[Senate Hearing 109-70]
[From the U.S. Government Publishing Office]
S. Hrg. 109-70
DRUG IMPORTATION: THE REALITIES OF SAFETY AND SECURITY
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HEARING
before the
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
ON
8
EXAMINING THE REALITIES OF SAFETY AND SECURITY REGARDING DRUG
IMPORTATION
__________
FEBRUARY 16, 2005
__________
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
JUDD GREGG, New Hampshire, Chairman
BILL FRIST, Tennessee EDWARD M. KENNEDY, Massachusetts
MICHAEL B. ENZI, Wyoming CHRISTOPHER J. DODD, Connecticut
LAMAR ALEXANDER, Tennessee TOM HARKIN, Iowa
CHRISTOPHER S. BOND, Missouri BARBARA A. MIKULSKI, Maryland
MIKE DeWINE, Ohio JAMES M. JEFFORDS (I), Vermont
PAT ROBERTS, Kansas JEFF BINGAMAN, New Mexico
JEFF SESSIONS, Alabama PATTY MURRAY, Washington
JOHN ENSIGN, Nevada JACK REED, Rhode Island
LINDSEY GRAHAM, South Carolina JOHN EDWARDS, North Carolina
JOHN WARNER, Virginia HILLARY RODHAM CLINTON, New York
Sharon R. Soderstrom, Staff Director
J. Michael Myers, Minority Staff Director and Chief Counsel
C O N T E N T S
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STATEMENTS
WEDNESDAY, FEBRUARY 16, 2005
Page
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming.. 1
Kennedy, Hon. Edward M., a U.S. Senator from the State of
Massachusetts.................................................. 2
Carmona, Hon. Richard, M.D., M.P.H., F.A.C.S., Surgeon General,
U.S. Public Health Service, Department of Health and Human
Services, Washington, DC....................................... 4
Prepared statement........................................... 14
Pawlenty, Hon. Tim, Governor of the State of Minnesota, St. Paul,
MN............................................................. 18
Prepared statement........................................... 19
Gray, John M., President and CEO, Healthcare Distribution
Management Association (HDMA), Reston, VA...................... 22
Prepared statement........................................... 24
Catizone, Carmen A., MS, RPh, DPh, Executive Director/Secretary,
National Association of Boards of Pharmacy..................... 27
Prepared statement........................................... 29
Rost, Peter, M.D., Vice President of Marketing for Endocrine
Care, Pfizer................................................... 34
Prepared statement........................................... 35
Additional Material
Statements, articles, publications, letters, etc.:
Pfizer, Inc.................................................. 45
Vitter, David, a U.S. Senator from the State of Louisiana,
prepared statement......................................... 48
American Pharmacists Association (APhA)...................... 49
Allergan, Inc................................................ 52
Response to Questions of Senator Kennedy by Richard Carmona.. 54
Response to Questions of Senator Hatch by Richard Carmona.... 55
Response to Questions of Senator Enzi by Carmen Catizone..... 56
Response to Questions of Senator Enzi by John Gray........... 56
Response to Questions of Senator Enzi by Governor Tim
Pawlenty................................................... 57
Response to Questions of Senator Hatch by Governor Tim
Pawlenty................................................... 59
Response to Questions of the Committee by Peter Rost, M.D.... 60
DRUG IMPORTATION: THE REALITIES OF SAFETY AND SECURITY
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WEDNESDAY, FEBRUARY 16, 2005
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, D.C.
The committee met, pursuant to notice, at 10:01 a.m. in
room SD-430, Dirksen Senate Office Building, Hon. Mike Enzi
(chairman of the committee) presiding.
Present: Senators Enzi, Alexander, Burr, Kennedy, and
Murray.
Opening Statement of Senator Enzi
The Chairman. I will go ahead and call to order this
hearing on Drug Importation: The Realities of Safety and
Security.
Our real purpose in having this series of hearings that we
are going to be having is to find out as much as we can about
drug reimportation before we do legislation. I know in the
ether of Washington, where there are ideas just zipping around
in the air all the time, it is kind of hard to hold up and get
the information before we grab the answers out of the air, but
that is what we are going to try to do with this series, and of
course, today, we will focus on the recently released report by
a Health and Human Services task force on drug importation that
was mandated by the Medicare Modernization Act, and tomorrow,
we will be looking at the Department of Commerce's report on
price controls overseas and their implications for American
consumers.
We want to get into all of the aspects of the drug industry
that we possibly can. They have done a marvelous job on coming
up with treatments for virtually every disease or on the way to
getting one for every disease, both treatment and prevention. I
have noticed that there is a relationship between the number of
people affected and the price that can be charged and whether
there is a solution out there yet for that particular illness.
It all has to be balanced with how we are affected by our
need for pharmacists in the United States, and of course, I am
a big believer in Main Street and the relationship between the
pharmacist and the individual, and I am real pleased with the
program that they have where they help review the prescriptions
that people have and, in some cases, suggest generics, and at
any rate, are saving millions of dollars for people across the
United States through that mechanism.
People probably would not even be considering ordering
drugs from overseas, except that we have gotten used to using
the Internet and have found advantages that the Internet
provides, so I do believe that we can develop an import plan to
import prescription drugs from other countries and still
maintain the level of safety and effectiveness that Americans
have come to expect and demand. In fact, drug reimportation
probably cannot happen unless we can guarantee those things.
So today, we are taking the first step in this process and
focusing our attention on the results of this study. The task
force did identify challenges that we have to address if we are
to create a feasible drug importation system, and this will
give us the opportunity to examine the results of the report in
detail.
I appreciate all those who will be testifying today. If we
are going to open our borders to prescription medications, we
had better be sure how we are going to do it and how it will
operate, both in the short-term and in the long run. We have to
do it right, and getting our questions answered today will be
the first step in that process.
Senator Kennedy.
Opening Statement of Senator Kennedy
Senator Kennedy. Thank you. Thank you very much, Mr.
Chairman.
I want to thank our Chairman Enzi for having this series of
hearings. As he has pointed out, drug importation has been an
issue that we have considered on the floor. Legislation has
been introduced. Unlike many other times when we are
considering public policy, we have the examples of what is
happening out in the real world in a number of communities, in
a number of States around our country.
The United States spend the most in investing in
prescription drugs. We then develop these drugs, and I am a
great believer that we are living in the period of the life
sciences. What we have seen achieved in recent years I think
will pale to what the potential breakthroughs will be in these
next several years, and the impact on life and on our families,
I think, is just going to be extraordinary. If we get a
breakthrough with Alzheimer's, we will empty two-thirds of the
hospital beds in my State of Massachusetts. The opportunities
that are out there are just breathtaking.
But as we spend the most, we also charge the most, and we
know that there are similar or the same drugs that are being
sold in other countries that are vastly more reasonable and at
a lesser price. The real question that our seniors have gotten
way ahead of the political leadership on, and understand, is
why should we not be able to take advantage of these?
We hear a lot of reasons for it, safety being the most
compelling, as well as the impact of taking this course of
action on profits and what that will mean in terms of
breakthrough on future drugs. We can examine that issue, which
we have been unable to really understand completely over the 40
years I have been in the United States Senate, and I doubt if
we will ever be able completely to understand that whole issue
of profits and the companies.
But we have seen some extraordinary efforts by communities.
In Massachusetts, the city of Springfield has been using
Canadian pharmacies to provide prescription drugs for its city
employees and retirees. Springfield's example led the way for
other cities such as Boston to do the same, and whole States
are involved as well, as Governor Pawlenty will tell us. The
Internet revolution, as the Chairman mentioned, vastly expanded
the opportunity, enabling patients across America to go to
Canada on the Internet and save thousands of dollars a year on
prescriptions. Meanwhile, the European Union has had parallel
trade in drugs, one member nation to another, for decades, and
as we will hear from Dr. Rost, parallel trade in Europe is
safe, and it saves money.
American experiences such as Springfield's and Minnesota's
and the European experience with parallel trade show us that we
can import drugs safely and that importation will make drugs
more affordable. Access to affordable drugs is critical to
patients, in Springfield and in Boston and every city and town
in Massachusetts; in fact, it is critical to patients in every
American State.
Senators Dorgan, Snowe, Grassley, McCain, Jeffords,
Clinton, Bingaman and I introduced last week S. 334 to allow
the importation of safe, FDA-approved drugs manufactured in
plants inspected by the FDA, and we hope it will be enacted
quickly this year. It will allow American patients to buy safe
drugs at the fair price that Canadians and Europeans pay, not
the exorbitant prices that patients are forced to pay here in
the United States.
Finally, President Bush has threatened to veto any attempt
to change the new Medicare prescription drug law, and I agree
that nothing should be done to weaken an already weak drug
benefit. We are talking today about the safe importation of
prescription drugs from Canada and Europe, but I believe that
the White House should consider an additional common sense step
as well to curb the costs of the new Medicare law and ensure a
better drug benefit for seniors and the disabled.
By allowing the Medicare program to negotiate fair prices
with drug manufacturers, we could save up to $190 billion over
the next decades. The Veterans Administration has such
negotiating authority and it has used it wisely to cut costs
and help our veterans with their prescription drug needs, and I
believe that this is a practical step the White House should
consider as well.
I want to join in welcoming our Surgeon General Carmona and
Governor Pawlenty and our other witnesses today, and I again
express appreciation to our Chair for having this hearing.
Thank you.
The Chairman. Well, I thank you, and thank you for the bill
that you have submitted and the other bills that have been
submitted by other individuals dealing with drug reimportation.
I think that from the range of interest that we have on it, we
will be able to come up with some good conclusions.
I particularly want to thank Dr. Carmona, the Surgeon
General, for his work on the special task force that came up
with the drug importation report. I thank him for summarizing
it in his testimony and then I hesitate but will ask that he
summarize the summarization, assuming that everyone who has
been here today will have already read both the full report and
your summary so that we can get--I know there are a lot of
questions that people have that they are really interested in
directing at you, so we appreciate that opportunity.
Dr. Carmona.
STATEMENT OF HON. RICHARD CARMONA, M.D., M.P.H.,
F.A.C.S., SURGEON GENERAL, U.S. PUBLIC HEALTH SERVICE,
DEPARTMENT OF HEALTH AND HUMAN SERVICES,
WASHINGTON, DC
Dr. Carmona. Thank you, Mr. Chairman and Senator Kennedy,
other distinguished members of the committee.
Thank you for asking me to join you today. My name is
Richard Carmona. I am the United States Surgeon General. I was
also the chairman of the HHS Task Force on Drug Importation,
which was comprised of 13 senior executives with diverse
experience from across the Federal Government. In February
2004, then-Secretary Tommy Thompson created the task force to
advise him on questions posed by Congress in the Medicare
Modernization Act about the safety issues surrounding the
importation of prescription drugs.
As you know, the role of the Surgeon General is to protect
and promote the health and well-being of the American people.
Everything I do as Surgeon General is based in science, and
that was my guiding principle in leading this task force. We
went where the facts and the science led us. In doing so, we
also ensured an open and transparent process. The task force
held six listening sessions, heard from more than 100
presenters, and received information from over 100 individuals
and organizations via our online docket.
In addition, I led a site visit to the John F. Kennedy
International Airport in New York City to see how imported
drugs are processed by U.S. Customs and Border Protection and
by officials of the Food and Drug Administration. The visit
demonstrated to us the huge challenge of ensuring the safety of
imported drugs.
After that site visit and after listening to all of the
presenters, reading the statements and studying the science,
the task force produced a comprehensive 127-page report. The
report has eight key findings. They are: our current system of
drug regulation has been very effective in protecting the
public safety, but it is facing new threats. Any change to our
current regulatory system must be done with great care to
ensure the continued safety and efficacy of our Nation's drug
supply.
Two, there are significant risks associated with the
current illegal importation of drugs for personal use. To name
just a few, there are 355 points of entry for access into the
United States. This includes 14 international mail branches, 29
express consignment facilities and 312 ports. FDA inspectors
are already stretched thin reviewing the millions of
prescription drug packages that currently pass through those
points of entry each year.
We all know that illegally purchasing prescription drugs
over the Internet without a prescription is relatively easy to
do. The reality is that this lack of relationship between a
doctor and a patient is extremely dangerous and potentially
fatal. Although some licensed Internet pharmacies provide a
legitimate way to buy medicines, many Internet pharmacies are
not licensed. They are rogue operations that pretend to be
legitimate and are actually providing dangerous products, and
by dangerous, I mean that these drugs are often grossly
mislabeled, expired, subpotent, superpotent or placebos and
have usually been transported improperly with a complete
disregard for safety precautions.
Three, the task force found that it would be
extraordinarily difficult and costly for personal importation
to be implemented in a way that would ensure the safety and
effectiveness of all prescription drugs.
Four, looking at commercial prescription drug importation,
the overall national savings would likely be small. Building
the infrastructure to support commercial importation would cost
a tremendous amount of money and require significant changes in
the law. Consequently, the savings to consumers would be less
than 1 percent of total spending, while intermediaries would
probably capture any other savings.
The public expectation that imported drugs are less
expensive than American drugs is generally not true; example:
the prices of generic drugs in other countries are on average
50 percent more than prices that Americans pay for the same
generic drugs.
Six, legalized importation would most likely reduce the
future development of new drugs for American consumers. It is
no secret that pharmaceutical research and development spending
may drop. This would result in fewer new drugs at a higher cost
to Americans' health and well-being.
Seven, the effects of importation on intellectual property
rights are also likely to be significant, and finally, the task
force concluded that importation raises new liability concerns
for consumers, manufacturers, distributors, pharmacies and
other entities.
In closing, I want to state that like you, I truly
appreciate the critical role of prescription drugs in our
public health system. Science has brought us medications that
can reduce the risk of heart attack and stroke, lower blood
pressure, cure infection and save and enhance life. We must
find more ways to provide these life-saving medicines to those
who need them. This is being addressed, in part, through the
Medicare Modernization Act and the new Medicare drug discount
card.
Today, millions more seniors have access to the drugs they
need, and when the Medicare Modernization Act is fully
implemented less than a year from now, more seniors will have
even more access to the benefits provided by the new law. There
are other ways for consumers to save money on prescription
drugs. Over the past few years, the FDA has worked hard to
speed generic drug approvals and availability, and consumers
are being encouraged to comparison shop and to ask their doctor
or pharmacist for money-saving generic alternatives.
Mr. Chairman, this concludes my oral statement. I would ask
that you accept my full written statement for the record. Thank
you, and of course, I would be happy to answer any questions.
The Chairman. Your full written statement will be a part of
the record. We will be encouraging everybody to look at the
report as well as your full statement, and I appreciate the
excellent summary that you have given, and I particularly was
impressed with the number of hearings and people that you
talked to, so our hearing is just kind of a summing down of all
of the work that you did before, and of course, something gets
lost in the translation every time there is one of those
reductions in information, but I do appreciate all of the
effort that you have gone to and the way that you presented it
to us.
You suggest that personal importation is not feasible
because of the volume of packages that would need to be
inspected, and I assume that this is something that you
presented, too, showing the numerous pictures here of the
volume that are being inspected, and it assumes that we would
expect the FDA to inspect every package.
What if we gave the FDA the authority to approve domestic
and foreign Internet pharmacies and gave consumers the
information they needed to know that these pharmacies has been
approved by the FDA and that the buyer should beware of the
rest of the Internet and possible hacking into the Internet?
Would that be a viable way to address the safety concerns
without expecting the FDA to inspect every package that comes
through the mail?
Dr. Carmona. Well, sir, I think that the premise you raise
is an interesting one, but whatever Congress choses to consider
as a program of importation, we would need to still make sure
that the Internet pharmacies were regulated; that there was a
pedigree established for each and every medication from the
time of its production to the time it reaches that pharmacy and
to the time it is distributed so that the patient at the other
end can be certainly assured that the medication that they have
is truly safe and effective and not one of the adulterated
medications that we have seen so much of like in the pictures
that you have seen here at the JFK center.
So certainly, Internet is one of the many options that
could be considered if Congress decides to go on that path. I
would just suggest that there still needs to be a process in
place to ensure everything from the manufacturing to the
distribution, a so-called pedigree that is established, so that
every citizen is sure that they have a safe medication when
they get it.
The Chairman. Thank you. Leaving the safety of the Internet
and moving to the promise of anticounterfeiting technology to
help ensure the safety and authenticity of prescription drugs,
while this technology sounds promising, until it is universally
adopted, I do not think it can be relied upon to secure safety,
efficacy and integrity of the global market to safely import
prescription drugs.
I am concerned that the potential cost of keeping such
technology current would raise the cost of imported medicines
to the point where they really would not be cost-saving to the
consumers. Could you tell me anything about the cost of those
technologies and how often they might have to be changed in
order to stay ahead of the counterfeiter?
Dr. Carmona. Yes, sir, in our committee, we actually asked
experts to come forward and give us information on what the
state-of-the-art was for so-called track and trace technology,
like RFID, the radio frequency ID just being one example. In
the United States now, there is considerable research going on
in this area, and in some areas, there are tests going on to
determine just how effective these types of technology are.
But as you implied in your question to me, this is a global
issue, and we are far ahead of many other countries in this
area. So for us to be able to use that effectively and partner
with other countries for importation or reimportation, they
would have to also engage in this technology, and we would have
to have once again a method for tracking and tracing every
single medication.
The costs are very difficult to estimate. We did ask the
experts during the hearing. Obviously, technology development
and application is expensive. Experts have told us that once in
place, this technology would have to be changed fairly
frequently or modified, because the fact is that there will be
others out there who will figure out the system and be able to
circumvent the processes we put in place.
So as with many technologies that are used to protect the
consumer, we have to stay one step ahead, I mean, just like our
engravers do at the Mint with the dollar bill; you know, every
so often, they have to change colors and holograms and so on,
because there are those that figure out the process and use it
against us.
The Chairman. Thank you. As your report noted, allowing the
importation of patented pharmaceuticals would impact the
intellectual property rights of the developers of
pharmaceutical products. I am concerned that this would result
in a reduction in research and development spent on
pharmaceuticals. Has HHS determined whether the incentives to
invest in R&D would be diminished by legalizing drug
importation? Can you discuss the impact of a reduction in R&D
on pharmaceutical innovation and how that, in turn, could
impact America's access to pharmaceuticals?
Dr. Carmona. Yes, sir, these are some of the questions that
we posed to the experts who came before us. The task force,
being very diverse and certainly having knowledge in some of
these areas, none of us really had the broader expertise that
would be required. So we actively sought out experts to come
and talk to us about these issues, property rights,
intellectual property rights, patent rights and so on.
There is a concern that certainly, any importation program
could have the potential effect of eroding research and
development in this country by disincentivizing, if you will,
those who invest in this very robust market. We heard time and
time again how the United States is the economic pharmaceutical
engine for the world, the research engine for the world. You
know, we were very careful to ask questions as to what would be
the short and long term consequences of any importation.
We heard time and time again from economists as well as
scientists, you must be careful if you go down that path,
because there is a chance that in the long run, you may
undermine this very robust industry because people will not be
willing to invest as they have now.
The Chairman. Thank you. My time has expired.
Senator Kennedy.
Senator Kennedy. Thank you very much.
Of course, those companies are still making a substantial
profit, even when they sell it at a cheaper price abroad. You
make an extraordinarily compelling case, which I think all of
us agree with, and that is that an unregulated black market
system has all kinds of dangers for the American consumer. We
all agree with that. That is not what we are talking about in
the legislation that we have introduced. The former head of the
FDA has testified, Mark McClellan, that you can get safe
prescription drugs in a Canadian pharmacy.
Dr. Carmona. Yes, sir.
Senator Kennedy. We reviewed, when we passed the FDA
legislation in 1997, what different countries in Western Europe
and other countries around the world do to regulate drugs. The
Canadians have a first rate system that is respected, as Mark
McClellan, the former head of FDA, said. Now, if they have a
sound system, why can we not find a regulated system like those
tried in Massachusetts or Minnesota or Illinois and make
importation from Canada safe?
Dr. Carmona. Senator, thank you for your question.
We do agree, and I agree with my colleague Mark McClellan
that the Canadian system, that part which is regulated, in
fact, meets standards much like our own, that Canadian citizens
can rest assured that the medications they get from their
regulated pharmacies are good. What we found, though, Senator,
is that when we looked at the data from Customs and Border
Protection and others, we went and visited the JFK facility,
that there are many out there that are purporting to be
Canadian pharmacies. In fact, we found hundreds of Web sites
purporting to be Canadian pharmacies when really, they were
offshore gimmicks that were perpetrated on the public.
In fact, we saw some with FDA seals of approval on them
which we had no knowledge of. When we went to the JFK facility,
and you have some of the pictures there, we saw hundreds and
hundreds of packages that come in on a daily basis, some of
them Internet, some of them mail, but all of them that we saw
were dangerous, because they were improperly stored, they were
improperly transported, they were knockoffs; in fact, fakes, in
some cases, using what looked to be a normal American label but
in fact the medication inside was not that.
Senator Kennedy. Well, are we talking then about a
technology to identify for consumers the legitimate licensed
Canadian Internet pharmacies?
Dr. Carmona. Yes, sir, that is actually one of the things
that we would recommend, that if Congress chooses to go down
that path that we should certainly define the system. It should
stay a closed system, one that is very well defined by you all,
and then have the appropriate technology in place to ensure the
pedigree of any medication.
Senator Kennedy. Well, I think that is certainly what our
legislation does, but what is your reaction to--I know the task
force reaction--what happens in Europe with the kinds of
reimportation programs that they have there and that apparently
have demonstrated safety and have also had impact in terms of
savings for consumers.
Dr. Carmona. In some of the areas that we looked at, you
are right, Senator, that when there is trade that is clearly
regulated and standardized in pharmaceuticals, it can be done
safely. As you say, some of the EU countries have demonstrated
that. However, the standard that we have established in the
United States for safety and pedigree establishment often
exceeds what has been done in the EU, so yes, it can be done,
and we fully support that.
My input to Congress would be any program that you would be
willing to entertain that first should be closed. It should be
well-defined. We should know every single point of entry and
transport of those medications, manufacture, and it should be
regulated to the highest standards, which really, our FDA has
established for the world.
Senator Kennedy. Well, I agree with you, and that is why I
hope, Mr. Chairman, we are going to be able to make some
progress on this, because that is certainly what we have
attempted to do with our legislation, the bipartisan bill S.
334. There is the question whether the European situation is
quite the same as ours, but, of course, they have different
languages, so they need different labels. They still have an
outstanding record of safety. We are going to hear more about
it.
I think we are going to hear later about these programs,
both in Minnesota and in my own State, Springfield, that have
had very considerable success. My own sense is that if you have
ideas, we want to work with you as a result of that task force
to assure that we get the best in terms of safety. You have
done a good deal of research in this area. I think you have
outlined the kind of gold standard of what is necessary in
terms of safety, and we will certainly want to work with you in
the development of our legislation if there can be improvement.
I think in another hearing one of my colleagues, Senator
Clinton, asked whether you had had a chance to review our
legislation, but I think I will hold on asking you about that.
I will submit some other questions just on generics, and I
appreciate your presence here.
My time is up, Mr. Chairman.
The Chairman. We can easily do another round here----
Senator Kennedy. Okay.
The Chairman. Because--
[Laughter.]
Senator Kennedy. I like your style.
The Chairman. We do not have a lot of people waiting to ask
questions.
[Laughter.]
Which really surprises me, because there has been so much
attention to this. I am not sure whether they feel that they
have the answers due to the completeness of the report that you
did or whether there is some other reason that we do not have
more people at the hearing.
