is a lot
of difference between neckties and pharmaceuticals. And I do
think the question is a valid question. But, I am not taking a
side right now. I am trying to make a point, that if you wipe
out all this other stuff we were talking about, you are
advocating price controls to another country versus being for
price controls in the United States.
My second question is to Ms. Stabenow from Michigan. You
made a statement that we are giving Americans a false choice of
higher costs in return for safer and newer drugs. Don't you
believe that there is some value to recovery of R&D and
incentives on that to develop drugs versus being in a stagnant
situation where you don't have that incentive?
Senator Stabenow. Absolutely, Senator----
Senator Isakson. Then why is that a false choice?
Senator Stabenow [continuing]. What I am saying is that
what we hear from the other side is that somehow to lower price
means that we won't have research, where, in fact, we know that
the industry is spending much, much more on advertising and
marketing today than they are on research and that all you have
to do is turn on your television set and you see it.
And in addition to that, we as taxpayers in America are
spending close to $30 billion this last year for basic research
that we then give to the companies at no charge because it is
so important that they continue to develop these breakthrough
drugs.
So this is just already something that American taxpayers
are helping to pay for, and yet we, in return for doing that
and all the tax credits and incentives, which I support, the
gift that we get back are the highest prices in the world. It
is not a good deal.
Senator Vitter. Senator, could I respond very quickly, too,
to the two questions----
Senator Isakson. Quickly.
Senator Vitter [continuing]. Because this goes to the heart
of this issue. I only speak for myself. I am strongly for these
proposals not because I want to support and import price
control, but because I believe if we establish a true worldwide
free market through measures like this, we will break down
disparate pricing around the world and make it extremely
difficult to have these different pricing regimes, including
old-fashioned price control regimes. That is why I am for this
proposal, to break through that disparate global pricing and to
make it difficult or impossible for other countries to do what
they are doing now, which is to push all of their R&D costs
onto us and us alone as American consumers.
Senator Isakson. That is a noble goal, because my question
is rooted in my serious concern that we have abdicated to our
country the total responsibility for pharmaceutical development
and breakthrough, and yet putting a disincentive on the entire
system to turn around and import, in whole or in part, price
controls, which is a double-whammy.
Now, since you all abused your time, I am going to abuse
mine. I will have to tell you, now, your thing on advertising
is right on. I still don't understand all those ads. I don't
know if they spend more on ads than they do on R&D, but they
spend more on ads than they probably ought to, in my judgment,
and it ought to be going into R&D.
But we can't--I am sure your goals are noble. I hope, and
Senator Vitter has said it in a very eloquent way, we have to
protect what we have in this country in terms of a safe and
innovative and a breakthrough pharmaceutical climate and do so
because that is as healthy for our consumers and our
constituents as is anything else that we can do. So I just
wanted to make that comment and I appreciate David's remark.
I yield, Mr. Chair.
Senator Snowe. Mr. Chairman.
The Chairman. Senator Burr.
Opening Statement of Senator Burr
Senator Burr. Thank you, Mr. Chairman, and I will tell the
witnesses I am not going to ask questions. I am going to save
them for Dr. Kessler and others later on. I just want to make a
statement for the propose of my colleagues.
In 1997, we passed the Food and Drug Modernization Act. I
was one of the co-authors of that legislation. I worked with
Dr. Kessler on it. Details do matter. Details are important as
it relates to how we instruct the FDA to proceed, all the way
down to the smallest details. I can remember months in a room
with FDA officials and the wrong word implies something
different.
Let me just share with everybody the titles that Judd Gregg
was just talking about. Section 501, Adulterated Drugs and
Devices. Section 502, Misbranded Drugs and Devices. Section
505, New Drugs. Section 506, Fast-Track Products. This is an
extremely delicate area that we talk about the potential of a
wholesale change, all in the quest of trying to reimport drugs.
I am not here raising questions about it. I think that
working with individuals at the FDA, with staff on the Hill
looking at specific language, working with each other, trying
to both know what the impact of any change, even just a change
in words--I mean, if this were so easy, the United States of
America would have harmonized our drug laws with the E.U.
already.
And the fact is, we found out we couldn't do it because we
couldn't accept their standards and we wouldn't accept the
paper trail that existed between E.U. countries. And I won't
name any of the countries in the E.U., but there are some that
the standard--it is so low that I am sure that if they weren't
part of a group, nobody would accept it. But we are here
talking about us accepting it. And if, in fact, this body or
any body accepted legislation that put us on that pathway, then
we had better make sure that we have minimized the effects on
the American people.
I believe to suggest to do this is, in fact, to bring a
higher level of safety is misguided. But I do appreciate the
time that all of the sponsors have put into it. I am sure that
this will receive the debate that I believe it deserves, and I
believe at the end of the process, we will not be experts, but
we will certainly be smarter for having gone through it. I
thank the Chairman.
Senator Snowe. Mr. Chairman. Mr. Chairman. I will answer--
Mr. Chairman.
The Chairman. Did the Senator ask the question?
Senator Burr. I yielded back.
The Chairman. He yielded back his time.
Senator Snowe. Mr. Chairman, could I just answer a
question, because I really didn't have the opportunity to
respond and I think it is important before we depart that
certain misrepresentations do not occur with respect to our
legislation. We may have differences on the legislative
language, and that is legitimate. Agencies have been doing that
for centuries. I don't think there is any question. But we have
put a great deal of time and input in drafting this legislation
for a very serious approach.
Now, you may have differences over the language, but first
and foremost, understand that the European Union has
comparatively the same regulatory standards as we do in
America. What I was showing you in my earlier display were
countries where we import drugs today that are used by
Americans from countries that have lower standards, and I think
that is important to indicate.
Now, to the question that Senator Gregg was raising, as
Senator Dorgan indicated, we created a different standard for
looking at drugs that have changes. It is not replacing the
existing standard, but those that may have changes so that
there is a system in place. Today, that isn't the case,
frankly, and that is what we indicated.
And third, let me just indicate something else. FDA has
reduced its factory inspections over the last 20 years. I
mentioned that in my earlier statement. They have reduced them
from 4,300 in 1980 to 1,600 in 2001. Fewer inspections. That
map that I had up here earlier that showed all the countries
from which we are importing drugs that have lower standards
than the United States, I got that information from the FDA's
own report showing that, Mr. Chairman. And on the blue, the
European Union and the other countries from which we would
import have the same standards as the United States. And we
have testimony from the former Secretary General of the
European Trade Organization, there has been not one problem in
30 years of parallel trading among the European countries.
So I think it is important to establish that. We may have
differences over legislative language and approach. Yes, I
would hope we would have a different standard because we have
none now on the importation. That is a problem. And so we need
change, and hopefully it would be to supercede the status quo
and examine any changes in medications coming across the border
so that we have a process in place by FDA.
If there is a better suggestion, we welcome it. I think we
all would work to welcome change. After 6 years since Senator
Dorgan first introduced this legislation, I think America can
do better.
The Chairman. Each of you will have an opportunity to
expand on your remarks, and all of the members of the
committee, as well. The record will stand open for 10 days and
there will be an opportunity for some written questions to also
increase it, because I actually have more questions now than
when I started on this--
[Laughter.]
And we had a whole series of hearings on the FDA and how
they operate and concerns that we have with safety within the
present operation and we have about 40 suggestions for how we
need to change the FDA, and I am mentally trying to figure out
how we work that into the entire world.
I appreciate the effort that you have put into this. We
will do something on drug importation. I hope that all of you
will work with me on it. The amendment that went on the budget
bill was an amendment that I submitted and I appreciate the co-
sponsorships of a number of people and the unanimous way in
which it passed, and one of the key parts of it was that it
would go through regular order in the committee. And, of
course, the only way it can go through in regular order in the
committee is if we are doing something on it. I will be doing
something on it and would like to be doing something on it in
conjunction with all of the people that have an interest in
importation, including the pharmaceutical companies who
probably from today have gotten the message that it would be a
good idea to have a little lower prices in the United States.
I thank all of you for being on this panel and we will move
to the next panel because we have a vote in just a few minutes
and we will have to work around that. Thank you.
If I can have the next panel take their place, we will put
some name tags there. I will go ahead with the introductions.
While I am doing this, I will ask the panel, who I know have
already looked at being able to summarize the information that
they have, to concentrate on summarizing the information. We
have two votes that will take place at 11:45, which means it
will be about 12:30 before we can get anybody back, if we can
get anybody back, because that then runs into policy lunches,
which is where we get to find out what is going to happen the
rest of the week as it affects our lives, so that is usually
pretty well attended.
Mr. Graham Satchwell is the Managing Director of Proco
Solutions, a consultancy in London, the United Kingdom,
specializing in brand protection. Mr. Satchwell is a former
detective superintendent and has held senior security executive
positions within several global corporations. He has recently
published a book, A Sick Business: Counterfeit Medicines and
Organized Crime on parallel trade, counterfeiting, and
diversion of prescription drugs in the E.U. He will discuss the
security implications of the list of permitted countries in the
Dorgan legislation and how this list may not be sufficient to
protect against counterfeiting and diversion of pharmaceuticals
destined for the U.S. market under a legalized importation
scheme.
Dr. Todd Cecil is the Vice President of Standards
Development at the United States Pharmacopeia, or USP. USP is a
nonprofit, nongovernmental standard-setting organization that
advances public health by ensuring the quality and consistency
of medicines, promoting the safe and proper use of medications,
and verifying the ingredients in dietary supplements. Mr. Cecil
will discuss the qualifying drugs provision in S. 334 which
allows imported drugs that are not bioequivalent to be
substituted for prescribed U.S. label drugs, potentially with
very harmful consequences to the patient.
I will invite Senator Isakson to introduce Mr. Thomas
Arthur.
Senator Isakson. Thank you, Mr. Chairman. It is a pleasure
for me to welcome the Dean of the Emory University School of
Law, Dean Thomas Arthur, to be with us today. Dean Arthur
graduated from the Yale Law School and from Duke University
before coming to Emory and he practiced law for 11 years in
Washington, D.C. at Kirkland and Ellis. Dean Arthur teaches
antitrust, civil procedure, administrative law at Emory
University. He has been published in the California Law Review,
the Tulane Law Review, and the New York University Law Review.
His testimony today will focus on constitutional,
intellectual property, and international law, and having
realized we were pressing in time, I read it before hearing it
and it is awfully good. I commend it to the Chairman.
The Chairman. Thank you. I have also read the testimony of
all of these people and appreciate it.
Dr. David Kessler is the fourth presenter. He is the Dean
and Vice Chancellor for Medical Affairs at the University of
California, San Francisco School of Medicine. Before joining
UCSF in the fall of 2003, Dr. Kessler had been the Dean of the
Yale University School of Medicine since July of 1997. Dr.
Kessler served as Commissioner of the United States Food and
Drug Administration from November 1990 until March 1997. He was
appointed by President Bush and reappointed by President
Clinton. Dr. Kessler will discuss the implementation of a safe
drug importation system.
Mr. Satchwell, you can begin.
STATEMENT OF GRAHAM SATCHWELL, MANAGING DIRECTOR, PROCO
SOLUTIONS, LONDON, UNITED KINGDOM
Mr. Satchwell. Mr. Chairman and members of the committee,
thank you for inviting me to speak here. As you know, I am
trying to give a European perspective on these things.
I would like to say this, though, that----
The Chairman. I don't believe your microphone is on. Sorry.
There is a little button there.
Mr. Satchwell. Is that better? Can you hear me now okay?
Okay now?
The Chairman. Thank you.
Mr. Satchwell. This morning, there was reference to whether
you support pharmaceutical companies or the U.S. public on this
issue. I can say that from my perspective, I know there are
many patient safety groups in the UK that would be advising you
in the way that I would, and clearly, they would not be doing
that on behalf of pharmaceutical companies.
There was also reference made this morning to what goes on
outside of Europe, and Asia was mentioned in particular. China
suffered 100,000 deaths from counterfeit medicines the year
before last, and about the same number, I think, last year.
There are particular initiatives, major initiatives because of
public safety fears going on in the Philippines, India,
Thailand, Malaysia, and elsewhere in Asia, and in Africa, it is
an endemic problem, as you are probably aware.
Turning back to Europe, the UK receives more, far more
parallel traded medicine than any other European country
because the prices in the UK are so much higher than elsewhere
in Europe. But the U.S.A., by comparison, is an even more
attractive market to those who would cheat the parallel trading
system. So you would be a prime target, just as the UK is now.
Parallel trade has three great pitfalls. First, it provides
a perfect way to smuggle counterfeit product into the
legitimate chain.
Second, it necessitates repackaging and there is powerful
statistical and anecdotal evidence to show that repacking in
itself has caused problems, counterfeiting aside.
Third, parallel trade is particularly difficult to police.
Currently, a UK dealer might receive an unsolicited e-mail
from a business elsewhere in Europe offering a drug at a
particularly attractive price. The UK dealer should ensure that
the seller is licensed and ask for evidence of that. The seller
will then fax a document that purports to be a license to
conduct that business. That is it. There is no one European
body that the British dealer can check with to make sure that
that is a bona fide license or not, and the UK regulatory
agency doesn't see it as their role to do so. In fact, for the
UK dealer to accurately be able to check a license that is
faxed from Greece or one of the other many European countries
and verify its accuracy would mean that each UK trader would
need to speak every European language. It is impossible for a
UK dealer--oh, I want to stop here.
There is something I wanted to say right up front, and it
is very blunt, forgive me, but Dr. Rost, who has been referred
to this morning, is provably wrong in his contentions, provably
wrong. I want that to go on the record, please, because it can
be supported by regulatory agencies, patient safety groups, my
own experiences, and so on. Now I will press on, if I might.
A UK dealer doesn't know where the products in his
warehouse have come from. They may purport to have come from
Greece, but, in fact, they could have come from India or China,
Eastern Europe, or elsewhere. There is just no way of his
knowing.
It is extremely easy for anyone to find a foreign party
willing to counterfeit medicines. I have done it myself on many
occasions. It is very easy. And then present those medicines as
genuine--that, of course, I have not done--especially when
those medicines are repackaged.
The recent Lipitor case is a perfect example of when you
import product that you can also import problems. You know, of
course, that the Lipitor matter involved drawing in fake
Lipitor from other countries, and you all know better than I
where those drugs originated. In the U.S.A., there are already
real problems and injuries as a result of counterfeit product
despite, the achievements of the FDA.
In relation to what has gone on in Europe and the provable
evidence that Mr. Rost is wrong, the FDA, of course, can access
that evidence themselves.
Parallel trade in Europe has led to a situation where
medicines often change hands more than 20 times in the
distribution chain. Parallel trade can make fast and thorough
product recall practically impossible.
I agree entirely with Senator Burr that the standards that
apply in Europe in relation to regulatory control often leave
much to be desired and they are not good. There is not standard
good practice across Europe when it comes to regulatory
control.
The harm that can be caused by a dishonest exporter of
pharmaceuticals is extreme. Proper regulation and enforcement
are both needed if parallel trade in medicines is to be safe
and a clear distinction needs to be made between the writing of
legislation and the practical enforcement of those regulations.
I can say this. It is clear that some of those who are
actively seeking to supply, and indeed are now supplying, the
U.S. market are dealing with foreign entities that are, known
or unknown to them, at least very questionable. Of that, I have
evidence.
Some cases of harm have already been recorded in the UK and
in the United States. On record, you have cases that involve
organized crime in the UK and organized crime in the United
States, and I talked about an explosion in the UK of organized
crime. The cases that you will see, in fact, only involve
international organized crime and some link the UK to the
U.S.A. in that regard.
The UK's National Criminal Intelligence Service recognizes
the threat--and has done so for 2 or 3 years--that comes from
pharmaceutical counterfeiting, and that is reflected also,
actually, in the most recent reports of Interpol. So both
Interpol and the UK's own National Criminal Intelligence
Service recognize the threats.
There have been cases last year in the UK of Cialis and
Reductil both being counterfeited and smuggled into the
legitimate chain. The method of getting those products into the
innocent hands of distributors in the UK was via parallel
trade. In fact, we can go back a number of years. I can go back
7 or 8 years to cases involving parallel trade in Italy, where
certain GlaxoSmithKline products were actually counterfeited by
members of the Cammora, a Naples crime gang, and then smuggled
on more than one occasion into UK for distribution.
So there have been a number of significant cases over the
years, but it is true to say that there has been a great deal
of reluctance to put those cases into the public eye. I don't
know why that is, but they are there on the record if you
looked for them.
The Chairman. Thank you.
[The prepared statement of Mr. Satchwell follows:]
Prepared Statement of Graham Satchwell
Mr. Chairman and members of the committee, I have been asked to
comment on the safety of the drug supply from what has been termed,
``permitted countries'' (as defined) and whether it is possible, given
the experience of parallel trade within the EU, to truly limit
importation to these ``permitted countries.''
I understand that under the Bill importation will be allowed,
subject to the importation of drugs to the United States not adversely
affecting public health.
Perhaps I should first tell you why I think I have been asked to
contribute to this discussion. I have been involved in the business of
investigating counterfeiting and other intellectual property crime, and
its links to organised crime for many years.
In addition--
In 2004, on behalf of the Stockholm Network, a European
based organisation, I completed the writing of a book entitled ``A Sick
Business--Counterfeit Medicines & Organised Crime.'' It has been widely
reported upon and Interpol have asked to link it to their Internet
site.
I am a member of UK Government's Patent Office
Investigative Strategy Group.
For several years to 1999, I was the official spokesperson
(on counterfeiting of branded goods) for Association of Chief Police
Officers (ACPO) England & Wales.
Prior to leaving the Police Service I received personal
thanks from four HMG Ministers. I was a detective superintendent for
many years in the UK; those thanks included comments from the UK Trade
& Industry Secretary in relation to work in anti-counterfeiting of
branded goods.
During my investigative work I have been officially
commended by HM Judges, chief constables, the Director of Public
Prosecutions and The Lord Lieutenant of London for successful major
investigations.
I have successfully led international and politically
sensitive major corporate investigations into counterfeiting, illegal
diversion and fraud including the massive re-importation of anti-
retroviral drugs from Africa to Europe.
I was the chief architect and author of the 1999 UK
``Memorandum of Understanding`` between all police forces in UK,
Customs authorities and other law enforcement agencies, brand-owners
and industry groups on the investigation of counterfeiting of branded
goods.
For 3 years I was Director of Security (Europe, Middle
East & Africa) for GlaxoSmithKline and took the lead on anti-
counterfeiting and unlawful diversion.
Three years ago I created and led an anti-counterfeiting
investigative forum in Europe involving the world's leading
pharmaceutical companies.
Between 1994 & 1999 I was the Metropolitan Police ``Joint
Action Group'' leader in relation to counterfeiting of branded goods.
I am currently providing both anti-counterfeiting and
diversion strategic input and operational results to several major
corporations and doing research into these subjects for another book on
the same subject.
