[Senate Hearing 109-70]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 109-70

         DRUG IMPORTATION: THE REALITIES OF SAFETY AND SECURITY

=======================================================================

                                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

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions


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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

                              ----------                              

                               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

                              ----------                              


                      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\
---------------------------------------------------------------------------
    \1\ Minnesota Board of Pharmacy Office Memorandum, at 2-5 (December 
24, 2003).
---------------------------------------------------------------------------
     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.''
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \3\ ``No Prescription? No Problem,'' Prevention.com http://
www.prevention.com/cda/feature2002/0,2479,s1-6568,00.html#top.
---------------------------------------------------------------------------
     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\
---------------------------------------------------------------------------
    \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.]
  

                                  
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