On Monday, I was on CNBC briefly for--I think that was my
fourth national appearance in my 8 years of being here.
[Laughter.]
I am a little reluctant to do that sort of thing, but the
program started off with a Canadian minister talking about what
is about to happen to their market, and he said that they only
have 40 million people up there and not all of those are using
prescriptions, and those are coming largely from the United
States. He knew that the United States had 240 million people,
and he hoped that our request for pharmaceuticals out of his
country did not swamp them so bad that they could not have any.
I was listening to some of the detriments that he pointed
out that we would encounter trying to go through their market
to get things for our market. One of the things I am going to
be doing and have started already doing as Chairman is to sit
down with various groups, the doctors, other providers, the
lawyers, the insurance companies, the pharmaceutical companies
and even in so far as possible, the customers, which are the
patients.
What I have been asking each of them is what can you do to
increase access, provide more quality and keep the cost down?
Of course, the first reaction by everybody is to say what the
lawyers can do or what the insurance company can do and what
the doctors can do. No, no, that is not what we are trying to
do here. I want to know what you can do to hold down the costs,
to increase quality and access.
Once they start thinking about it, I am really pleased with
the ideas that people have come up with for ways that they can
participate, and I think that may provide us with some
solutions on all of this. On pharmaceuticals, it seems a little
convoluted to me to have to go through Canada or any other
country to get lower-cost pharmaceuticals, and I did note the
concern of the Canadian minister.
Getting back to the questions here, in order to truly
implement safe importation, pending proposals rely on this
pedigree that you have mentioned several times or paperwork
that can accompany the drugs from the foreign suppliers to the
exporters in this country. Now, counterfeiters are able to copy
packaging, the holograms, security mechanisms, the shape of the
pill, the kind of the bottle. We have had the FDA testify
before on kinds of problems that they see.
Now, in terms of working with other countries in the
context of this commercial importation, how would we ensure the
authenticity of these paper pedigrees and verify that it is
indeed an authentic document and not something made on
somebody's computer or at the local Kinko's? Would other
countries have to agree to assure the accuracy of those
pedigrees, or would those kinds of arrangements have to be in
place prior to implementation and then change fairly
frequently?
So what have you learned about the willingness of other
countries to do this?
Dr. Carmona. We reached out, Senator, to any and all
countries who would weigh in on this, and really, Switzerland
and Canada were our big takers. There were not a lot of people
interested, because they recognized, we heard, the cost of
developing such a system: you are right in that looking at the
global marketplace, whoever we decided to partner with would
have to embrace the same technology, because what we would be
doing is interconnectiveness in a newly-established system,
whichever country we were working with.
It really goes far beyond paper. What we are really talking
is more advanced technology, which is electronic. There really
does not have to be movement of paper. Tracking and tracing
technology can be done all electronically. But you still have
to stay a step ahead of your adversaries, who are always going
to be looking to figure out a way to make that hologram the
same way you do or the watermark in the medication or somehow
get themselves into our system so that they can, you know,
potentially put counterfeit medications in there.
So we are concerned about that. But the underlying premise
is true: we would have to form partnerships, and other
countries who would want to engage in this type of trade with
us would have to fully embrace this technology and the
philosophy of the system that we are creating, yes, sir.
The Chairman. Thank you, now, my understanding is that the
European Union does not allow importation from outside its
borders; is that correct?
Dr. Carmona. Generally speaking, sir, the European Union
acts much like our States do. There is State regulation, and
they have relationships between countries that are still
blossoming in the new EU, but in general, that is correct.
The Chairman. Okay, thank you, and one more very quick
question: you mentioned that the FDA seal of approval is being
used on some Web sites that definitely are not approved by the
FDA. Is there any kind of international enforcement against
that, and where would that take place?
Dr. Carmona. Well, it is very limited, sir, and that is why
some of the folks that we found that were doing these things
are very clever. They will put a Web site up in Canada and have
a name that implies they are a Canadian-sanctioned
organization, which lets people believe, oh, Canada has similar
standards to the United States; then, it must be safe.
The fact is that the Canadian Government has told us
repeatedly they do not regulate those sites. They regulate the
pharmaceuticals in Canada for use by their citizens. So anybody
can come, spend $50, put a Web site up, and what we have found,
our investigators have found, that often, the billing is
offshore someplace. The drug is being made in some country far,
far away from here, not in Canada. Canada is used as a
passthrough so that they can call it a Canadian drug, and the
bottom line is the public gets something that we have no idea
if it is safe or effective or could even be harmful to the
public.
We have seen that quite often, both at the JFK Center as
well as the Internet sites that our staff, FDA and DEA and
Customs and Border Protection have investigated.
The Chairman. Thank you. My time has expired again.
Senator Kennedy.
Senator Kennedy. Just quickly, did you examine any of the
existing city or State import programs in terms of safety? Did
you look at any of those States?
Dr. Carmona. Senator, we did not look at them specifically.
We did have some of the governors and State officials come and
speak to us about their programs, but we stuck with the
questions that were posed to us by Congress, and we did not go
off on many of those tangents to, you know, look at if those
systems were safe and effective and so on.
Senator Kennedy. Because I have been impressed by the
success, first of all, in safety. In Springfield, MA, a
determination was made about a certain Canadian pharmacy that
was highly regarded, and Springfield worked out the contractual
arrangements with tens of thousands of dollars in savings. When
FDA looked at this pharmacy, they had one bad case with
insulin. Our legislation does not permit importation of
insulin, in part, because of the refrigeration issues.
But other States, as I understand we will hear from
Governor Pawlenty, have a Web site which identifies legitimate
Canadian pharmacies. Although I suppose people can try to hack
into the site to disrupt it like they can any other site--and
it has worked. Illinois has used their State Board of Health,
and they went up and examined the companies themselves that
they were going to import from and have very much involved
local pharmacies to give patients guidance, and they have had a
very impressive program. Other States in that region now are
joining it.
So these programs and our legislation has a way a way of
proceeding that I think does about as much as you can do in
terms of safety, and listening to your comments, I think,
certainly, we would meet your criteria. We will, as I mentioned
earlier, work with you, because I think there are a variety of
different ways of doing it. I think these States, these
governors, these mayors, have put safety as a first priority.
Nothing is going to be 100 percent perfect in this world, but
the difference that it makes in terms of prescription drugs,
which are so necessary to the health of many of our seniors and
others, has just been extremely dramatic, and when we are not
having negotiated prices for the Medicare prescription drug
benefit, as we do in the VA system, our seniors are under
incredible pressure, and I think this fairly cries out for
action. But again, I want to thank you and indicate that we
will certainly work with you and your task force to give the
highest priority to the issues of safety.
I wanted to just mention, Mr. Chairman, on the question we
have for why some of our colleagues are not here. We have
Secretary Rice, who just returned, appearing before the Foreign
Relations Committee. Senator Dodd is over there. In EPW, on
clear skies, we have Senator Jeffords and Senator Clinton. In
the Banking Committee, we have Secretary Levitt in the Finance
Committee and Mr. Greenspan in the Banking Committee, so there
are a lot of pressures on our colleagues. I know, as you do on
your side, the great interest in this issue, because this is
really a bipartisan issue of great concern to our seniors and
others.
The Chairman. Right, you and I will be working with the
other members of the committee to come up with some solutions.
Senator Murray.
Senator Murray. Thank you, Mr. Chairman. I really
appreciate your holding this hearing. I think it is really an
important one. We do hear a lot about reimportation at home,
and Dr. Carmona, thank you so much for coming and testifying on
the work of your committee.
I always worry when we start talking about reimportation
that we are not looking at a lot of the real issues that are
facing us in terms of prescription drugs, the coverage gap with
Medicare and 44 million people who are uninsured today who do
not have access to any health care whatsoever. When we talk
about reimportation, it is not going to deal with a number of
the issues that really are impacting our health care, but it is
an issue out there and one that we need to really understand
what we are doing. I have always been concerned about the
safety and efficacy of our drugs and want to make sure that if
we move down this road, we do it correctly, so I appreciate the
work that you and the task force have done.
One of the interesting findings that I saw was the degree
to which consumers are already importing drugs into the United
States for personal use, and I know we have had previous
hearings where we have seen drugs that have come in from China
and Belize with Web sites someplace else, and we have had
testimony from families that have been impacted by drugs that
have come in that have had devastating effects.
So we have to be careful what we do. I wanted the chance to
ask you this morning, how do we protect consumers from the
risks of reimportation or from purchasing on the Internet?
Dr. Carmona. Senator, I think that our most important
endeavor in this task force is the safety to our citizens, as I
know it is for you. The way to do that is to make sure that
whatever system Congress decides on that it is what we would
define as a closed system, and closed meaning we have hundreds
and hundreds of portals of entry around the country, and if you
then look at each individual being able to import whenever they
want, you have thousands of combinations and permutations, and
we cannot guarantee safety.
A closed system would say these are the sites we can deal
with, whether Internet or fixed. These are the sites that the
FDA will have authority to work with and make sure that the
processes are up to standard, that packaging, marketing, et
cetera, transport of the medication, a pedigree is established.
So I think the underlying premise is that whichever path
Congress decides to take that we make sure the system is
prospectively well-defined, and we can ensure the pedigree of
each and every medication that comes to us from any source.
Senator Murray. I noticed that the task force asked for
comments from foreign governments about their willingness or
ability to implement new or additional protections to ensure
safety. Did you get any comments from any foreign governments?
Dr. Carmona. Senator, very few. We heard through the
grapevine, if you will, that most did not want to comment. They
recognized the extreme cost and some of the economic burden it
may place on them to look at this kind of trade. We did hear
from Canada, of course, because that was the driving force. We
heard also from Switzerland, but very limited remarks in this
area.
But we feel, though, strongly that any partnerships that
were created, that the partner would really have to embrace the
technology and the concept of pedigree to ensure safety on both
sides.
Senator Murray. Can we assume that Canada has the same drug
approval and safety standards that we do or not?
Dr. Carmona. According to our FDA experts, I have been told
that the regulatory process in Canada is very similar and that
Canadians can feel as assured as Americans in purchasing drugs
from Canadian-regulated pharmacies with licensed pharmacists,
pretty much an analogous situation to the United States.
Senator Murray. Now, I know that the task force was
instructed to evaluate the safety and security of the U.S. drug
supply. But we have seen evidence that some large purchasers in
the United States like the VA or Medicaid programs get big
discounts today when they do negotiation. Is there any concern
that importation would eliminate any of those discounts that we
currently have for Medicaid or for VA?
Dr. Carmona. Senator, I would only be able to give you a
guess at that. That is not something we studied within the task
force.
Senator Murray. So you did not look at that at all. Okay,
all right.
Well, I think that we have a real challenge in front of us.
I think people are crying out for lower drug costs. We have to
find a way to get there. But I think one of the things we
really have to work very hard at as policy makers is to make
sure we do it safely and effectively and in a way that American
consumers know that their families are safe when they purchase
drugs. So I appreciate the work of the task force.
Thank you.
Dr. Carmona. Thank you, ma'am.
The Chairman. Thank you for your great addition to the
record.
Dr. Carmona, I thank you for being here. I thank you for
all of the effort you put into the task force. I am not sure we
have had a Surgeon General that has had quite as diverse a
background as you do, which really contributes to information
and decisions that you make and pass on to us. I am not sure we
have had a Surgeon General before who was in the Army before
they went to college or that served as a paramedic and a nurse
as well as a doctor. So we thank you for that diverse
background and the way that that leads to good decisions.
Thank you for your testimony. We will leave the record open
so that perhaps some other questions can be asked yet to build
the record a little bit more fully. Thank you.
Dr. Carmona. Thank you, Mr. Chairman; thank you, Senators.
[The prepared statement of Dr. Carmona follows:]
Prepared Statement of Richard H. Carmona
INTRODUCTION
Good morning Mr. Chairman and distinguished members of the
committee. My name is Dr. Richard Carmona, and I am the Surgeon General
of the United States Public Health Service. I appreciate having this
opportunity to discuss the work of the HHS Task Force on Drug
Importation and issues relating to the importation of prescription
drugs into the United States.
BRIEF OVERVIEW OF DRUG IMPORTATION
The Federal Food, Drug, and Cosmetic (FD&C) Act limits the types of
drugs that may be imported into the United States. Currently, the only
types of legally imported drugs are: (1) those that are manufactured in
foreign FDA-inspected facilities and the subject of an FDA-approved
drug application, or (2) those that are U.S.-approved and manufactured
in the United States, sent abroad, then re-imported to the United
States by the manufacturer under proper controls and in compliance with
FD&C Act requirements.
All imported drugs are required to meet the same standards as
domestic drugs, and thus cannot be unapproved, misbranded, or
adulterated. The FD&C Act prohibits individuals from importing
unapproved, misbranded, or adulterated drugs into the United States.
This prohibition extends to drugs that are foreign versions of U.S.-
approved medications, and drugs dispensed without a prescription.
Although importing unapproved prescription drugs is illegal, FDA
may exercise its enforcement discretion and not take action against
illegal personal importation in certain situations. FDA has developed a
policy to guide its exercise of enforcement discretion with respect to
importation of the products it regulates. This policy is called the
personal importation policy, and it was last updated in 1988 in
response to concerns that certain AIDS treatments were not available in
the United States. Under the policy, FDA exercises its enforcement
discretion under certain circumstances and does not stop individuals
with serious conditions from bringing into the United States treatments
that are legally available in foreign countries but are not approved in
the United States.
THE MEDICARE PRESCRIPTION DRUG, IMPROVEMENT AND MODERNIZATION ACT
OF 2003 (MMA)
In 2003, Congress passed the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (Medicare Modernization Act
or MMA), which provides an important new prescription drug benefit for
seniors. MMA also includes provisions aimed at providing lower cost
drugs to consumers.
MMA provides authority for pharmacists and wholesalers to import
certain drugs from Canada, subject to certain conditions. The drug
importation provisions in MMA only become effective if the Secretary of
HHS first certifies that implementing the program will pose no
additional risk to public health and safety and will result in a
significant reduction in the cost of such drugs to the American
consumer. In addition, MMA directs the Secretary of HHS to grant
waivers to permit importation of a 90-day supply of any FDA-approved
prescription drug imported from Canada from a licensed pharmacy for
personal use.
MMA also required the Secretary of HHS to complete a comprehensive
study that identifies problems with implementation of existing law and
examines a range of issues associated with the importation of drugs.
HHS TASK FORCE ON DRUG IMPORTATION
On February 26, 2004, then-HHS Secretary Tommy G. Thompson
announced the creation of a task force to advise him on how to address
the drug importation questions posed by Congress in the Medicare
Modernization Act. I served as the chairman of the task force, which
was comprised of 13 senior executives with diverse experience from
across the Federal Government.
The Task Force was charged with gathering input, ideas, and
expertise from the public on issues related to drug importation. One of
the main goals of the Task Force was to ensure an open and transparent
process that provided an opportunity for all views to be heard. To that
end, the Task Force held six listening sessions, including an open
public meeting, heard from more than 100 presenters and received
information from over 100 individuals and organizations via the Task
Force's online docket.
Among the presenters were consumer representatives, pharmaceutical
industry representatives, international regulatory and industry
representatives, academicians, health care purchasers, professional
medical groups, government and elected officials, and members of the
public.
In addition, a group of Task Force members conducted a site visit
to John F. Kennedy International Airport in New York City to see how
imported drugs are processed daily by U.S. Customs and Border
Protection (CBP) and Food and Drug Administration (FDA) officials. This
site visit demonstrated to us the huge challenge of ensuring the safety
of imported drugs.
REPORT ON PRESCRIPTION DRUG IMPORTATION
The Task Force produced a report that contains our findings based
on all of the information presented to us and expert views solicited
from appropriate government agencies. The report is available online at
http://www.hhs.gov/importtaskforce/. The key findings of the Task Force
are:
1. The current system of drug regulation in the United States has
been very effective in protecting public safety, but is facing new
threats. It should be modified only with great care to ensure continued
high standards of safety and effectiveness for the U.S. drug supply.
Safety and protection of the public health are paramount;
safety should not be sacrificed for affordability.
There are particular products of concern, including
controlled substances, intravenous products, biologics, drugs that must
be refrigerated or frozen, drugs that have specific post-marketing risk
management programs, drugs that are highly susceptible to
counterfeiting on the global market, and those that have less expensive
alternatives (i.e., generics) in the United States, that pose special
concerns in the importation context.
To maintain current levels of safety, standards of
practice at the level that currently exist in the United States would
need to apply to all foreign drug suppliers under a commercial
importation program. In addition, Memoranda of Understanding (MOU) may
be needed with the affected countries to ensure effective enforcement.
There are promising new and emerging anti-counterfeiting
technologies; however, until they are universally adopted, they cannot
be adequately relied upon to secure the safety, efficacy, and integrity
of the global market to safely import prescription drugs into the
United States.
2. There are significant risks associated with the way individuals
are currently importing drugs that violate the FD&C Act.
According to CBP, there are 355 ``points of entry'' for
access into the United States. This includes 14 international mail
branches, 29 express consignment facilities, and 312 ports. Given the
broad responsibilities assigned to FDA, only a limited number of FDA
inspectors are available to staff the 14 international mail facilities
in the United States that receive millions of small packages a year,
where they historically have had to inspect only a small number of
large commercial pharmaceutical imports.
FDA currently does not have sufficient resources to ensure
adequate inspection of current levels of personal shipments of
prescription drugs entering the United States. Moreover, to maintain an
adequate inspection of current levels of commercially imported
pharmaceutical products would require significant investment in
information technology and personnel, among other things.
Imported drugs are arriving from all corners of the world,
including developed and emerging countries. Nearly 5 million shipments,
comprising about 12 million prescription drug products with a value of
approximately $700 million, entered the United States from Canada alone
in 2003. The report estimates that an equivalent amount of prescription
drugs may come in from the rest of the world.
Many state-licensed Internet pharmacies provide a
legitimate means for consumers to access safe and effective medicines,
but others raise significant safety concerns. Some sellers of imported
drugs are ``rogue'' Internet pharmacies that pretend to be legitimate
and operate behind facades. Many of the drugs sold over the Internet
claim to be interchangeable with the approved U.S. drug, but are not.
Purchasing prescription drugs over the Internet without a
prescription has been found to be relatively easy to accomplish. In
those cases, the lack of an adequate health professional/patient
relationship is of particular concern.
3. It would be extraordinarily difficult and costly for
``personal'' importation to be implemented in a way that ensures the
safety and effectiveness of the imported drugs.
There is no realistic level of resources that could ensure
that personally imported drugs are adequately inspected to assure their
safety since visual inspection, testing, and oversight of all
personally imported prescription drugs are not feasible or practical at
this time.
The report estimates that 10 million packages containing
prescription drugs entered the United States in 2003. It is estimated
that it would cost $3 billion to examine all of these packages.
4. Overall national savings from legalized commercial importation
will likely be a small percentage of total drug spending and developing
and implementing such a program would incur significant costs and
require significant additional authorities.
A commercial importation program could be feasible but
would require new legal authorities, substantial additional resources,
and significant restrictions on the type of drugs that could be
imported, which could increase the costs of imported drugs.
Total savings to drug buyers from legalized commercial
importation would be 1 to 2 percent of total drug spending and much
less than international price comparisons might suggest. The savings
going directly to individuals would be less than 1 percent of total
spending. Most of the savings would likely go to third party payers,
such as insurance companies and HMOs.
Under legalized importation, intermediaries may capture a
large part of the potential savings.
5. The public expectation that most imported drugs are less
expensive than American drugs is not generally true.
The prices foreigners pay for generic drugs are on average
50 percent greater than prices Americans pay for generic drugs.
There is evidence that greater use of U.S.-approved
generic drugs by Americans could reduce drug spending by billions of
dollars annually.
Foreign drug supplies in many countries that might export
to the United States are sufficiently small relative to U.S. drug
consumption as to raise questions about the sustainability of high-
volume exports from those countries.
To the extent that prescription drugs are eligible for
importation from the same company at a lower price than in the United
States, potential quantity constraints imposed by manufacturers or
foreign governments would limit the eligible supply and the benefits to
U.S. consumers.
6. Legalized importation will likely adversely affect the future
development of new drugs for American consumers.
Americans have a greater choice of newly launched
pharmaceutical products than foreigners. In recent years, more than 40
percent of new drugs were launched first in the United States.
Under a legalized commercial importation program, R&D
spending would drop, which could result in between 4 to 18 fewer new
drugs introduced per decade, at a substantial cost to society.
Estimates of reduced benefits, due to reduced R&D
spending, to future drug consumers may range from $5 billion to $20
billion per decade without including gains from having a greater
variety of generics in the future. Reduced benefits may significantly
offset savings from legalized importation.
7. The effects of legalized importation on intellectual property
rights are uncertain but likely to be significant.
Importation could impact the intellectual property rights
of developers of pharmaceutical products and could be subject to
challenge under domestic law, including possibly the U.S. Constitution,
and international intellectual property rules.
It is likely that intellectual property rights holders
will exercise their rights to the fullest extent available under the
law and the effects may impact the availability of imported drugs.
International agreements recognizing intellectual property
rights may be affected by the legalization of importation.
8. Legalized importation raises liability concerns for consumers,
manufacturers, distributors, pharmacies, and other entities.
Allowing prescription drug importation would have
uncertain effects on the litigation exposure of manufacturers,
distributors, doctors, and pharmacists.
To deal with these risks, entities in the pharmaceutical
distribution chain would likely take additional costly defensive
actions.
Some potentially liable parties could be unavailable to
U.S. courts and, therefore, to consumers, industry, or health care
providers.
CONCLUSION
As a trauma surgeon, the former CEO of a health system, and now
doctor to the American people, I understand the critical role that
prescription drugs have in our public health system. It is truly
wonderful that science has brought us medications that can reduce the
risk of heart attack and stroke, lower blood pressure, cure infection,
and save and enhance life. As a society we must find more ways to
provide these life-saving medicines to those who need them.
President Bush and Secretary Thompson, as well as my task force
colleague Dr. McClellan, have already made great strides with the
initial implementation of the Medicare Modernization Act and the new
Medicare drug discount card. Today, millions more seniors are getting
access to the drugs that they need, and as the Medicare Modernization
Act becomes fully implemented in the coming years, even more seniors
will have even more access to the preventative and drug benefits
provided through the new law.
In addition to the new Medicare drug discount card, there are other
ways for U.S. consumers to save money on domestic prescription drugs.
Consumers are encouraged to shop around for price comparisons, ask
their doctor or pharmacist for generic alternatives, and take advantage
of prescription drug discount cards.
Thank you. I will be happy to answer any questions you may have.
The Chairman. Can we have the next panel move up to the
table, please? See if we can have the Governor on this side,
followed by--it would be the Honorable Tim Pawlenty, the
Governor of Minnesota, from St. Paul, MN; then, Mr. John Gray,
president and CEO of the Healthcare Distribution Management
Association in Reston, VA; then, Mr. Carmen Catizone, the
executive director of the National Association of Boards of
Pharmacy, from Mount Prospect, IL; and Dr. Peter Rost, the
vice-president of Marketing for Endocrine Care of Pfizer.
I want to thank all of you for serving on this panel. We
know that it will greatly enhance our knowledge of drug
reimportation, both the realities of the safety and the
security. We appreciate the experience that each of you have
had in that area. Again, I will ask each of you to summarize
your testimony. Your full testimony will be part of the record
but if you can do a summary, that would allow us more
opportunity for questions.
Begin with Governor Pawlenty.