I have had items published on counterfeiting, diversion
and other crime issues in UK and U.S.A.
I should also mention that I am an Honours Law Graduate.
It is about 10 years since the first case involving counterfeit
pharmaceuticals came my way. I have specialised in that area for the
last 4 years.
It was about 3 years ago that I first developed an interest in the
supplies of pharmaceutical products being advertised on the Internet
and purporting to come from Canada primarily to serve the U.S market.
I would like to preface my comments by saying that I am in favour
of parallel trade. It seems to me right and fair that those who suffer
from the highest prices (U.S.A. and Northern Europe) should be able to
enter into free-trade with those in less developed countries, to the
benefit of both parties and as a result of the differentiation in
pricing structures which are imposed.
However, it seems to me to be abundantly clear that in matters such
as medicine, special care needs to be taken. It is one thing to buy
substandard footwear but quite another to take substandard and
potentially life-threatening or life-damaging medicines.
I have read from time to time comments such as, ``it can be
difficult for the layman to identify counterfeit drugs'' or ``it would
need a trained doctor to examine the package to know whether the drugs
were genuine.'' Such comments completely miss the point and show a lack
of experience in handling counterfeit medicines.
The truth is that counterfeit medicines often appear so like the
genuine product that no one, not the best specialist can tell the
genuine packaging from the counterfeit. And no one, not the best
specialist can tell the genuine product from the counterfeit unless the
product is subjected to chemical analysis. The result is that everyone,
poor, ignorant, rich and smart, all are at risk from counterfeit or
substandard products--and they probably won't recognise them when they
and if they see them.
Counterfeiters and dealers in substandard medicines do not target
particular medicines that we might call ``life-style drugs'' (such as
``erectile dysfunction,'' or ``slimming'' products or ``steroids'')
they simply act in their own best commercial interests--they target big
selling drugs. A little research into the proportion of the world's top
selling drugs illustrates the point perfectly--most have been
counterfeited. The threat is therefore neither restricted to those of a
certain income, intelligence, nor illness suffered.
The Internet provides an unstoppable market that can, and is, taken
advantage of by private and commercial purchasers of firearms,
narcotics, pornography, fraudulent deals and all sorts of consumer
goods. It cannot be stopped nor easily regulated. Governments make
increasing resources available to control the adverse elements of
online trading and given that individuals in the U.S.A., UK and
elsewhere will buy access to goods and services that are harmful to
themselves and others, it is apparent that the Internet market needs to
be regulated like any conventional one. Of course such regulation must
be commensurate with the level of harm that the particular transaction
could be expected to cause.
I have read the draft bill and there are many aspects that I am not
competent to comment upon. However, I notice that an important
distinction is made between the private individual buyer and the
commercial importer; the former risks harming himself, the latter risks
harming many others. It seems obvious that regulations on business-to-
business transactions should be much more tightly controlled. Thus it
is surprising that S. 334 attempts to build a regulatory framework for
commercial drug importation via domestic importers and their contracts
with foreign companies.
You have invited my specific comments on the safety of the drug
supply from those ``permitted'' countries and whether it is possible,
given parallel trade within the EU, to truly limit importation to these
``permitted countries.'' Based on my experience, I have concluded that
the regulatory framework as described in this proposal will not afford
your citizens the protections they currently enjoy. As it stands, S.
334 does not afford confidence that a drug from a ``permitted country''
will have originated there or have been subject to appropriate
regulation.
It seems to me that there are two particular issues that this
committee will be considering that I might be able to assist with; the
experience gained from parallel train of medicines within the Europe
Community; and second, what this experience tells us about how the
supply from countries outside of the EEC impacts on this more highly
regulated community.
The UK now receives some 140 million parallel traded medicines per
annum. This is more than 20 percent of the entire consumption of the
British National Health Service. The UK receives much more parallel
traded product than any other European country; the reason is obvious--
the UK is an expensive market in which parallel traded goods offer the
best return for any European importer.
Have there been any problems as a result of this trade? There have
been many, and there is now a growing awareness of their significance.
Currently the UK Serious Fraud Office (A British Government Agency) is
conducting a truly massive investigation into the activities of those
responsible for the sale of generics to the UK National Health Service,
some of those are involved in parallel trade.
The MHRA has recently admitted a problem with counterfeit
medicines. Parallel traded medicines are a proven method of introducing
counterfeit and other sub-standard medicines into the distribution
chain.
The difficulties surrounding parallel trade arise as a result of
several factors:
The very necessary requirements that medicines marketed in
Britain must be packaged in the English language and contain a patient
information leaflet in English language--the repackaging of branded
goods that follows that requirement (Parallel traded goods will be
printed in Spanish or Greek or other language).
Repackaging standards are not uniformly high and Patient
Safety Groups in UK provide many examples of patients being dispensed
medicines that ``don't look right'' or have accompanying patient
information that is incomplete, dangerously translated or otherwise
different in effect.
Repackaging is often conducted in the exporting country or
some intermediate country. In such cases the UK regulators are blind to
the conditions under which these processes are conducted.
Repackaging is labour intensive. It is often not a
mechanised process. The result is that repackaging is often done in
those countries with the cheapest labour. It is just such countries of
course that often cannot afford proper regulatory control, spend least
on hygiene, and frankly, worry least about U.S. or UK concerns.
Wrappings are taken off, blister packs emptied by hand or
cut up (A month's supply in Continental Europe is usually 30 days
worth, in UK a month's supply is 28 days worth, traders regularly
manually remove 2 days supply from each 30 and put them by to create
further packs).
One survey in 2004 revealed that of 300 parallel traded
medicines examined, 25 percent should have failed on ``safety
reasons,'' 50 percent because of poor quality of product. In addition,
80 percent failed on legal grounds such as IPR infringement.
Part of the repackaging process involves the removal of
the product from the brand owners packaging including batch numbering
and anti-counterfeiting features. This in itself provides an ideal
opportunity for sub-standard medicine, counterfeit or otherwise to
enter the chain.
Of course much parallel trade and repackaging is conducted
in properly, according to the law. However, in reality, those who
choose to buy out of date, counterfeit or otherwise substandard
medicines and to have them repackaged or stored in totally
inappropriate conditions, can do so in Europe with very low risk of
detection.
One potential risk that has not been adequately researched
on either side of the Atlantic, is the potential for counterfeiters to
copy lawfully repackaged product. This is a low cost and perhaps the
most anonymous method of introducing counterfeit in the chain with
lowest risk of detection.
Another very serious concern is to establish that drugs have been
distributed legitimately from verified sources.
First and foremost, how can a parallel trader trust the bona fides
of the trader from whom he purchased his product? If a UK parallel
trader wishes to buy from another European dealer then he must first
ensure that that foreign dealer is licensed within his own country. The
mechanism for doing so is sloppy. It is not sloppy only in UK but
elsewhere in Europe.
Currently the UK dealer might receive an unsolicited e-mail from a
business which advertises a particular drug at an attractive price. The
UK dealer might e-mail back and a price be agreed. The UK dealer should
then ensure that the seller is licensed. He will therefore ask for
evidence from the seller. The seller will then fax or post a document
that purports to be a licence to conduct such trade. There is no one
European body with which the UK dealer can verify his sellers'
credentials, and the UK regulatory authority do not see it as their
duty.
It should be no surprise that this is seen as something of a
loophole. It is impossible for a UK dealer to be aware of the origin of
the product in his warehouse. He might have been told that it
originated from Greece, but in Greece it could easily have been
repackaged from India or Pakistan or China.
In the course of my work I have myself negotiated to buy
counterfeit medicines from China, Germany, Poland, India, Pakistan and
other countries. It is extremely easy for anyone to find a foreign
party willing to counterfeit medicines (without active ingredients) and
present those medicines in packaging that will easily pass as genuine.
This is not hypothetical. There have been well-publicised cases in
U.S.A. and UK to illustrate the point. In the U.S.A. the recent Lipitor
case is but one example amongst many. You will recall that one of the
several defendants in that case was a convicted cocaine dealer.
Parallel trade in its current form provides ideal opportunities for the
unscrupulous. In the UK in 2004 there were several counterfeiting cases
but the most informative were those involving the medicines Reductil
and Cialis. Counterfeited products entered the legitimate distribution
chain in Holland and were shipped to UK dealers for onward sale into
the (innocent) market.
Parallel trade in Europe has led to a situation where medicines
often change hands more than 20 times before reaching the dispensary.
They are manufactured in one country, shipped to the country in which
they were intended to be marketed, bought and sold from there by
wholesalers and then into the parallel trade market where they
typically pass through many hands into the more expensive markets and
then frequently moved on again.
No doubt the creation and use of such a long distribution chain is
often in itself innocent, but it makes product recall extremely
difficult; the manufacturer and regulatory authorities do not and
cannot know where the relevant batch is. In addition, such long and
convoluted distribution exposes medicines to the increased likelihood
of inappropriate storage, provides anonymity for those at the top of
the chain, and gives an easy excuse for those downstream should the
goods prove substandard (they claim not to know of their origin and
movements).
Product recall is of course a vital patient safety issue. In the UK
it is currently not working properly and I have no reason to think that
things are much better elsewhere in Europe. Apart from the problems
that arise from repackaging, we simply do not have a system that can
cope with having so many different bodies holding medicines from so
many other bodies. Currently, if there is a product recall then a
notice is faxed by the MHRA to amongst others primary health trusts, to
those listed as having imported the batch if indeed it is a batch
rather than whole product issue. However, the overwhelming number of
wholesalers and parallel traders are not advised. In a very fluid
market such as has been created in pharmaceuticals, this means that
those who are in possession of what has become ``unsaleable'' stock are
able, innocently or otherwise, to sell it forward to innocent
recipients. Following a product recall in UK last year, incidents
occurred where chemists attempted to sell products that had been
subject to official recall.
Like any profession, lawyer, policeman, stevedore, parallel trader,
there is a dishonest element. The harm that can be caused by a
dishonest importer of pharmaceuticals is extreme. Proper regulation and
enforcement are both needed if parallel trade in medicines is to be
safe. But a clear distinction needs to be made between the writing of
legislation (and regulations) and the practical enforcement of the
same.
In the UK there are adequate regulations, these are more or less
mirrored across the E.U. However, the matter of enforcement of those
regulations is another matter. It must be extremely difficult to
adequately ``police'' parallel trade, and the movement of such products
within the UK, when the number of licences issued has increased tenfold
in 10 years (from 300 to 3000) without any corresponding increase in
staff. It currently takes about 18 months to obtain a parallel trade
licence. You can imagine the opportunity that this small regulatory
agency has to conduct audits on premises (without notice).
Your much larger country will I believe, because of the
attractiveness of the U.S. market (both size and cost), face an even
more formidable challenge. Without a good number of regulators and
inspectors on European soil, it is impossible to conclude that the
United States will be able to do any meaningful verifications of drug
pedigree, much less in Japan, Australia, New Zealand, or other
``permitted countries.''
Before the commercial importation is permitted, I strongly urge you
to weigh your confidence that you have created and funded a system that
not only provides adequate measures to restrict the type of person who
can be involved in the supply of those drugs, restricts involvement of
particular businesses (by providing criteria for licensing and minimum
operating standards), the country of origin of drugs, but also provides
adequate inspection and enforcement provisions. Simply relying on the
fact that the drugs have come from a European (or permitted country)
dealer will not do that.
There is of course great difficulty in relation to enforcement.
Importers in U.S.A., should they receive counterfeit or substandard
product will no doubt (honestly or otherwise) claim that they had no
idea that the goods were other than genuine. It will be for the public
authorities to show a guilty mind. The same defence will be offered by
those who export from abroad, out of reach of U.S. regulators. Reliance
on the law of contract will only extend to ``parties to the contract.''
That is hardly sufficient within a complex and lengthy distribution
chain, abroad.
In many countries, including the UK, the involvement of major law
enforcement agencies (as opposed to regulatory ones) is something that
can be achieved--though it has been only rarely and invariably after
the fact. The setting up of thorough investigations after
counterfeiting incidents is not a satisfactory means to protect public
health, neither will the law of contract (with foreign companies)
enforce public safety in the U.S.A. Stronger measures are needed to
prevent counterfeiting incidents.
Of course it is impossible to consider the issue of S. 334 without
thinking about ``Online'' sales from Canada. It is a vital experience
upon which to call. The opportunities to make a fast buck from the
Canadian online pharmaceutical business were quickly pursued by both
legitimate businessmen and others. More than 2 years ago advertisements
were placed on the Web purporting to come from Canada and yet when
drugs were ordered they frequently came from Malaysia, Vanuatu or
Eastern Europe. Rates of counterfeiting in such places are high, but
that aside, the likelihood of drugs being time-expired or incorrectly
stored are extremely high.
I have maintained an interest in this issue and it is clear that
some of those who are actively seeking to supply, and indeed now
actively supplying the U.S. market are dealing with foreign entities
that are, known or unknown to them, at the very least questionable. Of
that I have clear evidence.
Even now some Online Canadian business to business traders are
actively advertising to supply pharmaceuticals from India and
elsewhere.
The pharmaceuticals market is of course a huge one and will no
doubt continue to increase. There are fortunes to be made, and I can
understand why there is a push toward this type of legislation in order
to reduce the cost of drugs to the U.S. consumer.
I have often been asked, Why should the industrialized world worry
about drug distribution issues when so few people appear to be hurt by
them? To an increasing extent the developed world is becoming more
aware of the dangers that counterfeit and other substandard medicines.
Cases of harm in the U.S.A. have been recorded. However, if one looks
at the global picture it is clear that tens of thousands of people die
annually from using such medicines. Those who perpetrate such crime do
so for one reason--money. Providing substandard medicines is not a race
crime, there is no reason to believe that those who kill those in the
developing world by these means would think any more of taking American
or European lives, indeed the opposite might be true.
Very often counterfeit drugs contain some active ingredient but in
lower dosage, or contain an alternative active, in both cases the user
of those drugs might suffer gradual deterioration of health as the
disease overcomes the lesser treatment. The results might be simply
greater suffering or death. No one knows, and there is little chance of
finding out.
The UK's Criminal Intelligence Service recognises these threats, so
too does Interpol.
It has only been 5 months since I published (via the Stockholm
Network) my book on this subject, and there has been a great deal of
interest since. Still however, despite all the evidence some people
fail to see the potential for widespread harm. For those who wish to
see the dangers, they are clear. Those who call upon Europe in support
of allowing easier access to the U.S. market ignore the evidence most
blatantly.
Before legislation is introduced in the U.S.A., given the potential
for serious public harm, it is fundamentally important that the risks
are fully understood and weighed, and then an importation system
designed and properly policed in order to achieve and maintain
compliance. I would most strenuously recommend that you consider
establishing an international framework with regulators, law
enforcement, and public health officials of the ``permitted countries''
in order to establish a system that affords adequate protection.
The Chairman. Dr. Cecil.
STATEMENT OF TODD CECIL, VICE PRESIDENT OF STANDARDS
DEVELOPMENT, UNITED STATES PHARMACOPEIA, ROCKVILLE, MD
Mr. Cecil. Good morning, Mr. Chairman and members of the
committee. I am Dr. Cecil. I am a chemist, and I am the Vice
President of Standards Development, USP----
The Chairman. Microphone again. Is the little light on? If
the light is on, then you have it on.
Mr. Cecil. It is on.
The Chairman. Thank you.
Mr. Cecil. In consideration of time, I will be brief. USP
is a not-for-profit group that develops standards, chemical
standards, for comparison and control of drug substances and
drug products in the United States and is written into law in a
number of different places. We want to talk about three major
key principle components that we want you to look at. One is
public standards. The second is pharmaceutical equivalents. And
the third is bioequivalents, and let me skip on.
Based on USP's experience and long history ensuring
consistency and quality of drugs, we have the following
observations.
First, USP believes that any medicine imported without the
benefit of the submission of a New Drug Application, or BLA,
Biologics Licensing Application, or an ANDA, an Abbreviated New
Drug Application, to FDA and subsequent agency review must
conform to a USP-NF monograph. Lacking this conformity, the
imported medicine should indicate where it differs from the
public standard and should state so clearly on the label. The
science and regulatory basis for these requirements is the
foundation for ensuring quality drugs in the United States and
has been for over 185 years.
USP believes that the success of any drug importation
program implemented in the United States must recognize the
critical role of public standards and required adherence to the
official U.S. compendia, that is the USP-NF. Adherence to the
public standard in the USP-NF can achieve, via testing to the
standard of a monograph or the use of USP reference standards,
the consistency and uniformity sought by the initial founders
of USP in 1820 and equally critical today in ensuring good
quality pharmaceutical care.
Second, through intense science-based deliberations on the
part of the USP, the FDA, and the manufacturers, the United
States has led the world in considering various issues of
bioequivalence for over 50 years. This consideration has many
origins, but it certainly began in part to the failure of
tablets containing cardiac glycosides, digitalis and its
congeners, in the early 1970s. These issues led to national
efforts to better define bioequivalence and determine
appropriate procedures for assessment.
In the United States, the Congressional Office of
Technology Assessment, or OTA, issued a key report in 1974.
Many recommendations of the OTA report were subsequently
adopted by the FDA and were published in 1977 as regulation.
These regulations set the stage for passage of the 1984 Drug
Price Competition and Patent Term Restoration Amendments to the
FDCA, which established the comprehensive system of
interchangeable, multi-source products in the United States.
Following these major scientific and legislative advances,
FDA published a number of guidances that further addressed the
many and various complicated bioanalytical and bioequivalent
studies that may be needed for both the pioneer and certainly
for the generic manufacturers to allow market access. The end
result of these science and legal endeavors is a coherent
system of interchangeable pharmaceutical dosage forms.
The USP requests that Congress consider carefully whether
this multi-decade effort, beginning through substantial
marketplace problems and moving to Congressional action through
the OTA, can be assumed to have occurred in other countries.
The U.S. regulatory, academic, and manufacturing communities
have worked to great mutual benefit with their counterparts in
other countries. However, these collaborative efforts, no
matter how successful, do not guarantee the regulatory systems
of other countries will impose the same rigor of bioequivalence
that does the FDA.
And third, the USP believes that drug importation programs
should carefully consider public health impact of allowing
dosage forms from other markets in the treatment of patients
and consumers in the United States. Bioequivalence is a
concept. It is not just a single clinical study performed by a
generic applicant as part of documentation required for an
ANDA. Rather, it is a complicated science and policy approach
that requires equivalent performance between multiple
iterations of both the pioneer and, at the appropriate time,
interchangeable multi-source generic products. Both pioneer and
generic manufacturers are required under law to initially
establish bioequivalence and then assure continuing
bioequivalence through careful post-approval changes--change
control, pardon me.
USP wishes to emphasize the importance of the pre- and
post-approval change control to patient health. In today's
environment, where appropriate health care cost control is
critical, substantiation of therapeutically equivalent dose
forms can occur frequently as health care systems and
practitioners try to achieve the most efficient treatment at
the lowest cost.
Given the strength of the FDA regulatory system, patients
and their practitioners can be reasonably assured that the
patient is getting the same medication time after time and dose
after dose. Introducing a dosage form for another market has
the possibility of substantially disturbing the finely tuned
equilibrium, so that without some assurance of bioequivalence,
the participating patient would have no way of knowing that the
patient is receiving a therapeutically equivalent dosage form.
USP looks forward to working with Congress and other
stakeholders in ongoing work in this area, and I would like to
thank Mr. Chairman and members of the committee for allowing us
this opportunity to speak to you.
The Chairman. Thank you.
[The prepared statement of Mr. Cecil follows:]
Prepared Statement of Todd Cecil, Ph.D.
I. Introduction
The United States Pharmacopeia (USP) is a private not-for-profit
organization whose mission is to promote the public health by
establishing and disseminating officially recognized standards to
ensure the quality of medicines and other health care products. USP
achieves its mission through the contribution of volunteers
representing, pharmacy, medicine, and other health care professions, as
well as science, academia, the U.S. Government, the pharmaceutical
industry, and consumer organizations.
USP was created in 1820 by practitioners who wished to promote the
quality of therapeutic products. The first pharmacopeia was published
in 1820 and began as a ``recipe'' book to promote uniformity in drugs
(a drug includes its active ingredient(s) and excipients) that were
generally available in the United States at that time. Prior to the
publication of the first pharmacopeia, the quality of drugs varied
between cities and regions. The practitioners recognized that by
setting public standards for drug products, they would help ensure the
consistency and quality of drugs used in this country.
Ensuring drug quality through public standards remains USP's core
mission. Today, USP's drug standards are developed by its Council of
Experts and Expert Committees, a group of 650 nationally and
internationally recognized scientists and practitioners in medicine,
pharmacy, the pharmaceutical sciences and many other healthcare
professions. USP's standards are widely recognized in the United States
and elsewhere because they are authoritative, science-based and
developed through a transparent and credible process with established
integrity.
USP's standards are made public through the United States
Pharmacopeia (USP) and the National Formulary (NF). Together the two
compendia are published as a combined text annually (USP-NF) with two
Supplements. Originally a book of process standards (recipes for
preparations), USP-NF evolved over time into compendia containing
primarily product standards. These standards are expressed in public
monographs for drug substances, excipients, dosage forms and other
articles, and in General Chapters, which are dedicated to procedures
widely used throughout the compendia. The USP-NF monographs contain
specifications (tests, procedures, and acceptance criteria) that help
ensure the strength, quality, and purity of the named items. The
purpose of the USP-NF is to provide a single standard for medicines
used in the United States to ensure product uniformity and quality.
Closely allied with public monographs in USP-NF, and equally
important in many respects, is the availability of an official USP
Reference Standard. USP Reference Standards are chemical substances
used by the pharmaceutical industry to test conformity to the USP-NF.
USP Reference Standards are highly characterized chemical materials
used in quality control laboratories to carry out tests for strength,
quality, and purity described in the USP-NF. USP Reference Standards
and USP-NF monographs are complementary tools to ensure these critical
attributes for pharmaceutical substances and products.
Over the years, Congress has relied on USP on many occasions and
has repeatedly recognized USP's expertise as a standard-setting
organization. Initially, in the Import Drug Act of 1848, Congress
turned to USP for public standards for imported medicines. Today,
principal recognition occurs as a result of Congress' recognition of
the USP-NF as official compendia of the United States. The Federal
Food, Drug, and Cosmetic Act (FDCA) makes the official compendia, the
USP-NF, enforceable by the Food and Drug Administration (FDA).
For over 185 years, USP's activities have supported the
availability of safe, effective, good quality therapeutic products for
patients and consumers. USP believes it can play a leading and helpful
role, working with this committee and Congress, the Federal Government,
and other relevant organizations and stakeholders, in evaluating the
scientific issues surrounding drug importation and continuing to help
ensure the availability of safe, effective, good quality therapeutic
products.
II. Science Issues
USP commends Congress for its efforts in attempting to address the
issues of drug importation and acknowledging the important role science
has in helping ensure that the importation of drugs to the United
States will not adversely affect public health. The issue surrounding
drug importation calls into question many scientific issues that merit
full consideration. This testimony will discuss two science issues--
pharmaceutical equivalence and bioequivalence--that USP believes are
key considerations in allowing importation of drugs into the United
States. USP will also address the need for public standards and the
public health impact that imported drugs may have on patients and
consumers.
A. Public Monographs in USP-NF and Official USP Reference Standards
USP believes that any medicine imported without benefit of
submission of a New Drug Application (NDA), Biologics Licensing
Application (BLA), or Abbreviated New Drug Application (ANDA) to FDA
and subsequent Agency review must conform to a USP-NF monograph both
for its ingredients, including and most importantly the drug substance
and the dosage form. Lacking this conformity, the imported medicine
should indicate how it differs and should so state clearly on the
label. The general approach accords with the FDCA, which states that a
drug shall be deemed to be adulterated if it purports to be or is
represented as a drug, the name of which is recognized in an official
compendium and its strength differs from, or its quality or purity
falls below, the standards set forth in such compendium. Such
determination regarding strength, quality, or purity shall be made in
accordance with the tests or methods of assay set forth in such
compendium.
The science and regulatory basis for these requirements is the
foundation for ensuring quality drugs in the United States and has been
for over 185 years. Specifically, in the Import Drug Act of 1848, the
U.S. Government turned to the United States Pharmacopeia for public
standards for imported medicines. With passage of the Pure Food and
Drug Act in 1906 and in the following almost 100 years, USP has
provided public monographs for ingredients and dosage forms, working
collaboratively with the FDA and manufacturers of medicines legally
marketed in the United States. With passage of the Federal Food, Drug
and Cosmetic Act in 1938, USP and subsequently NF were named as
official compendia of the United States.
The USP science-based and public process for developing an official
monograph for the USP-NF and official USP Reference Standards is a well
evolved system that works in concert with efforts of U.S. manufacturers
and the FDA to assure the public trust. Speaking simply, the public
monograph in the USP-NF for a dosage form and its ingredients is the
public Quality document, which allies with the Safety and Efficacy
information expressed in product labeling. In offering a USP-NF
monograph and, where needed, official USP Reference Standard, USP is
part of a comprehensive quality system that helps assure practitioners
and patients--and the public at large--that a medicine is ``fit for
purpose,'' i.e., is safe and/or effective in the maintenance of health
and treatment of disease. Testing to a public monograph in USP-NF
supports the Nation's historical objective, through many laws and
through actions of FDA itself, in ensuring the identity of an article
via the test procedures and other standards of the monograph,
regardless of who is manufacturing the article, who is testing it, and
when or where it is tested.
In establishing a drug importation program, it is critical for the
U.S. Government and other independent testing laboratories to have the
capability to test the medicine and its ingredients. The most
transparent and effective way this testing can be achieved is via a
public monograph in USP-NF, allied with an official USP Reference
Standard when needed. Without this capability, the U.S. will ultimately
be relying on testimonials from manufacturers vending their products in
other countries or on private and/or public specifications that have
not undergone the stringent analytical processes conducted either by
FDA or USP.
The USP-NF has for 185 years provided public standards for
medicines. These standards provide information on the quality,
strength, and purity of the ingredient or product and ensure
consistency in the medicines taken by the public. USP feels strongly
that the success of any drug importation program implemented in the
United States must recognize the critical role of public standards and
require adherence to the official U.S. compendia--the USP-NF. Adherence
to the public standards in the USP-NF can achieve, via testing to the
standards of a monograph and with the use of USP Reference Standards,
the consistency and uniformity sought by the initial founders of USP in
1820. The failure of such recognition will result in the lack of
consistency and uniformity that existed prior to 1820.
B. Pharmaceutical Equivalence
A critical part of the legislation speaks to the definition of
pharmaceutical equivalence (PE). The definition alludes to when the
drug substance in two duplicate dosage forms is the same or not.
Assurance of ``sameness'' can be readily demonstrated through
conformance to a modern monograph in USP-NF. Thus, if the drug
substance meets the specification (tests, analytical procedures, and
acceptance criteria) specified in the monograph, its identity is
established, irrespective of the source of the drug substance, and
pharmaceutical equivalence for this specific substance is established.
A modern monograph in USP-NF must account for important
characteristics of the drug substance and its impact on safety and
efficacy. The drug substance includes impurities and physical
characteristics such as particle size. The active pharmaceutical
ingredient (API) is itself only one component in the drug substance.
Furthermore, the API can take on many forms that at times affect--
``dramatically''--the safety and efficacy of the dosage form containing
the drug substance. The active pharmaceutical ingredient may differ in
terms of crystalline form (different arrangements and/or conformations
of the molecules in the crystal lattice), amorphous forms (disordered
arrangements of molecules that do not possess a distinguishable crystal
lattice), and solvates (crystal forms containing either stoichiometric
or nonstoichiometric amounts of a solvent, such as water). Critical
risks to public health have arisen based on U.S. experience for
virtually all these important characteristics of the drug substance.
These risks have related to both sub- and super-potency, risk from
impurities, risk from changes in polymorphic form, and risk from change
in particle size. Although less well studied, many of these risks are
likely to extend to a dosage form's excipients, given that these
ingredients frequently form the major part of a dosage form.
C. Bioequivalence
Through intense science-based deliberations on the part of USP,
FDA, and manufacturers, the United States has led the world in
considering the various issues of bioequivalence (BE) for over 50
years. This consideration has many origins, but it began in part with
failure of tablets containing cardiac glycosides (digitalis and its
congeners) in the early 1970's. These issues led to national efforts to
define BE and to determine appropriate procedures for assessment. In
the United States, the Congressional Office of Technology Assessment
issued a key report on July 15, 1974 (OTA Report). The OTA Report
recommended the importance of bioavailability and bioequivalence
studies and indicated further steps to ensure that this information
became part of the drug development and regulatory processes. Many
recommendations of the OTA Report were subsequently adopted by FDA and
were published in 1977 as regulations entitled Part 320-Bioavailability
and Bioequivalence Requirements, which contain Subparts A (General
Provisions) and B (Procedures for Determining the Bioavailability or
Bioequivalence of Drug Products). These regulations were themselves a
seminal event and have stood the test of time, with only minor
revisions, and have established firmly the general approach to assuring
PE and BE for all dosage forms over time. The regulations set the stage
for the passage of the 1984 Drug Price Competition and Patent Term
Restoration amendments to the FDCA, which established a comprehensive
system of interchangeable multi-source products in the U.S. This
legislation has also stood the test of time, again undergoing only
relatively minor revisions.
Following on to these major scientific and legislative advances,
FDA expended considerable energies in the 1990's and thereafter to come
to a better understanding of how to document interchangeability for
many different types of ingredients and dosage forms. The general
approach is established in FDA guidances that address the many and
various complicated bioavailability and bioequivalence studies that may
be needed both for the pioneer and certainly for the generic
manufacturer to allow market access. They ally with the scale up and
post approval change (SUPAC) documents created by FDA in the same
timeframe. While this work is incomplete, it remains a beacon to the
world on the information needed to assure a system of fully
interchangeable pioneer and generic dosage forms.
The end result of both these seminal scientific and legislative
endeavors discussed above is a coherent system of interchangeable
pharmaceutical dosage forms. This system has worked to great success,
based on sound legislative, regulatory, and scientific approaches
involving a broad constellation of stakeholders. USP requests Congress
to consider carefully whether this multi-decade effort, beginning with
substantial marketplace problems and moving to Congressional action
through the Office of Technology Assessment, can be assumed to have
occurred in other countries. The U.S. regulatory, academic, and
manufacturing communities have worked to great mutual benefit with
their counterparts in other countries. However, these collaborative
efforts, no matter how successful, do not guarantee that regulatory
systems in other countries impose the same rigor for bioequivalence as
does the FDA.
D. Patient Care Issues
USP believes that any drug importation program should carefully
consider the public impact of allowing dosage forms from other markets
in the treatment of U.S. patients and consumers. Bioequivalence as a
concept is not just a single clinical study performed by a generic
applicant as part of the documentation required in an ANDA. Rather it
is a complicated science and policy approach that requires equivalent
performance between multiple iterations of both a pioneer and, at the
appropriate time, interchangeable multi-source generic products. Thus,
bioequivalence per se exists as a challenge that must be documented for
dosage form continuously throughout the life of any medicine
irrespective of the company that is manufacturing it. To gain a glimpse
of the general challenge, USP wishes to review briefly an entire and
comprehensive series of pre- and post-market series of regulatory and
compendial controls.
(i) Pre- and Post-Market Change Control
For the first-entry pioneer manufacturer, a careful series of
approaches are needed to assure that the clinical trial material on
which safety and efficacy are based is equivalent to the to-be-marketed
dosage form. This is a highly resource intensive enterprise executed by
U.S. innovator companies who must satisfy FDA requirements for careful
product development in a regulatory filing. Many laws, regulations, and
guidances provide specific and detailed requirements and
recommendations for a pioneer manufacturer in this endeavor. It is a
risk based approach that can intensify even for relatively simple,
orally administered dosage forms, depending on the complexity of the
drug substance--the active pharmaceutic ingredient, excipients, and the
dosage form itself.
After approval, the NDA holder must provide continuing assurance to
FDA that the approved dosage form remains both pharmaceutically
equivalent and bioequivalent to the originally marketed dosage form--
even in the presence of multiple changes in method of manufacturing,
components, and composition. These same approaches are also critical
for U.S. generic manufacturers who have, in principle, the same
requirements to initially establish bioequivalence and then assure
continuing bioequivalence through careful post-approval change control.
Compliance with the general requirements for both pioneer and generic
manufacturers over time is a daunting task. The general manufacturing
and regulatory set of approaches even now, after many years of study,
is not fully resolved for all dosage forms. Below is a chart that sets
forth the science and regulatory process for drug approval (Figure
One).
While much remains to be done in this area, USP commends FDA and
the U.S. pharmaceutical industry for coming to a much clearer
understanding of how to assure, in the presence of pre- and post-
approval change, stable quality and performance characteristics of a
dosage form and its ingredients over time. These tasks are critical to
the U.S. patient and the consumer. The U.S. Congress itself emphasized
the importance of post-approval change control with passage of the Food
and Drug Administration Modernization Act in 1997, which legislates
three types of changes and the need for associated filing requirements.
This legislation was subsequently adopted by FDA in changes in
regulation at 21 CFR 314.70 and associated regulatory guidance. This
important legislation followed on to the FDA's careful delineation of
the types of information needed by dosage form in the presence of
certain changes (SUPAC documents). Again while much more work needs to
be done, the SUPAC documents and the FDA's subsequent revisions of both
regulation and guidance put the United States and FDA and its regulated
industry in the forefront of post-approval change control.
USP has a long and honorable history of supporting approaches that
assure optimal dosage form performance. This is expressed most
prominently in the USP dosage form monograph, which frequently includes
a performance test such as dissolution or disintegration. Dissolution
acceptance criteria are usually set in private negotiations between an
applicant and a regulatory agency. These subsequently can enter the
public dosage form monograph in USP-NF based on decisions of the USP
Council of Experts. Based on the relationship between the regulatory
decisions and information voluntarily submitted by a pharmaceutical
manufacturer to USP, the USP dissolution procedure links to the
regulatory judgment about bioavailability and bioequivalence and,
ultimately, to a judgment about safety and efficacy. For imported
medicines, conformance to a USP dissolution test would be critical to
an understanding of product performance.
(ii) Importance to the Patient
USP wishes to emphasize the importance of pre- and post-approval
change control to the patient and consumer. The U.S. system generally
allows interchangeability based on the ratings set forth in FDA's
Approved Drug Products with Therapeutic Equivalence (also known as the
``Orange Book''). The Orange Book identifies drug products approved on
the basis of safety and effectiveness by the FDA under the FDCA and
provides guidance on drug interchangability. This means that in all 50
states and territories, substitution of appropriately rated (e.g., AB
rated oral dosage forms) may occur at the pharmacy level. In today's
environment, where appropriate healthcare cost control is critical,
substitution of therapeutically equivalent dosage forms from one
manufacturer to another can occur frequently, as healthcare systems and
practitioners try to achieve the most effective treatment at the lowest
cost. In practice, this might mean that a patient would receive a
dosage form from many different manufacturers over the course of a
year's treatment. Given the strength of the U.S. system, this patient--
and his/her practitioner team--can be reasonably assured that the
patient is getting the same medication time after time and dose after
dose. But this assurance is based on FDA's rigorous control of both
pharmaceutical equivalence and bioequivalence through careful pre- and
post-approval change. Introducing a dosage form from another market has
the possibility of substantially disturbing this finely tuned
equilibrium so that, without some assurance of bioequivalence, the
practitioner and patient would have essentially no assurance that at
any point in time they were receiving a therapeutically equivalent
dosage form. For both the patient and practitioner, this is an
especially critical point. Health and disease have their own inherent
progression. Medicines are not like cars, where breakdowns are usually
readily apparent but rather may be attributed to the course of a
disease or other factors. This challenge in assessing causality impedes
understanding that absence of progress or unexpected toxicity may in
fact be attributed to the failure of a medicine.
Through careful safety, efficacy, and quality pre-market studies,
the U.S. system requires a pioneer to gain some understanding of the
dose/response relationship for a medicine. This dose/response
relationship allows the concept of a therapeutic window, as
demonstrated by the following figure (Figure Two).
The therapeutic window refers to the point at which efficacy begins
to be lost, if the dose administered is too low or too high or is
unacceptably toxic. A dosage form should deliver the same amount of
drug at the same rate to a patient with each dose time after time to
maintain optimal safety and efficacy. If a dosage form under- or over-
performs, as may happen with bioinequivalent products, then the optimal
safety/efficacy profile may be lost. It is important also to note that
concepts of bioequivalence and therapeutic equivalence are applicable
to the individual. Thus a patient/consumer must receive a dosage form
that reliably delivers the right amount of the drug at the right time,
day after day, in order to assure optimal safety and efficacy over
time.
Furthermore, while all regulatory systems produce drugs based on
population studies, the concept of generic substitution relates also to
the therapeutic window for a single patient. At this time we have
little or no understanding of this therapeutic window in an individual
or how it might change in different populations such as the elderly,
children, women, or the infirm. As a specific example, the therapeutic
window for a narrow therapeutic range drug such as warfarin might range
between 2 and 10 or more milligrams/day in the population. But in an
individual, such a wide dose range would produce intolerable loss of
efficacy, manifested in excessive coagulation, or unacceptable
toxicity, manifested by bleeding. Careful attention to bioequivalence
both within and between manufacturers is designed to prevent such
occurrences. Even small differences between bioinequivalent dosage
forms--in terms of amount of drug delivered and the rate at which is
delivered--can thus produce dangerous outcomes in individual patients.