STATEMENT OF HON. TIM PAWLENTY, GOVERNOR OF THE STATE OF
MINNESOTA, ST. PAUL, MN
Governor Pawlenty. Good morning, Mr. Chairman, Senator
Kennedy, members of the committee, thank you for the chance to
be here and share a few thoughts about the Minnesota
experience. Senator Kennedy, Springfield, MA, of course was the
pioneer in this area, and Minnesota was the first State to do
it, and we have got some pioneers there including Senator
Dayton and Congressman Gutknecht and others who have helped
with our effort and helped blaze the trail.
In short, I think the American health care delivery system
is broken. I think there are many observers who believe it is
going to collapse in the next 15 to 20 years for a whole
variety of reasons. The lack of affordability of prescription
medicines is one reason, one of the forces or factors that is
contributing to that challenge and I think a burgeoning crisis.
One troubling aspect, of course, is we have too many Americans
who, for a variety of reasons cannot afford or cannot access
affordable prescription medicines.
Downstairs in this building, when you enter the Dirksen
Senate Office Building at one of the entrances is a tribute to
Senator Dirksen. It honors him for, quote, ``his unerring sense
of the possible.'' We have before us today a chance to make
progress on one piece of a critically important issue for a lot
of Americans and certainly a lot of Minnesotans, and that is
access to affordable prescription medicines.
Mr. Chair and Senators, what you hear in this debate and
see a lot in this debate is the dangling of the shiny object.
You see folks who distract from what is actually happening or
what is proposed in legislation to draw your attention to other
concerns or aspects. Senator Kennedy, I think you hit it right
on the nail when you said earlier that we are not proposing to
go out and encourage people to use rogue Internet pharmacies or
encourage people to access counterfeiters. If you go to
licensed, established, credible, reputable Canadian pharmacies,
there is no evidence, I repeat there is no evidence that as
applied to those pharmacies, those operations that the safety
concerns exist in any manner.
So, what you see in the debate is advocates, the opponents
who come forward with the shiny object and say there are
Indonesian operations; there are Middle Eastern operations;
they counterfeit; they mislabel; they change the doses; they do
all sorts of nasty things. Well, that is all very interesting,
but that is not what we are proposing. We are proposing,
ideally, the Federal Government but at the very least State
governments use their regulatory and health and safety powers
to step forward and identify for consumers in a credible,
reliable way the licensed, established, credible operations
that can provide these medicines at a discount to Minnesotans
and to American consumers, and if we do it that way, as is the
focus of your legislation, there is not a problem.
Then, the question becomes one of logistics. In Minnesota,
MN, like in every other State in the country, we have a large
veterans hospital. Every day, every week, they mail out
hundreds, thousands of pharmacy prescription medicines. It is
done safely, and so, the premise being that they can do it from
Minneapolis, but you cannot mail or FedEx or UPS a prescription
from Winnipeg to Duluth? I just do not buy it, Mr. Chairman.
Neither do the consumers who are using our service.
In short, what we have is two Web sites, one for all
consumers in Minnesota, one for our State employees. They go on
the Web site. They have to have a prescription from their own
doctor. They download an order form. They send it up to the
pharmacy in Canada. It is countersigned by a Canadian doctor.
We have gone up, inspected, contracted with these Canadian
pharmacies to meet our protocols. They have done that.
We have over 9,000 prescriptions who have been fulfilled
through this process, and you know what the number one
complaint is in this process? Our own Federal Government. Our
number one complaint is the FDA or the Postal Service or the
Customs agency has interfered and disrupted the delivery of the
drugs or delayed the service. We have had no, zero, none,
safety complaints or incidents with respect to our program.
I think you are well aware of the arguments for and
against. I will not belabor the point and will invite your
questions, but I just encourage you as this debate unfolds to
not avert your gaze to the shiny object, which is the horrible
things that we all admit happen on the Internet. It is full of
bad characters, shady characters and the like, but that is not
what we are proposing. We are asking the government, ideally
the FDA, the ones who are best suited, well suited, equipped,
have specialty and expertise to step in and identify the
credible, reputable operators in Canada or elsewhere, and then,
it is just a matter of trusting, like we do every day through
our American mail order pharmacies, that we have the logistics
and distribution systems to deliver the medicine. We have done
it.
So in closing, I would just say if Congress cannot or will
not or is unable to act, please at least follow the advice of
Paul McCartney when he sang, Let It Be.
[Laughter.]
If you cannot help us, please stay out of the way, and let
it be so that we can continue to demonstrate that this can
work. Eventually, we will mount enough evidence where it will
become obvious and compelling. So, help us if you can, but in
the worst case, please let it be. Thank you.
[The prepared statement of Governor Pawlenty follows:]
Prepared Statement of Governor Tim Pawlenty, Governor
of St. Paul, MN
Chairman Enzi, Senator Kennedy, and members of the Senate Committee
on Health, Education, Labor, and Pensions, it is an honor to be with
you today.
As I entered this building this morning, I saw the tribute to
Senator Everett Dirksen carved in the marble downstairs. It strikes a
fitting tone for his hearing.
It honored Senator Dirksen for ``his unerring sense of the possible
that enabled him to know when to compromise; by such men are our
freedoms retained.''
In an increasingly polarized environment, we need to know when to
compromise and practice the art of the possible.
If ever there was an issue that we can come together on this is it.
The rising cost of prescription drugs has sparked a prairie fire that
is spreading across our Nation. Today we have an opportunity to make
bold steps toward progress.
We've all heard the arguments about why Americans pay more for
prescription drugs than other countries. But the bottom line is that
Americans pay more than the rest of the world and the price
differential puts prescription medicines out of reach for too many
Americans. The current situation is unfair and untenable.
That's why in Minnesota we've decided to take action. We're taking
a method, trying it and finding strong success.
MINNESOTA'S PLAN
The Minnesota Plan for Prescription Drugs has a very simple goal--
to get a better deal for Minnesotans. We have established a program to
facilitate the purchase of prescription drugs from Canada by
individuals.
We have established two Web sites--MinnesotaRxConnect.com for all
Minnesota citizens and Advantage-Meds.com for State employees, retirees
and their dependents.
Through MinnesotaRxConnect, Minnesotans are able to determine if
their prescription medications are available at a lower cost from a
Canadian pharmacy, and if so, how to order them. The site focuses on
maintenance drugs that can be shipped safely from Canada. Only
reputable Canadian pharmacies licensed by a Canadian province, willing
to have their facilities and safety protocols reviewed by the Minnesota
Department of Human Services are used. The four pharmacies affiliated
with MinnesotaRxConnect have each been visited by pharmacists employed
by the State of Minnesota, including Minnesota Board of Pharmacy
inspectors. The site also lets consumers know if there is a lower cost
generic alternative about which they should see their doctor.
In addition, MinnesotaRxConnect is about more than just Canadian
importation. It provides tips about how to become an informed consumer
of prescription medicines including links to other programs that might
assist consumers in purchasing their medications, such as State and
pharmaceutical manufacturer programs.
Those individuals wishing to take advantage of the program need to
obtain a prescription from their own physician and send a copy of the
prescription, an order form and a medical history questionnaire to the
Canadian pharmacy. To comply with Canadian law, the prescription is
reviewed and countersigned by a Canadian physician. Assuming that all
is in order, the pharmacy ships the medication to the patient by mail
in the manufacturer's original, sealed container whenever possible.
Since the launch of MinnesotaRxConnect a little over 1 year ago,
the Canadian pharmacies have filled more than 9,000 prescriptions for
people ordering through the site. We have received only a couple of
complaints about the pharmacies regarding billing issues. Those
complaints were quickly resolved by the pharmacies when the State
contacted them. We have received no complaints about the quality,
effectiveness or safety of the drugs.
Let me repeat--we have not received a single complaint, out of more
than 9,000 prescriptions filled--regarding the quality, effectiveness
or safety of the drugs that were purchased utilizing our prescription
drug Web site.
The top complaint we have received is not regarding Canadian
pharmacies or drugs, but about enforcement actions taken by the U.S.
Government. A number of packages shipped by the pharmacies affiliated
with our Web sites have been seized by the FDA, Customs or the Postal
Service. When notified, the pharmacies promptly ship another supply at
no cost to the customer.
Consumers who use MinnesotaRxConnect must first visit with their
personal physician and get a prescription from them. The prescription
is reviewed by Canadian pharmacists who contact the U.S. physician to
clear up any potential problems. The prescription and the patient's
medical history are then sent to the Canadian physician for yet another
review. A Canadian physician then countersigns the prescription.
Recently, the Canadian government has raised concerns about the
practice of countersigning. Canada's Minister of Health has said he
considers physician countersigning to be unethical. We disagree. We see
the countersigning process as an additional safety check, one more
opportunity for a medical professional to review the prescription for
potential problems.
If the Canadian physician was the only doctor involved, it would be
unethical for them to issue a prescription to someone they had never
seen or examined. But in this process, the Canadian physician is only
double-checking a process that first included the patient being
examined by their doctor and that doctor issuing a prescription.
Unfortunately, there are some unethical web-based operations that
will have a physician write prescriptions based only on an online
questionnaire that the patient fills out. In such cases, no physician
sees the patient. Our system ensures that this does not happen by
requiring that the patient meet with and receive a prescription from
their physician.
Through a second Web site, Advantage-Meds.com, State employees,
retirees and their dependents can purchase certain prescription
medicines at no cost through one of the Canadian mail order pharmacies
affiliated with MinnesotaRxConnect.
During 2004 (May 13--Dec 31):
1. 1,861 members enrolled.
Eligible members include 48,000 employees and 72,000
dependents;
A member can enroll but not order a drug;
A member can order more than one drug.
2. 3,166 drugs were ordered.
An order is one 3-month supply of one drug;
Represents about 1 percent of the drugs purchased by
members.
3. 27,526 persons made 42,232 visits to the Web site.
4. $577,479 was spent by program.
Average of $76,992 per month (7.5 months);
Average cost of $184 per drug (3 month order).
5. Approximately $300,000 was saved by program and members.
$98 per drug;
$53 to program in reduced costs;
$45 to members in waived co-payments;
Results meet initial expectations.
We recognize that these measures are not the long-term solution.
They are, however, designed to provide short-term relief and to build
pressure for long-term reform.
ENSURING SAFETY
Those who oppose reimportation often talk of great problems with
safety. On this point, it is important to be clear about what we have
done.
We reference services available from established, reputable,
credible, accredited Canadian pharmacies. There is no evidence to
suggest such pharmacies are unsafe. To the contrary, Minnesota Board of
Pharmacy surveyors have visited the pharmacies and found no significant
problems. Canadians are not dying or at risk because of their system.
Assertions that a program like Minnesota's is unsafe suggests either
the pharmacies we have chosen are unsafe or they are too inept to
properly mail or deliver medicines safely. Neither is true. Moreover
many reputable, established pharmacies in the United States already use
a mail order, Internet or phone order system. The FDA apparently thinks
it works well for them. For example, the Veterans Hospital in
Minneapolis mails out a large number of prescriptions to patients each
week.
Our program should not be confused with the questionable Internet
pharmacy or ``storefront'' marketing entities that offer or have
offered their services to U.S. citizens with little or no oversight. We
agree that such operations present an unreasonable safety risk to
consumers.
Our Department of Human Services conducted a review of Canadian
practices, similar but independent of that done by the State of
Illinois. We came to the same conclusion that they did: the Canadian
system is comparable to ours in safety standards.
There is a misperception that reimportation from Canada is some
risky endeavor in which we give up safety to use a Third World
apothecary just to save a dime. Canada's pharmaceutical regulatory
system is strong and effective. At the State level, we continue to
monitor and ensure that those pharmacies serving our citizens are held
to the highest standards of safety.
Let me briefly explain to you some of the safety and security
protocols we are using as part of our reimportation program:
1. The pharmacies associated with our Web site are licensed by the
Canadian province in which they are located;
2. The pharmacies have agreed to allow unannounced inspections of
their facilities, and the Minnesota Department of Human Services
Pharmacy Program Manager, who is a pharmacist, has conducted
unannounced follow-up visits to all four pharmacies;
3. Medications are dispensed in the manufacturer's unopened,
safety-sealed containers in appropriate amounts whenever possible;
4. Medications shipped are approved for use in Canada by the
Therapeutic Products Directorate of Health Canada, which uses standards
similar to those of the FDA when approving drugs.
THE INDUSTRY'S ACTIONS
Pharmaceutical manufacturers such as Merck, Pfizer, Eli Lilly and
others have withheld supplies of prescription drugs from Canadian
pharmacies that serve Americans.
Their actions are unfortunate. I urge this committee to review the
comments and actions of the companies involved.
MINNESOTA IS READY TO LEAD THE WAY
The States are often called the ``laboratories of democracy.'' The
State of Minnesota is proving that again by moving ahead in
implementing this prescription medicine plan.
Let us be the experiment. Let us try it. Let us continue to put the
arguments to the test. If it doesn't work, we'll admit it. The current
system is not ``safe'' because too many people can't afford their
medicine.
Thank you very much.
______
Minnesota RxConnect Online
Minnesota RxConnect Online, www.MinnesotaRxConnect.com, was created
to provide Minnesotans information on issues related to prescription
medicine, safety and cost-saving tips, and programs to help low-income
Minnesotans pay for prescription medications.
This site also provides Minnesotans with information about
accessing lower-cost prescription medicine from Canada. The site hosts
a list of medicines and prices available through four Canadian
pharmacies. Consumers can print order forms from the site for
individual use in placing an order with a pharmacy. (Orders cannot be
placed online through the site.)
site activity from jan. 30th (launch date) through january 2005
Total number of site visits (aka `hits'): 174,599
Total number of prescriptions ordered: 9,006
Total cost of all prescriptions ordered: $1,119,190
Number of medications listed on the site (at launch): 821
Activity by Pharmacy
----------------------------------------------------------------------------------------------------------------
Total
Care Granville Canada U.S. CanadaDrugs Totals
Pharmacy Pharmacy Pharmacy .com
----------------------------------------------------------------------------------------------------------------
New prescriptions.................................... 1,214 1,881 2,015 509 5,619
Refill prescriptions................................. 1,198 1,018 918 253 3,387
Total prescriptions.................................. 2,412 2,899 2,933 762 9,006
Average cost of prescription......................... $126.38 $148.06 $136.00 $115.92
----------------------------------------------------------------------------------------------------------------
The Chairman. Thank you for your enthusiastic and
innovative testimony. We really appreciate that.
Mr. John Gray.
STATEMENT OF JOHN M. GRAY, PRESIDENT AND CEO, HEALTHCARE
DISTRIBUTION MANAGEMENT ASSOCIATION (HDMA), RESTON, VA
Mr. Gray. Thank you, Mr. Chairman, Senator Kennedy, members
of the committee.
My name is John Gray. I am the president and CEO of the
Healthcare Distribution Management Association, HDMA. We have
worked with our members, the Nation's 46 full-service
distributors to secure a safe, efficient, reliable distribution
system that provides life saving health care products and
services. Our member companies are responsible for the daily
delivery of over 9 million of the Nation's prescription drugs
to more than 130,000 retail pharmacies, hospital, nursing
homes, clinics and other provider sites in all 50 States.
My purpose here is to emphasize four key points: the
primary responsibility of the health care industry is to ensure
patient safety and health. Our mission as a health care
distributor is to ensure that the prescription drug supply
chain remains safe, secure and tightly regulated. Any efforts
to permit importation of prescription drugs from abroad must
not weaken this system.
Significant efforts are underway and should continue to
further secure our own domestic supply chain in the face of
what we see as an increasing incidence of counterfeit and
adulterated products entering our markets from domestic and
foreign sources. There is no single solution to secure the
integrity of the prescription drug supply. The only effective
response is a series of multiple strategies, including
participation from all participants in our supply chain here in
the United States.
The Nation's drug system is highly regulated at both
Federal and State levels. The Federal and State partnership has
served the Nation well to date. However, even the United States
now is no longer immune from the growing and increasingly
sophisticated threat of counterfeiting. According to the FDA,
the number of instances where counterfeit products have been
breached into the domestic supply chain that have been reported
to them have gone from six cases just 5 years ago to over 22
cases in the year 2003.
Given the increasing sophistication and frequency of
counterfeiting, it is imperative that we remain vigilant and
seek new approaches to secure the domestic prescription drug
supply. The effort should include three items: strengthening
government regulation, oversight and enforcement; adopting new
technologies; and developing and implementing what we call best
industry practices.
HDMA joined the FDA's call for States' review and revised
their current wholesale licensing statutes and regulations. We
have undertaken the added step of drafting our own model
legislation under consideration in multiple States. This bill
calls for additional requirements to be met in order to receive
a prescription drug distribution license as well as increased
State oversight and enforcement measures. While many States
have taken the licensure and inspection responsibilities
seriously, we at HDMA remain concerned that too few States have
devoted sufficient attention and resources to this area.
We believe that significant variation in the levels of
State regulation of pharmaceutical distributors has led to
inconsistent standards being applied across the United States.
We think this must change and will continue to advocate for
stronger, more uniform national standards for the licensure of
pharmaceutical distributors. HDMA also believes that technology
can serve an important role in securing our drug supply.
However, no single technology can prevent counterfeiting by
itself.
We believe that deployment of electronic product codes,
radio frequency ID or RFID hold the most promise for tracking
and tracing and authenticating product movement across our
supply chain. Using RFID technology, a tiny radio frequency
chip containing essential data in the form of an electronic
product code will allow supply chain stakeholders to track the
chain of custody, or as it is called, pedigree of every unit of
medication on an individual basis.
Tremendous progress is being made in the development of
technology. It is a monumental endeavor. It is going to require
a lot of collaboration among all key players in the supply
chain in order to get this technology instituted across our
country. We are working closely with standard development
organizations, for example, the EPC Global, to further the
awareness and adoption of the EPC in health care both in the
United States and abroad, and we have been an advocate for the
adoption of this technology here in this country.
FDA's November 15, 2004, issuance compliance guide for
implementing RFID feasibility study and pilot programs we think
was an important and essential step in getting the technology
off the ground. It will take an unwavering commitment from both
the government and each of the supply chain partners to realize
the adoption of this RFID technology in any kind of measured or
meaningful way.
Finally, the entire supply chain and HDMA are constantly
working to identify new ways and developing voluntary business
practices that will assure product safety. In conclusion, we
recognize the public trust placed upon them to ensure that our
members provide authentic pharmaceutical products that are
handled, stored and ultimately dispensed to patients safely and
efficiently. Our message to the committee today is that
securing the Nation's prescription drug supply requires a
constant vigilance in the face of increasingly sophisticated
international threats.
We do not believe there is a single solution to the effort;
rather, a combination of approaches involving both government
and supply chain partners. We think technology will play an
important role, but technology is evolving and has to be
combined with stricter regulations and best business practices.
Any consideration of the importation of drugs from abroad must
incorporate, we think, these multiple strategies. The health
and safety of our Nation, literally, is at stake.
Thank you very much.
[The prepared statement of Mr. Gray follows:]
Prepared Statement of John M. Gray
Thank you, Mr. Chairman and members of the committee for this
opportunity to provide testimony on current efforts to further ensure
and strengthen the integrity of the Nation's prescription drug supply.
I appreciate the opportunity to provide the perspective of the domestic
healthcare distribution industry as this committee considers the issue
of importation of prescription drug products from abroad.
My name is John Gray, and I am the President and CEO of the
Healthcare Distribution Management Association (HDMA). For more than
125 years, HDMA has worked with its members--the Nation's 46 full-
service healthcare distributors--to secure a safe, efficient and
reliable distribution system that provides life-saving healthcare
products and services. On any given day, HDMA's member companies are
responsible for delivering 9 million of the Nation's prescription drug
products to more than 130,000 retail pharmacies, hospitals, nursing
homes, clinics and other provider sites in all 50 States.
My purpose here today is to emphasize four principal points:
1. The primary responsibility of the healthcare industry is to
ensure patient health and safety.
2. Our mission as healthcare distributors is to ensure that the
prescription drug supply chain remains safe, secure and tightly
regulated. Any efforts to permit the importation of prescription drug
products from abroad must not weaken this system.
3. Significant efforts are underway, and must continue, to further
secure the domestic supply chain in the face of increasing incidents of
counterfeit and adulterated products entering markets, both domestic
and abroad.
4. There is no single solution to secure the integrity of the
prescription drug supply--the only effective response is one that
involves multiple strategies and includes the participation and
commitment of all supply chain partners.
Patients in the United States expect that when they receive a
prescription from their medical provider, the medication will be
available for dispensing upon their arrival at a pharmacy. They expect
and deserve authentic medicine that has been handled and stored
properly. Each member of the supply chain--from the manufacturer, to
the distributor, to the pharmacy--has an important role and we must
work in tandem to ensure a safe and reliable supply of prescription
drugs for patients.
CURRENT REGULATORY ENVIRONMENT
The responsibility to provide a safe and reliable supply of
prescription drugs requires constant vigilance. The Nation's drug
distribution system is highly regulated at both the Federal and State
levels of government, under the Prescription Drug Marketing Act\1\
(PDMA), which was enacted in 1988 and amended in 1992. At the time of
the PDMA's original enactment, Congress found that ``American consumers
[could not] purchase prescription drugs with the certainty that the
products [were] safe and effective,'' and that there [was] an
``unacceptable risk that counterfeit, adulterated, misbranded,
subpotent, or expired drugs will be sold to American consumers.'' \2\
The PDMA established a closed and highly regulated domestic supply
chain. The PDMA also established minimum Federal licensing standards
and delegated to the States the responsibility to serve as the
licensing bodies. The States, therefore, are empowered to inspect,
regulate and approve the firms conducting business as pharmaceutical
distributors.
---------------------------------------------------------------------------
\1\ Pub.L.No. 100-293 (1988) (codified as amended at 21 U.S.C.
Sec. 353 et seq. (1992)).
\2\ Id. Sec. Sec. 2(1), 2(8).
---------------------------------------------------------------------------
HDMA full service distributor members are also strictly regulated
by the Drug Enforcement Administration (DEA), both as distributors of
List I Chemicals and Controlled Substances. The DEA, along with State
Controlled Substance Authorities, add an additional and important level
of inspection and regulation of our member facilities, ensuring that
products with abuse potential are kept in a highly secure environment
with strong recordkeeping requirements.
This Federal/State regulatory and oversight partnership has served
the Nation well to date. However, even the United States is not immune
from the growing and increasingly sophisticated threat of
counterfeiting. According to FDA's report entitled, ``Combating
Counterfeit Drugs'' (February, 2004), patients in some countries
actually have a better chance of getting a fake drug than the
legitimate product. While still extremely rare, instances of
counterfeit or adulterated\3\ products entering the domestic supply
chain have been on the increase in recent years. According to the FDA,
the number of instances where counterfeit products have breached the
domestic supply chain has increased from 6 cases in the year 2000 to 22
cases in 2003. Each of these situations poses a serious public health
threat. As healthcare distributors, we recognize there is no greater
responsibility than doing everything we can to ensure that the products
we deliver to pharmacies and other healthcare providers are authentic,
and have been stored and handled properly.
---------------------------------------------------------------------------
\3\ A drug is deemed legally adulterated unless it is manufactured
and held in conformance with current good manufacturing practice (GMP).
GMP is intended, among other things, to assure that drugs are properly
handled and stored at all times before they are dispensed to consumers.
21 U.S.C. Sec. (a)(2)(D)
---------------------------------------------------------------------------
ONGOING SUPPLY CHAIN IMPROVEMENTS
Given the increasing sophistication and frequency of product
counterfeiting, it is imperative that our Nation remains vigilant and
constantly seeks new approaches to further secure the domestic
prescription drug supply. These ongoing efforts include:
1. strengthening government regulation, oversight and enforcement;
2. adopting new technologies; and
3. developing and implementing industry best practices.