Congress, FDA, USP, the pharmaceutical industry, and many other
stakeholders have been addressing the issue of bioequivalence and its
impact on patients for over 50 years in the United States. The result
is a vigorous regulatory process that provides reasonable assurances to
patients and practitioners. Any drug importation program must provide
patients and practitioners in the United States the equivalent
assurance in order to not to adversely impact public health. USP
believe that adherence to public standards in the USP-NF is one
mechanism to help achieve such assurances.
III. Conclusion
USP commends Congress for its efforts in attempting to address the
issues surrounding drug importation. USP looks forward to working with
Congress and other stakeholders in the ongoing effort to ensure that
patients and consumers are not adversely affected by the importation of
drugs into the United States. USP is ready to assist you by making
available our scientific expertise and experience. Specifically, USP
believes it can play a leading and helpful role, working with this
committee and Congress, the Federal Government, and other relevant
organizations and stakeholders, in evaluating the scientific issues
surrounding drug importation.
Thank you Mr. Chairman and members of the committee for providing
USP the opportunity to provide input on the scientific issues
surrounding drug importation.
______
Annex 1.--USP and its Public Health Mission
1. history
USP is a not-for-profit organization that was created in 1820 by 11
practitioners who wanted to promote the quality of therapeutic
products. The first pharmacopeia was published in the United States in
1820 and began as a ``recipe'' book to promote uniformity in drugs (a
drug includes its active ingredient(s) and excipients) that were
generally available in the United States at that time. Prior to the
publication of the first pharmacopeia, the quality of drugs varied
between cities and regions. The practitioners recognized that by
setting public standards for drug products, they would help ensure the
consistency and quality of drugs. Ensuring drug quality through public
standards remains USP's core mission.
2. volunteer based organization
USP's governing bodies include its Convention, which meets every 5
years, and a Board of Trustees, which provides direction to staff in
the years between Convention meetings. Standards-setting activities are
conducted by the USP Council of Experts. Membership in the Convention
(representing approximately 400 associations), on the Board (11 members
representing Convention constituencies), and on the Council and its
Expert Committees (approximately 650 members) is entirely voluntary. To
support the activities of these bodies, USP maintains a staff of
approximately 350 in its Rockville offices.
3. public monograph in the usp-nf and official usp reference standards
USP's drug standards are developed by its Council of Experts and
Expert Committees, a group of 650 nationally and internationally
recognized scientists and practitioners in medicine, pharmacy, the
pharmaceutical sciences and many other healthcare professions. USP's
standards are widely recognized in the United States and elsewhere
because they are authoritative, science-based and developed through a
transparent and credible process with established integrity.
USP provides standards for more than 4,000 prescription and non-
prescription drugs, dietary supplements, veterinary drugs, health care
product, and excipients. These standards are presented in a combined
text consisting of two compendia--the United States Pharmacopeia (USP),
to which the National Formulary (NF) was added in 1975. Together the
two compendia are published as a combined text annually (USP-NF) with
two Supplements.
USP's standards, which are presented in monograph form, contain
specifications (tests, procedures, and acceptance criteria) that help
ensure the strength, quality, and purity of the named articles. Closely
allied with public monograph in the USP-NF, and equally important in
many respects, is the availability of official USP Reference Standards.
USP Reference Standards (chemical specimens) are used in the
pharmaceutical industry to test conformity to such monograph standards.
USP provides approximately 1,750 USP Reference Standards that are
specifically required in many Pharmacopeial assays and tests.
USP's official Reference Standards are highly characterized
materials used in a quality control laboratory to carry out tests for
strength, quality, and purity described in the USP-NF. Such tests help
to determine whether a batch being released to the market conforms to
its USP-NF specification as required by law and will continue to
conform throughout its shelf life. The Reference Standards are
typically used to conduct the analytical procedures set forth in the
USP-NF.
USP Reference Standards also are used as calibrators--for
dissolution, particle count, melting point, and standardization of
titrants and as blanks and controls (negative control plastic, lanolin,
and methylcellulose). Reference Standards are used for measurements
required to obtain accurate and reproducible results in chromatographic
and spectrophotometric procedures. USP has Reference Standards for drug
substances, dosage forms, dietary supplements, excipients, impurities,
and degradation products, as well as performance calibrators.
4. reference standards development process
When USP identifies the need for a new Reference Standard (based on
monographs in the USP-NF that require its use), it requests bulk
materials from pharmaceutical manufacturers. USP subjects the candidate
materials it receives from manufacturers to rigorous analysis and
review. USP tests the materials in its own laboratories, and requests
collaborative testing by FDA and independent laboratories. The goal of
the collaborative testing is to confirm the identity and assess the
purity of the material, to confirm its homogeneity, to determine its
suitability for use in the official applications, to provide the user
with all the necessary information and directions for use, and to
acquire time-zero information for future continued-suitability-for-use
studies. USP compares and analyzes the results of this collaborative
testing and prepares a report for its Reference Standards Expert
Committee (RS-EC). The RS-EC comprises experts from industry,
government agencies, and academia from the United States and from
abroad. The RS-EC determines whether the candidate material is suitable
to be established as an official USP Reference Standard. USP Reference
Standards are established and released under the authority of the USP
Board of Trustees upon recommendation of the USP RS-EC.
5. public process
During the past 185 years, USP has played an important role in
developing standards for medicines, including drugs, devices,
biologicals, and dietary supplements. USP standards are developed and
continuously revised by a unique public process, involving expert
volunteers from academia, industry, government, trade associations, and
consumers, and are subject to public comment.
USP's public comment process occurs via the Pharmacopeial Forum
(PF) and is similar to the Federal Government's Federal Register. The
PF is the working vehicle of the USP Council of Experts (CoE). The PF
provides interested parties the opportunity to review and comment as
the CoE develop and/or revise standards for the USP-NF.
6. legal recognition
The USP-NF is recognized in Federal laws regulating drugs, food,
devices, and dietary supplements. Initially, in the Import Drug Act of
1848, Congress turned to USP for public standards for imported
medicines. Thereafter, the USP was incorporated in the 1906 Pure Food
and Drug Act, which stated that drugs included all those medicines and
preparations in the USP and stated that a drug was considered
adulterated if it differed from the standard of strength, quality, or
purity described in the USP. The current law, the Federal Food, Drug,
and Cosmetic Act (FDCA), was enacted in 1938 and recognizes the USP-NF
in several sections. The FDCA defines the USP-NF as official compendia,
specifically stating that ``official compendium'' includes the United
States Pharmacopeia, the National Formulary or any supplement to any of
them. The FDCA also incorporates the 1906 adulteration provision, by
stating that a drug is adulterated if it is recognized in the USP-NF
and fails to meet the strength, quality, or purity set forth by
compendial standards. In addition, the FDCA integrates USP-NF standards
in the misbranding provisions for drug products, saying that drugs are
considered misbranded if they fail to adhere to USP-NF standards for
packaging and labeling. Section 502(e) requires that the established
name of a drug appear on the label and states that the established name
of a drug or ingredient is the one designated by the Secretary of the
Health and Human Services or the name appearing in the USP-NF.
Congress also has recognized USP-NF standards for dietary
supplements but has made adherence to them voluntary. Specifically,
Sec. 402(s)(2)(D) provides that a dietary supplement is considered
misbranded if it states conformance to an USP-NF monograph and fails to
so conform. Thus, if a dietary supplement manufacturer asserts
conformance to the USP-NF monograph, the product must conform to the
monograph requirements or the product will be deemed misbranded.
The Social Security Act (SSA) recognizes the USP-NF in the
provisions regarding Medicare. According to the SSA, Medicare provides
reimbursement for drugs that cannot be self-administered, such as those
drugs administered in a physician's office. The SSA then defines drugs
to be those that are included or approved for inclusion in the USP, NF,
United States Homeopathic Pharmacopeia, or in New Drugs or Accepted
Dental Remedies or approved by the pharmacy and drug therapeutics
committee. As a practical matter, drugs administered in a physician's
office are generally not subject to approval by a pharmacy and drug
therapeutics committee so the drugs must be in the USP-NF or approved
for inclusion in them. USP has a process whereby a drug can be readily
approved for inclusion into the pharmacopeia.
Most recently, under the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003, the Secretary of the Department of
Health and Human Services is required to request USP to develop, in
consultation with pharmaceutical benefit managers and other interested
parties, a list of categories and classes that may be used by
prescription drug plans in developing their formularies. USP is to
revise this classification from time to time to reflect changes in
therapeutic uses of covered drugs and addition of new covered drugs. In
December 2004, USP provided the Centers for Medicare and Medicaid
Services (CMS) the USP Model Guidelines as set forth under the MMA. USP
is working with CMS to determine the revision process for the USP Model
Guidelines.
7. other related usp activities
a. USP--International
The international market for manufactured pharmaceuticals is
changing at a rapid pace, leading to an especially challenging global
environment where the likelihood of counterfeit and substandard drugs
is of increasing concern. Like early practitioners in the United
States, modern practitioners in many parts of the world beyond the
United States may confront a bewildering array of poorly named
therapeutic ingredients and products, with uncertain safety, efficacy,
and quality. In a recent publication, USP proposed the creation of a
separate official USP compendium, clearly distinguished from USP-NF, to
support international needs and, as feasible, national interests as
well. The approach allows availability of useful public analytical
information to all constituencies of USP throughout the world. USP
believes this general approach to assure optimal quality of medicines
irrespective of their market sphere of authority might be especially
useful in considering issues of importation.
b. USP's Verification Programs
USP has established a Dietary Supplement Ingredient and Product
verification program. USP is considering expansion of the approach to
excipients, drug substances and perhaps even dosage forms. USP believes
that this type of program could be used by the Federal Government to
help assure the quality of medicines entering the U.S. market from
another country or region. USP has enclosed additional information on
its Verification Programs.
The Chairman. And again, I will reiterate that all of your
testimony will be a part of the record and I really do
appreciate all the work you went through. There are more pages
there than we could possibly handle in a hearing, but there is
a lot of good information. I have been through it all.
Mr. Arthur.
STATEMENT OF THOMAS C. ARTHUR, DEAN, EMORY UNIVERSITY SCHOOL OF
LAW, ATLANTA, GA
Mr. Arthur. Thank you, Mr. Chairman. Mr. Chairman, members
of the committee, I am honored to be asked to come before you
today to discuss some of the issues with the statute. The
issues that I would like to discuss haven't been discussed so
far, except that they have been alluded to by Senator Isakson.
This is not just a bill to provide--to permit imports by
people who wish to import drugs into this country. It also
contains provisions to coerce people to import drugs into this
country that do not wish to, and along with that, it has
provisions which are intended not just to permit free
importation and free trade, but also to create by indirection
foreign price controls over American drugs and have them
imported into the United States.
Now, the way the bill does this is it requires U.S.
manufacturers selling abroad and foreign manufacturers who sell
drugs in the United States to make available in the
quantities--at unlimited quantities and at prices regulated by
foreign price controls supplies to be imported back into the
United States, or in the case of American producers, reimported
back into the United States. It also has provisions which
regulate the prices at which these companies can sell drugs to
exporters, even drugs that are not intended to be sent back to
the United States, and other various regulatory provisions for
companies overseas.
Now, that presents four problems. The first problem is that
it raises questions with the appropriate constitutional scope
of foreign commerce. The power to pass this bill and these
provisions regulating what foreign nationals do in their own
countries comes from the power of the Congress over foreign
commerce. This power, according to the Supreme Court, also
extends to acts taken abroad that affect U.S. commerce.
Now, in one sense, any act, even a decision not to trade
with the United States, arguably can affect the foreign
commerce of the United States. For example, we have learned
recently that oil consumption in China affects American gas
prices. But if effects of that indirect sort can justify
American regulation of foreign economies, it proves too much.
It would allow the Congress to regulate the entire world.
Second, it raises a question about international law.
International law permits countries to regulate
extraterritorially to protect their own interest. But again,
that is a matter of whether there are direct effects intended
to cause effects in the United States, not whether there are
intentions not to affect the United States which may indirectly
affect it.
Now, this is a two-way street. To the extent that we can
say that decisions not to sell in the United States authorize
us to regulate and coerce people to do so, it would also under
international law allow other countries to regulate our
citizens for their benefit. It is a two-way street. And because
intrusive extraterritorial regulation can be such a problem,
nations have voluntarily imposed what is known as the rule of
comity in which they stay their hands. They voluntarily write
statutes which regulate extraterritorially only to the extent
absolutely necessary. The Supreme Court has announced that it
interprets statutes with a canon of construction to suggest
that they read statutes narrowly, as Justice Breyer wrote for
the unanimous Court last year in the Empagran case, to ensure
that we intrude as little as possible in the ability of other
countries to run their own affairs. Now, we don't do this just
to be nice. We do this because what goes around comes around.
If we can regulate other countries' activities, then they can
regulate ours.
Therefore, it leads me into my third point, which is this
point made by Senator Isakson. If regulating drug prices is a
good idea in the United States, why don't we do it directly in
the United States? If we do it directly in the United States
instead of importing other countries' drug and price controls,
we don't interfere with their business. We don't try to give
command and control regulations to foreign companies. We don't
raise any of these issues. But in addition, we would have a
regulatory regime which would be produced by an American
Congress and responsive to American needs for the benefit of
American consumers, done to be imposed by an American
regulatory agency using American processes and procedures,
which are not the same as they are in the rest of the world, as
we have learned sometimes to our dismay, and subject to
Congressional oversight and judicial review in American courts.
By importing regulations of drug prices that are done by
other countries for the benefit of their consumers and their
voters, regulated and overseen by their legislative committees
and reviewed in their courts, I don't understand why we would
want to import their sovereignty into our country rather than
doing it ourselves, which leads to my fourth point, and I will
conclude, sir.
I think the reason we haven't done it directly is it is not
probably a good idea. There has been a lot of discussion about
whether drug prices are too high and so forth and so on, but
nonetheless, American policy through the patent laws, which
have been visited time and again by this Congress, has been to
provide the incentives to the patent system for the development
of new drugs, and that is something which the Congress could
change if it wants to, but so far, it has not seen that to be a
good idea.
The Chairman. Thank you.
[The prepared statement of Mr. Arthur follows:]
Prepared Statement of Thomas C. Arthur, L.Q.C.
Mr. Chairman and members of the committee, I am pleased to be here
today to discuss with you the important constitutional, international
law and public policy issues raised by S. 334. The views expressed
herein, of course, are strictly my own and not those of Emory
University or its School of Law.
To summarize my views at the outset, I have four objections to S.
334 (the Dorgan Bill). First, to the extent that it seeks to regulate
the exclusively foreign operations of foreign drug manufacturers in
foreign markets, the Dorgan Bill may be unconstitutional. Second, even
if assumed to be constitutional, the bill's extensive and heavy handed
regulation of foreign drug manufacturers in foreign markets threatens
to raise drug prices abroad and otherwise violate the fundamental
principle of comity by undermining the policies of other countries. Not
only will this violate principles of international law and create
animosity toward the United States, it will also invite other countries
to regulate conduct in the United States for the benefit of their
economies, regardless of adverse effects on American interests. Third,
the purpose of the bill's intrusive provisions is to impose other
countries' drug price controls on drugs consumed in the United States.
But if drug price controls were a good idea, they could be imposed
directly in this country without interfering with other countries'
regulation of their own pharmaceutical markets. In that case, they
would not be imposed by foreign governments under foreign legal
standards unchecked by either Congressional oversight or judicial
review. Instead, they could be imposed by an American regulator under
American legal standards, subject to oversight by the Congress and
review in the courts. Fourth, drug price controls are not a good idea,
whether imposed directly by new legislation or indirectly by the Dorgan
Bill. If the bill operates as its sponsors hope, it will seriously
undermine the incentives to innovation in the drug industry that the
patent laws currently provide.
constitutional issues
Congress' Constitutional authority to enact the Dorgan Bill must
come from the Commerce Clause, particularly the ``Power . . . To
regulate Commerce with Foreign Nations.'' U.S. Const. Art. I, Sec. 8.
cl. 3. This provision empowers Congress to regulate our international
trade. Several provisions of S. 334 seek to coerce foreign
manufacturers which produce drugs that are not for sale in the United
States to supply those products for export to the U.S. against their
will. See S. 334, Sec. (n)(1) at 72-86. These provisions also impose a
duty to supply exporters with other drugs that will not be exported to
America, but rather consumed abroad, and regulate the prices for those
coerced sales. See S. 334, Sec. Sec. (n)(1)(A), (C), & (D). But when
foreign manufacturers choose not to ship certain products to this
country or agree with third parties to stay out of that trade, it is
hard to see how Congress can legitimately regulate those decisions
under the guise of regulating the foreign commerce of the United
States.
One can argue that their decision not to export to the United
States affects the foreign commerce of this country. As globalization
proceeds, output and consumption decisions in other countries will
increasingly have some economic effects on the prices and quantities of
goods exported to the United States. For example, it has been reported
in the press that the growing demand for petroleum products in China
and other developing nations has diverted supplies from the United
States, causing higher gasoline prices here and around the world. In a
manner of speaking, then, the consumption decisions of Chinese
industries and consumers are affecting petroleum exports to the United
States, a part of our ``foreign commerce.''
But this argument proves too much. It would provide a rationale for
Congress to regulate the entire world economy. This certainly was not
intended by the Framers, nor can it be justified as a reasonable
expansion of Congressional power to fit modern conditions. The
provisions of the Constitution must be given a reasonable
interpretation. A reading of the commerce clause extending the
legislative jurisdiction of the United States to virtually the entire
world economy cannot be reasonable.
international law and comity issues
Under current international law a nation may regulate conduct
outside its territory that has significant effects within its
territory. This is the principle that justifies, e.g., the
extraterritorial application of our antitrust laws to foreign nationals
for conduct in their own countries and, as most dramatically seen in
the EU's prohibition of the GE/Honeywell merger, the extraterritorial
application of other countries' laws to the activities of Americans
taken in the United States.
To the extent that provisions of the Dorgan Bill would attempt to
coerce foreign manufacturers, who are directly or indirectly engaged in
commerce, to export to the United States and to sell in their own
countries other drugs, which will not be exported to the U.S., at
controlled prices to exporters, the legislation's extraterritorial
effect would violate international law.
The ``significant effects'' test permits very intrusive
extraterritorial regulation, as the GE/Honeywell decision illustrated.
To moderate such effects, nations traditionally have voluntarily
followed the principle of prescriptive comity, which counsels against
regulation that unreasonably interferes with other countries' efforts
to regulate their own affairs. Thus legislatures and courts have
foregone opportunities to regulate within other countries to avoid
undue interference with those countries' self-governance. For example,
the Supreme Court ``ordinarily construes ambiguous statutes to avoid
unreasonable interference with the sovereign authority of other
nations.'' F. Hoffman-LaRoche Ltd. v. Empagran S. A., 159 L.Ed. 2d 226,
236 (2004) (Breyer, J.); see also Hartford Fire Ins. Co. v. California,
509 U.S. 764, 812-19 (1993) (Scalia, J., dissenting) (discussing use of
prescriptive comity to construe statutes). Indeed, the statute
construed in Empagran, the Foreign Trade Antitrust Improvements Act of
1982, was passed in 1982 to ensure that the Sherman Act would not be
unreasonably applied extraterritorially. Empagran, 159 L.Ed. 2d at 240.
Nations do not follow the comity principle just to be nice. They do
so as a matter of enlightened self-interest, in the realization that
extraterritorial regulation is a two-way street. A nation that extends
the extraterritorial reach of its laws unreasonably can expect the same
treatment in return. Legislatures and courts around the world have
exercised self-restraint as a matter of mutual self-interest.
The provisions of S. 334, even if assumed to be constitutional and
valid under international law, violate these principles of prescriptive
comity. In essence, the bill intrusively regulates drug manufacturers
in other countries, both as described above and in a myriad of other
ways. These provisions are remarkably intrusive into other countries'
affairs. At the least, they will stir up resentment toward the United
States. It is hard to believe that the presence of FDA inspectors
abroad will not be seen as a slur against other countries' drug
regulations and yet another example of American exceptionalism and
``imperialism.'' Other provisions add injury to this insult and may
provoke more than mere resentment. The most glaring example is the
requirement to sell for export to the United States at local prices. In
many cases companies that sell both in this country and abroad, the
primary targets of the bill, will raise foreign prices or even forego
sales in other countries altogether rather than lose U.S. revenues.
In response to these injuries, other countries will be tempted to
retaliate against the American interests by adopting similar
requirements where their products are sold for less in this country
than at home. For example, Japan could require its camera and
electronics firms to sell in the United States at (higher) Japanese
domestic prices.
Even if other countries do not retaliate in kind, the Dorgan Bill
would set a bad precedent that erodes the principle of comity, to the
detriment of American sovereignty and interests. In today's
interdependent global economy many nations can justify extraterritorial
regulation of American conduct under the effects test used in
international law. If the United States aggressively and insensitively
promotes its own interests via the extraterritorial application of its
laws, it can hardly expect other countries to exercise self-restraint.
This is already a serious problem in antitrust, as the confusion and
conflict caused by the worldwide application of over 100 countries'
competition laws has led to calls, in America as well as abroad, for a
supranational competition law under the auspices of, e.g., the WTO.
form of drug price control regime issues
The bill is clearly aimed at drug companies that sell in both the
United States and in other countries, most notably Canada, where
foreign price controls force them to charge lower prices. By forcing
these companies or their foreign affiliates and licensees to supply the
American market from abroad, especially from Canada, the bill seeks to
import these foreign price controls into the United States.
But if drug price controls are a good idea, they should be directly
imposed by our Government in a straightforward manner, rather than in
this backdoor, Rube Goldberg fashion. Under the Dorgan Bill the price
controls of any of the foreign governments in the bill's list of
``permitted countries'' may be imposed indirectly on American
manufacturers. These controlled prices will be imposed by foreign
governments which do not answer to American voters. They will be
imposed under foreign legal standards by foreign regulatory bodies
using foreign administrative procedure. If subject to judicial review
at all, it would be available only in foreign courts. These agencies
and their regulations will be beyond the checks and balances of
Congressional oversight and judicial review in American courts.
By contrast, direct controls under a regulatory regime adopted by
our Congress would be authorized by a statue enacted under the
constitutional and political constraints of our system of government,
by the U.S. Congress responding to the policy preferences of American
voters. It would be implemented by an agency of the U.S. Government,
pursuant to U.S. statutory standards, under the procedural and judicial
review procedures contained in the enabling legislation, the
Administrative Procedure Act and the Constitution.
In short, an American price control system would be an action of
the U.S. Government, operating for the sole benefit of American
consumers under American legal and constitutional principles, subject
to American political and legal controls. These are the benefits of any
regulatory regime created by our sovereign Government. If drug price
controls are a good idea, why would we delegate this task to foreign
governments, rather than to our own?
innovation issues
If the Dorgan Bill operates as its sponsors intend, it might well
remove the incentives to innovation, provided by U.S. patent policy,
that have made the American drug industry the leading provider of new
medications. This is why there has been no serious move for drug price
controls. Instead, public policy has gone in the exact opposite
direction, giving the creators of new drugs patent rights that protect
them from competitive pressures for a limited statutory period. This
patent protection is justified as a reasonable inducement for
innovation.
The economic theory of the Dorgan Bill appears to be that the
profit incentives currently provided by drug patents are excessive, not
necessary to induce the research and development of new drugs. This
thesis is based on the fact that drug companies make enough in Canada
and other price controlling countries to justify production and sales
there.
This theory is wrong. Once a new drug has been developed, the
expenses of developing it have already been incurred. They are what
economists call sunk costs. A rational seller will sell, if need be, at
a low price that does not allow it to recover these sunk costs, so long
as the sales do permit it to cover the current costs of production.
This is especially true if the seller can charge enough in other
markets to recover its sunk costs.
We see this all the time in the travel industry, as hotels rent
rooms and airlines sell seats at very low prices rather than see them
go empty. As long as the hotel or airline recovers its immediate out of
pocket costs, the low price makes sense. But as we are now seeing in
the airline industry, a carrier cannot survive if too many of its seats
go at these low prices.
A similar principle applies to the drug industry. It makes business
sense to sell in Canada as long as the controlled prices cover the out
of pocket costs of producing and distributing the drugs there. But this
does not mean that Canadian price levels would be sufficient to induce
the research and development necessary to produce new medications.
This is not just a theoretical argument. If Canadian and European
drug prices are sufficient to induce innovation, why do those countries
depend on the American drug industry for new drugs? Why don't their
domestic drug companies match ours? Canadians may argue their
population and GDP are too small to support a domestic drug industry,
but Europeans cannot. The European Union's population and GDP are as
large as our own. Yet most new drugs continue to be developed in the
United States.
In sum, the Dorgan Bill raises serious issues of constitutional and
international law, would subject American interests to foreign
regulatory regimes, and would threaten the incentives that make this
country the leading developer of lifesaving new medications. It should
not be adopted.
The Chairman. Dr. Kessler.
STATEMENT OF DAVID A. KESSLER, M.D., DEAN, UNIVERSITY OF
CALIFORNIA, SAN FRANCISCO SCHOOL OF MEDICINE, SAN FRANCISCO, CA
Dr. Kessler. Mr. Chairman, I am pleased to be here to
address the important issue of the safety of our drug supply.
During my more than 25 years as a physician and
particularly in my role at FDA, assuring the safety of
prescription drugs has been one of my greatest concerns. I am
here today to ask you to take important steps to protect
American consumers from our current system of unregulated drug
importation. The current system presents uncontrolled risks to
the American public.
With the explosion in shipments from Canada in the last
several years, FDA has seen a growing number of counterfeit and
questionable drugs. The current system is out of control. There
is virtually no reliable way for consumers to know whether an
Internet pharmacy outside the United States is legitimate and
sells authentic, safe, and effective drugs.
FDA currently lacks the jurisdiction and resources to
verify that legitimate pharmacies in Canada or elsewhere are
delivering safe and effective drugs to people here in the
United States. The existing framework in Section 801(a) of the
Federal Food, Drug, and Cosmetic Act effectively ties FDA's
hands.
Mr. Chairman, the choice before you is not the choice of
imports or no imports. We already have a system of importation
of drugs that jeopardizes public health. Congress, I believe,
has a responsibility to fix this serious problem.
The Pharmaceutical Marketing Access and Drug Safety Act of
2005 includes provisions that would address these problems.
This legislation goes farther than previous attempts at
addressing this issue. The bill would allow FDA to implement
safeguards to stop dangerous imports that currently reach
American consumers. The bill gives FDA a way to assess whether
drugs distributed in other countries meet FDA standards and it
assures that FDA reviews drugs before they are imported. The
bill gives FDA authority to verify that imported drugs are made
in legitimate, FDA-inspected plants.
And yes, today in the United States, manufacturers submit
manufacturing changes every day. If you change a color of a
capsule or the capsule supplier, that is a manufacturing
change. FDA has a long history of handling these kind of
changes.
The bill anticipates and accommodates various anti-
counterfeiting technologies that are now or will become
practical. This bill, through user fees, gives FDA the
resources it needs to inspect facilities and verify their
product. The bill assures that imported drugs will be labeled
appropriately for patients. The bill gives FDA and other
agencies better authority to police the importation of drugs
from dangerous, illegitimate, and scrupulous Internet sites and
suppliers overseas.
The bill also addresses domestic Internet pharmacies.
American citizens who choose to buy their drugs from another
country or via the Internet can have confidence that they are
getting FDA-approved drugs from FDA-inspected manufacturing
plants if they work within the safety system created by this
legislation.
Mr. Chairman, as Congress debates this legislation, there
are some important points I would ask you to keep in mind. The
proposed regulatory system that would permit importation of
safe and effective prescription drugs should be implemented in
a carefully phased manner. S. 334, in effect, creates a safe
system, a validated system for drug importation. I commend the
bill's sponsors for including provisions to limit the number of
authorized pharmacy wholesalers and drugs in the first 2 years.
Congress should consider whether similar limits should be
included in the legislation in subsequent years in order to
keep the program manageable and of the highest quality.
Mr. Chairman, I believe that implementing these provisions
in a phased manner and with sufficient resources would be an
important step to protect the public from the uncontrolled risk
of imported drugs that exists today. The American public will
be safer with a regulated system than with the current system
of uncontrollable risk.
Thank you, Mr. Chairman.
The Chairman. Thank you.
[The prepared statement of Dr. Kessler follows:]
Prepared Statement of David A. Kessler, M.D.
executive summary
The recent exponential increase in unregulated prescription imports
amounts to uncontrolled risk to American consumers. The existing
framework in section 801(a) of the Federal Food, Drug and Cosmetic Act
effectively ties the FDA's hands so that it cannot halt packages
containing questionable drugs on their way to U.S. consumers. Congress
must act to protect the public from dangerous imports. S. 334 would
allow FDA to implement safeguards to effectively and efficiently stop
dangerous imports currently reaching American consumers and to assess
the manufacturing source of imported drugs according to the same
standards used for domestic drugs. Implementing these provisions in a
phased manner and with sufficient resources would be an important step
to protect the public from the uncontrolled risk of imported drugs that
exists today.
______
Mr. Chairman, members of the committee, my name is David Kessler. I
was Commissioner of the Food and Drug Administration from 1990 until
1997. Currently, I am vice chancellor of medical affairs and dean of
the School of Medicine at the University of California, San Francisco.
I am pleased to be here today to address the important issue of the
safety of our drug supply.
During my more than 25 years as a physician and particularly in my
role at FDA, protecting the public health and assuring the safety of
prescription drugs has been one of my greatest concerns. I am here
today to ask you to take important steps to protect American consumers
from our current system of unregulated drug importation that presents
uncontrolled risks to the American public.
In the past couple of years, there has been an exponential increase
in the number of prescriptions brought into the United States from
Canada and other countries. The Department of Health and Human Services
has estimated that the number of shipments has grown from 2 million
packages in 2001 to 10 million in 2004. With this explosion in
shipments, FDA has seen a growing number of counterfeit and
questionable drugs. Currently, FDA is unable to adequately assure that
the imported drugs reaching American consumers are safe and effective
because the agency lacks both the resources and an effective statutory
framework to regulate or stop the shipments. The continued increase in
prescription drug prices, the ease of setting up what looks like a
legitimate pharmacy on the Internet, and the absence of regulation all
contribute to this worrisome trend.
I am sure that most American consumers making these purchases truly
believe they are getting the drugs that their doctors prescribed to
keep them healthy. And the low prices offered on Web sites and by e-
mail may be hard to resist.
But the current system amounts to uncontrolled risk. Consumers have
no way to verify whether the drugs they receive measure up to U.S.
standards for efficacy and safety. Even worse, the FDA lacks the
regulatory structure to efficiently police the marketplace.
The current system is out of control.
There is no reliable way to know whether an Internet pharmacy
outside the United States is legitimate and sells authentic, safe and
effective drugs, although some cities and States have identified
legitimate Canadian pharmacies from which consumers can order Canadian
drugs.
The existing framework in section 801(a) of the Federal Food, Drug
and Cosmetic Act effectively ties the FDA's hands so that it cannot
halt packages containing questionable drugs on their way to U.S.
consumers. Currently, if an FDA inspector identifies a questionable
drug shipment, the agency must conduct a detailed inspection and send a
specific notice to the addressee detailing the violations before it can
take final action.
FDA currently lacks the jurisdiction and resources to verify that
legitimate pharmacies in Canada or elsewhere are delivering safe and
effective drugs to people here in the United States. The FDA does not
have the authority or the resources to inspect pharmacies, wholesalers
or manufacturers in Canada or anywhere else outside the United States.
The agency's current ability to inspect manufacturing plants producing
drugs for the U.S. market does not extend to facilities manufacturing
drugs for Canada or anywhere else.
Mr. Chairman, the choice before you is not the choice of imports or
no imports. We already have a system of importation of drugs that
jeopardizes public health. Congress has the responsibility to fix this
serious problem.
The risk to consumers in the current scenario is not just
theoretical. FDA investigators ordered prescriptions from one Web site
purporting to be selling approved drugs. Although the site advertised
what it said were Canadian generic versions of Viagra, Ambien, and
Lipitor, none of the drugs that were delivered measured up to the
minimum U.S. standards. All three of the drugs had the wrong amount of
active ingredients; the Lipitor and Viagra pills also were contaminated
and failed dissolution tests. Simply put, these prescriptions were not
safe and not effective.
While that Web site may no longer operate, there are literally
hundreds of other Web sites that exist today without any regulatory
oversight whatsoever.
As I understand it, the Pharmaceutical Market Access and Drug
Safety Act of 2005 includes provisions that would address these
problems. This legislation goes farther than previous attempts at
addressing this issue. This bill would allow FDA to implement
safeguards to effectively and efficiently stop dangerous imports that
currently reach American consumers. American citizens who choose to buy
their drugs from another country or via the Internet will have
confidence they are getting drugs that are indeed safe and effective,
if they work within the confines of the safety system created by this
legislation. The health benefits of modern pharmaceuticals are possible
only if patients get the right doses of the right medication.
S. 334 would enable FDA to determine where a drug comes from and
whether it truly is the drug that the seller claims. By requiring FDA
inspection and approval of both the manufacturing source of the drug
and the chain of custody of the drug, the act allows consumers and
commercial entities to buy prescription drugs from Canada and certain
other countries with reasonable assurance that the drugs are safe and
effective.
S. 334 gives the FDA the authority to assess the manufacturing
source of drugs according to the same standards used for domestic drugs
and to ban the importation of any drug it finds inadequate. Furthermore
the bill gives the FDA the authority to inspect and verify the ``chain
of custody'' of the drugs all the way back to the source of
manufacture.
It also bars imports from countries known to be major sources of
counterfeit pharmaceuticals.
In addition to assuring the safety and efficacy of the supply of
imported drugs, S. 334 would increase the safety of drugs purchased via
domestic Internet sites. Legitimate pharmacies require a doctor's
prescription. This bill makes that rule apply to online pharmacies, and
it authorizes State Attorneys General to go to Federal court to shut
down rogue pharmacies.
The provisions of S. 334 make it possible for consumers to safely
import drugs for their own use and enables American pharmacies to
obtain safe and effective drugs from other countries for the benefit of
consumers here. It also anticipates and accommodates anti-
counterfeiting technology that is now or may become practical.
Mr. Chairman, as Congress debates this legislation, there are some
important points I would ask you to keep in mind.
First, the proposed regulatory system that would permit importation
of safe and effective prescription drugs should be implemented in a
carefully phased manner. S. 334, in effect, creates a safe system for
drug importation. I commend the bill for its provisions that limit the
number of authorized pharmacies, wholesalers and drugs in the first 2
years. Let me suggest that Congress consider whether similar limits
should be included in the legislation for subsequent years, in order to
keep the program manageable and of the highest quality.
Second, creating a safe environment for drug importation also means
giving the FDA clear jurisdiction and sufficient resources to do its
job effectively. S. 334 gives FDA the authority to take strong
regulatory action against questionable imported prescription drugs,
while at the same time, creating a program for safe and effective
imports.
Implementing this program will require significant resources. The
bill provides funding through user fees, but these should be
periodically evaluated to make sure this funding is sufficient to
assure the safety of the drug supply.
Mr. Chairman, I believe that the American public will be safer with
a regulated system than with the system of uncontrolled risk that we
allow today.
The Chairman. I appreciate the brevity of all of the
members of this panel. I apologize again that we are more than
halfway through a vote, so we won't have much time, but since
you have testified, I hope you will be open to written
questions that any member of the committee may submit, and many
were planning on doing that anyway, and we would appreciate
your quick response on those. The record will stay open for
another 10 days. You can expand on anything that you get in
questions or anything in addition to the statement that you
have given.
I do have from Dr. Kessler a couple of letters that he
wrote, one that he wrote in 1999 and one in 2000, as well as
his letter last year supporting the Dorgan legislation, and I
would ask unanimous consent that all three of those letters be
a part of the record preliminary to some of the questions that
I will need to ask. I do appreciate your comments, Dr. Kessler,
about a phased-in implementation of S. 334.
[The letters of Dr. Kessler follow:]
May 19, 2004.
Hon. Edward M. Kennedy,
U.S. Senate,
Washington, D.C. 20510.
Dear Senator Kennedy: Thank you for the opportunity to respond to
your questions about S. 2328, the Pharmaceutical Market Access and Drug
Safety Act of 2004. As a former Commissioner of Food and Drugs, and a
current leader of one of the Nation's leading centers for medical
research and treatment, I share your concern over the affordability of
prescription drugs, and support your efforts to ensure that less costly
prescription drugs purchased overseas are safe and effective.
Question 1. Does S. 2328 ensure the safety of drugs imported to the
United States? In particular, are there adequate assurances that drugs
imported by registered pharmacies and wholesalers and exported to
individuals from registered pharmacies in Canada will not be
counterfeit and will meet the conditions of approval of the Food and
Drug Administration?
Answer 1. It is essential that prescription drugs purchased by
Americans are safe and effective. I am certain that FDA, given the
proper authority, mandate, and support can ensure the safety of drugs
imported into the United States. S. 2328 provides a sound framework for
assuring that imported drugs are safe and effective. Most notably, it
provides additional resources to the agency to run such a program,
oversight by FDA of the chain of custody of imported drugs back to FDA-
inspected plants, a mechanism to review imported drugs to ensure that
they meet FDA's approval standards, and the registration and oversight
of importers and exporters to assure that imported drugs meet these
standards and are not counterfeit. As the legislation progresses, I'm
sure that adjustments to this sound framework can be made to
accommodate legitimate concerns of FDA or other experts and ensure that
the legislation works as intended.