1. strengthening government regulation, oversight & enforcement
With regard to the strengthening of regulations that provide
oversight and licensure of domestic healthcare distributors, HDMA
joined in the FDA's call for States to review and revise their current
wholesale licensing statutes and regulations. HDMA has taken the added
step of drafting model legislation that is under consideration in
multiple States. This HDMA model bill calls for additional requirements
to be met in order to receive a prescription drug distribution license,
as well as increased State oversight and enforcement measures.
While many States have taken their licensure and inspection
responsibilities seriously, we remain concerned that too few States
have devoted sufficient attention or resources to this area. For
example, some States will issue a distribution license without ever
conducting a pre-license inspection. Many States struggle with the
ability to regulate out-of-state distributors in an industry that is
increasingly shipping products across State lines. Many States also are
slow to update and make publicly available the licensing status of a
distributor or pharmacy.
HDMA believes that significant variation in the levels of State
regulations of pharmaceutical distributors has led to inconsistent
standards being applied across the States. We believe this must change
and we will continue to advocate for stronger, more uniform national
standards for the licensure of pharmaceutical distributors. HDMA
believes an essential responsibility of government is to ensure that
only legitimate, law-abiding organizations are licensed to distribute
pharmaceutical products.
2. ADOPTING NEW TECHNOLOGIES
HDMA strongly believes that technology can serve an important role
in securing the Nation's prescription drug supply; however, no single
technology can absolutely prevent counterfeiting. Rather, a layering of
various strategies can create a significant barrier to entry. Overt and
covert authentication technologies currently are being used by
manufacturers today.
As those who seek to introduce counterfeit or adulterated products
into the supply chain become more sophisticated, so, too, must the
technologies that manufacturers, distributors and pharmacies employ to
frustrate and defeat them. We believe technologies employing electronic
product codes (EPC)/radio frequency identification (RFID) hold the most
promise for tracking, tracing and authenticating a product's movement
across the supply chain. Using RFID technology, a tiny radio frequency
chip containing essential data in the form of an electronic product
code will allow supply chain stakeholders to track the chain of custody
(or pedigree) of every unit of medication on an individual basis. By
tying each discrete product unit to a unique electronic ID, a product
can be tracked electronically through the supply chain.
Further, EPC/RFID technology represents an opportunity to
significantly improve efficiencies in managing supplies and inventory.
According to a recent HDMA Healthcare Foundation Report entitled,
``Adopting EPC in Healthcare: Costs and Benefits,'' patient safety can
be enhanced and efficiencies to the healthcare supply chain can be
achieved via the industry-wide adoption of EPC/RFID. EPC/RFID is more
efficient and cost-effective than paper pedigrees or alternative
electronic tracking methods that do not involve the serialization of
individual products. Paper pedigrees have been forged in previous
domestic counterfeiting situations. Moreover, paper pedigrees would
literally halt the efficient distribution of drugs given the volume of
products delivered and the sophisticated automation technology utilized
to do so safely and efficiently.
I am pleased to report to the committee that tremendous progress is
being made in the development and adoption of EPC/RFID technology with
respect to pharmaceutical products. This is a monumental endeavor that
will require close collaboration among all constituents of the
healthcare supply chain and will take several years to proliferate the
market in the United States. Industry, commercial vendors and
government agencies are working together to develop the necessary
standards for communication of tagged items across the supply chain.
HDMA is working closely with standards development organizations such
as EPCglobal to further the awareness, adoption and implementation of
EPC in healthcare. While progress is extremely positive, there are many
hurdles to overcome including business and technology challenges such
as data management issues, interoperability of tags and readers and
standards development. HDMA's focus has been to advocate for the
adoption of this technology in the United States.
FDA's November 15, 2004 issuance of a Compliance Policy Guide (CPG)
for implementing RFID feasibility studies and pilot programs was an
important and essential step in moving this technology forward. The
policy guide clarified the Agency's position with regard to any
labeling or current Good Manufacturing Practices (GMP) issues that may
arise by affixing an RFID tag to a pharmaceutical product. Several
manufacturers and distributors simultaneously announced their intention
to move forward with pilot programs that will involve the tagging of
products susceptible to counterfeiting. These studies will
significantly enhance the understanding and operability of this
technology in the healthcare system.
Although the industry is moving forward in the development and
adoption of EPC/RFID technology, it will take time and an unwavering
commitment on the part of government and each partner in the supply
chain to realize adoption of RFID technology in a measured, meaningful
and universal way. HDMA members look forward to the support of the
committee in ensuring that our laws and regulations continue to support
the adoption of this important and patient safety enhancing technology.
3. DEVELOPING AND IMPLEMENTING INDUSTRY BEST PRACTICES
Finally, the entire supply chain is constantly identifying new ways
to improve upon business practices that can enhance product safety.
Many of HDMA's full service distributor members have adopted a
voluntary set of best practices known as the ``Recommended Guidelines
for Pharmaceutical Distribution System Integrity.'' These guidelines
establish a rigorous due diligence process for pharmaceutical
distributors in order to further protect the integrity of the
pharmaceutical supply chain.
CONCLUSION
In conclusion, HDMA members recognize the public trust placed upon
them to ensure that authentic pharmaceutical products are handled,
stored and ultimately, dispensed to patients safely and efficiently.
Our message to the committee today is that securing the Nation's
prescription drug supply chain requires constant vigilance in the face
of increasingly sophisticated threats. We do not believe there is a
single solution to this effort; rather, a combination of many
approaches is required, involving the government and all supply chain
partners. Technology plays an important and essential role in this
effort, but technology is evolving and must be combined with strict
regulation and best business practices to be most effective. Any
consideration of the importation of prescription drugs from abroad
must, at a minimum, incorporate these multiple approaches to safety and
security. The health and safety of our Nation, literally, is at stake.
HDMA appreciates this opportunity to provide the perspective of the
Nation's full-service healthcare distributors on these critically
important issues.
The Chairman. Thank you.
Mr. Carmen Catizone.
STATEMENT OF CARMEN A. CATIZONE, MS, RPh, DPh, EXECUTIVE
DIRECTOR/SECRETARY, NATIONAL ASSOCIATION OF BOARDS OF PHARMACY
Mr. Catizone. Thank you, Mr. Chairman, Senator Kennedy,
other members of the committee. I am honored to be here today
and respond to the committee's request on if and how the
National Association of Boards of Pharmacy Verified Internet
Pharmacy Practice Site Program could be utilized to help assure
the safety of drugs purchased over the Internet if the United
States were to legalize drug importation.
The VIPPS program was introduced in 1999 by NABP and
incorporates traditional regulation and licensure with consumer
empowerment to help consumers discern legal and legitimate
pharmacies from rogue pharmacies. The VIPPS program allows
consumers to make an educated choice about what pharmacies they
should use and directs them to licensed and regulated
pharmacies. There is no other program in the world that matches
the VIPS program. The majority of programs representing
themselves as accreditation or certification bodies for
Internet pharmacies are simply promotional vehicles for
Internet entrepreneurs and charlatans.
In NABP's opinion, the only means of providing assurances
for the importation of medications into the United States is
the development of a sound regulatory framework that allows
only drug products that are approved by the FDA and
manufactured in FDA-registered facilities to be imported in the
United States for dispensing to U.S. patients through U.S.-
licensed pharmacists and pharmacies. Clearly, the VIPPS program
can be implemented to ensure that foreign pharmacies and
wholesale distributors are dispensing medications in accordance
with State and Federal laws.
To structure an importation model, NABP would define a new
category within its VIPPS program: an international VIPPS
patient care pharmacy that would identify VIPPS-accredited
pharmacies outside the United States. NABP would amend the
VIPPS criteria to address international practice and focus on
areas that document and provide evidence on an ongoing basis
that the drug products being distributed were FDA-approved and
originated from FDA-registered facilities. This discussion
would focus, again, on the pedigree, which has been mentioned
several times in the hearing.
We would also work with United States and foreign pharmacy
licensing authorities to develop mutual enforcement agreements
with the pharmacy jurisdictions in the United States and other
countries that would regulate international pharmacies by
requiring the licensure, registration of these entities by the
appropriate authority in the country where the facility is
located as well as where the patient resides.
As importation has evolved, the model has changed. We have
seen the medications go from the pharmacy to the patient, from
the pharmacy to a wholesale distributor to the patient, from
the wholesale distributor to the pharmacy to the patient. It is
critical to include the entire process in the regulatory model
so that the loop is closed, and the integrity of the U.S.
distribution system is maintained.
On this important note, serious consideration should be
given to the regulation and the accreditation of foreign
wholesale distributors. NABP's Verified, Accredited Wholesale
Distributors Program, which is now in operation and was created
in response to the FDA's report on counterfeit drugs, provides
a mechanism for the States and for the industry to accredit
prescription drug and device distributors that helps to ensure
the safety of the U.S. drug distribution system and thwart the
introduction of counterfeit products.
In closing, NABP appreciates the opportunity to share our
comments with the committee. We respectfully request that the
committee recognize that allowing and encouraging the illegal
purchase and importation of prescription medications from other
countries without the appropriate regulatory safeguards is a
serious threat to our regulatory foundation and patient safety.
NABP requests further the committee's consideration and
assistance in preserving the sanctity of current regulations,
so as to prevent patients from being seriously injured by the
illegal importation of drug products from countries where U.S.
laws and regulations are being ignored or the laws and
standards for drug safety and patient care are below the
standards here in the United States
NABP also respectfully asks consideration to the importance
of Federal and State laws, maintaining the FDA drug approval
and monitoring process, and the adoption of solutions that are
focused on patient safety such as the VIPPS and VAWDS programs.
Thank you.
[The prepared statement of Mr. Catizone follows:]
Prepared Statement of Carmen A. Catizone
Chairman Enzi and members of the committee, I am honored to respond
to the request of the committee and present information concerning the
National Association of Boards of pharmacy (NABP) Verified Internet
Pharmacy Practice Sites (VIPPS) program. Hopefully this information
can/will assist the committee in determining if and how the VIPPS
program could be utilized to help assure the safety of drugs purchased
over the Internet if the United States were to legalize drug
importation.
The NABP was founded in 1904. Our members are the pharmacy
regulatory and licensing jurisdictions in the United States, District
of Columbia, Guam, Puerto Rico, and the Virgin Islands, eight provinces
of Canada, two Australian States, New Zealand, and South Africa. Our
purpose is to serve as the independent, international, and impartial
Association that assists States and provinces in developing,
implementing, and enforcing uniform standards for the purpose of
protecting the public health.
In May, 2004, we appeared before the Health and Human Services'
(HHS) Task Force on Importation chaired by Richard H. Carmona, M.D.,
M.P.H., F.A.C.S., United States Surgeon General. At that time we stated
NABP's opposition to the illegal importation of drug products and
presented information to document the compromise of our medication
system and State regulation of the practice of pharmacy that is
occurring because of the illegal importation of drug products. Our
testimony also noted that the member States of NABP adopted a
resolution which resolved:
That NABP continue to oppose the illegal importation of medications
and express to the Food and Drug Administration (FDA) the concerns of
its member boards and strongly urge the FDA or appropriate legal
authority to pursue actions against State and local governments for
endorsing, promoting, or engaging in the illegal importation of
medications.
The illegal importation of drugs from Canada and other countries is
one of the most complicated and frustrating issues confronting pharmacy
regulators. It is an issue that has the potential of altering how drugs
are approved, medications are dispensed in the United States, and the
practice of pharmacy is regulated. In fact, if the illegal importation
of drugs into the United States is allowed to continue unabated, the
impact on patient safety will be devastating. Patients illegally
importing drugs are bypassing the drug approval process of the Food and
Drug Administration (FDA) and the safety of U.S. licensed pharmacists
and pharmacies and placing their health and well being in the hands of
the country, territory, or back room with the seemingly, lowest prices
for drugs.
Critics of the regulatory actions of the FDA and State boards of
pharmacy against entities illegally distributing or assisting in the
illegal distribution of drugs from countries outside of the United
States contend that there have been only a few reports of patient harm
and injury. Although the number of reports may be low, the actual harm
to patients could be significant. NABP maintains that the number of
reported patient injuries is low and immeasurable because patients may
not be able to discern whether the drugs received from other countries
are authentic or appropriate and adverse reactions resulting from
patients receiving wrong or counterfeit drugs may not manifest in the
health care system until sometime later when the patient's condition
worsens and requires emergency treatment or hospitalization. NABP also
maintains that consumers purchasing drugs from other countries are
reluctant to report any adverse consequences because of the fear of
prosecution that could result for violating Federal and State laws.
NABP'S VERIFIED INTERNET PHARMACY PRACTICE SITESTM (VIPPS) PROGRAM
The Verified Internet Pharmacy Practice Sites Program (VIPPS) was
introduced by NABP in 1999 and incorporates traditional regulation and
consumer empowerment into a thorough and successful accreditation and
certification system. The VIPPS program was implemented with wide
consumer acceptance and support. Information about the VIPPS program
has appeared on national and local news media programs and consumer
information specials. The exposure included programming on CNN, ABC
World News Tonight, NPR Radio, NBC News, CBS News, and Fox Special
Report. Articles, stories and consumer advice recommending the VIPPS
program have also appeared throughout the print media in local
newspapers across the country as well as in Time, Newsweek, the Ladies
Home Journal, Consumer Reports, USA Today, Wall Street Journal, New
York Times, Washington Post, and other national publications. NABP
estimates that more than 10 million consumers have heard, watched, or
read about the VIPPS program. Government agencies such as the FDA and
the Center for Medicare and Medicaid Services (CMS) also reference and
recommend that consumers refer to the VIPPS program. Professional
organizations such as the Federation of State Medical Boards (FSMB),
American Pharmacists Association (APhA), and the American Medical
Association (AMA) have also referenced and recommended consumers to the
VIPPS program to consumers.
The VIPPS accreditation program is similar to the national
accreditation of hospitals recognized by Federal and State agencies and
health care insurance companies. The VIPPS program addresses the
Internet pharmacy's level of performance in key functional areas and
focuses on an Internet pharmacy's ability to provide safe medications
and quality care. The VIPPS program is unique to the practice of
pharmacy and the Internet. There are no equal or equivalent
accreditation or certification programs in the world. Other
certification or accreditation programs which operate in the Internet
arena lack NABP's extensive evaluation process, access to licensure and
disciplinary information, and intense onsite inspection procedures. The
majority of programs representing themselves as accreditation or
certification bodies for Internet pharmacies are simply promotional
vehicles for Internet entrepreneurs and charlatans.
The VIPPS process ensures compliance with State and Federal laws
governing the practice of pharmacy and verifies directly with the State
boards of pharmacy the licensure and disciplinary status of the
Internet pharmacy seeking accreditation. VIPPS also certifies
compliance with an 18-point criterion (Attachment A) through rigorous
onsite inspections and the meticulous analysis of the site's operations
and submitted written information. The VIPPS Criteria include criterion
that concentrate on the distinctions of Internet practice, such as the
transmission of prescription information and patient data,
confidentiality of patient records, and quality improvement and
monitoring of prescription processing and patient interactions.
The VIPPS Criteria also set forth performance expectations for
activities that affect the integrity of the medications and quality of
patient care. If an Internet pharmacy does the right things and does
them well, there is a strong likelihood that its patients will
experience good outcomes. NABP develops its criteria in consultation
with health care experts, providers, measurement experts, regulators,
and consumers. Achieving VIPPS accreditation is an indication that the
Internet pharmacy is recognized for complying with national performance
standards that promote safe medications and quality healthcare
delivery.
In early 2003, NABP detected a major shift in activity on the
Internet. At this time, there appeared to be an unprecedented increase
in the number of Internet Web sites offering American consumers lower
priced medications from Canada and other foreign sources. Sites
involved in this illegal activity jammed the Internet, deluged
consumers with advertisements and solicitations at every turn and
click, and aggressively lobbied senior citizen groups and other special
interest groups for Congressional support to protect their activities.
NABP spoke out at the time, and continues to speak out, against these
sites and their illegal activities. NABP has commented extensively on
the need to close these sites and end their illegal operations. Working
with the States and the FDA, NABP has documented incidences of patient
harm from Internet sites and pharmacies operating in Canada and other
parts of the world. Most recently, with the proliferation of Canadian
Internet pharmacies exporting prescription medications to the United
States, NABP has discovered surreptitious Web sites designed to look
like they are based in Canada, when in actuality they are operated in
and/or ship medications from Latin America or overseas and have no ties
to Canada other than their misappropriation of the Canadian flag.
In November of 2003, NABP and the National Association of Pharmacy
Regulatory Authorities (NAPRA) in Canada expanded the VIPPS program to
include legitimate, legal, and safe pharmacies duly registered in the
various provinces. The VIPPS Canada program mirrors NABP's VIPPS
program in the United States and identifies for Canadian patients
Internet pharmacies accredited through a credible process with
standards focusing on the protection of the public health and patient
safety. Presently, those Canadian pharmacies which ship prescription
drugs into the United States, in direct violation of State and Federal
laws, would not qualify for VIPPS certification.
VIPPS: WHETHER AND HOW THIS TYPE OF PROGRAM COULD HELP ASSURE THE
SAFETY OF DRUGS PURCHASED OVER THE INTERNET IF THE UNITED STATES WERE
TO LEGALIZE DRUG IMPORTATION
The importation of medications into the United States from Canadian
and other non-U.S. based pharmacies poses a public health concern and
regulatory quagmire. The public health concern rests with the inability
of foreign and U.S. pharmacy regulators to ensure that medications
illegally imported into the United States are legitimate and safe
because the importation activities fall outside of the existing
regulatory safeguards. The regulatory position advocated by NABP
emphasizes the importance of ensuring that the dispensing and
distribution of medications in the United States are safe for American
patients.
The only means of providing such assurances is the development of a
sound regulatory framework that allows only drug products that are
approved by the FDA and manufactured in FDA registered facilities to be
imported in the United States for dispensing to U.S. patients from U.S.
licensed pharmacists and pharmacies. If the appropriate inter-border
regulatory framework is not in place, then allowing for the purchase
and import of drugs from pharmacies or foreign operations that do not
comply with existing Federal and State laws and regulations places U.S.
patients at significant risk. If the safeguards in place for the U.S.
drug approval system and State regulation of pharmacists and pharmacies
and wholesale distributors are not in place or deliberately
compromised, then U.S. patients will be subject to the dangers of a
``buyers beware'' environment and left unprotected to gamble with their
health and safety.
More importantly, each progression to extend the distribution
source of drugs outside of the FDA drug approval process and U.S.
licensed pharmacists and pharmacies to unknown borders exacerbates an
already dangerous situation. The importation of drugs without an
effective regulatory framework to countries lacking valid drug approval
processes, regulatory systems, or practice standards, provides for the
almost certain erosion and destruction of the entire drug approval
process and regulatory structure of the United States. Allowing the
illegal importation of drugs to continue will, in effect, turn back the
hands of time to the days of the Elixir Sulfanilamide disaster (1937)
when 105 people died after ingesting a preparation containing
diethylene glycol, anti-freeze. It was a time before the FDA was
charged to ensure the safety of drugs and the drug development strategy
was to throw drugs together and if they didn't explode, they were
appropriate to sell.
The U.S. system, based within the regulatory framework of State
practice acts and the FDA drug approval and monitoring processes, has
been exemplary in protecting the citizens of the various States and
providing patients and health care practitioners with the assurances
and confidence that the medications prescribed and dispensed are safe
and effective products. The State-based regulatory system successfully
protects patients and is flexible enough to extend the regulatory
framework and safety net across State borders and allow for the
practices of telepharmacy and telemedicine.
A discussion of whether the VIPPS Program or a VIPPS model can be
utilized to allow for the importation of drugs is mute if the violation
of Federal laws and compromise of the FDA drug approval process are not
addressed and corrected. Clearly the VIPPS program can be implemented
to ensure that foreign pharmacies and wholesale distributors are
dispensing and distributing medications, respectively, in accordance
with State and Federal laws. This can be accomplished through the
following modifications of the VIPPS program:
(1) NABP would define an International VIPPS Patient Care Pharmacy
agreement to certify VIPPS accredited pharmacies outside of the United
States. NABP would amend the VIPPS Criteria to require pharmacies
dispensing medications across the border and seeking VIPPS
accreditation to document and provide evidence on an on-going basis
that the drug products being distributed were FDA approved and obtained
from FDA registered facilities. The international pharmacy seeking
VIPPS accreditation would also have to document and demonstrate
compliance with the laws and the patient care standards of all
jurisdictions in which the patient and the pharmacy resides.
(2) NABP would work with U.S. and foreign pharmacy authorities to
develop mutual enforcement agreements with the pharmacy jurisdictions
in other countries that would regulate international pharmacies by
requiring the licensure/registration of these entities by the
appropriate authority in the country where they are located and where
the patient resides. The mutual enforcement agreements would also
require continued monitoring of the distribution and dispensing of
medications in order to ensure that the pharmacy maintains its
compliance with all applicable laws/regulations. This requirement could
also be managed through the International VIPPS Patient Care Pharmacy
program.
However, and most importantly, absent action to resolve the
violations of Federal law, no modification of the VIPPS program is
possible to create a legal and effective regulatory framework for the
importation of medications to U.S. patients. Legislation passed in
Rhode Island requiring the Rhode Island Board of Pharmacy to license
Canadian pharmacies despite the obvious and knowing violation of
Federal laws is a perilous and illogical action. The Rhode Island
legislation is in effect requiring the agency mandated to uphold the
pharmacy laws of the State to license pharmacies willfully engaged in
violation of Federal laws in complete defiance of the legislative
mandate of the State board. It is inconceivable to place such a
confounding burden on the State board of pharmacy or to implement an
importation model that does not recognize the necessity of complying
with Federal law. Similarly, to implement a VIPPS-like program for the
importation of drugs in direct violation of Federal law would not be
feasible and defy the entire enforcement and legal system of the United
States.
VERIFIED-ACCREDITED WHOLESALE DISTRIBUTORSTM (VAWDTM) PROGRAM
On a final but very important note, if an importation model is
advanced, provided Federal law is not violated, then serious
consideration must be given to the regulation and accreditation of
foreign wholesale distributors. NABP's Verified-Accredited Wholesale
Distributors (VAWD) program, created in response to the FDA's Report on
Counterfeit Drugs, provides a mechanism for the accreditation of
prescription drug and device distributors that helps to ensure the
safety of the U.S. drug distribution system and thwart counterfeit
products. Similar to the VIPPS program, the VAWD program requires
licensure verification, policy and procedure evaluation, and an onsite
inspection to ensure compliance with comprehensive drug distribution
laws and standards addressing such important issues as background
checks, facility security, pedigrees, authentications, quarantine of
suspect product, and verification of product sellers and purchasers.
The VAWD program represents an additional regulatory model that can be
utilized to oversee the safe cross-border distribution of prescription
medications to U.S. wholesale distributors and pharmacies.
CONCLUSIONS
NABP appreciates the opportunity to share its comments with the
committee. NABP respectfully requests that the committee recognize that
allowing and encouraging the illegal purchase and importation of
medications from other countries without the appropriate regulatory
safeguards is a serious threat to our regulatory foundation and patient
safety. NABP requests further, the committee's assistance in preserving
the sanctity of current regulations so as to prevent any patient from
being seriously injured by the illegal importation of drug products
from countries where U.S. laws and regulations are being ignored or the
laws and standards for drug safety and effectiveness of that country or
territory are not equivalent to U.S. laws and standards. NABP also
respectfully requests that if importation of medications to U.S.
patients is allowed then careful consideration be given to the
importance of Federal and State laws, maintaining the FDA drug approval
and monitoring process, and the adoption of solutions that are focused
on patient safety.
Thank you for the opportunity to address this important issue.
______
Attachment A.--Verified Internet Pharmacy Practice Sites (VIPPS)
Criteria
LICENSURE AND POLICY MAINTENANCE
Qualifying VIPPS Pharmacies (see definitions) must:
(1) Provide NABP with the information necessary to verify that the
VIPPS pharmacy is licensed or registered in good standing to operate a
pharmacy and/or engage in the practice of pharmacy with all applicable
jurisdictions;
(2) Provide NABP with the information necessary to verify that all
persons affiliated with the site, including those affiliated through
contractual or other responsible arrangements, that are engaging in the
practice of pharmacy are appropriately licensed or registered and in
good standing in all applicable jurisdictions;
(3) Maintain and enforce a comprehensive policy and procedure that
documents how the pharmacy's policies and procedures are organized,
authorized for implementation, revised, retired and archived; and
(4) Comply with all applicable statutes and regulations governing
the practice of pharmacy where licensed or registered, and comply with
the more stringent law or regulation as determined by conflicts of law
rules. VIPPS pharmacies must maintain and enforce policies and
procedures that address conflicts of law issues that may arise between
individual States or between State and Federal laws and regulations.
Said policies and procedures must assure compliance with applicable
laws including generic substitution laws and regulations, and must
prohibit unauthorized therapeutic substitution from occurring without
necessary patient or prescriber authorization and outside of the
conditions for participation in State or Federal programs such as
Medicaid.
PRESCRIPTIONS
Qualifying VIPPS Pharmacies, in accordance with applicable State
and Federal laws and regulations, must:
(5) Maintain and enforce policies and procedures that assure the
integrity, legitimacy, and authenticity of the Prescription Drug Order
and seek to prevent Prescription Drug Orders from being submitted,
honored, and filled by multiple pharmacies. Maintain and enforce
policies and procedures that assure that prescription medications are
not prescribed or dispensed based upon telephonic, electronic, or
online medical consultations without there being a pre-existing
patient-prescriber relationship that has included an in-person physical
examination.
PATIENT INFORMATION
Qualifying VIPPS Pharmacies, in accordance with applicable State
and Federal laws and regulations, must:
(6) Maintain and enforce policies and procedures ensuring
reasonable verification of the identity of the patient, prescriber,
and, if appropriate, caregiver, in accordance with applicable State
law;
(7) Obtain and maintain in a readily accessible format, patient
medication profiles and other related data in a manner that facilitates
consultation with the prescriber, when applicable, and counseling of
the patient or caregiver;
(8) Conduct a prospective drug use review (DUR) prior to the
dispensing of a medication or device in accordance with applicable
State law; and
(9) Maintain and enforce policies and procedures to assure patient
confidentiality and the protection of patient identity and patient-
specific information from inappropriate or non-essential access, use,
or distribution while such information is being transmitted via the
Internet and while the pharmacy possesses such information. [The NABP
Guidelines for the Confidentiality of Patient Health Care Information
as It Relates to Patient Compliance and Patient Intervention Programs
can serve as a useful resource for addressing the confidentiality and
security of patient data.]
COMMUNICATION
Qualifying VIPPS Pharmacies, in accordance with applicable State
and Federal laws and regulations and VIPPS program criteria must:
(10) Maintain and enforce policies and procedures requiring
pharmacists to offer interactive, meaningful consultation to the
patient or caregiver;
(11) Maintain and enforce policies and procedures establishing a
mechanism for patients to report, and the VIPPS Pharmacy to take
appropriate action regarding, suspected adverse drug reactions and
errors;
(12) Maintain and enforce policies and procedures that provide a
mechanism to contact the patient and, if necessary, the prescriber, if
an undue delay is encountered in delivering the prescribed drug or
device. Undue delay is defined as an extension of the normal delivery
cycle sufficient to jeopardize or alter the patient treatment plan;
(13) Maintain and enforce policies and procedures establishing
mechanisms to inform patients or caregivers about drug recalls; and
(14) Maintain and enforce policies and procedures establishing
mechanisms to educate patients and caregivers about the appropriate
means to dispose of expired, damaged, and unusable medications.
STORAGE AND SHIPMENT
Qualifying VIPPS Pharmacies, in accordance with applicable State
and Federal laws and regulations and VIPPS program criteria, must:
(15) Ship controlled substances to patients via a secure and
traceable means; and
(16) Assure that medications and devices are maintained within
appropriate temperature, light, and humidity standards, as established
by the United States Pharmacopeia (USP), during storage and shipment.
OVER-THE-COUNTER PRODUCTS
Qualifying VIPPS Pharmacies must:
(17) Comply with all applicable Federal and State laws regarding
the sale of Over-the-Counter Products identified as precursors to the
manufacture or compounding of illegal drugs.
QUALITY IMPROVEMENT PROGRAMS
Qualifying VIPPS Pharmacies must:
(18) Maintain a Quality Assurance/Quality Improvement Program.
REPORTING TO NABP
Qualifying VIPPS Pharmacies must:
(19) Notify NABP within thirty (30) days of any change of
information provided as part of the verification process, including
change in pharmacist-in-charge, or involving data displayed on the
VIPPS Web site. VIPPS pharmacies shall notify NABP in writing within
ten (10) days of ceasing operations. The written notification shall
include the date the pharmacy will be closed, and an affirmation that
all VIPPS Seals and references to the VIPPS program have been removed
from the Web site and wherever else they are displayed.
The Chairman. Thank you very much.
Dr. Peter Rost.
STATEMENT OF PETER ROST, M.D., VICE PRESIDENT OF MARKETING FOR
ENDOCRINE CARE, PFIZER
Dr. Rost. Thank you, Chairman Enzi, Senator Kennedy. Thank
you so much for inviting me here today.
My name is Peter Rost, and I am a physician who has spent
20 years marketing pharmaceuticals. I have been responsible for
a region in Europe, and I am currently a vice-president with
Pfizer. The views I will present today are my own and do not
reflect those of my employer, which will become abundantly
clear.
By now, most of you have noticed that I do not have an East
Coast accent. I am a naturalized U.S. citizen, came to this
country, voted with my feet, because I wanted to be here. I
think this is a wonderful country, a country where we have
freedom of speech, a freedom that I am choosing to exercise
today.
The first question I usually get is you are a drug
executive. How can you speak in favor of reimportation? That
does not make any sense. What has influenced me is my own
personal experience with reimportation in Europe, working for
another pharmaceutical company. I first assisted the President
of Europe, and then, I was managing the northern region in
Europe, and I had a problem over there, I had a problem of a
lot of reimported drugs coming into my market, and I was not
happy. So you know what I did? I lowered my prices 30 to 40
percent. Do you know what happened? In 2 years, I doubled
sales. My market company went from number 19 in the business to
number 7, less than 2 years, best performance in the history of
the Swedish pharmaceutical industry.
So I learned that the free market works and that there are
several sides to this coin, and I think that the industry is
making a historic mistake right now opposing drug importation,
and I am not the only one thinking so. As a matter of fact, Roy
Vagelos, the well-known former chairman of Merck and one of the
industry's most prominent boosters last year in the New York
Times said the industry delivered miracles, and now, they are
throwing it all away. They just do not get it. He was referring
to drug prices.
I am going to focus on two areas: safety and cost-
effectiveness of reimportation. Lester Crawford has been quoted
as saying that his main concern about reimportation is that Al
Qaeda would attack the supply of drugs. But being concerned
about safety of imported drugs assumes that you are safe
already. I do not think we are. What the FDA has forgotten is
that we have thousands of secondary wholesalers in the United
States today. States license them, not the FDA. All it takes
for a terrorist to become a drug wholesaler is $1,000 and a
driver's license.
Another problem, very important, right here in the United
States today is that our drugs are shipped in big vats to
wholesalers, and they pour them in smaller bulk-size bottles,
and then, the pharmacists pour those drugs to the patients,
lots of entry points for a terrorist or anyone else. In Europe,
it is different. Drugs are shipped in individual bottles or
blisters, and no one touches the drug after it leaves the
manufacturer. Pretty good system. We should have it, too.
So I believe that getting drugs from Europe really could be
safer than getting it in the United States. The German Federal
Health Ministry has recently verified that not one single
confirmed case of a counterfeit medicine has ever come through
the trade chain in Europe.
Legalized and regulated reimportation is about the safe
drug supply. It is about getting drugs to consumers who cannot
afford them, because, you know, the biggest safety problem we
have, the safety problem nobody has mentioned today is when you
do not take a drug. It does not work. We have lots of patients
in the United States that do not take drugs: 15 percent of
uninsured children did not take the drugs they needed because
of cost. Twenty-eight percent of adults, same thing. Diabetes
care had a study showing that 28 percent of elderly diabetes
patients had to choose between food and drugs in America today.
What is the effect of this? We have the numbers. I just
checked out the WHO Web site. In America, more babies die every
year than any other industrialized country and more elderly
die. We have higher infant mortality rates, child mortality
rates and a shorter life span than every other industrialized
country: Singapore, Australia, New Zealand, Japan, Canada,
Western Europe.
Now, I remember this was the country that put a man on the
moon, and here we are 40 years later not even taking care of
our babies. I mean, come on: this, we have to do something
about. Drugs help people. Drugs make a difference. We know
that. That is part of the solution.
You have also heard in the HHS report that savings would
really only represent 1 to 2 percent of drug expenditures, and
the biggest fallacy in the report is that it assumes that there
would only be a 20 percent discount, while we know that drugs
are 100 percent more expensive than in Europe. So this assumes
that reimporters would really do price gouging.
I need to wrap up, so I will say that my overall concern is
that every day, Americans die because they cannot afford life-
saving drugs, because we want to protect the profits of often
foreign corporations. I believe we have to speak out for the
people who cannot afford drugs in favor of free trade and
against the closed market. Stopping good reimportation bills
has a high cost, not just in money but in American lives.
I and many of my colleagues joined the drug industry to
save lives, not to take them. That is the reason I am here
today. Thank you.
[The prepared statement of Dr. Rost follows:]
Prepared Statement of Peter Rost
Chairman Enzi and Senator Kennedy thank you for inviting me today.
My name is Peter Rost and I'm a physician who has spent 20 years
marketing pharmaceuticals. I've been responsible for a region in Europe
and I'm currently a Vice President at Pfizer. The views I will present
are my own and do not reflect those of my employer.
By now, most of you have noted that I don't have an East Coast
accent. I'm a naturalized U.S. citizen and I voted with my feet when I
came here 20 years ago. I think this is a great country, where we have
the freedom of speech--a freedom I'm exercising today.
The first question I usually get is ``you're a drug executive, how
can you speak in favor of reimportation.'' What has influenced me is my
own personal experience with reimportation in Europe while working for
another pharmaceutical company. First I assisted the president of
Europe; then I headed up the Nordic region. I had lots of reimported
drugs coming into my market, and I was not happy about this. So I
dropped my own prices. You know what happened? I doubled sales and
increased my company ranking from No. 19 to No. 7 in less than 2 years.
So I know that the free market works and I think the industry is making
a historic mistake, opposing drug importation.
My concern is that we have 67 million Americans without insurance
for drugs. Many of them don't get the drugs they need because they
can't afford them, because drugs cost twice as much in the United
States as in other countries.
And what really troubles me is that when we in the drug industry
charge these high prices to the uninsured, we sell the rest of our
drugs, right here in the United States, today, at the same low prices
we charge in Canada and Europe. It's done through rebates. These are
given to those with enough power to negotiate drug prices, such as the
Department of Veterans Affairs and various pharmacy benefit mangers.
So the fight against reimportation is a fight to continue to charge
our uninsured, our elderly, our poor, our weakest, full price, while
giving everyone else a rebate. This is fundamentally unethical. This is
not how we're supposed to treat our grandparents who built this
country.
Legalized reimportation can help these people. The biggest argument
against reimportation is safety. [According to AP, FDA Commissioner]
Lester Crawford has said that his main concern about drug reimportation
is that al Qaeda might attack the supply of Canadian drugs.
But the FDA has forgotten that we have thousands of secondary
wholesalers that trade drugs. States license them, not the FDA. All it
takes for a terrorist to become a drug wholesaler is $1,000 and a
driver's license, [according to Aaron Graham, head of security for
Purdue Pharma, quoted in the Providence Journal]. Another problem,
right here in the United States, is that our drugs are shipped in big
vats to wholesalers, and then poured into smaller, bulk-size
containers, from which tablets are dispensed manually to the patient.
Lots of entry points for a terrorist. In Europe, drugs are sold in
tamper-proof individual bottles or blisters, and no one touches a drug
after it leaves the manufacturer.
So I believe that getting a drug from Europe is actually safer than
getting it in the United States. The German Federal Health Ministry has
verified that not one single confirmed case of a counterfeit medicine
has ever come through the parallel trade chain. The UK regulatory
authority has described the level of pharmaceutical counterfeiting as
``virtually undetectable'' [according to European Association of Euro-
Pharmaceutical Companies].
Legalized and regulated reimportation is about a safe drug supply.
It's about getting drugs to consumers who can't afford them. The
biggest problem we have today is that drugs don't work if you don't
take them. The Kaiser Family Foundation reported [in a 2001 study] that
15 percent of uninsured children and 28 percent of uninsured adults had
gone without prescription medication because of cost. The journal
Diabetes Care recently reported [February, 2004] on a study of older
adults with diabetes. Twenty-eight percent said they went without food
to pay for drugs. Is this how we want to treat our elderly, force them
to choose between food and medicines?
And by the way, not even the drug companies want to pay for brand
name drugs anymore. Novartis, one of the largest foreign drug makers,
was so concerned about drug costs that the CEO sent a memo to all U.S.
employees urging them to choose more generics. He didn't realize the
memo would make front page news [NJ Star-Ledger, Oct 15, 2004].
[Let's also point out that half of the largest pharmaceutical
companies are foreign corporations [Novartis, Glaxo, Astra-Zeneca,
Roche and Sanofi-Aventis]. Why should we allow foreigners to come in
and gouge American tax payers? Perhaps we shouldn't allow them to
charge us more than their own governments are prepared to pay for our
drugs? In Europe that's called reference pricing.]
So what do these foreign companies do? They take out big ads in
American newspapers [Glaxo] and tell us that reimportation is not safe,
while they know full well that it's been done safely and cost-
effectively in their own home markets, in Europe, for over 20 years.
And I know that some of you may tell me that reimportation is not
the answer; the HHS report speculates that savings would represent only
1 percent to 2 percent of drug expenditures.
You know what, the short answer is that if this was true,
reimportation of drugs would never have existed in Europe with much
smaller price differentials than the United States, and it would never
take off in the United States. Why, then, do you think, the drug
industry spends so much time and money fighting reimportation? The
answer is that the data in the HHS report don't support this
conclusion.
There is one simple flawed assumption in the report that drives
their incorrect conclusion. It's that ``U.S. drug buyers may get
discounts of only 20 percent or less, with the rest of the difference
between U.S. and foreign prices going to commercial importers.'' This
assumption is based on a London School of Economics study. Guess who
sponsored that study? You got it--the drug industry [Johnson & Johnson,
according to Pharma Marketing].
[In fact, table 7.2 in the HHS report shows that U.S. drug prices
are 100 percent higher than in Europe. So the premise of less than 20
percent savings assumes price gouging by importers and a complete lack
of competition. Of course, we in the industry know that is not how the
free market works.]
Every day Americans die because they can't afford life-saving
drugs, because we want to protect the profits of foreign corporations.
I believe we have to speak out for the people who can't afford drugs,
in favor of free trade and against a closed market. Stopping good
reimportation bills has a high cost. Not just in money, but in American
lives.
I and many of my colleagues joined the drug industry to save lives,
not to take them. That's the reason I've chosen to speak out today.
Thank you.
The Chairman. Thank you. I appreciate the testimony of all
of the members of the panel. I particularly appreciate the work
that you put into an even fuller testimony, which will, of
course, be a part of the record, and I encourage everybody to
take a look at that. I appreciate your doing the summary so
that we can get to questions.
Governor Pawlenty, I want to congratulate you on your
RxConnect, a very innovative and obviously very effective
system, and I have a bunch of questions on the cost of that so
that we can relate it to what our costs might be on a Federal
level were we to do something similar, but that is a lot more
detailed. I found that that kind of puts people to sleep. So I
will stick with some things that might be of greater interest.
In a poll that was released last fall that supports
importation beyond Canada, there was about a 30 to 40 percent
approval of that. Do the Internet pharmacies that
MinnesotaRxConnect has a relationship with in Canada get their
medications from countries other than Canada, and do you extend
the Web site approvals beyond Canada, and if so, is that
disclosed to the consumers?
Governor Pawlenty. Mr. Chairman, thank you for the
question. To clarify, the pharmacies that we have identified in
Canada are actual pharmacies. Just to be clear on the term
Internet pharmacy, sometimes, that leads people to think there
is a virtual operation; there is not a physical operation.
These orders are placed, in most instances, via a fax order
form that is downloaded from our Web site and then faxed to the
pharmacy, so we do not even actually--the consumers do not even
place the order over the Internet. They are placed on a fax
that goes to the physical pharmacy.
In terms of the source of the drugs from Canadian
pharmacies, it varies, but as a general expectation, we expect
the drugs to be sourced from Canada or the United States. We
are aware that in certain instances, they are sourcing the
drugs from certain European countries as well.
The Chairman. Thank you.
Mr. Gray, even in a closed distribution system like we have
in the United States, from time to time, counterfeit medicines
have been able to enter our system. How do you answer critics
who argue that if counterfeit drugs are already entering our
closed system, what is the harm in expanding the marketplace
internationally?
Mr. Gray. Well, products have entered the system, and our
obligation is to tighten that regulatory requirement on the
points at which those products have entered the system, and we
have been arguing for stiffer State licensing, more national
uniform licensing standards to close those loopholes, and our
responsibility and our objective here today is as distributors,
as folks who look strictly at the supply chain, the logistics
aspects of the business, our feeling and our responsibility, we
feel, is to make as secure our U.S. domestic supply chain
before we start introducing foreign products into our system.
We acknowledge there are improvements to be made; there are
stricter regulations, more uniform regulations that are
required. There are technologies that need to be employed, and
we think looking at the 50-State supply chain we currently
handle, we have got enough to do there to make that supply
chain as safe and secure and then start considering what other
options there might be.
The Chairman. Thank you.
Mr. Catizone, I have heard arguments that the pharmacies in
Canada or other developed countries are about the same as the
pharmacies in the United States. Is that true, and if not, what
are the differences that would be important for us to
recognize?
Mr. Catizone. We have heard that same statement, Senator,
and the fact of the matter is that the Canadian pharmacies that
are licensed under the Canadian system are equivalent to the
U.S. pharmacies and regulatory system. We cannot make that same
statement for countries outside of Canada, because we have done
an analysis of their practice standards, we have done an
analysis of their products, and it appears that those standards
and those product standards are below the standards within the
United States.
The problem with importation is that it falls outside of
the traditional regulatory schemes of Canada and the United
States, and many pharmacies are operating within that empty
wasteland and practicing and sending medicines to U.S. citizens
without any regulation.
The Chairman. I will try and get some more information on
that from you.
Mr. Rost, instead of us worrying about the reimportation
thing, why do you not just reduce the price of the drugs in
this country that you control, and then, we would not have to
bring them back in through Canada?
Dr. Rost. Well, companies already do that. Companies today
sell their drugs, which is not very much talked about, at
European and Canadian prices today in the United States. They
sell them to the parties who can negotiate: pharmacy benefit
managers, Department of Veterans Affairs. The people who pay
full price are the people who cannot negotiate: the uninsured,
the poor, the elderly. They are the ones who get stuck with the
high bill. I believe that is unethical.
The Chairman. Thank you. My time is expired. I do have some
other questions for all of you. I will submit those in writing.
Senator Kennedy. Dr. Rost, do you still work for Pfizer?
Dr. Rost. Yes, I do. Yes, I do.
Senator Kennedy. Are they an enlightened company to let you
loose up here?
[Laughter.]
Dr. Rost. Well, Pfizer reacted quite strongly the first
time I was down here on the Hill, and they hired a law firm and
started I would call it a bit of an inquisition, McCarthy-type
hearing. They asked me about everything Senators and
Congressmen had told me in their private chambers. They even
asked me where I had slept when I was in Washington, and if
anybody wonders, it was next to my wife.
[Laughter.]
But the Justice Department in New Jersey picked up on this
and called me in, and it turns out that to try to dissuade
anybody from appearing before Congress is a criminal act. You
can get a year in jail. There are also State laws that protect
people's legal political activity in their free time, which
this is.
So after, I think, everybody was informed what the ground
rules were, the investigation stopped.
Senator Kennedy. Well, I was about to give them great
credit for encouraging this kind of discourse from a person who
is clearly a talented and concerned and experienced medical
officer, but in any event, we are very grateful for your
presence here and your testimony.
Governor, I just listened to one of the most persuasive
Republicans I have ever heard with your very excellent
commentary. You appeared before the task force. I am just
wondering, it does not seem like the task force embraced your
story. Just quickly, do you have any reactions to the task
force or the task force report?
Governor Pawlenty. Senator, I did appear before the task
force and provided testimony. In listening to the Surgeon
General, I think they viewed our approach or looking at it more
critically beyond the scope of their charge from Congress. I
will say the Surgeon General appeared to me and continues to
appear to me to be genuine and sincere in his review of these
matters. I would hope, though, that somebody would take a
critical look at what Minnesota or other States are doing.
Senator Kennedy. Okay.
Governor Pawlenty. We have offered, by the way, to the FDA
to be a demonstration project that we would pay for, have their
inspectors come in. We would follow their rules. If there were
problems, we would agree to shut down our program. They have
not taken us up on the offer.
Senator Kennedy. Well, it is an enormously impressive
story.
Some of the pharmaceutical manufacturers are limiting the
supplies of drugs to companies exporting drugs to Americans.
Have your Canadian pharmacies been able to maintain adequate
supplies for the Minnesotans?
Governor Pawlenty. Senator, yes, but they are under
increasing pressure, and more recently, we have signals that
certain of the pharmacies are going to be running short or
having delays or maybe running out of supply, because it is
pretty clear that the pharmaceutical companies are choking off
supply to those pharmacies because of their participation in
our program.
Senator Kennedy. The Surgeon General also commented,
Governor, that it costs billions of dollars to inspect all of
the drugs being shipped to individuals in the United States; do
you feel it is necessary to inspect all of the packaged drugs
that are sent from registered exporters to American consumers
through the Federal Postal Service?
Governor Pawlenty. Senator, no, I think the point that you
raised earlier which is, again, the shiny object of--we
concede, we stipulate that there are all sorts of garbage and
shady characters on the Internet. We should not condone or
promote that type of approach. What we should condone and
promote is identifying and contractually engaging in a
relationship and hopefully regulating established credible,
reputable pharmacies, direct our consumers to those, and then,
it just becomes a matter of shipping logistics, which I believe
in an era, as we said, we put a man on the moon some years ago,
we should at least be able to mail a package from Thunder Bay
to Duluth without too much difficulty.
Senator Kennedy. Dr. Rost, just if you would expand on this
concept as a physician as well as a pharmaceutical company
executive, is drug importation under a closely regulated
environment a better alternative for consumers than not having
access to the medicines because they cannot afford them?
Dr. Rost. Well, in Europe, they have a system up and
running which they have had for over 20 years that works safely
and cost-effectively which does not mean that consumers have to
go on the Internet. This, what we have here today, is the Wild
West. It is not good. I do not think anybody thinks it is good.