Question 2. Will the user fees provided for in S. 2328 provide
adequate resources for FDA to police the importation of drugs under the
bill?
Answer 2. FDA must be given new and adequate resources to carry out
the responsibilities it would have under S. 2328. As commissioner, I
oversaw the implementation of the 1992 Prescription Drug User Fee Act
(PDUFA). PDUFA has proven that users fees can be an effective means of
funding critical agency programs. User fees capped at 1 percent of the
value of imported drugs as provided in S. 2328 would give substantial
resources to FDA to police drug imports. For example, using CBO
projections that 10-15 percent of drugs used in the United States might
come in through imports, and assuming that the drugs will be half the
price of domestic drugs, the user fee proposal in S. 2328 could result
in up to $100 million in new resources for FDA, which would enable FDA
to double the center for drugs field budget. It will be important,
however, that the Congress work with FDA to ensure that as the drug
import program evolves that FDA receives adequate, new funds to support
the program.
Question 3. Does S. 2328 provide adequate protections against
efforts by drug companies to stop drug importation, such as cutting of
supply of drugs to those entities that export drugs to the United
States or changing drugs distributed overseas so that they do not meet
the conditions of approval of FDA?
Answer 3. U.S. prescription drug companies have made their products
available at substantially less cost in highly developed countries such
as Canada, but have then acted to prevent U.S. citizens from importing
these less costly versions of their products. The steps you have taken
in S. 2328 are effective tools to prevent some of the industry
practices that have been documented to date.
Question 4. Do you believe that innovation in the pharmaceutical
industry will cease because of drug importation? How will it be
affected?
Answer 4. Research and development funding is an expense that
should be shared equally by the citizens of wealthy countries
throughout the world. Innovation is the heart of the prescription drug
industry. The leaders of the industry, its stockholders, and the
continuing enormous investment in biomedical research that is occurring
at leading institutions around the world will ensure that drug
innovation not only continue but accelerates.
Again, thank you for the opportunity to assist you with this
important endeavor.
Sincerely,
David Kessler, M.D.,
Dean, UCSF School of Medicine.
______
September 13, 2000.
Hon. Byron Dorgan,
719 Hart Senate Office Building,
Washington, D.C. 20510.
Dear Senator Dorgan: Thank you very much for your letter of
September 12, 2000. I very much applaud the effort that you and your
colleagues are making to assure that the American people have access to
the highest quality medicines. As you know, my concerns about the re-
importation of prescription drugs center around the issues of assuring
quality products. The Senate bill which allows only the importation of
FDA approved drugs, manufactured in approved FDA facilities, and for
which the chain of custody has been maintained, addresses my
fundamental concerns. The requirement that the importer maintain a
written record of the chain of custody and batch testing to assure the
product is both authentic and unadulterated provides an important
safety net for consumers.
Let me address your specific questions. First, I believe U.S.
licensed pharmacists and wholesalers--who know how drugs need to be
stored and handled and who would be importing them under the strict
oversight of the FDA are well positioned to safely import quality
products rather than having American consumers do this on their own.
Second, if the FDA is given the resources necessary to ensure that
imported, FDA-approved prescription drugs are the authentic product,
made in an FDA-approved manufacturing facility, l believe the
importation of these products could be done without causing a greater
health risk to American consumers that currently exists. Finally, as a
nation we have the best medical armamentarium in the world. Over the
years FDA and the Congress have worked hard to assure that the American
public has access to important medicine as soon as possible. But
developing life saving medications doesn't do any good unless Americans
can afford to buy the drugs their doctors prescribe. The price of
prescription drugs poses a major public health challenge, While we
should do nothing that compromises the safety and quality of our
medicine it is important to take steps to make prescription drugs more
affordable.
I applaud your efforts to provide American consumers with both safe
and affordable medicine.
Sincerely,
David A. Kessler, M.D.
______
June 29, 1999.
Hon. John D. Dingell,
2328 Rayburn House Office Building,
U.S. House of Representatives,
Washington, D.C. 20515.
Dear Representative Dingell: You may recall that there has been a
continuing controversy about the reimportation into the United States
of prescription drugs manufactured here and exported abroad (so-called
``American Goods Returned''). As you know the Prescription Drug
Marketing Act of 1987 (the PDMA), P.L. 100-293 (Apr. 22, 1988), of
which you were the principal sponsor in the House prohibits such
reimportation. As the former FDA Commissioner who oversaw the
implementation of many of the provisions of the PDMA, I wanted you to
know of my concerns about this issue.
I believe the prohibition on reimporting exported drugs serves two
critical public health purposes: (1) preventing the introduction into
U.S. commerce of prescription drugs that may have been improperly
stored, handled, and shipped overseas, and (2) reducing the
opportunities for importation of counterfeit and unapproved
prescription drugs. I know you will recall that the Energy and Commerce
Committee described these purposes in its report accompanying the bill
that became the PDMA.
Specifically, the existence and method of operation of a wholesale
submarket, herein referred to as the ``diversion market,'' prevents
effective control over or even routine knowledge of the true sources of
merchandise in a significant number of cases. As a result,
pharmaceuticals which have been mislabeled, misbranded, improperly
stored or shipped, have exceeded their expiration dates, or are bald
counterfeits, are injected into the national distribution system for
ultimate sale to consumers. . . .
A significant volume of pharmaceuticals is being reimported to the
United States as American Goods Returned. These goods present a health
and safety risk to American consumers because they may have become
subpotent or adulterated during foreign handling and shipping. The
ready market for reimports has also been a catalyst for the
perpetration of a continuing series of frauds against American
manufacturers, and has provided the cover for the importation of
counterfeit pharmaceuticals in several cases. Moreover, the hazards
associated with reimports have forced the Food and Drug Administration
and U.S. Customs Service to spend inspectional and other resources that
are solely needed in other areas.
H.R. Rep. No. 76, 100th Cong., 1st Seas. 6-7 (1987).
In 1986, the Oversight and Investigations Subcommittee of the
Energy and Commerce Committee, which you chaired, described the public
health and safety concerns of allowing ``American Goods Returned'' as
follows:
[T]he clear and present danger to the public health from reimported
pharmaceuticals is the threat that subpotent, superpotent, impotent or
even toxic substances labeled as U.S.-produced legend drugs will enter
the distribution system. The foremost danger comes from so-called
``generic'' drugs produced in developing countries that do not provide
product patent protection for pharmaceuticals.
Uncertain Returns: The Multimillion Dollar Market in Reimported
Pharmaceuticals, 99th Cong., 2nd Sass. 23 (Comm. Print 99-GG 1986). One
well-publicized example involved importation of more than 1 million
counterfeit birth control pills, complete with counterfeit packaging
and labeling. Id.; Dangerous Medicine: The Risk to American Consumers
From Prescription Drug Diversion and Counterfeiting, 99th Cong., 2nd
Sess. 22 (Comm. Print 99-Z 1986).
In my view, the dangers of allowing reimportation of prescription
drugs may be even greater today than they were in 1986. For example,
with the rise of Internet pharmacies, the opportunities for illicit
distribution of adulterated and counterfeit products have grown well
beyond those available in prior years. Repealing the prohibition on
reimportation of drugs would remove one of the principal statutory
tools for dealing with this growing issue.
I know one argument now being made for allowing reimportation is
that this would make lower priced prescription drugs available to U.S.
consumers. But, your committee effectively rebutted that argument in
1986, in terms that seem to me to be equally applicable today.
Pharmaceuticals reimported by diverters displace full price sales
in the wholesale market. Moreover, prices to ultimate consumers are
generally not lowered as a result of diversion. Rather, the profits go
to the various middlemen, here and abroad, while consumers bear the
risk.
Uncertain Returns, supra, at 32 (emphasis added). See also
Dangerous Medicine, supra, at 25-26 (``there is little or no
significant benefit to consumers from pharmaceutical reimportation, and
there are obvious costs in terms of health and safety risks and the
utilization of scarce FDA resources'').
I know of no changed circumstances that require either a shift in
FDA policy or the passage of legislation to repeal PDMA's prohibition
on reimporting drugs. Furthermore, I believe that such a repeal or
change in policy would re-create the substantial public health risks
PDMA was designed to eliminate, I would welcome your analysis and
comments on this matter.
Sincerely,
David A. Kessler, M.D.
__________
The Chairman. Senator Burr.
Senator Burr. Thank you, Mr. Chairman. Let me thank this
panel for your willingness to be here, but more importantly,
for your expertise, your interest, and your passion for this.
Mr. Satchwell, I can't thank you enough for your
willingness to point out, hey, we have tried some of this. It
doesn't work. I think listening to people who have either
willingly or unwillingly become part of something is important.
That you look up and say those that claimed that this would
happen, in fact, were wrong. It does create a nightmare when
you try to blend together a group of individual regulatory
regimes into one where you haven't changed the regulations, you
have just said, we will ignore ours and accept yours because
there has to be some greater good, and I think that the
European Union will revisit that at some point. I think that is
enough of a warning that we shouldn't join into it as a full-
fledged partner and blindly accept the standards of other
countries. I know that shortly after we did FDAMA, that was an
issue that was on the table for the United States as it related
to harmonization.
Mr. Cecil, the labeling issue is quite important. Labeling
should clearly state differences in equivalencies. The problem
is that these bills that are on the table inject bulk
purchasing into the United States for the first time. This is
not an individual prescription that is being accessed from
Canada. This is opening up the United States to a bulk market
of foreign products. We have to hope that labels follow these
products.
Mr. Arthur, I think that this proposal ignores U.S. code in
total as it relates to patent protection, and intellectual
property rights. Now, I understand that the Dorgan bill
surgically opens the Code up and says, in this particular case,
reimportation of drugs is ok. Will you address the precedent
that we are setting by doing that?
Mr. Arthur. Well, Senator, I agree with you. It seems to me
it is completely opposite from the provisions of the patent
laws, particularly the ones that appertain to drugs, because
there is a very careful statutory scheme that provides patent
protection for people who actually come up with new drugs which
have never been made before and which are not obvious and all
the other protections of the patent code to make sure there has
been real innovation, and the whole basis of that system is one
of incentives. That is, it allows you to, for a limited term of
years set by the statute and authored to deal with the problems
of getting it through the FDA, a period in which you can be the
exclusive seller.
Now, it is intended, in other words, to take ordinary
business incentives, and that incentive basically is the one to
make money, to use it as an incentive to get companies to
innovate and produce new drugs and invest into a risky system,
because prices of drugs don't only represent the price of the
actual drug, its manufacture, or even its R&D, but also the
ones that fail.
Senator Burr. Well, the authors of this bill might suggest
that their intent is not to eliminate patent protection for new
therapies. They are not here and that may be a question that we
need to ask them, because they know that you need that
incentive for those new therapies to be developed. The problem
that we have today is that we are not overpriced on generic
drugs. As a matter of fact, the U.S. market is underneath all
foreign markets as it relates to the price of generics. So if
they kept the patent protection for the new therapies, they
haven't done anything. So I have got to think that their intent
is to eliminate the patent protection, the incentive for
research and development for new therapies as well as those
that still have some patent life in them.
Mr. Arthur. Oh, absolutely. I mean, what it would do, if I
understand the bill, I think the key is reimportation. It is
interesting, we have only heard that word reimportation during
this hearing without anybody talking very much about it. A
normal trade matter, a normal trade law would be one that
applies to importation, voluntary importation. Reimportation
suggests that a drug be made in the United States, sent to
Canada, and then sent right back again. The only thing that is
imported is the Canadian price----
Senator Burr. And we----
Mr. Arthur [continuing]. As a way to, in effect,
artificially lower the price. It is almost--it is like driving
your car with one foot on the accelerator and one foot on the
brake.
The patent law gives American companies, and European
companies, for that matter, any company that innovates and gets
an American patent, the right to set the price at what it
chooses to. Price controls go in the opposite direction. So to
say on the one hand, you can charge whatever you want to in the
United States. That is your reward for innovation. But you are
under legal obligation, if you sell in any one of these other
countries, to provide enough to any exporter in that country to
resupply the United States market at a lower price. It
basically gives with one hand, takes away with the other.
Senator Burr. The Chairman and I have to leave, and I
apologize, but I do want to ask Dr. Kessler one or two
questions. You said in your testimony that you were glad to see
that the legislation initially limits the number of pharmacies,
the number of wholesalers, and the number of drugs
participating in reimportation. Can you envision how that is
going to happen, how we are going to limit the number of
pharmacies, the number of wholesalers, the number of drugs?
Dr. Kessler. Certainly, Senator. I strongly support that.
As the Chairman said, I think a phased approach makes sense.
Senator Burr. But understand, we can't determine whether
something is adulterated today at Dulles Airport without
bringing a biologist in and going through some type of process
where we can determine the active ingredients because the
knock-off is so good. Are we now going to ask these individuals
to only let the blue pills in, but not the red ones, and only
if they come from this pharmacy and not that one, and only if
it came through this wholesaler and not the 12 other ones that
we excluded?
Dr. Kessler. I think what S. 334 does is create, in
essence, a safe environment. It tries to create a safe
environment by dealing with 50 to 100 pharmacies, the top
selling drugs. And, in fact, I think by keeping it small and
keeping it focused on those drugs that are the most important,
we have the greatest ability to assure the American people that
their drugs would be safe----
Senator Burr. And we rely on a paper trail, a paper chain
to assure us that it went through the right wholesaler, that it
came from the right manufacturer. Now, let me just ask you
this. In the 7 years that you were at the FDA, you were an
advocate for safety. You understood the letter of the law as it
related to the FDA process. Would the FDA have ever accepted a
regulatory scheme in the United States where companies weren't
inspected, they just had to have paperwork that said that they
met the FDA standard, paperwork that said that the ingredients
that they got were, in fact, from where they said they were and
not necessarily tested?
Dr. Kessler. Senator, it is an excellent question, and, of
course, FDA would not only require the paperwork, but as S. 334
contemplates, FDA would have to be able to go in and inspect.
So it is paperwork and inspection. I think if you ask career
officials at FDA today, they would much prefer the ability to
have jurisdiction and the resources to be able to have the
paperwork and the ability to inspect rather than have the
uncontrolled system that they are currently dealing with----
Senator Burr. We have had U.S. drugs manufactured abroad
for well over a decade. When you were FDA Commissioner, were
there facilities from which we brought drugs into the United
States that were not inspected by the FDA?
Dr. Kessler. We inspected facilities all around----
Senator Burr. Were there any that were not inspected by the
FDA that manufactured drugs for U.S. consumption?
Dr. Kessler. For counterfeit? There were certainly
counterfeit. There have always been counterfeit. There will
continue to be counterfeit.
Senator Burr. I am talking about authorized manufacturers.
Did we get to every manufacturer in the world----
Dr. Kessler. We did not have--it is an excellent point,
Senator. We did not have the resources in order to be able to
do foreign inspections as much as we would like. That is why S.
334 requires the user fees to do those inspections and
requires--in some ways, it is ironic. The inspections would be
every 12 months.
Senator Burr. You were required before.
Dr. Kessler. You didn't give us the--I mean, not you,
Senator--[Laughter.]--but the resources weren't there. I
apologize.
The Chairman. The Senator's time----
Dr. Kessler. You always did. You were the friend of the
agency.
Senator Burr. But my point is this.
Dr. Kessler. It is a good point.
Senator Burr. You had it in law. It said it had to be done,
and the resources meant that you couldn't do it. What blind
faith should we leap into this with a new bill that proposes a
whole new regulatory acceptance on our part and say, well, we
just have to trust that it is going to work?
Dr. Kessler. No blind faith, Senator.
Senator Burr. So we have to trust----
Dr. Kessler. Set up the right system. Give the agency the
right resources. Give the FDA the right jurisdiction, as this
bill tries to do, and then I think you can have the assurances.
Senator Burr. David, in the absence of----
The Chairman. The Senator's time has expired and so has the
vote.
[Laughter.]
Senator Burr. Last one. In the absence of the next
Congress, who may or may not fund, and you know how the budget
process goes up here, everything that the FDA wants, have we
not set up a regime then that allows inspections not to happen
because somebody says, we didn't get funding, and the American
consumer is then the recipient of adulterated, counterfeit,
illicit drugs, and FDA just says, well, we didn't have the
money. You didn't give it to us.
I think we have always erred on the side of making sure
that didn't happen. You did it when you were there. I think the
Congress, since I have been involved, wouldn't have done it.
There is an easy way out. That is, give everybody what they
want. But we make decisions based upon the safety of the entire
population.
I thank you for your service. I thank all of you for your
time. I yield back.
The Chairman. I will allow each of you to answer that last
one in writing and him to submit other questions, as well as
everybody else.
This hearing is adjourned.
[Additional material follows.]
ADDITIONAL MATERIAL
S. 334: A Different FDA Standard for Imported Drugs That Would
Compromise the Safety, Effectiveness, and Quality of the American
Prescription Drug Supply
On February 9, 2005, Senator Dorgan introduced S. 334, the
Pharmaceutical Market Access and Drug Safety Act of 2005. This bill
legalizes commercial and personal importation of unapproved
prescription drugs from foreign countries, thereby opening a closed
system designed to protect the health and safety of the American
public. S. 334 makes sweeping changes to the Federal Food, Drug, and
Cosmetic Act (FDCA). It creates an entirely new statutory regime to
govern the importation of ``qualifying'' prescription drugs from
``permitted countries.'' It exempts imported drugs from sections 501
and 502 of the FDCA, which set forth the prohibitions on adulteration
and misbranding that apply to domestic products. Moreover, imported
foreign drugs are not subject to the rigorous ``gold standard''
approval mechanisms/requirements of section 505 of the FDCA. Rather,
the bill creates a new standard of ``approval,'' a ``manufacturing
changes'' standard, for these foreign products. Under this approach,
manufacturers would be mandated to submit ``notices'' describing the
differences between their foreign product and domestic product as
though they were making a change in the manufacturing process and
thereby removing one product from the marketplace. But in fact, this
process would result in the availability of both products in the United
States. The bill would require an order from the Food and Drug
Administration (FDA) to ensure that importation of unapproved foreign
products will not begin. This inverts the rule applicable to domestic
products that distribution of the new version of the product is
prohibited until FDA issues an approval. Finally, the bill replaces the
refusal-to-admit mandate in section 801 of the FDCA with a permissive
authority. Other provisions of the bill are fundamentally flawed, as
well. These include, for example, the attempt to exclude imports from
certain European countries and the lack of any effective funding
mechanism. The sweeping changes S. 334 makes to the FDCA, will put
American patients at serious risk of receiving dangerous and
counterfeit prescription drugs.
i. the current system ensures the safety and effectiveness of
prescription drugs marketed in the united states
Since 1938, section 505(d)(1) of the FDCA has prohibited the
marketing of any new drug unless it has been shown to be ``safe for use
under the conditions prescribed, recommended, or suggested'' in its
labeling. In 1962, Congress amended the FDCA and section 505(d)(5) now
requires proof of the effectiveness of marketed drugs and gives FDA
authority to stipulate the specific tests required before the agency
will approve the drug for marketing. Since that time, FDA's authority
has been expanded, strengthened, and refined by the Hatch-Waxman Act of
1984 and the Prescription Drug Marketing Act of 1987 (PDMA). As a
result of these enactments, FDA now regulates virtually every stage in
the life of a prescription drug, from pre-clinical testing in animals
and human clinical trials before the drug can be marketed, to
manufacturing, labeling, packaging, and advertising when the drug is
marketed, as well as to monitoring the safety of a drug after its sale
to consumers.