What I am in favor of is the same thing as the American Medical
Association is endorsing, which is a closed system, where
wholesalers and pharmacists are up front importing drugs.
However, I know that takes time, and I believe when you see
this boat, this sinking boat with babies and elderly, you
cannot just sit around year after year after year and check on
safety issues. If you have shown in a number of States and
cities like Springfield, MA, that these programs work, let us
get them running, because it can make a difference in the lives
of a number of people.
We cannot wait. Every day we wait, we lose another person.
Senator Kennedy. Thank you, Mr. Chairman. My time is up, I
think.
The Chairman. Thank you.
Senator Alexander.
Senator Alexander. Thank you, Mr. Chairman.
I wonder if any of you would help me evaluate the news
report citing the Canadian Health Minister as suggesting that
Canada does not want to be the drug store for the United
States. What did you make of that? Was that an accurate
statement? What does that mean?
Mr. Catizone. From our review of the situation, what it
means, and our discussions with Canadian officials is one of
the issues that was noted earlier: first, there is concern that
there will not be medications for Canadian citizens because of
the drain on the supply by U.S. patients, and second, the
Canadian Government is also concerned that the medications and
distributors dispensing those medications is falling outside of
their regulated system, and they have no way to manage that or
to respond to complaints that they are receiving from U.S.
patients.
Senator Alexander. Does anyone else have a comment on that?
Mr. Gray. I would agree with that, and I think it is over
the supply issue, because I know our companies have looked at
this and are concerned about the issue given, as suggested
earlier, 40 million people in Canada, 300 million people here,
in the logistic supply chain sense, you look at it and say
where do you get the volume of drugs to take care of 300
million Americans, most of who are fast approaching the age of
60 or over when you are only getting a small supply from
Canada?
The question is when that drug comes over, and there is a
limited supply, who makes the allocation decision as to where
that drug goes? Does it go to Duluth, MN? Does it go to
Phoenix, AZ? From our perspective we have looked at, we are
trying to figure out where is all this drug supply going to
come from to replace the drugs that we are currently selling in
the United States at arguably or what is suggested to be maybe
a cheaper price.
From a logistics point of view, we are questioning how we
are going to get the drugs and how there are going to be enough
of them.
Senator Alexander. Dr. Rost.
Dr. Rost. Well, I think the sad situation we have today is
that a number of large drug companies are limiting supply to
Canada in the name of safety, but what really happens, then, is
that they force Americans who cannot afford our drug prices in
our drug stores here to buy those drugs somewhere else, which
certainly does not help safety. The other comment I would have
is clearly, Canada cannot supply the United States. However,
the European Union is a big market, and any functioning bill
needs to include the European Union. To start with Canada would
not work.
Senator Alexander. Governor, did you have any reaction to
that?
Governor Pawlenty. Yes, Senator, just to put it in context,
of course, people who are currently insured or are part of a
program that has a prescription drug benefit are not the ones
seeking Canada, so it is not the entire American market. It is
just a slice of it. I think it is a supply issue as I
understand the Canadian officials' concerns. That concern is
really a function of the pharmaceutical companies limiting
supply to Canada. It is not as if purchases that would have
otherwise taken place in the United States, now that demand is
transferred to Canada.
Theoretically, the supply could also then be diverted to
Canada as more demand is generated in Canada, but what is
happening, of course, is that the supply is being manipulated
as a message, I think, to the Canadian pharmacies that you
should not participate in these programs.
Senator Alexander. Thank you. How can we most fairly
evaluate what the costs would be of a system that would
properly regulate and try to make safe imported drugs? I assume
there would be--there has been some testimony about
anticounterfeiting technology which might be developed, but I
assume there would be an expense to that. Whenever the FDA
testifies here on this subject, they talk to us about a fairly
large cost of setting up the facilities to handle the
importation of drugs. How do we evaluate whether taking this
step would, in effect, with the added cost of
anticounterfeiting technologies and other administrative costs,
whether we would end up adding so much to the cost of the drugs
that there really would not be much cost savings?
Mr. Gray. Well, I think the first thing to consider, and
the industry is in the process of doing this now, is what is
the cost of this technology just within the domestic supply
chain? We are actively working on pilot projects now with a
number of organizations throughout the United States and in the
industry already trying to understand what it is going to cost
to implement just this system for track and trace within the 50
States.
I think until we have a grasp around that number, because
that track and trace is going not only into pharmaceutical but
consumer goods. Food industry and what have you are all quickly
moving to it, and quite frankly, the suppliers of the
technology and the implementers, those of us who are
distributors, are trying to figure out what is this really
going to cost, both the manufacturer cost, the distributor
cost, the retail cost, the warehouse to operations cost and
what have you.
Quite frankly, and as I said earlier, we have got to get
our hands around the U.S. system first before we get an
understanding what is going to be the implications of then
extending this out beyond the U.S. borders, whether it is to
Canada or the European Union. My adage is I think we have got
to get our own house in order before we move outside to look at
other systems. We have a lot of work still to do to get this
technology into place for the next 3 to 4 years.
Senator Alexander. Thank you.
I see my time is up. Thank you, Mr. Chairman.
The Chairman. Senator Burr.
Senator Burr. Thank you, Mr. Chairman, and I appreciate the
fact that we are going to cover this issue over a number of
hearings. I want to thank the witnesses and suggest this is
probably one of the most important things this committee will
do.
Governor, thank you for your willingness to come in. I
think it is safe to say that what you exercise in Minnesota is,
in fact, the waiver that the FDA provides individuals to seek
the fulfillment of their prescriptions outside of the United
States, something that they are not breaking the law to do
today and that is not being enforced under any other method.
The only change is that Canadians are now questioning whether
the Canadian doctor's sign-off of a U.S. doctor's prescription
should be policy; in other words, accepting the medical
decisions of somebody in another country which, in fact, is
what we are here discussing. Whether we are going to accept the
medical decisions of the policies of other countries, and, as
you said, I am comfortable in doing it with Canada, and I think
as others have raised, if you cannot 100 percent with
reliability understand the chain of custody--did that come from
Italy. We could not sign onto any kind of harmonization
agreement in the international community, because we disagree
with many of the things that they use for their drug approval
process.
We have a much bigger animal here that is not as simple as
just trying to replicate what Minnesota has done. We have to
look down the road and say how could it grow into something
that was not intended on your part and certainly not intended
on our part? I think you said that delivery was nothing to
worry about. If delivery were nothing to worry about, part of
the jurisdiction of this committee would not be bioterrorism. I
would not be a subcommittee chairman concerned with the mail
contamination of anthrax and ricin.
In fact, delivery is a concern. It is a concern in
terrorism; it is a concern with adulterated products. It is a
concern as to who we use, here in the United States, to verify
whether it is an approved pharmacy or an approved outlet.
Whether it is the Postal Service, whether it is Customs, and
one only has to travel to Dulles Airport to see the challenge
that a Customs agent has trying to determine whether a
counterfeit drug which people have matched the identical color,
the identical stamp, the identical packaging. I think Dr. Rost
can agree to this, counterfeiting is rampant maybe not in our
borders but around the country or around the world today.
I take for granted the shiny object was the question of
safety, so I am not going to go to safety. But I think there
are legitimate reasons that in an honest way, we can have that
debate.
I want to go to U.S. Code. U.S. Code protects the patents
of U.S. companies. The U.S. patent law protects the patents of
U.S. companies. The Food, Drug and Cosmetic Act protects the
patents of companies and products that are regulated by that
agency. The Prescription Drug Marketing Act protects the
patents of companies that are regulated under that marketing
act.
Are you suggesting that we ignore U.S. Code, U.S. patent
protection to facilitate a much broader access by U.S.
consumers to prescription drugs?
Governor Pawlenty. Senator, I hope my microphone is on.
Senator, the question that you ask, I think, relates to
intellectual property rights, and there are some who object to
Canada's approach to either negotiating prices or how they deal
with intellectual property. They do it somewhat differently
than the United States does, but they have a framework for it,
and it is public, and it is, you know, appropriate as far as
they are concerned.
The concern that I have is when the United States is in the
market for any other product, we shop the world for the best
deal, and so, we go to China, for example, for products, even
though they have a Communist Government, they have limited land
rights, limited human rights, environmental policies that may
be of concern to Americans. We do not get----
Senator Burr. But, Governor, let me stop you there. We
aggressively go after textile products that come from China
that are not authorized by the copyright holder. If, in fact,
we have counterfeit CDs and DVDs, we are aggressively at the
table negotiating with the Chinese today about the special
nature of the way the United States protects those patents and
those copyrights of U.S. innovators.
I guess my question is what do we do to the negotiators we
have got at the table who are trying to negotiate the
breakthroughs for 3M? 3M in your State has a tremendous list of
patents. I think Dr. Rost would also agree that the ability to
have patents allows innovation in the drug industry. I will
come to you in a second.
I think that Senator Murray would agree that one of the
reasons that Microsoft is headquartered in the United States is
that we have a law that says we will protect your intellectual
property. Yet we are picking one sector out now, and we are
saying we are going to ignore that. The question is what
precedent does this institution set if we ignore U.S. Code?
This is rooted in the Constitution, and we are going to step on
it.
Governor Pawlenty. Senator, I do not understand that the
Canadian patent system is somehow rogue or illegal or
inappropriate. They have modern and sophisticated intellectual
practices and property code in Canada.
Senator Burr. It is our patent system that I am--our patent
system says that if it is against the patent holder's wishes,
that product cannot be reimported or exported or imported into
the United States. The question is are we going to enforce our
own law, our own protections?
Governor Pawlenty. Senator, I know time is short, but the
system is, of course, that Canada negotiates with the
pharmaceutical companies for their prices. They also negotiate
over their patent protocols and procedures and expectations. It
is a mutually negotiated or agreed-upon arrangement in Canada.
Senator Burr. But one thing is that reimportation into the
United States is against U.S. Code, U.S. law. A patent holder
would have to sign off on the reimportation, which is not the
case when we move to a bulk situation.
Governor Pawlenty. Senator, I understand your point. Now,
as applied to the way that Minnesota does it, we fall within
the individual use exception.
Senator Burr. Right.
Governor Pawlenty. If Congress were to move more broadly
into allowing this, then, you would have to address this issue.
So I understand what you are saying now. It is not that it
could not be done, but you would have to address it in a way
that is fair and equitable.
Senator Burr. We would have to ignore U.S. law.
Governor Pawlenty. If I might just quickly----
The Chairman. The Senator's time has expired. I will have
to ask for each of you to respond to that in writing at this
point----
Governor Pawlenty. Okay.
The Chairman [continuing]. To any questions that he or the
rest of us might have the same way, because the record will be
left open for 10 days for witnesses to amplify their remarks
and also members to propose different questions. I do thank the
panel for the extensive knowledge that they have and their
willingness to share it and to take the extra time to answer
our written questions.
I would also ask unanimous consent that we be allowed to
include a letter from Pfizer for the record to explain that Dr.
Rost is not appearing on behalf of Pfizer.
Without objection.
[The information follows:]
Pfizer Inc., Corporate Affairs,
New York, NY,
February 16, 2005.
Hon. Michael B. Enzi,
Chairman,
Committee on Health, Education, Labor, and Pensions,
Dirksen Senate Office Building,
Washington, D.C. 20510.
Dear Chairman Enzi: We understand that Dr. Peter Rost will testify
today before the Senate Committee on Health, Education, Labor, and
Pensions on the subject of prescription drug importation. At the
outset, it is important to note that while any citizen is entitled to
speak before the Congress, Dr. Rost is not speaking on behalf of
Pfizer. Dr. Rost has never been involved in the extensive analysis of
this critical issue that has been undertaken at Pfizer. He has not
participated in Pfizer's active involvement in the government's
examination of this issue. These Pfizer activities include the
following:
In April, Pfizer's Vice President of Global Security, John
Theriault, testified before the Department of Health and Human
Services' Importation Task Force, which was mandated by Congress to
study the feasibility of importation. In May, Pfizer provided a
submission to the Task Force that supports Pfizer's position that
foreign authorities do not have the controls in place to guarantee the
safety of exported regulated drugs.
Pfizer also participated in the GAO's study of drugs
purchased online by helping determine whether these drugs are
counterfeit. The GAO testified before a Senate subcommittee in June,
concluding that consumers can easily buy drugs over the Internet
without a prescription. The GAO concluded by stating, ``It is notable
that we identified these numerous problems despite the relatively small
number of drugs we purchased, consistent with problems recently
identified by State and Federal regulatory agencies.''
In addition, we have no basis to support Dr. Rost's purported
expertise in this area. It has been a number of years since Dr. Rost
was stationed in Europe and we believe that his knowledge is outdated.
For example, he incorrectly suggests that the price differences
exploited by parallel trade in Europe have been passed on as savings to
consumers when virtually all objective analysis refutes that assertion.
A study conducted by the London School of Economics, which was
published last year, found that national health systems within the EU
realized minimal savings from parallel traded products. In fact, the
study showed that no single national payer saved more than 2.2 percent
because of this trade despite wildly varying price discrepancies. In
the UK, the study found that ``The impact on patients in the UK from
parallel trade is zero'' and that prices of parallel imported products
``are on average the same as those of locally sourced equivalents . .
.'' (despite average price differentials of more than 20 percent).
Parallel trade in Europe involves trade between pharmacies and
wholesalers subject to regulations in their respective home markets. It
does not involve individuals importing medicines on their own from
foreign jurisdictions. Our long experience analyzing parallel trade and
considerable objective research shows the gains ultimately accrue to
the middlemen rather than to consumers or payers.
The issue of importation and how it may impact the safety of
American patients is a serious health issue requiring informed debate.
In 1987, Congress enacted important changes to prohibit the importation
of unapproved medicines in response to many instances of unsafe foreign
medicines entering the United States. While the public health threats
caused by such medications were significant enough in 1987, the
potential threats from unapproved prescription drugs are even greater
today.
Here are a few key points that we believe need to be factored into
the discussion:
Unapproved, unregulated and counterfeit medicines bought
online can (and do) come from virtually anywhere in the world. In light
of the counterfeiting activity Pfizer has investigated, the importation
proposals we have seen in Washington and some of the States are truly
alarming. These programs open a tightly regulated system to a new drug
distribution channel in which virtually every participant operates
outside the law, outside the standards of acceptable medical practice
and without effective oversight.
In December 2003, the Minnesota Board of Pharmacy
investigated eight Canadian Internet pharmacies and found 32 different
unsafe or questionable pharmacy practices (on pre-arranged visits!),
including unsupervised technicians performing pharmacist functions;
shipping multiple labels unattached from multiple prescriptions in the
same box; incomplete patient profiles; returned products re-labeled and
resold; and unsafe storage and shipping, particularly of temperature-
sensitive drugs. The Board investigators found that the standards
followed by the Canadian Internet export operations varied greatly from
pharmacy to pharmacy--some ``appearing to have few standards at
all.''\1\
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\1\ Minnesota Board of Pharmacy Office Memorandum, at 2-5 (December
24, 2003).
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A still larger concern is that consumers don't have any
real idea about the true origin of the products. As the National
Association of Boards of Pharmacy cautioned in its Position Paper on
importation:\2\ ``An order for what is purported to be a Canadian drug
may never be filled by a legitimate Canadian pharmacy with a Canadian
drug or even be filled in Canada. The well-known risks that all
consumers take when purchasing over the Internet, where, for example,
an anonymous company may be `here today and gone tomorrow' or an
illicit business is disguised as a legitimate organization, are
heightened when purchasing foreign drugs.''
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\2\ ``National Association of Boards of Pharmacy Position Paper on
the Importation of Foreign Prescription Drugs, March 2003.
---------------------------------------------------------------------------
This concern is echoed in Prevention magazine's detailed
review of Internet pharmacy practices: ``Shoppers need to be aware of a
deceptive tactic known as `hiding under the maple leaf ': Web sites
that advertise themselves as Canadian or prominently display the
familiar maple leaf flag but are actually registered elsewhere.'' \3\
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\3\ ``No Prescription? No Problem,'' Prevention.com http://
www.prevention.com/cda/feature2002/0,2479,s1-6568,00.html#top.
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The dangerous nature of the products being shipped from
foreign Internet pharmacies across the American border is exemplified
by recent spot examinations conducted by the FDA and U.S. Customs.
These found many shipments containing dangerous, unapproved and
counterfeit drugs that pose serious safety problems. An overwhelming
majority of the parcels violated U.S. laws and regulations because they
contained unapproved drugs.''
Finally, a study by the head of the University of Michigan School
of Public Health's Department of Health Management and Policy warns
that Federal drug importation would result in the loss to the State of
thousands of jobs, decreased availability of U.S.-discovered medicines
around the world, and diminished patient health benefits as a result of
reduced future availability of new medicines from an overall reduction
in R&D.\4\
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\4\ ``Prescription Drug Importation, Investment and Employment in
Michigan,'' Dean G. Smith, Ph.D., Professor and Chair of the Department
of Health Management and Policy, School of Public Health, University of
Michigan, Sept. 21, 2004.
---------------------------------------------------------------------------
The situation overseas is no better. Notably, in recent months the
UK suffered two high-profile counterfeit cases involving fake medicines
in the legitimate supply chain:\5\
---------------------------------------------------------------------------
\5\ ``Counterfeit Drugs Set Alarm Bells Ringing,'' Pharmaceutical
Journal, 11 September 2004, p1.
---------------------------------------------------------------------------
In August, a UK health care agency issued an alert
recalling two batches of Lilly's Cialis when counterfeits were
discovered after a patient reported to Lilly that his 20mg tablets were
crumbly.
In September, the same UK agency issued a second alert
recalling a batch of Abbott's Reductil after counterfeits were spotted
by a wholesaler after it became suspicious of the batch number.
The extent of counterfeit medicines in the UK is unclear. However,
at the end of 2000, the Centre for Economic Business Research claimed
that 6 percent of the drugs in the UK were probably fake.\6\ Pfizer
believes that international counterfeit operations are clearly
targeting Europe's legitimate supply system.
---------------------------------------------------------------------------
\6\ ``Fake medicines cost 180m, says ACG,''
Pharmaceutical Journal, 23/30 December 2000,
p. 905.
---------------------------------------------------------------------------
We hope you will take this information and the issues they raise
into consideration as your committee considers this important issue.
Sincerely,
Chuck Hardwick,
Senior Vice President,
Worldwide Government & Public Affairs.
______
The Chairman. Thank you all for appearing here today. We
will look forward to your further answers.
[Editors Note--Due to the high cost of printing, previously
published materials submitted by witnesses are maintained in the
committee files.]
[Additional material follows.]
ADDITIONAL MATERIAL
Prepared Statement of Senator Vitter
Mr. Chairman, I welcome the opportunity to discuss the issue of
prescription drug importation. This is an issue about which I feel
strongly: my first legislative action as a U.S. Senator was to
introduce the Pharmaceutical Market Access Act of 2005 (S. 109).
I would have to say that introducing S. 109, which would put
affordable prescription drugs within reach of all Americans, was not an
easy first action. This bipartisan bill is opposed by some very
powerful interests in Washington, including the big drug companies. The
bill is opposed by the Administration and it was not particularly
welcomed by any leadership in Congress, Senate or House, Republican or
Democrat. But I could not ignore the wishes of a vast majority of the
citizens of my State.
As I traveled throughout Louisiana over the past year, I heard
countless seniors in particular tell similar stories about the
outrageous costs of their prescription drugs and how it burdens their
lives. The United States is the world's largest market for
pharmaceuticals. Yet we pay the world's highest prices. American
seniors alone will spend $1.8 trillion on prescription drugs over the
next decade. Meanwhile, citizens of virtually every other
industrialized country pay significantly lower prices, lower by 30
percent or more. And this figure includes many countries which are not
dominated by old-fashioned price control regimes.
My bill would make prescription drugs more affordable by expanding
free trade and world commerce, by legalizing the importation of
prescription drugs from 25 industrialized countries with pharmaceutical
structures equivalent or superior to our own. For the first time,
individual consumers would be allowed to legally import prescription
drugs for their personal use.
Critics of drug importation cite safety as their primary concern. I
share a belief that the safety of prescription drugs is paramount. My
bill takes steps to resolve real safety concerns and strengthen
existing laws by adding new requirements to promote the safety of
prescription drugs here at home and those brought in from abroad. It
includes new requirements that imported prescription drugs either be
packaged and shipped using state-of-the-art counterfeit-resistant
technologies or be carefully tested for authenticity before entering
commerce in our country.
Not long ago, a team of specialists, appointed by the Governor of
Illinois, exhaustively researched the question of whether Americans can
safely and effectively purchase prescription drugs from other
industrialized countries. Their findings are described in two recent
reports: the first, entitled ``Report on Feasibility of Employees and
Retirees Safely and Effectively Purchasing Prescription Drugs From
Canadian Pharmacies'' (released October 27, 2003); and the second,
entitled ``Can Illinois Residents and Businesses Safely and Effectively
Purchase Prescription Drugs From Europe'' (released June 28, 2004).
The authors of the first report conclude that Canadian methods of
ensuring the safety and efficacy of prescription drugs are comparable
to those of the United States. As noted in the October 27, 2003 report,
at virtually every level, the United States and Canada have comparable
requirements for the warehousing and storage of pharmaceuticals. The
authors also conclude that Canada's system for the pricing and
distribution of prescription drugs is less likely to foster drug
counterfeiting than our own system in the United States.
The authors of the second report conclude that it is both possible
and desirable to allow purchases of prescription drugs from approved
facilities in Europe; and they say it can be done in a manner that
protects consumer safety. The authors also predict that consumer cost-
savings can be achieved if drug companies do not restrict or stop
supplies to foreign facilities that sell prescription drugs to
Americans. Finally, the report details how residents of the United
States spend more money on health care than residents of any other
country in the world, yet the higher spending does not guarantee lower
mortality rates or longer life expectancies. I request that the full
text of both reports be included in the Record of this hearing with my
statement.
Drug importation is not a conservative or liberal issue. It is not
a Democrat or Republican issue. It is a universal issue and a challenge
to provide our Nation's consumers access to safe and affordable drugs.
That is why I worked to assemble a coalition of Senators and
Representatives from across the political spectrum in support of this
legislation. This coalition makes the bill unique as the first
bipartisan and bicameral drug importation proposal.
On January 25, 2005, U.S. Congressman Gil Gutknecht introduced the
companion measure to S. 109 in the House of Representatives. His bill,
H.R. 328, is identical to the one that I introduced on January 24th;
and, like my bill, it has bipartisan support. An earlier version of the
Gutknecht bill passed the House of Representatives in the 108th
Congress with my strong support and it remains the only bill ever to
pass either chamber on this subject. Congressman Gutknecht and I share
the view that an unaffordable drug is neither safe nor effective.
I look forward to working with all of my new Senate colleagues to
advance the cause of drug importation for all Americans. And, of
course, my door is always open to those who want to join our effort or
who have other ideas on how to bring the high cost of prescription
drugs down to an affordable level. This issue is too important for us
not to act.
Prepared Statement of the American Pharmacists Association (APhA)
The American Pharmacists Association (APhA) appreciates the
opportunity to provide our perspective on the risks and benefits
associated with prescription drug importation. APhA, founded in 1852 as
the American Pharmaceutical Association, represents more than 52,000
practicing pharmacists, pharmaceutical scientists, student pharmacists,
and pharmacy technicians. APhA is the first-established and largest
national association of pharmacists in the United States.
THE LIKELY RISKS OF PRESCRIPTION DRUG IMPORTATION
The public pressure to address access to lower prescription prices
has prompted Congress to look at the possibility of legalizing
prescription drug importation. This charge carries with it a
significant responsibility--to determine if prescription drug
importation can be conducted safely, and its potential impact on public
health, medical costs, and the development of new medications. To make
this determination, Congress must consider a number of important
questions ranging from the scope and volume of imported drugs, the
adequacy of safety protections, and potential liability issues, to the
need for modifications in manufacturing and distribution technologies,
the drug distribution system, and State and Federal laws.
We appreciate why many have rallied around importation as the
``solution'' to providing consumers access to lower cost prescription
drugs. As pharmacists, we are acutely aware that some patients--
especially seniors--face challenges in accessing valuable, but
sometimes unaffordable, medications. Many pharmacists can vividly
recall the dismay of having to tell one of their patients--especially a
senior on a fixed income--the cost of their medication, knowing that
the cost may be more than the patient can afford. Consequently, APhA
strongly supports efforts to enhance patient access to prescription
medications. However, we have significant concerns with proposals to
``solve'' the problem by expanding importation. Our concerns generally
fit in two areas: the integrity of the drug product itself and the
impact on patient care.
THE INTEGRITY OF THE MEDICATION
The current U.S. drug distribution system was designed to keep
unapproved and potentially unsafe medications from entering the U.S.
drug supply. Current U.S. laws and regulations were put in place after
several critical incidents resulted in patient harm. When patients were
harmed by contaminated or ineffective medications, Congress took action
to protect patients. Those actions included requiring evidence of
safety and effectiveness, controlling the production and distribution
of products, prohibiting the importation of unapproved medications, and
other efforts to limit the presence of counterfeit and contaminated
medications. Intentionally circumventing the U.S. regulatory system--as
prescription drug importation would allow--creates an opportunity for
mislabeled, mishandled, subpotent, or counterfeit drugs to make their
way onto the shelves of pharmacies and into the hands of patients.
In an attempt to reduce the risk, some Congressional proposals have
limited importation to specific countries. While some countries, such
as Canada, may have a system to regulate medications comparable to the
U.S. system, it is important to recognize that a program limited to
import prescription drugs from Canada--no matter how carefully
designed--will open the closed U.S. regulatory system to countries
beyond Canada. ``Opening the door'' to Canada opens the door--period.
And opening the door creates opportunities for unscrupulous operators
to penetrate the system. Before any new system is adopted, we must be
certain that, at a minimum, U.S. regulatory authorities will be able to
distinguish between a ``legitimate'' (a prescription filled through an
``approved'' importation program) package of prescription drugs
crossing the U.S. border and another package of prescription drugs
entering the United States from an unapproved country or drug seller.
It's also critical to keep in mind that while Canada is touted most
frequently as the source of the imported products, there are no
guarantees that the drugs U.S. patients will receive are those that are
being delivered to Canadian citizens. In fact, as reports have
indicated, Canada is not equipped to handle the demand that would
potentially occur if prescription drug importation was legalized in
America. The Internet pharmacies that are currently filling most of the
orders--in violation of U.S. law--are now threatening to move to other
countries to increase their supplies of drugs. Without a comprehensive,
well-structured, well-funded new bureaucracy to regulate prescription
drug importation, American patients, pharmacists, and physicians will
have no guarantee that the products that physicians prescribe,
pharmacists dispense and work with, and patients ingest won't do more
harm to the patient than good.
But even with the comprehensive U.S. system, counterfeit drugs have
penetrated our system. According to the Food and Drug Administration
(FDA), the number of counterfeit drug investigations has increased
fourfold since the late 1990's.\1\ For example, in 2003, 11,000 boxes
of counterfeit Epogen and Procrit were found on pharmacy shelves and in
patients' homes. Three months later, the FDA discovered five lots of
counterfeit Lipitor. And more recently, the FDA warned of counterfeit
Ortho Evra contraceptive patches that contain no active ingredient and
were being sold online by a company based in India. These examples
support the need for review and refinement of our existing safety net,
not the expansion of efforts to circumvent or relax that system. A
poorly constructed importation proposal would relax our current system
and damage our safety net. Opening the door to importation increases
the risk of counterfeit medications infiltrating our drug supply.
---------------------------------------------------------------------------
\1\ William Hubbard. Statement before the Senate Committee on
Finance Subcommittee on Health Care and Subcommittee on International
Trade. April 27, 2004.
---------------------------------------------------------------------------
Even when a patient receives a ``legitimate'' drug, there are
differences between drugs that are sold in the United States and other
countries. Medications obtained outside of the United States may
contain different formulations--with differences in the amount of
active ingredient or differences in the type of inactive ingredients--
both of which can affect the product's stability and how the product
works. Because of these differences, any safe importation system must
limit importation to products approved by the Food and Drug
Administration, not merely products that contain the same, or similar,
active ingredients. Medications are different--and minor differences
matter.
Storage and shipping conditions can also affect drug stability and
potency. Consumers who obtain their medications outside the United
States have no way to know how their medications were handled. Any safe
importation system must ensure that the medication was maintained at
the correct temperature, was stored in the correct type of container,
and was properly protected during shipment.
IMPACT ON PATIENT CARE
Importation not only removes the United States guarantee to
patients that their drugs will be safe, it also directly impacts
patient care. While much of the importation debate is driven by
disparities in drug pricing, those disparities are evident only on the
front end--when we only know the cost of the drug, not the value. The
most expensive medication is the one that doesn't work: in the
situation where the drug doesn't lower blood pressure appropriately,
the consumer paid good money, but received no benefit. In addition to
paying cash, the patient paid a price with their health as their
condition went unmanaged. The value of a medication should be assessed
after the consumer has used it, after consultation with their
pharmacist and doctor to make the best use of it. But this
collaboration is challenged in many importation scenarios.
Because of the stigma involved in importing medications, many
patients do not tell their physician or pharmacist about medications
they are securing outside of the United States. This is understandable,
but dangerous. When a patient obtains medications from multiple
sources--in this case through importation and a local pharmacy--neither
the domestic nor international pharmacist has the patient's complete
medication profile unless the patient provides this information. The
pharmacist is unable to determine whether the new prescription will
conflict with any other medications the patient takes, whether the new
prescription has ingredients that duplicate a current prescription, or
whether its mere presence suggests other medical problems for the
patient that should be followed-up with the patient's physician. This
virtual blindness compromises the ability of physicians to care for
their patients and the ability of pharmacists to partner with patients
to improve medication use and advance patient care.
Not knowing a patient's entire medication regimen or the content
and strength of a particular drug can also cause problems when a
patient suffers unexpected complications or does not respond as
expected to a medication. Consider a patient working with their local
physician and pharmacist to treat their high blood pressure. The
patient imports a faulty medication that has no, or little, active
ingredient. It is unlikely the patient will physically feel anything
different; it is unlikely he would actually notice any difference in
the product. Later the patient visits the physician and his blood-
pressure reading shows that the medication is not working. Because of
our trust in the medication supply, it is highly unlikely that the
physician will consider that there was a problem with the medication.
Rather, the physician will likely assume that the medication did not
work and will consequently either increase the dose or choose another
medication. This sets the stage for using a stronger, but potentially
unnecessary, medication and increasing overall health care costs.
Also consider the scenario where a patient is in need of a
prescription medication on a short timeframe--such as an antibiotic for
an infection or a pain medication to treat symptoms from an injury. If
that patient has been importing his or her medications, the pharmacist
is unable to determine whether the new prescription will conflict with
any other medications the patient takes, has ingredients that duplicate
a current prescription, or whether its mere presence suggests other
medical problems for the patient that should be followed-up with the
patient's physicians. This ``blindness'' compromises the ability of
physicians to care for their patients and the ability of pharmacists to
partner with patients to improve medication use and advance patient
care.
Both of these scenarios help explain why it is difficult to answer
the often asked question, ``Where are the bodies [the documented
evidence of patient harm from importation]?'' Counterfeit drugs can
exacerbate illness and/or hasten death. But it's unlikely that either
of these results would be linked to a faulty drug because of our
current faith in the U.S. drug supply. Importation could cloud the
promise of improved health from medications; importation compromises
the pharmacist's role in patient care.
THE NEED TO ADDRESS ISSUES OF CONCERN
Medications have become a critical aspect of patient care. But
prescription medications are only safe and effective when patients
receive ``what the doctor ordered'', understand how to use the drug
appropriately, and what side effects they should watch. Direct
interaction between the prescribers, pharmacists and patients is
critical to ensuring appropriate medication use. Effective patient care
is about real relationships--physician-patient, pharmacist-physician,
and pharmacist-patient relationships. To remove such a basic component
of our health care delivery system's safety net seems diametrically
opposed to the ``pro patient safety'' environment we are all working to
achieve.
When you consider all of the risks associated with the importation
of prescription drugs, just a few of which have been described, it
appears foolhardy to consider haphazardly opening our borders to
imported pharmaceuticals. Allowing importation carries the risk that
mislabeled, mishandled, subpotent, or counterfeit drugs will reach the
hands of U.S. patients. We suggest that Congress stop asking the
question ``do we allow importation?'', which has become highly
politicized, and instead ask ``what do we do to assure the safety and
the integrity of the U.S. drug supply?''
There appear to be two options. One, we begin strictly enforcing
current law that prohibits importation. Provide the FDA, the Drug
Enforcement Administration, Customs Bureau, and other regulatory
agencies the funds and resources necessary to enforce the law; and
continue efforts to find other means of increasing access to affordable
medications. At a minimum, policymakers should avoid any further
endorsement of this unregulated and unknown practice. Instead, we must
continue to educate consumers on the risks.
The second option is developing a new bureaucracy to assure the
safety of our medication supply. A new system, regardless of whether or
not it allows importation, must resolve several issues of concern to
ensure that patients continue to receive safe and effective
medications--and that they know how to use those medications.
Specifically, a new system must address the role of the FDA and the
State Boards of Pharmacy in maintaining a safe drug supply, respect the
patient-
pharmacist-physician relationship, require valid prescriptions, assure
consumer recourse for harm, prevent efforts to circumvent U.S. health
care professionals, include measures to limit counterfeit and
contaminated drugs, and address the differences between FDA-approved
medications and foreign products. Even this long litany of issues is
not an exhaustive list of what must be tackled when evaluating a system
to protect the U.S. drug supply and American consumers.
BALANCING RISK AND BENEFIT
Prescription drugs, unlike so many other products, are not just
another commodity--we ingest them to affect our bodies. They are one of
the most valuable weapons we have in our health care arsenal today and
we must treat them as such. Pharmacists rely on the quality of the U.S.
prescription drug supply to provide their patients with safe and
effective treatments. As the FDA does when it evaluates a new
prescription drug, we must look at both the risks and the benefits and
determine if the benefits outweigh the risks.
Importation may provide the benefit of lower cost prescription
drugs, but as currently practiced it appears that the benefits do not
outweigh the potential risks. We caution against recommending
importation as an alternative method of drug distribution without
appropriate safeguards--both in statute or regulation and in
enforcement. At a minimum, any legalization of importation should be
limited to drug products approved by the Food and Drug Administration
and assure coordination of care with the consumer's doctor and
pharmacist. The perils of personal importation via the Internet are
many. If our closed system is opened, we must have strong measures--and
enforcement behind those measures--to help decrease the likelihood of
unscrupulous operators preying on consumers through their medicine
cabinet.
APhA thanks you for the opportunity to provide comments on this
important issue. We appreciate the committee's commitment to examining
the wide range of issues surrounding the prescription drug importation
debate. We offer our assistance to the committee as you continue your
valuable work to develop a safe and effective system of providing
prescription medications and pharmacists' services to all Americans.
Prepared Statement of Allergan, Inc.
This testimony is submitted on behalf of Allergan, Inc., a
biologics and pharmaceutical company headquartered in Irvine,
California. Allergan develops innovative therapies for vision,
muscular, and other disorders and conditions. We have developed a
number of orphan products, including Botox, which is a biologic used to
treat dystonia and related eye disorders, as well as muscular
contracture in pediatric cerebral palsy patients.
We appreciate the opportunity to submit testimony on the matter of
prescription drug importation legislation, and in particular, on the
need for an exemption in such legislation for FDA-designated orphan
drugs. Allergan believes that Congress should exclude orphan drugs from
prescription drug importation legislation for two reasons: (1)
permitting importation of orphan drugs would endanger patient safety,
as many orphan drugs have unique handling requirements which are
critical for maintaining their potency; and (2) permitting importation
of orphan drugs would undermine the Orphan Drug Act and thus jeopardize
the future development of rare disease therapies.
I. BACKGROUND ON ORPHAN DRUGS
``Orphan'' drugs are drugs (including biologicals) that are
developed specifically to treat a rare disease or condition, i.e.,
generally, a disease or condition that affects fewer than 200,000
people nationwide. According to the National Organization for Rare
Disorders, more than 6,000 rare diseases have been identified. Some
rare diseases are as familiar as cystic fibrosis, hemophilia, and Lou
Gehrig's disease, while others--such as Hamburger disease and Job
syndrome--might be known only to the relative few who are afflicted
with the disease, along with their families and health care
professionals. By definition, the number of people with a particular
orphan disease is relatively small, but collectively, rare diseases
afflict more than 25 million Americans. In fact, 1 out of every 10
people in the United States has received a rare disease diagnosis. Rare
disease patients rely on orphan drugs to treat their diseases, which
often are life-threatening acute or chronic conditions.
II. IMPORTATION OF ORPHAN DRUGS WOULD ENDANGER PATIENT SAFETY
Exempting orphan drugs from prescription drug importation
legislation is imperative to ensure the safety of rare disease
therapies administered in the United States. Many orphan drugs are
biologicals, which often require unique handling and shipping measures,
such as maintaining the product at specific and sometimes extreme
temperatures, and limiting the product's exposure to light. These
unique handling requirements are critical to maintaining the product's
safety and efficacy. The failure to adhere to these special handling
requirements can endanger patient health by making the product
ineffective or even harmful. However, it is difficult, if not
impossible, to determine whether and the extent to which a drug's
potency has been compromised as a result of failure to adhere to
prescribed shipping requirements.
The dosage form of many orphan drugs makes them particularly
vulnerable to unscrupulous counterfeiters. Many orphan drugs are
infused or injected. The liquid form of these infused and injectable
products makes them more susceptible to counterfeiting than tablets or
pills--and more dangerous for patients. These products are infused and
injected directly into the bloodstream, and thus, the effects of
counterfeit drugs are experienced immediately and severely.
These safety concerns are not hypothetical or exaggerated. Consider
the following reported examples of counterfeit or diluted orphan drugs
that have entered the U.S. drug supply under current law:
Epogen (epoetin alfa). Epogen is an injectable biologic
used to stimulate red blood cell production. On February 21, 2001, the
manufacturer of Epogen disclosed reported incidents of tampering. The
flip caps from some vials had been removed and the vial contents were
replaced with varying amounts of a subpotent aqueous solution. The
vials bore counterfeit labels with phony lot numbers. Lab tests
revealed that some vials contained active ingredient 20 times lower
than expected. A 16-year-old liver transplant patient suffered severe
muscle cramping after receiving injections of the subpotent drug. His
parents had purchased the drug from a national pharmacy chain store,
which had in turn received it from one of three national drug
distributors.
Gamimune N (immune globulin intravenous, human). Gamimune
N is a liquid formulation plasma concentrate used to treat various
immune deficiencies. In early 2002, nurses noticed that certain vials
of Gamimune N were atypically cloudy. The manufacturer of Gamimune N
recalled two separate lots of the drug, one on February 1, 2002, and
one on March 14, 2002. An analysis revealed that someone had tampered
with the overseals of at least 13 vials. The damaged vials contained
diluted Gamimune N, were contaminated with bacteria, had an
unexpectedly low protein concentration, and demonstrated an elevated
chloride level.
Neupogen (filgrastim). Neupogen is an injectable colon-
stimulating factor used mostly in cancer patients. In 2001, a
distributor discovered counterfeit vials of the drug that contained
fake lot numbers and incorrect expiration dates. Laboratory tests later
revealed that the vials contained only saline solution.
Nutropin AQ (somatropin (rDNA origin) infection). Nutropin
AQ is the liquid formulation of Nutropin, a lyophilized recombinant
human growth hormone. Nutropin AQ is used to treat children with growth
failure and patients suffering from AIDS wasting. In 2001, patients,
doctors, and pharmacists detected abnormal vials of Nutropin AQ.
Subsequent analysis revealed at least one vial contained insulin
instead of Nutropin.
Procrit (epoetin alfa). Procrit helps anemic cancer and
HIV patients increase their red blood cell counts. Counterfeit versions
of the drug were first discovered in 2002 and have been found at two
large wholesalers and a number of retail outlets. Counterfeit lots of
the drug that purported to contain 40,000 units only had 2,000 units.
Instead of active ingredients, some vials contained bacteria-tainted
water that can cause blood stream infections.
Retrovir (zidovudine). Retrovir, also known as AZT, was
the first drug approved for the treatment of HIV. In 2001, a routine
inspection revealed 52 bottles of counterfeit Retrovir. A spokesperson
for the company that had sold the counterfeit drug apologized,
explaining that the large volume of sales prevented the adequate
detection of counterfeit drugs.
Serostim (somatropin (rDNA origin) for injection). There
have been two counterfeit incidents associated with Serostim for
injection, a growth hormone used to treat AIDS wasting. In 2001, a
recall at the distributor level was prompted by consumer complaints
about adverse events. In 2002, the manufacturer of the drug became
aware of another counterfeit batch. One batch reportedly contained a
generic hormone, while the other contained a significantly smaller dose
of the human growth hormone.
Although prescription drug importation legislation may establish
safeguards to protect the Nation's drug supply, safeguards can never be
completely effective. Even the legal safeguards currently in place have
not prevented numerous cases of counterfeit and adulterated orphan
drugs in the United States. Importation of orphan drugs would only
increase the risk of exposing rare disease patients to an ineffective
or harmful drug, because more entities that are far beyond the
effective control of FDA will handle the drug before it reaches the
patient. This introduces a much greater risk that a drug may be
mishandled, contaminated, or counterfeited by an unscrupulous or
careless person willing to exploit or ignore patient safety for
economic benefit. Congress therefore should exempt orphan drugs--with
their higher threat of adulteration and contamination, or compromised
safety or efficacy due to mishandling--to reduce the risk of
introducing unsafe products into the U.S. drug supply.
III. IMPORTATION OF ORPHAN DRUGS WOULD JEOPARDIZE FUTURE DEVELOPMENT OF
RARE DISEASE THERAPIES
In enacting the Orphan Drug Act in 1983, Congress recognized the
unique challenges that rare diseases pose for patients and drug
manufacturers. Congress determined that there are ``many diseases and
conditions . . . which affect . . . small numbers of individuals,'' and
that ``because so few individuals are affected by any one rare disease
or condition,'' companies that develop ``orphan drugs'' to treat these
diseases may ``reasonably expect . . . to incur a financial loss'' in
doing so. Given the inability of companies to recoup costs incurred in
bringing these products to market, Congress found that ``orphan drugs
will not be developed'' absent changes in Federal law to encourage
their development.
To address this problem, Congress established certain incentives
under Federal law for orphan drug development, including market
exclusivity for 7 years, tax credits, assistance for clinical research,
and research grants. These incentives have been essential to the
development of orphan drugs. As a result of the Orphan Dug Act, more
than 240 orphan drugs have been developed to treat rare diseases
affecting approximately 12 million Americans.
Permitting importation of orphan drugs would thwart the goals of
Orphan Drug Act, because it would introduce competition during the
period in which the Orphan Drug Act promises market exclusivity. In
addition to breaching the promise that Congress made in the Orphan Drug
Act, this would impair manufacturers' ability to recover the costs
incurred in developing rare disease therapies and discourage future
research and development efforts aimed at discovering treatments for
rare diseases. This result is precisely what the Orphan Drug Act sought
to avoid, and could have disastrous consequences for the future
development of orphan drugs--and thus for the millions of Americans
suffering from rare diseases for which effective treatments have not
yet been developed.
IV. CONCLUSION
In conclusion, we believe it is imperative that Congress exempt
orphan drugs from prescription drug importation legislation to ensure
the safety of rare disease therapies administered in the United States,
and to maintain appropriate incentives to encourage the future
development of orphan drugs. Allergan has long been a supporter of the
rare disease community and the Orphan Drug Program, and we remain
committed to developing innovative therapies for the 25 million
Americans suffering from rare diseases. We would be happy to provide
the committee with any additional information that may be useful as it
considers these important issues.
__________
Response to Questions of Senator Kennedy by Richard Carmona, M.D.
Question 1. The HHS Report explains that drug importation would
reduce revenues for the drug industry, which would cause them to cut
research and development, leading to fewer drugs on the market in the
future, and huge societal costs. Instead, the report suggests we find
ways to encourage people to use generics whenever available, saying
that would save as much or more anyway. Wouldn't switching to generics
also decrease revenues for the drug industry, and have the same
negative effect on R&D?
Answer 1. While both drug importation and switching to generics
would reduce revenue to innovator drug companies, the impacts on future
research and development (R&D) are quite different. Many of the drugs
likely to be imported are early in their life cycle and are just
beginning to repay innovators for their substantial investments.
Reductions in revenues in these cases are important because they occur
relatively soon after decisions to undertake research and development.
When a consumer switches to a generic version of an innovator's drug,
however, the reduction in revenues occur later in the life of the
innovator's drug--after the expiration of all patents and exclusive
marketing opportunities granted by the government. These reductions in
revenues are so long after R&D decisions that they are relatively
unimportant from the perspective of potential investors in R&D. Thus,
we believe the impacts on R&D from increased generic utilization would
be minimal. By encouraging consumers to switch to generics whenever
available, we are encouraging them to save money while still providing
firms bringing costly innovations to market a fair opportunity to
recoup their investments.
Question 2. In your testimony you stated that America would likely
save less than 1 percent of our total drug bill through importation.
That is based in large part on the fact that much of our expenditures
are for drugs that are biologics, or generics, or drugs otherwise
inappropriate for importation. But, page 75 of the report seems to
state that for drugs that would be eligible for importation,
``discounts to U.S. drug purchasers will average 20 percent of the
price of equivalent U.S. pharmaceutical products.'' Do you agree that
that would be a substantial savings for many individuals, similar to
what seniors are receiving with Medicare drug discount cards?
Answer 2. The estimate of 20 percent savings would apply to those
drugs eligible for importation, where there would exist an importable
supply, and to the extent that intermediaries would not capture more
than half of the potential savings. But note that the report states
that the discounts would accrue to U.S. ``drug purchasers.'' This is an
important distinction. There is no guarantee that individual consumers,
in particular cash-paying seniors, would have direct access to these
cheaper drugs. The Task Force Report recognizes that, given the
economic power of large purchasers, it is possible that all of the
available supply could be purchased by large organizations or third-
party payers and that few savings would ever reach the individual
consumer. While CMS can speak better about the details of the Medicare
drug discount cards, it would seem that this program puts the buying
power of large groups into the hands of individual consumers, who would
have access to cheaper drugs without regard to importable supply or the
market power of intermediaries. So one would expect the savings for
individual consumers from legalized commercial importation to be quite
different from the Medicare drug benefits.
______
Response to Questions of Senator Hatch by Richard Carmona, M.D.
Question 1. You mentioned that there are significant safety
concerns regarding drug importation, but if Congress wants to legislate
a system, it should be closed, well-defined, and capable of ensuring
the pedigree of the drugs. While these seem to be valid principles if
there were to be an import regime, I am concerned about the
practicality of designing a system to meet those requirements. Could
you elaborate on what you meant by a closed system? For example, would
other countries have to participate? If so, how would the United States
negotiate the agreement with those other countries? How would this be
enforced? Similarly, what are the ways in which the United States would
go about ensuring that pedigree?