The key to FDA's ability to protect the safety, effectiveness, and
quality of prescription drugs is its authority to review and approve
new drug applications before a new drug may be sold. A new drug
application (NDA), filed under section 505(b), must contain full
reports establishing with substantial evidence the safety and
effectiveness of the proposed product. An abbreviated new drug
application (ANDA), filed under section 505(j), does not contain data
on safety and effectiveness. Instead, an ANDA applicant may
``piggyback'' on the safety and effectiveness data which has been
previously submitted to the FDA by the innovator of the product.
However, an ANDA applicant must submit data described in section
505(j)(2) which establishes--among other things--that a proposed
generic drug must have the same active ingredient as and be
bioequivalent to the innovator drug. When FDA approves an application
under section 505, the approval is specific to the product formulation
and labeling, as well as the manufacturing process and facilities,
described in the application.
After approval as stated in section 506(A), FDA retains regulatory
authority over both the manufacturer and the drug product. For example,
the holder of an approved application must validate any change to any
aspect of the approved product (including changes in the manufacturing
process) and must notify FDA of that change. Further, it must submit a
supplemental application to FDA for all but the most minor changes. And
it must seek prior approval of significant changes with the potential
to affect safety, effectiveness, or quality. The manufacturer must
continue to ensure that the drug, and the methods used in, as well as
the facilities and controls used for, its manufacture, processing,
packing, and holding comply with current good manufacturing practice
(GMP) as described in section 501(a). Section 502(n) of the FDCA
mandates that the drug not be misbranded, so--for example--the
manufacturer and distributor must include in their advertisements for
the product a ``brief summary'' of the product's side effects,
contraindications, and effectiveness.
In short, sections 501, 502, and 505 form the foundation of FDA's
regulation of pharmaceuticals in the United States by prohibiting the
introduction into interstate commerce of an adulterated, misbranded, or
unapproved new drug. Importation of a prescription drug results in the
introduction of that drug into interstate commerce and therefore
imported drug products are subject to sections 501, 502, and 505. A
drug manufactured in a facility not listed in the approved application,
and a drug that is not manufactured according to the specifications
described in the approved application, is unapproved--even if made by
the NDA or ANDA holder. It cannot be imported or otherwise introduced
into interstate commerce. Moreover, section 801--added by the PDMA--
prohibits the importation (sometimes called ``reimportation'') of a
drug manufactured in the United States in full compliance with the
approved application and then exported abroad. There is an exception
(section 801(d) for the original manufacturer, who is an integral part
of this closed regulatory system and subject to FDA authority and
oversight at all times.
ii. unsafe products.--s. 334 writes sections 501, 502, and 505 out of
the fdca, creating for unapproved foreign products a new regime that is
fundamentally inconsistent with u.s. drug law
S. 334 permits the importation of foreign products that do not
comply with any approved NDA and that are not bioequivalent to any
approved U.S. drug. It also exempts these products from most of the
adulteration and misbranding provisions that apply to domestic
products. In sum, it writes sections 501, 502, and 505 out of the
statute ending decades of consumer protection. It also effectively
exempts imported drugs from section 506A, which governs manufacturing
changes made to products approved under sections 505. And it eliminates
the tough refusal-to-admit standard that applies to imports under
section 801(a). Finally, it repeals the PDMA, amending section 801(d)
to permit the ``reimportation'' of approved drug products that have
been outside the jurisdiction of the FDA and beyond the control of the
manufacturer.
A. S. 334 Writes the Section 505 Approval Process Out of the FDCA
FDA's ability to protect American patients from unsafe and
ineffective drugs depends on its authority under section 505 of the
FDCA to review and approve new medicines prior to their distribution in
commerce. The Dorgan bill, however, creates an alternative route to
market for foreign drugs, one that wholly bypasses section 505. It
expressly permits the importation of foreign drugs that are different
from and not bioequivalent to any FDA-approved drug, raising serious
safety concerns. It permits these products to enter the United States
pursuant to FDA review of a ``notice'' (rather than an application)
using the ``manufacturing changes'' standard of section 506A. In
addition the new pathway to market contained in S. 334 threatens the
balance between encouraging innovation, on the one hand, and ensuring
timely generic competition, on the other hand.
1. S. 334 Replaces the Uncompromising Approval Standard in
Section 505 with Speculation About a Hypothetical
``Manufacturing Changes'' Submission
Proposed section 804(g)(2)(A) of S. 334 provides that an imported
drug must ``comply with the conditions established in the approved
application under section 505(b) for the U.S. label drug as described
under this subsection.'' Subsection 804(g) of S. 334, however, does not
really require the foreign drug to comply with either section 505 or
the approved NDA. Rather, it requires the manufacturer of any
``qualifying'' drug to submit a ``notice'' to FDA.
A product is a ``qualifying'' drug if it is a drug for which there
is a ``corresponding U.S. label drug.'' This, in turn, is a
``prescription drug'' that (1) has the same active ingredient or
ingredients, route of administration, dosage form, and strength as the
qualifying drug, (2) is manufactured by or for the person that
manufactures the qualifying drug, (3) is approved under section 505(c)
of the FDCA, and (4) is not a controlled substance, biological product,
infused drug, inhaled drug, or drug for which there are two marketed
generics. The ``notice'' must identify each difference in the
qualifying drug from a ``condition established in the approved
application'' for the corresponding U.S. label drug. (The notice need
not identify variations provided for in the U.S. drug's labeling or
differences in the labeling, except ingredient labeling.)
It must include ``the information that the Secretary may require
under section 506A,'' although section 506A applies only to ``a drug
for which there is in effect an approved application under section 505
or 512 or a license under section 351 of the Public Health Service
Act'' (i.e., not an import), so this requirement may be meaningless. It
must also include ``any additional information the Secretary may
require,'' which in turn may--but need not--include data on
bioequivalence. Finally, the notice must include (1) the date on which
the qualifying drug was or will be introduced for commercial
distribution in the foreign country, (2) a demonstration that the
manufacturer has notified the foreign government about the notice to
FDA, (3) the foreign marketing application in original and in
translation, and (4) various certifications as well as a filing fee in
many cases.
This ``notice'' submitted to FDA is nothing like a new drug
application. FDA regulations and dozens of FDA guidance documents, lay
out the content and format requirements for any new drug application
filed with FDA. Among other things, the NDA must include a chemistry,
manufacturing, and controls (CMC) section that describes the
composition, manufacture, and specifications of the drug substance and
drug product, including its physical and chemical characteristics; its
stability; the process and controls used during manufacturing and
packaging; and analytical methods to assure its identity, strength,
quality, and purity. Every step in the manufacturing process must be
described in exhaustive detail, and the entire process must be
``validated'' (i.e., the company must document that it consistently
produces a product meeting pre-determined specifications and quality
attributes). The NDA also includes a nonclinical pharmacology and
toxicology section, a human pharmacokinetic and bioavailability
section, a microbiology section (if the product is an anti-infective
drug), a clinical data section, a statistical section, labeling, case
report forms, and patent information. An NDA can exceed a hundred
thousand pages in length. The CMC section itself can exceed thousands
of pages in length. Although proposed section 804(g) would require
manufacturers to provide FDA with English translations of the relevant
foreign marketing applications, these applications will not comply with
21 CFR Sec. 314.50 or with accompanying agency guidance documents. The
foreign regulator may have required different information, in a
different format, and in a different order.
Under S. 334, the Secretary must treat the difference described in
the notice as a ``manufacturing change to the U.S. label drug under
section 506A.'' He must ``review and approve or disapprove the
difference . . . using the safe and effective standard for approving or
disapproving a manufacturing change under section 506A.'' If FDA
concludes that it would approve a supplement for the U.S. drug if the
difference were presented as a manufacturing change to the NDA for the
FDA-approved product, it must allow the foreign product to be imported.
There would be no such supplement, however, and it is not clear how FDA
could determine what data this non-existent supplement would contain
and whether the supplement would be approvable under ``the safe and
effective standard'' of section 506A of the FDCA. When an NDA-holder
makes a manufacturing change, it supplements an existing document (the
NDA) that is both highly detailed and very specific to the FDA-approved
drug. The ``difference'' between two drugs, one that is the subject of
this document and one that is not, cannot plausibly be reviewed as a
``change'' to that document--any more than the edits to one piece of
legislation can be grafted onto a different piece of legislation. So
while the Dorgan bill purports to apply the ``safe and effective
standard'' in section 506A, the standard is meaningless in this
context: it in essence lowers the existing standards.
The new ``notice'' provisions also reverse the presumption in
section 505. Under current law, the burden is on the manufacturer--
whether innovator or generic manufacturer--to satisfy the legal
standards of section 505. Absent approval of an application filed under
section 505(b) or 505(j), the new drug in question cannot be
distributed. If the Dorgan bill became law, however, the FDCA would not
automatically prohibit the distribution of qualifying foreign drugs,
even if they were significantly different from FDA-approved drugs.
Instead, FDA would have to affirmatively issue an order that
importation not begin until the agency's review of the manufacturer's
notice was complete.
2. Eliminates the Bioequivalence Standard.--S. 334 Permits
the Importation of Non-Bioequivalent Drugs for
Which There Would be No Assurance of Safety or
Effectiveness
While the Dorgan bill putatively incorporates the sameness
requirements of section 505(j) by requiring that imported drugs have
the same active ingredient, route of administration, dosage form, and
strength as the corresponding FDA-approved drug , it does not require
that these unapproved drugs be bioequivalent to any FDA-approved
product. Nor does it require pre-market submission of detailed
manufacturing information. So in addition to exempting imported drugs
from the NDA requirement, it exempts them from the alternate
requirement of bioequivalence applicable to generic drugs in the United
States. The risk to patients from nonbioequivalent therapies would be
amplified for certain classes and categories of drugs, including those
with a narrow therapeutic index. The Surgeon General's Task Force
concluded that, ``even slight changes in the dose and/or amount of drug
in the blood could potentially have dangerous effects'' for persons
taking drugs with a narrow therapeutic index such as digoxin, lithium,
phenytoin, theophylline, and warfarin. If a patient switches from a
U.S. drug to a nonbioequivalent foreign drug, the change could cause
his clinical condition to recur or lead to toxicity.
Currently under section 505(j) of the FDCA, when an applicant seeks
to market a ``generic version'' of an innovator product, the applicant
must establish that the product is the same as, and bioequivalent to,
the innovator drug which has already been approved through the NDA
process before it can be presumed to be as safe and effective as that
innovator product. A sponsor must also provide as required in 505(j)
full chemistry, manufacturing, and controls information regarding the
``generic'' drug and product manufacturing. Bioequivalence concerns are
real and the lack of equivalence has prompted the FDA and the World
Health Organization (WHO) to remove a number of drugs from the
marketplace and its list of pre-qualified medications respectively.
(See WHO, ``Removal of Antiretroviral Products from the WHO List of
Prequalified Medicines,'' at <>).
If S. 334 were adopted there would then be three pathways to the
U.S. prescription drug market--a new drug application under 505(b), an
abbreviated new drug application under 505(j), and a ``notice of
manufacturing change'' under the Dorgan bill. This eviscerates the
important balance struck by Congress in 1984 and in 2003, when it
drafted and then amended the Hatch-Waxman amendments to the FDCA. Under
S. 334 a foreign drug product might be permitted on the U.S. market on
the strength of the U.S. innovator product's NDA safety and efficacy
data, even if the products are different, made differently, and not
bioequivalent. The Dorgan bill authorizes the Secretary to exclude non-
bioequivalent foreign drugs if he determines that the availability of
both versions ``would pose a threat to the public health.'' But the
Secretary could not make this determination in time to exclude the
foreign drug entry into the United States market: it would require
clinical data assessing the effect of a switch or post-approval data
from a country in which both were approved and marketed. Such drugs are
not eligible for approval through the ANDA process, and they should not
be eligible for import into this country.
The likely result is a glut of non-bioequivalent foreign drug
products will enter the U.S. market. The FDA has expressed concern
about this ``needless proliferation of pharmaceutical alternative drug
products.'' For each FDA-approved drug product, there could be dozens
of nonbioequivalent foreign versions. Such an influx of non-
bioequivalent drugs will be confusing to both patients and
practitioners. The Secretary may--but is not required to--add to the
U.S. labeling (which, of course, is specific to a different product) an
advisory that the drug is ``safe and effective'' but ``not
bioequivalent'' to the FDA-approved product. When the product is
dispensed to a consumer, the pharmacist must include that advisory. The
advisory is likely to be meaningless to consumers, however. And nothing
requires that this information be provided to the healthcare provider
who prescribed the drug. A physician will thus have no way of knowing
that his patient has received a non-bioequivalent drug. Even if the
advisory is provided to the physician, it will be meaningless without
an explanation of how the imported product differs from the approved
product, i.e., is it super potent as the result of greater
bioavailability or sub potent due to poor bioavailability.
B. S. 334 Exempts Imported Foreign Drugs From Adulteration Provisions
in Section 501
Section 501 of the FDCA defines the situations in which a drug is
deemed ``adulterated'' and its distribution therefore a prohibited act.
Among other things as stated in section 501(a)(1) & (a)(2), a drug is
adulterated if it ``consists in whole or in part of any filthy, putrid,
or decomposed substance'' or if it ``has been prepared, packed, or held
under unsanitary conditions.'' It is also adulterated, according to
section 501(a)(3) if its ``container is composed, in whole or in part,
of any poisonous or deleterious substance which may render the contents
injurious to health.'' Finally a drug can be considered to be
adulterated if the ``methods used in, or the facilities or controls
used for, its manufacture, processing, packing, or holding do not
conform to or are not operated or administered in conformity with
current good manufacturing practice.''
Rather than requiring that imported drugs comply with section 501
of the FDCA, however, S. 334 writes that provision and the associated
hundreds of pages of Federal regulations and code out of the existence.
Under proposed section 804(g)(4), an imported drug is ``considered to
be in compliance with section 501 if the drug is in compliance with''
proposed section 804(c). In turn, section 804(c) requires merely that
the following be true: (1) the drug was manufactured in an
establishment required to register under the FDCA and inspected either
by FDA or by a permitted country whose regulatory system FDA recognizes
as equivalent under a mutual recognition agreement; (2) the
establishment manufactured the drug for distribution in the United
States or one or more permitted countries; (3) the drug meets minimal
chain-of-custody and paper pedigree requirements; (4) the drug is
imported from a permitted country; (5) if ever outside a permitted
country, the drug was under the control of the manufacturer; and (6)
the registered importer or, in the case of personal importation the
registered exporter, retains a sample of each lot sufficient for
testing. Provided these minimal requirements are met, the drug is
deemed to comply with section 501.
This means, in short, that an imported drug may consist ``in whole
or in part of any filthy, putrid, or decomposed substance.'' Its
container may be composed of a ``poisonous or deleterious substance''
that renders the contents injurious to health. It may contain an unsafe
color additive. As discussed more fully below, FDA will no longer be
instructed to interdict such a drug at the border. And because the drug
will be exempt from the adulteration provisions of section 501 that
apply to domestic products, FDA may be without authority to seize it
once it enters the stream of commerce. Indeed, even if the drug becomes
adulterated after entering the country (for example because it is held
in unsanitary conditions, causing it to become contaminated with
filth), FDA will arguably be powerless to seize it under section 304.
C. S. 334 Effectively Writes the Misbranding Provisions of Section 502
Out of the FDCA
The Dorgan bill exempts unapproved foreign drugs from 8 of the 12
basic misbranding provisions that apply under section 502 to brand and
generic drugs currently authorized for distribution in the United
States. Specifically, the bill provides in proposed section 804(g)(3)
that a commercially-imported drug will be considered ``in compliance
with section 502'' if it bears (1) a copy of the labeling approved for
the corresponding U.S. drug, (2) the name and location of the
manufacturer, (3) the lot number assigned by the manufacturer, (4) the
name, location, and registration number of the registered importer, and
(5) the National Drug Code (NDC) number assigned to the drug by the
Secretary. A personally imported drug will be considered ``in
compliance with section 502'' if its packaging and labeling comply with
all applicable regulations promulgated under sections 3 and 4 of the
Poison Prevention Packaging Act, and if its labeling includes (1)
directions for use by the consumer, (2) the lot number assigned by the
manufacturer, (3) the name and registration number of the registered
exporter, (4) if required by the Secretary, an advisory that the
product is safe and effective but not bioequivalent to the U.S. label
drug, (5) if the inactive ingredients are different from those in the
U.S. label drug, an advisory regarding allergies and a list of those
ingredients, and (6) a copy of any ``special labeling'' that would be
required by the Secretary if the U.S. label drug were dispensed in the
United States. Section 502 itself, however will not apply.
Not only does the Dorgan bill exempt foreign drugs from the
misbranding provisions of section 502, but it affirmatively requires
that these products bear inaccurate labeling.
Specifically, it requires that the FDA-approved labeling for the
corresponding U.S. drug accompany any commercially imported unapproved
foreign drug--even though the foreign drug may not be bioequivalent and
even though some of the information in the labeling may be incorrect.
Although the labeling may be amended to include a brief statement if
the drugs are not bioequivalent and must include information about
variations in inactive ingredient, the rest of the labeling will
pertain to a different drug and could be inaccurate. The foreign drug,
for example, may have been studied in different clinical trials than
those summarized in the FDA-approved labeling. As a result of a change
in the inactive ingredients, information on storage conditions and
stability may be inaccurate. FDA-approved labeling distills the
mountain of data submitted to FDA about a particular drug, including
data from all clinical and pre-clinical studies, into a set of
instructions that permits physicians to use the drug product safely and
effectively. The Dorgan bill slaps this carefully crafted labeling onto
a different drug, undermining the FDA-approved labeling and interfering
with the ability of physicians to make thoughtful prescribing
decisions.
D. S. 334 Repeals the PDMA Prohibition on Reimportation
Congress amended the FDCA in 1988 to prohibit the reimportation of
FDA-approved drug products that have circulated overseas outside the
control of the manufacturer and beyond the jurisdiction of the FDA.
Congress added this provision to seal a dangerous hole that had allowed
the introduction of counterfeit medicines in the 1980s.