Answer 1. The drug distribution network for legal prescription
drugs in the United States is a ``closed'' system that involves several
entities (e.g., manufacturers, wholesalers, pharmacies) that move drug
products from the point of manufacture to the end user, and provides
against receiving unsafe, ineffective, or poor quality medications. All
of these entities are known and subject to Federal and State regulatory
and legislative oversight. This system evolved as a result of
legislative requirements that drugs be treated as potentially dangerous
consumer goods that require professional oversight to protect the
public health. The result has been a level of safety for drug products
that is widely recognized as the world's ``gold standard.'' To maintain
current levels of safety, the standards that currently exist in the
United States (or some equivalent) would need to apply to all foreign
drug suppliers who were authorized to sell drugs into the United States
under a legalized commercial importation program. Legalized importation
of drugs in such a way that creates an opening in the ``closed'' system
will likely result in some increase in risk, as the evidence shows that
weaknesses in the oversight of drug regulation and the distribution
system have been exploited.
As stated in the Drug Importation Task Force Report, Memoranda of
Understanding (MOU) may be needed with the affected countries to ensure
effective enforcement of the terms of a new importation system.
Because electronic track and trace technology and capability is
still in its infancy, it would be logistically difficult and resource
intensive to validate and authenticate paper pedigrees that include, or
originate in, a foreign country.
Question 2. The enforcement mechanism is also of great interest to
me, especially in reference to Internet pharmacies. Could you please
advise the committee as to how the Internet marketplace could be
policed so that American consumers could be assured about the safety,
efficacy and pedigree of the medications they are receiving? In the
United States, for example, pharmaceutical manufacturing plants are
registered and regularly inspected, pharmacies are licensed, etc. Would
those same regulatory safeguards exist with respect to products
distributed through Internet pharmacies?
Answer 2. The Drug Importation Task Force Report noted that there
are an increasing number of foreign Internet pharmacies capitalizing on
the vulnerability of patients in search of less expensive prescription
drugs. The Internet has created a marketplace for the sale of
unapproved drugs, prescription drugs dispensed without a valid
prescription, drugs of unknown origin, counterfeit drugs, and otherwise
substandard drugs. Although there are a number of legitimate and
reputable Internet pharmacies in the United States that serve American
consumers, there are a considerable number of Internet pharmacies that
are not legitimate and that unlawfully sell prescription drugs to
American consumers. Unfortunately, it is very easy to set up a webpage
that misrepresents the pharmacy's location, the source and country of
origin of its drugs, the regulatory status of the drugs (e.g., whether
or not FDA-approved), and its compliance with applicable laws and
regulations. It is extremely difficult for highly trained investigators
to tell the difference between legitimate and illegal sites; it will be
even more difficult for consumers to differentiate. Because of the ease
with which such Web sites can be established and because the Internet
helps obscure their physical location, it would be nearly impossible to
monitor, find, or inspect all of these pharmacies.
Furthermore, the volume of packages entering the United States
today has been increasing at a steady rate. Under a personal
importation program, it would be very difficult to distinguish which of
these millions of packages are from ``permitted'' Internet pharmacies
and which are from rogue Web sites, increasing the potential safety
risks associated with imported drugs.
There are efforts to help patients identify if an online pharmacy
site is appropriately licensed, such as the Verified Internet Pharmacy
Practice Site (VIPPS) certification program, run by the National
Association of Boards of Pharmacy. Online pharmacies with the VIPPS
logo also have successfully completed a rigorous inspection and review.
__________
Response to Questions of Senator Enzi by Carmen Catizone
Question 1. I am interested in the VIPPS program to certify
Internet Pharmacies. Third-party certification has been remarkably
successful in other areas. I do note, however, that you have an
extensive disclaimer about the information in the VIPPS database, which
states that this information is advisory only, and voluntarily supplied
by Boards of Pharmacy and the pharmacy site themselves. What level of
resources would it take to verify--on an ongoing basis--the information
necessary for safe importation of prescription drugs from online
pharmacies?
Answer 1. NABP considers the information provided by the VIPPS
program as reliable and valid and certifies all such information with
the primary source, State licensing authorities. The disclaimers are
legal formalities to recognize the legal authority of the State
Agencies and to minimize NABP's liability. Our disclaimers are not
meant to diminish the validity of the information. The VIPPS program as
presently organized verifies information in a manner and to the extent
that would be needed for domestic-based pharmacy practice. The
verification of foreign-based pharmacy operations would require
extensive resources that NABP could not even estimate at this point.
Question 2. The VIPPS program is completely voluntary. How many
Internet pharmacies are participating in VIPPS? What fraction of
Internet pharmacies does that constitute?
Answer 2. Since its inception approximately 24 sites have received
the VIPPS seal. Over time some of the sites have consolidated or ceased
operations or lost their VIPPS accreditation. The 24 VIPPS seals
awarded represent some 10-12,000 pharmacies in the United States out of
approximately 78,000 total pharmacies in the United States. The total
number of legitimate pharmacy Web sites is estimated at approximately
150. A number of these Web sites are local pharmacies that do not serve
patients outside of their local patient base and utilize the Internet
simply to facilitate refill authorizations or provide medication
information.
__________
Response to Question of Senator Enzi by John Gray
Healthcare Distribution Management Association
(HDMA),
Reston, VA 20190-5348,
March 15, 2005.
Below is the response of HDMA President and CEO John Gray to the
question for the record posed by Chairman Enzi as a follow-up to John's
presentation at the committee's February 16th hearing, ``Drug
Importation: The Realities of Safety and Security.'' As always, please
do not hesitate to contact me if you have any questions.
Question. I have heard a lot about Radio Frequency Identification
(RFID). Can you tell me a little more about this technology, and what
sort of role it might play in ensuring the pharmaceutical supply chain,
both as it stands now and as things might look if the United States
were to legalize drug importation?
Answer. The Healthcare Distribution Management (HDMA) strongly
believes that technology can serve an important role in securing the
Nation's prescription drug supply; however, no single technology can
absolutely prevent counterfeiting. Rather, a layering of various
strategies can create a significant barrier to entry. We believe
technologies employing radio frequency identification (RFID) utilizing
electronic product codes (EPC) hold the most promise for tracking,
tracing and authenticating a product's movement across the supply
chain.
The EPC is a unique number that identifies a specific item in the
supply chain. The EPC may also include identifying information such as
the manufacturer, product information and a unique serial number. A
RFID tag, which is a silicon microchip, smaller than a grain of sand,
and an antenna is applied to the items and contains the EPC number.
Using RFID technology, the chip ``communicates'' its number to a
``reader'' that picks up the signal and records the information. This
technology will allow supply chain stakeholders to track the chain of
custody (or pedigree) of every unit of medication on an individual
basis. By tying each discrete product unit to a unique electronic ID, a
product can be tracked electronically through the supply chain.
Furthermore, EPC/RFID technology represents an opportunity to
significantly improve efficiencies in managing supplies and inventory.
According to a recent HDMA Healthcare Foundation Report entitled,
``Adopting EPC in Healthcare: Costs and Benefits,'' patient safety can
be enhanced and efficiencies to the healthcare supply chain can be
achieved via the industry-wide adoption of EPC/RFID. EPC/RFID is more
efficient and cost-effective than paper pedigrees or alternative
electronic tracking methods that do not involve the serialization of
individual products. Paper pedigrees have been forged in previous
domestic counterfeiting situations. Moreover, paper pedigrees would
literally halt the efficient distribution of drugs given the volume of
products delivered and the sophisticated automation technology utilized
to do so safely and efficiently.
Tremendous progress is being made in the development and adoption
of EPC/RFID technology with respect to pharmaceutical products. This is
a monumental endeavor that will require close collaboration among all
constituents of the healthcare supply chain and will take several years
to proliferate the market in the United States. Industry, commercial
vendors and government agencies are working together to develop the
necessary standards for communication of tagged items across the supply
chain. HDMA is working closely with standards development organizations
such as EPCglobal to further the awareness, adoption and implementation
of EPC in healthcare distribution. While progress is extremely
positive, there are many hurdles to overcome including business and
technology challenges such as data management issues, interoperability
of tags and readers and standards development. HDMA's focus has been to
advocate for the adoption of this technology in the United States.
Although the industry is moving forward in the development and
adoption of EPC/RFID technology, it will take time and an unwavering
commitment on the part of government and each partner in the supply
chain to realize adoption of RFID technology in a measured, meaningful
and universal way. HDMA members look forward to the support of the
committee in ensuring that our laws and regulations continue to support
the industry's role in driving adoption of this important and patient
safety enhancing technology.
__________
Response to Questions of Senator Enzi by Governor Tim Pawlenty
Office of Governor Tim Pawlenty,
Saint Paul, MN 55155,
March 17, 2005.
Hon. Mike Enzi, Chairman,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510-6300.
Dear Senator Enzi: Thank you for the opportunity to testify before
the U.S. Senate Committee on Health, Education, Labor, and Pensions on
February 16th. It was my pleasure to share with you Minnesota's success
in supplying Minnesotans with information and assistance in attaining
affordable and safe prescription medicines. You and Senator Hatch both
requested additional information and analysis about Minnesota RxConnect
and Minnesota Advantage Meds. Below are answers to your inquiries.
Question 1. I was intrigued by your description of the RxConnect
program. What does the program cost and how is it funded? Does the cost
scale with the number of users? In other words, how much would it cost
to double the program? Triple it?
Answer 1. The program cost is minimal and is funded from general
State revenues. The work done for the MinnesotaRxConnect program was
completed by employees of the Minnesota Department of Human Services.
Consequently, no additional funds were expended to hire vendors or
contractors. The cost of sending State personnel to inspect pharmacies
was approximately $10,000. The cost of printing brochures was
$2,893.80.
The hard costs for setting up the program for State employees and
their dependents, Advantage-meds.com, was also minimal. Several staff
members were involved in implementation and an actuary was paid a small
amount to provide drug data. All salaries and other costs were paid out
of the employee insurance fund. E-mail was used to announce the program
to employees, so the communications costs were minimal.
With both programs, the cost does not scale with the number of
users. Expanding the program would not significantly increase costs.
Question 2. Recently, many Canadian Internet pharmacies have
announced that they are going beyond Canada to get their medicines for
American consumers, into countries such as Israel, parts of the EU, New
Zealand, etc. In a poll that was released this past fall on
importation, support for importation beyond Canada was around 30-40
percent. Do the Internet pharmacies that Minnesota RxConnect has a
relationship with in Canada get their medicines from countries other
than Canada and if so, is that information disclosed to consumers
buying those medicines?
Answer 2. There are really two parts to the answer. Many of the
medications used in Canada are imported into Canada from other
countries. However, the same thing is true for the United States. Many
brand and generic medications are imported into the United States from
Europe, Japan, Israel, India and other countries. Those drugs are
approved by the FDA and are purchased by U.S. wholesalers, sold to U.S.
pharmacies and dispensed by U.S. pharmacists directly to Americans
every day. For example, most of the Lipitor dispensed in both Canadian
and American pharmacies is made in a manufacturing plant in Ireland.
Similarly, drugs are imported into Canada with the approval of
Health Canada and are ultimately dispensed to Canadian citizens. The
Canadian Internet pharmacies, of course, dispense those Canadian-
approved drugs to U.S. citizens.
Many of the largest pharmaceutical manufacturers are trying to
drive Canadian mail-order pharmacies out of business. They are refusing
to sell prescription drugs directly to the pharmacies and are
threatening to withhold product from wholesalers that do business with
the pharmacies. Consequently, some Canadian mail order pharmacies have
established relationships with pharmacies in other countries such as
the United Kingdom, Australia, New Zealand, Israel and Chile.
Two of the pharmacies affiliated with our Web site have such
relationships. Those pharmacies will not send a prescription to be
filled by a pharmacy in another country without informing (and getting
written permission from) the customer. The Canadian pharmacy still
receives the written prescription, verifies that it is valid and
appropriate, checks for problems and enters the data into the pharmacy
computer system. Using a secure connection, the data is transmitted to
the pharmacy in, say, the United Kingdom, where it is checked again by
the U.K. pharmacist and physician. The U.K. pharmacy then sends the
filled prescription directly to the customer in the United States.
Billing is handled by the Canadian pharmacy. In this example, the drug
shipped to the U.S. customer would be approved for use in the United
Kingdom. Note that the Canadian pharmacy is not buying and importing
the drug from the U.K. and then dispensing it to the U.S. citizen. That
would be illegal under Canadian law.
Question 3. While you have advocated for allowing Minnesotans to
import drugs from pharmacies in Canada, most importation proposals
pending at the Federal level allow pharmacists and wholesalers to
import drugs from 20 to 25 countries around the world. What is your
position on legislation that goes beyond just Canada and goes beyond
personal importation?
Answer 3. Employees of the Minnesota Department of Human Services
have studied the pharmaceutical distribution system of the United
Kingdom. As part of that study, they reviewed the U.K. parallel
importation process and were favorably impressed. A large number of
drugs used in the U.K. contain the same active ingredient in the same
strength as the drugs used in the United States. They are made by the
same manufacturer, look the same, have the same brand name and are
sometimes made in the same plant--no matter where they are shipped
around the world.
A parallel importer in the United Kingdom must be registered by the
appropriate regulatory agency. In addition, it must obtain a license
for each and every product it wants to import from another European
nation. The imported drug must be approved for use in the United
Kingdom, in the country from which it is imported
and/or by the European Medicines Agency. The parallel importer must
keep meticulous records that detail the sales history of each box of
drug that is imported--from manufacturer to foreign wholesaler to
parallel importer. Products that are imported into the U.K. typically
come from Greece, Italy or Spain. Approximately 20 percent of the drugs
dispensed to patients in the United Kingdom are parallel imports.
Britons don't appear to be suffering adverse consequences due to drugs
imported from Greece, Italy and Spain.
European standards for drug manufacturing and distribution appear
to be comparable to those used in the United States and certainly
rigorous enough to adequately protect patients in Europe. If parallel
importation can work so successfully in Europe, there would seem to be
no reason to believe that it couldn't work for the United States.
______
Response to Questions of Senator Hatch by Governor Pawlenty
I understand that Canadian pharmacies on the Internet require
customers to sign a waiver absolving the pharmacies of any liability.
These waiver forms routinely make U.S. customers waive many other
rights, such as the right to privacy, the right to consult a qualified
pharmacist, the right to child-proof packaging, and any warranties that
the drugs are safe and effective.
Many of these requirements are well-established tenets of U.S.
practice and law. For example, the right to privacy of medical
information was established by HIPAA, an act passed overwhelmingly by
the Congress. The U.S. standard of safety and efficacy for
pharmaceuticals is the hallmark of our country's drug approval system,
and a requirement that has led many to call our system the ``gold
standard'' of the world.
Question 1. My questions are this: Why should Minnesota consumers
be required to waive these important requirements, requirements that
largely apply to the purchase of pharmaceuticals in other States? Have
you developed any information, such as public education or surveys, to
gauge the measure to which your residents are aware of these important
rights and the fact that they are entering into legal agreements to
waive them, agreements that would in effect make the consumers
responsible for the potentially hazardous results of safety problems?
Answer 1. We agree that Minnesota consumers should not be required
to sign waivers of liability. The pharmacies affiliated with the
MinnesotaRxConnect and Minnesota Advantage-meds Web sites do not
require patients to sign waivers of liability.
Question 2. You stated in your testimony that since the launch of
MinnesotaRxConnect, not a single complaint has been raised regarding
the quality, effectiveness, or safety of the drugs that were purchased
utilizing your prescription drug Web site. My questions are this: On
what do you base these figures? Would you please describe the post-
marketing surveillance system you have put into place?
Answer 2. State agencies have received a number of letters, e-mails
and phone calls about the importation programs. No more than 20 have
been complaints--with three-fourths of the complaints involving FDA
seizure of medications. The remaining complaints were about pricing
issues or delayed shipments. We have received no complaints about the
quality, effectiveness or safety of drug products.
The pharmacies affiliated with our programs keep internal logs of
complaints and we have reviewed them. The complaints most commonly
involve billing errors or delayed shipment. In many cases delayed
shipments were traced to FDA drug seizures. In a few instances, the
wrong drug had been shipped. However, U.S. pharmacies (both mail order
and community) sometimes dispense an incorrect medication. Again, we
noted no complaints involving the quality, effectiveness or safety of
the drug products shipped.
The actions taken by the pharmacies affiliated with our Web sites
in response to drug recalls provides further assurance that they take
the safety of patients seriously. When Vioxx was voluntarily recalled
by the manufacturer, the pharmacies contacted all of the patients to
whom they had recently shipped Vioxx to notify them of the recall. They
even accepted returns of unused Vioxx. That was at a financial loss
because Merck won't accept returns from the Canadian Internet
pharmacies.
We have not surveyed users of the MinnesotaRxConnect or Advantage-
meds.com Web sites because we do not track them. We feel it would be
inappropriate for the State of Minnesota to track the identities and
drug usage of the people who use our Web sites.
Thank you again for the opportunity to testify before you. Please
do not hesitate to contact me or my staff if you have additional
questions about Minnesota programs.
Sincerely,
Tim Pawlenty,
Governor.
__________
Response to Questions of the Committee by Peter Rost, M.D.
Question 1. Dr. Rost, you wrote in a January 2005 commentary
published in the Star-Ledger that Americans would save $37.8 billion
annually from legalized importation. Your findings contradict modeling
done by the HHS Task Force, as well as calculations by the
Congressional Budget Office, both of whom found savings of about 1-2
percent of total drug spending. As you state in the editorial, your
calculations were based on the assumption that legislation to permit
importation would also make it illegal to limit supply. What basis do
you have to believe that the Congress would support those provisions
and that they would pass Constitutional muster?
Answer 1. The house already passed the Pharmaceutical Market Access
Act once, (the ``Gutknecht bill''), which allow for drug importation to
begin without first requiring certification by the Health and Human
Services Secretary.
The new, bipartisan Pharmaceutical Market Access and Drug Safety
Act introduced by Senator Byron L. Dorgan and others in February 2005
includes a number of provisions intended to ensure that the drug
industry cannot thwart the law and prevent consumers from reaping the
benefits of drug importation:
Allows drug importation to begin without first requiring
certification by the HHS Secretary.
Includes a non-discrimination provision that would make it
an unfair and discriminatory act for drug manufacturers to get around
the law by shutting down the supply of prescription drugs they make
available to pharmacists and wholesalers, as they are currently doing
in Canada. However, these provisions do not ``force'' drug companies to
sell an unlimited quantity of their products in any given country, nor
would drug companies be selling their products for a loss in those
countries where they do choose to continue selling their products.
Therefore, there is no unconstitutional ``takings.''
Also includes features to prevent a drug company from
blocking importation by making subtle changes to a drug, such as
changing the color or the place of manufacture, so that it is no longer
FDA approved.
The Senate bill already has more than 30 cosponsors. Senator Frist
blocked the vote of a similar bill in 2004, because he feared it would
be approved.
This may be the strongest indication that the bill would pass.
Question 2. What are your calculated savings if these forced sales
provisions are NOT included in legislation?
Answer 2. The Congressional Budget Office, when calculating savings
of 1-2 percent assumed that pharmaceutical companies would limit
supply. The HHS report also states ``The foreign supply of patented
brand-name drugs may be limited relative to the total volume of such
drugs consumed in the U.S. market. Imported drugs may be around 12
percent of total use of such drugs in the United States, depending on
the scope of any importation program, because drug companies have
incentives to impede exports.'' This is one key factor resulting in low
savings in the HHS report. I agree with the Congressional Budget Office
and HHS report that if provisions to guarantee free supply are NOT
included in a bill, savings would amount to 1-2 percent of total drug
bill, although I believe the HHS report has come to that conclusion
using incorrect assumptions.
Average drug prices are 50 percent lower in Europe than in the
United States (HHS report, figure 7.2). HHS also assumes that
manufacturers will restrict supply, and that ``imported drugs may be
around 12 percent of total use of such drugs in the United States'' I
think the number 12 percent is far too high in a scenario in which
manufacturers limit supply. More realistic may be around 4-6 percent.
The HHS report also makes the fundamental mistake of assuming that
``U.S. drug buyers may get discounts of only 20 percent or less, with
the rest of the difference between U.S. and foreign prices going to
commercial importers.'' In my experience, in Europe, parallel trade
starts with price differences as low as 8-10 percent and I think it is
more realistic to assume that U.S. drug buyers will get discounts of
about 40-45 percent. 40 percent discount on 4 percent of total use
would result in savings of 1.6 percent annually.
Please also note that the CBO and HHS numbers do not quantify
indirect savings that might accrue as a result of drug companies
limiting price increases or lowering their U.S. prices domestically in
order to make importation less necessary.
Question 3. As you know, the Canadian market is very small relative
to the U.S. market. If importation became a widespread practice, how do
you envision the Canadian government responding if shortages in their
market develop? Do you foresee any problems for Canadian or U.S.
patients if that were to occur? Have you considered that even if
Congress passes legislation to legalize importation, countries may act
to prohibit the export of medicines from their own countries?
Answer 3. Canada alone is not a large enough market and therefore
any real drug importation bill does need to allow parallel trade not
just with Canada but with other major industrialized nations,
particularly the EU. If Congress passes a law that makes limitation of
supply illegal, with appropriate penalties, shortages would be avoided.
The example to use is Europe, in which the Rome treaty guarantees free
trade. Individual countries have laws or trade agreements that ensure
that the local market is fully supplied and that only excess drugs are
exported. This has created an effective distribution system without
supply problems for over 20 years.
Clearly, if drug companies have the opportunity to limit supply,
they will. In any such instance local governments are likely to ensure
that local supply is not jeopardized. Restricting supply within Europe
is illegal, while clearly an increased demand can result in supply
restrictions until manufacturing can be increased, which may take 12-24
months. Drug companies already today use this excuse to try to limit
supply within EU. A strong U.S. law with appropriate financial
penalties could actually alleviate this situation, since it would make
it even more difficult for companies to limit production or take a
chance on being sued by the European Union.
Question 4. You indicate in your testimony that many Americans
cannot afford prescription drugs, and you suggest importation as a
solution. However, generics are usually less expensive than brand
drugs. In addition, the new Medicare prescription drug benefit will
come into full effect shortly, benefiting millions of seniors. There
are also a number of national and State programs to provide assistance
with drug costs to low-income Americans. Why should Americans look to
Europe for imported drugs, when there are often less expensive options
here at home?
Answer 4. Generics are an excellent solution, when available. In
reality that is only an option for older drugs. It is reasonable for a
wealthy country, such as the United States, to provide a system in
which all citizens have access to most recent medical advances. The
Medicare drug benefit will provide $1,000 for someone with a $4,000
drug bill. That person is still better off importing drugs. Reality is
that national and State programs don't work, otherwise the Kaiser
Family Foundation couldn't have reported in a 2001 study that 15
percent of uninsured children and 28 percent of uninsured adults had
gone without prescription medication because of cost. The journal
Diabetes Care reported in February, 2004 on a study of older adults
with diabetes. Twenty-eight percent said they went without food or
other necessities to pay for drugs. Legalized and regulated
reimportation would provide cheaper drugs right at the pharmacy,
without forcing patients to make phone calls, write lengthy
applications to drug companies, or go on the Internet in search of
rebates or less costly drugs.
__________
[Whereupon, at 11:34 a.m., the committee adjourned.]