In 1984, nearly 2 million counterfeits of G.D. Searle's Ovulen 21
birth control pills were found to have been shipped to Miami and New
York from Panama. In June 1985, the staff of the Subcommittee on
Oversight and Investigations of the House Committee on Energy and
Commerce published a report discussing the incident and launching the
legislative effort that would culminate in the PDMA provision
prohibiting reimportation of American-made and FDA-approved goods that
have circulated overseas. In 1985, 1,800 bottles of Eli Lilly's
antibiotic Ceclor capsules entered Miami and Boston from Singapore. The
products contained Eli Lilly's active ingredient, but the capsules,
labels, lot numbers, and packaging were all fake. The subcommittee
convened the first of eight public hearings on drug diversion and
counterfeiting on July 10, 1985. Over 2 years, the Energy and Commerce
Committee heard from State and Federal law enforcement officers,
private investigators, State drug and narcotic agents, Customs
officials, Food and Drug Administration (FDA) officials, pharmacists,
diverters, U.S. attorneys, pharmacy and pharmaceutical trade
associations, pharmaceutical sales representatives, and senior
enforcement officials from State regulatory agencies.
After this elaborate investigation, the House Energy and Commerce
Committee concluded that permitting reimportation of U.S.-origin goods
``prevents effective control or even routine knowledge of the true
sources of merchandise in a significant number of cases.'' As a result,
``pharmaceuticals which have been mislabeled, misbranded, improperly
stored or shipped, have exceeded their expiration dates, or are bald
counterfeits, are injected into the national distribution system for
ultimate sale to consumers.'' Congress amended the FDCA to prohibit the
reimportation of approved drugs that have left the United States. The
prohibition was not controversial, and it has been a significant
component of our country's defense against the surfeit of counterfeit
medicines on the global market.
The Dorgan bill reopens the American drug supply to drugs sent
overseas, shipped from country to country, passed from party to party,
and then imported to the United States by third parties that are not
affiliated with the manufacturer. If it becomes law, the Dorgan bill
will return us to a time when counterfeits entered this country under
the guise of ``American goods returned'' and jeopardized the health of
American patients.
E. S. 334 Eviscerates the Tough ``Refuse to Admit'' Rule That Applies
to Obviously Dangerous Drugs at the Border
Under section 801(a) of the FDCA, FDA must refuse entry to a drug
at the border if it appears from examination or otherwise that: (1) the
drug ``has been manufactured, processed, or packed under unsanitary
conditions,'' (2) the drug is ``forbidden or restricted in sale in the
country in which it was produced or from which it was exported,'' or
(3) the drug is ``adulterated, misbranded, or in violation of section
505.'' By mandating that FDA refuse admission to obviously violative
drug products, this provision too is an important element in the
defense of our drug supply. Yet the Dorgan bill effectively repeals it.
First, proposed section 804(g)(1) states that an imported drug must
comply with the standards in section 801(a) ``subject to paragraphs
(2), (3), and (4).'' These paragraphs, in turn, effectively delete the
requirement of approval (paragraph 2), prohibition of misbranding
(paragraph 3), and prohibition of adulteration (paragraph 4). Second,
proposed section 804(g)(5) states that an import ``may'' (but need not)
be refused admission if--among other things--the drug does not comply
with the substitute-501 or the substitute-502 provision, or the
Secretary ``becomes aware'' that the drug (1) may be counterfeit, (2)
may have been prepared, packed, or held under unsanitary conditions, or
(3) may have been manufactured, processed, packed, or held in
facilities that do not conform to GMP. Additional permissive grounds
are listed, although some make no sense. For example, the Secretary
``may'' refuse the drug admission if he has ordered that its
importation cease after review of the manufacturer's notice.
Inexplicably, it appears he may instead choose to permit that drug to
enter the country. To give another example, the Secretary may refuse
the drug admission if he has ``withdrawn approval'' of the drug under
section 505(e). Since imported foreign drugs are not ``approved'' under
section 505 in the first place, this provision may be meaningless.
In short, every ground listed in the new ``refuse to admit''
provision is permissive. The Secretary may choose--or perhaps by virtue
of resource limitations may be forced--to permit a foreign drug into
U.S. commerce even if it has been recalled, its markings appear
counterfeit, or he is aware that it was not manufactured in accordance
with GMP. Moreover, the Secretary lacks even permissive authority to
refuse admission of a drug that violates the provisions of section 501
that apply to domestic products. He thus lacks authority to stop a
product clearly composed of a ``filthy, putrid, or decomposed
substance'' or held in a container composed of a ``poisonous''
substance. And, as discussed above, because this product would be
exempt from the adulteration and misbranding provisions of sections 501
and 502, FDA may lack authority to seize the product under section 304
after it enters the stream of commerce.
iii. unsafe sources of prescription drugs.--s. 334 is fundamentally
flawed, and its implementation would put the american drug supply at
risk
The Dorgan bill creates a significant risk that poor-quality and
counterfeit drugs will be imported into this country and sold to
American consumers. First, in an apparent effort to limit importation
from the newest members of the European Union (EU), the bill draws
unworkable and unenforceable distinctions between EU member states.
Second, the bill's distribution safeguards--intended so FDA may
document and monitor the chain of custody and ensure the authenticity
of imported drugs--are inadequate. And third, the bill does not provide
FDA with enough time or money to implement its provisions safely.
A. The Dorgan Bill Draws an Unworkable and Unenforceable Distinction
Between EU Member Countries in its Definition of ``Permitted
Countries''
S. 334 authorizes commercial and personal importation of qualifying
drugs from ``permitted countries.'' It defines ``permitted country'' to
mean Australia, Canada, Japan, New Zealand, Switzerland, and any member
of the European Union except those operating under 2003 accession
treaties that include ``a transitional measure for the regulation of
human pharmaceutical products that has not expired.'' Five of the ten
countries that joined the EU on May 1, 2004, have transitional measures
of this sort in their accession treaties: Cyprus, Lithuania, Malta,
Poland, and Slovenia. The bill's definition of ``permitted country''
therefore includes the 15 ``old'' EU member states (Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
Netherlands, Portugal, Spain, Sweden, and the United Kingdom) and five
of the ten ``new'' EU member states (Estonia, Latvia, Hungary,
Slovakia, and Czech Republic). It does not include Cyprus, Lithuania,
Malta, Poland, or Slovenia. At the expiration of the relevant treaty
provision, the last in 2008, imports from these last five countries
also will be permitted.
This distinction between EU members, however, does not fully
overlap with the EU regime, and it draws distinctions between EU
products that are contrary to EU law and policy, including a founding
principle that goods should move freely between member countries. The
accession treaties for the five member states excluded by S. 334 limit
the movement of only certain drug products approved for sale prior to
accession. Other drugs approved by those members may move freely
throughout the EU. These include drugs cleared by those countries after
May 1, 2004, as well as drugs approved prior and then reapproved under
a regulatory regime that complies with EU-requirements. In contrast,
the Dorgan bill prohibits importation of all drugs from each of these
five countries until the expiration of that country's transition
period. In other words, the EU draws distinctions that the Dorgan bill
does not, and the Dorgan bill draws a distinction that the EU does not.
This fundamental asymmetry makes the Dorgan approach unworkable.
For example, even if a drug is approved throughout the European Union,
section 804(c)(2) of the Dorgan bill prohibits its import if it was
actually manufactured for distribution solely in an excluded member
state (i.e., and not also a ``permitted'' member state). While section
804(c)(5) of the Dorgan bill prohibits the importation of a drug that
has passed through an excluded member state, unless it was within the
manufacturer's control at the time. A drug may thus be imported into
the United States if it was manufactured for and exported from a
permitted country, even if it was manufactured in an excluded member
state. A product may also be imported if the manufacturer shipped the
drug to a distributor in a permitted country by way of an excluded
member state. If, however, the distributor shipped the product through
an excluded member state, the drug is no longer eligible for export to
this country. This effectively imposes tracking and chain-of-custody
requirements that do not exist under EU law.
B. S. 334 Does Not Adequately Protect the American Drug Supply From
Counterfeit and Damaged Pharmaceuticals
The Dorgan bill provisions intended to ensure that imported drugs
are both authentic and traced from manufacturer to patient are
inadequate and unrealistic. As a result, with the newly opened border,
the resulting glut of imports, and FDA's longstanding resource
constraints, the volume of counterfeit and damaged medicines that enter
the U.S. drug supply will undoubtedly increase.
In section 804(c)(3) of S. 334 registered importers and registered
exporters are required to obtain drugs directly from the manufacturer
or from an entity that agrees in a contract with the registered party
to meet certain chain-of-custody requirements. Specifically, the
contracting party must (1) provide a statement that identifies each
prior sale, purchase, or trade of the drug, (2) permit FDA to inspect
those statements and related records to confirm their accuracy, (3)
permit FDA to inspect its warehouses and other facilities, including
records, to determine whether the facilities comply with FDCA standards
applicable ``to facilities of that type in the United States,'' and (4)
ensure, through contracts if necessary, that the Secretary has the same
inspectional authority with respect to prior parties in the chain of
custody.
The bill does not give FDA regulatory authority or jurisdiction
over foreign parties in the chain of custody. The bill instead relies
upon the contractual assurances from those foreign parties that they
will honor chain-of-custody statements and permit to the Secretary to
inspect records, facilities, and warehouses. This contractual right,
presumably, would be enforced by the registered importer or exporter,
possibly only under foreign contract law. It is unclear how FDA could
enforce the requirement that a registered party ``enforce'' the
contract, under those circumstances. If a foreign party in the chain of
custody refused inspection, presumably the registered party could sue
for breach of contract. When could HHS deem the registered party to
have violated the statutory requirement to enforce the contract? For
example, if the foreign court agreed that there had been a breach but
ordered money damages instead of specific performance, perhaps then HHS
could terminate the registration--or perhaps the registrant could argue
it had adequately ``enforced'' the contract. In any event, in this
situation, there is no way for FDA to assert rights directly over the
foreign parties in the chain of custody and no recourse for U.S.
consumers who may be injured while the registrant and its
subcontractors bicker over contract terms and while FDA's hands are
tied.
The process outlined in S. 334 does not require the identification
of any repackaging or relabeling firm that had the drug product in
their custody after the product left the custody of the manufacturer,
even though these practices may increase the risk of adulteration and
the risk of contamination with counterfeits. Further, nothing in the
chain-of-custody provision addresses the risks inherent in
transshipment. During movement from permitted country to permitted
country, these drugs are out of the manufacturer's control, beyond
FDA's jurisdiction, and often exempt from local government regulation.
Lax storage, handling, and shipping could degrade the products and
endanger the patients who eventually take them.
FDA's lack of authority over foreign parties is exacerbated by the
bill's exemption of foreign commercial exporters from its registration
requirements. The bill requires two categories of entity to register:
(1) licensed pharmacies and wholesalers in the United States who import
commercial quantities of drugs ``registered importers,'' and (2)
entities in Canada ``registered exporters'' who ship medicine directly
to individuals in the United States. It does not, however, require
registered importers to purchase their supplies from registered
exporters. In other words, wholesalers and pharmacies will purchase
foreign drugs from foreign companies that are not regulated under the
FDCA and may not be regulated under foreign law.
Elsewhere the bill relies on unrealistic requirements to ensure
that the medicine supply will be protected. For example, it provides
that the Secretary must inspect registered exporters and registered
importers, and during this inspection ``verify the chain of custody''
from the manufacturer to that entity. Simply stating that the Secretary
must ``verify'' the chain, however, will not ensure that he has the
resources or information necessary to do so. While the bill calls for
the use of anti-counterfeiting and track-and-trace technology, it
admits that some drugs will lack these features, and it adds that these
drugs may not be excluded from the import chain simply because they
lack these features. A drug without such features, and with a forged
pedigree paper, may be incorrectly deemed ``verified'' even if
fraudulent and dangerous. And although the bill requires the retention
of samples, it does not require that products actually be tested--
whether for authenticity or for adulteration. Random sampling and
testing will never allow FDA to identify all counterfeit or dangerous
drugs. But it would be one means to identify some compromised drugs.
Without accompanying testing requirements, the sample retention
provision is simply a housekeeping provision in the guise of a safety
measure.
C. S. 334 Does Not Provide FDA With Sufficient Resources or Time for
Its Implementation
HHS and Customs officials have repeatedly testified to Congress
that they lack the personnel and resources to adequately enforce
existing law. The Dorgan bill would open the borders to a flood of
foreign products, without providing HHS with adequate funding to
enforce its provisions. Although the bill requires registered importers
to pay a one-time registration fee of $10,000 and thereafter inspection
fees assessed twice annually, the latter are capped at 1 percent of the
total price of the drugs imported annually under the law. (A matching
provision applies to registered exporters.) A fund consisting of 1
percent will be insufficient for FDA to undertake all the tasks
assigned to it under the bill. To give just a few examples of new tasks
to be undertaken by FDA: the agency must assign personnel to review
registration forms and changes to those forms; maintain the Web site
and staff the toll-free number that lists registered exporters and
lists notices filed by manufacturers; monitor importer and exporter
compliance with registration conditions; conduct hearings related to
suspension of registrations; conduct hearings related to termination of
registrations; conduct onsite inspections of exporters and importers at
least 12 times per year per registered party; review notices of import
shipments; verify chains of custody; inspect the facilities and records
of foreign parties in the chain of custody; inspect shipments to
determine whether they should be refused admission; calculate, assess,
and adjust inspection fees throughout the year; inspect foreign
manufacturing establishments when notices are submitted under section
804(g); undertake consumer education activities; verify that registered
exporters are authorized to dispense drugs under the law of the
permitted country in which they are located; and monitor the affixing
of markings to imported drugs. If the agency lacks sufficient resources
to police illegal imports now, how will a 1-percent user fee possibly
fund a program of this magnitude?
The bill also fails to provide FDA with adequate time to draft
implementing regulations. Under S. 334, regardless of the status of
implementing regulations, personal importation from Canada may begin 90
days after enactment. Even if FDA has not finalized implementing
regulations, commercial importation from Canada and other permitted
countries may begin 1 year after enactment. The Dorgan bill authorizes
personal importation from Canada 90 days after enactment, regardless of
whether FDA has issued implementing regulations. Commercial importation
from Canada and other permitted countries may begin 1 year after
enactment, again even if FDA has not concluded a rulemaking. This is
not enough time for the agency to complete notice and comment
rulemaking or to establish the infrastructure necessary to implement
the complex drug importation scheme embodied in S. 334. Even the
Bioterrorism law for food security provided 18 months for many parts of
the final regulations to be issued, and FDA already had food
importation authority and inspection infrastructure in place.
iv. other concerns.--s. 334 disturbs the balance between innovation and
generic entry struck by congress in 1984 and affirmed in 2003
The Hatch-Waxman Act was the culmination of years of legislative
consideration as to the proper balance between making available lower
cost generic drugs and creating an incentive for pharmaceuticals
innovation. The result was a compromise between the research-based and
generic industries whereby generic manufacturers obtained the ability
to gain approval based upon proprietary innovator data and to infringe
patents prior to expiration in order to conduct tests necessary for FDA
approval. In return, pioneers were promised the restoration of a
portion of the patent term lost to FDA review, a meaningful opportunity
to vindicate patent rights prior to generic approval and market entry,
and limitations on generic companies' use of their proprietary data.
Congress affirmed this compromise in 2003 in the Medicare Modernization
Act (MMA). The Dorgan bill threatens to destroy it.
S. 334 undercuts the very incentive to innovate that Congress
sought to provide in the Hatch-Waxman Act and preserve in the MMA. The
bill adds a new provision to the Patent Act that would adversely affect
patent rights that are an important incentive for innovation. Under the
provision, it is not an act of patent infringement to use, offer to
sell, sell within the United States, or import into the United States
any patented invention under section 804 that was first sold abroad by
or under the authority of the owner or licensee of such patent. This
overturns settled law. And only the pharmaceutical industry is singled
out for this treatment. Indeed, the very concept of foreign drug
importation threatens U.S. innovation. Following approval of an
innovative new drug in the United States, there will be immediate
market penetration by a price-controlled foreign import. This will
eviscerate the market for the innovator product, effectively
eliminating the intellectual property protection that otherwise allows
innovators to recoup their investment in research and development.
v. unsafe internet pharmacies.--s. 334's internet pharmacy provisions
create an illusion of safety without fully addressing rogue internet
pharmacies
As the Surgeon General's task force pointed out in December, many
drugs sold over the Internet are sold by ``rogue'' pharmacies, which
claim that their products are ``FDA-approved drugs,'' even though the
drugs are not. Further, as FDA witnesses testified before Congress last
year, some sites falsely purport to be ``Canadian'' pharmacies. The
drugs they sell--which could be counterfeits or even toxic--may in fact
be shipped from countries with very ineffective pharmaceutical
regulatory systems. The Dorgan bill requires that domestic Internet
pharmacies have a ``qualifying medical relationship'' with their
patients and include certain identifying information on their Web
sites. But these provisions are inadequate to assure the safety of
consumers. The bill does not require Internet pharmacies to be
certified as legitimate businesses--let alone require them to register
with or seek the approval of the government before operating. It does
not ensure adequate tracking of adverse events linked to drugs
dispensed over the Internet. It does not require Internet pharmacies to
establish systems for addressing consumer complaints. It does not
establish a mechanism for effective recalls of drugs distributed
through the Internet. It does not address the problematic practice of
Internet pharmacies requiring a waiver of liability from purchasers.
This timid step toward regulating Internet pharmacy may create the
illusion of safety without actually reforming the Internet pharmacy
industry and protecting American consumers from unsafe and/or
ineffective prescription drugs.
vi. the dorgan bill should be rejected for failure to ensure the safety
of american patients
The Dorgan bill lacks provisions that would allow HHS to stop
importation if it proves dangerous. For example, the bill does not
instruct HHS, or anyone else, to evaluate the impact of the importation
program on patient safety or drug costs. It appears to be permanent;
there is no sunset or opportunity for Congress to assess, modify, and
reauthorize its provisions in the light of experience. There is no
provision for suspension of the program if patients begin to die. In
fact, although the Secretary may impose ``other'' requirements on
registered importers and registered exporters in order to protect ``the
public health,'' the bill expressly provides that he must still permit
both personal and commercial importation. In other words, even if a
particular requirement or standard is essential to protect the public
from an imminent danger, if importers and exporters are unable to meet
it, the Secretary may not impose it. The Dorgan bill does not even
contemplate a pilot program, which might allow HHS to test the impact
of importation in a controlled setting before throwing open the borders
nationwide. Indeed, even if personal importation from Canada proves
unsafe in the first year, the Secretary may not limit the number of
permitted countries from which commercial importation begins in the
second year.
In light of the evidence in the preceding pages, it is difficult to
understand why Congress would even consider passing the Dorgan bill.
[Whereupon, at 12:10 p.m., the hearing was adjourned.]